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 June 30, 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 July 31, 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 . . . . . . .
. . . . 5
Condensed Consolidated Balance Sheets - Liabilities and
Shareholders' Equity. . . . . . . . . . . . . . . . . . . .
. . . 6
Condensed Consolidated Statements of Cash Flows. . . . . . .
. . . . 7
Notes to Condensed Consolidated Financial Statements . . . .
. . . . 8
PART II. OTHER INFORMATION
Items 1 through 6. . . . . . . . . . . . . . . . . . . . . .
. . . . 9
Signature. . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 10
<TABLE>
PART I. FINANCIAL INFORMATION
GTE FLORIDA INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended Six Months
Ended
June 30, June 30,
1994 1993 1994
1993
(Thousands of Dollars)
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Local network services $ 146,824 $ 135,386 $ 290,326 $ 268,551
Network access services 111,807 94,784 219,770 206,734
Long distance services 20,345 19,565 41,170 36,719
Equipment sales and services 23,758 22,754 49,242
41,710
Other 39,034 37,450 44,437 42,350
341,768 309,939 644,945 596,064
OPERATING EXPENSES:
Cost of sales and services 72,898 75,303 154,053
140,302
Depreciation and amortization 65,786 65,146 131,408
129,644
Marketing, selling, general
and administrative 106,282 110,945 220,039 206,637
244,966 251,394 505,500 476,583
Net operating income 96,802 58,545 139,445 119,481
OTHER (INCOME) DEDUCTIONS:
Interest expense 15,523 18,081 31,095 36,387
Other - net 377 (184) (520)
(618)
INCOME BEFORE INCOME TAXES 80,902 40,648 108,870 83,712
INCOME TAXES 30,143 14,396 40,283 29,650
NET INCOME $ 50,759 $ 26,252 $ 68,587 $ 54,062
</TABLE>
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 increased $24.5 million for the three months and $14.5
million for the six months ended June 30, 1994 compared to the
same periods in 1993. The second quarter increase is
attributable to higher operating revenues from growth in local
revenues, minutes of use growth in access revenue, and lower
expenses from interest and operations. The year-to-date increase
is primarily due to increased operating revenue and decreased
interest expense offset by slightly higher operating expenses.
The 1993 results include a one-time charge in the second quarter
of $2.4 million for enhanced early retirement and voluntary
separation programs.
Operating Revenues
Operating revenues increased 10% or $31.8 million for the three
months and 8% or $48.9 million for the six months ended June 30,
1994 compared to the same periods in 1993.
Local network service revenues increased 8% or $11.4 million for
the three months and 8% or $21.8 million for the six months ended
June 30, 1994 compared to the same periods in 1993. Local
revenues increased due to customer growth experienced through
access line gain. Revenues in 1994 also increased due to
increased sales of CentraNet (Registered Trademark), class/custom
calling and nonrecurring revenues.
Network access service revenues increased 18% or $17.0 million
for the three months and 6% or $13.0 million for the six months
ended June 30, 1994 compared to the same periods in 1993. The
second quarter and year-to-date increases are primarily due to
increased access minutes of use. The year-to-date increase is
slightly offset by the final phase out of transitional support
payments received from the National Exchange Carrier Association
(NECA). As of April 1, 1993, the Company no longer received
transitional support funds and has begun making long term support
payments to NECA as required by the Federal Communications
Commission.
Long distance service revenues increased 4% or $0.8 million for
the three months and 12% or $4.5 million for the six months ended
June 30, 1994 compared to the same periods in 1993. The
increases are primarily due to increased toll message activity.
Equipment sales increased 4% or $1.0 million for the three months
and 18% or $7.5 million for the six months ended June 30, 1994
compared to the same periods in 1993. The increases are due to
increased sales of single line telephones, large private branch
exchange systems, voice message services, radio paging equipment
and installation and sales of wiring and stand alone premise
equipment, partially offset by decreased rent revenue for single
line telephones.
2
GTE FLORIDA INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Other operating revenues increased 4% or $1.6 million for the
three months and 5% or $2.1 for the six months ended June 30,
1994. The increases are primarily due to lower directory
uncollectibles and higher 800 service revenue.
Operating Expenses
Operating expenses decreased 3% or $6.4 million for the three
months and increased 6% or $28.9 million for the six months ended
June 30, 1994. The second quarter 1994 decrease is due to lower
right-to-use fees, decreased labor and benefit costs and the
absence of a $3.8 million charge recorded in the second quarter
of 1993 for enhanced early retirement and voluntary separation
programs. These decreases were slightly offset by higher costs
associated with product sales and increased materials and data
processing expenses. The year-to-date increase is due to higher
costs associated with product sales and increased materials and
data processing costs, offset by lower right-to-use fees,
decreased labor and benefit costs and the above mentioned $3.8
million charge in 1993 for enhanced early retirement and
voluntary separation programs.
Other Expenses
Interest expense decreased 14% or $2.6 million for the three
months and 15% or $5.3 million for the six months ended June 30,
1994 compared to the same periods in 1993. The decreases are
primarily attributable to 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 increased $15.7 million and $10.6 million for the
three months and six months ended June 30, 1994, respectively,
compared to the same periods in 1993. The increases are
primarily due to increases in pretax income.
CAPITAL RESOURCES AND LIQUIDITY
The Company's primary source of funds during 1994 was cash flow
from operating activities of $234.6 million compared to $175.6
million for the same period in 1993. The year to year increase
in cash flows from operations is the result of improved operating
results and the absence of a significant decrease in accounts
payable that occurred in the first six months of 1993.
3
GTE FLORIDA INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
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 $119.9 million compared to $117.5 million during
the same period in 1993. The Company's anticipated construction
costs for 1994 are approximately $300 million.
Cash used in financing activities was $122.6 million in 1994
compared to $60.5 million in 1993. This included dividend
payments of $13.6 million in 1994 compared to $31.4 million in
1993, a decrease in short-term debt of $104.0 million in 1994
compared to an increase of $29.0 million in 1993, a reduction of
$4.8 million in affiliate notes in 1994 and a retirement of $58.1
million of long-term debt in 1993.
During the second quarter of 1994, the Company continued
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. Cash requirements for
the implementation of the re-engineering plan during 1994 are
expected to be largely offset by cost savings.
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 $2.8 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.
4
GTE FLORIDA INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
1994 1993
(Thousands of Dollars)
CURRENT ASSETS:
Cash $ 5,417 $ 6,688
Receivables, less allowances of
$24,259 and $25,229, respectively 260,868 262,085
Note receivable from affiliate 13,525 8,680
Materials and supplies, at average cost 25,234 22,511
Prepayments and other 25,335 31,260
Total current assets 330,379 331,224
PROPERTY, PLANT AND EQUIPMENT:
Original cost 3,767,734 3,769,672
Accumulated depreciation (1,224,273)
(1,205,289)
Net property, plant and equipment 2,543,461 2,564,383
OTHER ASSETS 72,136 67,545
TOTAL ASSETS $ 2,945,976 $ 2,963,152
See Notes to Condensed Consolidated Financial Statements.
5
GTE FLORIDA INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, December 31,
1994 1993
(Thousands of Dollars)
CURRENT LIABILITIES:
Short-term debt, including current maturities $ 92,955 $
177,030
Accounts payable 90,201 107,402
Accrued taxes 33,695 9,630
Accrued payroll and vacations 31,119 35,648
Accrued interest 8,868 9,873
Accrued dividends 32,493 544
Accrued restructuring costs and other 131,636 138,947
Total current liabilities 420,967 479,074
LONG-TERM DEBT 728,793 747,946
DEFERRED CREDITS, primarily deferred
income taxes and investment tax credits 600,297 563,260
SHAREHOLDERS' EQUITY:
Preferred stock 60,096 60,096
Common stock 585,000 585,000
Other capital 289 289
Reinvested earnings 550,534 527,487
Total shareholders' equity 1,195,919 1,172,872
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,945,976 $
2,963,152
See Notes to Condensed Consolidated Financial Statements.
6
GTE FLORIDA INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
1994 1993
(Thousands of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 68,587 $ 54,062
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 131,408 129,644
Deferred income taxes and investment
tax credits 19,125 (4,196)
Provision for uncollectible accounts 11,795
12,291
Changes in current assets and
current liabilities (13,397)
(41,484)
Other - net 17,129 25,270
Net cash from operating activities 234,647 175,587
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (119,930)
(117,458)
Other - net 6,565 2,645
Net cash used in investing activities (113,365)
(114,813)
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt retired (123)
(58,099)
Dividends paid to shareholders (13,590)
(31,368)
Net change in affiliate notes (4,845)
- - --
Increase (decrease) in short-term debt (103,995)
28,950
Net cash used in financing activities (122,553)
(60,517)
Increase (decrease) in cash (1,271)
257
Cash at beginning of period 6,688 5,100
Cash at end of period $ 5,417 $ 5,357
See Notes to Condensed Consolidated Financial Statements.
7
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 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. On July 7, 1994, the Court issued its opinion
accepting the Company's argument that the Commission should not
have made a $4.6 million adjustment for expenses associated with
affiliate transactions. The case has been remanded to the
Commission. It is not possible to determine what action the
Commission will take at this time.
(3) Reclassifications of prior year data have been made in the
financial statements where appropriate to conform to the 1994
presentation.
8
GTE FLORIDA INCORPORATED AND SUBSIDIARY
PART II. OTHER INFORMATION
Items 1 through 6 are not applicable for the quarter ended June
30, 1994.
9
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: August 12, 1994 WILLIAM M. EDWARDS, III
WILLIAM M. EDWARDS, III
Controller
(Chief Accounting Officer)
10
