<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[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
From the transition period from to
Commission file number 1-4166
- - ------------------------------------------------------------
ROCHESTER TELEPHONE CORPORATION
(Exact name of registrant as specified in its charter)
New York 16-0613330
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
180 South Clinton Avenue, Rochester, NY 14646-0700
(Address of principal executive offices) (Zip Code)
(716) 777-1000
(Registrant's telephone number, including area code)
- - ------------------------------------------------------------
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
Indicate the number of shares outstanding of each of
the issuer's classes of common stock, as of the latest
practicable date.
$1.00 Par Value Common Stock 73,156,596 as of July 31, 1994
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ROCHESTER TELEPHONE CORPORATION
Part I - Financial Information
==============================
Item 1 - Financial Statements
Presented on the following pages are the
consolidated financial statements of Rochester
Telephone Corporation. In the opinion of management,
the consolidated financial information reflects all
adjustments necessary for a fair presentation of the
financial statements for the interim periods included
herein. There have been no adjustments made in the
interim financial statements which are not of a normal
recurring nature.
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<PAGE>
<TABLE>
Consolidated Balance Sheet
<CAPTION>
June 30, December 31,
1994 1993
In thousands of dollars (Unaudited)
- - -----------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 189,184 $ 31,284
Short-term investments 152 349
Accounts receivable 164,373 157,320
Material and supplies 10,576 11,208
Prepayments and other 21,531 21,583
- - -----------------------------------------------------------------------------------
Total Current Assets 385,816 221,744
- - -----------------------------------------------------------------------------------
Property, Plant and Equipment:
Telephone plant in service 1,543,708 1,561,032
Telephone plant under construction 34,393 33,048
- - -----------------------------------------------------------------------------------
1,578,101 1,594,080
Less-Accumulated depreciation 667,943 652,578
- - -----------------------------------------------------------------------------------
Net Telephone Plant 910,158 941,502
- - -----------------------------------------------------------------------------------
Telecommunication property 174,234 153,954
Less-Accumulated depreciation 77,133 68,265
- - -----------------------------------------------------------------------------------
Net Telecommunication Property 97,101 85,689
- - -----------------------------------------------------------------------------------
Goodwill 144,559 166,283
- - -----------------------------------------------------------------------------------
Deferred and Other Assets 89,537 94,983
- - -----------------------------------------------------------------------------------
Total Assets $1,627,171 $1,510,201
===================================================================================
Liabilities and Shareowners' Equity
Current Liabilities
Accounts payable $ 131,958 $ 147,152
Notes payable 106 303
Advance billings 10,543 12,572
Dividends payable 15,116 14,058
Long-term debt due within one year 3,290 3,962
Taxes accrued 14,253 14,729
Interest accrued 13,592 13,583
- - -----------------------------------------------------------------------------------
Total Current Liabilities 188,858 206,359
- - -----------------------------------------------------------------------------------
</TABLE>
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<TABLE>
Consolidated Balance Sheet
<CAPTION>
June 30, December 31,
1994 1993
In thousands of dollars (Unaudited)
- - -----------------------------------------------------------------------------------
<S> <C> <C>
Long-Term Debt 481,725 492,555
- - -----------------------------------------------------------------------------------
Deferred Income Taxes 117,592 116,967
- - -----------------------------------------------------------------------------------
Deferred Benefits 28,854 16,121
- - -----------------------------------------------------------------------------------
Minority Interests 11,380 3,100
- - -----------------------------------------------------------------------------------
Shareowners' Equity:
Common stock 73,152 34,025
Capital in excess of par value 264,066 201,591
Retained earnings 438,767 418,889
- - -----------------------------------------------------------------------------------
775,985 654,505
Less-Treasury stock, at cost - 2,191
- - -----------------------------------------------------------------------------------
Common Shareowners' Equity 775,985 652,314
Preferred stock 22,777 22,785
- - -----------------------------------------------------------------------------------
Total Shareowners' Equity 798,762 675,099
- - -----------------------------------------------------------------------------------
Total Liabilities and Shareowners' Equity $1,627,171 $1,510,201
===================================================================================
See accompany Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
ROCHESTER TELEPHONE CORPORATION
Consolidated Statement of Income
(Unaudited)
<CAPTION>
3 Months Ended June 30, 6 Months Ended June 30,
In thousands, except per share data 1994 1993 1994 <F1> 1993
- - -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues and Sales:
Telephone Operations $154,905 $148,303 $305,904 $292,877
Telecommunication Services 96,922 74,549 187,736 140,944
- - -----------------------------------------------------------------------------------------------------
Total Revenues and Sales 251,827 222,852 493,640 433,821
- - -----------------------------------------------------------------------------------------------------
Costs and Expenses:
Operating expenses 147,450 128,581 289,853 250,219
Cost of goods sold 5,534 5,889 11,914 10,917
Depreciation 30,531 27,883 59,603 56,811
Taxes other than income taxes 12,279 11,550 24,174 22,561
- - -----------------------------------------------------------------------------------------------------
Total Costs and Expenses 195,794 173,903 385,544 340,508
- - -----------------------------------------------------------------------------------------------------
Operating Income 56,033 48,949 108,096 93,313
Interest expense 10,886 12,190 21,855 24,000
Other income and expense:
Allowance for funds used
during construction 280 302 556 672
Gain on sale of subsidiary 12,933 - 12,933 -
Other income (expense), net (4,944) (5,427) (10,623) (9,052)
- - -----------------------------------------------------------------------------------------------------
Income Before Taxes and Cumulative
Effect of Change in Accounting
Principle 53,416 31,634 89,107 60,933
Income taxes 18,520 11,804 31,809 23,085
- - -----------------------------------------------------------------------------------------------------
Income Before Cumulative Effect of
Change in Accounting Principle 34,896 19,830 57,298 37,848
Cumulative Effect of Change in
Accounting Principle - accounting
for post-employment benefits - - (7,197) -
- - -----------------------------------------------------------------------------------------------------
Consolidated Net Income 34,896 19,830 50,101 37,848
Dividends on preferred stock 296 296 593 593
- - -----------------------------------------------------------------------------------------------------
Income Applicable to Common Stock $ 34,600 $ 19,534 $ 49,508 $ 37,255
=====================================================================================================
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
ROCHESTER TELEPHONE CORPORATION
Consolidated Statement of Income
(Unaudited)
<CAPTION>
3 Months Ended June 30, 6 Months Ended June 30,
In thousands, except per share data 1994 1993 1994 1993
- - -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividends declared on common stock $ 14,815 $ 13,583 $ 29,630 $ 26,749
Dividends declared per common share $ .2025 $ .1975 $ .4050 $ .3950
Average common shares outstanding 73,227 67,502 71,910 67,084
Earnings Per Common Share
Primary:
Income before cumulative effect of
change in accounting principle $ .47 $ .29 $ .79 $ .56
Cumulative effect of change in
accounting principle - - (.10) -
- - -----------------------------------------------------------------------------------------------------
Net Earnings Per Common Share $ .47 $ .29 $ .69 $ .56
- - -----------------------------------------------------------------------------------------------------
Fully Diluted:
Income before cumulative effect of
change in accounting principle $ .47 $ .29 $ .79 $ .55
Cumulative effect of change in
accounting principle - - (.10) -
- - -----------------------------------------------------------------------------------------------------
Net Earnings Per Common Share $ .47 $ .29 $ .69 $ .55
=====================================================================================================
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
ROCHESTER TELEPHONE CORPORATION
Business Segment Information
(Unaudited)
<CAPTION>
3 Months Ended June 30, 6 Months Ended June 30,
In thousands of dollars 1994 1993 1994 1993
- - -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Telephone Operations
Revenues:
Local service $ 61,309 $ 56,923 $ 119,752 $ 112,443
Network access service 58,205 55,038 117,068 108,577
Long distance network service 6,670 7,004 12,486 13,524
Directory advertising,
billing services, and other 29,940 30,400 59,217 60,368
Less: Uncollectibles 1,219 1,062 2,619 2,035
- - -----------------------------------------------------------------------------------------------------
Total Revenues $ 154,905 $ 148,303 $ 305,904 $ 292,877
======================================================================================================
Operating Income $ 45,660 $ 42,275 $ 89,271 $ 80,412
======================================================================================================
Depreciation $ 25,483 $ 23,824 $ 50,911 $ 48,902
======================================================================================================
Construction Expenditures $ 13,150 $ 26,613 $ 25,997 $ 42,390
======================================================================================================
Identifiable Assets <F1> $1,526,089 $1,425,912 $1,526,089 $1,425,912
======================================================================================================
Telecommunication Services
Sales:
Network Systems and Services:
Non-Affiliate $ 85,339 $ 67,275 $ 167,425 $ 128,192
Affiliate 1,566 1,178 3,459 1,965
Wireless Communications 11,799 6,992 20,895 12,413
Eliminations (1,782) (896) (4,043) (1,626)
- - -----------------------------------------------------------------------------------------------------
Total Sales $ 96,922 $ 74,549 $ 187,736 $ 140,944
======================================================================================================
Operating Income:
Network Systems and Services $ 9,279 $ 6,163 $ 16,959 $ 11,938
Wireless Communications 1,007 493 1,760 926
Eliminations 87 18 106 37
- - -----------------------------------------------------------------------------------------------------
Total Operating Income $ 10,373 $ 6,674 $ 18,825 $ 12,901
======================================================================================================
Depreciation $ 5,048 $ 4,059 $ 8,692 $ 7,909
======================================================================================================
Construction Expenditures $ 12,243 $ 3,147 $ 18,225 $ 4,321
======================================================================================================
Identifiable Assets <F1> $ 296,047 $ 245,483 $ 296,047 $ 245,483
======================================================================================================
<FN>
<F1> Includes assets eliminated in consolidation of $194,965 in 1994 and $132,096 in 1993.
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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<TABLE>
Consolidated Statement of Cash Flows
(Unaudited)
<CAPTION>
6 Months Ended June 30
In thousands of dollars 1994 1993
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities
Income before cumulative effect of change in
accounting principle $ 57,298 $ 37,848
Cumulative effect of change in accounting principle (7,197) -
- - -----------------------------------------------------------------------------------------
Net Income 50,101 37,848
- - -----------------------------------------------------------------------------------------
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and amortization 61,302 63,489
Gain on sale of assets (9,915) (1,987)
Cumulative effect of change in accounting principle 11,072 -
Changes in operating assets and liabilities, exclusive
of impacts of purchase acquisitions and divestitures:
(Increase) in accounts receivable (6,452) (7,418)
Decrease in material and supplies 530 845
Decrease in prepayments and other current assets 1,163 3,225
(Increase) in deferred and other assets (14,367) (4,947)
(Decrease) in accounts payable (17,000) (12,371)
(Decrease) in advance billings (2,207) (1,848)
Increase/(decrease) in accrued interest and taxes 6,019 (1,362)
Increase in deferred benefits 1,515 7,444
(Decrease)/increase in deferred income taxes (2,366) 3,662
- - -----------------------------------------------------------------------------------------
Total Adjustments 29,294 48,732
- - -----------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 79,395 86,580
- - -----------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Expenditures for property, plant and equipment, net (44,028) (41,926)
Decrease in short-term investments 197 115
Investment in cellular 1,174 (627)
Proceeds from asset sales - 2,670
Proceeds from sale of company 55,689 -
Investment in nonaffiliated entities - (3,321)
Purchase of company - (7,377)
Cash acquired in purchase acquisitions - 178
- - -----------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Investing Activities 13,032 (50,288)
- - -----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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<TABLE>
Consolidated Statement of Cash Flows
(Unaudited)
<CAPTION>
6 Months Ended June 30
In thousands of dollars 1994 1993
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Financing Activities
(Decrease)/increase in notes payable (197) 109
Proceeds from long-term debt - 35,234
Repayments of long-term debt (11,547) (50,874)
Dividends paid (29,206) (27,050)
Purchases of treasury stock - (7,739)
Redemptions of preferred stock (8) (8)
Issuance of treasury stock 2,302 -
Issuance of common stock 103,862 -
Minority interests 267 201
- - -----------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities 65,473 (50,127)
- - -----------------------------------------------------------------------------------------
Net Increase (decrease) in Cash and Cash Equivalents 157,900 (13,835)
Cash and Cash Equivalents at Beginning of Period 31,284 69,347
- - -----------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $189,184 $55,512
===========================================================================================
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
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ROCHESTER TELEPHONE CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
Note 1:Consolidation
-------------
The consolidated financial information includes the
accounts of Rochester Telephone Corporation and its
affiliates (the "Company"). The Company reports its
operations in two segments: Telephone Operations and
Telecommunication Services. Telephone Operations is
comprised of 36 local telephone operating companies.
Telecommunication Services is segregated within the
Business Segment Information into two general lines of
business: 1) Network Systems and Services and 2)
Wireless Communications. Intercompany transactions
have been eliminated except for intercompany profit on
regulated company purchases (affiliate sales) from
Telecommunication Services. In the opinion of
management, prices charged by Telecommunication
Services are comparable to prices the regulated
companies would be required to pay other suppliers.
Note 2: Income Taxes
------------
The Company files a consolidated federal income tax
return.
The provision for income taxes consists of the
following (in thousands):
3 Months Ended 6 Months Ended
June 30, June 30,
1994 1993 1994 1993
---- ---- ---- ----
Federal
Current $17,236 $ 9,803 $30,418 $19,604
Deferred (544) 650 (2,063) 868
------- ------- ------- -------
$16,692 $10,453 $28,355 $20,472
------- ------- ------- -------
State
Current $ 1,979 $ 1,096 $ 3,757 $ 2,347
Deferred (151) 255 (303) 266
------- ------- ------- -------
$ 1,828 $ 1,351 3,454 2,613
------- ------- ------- -------
Total $18,520 $11,804 $31,809 $23,085
======= ======= ======= =======
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ROCHESTER TELEPHONE CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
Deferred income taxes have not been provided by
Telephone Operations for flow-through of temporary
differences where the regulatory agencies permit
only taxes actually paid to be recognized. At
June 30, 1994, the cumulative balance of tax
reductions not previously offset by provisions for
deferred federal income taxes amounted to $46
million. Similarly, the cumulative balances of
tax reductions not previously offset by provisions
for deferred state income taxes amounted to $20
million at June 30, 1994. Consistent with the
provisions of Financial Accounting Standards Board
Statement No. 109 (FAS 109), "Accounting for
Income Taxes", a deferred tax liability and a
long-term deferred asset have been recorded to
reflect the impact applicable to these cumulative
reductions and the future revenue to be recovered
when these taxes become payable.
Note 3: Cash Flows
----------
For purposes of the Statement of Cash Flows,
the Company considers all highly-liquid
investments with a maturity of three months or
less when purchased to be cash equivalents.
Actual interest paid was $21.8 million and
$24.8 million for the six month periods ended June
30, 1994, and June 30, 1993, respectively. In
addition, actual income taxes paid were $37.9
million for the six months ended June 30, 1994,
and $22.5 million for the six months ended June
30, 1993.
Note 4: Stock Split
-----------
In November 1993, the Board of Directors
approved a 2-for-1 split of the Company's common
stock effected in the form of a 100 percent stock
dividend with no change in the $1.00 per share par
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<PAGE>
ROCHESTER TELEPHONE CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
value. The New York State Public Service Commission
(NYSPSC) approved the split in March of 1994. The
record date for the split was April 15, 1994, and
distribution of certificates began on April 29, 1994.
Historical share and per share data have been
retroactively adjusted to reflect the split where
appropriate.
Note 5: Earnings Per Share
------------------
Average common shares outstanding include amounts
for common stock equivalents resulting from stock
options outstanding at June 30, 1994, and June 30,
1993.
Primary earnings per common share amounts are
calculated by dividing Income Applicable to Common
Stock by the weighted average common shares and common
share equivalents outstanding, as applicable, during
each period. Earnings per share on a fully diluted
basis are computed as set forth in Exhibit 11.
Note 6: Stock Option Plans
------------------
In 1992 the Company implemented a Directors Stock
Option Plan and an Executive Stock Option Plan
("Plans"). Under the original plans, which were
approved by shareowners in 1990, the Company was
authorized to issue a maximum of 400,000 shares of
common stock over a ten-year period.
At the April 1994 Annual Meeting, shareowners
approved amendments to both plans which increased the
total number of option shares to 1,500,000. The
amendments also provided for automatic increases in
the number of shares that may be issued as a result of
a stock split. Consequently, since the stock was
split (see Note 4) subsequent to the 1994 Annual
Meeting, there are currently 3,000,000 option shares
available for issuance.
Under both Plans, the exercise price is the fair
market value of the stock on the date of the grant of
the stock option. One third of the options become
exercisable on the first year anniversary of the grant
date. Another third become exercisable on the second
year anniversary and the final third become
exercisable on the third year anniversary of the grant
date. The options expire ten years after the date of
grant.
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ROCHESTER TELEPHONE CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
Information with respect to options under the above
plans follows:
Option Price
Shares Per Share Aggregate
------ ------------ ---------
Outstanding at
March 31, 1994 634,154 $12,420,135
Second Quarter Activity:
Granted 116,000 $22.688 2,631,750
Exercised (3,997) $15.688-$19.750 (69,784)
Cancelled (2,000) $21.188-$22.688 (42,975)
--------- ------------
Outstanding at
June 30, 1994 744,157 $14,939,126
======= ===========
At June 30, 1994, 102,115 shares were exercisable
and 2,248,662 shares were available for future grant.
Shares and option price per share were adjusted for
the 2-for-1 split in April, 1994.
Note 7: Stock Offering
--------------
In February of 1994, the Company sold 5.4 million
shares of its common stock at $42 per share in a
public offering. As part of the offering, 2,549,000
new primary shares were issued and sold directly by
the Company and 2,885,000 shares were sold by C FON
Corporation, a wholly-owned subsidiary of Centel
Corporation, which is a wholly-owned subsidiary of
Sprint Corporation. All share and per share data is
prior to the 2-for-1 stock split in April, 1994.
The net proceeds from the primary shares sold
during the offering, subject to approval by the
NYSPSC, may be used for general corporate purposes,
including expansion of the Company's lines of
business.
Note 8: Postemployment Benefits
-----------------------
In 1992, the Financial Accounting Standards Board
released Statement No. 112, "Employers' Accounting for
Postemployment Benefits" (FAS 112) which was required
to be implemented by January 1, 1994. FAS 112
requires that projected future costs of providing
postemployment, pre-retirement benefits, such as
disability, pre-pension leave (salary continuation)
and severance pay, be recognized as an expense as
employees render service rather than when the benefits
are paid.
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ROCHESTER TELEPHONE CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
The Company adopted the provisions of FAS 112
effective January 1, 1994. The Company recognized the
obligation for postemployment benefits through a
cumulative effect charge to net income of $7.2
million, net of taxes of $3.9 million. The adoption
of FAS 112 is not expected to significantly impact
future operating expense or the Company's cash flow.
Note 9: Divestitures:
------------
On May 16, 1994, the Company completed the sale of
Minot Telephone Company in Minot, North Dakota to a
subsidiary of the Souris River Telecommunications
Cooperative. Minot Telephone was the Company's only
holding in North Dakota and the Company had reassessed
its prospects for expansion in North Dakota. The sale
of Minot Telephone Company resulted in a $9.5 million
after-tax gain, or $.13 per share, included in the
second quarter results.
Note 10: Commitments and Contingencies
----------------------------
It is anticipated that the Company will expend
approximately $82 million for additions to property,
plant, and equipment during 1994. In connection with
this construction program, the Company has made
certain commitments for the purchase of material and
equipment.
The NYSPSC issued an order on July 6, 1993 which
imposed a royalty on Rochester Tel in the amount of
two percent of the total capitalization of Rochester's
unregulated operations. Based upon an initial
interpretation of the Order, Rochester estimates that
its effect is in the range of $2.0 million per year.
The Company filed a legal challenge to the
Commission's action on the royalty proposal in the
courts. On June 30, 1994, the Appellate Division of
the New York State Supreme Court upheld the NYSPSC
decision of July 6, 1993. The Company filed, on July
29, 1994, a Notice of Appeal and Motion for Leave To
Appeal with the New York Court of Appeals. If
ultimately upheld in the courts, the royalty would be
treated as an offset to the Rochester, New York
operating company's regulated revenue requirement from
regulated intrastate telephone operations. The
Company is vigorously contesting this case but cannot
predict the outcome with any certainty at this time.
The Company's Open Market Plan, discussed in the
following paragraph, also includes a proposal to
resolve the royalty issue for the duration of the Open
Market Plan Agreement.
<PAGE>
<PAGE>
ROCHESTER TELEPHONE CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
In February 1993, the Company filed a petition for
reorganization with the NYSPSC. The petition became
known as the Company's Open Market Plan and Corporate
Restructuring Proposal. The request was twofold,
first establishing two new subsidiary companies to be
constituted from the operating assets of the existing
Rochester operating telephone company. One company
would be a competitive telecommunications company
which would provide an array of services on a retail
basis in the Rochester marketplace. This company
would have the flexibility to price and introduce
services as necessary to compete. The second company
would be a wholesale network company which would be
regulated and would provide services to the new
competitive subsidiary company and all other
telecommunications providers on an equal basis. This
configuration, unique in the telecommunications
industry, was being proposed to better meet the
current and emerging competition in the marketplace.
The second aspect of the petition involved the
Company's request to reorganize into a holding company
structure. Under this approach, the Company would
create a new unregulated holding company for the
consolidated organization. This structure would
provide the financing flexibility to continue the
acquisition and diversification efforts necessary for
the long-term growth of the business. On May 17, 1994
the Company reached a Joint Stipulation and Agreement
with the Staff of the NYSPSC, Time Warner
Communications and the Communications Workers of
America on the terms of this Open Market Plan and
Corporate Restructuring. Subsequently, on August 1,
1994 the New York State Department of Economic
Development also officially endorsed the Plan. The
Joint Stipulation and Agreement included operational
modifications to the Company's original proposal as
well as a rate reduction of $21 million over seven
years and a form of price cap regulation for at least
five years. The Company and other interested parties
are currently pursuing final approval by the NYSPSC,
and the NYSPSC has adopted a hearing and briefing
schedule running through August 1994. The Company is
aggressively pursuing approval of the Joint
Stipulation but cannot predict the outcome at this
time.
On March 12, 1993, the Company signed a definitive
agreement with a subsidiary of NYNEX Corporation to
form a cellular supersystem joint venture in upstate
and western New York State to provide cellular
telephone customers with expanded geographic
coverage. The supersystem, which began operations on
July 1, 1994, initially includes the cellular markets
<PAGE>
<PAGE>
in Buffalo, Rochester, Syracuse, Utica-Rome and New
York Rural Service Area #1, which includes Jefferson,
St. Lawrence and Lewis counties. The supersystem is a
50/50 joint venture partnership, with Rochester Tel
Cellular as the manager. The Company's share of the
joint venture earnings will be accounted for under the
equity method. On December 21, 1993, the Company and
NYNEX announced their intention to include the
Binghamton and Elmira areas in the supersystem,
following receipt of the necessary approvals and
satisfaction of other preconditions.
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations
Three Months Ended June 30, 1994 and 1993
==========================================
OVERVIEW
========
Consolidated operating income increased $7.1
million, or 14.5 percent, for the three months ended
June 30, 1994, over the comparable period in 1993.
Operating income from Telecommunication Services
increased $3.7 million, or 55.4 percent, while
operating income from Telephone Operations increased
$3.4 million, or 8.0 percent, for the three months
ended June 30, 1994 over the respective period in
1993. Consolidated net income was $34.9 million for
the quarter, which includes a $9.5 million after-tax
gain from the completed sale of Minot Telephone
Company. Exclusive of this gain, consolidated net
income increased $5.5 million, or 27.9 percent, over
the second quarter of 1993.
Primary earnings per average common shares were
$.47 in the second quarter of 1994, of which $.13 is
associated with the gain from the sale of Minot
Telephone Company. Net of the gain, this represents
an increase of $.05 per share, or 17.2 percent, over
the comparable quarter in 1993. Average common shares
outstanding in the second quarter of 1994 were 73.2
million, an increase of 5.7 million shares over the
second quarter of 1993. This increase is due mainly
to the issuance of 2.5 million additional shares from
the February 1994 equity offering and the 2-for-1
stock split that was effected in April 1994. See
Notes 4 and 7 to the Financial Statements set forth in
Part I, Item 1 for additional information.
<PAGE>
<PAGE>
FINANCIAL REVIEW
================
Revenues and Sales
- - ------------------
Total revenues and sales for the second quarter of
1994 were $251.8 million, an increase of $29.0
million, or 13.0 percent, over 1993. Revenues from
Telephone Operations for the second quarter of 1994
increased $6.6 million, or 4.5 percent, over the
comparable period in 1993. Local telephone service
revenues increased $4.4 million, or 7.7 percent,
primarily as a result of an increase in access lines,
higher Custom Calling Features revenue and rate
increases received in Minnesota and Iowa. Network
access and long distance network service revenues
increased $2.8 million, or 4.6 percent, in the second
quarter of 1994 primarily due to higher switched
access revenue and higher toll service rates.
Sales from Telecommunication Services increased
$22.4 million, or 30.0 percent, in the second quarter
of 1994 when compared to the corresponding quarter in
1993. An increase of $18.5 million, or 27.0 percent,
in Long Distance revenues was the major contributor to
this improvement. This increase is due to increased
usage, the growth of the Company's Residential Calling
Program, price increases and the impact of the
acquisitions of Budget Call Long Distance, Inc. in
June 1993 and Mid Atlantic Telecom, Inc. in September
1993.
Costs and Expenses
- - ------------------
Total consolidated costs and expenses increased
$21.9 million, or 12.6 percent, in the second quarter
of 1994 when compared to the same period in 1993.
Consolidated operating expenses increased $18.9
million, or 14.7 percent, primarily as a result of
higher access charges relating to the increase in long
distance revenues. Telephone operating expenses
increased 1.6 percent over the second quarter of
1993. Operating expenses for the regional telephone
companies increased 4.1 percent in the quarter due
mainly to increased plant related expenses resulting
from higher sales volumes. Operating expenses at the
Rochester operating company decreased 1.8 percent
primarily as a result of force level reductions.
<PAGE>
<PAGE>
Operating Income
- - ----------------
Operating income from Telephone Operations
increased $3.4 million, or 8.0 percent, in the second
quarter of 1994 when compared to the corresponding
quarter in 1993. The regional telephone companies led
the operating income performance in this business
segment with a 9.8 percent increase in operating
income primarily due to increased revenues in the
Midwest Region. This resulted in a 34.6 percent
regional telephone operating margin, compared to 33.4
percent for the second quarter of 1993. At the
Rochester operating company, operating income
increased 5.9 percent primarily due to lower wages and
benefits resulting from lower work force levels.
Operating income from Telecommunication Services
increased $3.7 million, or 55.4 percent, in the second
quarter of 1994 when compared to the corresponding
quarter in 1993. The Network Systems and Services
business segment operating income increased 50.6
percent in the second quarter of 1994 versus the
second quarter of 1993 due to the substantial increase
in long distance revenues. In the Wireless segment,
operating income increased $.5 million, or 104.3
percent, primarily as a result of the consolidation of
the Alabama wireless properties, in which Rochester
Tel recently acquired a controlling interest.
Interest Expense
- - ----------------
For the three months ended June 30, 1994, interest
charges decreased $1.3 million, or 10.7 percent, over
the comparable period in 1993. This decrease is the
result of lower debt balances for the three month
period ended June 30, 1994 when compared to the same
period in 1993.
Gain on Sale of Assets
- - ----------------------
On May 16, 1994, the Company completed the sale of
Minot Telephone Company in Minot, North Dakota. This
transaction resulted in a pre-tax gain of $12.9
million.
Income Taxes
- - ------------
Consolidated income taxes increased $6.7 million,
or 56.9 percent, in the second quarter of 1994 when
compared to the corresponding period in 1993. Taxes
associated with the sale of Minot Telephone Company
accounted for $3.4 million of this increase. The
remainder of this increase is due to higher income.
The effective income tax rate was 34.7 percent for the
three month period ended June 30, 1994, as compared to
37.3 percent for the period ended June 30, 1993.
<PAGE>
<PAGE>
Six Months Ended June 30, 1994 and 1993
==========================================
OVERVIEW
========
Consolidated operating income increased $14.8
million, or 15.8 percent, for the six months ended June
30, 1994 over the comparable period in 1993. Operating
income from Telecommunication Services increased $5.9
million, or 45.9 percent, while Telephone Operations
increased $8.9 million, or 11.0 percent, over the
respective period in 1993. Income before the
cumulative effect of a change in accounting principle
for the six months ended June 30, 1994 was $57.3
million reflecting an increase of $19.5 million, or
51.4 percent, when compared to the corresponding period
in 1993. Excluding the cumulative effect of a change
in accounting principle and the after-tax gain on the
sale of the Minot Telephone subsidiary, consolidated
net income was $47.8 million for the first six months
of 1994, an increase of $9.9 million, or 26.2 percent,
when compared to the corresponding period in 1993.
In January 1994, the Company adopted Financial
Accounting Standards Board Statement No. 112 (FAS 112),
"Employers' Accounting for Postemployment Benefits."
The Company recognized the obligation for
postemployment benefits through a cumulative effect
charge to net income of $7.2 million, net of taxes of
$3.9 million. The adoption of FAS 112 is not expected
to significantly impact future operating expense or the
Company's cash flow.
Primary earnings before the cumulative effect of a
change in accounting principle per average common share
were $.79 for the six months ended June 30, 1994. This
represents an increase of $.23 per share, or 41.1
percent, over the comparable period in 1993. The
adoption of FAS 112 negatively impacted primary
earnings by $.10 per share for the six months ended
June 30, 1994. Primary earnings after the cumulative
effect of a change in accounting principle per average
common share were $.69 for the six months ended June
30, 1994. This represents an increase of $.13 per
share over the comparable period in 1993. Average
common shares outstanding for the six months ended June
30, 1994 were 71.9 million, 4.8 million shares more
than the comparable period of 1993, chiefly as a result
of the equity offering and the subsequent 2-for-1 stock
split described in Notes 4 and 7 to the Financial
Statements set forth in Part I, Item 1. All share and
per share data have been adjusted for the 2-for-1 stock
split.
<PAGE>
<PAGE>
FINANCIAL REVIEW
================
Revenues and Sales
- - ------------------
Total revenues and sales for the six months ended
June 30, 1994 were $493.6 million, an increase of
$59.8 million, or 13.8 percent, over 1993. Revenues
from Telephone Operations for the first six months of
1994 increased $13.0 million, or 4.4 percent, over the
comparable period in 1993. Local telephone service
revenues increased $7.3 million, or 6.5 percent,
primarily as a result of an increase in access lines,
higher Custom Calling Features revenue and rate
increases received in Minnesota and Iowa. Network
access and long distance network service revenues
increased $7.5 million, or 6.1 percent, for the six
months ended June 30, 1994, primarily due to higher
switched access revenue and higher toll service rates.
Sales from Telecommunication Services increased
$46.8 million, or 33.2 percent, for the first six
months of 1994 when compared to the corresponding
period in 1993. An increase of $40.7 million, or 31.3
percent, in Long Distance revenues was the major
contributor to this improvement. This increase is due
to increased usage, the growth of the Company's
Residential Calling Program, price increases and the
impact of the acquisitions of Budget Call Long
Distance, Inc. in June 1993 and Mid Atlantic Telecom,
Inc. in September 1993.
Costs and Expenses
- - ------------------
Total consolidated costs and expenses increased
$45.0 million, or 13.2 percent, in the first six
months of 1994 when compared to the same period in
1993. Consolidated operating expenses increased $39.6
million, or 15.8 percent, primarily as a result of
higher access charges relating to the increase in long
distance revenues. Telephone operating expenses for
the six months ended June 30, 1994 increased 1.1
percent compared to the same period in 1993.
Operating expenses for the regional telephone
companies increased 3.9 percent in the first six
months of 1994 when compared to the same period in
1993, due mainly to increased plant related expenses
resulting from higher sales volumes. Operating
expenses at the Rochester operating company decreased
2.5 percent primarily as a result of force level
reductions.
Operating Income
- - ----------------
Operating income from Telephone Operations
increased $8.9 million, or 11.0 percent, for the six
<PAGE>
<PAGE>
months ended June 30, 1994 when compared to the
corresponding period in 1993. The regional telephone
companies led the operating income performance in this
business segment with a 16.5 percent increase in
operating income primarily due to increased revenues
in the Midwest Region. This resulted in a 34.5
percent operating margin, compared to 31.9 percent for
the first six months of 1993. At the Rochester
operating company, operating income increased 3.9
percent primarily due to lower wages and benefits
resulting from lower work force levels.
Operating income from Telecommunication Services
increased $5.9 million, or 45.9 percent, for the first
six months ended June 30, 1994, when compared to the
corresponding period in 1993. The Network Systems and
Services business segment operating income increased
42.1 percent for the six months ended June 30, 1994
versus the corresponding period of 1993 due to the
substantial increase in long distance revenues. In
the Wireless segment, operating income increased $.8
million, or 90.0 percent, as a result of the Utica
Rome acquisition in April of 1993 and the consoli-
dation of the Alabama wireless properties.
Interest Expense
- - ----------------
For the six months ended June 30, 1994, interest
charges decreased $2.1 million, or 8.9 percent, over
the comparable period in 1993. This decrease is the
result of lower debt balances for the six month period
ended June 30, 1994 when compared to the same period
in 1993.
Gain on Sale of Assets
- - ----------------------
On May 16, 1994, the Company completed the sale of
Minot Telephone Company in Minot, North Dakota. This
transaction resulted in a pre-tax gain of $12.9
million.
Income Taxes
- - ------------
Consolidated income taxes increased $8.7 million,
or 37.8 percent, for the six months ended June 30,
1994 when compared to the corresponding period in
1993. Taxes associated with the sale of Minot
Telephone Company accounted for $3.4 million of this
increase. The remainder of this increase is due to
higher income. The effective income tax rate was 35.7
percent for the six month period ended June 30, 1994,
as compared to 37.9 percent for the period ended June
30, 1993.
<PAGE>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
===============================
Cash and Cash Equivalents
- - -------------------------
At June 30, 1994, the Company had $189.2
million in cash and cash equivalents compared to
$31.3 million at December 31, 1993, an increase of
$157.9 million resulting mainly from the equity
offering as described in Note 7 to the Financial
Statements set forth in Part I, Item 1, and the
sale of Minot Telephone Company in May of 1994 as
described in Note 9 to the Financial Statements
set forth in Part I, Item 1. See the Consolidated
Statement of Cash Flows for additional
information.
Debt
- - ----
Debt, including notes payable, totaled $485.1
million at June 30, 1994, a decrease of $11.7
million from December 31, 1993. This decrease was
a result of the early retirement of high cost
subsidiary debt during the first six months of
1994 in addition to the normal paydown of debt
through June 30, 1994.
Debt Ratio and Interest Coverage
- - --------------------------------
The Company's debt ratio (total debt as a
percent of total capitalization) was 37.8 percent
at the end of June 30, 1994, versus 42.4 percent
at the end of 1993. This change is primarily due
to the common stock issuance during the first
quarter. Pre-tax interest coverage before the
cumulative effect of a change in accounting
principle was 5.1 times for the first six months
ended June 1994 compared to 3.9 times at the end
of 1993.
Construction Spending
- - ---------------------
The Company plans to spend a total of
approximately $82 million on capital expenditures
in 1994. Telephone Operations plans to spend
approximately $57 million and Telecommunication
Services plans to spend approximately $25
million. The Company has a number of financing
options available to fund its capital
expenditures, including the use of internally
generated funds and the issuance of additional
debt or equity.
<PAGE>
<PAGE>
Dividends
- - ---------
On June 21, 1994, the Board of Directors declared
the second quarter 1994 regular dividend of 20.25
cents per share on the Company's common stock, payable
August 1, 1994, to shareowners of record on July 15,
1994.
OTHER ITEMS
===========
Acquisitions
- - ------------
Effective July 6, 1994, the Company definitively
agreed to purchase the Minnesota Cellular Telephone
Company ("MSCTC") in a tax-deferred stock-for-stock
transaction. MSCTC is the non-wireline cellular
provider of service in Minnesota RSA #10 which is
south of Minneapolis. Regulatory approvals are
pending. The acquisition is expected to be completed
in the first quarter of 1995 and will be accounted for
as a pooling of interests.
Open Market Plan
- - ----------------
In February 1993, the Company filed a widely
recognized innovative proposal with the NYSPSC that
would result in opening the Rochester, New York local
exchange market to competition and simultaneously
allow Rochester Tel to form a holding company. The
Company's proposal is called the "Open Market Plan".
Under the proposal, two new companies would be formed
from the operating assets of the existing Rochester
operating telephone company. One company would be a
competitive telecommunications company which would
provide an array of services on a retail basis in the
Rochester marketplace. This company would have the
flexibility to price and introduce services as
necessary to compete. The second company would be a
wholesale network company which would be regulated and
would provide services to the new competitive
subsidiary company and all other telecommunications
providers on an equal basis. This configuration,
unique in the telecommunications industry, was being
proposed to better meet the current and emerging
competition in the marketplace.
The second aspect of the petition involved the
Company's request to reorganize into a holding company
structure. Under this approach, the Company would
create a new unregulated holding company for the
consolidated organization. This structure would
<PAGE>
<PAGE>
provide the financing flexibility to continue
acquisition and diversification efforts necessary for
the long-term growth of the business. On May 17, 1994,
the Company reached a Joint Stipulation and Agreement
with the Staff of the NYSPSC, Time Warner
Communications and the Communications Workers of
America on the terms of this Open Market Plan and
Corporate Restructuring. Subsequently, on August 4,
1994 the New York State Department of Economic
Development also officially endorsed the Plan. The
Joint Stipulation and Agreement included operational
modifications to the Company's original proposal as
well as a rate reduction of $21 million over seven
years and a form of price cap regulation for at least
five years. The Company and other interested parties
are currently pursuing final approval by the NYSPSC,
and the NYSPSC has adopted a hearing and briefing
schedule running through August 1994. The Company is
aggressively pursuing approval of the Joint
Stipulation but cannot predict the outcome at this
time. If approved by the NYSPSC, implementation is
expected to begin in January of 1995.
Regulatory Proceedings
- - ----------------------
In 1986, the Company and the NYSPSC entered into an
agreement which allowed the Company to pursue certain
acquisitions and investments without further
Commission approval. This agreement was amended in
1987, 1989 and 1991. The 1991 amendment preceded the
acquisition of the Vista Telephone properties in
Minnesota and Iowa from Centel Corporation. Certain
portions of the amendment expired in June 1993, and at
the request of the Company, the Commission extended
the amendment to December 1993. It is anticipated
that resolution of the Company's Open Market Plan
filing and the associated provision allowing Rochester
Tel to form a Holding Company would eliminate the
necessity of this agreement. Until the Open Market
Plan proposal is resolved, effective January 1, 1994,
the Company must petition the Commission for approval
of future acquisitions.
In 1984, the NYSPSC initiated a proceeding to
investigate whether or not the Company's unregulated
subsidiaries should pay a royalty to the Rochester,
New York operating company for alleged intangible
benefits received from the use of the Rochester
Telephone name and reputation. The proceeding was
reopened in 1990. In its Opinion and Order in Case
87-C-8959, issued July 6, 1993, the Commission, by a
three-to-two vote, imposed a royalty in the amount of
two percent of the total capitalization of Rochester
Tel's unregulated operations.
<PAGE>
<PAGE>
Based upon an initial interpretation of the Order,
Rochester Tel estimates that the effect of the Order
is in the range of $2 million per year. The Company
vigorously disagrees with the Commission's
determination and has sought judicial review of the
Commission's Opinion and Order. See Part II, Item 1,
Legal Proceedings, for more information.
On March 12, 1993, the Company signed a definitive
agreement with a subsidiary of NYNEX Corporation to
form a cellular supersystem joint venture in upstate
and western New York State to provide cellular
telephone customers with expanded geographic
coverage. The supersystem, which began operations on
July 1, 1994, initially includes the cellular markets
in Buffalo, Rochester, Syracuse, Utica-Rome and New
York Rural Service Area #1, which includes Jefferson,
St. Lawrence and Lewis counties. The supersystem is a
50/50 joint venture partnership, with Rochester Tel
Cellular as the manager. The Company's share of the
joint venture earnings will be accounted for under the
equity method. On December 21, 1993, the Company and
NYNEX announced their intention to include the
Binghamton and Elmira areas in the supersystem,
following receipt of the necessary approvals and
satisfaction of other preconditions.
Incentive Regulation
- - --------------------
An incentive regulation agreement which the NYSPSC
approved in January 1990 for the Rochester, New York
operating company expired at the end of 1992. The
Rochester, New York operating company proposed a new
incentive regulation agreement in January 1993 to the
Commission staff, and reached a settlement, which was
approved by the Commission on February 17, 1994. The
settlement reduces the Rochester, New York operating
company's revenue requirement by $5 million in 1993
and $9.5 million in 1994. In 1994, fifty percent of
the Rochester, New York operating company's earnings
above the authorized return on equity are subject to
sharing with ratepayers. Under the proposed May 17,
1994 Joint Stipulation and Agreement (the Open Market
Plan), the 1994 amounts would be credited to the
Company's depreciation reserve. The authorized return
is currently 10.9 percent and is subject to adjustment
based on the results of the Generic Financing
Proceeding. Also, if the Rochester, New York
operating company's service levels in 1994 drop below
1992 levels, the Company will be subject to a penalty
of one-half of one percent of its local service and
intraLATA toll revenues.
<PAGE>
<PAGE>
Part II - Other Information
===========================
Item 1 - Legal Proceedings
On June 11, 1992, a group of corporate plaintiffs
consisting of Cooper Industries, Inc., Keystone
Consolidated Industries, Inc., The Monarch Machine
Tool Company, Niagara Mohawk Corporation, and Overhead
Door Corporation commenced an action in the United
States District Court for the Northern District of New
York seeking contribution from Rotelcom Inc., a
wholly-owned subsidiary of the registrant held through
intervening subsidiaries, and fourteen other corporate
defendants for environmental "response costs" in the
approximate amount of $1.5 million incurred by the
plaintiffs pursuant to a decree entered into by
plaintiffs with the United States Environmental
Protection Agency.
The consent decree concerned the clean-up of an
environmental Superfund site located in Cortland, New
York. It is alleged that the corporate defendants
disposed of hazardous substances at the site and are
therefore liable under the Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA).
The action is currently in discovery. Rotelcom Inc.
has been vigorously defending this lawsuit. However,
the Company is unable to predict the outcome at this
time.
In its Opinion and Order in Case 87-C-8959, issued
July 6, 1993, the NYSPSC, by a three-to-two vote,
imposed a royalty upon the Company in the amount of
two percent of the total capitalization of the
Company's unregulated operations. The NYSPSC
justified the royalty on two grounds: first, that
ratepayers are entitled to protection from the
potential for cost misallocations and increased risk
that accompany diversification of the Company's basic
telephone business; and second, that the Company's
unregulated operations benefit from their use of the
Rochester name and reputation. The NYSPSC rejected
the Company's statutory and constitutional defenses
and concluded that it possessed the authority under
the Public Service Law to impose a royalty and that
its imposition is not unconstitutional. Based upon an
initial interpretation of the Order, the Company
estimates that its potential effect is in the range of
$2 million per year. The royalty, if implemented,
would be an imputation against the Rochester, New York
operating company's revenue requirement from regulated
intrastate operations. The NYSPSC ordered the
<PAGE>
<PAGE>
Rochester, New York operating company to file, by
August 5, 1993, an accounting plan to account for the
royalty amount, together with a plan for returning such
amount to ratepayers. Although the Rochester, New York
operating company requested the NYSPSC to waive this
requirement, the NYSPSC denied this request. In
compliance with the order of the NYSPSC, on August 5,
1993, the Rochester, New York operating company filed
its plan.
On August 6, 1993, the Rochester, New York operating
company filed with Supreme Court, Albany County, its
petition pursuant to Article 78 of the New York Civil
Practice Law and Rules seeking judicial review of the
NYSPSC's Opinion and Order. By order dated October 7,
1993, this proceeding was transferred to the Appellate
Division, Third Department. The Company filed its
Brief on December 16, 1993. Respondents' briefs were
filed on February 28, 1994, and reply briefs were filed
on March 16, 1994. Oral argument was held on April 26,
1994. On June 30, 1994, the Appellate Division
unanimously upheld the Commission's Order. On July 29,
1994, the Company filed a Notice of Appeal and a Motion
for Leave To Appeal with the New York Court of
Appeals. The Company is vigorously contesting this
case and is of the opinion that it will ultimately
prevail, but cannot predict the outcome with any
certainty at this time.
The Company's Open Market Plan, as discussed in Note
10 to the Financial Statements set forth in Part I,
Item 1, also includes a proposal to resolve the royalty
issue for the duration of the Open Market Plan
Agreement.
Item 4 - Submission of Matters to a Vote of Security Holders
---------------------------------------------------
At the Annual Meeting of Share Owners held on April
27, 1994, the shareowners voted on the election of 12
Directors (constituting the entire Board of Directors)
and the independent auditors for the year 1994. The
results were as follows:
Election of Directors For Withheld
- - --------------------- --- --------
1. Patricia C. Barron 29,365,420 335,488
2. Ronald L. Bittner 29,474,347 226,561
3. John R. Block 29,238,107 462,801
4. Harlan D. Calkins 29,322,611 378,297
5. Brenda E. Edgerton 29,352,640 348,268
6. Jairo A. Estrada 29,534,985 165,923
7. Daniel E. Gill 29,389,733 311,175
8. Alan C. Hasselwander 29,540,002 160,906
9. Douglas H. McCorkindale 29,353,700 347,208
10. Richard P. Miller, Jr. 29,379,529 321,379
11. Leo J. Thomas 29,519,173 181,735
12. Michael T. Tomaino 29,383,319 317,589
<PAGE>
<PAGE>
Election of Price Waterhouse as independent auditors
for the fiscal year 1994.
For Against Abstain
--- ------- -------
29,325,483 270,583 104,572
Amendment No. 3 to the Supplemental Retirement Savings
Plan to add Company common stock as an investment
vehicle for Plan participants.
For Against Abstain
--- ------- -------
28,082,195 1,035,913 582,800
Restated Executive Stock Option Plan which, among
other modifications, increased from 300,000 to
1,000,000 the number of authorized shares which are
available for option grants.
For Against Abstain
--- ------- -------
26,174,920 2,920,018 605,970
Amendment No. 1 to the Directors Stock Option Plan
which, among other modifications, increased the annual
grant to outside Directors from 1,000 to 2,000 options
and increased from 100,000 to 500,000 the number of
authorized shares which are available for option
grants.
For Against Abstain
--- ------- -------
25,913,449 3,147,134 640,325
Directors' Common Stock Deferred Growth Plan which
allows Directors to defer Board compensation in
Company common stock.
For Against Abstain
--- ------- -------
27,721,950 1,384,023 594,935
There was no other action taken at the meeting.
<PAGE>
<PAGE>
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
10-45 - Copy of Amendment No. 7 to the
Supplemental Management Pension
Plan
11 - Computation of Earnings per
Share of Common Stock on a
Fully Diluted Basis (Unaudited)
(b) Reports on Form 8-K
The Company filed three (3) Forms 8-K during
the quarter ended June 30, 1994 and through
the filing date of this Form 10-Q as follows:
Financial
SEC Filing Date Item No. Statements
--------------- -------- ----------
May 17, 1994 Item 5 None
July 1, 1994 Item 5 None
July 14, 1994 Item 5 None
<PAGE>
<PAGE>
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.
ROCHESTER TELEPHONE CORPORATION
-------------------------------
(Registrant)
Dated: August 12, 1994 By /s/Louis L. Massaro
----------------------------
Louis L. Massaro
Corporate Vice President
and Treasurer (and Principal
Financial Officer)
<PAGE>
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- - ------- -----------
10-45 Copy of Amendment No. 7 Filed herewith
to the Company's
Supplemental Management
Pension Plan
11 Computation of Earnings Filed herewith
per Share of Common Stock
on a Fully Diluted Basis
(Unaudited)
<PAGE>
EXHIBIT 10-45
ROCHESTER TELEPHONE CORPORATION
SUPPLEMENTAL MANAGEMENT PENSION PLAN
Amendment No. 7 to September 1, 1989 Restatement
Pursuant to Article Six, the Plan is amended, effective January 1, 1994, by
adding the following new Section 4.2 immediately following Section 4.1 and by
renumbering the remaining provisions of Article Four accordingly:
4.2 Subject to the conditions set forth below, an eligible Employee who
terminates employment on or after reaching age 50 with at least five
years of service while holding the position of Corporate Vice President or
higher shall be entitled to receive a benefit equal to (a) minus (b) below
where
(a) equals the sum of (1) for each of the eligible Employee's
first 15 years of service, 2.5 percent times his average annual
compensation during the three consecutive years of service with
the Company that produce the highest such average plus (2) for
each of the next 15 years of service 1.5 percent times his average
annual compensation during the three consecutive years of service
with the Company that produce the highest such average, provided
that in no event shall the amount under this subsection (a) exceed
60 percent of the eligible Employee's highest three years' average
compensation; minus
(b) equals the sum of the straight life annuity benefit payable under
Section 4.1 of this Plan and the straight life annuity benefit payable
under the Funded Plan.
The normal form of benefit payable under this Section 4.2 is a straight life
annuity commencing as of the eligible Employee's date of retirement and
shall not be subject to actuarial reduction even if the benefit payable from
the Funded Plan is subject to such reduction.
- - - 2 -
IN WITNESS WHEREOF, the Company has caused its duly authorized officer to
execute this Amendment on its behalf this 15th day of November 1993.
ROCHESTER TELEPHONE CORPORATION
By /s/ Josephine S.Trubek
-----------------------------------------
Josephine S. Trubek,
Corporate Secretary
<PAGE>
<TABLE>
Exhibit 11
Rochester Telephone Corporation
Computation of Earnings per Share of Common Stock
on a Fully Diluted Basis (Unaudited)
<CAPTION>
3 Months Ended 6 Months Ended
June 30, June 30,
(In thousands, except per share data) 1994 1993 1994 1993
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income applicable to common stock . . . . . . . $34,600 $19,534 $49,508 $ 37,255
Add: Interest on convertible
debentures. . . . . . . . . . . . . . 139 138 277 276
------- ------- ------- --------
34,739 19,672 49,785 37,531
Less: Increase in related federal
income taxes . . . . . . . . . . . . 49 47 97 94
------- ------- ------- --------
Adjusted income applicable to common stock. . $34,690 $19,625 $49,688 $ 37,437
======= ======= ======= ========
Total adjusted common shares assuming
conversion at beginning of each
period of outstanding convertible
debentures and stock options. . . . . . . . . 73,737 68,040 72,427 67,614
======= ======= ======= ========
Earnings per share of common
stock on a fully diluted basis . . . . . . . $ .47 $ .29 $ .69 $ .55
======= ======= ======= ========
112q94asc
</TABLE>
<PAGE>
<PAGE>
