-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IWYwm3bswVFGkxv2LEAvzbWZQJV9ljL/8bO99D0vELbCZrBK97EM8hKZPZ3DDGCQ NnbnNLVrJgjiIwAGR+c98g== 0000101830-96-000009.txt : 19960314 0000101830-96-000009.hdr.sgml : 19960314 ACCESSION NUMBER: 0000101830-96-000009 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960312 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPRINT CORP CENTRAL INDEX KEY: 0000101830 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 480457967 STATE OF INCORPORATION: KS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-04721 FILM NUMBER: 96533769 BUSINESS ADDRESS: STREET 1: 2330 SHAWNEE MISSION PKWY STREET 2: P O BOX 11315 CITY: WESTWOOD STATE: KS ZIP: 66205 BUSINESS PHONE: 9136243000 MAIL ADDRESS: STREET 1: 2330 SHAWNEE MISSION PKWY STREET 2: NULL CITY: WESTWOOD STATE: KS ZIP: 66205 FORMER COMPANY: FORMER CONFORMED NAME: UNITED TELECOMMUNICATIONS INC DATE OF NAME CHANGE: 19920316 FORMER COMPANY: FORMER CONFORMED NAME: UNITED UTILITIES INC DATE OF NAME CHANGE: 19731011 10-K405 1 SPRINT CORPORATION 1995 FORM 10-K 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, 1995 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 (IRS 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 New York Stock Exchange (shares outstanding at March 1, 1996, Chicago Stock Exchange 350,267,424) 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. [X] Aggregate market value of voting stock held by non-affiliates at March 1, 1996 is $14,896,581,249. 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 primarily a holding company. Sprint's principal subsidiaries provide domestic and international long distance and local exchange 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. Beginning in January 1996, Sprint will operate a small telephone refurbishing business in the state of Kansas. In March 1996, Sprint spun-off its cellular division to holders of Sprint's common stock. Sprint is a 40 percent partner in Sprint Spectrum LP, a partnership with Tele-Communications Inc. (TCI), Comcast Corporation (Comcast) and Cox Communications, Inc. (Cox) to provide wireless personal communications services (PCS) on a broad geographic basis within the United States. Sprint is also a partner in Global One, a joint venture with France Telecom (FT) and Deutsche Telekom AG (DT) to provide seamless global telecommunications services to business, consumer and carrier markets worldwide. The interests of DT and FT in the venture are held by their own joint venture, referred to as Atlas. The operating group serving Europe (excluding Germany and France) is owned one-third by Sprint and two-thirds by Atlas. The operating group for the worldwide activities outside the United States and Europe is owned 50 percent by Sprint and 50 percent by Atlas. Home country markets will be served by DT in Germany, FT in France and Sprint in the United States. TELECOMMUNICATIONS LAW The Telecommunications Act of 1996, which was signed into law in February 1996, promotes competition in all aspects of telecommunications. In particular, the new law removes barriers to competition that will enable local and long distance companies and cable TV companies to enter each others' markets. The regional Bell Operating Companies (RBOCs) were allowed to provide out-of-region and incidental long distance service upon enactment. The RBOCs will be allowed to provide in-region long distance service once they obtain state certification of compliance with a competitive "checklist" and a Federal Communications Commission (FCC) ruling that it is in the public interest and that a facilities based competitor exists in each market (or the failure of potential providers to request local access). The new law directs the FCC to conclude a large number of rule-makings in a relatively short period of time, including defining the requirements of the competitive "checklist"; such rules will significantly influence the amount and shape of competition in both local and long distance markets in the future. The new law eliminates regulatory barriers to entry into local telephone markets and imposes several obligations upon incumbent local exchange carriers (LECs). They must allow local resale without unreasonable restrictions, provide number portability (to the extent technically feasible) and dialing parity, afford access to rights-of-way, establish reciprocal compensation arrangements, negotiate interconnection agreements, provide nondiscriminatory access to unbundled network elements and allow collocation of interconnection equipment by competitors. The FCC is presently developing regulations to implement these requirements. Some of Sprint's LECs in rural areas may be exempted from some of these requirements. Many states, including most of the states in which Sprint's LECs operate, allow some competitive entry into the intraLATA long-distance and local service markets. The federal law preempts inconsistent state laws. 1 The impact of the Act on Sprint is unknown because a number of important implementation issues (such as the nature and extent of continued subsidies for local rates) still need to be decided by state or federal regulators. However, the Act offers opportunities as well as risks. Sprint should benefit from the opportunity to enter local telephone markets. The new competitive environment should lead to a reduction in local access fees, the largest single cost in providing long distance service today. The risk aspect of local competition is that historical prices and market shares of Sprint's LECs in their current operating regions (approximately 4 percent of the nation's local phone lines) are likely to decline. The removal of the long distance restrictions on the RBOCs is not anticipated to have an immediate significant adverse impact on Sprint because of the substantial preconditions that must be met before RBOCs can provide most in-region long distance services. In addition, Sprint could potentially offset some losses of long distance customers at the retail level if it were successful in becoming the underlying carrier for resellers (including the RBOCs) entering the long distance market. LONG DISTANCE COMMUNICATIONS SERVICES Sprint's 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 and international long distance voice, video, and data communications services, and consists principally of Sprint Communications Company L.P. (the Limited Partnership). The terms under which the division offers its services to the public are subject to different levels of state and federal regulation, but rates are not subject to rate-base regulation except nominally in some states. The division had net operating revenues of $7.3 billion, $6.8 billion and $6.1 billion in 1995, 1994 and 1993, respectively. 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, MCI and other telecommunications providers 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. As competition has developed in long distance markets in recent years, the FCC has streamlined regulation of interstate interexchange carriers, including AT&T. Nondominant competitive long distance carriers (like Sprint) have been subject to considerably less regulation, because market forces served as a more effective regulator of prices. As AT&T lost domestic market share, it sought to be relieved of regulation as well. The FCC ended rate-of-return regulation of AT&T in 1989, and removed some competitive services from price caps regulation in 1991. In October 1995, the FCC reclassified AT&T as a nondominant domestic carrier, in exchange for commitments to protect rates charged to low income, low volume, and reseller customers. The FCC did not find that the long distance market was completely competitive and some interstate regulation continues to apply. AT&T also subsequently sought to be declared a nondominant international carrier, and that request is pending. See "Telecommunications Law" for a discussion of the new telecommunications legislation and its potential impact on the long distance division. LOCAL COMMUNICATIONS SERVICES The local division is comprised of regulated LECs which serve approximately 6.7 million access lines in 19 states. In addition to furnishing local exchange services, the division provides intraLATA toll service and interLATA access by telephone customers and other carriers to Sprint's local exchange facilities. 2 The division had net operating revenues of $4.7 billion, $4.4 billion and $4.1 billion in 1995, 1994 and 1993, respectively. Florida and North Carolina were the only jurisdictions in which 10 percent or more of the division's total 1995 net operating revenues were generated. The following table reflects major revenue categories as a percentage of the division's total net operating revenues: 1995 1994 1993 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- Local service 39.7% 39.7% 39.4% Network access 36.1 36.2 37.1 Toll service 10.3 12.0 12.2 Other 13.9 12.1 11.3 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- 100.0% 100.0% 100.0% -- ------------- --- ------------- -- -------------
AT&T is the division's largest customer for network access services. In 1995, 15.2 percent of the division's net operating revenues was derived from services provided to AT&T, primarily network access services, compared to 16.6 percent in 1994 and 17.3 percent in 1993. While AT&T is a significant customer, Sprint does not believe the division's revenues are dependent upon AT&T, as customers' demand for interLATA 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. The LECs comprising the division are subject to the jurisdiction of the FCC and the public service commissions of each of the states in which they operate. In each state in which the commission exercises authority to grant certificates of public convenience and necessity, the LECs have been granted certificates of indefinite duration to provide local exchange telephone service in their current service areas. Effective January 1, 1991, the FCC adopted a price caps regulatory format for the RBOCs and the GTE local exchange companies. Other LECs could voluntarily 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. The LECs owned by Centel Corporation did not originally elect price caps, but as a result of the merger with Sprint, these LECs adopted price caps effective July 1, 1993. During 1995, the FCC adopted modifications to the price cap plan to reset productivity elections, change certain rate adjustment methods, address new service offerings and generally reduce regulatory requirements. Under these changes, Sprint's LECs elected a productivity factor that allows them to avoid sharing of interstate access earnings. See "Telecommunications Law" for a discussion of the new telecommunications legislation and its potential impact on the local communications division. PRODUCT DISTRIBUTION AND DIRECTORY PUBLISHING North Supply Company (North Supply), a wholesale distributor of telecommunications and security and alarm products, distributes products of more than 1,200 manufacturers to approximately 9,500 customers. Products range from basics, such as wire and cable, telephones and repair parts, to complete PBX systems, transmission systems and security and alarm equipment. North Supply also provides material management services to several of its affiliates and to several subsidiaries of the Bell Operating 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 and services. 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 39.5 percent of North Supply's total sales in 1995, 42.4 percent in 1994 and 39.3 percent in 1993. North Supply's net operating revenues were $854 million, $829 million, and $677 million in 1995, 1994 and 1993, respectively. 3 Sprint Publishing & Advertising along with Centel Directory Company publish and market 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 companies publish approximately 325 directories in 20 states with a circulation of 17 million copies. Sprint Publishing & Advertising's net operating revenues were $294 million, $280 million and $268 million in 1995, 1994 and 1993, respectively. Centel Directory Company operates 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. JOINT VENTURES In March 1995, Sprint Spectrum achieved a national wireless presence in the first round of PCS license auctions by the FCC. Sprint Spectrum and its affiliates won the rights to PCS licenses in 30 major trading areas at a cost of $2.2 billion. It is Sprint Spectrum`s objective to begin offering PCS in 20 to 25 major metropolitan markets, with a population of approximately 100 million, by the end of 1996. Also in March 1995, the four partners agreed that Sprint Spectrum would provide local telecommunications services on a national basis using the facilities of the cable partners. Effective as of January 31, 1996, the four partners entered into a series of agreements amending their approach to providing competitive local services. Under the revised agreements, local offerings in each market will be the subject of individual joint ventures to be negotiated between Sprint and the applicable cable company. However, there can be no assurances that any such joint ventures will be formed. On January 31, 1996, Sprint consummated its global joint venture (Global One) with DT and FT. Sprint contributed to the joint venture certain subsidiaries which conducted its international telecommunications business and certain assets of its U.S. subsidiaries used in such business. ENVIRONMENT Sprint's environmental compliance and remediation expenditures are primarily related to the operation of standby power generators for its telecommunications equipment. The expenditures arise in connection with permits, standards compliance, or occasional remediation, which are usually associated with generators, batteries or fuel storage. Certain Sprint subsidiaries have been designated a potentially responsible party at sites relating to either landfill contamination or discontinued power generation operations. Sprint's expenditures relating to environmental compliance and remediation have not been material to the financial statements or to the operations of Sprint and are not expected to have any future material effects. PATENTS, TRADEMARKS AND LICENSES Sprint and its subsidiaries own numerous patents, patent applications and trademarks in the U.S. and other countries. Sprint and its subsidiaries are also licensed under domestic and foreign patents and trademarks owned by others. In the aggregate, these patents, patent applications, trademarks and licenses are of material importance to Sprint's business. Generally, Sprint's trademarks and trademark licenses have no limitation on duration; Sprint's patents and the patents to which Sprint is licensed range generally in duration from 1 to 17 years. EMPLOYEE RELATIONS As of December 31, 1995, Sprint and its subsidiaries had approximately 48,300 employees, of whom approximately 26 percent are represented by unions. During 1995, Sprint and its subsidiaries had no material work stoppages caused by labor controversies. 4 INFORMATION AS TO INDUSTRY SEGMENTS Sprint's net operating revenues from affiliates and non-affiliates, by segment, for the three years ended December 31, 1995, 1994 and 1993, are as follows (in millions):
Net Operating Revenues - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- 1995 1994 1993 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- Long Distance Communications Services Non-affiliates $ 7,238.5 $ 6,763.5 $ 6,096.5 Affiliates 38.9 41.6 42.7 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- 7,277.4 6,805.1 6,139.2 Local Communications Services Non-affiliates 4,453.0 4,179.7 3,914.3 Affiliates 266.4 233.1 211.7 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- 4,719.4 4,412.8 4,126.0 Product Distribution and Directory Publishing Non-affiliates 811.2 757.9 679.2 Affiliates 336.8 350.8 266.0 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- 1,148.0 1,108.7 945.2 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- Subtotal 13,144.8 12,326.6 11,210.4 Intercompany revenues (379.7) (340.0) (295.7) - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- Net operating revenues $ 12,765.1 $ 11,986.6 $ 10,914.7 -- ------------- --- ------------- -- -------------
In accordance with Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation," revenues and related net income of nonregulated operations attributable to intercompany transactions with Sprint's regulated telephone companies have not been eliminated in the above table or the accompanying consolidated financial statements. Intercompany revenues of such entities amounted to $262 million, $285 million and $225 million in 1995, 1994 and 1993, respectively. In conjunction with the adoption of accounting principles for a competitive marketplace (see Note 2 of Notes to Consolidated Financial Statements) such intercompany amounts will be eliminated beginning in 1996. All other significant intercompany transactions have been eliminated. For additional information as to industry segments of Sprint, refer to "Segmental Results of Operations" within Management's Discussion and Analysis of Financial Condition and Results of Operations filed as part of this report (pages 23 through 26). Item 2. Properties The aggregate cost of Sprint's property, plant and equipment was $19.9 billion as of December 31, 1995, of which $12.6 billion relates to local communications services and $6.8 billion relates to long distance communications services. These properties consist primarily of land, buildings, digital fiber-optic network, switching equipment, 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 $11.2 billion is either pledged as security for first mortgage bonds and certain notes or is restricted for use as mortgaged property. 5 Item 3. Legal Proceedings Following announcement of the Sprint/Centel merger agreement in May 1992, class action suits were filed against Centel and certain of its officers and directors. The federal actions were consolidated in the United States District Court for the Northern District of Illinois. An amended complaint was filed against the Company and two officers/directors. The amended 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. In January 1995, a purported class action suit was filed against Centel's financial advisors in state court in New York in connection with the Sprint/Centel merger. In October 1995, the New York trial court granted a motion to dismiss that suit, but the plaintiffs have appealed from the order dismissing their claims. Sprint may have indemnification obligations to the financial advisors in connection with this suit. 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 On January 29, 1996, Sprint held a Special Meeting of Shareholders to vote on three proposals relating to the investment in Sprint by DT and FT (see "Management's Discussion and Analysis of Financial Condition and Results of Operations. - Strategic Developments - Global One" (pages 20 and 21) for further discussion related to this investment). The shareholders approved all three proposals. The following votes were cast with respect to the proposal to approve and adopt the Investment Agreement dated as of July 31, 1995, as amended, among Sprint, FT and DT and the transactions contemplated by the Investment Agreement (Proposal No. 1). FOR 254,701,899 AGAINST 11,925,847 ABSTAIN 2,178,235 The following votes were cast with respect to the proposal to approve and adopt the Charter Amendments and the Bylaw Amendments contemplated by the Investment Agreement (Proposal No. 2). FOR 251,797,486 AGAINST 14,749,579 ABSTAIN 2,258,916 The following votes were cast by the common stock, voting as a separate class, with respect to the proposal to approve and adopt the Charter Amendments and the Bylaw Amendments contemplated by the Investment Agreement (Proposal No. 2). FOR 251,666,480 AGAINST 14,747,104 ABSTAIN 2,249,151 6 The following votes were cast with respect to the proposal to approve and adopt the Control Share Acquisitions Plan and to accord to the shares acquired pursuant to such plan full voting rights (Proposal No. 3). FOR 257,433,764 AGAINST 6,447,938 ABSTAIN 4,924,279 The following votes were cast with respect to the proposal to approve and adopt the Control Share Acquisitions Plan and to accord to the shares acquired pursuant to such plan full voting rights, excluding shares held by (i) FT, DT or any member of a group with FT and DT that makes or proposes to make a "control share acquisition" (as defined in the Kansas Control Share Acquisitions Statute), (ii) officers of Sprint and (iii) employees of Sprint who are also directors of Sprint (Proposal No. 3). FOR 256,780,521 AGAINST 6,449,252 ABSTAIN 4,924,777 7
Item 10(b). Executive Officers of the Registrant Office Name Age - -------------------------------------------------------------- --------------------------------- ------ Chairman and Chief Executive Officer William T. Esrey (1) 56 President and Chief Operating Officer Ronald T. LeMay (2) 50 President and Chief Operating Officer - Long Distance Division Gary D. Forsee (3) 45 President and Chief Operating Officer - Local Communications Division D. Wayne Peterson (4) 60 Executive Vice President - Law and External Affairs J. Richard Devlin (5) 45 Executive Vice President - Chief Financial Officer Arthur B. Krause (6) 54 Senior Vice President - Corporate Finance Gene M. Betts (7) 43 Senior Vice President - External Affairs John R. Hoffman (8) 50 Senior Vice President and Controller John P. Meyer (9) 45 Senior Vice President - Strategic Planning and Corporate Development Theodore H. Schell (10) 51 Senior Vice President - Quality Development and Public Relations Richard C. Smith, Jr. (11) 54 Senior Vice President and Treasurer M. Jeannine Strandjord (12) 50 Senior Vice President - Human Resources I. Benjamin Watson (13) 47 Vice President and Secretary Don A. Jensen (14) 60 (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. LeMay was elected President and Chief Operating Officer in February 1996. He had served as Vice Chairman since April 1995. From 1989 to 1995, he had served as President - Long Distance Division. He was elected to the Board of Directors of Sprint in 1993. Mr. LeMay also serves as the Chief Executive Officer of Sprint Spectrum. (3) Mr. Forsee was elected President - Long Distance Division in April 1995. He also serves as President and Chief Operating Officer of the Limited Partnership. Mr. Forsee had served as Senior Vice President - Staff Operations of the Limited Partnership since 1993. From 1991 to 1993, he was President of the Limited Partnership's Business Service Group. Prior to that time he served as President of the Limited Partnership's Government Services Division. (4) Mr. Peterson was elected President - Local Communications Division in 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. (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 in 1990. (8) Mr. Hoffman was elected Senior Vice President - External Affairs in 1990. (9) Mr. Meyer was elected Senior Vice President and Controller in 1993. He had served as Vice President and Controller of Centel since 1989. (10) Mr. Schell was elected Senior Vice President - Strategic Planning and Corporate Development in 1990. 8 (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. (12) Ms. Strandjord was elected Senior Vice President and Treasurer in 1990. (13) Mr. Watson was elected Senior Vice President - Human Resources in 1993. He had served as Vice President Finance and Administration of United Telephone - Eastern Group, an operating group of subsidiaries of Sprint, since 1990. (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.
9 Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Market Price Per Share - --------------------------- ----------------------------------------- -- ----------------------------------------- 1995 1994 ----------------------------------------- ----------------------------------------- End of End of High Low Period High Low Period ------------- ------------- ------------- ------------- ------------- ------------- First Quarter $ 31 7/8 $ 25 7/8 $ 30 1/4 $ 38 1/8 $ 32 1/2 $ 34 1/4 Second Quarter 35 7/8 30 3/8 33 5/8 40 1/8 33 1/4 34 7/8 Third Quarter 36 7/8 32 5/8 35 40 1/8 34 1/8 38 1/8 Fourth Quarter 41 1/8 33 1/4 39 5/8 38 7/8 26 1/8 27 5/8 - --------------------------- -- ---------- -- ---------- -- ---------- -- --- --------- --- --------- --- ---------
As of March 1, 1996, there were approximately 100,000 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 listed and 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, 1995 and 1994. Item 6. Selected Financial Data For information required by Item 6, refer to the "Selected Financial Data" section of the Financial Statements, Financial Statement Schedule and Supplementary Data filed as part of this report (page 19). 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 Schedule and Supplementary Data filed as part of this report (pages 20 through 32). Item 8. Financial Statements and Supplementary Data For information required by Item 8, refer to the "Consolidated Financial Statements and Schedule" and "Quarterly Financial Data" sections of the Financial Statements, Financial Statement Schedule and Supplementary Data filed as part of this report (pages 35 through 61). Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None. 10 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 (pages 8 and 9). 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. 11 Part IV Item 14. Exhibits, Financial Statement Schedule, 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 Schedule and Supplementary Data (page 18). 2. The consolidated financial statement schedule of Sprint filed as part of this report is listed in the Index to Financial Statements, Financial Statement Schedule and Supplementary Data (page 18). 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 4A to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (b) Bylaws, as amended (filed as Exhibit 4B to Sprint Corporation Current Report on Form 8-K for the year ended January 31, 1996 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 UMB 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). (d) Second Amendment to Rights Agreement dated as of July 31, 1995 between Sprint Corporation and UMB Bank, n.a. (filed as Exhibit 2(d) to Form 8-A/A-2 dated October 20, 1995 amending Sprint Corporation Registration Statement on Form 8-A dated August 11, 1989 (File No. 1-4721) and incorporated herein by reference). (e) Standstill Agreement dated as of July 31, 1995, by and among Sprint Corporation, France Telecom and Deutsche Telekom AG (filed as Exhibit (10)(c) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 and incorporated herein by reference). 12 (10) Material Agreements - Joint Ventures: (a) Joint Venture Agreement dated as of June 22, 1995 among Sprint Corporation, Sprint Global Venture, Inc., France Telecom and Deutsche Telekom AG (filed as Exhibit (10)(a) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 and incorporated herein by reference). (b) Amendment No. 1 to Joint Venture Agreement, dated as of January 31, 1996, among Sprint Corporation, Sprint Global Venture, Inc., France Telecom, Deutsche Telekom AG and Atlas Telecommunications, S.A. (filed as Exhibit 99A to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (c) Investment Agreement dated as of July 31, 1995 among Sprint Corporation, France Telecom and Deutsche Telekom AG (including as an exhibit the Stockholders' Agreement among France Telecom, Deutsche Telekom AG and Sprint Corporation) (filed as Exhibit (10)(b) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 and incorporated herein by reference). (d) Amended and Restated Agreement of Limited Partnership of MajorCo., L.P., dated as of January 31, 1996, among Sprint Spectrum, L.P., TCI Network Services, Comcast Telephony Services and Cox Telephony Partnership (filed as Exhibit 99C to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (e) Parents Agreement dated as of January 31, 1996, between Sprint Corporation and Tele-Communications, Inc. (filed as Exhibit 99D to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (f) Parents Agreement dated as of January 31, 1996, between Sprint Corporation and Comcast Corporation (filed as Exhibit 99E to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (g) Parents Agreement dated as of January 31, 1996, between Sprint Corporation and Cox Communications, Inc. (filed as Exhibit 99F to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (10) Executive Compensation Plans and Arrangements (h) 1985 Stock Option Plan, as amended (filed as Exhibit (10)(c) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). Appendix to Stock Option Plans. (i) 1990 Stock Option Plan, as amended (filed as Exhibit (10)(d) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). Appendix to Stock Option Plans. See Exhibit (10)(h). (j) 1990 Restricted Stock Plan, as amended (filed as Exhibit 99 to Sprint Corporation Registration Statement No. 33-65147 and incorporated herein by reference). (k) Executive Deferred Compensation Plan, as amended. (l) Management Incentive Stock Option Plan, as amended (filed as Exhibit (10)(g) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). Appendix to Stock Option Plans. See Exhibit (10)(h). 13 (m) Long-Term Stock Incentive Program, as amended (filed as Exhibit (10)(h) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). (n) Sprint Supplemental Executive Retirement Plan (filed as Exhibit (10)(i) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). (o) Amended and Restated Centel Directors Deferred Compensation Plan (filed as Exhibit (10)(j) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). (p) 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). (q) Executive Long-Term Incentive Plan (filed as Exhibit 10(j) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference). (r) Executive Management Incentive Plan (filed as Exhibit 10(k) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference). (s) 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). (t) 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). (u) Retirement Plan for Directors, as amended (filed as Exhibit 10(b) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 1994 and incorporated herein by reference). (v) Key Management Benefit Plan, as amended (filed as Exhibit 10(o) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference). (w) Agreement Regarding Special Compensation and Post Employment Restrictive Covenants between Sprint Corporation and one of its Executive Officers. (x) Director's Deferred Fee Plan, as amended. (y) Form of Contingency Employment Agreements between Sprint Corporation and certain of its executive officers (filed as Exhibit 10(b) to Sprint Corporation Quarterly Report on Form 10-Q for the year ended March 31, 1995, and incorporated herein by reference). (z) 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). 14 (aa) Summary of Executive Officer and Board of Directors Benefits. (bb) Agreements Regarding Special Compensation and Post Employment Restrictive Covenants between Sprint Corporation and four of its executive officers (filed as Exhibit 10(d) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1994 and incorporated herein by reference). (cc) Amended and Restated Centel Stock Option Plan (filed as Exhibit 10(w) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). Appendix to Stock Option Plans. See Exhibit (10)(h). (dd) Agreements Regarding Special Compensation and Post Employment Restrictive Covenants between Sprint Corporation and three of its executive officers (filed as Exhibit 10(x) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1993, and incorporated herein by reference). (ee) Description of agreement regarding Supplemental Pension Benefits between Sprint Corporation and one of its executive officers (filed as Exhibit 10(e) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1994, and incorporated herein by reference). (ff) Amended and Restated Centel Director Stock Option Plan (filed as Exhibit 10(aa) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1993, and incorporated herein by reference). (11) Computation of Earnings Per Common Share. (12) Computation of Ratio of Earnings to Fixed Charges. (21) Subsidiaries of Registrant. (23) Consent of Ernst & Young LLP. (27) Financial Data Schedules: (a) 1995 Financial Data Schedule. (b) Restated 1994 Financial Data Schedule. 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 Sprint filed a Current Report on Form 8-K dated January 31, 1996 in which it reported the investment of $3.0 billion in Sprint by FT and DT and the consummation of the global venture with FT and DT (see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Strategic Developments - Global One" (pages 20 and 21) for further discussion). It also reported that Sprint, TCI, Comcast and Cox had entered into a series of agreements amending in certain respects their previously announced joint venture to engage in the communications business (see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Strategic Developments - Sprint Spectrum LP" (page 21) for further discussion). (c) Exhibits are listed in Item 14(a). 15 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 11, 1996 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 11th day of March, 1996. /s/ W. T. Esrey William T. Esrey Chairman and Chief Executive Officer /s/ Arthur B. Krause Arthur B. Krause Executive Vice President and Chief Financial Officer /s/ John P. Meyer John P. Meyer Senior Vice President and Controller Principal Accounting Officer 16 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 11th day of March, 1996. /s/ DuBose Ausley DuBose Ausley, Director /s/ Warren L. Batts Warren L. Batts, Director /s/ Michel Bon Michel Bon, Director /s/ Ruth M. Davis Ruth M. Davis, Director /s/ W. T. Esrey William T. Esrey, Director /s/ Donald J. Hall Donald J. Hall, Director /s/ Harold S. Hook Harold S. Hook, Director /s/ Ronald T. LeMay Ronald T. LeMay, Director /s/ Linda K. Lorimer Linda Koch Lorimer, Director /s/ Charles E. Rice Charles E. Rice, Director /s/ Ron Sommer Ron Sommer, Director /s/ Stewart Turley Stewart Turley, Director 17
INDEX TO FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULE AND SUPPLEMENTARY DATA Sprint Corporation Page Reference --------------------- Selected Financial Data 19 Management's Discussion and Analysis of Financial Condition and Results of Operations 20 Consolidated Financial Statements and Schedule: Management Report 33 Report of Independent Auditors - Ernst & Young LLP 34 Consolidated Statements of Income for each of the three years ended December 31, 1995 35 Consolidated Balance Sheets as of December 31, 1995 and 1994 36 Consolidated Statements of Cash Flows for each of the three years ended December 31, 1995 38 Consolidated Statements of Common Stock and Other Shareholders' Equity for each of the three years ended December 31, 1995 39 Notes to Consolidated Financial Statements 40 Financial Statement Schedule for each of the three years ended December 31, 1995: II - Consolidated Valuation and Qualifying Accounts 59 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 60
18
SELECTED FINANCIAL DATA Sprint Corporation As of or For the Years Ended December 31, - --------------------------------------------------------------------------------------------------------------------- 1995 1994 (1) 1993 (1) 1992 (1) 1991 (1) - --------------------------------------------------------------------------------------------------------------------- (In Millions, Except Per Share Data) Results of Operations Net operating revenues $ 12,765.1 $ 11,986.6 $ 10,914.7 $ 10,105.7 $ 9,697.2 Operating income (2) 1,834.3 1,690.7 1,214.1 1,199.8 1,186.1 Income from continuing operations (2), (3) 946.1 899.2 517.1 550.6 530.8 Earnings per common share from continuing operations (2), (3) 2.69 2.57 1.50 1.62 1.58 Dividends per common share 1.00 1.00 1.00 1.00 1.00 Financial Position Total assets $ 15,195.9 $ 14,547.5 $ 13,898.1 $ 13,431.7 $ 13,785.9 Property, plant and equipment, net 9,715.8 10,258.8 9,883.1 9,895.6 10,072.7 Total debt (including short-term borrowings) 5,677.4 4,937.2 5,094.4 5,442.7 5,571.2 Redeemable preferred stock 32.5 37.1 38.6 40.2 56.6 Common stock and other shareholders' equity 4,642.6 4,524.8 3,918.3 3,971.6 3,671.9 Cash Flow Data Cash from operating activities - continuing operations $ 2,566.4 $ 2,346.0 $ 2,007.8 $ 2,397.3 $ 1,808.1 Capital expenditures 1,857.3 1,751.6 1,429.8 1,342.4 1,431.4 Free cash flow (4) 357.6 245.0 230.9 454.8 80.9
(1) The accompanying Selected Financial Data have been restated to reflect the spin-off of Sprint's cellular and wireless division (Cellular) to Sprint shareholders. Accordingly, Cellular's operating results have been excluded from income from continuing operations and are reported as discontinued operations. (2) During 1995, nonrecurring charges of $88 million were recorded related to a restructuring within the local division. Such charges reduced consolidated 1995 income from continuing operations by $55 million ($0.16 per share). 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). (3) During 1994, Sprint sold an investment in equity securities, realizing a gain of $35 million, which increased consolidated 1994 income from continuing operations by $22 million ($0.06 per share). 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 $11 million ($0.03 per share). During 1992 and 1991, gains were recognized related to the sales of certain local telephone properties, which increased consolidated 1992 income from continuing operations by $44 million ($0.13 per share) and consolidated 1991 income from continuing operations by $64 million ($0.19 per share). (4) Free cash flow is an internal measurement utilized by Sprint to assess the coverage of capital expenditures and dividends paid by cash provided from operating activities of continuing operations. This measurement is not an alternative to operating income determined in accordance with generally accepted accounting principles as an indicator of operating performance. Such amount for 1992 excludes the additional proceeds from the sale of accounts receivable of $300 million. 19 MANAGEMENT'S DISCUSSION AND ANALYSIS OF Sprint Corporation FINANCIAL CONDITION AND RESULTS OF OPERATIONS Strategic Developments Telecommunications Law In February 1996, the Telecommunications Act of 1996 (the Act) was signed into law. The purpose of the Act is to promote competition in all aspects of telecommunications. The Act requires telecommunications carriers to interconnect with other carriers and to provide for resale, number portability, dialing parity, access to rights-of-way and compensation for reciprocal traffic. Additionally, incumbent local telephone companies are required to provide nondiscriminatory unbundled access, resale at wholesale rates and notice of changes that would affect interoperability of facilities and networks. The Federal Communications Commission (FCC) is to adopt mechanisms to ensure that essential telecommunications services are affordable. The Act also provides that regional Bell Operating Companies (RBOCs) may provide long distance service upon enactment that is out-of-region or incidental to: (1) audio/video programming; (2) Internet for schools; (3) mobile services; (4) information or alarm services; and (5) telecommunications signaling. In order for an RBOC to provide in-region long distance service, the Act requires the RBOC to comply with a comprehensive competitive checklist and expands the role of the U.S. Department of Justice in the FCC's determination of whether the entry of an RBOC into the competitive long distance market is in the public interest. Additionally, there must be a real facilities-based competitor for residential and business local telephone service (or the failure of potential providers to request access) prior to an RBOC providing in-region long distance service. RBOCs must provide long distance services through a separate subsidiary for at least three years. Until the RBOCs are allowed into long distance or three years have passed, long distance carriers with more than 5 percent of the nation's access lines may not jointly market RBOC resold local telephone service, and states may not require RBOCs to provide intraLATA dialing parity. Telecommunications companies may also provide video programming and cable operators may provide telephone service in the same service area. The Act prohibits telecommunications carriers and cable operators from acquiring more than 10 percent of each other, except in rural and other specified areas. The impact of the Act on Sprint is unknown because a number of important implementation issues (such as the nature and extent of continued subsidies for local rates) still need to be decided by state or federal regulators. However, the Act offers opportunities as well as risks. Sprint should benefit from the opportunity to enter local telephone markets. The new competitive environment should lead to a reduction in local access fees, the largest single cost in providing long distance service today. The risk aspect of local competition is that historical prices and market shares of Sprint's local telephone companies (approximately 4 percent of the nation's local telephone access lines) are likely to decline. The removal of the long distance restrictions on the RBOCs is not anticipated to have an immediate significant adverse impact on Sprint because of the substantial preconditions that must be met before RBOCs can provide most in-region long distance services. In addition, Sprint could potentially offset some losses of long distance customers at the retail level if it were successful in becoming the underlying carrier for resellers (including the RBOCs) entering the long distance market. Global One On January 31, 1996, Sprint, along with Deutsche Telekom (DT) and France Telecom (FT), consummated their joint venture, operating as Global One, which will provide seamless global telecommunications services to business, consumer and carrier markets worldwide. The interests of DT and FT in the venture are held by their own joint venture, referred to as Atlas. The operating group serving Europe (excluding Germany and France) will be owned one-third by Sprint and two-thirds by Atlas. The operating group for the worldwide activities outside the United States and Europe will be owned 50 percent by Sprint and 50 percent by Atlas. Home country markets will be served by DT in Germany, FT in France and Sprint in the United States. 20 Upon closing of the agreement, DT and FT acquired shares of a new class of preference stock for a total of $3.0 billion, which resulted in DT and FT each holding approximately 7.5 percent of the Sprint voting power. DT and FT will make the remainder of their investment in Sprint following the spin-off of Sprint's Cellular and Wireless Division (Cellular) to shareholders of Sprint common stock. Following their full investment, DT and FT will each own shares of Class A common stock with approximately 10 percent of Sprint's voting power. Depending on the price of Cellular shares at the time of the spin-off, the total amount of the investment is expected to be between $3.5 billion and $3.7 billion. DT and FT, as the holders of the Class A Stock, will have the right in most circumstances to proportionate representation on Sprint's board of directors and to purchase additional shares of Class A Stock from Sprint to enable them to maintain their ownership level at 20 percent. In addition, the holders of Class A Stock will have disapproval rights with respect to Sprint's undertaking certain types of transactions. DT and FT have also entered into a standstill agreement with Sprint that contains restrictions on their ability to acquire voting securities of Sprint other than as contemplated by the investment agreement and related agreements, as well as customary provisions restricting DT and FT from initiating or participating in any proposal with respect to the control of Sprint. In connection with the closing of the Global One joint venture, the long distance division contributed certain assets and the related operations of its international business unit to Global One. Sprint Spectrum Sprint, along with Tele-Communications Inc. (TCI), Comcast Corporation (Comcast) and Cox Communications, Inc. (Cox), have formed a joint venture, Sprint Spectrum LP, formerly known as Sprint Telecommunications Venture to provide wireless communications services on a broad geographic basis within the United States. In March 1995, Sprint Spectrum took a critical first step to a national wireless capabilities. In the first round of broadband Personal Communications Services (PCS) license auctions by the FCC, Sprint Spectrum and its affiliates won the rights to PCS licenses in 30 major trading areas (MTAs) at a cost of $2.2 billion. Sprint Spectrum's wireless presence, including Sprint Spectrum wireless affiliates, covers a population of more than 182 million in the United States. In March 1995, Sprint, TCI, Comcast and Cox signed a definitive joint venture agreement to provide competitive local telecommunications services on a national basis using the facilities of the cable partners. In February 1996, the four partners announced a change in their approach to providing such services. The previous agreement called for the conversion of cable systems passing 10 million homes by the end of 1997 and had a fixed compensation formula between Sprint Spectrum and the cable companies. Under the revised agreements, competitive local telephone services will be the subject of individual joint ventures to be negotiated between Sprint and each cable partner, rather than through Sprint Spectrum. This approach will allow greater flexibility to decide specific terms and timing for entry into local telephone markets. However, there can be no assurance that any such joint ventures will be formed. In conjunction with the approval of a business plan for Sprint Spectrum to build out a national wireless network, the four partners have committed to make cash capital contributions to Sprint Spectrum of approximately $4.2 billion through the end of 1997, of which Sprint's portion is estimated to be approximately $1.7 billion. Approximately $960 million of this commitment has already been contributed by Sprint to Sprint Spectrum, primarily to fund amounts paid to the FCC in connection with licenses won in the PCS auction. In November 1995, American Personal Communications (APC), an affiliate of Sprint Spectrum, launched Sprint Spectrum, the nation's first broadband PCS system. Sprint Spectrum will serve a large geographic area encompassing Washington, D.C., all of Maryland and more than half of Virginia. It is Sprint Spectrum's objective to begin offering personal communications service in as many as 20 to 25 major metropolitan areas by December 1996, covering over 100 million people, and to substantially complete construction of the remainder of its system by December 1998. Sprint Spectrum has executed contracts with two vendors of Code Division Multiple Access (CDMA) to deploy this new developing technology across the venture's nationwide wireless communications network. 21 Spin-off of Cellular Division Due in part to divestiture requirements imposed by the FCC with respect to PCS licenses awarded to Sprint Spectrum, the Sprint board of directors has approved the spin-off of Cellular to the holders of Sprint common stock. Sprint has received a favorable ruling from the Internal Revenue Service regarding the tax-free nature of the spin-off. After the spin-off, Cellular will market its wireless service under the 360 Communications Company brand name and will no longer be included under the umbrella of the Sprint brand name. The spin-off will be effected by distributing to all holders of Sprint common stock all shares of Cellular common stock at a rate of 1 share of Cellular common stock for every 3 shares of Sprint common stock held. In connection with the closing, Cellular will repay approximately $1.4 billion of intercompany debt owed by Cellular to Sprint and its subsidiaries, and Sprint will contribute to the equity capital of Cellular any debt owed by Cellular in excess of the intercompany debt being repaid. Prior years' consolidated financial statements have been restated to reflect the spin-off of Cellular. Accordingly, the operating results, net assets and cash flows of Cellular are separately classified as discontinued operations. Results of Operations Consolidated Sprint's two primary divisions -- long distance and local exchange -- generated record levels of net operating revenues and improved operating results in 1995. The long distance division generated a 7 percent growth in traffic volumes in 1995, and the number of access lines served by the local division grew 4.7 percent. Total net operating revenues for the year ended December 31, 1995 were $12.8 billion, a 6 percent increase over net operating revenues of $12.0 billion for 1994. Total net operating revenues for the year ended December 31, 1993 were $10.9 billion. For the year ended December 31, 1995, income from continuing operations was $946 million, or $2.69 per share, compared with $899 million, or $2.57 per share, for 1994 and $517 million, or $1.50 per share, for 1993. Income from continuing operations for the year ended December 31, 1995 included a charge related to the restructuring of Sprint's local division ($0.16 per share). Income from continuing operations for the year ended December 31, 1994 included a gain related to the sale of an investment in equity securities ($0.06 per share). Income from continuing operations for the year ended December 31, 1993 included charges related to the merger and integration costs associated with the Centel merger and the realignment and restructuring of Sprint's long distance division ($0.56 per share) and a charge associated with the enactment of the Revenue Reconciliation Act of 1993 ($0.03 per share). 22 Segmental Results of Operations Long Distance Communications Services
As of or for the Years Ended December 31, --------------------------------------------------- 1995 1994 1993 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- (In Millions) Net operating revenues $ 7,277.4 $ 6,805.1 $ 6,139.2 Operating expenses Interconnection 3,102.7 2,994.5 2,710.7 Operations 1,046.6 925.4 857.7 Selling, general and administrative 1,839.7 1,737.0 1,548.1 Depreciation and amortization 581.6 550.5 523.5 Merger, integration and restructuring costs -- -- 45.9 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- Total operating expenses 6,570.6 6,207.4 5,685.9 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- Operating income $ 706.8 $ 597.7 $ 453.3 (1) -- ------------- --- ------------- -- ------------- Operating margin 9.7% 8.8% 7.4%(1) -- ------------- --- ------------- -- ------------- Capital expenditures $ 861.7 $ 774.1 $ 529.4 -- ------------- --- ------------- -- ------------- Identifiable assets $ 4,912.2 $ 4,546.0 $ 4,195.8 -- ------------- --- ------------- -- -------------
(1) Excluding the merger, integration and restructuring costs of $45.9 million, operating income and margin for 1993 would have been $499.2 million and 8.1 percent, respectively. Sprint's long distance division provides domestic and international voice, video and data communications services. The terms under which the division offers its services to the public are subject to different levels of state and federal regulation, but rates are not subject to rate-base regulation except nominally in some states. Net operating revenues increased 7 percent in 1995, following an 11 percent increase in 1994. Traffic volume increased 7 percent and 11 percent over the same periods. Revenue growth was primarily driven by strong performance in the data services market, which includes sales to consumer on-line services and Internet connectivity, transaction processing such as credit card authorizations and check guarantees, data communication for multinational corporations and data-intensive applications such as image transfer and client/server exchange. Also contributing to this growth was the business market which continued to experience growth in "800" services and private line services, the international market which reflects the division's continuing efforts to target new geographic markets, and the residential market which reflects the success of the Sprint Sense (sm) calling plan. Interconnection costs consist of amounts paid to local exchange carriers, other domestic service providers and foreign telephone companies for the completion of calls made by the division's customers. Interconnection costs increased in 1995 and 1994 primarily as a result of traffic volume growth. Also contributing to these increases were increases in access costs associated with the growth in data products and international interconnection costs. These increases were partially offset by reduced costs of connecting to networks domestically as a result of lower interstate access rates. As a percentage of net operating revenues, interconnection costs were 42.6 percent in 1995 compared to 44.0 percent and 44.2 percent in 1994 and 1993, respectively. 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 $121 million in 1995 and $68 million in 1994. The 1995 increase was primarily due to increased costs associated with growth within the data products market and increased international network operations costs reflecting growth in overseas products and foreign operations. The 1994 increase was primarily due to expanded product offerings as well as providing services to new customers. 23 Selling, general and administrative (SG&A) expense increased $103 million and $189 million in 1995 and 1994, respectively, generally reflecting the overall growth in the division's operating activities. These increases were generally due to increased advertising expenses resulting from the ongoing sales and marketing efforts which are important in the intensely competitive long distance marketplace. The division has continued to focus on cost containment of SG&A expenses in an effort to further enhance the division's profitability. As a result, SG&A expense as a percentage of net operating revenues decreased from 25.5 percent for 1994 to 25.3 percent for 1995. Depreciation and amortization increased $31 million in 1995 and $27 million in 1994, generally due to an increase in the asset base. The increase in 1995 was generally due to an increase in the asset base in support of data revenue growth and synchronous optical network (SONET) deployment. SONET provides significantly improved transport capacity. Local Communications Services
As of or for the Years Ended December 31, --------------------------------------------------- 1995 1994 1993 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- (In Millions) Net operating revenues Local service $ 1,875.7 $ 1,752.3 $ 1,624.3 Network access 1,705.8 1,598.4 1,530.4 Toll service 485.4 529.3 505.3 Other 652.5 532.8 466.0 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- Total net operating revenues 4,719.4 4,412.8 4,126.0 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- Operating expenses Plant operations 1,360.6 1,298.3 1,206.7 Depreciation and amortization 835.6 794.6 733.0 Customer operations 601.0 549.3 532.4 Other 793.8 752.4 710.6 Merger, integration and restructuring costs 87.6 -- 190.1 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- Total operating expenses 3,678.6 3,394.6 3,372.8 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- Operating income $ 1,040.8 (1) $ 1,018.2 $ 753.2 (2) -- ------------- --- ------------- -- ------------- Operating margin 22.1% (1) 23.1% 18.3% (2) -- ------------- --- ------------- -- ------------- Capital expenditures $ 950.8 $ 914.2 $ 845.3 -- ------------- --- ------------- -- ------------- Identifiable assets $ 6,970.4 $ 7,821.3 $ 7,603.9 -- ------------- --- ------------- -- ------------- (1) Excluding the restructuring costs of $87.6 million, operating income and margin for 1995 would have been $1,128.4 million and 23.9 percent, respectively. (2) Excluding the merger and integration costs of $190.1 million, operating income and margin for 1993 would have been $943.3 million and 22.9 percent, respectively.
The local division consists principally of Sprint's regulated telephone companies which provide local exchange services, access by telephone customers and other carriers to local exchange facilities, and long distance services within specified geographic areas. 24 Net operating revenues increased 7 percent in both 1995 and 1994. Increased local service revenues reflect a 4.7 percent and 4.8 percent increase in the number of access lines served for 1995 and 1994, respectively, as well as growth in add-on services, such as custom calling features. Network access revenues, derived from interexchange long distance carriers' use of the local network to complete calls, increased during 1995 and 1994 as a result of increased traffic volumes, a portion of which is due to a migration of traffic related to toll service revenues as described below. The increase was partially offset by periodic reductions in network access rates charged. The FCC announced a new interim interstate price caps plan during the first quarter of 1995. Under the new plan, which became effective August 1, 1995, the local division adopted a rate formula based on the maximum productivity factors that effectively removed the earnings cap on the division's interstate access revenues. Interstate access revenues comprise approximately 60 percent of the division's network access revenues. Toll service revenues, related to the provision of long distance services within specified geographical areas and the reselling of interexchange long distance services, decreased 8 percent in 1995 following an increase of 5 percent in 1994. The 1995 decrease primarily reflects increased competition in the intrastate long distance markets as interexchange long distance carriers are now offering intraLATA long distance service in certain states. While toll service revenues have declined as a result of this increased competition, this reduction has been partially recovered through an increase in network access revenues resulting from additional use of the local network by interexchange long distance carriers. Other revenues, including revenues from directory publishing fees, billing and collection services, and sales of telecommunications equipment, increased 22 percent in 1995 and 14 percent in 1994 generally due to growth in equipment sales and increases in nonregulated revenues. Plant operations expense includes network operations costs; repair and maintenance costs of property, plant and equipment; and other costs associated with the provision of local exchange services. The 5 percent and 8 percent increases in such costs in 1995 and 1994, respectively, were primarily related to increases in the costs of providing services resulting from access line growth. Additionally, certain states have implemented revised toll plans requiring payment of access charges for calls terminating in the service areas of other local exchange carriers, resulting in increased plant operations expense. The 1995 increase also reflects increases in repair and maintenance costs in the division's Florida and Mid-Atlantic regions related to bad weather conditions, including the flooding rains and hurricanes which occurred in 1995. Increased expenditures related to switching system software associated with advanced calling features contributed to the higher level of plant operations expense in 1994. Depreciation and amortization expense increased $41 million in 1995, following a $62 million increase in 1994. These increases generally reflect system-wide plant additions and also include the effects of depreciation rate changes, special short-term amortizations and nonrecurring charges approved by state regulatory commissions. Customer operations expense includes costs associated with business office operations and billing services, marketing costs, and expenses related to providing operator and directory assistance and other customer services. These costs increased 9 percent and 3 percent in 1995 and 1994, respectively. The increases in 1995 and 1994 were related to increased costs associated with the overall growth in access lines. Expense levels in 1995 were also affected by marketing costs to promote new products and services, increased business office operations costs resulting from longer office hours for greater customer accessibility and customer costs related to increased nonregulated activities. Other operating expenses increased $41 million and $42 million in 1995 and 1994, respectively, primarily due to costs associated with the growth in equipment sales. In November 1995, Sprint initiated a realignment and restructuring of its local communications division, including the elimination of approximately 1,600 positions primarily in the network and finance functions. This restructuring is intended to streamline current processes in order to reduce costs in an increasingly competitive marketplace. These actions resulted in a nonrecurring charge of $88 million. The accrued liability associated with this charge specifically relates to the benefits that affected employees will receive upon termination. 25 Sprint adopted accounting principles for a competitive marketplace effective December 31, 1995 and discontinued applying Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation," to its local division. The accounting impact to Sprint was a noncash, extraordinary charge of $565 million, net of related income tax benefits. See Note 2 of Notes to Consolidated Financial Statements for additional discussion. Sprint does not expect the discontinued application of SFAS No. 71 to have a significant impact on 1996 depreciation expense. Additionally, future business transactions of the local division will be recorded following their economic substance, and regulatory assets and liabilities pursuant to SFAS No. 71 will no longer be recognized. Furthermore, revenues and related net income of nonregulated operations attributable to transactions with Sprint's regulated local exchange carriers, which were previously not eliminated in the accompanying Consolidated Financial Statements in accordance with SFAS No. 71, will be eliminated. Intercompany revenues of such entities amounted to $262 million, $285 million and $225 million in 1995, 1994 and 1993, respectively. Product Distribution and Directory Publishing
As of or for the Years Ended December 31, --------------------------------------------------- 1995 1994 1993 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- (In Millions) Net operating revenues $ 1,148.0 $ 1,108.7 $ 945.2 Operating expenses Costs of services and products 965.8 938.2 801.0 Selling, general and administrative 88.1 88.8 74.7 Depreciation and amortization 7.4 6.9 5.4 Merger and integration costs -- -- 2.5 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- Total operating expenses 1,061.3 1,033.9 883.6 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- Operating income $ 86.7 $ 74.8 $ 61.6 (1) -- ------------- --- ------------- -- ------------- Operating margin 7.6% 6.7% 6.5% (1) -- ------------- --- ------------- -- ------------- Capital expenditures $ 7.8 $ 6.7 $ 9.0 -- ------------- --- ------------- -- ------------- Identifiable assets $ 395.4 $ 376.2 $ 341.8 -- ------------- --- ------------- -- ------------- (1) Excluding the merger and integration costs of $2.5 million, operating income and margin for 1993 would have been $64.1 million and 6.8 percent, respectively.
North Supply, a wholesale distributor of telecommunications products, had 1995 net operating revenues of $854 million compared to $829 million in 1994 and $677 million in 1993. The increase in 1995 primarily reflects growth in sales to nonaffiliates as well as overall price increases. The increase in 1994 primarily reflects increased sales to the local division, partially as a result of sales to the merged Centel telephone operations. As a percentage of net operating revenues, operating expenses for 1995, 1994 and 1993 were 94.4 percent, 95.5 percent and 96.5 percent, respectively. Sprint Publishing & Advertising, a publisher and marketer of telephone directories, had net operating revenues of $294 million in 1995 compared to $280 million in 1994 and $268 million in 1993. As a percentage of net operating revenues, operating expenses for 1995, 1994 and 1993 were 86.9 percent, 86.7 percent and 84.9 percent, respectively. 26 Nonoperating Items Interest Expense Interest expense related to continuing operations totaled $261 million in 1995 compared to $301 million in 1994 and $367 million in 1993. Interest expense related to the operations of Cellular totaled $124 million, $97 million and $85 million in 1995, 1994 and 1993, respectively, and is included in discontinued operations in the Consolidated Statements of Income. Sprint's average debt outstanding, including the debt incurred to fund intercompany advances to Cellular, increased by $668 million in 1995 compared to the prior year. The increase in average debt outstanding during 1995 was primarily from short-term borrowings incurred to fund investments in Sprint Spectrum. Because the interest costs on the borrowings associated with Sprint's investment in this venture are being capitalized until Sprint Spectrum commences operations, interest expense did not increase proportionately to the increase in average debt outstanding. Sprint's effective interest rate decreased 44 basis points from 1994 to 1995 primarily due to the increase in short-term borrowings as a percent of total borrowings. Sprint's average debt outstanding decreased by $334 million and $596 million in 1994 and 1993, respectively, and the effective interest rate decreased 52 and 15 basis points, respectively, due to debt refinancings which occurred during 1993 and 1992. Other Expense, Net The components of other income (expense) are as follows (in millions):
For the Years Ended December 31, ---------------------------------------------------- 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------- Loss on sales of accounts receivable $ (38.6) $ (28.7) $ (22.0) Equity in loss of Sprint Spectrum (31.4) (1.3) -- Global One venture costs (22.9) (6.1) -- Gain on sale of investment in equity securities -- 34.7 -- Other, net (0.3) (0.7) (12.0) - ------------------------------------------------------------------------------------------------------------------- Total other expense, net $ (93.2) $ (2.1) $ (34.0) ----------------------------------------------------
Income Tax Provision Sprint's income tax provisions for 1995, 1994 and 1993 resulted in effective tax rates of 36.1 percent, 35.2 percent and 36.4 percent, respectively. During 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. See Note 5 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 rate. As of December 31, 1995, Sprint had recorded deferred income tax assets of $501 million, net of a $17 million valuation allowance. See Note 5 of Notes to Consolidated Financial Statements for information regarding the sources which gave rise to these assets. 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 the reversal of existing deferred tax liabilities or ordinary operations. 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. 27 Discontinued Operations - Cellular Division As a result of the tax-free spin-off of Cellular to shareholders of Sprint common stock, the operating results, net assets and cash flows of Cellular have been separately classified as discontinued operations and are excluded from amounts for the continuing operations of Sprint. Cellular's operating results exclude its share of Sprint's corporate overhead expenses. These expenses have been reallocated to Sprint's continuing operations in the accompanying Consolidated Statements of Income as well as in the accompanying Segmental Results of Operations. Accordingly, Cellular's results of operations as reflected below may not be indicative of its futures operating results once the spin-off is completed. Such expenses were $13 million, $12 million and $12 million for each of the years ended December 31, 1995, 1994 and 1993, respectively. See Note 3 of Notes to Consolidated Financial Statements for further discussion. Cellular's results of operations are summarized as follows:
For the Years Ended December 31, ----------------------------------------------------- 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------- (In Millions) Net operating revenues $ 834.4 $ 626.5 $ 410.5 Operating expenses 675.6 529.4 374.0 - ------------------------------------------------------------------------------------------------------------------- Operating income 158.8 97.1 36.5 Interest expense (124.0) (97.3) (85.4) Other income (expense), net 10.9 (5.6) 11.7 - ------------------------------------------------------------------------------------------------------------------- Income (Loss) before income taxes 45.7 (5.8) (37.2) Income tax provision (benefit) 31.2 9.7 (0.7) Cumulative effect of change in accounting principle, net -- -- (1.6) - ------------------------------------------------------------------------------------------------------------------- Income (Loss) from cellular division $ 14.5 $ (15.5) $ (38.1) ----------------------------------------------------
Net operating revenues increased $208 million during 1995 and $216 million during 1994. These increases resulted principally from the growth in the number of cellular customers, which increased 44 percent in 1995 and 59 percent in 1994. The effect of this growth was partially offset by a decline in service revenue per customer. Operating expenses increased $146 million for 1995 and $155 million for 1994. These increases resulted principally from the growth in the number of cellular customers and increased advertising costs. Discontinued Operations - Other For the year ended December 31, 1994, Sprint recognized $7 million of income associated with the settlement of matters related to a discontinued operation. Also, during 1993, Sprint incurred a loss from discontinued operations of $12 million, net of income tax benefits. Extraordinary Items As described in Note 2 of Notes to Consolidated Financial Statements, Sprint adopted accounting principles for a competitive marketplace and discontinued applying SFAS No. 71 to its local division effective December 31, 1995. The application of SFAS No. 71 requires the accounting recognition of the rate actions of regulators where appropriate. Sprint determined that the local division no longer met the criteria for application of SFAS No. 71 due to changes in the regulatory framework, which continues to evolve from rate-base regulation to price regulation, as the latter does not provide for the recovery of specific costs. In addition, the division operates in an evolving competitive environment in which the level and types of competition are increasing such that they may no longer allow for service and product pricing that provides for the recovery of specific costs. As a result, Sprint recorded a noncash, extraordinary charge of $565 million ($1.61 per share), net of related income tax benefits. 28 In 1993, Sprint incurred extraordinary losses related to the early extinguishment of debt of $29 million, 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 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 $383 million ($1.12 per share). Financial Condition Sprint's consolidated assets totaled $15.2 billion at December 31, 1995 compared to $14.5 billion at December 31, 1994. Accounts receivable increased $136 million from 1994 to 1995, generally due to a 6 percent increase in consolidated net operating revenues. Sprint's allowance for doubtful accounts as a percentage of gross accounts receivable increased from 8 percent at December 31, 1994 to 13 percent at December 31, 1995. The increased percentage generally reflects the timing of sales and customer payments as well as reserves established during 1995 relative to certain of the long distance division's reseller customers. The reseller market has experienced significant competition, which has had a negative impact on these customers' repayment patterns. This increase has not had a significant impact on the revenue growth for the long distance division. Property, plant and equipment, net of accumulated depreciation, decreased $543 million from 1994 to 1995. This decrease was primarily due to the discontinued application of SFAS No. 71, which resulted in a $979 million increase to accumulated depreciation. Exclusive of this write-off, net property, plant and equipment increased $436 million due to increased capital expenditures to enhance and upgrade Sprint's networks, to expand service capabilities and to increase productivity. Current maturities of long-term debt decreased $52 million from 1994 to 1995 due to scheduled debt payments. As of December 31, 1995, Sprint's total capitalization aggregated $10.4 billion, consisting of short-term borrowings, long-term debt (including current maturities), redeemable preferred stock, and common stock and other shareholders' equity. Short-term borrowings and long-term debt (including current maturities) comprised 54.8 percent of total capitalization as of December 31, 1995 compared to 52.0 percent at year-end 1994. The increase in the debt-to-capital ratio is attributable to increased short-term borrowings to fund investments in Sprint Spectrum. Liquidity and Capital Resources Cash Flows - Operating Activities Cash flows from operating activities, which are Sprint's primary source of liquidity, were $2.6 billion, $2.3 billion and $2.0 billion in 1995, 1994 and 1993, respectively, for continuing operations. The increased cash flows in 1995 reflect improved operating results and reduced working capital requirements. Operating cash flows for 1994 and 1993 reflect improved operating results, partially offset by expenditures of $86 million and $155 million for 1994 and 1993, respectively, related to the 1993 merger, integration and restructuring actions. Cash Flows - Investing Activities Investing activities of Sprint's continuing operations used cash of $2.8 billion, $1.8 billion and $1.5 billion in 1995, 1994 and 1993, respectively. Capital expenditures, which represent Sprint's most significant investing activity, were $1.9 billion, $1.8 billion and $1.4 billion in 1995, 1994 and 1993, respectively. Long distance capital expenditures were incurred each year primarily to meet increased demand for data related services, to enhance network reliability and to upgrade 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. 29 During 1995 and 1994, Sprint contributed $911 million and $52 million, respectively, to Sprint Spectrum. In 1995, $840 million of this contribution was used to fund Sprint's share of payments to the FCC for licenses acquired in the PCS auction. The remainder was used to fund Sprint's share of the venture's acquisition of a limited partnership interest in APC, as well as related capital and operating requirements. The 1994 contribution funded Sprint's share of the initial payment to the FCC for the PCS auction. Investing activities for 1994 also included $118 million received in connection with the sale of an investment in equity securities. Cash Flows - Financing Activities Sprint's financing activities provided cash of $423 million in 1995 and used cash of $457 million and $615 million in 1994 and 1993, respectively. During 1995, Sprint issued $261 million of long-term debt and increased short-term borrowings $1.1 billion. The proceeds from these borrowings were primarily used to fund commitments associated with Sprint Spectrum. Proceeds were also used to repay scheduled long-term debt maturities and to repay $282 million of 9.875 percent notes prior to maturity. The redemption premiums associated with this early retirement were not significant. Long-term debt retirements during 1994 included the redemption of $102 million of debt called, prior to scheduled maturity, in 1993. During 1993, 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 $1.2 billion of debt. During 1995, Sprint renewed its revolving credit agreement with a syndicate of domestic and international banks for five years, through October 2000. In addition to the extension, the revolving credit agreement was increased to $1.5 billion from $1.1 billion. Sprint paid dividends to common and preferred shareholders of $352 million, $349 million and $347 million in 1995, 1994 and 1993, respectively. Sprint's indicated annual dividend rate on common stock is currently $1.00 per share. Cash Flows - Discontinued Operations Cellular's cash flows from operating activities were $163 million, $173 million and $198 million in 1995, 1994 and 1993, respectively. Cellular's investing activities used cash of $325 million, $272 million and $170 million in 1995, 1994 and 1993, respectively, primarily consisting of capital expenditures. The increases in capital expenditures reflect the significant increases in the number of cellular customers served. Capital Requirements On January 31, 1996, DT and FT invested $3.0 billion in Sprint and, upon the spin-off of Cellular, will make an additional aggregate investment of approximately $500 million to $700 million. Also in conjunction with the spin-off, Cellular will repay approximately $1.4 billion of intercompany debt payable to Sprint and its subsidiaries. Sprint does not expect to require any additional external financing during 1996. Cash proceeds received from DT, FT and Cellular are expected to be used to repay approximately $2.1 billion in short-term borrowings and approximately $500 million in long-term borrowings. Approximately $600 million of the proceeds will also be required to fund the termination of an accounts receivable sales agreement. An additional $600 million will be used to fund commitments associated with Sprint Spectrum and its affiliates. Remaining cash proceeds will be invested on a temporary basis. During 1996, Sprint anticipates funding capital expenditures of approximately $2.0 billion and dividends of approximately $426 million with cash flows from operating activities. 30 Liquidity At year-end 1995, Sprint had the ability to borrow $880 million under revolving credit agreements 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 $1.0 billion of debt securities could be offered for sale as of December 31, 1995. 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, 1995, Sprint had borrowing capacity of approximately $3.6 billion under the most restrictive of its debt covenants. General Hedging Policies Sprint, on a limited basis, utilizes certain derivative financial instruments in an effort to manage exposure to interest rate risk and foreign exchange risk. Sprint's utilization of such derivative financial instruments related to hedging activities is generally limited to interest rate swap agreements and forward contracts and options in foreign currencies. Sprint will in no circumstance take speculative positions and create an exposure to benefit from market fluctuations. All hedging activity is in accordance with board-approved policies. Any potential loss or exposure related to Sprint's use of derivative instruments is immaterial to its overall operations, financial condition and liquidity. See Note 11 of Notes to Consolidated Financial Statements for more information related to Sprint's portfolio of derivative instruments. Interest Rate Risk Management Sprint's interest rate risk management program focuses on minimizing vulnerability of net income to movements in interest rates, setting an optimal mixture of floating-rate and fixed-rate debt in the liability portfolio and preventing liquidity risk. Sprint primarily employs a gap methodology to measure interest rate exposure and utilizes simulation analysis to manage interest rate risk. Sprint takes an active stance in modifying hedge positions to benefit from the value of timing flexibility and fixed-rate/floating-rate adjustments. Foreign Exchange Risk Management Sprint's foreign exchange risk management program focuses on optimizing consolidated cash flows and stabilizing accounting results. Sprint does not hedge translation exposure because it believes that optimizing consolidated cash flows will, over time, maintain shareholder value. Sprint's primary transaction exposure in foreign currencies results from changes in foreign exchange rates between the dates Sprint incurs and settles liabilities (payable in a foreign currency) to overseas telephone companies for the costs of terminating international calls made by Sprint's domestic customers. Impact of Recently Issued Accounting Pronouncements In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which is effective for fiscal years beginning after December 15, 1995. SFAS No. 121 requires that assets to be held and used be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Sprint does not anticipate that the requirements of SFAS No. 121 will have a material effect on its 1996 operating results. 31 In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation," which is effective for fiscal years beginning after December 15, 1995. SFAS No. 123 encourages companies to account for stock compensation awards under a fair value based method, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over a service period. Companies may choose not to apply the new accounting method and may continue to apply current accounting requirements, which generally result in no recognition of compensation cost for most fixed stock option plans. Those that so choose, however, will be required to disclose in the notes to the financial statements what net income and earnings per share would have been if they had followed the FASB's new accounting method. Sprint has elected to continue to apply the current accounting requirements for stock-based compensation and will comply with the disclosure requirements in the notes to its 1996 consolidated financial statements. 32 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 LLP, 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 and Chief Financial Officer 33 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, 1995 and 1994, 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, 1995. Our audits also included the financial statement schedule listed in the Index to Financial Statements, Financial Statement Schedule and Supplementary Data. These financial statements and the schedule are the responsibility of the management of Sprint. Our responsibility is to express an opinion on these financial statements and the schedule 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sprint at December 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Notes 1 and 2 to the consolidated financial statements, Sprint discontinued accounting for the operations of its local telecommunications division in accordance with Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation," in 1995. As discussed in Notes 1 and 4 to the consolidated financial statements, Sprint changed its method of accounting for postretirement benefits, postemployment benefits and circuit activity costs in 1993. ERNST & YOUNG LLP Kansas City, Missouri February 14, 1996 34
CONSOLIDATED STATEMENTS OF INCOME Sprint Corporation For the Years Ended December 31, ----------------------------------------------- 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------- (In Millions, Except Per Share Data) Net Operating Revenues $ 12,765.1 $ 11,986.6 $ 10,914.7 Operating Expenses Costs of services and products 6,504.9 6,154.5 5,591.9 Selling, general and administrative 2,871.9 2,755.4 2,532.5 Depreciation and amortization 1,466.4 1,386.0 1,283.7 Merger, integration and restructuring costs 87.6 -- 292.5 ------------------------------------------------------------------------------------------------------------- Total operating expenses 10,930.8 10,295.9 9,700.6 ------------------------------------------------------------------------------------------------------------- Operating Income 1,834.3 1,690.7 1,214.1 Interest expense (260.7) (300.7) (367.0) Other expense, net (93.2) (2.1) (34.0) - ------------------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 1,480.4 1,387.9 813.1 Income tax provision (534.3) (488.7) (296.0) - ------------------------------------------------------------------------------------------------------------------- Income From Continuing Operations 946.1 899.2 517.1 Discontinued operations, net Cellular division 14.5 (15.5) (38.1) Other -- 7.0 (12.3) Extraordinary items, net (565.3) -- (29.2) Cumulative effect of changes in accounting principles, net -- -- (382.6) - ------------------------------------------------------------------------------------------------------------------- Net income 395.3 890.7 54.9 Preferred stock dividends (2.6) (2.7) (2.8) - ------------------------------------------------------------------------------------------------------------------- Earnings applicable to common stock $ 392.7 $ 888.0 $ 52.1 ----------------------------------------------- Earnings Per Common Share Continuing operations $ 2.69 $ 2.57 $ 1.50 Discontinued operations 0.04 (0.02) (0.15) Extraordinary items (1.61) -- (0.08) Cumulative effect of changes in accounting principles -- -- (1.12) - ------------------------------------------------------------------------------------------------------------------- Total $ 1.12 $ 2.55 $ 0.15 ----------------------------------------------- Weighted average number of common shares 350.1 348.7 343.7 ----------------------------------------------- Dividends per common share $ 1.00 $ 1.00 $ 1.00 ----------------------------------------------- See accompanying Notes to Consolidated Financial Statements.
35
CONSOLIDATED BALANCE SHEETS Sprint Corporation As of December 31, ------------------------------------ 1995 1994 - ------------------------------------------------------------------------------------------------------------------------ Assets (In Millions) Current assets Cash and equivalents $ 124.2 $ 113.7 Accounts receivable, net of allowance for doubtful accounts of $222.5 million ($126.9 million in 1994) 1,523.7 1,387.9 Receivable from cellular division 1,400.0 -- Inventories 171.0 187.5 Deferred income taxes 45.5 54.2 Prepaid expenses 166.6 144.5 Other 188.4 155.4 ------------------------------------------------------------------------------------------------------------------ Total current assets 3,619.4 2,043.2 Investments in equity securities 262.9 177.6 Property, plant and equipment Long distance communications services 6,773.7 6,056.3 Local communications services 12,603.1 11,827.4 Other 539.1 498.6 ------------------------------------------------------------------------------------------------------------------ 19,915.9 18,382.3 Less accumulated depreciation 10,200.1 8,123.5 ------------------------------------------------------------------------------------------------------------------ 9,715.8 10,258.8 Investments in affiliates 1,130.1 198.6 Receivable from cellular division -- 1,271.1 Net investment in cellular division 106.9 59.7 Other assets 360.8 538.5 -------------------------------------------------------------------------------------------------------------------- $ 15,195.9 $ 14,547.5 ------------------------------------
36
CONSOLIDATED BALANCE SHEETS (continued) Sprint Corporation As of December 31, ----------------------------------- 1995 1994 - ------------------------------------------------------------------------------------------------------------------------ Liabilities and Shareholders' Equity (In Millions) Current liabilities Current maturities of long-term debt $ 280.4 $ 332.4 Short-term borrowings 2,144.0 -- Accounts payable 938.9 927.8 Accrued interconnection costs 617.7 527.6 Accrued taxes 235.5 237.9 Other 925.6 817.4 ----------------------------------------------------------------------------------------------------------------- Total current liabilities 5,142.1 2,843.1 Long-term debt 3,253.0 4,604.8 Deferred credits and other liabilities Deferred income taxes and investment tax credits 843.4 1,197.5 Postretirement and other benefit obligations 889.3 845.9 Other 393.0 494.3 ----------------------------------------------------------------------------------------------------------------- 2,125.7 2,537.7 Redeemable preferred stock 32.5 37.1 Common stock and other shareholders' equity Common stock, par value $2.50 per share, authorized 500.0 million shares, issued 349.2 million (348.6 million in 1994), and outstanding 349.2 million (348.3 million in 1994) 872.9 871.4 Capital in excess of par or stated value 960.0 942.9 Retained earnings 2,766.5 2,730.9 Other 43.2 (20.4) ----------------------------------------------------------------------------------------------------------------- 4,642.6 4,524.8 ----------------------------------------------------------------------------------------------------------------- $ 15,195.9 $ 14,547.5 ----------------------------------
See accompanying Notes to Consolidated Financial Statements. 37
CONSOLIDATED STATEMENTS OF CASH FLOWS Sprint Corporation For the Years Ended December 31, ----------------- ---------------- ----------------- 1995 1994 1993 - ----------------------------------------------------------------- ----------------- ---------------- ----------------- (In Millions) Operating Activities Net income $ 395.3 $ 890.7 $ 54.9 Adjustments to reconcile net income to net cash provided by operating activities: (Income) Loss from cellular division (14.5) 15.5 38.1 Extraordinary items 565.3 -- 20.4 Cumulative effect of changes in accounting principles -- -- 382.6 Depreciation and amortization 1,466.4 1,386.0 1,283.7 Deferred income taxes and investment tax credits 5.8 53.2 (39.1) Changes in operating assets and liabilities Accounts receivable, net (135.8) (226.5) (166.4) Inventories and other current assets (38.6) (56.1) (9.9) Accounts payable and other current liabilities 178.5 120.2 315.3 Noncurrent assets and liabilities, net 124.0 128.5 33.3 Other, net 20.0 34.5 94.9 - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- Net cash provided by continuing operations 2,566.4 2,346.0 2,007.8 Net cash provided by cellular division 162.5 172.9 197.7 - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- Net cash provided by operating activities 2,728.9 2,518.9 2,205.5 - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- Investing Activities Capital expenditures (1,857.3) (1,751.6) (1,429.8) Proceeds from sale of investment in equity securities -- 117.7 -- Investments in affiliates (948.7) (74.1) (31.2) Other, net (10.4) (44.4) (9.3) - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- Net cash used by continuing operations (2,816.4) (1,752.4) (1,470.3) Net cash used by cellular division (324.6) (272.4) (169.9) - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- Net cash used by investing activities (3,141.0) (2,024.8) (1,640.2) - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- Financing Activities Proceeds from long-term debt 260.7 107.9 840.4 Retirements of long-term debt (630.0) (597.0) (1,589.0) Net increase in notes payable and commercial paper 1,109.5 321.5 393.5 Proceeds from common stock issued 16.9 42.7 70.8 Proceeds from employee stock purchase installments 38.8 33.1 28.3 Dividends paid (351.5) (349.4) (347.1) Other, net (21.8) (15.7) (11.5) - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- Net cash provided (used) by financing activities 422.6 (456.9) (614.6) - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- Increase (Decrease) in Cash and Equivalents 10.5 37.2 (49.3) Cash and Equivalents at Beginning of Year 113.7 76.5 125.8 - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- Cash and Equivalents at End of Year $ 124.2 $ 113.7 $ 76.5 --- ------------- -- ------------- --- ------------- - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- Supplemental Cash Flows Information Cash paid for interest - continuing operations $ 263.5 $ 320.8 $ 368.2 Cash paid for interest - cellular division $ 124.0 $ 97.3 $ 85.4 Cash paid for income taxes $ 532.8 $ 435.1 $ 292.4 Noncash Activities Common stock contributed to employee savings plans, at market $ -- $ 31.0 $ 39.0 - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- See accompanying Notes to Consolidated Financial Statements.
38
CONSOLIDATED STATEMENTS OF COMMON STOCK Sprint Corporation AND OTHER SHAREHOLDERS' EQUITY For the Years Ended December 31, 1995, 1994 and 1993 - ------------------------------------------------------------------------------------------------------------------------- Capital in Excess of Par or Common Stock Stated Value Retained Earnings Other Total - ------------------------------------------------------------------------------------------------------------------- (In Millions) Balance as of January 1, 1993 (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 Change in unrealized holding gains on investments in equity securities, 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 Net income -- -- 890.7 -- 890.7 Common stock dividends -- -- (346.7) -- (346.7) Preferred stock dividends -- -- (2.7) -- (2.7) Employee stock purchase and other installments received, net -- -- -- 15.0 15.0 Common stock issued 12.8 111.9 -- (53.4) 71.3 Change in unrealized holding gains on investments in equity securities, net -- -- -- (20.5) (20.5) Other, net 0.1 3.6 5.4 (9.7) (0.6) - ------------------------------------------------------------------------------------------------------------------- Balance as of December 31, 1994 (348.6 million shares issued and 348.3 million shares outstanding) 871.4 942.9 2,730.9 (20.4) 4,524.8 Net income -- -- 395.3 -- 395.3 Common stock dividends -- -- (348.9) -- (348.9) Preferred stock dividends -- -- (2.6) -- (2.6) Other installments received, net -- -- -- 3.0 3.0 Common stock issued 1.4 13.5 -- -- 14.9 Change in unrealized holding gains on investments in equity securities, net -- -- -- 54.6 54.6 Other, net 0.1 3.6 (8.2) 6.0 1.5 - ------------------------------------------------------------------------------------------------------------------- Balance as of December 31, 1995 (349.2 million shares issued and outstanding) $ 872.9 $ 960.0 $ 2,766.5 $ 43.2 $ 4,642.6 ------------------------------------------------------------------ See accompanying Notes to Consolidated Financial Statements.
39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Sprint Corporation 1. Summary of Significant Accounting Policies This summary of significant accounting policies of Sprint Corporation is presented to assist in understanding the accompanying consolidated financial statements. Basis of Consolidation and Presentation The accompanying consolidated financial statements include the accounts of Sprint Corporation and its wholly-owned and majority-owned subsidiaries (Sprint). Investments in entities in which Sprint does not have a controlling interest are accounted for using the equity method. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Prior years' financial statements have been restated to reflect Sprint's spin-off of its cellular and wireless communications services division (Cellular) (see Note 3). The operating results, net assets and cash flows of Cellular are separately classified as discontinued operations and are excluded from amounts reported for the continuing operations of Sprint. Intercompany transactions with Cellular and its subsidiaries, which were previously eliminated in consolidation, are now reflected in Sprint's consolidated financial statements. Certain other amounts previously reported for prior periods have been reclassified to conform to the current period presentation in the accompanying consolidated financial statements. Such reclassifications had no effect on the results of operations or shareholders' equity as previously reported. In accordance with Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation," revenues and related net income of nonregulated operations attributable to intercompany transactions with Sprint's regulated telephone companies have not been eliminated in the accompanying consolidated financial statements. Intercompany revenues of such entities amounted to $262 million, $285 million and $225 million in 1995, 1994 and 1993, respectively. In conjunction with the adoption of accounting principles for a competitive marketplace (see Note 2), such intercompany amounts will be eliminated beginning in 1996. All other significant intercompany transactions have been eliminated. Classification of Operations The long distance communications services division provides domestic and international voice, video and data communications services. The terms under which the division offers its services to the public are subject to different levels of state and federal regulation, but rates are generally not subject to rate-base regulation. The local communications services division consists principally of the operations of Sprint's 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 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. 40 1. Summary of Significant Accounting Policies (continued) Revenue Recognition Operating revenues for the long distance and local 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. 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 part of its cash management program, Sprint utilizes controlled disbursement banking arrangements. As of December 31, 1995 and 1994, outstanding checks in excess of cash balances of $131 million and $126 million, respectively, are included in accounts payable. Sprint had sufficient funds available to fund these outstanding checks when they were presented for payment. Investments in Equity Securities Investments in equity securities are classified as available for sale and are reported at fair value (estimated based on quoted market prices) as of December 31, 1995 and 1994. As of December 31, 1995 and 1994, the cost of such investments was $109 million each year. These investments had gross unrealized holding gains of $154 million and $69 million for 1995 and 1994, respectively, which are reflected as an addition to other shareholders' equity, net of related income taxes. During 1994, Sprint sold an investment in equity securities, realizing a gain of $35 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. 41 1. Summary of Significant Accounting Policies (continued) Depreciation The cost of property, plant and equipment for Sprint's local communications division was generally depreciated on a straight-line composite basis over the lives prescribed by regulatory commissions. In connection with the discontinuation of SFAS No. 71, Sprint will begin recording depreciation expense based on estimated economic useful lives rather than those prescribed by regulatory commissions (see Note 2). The cost of property, plant and equipment of Sprint's other divisions is depreciated generally on a straight-line basis over the estimated economic useful lives. Income Taxes Deferred income taxes are provided for certain temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax 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. Capitalized Interest Interest costs associated with the construction of capital assets, including interest costs on borrowings incurred to fund Sprint's investment in Sprint Spectrum, are capitalized. Total amounts capitalized during 1995, 1994 and 1993 were $57 million, $8 million and $7 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. See Note 12 for a discussion of the consummation of the Global One joint venture and the pro forma impact of the related issuance of shares on earnings per share. 2. Adoption of Accounting Principles for a Competitive Marketplace Effective December 31, 1995, Sprint determined that its local communications services division no longer met the criteria necessary for the continued application of the provisions of SFAS No. 71. As a result of the decision to discontinue the application of SFAS No. 71, Sprint recorded a noncash, extraordinary charge of $565 million, net of income tax benefits of $437 million. Sprint's determination that it was no longer eligible for the continued application of the accounting required by SFAS No. 71 was based on changes in the regulatory framework, which continues to evolve from rate-base regulation to price regulation and the convergence of competition in the telecommunications industry. Based on these occurrences, Sprint no longer believes that it can be assured that prices will be maintained at levels which will provide for the recovery of specific costs. 42
2. Adoption of Accounting Principles for a Competitive Marketplace (continued) The components of the extraordinary charge recognized as a result of the discontinued application of SFAS No. 71 are as follows (in millions): Pre-Tax After-Tax - ------------------------------------------------------------------------- -- ----------------- -- ----------------- Increase to the accumulated depreciation balance $ 979.1 $ 607.9 Recognition of switch software asset (99.5) (61.7) Elimination of other net regulatory assets 123.1 76.3 -- ----------------- -- ----------------- Total $ 1,002.7 622.5 -- ----------------- Tax-related net regulatory liabilities (43.9) Accelerated amortization of investment tax credits (13.3) -- ----------------- Extraordinary charge $ 565.3 -- -----------------
The adjustment to the accumulated depreciation balance was determined by the completion of depreciation reserve and impairment studies. The depreciation reserve study analyzed, by individual plant asset categories, the impacts of regulator-prescribed depreciable asset lives compared to Sprint's estimated economic lives. The results identified the cumulative under depreciation of certain asset categories. The impairment study, which validated the results of the depreciation study, estimated the impact on future revenues caused by price changes and developing industry competition, and the resulting effects on cash flows. The following is a summary of the telecommunications plant in service asset balances and corresponding reserve adjustment (in millions).
Pre-Change Post-Change ------------------------------------------- ---------------- Category of Plant Asset Plant in Net Plant Reserve Revised Net Service Reserve Adjustment Plant - --------------------------- -- ----------- --- ----------- --- ----------- -- --------------- --- ---------------- Cable $ 5,006.4 $ 2,553.3 $ 2,453.1 $ 633.4 $ 1,819.7 Circuit 1,699.7 916.8 782.9 118.3 664.6 Switching 2,989.1 1,223.3 1,765.8 143.9 1,621.9 Other 2,441.5 1,070.2 1,371.3 83.5 1,287.8 - --------------------------- -- ----------- --- ----------- --- ----------- -- --------------- --- ---------------- Total plant $ 12,136.7 $ 5,763.6 $ 6,373.1 $ 979.1 $ 5,394.0 -- ----------- --- ----------- --- ----------- -- --------------- --- ----------------
The following is a summary of lives before and after the discontinued application of SFAS No. 71. Pre-Change Composite of Post-Change Regulator- Estimated Approved Asset Economic Category of Plant Asset Lives Asset Lives - -------------------------------------------------------------- ------------------------- ------------------------- Cable 17 - 43 15 - 20 Circuit 9 - 13 7 - 11 Digital switching 12 - 20 11 - 12 - -------------------------------------------------------------- ------------------------- -------------------------
43 2. Adoption of Accounting Principles for a Competitive Marketplace (continued) The discontinued application of SFAS No. 71 also required Sprint to eliminate from its consolidated balance sheet the effects of any actions of regulators that had been recognized as assets and liabilities pursuant to SFAS No. 71, but would not have been recognized as assets and liabilities by enterprises in general. The elimination of other net regulatory assets primarily related to deferred postretirement benefit obligations and deferred debt financing costs. Additionally, revenues and related net income of nonregulated operations attributable to transactions with Sprint's regulated local exchange carriers, which were previously not eliminated in the accompanying consolidated financial statements in accordance with SFAS No. 71, will be eliminated beginning in 1996. Intercompany revenues of such entities amounted to $262 million, $285 million and $225 million in 1995, 1994 and 1993, respectively. The tax-related adjustments were required to adjust deferred income tax amounts to the currently enacted statutory rates and to eliminate tax-related regulatory assets and liabilities. Sprint's local division uses the deferral method of accounting for investment tax credits and amortizes the credits as a reduction to tax expense over the life of the asset that gave rise to the tax credit. Since plant asset lives were shortened, the related investment tax credits were adjusted to reduce the unamortized balance by a corresponding amount. 3. Spin-off of Cellular Division Due in part to divestiture requirements imposed by the Federal Communications Commission (FCC) with respect to Personal Communications Services (PCS) licenses awarded to Sprint Spectrum, the Sprint board of directors has approved the spin-off of Cellular to the holders of Sprint common stock. Sprint has received a favorable ruling from the Internal Revenue Service regarding the tax-free nature of the spin-off. The spin-off will be effected by distributing to all holders of Sprint common stock all shares of Cellular common stock at a rate of 1 share of Cellular common stock for every 3 shares of Sprint common stock held. In connection with the closing, Cellular will repay approximately $1.4 billion of intercompany debt owed by Cellular to Sprint and its subsidiaries, and Sprint will contribute to the equity capital of Cellular any debt owed by Cellular in excess of the intercompany debt being repaid. The net operating results of Cellular have been separately classified as discontinued operations in the Consolidated Statements of Income as summarized below. Interest expense has been allocated to Cellular based on the assumed repayment of intercompany debt to Sprint by Cellular. The operating expenses as presented below do not include Cellular's share of general corporate overhead expenses. These expenses have been reallocated to Sprint's other operating segments. Accordingly, Cellular's results of operations as reflected below may not be indicative of its future operating results once the spin-off is completed. Such expenses were $13 million, $12 million and $12 million for each of the years ended December 31, 1995, 1994 and 1993, respectively.
(in millions) 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------- Net operating revenues $ 834.4 $ 626.5 $ 410.5 Operating expenses 675.6 529.4 374.0 - ------------------------------------------------------------------------------------------------------------------- Operating income 158.8 97.1 36.5 Interest expense (124.0) (97.3) (85.4) Other income (expense), net 10.9 (5.6) 11.7 - ------------------------------------------------------------------------------------------------------------------- Income (Loss) before income taxes 45.7 (5.8) (37.2) Income tax provision (benefit) 31.2 9.7 (0.7) Cumulative effect of change in accounting principle, net -- -- (1.6) - ------------------------------------------------------------------------------------------------------------------- Income (Loss) from cellular division $ 14.5 $ (15.5) $ (38.1) ----------------------------------------------------
44 3. Spin-off of Cellular Division (continued) The net assets and liabilities of Cellular have been separately classified as net investment in cellular division in the Consolidated Balance Sheets as summarized below (in millions):
1995 1994 - ------------------------------------------------------------------------------- --- ------------- -- ------------- Current assets $ 153.9 $ 145.9 Noncurrent assets 1,799.0 1,581.7 Advance payable (1,433.0) (1,271.1) Other current liabilities (166.6) (212.1) Noncurrent liabilities (246.4) (184.7) - ------------------------------------------------------------------------------- --- ------------- -- ------------- Investment in cellular division $ 106.9 $ 59.7 --- ------------- -- -------------
4. 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, 1995, 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 costs (credits) and related weighted average assumptions are as follows (in millions):
1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------- Service cost -- benefits earned during the period $ 51.8 $ 61.6 $ 58.2 Interest cost on projected benefit obligation 129.7 121.6 103.9 Actual return on plan assets (472.1) (1.1) (241.2) Net amortization and deferral 287.9 (176.6) 62.5 - ------------------------------------------------------------------------------------------------------------------- Net pension cost (credit) $ (2.7) $ 5.5 $ (16.6) ---------------------------------------------------- Discount rate 8.5% 7.5% 8.0% Expected long-term rate of return on plan assets 9.5% 9.5% 9.5% Anticipated composite rate of future increases in compensation 5.0% 4.5% 5.5%
45 4. Employee Benefit Plans (continued) The funded status and amounts recognized in the Consolidated Balance Sheets for the plan, as of December 31, are as follows (in millions):
1995 1994 - ------------------------------------------------------------------------------------------------------------------- Actuarial present value of benefit obligations Vested benefit obligation $ (1,705.1) $ (1,338.1) ----------------------------------- Accumulated benefit obligation $ (1,866.0) $ (1,459.5) ----------------------------------- Projected benefit obligation $ (1,962.7) $ (1,547.3) Plan assets at fair value 2,331.3 1,950.2 - ------------------------------------------------------------------------------------------------------------------- Plan assets in excess of the projected benefit obligation 368.6 402.9 Unrecognized net gains (199.2) (203.8) Unrecognized prior service cost 101.3 107.4 Unamortized portion of transition asset (170.9) (197.0) - ------------------------------------------------------------------------------------------------------------------- Prepaid pension cost $ 99.8 $ 109.5 -----------------------------------
The projected benefit obligations as of December 31, 1995 and 1994 were determined using discount rates of 7.25 percent and 8.5 percent, respectively, and anticipated composite rates of future increases in compensation of 4.25 percent and 5.0 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 aggregated $51 million, $47 million and $49 million in 1995, 1994 and 1993, respectively. Postretirement Benefits Sprint sponsors postretirement benefit (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. Effective January 1, 1993, Sprint changed or modified its method of accounting for postretirement benefits by adopting SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The resulting nonrecurring, noncash charge of $339 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. 46 4. Employee Benefit Plans (continued) The components of the net postretirement benefits cost are as follows (in millions):
1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------- Service cost -- benefits earned during the period $ 22.2 $ 23.2 $ 21.7 Interest on accumulated benefit obligation 58.7 53.2 56.3 Net amortization and deferral (9.4) (1.9) -- - ------------------------------------------------------------------------------------------------------------------- Net postretirement benefits cost $ 71.5 $ 74.5 $ 78.0 ----------------------------------------------------
For measurement purposes, a weighted average annual health care cost trend rate of 12 percent was assumed for 1995, gradually decreasing to 6 percent by 2001 and remaining constant thereafter. The effect of a 1 percent increase in the assumed trend rates would have increased the 1995 net postretirement benefits cost by approximately $14 million. The discount rates for 1995, 1994 and 1993 were 8.5 percent, 7.5 percent and 8.0 percent, respectively. The amounts recognized in the Consolidated Balance Sheets, as of December 31, are as follows (in millions):
1995 1994 - ------------------------------------------------------------------------------- --- ------------- -- ------------- Accumulated postretirement benefits obligation Retirees $ 312.4 $ 298.8 Active plan participants -- fully eligible 118.3 130.4 Active plan participants -- other 328.6 244.5 - ------------------------------------------------------------------------------- --- ------------- -- ------------- 759.3 673.7 Unrecognized prior service benefit 5.6 5.9 Unrecognized net gains 115.3 154.1 - ------------------------------------------------------------------------------- --- ------------- -- ------------- Accrued postretirement benefits cost $ 880.2 $ 833.7 --- ------------- -- -------------
The accumulated benefits obligations as of December 31, 1995 and 1994 were determined using discount rates of 7.25 percent and 8.5 percent, respectively. A weighted average annual health care trend rate of 9.6 percent was assumed for 1996, gradually decreasing to 5 percent by 2001 and remaining constant thereafter. The effect of a 1 percent annual increase in the assumed health care cost trend rates would have increased the accumulated benefits obligation as of December 31, 1995 by approximately $100 million. 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. 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. 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. 47 5. Income Taxes The components of the income tax provisions allocated to continuing operations are as follows (in millions):
1995 1994 1993 - --------------------------------------------------------------- -- -------------- -- ------------- --- ------------- Current income tax provision Federal $ 437.4 $ 355.7 $ 283.8 State 91.1 79.8 51.3 - --------------------------------------------------------------- -- -------------- -- ------------- --- ------------- 528.5 435.5 335.1 Deferred income tax provision (benefit) Federal 45.9 81.6 11.8 State (23.6) (6.4) (26.2) Amortization of deferred investment tax credits (16.5) (22.0) (24.7) - --------------------------------------------------------------- -- -------------- -- ------------- --- ------------- 5.8 53.2 (39.1) - --------------------------------------------------------------- -- -------------- -- ------------- --- ------------- Total income tax provision $ 534.3 $ 488.7 $ 296.0 -- -------------- -- ------------- --- -------------
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 $11 million ($0.03 per share). Adjustments to the net deferred income tax liabilities associated with the regulated telephone companies were generally recorded as reductions to regulatory liabilities and have been subsequently eliminated in connection with Sprint's discontinued application of SFAS No. 71 (see Note 2). The differences which cause the effective income tax rate to vary from the statutory federal income tax rate of 35 percent in 1995, 1994 and 1993 are as follows (in millions):
1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------- Income tax provision at the statutory rate $ 518.1 $ 485.8 $ 284.6 Less investment tax credits included in income 16.5 22.0 24.7 - -------------------------------------------------------------------------------------------------------------------- Expected federal income tax provision after investment tax credits 501.6 463.8 259.9 Effect of State income taxes, net of federal income tax effect 43.9 47.7 16.3 Differences required to be flowed through by regulatory commissions 4.9 4.8 6.0 Reversal of rate differentials (8.6) (9.7) (13.0) Merger related costs -- -- 18.0 Other, net (7.5) (17.9) 8.8 - -------------------------------------------------------------------------------------------------------------------- Income tax provision, including investment tax credits $ 534.3 $ 488.7 $ 296.0 ------------------------------------------------------ Effective income tax rate 36.1% 35.2% 36.4% ------------------------------------------------------
48 5. Income Taxes (continued) The income tax provisions (benefits) allocated to other items are as follows (in millions):
1995 1994 1993 - ---------------------------------------------------------------- --- ------------ -- ------------- -- ------------ Discontinued operations: Cellular division $ 31.2 $ 9.7 $ (0.7) Other -- (9.0) (6.6) Extraordinary loss on discontinuance of SFAS No. 71 (437.4) -- -- Extraordinary losses on early extinguishments of debt -- -- (20.3) Cumulative effect of changes in accounting principles Postretirement benefits -- -- (216.0) Postemployment benefits -- -- (6.6) Circuit activity costs -- -- (21.5) Unrealized holding gains on investments in equity securities (recorded directly to shareholders' equity) 30.7 (11.6) 36.5 Stock ownership, purchase and options arrangements (recorded directly to shareholders' equity) (7.5) (8.1) (10.6) - ---------------------------------------------------------------- --- ------------ -- ------------- -- ------------
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, 1995 and 1994, along with the income tax effect of each, are as follows (in millions):
1995 Deferred Income Tax 1994 Deferred Income Tax ------------- -- ------------- --- ------------- -- ------------- Assets Liabilities Assets Liabilities - -------------------------------------------- --- ------------- -- ------------- --- ------------- -- ------------- Property, plant and equipment $ -- $ 1,276.7 $ -- $ 1,525.3 Postretirement and other benefits 347.0 -- 298.0 -- Alternative minimum tax credit carryforwards 8.6 -- 93.0 -- Operating loss carryforwards 26.9 -- 45.8 -- Integration and restructuring costs 32.7 -- 12.2 -- Revenue reserves 33.3 -- 33.4 -- Other, net 69.8 -- -- 5.3 - -------------------------------------------- --- ------------- -- ------------- --- ------------- -- ------------- 518.3 1,276.7 482.4 1,530.6 Less valuation allowance 17.4 -- 21.1 -- - -------------------------------------------- --- ------------- -- ------------- --- ------------- -- ------------- Total $ 500.9 $ 1,276.7 $ 461.3 $ 1,530.6 --- ------------- -- ------------- --- ------------- -- -------------
During 1995, 1994 and 1993, the valuation allowance related to deferred income tax assets decreased $4 million, $1 million and $7 million, respectively. As of December 31, 1995, Sprint has available, for income tax purposes, $9 million of alternative minimum tax credit carryforwards to offset regular income tax payable in future years, and tax benefits of $27 million associated with state operating loss carryforwards. The loss carryforwards expire in varying amounts annually from 1996 through 2010. 49 6. Borrowings Long-term debt, as of December 31, is as follows (in millions):
Maturing 1995 1994 - -------------------------------------------------------------------------------------------------------------------- Corporate Senior notes 9.45% 1995 $ -- $ 50.0 9.88% 1995 -- 80.0 10.45% 1996 100.0 200.0 9.19% to 9.60% 1998 43.0 43.0 8.25% (1) 2000 138.4 -- 8.13% to 9.80% 2000 to 2003 632.3 632.3 Debentures 9.25% 2022 200.0 200.0 Notes payable and commercial paper, classified as long-term debt 1995 -- 934.0 Long Distance Communications Services Vendor financing agreements 6.19% to 10.17% 1996 to 1999 177.6 223.1 Local Communications Services First mortgage bonds 2.00% to 9.37% 1996 to 2000 342.9 355.3 6.25% to 7.88% 2001 to 2005 510.7 511.5 4.00% to 9.79% 2006 to 2010 151.9 151.9 6.88% to 7.46% 2011 to 2015 90.0 90.0 8.77% to 9.68% 2016 to 2020 278.5 279.1 7.13% to 9.89% 2021 to 2025 193.0 123.5 Debentures and notes 2.00% to 9.61% 1996 to 2016 415.6 424.0 Notes payable and commercial paper, classified as long-term debt 1996 42.8 143.4 Other 2.00% to 19.45% 1996 to 2009 9.8 20.0 Other Senior notes 9.88% 1995 -- 250.0 Debentures 9.00% 2019 150.0 150.0 Other 5.39% to 12.50% 1996 to 1999 56.9 76.1 - -------------------------------------------------------------------------------------------------------------------- 3,533.4 4,937.2 Less current maturities 280.4 332.4 - -------------------------------------------------------------------------------------------------------------------- Long-term debt $ 3,253.0 $ 4,604.8 -----------------------------------
(1) Notes are exchangeable for 4.4 million shares of Southern New England Telecommunications Corporation common stock owned by Sprint and included in investments in equity securities at December 31, 1995. 50 6. Borrowings (continued) Long-term debt maturities during each of the next five years are as follows (in millions):
- ------------------------------------------------------------------------------------------------------------------- 1996 $ 280.4 1997 123.0 1998 160.9 1999 28.9 2000 682.9 - -------------------------------------------------------------------------------------------------------------------
Property, plant and equipment with an aggregate cost of approximately $11.2 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):
1995 1994 - ------------------------------------------------------------------------------------------------------------------- Bank notes, 5.90% (5.85% in 1994) $ 1,551.8 $ 263.0 Master Trust notes (6.33% in 1994) -- 248.7 Commercial paper, 6.31% (5.08% in 1994) 635.0 565.7 - ------------------------------------------------------------------------------------------------------------------- Total notes payable and commercial paper $ 2,186.8 $ 1,077.4 -----------------------------------
As of December 31, 1995, $2.1 billion of notes payable and commercial paper was classified as short-term borrowings. As of December 31, 1995 and 1994, $43 million and $1.1 billion, respectively, of notes payable and commercial paper were classified as long-term debt. Such classifications were based on Sprint's ability and intent to refinance such borrowings on a long-term basis. 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. At December 31, 1995, Sprint had aggregate credit arrangements which provided $2.8 billion. Of the $2.2 billion of notes payable and commercial paper outstanding at December 31, 1995, $2.0 billion had been specifically borrowed under such credit arrangements, resulting in $790 million of availability. Sprint is in compliance with all restrictive or financial covenants relating to its debt arrangements at December 31, 1995. During 1993, Sprint redeemed or called for redemption prior to scheduled maturities $1.3 billion 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, net of related income tax benefits, and is reflected as an extraordinary loss in the Consolidated Statements of Income. 51 7. Redeemable Preferred Stock Sprint has 20 million authorized shares and subsidiaries have approximately 5 million authorized shares of preferred stock, including nonredeemable preferred stock. The redeemable preferred stock outstanding, as of December 31, is as follows (in millions):
1995 1994 - ------------------------------------------------------------------------------------------------------------------- Third series -- stated value $100 per share, shares - 184,000 in 1995 and 196,000 in 1994, nonparticipating, nonvoting, cumulative 7.75% annual dividend rate $ 18.4 $ 19.6 Fifth series -- stated value $100,000 per share, shares - 95 in 1995 and 1994, voting, cumulative 6% annual dividend rate 9.5 9.5 Subsidiaries -- stated value ranging from $10 to $100 per share, shares - 110,675 in 1995 and 364,345 in 1994, annual dividend rates ranging from 4.7% to 5.0% 4.6 8.0 - ------------------------------------------------------------------------------------------------------------------- Total redeemable preferred stock $ 32.5 $ 37.1 -----------------------------------
Sprint's third series preferred stock was called in January 1996. In March 1996, 24,000 shares will be redeemed at a price of $100.00 per share and the remaining shares will be redeemed at a price of $101.77 per share. 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. 8. Common Stock Common stock activity during 1995 and shares reserved for future grants under stock option plans or for future issuances under various arrangements are as follows (in millions):
Number of Shares ------------------------------------------ 1995 Reserved as of Activity December 31, 1995 - ---------------------------------------------------------------------------------------------------------------- Employees Stock Purchase Plan 0.1 7.1 Employee savings plans -- 3.4 Automatic Dividend Reinvestment Plan -- 1.1 Officer and key employees' and directors' stock options 0.4 16.9 Conversion of preferred stock and other 0.1 1.3 - ---------------------------------------------------------------------------------------------------------------- Total 0.6 29.8 ------------------------------------------
As of December 31, 1995, elections to purchase 2 million of Sprint's common shares were outstanding under the 1994 offering of the Employees Stock Purchase Plan (ESPP). The purchase price under the offering cannot exceed $32.35 per share, such price representing 85 percent of the average market price on the offering date, or fall below $12.00 per share. The 1994 offering terminates on June 30, 1996. Upon the spin-off of Cellular, the number of shares underlying elections by non-Cellular employees and the related per share purchase price will be adjusted to maintain both the aggregate fair market value of stock underlying the elections and the relationship between the per share purchase 52 8. Common Stock (continued) price and the related per share market value. At the option of Cellular employees, elections made by Cellular employees are expected to be terminated under the terms and conditions of Sprint's ESPP, or to be replaced by elections to purchase shares of the common stock of Cellular. As of December 31, 1995, Cellular employees held elections to purchase approximately 58,000 shares of Sprint common stock under the ESPP. Under various stock option plans, shares of common stock are reserved for issuance to officers, outside directors and certain employees. All options are granted at 100 percent of the market price at date of grant. Approximately 1 percent of all options outstanding as of December 31, 1995 provide for the granting of stock appreciation rights as an alternate method of settlement upon exercise. A summary of stock option activity under the plans is as follows (in millions, except per share data):
Per Share Aggregate Number of Exercise 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 Granted 2.8 30.81 39.50 100.3 Exercised Options without stock appreciation rights (0.8) 9.44 33.75 (17.4) Options with stock appreciation rights (0.2) 11.09 29.68 (3.8) Terminated and expired (0.6) 22.13 36.69 (16.7) - ------------------------------------------------------------------------------------------------------------------- Shares under option as of December 31, 1994 (3.7 million shares exercisable) 7.8 11.09 39.50 233.2 Granted 3.3 28.69 40.75 97.8 Exercised Options without stock appreciation rights (0.6) 11.09 36.69 (13.9) Options with stock appreciation rights (0.1) 11.09 29.68 (1.1) Terminated and expired (0.4) 14.03 39.31 (14.3) - ------------------------------------------------------------------------------------------------------------------- Shares under option as of December 31, 1995 (5.3 million shares exercisable) 10.0 $ 14.03 $ 40.75 $ 301.7 --------------------------------------------------------
Upon the spin-off of Cellular, the number of shares underlying options held by non-Cellular employees and the related per share purchase price will be adjusted to maintain both the aggregate fair market value of stock underlying the options and the relationship between the per share purchase price and the related per share market value. Options held by Cellular employees are expected to be converted into options to purchase shares of Cellular common stock. As of December 31, 1995, Cellular employees held options to purchase approximately 320,000 shares of Sprint common stock. 53 8. Common Stock (continued) 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 $55 million as of December 31, 1995 is reflected as a reduction to other shareholders' equity. At December 31, 1995 the Savings Plan Trust held approximately 18 million shares of Sprint common stock. 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 $235.00 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 $10.00 per share or 200 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, 1995. The Rights may be redeemed by Sprint at a price of $0.01 per Right and will expire on September 8, 1999. During 1995, 1994 and 1993, Sprint declared and paid annual dividends on common stock of $1.00 per share, and Centel declared pre-merger (see Note 10) common stock dividends of $0.15 per share during 1993. The most restrictive covenant applicable to dividends on common stock results from the $1.5 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, $1.9 billion of Sprint's $2.8 billion consolidated retained earnings were effectively restricted from the payment of dividends as of December 31, 1995. 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, $192 million of the related subsidiaries' $653 million total retained earnings is restricted as of December 31, 1995. The flow of cash in the form of advances from the subsidiaries to Sprint is generally not restricted. 9. Commitments and Contingencies Litigation, Claims and Assessments Following announcement in 1992 of Sprint's merger agreement with Centel (see Note 10), 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 which seeks damages for alleged violations of securities laws. On October 12, 1995, the New York trial court granted the motion of Centel's financial advisors to dismiss a purported class action suit filed against them in connection with their representation of Centel in the merger. The plaintiffs have appealed from the order dismissing their claims. Sprint may have indemnification obligations to the financial advisors in connection with this suit. 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 December 1996, Sprint could 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 were typically reinvested in the pool. Sprint was required to repurchase the designated pool of accounts receivable only upon the occurrence of specified events involving non-collectibility of accounts. As of December 31, 1995, Sprint had not been required to repurchase receivables 54 9. Commitments and Contingencies (continued) under this recourse provision. Because Sprint retained credit losses associated with its accounts receivable, any exposure related to this retention was estimated in conjunction with Sprint's calculation of its reserve for uncollectible accounts. Receivables sold that remained uncollected as of December 31, 1995 and 1994 aggregated $600 million. In January 1996, Sprint elected to terminate this agreement. Commitments See "Liquidity and Capital Resources" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of cash commitments associated with Sprint Spectrum. Operating Leases Minimum rental commitments as of December 31, 1995 for all noncancelable operating leases, consisting principally of leases for data processing equipment and real estate, are as follows (in millions):
- ------------------------------------------------------------------------------------------------------------------- 1996 $ 237.4 1997 186.4 1998 137.7 1999 108.6 2000 76.8 Thereafter 270.7 - -------------------------------------------------------------------------------------------------------------------
Gross rental expense aggregated $402 million in 1995, $379 million in 1994 and $382 million in 1993. The amount of rental commitments applicable to subleases, contingent rentals and executory costs is not significant. 10. Sprint / Centel Merger Effective March 9, 1993, Sprint consummated its merger with Centel, a telecommunications company with local exchange and cellular and wireless communications services operations. Pursuant to the merger agreement 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 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 was accounted for as a pooling of interests. 55 11. Additional Financial Information Segment Information Information related to Sprint's operating business segments is included in the tables in "Segmental Results of Operations" of "Management's Discussion and Analysis of Financial Condition and Results of Operations." The net operating revenues and operating expenses shown in such tables include revenues and expenses eliminated in consolidation totaling $ 380 million, $340 million and $296 million for the years ended December 31, 1995, 1994 and 1993, respectively. Sprint incurred capital expenditures of $37 million, $57 million and $46 million for the years ended December 31, 1995, 1994 and 1993, respectively, and had assets, including the net assets of the discontinued cellular division, of $2.9 billion, $1.8 billion and $1.8 billion at December 31, 1995, 1994 and 1993, respectively, not attributable to operating segments. Additionally, Sprint incurred $54 million of merger, integration and restructuring costs not attributable to its segmental operations for the year ended December 31, 1993. Realignment and Restructuring Charge During 1995, Sprint initiated a realignment and restructuring of its local communications services division, including the elimination of approximately 1,600 positions primarily in the network and finance functions. These actions resulted in a nonrecurring charge of $88 million, which reduced income from continuing operations by $55 million ($0.16 per share). The accrued liability associated with this charge specifically relates to the benefits that affected employees will receive upon termination. 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 resulted in a nonrecurring charge of $34 million, which reduced income from continuing operations by $21 million ($0.06 per share). Concentrations of Credit Risk Sprint's accounts receivable are not subject to any concentration of credit risk. Interest rate swap agreements and foreign currency contracts involve the risk of dealing with counterparties and their ability to meet the terms of the contracts. Notional principal amounts often are used to express the volume of these transactions, but the amounts subject to credit risk are significantly smaller. In the event of nonperformance by the counterparties, Sprint's accounting loss would be limited to the net amount that it would be entitled to receive under the terms of the applicable interest rate swap agreement or foreign currency contract. However, Sprint does not anticipate nonperformance by any of the counterparties with which it has such agreements. Sprint controls the amount of credit risk as well as the concentration of credit risk of its interest rate swap agreements and foreign currency contracts through credit approvals, dollar exposure limits and internal monitoring procedures. 56 11. Additional Financial Information (continued) Financial Instruments Sprint estimates the fair value of its financial instruments using available market information and appropriate valuation methodologies. Accordingly, the estimates presented herein are not necessarily indicative of the values Sprint could realize in a current market exchange. Although management is not aware of any factors that would affect the estimated fair value amounts presented as of December 31, 1995, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and, therefore, estimates of fair value subsequent to that date may differ significantly from the amounts presented herein. The carrying amounts and estimated fair values of Sprint's financial instruments, as of December 31, are as follows (in millions):
1995 1994 ------------------------------ ------------------------------ Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value - -------------------------------------------- --- ------------- -- ------------- --- ------------- -- ------------- Financial assets Cash and cash equivalents $ 124.2 $ 124.2 $ 113.7 $ 113.7 Investments in equity securities 262.9 262.9 177.6 177.6 Financial liabilities Short-term borrowings 2,144.0 2,144.0 -- -- Long-term debt Corporate 1,113.7 1,282.9 2,139.3 2,170.5 Long distance communications services 177.6 184.5 223.1 222.1 Local communications services 2,035.2 2,237.5 2,098.7 1,966.4 Other 206.9 242.8 476.1 488.2 Off-balance sheet instruments Interest rate swap agreements -- (3.4) -- 2.6 Foreign currency contracts 0.5 0.4 -- (0.4) - -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
The carrying values of Sprint's cash equivalents approximate fair value as of December 31, 1995 and 1994. The fair value of Sprint's investments in equity securities are estimated by reference to quoted market prices. The fair values of Sprint's long-term debt are estimated based on quoted market prices for publicly traded issues, and the present value of estimated future cash flows using a discount rate commensurate with the risks involved for all other issues. The fair value of interest rate swap agreements is estimated as the cost that Sprint would receive (pay) to terminate the swap agreements at December 31, 1995 and 1994, taking into account the then-current interest rates. The fair value of foreign currency contracts is estimated as the replacement cost of the contracts at December 31, 1995 and 1994, taking into account the then-current foreign currency exchange rates. Interest Rate Swap Agreements Interest rate swap agreements are utilized by Sprint as part of its interest rate risk management program. Net interest paid or received related to such agreements is recorded using the accrual method and is recorded as an adjustment to interest expense. Sprint had interest rate swap agreements with notional amounts of $275 million and $125 million outstanding at December 31, 1995 and 1994, respectively. Net interest (income) expense related to interest rate swap agreements was ($400,000), $1 million and $2 million for the years ended December 31, 1995, 1994 and 1993, respectively. There were no deferred gains or losses relating to any terminated interest rate swap agreements at December 31, 1995, 1994 and 1993. 57 11. Additional Financial Information (continued) Foreign Currency Contracts As part of its foreign currency exchange risk management program, Sprint purchases and sells over-the-counter forward contracts and options in various foreign currencies. Sprint had outstanding approximately $13 million of open forward contracts to buy various foreign currencies at both December 31, 1995 and 1994. Sprint had no outstanding open forward contracts to sell various foreign currencies at December 31, 1995 and $1 million outstanding at December 31, 1994. Sprint had approximately $24 million of outstanding open purchase option contracts to call various foreign currencies at December 31, 1995. The premium paid for an option is amortized over the life of the option. The unamortized premiums paid for options outstanding at December 31, 1995 were $300,000. There were no foreign currency option contracts outstanding at December 31, 1994. The forward contracts open at December 31, 1995 all had an original maturity of six months or less. The net gain or loss recorded to reflect the fair value of such contracts is recorded in the period incurred. Total net losses of $1 million, $2 million and $1 million were recorded related to foreign currency transactions and contracts for the years ended December 31, 1995, 1994 and 1993, respectively. At December 31, 1995, 1994 and 1993, Sprint had foreign currency translation gains (losses) of ($10) million, $1 million and $2 million, respectively, included in "Other, net" in the Consolidated Statements of Common Stock and Other Shareholders' Equity. 12. Subsequent Event On January 31, 1996, Sprint, along with Deutsche Telekom (DT) and France Telecom (FT), consummated their joint venture, operating as Global One, which will provide seamless global telecommunications services to business, consumer and carrier markets worldwide. Upon closing of the agreement, DT and FT acquired shares of a new class of preference stock for a total of $3.0 billion, which resulted in DT and FT each holding approximately 7.5 percent of the Sprint voting power. DT and FT will make the remainder of their investment in Sprint following the spin-off of Cellular. Following their full investment, DT and FT will each own shares of Class A common stock with approximately 10 percent of Sprint's voting power. Depending on the price of Cellular shares at the time of the spin-off, the total amount of the investment is expected to be between $3.5 billion and $3.7 billion. Assuming the $3.0 billion of proceeds from the issuance of the Class A preference stock was initially used to the extent possible to repay debt outstanding at December 31, 1995, and such issuance and repayment is assumed to have taken place as of January 1, 1995, Sprint's earnings per share from continuing operations would have decreased from $2.69 per share to $2.52 per share for the year ended December 31, 1995. 58 SPRINT CORPORATION SCHEDULE II -- CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 1995, 1994 and 1993 (In Millions)
Additions --------------------------- Balance Charged to Balance beginning Charged to other Other end of of year income accounts deductions year - ------------------------------------------------------------------------------------------------------------------- 1995 Allowance for doubtful accounts $ 126.9 $ 415.3 $ 7.0 $ (326.7) (1)$ 222.5 ----------------------------------------------------------------------------- Valuation allowance - deferred income tax assets $ 21.1 $ 4.3 -- $ (8.0) $ 17.4 ----------------------------------------------------------------------------- 1994 Allowance for doubtful accounts $ 120.3 $ 299.9 $ 4.5 $ (297.8) (1)$ 126.9 ----------------------------------------------------------------------------- Valuation allowance - deferred income tax assets $ 22.1 $ 2.2 -- $ (3.2) $ 21.1 ----------------------------------------------------------------------------- 1993 Allowance for doubtful accounts $ 116.7 $ 263.7 $ 2.6 $ (262.7) (1)$ 120.3 ----------------------------------------------------------------------------- Valuation allowance - deferred income tax assets $ 28.7 $ 0.7 -- $ (7.3) $ 22.1 ----------------------------------------------------------------------------- (1) Accounts written off, net of recoveries.
59 QUARTERLY FINANCIAL DATA (Unaudited)
First Quarter Second Quarter Third Quarter ---------------------- --------------------- ---------------------- ---------------------- --------------------- ---------------------- 1995 (1) 1994 (1) 1995 (1) 1994 (1) 1995 (1) 1994 (1) - -------------------------------------------------------------------------------------------------------------------- (In Millions, Except Per Share Data) Net operating revenues $ 3,079.1 $ 2,896.5 $ 3,142.1 $ 2,984.7 $ 3,205.3 $ 3,054.6 Operating expenses Costs of services and products 1,581.6 1,488.5 1,606.7 1,525.0 1,623.7 1,563.4 Selling, general and administrative 694.7 665.4 714.1 687.5 715.9 711.8 Depreciation and amortization 360.0 329.6 359.5 343.8 368.6 344.2 Merger, integration and restructuring costs (2) -- -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------- Total operating expenses 2,636.3 2,483.5 2,680.3 2,556.3 2,708.2 2,619.4 - -------------------------------------------------------------------------------------------------------------------- Operating income 442.8 413.0 461.8 428.4 497.1 435.2 Interest expense (68.2) (81.1) (69.0) (76.2) (64.7) (73.3) Other income (expense), net (3) (20.5) 30.6 (13.9) (9.2) (20.3) (5.8) - -------------------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 354.1 362.5 378.9 343.0 412.1 356.1 Income tax provision (129.4) (128.4) (135.7) (123.6) (148.5) (127.9) - -------------------------------------------------------------------------------------------------------------------- Income from continuing operations 224.7 234.1 243.2 219.4 263.6 228.2 Discontinued operations, net Cellular division (0.4) (6.7) 2.5 0.2 4.9 1.9 Other -- -- -- -- -- -- Extraordinary items, net (4) -- -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------- Net income (loss) 224.3 227.4 245.7 219.6 268.5 230.1 Preferred stock dividends (0.7) (0.7) (0.6) (0.7) (0.6) (0.6) - -------------------------------------------------------------------------------------------------------------------- Earnings (Loss) applicable to common stock $ 223.6 $ 226.7 $ 245.1 $ 218.9 $ 267.9 $ 229.5 ---------------------------------------------------------------------------- Earnings (Loss) per common share Continuing operations $ 0.64 $ 0.67 $ 0.69 $ 0.63 $ 0.75 $ 0.65 Discontinued operations -- (0.02) 0.01 -- 0.01 0.01 Extraordinary items -- -- -- -- -- -- ---------------------------------------------------------------------------- Total $ 0.64 $ 0.65 $ 0.70 $ 0.63 $ 0.76 $ 0.66 ----------------------------------------------------------------------------
(1) The accompanying Quarterly Financial Data have been restated from previously reported amounts to reflect the spin-off of Sprint's cellular and wireless division (Cellular) to shareholders of Sprint common stock. Accordingly, Cellular's operating results have been excluded from income from continuing operations and are reported as discontinued operations. (2) During fourth quarter 1995, nonrecurring charges of $88 million were recorded related to a restructuring within the local communications division. Such charges reduced net income by $55 million ($0.16 per share). See Note 11 of Notes to Consolidated Financial Statements for additional information. (3) During first quarter 1994, Sprint sold an investment in equity securities, realizing a gain of $35 million, which increased net income by $22 million ($0.06 per share). (4) During fourth quarter 1995, Sprint adopted accounting principles for a competitive marketplace for its local communications division and discontinued the application of SFAS No. 71. As a result, Sprint recorded a noncash, after-tax extraordinary charge of $565 million ($1.61 per share). See Note 2 of Notes to Consolidated Financial Statements for additional information. 60
Sprint Corporation Fourth Quarter Total Year ---------------------- ------------------------- - --------------------------- ------------------------- 1995 1994 (1) 1995 1994 (1) - ------------------------------------------------------- $ 3,338.6 $ 3,050.8 $ 12,765.1 $ 11,986.6 1,692.9 1,577.6 6,504.9 6,154.5 747.2 690.7 2,871.9 2,755.4 378.3 368.4 1,466.4 1,386.0 87.6 -- 87.6 -- - ------------------------------------------------------- 2,906.0 2,636.7 10,930.8 10,295.9 - ------------------------------------------------------- 432.6 414.1 1,834.3 1,690.7 (58.8) (70.1) (260.7) (300.7) (38.5) (17.7) (93.2) (2.1) - ------------------------------------------------------- 335.3 326.3 1,480.4 1,387.9 (120.7) (108.8) (534.3) (488.7) - ------------------------------------------------------- 214.6 217.5 946.1 899.2 7.5 (10.9) 14.5 (15.5) -- 7.0 -- 7.0 (565.3) -- (565.3) -- - ------------------------------------------------------- (343.2) 213.6 395.3 890.7 (0.7) (0.7) (2.6) (2.7) - ------------------------------------------------------- $ (343.9) $ 212.9 $ 392.7 $ 888.0 - ------------------------------------------------------- $ 0.61 $ 0.62 $ 2.69 $ 2.57 0.02 (0.01) 0.04 (0.02) (1.61) -- (1.61) -- - ------------------------------------------------------- $ (0.98) $ 0.61 $ 1.12 $ 2.55 - -------------------------------------------------------
61 EXHIBIT INDEX EXHIBIT NUMBER (3) Articles of Incorporation and Bylaws: (a) Articles of Incorporation, as amended (filed as Exhibit 4A to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (b) Bylaws, as amended (filed as Exhibit 4B to Sprint Corporation Current Report on Form 8-K for the year ended January 31, 1996 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 UMB 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). (d) Second Amendment to Rights Agreement dated as of July 31, 1995 between Sprint Corporation and UMB Bank, n.a. (filed as Exhibit 2(d) to Form 8-A/A-2 dated October 20, 1995 amending Sprint Corporation Registration Statement on Form 8-A dated August 11, 1989 (File No. 1-4721) and incorporated herein by reference). (e) Standstill Agreement dated as of July 31, 1995, by and among Sprint Corporation, France Telecom and Deutsche Telekom AG (filed as Exhibit (10)(c) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 and incorporated herein by reference). (10) Material Agreements - Joint Ventures: (a) Joint Venture Agreement dated as of June 22, 1995 among Sprint Corporation, Sprint Global Venture, Inc., France Telecom and Deutsche Telekom AG (filed as Exhibit (10)(a) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 and incorporated herein by reference). (b) Amendment No. 1 to Joint Venture Agreement, dated as of January 31, 1996, among Sprint Corporation, Sprint Global Venture, Inc., France Telecom, Deutsche Telekom AG and Atlas Telecommunications, S.A. (filed as Exhibit 99A to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (c) Investment Agreement dated as of July 31, 1995 among Sprint Corporation, France Telecom and Deutsche Telekom AG (including as an exhibit the Stockholders' Agreement among France Telecom, Deutsche Telekom AG and Sprint Corporation) (filed as Exhibit (10)(b) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 and incorporated herein by reference). (d) Amended and Restated Agreement of Limited Partnership of MajorCo., L.P., dated as of January 31, 1996, among Sprint Spectrum, L.P., TCI Network Services, Comcast Telephony Services and Cox Telephony Partnership (filed as Exhibit 99C to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (e) Parents Agreement dated as of January 31, 1996, between Sprint Corporation and Tele-Communications, Inc. (filed as Exhibit 99D to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (f) Parents Agreement dated as of January 31, 1996, between Sprint Corporation and Comcast Corporation (filed as Exhibit 99E to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (g) Parents Agreement dated as of January 31, 1996, between Sprint Corporation and Cox Communications, Inc. (filed as Exhibit 99F to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (10) Executive Compensation Plans and Arrangements (h) 1985 Stock Option Plan, as amended (filed as Exhibit (10)(c) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). Appendix to Stock Option Plans. (i) 1990 Stock Option Plan, as amended (filed as Exhibit (10)(d) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). Appendix to Stock Option Plans. See Exhibit (10)(h). (j) 1990 Restricted Stock Plan, as amended (filed as Exhibit 99 to Sprint Corporation Registration Statement No. 33-65147 and incorporated herein by reference). (k) Executive Deferred Compensation Plan, as amended. (l) Management Incentive Stock Option Plan, as amended (filed as Exhibit (10)(g) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). Appendix to Stock Option Plans. See Exhibit (10)(h). (m) Long-Term Stock Incentive Program, as amended (filed as Exhibit (10)(h) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). (n) Sprint Supplemental Executive Retirement Plan (filed as Exhibit (10)(i) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). (o) Amended and Restated Centel Directors Deferred Compensation Plan (filed as Exhibit (10)(j) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). (p) 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). (q) Executive Long-Term Incentive Plan (filed as Exhibit 10(j) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference). (r) Executive Management Incentive Plan (filed as Exhibit 10(k) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference). (s) 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). (t) 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). (u) Retirement Plan for Directors, as amended (filed as Exhibit 10(b) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 1994 and incorporated herein by reference). (v) Key Management Benefit Plan, as amended (filed as Exhibit 10(o) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference). (w) Agreements Regarding Special Compensation and Post Employment Restrictive Covenants between Sprint Corporation and one of its Executive Officers. (x) Director's Deferred Fee Plan, as amended. (y) Form of Contingency Employment Agreements between Sprint Corporation and certain of its executive officers (filed as Exhibit 10(b) to Sprint Corporation Quarterly Report on Form 10-Q for the year ended March 31, 1995, and incorporated herein by reference). (z) 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). (aa) Summary of Executive Officer and Board of Directors Benefits. (bb) Agreements Regarding Special Compensation and Post Employment Restrictive Covenants between Sprint Corporation and four of its executive officers (filed as Exhibit 10(d) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1994 and incorporated herein by reference). (cc) Amended and Restated Centel Stock Option Plan (filed as Exhibit 10(w) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). Appendix to Stock Option Plans. See Exhibit (10)(h). (dd) Agreements Regarding Special Compensation and Post Employment Restrictive Covenants between Sprint Corporation and three of its executive officers (filed as Exhibit 10(x) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1993, and incorporated herein by reference). (ee) Description of agreement regarding Supplemental Pension Benefits between Sprint Corporation and one of its executive officers (filed as Exhibit 10(e) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1994, and incorporated herein by reference). (ff) Amended and Restated Centel Director Stock Option Plan (filed as Exhibit 10(aa) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1993, and incorporated herein by reference). (11) Computation of Earnings Per Common Share. (12) Computation of Ratio of Earnings to Fixed Charges. (21) Subsidiaries of Registrant. (23) Consent of Ernst & Young LLP. (27) Financial Data Schedules: (a) 1995 Financial Data Schedule. (b) Restated 1994 Financial Data Schedule. EX-10 2 APPENDIX Exhibit (10)(h) APPENDIX TO STOCK OPTION PLANS APPENDIX Spin-off of Sprint Cellular Company. The Corporation, Centel Corporation, and Sprint Cellular Company entered into a Distribution Agreement in connection with the distribution of stock in Sprint Cellular Company to the Corporation's Stock-holders. All capitalized terms in this section not otherwise defined in the Plan shall have the meanings ascribed to them in the Distribution Agreement. Treatment of Post-Distribution Sprint Group Employees. As of the Distribution Time, all outstanding stock option grants (each an "Unadjusted Grant") of Sprint Group Employees to purchase Sprint Common Stock issued under the Plan shall be adjusted (each grant so adjusted an "Adjusted Grant") to take into account the effect of the Distribution on the price of Sprint Common Stock, as provided in the Distribution Agreement. Treatment of Post-Distribution SpinCo Group Employees. As of the Distribution Time, all outstanding stock option grants (each a "Canceled Grant") of SpinCo Group Employees to purchase Sprint Common Stock under the Sprint Stock Option Plans shall be canceled to the extent that such Canceled Grants are replaced with a grant (each a "Replacement Grant") of an option to purchase SpinCo Common Stock under the SpinCo Rollover Employee Stock Option Plan. Administration. The Corporate Secretary shall make such adjustment calculations and cancellations of grants and shall suspend option exercises for the period of time specified as the Blackout Period in the Distribution Agreement or during such other appropriate period of time as he deems necessary or desirable for the orderly implementation of such adjustments. EX-10 3 EXECUTIVE DEFERRED COMPENSATION PLAN Exhibit (10)(k) Executive Deferred Compensation Plan (as amended through December 12, 1995) ARTICLE I PURPOSE The purpose of the Sprint Corporation Executive Deferred Compensation Plan (hereinafter referred to as the "Plan") is to provide funds for retirement or death for executive employees (and their beneficiaries) of Sprint Corporation and its subsidiaries. It is intended that the Plan will aid in retaining and attracting employees of exceptional ability by providing such employees with a means to supplement their standard of living at retirement. ARTICLE II DEFINITIONS For the purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the context clearly indicates otherwise: 2.1 Account Transfer Request. "Account Transfer Request" means a written notice, in a form prescribed by the Company, by a Participant to transfer all or any portion of one Deferred Benefit Account to another Deferred Benefit Account as provided for in paragraph 6.7. 2.2 Beneficiary. "Beneficiary" means the person, persons or entity designated by the Participant, or as provided in Article VIII, to receive any benefits payable under the Plan. Any Participant Beneficiary Designation shall be made in a written instrument filed with the Company and shall become effective only when received, accepted and acknowledged in writing by the Company. 2.3 Board. "Board" means the Board of Directors of the Company. 2.4 Cellular. "Cellular" means Sprint Cellular Company, however renamed, or any successor thereto. 2.5 Cellular Insider. "Cellular Insider" means, as of any time when the determination thereof is relevant, any Participant subject to liability under Section 16 of the Securities Exchange Act of 1934 with respect to trading in the equity securities of Cellular. 2.6 Cellular Share Unit. "Cellular Share Unit" means a measure of participation under the Plan having a value based on the market value of one share of common stock of Cellular after the distribution thereof by the Company to the Company's shareholders. 2.7 Committee. "Committee" means Deferred Compensation Committee appointed to review the Plan decisions pursuant to Article III. 2.8 Company. "Company" means Sprint Corporation, or any successor thereto. 2.9 Compensation. "Compensation" means the Base Salary, Annual Incentive Compensation and Long-Term Incentive Compensation payable to a Participant during a Plan Year other than a distribution under this plan. (a) Base Salary. "Base Salary" means all regular cash remuneration for services, other than such items as Annual Incentive Compensation, payable by the Employer to a Participant in cash during a Plan Year, but before reduction for amounts deferred pursuant to this Plan or any other Plan of the Employer. (b) Annual Incentive Compensation. "Annual Incentive Compensation" means any annual cash incentive compensation payable by the Employer to a Participant in a Plan Year. (c) Long-Term Incentive Compensation. "Long-Term Incentive Compensation" means any incentive compensation earned over a period of at least two years. 2.10 Deferral Benefit. "Deferral Benefit" means the benefit payable to a Participant on his retirement, death, disability, or termination of employment as calculated in Article VII hereof. 2.11 Deferred Benefit Account. "Deferred Benefit Account" means the accounts maintained on the books of account of the Employer for each Participant pursuant to Article VI. Separate Deferred Benefit Accounts shall be maintained for each Participant. More than one Deferred Benefit Account shall be maintained for each Participant to reflect (a) Termination and Retirement Interest Yields, (b) separate deferral elections, and (c) Account A, Account B, Account C, Account AA, Account BB, and Account CC elections. For Account AA two sub-accounts (a Retirement Deferred Benefit Account and a Termination Deferred Benefit Account) shall be maintained to reflect the difference in Interest Yields as provided in Article VI, paragraph 6.4. For Account BB two sub-accounts (a Retirement Deferred Benefit Account and a Termination Deferred Benefit Account) shall be maintained to reflect, in the event of a transfer from Account AA to Account BB pursuant to paragraph 6.7, the difference in values of the two sub- accounts of Account AA transferred to Account BB. For Account CC two sub-accounts (a Retirement Deferred Benefit Account and a Termination Deferred Benefit Account) shall be maintained to reflect the crediting of Cellular Share Units with respect to Share Units in the respective sub-accounts of the Account BB with respect to which the Cellular Share Units were credited pursuant to Section 6.3(b). A Participant's Deferred Benefit Accounts shall be used solely as a device for the measurement and determination of the amounts to be paid to the Participant pursuant to this Plan. A Participant's Deferred Benefit Account shall not constitute or be treated as a trust fund of any kind. Unless the context requires otherwise, "Deferred Benefit Account" shall mean the aggregate balance of all accounts of a Participant. 2.12 Determination Date. "Determination Date" means the date on which the amount of a Participant's Deferred Benefit Account is determined as provided in Article VI hereof. The last day of each calendar month shall be a Determination Date. 2.13 Disability. "Disability" or "Disabled Participant" means a physical or mental condition of a Participant resulting in a determination of disability for purposes of receiving benefits under the Employer Long-Term Disability Insurance Plan. 2.14 Distribution Agreement. "Distribution Agreement" means the agreement entered into by the Company, Cellular, and Centel Corporation for the purpose of providing for the distribution by the Company of its stock in Cellular to the Company's stockholders. 2.15 Distribution Dividend Rate. "Distribution Dividend Rate" means the Dividend Rate as defined in the Distribution Agreement. 2.16 Distribution Time. "Distribution Time" is defined in the Distribution Agreement. 2.17 Early Retirement Date. "Early Retirement Date" means the date on which the Participant actually terminates employment following the first day of the month coincidental with or next following a Participant's attainment of age fifty-five (55), but before his Normal Retirement Date. 2.18 Employer. "Employer" means Sprint Corporation, any successor to the business thereof or any affiliate or subsidiary designated by the Board. 2.19 Internal Revenue Code. "Internal Revenue Code" means Internal Revenue Code of 1986, as amended or supplemented from time to time. References to any section of the Internal Revenue Code shall be to that section as it is renumbered, amended, supplemented or re-enacted. 2.20 Interest Yield. "Interest Yield" means with respect to any calendar month the Termination Interest Yield or the Retirement Interest Yield as defined below: (a) Termination Interest Yield. The "Termination Interest Yield" means (1) in the case of balances in Account AA, the composite yield on Moody's Seasoned Corporate Bond Yield Index for the preceding calendar month as determined from Moody's Bond Record published by Moody's Investors Services, Inc. (or any successor thereto), or, if such monthly yield is no longer published, a substantially similar average selected by the Company, and (2) in the case of balances in Account A, the greater of (i) the prime rate in effect at Citibank, N.A. at the opening of business on the first business day of the month, or if said bank, for any reason, no longer publishes its prime rate, the prime rate similarly determined of another major bank selected by the Company and (ii) six percent per annum. (b) Retirement Interest Yield. The "Retirement Interest Yield" means (1) in the case of balances in Account AA, three percentage points over the Termination Interest Yield, and (2) in the case of balances in Account A, the Termination Interest Yield. 2.21 Normal Retirement Age. "Normal Retirement Age" means the time at which a Participant attains age sixty - -five (65). 2.22 Normal Retirement Date. "Normal Retirement Date" means the first day of the month coincidental with or next following a Participant's Normal Retirement Age. 2.23 Participant. "Participant" means any individual who is designated by the Company in accordance with paragraph 4.1 to participate in this Plan and who elects to participate by filing a Participation Agreement as provided in Article IV. 2.24 Participation Agreement. "Participation Agreement" means the agreement, in a form prescribed by the Company, filed by a Participant before the beginning of the first period in which the Participant's Compensation is to be deferred pursuant to the Plan and the Participation Agreement. A new Participation Agreement shall be filed by the Participant for each separate Base Salary deferral election and for each Annual Incentive Compensation and Long-Term Incentive Compensation deferral election not accompanying a Base Salary deferral election. 2.25 Plan. "Plan" means the Sprint Corporation Executive Deferred Compensation Plan as set forth in this document. This Plan is the successor to, and comprises an amendment and revision of, the United Telecommunications, Inc. 1985 Executive Deferred Compensation Plan adopted February 12, 1985. 2.26 Plan Administrator. "Plan Administrator" means the person appointed by the Company to represent the Company in the administration of this Plan. 2.27 Plan Year. "Plan Year" means a twelve month period commencing May 1st and ending the following April 30th. The first Plan Year shall commence on May 1, 1985. 2.28 Retirement Plan. "Retirement Plan" means the Sprint Retirement Pension Plan, as amended from time to time. 2.29 Share Unit. "Share Unit" means a measure of participation under the Plan having a value based on the market value of a share of common stock of the Company. 2.30 Spouse. "Spouse" means a Participant's wife or husband who was lawfully married to the Participant upon the Participant's retirement, death or severance from service. 2.31 Sprint Insider. "Sprint Insider" means, as of any time when the determination thereof is relevant, any Participant subject to liability under Section 16 of the Securities Exchange Act of 1934 with respect to trading in the equity securities of the Company. 2.32 Transition Date. "Transition Date" means May 1, 1990. ARTICLE III ADMINISTRATION 3.1 Plan Administrator; Company and Committee; Duties. This Plan shall be administered by the Committee. The Committee shall consist of not more than five persons appointed by the Board. The Committee may be a consolidated Committee administering other benefit plans of the Company in addition to this Plan. The Committee shall have the authority to make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan. The Committee may appoint a Benefit Administrative Committee and a Plan Administrator. The Committee may delegate its duties for the day-to-day operations of the Plan to the Plan Administrator and other duties to the Benefit Administrative Committee. Members of the Committee, the Benefit Administrative Committee and the Plan Administrator may be Participants under this Plan. 3.2 Claim for Benefits. Any claim for benefits under this Plan shall be made in writing to the Plan Administrator. If a claim for benefits is wholly or partially denied, the Plan Administrator shall so notify the Participant or Beneficiary within 90 days after receipt of the claim. The notice of denial shall be written in a manner calculated to be understood by the Participant or Beneficiary and shall contain (a) the specific reason or reasons for denial of the claim, (b) specific references to the pertinent Plan provisions upon which the denial is based, (c) a description of any additional material or information necessary to perfect the claim together with an explanation of why such material or information is necessary and (d) an explanation of the claims review procedure. The decision or action of the Plan Administrator shall be final, conclusive and binding on all persons having any interest in the Plan, unless a written appeal is filed as provided in Section 3.3 hereof. 3.3 Review of Claim. Within 60 days after the receipt by the Participant or Beneficiary of notice of denial of a claim, the Participant or Beneficiary may (a) file a request with the Benefit Administrative Committee that it conduct a full and fair review of the denial of the claim, (b) review pertinent documents and (c) submit questions and comments to the Committee in writing. 3.4 Decision After Review. Within 60 days after the receipt of a request for review under Section 3.3, the Committee shall deliver to the Participant or Beneficiary a written decision with respect to the claim, except that if there are special circumstances (such as the need to hold a hearing) which require more time for processing, the 60-day period shall be extended to 120 days upon notice to the Participant or Beneficiary to that effect. The decision shall be written in a manner calculated to be understood by the Participant or Beneficiary and shall (a) include the specific reason or reasons for the decision and (b) contain a specific reference to the pertinent Plan provisions upon which the decision is based. ARTICLE IV PARTICIPATION 4.1 Participation. Participation in the Plan shall be limited to executives having a job grade level of E14 or above, or any other employees designated by the Committee, who elect to participate in the Plan by filing a Participation Agreement with the Company. Except as provided below, a Participation Agreement must be filed before the April 15th immediately preceding the Plan Year in which the Participant's participation under the agreement will commence, and the election to participate shall be effective on the first day of the Plan Year following receipt by the Company of a properly completed and executed Participation Agreement. A Participant in the Plan, who is also a participant in the Employer's 1975 Executive Deferred Compensation Plan, may elect to transfer to this Plan all, and not less than all, of the dollar value of his Account A and the dollar value of his Account B under the 1975 Plan. Such election shall be made by delivering to the Company a properly executed Participation Agreement; such an election must be made when the Participant is first eligible for the 1985 Plan. 4.2 Minimum and Maximum Deferral and Length of Participation. A Participant may elect in any Participation Agreement to defer a portion of his Compensation. The minimum and maximum amounts that may be deferred under any single Participation Agreement shall be in $100 units and shall be as follows:
Minimum Maximum Deferral Deferral With respect $300 per 50% of Base to initial month Salary Base Salary Deferrals With respect $100 per 50% of Base to Minimum Maximum Deferral Deferral Subsequent month Salary Base Salary Deferrals With respect 25% of 100% of to Annual Annual Annual Incentive Incentive Incentive Compensation Compensation Compensation With respect 25% of Long- 100% of Long- to Long-Term Term Term Incentive Incentive Incentive Compensation Compensation Compensation
(a) With respect to Base Salary deferrals, the dollar amount of deferral elected in each Participation Agreement shall be the amount of Base Salary that will be deferred in each month subject to the Participation Agreement. Each Participation Agreement shall apply to the Participant's Base Salary payable over a period (1) for Participation Agreements first effective before the Transition Date, of either four or eight Plan Years, or (2) for Participation Agreements first effective on or after the Transition Date, one Plan Year (or, in either case, until the Participant's retirement, whichever occurs first), commencing with the Plan Year immediately following the Plan Year in which the respective Participation Agreement is filed. The fixed dollar amount of Base Salary deferral applicable over a deferral period shall not be changed by virtue of a change in Base Salary alone. (b) With respect to Annual Incentive Compensation or Long-Term Incentive Compensation deferrals, the deferral percentage selected in each Participation Agreement shall apply only to the Participant's Annual Incentive Compensation or Long-Term Incentive Compensation paid in the Plan Year immediately following receipt of the respective Participation Agreement. (c) From time to time, the Company may increase or decrease the minimum and maximum deferrals set forth above as well as the period for which the deferrals are effective by giving reasonable written notice to the affected Participants. Such changes shall be effective for all Participation Agreements filed thereafter. (d) A Participant's election to defer Compensation shall be irrevocable upon the filing of the respective Participation Agreement; provided, however, that the deferral of Compensation under any Participation Agreement may be suspended or amended as provided in paragraphs 7.5 or 9.1. 4.3 Additional Participation Agreements. A Participant may enter into additional Participation Agreements by filing a Participation Agreement with the Company before April 15th of any calendar year, stating the amount that the Participant elects to have deferred. Such additional agreements shall be effective as to Compensation paid in Plan Years beginning after the last day of the Plan Year in which the respective agreement is filed with the Company. Each additional Participation Agreement is subject to all of the provisions and requirements set forth in paragraph 4.2, including without limitation, the provisions relating to minimum and maximum deferral amounts and duration of the agreements; provided, that the minimum Base Salary deferral for each additional Participation Agreement shall be $1,200 per year. In addition, the aggregate amount of Base Salary that a Participant may have deferred under this Plan out of his Base Salary for any single Plan Year under all applicable Participation Agreements shall not exceed 50% of his Base Salary, excluding Incentive Compensation. In the event a Participant elects to defer Compensation for a new period, the new election shall be treated as an arrangement for which a separate Deferred Benefit Account shall be maintained and separate Deferred Benefits shall be payable. ARTICLE V DEFERRED COMPENSATION 5.1 Elective Deferred Compensation. The amount of Compensation that a Participant elects to defer in the Participation Agreement executed by the Participant, with respect to each Plan Year of participation in the Plan, shall be credited by the Company to the Participant's Deferred Benefit Account throughout each Plan Year as the Participant is paid the non-deferred portion of Compensation for such Plan Year. The amount credited to a Participant's Deferred Benefit Account shall equal the amount deferred. To the extent that the Employer is required to withhold any taxes or other amounts from the employees' deferred wages pursuant to any state, federal or local law, such amounts shall be taken out of the portion of the Participant's Compensation which is not deferred under this Plan. 5.2 Additional Payments. The Company also intends that supplemental payments shall be made at death, disability or termination of employment, as the case may be, for any reduction in benefits due to deferrals of Compensation under this Plan in respect of any of the Employer's life insurance or disability plans or Employees Stock Purchase Plan now in existence or adopted after the effective date of this Plan. 5.3 Vesting of Deferred Benefit Account. A Participant shall be 100% vested in his/her Deferred Benefit Account. ARTICLE VI DEFERRED BENEFIT ACCOUNT 6.1 Determination of Account. Each Participant's Deferred Benefit Account, as of each Determination Date, shall consist of the balance of the Participant's Deferred Benefit Account as of the immediately preceding Determination Date, plus the Participant's elective deferred compensation withheld since the immediately preceding Determination Date pursuant to paragraph 5.1 and plus amounts credited to the Participant's Deferred Benefit Account pursuant to paragraphs 6.4 and 6.5. The Deferred Benefit Account of each Participant shall be reduced by the amount of all distributions, if any, made from such Deferred Benefit Account since the preceding Determination Date. 6.2 Type of Deferral. A Participant may elect to have any portion of the amount deferred credited to either Account A (fixed income return) or to Account B (Share Units). The initial election shall be made by a properly executed Participation Agreement. With respect to a Participation Agreement first effective before the Transition Date, an election to defer any amount to Account A shall be treated as an election to defer to Account AA, except as set forth below. An election to change the apportionment of deferred amounts between Accounts A and B may be made by a Participant filing with the Plan Administrator a revised Participation Agreement indicating such change on or before April 15th of each calendar year. The revised Participation Agreement shall be deemed a continuation of the initial Participation Agreement to which it relates for purposes of complying with the provisions of paragraphs 4.2 and 4.3 relating to the minimum and maximum deferrals and duration of the Participation Agreement. The revised Participation Agreement shall be effective for Plan Years beginning after the date it is filed. Deferrals in such Plan Years shall be credited in accordance with the election of the revised Participation Agreement, provided, however, that an election to allocate a portion of deferrals to Account A in excess of the portion allocated in the Participation Agreement to be deferred into the fixed income account as of May 1, 1989, shall be deemed to be an election by the Participant to allocate to Account AA a portion of deferrals equal to the portion so allocated to the fixed income account on May 1, 1989, and to allocate to Account A the portion in excess of such portion. 6.3 Creation of Accounts AA, BB, C, and CC. (a) Accounts AA and BB. As of the start of business on the Transition Date, all amounts standing to the credit of each Participant in Account A shall be transferred to an Account AA. As of the start of business on the Transition Date, amounts standing to the credit of each Participant in Account B that are attributable to prior transfers from Account A into Account B shall be transferred to an Account BB. The amount of such transfers shall be an amount equal to the sum of the dollar amount of all transfers from Account A to Account B during the period beginning on the effective date of the Participation Agreement and ending on the Transition Date. For all purposes of this Plan, except as otherwise noted in this Plan, Account AA shall be treated in the same manner as Account A, and Account BB shall be treated in the same manner as Account B. Compensation earned by employees on or after the Transition Date subject to deferral under a Participation Agreement first effective before the Transition Date shall be credited to Accounts AA and B (in accordance with the Participant's election to allocate such deferrals to Accounts A or B, respectively, in such Participation Agreements) for such Participation Agreement. (b) Accounts C and CC. On the Determination Date first following the Distribution Time, there shall be credited to Accounts C and CC, created for each Participant having a positive balance in an Account B or BB with respect to any Plan Year, a number of Cellular Share Units determined as follows: (1) one Cellular Share Unit in Account C for each Distribution Dividend Rate number of Share Units in Account B for such Participant for such Plan Year as of the Distribution Time; and (2) one Cellular Share Unit in the Retirement Deferred Benefit Account of Account CC for each Distribution Dividend Rate number of Share Units in the Retirement Deferred Benefit Account of Account BB for such Participant for such Plan Year as of the Distribution Time; and. (3) one Cellular Share Unit in the Termination Deferred Benefit Account of Account CC for each Distribution Dividend Rate number of Share Units in the Termination Deferred Benefit Account of Account BB for such Participant for such Plan Year as of the Distribution Time. 6.4 Maintenance of Accounts A and AA. As of each Determination Date, the Participant's Deferred Benefit Accounts A and AA shall be increased by the amount of interest earned since the preceding Determination Date. Interest on Accounts A and AA shall be based upon the Interest Yield. For Account AA, a Retirement Deferred Benefit Account shall be maintained and increased at the rate specified by the Retirement Interest Yield and a Termination Deferred Benefit Account shall be maintained and increased at the rate specified by the Termination Interest Yield. Interest shall be credited on the mean average of the balances of the Deferred Benefit Account on the Determination Date (before crediting the interest) and on the last preceding Determination Date, but after the Deferred Benefit Account has been adjusted for any contributions or distributions to be credited or deducted for each such day. 6.5 Maintenance of Share Unit Accounts. (a) Maintenance of Accounts B and BB. (1) Conversion between Dollar Amounts and Share Units in Accounts B and BB. When an amount is to be added to a Participant's Deferred Benefit Accounts B or BB, it shall be converted into Share Units, or fractions thereof, by dividing the amount to be credited by the closing price of the Company's common stock as reported by the New York Stock Exchange on the last trading day on or before the Determination Date. When a number of Share Units is to be subtracted from a Participant's Deferred Benefit Accounts B or BB, such number of Share Units shall be converted into a dollar amount by multiplying such number of Share Units by the closing price of the Company's common stock as reported by the New York Stock Exchange on the last trading day on or before the Determination Date. (2) Sub-accounts to be Maintained for Purposes of Computing Retirement and Termination Benefits. Two sub-accounts shall be maintained for Account BB: (i) a Retirement Deferred Benefit Account which shall include the transfer from Account B into Account BB described in paragraph 6.3(a) plus amounts transferred from the Account AA Retirement Deferred Benefit Account, if any, plus other additions pursuant to this paragraph 6.5(a); and (ii) a Termination Deferred Benefit Account which shall include the transfer from Account B into Account BB described in paragraph 6.3(a) plus amounts transferred from the Account AA Termination Deferred Benefit Account, if any, plus other additions pursuant to this paragraph 6.5(a). (3) Dividends to non-Sprint Insiders. For all Participants other than Sprint Insiders, when a dividend is declared and paid by the Company on its common stock, an amount shall be credited to the Participant's Accounts B and BB as though the same dividend had been paid on the Share Units in such accounts as of the Determination Date immediately preceding the declaration of the dividend, and such amount shall be converted to Share Units. Such amount shall be valued as of the Determination Date immediately preceding the declaration of the dividend. (4) Dividends to Sprint Insiders. For Sprint Insiders, subparagraph (3) of this paragraph 6.5(a) shall apply to balances in Accounts B and BB as of April 30, 1991. With respect to Share Units resulting from deferrals or transfers from Account A or Account AA into Account B or Account BB on or after May 1, 1991 ("Post May 1, 1991 Share Units"), when a cash dividend is declared and paid by the Company on its common stock, an amount shall be credited to the Participant's Account A or Account AA, as appropriate, as though the same dividend had been paid on the Post May 1, 1991, Share Units as of the Determination Date immediately preceding the declaration of the dividend. (5) Effect of Recapitalization. In the event of a stock dividend, stock split, or other corporate reorganization involving the Company's common stock, the Company shall make equitable adjustment to the number of Share Units credited to a Participant's Accounts B and BB as may be necessary to give effect to such change in the Company's capital structure. (6) Conversion of Share Units to Dollars on Dis tribution. Share Units in Accounts B and BB shall be converted to an equivalent dollar amount before any distribution thereof to a Participant pursuant to Article VII. For purposes of distribution, the value of a Share Unit shall be the average closing price of the Company's common stock on the New York Stock Exchange on the last trading day of each of the twelve calendar months immediately preceding the date of distribution. If a Participant elects payment in other than a lump sum, Share Units shall be so converted to a dollar amount with respect to each payment made in the distribution. During the period of distribution, dividends and other equitable adjustments shall be credited to the Participant's Accounts B and BB in accordance with paragraphs 6.5(a)(3), 6.5(a)(4), and 6.5(a)(5). For such purposes, a Participant that is a Sprint Insider immediately before the event that entitles the Participant to distribution shall be deemed a Sprint Insider during the period of distribution. (b) Maintenance of Accounts C and CC. (1) Conversion between Dollar Amounts and Cellular Share Units in Accounts B and BB. When an amount is to be added to a Participant's Deferred Benefit Accounts C or CC, it shall be converted into Cellular Share Units, or fractions thereof, by dividing the amount to be credited by the closing price of Cellular's common stock as reported by the New York Stock Exchange on the last trading day on or before the Determination Date. When a number of Cellular Share Units is to be subtracted from a Participant's Deferred Benefit Accounts C or CC, such number of Cellular Share Units shall be converted into a dollar amount by multiplying such number of Cellular Share Units by the closing price of Cellular's common stock as reported by the New York Stock Exchange on the last trading day on or before the Determination Date. (2) Sub-accounts to be Maintained for Purposes of Computing Retirement and Termination Benefits. Two sub-accounts shall be maintained for Account CC: (i) a Retirement Deferred Benefit Account which shall include the value of the Cellular Share Units credited pursuant to paragraph 6.3(b)(2) plus other additions pursuant to this paragraph 6.5(b) and (ii) a Termination Deferred Benefit Account which shall include the value of the Cellular Share Units credited pursuant to paragraph 6.3(b)(3) plus other additions pursuant to this paragraph 6.5(b). (3) Dividends to non-Cellular Insiders. For all Participants other than Cellular Insiders, when a dividend is declared and paid by Cellular on its common stock, an amount shall be credited to the Participant's Accounts C and CC as though the same dividend had been paid on the Cellular Share Units in such accounts as of the Determination Date immediately preceding the declaration of the dividend, and such amount shall be converted to Cellular Share Units. Such amount shall be valued as of the Determination Date immediately preceding the declaration of the dividend. (4) Dividends to Cellular Insiders. For Participants that are Cellular Insiders, when a cash dividend is declared and paid by Cellular on its common stock, an amount equal to such dividend shall be credited to the Participant's Account A or Account AA with respect to Cellular Share Units in Accounts C or CC, respectively as of the Determination Date immediately preceding the declaration of the dividend. (5) Effect of Recapitalization. In the event of a stock dividend, stock split or other corporate reorganization involving Cellular's common stock, the Company shall make equitable adjustment to the number of Cellular Share Units credited to a Participant's Accounts C and CC as may be necessary to give effect to such change in Cellular's capital structure. (6) Conversion of Cellular Share Units to Dollars on Distribution. Cellular Share Units in Accounts C and CC shall be converted to an equivalent dollar amount before any distribution thereof to a Participant pursuant to Article VII. For purposes of distribution, the value of a Cellular Share Unit shall be the average closing price of Cellular's common stock on the New York Stock Exchange on the last trading day for each of (i) the 12 calendar months immediately preceding the date of such distribution or (ii) the smaller number of calendar months elapsed from the Distribution Time to such distribution. If a Participant elects payment in other than a lump sum, Cellular Share Units shall be so converted to a dollar amount with respect to each payment made in the distribution. During the period of distribution, dividends and other equitable adjustments shall be credited to the Participant's Accounts C and CC in accordance with paragraphs 6.5(b)(3), 6.5(b)(4), and 6.5(b)(5). For such purposes, a Participant that is a Cellular Insider immediately before the event that entitles the Participant to distribution shall be deemed a Cellular Insider during the period of distribution. 6.6 Statement of Accounts. The Company shall submit to each Participant, within 120 days after the close of each Plan Year, a statement in such form as the Company deems desirable, setting forth the balance to the credit of such Participant in his Deferred Benefit Accounts A, B, and C and in his Deferred Benefit Accounts AA, BB, and CC (showing separate calculations for each Interest Yield), in each case, as of the last day of the preceding Plan Year. 6.7 Transfers Between Accounts. Within the limitations of this paragraph 6.7, a Participant may elect, by executing an Account Transfer Request: (1) to transfer all or any portion of his Account A to Account B, (2) to transfer all or any portion of his Account B to Account A, (3) to transfer all or any portion of his Account AA to Account BB, (4) to transfer all or any portion of his Account BB to Account AA, (5) to transfer all or any portion of his Account C to Account A, (6) to transfer all or any portion of his Account C to Account B, (7) to transfer all or any portion of his Account CC to Account AA, and (8) to transfer all or any portion of his Account CC to Account BB. Such election shall be effective on the last day of the calendar month in which the Plan Administrator timely receives the Participant's executed Account Transfer Request. (a) Limitation on Sprint Insiders' Transfer of Share Units. Sprint Insiders may not request any of the foregoing transfers involving transfer into or out of Accounts B or BB more than twice in any Plan Year, and no such transfer may be made unless a period of at least six months shall have elapsed from the effective date of the most recent such transfer (whether it occurred in the current Plan Year or not) to the effective date of the current such transfer. (b) Limitation on Cellular Insiders' Transfer of Cellular Share Units. Cellular Insiders may not request any of the foregoing transfers involving transfers out of Accounts C or CC more than twice in any Plan Year, and no such transfer may be made unless a period of at least six months shall have elapsed from the effective date of the most recent such transfer (whether it occurred in the current Plan Year or not) to the effective date of the current such transfer. (c) Limitations on Other Transfers. Transfers other than those described in paragraphs 6.7(a) or 6.7(b) may not be made more than four times in any Plan Year, and no such transfer may be made unless a period of at least three months shall have elapsed from the effective date of the most recent such transfer (whether it occurred in the current Plan Year or not) to the effective date of the current transfer. ARTICLE VII BENEFITS 7.1 Benefit for Normal or Early Retirement and Termination After Age 55. Subject to paragraph 7.6 below, upon a Participant's (i) retirement after reaching the Normal Retirement Date, or (ii) retirement after reaching the Early Retirement Date, or (iii) termination of employment after attaining age 55, he shall be entitled to a Deferral Benefit equal to the amount of his Retirement Deferred Benefit Account determined under paragraph 6.1 hereof as of the Determination Date coincident with or immediately following such event. 7.2 Termination of Employment Before Age 55. Upon any termination of service of the Participant before age 55 for reasons other than death or Disability, the Employer shall pay to the Participant, as compensation earned for services rendered before his termination of service, a Deferral Benefit equal to the amount of his Termination Deferred Benefit Account determined under paragraph 6.1 hereof. The Termination Deferred Benefit Account of a Participant whose employment has terminated shall be paid in a single sum to the terminated Participant within 30 days following termination of employment, if the aggregate balance of the Deferred Benefit Account(s) of such Participant is $20,000 or less. If such aggregate balance of a Participant's Deferred Benefit Account(s) is more than $20,000, payment shall commence pursuant to the Participant's election in the Participation Agreement. 7.3 Death. If a Participant dies after the commencement of payments of his Deferral Benefit, his Beneficiary shall continue to receive the remaining installments of his Deferred Benefit Account in accordance with the Participant's election pursuant to paragraph 7.6. If a Participant dies while employed, before any payments of a Deferral Benefit, the aggregate amounts deferred under all Participation Agreements shall be determined as follows: (a) In the case of deferrals pursuant to a Participation Agreement first effective before the Transition Date: (1) Deferrals of Incentive Compensation shall be the Retirement Deferred Benefit Account value thereof. (2) Deferrals of Base Salary pursuant to Participation Agreements requiring a total deferral of less than $15,000 per year allocated to Accounts A and AA pursuant to the Participation Agreement as revised on the date of the Participant's death shall be the greater of (i) the Retirement Deferred Benefit Account value thereof or (ii) ten times the amount of the elected annual Base Salary deferral. (3) Deferrals of Base Salary pursuant to Participation Agreements requiring a total deferral of $15,000 or more per year allocated to Accounts A and AA pursuant to the Participation Agreement as revised on the date of the Participant's death shall be determined as follows: (i) that portion of the deferral which totals $15,000 per year shall be the greater of (x) the Retirement Deferred Benefit Account value thereof and (y) ten times the amount of the elected annual Base Salary deferral, and (ii) the portion of such deferral which is in excess of $15,000 per year shall be the Retirement Deferred Benefit Account value of such excess. (4) Deferrals allocated to Accounts B and BB shall be the Retirement Deferred Benefit Account value thereof. (b) In the case of deferrals pursuant to a Participation Agreement first effective on or after the Transition Date, the aggregate amount of all deferrals shall be the Retirement Deferred Benefit Account value of Accounts A and B. The Deferral Benefit shall be payable as provided for in paragraph 7.6. The Deferral Benefit provided above shall be in lieu of all other benefits under this Plan. 7.4 Disability. In the event of Disability while employed by the Employer, before the completion of all deferrals provided for under a Participation Agreement, the Employer shall credit to the disabled Participant's Deferred Benefit Account an amount equal to the amount of the Participant's Agreement to defer during such period of Disability, but not beyond the period elected. In the event of Disability before termination of employment or the Normal Retirement Date, the disabled Participant, unless he otherwise elects under this paragraph, shall be entitled to the amount in his Retirement Deferred Benefit Account (rather than his Termination Deferred Benefit Account) determined under paragraph 6.1 as of the Determination Date next following such Disability, with payments to commence upon attainment of the Participant's Normal Retirement Date in the form specified in paragraph 7.6(a)(2) and/or 7.6(a)(3) over a 15 year period. Before payments commence under the preceding sentence, a Disabled Participant may elect, subject to Committee approval upon good cause shown: (i) to accelerate commencement of the payments to any earlier date, but not sooner than 60 days after the onset of Disability and/or (ii) to change the form of payment permitted under paragraph 7.6(a). 7.5 Suspension of Participation; Failure to Continue Participation. The Committee, in its sole discretion, may suspend the deferral of a Participant's Compensation upon the advanced written request of a Participant on account of financial hardship suffered by that Participant. A Participant must file any request for such suspension on or before the 15th day preceding the regular payment date on which the suspension is to take effect. The Committee, in its sole discretion, shall determine the amount, if any, that will not be deferred by the Participant as a result of the financial hardship. The suspension of any deferrals under this paragraph shall not affect amounts deferred with respect to periods before the effective date of the suspension. A Participant whose deferrals are suspended may not execute a subsequent Participation Agreement that would take effect before the beginning of the third Plan Year following the close of the Plan Year in which the suspension first took effect. In the event the Participant ceases to remain a member of the class of employees who are eligible to participate in this Plan, the Participant may elect to suspend the amount of any remaining deferral commitment in the same manner as described for other suspensions in this paragraph, except that Committee approval shall not be required. 7.6 Form of Benefit Payment. (a) Upon the happening of an event described in paragraphs 7.1, 7.2, 7.3 or 7.4 above, the Employer shall pay to the Participant or his Beneficiary the amount specified in one of the following forms as elected by the Participant in the Participation Agreement filed by the Participant: (1) a lump sum payment at a time designated in the Participation Agreement but no later than the Participant's Normal Retirement Date. (2) with respect to balances in Accounts A and AA, an annual payment of a fixed amount that shall amortize the Deferred Benefit Account balance in equal annual payments of principal and interest over a period from 2 to 20 years. For purposes of determining the amount of the annual payment, the assumed rate of interest on Accounts A and AA shall be the average of the applicable Interest Yield as of each Determination Date for the 60 months preceding the initial annual installment payment. (3) with respect to balances in Accounts B and BB, an annual payment over a period from 2 to 20 years, each such payment having a value, as determined pursuant to paragraph 6.5(a)(6), of the number of Share Units equal to (i) the number of Share Units in the accounts on the Determination Date immediately following the event described in paragraph 7.1, 7.2, 7.3 or 7.4, divided by (ii) the number of annual installments elected. During the period that a Participant is receiving a distribution from Account B or BB, Share Unit dividends will be added to the Accounts in accordance with subparagraph 6.5(a)(3) or 6.5(a)(4) hereof. Such Share Unit dividends shall be valued in the same manner as previously described, and all such Share Units accruing after a distribution from Accounts B or BB is made shall be paid to the Participant with the next distribution from the account. (4) with respect to balances in Accounts C and CC, an annual payment over a period from 2 to 20 years, each such payment having a value, as determined pursuant to paragraph 6.5(b)(6), of the number of Cellular Share Units equal to (i) the number of Cellular Share Units in the accounts on the Determination Date immediately following the event described in paragraph 7.1, 7.2, 7.3 or 7.4, divided by (ii) the number of annual installments elected. During the period that a Participant is receiving a distribution from Account C or CC, Cellular Share Unit dividends will be added to the Accounts in accordance with subparagraph 6.5(b)(3) or 6.5(b)(4) hereof. Such Cellular Share Unit dividends shall be valued in the same manner as previously described, and all such Cellular Share Units accruing after a distribution from Accounts C or CC is made shall be paid to the Participant with the next distribution from the account. (b) A Participant may change the form in which his benefits shall be paid by filing a revised Participation Agreement indicating such change before attaining age 60 and at least 13 months before the date upon which the payments to be made are determined. Such revised Participation Agreement shall be deemed a continuation of the initial Participation Agreement to which it relates for purposes of complying with the provisions of paragraphs 4.2 and 4.3 relating to the minimum and maximum deferrals and the duration of Participation Agreements. No such revised Participation Agreement shall change the amount elected to be deferred in the original Participation Agreement, nor the time elected for commencement of benefit payments. (c) In the absence of a Participant's election under subparagraph 7.6(a), benefits shall be paid in the form specified in subparagraph 7.6(a)(2), 7.6(a)(3), and 7.6(a)(4) over a 15 year period, except as provided in paragraph 7.2. In the event of a Disabled Participant, payment shall be in the form described in paragraph 7.4. 7.7 Withholding; Payroll Taxes. To the extent required by the law in effect at the time payments are made, the Employer shall withhold from payments made hereunder any taxes required to be withheld from an employee's wages for the federal or any state or local government. 7.8 Commencement of Payments. Unless otherwise provided, payments under this Plan shall begin within 60 days following receipt of notice by the Plan Administrator of an event which entitles a Participant (or a Beneficiary) to payments under this Plan, or at such earlier date as may be determined by the Company pursuant to the terms of the Plan. All payments shall be made as of the first day of the month. 7.9 Termination of SpinCo Group Employees. For purposes of this Plan, any Participant who, within the meaning of the Distribution Agreement, is a SpinCo Group Employee immediately after the Distribution Time shall be treated as terminated on the Distribution Time. ARTICLE VIII BENEFICIARY DESIGNATION 8.1 Beneficiary Designation. Each Participant shall have the right, at any time, to designate any person or persons as his Beneficiary or Beneficiaries (both principal as well as contingent) to whom payment under this Plan shall be paid in the event of his death before complete distribution to the Participant of the benefits due him under the Plan. 8.2 Amendments. Any Beneficiary Designation may be changed by a participant by the written filing of such change on a form prescribed by the Company. The filing of a new Beneficiary Designation form will cancel all Beneficiary Designations previously filed. 8.3 No Beneficiary Designation. If a Participant fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant, then the Participant's designated Beneficiary shall be deemed to be the person or persons surviving him in the first of the following classes in which there is a survivor, share and share alike: (a) The surviving Spouse; (b) The Participant's children, except that if any of the children predecease the Participant but leave issue surviving, then such issue shall take by right of representation the share their parent would have taken if living; (c) The Participant's personal representative (executor or administrator). 8.4 Effect of Payment. The payment to the deemed Beneficiary shall completely discharge the Employer's obligations under this Plan. ARTICLE IX AMENDMENT AND TERMINATION OF PLAN 9.1 Amendment. The Board may at any time amend the Plan in whole or in part; provided, however, that no amendment shall be effective to decrease or restrict any Deferred Benefit Account at the time of such amendment. 9.2 Employer's Right to Terminate. The Board may at any time terminate the Plan with respect to new elections to defer if, in its judgment, the continuance of the Plan, the tax, accounting, or other effects thereof, or potential payments thereunder would not be in the best interests of the Company. The Board may also terminate the Plan in its entirety at any time, and upon any such termination, each Participant (a) who is then receiving a Deferral Benefit shall be paid in a lump sum, or over such period of time as determined by the Company, the then remaining balance in his Deferred Benefit Account, and (b) who has not received a Deferral Benefit shall be paid in a lump sum, or over such period of time as determined by the Company, the balance in his Deferred Benefit Account. ARTICLE X MISCELLANEOUS 10.1 Unsecured General Creditor. Participants and their Beneficiaries shall have no legal or equitable rights, interest or claims in any property or assets of the Employer, nor shall they be Beneficiaries of, or have any rights, claims or interests in any life insurance policies, annuity contracts or the proceeds therefrom owned or which may be acquired by the Employer ('Policies'). Such Policies or other assets of the Employer shall not be held under any trust for the benefit of Participants or their Beneficiaries or held in any way as collateral security for the fulfilling of the obligations of the Employer under this Plan. Any and all of the Employer's assets and Policies shall be, and remain, the general, unpledged, unrestricted assets of the Employer. The Employer's obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Employer to pay money in the future. 10.2 Nonassignability. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable. No part of the amounts payable shall, before actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency. 10.3 Not a Contract of Service. The terms and conditions of this Plan shall not be deemed to constitute a contract of service between the Employer and the Participant, and the Participant (or his Beneficiary) shall have no rights against the Employer except as may otherwise be specifically provided herein. Moreover, nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of the Employer or to interfere with the right of the Employer to discipline or discharge him at any time. 10.4 Protective Provisions. A Participant will cooperate with the Employer by furnishing any and all information requested by the Employer, in order to facilitate the payment of benefits hereunder, and by taking such physical examinations as the Employer may deem necessary and taking such other action as may be requested by the Employer. 10.5 Applicable Law. The Plan, and any Participation Agreement related thereto, shall be governed by the laws of the State of Kansas, without regard to the principles of conflicts of law. 10.6 Alcatel Employees. A transfer of employees to the joint venture with Alcatel, N.V. (the "Joint Venture") on December 31, 1993, shall not be treated as a retirement or termination of employment under the Plan. When such transferred employees retire or terminate employment with the Joint Venture (other than by reason of a transfer to employment with the Company or an affiliate of the Company), or if before such retirement or termination of employment, the Company ceases to own at least a 49 percent interest in the Joint Venture (or such lesser percentage as determined by the Organization and Compensation Committee of the Company), the transferred employees shall be considered to have retired or terminated employment. 10.7 STV Employees. A transfer of employees to the Sprint Telecommunications joint venture ("STV") shall not be treated as a retirement or termination of employment under the Plan. When such transferred employees retire or terminate employment with STV (other than by reason of a transfer to employment with the Company or an affiliate of the Company), or if before such retirement or termination of employment, the Company ceases to own at least a 40 percent interest in STV (or such lesser percentage as determined by the Organization and Compensation Committee of the Company), the transferred employees shall be considered to have retired or terminated employment. 10.8 FT and DT Joint Venture Employees. A transfer of employees to one of the joint ventures formed among the Company, France Telecom, and Deutsche Telekom pursuant to the Joint Venture Agreement dated June 22, 1995 (collectively, the "FT-DT Ventures"), shall not be treated as a retirement or termination of employment under the Plan. When such transferred employees retire or terminate employment with such joint venture (other than by reason of a transfer to employment with the Company or an affiliate of the Company or to another of the FT-DT Ventures), or if before such retirement or termination of employment, the Company ceases to own at least the same percentage interest in such venture as it is entitled to own under the Joint Venture Agreement (or such lesser percentage as determined by the Organization and Compensation Committee of the Company), the transferred employees shall be considered to have retired or terminated employment. EX-10 4 AGREEMENT REGARDING SPECIAL COMPENSATION AND POST EMPLOYMENT RESTRICTIVE COVENANTS Exhibit (10)(w) AGREEMENT REGARDING SPECIAL COMPENSATION AND POST EMPLOYMENT RESTRICTIVE COVENANTS THIS AGREEMENT made this 9th day of November, 1993, by and between SPRINT/UNITED MANAGEMENT COMPANY, a Kansas corporation and subsidiary of Sprint Corporation ("Employer"), and GARY D. FORSEE ("Executive"). W I T N E S S E T H: WHEREAS, Employer and its parent and affiliates are engaged in the telecommunications business; WHEREAS, Executive has expertise, experience and capability in the business of Employer and the telecommunications business in general; WHEREAS, Executive has been, and/or now is serving Employer as Senior Vice President, Staff Operations; WHEREAS, Employer desires to enter into this Agreement to provide severance and other benefits for Executive and obtain Executive's agreements regarding confidentiality and post- employment restrictive covenants for Employer; and WHEREAS, Executive is willing to provide such agreements to Employer. NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which consideration is mutually acknowledged by the parties, it is hereby agreed as follows: 1. Recitals. The recitals hereinbefore set forth constitute an integral part of this Agreement, evidencing the intent of the parties in executing this Agreement, and describing the circumstances surrounding its execution. Said recitals are by express reference made a part of the covenants hereof, and this Agreement shall be construed in light thereof. 2. Duties and Responsibilities. The duties and responsibilities of Executive are and shall continue to be of an executive nature as shall be required by Employer in the conduct of its business. Executive's powers and authority shall include all those presently delegated to him or such other duties and responsibilities as from time to time may be assigned to him. Executive recognizes, that during his employment hereunder, he owes an undivided duty of loyalty to Employer, and agrees to devote his entire business time and attention to the performance of said duties and responsibilities and to use his best efforts to promote and develop the business of Employer. 3. Employment Term. Executive's employment may be terminated by either party in accordance with Sections 5, 6, 7, or 8 herein. 4. Compensation and Benefits. During employment, Executive shall be entitled to receive a base annual salary, shall be reimbursed for reasonable expenses incurred and accounted for in accordance with the policies and procedures of Employer, and shall be entitled to vacation pay and other benefits applicable to employees generally, each as may from time to time be established, amended or terminated. In addition, upon execution of this Agreement, Executive shall be awarded five thousand (5,000) shares of restricted stock as set forth in a restricted stock agreement of even date herewith, attached hereto and incorporated herein (the "Restricted Stock Agreement"), shall be entitled to the Special Compensation set forth in Section 6 hereof in accordance with the terms of this Agreement, and shall be entitled, subject to approval of the Organization and Compensation Committee, to participation in the Key Management Benefit Plan in accordance with the terms of said plan. 5. Termination by Employer: Special Compensation. At any time, Employer may terminate Executive's employment for any reason. If Executive's termination is other than pursuant to Section 6, Executive shall, subject to the other provisions of this Section 5, be entitled to the following Special Compensation (as that term is defined in this Section 5) in lieu of any benefits available under any and all Employer separation plans or policies. If Executive's termination is pursuant to Sections 5, 6 or 7, Executive's obligations under Sections 11, 12, 13, and 14 hereof shall continue. For purposes of this Agreement, "Special Compensation" shall consist of : (a) to continue to receive for a period of eighteen (18) months from the date of termination (the "Severance Period") biweekly compensation at the rate equal to the biweekly amount of his base annual salary in effect at the date of termination of employment; (b) to receive a bonus, based on actual performance results, up to the target amount, under the Management Incentive Plan ("MIP") throughout the Severance Period provided that the amount, if any, payable under such Plan for the award period including the last day of the Severance Period shall be pro rated based upon the number of months of the Severance Period that fall within the award period and the total number of months in such award period; (c) to receive an award under the Long Term Incentive Plan, pro rated based on the Executive's last day worked, exclusive of any Severance Period, determined in accordance with the terms of said Plan; (d) acceleration of vesting of restricted stock in accordance with the relevant provisions of the Restricted Stock Agreement; (e) to continue to receive throughout the Severance Period any executive medical, dental, life, and qualified or nonqualified retirement benefits which the Executive was receiving or was entitled to receive at the time of termination, except that long term disability and short term disability benefits cease on the last day worked; (f) outplacement counseling by a firm selected by Employer to continue until Executive becomes employed; and (g) to continue to receive throughout the Severance Period all applicable executive perquisites (including automobile allowance, long distance services and all miscellaneous services) except country club membership dues and accrual of vacation. Employer shall pay or cause to be paid the amounts payable under paragraph (a) above in equal installments, bi-weekly in arrears, and the amount payable under paragraphs (b) and (c) in accordance with the terms of the Plans. All payments pursuant to this Section shall be subject to applicable federal and state income and other withholding taxes. In addition to the Special Compensation described above, Executive shall also be entitled to any vacation pay for vacation accrued by Executive in the calendar year of termination but not taken at the time of termination. In the event Executive becomes employed full time during the Severance Period, Executive's entitlement to continuation of the benefits described in paragraph (e) shall immediately cease, however, Executive shall retain any rights to continue medical insurance coverage under the COBRA continuation provisions of the group medical insurance plan by paying the applicable premium therefor. The payments and benefits provided for in this Section shall be in addition to all other sums then payable and owing to Executive hereunder and, except as expressly provided herein, shall not be subject to reduction for any amounts received by Executive for employment or services provided after termination of employment hereunder, and shall be in full settlement and satisfaction of all of Executive's claims and demands. In all events, Executive's right to receive severance and/or other benefits pursuant to this Section shall cease immediately in the event Executive is re-employed by Employer or an affiliate or Executive breaches his Confidential Information Covenant (as defined in Section 11 hereof), or breaches Sections 12, 13 or 14 hereof. In all cases, Employer's rights under Section 15 shall continue. 6. Voluntary Resignation by Executive; Termination for Cause; Total Disability Upon termination of Executive's employment by either Voluntary Resignation, Termination for Cause (as those terms are defined in this Section 6), or Total Disability, as that term is defined in the Long Term Disability Plan, Executive shall have no right to compensation, severance pay or other benefits described herein but Executive's obligations under Sections 11, 12, 13 and 14 hereof shall continue. (a) Voluntary Resignation by Executive. At any time, Executive has the right, by written notice to Employer, to terminate his services hereunder ("Voluntary Resignation"), effective as of thirty (30) days after such notice. (b) Termination for Cause by Employer. At any time, Employer has the right to terminate Executive's employment. Termination upon the occurrence of any of the following shall be deemed termination for cause ("Termination for Cause"): (i) Conduct by the Executive which reflects adversely on the Executive's honesty, trustworthiness or fitness as an Executive, or (ii) Executive's willful engagement in conduct which is demonstrably and materially injurious to the Employer. For Termination for Cause, written notice of the termination of Executive's employment by Employer shall be served upon Executive and shall be effective as of the date of such service. Such notice given by Employer shall specify the act or acts of Executive underlying such termination. (c) Total Disability. Upon the total disability of the Executive, as that term is defined in the Long Term Disability Plan, Executive shall have no right to compensation or severance pay described herein but shall be entitled to long term disability and other such benefits afforded under the applicable policies and plans. 7. Resignation Following Constructive Discharge. If at any time, except in connection with a termination pursuant to Section 5, 6, or 8 Executive is Constructively Discharged (as that term is defined in this Section 7) then Executive shall have the right, by written notice to Employer within sixty (60) days of such Constructive Discharge, to terminate his services hereunder, effective as of thirty (30) days after such notice. Executive shall in such event be entitled to the compensation and benefits as if such employment were terminated pursuant to Section 5 of this Agreement. For purposes of this Agreement, the Executive shall be "Constructively Discharged" upon the occurrence of any one of the following events: (a) Executive is removed from his position with Employer other than as a result of Executive's appointment to positions of equal or superior scope and responsibility; or (b) Executive's targeted total compensation is reduced by more than 10% (other than across-the-board reductions similarly affecting all officers of the Long Distance Division of Employer). 8. Effect of Change in Control. In the event that within one year of a Change in Control (as that term is defined in this Section 8) Executive's employment is terminated: (a) by the Employer other than pursuant to Section 6 hereof, or, (b) by Executive pursuant to Section 7 hereof, then Executive shall be entitled to the Special Compensation described in Section 5 and shall be bound by Section 11, but shall not have any continuing obligations under Sections 12, 13, and 14, except as otherwise required by common law or statute. For purposes of this Agreement, a "Change in Control" shall be deemed to have occurred if: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")) other than a trustee or other fiduciary holding securities under an employee benefit plan of Sprint Corporation ("Sprint") or any of its affiliates, and other than Sprint or a corporation owned, directly or indirectly, by the stockholders of Sprint in substantially the same proportions as their ownership of stock of Sprint, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Sprint representing 20% or more of the combined voting power of Sprint's then outstanding securities, or (ii) during any period of two consecutive years (not including any period prior to the date of this Agreement), incumbent members cease for any reason to constitute a majority of the members of the Board of Directors of Sprint. A member of the Board of Directors of Sprint shall be an "incumbent member" if such individual is as of the date of this Agreement or at the beginning of the applicable two consecutive year period a member of the Board of Directors of Sprint, and any new director after the date of this Agreement (other than a director designated by person who has entered into an agreement to effect a transaction described in subparagraph (i) above) whose election to the Board or nomination for election by the stockholders of Sprint was approved by a vote of at least two-thirds (2/3) of the directors still in office who either were directors as of the date hereof or as of the first day of the applicable two consecutive year period or whose election or nomination for election was previously so approved. 9. Dispute Resolution. All disputes arising under this Agreement, other than those disputes relating to Executive's alleged violations of Sections 11 through 14 herein, shall be submitted to arbitration by the American Arbitration Association of Kansas City, Missouri. Costs of arbitration shall be borne equally by the parties. The decision of the arbitrators shall be final and there shall be no appeal from any award rendered. Any award rendered may be entered as a judgment in any court of competent jurisdiction. In any judicial enforcement proceeding, the losing party shall reimburse the prevailing party for its reasonable costs and attorneys' fees for enforcing its rights under this Agreement, in addition to any damages or other relief granted. This Section 9 does not apply to any action by Employer to enforce Sections 11 through 14 of this Agreement and does not in any way restrict Employer's rights under Section 15 herein. 10. Enforcement. In the event Employer shall fail to pay any amounts due to Executive under this Agreement as they come due, Employer agrees to pay interest on such amounts at a rate of prime plus two percent (2%) per annum. Employer agrees that Executive and any successor shall be entitled to recover all costs of successfully enforcing any provision of this Agreement, including reasonable attorney fees and costs of litigation. 11. Confidential Information. Executive acknowledges that during the course of his employment he has learned or will learn or develop Confidential Information (as that term is defined in this Section 11). Executive further acknowledges that unauthorized disclosure or use of such Confidential Information, other than in discharge of Executive's duties, will cause Employer irreparable harm. For purposes of this Section, Confidential Information means trade secrets (such as technical and non-technical data, a formula, pattern, compilation, program, device, method, technique, drawing, process) and other proprietary information concerning the products, processes or services of Employer or its parent, and/or affiliates, including but not limited to: computer programs; unpatented inventions, discoveries or improvements; marketing, manufacturing, or organizational research and development; business plans; sales forecasts; personnel information, including the identity of other employees of Employer, their responsibilities, competence, abilities, and compensation; pricing and financial information; current and prospective customer lists and information on customers or their employees; information concerning planned or pending acquisitions or divestitures; and information concerning purchases of major equipment or property, which information: (a) has not been made generally available to the public; and (b) is useful or of value to the current or anticipated business, or research or development activities of Employer or of any customer or supplier of Employer, or (c) has been identified to Employee as confidential by Employer, either orally or in writing. Except in the course of his employment and in the pursuit of the business of Employer or any of its subsidiaries or affiliates, Executive shall not, during the course of his employment, or for a period of eighteen (18) months following termination of his employment for any reason, directly or indirectly, disclose, publish, communicate or use on his behalf or another's behalf, any proprietary information or data of Employer or any of its subsidiaries or affiliates. Executive acknowledges that Employer operates and competes nationally, and that Employer will be harmed by unauthorized disclosure or use of Confidential Information regardless of where such disclosure or use occurs, and that therefore this confidentiality agreement is not limited to any single state or other jurisdiction. 12. Non-Competition. Executive acknowledges that use or disclosure of Confidential Information described in Section 11 is likely if Executive were to perform telecommunications functions relating to long distance services on behalf of a competitor of Employer. Therefore, Executive shall not, for eighteen (18) months following termination of employment for any reason (the "Non-Compete Period"), accept any position, including but not limited to a position in the long distance operations of AT&T or MCI, where the performance of duties in that position will involve managing, controlling, participating in, investing in, acting as consultant or advisor to, rendering services for, or otherwise assisting any person or entity in the long distance business and performing functions relating to long distance services, including all forms of interexchange, interstate, intrastate, interlata and international communications. Executive acknowledges that Employer operates and competes nationally, and that therefore this non-competition agreement is not limited to any single state or other jurisdiction. This section shall not prevent Executive from using general skills and experience developed during employment with Employer or other employers; or from accepting a position of employment with another company, firm, or other organization which competes with Employer, if its business is diversified and Executive is employed in a part of the business that is not related to long distance Services and provided that such position does not require or permit the disclosure or use of Confidential Information. 13. Inducement of Other Employees. For a eighteen (18) month period following termination of employment, Executive will not directly or indirectly solicit, induce or encourage any employee or agent of Employer to terminate his relationship with Employer. 14. Return of Employer's Property. All notes, reports, sketches, plans, published memoranda or other documents created, developed, generated or held by Executive during employment, concerning or related to Employer's business, and whether containing or relating to Confidential Information or not, are the property of Employer and will be promptly delivered to Employer upon termination of Executive's employment for any reason whatsoever. During the course of employment, Executive shall not remove any of the above property containing Confidential Information, or reproductions or copies thereof, or any apparatus from Employer's premises without authorization. 15. Remedies. Executive acknowledges that the restraints and agreements herein provided are fair and reasonable, that enforcement of the provisions of Sections 11, 12, 13 and 14 will not cause him undue hardship and that said provisions are reasonably necessary and commensurate with the need to protect Employer and its legitimate and proprietary business interests and property from irreparable harm. Executive acknowledges that failure to comply with the terms of this Agreement will cause irreparable damage to Employer. Therefore, Executive agrees that, in addition to any other remedies at law or in equity available to Employer for Executive's breach or threatened breach of this Agreement, Employer is entitled to specific performance or injunctive relief, without bond, against Executive to prevent such damage or breach, and the existence of any claim or cause of action Executive may have against Employer will not constitute a defense thereto. Executive further agrees to pay reasonable attorney fees and costs of litigation incurred by Employer in any proceeding relating to the enforcement of the Agreement or to any alleged breach thereof in which Employer shall prevail in whole or in part. In the event of a breach or a violation by Executive of any of the covenants and provisions of this Agreement, the running of the Non-Compete Period (but not of Executive's obligation thereunder), shall be tolled during the period of the continuance of any actual breach or violation. 16. Confidentiality of Agreement. As a specific condition to Executive's right to Special Compensation or other benefits described herein, Executive agrees that he will not disclose or discuss: the existence of this Agreement; the Special Compensation provided hereunder; or any other terms of the Agreement except: (1) to members of his immediate family; (2) to his financial advisor or attorney but then only to the extent necessary for them to assist him; or (3) as required by law or to enforce legal rights. 17. Entire Understanding. This Agreement constitutes the entire understanding between the parties relating to Executive's employment hereunder and supersedes and cancels all prior written and oral understandings and agreements with respect to such matters, except for the terms and provisions of the Key Management Benefit Plan and any other employee benefit or other compensation plans (or any agreements or awards thereunder) referred to in or contemplated by this Agreement and except for the SPRINT UNITED EMPLOYEE AGREEMENT REGARDING PROPERTY RIGHTS AND BUSINESS PRACTICES which the Executive has signed and by which Executive continues to be bound. 18. Binding Effect. This Agreement shall be binding upon and inure to the benefit of Executive's executors, administrators, legal representatives, heirs and legatees and the successors and assigns of Employer. 19. Partial Invalidity. The various provisions of this Agreement are intended to be severable and to constitute independent and distinct binding obligations. Should any provision of this Agreement be determined to be void and unenforceable, in whole or in part, it shall not be deemed to affect or impair the validity of any other provision or part thereof, and such provision or part thereof shall be deemed modified to the extent required to permit enforcement. Without limiting the generality of the foregoing, if the scope of any provision contained in this Agreement is too broad to permit enforcement to its full extent, but may be made enforceable by limitations thereon, such provision shall be enforced to the maximum extent permitted by law, and Executive hereby agrees that such scope may be judicially modified accordingly. 20. Strict Construction. The language used in this Agreement will be deemed to be the language chosen by Employer and Executive to express their mutual intent and no rule of strict construction shall be applied against any person. 21. Waiver. The waiver of any party hereto of a breach of any provision of this Agreement by any other party shall not operate or be construed as a waiver of any subsequent breach. 22. Notices. Any notice or other communication required or permitted to be given hereunder shall be determined to have been duly given to any party (a) upon delivery to the address of such party specified below if delivered personally or by courier; (b) upon dispatch if transmitted by telecopy or other means of facsimile, provided a copy thereof is also sent by regular mail or courier; or (c) within forty-eight (48) hours after deposit thereof in the U.S. mail, postage prepaid, for delivery as certified mail, return receipt requested, addressed, in any case to the party at the following address(es) or telecopy numbers: If to Executive: Gary D. Forsee Sprint Communications Company, L.P. 8140 Ward Parkway Kansas City, MO 64114 If to Employer and/or Company: Sprint Corporation 2330 Shawnee Mission Parkway Westwood, KS 66205 Attention: Corporate Secretary or to such other address(es) or telecopy number(s) as any party may designate by Written Notice in the aforesaid manner. 23. Governing Law. This Agreement shall be governed by, and interpreted, construed and enforced in accordance with, the laws of the State of Kansas. 24. Gender and Number. Wherever from the context it appears appropriate, each term stated in either the singular of plural shall include the singular and the plural, and the pronouns stated in either the masculine, the feminine or the neuter gender shall include the masculine, feminine or neuter. 25. Headings. The headings of the Sections of this Agreement are for reference purposes only and do not define or limit, and shall not be used to interpret or construe the contents of this Agreement. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed at Westwood, Kansas, on the date above set forth. GARY D. FORSEE SPRINT/UNITED MANAGEMENT COMPANY /s/Gary D. Forsee By:/s/B. Watson Authorized Officer AMENDMENT The Agreement Regarding Special Compensation and Post Employment Restrictive Covenants (the "Special Agreement") between Sprint/United Management Company and Gary D. Forsee (the "Executive") is hereby amended as follows, effective January 3, 1994: 1. The first sentence of Section 8 shall be changed by adding the word "or" at the end of item (b) and by adding the following item (c): (c) by Executive if Executive is required to be based anywhere other than the Kansas City metropolitan area or the Dallas, Texas metropolitan area except for required travel on business to an extent substantially consistent with Executive's business travel obligations immediately prior to the Change in Control; 2. Section 12 shall be changed by: (a) deleting from the second sentence of the first paragraph the words "the performance of duties in that position will involve", and substituting in lieu thereof the words "Executive dedicates his time and efforts principally to"; and (b) changing the last sentence of the Section to read: This section shall not prevent Executive from using general skills and experience developed during employment with Employer or other employers; or from accepting a position of employment with another company, firm, or other organization which competes with Employer, if its business is diversified and Executive is employed in a part of the business that is not related principally to long distance services and provided that such position does not require or permit the disclosure or use of Confidential Information. Except as amended herein, the terms of the Special Agreement shall remain in effect. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed at Westwood, Kansas, as of the date above set forth. EXECUTIVE SPRINT/UNITED MANAGEMENT COMPANY /s/ Gary D. Forsee By: /s/ B. Watson 1/10/94 Title: SVP - HR EX-10 5 DIRECTORS' DEFERRED FEE PLAN Exhibit (10)(x) Directors' Deferred Fee Plan (as amended through December 12, 1995) ARTICLE I PURPOSE The purpose of the Sprint Corporation Directors' Deferred Fee Plan (hereinafter referred to as the "Plan") is to provide funds upon termination of service or death for Directors (and their beneficiaries) of Sprint Corporation and its subsidiaries. It is intended that the Plan will aid in retaining and attracting Directors of exceptional ability by providing such Directors with a means to supplement their standard of living. ARTICLE II DEFINITIONS For the purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the context clearly indicates otherwise: 2.1 Account Transfer Request. "Account Transfer Request" means a written notice, in a form prescribed by the Company, by a Participant to transfer all or any portion of one Deferred Benefit Account to another Deferred Benefit Account as provided for in paragraph 6.7. 2.2 Beneficiary. "Beneficiary" means the person, persons, or entity designated by the Participant, as provided in Article VIII, to receive any benefits payable under the Plan. Any Participant Beneficiary Designation shall be made in a written instrument filed with the Company and shall become effective only when received, accepted, and acknowledged in writing by the Company. 2.3 Board "Board" means the Board of Directors of the Company. 2.4 Cellular. "Cellular" means Sprint Cellular Company, however renamed, or any successor thereto. 2.5 Cellular Insider. "Cellular Insider" means, as of any time when the determination thereof is relevant, any Participant subject to liability under Section 16 of the Securities Exchange Act of 1934 with respect to trading in the equity securities of Cellular. 2.6 Cellular Share Unit. "Cellular Share Unit" means a measure of participation under the Plan having a value based on the market value of one share of common stock of Cellular after the distribution thereof by the Company to the Company's shareholders. 2.7 Committee. "Committee" means the Organization and Compensation Committee of the Board. 2.8 Company. "Company" means Sprint Corporation, or any successor thereto. 2.9 Deferral Benefit. "Deferral Benefit" means the benefit payable to a Participant on his death or termination of service as a Director, as calculated in Article VII hereof. 2.10 Deferred Benefit Account. "Deferred Benefit Account" means the accounts maintained on the books of account of the Company for each Participant pursuant to Article VI. Separate Deferred Benefit Accounts shall be maintained for each Participant. More than one Deferred Benefit Account shall be maintained for each Participant to reflect (a) separate deferral elections made pursuant to separately executed Participation Agreements as provided in paragraph 4.3, and (b) Account A, Account B, Account C, Account AA, Account BB, and Account CC elections made by each Participant in each such Participation Agreement. A Participant's Deferred Benefit Account shall be used solely as a device for the measurement and determination of the amounts to be paid to the Participant pursuant to this Plan. A Participant's Deferred Benefit Account shall not constitute or be treated as a trust fund of any kind. 2.11 Determination Date. "Determination Date" means the date on which the amount of a Participant's Deferred Benefit Account is determined as provided in Article VI hereof. The last day of each calendar month shall be a Determination Date. 2.12 Director. "Director" means a member of the Board of Directors of the Company or its subsidiaries who is not an employee of the Company or its subsidiaries. 2.13 Distribution Agreement. "Distribution Agreement" means the agreement entered into by the Company, Cellular, and Centel Corporation for the purpose of providing for the distribution by the Company of its stock in Cellular to the Company's stockholders. 2.14 Distribution Dividend Rate. "Distribution Dividend Rate" means the Dividend Rate as defined in the Distribution Agreement. 2.15 Distribution Time. "Distribution Time" is defined in the Distribution Agreement. 2.16 Fee. "Fee" means any cash compensation paid to a Director for his services as a Director other than a distribution under this Plan. 2.17 Interest Yield. "Interest Yield" means, with respect to any calendar month, (a) in the case of balances in Account AA, three percentage points over the composite yield on Moody's Seasoned Corporate Bond Yield Index for the preceding calendar month as determined from Moody's Bond Record published by Moody's Investors Services, Inc. (or any successor thereto), or, if such monthly yield is no longer published, a substantially similar average selected by the Company, (b) in the case of balances in Account A, the greater of (i) the prime rate in effect at Citibank, N.A., at the opening of business on the first business day of the month, or if said bank, for any reason, no longer publishes its prime rate, the prime rate similarly determined of another major bank selected by the Company and (ii) six percent per annum. 2.18 Participant. "Participant" means any Director who elects to participate by filing a Participation Agree ment as provided in Article IV. 2.19 Participation Agreement. "Participation Agreement" means the agreement, in a form prescribed by the Company, filed by a Participant before the beginning of the first period in which the Participant's Fees are to be deferred pursuant to the Plan. A new Participation Agreement shall be filed by the Participant for each separate fee deferral election. 2.20 Plan. "Plan" means the Sprint Corporation Directors' Deferred Fee Plan as set forth in this document. This Plan is the successor to, and comprises an amendment and revision of, the United Telecommunications, Inc., 1985 Directors' Deferred Fee Plan adopted February 12, 1985. 2.21 Plan Administrator. "Plan Administrator" means the person appointed by the Company to represent the Company in the administration of this Plan. 2.22 Plan Year. "Plan Year" means a twelve-month period commencing May 1st and ending the following April 30th. The first Plan Year shall commence on May 1, 1985. 2.23 Share Unit. "Share Unit" means a measure of participation under the Plan having a value based on the market value of a share of common stock of the Company. 2.24 Spouse. "Spouse" means a Participant's wife or husband who was lawfully married to the Participant upon the Participant's death or severance from service. 2.25 Transition Date. "Transition Date" means May 1, 1990. ARTICLE III ADMINISTRATION 3.1 Plan Administrator; Company and Committee; Duties. This Plan shall be administered by the Plan Administrator. Decisions of the Plan Administrator may be reviewed by the Company through the Committee. Members of the Committee may be Participants under this Plan. The Company shall also have the authority to make, amend interpret, and enforce all appropriate rules and regulations for the administration of this Plan and decide or resolve any and all questions including interpretations of this Plan as may arise in connection with the Plan. 3.2 Binding Effect of Decisions. The decision or action of the Company in respect to any question aris ing out of or in connection with the administration, interpretation, and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan unless a written appeal is received by the Company within sixty days of the disputed action. The appeal will be reviewed by the Committee, and its decision shall be final, conclusive, and binding on the Participant and on all persons claiming by, through, or under the Participant. ARTICLE IV PARTICIPATION 4.1 Participation. Participation in the Plan shall be limited to Directors, under age 70, who elect to participate in the Plan by filing a Participation Agreement with the Company. Except as provided below, a Participation Agreement must be filed before the April 15th immediately preceding the Plan Year in which the Participant's participation under the agreement will commence, and the election to participate shall be effective on the first day of the Plan Year following receipt by the Company of a properly completed and executed Participation Agreement. With respect to an individual becoming a Director during a Plan Year who thereby becomes eligible to participate herein, an initial Participation Agreement may be filed within 30 days of the Company's notification to him of his eligibility to participate, and such election to participate shall be effective on the first day of the month following the Company's receipt thereof, except that elections not received by the Company before the 15th day of any calendar month shall be effective no earlier than the first day of the second month following the month of receipt. 4.2 Amount of Deferral and Length of Participation. A Participant may elect in any Participation Agreement to defer up to 100% of the Fees that are expected at the time of election to be earned over a period of (1) for Participation Agreements first effective before the Transition Date, either 4 or 8 Plan Years, and (2) for Participation Agreements first effective on or after the Transition Date, one Plan Year, provided, the minimum amount of Fees that may be deferred shall, in either case, be $5,000 per year or 100% of Fees payable, whichever is less. (a) The deferral percentage in each Participation Agreement shall be applied to the Participant's Fees as they are payable during the period of election. (b) A Participant's election to defer his Fees shall be irrevocable upon the filing of the respective Participation Agreement; provided, however, that the deferral of Fees under any Participation Agreement may be suspended or amended as provided in paragraphs 7.3 or 9.1. 4.3 Additional Participation Agreements. A Participant may enter into additional Participation Agreements by filing a Participation Agreement with the Company before April 15th of any calendar year, stating the amount that the Participant elects to have deferred. Such additional agreements shall be effective as to Fees paid in Plan Years beginning after the last day of the Plan Year in which the respective agreement is filed with the Company. Each additional Participation Agreement is subject to all of the provisions and requirements set forth in paragraph 4.2. In the event a Participant elects to defer Fees pursuant to a new Participation Agreement, the new election shall be treated as an arrangement for which a separate Deferred Benefit Account shall be maintained and separate Deferral Benefits shall be payable. ARTICLE V DEFERRED FEES 5.1 Elective Deferred Fees. The amount of Fees that a Participant elects to defer in the Participation Agreement executed by the Participant, with respect to each Plan Year of participation in the Plan, shall be credited by the Company to the Participant's Deferred Benefit Account throughout each Plan Year as the Participant is paid. The amount credited to a Participant's Deferred Benefit Account shall equal the amount deferred. To the extent that the Company is required to withhold any taxes or other amounts from the Directors' deferred Fees pursuant to any state, federal or local law, such amounts shall be taken out of the Participant's Fees. 5.2 Vesting of Deferred Benefit Account. A Participant shall be 100% vested in the Deferred Benefit Account. ARTICLE VI DEFERRED BENEFIT ACCOUNT 6.1 Determination of Account. Each Participant's Deferred Benefit Account, as of each Determination Date, shall consist of the balance of the Participant's Deferred Benefit Account as of the immediately preceding Determination Date plus the Participant's elective deferred Fees withheld since the immediately preceding Determination Date pursuant to paragraph 5.1 and plus amounts credited to the Participant's Deferred Benefit Account pursuant to paragraphs 6.4 and 6.5. The Deferred Benefit Account of each Participant shall be reduced by the amount of all distributions, if any, made from such Deferred Benefit Account since the preceding Determination Date. 6.2 Type of Deferral. A Participant may elect to have any portion of the amount deferred credited to either Account A (fixed income return) or to Account B (Share Units). The initial election shall be made by a properly executed Participation Agreement. With respect to a Participation Agreement first effective before the Transition Date, an election to defer any amount to Account A shall be treated as an election to defer to Account AA, except as set forth below. An election to change the apportionment of deferred amounts between Accounts A and B may be made by a Participant filing with the Plan Administrator a revised Participation Agreement indicating such change on or before April 15th of each calendar year. The revised Participation Agreement shall be deemed a continuation of the initial Participation Agreement to which it relates for purposes of complying with the provisions of paragraphs 4.2 and 4.3 relating to the minimum and maximum deferrals and duration of the Participation Agreement. The revised Participation Agreement shall be effective for Plan Years beginning after the date it is filed. Deferrals in such Plan Years shall be credited in accordance with the election of the revised Participation Agreement, provided, however, that with respect to Participation Agreements first effective before the Transition Date, an election to allocate a portion of deferrals to Account A in excess of the portion allocated in the Participation Agreement to be deferred into the fixed income account as of May 1, 1989, shall be deemed to be an election by the Participant to allocate to Account AA a portion of deferrals equal to the portion so allocated to the fixed income account on May 1, 1989, and to allocate to Account A the portion in excess of such portion. 6.3 Creation of Accounts AA, BB, C, and CC. (a) Accounts AA and BB. As of the start of business on the Transition Date, all amounts standing to the credit of each Participant in Account A shall be transferred to an Account AA. As of the start of business on the Transition Date, amounts standing to the credit of each Participant in Account B that are attributable to prior transfers from Account A into Account B shall he transferred to an Account BB. The amount of such transfers shall be an amount equal to the sum of the dollar amount of all transfers from Account A to Account B during the period beginning on the effective date of the Participation Agreement and ending on the Transition Date. For all purposes of this Plan, except as otherwise noted in this Plan, Account AA shall be treated in the same manner as Account A, and Account BB shall be treated in the same manner as Account B. Fees earned by Directors on or after the Transition Date subject to deferral under a Participation Agreement first effective before the Transition Date shall be credited to Accounts AA and B (in accordance with the Participant's election to allocate such deferrals to Accounts A or B, respectively, in such Participation Agreements) for such Participation Agreement. (b) Accounts C and CC. On the Determination Date first following the Distribution Time, there shall be credited to an Account C and CC, created for each Participant having a positive balance in an Account B or BB with respect to any Plan Year, a number of Cellular Share Units determined as follows: (1) one Cellular Share Unit in Account C for each Distribution Dividend Rate number of Share Units in Account B for such Participant for such Plan Year as of the Distribution Time; and (2) one Cellular Share Unit in Account CC for each Distribution Dividend Rate number of Share Units in Account BB for such Participant for such Plan Year as of the Distribution Time. 6.4 Maintenance of Accounts A and AA. As of each Determination Date, the Participant's Deferred Benefit Accounts A and AA shall be increased by the amount of interest earned since the preceding Determination Date based on the Interest Yield. Interest shall be credited on the average of the balances of the Deferred Benefit Account on the Determination Date (before crediting the interest) and on the last preceding Determination Date, but after the Deferred Benefit Account has been adjusted for any contributions or distributions to be credited or deducted for each such day. 6.5 Maintenance of Share Unit Accounts. Accounts B and BB and Accounts C and CC shall maintain balances in Share Units and Cellular Share Units, respectively. (a) Maintenance of Accounts B and BB. (1) Conversion between Dollar Amounts and Share Units in Accounts B and BB. When an amount is to be added to a Participant's Deferred Benefit Accounts B or BB, it shall be converted into Share Units, or fractions thereof, by dividing the amount to be credited by the closing price of the Company's common stock as reported by the New York Stock Exchange on the last trading day on or before the Determination Date. When a number of Share Units is to be subtracted from a Participant's Deferred Benefit Accounts B or BB, such number of Share Units shall be converted into a dollar amount by multiplying such number of Share Units by the closing price of the Company's common stock as reported by the New York Stock Exchange on the last trading day on or before the Determination Date. (2) Dividends on Grandfathered Share Units. With respect to balances in Accounts B and BB as of April 30, 1991, when a dividend is declared and paid by the Company on its common stock, an amount shall be credited to the Participant's Accounts B and BB as though the same dividend had been paid on the Share Units in such accounts as of the Determination Date immediately preceding the declaration of the dividend, and such amount shall be converted to Share Units. Such amount shall be valued as of the Determination Date immediately preceding the declaration of the dividend. (3) Dividends on Other Share Units. With respect to Share Units resulting from deferrals or transfers from Account A or Account AA into Account B or Account BB on or after May 1, 1991 ("Post May 1, 1991, Share Units"), when a cash dividend is declared and paid by the Company on its common stock an amount shall be credited to the Participant's Account A or Account AA, as appropriate, as though the same dividend had been paid on the Post May 1, 1991, Share Units as of the Determination Date immediately preceding the declaration of the dividend. (4) Effect of Recapitalization. In the event of a stock dividend, stock split, or other corporate reorganization involving the Company's common stock, the Company shall make equitable adjustment to the number of Share Units credited to a Participant's Accounts B and BB as may be necessary to give effect to such change in the Company's capital structure. (5) Conversion of Share Units to Dollars on Dis tribution. Share Units in Accounts B and BB shall be converted to an equivalent dollar amount before any distribution thereof to a Participant pursuant to Article VII. For purposes of distribution, the value of a Share Unit shall be the average closing price of the Company's common stock on the New York Stock Exchange on the last trading day of each of the 12 calendar months immediately preceding the date of distribution. If a Participant elects payment in other than a lump sum, Share Units shall be so converted to a dollar amount with respect to each payment made in the distribution. During the period of distribution, dividends and other equitable adjustments shall be credited to the Participant's Accounts A, AA, B, and BB in accordance with paragraphs 6.5(a)(2), 6.5(a)(3), and 6.5(a)(4). (b) Maintenance of Accounts C and CC. (1) Conversion between Dollar Amounts and Cellular Share Units in Accounts C and CC. When an amount is to be added to a Participant's Deferred Benefit Accounts C or CC, it shall be converted into Cellular Share Units, or fractions thereof, by dividing the amount to be credited by the market value of a share of Cellular's common stock on the Determination Date. When a number of Cellular Share Units is to be subtracted from a Participant's Deferred Benefit Accounts C or CC, such number of Cellular Share Units shall be converted into a dollar amount by multiplying such number of Cellular Share Units by the closing price of Cellular's common stock as reported by the New York Stock Exchange on the last trading day on or before the Determination Date. (2) Dividends on Cellular Share Units. With respect to balances in Accounts C and CC, when a dividend is declared and paid by Cellular on its common stock, an amount shall be credited to the Participant's Accounts C and CC as though the same dividend had been paid on the Cellular Share Units in such accounts as of the Determination Date immediately preceding the declaration of the dividend, and such amount shall be converted to Cellular Share Units. Such amount shall be valued as of the Determination Date immediately preceding the declaration of the dividend. (3) Effect of Recapitalization. In the event of a stock dividend, stock split, or other corporate reorganization involving the Company's common stock, the Company shall make equitable adjustment to the number of Cellular Share Units credited to a Participant's Accounts C and CC as may be necessary to give effect to such change in the Employer's capital structure. (4) Conversion of Cellular Share Units to Dollars on Distribution. Cellular Share Units in Accounts C and CC shall be converted to an equivalent dollar amount before any distribution thereof to a Participant pursuant to Article VII. For purposes of distribution, the value of a Share Unit shall be the average closing price of the Company's common stock on the New York Stock Exchange on the last trading day of each of the (i) 12 calendar months immediately preceding the date of distribution or (ii) the smaller number of calendar months elapsed from the Distribution Time to such distribution. If a Participant elects payment in other than a lump sum, Cellular Share Units shall be so converted to a dollar amount with respect to each payment made in the distribution. During the period of distribution, dividends and other equitable adjustments shall be credited to the Participant's Accounts A, AA, C, and CC in accordance with paragraphs 6.5(b)(2) and 6.5(a)(3). 6.6 Statement of Accounts. The Company shall submit to each Participant, within 120 days after the close of each Plan Year, a statement in such form as the Company deems desirable, setting forth the balance to the credit of such Participant in his Deferred Benefit Accounts A and AA, B and BB, and C and CC, in each case as of the last day of the preceding Plan Year. 6.7 Transfer Between Accounts. Within the limitations of this paragraph 6.7, a Participant may elect, by executing an Account Transfer Request: (1) to transfer all or any portion of his Account A to Account B, (2) to transfer all or any portion of his Account B to Account A, (3) to transfer all or any portion of his Account AA to Account BB, (4) to transfer all or any portion of his Account BB to Account AA, (5) to transfer all or any portion of his Account C to Account A, (6) to transfer all or any portion of his Account C to Account B, (7) to transfer all or any portion of his Account CC to Account AA, and (8) to transfer all or any portion of his Account CC to Account BB. Such election shall be effective on the last day of the calendar month in which the Plan Administrator timely receives the Participant's executed Account Transfer Request. (a) Limitation on Sprint Insiders' Transfer of Share Units. Sprint Insiders may not request any of the foregoing transfers involving transfer into or out of Accounts B or BB more than twice in any Plan Year, and no such transfer may be made unless a period of at least six months shall have elapsed from the effective date of the most recent such transfer (whether it occurred in the current Plan Year or not) to the effective date of the current such transfer. (b) Limitation on Cellular Insiders' Transfer of Cellular Share Units. Cellular Insiders may not request any of the foregoing transfers involving transfers out of Accounts C or CC more than twice in any Plan Year, and no such transfer may be made unless a period of at least six months shall have elapsed from the effective date of the most recent such transfer (whether it occurred in the current Plan Year or not) to the effective date of the current such transfer. (c) Limitations on Other Transfers. Transfers other than those described in paragraphs 6.7(a) or 6.7(b) may not be made more than four times in any Plan Year, and no such transfer may be made unless a period of at least three months shall have elapsed from the effective date of the most recent such transfer (whether it occurred in the current Plan Year or not) to the effective date of the current transfer. ARTICLE VII BENEFITS 7.1 Termination of Service as Director. Subject to paragraph 7.4 below, upon any termination of service of the Participant for reasons other than his death, the Company shall pay to the Participant a Deferral Benefit equal to the amount of his Deferred Benefit Account determined under paragraph 6.1 thereof. 7.2 Death. If a Participant dies after the commencement of payments of his Deferral Benefit, his Beneficiary shall continue to receive the remaining balance of his Deferred Benefit Account in accordance with the Participant's election pursuant to paragraph 7.4. If a Participant dies before any payments of a Deferral Benefit, the amounts deferred under each Participation Agreement shall be determined separately as follows: (a) deferrals allocated to Accounts A, B, BB, C, and CC shall be the Deferred Benefit Account values thereof and (b) deferrals allocated to Account AA shall be the greater of (i) the Deferred Benefit Account value thereof and (ii) ten times the amount of the elected annual fee deferral allocated to Account AA pursuant to the Participation Agreement as revised on the date of the Participant's death, subject to such conditions relating to the Participant's health as the Company may impose. The Deferral Benefit shall be payable as provided for in paragraph 7.4. The Deferral Benefit provided above shall be in lieu of all other benefits under this Plan. 7.3 Suspension of Participation; Failure to Continue Participation. The Committee, in its sole discretion, may suspend the deferral of a Participant's Fees upon the advanced written request of a Participant on account of financial hardship suffered by that Participant. A Participant must file any request for such suspension on or before the 15th day preceding the regular payment date on which the suspension is to take effect. The Committee, in its sole discretion, shall determine the amount, if any, that will not be deferred by the Participant as a result of the financial hardship. The suspension of any deferrals under this paragraph shall not affect amounts deferred with respect to periods before the effective date of the suspension. A Participant whose deferrals are suspended may not execute a subsequent Participation Agreement that would take effect before the beginning of the third Plan Year following the close of the Plan Year in which the suspension first took effect. 7.4 Form of Benefit Payment (a) Upon the happening of an event described in paragraphs 7.1 or 7.2 above, the Company shall pay to the Participant or his Beneficiary the amount specified therein in one of the following forms as elected by the Participant in the Participation Agreement filed by the Participant: (1) a lump sum payment at a time designated in the Participation Agreement but no later than the applicable Company's mandatory termination date for Directors. (2) with respect to balances in Accounts A and AA, an annual payment of a fixed amount that shall amortize the Deferred Benefit Account balance in equal annual payments of principal and interest over a period from 2 to 20 years. For purposes of determining the amount of the annual payment, the assumed rate of interest on Accounts A and AA shall be the average of the applicable Interest Yield as of each Determination Date for the 60 months preceding the initial annual installment payment. (3) with respect to balances in Accounts B and BB, an annual payment over a period from 2 to 20 years. Each payment shall be the value, as determined pursuant to paragraph 6.5(a)(5), of the number of Share Units equal to (i) the number of Share Units in the accounts on the Determination Date immediately following the event described in paragraphs 7.1 or 7.2, divided by (ii) the number of annual installments elected. During the period that a Participant is receiving a distribution from Account B or BB, Share Unit dividends will be added to the Accounts in accordance with subparagraph 6.5(a)(2) or 6.5(a)(3) hereof. Such Share Unit dividends shall be valued in the same manner as previously described, and all such Share Units accruing after a distribution from Accounts B or BB is made shall be paid to the Participant with the next distribution from the account. (4) With respect to balances in Accounts C and CC, an annual payment over a period from 2 to 20 years. Each payment shall be the value, as determined pursuant to paragraph 6.5(b)(4), of the number of Cellular Share Units equal to (i) the number of Cellular Share Units in the accounts on the Determination Date immediately following the event described in paragraphs 7.1 or 7.2, divided by (ii) the number of annual installments elected. During the period that a Participant is receiving a distribution from Account C or CC, Share Unit dividends will be added to the Accounts in accordance with subparagraph 6.5(b)(2) hereof. Such Cellular Share Unit dividends shall be valued in the same manner as previously described, and all such Cellular Share Units accruing after a distribution from Accounts C or CC is made shall be paid to the Participant with the next distribution from the account. (b) A Participant may change the form in which his benefits shall be paid by filing a revised Participation Agreement indicating such change at least 13 months before the date upon which the initial payment to be made is determined. Such revised Participation Agreement shall be deemed a continuation of the initial Participation Agreement to which they relate for purposes of complying with the provisions of paragraphs 4.2 and 4.3 relating to the minimum and maximum deferrals and duration of the Participation Agreements. No such revised Participation Agreement shall change the amount elected to be deferred in the original Participation Agreement nor the time elected for commencement of benefit payments. (c) In the absence of a Participant's election under subparagraph 7.4(a), benefits shall be paid in the form specified in subparagraphs 7.4(a)(2), 7.4(a)(3), and 7.4(a)(4) over a 15 year period. 7.5 Commencement of Payments. Unless otherwise provided, payments under this Plan shall begin within 60 days following receipt of notice by the Company of an event that entitles a Participant (or a Beneficiary) to payments under this Plan, or at such earlier date as may be determined by the Company pursuant to the terms of the Plan. All payments shall be made as of the first day of the month. ARTICLE VIII BENEFICIARY DESIGNATION 8.1 Beneficiary Designation. Each Participant shall have the right, at any time, to designate any person or persons as his Beneficiary or Beneficiaries (both principal as well as contingent) to whom payment under this Plan shall be paid in the event of his death before complete distribution to the Participant of the benefits due him under the Plan. 8.2 Amendments. Any Beneficiary Designation may be changed by a Participant by the written filing of such change on a form prescribed by the Company. The filing of a new Beneficiary Designation form will cancel all Beneficiary Designations previously filed. 8.3 No Beneficiary Designation. If a Participant fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant, then the Participant's designated Beneficiary shall be deemed to be the person or persons surviving him in the first of the following classes in which there is a survivor, share and share alike: (a) The surviving Spouse; (b) The Participant's children, except that if any of the children predecease the Participant but leave issue surviving, then such issue shall take by right of representation the share their parent would have taken if living; (c) The Participant's personal representative (executor or administrator). 8.4 Effect of Payment. The payment to the deemed Beneficiary shall completely discharge the Company's obligations under this Plan. ARTICLE IX AMENDMENT AND TERMINATION OF PLAN 9.1 Amendment. The Board may at any time amend the Plan in whole or in part; provided, however, that no amendment shall be effective to decrease or restrict any Deferred Benefit Account at the time of such amendment. 9.2 Employer's Right to Terminate. The Board may at any time terminate the Plan with respect to new elections to defer if, in its judgment, the continuance of the Plan, the tax, accounting, or other effects thereof, or potential payments thereunder would not be in the best interests of the Company. The Board may also terminate the Plan in its entirety at any time, and upon any such termination, each Participant (a) who is then receiving a Deferral Benefit shall be paid in a lump sum, or over such period of time as determined by the Company, the then remaining balance in his Deferred Benefit Account, and (b) who has not received a Deferral Benefit shall be paid in a lump sum, or over such period of time as determined by the Company, the balance in his Deferred Benefit Account. ARTICLE X MISCELLANEOUS 10.1 Unsecured General Creditor. Participants and their Beneficiaries shall have no legal or equitable rights, claims, or interests in any property or assets of the Company, nor shall they be Beneficiaries of, or have any rights, claims, or interests in any life insurance policies, annuity contracts or the proceeds therefrom owned or that may be acquired by the Company ("Policies"). Such Policies or other assets of the Company shall not be held under any trust for the benefit of Participants or their Beneficiaries or held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan. Any and all of the Company's assets and Policies shall be and remain the general, unpledged, unrestricted assets of the Company. The Company's obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Employer to pay money in the future. 10.2 Nonassignability. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable. No part of the amounts payable shall, before actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony, or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency. 10.3 Not a Contract of Service. The terms and conditions of this Plan shall not be deemed to constitute a contract of service between the Company and the Participant, and the Participant (or his Beneficiary) shall have no rights against the Company except as may otherwise be specifically provided herein. Moreover, nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of the Company. 10.4 Protective Provisions. A Participant will cooperate with the Company by furnishing any and all information requested by the Company, in order to facilitate the payment of benefits hereunder, by taking such physical examinations as the Company may deem necessary, and by taking such other action as may be requested by the Company. 10.5 Applicable Law. The Plan, and any Participation Agreement related thereto, shall be governed by the laws of the State of Kansas, without regard to the principles of conflicts of law. EX-10 6 SUMMARY Exhibit (10)(aa) SUMMARY OF EXECUTIVE OFFICER AND BOARD OF DIRECTORS BENEFITS
Description Eligible Positions Amount/Schedule of Benefit Automobile Chief Executive Officer $1,500/month Allowance Chief Operating Officer $1,300/month Division Presidents $1,100/month and Executive Vice Presidents Senior Vice Presidents $1,000/month Vice Presidents $900/month Assistant Vice Presidents $700/month Club Membership Chief Executive Officer, Dues approved Chief Operating Officer, at discretion of Division Presidents CEO and Executive Vice Presidents Senior Vice Presidents Dues approved at discretion of Executive Vice Presidents Sprint Long- Board of Directors, Chief Unlimited Distance Executive Officer, Telephone Chief Operating Officer, Service Division Presidents, Executive and Senior Vice Presidents Miscellaneous Chief Executive Officer $15,000/year services and Chief Operating (e.g., Officer investment/tax Division Presidents and $12,000/year counseling, Executive Vice income tax Presidents preparation, Senior Vice Presidents $10,000/year estate Vice Presidents and $3,500 initially planning) Assistant Vice and Presidents $1,500/year Disability Chief Executive Officer, 52 weeks at Chief Operating full base pay Officer, Division Presidents, Executive and Senior Vice Presidents, Vice Presidents and Assistant Vice Presidents Separation Chief Executive Officer, Less than 5 Chief Operating years' services: Officer, Division 17 weeks' Presidents, Executive salary and Senior Vice continuation Presidents, Vice 5 to 10 years' Presidents and service Assistant Vice 35 weeks' Presidents salary continuation 11 to 18 years' service 43 weeks' salary continuation More than 19 years' service: 1 year salary continuation
EX-11 7 COMPUTATION OF EARNINGS PER COMMON SHARE
EXHIBIT (11) SPRINT CORPORATION COMPUTATION OF EARNINGS PER COMMON SHARE (In Millions, Except Per Share Data) For the Years Ended December 31, ---------------------------------------------- 1995 1994 1993 - ------------------------------------------------------------------- -- ------------ -- ------------ -- ----------- PRIMARY EARNINGS PER SHARE Income from continuing operations $ 946.1 $ 899.2 $ 517.1 Preferred stock dividends (2.6) (2.7) (2.8) - --------------------------------------------------------------------- ------------ -- ------------ -- ----------- 943.5 896.5 514.3 Discontinued operations, net 14.5 (8.5) (50.4) Extraordinary items (565.3) -- (29.2) Cumulative effect of changes in accounting principles, net -- -- (382.6) - --------------------------------------------------------------------- ------------ -- ------------ -- ----------- Earnings applicable to common stock $ 392.7 $ 888.0 $ 52.1 -- ------------ -- ------------ -- ----------- Weighted average number of common shares (1) 350.1 348.7 343.7 -- ------------ -- ------------ -- ----------- Primary earnings per share Continuing operations $ 2.69 $ 2.57 $ 1.50 Discontinued operations 0.04 (0.02) (0.15) Extraordinary items (1.61) -- (0.08) Cumulative effect of changes in accounting principles -- -- (1.12) - ------------------------------------------------------------------- -- ------------ -- ------------ -- ----------- Total $ 1.12 $ 2.55 $ 0.15 -- ------------ -- ------------ -- ----------- FULLY DILUTED EARNINGS PER SHARE Income from continuing operations, net of preferred stock dividends $ 943.5 $ 896.5 $ 514.3 Convertible preferred stock dividends 0.5 0.6 0.6 - ------------------------------------------------------------------- -- ------------ -- ------------ -- ----------- 944.0 897.1 514.9 Discontinued operations, net 14.5 (8.5) (50.4) Extraordinary items (565.3) -- (29.2) Cumulative effect of changes in accounting principles, net -- -- (382.6) - ------------------------------------------------------------------- -- ------------ -- ------------ -- ----------- Earnings as adjusted for purposes of computing fully diluted earnings per share $ 393.2 $ 888.6 $ 52.7 -- ------------ -- ------------ -- ----------- Weighted average number of common shares 350.1 348.7 343.7 Additional dilution for common stock equivalents and dilutive securities 2.7 1.3 2.0 - ------------------------------------------------------------------- -- ------------ -- ------------ -- ----------- Total 352.8 350.0 345.7 -- ------------ -- ------------ -- ----------- Fully diluted earnings per share Continuing operations $ 2.68 $ 2.56 $ 1.49 Discontinued operations 0.04 (0.02) (0.15) Extraordinary item (1.61) -- (0.08) Cumulative effects of changes in accounting principles -- -- (1.11) - ------------------------------------------------------------------- -- ------------ -- ------------ -- ----------- Total $ 1.11 $ 2.54 $ 0.15 -- ------------ -- ------------ -- ----------- (1) Weighted average number of common shares outstanding has been adjusted for dilutive common stock equivalents using the treasury stock method.
EX-12 8 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
EXHIBIT (12) SPRINT CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (In Millions) 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------- Earnings Income from continuing operations $ 946.1 $ 899.2 $ 517.1 $ 550.6 $ 530.8 Capitalized interest (57.0) (7.5) (7.3) (10.4) (14.2) Income tax provision 534.3 488.7 296.0 292.1 257.2 - ------------------------------------------------------------------------------------------------------------------- Subtotal 1,423.4 1,380.4 805.8 832.3 773.8 ------------------------------------------------------------------ Fixed charges Interest charges 317.7 308.2 374.3 434.8 461.8 Interest factor of operating rents 120.1 111.5 117.4 113.2 102.7 Pre-tax cost of preferred stock dividends of subsidiaries 0.7 0.9 1.6 2.1 2.4 - ------------------------------------------------------------------------------------------------------------------- Total fixed charges 438.5 420.6 493.3 550.1 566.9 ------------------------------------------------------------------ Earnings, as adjusted $ 1,861.9 $ 1,801.0 $ 1,299.1 $ 1,382.4 $ 1,340.7 ------------------------------------------------------------------ Ratio of earnings to fixed charges 4.25 (1) 4.28 2.63 (2) 2.51 2.36 ------------------------------------------------------------------
(1) Earnings as computed for the ratio of earnings to fixed charges includes the nonrecurring restructuring costs of $88 million recorded in 1995. In the absence of these nonrecurring costs, the ratio of earnings to fixed charges would have been 4.45 for 1995. (2) Earnings as computed for the ratio of earnings to fixed charges includes the nonrecurring merger, integration and restructuring costs of $293 million recorded in 1993. In the absence of these nonrecurring costs, the ratios of earnings to fixed charges would have been 3.23 for 1993. NOTE : The above ratios have been computed by dividing fixed charges into the sum of (a) income from continuing operations less capitalized interest included in income, (b) income taxes, and (c) fixed charges. Fixed charges consist of interest on all indebtedness (including amortization of debt issuance expenses), the interest component of operating rents and the pre-tax cost of preferred stock dividends of subsidiaries. EX-21 9 SUBSIDIARIES OF REGISTRANT Exhibit (21) SPRINT CORPORATION SUBSIDIARIES OF REGISTRANT Sprint Corporation is the parent. The subsidiaries of Sprint Corporation are as follows:
Ownership Interest Jurisdiction of Held Incorporation by Its Name or Organization Immediate Parent Carolina Telephone and Telegraph Company North Carolina 100 Subsidiaries: Carolina Telephone Long Distance, Inc. North Carolina 100 SC One Company Kansas 100 Centel Corporation Kansas 100 Subsidiaries: Centel Capital Corporation Delaware 100 Centel Cellular Company of Mexico Delaware 100 Subsidiary: Telefonia Celular del Norte, S.A. de C.V. Mexico 20 Centel Credit Company Delaware 100 Centel Directory Company Delaware 100 Subsidiary: The CenDon Partnership Illinois Partnership 50 Centel-Texas, Inc. Texas 100 Subsidiary: Central Telephone Company of Texas Texas 100 Central Telephone Company Delaware 94 (1) Subsidiaries: Central Telephone Company of Florida Florida 100 Central Telephone Company of Illinois Illinois 100 Central Telephone Company of Virginia Virginia 100 New Centel Communications Company Delaware 100 C FON Corporation Delaware 100 DirectoriesAmerica, Inc. Kansas 100 Subsidiary: Sprint Publishing & Advertising, Inc. Kansas 100 - ---------------------------------- (1) Centel Corporation owns all of the common stock. (Sprint Corporation Subsidiaries Continued) Florida Telephone Corporation Florida 100 Subsidiaries: Sprint Metropolitan Networks, Inc. Florida 100 Sprint Payphone Services, Inc. Florida 100 Vista-United Telecommunications Florida 49 LD Corporation Kansas 100 North Supply Company Ohio 100 Subsidiaries: Northstar Transportation, Inc. Kansas 100 North Supply Company of Lenexa Delaware 100 North Supply International, Ltd. Kansas 100 NSC Advertising, Inc. Kansas 100 Sprint Products Group, Inc. Kansas 100 S FON Corporation Delaware 100 Sprint Asian American, Inc. Kansas 100 Subsidiary: Asian American Communications, L.L.C. Kansas 25 Sprint Capital Corporation Delaware 100 Sprint Healthcare Systems, Inc. Kansas 100 Sprint Mid-Atlantic Telecom, Inc. North Carolina 100 Sprint/United Management Company Kansas 100 UCOM, Inc. Missouri 100 Subsidiaries: Sprint Communications Company L.P. Delaware Partnership 34 Subsidiaries: Asian American Communications, L.L.C. Kansas 24 Sprint Communications Company of New Hampshire, Inc. New Hampshire 100 Sprint Communications Company of Virginia, Inc. Virginia 100 Sprint Licensing, Inc. Kansas 100 USST of Texas, Inc. Texas 100 Sprint Enterprises, L.P. Delaware Partnership 32 Subsidiaries: Sprint Spectrum Holding Company, L.P. Delaware Partnership 40 Subsidiaries: Sprint Spectrum L.P. Delaware Partnership 99(2) Subsidiary: WirelessCo, L.P. Delaware Partnership 99(3) Subsidiary: American PCS, L.P. Delaware 49 NewTelco, L.P. Delaware Partnership 99(2) - ---------------------------------- (2) Sprint Spectrum Holding Company, L.P. holds the general partnership interest of greater than 99 percent. (3) Sprint Spectrum L.P. holds the general partnership interest of greater than 99 percent. (Sprint Enterprises, L.P. Subsidiaries Continued) MinorCo, L.P. Delaware Partnership 40 Subsidiaries: Sprint Spectrum L.P. Delaware Partnership (4) NewTelco, L.P. Delaware Partnership (4) WirelessCo, L.P. Delaware Partnership (4) PhillieCo, L.P. Delaware Partnership 47 Sprint Global Venture, Inc. Kansas (5) Subsidiaries: Global One Communications Europe, L.L.C. Delaware 33 Global One Communications GBN Holding, Ltd. Ireland 50 Global One Communications Holding, B.V. Netherlands 33 Global One Communications, L.L.C. Delaware 50 Global One Communications Operations, Ltd. Ireland 33 Global One Communications Service, B.V. Netherlands 33 Global One Communications World Holding, B.V. Netherlands 50 Global One Communications World Operations, Ltd. Ireland 50 Global One Communications World Service, B.V. Netherlands 50 UC PhoneCo, Inc. Kansas 100 Subsidiary: Sprint Enterprises, L.P. Delaware Partnership 17 United Telephone Company of the Carolinas South Carolina 100 Subsidiaries: SC Two Company Kansas 100 United Telephone Long Distance, Inc. South Carolina 100 United Telephone Company of Eastern Kansas Delaware 100 Subsidiary: Sprint/United Midwest Management Services Company Kansas 20 Subsidiary: United Teleservices, Inc. Kansas 100 United Telephone Company of Florida Florida 100 Subsidiaries: United Telephone Communications Systems, Incorporated Florida 100 United Telephone Long Distance, Incorporated Florida 100 United Telephone Company of Indiana, Inc. Indiana 100 Subsidiary: SC Four Company Kansas 100 United Telephone Company of Kansas Kansas 100 Subsidiary: Sprint/United Midwest Management Services Company Kansas 80 United Telephone Company of Minnesota Minnesota 100 United Telephone Company of Missouri Missouri 100 Subsidiary: SC Eight Company Kansas 100 - ---------------------------------- (4) MinorCo, L.P. holds a limited and preferred partnership interest of less than 1 percent. (5) UCOM, Inc., US Telecom, Inc., and Utelcom, Inc. each holds less than 1 percent of the common stock. (Sprint Corporation Subsidiaries Continued) United Telephone Company of New Jersey, Inc. New Jersey 100 United Telephone Company of the Northwest Oregon 100 United Telephone Company of Ohio Ohio 100 Subsidiaries: SC Five Company Kansas 100 United Telephone Communications Services of Ohio, Inc. Ohio 100 United Telephone Long Distance, Inc. Ohio 100 Subsidiary: Sprint Alarm Monitoring Services, Inc. Ohio 100 United Telephone Long Distance of Indiana, Inc. Indiana 100 United Telephone Company of Pennsylvania, The Pennsylvania 100 Subsidiaries: Joint Underground Locating Services, Inc. Pennsylvania 100 SC Six Company Kansas 100 United Telephone Long Distance, Inc. Pennsylvania 100 Valley Network Partnership Virginia Partnership 20 United Telephone Company of Southcentral Kansas Arkansas 100 United Telephone Company of Texas, Inc. Texas 100 Subsidiary: SC Seven Company Kansas 50 United Telephone Company of the West Delaware 100 United Telephone-Southeast, Inc. Virginia 100 Subsidiaries: SC Three Company Kansas 100 United Telephone Long Distance, Inc. Tennessee 100 UTLD, Inc. Virginia 100 Valley Network Partnership Virginia Partnership 20 US Telecom, Inc. Kansas 100 Subsidiaries: ASC Telecom, Inc. Kansas 100 LCF, Inc. California 100 SC Seven Company Kansas 50 Sprint Communications Company L.P. Delaware Partnership 59 Sprint Enterprises, L.P. Delaware Partnership 33 Sprint Global Venture, Inc. Kansas (5) Sprint Iridium, Inc. Kansas 100 Subsidiary: Iridium U.S., L.P. Delaware Partnership 27 United Telecommunications, Inc. Delaware 100 US Telecom of New Hampshire, Inc. New Hampshire 100 UST PhoneCo, Inc. Kansas 100 Subsidiary: Sprint Enterprises, L.P. Delaware Partnership 18 - ---------------------------------- (5) UCOM, Inc., US Telecom, Inc., and Utelcom, Inc. each holds less than 1 percent of the common stock. (Sprint Corporation Subsidiaries Continued) Utelcom, Inc. Kansas 100 Subsidiaries: Private TransAtlantic Telecommunications System, Inc. Delaware 100 Subsidiary: Private Trans-Atlantic Telecommunications System (N.J.), New Jersey 100 Inc. Sprint Communications Company L.P. Delaware Partnership 5 Sprint Global Venture, Inc. Kansas (5) Sprint International Incorporated Delaware 100 Subsidiaries: Consortium Communications International, Inc. New York 100 Sprint FON Inc. Delaware 100 Sprint Global Venture, Inc. Kansas 86 Sprint International Caribe, Inc. Puerto Rico 100 Sprint International Communications Corporation Delaware 100 Subsidiaries: Sprint Communications Company L.P. Delaware Partnership 2 Sprint Global Venture, Inc. Kansas 13 Sprint International France S.A. France 100 Sprint Telecommunications France Inc. Delaware 100 Sprint Telecommunications Services GmbH Germany 100 - ---------------------------------- (5) UCOM, Inc., US Telecom, Inc., and Utelcom, Inc. each holds less than 1 percent of the common stock.
EX-23 10 CONSENT OF INDEPENDENT AUDITORS EXHIBIT (23) SPRINT CORPORATION CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-3, No. 33-34567; Form S-3, No. 33-48689; Form S-3, No. 33-58488; Form S-3, No. 33-59996; Form S-3, No. 33-64564; Form S-8, No. 33-35173; Form S-8, No. 33-44255; Form S-8, No. 33-38761; Form S-8, No. 33-21662; Form S-8, No. 33-28544; Form S-8, No. 33-31802; Form S-8, No. 2-97322; Form S-8, No. 33-50421; Form S-8, No. 2-71704; Form S-8, No. 2-62061; Form S-8, No. 33-59316; Form S-8, No. 33-59318; Form S-8, No. 33-59322; Form S-8, No. 33-59324; Form S-8, No. 33-59326; Form S-8, No. 33-59328; Form S-8, No. 33-53695; Form S-8, No. 33-57785; Form S-8, No. 33-57911; Form S-8, No. 33-59349; Form S-8, No. 33-65147; and Form S-8, No. 33-65149) of Sprint Corporation and in the related Prospectuses of our report dated February 14, 1996, with respect to the consolidated financial statements and schedule of Sprint Corporation included in this Annual Report (Form 10-K) for the year ended December 31, 1995. /s/ERNST & YOUNG LLP ERNST & YOUNG LLP Kansas City, Missouri March 7, 1996 EX-27 11 1995 FDS - EXHIBIT 27(A)
5 1000 YEAR DEC-31-1995 DEC-31-1995 124,200 0 1,746,200 222,500 171,000 3,619,400 19,915,900 10,200,100 15,195,900 5,142,100 3,253,000 32,500 0 872,900 3,769,700 15,195,900 0 12,765,100 0 7,971,300 0 0 260,700 1,480,400 534,300 946,100 14,500 (565,300) 0 395,300 1.12 1.11
EX-27 12 RESTATED 1994 FDS - EXHIBIT 27(B)
5 1000 YEAR DEC-31-1994 DEC-31-1994 113,700 0 1,514,800 126,900 187,500 2,043,200 18,382,300 8,123,500 14,547,500 2,843,100 4,604,800 37,100 0 871,400 3,653,400 14,547,500 0 11,986,600 0 7,540,500 0 0 300,700 1,387,900 488,700 899,200 (8,500) 0 0 890,700 2.55 2.54
-----END PRIVACY-ENHANCED MESSAGE-----