UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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)889-6010
(Registrant's telephone number, including area code)
This registrant meets the conditions set forth in 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 is no common stock held by non-affiliates.
There are 6,500,000 shares of common stock outstanding as of March 31, 1997, and
as of the date of filing this report.
<PAGE>
SPRINT-FLORIDA, INCORPORATED
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 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>
PART I.
Item 1.
SPRINT-FLORIDA, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
March 31, December 31,
1997 1996
- ------------------------------------------------------------------------------------------------------------------
(unaudited)
ASSETS
Current assets
<S> <C> <C>
Cash $ 13,681 $ 185,938
Receivables
Customers and other, net of allowance for doubtful
accounts of $5,015 and $5,370 122,451 125,384
Interexchange carriers 60,188 59,432
Affiliated companies 17,230 12,907
Inventories 25,651 26,879
Prepaid expenses and other 3,672 8,171
- ------------------------------------------------------------------------------------------------------------------
Total current assets 242,873 418,711
Property, plant and equipment 3,472,845 3,411,797
Less accumulated depreciation 1,922,763 1,879,235
- ------------------------------------------------------------------------------------------------------------------
1,550,082 1,532,562
Deferred charges and other assets 50,571 49,411
- ------------------------------------------------------------------------------------------------------------------
$ 1,843,526 $ 2,000,684
---------------------------------------
</TABLE>
See accompanying Condensed Notes to Financial Statements.
1
<PAGE>
<TABLE>
<CAPTION>
PART I.
Item 1.
SPRINT-FLORIDA, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
March 31, December 31,
1997 1996
- ------------------------------------------------------------------------------------------------------------------
(unaudited)
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
<S> <C> <C>
Outstanding checks in excess of cash balances $ 9,078 $ 13,317
Advances from parent company 103,678 134,900
Current maturities of long-term debt 1,445 1,916
Accounts payable
Vendors and other 28,551 23,746
Interexchange carriers 35,252 32,017
Affiliated companies 25,188 202,425
Accrued taxes 42,477 15,178
Advance billings and customer deposits 29,961 28,802
Accrued vacation 17,243 16,612
Accrued interest 8,098 13,300
Accrued payroll and commissions 10,274 9,310
Other 9,727 13,019
- ------------------------------------------------------------------------------------------------------------------
Total current liabilities 320,972 504,542
Long-term debt 454,864 455,108
Deferred credits and other liabilities
Deferred income taxes 147,390 145,939
Deferred investment tax credits 5,625 6,245
Postretirement and other benefit obligations 75,956 71,822
Other 14,262 15,990
- ------------------------------------------------------------------------------------------------------------------
243,233 239,996
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 578,909 555,490
- ------------------------------------------------------------------------------------------------------------------
824,457 801,038
- ------------------------------------------------------------------------------------------------------------------
$ 1,843,526 $ 2,000,684
---------------------------------------
</TABLE>
See accompanying Condensed Notes to Financial Statements.
2
<PAGE>
<TABLE>
<CAPTION>
PART I.
Item 1.
SPRINT-FLORIDA, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands)
Three Months Ended
March 31,
-----------------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------
NET OPERATING REVENUES
<S> <C> <C>
Local service $ 134,532 $ 123,106
Network access 132,340 121,498
Toll service 11,239 21,642
Telecommunications equipment 12,364 9,022
Other 29,300 32,170
- ----------------------------------------------------------------------------------------------------------
Total net operating revenues 319,775 307,438
- ----------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Plant operations 75,046 76,278
Depreciation and amortization 60,543 59,016
Customer operations 42,785 41,178
Corporate operations 24,663 27,031
Cost of telecommunications equipment 8,599 5,932
Other 8,161 7,893
- ----------------------------------------------------------------------------------------------------------
Total operating expenses 219,797 217,328
- ----------------------------------------------------------------------------------------------------------
OPERATING INCOME 99,978 90,110
Interest expense (10,181) (11,674)
Other expense, net (115) (207)
- ----------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 89,682 78,229
Income tax provision (34,413) (30,116)
- ----------------------------------------------------------------------------------------------------------
NET INCOME $ 55,269 $ 48,113
- ----------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (UNAUDITED)
(in thousands)
Three Months Ended
March 31,
1997 1996
- ----------------------------------------------------------------------------------------------------------
RETAINED EARNINGS AT BEGINNING OF PERIOD $ 555,490 $ 492,766
Net Income 55,269 48,113
- ----------------------------------------------------------------------------------------------------------
610,759 540,879
Common stock dividends (31,850) (27,950)
- ----------------------------------------------------------------------------------------------------------
RETAINED EARNINGS AT END OF PERIOD $ 578,909 $ 512,929
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Condensed Notes to Consolidated Financial Statements.
3
<PAGE>
<TABLE>
<CAPTION>
PART I.
Item 1.
SPRINT-FLORIDA, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Three Months Ended
March 31,
---------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 55,269 $ 48,113
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 60,543 59,016
Deferred income taxes and investment tax credits 6,764 (1,089)
Changes in operating assets and liabilities:
Receivables, net (2,146) (6,021)
Inventories and other current assets (195) 2,066
Accounts payable and other current liabilities 23,123 4,869
Noncurrent assets and liabilities, net 2,936 8,370
Other, net (11) -
- ----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 146,283 115,324
- ----------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Capital expenditures (77,390) (73,067)
Other, net (2,363) (1,709)
- ----------------------------------------------------------------------------------------------------------
Net cash used by investing activities (79,753) (74,776)
- ----------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Decrease in advances from parent company (31,222) (6,273)
Repurchase of receivables (175,000) -
Retirements of long-term debt (715) (12,426)
Dividends paid (31,850) (27,950)
- ----------------------------------------------------------------------------------------------------------
Net cash used by financing activities (238,787) (46,649)
- ----------------------------------------------------------------------------------------------------------
DECREASE IN CASH (172,257) (6,101)
CASH AT BEGINNING OF PERIOD 185,938 11,473
- ----------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 13,681 $ 5,372
-------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 15,383 $ 18,090
Cash paid for income taxes $ 4,236 $ 3,466
</TABLE>
See accompanying Condensed Notes to Consolidated Financial Statements.
4
<PAGE>
PART I.
Item 1.
SPRINT-FLORIDA, INCORPORATED
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1997 and 1996
The information contained in this Form 10-Q has been prepared in accordance with
the rules and regulations of the Securities and Exchange Commission. In
management's opinion, the 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 in accordance with generally accepted accounting
principles (GAAP) have been condensed or omitted. These consolidated financial
statements should be read in connection with Sprint-Florida, Incorporated's 1996
annual report on Form 10-K. The results of operations for the 1997 first quarter
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); accordingly, earnings
per share information has been omitted.
The consolidated financial statements are prepared in conformity with 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, pursuant to an Agreement and Plan of Merger, Central Telephone
Company of Florida, a wholly-owned subsidiary of Central Telephone Company,
merged with and into Sprint-Florida. Prior period financial statements and
certain other amounts have been restated to reflect the new reporting entity.
Net income for the three months ended March 31, 1996 increased $7,245,000 as a
result of the merger.
Certain other amounts previously reported have been reclassified to conform to
the current period presentation in the consolidated financial statements. 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; accordingly, the transaction was recorded as a
borrowing.
5
<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 disseminated to the public. There can be no assurances of future
performance. 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 and the Florida Public Service
Commission under the Telecommunications Act of 1996;
- 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 variations 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, pursuant to an Agreement and Plan of Merger, Central Telephone
Company of Florida, a wholly-owned subsidiary of Central Telephone Company,
merged with and into Sprint-Florida. As a result, prior period financial
information has been restated to reflect the new reporting entity.
Results of Operations
Total net operating revenues increased 4% for the 1997 first quarter compared
with the same 1996 period. The increase is primarily due to increased local
service and network access revenue, partly offset by a decrease in toll service
revenues. Telecommunications equipment revenues continue to grow due to
increased equipment sales. Other revenues experienced a modest decline due to a
reduction in billing and collection revenues and telemarketing revenues, due to
a transfer of telemarketing services to an affiliated company.
Local service revenues, derived from local exchange services, increased 9% for
the 1997 first quarter compared with the same 1996 period. The increase is
primarily due to continued residential and business growth in both the number of
access lines served and custom calling features, including Caller ID, voice
dialing and return call. Access lines served grew 5.9% during the past twelve
months and revenues from custom calling features increased 15% compared with the
1996 first quarter. In addition, local service revenues increased due to
residential and business wire maintenance revenue. Another contributing factor
to the increase in local service revenues was the conversion of certain
short-haul toll routes to flat rates per call which also caused a decrease to
toll service revenues.
Network access revenues, derived from interexchange long distance carriers' use
of the local network to complete calls, increased 9% for the 1997 first quarter
compared with the same 1996 period. The increase was primarily due to increased
interstate volumes of 7% and intrastate volumes of 9%.
6
<PAGE>
Toll service revenues, mainly derived from providing long distance services
within specified geographical areas, decreased $10 million for the 1997 first
quarter compared with the same 1996 period. The decrease is mainly due to
increased competition in this market and the conversion of certain short-haul
toll routes to flat rates per call, which also contributed to an increase to
local service revenues. In addition, the 1996 first quarter reflects revenues
from reselling interexchange long distance services by United Telephone Long
Distance, Inc. (UTLD), a subsidiary of Sprint-Florida. This revenue has
decreased as these services were phased out during the 1997 first quarter.
Total operating expenses increased 1% for the 1997 first quarter compared with
the same 1996 period. The increase primarily reflects an increase in network
operating expense and marketing costs to promote products and services. Network
operating costs increased due to the growth in the number of access lines
served. In addition, operating expenses increased due to increased cost of
telecommunications equipment due to growth in equipment sales. The increase in
operating expenses was partly offset by a decrease in general and administrative
services provided by Sprint Corporation. Plant operations expense for the 1996
first quarter reflects expenses related to reselling interexchange long distance
services by UTLD. These expenses have decreased as these services were phased
out during the 1997 first quarter.
7
<PAGE>
PART II.
Other Information
Item 1. Legal Proceedings
There were no reportable events during the quarter ended March 31,
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 March 31,
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) March 31, 1997
(b) March 31, 1996 Restated
(b) In January 1997, Sprint-Florida filed a Current Report on Form 8-K
dated December 19, 1996, in which it reported (1) the change of
its name to Sprint-Florida, Incorporated from United Telephone
Company of Florida, effective December 19, 1996; (2) the transfer
of ownership of Sprint-Florida's capital stock from Sprint
Corporation to a Sprint subsidiary, effective December 31, 1996;
and (3) the merger of Central Telephone Company of Florida with
and into Sprint-Florida, effective December 31, 1996.
8
<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/ J. J. Beling
J. J. Beling
Controller & Chief Accounting Officer
Date: May 8, 1997
9
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER
(27) Financial Data Schedules
(a) March 31, 1997
(b) March 31, 1996 Restated
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Mar-31-1997
<CASH> 13,681
<SECURITIES> 0
<RECEIVABLES> 204,884
<ALLOWANCES> 5,015
<INVENTORY> 25,651
<CURRENT-ASSETS> 242,873
<PP&E> 3,472,845
<DEPRECIATION> 1,922,763
<TOTAL-ASSETS> 1,843,526
<CURRENT-LIABILITIES> 320,972
<BONDS> 454,864
0
0
<COMMON> 16,250
<OTHER-SE> 808,207
<TOTAL-LIABILITY-AND-EQUITY> 1,843,526
<SALES> 0
<TOTAL-REVENUES> 319,775
<CGS> 0
<TOTAL-COSTS> 178,374
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,181
<INCOME-PRETAX> 89,682
<INCOME-TAX> 34,413
<INCOME-CONTINUING> 55,269
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,269
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Mar-31-1996
<CASH> 3,788
<SECURITIES> 0
<RECEIVABLES> 174,253
<ALLOWANCES> 3,304
<INVENTORY> 28,253
<CURRENT-ASSETS> 210,587
<PP&E> 2,639,941
<DEPRECIATION> 1,448,776
<TOTAL-ASSETS> 1,443,047
<CURRENT-LIABILITIES> 214,365
<BONDS> 437,291
0
0
<COMMON> 16,250
<OTHER-SE> 582,312
<TOTAL-LIABILITY-AND-EQUITY> 1,443,047
<SALES> 0
<TOTAL-REVENUES> 307,438
<CGS> 0
<TOTAL-COSTS> 176,472
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,674
<INCOME-PRETAX> 78,229
<INCOME-TAX> 30,116
<INCOME-CONTINUING> 48,113
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48,113
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
