<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 September 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 972-718-5600
(Former name, former address and former 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 October 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 Nine Months Ended
September 30, September 30,
----------------------- -----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
REVENUES AND SALES
Local services $ 291,064 $ 274,530 $ 850,752 $ 804,888
Network access services 271,652 260,654 813,569 792,914
Toll services 89,142 93,158 266,470 279,079
Other services and sales 110,371 87,066 299,183 231,695
---------- ---------- ---------- ----------
Total revenues and sales 762,229 715,408 2,229,974 2,108,576
---------- ---------- ---------- ----------
OPERATING COSTS AND EXPENSES
Costs of services and sales 283,753 261,385 798,692 735,507
Selling, general and administrative 114,479 102,737 344,186 296,772
Depreciation and amortization 119,706 140,783 374,509 421,033
---------- ---------- ---------- ----------
Total operating costs and expenses 517,938 504,905 1,517,387 1,453,312
---------- ---------- ---------- ----------
OPERATING INCOME 244,291 210,503 712,587 655,264
Interest - net 29,708 29,963 85,307 86,262
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 214,583 180,540 627,280 569,002
Income taxes 76,557 66,527 228,455 209,810
---------- ---------- ---------- ----------
NET INCOME $ 138,026 $ 114,013 $ 398,825 $ 359,192
========== ========== ========== ==========
</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 Nine Months Ended
September 30, September 30,
------------------- ---------------------
1996 1995 1996 1995
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net income $ 138.0 $ 114.0 $ 398.8 $ 359.2
</TABLE>
Net income increased 21% or $24 and 11% or $39.6 for the three and nine months
ended September 30, 1996, respectively, compared to the same periods in 1995.
The increases are primarily due to higher revenues and sales, and lower
depreciation expense partially offset by higher operating expenses.
Revenues and Sales
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ---------------------
1996 1995 1996 1995
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Local services $ 291.1 $ 274.5 $ 850.7 $ 804.9
Network access services 271.6 260.7 813.6 792.9
Toll services 89.1 93.2 266.5 279.1
Other services and sales 110.4 87.0 299.2 231.7
-------- -------- --------- ---------
Total revenues and sales $ 762.2 $ 715.4 $ 2,230.0 $ 2,108.6
</TABLE>
Total revenues and sales increased 7% or $46.8 and 6% or $121.4 for the three
and nine months ended September 30, 1996, respectively, compared to the same
periods in 1995.
Local service revenues increased 6% or $16.6 and 6% or $45.8 for the three and
nine months ended September 30, 1996, respectively, compared to the same periods
in 1995. The number of switched access lines increased 3% for both the three and
nine months ended September 30, 1996, which generated revenues of $4.9 and
$19.6, respectively. The increase in local service revenues for both periods of
1996 also reflects growth of $5.8 and $14.9 in sales of CentraNet(trademark) and
enhanced custom calling features, such as SmartCall(trademark), and growth of
$0.7 and $8.3 in measured usage service revenues. A revenue neutral rate
restructuring in Michigan, effective fourth quarter 1995, resulted in an
increase in local service revenues of $3.3 and $9.8, which is offset by
corresponding decreases in both network access and toll services revenues. An
adjustment to correct the billing of certain state excise taxes in the second
quarter of 1996 of $7.2 partially offset the nine month increase.
Network access service revenues increased 4% or $10.9 and 3% or $20.7 for the
three and nine months ended September 30, 1996, respectively, compared to the
same periods in 1995. Minutes of use increased 11% for both the three and nine
month periods ended September 30, 1996, generating revenues of $14.5 and $45.7,
respectively. Growth in special access lines producing revenues of $2.5 and
$7.4 also contributed to increased network access service revenues. Reductions
of $5.7 and $27.8 reflecting the net effect of the changes in interstate access
revenues associated with the Federal Communications Commission's (FCC) 1995 and
1996 price caps and the rate restructure in Michigan, as discussed above,
partially offset the increases to revenues. The nine month period was also
impacted by favorable carrier settlements of $10 recorded in the first quarter
of 1995.
2
<PAGE> 4
GTE NORTH INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
Toll service revenues decreased 4% or $4.1 and 5% or $12.6 for the three and
nine months ended September 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 primarily as a result of the Illinois conversion to an
Originating Responsibility Plan (ORP). The effect of the rate restructure in
Michigan as discussed above in local service revenues also contributed to the
decrease in toll service revenues.
Other services and sales revenues increased 27% or $23.4 and 29% or $67.5 for
the three and nine months ended September 30, 1996, respectively, compared to
the same periods in 1995. The three and nine 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 Nine Months Ended
September 30, September 30,
--------------------- --------------------
1996 1995 1996 1995
----------- -------- ---------- --------
<S> <C> <C> <C> <C>
Total operating costs and expenses $ 517.9 $ 504.9 $ 1,517.4 $1,453.3
</TABLE>
Total operating costs and expenses increased 3% or $13 and 4% or $64.1 for the
three and nine months ended September 30, 1996, respectively, compared to the
same periods in 1995.
Higher costs associated with revenue generation efforts contributed to
increases in operating costs and expenses resulting in higher material and
equipment costs related to business equipment sales of $10.7 and $26.6 for the
three and nine months ended September 30, 1996, respectively, increased
telecommunication costs of $4 and $10.2, higher operating taxes of $10.6 for
both periods and increased contractor costs of $0.5 and $11. The nine month
increase also includes higher advertising expense of $7 and higher pole
attachment rental expense of $2.5. In addition, the increases are the result of
an increase in data processing costs of $7.1 and $9.5 for the three and nine
months ended September 30, 1996, respectively, and a reserve of $5.7 for inside
wire maintenance settlement costs recorded in the third quarter of 1996. The
three month increase is partially offset by actuarial adjustments to the
Company's benefit plans of $8.4 recorded in the third quarter of 1996. Lower
depreciation expense of $21.1 and $46.5, primarily due to a one-time adjustment
and prospective rate changes during the second quarter of 1996, partially
offset the three and nine month increases. 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 Nine Months Ended
September 30, September 30,
--------------------- --------------------
1996 1995 1996 1995
----------- -------- ---------- --------
<S> <C> <C> <C> <C>
Income taxes $ 76.6 $ 66.5 $ 228.5 $ 209.8
</TABLE>
Income taxes increased 15% or $10.1 and 9% or $18.7 for the three and nine
months ended September 30, 1996, respectively, compared to the same periods in
1995. These increases are primarily due to corresponding increases in pre-tax
income offset by adjustments to prior years' tax provision.
3
<PAGE> 5
GTE NORTH INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
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. On July 1, 1996, the
Company began participating 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. In November
1996, the Company issued $250 of 6.90% debentures to refinance the debt called
and redeemed in the fourth quarter of 1995.
The Company's primary source of funds during the first nine months of 1996 was
cash from operations of $859.9 compared to $666.2 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 nine months of 1996 were
$428.1 compared to $408 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. The Company
anticipates capital expenditures for 1996 to increase from the 1995 level,
reflecting the continuing modernization of facilities and anticipated growth.
Cash used in financing activities was $453 during the first nine months of 1996
compared to $243.7 for the same period in 1995. This included dividend payments
of $382.7 in the first nine months of 1996 compared to $217.7 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 $239.8 for the first
nine months of 1996, compared to an increase of $28.6 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 nine months of
1996, costs of approximately $3.3 have been incurred, including $2 to
re-engineer customer service processes and $1.3 to re-engineer administrative
processes. Since the plan's inception at the beginning of 1994, costs of
approximately $284.4 have been incurred, including $200.7 to re-engineer
customer service processes and $51.4 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 September 30, 1996, $90.2 remains in the
restructuring reserve which management believes is adequate to cover future
expenditures.
4
<PAGE> 6
GTE NORTH INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
On August 8, 1996, the FCC published its Report and Order (Order) containing
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). On August 9, 1996, the FCC
released its Second Report and Order implementing the provision of number
portability and dialing parity in accord with the Telecommunications Act.
GTE believes that if the Order were implemented as drafted, it would cause
irreparable harm to local-exchange carriers (LECs) by providing unfair
advantages to other carriers who will compete with the LECs in providing local
service in the LEC's local territory.
On September 16, 1996, GTE filed an appeal and motion for stay of the Order with
the United States Court of Appeals for the District of Columbia. This appeal
argued that the FCC had no jurisdiction to impose national pricing rules for
what is essentially local service. This appeal was subsequently transferred to
the Court of Appeals for the Eighth Circuit together with appeals by other LECs
and state regulatory commissions. On October 15, 1996, the Eighth Circuit
granted a partial stay. The stay delays implementation of the Order's pricing
provisions and associated rules, as well as the rules requiring GTE and other
LECs to permit requesting carriers to select terms and conditions from various
agreements between them and other carriers for purposes of interconnection.
Additionally, the Court scheduled oral argument on the merits for the week of
January 13, 1997. On November 12, 1996, the Supreme Court denied applications to
vacate the stay filed by the FCC and various companies seeking to enter the
local-exchange business.
While GTE cannot predict the outcome of the Court's final decision, GTE intends
to continue to vigorously present its position in Court.
GTE is continuing to negotiate with requesting carriers over the terms of
interconnection, unbundled network elements and resale rates. In some cases, the
parties have been unable to agree within the statutory period for negotiation
and have gone to arbitration before various state regulatory commissions,
including Illinois, Indiana, Michigan, Ohio, Pennsylvania and Wisconsin. It is
expected that in December 1996, the first state commission decision determining
the prices and terms of unresolved issues will be released. Subsequent
decisions are expected to be issued over a period extending through the first
quarter of 1997.
In 1996, GTE, through a separate subsidiary, began offering long distance
service to its customers in selected states, including Illinois, Indiana,
Michigan, Ohio, Pennsylvania and Wisconsin, marketed under the name GTE Easy
Savings Plan(service mark). GTE plans to offer this service by December 31, 1996
in all 50 states, including the 28 states where it currently offers local
telephone service.
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 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.
The Company's intrastate business is regulated by the state regulatory
commissions in Illinois, Indiana, Michigan, Ohio, Pennsylvania and Wisconsin.
5
<PAGE> 7
GTE NORTH INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
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, Pennsylvania and Wisconsin have
concluded that intraLATA 1+ competition is in the public interest. The Company
converted all capable offices in Illinois to 1+ intraMarket Service Area (MSA)
toll presubscription by November 1, 1996. In Michigan, the Company provided
intraLATA 1+ dialing parity in all capable switches by June 30, 1996 as ordered
by the Michigan Public Service Commission (MPSC) to comply with Public Act 216.
IntraLATA 1+ competition has been authorized in Ohio and Pennsylvania. 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 by year end 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 included 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. In August 1996, this investigation
was dismissed pending an FCC order on access charge reform.
In Michigan, pursuant to Public Act 216, the Company eliminated an interLATA
carrier common line (CCL) 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 in order to compensate the
Company for CCL surcharge revenues lost.
In Ohio on October 9, 1996, the Company filed to reduce its intrastate
terminating Carrier Common Line Charge (CCLC) by $10, effective November 15,
1996.
Eleven separate class action lawsuits have been brought against the Company and
five of its affiliates relating to the provision of inside wire maintenance
services. All cases are in different stages in the various legal systems. On
August 8, 1996, a preliminary settlement was reached in one of the cases. The
Court has conditionally certified this case as a national class of plaintiffs
for settlement purposes. While all cases have not yet been consolidated, it is
GTE's intent to consolidate all pending lawsuits and effect a nationwide
settlement of all inside wire claims. A fairness hearing will be held on
December 18, 1996. This hearing will allow for any objections to the settlement
and could finally approve the settlement. If accepted, all pending lawsuits
would be dismissed and future lawsuits would be precluded from 1987 to the date
of settlement. Management believes that the Company has adequately provided for
this settlement in its financial statements.
6
<PAGE> 8
GTE NORTH INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------ -----------
(Thousands of Dollars)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and temporary investments $ 10,390 $ 31,655
Receivables, less allowances of $31,542 and $24,059 614,975 662,350
Inventories and supplies 60,597 48,257
Deferred income tax benefits 23,960 76,993
Prepaid taxes and other 47,806 33,961
----------- -----------
Total current assets 757,728 853,216
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, at cost 9,108,353 8,902,302
Accumulated depreciation (6,226,311) (6,060,728)
----------- -----------
Total property, plant and equipment, net 2,882,042 2,841,574
OTHER ASSETS, primarily employee benefit plans 675,916 594,291
----------- -----------
Total assets $ 4,315,686 $ 4,289,081
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term obligations, including current maturities $ 157,383 $ 435,443
Accounts payable 178,835 147,272
Taxes payable 138,995 126,179
Accrued interest 24,882 21,149
Accrued payroll costs 150,320 150,728
Dividends payable 141,720 98,229
Accrued restructuring costs 90,169 93,501
Other 161,545 134,691
----------- -----------
Total current liabilities 1,043,849 1,207,192
----------- -----------
Long-term debt 1,541,668 1,330,811
Deferred income taxes 164,997 177,199
Employee benefit plans 291,799 268,430
Other liabilities 18,634 22,382
----------- -----------
Total liabilities 3,060,947 3,006,014
----------- -----------
PREFERRED STOCK, subject to mandatory redemption 16,696 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 187,549 214,947
----------- -----------
Total shareholders' equity 1,238,043 1,265,441
----------- -----------
Total liabilities and shareholders' equity $ 4,315,686 $ 4,289,081
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
7
<PAGE> 9
GTE NORTH INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
1996 1995
--------- ---------
(Thousands of Dollars)
<S> <C> <C>
OPERATIONS
Net income $ 398,825 $ 359,192
Adjustments to reconcile net income to net cash from operations:
Depreciation and amortization 374,509 421,033
Deferred income taxes 40,831 45,957
Provision for uncollectible accounts 28,897 24,739
Change in current assets and current liabilities 75,263 (113,718)
Other - net (58,475) (71,024)
--------- ---------
Net cash from operations 859,850 666,179
--------- ---------
INVESTING
Capital expenditures (428,087) (408,007)
Acquisition of assets -- (5,200)
Other - net -- 334
--------- ---------
Net cash used in investing (428,087) (412,873)
--------- ---------
FINANCING
Long-term debt issued 196,902 --
Long-term debt and preferred stock retired (46,846) (54,633)
Dividends (382,732) (217,711)
Increase (decrease) in short-term obligations, excluding current maturities (239,790) 28,600
Other - net 19,438 --
--------- ---------
Net cash used in financing (453,028) (243,744)
--------- ---------
Increase (decrease) in cash and temporary investments (21,265) 9,562
Cash and temporary investments:
Beginning of period 31,655 30,373
--------- ---------
End of period $ 10,390 $ 39,935
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
8
<PAGE> 10
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.
9
<PAGE> 11
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 no reports on Form 8-K during the third quarter
of 1996.
10
<PAGE> 12
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: November 14, 1996 William M. Edwards, III
------------------------ ----------------------------------
William M. Edwards, III
Vice President - Controller
(Principal Accounting Officer)
11
<PAGE> 13
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>
Nine Months Ended
September 30, 1996
------------------
<S> <C>
Net earnings available for fixed charges:
Income from continuing operations $398,825
Add - Income taxes 228,455
- Fixed charges 98,729
--------
Adjusted earnings $726,009
========
Fixed charges:
Interest expense $ 90,388
Portion of rent expense
representing interest 8,341
--------
Adjusted fixed charges $ 98,729
========
RATIO OF EARNINGS TO FIXED CHARGES 7.35
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 10,390
<SECURITIES> 0
<RECEIVABLES> 646,517
<ALLOWANCES> 31,542
<INVENTORY> 60,597
<CURRENT-ASSETS> 757,728
<PP&E> 9,108,353
<DEPRECIATION> 6,226,311
<TOTAL-ASSETS> 4,315,686
<CURRENT-LIABILITIES> 1,043,849
<BONDS> 1,541,668
16,696
29,033
<COMMON> 978,351
<OTHER-SE> 230,659
<TOTAL-LIABILITY-AND-EQUITY> 4,315,686
<SALES> 2,229,974
<TOTAL-REVENUES> 2,229,974
<CGS> 798,692
<TOTAL-COSTS> 1,517,387
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 85,307
<INCOME-PRETAX> 627,280
<INCOME-TAX> 228,455
<INCOME-CONTINUING> 398,825
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 398,825
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
