<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended June 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number 0-1210
GTE NORTH INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
WISCONSIN 35-1869961
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
600 Hidden Ridge, HQE04B12 - Irving, Texas 75038
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code 214-718-5600
(Former name, former address and formal fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
The Company had 978,351 shares of $1,000 stated value common stock outstanding
at July 31, 1996. The Company's common stock is 100% owned by GTE Corporation.
<PAGE> 2
PART I. FINANCIAL INFORMATION
GTE NORTH INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
REVENUES AND SALES:
Local services $ 278,626 $ 266,839 $ 559,688 $ 530,358
Network access services 272,037 269,049 541,917 532,260
Toll services 85,127 91,199 177,328 185,921
Other services and sales 100,394 78,649 188,812 144,629
---------- ---------- ---------- ----------
Total revenues and sales 736,184 705,736 1,467,745 1,393,168
---------- ---------- ---------- ----------
OPERATING COSTS AND EXPENSES:
Costs of services and sales 257,282 238,746 514,939 474,122
Selling, general and administrative 122,852 97,021 229,707 194,035
Depreciation and amortization 118,436 139,608 254,803 280,250
---------- ---------- ---------- ----------
Total operating costs and expenses 498,570 475,375 999,449 948,407
---------- ---------- ---------- ----------
OPERATING INCOME 237,614 230,361 468,296 444,761
Interest - net 27,588 27,899 55,599 56,299
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 210,026 202,462 412,697 388,462
Income taxes 78,270 73,238 151,898 143,283
---------- ---------- ---------- ----------
NET INCOME $ 131,756 $ 129,224 $ 260,799 $ 245,179
========== ========== ========== ==========
</TABLE>
Per share data is omitted since the Company's common stock is 100% owned by GTE
Corporation (GTE).
See Notes to Condensed Consolidated Financial Statements.
1
<PAGE> 3
GTE NORTH INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in Millions)
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net income $131.8 $129.2 $260.8 $245.2
</TABLE>
Net income increased 2% or $2.6 and 6% or $15.6 for the three and six months
ended June 30, 1996, respectively, compared to the same periods in 1995. The
increases are primarily due to higher revenues and sales, primarily local
services and other services and sales, and lower depreciation expense partially
offset by higher operating expenses.
Revenues and Sales
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ --------------------------
1996 1995 1996 1995
------ ------ -------- --------
<S> <C> <C> <C> <C>
Local services $278.6 $266.8 $ 559.7 $ 530.4
Network access services 272.1 269.1 541.9 532.3
Toll services 85.1 91.2 177.3 185.9
Other services and sales 100.4 78.6 188.8 144.6
------ ------ -------- --------
Total revenues and sales $736.2 $705.7 $1,467.7 $1,393.2
</TABLE>
Total revenues and sales increased 4% or $30.5 and 5% or $74.5 for the three
and six months ended June 30, 1996, respectively, compared to the same periods
in 1995.
Local service revenues increased 4% or $11.8 and 6% or $29.3 for the three and
six months ended June 30, 1996, respectively, compared to the same periods in
1995. The number of switched access lines increased 4% for both the three and
six months ended June 30, 1996, which generated additional revenues of $8 and
$14.7, respectively. The three and six month increases also reflect $3.3 and
$9.1 growth in sales of CentraNet(R) and enhanced custom calling features, such
as SmartCall(R), and $6.6 and $10.4 of growth in measured usage service
revenues. These increases are partially offset by a reclassification in the
second quarter of 1996 of $7.2.
Network access service revenues increased 1% or $3 and 2% or $9.6 for the three
and six months ended June 30, 1996, respectively, compared to the same periods
in 1995. Minutes of use increased 11% for both the three and six month
periods ended June 30, 1996, which generated additional revenues of $15.2 and
$31.2, respectively. The three and six month increases are also due to
increases of $2.5 and $4.9 in special access revenues associated with growth in
special access lines. These favorable items were partially offset by
reductions in revenues of $14.5 and $22.1 reflecting the net effect of the
interstate access revenues associated with the Federal Communication
Commission's (FCC) price cap. The six month amounts were also impacted by
favorable carrier settlements of $10 recorded in the first quarter of 1995.
Toll service revenues decreased 7% or $6.1 and 5% or $8.6 for the three and six
months ended June 30, 1996, respectively, compared to the same periods in 1995.
These decreases are primarily due to optional discount calling plans and 10XXX
and 1+ intraLATA toll competition, partially offset by an increase in toll
volumes.
2
<PAGE> 4
GTE NORTH INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
Other services and sales revenues increased 28% or $21.8 and 31% or $44.2 for
the three and six months ended June 30, 1996, respectively, compared to the
same periods in 1995. The three and six month increases are primarily due to
additional business equipment sales, primarily private branch exchange phone
systems sales and the associated maintenance contracts, previously marketed
through GTE Telecom Marketing Incorporated (TMC).
Operating Costs and Expenses
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Total operating costs and expenses $498.6 $475.4 $999.4 $948.4
</TABLE>
Total operating costs and expenses increased 5% or $23.2 and 5% or $51 for the
three and six months ended June 30, 1996, respectively, compared to the same
periods in 1995.
The three and six month increases in operating costs and expenses are primarily
attributable to higher sales and marketing costs associated with revenue
generation efforts including higher labor costs of $10.4 for both the three and
six month periods, higher material costs related to voice and data equipment
sales of $9.8 and $15.9 for the three and six months ended June 30, 1996,
respectively, increased telecommunication costs of $4.4 and $6.2, and increased
contractor costs of $4.1 and $10.5. The increases are also the result of an
increase in data processing costs of $6.6 for both periods and higher
advertising expense of $3.2 and $7.2 for the three and six months ended June
30, 1996, respectively. The six month increase also includes higher pole
attachment rental expense of $3.4. The three and six month increases are
partially offset by lower depreciation expense of $21.2 and $25.5 primarily due
to a one-time adjustment and prospective rate changes during the second quarter
of 1996. The impact of $10.5 in pension settlement gains recorded in the
second quarter of 1995 was partially offset by settlement gains of $7.2
recorded in the first quarter of 1996 which resulted from lump-sum payments
from the Company's pension plans.
Income Taxes
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ------------------------
1996 1995 1996 1995
----- ----- ------ ------
<S> <C> <C> <C> <C>
Income taxes $78.3 $73.2 $151.9 $143.3
</TABLE>
Income taxes increased 7% or $5.1 for the three months and 6% or $8.6 for the
six months ended June 30, 1996 compared to the same periods in 1995. These
increases are primarily due to corresponding increases in pre-tax income.
CAPITAL RESOURCES AND LIQUIDITY
Management believes that the Company has adequate internal and external
resources available to meet ongoing operating requirements for construction of
new plant, modernization of facilities and payment of dividends. The Company
generally funds its construction program from operations, although external
financing is available. Short-term borrowings can be obtained through
commercial paper borrowings or borrowings from GTE. As of July 1, 1996, the
Company participated with other affiliates in a $1,500 syndicated line of
credit to back up commercial paper borrowings. Through this shared arrangement
the Company can issue up to $700 of commercial paper.
3
<PAGE> 5
GTE NORTH INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
The Company's primary source of funds during the first six months of 1996 was
cash from operations of $580.5 compared to $408.4 for the same period in 1995.
The year-to-year increase in cash from operations primarily reflects improved
results from operations and a decrease in the Company's working capital
requirements. Cash from operations is also being utilized to fund the
Company's re-engineering plan.
The Company's capital expenditures during the first six months of 1996 were
$263.3 compared to $263.2 for the same period in 1995. The 1996 expenditures
reflect the Company's continued growth in access lines and modernization of
current facilities and introduction of new products and services, including
broadband digital services and switched digital services. In 1996, capital
expenditures are expected to decrease slightly from the 1995 level.
Cash used in financing activities was $332.7 during the first six months of
1996 compared to $155.5 for the same period in 1995. This included dividend
payments of $231.1 in the first six months of 1996 compared to $132.2 for the
same period in 1995. The Company issued $200 of 7 5/8% debentures in May 1996
to refinance the debt called and redeemed in the fourth quarter of 1995.
Financing activities also included a decrease in short-term debt of $299.4 for
the first six months of 1996, compared to a decrease of $21 for the same period
in 1995 reflecting a reduction in commercial paper primarily from the proceeds
of the debt issuance.
During 1995, the Company entered into forward contracts to sell $200 of
U.S.Treasury bonds in order to hedge against future changes in market interest
rates related to the debt the Company called and redeemed in the fourth quarter
of 1995, and refinanced in May 1996 (discussed above). A gain of approximately
$19 occurred upon settlement of the forward contracts and will be amortized
over the life of the associated refinanced debt as an offset to interest
expense.
OTHER MATTERS
In connection with the re-engineering plan, during the first six months of
1996, costs of approximately $2.7 have been incurred, including $1.6 to
re-engineer customer service processes and $1.1 to re-engineer administrative
processes. Since the plan's inception at the beginning of 1994, costs of
approximately $283.8 have been incurred, including $200.3 to re-engineer
customer service processes and $51.2 to re-engineer administrative processes.
The restructuring costs also include $32.3 to consolidate facilities and
operations and other related costs. These expenditures were primarily
associated with the closure and relocation of various service centers, software
enhancements and separation benefits associated with employee reductions.
Implementation of the re-engineering plan is expected to be substantially
completed by the end of 1996. As of June 30, 1996, $90.8 remains in the
restructuring reserve which management believes is adequate to cover future
expenditures.
On August 1, 1996, the Federal Communications Commission (FCC) voted to release
its rules implementing Section 251 of the Telecommunications Act of 1996 (the
Telecommunications Act) dealing with interconnection, unbundling of network
elements and wholesale prices and other terms for competitive entry into
local-exchange service (Competitive Entry Terms). The terms of the FCC's
Report and Order (Order) were published on August 8, 1996, and GTE is in the
process of reviewing the Order.
The Order acknowledges that the Telecommunications Act calls for negotiation of
terms and prices for Competitive Entry Terms between the local-exchange carrier
(LEC) and the competing carriers. The Order, among other things, prescribes
the rules for interconnection of a LEC's facilities with those of carriers
competing in the local-exchange market and the pricing methodology to be used
by states in establishing interconnection rates. The FCC methodology calls for
the states to use forward-looking costs defined as Total Element Long Run
Incremental Cost (TELRIC), including a reasonable amount of forward-looking
joint and common costs. State regulatory commissions are to establish the
appropriate prices based on this methodology. The FCC also identified network
elements to be unbundled and priced by the states using the same TELRIC plus
reasonable joint and common costs. Proxy prices for the various network
elements are set out and may be used by states which have not approved cost
studies by statutory deadlines for completing any arbitration of issues
unresolved by negotiation between the LEC and other carriers. Access to the
unbundled elements are to be at technically feasible points.
Additionally, the Order mandated use of a method of determining a LEC's avoided
costs for purposes of resale rates. States are to determine the specific rates
using this methodology but, on an interim basis, may instead elect to use a
default range of rates established by the FCC. The default discount rates
range from 17% - 25% off retail rates.
To continue to support universal service, the FCC established a temporary
access framework. A competitor purchasing local service for resale or
providing only long distance service must pay full current access rates. If
unbundled local switching is purchased, the competitor must pay 75% of the
existing Transport Interconnection Charge and all of the existing Carrier
Common Line Charge. A competitor providing its own switching facility pays no
access charges even if it purchases an unbundled loop from a LEC.
The Order also provides for mutual compensation for interconnection but
presumes calling will be balanced and permits "bill and keep" arrangements. If
the LEC demonstrates calling is not balanced, interconnection prices are to be
set by the state for both carriers at the LEC's forward-looking costs.
GTE is still reviewing the impact of the approximately 700-page Order. In
addition, the FCC is scheduled to release additional rules relating to
universal service and access charge reform in the second quarter of 1997.
Until all the rules have been issued, it is difficult to determine the effect
on GTE. However, GTE has concerns about the Order as it relates to the ability
of a local-exchange carrier to recover all of its present costs from its
ongoing retail customers and the wholesale prices to be set by state regulatory
agencies pursuant to the FCC's guidelines.
GTE plans to appeal various aspects of the Order. Although it is too early to
determine the impact of these rules, GTE believes that, if implemented as
contained in the Order, they may advantage new entrants and competitors in a
LEC's territory. Thus, while the Order may contribute to some market erosion in
GTE's franchised territories, it may also advantage GTE outside of its
franchised territory.
In 1996, GTE, through a separate subsidiary, began offering long distance
service to its customers in selected states, including Illinois, Indiana,
Michigan and Wisconsin, marketed under the name GTE Easy Savings Plan(SM). GTE
plans to offer this service in all 28 states where it currently offers local
telephone service by December 1996.
The Company submitted its 1996 annual interstate access filing on April 2,
1996, utilizing the FCC's interim price cap rules. In doing so, the Company
changed its productivity factor from 4.0% to 5.3% for its Michigan tariff
entity. On June 24, 1996, the FCC ordered all local-exchange carriers (LECs)
subject to price cap regulation, including the Company, to update their GDP-PI
inflation factors through the fourth quarter of 1995. Overall, the final 1996
interstate access filing resulted in an annual price reduction of $5.2,
effective July 1, 1996.
4
<PAGE> 6
GTE NORTH INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
The Company's intrastate business is regulated by the state regulatory
commissions in Illinois, Indiana, Michigan, Ohio, Pennsylvania and Wisconsin.
The Telecommunications Act of 1996 (the Telecommunications Act) forbids states
from imposing any barriers to entry into local and toll competition. Local
competition has been authorized in Illinois, Michigan, Ohio, Pennsylvania and
Wisconsin. Local competition is a current open docket in Indiana. A recent
July 1, 1996 order required the filing of wholesale tariffs for bundled resale.
In addition, Illinois, Michigan, Ohio and Pennsylvania have concluded that
intraLATA 1+ competition is in the public interest. The Company will be
converting all capable offices in Illinois to 1+ intraMarket Service Area (MSA)
toll presubscription by November 1996. On March 26, 1996, to comply with
Public Act 216, the Michigan Public Service Commission (MPSC) ordered the
Company to provide intraLATA 1+ dialing parity in all capable switches by June
30, 1996. IntraLATA 1+ competition has been authorized in Ohio and
Pennsylvania. The Telecommunications Act requires GTE to negotiate intraLATA
dialing parity provisions with its competitors. In subsequent negotiations,
GTE will address implementation of 1+ in those states which have not previously
ordered implementation. In Wisconsin, a Commission order was issued July 29,
1996 mandating the Company to provide 1+ intraLATA equal access in all of its
exchanges by January 8, 1997. In Indiana, hearings took place in July to hear
testimony on the manner in which LECs should make 1+ and 0+ intraLATA access
available. A Commission order is expected in the third quarter of 1996.
The Company intends to continue to respond aggressively to regulatory and legal
developments that allow for increased competition and opportunities in the
marketplace. On December 20, 1995, an order was issued by the Illinois
Commerce Commission (ICC) granting the Joint Petition for Approval of
Stipulation and Agreement terminating Primary Toll Carrier (PTC) arrangements
in the state of Illinois. Private line PTC was eliminated on March 31, 1996,
and toll PTC was eliminated July 15, 1996, thus dissolving the PTC arrangement
for GTE in Illinois. After PTC termination, each LEC will be responsible for
providing 1+ intraMarket Service Area (MSA) toll to its end users.
The ICC initiated a statewide access rate investigation in January 1996. The
scope of this generic access docket includes the elimination of the Residual
Interconnection Charge (RIC) as well as rate structures, wholesale usage, small
LEC issues, classification of access services for incumbent versus new LECs,
and effects of the Telecommunications Act. The Company is advocating a revenue
neutral rate rebalancing in this docket.
In Michigan, pursuant to Public Act 216, the Company eliminated an interLATA
carrier common line surcharge retroactive to December 1, 1995, resulting in an
access revenue reduction of $5.2 . On January 15, 1996, an end user charge was
implemented to generate local revenue of $5.2 resulting in a revenue neutral
issue.
5
<PAGE> 7
GTE NORTH INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
(Thousands of Dollars)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and temporary investments $ 16,135 $ 31,655
Receivables, less allowances of $27,390 and $24,059 629,916 662,350
Inventories and supplies 64,122 48,257
Deferred income tax benefits 63,176 76,993
Prepaid taxes and other 61,977 33,961
------------ ------------
Total current assets 835,326 853,216
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, at cost 9,005,775 8,902,302
Accumulated depreciation (6,155,253) (6,060,728)
------------ ------------
Total property, plant and equipment, net 2,850,522 2,841,574
OTHER ASSETS, primarily employee benefit plans 653,086 594,291
------------ ------------
Total assets $ 4,338,934 $ 4,289,081
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term obligations, including current maturities $ 351,759 $ 435,443
Accounts payable 212,174 147,272
Taxes payable 135,279 126,179
Accrued interest 22,026 21,149
Accrued payroll costs 139,490 150,728
Dividends payable 151,364 98,229
Accrued restructuring costs 90,824 93,501
Other 136,924 134,691
------------ ------------
Total current liabilities 1,239,840 1,207,192
------------ ------------
NON-CURRENT LIABILITIES:
Long-term debt 1,315,533 1,330,811
Deferred income taxes 199,095 177,199
Employee benefit plans 287,859 268,430
Other liabilities 37,671 22,382
------------ ------------
Total non-current liabilities 1,840,158 1,798,822
------------ ------------
PREFERRED STOCK, subject to mandatory redemption 16,917 17,626
------------ ------------
SHAREHOLDERS' EQUITY:
Preferred stock 29,033 29,033
Common stock (978,351 shares issued) 978,351 978,351
Additional paid-in capital 43,110 43,110
Retained earnings 191,525 214,947
------------ ------------
Total shareholders' equity 1,242,019 1,265,441
------------ ------------
Total liabilities and shareholders' equity $ 4,338,934 $ 4,289,081
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
6
<PAGE> 8
GTE NORTH INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------------
1996 1995
---------- ----------
(Thousands of Dollars)
<S> <C> <C>
OPERATIONS:
Net income $ 260,799 $ 245,179
Adjustments to reconcile net income
to net cash from operations:
Depreciation and amortization 254,803 280,250
Deferred income taxes 35,713 30,752
Provision for uncollectible accounts 18,180 18,278
Changes in current assets and current liabilities 33,350 (126,900)
Other - net (22,312) (39,128)
---------- ----------
Net cash from operations 580,533 408,431
---------- ----------
INVESTING:
Capital expenditures (263,333) (263,197)
---------- ----------
Cash used in investing (263,333) (263,197)
---------- ----------
FINANCING:
Long-term debt issued 196,902 --
Long-term debt and preferred stock retired (18,584) (2,314)
Dividends (231,086) (132,167)
Decrease in short-term obligations, excluding current maturities (299,390) (21,010)
Other - net 19,438 --
---------- ----------
Net cash used in financing (332,720) (155,491)
---------- ----------
Decrease in cash and temporary investments (15,520) (10,257)
Cash and temporary investments:
Beginning of period 31,655 30,373
---------- ----------
End of period $ 16,135 $ 20,116
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
7
<PAGE> 9
GTE NORTH INCORPORATED AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) The unaudited condensed consolidated financial statements included
herein have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. However, in the opinion of management of the Company, the
condensed consolidated financial statements include all adjustments,
which consist only of normal recurring accruals, necessary to present
fairly the financial information for such periods. These condensed
consolidated financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's
1995 Annual Report on Form 10-K.
(2) Reclassifications of prior year data have been made, where appropriate,
to conform to the 1996 presentation.
8
<PAGE> 10
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K.
(12) Statement re: Calculation of the Consolidated Ratio of
Earnings to Fixed Charges
(27) Financial Data Schedule
(b) The Company filed a report on Form 8-K dated May 7, 1996, under
Item 7, "Financial Statements and Exhibits." No financial
information was included with this report.
9
<PAGE> 11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GTE North Incorporated
------------------------------
(Registrant)
Date: August 14, 1996 William M. Edwards, III
--------------- ------------------------------
William M. Edwards, III
Vice President - Controller
(Principal Accounting Officer)
10
<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
12 Statement re: Calculation of the Consolidated Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 12
GTE NORTH INCORPORATED AND SUBSIDIARY
STATEMENT OF THE CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
(Thousands of Dollars)
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1996
----------------
<S> <C>
Net earnings available for fixed charges:
Income from continuing operations $260,799
Add - Income taxes 151,898
- Fixed charges 63,428
--------
Adjusted earnings $476,125
========
Fixed charges:
Interest expense $ 58,773
Portion of rent expense
representing interest 4,655
--------
Adjusted fixed charges $ 63,428
========
RATIO OF EARNINGS TO FIXED CHARGES 7.51
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 16,135
<SECURITIES> 0
<RECEIVABLES> 657,306
<ALLOWANCES> 27,390
<INVENTORY> 64,122
<CURRENT-ASSETS> 835,326
<PP&E> 9,005,775
<DEPRECIATION> 6,155,253
<TOTAL-ASSETS> 4,338,934
<CURRENT-LIABILITIES> 1,239,840
<BONDS> 1,315,533
<COMMON> 978,351
16,917
29,033
<OTHER-SE> 234,635
<TOTAL-LIABILITY-AND-EQUITY> 4,338,934
<SALES> 1,467,745
<TOTAL-REVENUES> 1,467,745
<CGS> 514,939
<TOTAL-COSTS> 999,449
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55,599
<INCOME-PRETAX> 412,697
<INCOME-TAX> 151,898
<INCOME-CONTINUING> 260,799
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 260,799
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
