Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark one)
---
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly 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 1-1150
NEW ENGLAND TELEPHONE AND TELEGRAPH COMPANY
Incorporated under the laws of the State of New York
I.R.S. Employer Identification Number 04-1664340
125 High Street, Boston, Massachusetts 02110
Telephone Number (617) 743-9800
THE REGISTRANT, A WHOLLY OWNED SUBSIDIARY OF NYNEX 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 THE 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 .
<PAGE>
- 2 -
Form 10-Q Part I New England Telephone and Telegraph Company
<TABLE>
PART I - FINANCIAL INFORMATION
STATEMENTS OF INCOME AND RETAINED EARNINGS
(In millions) (Unaudited)
<CAPTION>
For the
Three Months Ended
March 31,
1994 1993
<S> <C> <C>
OPERATING REVENUES
Local service . . . . . . . . . . . . . . $ 470.2 $ 445.7
Long distance . . . . . . . . . . . . . . 193.4 186.8
Network access. . . . . . . . . . . . . . 298.9 294.5
Other . . . . . . . . . . . . . . . . . . 90.2 83.1
Total operating revenues . . . . . . . . 1,052.7 1,010.1
OPERATING EXPENSES
Maintenance and support . . . . . . . . . 305.0 258.4
Depreciation and amortization . . . . . . 219.8 195.9
Marketing and customer services . . . . . 146.3 133.9
Taxes other than income taxes . . . . . . 23.5 30.3
Provision for uncollectible revenues. . . 12.2 12.7
Other . . . . . . . . . . . . . . . . . . 82.2 103.0
Total operating expenses . . . . . . . . 789.0 734.2
Operating income. . . . . . . . . . . . . . 263.7 275.9
Other income (expense) - net. . . . . . . . 2.7 (13.3)
Interest expense. . . . . . . . . . . . . . 40.2 46.3
Earnings before Income taxes and
cumulative effect of change in
accounting principle. . . . . . . . . . 226.2 216.3
Income taxes
Federal . . . . . . . . . . . . . . . . . 66.1 60.8
State . . . . . . . . . . . . . . . . . . 15.4 15.3
Total income taxes . . . . . . . . . . . 81.5 76.1
Earnings before cumulative effect
of change in accounting principle . . . 144.7 140.2
Cumulative effect of change in accounting
for postemployment benefits, net of
taxes . . . . . . . . . . . . . . . . . - (25.3)*
Net Income. . . . . . . . . . . . . . . . . $ 144.7 $ 114.9 *
RETAINED EARNINGS
Beginning of period . . . . . . . . . . . $ 929.9 $1,262.0
Net income . . . . . . . . . . . . . . . 144.7 114.9 *
Dividends declared . . . . . . . . . . . (106.0) (103.4)
End of period . . . . . . . . . . . . . . $ 968.6 $1.273.5 *
*Restated to reflect the adoption of Statement of Financial Accounting
Standards No. 112 in the fourth quarter of 1993 retroactive to January 1, 1993.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
- 3 -
Form 10-Q Part I New England Telephone and Telegraph Company
<TABLE>
BALANCE SHEETS
(In millions)
<CAPTION>
March 31, December 31,
1994 1993
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . $ 8.8 $ 11.2
Receivables (net of allowance of $54.1
and $51.7, respectively) . . . . . . . . . 748.5 732.5
Deferred income taxes. . . . . . . . . . . . 105.6 120.6
Deferred charges . . . . . . . . . . . . . . 93.9 99.5
Inventory. . . . . . . . . . . . . . . . . . 44.0 57.6
Prepaid expenses and other . . . . . . . . . 35.7 69.6
Total current assets . . . . . . . . . . . 1,036.5 1,091.0
Telephone plant - at cost. . . . . . . . . . . 11,777.1 11,591.1
Less: accumulated depreciation . . . . . . . 5,160.1 5,013.9
6,617.0 6,577.2
Deferred charges and other . . . . . . . . . . 594.4 602.8
TOTAL ASSETS . . . . . . . . . . . . . . . . $ 8,247.9 $ 8,271.0
LIABILITIES AND SHARE OWNER'S EQUITY
Current liabilities:
Accounts payable
Affiliates . . . . . . . . . . . . . . . . $ 395.6 $ 404.3
Trade and other. . . . . . . . . . . . . . 577.2 587.7
Short-term debt. . . . . . . . . . . . . . . 65.6 158.5
Dividends payable. . . . . . . . . . . . . . 106.1 103.4
Taxes accrued. . . . . . . . . . . . . . . . 91.0 26.5
Advance billing and customers' deposits. . . 20.7 18.2
Interest accrued . . . . . . . . . . . . . . 45.1 37.8
Total current liabilities. . . . . . . . . 1,301.3 1,336.4
Long-term debt . . . . . . . . . . . . . . . . 2,164.3 2,164.0
Deferred income taxes. . . . . . . . . . . . . 829.5 841.7
Unamortized investment tax credits . . . . . . 109.9 115.4
Other long-term liabilities
and deferred credits . . . . . . . . . . . . 785.2 794.5
Total liabilities. . . . . . . . . . . . . 5,190.2 5,252.0
Commitments and contingencies (Notes (d) and
(e))
Share owner's equity:
Common stock - one share, without par value. 2,089.1 2,089.1
Retained earnings. . . . . . . . . . . . . . 968.6 929.9
Total share owner's equity . . . . . . . . 3,057.7 3,019.0
TOTAL LIABILITIES AND SHARE OWNER'S EQUITY . $ 8,247.9 $ 8,271.0
See accompanying notes to financial statements.
</TABLE>
<PAGE>
- 4 -
Form 10-Q Part I New England Telephone and Telegraph Company
<TABLE>
STATEMENTS OF CASH FLOWS
(In millions) (Unaudited)
<CAPTION>
For The
Three Months Ended
March 31,
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income. . . . . . . . . . . . . . . . . . . . $ 144.7 $ 114.9 *
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization. . . . . . . . . 219.8 195.9
Allowance for funds used during
construction - equity component. . . . . . . (2.0) (2.0)
Changes in operating assets and liabilities:
Receivables. . . . . . . . . . . . . . . . . (16.0) 1.4
Deferred income taxes. . . . . . . . . . . . 15.0 (6.5)*
Deferred charges . . . . . . . . . . . . . . 5.6 14.9
Inventory. . . . . . . . . . . . . . . . . . 13.6 4.1
Prepaid expenses and other . . . . . . . . . 33.9 (6.8)
Accounts payable . . . . . . . . . . . . . . (19.2) (64.4)*
Taxes accrued. . . . . . . . . . . . . . . . 64.5 85.9
Advance billing and customers' deposits. . . 2.5 1.2
Interest accrued . . . . . . . . . . . . . . 7.3 (6.1)
Deferred income taxes and Unamortized
investment tax credits . . . . . . . . . . . (17.7) (126.7)*
Other long-term liabilities and
deferred credits . . . . . . . . . . . . . . (9.3) 140.6 *
Other - net. . . . . . . . . . . . . . . . . . (3.1) 3.3
Total adjustments . . . . . . . . . . . . . . . . 294.9 234.8
Net cash provided by operating activities . . . . 439.6 349.7
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . (245.5) (172.9)
Advances to NYNEX. . . . . . . . . . . . . . . - 82.0
Net cash used in investing activities . . . . . . (245.5) ( 90.9)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from NYNEX. . . . . . . . . . . . . . (92.8) 0.1
Dividends paid to NYNEX. . . . . . . . . . . . (103.4) (99.1)
Issuance of long-term debt . . . . . . . . . . - 223.6
Repayment of long-term debt and
capital leases. . . . . . . . . . . . . . (0.3) (0.3)
Debt refinancings and call premiums. . . . . . - (380.5)
Net cash used in financing activities . . . . . . (196.5) (256.2)
Net (decrease) increase in Cash . . . . . . . . . (2.4) 2.6
Cash at beginning of year . . . . . . . . . . . . 11.2 12.7
Cash at end of year . . . . . . . . . . . . . . . $ 8.8 $ 15.3
*Restated to reflect the adoption of Statement of Financial Accounting
Standards No. 112 in the fourth quarter of 1993 retroactive to January 1, 1993.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
- 5 -
Form 10-Q Part I New England Telephone and Telegraph Company
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(a) BASIS OF PRESENTATION - The financial statements have been prepared by
New England Telephone and Telegraph Company (the "Company"), a wholly owned
subsidiary of NYNEX Corporation ("NYNEX"), pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC") and, in the
opinion of management, include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the financial
information for each period shown. 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 SEC rules and regulations. Management believes that the
disclosures made are adequate to make the information presented not
misleading. Certain information in the financial statements for 1993 has
been reclassified to conform to the current year's presentation. The results
for interim periods are not necessarily indicative of results for the full
year. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's 1993 Annual
Report on Form 10-K.
(b) CASH - The Company's cash management policy is to make funds available
in banks when checks are presented. At March 31, 1994, the Company had
recorded in Accounts payable checks outstanding but not yet presented for
payment of $63.1 million.
(c) SUPPLEMENTAL INFORMATION - The following information is provided in
accordance with Statement of Financial Accounting Standards No. 95,
"Statement of Cash Flows":
<TABLE>
<CAPTION>
For the
Three Months Ended
March 31,
1994 1993
(In millions)
<S> <C> <C>
Income tax (refunds) payments. . . . . . . . . . $(16.9) $31.7
Interest payments. . . . . . . . . . . . . . . . $ 32.2 $50.9
</TABLE>
(d) REVENUES SUBJECT TO POSSIBLE REFUND - Several regulatory matters,
primarily involving the rates and charges for the provision of certain
interstate access and other related services, may possibly require the refund
of a portion of the revenues collected for such services in the current and
prior periods. As of March 31, 1994, the aggregate amount
of such revenues that was estimated to be subject to possible refund was
approximately $14 million, plus related interest. The outcome of each
pending matter, as well as the time frame within which each will be resolved,
is not presently determinable.
<PAGE>
- 6 -
Form 10-Q Part I New England Telephone and Telegraph Company
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
(e) LITIGATION AND OTHER CONTINGENCIES - Various legal actions and
regulatory proceedings are pending that may affect the Company, including
matters involving Racketeer Influenced and Corrupt Organizations Act,
antitrust, tort, contract and tax deficiency claims. While counsel cannot
give assurance as to the outcome of any of these matters, in the opinion
of management based upon the advice of counsel, the ultimate resolution of
these matters in future periods is not expected to have a material effect
on the Company's financial position or annual operating results but could
have a material effect on quarterly operating results.
<PAGE>
- 7 -
Form 10-Q Part I New England Telephone and Telegraph Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
The following Management's Narrative Analysis of Results of Operations is
provided pursuant to General Instruction H(2) to Form 10-Q.
BUSINESS RESTRUCTURING
As previously reported (see the Company's Annual Report on Form 10-K for the
year ended December 31, 1993), the Company recorded pretax charges of
approximately $619 million in the fourth quarter of 1993 for business
restructuring. These charges included costs for severance, postretirement
medical costs and for re-engineering the way service is delivered to
customers. In the first quarter of 1994, the Company utilized approximately
$5 million of the restructuring reserves, primarily for developing and
marketing a single "NYNEX" brand identity and for systems re-engineering.
In addition, the reserve was reduced by approximately $6 million to reflect
a revised estimate of costs related to a "NYNEX" brand identity.
In February of 1994, the Board of Directors of NYNEX Corporation approved a
pension enhancement for eligible management employees who retire through
December 31, 1996. This enhancement will be offered at different times
through 1996 according to local force requirements. An agreement has
been reached with the Communications Workers of America which extends the
existing labor agreement to August 1998 and provides a retirement incentive.
Negotiations to reach a similar agreement with the International Brotherhood of
Electrical Workers continue. The management retirement incentive and any
nonmanagement retirement incentive that may subsequently be implemented are
intended to provide a voluntary means to implement a portion of the planned
work force reductions of approximately 6,300 employees by the end of 1996.
There were no significant cost savings as a result of business restructuring
in the first quarter of 1994. Force reductions will begin in the second quarter
of 1994 as re-engineering initiatives are implemented and as retirement
incentives are offered to eligible employees.
FIRST THREE MONTHS OF 1994 AS COMPARED TO FIRST THREE MONTHS OF 1993
OPERATING REVENUES
Operating revenues increased $42.6 million, or 4.2%, over the same period
last year. The increase in total operating revenues is comprised of the
following:
<TABLE>
<CAPTION>
Increase
(In millions)
<S> <C>
Local service. . . . . . . . . . . . . . $24.5
Long distance. . . . . . . . . . . . . . 6.6
Network access . . . . . . . . . . . . . 4.4
Other. . . . . . . . . . . . . . . . . . 7.1
$42.6
</TABLE>
Local service revenues are earned from the provision of local exchange, local
private line and local public network services. Local service revenues
increased $24.5 million due principally to increased customer demand
evidenced by growth in access lines and growth in sales of calling features
such as caller identification, remote call forwarding and touch-tone
services. This increase also includes the 1994 reversal of
<PAGE>
- 8 -
Form 10-Q Part I New England Telephone and Telegraph Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
FIRST THREE MONTHS OF 1994 AS COMPARED TO FIRST THREE MONTHS OF 1993
(Continued)
OPERATING REVENUES (Continued)
$5 million of revenues deferred in 1993, that were in excess of the required
one-time credit to customers' bills pursuant to the Rhode Island price
regulation trial for 1993.
Long distance revenues are earned from the provision of services beyond the
local service area, but within the local access transport area ("LATA"), and
include public and private network switching. Long distance revenues
increased $6.6 million principally due to increased message toll service
usage, including the effect of severe winter weather, partially offset by
decreases in private line revenues and wide area telecommunications service
revenues due primarily to increased competition and customer shifts to
lowered priced services offered by the Company.
Network access revenues are earned from the provision of exchange access
services primarily to interexchange carriers. Network access revenues
increased $4.4 million due principally to a $7 million increase in switched
access revenues partially offset by a $3 million decrease in special access
revenues. Switched access revenues increased due principally to an
$18 million increase in network demand offset by a net decrease of
approximately $6 million primarily attributable to interstate rate changes.
Special access revenues decreased due principally to decreased demand
resulting from increased competition and customer shifts to lower priced
services offered by the Company.
Other revenues are earned from the provision of products and services other
than Local service, Long distance and Network access. Other revenues
increased $7.1 million due principally to a $4 million increase in revenues
related to the directory licensing agreement with NYNEX Information Resources
Company resulting from higher estimated pretax earnings from the directories
published pursuant to the agreement and to a $2 million increase in revenues
from inside wire related charges and voice messaging services.
OPERATING EXPENSES
Operating expenses for the three months ended March 31, 1994 increased
$54.8 million, or 7.5%, over the same period last year. This increase in
total operating expenses is comprised of the following:
<TABLE>
<CAPTION>
Increase (Decrease)
(In millions)
<S> <C>
Depreciation and amortization. . . . . . $23.9
Taxes other than income taxes. . . . . . (6.8)
All other:
Employee related . . . . . . . . . . 1.7
Other. . . . . . . . . . . . . . . . 36.0
$54.8
</TABLE>
<PAGE>
- 9 -
Form 10-Q Part I New England Telephone and Telegraph Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
FIRST THREE MONTHS OF 1994 AS COMPARED TO FIRST THREE MONTHS OF 1993
(Continued)
OPERATING EXPENSES (Continued)
Depreciation and amortization increased $23.9 million due principally to a
$17 million increase due to revised intrastate depreciation rates in
Massachusetts effective July 1993 and a $7 million increase associated with
increased plant investment.
Taxes other than income taxes, which include gross receipts taxes, property
taxes and other non-income based taxes, decreased $6.8 million due
principally to an $8 million decrease in property taxes primarily
attributable to a reversal of a 1993 accrual as a result of unasserted
municipal assessments.
Employee related costs, which consist primarily of wages, payroll taxes and
employee benefits, increased $1.7 million. Wages and payroll taxes increased
$2 million, due principally to increases in salary and wage rates, partially
offset by decreases resulting from reductions in the Company's work force due
to transfers of employees to Telesector Resources Group, Inc. ("Telesector
Resources") associated with re-engineering the way service is delivered to
customers, including operating the Company and New York Telephone Company
("New York Telephone") as a single enterprise under the "NYNEX" brand (see
Other operating expenses below).
Other operating expenses, which consist primarily of contracted and
centralized services, rent and other general and administrative costs,
increased $36.0 million. This increase was principally due to: a
$14 million net increase in charges from affiliated companies primarily
attributable to the transfer of employees from the Company to Telesector
Resources (see Employee related costs above); a $9 million increase in right
to use fees principally resulting from increased software purchases; and a $7
million increase resulting from capitalization in 1993 of certain 1992
engineering charges.
<PAGE>
- 10 -
Form 10-Q Part I New England Telephone and Telegraph Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
FIRST THREE MONTHS OF 1994 AS COMPARED TO FIRST THREE MONTHS OF 1993
(Continued)
OTHER INCOME (EXPENSE) - NET
Other income (expense) - net increased $16.0 million over the same period
last year due principally to a $14 million increase resulting from
termination in 1994 of payments to New York Telephone pursuant to the
transition plan to phase in the earnings impact of the unified tariff access
rate structure. In addition, there was a $3 million increase due to higher
expenses in the first three months of 1993 for the interstate portion of call
premiums and other charges associated with the refinancing of long-term debt.
INTEREST EXPENSE
Interest expense decreased $6.1 million from the same period last year,
primarily due to a decrease in average interest rates resulting from
long-term debt refinancings in 1993 and a decrease in the average level of
external debt.
INCOME TAXES
Income taxes increased $5.4 million over the same period last year. The
increase was principally due to an increase in taxable income and
a $3 million increase associated with the enactment of the Revenue
Reconciliation Act of 1993 on August 10, 1993, which increased the statutory
corporate federal income tax rate from 34 percent to 35 percent retroactive
to January 1, 1993.
FINANCING
At March 31, 1994, the Company had $500 million of unissued, unsecured debt
securities registered with the SEC.
<PAGE>
- 11 -
Form 10-Q Part II New England Telephone and Telegraph Company
PART II - OTHER INFORMATION
Item 5. Other Information
State Regulatory Matters
Maine
As previously reported (see New England Telephone and Telegraph
Company's ("the Company") Annual Report on Form 10-K for the year
ended December 31, 1993), the Company filed its comprehensive rate
design proposal with the Maine Public Utilities Commission ("MPUC")
on July 6, 1992. In a decision dated April 13, 1994, the MPUC
rejected the Company's rate design proposal. The MPUC found that
the Company had not adequately supported the proposal. Because the
Company proposal was designed to be revenue neutral, there will be
no immediate earnings impact from the MPUC's decision.
The MPUC expressed an interest in exploring how the rate realignment
proposed by the Company might be accomplished through an alternative
form of regulation, in lieu of traditional rate of return
regulation. The MPUC announced its intention to commence such an
investigation, as well as a related investigation into competition,
interconnection and the unbundling of tariffed services.
Massachusetts
On April 14, 1994, the Company filed comprehensive tariff provisions
with the Massachusetts Department of Public Utilities ("MDPU") as
part of an Alternative Regulatory Plan ("Plan") to govern the
Company's Massachusetts intrastate operations. The Plan proposes
the following: (1) regulation of the Company for a period of ten
years from the date of MDPU approval under a price framework; (2)
pricing rules that limit the Company's ability to increase both
overall average prices and specific rate elements, including a
ceiling on the weighted average price of all tariffed services based
on a formula of inflation minus a productivity factor plus or minus
exogenous changes; (3) no earnings restriction; (4) a cap on the
monthly rates for residence services until August 2001; (5) an
increase of $2.50 monthly in the credit on exchange services for
Lifeline customers; (6) investment commitments for the public
telecommunications network, including commencing the deployment of a
broadband network in Massachusetts; (7) quality of service
commitments; (8) rate reductions for switched access services; and
(9) a new streamlined standard of regulation governing the review of
tariff filings. On April 20, 1994, in accordance with its statutory
authority, the MDPU suspended the effective date of the proposed
tariffs until November 14, 1994, in order to investigate the filing.
<PAGE>
- 12 -
Form 10-Q Part II New England Telephone and Telegraph Company
PART II - OTHER INFORMATION (Continued)
Item 5. Other Information (Continued)
State Regulatory Matters (Continued)
Rhode Island
Pursuant to the Rhode Island price regulation trial, on March 1,
1994, the Company filed information with the Rhode Island Public
Utilities Commission ("RIPUC") proposing a 1993 shared earnings
credit of $0.4 million. The RIPUC has scheduled a hearing in May
regarding the filing.
Vermont
As previously reported (see the Company's Report on Form 10-K for
the year ended December 31, 1993), the Company filed a petition for
a price regulation plan with the Vermont Public Service Board
("VPSB") on October 5, 1993. In a related proceeding, on December
1, 1993, the Vermont Department of Public Service ("VDPS") filed a
petition seeking to examine the Company's rates and to ensure that
rates are at appropriate levels prior to the initiation of a price
regulation plan. On April 11, 1994, the VDPS filed testimony
alleging that the Company is overearning in Vermont by $27.5
million on an annual basis and asking the VPSB to direct that any
rate reduction be returned to the ratepayers of Vermont in the form
of a rebate retroactive to December 1993. A decision in both the
incentive regulation and rate dockets is due from the VPSB by
October 5, 1994.
Federal Regulatory Matters
On April 1, 1994, the Company filed tariffs to implement the fourth
annual update to the price cap rates. These tariffs, as amended,
will result in a net reduction in the Company's annual interstate
access rates of approximately $0.3 million during the tariff period
from July 1, 1994 to June 30, 1995.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number
(12) Computation of Ratio of Earnings to Fixed Charges
(b) Reports on Form 8-K
The Company's Current Report on Form 8-K, date of report
January 24, 1994 and filed March 1, 1994, reporting on
Item 5.
<PAGE>
- 13 -
Form 10-Q New England Telephone and Telegraph Company
SIGNATURES
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.
NEW ENGLAND TELEPHONE AND TELEGRAPH COMPANY
Gail Deegan
Gail Deegan
Vice President, Chief Financial Officer and Treasurer
(Principal Financial and Chief Accounting Officer)
May 11, 1994
<TABLE>
Exhibit 12
New England Telephone and Telegraph Company
Computation of Ratio of Earnings to Fixed Charges
(Dollars in millions)
<CAPTION>
For the Three
Months Ended
March 31, For The Year Ended December 31,
1994 1993 1992 1991 1990 1989
(Unaudited)
Earnings
<S> <C> <C>
Earnings Before Interest Expense
and Cumulative Effect of
Change in Accounting Principle . . . . . . . . $184.9 $281.3 $676.3 $507.7 $624.8 $563.9
Federal Income Taxes. . . . . . . . . . . . . . . 66.1 (41.0) 194.4 105.0 146.8* 142.0*
State Income Taxes. . . . . . . . . . . . . . . . 15.4 1.9 46.5 30.9 41.2* 43.2*
Estimated Interest Portion of Rental Expense. . . 6.4 22.8 24.8 26.7 21.7 18.9
Total Earnings. . . . . . . . . . . . . . . . . . $272.8 $265.0 $942.0 $670.3 $834.5 $768.0
Fixed Charges
Total Interest Expense. . . . . . . . . . . . . . $ 40.2 $175.0 $189.7 $191.2 $195.4 $194.4
Estimated Interest Portion of Rental Expense. . . 6.4 22.8 24.8 26.7 21.7 18.9
Total Fixed Charges . . . . . . . . . . . . . . . $ 46.6 $197.8 $214.5 $217.9 $217.1 $213.3
Ratio of Earnings to Fixed Charges . . . . . . . . . 5.85 1.34 4.39 3.08 3.84 3.60
*Includes income tax effects of nonoperating items recorded in Other income (expense) - net.
</TABLE>
<TABLE>
NEW ENGLAND TELEPHONE AND TELEGRAPH COMPANY
VOLUNTARY SCHEDULE - CERTAIN FINANCIAL INFORMATION
<CAPTION>
(UNAUDITED)
DATA STATED IN MILLIONS
FIRST QUARTER FIRST QUARTER YEAR TO DATE
REGULATION STATEMENT CAPTION 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C>
5-02(1) Cash $ 8.8 $ 15.3
5-02(9) Total current assets 1,036.5 992.9 *
5-02(18) Total Assets 8,247.9 8,229.8 *
5-02(21) Total current liabilities 1,301.3 1,092.9 *
5-02(22) Long-term debt 2,164.3 2,064.4
5-02(30) Common stock 2,089.1 2,089.1
5-03(b)(10) Earnings before income taxes
and cumulative effect of change
in accounting principle 226.2 216.3 $226.2 $216.3
5-03(b)(11) Income taxes 81.5 76.1 81.5 76.1
5-03(b)(16) Earnings before cumulative effect
of change in accounting principle 144.7 140.2 144.7 140.2
5-03(b)(18) Cumulative effect of change in
accounting for postemployment
benefits, net of taxes - (25.3)* - (25.3)*
5-03(b)(19) Net Income 144.7 114.9 * 144.7 114.9 *
* Restated to reflect the adoption of Statement of Financial Accounting Standards No. 112 in the fourth quarter
of 1993 retroactive to January 1, 1993.
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