-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IVZCSULRZ+4uohrbXYn8LvChcL4qXy/pItO+BTlxbUBxkbQBM6AUG6sYBqHNReF8 XsPPTGZ568upiBfOymqY8w== 0000950134-96-002076.txt : 19960515 0000950134-96-002076.hdr.sgml : 19960515 ACCESSION NUMBER: 0000950134-96-002076 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONTEL OF CALIFORNIA INC CENTRAL INDEX KEY: 0000024186 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 951789511 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-01245 FILM NUMBER: 96564459 BUSINESS ADDRESS: STREET 1: 600 HIDDEN RIDGE STREET 2: HQE04B12 CITY: IRVING STATE: TX ZIP: 75038 BUSINESS PHONE: 2147185600 FORMER COMPANY: FORMER CONFORMED NAME: CONTINENTAL TELEPHONE CO OF CALIFORNIA DATE OF NAME CHANGE: 19880519 FORMER COMPANY: FORMER CONFORMED NAME: CALIFORNIA INTERSTATE TELEPHONE CO DATE OF NAME CHANGE: 19750501 10-Q 1 FORM 10-Q FOR QUARTER ENDED MARCH 31, 1996 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended March 31, 1996 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number 0-1245 CONTEL OF CALIFORNIA, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CALIFORNIA 95-1789511 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 16071 Mojave Drive, Victorville, California 92392 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Registrant's telephone number, including area code 619-245-0511 (Former name, former address and formal fiscal year, if changed since last report) The registrant, a wholly-owned subsidiary of GTE 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). 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 Company had 2,503,667 shares of $5 par value common stock outstanding at April 30, 1996. The Company's common stock is 100% owned by GTE Corporation. 2 PART I. FINANCIAL INFORMATION Contel of California, Inc. and Subsidiary CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, ------------------------------- 1996 1995 ---------- --------- (Thousands of Dollars) Revenues and sales: Local services $36,658 $28,931 Network access services 28,447 27,652 Toll services 14,843 16,174 Other services and sales 6,383 6,831 ------- ------- Total revenues and sales 86,331 79,588 ------- ------- Operating costs and expenses: Cost of services and sales 28,775 26,319 Selling, general and administrative 9,132 14,615 Depreciation and amortization 17,420 16,998 ------- ------- Total operating costs and expenses 55,327 57,932 ------- ------- Operating income 31,004 21,656 Interest - net 2,178 2,981 ------- ------- Income before income taxes 28,826 18,675 Income taxes 13,019 6,951 ------- ------- Net income $15,807 $11,724 ======= =======
Per share data is omitted since the Company's common stock is 100% owned by GTE Corporation (GTE). See Notes to Condensed Consolidated Financial Statements. 1 3 Contel of California, Inc. and Subsidiary MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in Millions) RESULTS OF OPERATIONS
Three Months Ended March 31, --------------------------- 1996 1995 -------- -------- Net income $15.8 $11.7
Net income increased 35% or $4.1 for the three months ended March 31, 1996, compared to the same period in 1995. This increase is primarily due to higher local service revenues and lower operating costs and expenses. REVENUES AND SALES
Three Months Ended March 31, ---------------------------- 1996 1995 -------- ---------- Local services $36.7 $28.9 Network access services 28.4 27.7 Toll services 14.8 16.2 Other services and sales 6.4 6.8 ----- ----- Total revenues and sales $86.3 $79.6
Total revenues and sales increased 8% or $6.7 for the three months ended March 31, 1996, compared to the same period in 1995. Local service revenues increased 27% or $7.8 for the three months ended March 31, 1996, compared to the same period in 1995. This increase primarily reflects $5.7 in payments received from the California High Cost Fund and a 3% growth in switched access lines, which generated $0.6 of additional revenues. The increase is also due to tariff revenue increases of $0.3 associated with the Company's decision to consolidate its special access tariffs during the first quarter of 1966. This increase is offset in toll service revenues discussed below. Network access service revenues increased 3% or $0.7 for the three months ended March 31, 1996, compared to the same period in 1995. This increase is partially due to a 6% increase in minutes of use, which generated $0.3 of additional revenues. This increase is also due to tariff revenue increases of $0.6 associated with the Company's decision to consolidate its special access tariffs during the first quarter of 1996. This tariff revenue increase is offset in toll service revenues discussed below. These increases are partially offset by a $0.4 decline in revenues reflecting the August 1995 interstate rate reductions associated with the FCC price cap. Toll service revenues decreased 9% or $1.4 for the three months ended March 31, 1996, compared to the same period in 1995, primarily reflecting the consolidation of special access tariffs discussed above and lower toll volumes resulting from 10XXX intraLATA toll competition. 2 4 Contel of California, Inc. and Subsidiary MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) OPERATING COSTS AND EXPENSES
Three Months Ended March 31, --------------------------- 1996 1995 -------- -------- Total operating costs and expenses $55.3 $57.9
Total operating costs and expenses decreased 4% or $2.6 for the three months ended March 31, 1996, compared to the same period in 1995. This decrease is primarily attributable to $1.8 of lower labor and benefits costs associated with the Company's re-engineering plan and a $0.5 decrease in end-user uncollectibles. INCOME TAXES
Three Months Ended March 31, ---------------------------- 1996 1995 --------- -------- Income taxes $13.0 $7.0
Income taxes increased 86% or $6 for the three months ended March 31, 1996, compared to the same period in 1995. This increase is primarily due to a corresponding increase in pretax income and an increase in permanent tax differences. OTHER MATTERS In connection with the re-engineering plan, during the first three months of 1996, costs of approximately $6.1 have been incurred, including $4.3 to re-engineer customer service processes and $1.8 to re-engineer administrative processes. Since the plan's inception at the beginning of 1994, costs of approximately $34.6 have been incurred, including $21.6 to re-engineer customer service processes and $9.9 to re-engineer administrative processes. The restructuring costs also include $3.1 to consolidate facilities and operations and other related costs. These expenditures were primarily associated with the closure and relocation of various service centers, software enhancements and separation benefits associated with employee reductions. Implementation of the re-engineering plan is expected to be substantially completed by the end of 1996. As of March 31, 1996, $14.4 remains in the restructuring reserve which management believes is adequate to cover future expenditures. On October 5, 1995, the Governor of the State of California signed a law which clarified the authority of the California Public Utilities Commission (CPUC) to allocate utility merger benefits between ratepayers and shareholders with not less than 50% going to the ratepayers of the merged company. The new law became effective January 1, 1996. On April 10, 1996, the CPUC issued a decision approving the merger of the Company into GTE California Incorporated under the terms of the amended legislation. As part of this order, the CPUC ordered $69.7 of merger savings to be flowed to the ratepayers of the merged company; which represents half of the total savings expected to be realized by this merger. Rate integration and the determination of the Company's premerger New Regulatory Framework (NRF) startup revenue requirement will be handled in Phase III of this proceeding. It is currently anticipated that the merger will occur in the second half of 1996. 3 5 Contel of California, Inc. and Subsidiary MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The Company submitted its 1996 annual interstate access filing on April 2, 1996, utilizing the FCC's interim price cap rules. In doing so, the Company changed its productivity factor from 5.3% to 4.0% for its Arizona (Contel) tariff entity. Overall, the proposed rates result in a $2.4 price reduction, effective July 1, 1996. The Company anticipates the FCC will issue an order prior to the effective date, which may require changes to the Company's annual filing. 4 6 Contel of California, Inc. and Subsidiary CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31, 1996 1995 ------------- -------------- (Thousands of Dollars) ASSETS Current assets: Cash and temporary investments $ 1,033 $ 2,139 Receivables, less allowances of $5,133 and $4,895 62,425 120,872 Inventories and supplies 712 652 Deferred income tax benefits 16,235 18,432 Other 1,352 841 --------- --------- Total current assets 81,757 142,936 --------- --------- Property, plant and equipment, at cost 923,650 915,291 Accumulated depreciation (649,747) (635,134) --------- --------- Total property, plant and equipment, net 273,903 280,157 --------- --------- Deferred income tax benefits and other assets 16,228 16,331 --------- --------- Total assets $ 371,888 $ 439,424 ========= ========= LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities: Notes payable to affiliates $ -- $ 51,838 Accounts payable 16,058 35,491 Taxes payable 24,290 21,943 Accrued interest 3,593 2,389 Accrued payroll costs 7,977 9,369 Accrued restructuring costs 14,426 20,455 Other 18,763 27,619 --------- --------- Total current liabilities 85,107 169,104 --------- --------- Non-current liabilities: Long-term debt 90,000 90,000 Deferred income taxes 5,452 5,781 Employee benefit plans 61,391 60,516 Other liabilities 5,936 5,828 --------- --------- Total non-current liabilities 162,779 162,125 --------- --------- Shareholder's equity: Common stock (2,503,667 shares issued) 12,518 12,518 Additional paid-in capital 78,917 78,917 Retained earnings 32,567 16,760 --------- --------- Total shareholder's equity 124,002 108,195 --------- --------- Total liabilities and shareholder's equity $ 371,888 $ 439,424 ========= =========
See Notes to Condensed Consolidated Financial Statements. 5 7 Contel of California, Inc. and Subsidiary CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, -------------------------------- 1996 1995 ---------- ----------- (Thousands of Dollars) Operations: Net income $ 15,807 $ 11,724 Adjustments to reconcile net income to net cash from operations: Depreciation and amortization 17,420 16,998 Deferred income taxes 2,820 2,275 Provision for uncollectible accounts 664 1,162 Changes in current assets and current liabilities 30,900 17,126 Other - net (401) 5,471 -------- -------- Net cash from operations 67,210 54,756 -------- -------- Investing: Capital expenditures (10,982) (9,787) -------- -------- Cash used in investing (10,982) (9,787) -------- -------- Financing: Dividends -- (15,261) Net change in affiliate notes (57,334) (30,031) -------- -------- Net cash used in financing (57,334) (45,292) -------- -------- Decrease in cash and temporary investments (1,106) (323) Cash and temporary investments: Beginning of period 2,139 2,244 -------- -------- End of period $ 1,033 $ 1,921 ======== ========
See Notes to Condensed Consolidated Financial Statements. 6 8 Contel of California, Inc. and Subsidiary NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1) The unaudited condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. 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 rules and regulations. However, in the opinion of management of the Company, the condensed consolidated financial statements include all adjustments, which consist only of normal recurring accruals, necessary to present fairly the financial information for such periods. These condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's 1995 Annual Report on Form 10-K. (2) Reclassifications of prior year data have been made, where appropriate, to conform to the 1996 presentation. 7 9 Contel of California, Inc. and Subsidiary PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits required by Item 601 of Regulation S-K. 27 Financial Data Schedule (b) The Company filed no reports on Form 8-K during the first quarter of 1996. 8 10 SIGNATURE 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. Contel of California, Inc. -------------------------------------------- (Registrant) Date: May 14, 1996 Michael W. Bollinger ------------ -------------------------------------------- Michael W. Bollinger Assistant Vice President - Controller (Principal Financial and Accounting Officer) 9 11 EXHIBIT INDEX
Exhibit Number Description - ------- ----------- 27 Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1995 JAN-01-1996 MAR-31-1996 1,033 0 67,558 5,133 712 81,757 923,650 649,747 371,888 85,107 90,000 12,518 0 0 111,484 371,888 86,331 86,331 28,775 55,327 0 0 2,178 28,826 13,019 15,807 0 0 0 15,807 0 0
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