UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 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 (IRS Employer
incorporation or organization) Identification No.)
P.O. Box 165000, Altamonte Springs, FL 32716-5000
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (407) 889-6010
--------------------------
Securities registered pursuant to Section 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 9.89% due February 1, 2021
7 1/4% due December 15, 2004 7 1/8% due July 15, 2023
6 7/8% due July 15, 2013 8 3/8% due January 15, 2025
The registrant meets the conditions set forth in General Instruction 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 were 6,500,000 common shares outstanding at December 31, 1997, and at the
date of filing of this report.
<PAGE>
SPRINT-FLORIDA, INCORPORATED
SECURITIES AND EXCHANGE COMMISSION
ANNUAL REPORT ON FORM 10-K
Part I
Item 1. Business
Sprint-Florida, Incorporated (Sprint-Florida) is, indirectly, a wholly-owned
subsidiary of Sprint Corporation. In December 1996, Sprint-Florida changed its
name from United Telephone Company of Florida to Sprint-Florida, Incorporated.
At year-end 1996, Sprint Corporation contributed Sprint-Florida's capital stock
to Centel Corporation (Centel), a wholly-owned Sprint Corporation subsidiary.
Centel contributed the capital stock to Central Telephone Company (CTC), a
wholly-owned subsidiary of Centel. Immediately following this contribution,
Central Telephone Company of Florida, a wholly-owned subsidiary of CTC, merged
into Sprint-Florida.
Sprint-Florida provides local exchange telecommunications services in 36
counties in north, central and southwest Florida. These services include access
by telephone customers and other carriers to Sprint-Florida's local exchange
facilities, sales of telecommunications equipment, and long distance services
within specified geographical areas, or local access transport areas (LATAs).
Sprint-Florida is subject to the jurisdiction of the Federal Communications
Commission (FCC) and the Florida Public Service Commission (FPSC).
The following table reflects major revenue categories as a percentage of
Sprint-Florida's total net operating revenues:
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------- ---------------- ----------------- ----------------
<S> <C> <C> <C>
Local service 44.7% 41.6% 40.6%
Network access 39.9 38.8 38.4
Toll service 3.3 6.4 7.8
Other 12.1 13.2 13.2
- -------------------------------------------------------------- ---------------- ----------------- ----------------
100.0% 100.0% 100.0%
---------------- ----------------- ----------------
</TABLE>
<PAGE>
The following table summarizes access lines in service at the end of each of the
last three years:
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------- ---------------- ----------------- ----------------
(in thousands)
Access lines
<S> <C> <C> <C>
Residential 1,355 1,286 1,227
Business 576 527 484
- -------------------------------------------------------------- ---------------- ----------------- ----------------
Total 1,931 1,813 1,711
---------------- ----------------- ----------------
Growth rates 6.6% 5.9%
---------------- -----------------
</TABLE>
AT&T is Sprint-Florida's largest customer for network access services. In 1997
and 1996, 16% of Sprint-Florida's net operating revenues was derived from
services (mainly network access services) provided to AT&T, compared with 19% in
1995. While AT&T is a significant customer, Sprint-Florida does not believe
revenues are dependent on AT&T, as customers' demand for interLATA long distance
telephone service is not tied to any one long distance carrier.
Sprint-Florida had approximately 5,300 employees at year-end 1997, of which 48%
were represented by either the Communications Workers of America or the
International Brotherhood of Electrical Workers for collective bargaining
purposes.
In 1987, Sprint-Florida formed United Telephone Long Distance, Inc. (UTLD). UTLD
resold interexchange long distance services from exchanges within
Sprint-Florida's service area. Through early 1997, Sprint-Florida phased
out these reseller services.
In July, 1995, telecommunications reform legislation became law in Florida. This
legislation allowed competition in the local telephone marketplace beginning in
1996, while replacing rate of return regulation with price regulation.
The extent and ultimate impact of competition 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 competition 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 law.
Sprint-Florida's environmental compliance and remediation expenditures are
mainly related to the operation of standby power generators for its
telecommunications equipment. The expenditures arise in connection with
standards compliance, permits, or occasional remediation, which may be related
to generators, batteries or fuel storage. Sprint-Florida's expenditures relating
to environmental compliance and remediation have not been material to its
financial statements or its operations and are not expected to have any future
material effects.
<PAGE>
Item 2. Properties
Sprint-Florida's properties consist mainly of land, structures, facilities and
equipment. Substantially all of the telephone property, plant and equipment is
subject to the liens of the indentures securing Sprint-Florida's first mortgage
debt.
The following table summarizes Sprint-Florida's major telephone assets as a
percentage of total property, plant and equipment at year-end, 1997:
Property, plant and equipment
Cable and wire facilities 47.4%
Central office equipment 39.4
General support assets 9.0
Other 4.2
- -----------------------------------------
100.0%
- -----------------------------------------
Item 3. Legal Proceedings
No material legal proceedings are pending against Sprint-Florida or its
subsidiaries.
Item 4. Submission of Matters to a Vote of Security Holders
Omitted under the provisions of General Instruction I.
<PAGE>
Part II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
Sprint-Florida's common stock is owned by CTC; consequently, it is not publicly
traded.
Item 6. Selected Financial Data
Omitted under the provisions of General Instruction I.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
Sprint-Florida, Incorporated, with its wholly-owned subsidiaries,
(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 and latitude allowed its
competitors by the Federal Communications Commission (FCC) or 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 was a wholly-owned
subsidiary of Central Telephone Company, merged into Sprint-Florida. As a
result, prior period financial information has been restated to reflect the new
reporting entity.
Regulatory Developments
The Telecom Act, which was signed into law in February 1996, was designed to
promote competition in all aspects of telecommunications. It eliminated legal
and regulatory barriers to entry into local telephone markets. It also required
incumbent local exchange carriers (LECs), among other things, to allow local
resale at wholesale rates, negotiate interconnection agreements, provide
nondiscriminatory access to unbundled network elements and allow collocation of
interconnection equipment by competitors. The Telecom Act also allows Bell
Operating Companies 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. The Telecom Act's
impact on Sprint-Florida remains unclear because the rules for competition are
still being decided by regulators and the courts. Local competition is expected
to eventually result in some loss of Sprint-Florida's market share.
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
LECs and state public utility commissions 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.
<PAGE>
In 1997, the court struck down the FCC's pricing rules. It ruled that the
Telecom Act left jurisdiction over pricing matters to the states. The court also
struck down certain other FCC rules on jurisdictional or substantive grounds.
The U.S. Supreme Court has agreed to review the appeals court decision.
In 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. All
carriers providing telecommunications services will be required to
fund this program, which is capped at $2.7 billion per year. However,
LECs can pass their portion of these costs on to long distance
carriers.
- Per-minute interstate access rates charged by LECs will decline over
time to become cost-based, beginning in July 1997.
- Certain monthly flat-rate charges paid by some local telephone
customers 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.
- 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 delayed, 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.
<TABLE>
<CAPTION>
Results of Operations
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Years ended December 31, 1997 1996
- ------------------------------------------------------------------------------- --- ------------- -- -------------
(in thousands)
Net Operating Revenues
<S> <C> <C>
Local service $ 555,271 $ 504,367
Network access 494,865 470,576
Toll service 41,527 78,031
Other 149,664 159,724
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Net operating revenues 1,241,327 1,212,698
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Operating Expenses
Costs of services and products 424,341 401,164
Selling, general and administrative 238,697 242,647
Depreciation and amortization 245,839 235,531
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Total operating expenses 908,877 879,342
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Operating Income $ 332,450 $ 333,356
--- ------------- -- -------------
</TABLE>
Net Operating Revenues
Net operating revenues increased 2% in 1997 mainly because of customer access
line growth of 6.6%.
Local service revenues, derived from providing local exchange services,
increased 10% in 1997. This increase is mainly due to the access line growth,
which reflects strong economic growth in the service areas and increases in
second-line service for existing business and residential customers to meet
their lifestyle and data access needs. Local service revenues also increased
because of extended area calling plans and increased demand for advanced
intelligent network services, such as Caller ID and Call Waiting. In addition,
revenues increased due to increased wire maintenance agreements.
Network access service revenues, derived from interexchange long distance
carriers' use of the local network to complete calls, increased 5% in 1997. This
increase is mainly due to a 9% increase in minutes of use. The 1997 revenue
growth was partly offset by FCC-mandated access rate reductions effective in
July 1997 -- see "Regulatory Developments" for more information.
Toll service revenues are mainly derived from providing long distance services
within specified geographical areas, or local access transport areas (LATAs).
These revenues decreased 47% in 1997, mainly because reseller interexchange long
distance services were phased out through early 1997, and extended local area
calling plans. This decline was partly offset by the related increase in local
service and network access revenues.
Other revenues are derived from telecommunications equipment sales, directory
sales and listing services, and billing and collection services. Other revenues
decreased 6% in 1997 mainly because of a change in transfer pricing for certain
transactions between Sprint-Florida and Sprint Corporation's directory
publishing division beginning in July 1997 to more accurately reflect market
pricing. Partly offsetting the decrease was an increase in revenues from sales
of telephone equipment.
Operating Expenses
Costs of services and products increased 6% in 1997 mainly because of customer
access line growth and increased equipment sales. Cost of services and products
were 34.2% of net operating revenues in 1997 and 33.1% in 1996.
Selling, general and administrative expense decreased 2% in 1997 from savings
related to the restructuring of the finance function and general cost control
measures.
Depreciation increased 4% in 1997 mainly because of plant additions.
Extraordinary Items
Sprint-Florida incurred after-tax extraordinary charges of $253,000 related to
the early extinguishment of debt in 1996.
Year 2000 Issue
The "Year 2000" issue affects installed computer systems, network elements,
software applications, and other business systems that have time-sensitive
programs that may not properly reflect or recognize the year 2000. Because many
computers and computer applications define dates by the last two digits of the
year, "00" may not be properly identified as the year 2000. This error could
result in miscalculations or system failures.
Sprint Corporation, with its subsidiaries, (Sprint) started a program in 1996 to
identify and address the Year 2000 issue. It is taking an inventory of its
network and computer systems and is creating and implementing plans to make them
Year 2000 compliant. Sprint is using both internal and external sources to
identify, correct or reprogram, and test its systems for Year 2000 compliance.
The total cost of modifications and conversions is not known at this time;
however, it is not expected to be material to Sprint-Florida's financial
position, results of operations or cash flows and is being expensed as incurred.
The Year 2000 issue may also affect the systems and applications of Sprint's
customers, vendors or resellers. Sprint is also contacting others with whom it
conducts business to receive the appropriate warranties and assurances that
those third parties are, or will be, Year 2000 compliant.
If compliance is not achieved in a timely manner, the Year 2000 issue could have
a material effect on Sprint's operations. However, Sprint is focusing on
identifying and addressing all aspects of its operations that may be affected by
the Year 2000 issue and is addressing the most critical applications first. As a
result, Sprint management does not believe its operations, or the operations of
its subsidiaries, will be materially adversely affected.
Impact of Recently Issued Accounting Pronouncement
See Note 10 of Notes to Consolidated Financial Statements for a discussion of a
recently issued accounting pronouncement.
<PAGE>
Item 8. Financial Statements and Supplementary Data Index
<TABLE>
<CAPTION>
Page Reference
------------------------
<S> <C>
Report of Independent Auditors 9
Consolidated Statements of Income and Retained Earnings for each of the three
years ended December 31, 1997 10
Consolidated Balance Sheets at December 31, 1997 and 1996 11
Consolidated Statements of Cash Flows for each of the three years ended December
31, 1997 12
Notes to Consolidated Financial Statements 13
Schedule II - Consolidated Valuation and Qualifying Accounts for each of the three
years ended December 31, 1997 25
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Sprint-Florida, Incorporated
We have audited the accompanying consolidated balance sheets of Sprint-Florida,
Incorporated (Sprint-Florida), a wholly-owned subsidiary of Sprint Corporation,
as of December 31, 1997 and 1996, 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, 1997. Our audits also included the financial statement
schedule listed in the Financial Statements and Supplementary Data Index. These
financial statements and the schedule are the responsibility of Sprint-Florida'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
Sprint-Florida at December 31, 1997 and 1996, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1997, 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 year ended December 31, 1995 have been restated to reflect this
change.
As discussed in Note 8 to the consolidated financial statements, Sprint-Florida
discontinued accounting for its operations in accordance with Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation," in 1995.
ERNST & YOUNG LLP
Kansas City, Missouri
January 21, 1998
9
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS Sprint-Florida, Incorporated
- ---------------------------------------------------- -- ----------------- -- ----------------- -- -----------------
Years Ended December 31, 1997 1996 1995
- ---------------------------------------------------- -- ----------------- -- ----------------- -- -----------------
(in thousands)
<S> <C> <C> <C>
Net Operating Revenues $ 1,241,327 $ 1,212,698 $ 1,120,968
Operating Expenses
Costs of services and products 424,341 401,164 399,905
Selling, general and administrative 238,697 242,647 231,402
Depreciation 245,839 235,531 228,562
Restructuring costs -- -- 15,379
- ---------------------------------------------------- -- ----------------- -- ----------------- -- -----------------
Total operating expenses 908,877 879,342 875,248
- ---------------------------------------------------- -- ----------------- -- ----------------- -- -----------------
Operating Income 332,450 333,356 245,720
Interest expense (43,096) (45,210) (47,464)
Other expense, net (453) (1,011) (1,198)
- ---------------------------------------------------- -- ----------------- -- ----------------- -- -----------------
Income before income taxes and extraordinary items 288,901 287,135 197,058
Income taxes (110,118) (109,659) (73,126)
- ---------------------------------------------------- -- ----------------- -- ----------------- -- -----------------
Income before extraordinary items 178,783 177,476 123,932
Extraordinary items, net -- (253) (138,595)
- ---------------------------------------------------- -- ----------------- -- ----------------- -- -----------------
Net Income (Loss) 178,783 177,223 (14,663)
Retained Earnings at Beginning of Year 555,490 492,766 611,804
Dividends declared (169,000) (114,499) (104,375)
- ---------------------------------------------------- -- ----------------- -- ----------------- -- -----------------
Retained Earnings at End of Year $ 565,273 $ 555,490 $ 492,766
-- ----------------- -- ----------------- -- -----------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
10
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS Sprint-Florida, Incorporated
- ----------------------------------------------------------------- --- ------------------- --- ------------------
December 31, 1997 1996
- ----------------------------------------------------------------- --- ------------------- --- ------------------
(in thousands, except per share data)
Assets
Current assets
<S> <C> <C>
Cash $ 25,470 $ 185,938
Accounts receivable
Customers and other, net of allowance of $5,515 and
$5,370 150,047 125,384
Interexchange carriers 58,074 59,432
Affiliated companies 10,041 12,907
Inventories 25,114 26,879
Other 7,072 8,171
- ----------------------------------------------------------------- --- ------------------- --- ------------------
Total current assets 275,818 418,711
- ----------------------------------------------------------------- --- ------------------- --- ------------------
Property, plant and equipment 3,632,432 3,411,797
Less accumulated depreciation 2,028,184 1,879,235
- ----------------------------------------------------------------- --- ------------------- --- ------------------
Net property, plant and equipment 1,604,248 1,532,562
- ----------------------------------------------------------------- --- ------------------- --- ------------------
Deferred charges and other assets 59,203 49,411
- ----------------------------------------------------------------- --- ------------------- --- ------------------
Total $ 1,939,269 $ 2,000,684
--- ------------------- --- ------------------
Liabilities and Shareholder's Equity
Current liabilities
Outstanding checks in excess of cash balances $ 10,801 $ 13,317
Advances from parent 38,999 134,900
Current maturities of long-term debt 304 1,916
Accounts payable
Vendors and other 43,687 23,746
Interexchange carriers 26,663 32,017
Affiliated companies 220,354 202,425
Advance billings and customer deposits 32,677 28,802
Other 55,248 67,419
- ----------------------------------------------------------------- --- ------------------ ---- ------------------
Total current liabilities 428,733 504,542
- ----------------------------------------------------------------- --- ------------------ ---- ------------------
Long-term debt 455,011 455,108
- ----------------------------------------------------------------- --- ------------------ ---- ------------------
Deferred credits and other liabilities
Deferred income taxes and investment tax credits 152,120 152,184
Postretirement and other benefit obligations 83,332 71,822
Other 9,252 15,990
- ----------------------------------------------------------------- --- ------------------ ---- ------------------
Total deferred credits and other liabilities 244,704 239,996
- ----------------------------------------------------------------- --- ------------------ ---- ------------------
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 565,273 555,490
- ----------------------------------------------------------------- --- ------------------ ---- ------------------
Total shareholder's equity 810,821 801,038
- ----------------------------------------------------------------- --- ------------------ ---- ------------------
Total $ 1,939,269 $ 2,000,684
--- ------------------ ---- ------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
11
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS Sprint-Florida, Incorporated
- ----------------------------------------------------------------- ----------------- ---------------- -----------------
Years Ended December 31, 1997 1996 1995
- ----------------------------------------------------------------- ----------------- ---------------- -----------------
(in thousands)
Operating Activities
<S> <C> <C> <C>
Net income (loss) $ 178,783 $ 177,223 $ (14,663)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation 245,839 235,531 228,562
Deferred income taxes and investment tax credits 2,098 2,805 (15,985)
Extraordinary losses, net -- 253 138,595
Changes in operating assets and liabilities
Receivables, net (20,439) (14,851) (9,587)
Inventories and other current assets 3,052 741 4,083
Accounts payable, accrued expenses and other current
liabilities 6,704 (28,962) (9,074)
Other assets and liabilities, net (7,370) 3,799 24,094
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Net cash provided by operating activities 408,667 376,539 346,025
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Investing Activities
Capital expenditures (316,253) (279,032) (227,190)
Other, net (1,272) 801 3,294
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Net cash used by investing activities (317,525) (278,231) (223,896)
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Financing Activities
Proceeds from long-term debt -- -- 68,576
Payments on long-term debt (1,709) (67,547) (7,165)
Increase (decrease) in advances from parent (95,901) 83,461 (79,827)
Dividends paid (169,000) (114,499) (104,375)
Sale of receivables, net 15,000 175,000 --
Other, net -- (258) (2,305)
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Net cash provided (used) by financing activities (251,610) 76,157 (125,096)
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Increase (Decrease) in Cash and Equivalents (160,468) 174,465 (2,967)
Cash and Equivalents at Beginning of Year 185,938 11,473 14,440
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Cash and Equivalents at End of Year $ 25,470 $ 185,938 $ 11,473
--- ------------- -- ------------- --- -------------
Supplemental Cash Flow Information
Cash paid for interest, net of amounts capitalized $ 43,471 $ 46,832 $ 50,607
Cash paid for income taxes $ 119,352 $ 99,918 $ 91,217
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Sprint-Florida, Incorporated
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. (Sprint-Florida). All significant intercompany transactions have been
eliminated. Sprint-Florida is a wholly-owned subsidiary of Central Telephone
Company (CTC), which is, indirectly, a wholly-owned subsidiary of Sprint
Corporation; accordingly, earnings per share information has been omitted.
The consolidated financial statements are prepared according to generally
accepted accounting principles. These principles require 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-year
presentation. These reclassifications had no effect on the results of operations
or shareholder's equity as previously reported.
At year-end 1995, Sprint-Florida adopted accounting principles for a competitive
marketplace and discontinued accounting for the economic effects of regulation
under Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for
the Effects of Certain Types of Regulation" (see Note 8).
Operations
Sprint-Florida provides local exchange services, access by telephone customers
and other carriers to local exchange facilities, sales of telecommunications
equipment and long distance services within specified geographical areas in
Florida.
Revenue Recognition
Sprint-Florida recognizes operating revenues as services are rendered or as
products are delivered to customers. Operating revenues are recorded net of an
estimate for uncollectible accounts.
Cash and Equivalents
Sprint-Florida uses controlled disbursement banking arrangements as part of its
cash management program. Outstanding checks in excess of cash balances are
reflected as a current liability on the consolidated balance sheets.
Sprint-Florida had sufficient funds available to fund these outstanding checks
when they were presented for payment.
13
<PAGE>
1. Summary of Significant Accounting Policies (continued)
Inventories
Inventories consist of materials and supplies (stated at average cost) and
equipment held for resale (stated at the lower of average cost or market).
Property, Plant and Equipment
Property, plant and equipment is 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 71 at year-end 1995, the cost of property, plant and
equipment had been generally depreciated on a straight-line basis over the lives
prescribed by regulatory commissions.
Income Taxes
Sprint-Florida's operations are included in the consolidated federal income tax
return of Sprint Corporation and its subsidiaries (Sprint). Federal income tax
is calculated by Sprint-Florida on the basis of its filing a separate return.
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.
2. Change in Reporting Entity
During 1996, Central Telephone Company of Florida merged into Sprint-Florida.
Due to this change in entity, the Sprint-Florida's 1995 financial statements
were restated to present the financial information for the new reporting entity.
This change increased income before extraordinary items by $19 million and
decreased 1995 net income by $11 million.
14
<PAGE>
3. Employee Benefit Plans
Defined Benefit Pension Plan
Substantially all Sprint-Florida employees are covered by a noncontributory
defined benefit pension plan sponsored by Sprint. Benefits for plan participants
represented by collective bargaining units are based on negotiated schedules of
defined amounts. For participants not covered by collective bargaining
agreements, the plan provides pension benefits based on years of service and
participants' compensation.
Sprint-Florida's policy is to make annual plan contributions 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 benefits are fully funded at
retirement. At year-end 1997, 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 Sprint subsidiary based on a
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 Sprint-Florida were $3
million in 1997 and 1996, and $4 million in 1995.
Defined Contribution Plans
Sprint sponsors defined contribution employee savings plans covering
substantially all Sprint-Florida employees. Participants may contribute portions
of their pay to the plans. For employees represented by collective bargaining
units, Sprint-Florida matches contributions based on negotiated amounts.
Sprint-Florida also matches contributions of employees not covered by collective
bargaining agreements. For those participants, their contributions are matched
in Sprint Corporation common stock. The matching is equal to 50% of
participants' contributions up to 6% of their pay. In addition, Sprint may, at
the discretion of its Board of Directors, provide matching contributions based
on the performance of Sprint Corporation common stock compared to other
telecommunications companies' stock. Sprint-Florida's matching contributions
were $6 million in 1997, 1996 and 1995.
Postretirement Benefits
Sprint provides postretirement benefits (principally medical benefits) to
substantially all employees. Employees retiring before certain dates are
eligible for benefits at no cost, or at a reduced cost. Employees retiring after
certain dates are eligible for benefits on a shared-cost basis. Sprint-Florida
funds the accrued costs as benefits are paid.
Net postretirement benefit costs are determined for each Sprint subsidiary based
on a calculation of service costs and accumulated postretirement benefit
obligations and an appropriate allocation of unrecognized prior service costs,
unrecognized net gains and transition obligation. Sprint-Florida recorded net
postretirement benefit costs of $15 million in 1997, $16 million in 1996 and $17
million in 1995.
15
<PAGE>
4. Income Taxes
Income tax expense on income before extraordinary items consisted of the
following:
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
(in thousands)
Current income tax expense
<S> <C> <C> <C>
Federal $ 92,593 $ 92,290 $ 76,544
State 15,427 14,564 12,567
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Total current 108,020 106,854 89,111
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Deferred income tax expense (benefit)
Federal 4,044 4,744 (10,217)
State 661 1,477 (1,733)
Amortization of deferred ITC (2,607) (3,416) (4,035)
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Total deferred 2,098 2,805 (15,985)
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Total income tax expense $ 110,118 $ 109,659 $ 73,126
-- ------------- --- ------------- -- -------------
</TABLE>
The differences that cause the effective income tax rate to vary from the
statutory rate of 35% were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
(in thousands)
<S> <C> <C> <C>
Income tax expense at the statutory rate $ 101,115 $ 100,497 $ 68,970
Less ITC included in income 2,607 3,416 4,035
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Expected federal income tax expense after ITC 98,508 97,081 64,935
Effect of
State income tax, net of federal income tax effect 10,457 10,427 7,042
Other, net 1,153 2,151 1,149
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Income tax expense, including ITC $ 110,118 $ 109,659 $ 73,126
-- ------------- --- ------------- -- -------------
Effective income tax rate 38.1% 38.2% 37.1%
-- ------------- --- ------------- -- -------------
</TABLE>
16
<PAGE>
4. Income Taxes (continued)
In 1996, Sprint-Florida redeemed outstanding debt, prior to maturity, resulting
in an after-tax extraordinary loss of $253,000, net of income tax benefits of
$159,000 (see Note 5). At year-end 1995, Sprint-Florida adopted accounting
principles for a competitive marketplace and discontinued applying SFAS 71 to
its financial statements. This resulted in an after-tax, noncash extraordinary
charge of $139 million, net of income tax benefits of $107 million (see Note 8).
Sprint-Florida recognizes deferred income taxes for the temporary differences
between the carrying amounts of it'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 year-end 1997 and
1996, along with the income tax effect of each, were as follows:
<TABLE>
<CAPTION>
1997 Deferred Income Tax 1996 Deferred Income Tax
------------- -- ------------- --- ------------- -- -------------
Assets Liabilities Assets Liabilities
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
(in thousands)
<S> <C> <C> <C> <C>
Property, plant and equipment $ -- $ 170,111 $ -- $ 167,139
Expense accruals 34,998 -- 34,427 --
Prepaid pension costs -- 14,509 -- 13,336
Other, net 7,239 -- 6,031 --
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Total $ 42,237 $ 184,620 $ 40,458 $ 180,475
--- ------------- -- ------------- --- ------------- -- -------------
</TABLE>
17
<PAGE>
5. Borrowings
Long-term Debt
Long-term debt at year-end was as follows:
<TABLE>
<CAPTION>
Interest Rates 1997 1996
- ----------------------------------------------------- ------------------------- --- ------------- -- -------------
(in thousands)
First mortgage bonds, maturities
<S> <C> <C> <C>
2003 - 2007 6.3% - 7.3% $ 120,000 $ 120,000
2013 - 2017 6.9% 60,000 60,000
2018 - 2022 9.3% - 9.9% 133,800 134,000
2023 - 2027 7.1% - 8.4% 145,000 145,000
Other Various 272 1,990
Unamortized debt discount (3,757) (3,966)
- ----------------------------------------------------- ------------------------- --- ------------- -- -------------
455,315 457,024
Less current maturities 304 1,916
- ----------------------------------------------------- ------------------------- --- ------------- -- -------------
Long-term debt $ 455,011 $ 455,108
--- ------------- -- -------------
</TABLE>
Long-term debt maturities, including sinking fund requirements, during each of
the next five years are as follows:
- ------------------------------------------------------ -- ----------------------
(in thousands)
1998 $ 304
1999 200
2000 200
2001 200
2002 200
- ------------------------------------------------------ -- ----------------------
The first mortgage bonds and notes are secured by substantially all of
Sprint-Florida's property, plant and equipment.
Under the most restrictive terms of Sprint-Florida's first mortgage bond
indentures, retained earnings were not restricted from payment of dividends at
year-end 1997.
Sprint-Florida's 1997 short-term financing was mainly provided by Sprint. The
weighted average interest rates on short-term borrowings were 5.0% in 1997, 5.4%
in 1996 and 6.0% in 1995.
Sprint-Florida was in compliance with all restrictive or financial covenants
relating to its debt arrangements at year-end 1997.
During 1996, Sprint-Florida redeemed, prior to maturity, $12 million of its
Central Telephone Company of Florida 9.37% Bonds, $37 million of its 6.68%
Senior Notes and $16 million of its 6.03% Senior Notes. These early redemptions
resulted in a $253,000 after-tax extraordinary loss.
18
<PAGE>
6. Commitments and Contingencies
Gross rental expense totaled $11 million in 1997, $12 million in 1996 and $13
million in 1995. Minimum rental commitments at year-end 1997 are as follows:
- ----------------------------------------------------------- --------------------
(in thousands)
1998 $ 4,542
1999 3,723
2000 2,338
2001 2,193
2002 2,210
Thereafter 1,530
- ----------------------------------------------------------- --- ----------------
Various suits arising in the ordinary course of business are pending against
Sprint-Florida. Management cannot predict the final outcome of these actions,
but believes they will not result in a material effect on Sprint-Florida's
financial statements.
7. Related Party Transactions
Sprint-Florida's related party transactions were as follows:
<TABLE>
<CAPTION>
Affiliated
Transaction Description Company 1997 1996 1995
- ----------------------------------------- ---------------- --- ---------------- --- ------------- -- -------------
Sprint-Florida: (in thousands)
<S> <C> <C> <C> <C>
Purchased telecommunications equipment, North Supply $ 136,283 (1) (2) $ 74,774 $ 69,999
construction and maintenance equipment Company
and materials and supplies.
- ----------------------------------------- ---------------- --- ---------------- --- ------------- -- -------------
Reimbursed Sprint for data processing Sprint 149,964 103,519 93,427
services, other data-related costs and
certain management costs.
- ----------------------------------------- ---------------- --- ---------------- --- ------------- -- -------------
Received fees for the right to publish Sprint 28,959 (2) 68,076 64,473
telephone directories in Publishing &
Sprint-Florida's territory; and listing Advertising
and billing and collection services. and Centel
Directory
Company
- ----------------------------------------- ---------------- --- ---------------- --- ------------- -- -------------
</TABLE>
(1) During 1997, Sprint centralized certain local division purchasing and
warehousing functions at North Supply Company. This resulted in increased
sales of telecommunications equipment and distribution.
(2) Beginning in July 1997, Sprint changed its transfer pricing for certain
transactions between affiliates to more accurately reflect market pricing.
19
<PAGE>
8. Adoption of Accounting Principles for a Competitive Marketplace
At year-end, 1995, Sprint-Florida determined that it no longer met the criteria
necessary for the continued use of SFAS 71. As a result, 1995 operating results
included a noncash, extraordinary charge of $139 million, net of income tax
benefits of $107 million. The decision to discontinue using SFAS 71 was based on
changes in the regulatory framework and the convergence of competition in the
telecommunications industry.
The 1995 extraordinary charge recognized when Sprint-Florida discontinued using
SFAS 71 consisted of the following:
<TABLE>
<CAPTION>
Pretax After-Tax
- ------------------------------------------------------------------------------- --- ------------- -- -------------
(in thousands)
<S> <C> <C>
Increase in accumulated depreciation $ 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 ITC amortization (5,019)
-- -------------
Extraordinary charge $ 138,595
-- -------------
</TABLE>
9. Additional Financial Information
Restructuring Costs
In 1995, Sprint-Florida recorded a $15 million restructuring charge, which
reduced net income by $10 million. The restructuring plan included the planned
elimination over several years of approximately 310 positions at Sprint-Florida,
mainly in the network and finance functions. Through 1997, a majority of the
positions have been eliminated resulting in termination benefit payments of $6
million.
Major Customer Information
Consolidated operating revenues from AT&T, resulting mainly from network access,
billing and collection services and the lease of network facilities totaled $203
million in 1997, $197 million in 1996 and $209 million in 1995.
Sprint-Florida's customer and other accounts receivable are not subject to
significant concentrations of credit risk due to the large number of customers
in Sprint-Florida's customer base.
20
<PAGE>
Financial Instruments
Sprint-Florida estimates the fair value of its financial instruments using
available market information and appropriate valuation methodologies. As a
result, the estimates do not necessarily represent the values Sprint-Florida
could realize in a current market exchange. Although management is not aware of
any factors that would affect the estimated fair value amounts presented at
year-end 1997, those amounts have not been comprehensively revalued for
financial statement purposes since that date. Therefore, fair value estimates
after year-end 1997 may differ significantly from the amounts discussed below.
Sprint-Florida's financial instruments mainly consisted of long-term debt with
carrying amounts of $455 and $457 million and estimated fair values of $491 and
$479 million at year-end 1997 and 1996, respectively. The estimated fair value
of Sprint-Florida's long-term debt was based on quoted market prices for
publicly traded issues. The estimated fair value of all other issues was based
on the present value of estimated future cash flows using a discount rate based
on the risks involved. The carrying values of Sprint-Florida's other financial
instruments (principally short-term borrowings) approximate fair value at
year-end 1997 and 1996.
Sprint-Florida has not invested in derivative financial instruments.
Sales of Accounts Receivable
In January 1997 and 1998, Sprint-Florida repurchased $175 and $190 million of
accounts receivable sold to United Telecommunications, Inc., an affiliated
company, at year-end, 1996 and 1997, respectively. Accordingly, the transactions
were treated as a borrowing in the Consolidated Balance Sheets.
Subsequent Events
In 1998, Sprint-Florida called, prior to the scheduled maturity, $115 million of
its 9.25% Bonds. This resulted in a $4 million after-tax loss in 1998.
10. Recently Issued Accounting Pronouncement
In February 1998, the Financial Accounting Standards Board issued SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits." SFAS
132 standardizes the disclosure requirements for pensions and postretirement
benefits where practical. It also eliminates certain disclosures and requires
certain additional information. Sprint-Florida will adopt SFAS 132 in its 1998
year-end financial statements. SFAS 132 is not expected to have a significant
effect on Sprint-Florida's pension and postretirement benefit plan disclosures.
21
<PAGE>
Parts II - IV
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.
22
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. The consolidated financial statements of Sprint-Florida filed as
part of this report are listed in the Financial Statements and
Supplementary Data Index.
2. The consolidated financial statement schedule of Sprint-Florida
filed as part of this report is listed in the Financial Statements
and Supplementary Data Index.
3. The following exhibits are filed as part of this report:
EXHIBITS
(3) Articles of Incorporation and Bylaws:
(a) Articles of Incorporation as amended
(b) Bylaws as amended
(4) Instruments defining the Rights of Security Holders:
(a) The rights of Sprint-Florida's equity security holders are
defined in Articles IV and VII of its Articles of
Incorporation. See Exhibit 3(a) above.
(b) Indenture of Mortgage dated as of the 2nd day of January
1941, between Sprint-Florida (formerly United Telephone
Company of Florida) and Sun First National Bank of Orlando,
as Trustee, as supplemented by the First through
Thirty-First Supplemental Indentures (filed as Exhibits 4J
through 4U to Registration Statement No. 2-11471, Exhibits
4V through 4Y to Registration Statement No. 2-12334,
Exhibit 4Z to Registration Statement No. 2-13108, Exhibits
4X through 4Z and 4-AA to Registration Statement No.
2-22096, Exhibit 4-A-2 to Registration Statement No.
2-38951, Exhibit 2-A-2 to Registration Statement No.
2-42543, Exhibit 2-A-2 to Registration Statement No.
2-45708, Exhibit 2-D-26 to Registration Statement No.
2-51785, Exhibits 4Q, 4V, 4W, 4X, and 4-CC to Registration
Statement No. 2-69791, Exhibit 4-DD to Registration 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).
(c) Thirty-Second Supplemental Indenture dated as of December
1, 1992, between Sprint-Florida and Barnett Banks Trust
Company, N.A. (filed as Exhibit 4 (i) to Sprint-Florida's
1992 Annual Report on Form 10-K and incorporated herein by
reference).
(d) Thirty-Third Supplemental Indenture dated as of May 1,
1993, between Sprint-Florida and Barnett Banks Trust
Company, N.A. (filed as Exhibit 99 to Sprint-Florida
Current Report on Form 8-K dated May 12, 1993, and
incorporated herein by reference).
<PAGE>
(e) Thirty-Fourth Supplemental Indenture dated as of July 1,
1993, between Sprint-Florida and Barnett Banks Trust
Company, N.A. (filed as Exhibit 99 to Sprint-Florida's
Current Report on Form 8-K dated July 7, 1993, and
incorporated herein by reference).
(f) Thirty-Fifth Supplemental Indenture dated as of January 15,
1995, between Sprint-Florida and The Bank of New York
(filed as Exhibit 4(f) to Sprint-Florida's Annual Report on
Form 10-K for the year ended December 31, 1996, and
incorporated herein by reference).
(27) Financial Data Schedules
(a) December 31, 1997
(b) September 30, 1997 Restated
(c) June 30, 1997 Restated
(d) March 31, 1997 Restated
(e) December 31, 1996 Restated
(f) September 30, 1996 Restated
(g) June 30, 1996 Restated
(h) March 31, 1996 Restated
(i) December 31, 1995 Restated
Sprint-Florida 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) Indenture between Sprint-Florida (successor to Southeastern Telephone
Company) and The First National Bank of Chicago, as Trustee, dated April
1, 1947, as amended by twenty-two supplemental indentures.
The obligations under this indenture were assumed by Sprint-Florida in the
merger, effective December 31, 1996, between Central Telephone Company of
Florida and Sprint-Florida. The total amount of securities authorized under this
indenture does not exceed 10% of the total assets of Sprint-Florida.
(b) Report on Form 8-K
No reports on Form 8-K were filed during the three months ended
December 31, 1997.
<PAGE>
<TABLE>
<CAPTION>
SPRINT-FLORIDA, INCORPORATED
SCHEDULE II -- CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1997, 1996 and 1995
Additions Deductions
-------------- ---------------
Accounts
Balance charged off Balance end
beginning Charged to net of of year
of year expense collections
- ----------------------------------------- -- ------------- --- -------------- --- --------------- -- -------------
(in thousands)
1997
<S> <C> <C> <C> <C>
Allowance for doubtful accounts $ 5,370 $ 9,282 $ (9,137) $ 5,515
- ----------------------------------------- -- ------------- --- -------------- --- --------------- -- -------------
1996
Allowance for doubtful accounts $ 4,252 $ 8,464 $ (7,346) $ 5,370
- ----------------------------------------- -- ------------- --- -------------- --- --------------- -- -------------
1995
Allowance for doubtful accounts $ 3,268 $ 6,868 $ (5,884) $ 4,252
- ----------------------------------------- -- ------------- --- -------------- --- --------------- -- -------------
</TABLE>
<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 duly authorized.
SPRINT-FLORIDA, INCORPORATED
----------------------------------------------------
(Registrant)
By /s/ Michael B. Fuller
----------------------------------------------------
Michael B. Fuller
President and Chief Executive Officer
Date: March 23, 1998
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 indicated on the 23rd day of March, 1998.
/s/ Michael B. Fuller
----------------------------------------------------
Michael B. Fuller
President and Chief Executive Officer and
Director
/s/Richard D. McRae
----------------------------------------------------
Richard D. McRae
Vice President (Chief Financial Officer) and
Director
/s/John I. Lehman
----------------------------------------------------
John I. Lehman
Controller (Chief Accounting Officer)
/s/Don A. Jensen
----------------------------------------------------
Don A. Jensen
Director
<PAGE>
EXHIBITS INDEX
Exhibit
Number
(3) Articles of Incorporation and Bylaws:
(a) Articles of Incorporation as amended
(b) Bylaws as amended
(4) Instruments defining the Rights of Security Holders:
(a) The rights of Sprint-Florida's equity security holders are
defined in Articles IV and VII of its Articles of
Incorporation. See Exhibit 3(a) above.
(b) Indenture of Mortgage dated as of the 2nd day of January
1941, between Sprint-Florida (formerly United Telephone
Company of Florida) and Sun First National Bank of Orlando,
as Trustee, as supplemented by the First through
Thirty-First Supplemental Indentures (filed as Exhibits 4J
through 4U to Registration Statement No. 2-11471, Exhibits
4V through 4Y to Registration Statement No. 2-12334,
Exhibit 4Z to Registration Statement No. 2-13108, Exhibits
4X through 4Z and 4-AA to Registration Statement No.
2-22096, Exhibit 4-A-2 to Registration Statement No.
2-38951, Exhibit 2-A-2 to Registration Statement No.
2-42543, Exhibit 2-A-2 to Registration Statement No.
2-45708, Exhibit 2-D-26 to Registration Statement No.
2-51785, Exhibits 4Q, 4V, 4W, 4X, and 4-CC to Registration
Statement No. 2-69791, Exhibit 4-DD to Registration 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).
(c) Thirty-Second Supplemental Indenture dated as of December
1, 1992, between Sprint-Florida and Barnett Banks Trust
Company, N.A. (filed as Exhibit 4 (i) to Sprint-Florida's
1992 Annual Report on Form 10-K and incorporated herein by
reference).
(d) Thirty-Third Supplemental Indenture dated as of May 1,
1993, between Sprint-Florida and Barnett Banks Trust
Company, N.A. (filed as Exhibit 99 to Sprint-Florida
Current Report on Form 8-K dated May 12, 1993, and
incorporated herein by reference).
<PAGE>
(e) Thirty-Fourth Supplemental Indenture dated as of July 1,
1993, between Sprint-Florida and Barnett Banks Trust
Company, N.A. (filed as Exhibit 99 to Sprint-Florida's
Current Report on Form 8-K dated July 7, 1993, and
incorporated herein by reference).
(f) Thirty-Fifth Supplemental Indenture dated as of January 15,
1995, between Sprint-Florida and The Bank of New York
(filed as Exhibit 4(f) to Sprint-Florida's Annual Report on
Form 10-K for the year ended December 31, 1996, and
incorporated herein by reference).
(27) Financial Data Schedules
(a) December 31, 1997
(b) September 30, 1997 Restated
(c) June 30, 1997 Restated
(d) March 31, 1997 Restated
(e) December 31, 1996 Restated
(f) September 30, 1996 Restated
(g) June 30, 1996 Restated
(h) March 31, 1996 Restated
(i) December 31, 1995 Restated
<PAGE>
Exhibit 3(a)
ARTICLES OF INCORPORATION
OF
SPRINT-FLORIDA, INCORPORATED
(AS AMENDED FEBRUARY 5, 1998)
ARTICLE I - NAME
The name of this Corporation shall be:
SPRINT-FLORIDA, INCORPORATED.
ARTICLE II - PLACE OF BUSINESS
The principal place of business of this Corporation shall be Apopka,
Orange County, Florida, but it may establish offices and agencies in any place
or places in or out of the State of Florida.
ARTICLE III - PURPOSE AND GENERAL POWERS
The general purpose of this Corporation shall be the transaction of any
or all lawful business for which corporations may be incorporated under the
Florida Business Corporation Act, as amended (hereinafter referred to as the
"Act"). This Corporation shall have all the powers enumerated in the Act and all
such powers as are not specifically prohibited to corporations for profit under
the laws of the State of Florida.
ARTICLE IV - CAPITAL STOCK
(a) Amount and designation - The aggregate number of shares which this
Corporation shall have authority to issue is 16,000,000 shares of common stock
having a par value of $2.50 per share, which shall be designated "Common Stock."
(b) Voting Rights of Stockholders - At each meeting of the stockholders,
every holder of Common Stock shall be entitled to cast one vote, on each matter
on which stockholders of record shall be entitled to vote, for each share of
such stock standing in such holder's name on the record books of the Corporation
on the record date fixed for the determination of stockholders entitled to vote
at such meeting. Such holders shall vote together on all such matters and not by
classes or series, except when and as may be otherwise required by law or these
Articles of Incorporation.
(c) Payment for Common Stock - All or any of the Common Stock of the
Corporation, if sold, may be paid for in cash, but may also be paid for in
property, labor or
<PAGE>
services at a just valuation to be fixed by the Board of Directors at a meeting
called for that purpose. Property, labor or services may also be purchased or
paid for with Common Stock at a just valuation of such property, labor or
services, to be fixed by the Board of Directors of the Corporation at a meeting
called for such purpose. In no event shall such just valuation be less than par
value.
(d) No Preemptive Rights - No holders of shares of any class of the
capital stock of the Corporation shall have as a matter of right any preemptive
or preferential right to subscribe for, purchase, receive or otherwise acquire
any part of any new or additional issue of stock of any class, whether now or
hereafter authorized, or any bonds, debentures, notes, or other securities of
the Corporation, whether or not convertible into shares of stock of the
Corporation.
ARTICLE V - TERM
This Corporation shall have perpetual existence.
ARTICLE VI - REGISTERED OFFICE AND AGENT
The street address of the registered office of the Corporation shall be
1201 Hays Street, Tallahassee, Florida 32301 and the registered agent of the
Corporation at such address shall be the Corporation Service Company.
ARTICLE VII - DIRECTORS
The number of directors of the Corporation shall not be less than two
nor more than ten as may be determined from time to time by the affirmative vote
of a majority of the shareholders of the Corporation entitled to vote in the
election of directors or by the affirmative vote of a majority of the Board of
Directors of the Corporation.
2
<PAGE>
Exhibit 3(b)
SPRINT-FLORIDA, INCORPORATED
Incorporated Under the Laws
of the State of Florida
September 29, 1925
BYLAWS
AS AMENDED JANUARY 12, 1998
CONTENTS OF BYLAWS
SECTION
Amendments to Bylaws 67 - 73
Assistant Secretary 34 & 48
Assistant Treasurer 34 & 52
Board of Directors 12
Chairman of the Board 33 & 37
Certificates of Stock 61
Committees - Other 32
Compensation of Directors 17
Compensation of Officers 35
Controller 33 & 54
Corporate Seal 66
Duties of Officers - May be Delegated 60
Executive Committee 28
Indemnification of Directors, Officers
and Employees 73
Inspectors of Election 11
Lost Certificates of Stock 64
Meetings of Directors 19
Meetings of Stockholders 1
Notices of Meetings of Directors 24
Notices of Meetings of Stockholders 4
Officers 33 - 60
Other Committees 32
President 33 & 38
Quorum and Conduct of Meetings of
Stockholders 8
Secretary 33 & 43
Stock Record 65
Transfer of Stock 62
Treasurer 33 & 49
Vacancies 59
Vice Presidents 33 & 42
<PAGE>
MEETINGS OF STOCKHOLDERS
1. The annual meeting of the stockholders shall be held at the offices of
the Corporation in Apopka, Florida, or at such other place either inside
or outside the State of Florida as may be designated in the notice of
the meeting, on such business day in the month of February of each
calendar year as is determined by the Board of Directors.
2. A special meeting of the stockholders may be called at
any time by the Board of Directors, the Executive
Committee, the Chairman of the Board, or the President;
and the Chairman of the Board, President, or the
Secretary shall call a special meeting whenever requested,
in writing, by five directors, or by stockholders
representing twenty-five percent of the outstanding stock
entitled to vote at such meeting. Such request shall
specify the time and object of the proposed meeting.
3. Special meetings of the stockholders shall be held at the offices of the
Corporation in Apopka, Florida, or at such other place either inside or
outside the State of Florida, as may be designated in the notice of the
meeting.
NOTICE OF MEETINGS OF STOCKHOLDERS
4. Notice of any meeting of the stockholders shall be mailed
by the Secretary not less than ten nor more than forty
days before the meeting, directed to each stockholder of
record entitled to vote at such meeting at his address as
it appears on the stock record, unless the stockholder has
filed with the Secretary a written request that notices
intended for him shall be mailed to some other address in
which case it shall be mailed to the address designated in
such request.
5. Notice of an annual meeting or of a special meeting shall state the time
and place and object of such meeting.
6. The failure of any stockholders to receive notice of any meeting of
stockholder shall not invalidate the meeting.
7. If amendments to the Bylaws or the Articles of
Incorporation are proposed by a stockholder, group of
stockholders or the Board of Directors for consideration
by the stockholders at any annual meeting or special
meeting, the principal provisions of such proposed
amendments shall be described in said notice or
attachments thereto for the stockholders perusal prior to
any annual or special meeting.
2
<PAGE>
QUORUM AND CONDUCT OF MEETINGS OF STOCKHOLDERS
8. At all meetings of the stockholders, a majority in interest of the stock
entitled to vote thereat shall constitute a quorum, except where by law
a greater interest is required; but a less number may adjourn the
meeting to a day specified.
9. Each stockholder entitled to vote shall be entitled to one vote for each
share of stock standing in the name of each such stockholder on the
books of the Corporation. Any stockholder entitled to vote may vote in
person or by written proxy. Upon demand of any stockholder, the vote for
directors or vote upon any other matters before the meeting, shall be by
ballot.
10. Except as otherwise provided by law, at any duly constituted meeting,
the vote of a majority in interest of the stock represented and entitled
to vote shall be sufficient to pass any measure.
INSPECTORS OF ELECTION
11. Where demand is made at a stockholders meeting to have vote by ballot,
three inspectors of election shall be elected by ballot by the
stockholders to serve during the meeting.
BOARD OF DIRECTORS
12. The business of the Corporation shall be managed by a Board of Directors
who shall be elected by the stockholders at the annual meeting and who
shall serve until their successors are elected.
13. Vacancies in the Board may be filled by the remaining directors.
14. The number of directors that shall constitute the whole Board shall be
determined from time to time in accordance with the provisions of the
Articles of Incorporation of the Corporation.
15. Deleted April 17, 1974.
16. If the maximum number of directors are not elected at the annual
meeting, additional directors may be elected at a special meeting,
provided the notice of the meeting gives notice of such intention.
17. Directors as such shall receive no stated salaries for their services,
but by resolution of the Board of Directors, a fixed sum and expenses of
attendance may be allowed those directors not receiving regular salaries
from the Corporation, for attendance at regular and special meetings of
the Board or Executive Committee provided that nothing herein contained
shall be construed to preclude any director
3
<PAGE>
from representing the Corporation in any other capacity and
receiving compensation therefore.
18. No director elected by the stockholders may be removed as a director by
the Board of Directors. Any director elected by the stockholders can be
removed only by a majority vote of the outstanding common stock of the
corporation at a special meeting of the stockholders called for such
purpose.
19. Meetings of the Board of Directors may be held at the offices of the
corporation in Apopka, Florida, or at any other place either inside or
outside the State of Florida.
20. A meeting of the Board of Directors for the election of officers and the
transaction of general business shall be held immediately following the
annual meeting of stockholders.
21. Regular meetings of the Board of Directors shall also be held at such
times and places as the Board may determine.
22. Special meetings of the Board of Directors may be called at any time by
the Chairman of the Board, or the President, and shall be called by the
Chairman of the Board, President, or by the Secretary upon request in
writing signed by two or more Directors and specifying the object of the
meeting, but special meetings, at any time or place, may be held by the
written consent and waiver of notice signed by all the Directors.
23. A majority of the Directors shall constitute a quorum, but a less number
may adjourn a meeting to any specified time and place.
NOTICE OF MEETINGS OF DIRECTORS
24. Notice of any meeting of the directors shall be sent by the Secretary to
each Director at least two days before such meeting, by mail, messenger
or telegraph, or be given personally, or by telephone.
25. Notice of a regular meeting shall state the time and place of such
meeting.
26. Notice of special meeting shall state the time, place and object of such
meeting.
27. No notice shall be necessary for the annual meeting for the election of
officers and the transaction of general business held immediately after
the annual meeting of the stockholders.
4
<PAGE>
EXECUTIVE COMMITTEE
28. The Board of Directors may designate by resolution from their number an
Executive Committee of not less than three members. A majority of the
Committee shall constitute quorum.
29. Except as otherwise provided by law, such Committee shall have and
exercise all the powers of the Board of Directors in the intervals
between the meetings of the Board.
30. Minutes of all meetings of the Committee shall be kept and recorded by
the Secretary, and shall be from time to time reported to the Board of
Directors.
31. The Chairman of the Board, or President, may designate from time to time
a member of the Board of Directors to act as a member of the Executive
Committee at any time or meetings thereof in place of any member of the
Executive Committee absent therefrom.
OTHER COMMITTEES
32. The Board of Directors may designate by resolution any other committee
or committees. Such other committees shall have and shall exercise such
powers as shall be conferred upon them respectively by the Board of
Directors.
OFFICERS
33. The Officers of the corporation shall be elected, or
appointed, by the Directors and shall consist of a President,
such number of Vice Presidents as the Directors shall from
time to time determine, a Secretary, a Treasurer and a
Controller. The Directors may elect a Chairman of the Board.
The Chairman of the Board of Directors and President must be
members of the Board of Directors, but other officers elected
or appointed may or may not be members of the Board at the
option of the Board of Directors.
34. The Board of Directors may appoint one or more Assistant Secretaries,
one or more Assistant Treasurers, and such other officers and agents as
the Board may consider necessary, who shall have such powers and perform
such duties as may be assigned to them by the Board of Directors or the
Executive Committee.
35. The salaries of the officers, elected or appointed, of the Corporation
shall be fixed by the Board of Directors.
36. More than one office may be held by one and the same person.
5
<PAGE>
THE CHAIRMAN
37. The Chairman of the Board of Directors shall preside at all meetings of
the stockholders and the Board of Directors at which he is present. In
the absence of the Chairman of the Board, the President shall preside.
THE PRESIDENT
38. The President shall have direct charge of and supervision
over the entire operations of the Corporation, including
operational matters, as well as financial matters, and shall
be the chief executive officer of the Corporation. He shall
likewise have the responsibility of carrying out the policies
and decisions adopted by the Board of Directors or the
Executive Committee. Upon authorization of the President,
the duties of the President may be delegated to any other
officer of the Corporation.
39. The President is empowered to execute deeds, bills of sale, notes,
mortgages, bonds, contracts and other instruments that require
execution, for and in behalf of the Corporation, and to sign
certificates of stock.
40. The President shall have such other powers and perform such other duties
as usually appertain to the office in business corporations or as may be
delegated to him by the Board of Directors or the Executive Committee.
41. In the absence or inability of the President, the duties of the office
shall be performed by such other officer of the Corporation as the Board
of Directors or the Executive Committee may designate.
THE VICE PRESIDENT
42. An Executive Vice President and/or one or more Vice Presidents may be
elected or appointed by the Board of Directors from time to time. Such
Vice Presidents shall be responsible to the President.
THE SECRETARY
43. The Secretary shall send all requisite notice of meetings of the
stockholders, the Board of Directors, and the Executive Committee.
44. The Secretary shall attend all meetings of the stockholders, the Board
of Directors and the Executive Committee and shall keep a true and
faithful record of the proceedings.
45. The Secretary shall have custody of the seal of the Corporation and of
all records, books, documents and papers of the Corporation, except
those required to be in
6
<PAGE>
the custody of the Treasurer or the Controller, and except such
subsidiary records as may be kept in departmental offices.
46. The Secretary shall sign and execute all documents which require his
signature and execution, and shall affix the seal of the Corporation
thereto and attest the same when necessary.
47. The Secretary shall have such other powers and perform such other duties
as usually appertain to the office in business corporations, or as may
be assigned to him by the Board of Directors or the Executive Committee.
48. Any Assistant Secretary, in case of the absence or inability of the
Secretary, may exercise the powers to perform the duties of the
Secretary. The Assistant Secretaries shall have such other powers and
perform such other duties as may be assigned to them by the Board of
Directors, the Executive Committee or the Secretary.
THE TREASURER
49. The Treasurer shall receive and have charge of all
funds and securities of the Corporation; he shall deposit
the funds to the credit of the Corporation in such
depositories as the Board of Directors or the Executive
Committee shall designate, and he shall disburse the same
only on written approval of the Controller or his duly
authorized representative, and under such rules and
regulations as the Board of Directors or the Executive
Committee may adopt.
50. The Treasurer shall keep full and regular books showing all his receipts
and disbursements which books shall be open at all times to the
inspection of any member of the Board of Directors and he shall make
such reports as the Board of Directors or the Executive Committee may
require.
51. The Treasurer shall have such other powers and perform such other duties
as usually appertain to the office in business corporations, or as may
be assigned to him by the Board of Directors or the Executive Committee.
52. Any Assistant Treasurer shall have such powers and perform such duties
as may be assigned to him by the Board of Directors, the Executive
Committee or the Treasurer within the scope of his authority.
53. The Treasurer and any Assistant Treasurer shall give such security for
the faithful performance of his duties as the Board of Directors or the
Executive Committee may require.
7
<PAGE>
THE CONTROLLER
54. The Controller shall have custody and charge of all books of account,
except those required by the Treasurer in keeping record of the work of
his office, and shall have supervision over such subsidiary accounting
records as may be kept in departmental offices.
55. The Controller shall have access to all books of account, including the
records of the Secretary and the Treasurer, for purposes of audit and
for obtaining information necessary to verify or complete the records of
his office.
56. The Controller or his duly authorized representatives shall certify to
the authorization and approval pertaining to all vouchers; and no
payments from the general cash shall be made by the Treasurer except on
voucher bearing the written approval of the Controller or his authorized
representative.
57. The Controller shall be responsible to the President and shall perform
such other duties as may be assigned to him by the Board of Directors or
the Executive Committee.
58. The Controller may designate some other person or persons to perform
such of his duties as he finds necessary to delegate in the ordinary
conduct of the business, and shall with the approval of the Board of
Directors or the Executive Committee designate some person to perform
the duties of Controller in case of his absence or inability.
VACANCIES
59. If the office of any Director, the Chairman of the Board,
the President, Vice President, the Secretary, the Treasurer,
the Controller, or any officer elected or appointed by the
Board of Directors becomes vacant by reason of death, retirement,
removal or otherwise, the Directors then in office may elect or
appoint a successor or successors who shall respectively hold
office for the unexpired term in respect to which such vacancy
occurred.
DUTIES MAY BE DELEGATED
60. In case of the absence or inability of any officer, or for any other
reason that the Board of Directors may deem sufficient, the Board may
delegate the powers and duties of such office to any other officer, or
any other director, for the time being.
8
<PAGE>
CERTIFICATES OF STOCK
61. The certificates of stock of the Corporation shall be numbered and
entered in the books of the Corporation as they are issued. They shall
exhibit the holders name and the number of shares, and shall be signed
by the President or a Vice President and by the Secretary or an
Assistant Secretary, and shall bear the corporate seal.
TRANSFER OF STOCK
62. Transfer of stock shall be made on the books of the Corporation only by
the person named in the certificate, or by an attorney lawfully
constituted in writing, and upon surrender of such certificates.
63. The Corporation will be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof, and accordingly,
shall not be bound to recognize any other claim to or interest in such
shares on the part of any other person, whether or not it shall have
express notice thereof, save as may be expressly provided by the laws of
the State of Florida.
LOST CERTIFICATES
64. Any person claiming a certificate of stock to be lost or
destroyed shall make an affidavit or affirmation to that effect,
and advertise the same in such manner as the Board of Directors
may require, and shall give the Corporation a bond of indemnity,
with one or more sureties satisfactory to the Board of Directors,
in at least double the par value of the stock represented by the
certificate claimed to be lost or destroyed, whereupon a new
certificate may be issued of the same tenor and for the same
number of shares as the one alleged to be lost or destroyed, but
always subject to the approval of the Board of Directors.
STOCK RECORD
65. A stock ledger shall be maintained showing a record of the stock holding
of each stockholder.
CORPORATE SEAL
66. The corporate seal shall have inscribed thereon:
"Sprint-Florida, Incorporated. Corporate Seal."
AMENDMENTS
67. Deleted January 12, 1998.
9
<PAGE>
68. Any stockholder or group of stockholders of record can
propose amendments to the Bylaws or the Articles of
Incorporation by a notice in writing to the Secretary,
outlining in sufficient detail such proposed amendments
to be considered at any annual meeting of the stockholders.
Such notice must be sufficiently in advance of the annual
meeting and in the hands of the Secretary in time to comply
with Sections Four and Seven of these bylaws entitled
"Notice of Meetings of Stockholders."
69. Stockholders representing twenty-five percent of the total outstanding
stock entitled to vote can propose amendments to the Bylaws or Articles
of Incorporation by a notice in writing to the Secretary outlining in
sufficient detail such proposed amendments and the request that a
special meeting of the stockholders be called in accordance with Section
Two of these Bylaws, entitled "Meetings of Stockholders."
70. Any proposals for amendments to the Bylaws or the
Articles of Incorporation can be recommended by any elected
or appointed officer or the Executive Committee, but must have
approval of the Board of Directors before being recommended by
the management of the Company as a group for consideration at
any annual or special meeting of the stockholders. Any
officer who is also a stockholder, however, shall have the right
as a stockholder, to propose amendments to the Bylaws or Articles
of Incorporation at any annual meeting of the stockholders so
long as Section 68 under this heading is complied with.
71. In no event shall any amendment or amendments to the Bylaws or the
Articles of Incorporation be considered valid unless proper notice of
such amendment or amendments is given to stockholders in advance of any
annual or special meeting in compliance with Sections 4, 7, 68, 69 and
70 of these Bylaws.
72. That whenever in these Bylaws the word "stockholder" or
"stockholders" is used, it shall be construed to mean only the
holder or holders of stock entitled to vote pursuant to the
Certificate of Incorporation, except, however, as used in Bylaw
Number 65 pertaining to the maintenance of a stock ledger; and
wherever in these Bylaws the word "stock" is used, it shall be
construed to mean stock possessing voting power pursuant to the
Certificate of Incorporation, except, however, as used in Bylaws
Numbers 39, 61, 62, 63, 64 and 65 pertaining generally to the
issuance of stock certificates and maintenance of stock records.
73. Indemnification of Officer and Directors.
(a) Limitation of Liability.
No person shall be liable to the Corporation for any loss or
damage suffered by it on account of any action taken or omitted
to be taken by him or her as a director or officer of the
Corporation in good
10
<PAGE>
faith, if such person (1) exercised or used the same degree of
care and skill as a prudent man or woman would have exercised or
used under the circumstances in the conduct of his or her own
affairs, or (2) took or omitted to take such action in reliance
on advice of counsel for the Corporation or upon statements made
or information furnished by officers or employees of the
Corporation which he or she had reasonable grounds to believe.
(b) Indemnification
(1) Actions Other Than Those by or in the Right of
the Corporation. The Corporation shall indemnify
any person who was or is a party or is threatened
to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other
than an action by or in the right of the Corporation)
by reason of the fact that he or she is or was a
director or officer of the Corporation, or is or was
serving at the request of the Corporation as a
director or officer of another corporation,
partnership, joint venture, trust or other
enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by
him or her in connection with such action, suit or
proceeding if he or she acted in good faith and in
a manner he or she reasonably believed to be in or
not opposed to the best interests of the Corporation
(or such other corporation or organization), and,
with respect to any criminal action or proceeding,
had no reasonable cause to believe his or her conduct
was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendre or its equivalent,
shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which
he or she reasonably believed to be in or not opposed
to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct
was unlawful.
(2) Action by or in the Right of the Corporation.
The Corporation shall indemnify any person who
was or is a party or is threatened to be made a
party to any threatened, pending or completed
action or suit by or in the right of the
Corporation to procure a judgment in its favor
by reason of the fact that he or she is or was
a director or officer, of the Corporation, or
is or was serving at the request of the
Corporation as a director or
11
<PAGE>
officer of another corporation, partnership, joint
venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably
incurred by him or her in connection with the defense or
settlement of such action or suit if he or she acted in
good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the
Corporation (or such other corporation or organization)
and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable for
negligence or misconduct in the performance of his or
her duty to the Corporation (or such other corporation
or organization) unless and only to the extent that the
court in which such action or suit was brought shall
determine upon application that, despite the
adjudication of liability but in view of all the
circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which
such court shall deem proper.
(3) Successful Defense of Action. Notwithstanding, and
without limitation of, any other provision of this
Section 73, to the extent that a director or officer
of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or
proceeding referred to in paragraph (1) or (2) of
this Section 73, or in defense of any claim, issue
or matter therein, he or she shall be indemnified
against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection
therewith.
(4) Determination Required. Any indemnification under
paragraph (1) or (2) of this Section 73 (unless
ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a
determination that indemnification of the director or
officer is proper in the circumstances because he or
she has met the applicable standard of conduct set
forth in said paragraph. Such determination shall
be made (i) by the Board of Directors by a majority
vote of a quorum consisting of directors who were
not parties to the particular action, suit or
proceeding, or (ii) if a quorum is not obtainable,
or, even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel
in a written opinion, or (iii) by the stockholders.
(5) Advance of Expenses. Expenses incurred in defending
a civil or criminal action, suit or proceeding may
be paid by the
12
<PAGE>
Corporation in advance of the final disposition of such
action, suit or proceeding as authorized may be paid by
the Corporation in advance of the final disposition of
such action, suit or proceeding as authorized by the
Board of Directors in the specific case upon receipt of
a satisfactory undertaking by or on behalf of the
director or officer to repay such amount unless it shall
ultimately be determined that he or she is entitled to
be indemnified by the Corporation as authorized in this
Section 73.
(c) Nonexclusivity; Duration.
The indemnifications, rights, and limitations of liability
provided by this Section 73 shall not be deemed exclusive of any
other indemnifications, rights or limitations of liability to
which any person may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise,
either as to action in his official capacity or as to action in
another capacity while holding office, and they shall continue
although such person has ceased to be a director or officer and
shall inure to the benefit of his or her heirs, executors and
administrators.
13
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