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, 1995
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, 1995. The Company's common stock is
100% owned by GTE Corporation.
<TABLE>
PART I. FINANCIAL INFORMATION
GTE FLORIDA INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three
Months Ended
March
31,
1995
1994
(Thousands of
Dollars)
<S> <C>
<C>
OPERATING REVENUES:
Local network services $ 151,650 $
143,502
Network access services 114,805
107,963
Long distance services 20,602
20,825
Equipment sales and services 28,040
25,484
Other 6,436
5,403
321,533
303,177
OPERATING EXPENSES:
Cost of sales and services 74,088
81,155
Depreciation and amortization 69,850
65,622
Marketing, selling, general
and administrative 97,948
113,757
241,886
260,534
Net operating income 79,647
42,643
OTHER (INCOME) DEDUCTIONS:
Interest expense 16,021
15,572
Other - net (386)
(897)
INCOME BEFORE INCOME TAXES 64,012
27,968
INCOME TAXES 24,681
10,140
NET INCOME $ 39,331 $
17,828
</TABLE>
Per share data is omitted since the Company's common stock is
100% owned by GTE Corporation (GTE).
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
(DOLLARS IN MILLIONS)
RESULTS OF OPERATIONS
Net income was $39.3 for the three months ended March 31, 1995
compared to $17.8 for the same period in 1994, reflecting an
increase of $21.5. This increase is primarily due to higher
revenues resulting from customer growth and lower operating
expenses related to reductions in workforce.
OPERATING REVENUES
Operating revenues were $321.5 and $303.2 for the three months
ended March 31, 1995 and 1994, respectively. This reflects an
increase of 6% or $18.3.
Local network services revenues were $151.7 and $143.5 for the
three months ended March 31, 1995 and 1994, respectively,
reflecting an increase of 6% or $8.2. This increase is primarily
due to continued customer growth as reflected by a 4% increase in
access lines, which generated $4.3 in additional revenues,
increased revenues of $1.7 from enhanced custom calling features
and increased revenues of $1.4 from growth in Integrated Services
Digital Network (ISDN), a service that permits high-speed
transmission of integrated voice, data and image over one phone
line.
Network access services revenues were $114.8 and $108.0 for the
three months ended March 31, 1995 and 1994, respectively,
reflecting an increase of 6% or $6.8. This increase is primarily
due to a 13% increase in minutes of use, which generated $10.7 in
additional revenues, partially offset by $4.6 of unfavorable
interstate access settlements.
Equipment sales and services revenues were $28.0 and $25.5 for
the three months ended March 31, 1995 and 1994, respectively,
reflecting an increase of 10% or $2.5. This increase is
primarily due to a $2.2 increase in revenues derived from sales
of Radio Paging services and Personal Secretary voice messaging
services.
Other operating revenues were $6.4 and $5.4 for the three months
ended March 31, 1995 and 1994, respectively, reflecting an
increase of 19% or $1.0. This increase is primarily due to a
$0.7 increase in Database 800 service revenue.
OPERATING EXPENSES
Operating expenses were $241.9 and $260.5 for the three months
ended March 31, 1995 and 1994, respectively, reflecting a
decrease of 7% or $18.6. This decrease is primarily the result
of an $8.5 decrease in labor and benefit costs reflecting
reductions in workforce associated with the Company's re-
engineering plan initiated in 1994, a $3.7 decrease in digital
switching software upgrades and a $2.7 decrease in charges
related to unbillable calling card calls.
2
GTE FLORIDA INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
OTHER DEDUCTIONS
Income tax expenses were $24.7 and $10.1 for the three months
ended March 31, 1995 and 1994, respectively, reflecting an
increase of $14.6. This increase is primarily due to the
increase in pretax income, the declining effects of deferred
investment tax credits and the lower reversal of tax rate
differentials on deferred tax balances.
CAPITAL RESOURCES AND LIQUIDITY
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, at March 31, 1995 a $3,500 line of credit was available
to the Company through shared lines of credit with GTE and other
affiliates to support short-term financing needs.
The Company's primary source of funds during 1995 was cash from
operating activities of $118.3 compared to $127.3 for the same
period in 1994. The decrease primarily reflects unfavorable
timing of payments of payables partially offset by increased
operating results.
The Company's capital expenditures during the first three months
of 1995 were $56.8 compared to $48.5 during the same period in
1994. The 1995 expenditures reflect the Company's continued
growth in access lines, modernization of facilities and
provisioning of new products and services, including Video
Connect (an interactive and broadcast video product utilized in
the broadcast, educational and business markets), broadband
digital services and switched digital services. In 1995,
construction costs are expected to increase slightly from $274.0
of capital expenditures incurred during 1994.
Cash used for financing activities was $71.4 in 1995 compared to
$78.7 in 1994. This included dividend payments of $44.2 in 1995
compared to $1.1 in 1994 and decreases in short-term debt of
$28.5 in 1995 compared to $68.9 in 1994.
OTHER MATTERS
As previously reported, results for 1993 included a one-time
pretax restructuring charge of $194.3, which reduced net income
by $119.7, primarily for incremental costs related to
implementation of the Company's three-year re-engineering plan.
The re-engineering plan will redesign and streamline processes to
improve customer-responsiveness and product quality, reduce the
time necessary to introduce new products and services and further
reduce costs.
3
GTE FLORIDA INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Implementation of the re-engineering plan began during 1994 and
is expected to be completed by the end of 1996. Expenditures of
$51.1 have been made since inception of the re-engineering plan,
including $7.6 during the first three months of 1995. These
expenditures were primarily associated with the consolidation of
customer contact, network operations and operator service
centers, separation benefits from employee reductions and
incremental expenditures to redesign and streamline processes.
The level of re-engineering activities and related expenditures
are expected to accelerate during the remainder of 1995. There
have been no significant changes made to the overall re-
engineering plan as originally reported. As of March 31, 1995,
$143.2 remains in the restructuring reserve, of which $55.8 is
classified as a current liability. Management believes the
reserve is adequate to cover future expenditures.
In March 1995, the Federal Communications Commission (FCC)
increased the local-exchange carrier (LEC) productivity factors
associated with its interstate price cap plan to provide three
different options, on an interim basis, regarding the
determination and use of productivity factors. These changes
will be reflected in the LECs' annual tariff filing, effective
August 1, 1995. The FCC is expected to continue to consider
permanent changes to its price cap plan in a future rulemaking
proceeding. GTE believes the impact of the interim rules will be
minimized in the near-term because GTE has reduced its access
fees in previous years to amounts below the FCC's maximum price.
In April 1995, GTE filed a motion with the U.S. District Court
for the District of Columbia to remove the 1984 Consent Decree,
which restricts the Company from providing interLATA services.
GTE believes that the Consent Decree is no longer required since
GTE has since divested its interests in the entities whose
purchase gave rise to the Consent Decree.
In May 1995, the FCC approved GTE's applications to construct a
new fiber-optic and coaxial-cable video network in four markets,
including Pasco and Pinellas Counties, Florida. GTE expects to
submit tariffs that set the rates for use of its video network to
the FCC for approval and to commence the initial deployment of
the network in late 1995 and early 1996.
On January 21, 1993, the Florida Public Service Commission (FPSC)
issued an order effective January 6, 1993 to reduce rates $14.5.
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. The Company filed
an appeal of various aspects of the FPSC's rate case decision
with the Florida 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 $4.8 adjustment for expenses associated
with affiliate transactions and remanded this issue to the
Commission. On April 3, 1995, the Commission approved a $4.8
increase to certain local rates, effective May 2, 1995.
4
<TABLE>
GTE FLORIDA INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
March 31,
December 31,
1995
1994
(Thousands of
Dollars)
<S> <C>
<C>
CURRENT ASSETS:
Cash $ 614 $
10,527
Receivables, less allowances of
$20,271 and $19,737, respectively 258,308
292,736
Note receivable from affiliate 7,422
8,495
Materials and supplies 23,538
15,713
Prepayments and other 18,478
19,365
Total current assets 308,360
346,836
PROPERTY, PLANT AND EQUIPMENT:
Original cost 3,828,657
3,781,735
Accumulated depreciation (1,288,801)
(1,229,633)
Net property, plant and equipment 2,539,856
2,552,102
OTHER ASSETS 96,825
91,317
TOTAL ASSETS $ 2,945,041 $
2,990,255
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<TABLE>
GTE FLORIDA INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
March 31,
December 31,
1995
1994
(Thousands of
Dollars)
<S> <C>
<C>
CURRENT LIABILITIES:
Short-term debt, including current maturities $ 108,946 $
137,508
Accounts payable 84,288
117,191
Accrued taxes 48,640
32,073
Accrued payroll and vacations 37,175
40,466
Accrued interest 14,928
8,911
Accrued dividends 27,526
43,669
Accrued restructuring costs and other 97,761
94,224
Total current liabilities 419,264
474,042
LONG-TERM DEBT 730,494
729,754
DEFERRED CREDITS AND RESERVES, primarily
deferred income taxes, investment tax
credits and restructuring costs 585,639
588,100
SHAREHOLDERS' EQUITY:
Preferred stock 60,096
60,096
Common stock 585,000
585,000
Other capital 289
289
Reinvested earnings 564,259
552,974
Total shareholders' equity 1,209,644
1,198,359
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,945,041 $
2,990,255
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
6
<TABLE>
GTE FLORIDA INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Three
Months Ended
March
31,
1995
1994
(Thousands of
Dollars)
<S> <C>
<C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 39,331 $
17,828
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 69,850
65,622
Deferred income taxes and investment
tax credits 5,860
9,159
Provision for uncollectible accounts 5,303
3,748
Changes in current assets and
current liabilities (5,936)
48,861
Other - net 3,937
(17,870)
Net cash from operating activities 118,345
127,348
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (56,829)
(48,542)
Cash used in investing activities (56,829)
(48,542)
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt issued 272
- --
Long-term debt retired (49)
(35)
Dividends paid to shareholders (44,189)
(1,071)
Net change in affiliate notes 1,073
(8,780)
Decrease in short-term debt (28,536)
(68,850)
Net cash used in financing activities (71,429)
(78,736)
Increase (decrease) in cash (9,913)
70
Cash at beginning of period 10,527
6,688
Cash at end of period $ 614 $
6,758
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
7
GTE FLORIDA INCORPORATED AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) The unaudited condensed consolidated financial statements
included herein have been prepared by the Company, 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 1994 Annual Report on Form 10-K.
(2) Reclassifications of prior year data have been made in the
financial statements where appropriate to conform to the 1995
presentation.
8
GTE FLORIDA INCORPORATED AND SUBSIDIARY
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K.
(27) Financial Data Schedule.
(b) The Company filed no reports on Form 8-K during the
first
quarter of 1995.
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 hereunto duly authorized.
GTE FLORIDA
INCORPORATED
(Registrant)
Date: May 10, 1995 WILLIAM M.
EDWARDS, III
WILLIAM M.
EDWARDS, III
Controller
(Chief
Accounting Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1995
<CASH> 614
<SECURITIES> 0
<RECEIVABLES> 278,579
<ALLOWANCES> 20,271
<INVENTORY> 23,538
<CURRENT-ASSETS> 308,360
<PP&E> 3,828,657
<DEPRECIATION> 1,288,801
<TOTAL-ASSETS> 2,945,041
<CURRENT-LIABILITIES> 419,264
<BONDS> 730,494
<COMMON> 585,000
0
60,096
<OTHER-SE> 564,548
<TOTAL-LIABILITY-AND-EQUITY> 2,945,041
<SALES> 321,533
<TOTAL-REVENUES> 321,533
<CGS> 74,088
<TOTAL-COSTS> 241,886
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,021
<INCOME-PRETAX> 64,012
<INCOME-TAX> 24,681
<INCOME-CONTINUING> 39,331
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,331
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
