FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] Annual Report Pursuant to section 13 or 15(d) of the
securities exchange act of 1934
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
Commission file number 0-1244
UNITED TELEPHONE COMPANY OF FLORIDA
(Exact name of registrant as specified in its charter)
FLORIDA 59-0248365
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. BOX 165000, Altamonte Springs, Florida 32716-5000
(Address of principal executive offices)
(407) 889-6010
(Registrant's telephone number, including area code)
Securities registered pursuant to Sections 12(b) and 12(g) of the Act: None
Securities subject to Section 15(d) of the Act:
Title of each class
First Mortgage Bonds
6 1/4% due May 15, 2003 9 1/4% due September 15, 2019
7 1/4% due December 1, 2004 7 1/8% due July 15, 2023
6 7/8% due July 15, 2013 8 3/8% due January 15, 2025
The registrant meets the conditions set forth in General Instruction J(1) (a)
and (b) of Form 10-K and is therefore filing this Form with the reduced
disclosure format.
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]
There is no common stock held by non-affiliates.
There are 6,500,000 shares of common stock outstanding at the end of the fiscal
year and as of the date of filing of this report.
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
1995 FORM 10-K/PART I
Item 1. Business
- ------- --------
United Telephone Company of Florida (the Company) is a subsidiary of Sprint
Corporation (Sprint). The principal executive offices of the Company are located
at 555 Lake Border Drive, Apopka, Florida 32703.
The Company was formed as the result of a combination effective December 31,
1982, pursuant to an Agreement and Plan of Merger, in which the Company's
affiliates, the former United Telephone Company of Florida, The Winter Park
Telephone Company and Orange City Telephone Company, Incorporated were merged
into Florida Telephone Corporation (FTC). As the surviving corporation, FTC,
which had been incorporated under the laws of the State of Florida on September
29, 1925, amended its articles of incorporation to provide for a change of
corporate name to United Telephone Company of Florida.
The Company is engaged in the business of furnishing communications services,
principally local, network access and long distance services, serving
approximately 1,165,000 customers in all or part of 24 Florida counties,
comprising some 30 percent of the state's total area. The Company's current
estimate of population within its service areas is 2.5 million as compared to
census counts of approximately 1.8 million in 1990, 1.0 million in 1980 and
600,000 in 1970.
The Company had 6,089 employees at December 31, 1995, of which 2,689 or 44.2
percent are represented by either the Communications Workers of America or the
International Brotherhood of Electrical Workers for collective bargaining
purposes. Of the 6,089 employees, 1,321 are dedicated to serving Central
Telephone Company of Florida, an affiliated company which reimburses the Company
for the related employee costs.
In addition to furnishing local service, the Company's central offices and toll
lines are connected with other telephone companies and with the nationwide toll
networks of interexchange carriers (IXCs) for the provision of message toll
service and other long distance services. Toll calls may thus be made to any
telephone in the United States and most other countries. Other
telecommunications services, for the most part furnished in conjunction with
other telephone companies, include facilities for private line service, data
transmission and wide area toll service (WATS).
Revenues from communications services constituted 84.9 percent of the operating
revenues of the Company in 1995. The remaining 15.1 percent was derived largely
from directory operations, equipment sales, facilities leases and billing and
collection services provided to IXCs. A significant portion of the Company's
network access revenue is derived from network access billings to AT&T Corp.
(AT&T). However, the Company does not believe its revenues are dependent upon
AT&T, as customers' demand for interLATA long distance telephone service is not
tied to any one long distance carrier. 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.
I-1
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
1995 FORM 10-K/PART I
Item 1. Business (continued)
- ----------------------------
During the five years ended December 31, 1995, the compounded annual growth rate
in access lines served was 4.9 percent.
The following table summarizes access lines in service at the end of each of the
last five years together with the number of access minutes of use for each of
those years:
<TABLE>
<CAPTION>
(Expressed in thousands, except percentages)
Access Lines Served Percent Access Minutes Percent
Year Residence Business Total Increase of Use Increase
---- --------- -------- ----- -------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
1995 1,002 352 1,354 5.0 5,938,786 9.5
1994 964 326 1,290 5.5 5,425,072 10.7
1993 920 303 1,223 5.3 4,898,573 5.6
1992 882 279 1,161 4.4 4,639,061 6.4
1991 849 263 1,112 4.3 4,360,713 6.6
</TABLE>
In 1987, the Company formed United Telephone Long Distance, Inc. (UTLD), a
Florida corporation, and in 1988 the Florida Public Service Commission (FPSC)
granted UTLD's request for certification as an interexchange carrier. UTLD
resells WATS service as interLATA message telephone service from exchanges
within the Company's service area.
The Company is subject to the jurisdiction of the Federal Communications
Commission (FCC) and the FPSC.
Effective January 1, 1991, the FCC adopted a price cap regulatory format for the
Bell Operating Companies and the GTE local exchange companies. Other local
exchange companies (LECs) could voluntarily become subject to the price cap
regulation. Under price caps, prices for access service must be adjusted
annually to reflect industry average productivity gains (as specified by the
FCC), inflation and certain allowed cost changes. The Company elected to be
subject to price cap regulation, and under the form of the plan adopted, the
Company had the opportunity to earn up to a 15.25 percent rate of return on
investment on its interstate operations through June 30, 1995. 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, the Company
elected a productivity factor that allows it to avoid sharing interstate access
earnings.
I-2
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
1995 FORM 10-K/PART I
Item 1. Business (continued)
- ------- --------------------
In June 1994, the Company entered into a stipulation with the FPSC whereby the
Company's intrastate rates were reduced by $17.6 million on an annual basis
beginning July 1, 1994. Approximately $9.9 million of the rate reduction was in
intrastate access elements and was intended to bring the intrastate access rates
more in line with interstate rates. Approximately $5.0 million of the rate
reduction was in intraLATA toll rates, and $2.7 million in local service
revenue. In addition, the Company agreed to record additional depreciation of
$2.8 million ($2.1 million intrastate), which was recognized in the second
quarter. The Company's allowed intrastate return on equity was capped at 13.0
percent for 1994 with any earnings in excess of 13.0 percent to be deferred to
1995 when the upper range of the allowed return reverted to 13.5 percent.
In November 1994, in compliance with FPSC regulations, the Company filed its
triennial depreciation study seeking an increase in annual depreciation expense
of approximately $16.3 million effective January 1, 1995. In this filing, the
Company sought shorter service lives to recognize obsolescence caused by
emerging technologies required to meet customer demands for more sophisticated
voice and data facilities. On January 17, 1995, the FPSC allowed the Company to
implement, on a preliminary basis, the proposed rates, reduced by a one-time
depreciation charge of $3.2 million ($2.4 million intrastate) to be recorded in
1994, which served to bring the Company's 1994 intrastate return on equity below
the 13.0 percent cap noted above. On March 1, 1995, the Office of Public Counsel
filed a petition for a hearing in protest of the FPSC's approval of the early
implementation of the depreciation rates.
On December 1, 1994, the FPSC approved the Company's proposal, filed November 2,
1994, for additional rate reductions with an effective date of January 1, 1995.
The total proposed revenue reduction was $10.6 million in 1995, $9 million of
which was in switched access charge reductions and the remainder in cellular
interconnection usage rates and intraLATA toll rates.
In September 1995, the FPSC approved an increase in annual depreciation expense
of $18.9 million. The new depreciation rates were effective January 1, 1995 and
had been substantially recognized under the preliminary order discussed above.
In addition, the FPSC determined that the Company had exceeded its 13.0 percent
cap by $1.5 million including interest for 1994 and required that this amount be
included in the determination of the Company's 1995 intrastate return on equity.
In recognition of this recent FPSC order, the $3.2 million of additional
depreciation recorded in December, 1994, due to the preliminary order, was
reversed in September 1995.
I-3
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
1995 FORM 10-K/PART I
Item 1. Business (continued)
- ------- --------------------
On July 1, 1995, telecommunications reform legislation became law in Florida.
This legislation allows competition in the local telephone marketplace beginning
January 1, 1996, while replacing rate of return regulation with price
regulation. While the Company cannot predict the ultimate effects of this
legislation on its future operations, it does not expect a material adverse
impact in the near term.
At the interstate level, the FCC has revised its rules to permit connection of
customer-owned coin telephones to the local network, exposing LECs to direct
coin telephone competition. Additionally, to facilitate competition in providing
access to interexchange carriers and end users, the FCC mandated that all Tier 1
LECs, including the Company, allow virtual colocation of Competitive Access
Providers' equipment in LEC central offices.
The extent and ultimate impact of competition for LECs will continue to depend,
to a considerable degree, on FCC and state regulatory actions, court decisions
and possible federal and state legislation. Federal legislation designed to
stimulate local competition between local exchange service providers and cable
programming service providers in both markets has been recently passed and
signed into law. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for a discussion of this new law. While the
Company cannot predict the ultimate effects of this legislation on its future
operations, the Company's historical prices and market share are likely to
decline as a result of increased local competition.
The Company'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 may be associated with
generators, batteries or fuel storage. The Company has been designated a
potentially responsible party at a site relating to landfill contamination. The
Company's expenditures relating to environmental compliance and remediation have
not been material to the financial statements or to the operations of the
Company and are not expected to have any future material effects.
Item 2. Properties
- ------- ----------
The properties of the Company consist principally of land, structures,
facilities and equipment. Substantially all of the telephone property, plant and
equipment is subject to the liens of the indentures securing the Company's first
mortgage debt. Of the Company's investment in telephone plant in service as of
December 31, 1995, cable and wire facilities represented approximately 50
percent of the total; central office equipment, 37 percent; land and buildings,
6 percent; telephone instruments and certain related equipment installed on
subscriber premises, 2 percent; and, other telephone plant, 5 percent.
I-4
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
1995 FORM 10-K/PART I
Item 2. Properties (continued)
- ------- ----------------------
The following table sets forth the gross property additions and the retirements
or sales of property during each of the five years in the period ended December
31, 1995:
Gross Property Retirements
Year Additions or Sales
----- -------------- ---------------
(In Thousands)
1995 $166,776 $59,950
1994 177,828 71,194
1993 185,002 62,599
1992 184,692 72,947
1991 175,215 124,551
Item 3. Legal Proceedings
- ------- -----------------
No material legal proceedings are pending to which the Company or its subsidiary
is a party or of which any of their property is subject.
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
Omitted under the provisions of General Instruction J.
I-5
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
1995 FORM 10-K/PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
All of the common stock of the Company is owned by Sprint and consequently is
not traded.
Item 6. Selected Financial Data
- ------- -----------------------
<TABLE>
Year Ended December 31,
1995 1994 1993 1992 1991
------------ ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
(In Thousands of Dollars)
Operating Revenues $ 909,041 $ 865,198 $ 802,368 $ 760,905 $733,539
Net Income (Loss) (3,474) 110,033 77,321 97,621 92,781
(1) (2) (3)
Total Assets 1,444,593 1,665,294 1,612,083 1,540,694 1,502,006
Long-Term Debt
(excluding current
maturities)
and Redeemable
Preferred Stock 437,733 441,474 393,612 402,377 424,410
Access Lines Served
per Employee (4) 284.0 281.4 261.4 243.9 237.9
<FN>
(1) In the fourth quarter of 1995, the Company determined that it no
longer met the criteria necessary for the continued application of the
provisions of Statement of Financial Accounting Standards (SFAS) No.
71, "Accounting for the Effects of Certain Types of Regulation." As a
result of the decision to discontinue the application SFAS No. 71, the
Company recorded a noncash extraordinary charge of $108.4 million,
which is net of income tax benefits of $82 million. (See Note 2 of
Notes to Consolidated Financial Statements for additional
information.) The years 1994 and 1993 include extraordinary losses on
early extinguishments of debt. The effects of such losses were to
decrease net income by $215,000 and $1.4 million, in 1994 and 1993,
respectively.
(2) During 1995, Sprint initiated a realignment and restructuring of its
local communications services division, including the elimination of
approximately 250 of the Company's positions. These actions resulted in
a nonrecurring charge to the Company of $12.2 million, which reduced
net income by approximately $7.5 million.
(3) During 1993, nonrecurring charges of $51.1 million were recorded
related to Sprint's merger with Centel Corporation, which reduced net
income by approximately $31 million.
(4) Effective January 1, 1994, and as a result of the Sprint/Centel merger,
employees of an affiliate, Central Telephone Company of Florida, are,
for payroll processing and benefit purposes, considered employees of
the Company. The access lines served per employee at the end of 1995
and 1994 exclude the 1,321 and 1,418, respectively, employees dedicated
to serving Central Telephone Company of Florida.
</FN>
</TABLE>
Earnings and dividends per common share information has been omitted because all
of the common stock of the Company is owned by Sprint.
II-1
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
1995 FORM 10-K/PART II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
-------------
The Company's financial well-being plays a vital role in its efforts to provide
efficient, responsive, state-of-the-art communication services to the rapidly
growing Florida market amid the uncertainties created by deregulation. In order
to meet the challenges of this dynamic environment, the Company continues to
seek ways to increase organizational efficiency through process improvements and
careful control of construction expenditures and automation and consolidation of
functions. Concurrently, efforts have been undertaken to aggressively implement
new technologies, including enhanced digital switching, fiber optics and pair
gain devices that offer expanded services at reduced costs.
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 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 that is out-of-region or incidental to audio/video
programming, Internet for schools, mobile services, information or alarm
services and 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 five 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 telepone 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 the Company 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 Company's historical prices and market share are likely to decline as a
result of increased local competition.
II-2
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
1995 FORM 10-K/PART II
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
---------------------------------
Liquidity and Capital Resources
- -------------------------------
As detailed in the Consolidated Statements of Cash Flows, the Company had net
cash provided by its operating activities of $286 million, $294 million and $254
million in 1995, 1994 and 1993, respectively. While operating results of the
Company improved in 1995, operating cash flows decreased due to an increase in
the 1995 deferred tax benefit.
The Company has significant cash requirements because of its need for
substantial amounts of plant and equipment to provide communications services to
customers. The Company's planned construction expenditures for modernization and
growth in 1996 are approximately $202 million, of which $90 million is for
central office equipment, $67 million for cable and wire facilities, $17 million
for general support assets, $14 million for generic software and $14 million for
other telecommunications assets. Actual expenditures were $167 million in 1995,
$178 million in 1994 and $185 million in 1993.
Because the Company is capital intensive, external financing is sometimes
required to supplement cash provided by operations. The primary source of
external financing has been through the issuance of debt. As of December, 1994,
$70 million of the commercial paper outstanding had been reclassified as
long-term debt due to the refinancing of these borrowings on a long-term basis.
In addition, on November 17, 1995, the Company retired, prior to scheduled
maturity, its 2 percent and 6 percent debt to the Rural Utilities Service
(formerly Rural Electrification Administration). The principal, unamortized
costs, and prepayment penalty was $774,000. The Company issued $70 million of
8.38 percent Series HH bonds on January 15, 1995. Long-term debt is further
detailed in Note 5 of Notes to the Consolidated Financial Statements.
The average short-term debt outstanding was $35 million during 1995, $39 million
during 1994 and $35 million during 1993. At year end, short-term debt,
consisting primarily of commercial paper and advances from Sprint, decreased by
$10 million in 1995, $27 million in 1994 and increased $16 million in 1993.
The Company anticipates that substantially all of the cash required in 1996 for
its construction program and principal payments and retirement of long term debt
will be provided by operating activities. If additional funds are required
during 1996, it is expected that they will be raised through the issuance of
commercial paper and bank borrowings. The Company maintains bank lines of credit
sufficient to support outstanding commercial paper and bank borrowings and
anticipates no difficulty in meeting potential external financing requirements
in this manner during 1996. The Company had lines of credit totaling $100
million at December 31, 1995, of which $70.3 million was unused.
II-3
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
1995 FORM 10-K/PART II
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
---------------------------------
Liquidity and Capital Resources (continued)
- -------------------------------------------
At year end, the Company's ratio of common equity to total capital was 55.5
percent in 1995, 58.8 percent in 1994 and 60.8 percent in 1993. The equity ratio
decreased in 1995 primarily due to the noncash charge associated with the
discontinued application of SFAS No. 71 and restructuring charges. ( See Note 2
of Notes to Consolidated Financial Statements.) The ratio of short-term debt to
total capital was 2.8 percent in 1995, 3.4 percent in 1994 and 5.7 percent in
1993.
Financial Condition
- -------------------
The Company's consolidated assets totaled $1.4 billion at December 31, 1995
compared to $1.7 billion at December 31, 1994. Property, plant and equipment,
net of accumulated depreciation, decreased $200.7 million from 1994 to 1995 due
primarily to the discontinued application of SFAS No. 71, "Accounting for the
Effects of Certain Types of Regulation", during the fourth quarter of 1995,
which resulted in a $192.6 million increase to accumulated depreciation. (See
Note 2 of Notes to Consolidated Financial Statements for additional discussion.)
Accounts payable decreased $16.6 million from 1994 to 1995 primarily due to the
timing of cash disbursements. Postretirement and other benefit obligations
increased $13.4 million from 1994 to 1995, primarily due to the current year's
postretirement benefits costs.
Results of Operations
- ---------------------
Local service revenues are derived from providing telephone exchange services.
Local service revenues increased in 1995 primarily due to increases in basic
area service revenues reflecting access line growth of approximately 64,000 or
5.0 percent. Also contributing to the increase in 1995 was the increase in
revenue for custom calling features, increased equipment leases and increased
demand for inside wire maintenance contracts.
Network access service revenues are derived from billing other carriers and
telephone customers for their use of the local network to complete long distance
calls in those instances where long distance service is not provided entirely by
the Company. Network access service revenues increased $10.4 million in 1995
primarily due to increased minutes of use and customer activity net of the
January 1, 1995 rate reduction. In addition, the adoption of the 5.3 percent
productivity rate for the FCC Interstate price cap plan, effective August, 1995,
eliminated the rate of return ceiling on interstate earnings, beginning July,
1995, and therefore increased the retention of revenue.
Long distance service revenues are derived principally from providing long
distance services within designated areas. Revenues decreased in 1995 primarily
due to rate reductions effective January 1, 1995 and because of increased
competition in this market. Also contributing to the reduction in 1995 revenue
was the conversion of certain short-haul toll routes to flat rate message plans.
These flat rate revenue streams are included in local service revenue.
II-4
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
1995 FORM 10-K/PART II
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
---------------------------------
Results of Operations (continued)
- ---------------------------------
Other revenues include revenues related to directory publishing fees, providing
billing and collection services and operator services for interexchange
carriers, sales of telecommunications equipment and leasing of network
facilities. Other revenues increased in 1995 primarily due to an increase in
directory revenues and direct marketing services partially offset by a decrease
in equipment sales.
Plant expense increased in 1995 primarily due to increased access line movement,
increased access lines in service, repairs of cable and wire facilities due to
inclement weather and increases in computer and data expenses.
Depreciation expense increased $17.6 million during 1995 primarily due to the
implementation of new depreciation rates effective January 1, 1995 and also due
to the asset base growth between 1994 and 1995.
Customer operations expense increased in 1995 primarily due to increases in
expenses associated with expanded hours of business office operations, increases
in the number of customer contacts and increased directory expenses.
Corporate operations expense decreased in 1995 due to a decrease in advertising
and general and administrative services provided by Sprint.
In November 1995, Sprint initiated a realignment and restructuring of its local
communications services division, including the elimination of approximately 250
of the Company's positions. This restructuring is geared toward streamlining
current processes in order to reduce costs in an increasingly competitive
marketplace. These actions resulted in a nonrecurring charge to the Company of
$12.2 million, which reduced net income by $7.5 million. The accrued liability
associated with this charge specifically relates to the benefits that affected
employees will receive upon termination.
Effective March 9, 1993, Sprint consummated its merger with Centel Corporation,
a telecommunications company with local exchange and cellular and wireless
communications services operations (see Note 9 of Notes to Consolidated
Financial Statements for additional information). The transaction costs
associated with the merger (consisting primarily of investment banking and legal
fees) and the estimated expenses of integrating and restructuring the operations
of the two companies (consisting primarily of employee severance and relocation
expenses and costs of eliminating duplicative facilities) resulted in a
nonrecurring charge to Sprint during 1993. The portion of such charge
attributable to the Company was $51.1 million, which reduced 1993 net income by
approximately $31 million.
II-5
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
1995 FORM 10-K/PART II
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
---------------------------------
Nonoperating Items
- ------------------
The increase in interest charges in 1995 was primarily due to the issuance of
Series HH mortgage bonds in January, 1995 to replace short-term borrowings.
Extraordinary Items
- -------------------
As described in Note 2 of Notes to Consolidated Financial Statements, the
Company adopted accounting principles for a competitive marketplace and
discontinued applying SFAS No. 71, "Accounting for the Effects of Certain Types
of Regulation," effective December 31, 1995. The application of SFAS No. 71
required the accounting recognition of the rate actions of regulators where
appropriate. The Company determined that it no longer met the criteria for
following 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 Company 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, the
Company recorded a noncash, extraordinary charge of $108.4 million, net of
related income tax benefits.
The Company incurred extraordinary charges related to the early extinguishments
of debt of $215,000 and $1.4 million, net of related income tax benefits, in
1994 and 1993, respectively.
Effects of Inflation
The effects of inflation on the operations of the Company were not significant
during 1995, 1994 or 1993.
II-6
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
1995 FORM 10-K/PART II
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Pages
-----
Report of Independent Auditors II-8
Consolidated Balance Sheets
as of December 31, 1995 and 1994 II-9-II-10
Consolidated Statements of Income
for each of the three years ended December 31, 1995 II-11
Consolidated Statements of Retained Earnings
for each of the three years ended December 31, 1995 II-12
Consolidated Statements of Cash Flows
for each of the three years ended December 31, 1995 II-13
Notes to Consolidated Financial Statements II-14-II-29
II-7
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
1995 FORM 10-K/PART II
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
United Telephone Company of Florida
We have audited the accompanying consolidated balance sheets of United Telephone
Company of Florida (the Company), a wholly-owned subsidiary of Sprint
Corporation, as of December 31, 1995 and 1994, and the related consolidated
statements of income, retained earnings, and cash flows 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 at Item 14(a)2. These financial
statements and the schedule are the responsibility of the Company's management.
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 the
Company 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 Note 2 to the consolidated financial statements, the Company
discontinued accounting for its operations in accordance with Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation," in 1995.
ERNST & YOUNG LLP
Kansas City, Missouri
January 24, 1996
II-8
<PAGE>
<TABLE>
PART II.
Item 8.
UNITED TELEPHONE COMPANY OF FLORIDA
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 and 1994
(In Thousands)
ASSETS 1995 1994
------ -------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 9,267 $ 9,473
Receivables:
Interexchange carriers 38,278 36,993
Customers and other 81,404 78,805
Unbilled toll 19,197 22,597
Affiliated companies 24,677 26,844
Allowance for uncollectible accounts (3,731) (3,318)
Inventories 26,938 27,426
Prepayments 2,387 6,158
Deferred income taxes 9,506 8,801
-------------- --------------
207,923 213,779
-------------- --------------
PROPERTY, PLANT AND EQUIPMENT
Land and buildings 155,794 149,033
Telephone network equipment and outside plant 2,274,640 2,160,156
Other 135,833 127,453
Construction in progress 54,863 40,954
------------ --------------
2,621,130 2,477,596
Less accumulated depreciation 1,420,212 1,076,007
------------ -------------
1,200,918 1,401,589
------------ -------------
DEFERRED CHARGES AND OTHER ASSETS 35,752 49,926
-------------- --------------
$ 1,444,593 $ 1,665,294
============== ==============
See Accompanying Notes to Consolidated Financial Statements.
II-9
</TABLE>
<PAGE>
<TABLE>
PART II.
Item 8.
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
------------------------------------
--------------- ---------------
<S> <C> <C>
CURRENT LIABILITIES
Outstanding checks in excess of cash balances $ 3,383 $ 3,215
Commercial paper 29,658 39,809
Current maturities of long-term debt 2,034 4,467
Accounts payable:
Interexchange carriers 53,069 56,170
Affiliated companies 23,665 39,816
Other 36,242 33,616
Advance billings and customer deposits 22,651 23,297
Accrued interest 11,556 7,514
Accrued vacation pay 16,159 15,382
Other 29,454 27,075
---------------- ---------------
227,871 250,361
---------------- ---------------
LONG-TERM DEBT 437,733 439,495
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes 109,991 196,139
Deferred investment tax credits 8,816 19,636
Postretirement and other benefit obligations 60,155 46,712
Regulatory liability - 11,143
Other 14,383 6,471
---------------- --------------
193,345 280,101
---------------- --------------
REDEEMABLE PREFERRED STOCK
Series 1959, at redemption value - 340
Series 1961, at redemption value - 108
Series 1966, at redemption value - 1,531
---------------- --------------
- 1,979
---------------- --------------
COMMON STOCK AND OTHER STOCKHOLDER'S EQUITY
Common stock, authorized 16,000,000 shares, par value
$2.50, issued and outstanding 6,500,000 shares 16,250 16,250
Capital in excess of par value 166,583 166,448
Retained earnings 402,811 510,660
---------------- ---------------
585,644 693,358
---------------- ---------------
$ 1,444,593 $ 1,665,294
==================== =================
See Accompanying Notes to Consolidated Financial Statements.
II-10
</TABLE>
<PAGE>
<TABLE>
UNITED TELEPHONE COMPANY OF FLORIDA
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
(In Thousands)
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING REVENUES
Local service $ 364,053 $ 340,887 $ 309,310
Network access service 331,002 320,586 309,221
Long distance service 76,967 83,112 84,217
Other 137,019 120,613 99,620
------------ ------------- -------------
909,041 865,198 802,368
OPERATING EXPENSES
Plant expense 241,187 232,302 215,009
Depreciation 186,888 169,326 150,233
Customer operat 133,242 118,383 110,385
Corporate opera 81,016 83,876 75,224
Merger, integration and restructuring costs 12,180 - 51,080
Other 23,761 26,023 19,944
Taxes:
Federal income:
Current 75,418 58,933 38,536
Deferred (18,504) 28 1,011
Deferred investment tax credits (3,471) (3,134) (3,471)
State, local and miscellaneous 34,511 34,356 30,168
------------- -------------- ------------
766,228 720,093 688,119
------------- -------------- ------------
OPERATING INCOME 142,813 145,105 114,249
INTEREST EXPENSE
Interest on long-term debt 34,591 30,897 34,363
Interest on short-term debt 734 1,718 1,101
Other 3,473 2,865 924
------------- ------------- -------------
38,798 35,480 36,388
OTHER INCOME
Interest charged to construction 269 561 369
Interest income 598 62 512
------------- ------------- -------------
867 623 881
------------- ------------- -------------
INCOME BEFORE EXTRAORDINARY ITEM 104,882 110,248 78,742
EXTRAORDINARY ITEMS
Discontinuation of regulatory accounting principles
and early extinguishment of debt, net (108,356) (215) (1,421)
-------------- ------------- -------------
NET INCOME (LOSS) $ (3,474) $ 110,033 $ 77,321
============== ============= =============
See Accompanying Notes to Consolidated Financial Statements.
II-11
</TABLE>
<PAGE>
<TABLE>
UNITED TELEPHONE COMPANY OF FLORIDA
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS Part II.
YEARS ENDED DECEMBER 31, 1995, 1994 and 1993 Item 8
(In Thousands)
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Balance at Beginning of Year $ 510,660 $ 532,406 $ 520,895
Net income (loss) (3,474) 110,033 77,321
Cash dividends:
Common stock (104,325) (131,675) (65,700)
Preferred stock (50) (104) (110)
--------- --------- ---------
Balance at End of Year $ 402,811 $ 510,660 $ 532,406
========= ========= =========
See Accompanying Notes to Consolidated Financial Statements.
II-12
</TABLE>
<PAGE>
<TABLE>
UNITED TELEPHONE COMPANY OF FLORIDA Part II.
CONSOLIDATED STATEMENTS OF CASH FLOWS Item 8.
YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
(In Thousands)
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (3,474) $ 110,033 $ 77,321
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 186,888 169,326 150,233
Deferred income taxes and investment
tax credits (24,844) (1,708) 2,294
Extraordinary losses 108,356 349 (396)
Changes in operating assets and liabilities:
Receivables, net 2,096 (29,943) (12,622)
Inventories 488 (4,636) (1,061)
Prepayments 3,771 (4,847) 1,459
Accounts payable, accrued expenses, and
other current liabilities (9,906) 33,723 23,395
Noncurrent assets and liabilities, net 21,788 20,668 12,372
Other, net 724 843 883
--------- --------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 285,887 293,808 253,878
INVESTING ACTIVITIES
Capital expenditures (166,776) (177,828) (185,002)
Net salvage from plant and equipment retired 3,722 (1,119) (876)
-------- ---------- --------
NET CASH USED BY INVESTING ACTIVITIES (163,054) (178,947) (185,878)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 68,576 - 202,772
Principal payments and retirements of long-term debt (4,784) (18,315) (211,984)
Net increase (decrease) in short-term borrowings (80,151) 42,599 15,510
Redemption of preferred stock (1,979) (108) (107)
Premiums on early redemption of long-term debt - (138) (9,011)
Dividends paid (104,375) 131,779) (65,810)
Additions to unamortized debt expense (326) - (1,943)
--------- --------- ---------
NET CASH USED BY FINANCING ACTIVITIES (123,039) (107,741) (70,573)
--------- --------- ---------
INCREASE (DECREASE) IN CASH (206) 7,120 (2,573)
CASH AT BEGINNING OF YEAR 9,473 2,353 4,926
-------- ------- --------
CASH AT END OF YEAR $ 9,267 $ 9,473 $ 2,353
======== ======= =======
Supplemental Cash Flows Information
Cash paid for interest $ 42,374 $ 34,749 $ 35,971
Cash paid for income taxes 85,563 77,143 38,656
See Accompanying Notes to Consolidated Financial Statements.
II-13
</TABLE>
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of United Telephone
Company of Florida is presented to assist in understanding the
accompanying consolidated financial statements. The consolidated financial
statements and notes are representations of management, which is
responsible for their integrity and objectivity. These accounting policies
conform with generally accepted accounting principles and reflect
practices appropriate to the industry in which United Telephone Company of
Florida operates.
Basis of Presentation
---------------------
The accompanying consolidated financial statements include the accounts of
United Telephone Company of Florida and its wholly-owned subsidiary,
United Telephone Long Distance, Inc., collectively referred to as the
"Company." All significant intercompany transactions have been eliminated.
The Company is a wholly-owned subsidiary of Sprint Corporation (Sprint);
accordingly, earnings per share information has been omitted.
Certain 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 stockholder's equity as
previously reported.
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.
Operations
----------
The Company is engaged in the business of providing communications
services, principally local, network access and long distance services in
Florida. The Company adopted accounting principles for a competitive
marketplace and discontinued accounting for the economic effects of
regulation pursuant to Statement of Financial Accounting Standards (SFAS)
No. 71, "Accounting for the Effects of Certain Types of Regulation,"
effective December 31, 1995 (See Note 2).
Cash
----
As part of its cash management program, the Company utilizes controlled
disbursement banking arrangements. Outstanding checks in excess of cash
balances are reflected as a current liability on the balance sheet. The
company had sufficient funds available to fund these outstanding checks
when they were presented for payment.
II-14
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Inventories
-----------
Inventories consist of materials and supplies, stated at average cost, and
equipment held for resale, stated at the lower of average cost or market.
The sales inventory balances were $9,200,000 and $11,494,000 at December
31, 1995 and 1994, respectively.
Property, Plant and Equipment
-----------------------------
Property, plant and equipment are recorded at cost. Retirements of
depreciable property are charged against accumulated depreciation with no
gain or loss recognized. Repairs and maintenance costs are expensed as
incurred.
Depreciation
------------
The cost of property, plant and equipment is depreciated generally on the
composite group remaining life method of depreciation and straight-line
composite rates. In connection with the discontinuation of SFAS No. 71,
the Company will begin recording depreciation expense based on expected
economic useful lives in 1996. Previously, such lives relating to
regulated property, plant and equipment were those prescribed by
regulatory commissions. Depreciation rate changes, special short-term
amortizations and nonrecurring charges approved by regulatory commissions
resulted in $15.7 million and $6 million increases in depreciation in 1995
and 1994, respectively, and a $9.3 million decrease in 1993. After the
related effects on revenues and income taxes, these items reduced net
income for 1995 and 1994 by approximately $8.4 million and $2.7 million,
respectively, and increased net income for 1993 by approximately $4.9
million. Average annual composite depreciation rates, excluding the
nonrecurring charges, were 8.0 percent for 1995, 6.8 percent for 1994 and
6.7 percent for 1993.
Income Taxes
------------
Operations of the Company are included in the consolidated federal income
tax returns of Sprint. Federal income tax is calculated by the Company on
the basis of its filing a separate return.
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 (ITC) have been deferred and are being amortized
over the estimated useful lives of the related property.
II-15
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Interest Charged to Construction
--------------------------------
In May 1994, the Florida Public Service Commission (FPSC) staff, citing
the immateriality of interest capitalized on long-term construction
projects, filed comments with the Federal Communications Commission (FCC)
supporting the elimination of interest charged to construction. In
addition, the FPSC directed the Company to cease recognizing interest
charged to construction effective November 1, 1994. In February, 1995, the
FCC issued an order which not only upheld the calculation of interest
during construction on long-term construction projects, but ordered that
such interest be calculated on all projects whose estimated gross
additions exceed $100,000. The order was effective in September, 1995. The
Company has complied with these regulatory orders.
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 the asset in question
may not be recoverable. Management does not anticipate that SFAS No. 121
will have a material effect on its 1996 operating results.
II-16
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
2. ADOPTION OF ACCOUNTING PRINCIPLES FOR A COMPETITIVE MARKETPLACE
Effective December 31, 1995, the Company determined that it 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, the Company recorded a noncash, extraordinary charge of
$108.4 million, net of income tax benefits of $82 million.
The Company'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, the Company no longer believes that it can be assured that
prices will be maintained at levels which will provide for the recovery of
specific costs.
The components of the extraordinary charge recognized as a result of the
discontinued application of SFAS No. 71 are as follows (in thousands):
Pre-tax After-tax
------- ---------
Increase to the accumulated depreciation balance $ 192,565 $ 118,283
Recognition of switch software asset (17,237) (10,588)
Elimination of other net regulatory assets 15,072 9,288
--------- ---------
Total $ 190,400 $ 116,983
Tax-related net regulatory liabilities ( 4,113)
Accelerated amortization ofinvestment tax credits ( 4,514)
---------
Extraordinary charge $ 108,356
=========
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
the Company'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.
II-17
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
2. ADOPTION OF ACCOUNTING PRINCIPLES FOR A COMPETITIVE MARKETPLACE
(CONTINUED)
The following is a summary of the telecommunications plant in service
asset balances and corresponding reserve adjustment (in thousands).
<TABLE>
Pre-change Post-change
----------------------------------- ------------
Category of Plant in Net Reserve Revised
Plant Asset Service Reserve Plant Adjustment Net Plant
----------- ------- ------- ----- ---------- ---------
<S> <C> <C> <C> <C> <C>
Cable $1,189,702 $584,441 $605,261 $128,361 $476,900
Circuit 374,488 224,698 149,790 16,638 133,152
Switching 576,566 225,464 351,102 20,184 330,918
Other 309,708 176,686 214,022 27,382 186,640
---------- ---------- -------- -------- ---------
Total Plant $2,531,464 $1,211,289 $1,320,175 $192,565 $1,127,610
========== ========== ========== ======== ==========
</TABLE>
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
----------------------- ----- -----------
Cable 18 to 21 15 to 20
Circuit 9 to 11 7 to 11
Switching 12 to 18 11 to 12
The discontinued application of SFAS No. 71 also required the Company 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 capitalized software costs and
deferred debt extinguishment costs.
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. The Company 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.
II-18
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
3. EMPLOYEE BENEFIT PLANS
Effective January 1, 1994, as a result of the merger of Sprint and Centel
Corporation (Centel), employees of Central Telephone Company of Florida,
an affiliate, are considered employees of the Company. As a result, the
Company assumed the January 1, 1994 liability for postretirement benefits
in the amount of $16.2 million in addition to prepaid pension costs of
$2.5 million related to Central Telephone Company of Florida's active
employees and retirees.
Defined Benefit Pension Plan
----------------------------
Substantially all employees of the Company are covered by a
noncontributory defined benefit pension plan sponsored by Sprint. 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.
The Company'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.
Pension costs or credits are determined for each subsidiary of Sprint
based on a direct calculation of service costs and projected benefit
obligations and an appropriate allocation of unrecognized prior service
costs, transition asset, and plan assets. Net periodic pension credits
recorded by the Company for the years ended December 31, 1995, 1994, and
1993 were $3,521,000, $3,638,000 and $8,431,000, respectively. In
addition, the Company recorded pension curtailment gains of $115,000 in
1993 as a result of merger and integration actions (see Note 9).
II-19
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
3. EMPLOYEE BENEFIT PLANS (continued)
Defined Contribution Plans
--------------------------
Sprint sponsors defined contribution employee savings plans covering
substantially all employees of the Company. Participants may contribute
portions of their compensation to the plans. Contributions of participants
represented by collective bargaining units are matched by the Company
based upon defined amounts as negotiated by the respective parties.
Contributions of participants not covered by collective bargaining
agreements are also matched by the Company. For these participants, the
Company provides matching contributions in Sprint common stock equal to 50
percent of participants' contributions up to 6 percent of their
compensation and may, at the discretion of Sprint's Board of Directors,
provide additional matching contributions based upon the performance of
Sprint's common stock price in comparison to other telecommunications
companies. The Company's matching contributions aggregated approximately
$5,700,000, $5,300,000 and $3,800,000 in 1995, 1994 and 1993,
respectively.
Postretirement Benefits
-----------------------
Sprint sponsors postretirement benefits (principally health care benefits)
arrangements covering substantially all employees of the Company.
Employees who retired before specified dates are eligible for these
benefits at reduced cost. Employees retiring after specified dates are
eligible for these benefits on a shared cost basis. The Company funds the
accrued costs as benefits are paid.
Net postretirement benefit costs are determined for each subsidiary of
Sprint based on a direct calculation of service costs and accumulated
postretirement benefit obligations and an appropriate allocation of
unrecognized prior service costs, unrecognized net gains and transition
obligation. Net postretirement benefit costs recorded by the Company for
the years ended December 31, 1995, 1994 and 1993 were $17,420,000,
$16,667,000 and $14,640,000, respectively. In addition, the Company
recorded postretirement benefit curtailment losses of $ 5,632,000 in 1993
as a result of merger and integration actions (see Note 9).
Postemployment Benefits
-----------------------
Effective January 1, 1994, the Company adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." Upon adoption, the Company
recognized certain previously unrecorded obligations for benefits being
provided to former or inactive employees and their dependents, after
employment but before retirement. The resulting charge did not
significantly impact the Company's financial statements. Such
postemployment benefits offered by the Company include severance,
disability and worker's compensation benefits, including the continuation
of other benefits such as health care and life insurance coverage.
II-20
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
4. INCOME TAXES
The components of federal and state income tax expense are as follows (in
thousands):
1995 1994 1993
---- ---- ----
Federal Income Tax
Current $75,418 $58,933 $38,536
Deferred (18,504) 28 1,011
Amortization of deferred ITC (3,471) (3,134) (3,471)
--------- --------- --------
53,443 55,827 36,076
--------- -------- --------
State Income Tax
Current 12,052 8,467 4,879
Deferred (2,869) 1,398 2,064
--------- --------- --------
9,183 9,865 6,943
--------- -------- --------
Total income tax expense $ 62,626 $65,692 $43,019
======== ======= =======
II-21
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
4. INCOME TAXES (continued)
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. The resulting adjustments to the Company's deferred income tax
assets and liabilities to reflect the revised rate were generally
reflected as reductions to the related regulatory liabilities and have
been subsequently eliminated in connection with the Company'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 thousands):
<TABLE>
1995 1994 1993
----- ------ ----
<S> <C> <C> <C>
Federal income tax expense at the statutory rate $58,628 $ 61,579 $ 42,616
Less ITC included in income 3,471 3,134 3,471
------ ------ -----
Expected federal income tax expense after
ITC 55,157 58,445 39,145
Effect of:
Book depreciation applicable
to items previously deducted for
tax purposes 550 1,168 710
Deferred taxes reversing at
prior year rates (198) (1,313) (2,400)
State income tax, net of federal
income tax effect 5,969 6,412 4,513
Other, net 1,148 980 1,051
------ ---- -----
Income tax expense, including
ITC $ 62,626 $ 65,692 $ 43,019
======= ======= ======
Effective income tax rate 37.39% 37.34% 35.33%
===== ===== =====
</TABLE>
In 1995 an income tax benefit of $82 million associated with the
extraordinary charge for the discontinuation of regulatory accounting
principles was reflected as a reduction of such charge in the consolidated
statement of income. In 1994 and 1993, income tax benefits of $134,000,
and $873,000, respectively, associated with the extraordinary charges
incurred related to the early extinguishments of debt were reflected as
reductions of such charges in the consolidated statements of income.
II-22
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
4. INCOME TAXES (continued)
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 thousands):
<TABLE>
1995 1994
----- ----
Deferred Income Tax Deferred Income Tax
Assets Liabilities Assets Liabilities
-------------------- ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
Property, plant and equipment $ - $ 142,413 $ - $ 213,812
Expense accruals 29,491 17,661 -
Deferred ITC - 8,816 - 19,636
Other, net 12,437 - 8,813 -
- - - -
-------------------- ------------------ ----------------- ------------------
$ 41,928 $ 151,229 $ 26,474 $ 233,448
==================== ================== ================= ==================
</TABLE>
II-23
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
5. LONG-TERM DEBT AND EXTRAORDINARY CHARGES ON EXTINGUISHMENTS
Long-term debt at December 31, excluding current maturities and net of
related unamortized debt discount, is summarized below (in thousands):
1995 1994
------ -------
Weighted average
Amount interest Amount
rate
First mortgage bonds,
maturities 2003 to 2025 (1) $435,857 7.7% $ 435,268
First mortgage RUS notes,
maturing 2002 - - 126
First mortgage Rural Telephone Bank
notes, maturing 2013 - - 633
Capital leases, 1996 to 2087 1,876 7.4 3,468
------- -------
$437,733 $ 439,495
======= =======
(1) Includes $70 million of commercial paper reclassified to long-term at
December 31, 1994 as a result of its being replaced by the issuance of
Series HH 8.38 percent First Mortgage Bonds in January 1995.
II-24
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
5. LONG-TERM DEBT AND EXTRAORDINARY CHARGES ON EXTINGUISHMENTS (continued)
The Company has scheduled long-term debt maturities of $2.0 million in
1996. No maturities are scheduled during 1997 through 2000.
The first mortgage bonds and notes are secured by substantially all of the
Company's property, plant and equipment.
As of December 31, 1995, the Company had lines of credit with banks
totaling $100 million of which $70.3 million was unused. The bank lines,
which are renewable in May and June, 1996, provide for short-term
borrowings at market rates of interest and require annual commitment fees
based on the unused portion. Lines of credit, which support outstanding
commercial paper, may be withdrawn by the banks if there is a material
adverse change in the financial condition of the Company. The weighted
average interest rate on short-term borrowings for 1995 and 1994 is 5.95%
and 4.56%, respectively.
The Company is in compliance with all restrictive or financial covenants
relating to its debt arrangements at December 31, 1995.
During 1995, the Company redeemed, prior to scheduled maturities, its
$633,000 Rural Telephone Bank 6.0 percent Note, and its $126,000 Rural
Utilities Service (formerly Rural Electrification Administration) 2.0
percent Note. On January 15, 1995, the Company issued Series HH 8.375
percent first mortgage bonds for $70 million which was used to reduce
short-term debt. During 1994, the Company redeemed, prior to scheduled
maturities, its Winter Park 6.50 percent Series I Bonds for $2.5 million
and a portion of its 9.25 percent Series CC Bonds for $20.5 million which
includes principal, interest and redemption premiums. Except for amounts
deferred as allowed by the FPSC, the prepayment penalties incurred in
connection with the early extinguishments of debt and the write off of
related unamortized issuance costs, net of the related income tax
benefits, are reflected as extraordinary charges in the 1994 and 1993
consolidated statements of income.
As of December 31, 1994, $70 million of commercial paper was classified as
long-term debt due to the Company's January 1995 refinancing of such
borrowings on a long-term basis as noted above.
II-25
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
6. REDEEMABLE PREFERRED STOCK
In July 1995, the Company redeemed all of its outstanding cumulative
preferred stock. The principal, accumulated dividends, and redemption
premium amounted to $2,013,000.
The Company had 1,500,000 authorized shares of redeemable preferred stock.
The redeemable preferred stock outstanding, at redemption value, as of
December 31, 1994, was as follows (in thousands):
1994
-------------------------------------
Shares Amount
------ ------
Series 1959 - par value
$10, voting, cumulative
5.4% annual dividend rate 34,000 $ 340
Series 1961 - par value
$10, voting, cumulative
5.25% annual dividend rate 10,800 108
Series 1966 - par value
$10, voting, cumulative
5% annual dividend rate 153,120 1,531
-----
$ 1,979
=======
II-26
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
7. COMMITMENTS
Gross rental expense aggregated $10,679,000 in 1995, $10,265,000 in 1994,
and $8,543,000 in 1993. Minimum rental commitments as of December 31, 1995
for non-cancelable operating leases are not significant.
The Company's planned capital expenditures for the year ending December
31, 1996 are approximately $202,000,000. Normal purchase commitments have
been or will be made for these planned expenditures.
8 RELATED PARTY TRANSACTIONS
The Company purchases telecommunications equipment, construction and
maintenance equipment, materials and supplies from its affiliate, North
Supply Company. Total purchases for 1995, 1994 and 1993 were $68,998,747,
$72,060,000 and $67,889,000, respectively.
Under an agreement with Sprint, the Company receives, at cost, consulting
and advisory management services. In addition, certain corporate expenses
and a credit resulting from deferred income taxes on intercompany profits
are also allocated by Sprint to affiliated companies. Total charges to the
Company aggregated $47,962,000, $39,742,000, and $45,369,000 in 1995, 1994
and 1993, respectively, and the credit relating to deferred income taxes
was $1,089,000 in 1993. The credit relating to deferred income taxes was
eliminated in 1994. The Company reimburses Sprint for certain data
processing services and other data related costs which are incurred for
the Company's benefit. Such charges, which approximate the cost of such
services as determined by Sprint, aggregated $26,273,000, $22,704,000, and
$21,367,000 in 1995, 1994, and 1993, respectively.
The Company enters into cash advance and borrowing transactions with
Sprint; generally, interest is computed based on the prior month's
thirty-day average commercial paper index, as published in the Federal
Reserve Statistical Release H.15 plus 15 basis points. Interest expense on
such advances from Sprint was $3,100, $42,000, and $46,000 in 1995, 1994
and 1993, respectively. Interest income on such advances to Sprint was
$414,000, 15,000, and $3,000 in 1995, 1994, and 1993, respectively.
The Company provides various services to Sprint, such as facilities
rental, postage, house services, company official toll and other
miscellaneous items. The Company received $2,868,000, $7,314,000, and
$11,625,000 in 1995, 1994, and 1993, respectively, for such services.
II-27
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
8. RELATED PARTY TRANSACTIONS (continued)
Sprint Publishing & Advertising, an affiliate, pays the Company a fee for
the right to publish telephone directories in the Company's operating
territory, a listing fee, and a fee for billing and collection services
performed for Sprint Publishing & Advertising by the Company. For 1995,
1994 and 1993, Sprint Publishing & Advertising paid the Company a total of
$53,946,000, $49,122,000, and $45,458,000, respectively. The Company paid
Sprint Publishing & Advertising $4,420,000, $3,634,000, and $3,451,000 in
1995, 1994, and 1993, respectively, for its costs of publishing the white
page portion of the directories.
The Company provides various services to Sprint's long distance
communications services division, such as network access, operator and
billing and collection services, and the lease of network facilities. The
Company received $34,473,000, $29,656,000 and $25,171,000 in 1995, 1994
and 1993, respectively, for these services. The Company paid Sprint's long
distance communications services division $13,805,000, $11,528,000, and
$13,863,000 in 1995, 1994 and 1993, respectively, for interexchange
telecommunication services.
The Company is reimbursed by affiliated companies for certain salaries and
other costs which are incurred by the Company for the affiliates' benefit.
Also, the Company reimburses affiliated companies for charges incurred by
the affiliates for the Company's benefit. The reimbursable charges
approximate the cost of such items as determined by the Company and the
affiliates. Such amounts reimbursed to the Company, net of reimbursements
paid, aggregate approximately $67 million, $64 million and $2 million in
1995, 1994 and 1993, respectively.
Certain directors and officers of the Company and Sprint are also
directors or officers of banks at which the Company conducts borrowings
and related transactions. The terms are comparable with other banks at
which the Company has similar transactions.
9. MERGER, INTEGRATION AND RESTRUCTURING COSTS
Sprint/Centel Merger
--------------------
Effective March 9, 1993, Sprint consummated its merger with Centel
Corporation (Centel), a telecommunications company with local exchange and
cellular/wireless communications services operations. Centel's local
exchange telephone businesses operate in six states: Florida, North
Carolina, Virginia, Illinois, Texas, and Nevada. Pursuant to the Agreement
and Plan of Merger dated May 27, 1992, Sprint issued 1.37 shares of its
common stock in exchange for each outstanding share of Centel common
stock. 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 to Sprint during 1993. The portion of such charges attributable to
the Company was $51 million, which reduced 1993 net income by
approximately $31 million.
II-28
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
10. ADDITIONAL FINANCIAL INFORMATION
Realignment and Restructuring Charge
------------------------------------
During 1995, Sprint initiated a realignment and restructuring of its local
communications services division, including the elimination of
approximately 250 of the Company's positions. These actions resulted in a
nonrecurring charge to the Company of $12.2 million, which reduced net
income by $7.5 million. The accrued liability associated with this charge
specifically relates to the benefits that affected employees will receive
upon termination.
Major Customer Information
--------------------------
Consolidated operating revenues from AT&T Corp. resulting primarily from
network access, billing and collection services, and the lease of network
facilities aggregated approximately $162 million, $172 million and $167
million for 1995, 1994 and 1993, respectively.
The Company's customer and other accounts receivable are not subject to
significant concentration of credit risk due to the large number of
customers in the Company's customer base.
The principal industries in the Company's service area include the retail
trade and service industries.
Financial Instruments Information
---------------------------------
The Company 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 the Company 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 Company's financial instruments primarily consist of long-term debt,
including current maturities, with carrying amounts as of December 31,
1995 and 1994 of $504,745,000 and $443,962,000, respectively, and
estimated fair values of $468,627,000 and $471,956,000, respectively. The
fair values are estimated based on quoted market prices for
publicly-traded issues, and based on the present value of estimated future
cash flows using a discount rate commensurate with the risks involved for
all other issues.
The carrying values of the Company's other financial instruments
(principally short-term borrowings) approximate fair value as of December
31, 1995 and 1994.
The Company has not invested in derivative financial instruments.
II-29
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
1995 FORM 10-K/PART III
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None
Item 10. Directors and Executive Officers of the Registrant
Omitted under the provisions of General Instruction J.
Item 11. Executive Compensation
Omitted under the provisions of General Instruction J.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Omitted under the provisions of General Instruction J.
Item 13. Certain Relationships and Related Transactions
Omitted under the provisions of General Instruction J.
III-1
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
1995 FORM 10-K/PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- -------- ---------------------------------------------------------------
(a) 1. The consolidated financial statements of the Company filed as a
part of this report are listed in the Index to Consolidated
Financial Statements on page II-7.
2. The consolidated financial statement schedule of the Company filed
as a part of this report is listed in the Index to Consolidated
Financial Statement Schedules on page IV-3.
3. The following exhibits are filed as part of this report:
EXHIBITS
(3)(a) Articles of Incorporation (filed as Exhibit 4 to the
Company's Current Report on Form 8-K dated December 31,
1982 and incorporated herein by reference).
(3)(b) Bylaws as amended February 28, 1995 (filed as Exhibit 3(b)
(4)(a) The rights of the Company's equity security holders are
defined in Articles IV and VII of the Company's Articles
of Incorporation. See Exhibit 3(a) above.
(4)(b) Indenture of Mortgage dated as of the 2nd day of January
1941, between the Company and Sun First National Bank of
Orlando, as Trustee, as supplemented by the First through
Thirty-First Supplemental Indentures (filed as Exhibits 4J
through 4U to Registration Statement No. 2-11471, Exhibits
4V through 4Y to Registration Statement No. 2-12334,
Exhibit 4Z to Registration Statement No. 2-13108, Exhibits
4X through 4Z and 4-AA to Registration Statement No.
2-22096, Exhibit 4-A-2 to Registration Statement No.
2-38951, Exhibit 2-A-2 to Registration Statement No.
2-42543, Exhibit 2-A-2 to Registration Statement No.
2-45708, Exhibit 2-D-26 to Registration Statement No.
2-51785, Exhibits 4Q, 4V, 4W, 4X, and 4-CC to Registration
Statement No. 2-69791, Exhibit 4-DD to Registration
Statement No. 33-5949, Exhibit 4-EE to Registration
Statement No. 33-13964, and Exhibits 4-FF and 4-GG to
Registration Statement No. 33-51404, and incorporated
herein by reference). (4)(c) Thirty-Second Supplemental
Indenture dated as of December 1, 1992 between the Company
and Barnett Banks Trust Company, N.A. (filed as Exhibit 4
(i) to the Company's 1992 Annual Report on Form 10-K and
incorporated herein by reference). (4)(d) Thirty-Third
Supplemental Indenture dated as of May 1, 1993 between the
Company and Barnett Banks Trust Company, N.A. (filed as
Exhibit 99 to the Company's Current Report on Form 8-K
dated May 12, 1993, and incorporated herein by reference).
IV-1
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
1995 FORM 10-K/PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
-----------
(4)(e) Thirty-Fourth Supplemental Indenture dated as of July 1,
1993 between the Company and Barnett Banks Trust Company,
N.A. (filed as Exhibit 99 to the Company's Current Report
on Form 8-K dated July 7, 1993, and incorporated herein by
reference).
(4)(f) Thirty-Fifth Supplemental Indenture dated as of January
15, 1995 between the Company and The Bank of New York.
The Company will furnish to the Securities and Exchange Commission, upon
request, copies of the following instruments defining the rights of
holders of its long- term debt.
(a) Supplemental Mortgage and Security Agreement dated as of
July 18, 1972 between Orange City Telephone Company,
Incorporated, United States of America and Rural Telephone
Bank.
The obligations under these instruments were assumed by the Company in the
merger, effective December 31, 1982, with The Winter Park Telephone Company, the
former United Telephone Company of Florida and Orange City Telephone Company,
Incorporated. The total amount of securities authorized under these or any other
said instruments does not exceed 10% of the total assets of the Company.
(b) The Registrant was not required to file a report on Form
8-K during the last quarter of 1995.
IV-2
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
1995 FORM 10-K/PART IV
Item 14 (a) 2. Index to Consolidated Financial Statement Schedules
- -------------- ---------------------------------------------------
For each of the three years in the period ended December 31 1995:
Schedule II - Consolidated valuation and qualifying accounts
All other schedules have been omitted since the required information is not
present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements, including the notes thereto.
IV-3
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
1995 FORM 10-K/PART IV
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
Balance at Charged Accounts Charged Balance
Beginning to Off, Net of at End
of Year Expense Collections of Year
------- ------- ----------- -------
Deducted from assets:
Allowance for
uncollectible accounts:
Year Ended
December 31, 1995 $3,318 $4,868 $(4,455) $3,731
===== ===== ======= =====
Year Ended
December 31, 1994 $2,857 $4,127 $(3,666) $3,318
===== ===== ======= =====
Year Ended
December 31, 1993 $2,616 $3,580 $(3,339) $2,857
===== ===== ======= =====
IV-4
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
1995 FORM 10-K/PART IV
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 authorized.
UNITED TELEPHONE COMPANY OF FLORIDA
(Registrant)
Date: March 29, 1996 By: /s/ R. D. McRae
-------------- ---------------
R. D. McRae
Vice President - Business Development
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
/s/ J. D. Kelley /s/ D. W. Peterson
J. D. Kelley D. W. Peterson, Director
President, Director and Dated: February 27, 1996
Chief Executive Officer
Dated: February 27, 1996 /s/ C. E. Rice
C. E. Rice, Director
/s/ R. D. McRae Dated: February 27, 1996
R. D. McRae
Vice President - Business Development /s/ M. T. Smith
and Chief Financial Officer M. T. Smith, Director
Dated: February 27, 1996 Dated: February 27, 1996
/s/ J. J. Beling /s/ R. M. Taylor
J. J. Beling, Controller R. M. Taylor, Director
Principal Accounting Officer Dated: February 27, 1996
Dated: February 27, 1996
/s/ R. E. Bond
R. E. Bond, Director
Dated: February 27, 1996
/s/ Bill Frederick
Bill Frederick, Director
Dated: February 27, 1996
IV-5
<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
EXHIBITS
TO
ANNUAL REPORT
ON
FORM 10-K
Date of Report: March 29, 1996
UNITED TELEPHONE COMPANY OF FLORIDA
(Exact name of registrant as specified in its charter)
<PAGE>
EXHIBIT 3(b)
Bylaws as amended February 28, 1995
<PAGE>
UNITED TELEPHONE COMPANY OF FLORIDA
Incorporated Under the Laws
of the State of Florida
September 29, 1925
BYLAWS
AS AMENDED FEBRUARY 28, 1995
CONTENTS OF BYLAWS
SECTION
Amendments to Bylaws .............................................. 67 - 73
Assistant Secretary ............................................... 34 & 48
Assistant Treasurer ............................................... 34 & 52
Board of Directors ................................................ 12
Chairman of the Board.............................................. 33 & 37
Certificates of Stock.............................................. 61
Committees - Other ................................................ 32
Compensation of Directors ......................................... 17
Compensation of Officers .......................................... 35
Controller ........................................................ 33 & 54
Corporate Seal .................................................... 66
Duties of Officers - May be Delegated ............................. 60
Executive Committee ............................................... 28
Indemnification of Directors, Officers and Employees . ............ 73
Inspectors of Election ............................................ 11
Lost Certificates of Stock ........................................ 64
Meetings of Directors ............................................. 19
Meetings of Stockholders .......................................... 1
Notices of Meetings of Directors ...................... ........... 24
Notices of Meetings of Stockholders ............................... 4
Officers .......................................................... 33 - 60
Other Committees .................................................. 32
President ......................................................... 33 & 38
Quorum and Conduct of Meetings of Stockholders .................... 8
Secretary .............................................. ......... 33 & 43
Stock Record ...................................................... 65
Transfer of Stock ................................................. 62
Treasurer ......................................................... 33 & 49
Vacancies ......................................................... 59
Vice Presidents ................................................... 33 & 42
3b-1
<PAGE>
MEETINGS OF STOCKHOLDERS
1. The annual meeting of the stockholders shall be held at the offices of
the Corporation in Apopka, Florida, or at such other place either inside
or outside the State of Florida as may be designated in the notice of the
meeting, on such business day in the month of February of each calendar
year as is determined by the Board of Directors.
2. A special meeting of the stockholders may be called at any time by the
Board of Directors, the Executive Committee, the Chairman of the Board,
or the President; and the Chairman of the Board, President, or the
Secretary shall call a special meeting whenever requested, in writing, by
five directors, or by stockholders representing twenty-five percent of
the outstanding stock entitled to vote at such meeting.
Such request shall specify the time and object of the proposed meeting.
3. Special meetings of the stockholders shall be held at the offices of the
Corporation in Apopka, Florida, or at such other place either inside or
outside the State of Florida, as may be designated in the notice of the
meeting.
NOTICE OF MEETINGS OF STOCKHOLDERS
4. Notice of any meeting of the stockholders shall be mailed by the
Secretary not less than ten nor more than forty days before the meeting,
directed to each stockholder of record entitled to vote at such meeting
at his address as it appears on the stock record, unless the stockholder
has filed with the Secretary a written request that notices intended for
him shall be mailed to some other address in which case it shall be
mailed to the address designated in such request.
5. Notice of an annual meeting or of a special meeting shall state the
time and place and object of such meeting.
6. The failure of any stockholders to receive notice of any meeting of
stockholder shall not invalidate the meeting.
7. If amendments to the Bylaws or the Articles of Incorporation are proposed
by a stockholder, group of stockholders or the Board of Directors for
consideration by the stockholders at any annual meeting or special
meeting, the principal provisions of such proposed amendments shall be
described in said notice or attachments thereto for the stockholders
perusal prior to any annual or special meeting.
3b-2
<PAGE>
QUORUM AND CONDUCT OF MEETINGS OF STOCKHOLDERS
8. At all meetings of the stockholders, a majority in interest of the stock
entitled to vote thereat shall constitute a quorum, except where by law a
greater interest is required; but a less number may adjourn the meeting
to a day specified.
9. Each stockholder entitled to vote shall be entitled to one vote for each
share of stock standing in the name of each such stockholder on the books
of the Corporation. Any stockholder entitled to vote may vote in person
or by written proxy. Upon demand of any stockholder, the vote for
directors or vote upon any other matters before the meeting, shall be by
ballot.
10. Except as otherwise provided by law, at any duly constituted meeting, the
vote of a majority in interest of the stock represented and entitled to
vote shall be sufficient to pass any measure.
INSPECTORS OF ELECTION
11. Where demand is made at a stockholders meeting to have vote by ballot,
three inspectors of election shall be elected by ballot by the
stockholders to serve during the meeting.
BOARD OF DIRECTORS
12. The business of the Corporation shall be managed by a Board of Directors
who shall be elected by the stockholders at the annual meeting and who
shall serve until their successors are elected.
13. Vacancies in the Board may be filled by the remaining directors.
14. The number of directors shall not be less than seven nor more than
twenty-one in number.
15. Deleted April 17, 1974.
16. If the maximum number of directors are not elected at the annual meeting,
additional directors may be elected at a special meeting, provided the
notice of the meeting gives notice of such intention.
17. Directors as such shall receive no stated salaries for their services,
but by resolution of the Board of Directors, a fixed sum and expenses of
attendance may be allowed those directors not receiving regular salaries
from the Corporation, for attendance at regular and special meetings of
the Board or Executive Committee provided that nothing herein contained
shall be construed to preclude any director from representing the
Corporation in any other capacity and receiving compensation therefore.
3b-3
<PAGE>
18. No director elected by the stockholders may be removed as a director by
the Board of Directors. Any director elected by the stockholders can be
removed only by a majority vote of the outstanding common stock of the
corporation at a special meeting of the stockholders called for such
purpose.
19. Meetings of the Board of Directors may be held at the offices of the
corporation in Apopka, Florida, or at any other place either inside or
outside the State of Florida.
20. A meeting of the Board of Directors for the election of officers and the
transaction of general business shall be held immediately following the
annual meeting of stockholders.
21. Regular meetings of the Board of Directors shall also be held at such
times and places as the Board may determine.
22. Special meetings of the Board of Directors may be called at any time by
the Chairman of the Board, or the President, and shall be called by the
Chairman of the Board, President, or by the Secretary upon request in
writing signed by two or more Directors and specifying the object of the
meeting, but special meetings, at any time or place, may be held by the
written consent and waiver of notice signed by all the Directors.
23. A majority of the Directors shall constitute a quorum, but a less number
may adjourn a meeting to any specified time and place.
NOTICE OF MEETINGS OF DIRECTORS
24. Notice of any meeting of the directors shall be sent by the Secretary to
each Director at least two days before such meeting, by mail, messenger
or telegraph, or be given personally, or by telephone.
25. Notice of a regular meeting shall state the time and place of such
meeting.
26. Notice of special meeting shall state the time, place and object of such
meeting.
27. No notice shall be necessary for the annual meeting for the election of
officers and the transaction of general business held immediately after
the annual meeting of the stockholders.
3b-4
<PAGE>
EXECUTIVE COMMITTEE
28. The Board of Directors may designate by resolution from their number an
Executive Committee of not less than three members. A majority of the
Committee shall constitute quorum.
29. Except as otherwise provided by law, such Committee shall have and
exercise all the powers of the Board of Directors in the intervals
between the meetings of the Board.
30. Minutes of all meetings of the Committee shall be kept and recorded by
the Secretary, and shall be from time to time reported to the Board of
Directors.
31. The Chairman of the Board, or President, may designate from time to time
a member of the Board of Directors to act as a member of the Executive
Committee at any time or meetings thereof in place of any member of the
Executive Committee absent therefrom.
OTHER COMMITTEES
32. The Board of Directors may designate by resolution any other committee or
committees. Such other committees shall have and shall exercise such
powers as shall be conferred upon them respectively by the Board of
Directors.
33. The Officers of the corporation shall be elected, or appointed, by the
Directors and shall consist of a President, such number of Vice
Presidents as the Directors shall from time to time determine, a
Secretary, a Treasurer and a Controller. The Directors may elect a
Chairman of the Board. The Chairman of the Board of Directors and
President must be members of the Board of Directors, but other officers
elected or appointed may or may not be members of the Board at the option
of the Board of Directors.
34. The Board of Directors may appoint one or more Assistant Secretaries, one
or more Assistant Treasurers, and such other officers and agents as the
Board may consider necessary, who shall have such powers and perform such
duties as may be assigned to them by the Board of Directors or the
Executive Committee.
35. The salaries of the officers, elected or appointed, of the Corporation
shall be fixed by the Board of Directors.
36. More than one office may be held by one and the same person.
3b-5
<PAGE>
THE CHAIRMAN
37. The Chairman of the Board of Directors shall preside at all meetings of
the stockholders and the Board of Directors at which he is present. In
the absence of the Chairman of the Board, the President shall preside.
THE PRESIDENT
38. The President shall have direct charge of and supervision over the entire
operations of the Corporation, including operational matters, as well as
financial matters, and shall be the chief executive officer of the
Corporation. He shall likewise have the responsibility of carrying out
the policies and decisions adopted by the Board of Directors or the
Executive Committee. Upon authorization of the President, the duties of
the President may be delegated to any other officer of the Corporation.
39. The President is empowered to execute deeds, bills of sale, notes,
mortgages, bonds, contracts and other instruments that require execution,
for and in behalf of the Corporation, and to sign certificates of stock.
40. The President shall have such other powers and perform such other duties
as usually appertain to the office in business corporations or as may be
delegated to him by the Board of Directors or the Executive Committee.
41. In the absence or inability of the President, the duties of the office
shall be performed by such other officer of the Corporation as the Board
of Directors or the Executive Committee may designate.
THE VICE PRESIDENT
42. An Executive Vice President and/or one or more Vice Presidents may be
elected or appointed by the Board of Directors from time to time. Such
Vice Presidents shall be responsible to the President.
THE SECRETARY
43. The Secretary shall send all requisite notice of meetings of the
stockholders, the Board of Directors, and the Executive Committee.
44. The Secretary shall attend all meetings of the stockholders, the Board of
Directors and the Executive Committee and shall keep a true and faithful
record of the proceedings.
45. The Secretary shall have custody of the seal of the Corporation and of
all records, books, documents and papers of the Corporation, except those
required to be in the custody of the Treasurer or the Controller, and
except such subsidiary records as may be kept in departmental offices.
3b-6
<PAGE>
46. The Secretary shall sign and execute all documents which require his
signature and execution, and shall affix the seal of the Corporation
thereto and attest the same when necessary.
47. The Secretary shall have such other powers and perform such other duties
as usually appertain to the office in business corporations, or as may be
assigned to him by the Board of Directors or the Executive Committee.
48. Any Assistant Secretary, in case of the absence or inability of the
Secretary, may exercise the powers to perform the duties of the
Secretary. The Assistant Secretaries shall have such other powers and
perform such other duties as may be assigned to them by the Board of
Directors, the Executive Committee or the Secretary.
THE TREASURER
49. The Treasurer shall receive and have charge of all funds and securities
of the Corporation; he shall deposit the funds to the credit of the
Corporation in such depositories as the Board of Directors or the
Executive Committee shall designate, and he shall disburse the same only
on written approval of the Controller or his duly authorized
representative, and under such rules and regulations as the Board of
Directors or the Executive Committee may adopt.
50. The Treasurer shall keep full and regular books showing all his receipts
and disbursements which books shall be open at all times to the
inspection of any member of the Board of Directors and he shall make such
reports as the Board of Directors or the Executive Committee may require.
51. The Treasurer shall have such other powers and perform such other duties
as usually appertain to the office in business corporations, or as may be
assigned to him by the Board of Directors or the Executive Committee.
52. Any Assistant Treasurer shall have such powers and perform such duties as
may be assigned to him by the Board of Directors, the Executive Committee
or the Treasurer within the scope of his authority.
53. The Treasurer and any Assistant Treasurer shall give such security for
the faithful performance of his duties as the Board of Directors or the
Executive Committee may require.
3b-7
<PAGE>
THE CONTROLLER
54. The Controller shall have custody and charge of all books of account,
except those required by the Treasurer in keeping record of the work of
his office, and shall have supervision over such subsidiary accounting
records as may be kept in departmental offices.
55. The Controller shall have access to all books of account, including the
records of the Secretary and the Treasurer, for purposes of audit and for
obtaining information necessary to verify or complete the records of his
office.
56. The Controller or his duly authorized representatives shall certify to
the authorization and approval pertaining to all vouchers; and no
payments from the general cash shall be made by the Treasurer except on
voucher bearing the written approval of the Controller or his authorized
representative.
57. The Controller shall be responsible to the President and shall perform
such other duties as may be assigned to him by the Board of Directors or
the Executive Committee.
58. The Controller may designate some other person or persons to perform such
of his duties as he finds necessary to delegate in the ordinary conduct
of the business, and shall with the approval of the Board of Directors or
the Executive Committee designate some person to perform the duties of
Controller in case of his absence or inability.
VACANCIES
59. If the office of any Director, the Chairman of the Board, the President,
Vice President, the Secretary, the Treasurer, the Controller, or any
officer elected or appointed by the Board of Directors becomes vacant by
reason of death, retirement, removal or otherwise, the Directors then in
office may elect or appoint a successor or successors who shall
respectively hold office for the unexpired term in respect to which such
vacancy occurred.
DUTIES MAY BE DELEGATED
60. In case of the absence or inability of any officer, or for any other
reason that the Board of Directors may deem sufficient, the Board may
delegate the powers and duties of such office to any other officer, or
any other director, for the time being.
3b-8
<PAGE>
CERTIFICATES OF STOCK
61. The certificates of stock of the Corporation shall be numbered and
entered in the books of the Corporation as they are issued. They shall
exhibit the holders name and the number of shares, and shall be signed by
the President or a Vice President and by the Secretary or an Assistant
Secretary, and shall bear the corporate seal.
TRANSFER OF STOCK
62. Transfer of stock shall be made on the books of the Corporation only by
the person named in the certificate, or by an attorney lawfully
constituted in writing, and upon surrender of such certificates.
63. The Corporation will be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof, and accordingly,
shall not be bound to recognize any other claim to or interest in such
shares on the part of any other person, whether or not it shall have
express notice thereof, save as may be expressly provided by the laws of
the State of Florida.
LOST CERTIFICATES
64. Any person claiming a certificate of stock to be lost or destroyed shall
make an affidavit or affirmation to that effect, and advertise the same
in such manner as the Board of Directors may require, and shall give the
Corporation a bond of indemnity, with one or more sureties satisfactory
to the Board of Directors, in at least double the par value of the stock
represented by the certificate claimed to be lost or destroyed, whereupon
a new certificate may be issued of the same tenor and for the same number
of shares as the one alleged to be lost or destroyed, but always subject
to the approval of the Board of Directors.
STOCK RECORD
65. A stock ledger shall be maintained showing a record of the stock
holding of each stockholder.
CORPORATE SEAL
66. The corporate seal shall have inscribed thereon: "United Telephone
Company of Florida, a Florida Corporation. Corporate Seal."
AMENDMENTS
67. The Articles of Incorporation, Article VI, provides that "The bylaws may
be adopted or amended only by a majority of all the voting stock voting
in person or by proxy".
3b-9
<PAGE>
68. Any stockholder or group of stockholders of record can propose amendments
to the Bylaws or the Articles of Incorporation by a notice in writing to
the Secretary, outlining in sufficient detail such proposed amendments to
be considered at any annual meeting of the stockholders. Such notice must
be sufficiently in advance of the annual meeting and in the hands of the
Secretary in time to comply with Sections Four and Seven of these bylaws
entitled "Notice of Meetings of Stockholders."
69. Stockholders representing twenty-five percent of the total outstanding
stock entitled to vote can propose amendments to the Bylaws or Articles
of Incorporation by a notice in writing to the Secretary outlining in
sufficient detail such proposed amendments and the request that a special
meeting of the stockholders be called in accordance with Section Two of
these Bylaws, entitled "Meetings of Stockholders."
70. Any proposals for amendments to the Bylaws or the Articles of
Incorporation can be recommended by any elected or appointed officer or
the Executive Committee, but must have approval of the Board of Directors
before being recommended by the management of the Company as a group for
consideration at any annual or special meeting of the stockholders. Any
officer who is also a stockholder, however, shall have the right as a
stockholder, to propose amendments to the Bylaws or Articles of
Incorporation at any annual meeting of the stockholders so long as
Section 68 under this heading is complied with.
71. In no event shall any amendment or amendments to the Bylaws or the
Articles of Incorporation be considered valid unless proper notice of
such amendment or amendments is given to stockholders in advance of any
annual or special meeting in compliance with Sections 4, 7, 68, 69 and 70
of these Bylaws.
72. That whenever in these Bylaws the word "stockholder" or "stockholders" is
used, it shall be construed to mean only the holder or holders of stock
entitled to vote pursuant to the Certificate of Incorporation, except,
however, as used in Bylaw Number 65 pertaining to the maintenance of a
stock ledger; and wherever in these Bylaws the word "stock" is used, it
shall be construed to mean stock possessing voting power pursuant to the
Certificate of Incorporation, except, however, as used in Bylaws Numbers
39, 61, 62, 63, 64 and 65 pertaining generally to the issuance of stock
certificates and maintenance of stock records.
3b-10
<PAGE>
73. Indemnification of Officer and Directors.
(a) Limitation of Liability.
No person shall be liable to the Corporation for any loss or
damage suffered by it on account of any action taken or omitted to
be taken by him or her as a director or officer of the Corporation
in good faith, if such person (1) exercised or used the same
degree of care and skill as a prudent man or woman would have
exercised or used under the circumstances in the conduct of his or
her own affairs, or (2) took or omitted to take such action in
reliance on advice of counsel for the Corporation or upon
statements made or information furnished by officers or employees
of the Corporation which he or she had reasonable grounds to
believe.
(b) Indemnification
(1) Actions Other Than Those by or in the Right of the
Corporation. The Corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation)
by reason of the fact that he or she is or was a director or
officer of the Corporation, or is or was serving at the
request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection
with such action, suit or proceeding if he or she acted in
good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the
Corporation (or such other corporation or organization),
and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his or her conduct was
unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea
of nolo contendre or its equivalent, shall not, of itself,
create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to
be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
3b-11
<PAGE>
(2) Action by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of
the Corporation to procure a judgment in its favor by reason
of the fact that he or she is or was a director or officer,
of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another
corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection
with the defense or settlement of such action or suit if he
or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best
interests of the Corporation (or such other corporation or
organization) and except that no indemnification shall be
made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his or her
duty to the Corporation (or such other corporation or
organization) unless and only to the extent that the court
in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for
such expenses which such court shall deem proper.
(3) Successful Defense of Action. Notwithstanding, and without
limitation of, any other provision of this Section 73, to
the extent that a director or officer of the Corporation has
been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraph (1) or
(2) of this Section 73, or in defense of any claim, issue or
matter therein, he or she shall be indemnified against
expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection therewith.
(4) Determination Required. Any indemnification under paragraph
(1) or (2) of this Section 73 (unless ordered by a court)
shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of
the director or officer is proper in the circumstances
because he or she has met the applicable standard of conduct
set forth in said paragraph. Such determination shall be
made (i) by the Board of Directors by a majority vote of a
quorum consisting of directors who were not parties to the
particular action, suit or proceeding, or (ii) if a quorum
is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the stockholders.
3b-12
<PAGE>
(5) Advance of Expenses. Expenses incurred in defending a civil
or criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such
action, suit or proceeding as authorized may be paid by the
Corporation in advance of the final disposition of such
action, suit or proceeding as authorized by the Board of
Directors in the specific case upon receipt of a
satisfactory undertaking by or on behalf of the director or
officer to repay such amount unless it shall ultimately be
determined that he or she is entitled to be indemnified by
the Corporation as authorized in this Section 73.
(c) Nonexclusivity; Duration.
The indemnifications, rights, and limitations of liability
provided by this Section 73 shall not be deemed exclusive of any
other indemnifications, rights or limitations of liability to
which any person may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors, or otherwise, either
as to action in his official capacity or as to action in another
capacity while holding office, and they shall continue although
such person has ceased to be a director or officer and shall inure
to the benefit of his or her heirs, executors and administrators.
3b-13
<PAGE>
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