Form 10-Q/A
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 June 30, 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 1-3435
NEW YORK TELEPHONE COMPANY
Incorporated under the laws of the State of New York
I.R.S. Employer Identification Number 13-5275510
1095 Avenue of the Americas, New York, New York 10036
Telephone Number (212) 395-2121
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 .
AMENDMENT NO. 1
The registrant hereby amends the Form 10-Q for the quarterly period
ended June 30, 1994, to correct an error by the outside actuary
of the registrant in calculating the cost of pension enhancements,
as set forth in "Part 1 - Financial Information" attached hereto.
The effect of the correction on net income for the second quarter was
a decrease of $61.9 million, net of income tax of $33.3 million.
<PAGE>
Form 10-Q/A Part I New York Telephone Company
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(In millions) (Unaudited)
For The For The
Three Months Ended Six Months Ended
June 30, June 30,
1994 # 1993 1994 # 1993
OPERATING REVENUES
<S> <C> <C> <C> <C>
Local service. . . . . . . . . . . $1,189.3 $1,176.1 $2,357.5 $2,323.8
Long distance. . . . . . . . . . . 85.0 94.4 173.3 187.9
Network access . . . . . . . . . . 552.1 557.1 1,119.7 1,115.2
Other. . . . . . . . . . . . . . . 88.9 134.6 184.3 281.2
Total operating revenues. . . . . 1,915.3 1,962.2 3,834.8 3,908.1
OPERATING EXPENSES
Maintenance and support. . . . . . 602.0 599.2 1,230.0 1,155.5
Depreciation and amortization. . . 371.5 358.8 738.7 716.9
Marketing and customer services. . 246.1 247.8 495.8 478.3
Taxes other than income taxes. . . 199.7 203.9 399.7 423.1
Provision for uncollectibles . . . 22.5 13.7 43.7 28.7
Other. . . . . . . . . . . . . . . 589.6 154.5 737.2 366.1
Total operating expenses. . . . . 2,031.4 1,577.9 3,645.1 3,168.6
Operating income . . . . . . . . . . (116.1) 384.3 189.7 739.5
Other income - net . . . . . . . . . 4.8 19.6 8.1 39.3
Interest expense . . . . . . . . . . 76.6 89.3 151.3 177.9
Earnings before income taxes
and cumulative effect of change
in accounting principle. . . . . . (187.9) 314.6 46.5 600.9
Income taxes . . . . . . . . . . . . (76.0) 90.2 (3.8) 171.2
Earnings (loss) before cumulative
effect of change in accounting
principle. . . . . . . . . . . . . (111.9) 224.4 50.3 429.7
Cumulative effect of change in
accounting for postemployment
benefits, net of taxes . . . . . . - - - (90.8)*
NET INCOME (LOSS). . . . . . . . . . $ (111.9) $ 224.4 $ 50.3 $ 338.9 *
RETAINED EARNINGS
Beginning of period. . . . . . . . $1,062.9 $1,747.1*$1,082.0 $1,813.6
Net income (loss) . . . . . . . . (111.9) 224.4 50.3 338.9 *
Dividends . . . . . . . . . . . . (181.1) (180.9) (362.4) (361.9)
End of period. . . . . . . . . . . $ 769.9 $1,790.6*$ 769.9 $1,790.6 *
</TABLE>
# Second quarter 1994 amounts have been restated to correct an error
by the outside actuary of the registrant in calculating the cost of
pension enhancements.
* 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 consolidated financial statements.
-2-
<PAGE>
Form 10-Q/A Part I New York Telephone Company
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(In millions)
June 30, December 31,
1994 # 1993
(Unaudited)
ASSETS
Current assets:
<S> <C> <C>
Cash and temporary cash investments. . . . . $ 41.2 $ 7.5
Receivables (net of allowance of $135.2
and $134.8, respectively). . . . . . . . . 1,448.7 1,427.5
Deferred charges . . . . . . . . . . . . . . 75.2 55.5
Deferred income taxes. . . . . . . . . . . . 8.6 99.4
Inventory. . . . . . . . . . . . . . . . . . 65.6 72.4
Prepaid expenses and other . . . . . . . . . 90.5 102.9
Total current assets . . . . . . . . . . . 1,729.8 1,765.2
Telephone plant - at cost. . . . . . . . . . . 20,019.0 19,696.5
Less: accumulated depreciation. . . . . . . 8,018.3 7,580.5
12,000.7 12,116.0
Deferred charges and other . . . . . . . . . . 1,539.8 1,554.2
Total Assets . . . . . . . . . . . . . . . . $15,270.3 $15,435.4
LIABILITIES AND SHARE OWNER'S EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . $ 1,668.2 $ 1,744.7
Short-term debt. . . . . . . . . . . . . . . 350.7 255.7
Dividends payable. . . . . . . . . . . . . . 181.2 181.0
Taxes accrued. . . . . . . . . . . . . . . . 41.8 48.3
Advance billing and customers' deposits. . . 183.1 187.2
Interest accrued . . . . . . . . . . . . . . 11.4 58.2
Total current liabilities. . . . . . . . . 2,436.4 2,475.1
Long-term debt . . . . . . . . . . . . . . . . 3,975.0 3,972.1
Deferred income taxes. . . . . . . . . . . . . 1,560.9 1,826.9
Unamortized investment tax credits . . . . . . 228.8 244.9
Other long-term liabilities and deferred
credits. . . . . . . . . . . . . . . . . . . 2,196.1 1,731.2
Total liabilities. . . . . . . . . . . . . 10,397.2 10,250.2
Commitments and contingencies (Notes (d) and (e))
Share owner's equity:
Common stock - one share, without par value. 4,103.2 4,103.2
Retained earnings. . . . . . . . . . . . . . 769.9 1,082.0
Total share owner's equity . . . . . . . . 4,873.1 5,185.2
Total Liabilities and Share Owner's Equity . $15,270.3 $15,435.4
</TABLE>
# Second quarter 1994 amounts have been restated to correct an error
by the outside actuary of the registrant in calculating the cost of
pension enhancements.
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
Form 10-Q/A Part I New York Telephone Company
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions) (Unaudited)
For the Six Months Ended
June 30,
1994 # 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income. . . . . . . . . . . . . . . . . . $ 50.3 $ 338.9 *
Adjustments to reconcile net income to net. .
cash provided by operating activities:
Depreciation and amortization . . . . . . . . 738.7 716.9
Allowance for funds used during
construction - equity component . . . . . . (9.3) (11.6)
Change in operating assets and liabilities:
Receivables . . . . . . . . . . . . . . . . (21.2) 36.5
Current Deferred charges, Inventory,
Deferred income taxes and Prepaid
expenses and other. . . . . . . . . . . . 90.3 (115.3)
Accounts payable, Deferred income taxes,
Taxes accrued, Advance billing and
customers' deposits and Interest accrued. (133.9) (231.3)*
Deferred income taxes and Unamortized
investment tax credits. . . . . . . . . . . (282.1) 132.9 *
Other long-term liabilities and
deferred credits. . . . . . . . . . . . . . 464.9 41.2 *
Other - net . . . . . . . . . . . . . . . . . (16.1) 35.6
Total adjustments . . . . . . . . . . . . . . 831.3 604.9
Net cash provided by operating
activities. . . . . . . . . . . . . . . . . 881.6 943.8
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures. . . . . . . . . . . . (582.7) (531.6)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from NYNEX . . . . . . . . . . . . (493.7) (243.2)
Dividends paid to NYNEX . . . . . . . . . . (362.2) (355.9)
Issuance of long-term debt. . . . . . . . . 593.5 494.3
Repayment of long-term debt and capital
leases. . . . . . . . . . . . . . . . . . ( 2.8) ( 2.6)
Debt refinancings and call premiums . . . . - (309.2)
Net cash used in financing activities . . . . (265.2) (416.6)
Net increase (decrease) in Cash and
temporary cash investments. . . . . . . . . 33.7 (4.4)
Cash and temporary cash investments at
beginning of period . . . . . . . . . . . . 7.5 24.7
Cash and temporary cash investments at
end of period . . . . . . . . . . . . . . . $ 41.2 $ 20.3
</TABLE>
# Second quarter 1994 amounts have been restated to correct an error
by the outside actuary of the registrant in calculating the cost of
pension enhancements.
* 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 consolidated financial statements.
-4-
<PAGE>
Form 10-Q/A Part I New York Telephone Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(a) BASIS OF PRESENTATION - The consolidated financial statements
have been prepared by New York Telephone 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 consolidated 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 consolidated 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 the results for
the full year. These consolidated financial statements should be
read in conjunction with the consolidated financial statements and
notes thereto included in the Company's 1993 Annual Report on Form
10-K and the current year's previously issued Quarterly Report on
Form 10-Q.
(b) CASH AND TEMPORARY CASH INVESTMENTS - The Company's cash
management policy is to make funds available in banks when checks
are presented. At June 30, 1994, the Company had recorded in
Accounts payable checks outstanding but not yet presented for
payment of $48.8 million.
<TABLE>
<CAPTION>
(c) SUPPLEMENTAL INFORMATION - The following information is provided
in accordance with Statement of Financial Accounting Standards
No. 95, "Statement of Cash Flows":
For the
Six Months Ended
June 30,
1994 1993
(In millions)
<S> <C> <C>
Income tax payments .......................... $166.6 $307.0
Interest payments ............................ $125.9 $159.1
</TABLE>
(d) REVENUES SUBJECT TO POSSIBLE REFUND - Several state and federal
regulatory matters may possibly require the refund of a portion of
the revenues collected in the current and prior periods, including
affiliate transactions issues in the Company's 1990 intrastate rate
case and overearnings complaints by interstate access customers. As
of June 30, 1994, the aggregate amount of such revenues that was
estimated to be subject to possible refund was approximately
$188 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/A Part I New York Telephone Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
(e) LITIGATION AND OTHER CONTINGENCIES - It is probable that local
tax claims aggregating approximately $210 million in tax and
$137 million in associated interest will be asserted against the
Company for the period 1983 through the second quarter of 1994. The
claims relate to the taxability of the Company's interstate and
intrastate network access revenues. The current status is that
these matters have been identified as possible audit adjustments by
the taxing authority, and the Company is presenting its arguments
against those adjustments. While the Company's counsel cannot give
assurance as to the outcome, counsel believes that the Company has
strong legal positions in these matters.
Various other 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 on 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/A Part I New York Telephone 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.
STATE REGULATORY MATTERS
As previously reported (see the Company's Annual Report on Form 10-K
for the year ended December 31, 1993), in the first phase of the
incentive regulation proceeding, the New York State Public Service
Commission ("NYSPSC") issued Orders on December 24, 1993 and January
28, 1994 for a reduction in the Company's rates of $170 million
annually, effective January 1, 1994, and required that an additional
$153 million of current revenues be made available "for the ultimate
benefit of customers and the Company's competitive position through
earnings incentives for short-term service improvements and a longer
term plan for performance-based earning incentives and network
improvements." That incentive regulatory plan is currently being
pursued in the second phase of the proceeding. The $170 million
rate reduction was intended to reduce intrastate revenues by
approximately $141 million annually. As ordered by the NYSPSC, the
Company has designated $31 million of the $153 million as an
incentive to improve overall service quality in the Brooklyn-Queens-
Bronx service area.
As previously reported (see the Company's Annual Report on Form 10-K
for the year ended December 31, 1993), on February 4, 1993, the
NYSPSC issued an order with respect to the Second and Third Stages,
permitting the Company to retain 1993 earnings above a return on
equity of 11.7% and up to 12.7%, depending on its attainment of
specified service-quality criteria, with earnings above 12.7% return
on equity to be held for the ratepayers' benefit. The Company has
submitted a report to the NYSPSC showing 1993 earnings below 11.7%.
The NYSPSC is currently reviewing the Company's submission.
BUSINESS RESTRUCTURING
Second quarter 1994 results include approximately $395 million of
pretax charges ($257 million after-tax) for pension enhancements for
approximately 500 management and 1,900 nonmanagement employees who
elected during the quarter to leave the Company under retirement
incentives and for the Company's allocation from Telesector
Resources Group, Inc. ("TRG") 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 both the Company's
pension enhancements and the Company's allocation of TRG's pension
enhancements were recorded. The retirement incentives are intended
to provide a voluntary means to implement a portion of the planned
work force reductions of approximately 9,000 employees by the end of
1996. The components of the $395 million pretax charges are as follows:
$230 million ($150 million after-tax) for pension enhancements,
$116 million ($75 million after-tax) for associated postretirement
medical benefits,$26 million ($17 million after-tax) for charges
allocated to the Company from TRG for its pension enhancements and
$23 million ($15 million after-tax) for charges allocated to the
Company from TRG for its associated postretirement medical benefits.
-7-
<PAGE>
Form 10-Q/A Part I New York Telephone Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
BUSINESS RESTRUCTURING (Continued)
The retirement incentives credit employees with an additional six
years towards both their age and their length of service for the
purpose of determining pension eligibility and benefits. Much of
the cost of the incentives will be funded by NYNEX's pension plans.
This incentive also resulted in more individuals qualifying for
lifetime medical coverage than under the severance plan. The
pension enhancement to the NYNEX management pension plan was
announced in February 1994 and will be offered at different times
through 1996 according to local force requirements. The Company's
agreements with the Communications Workers of America and with the
International Brotherhood of Electrical Workers ("IBEW") in New
York, which extend the existing labor agreements to August 1998,
provide a retirement incentive (see COLLECTIVE BARGAINING AGREEMENTS below).
The restructuring reserve balance for the 1993 business
restructuring charges at June 30, 1994 was approximately
$573 million, excluding the liability recorded at year-end for
postretirement medical benefits associated with employees leaving
the Company under the business restructuring. In the first six
months of 1994, the Company reduced 1993 restructuring reserves by
$148 million as follows: $54 million of severance reserves was
transferred to the pension liability on a per employee basis as a
result of employees' leaving under the special pension enhancements
as opposed to severance provisions as previously accrued for; $8
million was utilized for other retiree costs; $12 million was
utilized for developing a single "NYNEX" brand identity; $31 million
was utilized for the Company's allocation of TRG's pension
enhancements; $24 million was utilized for the Company's allocation
of TRG's postretirement medical benefits; and $19 million was
utilized for the Company's allocation of TRG's process re-
engineering. Additionally, $26 million of reserves accrued in 1991
for severance costs related to TRG was utilized for the Company's
allocation of TRG's pension enhancements.
There were no significant cost savings as a result of business
restructuring in the first six months of 1994. Since most of the
employees that left the Company under the terms of the enhanced
pension offering left in late June, the expense savings associated
with this force reduction have not yet been realized.
FIRST SIX MONTHS OF 1994 AS COMPARED TO FIRST SIX MONTHS OF 1993
<TABLE>
<CAPTION>
OPERATING REVENUES
Operating revenues for the six months ended June 30, 1994 decreased
$73.3 million, or 1.9%, from the same period last year. This
decrease in total operating revenues is comprised of the following:
Increase (Decrease)
(In millions)
<S> <C>
Local service. . . . . . . . . $ 33.7
Long distance. . . . . . . . . (14.6)
Network access . . . . . . . . 4.5
Other. . . . . . . . . . . . . (96.9)
$(73.3)
</TABLE>
-8-
<PAGE>
Form 10-Q/A Part I New York Telephone Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
FIRST SIX MONTHS OF 1994 AS COMPARED TO FIRST SIX MONTHS OF 1993 (Continued)
OPERATING REVENUES (Continued)
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 primarily due to a net
$95 million increase attributable to increased demand as evidenced
by growth in access lines, growth in sales of calling features, such
as call waiting, remote call forwarding and touch-tone services, and
higher usage associated with the severe winter storms. In addition,
there was a $5 million increase due to a 1993 reduction in revenues
associated with the reversal of a 1990 deferral of private line
revenues. These increases were partially offset by a $67 million
revenue reduction pursuant to an NYSPSC 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 primarily
attributable to a $7 million revenue reduction pursuant to an NYSPSC
order (see STATE REGULATORY MATTERS above) and a decrease in demand
for private line and wide area telecommunications services as a
result of 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. Switched
access revenues are charges to telecommunications carriers for
access to the Company's local exchange facilities. Switched access
revenues increased a net $17 million principally due to increased
usage, partially offset by a reduction in interstate rates, which
included the phase-out of the equal access cost recovery charge, and
by a $6 million revenue reduction pursuant to an NYSPSC order (see
STATE REGULATORY MATTERS above). Special access revenues are
charges for dedicated lines that connect terminal locations of
interexchange carriers and end users. Special access revenues
decreased $12 million primarily due to a reduction in interstate
rates, increased competition and customer shifts to lower priced
Company services.
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 $77 million
reduction in revenues as ordered by the NYSPSC representing the
first and second quarter deferrals of the $153 million (see STATE
REGULATORY MATTERS above), a $24 million decrease in revenues
attributable to the 1993 reversal of previously recorded reductions
in revenues in connection with the phase-out of ad valorem taxes on
central office equipment, and a $7 million decrease due to the
cessation of imputed revenues for procurement costs. Partially
offsetting these decreases was a $10 million increase due to the
1993 reversal of a 1992 deferral of revenues for concession service.
-9-
<PAGE>
Form 10-Q/A Part I New York Telephone Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
FIRST SIX MONTHS OF 1994 AS COMPARED TO FIRST SIX MONTHS OF 1993 (Continued)
<TABLE>
<CAPTION>
OPERATING EXPENSES
Operating expenses for the six months ended June 30, 1994 increased
$476.5 million, or 15.0%, over the same period last year. This
increase in total operating expenses is comprised of the following:
Increase (Decrease)
(In millions)
<S> <C>
Depreciation and amortization. . . . $ 21.8
Taxes other than income taxes. . . . (23.4)
All other:
Business restructuring charges . . 394.9
Employee related . . . . . . . . . 37.1
Other. . . . . . . . . . . . . . . 46.1
$476.5
</TABLE>
Depreciation and amortization increased principally due to a
$25 million increase in plant investment.
Taxes other than income taxes decreased principally due to a
$28 million decrease in property taxes resulting from lower
assessments of property value, partially offset by a $2 million
increase in New York State capital stock tax.
Business restructuring charges recorded in the second quarter
consisted of incremental costs related to pension enhancements (see
BUSINESS RESTRUCTURING above).
Employee related costs consist primarily of wages, payroll taxes,
and employee benefits. Wages and payroll taxes increased a net
$32 million principally due to increases in salary and wage rates
and additional labor costs due to initiatives to improve service
quality, partially offset by reductions in the Company's work force
attributable to the Company's force reduction program and the
transfer of employees to TRG associated with re-engineering the way
service is delivered to customers, including operating the Company
and New England Telephone and Telegraph Company ("New England
Telephone") as a single enterprise under the "NYNEX" brand (see
Other operating expenses below). Benefit expenses increased
$8 million primarily due to higher costs of providing medical
coverage for active and retired employees.
Other operating expenses consist primarily of contracted and
centralized services, rent and other general and administrative
costs. The increase in other operating expenses was due principally
to a $42 million net increase in charges from affiliated companies
due to an increase in contracted and centralized services and the
transfer of employees from the Company and NYNEX Corporate to TRG
(see Employee related costs above), a $23 million increase in bad
debt expense recognized pursuant to provisions of the billing and
collection contract with AT&T, and a $15 million increase in the
Provision for uncollectibles. Partially
-10-
<PAGE>
Form 10-Q/A Part I New York Telephone Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
FIRST SIX MONTHS OF 1994 AS COMPARED TO FIRST SIX MONTHS OF 1993 (Continued)
OPERATING EXPENSES (Continued)
offsetting these increases were a $12 million decrease in right-to-
use fees due to lower purchases of software, a $14 million decrease
due to the completion of equal access amortization in 1993 and a
$9 million decrease attributable to the reversal in 1993 of deferred
inside wire expense recorded in 1991 and 1992.
OTHER INCOME - NET
Other income - net for the six months ended June 30, 1994 decreased
$31.2 million from the same period last year due principally to a
$28 million decrease resulting from the completion in 1993 of the
transition plan with New England Telephone to phase in the earnings
impact of the unified tariff access rate structure. This decrease
was partially offset by an increase due to higher expenses in the
first six 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 for the six months ended June 30, 1994 decreased
$26.6 million from the same period last year, primarily due to lower
average interest rates resulting from long-term debt refinancings
during 1993 and higher expenses in the first six months of 1993 for
interest on customer overbillings.
INCOME TAXES
Income taxes for the six months ended June 30, 1994 decreased
$175.0 million from the same period last year, principally due to a
$180 million decrease as a result of a decrease in taxable income,
partially offset by a $5 million increase in tax expense 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 June 30, 1994, the Company had $250 million of unissued,
unsecured debt securities registered with the SEC.
Pursuant to the indentures for certain of its debentures, the
Company has covenanted that it will not issue additional funded debt
securities ranking equally with or prior to such debentures unless
it has maintained an earnings coverage of 1.75 for interest charges
for a period of any 12 consecutive months out of the 15 month period
prior to the date of the proposed issuance. As a result of the 1993
business restructuring charges and the 1994 pension enhancements,
the Company does not currently meet the earnings coverage
requirement.
-11-
<PAGE>
Form 10-Q/A Part I New York Telephone Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
FIRST SIX MONTHS OF 1994 AS COMPARED TO FIRST SIX MONTHS OF 1993
(Continued)
COLLECTIVE BARGAINING AGREEMENTS
On March 24, 1994, an agreement was reached with the Communications
Workers of America and Local 2213 of the International Brotherhood
of Electrical Workers ("IBEW") in New York to extend through August
8, 1998 the collective bargaining agreements that were to expire on
August 5, 1995. The agreements were ratified in May 1994. Under
the terms of the new agreements, there will be basic wage increases
of 10.5% during the life of the agreements. Wages will increase
4.0% on August 6, 1995, 3.5% on August 4, 1996 and 3.0% on August 3,
1997. In 1997 there may also be a cost-of-living adjustment. The
agreements also provide for retirement incentives, a commitment to
no layoffs or loss of wages as a result of Company-initiated
"process change", an enhanced educational program and incentives to
improve service quality.
-12-
<PAGE>
Form 10-Q/A Part I New York Telephone 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 York Telephone Company
Mel Meskin
Mel Meskin
Vice President - Finance and Treasurer
(Principal Financial and Chief Accounting Officer)
October 31, 1994
-13-
