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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report - November 9, 1995
(Date of earliest event reported)
GTE FLORIDA INCORPORATED
(Exact name of registrant as specified in its charter)
FLORIDA
(State or other jurisdiction of incorporation or organization)
1-3090 59-0397520
(Commission File Number) (IRS Employer Identification No.)
600 Hidden Ridge, HQE04B12 - Irving, Texas 75038
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 214-718-5600
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GTE FLORIDA INCORPORATED AND SUBSIDIARY
FORM 8-K
ITEM OF INFORMATION
Item 5. Other Events
On November 9, 1995, GTE Florida Incorporated (the Company) announced through
its parent, GTE Corporation, that in response to recently enacted and pending
legislation and the increasingly competitive environment in which the Company
expects to operate, effective January 1, 1996, the Company is discontinuing the
use of accounting practices appropriate to regulated enterprises. As a result
of this decision, the Company will record a non-cash, extraordinary charge of
approximately $378.6 million after taxes during the fourth quarter of 1995.
This charge, which is based on the results of a comprehensive study of the
economic lives of the Company's telephone plant and equipment, will have no
effect on the Company's customers or its liquidity and capital resources.
The Company has traditionally followed the accounting for regulated enterprises
prescribed by Statement of Financial Accounting Standards No. 71, "Accounting
for the Effects of Certain Types of Regulation" (FAS 71). In general, FAS 71
required the Company to depreciate its plant and equipment over regulator
approved lives which may extend beyond the assets' actual economic lives. FAS
71 also required the deferral of certain costs based upon approvals received
from regulators to recover such costs in the future. As a result of these
requirements, the recorded net book value of certain assets and liabilities,
primarily telephone plant and equipment, was higher than that which would
otherwise have been recorded.
The charge will primarily represent an adjustment to the net book value of the
fixed assets of the Company, through an increase in accumulated depreciation,
and is not expected to have a significant effect on depreciation expense of
existing plant and equipment or earnings over the next several years. The
income statement effect of this change in accounting will be reflected in the
Company's consolidated statements of income as an extraordinary charge, net of
tax, under the provisions of Statement of Financial Accounting Standards No.
101, "Regulated Enterprises-Accounting for the Discontinuation of Application
of FASB Statement No. 71."
The accompanying pro forma statements of income for the nine months ended
September 30, 1995 and the year ended December 31, 1994, and the pro forma
balance sheet as of September 30, 1995 are based on historical condensed
consolidated financial statements, adjusted to give effect to the
discontinuance of FAS 71 as though it had occurred at the beginning of each
period presented. The pro forma financial information should be read in
conjunction with the historical consolidated financial statements and related
notes thereto. The pro forma financial information is not necessarily
indicative of the results that would have been attained had the discontinuance
of FAS 71 occurred in an earlier period.
In addition, the Company announced through its parent, GTE Corporation, that it
will refinance, on a long-term basis, approximately $75.3 million of its
long-term debt issues. The positive impact of these redemptions is not
expected to have a significant effect on the Company's earnings over the next
several years.
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GTE FLORIDA INCORPORATED AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF INCOME
<TABLE>
<CAPTION>
As Reported Pro Forma
Nine Months Nine Months
Ended Ended
September 30, Pro Forma September 30,
1995 Adjustments 1995
--------------- ------------- ---------------
(Thousands of Dollars)
<S> <C> <C> <C>
OPERATING REVENUES $ 1,012,418 $ 17,554 (1) $ 1,029,972
OPERATING EXPENSES
Cost of sales and services 408,278 408,278
Depreciation and amortization 216,680 216,680
Selling, general & administrative 138,567 17,554 (1) 156,121
------------- ----------- -------------
Total operating expenses 763,525 17,554 781,079
------------- ----------- -------------
OPERATING INCOME 248,893 -- 248,893
------------- ----------- -------------
OTHER DEDUCTIONS 48,022 48,022
------------- ----------- -------------
Income before income taxes 200,871 -- 200,871
INCOME TAXES 75,950 75,950
------------- ----------- -------------
Income before extraordinary charge 124,921 -- 124,921
EXTRAORDINARY CHARGE -- (378,641) (2) (378,641)
------------- ----------- -------------
Net income (loss) $ 124,921 $ (378,641) $ (253,720)
============= =========== =============
</TABLE>
See Notes to Unaudited Condensed Consolidated Pro Forma Financial Information.
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GTE FLORIDA INCORPORATED AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF INCOME
<TABLE>
<CAPTION>
As Reported Pro Forma
Year Ended Year Ended
December 31, Pro Forma December 31,
1994 Adjustments 1994
--------------- ------------- --------------
(Thousands of Dollars)
<S> <C> <C> <C>
OPERATING REVENUES $ 1,306,522 $ 20,611 (1) $ 1,327,133
OPERATING EXPENSES
Cost of sales and services 538,394 538,394
Depreciation and amortization 277,236 277,236
Selling, general & administrative 204,237 20,611 (1) 224,848
------------ ----------- --------------
Total operating expenses 1,019,867 20,611 1,040,478
------------ ----------- --------------
OPERATING INCOME 286,655 -- 286,655
------------ ----------- --------------
OTHER DEDUCTIONS 60,233 60,233
------------ ----------- --------------
Income before income taxes 226,422 -- 226,422
INCOME TAXES 86,167 86,167
------------ ----------- --------------
Income before extraordinary charge 140,255 -- 140,255
EXTRAORDINARY CHARGE -- (378,641) (2) (378,641)
------------ ----------- --------------
Net income (loss) $ 140,255 $ (378,641) $ (238,386)
============ =========== ==============
</TABLE>
See Notes to Unaudited Condensed Consolidated Pro Forma Financial Information.
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GTE FLORIDA INCORPORATED AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
<TABLE>
<CAPTION>
As Reported Pro Forma
September 30, Pro Forma September 30,
1995 Adjustments 1995
-------------- -------------- --------------
(Thousands of Dollars)
<S> <C> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 10,041 $ 10,041
Accounts and notes receivable, less allowance
of $22,556 273,794 273,794
Materials and supplies 19,244 19,244
Prepayments and other 14,906 14,906
--------------- ------------ ------------
Total current assets 317,985 317,985
--------------- ------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Original cost 3,929,385 3,929,385
Accumulated depreciation (1,393,813) $ (617,313) (3) (2,011,126)
--------------- ------------ ------------
Net property, plant and equipment 2,535,572 (617,313) 1,918,259
--------------- ------------ ------------
PREPAID PENSION COSTS 87,930 87,930
--------------- ------------ ------------
OTHER ASSETS 29,279 29,279
--------------- ------------ ------------
Total Assets $ 2,970,766 $ (617,313) $ 2,353,453
=============== ============ ============
</TABLE>
See Notes to Unaudited Condensed Consolidated Pro Forma Financial Information.
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GTE FLORIDA INCORPORATED AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
<TABLE>
<CAPTION>
As Reported Pro Forma
September 30, Pro Forma September 30,
1995 Adjustments 1995
------------- ------------- --------------
(Thousands of Dollars)
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Short-term debt, including current maturities $ 71,195 $ 71,195
Accounts payable 82,985 82,985
Accrued taxes 44,674 44,674
Accrued payroll and vacations 42,572 42,572
Accrued interest 14,859 14,859
Accrued dividends 33,180 33,180
Accrued restructuring costs and other 109,169 109,169
----------- ------------ ------------
Total current liabilities 398,634 398,634
----------- ------------ ------------
LONG-TERM DEBT 724,123 $ 4,316 (5) 728,439
----------- ------------ ------------
RESERVES AND DEFERRED CREDITS:
Deferred income taxes 397,903 (237,838) (6) 160,065
Employee benefit obligations 106,517 106,517
Restructuring costs and other 77,376 (5,150) (4) 72,226
----------- ------------ ------------
Total reserves and deferred credits 581,796 (242,988) 338,808
----------- ------------ ------------
SHAREHOLDERS' EQUITY:
Preferred stock 60,096 60,096
Common stock 585,000 585,000
Other capital 50,289 50,289
Reinvested earnings 570,828 (378,641) (2) 192,187
----------- ------------ ------------
Total shareholders' equity 1,266,213 (378,641) 887,572
----------- ------------ ------------
Total Liabilities and Shareholders' Equity $ 2,970,766 $ (617,313) $ 2,353,453
=========== ============ ============
</TABLE>
See Notes to Unaudited Condensed Consolidated Pro Forma Financial Information.
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GTE FLORIDA INCORPORATED AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA
FINANCIAL INFORMATION
(1) Represents the reclassification of the provision for uncollectible accounts
to selling, general and administrative expenses, consistent with non-regulated
accounting practices.
(2) Represents the after-tax effect of the adjustments described in notes 3 - 5
below.
(3) Represents the write-down of property, plant and equipment, net due to an
impairment of such assets resulting from depreciation lives set by regulators
that are longer than the assets' economic lives.
(4) Represents the write-off of net regulatory liabilities and the write-off of
the original debt issuance costs associated with $75.3 million of long-term
debt that will be refinanced.
(5) Represents the costs associated with refinancing $75.3 million of long-term
debt.
(6) Represents the tax effect of the adjustments described in notes 3 - 5
above.
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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 hereunto duly authorized.
GTE FLORIDA INCORPORATED
(Registrant)
Date: November 13, 1995 By William M. Edwards III
----------------------
William M. Edwards III
Controller
(Chief Accounting Officer)
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