UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 1-4721
SPRINT CORPORATION
(Exact name of registrant as specified in its charter)
KANSAS 48-0457967
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 11315, Kansas City, Missouri 64112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (913) 624-3000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Preferred Stock, without par
value
First series, $7.50 stated
value New York Stock Exchange
Second series, $6.25 stated
value New York Stock Exchange
Common stock, $2.50 par value,
and Rights (shares New York Stock Exchange
outstanding at March 1, 1994, Chicago Stock Exchange
343,913,432) Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of voting stock held by non-affiliates at
March 1, 1994 is $12,687,759,984.
Documents incorporated by reference.
Registrant's definitive proxy statement filed pursuant to
Regulation 14A promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934 is
incorporated by reference in Part III hereof.
SPRINT CORPORATION
SECURITIES AND EXCHANGE COMMISSION
ANNUAL REPORT ON FORM 10-K
Part I
Item 1. Business
THE CORPORATION
Sprint Corporation (Sprint), incorporated in 1938 under the laws
of Kansas, is a holding company. Sprint's principal subsidiaries
provide local exchange, cellular/wireless and domestic and
international long distance telecommunications services. Other
subsidiaries are engaged in the wholesale distribution of
telecommunications products and the publishing and marketing of
white and yellow page telephone directories.
Sprint, through its subsidiaries, owns Sprint Communications
Company L.P. (the Limited Partnership), the principal entity
comprising the long distance division. Through December 31,
1991, GTE Corporation (GTE) owned a 19.9 percent interest in the
Limited Partnership. In March 1993, Sprint's merger with Centel
Corporation (Centel) was consummated, increasing Sprint's local
exchange operations and greatly expanding its cellular/wireless
operations.
LONG DISTANCE COMMUNICATIONS SERVICES
The long distance division is the nation's third largest long
distance telephone company, operating a nationwide all-digital
long distance communications network utilizing state-of-the-art
fiber-optic and electronic technology. The division provides
domestic voice and data communications services across certain
specified geographical boundaries, as well as international long
distance communications services. Rates charged by the division
for its services sold to the public are subject to different
levels of state and federal regulation, but are generally not
subject to rate-base regulation. The division had net operating
revenues of $6.14 billion, $5.66 billion and $5.39 billion in
1993, 1992 and 1991, respectively.
The 1982 Modification of Final Judgment (MFJ) entered into by
American Telephone and Telegraph Company (AT&T) and the
Department of Justice significantly affected the long distance
communications market. The major aspects of the MFJ were (1) the
divestiture of AT&T's local telephone operating companies (the
Bell Operating Companies), (2) the creation of geographical areas
called Local Access and Transport Areas (LATAs) within which the
Bell Operating Companies and independent local exchange companies
provide basic local and intra-LATA toll service, (3) the
retention of long distance services by AT&T, and (4) the
prohibition against the Bell Operating Companies providing inter-
LATA services and information services, and manufacturing
telecommunications equipment. The Bell Operating Companies and
GTE local exchange companies were required by the MFJ and the GTE
Consent Decree, respectively, to provide customers with access to
all inter-LATA carriers' networks in a manner "equal in type,
quality, and price" to that provided to AT&T (equal access). The
independent local exchange companies were required by the Federal
Communications Commission (FCC) to provide equal access from many
of their central offices.
AT&T dominates the long distance communications market and is
expected to continue to dominate the market for some years into
the future. MCI Communications Corporation (MCI) is the nation's
second largest long distance telephone company. Sprint's long
distance division competes with AT&T and MCI in all segments of
the long distance communications market. Competition is based
upon price and pricing plans, the types of services offered,
customer service, and communications quality, reliability and
availability.
The opportunities for and cost of competition and, as a result,
the structure of the long distance telecommunications industry
are all subject to varying degrees of change by decisions of the
executive, judicial and legislative branches of the federal
government. The stated objective of these changes is to open the
long distance market to new entrants and eventually replace
regulation with competition where it best serves the public
interest. Some of the major issues being addressed by the
federal government to facilitate the transition to a competitive
market include the full implementation of equal access (discussed
above), equal charges per unit of traffic for access transport
provided to long distance carriers (discussed below), lessened
regulation of AT&T (including permitting individual customer
offerings), and the modification of some or all of the line-of-
business restrictions imposed on the Bell Operating Companies by
the MFJ (also discussed below). Many of these same competitive
issues are also being considered by a number of state regulators
and legislators.
In 1982, the FCC distinguished between carriers and found some
(AT&T and the Local Exchange Carriers, or LECs) to be dominant,
and others (primarily smaller competitive long distance
companies) to be nondominant. The FCC found it was in the public
interest to continue to regulate dominant carriers but, because
of market forces, it was appropriate to significantly lessen the
amount of regulation applied to nondominant domestic carriers;
thus, for instance, nondominant carriers were allowed to choose
not to file interstate tariffs. This policy of "permissive
detariffing" for nondominant carriers was found by the U.S. Court
of Appeals for the D.C. Circuit, in November 1992, to violate the
requirement in the Communications Act that all carriers "shall"
file tariffs. In response to the Court's decision, the FCC
adopted rules streamlining tariff filings for nondominant
carriers. The U.S. Supreme Court subsequently agreed to hear an
appeal of the Circuit Court decision. In February 1993, AT&T
filed lawsuits in federal District Court in Washington, D.C.
against the Limited Partnership, MCI and WilTel, Inc. alleging
unspecified damages for providing competitive service at rates
not contained in tariffs filed with the FCC. In November 1993,
the court granted Sprint's motion to dismiss AT&T's lawsuit;
however, AT&T has appealed the decision to the D.C. Circuit
Court. Although it is impossible to predict the outcome of these
proceedings with certainty, Sprint believes that the Limited
Partnership has at all times complied with applicable laws and
regulations and that its rates are proper and enforceable.
In 1989, the FCC replaced regulation of AT&T's rate of return
with a system of price caps, giving AT&T increased pricing
flexibility. In 1991, the FCC adopted partial "streamlined"
regulation of certain competitive business services provided by
AT&T. Specifically, the FCC removed these services (primarily
WATS and private line) from price caps regulation, reduced the
related tariff filing requirements and permitted contracts with
individual customers if the terms are generally available to
other business users. The FCC subsequently extended
"streamlined" regulation to most 800 services provided by AT&T.
Also in 1991, the FCC extended the provision of the MFJ requiring
the Bell Operating Companies (and all other LECs) to apply "equal
charges per unit of traffic" for access transport to all
interexchange carriers, which otherwise would have expired, and
instituted a comprehensive proceeding to determine new access
transport rules. In October 1992, the FCC adopted a new rate
structure and new pricing rules for LEC-provided switched
transport. LECs filed new access transport tariffs with the FCC
in September 1993, which contain rates that will purportedly
reduce the costs of the largest interexchange carrier by less
than 1 percent and increase the costs of the smaller
interexchange carriers (including Sprint's long distance division)
by less than 2 percent. The new rates went into effect on December
30, 1993.
In 1991, a series of decisions by the U.S. District Court and
Circuit Court of Appeals in Washington, D.C. resulted in the
MFJ's restriction against participation by the Bell Operating
Companies in information services being removed. Legislation has
been introduced in Congress, however, to place some safeguards on
the provision of those services. Legislation also has been
introduced in both Houses of Congress in 1994 to substantially
modify the restrictions in the MFJ. The bill in the U.S. House
would require the Justice Department, instead of the District
Court, to determine whether the provision of long distance
service by the Bell Operating Companies would substantially harm
competition, but there are significant exceptions to this rule.
The bill in the U.S. Senate would require the FCC to determine
that the Bell Operating Companies can provide competitive long
distance service only after local telephone competition has
diminished their monopoly power. The Clinton Administration has
also indicated that it favors legislation which promotes local
telephone competition and the national information
infrastructure. Although federal legislation to modify the MFJ
has been introduced several times in recent years but has not
passed, there appears to be a greater likelihood that Congress
will act during the Clinton Administration.
LOCAL COMMUNICATIONS SERVICES
The local division is comprised of rate-regulated local exchange
operating companies which serve approximately 6.1 million access
lines in 19 states. In addition to furnishing local exchange
services, the division provides intra-LATA toll service and
access by other carriers to Sprint's local exchange facilities.
The division had net operating revenues of $4.13 billion, $3.86
billion and $3.75 billion in 1993, 1992 and 1991, respectively.
Florida and North Carolina were the only jurisdictions in which
10 percent or more of the division's total 1993 net operating
revenues were generated. The following table reflects major
revenue categories as a percentage of the division's total net
operating revenues:
1993 1992 1991
Local service 39.4% 39.0% 38.3%
Network access 37.1 36.9 37.2
Toll service 12.2 12.6 13.0
Other 11.3 11.5 11.5
Total 100.0% 100.0% 100.0%
AT&T, as the dominant long distance telephone company, is the
division's largest customer for network access services. In
1993, 17.3 percent of the division's net operating revenues (6.3
percent of Sprint's consolidated net operating revenues) was
derived from services provided to AT&T, primarily network access
services, compared to 18.7 percent (6.9 percent of Sprint's
consolidated net operating revenues) in 1992. While AT&T is a
significant customer, Sprint does not believe the division's
revenues are dependent upon AT&T, as customers' demand for inter-
LATA long distance telephone service is not tied to any one long
distance carrier. Historically, as the market share of AT&T's
long distance competitors increases, the percent of revenues
derived from network access services provided to AT&T decreases.
Effective January 1, 1991, the FCC adopted a price caps
regulatory format for the Bell Operating Companies and the GTE
local exchange companies. Other LECs could volunteer to become
subject to price caps regulation. Under price caps, prices for
network access service must be adjusted annually to reflect
industry average productivity gains (as specified by the FCC),
inflation and certain allowed cost changes. Sprint elected to be
subject to price caps regulation, and under the form of the plan
adopted, Sprint's LECs generally have an opportunity to earn up
to a 14.25 percent rate of return on investment. Some of
Sprint's LECs have committed to produce higher than industry
average productivity gains, and as a result have an opportunity
to earn up to a 15.25 percent rate of return on investment. The
LECs owned by Centel did not originally elect price caps, but as
a result of the merger, these LECs adopted price caps effective
July 1, 1993. Prior to price caps, under rate of return
regulation, the Centel companies' authorized rate of return on
investment was 11.25 percent, with the ability to earn 0.25
percent above the authorized return. The FCC is conducting a
scheduled review of all aspects of the price caps plan; changes
to the plan may be proposed by interested parties and the FCC may
implement changes in 1995. Without further action by the FCC,
the current price caps plan would expire in 1995 and would be
replaced by rate of return regulation.
The potential for more direct competition with Sprint's LECs is
increasing. Many states, including most of the states in which
Sprint's LECs operate, allow competitive entry into the intra-LATA
long distance service market. State regulators are also
increasingly confronted with requests to permit resale of
local exchange services, with such resale now existing in a number
of states in which Sprint's LECs operate, including Pennsylvania,
Kansas, Illinois and Missouri. Illinois law also allows
alternative telecommunications providers to obtain certificates
of local exchange service authority in direct competition with
existing LECs if certain showings are made to the satisfaction
of the Illinois Commerce Commission.
At the interstate level, the FCC has revised its rules to permit
connection of customer-owned coin telephones to the local
network, exposing LECs to direct coin telephone competition.
Additionally, the FCC has assisted Competitive Access Providers
(CAPs) in providing access to interexchange carriers and end
users by mandating that all Tier 1 (over $100 million annual
operating revenues) LECs allow collocation of CAP equipment in
LEC central offices. The FCC's decision regarding collocation is
under appeal to the U.S. Court of Appeals for the D.C. Circuit.
The extent and ultimate impact of competition for LECs will
continue to depend, to a considerable degree, on FCC and state
regulatory actions, court decisions and possible federal or state
legislation. Legislation designed to stimulate local competition
between local exchange service providers and cable programming
service providers, in both markets, is presently pending in both
houses of the U.S. Congress. It is uncertain if any of the bills
will be enacted.
CELLULAR AND WIRELESS COMMUNICATIONS SERVICES
The cellular and wireless division primarily consists of Sprint
Cellular Company and its subsidiaries. In addition, Sprint's
LECs hold FCC licenses for Rural Service Areas. For management
and financial reporting purposes, these operations have been
combined with Sprint Cellular Company's operations.
Approximately 50 percent of Sprint's local communications
services customers are located in areas served by the cellular
and wireless division of Sprint. The division has operating
control of 88 markets in 15 states and a minority interest in 64
markets. The division had net operating revenues of $464 million
in 1993 and served more than 652,000 customers as of year end.
In 1992 and 1991, the division had revenues of $322 million and
$242 million, respectively.
Prior to the November 1992 decision by the U.S. Court of Appeals
for the D.C. Circuit rejecting permissive detariffing discussed
above under "Long Distance Communications Services", cellular
carriers had not filed tariffs with the FCC. In February 1993,
resale of domestic interstate toll tariffs for Sprint's cellular
and wireless operations were filed. The FCC, pursuant to
authority conferred by the Revenue Reconciliation Act of 1993,
has adopted rules to pre-empt all state regulation of commercial
mobile radio services, including cellular, and to forbear from
enforcing tariffing requirements with respect to commercial
mobile radio services.
The FCC licenses two carriers in each cellular market area and
these carriers compete directly with each other to provide
cellular service to end users and resellers. Each carrier is
licensed to operate on frequencies set aside for its cellular
operation. Licensees also encounter retail competition from
resale carriers in their market. Sprint Cellular Company also
sells cellular equipment in the competitive retail market.
Competition is based on quality of service, price and product
quality.
The FCC has announced that it will award additional radio
spectrum for the provision of personal communications services
(PCS). The FCC is expected to auction spectrum licenses during
1994. The FCC expects that PCS will result in additional competition
for existing cellular carriers.
PRODUCT DISTRIBUTION AND DIRECTORY PUBLISHING
North Supply Company (North Supply), a wholesale distributor of
telecommunications, security and alarm, and electrical products,
distributes products of more than 900 manufacturers to
approximately 12,000 customers. Products range from basics, such
as wire and cable, telephones and repair parts, to complete PBX
systems and security and alarm equipment. North Supply also
provides material management services to several of its
affiliates and to several subsidiaries of the Regional Bell
Holding Companies.
The nature of competition in North Supply's markets demands a
high level of customer service to succeed, as a number of
competitors, including other national wholesale distributors,
sell the same products.
North Supply sells to telephone companies and other users of
telecommunications products, including Sprint's local and long
distance divisions, other local and long distance telephone
companies, and companies with large private networks. Other
North Supply customers include original equipment manufacturers,
interconnect companies, security and alarm dealers and local,
state and federal governments. Sales to affiliates represented 39.3
percent of North Supply's total sales in 1993 and 1992 and
36.5 percent in 1991. North Supply's net operating revenues
were $677 million, $594 million and $569 million in 1993,
1992 and 1991, respectively.
Sprint Publishing & Advertising publishes and markets white and
yellow page telephone directories in certain of Sprint's local
exchange territories, as well as in the greater metropolitan
areas of Milwaukee, Wisconsin and Chicago, Illinois. The company
publishes approximately 277 directories in 19 states with a
circulation of 12.6 million copies. Sprint Publishing &
Advertising's net operating revenues were $268 million, $257
million, and $245 million in 1993, 1992 and 1991, respectively.
In addition, Centel Directory Company, another Sprint subsidiary,
publishes and markets approximately 59 directories in 5 states
with a circulation of 3.5 million copies through The CenDon
Partnership, a general partnership between Centel Directory
Company and The Reuben H. Donnelley Corporation. Revenues of
Sprint Publishing & Advertising and The CenDon Partnership are
principally derived from selling directory advertisements. The
companies compete with publishers of telephone directories and
others for advertising revenues.
ENVIRONMENT
Sprint's subsidiaries are involved in the remediation of certain
sites, primarily relating to leakage from tanks used for the
storage of gasoline for vehicles and diesel fuel for standby
power generators. Compliance with federal, state and local
provisions relating to the protection of the environment has had
no significant effect on the capital expenditures or earnings of
Sprint or any of its subsidiaries, and future effects are not
expected to be material.
PATENTS, TRADEMARKS AND LICENSES
Sprint and its subsidiaries own numerous patents, patent
applications and trademarks in the United States and other
countries. Sprint and its subsidiaries are also licensed under
domestic and foreign patents owned by others. In the aggregate,
these patents, patent applications, trademarks and licenses are
of material importance to Sprint's businesses.
EMPLOYEE RELATIONS
As of December 31, 1993, Sprint and its subsidiaries had
approximately 50,500 employees, of whom approximately 25 percent
are members of unions. During 1993, Sprint and its subsidiaries
had no material work stoppages caused by labor controversies.
INFORMATION AS TO INDUSTRY SEGMENTS
Sprint's net operating revenues from affiliates and non-
affiliates, by segment, for the three years ended December 31,
1993, 1992 and 1991, are as follows (in millions):
Net Operating Revenues
1993 1992 1991
Long Distance Communications
Services
Non-affiliates $ 6,088.4 $ 5,612.1 $ 5,344.2
Affiliates 50.8 46.1 43.4
6,139.2 5,658.2 5,387.6
Local Communications Services
Non-affiliates 3,911.5 3,662.4 3,564.6
Affiliates 214.5 199.8 189.1
4,126.0 3,862.2 3,753.7
Cellular and Wireless
Communications Services
Non-affiliates 464.0 322.2 242.1
Product Distribution and
Directory Publishing
Non-affiliates 679.2 629.7 618.5
Affiliates 266.0 233.2 207.5
945.2 862.9 826.0
Subtotal 11,674.4 10,705.5 10,209.4
Intercompany revenues (306.6) (285.2) (276.1)
Net operating revenues $ 11,367.8 $ 10,420.3 $ 9,933.3
For additional information as to industry segments of Sprint,
refer to "Business Segment Information" within the Financial
Statements, Financial Statement Schedules and Supplementary Data filed
as part of this report.
Item 2. Properties
The aggregate cost of Sprint's property, plant and equipment was
$17.72 billion as of December 31, 1993, of which $11.23 billion
relates to local communications services, $5.49 billion relates
to long distance communications services and $570 million relates
to cellular/wireless communications services. These properties
consist primarily of land, buildings, digital fiber-optic
network, switching equipment, cellular radio, microwave radio and
cable and wire facilities and are in good operating condition.
Certain switching equipment and several general office facilities
are located on leased premises. The long distance division has
been granted easements, rights-of-way and rights-of-occupancy,
primarily by railroads and other private landowners, for its
fiber-optic network.
The properties of the product distribution and directory
publishing businesses consist primarily of office and warehouse
facilities to support the business units in the distribution of
telecommunications products and publication of telephone
directories.
Sprint owns its corporate headquarters building and certain other
property located in the greater Kansas City metropolitan area.
Property, plant and equipment with an aggregate cost of
approximately $10.36 billion is either pledged as security for
first mortgage bonds and certain notes or is restricted for use
as mortgaged property.
Item 3. Legal Proceedings
In September 1993, a memorandum of agreement setting forth
settlement terms was executed in connection with the class action
lawsuit originally filed in 1990 by certain Sprint shareholders
against Sprint and certain of its executive officers and
directors in the United States District Court for the District of
Kansas. An amended class action complaint was filed in January
1992 after dismissal without prejudice of the original complaint.
The plaintiffs in the class action alleged violations of various
federal securities laws and related state laws and, among other
relief, sought unspecified compensatory damages. A related
shareholders' derivative complaint was dismissed without
prejudice by the same court in March 1993. Pursuant to the
settlement, which includes settlement of the derivative claims,
Sprint will pay $28.5 million. Sprint admits no wrongdoing, but
settled the case to avoid the costs and uncertainties of further
litigation and the disruption of business activities that would
result from trial. Approximately 60 percent of the settlement
will be recovered from Sprint's insurance carriers. The net
settlement did not have a significant effect on Sprint's 1993
results of operations. The settlement agreement is subject to
the approval of the court.
Following announcement of the Sprint/Centel merger agreement in
May 1992, a class action suit was filed by certain Centel
shareholders against Centel and certain of its officers and
directors. The suit was consolidated in the United States
District Court for the Northern District of Illinois in July
1992. The complaint alleges violations of federal securities
laws by failing to disclose pertinent information regarding the
value of Centel common stock. The plaintiffs seek damages in an
unspecified amount.
Other suits arising in the ordinary course of business are
pending against Sprint and its subsidiaries. Sprint cannot
predict the ultimate outcome of these actions or the above-
described litigation, but believes they will not result in a
material effect on Sprint's consolidated financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the
fourth quarter of 1993.
Item 10(b). Executive Officers of the Registrant
Office Name Age
Chairman and Chief Executive Officer William T. Esrey (1) 54
President - Cellular and Wireless
Communications Division Dennis E. Foster (2) 53
President - Long Distance Division Ronald T. LeMay (3) 48
President - Local Telecommunications
Division D. Wayne Peterson (4) 58
Executive Vice President - Law and
External Affairs J. Richard Devlin (5) 43
Executive Vice President - Chief
Financial Officer Arthur B. Krause (6) 52
Senior Vice President - Financial
Services and Taxes Gene M. Betts (7) 41
Senior Vice President - External
Affairs John R. Hoffman (8) 48
Senior Vice President and Controller John P. Meyer (9) 43
Senior Vice President - Strategic
Planning and Business Development Theodore H. Schell (10) 49
Senior Vice President - Quality
Development and Public Relations Richard C. Smith,Jr.(11) 53
Senior Vice President - Treasurer M. Jeannine
Strandjord (12) 48
Senior Vice President - Human
Resources I. Benjamin Watson (13) 45
Vice President and Secretary Don A. Jensen (14) 58
(1)Mr. Esrey was elected Chairman in 1990. He was elected Chief
Executive Officer and a member of the Board of Directors in
1985. In addition, he has served as Chief Executive Officer
of the Limited Partnership since 1988.
(2)Mr. Foster was elected President - Cellular and Wireless
Communications Division in April 1993. Mr. Foster had served
as Senior Vice President - Operations of a subsidiary of
Sprint since 1992. From 1991 to 1992, he served as President
of GTE Mobilnet in Atlanta, Georgia. Prior to that, he had
served in various positions with GTE Corporation for more
than five years.
(3)Mr. LeMay was elected President - Long Distance Division in
1989. He had served as Executive Vice President - Corporate
Affairs of Sprint since 1987. He was elected to the Board of
Directors of Sprint in 1993.
(4)Mr. Peterson was elected President - Local Telecommunications
Division in August 1993. From 1980 to 1993, he served as
President of Carolina Telephone and Telegraph Company, a
subsidiary of Sprint.
(5)Mr. Devlin was elected Executive Vice President - Law and
External Affairs in 1989. He had served as Vice President
and General Counsel - Telephone since 1987.
(6)Mr. Krause was elected Executive Vice President - Chief
Financial Officer in 1988. During 1990 and 1991, he also
served as Chief Information Officer.
(7)Mr. Betts was elected Senior Vice President - Financial
Services and Taxes in 1990. He had served as Vice President
- Taxes since 1988.
(8)Mr. Hoffman was elected Senior Vice President - External
Affairs in 1990. He had served in the same capacity at the
Limited Partnership since 1986.
(9)Mr. Meyer was elected Senior Vice President and Controller in
April 1993. He had served as Vice President and Controller
of Centel since 1989. From 1986 to 1989, he served as
Controller of Centel.
(10)Mr. Schell was elected Senior Vice President - Strategic
Planning and Business Development of Sprint in 1990. He
joined the Long Distance Division as Vice President -
Strategic Planning in 1989. From 1983 to 1989, he served as
President of RealCom Communications Corporation, an IBM
subsidiary, whose principal business is telecommunications
services.
(11)Mr. Smith was elected Senior Vice President - Quality
Development and Public Relations in 1991. He had served as
President of the Limited Partnership's National Markets since
1989. From 1986 to 1989, he served as President of the
Limited Partnership's National Accounts Division.
(12)Ms. Strandjord was elected Senior Vice President -
Treasurer in 1990. She had served as Vice President and
Controller since 1986.
(13)Mr. Watson was elected Senior Vice President - Human
Resources in April 1993. Mr. Watson headed a transition team
in connection with the Centel merger following announcement
of the merger. He had served as Vice President - Finance and
Administration of United Telephone - Eastern Group, an
operating group of subsidiaries of Sprint, since 1990. From
1983 to 1990, he served as Vice President - Administration of
the Midwest Group, an operating group of subsidiaries of
Sprint.
(14)Mr. Jensen was elected Vice President and Secretary in
1975.
There are no known family relationships between any of the
persons named above or between any such persons and any outside
directors of Sprint. Officers are elected annually.
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Market Price Per Share
1993 1992
End of End of
High Low Period High Low Period
First Quarter 31 3/4 25 1/2 30 1/2 26 3/8 21 22 1/2
Second Quarter 35 3/8 29 1/2 35 1/8 25 20 3/4 21 3/4
Third Quarter 37 1/2 33 1/2 36 3/4 24 3/8 21 1/2 24 3/8
Fourth Quarter 40 1/4 31 3/8 34 3/4 26 3/4 23 3/8 25 1/2
As of March 1, 1994, there were approximately 105,000 record
holders of Sprint's common stock. The principal trading market
for Sprint's common stock is the New York Stock Exchange. The
common stock is also traded on the Chicago and Pacific Stock
Exchanges. Sprint has declared dividends of $0.25 per quarter
during each of the years ended December 31, 1993 and 1992.
Item 6. Selected Financial Data
For information required by Item 6, refer to the "Selected Financial Data"
section of the Financial Statements, Financial Statement Schedules and
Supplementary Data filed as part of this report.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
For information required by Item 7, refer to the "Management's Discussion
and Analysis of Financial Condition and Results of Operations" section
of the Financial Statements, Financial Statement Schedules and Supplementary
Data filed as part of this report.
Item 8. Financial Statements and Supplementary Data
For information required by Item 8, refer to the "Consolidated Financial
Statements and Schedules" and "Quarterly Financial Data sections of the
Financial Statements, Financial Statement Schedules and Supplementary
Data filed as part of this report.
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
As previously reported in Sprint's Current Report on Form 8-K
dated April 23, 1993, following consummation of the merger with
Centel, Arthur Andersen & Co. was replaced with Ernst & Young as
auditors of Centel and its subsidiaries, effective April 23,
1993.
Part III
Item 10. Directors and Executive Officers of the Registrant
Pursuant to Instruction G(3) to Form 10-K, the information
relating to Directors of Sprint required by Item 10 is
incorporated by reference from Sprint's definitive proxy
statement filed pursuant to Regulation 14A.
For information pertaining to Executive Officers of Sprint, as
required by Instruction 3 of Paragraph (b) of Item 401 of
Regulation S-K, refer to the "Executive Officers of the Registrant"
section of Part I of this report.
Pursuant to Instruction G(3) to Form 10-K, the information
relating to compliance with Section 16(a) required by Item 10 is
incorporated by reference from Sprint's definitive proxy
statement filed pursuant to Regulation 14A.
Item 11. Executive Compensation
Pursuant to Instruction G(3) to Form 10-K, the information
required by Item 11 is incorporated by reference from Sprint's
definitive proxy statement filed pursuant to Regulation 14A.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Pursuant to Instruction G(3) to Form 10-K, the information
required by Item 12 is incorporated by reference from Sprint's
definitive proxy statement filed pursuant to Regulation 14A.
Item 13. Certain Relationships and Related Transactions
Pursuant to Instruction G(3) to Form 10-K, the information
required by Item 13 is incorporated by reference from Sprint's
definitive proxy statement filed pursuant to Regulation 14A.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) 1. The consolidated financial statements of Sprint
and supplementary financial information filed as part of
this report are listed in the Index to Financial
Statements, Financial Statement Schedules and
Supplementary Data.
2. The consolidated financial statement
schedules of Sprint filed as part of this report are
listed in the Index to Financial Statements, Financial
Statement Schedules and Supplementary Data.
3. The following exhibits are filed as part of
this report:
EXHIBITS
(3) Articles of Incorporation and Bylaws:
(a) Articles of Incorporation, as amended (filed
as Exhibit 4 to Sprint Corporation Current Report
on Form 8-K dated March 9, 1993 and incorporated
herein by reference).
(b) Bylaws, as amended (filed as Exhibit 3(b) to
Sprint Corporation Annual Report on Form 10-K for
the year ended December 31, 1991 and incorporated
herein by reference).
(4) Instruments defining the Rights of Sprint's Equity
Security Holders:
(a) The rights of Sprint's equity security holders
are defined in the Fifth, Sixth, Seventh and Eighth
Articles of Sprint's Articles of Incorporation. See
Exhibit 3(a).
(b) Rights Agreement dated as of August 8, 1989,
between Sprint Corporation (formerly United
Telecommunications, Inc.) and United Missouri Bank,
N.A. (formerly United Missouri Bank of Kansas City,
N.A.), as Rights Agent (filed as Exhibit 2(b) to
Sprint Corporation Registration Statement on Form 8-
A dated August 11, 1989 (File No. 1-4721), and
incorporated herein by reference).
(c) Amendment and supplement dated June 4, 1992 to
Rights Agreement dated as of August 8, 1989 (filed
as Exhibit 2(c) to Amendment No. 1 on Form 8 dated
June 8, 1992 to Sprint Corporation Registration
Statement on Form 8-A dated August 11, 1989 (File
No. 1-4721), and incorporated herein by reference).
(10) Material Agreements - Merger Agreement:
(a) Agreement and Plan of Merger dated as of May
27, 1992, among Sprint Corporation, F W Sub Inc.
and Centel Corporation (filed as Exhibit 2 to
Sprint Corporation Current Report on Form 8-K dated
May 27, 1992 and incorporated herein by reference).
(b) First Amendment dated as of February 19, 1993,
to the Agreement and Plan of Merger, dated as of
May 27, 1992, among Sprint Corporation, F W Sub
Inc. and Centel Corporation (filed as Exhibit 2b to
Sprint Corporation Current Report on Form 8-K dated
March 9, 1993 and incorporated herein by
reference).
(10) Executive Compensation Plans and Arrangements:
(c) 1978 Stock Option Plan, as amended (filed as
Exhibit 19(a) to United Telecommunications, Inc.
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1991, and incorporated herein by
reference).
(d) 1981 Stock Option Plan, as amended (filed as
Exhibit 19(b) to United Telecommunications, Inc.
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1991, and incorporated herein by
reference).
(e) 1985 Stock Option Plan, as amended (filed as
Exhibit 19(c) to United Telecommunications, Inc.
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1991, and incorporated herein by
reference).
(f) 1990 Stock Option Plan, as amended.
(g) 1990 Restricted Stock Plan, as amended (filed
as Exhibit 99 to Sprint Corporation Registration
Statement No. 33-50421 and incorporated herein by
reference).
(h) Long-Term Stock Incentive Program, as amended
(filed as Exhibit 19(e) to United
Telecommunications, Inc. Quarterly Report on Form
10-Q for the quarter ended September 30, 1991, and
incorporated herein by reference).
(i) Restated Memorandum Agreements Respecting
Supplemental Pension Benefits between Sprint
Corporation (formerly United Telecommunications,
Inc.) and two of its current and former executive
officers (filed as Exhibit 10(i) to Sprint
Corporation Annual Report on Form 10-K for the year
ended December 31, 1992, and incorporated herein by
reference).
(j) Executive Long-Term Incentive Plan.
(k) Executive Management Incentive Plan.
(l) Long-Term Incentive Compensation Plan (filed
as Exhibit 10(j) to United Telecommunications, Inc.
Annual Report on Form 10-K for the year ended
December 31, 1989, and incorporated herein by
reference).
(m) Short-Term Incentive Compensation Plan (filed
as Exhibit 10(k) to United Telecommunications, Inc.
Annual Report on Form 10-K for the year ended
December 31, 1989, and incorporated herein by
reference).
(n) Retirement Plan for Directors, as amended
(filed as Exhibit 28d to Registration Statement No.
33-28237, and incorporated herein by reference).
(o) Key Management Benefit Plan, as amended.
(p) Executive Deferred Compensation Plan, as
amended (filed as Exhibit 19(f) to United
Telecommunications, Inc. Quarterly Report on Form
10-Q for the quarter ended September 30, 1991, and
incorporated herein by reference).
(q) Director's Deferred Fee Plan, as amended
(filed as Exhibit 19(g) to United
Telecommunications, Inc. Quarterly Report on Form
10-Q for the quarter ended September 30, 1991, and
incorporated herein by reference).
(r) Supplemental Executive Retirement Plan (filed
as Exhibit 10(q) to Sprint Corporation Annual
Report on Form 10-K for the year ended December 31,
1992, and incorporated herein by reference).
(s) Form of Contingency Employment Agreements
between Sprint Corporation and certain of its
executive officers (filed as Exhibit 10(r) to
Sprint Corporation Annual Report on Form 10-K for
the year ended December 31, 1992, and incorporated
herein by reference).
(t) Form of Indemnification Agreements between
Sprint Corporation (formerly United
Telecommunications, Inc.) and its Directors and
Officers (filed as Exhibit 10(s) to Sprint
Corporation Annual Report on Form 10-K for the year
ended December 31, 1991, and incorporated herein by
reference).
(u) Summary of Executive Benefits (filed as
Exhibit 10(u) to Sprint Corporation Annual Report
on Form 10-K for the year ended December 31, 1991,
and incorporated herein by reference).
(v) Amended and Restated Centel Management
Incentive Plan.
(w) Amended and Restated Centel Stock Option Plan.
(x) Agreements Regarding Special Compensation and
Post Employment Restrictive Covenants between
Sprint Corporation and three of its executive
officers.
(y) Amended and Restated Centel Matched Deferred
Salary Plan.
(z) Amended and Restated Centel Directors Deferred
Compensation Plan.
(aa) Amended and Restated Centel Director Stock
Option Plan.
(11) Computation of Earnings Per Common Share.
(12) Computation of Ratio of Earnings to Fixed Charges.
(21) Subsidiaries of Registrant.
(23a) Consent of Ernst & Young.
(23b) Consent of Arthur Andersen & Co.
Sprint will furnish to the Securities and Exchange Commission,
upon request, a copy of the instruments defining the rights of
holders of its long-term debt and the long-term debt of its
subsidiaries. The total amount of securities authorized under
any of said instruments does not exceed 10 percent of the total
assets of Sprint and its subsidiaries on a consolidated basis.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the
fourth quarter of 1993.
(c) Exhibits are listed in Item 14(a).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SPRINT CORPORATION
(Registrant)
By /s/ W. T. Esrey
William T. Esrey
Chairman and
Chief Executive Officer
Date: March 14, 1994
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities indicated on
the 14th day of March, 1994.
/s/ W. T. Esrey
William T. Esrey
Chairman and
Chief Executive Officer
/s/ Arthur B. Krause
Arthur B. Krause
Executive Vice President -
Chief Financial Officer
/s/ John P. Meyer
John P. Meyer
Senior Vice President and Controller
Principal Accounting Officer
SIGNATURES
SPRINT CORPORATION
(Registrant)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities indicated on
the 14th day of March, 1994.
/s/ DuBose Ausley /s/ Robert E. R. Huntley
DuBose Ausley, Director Robert E. R. Huntley, Director
/s/ Warren L. Batts /s/ George Hutton Jr.
Warren L. Batts, Director George N. Hutton Jr., Director
/s/ Ruth M. Davis /s/ Ronald T. LeMay
Ruth M. Davis, Director Ronald T. LeMay, Director
/s/ Joseph L. Dionne /s/ Linda K. Lorimer
Joseph L. Dionne, Director Linda Koch Lorimer, Director
/s/ W. T. Esrey /s/ C. Price
William T. Esrey, Director Charles H. Price II, Director
/s/ Donald J. Hall /s/ Frank E. Reed
Donald J. Hall, Director Frank E. Reed, Director
/s/ P. H. Henson /s/ Charles E. Rice
Paul H. Henson, Director Charles E. Rice, Director
/s/ Harold S. Hook /s/ Stewart Turley
Harold S. Hook, Director Stewart Turley, Director
INDEX TO FINANCIAL STATEMENTS, FINANCIAL Sprint Corporation
STATEMENT SCHEDULES AND SUPPLEMENTARY DATA
Selected Financial Data
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Consolidated Financial Statements and Schedules:
Management Report
Report of Independent Auditors - Ernst & Young
Report of Independent Auditors - Arthur Andersen & Co.
Business Segment Information as of or for each of the
three years ended December 31, 1993
Consolidated Statements of Income for each of the
three years ended December 31, 1993
Consolidated Balance Sheets as of December 31, 1993
and 1992
Consolidated Statements of Cash Flows for each of the
three years ended December 31, 1993
Consolidated Statements of Common Stock and Other
Shareholders' Equity for each of the three years
ended December 31, 1993
Notes to Consolidated Financial Statements
Financial Statement Schedules for each of the three
years ended December 31, 1993:
V - Consolidated Property, Plant and Equipment
VI - Consolidated Accumulated Depreciation
VIII - Consolidated Valuation and Qualifying
Accounts
IX - Consolidated Short-term Borrowings
X - Consolidated Supplementary Income
Statement Information
Certain financial statement schedules are omitted
because the required information is not present, or
because the information required is included in the
consolidated financial statements and notes thereto.
Quarterly Financial Data
SELECTED FINANCIAL DATA Sprint Corporation
As of or For the Years Ended December 31,
1993 1992 1991 1990 1989
(In Millions, Except Per Share Data)
Results of Operations <1>
Net operating revenues $ 11,367.8 $10,420.3 $9,933.3 $9,469.8 $8,557.6
Operating income <2> 1,250.6 1,213.4 1,185.6 1,045.3 1,076.7
Income from continuing
operations <2>, <3>,
<4> 480.6 496.1 472.7 351.1 353.0
Earnings per common
share from continuing
operations <2>, <3>,
<4> 1.39 1.46 1.41 1.06 1.08
Dividends per common
share 1.00 1.00 1.00 1.00 0.97
Financial Position <1>
Total assets $14,148.9 $13,599.6 $13,929.8 $14,080.6 $13,092.7
Property, plant and
equipment, net 10,314.8 10,219.9 10,310.5 10,295.2 9,700.9
Total debt (including
short-term borrowings) 5,094.4 5,442.7 5,571.2 6,082.3 5,471.3
Redeemable preferred
stock 38.6 40.2 56.6 60.0 63.5
Common stock and other
shareholders' equity 3,918.3 3,971.6 3,671.9 3,353.5 3,151.5
<1>Effective March 9, 1993, Sprint Corporation (Sprint)
consummated its merger with Centel Corporation (Centel).
Because the merger has been accounted for as a pooling of
interests, the accompanying data has been retroactively
restated to include the results of operations and financial
position of Centel. Dividends per common share for periods
prior to the merger represent the amounts paid by Sprint.
<2>During 1993, nonrecurring charges of $293 million were
recorded related to (a) transaction costs associated with the
merger with Centel and the expenses of integrating and
restructuring the operations of the two companies and (b) a
realignment and restructuring within the long distance
division. Such charges reduced consolidated 1993 income from
continuing operations by $193 million ($0.56 per share).
During 1990, nonrecurring charges of $72 million were
recorded related to the long distance division, which reduced
consolidated 1990 income from continuing operations by $37
million ($0.11 per share).
<3>During 1992 and 1991, gains were recognized related to the
sales of certain local telephone and cellular properties,
which increased consolidated 1992 income from continuing
operations by $44 million ($0.13 per share) and consolidated
1991 income from continuing operations by $78 million ($0.23
per share).
<4>During 1993, as a result of the enactment of the Revenue
Reconciliation Act of 1993, Sprint was required to adjust its
deferred income tax assets and liabilities to reflect the
increased tax rate. Such adjustment reduced consolidated
1993 income from continuing operations by $13 million ($0.04
per share).
MANAGEMENT'S DISCUSSION AND ANALYSIS OF Sprint Corporation
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sprint/Centel Merger
Effective March 9, 1993, Sprint Corporation (Sprint)
consummated its merger with Centel Corporation (Centel), creating
a diversified telecommunications enterprise with operations in
long distance, local exchange and cellular/wireless
communications services. The merger has been accounted for as a
pooling of interests. Accordingly, the accompanying consolidated
financial statements and information have been restated
retroactively to include the results of operations, financial
position and cash flows of Centel for all periods prior to
consummation of the merger.
Consolidated Results of Operations
Each of Sprint's primary divisions -- long distance, local and
cellular/wireless communications services -- generated record
levels of net operating revenues and improved operating results
in 1993. The long distance division generated a solid 8 percent
growth in traffic volumes in 1993, the number of access lines
served by the local division grew 5 percent, and the
cellular/wireless division benefited from a strong 67 percent
customer line growth rate. Cost controls and synergies resulting
from the merger with Centel also contributed to the improved 1993
results.
Consolidated results of operations in 1993, 1992 and 1991 were,
however, affected by several nonrecurring items, as described in
the next section. Highlights of consolidated results are as
follows, excluding nonrecurring items as applicable:
*Consolidated net operating revenues grew 9 percent in 1993
to $11.37 billion, following a 5 percent increase in 1992.
*Income from continuing operations in 1993 was $687 million
as compared to $452 million in 1992 and $395 million in 1991 --
which represents a compounded annual growth rate of 21 percent
over the past three years.
*Earnings per common share from continuing operations
increased 50 percent in 1993 to $1.99 per share as compared to
$1.33 per share in 1992.
The following analysis of earnings per common share in 1993 and
1992 highlights the factors contributing to the improved results
and the impact of nonrecurring items:
1993 1992
Prior year's earnings per common share from
continuing operations (excluding
nonrecurring items) $ 1.33 $ 1.18
Favorable (unfavorable) factors contributing
to changes
Divisional operating results 0.63 0.06
Interest expense 0.11 0.07
Other non-operating expense (0.03) 0.05
Effective income tax rate (0.02) (0.02)
Change in weighted average common shares (0.03) (0.01)
Current year's earnings per common share from
continuing operations (excluding
nonrecurring items) 1.99 1.33
Nonrecurring items
Merger, integration and restructuring costs (0.56)
Divestitures 0.13
1993 Tax law change (0.04)
Discontinued operations (0.04)
Extraordinary losses (0.08) (0.05)
Accounting changes (1.12) 0.07
Total earnings per common share $ 0.15 $ 1.48
Nonrecurring Items
Merger, Integration and Restructuring Costs - As a result of
the merger with Centel, the operations of the merged companies
continue to be integrated and restructured to achieve
efficiencies which have begun to yield operational synergies and
cost savings, particularly during the latter half of 1993. The
transaction costs associated with the merger (consisting
primarily of investment banking and legal fees) and the estimated
expenses of integrating and restructuring the operations of the
two companies (consisting primarily of employee severance and
relocation expenses and costs of eliminating duplicative
facilities) resulted in nonrecurring charges aggregating $259
million, which reduced 1993 income from continuing operations by
$172 million ($0.50 per share).
In addition, in 1993, Sprint initiated a realignment and
restructuring of its long distance division, including the
elimination of approximately 1,000 positions and the closure of
two facilities. These actions are expected to improve market
focus, lower costs and streamline operations within the division,
and resulted in a nonrecurring charge of $34 million, which
reduced 1993 income from continuing operations by $21 million
($0.06 per share).
Divestitures - Divestitures of local telephone and cellular
operations in 1992 and 1991 resulted in gains of $81 million and
$114 million, respectively, which increased income from
continuing operations by $44 million and $78 million,
respectively.
1993 Tax Law Change - In August 1993, the Revenue
Reconciliation Act of 1993 was enacted which, among other
changes, raised the federal income tax rate to 35 percent from 34
percent. As a result, Sprint adjusted its deferred income tax
assets and liabilities to reflect the revised rate. The
adjustment related to Sprint's nonregulated subsidiaries
increased the income tax provision for 1993 by $13 million.
Discontinued Operations and Extraordinary Losses - During 1993,
Sprint incurred a loss from discontinued operations of $12
million, net of related income tax benefits. In 1993, 1992 and
1991, Sprint incurred extraordinary losses related to the early
extinguishments of debt of $29 million, $16 million, and $2
million, respectively, net of related income tax benefits.
Accounting Changes - Effective January 1, 1993, Sprint changed
its method of accounting for postretirement and postemployment
benefits by adopting Statement of Financial Accounting Standards
(SFAS) No. 106 and No. 112 and effected another accounting
change. The cumulative effect of these changes in accounting
principles reduced 1993 net income by $384 million. Effective
January 1, 1992, Sprint also changed its method of accounting for
income taxes by adopting SFAS No. 109. The cumulative effect of
this change in accounting principle increased 1992 net income by
$23 million.
Non-operating Items
Interest expense in 1993 and 1992 decreased $59 million and $37
million, respectively, generally related to decreases in average
levels of debt outstanding and lower interest rates.
The components of other expense, net are as follows (in
millions):
1993 1992 1991
Equity in earnings from cellular
minority partnership investments $ 20.0 $ 12.8 $ 8.8
Minority interests (9.4) (6.1) (51.6)
Write-down of assets held for sale (16.0) (15.0)
Other, net (16.9) 3.3 7.2
Total other expense, net $ (22.3) $ (5.0) $ (35.6)
The decline in 1992 minority interests reflects Sprint's
acquisition of the remaining 19.9 percent minority interest in
Sprint Communications Company L.P. (the Limited Partnership)
effective January 1, 1992.
Sprint's income tax provisions for 1993, 1992 and 1991 resulted
in effective tax rates of 38 percent, 36 percent and 34 percent,
respectively. See Note 4 of "Notes to Consolidated Financial
Statements" for information regarding the differences which cause
the effective income tax rates to vary from the statutory federal
income tax rates. As of December 31, 1993, Sprint has recorded
deferred income tax assets of $316 million related to
postretirement benefits and other accruals, $260 million related
to alternative minimum tax credit carryforwards, and $40 million
(net of a $25 million valuation allowance) related to state
operating loss carryforwards. Sprint's management has determined
that it is more likely than not that these deferred income tax
assets, net of the valuation allowance, will be realized based on
current income tax laws and expectations of future taxable income
stemming from ordinary operations or the reversal of existing
deferred tax liabilities. Uncertainties surrounding income tax
law changes, shifts in operations between state taxing
jurisdictions, and future operating income levels may, however,
affect the ultimate realization of all or some portion of these
deferred income tax assets.
The effects of inflation on Sprint's operations were not
significant during 1993, 1992, or 1991.
Segmental Results of Operations
Long Distance Communications Services
Sprint's long distance division provides domestic and
international voice and data communications services. Rates
charged by the division for its services are subject to different
levels of state and federal regulation, but are generally not
rate-base regulated.
Net operating revenues increased 9 percent in 1993, following a
5 percent increase in 1992. Such increases were generally due to
traffic volume growth of 8 percent and 6 percent, respectively.
Average revenue per minute received from customers was relatively
constant during 1993 but declined 3 percent during 1992,
primarily due to the mix of products among markets and
competitive influences. The increases in net operating revenues
and traffic volumes in both 1993 and 1992 reflect ongoing growth
in the business and international markets, coupled with
rebounding growth in the residential market during 1993. Growth
in the business market in 1993 was also enhanced by the arrival
of "800 portability," whereby customers who wish to change long
distance carriers may now do so while retaining their advertised
"800" numbers. In addition, lower revenue adjustments,
reflecting improvement in the collectibility of customer accounts
receivable, resulted in increased net operating revenues in 1992.
Future rates of growth in both net operating revenues and traffic
volumes may be influenced by both domestic and international
economic conditions and the division's ability to maintain market
share and current price levels in the intensely competitive long
distance marketplace.
Interconnection costs increased $136 million and $118 million
in 1993 and 1992, respectively. International interconnection
costs increased due to increased traffic volumes, partially
offset by price reductions and the conversion of international
traffic from resale arrangements (traffic transported by other
long distance carriers) to less costly direct access
arrangements. Costs of connecting to networks domestically also
increased primarily as a result of traffic volume growth,
partially offset by reductions in interconnection rates paid to
local exchange companies and by reduced costs related to the
transition from switched to special access arrangements.
Interconnection costs as a percentage of net operating revenues
were 44 percent in 1993 as compared to 46 percent in both 1992
and 1991.
Operations expense consists of costs related to operating and
maintaining the long distance network; costs of providing various
services such as operator services, public payphones,
telecommunications services for the hearing impaired, and video
teleconferencing; and costs of data systems sales. Operations
expense increased $98 million in 1993 over 1992, partially due to
a change in accounting whereby circuit activity costs are now
being expensed when incurred (see Note 1 of "Notes to
Consolidated Financial Statements" for additional information).
Exclusive of the effect of this accounting change, operations
expense increased approximately $63 million in 1993 and $43
million in 1992, primarily due to expanded service offerings,
increased traffic volumes and increased salaries and related
benefits.
Selling, general and administrative (SG&A) expense increased
$120 million and $92 million in 1993 and 1992, respectively,
generally as a result of intensified sales and marketing efforts.
During 1993, marketing efforts primarily directed towards "800
portability," The Most calling plan and the recently introduced
"Be there now" campaign resulted in increased advertising and
other marketing expenses, as well as increased commissions and
salaries and related expenses. During 1992, the introduction of
several new calling plans and calling card features also resulted
in increases in such sales and marketing expenses. Despite the
increases in the amount of SG&A expense in 1993 and 1992, such
expenses as a percentage of net operating revenues remained
constant when compared to 1991, at 25 percent.
Depreciation and amortization in 1993 decreased from 1992,
primarily due to the change in accounting for circuit activity
costs, as described above. Depreciation and amortization in 1992
was consistent with the 1991 amount as the increased depreciation
resulting from additions to property, plant and equipment was
substantially offset by a decrease in amortization expense
resulting from the full amortization in June 1991 of certain
intangible assets related to the 1986 formation of the Limited
Partnership.
Local Communications Services
The local division consists principally of Sprint's rate-
regulated, local exchange telephone operations. The following
table summarizes, by major category, the net operating revenues
of the division (in millions):
1993 1992 1991
Net operating revenues
Local service $ 1,624.3 $ 1,507.4 $ 1,436.4
Network access 1,530.4 1,425.8 1,398.5
Toll service 505.3 487.5 487.2
Other 466.0 441.5 431.6
Total $ 4,126.0 $ 3,862.2 $ 3,753.7
As described in Note 9 of "Notes to Consolidated Financial
Statements," certain local telephone operations were divested
during 1992 and 1991. The following comparisons and discussion
exclude the effects of such divested operations.
Net operating revenues increased 7 percent in 1993, following a
5 percent increase in 1992. Increased local service revenues
reflect continued increases in the number of access lines served
and growth in add-on services, such as custom calling features.
The division experienced 4.8 percent growth in access lines
during 1993, compared to 4.2 percent in 1992. Network access
revenues, derived from interexchange long distance carriers' use
of the local network to complete calls, increased during 1993 and
1992 as a result of increased traffic volumes and additional
revenues resulting from the recognition of a portion of the
merger, integration and restructuring costs for regulatory
purposes in certain jurisdictions, partially offset by periodic
reductions in network access rates charged. Toll service
revenues, related to the provision of long distance services
within specified geographical areas and the reselling of
interexchange long distance services, increased 4 percent and 1
percent in 1993 and 1992, respectively. Such increase in 1993
primarily reflects the election of the division's Indiana
operations to serve as the primary intralata toll carrier within
its serving area, rather than providing network access to another
carrier. Other revenues increased in 1993 and 1992 generally due
to higher equipment sales.
Plant operations expense includes network operations costs;
repair and maintenance costs of property, plant and equipment;
and other expenses associated with the cost of providing
services. The 4 percent and 2 percent increases in such costs in
1993 and 1992, respectively, were primarily related to increases
in the costs of providing services resulting from access line
growth.
Depreciation and amortization expense increased $14 million in
1993, following a $15 million increase in 1992. Exclusive of the
effects of depreciation rate changes, special short-term
amortizations and nonrecurring charges approved by state
regulatory commissions, such increases were $17 million and $16
million, respectively, generally due to plant additions.
Other operating expense increased $99 million and $122 million
in 1993 and 1992, respectively. Such increases resulted
primarily from higher sales and marketing expenses to promote new
products and services; increases in systems development costs
incurred to enhance the efficiency and capabilities of the
division's billing processes; and increases in the cost of
equipment sales.
The increases in both plant operations and other operating
expenses also reflect the impact of the increased postretirement
benefits cost of approximately $38 million being recognized in
1993 as a result of the adoption of SFAS No. 106.
Consistent with most local exchange carriers, the division
accounts for the economic effects of regulation pursuant to SFAS
No. 71, "Accounting for the Effects of Certain Types of
Regulation." The application of SFAS No. 71 requires the
accounting recognition of the rate actions of regulators where
appropriate, including the recognition of depreciation and
amortization based on estimated useful lives prescribed by
regulatory commissions rather than those which might be utilized
by non-regulated enterprises. Sprint's management believes that
the division's operations meet the criteria for the continued
application of the provisions of SFAS No. 71. With increasing
competition and the changing nature of regulation in the
telecommunications industry, the ongoing applicability of SFAS
No. 71 must, however, be constantly monitored and evaluated.
Should the division no longer qualify for the application of the
provisions of SFAS No. 71 at some future date, the accounting
impact could result in the recognition of a material,
extraordinary, noncash charge.
Cellular and Wireless Communications Services
Sprint's cellular and wireless division consists of wholly-
owned and majority-owned interests in 42 metropolitan service
area (MSA) markets and 46 rural service area (RSA) markets. The
company also owns minority interests in 31 MSA and 33 RSA
markets. Equity in the earnings and losses of these minority
investments is included in other expense, net in the consolidated
statements of income.
The increases in net operating revenues during 1993 and 1992
resulted principally from the growth in customer lines served,
which increased 67 percent in 1993 and 52 percent in 1992. The
effects of growth in customer lines served was partially offset
by a decline in service revenue per customer line served,
reflecting an industry-wide trend that has occurred as a result
of increased general consumer market penetration.
Costs of services and products declined to 33 percent of net
operating revenue in 1993 from 37 percent in 1992 and 39 percent
in 1991, generally reflecting economies gained from serving
additional customer lines. The increases in selling, general and
administrative expense for 1993 and 1992 resulted principally
from increased commissions and customer service expenses, as well
as increased advertising costs related to the growth in customer
lines. Despite the increases in the amount of SG&A expense, such
costs as a percentage of net operating revenues declined to 45
percent in 1993 from 48 percent in 1992 and 47 percent in 1991.
Such improvement resulted primarily from an overall reduction in
the unit cost of acquiring new customers and additional economies
realized from providing service and support to a larger customer
base. Depreciation and amortization increased during both 1993
and 1992 as additional investment in property, plant and
equipment was required to meet the growth in customer lines.
Product Distribution and Directory Publishing
Sprint's product distribution and directory publishing
businesses generated operating income of $64 million, $66 million
and $62 million in 1993, 1992 and 1991, respectively. North
Supply, a wholesale distributor of telecommunications products,
had 1993 net operating revenues of $677 million, compared to $594
million in 1992 and $569 million in 1991. The increases
primarily reflect additional nonaffiliated contracts and
increased sales to the local division, partially as a result of
sales during 1993 to the merged Centel telephone operations.
Sprint Publishing & Advertising, a publisher and marketer of
telephone directories, had net operating revenues of $268 million
in 1993, compared with 1992 and 1991 net operating revenues of
$257 million and $245 million, respectively.
Liquidity and Capital Resources
Cash Flows - Operating Activities
Cash flows from operating activities, which are Sprint's
primary source of liquidity, were $2.14 billion, $2.26 billion
and $1.82 billion in 1993, 1992 and 1991, respectively. The 1992
operating cash flows include proceeds of $300 million from the
sale of accounts receivable within the long distance division.
Excluding these proceeds, the improvement in 1993 operating cash
flows reflects better operating results, partially offset by
expenditures related to merger, integration and restructuring
actions of $155 million.
Cash Flows - Investing Activities
Sprint's investing activities used cash of $1.57 billion, $1.58
billion and $1.08 billion in 1993, 1992 and 1991, respectively.
Capital expenditures, which represent Sprint's most significant
investing activity, were $1.59 billion, $1.47 billion and $1.52
billion in 1993, 1992 and 1991, respectively (see "Business
Segment Information" for the amounts incurred by each division).
Long distance capital expenditures were incurred each year
primarily to increase the network capacity and to enhance network
capabilities for providing new products and services. Capital
expenditures for the local division were made to accommodate
access line growth, to continue the conversion to digital
technologies, and to expand the division's capabilities for
providing enhanced telecommunications services. The increases in
1993 and 1992 capital expenditures for the cellular and wireless
division reflect the significant increases in the number of
customer lines served during such years.
Investing activities in 1992 also include $250 million paid in
connection with Sprint's $530 million acquisition of the
remaining 19.9 percent interest in the Limited Partnership and
proceeds of $114 million from the sale of certain local telephone
properties. Investing activities for 1991 include proceeds of
$468 million from the divestitures of certain local telephone,
cellular and other properties.
Cash Flows - Financing Activities
Sprint's financing activities used cash of $620 million, $681
million and $755 million in 1993, 1992 and 1991, respectively.
Improved operating cash flows during each year, together with
proceeds from the sale of additional accounts receivable in 1992
and from the various divestitures in 1992 and 1991, allowed
Sprint to fund capital expenditures and dividends internally and
to reduce total debt outstanding during each year. In addition,
the $280 million note issued to the seller in connection with the
acquisition of the remaining interest in the Limited Partnership
was paid in 1992.
During 1993 and 1992, a significant level of debt refinancing
occurred in order to take advantage of lower interest rates.
Accordingly, a majority of the proceeds from long-term borrowings
in 1993 was used to finance the redemption prior to scheduled
maturities of $1.24 billion of debt. During 1992, Sprint
refinanced $720 million of long-term debt and borrowed $250
million to finance the payment related to the acquisition of the
remaining 19.9 percent interest in the Limited Partnership.
Sprint paid dividends to common and preferred shareholders of
$347 million, $300 million and $296 million in 1993, 1992 and
1991, respectively. Sprint's indicated annual dividend rate on
common stock is currently $1.00 per share.
Financial Position, Liquidity and Capital Requirements
As of December 31, 1993, Sprint's total capitalization
aggregated $9.05 billion, consisting of long-term debt (including
current maturities), redeemable preferred stock, and common stock
and other shareholders' equity. Long-term debt (including
current maturities) and short-term borrowings comprised 55
percent of total capitalization as of December 31, 1993, compared
to 58 percent at year-end 1992 (as adjusted in both years on a
proforma basis for the effects of changes in accounting
principles).
During 1994, Sprint anticipates funding estimated capital
expenditures of $1.8 billion and dividends with cash flows from
operating activities. Notes payable and commercial paper
outstanding as of December 31, 1993 (classified as long-term
debt) aggregated $756 million. During 1994, this entire balance
will be replaced by the issuance of long-term debt or will
continue to be refinanced under existing long-term credit
facilities. Sprint expects its external cash requirements for
1994 to be approximately $800 million to $900 million, which is
generally required to repay scheduled long-term debt maturities
and reduce notes payable and commercial paper outstanding. A
portion of such external cash requirements is expected to be
generated from issuances of common stock through employee benefit
plans and from the sale of certain investments. The method of
financing the remaining external cash requirements will depend
upon prevailing market conditions during the year. Sprint may
also undertake additional debt refinancings during 1994 in order
to take advantage of favorable interest rates.
At year-end 1993, Sprint had the ability to borrow $803 million
under a revolving credit agreement with a syndicate of domestic
and international banks and other bank commitments. Other
available financing sources include a Medium-Term Note program,
under which Sprint may offer for sale up to $175 million of
unsecured senior debt securities. Additionally, pursuant to
shelf registration statements filed with the Securities and
Exchange Commission, up to $1.2 billion of debt securities may be
offered for sale.
The aggregate amount of additional borrowings which can be
incurred is ultimately limited by certain covenants contained in
existing debt agreements. As of December 31, 1993, Sprint had
borrowing capacity of approximately $2.8 billion under the most
restrictive of its debt covenants.
MANAGEMENT REPORT
The management of Sprint Corporation has the responsibility for
the integrity and objectivity of the information contained in
this Annual Report. Management is responsible for the consistency of
reporting such information and for ensuring that generally
accepted accounting principles are used.
In discharging this responsibility, management maintains a
comprehensive system of internal controls and supports an
extensive program of internal audits, has made organizational
arrangements providing appropriate divisions of responsibility
and has established communication programs aimed at assuring that
its policies, procedures and codes of conduct are understood and
practiced by its employees.
The consolidated financial statements included in this Annual
Report have been audited by Ernst & Young, independent auditors.
Their audit was conducted in accordance with generally accepted
auditing standards and their report is included herein.
The responsibility of the Board of Directors for these
financial statements is pursued primarily through its Audit
Committee. The Audit Committee, composed entirely of directors
who are not officers or employees of Sprint, meets periodically
with the internal auditors and independent auditors, both with
and without management present, to assure that their respective
responsibilities are being fulfilled. The internal and
independent auditors have full access to the Audit Committee to
discuss auditing and financial reporting matters.
/s/ W. T. Esrey
William T. Esrey
Chairman and Chief Executive Officer
/s/ Arthur B. Krause
Arthur B. Krause
Executive Vice President - Chief Financial Officer
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Sprint Corporation
We have audited the accompanying consolidated balance sheets of
Sprint Corporation (Sprint) as of December 31, 1993 and 1992, and
the related consolidated statements of income, cash flows, and
common stock and other shareholders' equity for each of the three
years in the period ended December 31, 1993. Our audits also
included the financial statement schedules listed in the Index
To Financial Statements, Financial Statement Schedules and
Supplementary Data. These financial statements and schedules are
the responsibility of the management of Sprint. Our responsibility
is to express an opinion on these financial statements and
schedules based on our audits. We did not audit the financial
statements or schedules of Centel Corporation, a wholly-owned
subsidiary, as of December 31, 1992, or for each of the two years
in the period ended December 31, 1992, which statements reflect
total assets constituting 25% in 1992, and net income constituting
approximately 9% in 1992 and 29% in 1991 of the related consolidated
financial statement totals. Those statements and schedules were
audited by other auditors whose report has been furnished to us,
and our opinion, insofar as it relates to data included for Centel
Corporation, is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other
auditors, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Sprint Corporation at December 31, 1993 and 1992, and
the consolidated results of its operations and its cash flows for
each of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles. Also
in our opinion, the related financial statement schedules, when
considered in relation to the basic financial statements taken as
a whole, present fairly in all material respects the information
set forth therein.
As discussed in Note 1 to the consolidated financial
statements, Sprint changed its method of accounting for
postretirement benefits, postemployment benefits and circuit
activity costs in 1993 and income taxes in 1992.
ERNST & YOUNG
Kansas City, Missouri
February 2, 1994
REPORT OF INDEPENDENT AUDITORS
To the Shareowners of Centel Corporation:
We have audited the consolidated balance sheet of CENTEL
CORPORATION (a Kansas corporation) AND SUBSIDIARIES as of
December 31, 1992, and the related consolidated statements of
income, common shareowners' investment and cash flows for each of
the two years in the period ended December 31, 1992, prior to the
pooling of interests with Sprint Corporation (and, therefore, are
not presented herein) described in Note 2 to the consolidated
financial statements of Sprint Corporation for the year ended
December 31, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Centel Corporation and Subsidiaries as of December 31, 1992,
and the results of their operations and their cash flows for each
of the two years in the period ended December 31, 1992, in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. In connection with
our audits, certain auditing procedures were applied to the following
schedules which are required for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the
basic financial statements. Such schedules are not included herein:
Schedule I - Marketable Securities
Schedule V - Consolidated Plant, Property and Equipment
Schedule VI - Consolidated Accumulated Depreciation
Schedule VIII - Consolidated Allowance for Doubtful Accounts
Schedule IX - Consolidated Short-Term Borrowings
Schedule X - Consolidated Supplementary Income Statement
Information
In our opinion, the information contained in these schedules fairly states,
in all material respects, the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Chicago, Illinois
February 3, 1993
BUSINESS SEGMENT INFORMATION Sprint Corporation
As of or for the Years Ended
December 31,
1993 1992 1991
(In Millions)
Long Distance Communications Services <1>
Net operating revenues $ 6,139.2 $ 5,658.2 $ 5,387.6
Operating expenses
Interconnection 2,710.7 2,574.9 2,457.0
Operations 857.7 759.8 717.1
Selling, general and administrative 1,546.4 1,426.3 1,334.3
Depreciation and amortization 523.5 586.6 584.4
Total operating expenses <2>, <3> 5,638.3 5,347.6 5,092.8
Operating income $ 500.9 $ 310.6 $ 294.8
Capital expenditures $ 529.4 $ 468.1 $ 580.2
Identifiable assets as of December 31 $ 4,193.1 $ 4,232.0 $ 4,543.5
Local Communications Services <1>
Net operating revenues $ 4,126.0 $ 3,862.2 $ 3,753.7
Operating expenses
Plant operations 1,206.7 1,165.6 1,160.9
Depreciation and amortization 733.0 720.0 716.7
Other 1,232.5 1,137.0 1,036.5
Total operating expenses <2>, <4> 3,172.2 3,022.6 2,914.1
Operating income $ 953.8 $ 839.6 $ 839.6
Capital expenditures $ 845.3 $ 839.4 $ 802.4
Identifiable assets as of December 31 $ 7,604.0 $ 7,242.2 $ 7,099.6
Cellular and Wireless Communications Services <1>
Net operating revenues $ 464.0 $ 322.2 $ 242.1
Operating expenses
Cost of services and products 154.9 118.3 95.2
Selling, general and administrative 209.9 154.6 114.5
Depreciation and amortization 75.0 52.1 43.2
Total operating expenses <2> 439.8 325.0 252.9
Operating income (loss) $ 24.2 $ (2.8) $ (10.8)
Capital expenditures $ 164.9 $ 123.8 $ 91.8
Identifiable assets as of December 31 $ 1,504.3 $ 1,489.4 $ 1,418.1
Product Distribution, Directory Publishing and Other <1>
Net operating revenues $ 945.2 $ 862.9 $ 826.0
Operating income <2> $ 64.2 $ 66.0 $ 62.0
Depreciation and amortization $ 27.2 $ 32.8 $ 25.2
Capital expenditures $ 55.1 $ 34.9 $ 48.8
Identifiable assets as of December 31 $ 847.5 $ 636.0 $ 868.6
<1>Include net operating revenues and operating expenses
eliminated in consolidation of $306.6 million, $285.2 million
and $276.1 million for the years ended December 31, 1993,
1992 and 1991, respectively.
<2>Exclude a nonrecurring charge of $259.0 million in 1993
related to the transaction costs associated with the merger
with Centel and the estimated expenses of integrating and
restructuring the operations of the two companies (see Note 2
of "Notes to Consolidated Financial Statements" for
additional information). Such charge was allocable as
follows: Long Distance-$12.4 million; Local-$190.1 million;
Cellular and Wireless-$3.2 million; Product Distribution and
Directory Publishing-$2.5 million; and Other-$50.8 million.
<3>Exclude a nonrecurring charge of $33.5 million in 1993
related to the realignment and restructuring of the long
distance division (see Note 9 of "Notes to Consolidated
Financial Statements" for additional information).
<4>Includes increased postretirement benefits cost of
approximately $38 million in 1993 related to the adoption of
SFAS No. 106. Such cost for the other divisions was not
significant.
CONSOLIDATED STATEMENTS OF INCOME Sprint Corporation
For the Years Ended
December 31,
1993 1992 1991
(In Millions, Except Per
Share Data)
Net Operating Revenues $11,367.8 $10,420.3 $ 9,933.3
Operating Expenses
Costs of services and products 5,736.1 5,325.5 5,091.0
Selling, general and administrative 2,729.9 2,489.9 2,287.2
Depreciation and amortization 1,358.7 1,391.5 1,369.5
Merger, integration and restructuring costs 292.5
Total operating expenses 10,117.2 9,206.9 8,747.7
Operating Income 1,250.6 1,213.4 1,185.6
Gain on divestiture of telephone
and cellular properties 81.1 113.9
Interest expense (452.4) (511.1) (548.3)
Other expense, net (22.3) (5.0) (35.6)
Income from continuing operations
before income taxes 775.9 778.4 715.6
Income tax provision (295.3) (282.3) (242.9)
Income From Continuing Operations 480.6 496.1 472.7
Discontinued operations, net (12.3) 49.4
Extraordinary losses on early
extinguishments of debt, net (29.2) (16.0) (1.9)
Cumulative effect of changes in
accounting principles, net (384.2) 22.7
Net income 54.9 502.8 520.2
Preferred stock dividends (2.8) (3.5) (4.1)
Earnings applicable to common stock $ 52.1 $ 499.3 $ 516.1
Earnings Per Common Share
Continuing operations $ 1.39 $ 1.46 $ 1.41
Discontinued operations (0.04) 0.15
Extraordinary item (0.08) (0.05) (0.01)
Cumulative effect of changes in
accounting principles (1.12) 0.07
Total $ 0.15 $ 1.48 $ 1.55
Weighted average number of common shares 343.7 337.2 333.5
See accompanying notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS Sprint Corporation
As of December 31,
1993 1992
Assets (In Millions)
Current assets
Cash and equivalents $ 76.8 $ 128.8
Accounts receivable, net of allowance
for doubtful accounts of $121.9 million
($118.0 million in 1992) 1,230.6 1,044.8
Investment in common stock 130.2
Inventories 182.3 172.1
Deferred income taxes 81.1 46.5
Prepaid expenses 120.7 102.5
Other 156.2 169.3
Total current assets 1,977.9 1,664.0
Investments in common stocks 173.1 209.0
Property, plant and equipment
Long distance communications services 5,492.7 5,355.9
Local communications services 11,226.4 10,732.2
Cellular and wireless communications services 569.6 409.9
Other 433.7 405.2
17,722.4 16,903.2
Less accumulated depreciation 7,407.6 6,683.3
10,314.8 10,219.9
Cellular minority partnership investments 287.5 271.2
Excess of cost over net assets acquired 736.8 765.3
Other assets 658.8 470.2
$14,148.9 $13,599.6
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt $ 523.4 $ 386.6
Short-term borrowings 362.3
Accounts payable 925.4 755.4
Accrued interconnection costs 487.5 464.3
Accrued taxes 307.2 291.9
Other 825.1 716.8
Total current liabilities 3,068.6 2,977.3
Long-term debt 4,571.0 4,693.8
Deferred credits and other liabilities
Deferred income taxes and investment tax
credits 1,182.9 1,308.3
Postretirement and other benefit obligations 793.1 69.0
Other 576.4 539.4
2,552.4 1,916.7
Redeemable preferred stock 38.6 40.2
Common stock and other shareholders' equity
Common stock, par value $2.50 per share,
authorized-500.0 million shares 858.5 847.1
Capital in excess of par or stated value 827.4 717.5
Retained earnings 2,184.2 2,451.7
Other 48.2 (44.7)
3,918.3 3,971.6
$14,148.9 $13,599.6
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS Sprint Corporation
For the Years Ended December 31,
1993 1992 1991
(In Millions)
Operating Activities
Net income $ 54.9 $ 502.8 $ 520.2
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization 1,358.7 1,391.5 1,369.5
Gain on divestiture of telephone
and cellular properties (81.1) (113.9)
Discontinued operations (5.9) (20.6) (43.9)
Extraordinary losses on early
extinguishments of debt 49.5 25.1 3.1
Cumulative effect of changes in
accounting principles 384.2 (22.7)
Deferred income taxes and investment
tax credits (34.5) 3.0 (34.7)
Changes in operating assets and liabilities
Accounts receivable, net (185.8) 257.8 42.4
Inventories and other current assets (42.7) (13.9) 52.3
Accounts payable and accrued
interconnection costs 196.4 165.8 (130.1)
Accrued expenses and other
current liabilities 160.5 (39.0) 98.5
Noncurrent assets and liabilities, net 135.1 152.3 7.0
Other, net 66.0 (59.5) 50.2
Net cash provided by operating
activities 2,136.4 2,261.5 1,820.6
Investing Activities
Capital expenditures (1,594.7) (1,466.2) (1,523.2)
Acquisition of Limited Partnership
minority interest (250.0)
Proceeds from divestiture of
telephone and cellular properties 114.0 148.3
Proceeds from sale of discontinued
operations 320.0
Other, net 26.3 24.3 (24.5)
Net cash used by investing activities (1,568.4) (1,577.9) (1,079.4)
Financing Activities
Proceeds from long-term debt 840.4 951.2 645.0
Retirements of long-term debt (1,589.0) (1,257.4) (744.3)
Net increase (decrease) in notes
payable and commercial paper 393.5 147.0 (468.3)
Payment of note payable to
minority partner (280.0)
Proceeds from common stock issued 70.8 51.6 54.1
Proceeds from employees stock purchase
installments, net 28.3 13.2 13.9
Dividends paid (347.1) (300.1) (295.8)
Other, net (16.9) (6.2) 40.7
Net cash used by financing activities (620.0) (680.7) (754.7)
Increase (Decrease) in Cash and
Equivalents (52.0) 2.9 (13.5)
Cash and Equivalents at Beginning of Year 128.8 125.9 139.4
Cash and Equivalents at End of Year $ 76.8 $ 128.8 $ 125.9
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMMON STOCK Sprint Corporation
AND OTHER SHAREHOLDERS'EQUITY
For the Years Ended December 31, 1993, 1992 and 1991
Capital in
Excess of
Par or
Common Stated Retained
Stock Value Earnings Other Total
(In Millions)
Balance as of January 1,
1991 (330.6 million
shares issued and
outstanding) $ 826.4 $ 554.0 $2,021.4 $ (48.3) $3,353.5
Net income 520.2 520.2
Common stock dividends (291.7) (291.7)
Preferred stock dividends (4.1) (4.1)
Employee stock purchase
and other installments
received, net 16.0 16.0
Common stock issued 10.0 85.6 (24.8) 70.8
Other, net 0.5 0.7 2.3 3.7 7.2
Balance as of December
31, 1991 (334.8 million
shares issued and
outstanding) 836.9 640.3 2,248.1 (53.4) 3,671.9
Net income 502.8 502.8
Common stock dividends (296.6) (296.6)
Preferred stock dividends (3.5) (3.5)
Employee stock purchase
and other installments
received, net 15.5 15.5
Common stock issued 9.9 73.7 (6.5) 77.1
Other, net 0.3 3.5 0.9 (0.3) 4.4
Balance as of December
31, 1992 (338.9 million
shares issued and
outstanding) 847.1 717.5 2,451.7 (44.7) 3,971.6
Net income 54.9 54.9
Common stock dividends (324.5) (324.5)
Preferred stock dividends (2.8) (2.8)
Employee stock purchase
and other installments
received, net 30.8 30.8
Common stock issued 11.0 98.4 (2.4) 107.0
Unrealized holding gains
on investments in common
stocks, net 64.8 64.8
Other, net 0.4 11.5 4.9 (0.3) 16.5
Balance as of December
31, 1993 (343.4 million
shares issued and
outstanding) $ 858.5 $ 827.4 $2,184.2 $ 48.2 $3,918.3
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Sprint Corporation
1. Accounting Policies
Basis of Consolidation
The accompanying consolidated financial statements include the
accounts of Sprint Corporation and its wholly-owned and majority-
owned subsidiaries (Sprint), including Centel Corporation
(Centel) and Sprint Communications Company L.P. (the Limited
Partnership). Investments in less than 50 percent-owned cellular
communications partnerships are accounted for using the equity
method.
During 1991, GTE Corporation (GTE) owned a 19.9 percent
interest in the Limited Partnership. Effective January 1, 1992,
Sprint acquired GTE's interest in exchange for a $250 million
cash payment and a $280 million note which was paid in June 1992.
In accordance with industry practice, revenues and related net
income of non-regulated operations attributable to transactions
with Sprint's rate-regulated telephone companies have not been
eliminated in the accompanying consolidated financial statements.
Intercompany revenues of such entities amounted to $225 million,
$194 million and $164 million in 1993, 1992 and 1991,
respectively.
All other significant intercompany transactions have been
eliminated.
Classification of Operations
The long distance communications services division provides
domestic voice and data communications services across certain
specified geographical boundaries, as well as international long
distance communications services. Rates charged for such
services sold to the public are subject to different levels of
state and federal regulation, but are generally not subject to
rate-base regulation.
The local communications services division consists principally
of the operations of Sprint's rate-regulated telephone companies.
These operations provide local exchange services, access by
telephone customers and other carriers to local exchange
facilities and long distance services within specified
geographical areas.
The cellular and wireless communications services division
consists of wholly-owned and majority-owned interests in
partnerships and corporations operating cellular and wireless
communications properties in various metropolitan and rural
service area markets.
The product distribution and directory publishing businesses
include the wholesale distribution of telecommunications products
and the publishing and marketing of white and yellow page
telephone directories.
Revenue Recognition
Operating revenues for the long distance, local and
cellular/wireless communications services divisions are
recognized as communications services are rendered. Operating
revenues for the long distance communications services division
are recorded net of an estimate for uncollectible accounts.
Operating revenues for Sprint's product distribution business
are recognized upon delivery of products to customers.
Regulated Operations
Sprint's rate-regulated telephone companies account for the
economic effects of regulation pursuant to Statement of Financial
Accounting Standards (SFAS) No. 71, "Accounting for the Effects
of Certain Types of Regulation," which requires the accounting
recognition of the rate actions of regulators where appropriate.
Such actions can provide reasonable assurance of the existence of
an asset, reduce or eliminate the value of an asset, or impose a
liability on a regulated enterprise.
Cash and Equivalents
Cash equivalents generally include highly liquid investments
with original maturities of three months or less and are stated
at cost, which approximates market value.
As of December 31, 1993 and 1992, outstanding checks in excess
of cash balances of $166 million and $151 million, respectively,
are included in accounts payable.
Investments in Common Stocks
Effective December 31, 1993, Sprint changed its method of
accounting for its portfolio of marketable equity securities by
adopting SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Accordingly, such investments in
common stocks are classified as available for sale and reported
at fair value (estimated based on quoted market prices) as of
December 31, 1993 and at cost as of December 31, 1992. As of
December 31, 1993, the cost of such investments is $202 million,
with the gross unrealized holding gains of $101 million reflected
as an addition to other shareholders' equity, net of related
income taxes. As of December 31, 1992, the market value of such
investments was $278 million.
Inventories
Inventories, consisting principally of those related to
Sprint's product distribution business, are stated at the lower
of cost (principally first-in, first-out method) or market.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Generally,
ordinary asset retirements and disposals are charged against
accumulated depreciation with no gain or loss recognized.
Repairs and maintenance costs are expensed as incurred.
Effective January 1, 1993, Sprint's long distance
communications services division changed its method of accounting
for certain costs related to connecting new customers to its
network. The change was made to conform Sprint's accounting to
the predominant industry practice for such costs. Under the new
method, such costs (which were previously capitalized) are being
expensed when incurred. The resulting nonrecurring, noncash
charge of $32 million ($0.09 per share), net of related income
tax benefits, is reflected in the 1993 consolidated statement of
income as a cumulative effect of change in accounting principle.
The proforma impact of retroactive application of the change
would not have been material to net income or earnings per share
for 1992 or 1991, and the impact of the change on Sprint's 1993
operating expenses was not significant.
Depreciation
The cost of property, plant and equipment is depreciated
generally on a straight-line basis over the estimated useful
lives (such lives related to regulated property, plant and
equipment are those prescribed by regulatory commissions).
Depreciation rate changes, special short-term amortizations and
nonrecurring charges approved by regulatory commissions for the
rate-regulated telephone companies resulted in additional
depreciation totaling $7 million, $46 million and $49 million in
1993, 1992 and 1991, respectively. After the related effects on
revenues and income taxes, these items reduced income from
continuing operations for 1993, 1992 and 1991 by approximately $4
million, $24 million and $25 million, respectively.
Cellular Minority Partnership Investments
Cellular minority partnership investments include the excess of
the purchase price over the underlying book value of cellular
communications partnerships of $203 million and $209 million as
of December 31, 1993 and 1992, respectively. Such excess is
being amortized on a straight-line basis over 40 years;
accumulated amortization aggregated $29 million and $23 million
as of December 31, 1993 and 1992, respectively.
Excess of Cost over Net Assets Acquired
The excess of the purchase price over the fair value of net
assets acquired, principally related to cellular communications
services properties, is being amortized on a straight-line basis
over 40 years. Accumulated amortization aggregated $112 million
and $88 million as of December 31, 1993 and 1992, respectively.
Postretirement Benefits
Effective January 1, 1993, Sprint changed or modified its
method of accounting for certain postretirement benefits by
adopting SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." Sprint provides postretirement
benefits (principally health care benefits) to certain retirees.
SFAS No. 106 requires accrual of the expected cost of providing
postretirement benefits to employees and their dependents or
beneficiaries during the years employees earn the benefits.
During 1992 and 1991, the cost of providing postretirement
benefits to Sprint's retirees was expensed as such costs were
paid, while for Centel's employees and retirees, an accrual basis
approach was utilized to recognize such costs.
Upon adoption of the new standard, Sprint elected to
immediately recognize its previously unrecorded obligation for
postretirement benefits already earned by current retirees and
employees (the transition obligation), a substantial portion of
which related to its rate-regulated telephone companies.
Pursuant to SFAS No. 71, regulatory assets associated with the
recognition of the transition obligation were recorded in
jurisdictions where the regulators have issued orders specific to
Sprint permitting recognition of net postretirement benefits
costs for ratemaking purposes, and providing for recovery of the
transition obligation over a period of no longer than 20 years.
As of December 31, 1993, such regulatory assets aggregated $83
million. In all other jurisdictions, regulatory assets
associated with the recognition of the transition obligation were
not recorded due to the uncertainties as to the timing and extent
of recovery.
The resulting nonrecurring, noncash charge of $341 million
($1.00 per share), net of related income tax benefits, is
reflected in the 1993 consolidated statement of income as a
cumulative effect of change in accounting principle. Net
postretirement benefits cost for 1993 increased approximately $50
million as a result of adopting SFAS No. 106.
Postemployment Benefits
Effective January 1, 1993, Sprint adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." Upon
adoption, Sprint recognized certain previously unrecorded
obligations for benefits being provided to former or inactive
employees and their dependents, after employment but before
retirement. Such postemployment benefits offered by Sprint
include severance, disability and workers compensation benefits,
including the continuation of other benefits such as health care
and life insurance coverage.
The resulting nonrecurring, noncash charge of $11 million
($0.03 per share), net of related income tax benefits, is
reflected in the 1993 consolidated statement of income as a
cumulative effect of change in accounting principle. Adoption of
SFAS No. 112 had no significant impact on operating expenses in
1993.
Income Taxes
Effective January 1, 1992, Sprint changed its method of
accounting for income taxes by adopting SFAS No. 109, "Accounting
for Income Taxes." SFAS No. 109 requires an asset and liability
approach to accounting for income taxes and establishes less
restrictive criteria for recognizing deferred income tax assets.
Accordingly, Sprint adjusted its existing deferred income tax
assets and liabilities to reflect current statutory income tax
rates and previously unrecognized tax benefits related to federal
and certain state net operating loss carryforwards. To the
extent reductions of the rate-regulated telephone companies'
deferred income tax liabilities will accrue to the benefit of its
customers, such reductions were recorded as regulatory
liabilities. The remaining net change in Sprint's deferred
income tax assets and liabilities increased 1992 net income by
$23 million ($0.07 per share) and is reflected in the
consolidated statement of income as a cumulative effect of change
in accounting principle. As allowed under SFAS No. 109, prior
years' consolidated financial statements were not restated.
During 1991, in accordance with Accounting Principles Board
Opinion (APB) No. 11, deferred income taxes were provided for all
differences in timing of reporting income and expenses for
financial statement and income tax purposes, except for rate-
regulated telephone companies' items that were not allowable by
various regulatory commissions as expenses for rate-making
purposes.
Investment tax credits related to regulated telephone property,
plant and equipment have been deferred and are being amortized
over the estimated useful lives of the related assets.
Interest Charged to Construction
Regulatory commissions allow the rate-regulated telephone
companies to capitalize an allowance for funds expended during
construction. Amounts capitalized will be recovered over the
service lives of the respective assets constructed as the
resulting higher depreciation is recovered through increased
revenues. Interest costs associated with the construction of
capital assets for Sprint's other operations are capitalized in
accordance with SFAS No. 34, "Capitalization of Interest Costs."
Total interest amounts capitalized during 1993, 1992 and 1991,
including an allowance for funds expended during construction,
totaled $8 million, $11 million and $15 million, respectively.
Earnings Per Share
Earnings per common share amounts are based on the weighted
average number of shares both outstanding and issuable assuming
exercise of all dilutive options, as applicable.
Reclassifications
Certain amounts in the accompanying consolidated financial
statements for 1992 and 1991 have been reclassified to conform to
the presentation of amounts in the 1993 consolidated financial
statements. Such reclassifications had no effect on the results
of operations.
2. Sprint / Centel Merger
Effective March 9, 1993, Sprint consummated its merger with
Centel, a telecommunications company with local exchange and
cellular/wireless communications services operations. Pursuant
to the Agreement and Plan of Merger dated May 27, 1992, Sprint
issued 1.37 shares of its common stock in exchange for each
outstanding share of Centel common stock, or approximately 119
million shares. The transaction costs associated with the merger
(consisting primarily of investment banking and legal fees) and
the estimated expenses of integrating and restructuring the
operations of the two companies (consisting primarily of employee
severance and relocation expenses and costs of eliminating
duplicative facilities) resulted in nonrecurring charges of $259
million, which reduced 1993 income from continuing operations by
$172 million ($0.50 per share).
The merger has been accounted for as a pooling of interests.
Accordingly, the accompanying consolidated financial statements
have been retroactively restated for all periods presented to
include the results of operations, financial position and cash
flows of Centel. In addition, the accompanying consolidated
financial statements reflect the elimination of significant,
recurring intercompany transactions and certain adjustments to
conform the accounting policies of the two companies.
Operating results of the separate companies for periods prior
to the merger are as follows (in millions):
1992 1991
Net operating revenues
Sprint $ 9,230.4 $ 8,779.7
Centel 1,191.4 1,180.5
Eliminations and reclassifications (1.5) (26.9)
Total $ 10,420.3 $ 9,933.3
Income from continuing operations
Sprint $ 427.2 $ 367.5
Centel 83.8 112.3
Accounting conformity adjustments (14.9) (7.1)
Total 496.1 472.7
Discontinued operations, net 49.4
Extraordinary losses on early extinguishments
of debt, net (1992: Sprint - $6.5 million,
Centel - $9.5 million; 1991:
Centel - $1.9 million) (16.0) (1.9)
Cumulative effect of change in
accounting for income taxes 22.7
Net income (1992: Sprint - $457.1 million,
Centel - $45.7 million; 1991:
Sprint - $367.5 million,
Centel - $152.7 million) $ 502.8 $ 520.2
3. Employee Benefit Plans
Defined Benefit Pension Plan
Substantially all Sprint employees are covered by a
noncontributory defined benefit pension plan. For participants
of the plan represented by collective bargaining units, benefits
are based upon schedules of defined amounts as negotiated by the
respective parties. For participants not covered by collective
bargaining agreements, the plan provides pension benefits based
upon years of service and participants' compensation.
Sprint's policy is to make contributions to the plan each year
equal to an actuarially determined amount consistent with
applicable federal tax regulations. The funding objective is to
accumulate funds at a relatively stable rate over the
participants' working lives so that benefits are fully funded at
retirement. As of December 31, 1993, the plan's assets consisted
principally of investments in corporate equity securities and
U.S. government and corporate debt securities.
The components of the net pension credits and related weighted
average assumptions are as follows (in millions):
1993 1992 1991
Service cost -- benefits earned
during the period $ 58.2 $ 50.8 $ 47.8
Interest cost on projected benefit
obligation 103.9 96.1 87.2
Actual return on plan assets (241.2) (89.5) (381.7)
Net amortization and deferral 62.5 (64.7) 231.4
Net pension credit $ (16.6) $ (7.3) $ (15.3)
Discount rate 8.0% 8.4% 8.6%
Expected long-term rate of return
on plan assets 9.5% 8.5% 8.5%
Anticipated composite rate of
future increases in compensation 5.5% 6.2% 7.3%
In addition, Sprint recognized pension curtailment losses of $3
million in 1993 as a result of integration and restructuring
actions (see Notes 2 and 9).
The funded status and amounts recognized in the consolidated
balance sheets for the plan, as of December 31, are as follows
(in millions):
1993 1992
Actuarial present value of benefit
obligations
Vested benefit obligation $ (1,277.0) $ (1,043.6)
Accumulated benefit obligation $ (1,462.7) $ (1,183.2)
Projected benefit obligation $ (1,582.9) $ (1,321.2)
Plan assets at fair value 2,029.0 1,862.4
Plan assets in excess of the projected
benefit obligation 446.1 541.2
Unrecognized net gains (197.3) (215.1)
Unrecognized prior service cost 88.1 23.0
Unamortized portion of transition asset (221.9) (247.3)
Prepaid pension cost $ 115.0 $ 101.8
The projected benefit obligations as of December 31, 1993 and
1992 were determined using discount rates of 7.5 percent and 8.0
percent, respectively, and anticipated composite rates of future
increases in compensation of 4.5 percent and 5.5 percent,
respectively.
Defined Contribution Plans
Sprint sponsors defined contribution employee savings plans
covering substantially all employees. Participants may
contribute portions of their compensation to the plans.
Contributions of participants represented by collective
bargaining units are matched by Sprint based upon defined amounts
as negotiated by the respective parties. Contributions of
participants not covered by collective bargaining agreements are
also matched by Sprint. For these participants, Sprint provides
matching contributions in common stock equal to 50 percent of
participants' contributions up to 6 percent of their compensation
and may, at the discretion of the Board of Directors, provide
additional matching contributions based upon the performance of
Sprint's common stock in comparison to other telecommunications
companies. Sprint's matching contributions (including cash
contributions under the former Centel savings plans) aggregated
$49 million, $40 million and $36 million in 1993, 1992 and 1991,
respectively.
Postretirement Benefits
Sprint sponsors postretirement benefits (principally health
care benefits) arrangements covering substantially all employees.
Employees who retired before specified dates are eligible for
these benefits at no cost or a reduced cost. Employees retiring
after specified dates are eligible for these benefits on a shared
cost basis. Sprint funds the accrued costs as benefits are paid.
The components of the 1993 net postretirement benefits cost are
as follows (in millions):
Service cost -- benefits earned during the period $ 22.1
Interest on accumulated benefit obligation 56.5
Net postretirement benefits cost $ 78.6
For measurement purposes, an annual health care cost trend rate
of 13 percent was assumed for 1993, gradually decreasing to 6
percent by 2001 and remaining constant thereafter. The effect of
a one percent increase in the assumed trend rates would have
increased the 1993 net postretirement benefits cost by
approximately $14 million. The weighted average discount rate
for 1993 was 8.0 percent.
In addition, the Company recognized postretirement benefits
curtailment losses of $11 million in 1993 as a result of
integration and restructuring actions (see Notes 2 and 9).
The cost of providing postretirement benefits was $28 million
in 1992 and $29 million in 1991.
The amount recognized in the consolidated balance sheet as of
December 31, 1993 is as follows (in millions):
Accumulated postretirement benefits obligation
Retirees $ 322.8
Active plan participants -- fully eligible 158.0
Active plan participants -- other 254.4
735.2
Unrecognized prior service benefit 6.8
Unrecognized net gains 38.9
Accrued postretirement benefits cost $ 780.9
The accumulated benefits obligation as of December 31, 1993 was
determined using a discount rate of 7.5 percent. An annual
health care trend rate of 12 percent was assumed for 1994,
gradually decreasing to 6 percent by 2001 and remaining constant
thereafter. The effect of a one percent annual increase in the
assumed health care cost trend rates would have increased the
accumulated benefits obligation as of December 31, 1993 by
approximately $98 million.
4. Income Taxes
The components of the income tax provisions allocated to
continuing operations are as follows (in millions):
1993 1992 1991
Current income tax provision
Federal $ 275.6 $ 242.1 $ 232.9
State 54.2 37.2 44.7
Amortization of deferred
investment tax credits (24.7) (31.3) (34.6)
305.1 248.0 243.0
Deferred income tax provision
(benefit)
Federal 16.4 9.5 (6.4)
State (26.2) 24.8 6.3
(9.8) 34.3 (0.1)
Total income tax provision $ 295.3 $ 282.3 $ 242.9
On August 10, 1993, the Revenue Reconciliation Act of 1993 was
enacted which, among other changes, raised the federal income tax
rate for corporations to 35 percent from 34 percent, retroactive
to January 1, 1993. Accordingly, Sprint adjusted its deferred
income tax assets and liabilities to reflect the revised rate.
The resulting adjustment related to Sprint's nonregulated
subsidiaries increased the 1993 deferred income tax provision by
$13 million ($0.04 per share). Adjustments to the net deferred
income tax liabilities associated with the rate-regulated
telephone companies were generally recorded as reductions to
regulatory liabilities and, accordingly, had no immediate effect
on Sprint's net income.
The differences which cause the effective income tax rate to
vary from the statutory federal income tax rate of 35 percent in
1993 and 34 percent in 1992 and 1991 are as follows (in
millions):
1993 1992 1991
Income tax provision at the
statutory rate $ 271.6 $ 264.7 $ 243.3
Less investment tax credits
included in income 24.7 31.3 34.6
Expected federal income tax
provision after investment tax
credits 246.9 233.4 208.7
Effect of
State income taxes, net of federal
income tax effect 18.2 40.9 33.7
Differences required to be flowed
through by regulatory commissions 6.0 5.6 5.7
Reversal of rate differentials (13.0) (16.3) (23.7)
Amortization of intangibles 8.8 8.6 8.3
Merger related costs 18.0
Other, net 10.4 10.1 10.2
Income tax provision, including
investment tax credits $ 295.3 $ 282.3 $ 242.9
Effective income tax rate 38% 36% 34%
The income tax provisions (benefits) allocated to other items
are as follows (in millions):
1993 1992 1991
Discontinued operations $ (6.6) $ 15.3
Extraordinary losses on early
extinguishments of debt (20.3) $ (9.1) (1.2)
Cumulative effect of changes in
accounting principles
Postretirement benefits (216.7)
Postemployment benefits (6.7)
Circuit activity costs (21.5)
Unrealized holding gains on
investments in common stocks
(recorded directly to
shareholders' equity) 36.5
Stock ownership, purchase and
options arrangements (recorded
directly to shareholders' equity) (10.6) (6.0) (2.7)
Effective with the adoption of SFAS No. 109 in 1992, deferred
income taxes are provided for the temporary differences between
the carrying amounts of Sprint's assets and liabilities for
financial statement purposes and their tax bases. The sources of
the differences that give rise to the deferred income tax assets
and liabilities as of December 31, 1993 and 1992, along with the
income tax effect of each, are as follows (in millions):
1993 Deferred 1992 Deferred
Income Tax Income Tax
Assets Liabilities Assets Liabilities
Property, plant and
equipment $ 1,564.0 $ 1,522.6
Postretirement and
other benefits $ 281.1 $ 25.6
Alternative minimum
tax credit
carryforwards 259.7 311.6
Operating loss
carryforwards 64.7 70.2
Integration and
restructuring
costs 35.0
Other, net 9.9 10.2
Subtotal 640.5 1,573.9 417.6 1,522.6
Less valuation
allowance 24.5 30.2
Total $ 616.0 $ 1,573.9 $ 387.4 $ 1,522.6
During 1993 and 1992, the valuation allowance related to
deferred income tax assets decreased $6 million and $5 million,
respectively.
During 1991, in accordance with APB No. 11, deferred income tax
provisions resulted from the differences in the timing of
recognizing certain revenues and expenses for financial statement
and income tax purposes. The sources of the differences, along
with the income tax effect of each, are as follows (in millions):
Property, plant and equipment $ 86.5
Allowance for doubtful accounts 8.9
Deferred revenue (2.9)
Expense accruals (9.0)
Exchangeable debentures 7.0
Alternative minimum tax credit carryforwards (90.8)
Investment tax credit carryforwards 5.9
Special partnership allocations 25.3
Sale of telephone properties (32.2)
Other, net 1.2
Total $ (0.1)
As of December 31, 1993, Sprint has available, for income tax
purposes, $260 million of alternative minimum tax credit
carryforwards to offset regular income tax payable in future
years, and tax benefits of $65 million associated with state
operating loss carryforwards. The loss carryforwards expire in
varying amounts annually from 1994 through 2008.
5. Debt
Long-term debt, as of December 31, is as follows (in
millions):
Maturing 1993 1992
Corporate
Senior notes
9.75% 1993 $ 100.0
8.60% to 9.71% 1994 $ 225.0 225.0
9.45% 1995 50.0 50.0
10.45% 1996 200.0 200.0
9.88% 1997 120.0 160.0
9.19% to 9.60% 1998 43.0 43.0
8.13% to 9.80% 2000 to 2003 632.3 632.3
Debentures
9.25% 2022 200.0 200.0
Subordinated debentures
8.00% 2006 204.8
Notes payable and commercial
paper, classified as
long-term debt 1996 634.4
Other
11.88% 1999 4.5 5.6
Long Distance Communications
Services
Vendor financing agreements
6.99% to 10.18% 1994 to 2001 423.4 538.5
Note payable to GTE
5.30% 1993 72.8
Local Communications Services
First mortgage bonds
4.63% to 9.00% 1994 to 1998 167.4 260.3
2.00% to 9.37% 1999 to 2003 541.1 487.1
4.00% to 8.75% 2004 to 2008 353.0 344.3
6.88% to 9.79% 2009 to 2013 80.0 32.6
8.77% to 8.78% 2014 to 2018 80.5 216.3
7.13% to 9.89% 2019 to 2023 343.1 268.9
Debentures and notes
4.50% to 9.61% 1994 to 2017 424.4 340.1
Notes payable and commercial
paper, classified as
long-term debt 1996 121.4
Other
2.00% to 19.45% 1994 to 2017 17.3 20.7
Other
Senior notes
9.88% to 11.70% 1998 to 2000 277.1 281.0
Debentures
9.00% 2019 150.0 229.2
Other
8.59% to 13.00% 1995 to 1998 6.5 167.9
Subtotal 5,094.4 5,080.4
Less current maturities 523.4 386.6
Long-term debt $4,571.0 $4,693.8
Long-term debt maturities during each of the next five years
are as follows (in millions):
Amount
1994 $ 523.4
1995 216.8
1996 1,104.2
1997 100.7
1998 385.3
Property, plant and equipment with an aggregate cost of
approximately $10.36 billion is either pledged as security for
first mortgage bonds and certain notes or is restricted for use
as mortgaged property.
Notes payable and commercial paper outstanding and related
weighted average interest rates, as of December 31, are as
follows (in millions):
1993 1992
Bank notes, 3.55% weighted average interest
rate $ 397.5 $ 206.3
Master Trust notes, 3.71% weighted average
interest rate 250.0 80.0
Commercial paper, 3.29% weighted average
interest rate 108.3 76.0
Total notes payable and commercial paper $ 755.8 $ 362.3
Notes payable and commercial paper outstanding as of December
31, 1993 are classified as long-term debt due to Sprint's intent
to refinance such borrowings on a long-term basis and due to its
demonstrated ability to do so pursuant to the $1.1 billion
revolving credit agreement described below. Such borrowings as
of December 31, 1992 were classified as short-term borrowings.
The bank notes are renewable at various dates throughout the
year. Sprint pays a fee to certain commercial banks to support
current and future credit requirements based upon loan
commitments. Lines of credit may be withdrawn by the banks if
there is a material adverse change in Sprint's financial
condition.
Sprint has a Master Trust Note Agreement with the trust
division of a bank to borrow funds on demand. Interest on such
borrowings is at a rate that yields interest equivalent to the
most favorable discount rate paid on 180-day commercial paper.
As of December 31, 1993, Sprint had a total of $1.31 billion
of credit arrangements, consisting of various bank commitments
and a $1.1 billion revolving credit agreement with a syndicate of
domestic and international banks. At that date, Sprint had
availability totaling $803 million under such arrangements. The
revolving credit agreement expires in July 1996 and, subject to
the approval of the lenders, may be extended for up to an
additional two years.
During 1993 and 1992, Sprint redeemed or called for redemption
prior to scheduled maturities $1.34 billion and $720 million,
respectively, of first mortgage bonds, senior notes and
debentures. Excluding amounts deferred by the rate-regulated
telephone companies as required by certain regulatory
commissions, the prepayment penalties incurred in connection with
early extinguishments of debt and the write-off of related debt
issuance costs aggregated $29 million in 1993 and $16 million in
1992, net of related income tax benefits, and are reflected as
extraordinary losses in the consolidated statements of income.
In 1991, extraordinary losses of $2 million, net of related
income tax benefits, were recorded related to the early
extinguishment and defeasance of debt.
6. Redeemable Preferred Stock
Sprint has 20 million authorized shares and subsidiaries have
approximately 6 million authorized shares of preferred stock,
including non-redeemable preferred stock. The redeemable
preferred stock outstanding, as of December 31, is as follows (in
millions):
1993 1992
Third series -- stated value $100 per share,
shares - 208,000 in 1993 and 220,000 in
1992, non-participating, non-voting,
cumulative 7.75% annual dividend rate $ 20.8 $ 22.0
Fifth series -- stated value $100,000 per
share, shares - 95 in 1993 and 1992, voting,
cumulative 6% annual dividend rate 9.5 9.5
Subsidiaries -- stated value ranging from $10
to $100 per share, shares - 380,055 in 1993
and 395,765 in 1992, annual dividend rates
ranging from 4.7% to 5.4% 8.3 8.7
Total redeemable preferred stock $ 38.6 $ 40.2
Sprint's third series preferred stock is redeemed through a
sinking fund at the rate of 12,000 shares, or $1.2 million per
year, until 2008, at which time all remaining shares are to be
redeemed. Sprint may redeem additional third series preferred
shares at $102.55 per share during 1994, and at declining amounts
in succeeding years. In the event of default, the holders of
Sprint's third series redeemable preferred stock are entitled to
elect a certain number of directors until all arrears in dividend
and sinking fund payments have been paid.
Sprint's fifth series preferred stock must be redeemed in full
in 2003. If less than full dividends have been paid for four
consecutive dividend periods or if the total amount of dividends
in arrears exceeds an amount equal to the dividend payment for
six dividend periods, the holders of the fifth series preferred
stock are entitled to elect a majority of directors standing for
election until all arrears in dividend payments have been paid.
7. Common Stock
Common stock activity during 1993 and shares reserved for
future grants under stock option plans or future issuances under
various arrangements are as follows (in millions):
Number of Shares
1993 Reserved as of
Activity December 31, 1993
Employees Stock Purchase Plan 0.1 3.3
Employee savings plans 1.4 5.0
Automatic Dividend Reinvestment Plan 0.4 1.3
Officer and key employees' and
Directors' stock options 2.2 12.2
Conversion of preferred stock and
other 0.4 2.1
Total 4.5 23.9
As of December 31, 1993, elections to purchase 2.6 million of
Sprint's common shares were outstanding under the 1992 offering
of the Employees Stock Purchase Plan. The purchase price under
the offering cannot exceed $19.66 per share, such price
representing 85 percent of the average market price on the
offering date, or fall below $12.00 per share. The 1992 offering
terminates on June 30, 1994.
Under various stock option plans, shares of common stock are
reserved for issuance to officers, other key employees and
outside directors. All options are granted at 100 percent of the
market price at date of grant. Approximately 6 percent of all
options outstanding as of December 31, 1993 provide for the
granting of stock appreciation rights as an alternate method of
settlement upon exercise. The stock appreciation rights feature
allows the optionee to elect to receive any gain in the stock
price on the underlying option directly from Sprint, either in
stock or in cash or a combination of the two, in lieu of
exercising the option by payment of the purchase price. A
summary of stock option activity under the plans is as follows
(in millions, except per share data):
Per Share
Number Exercise Aggregate
of Price Exercise
Shares Low High Amount
Shares under option as of
January 1, 1993 (5.5
million shares exercisable) 7.5 $ 9.44 $ 39.31 $ 170.2
Granted 1.6 27.50 38.44 50.3
Exercised
Options without stock
appreciation rights (2.1) 9.44 33.75 (41.0)
Options with stock
appreciation rights (0.3) 11.09 29.68 (5.5)
Terminated and expired (0.1) 18.16 33.75 (3.2)
Shares under option as of
December 31, 1993 (4.5
million shares exercisable) 6.6 $ 9.44 $ 39.31 $ 170.8
During 1990, the Savings Plan Trust, an employee savings plan,
acquired shares of common stock from Sprint in exchange for a $75
million promissory note payable to Sprint. The note bears an
interest rate of 9 percent and is to be repaid from the common
stock dividends received by the plan and the contributions made
to the plan by Sprint in accordance with plan provisions. The
remaining balance of the note receivable of $60 million as of
December 31, 1993 is reflected as a reduction to other
shareholders' equity.
Under a Shareholder Rights plan, one-half of a Preferred Stock
Purchase Right is attached to each share of common stock. Each
Right, which is exercisable and detachable only upon the
occurrence of certain takeover events, entitles shareholders to
buy units consisting of one one-hundredth of a newly issued share
of Preferred Stock-Fourth Series, Junior Participating at a price
of $235 per unit or, in certain circumstances, common stock.
Under certain circumstances, Rights beneficially owned by an
acquiring person become null and void. Sprint's Preferred Stock-
Fourth Series is without par value. It is voting, cumulative and
accrues dividends equal generally to the greater of $10 per share
or one hundred times the aggregate per share amount of all common
stock dividends. No shares of Preferred Stock-Fourth Series were
issued or outstanding at December 31, 1993. The Rights may be
redeemed by Sprint at a price of one cent per Right and will
expire on September 8, 1999.
During 1993, 1992 and 1991, Sprint declared and paid annual
dividends on common stock of $1.00 per share, and Centel declared
pre-merger common stock dividends of $0.15, $0.90 and $0.89 per
share, respectively. The most restrictive covenant applicable to
dividends on common stock results from the $1.1 billion revolving
credit agreement. Among other restrictions, this agreement
requires Sprint to maintain specified levels of consolidated net
worth, as defined. As a result of this requirement, $1.45
billion of Sprint's $2.18 billion consolidated retained earnings
were effectively restricted from the payment of dividends as of
December 31, 1993. The indentures and financing agreements of
certain of Sprint's subsidiaries contain various provisions
restricting the payment of cash dividends on subsidiary common
stock held by Sprint. In connection with these restrictions,
$749 million of the related subsidiaries' $1.79 billion total
retained earnings is restricted as of December 31, 1993. The
flow of cash in the form of advances from the subsidiaries to
Sprint is generally not restricted.
8. Commitments and Contingencies
Litigation, Claims and Assessments
During 1993, an agreement for settlement was reached related
to a class action complaint filed in January 1992 against Sprint
and certain of its officers and directors, amending a complaint
originally filed in 1990. The plaintiffs in the class action
alleged violations of various federal securities laws and related
state laws and, among other relief, sought unspecified
compensatory damages. The settlement, which is subject to
approval by the court, totaled $29 million, of which
approximately 60 percent will be recovered from Sprint's
insurance carriers. The net settlement did not have a
significant effect on Sprint's 1993 results of operations.
Following announcement of Sprint's merger with Centel, class
action suits were filed against Centel and certain of its
officers and directors in federal and state courts. The state
suits have been dismissed, while the federal suits have been
consolidated into a single action and seek damages for alleged
violations of securities laws. These and various other suits
arising in the ordinary course of business are pending against
Sprint. Management cannot predict the ultimate outcome of these
actions but believes they will not result in a material effect on
Sprint's consolidated financial statements.
Accounts Receivable Sold with Recourse
Under an agreement available through January 1995, Sprint may
sell on a continuous basis, with recourse, up to $600 million of
undivided interests in a designated pool of its accounts
receivable. Subsequent collections of receivables sold to
investors are typically reinvested in the pool. On a quarterly
basis, subject to the approval of the investors, Sprint may
extend the agreement for an additional ninety days. During 1992,
proceeds of $300 million were received under the arrangement.
Receivables sold that remained uncollected as of December 31,
1993 and 1992 aggregated $600 million.
Operating Leases
Minimum rental commitments as of December 31, 1993 for all non-
cancelable operating leases, consisting principally of leases for
data processing equipment and real estate, are as follows (in
millions):
Amount
1994 $ 304.1
1995 251.4
1996 171.1
1997 100.6
1998 83.8
Thereafter 243.6
Gross rental expense aggregated $387 million, $385 million and
$397 million in 1993, 1992 and 1991, respectively. The amount of
rental commitments applicable to subleases, contingent rentals
and executory costs is not significant.
9. Additional Financial Information
Segment Information
See "Business Segment Information."
Realignment and Restructuring Charge
During 1993, Sprint initiated a realignment and restructuring
of its long distance communications services division, including
the elimination of approximately 1,000 positions and the closure
of two facilities. These actions are expected to improve market
focus, lower costs and streamline operations within the division,
and resulted in a nonrecurring charge of $34 million, which
reduced income from continuing operations by $21 million ($0.06
per share).
Divestiture of Telephone and Cellular Properties
During 1992, the sale of Centel's local telephone operations
in Ohio was completed, pursuant to a definitive agreement reached
in November 1991. Proceeds from the sale aggregated $129
million, including $114 million of cash and $15 million of
assumed debt; a gain of $44 million ($0.13 per share), net of
related income taxes, was realized on the sale.
During 1991, the sales of Centel's local telephone operations
in Minnesota and Iowa were completed, pursuant to a definitive
agreement reached in November 1990. Proceeds from the sales
included $116 million in cash, 2,885,000 shares of Rochester
Telephone Corporation common stock with a value of $84 million
and ownership rights in various cellular franchises with a value
of $28 million. Gains of $64 million ($0.19 per share), net of
related income taxes, were realized on the sales. Also during
1991, 50 percent of Centel's interest in a cellular limited
partnership was divested. Cash proceeds of $36 million were
received, and a gain of $14 million ($0.04 per share), net of
related income taxes, was realized on this divestiture.
Discontinued Operations
During 1991, pursuant to a definitive agreement reached in
December 1990, the sale of Centel's electric operations was
completed for $320 million in cash and $26 million of assumed
liabilities. A gain of $37 million, net of related income taxes,
was realized on the sale. Revenues related to discontinued
operations were $178 million in 1991.
Financial Instruments
The carrying amounts and estimated fair values of Sprint's
long-term debt, as of December 31, are as follows (in millions):
1993 1992
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
Long-term debt
Corporate $ 2,109.2 $ 2,377.2 $ 1,820.7 $ 1,957.3
Long distance
communications services 423.4 447.8 611.3 656.7
Local communications
services 2,128.2 2,342.5 1,970.3 2,032.3
Other 433.6 534.6 678.1 705.4
The fair values of Sprint's long-term debt are estimated based
on quoted market prices for publicly-traded issues, and based on
the present value of estimated future cash flows using a discount
rate commensurate with the risks involved for all other issues.
The carrying values of Sprint's other financial instruments
(principally cash equivalents, temporary investments, short-term
borrowings, interest rate swap/cap agreements and foreign
currency contracts) approximate fair value as of December 31,
1993 and 1992.
Supplemental Cash Flows Information
1993 1992 1991
Cash paid for (in millions)
Interest $ 453.6 $ 507.5 $ 568.7
Income taxes $ 292.4 $ 269.0 $ 244.8
During 1993, 1992 and 1991, Sprint contributed previously
unissued shares of its common stock with market values of $39
million, $28 million and $25 million, respectively, to the
employee savings plans.
SPRINT CORPORATION
SCHEDULE V -- CONSOLIDATED PROPERTY, PLANT AND EQUIPMENT
Year Ended December 31, 1993
(In Millions)
Balance Balance
beginning Additions Other end of
of year at cost Retirements changes year
LONG DISTANCE
COMMUNICATIONS
SERVICES
Digital fiber-
optic network $ 3,976.9 $ 367.0 $ 153.0 (101.5)<1> $ 4,089.4
Data
communications
equipment 301.9 54.5 11.4 (64.8)<2> 280.2
Administrative
assets 864.5 81.1 30.8 (31.2)<2> 883.6
Construction-in-
progress 212.6 26.8 0.1 239.5
Subtotal 5,355.9 529.4 195.2 (197.4) 5,492.7
LOCAL
COMMUNICATIONS
SERVICES
Land and
buildings 636.5 29.7 6.2 660.0
Other general
support assets 624.7 75.1 58.2 (0.7) 640.9
Cable and wire
facility
assets 5,150.8 324.9 71.5 5,404.2
Central office
assets 3,855.7 387.8 163.6 3.3 4,083.2
Information
origination/
termination
assets 333.6 51.1 49.1 (0.2) 335.4
Telephone plant
under
construction 130.9 (23.3) (4.9) 102.7
Subtotal 10,732.2 845.3 348.6 (2.5) 11,226.4
CELLULAR AND
WIRELESS
COMMUNICATIONS
SERVICES 409.9 164.9 3.3 (1.9) 569.6
PRODUCT
DISTRIBUTION,
DIRECTORY
PUBLISHING AND
OTHER 405.2 55.1 24.8 (1.8) 433.7
$ 16,903.2 $ 1,594.7 $ 571.9 $ (203.6) $ 17,722.4
Depreciation is computed on a straight-line basis. The weighted
average annual composite depreciation rate for the rate-regulated
local division, excluding special short-term amortizations and
nonrecurring charges, was 6.7 percent in 1993.
<1>Adjustment primarily represents reductions to plant due to a
change in the method of accounting for certain costs related
to connecting new customers to the network. See Note 1 of
"Notes to Consolidated Financial Statements" for additional
information.
<2>Adjustments primarily represent the contribution of plant to
a joint venture.
SPRINT CORPORATION
SCHEDULE V -- CONSOLIDATED PROPERTY, PLANT AND EQUIPMENT
Year Ended December 31, 1992
(In Millions)
Balance Balance
beginning Additions Other end of
of year at cost Retirements changes year
LONG DISTANCE
COMMUNICATIONS
SERVICES
Digital fiber-
optic network $ 3,899.1 $ 356.8 $ 230.2 $ (48.8)<1><2> $ 3,976.9
Data
communications
equipment 243.9 51.2 3.7 10.5 <2> 301.9
Administrative
assets 932.0 76.6 76.5 (67.6)<2> 864.5
Construction-in
-progress 227.7 (16.5) 1.4 212.6
Subtotal 5,302.7 468.1 310.4 (104.5) 5,355.9
LOCAL
COMMUNICATIONS
SERVICES
Land and
buildings 598.7 53.5 15.3 (0.4) 636.5
Other general
support assets 593.8 81.6 51.5 0.8 624.7
Cable and wire
facility
assets 4,959.2 292.9 101.2 (0.1) 5,150.8
Central office
assets 3,688.3 377.2 210.4 0.6 3,855.7
Information
origination/
termination
assets 527.4 42.4 237.0 0.8 333.6
Telephone plant
under
construction 140.2 (8.2) (1.1) 130.9
Subtotal 10,507.6 839.4 615.4<3> 0.6 10,732.2
CELLULAR AND
WIRELESS
COMMUNICATIONS
SERVICES 298.4 123.8 8.2 (4.1) 409.9
PRODUCT
DISTRIBUTION,
DIRECTORY
PUBLISHING AND
OTHER 398.8 34.9 29.3 0.8 405.2
$ 16,507.5 $ 1,466.2 $ 963.3 $ (107.2) $ 16,903.2
Depreciation is computed on a straight-line basis. The weighted
average annual composite depreciation rate for the rate-regulated
local division, excluding special short-term amortizations and
nonrecurring charges, was 6.6 percent in 1992.
<1>Adjustment represents an adjustment pursuant to Accounting
Principles Board Opinion No. 16 related to the acquisition of
the remaining 19.9% of the Limited Partnership, partially
offset by reclassifications of plant among categories.
<2>Adjustments represent the reclassification of plant among
categories.
<3>Retirements include approximately $95 million related to the
divestiture of Centel's local telephone operations in Ohio.
SPRINT CORPORATION
SCHEDULE V -- CONSOLIDATED PROPERTY, PLANT AND EQUIPMENT
Year Ended December 31, 1991
(In Millions)
Balance Balance
beginning Additions Other end of
of year at cost Retirements changes year
LONG DISTANCE
COMMUNICATIONS
SERVICES
Digital fiber-
optic network $ 3,619.1 $ 451.6 $ 137.5 $(34.1)<1> $ 3,899.1
Data
communications
equipment 178.4 54.0 3.3 14.8 <2> 243.9
Administrative
assets 835.1 136.8 39.2 (0.7) 932.0
Construction-in
-progress 289.9 (62.2) 227.7
Subtotal 4,922.5 580.2 180.0 (20.0) 5,302.7
LOCAL
COMMUNICATIONS
SERVICES
Land and
buildings 585.9 27.0 15.0 0.8 598.7
Other general
support assets 564.8 75.7 49.4 2.7 593.8
Cable and wire
facility
assets 4,801.0 308.1 149.8 (0.1) 4,959.2
Central office
assets 3,580.2 348.3 238.5 (1.7) 3,688.3
Information
origination/
termination
assets 708.7 33.1 215.0 0.6 527.4
Telephone plant
under
construction 131.4 10.2 0.1 (1.3) 140.2
Subtotal 10,372.0 802.4 667.8<3> 1.0 10,507.6
CELLULAR AND
WIRELESS
COMMUNICATIONS
SERVICES 222.5 91.8 14.5 (1.4) 298.4
PRODUCT
DISTRIBUTION,
DIRECTORY
PUBLISHING AND
OTHER 363.9 48.8 13.8 (0.1) 398.8
$ 15,880.9 $ 1,523.2 $ 876.1 $ (20.5) $ 16,507.5
Depreciation is computed on a straight-line basis. The weighted
average annual composite depreciation rate for the rate-regulated
local division, excluding special short-term amortizations and
nonrecurring charges, was 6.3 percent in 1991.
<1>Adjustment primarily represents the reclassification of plant
between categories and to inventories.
<2>Adjustment represents the reclassification of plant between
categories.
<3>Retirements include approximately $213 million related to the
divestiture of Centel's local telephone operations in
Minnesota and Iowa.
SPRINT CORPORATION
SCHEDULE VI -- CONSOLIDATED ACCUMULATED DEPRECIATION
Year Ended December 31, 1993
(In Millions)
Balance Additions Balance
beginning charged to Other end of
of year income Retirements Changes year
LONG DISTANCE
COMMUNICATIONS
SERVICES
Digital fiber-
optic network $1,258.4 $357.4 $105.4 $(62.6)<3> $1,447.8
Data
communications
equipment 169.5 37.7 9.2 (18.4)<4> 179.6
Administrative
assets 507.2 122.7 30.7 (13.3)<4> 585.9
Subtotal 1,935.1 517.8 145.3 (94.3) 2,213.3
LOCAL
COMMUNICATIONS
SERVICES
Buildings 180.1 22.0 6.2 (2.5) 193.4
Other general
support assets 318.0 67.5 58.0 4.6 332.1
Cable and wire
facility
assets 2,172.8 301.1 71.5 (12.2) 2,390.2
Central office
assets 1,572.9 307.6 165.1 6.5 1,721.9
Information
origination/
termination
assets 251.0 28.8 49.1 5.2 235.9
Subtotal 4,494.8 727.0 349.9 1.6 4,873.5
CELLULAR AND
WIRELESS
COMMUNICATIONS
SERVICES 85.9 55.5 2.0 (1.5) 137.9
PRODUCT
DISTRIBUTION,
DIRECTORY
PUBLISHING AND
OTHER 167.5 33.3 21.1 3.2 182.9
$6,683.3 $1,333.6<1> $518.3<2> $(91.0) $7,407.6
<1> Reconciliation of additions charged to income to
amount disclosed in the consolidated statement of
income:
Amount charged to income $ 1,333.6
Amortization of intangibles 25.1
Depreciation and amortization
included in consolidated
statement of income $ 1,358.7
<2> Reconciliation of retirements included
in Schedule V -- Consolidated Property,
Plant and Equipment:
Amount charged to reserve $ 518.3
Net book value of long distance and
cellular/wireless division retirements
and other 53.6
Total Schedule V retirements $ 571.9
<3>Adjustment primarily represents reduction to accumulated
depreciation due to a change in the method of accounting for
certain costs related to connecting new customers to the
network. See Note 1 of "Notes to Consolidated Financial
Statements" for additional information.
<4>Adjustments primarily represent the contribution of plant to
a joint venture.
SPRINT CORPORATION
SCHEDULE VI -- CONSOLIDATED ACCUMULATED DEPRECIATION
Year Ended December 31, 1992
(In Millions)
Balance Additions Balance
beginning charged to Other end of
of year income Retirements Changes year
LONG DISTANCE
COMMUNICATIONS
SERVICES
Digital fiber-
optic network $1,062.9 $385.6 $190.6 $0.5<3> $1,258.4
Data
communications
equipment 125.5 39.5 3.1 7.6<3> 169.5
Administrative
assets 453.3 136.9 74.9 (8.1)<3> 507.2
Subtotal 1,641.7 562.0 268.6 1,935.1
LOCAL
COMMUNICATIONS
SERVICES
Buildings 171.1 19.9 10.4 (0.5) 180.1
Other general
support assets 300.9 61.8 49.3 4.6 318.0
Cable and wire
facility
assets 1,973.8 289.4 78.6 (11.8) 2,172.8
Central office
assets 1,429.5 319.7 182.9 6.6 1,572.9
Information
origination/
termination
assets 458.0 26.5 236.7 3.2 251.0
Subtotal 4,333.3 717.3 557.9 2.1 4,494.8
CELLULAR AND
WIRELESS
COMMUNICATIONS
SERVICES 60.6 32.8 2.9 (4.6) 85.9
PRODUCT
DISTRIBUTION,
DIRECTORY
PUBLISHING AND
OTHER 161.4 30.4 24.3 167.5
$6,197.0 $1,342.5<1> $853.7<2> $(2.5) $6,683.3
<1>Reconciliation of additions charged to income to
amount disclosed in the consolidated statement of
income:
Amount charged to income $ 1,342.5
Amortization of intangibles 49.0
Depreciation and amortization included in
consolidated statement of income $ 1,391.5
<2>Reconciliation of retirements included in Schedule V
-- Consolidated Property, Plant and Equipment:
Amount charged to reserve $ 853.7
Divestiture of local telephone operations 57.3
Net book value of long distance and
cellular/wireless divisions retirements
and other 52.3
Total Schedule V retirements $ 963.3
<3>Adjustments primarily represent reclassifications of plant
among categories.
SPRINT CORPORATION
SCHEDULE VI -- CONSOLIDATED ACCUMULATED DEPRECIATION
Year Ended December 31, 1991
(In Millions)
Balance Additions Balance
beginning charged to Other end of
of year income Retirements Changes year
LONG DISTANCE
COMMUNICATIONS
SERVICES
Digital fiber-
optic network $810.9 $370.8 $118.8 $1,062.9
Data
communications
equipment 63.4 24.1 1.1 $39.1 125.5
Administrative
assets 363.6 143.5 22.6 (31.2)<3> 453.3
Subtotal 1,237.9 538.4 142.5 7.9 1,641.7
LOCAL
COMMUNICATIONS
SERVICES
Buildings 162.0 18.9 8.5 (1.3) 171.1
Other general
support assets 270.5 67.5 42.1 5.0 300.9
Cable and wire
facility
assets 1,802.5 271.4 89.2 (10.9) 1,973.8
Central office
assets 1,295.9 320.0 192.1 5.7 1,429.5
Information
origination/
termination
assets 631.1 36.2 213.2 3.9 458.0
Subtotal 4,162.0 714.0 545.1 2.4 4,333.3
CELLULAR AND
WIRELESS
COMMUNICATIONS
SERVICES 42.0 24.7 4.8 (1.3) 60.6
PRODUCT
DISTRIBUTION,
DIRECTORY
PUBLISHING AND
OTHER 143.8 27.9 12.1 1.8 161.4
$5,585.7 $1,305.0<1> $704.5<2> $10.8 $6,197.0
<1>Reconciliation of additions charged to income to
amount disclosed in the consolidated statement of
income:
Amount charged to income $ 1,305.0
Amortization of intangibles 64.5
Depreciation and amortization included
in consolidated statement of income $ 1,369.5
<2>Reconciliation of retirements included in Schedule V
-- Consolidated Property, Plant and Equipment:
Amount charged to reserve $ 704.5
Divestiture of local telephone operations 122.7
Net book value of long distance and
cellular/wireless divisions retirements
and other 48.9
Total Schedule V retirements $ 876.1
<3>Adjustments primarily represent reclassifications of plant
between categories.
SPRINT CORPORATION
SCHEDULE VIII -- CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1993, 1992 and 1991
(In Millions)
Additions
Balance Charged Charged Balance
beginning to to other Other end of
of year income accounts deductions year
1993
Allowance for
doubtful accounts $118.0 $271.5 $2.6 $(270.2)<1> $121.9
Valuation allowance
- deferred income
tax assets $30.2 $0.7 $(6.4) $24.5
1992
Allowance for
doubtful accounts $144.8 $267.6 $2.4 $(296.8)<1> $118.0
Valuation allowance
- deferred income
tax assets $35.4<2> $ (5.2) $30.2
1991
Allowance for
doubtful accounts $212.6 $371.2 $2.9 $(441.9)<1> $144.8
<1> Accounts written off, net of recoveries.
<2> Valuation allowance established upon adoption of SFAS No. 109,
"Accounting for Income Taxes." See Notes 1 and 4 of "Notes to
Consolidated Financial Statements" for additional information.
SPRINT CORPORATION
SCHEDULE IX -- CONSOLIDATED SHORT-TERM BORROWINGS
Years Ended December 31, 1993, 1992 and 1991
(In Millions)
1993 <1> 1992 1991 <1>
Bank Commercial Bank Commercial Bank Commercial
Notes Paper Notes Paper Notes Paper
<2> <3> <2> <3> <2> <3>
Balance at end
of period $ 647.5 $108.3 $ 286.3 $76.0 $ 185.3 $30.0
Weighted average
interest rate 3.61% 3.29% 3.92% 4.10% 5.25% 5.31%
Average amount
outstanding
during the
year $ 456.8 $80.3 $ 398.0 $37.5 $ 401.2 $52.5
Maximum amount
outstanding
during the
year $ 722.0 $198.0 $ 486.4 $78.5 $ 749.0 $130.2
Weighted average
interest rate
during the
year (computed
by dividing
the annual
interest
expense by the
average debt
outstanding
during the
year) 3.70% 3.25% 4.17% 4.10% 6.73% 6.66%
<1>As of December 31, 1993 and 1991, short-term borrowings were
classified as long-term debt in the consolidated balance sheets
due to Sprint's intent and demonstrated ability to refinance
such borrowings on a long-term basis.
<2>Bank notes are generally issued for terms ranging from overnight
to 60 days.
<3>Commercial paper is generally issued for periods ranging from
overnight to 30 days.
SPRINT CORPORATION
SCHEDULE X -- CONSOLIDATED SUPPLEMENTARY
INCOME STATEMENT INFORMATION
Years Ended December 31, 1993, 1992 and 1991
(In Millions)
1993 1992 1991
Maintenance and repairs <1> $ 167.2 $ 174.1 $ 162.2
Taxes, other than payroll and
income taxes:
Property taxes $ 158.6 $ 148.2 $ 157.0
Gross receipts and other 77.9 76.8 60.7
$ 236.5 $ 225.0 $ 217.7
Advertising expense $ 317.2 $ 251.7 $ 192.6
<1>Amount represents maintenance and repairs for the long
distance division, cellular and wireless division, and
product distribution, directory publishing and other.
For the local division, maintenance and repairs is
the primary component of plant operations expense which
totaled $1.21 billion, $1.17 billion and $1.16 billion in
1993, 1992 and 1991, respectively.
QUARTERLY
FINANCIAL DATA
(Unaudited)
First Quarter Second Quarter Third Quarter
1993 1992 1993 1992 1993 1992
(In Millions, Except Per Share Data)
Net operating
revenues $2,718.0 $2,501.0 $2,800.9 $2,568.2 $2,867.6 $2,631.2
Operating
expenses
Costs of
services and
products 1,381.9 1,272.5 1,408.9 1,307.2 1,435.1 1,350.8
Selling, general
and
administrative 641.8 594.5 675.9 625.0 690.8 609.7
Depreciation and
amortization 337.2 334.3 338.0 352.4 338.5 356.8
Merger,
integration and
restructuring
costs <1>,<2> 248.0 44.5
Total operating
expenses 2,608.9 2,201.3 2,422.8 2,284.6 2,508.9 2,317.3
Operating income 109.1 299.7 378.1 283.6 358.7 313.9
Gain on
divestiture of
telephone
properties <3> 81.1
Interest expense (117.9) (131.2) (113.0) (129.4) (114.2) (126.7)
Other income
(expense), net (0.7) (1.8) (8.1) 6.5 (11.4) 6.4
Income (loss)
from continuing
operations
before income
taxes (9.5) 166.7 257.0 241.8 233.1 193.6
Income tax
provision <4> (1.8) (60.4) (91.9) (94.2) (96.4) (68.3)
Income (loss)
from continuing
operations (11.3) 106.3 165.1 147.6 136.7 125.3
Discontinued
operations, net (12.3)
Extraordinary
losses on early
extinguishments
of debt, net (5.2) (8.5) (14.5) (5.6)
Cumulative effect
of changes in
accounting
principles, net<5> (384.2) 22.7
Net income (loss) (413.0) 129.0 156.6 147.6 122.2 119.7
Preferred stock
dividends (0.6) (1.0) (0.9) (0.9) (0.6) (0.9)
Earnings (loss)
applicable to
common stock $(413.6) $128.0 $155.7 $146.7 $121.6 $118.8
Earnings (loss)
per common share
Continuing
operations $(0.03) $0.31 $0.48 $0.44 $0.39 $0.37
Discontinued
operations (0.04)
Extraordinary
item (0.02) (0.02) (0.04) (0.02)
Cumulative
effect of
changes in
accounting
principles (1.12) 0.07
Total $(1.21) $0.38 $0.46 $0.44 $0.35 $0.35
QUARTERLY Sprint Corporation
FINANCIAL DATA
(Unaudited)
Fourth Quarter Total Year
1993 1992 1993 1992
Net operating
revenues $2,981.3 $2,719.9 $11,367.8 $10,420.3
Operating
expenses
Costs of
services and
products 1,510.2 1,395.0 5,736.1 5,325.5
Selling, general
and
administrative 721.4 660.7 2,729.9 2,489.9
Depreciation and
amortization 345.0 348.0 1,358.7 1,391.5
Merger,
integration and
restructuring
costs <1>,<2> 292.5
Total operating
expenses 2,576.6 2,403.7 10,117.2 9,206.9
Operating income 404.7 316.2 1,250.6 1,213.4
Gain on
divestiture of
telephone
properties <3> 81.1
Interest expense (107.3) (123.8) (452.4) (511.1)
Other income
(expense), net (2.1) (16.1) (22.3) (5.0)
Income (loss)
from continuing
operations
before income
taxes 295.3 176.3 775.9 778.4
Income tax
provision <4> (105.2) (59.4) (295.3) (282.3)
Income (loss)
from continuing
operations 190.1 116.9 480.6 496.1
Discontinued
operations, net (12.3)
Extraordinary
losses on early
extinguishments
of debt, net (1.0) (10.4) (29.2) (16.0)
Cumulative effect
of changes in
accounting
principles, net <5> (384.2) 22.7
Net income (loss) 189.1 106.5 54.9 502.8
Preferred stock
dividends (0.7) (0.7) (2.8) (3.5)
Earnings (loss)
applicable to
common stock $188.4 $105.8 $52.1 $499.3
Earnings (loss)
per common share
Continuing
operations $0.55 $0.34 $1.39 $1.46
Discontinued
operations (0.04)
Extraordinary
item (0.03) (0.08) (0.05)
Cumulative
effect of
changes in
accounting
principles (1.12) 0.07
Total $0.55 $0.31 $0.15 $1.48
<1>During 1993, Sprint consummated its merger with Centel. The
transaction costs associated with the merger and the expenses
of integrating and restructuring the operations of the two
companies resulted in nonrecurring charges in the first and
third quarters of 1993. Such charges reduced net income by
$165 million ($0.48 per share) and $7 million ($0.02 per
share), respectively. See Note 2 of "Notes to Consolidated
Financial Statements" for additional information.
<2>During third quarter 1993, Sprint realigned and restructured
its long distance communications services division, resulting
in a nonrecurring charge which reduced net income by $21
million ($0.06 per share). See Note 9 of "Notes to
Consolidated Financial Statements" for additional
information.
<3>During second quarter 1992, a gain of $44 million ($0.13 per
share), net of related income taxes, was recognized related
to the sale of certain of Centel's local telephone
operations. See Note 9 of "Notes to Consolidated Financial
Statements" for additional information.
<4>During third quarter 1993, the Revenue Reconciliation Act of
1993 was enacted which, among other changes, raised the
federal income tax rate to 35 percent from 34 percent. As a
result, Sprint adjusted its deferred income tax assets and
liabilities to reflect the revised rate, resulting in a
nonrecurring charge which reduced net income by $13 million
($0.04 per share). See Note 4 of "Notes to Consolidated
Financial Statements" for additional information.
<5>Effective January 1, 1993, Sprint changed its method of
accounting for postretirement and postemployment benefits by
adopting SFAS No. 106 and No. 112 and effected another
accounting change. Effective January 1, 1992, Sprint changed
its method of accounting for income taxes by adopting SFAS
No. 109. See Note 1 of "Notes to Consolidated Financial
Statements" for additional information.
EXHIBIT INDEX
EXHIBIT
NUMBER
(3) Articles of Incorporation and Bylaws:
(a) Articles of Incorporation, as amended
(filed as Exhibit 4 to Sprint Corporation
Current Report on Form 8-K dated March 9, 1993
and incorporated herein by reference).
(b) Bylaws, as amended (filed as Exhibit 3(b)
to Sprint Corporation Annual Report on Form 10-
K for the year ended December 31, 1991 and
incorporated herein by reference).
(4) Instruments defining the Rights of Sprint's
Equity Security Holders:
(a) The rights of Sprint's equity security
holders are defined in the Fifth, Sixth,
Seventh and Eighth Articles of Sprint's
Articles of Incorporation. See Exhibit 3(a).
(b) Rights Agreement dated as of August 8,
1989, between Sprint Corporation (formerly
United Telecommunications, Inc.) and United
Missouri Bank, N.A. (formerly United Missouri
Bank of Kansas City, N.A.), as Rights Agent
(filed as Exhibit 2(b) to Sprint Corporation
Registration Statement on Form 8-A dated
August 11, 1989 (File No. 1-4721), and
incorporated herein by reference).
(c) Amendment and supplement dated June 4,
1992 to Rights Agreement dated as of August 8,
1989 (filed as Exhibit 2(c) to Amendment No. 1
on Form 8 dated June 8, 1992 to Sprint
Corporation Registration Statement on Form 8-A
dated August 11, 1989 (File No. 1-4721), and
incorporated herein by reference).
(10) Material Agreements - Merger Agreement:
(a) Agreement and Plan of Merger dated as of
May 27, 1992, among Sprint Corporation, F W
Sub Inc. and Centel Corporation (filed as
Exhibit 2 to Sprint Corporation Current Report
on Form 8-K dated May 27, 1992 and
incorporated herein by reference).
(b) First Amendment dated as of February 19,
1993, to the Agreement and Plan of Merger,
dated as of May 27, 1992, among Sprint
Corporation, F W Sub Inc. and Centel
Corporation (filed as Exhibit 2b to Sprint
Corporation Current Report on Form 8-K dated
March 9, 1993 and incorporated herein by
reference).
(10) Executive Compensation Plans and
Arrangements:
(c) 1978 Stock Option Plan, as amended (filed
as Exhibit 19(a) to United Telecommunications,
Inc. Quarterly Report on Form 10-Q for the
quarter ended September 30, 1991, and
incorporated herein by reference).
(d) 1981 Stock Option Plan, as amended (filed
as Exhibit 19(b) to United Telecommunications,
Inc. Quarterly Report on Form 10-Q for the
quarter ended September 30, 1991, and
incorporated herein by reference).
(e) 1985 Stock Option Plan, as amended (filed
as Exhibit 19(c) to United Telecommunications,
Inc. Quarterly Report on Form 10-Q for the
quarter ended September 30, 1991, and
incorporated herein by reference).
(f) 1990 Stock Option Plan, as amended.
(g) 1990 Restricted Stock Plan, as amended
(filed as Exhibit 99 to Sprint Corporation
Registration Statement No. 33-50421 and
incorporated herein by reference).
(h) Long-Term Stock Incentive Program, as
amended (filed as Exhibit 19(e) to United
Telecommunications, Inc. Quarterly Report on
Form 10-Q for the quarter ended September 30,
1991, and incorporated herein by reference).
(i) Restated Memorandum Agreements Respecting
Supplemental Pension Benefits between Sprint
Corporation (formerly United
Telecommunications, Inc.) and two of its
current and former executive officers (filed
as Exhibit 10(i) to Sprint Corporation Annual
Report on Form 10-K for the year ended
December 31, 1992 and incorporated herein by
reference).
(j) Executive Long-Term Incentive Plan.
(k) Executive Management Incentive Plan.
(l) Long-Term Incentive Compensation Plan
(filed as Exhibit 10(j) to United
Telecommunications, Inc. Annual Report on Form
10-K for the year ended December 31, 1989, and
incorporated herein by reference).
(m) Short-Term Incentive Compensation Plan
(filed as Exhibit 10(k) to United
Telecommunications, Inc. Annual Report on Form
10-K for the year ended December 31, 1989, and
incorporated herein by reference).
(n) Retirement Plan for Directors, as amended
(filed as Exhibit 28d to Registration
Statement No. 33-28237, and incorporated
herein by reference).
(o) Key Management Benefit Plan, as amended.
(p) Executive Deferred Compensation Plan, as
amended (filed as Exhibit 19(f) to United
Telecommunications, Inc. Quarterly Report on
Form 10-Q for the quarter ended September 30,
1991, and incorporated herein by reference).
(q) Director's Deferred Fee Plan, as amended
(filed as Exhibit 19(g) to United
Telecommunications, Inc. Quarterly Report on
Form 10-Q for the quarter ended September 30,
1991, and incorporated herein by reference).
(r) Supplemental Executive Retirement Plan
(filed as Exhibit 10(q) to Sprint Corporation
Annual Report on Form 10-K for the year ended
December 31, 1992, and incorporated herein by
reference).
(s) Form of Contingency Employment Agreements
between Sprint Corporation and certain of its
executive officers (filed as Exhibit 10(r) to
Sprint Corporation Annual Report on Form 10-K
for the year ended December 31, 1992, and
incorporated herein by reference).
(t) Form of Indemnification Agreements
between Sprint Corporation (formerly United
Telecommunications, Inc.) and its Directors
and Officers (filed as Exhibit 10(s) to Sprint
Corporation Annual Report on Form 10-K for the
year ended December 31, 1991 and incorporated
herein by reference).
(u) Summary of Executive Benefits (filed as
Exhibit 10(u) to Sprint Corporation Annual
Report on Form 10-K for the year ended
December 31, 1991 and incorporated herein by
reference).
(v) Amended and Restated Centel Management
Incentive Plan.
(w) Amended and Restated Centel Stock Option
Plan.
(x) Agreements Regarding Special Compensation
and Post Employment Restrictive Covenants
between Sprint Corporation and three of its
executive officers.
(y) Amended and Restated Centel Matched
Deferred Salary Plan.
(z) Amended and Restated Centel Directors
Deferred Compensation Plan.
(aa) Amended and Restated Centel Director
Stock Option Plan.
(11) Computation of Earnings Per Common Share.
(12) Computation of Ratio of Earnings to Fixed
Charges.
(21) Subsidiaries of Registrant.
(23a) Consent of Ernst & Young.
(23b) Consent of Arthur Andersen & Co.