UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
For the period ended March 31, 1994
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: 1-3090
GTE FLORIDA INCORPORATED
(Exact name of registrant as specified in its charter)
FLORIDA 59-0397520
(State or other jurisdiction of (I.R.S.
Employer
Incorporation or organization)
Identification No.)
One Tampa City Center, Tampa, Florida 33602
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code 813-224-
4011
(Former name, former address and former fiscal year, if changed
since last report)
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
The Company had 23,400,000 shares of $25 par value common stock
outstanding at April 30, 1994.
GTE FLORIDA INCORPORATED AND SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION PAGE
,
Condensed Consolidated Statements of Income. . . . . . . . .
. . . . 1
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . .
. . . 2
Condensed Consolidated Balance Sheets - Assets . . . . . . .
. . . . 4
Condensed Consolidated Balance Sheets - Liabilities and
Shareholders' Equity. . . . . . . . . . . . . . . . . . . .
. . . 5
Condensed Consolidated Statements of Cash Flows. . . . . . .
. . . . 6
Notes to Condensed Consolidated Financial Statements . . . .
. . . . 7
PART II. OTHER INFORMATION
Items 1 through 6. . . . . . . . . . . . . . . . . . . . . .
. . . . 8
Signature. . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 9
PART I. FINANCIAL INFORMATION
GTE FLORIDA INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31,
1994 1993
(Thousands of Dollars)
OPERATING REVENUES:
Local network services $ 143,502 $ 133,165
Network access services 107,963 111,950
Long distance services 20,825 17,154
Equipment sales and services 25,484 18,956
Other 5,403 4,900
303,177 286,125
OPERATING EXPENSES:
Cost of sales and services 81,155 64,999
Depreciation and amortization 65,622 64,498
Marketing, selling, general and administrative 113,757
95,692
260,534 225,189
Net operating income 42,643 60,936
OTHER (INCOME) DEDUCTIONS:
Interest expense 15,572 18,306
Other - net (897)
(434)
INCOME BEFORE INCOME TAXES 27,968 43,064
INCOME TAXES 10,140 15,254
NET INCOME $ 17,828 $ 27,810
Per share data is omitted since the Company's common stock is
100% owned by GTE Corporation (Parent Company).
See Notes to Condensed Consolidated Financial Statements.
1
GTE FLORIDA INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OPERATING RESULTS
Net income decreased 36% or $10.0 million for the three months
ended March 31, 1994 as the result of increased operating
expenses partially offset by increased revenues due to customer
growth and lower interest expense.
Operating Revenues
Operating revenues increased 6% or $17.0 million for the three
months ended March 31, 1994 compared to the same period in 1993.
Local network service revenues for the first quarter of 1994 were
8% or $10.3 million higher than the first quarter of 1993. Local
revenues increased due to customer growth experienced through
access line gain. Revenues in 1994 also increased due to
increased sales of CentraNet (Trademark) and other enhanced
features.
Network access service revenues decreased 4% or $4.0 million for
the three months ended March 31, 1994 compared to the same period
in 1993. The 1994 decrease was primarily the result of the final
phase out of transitional support payments received from the
National Exchange Carrier Association (NECA). On April 1, 1993,
the Company no longer received transitional support funds and
began making long term support payments to NECA as required by
the FCC. This decrease was partially offset by a slight increase
in network usage.
Long distance service revenues increased 21% or $3.7 million for
the three months ended March 31, 1994. The 1994 increase
reflects increased usage. This increase was partially offset by
restructuring of private line tariffs and a reduction in end user
toll rates, both due to the Florida Public Service Commission
rate case order dated January 21, 1993.
Equipment sales and services revenues increased 34% or $6.5
million for three months ended March 31, 1994. The 1994 increase
was due to increased sales of single-line telephones and private
branch exchanges and increased revenues from wiring installation.
Other operating revenues increased 10% or $0.5 million for three
months ended March 31, 1994. The 1994 increase was due to
increased rental revenues from facilities shared with other GTE
telephone operating companies and higher 800 services revenue
partially offset by increased provisions for uncollectible
accounts.
Operating Expenses
Operating expenses increased 16% or $35.3 million for three
months ended March 31, 1994. The 1994 increase reflects higher
costs associated with product sales, higher right-to-use fees and
increased contractor, labor and benefits costs.
2
GTE FLORIDA INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Other Expenses
Interest expense decreased 15% or $2.7 million in 1994. The 1994
decrease is primarily attributable to lower long-term debt levels
and lower rates on long-term debt. In November 1993, the Company
called $390 million of bonds with rates ranging from 8 1/8% to
10% and refinanced these bonds with 6.31% and 7.41% Debentures.
Income taxes decreased 34% or $5.1 million for the three months
ended March 31, 1994 compared to 1993. The decrease is primarily
due to the decrease in pretax income.
CAPITAL RESOURCES AND LIQUIDITY
The Company's primary source of funds during 1994 was cash flow
from operating activities of $128.9 million compared to $130.2
million for the same period in 1993.
Capital expenditures represent a significant use of funds during
1994 and 1993 reflecting the Company's continued growth in access
lines, modernization of current facilities and introduction of
new products and services. The Company's capital expenditures
during 1994 were $53.5 million compared to $58.2 million during
the same period in 1993. The Company's anticipated construction
costs for 1994 are approximately $300 million.
Cash used for financing activities was $78.8 million in 1994
compared to $52.7 million in 1993. This included dividend
payments of $1.1 million in 1994 compared to $9.9 million in
1993, a decrease in short-term debt of $68.9 million in 1994
compared to $42.7 million in 1993 and a reduction of $8.8 million
in affiliate notes in 1994.
During the first quarter of 1994, the Company began
implementation of its re-engineering plan. This plan will allow
the Company to continue to respond aggressively to competitive
and regulatory developments through reduced costs, improved
service quality, competitive prices and new product offerings.
Moreover, implementation of this program over the next three
years will position the Company to accelerate delivery of a full
array of voice, video and data services.
Management believes that the Company has adequate internal and
external resources available to meet ongoing operating
requirements for construction of new plant, modernization of
facilities and payment of dividends. The Company generally funds
its construction program from operations although external
financing is available. Short-term borrowings can be obtained
through commercial paper borrowings or borrowings from GTE. In
addition, a $3.9 billion line of credit is available to the
Company through shared lines of credit with GTE and other
affiliates to support short-term financing needs.
3
GTE FLORIDA INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31,
December 31,
1994 1993
(Thousands of Dollars)
CURRENT ASSETS:
Cash $ 6,758 $ 6,688
Receivables, less allowances of
$29,811 and $25,229, respectively 226,666 262,085
Note receivable from affiliate 17,460 8,680
Materials and supplies, at average cost 24,996 22,511
Prepayments and other 28,886 31,260
Total current assets 304,766 331,224
PROPERTY, PLANT AND EQUIPMENT:
Original cost 3,775,764 3,769,672
Accumulated depreciation (1,226,831)
(1,205,289)
Net property, plant and equipment 2,548,933 2,564,383
OTHER ASSETS 65,300 67,545
TOTAL ASSETS $ 2,918,999 $ 2,963,152
See Notes to Condensed Consolidated Financial Statements.
4
GTE FLORIDA INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31,
December 31,
1994 1993
(Thousands of Dollars)
CURRENT LIABILITIES:
Short-term debt, including current maturities $ 108,115 $
177,030
Accounts payable 86,239 107,402
Accrued taxes 18,634 9,630
Accrued payroll and vacations 27,561 35,648
Accrued interest 15,664 9,873
Accrued dividends 11,999 544
Accrued restructuring costs and other 144,137 138,947
Total current liabilities 412,349 479,074
LONG-TERM DEBT 748,363 747,946
DEFERRED CREDITS, primarily deferred
income taxes and investment tax credits 580,112 563,260
SHAREHOLDERS' EQUITY:
Preferred stock 60,096 60,096
Common stock 585,000 585,000
Other capital 289 289
Reinvested earnings 532,790 527,487
Total shareholders' equity 1,178,175 1,172,872
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,918,999 $
2,963,152
See Notes to Condensed Consolidated Financial Statements.
5
GTE FLORIDA INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
1994 1993
(Thousands of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 17,828 $ 27,810
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 65,622 64,498
Deferred income taxes and investment
tax credits 8,864 (2,098)
Provision for uncollectible accounts 5,334
4,182
Changes in current assets and
current liabilities 20,691 15,468
Other - net 10,565 20,296
Net cash from operating activities 128,904 130,156
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (53,499)
(58,216)
Other - net 3,453 1,900
Net cash used in investing activities (50,046)
(56,316)
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt retired (87)
(113)
Dividends paid to shareholders (1,071)
(9,936)
Net change in affiliate notes (8,780)
- - --
Decrease in short-term debt (68,850)
(42,650)
Net cash used in financing activities (78,788)
(52,699)
Increase in cash 70 21,141
Cash at beginning of period 6,688 5,100
Cash at end of period $ 6,758 $ 26,241
See Notes to Condensed Consolidated Financial Statements.
6
GTE FLORIDA INCORPORATED AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) The condensed consolidated financial statements included
herein have been prepared by the Company, without audit, pursuant
to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. However, in the
opinion of management of the Company, the condensed consolidated
financial statements include all adjustments, which consist only
of normal recurring accruals, necessary to present fairly the
financial information for such periods. These condensed
consolidated financial statements should be read in conjunction
with the financial statements and the notes thereto included in
the Company's 1993 Annual Report to Shareholders incorporated by
reference in the Annual Report on Form 10-K.
(2) On January 21, 1993, the Florida Public Service Commission
issued an order effective January 6, 1993 to reduce rates by
$14.5 million on a permanent basis. This order established a
midpoint return on equity of 12.2% for 1993 and beyond for all
state ratemaking purposes. The Company filed a motion for
reconsideration of the rate order and the Commission lowered the
rate reduction by $0.8 million. The Company has subsequently
filed an appeal of various aspects of the FPSC's rate case
decision with the Florida State Supreme Court. Oral arguments
were heard by the Court on January 31, 1994. It is not possible
to determine the outcome of this proceeding at this time.
(3) Reclassifications of prior year data have been made in the
financial statements where appropriate to conform to the 1994
presentation.
7
GTE FLORIDA INCORPORATED AND SUBSIDIARY
PART II. OTHER INFORMATION
Items 1 through 5 are not applicable for the quarter ended March
31, 1994.
Item 6. Exhibits and Reports on Form 8-K.
GTE Florida Incorporated filed a report on Form 8-K dated January
13, 1994 on January 14, 1994, under Item 5, "Other Events." No
financial statements were filed with this report.
8
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
GTE FLORIDA
INCORPORATED
(Registrant)
Date: May 12, 1994 WILLIAM M. EDWARDS, III
WILLIAM M. EDWARDS, III
Controller
(Chief Accounting Officer)
9
