<PAGE> 1
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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, 2000
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 IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1255 Corporate Drive, SVC04C08, Irving, Texas 75038
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code 972-507-5000
(Former name, former address and former fiscal year,
if changed since last report)
The registrant, a wholly-owned subsidiary of GTE Corporation, meets the
conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is
therefore filing this form with reduced disclosure format pursuant to General
Instruction (H)(2).
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, 2000. The Company's common stock is 100% owned by GTE Corporation.
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<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GTE FLORIDA INCORPORATED AND SUBSIDIARY
Condensed Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
2000 1999
------------ ------------
(Dollars in Millions)
<S> <C> <C>
REVENUES AND SALES
Local services $ 190.3 $ 185.0
Network access services 148.9 149.8
Other services and sales 67.9 62.0
------------ ------------
Total revenues and sales 407.1 396.8
------------ ------------
OPERATING COSTS AND EXPENSES
Cost of services and sales 160.2 151.3
Selling, general and administrative 62.8 75.7
Depreciation and amortization 92.6 95.6
------------ ------------
Total operating costs and expenses 315.6 322.6
------------ ------------
OPERATING INCOME 91.5 74.2
OTHER EXPENSE
Interest - net 17.3 16.7
------------ ------------
INCOME BEFORE INCOME TAXES 74.2 57.5
Income taxes 28.8 22.4
------------ ------------
NET INCOME $ 45.4 $ 35.1
============ ============
</TABLE>
Per share data is omitted since the Company's common stock is 100% owned by GTE
Corporation.
The accompanying notes are an integral part of these statements.
1
<PAGE> 3
GTE FLORIDA INCORPORATED AND SUBSIDIARY
Condensed Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
(Dollars in Millions)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 117.6 $ 127.6
Receivables, less allowances of $33.6 million and $34.0 million 410.8 404.7
Accounts receivable from affiliates 10.0 15.1
Notes receivable from affiliates 910.0 1,422.8
Inventories and supplies 21.5 17.5
Prepayments and other 34.0 50.8
------------ ------------
Total current assets 1,503.9 2,038.5
------------ ------------
Property, plant and equipment, at cost 4,901.9 4,842.0
Accumulated depreciation (2,966.8) (2,901.2)
------------ ------------
Total property, plant and equipment, net 1,935.1 1,940.8
------------ ------------
Prepaid pension costs 320.3 293.9
Other assets 15.0 10.7
------------ ------------
Total assets $ 3,774.3 $ 4,283.9
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 4
GTE FLORIDA INCORPORATED AND SUBSIDIARY
Condensed Consolidated Balance Sheets (Unaudited) - Continued
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
(Dollars in Millions)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term obligations, including current maturities $ 1,200.3 $ 1,730.5
Notes payable to affiliates 20.5 3.6
Accounts payable 45.8 59.4
Affiliate payables 86.8 77.9
Taxes payable 67.7 38.3
Accrued interest 19.4 11.8
Other 176.1 175.2
------------ ------------
Total current liabilities 1,616.6 2,096.7
------------ ------------
Long-term debt 892.2 892.1
Deferred income taxes 232.1 225.4
Employee benefit plans and other liabilities 229.3 226.0
------------ ------------
Total liabilities 2,970.2 3,440.2
------------ ------------
Shareholders' equity
Preferred stock -- 21.2
Common stock (23,400,000 shares issued) 585.0 585.0
Additional paid-in capital 57.8 57.6
Retained earnings 161.3 179.9
------------ ------------
Total shareholders' equity 804.1 843.7
------------ ------------
Total liabilities and shareholders' equity $ 3,774.3 $ 4,283.9
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 5
GTE FLORIDA INCORPORATED AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
2000 1999
------------ ------------
(Dollars in Millions)
<S> <C> <C>
OPERATIONS
Net income $ 45.4 $ 35.1
Adjustments to reconcile net income to net cash from operations:
Depreciation and amortization 92.6 95.6
Employee retirement benefits (24.6) (4.4)
Provision for uncollectible accounts 8.0 6.2
Changes in current assets and current liabilities 39.6 92.1
Deferred income taxes and other - net 1.0 2.2
------------ ------------
Net cash from operations 162.0 226.8
------------ ------------
INVESTING
Capital expenditures (85.0) (94.1)
Other - net (0.1) --
------------ ------------
Net cash used in investing (85.1) (94.1)
------------ ------------
FINANCING
Preferred stock retired, including premiums paid on early retirement (22.0) --
Dividends paid (64.4) (28.3)
Decrease in short-term obligations, excluding current maturities (530.2) (417.1)
Net change in affiliate notes 529.7 312.4
------------ ------------
Net cash used in financing (86.9) (133.0)
------------ ------------
Decrease in cash and cash equivalents (10.0) (0.3)
Cash and cash equivalents:
Beginning of period 127.6 113.5
------------ ------------
End of period $ 117.6 $ 113.2
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 6
GTE FLORIDA INCORPORATED AND SUBSIDIARY
Consolidated Statement of Shareholders' Equity (Unaudited)
<TABLE>
<CAPTION>
Additional
Preferred Common Paid-In Retained
Stock Stock Capital Earnings Total
-------- -------- -------- -------- --------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C>
Shareholders' equity, December 31, 1999 $ 21.2 $ 585.0 $ 57.6 $ 179.9 $ 843.7
Net income 45.4 45.4
Redemption of preferred stock (21.2) (0.8) (22.0)
Tax benefit from exercise of stock options 0.2 0.2
Dividends declared (63.2) (63.2)
-------- -------- -------- -------- --------
Shareholder's equity, March 31, 2000 $ -- $ 585.0 $ 57.8 $ 161.3 $ 804.1
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 7
GTE FLORIDA INCORPORATED AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 1. BASIS OF PRESENTATION
GTE Florida Incorporated (the Company) is incorporated under the laws of the
State of Florida and is a subsidiary of GTE Corporation (GTE).
The accompanying unaudited condensed consolidated financial statements have been
prepared based upon Securities and Exchange Commission (SEC) rules that permit
reduced disclosure for interim periods. These condensed consolidated financial
statements reflect all adjustments that are necessary for a fair presentation of
results of operations and financial position for the interim periods shown
including normal recurring accruals. The results for the interim periods are not
necessarily indicative of results for the full year. For a more complete
discussion of significant accounting policies and certain other information,
please refer to the consolidated financial statements and the notes thereto
included in the Company's 1999 Annual Report on Form 10-K.
Reclassifications of prior year data have been made, where appropriate, to
conform to the 2000 presentation.
NOTE 2. PREFERRED STOCK
In March 2000, the Company redeemed all 847,800 outstanding shares of preferred
stock and paid premiums of $0.8 million pretax on the early redemption.
NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. The statement requires
entities that use derivative instruments to measure these instruments at fair
value and record them as assets or liabilities on the balance sheet. It also
requires entities to reflect the gains or losses associated with changes in the
fair value of these derivatives, either in earnings or as a separate component
of comprehensive income, depending on the nature of the underlying contract or
transaction. The Company is currently assessing the impact of adopting SFAS No.
133, as amended, which is effective January 1, 2001.
In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101,
"Revenue Recognition in Financial Statements," which currently must be adopted
by June 30, 2000. SAB No. 101 provides additional guidance on revenue
recognition as well as criteria for when revenue is generally realized and
earned and also requires the deferral of incremental costs. The Company is
currently assessing the impact of SAB No. 101.
NOTE 4. DIRECTORY PUBLISHING REVENUES
Consistent with industry practice, effective January 1, 2000, GTE changed its
method of recognizing directory publishing revenues. GTE Directories, a
wholly-owned subsidiary of GTE, publishes telephone directories for which it
receives advertising revenue. Under the previous method of revenue recognition,
approximately 60% of the advertising revenue for directories published in the
Company's operating areas was recognized as revenue by the Company. The
remaining 40% was recognized as revenue by GTE Directories. Under the new
method, GTE Directories now recognizes 100% of the directory publishing
revenues. The Company, in-turn, bills GTE Directories for customer listing
information and billing and collection services. As a result, the Company's
other services and sales revenues and operating income for the three months
ended March 31, 2000 decreased $2.6 million and $1.8 million, respectively,
compared to the first quarter of 1999.
6
<PAGE> 8
GTE FLORIDA INCORPORATED AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
NOTE 5. SEGMENT REPORTING
The Company has two reportable segments, Telephone Operations and GTE Funding
Incorporated (GTE Funding). The Telephone Operations segment primarily provides
wireline communication services to local markets. The GTE Funding segment
provides short-term financing and investment vehicles and cash management
services for the Company and six other of GTE's domestic telephone operating
subsidiaries, each of which is contractually obligated to repay all amounts
borrowed from GTE Funding.
GTE Funding has no reportable revenue or net income. Its interest expense is
approximately equal to the interest income received on affiliate notes between
GTE Funding and the various domestic telephone operating subsidiaries.
The following table represents segment income statement results for the three
months ended March 31 and balance sheet results as of March 31, 2000 and
December 31, 1999, respectively:
<TABLE>
<CAPTION>
2000 1999
------------ ------------
(Dollars in Millions)
<S> <C> <C>
TELEPHONE OPERATIONS:
Total external revenues $ 407.1 $ 396.8
Operating income 91.8 75.9
Depreciation and amortization 92.6 95.6
Interest expense 17.6 18.5
Capital expenditures 85.0 94.1
Total assets 2,640.7 2,723.6
GTE FUNDING:
Operating loss $ (0.3) $ (1.7)
Interest expense 24.9 25.7
Interest income 25.2 27.4
Total assets (a) 1,125.6 1,732.3
CONSOLIDATED REVENUES $ 407.1 $ 396.8
CONSOLIDATED OPERATING INCOME 91.5 74.2
CONSOLIDATED ASSETS 3,774.3 4,283.9
</TABLE>
(a) Assets consist primarily of cash and cash equivalents and notes receivable
from affiliates.
NOTE 6. PROPOSED MERGER WITH BELL ATLANTIC CORPORATION
Bell Atlantic and GTE have announced a proposed merger of equals under a
definitive merger agreement dated July 27, 1998. Under the terms of the
agreement, GTE shareholders will receive 1.22 shares of Bell Atlantic common
stock for each share of GTE common stock they own. Bell Atlantic shareholders
will continue to own their existing shares after the merger.
The merger is expected to qualify as a pooling of interests, which means that
for accounting and financial reporting purposes the companies will be treated as
if they had always been combined. At annual meetings held in May 1999, the
shareholders of each company approved the merger. The completion of the merger
is subject to a number of conditions, including certain regulatory approvals and
receipt of opinions that the merger will be tax-free. All state regulatory
commissions have now approved the merger and the only remaining approval is
required from the Federal Communications Commission.
7
<PAGE> 9
GTE FLORIDA INCORPORATED AND SUBSIDIARY
Item 2. Management's Discussion and Analysis of Results of Operations
(Abbreviated pursuant to General Instruction H(2) of Form 10-Q.)
RESULTS OF OPERATIONS
Net income for the three months ended March 31, 2000 increased $10.3 million, or
29%, compared to the same period in 1999, primarily due to an increase in local
services and other services and sales revenues and a decrease in selling,
general and administrative expenses, partially offset by a corresponding
increase in income taxes.
<TABLE>
<CAPTION>
REVENUES AND SALES
(Dollars in Millions) Three Months Ended
March 31,
------------------------------ Increase Percent
2000 1999 (Decrease) Change
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Local services $ 190.3 $ 185.0 $ 5.3 3%
Network access services 148.9 149.8 (0.9) (1)%
Other services and sales 67.9 62.0 5.9 10%
------------- ------------- -------------
Total revenues and sales $ 407.1 $ 396.8 $ 10.3 3%
============= ============= =============
</TABLE>
Local Services Revenues
Access line growth was 3% for the first quarter of 2000, generating additional
revenues of $2.4 million from basic local services, Integrated Services Digital
Network and Digital Channel Services. Greater demand for enhanced customer
calling services, such as SmartCall(R) and CLASS services, contributed an
additional $2.7 million in local services revenue growth for the first quarter
of 2000.
Network Access Services Revenues
Minutes of use increased 12%, generating additional revenues of $8.7 million for
the first quarter of 2000 compared to the first quarter of 1999. Special access
revenues grew by $12.9 million as a result of greater demand for increased
bandwidth services by high-capacity users. These increases were partially offset
by the impact of mandated interstate and intrastate access price reductions and
rate element adjustments of $20.4 million.
Other Services and Sales Revenues
The first quarter increase in other services and sales revenues was primarily
driven by increases in nonregulated service revenues and equipment sales of $6.1
million, partially offset by the impact of a change in the revenue recognition
method for directory publishing revenues (for further information see "OTHER
DEVELOPMENTS - Directory Publishing Revenues").
8
<PAGE> 10
GTE FLORIDA INCORPORATED AND SUBSIDIARY
Management's Discussion and Analysis of Results of Operations - Continued
(Abbreviated pursuant to General Instruction H(2) of Form 10-Q.)
<TABLE>
<CAPTION>
OPERATING COSTS AND EXPENSES
(Dollars in Millions) Three Months Ended
March 31,
------------------------------ Increase Percent
2000 1999 (Decrease) Change
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Cost of services and sales $ 160.2 $ 151.3 $ 8.9 6%
Selling, general and administrative 62.8 75.7 (12.9) (17)%
Depreciation and amortization 92.6 95.6 (3.0) (3)%
------------- ------------- -------------
Total operating costs and expenses $ 315.6 $ 322.6 $ (7.0) (2)%
============= ============= =============
</TABLE>
The decrease in operating costs and expenses was primarily due to the
recognition of a pretax gain of $18.9 million associated with lump-sum
settlements of pension obligations for former employees electing deferred vested
pension cash-outs and for current employees who met certain eligibility
requirements. Further contributing to the cost decrease was a one-time special
charge of $16.2 million in the first quarter of 1999 associated with employee
separation programs. Partially offsetting these expense reductions were higher
costs associated with customer and access line growth and costs for new
initiatives, such as digital subscriber line (DSL) service, which increased
expenses by $25.0 million. In addition, operating costs and expenses increased
$3.7 million due to greater demand for telecommunications services and
equipment, and $2.2 million due to the settlement of a three-year union labor
contract, effective August 1999. The decrease in depreciation and amortization
expense was primarily the result of a depreciation rate reduction, effective May
1999, which was partially offset by ongoing investment in network facilities as
a result of switched access line growth due to higher demand from both Internet
Service Providers (ISPs) and customers.
OTHER INCOME STATEMENT ITEMS
Income taxes increased $6.4 million or 29% in the first quarter of 2000 compared
to the same period in 1999, primarily due to a corresponding increase in pretax
income.
INTERSTATE REGULATORY DEVELOPMENTS
During the first quarter of 2000, regulatory and legislative activity at both
the state and federal levels continued to be a direct result of the
Telecommunications Act of 1996 (Telecommunications Act). Along with promoting
competition in all segments of the telecommunications industry, the
Telecommunications Act was intended to preserve and advance universal service.
GTE continued in 2000 to meet the wholesale requirements of new competitors. GTE
has continued to sign interconnection agreements with other carriers, providing
them the capability to purchase unbundled network elements (UNEs), resell retail
services and interconnect facilities-based networks.
Universal Service
In November 1999, the Federal Communications Commission (FCC) released an order
dealing with implementation of the new FCC federal high cost support mechanism
for non-rural incumbent local exchange carriers (ILECs), including GTE. The
effective date for the new federal universal service plan was January 1, 2000.
This plan will distribute federal high cost funds to states with higher than
average costs. The role of state commissions is to ensure reasonable
comparability within the borders of a state. Federal high cost support will be
calculated by comparing the nationwide average cost with each state's average
cost per line, and providing federal support for only states that
9
<PAGE> 11
GTE FLORIDA INCORPORATED AND SUBSIDIARY
Management's Discussion and Analysis of Results of Operations - Continued
(Abbreviated pursuant to General Instruction H(2) of Form 10-Q.)
exceed 135% of the nationwide average. To guard against rate shock, the FCC also
adopted a "hold harmless" approach so that the amount of support provided to
each non-rural carrier under the new plan will not be less than the amount
provided today. U S WEST has appealed this order on the basis that it fails to
provide a sufficient amount of support. This FCC order also established a May 1,
2000 deadline by which state commissions must create at least three deaveraged
price zones for UNEs. In January 2000, GTE requested the FCC grant a one year
delay to give state commissions ample opportunity to implement deaveraged retail
rates and establish state universal service funds in concert with UNE
deaveraging. However, on April 6, 2000, the FCC denied GTE's request for an
extension of time. The FCC expects state commissions, rather than the individual
telephone companies, to file a waiver of the May 1, 2000 deadline, if necessary.
On April 28, 2000, the FCC granted temporary waivers to seven state commissions
allowing them to delay compliance up to six months. The remaining states that
GTE operates in have already adopted permanent deaveraged UNE rates.
OTHER DEVELOPMENTS
Proposed Merger with Bell Atlantic Corporation
Bell Atlantic and GTE have announced a proposed merger of equals under a
definitive merger agreement dated July 27, 1998. Under the terms of the
agreement, GTE shareholders will receive 1.22 shares of Bell Atlantic common
stock for each share of GTE common stock they own. Bell Atlantic shareholders
will continue to own their existing shares after the merger.
The merger is expected to qualify as a pooling of interests, which means that
for accounting and financial reporting purposes the companies will be treated as
if they had always been combined. At annual meetings held in May 1999, the
shareholders of each company approved the merger. The completion of the merger
is subject to a number of conditions, including certain regulatory approvals and
receipt of opinions that the merger will be tax-free. All state regulatory
commissions have now approved the merger and the only remaining approval is
required from the FCC. Both companies are working diligently to complete the
merger and are targeting completion of the merger in the second quarter of 2000.
Directory Publishing Revenues
Consistent with industry practice, effective January 1, 2000, GTE changed its
method of recognizing directory publishing revenues. GTE Directories, a
wholly-owned subsidiary of GTE, publishes telephone directories for which it
receives advertising revenue. Under the previous method of revenue recognition,
approximately 60% of the advertising revenue for directories published in the
Company's operating areas was recognized as revenue by the Company. The
remaining 40% was recognized as revenue by GTE Directories. Under the new
method, GTE Directories now recognizes 100% of the directory publishing
revenues. The Company, in-turn, bills GTE Directories for customer listing
information and billing and collection services. As a result, the Company's
other services and sales revenues and operating income for the three months
ended March 31, 2000 decreased $2.6 million and $1.8 million, respectively,
compared to the first quarter of 1999. Other services and sales revenues and
operating income for the year ended December 31, 2000 are expected to decrease
by approximately $103.5 million and $95.3 million, respectively, compared to
1999.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and
10
<PAGE> 12
GTE FLORIDA INCORPORATED AND SUBSIDIARY
Management's Discussion and Analysis of Results of Operations - Continued
(Abbreviated pursuant to General Instruction H(2) of Form 10-Q.)
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The
statement requires entities that use derivative instruments to measure these
instruments at fair value and record them as assets or liabilities on the
balance sheet. It also requires entities to reflect the gains or losses
associated with changes in the fair value of these derivatives, either in
earnings or as a separate component of comprehensive income, depending on the
nature of the underlying contract or transaction. The Company is currently
assessing the impact of adopting SFAS No. 133, as amended, which is effective
January 1, 2001.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements," which
currently must be adopted by June 30, 2000. SAB No. 101 provides additional
guidance on revenue recognition as well as criteria for when revenue is
generally realized and earned and also requires the deferral of incremental
costs. The Company is currently assessing the impact of SAB No. 101.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
In this Management's Discussion and Analysis, the Company has made
forward-looking statements. These statements are based on the Company's
estimates and assumptions and are subject to certain risks and uncertainties.
Forward-looking statements include the information concerning possible or
assumed future results of operations of the Company, as well as those statements
preceded or followed by the words "anticipates," "believes," "estimates,"
"expects," "hopes," "targets" or similar expressions. For each of these
statements, the Company claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995.
The future results of the Company could be affected by subsequent events and
could differ materially from those expressed in the forward-looking statements.
If future events and actual performance differ from the Company's assumptions,
the actual results could vary significantly from the performance projected in
the forward-looking statements.
The following important factors could affect the future results of the Company
and could cause those results to differ materially from those expressed in the
forward-looking statements: (1) materially adverse changes in economic
conditions in the markets served by the Company; (2) material changes in
available technology; (3) the final resolution of federal, state and local
regulatory initiatives and proceedings, including arbitration proceedings, and
judicial review of those initiatives and proceedings, pertaining to, among other
matters, the terms of interconnection, access charges, universal service,
unbundled network elements and resale rates; and (4) the extent, timing, success
and overall effects of competition from others in the local telephone and
intraLATA (local access and transport area) toll service markets.
11
<PAGE> 13
PART II. OTHER INFORMATION
GTE FLORIDA INCORPORATED AND SUBSIDIARY
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required by Item 601 of Regulation S-K.
10 Material Contracts - Letter Agreement between GTE Service
Corporation and John Appel
12 Statement re: Calculation of the Consolidated Ratio of
Earnings to Fixed Charges
27 Financial Data Schedule
(b) The Company filed no reports on Form 8-K during the first quarter of
2000.
12
<PAGE> 14
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, 2000 /s/ Stephen L. Shore
------------------- ------------------------------------
Stephen L. Shore
Controller
(Principal Accounting Officer)
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
-------- -----------
<S> <C>
10 Material Contracts - Letter Agreement between
GTE Service Corporation and John Appel
12 Statement re: Calculation of the Consolidated Ratio
of Earnings to Fixed Charges
27 Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit 10
PERSONAL & CONFIDENTIAL
April 26, 2000
Mr. John Appel
[Address]
[Address]
Dear John:
As we have discussed, it is important to GTE that you remain with the company at
least through the closing of the merger. That being the case, if you remain with
GTE at least through the closing (or, if later, June 30, 2000) but separate as a
result of the merger thereafter, GTE will calculate your lump sum pension
benefit using the interest rate as of July 1, 2000 or the interest rate that
would ordinarily be used given your actual separation date, whichever would
provide you with the highest lump sum benefit. This special interest rate
protection will only be applicable if you elect to receive a lump sum pension
distribution following your separation, and any increase in the amount to which
you are entitled as a result of this commitment will be payable from the general
assets of GTE.
John, I want to thank you again for your flexibility. We need your leadership
now - more than ever. I truly appreciate this additional commitment.
Sincerely,
J. Randall MacDonald
Executive Vice President -
Human Resources & Administration
JRM:wh
c: J. T. D'Angelo, Jr.
E. D. Singer
<PAGE> 1
Exhibit 12
GTE FLORIDA INCORPORATED AND SUBSIDIARY
Statement of the Consolidated Ratio of Earnings to Fixed Charges
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in Millions) Three Months Ended Three Months Ended
March 31, 2000 March 31, 2000 (a)
------------------ ------------------
<S> <C> <C>
Net earnings available for fixed charges:
Income from continuing operations $ 45.4 $ 45.4
Add - Income taxes 28.8 28.8
- Fixed charges 43.9 18.9
-------------- --------------
Adjusted earnings $ 118.1 $ 93.1
============== ==============
Fixed charges:
Interest expense $ 40.3 $ 15.3
Portion of rent expense representing interest 3.6 3.6
-------------- --------------
Adjusted fixed charges $ 43.9 $ 18.9
============== ==============
RATIO OF EARNINGS TO FIXED CHARGES 2.69 4.93
</TABLE>
(a) Excludes $24.9 million of interest expense associated with commercial paper
issued by the Company's wholly-owned subsidiary, GTE Funding Incorporated
(GTE Funding), on behalf of GTE's other domestic telephone operating
subsidiaries. This interest expense is approximately equal to the interest
income received by the Company on affiliate notes between GTE Funding and
such domestic telephone operating subsidiaries. GTE Funding provides
short-term financing and investment vehicles and cash management services
for the Company and six other of GTE's domestic telephone operating
subsidiaries.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 117,600
<SECURITIES> 0
<RECEIVABLES> 1,364,400
<ALLOWANCES> 33,600
<INVENTORY> 21,500
<CURRENT-ASSETS> 1,503,900
<PP&E> 4,901,900
<DEPRECIATION> 2,966,800
<TOTAL-ASSETS> 3,774,300
<CURRENT-LIABILITIES> 1,616,600
<BONDS> 892,200
0
0
<COMMON> 585,000
<OTHER-SE> 219,100
<TOTAL-LIABILITY-AND-EQUITY> 3,774,300
<SALES> 407,100
<TOTAL-REVENUES> 407,100
<CGS> 160,200
<TOTAL-COSTS> 315,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,300
<INCOME-PRETAX> 74,200
<INCOME-TAX> 28,800
<INCOME-CONTINUING> 45,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,400
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
