<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 2-36292
GTE SOUTH INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
VIRGINIA 56-0656680
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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 21,000,000 shares of $25 par 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 SOUTH INCORPORATED
CONDENSED 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 $ 138,164 $ 125,189 $ 272,164 $ 246,300
Network access services 141,307 122,717 275,528 242,172
Toll services 30,988 36,628 65,219 74,140
Other services and sales 34,047 36,481 83,673 82,024
------------- -------------- ------------- -------------
Total revenues and sales 344,506 321,015 696,584 644,636
------------- -------------- ------------- -------------
OPERATING COSTS AND EXPENSES:
Costs of services and sales 121,772 113,961 243,802 224,063
Selling, general and administrative 50,835 50,714 98,478 96,528
Depreciation and amortization 68,668 69,208 138,200 137,462
------------- -------------- ------------- -------------
Total operating costs and expenses 241,275 233,883 480,480 458,053
------------- -------------- ------------- -------------
OPERATING INCOME 103,231 87,132 216,104 186,583
Interest - net 11,421 14,983 21,634 29,756
------------- -------------- ------------- -------------
INCOME BEFORE INCOME TAXES 91,810 72,149 194,470 156,827
Income taxes 35,313 28,011 74,213 59,876
------------- -------------- ------------- -------------
NET INCOME $ 56,497 $ 44,138 $ 120,257 $ 96,951
============= ============== ============= =============
</TABLE>
Per share data is omitted since the Company's common stock is 100%
owned by GTE Corporation (GTE).
See Notes to Condensed Financial Statements.
1
<PAGE> 3
GTE SOUTH INCORPORATED
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 $ 56.5 $ 44.1 $ 120.3 $ 97.0
</TABLE>
Net income increased 28% or $12.4 and 24% or $23.3 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 and
network access services, partially offset by higher operating costs and
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 $ 138.2 $ 125.2 $ 272.2 $ 246.3
Network access services 141.3 122.7 275.5 242.2
Toll services 31.0 36.6 65.2 74.1
Other services and sales 34.0 36.5 83.7 82.0
-------------- ------------- ------------- -------------
Total revenues and sales $ 344.5 $ 321.0 $ 696.6 $ 644.6
</TABLE>
Total revenues and sales increased 7% or $23.5 and 8% or $52 for the three and
six months ended June 30, 1996, respectively, compared to the same periods in
1995.
Local service revenues increased 10% or $13 and 11% or $25.9 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 5% for both the three and
six months ended June 30, 1996, which generated $5.7 and $9.4 of additional
revenues, respectively. The three and six month increases also reflect growth
of $2.7 and $5.1 from enhanced custom calling features, such as SmartCall(R),
higher sales of CentraNet(R) of $1.8 and $3.5, and increases in measured usage
service revenues of $0.8 and $2.9.
Network access service revenues increased 15% or $18.6 for the three months and
14% or $33.3 for the six months ended June 30, 1996, compared to the same
periods in 1995. Minutes of use increased 10% and 11% for the three and six
months ended June 30, 1996, which generated $9.2 and $15.8 of additional
revenues, respectively. The increases also reflect favorable interLATA access
revenue adjustments of $4.9 and $7.1, special access revenues associated with
growth of special lines of $1.9 and $4.2, increases in revenues of $0.3 and
$1.5 associated with access fees charged to cellular service providers, and
$1.1 and $1.8 of higher end user access charges due to line growth.
2
<PAGE> 4
GTE SOUTH INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
Toll service revenues decreased 15% or $5.6 and 12% or $8.9 for the three and
six months ended June 30, 1996, respectively, compared to the same periods in
1995. The decreases are primarily due to optional discount calling plans and a
decline in revenues resulting from lower toll volume, primarily relating to
10XXX intraLATA toll competition. The decreases are also the result of
unfavorable settlement activities reducing toll revenues by approximately $3.0
and $2.5.
Other services and sales revenues decreased 7% or $2.5 for the three months and
increased 2% or $1.7 for the six months ended June 30, 1996, compared to the
same periods in 1995. The three month decrease is primarily due to lower
billing and collection activity of $1.6. The six month increase is primarily
due to a $2.2 increase in directory advertising revenue reflecting timing of
directory publications.
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 $ 241.3 $ 233.9 $ 480.5 $ 458.1
</TABLE>
Total operating costs and expenses increased 3% or $7.4 and 5% or $22.4 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 attributable
to the increased revenues and sales discussed above including higher digital
software costs of $3.0 and $8.2 and increased contractor costs of $6.1 and
$7.6. In addition, the six month increase in operating costs and expenses
reflects increases in the provision for uncollectible accounts of $2.3. The
impact of $1.9 in pension settlement gains recorded in the second quarter of
1995 was partially offset by settlement gains of $3 recorded in the first
quarter of 1996 which resulted from lump-sum payments from the Company's
pension plans.
Other (Income) Expenses
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------- --------------------------------
1996 1995 1996 1995
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Interest - net $ 11.4 $ 15.0 $ 21.6 $ 29.8
Income taxes 35.3 28.0 74.2 59.9
</TABLE>
Interest - net decreased 24% or $3.6 and 28% or $8.2 for the three and six
months ended June 30, 1996, respectively, compared to the same periods in 1995.
The decreases are primarily due to lower interest expense reflecting lower
interest rates associated with the high-coupon refinancing program initiated
during the fourth quarter of 1995.
Income taxes increased 26% or $7.3 for the three months and 24% or $14.3 for
the six months ended June 30, 1996, compared to the same periods in 1995,
primarily due to corresponding increases in pre-tax income.
3
<PAGE> 5
GTE SOUTH INCORPORATED
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. 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 $300 of commercial paper.
The Company's primary source of funds during the first six months of 1996 was
cash from operations of $215.2 compared to $187.8 for the same period in 1995.
The year-to-year increase in cash from operations is primarily the result of
improved results from operations. 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
$119 compared to $110.9 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 the remainder of 1996 to increase slightly
from the 1995 level.
Cash used in financing activities was $117.3 during the first six months of
1996 compared to $69.2 for the same period in 1995. The Company issued $125 of
6% debentures in February 1996 and $250 of 7.5% debentures in March 1996 to
refinance the debt called and redeemed in the fourth quarter of 1995. The
proceeds were subsequently used to reduce commercial paper. In addition, the
Company has invested funds with GTE, pending cash requirements under its 1996
capital program.
During 1995, the Company entered into forward contracts to sell $250 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 subsequently refinanced in March 1996 (discussed above). A gain of
approximately $15 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 $14.7 have been incurred, including $12.4 to
re-engineer customer service processes and $2.3 to re-engineer administrative
processes. Since the plan's inception at the beginning of 1994, costs of
approximately $103.4 have been incurred, including $76.6 to re-engineer
customer service processes and $13.4 to re-engineer administrative processes.
The restructuring costs also include $13.4 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, $59.6 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.
4
<PAGE> 6
GTE SOUTH INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
The Company submitted its 1996 annual interstate access filing on April 2,
1996, utilizing the Federal Communication Commission's (FCC) interim price cap
rules. In doing so, the Company changed its productivity factor from 5.3% to
4.0% for its Kentucky (Contel) and Virginia (GTE) tariff entities. 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 $1.3, effective July 1, 1996.
The Company's intrastate business is regulated by the state regulatory
commissions in Alabama, Illinois, Kentucky, North Carolina, South Carolina and
Virginia.
Effective June 24, 1996, the Company began operating under an intrastate price
regulation plan in North Carolina. The plan eliminates earnings regulation and
regulation of depreciation rates, provides a price index mechanism to increase
service rates, allows contract service arrangements (CSA) without commission
approval, and shortens the tariff approval period. The commission will review
the operation of the plan within five years of its effective date. Also, the
Company may file for a new plan or modifications to the existing plan, when
circumstances warrant.
Under the plan, residential basic local service rates are capped at their
initial rates for three years, and switched access and carrier common line
rates are capped in the aggregate for the life of the plan. Increases in rates
for other services are limited to both service category and service specific
price indexes (calculated from an inflation index), except for CentraNet(R),
billing and collection, and enhanced digital switch service rates which are not
limited.
For those services subject to the price indexes, the Company may increase
prices at any time, but only one increase per year is permitted. Tariffs must
be filed with documentation demonstrating that all price changes comply with
the price indexes. Also, the Company must file annually to update the indexes.
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 North Carolina, South Carolina, Virginia and
Illinois. The local competition docket for Kentucky is pending. In addition,
Kentucky, North Carolina, South Carolina and Illinois have concluded that
intraLATA 1+ competition is in the public interest. The Company plans to
convert all capable offices to 1+ in North Carolina by February 1997, in
Kentucky and South Carolina by March 1997 and in Illinois by November 1996.
IntraLATA 1+ conversion schedules in Alabama and Virginia have been suspended
pending state commission action.
In 1996, GTE, through a separate subsidiary, began offering long distance
service to its customers in selected states, including Alabama, Kentucky, North
Carolina, Virginia and Illinois, 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.
5
<PAGE> 7
GTE SOUTH INCORPORATED
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------------ ------------------
(Thousands of Dollars)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and temporary investments $ 10,168 $ 31,271
Accounts receivable, less allowances of $20,546 and $17,081 191,157 171,593
Note receivable from affiliate 64,100 --
Inventories and supplies 25,689 17,510
Deferred income tax benefits 4,368 13,361
Other 13,305 12,288
------------------ ------------------
Total current assets 308,787 246,023
------------------ ------------------
PROPERTY, PLANT AND EQUIPMENT, at cost 4,006,784 3,927,849
Accumulated depreciation (2,459,120) (2,361,666)
------------------ ------------------
Total property, plant and equipment, net 1,547,664 1,566,183
OTHER ASSETS, primarily employee benefit plans 107,711 90,542
------------------ ------------------
Total assets $ 1,964,162 $ 1,902,748
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term obligations, including current maturities $ 16,303 $ 16,140
Accounts payable 93,733 92,290
Taxes payable 40,851 35,711
Accrued interest 15,518 8,213
Accrued payroll costs 30,314 35,621
Dividends payable 31,608 18
Accrued restructuring costs 59,622 74,254
Other 87,739 90,729
------------------ ------------------
Total current liabilities 375,688 352,976
------------------ ------------------
NON-CURRENT LIABILITIES:
Long-term debt 722,139 723,304
Deferred income taxes 72,546 78,722
Employee benefit plans 141,666 135,327
Other liabilities 5,515 4,305
------------------ ------------------
Total non-current liabilities 941,866 941,658
------------------ ------------------
PREFERRED STOCK, subject to mandatory redemption 2,660 2,756
------------------ ------------------
SHAREHOLDERS' EQUITY:
Preferred stock 412 412
Common stock (21,000,000 shares issued) 525,000 525,000
Additional paid-in capital 58,320 58,320
Retained earnings 60,216 21,626
------------------ ------------------
Total shareholders' equity 643,948 605,358
------------------ ------------------
Total liabilities and shareholders' equity $ 1,964,162 $ 1,902,748
================== ==================
</TABLE>
See Notes to Condensed Financial Statements.
6
<PAGE> 8
GTE SOUTH INCORPORATED
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------------------------
1996 1995
------------------ ------------------
(Thousands of Dollars)
<S> <C> <C>
OPERATIONS:
Net income $ 120,257 $ 96,951
Adjustments to reconcile net income
to net cash from operations:
Depreciation and amortization 138,200 137,462
Deferred income taxes 2,817 7,910
Provision for uncollectible accounts 12,335 12,240
Changes in current assets and current liabilities (46,787) (57,946)
Other - net (11,635) (8,814)
------------------ ------------------
Net cash from operations 215,187 187,803
------------------ ------------------
INVESTING:
Capital expenditures (119,028) (110,876)
------------------ ------------------
Cash used in investing (119,028) (110,876)
------------------ ------------------
FINANCING:
Long-term debt issued 369,126 --
Long-term debt and preferred stock retired (357) (56,945)
Dividends (50,077) (33,643)
Change in affiliate note (64,100) --
Increase (decrease) in short-term obligations,
excluding current maturities (386,700) 21,353
Other - net 14,846 --
------------------ ------------------
Net cash used in financing (117,262) (69,235)
------------------ ------------------
Increase (decrease) in cash and temporary investments (21,103) 7,692
Cash and temporary investments:
Beginning of period 31,271 6,549
------------------ ------------------
End of period $ 10,168 $ 14,241
================== ==================
</TABLE>
See Notes to Condensed Financial Statements.
7
<PAGE> 9
GTE SOUTH INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
(1) The unaudited condensed 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 financial
statements include all adjustments, which consist only of normal
recurring accruals, necessary to present fairly the financial
information for such periods. These condensed 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 Ratio of Earnings to
Fixed Charges
(27) Financial Data Schedule
(b) The Company filed no reports on Form 8-K during the second
quarter of 1996.
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 South 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 Ratio of Earnings to
Fixed Charges
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 12
GTE SOUTH INCORPORATED
STATEMENT OF THE 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 $ 120,257
Add - Income taxes 74,213
- Fixed charges 27,177
--------------------
Adjusted earnings $ 221,647
====================
Fixed charges:
Interest expense $ 24,530
Portion of rent expense
representing interest 2,647
--------------------
Adjusted fixed charges $ 27,177
====================
RATIO OF EARNINGS TO FIXED CHARGES 8.16
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 10,168
<SECURITIES> 0
<RECEIVABLES> 275,803
<ALLOWANCES> 20,546
<INVENTORY> 25,689
<CURRENT-ASSETS> 308,787
<PP&E> 4,006,784
<DEPRECIATION> 2,459,120
<TOTAL-ASSETS> 1,964,162
<CURRENT-LIABILITIES> 375,688
<BONDS> 722,139
<COMMON> 525,000
2,660
412
<OTHER-SE> 118,536
<TOTAL-LIABILITY-AND-EQUITY> 1,964,162
<SALES> 696,584
<TOTAL-REVENUES> 696,584
<CGS> 243,802
<TOTAL-COSTS> 480,480
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,634
<INCOME-PRETAX> 194,470
<INCOME-TAX> 74,213
<INCOME-CONTINUING> 120,257
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 120,257
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
