UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
----------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 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)889-6016
(Registrant's telephone number, including area code)
This registrant meets the conditions of General Instruction H(1)(a) and (b)
of Form 10-Q 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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
There are no equity securities held by non-affiliates.
There are 6,500,000 shares of common stock outstanding as of June 30, 1997, and
as of the date of filing this report.
<PAGE>
SPRINT-FLORIDA, INCORPORATED
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997
INDEX
<TABLE>
<CAPTION>
Part I - Financial Information Page
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheets 1
Consolidated Statements of Income 3
Consolidated Statements of Retained Earnings 3
Consolidated Statements of Cash Flows 4
Condensed Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Results of Operations 6
Part II - Other Information
Item 1. Legal Proceedings 8
Item 2. Changes in Securities 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
Signature 9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Item 1.
PART I.
SPRINT-FLORIDA, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
1997 1996
- -------------------------------------------------------------------------------------------------------------------
(unaudited)
Assets
Current assets
<S> <C> <C>
Cash $ -- $ 185,938
Accounts receivable
Customers and other, net of allowance for doubtful accounts of
$4,749 and $5,370 133,738 125,384
Interexchange carriers 55,775 59,432
Affiliated companies 16,755 12,907
Inventories 27,409 26,879
Prepaid expenses and other 2,120 8,171
- -------------------------------------------------------------------------------------------------------------------
Total current assets 235,797 418,711
Property, plant and equipment 3,516,430 3,411,797
Less accumulated depreciation 1,950,794 1,879,235
- -------------------------------------------------------------------------------------------------------------------
1,565,636 1,532,562
Deferred charges and other assets 57,359 49,411
- -------------------------------------------------------------------------------------------------------------------
$ 1,858,792 $ 2,000,684
------------------------------------------
See accompanying Condensed Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I.
Item 1.
SPRINT-FLORIDA, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
1997 1996
- -------------------------------------------------------------------------------------------------------------------
(unaudited)
Liabilities and shareholder's equity
Current liabilities
<S> <C> <C>
Outstanding checks in excess of cash balances $ 12,847 $ 13,317
Advances from parent company 127,029 134,900
Current maturities of long-term debt 952 1,916
Accounts payable
Vendors and other 26,167 23,746
Interexchange carriers 30,365 32,017
Affiliated companies 26,712 202,425
Accrued taxes 32,683 15,178
Advance billings and customer deposits 29,912 28,802
Other 45,627 52,241
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 332,294 504,542
Long-term debt 454,891 455,108
Deferred credits and other liabilities
Deferred income taxes and investment tax credits 147,162 152,184
Postretirement and other benefit obligations 78,480 71,822
Other 16,250 15,990
- -------------------------------------------------------------------------------------------------------------------
241,892 239,996
Shareholder's equity
Common stock, par value $2.50 per share, authorized - 16,000
shares, issued and outstanding - 6,500 shares 16,250 16,250
Capital in excess of par value 229,298 229,298
Retained earnings 584,167 555,490
- -------------------------------------------------------------------------------------------------------------------
829,715 801,038
- -------------------------------------------------------------------------------------------------------------------
$ 1,858,792 $ 2,000,684
------------------------------------------
See accompanying Condensed Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I.
Item 1.
SPRINT-FLORIDA, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands)
Quarter Ended Year to Date
June 30, June 30,
---------------------------------------------------------------------
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------
NET OPERATING REVENUES
<S> <C> <C> <C> <C>
Local service $ 137,014 $ 123,831 $ 271,546 $ 246,937
Network access 122,417 115,685 254,757 237,183
Toll service 11,327 20,778 22,566 42,420
Telecommunications equipment 13,836 12,762 26,200 21,784
Other 30,276 29,909 59,576 62,079
- ------------------------------------------------------------------------------------------------------------------
Total net operating revenues 314,870 302,965 634,645 610,403
- ------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Plant operations 75,457 76,170 150,503 152,448
Depreciation and amortization 61,110 59,856 121,653 118,872
Customer operations 42,114 41,158 84,899 82,336
Corporate operations 25,511 28,095 50,174 55,126
Cost of telecommunications equipment 9,547 9,038 18,146 14,970
Other 8,287 7,650 16,448 15,543
- ------------------------------------------------------------------------------------------------------------------
Total operating expenses 222,026 221,967 441,823 439,295
- ------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 92,844 80,998 192,822 171,108
Interest expense (10,866) (11,021) (21,047) (22,695)
Other expense, net (309) (153) (424) (360)
- ------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 81,669 69,824 171,351 148,053
Income taxes (31,236) (25,922) (65,649) (56,038)
- ------------------------------------------------------------------------------------------------------------------
NET INCOME $ 50,433 $ 43,902 $ 105,702 $ 92,015
- ------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (UNAUDITED)
(in thousands)
Year to Date
June 30,
----------------------------------
1997 1996
- ------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS AT BEGINNING OF PERIOD $ 555,490 $ 492,766
Net Income 105,702 92,015
- ------------------------------------------------------------------------------------------------------------------
661,192 584,781
Dividends declared (77,025) (52,975)
- ------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS AT END OF PERIOD $ 584,167 $ 531,806
- ------------------------------------------------------------------------------------------------------------------
See accompanying Condensed Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I.
Item 1.
SPRINT-FLORIDA, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Year to Date
June 30,
-----------------------------------
1997 1996
- -------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 105,702 $ 92,015
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 121,653 118,872
Deferred income taxes and investment tax credits 3,258 (3,187)
Changes in assets and liabilities:
Accounts receivable, net (8,545) (1,268)
Inventories and prepaid expenses (401) 2,388
Accounts payable, accrued expenses and other current liabilities 11,587 (28,253)
Other assets and liabilities, net (2,286) 11,097
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 230,968 191,664
- -------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Capital expenditures (152,280) (156,092)
Other, net (3,549) (3,442)
- -------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (155,829) (159,534)
- -------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase (decrease) in advances from parent company (7,871) 43,968
Repurchase of accounts receivable (175,000) --
Payments on long-term debt (1,181) (28,958)
Dividends paid (77,025) (52,975)
- -------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (261,077) (37,965)
- -------------------------------------------------------------------------------------------------------------------
DECREASE IN CASH (185,938) (5,835)
CASH AT BEGINNING OF PERIOD 185,938 11,473
- -------------------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ -- $ 5,638
-----------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest (excluding amounts capitalized) $ 21,019 $ 23,548
Cash paid for income taxes $ 60,260 $ 66,048
See accompanying Condensed Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
PART I.
Item 1.
SPRINT-FLORIDA, INCORPORATED
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1997 and 1996
The information in this Form 10-Q has been prepared according to the rules and
regulations of the Securities and Exchange Commission. In management's opinion,
these consolidated interim financial statements reflect all adjustments
(consisting only of normal recurring accruals) necessary to present fairly the
consolidated financial position, results of operations and cash flows for the
periods presented.
Certain information and footnote disclosures normally included in consolidated
financial statements prepared according to generally accepted accounting
principles (GAAP) have been condensed or omitted. These consolidated financial
statements should be read in connection with the Sprint-Florida, Incorporated
1996 annual report on Form 10-K. Operating results for the 1997 year-to-date
period are not necessarily indicative of the operating results that may be
expected for the year ending December 31, 1997.
1. Basis of Consolidation
The consolidated financial statements include the accounts of Sprint-Florida,
Incorporated and its wholly-owned subsidiaries (Sprint-Florida). All significant
intercompany transactions have been eliminated. Sprint-Florida is, indirectly, a
wholly-owned subsidiary of Sprint Corporation (Sprint); as a result, earnings
per share information is not required.
The consolidated financial statements are prepared according to GAAP. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported amounts of revenues and expenses. Actual results
could differ from those estimates.
In December 1996, Central Telephone Company of Florida, which is, indirectly, a
wholly-owned subsidiary of Sprint, merged into Sprint-Florida. Certain prior
year amounts have been restated to reflect the new reporting entity. As a
result, net income for the 1996 second quarter and year-to-date periods
increased $6,907,000 and $14,152,000, respectively.
Certain prior year amounts have been reclassified to conform to the current
period presentation. These reclassifications had no effect on the results of
operations or shareholder's equity as previously reported.
2. Repurchase of Accounts Receivable
In January 1997, Sprint-Florida repurchased $175 million of accounts receivable,
which were sold without recourse in December 1996 to an affiliated company.
Sprint-Florida retained all ownership, management and control of the receivables
prior to the repurchase. As a result, the transaction was recorded as a
borrowing in the 1996 year-end financial statements.
<PAGE>
PART I
Item 2.
SPRINT-FLORIDA, INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
General
Sprint-Florida, Incorporated and its wholly-owned subsidiaries (Sprint-Florida)
include certain estimates, projections and other forward-looking statements in
their reports, as well as in presentations to analysts and others, and in other
material made available to the public. Future performance cannot be assured.
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:
- the effects of vigorous competition in the markets in which
Sprint-Florida operates;
- the impact of any unusual items resulting from ongoing evaluations of
Sprint-Florida's business strategies;
- requirements imposed on Sprint-Florida and its competitors by the
Federal Communications Commission (FCC) and the Florida Public
Service Commission under the Telecommunications Act of 1996 (Telecom Act);
- unexpected results of litigation filed against Sprint-Florida; and
- the possibility of one or more of the markets in which Sprint-Florida
competes being impacted by changes in political, economic or other
factors such as legal and regulatory changes or other external factors
over which Sprint-Florida has no control.
In December 1996 Central Telephone Company of Florida, which is, indirectly, a
wholly-owned subsidiary of Sprint Corporation, merged into Sprint-Florida. As a
result, prior period financial information has been restated to reflect the new
reporting entity.
Regulatory Developments
In accordance with the Telecom Act, the FCC adopted detailed rules in 1996 to
govern interconnection to incumbent local networks by new market entrants.
Some local exchange carriers (LECs) and state public service commissions (PSCs)
appealed these rules to the U.S. Court of Appeals, which prevented most of the
pricing rules from taking effect pending a full review by the court.
In July 1997, the court struck down the FCC's pricing rules. It ruled that the
Telecom Act left jurisdiction over pricing matters to the PSCs. The court also
struck down certain other FCC rules on jurisdictional or substantive grounds.
The court's decision adds to the uncertainty, delay and complexity surrounding
local competition. The FCC plans to appeal the decision to the U.S. Supreme
Court.
In May 1997, the FCC issued important decisions on the structure and level of
access charges and universal service. These decisions will impact the industry
in several ways, including the following:
- an additional subsidy was created to support telecommunications services
for schools, libraries and rural health care providers. Funding for this
program, which is estimated to cost $2.7 billion per year, will be
assessed against all carriers providing telecommunications services.
However, it is expected that LECs will be able to pass their portion of
these costs on to long distance carriers;
- interstate access rates charged by LECs will decline by an estimated
$1.4 billion per year beginning July 1997;
- certain monthly flat-rate charges paid by some local telephone subscribers
will increase beginning in 1998;
- certain per-minute access charges paid by long distance companies were
converted to flat monthly charges based on pre-subscribed lines; and
- a basis has been established for replacing implicit access subsidies with
an explicit interstate universal service fund beginning in 1999.
A number of LECs, long distance companies and others have appealed some or all
of the FCC's orders. The effective date of the orders has not been postponed,
but the appeals are expected to take a year or more to conclude. The impact of
these FCC decisions on Sprint-Florida is difficult to determine, but is not
expected to be material.
Results of Operations
Year-to-date net operating revenues for 1997 have increased 4% compared with the
same period a year ago. This increase is mainly due to increased local service
and network access revenue, partly offset by a decrease in toll service
revenues.
Local service revenues, derived from local exchange services, increased 10% for
the 1997 year-to-date period compared with the same period a year ago. This
increase reflects a 6% growth rate in residential and business access lines
served during the past 12 months. The increase also reflects a 16% increase in
revenue from custom calling features, such as Caller ID, voice dialing and
return call, over the prior year period. In addition, local service revenues
increased due to residential and business wire maintenance revenue and the
extension of local area calling plans, which caused a corresponding decrease in
toll service revenues.
Network access revenues are derived from interexchange long distance carriers'
use of the local network to complete calls. These revenues increased 7% for the
1997 year-to-date period compared with same 1996 period mainly due to a 9%
increase in interstate and intrastate calling volumes.
Toll service revenues are mainly derived from providing long distance services
within specified geographical areas. Year-to-date toll service revenues for 1997
decreased $20 million compared with the same period a year ago. The decrease is
mainly due to reduced revenues from reselling interexchange long distance
services, which was phased out through early 1997, and extended local area
calling plans.
<PAGE>
PART II.
Other Information
Item 1. Legal Proceedings
There were no reportable events during the quarter ended June 30, 1997.
Item 2. Changes in Securities
Omitted under the provisions of General Instruction H
Item 3. Defaults Upon Senior Securities
Omitted under the provisions of General Instruction H
Item 4. Submission of Matters to a Vote of Security Holders
Omitted under the provisions of General Instruction H
Item 5. Other Information
There were no reportable events during the quarter ended June 30, 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
(27) Financial Data Schedules
(a) June 30, 1997
(b) September 30, 1996 Restated
(b) June 30, 1996 Restated
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June
30, 1997.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPRINT-FLORIDA, INCORPORATED
(Registrant)
By /s/ John I. Lehman
John I. Lehman
Controller & Chief Accounting Officer
By /s/ Douglas B. Lynn
Douglas B. Lynn
Assistant Vice President
Date: August 11, 1997
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT INDEX
- --------------------------------------------------------------------------------
EXHIBIT
NUMBER
(27) Financial Data Schedules
(a) June 30, 1997
(b) September 30, 1996 Restated
(c) June 30, 1996 Restated
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Jun-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 211,017
<ALLOWANCES> 4,749
<INVENTORY> 27,409
<CURRENT-ASSETS> 235,797
<PP&E> 3,516,430
<DEPRECIATION> 1,950,794
<TOTAL-ASSETS> 1,858,792
<CURRENT-LIABILITIES> 332,294
<BONDS> 454,891
0
0
<COMMON> 16,250
<OTHER-SE> 813,465
<TOTAL-LIABILITY-AND-EQUITY> 1,858,792
<SALES> 0
<TOTAL-REVENUES> 634,645
<CGS> 0
<TOTAL-COSTS> 357,055
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,047
<INCOME-PRETAX> 171,351
<INCOME-TAX> 65,649
<INCOME-CONTINUING> 105,702
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 105,702
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Sep-30-1996
<CASH> 10,754
<SECURITIES> 0
<RECEIVABLES> 201,198
<ALLOWANCES> 4,218
<INVENTORY> 26,291
<CURRENT-ASSETS> 240,475
<PP&E> 3,390,976
<DEPRECIATION> 1,856,593
<TOTAL-ASSETS> 1,822,842
<CURRENT-LIABILITIES> 301,522
<BONDS> 492,347
0
0
<COMMON> 16,250
<OTHER-SE> 770,750
<TOTAL-LIABILITY-AND-EQUITY> 1,822,842
<SALES> 0
<TOTAL-REVENUES> 915,804
<CGS> 0
<TOTAL-COSTS> 531,518
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,184
<INCOME-PRETAX> 216,960
<INCOME-TAX> 82,275
<INCOME-CONTINUING> 134,685
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 134,685
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Jun-30-1996
<CASH> 4,374
<SECURITIES> 0
<RECEIVABLES> 171,503
<ALLOWANCES> 3,178
<INVENTORY> 28,640
<CURRENT-ASSETS> 208,915
<PP&E> 2,671,725
<DEPRECIATION> 1,473,037
<TOTAL-ASSETS> 1,450,534
<CURRENT-LIABILITIES> 212,101
<BONDS> 436,838
0
0
<COMMON> 16,250
<OTHER-SE> 594,282
<TOTAL-LIABILITY-AND-EQUITY> 1,450,534
<SALES> 0
<TOTAL-REVENUES> 610,403
<CGS> 0
<TOTAL-COSTS> 353,656
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,695
<INCOME-PRETAX> 148,053
<INCOME-TAX> 56,038
<INCOME-CONTINUING> 92,015
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 92,015
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
