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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





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FORM 10-Q



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|(Mark one) |  |                                                                                                                                       |  | 
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------- |  | 
|x          |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June
30, 2003    |  | 
|           |  |                                                                                                                                      
|           |  | OR                                                                                                                                    |  | 
|           |  |                                                                                                                                      
| ̈          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934For the transition period from              to |  | 



Commission file number
1-3090





VERIZON FLORIDA INC.



|A Florida Corporation |  | I.R.S. Employer Identification No. 59-0397520
|--------------------- |  | ---------------------------------------------





1095 Avenue of the Americas, Room 3868, New York, New York 10036



Telephone number: (212) 395-2121



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THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION H(2).



Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.  Yes  x    No ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act).

Yes ̈No  x



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TABLE OF CONTENTS



|              |  |                                                               |  | Page
|------------- |  | ------------------------------------------------------------- |  | ----
|             
|PART I        |  | Financial Information                                         |  |     
|              |  |                                                              
|Item 1.       |  | Financial Statements                                          |  |     
|              |  |                                                              
|              |  | Condensed Consolidated Statements of Income                   |  |     
|              |  | Three and Six Months Ended June 30, 2003 and 2002             |  | 1   
|              |  |                                                              
|              |  | Condensed Consolidated Balance Sheets                         |  |     
|              |  | June 30, 2003 and December 31, 2002                           |  | 2   
|              |  |                                                              
|              |  | Condensed Consolidated Statements of Cash Flows               |  |     
|              |  | Six Months Ended June 30, 2003 and 2002                       |  | 4   
|              |  |                                                              
|              |  | Notes to Condensed Consolidated Financial Statements          |  | 5   
|              |  |                                                              
|Item 2.       |  | Managements Discussion and Analysis of Results of Operations |  | 9   
|              |  |                                                              
|Item 4.       |  | Controls and Procedures                                       |  | 16  
|              |  |                                                              
|PART II       |  | Other Information                                             |  |     
|              |  |                                                              
|Item 6.       |  | Exhibits and Reports on Form 8-K                              |  | 17  
|              |  |                                                              
|Signatures    |  |                                                               |  | 18  
|              |  |                                                              
|Exhibit Index |  |                                                               |  | 19  





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Verizon Florida Inc.



PART FINANCIAL INFORMATION



|Item 1. |  | Financial Statements
|------- |  | --------------------





CONDENSED CONSOLIDATED STATEMENTS OF INCOME



|                                                                                                 |  | Three Months EndedJune 30, |  | Six Months EndedJune 30,
|------------------------------------------------------------------------------------------------ |  | -------------------------- |  | ------------------------
|(Dollars in Millions) (Unaudited)                                                                |  | 2003                       |  | 2002                    
|                                                                                                
|Operating Revenues(including $32.4, $20.0, $59.5 and $41.2 from affiliates)                      |  | $396.1                     |  | $                       
|                                                                                                 |  |                            |  |                         
|                                                                                                 |  |                            |  |                         
|Operating Expenses(including $77.9, $73.9, $154.0 and $139.6 to affiliates)                      |  |                            |  |                         
|Cost of services and sales (exclusive of items shown below)                                      |  | 125.9                      |  |                         
|Selling, general and administrative expense                                                      |  | 104.9                      |  |                         
|Depreciation and amortization                                                                    |  | 80.2                       |  |                         
|                                                                                                 |  |                            |  |                         
|Total Operating Expenses                                                                         |  | 311.0                      |  |                         
|                                                                                                 |  |                            |  |                         
|                                                                                                 |  |                            |  |                         
|Operating Income                                                                                 |  | 85.1                       |  |                         
|                                                                                                 |  |                            |  |                         
|Other income, net (including $7.2, $9.2, $11.9 and $19.4 from affiliates)                        |  | 7.2                        |  |                         
|                                                                                                 |  |                            |  |                         
|Interest expense (including $8.2, $10.0, $18.3 and $18.4 to affiliates)                          |  | 25.5                       |  |                         
|                                                                                                 |  |                            |  |                         
|                                                                                                 |  |                            |  |                         
|Income before provision for income taxes and cumulative effect of change in accounting principle |  | 66.8                       |  |                         
|                                                                                                 |  |                            |  |                         
|Provision for income taxes                                                                       |  | 25.8                       |  |                         
|                                                                                                 |  |                            |  |                         
|                                                                                                 |  |                            |  |                         
|Income Before Cumulative Effect of Change in Accounting Principle                                |  | 41.0                       |  |                         
|                                                                                                 |  |                            |  |                         
|Cumulative effect of change in accounting principle, net of tax                                  |  |                           |  |                         
|                                                                                                 |  |                            |  |                         
|                                                                                                 |  |                            |  |                         
|Net Income                                                                                       |  | $  41.0                    |  | $                       
|                                                                                                 |  |                            |  |                         



See Notes to Condensed
Consolidated Financial Statements.





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CONDENSED CONSOLIDATED BALANCE SHEETS



ASSETS



|(Dollars in Millions)                                                    |  | June 30,2003 |  | December 31,2002
|------------------------------------------------------------------------ |  | ------------ |  | ----------------
|                                                                        
|                                                                         |  | (Unaudited)  |  |                 
|Current assets                                                           |  |              |  |                 
|Cash                                                                     |  | $     21.3   |  | $     40.2      
|Short-term investments                                                   |  | 23.2         |  | 67.1            
|Notes receivable from affiliates                                         |  | 1,065.8      |  | 843.1           
|Accounts receivable:                                                     |  |              |  |                 
|Trade and other, net of allowances for uncollectibles of $56.4 and $61.8 |  | 199.9        |  | 221.0           
|Affiliates                                                               |  | 56.7         |  | 178.5           
|Material and supplies                                                    |  | 41.8         |  | 31.9            
|Prepaid expenses                                                         |  | 6.2          |  | 17.4            
|Deferred income taxes                                                    |  | 11.1         |  | 10.4            
|Other                                                                    |  | 50.0         |  | 50.2            
|                                                                         |  |              |  |                 
|                                                                         |  | 1,476.0      |  | 1,459.8         
|                                                                         |  |              |  |                 
|Plant, property and equipment                                            |  | 5,432.7      |  | 5,354.3         
|Less accumulated depreciation                                            |  | 3,392.6      |  | 3,349.9         
|                                                                         |  |              |  |                 
|                                                                         |  | 2,040.1      |  | 2,004.4         
|                                                                         |  |              |  |                 
|Prepaid pension asset                                                    |  | 448.8        |  | 449.2           
|                                                                         |  |              |  |                 
|Other assets                                                             |  | 105.7        |  | 108.0           
|                                                                         |  |              |  |                 
|Total assets                                                             |  | $4,070.6     |  | $4,021.4        
|                                                                         |  |              |  |                 



See Notes to Condensed
Consolidated Financial Statements.





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CONDENSED CONSOLIDATED BALANCE SHEETS



LIABILITIES AND SHAREOWNERS INVESTMENT



|(Dollars in Millions)                         |  | June 30, 2003 |  | December 31,2002
|--------------------------------------------- |  | ------------- |  | ----------------
|                                             
|                                              |  | (Unaudited)   |  |                 
|Current liabilities                           |  |               |  |                 
|Debt maturing within one year:                |  |               |  |                 
|Notes payable to affiliates                   |  | $1,018.2      |  | $   810.9       
|Accounts payable and accrued liabilities:     |  |               |  |                 
|Affiliates                                    |  | 79.4          |  | 313.5           
|Other                                         |  | 114.7         |  | 109.0           
|Other current liabilities                     |  | 166.1         |  | 170.4           
|                                              |  |               |  |                 
|                                              |  | 1,378.4       |  | 1,403.8         
|                                              |  |               |  |                 
|                                              |  |              
|Long-term debt                                |  | 1,040.5       |  | 1,040.4         
|                                              |  |               |  |                 
|                                              |  |              
|Employee benefit obligations                  |  | 295.1         |  | 284.5           
|                                              |  |               |  |                 
|                                              |  |              
|Deferred credits and other liabilities        |  |               |  |                 
|Deferred income taxes                         |  | 365.0         |  | 322.3           
|Other                                         |  | 96.5          |  | 96.1            
|                                              |  |               |  |                 
|                                              |  | 461.5         |  | 418.4           
|                                              |  |               |  |                 
|                                              |  |              
|Shareowners investment                       |  |               |  |                 
|Common stockone share, without par value     |  | 585.0         |  | 585.0           
|Contributed capital                           |  | 191.3         |  | 191.2           
|Reinvested earnings                           |  | 118.8         |  | 98.1            
|                                              |  |               |  |                 
|                                              |  | 895.1         |  | 874.3           
|                                              |  |               |  |                 
|                                              |  |              
|Total liabilities and shareowners investment |  | $4,070.6      |  | $4,021.4        
|                                              |  |               |  |                 



See Notes to Condensed
Consolidated Financial Statements.





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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                              |  | Six Months EndedJune 30, |       
|----------------------------------------------------------------------------- |  | ------------------------ | ------
|(Dollars in Millions) (Unaudited)                                             |  | 2003                     |       
|                                                                             
|Net Cash Provided by Operating Activities                                     |  | $                        | 181.7 
|                                                                              |  |                          |       
|                                                                              |  |                         
|Cash Flows from Investing Activities                                          |  |                          |       
|Capital expenditures (including capitalized network and non-network software) |  |                          | (115.2
|Net change in short-term investments                                          |  |                          | 43.9  
|Change in notes receivable from affiliates                                    |  |                          | (222.7
|Other, net                                                                    |  |                          | 1.4   
|                                                                              |  |                          |       
|Net cash used in investing activities                                         |  |                          | (292.6
|                                                                              |  |                          |       
|                                                                              |  |                         
|Cash Flows from Financing Activities                                          |  |                          |       
|Change in notes payable to affiliates                                         |  |                          | 207.3 
|Dividends paid                                                                |  |                          | (112.3
|Net change in outstanding checks drawn on controlled disbursement accounts    |  |                          | (3.0  
|                                                                              |  |                          |       
|Net cash provided by financing activities                                     |  |                          | 92.0  
|                                                                              |  |                          |       
|                                                                              |  |                         
|Net change in cash                                                            |  |                          | (18.9 
|                                                                              |  |                         
|Cash, beginning of period                                                     |  |                          | 40.2  
|                                                                              |  |                          |       
|                                                                              |  |                         
|Cash, end of period                                                           |  | $                        | 21.3  
|                                                                              |  |                          |       



See Notes to Condensed
Consolidated Financial Statements.





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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



1.    Basis of Presentation



Verizon Florida Inc. is a wholly owned subsidiary of GTE Corporation (GTE), which is a
wholly owned subsidiary of Verizon Communications Inc. (Verizon). The accompanying unaudited condensed consolidated financial statements have been prepared based upon Securities and Exchange Commission rules that permit reduced disclosure for
interim periods. These financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial position for the interim periods shown including normal recurring accruals. The results for the
interim periods are not necessarily indicative of results for the full year. The balance sheet at December 31, 2002 has been derived from the audited financial statements at that date but does not include all of the information and footnotes
required by generally accepted accounting principles for complete financial statements. For a more complete discussion of significant accounting policies and certain other information, you should refer to the financial statements included in our
2002 Annual Report on Form 10-K.



We have reclassified certain amounts from
prior years data to conform to the 2003 presentation.





2.    Adoption of New Accounting Standards



Stock-Based Compensation



We participate in employee compensation plans sponsored by Verizon with awards of Verizon common stock. Prior to 2003, Verizon accounted for stock-based employee
compensation under Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, and followed the disclosure-only provisions of Statement of Financial Accounting Standards (SFAS)
No. 123, Accounting for Stock-Based Compensation. In accordance with APB Opinion No. 25, no stock-based employee compensation expense for our fixed stock option plans is reflected in our 2002 net income as all options granted under those
plans had an exercise price equal to the market value of the underlying common stock on the date of grant.



Effective January 1, 2003, Verizon adopted the fair value recognition provisions of SFAS No. 123, using the prospective method (as permitted under SFAS No. 148, Accounting for Stock-Based
CompensationTransition and Disclosure) to all new awards granted, modified or settled after January 1, 2003. Under the prospective method, employee compensation expense in the first year will be recognized for new awards granted,
modified, or settled. The options generally vest over a term of three years, therefore the expenses related to stock-based employee compensation included in the determination of net income for the three and six months ended June 30, 2003 are less
than what would have been recorded if the fair value method was also applied to previously issued awards. The following table illustrates the effect on net income if the fair value method had been applied to all outstanding and unvested options in
each period:



|                                                                                                                                                     |  | Three Months Ended June 30, |      |   | Six Months Ended June 30, |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ---- | - | ------------------------- | -
|(Dollars in Millions)                                                                                                                                |  | 2003                        |      |   | 2002                      |  
|                                                                                                                                                    
|Net income, as reported                                                                                                                              |  | $                           | 41.0 |   |                           | $
|Add: Stock option-related employee compensation expense included in reported net income, net of related tax
effects                                  |  |                             |     |   |                           |  
|Deduct: Total stock option-related employee compensation expense determined under fair value based method for all awards, net of
related tax effects |  |                             | (.2  | ) |                           |  
|                                                                                                                                                     |  |                             |      |   |                           |  
|Pro forma net income                                                                                                                                 |  | $                           | 40.8 |   |                           | $
|                                                                                                                                                     |  |                             |      |   |                           |  



After-tax compensation expense for
other stock-based compensation included in net income as reported for the three and six months ended June 30, 2003 and 2002 was not material.



Asset Retirement Obligations



Effective January 1, 2003, we adopted SFAS No. 143, Accounting for Asset Retirement Obligations. This standard provides the accounting for the cost of legal
obligations associated with the retirement of long-lived assets. SFAS No. 143 requires that companies recognize the fair value of a liability for asset retirement obligations in the period in which the obligations are incurred and capitalize that
amount as part of the book value of the long-lived asset. We have determined that we do not have a material legal obligation to remove long-lived assets as described by this statement. However, prior to the adoption of SFAS No. 143, we included
estimated removal costs in our group depreciation models. These costs have increased depreciation



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expense and accumulated depreciation for future removal costs for existing assets. These removal costs were recorded as a reduction to accumulated
depreciation when the assets were retired and removal costs were incurred.



For
some assets, such as telephone poles, the removal costs exceeded salvage value. Under the provisions of SFAS No. 143, we are required to exclude costs of removal from our depreciation rates for assets for which the removal costs exceed salvage.
Accordingly, in connection with the initial adoption of this standard on January 1, 2003, we have reversed accrued costs of removal in excess of salvage from our accumulated depreciation accounts for these assets. The adjustment was recorded as a
cumulative effect of an accounting change, resulting in the recognition of a gain of $74.8 million ($46.0 million after-tax). Effective January 1, 2003, we began expensing costs of removal in excess of salvage for these assets as incurred. The
ongoing impact of this change in accounting resulted in a decrease in depreciation expense and an increase in cost of services and sales, which was not material to our total operating expenses for the three and six month periods ended June 30, 2003.



Debt Extinguishment



In April 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145, among other things, eliminates the requirement that all gains and losses on the extinguishment of debt must be
classified as extraordinary items on the income statement, thereby permitting the classification of such gains and losses as extraordinary items only if they meet the criteria of APB Opinion No. 30, Reporting the Results of
OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. We adopted this provision of SFAS No. 145 effective January 1, 2003 and, upon
adoption, reclassified the losses on the early extinguishment of debt and related tax benefits that were previously reported in our statements of income as extraordinary items to Other expense and Provision for income taxes.





3.    Dividend



On August 1, 2003, we
declared and paid a dividend in the amount of $69.0 million to our parent, GTE.





4.    GTE Funding Incorporated



GTE Funding Incorporated (GTE Funding), a wholly owned subsidiary of Verizon Florida, provides short-term financing, investment vehicles and cash management services for
some of Verizons domestic operating telephone companies, including the company. From time to time, depending on the operating needs of each of those affiliates, GTE Funding may have a note receivable or note payable balance with an affiliate.
The Financial Services Agreements between GTE Funding and the affiliates specify that the affiliates are permitted to borrow or advance short-term funds on a day-to day (demand note) basis to finance their ordinary business and capital requirements.
Since these borrowings and advances are based on a variable interest rate and demand note basis, the carrying value of the notes approximates its fair market value.



In addition, GTE Funding has a contractual agreement with an affiliated company, Verizon Network Funding Corp. (VNFC), for the provision of
short-term financing and cash management services. VNFC issues commercial paper and obtains bank loans to fund the working capital requirements for some of Verizons network services subsidiaries, including the company, and invests funds in
temporary investments on their behalf.



The following table provides additional
information related to our carrying values by affiliated company:



|                           |  | Notes Receivable from Affiliates |         | Notes Payable to Affiliates
|-------------------------- |  | -------------------------------- | ------- | ---------------------------
|(Dollars in Millions)      |  | June 30, 2003                    |         | December 31, 2002          
|                          
|Verizon California Inc.    |  | $                                |        |                            
|Verizon North Inc.         |  |                                  | 416.4   |                            
|Verizon Northwest Inc.     |  |                                  |        |                            
|Verizon South Inc.         |  |                                  |        |                            
|GTE Southwest Incorporated |  |                                  |        |                            
|GTE Midwest Incorporated   |  |                                  |        |                            
|VNFC                       |  |                                  | 649.4   |                            
|                           |  |                                  |         |                            
|Total                      |  | $                                | 1,065.8 |                            
|                           |  |                                  |         |                            





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5.    Shareowners Investment



|(Dollars in Millions)        |  | CommonStock |       | ContributedCapital |   | ReinvestedEarnings | 
|---------------------------- |  | ----------- | ----- | ------------------ | - | ------------------ | 
|                            
|Balance at December 31, 2002 |  | $           | 585.0 |                    | $ | 191.2              | 
|Net income                   |  |             |       |                    |   |                    | 
|Dividends declared           |  |             |       |                    |   |                    | 
|Other                        |  |             |       |                    |   | .1                 | 
|                             |  |             |       |                    |   |                    | 
|Balance at June 30, 2003     |  | $           | 585.0 |                    | $ | 191.3              | 
|                             |  |             |       |                    |   |                    | 



Net income and comprehensive income
were the same for the six months ended June 30, 2003 and 2002.





6.    Segment Information



We have two reportable segments; Florida Telephone Operations and GTE Funding. We generally account for intersegment transactions at current market prices. GTE Funding
has no reportable net income. Its interest expense is approximately equal to the interest income received on affiliate notes between GTE Funding and the various domestic operating telephone companies. Accounting policies of the segments, as
applicable, are the same as those referred to in Note 1 (Basis of Presentation).



Segment results were as follows:



|                              |  | Three Months EndedJune 30, |       | Six Months Ended June 30,
|----------------------------- |  | -------------------------- | ----- | -------------------------
|(Dollars in Millions)         |  | 2003                       |       | 2002                     
|                             
|Florida Telephone Operations: |  |                            |       |                          
|Total external revenues       |  | $                          | 396.1 |                          
|Operating income              |  |                            | 85.1  |                          
|Depreciation and amortization |  |                            | 80.2  |                          
|Interest expense              |  |                            | 20.3  |                          
|Interest income               |  |                            | 2.0   |                          
|Capital expenditures          |  |                            | 62.6  |                          
|                              |  |                            |       |                          
|GTE Funding:                  |  |                            |       |                          
|Operating income              |  | $                          |      |                          
|Interest expense              |  |                            | 7.2   |                          
|Interest income               |  |                            | 7.2   |                          
|Consolidated Revenues         |  | $                          | 396.1 |                          
|Consolidated Operating Income |  |                            | 85.1  |                          

|                             |  |              
|---------------------------- |  | -------------
|(Dollars in Millions)        |  | June 30, 2003
|                            
|Assets                       |  |              
|Florida Telephone Operations |  | $            
|GTE Funding (a)              |  |              
|Reconciling items (b)        |  |              
|                             |  |              
|Consolidated Assets          |  | $            
|                             |  |              



|(a) |  | Assets consist primarily of cash and cash equivalents and accounts and notes receivable from affiliates.
|--- |  | --------------------------------------------------------------------------------------------------------

|(b) |  | Reconciling items consist primarily of intersegement accounts and notes receivable.
|--- |  | -----------------------------------------------------------------------------------





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7.    Employee Severance and Other Benefit Costs



We maintain ongoing severance plans for both management and associate employees, which
provide benefits to employees that are terminated. The costs for these plans are accounted for under SFAS No. 112, Employers Accounting for Postemployment Benefits. We accrue for severance benefits based on the terms of our
severance plan over the estimated service periods of the employees. The accruals are also based on the historical run-rate of actual severances and expectations for future severances. From time to time, because Verizons severance programs are
implemented across its subsidiaries, Verizon must redistribute the amount of severance liability based on actual experience at the companies.



In the fourth quarter of 2001, it was determined that our severance liability was not sufficient as a result of new downsizing plans and we recorded a special charge of
$6.1 million. In the second quarters of 2002 and 2003, again, it was determined that the severance liability was not sufficient because of further downsizing plans and we recorded special charges of $3.3 million and $1.7 million, respectively. As of
June 30, 2003, approximately 540 employees have been separated under the 2001, 2002 and 2003 severance programs. Nearly all of the separations under the 2001 and 2002 severance activity have occurred. As of June 30, 2003, our severance liability was
$14.3 million, which includes future payments to employees previously separated under the 2001, 2002 and 2003 severance programs. During the first six months of 2003, the companys severance liability was increased by $10.6 million for special
charges and the redistribution of severance liabilities across Verizons subsidiaries and decreased by $9.0 million principally for payments. Severance costs are included in selling, general and administrative expense in our statements of
income. We continually evaluate employee levels, and accordingly, we may incur future severance costs.



In addition, during the second quarter of 2003, we recorded a special charge of $.1 million in connection with pension and retirement benefit enhancements and we recorded a pension settlement loss of $9.2 million as
lump-sum payments exceeded the threshold of service and interest costs. The special termination benefits and settlement of pension obligations are recorded in accordance with SFAS No. 88, Employers Accounting for Settlements and
Curtailments of Defined Pension Plans and for Termination Benefits and SFAS No. 106, Employers Accounting for Postretirement Benefits Other than Pensions. Special termination benefits and settlement of pension obligations are
included in selling, general and administrative expense in our statements of income.





8.    Commitments and Contingencies



Various legal actions and regulatory proceedings are pending to which we are a party and claims which, if asserted, may lead to other legal
actions. We have established reserves for specific liabilities in connection with regulatory and legal matters, including environmental matters that we currently deem to be probable and estimable. We do not expect that the ultimate resolution of
pending regulatory and legal matters in future periods will have a material effect on our financial condition, but it could have a material effect on our results of operations.



From time to time, regulatory decisions require us to assure customers that we will provide a level of service performance that falls within
prescribed parameters. There are penalties associated with failing to meet those service parameters and we, from time to time, pay such penalties. We do not expect these penalties to have a material effect on our financial condition, but they could
have a material effect on our results of operations.



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|Item 2. |  | Managements Discussion and Analysis of Results of Operations
|------- |  | -------------------------------------------------------------

| |  | (Abbreviated pursuant to General Instruction H(2).)
| |  | ---------------------------------------------------



This discussion should be read in conjunction with the Condensed Consolidated Financial Statements and Condensed Consolidated Notes to Financial Statements.





RESULTS
OF OPERATIONS



We reported net income of $133.0 million for the six
month period ended June 30, 2003, compared to net income of $97.4 million for the same period in 2002. Our reported results included the following special items:





Cumulative Effect of Change in Accounting Principle



Effective January 1, 2003, we adopted Statement of Financial Accounting
Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations. This standard provides the accounting for the cost of legal obligations associated with the retirement of long-lived assets. SFAS No. 143 requires that companies
recognize the fair value of a liability for asset retirement obligations in the period in which the obligations are incurred and capitalize that amount as part of the book value of the long-lived asset. We have determined that we do not have a
material legal obligation to remove long-lived assets as described by this statement. However, prior to the adoption of SFAS No. 143, we included estimated removal costs in our group depreciation models. These costs have increased depreciation
expense and accumulated depreciation for future removal costs for existing assets. These removal costs were recorded as a reduction to accumulated depreciation when the assets were retired and removal costs were incurred.



For some assets, such as telephone poles, the removal costs exceeded salvage value. Under the
provisions of SFAS No. 143, we are required to exclude costs of removal from our depreciation rates for assets for which the removal costs exceed salvage. Accordingly, in connection with the initial adoption of this standard on January 1, 2003, we
have reversed accrued costs of removal in excess of salvage from our accumulated depreciation accounts for these assets. The adjustment was recorded as a cumulative effect of an accounting change, resulting in the recognition of a gain of $74.8
million ($46.0 million after-tax). Effective January 1, 2003, we began expensing costs of removal in excess of salvage for these assets as incurred. The ongoing impact of this change in accounting resulted in a decrease in depreciation expense and
an increase in cost of services and sales, which was not material to our total operating expenses for the three and six month periods ended June 30, 2003.





Employee Severance and Other Benefit Costs



We maintain ongoing severance plans for both management and associate employees, which
provide benefits to employees that are terminated. In the second quarters of 2003 and 2002, we recorded severance costs of $1.7 million and $3.3 million, respectively. Severance costs are included in selling, general and administrative expense in
our statements of income.



In addition, during the second quarter of 2003, we
recorded a special charge of $.1 million in connection with pension and retirement benefit enhancements and we recorded a pension settlement loss of $9.2 million as lump-sum payments exceeded the threshold of service and interest costs. Special
termination benefits and settlement of pension obligations are included in selling, general and administrative expense in our statements of income.



See Note 7 to the condensed consolidated financial statements for additional information.



These and other items affecting the comparison of our results of operations for the six month periods ending June 30, 2003 and 2002 are
discussed in the following sections.



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OPERATING REVENUES

(Dollars in Millions)



|                        |  | Six Months Ended June 30,
|----------------------- |  | -------------------------
|                        |  | 2003                     
|                       
|Local services          |  | $                        
|Network access services |  |                          
|Long distance services  |  |                          
|Other services          |  |                          
|                        |  |                          
|Total                   |  | $                        
|                        |  |                          





LOCAL SERVICES



|2003-2002  |  | (Decrease)           
|---------- |  | ---------------------
|          
|Six Months |  | $(16.5)        (4.1)%



Local service revenues are earned from
the provision of local exchange, local private line, wire maintenance, voice messaging and value-added services. Value-added services are a family of services that expand the utilization of the network, including products such as Caller ID, Call
Waiting and Return Call. The provision of local exchange services not only includes retail revenues, but also includes local wholesale revenues from unbundled network elements (UNEs), interconnection revenues from competitive local exchange carriers
(CLECs), certain data transport revenues and wireless interconnection revenues.



Local service revenues declined in the first six months of 2003 primarily due to lower demand and usage of our basic local wireline services. The effects of technology substitution from wireless services and the lagging economy largely
drove the decline in local service revenue growth, as reflected by a decline in switched access lines in service of 2.7% from a year ago. These factors were partially offset by the effect of higher billings to CLECs for the purchase of UNEs and for
interconnection of their network with our network. Increased sales of packaged wireline services as a result of expanded new products and pricing plans further offset the decline in local service revenues.





NETWORK
ACCESS SERVICES



|2003-2002  |  | (Decrease)          
|---------- |  | --------------------
|          
|Six Months |  | $(4.6)        (1.4)%



Network access service revenues are
earned from end-user subscribers and from long distance and other competing carriers who use our local exchange facilities to provide usage services to their customers. Switched access revenues are derived from fixed and usage-based charges paid by
carriers for access to our local network. Special access revenues originate from carriers and end-users that buy dedicated local exchange capacity to support their private networks. End-user access revenues are earned from our customers and from
resellers who purchase dial-tone services, including digital subscriber lines (DSL).



The decrease in network access revenues in the first six months of 2003 was mainly attributable to declines in switched minutes of use and switched access lines of 9.9% and 2.7%, respectively, from June 30, 2002, reflecting the impact of
the soft economy and wireless substitution. These decreases were partially offset by the net effect of rate changes associated with federal mandated price cap filings.



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LONG DISTANCE SERVICES



|2003-2002  |  | Increase         
|---------- |  | -----------------
|          
|Six Months |  | $2.6        19.5%



Long distance revenues are earned
primarily from calls made to points outside a customers local calling area, but within our service area (intraLATA toll). IntraLATA toll calls originate and terminate within the same LATA, but generally cover a greater distance than a local
call. These services are regulated by the Florida Public Service Commission (FPSC) except where they cross state lines. Other long distance services that we provide include 800 services and Wide Area Telephone Service (WATS). We also earn revenue
from private line and operator services associated with long distance calls.



Long distance service revenues increased in the first six months of 2003 primarily due to increased sales of packaged wireline services which include expanded product offerings and pricing plans, resulting in customer win-backs. This
increase was partially offset by the effects of competition, technology substitution and lower access line growth due to the soft economy.





OTHER SERVICES



|2003-2002  |  | Increase         
|---------- |  | -----------------
|          
|Six Months |  | $7.8        13.9%



Our other services include such
services as billing and collections for long distance carriers and affiliates, facilities rentals to affiliates and nonaffiliates, public (pay) telephone and customer premises equipment (CPE). Other service revenues also include fees paid by
customers for nonpublication of telephone numbers, multiple white page listings and late payment of bills, and fees paid by affiliates for usage of our directory listings and the provision of sales agent services.



Other service revenues increased in the first six months of 2003 primarily due to an increase
in customer late payment fees resulting from a change in collection terms, and higher revenues from affiliates for billing and collection services.





OPERATING EXPENSES

(Dollars in Millions)





COST OF SERVICES AND SALES



|2003-2002  |  | Increase         
|---------- |  | -----------------
|          
|Six Months |  | $17.6        7.7%



Cost of services and sales includes
the following costs directly attributable to a service or product: salaries and wages, benefits, materials and supplies, contracted services, network access and transport costs, customer provisioning costs, computer systems support and cost of
products sold. Aggregate customer care costs, which include billing and service provisioning, are allocated between cost of services and sales and selling, general and administrative expense.



The increase in cost of services and sales in the first six months of 2003 was mainly driven
by higher costs allocated from affiliates associated with cost of services and higher pension and other post-retirement benefit expenses. The company participates in Verizon Communications Inc.s (Verizon) defined pension plan and
postretirement healthcare and life insurance plans. As of December 31, 2002, Verizon changed key employee benefit plan assumptions in response to current conditions in the securities markets and medical and prescription drug costs trends. The
expected rate of return on pension plan assets has been changed from 9.25% in 2002 to 8.50% in 2003 and the expected rate of return on other postretirement benefit plan assets has been changed from 9.10% in 2002 to 8.50% in 2003. The discount rate
assumption has been lowered from 7.25% in 2002 to 6.75% in 2003 and the medical cost trend rate assumption has been increased from 10.00% in 2002 to 11.00% in 2003. For the six month period ended June 30, 2003, the company recorded pension and
postretirement benefit expense (after consideration of capitalized costs) of $12.3 million, compared to $.8 million for the same period in 2002.



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These cost increases were partially offset by lower access and transport costs. As part of our ongoing review of
local interconnection expense charged by CLECs, we determined that selected charges from CLECs, previously recorded as expense but not paid, were no longer required and, accordingly, we adjusted our first quarter 2003 operating expenses. In
addition, effective in 2003, we recognize as local interconnection expense no more than the amount payable under the April 27, 2001 Federal Communications Commission (FCC) order addressing intercarrier compensation for dial-up connections for
Internet-bound traffic.



See Other Matters  Compensation for
Internet Traffic for additional information on FCC rulemakings and other court decisions addressing intercarrier compensation for dial-up connections for Internet-bound traffic.





SELLING, GENERAL AND ADMINISTRATIVE EXPENSE



|2003-2002  |  | (Decrease)           
|---------- |  | ---------------------
|          
|Six Months |  | $(10.4)        (4.8)%



Selling, general and administrative
expense (SG&A) includes salaries and wages and benefits not directly attributable to a service or product, bad debt charges, taxes other than income, advertising and sales commission costs, customer billing, call center and information
technology costs, professional service fees, and rent for administrative space. Aggregate customer care costs, which include billing and service provisioning, are allocated between cost of services and sales and selling, general and administrative
expense.



The decrease in SG&A expense in the first six months of 2003 was
primarily driven by lower bad debt expense principally due to a reduction in uncollectible accounts receivable, improved collections and additional customer deposit requirements. In the second quarter of 2002, we recorded an impairment charge of
$15.1 million driven by our financial statement exposure to WorldCom. In addition, lower gross receipts and property taxes in the first six months of 2003, as compared to the same period in 2002, also contributed to the decrease in SG&A expense.
These decreases were partially offset by higher general and administrative costs allocated from affiliates.





DEPRECIATION AND AMORTIZATION



|2003-2002  |  | (Decrease)          
|---------- |  | --------------------
|          
|Six Months |  | $(5.2)        (3.1)%



Depreciation and amortization expense
decreased principally due to the effect of lower rates of depreciation, as well as the favorable impact of adopting SFAS No. 143, effective January 1, 2003. Under SFAS No. 143, we began expensing costs of removal in excess of salvage for outside
plant assets as incurred. Previously, we had included costs of removal for these assets in our depreciation rates.



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OTHER RESULTS

(Dollars in Millions)





OTHER INCOME, NET



|                |  | Six Months Ended June 30, |      |      |  
|--------------- |  | ------------------------- | ---- | ---- | -
|                |  | 2003                      |      | 2002 |  
|               
|Interest income |  | $                         | 12.2 |      | $



The decrease in other income, net was
attributable to a decrease in interest income primarily due to lower interest rates and lower average notes receivable balances with affiliates during the first six months of 2003.





INTEREST EXPENSE



|                                      |  | Six Months Ended June 30, |         |      |  
|------------------------------------- |  | ------------------------- | ------- | ---- | -
|                                      |  | 2003                      |         | 2002 |  
|                                     
|Interest expense                      |  | $                         | 49.4    |      | $
|Capitalized interest costs            |  |                           | .3      |      |  
|                                      |  |                           |         |      |  
|Total interest costs on debt balances |  | $                         | 49.7    |      | $
|                                      |  |                           |         |      |  
|Debt outstanding                      |  | $                         | 2,058.7 |      | $



Interest expense decreased in the
first six months of 2003, over the same period in 2002, primarily due to changes in the mix of short- and long-term interest rates and changes in the levels of debt during each period.





PROVISION FOR INCOME TAXES



|                           |  | Six Months Ended June 30, |      |   |      |  
|-------------------------- |  | ------------------------- | ---- | - | ---- | -
|                           |  | 2003                      |      |   | 2002 |  
|                          
|Provision for income taxes |  | $                         | 54.8 |   |      | $
|Effective income tax rate  |  |                           | 38.6 | % |      |  



The effective income tax rate is the
provision for income taxes as a percentage of income before provision for income taxes and cumulative effect of change in accounting principle. Our effective income tax rate was unchanged for the six months ended June 30, 2003, compared to the same
period in 2002.





OTHER MATTERS



FCC Regulation
and Interstate Rates



We are subject to the jurisdiction of the FCC with
respect to interstate services and related matters. In 2002, the FCC continued to implement reforms to the interstate access charge system and to implement the universal service and other requirements of the Telecommunications Act of
1996 (the 1996 Act).



Access Charges and Universal Service



On May 31, 2000, the FCC adopted the Coalition for Affordable Local and Long Distance
Services (CALLS) plan as a comprehensive five-year plan for regulation of interstate access charges. The CALLS plan has three main components. First, it establishes a portable interstate access universal service support of $650 million for the
industry. This explicit support replaces implicit support embedded in interstate access charges. Second, the plan simplifies the patchwork of common line charges into one subscriber line charge (SLC) and provides for de-averaging of the SLC by zones
and class of customers in a manner that will not undermine comparable and affordable universal service. Third, the plan sets into place a mechanism to transition to a set target of $0.0055 per minute for switched access services. Once that target
rate is reached, local exchange



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carriers are no longer required to make further annual price cap reductions to their switched access prices. The
annual reductions leading to the target rate, as well as annual reductions for the subset of special access services that remain subject to price cap regulation was set at 6.5% per year.



On September 10, 2001, the U.S. Court of Appeals for the Fifth Circuit ruled on an appeal of the FCC order adopting the plan. The court
upheld the FCC on several challenges to the order, but remanded two aspects of the decision back to the FCC on the grounds that they lacked sufficient justification. The court remanded back to the FCC for further consideration its decision setting
the annual reduction factor at 6.5% minus an inflation factor and the size of the new universal service fund at $650 million. The entire plan continued in effect pending the FCCs further consideration of its justification of these components.
On July 10, 2003, the FCC released an order on remand reaffirming these aspects of its plan. As a result of tariff adjustments which became effective in July 2003, we reached the $0.0055 benchmark.



The FCC has adopted rules for special access services that provide for pricing flexibility
and ultimately the removal of services from price regulation when prescribed competitive thresholds are met. In order to use these rules, carriers must forego the ability to take advantage of provisions in the current rules that provide relief in
the event earnings fall below prescribed thresholds. Verizon has been authorized to remove special access and dedicated transport services from price caps in 56 Metropolitan Statistical Areas (MSAs). In addition, the FCC has found that in 24 MSAs
Verizon has met the stricter standards to remove special access connections to end-user customers from price caps.



In November 1999, the FCC adopted a new mechanism for providing universal service support to high cost areas served by large local telephone companies. This funding
mechanism provides additional support for local telephone services in several states served by Verizons telephone operations. This system has been supplemented by the new FCC access charge plan described above. On July 31, 2001, the U.S. Court
of Appeals for the Tenth Circuit reversed and remanded to the FCC for further proceedings. The court concluded that the FCC had failed to adequately explain some aspects of its decision and had failed to address any need for a state universal
service mechanism. The current universal service mechanism remains in place pending the outcome of any FCC review as a result of these appeals. The FCC also has proceedings underway to evaluate possible changes to its current rules for assessing
contributions to the universal service fund. Any change in the current assessment mechanism could result in a change in the contribution that local telephone companies must make and that would have to be collected from customers.



Unbundling of Network Elements



In November 1999, the FCC announced its decision setting forth new unbundling requirements,
eliminating elements that it had previously required to be unbundled, limiting the obligation to provide others and adding new elements.



In addition to the unbundling requirements released in November 1999, the FCC released an order in a separate proceeding in December 1999, requiring incumbent local
exchange companies also to unbundle and provide to competitors the higher frequency portion of their local loop. This provides competitors with the ability to provision data services on top of incumbent carriers voice services.



On May 24, 2002, the U.S. Court of Appeals for the D.C. Circuit released an order that
overturned the most recent FCC decision establishing which network elements were required to be unbundled. In particular, the court found that the FCC did not adequately consider the limitations of the necessary and impair standards of
the 1996 Act when it chose national rules for unbundling and that it failed to consider the relevance of competition from other types of service providers, including cable and satellite. The court also vacated a separate order that had authorized an
unbundling requirement for line sharing where a competing carrier purchases only a portion of the copper connection to the end-user in order to provide high-speed broadband services using DSL technology. The U.S. Supreme Court
subsequently declined to review that decision.



On October 25, 2002, the U.S.
Court of Appeals for the D.C. Circuit released an order upholding the FCCs decisions that established interim limits on the availability of combinations of UNEs known as enhanced extended links or EELs. EELs consist of unbundled
loops and transport elements. The FCC decisions limited access to EELs to carriers that would use them to provide a significant amount of local traffic, and not just use them as substitutes for special access services.



Prior to the issuance of these orders from the U.S. Court of Appeals for the D.C. Circuit,
the FCC had already begun a review of the scope of its unbundling requirement through a rulemaking referred to as the triennial review of UNEs. This rulemaking reopened the question of what network elements must be made available on an unbundled
basis under the 1996 Act, and will address the impact of the order by the U.S. Court of Appeals for the D.C. Circuit overturning its previous rules, as well as other



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pending issues relating to unbundled elements, including the question of whether competing carriers may substitute
combinations of unbundled loops and transport for already competitive special access services. On February 20, 2003, the FCC announced a decision in its triennial review, but the order has not yet been released.



Compensation for Internet Traffic



On April 27, 2001, the FCC released an order addressing intercarrier compensation for
dial-up connections for Internet-bound traffic. The FCC found that Internet-bound traffic is interstate and subject to the FCCs jurisdiction. Moreover, the FCC again found that Internet-bound traffic is not subject to reciprocal compensation
under Section 251(b)(5) of the 1996 Act. Instead, the FCC established federal rates per minute for this traffic that decline from $0.0015 to $0.0007 over a three-year period. The FCC order also sets caps on the total minutes of this traffic that may
be subject to any intercarrier compensation and requires that incumbent local exchange carriers must offer to both bill and pay reciprocal compensation for local traffic at the same rate as they are required to pay on Internet-bound traffic. On May
3, 2002, the U.S. Court of Appeals for the D.C. Circuit rejected part of the FCCs rationale for its April 27, 2001 order, but declined to vacate the order while it is on remand.



Several parties requested rehearing, asking the court to vacate the underlying order. Those requests were denied in a series of orders
released on September 24, 2002 and September 25, 2002. The U.S. Supreme Court has declined to review that denial. In the meantime, pending further action by the FCC, the FCCs underlying order remains in effect.





State
Regulation of Rates and Services



Florida statutes govern the price cap
plan. Beginning January 1, 2001, we were able to raise basic local rates on 30 days notice once in any 12-month period not to exceed the GDP-PI less 1%. We may increase rates for non-basic services but increases for any category cannot exceed 6% in
any 12-month period unless another company is providing service in a given exchange, at which time we can increase our price up to 20% in a 12-month period. Earnings are not regulated.



Legislation was passed in 2003 that allows us to offset a reduction in intrastate access rates with an increase in basic local exchange
revenues upon the FPSC approval. The offset must be revenue neutral and take place over two to four years. In evaluating the petition, the FPSC is to consider whether granting the petition will remove current support for basic local
telecommunications services preventing the creation of a more attractive competitive local exchange market for the benefit of residential consumers and enhanced market entry. When our rates are reduced to parity as defined by the statute, our basic
services become subject to the same regulatory treatment as non-basic services.



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|Item 4. |  | Controls and Procedures
|------- |  | -----------------------



| | (a) |  | Evaluation of Disclosure Controls and Procedures
| | --- |  | ------------------------------------------------



| |  |  | Our chief executive officer and chief financial officer have evaluated the effectiveness of the registrants disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) of the Securities Exchange Act of 1934), as of the end of the period covered by this quarterly report, that ensure that information relating to the registrant which is required to be disclosed in this report is recorded, processed,
summarized and reported, within required time periods. They have concluded that the registrants disclosure controls and procedures were adequate and effective to ensure that material information relating to the registrant and its consolidated
subsidiaries would be made known to them by others within those entities, particularly during the period in which this quarterly report was being prepared.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | (b) |  | Changes in Internal Control over Financial Reporting
| | --- |  | ----------------------------------------------------



| |  |  | There were no significant changes in the registrants internal control over financial reporting during the period covered by this quarterly report, nor were there any
significant deficiencies or material weaknesses in these controls requiring corrective actions.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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PART II  OTHER INFORMATION



|Item 6. |  | Exhibits and Reports on Form 8-K
|------- |  | --------------------------------



|(a) |  | Exhibits:                                                                               |  |                                                                                                    
|--- |  | --------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------
|    |  |                                                                                        
|    |  | ExhibitNumber                                                                           |  |                                                                                                    
|    |  |                                                                                        
|    |  | 12                                                                                      |  | Computation of Ratio of Earnings to Fixed Charges.                                                 
|    |  |                                                                                        
|    |  | 31.1                                                                                    |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|    |  |                                                                                        
|    |  | 31.2                                                                                    |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|    |  |                                                                                        
|    |  | 32                                                                                      |  | Officer Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                  
|    | 
|(b) |  | There were no Current Reports on Form 8-K filed during the quarter ended June 30, 2003.



|
|

|
|





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SIGNATURES



Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





|                      |  |  |  | VERIZON FLORIDA INC.
|--------------------- |  |  |  | --------------------
|                      |  |  | 
|Date: August 12, 2003 |  |  |  | By                  
|                      |  |  |  |                     





UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF AUGUST 7, 2003.





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EXHIBIT INDEX



|ExhibitNumber |  |                                                                                                    
|------------- |  | ---------------------------------------------------------------------------------------------------
|12            |  | Computation of Ratio of Earnings to Fixed Charges.                                                 
|              | 
|31.1          |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|              | 
|31.2          |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|              | 
|32            |  | Officer Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                  





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