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, 1995
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>
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,
1995 1994
<S> <C> <C>
OPERATING REVENUES
Local service $ 479.3 $ 470.2
Long distance 172.2 193.4
Network access 317.9 298.9
Other 84.2 90.2
Total operating revenues 1,053.6 1,052.7
OPERATING EXPENSES
Maintenance and support 282.0 305.0
Depreciation and amortization 227.8 219.8
Marketing and customer services 125.7 146.3
Taxes other than income taxes 31.7 23.5
Provision for uncollectible revenues 14.7 12.2
Other 132.0 82.2
Total operating expenses 813.9 789.0
Operating income 239.7 263.7
Other income (expense) - net 3.2 2.7
Interest expense 40.3 40.2
Earnings before Income taxes 202.6 226.2
Income taxes
Federal 64.5 66.1
State 14.1 15.4
Total income taxes 78.6 81.5
Net Income $ 124.0 $ 144.7
RETAINED EARNINGS
Beginning of period $ 979.9 $ 929.9
Net income 124.0 144.7
Dividends declared (110.6) (106.0)
End of period $ 993.3 $ 968.6
</TABLE>
See accompanying notes to financial statements.
- 2 -
<PAGE>
Form 10-Q Part I New England Telephone and Telegraph Company
<TABLE>
BALANCE SHEETS
(In millions)
<CAPTION>
March 31, December 31,
1995 1994
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash $ 6.9 $ 9.1
Receivables (net of allowance of 819.4 804.2
$54.5 and $50.9, respectively)
Deferred income taxes 98.6 109.9
Deferred charges 76.1 82.6
Inventory 48.8 49.4
Prepaid expenses and other 32.0 18.2
Total current assets 1,081.8 1,073.4
Telephone plant - at cost 12,245.5 12,084.7
Less: accumulated depreciation 5,607.1 5,451.8
6,638.4 6,632.9
Deferred charges and other 561.4 574.8
TOTAL ASSETS $ 8,281.6 $ 8,281.1
LIABILITIES AND SHARE OWNER'S EQUITY
Current liabilities:
Accounts payable
Affiliates $ 416.6 $ 407.0
Trade and other 603.7 648.3
Short-term debt 0.5 55.6
Dividends payable 110.7 106.1
Taxes accrued 120.9 46.0
Advance billing and customers' deposits 21.0 20.1
Interest accrued 45.5 38.0
Total current liabilities 1,318.9 1,321.1
Long-term debt 2,163.9 2,163.6
Deferred income taxes 746.8 773.2
Unamortized investment tax credits 88.8 91.9
Other long-term liabilities
and deferred credits 880.8 862.3
Total liabilities 5,199.2 5,212.1
Commitments and contingencies
(Notes (f) and (g))
Share owner's equity:
Common stock-one share, without par value 2,089.1 2,089.1
Retained earnings 993.3 979.9
Total share owner's equity 3,082.4 3,069.0
TOTAL LIABILITIES AND SHARE OWNER'S EQUITY $8,281.6 $8,281.1
</TABLE>
See accompanying notes to financial statements.
- 3 -
<PAGE>
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,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 124.0 $ 144.7
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 227.8 219.8
Allowance for funds used during
construction - equity componen t (1.9) (2.0)
Changes in operating assets and liabilities:
Receivables 15.2 (16.0)
Deferred income taxes 11.3 15.0
Deferred charges 6.5 5.6
Inventory 0.6 13.6
Prepaid expenses and other (13.8) 33.9
Accounts payable (35.0) (19.2)
Taxes accrued 74.9 64.5
Advance billing and customers' deposits 0.9 2.5
Interest accrued 7.5 7.3
Deferred income taxes and Unamortized
investment tax credits (29.5) (17.7)
Other long-term liabilities and
deferred credits 18.5 (9.3)
Other - net 4.8 (3.1)
Total adjustments 287.8 294.9
Net cash provided by operating activities 411.8 439.6
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (222.1) (245.5)
Advances to NYNEX (30.6) -
Net cash used in investing activities (252.7) (245.5)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from NYNEX (55.1) (92.8)
Dividends paid to NYNEX (106.1) (103.4)
Repayment of long-term debt and capital leases (0.1) (0.3)
Net cash used in financing activities (161.3) (196.5)
Net decrease in cash (2.2) (2.4)
Cash at beginning of period 9.1 11.2
Cash at end of period $ 6.9 $ 8.8
</TABLE>
See accompanying notes to financial statements.
- 4 -
<PAGE>
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 1994 has been reclassified to conform to the
current year's presentation. The results for interim periods are
not necessarily indicative of the 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
1994 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, 1995,
the Company had recorded in Accounts payable checks outstanding
but not yet presented for payment of
$42.0 million.
(c) RECEIVABLES - At March 31, 1995, the Company had advances to
NYNEX of $30.6 million included in Receivables.
(d) ADOPTION OF FINANCIAL ACCOUNTING STANDARDS - Effective
January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 116, "Accounting for Contributions
Received and Contributions Made" ("Statement
No. 116"). The effect of implementing Statement No. 116 on the
Company's results of operations and financial position was
insignificant.
(e) 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,
1995 1994
(In millions)
<S> <C> <C>
Income tax payments (refunds) $36.6 $(16.9)
Interest payments $29.9 $ 31.0
(f) 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, 1995, the aggregate amount of such
revenues that was estimated to be subject to possible refund was
approximately $24.3 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.
- 5 -
<PAGE>
Form 10-Q Part I New England Telephone and Telegraph Company
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
(g) 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.
- 6 -
<PAGE>
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.
RESULTS OF OPERATIONS
For the three months ended March 31, 1995 and 1994, net income
was $124.0 and $144.7 million, respectively. Results for the
first quarter of 1995 included an after-tax charge of
$20.9 million for pension enhancements, for approximately 320
employees who elected during the quarter to leave the Company
under retirement incentives and for the Company's allocation from
Telesector Resources Group, Inc. ("Telesector Resources") for its
pension enhancements. A portion of the year-end 1993 accrual for
severance was utilized on a per employee basis, and the
incremental costs of the pension enhancements were recorded.
Results for the first quarter of 1994 did not include charges for
retirement incentives.
Operating revenues increased $0.9 million over the first quarter
of 1994 principally due to the net effect of: (1) growth in
access lines and usage, (2) a reduction in directory licensing
agreement revenues and (3) intrastate and interstate rate
reductions.
Operating expenses, excluding the pension enhancement charges,
decreased $6.3 million from the first quarter of 1994, as force
reductions and process re-engineering continued.
STATE REGULATORY MATTERS
Massachusetts
As previously reported (see the Company's Annual Report on Form
10-K for the year ended December 31, 1994), on April 14, 1994,
the Company filed tariff provisions with the Massachusetts
Department of Public Utilities ("MDPU") as part of an Alternative
Regulatory Plan to govern the Company's Massachusetts intrastate
operations. The MDPU's decision is pending.
Vermont
As previously reported (see the Company's Annual Report on Form
10-K for the year ended December 31, 1994), on February 6, 1995,
the Vermont Public Service Board ("VPSB") amended its earlier
order in the Company's Price Regulation Plan proceeding. On
March 8, 1995, the Company notified the VPSB of its rejection of
the VPSB's proposed changes and that, accordingly, the Company
would continue under rate of return regulation.
Also as previously reported, in the related proceeding to examine
the Company's level of earnings, on February 6, 1995, the VPSB
issued an order, recalculating certain aspects of the required
annual revenue reduction, the net effect of which remained
approximately $15 million, retroactive to December 29, 1993, the
date the VPSB opened the proceeding. In the first quarter of
1995, the Company reduced local operating revenues by
approximately $3 million for subsequent refunds to Vermont
- 7 -
<PAGE>
Form 10-Q Part I New England Telephone and Telegraph Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
customers for the period from January 1, 1995 through March 31,
1995 (see OPERATING REVENUES and OPERATING EXPENSES below). A
date for refunds to customers will be set once the VPSB completes
supplemental hearings on rate reduction design issues. On March
6, 1995, the Company filed an appeal of certain portions of the
VPSB's February 6 order with the Vermont Supreme Court.
OPERATING REVENUES
Operating revenues increased $0.9 million over the same period
last year. This increase is comprised of the following:
</TABLE>
<TABLE>
<CAPTION>
Increase (Decrease)
(In millions)
<S> <C>
Local service $ 9.1
Long distance (21.2)
Network access 19.0
Other (6.0)
$ 0.9
</TABLE>
Local service revenues are earned from the provision of local
exchange, local private line and local public network services.
The increase in Local service revenues was due principally to:
(1) increased customer demand of approximately $11 million,
driven by growth in access lines and sales of calling features,
(2) a net increase of approximately $7 million in local service
rates attributable to a restructuring of Massachusetts rates
effective April 14, 1994, (3) a $5 million decrease due to the
1994 reversal 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, and (4) a $3
million decrease resulting from the deferral of revenues during
the first quarter of 1995 for subsequent refund to Vermont
customers as required by a VPSB order (see STATE REGULATORY
MATTERS above).
Long distance revenues are earned from the provision of services
beyond the local service area, but within the local access and
transport area ("LATA"), and include public and private network
switching. The decrease in Long distance revenues was due
principally to: (1) a $10 million decrease in long distance
rates primarily attributable to the restructuring of
Massachusetts rates and (2) a net decrease of approximately $10
million resulting from decreased message toll service usage and
decreases in private line and wide area telecommunications
revenues primarily due to increased competition and customer
shifts to lower priced services offered by the Company.
Network access revenues are earned from the provision of exchange
access services primarily to interexchange carriers. The
increase in Network access revenues was due principally to a $17
million increase in switched access revenues as a result of
increased demand partially offset by a $2 million reduction in
interstate rates.
- 8 -
<PAGE>
Form 10-Q Part I New England Telephone and Telegraph Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
Other revenues are earned from the provision of products and
services other than Local service, Long distance and Network
access. The decrease in Other revenues was due principally to a
$5 million decrease in revenues related to the directory
licensing agreement with NYNEX Information Resources Company
("Information Resources"), as a result of Information Resources'
pension enhancement costs recorded in the first quarter of 1995
which lowered their pretax earnings. In addition, there was a
$5 million decrease in billing and collection revenues primarily
pursuant to the contract with AT&T Corp.
OPERATING EXPENSES
Operating expenses for the three months ended March 31, 1995
increased $24.9 million, or 3.2%, over the same period last year.
This increase is comprised of the following:
<TABLE>
<CAPTION>
Increase (Decrease)
(In millions)
<S> <C>
Depreciation and amortization $ 8.0
Taxes other than income taxes 8.2
All other:
Business restructuring charges
recorded in 1995 31.2
Employee related (11.2)
Other (11.3)
$ 24.9
</TABLE>
The increase in Depreciation and amortization was due principally
to a $5 million increase due to revised intrastate depreciation
rates in Vermont, effective February 1995 retroactive to January
1, 1994, and a $5 million increase associated with increased
depreciable plant investment.
Taxes other than income taxes include gross receipts taxes,
property taxes and other non-income based taxes. The increase
was due principally to an $8 million increase in property taxes
primarily attributable to a 1994 reversal of a 1993 accrual as a
result of unasserted municipal assessments.
Business restructuring charges recorded in 1995 consisted of
incremental costs related to pension enhancements. In the first
quarter of 1995, $31.2 million of pretax charges ($20.9 million
after-tax) was recorded for approximately 100 management and 220
nonmanagement employees who elected during the quarter to leave
under retirement incentives and for the Company's allocation from
Telesector Resources. The components of the pretax charges are
as follows: $24.7 million ($16.5 million after-tax) for pension
enhancements, $2.0 million ($1.6 million after-tax) for
associated postretirement medical benefits, $3.2 million
($2.0 million after-tax) for charges allocated to the Company
from Telesector Resources for its pension enhancements and
$1.3 million ($0.8 million after-tax) for its associated
postretirement medical benefits. Much of the cost of the
enhancements will be funded by NYNEX's pension plans.
- 9 -
<PAGE>
Form 10-Q Part I New England Telephone and Telegraph Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
Employee related costs consist primarily of wages, payroll taxes
and employee benefits. The decrease was due principally to a
$12 million net decrease in wages and payroll taxes primarily
attributable to reductions in the Company's work force due to
transfers of employees to Telesector Resources associated with
re-engineering the way service is delivered to customers and to
the Company's force reduction program, partially offset by
increases in salary and wage rates.
Other operating expenses consist primarily of contracted and
centralized services, rent and other general and administrative
costs. The decrease was principally due to: (1) a $26 million
decrease in expenses primarily due to the transfer of functions
to Telesector Resources (see Employee related costs above) and
unusually good weather in the first quarter of 1995 and (2) a
$5 million decrease in right to use fees resulting from
decreased software deployment. These decreases were partially
offset by a $20 million net increase in charges from affiliated
companies primarily attributable to an increase in Telesector
Resources' contracted and centralized services and salary and
wage rates, and the transfer of employees from the Company to
Telesector Resources (see Employee related costs above),
partially offset by decreases due to Telesector Resources' force
reduction program.
INCOME TAXES
Income taxes decreased from the same period last year
principally due to a decrease in taxable income, partially
offset by increases resulting from a decrease in amortization of
investment tax credits and a lower level of excess deferred tax
reversals, using the average rate assumption method, which had
been deferred at a rate higher than the current statutory rate.
- 10 -
<PAGE>
Form 10-Q Part I New England Telephone and Telegraph Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
CURRENT STATUS OF BUSINESS RESTRUCTURING
<TABLE>
Reserve Utilization in 1995
<CAPTION>
The restructuring reserve balance at March 31, 1995, which does
not include
the liability recorded at year-end for postretirement medical
benefits associated with employees' leaving the Company under the
business restructuring, was approximately $205 million. In the
first quarter of 1995, the Company reduced 1993 restructuring
reserves by approximately $39 million in the following
categories:
<S> <C> <C> <C>
Severance
Management $8
Nonmanagement 2
Total Severance $10
Severance transferred to Telesector
Resources 5
Process Re-engineering:
Systems redesign -
Work center consolidation -
Branding -
Relocation -
Training -
Re-engineering implementation -
Subtotal $ -
Telesector Resources' allocated
reserves:
Systems re-engineering 19
Re-engineering implementation 5
Work center consolidation -
Total allocated 24
Total process re-engineering 24
Total $39
</TABLE>
The severance reduction amount is comprised of severance reserves
transferred to the pension liability on a per employee basis as a
result of employees' leaving under the pension enhancements as
opposed to severance provisions as previously accrued for. $5
million was transferred from the Company to Telesector Resources
to cover severance costs associated with employees who
transferred from the Company to Telesector Resources and
subsequently left under the pension enhancements.
Cost Savings
During the first quarter of 1995, the Company experienced a
reduction in wages of approximately $18 million as well as a $10
million reduction in costs allocated from Telesector Resources as
a result of employees' leaving under retirement incentives.
FINANCING
At March 31, 1995, the Company had $500 million of unissued,
unsecured debt securities registered with the SEC.
- 11 -
<PAGE>
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, 1994), on May 10,
1994, the Maine Public Utilities Commission ("MPUC")
commenced a proceeding to explore alternatives to
traditional rate of return regulation and an earnings
investigation commenced in response to a ratepayer
complaint for the Company. On May 3, 1995, the MPUC
indicated its intent to reduce the Company's annual
revenues by $14.3 million, to order a one-time customer
credit of $2.8 million and to adopt a form of price cap
regulation that would impose quality of service standards
and a productivity factor more stringent than those
recommended by the Company. The MPUC is expected to issue
an order by May 15, 1995.
See, also, discussion of STATE REGULATORY MATTERS in Part
I, MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS.
FEDERAL REGULATORY MATTERS
Price Caps
On March 30, 1995, the Federal Communications Commission
("FCC") announced interim changes in the price cap rules
for local exchange carriers ("LECs") pending a further
notice of proposed rulemaking that the FCC hopes to
complete by early 1996. The FCC price cap formula adjusts
the limits on access price levels ("price cap index" or
"PCI") upward for inflation, downward for productivity
improvement and up or down for exogenous costs. Under the
interim rules each LEC will choose one of three
productivity factor offsets to be used in setting its
price cap index. LECs adopting the highest productivity
factor will retain all interstate earnings. The two other
options entail sharing of earnings and will allow an LEC
to achieve a maximum interstate rate of return of either
14.25% or 12.75%.
The FCC also determined that the original 3.3%
productivity factor adopted in 1991 and used since then by
most LECs was understated. Accordingly, the FCC's order
requires those LECs, including the Company, to make up
front reductions to "reinitialize" their respective PCIs.
The FCC also revised the criteria for including exogenous
cost changes in the calculation of the PCI. As a result,
the LECs will be required to recalculate their PCIs on a
prospective basis to exclude cost increases due to changes
in the accounting treatment of Other Postemployment
Benefit expenses.
The Company and New York Telephone Company (collectively,
the "Telephone Companies") are scheduled to file tariffs
in May 1995 to implement the fifth annual update to the
price cap rates, including the adjustments ordered by the
FCC. The tariffs, which are to become effective August 1,
1995, will reduce the Telephone Companies' interstate
access rates by approximately $79 million for the tariff
period ending June 30, 1996.
- 12 -
<PAGE>
Form 10-Q Part II New England Telephone and Telegraph Company
PART II - OTHER INFORMATION
The FCC gave the LECs additional pricing flexibility in
certain service categories and announced its intention to
examine broader questions of regulatory reform, including
the elimination of earnings sharing and a transition to a
streamlined regulatory structure, in the further notice of
proposed rulemaking.
Other Federal Regulatory Matters
Tariff revisions filed by the Telephone Companies with the
FCC became effective on April 29, 1995, to recover an
additional $2.3 million of exogenous costs resulting from
the implementation of Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions". Collection
of these revenues is subject to possible refund pending
resolution of the FCC's Common Carrier Bureau
investigation (see the Company's Annual Report on Form 10-
K for the year ended December 31, 1994).
On May 2, 1995, the Telephone Companies filed their
response to the FCC's March 3, 1995 Order to Show Cause in
connection with an audit of costs reported by the LECs to
the National Exchange Carrier Association. In that
response the Telephone Companies argued that no
forfeitures or price cap reductions should be imposed, and
that their internal processes are in compliance with the
FCC's rules.
EFFECTS OF REGULATORY ACCOUNTING
The Telephone Companies currently account for their
operations in accordance with the provisions of Statement
of Financial Accounting Standards No. 71, "Accounting for
the Effects of Certain Types of Regulation" ("Statement
No. 71"). The provisions of Statement No. 71 are followed
when the regulation of an enterprise's rates is intended
to permit recovery of the enterprise's costs and such
rates are likely to be collected from customers. This
process can create assets or liabilities solely by the
action of the regulatory authorities. Under Statement No.
71, companies generally depreciate plant and equipment
over lives approved by regulators. Statement No. 71 also
requires deferral of certain costs and obligations based
on approvals received from regulators. In the event that
the recoverability of costs through rates becomes unlikely
or uncertain, whether resulting from competitive effects
or specific regulatory actions, Statement No. 71 would no
longer apply. NYNEX Corporation and the Telephone
Companies continually assess their position and the
recoverability of their telecommunications assets with
respect to Statement No. 71 and believe that Statement
No. 71 still applies. However, it is possible that events
in the industry, the markets in which the Telephone
Companies operate and the possible effects of regulatory
and legislative initiatives could change the Telephone
Companies position in the near future. In that event,
implementation of Statement of Financial Accounting
Standards No. 101, "Regulated Enterprises - Accounting
- 13 -
<PAGE>
Form 10-Q Part II New England Telephone and Telegraph Company
PART II - OTHER INFORMATION
for the Discontinuation of Application of FASB Statement
No. 71" ("Statement No. 101"), would require the write-off
of previously established regulatory assets and
liabilities, including the adjustment of certain plant
balances to reflect the difference between recorded
depreciation and the amount of depreciation that would
have been recorded had the Telephone Companies not been
subject to rate regulation. The impact of such a change
would result in a material non-cash charge and would be
reported as an extraordinary item. This charge could also
include an adjustment to the carrying value of telephone
plant if it is determined, using a projected cash flow
approach, that impairment exists. While the effect of
implementing Statement No. 101 cannot be precisely
estimated at this time, Management believes that the total
non-cash effect of the accounting change on the Company's
net income would be between $0.8 and $1.2 billion.
OTHER
On April 13, 1995, it was announced that the seven
regional holding companies ("RHCs"), including NYNEX
Corporation, have decided to pursue the disposition of
Bell Communications Research, Inc. ("Bellcore"). Each of
the RHCs owns an equal interest in Bellcore. A final
decision regarding the disposition of their interests and
the structure of such a transaction will be subject to
obtaining satisfactory financial and other terms and
necessary approvals.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit
Number
(27) Financial Data Schedule
(b) Reports on Form 8-K.
No Report on Form 8-K was filed by the registrant
during the
quarter for which this report is filed.
- 14 -
<PAGE>
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
Mel Meskin
Mel Meskin
Vice President - Finance and Treasurer
(Principal Financial and Accounting Officer)
May 9, 1995
- 15 -
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000071344
<NAME> NEW ENGLAND TELEPHONE AND TELEEGRAPH COMPANY
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 7
<SECURITIES> 0
<RECEIVABLES> 819
<ALLOWANCES> 55
<INVENTORY> 49
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0
0
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</TABLE>
