UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 165000, Altamonte Springs, Florida 32716-5000
(Address of principal executive offices)
(407)889-6000
(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 March 31, 1998, and at the
date of filing this report.
<PAGE>
SPRINT-FLORIDA, INCORPORATED
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998
INDEX
<TABLE>
<CAPTION>
Part I - Financial Information Page Number
-----------
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
Part II - Other Information
Item 1. Legal Proceedings 7
Item 2. Changes in Securities 7
Item 3. Defaults Upon Senior Securities 7
Item 4. Submission of Matters to a Vote of Security Holders 7
Item 5. Other Information 7
Item 6. Exhibits and Reports on Form 8-K 7
Signatures 8
Exhibits
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Item 1.
PART I.
CONSOLIDATED BALANCE SHEETS Sprint-Florida, Incorporated
(in thousands, except per share data)
- -------------------------------------------------------------------------------------------------------------------
March 31, December 31,
1998 1997
- -------------------------------------------------------------------------------------------------------------------
(unaudited)
Assets
Current assets
<S> <C> <C>
Cash $ 4,466 $ 25,470
Accounts receivable
Customers and other, net of allowance of $5,599 and $5,515 137,248 149,317
Interexchange carriers 59,570 58,074
Affiliated companies 15,196 10,041
Inventories 27,007 25,114
Other 9,399 7,802
- -------------------------------------------------------------------------------------------------------------------
Total current assets 252,886 275,818
- -------------------------------------------------------------------------------------------------------------------
Property, plant and equipment 3,681,415 3,632,432
Less accumulated depreciation 2,064,124 2,028,184
- -------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 1,617,291 1,604,248
- -------------------------------------------------------------------------------------------------------------------
Deferred charges and other assets 74,526 59,203
- -------------------------------------------------------------------------------------------------------------------
Total $ 1,944,703 $ 1,939,269
------------------------------------------
Liabilities and Shareholder's Equity
Current liabilities
Outstanding checks in excess of cash balances $ 10,596 $ 10,801
Advances from parent 93,001 38,999
Accounts payable
Vendors and other 39,054 43,687
Interexchange carriers 33,598 26,663
Affiliated companies 224,288 220,354
Advance billings and customer deposits 33,764 32,677
Other 86,954 55,552
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 521,255 428,733
- -------------------------------------------------------------------------------------------------------------------
Long-term debt 339,760 455,011
- -------------------------------------------------------------------------------------------------------------------
Deferred credits and other liabilities
Deferred income taxes and investment tax credits 151,944 152,120
Postretirement and other benefit obligations 100,958 83,332
Other 9,211 9,252
- -------------------------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities 262,113 244,704
- -------------------------------------------------------------------------------------------------------------------
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 576,027 565,273
- -------------------------------------------------------------------------------------------------------------------
Total shareholder's equity 821,575 810,821
- -------------------------------------------------------------------------------------------------------------------
Total $ 1,944,703 $ 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)
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Three Months Ended March 31, 1998 1997
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
<S> <C> <C>
Net Operating Revenues $ 321,476 $ 317,835
Operating Expenses
Costs of services and products 105,771 98,973
Selling, general and administrative 61,949 58,341
Depreciation and amortization 57,976 60,543
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Total operating expenses 225,696 217,857
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Operating Income 95,780 99,978
Interest expense (11,399) (10,181)
Other expense, net (615) (115)
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Income before income taxes and
extraordinary item 83,766 89,682
Income taxes (32,175) (34,413)
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Income before extraordinary item 51,591 55,269
Extraordinary item, net (4,437) -
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Net Income 47,154 55,269
Retained Earnings at Beginning of Period 565,273 555,490
- ------------------------------------------------------------------------------- --- ------------- -- -------------
612,427 610,759
Dividends declared (36,400) (31,850)
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Retained Earnings at End of Period $ 576,027 $ 578,909
--- ------------- -- -------------
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)
- -------------------------------------------------------------------------------------------------------------------
Three Months Ended March 31, 1998 1997
- -------------------------------------------------------------------------------------------------------------------
Operating Activities
<S> <C> <C>
Net income $ 47,154 $ 55,269
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 57,976 60,543
Deferred income taxes and investment tax credits 25 6,764
Extraordinary item, net (1,664) -
Changes in assets and liabilities:
Receivables, net 5,418 (2,146)
Inventories and other current assets (3,692) (195)
Accounts payable, accrued expenses and other current liabilities 26,387 23,123
Other assets and liabilities, net 1,562 1,235
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 133,166 144,593
- -------------------------------------------------------------------------------------------------------------------
Investing Activities
Capital expenditures (68,825) (77,390)
Other, net (2,194) (673)
- -------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (71,019) (78,063)
- -------------------------------------------------------------------------------------------------------------------
Financing Activities
Increase (Decrease) in advances from parent 54,002 (31,222)
Sales of receivables, net 15,000 (175,000)
Payments on long-term debt (115,753) (715)
Dividends paid (36,400) (31,850)
- -------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (83,151) (238,787)
- -------------------------------------------------------------------------------------------------------------------
Decrease in Cash and Equivalents (21,004) (172,257)
Cash and Equivalents at Beginning of Period 25,470 185,938
- -------------------------------------------------------------------------------------------------------------------
Cash and Equivalents at End of Period $ 4,466 $ 13,681
-----------------------------------
Supplemental Cash Flow Information
Cash paid for interest, net of amounts capitalized $ 15,973 $ 15,383
-----------------------------------
Cash paid (refunded) for income taxes $ (349) $ 4,236
-----------------------------------
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 first quarter 1998 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; 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.
Results of Operations
<TABLE>
<CAPTION>
Selected Operating Results
---------------------------------------------------------------------
Three Months Ended
March 31, Variance
---------------------------------- ------------------------------
1998 1997 Dollar %
- -------------------------------------------- --- ------------- -- ------------- --- ------------- ----------------
(in thousands)
Net Operating Revenues
<S> <C> <C> <C> <C>
Local service $ 146,816 $ 134,532 $ 12,284 9.1 %
Network access 132,647 132,340 307 0.2 %
Toll service 7,691 11,239 (3,548) (31.6)%
Other 34,322 39,724 (5,402) (13.6)%
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Net operating revenues 321,476 317,835 3,641 1.1 %
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Operating Expenses
Costs of services and products 105,771 98,973 6,798 6.9 %
Selling, general and administrative 61,949 58,341 3,608 6.2 %
Depreciation and amortization 57,976 60,543 (2,567) (4.2)%
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Total operating expenses 225,696 217,857 7,839 3.6 %
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Operating Income $ 95,780 $ 99,978 $ (4,198) (4.2)%
--- ------------- -- ------------- --- -------------
Operating Margin 29.8% 31.5%
--- ------------- -- -------------
</TABLE>
<PAGE>
Net Operating Revenues
Net operating revenues increased 1% in first quarter 1998 compared with the same
period a year ago. This increase was mainly due to customer access line growth
of 6.6% during the past 12 months, offset by declines in toll service and other
revenues.
Local service revenues, derived from local exchange services, increased 9% in
first quarter 1998 from the same 1997 period. This increase reflects strong
economic growth in the service areas and increases in second-line service for
residential customers to meet their lifestyle and data access needs. Local
service revenues also increased because of continued demand for network-based
services such as Caller ID and Call Waiting as well as an increase in wiring
maintenance agreements.
Network access revenues, derived from interexchange long distance carriers' use
of the local network to complete calls, remained flat for the first quarter 1998
compared with the same 1997 period. The 1998 first quarter revenues reflect a 9%
growth in access minutes of use, offset by FCC-mandated access rate reductions.
Toll service revenues are mainly derived from providing long distance services
within specified regional calling areas, or local access transport areas
(LATAs). First quarter toll service revenues for 1998 declined 32% compared with
the same 1997 period. The decrease reflects extended local calling areas and
increased competition in the intrastate long distance market.
Other revenues are mainly derived from telecommunications equipment sales,
directory sales and listing services, and billing and collection services.
During the 1998 first quarter these revenues decreased 14% 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.
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 7% in first quarter 1998 compared with the same period a year ago
because of customer access line growth and increased equipment sales. Costs of
services and products was 32.9% of net operating revenues in the 1998 first
quarter and 31.1% for the same period a year ago.
Selling, general and administrative (SG&A) expense increased 6% in first quarter
1998 compared with the same 1997 period. This increase was mainly due to
increased customer service costs related to access line growth. SG&A expense was
19.3% of net operating revenues in the first quarter 1998 and 18.4% for the same
period a year ago.
Depreciation and amortization expense decreased 4% in first quarter 1998 period
compared with the same period a year ago. This decrease reflects new
depreciation rates that align expense recognition with plans for plant
replacement. This decline was partly offset by an increase in plant additions.
Depreciation and amortization expense was 18.0% of net operating revenues in the
first quarter 1998 and 19.0% for the same period a year ago.
Extraordinary Item
In 1998, 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 II.
Other Information
Item 1. Legal Proceedings
There were no reportable events during the quarter ended March 31,
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 March 31,
1998.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March
31, 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: May 7, 1998
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER
(27) Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Mar-31-1998
<CASH> 4,466
<SECURITIES> 0
<RECEIVABLES> 202,417
<ALLOWANCES> 5,599
<INVENTORY> 27,007
<CURRENT-ASSETS> 252,886
<PP&E> 3,681,415
<DEPRECIATION> 2,064,124
<TOTAL-ASSETS> 1,944,703
<CURRENT-LIABILITIES> 521,255
<BONDS> 339,760
0
0
<COMMON> 16,250
<OTHER-SE> 805,325
<TOTAL-LIABILITY-AND-EQUITY> 1,944,703
<SALES> 0
<TOTAL-REVENUES> 321,476
<CGS> 0
<TOTAL-COSTS> 163,747
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,399
<INCOME-PRETAX> 83,766
<INCOME-TAX> 32,175
<INCOME-CONTINUING> 51,591
<DISCONTINUED> 0
<EXTRAORDINARY> (4,437)
<CHANGES> 0
<NET-INCOME> 47,154
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
