Annual Report (Form 10-K), fiscal year 1994

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 the State of Connecticut: The Southern New England Telephone Company (providing, for the most part, regulated telecommunications services and directory publishing and advertising services); SNET Cellular, Inc., SNET Mobility, Inc. and SNET Paging, Inc. (providing wireless communications services); SNET America, Inc. (providing national and international long-distance services to Connecticut customers); SNET Diversified Group, Inc. (primarily engaged in the sale and leasing of communications equipment to residential and business customers; and providing other telecommunications services not subject to regulation); and SNET Real Estate, Inc. (engaging in leasing commercial real estate). The Corporation furnishes financial and strategic planning, and shareholder relations functions on its own behalf and on behalf of its subsidiaries.
THE SOUTHERN NEW ENGLAND TELEPHONE COMPANY
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 the provision of telecommunications services in the State of Connecticut, most of which are subject to rate regulation. These telecommunications services include (i) local and intrastate toll services, (ii) exchange access service, which links customers' premises to the facilities of other carriers, and (iii) other services such as digital transmission of data and transmission of radio and television programs, packet switched data network and private line services. Through its directory publishing operations, the Telephone Company publishes and distributes telephone directories throughout Connecticut and certain adjacent communities. The publishing division also develops and provides electronic publishing services.
In 1994, approximately 74% of the Corporation's consolidated revenues and sales were derived from the Telephone Company's rate regulated telecommunication 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, video dial tone, access charges and other matters, including the prescription of a uniform system of accounts and the setting of depreciation rates on plant utilized in interstate operations. 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, in providing telecommunications services in the State of 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, the issuance of securities and the setting of depreciation rates on telephone plant utilized in intrastate operations. 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.
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 opened a number of proceedings to determine an appropriate vision for Connecticut's telecommunications infrastructure and to address in the competitive phase: local exchange service competition; universal service and lifeline program policy issues; unbundling of 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 suggesting regulatory flexibilities to replace rate of return regulation with price regulation for noncompetitive 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.
The Telephone Company's regulated operations are subject to competition from companies and carriers, including competitive access providers, that construct and operate their own communications systems and networks for the provision of services to others as well as from companies that resell the telecommunications services of underlying carriers. Since the July 1, 1993 effective date of "10XXX" competition, over 40 telecommunications providers have received approval from the DPUC to offer "10XXX" or other competitive intrastate long- distance services. In addition, over 20 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.
Since the introduction of "10XXX" competition, AT&T and MCI have increased their marketing efforts in Connecticut to sell intrastate long-distance services primarily to residential customers. In response to AT&T's, MCI's 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. Over the past year, the Telephone Company has introduced a volume aggregation feature providing steeper discounts to several of its long-distance services that provides customers with the ability to combine their in- state long-distance calling for all of their "800" and WATS- like services. The Telephone Company has also introduced term options to several products and services that enable customers to gain additional discounts and rate stability in return for committing to the service for a longer time period.
Concerning competition for local exchange service, in January 1994, MCI announced plans to construct and operate local communication networks in large markets throughout the United States, including parts of Connecticut in which the Telephone Company operates. These networks would allow MCI to utilize its own facilities to provide services directly to customers. Pending DPUC approval, these services are expected to be available in Connecticut within one to two years. On January 26, 1994, MCI Metro Access Transmission Services, Inc. ("MCI Metro") was approved by the DPUC to offer non-switched, in- state long-distance private line services in Connecticut and has offered high capacity private line services to customers in Connecticut since February 1994. On December 20, 1994, MCI Metro filed an application with the DPUC to provide local exchange telecommunications services to business customers in Connecticut by 1996 with the expansion to residential customers thereafter. In addition to the expected facilities- based local service competition, AT&T has requested that the Telephone Company provide for the resale of its services including local service.
Competitive access providers continue to deploy fiber-ring technology throughout Connecticut. Their initial goal is to provide access and private line services with the intent to migrate customers to switched services. During 1994, the Telephone Company reached an agreement to lease part of its existing digital fiber-optic-ring network in the Hartford and Stamford metropolitan areas to MFS Communications Company, Inc. ("MFS"). This agreement will allow MFS to provide services to large business customers on an intraexchange basis utilizing the Telephone Company's facilities and eliminates the need for MFS to construct its own facilities.
In February 1994, pursuant to FCC orders, the Telephone Company's tariff for switched access expanded interconnection (i.e., collocation) service became effective. This tariff allows access customers, including interexchange carriers and competitive access providers, to collocate their own facilities in the Telephone Company's central offices and connect to the Telephone Company's switched access services. In June 1994, the FCC required LECs to provide a new form of interconnection that offers signaling information from LECs' end offices, allowing competitive access providers to offer tandem switching services in competition with the LECs. The Telephone Company filed its tariffs for tandem signaling in September 1994, for effect on January 24, 1995. The FCC has allowed the Telephone Company increased pricing flexibility coincident with the operation of interconnection that will allow it to compete with competitive access providers for
special access services. At this time, in accordance with the DPUC's May 5, 1994 decision, the Telephone Company's federal access tariff structure is also being utilized for the provision of intrastate access service.
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 regulations 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 and New Services
On December 6, 1994, the Telephone Company received approval from the DPUC to begin offering, in January 1995, a new voice messaging service called SNET MessageWorks[SM]. SNET MessageWorks is a voice messaging system that enables communication via recorded messages and is intended to meet the telephone answering and voice messaging needs of both residential and business customers.
On February 15, 1995, the DPUC lifted a nine-year-old restriction on the Corporation's total investment in unregulated business. The restriction prohibited the Corporation from investing more than 25% of its total assets in unregulated diversified activities without approval of the DPUC. The DPUC provided the Corporation greater flexibility to diversify into new markets up to 40% of total consolidated assets.
On May 24, 1993, the DPUC issued a decision on the capital recovery portion of the November 1992 rate request submitted by the Telephone Company ("Rate Request"). The Telephone Company was granted an increase in the composite intrastate depreciation rate from 5.7% to approximately 7.3%. This equated to an increase in the Telephone Company revenue requirement of approximately $40 million annually. The new depreciation rates were implemented effective July 1, 1993.
On July 7, 1993, the DPUC issued a decision ("Final Decision- I") in its three-phase review of the current and future telecommunications requirements of Connecticut and a final decision ("Final Decision-II") in the remainder of the Rate Request docket. The Final Decision-I addressed the evolving 1993 issues of: (i) competition; (ii) infrastructure modernization; (iii) rate design and pricing principles; and (iv) regulatory and legislative frameworks. With respect to rate design and pricing principles, the DPUC stated that the pricing of all services must be more in line with the costs of providing these services. Historically, to provide universal service, basic residential services had been subsidized by other tariffed services, primarily message toll and business services. In regard to the regulatory and legislative framework, the DPUC endorsed the concept of incentive-based regulation as a potentially more effective and efficient regulatory system than the present rate of return regulation.
The Final Decision-II authorized a rate of return on the Telephone Company's common equity ("ROE") of 11.65% and an increase in intrastate revenue of $39.4 million effective July 7, 1993. The Telephone Company was authorized previously to earn a 12.75% ROE. The increase in intrastate revenue of $39.4 million was offset virtually by the approximate $40 million increase in capital recovery granted on May 24, 1993. In addition, the Final Decision-II addressed areas of infrastructure modernization and incentive regulation. Under infrastructure modernization, the Final Decision-II supported, but did not mandate, implementation of an infrastructure modernization program.
The Final Decision-II established rates designed to achieve the increase in intrastate revenue of $39.4 million. The following major provisions were included in the Final Decision- II: (i) reductions in intrastate toll rates including several toll discount plans; (ii) a change in basic local service rates for residential and business customers to be phased in over a two-year period; (iii) a reduction in the pricing ratio gap between business and residential basic local service over a two-year period; (iv) a $7.00 per month Lifeline credit for low-income residential customers; (v) an increase in local calling service areas for most customers with none being reduced; (vi) an increase in the local coin telephone rate from $.10 to $.25; (vii) an increase in the directory assistance charge from $.24 to $.40 and a decrease in the number of "free" directory assistance calls; and (viii) a late payment charge of 1% monthly effective January 1, 1994. This rate award was implemented on July 9, 1993 through a combination of increases for coin telephone and directory assistance calls along with an interim surcharge on the remaining products and services with authorized increases including local exchange. The surcharge was in effect until October 9, 1993, when the remaining new rates became effective, including an average increase in residential basic local service rates of $.32 a month while business basic local service rates decreased by $.07 a month.
On July 9, 1994, the second and final phase of new rates became effective. Residential basic local service rates increased $.26 a month and business basic local service rates decreased between $.69 and $1.23 a month depending on the type of local service selected. At December 31, 1994, the Telephone Company's intrastate ROE was below the authorized 11.65%.
Federal Regulation Initiatives
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 ("Cable Act") violates the Telephone Company's First and Fifth Amendment rights. The Cable Act restricts in-territory provision of cable programming by LECs and prohibits LECs from owning more than 5% of any company that provides cable programming in their local service area. Several district courts and the Fourth and Ninth Circuit Courts of Appeal have rendered decisions consistent with the Telephone Company's position.
Effective July 1, 1991, the Telephone Company elected the FCC's price cap regulation, which replaced traditional rate of return regulation. Under price cap regulation, prices are no longer tied directly to the costs of providing service, but instead are capped by a formula that includes adjustments for inflation, assumed productivity increases and "exogenous" factors, such as changes in accounting principles, FCC cost separation rules, and tax laws. The treatment of exogenous factors affecting a company's costs is subject to FCC interpretation.
By electing price cap regulation, the Telephone Company is provided the opportunity to earn a higher interstate rate of return than that allowed under traditional rate of return regulation. However, price cap regulation presents additional risks since it establishes limits on the Telephone Company's ability to increase rates, even if the Telephone Company's interstate rate of return falls below the authorized rate of return. The Telephone Company is allowed to annually elect a productivity offset factor of 3.3% or 4.3%. Since price cap regulation was elected in July 1991, the Telephone Company has selected the 3.3% productivity factor. Choosing the 3.3% factor, the Telephone Company is allowed to earn up to a 12.25% interstate rate of return annually. Earnings between 12.25% and 16.25% would be shared equally with customers, and earnings over 16.25% would be returned to customers. Any amounts returned to customers would be in the form of prospective rate reductions. In addition, the Telephone Company's ability to achieve or exceed its interstate rate of return will depend, in part, on its ability to meet or exceed the assumed productivity increase.
On April 1, 1994, the Telephone Company filed with the FCC its 1994 annual interstate access tariff under price cap regulation for effect on July 1, 1994. The Telephone Company maintained its selection of the 3.3% productivity factor and is allowed to earn up to a 12.25% interstate rate of return annually before any sharing occurs. The 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. Management expects this decrease to be fully offset by increased demand. As of December 31, 1994, the Telephone Company's interstate rate of return was below the 12.25% threshold.
On July 12, 1994, the Court reversed and remanded to the FCC a ruling addressing the exogenous treatment of certain incremental postretirement costs incurred by price cap carriers, including the Telephone Company. The Telephone Company's tariffs, which took effect on July 2, 1993 and were subject to FCC further investigation, could be affected by the Court's decision. The Telephone Company's tariffs which took effect on July 1, 1994 could also be affected by the Court's decision. The Telephone Company expects the impact of this decision to be immaterial to total revenues.
The Telephone Company will file its 1995 annual interstate access tariff filing on April 3, 1995 under price cap regulation to become effective July 1, 1995. 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 election for the next tariff period.
In February 1994, the FCC began its scheduled inquiry into the price cap plan for LECs to determine whether to revise the current plan to improve LECs' performance in meeting the FCC's objectives. Results of this inquiry are expected in early 1995.
In July 1993, the FCC granted the Telephone Company increased interstate depreciation rates in connection with its triennial review of depreciation. The new depreciation rates were effective retroactive to January 1, 1993 and increased depreciation expense by approximately $11 million. However, under current price cap regulation applicable to the Telephone Company, any changes in depreciation rates cannot be reflected in interstate access rates.
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 1993 indicating it is in compliance with its CAM, and is currently undergoing an audit for the year 1994.
Regulated Operations
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:
1994 1993 1992 1991 1990
Network Access Lines in Service (thousands) 2,009 1,964 1,937 1,922 1,904
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 and its subsidiaries do not lend themselves to a detailed description by character and location. The majority of telecommunications property, plant and equipment of the Corporation and its subsidiaries is owned by the Telephone Company. Of the Corporation's investment in telecommunications property, plant and equipment at December 31, 1994, 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 11%; 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 12%.
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.
In 1993, the Telephone Company announced its intention to invest $4.5 billion over the next 15 years to build I-SNET, a statewide information superhighway. I-SNET will be an interactive multimedia network capable of delivering voice, video and a full range of information and interactive services. The Telephone Company expects I-SNET will reach approximately 160,000 residences and businesses by the end of 1995. The Telephone Company plans to support this investment primarily through increased productivity from the new technology deployed, ongoing cost-containment initiatives and customer demand for the new services offered. At this time, the Telephone Company does not plan to request a rate increase for this investment.
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 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 28, 1995)
Executive Officer Name Age(2) Position Since
Daniel J. Miglio 54 Chairman, President and Chief Executive Officer 1/86
Jean M. LaVecchia 42 Senior Vice President- Organization Development 8/94
Ronald M. Serrano 39 Senior Vice President- Corporate Development 1/93
Donald R. Shassian 39 Senior Vice President and Chief Financial Officer 12/93
Madelyn M. DeMatteo 46 Vice President, General Counsel and Secretary 5/90
John A. Sadek 61 Vice President and Comptroller 1/86
(1) Includes executive officers subject to Section 16 of the Securities Exchange Act of 1934. (2) As of December 31, 1994.
Mr. Miglio, Ms. LaVecchia, Ms. DeMatteo and Mr. Sadek 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 55,302 as of February 28, 1995. Information with respect to the quarterly high and low 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 48 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 Annual Report to Shareholders for the fiscal year ended December 31, 1994 on pages 18 through 47 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 Proxy Statement dated March 27, 1995 on pages 1 (commencing under the caption "Proxy Statement") through 8 and pages 13 through 17. Such information is incorporated herein by reference.
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 Statement of Income (Loss) - for the years ended December 31, 1994, 1993 and 1992 *
Consolidated Balance Sheet - as of December 31, 1994 and 1993 *
Consolidated Statement of Changes in Stockholders' Equity - for the years ended December 31, 1994, 1993 and 1992 *
Consolidated Statement of Cash Flows - for the years ended December 31, 1994, 1993 and 1992 *
Notes to Consolidated Financial Statements *
(2) Consolidated Financial Statement Schedule for the year ended December 31, 1994
Report of Independent Accountants 24
II - Valuation and Qualifying Accounts 25
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 Annual Report to Shareholders for the fiscal year ended December 31, 1994 [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)14 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 Southern New England Telephone Company and Shawmut Bank Connecticut, National Association, 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.
10(iii)(A)1 SNET Short Term Incentive Plan as amended February 8, 1995.
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 Executive Non-Qualified Pension Plan and Excess 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.
(3) Exhibits (continued):
Exhibit Number
10(iii)(A)6 SNET Management Pension Plan as amended November 1, 1987 (Exhibit 10-C to Form SE dated 3/21/88-1, File No. 1-9157). Amendments dated September 1, 1988 and January 1, 1989 (Exhibit 10-C to Form SE dated 3/21/89, File No. 1-9157). Amendments dated January 1, 1989 through August 6, 1989 (Exhibit 10- B to Form SE dated 3/20/90, File No. 1-9157). Amendments dated June 5, 1991 through September 25, 1991 (Exhibit 10-B to Form SE dated 3/20/92, File No. 1-9157). Amendments dated January 1, 1993 (Exhibit 10(iii)(A)6 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). Amendments dated September 8, 1993 through December 8, 1993 (Exhibit 10(iii)(A)6 to 1993 Form 10-K dated 3/23/94, File No. 1-9157). Amendments dated June 1, 1994 through November 16, 1994.
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.
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).
12 Computation of Ratio of Earnings to Fixed Charges.
(3) Exhibits (continued):
Exhibit Number
13 Pages 18 through 48 of the registrant's Annual Report to Shareholders for the fiscal year ended December 31, 1994.
21 Subsidiaries of the Corporation.
23 Consent of Independent Accountants.
24a Powers 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, 1994 for the SNET Management Retirement Savings Plan will be filed as an amendment prior to June 30, 1995.
99b Annual Report on Form 11-K for the plan year ended December 31, 1994 for the SNET Bargaining Unit Retirement Savings Plan will be filed as an amendment prior to June 30, 1995.
The Corporation will furnish, without charge, to a stockholder upon request a copy of the Annual Report to Shareholders and Proxy Statement, portions of which are incorporated by reference, and will furnish any other exhibit at cost.
(b) Reports on Form 8-K:
On October 26, 1994, the Corporation and the Telephone Company filed, separately, reports on Form 8-K, dated October 26, 1994 announcing the Corporation's financial results for the third quarter of 1994.
On November 22, 1994, the Corporation filed a report on Form 8- K, dated November 22, 1994, announcing that it had reached definitive agreements with Bell Atlantic Corporation and NYNEX Corporation to purchase certain cellular properties that are within or contiguous to areas served by SNET Mobility, Inc., a wholly-owned subsidiary of the Corporation. The properties to be purchased include all of Rhode Island and the New Bedford, Massachusetts area now owned by Bell Atlantic as well as NYNEX's ownership of 80% of the Pittsfield, Massachusetts market and a 16.1% interest in a cellular partnership currently 82.5% owned and managed by the Corporation.
On January 25, 1995, the Corporation and the Telephone Company filed, separately, reports on Form 8-K, dated January 24, 1995, announcing the Corporation's 1994 financial results and the change in credit ratings by Standard & Poor's on the Corporation's senior unsecured debt to A+ from AA and commercial paper rating to A-1 from A-1+.
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/ J. A. Sadek J. A. Sadek, Vice President and Comptroller, March 10, 1995
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:
D. J. Miglio* Chairman, President, Chief Executive Officer and Director
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICERS:
D. R. Shassian* Senior Vice President and Chief Financial Officer
J. A. Sadek By /s/ J. A. Sadek Vice President and Comptroller (J. A. Sadek, as attorney- in-fact and on his own behalf)
DIRECTORS:
F. G. Adams* William F. Andrews* Richard H. Ayers* Zoe Baird* Robert L. Bennett* Barry M. Bloom* March 10, 1995 F. J. Connor* William R. Fenoglio* Claire L. Gaudiani* J. R. Greenfield* Burton G. Malkiel* Frank R. O'Keefe, Jr.* * by power of attorney
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders 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 1994 Annual Report to Stockholders 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, 1994 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 24, 1995
SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS (Millions of Dollars)
COL. A COL. B COL. C(1) COL. C(2) COL. D COL. E
Additions
Balance at Charged to Balance beginning Charged to other accounts Deductions at end Description of period expense - Note(a) - Note(b) of period
Allowance for Uncollectible Accounts Receivable:
Year 1994 $26.7 $20.7 $6.3 $25.5 $ 28.2 Year 1993 21.8 28.9 3.6 27.6 26.7 Year 1992 16.3 33.3 3.9 31.7 21.8
Allowance for Uncollectible Direct-Financing Lease Notes Receivable of Discontinued Operations:
Year 1994 $ 11.7 $ 1.7 $ - $ 5.0 $ 8.4 Year 1993 8.2 15.6 - 12.1 11.7 Year 1992 4.6 9.2 - 5.6 8.2
(a) Includes amounts previously written off that were credited directly to this account when recovered and miscellaneous debits and credits.
(b) Includes amounts written off as uncollectible.
Additions Balance at Balance beginning Charged to Charged to Deductions at end Description of period expense other accounts -Note(a) of period
Restructuring Charge:
Year 1994 $355.0 $ - $ - $90.1 $264.9 Year 1993 - 355.0 - - 355.0
(a) Amount represents costs incurred that were charged against the restructuring reserve.
EXHIBIT INDEX
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)14 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 Southern New England Telephone Company and Shawmut Bank Connecticut, National Association, 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.
10(iii)(A)1 SNET Short Term Incentive Plan as amended February 8, 1995.
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 Executive Non-Qualified Pension Plan and Excess 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.
10(iii)(A)6 SNET Management Pension Plan as amended November 1, 1987 (Exhibit 10-C to Form SE dated 3/21/88-1, File No. 1-9157). Amendments dated September 1, 1988 and January 1, 1989 (Exhibit 10-C to Form SE dated 3/21/89, File No. 1-9157). Amendments dated January 1, 1989 through August 6, 1989 (Exhibit 10- B to Form SE dated 3/20/90, File No. 1-9157). Amendments dated June 5, 1991 through September 25, 1991 (Exhibit 10-B to Form SE dated 3/20/92, File No. 1-9157). Amendments dated January 1, 1993 (Exhibit 10(iii)(A)6 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). Amendments dated September 8, 1993 through December 8, 1993 (Exhibit 10(iii)(A)6 to 1993 Form 10-K dated 3/23/94, File No. 1-9157). Amendments dated June 1, 1994 through November 16, 1994.
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.
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).
12 Computation of Ratio of Earnings to Fixed Charges.
13 Pages 18 through 48 of the registrant's Annual Report to Shareholders for the fiscal year ended December 31, 1994.
21 Subsidiaries of the Corporation.
23 Consent of Independent Accountants.
24a Powers 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, 1994 for the SNET Management Retirement Savings Plan will be filed as an amendment prior to June 30, 1995.
99b Annual Report on Form 11-K for the plan year ended December 31, 1994 for the SNET Bargaining Unit Retirement Savings Plan will be filed as an amendment prior to June 30, 1995.