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, 1996
OR
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number 0-1244
SPRINT-FLORIDA, INCORPORATED
(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 8/9% due February 1, 2021
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
9 1/4% due September 15, 2019
The registrant meets the conditions set forth in General Instruction I(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>
SPRINT-FLORIDA, INCORPORATED
1996 FORM 10-K/PART I
Item 1. Business
--------
Sprint-Florida, Incorporated (the Company) is a wholly-owned subsidiary of
Central Telephone Company (CTC) which is, indirectly, a wholly-owned subsidiary
of Sprint Corporation (Sprint). The principal executive offices of the Company
are located at 555 Lake Border Drive, Apopka, Florida 32703.
On December 19, 1996, the Company changed its name from United Telephone Company
of Florida (United) to Sprint-Florida, Incorporated.
Effective December 31, 1996, all of the capital stock of the Company was
contributed by its parent, Sprint, to the capital of another wholly-owned Sprint
subsidiary, Centel Corporation (Centel), which then contributed all of the
capital stock of the Company to the capital of CTC, a wholly-owned subsidiary of
Centel.
Pursuant to an Agreement and Plan of Merger, effective December 31, 1996,
immediately following the contribution of all of the capital stock of the
Company to CTC, Central Telephone Company of Florida (Central), a Florida
corporation and a wholly-owned subsidiary of CTC, merged with and into the
Company.
The Company is engaged in the business of furnishing communications services,
principally local, network access and long distance services, serving
approximately 1,476,000 customers in all or part of 35 Florida counties,
comprising some 53 percent of the state's total area. In addition, the Company
sells and leases telephones and telephone related equipment. The Company's
current estimate of population within its service areas is 3.5 million as
compared to census counts of approximately 2.0 million in 1990.
The Company had 5,562 employees at December 31, 1996, of which 2,620 or 47
percent are represented by either the Communications Workers of America or the
International Brotherhood of Electrical Workers for collective bargaining
purposes.
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).
I-1
<PAGE>
Item 1. Business (continued)
--------------------
Revenues from communications services constituted 86.1 percent of the operating
revenues of the Company in 1996. The remaining 13.9 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.
During the two years ended December 31, 1996, the compounded annual growth rate
in access lines served was 5.5 percent.
The following table summarizes access lines in service at the end of each of the
last three years together with the number of access minutes of use for each of
those years:
<TABLE>
(Expressed in thousands, except percentages)
<CAPTION>
Access Lines Served Percent Access Minutes Percent
Year Residence Business Total Increase of Use Increase
---- --------- -------- ----- -------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C>
1996 1,286 527 1,813 5.9 8,182,074 9.1
1995 1,228 484 1,712 5.1 7,497,846 9.8
1994 1,185 444 1,629 5.2 6,827,670 10.3
</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. Prior to
January 1997, UTLD resold WATS service as interLATA message telephone service
from exchanges within the Company's service area. UTLD stopped providing
services in January 1997 and on February 20th, the FPSC granted UTLD's request
for decertification as an interexchange carrier. The Company is subject to the
jurisdiction of the Federal Communications Commission (FCC) and the FPSC.
I-2
<PAGE>
Item 1. Business (continued)
--------------------
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.
In September 1995, the FPSC approved an increase in annual depreciation expense
of $25.0 million. The new depreciation rates were effective January 1, 1995.
On July 1, 1995, telecommunications reform legislation became law in Florida.
This legislation allowed 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.
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 was passed and signed into law in
February 1996. See Management's Discussion and Analysis of Financial Condition
and Results of Operations for a discussion of this recent 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.
However, 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.
I-3
<PAGE>
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, 1996, cable and wire facilities represented approximately 49
percent of the total; central office equipment, 40 percent; general support
assets, 9 percent; and, other telephone plant, 2 percent.
The following table sets forth the gross property additions and the retirements
or sales of property during each of the three years in the period ended December
31, 1996:
Gross Property Retirements
Year Additions or Sales
---- -------------- -----------
(In thousands)
1996 $279,032 $117,303
1995 227,190 70,962
1994 222,441 85,663
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 I.
I-4
<PAGE>
SPRINT-FLORIDA, INCORPORATED
1996 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 Central Telephone Company and
consequently is not traded.
Item 6. Selected Financial Data
-----------------------
<TABLE>
Year Ended December 31, (1)
-------------------------------------------------------------
1996 1995 1994
---- ----- ----
(In thousands)
<S> <C> <C> <C>
Operating Revenues $1,223,090 $1,130,356 $1,073,389
Net Income (Loss) (2) (3) 177,223 (14,663) 136,295
Total Assets 2,000,684 1,768,580 2,017,534
Long-Term Debt
(excluding current
maturities)
and Redeemable
Preferred Stock 455,108 510,159 527,549
Access Lines Served
per Employee 325.9 281.0 271.1
<FN>
(1) All of the information has been restated to reflect the Merger, which
was effective December 31, 1996 (see Item 1, Business).
(2) 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 of SFAS No. 71,
the Company recorded a noncash extraordinary charge of $138.6 million,
which is net of income tax benefits of $107 million. (See Note 9 of
Notes to Consolidated Financial Statements for additional information.)
(3) During 1995, Sprint initiated a realignment and restructuring of its
local communications services division, including the elimination of
approximately 310 of the Company's positions. These actions resulted in
a nonrecurring charge to the Company of $15.4 million, which reduced
net income by approximately $9.5 million.
</FN>
</TABLE>
Earnings and dividends per common share information has been omitted because all
of the common stock of the Company is owned by Central Telephone Company.
II-1
<PAGE>
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.
The Company includes certain estimates, projections, and other forward-looking
statements in its reports, presentations, and other material disseminated to the
public. There can be no assurances of future performance and actual results may
differ materially from those in the forward-looking statements. Factors that
could cause actual results to differ materially from estimates or projections
contained in the forward-looking statements include:
o the effects of vigorous competition in the markets in which the Company
operates;
o the impacts of any unusual items resulting from ongoing evaluations of the
Company's business strategies;
o requirements imposed on the Company and its competitors by the FCC and the
FPSC under the Telecommunications Act of 1996 (the Act);
o unexpected results of litigation filed against the Company; and
o the possibility of one or more of the markets in which the Company competes
being affected by variations in political, economic or other factors
such as monetary policy, legal and regulatory changes or other external
factors over which the Company has no control.
Telecommunications Law
- ----------------------
The Act, which was signed into law in February 1996, promotes competition in all
aspects of telecommunications. In particular, the Act removes barriers to
competition that will enable local and long distance companies and cable
television companies to enter each others markets. The Act also allows Bell
Operating Companies (BOCs) to provide in-region long distance service once they
obtain state certification of compliance with a competitive "checklist," have a
facilities-based competitor, and obtain an FCC ruling that the provision of
in-region long distance service is in the public interest. As part of its public
interest inquiry, the FCC must solicit the views of the Department of Justice
and give those views substantial weight.
II-2
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
------------------------------------------------------------------------
of Operations (continued)
-------------------------
Telecommunications Law (continued)
- ----------------------------------
The FCC adopted detailed rules in August 1996 to govern interconnection to
incumbent local networks by new market entrants. Some LECs and state public
service commissions appealed these rules to the U.S. Court of Appeals, which
stayed some of the pricing rules pending full review by the court. A court
decision is expected in mid-1997.
The FCC is also expected to issue decisions in 1997 on two related matters
critical to local competition -- universal service reform and access reform.
Currently, local rates are subsidized through implicit subsidies, such as
above-cost access charges imposed on long distance companies for connections to
local customers. The purpose of universal service reform is to establish an
explicit subsidy mechanism to replace the current implicit subsidies. Access
reform will change the structure and level of access charges and will determine
the degree of regulatory oversight for those charges.
The impact of the Act on the Company is unknown partially due to universal
service reform and access reform, as discussed above, which still need to be
decided by state and federal regulators. However, the Company's historical
prices and market share are likely to decline as a result of increased local
competition.
Liquidity and Capital Resources
- -------------------------------
As detailed in the Consolidated Statements of Cash Flows, the Company had net
cash provided by its operating activities of $377 million, $346 million and $331
million in 1996, 1995 and 1994, respectively.
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 1997 are approximately $289 million, of which $134 million is for
central office equipment, $98 million for cable and wire facilities, $20 million
for general support assets, $23 million for generic software and $14 million for
other telecommunications assets. Actual expenditures were $279 million in 1996,
$227 million in 1995 and $222 million in 1994. 1995 and 1994 expenditures
exclude generic software purchases, which were $11 million in both years, as
these amounts were expensed as incurred prior to the discontinued application of
SFAS No. 71.
II-3
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
------------------------------------------------------------------------
of Operations (continued)
-------------------------
Liquidity and Capital Resources (continued)
- -------------------------------------------
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. During 1996, the
Company redeemed prior to scheduled maturities $11.75 million of its Central
Telephone Company of Florida 9.37 percent Series AA Bonds, $37.18 million of its
6.68 percent Senior Notes and $16 million of its 6.03 percent Senior Notes. The
Company incurred an extraordinary charge of $253,000, net of the associated tax
benefits, on this early extinguishment of debt. In addition, on November 17,
1995, the Company retired, prior to scheduled maturities, 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 also redeemed, prior to scheduled maturities, $782,000 of
its Central Telephone Company of Florida 8.0 percent Series R, Rural Telephone
Bank Note, and $863,000 of its 7.97 percent Series S, Federal Financing Bank
Note. 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 $60 million during 1996, $38 million
during 1995 and $50 million during 1994. At year end, short-term debt,
consisting primarily of commercial paper and advances from Sprint, increased $83
million in 1996 and decreased $80 million in 1995. The increase in 1996
short-term debt is partially attributed to long-term debt retirements, as noted
above.
On December 31, 1996, the Company sold $175 million of accounts receivable, for
cash, to United Telecommunications, Inc., an affiliated company. The Company
fully relinquished all ownership, management and control of the receivables,
which were sold without recourse. On January 2, 1997, the Company repurchased
these receivables. This transaction has accordingly been treated as a borrowing.
The Company anticipates that substantially all of the cash required in 1997 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 1997, it is expected that they will be raised through advances from
Sprint.
At year end, the Company's ratio of common equity to total capital was 57.5
percent in 1996, 56.2 percent in 1995 and 59.1 percent in 1994. The equity ratio
decreased in 1995 primarily due to the noncash charge associated with the
discontinued application of SFAS No. 71 and the nonrecurring restructuring
charge. The ratio of short-term debt to total capital was 9.7 percent in 1996,
3.9 percent in 1995 and 4.2 percent in 1994. The relative increase in short-term
debt is primarily due to the early extinguishment of debt during 1996.
II-4
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
------------------------------------------------------------------------
of Operations (continued)
-------------------------
Financial Condition
- -------------------
The Company's consolidated assets totaled $2.0 billion at December 31, 1996
compared to $1.8 billion at December 31, 1995. Cash increased $174.5 million
from 1995 to 1996 due to the December 31, 1996 sale of $175 million of net
accounts receivable. Accounts payable increased $132.8 million from 1995 to 1996
also due primarily to the December 31, 1996 sale of accounts receivable.
Postretirement and other benefit obligations increased $11.7 million from 1995
to 1996, 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 1996 primarily due to increases in basic
area service revenues reflecting access line growth of 101,236 lines or 5.9
percent. Also contributing to the increase in 1996 was the increase in revenue
for custom calling features, increased equipment leases and increased demand for
inside wire maintenance contracts. In addition, the conversion of certain
short-haul toll routes to flat rates per call resulted in an increase in local
service revenues and a decrease in long distance service revenues.
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 $40.1 million in 1996
primarily due to an increase in access minutes of use of 9.1 percent. 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 1996 primarily
due to increased competition in this market and the conversion of certain
short-haul toll routes to flat rates per call. These flat-rate revenue streams
are included in local service revenue.
Sales of equipment increased in 1996 primarily due to an increase in sales of
internetworking equipment and simple telephone instruments.
Other revenues include revenues related to directory publishing fees, providing
billing and collection services and operator services for interexchange carriers
and leasing of network facilities. Other revenues decreased in 1996 primarily
due to a decrease in telemarketing revenues as a result of the March 1, 1996,
spin-off of this function into an affiliated company, Sprint TELECENTERs, Inc.
II-5
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
------------------------------------------------------------------------
of Operations (continued)
-------------------------
Results of Operations (continued)
- ---------------------------------
Plant expense decreased in 1996 compared to 1995. In conjunction with the
adoption of accounting principles for a competitive marketplace, switch software
costs, which had previously been expensed as incurred, are now being capitalized
and amortized, resulting in a decrease in plant expense. In addition, the
decrease was also attributed to decreased movement and repairs of cable and wire
which was partially offset by increased computer expenses.
Depreciation expense increased $7.0 million during 1996. In conjunction with the
December 31, 1995 adoption of accounting principles for a competitive
marketplace, an adjustment was made to increase the accumulated depreciation
balance. This adjustment resulted in certain assets becoming fully depreciated,
thus reducing depreciation expense in 1996. However, this reduction was more
than offset by amortization of switch software costs which are now being
capitalized. This amortization effectively offsets the related decrease in plant
operations expense discussed above. Accordingly, the 1996 impact on operations
resulting from the capitalization of switch software was not significant.
Customer operations expense increased in 1996 primarily due to marketing and bad
debt costs supporting the increases in local service and other revenue streams.
Partially offsetting these increases was a decrease in telemarketing expenses as
a result of the March 1, 1996, spin-off of this function into an affiliated
company, Sprint TELECENTERs, Inc.
Corporate operations expense increased in 1996 due to an increase in general and
administrative services provided by Sprint.
Sales of equipment expense increased in 1996 primarily due to an increase in
equipment sales for internetworking equipment and simple telephone instruments.
In 1995, Sprint initiated a restructuring within its local division in an effort
to streamline certain processes and reduce costs in an increasingly competitive
marketplace. These actions resulted in the planned elimination over several
years of approximately 310 positions, mainly in the network and finance
functions. As a result, the Company recorded a $15.4 million nonrecurring charge
in 1995, which reduced net income by $9.5 million. The accrued liability
associated with this charge specifically relates to the benefits that affected
employees will receive upon termination. Through 1996, approximately 40
positions have been eliminated resulting in termination benefit payments of $1.1
million. Substantially all of the remaining positions are expected to be
eliminated during 1997 with the related costs expected to be paid during 1997
and 1998.
II-6
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
------------------------------------------------------------------------
of Operations (continued)
-------------------------
Nonoperating Items
- ------------------
The decrease in interest charges in 1996 was primarily due to a decrease in
long-term borrowings relative to short-term borrowings. In addition, there was a
decrease in interest on FCC reserves.
Extraordinary Items
- -------------------
The Company incurred extraordinary charges related to the early extinguishments
of debt of $253,000 and $215,000, net of related income tax benefits, in 1996
and 1994, respectively.
On December 31, 1995, the Company adopted accounting principles for a
competitive marketplace and discontinued applying SFAS No. 71 (see Note 9 of
Notes to Consolidated Financial Statements). SFAS No. 71 requires the accounting
recognition of regulators' rate actions where appropriate. The Company
determined that it no longer met the criteria for applying SFAS No. 71 due to
changes in the regulatory framework and the evolving competitive environment. As
a result, the Company recorded an after-tax, noncash, extraordinary charge of
$138.6 million.
Effects of Inflation
- --------------------
The effects of inflation on the operations of the Company were not significant
during 1996, 1995 or 1994.
II-7
<PAGE>
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Pages
-----
Report of Independent Auditors II-9
Consolidated Balance Sheets
as of December 31, 1996 and 1995 II-10 - II-11
Consolidated Statements of Income and Retained Earnings
for each of the three years ended December 31, 1996 II-12
Consolidated Statements of Cash Flows
for each of the three years ended December 31, 1996 II-13
Notes to Consolidated Financial Statements II-14 - II-25
II-8
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Sprint-Florida, Incorporated
We have audited the accompanying consolidated balance sheets of Sprint-Florida,
Incorporated (the Company), a wholly-owned subsidiary of Sprint Corporation, as
of December 31, 1996 and 1995, and the related consolidated statements of income
and retained earnings, and cash flows for each of the three years in the period
ended December 31, 1996. 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, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, 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, a change in
reporting entity occurred during 1996. The consolidated financial statements as
of and for the years ended December 31, 1995 and 1994 have been restated to
reflect this change.
As discussed in Note 9 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.
/s/Ernst & Young LLP
----------------------
ERNST & YOUNG LLP
Kansas City, Missouri
January 22, 1997
II-9
<PAGE>
<TABLE>
PART II.
Item 8.
SPRINT-FLORIDA, INCORPORATED
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 and 1995
(In thousands)
<CAPTION>
ASSETS 1996 1995
------ --------------- ---------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 185,938 $ 11,473
Receivables:
Customers and other, net of allowance of
$5,370 in 1996 and $4,252 in 1995 125,384 118,687
Interexchange carriers 59,432 49,603
Affiliated companies 12,907 14,582
Inventories 26,879 27,230
Deferred income taxes 5,922 12,636
Prepaid expenses and other 2,249 2,639
--------------- --------------
418,711 236,850
PROPERTY, PLANT AND EQUIPMENT 3,411,797 3,250,070
Less accumulated depreciation 1,879,235 1,764,109
--------------- --------------
1,532,562 1,485,961
DEFERRED CHARGES AND OTHER ASSETS 49,411 45,769
--------------- ---------------
$ 2,000,684 $ 1,768,580
=============== ===============
See Accompanying Notes to Consolidated Financial Statements.
II-10
</TABLE>
<PAGE>
<TABLE>
PART II.
Item 8.
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY 1996 1995
------------------------------------ --------------- ---------------
<S> <C> <C>
CURRENT LIABILITIES
Outstanding checks in excess of cash balances $ 13,317 $ 3,399
Commercial paper - 29,710
Advances from parent 134,900 21,729
Current maturities of long-term debt 1,916 14,235
Accounts payable:
Interexchange carriers 32,017 61,841
Affiliated companies 202,425 25,904
Vendors and other 23,746 37,603
Advance billings and customer deposits 28,802 27,624
Accrued interest 13,300 15,276
Accrued vacation pay 16,612 16,159
Accrued taxes 15,178 9,973
Accrued merger and integration costs 5,056 6,362
Other current liabilities 17,273 17,706
-------------- --------------
504,542 287,521
LONG-TERM DEBT, less current maturities 455,108 510,159
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes 145,939 146,431
Deferred investment tax credits 6,245 9,662
Postretirement and other benefit obligations 71,822 60,155
Other 15,990 16,338
-------------- --------------
239,996 232,586
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 229,298 229,298
Retained earnings 555,490 492,766
-------------- --------------
801,038 738,314
-------------- --------------
$ 2,000,684 $ 1,768,580
============== ==============
See Accompanying Notes to Consolidated Financial Statements.
II-11
</TABLE>
<PAGE>
<TABLE>
PART II.
Item 8.
SPRINT-FLORIDA, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
(In thousands)
<CAPTION>
1996 1995 1994
-------------- -------------- ----------------
<S> <C> <C> <C>
OPERATING REVENUES
Local service $ 504,367 $ 455,577 $ 426,452
Network access service 470,576 430,518 408,384
Long distance service 78,031 87,403 98,759
Sales of equipment 50,671 31,994 33,563
Other 119,445 124,864 106,231
------------ ------------ --------------
1,223,090 1,130,356 1,073,389
OPERATING EXPENSES
Plant expense 309,282 316,832 297,529
Depreciation 235,531 228,562 202,763
Customer operations 169,309 167,326 149,998
Corporate operations 109,799 103,837 107,233
Sales of equipment 35,351 21,973 27,436
Merger, integration and restructuring costs - 15,379 -
Other 30,462 30,727 29,874
------------ ------------ --------------
889,734 884,636 814,833
------------ ------------ --------------
OPERATING INCOME 333,356 245,720 258,556
Interest expense (45,210) (47,464) (43,490)
Other income (expense), net (1,011) (1,198) 2,034
------------ ------------ --------------
INCOME BEFORE INCOME TAXES AND 287,135 197,058 217,100
EXTRAORDINARY ITEMS
Income taxes (109,659) (73,126) (80,590)
------------ ------------ --------------
INCOME BEFORE EXTRAORDINARY ITEMS 177,476 123,932 136,510
Extraordinary items, net (253) (138,595) (215)
------------ ------------ --------------
NET INCOME (LOSS) 177,223 (14,663) 136,295
RETAINED EARNINGS AT BEGINNING OF YEAR 492,766 611,804 618,313
Cash Dividends - Common Stock (114,499) (104,325) (142,700)
Cash Dividends - Preferred Stock - (50) (104)
------------ ------------ --------------
RETAINED EARNINGS AT END OF YEAR $ 555,490 $ 492,766 $ 611,804
============ ============ ==============
See Accompanying Notes to Consolidated Financial Statements.
II-12
</TABLE>
<PAGE>
<TABLE>
PART II.
Item 8.
SPRINT-FLORIDA, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
(In thousands)
<CAPTION>
1996 1995 1994
----------- ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 177,223 $ (14,663) 136,295
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 235,531 228,562 202,763
Deferred income taxes and investment
tax credits 2,805 (15,985) (3,396)
Extraordinary losses 253 138,595 215
Changes in operating assets and liabilities:
Receivables, net (14,851) (9,587) (17,475)
Inventories and other current assets 741 4,083 (8,301)
Accounts payable, accrued expenses, and
other current liabilities (28,962) (9,074) 17,895
Noncurrent assets and liabilities, net 3,526 23,372 1,824
Other, net 273 722 844
----------- ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 376,539 346,025 330,664
INVESTING ACTIVITIES
Capital expenditures (279,032) (227,190) (222,441)
Other, net 801 3,294 (1,382)
------------ ----------- ------------
NET CASH USED BY INVESTING ACTIVITIES (278,231) (223,896) (223,823)
FINANCING ACTIVITIES
Proceeds from long-term debt - 68,576 -
Retirements of long-term debt (67,547) (7,165) (18,135)
Net increase (decrease) in short-term borrowings 83,461 (79,827) 64,056
Dividends paid (114,499) (104,375) (142,804)
Sale of accounts receivable 175,000 - -
Other, net (258) (2,305) (246)
----------- ------------ ------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 76,157 (125,096) (97,129)
----------- ------------ ------------
INCREASE (DECREASE) IN CASH 174,465 (2,967) 9,712
CASH AT BEGINNING OF YEAR 11,473 14,440 4,728
----------- ------------ ------------
CASH AT END OF YEAR $ 185,938 $ 11,473 $ 14,440
=========== ============ ============
Supplemental Cash Flow Information
Cash paid for interest $ 46,832 $ 50,607 $ 42,566
Cash paid for income taxes 86,751 91,217 89,751
See Accompanying Notes to Consolidated Financial Statements.
II-13
</TABLE>
<PAGE>
SPRINT-FLORIDA, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation and Presentation
---------------------------------------
The consolidated financial statements include the accounts of
Sprint-Florida, Incorporated and its wholly-owned subsidiary, United
Telephone Long Distance, Inc. (the Company). All significant intercompany
transactions have been eliminated. The Company is a wholly-owned
subsidiary of Central Telephone Company (CTC), which is, indirectly, a
wholly-owned subsidiary of Sprint Corporation (Sprint); accordingly,
earnings per share information has been omitted.
The consolidated financial statements are prepared in conformity with
generally accepted accounting principles (GAAP). GAAP requires management
to make estimates and assumptions that affect the reported amounts of
assets and liabilities. Those estimates and assumptions also affect the
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.
Certain amounts previously reported for prior years have been reclassified
to conform to the current year presentation in the consolidated financial
statements. These reclassifications had no effect on the results of
operations or stockholder's equity as previously reported.
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 9).
Operations
----------
The Company provides local exchange services, access by telephone
customers and other carriers to local exchange facilities, sales of
telecommunications equipment and long distance services in Florida.
Cash
----
As part of its cash management program, the Company uses controlled
disbursement banking arrangements. Outstanding checks in excess of cash
balances are reflected as a current liability on the consolidated balance
sheets. The Company had sufficient funds available to fund these
outstanding checks when they were presented for payment.
II-14
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition
-------------------
Service revenues are recognized as communications services are rendered.
Sales of telecommunications equipment are recognized upon delivery of
products to customers.
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).
Property, Plant and Equipment
-----------------------------
Property, plant and equipment are recorded at cost. Generally, ordinary
asset retirements and disposals are charged against accumulated
depreciation with no gain or loss recognized. Repairs and maintenance
costs are expensed as incurred.
Depreciation
------------
The cost of property, plant and equipment is generally depreciated on a
straight-line basis over estimated economic useful lives. Prior to the
discontinued use of SFAS No. 71 as of December 31, 1995, the cost of
property, plant and equipment had been generally depreciated on a
straight-line basis over the lives prescribed by regulatory commissions
(see Note 9).
Income Taxes
------------
Operations of the Company are included in the consolidated federal income
tax return 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) related to regulated telephone property,
plant and equipment have been deferred and are being amortized over the
estimated useful lives of the related assets.
II-15
<PAGE>
2. CHANGE IN REPORTING ENTITY
During 1996, United Telephone Company of Florida and Central Telephone
Company of Florida were merged into Sprint-Florida, Incorporated. As a
result of this change in entity, the financial statements of United
Telephone Company of Florida for 1995 and 1994 were restated to present
the financial information for the new reporting entity. The effect of this
change for 1995 and 1994 is as follows (in thousands):
1995 1994
---- ----
Income before extraordinary item $ 19,050 $ 26,262
Net Income (11,189) 26,262
3. EMPLOYEE BENEFIT PLANS
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 annual contributions to the plan 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. At year-end 1996, the plan's assets consisted
mainly 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, 1996, 1995 and
1994 were $2,768,000, $3,521,000 and $3,638,000, respectively.
II-16
<PAGE>
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. In addition, Sprint may, at the discretion of the Board of
Directors, provide 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
$6,400,000, $5,700,000 and $5,300,000 in 1996, 1995 and 1994,
respectively.
Postretirement Benefits
-----------------------
Sprint provides postretirement benefits (principally medical benefits) to
substantially all employees. Employees retiring before specified dates are
eligible for benefits at no cost, or a 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, 1996, 1995 and 1994 were $15,845,000,
$17,420,000 and $16,667,000, respectively.
II-17
<PAGE>
4. INCOME TAXES
The components of federal and state income tax expense on income before
extraordinary items are as follows (in thousands):
<TABLE>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current income tax expense
Federal $ 92,290 $ 76,544 $ 73,288
State 14,564 12,567 10,698
------- ------- -------
106,854 89,111 83,986
Deferred income tax expense (benefit)
Federal 4,744 (10,217) (1,067)
State 1,477 (1,733) 1,450
Amortization of deferred ITC (3,416) (4,035) (3,779)
------- ------- -------
2,805 (15,985) (3,396)
------- ------- -------
Total income tax expense $ 109,659 $ 73,126 $ 80,590
======= ====== ======
</TABLE>
The differences which cause the effective income tax rate to vary from the
statutory federal income tax rate of 35 percent in 1996, 1995 and 1994 are
as follows (in thousands):
<TABLE>
1996 1995 1994
----- ----- ----
<S> <C> <C> <C>
Federal income tax expense at the statutory rate $ 100,497 $ 68,970 $75,985
Less ITC included in income 3,416 4,035 3,779
------- ------- -------
Expected federal income tax expense after
ITC 97,081 64,935 72,206
Effect of:
State income tax, net of federal
income tax effect 10,427 7,042 7,896
Other, net 2,151 1,149 488
------- ------- -------
Income tax expense, including
ITC $ 109,659 $ 73,126 $ 80,590
======= ======= =======
Effective income tax rate 38.19 % 37.11 % 37.12 %
======= ======= =======
</TABLE>
II-18
<PAGE>
4. INCOME TAXES (continued)
In 1996 and 1994, income tax benefits of $159,000 and $134,000 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 and retained earnings (see Note 5).
In 1995, an income tax benefit of $107 million associated with the
extraordinary charge for the discontinued use of regulatory accounting
principles was reflected as a reduction of such charge in the consolidated
statements of income and retained earnings (see Note 9).
Deferred income taxes are provided for the temporary differences between
the carrying amounts of the Company's assets and liabilities for financial
statement purposes and their tax bases. The sources of the differences
that give rise to the deferred income tax assets and liabilities at
December 31, 1996 and 1995 along with the income tax effect of each, are
as follows (in thousands):
<TABLE>
1996 1995
----- ----
Deferred Income Tax Deferred Income Tax
Assets Liabilities Assets Liabilities
------------------ ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
Property, plant and equipment $ - $ 167,139 $ - $ 175,660
Expense accruals 21,091 - 29,763 -
Other, net 6,031 - 12,102 -
------------------ ------------------ ----------------- ------------------
$ 27,122 $ 167,139 $ 41,865 $ 175,660
====== ======= ====== =======
</TABLE>
II-19
<PAGE>
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):
<TABLE>
Interest Rates 1996 1995
-------------- ---- ----
<S> <C> <C> <C>
First mortgage bonds, maturities:
1997 to 2001 9.4% $ - $ 11,750
2002 to 2006 6.3% to 7.3% 120,000 120,000
2012 to 2016 6.9% 60,000 60,000
2017 to 2021 9.3% to 9.9% 134,000 134,200
2022 to 2026 7.1% to 8.4% 145,000 145,000
Debentures 6.0% to 6.7% - 53,175
Other 4.6% to 9.7% 1,990 4,412
------- -------
460,990 528,537
Less unamortized debt discount (3,966) (4,143)
------- -------
457,024 524,394
Less current maturities (1,916) (14,235)
------- -------
Long-term debt $ 455,108 $ 510,159
======= =======
</TABLE>
Long-term debt maturities during each of the next five years are as
follows (in thousands):
Year Amount
1997 $ 1,916
1998 304
1999 200
2000 200
2001 200
The first mortgage bonds and notes are secured by substantially all of the
Company's property, plant and equipment.
Under the most restrictive terms of the Company's first mortgage bond
indentures, no retained earnings were restricted from payment of dividends
at December 31, 1996.
The Company's short-term financing was provided primarily by Sprint in
1996. The weighted average interest rate on short-term borrowings for
1996, 1995 and 1994 was 5.41%, 5.98% and 4.98%, respectively.
II-20
<PAGE>
5. LONG-TERM DEBT AND EXTRAORDINARY CHARGES ON EXTINGUISHMENTS (continued)
The Company is in compliance with all restrictive or financial covenants
relating to its debt arrangements at December 31, 1996.
During 1996, the Company redeemed, prior to scheduled maturities, $11.75
million of its Central Telephone Company of Florida 9.37 percent Series AA
Bonds, $37.18 million of its 6.68 percent Senior Notes and $16 million of
its 6.03 percent Senior Notes. These early redemptions resulted in a
$253,000 after-tax extraordinary loss.
During 1995, the Company redeemed, prior to scheduled maturities, $633,000
of its Rural Telephone Bank 6.0 percent Note, and $136,000 of its Rural
Electrification Association 2.0 percent Note. Also in 1995, the Company
redeemed, prior to scheduled maturities, $782,000 of its Central Telephone
Company of Florida 8.0 percent Series R, Rural Telephone Bank Note, and
$863,000 of its 7.97 percent Series S, Federal Financing Bank Note. On
January 15, 1995, the Company issued Series HH 8.38 percent first mortgage
bonds for $70 million which was used to reduce short-term debt.
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.
7. COMMITMENTS AND CONTINGENCIES
Gross rental expense aggregated $12,191,000 in 1996, $12,786,000 in 1995,
and $12,619,000 in 1994. Minimum rental commitments as of December 31,
1996 are as follows (in thousands):
1997 $ 2,613
1998 988
1999 575
2000 150
2001 43
Thereafter 679
Various suits arising in the ordinary course of business are pending
against the Company. Management cannot predict the ultimate outcome of
these actions, but believes they will not result in a material effect on
the Company's financial statements.
II-21
<PAGE>
8. RELATED PARTY TRANSACTIONS
<TABLE>
Related party transactions of the Company are as follows (in thousands):
<CAPTION>
Affiliate Company Transaction Description 1996 1995 1994
----------------- ----------------------- ---- ---- ----
<S> <C> <C> <C> <C>
The Company:
North Supply Company Purchased telecommunications equipment, $ 74,774 $ 69,999 $ 72,319
construction and maintenance equipment,
and materials and supplies.
Sprint Reimbursed affiliate for data processing 103,519 93,427 97,575
services, other data related costs and
certain management costs.
Entered into cash advance and borrowing
transactions.
Interest expense on advances1 3,112 488 527
1 Interest is computed based on
the top-tier commercial paper
rate on the last day of the
prior month.
Provided various services such as 3,046 2,962 8,173
facilities rental, postage, house
services, company official toll and
other miscellaneous items.
Sprint Long Distance Provided network access, operator, and 45,492 43,493 37,171
Division billing and collection services; and the
lease of network facilities.
Paid for interexchange 9,565 14,906 12,477
telecommunications services.
Sprint Publishing Received fees for the right to publish 68,076 64,473 59,511
and Advertising and telephone directories in the Company's
Centel Directory territory, listing, and billing and
Company collection services.
Sprint Publishing Paid for costs of publishing the white 5,348 4,420 3,634
and Advertising pages portion of directories.
Other Sprint Local Was reimbursed for certain salaries and 9,037 1,568 637
Operating Companies other costs incurred for the benefit
of affiliates.
</TABLE>
Certain directors and officers of the Company and Sprint are also
directors 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.
II-22
<PAGE>
9. 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
$138.6 million, net of income tax benefits of $107 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):
<TABLE>
Pre-tax After-tax
-------- ---------
<S> <C> <C>
Increase to the accumulated depreciation balance $ 254,238 $ 156,166
Recognition of switch software asset (22,951) (14,098)
Elimination of other net regulatory assets 14,379 8,862
-------- ---------
Total $245,666 150,930
Tax-related net regulatory liabilities ======== (7,316)
Accelerated amortization of credits (5,019)
---------
Extraordinary Charge $ 138,595
=========
</TABLE>
The adjustment to the accumulated depreciation balance was determined by
the completion of depreciation reserve and impairment studies. The
depreciation reserve study analyzed, by individual plant asset categories,
the impacts of regulator-prescribed depreciable asset lives compared to 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.
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 deferred debt financing costs.
II-23
<PAGE>
9. ADOPTION OF ACCOUNTING PRINCIPLES FOR A COMPETITIVE MARKETPLACE
(CONTINUED)
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.
10. ADDITIONAL FINANCIAL INFORMATION
Realignment and Restructuring Charge
------------------------------------
In 1995, Sprint initiated a restructuring within its local division in an
effort to streamline certain processes and reduce costs in an increasingly
competitive marketplace. These actions resulted in the elimination of
approximately 310 positions, mainly in the network and finance functions.
As a result, the Company recorded a $15.4 million nonrecurring charge in
1995, which reduced net income by $9.5 million. The accrued liability
associated with this charge specifically relates to the benefits that
affected employees will receive upon termination.
Through 1996, approximately 40 positions have been eliminated resulting in
termination benefit payments of $1.1 million. Substantially all of the
remaining positions are expected to be eliminated during 1997 with the
related costs expected to be paid during 1997 and 1998.
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 $197 million, $209 million and $219
million for 1996, 1995 and 1994, 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.
II-24
<PAGE>
10. ADDITIONAL FINANCIAL INFORMATION (continued)
Financial Instruments
---------------------
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, 1996, 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,
1996 and 1995 of $457 million and $524 million, respectively, and
estimated fair values of $474 million and $563 million, respectively. The
fair value of the Company's long-term debt is estimated based on quoted
market prices for publicly traded issues. The fair value of all other
issues is estimated based on the present value of estimated future cash
flows using a discount rate commensurate with the risks involved.
The carrying values of the Company's other financial instruments
(principally short- term borrowings) approximate fair value as of December
31, 1996 and 1995.
The Company has not invested in derivative financial instruments.
Subsequent Event
----------------
On January 2, 1997, the Company repurchased $175 million of accounts
receivable sold to United Telecommunications, Inc., an affiliated company,
on December 31, 1996. Accordingly, the transaction was treated as a
borrowing in the December 31, 1996 balance sheet.
II-25
<PAGE>
SPRINT-FLORIDA, INCORPORATED
1996 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 I.
Item 11. Executive Compensation
Omitted under the provisions of General Instruction I.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Omitted under the provisions of General Instruction I.
Item 13. Certain Relationships and Related Transactions
Omitted under the provisions of General Instruction I.
III-1
<PAGE>
SPRINT-FLORIDA, INCORPORATED
1996 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-8.
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) Restated Articles of Incorporation (filed as Exhibit 3i to
the Company's Current Report on Form 8-K dated December
19, 1996 and incorporated herein by reference).
(3)(b) Bylaws as amended January 1, 1997 (filed as Exhibit 3ii to
the Company's Current Report on Form 8-K dated December
19, 1996 and incorporated herein by reference).
(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 United Telephone Company of Florida (United)
and Sun First National Bank of Orlando, as Trustee, as
supplemented by the First through Thirty-First Supple-
mental 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 State-
ment 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 United and Barnett Banks Trust Company,
N.A. (filed as Exhibit 4 (i) to United's 1992 Annual
Report on Form 10-K and incorporated herein by reference).
IV-1
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
(4)(d) Thirty-Third Supplemental Indenture dated as of May
1, 1993 between United and Barnett Banks Trust
Company, N.A. (filed as Exhibit 99 to United's
Current Report on Form 8-K dated May 12, 1993, and
incorporated herein by reference).
(4)(e) Thirty-Fourth Supplemental Indenture dated as of July
1, 1993 between United and Barnett Banks Trust
Company, N.A. (filed as Exhibit 99 to United'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 United and The Bank of New
York.
(4)(g) Twenty-Second Supplemental Indenture dated as of
December 31, 1996 between United and The First
National Bank of Chicago.
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 United in the merger,
effective December 31, 1982, between The Winter Park Telephone Company, United
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 Company filed a report on Form 8-K dated December 19, 1996. It
was reported that the former United Telephone Company of Florida and
Central Telephone Company of Florida were merged into Sprint-Florida,
Incorporated effective December 31, 1996.
IV-2
<PAGE>
Item 14 (a) 2. Index to Consolidated Financial Statement Schedules
For each of the three years in the period ended December 31 1996:
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>
<TABLE>
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<CAPTION>
Balance at Charged Accounts Charged Balance
Beginning to Off, Net of at End
of Year Expense Collections of Year
---------- --------- ---------------- ---------
<S> <C> <C> <C> <C>
Deducted from assets:
Allowance for
uncollectible accounts:
Year Ended
December 31, 1996 $4,252 $8,464 $(7,346) $5,370
===== ===== ======= =====
Year Ended
December 31, 1995 $3,268 $6,868 $(5,885) $4,252
===== ===== ======= =====
Year Ended
December 31, 1994 $2,763 $5,348 $(4,843) $3,268
===== ===== ======= =====
</TABLE>
IV-4
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto authorized.
SPRINT-FLORIDA, INCORPORATED
----------------------------
(Registrant)
Date: March 25, 1997 By: /s/ M. R. Mynatt
--------------- ------------------
M. R. Mynatt
Assistant Vice President - Finance
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/ M. B. Fuller
------------------ ------------------
J. D. Kelley M. B. Fuller, Director
President, Director and President and Chief Operating Officer -
Chief Executive Officer Sprint Local Telephone Division
Dated: March 25, 1997 Dated: March 25, 1997
/s/ M. R. Mynatt /s/ D. A. Jensen
------------------ ------------------
M. R. Mynatt D. A. Jensen, Director
Assistant Vice President - Finance Secretary - Sprint Corporation
(Principal Financial Officer) Dated: March 25, 1997
Dated: March 25, 1997
/s/ J. J. Beling
------------------
J. J. Beling, Controller
Principal Accounting Officer
Dated: March 25, 1997
IV-5
Twenty-Second Supplemental Indenture
SPRINT-FLORIDA, INCORPORATED
TO
THE FIRST NATIONAL BANK OF CHICAGO,
AS TRUSTEE
under
Indenture of Southeastern Telephone Company
dated April 1, 1947,
and Indentures Supplemental thereto
Dated as of December 31, 1996
Assumption by
Sprint-Florida, Incorporated
of Obligations in respect of Bonds and Indenture
THIS INSTRUMENT PREPARED BY:
Susan V. Stucker, Senior Attorney
Sprint-Florida, Incorporated
Post Office Box 165000
Altamonte Springs, FL 32716-5000
<PAGE>
THIS TWENTY-SECOND SUPPLEMENTAL INDENTURE, dated as of December 31, 1996,
between SPRINT-FLORIDA, INCORPORATED, a corporation duly organized and existing
under the laws of the State of Florida (hereinafter called the "Company"), and
THE FIRST NATIONAL BANK OF CHICAGO, a national banking association organized and
existing under the laws of the United States of America, as trustee (hereinafter
called the "Trustee").
WITNESSETH:
WHEREAS, under date of April I, 1947, Southeastern Telephone Company, a Florida
corporation (hereinafter called the "Predecessor"), executed and delivered to
The First National Bank of Chicago and John W. Henderson (who was succeeded by
Thomas C. Proctor), as trustees, its Indenture (hereinafter called the "Original
Indenture") providing for the issuance from time to time thereunder, in series,
of bonds of the Predecessor, for the purposes and subject to the limitations
specified therein; and
WHEREAS, the Predecessor thereafter executed and delivered to the trustees
successive indentures supplemental to and amendatory of the Original Indenture,
the last being dated as of April 1, 1968, and designated the Twelfth
Supplemental Indenture; and NEW SOUTHEASTERN, INC., a newly formed corporation
duly organized and existing under the laws of the State of Florida (hereinafter
called the "Successor"), succeeded by merger (in which it changed its name to
SOUTHEASTERN TELEPHONE COMPANY) to the Predecessor and by a supplemental
indenture dated as of December 1, 1971, designated the Thirteenth Supplemental
Indenture, assumed the obligations and succeeded to the powers and rights of the
Predecessor under the Original Indenture, as theretofore supplemented and
amended, all as in Article Thirteen of the Original Indenture provided, and
thereafter executed and delivered to the trustees further supplemental
indentures, the latest being dated as of January 15, 1991, and designated the
Twenty-First Supplemental Indenture (the Original Indenture, as heretofore
supplemented and amended, being hereinafter called the "Indenture"); and
WHEREAS, effective May 1, 1974, the Successor changed its name from SOUTHEASTERN
TELEPHONE COMPANY to CENTRAL TELEPHONE COMPANY OF FLORIDA (hereinafter called
"Central"); and
WHEREAS, effective December 20, 1996, Thomas C. Proctor resigned as a trustee;
and
WHEREAS, there have been issued under the Indenture twenty-eight (28) series of
first mortgage bonds, $19,000,000 principal amount of First Mortgage Sinking
Fund Bonds, Series BB, 9.89% due February 1, 2021 (hereinafter called the
"Series BB Bonds") being now outstanding; and
WHEREAS, Central is merging into the Company, effective December 31, 1996; and
WHEREAS, the Company desires, by this Twenty-Second Supplemental Indenture, (a)
to assume the obligations of Central in respect of the Indenture and the Series
BB Bonds and to succeed to the powers and rights of Central under the Indenture
and the Series BB Bonds, in order to effect compliance with the conditions, set
forth in Section 13.01 in Article Thirteen of the Indenture, to the right of
Central to merge into another corporation, and (b) to provide that no additional
bonds, with certain exceptions, shall be issued under the Indenture; and
WHEREAS, the Original Indenture and each indenture supplemental to the Original
Indenture has been recorded in each County within the State of Florida in which
Central owns real estate, for the purpose of preventing the extinguishment of
the Indenture under Chapter 712, Florida Statutes, the Indenture being hereby
incorporated herein and made a part hereof by this reference thereto; and
WHEREAS, all acts and things necessary to constitute this Twenty-Second
Supplemental Indenture a valid indenture supplemental to said Indenture have
been done and performed.
<PAGE>
NOW, THEREFORE, for the purposes aforesaid, the Company has executed and
delivered this Twenty-Second Supplemental Indenture, and in consideration of
the sum of One Dollar ($1.00) to the Company duly paid by the Trustee at or
before the ensealing and delivery hereof and for other good and valuable
consideration, the receipt whereof is hereby acknowledged, hereby covenants
to and with the Trustee and its successors in the trusts under the Indenture,
for the equal and pro rata benefit and security of all present and future
holders of all bonds issued under the Indenture, without any preference,
priority or distinction whatsoever, as follows:
ARTICLE I
Assumption of Obligations in Respect
of Bonds and Indenture
Pursuant to and in accordance with the provisions of Section 13.01 in Article
Thirteen of the Indenture, the Company hereby assumes and agrees to pay duly and
punctually the principal of and interest on the Series BB Bonds in accordance
with the provisions of said Series BB Bonds and the Indenture, and assumes and
agrees to duly and punctually perform and observe all the covenants and
conditions of the Indenture to be performed or observed by Central, such
assumption and agreements to be effective as of the effectiveness of said merger
of Central into the Company.
ARTICLE II
Preservation of Lien
Pursuant to and in accordance with the provisions of Section 13.01 in Article
Thirteen of the Indenture, the Company hereby covenants and agrees that it will
take all necessary action to protect the lien and priority of the lien of the
Indenture, the security afforded thereby and the rights and powers of the
Trustee and bondholders thereunder, that all property subject to the lien of the
Indenture at the time of the said merger shall continue to be subject to the
lien of the Indenture following the said merger and such lien shall have the
same force, effect, standing and priority as it had prior to the said merger,
and that all betterments, extensions, improvements, additions, repairs,
renewals, replacements, substitutions and alterations to, upon, for and of the
property and franchises subject to the lien of the Indenture at the time of the
merger (other than property of the nature of property excluded by the granting
clauses of the Indenture), acquired, installed or constructed by the Company
after the effectiveness of the said merger shall be and become subject to the
lien of the Indenture and such lien shall have the same force, effect, standing
and priority as if Central had acquired, installed or constructed such property.
ARTICLE III
Prohibition Against Issuance of Additional Bonds
No bonds, in addition to the $19,000,000 principal amount of Series BB Bonds now
outstanding, shall hereafter be issued under the Indenture, other than Series BB
Bonds issuable in exchange for or upon transfer of or in substitution for Series
BB Bonds theretofore outstanding, as provided in the Indenture.
ARTICLE IV
Sundry Provisions
The Twenty-Second Supplemental Indenture is executed and shall be construed as
an indenture supplemental to the Original Indenture, and shall form a part
thereof, and the Indenture is hereby ratified, approved and confirmed.
<PAGE>
The recitals contained in this Twenty-Second Supplemental Indenture are made by
the Company and not by the Trustee and all of the provisions contained in the
Indenture in respect of the rights, privileges, immunities, powers and duties of
the Trustee shall be applicable in respect hereof as fully and with like effect
as if set forth herein in full.
Nothing in this Twenty-Second Supplemental Indenture expressed or implied is
intended or shall be construed to give to any person other than the Company, the
Trustee, and the holders of the Series BB Bonds any legal or equitable right,
remedy or claim under or in respect of the Indenture or any covenant, condition
or provision therein or herein or in said Series BB Bonds contained; and all
such covenants, conditions and provisions are and shall be held to be for the
sole and exclusive benefit of the Company, the Trustee and the holders of the
Series BB Bonds.
In order to facilitate the recording or filing of this Twenty-Second
Supplemental Indenture, it may be simultaneously executed in several
counterparts, each of which shall be deemed to be an original, and such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, Sprint-Florida, Incorporated has caused this instrument to
be executed in its corporate name by its President or one of its Vice Presidents
and its corporate seal to be hereto affixed and to be attested by its Secretary
or one of its Assistant Secretaries, and The First National Bank of Chicago, as
Trustee aforesaid, has caused this instrument to be executed in its corporate
name by one of its Vice Presidents or one of its Assistant Vice Presidents and
its corporate seal to be hereunto affixed and to be attested by one of its
Assistant Secretaries, in each case in several counterparts (each of which
counterparts shall for all purposes be deemed to be an original), all as of the
day and year first above written.
SPRINT-FLORIDA, INCORPORATED
By: /s/ Jerry M. Johns
------------------
Jerry M. Johns, Vice President
(CORPORATE SEAL)
ATTEST:
/s/ Alan N. Berg
- ------------------
Alan N. Berg, Assistant Secretary
Signed, sealed and delivered by Sprint-Florida,
Incorporated, in the presence of the following
two witnesses:
/s/ Susan V. Stucker
- ---------------------
Susan V. Stucker
/s/ Leslie F. Klinger
- ----------------------
Leslie F. Klinger
<PAGE>
THE FIRST NATIONAL BANK
OF CHICAGO, as Trustee
By: /s/ Steven M. Wagner
---------------------
Steven M. Wagner, Vice President
ATTEST:
/s/ Janice Ott Rotunno
- -----------------------
Janice Ott Rotunno, Assistant Secretary
Signed, sealed and delivered by The First
National Bank of Chicago in the presence
of the following two witnesses:
/s/ Jeffrey L. Kinney
- ----------------------
Jeffrey L. Kinney
/s/ Mark J. Frye
- ----------------------
Mark J. Frye
<PAGE>
STATE OF FLORIDA )
) SS
COUNTY OF ORANGE )
I, Pamela Campbell, a Notary Public in and for the county, in the State
aforesaid, do hereby certify that Jerry M. Johns, Vice President of
Sprint-Florida, Incorporated, who is personally known to me to be the same
person whose name is subscribed to the foregoing instrument, and personally
known to me to be such Vice President, appeared before me this day in person and
acknowledged that he is, and was at the time of the execution and delivery of
the said instrument, the Vice President of said corporation, and that as such
Vice President, he, by authority of the Board of Directors of the corporation,
caused to be affixed to the instrument the corporate seal of the corporation,
and executed and delivered the instrument as the free and voluntary act and deed
of the corporation, for the uses and purposes therein set forth.
And I further certify that Alan N. Berg, Assistant Secretary of said
corporation, who is also personally known to me to be the same person whose name
is subscribed to the foregoing instrument, and personally known to me to be such
Assistant Secretary, likewise appeared before me this day in person and
acknowledged that he is, and was at the time of the execution and delivery of
this instrument, the Assistant Secretary of the corporation, and that as such
Assistant Secretary, he, by like authority of said Board of Directors, sealed
and signed the instrument in attestation of the due execution thereof as the
free and voluntary act and deed of the corporation, and that the seal thereto
attached is the common and corporate seal of the corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal
this 27th day of December in the year 1996.
/s/ Pamela Campbell
-------------------
Notary Public
My commission expires: (NOTARIAL SEAL)
12-28-99
---------------------
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Nilda Sierra, a Notary Public in and for the county, in the State aforesaid,
do hereby certify that Steven M. Wagner, Vice President of The First National
Bank of Chicago, who is personally known to me to be the same person whose name
is subscribed to the foregoing instrument, and personally known to me to be such
Vice President, appeared before me this day in person and acknowledged that he
is, and was at the time of the execution and delivery of the instrument, a Vice
President of said bank, and that as such Vice President, he, by authority of the
By-Laws of the bank, caused to be affixed to the instrument the corporate seal
of the bank, and executed and delivered the instrument as the free and voluntary
act and deed of the bank, for the uses and purposes therein set forth.
And I further certify that Janice Ott Rotunno, Assistant Secretary of said bank,
who is also personally known to me to be the same person whose name is
subscribed to the foregoing instrument, and personally known to me to be such
Assistant Secretary, likewise appeared before me this day in person and
acknowledged that she is, and was at the time of execution and delivery of the
instrument, Assistant Secretary of the bank, and that as such Assistant
Secretary, she, by like authority of the By-Laws, sealed and signed the
instrument in attestation of the due execution thereof as the free and voluntary
act and deed of the bank, and that the seal thereto attached is the common and
corporate seal of the bank.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal
this 23rd day of December in the year 1996.
/s/ Nilda Sierra
------------------
Notary Public
(NOTARIAL SEAL)
My Commission Expires:
11-12-97
- ---------------------
Thirty-Fifth Supplemental
Indenture of Mortgage
------------------
UNITED TELEPHONE COMPANY OF FLORIDA
TO
THE BANK OF NEW YORK,
Trustee
------------------
Dated as of January 15, 1995
<PAGE>
THIS THIRTY-FIFTH SUPPLEMENTAL INDENTURE OF MORTGAGE, dated as of January
15,1995, by and between UNITED TELEPHONE COMPANY OF FLORIDA, a corporation duly
organized and existing under the laws of the State of Florida, with its
principal place of business in Apopka, Orange County, Florida (hereinafter
sometimes referred to as the "Company"), and THE BANK OF NEW YORK, a state
banking corporation duly organized and existing under the laws of the State of
New York, having its principal corporate trust office in New York, New York, as
Trustee (hereinafter sometimes referred to as the "Trustee").
WHEREAS, the Company executed and delivered to The First National Bank at
Orlando, as Original Trustee, an Indenture of Mortgage dated as of the 2nd day
of January, 1941 (hereinafter referred to as the "Original Indenture"), to
secure its First Mortgage Bonds, issuable in series; and
WHEREAS, the Company thereafter executed and delivered certain Supplemental
Indentures, First through Thirty-Fourth, inclusive, for the various purposes of
creating additional series of First Mortgage Bonds, conveying and confirming
unto the trustee certain additional property and amending the Original Indenture
in certain respects (the Original Indenture as heretofore amended and
supplemented and as amended and supplemented by this Thirty-Fifth Supplemental
Indenture is sometimes hereinafter referred to as the "Indenture"); and
WHEREAS, Barnett Banks Trust Company, N.A., became successor trustee under the
Original Indenture, as supplemented, on November 24, 1982; and
WHEREAS, the Trustee became successor trustee under the Original Indenture, as
supplemented, on February 22, 1994; and
WHEREAS, pursuant to the Original Indenture, as supplemented, there were out-
standing as of December 31, 1994, First Mortgage Bonds of Series and principal
amounts as follows:
4 5/8% Bonds, Series R $ 2,500,000
9.25% Bonds, Series CC 115,000,000
7.25% Bonds, Series DD 50,000,000
6.25% Bonds, Series EE 70,000,000
6.875% Bonds, Series FF 60,000,000
7.125% Bonds, Series GG 75,000,000
----------
Total $372,500,000
which constitute the only bonds outstanding under the Original Indenture as
supplemented by the First through the Thirty-Fourth Supplemental Indentures,
inclusive; and
WHEREAS, the Company has determined by due corporate action to provide for the
issuance of additional First Mortgage Bonds in the aggregate principal amount of
Seventy Million Dollars ($70,000,000) to be known as the Company's "First
Mortgage Bonds, Series HH", and to make provision for the execution,
authentication and delivery of the entire issue pursuant to the terms of the
Indenture and to be in form and tenor substantially as hereinafter stated; and
WHEREAS, all things necessary to make the said First Mortgage Bonds, Series HH,
when authenticated by the Trustee and issued as provided in the Indenture, the
valid, binding and legal obligations of the Company, and to constitute the
Indenture a valid First Mortgage and Deed of Trust to secure the payment of the
principal of and interest on all bonds under all series issued thereunder have
been done and performed, and the creation, execution and delivery of this
Thirty-Fifth Supplemental Indenture and the execution and issuance of said First
Mortgage Bonds, Series HH, subject to the terms of the Indenture, have in all
respects been duly authorized;
<PAGE>
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That the Company, without in any way limiting the grant contained in the
Indenture, in consideration of the premises and One Dollar, lawful money of the
United States of America to it duly paid by the Trustee, the receipt whereof is
hereby acknowledged and for other good and valuable considerations, has granted,
bargained, sold, released, conveyed, aliened, assigned, confirmed, transferred,
mortgaged, warranted, pledged and set over, and does by these presents grant,
bargain, sell, release, convey, alien, assign, confirm, transfer, mortgage,
warrant, pledge and set over unto The Bank of New York and its successor, or
successors in trust, and to them and their assigns forever, all and singular the
premises, property, rights, franchises and physical property now owned or
hereafter acquired by the Company (real, personal and mixed) and wheresoever
situated, including all additions acquired or constructed by the Company since
the execution and delivery of the Original Indenture and including all
properties (real, personal and mixed) hereafter acquired by the Company and
wheresoever situated, other than property of the nature of that excluded by the
granting clauses of said Original Indenture.
TO HAVE AND TO HOLD all premises, rights, franchises, physical property
additions and property (real, personal and mixed) of the Company, including all
those properties now owned and hereafter acquired by the Company and wheresoever
situated, transferred, assigned, mortgaged or pledged by the Company as
aforesaid, or intended so to be, unto the Trustee and its successors in such
trust and to their assigns forever, it being agreed hereby that all such
premises, rights, franchises, physical property additions and property (real,
personal and mixed) of the Company shall be and are as fully granted and
conveyed hereby and as fully embraced within the lien of the Original Indenture
as if such premises, rights, franchises, physical property additions, and
property (real, personal and mixed) of the Company were specifically described
herein and conveyed hereby.
IN TRUST, NEVERTHELESS, for the purposes, with the provisions and subject to the
agreements, conditions and covenants set forth and expressed in the Indenture.
ARTICLE I
SERIES HH BONDS
SECTION 1. There shall be and are hereby created "First Mortgage Bonds, Series
HH" of the principal amount of Seventy Million Dollars ($70,000,000),
hereinafter sometimes referred to as "Series HH bonds" or "bonds of Series HH".
Series HH bonds shall be fully registered bonds without coupons authenticated by
the certificate of authentication of the Trustee. Each bond of Series HH shall
be dated as of the interest payment date next preceding the date of its
authentication upon or as of which interest payment date payment of interest was
last made upon bonds of Series HH (unless (a) issued on an interest payment date
to which interest was paid upon bonds of Series HH, in which event it shall be
dated as of the date of issue, or (b) issued prior to the occurrence of the
first interest payment date on which interest is payable on bonds of Series HH,
in which event it shall be dated January 26, 1995, or (c) issued between the
record date (as hereinbelow defined) for any interest payment date and such
interest payment date, in which event it shall be dated such interest payment
date) and shall bear interest at the annual rate of interest set forth
hereinafter in the form of Series HH bonds until the payment of the principal
thereof, such interest to be payable semi-annually on the fifteenth day of
January and July of each year, the first interest payment date being July 15,
1995. All Series HH bonds shall mature on January 15, 2025. The bonds of Series
HH may be issued in the denomination of $1000 or any integral multiples thereof.
<PAGE>
The person in whose name any Series HH bond is registered at the close of
business on any record date (as hereinbelow defined) with respect to any
interest payment date shall be entitled to receive the interest payable thereon
on such interest payment date notwithstanding the cancellation of such Series HH
bond upon any transfer or exchange thereof subsequent to such record date and
prior to such interest payment date, unless the Company shall default in the
payment of interest due on such interest payment date on any Series HH bond, in
which case such defaulted interest shall be paid to the person in whose name
such Series HH bond (or any Series HH bond or bonds issued upon transfer or
exchange thereof) is registered at the close of business on the record date for
the payment of such defaulted interest. The term "record date" as used in this
Section with respect to any interest payment date shall mean the January 1 or
July 1 next preceding such interest payment date, or, if such January 1 or July
1 is not a business day, the business day next preceding such January 1 or July
1, and such term, as used in this Section, with respect to the payment of any
defaulted interest shall mean the fifteenth day next preceding the date fixed by
the Company for the payment of defaulted interest or, if such fifteenth day is
not a business day, the business day next preceding such fifteenth day.
In any case where any interest payment date, or any date on which any payment of
principal is due, whether at stated maturity, upon redemption or otherwise, of
any Series HH bond shall not be a business day, then (notwithstanding any other
provision of the Indenture or of the Series HH bonds) payment of interest or
principal need not be made on such date, but may be made on the next succeeding
business day with the same force and effect as if made on the interest payment
date or date on which the payment of principal was due, provided that no
interest shall accrue for the period from and after such interest payment date
or date on which such payment of principal was due, as the case may be.
Such bonds and the certificate of authentication of the Trustee shall be
substantially in the following forms, respectively (with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by the Indenture), to wit:
[FORM OF SERIES HH BOND]
UNITED TELEPHONE COMPANY OF FLORIDA
8 3/8% FIRST MORTGAGE BOND, SERIES HH
due January 15, 2025
No. ...................... $....................
UNITED TELEPHONE COMPANY OF FLORIDA, a corporation of the State of Florida
hereinafter called the "Company"), for value received, hereby promises to pay to
................................or registered assigns, on January 15, 2025 the
principal sum of ......................................and to pay interest
thereon semi-annually on January 15 and July 15 of each year, commencing July
15, 1995, at the rate of 8 3/8% per annum, until said principal sum is paid. The
principal of and interest on this bond shall be payable at the office of The
Bank of New York, New York, New York, or its successors in trust, in coin or
currency of the United States of America which, at the time of payment, is legal
tender for the payment of public or private debts due in the United States of
America. Subject to certain exceptions provided in the Indenture hereafter
referred to, the interest so payable on any January 15 or July 15 will be paid
to the person in whose name this bond is registered at the close of business
on the January 1 or July 1 next preceding such January 15 or July 15, or if
such January 1 or July 1 is not a business day, the business day next preceding
such January 1 or July 1.
Payment of the principal of and interest on this Bond due at maturity will be
made in immediately available funds to The Depository Trust Company or its
nominee, provided that this Bond is presented to the Trustee in time for the
Trustee to make such payment in accordance with its normal procedures. Payment
of interest (other than interest payable at maturity) on this Bond will be made
by transfer of immediately available funds to The Depository Trust Company or
its nominee.
<PAGE>
The provisions of this bond are continued on the reverse hereof and such
continued provisions shall for all purposes have the same effect as though fully
set forth at this place.
This bond shall not be valid nor become obligatory for any purpose until it
shall have been authenticated by the execution of the certificate hereon
endorsed by the Trustee under the Indenture.
IN WITNESS WHEREOF, UNITED TELEPHONE COMPANY OF FLORIDA has caused this bond to
be executed in its corporate name with the signature of its President or one of
its Vice Presidents and its corporate seal to be hereunto affixed or a facsimile
thereof to be imprinted hereon and attested by the signature of its Secretary or
one of its Assistant Secretaries.
Dated .......................................
UNITED TELEPHONE COMPANY OF FLORIDA
By: ...................................................
President
Attest:
...........................................
Secretary
[FORM OF REVERSE OF SERIES HH BOND]
This bond is one of a duly authorized issue of First Mortgage Bonds of the
Company, limited to the aggregate principal amount as is set out in the Original
Indenture, the indentures supplemental thereto, and the Thirty-Fifth
Supplemental Indenture dated as of January 15, 1995, and known as First Mortgage
Bonds, Series HH, all issued and to be issued under and pursuant to and equally
secured by a duly recorded Indenture of Mortgage (herein referred to as the
Original Indenture), as amended and supplemented by thirty-five supplemental
indentures, each duly executed and delivered by the Company to The Bank of New
York, New York, New York, as Trustee, or to its predecessor trustee, upon
substantially all of the property and franchises of the Company now owned or
hereafter acquired, to which Original Indenture, as supplemented, and all
further supplemental indentures thereto reference is hereby made for a
description of the property transferred and mortgaged thereunder, the nature and
extent of the security and the rights of the holders of said bonds, and of the
Trustee and of the Company in respect of such security. Subsequent series of
bonds may be issued on such conditions and may vary as to date, date of
maturity, rate of interest and in other ways as in such Indentures provided or
permitted.
No reference herein to the Original Indenture, as supplemented, and no provision
of this bond or of the Original Indenture, as supplemented, shall alter or
impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of and interest on this bond at the respective times, at the
rate and in the currency herein prescribed.
<PAGE>
In case an event of default as defined in said Original Indenture occurs, the
principal of this bond may become or may be declared due and payable before the
stated maturity hereof, as specified in said Original Indenture.
This bond is transferable by the registered owner hereof, in person or by duly
authorized attorney, upon books of the Company to be kept for that purpose at
the office of the Trustee under the Indenture, upon surrender hereof at said
office for cancellation and upon presentation of a written instrument of
transfer duly executed, and thereupon the Company shall issue in the name of the
transferee or transferees, and the Trustee shall authenticate and deliver, a new
registered bond or bonds, of like form and in an authorized denomination or in
authorized denominations and of the same series, for the same aggregate
principal amount; bonds of this series upon surrender thereof at said office may
be exchanged for the same aggregate principal amount of bonds of this series of
another authorized denomination or other authorized denominations; all upon
payment of the charges, if any, and subject to the terms and conditions
specified in the Indenture.
The Company and the Trustee may treat the registered owner of this bond as the
absolute owner hereof for purposes of receiving payment of the principal hereof
and interest due hereon subject to the record date provision of the first
paragraph hereof, and for all other purposes, and neither the Company nor the
Trustee nor any paying agent or agency shall be affected by any notice to the
contrary whether this bond or the interest thereon shall be overdue or not.
No recourse shall be had for the payment of the principal of or the interest on
this bond or of any claim based hereon or in respect hereof or of said Original
Indenture, as supplemented, against any incorporator, subscriber, stockholder,
officer or director of the Company, past, present or future, whether directly or
through a receiver in bankruptcy, whether by virtue of any constitution, statute
or rule of law or by the enforcement of any assessment or penalty or otherwise,
all such liability being, by the acceptance of this bond, expressly released.
FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
FOR BONDS OF SERIES HH
TRUSTEE'S AUTHENTICATION CERTIFICATE
This bond is one of the First Mortgage Bonds, Series HH, provided for and
described in the Thirty-Fifth Supplemental Indenture of Mortgage within
mentioned.
THE BANK OF NEW YORK
As Trustee
By .....................................
Authorized Signature
SECTION 2. Series HH bonds redeemed pursuant to any of the provisions of Article
Six of the Indenture (including redemptions pursuant to Section 6.11 with the
proceeds from the sale of property pursuant to Section 9.04) may be redeemed at
any time at a redemption price equal to the principal amount thereof together
with interest accrued and unpaid to the date fixed for redemption. The Trustee
shall select bonds to be redeemed pursuant to any of the provisions of Article
Six of the Indenture, in such manner as, in its discretion, it shall deem
appropriate and equitable and not designed to result in disproportionate
redemption of Series HH bonds in relationship to other series of bonds.
SECTION 3. In case of the redemption of any of the Series HH bonds pursuant to
any of the provisions of Article Six of the Indenture (including redemptions
pursuant to Section 6.11 with the proceeds from the sale of property pursuant to
Section 9.04), the Trustee shall give notice of such redemption to the holders
of the Series HH bonds to be redeemed as hereinafter in this Section provided.
<PAGE>
Notice of redemption shall be given to the holders of Series HH bonds to be
redeemed as a whole or in part by mailing by registered mail, postage prepaid, a
notice of such redemption not less than thirty nor more than sixty days prior to
the date fixed for redemption to their last addresses as they shall appear upon
the bond register, but failure to give such notice by mailing in the manner
herein provided to the holder of any Series HH bond designated for redemption as
a whole or in part, or any defect therein, shall not affect the validity of the
proceedings for the redemption of any other Series HH bonds.
Any notice which is mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the holder receives the notice.
Each such notice of redemption shall specify the date fixed for redemption and
the redemption price at which Series HH bonds are to be redeemed, and shall
state that payment of the redemption price of the Series HH bonds to be redeemed
will be made at the office of the Trustee upon presentation and surrender of
such Series HH bonds, that interest accrued to the date fixed for redemption
will be paid as specified in said notice, and that on and after said date
interest thereon will cease to accrue. If less than all the Series HH bonds are
to be redeemed, the notice of redemption shall specify the Series HH bonds to be
redeemed as a whole or in part. In case any Series HH bond is to be redeemed in
part only, the notice which relates to such Series HH bond shall state the
portion of the principal amount thereof to be redeemed (which shall be $1,000 or
any integral multiple thereof), and shall state that on and after the redemption
date, upon surrender of such Series HH bond, the holder will receive the
redemption price in respect of the principal amount thereof called for
redemption and, without charge, a new bond or bonds of that series and of
authorized denominations for the principal amount thereof remaining unredeemed.
SECTION 4. If the giving of notice of redemption shall have been completed as
above provided, the Series HH bonds or portions of such bonds specified in such
notice shall become due and payable on the date and at the place stated in such
notice at the redemption price, together with interest accrued to the date fixed
for redemption, and on and after such date fixed for redemption interest on the
Series HH bonds or portions of such bonds so called for redemption shall cease
to accrue. On presentation and surrender of such Series HH bonds at said place
of payment in said notice specified, the said Series HH bonds shall be paid and
redeemed at the redemption price, together with interest accrued to the date
fixed for redemption.
SECTION 5. Bonds of Series HH, upon surrender thereof at the main office of the
Trustee, may be exchanged for the same aggregate principal amount of bonds of
that series of other authorized denominations. Within a reasonable time after
the surrender of bonds of Series HH accompanied by a request for such an
exchange, the Company shall execute and the Trustee shall authenticate and
deliver all bonds required in connection therewith.
Upon surrender for registration of transfer of any bonds, the Company shall
execute and the Trustee shall authenticate and deliver in the name of the
transferee or transferees a new bond or bonds of the same series for a like
aggregate principal amount.
All bonds presented or surrendered for exchange, registration of transfer,
redemption, or payment shall, if so required by the Company or the Trustee, be
accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Company or the Trustee, duly executed by the registered
holder or by his attorney duly authorized in writing.
No service charge shall be made for any exchange or registration of transfer of
bonds, but the Company may require payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in relation thereto.
<PAGE>
The Company shall not be required (a) to issue, exchange or register the
transfer of any bonds during a period beginning at the opening of business 15
days before the day of the mailing of a notice of redemption of less than all
the outstanding bonds and ending at the close of business on the day of such
mailing, or (b) to register the transfer of or exchange any bonds or portions
thereof called or selected for redemption.
SECTION 6. Upon or at any time and from time to time after the execution and
delivery of this Thirty-Fifth Supplemental Indenture, the Company may execute
and deliver to the Trustee and, subject to Section 4.01 of the Indenture, the
Trustee shall authenticate and deliver to or upon the order of the Company
Seventy Million Dollars ($70,000,000) in aggregate principal amount of Series HH
bonds.
ARTICLE II
DEFEASANCE
SECTION 1. Applicability of Article; Company's Option to Effect Defeasance.
The Company may at its option by Board Resolution, at any time, with respect to
the Series HH bonds, elect to have either Section 2 or Section 3 of this Article
II be applied to the outstanding Series HH bonds (hereinafter in this Article
II, the "Defeased Bonds"), upon compliance with the conditions set forth in this
Article II.
SECTION 2. Defeasance and Discharge.
Upon the Company's exercise of the option applicable to this Section, the
Company shall be deemed to have been discharged from its obligations with
respect to the outstanding Defeased Bonds on the date the conditions set forth
below are satisfied (hereinafter, "defeasance"). For this purpose, such
defeasance means that the Company shall be deemed to have paid and discharged
the entire indebtedness represented by the outstanding Defeased Bonds and to
have satisfied all its other obligations under the Defeased Bonds and the
Indenture insofar as the Defeased Bonds are concerned (and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging the
same), except for the following which shall survive until otherwise terminated
or discharged hereunder: (A) the rights of holders of outstanding Defeased Bonds
to receive, solely from the trust fund described in Section 4 of this Article II
and as more fully set forth in such Section, payments in respect of the
principal of and interest on the Defeased Bonds when such payments are due, (B)
the Company's obligations with respect to such Defeased Bonds under Sections
1.10, 1.12, 1.13, 12.02 and 15.01 of the Indenture, (C) the rights, powers,
trusts, duties, and immunities of the Trustee under the Indenture and (D) this
Article II. Subject to compliance with this Article II, the Company may exercise
its option under this Section 2 notwithstanding the prior exercise of its option
under Section 3 of this Article II with respect to the Defeased Bonds.
SECTION 3. Covenant Defeasance.
Upon the Company's exercise of the option applicable to this Section, the
Defeased Bonds shall no longer be entitled to the benefits of the lien of the
Indenture, which shall be deemed to be released for all purposes of the
Indenture with respect to the Defeased Bonds, and the Defeased Bonds shall not
be deemed to be outstanding for purposes of Section 4.01 of the Indenture, on
and after the date the conditions set forth below are satisfied (hereinafter,
"covenant defeasance").
<PAGE>
SECTION 4. Conditions to Defeasance.
The following shall be the conditions to application of either Section 2 or
Section 3 of this Article II to the outstanding Series HH bonds:
(1) the Company shall irrevocably have deposited or caused to be deposited with
the Trustee (or another trustee satisfying the requirements of Section 12.07 of
the Indenture, who shall agree to comply with the provisions of this Article II
applicable to it), as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the holders of the Defeased Bonds, (A) money in an amount, or
(B) U.S. Government Obligations which through the scheduled payment of principal
and interest in respect thereof in accordance with their terms will provide, not
later than one day before the due date of any payment, money in an amount, or
(C) a combination thereof, sufficient, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall be
applied by the Trustee (or other qualifying trustee) to pay and discharge, the
principal of and each installment of principal of and interest on the
outstanding Defeased Bonds on the stated maturity of such principal or
installment of principal or interest. For this purpose, "U.S. Government
Obligations" means securities that are (x) direct obligations of the United
States of America for the payment of which its full faith and credit is pledged
or (y) obligations of a person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the payment of which
is unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case, are not callable or redeemable
at the option of the issuer thereof, and shall also include a depository receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933,
as amended) as custodian with respect to any such US. Government Obligation or a
specific payment of principal of or interest on any such U.S. Government
Obligation held by such custodian for the account of the holder of such
depository receipt, provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the U.S. Government Obligation or the specific payment of principal of or
interest on the U.S. Government Obligation evidenced by such depository receipt.
(2) No event of default or event which with notice or lapse of time or both
would become an event of default with respect to the Defeased Bonds shall have
occurred and be continuing on the date of such deposit or, insofar as Section
8.01(e) is concerned, at any time during the period ending on the 91st day after
the date of such deposit or, if longer, ending on the day following the
expiration of the longest preference period applicable to the Company in respect
of such deposit (it being understood that this condition shall not be deemed
satisfied until the expiration of such period).
(3) Such defeasance or covenant defeasance shall not cause the Trustee for the
Defeased Bonds to have a conflicting interest as defined in Section 12.14 of the
Indenture and for purposes of the Trust Indenture Act of 1939, as amended, with
respect to any securities of the Company.
(4) Such defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a default under, the Indenture or any other
agreement or instrument to which the Company is a party or by which it is bound.
(5) Such defeasance or covenant defeasance shall not cause any Defeased Bonds
then listed on any registered national securities exchange under the Securities
Exchange Act of 1934, as amended, to be delisted.
(6) In the case of an election under Section 2 of this Article II, the Company
shall have delivered to the Trustee an opinion of counsel stating that (x) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling, or (y) subsequent to January 15, 1995, there has been a change
in the applicable Federal income tax law in either case to the effect that, and
<PAGE>
based thereon such opinion shall confirm that, the holders of the outstanding
Defeased Bonds will not recognize income, gain or loss for Federal income tax
purposes as a result of such defeasance and will be subject to Federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such defeasance had not occurred.
(7) In the case of an election under Section 3 of this Article II, the Company
shall have delivered to the Trustee an opinion of counsel to the effect that the
holders of the outstanding Defeased Bonds will not recognize income, gain or
loss for Federal income tax purposes as a result of such covenant defeasance and
will be subject to Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such covenant defeasance
had not occurred.
SECTION 5. Deposited Money and U.S. Government Obligations to be Held in Trust;
Miscellaneous.
All money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee collectively, for
purposes of this Section 5, the "Trustee") pursuant to Section 4 of this Article
II in respect of the outstanding Defeased Bonds shall be held in trust and
applied by the Trustee, in accordance with the provisions of the Defeased Bonds
and the Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the holders of the Defeased Bonds, of all sums due and to become
due thereon in respect of principal and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the U.S. Government Obligations deposited
pursuant to Section 4 of this Article II or the principal and interest received
in respect thereof other than any such tax, fee or other charge which by law is
for the account of the holders of the outstanding Defeased Bonds.
Anything in this Article II to the contrary notwithstanding, the Trustee shall
deliver or pay to the Company from time to time upon the written request of the
Company any money or U.S. Government Obligations held by it as provided in
Section 4 of this Article II which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof which
would then be required to be deposited to effect an equivalent defeasance or
covenant defeasance.
SECTION 6. Notice of Defeasance.
Notice of defeasance or covenant defeasance shall be given by registered mail,
postage prepaid, mailed not more than 30 days following the date of deposit of
money or U.S. Government Obligations pursuant to Section 4 of this Article II,
to the holders of Defeased Bonds at their last addresses as they appear on the
bond register not less than 10 days prior to such date of mailing. Notice of
defeasance or covenant defeasance shall be given by the Company or, at the
Company's request, by the Trustee in the name and at the expense of the Company.
ARTICLE III
ADDITIONAL PROVISIONS
SECTION 1. The Company agrees that it will at all times maintain, preserve and
keep the property subject to the lien of the Indenture, with the appurtenances
and every part and parcel thereof, in good repair, working order and condition
and equipped with suitable equipment.
SECTION 2. The Company, and the holders of the Series HH bonds by their
acceptance and holding thereof, hereby consent and agree that the provisions of
Sections 6.13, 4.01(d)(7) and 6.08 of the Indenture, insofar as they relate to
the amount of funds required to be expended by the Company for maintenance
<PAGE>
and/or provided for depreciation and/or expended for permanent additions against
which no bonds have been, or will be, issued, shall cease to be effective on the
earlier date on which either (a) no Bonds of Series R shall be outstanding or
(b) amendments to such Sections 6.13, 4.01(d)(7) and 6.08 of the Original
Indenture, as supplemented, shall have become effective upon the consent of the
holders of the Bonds of Series R.
SECTION 3. The Company, and the holders of the Series HH bonds by their
acceptance and holding thereof, hereby consent and agree to the amendment of
Subsection 4.01(e) and the parenthetical sentence of Section 15.04 of the
Indenture by deleting the word "independent" where it appears.
SECTION 4. The Company, and the holders of the Series HH bonds by their
acceptance and holding thereof, hereby consent and agree to the amendment of
Section 6.09 of the Indenture by adding the following phrase at the end of the
third sentence thereof: "provided that, if any such payment shall be in an
amount less than one-tenth of one percent (0.1%) of the book value, determined
in accordance with generally accepted accounting principles, of the mortgaged
property of the Company at that time, the payment shall be made to the Company
and shall not be required to be made to the Trustee."
SECTION 5. The Company, and the holders of the Series HH bonds by their
acceptance and holding thereof, hereby consent and agree to the amendment of
Section 6.10 of the Indenture by deleting the first sentence thereof and by
deleting the words "the insurance proceeds payable in respect of which exceed
the sum of Five Thousand Dollars ($5,000)" in the second sentence thereof.
SECTION 6. The Company, and the holders of the Series HH bonds by their
acceptance and holding thereof, hereby consent and agree to the amendment of
Section 6.11 of the Indenture by: (i) adding the following phrase at the end of
the first sentence: "provided that, if such proceeds amount to less than
one-tenth of one percent (0.1%) of the book value, determined in accordance with
generally accepted accounting principles, of the mortgaged property of the
Company at that time, the Company shall not be required to deposit such proceeds
with the Trustee"; (ii) inserting the following phrase after the word "purchase"
in clause (b) of the fourth sentence: "(except as provided in the first sentence
of this Section 6.11)"; (iii) deleting the first sentence in the second
paragraph thereof and adding in lieu thereof the following:
Any amount received by the Trustee as an award in such taking shall be paid over
by the Trustee to the Company upon the appropriation of net expenditures for
property additions in an amount equal to one hundred percent (100%) of such
award. Such appropriation shall be evidenced by filing with the Trustee (A) an
officers' certificate dated as of a date within 90 days prior to the date of
such appropriation, setting forth the information called for by paragraphs (1),
(2), (3), (4) and (5) of Subsection 4.01(d) of the Indenture and stating the
amount of net expenditures for property additions to be so appropriated, (B) an
engineer's certificate in the form required by Subsection 4.01(e) of the
Indenture if such an engineer's certificate would be required by such Subsection
4.01(e), (C) an opinion of counsel in the form called for by Subsection 4.01(f)
of the Indenture and (D) such further documents required by the provisions of
Article 15 of the Indenture.
and (iv) deleting the first sentence in the third paragraph thereof.
SECTION 7. The Company, and the holders of the Series HH bonds by their
acceptance and holding thereof, hereby consent and agree to the amendment of
Section 9.04 of the Indenture by (i) adding the following phrase at the end of
the second sentence of Subsection 9.04(b): "and provided, further, however, that
if the proceeds from the sale of any such property amount to less than one-tenth
of one percent (0.1%) of the book value, determined in accordance with generally
accepted accounting principles, of the mortgaged property of the Company at that
time, the Company shall not be required to deposit such proceeds with the
Trustee"; (ii) deleting the words "and a sworn statement of an independent
engineer" and the words "and such engineer" in Subsection 9.04(d); and (iii)
<PAGE>
deleting the words "in addition to any certificate required by Subsection (d) of
this Section" in the first sentence of Subsection 9.04(e). The Company, and the
holders of the Series HH bonds by their acceptance and holding thereof, hereby
further consent and agree that, at such time as the foregoing amendments to
Section 9.04 of the Indenture become effective, the release of property from the
lien of the Indenture upon its sale or exchange shall be governed by said
Section 9.04, notwithstanding any provisions to the contrary (relating to
specific parcels of real estate) contained in the Third and the Fifth
Supplemental Indentures.
SECTION 8. The amendments to the Indenture set forth in Sections 3 through 7 of
this Article III shall be effective on the earlier date on which either (a) no
Bonds of Series R shall be outstanding or (b) such amendment shall have become
effective upon the consent of the holders of the Bonds of Series R.
SECTION 9. The Company, and the holders of the Series HH bonds by their
acceptance and holding thereof, hereby consent and agree to the amendment of
Section 13.09 of the Indenture by deleting the phrase "seventy-five percent
(75%)" in each place where it appears and inserting in lieu thereof the phrase
"sixty-six and two-thirds percent (66 2/3%)". Such amendment shall be effective
on the earlier date on which either (a) no Bonds of Series R shall be
outstanding or (a) such amendment shall have become effective upon the consent
of the holders of the Bonds of Series R; provided, however, that such amendment
shall be effective immediately with respect to any modification or waiver of any
right which shall have been specifically provided in respect of the Series HH
bonds.
SECTION 10. The Company, and the holders of the Series HH bonds by their
acceptance and holding thereof, hereby consent and agree that the Series HH
bonds may be executed by the facsimile signature of the Company's president or
one of its vice-presidents under its corporate seal, attested by the facsimile
signature of the Company's secretary or one of its assistant secretaries.
SECTION 11. This Thirty-Fifth Supplemental Indenture of Mortgage may be
simultaneously executed in several counterparts, each of which shall be an
original, and all of which shall constitute but one and the same instrument. The
Indenture shall constitute one agreement between the parties.
SECTION 12. The aggregate principal amount of Series HH bonds authorized by this
Indenture is limited to Seventy Million Dollars ($70,000,000), and the Company
shall not execute and the Trustee shall not authenticate or deliver Series HH
bonds in excess of such aggregate principal amount, provided that nothing
contained in this Section or elsewhere in this Indenture, or in the Series HH
bonds, is intended to or shall limit execution by the Company or authentication
or delivery by the Trustee of Series HH bonds under the circumstances
contemplated by Sections 1.12 and 1.13 of the Original Indenture.
SECTION 13. The Original Indenture as heretofore amended and supplemented and as
amended and supplemented by this Thirty-Fifth Supplemental Indenture shall be,
remain and continue in full force and effect; and the Original Indenture as so
amended and supplemented is in all respects hereby ratified and confirmed.
<PAGE>
IN WITNESS WHEREOF, UNITED TELEPHONE COMPANY OF FLORIDA, party of the first
part, has caused these presents to be signed in its name and behalf by its
President or one of its Vice Presidents, and its corporate seal to be affixed,
and said seal to be attested by the signature of its Secretary or an Assistant
Secretary, and the due execution of these presents to be proved; THE BANK OF NEW
YORK, party of the second part, has caused these presents to be signed in its
name and behalf by its Vice President, and its corporate seal to be hereunto
affixed, and said seal to be attested by the signature of an Assistant
Treasurer, and the due execution of these presents to be proved; and all of
which shall be effective as of the 15th day of January, 1995.
UNITED TELEPHONE COMPANY
OF FLORIDA
By /s/ Richard D. McRae
----------------------
Richard D. McRae, Vice President
ATTEST:
/s/ Jerry M. Johns
- --------------------
Jerry M. Johns,
Secretary
Signed, sealed, executed, acknowl-
edged and delivered by UNITED
TELEPHONE COMPANY OF FLORIDA,
in the presence of:
[CORPORATE SEAL]
/s/ Susan V. Stucker
- ----------------------
Susan V. Stucker
/s/ Monika Bailey
- ----------------------
Monika Bailey
THE BANK OF NEW YORK
By /s/ Michael J. Pellino
------------------------
Michael J. Pellino, Vice President
ATTEST:
/s/ Garrett P. Smith
- ---------------------
Garrett P. Smith,
Assistant Treasurer
Signed, sealed, executed, acknowl-
edged and delivered by THE BANK
OF NEW YORK, in the presence of:
[CORPORATE SEAL]
/s/ Susan V. Stucker
- ---------------------
Susan V. Stucker
/s/ Monika Bailey
- ---------------------
Monika Bailey
<PAGE>
State of Florida } ss.:
County of Orange }
Before me, the undersigned, a notary public in and for the State and County
aforesaid, an officer duly authorized to take acknowledgments of deeds and other
instruments, personally appeared Richard D. McRae, Vice President of UNITED
TELEPHONE COMPANY OF FLORIDA, a corporation, party of the first part in and to
the above written instrument, and also personally appeared before me Jerry M.
Johns, Secretary of said corporation; and said persons being severally well
known to me or produced their driver's license as identification and who, as
such Vice President and as such Secretary, executed the above written instrument
on behalf of said corporation; and he, the Vice President, acknowledged that as
such Vice President he subscribed the said corporate name to said instrument on
behalf and by authority of said corporation, and he, the Secretary, acknowledged
that he affixed the seal of said corporation to said instrument and attested the
same by subscribing his name as Secretary of said corporation, by authority and
on behalf of said corporation, and each of the two persons above named
acknowledged that they, as such Vice President and Secretary, delivered said
instrument by authority and on behalf of said corporation, and that all such
acts were done freely and voluntarily and for the uses and purposes in said
instrument set forth, and that such instrument is the free act and deed of said
corporation; and each of said persons further acknowledged and declared that he
knows the seal of said corporation, and that the seal affixed to said instrument
is the corporate seal of the corporation aforesaid.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal
this 13th day of January, 1995, at Apopka in the State and County aforesaid.
/s/ Pamela Campbell
---------------------
Pamela Campbell
NOTARY PUBLIC STATE OF FLORIDA
[NOTARIAL SEAL]
<PAGE>
STATE OF FLORIDA } ss.:
COUNTY OF ORANGE }
Before me, the undersigned, a notary public in and for the State and County
aforesaid, an officer duly authorized to take acknowledgments of deeds and other
instruments, personally appeared Michael J. Pellino, Vice President of THE BANK
OF NEW YORK, a New York state banking corporation, party of the second part in
and to the above written instrument, and also appeared before me Garrett P.
Smith, Assistant Treasurer of said corporation; and said persons being severally
well known to me or produced their driver's license as identification and who,
as such Vice President and as such Assistant Treasurer, executed the above
written instrument on behalf of said corporation; and the said Vice President
acknowledged that as such Vice President he subscribed the name of said
corporation to said instrument on behalf and by authority of said corporation,
and the said Assistant Treasurer acknowledged that he affixed the seal of said
corporation to said instrument and attested the same by authority and on behalf
of said corporation, and each of the two persons above named acknowledged that
they, as such Vice President and as such Assistant Treasurer, delivered said
instrument by authority and on behalf of said corporation, and that all such
acts were done freely and voluntarily and for the uses and purposes in said
instrument set forth and that such instrument is the free act and deed of said
corporation; and each of said persons further acknowledged and declared that
said person knows the corporate seal of said corporation, and that the seal
affixed to said instrument is the corporate seal of the corporation aforesaid.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal
this 13th day of January, 1995, at Apopka, in the State and County aforesaid.
/s/ Pamela Campbell
---------------------
Pamela Campbell
NOTARY PUBLIC STATE OF FLORIDA
[NOTARIAL SEAL]
<PAGE>
To qualify for the excise tax treatment provided for in Section 201.08(4),
Florida Statutes (1993), the Company states that the Original Indenture and
First through Thirty-Fourth Supplemental Indentures were recorded in the
counties and at the book and page numbers set forth below:
Charlotte County: O.R. 865, p. 1354; O.R. 875, p. 961; O.R. 920, p. 2145;
O.R. 1061, p. 1865; O.R. 1251, p. 0954; O.R. 1277, p. 926; O.R. 1286, p.1619.
Citrus County: M.B. 16 p. 224; M.B. 16 p. 323; M.B. 17 p. 262; M.B. 18 p. 80;
M.B. 18 p. 87; M.B. 18 p. 227; M.B. 18 p. 546; M.B. 22 p. 371; O.R. 3 p.432;
O.R. 12 p.281; O.R. 16 p. 495; O.R. 21 p. 183; O.R. 33 p. 324; O.R. 46 p. 1;
O.R. 60 p. 232; O.R. 79 p. 545; O.R. 97 p. 500; O.R. 113 p. 542; O.R. 117 p. 65;
O.R. 161 p. 193; O.R. 177 p. 94; O.R. 278 p. 28; O.R. 300 p. 799; O.R. 321 p.
759; O.R. 341 p. 707; O.R. 381 p. 627; O.R. 597 p. 1055; O.R. 707, p. 1843; O.R.
740, p. 0288; O.R. 829, p. 1839; O.R. 0963, p. 0250; O.R. 982, p. 239; O.R. 989,
p. 942. Collier County: O.R. 1195, p. 163; O.R. 1208, p. 167; O.R. 1269, p.
1422; O.R. 1471, p. 2037; O.R. 1778, p. 001297; O.R. 1825, p. 1682; O.R. 1842,
pp. 1107-1139. DeSoto County: O.R. 224, p. 490; O.R. 226, p. 647; O.R. 236, p.
1109; O.R. 263, p. 369; O.R. 307, p. 567; O.R. 313, p. 1062; O.R. 315, p. 1120.
Glades County: O.R. 104, p. 247; O.R. 105, p. 893; O.R. 109, p. 1024; O.R. 120,
p. 862; O.R. 138, p. 0340; O.R. 140, p. 852; O.R. 141, pp.772-804. Hardee
County: O.R. 323, p. 463; O.R. 326, p. 131; O.R. 338, p. 831; O.R. 378, p. 245;
O.R. 438, p. 248; O.R. 445, p. 747; O.R. 448, p. 548. Hendry County: O.R. 374,
p. 889; O.R. 378, p. 976; O.R. 395, p. 977; O.R. 439, p. 579; O.R. 0490, p.
1884; O.R. 495, p. 1519; O.R. 497, pp. 1492-1524. Hernando County: M.B. 79 p.
418; M.B. 79 p. 468; O.R. 2 p. 97; O.R. 3 p. 59; O.R. 9 p. 456; O.R. 16 p.14;
O.R. 25 p.283; O.R. 32 p. 370; O.R. 43 p. 353; O.R. 57 p. 183; O.R. 69 p.255;
O.R. 78 p. 272; O.R. 80 p. 333; O.R. 103 p. 321; O.R. 111 p. 57; Q R. 253 p. 1;
O.R. 284 p. 100; O.R. 301 p. 881; O.R. 316 p. 65; O.R. 346 p. 892; O.R. 503 p.
1967; O.R. 617, p. 0989; O.R. 650, p. 1781; O.R. 751, p. 814; O.R. 892, p. 1059;
O.R. 913, p. 163; O.R. 920, p. 1745. Highlands County: O.R. 885, p.377; O.R.
897, p. 590; O.R. 947, p. 374; O.R. 1075, p. 69; O.R. 1199, p. 0414; O.R. 1216,
p.657; O.R. 1221, p.1890. Lake County: M.B. 85 p.564; M.B. 86 p. 1; M.B. 108
p.425; M.B. 109 p.33; M.B. 110 p. 565; M.B. 116 p. 171; M.B. 121 p. 237; M.B.
150 p. 459; M.B. 161 p. 541; M.B. 172 p.465; M.B. 179 p. 77; M.B. 183 p. 360;
M.B. 194 p. 335; O.R. 29 p. 358; O.R. 70 p. 20; O.R. 114 p. 188; O.R. 153 p. 11;
O.R. 188 p. 432; O.R. 196 p. 109; O.R. 264 p. 899; O.R. 283 p. 525; O.R. 422 p.
64; O.R. 454 p. 9; O.R. 484 p. 362; O.R. 510 p. 84; O.R. 565 p. 930; O.R. 750 p.
1494; O.R. 884, p. 1085; O.R. 920, p. 816; O.R. 1027, p. 2289; O.R. 1200,
p.0812; O.R. 1225, p.1430; O.R. 1235, p.1085. Lee County: O.R. 1846, p.1769;
O.R. 1858, p.4657; O.R. 1917, p.3070; O.R. 2098, p.1945; O.R. 2347, p.0583; O.R.
2387, p.1402; O.R. 2403, pp.1793-1825. Levy County: M.B. 2 p.10; M.B. 2 p.270;
M.B. 2 p.324; M.B. 2 p.422; M.B. 4 p.34; M.B. 4 p.251; M.B. 4 p.420; M.B. 4
p.569; M.B. 5 p.426; M.B. 8 p.391; M.B. 9 p.540; M.B. 11 p.325; M.B. 12 p.179;
M.B. 12 p.540; M.B. 14 p.440; M.B. 16 p.434; M.B. 19 p.17; M.B. 21 p.588; M.B.
24 p.378; M.B. 26 p.566; M.B. 27 p.320; M.B. 32 p.423; M.B. 34 p.263; O.R. 18
p.197; O.R. 28 p.753; O.R. 38 p.2; O.R. 47 p.399; O.R. 66 p.587; O.R. 193 p.59;
O.R. 274, p.475; O.R. 293, p.274; O.R. 369, p.676; O.R. 0478, p.107; O.R. 492,
p.292; O.R. 0497, p.435. Marion County: M.B. 95 p.126; M.B. 96 p.190; M.B. 107
p.266; M.B. 110 p.431; M.B. 113 p.450; M.B. 118 p.401; M.B. 127 p.359; M.B. 155
p.274; M.B. 170 p.494; M.B. 185 p.231; M.B. 193 p.515; M.B. 200 p.40; M.B. 213
p.306; M.B. 227 p.17; M.B. 243 p.324; O.R. 31 p.305; O.R. 63 p.457; O.R. 96 p.1;
O.R. 103 p.454; O.R. 193 p.1; O.R. 0222 p. 0435; O.R. 0449 p. 0701; O.R. 0495 p.
0341; O.R. 0533 p.0670; O.R. 0570 p.0708; O.R. 0653 p.0453; O.R. 1112 p.1058;
O.R. 1363, p.952; O.R. 1427, p.1343; O.R. 1605, p.430; O.R. 1884, p.1721; O.R.
1925, p.146; O.R. 1939, p.1812. Monroe County: O.R. 973 p.1496; O.R. 982, p.
787; O.R. 1012, p. 1947; O.R. 1106, p. 0174; O.R. 1236, p.2309; O.R. 1256,
p.2161; O.R. 1264, pp.586-617. Okeechobee County: O.R. 277 p.1697; O.R. 279,
p.1659; O.R. 237, p.124; O.R. 307, p.998; O.R. 340, p.325; O.R. 345, p.82; O.R.
346, p.1021. Orange County: M.B. 266, p.397; M.B. 285 p.443; M.B. 325 p.403;
M.B. 344 p.352; M.B. 350 p.487; M.B. 369 p.344; M.B. 394 p.442; M.B. 507 p.601;
M.B. 547 p.356; M.B. 586 p. 465; M.B. 612 p.672; O.R. 48 p.396; O.R. 173 p.418;
O.R. 293 p.700; O.R. 467, p.159; O.R. 691 p.294; O.R. 862 p.236; O.R. 1006
p.652; O.R. 1032 p.718; O.R. 1346 p.744; O.R. 1430, p.912; O.R. 2022 p.842; O.R.
2170 p.581; O.R. 2303 p.590; O.R. 2420 p.231; O.R. 2569 p.841; O.R. 3283 p.
2308; O R. 3807, p. 1587; O.R. 3888, p. 166; O.R. 4117, p. 1085; O.R. 4498, p.
1915; O.R. 4561, p. 4305; O.R. 4585, p. 1953. Osceola County: M.B. 16 p.246;
M.B. 17 p.86; M.B. 19 p.480; M.B. 20 p.361; M.B. 24 p.123; M.B. 24 p.507; M.B.
25 p.371; M.B. 36 p.221; M.B. 39 p.438; M.B. 43 p.208; M.B. 45 p.30; M.B. 46
p.328; M.B. 50 p.299; O.R. 15 p.1; O.R. 33 p.465; O.R. 56 p.39; O.R. 72 p.382;
O.R. 84 p.526; O.R. 87 p.501; O.R. 120 p.143; O.R. 130 p.327; O.R. 211 p.465;
O.R. 234 p.338; O.R. 251 p.19; O.R. 266 p.167; O.R. 297 p.20; O.R. 582 p.774;
O.R. 810, p.2240; O.R. 840, p.827; O.R. 938, p.2690; O.R. 1100, p.0375; O.R.
1124, p. 2305; O.R. 1132, p. 2327. Palm Beach County: O.R. 4872 p.633; O.R. 4893
p.94; O.R. 4949, p.1794; O.R. 5285, p.998; O.R. 6205, p.725; O.R. 7512, p.124;
O.R. 7708, p.22; O.R. 7786, p.423. Pasco County: M.B. 38 p.246; M.B. 38 p.384;
M.B. 41 p.414; M.B. 44 p.396; M.B. 46 p.284; M.B. 47 p.266; M.B. 48 p.556; M.B.
62 p.125; O.R. 4 p.36; O.R. 20 p.289 ;O.R. 30 p.54; O.R. 37 p.367; O.R. 61
p.188; O.R. 80 p.495; O.R. 106 p.279; O.R. 137 p.356; O.R. 166 p.569; O.R. 191
p.691; O.R. 197 p.290; O.R. 261 p.639; O.R. 287 p.218; O.R. 525 p.126; O.R. 581
p.497 O.R. 636 p.609; O.R. 689 p.16; O.R. 766 p.1479; O.R. 1191 p.42; O.R. 1522,
p.1777; O.R. 1609, p.0001; O.R. 1842, p.1967; O.R. 3096, p.0047; O.R. 3149,
p.1290; O.R. 3169, p.1936. Polk County: O.R. 2420 p.133; O.R. 2442 p.428; O.R.
2530, p.236; O.R. 2781, p.2255; O.R. 3178, p.0030; O.R. 3235, p.1286; O.R. 3255,
p.2169. St. Lucie County: O.R. 499, p.1715; O.R. 508, p.702; O.R. 543, p.302;
O.R. 655, p.2685; O.R. 0819, p.1114; O.R. 0840, p.2914; O.R. 848, p.1282.
Seminole County: O.R. 1394 p.1086; O.R. 1729 p.490; O.R. 1754, p.1170; O.R.
1849, p.1983; O.R. 2109, p.0502; O.R. 2517, p.1183; O.R. 2585, p.0040; O.R.
2611, p.308. Sumter County: M.B. 22 p.219; M.B. 22 p.341; M.B. 25 p.328; M.B. 26
p.95; M.B. 26 p.299; M.B. 27 p.427; M.B. 29 p.92; M.B. 35 p.538; M.B. 38 p.267;
M.B. 40 p.453; M.B. 41 p.458; M.B. 42 p.368; M.B. 44 p.478; M.B. 47 p.10; O.R. 8
p.175; O.R. 18 p.262; O.R. 27 p.580; O.R. 36 p.465; O.R. 38 p.378; O.R. 59
p.302; O.R. 66 p.639; O.R. 115 p.485; O.R. 125 p.531; O.R. 134 p.162; O.R. 141
p.491; O.R. 156 p.741; O.R. 259 p.50; O.R. 328, p.433; O.R. 345, p.238; O.R.
394, p.381; O.R. 470, p.390; O.R. 482, p.388; O.R. 487, p.12. Volusia County:
O.R. 2817 p. 1724; O.R. 2849, p.0999; O.R. 2982, p.1667; O.R. 3364, p.403; O.R.
3793, p.0075; O.R. 3827, p.3954; OR. 3840, p.1729.
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