<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1995.
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 1-6654
THE SOUTHERN NEW ENGLAND TELEPHONE COMPANY
(Exact name of registrant as specified in its charter)
Connecticut 06-0542646
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
227 Church Street, New Haven, CT 06510
(Address of principal executive offices) (Zip Code)
(203) 771-5200
(Registrant's telephone number,
including area code)
Not applicable
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
THE REGISTRANT, A WHOLLY OWNED SUBSIDIARY OF SOUTHERN NEW ENGLAND
TELECOMMUNICATIONS CORPORATION, MEETS THE CONDITIONS SET FORTH IN
GENERAL INSTRUCTION H(1) (a) AND (b) OF FORM 10-Q AND IS
THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT
PURSUANT TO GENERAL INSTRUCTION H(2).
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<PAGE>
Form 10-Q - Part I The Southern New England Telephone Company
PART I - FINANCIAL INFORMATION
The Southern New England Telephone Company ("Telephone Company")
is a wholly-owned telephone operating subsidiary of the Southern
New England Telecommunications Corporation ("Corporation") and
has its principal executive office at 227 Church Street, New
Haven, Connecticut 06510 (telephone number (203) 771-5200).
The condensed financial statements on the following pages have
been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC") and, in the opinion of
management, include all adjustments of a normal recurring nature
necessary for fair presentation for each period shown. The
1994 financial statements have been reclassified to conform to the
current year presentation. 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.
Operating results for any interim periods, or comparisons between
interim periods, are not necessarily indicative of the results
that may be expected for full fiscal years. It is suggested that
these financial statements be read in conjunction with the
financial statements and notes thereto included in the Telephone
Company's 1994 Annual Report on Form 10-K.
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<PAGE>
Form 10-Q - Part I The Southern New England Telephone Company
CONDENSED STATEMENT OF INCOME AND RETAINED EARNINGS
(Unaudited)
For the Three Months Ended
March 31,
Dollars in Millions 1995 1994
Revenues
Local service $157.4 $152.0
Network access 91.5 86.8
Intrastate toll 69.1 79.0
Publishing and other 56.0 51.6
Total Revenues 374.0 369.4
Costs and Expenses
Operating and maintenance 184.7 195.9
Depreciation and amortization 74.8 73.7
Taxes other than income 13.0 13.6
Total Costs and Expenses 272.5 283.2
Operating Income 101.5 86.2
Interest 13.2 14.1
Income Before Income Taxes 88.3 72.1
Income Taxes 34.8 29.0
Net Income $ 53.5 $ 43.1
Retained Earnings, Beginning of Period $648.0 $572.2
Net income 53.5 43.1
Dividends declared to parent (32.0) (23.0)
Retained Earnings, End of period $669.5 $592.3
The accompanying notes are an integral part of these financial statements.
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<PAGE>
Form 10-Q - Part I The Southern New England Telephone Company
CONDENSED BALANCE SHEET
Dollars in Millions March 31, 1995 Dec. 31, 1994
(Unaudited)
ASSETS
Cash and temporary cash investments $ 93.6 $ 44.2
Accounts receivable, net of allowance
for uncollectibles of $24.7 and $25.0,
respectively 255.9 267.4
Materials and supplies 6.8 6.2
Prepaid publishing 39.0 39.0
Deferred income taxes 100.3 92.6
Prepaid taxes and other assets 29.9 11.2
Total Current Assets 525.5 460.6
Telephone plant, at cost 4,113.7 4,080.1
Less: Accumulated depreciation 1,589.6 1,539.2
Telephone Plant, net 2,524.1 2,540.9
Deferred charges and other assets 243.9 247.3
Total Assets $3,293.5 $3,248.8
Liabilities and Shareholder's Equity
Accounts payable and accrued expenses $ 173.1 $ 181.6
Restructuring charge - current 167.8 145.5
Advance billings and customer deposits 44.2 42.3
Accrued compensated absenses 34.1 34.1
Other current liabilities 109.3 72.7
Total Current Liabilities 528.5 476.2
Long-term debt 746.4 746.3
Deferred income taxes 477.1 458.6
Restructuring charge - long-term 76.2 114.4
Unamortized investment tax credits 41.2 42.9
Other liabilities and deferred credits 223.5 231.3
Total Liabilities 2,092.9 2,069.7
Common Stock; $12.50 par value; 30,428,596
shares issued and 30,385,900 outstanding
at each period end 380.4 380.4
Proceeds in excess of par value 152.1 152.1
Retained earnings 669.5 648.0
Less: Treasury stock: 42,696 shares
at each period end (1.4) (1.4)
Total Shareholder's Equity 1,200.6 1,179.1
Total Liabilities and Shareholder's Equity $3,293.5 $3,248.8
The accompanying notes are an integral part of these financial statements.
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<PAGE>
Form 10-Q - Part I The Southern New England Telephone Company
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
For the Three Months Ended
March 31,
Dollars in Millions 1995 1994
Operating Activities
Net Income $ 53.5 $ 43.1
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 74.8 73.7
Effect of business restructuring (15.9) (16.9)
Change in operating assets and liabilities, net 41.3 14.9
Other, net 3.4 2.6
Net Cash Provided by Operating Activities 157.1 117.4
Investing Activities
Cash expended for capital additions (78.7) (73.7)
Other, net 1.0 (.3)
Net Cash Used by Investing Activities (77.7) (74.0)
Financing Activities
Cash dividends (30.0) (22.0)
Net proceeds of short-term debt from affiliate - 12.3
Repayment of long-term debt - (240.1)
Net Cash Used by Financing Activities (30.0) (249.8)
Increase (Decrease) in Cash and Temporary Cash
Investments 49.4 (206.4)
Cash and temporary cash investments at beginning
of period 44.2 214.5
Cash and Temporary Cash Investments at End
of Period $ 93.6 $ 8.1
Income Taxes Paid $ .1 $ 8.6
Interest Paid $ 10.3 $ 19.1
The accompanying notes are an integral part of these financial statements.
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<PAGE>
Form 10-Q - Part I The Southern New England Telephone Company
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1: Restructuring Charge
In December 1993, the Telephone Company recorded a restructuring
charge of $335.0 million before-tax, or $192.7 million after-tax,
to provide for a comprehensive restructuring program. The
program included costs to be incurred to facilitate employee
separations involving approximately 2,400 employees. The charge
also included: incremental costs of implementing appropriate
reengineering solutions; designing and developing new processes
and tools to continue the Telephone Company's provision of
excellent service; and retraining of the remaining employees to
help them meet the changing demands of customers.
The original 1993 restructuring charge and costs incurred during
1994 are summarized as follows:
Balance at Costs incurred Balance at
Dollars in Millions Dec. 31, 1993 during 1994 Dec. 31, 1994
Employee separation costs $160.0 $38.6 $121.4
Process and systems
reengineering 145.0 35.0 110.0
Exit and other costs 30.0 1.5 28.5
Total $335.0 $75.1 $259.9
In order to maintain quality customer service while at the same
time reengineering the business, the 1993 restructuring program
is expected to extend into 1997, rather than be completed by 1996
as originally intended. It is also possible that shifts within
reserve categories may occur. However, no significant changes in
the total cost of the 1993 restructuring program are likely to
occur nor are any adjustments anticipated to the original
estimate.
The Telephone Company incurred restructuring costs in 1995 as
follows:
For the Three Months
Dollars in Millions Ended March 31, 1995
Employee separation costs $ 1.9
Process and systems reengineering 13.7
Exit and other costs .3
Total Costs Incurred $15.9
Costs incurred for employee separations included payments for
severance, unused compensated absences, health care continuation
and employee retraining. Process and systems reengineering costs
included incremental costs incurred in connection with the
execution of numerous reengineering programs involving network
operations, customer service, repair and support processes. Exit
and other costs included expenses related to the initial phase of
redesigning work space requirements due to downsizing.
To date, the Telephone Company has implemented network
operations, customer service, repair and support programs and
developed new processes to substantially reduce the costs of
business while significantly improving quality and customer
service. The remaining employee separations will not be possible
without the development and installation of these new processes
which, among other things, will reduce or eliminate the current
labor-intensive interfaces between the existing systems.
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Form 10-Q - Part I The Southern New England Telephone Company
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1: Restructuring Charge (continued)
As of March 31, 1995, approximately 910 employees (560 management
and 350 bargaining-unit employees, or 18.0% and 5.4% of the
respective total workforce at the inception of the restructuring
program) had left the Telephone Company under severance plans and
retirement incentives. On April 21, 1995, the Connecticut Union
of Telephone Workers ("CUTW") ratified a new contract which
includes a voluntary "early-out option" available to bargaining-
unit employees [see Employee Relations]. The early-out option
provides enhanced pension benefits by adding six years to the age
and the length of service of employees for purposes of
determining pension and postretirement health care benefits
eligibility. Depending on the number and mix of employees who
volunteer for the early-out option, separation dates may be
staggered up to one year to ensure that service to customers will
not be adversely affected.
Expected accumulated savings are dependent on the timing and mix
of approximately 1,500 additional employee separations and are
currently estimated to be $60 million, $90 million, and $110
million for 1995, 1996, and 1997, respectively. These anticipated
savings will be substantially offset by costs related to the
growth in business, the construction of I-SNET, a statewide
information superhighway, and the cost of adding other employees
with different skills.
Cash expenditures are estimated at $120 million, $75 million, and
$35 million in 1995, 1996, and 1997, respectively. Incremental
capital expenditures related to the restructuring program
approximated $5 million for the first quarter 1995. These items
have been recorded in property, plant and equipment and will
result in increased depreciation expense in future years. The
Telephone Company anticipates total incremental capital
expenditures of approximately $60 million over the remaining life
of the program.
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<PAGE>
Form 10-Q - Part I The Southern New England Telephone Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Comparison of quarter ended March 31, 1995 vs. quarter ended March 31, 1994
Revenues and Sales
Local service revenues increased $5.4 million, or 3.6%, due
primarily to growth experienced in access lines in service.
Access lines in service grew 2.3% to approximately 2,025,000 at
March 31, 1995 from approximately 1,979,000 at March 31, 1994.
Also contributing to the increase in local service revenues was
an increase in subscriptions to premium services, such as
SmartLink[R]. In addition, revenues from maintenance of inside
wiring for residence customers increased due mainly to increased
rates effective January 1995.
Network access revenues generated primarily from interstate and
intrastate services increased $4.7 million, or 5.4%. Interstate
access revenues increased $2.5 million due primarily to an
increase in interstate minutes of use of approximately 5%.
Partially offsetting the impact of the increase in minutes of use
was a decrease in interstate access tariff rates implemented on
July 1, 1994, in accordance with the Telephone Company's 1994
annual Federal Communications Commission ("FCC") filing under
price cap regulation. In addition, intrastate access revenues
increased $2.2 million due mainly to an increase in intrastate
minutes of use.
Intrastate toll revenues, which include revenues primarily from
toll and WATS services, decreased $9.9 million, or 12.5%. Toll
message revenues decreased $7.1 million due primarily to reduced
intrastate toll rates and decreased volume. The decline in rates
was attributable to the introduction of several discount calling
plans in 1994 that provide competitive options to business and
residence customers. Toll message volume decreased 4.5%
primarily as a result of increased competition offset partially
by the migration of customers from WATS services. WATS revenues
decreased $2.2 million due primarily to lower message volumes
resulting from the shift to lower priced services and the impact
of competition.
Publishing and other revenues increased $4.4 million, or 8.5%.
Publishing and other revenues include: directory advertising;
revenues from billing and collections, and other non-access
services rendered on behalf of interexchange carriers; provision
for the Telephone Company's uncollectible accounts receivable;
and miscellaneous revenues. Other non-access services rendered
on behalf of interexchange carriers and lower provision for
uncollectible accounts receivable for the Telephone Company's
residence, business and directory customers contributed to the
increase in other revenues.
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<PAGE>
Form 10-Q - Part I The Southern New England Telephone Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Comparison of quarter ended March 31, 1995 vs. quarter ended March 31, 1994
Operating and Maintenance
Operating and maintenance expenses decreased $11.2 million, or
5.7%. Employee-related costs, including wages and employee-
benefit costs, represent a significant portion of these expenses.
The remainder of these costs is comprised primarily of general
and administrative expenses.
The Telephone Company's employee-related costs increased
approximately $2 million due primarily to a 5.0% wage rate
increase for bargaining-unit employees effective October 1994 in
accordance with the 1992 CUTW contract, and to a lesser extent,
an average 4.0% salary increase for management employees
effective April 1994. Also contributing to the increase in
employee-related costs was an increase in overtime payments and
higher incentive-based accruals. The impact of a 2.3% decrease
in the average work force partially offset these increases. Cost
savings associated with the restructuring program are anticipated
to continue in 1995 as additional employee separations are
expected to occur as a result of the early-out option available
to bargaining-unit employees during July 1995.
The Telephone Company's operating and maintenance expenses,
excluding employee-related costs, decreased approximately $13
million. The decrease was due primarily to cost-containment
efforts in areas such as contract services and publishing.
Depreciation and Amortization
Depreciation and amortization expense increased $1.1 million, or
1.5%. This increase was due primarily to revised depreciation
rate schedules for the Telephone Company's intrastate plant, as
approved by the Connecticut Department of Public Utility Control
("DPUC"), effective January 1, 1995.
Interest Expense
Interest expense decreased $0.9 million, or 6.4% due primarily to
a decrease in average debt outstanding of approximately $99
million.
Income Taxes
The combined federal and state effective tax rate for the three
months ended March 31, 1995 was 39.4% compared with 40.2% for the
comparable period in 1994. The effective tax rate decreased due
primarily to the recognition of an enacted state income tax
credit based on personal property taxes paid on certain data
processing equipment.
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<PAGE>
Form 10-Q - Part I The Southern New England Telephone Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Comparison of balances as of March 31, 1995 vs. December 31, 1994
Accounts Receivable
Accounts receivable decreased $11.5 million due primarily to
timing of cash collections.
Prepaid taxes and other assets
Prepaid taxes and other assets increased $18.7 million due
primarily to an increase in prepaid property taxes partially
offset by a decrease in income taxes receivable. The increase in
prepaid property taxes is a result of the Telephone Company's
annual payment of property taxes in March 1995. The prepaid
property taxes will be amortized over the remainder of 1995. The
receipt of an income tax refund resulted in a decrease in income
taxes receivable.
Other current liabilities
Other current liabilities increased $36.6 million due primarily
to an increase in accrued income taxes. The increase in accrued
income taxes was a result of the timing of 1995 income tax
payments coupled with no income tax accrual as of December 31,
1994 as an income tax refund was expected in the first quarter
1995.
Liquidity and Capital Resources
The Telephone Company generated cash flows from operations of
$157.1 million during the three months ended March 31, 1995 as
compared with $117.4 million during the three months ended March
31, 1994. The primary use of capital resources continued to be
capital expenditures.
For the three months ended March 31, 1995, cash outlays relating
to the Telephone Company's restructuring charge recorded in
December 1993 amounted to $12.7 million. Substantially all
of the expenditures related to incremental costs incurred
for executing numerous reengineering programs during the first
quarter 1995. These expenditures were funded from cash flows
from operations. Management currently anticipates that cash
expenditures in connection with the restructuring program will
approximate $120 million, $75 million, and $35 million in
1995, 1996 and 1997, respectively, and will be funded from operations.
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<PAGE>
Form 10-Q - Part I The Southern New England Telephone Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Competition
On May 26, 1994, Public Act 94-83 ("Act") was enacted providing a
new regulatory framework for the Connecticut telecommunications
industry. The Act, which took effect on July 1, 1994, represents
a broad strategic response to the changes facing the
telecommunications industry in Connecticut based on the premise
that broader participation in the Connecticut telecommunications
market will be more beneficial to the public than will broader
regulation. The Act opens Connecticut telecommunications
services to full competition, including local phone service
currently provided primarily by the Telephone Company, and
encourages the DPUC to adopt alternative forms of regulation for
telephone companies, including the Telephone Company's
noncompetitive and emerging competitive services.
The DPUC has conducted, and is conducting, a number of
proceedings in two phases to implement the Act. In the
competitive phase the Department is addressing: local exchange
service competition; universal service and lifeline program
policy issues; unbundling of local exchange carriers' ("LECs")
local networks; and reclassification of LECs' products and
services into competitive, emerging competitive and
noncompetitive categories. During the alternative regulation
phase, also underway, the Telephone Company intends to submit to
the DPUC an alternative regulation plan that will replace rate of
return regulation with price regulation for non-competitive and
emerging competitive services. The alternative regulation phase
will also involve a complete financial review of the Telephone
Company and will address cost of service, capital recovery and
service standards.
Since the July 1, 1993 effective date of "10XXX" competition,
over 50 telecommunications providers have received approval from
the DPUC to offer "10XXX" or other competitive intrastate long-
distance services. In addition, over 25 companies have filed for
initial certificates of public convenience and necessity and are
awaiting DPUC approval. Increasing competition in intrastate
long-distance service and the Telephone Company's reduction in
intrastate toll rates will continue to place significant downward
pressure on the Telephone Company's intrastate toll revenues as
will the implementation of intrastate equal access, which is
required to be implemented for all dual preferred interexchange
carrier ("PIC") capable switches no later than December 1, 1996.
No balloting of customers is required. Although the DPUC ordered
the Company to bear its proportionate share of the costs to
deploy the dual PIC technology, the DPUC added the estimated
1996 average net toll revenue loss to the cost recovery formula.
These costs will be recovered through an intrastate equal access
rate element on the presubscribed lines of all carriers unless
the Office of Consumer Counsel's December 7, 1994 Petition for
Administrative Appeal to the Superior Court results in a change.
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<PAGE>
Form 10-Q - Part I The Southern New England Telephone Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Since the introduction of "10XXX" competition, major carriers
have increased their marketing efforts in Connecticut to sell
intrastate long-distance services primarily to residential
customers. In response to major carriers and other competitors'
efforts, the Telephone Company has undertaken a number of
initiatives. The Telephone Company remains focused on providing
excellent customer service and quality products and has made
several changes to its product lines to provide creative options
and flexible packages that meet and exceed customers'
expectations. During the latter part of 1994 and the first
quarter of 1995, the Telephone Company added several new
discount calling plans to its existing High Volume Discount Toll
service offering. These plans target specific customer segments
and extend to them a discount and rate structure which addresses
key business needs. Additionally, the Telephone Company, working
with its affiliate SNET America, Inc., realigned its discount and
rate structures to provide the Connecticut customer with a
seamless toll service product line which includes a discount
structure that can be applied to intrastate, interstate and
international calling each and every month.
The Telephone Company expects to see continued movement toward a
fully competitive telecommunications marketplace, both on an
interexchange and intraexchange basis. The Telephone Company's
ability to compete is dependent upon regulatory reform that will
allow pricing flexibility to meet competition and provide a level
playing field with similar regulation for similar services and
with reduced regulation to reflect an emerging competitive
marketplace. The legislation and regulatory proceedings that
flow from it should produce a telecommunications marketplace in
Connecticut that, by providing equal opportunity to all
competitors, will work to benefit Connecticut consumers.
Regulatory Matters
State Regulation Initiatives
On February 6, 1995, the DPUC established the criteria,
information requirements and procedures to permit the
reclassification of telecommunications products and services from
noncompetitive to either emerging competitive or competitive
based on the degree of competition.
On February 28, 1995, the DPUC defined the capabilities and
qualities that, at a minimum, must be included in the basic
telecommunications service offered by all providers of local
service.
On March 15, 1995, the DPUC established regulations for market
entry by both new entrants and existing firms who wish to add
additional services to their certification.
On March 16, 1995, the DPUC ruled that local competition is
consistent with the goals of the Act and that effective local
competition requires the resolution of technical and operational
issues, such as, unbundling and number portability, which will be
addressed in other dockets.
On March 31, 1995, the DPUC concluded that the current
provisioning responsibilities associated with universal service
incurred by incumbent telephone companies must be extended to all
local service providers. In addition, the DPUC required the
mandatory establishment of a Lifeline Program and the
establishment of a Universal Service Program, if needed, for high
cost or geographically remote areas pending the completion of
cost studies.
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<PAGE>
Form 10-Q - Part I The Southern New England Telephone Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Federal Regulation Initiatives
The FCC adopted an interim plan for interstate access rates
requiring the LECs to pass through to long-distance companies a
greater share of cost savings. The interim plan allows LECs to
chose from among three productivity factors (4.0%, 4.7% or 5.3%).
These factors are an offset to inflation based on price increases
allowed each year. If the 5.3% factor is chosen, no earnings are
shared. If either the 4.7% or 4.0% factor is chosen, sharing
begins at 12.25%. In addition, companies are required to
reinitialize their price cap index on a 0.7% one-time downward
basis for each year they elected the 3.3% factor up to a 2.8%
maximum. The Telephone Company has maintained its selection of
the 3.3% productivity factor each year since entering price caps
in 1991. A further notice will be issued to address price cap
changes to respond to competition.
On May 9, 1995, the Telephone Company filed its 1995 annual
interstate access tariff filing under price cap regulation to
become effective August 1, 1995. The Telephone Company elected a
4.0% productivity factor and will be allowed to earn up to a
12.25% interstate rate of return annually before any sharing
mechanism is invoked. The filing, if approved by the FCC, is
anticipated to decrease interstate network access revenues by
approximately $10 million for the period August 1, 1995 to June
30, 1996. Management expects this decrease to be at least
partially offset by increased demand.
On March 9, 1995, the Telephone Company made tariff filings with
both the FCC and DPUC to establish rates for its market test of
Video Dialtone ("VDT") trial service. Approval of these tariffs
by the respective regulatory agencies will allow the Telephone
Company to charge its customers for services in the West Hartford
area and expanded trial area within Connecticut. The FCC recently
limited its jurisdiction over VDT to the provision of transport
video communications that have been transmitted over radio waves
or across state lines. Consequently, the Telephone Company filed
a state tariff for video-on-demand, enhanced pay-per-view and
broadcast services. The Telephone Company's tariffs initially
cover analog services based upon currently available technology.
The Telephone Company intends to deploy digital equipment as soon
as technically feasible and economically reasonable. The
Telephone Company anticipates that its federal tariff will become
effective on June 7, 1995 and its state tariff will take effect
subsequent to hearings at the DPUC that begin in May 1995.
On April 28, 1995, the Telephone Company filed with the FCC an
application to construct, operate, own, and maintain facilities
used to provide commercial VDT service in the State of
Connecticut. The proposed system, if approved, will be
constructed over the next 15 years and will eventually reach all
customers throughout the Telephone Company's service area.
On January 19, 1994, the Telephone Company filed suit in the U.S.
District Court ("Court") in New Haven requesting the Court find
that the Cable Communications Policy Act of 1984 violates the
Telephone Company's First and Fifth Amendment rights. On April
28, 1995, the Court ruled in favor of the Telephone Company by
allowing the Telephone Company to provide in-territory cable
programming and to own more than 5% of any company that provides
cable programming in its local service area.
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<PAGE>
Form 10-Q - Part I & II The Southern New England Telephone Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Employee Relations
On April 21, 1995, a new labor contract was ratified by members
of the CUTW. As a part of the new contract, a voluntary "early-
out option" will be available to bargaining-unit employees during
July 1995 and subsequent dates, when considered necessary, during
the life of the contract. The early-out option offers additional
incentives in the form of enhanced pension benefits. Bargaining-
unit employees leaving under the offer will receive increased
pensions of between 35% to 45%. CUTW members who remain with the
Corporation will receive a 4.0% wage rate increase in January
1996 and a 3.0% wage rate increase in both January 1997 and
January 1998. In addition, the contract also provides a sign-on
bonus and health benefit and pension enhancements. The new
agreement will be in effect until August 8, 1998 and will replace
the existing contract which was scheduled to expire on August 5,
1995. The contract is intended to keep layoffs to a minimum
while enabling the Corporation to position itself to meet
increasing competition through downsizing efforts.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There were no material developments in the first
quarter of 1995.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
On January 25, 1995, the Telephone Company filed
a report on Form 8-K, dated January 24, 1995,
announcing the Corporation's 1994 financial
results.
On April 21, 1995, the Telephone Company filed a
report on Form 8-K, dated April 20, 1995, announcing
the Corporation's financial results for the first
quarter of 1995.
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<PAGE>
Form 10-Q - Part II The Southern New England 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.
The Southern New England Telephone Company
May 9, 1995
/s/ J. A. Sadek
J. A. Sadek
Vice President and Comptroller
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<TABLE> <S> <C>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
1ST QUARTER OF 1995 FORM 10-Q OF THE SOUTHERN NEW ENGLAND TELEPHONE
COMPANY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 93,600
<SECURITIES> 0
<RECEIVABLES> 280,600
<ALLOWANCES> 24,700
<INVENTORY> 6,800
<CURRENT-ASSETS> 525,500
<PP&E> 4,113,700
<DEPRECIATION> 1,589,600
<TOTAL-ASSETS> 3,293,500
<CURRENT-LIABILITIES> 528,500
<BONDS> 746,400
<COMMON> 380,400
0
0
<OTHER-SE> 820,200
<TOTAL-LIABILITY-AND-EQUITY> 3,293,500
<SALES> 0
<TOTAL-REVENUES> 374,000
<CGS> 0
<TOTAL-COSTS> 272,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,200
<INCOME-PRETAX> 88,300
<INCOME-TAX> 34,800
<INCOME-CONTINUING> 53,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,500
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
