UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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 (IRS Employer
incorporation or organization) Identification No.)
P.O. Box 11315, Kansas City, Missouri 64112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (913) 624-3000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ----------------------------------------- ------------------------------
Preferred Stock, without par value
First series, $7.50 stated value New York Stock Exchange
Second series, $6.25 stated value New York Stock Exchange
Common stock, $2.50 par value, and Rights New York Stock Exchange
(shares outstanding at March 1, 1996, Chicago Stock Exchange
350,267,424) Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of voting stock held by non-affiliates at March 1, 1996
is $14,896,581,249.
Documents incorporated by reference.
Registrant's definitive proxy statement filed pursuant to Regulation 14A
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934 is incorporated by reference in Part III hereof.
<PAGE>
SPRINT CORPORATION
SECURITIES AND EXCHANGE COMMISSION
ANNUAL REPORT ON FORM 10-K
Part I
Item 1. Business
THE CORPORATION
Sprint Corporation (Sprint), incorporated in 1938 under the laws of Kansas, is
primarily a holding company. Sprint's principal subsidiaries provide domestic
and international long distance and local exchange telecommunications services.
Other subsidiaries are engaged in the wholesale distribution of
telecommunications products and the publishing and marketing of white and yellow
page telephone directories. Beginning in January 1996, Sprint will operate a
small telephone refurbishing business in the state of Kansas. In March 1996,
Sprint spun-off its cellular division to holders of Sprint's common stock.
Sprint is a 40 percent partner in Sprint Spectrum LP, a partnership with
Tele-Communications Inc. (TCI), Comcast Corporation (Comcast) and Cox
Communications, Inc. (Cox) to provide wireless personal communications services
(PCS) on a broad geographic basis within the United States.
Sprint is also a partner in Global One, a joint venture with France Telecom
(FT) and Deutsche Telekom AG (DT) to provide seamless global telecommunications
services to business, consumer and carrier markets worldwide. The interests of
DT and FT in the venture are held by their own joint venture, referred to as
Atlas. The operating group serving Europe (excluding Germany and France) is
owned one-third by Sprint and two-thirds by Atlas. The operating group for the
worldwide activities outside the United States and Europe is owned 50 percent by
Sprint and 50 percent by Atlas. Home country markets will be served by DT in
Germany, FT in France and Sprint in the United States.
TELECOMMUNICATIONS LAW
The Telecommunications Act of 1996, which was signed into law in February 1996,
promotes competition in all aspects of telecommunications. In particular, the
new law removes barriers to competition that will enable local and long distance
companies and cable TV companies to enter each others' markets. The regional
Bell Operating Companies (RBOCs) were allowed to provide out-of-region and
incidental long distance service upon enactment. The RBOCs will be allowed to
provide in-region long distance service once they obtain state certification of
compliance with a competitive "checklist" and a Federal Communications
Commission (FCC) ruling that it is in the public interest and that a facilities
based competitor exists in each market (or the failure of potential providers to
request local access). The new law directs the FCC to conclude a large number of
rule-makings in a relatively short period of time, including defining the
requirements of the competitive "checklist"; such rules will significantly
influence the amount and shape of competition in both local and long distance
markets in the future.
The new law eliminates regulatory barriers to entry into local telephone markets
and imposes several obligations upon incumbent local exchange carriers (LECs).
They must allow local resale without unreasonable restrictions, provide number
portability (to the extent technically feasible) and dialing parity, afford
access to rights-of-way, establish reciprocal compensation arrangements,
negotiate interconnection agreements, provide nondiscriminatory access to
unbundled network elements and allow collocation of interconnection equipment by
competitors. The FCC is presently developing regulations to implement these
requirements. Some of Sprint's LECs in rural areas may be exempted from some of
these requirements. Many states, including most of the states in which Sprint's
LECs operate, allow some competitive entry into the intraLATA long-distance and
local service markets. The federal law preempts inconsistent state laws.
1
<PAGE>
The impact of the Act on Sprint is unknown because a number of important
implementation issues (such as the nature and extent of continued subsidies for
local rates) still need to be decided by state or federal regulators. However,
the Act offers opportunities as well as risks. Sprint should benefit from the
opportunity to enter local telephone markets. The new competitive environment
should lead to a reduction in local access fees, the largest single cost in
providing long distance service today. The risk aspect of local competition is
that historical prices and market shares of Sprint's LECs in their current
operating regions (approximately 4 percent of the nation's local phone lines)
are likely to decline.
The removal of the long distance restrictions on the RBOCs is not anticipated to
have an immediate significant adverse impact on Sprint because of the
substantial preconditions that must be met before RBOCs can provide most
in-region long distance services. In addition, Sprint could potentially offset
some losses of long distance customers at the retail level if it were successful
in becoming the underlying carrier for resellers (including the RBOCs) entering
the long distance market.
LONG DISTANCE COMMUNICATIONS SERVICES
Sprint's long distance division is the nation's third largest long distance
telephone company, operating a nationwide all-digital long distance
communications network utilizing state-of-the-art fiber-optic and electronic
technology. The division provides domestic and international long distance
voice, video, and data communications services, and consists principally of
Sprint Communications Company L.P. (the Limited Partnership). The terms under
which the division offers its services to the public are subject to different
levels of state and federal regulation, but rates are not subject to rate-base
regulation except nominally in some states. The division had net operating
revenues of $7.3 billion, $6.8 billion and $6.1 billion in 1995, 1994 and 1993,
respectively.
AT&T dominates the long distance communications market and is expected to
continue to dominate the market for some years into the future. MCI
Communications Corporation (MCI) is the nation's second largest long distance
telephone company. Sprint's long distance division competes with AT&T, MCI and
other telecommunications providers in all segments of the long distance
communications market. Competition is based upon price and pricing plans, the
types of services offered, customer service, and communications quality,
reliability and availability.
As competition has developed in long distance markets in recent years, the FCC
has streamlined regulation of interstate interexchange carriers, including AT&T.
Nondominant competitive long distance carriers (like Sprint) have been subject
to considerably less regulation, because market forces served as a more
effective regulator of prices. As AT&T lost domestic market share, it sought to
be relieved of regulation as well. The FCC ended rate-of-return regulation of
AT&T in 1989, and removed some competitive services from price caps regulation
in 1991. In October 1995, the FCC reclassified AT&T as a nondominant domestic
carrier, in exchange for commitments to protect rates charged to low income, low
volume, and reseller customers. The FCC did not find that the long distance
market was completely competitive and some interstate regulation continues to
apply. AT&T also subsequently sought to be declared a nondominant international
carrier, and that request is pending.
See "Telecommunications Law" for a discussion of the new telecommunications
legislation and its potential impact on the long distance division.
LOCAL COMMUNICATIONS SERVICES
The local division is comprised of regulated LECs which serve approximately 6.7
million access lines in 19 states. In addition to furnishing local exchange
services, the division provides intraLATA toll service and interLATA access by
telephone customers and other carriers to Sprint's local exchange facilities.
2
<PAGE>
The division had net operating revenues of $4.7 billion, $4.4 billion and $4.1
billion in 1995, 1994 and 1993, respectively. Florida and North Carolina were
the only jurisdictions in which 10 percent or more of the division's total 1995
net operating revenues were generated. The following table reflects major
revenue categories as a percentage of the division's total net operating
revenues:
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Local service 39.7% 39.7% 39.4%
Network access 36.1 36.2 37.1
Toll service 10.3 12.0 12.2
Other 13.9 12.1 11.3
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
100.0% 100.0% 100.0%
-- ------------- --- ------------- -- -------------
</TABLE>
AT&T is the division's largest customer for network access services. In 1995,
15.2 percent of the division's net operating revenues was derived from services
provided to AT&T, primarily network access services, compared to 16.6 percent in
1994 and 17.3 percent in 1993. While AT&T is a significant customer, Sprint does
not believe the division's revenues are dependent upon AT&T, as customers'
demand for interLATA long distance telephone service is not tied to any one long
distance carrier. Historically, as the market share of AT&T's long distance
competitors increases, the percent of revenues derived from network access
services provided to AT&T decreases.
The LECs comprising the division are subject to the jurisdiction of the FCC and
the public service commissions of each of the states in which they operate. In
each state in which the commission exercises authority to grant certificates of
public convenience and necessity, the LECs have been granted certificates of
indefinite duration to provide local exchange telephone service in their current
service areas.
Effective January 1, 1991, the FCC adopted a price caps regulatory format for
the RBOCs and the GTE local exchange companies. Other LECs could voluntarily
become subject to price caps regulation. Under price caps, prices for network
access service must be adjusted annually to reflect industry average
productivity gains (as specified by the FCC), inflation and certain allowed cost
changes. Sprint elected to be subject to price caps regulation. The LECs owned
by Centel Corporation did not originally elect price caps, but as a result of
the merger with Sprint, these LECs adopted price caps effective July 1, 1993.
During 1995, the FCC adopted modifications to the price cap plan to reset
productivity elections, change certain rate adjustment methods, address new
service offerings and generally reduce regulatory requirements. Under these
changes, Sprint's LECs elected a productivity factor that allows them to avoid
sharing of interstate access earnings.
See "Telecommunications Law" for a discussion of the new telecommunications
legislation and its potential impact on the local communications division.
PRODUCT DISTRIBUTION AND DIRECTORY PUBLISHING
North Supply Company (North Supply), a wholesale distributor of
telecommunications and security and alarm products, distributes products of more
than 1,200 manufacturers to approximately 9,500 customers. Products range from
basics, such as wire and cable, telephones and repair parts, to complete PBX
systems, transmission systems and security and alarm equipment. North Supply
also provides material management services to several of its affiliates and to
several subsidiaries of the Bell Operating Companies.
The nature of competition in North Supply's markets demands a high level of
customer service to succeed, as a number of competitors, including other
national wholesale distributors, sell the same products and services.
North Supply sells to telephone companies and other users of telecommunications
products, including Sprint's local and long distance divisions, other local and
long distance telephone companies, and companies with large private networks.
Other North Supply customers include original equipment manufacturers,
interconnect companies, security and alarm dealers and local, state and federal
governments. Sales to affiliates represented 39.5 percent of North Supply's
total sales in 1995, 42.4 percent in 1994 and 39.3 percent in 1993. North
Supply's net operating revenues were $854 million, $829 million, and $677
million in 1995, 1994 and 1993, respectively.
3
<PAGE>
Sprint Publishing & Advertising along with Centel Directory Company publish and
market white and yellow page telephone directories in certain of Sprint's local
exchange territories, as well as in the greater metropolitan areas of Milwaukee,
Wisconsin and Chicago, Illinois. The companies publish approximately 325
directories in 20 states with a circulation of 17 million copies. Sprint
Publishing & Advertising's net operating revenues were $294 million, $280
million and $268 million in 1995, 1994 and 1993, respectively. Centel Directory
Company operates through The CenDon Partnership, a general partnership between
Centel Directory Company and The Reuben H. Donnelley Corporation. Revenues of
Sprint Publishing & Advertising and The CenDon Partnership are principally
derived from selling directory advertisements. The companies compete with
publishers of telephone directories and others for advertising revenues.
JOINT VENTURES
In March 1995, Sprint Spectrum achieved a national wireless presence in the
first round of PCS license auctions by the FCC. Sprint Spectrum and its
affiliates won the rights to PCS licenses in 30 major trading areas at a cost of
$2.2 billion. It is Sprint Spectrum`s objective to begin offering PCS in 20 to
25 major metropolitan markets, with a population of approximately 100 million,
by the end of 1996.
Also in March 1995, the four partners agreed that Sprint Spectrum would provide
local telecommunications services on a national basis using the facilities of
the cable partners. Effective as of January 31, 1996, the four partners entered
into a series of agreements amending their approach to providing competitive
local services. Under the revised agreements, local offerings in each market
will be the subject of individual joint ventures to be negotiated between Sprint
and the applicable cable company. However, there can be no assurances that any
such joint ventures will be formed.
On January 31, 1996, Sprint consummated its global joint venture (Global One)
with DT and FT. Sprint contributed to the joint venture certain subsidiaries
which conducted its international telecommunications business and certain assets
of its U.S. subsidiaries used in such business.
ENVIRONMENT
Sprint's environmental compliance and remediation expenditures are primarily
related to the operation of standby power generators for its telecommunications
equipment. The expenditures arise in connection with permits, standards
compliance, or occasional remediation, which are usually associated with
generators, batteries or fuel storage. Certain Sprint subsidiaries have been
designated a potentially responsible party at sites relating to either landfill
contamination or discontinued power generation operations. Sprint's expenditures
relating to environmental compliance and remediation have not been material to
the financial statements or to the operations of Sprint and are not expected to
have any future material effects.
PATENTS, TRADEMARKS AND LICENSES
Sprint and its subsidiaries own numerous patents, patent applications and
trademarks in the U.S. and other countries. Sprint and its subsidiaries are also
licensed under domestic and foreign patents and trademarks owned by others. In
the aggregate, these patents, patent applications, trademarks and licenses are
of material importance to Sprint's business. Generally, Sprint's trademarks and
trademark licenses have no limitation on duration; Sprint's patents and the
patents to which Sprint is licensed range generally in duration from 1 to 17
years.
EMPLOYEE RELATIONS
As of December 31, 1995, Sprint and its subsidiaries had approximately 48,300
employees, of whom approximately 26 percent are represented by unions. During
1995, Sprint and its subsidiaries had no material work stoppages caused by labor
controversies.
4
<PAGE>
INFORMATION AS TO INDUSTRY SEGMENTS
Sprint's net operating revenues from affiliates and non-affiliates, by segment,
for the three years ended December 31, 1995, 1994 and 1993, are as follows (in
millions):
<TABLE>
<CAPTION>
Net Operating Revenues
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
1995 1994 1993
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
<S> <C> <C> <C>
Long Distance Communications Services
Non-affiliates $ 7,238.5 $ 6,763.5 $ 6,096.5
Affiliates 38.9 41.6 42.7
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
7,277.4 6,805.1 6,139.2
Local Communications Services
Non-affiliates 4,453.0 4,179.7 3,914.3
Affiliates 266.4 233.1 211.7
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
4,719.4 4,412.8 4,126.0
Product Distribution and Directory Publishing
Non-affiliates 811.2 757.9 679.2
Affiliates 336.8 350.8 266.0
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
1,148.0 1,108.7 945.2
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Subtotal 13,144.8 12,326.6 11,210.4
Intercompany revenues (379.7) (340.0) (295.7)
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Net operating revenues $ 12,765.1 $ 11,986.6 $ 10,914.7
-- ------------- --- ------------- -- -------------
</TABLE>
In accordance with Statement of Financial Accounting Standards (SFAS) No. 71,
"Accounting for the Effects of Certain Types of Regulation," revenues and
related net income of nonregulated operations attributable to intercompany
transactions with Sprint's regulated telephone companies have not been
eliminated in the above table or the accompanying consolidated financial
statements. Intercompany revenues of such entities amounted to $262 million,
$285 million and $225 million in 1995, 1994 and 1993, respectively. In
conjunction with the adoption of accounting principles for a competitive
marketplace (see Note 2 of Notes to Consolidated Financial Statements) such
intercompany amounts will be eliminated beginning in 1996. All other significant
intercompany transactions have been eliminated. For additional information as to
industry segments of Sprint, refer to "Segmental Results of Operations" within
Management's Discussion and Analysis of Financial Condition and Results of
Operations filed as part of this report (pages 23 through 26).
Item 2. Properties
The aggregate cost of Sprint's property, plant and equipment was $19.9 billion
as of December 31, 1995, of which $12.6 billion relates to local communications
services and $6.8 billion relates to long distance communications services.
These properties consist primarily of land, buildings, digital fiber-optic
network, switching equipment, microwave radio and cable and wire facilities and
are in good operating condition. Certain switching equipment and several general
office facilities are located on leased premises. The long distance division has
been granted easements, rights-of-way and rights-of-occupancy, primarily by
railroads and other private landowners, for its fiber-optic network.
The properties of the product distribution and directory publishing businesses
consist primarily of office and warehouse facilities to support the business
units in the distribution of telecommunications products and publication of
telephone directories.
Sprint owns its corporate headquarters building and certain other property
located in the greater Kansas City metropolitan area.
Property, plant and equipment with an aggregate cost of approximately $11.2
billion is either pledged as security for first mortgage bonds and certain notes
or is restricted for use as mortgaged property.
5
<PAGE>
Item 3. Legal Proceedings
Following announcement of the Sprint/Centel merger agreement in May 1992, class
action suits were filed against Centel and certain of its officers and
directors. The federal actions were consolidated in the United States District
Court for the Northern District of Illinois. An amended complaint was filed
against the Company and two officers/directors. The amended complaint alleges
violations of federal securities laws by failing to disclose pertinent
information regarding the value of Centel common stock. The plaintiffs seek
damages in an unspecified amount. In January 1995, a purported class action suit
was filed against Centel's financial advisors in state court in New York in
connection with the Sprint/Centel merger. In October 1995, the New York trial
court granted a motion to dismiss that suit, but the plaintiffs have appealed
from the order dismissing their claims. Sprint may have indemnification
obligations to the financial advisors in connection with this suit.
Other suits arising in the ordinary course of business are pending against
Sprint and its subsidiaries. Sprint cannot predict the ultimate outcome of these
actions or the above-described litigation, but believes they will not result in
a material effect on Sprint's consolidated financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
On January 29, 1996, Sprint held a Special Meeting of Shareholders to vote on
three proposals relating to the investment in Sprint by DT and FT (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations. - Strategic Developments - Global One" (pages 20 and 21) for further
discussion related to this investment). The shareholders approved all three
proposals.
The following votes were cast with respect to the proposal to approve and adopt
the Investment Agreement dated as of July 31, 1995, as amended, among Sprint, FT
and DT and the transactions contemplated by the Investment Agreement (Proposal
No. 1).
FOR 254,701,899
AGAINST 11,925,847
ABSTAIN 2,178,235
The following votes were cast with respect to the proposal to approve and adopt
the Charter Amendments and the Bylaw Amendments contemplated by the Investment
Agreement (Proposal No. 2).
FOR 251,797,486
AGAINST 14,749,579
ABSTAIN 2,258,916
The following votes were cast by the common stock, voting as a separate class,
with respect to the proposal to approve and adopt the Charter Amendments and the
Bylaw Amendments contemplated by the Investment Agreement (Proposal No. 2).
FOR 251,666,480
AGAINST 14,747,104
ABSTAIN 2,249,151
6
<PAGE>
The following votes were cast with respect to the proposal to approve and adopt
the Control Share Acquisitions Plan and to accord to the shares acquired
pursuant to such plan full voting rights (Proposal No. 3).
FOR 257,433,764
AGAINST 6,447,938
ABSTAIN 4,924,279
The following votes were cast with respect to the proposal to approve and adopt
the Control Share Acquisitions Plan and to accord to the shares acquired
pursuant to such plan full voting rights, excluding shares held by (i) FT, DT or
any member of a group with FT and DT that makes or proposes to make a "control
share acquisition" (as defined in the Kansas Control Share Acquisitions
Statute), (ii) officers of Sprint and (iii) employees of Sprint who are also
directors of Sprint (Proposal No. 3).
FOR 256,780,521
AGAINST 6,449,252
ABSTAIN 4,924,777
7
<PAGE>
<TABLE>
<CAPTION>
Item 10(b). Executive Officers of the Registrant
Office Name Age
- -------------------------------------------------------------- --------------------------------- ------
<S> <C> <C>
Chairman and Chief Executive Officer William T. Esrey (1) 56
President and Chief Operating Officer Ronald T. LeMay (2) 50
President and Chief Operating Officer - Long Distance
Division Gary D. Forsee (3) 45
President and Chief Operating Officer - Local Communications
Division D. Wayne Peterson (4) 60
Executive Vice President - Law and External Affairs J. Richard Devlin (5) 45
Executive Vice President - Chief Financial Officer Arthur B. Krause (6) 54
Senior Vice President - Corporate Finance Gene M. Betts (7) 43
Senior Vice President - External Affairs John R. Hoffman (8) 50
Senior Vice President and Controller John P. Meyer (9) 45
Senior Vice President - Strategic Planning and Corporate
Development Theodore H. Schell (10) 51
Senior Vice President - Quality Development and Public
Relations Richard C. Smith, Jr. (11) 54
Senior Vice President and Treasurer M. Jeannine Strandjord (12) 50
Senior Vice President - Human Resources I. Benjamin Watson (13) 47
Vice President and Secretary Don A. Jensen (14) 60
<FN>
(1) Mr. Esrey was elected Chairman in 1990. He was elected Chief Executive
Officer and a member of the Board of Directors in 1985. In addition, he has
served as Chief Executive Officer of the Limited Partnership since 1988.
(2) Mr. LeMay was elected President and Chief Operating Officer in February
1996. He had served as Vice Chairman since April 1995. From 1989 to 1995,
he had served as President - Long Distance Division. He was elected to the
Board of Directors of Sprint in 1993. Mr. LeMay also serves as the Chief
Executive Officer of Sprint Spectrum.
(3) Mr. Forsee was elected President - Long Distance Division in April 1995. He
also serves as President and Chief Operating Officer of the Limited
Partnership. Mr. Forsee had served as Senior Vice President - Staff
Operations of the Limited Partnership since 1993. From 1991 to 1993, he was
President of the Limited Partnership's Business Service Group. Prior to
that time he served as President of the Limited Partnership's Government
Services Division.
(4) Mr. Peterson was elected President - Local Communications Division in 1993.
From 1980 to 1993, he served as President of Carolina Telephone and
Telegraph Company, a subsidiary of Sprint.
(5) Mr. Devlin was elected Executive Vice President - Law and External Affairs
in 1989.
(6) Mr. Krause was elected Executive Vice President - Chief Financial Officer
in 1988. During 1990 and 1991, he also served as Chief Information Officer.
(7) Mr. Betts was elected Senior Vice President in 1990.
(8) Mr. Hoffman was elected Senior Vice President - External Affairs in 1990.
(9) Mr. Meyer was elected Senior Vice President and Controller in 1993. He had
served as Vice President and Controller of Centel since 1989.
(10) Mr. Schell was elected Senior Vice President - Strategic Planning and
Corporate Development in 1990.
8
<PAGE>
(11) Mr. Smith was elected Senior Vice President - Quality Development and
Public Relations in 1991. He had served as President of the Limited
Partnership's National Markets since 1989.
(12) Ms. Strandjord was elected Senior Vice President and Treasurer in 1990.
(13) Mr. Watson was elected Senior Vice President - Human Resources in 1993. He
had served as Vice President Finance and Administration of United Telephone
- Eastern Group, an operating group of subsidiaries of Sprint, since 1990.
(14) Mr. Jensen was elected Vice President and Secretary in 1975.
There are no known family relationships between any of the persons named above
or between any such persons and any outside directors of Sprint. Officers are
elected annually.
</FN>
</TABLE>
9
<PAGE>
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
<TABLE>
<CAPTION>
Market Price Per Share
- --------------------------- ----------------------------------------- -- -----------------------------------------
1995 1994
----------------------------------------- -----------------------------------------
End of End of
High Low Period High Low Period
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $ 31 7/8 $ 25 7/8 $ 30 1/4 $ 38 1/8 $ 32 1/2 $ 34 1/4
Second Quarter 35 7/8 30 3/8 33 5/8 40 1/8 33 1/4 34 7/8
Third Quarter 36 7/8 32 5/8 35 40 1/8 34 1/8 38 1/8
Fourth Quarter 41 1/8 33 1/4 39 5/8 38 7/8 26 1/8 27 5/8
- --------------------------- -- ---------- -- ---------- -- ---------- -- --- --------- --- --------- --- ---------
</TABLE>
As of March 1, 1996, there were approximately 100,000 record holders of Sprint's
common stock. The principal trading market for Sprint's common stock is the New
York Stock Exchange. The common stock is also listed and traded on the Chicago
and Pacific Stock Exchanges. Sprint has declared dividends of $0.25 per quarter
during each of the years ended December 31, 1995 and 1994.
Item 6. Selected Financial Data
For information required by Item 6, refer to the "Selected Financial Data"
section of the Financial Statements, Financial Statement Schedule and
Supplementary Data filed as part of this report (page 19).
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
For information required by Item 7, refer to the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" section of the
Financial Statements, Financial Statement Schedule and Supplementary Data filed
as part of this report (pages 20 through 32).
Item 8. Financial Statements and Supplementary Data
For information required by Item 8, refer to the "Consolidated Financial
Statements and Schedule" and "Quarterly Financial Data" sections of the
Financial Statements, Financial Statement Schedule and Supplementary Data filed
as part of this report (pages 35 through 61).
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
10
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Registrant
Pursuant to Instruction G(3) to Form 10-K, the information relating to Directors
of Sprint required by Item 10 is incorporated by reference from Sprint's
definitive proxy statement filed pursuant to Regulation 14A.
For information pertaining to Executive Officers of Sprint, as required by
Instruction 3 of Paragraph (b) of Item 401 of Regulation S-K, refer to the
"Executive Officers of the Registrant" section of Part I of this report (pages 8
and 9).
Item 11. Executive Compensation
Pursuant to Instruction G(3) to Form 10-K, the information required by Item 11
is incorporated by reference from Sprint's definitive proxy statement filed
pursuant to Regulation 14A.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Pursuant to Instruction G(3) to Form 10-K, the information required by Item 12
is incorporated by reference from Sprint's definitive proxy statement filed
pursuant to Regulation 14A.
Item 13. Certain Relationships and Related Transactions
Pursuant to Instruction G(3) to Form 10-K, the information required by Item 13
is incorporated by reference from Sprint's definitive proxy statement filed
pursuant to Regulation 14A.
11
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
(a) 1. The consolidated financial statements of Sprint and supplementary
financial information filed as part of this report are listed in the
Index to Financial Statements, Financial Statement Schedule and
Supplementary Data (page 18).
2. The consolidated financial statement schedule of Sprint filed as part
of this report is listed in the Index to Financial Statements,
Financial Statement Schedule and Supplementary Data (page 18).
3. The following exhibits are filed as part of this report:
EXHIBITS
(3) Articles of Incorporation and Bylaws:
(a) Articles of Incorporation, as amended (filed as Exhibit
4A to Sprint Corporation Current Report on Form 8-K
dated January 31, 1996 and incorporated herein by
reference).
(b) Bylaws, as amended (filed as Exhibit 4B to Sprint
Corporation Current Report on Form 8-K for the year
ended January 31, 1996 and incorporated herein by
reference).
(4) Instruments defining the Rights of Sprint's Equity Security
Holders:
(a) The rights of Sprint's equity security holders are
defined in the Fifth, Sixth, Seventh and Eighth
Articles of Sprint's Articles of Incorporation. See
Exhibit 3(a).
(b) Rights Agreement dated as of August 8, 1989, between
Sprint Corporation (formerly United Telecommunications,
Inc.) and UMB Bank, n.a. (formerly United Missouri Bank
of Kansas City, N.A.), as Rights Agent (filed as
Exhibit 2(b) to Sprint Corporation Registration
Statement on Form 8-A dated August 11, 1989 (File No.
1-4721), and incorporated herein by reference).
(c) Amendment and supplement dated June 4, 1992 to Rights
Agreement dated as of August 8, 1989 (filed as Exhibit
2(c) to Amendment No. 1 on Form 8 dated June 8, 1992 to
Sprint Corporation Registration Statement on Form 8-A
dated August 11, 1989 (File No. 1-4721), and
incorporated herein by reference).
(d) Second Amendment to Rights Agreement dated as of July
31, 1995 between Sprint Corporation and UMB Bank, n.a.
(filed as Exhibit 2(d) to Form 8-A/A-2 dated October
20, 1995 amending Sprint Corporation Registration
Statement on Form 8-A dated August 11, 1989 (File No.
1-4721) and incorporated herein by reference).
(e) Standstill Agreement dated as of July 31, 1995, by and
among Sprint Corporation, France Telecom and Deutsche
Telekom AG (filed as Exhibit (10)(c) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995 and incorporated herein by
reference).
12
<PAGE>
(10) Material Agreements - Joint Ventures:
(a) Joint Venture Agreement dated as of June 22, 1995 among
Sprint Corporation, Sprint Global Venture, Inc., France
Telecom and Deutsche Telekom AG (filed as Exhibit
(10)(a) to Sprint Corporation Quarterly Report on Form
10-Q for the quarter ended June 30, 1995 and
incorporated herein by reference).
(b) Amendment No. 1 to Joint Venture Agreement, dated as of
January 31, 1996, among Sprint Corporation, Sprint
Global Venture, Inc., France Telecom, Deutsche Telekom
AG and Atlas Telecommunications, S.A. (filed as Exhibit
99A to Sprint Corporation Current Report on Form 8-K
dated January 31, 1996 and incorporated herein by
reference).
(c) Investment Agreement dated as of July 31, 1995 among
Sprint Corporation, France Telecom and Deutsche Telekom
AG (including as an exhibit the Stockholders' Agreement
among France Telecom, Deutsche Telekom AG and Sprint
Corporation) (filed as Exhibit (10)(b) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995 and incorporated herein by
reference).
(d) Amended and Restated Agreement of Limited Partnership
of MajorCo., L.P., dated as of January 31, 1996, among
Sprint Spectrum, L.P., TCI Network Services, Comcast
Telephony Services and Cox Telephony Partnership (filed
as Exhibit 99C to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(e) Parents Agreement dated as of January 31, 1996, between
Sprint Corporation and Tele-Communications, Inc. (filed
as Exhibit 99D to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(f) Parents Agreement dated as of January 31, 1996, between
Sprint Corporation and Comcast Corporation (filed as
Exhibit 99E to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(g) Parents Agreement dated as of January 31, 1996, between
Sprint Corporation and Cox Communications, Inc. (filed
as Exhibit 99F to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(10) Executive Compensation Plans and Arrangements
(h) 1985 Stock Option Plan, as amended (filed as Exhibit
(10)(c) to Sprint Corporation Quarterly Report on Form
10-Q for the quarter ended September 30, 1995 and
incorporated herein by reference). Appendix to Stock
Option Plans.
(i) 1990 Stock Option Plan, as amended (filed as Exhibit
(10)(d) to Sprint Corporation Quarterly Report on Form
10-Q for the quarter ended September 30, 1995 and
incorporated herein by reference). Appendix to Stock
Option Plans. See Exhibit (10)(h).
(j) 1990 Restricted Stock Plan, as amended (filed as
Exhibit 99 to Sprint Corporation Registration Statement
No. 33-65147 and incorporated herein by reference).
(k) Executive Deferred Compensation Plan, as amended.
(l) Management Incentive Stock Option Plan, as amended
(filed as Exhibit (10)(g) to Sprint Corporation
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995 and incorporated herein by
reference). Appendix to Stock Option Plans. See
Exhibit (10)(h).
13
<PAGE>
(m) Long-Term Stock Incentive Program, as amended (filed as
Exhibit (10)(h) to Sprint Corporation Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995
and incorporated herein by reference).
(n) Sprint Supplemental Executive Retirement Plan (filed as
Exhibit (10)(i) to Sprint Corporation Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995
and incorporated herein by reference).
(o) Amended and Restated Centel Directors Deferred
Compensation Plan (filed as Exhibit (10)(j) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995 and incorporated
herein by reference).
(p) Restated Memorandum Agreements Respecting Supplemental
Pension Benefits between Sprint Corporation (formerly
United Telecommunications, Inc.) and two of its current
and former executive officers (filed as Exhibit 10(i)
to Sprint Corporation Annual Report on Form 10-K for
the year ended December 31, 1992, and incorporated
herein by reference).
(q) Executive Long-Term Incentive Plan (filed as Exhibit
10(j) to Sprint Corporation Annual Report on Form 10-K
for the year ended December 31, 1993 and incorporated
herein by reference).
(r) Executive Management Incentive Plan (filed as Exhibit
10(k) to Sprint Corporation Annual Report on Form 10-K
for the year ended December 31, 1993 and incorporated
herein by reference).
(s) Long-Term Incentive Compensation Plan (filed as Exhibit
10(j) to United Telecommunications, Inc. Annual Report
on Form 10-K for the year ended December 31, 1989, and
incorporated herein by reference).
(t) Short-Term Incentive Compensation Plan (filed as
Exhibit 10(k) to United Telecommunications, Inc. Annual
Report on Form 10-K for the year ended December 31,
1989, and incorporated herein by reference).
(u) Retirement Plan for Directors, as amended (filed as
Exhibit 10(b) to Sprint Corporation Quarterly Report on
Form 10-Q for the quarter ended March 31, 1994 and
incorporated herein by reference).
(v) Key Management Benefit Plan, as amended (filed as
Exhibit 10(o) to Sprint Corporation Annual Report on
Form 10-K for the year ended December 31, 1993 and
incorporated herein by reference).
(w) Agreement Regarding Special Compensation and Post
Employment Restrictive Covenants between Sprint
Corporation and one of its Executive Officers.
(x) Director's Deferred Fee Plan, as amended.
(y) Form of Contingency Employment Agreements between
Sprint Corporation and certain of its executive
officers (filed as Exhibit 10(b) to Sprint Corporation
Quarterly Report on Form 10-Q for the year ended March
31, 1995, and incorporated herein by reference).
(z) Form of Indemnification Agreements between Sprint
Corporation (formerly United Telecommunications, Inc.)
and its Directors and Officers (filed as Exhibit 10(s)
to Sprint Corporation Annual Report on Form 10-K for
the year ended December 31, 1991, and incorporated
herein by reference).
14
<PAGE>
(aa) Summary of Executive Officer and Board of Directors
Benefits.
(bb) Agreements Regarding Special Compensation and Post
Employment Restrictive Covenants between Sprint
Corporation and four of its executive officers (filed
as Exhibit 10(d) to Sprint Corporation Quarterly Report
on Form 10-Q for the quarter ended September 30, 1994
and incorporated herein by reference).
(cc) Amended and Restated Centel Stock Option Plan (filed as
Exhibit 10(w) to Sprint Corporation Annual Report on
Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference). Appendix to Stock
Option Plans. See Exhibit (10)(h).
(dd) Agreements Regarding Special Compensation and Post
Employment Restrictive Covenants between Sprint
Corporation and three of its executive officers (filed
as Exhibit 10(x) to Sprint Corporation Annual Report on
Form 10-K for the year ended December 31, 1993, and
incorporated herein by reference).
(ee) Description of agreement regarding Supplemental Pension
Benefits between Sprint Corporation and one of its
executive officers (filed as Exhibit 10(e) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994, and incorporated
herein by reference).
(ff) Amended and Restated Centel Director Stock Option Plan
(filed as Exhibit 10(aa) to Sprint Corporation Annual
Report on Form 10-K for the year ended December 31,
1993, and incorporated herein by reference).
(11) Computation of Earnings Per Common Share.
(12) Computation of Ratio of Earnings to Fixed Charges.
(21) Subsidiaries of Registrant.
(23) Consent of Ernst & Young LLP.
(27) Financial Data Schedules:
(a) 1995 Financial Data Schedule.
(b) Restated 1994 Financial Data Schedule.
Sprint will furnish to the Securities and Exchange Commission, upon request, a
copy of the instruments defining the rights of holders of its long-term debt and
the long-term debt of its subsidiaries. The total amount of securities
authorized under any of said instruments does not exceed 10 percent of the total
assets of Sprint and its subsidiaries on a consolidated basis.
(b) Reports on Form 8-K
Sprint filed a Current Report on Form 8-K dated January 31, 1996 in
which it reported the investment of $3.0 billion in Sprint by FT and DT
and the consummation of the global venture with FT and DT (see
"Management's Discussion and Analysis of Financial Condition and Results
of Operations - Strategic Developments - Global One" (pages 20 and 21)
for further discussion). It also reported that Sprint, TCI, Comcast and
Cox had entered into a series of agreements amending in certain respects
their previously announced joint venture to engage in the communications
business (see "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Strategic Developments - Sprint
Spectrum LP" (page 21) for further discussion).
(c) Exhibits are listed in Item 14(a).
15
<PAGE>
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.
SPRINT CORPORATION
(Registrant)
By /s/ W. T. Esrey
William T. Esrey
Chairman and Chief Executive Officer
Date: March 11, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on the 11th day of March, 1996.
/s/ W. T. Esrey
William T. Esrey
Chairman and Chief Executive Officer
/s/ Arthur B. Krause
Arthur B. Krause
Executive Vice President and
Chief Financial Officer
/s/ John P. Meyer
John P. Meyer
Senior Vice President and Controller
Principal Accounting Officer
16
<PAGE>
SIGNATURES
SPRINT CORPORATION
(Registrant)
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 indicated on the 11th day of March, 1996.
/s/ DuBose Ausley
DuBose Ausley, Director
/s/ Warren L. Batts
Warren L. Batts, Director
/s/ Michel Bon
Michel Bon, Director
/s/ Ruth M. Davis
Ruth M. Davis, Director
/s/ W. T. Esrey
William T. Esrey, Director
/s/ Donald J. Hall
Donald J. Hall, Director
/s/ Harold S. Hook
Harold S. Hook, Director
/s/ Ronald T. LeMay
Ronald T. LeMay, Director
/s/ Linda K. Lorimer
Linda Koch Lorimer, Director
/s/ Charles E. Rice
Charles E. Rice, Director
/s/ Ron Sommer
Ron Sommer, Director
/s/ Stewart Turley
Stewart Turley, Director
17
<PAGE>
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULE AND SUPPLEMENTARY DATA Sprint Corporation
Page Reference
---------------------
<S> <C>
Selected Financial Data 19
Management's Discussion and Analysis of Financial Condition and Results of Operations 20
Consolidated Financial Statements and Schedule:
Management Report 33
Report of Independent Auditors - Ernst & Young LLP 34
Consolidated Statements of Income for each of the three years ended December 31, 1995 35
Consolidated Balance Sheets as of December 31, 1995 and 1994 36
Consolidated Statements of Cash Flows for each of the three years ended
December 31, 1995 38
Consolidated Statements of Common Stock and Other Shareholders' Equity for each of
the three years ended December 31, 1995 39
Notes to Consolidated Financial Statements 40
Financial Statement Schedule for each of the three years ended December 31, 1995:
II - Consolidated Valuation and Qualifying Accounts 59
Certain financial statement schedules are omitted because the required
information is not present, or because the information required is
included in the consolidated financial statements and notes thereto.
Quarterly Financial Data 60
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA Sprint Corporation
As of or For the Years Ended December 31,
- ---------------------------------------------------------------------------------------------------------------------
1995 1994 (1) 1993 (1) 1992 (1) 1991 (1)
- ---------------------------------------------------------------------------------------------------------------------
(In Millions, Except Per Share Data)
Results of Operations
<S> <C> <C> <C> <C> <C>
Net operating revenues $ 12,765.1 $ 11,986.6 $ 10,914.7 $ 10,105.7 $ 9,697.2
Operating income (2) 1,834.3 1,690.7 1,214.1 1,199.8 1,186.1
Income from continuing
operations (2), (3) 946.1 899.2 517.1 550.6 530.8
Earnings per common share from continuing
operations (2), (3) 2.69 2.57 1.50 1.62 1.58
Dividends per common share 1.00 1.00 1.00 1.00 1.00
Financial Position
Total assets $ 15,195.9 $ 14,547.5 $ 13,898.1 $ 13,431.7 $ 13,785.9
Property, plant and equipment, net 9,715.8 10,258.8 9,883.1 9,895.6 10,072.7
Total debt (including short-term
borrowings) 5,677.4 4,937.2 5,094.4 5,442.7 5,571.2
Redeemable preferred stock 32.5 37.1 38.6 40.2 56.6
Common stock and other shareholders'
equity 4,642.6 4,524.8 3,918.3 3,971.6 3,671.9
Cash Flow Data
Cash from operating activities -
continuing operations $ 2,566.4 $ 2,346.0 $ 2,007.8 $ 2,397.3 $ 1,808.1
Capital expenditures 1,857.3 1,751.6 1,429.8 1,342.4 1,431.4
Free cash flow (4) 357.6 245.0 230.9 454.8 80.9
</TABLE>
(1) The accompanying Selected Financial Data have been restated to reflect the
spin-off of Sprint's cellular and wireless division (Cellular) to Sprint
shareholders. Accordingly, Cellular's operating results have been excluded
from income from continuing operations and are reported as discontinued
operations.
(2) During 1995, nonrecurring charges of $88 million were recorded related to a
restructuring within the local division. Such charges reduced consolidated
1995 income from continuing operations by $55 million ($0.16 per share).
During 1993, nonrecurring charges of $293 million were recorded related to
(a) transaction costs associated with the merger with Centel and the
expenses of integrating and restructuring the operations of the two
companies and (b) a realignment and restructuring within the long distance
division. Such charges reduced consolidated 1993 income from continuing
operations by $193 million ($0.56 per share).
(3) During 1994, Sprint sold an investment in equity securities, realizing a
gain of $35 million, which increased consolidated 1994 income from
continuing operations by $22 million ($0.06 per share).
During 1993, as a result of the enactment of the Revenue Reconciliation Act
of 1993, Sprint was required to adjust its deferred income tax assets and
liabilities to reflect the increased tax rate. Such adjustment reduced
consolidated 1993 income from continuing operations by $11 million ($0.03
per share).
During 1992 and 1991, gains were recognized related to the sales of certain
local telephone properties, which increased consolidated 1992 income from
continuing operations by $44 million ($0.13 per share) and consolidated
1991 income from continuing operations by $64 million ($0.19 per share).
(4) Free cash flow is an internal measurement utilized by Sprint to assess the
coverage of capital expenditures and dividends paid by cash provided from
operating activities of continuing operations. This measurement is not an
alternative to operating income determined in accordance with generally
accepted accounting principles as an indicator of operating performance.
Such amount for 1992 excludes the additional proceeds from the sale of
accounts receivable of $300 million.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF Sprint Corporation
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Strategic Developments
Telecommunications Law
In February 1996, the Telecommunications Act of 1996 (the Act) was signed
into law. The purpose of the Act is to promote competition in all aspects of
telecommunications. The Act requires telecommunications carriers to interconnect
with other carriers and to provide for resale, number portability, dialing
parity, access to rights-of-way and compensation for reciprocal traffic.
Additionally, incumbent local telephone companies are required to provide
nondiscriminatory unbundled access, resale at wholesale rates and notice of
changes that would affect interoperability of facilities and networks. The
Federal Communications Commission (FCC) is to adopt mechanisms to ensure that
essential telecommunications services are affordable.
The Act also provides that regional Bell Operating Companies (RBOCs) may
provide long distance service upon enactment that is out-of-region or incidental
to: (1) audio/video programming; (2) Internet for schools; (3) mobile services;
(4) information or alarm services; and (5) telecommunications signaling. In
order for an RBOC to provide in-region long distance service, the Act requires
the RBOC to comply with a comprehensive competitive checklist and expands the
role of the U.S. Department of Justice in the FCC's determination of whether the
entry of an RBOC into the competitive long distance market is in the public
interest. Additionally, there must be a real facilities-based competitor for
residential and business local telephone service (or the failure of potential
providers to request access) prior to an RBOC providing in-region long distance
service. RBOCs must provide long distance services through a separate subsidiary
for at least three years. Until the RBOCs are allowed into long distance or
three years have passed, long distance carriers with more than 5 percent of the
nation's access lines may not jointly market RBOC resold local telephone
service, and states may not require RBOCs to provide intraLATA dialing parity.
Telecommunications companies may also provide video programming and cable
operators may provide telephone service in the same service area. The Act
prohibits telecommunications carriers and cable operators from acquiring more
than 10 percent of each other, except in rural and other specified areas.
The impact of the Act on Sprint is unknown because a number of important
implementation issues (such as the nature and extent of continued subsidies for
local rates) still need to be decided by state or federal regulators. However,
the Act offers opportunities as well as risks. Sprint should benefit from the
opportunity to enter local telephone markets. The new competitive environment
should lead to a reduction in local access fees, the largest single cost in
providing long distance service today. The risk aspect of local competition is
that historical prices and market shares of Sprint's local telephone companies
(approximately 4 percent of the nation's local telephone access lines) are
likely to decline.
The removal of the long distance restrictions on the RBOCs is not
anticipated to have an immediate significant adverse impact on Sprint because of
the substantial preconditions that must be met before RBOCs can provide most
in-region long distance services. In addition, Sprint could potentially offset
some losses of long distance customers at the retail level if it were successful
in becoming the underlying carrier for resellers (including the RBOCs) entering
the long distance market.
Global One
On January 31, 1996, Sprint, along with Deutsche Telekom (DT) and France
Telecom (FT), consummated their joint venture, operating as Global One, which
will provide seamless global telecommunications services to business, consumer
and carrier markets worldwide. The interests of DT and FT in the venture are
held by their own joint venture, referred to as Atlas. The operating group
serving Europe (excluding Germany and France) will be owned one-third by Sprint
and two-thirds by Atlas. The operating group for the worldwide activities
outside the United States and Europe will be owned 50 percent by Sprint and 50
percent by Atlas. Home country markets will be served by DT in Germany, FT in
France and Sprint in the United States.
20
<PAGE>
Upon closing of the agreement, DT and FT acquired shares of a new class of
preference stock for a total of $3.0 billion, which resulted in DT and FT each
holding approximately 7.5 percent of the Sprint voting power. DT and FT will
make the remainder of their investment in Sprint following the spin-off of
Sprint's Cellular and Wireless Division (Cellular) to shareholders of Sprint
common stock. Following their full investment, DT and FT will each own shares of
Class A common stock with approximately 10 percent of Sprint's voting power.
Depending on the price of Cellular shares at the time of the spin-off, the total
amount of the investment is expected to be between $3.5 billion and $3.7
billion.
DT and FT, as the holders of the Class A Stock, will have the right in most
circumstances to proportionate representation on Sprint's board of directors and
to purchase additional shares of Class A Stock from Sprint to enable them to
maintain their ownership level at 20 percent. In addition, the holders of Class
A Stock will have disapproval rights with respect to Sprint's undertaking
certain types of transactions. DT and FT have also entered into a standstill
agreement with Sprint that contains restrictions on their ability to acquire
voting securities of Sprint other than as contemplated by the investment
agreement and related agreements, as well as customary provisions restricting DT
and FT from initiating or participating in any proposal with respect to the
control of Sprint.
In connection with the closing of the Global One joint venture, the long
distance division contributed certain assets and the related operations of its
international business unit to Global One.
Sprint Spectrum
Sprint, along with Tele-Communications Inc. (TCI), Comcast Corporation
(Comcast) and Cox Communications, Inc. (Cox), have formed a joint venture,
Sprint Spectrum LP, formerly known as Sprint Telecommunications Venture to
provide wireless communications services on a broad geographic basis within the
United States. In March 1995, Sprint Spectrum took a critical first step to a
national wireless capabilities. In the first round of broadband Personal
Communications Services (PCS) license auctions by the FCC, Sprint Spectrum and
its affiliates won the rights to PCS licenses in 30 major trading areas (MTAs)
at a cost of $2.2 billion. Sprint Spectrum's wireless presence, including Sprint
Spectrum wireless affiliates, covers a population of more than 182 million in
the United States.
In March 1995, Sprint, TCI, Comcast and Cox signed a definitive joint
venture agreement to provide competitive local telecommunications services on a
national basis using the facilities of the cable partners. In February 1996, the
four partners announced a change in their approach to providing such services.
The previous agreement called for the conversion of cable systems passing 10
million homes by the end of 1997 and had a fixed compensation formula between
Sprint Spectrum and the cable companies. Under the revised agreements,
competitive local telephone services will be the subject of individual joint
ventures to be negotiated between Sprint and each cable partner, rather than
through Sprint Spectrum. This approach will allow greater flexibility to decide
specific terms and timing for entry into local telephone markets. However, there
can be no assurance that any such joint ventures will be formed.
In conjunction with the approval of a business plan for Sprint Spectrum to
build out a national wireless network, the four partners have committed to make
cash capital contributions to Sprint Spectrum of approximately $4.2 billion
through the end of 1997, of which Sprint's portion is estimated to be
approximately $1.7 billion. Approximately $960 million of this commitment has
already been contributed by Sprint to Sprint Spectrum, primarily to fund amounts
paid to the FCC in connection with licenses won in the PCS auction.
In November 1995, American Personal Communications (APC), an affiliate of
Sprint Spectrum, launched Sprint Spectrum, the nation's first broadband PCS
system. Sprint Spectrum will serve a large geographic area encompassing
Washington, D.C., all of Maryland and more than half of Virginia. It is Sprint
Spectrum's objective to begin offering personal communications service in as
many as 20 to 25 major metropolitan areas by December 1996, covering over 100
million people, and to substantially complete construction of the remainder of
its system by December 1998. Sprint Spectrum has executed contracts with two
vendors of Code Division Multiple Access (CDMA) to deploy this new developing
technology across the venture's nationwide wireless communications network.
21
<PAGE>
Spin-off of Cellular Division
Due in part to divestiture requirements imposed by the FCC with respect to
PCS licenses awarded to Sprint Spectrum, the Sprint board of directors has
approved the spin-off of Cellular to the holders of Sprint common stock. Sprint
has received a favorable ruling from the Internal Revenue Service regarding the
tax-free nature of the spin-off. After the spin-off, Cellular will market its
wireless service under the 360 Communications Company brand name and will no
longer be included under the umbrella of the Sprint brand name.
The spin-off will be effected by distributing to all holders of Sprint
common stock all shares of Cellular common stock at a rate of 1 share of
Cellular common stock for every 3 shares of Sprint common stock held. In
connection with the closing, Cellular will repay approximately $1.4 billion of
intercompany debt owed by Cellular to Sprint and its subsidiaries, and Sprint
will contribute to the equity capital of Cellular any debt owed by Cellular in
excess of the intercompany debt being repaid.
Prior years' consolidated financial statements have been restated to
reflect the spin-off of Cellular. Accordingly, the operating results, net assets
and cash flows of Cellular are separately classified as discontinued operations.
Results of Operations
Consolidated
Sprint's two primary divisions -- long distance and local exchange --
generated record levels of net operating revenues and improved operating results
in 1995. The long distance division generated a 7 percent growth in traffic
volumes in 1995, and the number of access lines served by the local division
grew 4.7 percent.
Total net operating revenues for the year ended December 31, 1995 were
$12.8 billion, a 6 percent increase over net operating revenues of $12.0 billion
for 1994. Total net operating revenues for the year ended December 31, 1993 were
$10.9 billion. For the year ended December 31, 1995, income from continuing
operations was $946 million, or $2.69 per share, compared with $899 million, or
$2.57 per share, for 1994 and $517 million, or $1.50 per share, for 1993. Income
from continuing operations for the year ended December 31, 1995 included a
charge related to the restructuring of Sprint's local division ($0.16 per
share). Income from continuing operations for the year ended December 31, 1994
included a gain related to the sale of an investment in equity securities ($0.06
per share). Income from continuing operations for the year ended December 31,
1993 included charges related to the merger and integration costs associated
with the Centel merger and the realignment and restructuring of Sprint's long
distance division ($0.56 per share) and a charge associated with the enactment
of the Revenue Reconciliation Act of 1993 ($0.03 per share).
22
<PAGE>
Segmental Results of Operations
Long Distance Communications Services
<TABLE>
<CAPTION>
As of or for the Years Ended
December 31,
---------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
(In Millions)
<S> <C> <C> <C>
Net operating revenues $ 7,277.4 $ 6,805.1 $ 6,139.2
Operating expenses
Interconnection 3,102.7 2,994.5 2,710.7
Operations 1,046.6 925.4 857.7
Selling, general and administrative 1,839.7 1,737.0 1,548.1
Depreciation and amortization 581.6 550.5 523.5
Merger, integration and restructuring costs -- -- 45.9
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Total operating expenses 6,570.6 6,207.4 5,685.9
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Operating income $ 706.8 $ 597.7 $ 453.3 (1)
-- ------------- --- ------------- -- -------------
Operating margin 9.7% 8.8% 7.4%(1)
-- ------------- --- ------------- -- -------------
Capital expenditures $ 861.7 $ 774.1 $ 529.4
-- ------------- --- ------------- -- -------------
Identifiable assets $ 4,912.2 $ 4,546.0 $ 4,195.8
-- ------------- --- ------------- -- -------------
</TABLE>
(1) Excluding the merger, integration and restructuring costs of $45.9 million,
operating income and margin for 1993 would have been $499.2 million and 8.1
percent, respectively.
Sprint's long distance division provides domestic and international voice,
video and data communications services. The terms under which the division
offers its services to the public are subject to different levels of state and
federal regulation, but rates are not subject to rate-base regulation except
nominally in some states.
Net operating revenues increased 7 percent in 1995, following an 11 percent
increase in 1994. Traffic volume increased 7 percent and 11 percent over the
same periods. Revenue growth was primarily driven by strong performance in the
data services market, which includes sales to consumer on-line services and
Internet connectivity, transaction processing such as credit card authorizations
and check guarantees, data communication for multinational corporations and
data-intensive applications such as image transfer and client/server exchange.
Also contributing to this growth was the business market which continued to
experience growth in "800" services and private line services, the international
market which reflects the division's continuing efforts to target new geographic
markets, and the residential market which reflects the success of the Sprint
Sense (sm) calling plan.
Interconnection costs consist of amounts paid to local exchange carriers,
other domestic service providers and foreign telephone companies for the
completion of calls made by the division's customers. Interconnection costs
increased in 1995 and 1994 primarily as a result of traffic volume growth. Also
contributing to these increases were increases in access costs associated with
the growth in data products and international interconnection costs. These
increases were partially offset by reduced costs of connecting to networks
domestically as a result of lower interstate access rates. As a percentage of
net operating revenues, interconnection costs were 42.6 percent in 1995 compared
to 44.0 percent and 44.2 percent in 1994 and 1993, respectively.
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 systems sales.
Operations expense increased $121 million in 1995 and $68 million in 1994. The
1995 increase was primarily due to increased costs associated with growth within
the data products market and increased international network operations costs
reflecting growth in overseas products and foreign operations. The 1994 increase
was primarily due to expanded product offerings as well as providing services to
new customers.
23
<PAGE>
Selling, general and administrative (SG&A) expense increased $103 million
and $189 million in 1995 and 1994, respectively, generally reflecting the
overall growth in the division's operating activities. These increases were
generally due to increased advertising expenses resulting from the ongoing sales
and marketing efforts which are important in the intensely competitive long
distance marketplace. The division has continued to focus on cost containment of
SG&A expenses in an effort to further enhance the division's profitability. As a
result, SG&A expense as a percentage of net operating revenues decreased from
25.5 percent for 1994 to 25.3 percent for 1995.
Depreciation and amortization increased $31 million in 1995 and $27 million
in 1994, generally due to an increase in the asset base. The increase in 1995
was generally due to an increase in the asset base in support of data revenue
growth and synchronous optical network (SONET) deployment. SONET provides
significantly improved transport capacity.
Local Communications Services
<TABLE>
<CAPTION>
As of or for the Years Ended
December 31,
---------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
(In Millions)
Net operating revenues
<S> <C> <C> <C>
Local service $ 1,875.7 $ 1,752.3 $ 1,624.3
Network access 1,705.8 1,598.4 1,530.4
Toll service 485.4 529.3 505.3
Other 652.5 532.8 466.0
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Total net operating revenues 4,719.4 4,412.8 4,126.0
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Operating expenses
Plant operations 1,360.6 1,298.3 1,206.7
Depreciation and amortization 835.6 794.6 733.0
Customer operations 601.0 549.3 532.4
Other 793.8 752.4 710.6
Merger, integration and restructuring costs 87.6 -- 190.1
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Total operating expenses 3,678.6 3,394.6 3,372.8
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Operating income $ 1,040.8 (1) $ 1,018.2 $ 753.2 (2)
-- ------------- --- ------------- -- -------------
Operating margin 22.1% (1) 23.1% 18.3% (2)
-- ------------- --- ------------- -- -------------
Capital expenditures $ 950.8 $ 914.2 $ 845.3
-- ------------- --- ------------- -- -------------
Identifiable assets $ 6,970.4 $ 7,821.3 $ 7,603.9
-- ------------- --- ------------- -- -------------
<FN>
(1) Excluding the restructuring costs of $87.6 million, operating income and margin for 1995 would have been
$1,128.4 million and 23.9 percent, respectively.
(2) Excluding the merger and integration costs of $190.1 million, operating income and margin for 1993 would
have been $943.3 million and 22.9 percent, respectively.
</FN>
</TABLE>
The local division consists principally of Sprint's regulated telephone
companies which provide local exchange services, access by telephone customers
and other carriers to local exchange facilities, and long distance services
within specified geographic areas.
24
<PAGE>
Net operating revenues increased 7 percent in both 1995 and 1994. Increased
local service revenues reflect a 4.7 percent and 4.8 percent increase in the
number of access lines served for 1995 and 1994, respectively, as well as growth
in add-on services, such as custom calling features.
Network access revenues, derived from interexchange long distance carriers'
use of the local network to complete calls, increased during 1995 and 1994 as a
result of increased traffic volumes, a portion of which is due to a migration of
traffic related to toll service revenues as described below. The increase was
partially offset by periodic reductions in network access rates charged. The FCC
announced a new interim interstate price caps plan during the first quarter of
1995. Under the new plan, which became effective August 1, 1995, the local
division adopted a rate formula based on the maximum productivity factors that
effectively removed the earnings cap on the division's interstate access
revenues. Interstate access revenues comprise approximately 60 percent of the
division's network access revenues.
Toll service revenues, related to the provision of long distance services
within specified geographical areas and the reselling of interexchange long
distance services, decreased 8 percent in 1995 following an increase of 5
percent in 1994. The 1995 decrease primarily reflects increased competition in
the intrastate long distance markets as interexchange long distance carriers are
now offering intraLATA long distance service in certain states. While toll
service revenues have declined as a result of this increased competition, this
reduction has been partially recovered through an increase in network access
revenues resulting from additional use of the local network by interexchange
long distance carriers.
Other revenues, including revenues from directory publishing fees, billing
and collection services, and sales of telecommunications equipment, increased 22
percent in 1995 and 14 percent in 1994 generally due to growth in equipment
sales and increases in nonregulated revenues.
Plant operations expense includes network operations costs; repair and
maintenance costs of property, plant and equipment; and other costs associated
with the provision of local exchange services. The 5 percent and 8 percent
increases in such costs in 1995 and 1994, respectively, were primarily related
to increases in the costs of providing services resulting from access line
growth. Additionally, certain states have implemented revised toll plans
requiring payment of access charges for calls terminating in the service areas
of other local exchange carriers, resulting in increased plant operations
expense. The 1995 increase also reflects increases in repair and maintenance
costs in the division's Florida and Mid-Atlantic regions related to bad weather
conditions, including the flooding rains and hurricanes which occurred in 1995.
Increased expenditures related to switching system software associated with
advanced calling features contributed to the higher level of plant operations
expense in 1994.
Depreciation and amortization expense increased $41 million in 1995,
following a $62 million increase in 1994. These increases generally reflect
system-wide plant additions and also include the effects of depreciation rate
changes, special short-term amortizations and nonrecurring charges approved by
state regulatory commissions.
Customer operations expense includes costs associated with business office
operations and billing services, marketing costs, and expenses related to
providing operator and directory assistance and other customer services. These
costs increased 9 percent and 3 percent in 1995 and 1994, respectively. The
increases in 1995 and 1994 were related to increased costs associated with the
overall growth in access lines. Expense levels in 1995 were also affected by
marketing costs to promote new products and services, increased business office
operations costs resulting from longer office hours for greater customer
accessibility and customer costs related to increased nonregulated activities.
Other operating expenses increased $41 million and $42 million in 1995 and
1994, respectively, primarily due to costs associated with the growth in
equipment sales.
In November 1995, Sprint initiated a realignment and restructuring of its
local communications division, including the elimination of approximately 1,600
positions primarily in the network and finance functions. This restructuring is
intended to streamline current processes in order to reduce costs in an
increasingly competitive marketplace. These actions resulted in a nonrecurring
charge of $88 million. The accrued liability associated with this charge
specifically relates to the benefits that affected employees will receive upon
termination.
25
<PAGE>
Sprint adopted accounting principles for a competitive marketplace
effective December 31, 1995 and discontinued applying Statement of Financial
Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types
of Regulation," to its local division. The accounting impact to Sprint was a
noncash, extraordinary charge of $565 million, net of related income tax
benefits. See Note 2 of Notes to Consolidated Financial Statements for
additional discussion.
Sprint does not expect the discontinued application of SFAS No. 71 to have
a significant impact on 1996 depreciation expense. Additionally, future business
transactions of the local division will be recorded following their economic
substance, and regulatory assets and liabilities pursuant to SFAS No. 71 will no
longer be recognized. Furthermore, revenues and related net income of
nonregulated operations attributable to transactions with Sprint's regulated
local exchange carriers, which were previously not eliminated in the
accompanying Consolidated Financial Statements in accordance with SFAS No. 71,
will be eliminated. Intercompany revenues of such entities amounted to $262
million, $285 million and $225 million in 1995, 1994 and 1993, respectively.
Product Distribution and Directory Publishing
<TABLE>
<CAPTION>
As of or for the Years Ended
December 31,
---------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
(In Millions)
<S> <C> <C> <C>
Net operating revenues $ 1,148.0 $ 1,108.7 $ 945.2
Operating expenses
Costs of services and products 965.8 938.2 801.0
Selling, general and administrative 88.1 88.8 74.7
Depreciation and amortization 7.4 6.9 5.4
Merger and integration costs -- -- 2.5
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Total operating expenses 1,061.3 1,033.9 883.6
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Operating income $ 86.7 $ 74.8 $ 61.6 (1)
-- ------------- --- ------------- -- -------------
Operating margin 7.6% 6.7% 6.5% (1)
-- ------------- --- ------------- -- -------------
Capital expenditures $ 7.8 $ 6.7 $ 9.0
-- ------------- --- ------------- -- -------------
Identifiable assets $ 395.4 $ 376.2 $ 341.8
-- ------------- --- ------------- -- -------------
<FN>
(1) Excluding the merger and integration costs of $2.5 million, operating income and margin for 1993 would have
been $64.1 million and 6.8 percent, respectively.
</FN>
</TABLE>
North Supply, a wholesale distributor of telecommunications products, had
1995 net operating revenues of $854 million compared to $829 million in 1994 and
$677 million in 1993. The increase in 1995 primarily reflects growth in sales to
nonaffiliates as well as overall price increases. The increase in 1994 primarily
reflects increased sales to the local division, partially as a result of sales
to the merged Centel telephone operations. As a percentage of net operating
revenues, operating expenses for 1995, 1994 and 1993 were 94.4 percent, 95.5
percent and 96.5 percent, respectively.
Sprint Publishing & Advertising, a publisher and marketer of telephone
directories, had net operating revenues of $294 million in 1995 compared to $280
million in 1994 and $268 million in 1993. As a percentage of net operating
revenues, operating expenses for 1995, 1994 and 1993 were 86.9 percent, 86.7
percent and 84.9 percent, respectively.
26
<PAGE>
Nonoperating Items
Interest Expense
Interest expense related to continuing operations totaled $261 million in
1995 compared to $301 million in 1994 and $367 million in 1993. Interest expense
related to the operations of Cellular totaled $124 million, $97 million and $85
million in 1995, 1994 and 1993, respectively, and is included in discontinued
operations in the Consolidated Statements of Income. Sprint's average debt
outstanding, including the debt incurred to fund intercompany advances to
Cellular, increased by $668 million in 1995 compared to the prior year. The
increase in average debt outstanding during 1995 was primarily from short-term
borrowings incurred to fund investments in Sprint Spectrum. Because the interest
costs on the borrowings associated with Sprint's investment in this venture are
being capitalized until Sprint Spectrum commences operations, interest expense
did not increase proportionately to the increase in average debt outstanding.
Sprint's effective interest rate decreased 44 basis points from 1994 to 1995
primarily due to the increase in short-term borrowings as a percent of total
borrowings. Sprint's average debt outstanding decreased by $334 million and $596
million in 1994 and 1993, respectively, and the effective interest rate
decreased 52 and 15 basis points, respectively, due to debt refinancings which
occurred during 1993 and 1992.
Other Expense, Net
The components of other income (expense) are as follows (in millions):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
----------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Loss on sales of accounts receivable $ (38.6) $ (28.7) $ (22.0)
Equity in loss of Sprint Spectrum (31.4) (1.3) --
Global One venture costs (22.9) (6.1) --
Gain on sale of investment in equity securities -- 34.7 --
Other, net (0.3) (0.7) (12.0)
- -------------------------------------------------------------------------------------------------------------------
Total other expense, net $ (93.2) $ (2.1) $ (34.0)
----------------------------------------------------
</TABLE>
Income Tax Provision
Sprint's income tax provisions for 1995, 1994 and 1993 resulted in
effective tax rates of 36.1 percent, 35.2 percent and 36.4 percent,
respectively. During 1993, the Revenue Reconciliation Act of 1993 was enacted
which, among other changes, raised the federal income tax rate to 35 percent
from 34 percent. As a result, Sprint adjusted its deferred income tax assets and
liabilities to reflect the revised rate. See Note 5 of Notes to Consolidated
Financial Statements for information regarding the differences which cause the
effective income tax rates to vary from the statutory federal income tax rate.
As of December 31, 1995, Sprint had recorded deferred income tax assets of
$501 million, net of a $17 million valuation allowance. See Note 5 of Notes to
Consolidated Financial Statements for information regarding the sources which
gave rise to these assets. Sprint's management has determined that it is more
likely than not that these deferred income tax assets, net of the valuation
allowance, will be realized based on current income tax laws and expectations of
future taxable income stemming from the reversal of existing deferred tax
liabilities or ordinary operations. Uncertainties surrounding income tax law
changes, shifts in operations between state taxing jurisdictions, and future
operating income levels may, however, affect the ultimate realization of all or
some portion of these deferred income tax assets.
27
<PAGE>
Discontinued Operations - Cellular Division
As a result of the tax-free spin-off of Cellular to shareholders of Sprint
common stock, the operating results, net assets and cash flows of Cellular have
been separately classified as discontinued operations and are excluded from
amounts for the continuing operations of Sprint.
Cellular's operating results exclude its share of Sprint's corporate
overhead expenses. These expenses have been reallocated to Sprint's continuing
operations in the accompanying Consolidated Statements of Income as well as in
the accompanying Segmental Results of Operations. Accordingly, Cellular's
results of operations as reflected below may not be indicative of its futures
operating results once the spin-off is completed. Such expenses were $13
million, $12 million and $12 million for each of the years ended December 31,
1995, 1994 and 1993, respectively. See Note 3 of Notes to Consolidated Financial
Statements for further discussion.
Cellular's results of operations are summarized as follows:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-----------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
(In Millions)
<S> <C> <C> <C>
Net operating revenues $ 834.4 $ 626.5 $ 410.5
Operating expenses 675.6 529.4 374.0
- -------------------------------------------------------------------------------------------------------------------
Operating income 158.8 97.1 36.5
Interest expense (124.0) (97.3) (85.4)
Other income (expense), net 10.9 (5.6) 11.7
- -------------------------------------------------------------------------------------------------------------------
Income (Loss) before income taxes 45.7 (5.8) (37.2)
Income tax provision (benefit) 31.2 9.7 (0.7)
Cumulative effect of change in accounting principle, net -- -- (1.6)
- -------------------------------------------------------------------------------------------------------------------
Income (Loss) from cellular division $ 14.5 $ (15.5) $ (38.1)
----------------------------------------------------
</TABLE>
Net operating revenues increased $208 million during 1995 and $216 million
during 1994. These increases resulted principally from the growth in the number
of cellular customers, which increased 44 percent in 1995 and 59 percent in
1994. The effect of this growth was partially offset by a decline in service
revenue per customer.
Operating expenses increased $146 million for 1995 and $155 million for
1994. These increases resulted principally from the growth in the number of
cellular customers and increased advertising costs.
Discontinued Operations - Other
For the year ended December 31, 1994, Sprint recognized $7 million of
income associated with the settlement of matters related to a discontinued
operation. Also, during 1993, Sprint incurred a loss from discontinued
operations of $12 million, net of income tax benefits.
Extraordinary Items
As described in Note 2 of Notes to Consolidated Financial Statements,
Sprint adopted accounting principles for a competitive marketplace and
discontinued applying SFAS No. 71 to its local division effective December 31,
1995. The application of SFAS No. 71 requires the accounting recognition of the
rate actions of regulators where appropriate. Sprint determined that the local
division no longer met the criteria for application of SFAS No. 71 due to
changes in the regulatory framework, which continues to evolve from rate-base
regulation to price regulation, as the latter does not provide for the recovery
of specific costs. In addition, the division operates in an evolving competitive
environment in which the level and types of competition are increasing such that
they may no longer allow for service and product pricing that provides for the
recovery of specific costs. As a result, Sprint recorded a noncash,
extraordinary charge of $565 million ($1.61 per share), net of related income
tax benefits.
28
<PAGE>
In 1993, Sprint incurred extraordinary losses related to the early
extinguishment of debt of $29 million, net of related income tax benefits.
Accounting Changes
Effective January 1, 1993, Sprint changed its method of accounting for
postretirement and postemployment benefits by adopting SFAS No. 106 and No. 112
and effected another accounting change. The cumulative effect of these changes
in accounting principles reduced 1993 net income by $383 million ($1.12 per
share).
Financial Condition
Sprint's consolidated assets totaled $15.2 billion at December 31, 1995
compared to $14.5 billion at December 31, 1994. Accounts receivable increased
$136 million from 1994 to 1995, generally due to a 6 percent increase in
consolidated net operating revenues. Sprint's allowance for doubtful accounts as
a percentage of gross accounts receivable increased from 8 percent at December
31, 1994 to 13 percent at December 31, 1995. The increased percentage generally
reflects the timing of sales and customer payments as well as reserves
established during 1995 relative to certain of the long distance division's
reseller customers. The reseller market has experienced significant competition,
which has had a negative impact on these customers' repayment patterns. This
increase has not had a significant impact on the revenue growth for the long
distance division. Property, plant and equipment, net of accumulated
depreciation, decreased $543 million from 1994 to 1995. This decrease was
primarily due to the discontinued application of SFAS No. 71, which resulted in
a $979 million increase to accumulated depreciation. Exclusive of this
write-off, net property, plant and equipment increased $436 million due to
increased capital expenditures to enhance and upgrade Sprint's networks, to
expand service capabilities and to increase productivity.
Current maturities of long-term debt decreased $52 million from 1994 to
1995 due to scheduled debt payments. As of December 31, 1995, Sprint's total
capitalization aggregated $10.4 billion, consisting of short-term borrowings,
long-term debt (including current maturities), redeemable preferred stock, and
common stock and other shareholders' equity. Short-term borrowings and long-term
debt (including current maturities) comprised 54.8 percent of total
capitalization as of December 31, 1995 compared to 52.0 percent at year-end
1994. The increase in the debt-to-capital ratio is attributable to increased
short-term borrowings to fund investments in Sprint Spectrum.
Liquidity and Capital Resources
Cash Flows - Operating Activities
Cash flows from operating activities, which are Sprint's primary source of
liquidity, were $2.6 billion, $2.3 billion and $2.0 billion in 1995, 1994 and
1993, respectively, for continuing operations. The increased cash flows in 1995
reflect improved operating results and reduced working capital requirements.
Operating cash flows for 1994 and 1993 reflect improved operating results,
partially offset by expenditures of $86 million and $155 million for 1994 and
1993, respectively, related to the 1993 merger, integration and restructuring
actions.
Cash Flows - Investing Activities
Investing activities of Sprint's continuing operations used cash of $2.8
billion, $1.8 billion and $1.5 billion in 1995, 1994 and 1993, respectively.
Capital expenditures, which represent Sprint's most significant investing
activity, were $1.9 billion, $1.8 billion and $1.4 billion in 1995, 1994 and
1993, respectively.
Long distance capital expenditures were incurred each year primarily to
meet increased demand for data related services, to enhance network reliability
and to upgrade capabilities for providing new products and services. 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.
29
<PAGE>
During 1995 and 1994, Sprint contributed $911 million and $52 million,
respectively, to Sprint Spectrum. In 1995, $840 million of this contribution was
used to fund Sprint's share of payments to the FCC for licenses acquired in the
PCS auction. The remainder was used to fund Sprint's share of the venture's
acquisition of a limited partnership interest in APC, as well as related capital
and operating requirements. The 1994 contribution funded Sprint's share of the
initial payment to the FCC for the PCS auction. Investing activities for 1994
also included $118 million received in connection with the sale of an investment
in equity securities.
Cash Flows - Financing Activities
Sprint's financing activities provided cash of $423 million in 1995 and
used cash of $457 million and $615 million in 1994 and 1993, respectively.
During 1995, Sprint issued $261 million of long-term debt and increased
short-term borrowings $1.1 billion. The proceeds from these borrowings were
primarily used to fund commitments associated with Sprint Spectrum. Proceeds
were also used to repay scheduled long-term debt maturities and to repay $282
million of 9.875 percent notes prior to maturity. The redemption premiums
associated with this early retirement were not significant.
Long-term debt retirements during 1994 included the redemption of $102
million of debt called, prior to scheduled maturity, in 1993.
During 1993, a significant level of debt refinancing occurred in order to
take advantage of lower interest rates. Accordingly, a majority of the proceeds
from long-term borrowings in 1993 was used to finance the redemption prior to
scheduled maturities of $1.2 billion of debt.
During 1995, Sprint renewed its revolving credit agreement with a syndicate
of domestic and international banks for five years, through October 2000. In
addition to the extension, the revolving credit agreement was increased to $1.5
billion from $1.1 billion.
Sprint paid dividends to common and preferred shareholders of $352 million,
$349 million and $347 million in 1995, 1994 and 1993, respectively. Sprint's
indicated annual dividend rate on common stock is currently $1.00 per share.
Cash Flows - Discontinued Operations
Cellular's cash flows from operating activities were $163 million, $173
million and $198 million in 1995, 1994 and 1993, respectively. Cellular's
investing activities used cash of $325 million, $272 million and $170 million in
1995, 1994 and 1993, respectively, primarily consisting of capital expenditures.
The increases in capital expenditures reflect the significant increases in the
number of cellular customers served.
Capital Requirements
On January 31, 1996, DT and FT invested $3.0 billion in Sprint and, upon
the spin-off of Cellular, will make an additional aggregate investment of
approximately $500 million to $700 million. Also in conjunction with the
spin-off, Cellular will repay approximately $1.4 billion of intercompany debt
payable to Sprint and its subsidiaries. Sprint does not expect to require any
additional external financing during 1996.
Cash proceeds received from DT, FT and Cellular are expected to be used to
repay approximately $2.1 billion in short-term borrowings and approximately $500
million in long-term borrowings. Approximately $600 million of the proceeds will
also be required to fund the termination of an accounts receivable sales
agreement. An additional $600 million will be used to fund commitments
associated with Sprint Spectrum and its affiliates. Remaining cash proceeds will
be invested on a temporary basis.
During 1996, Sprint anticipates funding capital expenditures of
approximately $2.0 billion and dividends of approximately $426 million with cash
flows from operating activities.
30
<PAGE>
Liquidity
At year-end 1995, Sprint had the ability to borrow $880 million under
revolving credit agreements 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. Additionally, pursuant to shelf
registration statements filed with the Securities and Exchange Commission, up to
$1.0 billion of debt securities could be offered for sale as of December 31,
1995.
The aggregate amount of additional borrowings which can be incurred is
ultimately limited by certain covenants contained in existing debt agreements.
As of December 31, 1995, Sprint had borrowing capacity of approximately $3.6
billion under the most restrictive of its debt covenants.
General Hedging Policies
Sprint, on a limited basis, utilizes certain derivative financial
instruments in an effort to manage exposure to interest rate risk and foreign
exchange risk. Sprint's utilization of such derivative financial instruments
related to hedging activities is generally limited to interest rate swap
agreements and forward contracts and options in foreign currencies. Sprint will
in no circumstance take speculative positions and create an exposure to benefit
from market fluctuations. All hedging activity is in accordance with
board-approved policies. Any potential loss or exposure related to Sprint's use
of derivative instruments is immaterial to its overall operations, financial
condition and liquidity. See Note 11 of Notes to Consolidated Financial
Statements for more information related to Sprint's portfolio of derivative
instruments.
Interest Rate Risk Management
Sprint's interest rate risk management program focuses on minimizing
vulnerability of net income to movements in interest rates, setting an optimal
mixture of floating-rate and fixed-rate debt in the liability portfolio and
preventing liquidity risk. Sprint primarily employs a gap methodology to measure
interest rate exposure and utilizes simulation analysis to manage interest rate
risk. Sprint takes an active stance in modifying hedge positions to benefit from
the value of timing flexibility and fixed-rate/floating-rate adjustments.
Foreign Exchange Risk Management
Sprint's foreign exchange risk management program focuses on optimizing
consolidated cash flows and stabilizing accounting results. Sprint does not
hedge translation exposure because it believes that optimizing consolidated cash
flows will, over time, maintain shareholder value. Sprint's primary transaction
exposure in foreign currencies results from changes in foreign exchange rates
between the dates Sprint incurs and settles liabilities (payable in a foreign
currency) to overseas telephone companies for the costs of terminating
international calls made by Sprint's domestic customers.
Impact of Recently Issued Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," which is effective for fiscal years beginning after
December 15, 1995. SFAS No. 121 requires that assets to be held and used be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Sprint does not
anticipate that the requirements of SFAS No. 121 will have a material effect on
its 1996 operating results.
31
<PAGE>
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which is effective for fiscal years beginning after December 15,
1995. SFAS No. 123 encourages companies to account for stock compensation awards
under a fair value based method, whereby compensation cost is measured at the
grant date based on the value of the award and is recognized over a service
period. Companies may choose not to apply the new accounting method and may
continue to apply current accounting requirements, which generally result in no
recognition of compensation cost for most fixed stock option plans. Those that
so choose, however, will be required to disclose in the notes to the financial
statements what net income and earnings per share would have been if they had
followed the FASB's new accounting method. Sprint has elected to continue to
apply the current accounting requirements for stock-based compensation and will
comply with the disclosure requirements in the notes to its 1996 consolidated
financial statements.
32
<PAGE>
MANAGEMENT REPORT
The management of Sprint Corporation has the responsibility for the
integrity and objectivity of the information contained in this Annual Report.
Management is responsible for the consistency of reporting such information and
for ensuring that generally accepted accounting principles are used.
In discharging this responsibility, management maintains a comprehensive
system of internal controls and supports an extensive program of internal
audits, has made organizational arrangements providing appropriate divisions of
responsibility and has established communication programs aimed at assuring that
its policies, procedures and codes of conduct are understood and practiced by
its employees.
The consolidated financial statements included in this Annual Report have
been audited by Ernst & Young LLP, independent auditors. Their audit was
conducted in accordance with generally accepted auditing standards and their
report is included herein.
The responsibility of the Board of Directors for these financial statements
is pursued primarily through its Audit Committee. The Audit Committee, composed
entirely of directors who are not officers or employees of Sprint, meets
periodically with the internal auditors and independent auditors, both with and
without management present, to assure that their respective responsibilities are
being fulfilled. The internal and independent auditors have full access to the
Audit Committee to discuss auditing and financial reporting matters.
/s/ W. T. Esrey
William T. Esrey
Chairman and Chief Executive Officer
/s/ Arthur B. Krause
Arthur B. Krause
Executive Vice President and Chief Financial Officer
33
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Sprint Corporation
We have audited the accompanying consolidated balance sheets of Sprint
Corporation (Sprint) as of December 31, 1995 and 1994, and the related
consolidated statements of income, cash flows, and common stock and other
shareholders' equity for each of the three years in the period ended December
31, 1995. Our audits also included the financial statement schedule listed in
the Index to Financial Statements, Financial Statement Schedule and
Supplementary Data. These financial statements and the schedule are the
responsibility of the management of Sprint. Our responsibility is to express an
opinion on these financial statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Sprint at December 31, 1995 and 1994, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
Also in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
As discussed in Notes 1 and 2 to the consolidated financial statements,
Sprint discontinued accounting for the operations of its local
telecommunications division in accordance with Statement of Financial Accounting
Standards No. 71, "Accounting for the Effects of Certain Types of Regulation,"
in 1995. As discussed in Notes 1 and 4 to the consolidated financial statements,
Sprint changed its method of accounting for postretirement benefits,
postemployment benefits and circuit activity costs in 1993.
ERNST & YOUNG LLP
Kansas City, Missouri
February 14, 1996
34
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME Sprint Corporation
For the Years Ended December 31,
-----------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
(In Millions, Except Per Share Data)
<S> <C> <C> <C>
Net Operating Revenues $ 12,765.1 $ 11,986.6 $ 10,914.7
Operating Expenses
Costs of services and products 6,504.9 6,154.5 5,591.9
Selling, general and administrative 2,871.9 2,755.4 2,532.5
Depreciation and amortization 1,466.4 1,386.0 1,283.7
Merger, integration and restructuring costs 87.6 -- 292.5
-------------------------------------------------------------------------------------------------------------
Total operating expenses 10,930.8 10,295.9 9,700.6
-------------------------------------------------------------------------------------------------------------
Operating Income 1,834.3 1,690.7 1,214.1
Interest expense (260.7) (300.7) (367.0)
Other expense, net (93.2) (2.1) (34.0)
- -------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes 1,480.4 1,387.9 813.1
Income tax provision (534.3) (488.7) (296.0)
- -------------------------------------------------------------------------------------------------------------------
Income From Continuing Operations 946.1 899.2 517.1
Discontinued operations, net
Cellular division 14.5 (15.5) (38.1)
Other -- 7.0 (12.3)
Extraordinary items, net (565.3) -- (29.2)
Cumulative effect of changes in accounting principles, net -- -- (382.6)
- -------------------------------------------------------------------------------------------------------------------
Net income 395.3 890.7 54.9
Preferred stock dividends (2.6) (2.7) (2.8)
- -------------------------------------------------------------------------------------------------------------------
Earnings applicable to common stock $ 392.7 $ 888.0 $ 52.1
-----------------------------------------------
Earnings Per Common Share
Continuing operations $ 2.69 $ 2.57 $ 1.50
Discontinued operations 0.04 (0.02) (0.15)
Extraordinary items (1.61) -- (0.08)
Cumulative effect of changes in accounting principles -- -- (1.12)
- -------------------------------------------------------------------------------------------------------------------
Total $ 1.12 $ 2.55 $ 0.15
-----------------------------------------------
Weighted average number of common shares 350.1 348.7 343.7
-----------------------------------------------
Dividends per common share $ 1.00 $ 1.00 $ 1.00
-----------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS Sprint Corporation
As of December 31,
------------------------------------
1995 1994
- ------------------------------------------------------------------------------------------------------------------------
Assets (In Millions)
Current assets
<S> <C> <C>
Cash and equivalents $ 124.2 $ 113.7
Accounts receivable, net of allowance for doubtful accounts of $222.5
million ($126.9 million in 1994) 1,523.7 1,387.9
Receivable from cellular division 1,400.0 --
Inventories 171.0 187.5
Deferred income taxes 45.5 54.2
Prepaid expenses 166.6 144.5
Other 188.4 155.4
------------------------------------------------------------------------------------------------------------------
Total current assets 3,619.4 2,043.2
Investments in equity securities 262.9 177.6
Property, plant and equipment
Long distance communications services 6,773.7 6,056.3
Local communications services 12,603.1 11,827.4
Other 539.1 498.6
------------------------------------------------------------------------------------------------------------------
19,915.9 18,382.3
Less accumulated depreciation 10,200.1 8,123.5
------------------------------------------------------------------------------------------------------------------
9,715.8 10,258.8
Investments in affiliates 1,130.1 198.6
Receivable from cellular division -- 1,271.1
Net investment in cellular division 106.9 59.7
Other assets 360.8 538.5
--------------------------------------------------------------------------------------------------------------------
$ 15,195.9 $ 14,547.5
------------------------------------
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS (continued) Sprint Corporation
As of December 31,
-----------------------------------
1995 1994
- ------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity (In Millions)
Current liabilities
<S> <C> <C>
Current maturities of long-term debt $ 280.4 $ 332.4
Short-term borrowings 2,144.0 --
Accounts payable 938.9 927.8
Accrued interconnection costs 617.7 527.6
Accrued taxes 235.5 237.9
Other 925.6 817.4
-----------------------------------------------------------------------------------------------------------------
Total current liabilities 5,142.1 2,843.1
Long-term debt 3,253.0 4,604.8
Deferred credits and other liabilities
Deferred income taxes and investment tax credits 843.4 1,197.5
Postretirement and other benefit obligations 889.3 845.9
Other 393.0 494.3
-----------------------------------------------------------------------------------------------------------------
2,125.7 2,537.7
Redeemable preferred stock 32.5 37.1
Common stock and other shareholders' equity
Common stock, par value $2.50 per share, authorized 500.0 million shares,
issued 349.2 million (348.6 million in 1994), and outstanding 349.2
million (348.3 million in 1994) 872.9 871.4
Capital in excess of par or stated value 960.0 942.9
Retained earnings 2,766.5 2,730.9
Other 43.2 (20.4)
-----------------------------------------------------------------------------------------------------------------
4,642.6 4,524.8
-----------------------------------------------------------------------------------------------------------------
$ 15,195.9 $ 14,547.5
----------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
37
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS Sprint Corporation
For the Years Ended December 31,
----------------- ---------------- -----------------
1995 1994 1993
- ----------------------------------------------------------------- ----------------- ---------------- -----------------
(In Millions)
Operating Activities
<S> <C> <C> <C>
Net income $ 395.3 $ 890.7 $ 54.9
Adjustments to reconcile net income to net cash provided by
operating activities:
(Income) Loss from cellular division (14.5) 15.5 38.1
Extraordinary items 565.3 -- 20.4
Cumulative effect of changes in accounting principles -- -- 382.6
Depreciation and amortization 1,466.4 1,386.0 1,283.7
Deferred income taxes and investment tax credits 5.8 53.2 (39.1)
Changes in operating assets and liabilities
Accounts receivable, net (135.8) (226.5) (166.4)
Inventories and other current assets (38.6) (56.1) (9.9)
Accounts payable and other current liabilities 178.5 120.2 315.3
Noncurrent assets and liabilities, net 124.0 128.5 33.3
Other, net 20.0 34.5 94.9
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Net cash provided by continuing operations 2,566.4 2,346.0 2,007.8
Net cash provided by cellular division 162.5 172.9 197.7
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Net cash provided by operating activities 2,728.9 2,518.9 2,205.5
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Investing Activities
Capital expenditures (1,857.3) (1,751.6) (1,429.8)
Proceeds from sale of investment in equity securities -- 117.7 --
Investments in affiliates (948.7) (74.1) (31.2)
Other, net (10.4) (44.4) (9.3)
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Net cash used by continuing operations (2,816.4) (1,752.4) (1,470.3)
Net cash used by cellular division (324.6) (272.4) (169.9)
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Net cash used by investing activities (3,141.0) (2,024.8) (1,640.2)
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Financing Activities
Proceeds from long-term debt 260.7 107.9 840.4
Retirements of long-term debt (630.0) (597.0) (1,589.0)
Net increase in notes payable and commercial paper 1,109.5 321.5 393.5
Proceeds from common stock issued 16.9 42.7 70.8
Proceeds from employee stock purchase installments 38.8 33.1 28.3
Dividends paid (351.5) (349.4) (347.1)
Other, net (21.8) (15.7) (11.5)
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Net cash provided (used) by financing activities 422.6 (456.9) (614.6)
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Increase (Decrease) in Cash and Equivalents 10.5 37.2 (49.3)
Cash and Equivalents at Beginning of Year 113.7 76.5 125.8
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Cash and Equivalents at End of Year $ 124.2 $ 113.7 $ 76.5
--- ------------- -- ------------- --- -------------
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Supplemental Cash Flows Information
Cash paid for interest - continuing operations $ 263.5 $ 320.8 $ 368.2
Cash paid for interest - cellular division $ 124.0 $ 97.3 $ 85.4
Cash paid for income taxes $ 532.8 $ 435.1 $ 292.4
Noncash Activities
Common stock contributed to employee savings plans, at market $ -- $ 31.0 $ 39.0
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF COMMON STOCK Sprint Corporation
AND OTHER SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1995, 1994 and 1993
- -------------------------------------------------------------------------------------------------------------------------
Capital in
Excess of
Par or
Common Stock Stated Value Retained
Earnings Other Total
- -------------------------------------------------------------------------------------------------------------------
(In Millions)
Balance as of January 1, 1993 (338.9 million
<S> <C> <C> <C> <C> <C>
shares issued and outstanding) $ 847.1 $ 717.5 $ 2,451.7 $ (44.7) $ 3,971.6
Net income -- -- 54.9 -- 54.9
Common stock dividends -- -- (324.5) -- (324.5)
Preferred stock dividends -- -- (2.8) -- (2.8)
Employee stock purchase and other installments
received, net -- -- -- 30.8 30.8
Common stock issued 11.0 98.4 -- (2.4) 107.0
Change in unrealized holding gains on
investments in equity securities, net -- -- -- 64.8 64.8
Other, net 0.4 11.5 4.9 (0.3) 16.5
- -------------------------------------------------------------------------------------------------------------------
Balance as of December 31, 1993 (343.4 million
shares issued and outstanding) 858.5 827.4 2,184.2 48.2 3,918.3
Net income -- -- 890.7 -- 890.7
Common stock dividends -- -- (346.7) -- (346.7)
Preferred stock dividends -- -- (2.7) -- (2.7)
Employee stock purchase and other installments
received, net -- -- -- 15.0 15.0
Common stock issued 12.8 111.9 -- (53.4) 71.3
Change in unrealized holding gains on
investments in equity securities, net -- -- -- (20.5) (20.5)
Other, net 0.1 3.6 5.4 (9.7) (0.6)
- -------------------------------------------------------------------------------------------------------------------
Balance as of December 31, 1994 (348.6 million
shares issued and 348.3 million shares
outstanding) 871.4 942.9 2,730.9 (20.4) 4,524.8
Net income -- -- 395.3 -- 395.3
Common stock dividends -- -- (348.9) -- (348.9)
Preferred stock dividends -- -- (2.6) -- (2.6)
Other installments received, net -- -- -- 3.0 3.0
Common stock issued 1.4 13.5 -- -- 14.9
Change in unrealized holding gains on
investments in equity securities, net -- -- -- 54.6 54.6
Other, net 0.1 3.6 (8.2) 6.0 1.5
- -------------------------------------------------------------------------------------------------------------------
Balance as of December 31, 1995 (349.2 million
shares issued and outstanding) $ 872.9 $ 960.0 $ 2,766.5 $ 43.2 $ 4,642.6
------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Sprint Corporation
1. Summary of Significant Accounting Policies
This summary of significant accounting policies of Sprint Corporation is
presented to assist in understanding the accompanying consolidated financial
statements.
Basis of Consolidation and Presentation
The accompanying consolidated financial statements include the accounts of
Sprint Corporation and its wholly-owned and majority-owned subsidiaries
(Sprint). Investments in entities in which Sprint does not have a controlling
interest are accounted for using the equity method.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Prior years' financial statements have been restated to reflect Sprint's
spin-off of its cellular and wireless communications services division
(Cellular) (see Note 3). The operating results, net assets and cash flows of
Cellular are separately classified as discontinued operations and are excluded
from amounts reported for the continuing operations of Sprint. Intercompany
transactions with Cellular and its subsidiaries, which were previously
eliminated in consolidation, are now reflected in Sprint's consolidated
financial statements.
Certain other amounts previously reported for prior periods have been
reclassified to conform to the current period presentation in the accompanying
consolidated financial statements. Such reclassifications had no effect on the
results of operations or shareholders' equity as previously reported.
In accordance with Statement of Financial Accounting Standards (SFAS) No.
71, "Accounting for the Effects of Certain Types of Regulation," revenues and
related net income of nonregulated operations attributable to intercompany
transactions with Sprint's regulated telephone companies have not been
eliminated in the accompanying consolidated financial statements. Intercompany
revenues of such entities amounted to $262 million, $285 million and $225
million in 1995, 1994 and 1993, respectively. In conjunction with the adoption
of accounting principles for a competitive marketplace (see Note 2), such
intercompany amounts will be eliminated beginning in 1996. All other significant
intercompany transactions have been eliminated.
Classification of Operations
The long distance communications services division provides domestic and
international voice, video and data communications services. The terms under
which the division offers its services to the public are subject to different
levels of state and federal regulation, but rates are generally not subject to
rate-base regulation.
The local communications services division consists principally of the
operations of Sprint's 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 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.
40
<PAGE>
1. Summary of Significant Accounting Policies (continued)
Revenue Recognition
Operating revenues for the long distance and local communications services
divisions are recognized as communications services are rendered. Operating
revenues for the long distance communications services division are recorded net
of an estimate for uncollectible accounts. Operating revenues for Sprint's
product distribution business are recognized upon delivery of products to
customers.
Cash and Equivalents
Cash equivalents generally include highly liquid investments with original
maturities of three months or less and are stated at cost, which approximates
market value. As part of its cash management program, Sprint utilizes controlled
disbursement banking arrangements. As of December 31, 1995 and 1994, outstanding
checks in excess of cash balances of $131 million and $126 million,
respectively, are included in accounts payable. Sprint had sufficient funds
available to fund these outstanding checks when they were presented for payment.
Investments in Equity Securities
Investments in equity securities are classified as available for sale and
are reported at fair value (estimated based on quoted market prices) as of
December 31, 1995 and 1994. As of December 31, 1995 and 1994, the cost of such
investments was $109 million each year. These investments had gross unrealized
holding gains of $154 million and $69 million for 1995 and 1994, respectively,
which are reflected as an addition to other shareholders' equity, net of related
income taxes.
During 1994, Sprint sold an investment in equity securities, realizing a
gain of $35 million.
Inventories
Inventories, consisting principally of those related to Sprint's product
distribution business, are stated at the lower of cost (principally first-in,
first-out method) or market.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Generally, ordinary
asset retirements and disposals are charged against accumulated depreciation
with no gain or loss recognized. Repairs and maintenance costs are expensed as
incurred.
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.
41
<PAGE>
1. Summary of Significant Accounting Policies (continued)
Depreciation
The cost of property, plant and equipment for Sprint's local communications
division was generally depreciated on a straight-line composite basis over the
lives prescribed by regulatory commissions. In connection with the
discontinuation of SFAS No. 71, Sprint will begin recording depreciation expense
based on estimated economic useful lives rather than those prescribed by
regulatory commissions (see Note 2).
The cost of property, plant and equipment of Sprint's other divisions is
depreciated generally on a straight-line basis over the estimated economic
useful lives.
Income Taxes
Deferred income taxes are provided for certain temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for tax purposes.
Investment tax credits related to regulated telephone property, plant and
equipment have been deferred and are being amortized over the estimated useful
lives of the related assets.
Capitalized Interest
Interest costs associated with the construction of capital assets,
including interest costs on borrowings incurred to fund Sprint's investment in
Sprint Spectrum, are capitalized. Total amounts capitalized during 1995, 1994
and 1993 were $57 million, $8 million and $7 million, respectively.
Earnings Per Share
Earnings per common share amounts are based on the weighted average number
of shares both outstanding and issuable assuming exercise of all dilutive
options, as applicable. See Note 12 for a discussion of the consummation of the
Global One joint venture and the pro forma impact of the related issuance of
shares on earnings per share.
2. Adoption of Accounting Principles for a Competitive Marketplace
Effective December 31, 1995, Sprint determined that its local
communications services division no longer met the criteria necessary for the
continued application of the provisions of SFAS No. 71. As a result of the
decision to discontinue the application of SFAS No. 71, Sprint recorded a
noncash, extraordinary charge of $565 million, net of income tax benefits of
$437 million.
Sprint's determination that it was no longer eligible for the continued
application of the accounting required by SFAS No. 71 was based on changes in
the regulatory framework, which continues to evolve from rate-base regulation to
price regulation and the convergence of competition in the telecommunications
industry. Based on these occurrences, Sprint no longer believes that it can be
assured that prices will be maintained at levels which will provide for the
recovery of specific costs.
42
<PAGE>
<TABLE>
<CAPTION>
2. Adoption of Accounting Principles for a Competitive Marketplace (continued)
The components of the extraordinary charge recognized as a result of the discontinued application of SFAS No. 71 are
as follows (in millions):
Pre-Tax After-Tax
- ------------------------------------------------------------------------- -- ----------------- -- -----------------
<S> <C> <C>
Increase to the accumulated depreciation balance $ 979.1 $ 607.9
Recognition of switch software asset (99.5) (61.7)
Elimination of other net regulatory assets 123.1 76.3
-- ----------------- -- -----------------
Total $ 1,002.7 622.5
-- -----------------
Tax-related net regulatory liabilities (43.9)
Accelerated amortization of investment tax credits (13.3)
-- -----------------
Extraordinary charge $ 565.3
-- -----------------
</TABLE>
The adjustment to the accumulated depreciation balance was determined by
the completion of depreciation reserve and impairment studies. The depreciation
reserve study analyzed, by individual plant asset categories, the impacts of
regulator-prescribed depreciable asset lives compared to Sprint's estimated
economic lives. The results identified the cumulative under depreciation of
certain asset categories. The impairment study, which validated the results of
the depreciation study, estimated the impact on future revenues caused by price
changes and developing industry competition, and the resulting effects on cash
flows.
The following is a summary of the telecommunications plant in service asset
balances and corresponding reserve adjustment (in millions).
<TABLE>
<CAPTION>
Pre-Change Post-Change
------------------------------------------- ----------------
Category of Plant Asset Plant in Net Plant Reserve Revised Net
Service Reserve Adjustment Plant
- --------------------------- -- ----------- --- ----------- --- ----------- -- --------------- --- ----------------
<S> <C> <C> <C> <C> <C>
Cable $ 5,006.4 $ 2,553.3 $ 2,453.1 $ 633.4 $ 1,819.7
Circuit 1,699.7 916.8 782.9 118.3 664.6
Switching 2,989.1 1,223.3 1,765.8 143.9 1,621.9
Other 2,441.5 1,070.2 1,371.3 83.5 1,287.8
- --------------------------- -- ----------- --- ----------- --- ----------- -- --------------- --- ----------------
Total plant $ 12,136.7 $ 5,763.6 $ 6,373.1 $ 979.1 $ 5,394.0
-- ----------- --- ----------- --- ----------- -- --------------- --- ----------------
</TABLE>
<TABLE>
<CAPTION>
The following is a summary of lives before and after the discontinued application of SFAS No. 71.
Pre-Change
Composite of Post-Change
Regulator- Estimated
Approved Asset Economic
Category of Plant Asset Lives Asset Lives
- -------------------------------------------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Cable 17 - 43 15 - 20
Circuit 9 - 13 7 - 11
Digital switching 12 - 20 11 - 12
- -------------------------------------------------------------- ------------------------- -------------------------
</TABLE>
43
<PAGE>
2. Adoption of Accounting Principles for a Competitive Marketplace
(continued)
The discontinued application of SFAS No. 71 also required Sprint to
eliminate from its consolidated balance sheet the effects of any actions of
regulators that had been recognized as assets and liabilities pursuant to SFAS
No. 71, but would not have been recognized as assets and liabilities by
enterprises in general. The elimination of other net regulatory assets primarily
related to deferred postretirement benefit obligations and deferred debt
financing costs. Additionally, revenues and related net income of nonregulated
operations attributable to transactions with Sprint's regulated local exchange
carriers, which were previously not eliminated in the accompanying consolidated
financial statements in accordance with SFAS No. 71, will be eliminated
beginning in 1996. Intercompany revenues of such entities amounted to $262
million, $285 million and $225 million in 1995, 1994 and 1993, respectively.
The tax-related adjustments were required to adjust deferred income tax
amounts to the currently enacted statutory rates and to eliminate tax-related
regulatory assets and liabilities. Sprint's local division uses the deferral
method of accounting for investment tax credits and amortizes the credits as a
reduction to tax expense over the life of the asset that gave rise to the tax
credit. Since plant asset lives were shortened, the related investment tax
credits were adjusted to reduce the unamortized balance by a corresponding
amount.
3. Spin-off of Cellular Division
Due in part to divestiture requirements imposed by the Federal
Communications Commission (FCC) with respect to Personal Communications Services
(PCS) licenses awarded to Sprint Spectrum, the Sprint board of directors has
approved the spin-off of Cellular to the holders of Sprint common stock. Sprint
has received a favorable ruling from the Internal Revenue Service regarding the
tax-free nature of the spin-off.
The spin-off will be effected by distributing to all holders of Sprint
common stock all shares of Cellular common stock at a rate of 1 share of
Cellular common stock for every 3 shares of Sprint common stock held. In
connection with the closing, Cellular will repay approximately $1.4 billion of
intercompany debt owed by Cellular to Sprint and its subsidiaries, and Sprint
will contribute to the equity capital of Cellular any debt owed by Cellular in
excess of the intercompany debt being repaid.
The net operating results of Cellular have been separately classified as
discontinued operations in the Consolidated Statements of Income as summarized
below. Interest expense has been allocated to Cellular based on the assumed
repayment of intercompany debt to Sprint by Cellular. The operating expenses as
presented below do not include Cellular's share of general corporate overhead
expenses. These expenses have been reallocated to Sprint's other operating
segments. Accordingly, Cellular's results of operations as reflected below may
not be indicative of its future operating results once the spin-off is
completed. Such expenses were $13 million, $12 million and $12 million for each
of the years ended December 31, 1995, 1994 and 1993, respectively.
<TABLE>
<CAPTION>
(in millions) 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net operating revenues $ 834.4 $ 626.5 $ 410.5
Operating expenses 675.6 529.4 374.0
- -------------------------------------------------------------------------------------------------------------------
Operating income 158.8 97.1 36.5
Interest expense (124.0) (97.3) (85.4)
Other income (expense), net 10.9 (5.6) 11.7
- -------------------------------------------------------------------------------------------------------------------
Income (Loss) before income taxes 45.7 (5.8) (37.2)
Income tax provision (benefit) 31.2 9.7 (0.7)
Cumulative effect of change in accounting principle, net -- -- (1.6)
- -------------------------------------------------------------------------------------------------------------------
Income (Loss) from cellular division $ 14.5 $ (15.5) $ (38.1)
----------------------------------------------------
</TABLE>
44
<PAGE>
3. Spin-off of Cellular Division (continued)
The net assets and liabilities of Cellular have been separately classified
as net investment in cellular division in the Consolidated Balance Sheets as
summarized below (in millions):
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------------------------- --- ------------- -- -------------
<S> <C> <C>
Current assets $ 153.9 $ 145.9
Noncurrent assets 1,799.0 1,581.7
Advance payable (1,433.0) (1,271.1)
Other current liabilities (166.6) (212.1)
Noncurrent liabilities (246.4) (184.7)
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Investment in cellular division $ 106.9 $ 59.7
--- ------------- -- -------------
</TABLE>
4. Employee Benefit Plans
Defined Benefit Pension Plan
Substantially all Sprint employees are covered by a noncontributory defined
benefit pension plan. For participants of the plan represented by collective
bargaining units, benefits are based upon schedules of defined amounts as
negotiated by the respective parties. For participants not covered by collective
bargaining agreements, the plan provides pension benefits based upon years of
service and participants' compensation.
Sprint's policy is to make contributions to the plan each year equal to an
actuarially determined amount consistent with applicable federal tax
regulations. The funding objective is to accumulate funds at a relatively stable
rate over the participants' working lives so that benefits are fully funded at
retirement. As of December 31, 1995, the plan's assets consisted principally of
investments in corporate equity securities and U.S. government and corporate
debt securities.
The components of the net pension costs (credits) and related weighted
average assumptions are as follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost -- benefits earned during the period $ 51.8 $ 61.6 $ 58.2
Interest cost on projected benefit obligation 129.7 121.6 103.9
Actual return on plan assets (472.1) (1.1) (241.2)
Net amortization and deferral 287.9 (176.6) 62.5
- -------------------------------------------------------------------------------------------------------------------
Net pension cost (credit) $ (2.7) $ 5.5 $ (16.6)
----------------------------------------------------
Discount rate 8.5% 7.5% 8.0%
Expected long-term rate of return on plan assets 9.5% 9.5% 9.5%
Anticipated composite rate of future increases in compensation 5.0% 4.5% 5.5%
</TABLE>
45
<PAGE>
4. Employee Benefit Plans (continued)
The funded status and amounts recognized in the Consolidated Balance Sheets
for the plan, as of December 31, are as follows (in millions):
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------------------------------------------------------------
Actuarial present value of benefit obligations
<S> <C> <C>
Vested benefit obligation $ (1,705.1) $ (1,338.1)
-----------------------------------
Accumulated benefit obligation $ (1,866.0) $ (1,459.5)
-----------------------------------
Projected benefit obligation $ (1,962.7) $ (1,547.3)
Plan assets at fair value 2,331.3 1,950.2
- -------------------------------------------------------------------------------------------------------------------
Plan assets in excess of the projected benefit obligation 368.6 402.9
Unrecognized net gains (199.2) (203.8)
Unrecognized prior service cost 101.3 107.4
Unamortized portion of transition asset (170.9) (197.0)
- -------------------------------------------------------------------------------------------------------------------
Prepaid pension cost $ 99.8 $ 109.5
-----------------------------------
</TABLE>
The projected benefit obligations as of December 31, 1995 and 1994 were
determined using discount rates of 7.25 percent and 8.5 percent, respectively,
and anticipated composite rates of future increases in compensation of 4.25
percent and 5.0 percent, respectively.
Defined Contribution Plans
Sprint sponsors defined contribution employee savings plans covering
substantially all employees. Participants may contribute portions of their
compensation to the plans. Contributions of participants represented by
collective bargaining units are matched by Sprint based upon defined amounts as
negotiated by the respective parties. Contributions of participants not covered
by collective bargaining agreements are also matched by Sprint. For these
participants, Sprint provides matching contributions in common stock equal to 50
percent of participants' contributions up to 6 percent of their compensation and
may, at the discretion of the Board of Directors, provide additional matching
contributions based upon the performance of Sprint's common stock in comparison
to other telecommunications companies. Sprint's matching contributions
aggregated $51 million, $47 million and $49 million in 1995, 1994 and 1993,
respectively.
Postretirement Benefits
Sprint sponsors postretirement benefit (principally health care benefits)
arrangements covering substantially all employees. Employees who retired before
specified dates are eligible for these benefits at no cost or a reduced cost.
Employees retiring after specified dates are eligible for these benefits on a
shared cost basis. Sprint funds the accrued costs as benefits are paid.
Effective January 1, 1993, Sprint changed or modified its method of
accounting for postretirement benefits by adopting SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." The resulting
nonrecurring, noncash charge of $339 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.
46
<PAGE>
4. Employee Benefit Plans (continued)
The components of the net postretirement benefits cost are as follows (in
millions):
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost -- benefits earned during the period $ 22.2 $ 23.2 $ 21.7
Interest on accumulated benefit obligation 58.7 53.2 56.3
Net amortization and deferral (9.4) (1.9) --
- -------------------------------------------------------------------------------------------------------------------
Net postretirement benefits cost $ 71.5 $ 74.5 $ 78.0
----------------------------------------------------
</TABLE>
For measurement purposes, a weighted average annual health care cost trend
rate of 12 percent was assumed for 1995, gradually decreasing to 6 percent by
2001 and remaining constant thereafter. The effect of a 1 percent increase in
the assumed trend rates would have increased the 1995 net postretirement
benefits cost by approximately $14 million. The discount rates for 1995, 1994
and 1993 were 8.5 percent, 7.5 percent and 8.0 percent, respectively.
The amounts recognized in the Consolidated Balance Sheets, as of December
31, are as follows (in millions):
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Accumulated postretirement benefits obligation
<S> <C> <C>
Retirees $ 312.4 $ 298.8
Active plan participants -- fully eligible 118.3 130.4
Active plan participants -- other 328.6 244.5
- ------------------------------------------------------------------------------- --- ------------- -- -------------
759.3 673.7
Unrecognized prior service benefit 5.6 5.9
Unrecognized net gains 115.3 154.1
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Accrued postretirement benefits cost $ 880.2 $ 833.7
--- ------------- -- -------------
</TABLE>
The accumulated benefits obligations as of December 31, 1995 and 1994 were
determined using discount rates of 7.25 percent and 8.5 percent, respectively. A
weighted average annual health care trend rate of 9.6 percent was assumed for
1996, gradually decreasing to 5 percent by 2001 and remaining constant
thereafter. The effect of a 1 percent annual increase in the assumed health care
cost trend rates would have increased the accumulated benefits obligation as of
December 31, 1995 by approximately $100 million.
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 being provided to former
or inactive employees and their dependents after employment, but before
retirement. 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. 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.
47
<PAGE>
5. Income Taxes
The components of the income tax provisions allocated to continuing
operations are as follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------- -- -------------- -- ------------- --- -------------
Current income tax provision
<S> <C> <C> <C>
Federal $ 437.4 $ 355.7 $ 283.8
State 91.1 79.8 51.3
- --------------------------------------------------------------- -- -------------- -- ------------- --- -------------
528.5 435.5 335.1
Deferred income tax provision (benefit)
Federal 45.9 81.6 11.8
State (23.6) (6.4) (26.2)
Amortization of deferred investment tax credits (16.5) (22.0) (24.7)
- --------------------------------------------------------------- -- -------------- -- ------------- --- -------------
5.8 53.2 (39.1)
- --------------------------------------------------------------- -- -------------- -- ------------- --- -------------
Total income tax provision $ 534.3 $ 488.7 $ 296.0
-- -------------- -- ------------- --- -------------
</TABLE>
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,
Sprint adjusted its deferred income tax assets and liabilities to reflect the
revised rate. The resulting adjustment related to Sprint's nonregulated
subsidiaries increased the 1993 deferred income tax provision by $11 million
($0.03 per share). Adjustments to the net deferred income tax liabilities
associated with the regulated telephone companies were generally recorded as
reductions to regulatory liabilities and have been subsequently eliminated in
connection with Sprint's discontinued application of SFAS No. 71 (see Note 2).
The differences which cause the effective income tax rate to vary from the
statutory federal income tax rate of 35 percent in 1995, 1994 and 1993 are as
follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax provision at the statutory rate $ 518.1 $ 485.8 $ 284.6
Less investment tax credits included in income 16.5 22.0 24.7
- --------------------------------------------------------------------------------------------------------------------
Expected federal income tax provision after investment tax
credits 501.6 463.8 259.9
Effect of
State income taxes, net of federal income tax effect 43.9 47.7 16.3
Differences required to be flowed through by regulatory
commissions 4.9 4.8 6.0
Reversal of rate differentials (8.6) (9.7) (13.0)
Merger related costs -- -- 18.0
Other, net (7.5) (17.9) 8.8
- --------------------------------------------------------------------------------------------------------------------
Income tax provision, including investment tax credits $ 534.3 $ 488.7 $ 296.0
------------------------------------------------------
Effective income tax rate 36.1% 35.2% 36.4%
------------------------------------------------------
</TABLE>
48
<PAGE>
5. Income Taxes (continued)
The income tax provisions (benefits) allocated to other items are as
follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------- --- ------------ -- ------------- -- ------------
Discontinued operations:
<S> <C> <C> <C>
Cellular division $ 31.2 $ 9.7 $ (0.7)
Other -- (9.0) (6.6)
Extraordinary loss on discontinuance of SFAS No. 71 (437.4) -- --
Extraordinary losses on early extinguishments of debt -- -- (20.3)
Cumulative effect of changes in accounting principles
Postretirement benefits -- -- (216.0)
Postemployment benefits -- -- (6.6)
Circuit activity costs -- -- (21.5)
Unrealized holding gains on investments in equity securities
(recorded directly to shareholders' equity) 30.7 (11.6) 36.5
Stock ownership, purchase and options arrangements (recorded
directly to shareholders' equity) (7.5) (8.1) (10.6)
- ---------------------------------------------------------------- --- ------------ -- ------------- -- ------------
</TABLE>
Deferred income taxes are provided for the temporary differences between
the carrying amounts of Sprint's assets and liabilities for financial statement
purposes and their tax bases. The sources of the differences that give rise to
the deferred income tax assets and liabilities as of December 31, 1995 and 1994,
along with the income tax effect of each, are as follows (in millions):
<TABLE>
<CAPTION>
1995 Deferred Income Tax 1994 Deferred Income Tax
------------- -- ------------- --- ------------- -- -------------
Assets Liabilities Assets Liabilities
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
<S> <C> <C> <C> <C>
Property, plant and equipment $ -- $ 1,276.7 $ -- $ 1,525.3
Postretirement and other benefits 347.0 -- 298.0 --
Alternative minimum tax credit
carryforwards 8.6 -- 93.0 --
Operating loss carryforwards 26.9 -- 45.8 --
Integration and restructuring costs 32.7 -- 12.2 --
Revenue reserves 33.3 -- 33.4 --
Other, net 69.8 -- -- 5.3
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
518.3 1,276.7 482.4 1,530.6
Less valuation allowance 17.4 -- 21.1 --
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Total $ 500.9 $ 1,276.7 $ 461.3 $ 1,530.6
--- ------------- -- ------------- --- ------------- -- -------------
</TABLE>
During 1995, 1994 and 1993, the valuation allowance related to deferred
income tax assets decreased $4 million, $1 million and $7 million, respectively.
As of December 31, 1995, Sprint has available, for income tax purposes, $9
million of alternative minimum tax credit carryforwards to offset regular income
tax payable in future years, and tax benefits of $27 million associated with
state operating loss carryforwards. The loss carryforwards expire in varying
amounts annually from 1996 through 2010.
49
<PAGE>
6. Borrowings
Long-term debt, as of December 31, is as follows (in millions):
<TABLE>
<CAPTION>
Maturing 1995 1994
- --------------------------------------------------------------------------------------------------------------------
Corporate
Senior notes
<S> <C> <C> <C> <C>
9.45% 1995 $ -- $ 50.0
9.88% 1995 -- 80.0
10.45% 1996 100.0 200.0
9.19% to 9.60% 1998 43.0 43.0
8.25% (1) 2000 138.4 --
8.13% to 9.80% 2000 to 2003 632.3 632.3
Debentures
9.25% 2022 200.0 200.0
Notes payable and commercial paper, classified
as long-term debt 1995 -- 934.0
Long Distance Communications Services
Vendor financing agreements
6.19% to 10.17% 1996 to 1999 177.6 223.1
Local Communications Services
First mortgage bonds
2.00% to 9.37% 1996 to 2000 342.9 355.3
6.25% to 7.88% 2001 to 2005 510.7 511.5
4.00% to 9.79% 2006 to 2010 151.9 151.9
6.88% to 7.46% 2011 to 2015 90.0 90.0
8.77% to 9.68% 2016 to 2020 278.5 279.1
7.13% to 9.89% 2021 to 2025 193.0 123.5
Debentures and notes
2.00% to 9.61% 1996 to 2016 415.6 424.0
Notes payable and commercial paper, classified
as long-term debt 1996 42.8 143.4
Other
2.00% to 19.45% 1996 to 2009 9.8 20.0
Other
Senior notes
9.88% 1995 -- 250.0
Debentures
9.00% 2019 150.0 150.0
Other
5.39% to 12.50% 1996 to 1999 56.9 76.1
- --------------------------------------------------------------------------------------------------------------------
3,533.4 4,937.2
Less current maturities 280.4 332.4
- --------------------------------------------------------------------------------------------------------------------
Long-term debt $ 3,253.0 $ 4,604.8
-----------------------------------
</TABLE>
(1) Notes are exchangeable for 4.4 million shares of Southern New England
Telecommunications Corporation common stock owned by Sprint and included in
investments in equity securities at December 31, 1995.
50
<PAGE>
6. Borrowings (continued)
Long-term debt maturities during each of the next five years are as follows
(in millions):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<C> <C>
1996 $ 280.4
1997 123.0
1998 160.9
1999 28.9
2000 682.9
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Property, plant and equipment with an aggregate cost of approximately $11.2
billion is either pledged as security for first mortgage bonds and certain notes
or is restricted for use as mortgaged property.
Notes payable and commercial paper outstanding and related weighted average
interest rates, as of December 31, are as follows (in millions):
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bank notes, 5.90% (5.85% in 1994) $ 1,551.8 $ 263.0
Master Trust notes (6.33% in 1994) -- 248.7
Commercial paper, 6.31% (5.08% in 1994) 635.0 565.7
- -------------------------------------------------------------------------------------------------------------------
Total notes payable and commercial paper $ 2,186.8 $ 1,077.4
-----------------------------------
</TABLE>
As of December 31, 1995, $2.1 billion of notes payable and commercial paper
was classified as short-term borrowings. As of December 31, 1995 and 1994, $43
million and $1.1 billion, respectively, of notes payable and commercial paper
were classified as long-term debt. Such classifications were based on Sprint's
ability and intent to refinance such borrowings on a long-term basis.
The bank notes are renewable at various dates throughout the year. Sprint
pays a fee to certain commercial banks to support current and future credit
requirements based upon loan commitments. Lines of credit may be withdrawn by
the banks if there is a material adverse change in Sprint's financial condition.
At December 31, 1995, Sprint had aggregate credit arrangements which
provided $2.8 billion. Of the $2.2 billion of notes payable and commercial paper
outstanding at December 31, 1995, $2.0 billion had been specifically borrowed
under such credit arrangements, resulting in $790 million of availability.
Sprint is in compliance with all restrictive or financial covenants
relating to its debt arrangements at December 31, 1995.
During 1993, Sprint redeemed or called for redemption prior to scheduled
maturities $1.3 billion of first mortgage bonds, senior notes and debentures.
Excluding amounts deferred by the rate-regulated telephone companies as required
by certain regulatory commissions, the prepayment penalties incurred in
connection with early extinguishments of debt and the write-off of related debt
issuance costs aggregated $29 million, net of related income tax benefits, and
is reflected as an extraordinary loss in the Consolidated Statements of Income.
51
<PAGE>
7. Redeemable Preferred Stock
Sprint has 20 million authorized shares and subsidiaries have approximately
5 million authorized shares of preferred stock, including nonredeemable
preferred stock. The redeemable preferred stock outstanding, as of December 31,
is as follows (in millions):
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Third series -- stated value $100 per share, shares - 184,000 in 1995 and
196,000 in 1994, nonparticipating, nonvoting, cumulative 7.75% annual
dividend rate $ 18.4 $ 19.6
Fifth series -- stated value $100,000 per share, shares - 95 in 1995 and 1994,
voting, cumulative 6% annual dividend rate 9.5 9.5
Subsidiaries -- stated value ranging from $10 to $100 per share, shares -
110,675 in 1995 and 364,345 in 1994, annual dividend rates ranging from
4.7% to 5.0% 4.6 8.0
- -------------------------------------------------------------------------------------------------------------------
Total redeemable preferred stock $ 32.5 $ 37.1
-----------------------------------
</TABLE>
Sprint's third series preferred stock was called in January 1996. In March
1996, 24,000 shares will be redeemed at a price of $100.00 per share and the
remaining shares will be redeemed at a price of $101.77 per share.
Sprint's fifth series preferred stock must be redeemed in full in 2003. If
less than full dividends have been paid for four consecutive dividend periods or
if the total amount of dividends in arrears exceeds an amount equal to the
dividend payment for six dividend periods, the holders of the fifth series
preferred stock are entitled to elect a majority of directors standing for
election until all arrears in dividend payments have been paid.
8. Common Stock
Common stock activity during 1995 and shares reserved for future grants
under stock option plans or for future issuances under various arrangements are
as follows (in millions):
<TABLE>
<CAPTION>
Number of Shares
------------------------------------------
1995 Reserved as of
Activity December 31, 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Employees Stock Purchase Plan 0.1 7.1
Employee savings plans -- 3.4
Automatic Dividend Reinvestment Plan -- 1.1
Officer and key employees' and directors' stock options 0.4 16.9
Conversion of preferred stock and other 0.1 1.3
- ----------------------------------------------------------------------------------------------------------------
Total 0.6 29.8
------------------------------------------
</TABLE>
As of December 31, 1995, elections to purchase 2 million of Sprint's common
shares were outstanding under the 1994 offering of the Employees Stock Purchase
Plan (ESPP). The purchase price under the offering cannot exceed $32.35 per
share, such price representing 85 percent of the average market price on the
offering date, or fall below $12.00 per share. The 1994 offering terminates on
June 30, 1996. Upon the spin-off of Cellular, the number of shares underlying
elections by non-Cellular employees and the related per share purchase price
will be adjusted to maintain both the aggregate fair market value of stock
underlying the elections and the relationship between the per share purchase
52
<PAGE>
8. Common Stock (continued)
price and the related per share market value. At the option of Cellular
employees, elections made by Cellular employees are expected to be terminated
under the terms and conditions of Sprint's ESPP, or to be replaced by elections
to purchase shares of the common stock of Cellular. As of December 31, 1995,
Cellular employees held elections to purchase approximately 58,000 shares of
Sprint common stock under the ESPP.
Under various stock option plans, shares of common stock are reserved for
issuance to officers, outside directors and certain employees. All options are
granted at 100 percent of the market price at date of grant. Approximately 1
percent of all options outstanding as of December 31, 1995 provide for the
granting of stock appreciation rights as an alternate method of settlement upon
exercise. A summary of stock option activity under the plans is as follows (in
millions, except per share data):
<TABLE>
<CAPTION>
Per Share Aggregate
Number of Exercise Price Exercise
---------------------
Shares Low High Amount
- -------------------------------------------------------------------------------------------------------------------
Shares under option as of January 1, 1993 (5.5
<S> <C> <C> <C> <C>
million shares exercisable) 7.5 $ 9.44 $ 39.31 $ 170.2
Granted 1.6 27.50 38.44 50.3
Exercised
Options without stock appreciation rights (2.1) 9.44 33.75 (41.0)
Options with stock appreciation rights (0.3) 11.09 29.68 (5.5)
Terminated and expired (0.1) 18.16 33.75 (3.2)
- -------------------------------------------------------------------------------------------------------------------
Shares under option as of December 31, 1993 (4.5
million shares exercisable) 6.6 9.44 39.31 170.8
Granted 2.8 30.81 39.50 100.3
Exercised
Options without stock appreciation rights (0.8) 9.44 33.75 (17.4)
Options with stock appreciation rights (0.2) 11.09 29.68 (3.8)
Terminated and expired (0.6) 22.13 36.69 (16.7)
- -------------------------------------------------------------------------------------------------------------------
Shares under option as of December 31, 1994 (3.7
million shares exercisable) 7.8 11.09 39.50 233.2
Granted 3.3 28.69 40.75 97.8
Exercised
Options without stock appreciation rights (0.6) 11.09 36.69 (13.9)
Options with stock appreciation rights (0.1) 11.09 29.68 (1.1)
Terminated and expired (0.4) 14.03 39.31 (14.3)
- -------------------------------------------------------------------------------------------------------------------
Shares under option as of December 31, 1995 (5.3
million shares exercisable) 10.0 $ 14.03 $ 40.75 $ 301.7
--------------------------------------------------------
</TABLE>
Upon the spin-off of Cellular, the number of shares underlying options held by
non-Cellular employees and the related per share purchase price will be adjusted
to maintain both the aggregate fair market value of stock underlying the options
and the relationship between the per share purchase price and the related per
share market value. Options held by Cellular employees are expected to be
converted into options to purchase shares of Cellular common stock. As of
December 31, 1995, Cellular employees held options to purchase approximately
320,000 shares of Sprint common stock.
53
<PAGE>
8. Common Stock (continued)
During 1990, the Savings Plan Trust, an employee savings plan, acquired
shares of common stock from Sprint in exchange for a $75 million promissory note
payable to Sprint. The note bears an interest rate of 9 percent and is to be
repaid from the common stock dividends received by the plan and the
contributions made to the plan by Sprint in accordance with plan provisions. The
remaining balance of the note receivable of $55 million as of December 31, 1995
is reflected as a reduction to other shareholders' equity. At December 31, 1995
the Savings Plan Trust held approximately 18 million shares of Sprint common
stock.
Under a Shareholder Rights plan, one-half of a Preferred Stock Purchase
Right is attached to each share of common stock. Each Right, which is
exercisable and detachable only upon the occurrence of certain takeover events,
entitles shareholders to buy units consisting of one one-hundredth of a newly
issued share of Preferred Stock-Fourth Series, Junior Participating at a price
of $235.00 per unit or, in certain circumstances, common stock. Under certain
circumstances, Rights beneficially owned by an acquiring person become null and
void. Sprint's Preferred Stock-Fourth Series is without par value. It is voting,
cumulative and accrues dividends equal generally to the greater of $10.00 per
share or 200 times the aggregate per share amount of all common stock dividends.
No shares of Preferred Stock-Fourth Series were issued or outstanding at
December 31, 1995. The Rights may be redeemed by Sprint at a price of $0.01 per
Right and will expire on September 8, 1999.
During 1995, 1994 and 1993, Sprint declared and paid annual dividends on
common stock of $1.00 per share, and Centel declared pre-merger (see Note 10)
common stock dividends of $0.15 per share during 1993. The most restrictive
covenant applicable to dividends on common stock results from the $1.5 billion
revolving credit agreement. Among other restrictions, this agreement requires
Sprint to maintain specified levels of consolidated net worth, as defined. As a
result of this requirement, $1.9 billion of Sprint's $2.8 billion consolidated
retained earnings were effectively restricted from the payment of dividends as
of December 31, 1995. The indentures and financing agreements of certain of
Sprint's subsidiaries contain various provisions restricting the payment of cash
dividends on subsidiary common stock held by Sprint. In connection with these
restrictions, $192 million of the related subsidiaries' $653 million total
retained earnings is restricted as of December 31, 1995. The flow of cash in the
form of advances from the subsidiaries to Sprint is generally not restricted.
9. Commitments and Contingencies
Litigation, Claims and Assessments
Following announcement in 1992 of Sprint's merger agreement with Centel
(see Note 10), 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
which seeks damages for alleged violations of securities laws. On October 12,
1995, the New York trial court granted the motion of Centel's financial advisors
to dismiss a purported class action suit filed against them in connection with
their representation of Centel in the merger. The plaintiffs have appealed from
the order dismissing their claims. Sprint may have indemnification obligations
to the financial advisors in connection with this suit. 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 December 1996, Sprint could 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 were typically reinvested in the pool. Sprint was
required to repurchase the designated pool of accounts receivable only upon the
occurrence of specified events involving non-collectibility of accounts. As of
December 31, 1995, Sprint had not been required to repurchase receivables
54
<PAGE>
9. Commitments and Contingencies (continued)
under this recourse provision. Because Sprint retained credit losses associated
with its accounts receivable, any exposure related to this retention was
estimated in conjunction with Sprint's calculation of its reserve for
uncollectible accounts. Receivables sold that remained uncollected as of
December 31, 1995 and 1994 aggregated $600 million. In January 1996, Sprint
elected to terminate this agreement.
Commitments
See "Liquidity and Capital Resources" in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for a discussion of
cash commitments associated with Sprint Spectrum.
Operating Leases
Minimum rental commitments as of December 31, 1995 for all noncancelable
operating leases, consisting principally of leases for data processing equipment
and real estate, are as follows (in millions):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
1996 $ 237.4
1997 186.4
1998 137.7
1999 108.6
2000 76.8
Thereafter 270.7
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Gross rental expense aggregated $402 million in 1995, $379 million in 1994
and $382 million in 1993. The amount of rental commitments applicable to
subleases, contingent rentals and executory costs is not significant.
10. Sprint / Centel Merger
Effective March 9, 1993, Sprint consummated its merger with Centel, a
telecommunications company with local exchange and cellular and wireless
communications services operations. Pursuant to the merger agreement dated May
27, 1992, Sprint issued 1.37 shares of its common stock in exchange for each
outstanding share of Centel common stock, or approximately 119 million shares.
The transaction costs associated with the merger (consisting primarily of
investment banking and legal fees) and the 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 of $259 million, which reduced 1993
income from continuing operations by $172 million ($0.50 per share). The merger
was accounted for as a pooling of interests.
55
<PAGE>
11. Additional Financial Information
Segment Information
Information related to Sprint's operating business segments is included in
the tables in "Segmental Results of Operations" of "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The net operating
revenues and operating expenses shown in such tables include revenues and
expenses eliminated in consolidation totaling $ 380 million, $340 million and
$296 million for the years ended December 31, 1995, 1994 and 1993, respectively.
Sprint incurred capital expenditures of $37 million, $57 million and $46 million
for the years ended December 31, 1995, 1994 and 1993, respectively, and had
assets, including the net assets of the discontinued cellular division, of $2.9
billion, $1.8 billion and $1.8 billion at December 31, 1995, 1994 and 1993,
respectively, not attributable to operating segments. Additionally, Sprint
incurred $54 million of merger, integration and restructuring costs not
attributable to its segmental operations for the year ended December 31, 1993.
Realignment and Restructuring Charge
During 1995, Sprint initiated a realignment and restructuring of its local
communications services division, including the elimination of approximately
1,600 positions primarily in the network and finance functions. These actions
resulted in a nonrecurring charge of $88 million, which reduced income from
continuing operations by $55 million ($0.16 per share). The accrued liability
associated with this charge specifically relates to the benefits that affected
employees will receive upon termination.
During 1993, Sprint initiated a realignment and restructuring of its long
distance communications services division, including the elimination of
approximately 1,000 positions and the closure of two facilities. These actions
resulted in a nonrecurring charge of $34 million, which reduced income from
continuing operations by $21 million ($0.06 per share).
Concentrations of Credit Risk
Sprint's accounts receivable are not subject to any concentration of credit
risk. Interest rate swap agreements and foreign currency contracts involve the
risk of dealing with counterparties and their ability to meet the terms of the
contracts. Notional principal amounts often are used to express the volume of
these transactions, but the amounts subject to credit risk are significantly
smaller. In the event of nonperformance by the counterparties, Sprint's
accounting loss would be limited to the net amount that it would be entitled to
receive under the terms of the applicable interest rate swap agreement or
foreign currency contract. However, Sprint does not anticipate nonperformance by
any of the counterparties with which it has such agreements. Sprint controls the
amount of credit risk as well as the concentration of credit risk of its
interest rate swap agreements and foreign currency contracts through credit
approvals, dollar exposure limits and internal monitoring procedures.
56
<PAGE>
11. Additional Financial Information (continued)
Financial Instruments
Sprint estimates the fair value of its financial instruments using
available market information and appropriate valuation methodologies.
Accordingly, the estimates presented herein are not necessarily indicative of
the values Sprint could realize in a current market exchange. Although
management is not aware of any factors that would affect the estimated fair
value amounts presented as of December 31, 1995, such amounts have not been
comprehensively revalued for purposes of these financial statements since that
date and, therefore, estimates of fair value subsequent to that date may differ
significantly from the amounts presented herein. The carrying amounts and
estimated fair values of Sprint's financial instruments, as of December 31, are
as follows (in millions):
<TABLE>
<CAPTION>
1995 1994
------------------------------ ------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Financial assets
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 124.2 $ 124.2 $ 113.7 $ 113.7
Investments in equity securities 262.9 262.9 177.6 177.6
Financial liabilities
Short-term borrowings 2,144.0 2,144.0 -- --
Long-term debt
Corporate 1,113.7 1,282.9 2,139.3 2,170.5
Long distance communications services 177.6 184.5 223.1 222.1
Local communications services 2,035.2 2,237.5 2,098.7 1,966.4
Other 206.9 242.8 476.1 488.2
Off-balance sheet instruments
Interest rate swap agreements -- (3.4) -- 2.6
Foreign currency contracts 0.5 0.4 -- (0.4)
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
</TABLE>
The carrying values of Sprint's cash equivalents approximate fair value as
of December 31, 1995 and 1994. The fair value of Sprint's investments in equity
securities are estimated by reference to quoted market prices. The fair values
of Sprint's long-term debt are estimated based on quoted market prices for
publicly traded issues, and the present value of estimated future cash flows
using a discount rate commensurate with the risks involved for all other issues.
The fair value of interest rate swap agreements is estimated as the cost that
Sprint would receive (pay) to terminate the swap agreements at December 31, 1995
and 1994, taking into account the then-current interest rates. The fair value of
foreign currency contracts is estimated as the replacement cost of the contracts
at December 31, 1995 and 1994, taking into account the then-current foreign
currency exchange rates.
Interest Rate Swap Agreements
Interest rate swap agreements are utilized by Sprint as part of its
interest rate risk management program. Net interest paid or received related to
such agreements is recorded using the accrual method and is recorded as an
adjustment to interest expense. Sprint had interest rate swap agreements with
notional amounts of $275 million and $125 million outstanding at December 31,
1995 and 1994, respectively. Net interest (income) expense related to interest
rate swap agreements was ($400,000), $1 million and $2 million for the years
ended December 31, 1995, 1994 and 1993, respectively. There were no deferred
gains or losses relating to any terminated interest rate swap agreements at
December 31, 1995, 1994 and 1993.
57
<PAGE>
11. Additional Financial Information (continued)
Foreign Currency Contracts
As part of its foreign currency exchange risk management program, Sprint
purchases and sells over-the-counter forward contracts and options in various
foreign currencies. Sprint had outstanding approximately $13 million of open
forward contracts to buy various foreign currencies at both December 31, 1995
and 1994. Sprint had no outstanding open forward contracts to sell various
foreign currencies at December 31, 1995 and $1 million outstanding at December
31, 1994. Sprint had approximately $24 million of outstanding open purchase
option contracts to call various foreign currencies at December 31, 1995. The
premium paid for an option is amortized over the life of the option. The
unamortized premiums paid for options outstanding at December 31, 1995 were
$300,000. There were no foreign currency option contracts outstanding at
December 31, 1994. The forward contracts open at December 31, 1995 all had an
original maturity of six months or less. The net gain or loss recorded to
reflect the fair value of such contracts is recorded in the period incurred.
Total net losses of $1 million, $2 million and $1 million were recorded related
to foreign currency transactions and contracts for the years ended December 31,
1995, 1994 and 1993, respectively.
At December 31, 1995, 1994 and 1993, Sprint had foreign currency
translation gains (losses) of ($10) million, $1 million and $2 million,
respectively, included in "Other, net" in the Consolidated Statements of Common
Stock and Other Shareholders' Equity.
12. Subsequent Event
On January 31, 1996, Sprint, along with Deutsche Telekom (DT) and France
Telecom (FT), consummated their joint venture, operating as Global One, which
will provide seamless global telecommunications services to business, consumer
and carrier markets worldwide. Upon closing of the agreement, DT and FT acquired
shares of a new class of preference stock for a total of $3.0 billion, which
resulted in DT and FT each holding approximately 7.5 percent of the Sprint
voting power. DT and FT will make the remainder of their investment in Sprint
following the spin-off of Cellular. Following their full investment, DT and FT
will each own shares of Class A common stock with approximately 10 percent of
Sprint's voting power. Depending on the price of Cellular shares at the time of
the spin-off, the total amount of the investment is expected to be between $3.5
billion and $3.7 billion.
Assuming the $3.0 billion of proceeds from the issuance of the Class A
preference stock was initially used to the extent possible to repay debt
outstanding at December 31, 1995, and such issuance and repayment is assumed to
have taken place as of January 1, 1995, Sprint's earnings per share from
continuing operations would have decreased from $2.69 per share to $2.52 per
share for the year ended December 31, 1995.
58
<PAGE>
SPRINT CORPORATION
SCHEDULE II -- CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1995, 1994 and 1993
(In Millions)
<TABLE>
<CAPTION>
Additions
---------------------------
Balance Charged to Balance
beginning Charged to other Other end of
of year income accounts deductions year
- -------------------------------------------------------------------------------------------------------------------
1995
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts $ 126.9 $ 415.3 $ 7.0 $ (326.7) (1)$ 222.5
-----------------------------------------------------------------------------
Valuation allowance - deferred
income tax assets $ 21.1 $ 4.3 -- $ (8.0) $ 17.4
-----------------------------------------------------------------------------
1994
Allowance for doubtful accounts $ 120.3 $ 299.9 $ 4.5 $ (297.8) (1)$ 126.9
-----------------------------------------------------------------------------
Valuation allowance - deferred
income tax assets $ 22.1 $ 2.2 -- $ (3.2) $ 21.1
-----------------------------------------------------------------------------
1993
Allowance for doubtful accounts $ 116.7 $ 263.7 $ 2.6 $ (262.7) (1)$ 120.3
-----------------------------------------------------------------------------
Valuation allowance - deferred
income tax assets $ 28.7 $ 0.7 -- $ (7.3) $ 22.1
-----------------------------------------------------------------------------
(1) Accounts written off, net of recoveries.
</TABLE>
59
<PAGE>
QUARTERLY FINANCIAL DATA
(Unaudited)
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter
---------------------- --------------------- ----------------------
---------------------- --------------------- ----------------------
1995 (1) 1994 (1) 1995 (1) 1994 (1) 1995 (1) 1994 (1)
- --------------------------------------------------------------------------------------------------------------------
(In Millions, Except Per Share Data)
<S> <C> <C> <C> <C> <C> <C>
Net operating revenues $ 3,079.1 $ 2,896.5 $ 3,142.1 $ 2,984.7 $ 3,205.3 $ 3,054.6
Operating expenses
Costs of services and products 1,581.6 1,488.5 1,606.7 1,525.0 1,623.7 1,563.4
Selling, general and administrative 694.7 665.4 714.1 687.5 715.9 711.8
Depreciation and amortization 360.0 329.6 359.5 343.8 368.6 344.2
Merger, integration and
restructuring costs (2) -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------
Total operating expenses 2,636.3 2,483.5 2,680.3 2,556.3 2,708.2 2,619.4
- --------------------------------------------------------------------------------------------------------------------
Operating income 442.8 413.0 461.8 428.4 497.1 435.2
Interest expense (68.2) (81.1) (69.0) (76.2) (64.7) (73.3)
Other income (expense), net (3) (20.5) 30.6 (13.9) (9.2) (20.3) (5.8)
- --------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes 354.1 362.5 378.9 343.0 412.1 356.1
Income tax provision (129.4) (128.4) (135.7) (123.6) (148.5) (127.9)
- --------------------------------------------------------------------------------------------------------------------
Income from continuing operations 224.7 234.1 243.2 219.4 263.6 228.2
Discontinued operations, net
Cellular division (0.4) (6.7) 2.5 0.2 4.9 1.9
Other -- -- -- -- -- --
Extraordinary items, net (4) -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------
Net income (loss) 224.3 227.4 245.7 219.6 268.5 230.1
Preferred stock dividends (0.7) (0.7) (0.6) (0.7) (0.6) (0.6)
- --------------------------------------------------------------------------------------------------------------------
Earnings (Loss) applicable to common
stock $ 223.6 $ 226.7 $ 245.1 $ 218.9 $ 267.9 $ 229.5
----------------------------------------------------------------------------
Earnings (Loss) per common share
Continuing operations $ 0.64 $ 0.67 $ 0.69 $ 0.63 $ 0.75 $ 0.65
Discontinued operations -- (0.02) 0.01 -- 0.01 0.01
Extraordinary items -- -- -- -- -- --
----------------------------------------------------------------------------
Total $ 0.64 $ 0.65 $ 0.70 $ 0.63 $ 0.76 $ 0.66
----------------------------------------------------------------------------
</TABLE>
(1) The accompanying Quarterly Financial Data have been restated from
previously reported amounts to reflect the spin-off of Sprint's cellular
and wireless division (Cellular) to shareholders of Sprint common stock.
Accordingly, Cellular's operating results have been excluded from income
from continuing operations and are reported as discontinued operations.
(2) During fourth quarter 1995, nonrecurring charges of $88 million were
recorded related to a restructuring within the local communications
division. Such charges reduced net income by $55 million ($0.16 per share).
See Note 11 of Notes to Consolidated Financial Statements for additional
information.
(3) During first quarter 1994, Sprint sold an investment in equity securities,
realizing a gain of $35 million, which increased net income by $22 million
($0.06 per share).
(4) During fourth quarter 1995, Sprint adopted accounting principles for a
competitive marketplace for its local communications division and
discontinued the application of SFAS No. 71. As a result, Sprint recorded a
noncash, after-tax extraordinary charge of $565 million ($1.61 per share).
See Note 2 of Notes to Consolidated Financial Statements for additional
information.
60
<PAGE>
<TABLE>
<CAPTION>
Sprint Corporation
Fourth Quarter Total Year
---------------------- -------------------------
- --------------------------- -------------------------
1995 1994 (1) 1995 1994 (1)
- -------------------------------------------------------
<C> <C> <C> <C>
$ 3,338.6 $ 3,050.8 $ 12,765.1 $ 11,986.6
1,692.9 1,577.6 6,504.9 6,154.5
747.2 690.7 2,871.9 2,755.4
378.3 368.4 1,466.4 1,386.0
87.6 -- 87.6 --
- -------------------------------------------------------
2,906.0 2,636.7 10,930.8 10,295.9
- -------------------------------------------------------
432.6 414.1 1,834.3 1,690.7
(58.8) (70.1) (260.7) (300.7)
(38.5) (17.7) (93.2) (2.1)
- -------------------------------------------------------
335.3 326.3 1,480.4 1,387.9
(120.7) (108.8) (534.3) (488.7)
- -------------------------------------------------------
214.6 217.5 946.1 899.2
7.5 (10.9) 14.5 (15.5)
-- 7.0 -- 7.0
(565.3) -- (565.3) --
- -------------------------------------------------------
(343.2) 213.6 395.3 890.7
(0.7) (0.7) (2.6) (2.7)
- -------------------------------------------------------
$ (343.9) $ 212.9 $ 392.7 $ 888.0
- -------------------------------------------------------
$ 0.61 $ 0.62 $ 2.69 $ 2.57
0.02 (0.01) 0.04 (0.02)
(1.61) -- (1.61) --
- -------------------------------------------------------
$ (0.98) $ 0.61 $ 1.12 $ 2.55
- -------------------------------------------------------
</TABLE>
61
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER
(3) Articles of Incorporation and Bylaws:
(a) Articles of Incorporation, as amended (filed as Exhibit
4A to Sprint Corporation Current Report on Form 8-K
dated January 31, 1996 and incorporated herein by
reference).
(b) Bylaws, as amended (filed as Exhibit 4B to Sprint
Corporation Current Report on Form 8-K for the year
ended January 31, 1996 and incorporated herein by
reference).
(4) Instruments defining the Rights of Sprint's Equity Security
Holders:
(a) The rights of Sprint's equity security holders are
defined in the Fifth, Sixth, Seventh and Eighth
Articles of Sprint's Articles of Incorporation. See
Exhibit 3(a).
(b) Rights Agreement dated as of August 8, 1989, between
Sprint Corporation (formerly United Telecommunications,
Inc.) and UMB Bank, n.a. (formerly United Missouri Bank
of Kansas City, N.A.), as Rights Agent (filed as
Exhibit 2(b) to Sprint Corporation Registration
Statement on Form 8-A dated August 11, 1989 (File No.
1-4721), and incorporated herein by reference).
(c) Amendment and supplement dated June 4, 1992 to Rights
Agreement dated as of August 8, 1989 (filed as Exhibit
2(c) to Amendment No. 1 on Form 8 dated June 8, 1992 to
Sprint Corporation Registration Statement on Form 8-A
dated August 11, 1989 (File No. 1-4721), and
incorporated herein by reference).
(d) Second Amendment to Rights Agreement dated as of July
31, 1995 between Sprint Corporation and UMB Bank, n.a.
(filed as Exhibit 2(d) to Form 8-A/A-2 dated October
20, 1995 amending Sprint Corporation Registration
Statement on Form 8-A dated August 11, 1989 (File No.
1-4721) and incorporated herein by reference).
(e) Standstill Agreement dated as of July 31, 1995, by and
among Sprint Corporation, France Telecom and Deutsche
Telekom AG (filed as Exhibit (10)(c) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995 and incorporated herein by
reference).
<PAGE>
(10) Material Agreements - Joint Ventures:
(a) Joint Venture Agreement dated as of June 22, 1995 among
Sprint Corporation, Sprint Global Venture, Inc., France
Telecom and Deutsche Telekom AG (filed as Exhibit
(10)(a) to Sprint Corporation Quarterly Report on Form
10-Q for the quarter ended June 30, 1995 and
incorporated herein by reference).
(b) Amendment No. 1 to Joint Venture Agreement, dated as of
January 31, 1996, among Sprint Corporation, Sprint
Global Venture, Inc., France Telecom, Deutsche Telekom
AG and Atlas Telecommunications, S.A. (filed as Exhibit
99A to Sprint Corporation Current Report on Form 8-K
dated January 31, 1996 and incorporated herein by
reference).
(c) Investment Agreement dated as of July 31, 1995 among
Sprint Corporation, France Telecom and Deutsche Telekom
AG (including as an exhibit the Stockholders' Agreement
among France Telecom, Deutsche Telekom AG and Sprint
Corporation) (filed as Exhibit (10)(b) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995 and incorporated herein by
reference).
(d) Amended and Restated Agreement of Limited Partnership
of MajorCo., L.P., dated as of January 31, 1996, among
Sprint Spectrum, L.P., TCI Network Services, Comcast
Telephony Services and Cox Telephony Partnership (filed
as Exhibit 99C to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(e) Parents Agreement dated as of January 31, 1996, between
Sprint Corporation and Tele-Communications, Inc. (filed
as Exhibit 99D to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(f) Parents Agreement dated as of January 31, 1996, between
Sprint Corporation and Comcast Corporation (filed as
Exhibit 99E to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(g) Parents Agreement dated as of January 31, 1996, between
Sprint Corporation and Cox Communications, Inc. (filed
as Exhibit 99F to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(10) Executive Compensation Plans and Arrangements
(h) 1985 Stock Option Plan, as amended (filed as Exhibit
(10)(c) to Sprint Corporation Quarterly Report on Form
10-Q for the quarter ended September 30, 1995 and
incorporated herein by reference). Appendix to Stock
Option Plans.
(i) 1990 Stock Option Plan, as amended (filed as Exhibit
(10)(d) to Sprint Corporation Quarterly Report on Form
10-Q for the quarter ended September 30, 1995 and
incorporated herein by reference). Appendix to Stock
Option Plans. See Exhibit (10)(h).
(j) 1990 Restricted Stock Plan, as amended (filed as
Exhibit 99 to Sprint Corporation Registration Statement
No. 33-65147 and incorporated herein by reference).
(k) Executive Deferred Compensation Plan, as amended.
(l) Management Incentive Stock Option Plan, as amended
(filed as Exhibit (10)(g) to Sprint Corporation
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995 and incorporated herein by
reference). Appendix to Stock Option Plans. See
Exhibit (10)(h).
<PAGE>
(m) Long-Term Stock Incentive Program, as amended (filed as
Exhibit (10)(h) to Sprint Corporation Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995
and incorporated herein by reference).
(n) Sprint Supplemental Executive Retirement Plan (filed as
Exhibit (10)(i) to Sprint Corporation Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995
and incorporated herein by reference).
(o) Amended and Restated Centel Directors Deferred
Compensation Plan (filed as Exhibit (10)(j) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995 and incorporated
herein by reference).
(p) Restated Memorandum Agreements Respecting Supplemental
Pension Benefits between Sprint Corporation (formerly
United Telecommunications, Inc.) and two of its current
and former executive officers (filed as Exhibit 10(i)
to Sprint Corporation Annual Report on Form 10-K for
the year ended December 31, 1992, and incorporated
herein by reference).
(q) Executive Long-Term Incentive Plan (filed as Exhibit
10(j) to Sprint Corporation Annual Report on Form 10-K
for the year ended December 31, 1993 and incorporated
herein by reference).
(r) Executive Management Incentive Plan (filed as Exhibit
10(k) to Sprint Corporation Annual Report on Form 10-K
for the year ended December 31, 1993 and incorporated
herein by reference).
(s) Long-Term Incentive Compensation Plan (filed as Exhibit
10(j) to United Telecommunications, Inc. Annual Report
on Form 10-K for the year ended December 31, 1989, and
incorporated herein by reference).
(t) Short-Term Incentive Compensation Plan (filed as
Exhibit 10(k) to United Telecommunications, Inc. Annual
Report on Form 10-K for the year ended December 31,
1989, and incorporated herein by reference).
(u) Retirement Plan for Directors, as amended (filed as
Exhibit 10(b) to Sprint Corporation Quarterly Report on
Form 10-Q for the quarter ended March 31, 1994 and
incorporated herein by reference).
(v) Key Management Benefit Plan, as amended (filed as
Exhibit 10(o) to Sprint Corporation Annual Report on
Form 10-K for the year ended December 31, 1993 and
incorporated herein by reference).
(w) Agreements Regarding Special Compensation and Post
Employment Restrictive Covenants between Sprint
Corporation and one of its Executive Officers.
(x) Director's Deferred Fee Plan, as amended.
(y) Form of Contingency Employment Agreements between
Sprint Corporation and certain of its executive
officers (filed as Exhibit 10(b) to Sprint Corporation
Quarterly Report on Form 10-Q for the year ended March
31, 1995, and incorporated herein by reference).
(z) Form of Indemnification Agreements between Sprint
Corporation (formerly United Telecommunications, Inc.)
and its Directors and Officers (filed as Exhibit 10(s)
to Sprint Corporation Annual Report on Form 10-K for
the year ended December 31, 1991, and incorporated
herein by reference).
<PAGE>
(aa) Summary of Executive Officer and Board of Directors
Benefits.
(bb) Agreements Regarding Special Compensation and Post
Employment Restrictive Covenants between Sprint
Corporation and four of its executive officers (filed
as Exhibit 10(d) to Sprint Corporation Quarterly Report
on Form 10-Q for the quarter ended September 30, 1994
and incorporated herein by reference).
(cc) Amended and Restated Centel Stock Option Plan (filed as
Exhibit 10(w) to Sprint Corporation Annual Report on
Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference). Appendix to Stock
Option Plans. See Exhibit (10)(h).
(dd) Agreements Regarding Special Compensation and Post
Employment Restrictive Covenants between Sprint
Corporation and three of its executive officers (filed
as Exhibit 10(x) to Sprint Corporation Annual Report on
Form 10-K for the year ended December 31, 1993, and
incorporated herein by reference).
(ee) Description of agreement regarding Supplemental Pension
Benefits between Sprint Corporation and one of its
executive officers (filed as Exhibit 10(e) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994, and incorporated
herein by reference).
(ff) Amended and Restated Centel Director Stock Option Plan
(filed as Exhibit 10(aa) to Sprint Corporation Annual
Report on Form 10-K for the year ended December 31,
1993, and incorporated herein by reference).
(11) Computation of Earnings Per Common Share.
(12) Computation of Ratio of Earnings to Fixed Charges.
(21) Subsidiaries of Registrant.
(23) Consent of Ernst & Young LLP.
(27) Financial Data Schedules:
(a) 1995 Financial Data Schedule.
(b) Restated 1994 Financial Data Schedule.
Exhibit (10)(h)
APPENDIX TO STOCK OPTION PLANS
APPENDIX
Spin-off of Sprint Cellular Company. The Corporation, Centel Corporation,
and Sprint Cellular Company entered into a Distribution Agreement in
connection with the distribution of stock in Sprint Cellular Company to the
Corporation's Stock-holders. All capitalized terms in this section not
otherwise defined in the Plan shall have the meanings ascribed to them in
the Distribution Agreement.
Treatment of Post-Distribution Sprint Group Employees. As of the
Distribution Time, all outstanding stock option grants (each an "Unadjusted
Grant") of Sprint Group Employees to purchase Sprint Common Stock issued
under the Plan shall be adjusted (each grant so adjusted an "Adjusted
Grant") to take into account the effect of the Distribution on the price of
Sprint Common Stock, as provided in the Distribution Agreement.
Treatment of Post-Distribution SpinCo Group Employees. As of the
Distribution Time, all outstanding stock option grants (each a "Canceled
Grant") of SpinCo Group Employees to purchase Sprint Common Stock under the
Sprint Stock Option Plans shall be canceled to the extent that such
Canceled Grants are replaced with a grant (each a "Replacement Grant") of
an option to purchase SpinCo Common Stock under the SpinCo Rollover
Employee Stock Option Plan.
Administration. The Corporate Secretary shall make such adjustment
calculations and cancellations of grants and shall suspend option exercises
for the period of time specified as the Blackout Period in the Distribution
Agreement or during such other appropriate period of time as he deems
necessary or desirable for the orderly implementation of such adjustments.
Exhibit (10)(k)
Executive Deferred Compensation Plan
(as amended through December 12, 1995)
ARTICLE I
PURPOSE
The purpose of the Sprint Corporation Executive Deferred Compensation Plan
(hereinafter referred to as the "Plan") is to provide funds for retirement or
death for executive employees (and their beneficiaries) of Sprint Corporation
and its subsidiaries. It is intended that the Plan will aid in retaining and
attracting employees of exceptional ability by providing such employees with a
means to supplement their standard of living at retirement.
ARTICLE II
DEFINITIONS
For the purposes of this Plan, the following words and phrases shall have the
meanings indicated, unless the context clearly indicates otherwise:
2.1 Account Transfer Request. "Account Transfer
Request" means a written notice, in a form prescribed
by the Company, by a Participant to transfer all or any
portion of one Deferred Benefit Account to another
Deferred Benefit Account as provided for in paragraph
6.7.
2.2 Beneficiary. "Beneficiary" means the person, persons or entity designated by
the Participant, or as provided in Article VIII, to receive any benefits payable
under the Plan. Any Participant Beneficiary Designation shall be made in a
written instrument filed with the Company and shall become effective only when
received, accepted and acknowledged in writing by the Company.
2.3 Board. "Board" means the Board of Directors of
the Company.
2.4 Cellular. "Cellular" means Sprint Cellular
Company, however renamed, or any successor thereto.
2.5 Cellular Insider. "Cellular Insider" means, as of any time when the
determination thereof is relevant, any Participant subject to liability under
Section 16 of the Securities Exchange Act of 1934 with respect to trading in the
equity securities of Cellular.
<PAGE>
2.6 Cellular Share Unit. "Cellular Share Unit" means
a measure of participation under the Plan having a
value based on the market value of one share of common
stock of Cellular after the distribution thereof by the
Company to the Company's shareholders.
2.7 Committee. "Committee" means Deferred
Compensation Committee appointed to review the Plan
decisions pursuant to Article III.
2.8 Company. "Company" means Sprint Corporation, or
any successor thereto.
2.9 Compensation. "Compensation" means the Base Salary, Annual Incentive
Compensation and Long-Term Incentive Compensation payable to a Participant
during a Plan Year other than a distribution under this plan.
(a) Base Salary. "Base Salary" means all regular cash remuneration for
services, other than such items as Annual Incentive Compensation, payable
by the Employer to a Participant in cash during a Plan Year, but before
reduction for amounts deferred pursuant to this Plan or any other Plan of
the Employer.
(b) Annual Incentive Compensation. "Annual Incentive
Compensation" means any annual cash incentive
compensation payable by the Employer to a
Participant in a Plan Year.
(c) Long-Term Incentive Compensation. "Long-Term
Incentive Compensation" means any incentive
compensation earned over a period of at least two
years.
2.10 Deferral Benefit. "Deferral Benefit" means the
benefit payable to a Participant on his retirement,
death, disability, or termination of employment as
calculated in Article VII hereof.
2.11 Deferred Benefit Account. "Deferred Benefit Account" means the accounts
maintained on the books of account of the Employer for each Participant pursuant
to Article VI. Separate Deferred Benefit Accounts shall be maintained for each
Participant. More than one Deferred Benefit Account shall be maintained for each
Participant to reflect (a) Termination and Retirement Interest Yields, (b)
separate deferral elections, and (c) Account A, Account B, Account C, Account
AA, Account BB, and Account CC elections.
For Account AA two sub-accounts (a Retirement Deferred Benefit Account and a
Termination Deferred Benefit Account) shall be maintained to
<PAGE>
reflect the difference in Interest Yields as provided
in Article VI, paragraph 6.4.
For Account BB two sub-accounts (a Retirement Deferred Benefit Account and a
Termination Deferred Benefit Account) shall be maintained to reflect, in the
event of a transfer from Account AA to Account BB pursuant to paragraph 6.7, the
difference in values of the two sub- accounts of Account AA transferred to
Account BB.
For Account CC two sub-accounts (a Retirement Deferred Benefit Account and a
Termination Deferred Benefit Account) shall be maintained to reflect the
crediting of Cellular Share Units with respect to Share Units in the respective
sub-accounts of the Account BB with respect to which the Cellular Share Units
were credited pursuant to Section 6.3(b).
A Participant's Deferred Benefit Accounts shall be used solely as a device for
the measurement and determination of the amounts to be paid to the Participant
pursuant to this Plan. A Participant's Deferred Benefit Account shall not
constitute or be treated as a trust fund of any kind. Unless the context
requires otherwise, "Deferred Benefit Account" shall mean the aggregate balance
of all accounts of a Participant.
2.12 Determination Date. "Determination Date" means
the date on which the amount of a Participant's
Deferred Benefit Account is determined as provided in
Article VI hereof. The last day of each calendar
month shall be a Determination Date.
2.13 Disability. "Disability" or "Disabled Participant" means a physical or
mental condition of a Participant resulting in a determination of disability for
purposes of receiving benefits under the Employer Long-Term Disability Insurance
Plan.
2.14 Distribution Agreement. "Distribution Agreement"
means the agreement entered into by the Company,
Cellular, and Centel Corporation for the purpose of
providing for the distribution by the Company of its
stock in Cellular to the Company's stockholders.
2.15 Distribution Dividend Rate. "Distribution
Dividend Rate" means the Dividend Rate as defined in
the Distribution Agreement.
2.16 Distribution Time. "Distribution Time" is defined
in the Distribution Agreement.
2.17 Early Retirement Date. "Early Retirement Date"
means the date on which the Participant actually
terminates employment following the first
<PAGE>
day of the month coincidental with or next following a Participant's attainment
of age fifty-five (55), but before his Normal Retirement Date.
2.18 Employer. "Employer" means Sprint Corporation,
any successor to the business thereof or any affiliate
or subsidiary designated by the Board.
2.19 Internal Revenue Code. "Internal Revenue Code"
means Internal Revenue Code of 1986, as amended or
supplemented from time to time. References to any
section of the Internal Revenue Code shall be to that
section as it is renumbered, amended, supplemented or
re-enacted.
2.20 Interest Yield. "Interest Yield" means with
respect to any calendar month the Termination Interest
Yield or the Retirement Interest Yield as defined
below:
(a) Termination Interest Yield. The "Termination
Interest Yield" means (1) in the case of balances
in Account AA, the composite yield on Moody's
Seasoned Corporate Bond Yield Index for the
preceding calendar month as determined from
Moody's Bond Record published by Moody's Investors
Services, Inc. (or any successor thereto), or,
if such monthly yield is no longer published, a
substantially similar average selected by the
Company, and (2) in the case of balances in
Account A, the greater of (i) the prime rate in
effect at Citibank, N.A. at the opening of
business on the first business day of the month,
or if said bank, for any reason, no longer
publishes its prime rate, the prime rate similarly
determined of another major bank selected by the
Company and (ii) six percent per annum.
(b) Retirement Interest Yield. The "Retirement Interest Yield" means (1) in the
case of balances in Account AA, three percentage points over the
Termination Interest Yield, and (2) in the case of balances in Account A,
the Termination Interest Yield.
2.21 Normal Retirement Age. "Normal Retirement Age"
means the time at which a Participant attains age sixty
- -five (65).
2.22 Normal Retirement Date. "Normal Retirement Date"
means the first day of the month coincidental with or
next following a Participant's Normal Retirement Age.
2.23 Participant. "Participant" means any individual
who is designated by the Company in accordance
with paragraph 4.1 to participate in this
<PAGE>
Plan and who elects to participate by filing a Participation Agreement as
provided in Article IV.
2.24 Participation Agreement. "Participation Agreement" means the agreement, in
a form prescribed by the Company, filed by a Participant before the beginning of
the first period in which the Participant's Compensation is to be deferred
pursuant to the Plan and the Participation Agreement. A new Participation
Agreement shall be filed by the Participant for each separate Base Salary
deferral election and for each Annual Incentive Compensation and Long-Term
Incentive Compensation deferral election not accompanying a Base Salary deferral
election.
2.25 Plan. "Plan" means the Sprint Corporation
Executive Deferred Compensation Plan as set forth in
this document. This Plan is the successor to, and
comprises an amendment and revision of, the United
Telecommunications, Inc. 1985 Executive Deferred
Compensation Plan adopted February 12, 1985.
2.26 Plan Administrator. "Plan Administrator" means
the person appointed by the Company to represent the
Company in the administration of this Plan.
2.27 Plan Year. "Plan Year" means a twelve month
period commencing May 1st and ending the following
April 30th. The first Plan Year shall commence on May
1, 1985.
2.28 Retirement Plan. "Retirement Plan" means the
Sprint Retirement Pension Plan, as amended from time to
time.
2.29 Share Unit. "Share Unit" means a measure of
participation under the Plan having a value based on
the market value of a share of common stock of the
Company.
2.30 Spouse. "Spouse" means a Participant's wife or
husband who was lawfully married to the Participant
upon the Participant's retirement, death or severance
from service.
2.31 Sprint Insider. "Sprint Insider" means, as of any time when the
determination thereof is relevant, any Participant subject to liability under
Section 16 of the Securities Exchange Act of 1934 with respect to trading in the
equity securities of the Company.
2.32 Transition Date. "Transition Date" means May 1,
1990.
<PAGE>
ARTICLE III
ADMINISTRATION
3.1 Plan Administrator; Company and Committee; Duties. This Plan shall be
administered by the Committee. The Committee shall consist of not more than five
persons appointed by the Board. The Committee may be a consolidated Committee
administering other benefit plans of the Company in addition to this Plan. The
Committee shall have the authority to make, amend, interpret, and enforce all
appropriate rules and regulations for the administration of this Plan and decide
or resolve any and all questions including interpretations of this Plan, as may
arise in connection with the Plan. The Committee may appoint a Benefit
Administrative Committee and a Plan Administrator. The Committee may delegate
its duties for the day-to-day operations of the Plan to the Plan Administrator
and other duties to the Benefit Administrative Committee. Members of the
Committee, the Benefit Administrative Committee and the Plan Administrator may
be Participants under this Plan.
3.2 Claim for Benefits. Any claim for benefits under this Plan shall be made in
writing to the Plan Administrator. If a claim for benefits is wholly or
partially denied, the Plan Administrator shall so notify the Participant or
Beneficiary within 90 days after receipt of the claim. The notice of denial
shall be written in a manner calculated to be understood by the Participant or
Beneficiary and shall contain (a) the specific reason or reasons for denial of
the claim, (b) specific references to the pertinent Plan provisions upon which
the denial is based, (c) a description of any additional material or information
necessary to perfect the claim together with an explanation of why such material
or information is necessary and (d) an explanation of the claims review
procedure. The decision or action of the Plan Administrator shall be final,
conclusive and binding on all persons having any interest in the Plan, unless a
written appeal is filed as provided in Section 3.3 hereof.
3.3 Review of Claim. Within 60 days after the receipt by the Participant or
Beneficiary of notice of denial of a claim, the Participant or Beneficiary may
(a) file a request with the Benefit Administrative Committee that it conduct a
full and fair review of the denial of the claim, (b) review pertinent documents
and (c) submit questions and comments to the Committee in writing.
3.4 Decision After Review. Within 60 days after the
receipt of a request for review under Section 3.3,
the Committee shall deliver to the
<PAGE>
Participant or Beneficiary a written decision with respect to the claim, except
that if there are special circumstances (such as the need to hold a hearing)
which require more time for processing, the 60-day period shall be extended to
120 days upon notice to the Participant or Beneficiary to that effect. The
decision shall be written in a manner calculated to be understood by the
Participant or Beneficiary and shall (a) include the specific reason or reasons
for the decision and (b) contain a specific reference to the pertinent Plan
provisions upon which the decision is based.
ARTICLE IV
PARTICIPATION
4.1 Participation. Participation in the Plan shall be limited to executives
having a job grade level of E14 or above, or any other employees designated by
the Committee, who elect to participate in the Plan by filing a Participation
Agreement with the Company. Except as provided below, a Participation Agreement
must be filed before the April 15th immediately preceding the Plan Year in which
the Participant's participation under the agreement will commence, and the
election to participate shall be effective on the first day of the Plan Year
following receipt by the Company of a properly completed and executed
Participation Agreement. A Participant in the Plan, who is also a participant in
the Employer's 1975 Executive Deferred Compensation Plan, may elect to transfer
to this Plan all, and not less than all, of the dollar value of his Account A
and the dollar value of his Account B under the 1975 Plan. Such election shall
be made by delivering to the Company a properly executed Participation
Agreement; such an election must be made when the Participant is first eligible
for the 1985 Plan.
4.2 Minimum and Maximum Deferral and Length of Participation. A Participant may
elect in any Participation Agreement to defer a portion of his Compensation. The
minimum and maximum amounts that may be deferred under any single Participation
Agreement shall be in $100 units and shall be as follows:
<TABLE>
<CAPTION>
Minimum Maximum
Deferral Deferral
<S> <C> <C>
With respect $300 per 50% of Base
to initial month Salary
Base Salary
Deferrals
With respect $100 per 50% of Base
to
<PAGE>
<CAPTION>
Minimum Maximum
Deferral Deferral
<S> <C> <C>
Subsequent month Salary
Base Salary
Deferrals
With respect 25% of 100% of
to Annual Annual Annual
Incentive Incentive Incentive
Compensation Compensation Compensation
With respect 25% of Long- 100% of Long-
to Long-Term Term Term
Incentive Incentive Incentive
Compensation Compensation Compensation
</TABLE>
(a) With respect to Base Salary deferrals, the dollar
amount of deferral elected in each Participation
Agreement shall be the amount of Base Salary that
will be deferred in each month subject to the
Participation Agreement. Each Participation
Agreement shall apply to the Participant's Base
Salary payable over a period (1) for Participation
Agreements first effective before the Transition
Date, of either four or eight Plan Years, or (2)
for Participation Agreements first effective on or
after the Transition Date, one Plan Year (or, in
either case, until the Participant's retirement,
whichever occurs first), commencing with the Plan
Year immediately following the Plan Year in which
the respective Participation Agreement is filed.
The fixed dollar amount of Base Salary deferral
applicable over a deferral period shall not be
changed by virtue of a change in Base Salary
alone.
(b) With respect to Annual Incentive Compensation or
Long-Term Incentive Compensation deferrals, the
deferral percentage selected in each Participation
Agreement shall apply only to the Participant's
Annual Incentive Compensation or Long-Term
Incentive Compensation paid in the Plan Year
immediately following receipt of the respective
Participation Agreement.
(c) From time to time, the Company may increase or decrease the minimum and
maximum deferrals set forth above as well as the period for which the
deferrals are effective by giving reasonable written notice to the affected
Participants. Such changes shall be effective for all Participation
Agreements filed thereafter.
(d) A Participant's election to defer Compensation shall be irrevocable upon
the filing of the respective Participation Agreement; provided, however,
that the deferral of Compensation under any Participation Agreement may be
suspended or amended as provided in paragraphs 7.5 or 9.1.
<PAGE>
4.3 Additional Participation Agreements. A Participant may enter into additional
Participation Agreements by filing a Participation Agreement with the Company
before April 15th of any calendar year, stating the amount that the Participant
elects to have deferred. Such additional agreements shall be effective as to
Compensation paid in Plan Years beginning after the last day of the Plan Year in
which the respective agreement is filed with the Company. Each additional
Participation Agreement is subject to all of the provisions and requirements set
forth in paragraph 4.2, including without limitation, the provisions relating to
minimum and maximum deferral amounts and duration of the agreements; provided,
that the minimum Base Salary deferral for each additional Participation
Agreement shall be $1,200 per year. In addition, the aggregate amount of Base
Salary that a Participant may have deferred under this Plan out of his Base
Salary for any single Plan Year under all applicable Participation Agreements
shall not exceed 50% of his Base Salary, excluding Incentive Compensation. In
the event a Participant elects to defer Compensation for a new period, the new
election shall be treated as an arrangement for which a separate Deferred
Benefit Account shall be maintained and separate Deferred Benefits shall be
payable.
ARTICLE V
DEFERRED COMPENSATION
5.1 Elective Deferred Compensation. The amount of Compensation that a
Participant elects to defer in the Participation Agreement executed by the
Participant, with respect to each Plan Year of participation in the Plan, shall
be credited by the Company to the Participant's Deferred Benefit Account
throughout each Plan Year as the Participant is paid the non-deferred portion of
Compensation for such Plan Year. The amount credited to a Participant's Deferred
Benefit Account shall equal the amount deferred. To the extent that the Employer
is required to withhold any taxes or other amounts from the employees' deferred
wages pursuant to any state, federal or local law, such amounts shall be taken
out of the portion of the Participant's Compensation which is not deferred under
this Plan.
5.2 Additional Payments. The Company also intends
that supplemental payments shall be made at death,
disability or termination of employment, as the case
may be, for any reduction in benefits due to deferrals
of Compensation under this Plan in respect of any of the
<PAGE>
Employer's life insurance or disability plans or Employees Stock Purchase Plan
now in existence or adopted after the effective date of this Plan.
5.3 Vesting of Deferred Benefit Account. A
Participant shall be 100% vested in his/her Deferred
Benefit Account.
ARTICLE VI
DEFERRED BENEFIT ACCOUNT
6.1 Determination of Account. Each Participant's Deferred Benefit Account, as of
each Determination Date, shall consist of the balance of the Participant's
Deferred Benefit Account as of the immediately preceding Determination Date,
plus the Participant's elective deferred compensation withheld since the
immediately preceding Determination Date pursuant to paragraph 5.1 and plus
amounts credited to the Participant's Deferred Benefit Account pursuant to
paragraphs 6.4 and 6.5. The Deferred Benefit Account of each Participant shall
be reduced by the amount of all distributions, if any, made from such Deferred
Benefit Account since the preceding Determination Date.
6.2 Type of Deferral. A Participant may elect to have any portion of the amount
deferred credited to either Account A (fixed income return) or to Account B
(Share Units). The initial election shall be made by a properly executed
Participation Agreement. With respect to a Participation Agreement first
effective before the Transition Date, an election to defer any amount to Account
A shall be treated as an election to defer to Account AA, except as set forth
below.
An election to change the apportionment of deferred amounts between Accounts A
and B may be made by a Participant filing with the Plan Administrator a revised
Participation Agreement indicating such change on or before April 15th of each
calendar year. The revised Participation Agreement shall be deemed a
continuation of the initial Participation Agreement to which it relates for
purposes of complying with the provisions of paragraphs 4.2 and 4.3 relating to
the minimum and maximum deferrals and duration of the Participation Agreement.
The revised Participation Agreement shall be effective for Plan Years beginning
after the date it is filed.
Deferrals in such Plan Years shall be credited in accordance with the election
of the revised Participation Agreement, provided, however, that an election to
allocate a portion of deferrals to Account A in excess of the portion allocated
in the Participation Agreement to be deferred into the
<PAGE>
fixed income account as of May 1, 1989, shall be deemed to be an election by the
Participant to allocate to Account AA a portion of deferrals equal to the
portion so allocated to the fixed income account on May 1, 1989, and to allocate
to Account A the portion in excess of such portion.
6.3 Creation of Accounts AA, BB, C, and CC.
(a) Accounts AA and BB. As of the start of business
on the Transition Date, all amounts standing to
the credit of each Participant in Account A shall
be transferred to an Account AA. As of the start
of business on the Transition Date, amounts
standing to the credit of each Participant in
Account B that are attributable to prior transfers
from Account A into Account B shall be transferred
to an Account BB. The amount of such transfers
shall be an amount equal to the sum of the dollar
amount of all transfers from Account A to Account
B during the period beginning on the effective
date of the Participation Agreement and ending on
the Transition Date. For all purposes of this
Plan, except as otherwise noted in this Plan,
Account AA shall be treated in the same manner as
Account A, and Account BB shall be treated in the
same manner as Account B. Compensation earned by
employees on or after the Transition Date subject
to deferral under a Participation Agreement first
effective before the Transition Date shall be
credited to Accounts AA and B (in accordance with
the Participant's election to allocate such
deferrals to Accounts A or B, respectively, in
such Participation Agreements) for such
Participation Agreement.
(b) Accounts C and CC. On the Determination Date first following the
Distribution Time, there shall be credited to Accounts C and CC, created
for each Participant having a positive balance in an Account B or BB with
respect to any Plan Year, a number of Cellular Share Units determined as
follows:
(1) one Cellular Share Unit in Account C for each Distribution Dividend
Rate number of Share Units in Account B for such Participant for such
Plan Year as of the Distribution Time; and
(2) one Cellular Share Unit in the Retirement
Deferred Benefit Account of Account CC for
each Distribution Dividend Rate number of
Share Units in the Retirement Deferred
Benefit Account of Account BB for such
Participant for such Plan Year as of the
Distribution Time; and.
<PAGE>
(3) one Cellular Share Unit in the Termination
Deferred Benefit Account of Account CC for
each Distribution Dividend Rate number of
Share Units in the Termination Deferred
Benefit Account of Account BB for such
Participant for such Plan Year as of the
Distribution Time.
6.4 Maintenance of Accounts A and AA. As of each Determination Date, the
Participant's Deferred Benefit Accounts A and AA shall be increased by the
amount of interest earned since the preceding Determination Date. Interest on
Accounts A and AA shall be based upon the Interest Yield. For Account AA, a
Retirement Deferred Benefit Account shall be maintained and increased at the
rate specified by the Retirement Interest Yield and a Termination Deferred
Benefit Account shall be maintained and increased at the rate specified by the
Termination Interest Yield. Interest shall be credited on the mean average of
the balances of the Deferred Benefit Account on the Determination Date (before
crediting the interest) and on the last preceding Determination Date, but after
the Deferred Benefit Account has been adjusted for any contributions or
distributions to be credited or deducted for each such day.
6.5 Maintenance of Share Unit Accounts.
(a) Maintenance of Accounts B and BB.
(1) Conversion between Dollar Amounts and Share
Units in Accounts B and BB. When an amount
is to be added to a Participant's Deferred
Benefit Accounts B or BB, it shall be
converted into Share Units, or fractions
thereof, by dividing the amount to be
credited by the closing price of the
Company's common stock as reported by the New
York Stock Exchange on the last trading day
on or before the Determination Date. When a
number of Share Units is to be subtracted
from a Participant's Deferred Benefit
Accounts B or BB, such number of Share Units
shall be converted into a dollar amount by
multiplying such number of Share Units by the
closing price of the Company's common stock
as reported by the New York Stock Exchange on
the last trading day on or before the
Determination Date.
(2) Sub-accounts to be Maintained for Purposes of
Computing Retirement and Termination
Benefits. Two sub-accounts shall be
maintained for Account BB: (i) a
<PAGE>
Retirement Deferred Benefit Account which shall include the transfer
from Account B into Account BB described in paragraph 6.3(a) plus
amounts transferred from the Account AA Retirement Deferred Benefit
Account, if any, plus other additions pursuant to this paragraph
6.5(a); and (ii) a Termination Deferred Benefit Account which shall
include the transfer from Account B into Account BB described in
paragraph 6.3(a) plus amounts transferred from the Account AA
Termination Deferred Benefit Account, if any, plus other additions
pursuant to this paragraph 6.5(a).
(3) Dividends to non-Sprint Insiders. For all
Participants other than Sprint Insiders, when
a dividend is declared and paid by the
Company on its common stock, an amount shall
be credited to the Participant's Accounts B
and BB as though the same dividend had been
paid on the Share Units in such accounts as
of the Determination Date immediately
preceding the declaration of the dividend,
and such amount shall be converted to Share
Units. Such amount shall be valued as of the
Determination Date immediately preceding the
declaration of the dividend.
(4) Dividends to Sprint Insiders. For Sprint
Insiders, subparagraph (3) of this paragraph
6.5(a) shall apply to balances in Accounts B
and BB as of April 30, 1991. With respect to
Share Units resulting from deferrals or
transfers from Account A or Account AA into
Account B or Account BB on or after May 1,
1991 ("Post May 1, 1991 Share Units"), when a
cash dividend is declared and paid by the
Company on its common stock, an amount shall
be credited to the Participant's Account A or
Account AA, as appropriate, as though the
same dividend had been paid on the Post May
1, 1991, Share Units as of the Determination
Date immediately preceding the declaration of
the dividend.
(5) Effect of Recapitalization. In the event of
a stock dividend, stock split, or other
corporate reorganization involving the
Company's common stock, the Company shall
make equitable adjustment to the number of
Share Units credited to a Participant's
Accounts B and BB as may be necessary to give
effect to such change in the Company's
capital structure.
<PAGE>
(6) Conversion of Share Units to Dollars on Dis
tribution. Share Units in Accounts B and BB
shall be converted to an equivalent dollar
amount before any distribution thereof to a
Participant pursuant to Article VII. For
purposes of distribution, the value of a
Share Unit shall be the average closing price
of the Company's common stock on the New York
Stock Exchange on the last trading day of
each of the twelve calendar months
immediately preceding the date of
distribution. If a Participant elects
payment in other than a lump sum, Share Units
shall be so converted to a dollar amount with
respect to each payment made in the
distribution. During the period of
distribution, dividends and other equitable
adjustments shall be credited to the
Participant's Accounts B and BB in accordance
with paragraphs 6.5(a)(3), 6.5(a)(4), and
6.5(a)(5). For such purposes, a Participant
that is a Sprint Insider immediately before
the event that entitles the Participant to
distribution shall be deemed a Sprint Insider
during the period of distribution.
(b) Maintenance of Accounts C and CC.
(1) Conversion between Dollar Amounts and
Cellular Share Units in Accounts B and
BB. When an amount is to be added to a
Participant's Deferred Benefit Accounts C or
CC, it shall be converted into Cellular Share
Units, or fractions thereof, by dividing the
amount to be credited by the closing price of
Cellular's common stock as reported by the
New York Stock Exchange on the last trading
day on or before the Determination Date.
When a number of Cellular Share Units is to
be subtracted from a Participant's Deferred
Benefit Accounts C or CC, such number of
Cellular Share Units shall be converted into
a dollar amount by multiplying such number of
Cellular Share Units by the closing price of
Cellular's common stock as reported by the
New York Stock Exchange on the last trading
day on or before the Determination Date.
(2) Sub-accounts to be Maintained for Purposes of
Computing Retirement and Termination
Benefits. Two sub-accounts shall be
maintained for Account CC: (i) a Retirement
Deferred Benefit Account which shall include
the
<PAGE>
value of the Cellular Share Units credited pursuant to paragraph
6.3(b)(2) plus other additions pursuant to this paragraph 6.5(b) and
(ii) a Termination Deferred Benefit Account which shall include the
value of the Cellular Share Units credited pursuant to paragraph
6.3(b)(3) plus other additions pursuant to this paragraph 6.5(b).
(3) Dividends to non-Cellular Insiders. For all
Participants other than Cellular Insiders,
when a dividend is declared and paid by
Cellular on its common stock, an amount shall
be credited to the Participant's Accounts C
and CC as though the same dividend had been
paid on the Cellular Share Units in such
accounts as of the Determination Date
immediately preceding the declaration of the
dividend, and such amount shall be converted
to Cellular Share Units. Such amount shall
be valued as of the Determination Date
immediately preceding the declaration of the
dividend.
(4) Dividends to Cellular Insiders. For
Participants that are Cellular Insiders, when
a cash dividend is declared and paid by
Cellular on its common stock, an amount equal
to such dividend shall be credited to the
Participant's Account A or Account AA with
respect to Cellular Share Units in Accounts C
or CC, respectively as of the Determination
Date immediately preceding the declaration of
the dividend.
(5) Effect of Recapitalization. In the event of
a stock dividend, stock split or other
corporate reorganization involving Cellular's
common stock, the Company shall make
equitable adjustment to the number of
Cellular Share Units credited to a
Participant's Accounts C and CC as may be
necessary to give effect to such change in
Cellular's capital structure.
(6) Conversion of Cellular Share Units to Dollars
on Distribution. Cellular Share Units in
Accounts C and CC shall be converted to an
equivalent dollar amount before any
distribution thereof to a Participant
pursuant to Article VII. For purposes of
distribution, the value of a Cellular Share
Unit shall be the average closing price of
Cellular's common stock on the New York Stock
Exchange on the last trading day for each of
(i) the 12 calendar months immediately
preceding the date of such distribution or
(ii) the smaller
<PAGE>
number of calendar months elapsed from the Distribution Time to such
distribution. If a Participant elects payment in other than a lump
sum, Cellular Share Units shall be so converted to a dollar amount
with respect to each payment made in the distribution. During the
period of distribution, dividends and other equitable adjustments
shall be credited to the Participant's Accounts C and CC in accordance
with paragraphs 6.5(b)(3), 6.5(b)(4), and 6.5(b)(5). For such
purposes, a Participant that is a Cellular Insider immediately before
the event that entitles the Participant to distribution shall be
deemed a Cellular Insider during the period of distribution.
6.6 Statement of Accounts. The Company shall submit to each Participant, within
120 days after the close of each Plan Year, a statement in such form as the
Company deems desirable, setting forth the balance to the credit of such
Participant in his Deferred Benefit Accounts A, B, and C and in his Deferred
Benefit Accounts AA, BB, and CC (showing separate calculations for each Interest
Yield), in each case, as of the last day of the preceding Plan Year.
6.7 Transfers Between Accounts. Within the limitations of this paragraph 6.7, a
Participant may elect, by executing an Account Transfer Request: (1) to transfer
all or any portion of his Account A to Account B, (2) to transfer all or any
portion of his Account B to Account A, (3) to transfer all or any portion of his
Account AA to Account BB, (4) to transfer all or any portion of his Account BB
to Account AA, (5) to transfer all or any portion of his Account C to Account A,
(6) to transfer all or any portion of his Account C to Account B, (7) to
transfer all or any portion of his Account CC to Account AA, and (8) to transfer
all or any portion of his Account CC to Account BB. Such election shall be
effective on the last day of the calendar month in which the Plan Administrator
timely receives the Participant's executed Account Transfer Request.
(a) Limitation on Sprint Insiders' Transfer of Share
Units. Sprint Insiders may not request any of the
foregoing transfers involving transfer into or out
of Accounts B or BB more than twice in any Plan
Year, and no such transfer may be made unless a
period of at least six months shall have elapsed
from the effective date of the most recent such
transfer (whether it occurred in the current Plan
Year or not) to the effective date of the current
such transfer.
<PAGE>
(b) Limitation on Cellular Insiders' Transfer of
Cellular Share Units. Cellular Insiders may not
request any of the foregoing transfers involving
transfers out of Accounts C or CC more than twice
in any Plan Year, and no such transfer may be made
unless a period of at least six months shall have
elapsed from the effective date of the most recent
such transfer (whether it occurred in the current
Plan Year or not) to the effective date of the
current such transfer.
(c) Limitations on Other Transfers. Transfers other
than those described in paragraphs 6.7(a) or
6.7(b) may not be made more than four times in any
Plan Year, and no such transfer may be made unless
a period of at least three months shall have
elapsed from the effective date of the most recent
such transfer (whether it occurred in the current
Plan Year or not) to the effective date of the
current transfer.
ARTICLE VII
BENEFITS
7.1 Benefit for Normal or Early Retirement and Termination After Age 55. Subject
to paragraph 7.6 below, upon a Participant's (i) retirement after reaching the
Normal Retirement Date, or (ii) retirement after reaching the Early Retirement
Date, or (iii) termination of employment after attaining age 55, he shall be
entitled to a Deferral Benefit equal to the amount of his Retirement Deferred
Benefit Account determined under paragraph 6.1 hereof as of the Determination
Date coincident with or immediately following such event.
7.2 Termination of Employment Before Age 55. Upon any termination of service of
the Participant before age 55 for reasons other than death or Disability, the
Employer shall pay to the Participant, as compensation earned for services
rendered before his termination of service, a Deferral Benefit equal to the
amount of his Termination Deferred Benefit Account determined under paragraph
6.1 hereof. The Termination Deferred Benefit Account of a Participant whose
employment has terminated shall be paid in a single sum to the terminated
Participant within 30 days following termination of employment, if the aggregate
balance of the Deferred Benefit Account(s) of such Participant is $20,000 or
less. If such aggregate balance of a Participant's Deferred Benefit Account(s)
is more than $20,000, payment shall commence pursuant to the Participant's
election in the Participation Agreement.
<PAGE>
7.3 Death. If a Participant dies after the commencement of payments of his
Deferral Benefit, his Beneficiary shall continue to receive the remaining
installments of his Deferred Benefit Account in accordance with the
Participant's election pursuant to paragraph 7.6.
If a Participant dies while employed, before any payments of a Deferral Benefit,
the aggregate amounts deferred under all Participation Agreements shall be
determined as follows:
(a) In the case of deferrals pursuant to a Participation Agreement first
effective before the Transition Date:
(1) Deferrals of Incentive Compensation shall be
the Retirement Deferred Benefit Account value
thereof.
(2) Deferrals of Base Salary pursuant to
Participation Agreements requiring a total
deferral of less than $15,000 per year
allocated to Accounts A and AA pursuant to
the Participation Agreement as revised on the
date of the Participant's death shall be the
greater of (i) the Retirement Deferred
Benefit Account value thereof or (ii) ten
times the amount of the elected annual Base
Salary deferral.
(3) Deferrals of Base Salary pursuant to
Participation Agreements requiring a total
deferral of $15,000 or more per year
allocated to Accounts A and AA pursuant to
the Participation Agreement as revised on the
date of the Participant's death shall be
determined as follows: (i) that portion of
the deferral which totals $15,000 per year
shall be the greater of (x) the Retirement
Deferred Benefit Account value thereof and
(y) ten times the amount of the elected
annual Base Salary deferral, and (ii) the
portion of such deferral which is in excess
of $15,000 per year shall be the Retirement
Deferred Benefit Account value of such
excess.
(4) Deferrals allocated to Accounts B and BB
shall be the Retirement Deferred Benefit
Account value thereof.
(b) In the case of deferrals pursuant to a
Participation Agreement first effective on or
after the Transition Date, the aggregate amount of
all deferrals shall be the Retirement Deferred
Benefit Account value of Accounts A and B. The
Deferral Benefit shall be payable as provided for
in paragraph 7.6. The Deferral Benefit provided
above shall be in lieu of all other benefits under
this Plan.
<PAGE>
7.4 Disability. In the event of Disability while employed by the Employer,
before the completion of all deferrals provided for under a Participation
Agreement, the Employer shall credit to the disabled Participant's Deferred
Benefit Account an amount equal to the amount of the Participant's Agreement to
defer during such period of Disability, but not beyond the period elected.
In the event of Disability before termination of employment or the Normal
Retirement Date, the disabled Participant, unless he otherwise elects under this
paragraph, shall be entitled to the amount in his Retirement Deferred Benefit
Account (rather than his Termination Deferred Benefit Account) determined under
paragraph 6.1 as of the Determination Date next following such Disability, with
payments to commence upon attainment of the Participant's Normal Retirement Date
in the form specified in paragraph 7.6(a)(2) and/or 7.6(a)(3) over a 15 year
period. Before payments commence under the preceding sentence, a Disabled
Participant may elect, subject to Committee approval upon good cause shown: (i)
to accelerate commencement of the payments to any earlier date, but not sooner
than 60 days after the onset of Disability and/or (ii) to change the form of
payment permitted under paragraph 7.6(a).
7.5 Suspension of Participation; Failure to Continue Participation. The
Committee, in its sole discretion, may suspend the deferral of a Participant's
Compensation upon the advanced written request of a Participant on account of
financial hardship suffered by that Participant. A Participant must file any
request for such suspension on or before the 15th day preceding the regular
payment date on which the suspension is to take effect. The Committee, in its
sole discretion, shall determine the amount, if any, that will not be deferred
by the Participant as a result of the financial hardship.
The suspension of any deferrals under this paragraph shall not affect amounts
deferred with respect to periods before the effective date of the suspension. A
Participant whose deferrals are suspended may not execute a subsequent
Participation Agreement that would take effect before the beginning of the third
Plan Year following the close of the Plan Year in which the suspension first
took effect.
In the event the Participant ceases to remain a member of the class of employees
who are eligible to participate in this Plan, the Participant may elect to
suspend the amount of any remaining deferral commitment in the
<PAGE>
same manner as described for other suspensions in this paragraph, except that
Committee approval shall not be required.
7.6 Form of Benefit Payment.
(a) Upon the happening of an event described in paragraphs 7.1, 7.2, 7.3 or 7.4
above, the Employer shall pay to the Participant or his Beneficiary the
amount specified in one of the following forms as elected by the
Participant in the Participation Agreement filed by the Participant:
(1) a lump sum payment at a time designated in the Participation Agreement
but no later than the Participant's Normal Retirement Date.
(2) with respect to balances in Accounts A and
AA, an annual payment of a fixed amount that
shall amortize the Deferred Benefit Account
balance in equal annual payments of principal
and interest over a period from 2 to 20
years. For purposes of determining the
amount of the annual payment, the assumed
rate of interest on Accounts A and AA shall
be the average of the applicable Interest
Yield as of each Determination Date for the
60 months preceding the initial annual
installment payment.
(3) with respect to balances in Accounts B and
BB, an annual payment over a period from 2 to
20 years, each such payment having a value,
as determined pursuant to paragraph
6.5(a)(6), of the number of Share Units equal
to (i) the number of Share Units in the
accounts on the Determination Date
immediately following the event described in
paragraph 7.1, 7.2, 7.3 or 7.4, divided by
(ii) the number of annual installments
elected. During the period that a
Participant is receiving a distribution from
Account B or BB, Share Unit dividends will be
added to the Accounts in accordance with
subparagraph 6.5(a)(3) or 6.5(a)(4) hereof.
Such Share Unit dividends shall be valued in
the same manner as previously described, and
all such Share Units accruing after a
distribution from Accounts B or BB is made
shall be paid to the Participant with the
next distribution from the account.
(4) with respect to balances in Accounts C and CC, an annual payment over
a period from 2 to 20 years, each such
<PAGE>
payment having a value, as determined pursuant to paragraph 6.5(b)(6),
of the number of Cellular Share Units equal to (i) the number of
Cellular Share Units in the accounts on the Determination Date
immediately following the event described in paragraph 7.1, 7.2, 7.3
or 7.4, divided by (ii) the number of annual installments elected.
During the period that a Participant is receiving a distribution from
Account C or CC, Cellular Share Unit dividends will be added to the
Accounts in accordance with subparagraph 6.5(b)(3) or 6.5(b)(4)
hereof. Such Cellular Share Unit dividends shall be valued in the same
manner as previously described, and all such Cellular Share Units
accruing after a distribution from Accounts C or CC is made shall be
paid to the Participant with the next distribution from the account.
(b) A Participant may change the form in which his
benefits shall be paid by filing a revised
Participation Agreement indicating such change
before attaining age 60 and at least 13 months
before the date upon which the payments to be made
are determined. Such revised Participation
Agreement shall be deemed a continuation of the
initial Participation Agreement to which it
relates for purposes of complying with the
provisions of paragraphs 4.2 and 4.3 relating to
the minimum and maximum deferrals and the duration
of Participation Agreements. No such revised
Participation Agreement shall change the amount
elected to be deferred in the original
Participation Agreement, nor the time elected for
commencement of benefit payments.
(c) In the absence of a Participant's election under subparagraph 7.6(a),
benefits shall be paid in the form specified in subparagraph 7.6(a)(2),
7.6(a)(3), and 7.6(a)(4) over a 15 year period, except as provided in
paragraph 7.2. In the event of a Disabled Participant, payment shall be in
the form described in paragraph 7.4.
7.7 Withholding; Payroll Taxes. To the extent required by the law in effect at
the time payments are made, the Employer shall withhold from payments made
hereunder any taxes required to be withheld from an employee's wages for the
federal or any state or local government.
7.8 Commencement of Payments. Unless otherwise provided, payments under this
Plan shall begin within 60 days following receipt of notice by the Plan
Administrator of an event which entitles a Participant
<PAGE>
(or a Beneficiary) to payments under this Plan, or at such earlier date as may
be determined by the Company pursuant to the terms of the Plan. All payments
shall be made as of the first day of the month.
7.9 Termination of SpinCo Group Employees. For purposes of this Plan, any
Participant who, within the meaning of the Distribution Agreement, is a SpinCo
Group Employee immediately after the Distribution Time shall be treated as
terminated on the Distribution
Time.
ARTICLE VIII
BENEFICIARY DESIGNATION
8.1 Beneficiary Designation. Each Participant shall have the right, at any time,
to designate any person or persons as his Beneficiary or Beneficiaries (both
principal as well as contingent) to whom payment under this Plan shall be paid
in the event of his death before complete distribution to the Participant of the
benefits due him under the Plan.
8.2 Amendments. Any Beneficiary Designation may be changed by a participant by
the written filing of such change on a form prescribed by the Company. The
filing of a new Beneficiary Designation form will cancel all Beneficiary
Designations previously filed.
8.3 No Beneficiary Designation. If a Participant fails to designate a
Beneficiary as provided above, or if all designated Beneficiaries predecease the
Participant, then the Participant's designated Beneficiary shall be deemed to be
the person or persons surviving him in the first of the following classes in
which there is a survivor, share and share alike:
(a) The surviving Spouse;
(b) The Participant's children, except that if any of the children predecease
the Participant but leave issue surviving, then such issue shall take by
right of representation the share their parent would have taken if living;
(c) The Participant's personal representative
(executor or administrator).
8.4 Effect of Payment. The payment to the deemed Beneficiary shall completely
discharge the Employer's obligations under this Plan.
<PAGE>
ARTICLE IX
AMENDMENT AND TERMINATION OF PLAN
9.1 Amendment. The Board may at any time amend the Plan in whole or in part;
provided, however, that no amendment shall be effective to decrease or restrict
any Deferred Benefit Account at the time of such amendment.
9.2 Employer's Right to Terminate. The Board may at any time terminate the Plan
with respect to new elections to defer if, in its judgment, the continuance of
the Plan, the tax, accounting, or other effects thereof, or potential payments
thereunder would not be in the best interests of the Company. The Board may also
terminate the Plan in its entirety at any time, and upon any such termination,
each Participant (a) who is then receiving a Deferral Benefit shall be paid in a
lump sum, or over such period of time as determined by the Company, the then
remaining balance in his Deferred Benefit Account, and (b) who has not received
a Deferral Benefit shall be paid in a lump sum, or over such period of time as
determined by the Company, the balance in his Deferred Benefit Account.
ARTICLE X
MISCELLANEOUS
10.1 Unsecured General Creditor. Participants and their Beneficiaries shall have
no legal or equitable rights, interest or claims in any property or assets of
the Employer, nor shall they be Beneficiaries of, or have any rights, claims or
interests in any life insurance policies, annuity contracts or the proceeds
therefrom owned or which may be acquired by the Employer ('Policies'). Such
Policies or other assets of the Employer shall not be held under any trust for
the benefit of Participants or their Beneficiaries or held in any way as
collateral security for the fulfilling of the obligations of the Employer under
this Plan. Any and all of the Employer's assets and Policies shall be, and
remain, the general, unpledged, unrestricted assets of the Employer. The
Employer's obligation under the Plan shall be merely that of an unfunded and
unsecured promise of the Employer to pay money in the future.
10.2 Nonassignability. Neither a Participant nor any other person shall have any
right to commute, sell, assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate or convey in advance of actual receipt
the amounts, if any, payable hereunder, or any
<PAGE>
part thereof, which are, and all rights to which are, expressly declared to be
unassignable and non-transferable. No part of the amounts payable shall, before
actual payment, be subject to seizure or sequestration for the payment of any
debts, judgments, alimony or separate maintenance owed by a Participant or any
other person, nor be transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or insolvency.
10.3 Not a Contract of Service. The terms and conditions of this Plan shall not
be deemed to constitute a contract of service between the Employer and the
Participant, and the Participant (or his Beneficiary) shall have no rights
against the Employer except as may otherwise be specifically provided herein.
Moreover, nothing in this Plan shall be deemed to give a Participant the right
to be retained in the service of the Employer or to interfere with the right of
the Employer to discipline or discharge him at any time.
10.4 Protective Provisions. A Participant will cooperate with the Employer by
furnishing any and all information requested by the Employer, in order to
facilitate the payment of benefits hereunder, and by taking such physical
examinations as the Employer may deem necessary and taking such other action as
may be requested by the Employer.
10.5 Applicable Law. The Plan, and any Participation
Agreement related thereto, shall be governed by the
laws of the State of Kansas, without regard to the
principles of conflicts of law.
10.6 Alcatel Employees. A transfer of employees to the joint venture with
Alcatel, N.V. (the "Joint Venture") on December 31, 1993, shall not be treated
as a retirement or termination of employment under the Plan. When such
transferred employees retire or terminate employment with the Joint Venture
(other than by reason of a transfer to employment with the Company or an
affiliate of the Company), or if before such retirement or termination of
employment, the Company ceases to own at least a 49 percent interest in the
Joint Venture (or such lesser percentage as determined by the Organization and
Compensation Committee of the Company), the transferred employees shall be
considered to have retired or terminated employment.
10.7 STV Employees. A transfer of employees to the Sprint Telecommunications
joint venture ("STV") shall not be treated as a retirement or termination of
employment under the Plan. When such transferred employees retire or terminate
employment with STV (other
<PAGE>
than by reason of a transfer to employment with the Company or an affiliate of
the Company), or if before such retirement or termination of employment, the
Company ceases to own at least a 40 percent interest in STV (or such lesser
percentage as determined by the Organization and Compensation Committee of the
Company), the transferred employees shall be considered to have retired or
terminated employment.
10.8 FT and DT Joint Venture Employees. A transfer of employees to one of the
joint ventures formed among the Company, France Telecom, and Deutsche Telekom
pursuant to the Joint Venture Agreement dated June 22, 1995 (collectively, the
"FT-DT Ventures"), shall not be treated as a retirement or termination of
employment under the Plan. When such transferred employees retire or terminate
employment with such joint venture (other than by reason of a transfer to
employment with the Company or an affiliate of the Company or to another of the
FT-DT Ventures), or if before such retirement or termination of employment, the
Company ceases to own at least the same percentage interest in such venture as
it is entitled to own under the Joint Venture Agreement (or such lesser
percentage as determined by the Organization and Compensation Committee of the
Company), the transferred employees shall be considered to have retired or
terminated employment.
Exhibit (10)(w)
AGREEMENT REGARDING SPECIAL COMPENSATION
AND POST EMPLOYMENT RESTRICTIVE COVENANTS
THIS AGREEMENT made this 9th day of November, 1993, by and between
SPRINT/UNITED MANAGEMENT COMPANY, a Kansas corporation and subsidiary of Sprint
Corporation ("Employer"), and GARY D.
FORSEE ("Executive").
W I T N E S S E T H:
WHEREAS, Employer and its parent and affiliates are engaged
in the telecommunications business;
WHEREAS, Executive has expertise, experience and capability
in the business of Employer and the telecommunications business
in general;
WHEREAS, Executive has been, and/or now is serving Employer
as Senior Vice President, Staff Operations;
WHEREAS, Employer desires to enter into this Agreement to provide severance
and other benefits for Executive and obtain Executive's agreements regarding
confidentiality and post- employment restrictive covenants for Employer; and
WHEREAS, Executive is willing to provide such agreements to Employer.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which consideration is mutually acknowledged by the parties, it
is hereby agreed as follows:
1. Recitals.
The recitals hereinbefore set forth constitute an integral part of this
Agreement, evidencing the intent of the parties in executing this Agreement, and
describing the circumstances surrounding its execution. Said recitals are by
express reference made a part of the covenants hereof, and this Agreement shall
be construed in light thereof.
2. Duties and Responsibilities.
The duties and responsibilities of Executive are and shall continue to be
of an executive nature as shall be required by Employer in the conduct of its
business. Executive's powers and authority shall include all those presently
delegated to him or such other duties and responsibilities as from time to time
may be assigned to him. Executive recognizes, that during his employment
hereunder, he owes an undivided duty of loyalty to Employer, and agrees to
devote his entire business time and attention to the performance of said duties
and responsibilities and to use his best efforts to promote and develop the
business of Employer.
3. Employment Term.
Executive's employment may be terminated by either party in accordance with
Sections 5, 6, 7, or 8 herein.
4. Compensation and Benefits.
During employment, Executive shall be entitled to receive a base annual
salary, shall be reimbursed for reasonable expenses incurred and accounted for
in accordance with the policies and procedures of Employer, and shall be
entitled to vacation pay and other benefits applicable to employees generally,
each as may from time to time be established, amended or terminated. In
addition, upon execution of this Agreement, Executive shall be awarded five
thousand (5,000) shares of restricted stock as set forth in a restricted stock
agreement of even date herewith, attached hereto and incorporated herein (the
"Restricted Stock Agreement"), shall be entitled to the Special Compensation set
forth in Section 6 hereof in accordance with the terms of this Agreement, and
shall be entitled, subject to approval of the Organization and Compensation
Committee, to participation in the Key Management Benefit Plan in accordance
with the terms of said plan.
5. Termination by Employer: Special Compensation.
At any time, Employer may terminate Executive's employment for any reason. If
Executive's termination is other than pursuant to Section 6, Executive shall,
subject to the other provisions of this Section 5, be entitled to the following
Special Compensation (as that term is defined in this Section 5) in lieu of any
benefits available under any and all Employer separation plans or policies. If
Executive's termination is pursuant to Sections 5, 6 or 7, Executive's
obligations under Sections 11, 12, 13, and 14 hereof shall continue.
For purposes of this Agreement, "Special Compensation" shall consist of :
(a) to continue to receive for a period of eighteen (18) months from the
date of termination (the "Severance Period") biweekly compensation at the
rate equal to the biweekly amount of his base annual salary in effect at
the date of termination of employment;
(b) to receive a bonus, based on actual performance results, up to the
target amount, under the Management Incentive Plan ("MIP") throughout the
Severance Period provided that the amount, if any, payable under such Plan
for the award period including the last day of the Severance Period shall
be pro rated based upon the number of months of the Severance Period that
fall within the award period and the total number of months in such award
period;
(c) to receive an award under the Long Term Incentive Plan, pro rated
based on the Executive's last day worked, exclusive of any Severance
Period, determined in accordance with the terms of said Plan;
(d) acceleration of vesting of restricted stock in
accordance with the relevant provisions of the Restricted
Stock Agreement;
(e) to continue to receive throughout the Severance Period any executive
medical, dental, life, and qualified or nonqualified retirement benefits
which the Executive was receiving or was entitled to receive at the time of
termination, except that long term disability and short term disability
benefits cease on the last day worked;
(f) outplacement counseling by a firm selected by
Employer to continue until Executive becomes employed; and
(g) to continue to receive throughout the Severance Period all
applicable executive perquisites (including automobile allowance, long
distance services and all miscellaneous services) except country club
membership dues and accrual of vacation.
Employer shall pay or cause to be paid the amounts payable under paragraph
(a) above in equal installments, bi-weekly in arrears, and the amount payable
under paragraphs (b) and (c) in accordance with the terms of the Plans. All
payments pursuant to this Section shall be subject to applicable federal and
state income and other withholding taxes.
In addition to the Special Compensation described above, Executive shall
also be entitled to any vacation pay for vacation accrued by Executive in the
calendar year of termination but not taken at the time of termination.
In the event Executive becomes employed full time during the Severance
Period, Executive's entitlement to continuation of the benefits described in
paragraph (e) shall immediately cease, however, Executive shall retain any
rights to continue medical insurance coverage under the COBRA continuation
provisions of the group medical insurance plan by paying the applicable premium
therefor.
The payments and benefits provided for in this Section shall be in addition
to all other sums then payable and owing to Executive hereunder and, except as
expressly provided herein, shall not be subject to reduction for any amounts
received by Executive for employment or services provided after termination of
employment hereunder, and shall be in full settlement and satisfaction of all of
Executive's claims and demands.
In all events, Executive's right to receive severance and/or other benefits
pursuant to this Section shall cease immediately in the event Executive is
re-employed by Employer or an affiliate or Executive breaches his Confidential
Information Covenant (as defined in Section 11 hereof), or breaches Sections 12,
13 or 14 hereof. In all cases, Employer's rights under Section 15 shall
continue.
6. Voluntary Resignation by Executive; Termination
for Cause; Total Disability
Upon termination of Executive's employment by either Voluntary
Resignation, Termination for Cause (as those terms are defined in this Section
6), or Total Disability, as that term is defined in the Long Term Disability
Plan, Executive shall have no right to compensation, severance pay or other
benefits described herein but Executive's obligations under Sections 11, 12, 13
and 14 hereof shall continue.
(a) Voluntary Resignation by Executive. At any time, Executive has
the right, by written notice to Employer, to terminate his services
hereunder ("Voluntary Resignation"), effective as of thirty (30) days after
such notice.
(b) Termination for Cause by Employer. At any time, Employer has
the right to terminate Executive's employment. Termination upon the
occurrence of any of the following shall be deemed termination for cause
("Termination for Cause"):
(i) Conduct by the Executive which reflects
adversely on the Executive's honesty, trustworthiness
or fitness as an Executive, or
(ii) Executive's willful engagement in conduct which is
demonstrably and materially injurious to the Employer.
For Termination for Cause, written notice of the termination of
Executive's employment by Employer shall be served upon Executive and shall
be effective as of the date of such service. Such notice given by Employer
shall specify the act or acts of Executive underlying such termination.
(c) Total Disability. Upon the total disability of the Executive, as
that term is defined in the Long Term Disability Plan, Executive shall have
no right to compensation or severance pay described herein but shall be
entitled to long term disability and other such benefits afforded under the
applicable policies and plans.
7. Resignation Following Constructive Discharge.
If at any time, except in connection with a termination pursuant to Section
5, 6, or 8 Executive is Constructively Discharged (as that term is defined in
this Section 7) then Executive shall have the right, by written notice to
Employer within sixty (60) days of such Constructive Discharge, to terminate his
services hereunder, effective as of thirty (30) days after such notice.
Executive shall in such event be entitled to the compensation and benefits as if
such employment were terminated pursuant to Section 5 of this Agreement.
For purposes of this Agreement, the Executive shall be "Constructively
Discharged" upon the occurrence of any one of the following events:
(a) Executive is removed from his position with Employer other than as
a result of Executive's appointment to positions of equal or superior scope
and responsibility; or
(b) Executive's targeted total compensation is reduced by more than 10%
(other than across-the-board reductions similarly affecting all officers of
the Long Distance Division of Employer).
8. Effect of Change in Control.
In the event that within one year of a Change in Control (as that term is
defined in this Section 8) Executive's employment is terminated:
(a) by the Employer other than pursuant to Section 6
hereof, or,
(b) by Executive pursuant to Section 7 hereof,
then Executive shall be entitled to the Special Compensation described in
Section 5 and shall be bound by Section 11, but shall not have any continuing
obligations under Sections 12, 13, and 14, except as otherwise required by
common law or statute.
For purposes of this Agreement, a "Change in Control" shall be deemed to
have occurred if:
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934 (the "Exchange Act")) other than a
trustee or other fiduciary holding securities under an employee benefit
plan of Sprint Corporation ("Sprint") or any of its affiliates, and other
than Sprint or a corporation owned, directly or indirectly, by the
stockholders of Sprint in substantially the same proportions as their
ownership of stock of Sprint, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Sprint representing 20% or more of the combined voting power
of Sprint's then outstanding securities, or
(ii) during any period of two consecutive years (not including any
period prior to the date of this Agreement), incumbent members cease for
any reason to constitute a majority of the members of the Board of
Directors of Sprint.
A member of the Board of Directors of Sprint shall be an "incumbent member" if
such individual is as of the date of this Agreement or at the beginning of the
applicable two consecutive year period a member of the Board of Directors of
Sprint, and any new director after the date of this Agreement (other than a
director designated by person who has entered into an agreement to effect a
transaction described in subparagraph (i) above) whose election to the Board or
nomination for election by the stockholders of Sprint was approved by a vote of
at least two-thirds (2/3) of the directors still in office who either were
directors as of the date hereof or as of the first day of the applicable two
consecutive year period or whose election or nomination for election was
previously so approved.
9. Dispute Resolution.
All disputes arising under this Agreement, other than those disputes
relating to Executive's alleged violations of Sections 11 through 14 herein,
shall be submitted to arbitration by the American Arbitration Association of
Kansas City, Missouri. Costs of arbitration shall be borne equally by the
parties. The decision of the arbitrators shall be final and there shall be no
appeal from any award rendered. Any award rendered may be entered as a judgment
in any court of competent jurisdiction. In any judicial enforcement proceeding,
the losing party shall reimburse the prevailing party for its reasonable costs
and attorneys' fees for enforcing its rights under this Agreement, in addition
to any damages or other relief granted. This Section 9 does not apply to any
action by Employer to enforce Sections 11 through 14 of this Agreement and does
not in any way restrict Employer's rights under Section 15 herein.
10. Enforcement.
In the event Employer shall fail to pay any amounts due to Executive under
this Agreement as they come due, Employer agrees to pay interest on such amounts
at a rate of prime plus two percent (2%) per annum. Employer agrees that
Executive and any successor shall be entitled to recover all costs of
successfully enforcing any provision of this Agreement, including reasonable
attorney fees and costs of litigation.
11. Confidential Information.
Executive acknowledges that during the course of his employment he has
learned or will learn or develop Confidential Information (as that term is
defined in this Section 11). Executive further acknowledges that unauthorized
disclosure or use of such Confidential Information, other than in discharge of
Executive's duties, will cause Employer irreparable harm.
For purposes of this Section, Confidential Information means trade secrets
(such as technical and non-technical data, a formula, pattern, compilation,
program, device, method, technique, drawing, process) and other proprietary
information concerning the products, processes or services of Employer or its
parent, and/or affiliates, including but not limited to: computer programs;
unpatented inventions, discoveries or improvements; marketing, manufacturing, or
organizational research and development; business plans; sales forecasts;
personnel information, including the identity of other employees of Employer,
their responsibilities, competence, abilities, and compensation; pricing and
financial information; current and prospective customer lists and information on
customers or their employees; information concerning planned or pending
acquisitions or divestitures; and information concerning purchases of major
equipment or property, which information: (a) has not been made generally
available to the public; and (b) is useful or of value to the current or
anticipated business, or research or development activities of Employer or of
any customer or supplier of Employer, or (c) has been identified to Employee as
confidential by Employer, either orally or in writing.
Except in the course of his employment and in the pursuit of the business
of Employer or any of its subsidiaries or affiliates, Executive shall not,
during the course of his employment, or for a period of eighteen (18) months
following termination of his employment for any reason, directly or indirectly,
disclose, publish, communicate or use on his behalf or another's behalf, any
proprietary information or data of Employer or any of its subsidiaries or
affiliates.
Executive acknowledges that Employer operates and competes nationally, and
that Employer will be harmed by unauthorized disclosure or use of Confidential
Information regardless of where such disclosure or use occurs, and that
therefore this confidentiality agreement is not limited to any single state or
other jurisdiction.
12. Non-Competition.
Executive acknowledges that use or disclosure of Confidential Information
described in Section 11 is likely if Executive were to perform
telecommunications functions relating to long distance services on behalf of a
competitor of Employer. Therefore, Executive shall not, for eighteen (18) months
following termination of employment for any reason (the "Non-Compete Period"),
accept any position, including but not limited to a position in the long
distance operations of AT&T or MCI, where the performance of duties in that
position will involve managing, controlling, participating in, investing in,
acting as consultant or advisor to, rendering services for, or otherwise
assisting any person or entity in the long distance business and performing
functions relating to long distance services, including all forms of
interexchange, interstate, intrastate, interlata and international
communications.
Executive acknowledges that Employer operates and competes nationally, and
that therefore this non-competition agreement is not limited to any single state
or other jurisdiction.
This section shall not prevent Executive from using general skills and
experience developed during employment with Employer or other employers; or from
accepting a position of employment with another company, firm, or other
organization which competes with Employer, if its business is diversified and
Executive is employed in a part of the business that is not related to long
distance Services and provided that such position does not require or permit the
disclosure or use of Confidential Information.
13. Inducement of Other Employees.
For a eighteen (18) month period following termination of employment,
Executive will not directly or indirectly solicit, induce or encourage any
employee or agent of Employer to terminate his relationship with Employer.
14. Return of Employer's Property.
All notes, reports, sketches, plans, published memoranda or other documents
created, developed, generated or held by Executive during employment, concerning
or related to Employer's business, and whether containing or relating to
Confidential Information or not, are the property of Employer and will be
promptly delivered to Employer upon termination of Executive's employment for
any reason whatsoever. During the course of employment, Executive shall not
remove any of the above property containing Confidential Information, or
reproductions or copies thereof, or any apparatus from Employer's premises
without authorization.
15. Remedies.
Executive acknowledges that the restraints and agreements herein provided
are fair and reasonable, that enforcement of the provisions of Sections 11, 12,
13 and 14 will not cause him undue hardship and that said provisions are
reasonably necessary and commensurate with the need to protect Employer and its
legitimate and proprietary business interests and property from irreparable
harm.
Executive acknowledges that failure to comply with the terms of this
Agreement will cause irreparable damage to Employer. Therefore, Executive agrees
that, in addition to any other remedies at law or in equity available to
Employer for Executive's breach or threatened breach of this Agreement, Employer
is entitled to specific performance or injunctive relief, without bond, against
Executive to prevent such damage or breach, and the existence of any claim or
cause of action Executive may have against Employer will not constitute a
defense thereto. Executive further agrees to pay reasonable attorney fees and
costs of litigation incurred by Employer in any proceeding relating to the
enforcement of the Agreement or to any alleged breach thereof in which Employer
shall prevail in whole or in part.
In the event of a breach or a violation by Executive of any of the
covenants and provisions of this Agreement, the running of the Non-Compete
Period (but not of Executive's obligation thereunder), shall be tolled during
the period of the continuance of any actual breach or violation.
16. Confidentiality of Agreement.
As a specific condition to Executive's right to Special Compensation or
other benefits described herein, Executive agrees that he will not disclose or
discuss: the existence of this Agreement; the Special Compensation provided
hereunder; or any other terms of the Agreement except: (1) to members of his
immediate family; (2) to his financial advisor or attorney but then only to the
extent necessary for them to assist him; or (3) as required by law or to enforce
legal rights.
17. Entire Understanding.
This Agreement constitutes the entire understanding between the parties
relating to Executive's employment hereunder and supersedes and cancels all
prior written and oral understandings and agreements with respect to such
matters, except for the terms and provisions of the Key Management Benefit Plan
and any other employee benefit or other compensation plans (or any agreements or
awards thereunder) referred to in or contemplated by this Agreement and except
for the SPRINT UNITED EMPLOYEE AGREEMENT REGARDING PROPERTY RIGHTS AND BUSINESS
PRACTICES which the Executive has signed and by which Executive continues to be
bound.
18. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of Executive's
executors, administrators, legal representatives, heirs and legatees and the
successors and assigns of Employer.
19. Partial Invalidity.
The various provisions of this Agreement are intended to be severable and
to constitute independent and distinct binding obligations. Should any provision
of this Agreement be determined to be void and unenforceable, in whole or in
part, it shall not be deemed to affect or impair the validity of any other
provision or part thereof, and such provision or part thereof shall be deemed
modified to the extent required to permit enforcement. Without limiting the
generality of the foregoing, if the scope of any provision contained in this
Agreement is too broad to permit enforcement to its full extent, but may be made
enforceable by limitations thereon, such provision shall be enforced to the
maximum extent permitted by law, and Executive hereby agrees that such scope may
be judicially modified accordingly.
20. Strict Construction.
The language used in this Agreement will be deemed to be the language
chosen by Employer and Executive to express their mutual intent and no rule of
strict construction shall be applied against any person.
21. Waiver.
The waiver of any party hereto of a breach of any provision of this
Agreement by any other party shall not operate or be construed as a waiver of
any subsequent breach.
22. Notices.
Any notice or other communication required or permitted to be given
hereunder shall be determined to have been duly given to any party (a) upon
delivery to the address of such party specified below if delivered personally or
by courier; (b) upon dispatch if transmitted by telecopy or other means of
facsimile, provided a copy thereof is also sent by regular mail or courier; or
(c) within forty-eight (48) hours after deposit thereof in the U.S. mail,
postage prepaid, for delivery as certified mail, return receipt requested,
addressed, in any case to the party at the following address(es) or telecopy
numbers:
If to Executive:
Gary D. Forsee
Sprint Communications Company, L.P.
8140 Ward Parkway
Kansas City, MO 64114
If to Employer and/or Company:
Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, KS 66205
Attention: Corporate Secretary
or to such other address(es) or telecopy number(s) as any party may designate by
Written Notice in the aforesaid manner.
23. Governing Law.
This Agreement shall be governed by, and interpreted, construed and
enforced in accordance with, the laws of the State of Kansas.
24. Gender and Number.
Wherever from the context it appears appropriate, each term stated in
either the singular of plural shall include the singular and the plural, and the
pronouns stated in either the masculine, the feminine or the neuter gender shall
include the masculine, feminine or neuter.
25. Headings.
The headings of the Sections of this Agreement are for reference purposes
only and do not define or limit, and shall not be used to interpret or construe
the contents of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed at Westwood, Kansas, on the date above set forth.
GARY D. FORSEE SPRINT/UNITED MANAGEMENT COMPANY
/s/Gary D. Forsee By:/s/B. Watson
Authorized Officer
<PAGE>
AMENDMENT
The Agreement Regarding Special Compensation and Post Employment
Restrictive Covenants (the "Special Agreement") between Sprint/United Management
Company and Gary D. Forsee (the "Executive") is hereby amended as follows,
effective January 3, 1994:
1. The first sentence of Section 8 shall be changed by adding the word "or"
at the end of item (b) and by adding the following item (c):
(c) by Executive if Executive is required to be based anywhere other
than the Kansas City metropolitan area or the Dallas, Texas
metropolitan area except for required travel on business to an extent
substantially consistent with Executive's business travel obligations
immediately prior to the Change in Control;
2. Section 12 shall be changed by:
(a) deleting from the second sentence of the first paragraph the words
"the performance of duties in that position will involve", and
substituting in lieu thereof the words "Executive dedicates his time
and efforts principally to"; and
(b) changing the last sentence of the Section to read:
This section shall not prevent Executive from using general skills and
experience developed during employment with Employer or other
employers; or from accepting a position of employment with another
company, firm, or other organization which competes with Employer, if
its business is diversified and Executive is employed in a part of the
business that is not related principally to long distance services and
provided that such position does not require or permit the disclosure
or use of Confidential Information.
Except as amended herein, the terms of the Special Agreement shall remain
in effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed at Westwood, Kansas, as of the date above set forth.
EXECUTIVE SPRINT/UNITED MANAGEMENT
COMPANY
/s/ Gary D. Forsee By: /s/ B. Watson
1/10/94 Title: SVP - HR
Exhibit (10)(x)
Directors' Deferred Fee Plan
(as amended through December 12, 1995)
ARTICLE I
PURPOSE
The purpose of the Sprint Corporation Directors' Deferred Fee Plan (hereinafter
referred to as the "Plan") is to provide funds upon termination of service or
death for Directors (and their beneficiaries) of Sprint Corporation and its
subsidiaries. It is intended that the Plan will aid in retaining and attracting
Directors of exceptional ability by providing such Directors with a means to
supplement their standard of living.
ARTICLE II
DEFINITIONS
For the purposes of this Plan, the following words and phrases shall have the
meanings indicated, unless the context clearly indicates otherwise:
2.1 Account Transfer Request. "Account Transfer
Request" means a written notice, in a form prescribed
by the Company, by a Participant to transfer all or any
portion of one Deferred Benefit Account to another
Deferred Benefit Account as provided for in paragraph
6.7.
2.2 Beneficiary. "Beneficiary" means the person, persons, or entity designated
by the Participant, as provided in Article VIII, to receive any benefits payable
under the Plan. Any Participant Beneficiary Designation shall be made in a
written instrument filed with the Company and shall become effective only when
received, accepted, and acknowledged in writing by the Company.
2.3 Board "Board" means the Board of Directors of the
Company.
2.4 Cellular. "Cellular" means Sprint Cellular
Company, however renamed, or any successor thereto.
2.5 Cellular Insider. "Cellular Insider" means, as of any time when the
determination thereof is relevant, any Participant subject to liability under
Section 16 of the Securities Exchange Act of 1934 with respect to trading in the
equity securities of Cellular.
2.6 Cellular Share Unit. "Cellular Share Unit" means
a measure of participation under the Plan having a
value based on the market value of
<PAGE>
one share of common stock of Cellular after the distribution thereof by the
Company to the Company's shareholders.
2.7 Committee. "Committee" means the Organization and
Compensation Committee of the Board.
2.8 Company. "Company" means Sprint Corporation, or
any successor thereto.
2.9 Deferral Benefit. "Deferral Benefit" means the
benefit payable to a Participant on his death or
termination of service as a Director, as calculated in
Article VII hereof.
2.10 Deferred Benefit Account. "Deferred Benefit Account" means the accounts
maintained on the books of account of the Company for each Participant pursuant
to Article VI. Separate Deferred Benefit Accounts shall be maintained for each
Participant. More than one Deferred Benefit Account shall be maintained for each
Participant to reflect (a) separate deferral elections made pursuant to
separately executed Participation Agreements as provided in paragraph 4.3, and
(b) Account A, Account B, Account C, Account AA, Account BB, and Account CC
elections made by each Participant in each such Participation Agreement.
A Participant's Deferred Benefit Account shall be used solely as a device for
the measurement and determination of the amounts to be paid to the Participant
pursuant to this Plan. A Participant's Deferred Benefit Account shall not
constitute or be treated as a trust fund of any kind.
2.11 Determination Date. "Determination Date" means
the date on which the amount of a Participant's
Deferred Benefit Account is determined as provided in
Article VI hereof. The last day of each calendar month
shall be a Determination Date.
2.12 Director. "Director" means a member of the Board
of Directors of the Company or its subsidiaries who is
not an employee of the Company or its subsidiaries.
2.13 Distribution Agreement. "Distribution Agreement"
means the agreement entered into by the Company,
Cellular, and Centel Corporation for the purpose of
providing for the distribution by the Company of its
stock in Cellular to the Company's stockholders.
2.14 Distribution Dividend Rate. "Distribution
Dividend Rate" means the Dividend Rate as defined in
the Distribution Agreement.
<PAGE>
2.15 Distribution Time. "Distribution Time" is
defined in the Distribution Agreement.
2.16 Fee. "Fee" means any cash compensation paid to a
Director for his services as a Director other than a
distribution under this Plan.
2.17 Interest Yield. "Interest Yield" means, with respect to any calendar month,
(a) in the case of balances in Account AA, three percentage points over the
composite yield on Moody's Seasoned Corporate Bond Yield Index for the preceding
calendar month as determined from Moody's Bond Record published by Moody's
Investors Services, Inc. (or any successor thereto), or, if such monthly yield
is no longer published, a substantially similar average selected by the Company,
(b) in the case of balances in Account A, the greater of (i) the prime rate in
effect at Citibank, N.A., at the opening of business on the first business day
of the month, or if said bank, for any reason, no longer publishes its prime
rate, the prime rate similarly determined of another major bank selected by the
Company and (ii) six percent per annum.
2.18 Participant. "Participant" means any Director who
elects to participate by filing a Participation Agree
ment as provided in Article IV.
2.19 Participation Agreement. "Participation Agreement" means the agreement, in
a form prescribed by the Company, filed by a Participant before the beginning of
the first period in which the Participant's Fees are to be deferred pursuant to
the Plan. A new Participation Agreement shall be filed by the Participant for
each separate fee deferral election.
2.20 Plan. "Plan" means the Sprint Corporation
Directors' Deferred Fee Plan as set forth in this
document. This Plan is the successor to, and comprises
an amendment and revision of, the United
Telecommunications, Inc., 1985 Directors' Deferred Fee
Plan adopted February 12, 1985.
2.21 Plan Administrator. "Plan Administrator" means
the person appointed by the Company to represent the
Company in the administration of this Plan.
2.22 Plan Year. "Plan Year" means a twelve-month
period commencing May 1st and ending the following
April 30th. The first Plan Year shall commence on May
1, 1985.
<PAGE>
2.23 Share Unit. "Share Unit" means a measure of
participation under the Plan having a value based on
the market value of a share of common stock of the
Company.
2.24 Spouse. "Spouse" means a Participant's wife or
husband who was lawfully married to the Participant
upon the Participant's death or severance from service.
2.25 Transition Date. "Transition Date" means May 1,
1990.
ARTICLE III
ADMINISTRATION
3.1 Plan Administrator; Company and Committee; Duties. This Plan shall be
administered by the Plan Administrator. Decisions of the Plan Administrator may
be reviewed by the Company through the Committee. Members of the Committee may
be Participants under this Plan. The Company shall also have the authority to
make, amend interpret, and enforce all appropriate rules and regulations for the
administration of this Plan and decide or resolve any and all questions
including interpretations of this Plan as may arise in connection with the Plan.
3.2 Binding Effect of Decisions. The decision or action of the Company in
respect to any question aris ing out of or in connection with the
administration, interpretation, and application of the Plan and the rules and
regulations promulgated hereunder shall be final and conclusive and binding upon
all persons having any interest in the Plan unless a written appeal is received
by the Company within sixty days of the disputed action. The appeal will be
reviewed by the Committee, and its decision shall be final, conclusive, and
binding on the Participant and on all persons claiming by, through, or under the
Participant.
ARTICLE IV
PARTICIPATION
4.1 Participation. Participation in the Plan shall be limited to Directors,
under age 70, who elect to participate in the Plan by filing a Participation
Agreement with the Company. Except as provided below, a Participation Agreement
must be filed before the April 15th immediately preceding the Plan Year in which
the Participant's participation under the agreement will commence, and the
election to participate shall be effective on the first day of the Plan Year
following receipt by the
<PAGE>
Company of a properly completed and executed Participation Agreement. With
respect to an individual becoming a Director during a Plan Year who thereby
becomes eligible to participate herein, an initial Participation Agreement may
be filed within 30 days of the Company's notification to him of his eligibility
to participate, and such election to participate shall be effective on the first
day of the month following the Company's receipt thereof, except that elections
not received by the Company before the 15th day of any calendar month shall be
effective no earlier than the first day of the second month following the month
of receipt.
4.2 Amount of Deferral and Length of Participation. A Participant may elect in
any Participation Agreement to defer up to 100% of the Fees that are expected at
the time of election to be earned over a period of (1) for Participation
Agreements first effective before the Transition Date, either 4 or 8 Plan Years,
and (2) for Participation Agreements first effective on or after the Transition
Date, one Plan Year, provided, the minimum amount of Fees that may be deferred
shall, in either case, be $5,000 per year or 100% of Fees payable, whichever is
less.
(a) The deferral percentage in each Participation Agreement shall be applied to
the Participant's Fees as they are payable during the period of election.
(b) A Participant's election to defer his Fees shall be irrevocable upon the
filing of the respective Participation Agreement; provided, however, that
the deferral of Fees under any Participation Agreement may be suspended or
amended as provided
in paragraphs 7.3 or 9.1.
4.3 Additional Participation Agreements. A Participant may enter into additional
Participation Agreements by filing a Participation Agreement with the Company
before April 15th of any calendar year, stating the amount that the Participant
elects to have deferred. Such additional agreements shall be effective as to
Fees paid in Plan Years beginning after the last day of the Plan Year in which
the respective agreement is filed with the Company. Each additional
Participation Agreement is subject to all of the provisions and requirements set
forth in paragraph 4.2. In the event a Participant elects to defer Fees pursuant
to a new Participation Agreement, the new election shall be treated as an
arrangement for which a separate Deferred Benefit Account shall be maintained
and separate Deferral Benefits shall be payable.
<PAGE>
ARTICLE V
DEFERRED FEES
5.1 Elective Deferred Fees. The amount of Fees that a Participant elects to
defer in the Participation Agreement executed by the Participant, with respect
to each Plan Year of participation in the Plan, shall be credited by the Company
to the Participant's Deferred Benefit Account throughout each Plan Year as the
Participant is paid. The amount credited to a Participant's Deferred Benefit
Account shall equal the amount deferred. To the extent that the Company is
required to withhold any taxes or other amounts from the Directors' deferred
Fees pursuant to any state, federal or local law, such amounts shall be taken
out of the Participant's Fees.
5.2 Vesting of Deferred Benefit Account. A
Participant shall be 100% vested in the Deferred
Benefit Account.
ARTICLE VI
DEFERRED BENEFIT ACCOUNT
6.1 Determination of Account. Each Participant's Deferred Benefit Account, as of
each Determination Date, shall consist of the balance of the Participant's
Deferred Benefit Account as of the immediately preceding Determination Date plus
the Participant's elective deferred Fees withheld since the immediately
preceding Determination Date pursuant to paragraph 5.1 and plus amounts credited
to the Participant's Deferred Benefit Account pursuant to paragraphs 6.4 and
6.5. The Deferred Benefit Account of each Participant shall be reduced by the
amount of all distributions, if any, made from such Deferred Benefit Account
since the preceding Determination Date.
6.2 Type of Deferral. A Participant may elect to have any portion of the amount
deferred credited to either Account A (fixed income return) or to Account B
(Share Units). The initial election shall be made by a properly executed
Participation Agreement. With respect to a Participation Agreement first
effective before the Transition Date, an election to defer any amount to Account
A shall be treated as an election to defer to Account AA, except as set forth
below.
An election to change the apportionment of deferred amounts between Accounts A
and B may be made by a Participant filing with the Plan Administrator a revised
Participation Agreement indicating such change on or before April 15th of each
calendar year. The revised Participation
<PAGE>
Agreement shall be deemed a continuation of the initial Participation Agreement
to which it relates for purposes of complying with the provisions of paragraphs
4.2 and 4.3 relating to the minimum and maximum deferrals and duration of the
Participation Agreement. The revised Participation Agreement shall be effective
for Plan Years beginning after the date it is filed.
Deferrals in such Plan Years shall be credited in accordance with the election
of the revised Participation Agreement, provided, however, that with respect to
Participation Agreements first effective before the Transition Date, an election
to allocate a portion of deferrals to Account A in excess of the portion
allocated in the Participation Agreement to be deferred into the fixed income
account as of May 1, 1989, shall be deemed to be an election by the Participant
to allocate to Account AA a portion of deferrals equal to the portion so
allocated to the fixed income account on May 1, 1989, and to allocate to Account
A the portion in excess of such portion.
6.3 Creation of Accounts AA, BB, C, and CC.
(a) Accounts AA and BB. As of the start of business
on the Transition Date, all amounts standing to
the credit of each Participant in Account A shall
be transferred to an Account AA. As of the start
of business on the Transition Date, amounts
standing to the credit of each Participant in
Account B that are attributable to prior transfers
from Account A into Account B shall he transferred
to an Account BB. The amount of such transfers
shall be an amount equal to the sum of the dollar
amount of all transfers from Account A to Account
B during the period beginning on the effective
date of the Participation Agreement and ending on
the Transition Date. For all purposes of this
Plan, except as otherwise noted in this Plan,
Account AA shall be treated in the same manner as
Account A, and Account BB shall be treated in the
same manner as Account B. Fees earned by
Directors on or after the Transition Date subject
to deferral under a Participation Agreement first
effective before the Transition Date shall be
credited to Accounts AA and B (in accordance with
the Participant's election to allocate such
deferrals to Accounts A or B, respectively, in
such Participation Agreements) for such
Participation Agreement.
(b) Accounts C and CC. On the Determination Date
first following the Distribution Time, there shall
be credited to an Account C and CC,
<PAGE>
created for each Participant having a positive balance in an Account B or
BB with respect to any Plan Year, a number of Cellular Share Units
determined as follows:
(1) one Cellular Share Unit in Account C for each Distribution Dividend
Rate number of Share Units in Account B for such Participant for such
Plan Year as of the Distribution Time; and
(2) one Cellular Share Unit in Account CC for each Distribution Dividend
Rate number of Share Units in Account BB for such Participant for such
Plan Year as of the Distribution Time.
6.4 Maintenance of Accounts A and AA. As of each Determination Date, the
Participant's Deferred Benefit Accounts A and AA shall be increased by the
amount of interest earned since the preceding Determination Date based on the
Interest Yield. Interest shall be credited on the average of the balances of the
Deferred Benefit Account on the Determination Date (before crediting the
interest) and on the last preceding Determination Date, but after the Deferred
Benefit Account has been adjusted for any contributions or distributions to be
credited or deducted for each such day.
6.5 Maintenance of Share Unit Accounts.
Accounts B and BB and Accounts C and CC shall maintain
balances in Share Units and Cellular Share Units,
respectively.
(a) Maintenance of Accounts B and BB.
(1) Conversion between Dollar Amounts and Share
Units in Accounts B and BB. When an amount
is to be added to a Participant's Deferred
Benefit Accounts B or BB, it shall be
converted into Share Units, or fractions
thereof, by dividing the amount to be
credited by the closing price of the
Company's common stock as reported by the New
York Stock Exchange on the last trading day
on or before the Determination Date. When a
number of Share Units is to be subtracted
from a Participant's Deferred Benefit
Accounts B or BB, such number of Share Units
shall be converted into a dollar amount by
multiplying such number of Share Units by the
closing price of the Company's common stock as
<PAGE>
reported by the New York Stock Exchange on
the last trading day on or before the
Determination Date.
(2) Dividends on Grandfathered Share Units. With
respect to balances in Accounts B and BB as
of April 30, 1991, when a dividend is
declared and paid by the Company on its
common stock, an amount shall be credited to
the Participant's Accounts B and BB as though
the same dividend had been paid on the Share
Units in such accounts as of the
Determination Date immediately preceding the
declaration of the dividend, and such amount
shall be converted to Share Units. Such
amount shall be valued as of the
Determination Date immediately preceding the
declaration of the dividend.
(3) Dividends on Other Share Units. With respect
to Share Units resulting from deferrals or
transfers from Account A or Account AA into
Account B or Account BB on or after May 1,
1991 ("Post May 1, 1991, Share Units"), when
a cash dividend is declared and paid by the
Company on its common stock an amount shall
be credited to the Participant's Account A or
Account AA, as appropriate, as though the
same dividend had been paid on the Post May
1, 1991, Share Units as of the Determination
Date immediately preceding the declaration of
the dividend.
(4) Effect of Recapitalization. In the event of
a stock dividend, stock split, or other
corporate reorganization involving the
Company's common stock, the Company shall
make equitable adjustment to the number of
Share Units credited to a Participant's
Accounts B and BB as may be necessary to give
effect to such change in the Company's
capital structure.
(5) Conversion of Share Units to Dollars on Dis
tribution. Share Units in Accounts B and BB
shall be converted to an equivalent dollar
amount before any distribution thereof to a
Participant pursuant to Article VII. For
purposes of distribution, the value of a
Share Unit shall be the average closing price
of the Company's common stock on the New York
Stock Exchange on the last trading day of
each of the 12 calendar months immediately
preceding the
<PAGE>
date of distribution. If a Participant elects payment in other than a
lump sum, Share Units shall be so converted to a dollar amount with
respect to each payment made in the distribution. During the period of
distribution, dividends and other equitable adjustments shall be
credited to the Participant's Accounts A, AA, B, and BB in accordance
with paragraphs 6.5(a)(2), 6.5(a)(3), and 6.5(a)(4).
(b) Maintenance of Accounts C and CC.
(1) Conversion between Dollar Amounts and
Cellular Share Units in Accounts C and
CC. When an amount is to be added to a
Participant's Deferred Benefit Accounts C or
CC, it shall be converted into Cellular Share
Units, or fractions thereof, by dividing the
amount to be credited by the market value of
a share of Cellular's common stock on the
Determination Date. When a number of
Cellular Share Units is to be subtracted from
a Participant's Deferred Benefit Accounts C
or CC, such number of Cellular Share Units
shall be converted into a dollar amount by
multiplying such number of Cellular Share
Units by the closing price of Cellular's
common stock as reported by the New York
Stock Exchange on the last trading day on or
before the Determination Date.
(2) Dividends on Cellular Share Units. With
respect to balances in Accounts C and CC,
when a dividend is declared and paid by
Cellular on its common stock, an amount shall
be credited to the Participant's Accounts C
and CC as though the same dividend had been
paid on the Cellular Share Units in such
accounts as of the Determination Date
immediately preceding the declaration of the
dividend, and such amount shall be converted
to Cellular Share Units. Such amount shall
be valued as of the Determination Date
immediately preceding the declaration of the
dividend.
(3) Effect of Recapitalization. In the event of
a stock dividend, stock split, or other
corporate reorganization involving the
Company's common stock, the Company shall
make equitable adjustment to the number of
Cellular Share Units credited to a
Participant's Accounts C and CC as may be
<PAGE>
necessary to give effect to such change in
the Employer's capital structure.
(4) Conversion of Cellular Share Units to Dollars
on Distribution. Cellular Share Units in
Accounts C and CC shall be converted to an
equivalent dollar amount before any
distribution thereof to a Participant
pursuant to Article VII. For purposes of
distribution, the value of a Share Unit shall
be the average closing price of the Company's
common stock on the New York Stock Exchange
on the last trading day of each of the (i) 12
calendar months immediately preceding the
date of distribution or (ii) the smaller
number of calendar months elapsed from the
Distribution Time to such distribution. If a
Participant elects payment in other than a
lump sum, Cellular Share Units shall be so
converted to a dollar amount with respect to
each payment made in the distribution.
During the period of distribution, dividends
and other equitable adjustments shall be
credited to the Participant's Accounts A, AA,
C, and CC in accordance with paragraphs
6.5(b)(2) and 6.5(a)(3).
6.6 Statement of Accounts. The Company shall submit to each Participant, within
120 days after the close of each Plan Year, a statement in such form as the
Company deems desirable, setting forth the balance to the credit of such
Participant in his Deferred Benefit Accounts A and AA, B and BB, and C and CC,
in each case as of the last day of the preceding Plan Year.
6.7 Transfer Between Accounts. Within the limitations of this paragraph 6.7, a
Participant may elect, by executing an Account Transfer Request: (1) to transfer
all or any portion of his Account A to Account B, (2) to transfer all or any
portion of his Account B to Account A, (3) to transfer all or any portion of his
Account AA to Account BB, (4) to transfer all or any portion of his Account BB
to Account AA, (5) to transfer all or any portion of his Account C to Account A,
(6) to transfer all or any portion of his Account C to Account B, (7) to
transfer all or any portion of his Account CC to Account AA, and (8) to transfer
all or any portion of his Account CC to Account BB. Such election shall be
effective on the last day of the calendar month in which the Plan Administrator
timely receives the Participant's executed Account Transfer Request.
<PAGE>
(a) Limitation on Sprint Insiders' Transfer of Share
Units. Sprint Insiders may not request any of the
foregoing transfers involving transfer into or out
of Accounts B or BB more than twice in any Plan
Year, and no such transfer may be made unless a
period of at least six months shall have elapsed
from the effective date of the most recent such
transfer (whether it occurred in the current Plan
Year or not) to the effective date of the current
such transfer.
(b) Limitation on Cellular Insiders' Transfer of
Cellular Share Units. Cellular Insiders may not
request any of the foregoing transfers involving
transfers out of Accounts C or CC more than twice
in any Plan Year, and no such transfer may be made
unless a period of at least six months shall have
elapsed from the effective date of the most recent
such transfer (whether it occurred in the current
Plan Year or not) to the effective date of the
current such transfer.
(c) Limitations on Other Transfers. Transfers other
than those described in paragraphs 6.7(a) or
6.7(b) may not be made more than four times in any
Plan Year, and no such transfer may be made unless
a period of at least three months shall have
elapsed from the effective date of the most recent
such transfer (whether it occurred in the current
Plan Year or not) to the effective date of the
current transfer.
ARTICLE VII
BENEFITS
7.1 Termination of Service as Director. Subject to paragraph 7.4 below, upon any
termination of service of the Participant for reasons other than his death, the
Company shall pay to the Participant a Deferral Benefit equal to the amount of
his Deferred Benefit Account determined under paragraph 6.1 thereof.
7.2 Death. If a Participant dies after the commencement of payments of his
Deferral Benefit, his Beneficiary shall continue to receive the remaining
balance of his Deferred Benefit Account in accordance with the Participant's
election pursuant to paragraph 7.4.
If a Participant dies before any payments of a Deferral Benefit, the amounts
deferred under each Participation Agreement shall be determined separately as
follows:
<PAGE>
(a) deferrals allocated to Accounts A, B, BB, C, and CC shall be the Deferred
Benefit Account values thereof and
(b) deferrals allocated to Account AA shall be the
greater of (i) the Deferred Benefit Account value
thereof and (ii) ten times the amount of the
elected annual fee deferral allocated to Account
AA pursuant to the Participation Agreement as
revised on the date of the Participant's death,
subject to such conditions relating to the
Participant's health as the Company may impose.
The Deferral Benefit shall be payable as provided for in paragraph 7.4.
The Deferral Benefit provided above shall be in lieu of all other benefits under
this Plan.
7.3 Suspension of Participation; Failure to Continue Participation. The
Committee, in its sole discretion, may suspend the deferral of a Participant's
Fees upon the advanced written request of a Participant on account of financial
hardship suffered by that Participant. A Participant must file any request for
such suspension on or before the 15th day preceding the regular payment date on
which the suspension is to take effect. The Committee, in its sole discretion,
shall determine the amount, if any, that will not be deferred by the Participant
as a result of the financial hardship. The suspension of any deferrals under
this paragraph shall not affect amounts deferred with respect to periods before
the effective date of the suspension. A Participant whose deferrals are
suspended may not execute a subsequent Participation Agreement that would take
effect before the beginning of the third Plan Year following the close of the
Plan Year in which the suspension first took effect.
7.4 Form of Benefit Payment
(a) Upon the happening of an event described in paragraphs 7.1 or 7.2 above,
the Company shall pay to the Participant or his Beneficiary the amount
specified therein in one of the following forms as elected by the
Participant in the Participation Agreement filed by the Participant:
(1) a lump sum payment at a time designated in the Participation Agreement
but no later than the applicable Company's mandatory termination date
for Directors.
(2) with respect to balances in Accounts A and AA, an annual payment of a
fixed amount that shall amortize the Deferred Benefit Account balance
in equal annual payments of
<PAGE>
principal and interest over a period from 2 to 20 years. For purposes
of determining the amount of the annual payment, the assumed rate of
interest on Accounts A and AA shall be the average of the applicable
Interest Yield as of each Determination Date for the 60 months
preceding the initial annual installment payment.
(3) with respect to balances in Accounts B and
BB, an annual payment over a period from 2 to
20 years. Each payment shall be the value,
as determined pursuant to paragraph
6.5(a)(5), of the number of Share Units equal
to (i) the number of Share Units in the
accounts on the Determination Date
immediately following the event described in
paragraphs 7.1 or 7.2, divided by (ii) the
number of annual installments elected.
During the period that a Participant is receiving a distribution from
Account B or BB, Share Unit dividends will be added to the Accounts in
accordance with subparagraph 6.5(a)(2) or 6.5(a)(3) hereof. Such Share
Unit dividends shall be valued in the same manner as previously
described, and all such Share Units accruing after a distribution from
Accounts B or BB is made shall be paid to the Participant with the
next distribution from the account.
(4) With respect to balances in Accounts C and
CC, an annual payment over a period from 2 to
20 years. Each payment shall be the value,
as determined pursuant to paragraph
6.5(b)(4), of the number of Cellular Share
Units equal to (i) the number of Cellular
Share Units in the accounts on the
Determination Date immediately following the
event described in paragraphs 7.1 or 7.2,
divided by (ii) the number of annual
installments elected.
During the period that a Participant is receiving a distribution from
Account C or CC, Share Unit dividends will be added to the Accounts in
accordance with subparagraph 6.5(b)(2) hereof. Such Cellular Share
Unit dividends shall be valued in the same manner as previously
described, and all such Cellular Share Units accruing after a
distribution from Accounts C or CC is made shall be paid to the
Participant with the next distribution from the account.
<PAGE>
(b) A Participant may change the form in which his
benefits shall be paid by filing a revised
Participation Agreement indicating such change at
least 13 months before the date upon which the
initial payment to be made is determined. Such
revised Participation Agreement shall be deemed a
continuation of the initial Participation
Agreement to which they relate for purposes of
complying with the provisions of paragraphs 4.2
and 4.3 relating to the minimum and maximum
deferrals and duration of the Participation
Agreements. No such revised Participation
Agreement shall change the amount elected to be
deferred in the original Participation Agreement
nor the time elected for commencement of benefit
payments.
(c) In the absence of a Participant's election under subparagraph 7.4(a),
benefits shall be paid in the form specified in subparagraphs 7.4(a)(2),
7.4(a)(3), and 7.4(a)(4) over a 15 year period.
7.5 Commencement of Payments. Unless otherwise provided, payments under this
Plan shall begin within 60 days following receipt of notice by the Company of an
event that entitles a Participant (or a Beneficiary) to payments under this
Plan, or at such earlier date as may be determined by the Company pursuant to
the terms of the Plan. All payments shall be made as of the first day of the
month.
ARTICLE VIII
BENEFICIARY DESIGNATION
8.1 Beneficiary Designation. Each Participant shall have the right, at any time,
to designate any person or persons as his Beneficiary or Beneficiaries (both
principal as well as contingent) to whom payment under this Plan shall be paid
in the event of his death before complete distribution to the Participant of the
benefits due him under the Plan.
8.2 Amendments. Any Beneficiary Designation may be changed by a Participant by
the written filing of such change on a form prescribed by the Company. The
filing of a new Beneficiary Designation form will cancel all Beneficiary
Designations previously filed.
8.3 No Beneficiary Designation. If a Participant
fails to designate a Beneficiary as provided above, or
if all designated Beneficiaries predecease the
Participant, then the Participant's designated
Beneficiary
<PAGE>
shall be deemed to be the person or persons surviving him in the first of the
following classes in which there is a survivor, share and share alike:
(a) The surviving Spouse;
(b) The Participant's children, except that if any of the children predecease
the Participant but leave issue surviving, then such issue shall take by
right of representation the share their parent would have taken if living;
(c) The Participant's personal representative
(executor or administrator).
8.4 Effect of Payment. The payment to the deemed Beneficiary shall completely
discharge the Company's obligations under this Plan.
ARTICLE IX
AMENDMENT AND TERMINATION OF PLAN
9.1 Amendment. The Board may at any time amend the Plan in whole or in part;
provided, however, that no amendment shall be effective to decrease or restrict
any Deferred Benefit Account at the time of such amendment.
9.2 Employer's Right to Terminate. The Board may at any time terminate the Plan
with respect to new elections to defer if, in its judgment, the continuance of
the Plan, the tax, accounting, or other effects thereof, or potential payments
thereunder would not be in the best interests of the Company. The Board may also
terminate the Plan in its entirety at any time, and upon any such termination,
each Participant (a) who is then receiving a Deferral Benefit shall be paid in a
lump sum, or over such period of time as determined by the Company, the then
remaining balance in his Deferred Benefit Account, and (b) who has not received
a Deferral Benefit shall be paid in a lump sum, or over such period of time as
determined by the Company, the balance in his Deferred Benefit Account.
ARTICLE X
MISCELLANEOUS
10.1 Unsecured General Creditor. Participants and
their Beneficiaries shall have no legal or equitable
rights, claims, or interests in any property or assets
of the Company, nor shall they be Beneficiaries of, or
have any rights, claims, or interests in any life
insurance policies, annuity contracts
<PAGE>
or the proceeds therefrom owned or that may be acquired by the Company
("Policies"). Such Policies or other assets of the Company shall not be held
under any trust for the benefit of Participants or their Beneficiaries or held
in any way as collateral security for the fulfilling of the obligations of the
Company under this Plan. Any and all of the Company's assets and Policies shall
be and remain the general, unpledged, unrestricted assets of the Company. The
Company's obligation under the Plan shall be merely that of an unfunded and
unsecured promise of the Employer to pay money in the future.
10.2 Nonassignability. Neither a Participant nor any other person shall have any
right to commute, sell, assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate or convey in advance of actual receipt
the amounts, if any, payable hereunder, or any part thereof, which are, and all
rights to which are, expressly declared to be unassignable and non-transferable.
No part of the amounts payable shall, before actual payment, be subject to
seizure or sequestration for the payment of any debts, judgments, alimony, or
separate maintenance owed by a Participant or any other person, nor be
transferable by operation of law in the event of a Participant's or any other
person's bankruptcy or insolvency.
10.3 Not a Contract of Service. The terms and conditions of this Plan shall not
be deemed to constitute a contract of service between the Company and the
Participant, and the Participant (or his Beneficiary) shall have no rights
against the Company except as may otherwise be specifically provided herein.
Moreover, nothing in this Plan shall be deemed to give a Participant the right
to be retained in the service of the Company.
10.4 Protective Provisions. A Participant will cooperate with the Company by
furnishing any and all information requested by the Company, in order to
facilitate the payment of benefits hereunder, by taking such physical
examinations as the Company may deem necessary, and by taking such other action
as may be requested by the Company.
10.5 Applicable Law. The Plan, and any Participation
Agreement related thereto, shall be governed by the
laws of the State of Kansas, without regard to the
principles of conflicts of law.
Exhibit (10)(aa)
SUMMARY OF EXECUTIVE OFFICER AND BOARD OF DIRECTORS BENEFITS
<TABLE>
<CAPTION>
Description Eligible Positions Amount/Schedule
of Benefit
<S> <C> <C>
Automobile Chief Executive Officer $1,500/month
Allowance Chief Operating Officer $1,300/month
Division Presidents $1,100/month
and Executive Vice
Presidents
Senior Vice Presidents $1,000/month
Vice Presidents $900/month
Assistant Vice Presidents $700/month
Club Membership Chief Executive Officer, Dues approved
Chief Operating Officer, at discretion of
Division Presidents CEO
and Executive Vice
Presidents
Senior Vice Presidents Dues approved
at discretion of
Executive
Vice Presidents
Sprint Long- Board of Directors, Chief Unlimited
Distance Executive Officer,
Telephone Chief Operating Officer,
Service Division Presidents,
Executive and Senior
Vice Presidents
Miscellaneous Chief Executive Officer $15,000/year
services and Chief Operating
(e.g., Officer
investment/tax Division Presidents and $12,000/year
counseling, Executive Vice
income tax Presidents
preparation, Senior Vice Presidents $10,000/year
estate Vice Presidents and $3,500 initially
planning) Assistant Vice and
Presidents $1,500/year
Disability Chief Executive Officer, 52 weeks at
Chief Operating full base pay
Officer, Division
Presidents, Executive
and Senior Vice
Presidents, Vice
Presidents and
Assistant Vice
Presidents
Separation Chief Executive Officer, Less than 5
Chief Operating years' services:
Officer, Division 17 weeks'
Presidents, Executive salary
and Senior Vice continuation
Presidents, Vice 5 to 10 years'
Presidents and service
Assistant Vice 35 weeks'
Presidents salary
continuation
11 to 18 years'
service
43 weeks'
salary
continuation
More than 19
years' service:
1 year salary
continuation
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT (11)
SPRINT CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(In Millions, Except Per Share Data)
For the Years Ended December 31,
----------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------- -- ------------ -- ------------ -- -----------
PRIMARY EARNINGS PER SHARE
<S> <C> <C> <C>
Income from continuing operations $ 946.1 $ 899.2 $ 517.1
Preferred stock dividends (2.6) (2.7) (2.8)
- --------------------------------------------------------------------- ------------ -- ------------ -- -----------
943.5 896.5 514.3
Discontinued operations, net 14.5 (8.5) (50.4)
Extraordinary items (565.3) -- (29.2)
Cumulative effect of changes in accounting principles, net -- -- (382.6)
- --------------------------------------------------------------------- ------------ -- ------------ -- -----------
Earnings applicable to common stock $ 392.7 $ 888.0 $ 52.1
-- ------------ -- ------------ -- -----------
Weighted average number of common shares (1) 350.1 348.7 343.7
-- ------------ -- ------------ -- -----------
Primary earnings per share
Continuing operations $ 2.69 $ 2.57 $ 1.50
Discontinued operations 0.04 (0.02) (0.15)
Extraordinary items (1.61) -- (0.08)
Cumulative effect of changes in accounting principles -- -- (1.12)
- ------------------------------------------------------------------- -- ------------ -- ------------ -- -----------
Total $ 1.12 $ 2.55 $ 0.15
-- ------------ -- ------------ -- -----------
FULLY DILUTED EARNINGS PER SHARE
Income from continuing operations, net of preferred stock
dividends $ 943.5 $ 896.5 $ 514.3
Convertible preferred stock dividends 0.5 0.6 0.6
- ------------------------------------------------------------------- -- ------------ -- ------------ -- -----------
944.0 897.1 514.9
Discontinued operations, net 14.5 (8.5) (50.4)
Extraordinary items (565.3) -- (29.2)
Cumulative effect of changes in accounting principles, net -- -- (382.6)
- ------------------------------------------------------------------- -- ------------ -- ------------ -- -----------
Earnings as adjusted for purposes of computing fully diluted
earnings per share $ 393.2 $ 888.6 $ 52.7
-- ------------ -- ------------ -- -----------
Weighted average number of common shares 350.1 348.7 343.7
Additional dilution for common stock equivalents and dilutive
securities 2.7 1.3 2.0
- ------------------------------------------------------------------- -- ------------ -- ------------ -- -----------
Total 352.8 350.0 345.7
-- ------------ -- ------------ -- -----------
Fully diluted earnings per share
Continuing operations $ 2.68 $ 2.56 $ 1.49
Discontinued operations 0.04 (0.02) (0.15)
Extraordinary item (1.61) -- (0.08)
Cumulative effects of changes in accounting principles -- -- (1.11)
- ------------------------------------------------------------------- -- ------------ -- ------------ -- -----------
Total $ 1.11 $ 2.54 $ 0.15
-- ------------ -- ------------ -- -----------
(1) Weighted average number of common shares outstanding has been adjusted for
dilutive common stock equivalents using the treasury stock method.
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT (12)
SPRINT CORPORATION
COMPUTATION OF RATIO OF
EARNINGS TO FIXED CHARGES
(In Millions)
1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------
Earnings
<S> <C> <C> <C> <C> <C>
Income from continuing operations $ 946.1 $ 899.2 $ 517.1 $ 550.6 $ 530.8
Capitalized interest (57.0) (7.5) (7.3) (10.4) (14.2)
Income tax provision 534.3 488.7 296.0 292.1 257.2
- -------------------------------------------------------------------------------------------------------------------
Subtotal 1,423.4 1,380.4 805.8 832.3 773.8
------------------------------------------------------------------
Fixed charges
Interest charges 317.7 308.2 374.3 434.8 461.8
Interest factor of operating rents 120.1 111.5 117.4 113.2 102.7
Pre-tax cost of preferred stock
dividends of subsidiaries 0.7 0.9 1.6 2.1 2.4
- -------------------------------------------------------------------------------------------------------------------
Total fixed charges 438.5 420.6 493.3 550.1 566.9
------------------------------------------------------------------
Earnings, as adjusted $ 1,861.9 $ 1,801.0 $ 1,299.1 $ 1,382.4 $ 1,340.7
------------------------------------------------------------------
Ratio of earnings to fixed charges 4.25 (1) 4.28 2.63 (2) 2.51 2.36
------------------------------------------------------------------
</TABLE>
(1) Earnings as computed for the ratio of earnings to fixed charges includes
the nonrecurring restructuring costs of $88 million recorded in 1995. In
the absence of these nonrecurring costs, the ratio of earnings to fixed
charges would have been 4.45 for 1995.
(2) Earnings as computed for the ratio of earnings to fixed charges includes
the nonrecurring merger, integration and restructuring costs of $293
million recorded in 1993. In the absence of these nonrecurring costs, the
ratios of earnings to fixed charges would have been 3.23 for 1993.
NOTE : The above ratios have been computed by dividing fixed charges into
the sum of (a) income 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.
Exhibit (21)
SPRINT CORPORATION
SUBSIDIARIES OF REGISTRANT
Sprint Corporation is the parent. The subsidiaries of Sprint Corporation are as
follows:
<TABLE>
<CAPTION>
Ownership
Interest
Jurisdiction of Held
Incorporation by Its
Name or Organization Immediate
Parent
<S> <C>
Carolina Telephone and Telegraph Company North Carolina 100
Subsidiaries:
Carolina Telephone Long Distance, Inc. North Carolina 100
SC One Company Kansas 100
Centel Corporation Kansas 100
Subsidiaries:
Centel Capital Corporation Delaware 100
Centel Cellular Company of Mexico Delaware 100
Subsidiary:
Telefonia Celular del Norte, S.A. de C.V. Mexico 20
Centel Credit Company Delaware 100
Centel Directory Company Delaware 100
Subsidiary:
The CenDon Partnership Illinois
Partnership 50
Centel-Texas, Inc. Texas 100
Subsidiary:
Central Telephone Company of Texas Texas 100
Central Telephone Company Delaware 94
(1)
Subsidiaries:
Central Telephone Company of Florida Florida 100
Central Telephone Company of Illinois Illinois 100
Central Telephone Company of Virginia Virginia 100
New Centel Communications Company Delaware 100
C FON Corporation Delaware 100
DirectoriesAmerica, Inc. Kansas 100
Subsidiary:
Sprint Publishing & Advertising, Inc. Kansas 100
- ----------------------------------
(1) Centel Corporation owns all of the common stock.
<PAGE>
(Sprint Corporation Subsidiaries Continued)
Florida Telephone Corporation Florida 100
Subsidiaries:
Sprint Metropolitan Networks, Inc. Florida 100
Sprint Payphone Services, Inc. Florida 100
Vista-United Telecommunications Florida 49
LD Corporation Kansas 100
North Supply Company Ohio 100
Subsidiaries:
Northstar Transportation, Inc. Kansas 100
North Supply Company of Lenexa Delaware 100
North Supply International, Ltd. Kansas 100
NSC Advertising, Inc. Kansas 100
Sprint Products Group, Inc. Kansas 100
S FON Corporation Delaware 100
Sprint Asian American, Inc. Kansas 100
Subsidiary:
Asian American Communications, L.L.C. Kansas 25
Sprint Capital Corporation Delaware 100
Sprint Healthcare Systems, Inc. Kansas 100
Sprint Mid-Atlantic Telecom, Inc. North Carolina 100
Sprint/United Management Company Kansas 100
UCOM, Inc. Missouri 100
Subsidiaries:
Sprint Communications Company L.P. Delaware
Partnership 34
Subsidiaries:
Asian American Communications, L.L.C. Kansas 24
Sprint Communications Company of New Hampshire, Inc. New Hampshire 100
Sprint Communications Company of Virginia, Inc. Virginia 100
Sprint Licensing, Inc. Kansas 100
USST of Texas, Inc. Texas 100
Sprint Enterprises, L.P. Delaware
Partnership 32
Subsidiaries:
Sprint Spectrum Holding Company, L.P. Delaware
Partnership 40
Subsidiaries:
Sprint Spectrum L.P. Delaware
Partnership 99(2)
Subsidiary:
WirelessCo, L.P. Delaware
Partnership 99(3)
Subsidiary:
American PCS, L.P. Delaware 49
NewTelco, L.P. Delaware
Partnership 99(2)
- ----------------------------------
(2) Sprint Spectrum Holding Company, L.P. holds the general partnership
interest of greater than 99 percent.
(3) Sprint Spectrum L.P. holds the general partnership interest of greater
than 99 percent.
<PAGE>
(Sprint Enterprises, L.P. Subsidiaries Continued)
MinorCo, L.P. Delaware
Partnership 40
Subsidiaries:
Sprint Spectrum L.P. Delaware
Partnership (4)
NewTelco, L.P. Delaware
Partnership (4)
WirelessCo, L.P. Delaware
Partnership (4)
PhillieCo, L.P. Delaware
Partnership 47
Sprint Global Venture, Inc. Kansas (5)
Subsidiaries:
Global One Communications Europe, L.L.C. Delaware 33
Global One Communications GBN Holding, Ltd. Ireland 50
Global One Communications Holding, B.V. Netherlands 33
Global One Communications, L.L.C. Delaware 50
Global One Communications Operations, Ltd. Ireland 33
Global One Communications Service, B.V. Netherlands 33
Global One Communications World Holding, B.V. Netherlands 50
Global One Communications World Operations, Ltd. Ireland 50
Global One Communications World Service, B.V. Netherlands 50
UC PhoneCo, Inc. Kansas 100
Subsidiary:
Sprint Enterprises, L.P. Delaware
Partnership 17
United Telephone Company of the Carolinas South Carolina 100
Subsidiaries:
SC Two Company Kansas 100
United Telephone Long Distance, Inc. South Carolina 100
United Telephone Company of Eastern Kansas Delaware 100
Subsidiary:
Sprint/United Midwest Management Services Company Kansas 20
Subsidiary:
United Teleservices, Inc. Kansas 100
United Telephone Company of Florida Florida 100
Subsidiaries:
United Telephone Communications Systems, Incorporated Florida 100
United Telephone Long Distance, Incorporated Florida 100
United Telephone Company of Indiana, Inc. Indiana 100
Subsidiary:
SC Four Company Kansas 100
United Telephone Company of Kansas Kansas 100
Subsidiary:
Sprint/United Midwest Management Services Company Kansas 80
United Telephone Company of Minnesota Minnesota 100
United Telephone Company of Missouri Missouri 100
Subsidiary:
SC Eight Company Kansas 100
- ----------------------------------
(4) MinorCo, L.P. holds a limited and preferred partnership interest of
less than 1 percent.
(5) UCOM, Inc., US Telecom, Inc., and Utelcom, Inc. each holds less than 1
percent of the common stock.
<PAGE>
(Sprint Corporation Subsidiaries Continued)
United Telephone Company of New Jersey, Inc. New Jersey 100
United Telephone Company of the Northwest Oregon 100
United Telephone Company of Ohio Ohio 100
Subsidiaries:
SC Five Company Kansas 100
United Telephone Communications Services of Ohio, Inc. Ohio 100
United Telephone Long Distance, Inc. Ohio 100
Subsidiary:
Sprint Alarm Monitoring Services, Inc. Ohio 100
United Telephone Long Distance of Indiana, Inc. Indiana 100
United Telephone Company of Pennsylvania, The Pennsylvania 100
Subsidiaries:
Joint Underground Locating Services, Inc. Pennsylvania 100
SC Six Company Kansas 100
United Telephone Long Distance, Inc. Pennsylvania 100
Valley Network Partnership Virginia
Partnership 20
United Telephone Company of Southcentral Kansas Arkansas 100
United Telephone Company of Texas, Inc. Texas 100
Subsidiary:
SC Seven Company Kansas 50
United Telephone Company of the West Delaware 100
United Telephone-Southeast, Inc. Virginia 100
Subsidiaries:
SC Three Company Kansas 100
United Telephone Long Distance, Inc. Tennessee 100
UTLD, Inc. Virginia 100
Valley Network Partnership Virginia
Partnership 20
US Telecom, Inc. Kansas 100
Subsidiaries:
ASC Telecom, Inc. Kansas 100
LCF, Inc. California 100
SC Seven Company Kansas 50
Sprint Communications Company L.P. Delaware
Partnership 59
Sprint Enterprises, L.P. Delaware
Partnership 33
Sprint Global Venture, Inc. Kansas (5)
Sprint Iridium, Inc. Kansas 100
Subsidiary:
Iridium U.S., L.P. Delaware
Partnership 27
United Telecommunications, Inc. Delaware 100
US Telecom of New Hampshire, Inc. New Hampshire 100
UST PhoneCo, Inc. Kansas 100
Subsidiary:
Sprint Enterprises, L.P. Delaware
Partnership 18
- ----------------------------------
(5) UCOM, Inc., US Telecom, Inc., and Utelcom, Inc. each holds less than 1
percent of the common stock.
<PAGE>
(Sprint Corporation Subsidiaries Continued)
Utelcom, Inc. Kansas 100
Subsidiaries:
Private TransAtlantic Telecommunications System, Inc. Delaware 100
Subsidiary:
Private Trans-Atlantic Telecommunications System (N.J.), New Jersey 100
Inc.
Sprint Communications Company L.P. Delaware
Partnership 5
Sprint Global Venture, Inc. Kansas (5)
Sprint International Incorporated Delaware 100
Subsidiaries:
Consortium Communications International, Inc. New York 100
Sprint FON Inc. Delaware 100
Sprint Global Venture, Inc. Kansas 86
Sprint International Caribe, Inc. Puerto Rico 100
Sprint International Communications Corporation Delaware 100
Subsidiaries:
Sprint Communications Company L.P. Delaware
Partnership 2
Sprint Global Venture, Inc. Kansas 13
Sprint International France S.A. France 100
Sprint Telecommunications France Inc. Delaware 100
Sprint Telecommunications Services GmbH Germany 100
- ----------------------------------
(5) UCOM, Inc., US Telecom, Inc., and Utelcom, Inc. each holds less than 1
percent of the common stock.
</TABLE>
EXHIBIT (23)
SPRINT CORPORATION
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-3, No. 33-34567; Form S-3, No. 33-48689; Form S-3, No. 33-58488; Form
S-3, No. 33-59996; Form S-3, No. 33-64564; Form S-8, No. 33-35173; Form S-8, No.
33-44255; Form S-8, No. 33-38761; Form S-8, No. 33-21662; Form S-8, No.
33-28544; Form S-8, No. 33-31802; Form S-8, No. 2-97322; Form S-8, No. 33-50421;
Form S-8, No. 2-71704; Form S-8, No. 2-62061; Form S-8, No. 33-59316; Form S-8,
No. 33-59318; Form S-8, No. 33-59322; Form S-8, No. 33-59324; Form S-8, No.
33-59326; Form S-8, No. 33-59328; Form S-8, No. 33-53695; Form S-8, No.
33-57785; Form S-8, No. 33-57911; Form S-8, No. 33-59349; Form S-8, No.
33-65147; and Form S-8, No. 33-65149) of Sprint Corporation and in the related
Prospectuses of our report dated February 14, 1996, with respect to the
consolidated financial statements and schedule of Sprint Corporation included in
this Annual Report (Form 10-K) for the year ended December 31, 1995.
/s/ERNST & YOUNG LLP
ERNST & YOUNG LLP
Kansas City, Missouri
March 7, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 124,200
<SECURITIES> 0
<RECEIVABLES> 1,746,200
<ALLOWANCES> 222,500
<INVENTORY> 171,000
<CURRENT-ASSETS> 3,619,400
<PP&E> 19,915,900
<DEPRECIATION> 10,200,100
<TOTAL-ASSETS> 15,195,900
<CURRENT-LIABILITIES> 5,142,100
<BONDS> 3,253,000
32,500
0
<COMMON> 872,900
<OTHER-SE> 3,769,700
<TOTAL-LIABILITY-AND-EQUITY> 15,195,900
<SALES> 0
<TOTAL-REVENUES> 12,765,100
<CGS> 0
<TOTAL-COSTS> 7,971,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 260,700
<INCOME-PRETAX> 1,480,400
<INCOME-TAX> 534,300
<INCOME-CONTINUING> 946,100
<DISCONTINUED> 14,500
<EXTRAORDINARY> (565,300)
<CHANGES> 0
<NET-INCOME> 395,300
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.11
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 113,700
<SECURITIES> 0
<RECEIVABLES> 1,514,800
<ALLOWANCES> 126,900
<INVENTORY> 187,500
<CURRENT-ASSETS> 2,043,200
<PP&E> 18,382,300
<DEPRECIATION> 8,123,500
<TOTAL-ASSETS> 14,547,500
<CURRENT-LIABILITIES> 2,843,100
<BONDS> 4,604,800
37,100
0
<COMMON> 871,400
<OTHER-SE> 3,653,400
<TOTAL-LIABILITY-AND-EQUITY> 14,547,500
<SALES> 0
<TOTAL-REVENUES> 11,986,600
<CGS> 0
<TOTAL-COSTS> 7,540,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 300,700
<INCOME-PRETAX> 1,387,900
<INCOME-TAX> 488,700
<INCOME-CONTINUING> 899,200
<DISCONTINUED> (8,500)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 890,700
<EPS-PRIMARY> 2.55
<EPS-DILUTED> 2.54
</TABLE>
