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 quarterly period ended March 31, 1994
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 1-4721
SPRINT CORPORATION
(Exact name of registrant as specified in its charter)
KANSAS 48-0457967
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
P.O. Box 11315, Kansas City, Missouri 64112
(Address of principal executive offices)
(913) 624-3000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
SHARES OF COMMON STOCK OUTSTANDING AT March 31, 1994 --344,422,762
PART 1.
Item 1.
SPRINT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Millions)
As of As of
March 31, December 31,
1994 1993
(Unaudited)
Assets
Current assets
Cash and equivalents $ 105.7 $ 76.8
Accounts receivable, net of allowance
for doubtful accounts of $130.0
million ($121.9 million in 1993) 1,299.1 1,230.6
Investment in common stock -- 130.2
Inventories 196.5 182.3
Deferred income taxes 75.4 81.1
Prepaid expenses 125.5 120.7
Other 157.9 156.2
Total current assets 1,960.1 1,977.9
Investment in common stock 139.0 173.1
Property, plant and equipment
Long distance communications services 5,532.1 5,492.7
Local communications services 11,391.5 11,226.4
Cellular and wireless communications
services 596.0 569.6
Other 440.7 433.7
17,960.3 17,722.4
Less accumulated depreciation 7,664.6 7,407.6
10,295.7 10,314.8
Cellular minority partnership
investments 287.0 287.5
Excess of cost over net assets acquired 732.0 736.8
Other assets 653.1 658.8
$ 14,066.9 $ 14,148.9
See accompanying notes to consolidated financial statements.
PART 1.
Item 1.
SPRINT CORPORATION
CONSOLIDATED BALANCE SHEETS (continued)
(In Millions)
As of As of
March 31, December 31,
1994 1993
(Unaudited)
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt $ 396.8 $ 523.4
Accounts payable 829.1 925.4
Accrued interconnection costs 501.7 487.5
Accrued taxes 380.4 307.2
Other 793.0 825.1
Total current liabilities 2,901.0 3,068.6
Long-term debt 4,529.5 4,571.0
Deferred credits and other liabilities
Deferred income taxes and investment tax
credits 1,131.2 1,182.9
Postretirement and other benefit
obligations 812.8 793.1
Other 613.2 576.4
2,557.2 2,552.4
Redeemable preferred stock 37.4 38.6
Common stock and other shareholders'
equity
Common stock, par value $2.50 per share,
authorized 500.0 million shares, issued
and outstanding 344.4 million (343.4
million in 1993) 861.1 858.5
Capital in excess of par or stated value 855.7 827.4
Retained earnings 2,326.9 2,184.2
Other (1.9) 48.2
4,041.8 3,918.3
$ 14,066.9 $ 14,148.9
See accompanying notes to consolidated financial statements.
PART I.
Item 1.
SPRINT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In Millions, Except Per Share Data)
Three Months
Ended
March 31,
1994 1993
(Unaudited)
Net operating revenues $ 3,033.2 $ 2,718.0
Operating expenses
Costs of services and products 1,528.4 1,381.9
Selling, general and administrative 724.2 641.8
Depreciation and amortization 352.3 337.2
Merger, integration and restructuring costs -- 248.0
Total operating expenses 2,604.9 2,608.9
Operating income 428.3 109.1
Interest expense (101.1) (117.9)
Other income (expense), net 29.2 (0.7)
Income (loss) from continuing operations
before income taxes 356.4 (9.5)
Income tax provision (129.0) (1.8)
Income (loss) from continuing operations 227.4 (11.3)
Discontinued operations, net -- (12.3)
Extraordinary losses on early
extinguishments of debt, net -- (5.2)
Cumulative effect of changes in accounting
principles, net -- (384.2)
Net income (loss) 227.4 (413.0)
Preferred stock dividends (0.7) (0.6)
Earnings (loss) applicable to common stock $ 226.7 $ (413.6)
Earnings (loss) per common share
Continuing operations $ 0.65 $ (0.03)
Discontinued operations -- (0.04)
Extraordinary item -- (0.02)
Cumulative effect of changes in accounting
principles -- (1.12)
Total $ 0.65 $ (1.21)
Weighted average number of common shares 346.7 341.6
Dividends per common share $ 0.25 $ 0.25
See accompanying notes to consolidated financial statements.
PART I.
Item 1.
SPRINT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
Three Months Ended
March 31,
1994 1993
(Unaudited)
Operating activities
Net income (loss) $ 227.4 $ (413.0)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities
Depreciation and amortization 352.3 337.2
Gain on sale of investment (34.7) --
Discontinued operations -- (1.3)
Extraordinary losses on early
extinguishments of debt -- 7.9
Cumulative effect of changes in accounting
principles -- 384.2
Deferred income taxes and investment tax
credits (10.4) (75.5)
Changes in operating assets and liabilities
Accounts receivable, net (68.5) (38.3)
Inventories and other current assets (20.9) 0.3
Accounts payable, accrued expenses and other
current liabilities (34.2) 159.6
Noncurrent assets and liabilities, net 51.9 134.1
Other, net 23.8 26.8
Net cash provided by operating activities 486.7 522.0
Investing activities
Capital expenditures (326.9) (326.0)
Proceeds from sale of investment in common
stock 117.7 --
Other, net (9.2) 6.0
Net cash used by investing activities (218.4) (320.0)
Financing activities
Proceeds from long-term debt 69.7 40.0
Retirements of long-term debt (238.8) (237.7)
Net increase (decrease) in notes payable and
commercial paper (0.1) 43.0
Proceeds from common stock issued 16.2 21.9
Proceeds from employees stock purchase
installments 3.4 7.0
Dividends paid (86.8) (88.4)
Other, net (3.0) (7.4)
Net cash used by financing activities (239.4) (221.6)
Increase (decrease) in cash and equivalents 28.9 (19.6)
Cash and equivalents at beginning of period 76.8 128.8
Cash and equivalents at end of period $ 105.7 $ 109.2
See accompanying notes to consolidated financial statements.
PART I.
Item 1.
SPRINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1994 and 1993
(Unaudited)
The information contained in this Form 10-Q for the three-month
interim periods ended March 31, 1994 and 1993 reflects all
adjustments, consisting only of normal recurring and certain
nonrecurring accruals (see Note 2), which are, in the opinion of
management, necessary to a fair statement of the operations for
such interim periods.
1. Accounting Policies
Basis of Consolidation
The accompanying consolidated financial statements include the
accounts of Sprint Corporation and its wholly-owned and majority-
owned subsidiaries (Sprint), including Centel Corporation
(Centel) and Sprint Communications Company L.P. Investments in
less than 50 percent-owned cellular communications partnerships
are accounted for using the equity method.
In accordance with industry practice, revenues and related net
income of non-regulated operations attributable to transactions
with Sprint's rate-regulated telephone companies have not been
eliminated in the accompanying consolidated financial statements.
Intercompany revenues of such entities amounted to $65 million
and $52 million for the three months ended March 31, 1994 and
1993, respectively.
All other significant intercompany transactions have been
eliminated.
Classification of Operations
The long distance communications services division provides
domestic voice and data communications services across certain
specified geographical boundaries, as well as international long
distance communications services. Rates charged for such
services sold to the public are subject to different levels of
state and federal regulation, but are generally not subject to
rate-base regulation.
The local communications services division consists principally
of the operations of Sprint's rate-regulated telephone companies.
These operations provide local exchange services, access by
telephone customers and other carriers to local exchange
facilities and long distance services within specified
geographical areas.
The cellular and wireless communications services division
consists of wholly-owned and majority-owned interests in
partnerships and corporations operating cellular and wireless
communications properties in various metropolitan and rural
service area markets.
The product distribution and directory publishing businesses
include the wholesale distribution of telecommunications products
and the publishing and marketing of white and yellow page
telephone directories.
Postretirement Benefits
Effective January 1, 1993, Sprint changed or modified its method
of accounting for certain postretirement benefits by adopting
Statement of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions." Sprint provides postretirement benefits (principally
health care benefits) to certain retirees. SFAS No. 106 requires
accrual of the expected cost of providing postretirement benefits
to employees and their dependents or beneficiaries during the
years employees earn the benefits.
Upon adoption of the new standard, Sprint elected to immediately
recognize its previously unrecorded obligation for postretirement
benefits already earned by current retirees and employees (the
transition obligation), a substantial portion of which related to
its rate-regulated telephone companies. Pursuant to SFAS No. 71,
regulatory assets associated with the recognition of the
transition obligation were recorded in jurisdictions where the
regulators have issued orders specific to Sprint permitting
recognition of net postretirement benefits costs for ratemaking
purposes, and providing for recovery of the transition obligation
over a period of no longer than 20 years. Accordingly, in
connection with the adoption of SFAS No. 106, Sprint recorded
regulatory assets of $87 million. In all other jurisdictions,
regulatory assets associated with the recognition of the
transition obligation were not recorded due to the uncertainties
as to the timing and extent of recovery.
The resulting nonrecurring, noncash charge of $341 million ($1.00
per share), net of related income tax benefits, is reflected in
the 1993 consolidated statement of income as a cumulative effect
of change in accounting principle.
Postemployment Benefits
Effective January 1, 1993, Sprint adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." Upon
adoption, Sprint recognized certain previously unrecorded
obligations for benefits to be provided to former or inactive
employees and their dependents, after employment but before
retirement. Such postemployment benefits offered by Sprint
include severance, disability and workers compensation benefits,
including the continuation of other benefits such as health care
and life insurance coverage.
The resulting nonrecurring, noncash charge of $11 million ($0.03
per share), net of related income tax benefits, is reflected in
the 1993 consolidated statement of income as a cumulative effect
of change in accounting principle.
Accounting for Circuit Activity Costs
Effective January 1, 1993, Sprint's long distance communications
services division changed its method of accounting for certain
costs related to connecting new customers to its network. The
change was made to conform Sprint's accounting to the predominant
industry practice for such costs. Under the new method, such
costs (which were previously capitalized) are being expensed when
incurred. The resulting nonrecurring, noncash charge of $32
million ($0.09 per share), net of related income tax benefits, is
reflected in the 1993 consolidated statement of income as a
cumulative effect of change in accounting principle.
Reclassifications
Certain amounts in the accompanying consolidated financial
statements for 1993 have been reclassified to conform to the
presentation of amounts in the 1994 consolidated financial
statements. Such reclassifications had no effect on the results
of operations.
2. Sprint/Centel Merger
Effective March 9, 1993, Sprint consummated its merger with
Centel, creating a diversified telecommunications enterprise with
operations in long distance, local exchange and cellular/wireless
communications services. The merger was accounted for as a
pooling of interests. The transaction costs associated with the
merger (consisting primarily of investment banking and legal
fees) and the estimated expenses of integrating and restructuring
the operations of the two companies (consisting primarily of
employee severance and relocation expenses and costs of
eliminating duplicative facilities) resulted in nonrecurring
charges during 1993 aggregating $259 million, of which $248
million was recorded during the 1993 first quarter. Such
nonrecurring charges reduced income from continuing operations
for the 1993 first quarter by $165 million ($0.48 per share).
3. Investments in Common Stocks
Investments in common stocks are classified as available for sale
and reported at fair value (estimated based on quoted market
prices). As of March 31, 1994 and December 31, 1993, the cost of
such investments is $119 million and $202 million, respectively,
with gross unrealized holding gains of $20 million and $101
million, respectively, reflected as additions to other
shareholders' equity, net of related income taxes.
During the three months ended March 31, 1994, Sprint sold an
investment in common stock, realizing a gain of $35 million,
which increased income from continuing operations by $22 million
($0.06 per share).
4. Income Taxes
The differences which cause the effective income tax rate to vary
from the statutory federal income tax rate of 35 percent and 34
percent for the three months ended March 31, 1994 and 1993,
respectively, are as follows (in millions):
Three Months Ended
March 31,
1994 1993
Income tax provision (benefit) at the
statutory rate $ 124.7 $ (3.2)
Effect of:
Investment tax credits included in income (5.1) (5.8)
State income taxes, net of federal income
tax effect 12.8 (0.5)
Merger related costs -- 14.0
Other, net (3.4) (2.7)
Income tax provision, including investment
tax credits $ 129.0 $ 1.8
Effective income tax rate 36% (19%)
On August 10, 1993, the Revenue Reconciliation Act of 1993 was
enacted which, among other changes, raised the federal income tax
rate for corporations to 35 percent from 34 percent, retroactive
to January 1, 1993. Accordingly, upon enactment, Sprint adjusted
its deferred income tax assets and liabilities to reflect the
revised rate.
5. Contingencies
Litigation, Claims and Assessments
In September 1993, a settlement agreement was reached related to
a class action complaint filed in January 1992 against Sprint and
certain of its officers and directors, amending a complaint
originally filed in 1990. The plaintiffs in the class action
alleged violations of various federal securities laws and related
state laws and, among other relief, sought unspecified
compensatory damages. The settlement, which is subject to
approval by the court, totaled $29 million, of which
approximately 60 percent will be recovered from Sprint's
insurance carriers. The net settlement did not have a
significant effect on Sprint's 1993 results of operations.
Following announcement of Sprint's merger with Centel, class
action suits were filed against Centel and certain of its
officers and directors in federal and state courts. The state
suits have been dismissed, while the federal suits have been
consolidated into a single action and seek damages for alleged
violations of securities laws. These and various other suits
arising in the ordinary course of business are pending against
Sprint. Management cannot predict the ultimate outcome of these
actions but believes they will not result in a material effect on
Sprint's consolidated financial statements.
Accounts Receivable Sold with Recourse
Under an agreement available through April 1995, Sprint may sell
on a continuous basis, with recourse, up to $600 million of
undivided interests in a designated pool of its accounts
receivable. Subsequent collections of receivables sold to
investors are typically reinvested in the pool. On a quarterly
basis, subject to the approval of the investors, Sprint may
extend the agreement for an additional ninety days. Receivables
sold that remained uncollected as of March 31, 1994 aggregated
$600 million.
6. Supplemental Cash Flows Information
Three Months Ended
March 31,
1994 1993
Cash paid for (in millions)
Interest $ 102.2 $ 98.4
Income taxes $ 15.9 $ 13.5
During the three months ended March 31, 1994 and 1993, Sprint
contributed previously unissued shares of its common stock with
market values of $12 million and $8 million, respectively, to the
employee savings plans.
7. Subsequent Event
In April 1994, Sprint's Board of Directors declared a common
stock dividend of $0.25 per share payable on June 30, 1994.
PART I.
Item 2.
SPRINT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sprint / Centel Merger
Effective March 9, 1993, Sprint Corporation (Sprint) consummated
its merger with Centel Corporation (Centel), creating a
diversified telecommunications enterprise with operations in long
distance, local exchange and cellular/wireless communications
services. The merger was accounted for as a pooling of
interests.
The operations of the merged companies continue to be integrated
and restructured to achieve efficiencies which have begun to
yield operational synergies and cost savings. The transaction
costs associated with the merger (consisting primarily of
investment banking and legal fees) and the estimated expenses of
integrating and restructuring the operations of the two companies
(consisting primarily of employee severance and relocation
expenses and costs of eliminating duplicative facilities)
resulted in nonrecurring charges during 1993 aggregating $259
million, of which $248 million was recorded during the 1993 first
quarter. Such nonrecurring charges reduced income from
continuing operations for the 1993 first quarter by $165 million
($0.48 per share).
Liquidity and Capital Resources
Cash flows from operating activities, which are Sprint's primary
source of liquidity, were $487 million during the first three
months of 1994, compared to $522 million during the first three
months of 1993. The decrease in operating cash flows generally
reflects increased working capital requirements associated with
the growth in the long distance, local and cellular/wireless
divisions.
Sprint's investing activities used cash of $218 million and $320
million during the first three months of 1994 and 1993,
respectively. Capital expenditures, which represent Sprint's
most significant investing activity, were $327 million and $326
million during the first three months of 1994 and 1993,
respectively. Long distance capital expenditures were incurred
primarily to enhance network capabilities for providing new
products and services and to meet increased customer demand.
Capital expenditures for the local division were made to
accommodate access line growth, to continue the conversion to
digital technologies, and to expand the division's capabilities
for providing enhanced telecommunications services. Capital
expenditures for the cellular and wireless division were made to
support the increase in the number of customer lines served.
Sprint expects capital expenditures for the year to be
approximately $1.8 billion. Investing activities in the first
three months of 1994 also include $118 million received in
connection with the sale of an investment in common stock.
Financing activities used cash of $239 million in the first three
months of 1994 and $222 million in the comparable 1993 period.
Long-term debt retirements during the first three months of 1994
include the redemption of $102 million of debt called, prior to
scheduled maturity, in 1993.
During 1994, Sprint anticipates funding capital expenditures and
dividends with cash flows from operating activities. Sprint
continues to expect its external cash requirements for 1994 to be
approximately $800 million to $900 million, which is generally
required to repay scheduled long-term debt maturities and reduce
notes payable and commercial paper outstanding. A portion of
such external cash requirements will be generated through
issuances of common stock through employee benefit plans and from
the sale of the investment in common stock discussed previously.
The method of financing the remaining external cash requirements
will depend on prevailing market conditions during the year.
Sprint may also undertake debt refinancing throughout the
remainder of 1994 in order to take advantage of favorable
interest rates.
As of March 31, 1994, Sprint had the ability to borrow $811
million under a revolving credit agreement with a syndicate of
domestic and international banks and other bank commitments.
Other available financing sources include a Medium-Term Note
program, under which Sprint may offer for sale up to $175 million
of unsecured senior debt securities. In addition, Sprint may
offer for sale approximately $1.2 billion of debt securities
pursuant to shelf registration statements filed with the
Securities and Exchange Commission.
The aggregate amount of additional borrowings which can be
incurred is ultimately limited by certain covenants contained in
existing debt agreements. As of March 31, 1994, Sprint had
borrowing capacity of approximately $3.2 billion under the most
restrictive of its debt covenants.
The most restrictive covenant applicable to dividends results
from Sprint's revolving credit agreement. Among other
restrictions, the agreement requires Sprint to maintain specified
levels of consolidated net worth, as defined. As a result of
this requirement, $1.53 billion of Sprint's $2.33 billion
consolidated retained earnings were effectively restricted from
the payment of dividends as of March 31, 1994.
Results Of Operations
Long Distance Communications Services
Selected Operating Results
(In Millions)
Three Months Ended
March 31, Variance
1994 1993 Dollar Percent
Net operating revenues $ 1,660.4 $ 1,491.3 $ 169.1 11.3%
Operating expenses
Interconnection 748.5 675.0 73.5 10.9%
Operations 214.8 193.1 21.7 11.2%
Selling, general and
administrative 420.3 368.4 51.9 14.1%
Depreciation and
amortization 133.7 134.1 (0.4) (0.3)%
Total operating
expenses 1,517.3 1,370.6 146.7 10.7%
Operating income $ 143.1 $ 120.7 $ 22.4 18.6%
Net operating revenues for the first quarter of 1994 increased 11
percent over the comparable 1993 period. The increase was
generally due to traffic volume growth of 11 percent. Average
revenue per minute received from customers was relatively
constant. The increases in net operating revenues and traffic
volumes reflect continuing growth in the business, international,
and residential markets. Growth in the business market was
primarily attributable to "800" services, reflecting the enhanced
growth opportunities generated by "800" portability, while growth
in the international and residential markets reflect ongoing
sales and marketing efforts.
Future rates of growth in both net operating revenues and traffic
volumes may be influenced by both domestic and international
economic conditions and the division's ability to maintain market
share and current price levels in the intensely competitive long
distance marketplace.
Interconnection costs increased during the first quarter of 1994
relative to the comparable 1993 period. As a percentage of net
operating revenues, interconnection costs were consistent between
the 1994 and 1993 first quarters, resulting from an increased
percentage related to international interconnection costs, offset
by a decreased percentage related to domestic interconnection
costs. International interconnection costs increased due to
increased traffic volumes and changes in the mix of traffic
volumes to various countries, partially offset by reductions in
rates paid to foreign telephone companies to complete
international calls made by the division's domestic customers.
Costs of connecting to networks domestically also increased
primarily as a result of traffic volume growth, partially offset
by reductions in interconnection rates paid to local exchange
companies.
Operations expense consists of costs related to operating and
maintaining the long distance network; costs of providing various
services such as operator services, public payphones,
telecommunications services for the hearing impaired, and video
teleconferencing; and costs of data system sales. Operations
expense for the first quarter of 1994 increased $22 million from
the comparable 1993 period, primarily due to expanded service
offerings and increased salaries and related benefits.
Selling, general and administrative expense for the first quarter
of 1994 increased $52 million, generally as a result of
intensified sales and marketing efforts. During the first
quarter of 1994, marketing efforts were primarily directed at The
Most (sm) and The Most WORLDWIDE (sm) calling plans and the
recently introduced voice-activated FONCARD (sm) product. These
efforts resulted in increased advertising and promotions expense,
as well as increased commission expense.
Local Communications Services
Selected Operating Results
(In Millions)
Three Months Ended
March 31, Variance
1994 1993 Dollar Percent
Net operating revenues
Local service $ 425.6 $ 388.1 $ 37.5 9.7%
Network access 391.0 373.6 17.4 4.7%
Toll service 134.2 124.4 9.8 7.9%
Other 117.7 105.4 12.3 11.7%
Total net operating
revenues 1,068.5 991.5 77.0 7.8%
Operating expenses
Plant operations 317.7 303.0 14.7 4.9%
Depreciation and
amortization 187.3 180.1 7.2 4.0%
Other 307.1 289.3 17.8 6.2%
Total operating
expenses 812.1 772.4 39.7 5.1%
Operating income $ 256.4 $ 219.1 $ 37.3 17.0%
The division's net operating revenues for the first quarter of
1994 increased 8 percent over the comparable 1993 period. Growth
in local service revenues reflects continued increases in the
number of access lines served and growth in add-on services, such
as custom calling features. The number of access lines served
grew 4.9 percent during the past twelve months. Network access
revenues, derived from interexchange long distance carriers' use
of the local network to complete calls, increased as a result of
increased traffic volumes, partially offset by periodic
reductions in network access rates charged. Toll service
revenues, related to the provision of long distance services
within specified geographical areas and the reselling of
interexchange long distance services, increased 8 percent. Such
increase primarily reflects increased traffic volumes. Other
revenues increased 12 percent generally due to higher equipment
sales.
Plant operations expense increased $15 million in the first
quarter of 1994 over the comparable 1993 period primarily due to
increases in the costs of providing services resulting from
access line growth. The increase in depreciation and
amortization expense for the first quarter of 1994 relative to
the comparable 1993 period was generally due to plant additions.
Other operating expenses increased $18 million in the first
quarter of 1994 over the comparable 1993 period. Among the
factors contributing to this increase were higher sales and
marketing expenses to promote new products and services;
increases in customer service costs and increases in the cost of
equipment sales.
Consistent with most local exchange carriers, the division
accounts for the economic effects of regulation pursuant to SFAS
No. 71, "Accounting for the Effects of Certain Types of
Regulation." The application of SFAS No. 71 requires the
accounting recognition of the rate actions of regulators where
appropriate, including the recognition of depreciation and
amortization based on estimated useful lives prescribed by
regulatory commissions rather than those that might be utilized
by non-regulated enterprises. Sprint's management believes the
division's operations meet the criteria for the continued
application of the provisions of SFAS No. 71. With increasing
competition and the changing nature of regulation in the
telecommunications industry, the ongoing applicability of SFAS
No. 71 must, however, be constantly monitored and evaluated.
Should the division no longer qualify for the application of the
provisions of SFAS No. 71 at some future date, the accounting
impact could result in the recognition of a material,
extraordinary, noncash charge.
Cellular and Wireless Communications Services
Selected Operating Results
(In Millions)
Three Months Ended
March 31, Variance
1994 1993 Dollar Percent
Net operating revenues $ 143.3 $ 92.5 $ 50.8 54.9%
Operating expenses
Costs of services and
products 46.2 32.5 13.7 42.2%
Selling, general and
administrative 62.0 41.3 20.7 50.1%
Depreciation and
amortization 22.7 16.9 5.8 34.3%
Total operating
expenses 130.9 90.7 40.2 44.3%
Operating income $ 12.4 $ 1.8 $ 10.6 --
Net operating revenues for the first quarter of 1994 increased 55
percent over the comparable 1993 period, primarily due to a 70
percent growth in customer lines served. The effects of growth
in customer lines served was partially offset by a decline in
service revenue per customer line, reflecting an industry-wide
trend that has occurred as a result of increased general consumer
market penetration.
Costs of services and products declined to 32 percent of net
operating revenues in the first quarter of 1994 from 35 percent
in the first quarter of 1993, generally reflecting economies of
scale gained from serving additional customer lines. Selling,
general and administrative (SG&A) costs for the first quarter of
1994 increased $21 million as a result of increased advertising
expense as well as increased commissions and customer service
expenses due to the growth in customer lines. Despite the
increase in the amount of SG&A expense, such expense as a
percentage of net operating revenues declined to 43 percent in
the first quarter of 1994 from 45 percent in the first quarter of
1993. Depreciation and amortization increased primarily due to
the additional investment in property, plant and equipment
required to accommodate the growth in customer lines.
Product Distribution and Directory Publishing Businesses
Selected Operating Results
(In Millions)
Three Months Ended
March 31, Variance
1994 1993 Dollar Percent
Net operating revenues $ 250.8 $ 215.5 $ 35.3 16.4%
Operating expenses 234.4 200.0 34.4 17.2%
Operating income $ 16.4 $ 15.5 $ 0.9 5.8%
North Supply, Sprint's product distribution subsidiary, had net
operating revenues of $183 million for the first quarter 1994,
reflecting a 21 percent increase from the comparable 1993 period.
The increase primarily reflects increased sales due to additional
non-affiliated contracts and increased sales to the local
communications services division. Sprint Publishing &
Advertising, Sprint's directory publishing subsidiary, had net
operating revenues of $68 million and $65 million for the three
months ended March 31, 1994 and 1993, respectively. Operating
expenses as a percentage of net operating revenues increased
slightly in the 1994 first quarter relative to the comparable
1993 period.
Non-Operating Items
Interest expense for the first quarter of 1994 decreased $17
million from the comparable 1993 period, generally related to a
decrease in average levels of debt outstanding and lower interest
rates.
The components of other income (expense), net are as follows (in
millions):
Three Months Ended
March 31,
1994 1993
Gain on sale of investment in common stock $ 34.7 $ --
Equity in earnings of cellular minority
partnership investments 2.6 4.2
Minority interests (3.5) (0.6)
Other (4.6) (4.3)
Total other income (expense), net $ 29.2 $ (0.7)
Income Tax Provision
See Note 4 of "Notes to Consolidated Financial Statements" for
information regarding the differences which cause the effective
income tax rate to vary from the statutory federal income tax
rate.
PART II.
Other Information
Item 1. Legal Proceedings
There were no reportable events during the quarter ended
March 31, 1994.
Item 2. Changes in Securities
There were no reportable events during the quarter ended
March 31, 1994.
Item 3. Defaults Upon Senior Securities
There were no reportable events during the quarter ended
March 31, 1994.
Item 4. Submission of Matters to a Vote of Security Holders
On April 19, 1994, Sprint held its Annual Meeting of
Shareholders. In addition to the election of six Class II
Directors to serve for a term of three years, the
shareholders approved the appointment of Ernst & Young as
independent auditors for Sprint, approved amendments to the
1988 Employees Stock Purchase Plan, approved performance
goals under certain compensation plans in accordance with
the Revenue Reconciliation Act of 1993, and did not approve
four shareholder proposals.
The following votes were cast for each of the following
nominees for Director or were withheld with respect to such
nominees:
For Withheld
Ruth M. Davis 277,841,172 3,642,232
Harold S.Hook 277,938,331 3,545,073
Ronald T.LeMay 277,515,431 3,967,973
Frank E. Reed 277,924,595 3,558,809
Charles E.Rice 277,936,681 3,546,723
Stewart Turley 277,951,141 3,532,263
The following votes were cast with respect to the proposal
to approve the appointment of Ernst & Young as independent
auditors for Sprint for 1994:
For 274,879,059
Against 4,745,603
Abstain 1,858,742
The following votes were cast with respect to the proposal
to approve amendments to the 1988 Employees Stock Purchase
Plan increasing the number of shares authorized for issuance
and making certain administrative changes to the Plan:
For 269,989,087
Against 9,352,734
Abstain 2,141,583
The following votes were cast with respect to the proposal
to approve performance goals under the Executive Management
Incentive Plan:
For 244,338,053
Against 33,807,833
Abstain 3,337,518
The following votes were cast with respect to the proposal
to approve performance goals under the Executive Long-Term
Incentive Plan:
For 264,019,116
Against 14,058,416
Abstain 3,405,872
The following votes were cast with respect to the proposal
to approve an amendment to the Long-Term Stock Incentive
Program limiting the grant of stock options or stock
appreciation rights to an individual employee during any
calendar year to 500,000 shares:
For 263,761,307
Against 14,452,401
Abstain 3,269,696
The following votes were cast with respect to a shareholder
proposal requesting that the Board of Directors of Sprint
implement certain procedures concerning the selection of
independent auditors:
For 19,816,696
Against 225,928,443
Abstain 6,610,733
Broker non-votes 29,127,532
The following votes were cast with respect to a shareholder
proposal to limit increases in executive cash compensation
to the average percentage pay increase granted to Sprint
employees:
For 23,127,053
Against 221,671,033
Abstain 7,557,786
Broker non-votes 29,127,532
The following votes were cast with respect to a shareholder
proposal requesting that the Board of Directors of Sprint
create a Facilities Closure and Relocation of Work
Committee:
For 19,449,898
Against 221,649,608
Abstain 11,256,366
Broker non-votes 29,127,532
The following votes were cast with respect to a shareholder
proposal recommending that the Board of Directors of Sprint
adopt and implement a policy of confidential voting at all
meetings of its shareholders:
For 118,328,597
Against 127,262,692
Abstain 6,764,583
Broker non-votes 29,127,532
Item 5. Other Information
Sprint's ratios of earnings to fixed charges were 3.73 and
0.92 for the three months ended March 31, 1994 and 1993,
respectively. These ratios have been computed by dividing
fixed charges into the sum of (a) income (loss) from
continuing operations less capitalized interest included in
income, (b) income taxes, and (c) fixed charges. Fixed
charges consist of interest on all indebtedness (including
amortization of debt issuance expenses), the interest factor
of operating rents and the pre-tax cost of preferred stock
dividends of subsidiaries. In the absence of the
nonrecurring merger, integration and restructuring costs of
$248 million recorded during the three months ended March
31, 1993, the ratio of earnings to fixed charges would have
been 2.57.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this
report:
(10) Material Agreements - Executive Compensation
Plans and Arrangements:
(a) Long-Term Stock Incentive Program, as amended.
(b) Retirement Plan for Directors, as amended.
(11) Computation of earnings per common share.
(12) Computation of ratio of earnings to fixed
charges.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
March 31, 1994.
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.
SPRINT CORPORATION
(Registrant)
By /s/ John P. Meyer
John P. Meyer
Senior Vice President --
Controller
Principal Accounting
Officer
Dated: May 13, 1994
EXHIBIT INDEX
EXHIBIT
NUMBER
(10) Material Agreements - Executive Compensation Plans and
Arrangements:
(a) Long-Term Incentive Program, as amended.
(b) Retirement Plan for Directors, as amended.
(11) Computation of Earnings Per Share
(12) Computation of Ratio of Earnings to Fixed Charges
Exhibit 10(a)
THE SPRINT LONG-TERM STOCK INCENTIVE PROGRAM
Section 1. Purpose. The purposes of the Sprint Long-
Term Stock Incentive Program (the "Plan") are to encourage
directors of Sprint Corporation (the "Company") and officers
and selected key employees of the Company and its Affiliates
to acquire a proprietary and vested interest in the growth
and performance of the Company, to generate an increased
incentive to contribute to the Company's future success and
prosperity, thus enhancing the value of the Company for the
benefit of stockholders, and to enhance the ability of the
Company and its Affiliates to attract and retain individuals
of exceptional talent upon whom, in large measure, the
sustained progress, growth and profitability of the Company
depends.
Section 2. Definitions. As used in the Plan, the
following terms shall have the meanings set forth below:
(a) "Affiliate" shall mean (i) any Person that
directly, or through one or more intermediaries,
controls, or is controlled by, or is under common
control with, the Company or (ii) any entity in which
the Company has a significant equity interest, as
determined by the Committee.
(b) "Award" shall mean any Option, Stock
Appreciation Right, Restricted Stock Award, Performance
Share, Performance Unit, Dividend Equivalent, Other
Stock Unit Award, or any other right, interest, or
option relating to Shares granted pursuant to the
provisions of the Plan.
(c) "Award Agreement" shall mean any written
agreement, contract, or other instrument or document
evidencing any Award granted hereunder and signed by
both the Company and the Participant or by both the
Company and an Outside Director.
(d) "Board" shall mean the Board of Directors of
the Company.
(e) "Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
(f) "Committee" shall mean the Organization and
Compensation Committee of the Board, composed of not
less than three directors each of whom is a
Disinterested Person.
(g) "Company" shall mean Sprint Corporation.
(h) "Disinterested Person" shall have the meaning
set forth in Rule 16b-3(d)(3) promulgated by the
Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, or any successor
definition adopted by the Commission.
(i) "Dividend Equivalent" shall mean any right
granted pursuant to Section 14(h) hereof.
(j) "Employee" shall mean any salaried employee
of the Company or of any Affiliate.
(k) "Fair Market Value" shall mean, with respect
to any property, the market value of such property
determined by such methods or procedures as shall be
established from time to time by the Committee.
(l) "Incentive Stock Option" shall mean an Option
granted under Section 6 hereof that is intended to meet
the requirements of Section 422A of the Code or any
successor provision thereto.
(m) "Nonstatutory Stock Option" shall mean an
Option granted to a Participant under Section 6 hereof,
and an Option granted to an Outside Director pursuant
to Section 11 hereof, that is not intended to be an
Incentive Stock Option.
(n) "Option" shall mean any right granted to a
Participant under the Plan allowing such Participant to
purchase Shares at such price or prices and during such
period or periods as the Committee shall determine.
"Option" shall also mean the right granted to an
Outside Director under Section 11 hereof allowing such
Outside Director to purchase shares of the common stock
of the Company on the terms set forth in Section 11.
(o) "Other Stock Unit Award" shall mean any right
granted to a Participant by the Committee pursuant to
Section 10 hereof.
(p) "Outside Director" shall mean a member of the
Board who is not an Employee of the Company or of any
Affiliate.
(q) "Participant" shall mean an Employee who is
selected by the Committee to receive an Award under the
Plan.
(r) "Performance Award" shall mean any Award of
Performance Shares or Performance Units pursuant to
Section 9 hereof.
(s) "Performance Period" shall mean that period
established by the Committee at the time any
Performance Award is granted or at any time thereafter
during which any performance goals specified by the
Committee with respect to such Award are to be
measured.
(t) "Performance Share" shall mean any grant
pursuant to Section 9 hereof of a unit valued by
reference to a designated number of Shares, which value
may be paid to the Participant by delivery of such
property as the Committee shall determine, including,
without limitation, cash, Shares, or any combination
thereof, upon achievement of such performance goals
during the Performance Period as the Committee shall
establish at the time of such grant or thereafter.
(u) "Performance Unit" shall mean any grant
pursuant to Section 9 hereof of a unit valued by
reference to a designated amount of property other than
Shares, which value may be paid to the Participant by
delivery of such property as the Committee shall
determine, including, without limitation, cash, Shares,
or any combination thereof, upon achievement of such
performance goals during the Performance Period as the
Committee shall establish at the time of such grant or
thereafter.
(v) "Person" shall mean any individual,
corporation, partnership, association, joint-stock
company, trust, unincorporated organization, or
government or political subdivision thereof.
(w) "Restricted Stock" shall mean any Share
issued with the restriction that the holder may not
sell, transfer, pledge, or assign such Share and with
such other restrictions as the Committee, in its sole
discretion, may impose (including, without limitation,
any restriction on the right to vote such Share, and
the right to receive any cash dividends), which
restrictions may lapse separately or in combination at
such time or times, in installments or otherwise, as
the Committee may deem appropriate.
(x) "Restricted Stock Award" shall mean an award
of Restricted Stock under Section 8 hereof.
(y) "Senior Officer" shall mean any employee of
the Company holding the office of Vice President or
higher.
(z) "Shares" shall mean shares of the common
stock of the Company, $2.50 par value, and such other
securities of the Company as the Committee may from
time to time determine.
(aa) "Stock Appreciation Right" shall mean any
right granted to a Participant pursuant to Section 7
hereof to receive, upon exercise by the Participant,
the excess of (i) the Fair Market Value of one Share on
the date of exercise or, if the Committee shall so
determine in the case of any such right other than one
related to any Incentive Stock Option, at any time
during a specified period before the date of exercise
over (ii) the grant price of the right as specified by
the Committee, in its sole discretion, on the date of
grant, which shall not be less than the Fair Market
Value of one Share on such date. Any payment by the
Company in respect of such right may be made in cash,
Shares, other property, or any combination thereof, as
the Committee, in its sole discretion, shall determine.
(bb) "Stockholder Meeting" shall mean the annual
meeting of stockholders of the Company in each year.
Section 3. Administration. The Plan shall be
administered by the Committee. The Committee shall have
full power and authority, subject to such orders or
resolutions not inconsistent with the provisions of the Plan
as may from time to time be adopted by the Board, to: (i)
select the Employees of the Company and its Affiliates to
whom Awards may from time to time be granted hereunder; (ii)
determine the type or types of Award to be granted to each
Participant hereunder; (iii) determine the number of Shares
to be covered by each Award granted hereunder;
provided,however, that Shares subject to Options and Stock
Appreciation Rights granted to any individual employee
during any calendar year shall not exceed a total of 500,000
Shares; (iv) determine the terms and conditions, not
inconsistent with the provisions of the Plan, of any Award
granted hereunder; (v) determine whether, to what extent and
under what circumstances Awards may be settled in cash,
Shares or other property or canceled or suspended; (vi)
determine whether, to what extent and under what
circumstances cash, Shares and other property and other
amounts payable with respect to an Award under this Plan
shall be deferred either automatically or at the election of
the Participant; (vii) interpret and administer the Plan and
any instrument or agreement entered into under the Plan;
(viii) establish such rules and regulations and appoint such
agents as it shall deem appropriate for the proper
administration of the Plan; and (ix) make any other
determination and take any other action that the Committee
deems necessary or desirable for administration of the Plan.
Decisions of the Committee shall be final, conclusive and
binding upon all persons, including the Company, any
Participant, any stockholder, and any employee of the
Company or of any Affiliate. Notwithstanding the above, the
Committee shall not have any discretion with respect to the
Options granted to Outside Directors pursuant to Section 11
hereof. A majority of the members of the Committee may
determine its actions and fix the time and place of its
meetings.
Section 4. Shares Subject to the Plan.
(a) Subject to adjustment as provided in Section
4(b), the total number of Shares available for grant
under the Plan in each calendar year shall be three-
fifths of one percent (0.6%) of the total outstanding
Shares as of the first day of such year for which the
Plan is in effect; provided that such number shall be
increased in any year by the number of Shares available
for grant hereunder in previous years but not covered
by Awards granted hereunder in such years; and provided
further, that no more than four million (4,000,000)<F1>
Shares shall be cumulatively available for the grant of
Incentive Stock Options under the Plan. In addition,
any Shares issued by the Company through the assumption
or substitution of outstanding grants from an acquired
company shall not reduce the shares available for
grants under the Plan. Any Shares issued hereunder may
consist, in whole or in part, of authorized and
unissued shares or treasury shares. If any Shares
subject to any Award granted hereunder are forfeited or
such Award otherwise terminates without the issuance of
such Shares or of other consideration in lieu of such
Shares, the Shares subject to such Award, to the extent
of any such forfeiture or termination, shall again be
available for grant under the Plan.
(b) In the event of any merger, reorganization,
consolidation, recapitalization, stock dividend, or
other change in corporate structure affecting the
Shares, such adjustment shall be made in the aggregate
number and class of Shares which may be delivered under
the Plan, in the number, class and option price of
Shares subject to outstanding Options granted under the
Plan, and in the value of, or number or class of Shares
subject to, Awards granted under the Plan as may be
determined to be appropriate by the Committee, in its
sole discretion, provided that the number of Shares
subject to any Award shall always be a whole number,
and provided further, that the number and price of
shares subject to outstanding Options granted to
Outside Directors pursuant to Section 11 hereof and the
number of shares subject to future Options to be
granted pursuant to Section 11 shall be subject to
adjustment only as set forth in Section 11.
Section 5. Eligibility. Any Employee (excluding any
member of the Committee) shall be eligible to be selected as
a Participant.
Section 6. Stock Options. Options may be granted
hereunder to Participants either alone or in addition to
other Awards granted under the Plan. Any Option granted to
a Participant under the Plan shall be evidenced by an Award
Agreement in such form as the Committee may from time to
time approve. Any such Option shall be subject to the
following terms and conditions and to such additional terms
and conditions, not inconsistent with the provisions of the
Plan, as the Committee shall deem desirable:
(a) Option Price. The purchase price per Share
purchasable under an Option shall be determined by the
Committee in its sole discretion; provided that such
purchase price shall not be less than the Fair Market
Value of the Share on the date of the grant of the
Option.
(b) Option Period. The term of each Option shall
be fixed by the Committee in its sole discretion;
provided that no Incentive Stock Option shall be
exercisable after the expiration of ten years from the
date the Option is granted.
(c) Exercisability. Options shall be exercisable
at such time or times as determined by the Committee at
or subsequent to grant. Unless otherwise determined by
the Committee at or subsequent to grant, no Incentive
Stock Option shall be exercisable during the year
ending on the day before the first anniversary date of
the granting of the Incentive Stock Option.
(d) Method of Exercise. Subject to the other
provisions of the Plan and any applicable Award
Agreement, any Option may be exercised by the
Participant in whole or in part at such time or times,
and the Participant may make payment of the option
price in such form or forms, including, without
limitation, payment by delivery of cash, Shares or
other consideration (including, where permitted by law
and the Committee, Awards) having a Fair Market Value
on the exercise date equal to the total option price,
or by any combination of cash, Shares and other
consideration as the Committee may specify in the
applicable Award Agreement.
(e) Incentive Stock Options. In accordance with
rules and procedures established by the Committee, the
aggregate Fair Market Value (determined as of the time
of grant) of the Shares with respect to which Incentive
Stock Options held by any Participant which are
exercisable for the first time by such Participant
during any calendar year under the Plan (and under any
other benefit plans of the Company or of any parent or
subsidiary corporation of the Company) shall not exceed
$100,000 or, if different, the maximum limitation in
effect at the time of grant under Section 422A of the
Code, or any successor provision, and any regulations
promulgated thereunder. The terms of any Incentive
Stock Option granted hereunder shall comply in all
respects with the provisions of Section 422A of the
Code, or any successor provision, and any regulations
promulgated thereunder.
(f) Form of Settlement. In its sole discretion,
the Committee may provide, at the time of grant, that
the shares to be issued upon an Option's exercise shall
be in the form of Restricted Stock or other similar
securities, or may reserve the right so to provide
after the time of grant.
Section 7. Stock Appreciation Rights. Stock
Appreciation Rights may be granted hereunder to Participants
either alone or in addition to other Awards granted under
the Plan and may, but need not, relate to a specific Option
granted under Section 6. The provisions of Stock
Appreciation Rights need not be the same with respect to
each recipient. Any Stock Appreciation Right related to a
Nonstatutory Stock Option may be granted at the same time
such Option is granted or at any time thereafter before
exercise or expiration of such Option. Any Stock
Appreciation Right related to an Incentive Stock Option must
be granted at the same time such Option is granted. In the
case of any Stock Appreciation Right related to any Option,
the Stock Appreciation Right or applicable portion thereof
shall terminate and no longer be exercisable upon the
termination or exercise of the related Option, except that a
Stock Appreciation Right granted with respect to less than
the full number of Shares covered by a related Option shall
not be reduced until the exercise or termination of the
related Option exceeds the number of shares not covered by
the Stock Appreciation Right. Any Option related to any
Stock Appreciation Right shall no longer be exercisable to
the extent the related Stock Appreciation Right has been
exercised. The Committee may impose such conditions or
restrictions on the exercise of any Stock Appreciation Right
as it shall deem appropriate.
Section 8. Restricted Stock.
(a) Issuance. Restricted Stock Awards may be
issued hereunder to Participants, for no cash
consideration or for such minimum consideration as may
be required by applicable law, either alone or in
addition to other Awards granted under the Plan. The
provisions of Restricted Stock Awards need not be the
same with respect to each recipient.
(b) Registration. Any Restricted Stock issued
hereunder may be evidenced in such manner as the
Committee in its sole discretion shall deem
appropriate, including, without limitation, book-entry
registration or issuance of a stock certificate or
certificates. In the event any stock certificate is
issued in respect of shares of Restricted Stock awarded
under the Plan, such certificate shall be registered in
the name of the Participant, and shall bear an
appropriate legend referring to the terms, conditions,
and restrictions applicable to such Award.
(c) Forfeiture. Except as otherwise determined
by the Committee at the time of grant, upon termination
of employment for any reason during the restriction
period, all shares of Restricted Stock still subject to
restriction shall be forfeited by the Participant and
reacquired by the Company; provided that in the event
of a Participant's retirement, permanent disability,
other termination of employment or death, or in cases
of special circumstances, the Committee may, in its
sole discretion, when it finds that a waiver would be
in the best interests of the Company, waive in whole or
in part any or all remaining restrictions with respect
to such Participant's shares of Restricted Stock.
Unrestricted Shares, evidenced in such manner as the
Committee shall deem appropriate, shall be issued to
the grantee promptly after the period of forfeiture, as
determined or modified by the Committee.
Section 9. Performance Awards. Performance Awards may
be issued hereunder to Participants, for no cash
consideration or for such minimum consideration as may be
required by applicable law, either alone or in addition to
other Awards granted under the Plan. The performance
criteria to be achieved during any Performance Period and
the length of the Performance Period shall be determined by
the Committee upon the grant of each Performance Award.
Except as provided in Section 12, Performance Awards will be
paid only after the end of the relevant Performance Period.
Performance Awards may be paid in cash, Shares, other
property or any combination thereof, in the sole discretion
of the Committee at the time of payment. The performance
levels to be achieved for each Performance Period and the
amount of the Award to be distributed shall be conclusively
determined by the Committee. Performance Awards may be paid
in a lump sum or in installments following the close of the
Performance Period or, in accordance with procedures
established by the Committee, on a deferred basis.
Section 10. Other Stock Unit Awards.
(a) Stock and Administration. Other Awards of
Shares and other Awards that are valued in whole or in
part by reference to, or are otherwise based on, Shares
or other property ("Other Stock Unit Awards") may be
granted hereunder to Participants, either alone or in
addition to other Awards granted under the Plan. Other
Stock Unit Awards may be paid in Shares, cash or any
other form of property as the Committee shall
determine. Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to
determine the Employees of the Company and its
Affiliates to whom and the time or times at which such
Awards shall be made, the number of Shares to be
granted pursuant to such Awards, and all other
conditions of the Awards. The provisions of Other
Stock Unit Awards need not be the same with respect to
each recipient.
(b) Terms and Conditions. Subject to the
provisions of this Plan and any applicable Award
Agreement, Shares subject to Awards made under this
Section 10 may not be sold, assigned, transferred,
pledged or otherwise encumbered prior to the date on
which the Shares are issued, or, if later, the date on
which any applicable restriction, performance or
deferral period lapses. Shares granted under this
Section 10 may be issued for no cash consideration or
for such minimum consideration as may be required by
applicable law; Shares purchased pursuant to a purchase
right awarded under this Section 10 shall be purchased
for such consideration as the Committee shall in its
sole discretion determine, which shall not be less than
the Fair Market Value of such Shares as of the date
such purchase right is awarded.
Section 11. Outside Directors' Options.
(a) Grant of Options. On the date of the 1989
Stockholders Meeting, each Outside Director shall
automatically be granted an Option to purchase 5,000<F2>
shares of the common stock of the Company, $2.50 par
value; on the date of the 1990 Stockholders Meeting,
each Outside Director who became an Outside Director
after the 1989 Stockholders Meeting shall automatically
be granted an Option to purchase 8,000<F3> shares of the
common stock of the Company; on the date of the 1991
Stockholders Meeting, each Outside Director who became
an Outside Director after the 1990 Stockholders Meeting
shall automatically be granted an Option to purchase
6,000<F4> shares of the common stock of the Company; on
the date of the 1992 Stockholders Meeting, each Outside
Director who became an Outside Director after the 1991
Stockholders Meeting shall automatically be granted an
Option to purchase 4,000<F5> shares of the common stock of
the Company; on the date of the 1993 Stockholders
Meeting, each Outside Director who became an Outside
Director after the 1992 Stockholders Meeting shall
automatically be granted an Option to purchase 2,000<F6>
shares of the common stock of the Company; and on the
date of each Stockholders Meeting after the 1993
Stockholders Meeting, each Outside Director shall
automatically be granted an Option to purchase 2,000<F7>
shares of the common stock of the Company. All such
options shall be Nonstatutory Stock Options. The price
at which each share of common stock covered by such
Options may be purchased shall be one hundred percent
(100%) of the fair market value of the stock on the
date the Option is granted. Fair market value for
purposes of this Section 11 shall be deemed to be the
average of the high and low prices of the common stock
for composite transactions as published by major
newspapers for the date the Option is granted or, if no
sale of the common stock shall have been made on that
day, the next preceding day on which there was a sale
of the common stock.
(b) Exercise of Options. Except as set forth in
this Section 11, 25% of the total number of the shares
subject to an Option granted to an Outside Director
shall become exercisable on December 31 of the year in
which the option is granted and 25% on December 31 of
each of the three succeeding years. The right to
purchase shares with respect to shares which have
become exercisable shall be cumulative during the term
of the Option. Any Option that has been outstanding
for more than one (1) year shall immediately become
exercisable in the event of a Change in Control, as
hereinafter defined. The Option may be exercised by
the Outside Director during the period that the Outside
Director remains a member of the Board and for a period
of five (5) years following retirement, provided that
only those Options exercisable at the date of the
Outside Director's retirement may be exercised during
the period following retirement and, provided further,
that in no event shall the Option be exercisable more
than ten (10) years after the date of grant.
In the event of the death of an Outside Director,
the Option shall be exercisable only within the twelve
(12) months next succeeding the date of death, and then
only (i) by the executor or administrator of the
Outside Director's estate or by the person or persons
to whom the Outside Director's rights under the Option
shall pass by the Outside Director's will or the laws
of descent and distribution, and (ii) if and to the
extent that the Outside Director was entitled to
exercise the Option at the date of the Outside
Director's death, provided that in no event shall the
Option be exercisable more than ten (10) years after
the date of grant.
(c) Payment. An Option granted to an Outside
Director shall be exercisable only upon payment to the
Company of the full purchase price of the shares with
respect to which the Option is being exercised.
Payment for the shares shall be in United States
dollars, payable in cash or by check.
(d) Adjustment of Options. In case there shall be
a merger, reorganization, consolidation,
recapitalization, stock dividend or other change in
corporate structure such that the shares of common
stock of the Company are changed into or become
exchangeable for a larger or smaller number of shares,
thereafter the number of shares subject to outstanding
Options and the number of shares subject to Options to
be granted to Outside Directors pursuant to the
provisions of this Section 11 shall be increased or
decreased, as the case may be, in direct proportion to
the increase or decrease in the number of shares of
common stock of the Company by reason of such change in
corporate structure, provided that the number of shares
shall always be a whole number, and the purchase price
per share of any outstanding Options shall, in the case
of an increase in the number of shares, be
proportionately reduced, and in the case of a decrease
in the number of shares, shall be proportionately
increased.
Section 12. Change in Control.
(a) In order to maintain the Participants' rights
in the event of any Change in Control of the Company,
as hereinafter defined, the Committee, as constituted
before such Change in Control, may, in its sole
discretion, as to any Award (except Options granted
pursuant to Section 11), either at the time an Award is
made hereunder or any time thereafter, take any one or
more of the following actions: (i) provide for the
acceleration of any time periods relating to the
exercise or realization of any such Award so that such
Award may be exercised or realized in full on or before
a date fixed by the Committee; (ii) provide for the
purchase of any such Award, upon the Participant's
request, for an amount of cash equal to the amount that
could have been attained upon the exercise of such
Award or realization of the Participant's rights had
such Award been currently exercisable or payable; (iii)
make such adjustment to any such Award then outstanding
as the Committee deems appropriate to reflect such
Change in Control; or (iv) cause any such Award then
outstanding to be assumed, or new rights substituted
therefor, by the acquiring or surviving corporation
after such Change in Control. The Committee may, in
its discretion, include such further provisions and
limitations in any agreement documenting such Awards as
it may deem equitable and in the best interests of the
Company.
(b) A "Change in Control" shall be deemed to have
occurred if (i) any Person other than a trustee or
other fiduciary holding securities under an employee
benefit plan of the Company, and other than the Company
or a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company,
is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934),
directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power
of the Company's then outstanding securities; or (ii)
during any period of two consecutive years, individuals
who at the beginning of such period constitute the
Board and any new Director (other than a Director
designated by a person who has entered into an
agreement with the Company to effect a transaction
described in (i) above) whose election by the Board or
nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds (2/3) of
the Directors then still in office who either were
Directors at the beginning of the period or whose
election or nomination for election was previously so
approved, cease for any reason to constitute a majority
thereof.
Section 13. Amendments and Termination. The Board may
amend, alter or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made that would
impair the rights of an optionee or Participant under an
Award theretofore granted, without the optionee's or
Participant's consent, or that without the approval of the
Stockholders would:
(a) except as is provided in Section 4(b) of the
Plan, increase the total number of shares reserved for
the purposes of the Plan;
(b) change the employees or class of employees
eligible to participate in the Plan; or
(c) change in any way the Options provided for in
Section 11 of the Plan.
The Committee may amend the terms of any Award
theretofore granted (except Options granted pursuant to
Section 11 hereof), prospectively or retroactively, but no
such amendment shall impair the rights of any Participant
without his consent. The Committee may also substitute new
Awards for Awards previously granted to Participants,
including without limitation previously granted Options
having higher option prices.
Section 14. General Provisions.
(a) No Award shall be assignable or transferable
by a Participant or an Outside Director otherwise than
by will or by the laws of descent and distribution;
provided that, if so determined by the Committee, a
Participant may, in the manner established by the
Committee, designate a beneficiary to exercise the
rights of the Participant with respect to any Award
upon the death of the Participant. Each Award shall be
exercisable, during the lifetime of the Participant or
the Outside Director, only by the Participant or the
Outside Director or, if permissible under applicable
law, by the guardian or legal representative of the
Participant or Outside Director.
(b) The term of each Award shall be for such
period of months or years from the date of its grant as
may be determined by the Committee; provided that in no
event shall the term of any Incentive Stock Option or
any Stock Appreciation Right related to any Incentive
Stock Option exceed a period of ten (10) years from the
date of its grant.
(c) No Employee or Participant shall have any
claim to be granted any Award under the Plan and there
is no obligation for uniformity of treatment of
Employees or Participants under the Plan.
(d) The prospective recipient of any Award under
the Plan shall not, with respect to such Award, be
deemed to have become a Participant, or to have any
rights with respect to such Award, until and unless
such recipient shall have executed an agreement or
other instrument evidencing the Award and delivered a
fully executed copy thereof to the Company, and
otherwise complied with the then applicable terms and
conditions.
(e) The Committee shall be authorized to make
adjustments in performance award criteria or in the
terms and conditions of other Awards in recognition of
unusual or nonrecurring events affecting the Company or
its financial statements or changes in applicable laws,
regulations or accounting principles. The Committee
may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Award in
the manner and to the extent it shall deem desirable to
carry it into effect. In the event the Company shall
assume outstanding employee benefit awards or the right
or obligation to make future such awards in connection
with the acquisition of another corporation or business
entity, the Committee may, in its discretion, make such
adjustments in the terms of Awards under the Plan as it
shall deem appropriate. Notwithstanding the above, the
Committee shall not have the right to make any
adjustments in the terms or conditions of Options
granted pursuant to Section 11.
(f) The Committee shall have full power and
authority to determine whether, to what extent and
under what circumstances any Award (other than an
Option granted pursuant to Section 11) shall be
canceled or suspended. In particular, but without
limitation, all outstanding Awards to any Participant
shall be canceled if the Participant, without the
consent of the Committee, while employed by the Company
or after termination of such employment, becomes
associated with, employed by, renders services to, or
owns any interest in (other than any nonsubstantial
interest, as determined by the Committee), any business
that is in competition with the Company or with any
business in which the Company has a substantial
interest as determined by the Committee or any one or
more Senior Officers or committee of Senior Officers to
whom the authority to make such determination is
delegated by the Committee.
(g) All certificates for Shares delivered under
the Plan pursuant to any Award shall be subject to such
stock-transfer orders and other restrictions as the
Committee may deem advisable under the rules,
regulations, and other requirements of the Securities
and Exchange Commission, any stock exchange upon which
the Shares are then listed, and any applicable Federal
or state securities law, and the Committee may cause a
legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
(h) Subject to the provisions of this Plan and
any Award Agreement, the recipient of an Award
(including, without limitation, any deferred Award, but
excluding Options granted pursuant to Section 11) may,
if so determined by the Committee, be entitled to
receive, currently or on a deferred basis, interest or
dividends, or interest or dividend equivalents, with
respect to the number of shares covered by the Award,
as determined by the Committee, in its sole discretion,
and the Committee may provide that such amounts (if
any) shall be deemed to have been reinvested in
additional Shares or otherwise reinvested.
(i) Except as otherwise required in any
applicable Award Agreement or by the terms of the Plan,
recipients of Awards under the Plan shall not be
required to make any payment or provide consideration
other than the rendering of services.
(j) The Committee may delegate to one or more
Senior Officers or a committee of Senior Officers the
right to grant Awards to Employees who are not officers
or directors of the Company and to cancel or suspend
Awards to Employees who are not officers or directors
of the Company.
(k) The Company shall be authorized to withhold
from any Award granted or payment due under the Plan
the amount of withholding taxes due with respect to an
Award or payment hereunder and to take such other
action as may be necessary in the opinion of the
Company to satisfy all obligations for the payment of
such taxes. The Company shall also be authorized to
accept the delivery of shares by a Participant in
payment for the withholding of federal, state and local
taxes (but not for social security and medicare taxes)
up to the Participant's marginal tax rates.
(l) Nothing contained in this Plan shall prevent
the Board of Directors from adopting other or
additional compensation arrangements, subject to
stockholder approval if such approval is required; and
such arrangements may be either generally applicable or
applicable only in specific cases.
(m) The validity, construction, and effect of the
Plan and any rules and regulations relating to the Plan
shall be determined in accordance with the laws of the
State of Kansas and applicable Federal law.
(n) If any provision of this Plan is or becomes
or is deemed invalid, illegal or unenforceable in any
jurisdiction, or would disqualify the Plan or any Award
under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to
conform to applicable laws or if it cannot be construed
or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan,
it shall be stricken and the remainder of the Plan
shall remain in full force and effect.
Section 15. Effective Date of Plan. The Plan shall be
effective as of April 18, 1989.
Section 16. Term of Plan. No Award shall be granted
pursuant to the Plan after 10 years from the date of
stockholder approval, but any Award theretofore granted may
extend beyond that date.
_______________________________
[FN]
<F1>The initial number of shares authorized was doubled due to
the December, 1989 two-for-one stock split.
<F2>The number of shares under the options was increased to
10,000 due to the December, 1989 two-for-one stock split.
<F3>The initial number of shares authorized was doubled due to
the December, 1989 two-for-one stock split.
<F4>The initial number of shares authorized was doubled due to
the December, 1989 two-for-one stock split.
<F5>The initial number of shares authorized was doubled due to
the December, 1989 two-for-one stock split.
<F6>The initial number of shares authorized was doubled due to
the December, 1989 two-for-one stock split.
<F7>The initial number of shares authorized was doubled due to
the December, 1989 two-for-one stock split.
Exhibit 10(b)
SPRINT CORPORATION
RETIREMENT PLAN FOR DIRECTORS
1. Name and Purpose
The name of the Plan is the Sprint Corporation Retirement
Plan for Directors ("Plan"). The purpose of the Plan is to
provide any Director of Sprint who is not concurrently an
employee of Sprint or any subsidiary of Sprint with continuing
compensation for services rendered as a retired Director and
thereby assist Sprint in the realization of its long-term
strategies and objectives.
It is intended that a person retired under this Plan will be
available to provide advice and counsel from time to time on such
matters as the Chairman of the Board shall request.
2. Definitions
"Sprint" means Sprint Corporation, a Kansas Corporation, or
any successor to a substantial portion of its business.
"Credited Service" means all whole years of service as an
Eligible Director of Sprint, including service as an Eligible
Director prior to the Effective Date of the Plan and service as a
Director of Centel Corporation prior to March 9, 1994. Service
while a Director but not an Eligible Director will not be deemed
to be service for any purpose under this Plan. Service as a
Director of a subsidiary of Sprint will not be deemed to be
service for any purpose under this Plan, except for service as a
Director of Centel Corporation prior to the merger between Sprint
and Centel Corporation effective March 9, 1993.
"Director" means any member of the Board of Directors of
Sprint.
"Eligible Director" means any Director who is not
concurrently employed by Sprint or any subsidiary of Sprint.
"Effective Date" means March 1, 1982.
"Participant" means any Eligible Director whose service has
terminated and who has otherwise qualified to commence to receive
a benefit under the terms of this Plan.
"Plan" means the Sprint Corporation Retirement Plan for
Directors.
"Plan Administrator" means the General Counsel of Sprint or
any other officer designated by the Chairman of the Board.
"Retainer" means the annual fee established by the Board of
Directors of Sprint and paid monthly for service as a Director,
but excludes any meeting fee, expense reimbursement, or any other
compensation received by a Director unless such compensation is
specifically included as a part of the Retainer by action of the
Board.
"Termination of Service" means cessation of service as a
Director.
3. Eligibility for Benefits
Each Director who has accumulated 5 or more years of
Credited Service shall be entitled to a benefit under the Plan
upon his or her termination of service as a Director.
4. Plan Benefits
The monthly benefit payable under the Plan to any
Participant whose Termination of Service occurs prior to April 1,
1989, shall be equal to one-twelfth of one-half of the Retainer
in effect for Eligible Directors. Any increase in the Retainer
subsequent to Termination of Service of any such Participant
shall apply in the determination of prospective monthly payments
for such Participant. The monthly benefit payable under the Plan
to any Participant whose Termination of Service occurs on or
after April 1, 1989, shall be equal to one-twelfth of the
Retainer in effect for Eligible Directors at the time Termination
of Service of such Participant occurs. There shall be no
adjustment in the benefit payable to any Participant whose
Termination of Service occurs on or after April 1, 1989 if the
Retainer is changed after his or her Termination of Service. The
benefit shall be paid to the Participant on or before the last
day of each month commencing with the month following his or her
Termination of Service. No benefit shall be paid hereunder to
any Director terminated for cause.
5. Duration of Benefits
The monthly payments provided by this Plan shall continue
until the first to occur of: (a) the number of monthly
payments made equals the number of months of service by the
Participant as an Eligible Director; or (b) 120 monthly
payments have been made; or (c) the last day of the month
following the death of the Participant. No benefit shall be paid
under this Plan in any month in which a Participant is employed
by or serving as a Director of any company if such service
constitutes or would in the opinion of the General Counsel of
Sprint be deemed to constitute a conflict of interest or other
legal impediment of such a nature as would preclude such
Participant from concurrently serving as a Director of Sprint.
6. Suspension of Benefits
If a Participant returns to service as a Director or becomes
an employee of Sprint or is or becomes a Director or employee of
any subsidiary of Sprint, payment of benefits under this Plan
shall be immediately suspended and shall commence again on the
last day of the month following the month in which such service
terminates. Following such termination, the amount of each
monthly payment for a Participant whose Termination of Service
occurred prior to April 1, 1989, shall be equal to one-twelfth of
one-half of the Retainer in effect for Eligible Directors at the
time payments under this Plan are resumed, and the amount of each
monthly payment for a Participant whose Termination of Service
occurred on or after April 1, 1989, shall be equal to one-twelfth
of the Retainer at the time such Participant's most recent
Termination of Service occurred.
Monthly payments shall continue until the first to occur of
(a) the number of monthly payments made, including payments
prior to the Participant's return to service, equals the number
of months of service by the individual as an Eligible Director:
or (b) 120 such monthly payments, including payments prior to
the Participant's return to service have been made; or (c) the
last day of the month following the death of the Participant.
7. Funding
No promise under this Plan shall be secured by any specific
asset of Sprint, nor shall any asset of Sprint be designated as
attributable to or be allocated to the satisfaction of any such
promise. Each benefit payment shall be made from Sprint's
general revenues.
8. Administration
The Plan Administrator shall have full power and authority
to administer the Plan, including the power to promulgate rules
of Plan administration, the power to settle any disputes as to
rights or benefits arising from the Plan, the power to appoint
agents and delegate his duties, and the power to make such
decisions or take such action as the Plan Administrator, in his
sole discretion, deems necessary or advisable to aid in the
proper administration of the Plan.
9. Alienation of Benefits
No benefit under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt thereat shall be void.
No such benefit payment shall, prior to receipt thereof by any
Participant, be in any manner liable for or subject to such
Participant's debt, alimony, child support, contract, liability,
engagement, or tort.
10. Withholding Taxes
The Company shall deduct from the amount of any payment
hereunder any tax required to be withheld by applicable law.
11. Governing Law
This Plan shall be governed and construed by the laws of the
State of Kansas.
12. Amendment, Modification, Or Termination Of The Plan
The Board of Directors may, at any time, terminate or, in
any respect, amend or modify the Plan, but such action shall not
affect the rights of any Participant then receiving benefits
under the Plan.
EXHIBIT (11)
SPRINT CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(In Millions, Except Per Share Data)
Three Months
Ended
March 31,
1994 1993
(Unaudited)
PRIMARY EARNINGS PER SHARE
Income (loss) from continuing operations $ 227.4 $(11.3)
Preferred stock dividends (0.7) (0.6)
226.7 (11.9)
Discontinued operations, net -- (12.3)
Extraordinary losses on early extinguishments
of debt, net -- (5.2)
Cumulative effect of changes in accounting
principles, net -- (384.2)
Earnings (loss) applicable to common stock $ 226.7 $(413.6)
Weighted average number of common shares (1) 346.7 341.6
Primary earnings (loss) per share
Continuing operations $ 0.65 $ (0.03)
Discontinued operations -- (0.04)
Extraordinary item -- (0.02)
Cumulative effect of changes in accounting
principles -- (1.12)
Total $ 0.65 $ (1.21)
FULLY DILUTED EARNINGS PER SHARE
Income (loss) from continuing operations, net of
preferred stock dividends $ 226.7 $(11.9)
Convertible preferred stock dividends 0.1 0.2
226.8 (11.7)
Discontinued operations, net -- (12.3)
Extraordinary losses on early extinguishments
of debt, net -- (5.2)
Cumulative effect of changes in accounting
principles, net -- (384.2)
Earnings (loss) as adjusted for purposes of
computing fully diluted earnings per share $ 226.8 $(413.4)
Weighted average number of common shares 346.7 341.6
Additional dilution for common stock equivalents
and dilutive securities (2) 1.2 --
Total 347.9 341.6
Fully diluted earnings (loss) per share
Continuing operations $ 0.65 $(0.03)
Discontinued operations -- (0.04)
Extraordinary item -- (0.02)
Cumulative effect of changes in accounting
principles -- (1.12)
Total $ 0.65 $(1.21)
(1) Weighted average number of common shares have been
adjusted for dilutive common stock equivalents using the
treasury stock method.
(2) During 1993, the additional dilution for common stock
equivalents and dilutive securities is not included for the
computation of fully diluted earnings per share as impact is
anti-dilutive.
EXHIBIT (12)
SPRINT CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
Three Months Ended
March 31,
1994 1993
(In Millions)
Earnings
Income (loss) from continuing
operations $ 227.4 $ (11.3)
Capitalized interest (1.0) (2.6)
Income tax provision 129.0 1.8
Subtotal 355.4 (12.1)
Fixed charges
Interest charges 102.1 120.5
Interest factor of operating rents 28.1 29.0
Pre-tax cost of preferred stock
dividends of subsidiaries 0.2 0.5
Total fixed charges 130.4 150.0
Earnings, as adjusted $ 485.8 $ 137.9
Ratio of earnings to fixed charges 3.73 0.92 (1)
(1) Earnings as computed for the ratio of earnings to fixed
charges were inadequate to cover fixed charges for the three
months ended March 31, 1993. The amount of the coverage
deficiency was $12.1 million. Earnings as computed for the
ratio of earnings to fixed charges includes the nonrecurring
merger, integration and restructuring costs of $248.0 million
recorded during the first quarter of 1993. In the absence of the
nonrecurring costs, the ratio of earnings to fixed charges
would have been 2.57.
Note: The above ratios have been computed by dividing fixed
charges into the sum of (a) income (loss) from continuing
operations less capitalized interest included in income, (b)
income taxes, and (c) fixed charges. Fixed charges consist
of interest on all indebtedness (including amortization of
debt issuance expenses), the interest component of operating
rents and the pre-tax cost of preferred stock dividends of
subsidiaries.
