Item 1. Business
GENERAL
Southern New England Telecommunications Corporation ("Corporation") was incorporated in 1986 under the laws of the State of Connecticut and has its principal executive offices at 227 Church Street, New Haven, Connecticut 06510 (telephone number (203) 771-5200). The Corporation is a holding company engaged through its subsidiaries in operations principally in Connecticut with expanded cellular services in Rhode Island and certain areas in Massachusetts. The Corporation has business units in the following telecommunications product groups: wireline; wireless; and information and entertainment. Wireline includes The Southern New England Telephone Company's telecommunications services; SNET America, Inc. (providing national and international long-distance services to Connecticut customers); and SNET Diversified Group, Inc. (providing premium telecommunications services and the selling and leasing of communications equipment to residential and business customers). Wireless includes SNET Cellular, Inc., SNET Mobility, Inc. and SNET Paging, Inc. (providing cellular (wholesale and retail), personal communications and paging resale services). Information and entertainment includes directory publishing, advertising and multimedia services. Non-telecommunications services include SNET Real Estate, Inc. (engaging in leasing commercial real estate) and the holding company (engaging in financial and strategic planning).
WIRELINE
The Southern New England Telephone Company's Telecommunications Services
The Southern New England Telephone Company ("Telephone Company"), a local exchange carrier ("LEC"), was incorporated in 1882 under the laws of the State of Connecticut and is engaged in providing telecommunications services in Connecticut, most of which are subject to various degrees of rate regulation. These telecommunications services include: local and intrastate toll services; network access service, which links customers' premises to the facilities of other carriers; and other services such as digital transmission of data and transmission of radio and television programs, packet switched data network and private line services.
In 1995, approximately 70% of the Corporation's consolidated revenues and sales were derived from the Telephone Company's rate regulated telecommunications services. The remainder was derived principally from the Corporation's other subsidiaries, directory publishing operations, and activities associated with the provision of facilities and non-access services to interexchange carriers. About 71% of the operating revenues from rate regulated services were attributable to intrastate operations, with the remainder attributable to interstate access services.
The Telephone Company is subject to the jurisdiction of the Federal Communications Commission ("FCC") with respect to interstate rates, services, access charges and other matters, including the prescription of a uniform system of accounts. The FCC also prescribes the principles and procedures (referred to as "separations procedures") used to separate investments, revenues, expenses, taxes and reserves between the interstate and intrastate jurisdictions. In addition, the FCC has adopted accounting and cost allocation rules for the separation of costs of regulated from non-regulated telecommunications services for interstate ratemaking purposes. The Telephone Company's interstate services have been
subject to price cap regulation since January 1991. Price caps are a form of incentive regulation to limit prices and improve productivity. The price cap plan sets maximum limits on prices and requires LECs to share earnings in excess of authorized levels.
The Telephone Company, in providing telecommunications services in Connecticut, is subject to regulation by the Connecticut Department of Public Utility Control ("DPUC"), which has jurisdiction with respect to intrastate rates and services and other matters such as the approval of accounting procedures and the issuance of securities. The DPUC has adopted accounting and cost allocation rules for intrastate ratemaking purposes, similar to those adopted by the FCC, for the separation of costs of regulated from non-regulated activities. The Telephone Company's intrastate services have been subject to the traditional rate of return regulation. In 1996, the DPUC issued a decision that replaces traditional rate of return regulation with alternative (price based) regulation to be employed during the transition to full competition [see State Regulatory Initiatives].
Competition
Connecticut's telecommunications industry continues to move toward a fully competitive marketplace brought about by legislative and regulatory initiatives during recent years. As a result of these initiatives, the Corporation is experiencing increased competition from interexchange carriers and competitive access providers with respect to the wireline's (Telephone Company's) existing services. Management supports bringing to customers the benefits of competition and affording all competitors the opportunity to compete fairly. As demand increases for telecommunications services in an increasingly competitive environment, the Corporation continues to seek growth opportunities beyond its traditional services.
In May 1994, the State of Connecticut Legislature enacted Public Act 94-83 ("Act"), 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 exchange 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.
The DPUC has conducted, and is conducting, a number of proceedings, in phases, to implement the Act. In the competitive phase, the DPUC addressed competition in the areas of: local exchange service; alternative operator services and customer owned coin operated telephone service; universal service and lifeline program policy issues; unbundling of LECs' local networks; and reclassification of LECs' products and services into non-competitive, emerging competitive and competitive categories. During the alternative regulation phase, the DPUC issued a decision replacing traditional rate of return regulation with alternative (price based) regulation to be employed during the transition to full competition. In addition, the alternative regulation phase involved a complete financial review of the Telephone Company and addressed cost of service, capital recovery and service standards [see State Regulatory Initiatives].
The Telephone Company's regulated services are subject to competition from companies and carriers, including competitive access providers, that construct and operate their own communications systems and networks, as well as from companies that resell the telecommunications systems and networks of underlying carriers. Over 85 telecommunications providers have received approval from the DPUC to
offer "10XXX" or other competitive intrastate long-distance services. In addition, over 35 companies have filed for initial certificates of public convenience and necessity and are awaiting DPUC approval. The reduction in intrastate toll rates, and the increasingly competitive intrastate toll market continue to place significant downward pressure on intrastate toll revenues. Also contributing to lower intrastate toll revenues is the implementation of intrastate equal access for all dual preferred interexchange carrier ("PIC") capable switches by December 1, 1996. Although the DPUC ordered the Telephone 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.
Since the introduction of "10XXX" competition, major carriers have increased their marketing efforts in Connecticut to sell intrastate long-distance services to Connecticut customers. In response to 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.
Throughout 1995, the Telephone Company, with its affiliate, has enhanced several discount calling plans in its High Volume Discount Toll service offering and realigned its discount and rate structures to provide Connecticut customers with SNET All Distance[SM], a seamless toll service product line which includes a discount structure that combines intrastate, interstate and international calling. One such product, SNET All Distance Simple Solutions[SM], was made available to small business and residence customers beginning in September 1995. This easy-to- understand calling plan provides simple, competitive rates with a sliding discount based on calling volume.
Concerning competition for local exchange service, seven telecommunications providers have been granted a certificate of public convenience and necessity for local service and one additional application is pending before the DPUC. The effect of increased competition on the Corporation's operating results cannot be predicted at this time. While some customers may purchase services from competitors, the Corporation expects that most competitors will utilize the Telephone Company's network and that increased network access revenues will offset a portion of local service revenues lost to competition. The Corporation's ability to compete continues to depend 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. Local service competition began in early 1996.
Regulatory Matters
State Regulatory Initiatives
In March 1996, the DPUC issued a decision that replaces traditional rate of return regulation with alternative (price based) regulation to be employed during the transition to full competition. The decision contains the following major items: price cap regulation for non-competitive services; a five year monitoring period on financial results; and a price cap formula on services categorized as non-competitive (utilizing an inflation factor, a 5% productivity offset, a narrowly defined exogenous factor, a potential service quality adjustment and various pricing bands). In addition, basic local service rates for residence, business and coin are frozen until January 1, 1998, at which time the price cap formula becomes effective for these services. The decision also authorized a rate of return on the Telephone Company's common equity of 11.90% during the monitoring period. The impact of these changes on the Telephone Company's operating results will depend on the timing of classifying the various products and services into categories (non-competitive, emerging competitive and competitive) for pricing (banding)
changes. As of December 31, 1995, the Telephone Company's rate of return was below the 11.90% threshold.
On July 5, 1995, the Telephone Company filed a tariff with the DPUC to offer wholesale local service and certain related features. The service provides competitive local exchange carriers with an alternative to building facilities or constructing a ubiquitous network to meet their local service coverage obligations. On December 20, 1995, the DPUC, in a final decision, established interim rates for unbundled network elements and wholesale local service. The rates will remain in effect until the Telephone Company files revised cost studies during the second quarter of 1996.
Federal Regulatory Initiatives
On February 1, 1996, the U.S. Congress passed legislation that created broad changes in telecommunications law and regulation nationwide. The primary thrust of this legislation opens local telecommunications markets to competition and allows the Regional Bell Operating Companies to provide long-distance services. In addition, the legislation permits telecommunications companies to enter the cable television business and eases cable regulation. The FCC is required to adopt terms and conditions to implement the legislation in the near term.
The majority of the federal legislation is consistent with legislation enacted by the State of Connecticut in 1994. Public Act 94-83 opened the Connecticut telecommunications market to competition, and the DPUC is nearing completion of the implementation proceedings. Certain provisions of the federal legislation relating to the prices the Telephone Company charges competitors for services could, however, have the effect of producing below cost prices, therefore necessitating the development of a significantly larger universal service fund than previously anticipated. If there are conflicts between state and federal law for LECs, including the Telephone Company, with less than 2% of the nationwide access lines, federal law prevails subject to a waiver and modification process included in the federal legislation. The DPUC may grant a waiver or modification of the federal law that is consistent with the public interest and avoids a significant adverse economic impact on users or a requirement that is unduly economically burdensome or technically infeasible.
Under price cap regulation, the FCC adopted an interim plan in 1995 for interstate access rates, requiring LECs to incorporate higher productivity targets into their rates. The interim plan requires LECs to choose from among three productivity factors: 4.0%, 4.7% or 5.3%. The selected factor is subtracted from inflation-based price increases allowed each year to account for increasing productivity. If either the 4.0% or 4.7% factor is chosen, LECs must share 50% of earnings above a 12.25% rate of return. In addition, all earnings above 13.25% and 16.25%, respectively, will be returned. If the 5.3% factor is chosen, all earnings can be retained without sharing. In addition, companies are required to reinitialize their price cap index ("PCI") on a one-time basis by reducing the PCI by 0.7% for each prior year in which they elected the 3.3% factor. The maximum PCI reduction over the four year price cap period would therefore be 2.8%. The Telephone Company has elected a 3.3% productivity factor each year since entering price cap regulation in 1991. Accordingly, the Telephone Company is required to reinitialize its PCI downward by 2.8%. The Telephone Company has joined a number of other LECs in filing an appeal with the D.C. Circuit Court of Appeals challenging the lawfulness of this interim plan. A decision on this appeal is expected in 1996.
In September 1995, the FCC released two further notices of proposed rulemaking that sought comment on changes to the established price cap plan including productivity measurements, sharing, common line formula, exogenous costs and necessary price cap rule changes to respond to a competitive environment for LECs. In response to the FCC, the Telephone Company commented that rule changes are required to
allow price cap LECs to compete with alternate providers. The FCC is expected to adopt new price cap rules in 1996.
The Telephone Company's 1995 annual interstate access tariff filing under price cap regulation took effect August 1, 1995. The Telephone Company elected a 4.0% productivity factor and was allowed to earn up to a 12.25% interstate rate of return annually before any sharing is required. This filing, which was approved by the FCC, incorporated rate reductions of approximately $10 million in decreased interstate network access revenues for the period August 1, 1995 to June 30, 1996. Management expects this decrease to be partially offset by increased demand. As of December 31, 1995, the Telephone Company's interstate rate of return was below the 12.25% threshold.
The Telephone Company's 1994 annual interstate access tariff filing under price cap regulation took effect July 1, 1994. The Telephone Company elected a 3.3% productivity factor and was allowed to earn up to a 12.25% interstate rate of return annually before any sharing is required. This filing, which was approved by the FCC, incorporated rate reductions of approximately $7 million in decreased annual interstate network access revenues for the period July 1, 1994 to June 30, 1995. This decrease was offset by increased demand.
The Telephone Company will file its 1996 annual interstate access tariff on April 2, 1996 to become effective July 1, 1996. The filing will adjust interstate access rates for an experienced rate of inflation, the FCC's productivity target and exogenous cost changes, if any. The Telephone Company does not anticipate changing its 4.0% productivity factor election for the next tariff period.
Since January 1, 1988, the Telephone Company has utilized an FCC approved, company-specific Cost Allocation Manual ("CAM"), which apportions costs between regulated and non-regulated activities, and describes transactions between the Telephone Company and its affiliates. In addition, the FCC requires larger LECs, including the Telephone Company, to undergo an annual independent audit to determine whether the LEC is in compliance with its approved CAM. The Telephone Company has received audit reports for 1988 through 1994 indicating it is in compliance with its CAM, and is currently undergoing an audit for the year 1995.
Capital Expenditures
The network access lines provided by the Telephone Company to customers' premises can be interconnected with the access lines of other telephone companies in the United States and with telephone systems in most other countries. The following table sets forth, for the Telephone Company, the number of network access lines in service at the end of each year:
1995 1994 1993 1992 1991 Network Access Lines in Service (thousands) 2,073 2,009 1,964 1,937 1,922
The Telephone Company has been making, and expects to continue to make, significant capital expenditures to meet the demand for regulated telecommunications services and to further improve such services [see discussion of I-SNET[SM] in Item 2.
Item 2. Properties
The principal properties of the Corporation do not lend themselves to a detailed description by character and location. The majority of telecommunications property, plant and equipment of the Corporation is owned by the Telephone Company. Of the Corporation's investment in telecommunications property, plant and equipment at December 31, 1995, central office equipment represented 40%; connecting lines not on customers' premises, the majority of which are on or under public roads, highways or streets and the remainder on or under private property, represented 35%; land and buildings (occupied principally by central offices) represented 12%; telephone instruments and related wiring and equipment, including private branch exchanges, substantially all of which are on the premises of customers, represented 2%; and other, principally vehicles and general office equipment, represented 11%.
Substantially all of the central office equipment installations and administrative offices are located in Connecticut in buildings owned by the Telephone Company situated on land which it owns in fee. Many garages, service centers and some administrative offices are located in rented quarters.
The Corporation has a significant investment in the properties, facilities and equipment necessary to conduct its business with the overwhelming majority of this investment relating to telephone operations. Management believes that the Corporation's facilities and equipment are suitable and adequate for the business.
The buildout of I-SNET, a $4.5 billion investment over 15 years, is expected to be completed by 2009. I-SNET, a statewide telephony and information superhighway, is an advanced network capable of delivering voice, video and a full range of information and interactive multimedia services. I-SNET passed approximately 170,000 households by December 1995 and brought service to its first customer in October 1995. The Telephone Company expects I-SNET to pass approximately 230,000 households and provide telephony service on up to 80,000 lines by December 1996. The Telephone Company plans to support this investment primarily through increased productivity from the new technology deployed, ongoing cost-reduction initiatives and customer demand for the new services offered.
Item 3.
Item 3. Legal Proceedings
The Corporation and certain of its subsidiaries are involved in various claims and lawsuits that arise in the normal conduct of their business. In the opinion of management, upon advice of counsel, these claims will not have a material adverse effect on the financial position, operating results or cash flows of the Corporation or its subsidiaries.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders in the fourth quarter of the fiscal year covered by this report.
Executive Officers of the Registrant (1) (as of February 29, 1996)
Executive Officer Name Age(2) Position Since
Daniel J. Miglio 55 Chairman, President and Chief Executive Officer 1/86 Jean M. LaVecchia 43 Senior Vice President- Organization Development 8/94 Fred T. Page 49 Senior Vice President- Network Services 2/96 Ronald M. Serrano 40 Senior Vice President-Communication, Information and Entertainment Group 1/93 Donald R. Shassian 40 Senior Vice President and Chief Financial Officer 12/93
(1) Executive officers subject to Section 16 of the Securities Exchange Act of 1934. (2) As of December 31, 1995.
Mr. Miglio, Ms. LaVecchia and Mr. Page have held high level managerial positions with the Corporation or its subsidiaries for more than the past five years. Mr. Serrano was a Vice President of Mercer Management Consulting, Inc., (formerly Strategic Planning Associates) for more than five years prior to joining the Corporation. Mr. Shassian was a partner with Arthur Andersen & Co., independent accountants, for more than five years prior to joining the Corporation.
PART II
Item 5.
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
The common stock of the Corporation is listed on the New York and Pacific stock exchanges and the number of holders of record, computed on the basis of registered accounts, was 52,962 as of February 29, 1996. Information with respect to the quarterly high, low and closing sales price for the Corporation's common stock and quarterly cash dividends declared is included in the registrant's Annual Report to Shareholders on page 47 under the caption "Market and Dividend Data" and is incorporated herein by reference pursuant to General Instruction G(2).
Items 6 through 8.
Information required under Items 6 through 8 is included in the registrant's combined Proxy Statement and 1995 Annual Report to Shareholders dated March 20, 1996 on pages 22 through 46 in their entirety and is incorporated herein by reference pursuant to General Instruction G(2).
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
No changes in or disagreements with accountants on any accounting or financial disclosure occurred during the period covered by this report.
PART III
Items 10 through 13.
Information required under Items 10 through 13 is included in the registrant's combined Proxy Statement and 1995 Annual Report to Shareholders dated March 20, 1996 on pages 1 (commencing under the caption "Proxy Information") through 5 and pages 8 through 11. Such information is incorporated herein by reference pursuant to General Instruction G(3).
Information regarding executive officers of the registrant required by Item 401(b) and (e) of Regulation S-K is included in Part I of this Annual Report on Form 10-K, following Item 4.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
(a) Documents filed as part of the report: Page
(1) Report on Consolidated Financial Statements *
Report of Audit Committee *
Report of Independent Accountants *
Consolidated Financial Statements:
Consolidated Statements of (Loss) Income - for the years ended December 31, 1995, 1994 and 1993 *
Consolidated Balance Sheets - as of December 31, 1995 and 1994 *
Consolidated Statements of Changes in Shareholders' Equity - for the years ended December 31, 1995, 1994 and 1993 *
Consolidated Statements of Cash Flows - for the years ended December 31, 1995, 1994 and 1993 *
Notes to Consolidated Financial Statements *
(2) Consolidated Financial Statement Schedule for the year ended December 31, 1995
Report of Independent Accountants 21
II - Valuation and Qualifying Accounts 22
Schedules other than those listed above have been omitted because the required information is contained in the financial statements and notes thereto, or because such schedules are not applicable.
* Incorporated herein by reference to the appropriate portions of the registrant's combined Proxy Statement and 1995 Annual Report to Shareholders dated March 20, 1996 [see Part II].
(3) Exhibits:
Exhibits identified in parentheses below, on file with the SEC, are incorporated herein by reference as exhibits hereto. Exhibits numbered 10(iii)(A)1 through 10(iii)(A)15 are management contracts or compensatory plans required to be filed as exhibits pursuant to Item 14 (c) of Form 10-K.
Exhibit Number
3a Amended and Restated Certificate of Incorporation of the registrant as filed June 14, 1990 (Exhibit 3-A to Form SE dated 3/15/91, File No. 1-9157).
3b By-Laws of the registrant as amended and restated through October 10, 1990 (Exhibit 3 to Form 8-K dated 10/10/90, File No. 1-9157).
4a Rights Agreement dated February 11, 1987 between Southern New England Telecommunications Corporation and The State Street Bank and Trust Company, as Rights Agent (Exhibit 1 to Form SE dated 2/13/87-1, File No. 1-9157). Amendment No. 1 dated December 13, 1989 (Exhibit 4 to Form SE dated 12/28/89, File No. 1-9157). Amendment No. 2 dated October 10, 1990 (Exhibit 4 to Form SE dated 10/12/90, File No. 1-9157).
4b Indenture dated December 13, 1993 between the registrant and Fleet National Bank of Connecticut, Trustee, issued in connection with the sale of $200,000,000 of 6 1/8% Medium-Term Notes, Series C, due December 15, 2003 and $245,000,000 of 7 1/4% Medium-Term Notes, Series C, due December 15, 2033 (Exhibit 4b to 1994 Form 10-K dated 3/10/95, File No. 1-9157).
4c Indenture dated July 10, 1991 between the registrant and Fleet National Bank of Connecticut, Trustee, issued in connection with the sale of $100,000,000 of 6 1/2% Medium-Term Notes, Series 2, due August 15, 2000 and $200,000,000 of 7% Medium-Term Notes, Series 2, due August 15, 2005.
10(iii)(A)1 SNET Short Term Incentive Plan as amended February 8, 1995 (Exhibit 10(iii)(A)1 to 1994 Form 10-K dated 3/10/95, File No. 1-9157).
10(iii)(A)2 SNET Long Term Incentive Plan as amended March 1, 1993 (Exhibit 10(iii)(A)2 to 1992 Form 10-K dated 3/23/93, File No. 1-9157).
10(iii)(A)3 SNET Financial Counseling Program as amended January 1987 (Exhibit 10-D to Form SE dated 3/23/87-1, File No. 1-9157).
10(iii)(A)4 Group Life Insurance Plan and Accidental Death and Dismemberment Benefits Plan for Outside Directors of SNET as amended July 1, 1986 (Exhibit 10-E to Form SE dated 3/23/87-1, File No. 1-9157).
(3) Exhibits (continued):
Exhibit Number 10(iii)(A)5 SNET Pension Benefit Plan as amended November 1, 1991 (Exhibit 10-A to Form SE dated 3/20/92, File No. 1-9157). Amendment dated December 8, 1993 (Exhibit 10 (iii)(A)5 to 1993 Form 10-K dated 3/23/94, File No. 1-9157). Amendment dated February 8, 1995 (Exhibit 10(iii)(A)5 to 1994 Form 10-K dated 3/10/95, File No. 1-9157). Amendments effective December 13, 1995 and January 1, 1996 .
10(iii)(A)6 SNET Management Pension Plan as amended March 31, 1995. Amendments effective December 20, 1995 through April 1, 1996.
10(iii)(A)7 SNET Incentive Award Deferral Plan as amended March 1, 1993 (Exhibit 10(iii)(A)7 to 1992 Form 10-K dated 3/23/93, File No. 1-9157).
10(iii)(A)8 SNET Mid-Career Pension Plan as amended November 1, 1991 (Exhibit 10-D to Form SE dated 3/20/92, File No. 1-9157). Amendment dated December 8, 1993 (Exhibit 10 (iii)(A)8 to 1993 Form 10-K dated 3/23/94, File No. 1-9157).
10(iii)(A)9 SNET Deferred Compensation Plan for Non-Employee Directors as amended January 1, 1993 (Exhibit 10(iii)(A)9 to 1992 Form 10-K dated 3/23/93, File No. 1-9157).
10(iii)(A)10 Change-in-Control Agreements (Exhibit 10-F to Form SE dated 3/15/91, File No. 1-9157).
10(iii)(A)11 SNET 1986 Stock Option Plan as amended March 1, 1993 (Exhibit 10(iii)(A)11 to 1992 Form 10-K dated 3/23/93, File No. 1-9157).
10(iii)(A)12 SNET Retirement and Disability Plan for Non- Employee Directors as amended April 14, 1993 (Exhibit 10(iii)(A)12 to 1993 Form 10-K dated 3/23/94, File No. 1-9157). Amendment dated January 1, 1994 (Exhibit 10(iii)(A)12 to 1994 Form 10-K dated 3/10/95, File No. . 1-9157).
10(iii)(A)13 SNET Non-Employee Director Stock Plan effective January 1, 1994 (Exhibit 4.4 to Registration No. 33-51055, File No. 1-9157).
10(iii)(A)14 Description of SNET Executive Retirement Savings Plan (Exhibit 10(iii)(A)14 to 1993 Form 10-K dated 3/23/94, File No. 1-9157).
10(iii)(A)15 SNET 1995 Stock Incentive Plan (Exhibit 4.4 to Registration No. 33-64975, File No. 1-9157).
(3) Exhibits (continued):
Exhibit Number
12 Computation of Ratio of Earnings to Fixed Charges.
13 Pages 22 through 47 of the registrant's combined Proxy Statement and 1995 Annual Report to Shareholders for the fiscal year ended December 31, 1995.
21 Subsidiaries of the Corporation.
23 Consent of Independent Accountants.
24a Power of Attorney.
24b Board of Directors' Resolution.
27 Financial Data Schedule.
99a Annual Report on Form 11-K for the plan year ended December 31, 1995 for the SNET Management Retirement Savings Plan will be filed as an amendment prior to June 30, 1996.
99b Annual Report on Form 11-K for the plan year ended December 31, 1995 for the SNET Bargaining Unit Retirement Savings Plan will be filed as an amendment prior to June 30, 1996.
The Corporation will furnish, without charge, to a shareholder upon request a copy of the combined Proxy Statement and 1995 Annual Report to Shareholders, portions of which are incorporated by reference, and will furnish any other exhibit at cost.
(b) Reports on Form 8-K:
On October 24, 1995, the Corporation and the Telephone Company filed, separately, reports on Form 8-K, dated October 23, 1995 announcing the Corporation's financial results for the third quarter of 1995.
On January 22, 1996, the Corporation and the Telephone Company filed, separately, reports on Form 8-K, dated January 22, 1996, announcing the Corporation's 1995 financial results including the fact that it discontinued the use of Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation."
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION
By /s/ Donald R. Shassian Donald R. Shassian, Senior Vice President and Chief Financial Officer March 20, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
PRINCIPAL EXECUTIVE OFFICER:
Daniel J. Miglio* Chairman, President, Chief Executive Officer and Director
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
Donald R. Shassian By /s/ Donald R. Shassian Senior Vice President and (Donald R. Shassian,as attorney- Chief Financial Officer in-fact and on his own behalf)
DIRECTORS:
William F. Andrews* Richard H. Ayers* Zoe Baird* Robert L. Bennett* Barry M. Bloom* March 20, 1996 Frank J. Connor* William R. Fenoglio* Claire L. Gaudiani* James R. Greenfield* Ira D. Hall* Burton G. Malkiel* Frank R. O'Keefe, Jr.* * by power of attorney
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Southern New England Telecommunications Corporation:
Our report on the consolidated financial statements of Southern New England Telecommunications Corporation has been incorporated by reference in this Form 10-K from the combined Proxy Statement and 1995 Annual Report to Shareholders of Southern New England Telecommunications Corporation on page 29 therein. In connection with our audits of such financial statements, we have also audited the related financial statement schedule for each of the three years in the period ended December 31, 1995 listed in Item 14 (a) (2) of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein.
Hartford, Connecticut COOPERS & LYBRAND L.L.P. January 22, 1996
SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS (Dollars in Millions)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Additions Balance at Balance at beginning Charged to Charged to end of Description of period expense other accounts Deductions period
Allowance for Uncollectible Accounts Receivable:
Year 1995 $29.8 $23.1 $3.6 (a) $22.3 (b) $34.2 Year 1994 27.9 20.7 7.5 (a) 26.3 (b) 29.8 Year 1993 23.5 28.4 4.9 (a) 28.9 (b) 27.9
Allowance for Uncollectible Direct-Financing Lease Notes Receivable:
Year 1995 $ 8.4 $ 1.4 $ - $ 0.1 (b) $ 9.7 Year 1994 11.7 1.7 - 5.0 (b) 8.4 Year 1993 8.2 15.6 - 12.1 (b) 11.7
Restructuring Charge:
Year 1995 $264.9 $ - $ - $187.9 (c) $ 77.0 Year 1994 355.0 - - 90.1 (c) 264.9 Year 1993 - 355.0 - - 355.0
(a) Includes amounts previously written off that were credited directly to this account when recovered and miscellaneous amounts.
(b) Includes amounts written off as uncollectible.
(c) Includes non-cash amounts charged against the restructuring reserve of $98.8 in 1995 and $26.5 in 1994, primarily net pension and postretirement curtailment losses.
Exhibit Index
Exhibits identified in parentheses below, on file with the SEC, are incorporated herein by reference as exhibits hereto.
Exhibit Number
3a Amended and Restated Certificate of Incorporation of the registrant as filed June 14, 1990 (Exhibit 3-A to Form SE dated 3/15/91, File No. 1-9157).
3b By-Laws of the registrant as amended and restated through October 10, 1990 (Exhibit 3 to Form 8-K dated 10/10/90, File No. 1-9157).
4a Rights Agreement dated February 11, 1987 between Southern New England Telecommunications Corporation and The State Street Bank and Trust Company, as Rights Agent (Exhibit 1 to Form SE dated 2/13/87-1, File No. 1-9157). Amendment No. 1 dated December 13, 1989 (Exhibit 4 to Form SE dated 12/28/89, File No. 1-9157). Amendment No. 2 dated October 10, 1990 (Exhibit 4 to Form SE dated 10/12/90, File No. 1-9157).
4b Indenture dated December 13, 1993 between the registrant and Fleet National Bank of Connecticut, Trustee, issued in connection with the sale of $200,000,000 of 6 1/8% Medium-Term Notes, Series C, due December 15, 2003 and $245,000,000 of 7 1/4% Medium-Term Notes, Series C, due December 15, 2033 (Exhibit 4b to 1994 Form 10-K dated 3/10/95, File No. 1-9157).
4c Indenture dated July 10, 1991 between the registrant and Fleet National Bank of Connecticut, Trustee, issued in connection with the sale of $100,000,000 of 6 1/2% Medium-Term Notes, Series 2, due August 15, 2000 and $200,000,000 of 7% Medium-Term Notes, Series 2, due August 15, 2005.
10(iii)(A)1 SNET Short Term Incentive Plan as amended February 8, 1995 (Exhibit 10(iii)(A)1 to 1994 Form 10-K dated 3/10/95, File No. 1-9157).
10(iii)(A)2 SNET Long Term Incentive Plan as amended March 1, 1993 (Exhibit 10(iii)(A)2 to 1992 Form 10-K dated 3/23/93, File No. 1-9157).
10(iii)(A)3 SNET Financial Counseling Program as amended January 1987 (Exhibit 10-D to Form SE dated 3/23/87-1, File No. 1-9157).
10(iii)(A)4 Group Life Insurance Plan and Accidental Death and Dismemberment Benefits Plan for Outside Directors of SNET as amended July 1, 1986 (Exhibit 10-E to Form SE dated 3/23/87-1, File No. 1-9157).
10(iii)(A)5 SNET Pension Benefit Plan as amended November 1, 1991 (Exhibit 10-A to Form SE dated 3/20/92, File No. 1-9157). Amendment dated December 8, 1993 (Exhibit 10 (iii)(A)5 to 1993 Form 10-K dated 3/23/94, File No. 1-9157). Amendment dated February 8, 1995 (Exhibit 10(iii)(A)5 to 1994 Form 10-K dated 3/10/95, File No. 1-9157). Amendments effective December 13, 1995 and January 1, 1996 .
10(iii)(A)6 SNET Management Pension Plan as amended March 31, 1995. Amendments effective December 20, 1995 through April 1, 1996.
10(iii)(A)7 SNET Incentive Award Deferral Plan as amended March 1, 1993 (Exhibit 10(iii)(A)7 to 1992 Form 10-K dated 3/23/93, File No. 1-9157).
10(iii)(A)8 SNET Mid-Career Pension Plan as amended November 1, 1991 (Exhibit 10-D to Form SE dated 3/20/92, File No. 1-9157). Amendment dated December 8, 1993 (Exhibit 10 (iii)(A)8 to 1993 Form 10-K dated 3/23/94, File No. 1-9157).
10(iii)(A)9 SNET Deferred Compensation Plan for Non-Employee Directors as amended January 1, 1993 (Exhibit 10(iii)(A)9 to 1992 Form 10-K dated 3/23/93, File No. 1-9157).
10(iii)(A)10 Change-in-Control Agreements (Exhibit 10-F to Form SE dated 3/15/91, File No. 1-9157).
10(iii)(A)11 SNET 1986 Stock Option Plan as amended March 1, 1993 (Exhibit 10(iii)(A)11 to 1992 Form 10-K dated 3/23/93, File No. 1-9157).
10(iii)(A)12 SNET Retirement and Disability Plan for Non- Employee Directors as amended April 14, 1993 (Exhibit 10(iii)(A)12 to 1993 Form 10-K dated 3/23/94, File No. 1-9157). Amendment dated January 1, 1994 (Exhibit 10(iii)(A)12 to 1994 Form 10-K dated 3/10/95, File No. . 1-9157).
10(iii)(A)13 SNET Non-Employee Director Stock Plan effective January 1, 1994 (Exhibit 4.4 to Registration No. 33-51055, File No. 1-9157).
10(iii)(A)14 Description of SNET Executive Retirement Savings Plan (Exhibit 10(iii)(A)14 to 1993 Form 10-K dated 3/23/94, File No. 1-9157).
10(iii)(A)15 SNET 1995 Stock Incentive Plan (Exhibit 4.4 to Registration No. 33-64975, File No. 1-9157).
12 Computation of Ratio of Earnings to Fixed Charges.
13 Pages 22 through 47 of the registrant's combined Proxy Statement and 1995 Annual Report to Shareholders for the fiscal year ended December 31, 1995.
21 Subsidiaries of the Corporation.
23 Consent of Independent Accountants.
24a Power of Attorney.
24b Board of Directors' Resolution.
27 Financial Data Schedule.
99a Annual Report on Form 11-K for the plan year ended December 31, 1995 for the SNET Management Retirement Savings Plan will be filed as an amendment prior to June 30, 1996.
99b Annual Report on Form 11-K for the plan year ended December 31, 1995 for the SNET Bargaining Unit Retirement Savings Plan will be filed as an amendment prior to June 30, 1996.