<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 033-00348
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 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)
The registrant, a wholly-owned subsidiary of GTE Corporation, meets the
conditions set forth in General Instruction H(1) (a) and (b) of Form 10-Q and
is therefore filing this form with reduced disclosure format pursuant to
General Instruction H(2).
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
July 31, 1996. The Company's common stock is 100% owned by GTE Corporation.
<PAGE> 2
PART I. FINANCIAL INFORMATION
GTE HAWAIIAN TELEPHONE COMPANY INCORPORATED AND SUBSIDIARIES
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 $ 59,577 $ 57,801 $ 120,106 $ 118,892
Network access services 37,058 33,163 72,479 65,871
Toll services 23,544 23,367 46,246 48,101
Other services and sales 58,153 54,889 80,529 76,896
--------- --------- --------- ---------
Total revenues and sales 178,332 169,220 319,360 309,760
--------- --------- --------- ---------
OPERATING COSTS AND EXPENSES:
Cost of services and sales 63,205 64,688 131,304 126,250
Selling, general and administrative 32,962 33,783 56,492 61,336
Depreciation and amortization 30,856 29,942 61,647 60,052
--------- --------- --------- ---------
Total operating costs and expenses 127,023 128,413 249,443 247,638
--------- --------- --------- ---------
OPERATING INCOME 51,309 40,807 69,917 62,122
OTHER (INCOME) EXPENSE
Interest - net 9,996 9,597 20,204 19,399
Other - net 244 (106) 610 (264)
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 41,069 31,316 49,103 42,987
Income taxes 14,002 8,343 16,548 12,359
--------- --------- --------- ---------
NET INCOME $ 27,067 $ 22,973 $ 32,555 $ 30,628
========= ========= ========= =========
</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 HAWAIIAN TELEPHONE COMPANY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in Millions)
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1996 1995
----- -----
<S> <C> <C>
Net income $32.6 $30.6
</TABLE>
Net income increased 7% or $2 for the six months ended June 30, 1996, compared
to same period in 1995. The increase is primarily the result of higher network
access service revenues, partially offset by lower toll service revenues and
higher income tax expense.
Revenues and Sales
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------
1996 1995
------ ------
<S> <C> <C>
Local services $120.1 $118.9
Network access services 72.5 65.9
Toll services 46.3 48.1
Other services and sales 80.5 76.9
------ ------
Total revenues and sales $319.4 $309.8
</TABLE>
Total revenues and sales increased 3% or $9.6 for the six months ended June 30,
1996, compared to the same period in 1995.
Local service revenues increased 1% or $1.2 for the six months ended June 30,
1996, compared to the same period in 1995. The increase is primarily driven by
continued customer growth as reflected by a 3% increase in access lines and
growth in sales of CentraNet(R) and custom calling features, such as
SmartCall(R). Partially offsetting these increases were lower private line
revenues.
Network access service revenues increased 10% or $6.6 for the six months ended
June 30, 1996, compared to the same period in 1995. The increase is primarily
a result of a 10% increase in minutes of use, which generated $3.5 in
additional revenues. The increase is also attributable to a $2.2 increase in
special access revenues associated with growth in special access lines.
Toll service revenues decreased 4% or $1.8 for the six months ended June 30,
1996, compared to the same period in 1995, primarily as a result of optional
discount calling plans and lower domestic toll volumes resulting from continued
competition with long distance carriers authorized to provide interisland toll
service on a 10XXX basis.
Other services and sales revenues increased 5% or $3.6 for the six months ended
June 30, 1996, compared to the same period in 1995, primarily as a result of
$3.2 in additional revenues from international service contracts initiated in
the second half of 1995 and $2.1 in additional revenues from equipment sales.
Revenues also increased $1.5 from growth in Radio Paging services. Partially
offsetting these increases was $3.9 of lower directory advertising revenues
recognized in 1996.
2
<PAGE> 4
GTE HAWAIIAN TELEPHONE COMPANY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
Operating Costs and Expenses
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------
1996 1995
------ ------
<S> <C> <C>
Total operating costs and expenses $249.4 $247.6
</TABLE>
Total operating costs and expenses increased 1% or $1.8 for the six months
ended June 30, 1996, compared to the same period in 1995. The increase is
primarily due to higher contractor costs and application software upgrades and
higher depreciation expense in 1996. These increases are partially offset by
settlement gains recorded in the first quarter of 1996 which resulted from
lump-sum payments from the Company's pension plans.
Income Taxes
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------
1996 1995
------ ------
<S> <C> <C>
Income taxes $ 16.5 $ 12.4
</TABLE>
Income taxes increased 33% or $4.1 for the six months ended June 30, 1996,
compared to the same period in 1995, primarily due to a higher pre-tax income
and prior years' tax adjustments.
OTHER MATTERS
As previously reported, results for 1993 included a one-time pre-tax
restructuring charge of $78.3, which reduced net income by $48.2, primarily for
incremental costs related to implementation of the Company's three year
re- engineering plan. The re-engineering plan will redesign and streamline
processes to improve customer-responsiveness and product quality, reduce the
time necessary to introduce new products and services and further reduce costs.
The major components of the estimated cost to implement the re-engineering plan
and activity since inception are as follows (dollars in millions):
<TABLE>
<CAPTION>
December 31, 1994 and December 31, 1996 June 30,
Component 1993 1995 Activity 1995 Activity 1996
- ---------------- ------------ ------------- ------------ -------- --------
<S> <C> <C> <C> <C> <C>
Customer service $52.8 $(28.5) $24.3 $(6.4) $17.9
Administrative 19.0 (3.9) 15.1 (1.4) 13.7
Other 6.5 (6.5) -- -- --
----- ------ ----- ----- -----
Total $78.3 $(38.9) $39.4 $(7.8) $31.6
===== ====== ===== ===== =====
</TABLE>
Implementation of the re-engineering plan began during 1994 and is expected to
be substantially completed by the end of 1996. Costs of $46.7 have been
incurred since the plan's inception. These expenditures were primarily
associated with the closure and relocation of various service centers, software
enhancements and separation benefits related to employee reductions. As of
June 30, 1996, $31.6 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.
3
<PAGE> 5
GTE HAWAIIAN TELEPHONE COMPANY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
On May 15, 1996, GTE, through a separate subsidiary, began offering long
distance to its customers in Hawaii, 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.
On July 11, 1996, Duff & Phelps Credit Rating Company reduced the ratings of
the Company's first mortgage bonds from 'A- ' (Single-A-Minus) to 'BBB+'
(Triple-B-Plus), its debentures from 'BBB+' (Triple-B-Plus) to 'BBB' (Triple-B)
and its commercial paper rating from 'D-1-' (D-One-Minus) to 'D-2' (D-Two).
The Company's financial performance has been affected by the lack of regulatory
relief and low intrastate returns. Approximately $331 of outstanding debt and
$150 of unissued shelf debt is affected by the downgrade.
During the first quarter of 1996, the Company purchased the remaining shares of
common stock outstanding in its subsidiary, Micronesian Telecommunications
Corporation (MTC).
The Company submitted its 1996 annual interstate access filing on April 2,
1996, utilizing the Federal Communications Commission's (FCC) interim price cap
rules. In doing so, the Company changed its productivity factor from 5.3% to
4.0% for its subsidiary, MTC. 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 increase of $1, effective July 1, 1996.
On September 29, 1995, the Company filed an application to increase its rates
by $74 in its 1995 Rate Case. The Public Utilities Commission of the State of
Hawaii (PUC) approved bifurcation of the proceeding into a revenue requirement
phase (Phase I) and a rate design phase (Phase II). The PUC held public
hearings on Phase I in late 1995. The Department of Defense (DOD), AT&T
Communications of Hawaii (AT&T) and Pacwest Telecommunications Corporation
(Pacwest) filed motions to intervene in this proceeding. On January 12, 1996,
the PUC granted the DOD intervention in both phases but limited AT&T and
Pacwest to participating in the formulation of issues for Phase I. The PUC
indicated that after the issues are approved, AT&T and Pacwest may file motions
to intervene if it appears that the issues will significantly impact their
interests. On March 22, 1996, the PUC approved another request by AT&T for
participation in the Company's rate case. The PUC, however, limited the scope
of AT&T's participation only to issues relating to cost allocations,
jurisdictional separations, and competitive impacts. The PUC denied a similar
second request by Pacwest to participate in the Company's rate case.
In May 1996, the other parties in the proceeding filed their positions on the
Company's proposed increase. On July 26, 1996, the Company filed a
stipulation with the PUC requesting approval of an agreement reached with the
Division of Consumer Advocacy, DOD, and AT&T that resolves most of the issues
presented in the Company's Rate Case. Based on the issues resolved, the
parties agreed the Company is entitled to an interim revenue increase of $17.9.
This figure is based on $10.1 for the agreed upon issues plus an additional
$7.8 to allow the Company to recover depreciation expense at levels currently
authorized by the PUC. On August 1, 1996, the PUC adopted the agreement with
the interim revenue increase of $17.9 subject to refund pending a final
decision on Phase I. The Company anticipates that it will file its Phase II
proposal in the second half of 1996.
On March 1, 1996, the PUC ordered the Company to implement 1+ and 0+ equal
access within the State by May 1, 1996. On March 11, 1996, the Company filed a
motion for stay of proceedings and for reconsideration of the PUC's order. On
April 19, 1996, the PUC denied the Company's motion for stay of the order and
required the Company to implement and have available 1+ and 0+ equal access
effective July 10, 1996.
4
<PAGE> 6
GTE HAWAIIAN TELEPHONE COMPANY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
On May 17, 1996, the PUC formally adopted new administrative rules governing
telecommunications competition and establishing a universal service fund in
Hawaii. Since June 3, 1996, the effective date of the new rules, the PUC
granted certificates of authority to four applicants to operate as resellers of
telecommunications services. An additional twenty-four applications for
certificates of authority remain pending before the Commission.
On May 11, 1993, the PUC initiated a communications infrastructure proceeding
which was intended to investigate such issues as: what markets should be opened
to competition; who should be allowed to compete in those markets; and what
rules, if any, should apply. On June 12, 1996, the PUC issued its decision and
order. Among its provisions, the order approved the Company's cost recovery
tariff and denied interexchange carriers' requests for "discounted" or impaired
intrastate access rates. It further required the Company to implement remote
call forwarding within six months as an interim measure pending full number
portability, and to file various position papers concerning recovery of the
undepreciated balance of its facilities, rate restructuring, and universal
service. In addition, the PUC ordered the parties to meet informally to arrive
at a consensus on unbundling the Company's network functions and services.
On July 15, 1996, as part of a pilot project, the PUC selected TelHawaii
Incorporated (TelHawaii) as the alternative provider of telecommunications
services and as the carrier of last resort in the Ka'u area of the island of
Hawaii, effective May 15, 1997. The Company must continue to provide service
in the Ka'u area while TelHawaii seeks federal universal service funding. The
PUC further required the Company and TelHawaii to negotiate all necessary
agreements, including as required or appropriate, an agreement for the transfer
to or use by TelHawaii of the Company's assets and agreements for extended area
service, directory assistance and publications, interconnection, enhanced 911,
and telecommunications relay services. The Company intends to continue
offering a competitive alternative for Ka'u customers even after TelHawaii
begins providing alternative telecommunications services as a carrier of last
resort.
On July 16, 1996, the Company filed its tariff on implementation of Minimum
Point of Entry (MPOE). The filing provides for further opening of the
competitive telecommunications arena in Hawaii for inside wire and intra
building cable. It also provides for the promotion of the growth of
competitive businesses for multi-unit locations. The tariff is pending PUC
approval. The proposed effective date is October 14, 1996, with implementation
of MPOE on January 1, 1997, over a five year period.
5
<PAGE> 7
GTE HAWAIIAN TELEPHONE COMPANY INCORPORATED AND SUBSIDIARIES
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 $ 5,955 $ 4,515
Receivables, less allowances of $10,025 and $6,338 180,548 150,560
Inventories and supplies 10,030 8,829
Deferred income tax benefits 12,908 18,157
Prepaid taxes and other 9,195 15,327
------------ ------------
Total current assets 218,636 197,388
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, at cost 1,990,334 1,967,801
Accumulated depreciation (1,192,962) (1,158,356)
------------ ------------
Total property, plant and equipment, net 797,372 809,445
------------ ------------
OTHER ASSETS, primarily employee benefit plans 155,958 147,982
------------ ------------
Total assets $ 1,171,966 $ 1,154,815
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Short-term obligations, including current maturities $ 253,552 $ 123,764
Accounts payable 22,275 37,531
Taxes payable 30,816 15,927
Accrued interest 10,489 11,786
Accrued payroll costs 27,171 31,351
Dividends payable 9,293 --
Accrued restructuring costs 31,567 39,353
Other 30,421 30,771
------------ ------------
Total current liabilities 415,584 290,483
------------ ------------
NON-CURRENT LIABILITIES:
Long-term debt 356,642 482,412
Deferred income taxes 86,256 78,114
Other liabilities 36,472 30,378
------------ ------------
Total non-current liabilities 479,370 590,904
------------ ------------
SHAREHOLDER'S EQUITY:
Common stock (10,000,000 shares issued) 250,000 250,000
Additional paid-in capital 41,146 41,146
Retained deficit (14,134) (17,718)
------------ ------------
Total shareholder's equity 277,012 273,428
------------ ------------
Total liabilities and shareholder's equity $ 1,171,966 $ 1,154,815
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
6
<PAGE> 8
GTE HAWAIIAN TELEPHONE COMPANY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------------
1996 1995
--------- ---------
(Thousands of Dollars)
<S> <C> <C>
OPERATIONS:
Net income $ 32,555 $ 30,628
Adjustments to reconcile net income
to net cash from operations:
Depreciation and amortization 61,647 60,052
Deferred income taxes 9,801 8,931
Provision for uncollectible accounts 7,102 7,518
Changes in current assets and current liabilities (34,160) (44,611)
Other - net (6,407) (10,541)
--------- ---------
Net cash from operations 70,538 51,977
--------- ---------
INVESTING:
Capital expenditures (43,670) (51,371)
Purchase of MTC stock (450) --
--------- ---------
Cash used in investing (44,120) (51,371)
--------- ---------
FINANCING:
Long-term debt retired (146,238) (1,269)
Dividends (20,029) (16,693)
Increase in short-term obligations, excluding current maturities 141,289 12,059
--------- ---------
Net cash used in financing (24,978) (5,903)
--------- ---------
Increase (decrease) in cash and temporary investments 1,440 (5,297)
Cash and temporary investments:
Beginning of period 4,515 7,709
--------- ---------
End of period $ 5,955 $ 2,412
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
7
<PAGE> 9
GTE HAWAIIAN TELEPHONE COMPANY INCORPORATED AND SUBSIDIARIES
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) On April 1, 1996, the Company redeemed prior to stated maturity its $35
million Series V 8.5% first mortgage bond. On June 1, 1996, the Company
redeemed prior to stated maturity its $75 million Series AA 9.0% first
mortgage bond. The Company expects to refinance this high coupon debt
during the second half of 1996. In anticipation of this refinancing
program the Company entered into forward contracts to sell $150 million
of U.S. Treasury bonds in order to hedge against future changes in
market interest rates. Any gain or loss recognized upon the expiration
or settlement of the forward contracts will be amortized over the life
of the associated refinanced debt as an offset or addition to interest
expense.
(3) 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 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 Hawaiian Telephone Company 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 HAWAIIAN TELEPHONE COMPANY AND SUBSIDIARIES
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 $32,555
Add - Income taxes 16,548
- Fixed charges 23,553
-------
Adjusted earnings $72,656
=======
Fixed charges:
Interest expense $21,462
Portion of rent expense
representing interest 2,091
-------
Adjusted fixed charges $23,553
=======
RATIO OF EARNINGS TO FIXED CHARGES 3.08
</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> 5,955
<SECURITIES> 0
<RECEIVABLES> 190,573
<ALLOWANCES> 10,025
<INVENTORY> 10,030
<CURRENT-ASSETS> 218,636
<PP&E> 1,990,334
<DEPRECIATION> 1,192,962
<TOTAL-ASSETS> 1,171,966
<CURRENT-LIABILITIES> 415,584
<BONDS> 356,642
<COMMON> 250,000
0
0
<OTHER-SE> 27,012
<TOTAL-LIABILITY-AND-EQUITY> 1,171,966
<SALES> 319,360
<TOTAL-REVENUES> 319,360
<CGS> 131,304
<TOTAL-COSTS> 249,443
<OTHER-EXPENSES> 610
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,204
<INCOME-PRETAX> 49,103
<INCOME-TAX> 16,548
<INCOME-CONTINUING> 32,555
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,555
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
