UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
For the period ended March 31, 1994
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: 2-33059
GTE HAWAIIAN TELEPHONE COMPANY INCORPORATED
(Exact name of registrant as specified in its charter)
Hawaii 99-0049500
(State or other jurisdiction of
(I.R.S. Employer
Incorporation or organization)
Identification No.)
1177 Bishop Street, Honolulu, Hawaii 96813
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code 808-546-
4511
(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 10,000,000 shares of $25 par value common stock
outstanding at April 30, 1994.
GTE HAWAIIAN TELEPHONE COMPANY INCORPORATED AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE
Condensed Consolidated Statements of Income . . . . . . . . .
. . . . 1
Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . .
. . . . 2
Condensed Consolidated Balance Sheets - Assets. . . . . . . .
. . . . 4
Condensed Consolidated Balance Sheets - Liabilities and
Shareholder's Equity . . . . . . . . . . . . . . . . . . .
. . . . 5
Condensed Consolidated Statements of Cash Flows . . . . . . .
. . . . 6
Notes to Condensed Consolidated Financial Statements. . . . .
. . . . 7
PART II. OTHER INFORMATION
Items 1 through 6 . . . . . . . . . . . . . . . . . . . . . .
. . . . 8
Signature . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 9
PART I. FINANCIAL INFORMATION
GTE HAWAIIAN TELEPHONE COMPANY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31,
1994 1993
(Thousands of Dollars)
OPERATING REVENUES:
Local network services $ 54,227 $ 52,082
Network access services 32,056 25,734
Long distance services 28,374 25,823
Equipment sales and services 17,969 20,850
Other 28,684 28,632
161,310 153,121
OPERATING EXPENSES:
Cost of sales and services 44,893 39,045
Depreciation and amortization 27,762 24,990
Marketing, selling, general and administrative 52,519
47,783
125,174 111,818
Net operating income 36,136 41,303
OTHER (INCOME) DEDUCTIONS:
Interest expense 8,497 7,368
Other - net 831 (332)
INCOME BEFORE INCOME TAXES 26,808 34,267
INCOME TAXES 10,143 13,695
NET INCOME $ 16,665 $ 20,572
Per share data is omitted since the Company's common stock is
100% owned by GTE Corporation (Parent Company).
See Notes to Condensed Consolidated Financial Statements.
1
GTE HAWAIIAN TELEPHONE COMPANY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OPERATING RESULTS
Net income decreased 19% or $3.9 million for the three months
ended March 31, 1994 compared to the same period in 1993. The
decrease is primarily the result of higher operating expenses
partially offset by higher revenues.
Operating Revenues
Operating revenues increased 5% or $8.2 million for the three
months ended March 31, 1994 compared to the same period in 1993.
Local network service revenues increased 4% or $2.1 million for
the first quarter of 1994 compared to the same period in 1993.
The increase reflects continued customer growth as reflected by
an increase in access lines.
Network access service revenue increased 25% or $6.3 million for
the first quarter of 1994 compared to the same period in 1993.
The increase is primarily due to higher carrier common line rates
and a favorable pooling settlement.
Long distance service revenues increased 10% or $2.6 million for
the first quarter of 1994 compared to the same period in 1993.
The increase is primarily attributable to increased usage and
higher international revenues.
Equipment sales and services revenues decreased 14% or $2.9
million for the first quarter of 1994 compared to the same period
in 1993. The decrease is primarily due to lower revenue from
sales of large private branch exchanges and key telephone
systems.
Operating Expenses
Operating expenses increased 12% or $13.4 million for the first
quarter of 1994 compared to the same period in 1993. The
increase is primarily due to higher software costs and higher
depreciation resulting from increased plant investments.
Other Expenses
Interest expense increased 15% or $1.1 million for the first
quarter of 1994 compared to the same period in 1993. The
increase is primarily due to higher average debt levels.
2
GTE HAWAIIAN TELEPHONE COMPANY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Income tax decreased 26% or $3.6 million for the first quarter of
1994 compared to the same period in 1993. The decrease is
primarily due to lower pretax income.
CAPITAL RESOURCES AND LIQUIDITY
The Company's primary source of funds during the first quarter of
1994 was cash flow from operating activities of $20 million
compared to $36 million for the same period in 1993. The
decrease primarily reflects lower revenues due to the timing
differences in the payment of accounts payable.
Capital expenditures represent the largest use of funds during
the first quarter of 1994 reflecting the Company's continued
growth in access lines, modernization of current facilities and
introduction of new products and services. The Company's capital
expenditures the first quarter of 1994 were $50 million compared
to $35 million during the same period in 1993. The Company's
anticipated construction costs for 1994 are approximately $170
million.
Cash provided from financing activities was $19 million for the
first quarter of 1994 compared to cash used for financing
activities of $2 million for the same period in 1993. The
Company increased short-term borrowings by $23 million primarily
to fund capital additions. External financing included long-term
borrowings of $123 million in the first quarter of 1993. The
proceeds were used to retire short-term debt.
During the first quarter of 1994, the Company began
implementation of its re-engineering plan. This plan will allow
the Company to continue to respond aggressively to competitive
and regulatory developments through reduced costs, improved
service quality, competitive prices and new product offerings.
Moreover, implementation of this program over the next three
years will position the Company to accelerate delivery of a full
array of voice, video and data services.
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. In
addition, a $3.9 billion line of credit is available to the
Company through shared lines of credit with GTE and other
affiliates to support short-term financing needs.
3
GTE HAWAIIAN TELEPHONE COMPANY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31,
December 31,
1994 1993
(Thousands of Dollars)
CURRENT ASSETS:
Cash $ 1,773 $ 808
Receivables, less allowances of
$6,344 and $9,072, respectively 127,615 119,467
Materials and supplies, at average cost 8,322 6,981
Deferred income tax benefits 14,644 14,203
Prepayments and other 16,519 14,924
Total current assets 168,873 156,383
PROPERTY, PLANT AND EQUIPMENT:
Original cost 1,853,339 1,823,848
Accumulated depreciation (697,086)
(678,175)
Net property, plant and equipment 1,156,253 1,145,673
PREPAID PENSION 99,536 96,209
OTHER ASSETS 25,518 27,680
TOTAL ASSETS $ 1,450,180 $ 1,425,945
See Notes to Condensed Consolidated Financial Statements.
4
GTE HAWAIIAN TELEPHONE COMPANY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDER'S EQUITY
March 31,
December 31,
1994 1993
(Thousands of Dollars)
CURRENT LIABILITIES:
Short-term debt, including current maturities $ 138,664 $
113,999
Accounts payable 20,823 50,227
Accrued taxes 15,697 10,141
Accrued payroll and vacations 24,131 19,251
Accrued interest 6,764 7,285
Accrued dividends 5,000 5,000
Accrued restructuring costs and other 68,687 69,694
Total current liabilities 279,766 275,597
LONG-TERM DEBT 379,248 379,901
DEFERRED CREDITS, primarily deferred
income taxes and investment tax credits 269,995 261,612
SHAREHOLDER'S EQUITY:
Common stock 250,000 250,000
Other capital 41,604 41,510
Reinvested earnings 229,567 217,325
Total shareholder's equity 521,171 508,835
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 1,450,180 $
1,425,945
See Notes to Condensed Consolidated Financial Statements.
5
GTE HAWAIIAN TELEPHONE COMPANY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
1994 1993
(Thousands of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 16,665 $ 20,572
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 27,762 24,990
Deferred income taxes and investment
tax credits 5,432 (1,679)
Provision for uncollectible accounts 1,380
3,477
Changes in current assets and
current liabilities (32,960)
(7,228)
Other - net 1,719 (4,251)
Net cash from operating activities 19,998 35,881
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (50,301)
(34,614)
Other - net 12,312 (230)
Net cash used in investing activities (37,989)
(34,844)
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued -- 40,000
Long-term debt issued -- 123,466
Long-term debt retired (585)
(917)
Dividends paid to shareholder (5,000)
- - --
Net change in affiliate notes 1,987 1,001
Increase (decrease) in short-term debt 22,554 (165,107)
Net cash provided from (used in)
financing activities 18,956 (1,557)
Increase (decrease) in cash 965 (520)
Cash at beginning of period 808 4,246
Cash at end of period $ 1,773 $ 3,726
See Notes to Condensed Consolidated Financial Statements.
6
GTE HAWAIIAN TELEPHONE COMPANY INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) The condensed consolidated financial statements included
herein have been prepared by the Company, without audit, 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 1993 Annual Report to Shareholder
incorporated by reference in the Annual Report on Form 10-K.
(2) On May 11, 1993, the Company filed a general rate increase
application with the Public Utilities Commission, requesting
approval to increase intrastate revenues by $50.4 million. This
represents a 15.9% increase over intrastate revenues for 1993 at
current rates, and is the first rate increase application the
Company has filed since 1985. The Company's rate restructure
proposal and earnings review investigation were incorporated into
a rate case docket. Hearings took place in March and April 1994.
A final decision is expected in late 1994.
(3) Reclassifications of prior year data have been made in the
financial statements where appropriate to conform to the 1994
presentation.
7
GTE HAWAIIAN TELEPHONE COMPANY INCORPORATED AND SUBSIDIARIES
PART II. OTHER INFORMATION
Items 1 through 5 are not applicable for the quarter ended March
31, 1994.
Item 6. Exhibits and Reports on Form 8-K.
GTE Hawaiian Telephone Company Incorporated filed a report on
Form 8-K dated January 13, 1994 on January 14, 1994, under Item
5, "Other Events." No financial statements were filed with this
report.
8
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 HAWAIIAN TELEPHONE COMPANY
INCORPORATED
(Registrant)
Date: May 12, 1994 WILLIAM M. EDWARDS, III
WILLIAM M. EDWARDS, III
Controller
(Chief Accounting Officer)
9
