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, 1998
----------------------------------
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 11315, Kansas City, Missouri 64112
(Address of principal executive offices)
(913)624-3000
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
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 were 6,500,000 common shares outstanding at June 30, 1998, and at the date
of filing this report.
<PAGE>
SPRINT-FLORIDA, INCORPORATED
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998
INDEX
<TABLE>
<CAPTION>
Part I - Financial Information Page
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheets 1
Consolidated Statements of Income and Retained Earnings 2
Consolidated Statements of Cash Flows 3
Condensed Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Results of Operations 5
Item 3. Quantitative and Qualitative Disclosures About Market Risk 8
Part II - Other Information
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
Exhibits
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Item 1.
PART I.
CONSOLIDATED BALANCE SHEETS Sprint-Florida, Incorporated
(in thousands, except per share data)
- -------------------------------------------------------------------------------------------------------------------
June 30, December 31,
1998 1997
- -------------------------------------------------------------------------------------------------------------------
(unaudited)
Assets
Current assets
<S> <C> <C>
Cash $ 367 $ 25,470
Accounts receivable
Customers and other, net of allowance for doubtful accounts of
$5,461 and $5,515 149,228 149,317
Interexchange carriers 56,728 58,074
Affiliated companies 9,419 10,041
Inventories 24,605 25,114
Other 1,794 7,802
- -------------------------------------------------------------------------------------------------------------------
Total current assets 242,141 275,818
- -------------------------------------------------------------------------------------------------------------------
Property, plant and equipment 3,758,510 3,632,432
Less accumulated depreciation 2,105,935 2,028,184
- -------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 1,652,575 1,604,248
- -------------------------------------------------------------------------------------------------------------------
Deferred charges and other assets 76,625 59,203
- -------------------------------------------------------------------------------------------------------------------
Total $ 1,971,341 $ 1,939,269
------------------------------------------
Liabilities and Shareholder's Equity
Current liabilities
Outstanding checks in excess of cash balances $ 20,628 $ 10,801
Advances from parent 123,159 38,999
Current maturities of long-term debt 207 304
Accounts payable
Vendors and other 41,268 43,687
Interexchange carriers 28,938 26,663
Affiliated companies 217,666 220,354
Advance billings and customer deposits 35,084 32,677
Other 56,878 55,248
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 523,828 428,733
- -------------------------------------------------------------------------------------------------------------------
Long-term debt 340,435 455,011
- -------------------------------------------------------------------------------------------------------------------
Deferred credits and other liabilities
Deferred income taxes and investment tax credits 153,463 152,120
Postretirement and other benefit obligations 104,742 83,332
Other 9,572 9,252
- -------------------------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities 267,777 244,704
- -------------------------------------------------------------------------------------------------------------------
Shareholder's equity
Common stock, par value $2.50 per share, 16,000 shares authorized,
6,500 shares issued and outstanding 16,250 16,250
Capital in excess of par value 229,298 229,298
Retained earnings 593,753 565,273
- -------------------------------------------------------------------------------------------------------------------
Total shareholder's equity 839,301 810,821
- -------------------------------------------------------------------------------------------------------------------
Total $ 1,971,341 $ 1,939,269
------------------------------------------
See accompanying Condensed Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I.
Item 1.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS Sprint-Florida, Incorporated
(Unaudited)
(in thousands)
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Quarter Ended Year-to-Date
June 30, June 30,
---------------------------------- ----------------------------------
1998 1997 1998 1997
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
<S> <C> <C> <C> <C>
Net Operating Revenues $ 322,558 $ 313,024 $ 644,034 $ 630,859
Operating Expenses
Costs of services and products 102,051 100,095 207,822 199,068
Selling, general and administrative 61,439 58,975 123,388 117,316
Depreciation and amortization 59,158 61,110 117,134 121,653
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Total operating expenses 222,648 220,180 448,344 438,037
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Operating Income 99,910 92,844 195,690 192,822
Interest expense (10,991) (10,866) (22,390) (21,047)
Other expense, net (1,463) (309) (2,078) (424)
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Income before income taxes and
extraordinary item 87,456 81,669 171,222 171,351
Income taxes (33,655) (31,236) (65,830) (65,649)
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Income before extraordinary item 53,801 50,433 105,392 105,702
Extraordinary item, net - - (4,437) -
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Net Income $ 53,801 $ 50,433 100,955 105,702
--- ------------- -- -------------
Retained Earnings at Beginning of Period
565,273 555,490
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Dividends declared (72,475) (77,025)
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Retained Earnings at End of Period $ 593,753 $ 584,167
--- ------------- -- -------------
See accompanying Condensed Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I.
Item 1.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Sprint-Florida, Incorporated
(in thousands)
- -------------------------------------------------------------------------------------------------------------------
Year-to-date June 30, 1998 1997
- -------------------------------------------------------------------------------------------------------------------
Operating Activities
<S> <C> <C>
Net income $ 100,955 $ 105,702
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 117,134 121,653
Deferred income taxes and investment tax credits 8,849 3,258
Extraordinary item, net (1,664) -
Changes in assets and liabilities:
Receivables, net 2,057 (7,025)
Inventories and other current assets 407 (1,921)
Accounts payable, accrued expenses and other current liabilities (2,582) 11,587
Other assets and liabilities, net 4,270 (3,388)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 229,426 229,866
- -------------------------------------------------------------------------------------------------------------------
Investing Activities
Capital expenditures (161,550) (152,280)
Other, net (3,911) (2,447)
- -------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (165,461) (154,727)
- -------------------------------------------------------------------------------------------------------------------
Financing Activities
Increase (Decrease) in advances from parent 84,160 (7,871)
Sales of receivables, net 15,000 (175,000)
Payments on long-term debt (115,753) (1,181)
Dividends paid (72,475) (77,025)
- -------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (89,068) (261,077)
- -------------------------------------------------------------------------------------------------------------------
Decrease in Cash and Equivalents (25,103) (185,938)
Cash and Equivalents at Beginning of Period 25,470 185,938
- -------------------------------------------------------------------------------------------------------------------
Cash and Equivalents at End of Period $ 367 $ -
-----------------------------------
Supplemental Cash Flow Information
Cash paid for interest, net of amounts capitalized $ 24,733 $ 21,019
-----------------------------------
Cash paid for income taxes $ 50,899 $ 60,260
-----------------------------------
See accompanying Condensed Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
PART I.
Item 1.
CONDENSED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) Sprint-Florida, Incorporated
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
Sprint-Florida, Incorporated's consolidated financial position, results of
operations and cash flows.
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
1997 annual report on Form 10-K. Operating results for the 1998 year-to-date
period are not necessarily indicative of the operating results that may be
expected for the year ending December 31, 1998.
1. Basis of Consolidation
The consolidated financial statements include the accounts of Sprint-Florida,
Incorporated and its wholly-owned subsidiary (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 has been omitted.
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.
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 1998, Sprint-Florida repurchased $190 million of accounts receivable
sold to an affiliated company in December 1997. Accordingly, the transaction was
treated as a borrowing in the 1997 year-end financial statements.
<PAGE>
PART I
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS Sprint-Florida, Incorporated
General
Sprint-Florida, Incorporated, with its wholly-owned subsidiary, (Sprint-Florida)
includes certain estimates, projections and other forward-looking statements in
its reports, in presentations to analysts and others, and in other publicly
available material. Future performance cannot be ensured. 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 or latitude allowed its
competitors by the Federal Communications Commission (FCC) or the
Florida Public Service Commission under the Telecommunications Act of
1996;
- unexpected results of litigation filed against Sprint-Florida;
- the impact of the Year 2000 issue and any related noncompliance; 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.
The words "estimate", "project", "intend", "expect", "believe" and similar
expressions are intended to identify forward-looking statements. These
forward-looking statements are found at various places throughout Management's
Discussion and Analysis of Results of Operations. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date hereof. Sprint-Florida undertakes no obligation to publicly release any
revisions to these forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
Moreover, Sprint-Florida, through senior management, may from time to time make
forward-looking statements about the matters described herein or other matters
concerning Sprint-Florida.
<PAGE>
<TABLE>
<CAPTION>
Results of Operations
Selected Operating Results
---------------------------------------------------------------------
Year-to-Date
June 30, Variance
---------------------------------- ------------------------------
1998 1997 Dollar %
- -------------------------------------------- --- ------------- -- ------------- --- ------------- ----------------
(in thousands)
Net Operating Revenues
<S> <C> <C> <C> <C>
Local service $ 296,784 $ 271,546 $ 25,238 9.3%
Network access 259,249 254,757 4,492 1.8%
Toll service 15,039 22,566 (7,527) (33.4)%
Other 72,962 81,990 (9,028) (11.0)%
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Net operating revenues 644,034 630,859 13,175 2.1%
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Operating Expenses
Costs of services and products 207,822 199,068 8,754 4.4%
Selling, general and administrative 123,388 117,316 6,072 5.2%
Depreciation and amortization 117,134 121,653 (4,519) (3.7)%
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Total operating expenses 448,344 438,037 10,307 2.4%
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Operating Income $ 195,690 $ 192,822 $ 2,868 1.5%
--- ------------- -- ------------- --- -------------
Operating Margin 30.4% 30.6%
--- ------------- -- -------------
</TABLE>
Net Operating Revenues
Net operating revenues increased 2% in the 1998 year-to-date period compared
with the same 1997 period. This increase reflects customer access line growth of
6.6% during the past 12 months, offset by decreases in toll service and other
revenues.
Local service revenues, derived from local exchange services, increased 9% in
the 1998 year-to-date period from the same 1997 period. Local service revenues
increased because of continued demand for network-based services such as Caller
ID and Call Waiting. This increase also reflects increased sales of private line
services and maintenance of customer wiring and equipment.
Network access revenues, derived from interexchange long distance carriers' use
of the local network to complete calls, increased 2% for the 1998 year-to-date
period compared with the same 1997 period. The 1998 year-to-date revenues
reflect an 8% increase in minutes of use, partly offset by FCC-mandated access
rate reductions.
Toll service revenues are mainly derived from providing long distance services
within specified regional calling areas that are beyond the local calling area.
Year-to-date 1998 toll service revenues declined 33% compared with the same 1997
period. This decrease was mainly due to extended local calling areas and
increased competition in the intrastate long distance market. These losses were,
in part, offset by increases in the division's local service revenues and
network access revenues. In addition, Sprint's long distance division has
acquired some of the customer base to help mitigate the erosion of these
revenues.
Other revenues include telecommunications equipment sales, directory sales and
listing services, and billing and collection services. During the 1998
year-to-date period, other revenues decreased 11% compared with the same 1997
period. This decrease mainly reflects a July 1997 change in transfer pricing for
certain transactions between Sprint-Florida and Sprint's product distribution
and directory publishing division to more accurately reflect market pricing.
This decrease was partly offset by increased equipment sales.
<PAGE>
Operating Expenses
Costs of services and products consists of costs related to operating and
maintaining the local network and costs of equipment sales. These expenses
increased 4% in the 1998 year-to-date period compared with the same period a
year ago. This reflects continued cost control, while still supporting customer
access line growth and increased equipment sales. Costs of services and products
was 32.3% of net operating revenues in the 1998 year-to-date period and 31.6%
for the same period a year ago.
Selling, general and administrative (SG&A) expense increased 5% in the 1998
year-to-date period compared with the same 1997 period. This increase was mainly
due to increased customer service costs related to access line growth and
marketing costs to promote new products and services. SG&A expense was 19.1% of
net operating revenues for the 1998 year-to-date period and 18.6% for the same
period a year ago.
Depreciation and amortization expense decreased 4% in the 1998 year-to-date
period compared with the same 1997 period. This decrease reflects lower
depreciation rates resulting from longer asset lives, partly offset by an
increase in plant additions. Depreciation and amortization expense was 18.2% of
net operating revenues in the 1998 year-to-date period and 19.2% for the same
period a year ago.
Extraordinary Item
In the 1998 first quarter, Sprint-Florida redeemed, prior to maturity, $115
million of debt with a 9.25% interest rate. This resulted in a $4 million
after-tax loss.
<PAGE>
PART I
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK Sprint-Florida, Incorporated
Omitted under the provisions of General Instruction H.
<PAGE>
PART II.
Other Information
Item 1. Legal Proceedings
There were no reportable events during the quarter ended June 30, 1998.
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, 1998.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June
30, 1998.
<PAGE>
SIGNATURES
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, 1998
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER
(27) Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Jun-30-1998
<CASH> 367
<SECURITIES> 0
<RECEIVABLES> 211,417
<ALLOWANCES> 5,461
<INVENTORY> 24,605
<CURRENT-ASSETS> 242,141
<PP&E> 3,758,510
<DEPRECIATION> 2,105,935
<TOTAL-ASSETS> 1,971,341
<CURRENT-LIABILITIES> 523,828
<BONDS> 340,435
0
0
<COMMON> 16,250
<OTHER-SE> 823,051
<TOTAL-LIABILITY-AND-EQUITY> 1,971,341
<SALES> 0
<TOTAL-REVENUES> 644,034
<CGS> 0
<TOTAL-COSTS> 324,956
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,390
<INCOME-PRETAX> 171,222
<INCOME-TAX> 65,830
<INCOME-CONTINUING> 105,392
<DISCONTINUED> 0
<EXTRAORDINARY> (4,437)
<CHANGES> 0
<NET-INCOME> 100,955
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
