AT&T Reports First Quarter Profits From Continuing Operations Of 80 Cents Per Share.NEW YORK--(BUSINESS WIRE)--April 20, 1998--AT&T today reported first quarter profits from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the of 80 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. , an increase of more than 19 percent on a diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis, compared to the year-ago first- quarter earnings of 67 cents per share. The first quarter results include the gains on the sales of AT&T Solutions Customer Care and AT&T's holdings in LIN Television Corporation that together generated 26 cents in earnings per share. Additionally, the first quarter results included a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta charge of $601 million, or 23 cents per share, reflecting the company's decision not to pursue the sale of local service on a Total Service Resale resale n. selling again, particularly at retail. In many states a "resale license" or "resale number" is required so that the state can monitor the collection of sales tax on retail sales. RESALE. (TSR (Terminate and Stay Resident) Refers to a program that remains in memory when the user exits it in order that it be immediately available at the press of a hotkey. ) basis. Excluding the gains and charge, profits from continuing operations were 77 cents per share. For the first quarter of 1998, income from continuing operations increased to $1.316 billion, compared to $1.088 billion in the first quarter of 1997, reflecting an improvement of 20.9 percent. The increase in income reflects a combination of continuing cost reduction and modest revenue growth. Total revenue for the first quarter of 1998 grew nearly one percent from a year ago to $12.631 billion, compared to $12.548 billion in the first quarter of 1997. Increases in revenues from business services, wireless services, outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. and systems integration, on-line services, and international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. and ventures were partly offset by a decrease in consumer services Consumer Services refers to the formulation, deformulation, technical consulting and testing of most consumer products, such as food, herbs, beverages, vitamins, pharmaceuticals, cosmetics, hair products, household cleaners, [paints, plastics, metals, waxes, coatings, minerals, revenue due to the flow through of access savings and the migration of customers to optional calling plans consistent with AT&T's strategy to target and retain profitable customers. "We delivered a solid quarter with earnings surpassing expectations and reflecting the benefits of our cost reduction efforts," said AT&T Chairman C. Michael Armstrong C Michael Armstong (born 18 October, 1938, in Detroit, Michigan) is the former AT&T chairman and CEO, who tried to reestablish AT&T as an end-to-end carrier. Unfortunately, due to the dot.com bust and various other issues, he was forced to break the group up in 2001. . "As expected, revenue growth was modest as we divested non- non- word element [L.]not . non- pref. Not: noninvasive. strategic businesses, lowered prices to pass through access charge reductions to customers, and systematically refocused our consumer marketing. For the year, however, we continue to target revenue growth of 2 to 4 percent." First Quarter Continuing Operations Highlights -- Total revenue from business services increased $245 million, while revenue from consumer services decreased $300 million. Total long distance volume growth was 4.9 percent. -- Total revenue from wireless services rose $73 million, an increase of 7 percent. -- Other/corporate (includes AT&T Solutions outsourcing and systems integration businesses, international operations and joint ventures and on-line services such as AT&T WorldNet See AT&T WorldNet. ) revenue increased $97 million or 21.1 percent over the first quarter of 1997. The increase was primarily due to growth in AT&T Solutions' outsourcing business and increased revenue from AT&T WorldNet attributable to a 23-percent increase in dial subscribers. -- Total operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. for the first quarter of 1998 were $11.2 billion, compared to year ago expenses of $10.9 billion, an increase of $332 million or 3.0 percent when compared with the first quarter of 1997. Excluding the charge related to local service, operating expenses decreased $269 million, or 2.5 percent. -- Access and Other Interconnection in·ter·con·nect v. in·ter·con·nect·ed, in·ter·con·nect·ing, in·ter·con·nects v.intr. To be connected with each other: The two buildings interconnect. v.tr. expenses fell by 8.1 percent, compared with the first quarter of 1997, due primarily to lower international settlement rates and access charge reform. These reductions continue to be passed on to AT&T business and residential customers, which created a downward pressure on revenue. -- Selling, General & Administrative (SG&A) expenses declined 3.9 percent, or $142 million, compared with the first quarter of 1997, due to reductions across the business including reductions in marketing and sales related expenses as well as corporate overheads. AT&T has targeted a decline of $1.6 billion in SG&A expenses by year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. . EXPENSES IN DETAIL Access and Other Interconnection For the first quarter of 1998, access and other interconnection expenses decreased $343 million, or 8.1 percent, to $3.909 billion, compared with the first quarter of 1997. The decrease is primarily due to lower international settlement rates and reductions in per minute access charges resulting from the FCC's access reform order, as well as AT&T's continuing efforts to manage this cost. These declines were partially offset by Universal Service Fund/Primary Interexchange Carrier See IXC. Charge expenses, also resulting from the FCC's access reform order, and increased calling volumes. Network and Other Communications For the first quarter of 1998, network and other communication expenses increased $130 million, or 6.1 percent, to $2.264 billion, compared with the first quarter of 1997. The increase is primarily due to greater payphone payphone Noun a coin-operated telephone payphone pay n → Münztelefon nt; (card phone) → Kartentelefon nt compensation expense and higher costs associated with revenue growth in data services and equipment sales. These increases were partially offset by the $80 million first quarter 1997 charge for exiting the two-way messaging business and a lower provision for uncollectibles. Depreciation and Amortization For the first quarter of 1998, depreciation and amortization expenses increased $86 million, or 9.2 percent, to $1.016 billion, compared with the first quarter of 1997. Excluding the first quarter 1997 charge for exiting the two-way messaging business, depreciation and amortization increased $166 million or 19.5 percent, primarily as a result of increased capital expenditures to improve AT&T's long-distance and wireless networks, including deployment of SONET technology. AT&T expects to finish its three- year SONET program in 1998 with the completion of about 50 SONET rings The architecture used in SONET technology. SONET rings, known as "self-healing rings," use two or more transmission paths between network nodes, which are typically digital cross-connects (DCSs) or add/drop multiplexers (ADMs). . The system increases the transmission capacity of AT&T's existing network by a factor of 10 without having to lay additional fiber-optic cable. Selling, General and Administrative For the first quarter of 1998, selling, general and administrative expenses dropped by $142 million, or 3.9 percent, to $3.451 billion, compared with the first quarter of 1997. The decrease reflects AT&T's continued efforts to reduce costs across the business. In particular, savings were realized on direct mail and telemarketing telemarketing, the practice of selling goods or services to customers by means of the telephone or of surveying consumer preferences in telephone conversations. to consumers, including the efforts to focus on targeted customer segments. Lower marketing and sales costs in business markets, achieved through the consolidation of functions and reductions in support staff, also contributed to the decline, along with reductions in corporate staff. OPERATING INCOME Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. Operating income decreased 15.2 percent to $1.39 billion in the quarter, while operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: decreased from 13.1 percent to 11.0 percent, reflecting the effect of the charge for local. Operating income, excluding the local charge, increased 21.4 percent to $1.99 billion in the quarter, while operating margin improved from 13.1 percent to 15.8 percent. Earnings before interest and taxes In financial and business accounting, earnings before interest and taxes (EBIT) is a measure of a firm's profitability that excludes interest and income tax expenses.[1] EBIT = Operating Revenue – Operating Expenses + Non-operating Income (EBIT EBIT See: Earnings Before Interest and Taxes EBIT See earnings before interest and taxes (EBIT). ), including other income, which reflects continuing operations only, increased 15.7 percent to $2.09 billion, while earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
CONSOLIDATED INCOME Income for the consolidated AT&T, including income from operations to be discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: , was $1.326 billion, or 81 cents per share, on a diluted basis for the quarter, compared with $1.126, or 69 cents per diluted share, in the 1997 first quarter. Segment Disclosures BUSINESS SERVICES Total revenue from business services increased $245 million or 4.5 percent to $5.673 billion in the first quarter, compared to the first quarter of 1997, driven primarily by strong revenue growth from data services. Data services revenue (adjusted for the 1997 sales of Tridom and Skynet) grew in the mid-teens for the quarter. Long distance volumes grew at a double-digit rate for the first quarter, driven by domestic inbound in·bound 1 adj. Bound inward; incoming: inbound commuter traffic. Adj. 1. inbound volume growth. Earnings before interest, taxes, depreciation and amortization (EBITDA) for business services increased $90 million, to $1.694 billion, or 5.6 percent over the year-ago quarter. Earnings before interest and taxes (EBIT) moved up 1.1 percent to $1.206 billion. Higher levels of depreciation resulting from higher property plant and equipment driven by AT&T's investment in data networks and SONET deployment accounted for the slower rate of EBIT growth. CONSUMER SERVICES Revenue from consumer services was $5.628 billion in the first quarter, a decrease of 5.1 percent from the year-ago quarter on slightly lower calling volumes. A major component of this decline came as a result of lower access costs imposed by the FCC (1) (Federal Communications Commission, Washington, DC, www.fcc.gov) The U.S. government agency that regulates interstate and international communications including wire, cable, radio, TV and satellite. The FCC was created under the U.S. in July of 1997, which enabled AT&T to put customers on more favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. rate plans and to lower basic rates. In addition, results reflect a continuation of the strategy to de-emphasize low-volume customers that was implemented in the second half of 1997. While these changes continue to have an impact on revenue and volume growth, they are contributing to improved profitability and retention of the consumer base. In addition, AT&T continues to contend in a fiercely competitive consumer marketplace and to experience the industry trend of movement from higher-priced services such as calling cards to lower priced services. These declines were partially offset by intra-LATA revenue and volume growth. EBITDA for consumer services increased by a significant 10.3 percent compared to the year- ago quarter, to $1.498 billion, reflecting AT&T's emphasis on improving the profitability of all of its operations. EBIT increased by 11.8 percent to $1.324 billion over the first quarter of 1997, due to a significant decrease in marketing expenses and the success of the strategy to de-emphasize lower-volume customers. WIRELESS SERVICES Total revenue from wireless services, including product sales, increased $73 million or 7.0 percent to $1.113 billion, compared to the first quarter of 1997. The increase was driven by growth in revenue from core 850 MHz (MegaHertZ) One million cycles per second. It is used to measure the transmission speed of electronic devices, including channels, buses and the computer's internal clock. A one-megahertz clock (1 MHz) means some number of bits (16, 32, 64, etc. markets and AT&T's 10 emerging 1.9 GHz PCS (1) (Personal Communications Services) Refers to wireless services that emerged after the U.S. government auctioned commercial licenses in 1994 and 1995. This radio spectrum in the 1. markets. Consolidated subscribers-those in markets in which AT&T owns a controlling interest controlling interest The ownership of a quantity of outstanding corporate stock sufficient to control the actions of the firm. Controlling interest often involves ownership of significantly less than 51% of a firm's outstanding stock because many owners fail - totaled 6.16 million on March 31, an increase of 16.9 percent over March 31, 1997. On a total basis, subscribers reached 8.37 million at the end of the quarter. Net adds for the quarter were approximately 195,000, which is a decrease of about 23 percent, compared to the first quarter of 1997. EBITDA from wireless markets increased 2.2 percent for the quarter up to $251 million, compared to $246 million in the first quarter of 1997. EBIT for the first quarter was negative $2 million, compared to first quarter 1997 EBIT of negative $31 million. First quarter 1997 included a $160 million charge to exit the two-way messaging business. Excluding that charge, EBIT declines reflect the start-up Start-up The earliest stage of a new business venture. costs and increased levels of depreciation associated with the activation activation /ac·ti·va·tion/ (ak?ti-va´shun) 1. the act or process of rendering active. 2. the transformation of a proenzyme into an active enzyme by the action of a kinase or another enzyme. 3. of new markets and capital spent in existing markets. AT&T has recently completed ten new digital wireless networks and currently provides digital PCS service to 24 of the nation's top 25 wireless markets. OTHER/CORPORATE This segment includes the results of AT&T Solutions outsourcing and network integration businesses, international operations and ventures and on-line services such as AT&T WorldNet. Other/corporate revenue increased $97 million or 21.1 percent over the first quarter of 1997, driven by increased revenue from AT&T Solutions' outsourcing business and AT&T WorldNet. EBITDA was negative $319 million for the quarter, an improvement of $135 million or 29.7 percent compared to first quarter 1997. EBIT was a negative $435 million for the quarter, an improvement of $103 million or 19.3 percent compared to a year ago. Supplemental Disclosures AT&T Solutions, the company's outsourcing, network integration and multi-media call center business, grew revenue 39.3 percent in the first quarter to $218 million. The unit currently has a backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. of more than $3 billion under contract with such clients as United Healthcare, Textron, J.P. Morgan Morgan, American family of financiers and philanthropists. Junius Spencer Morgan, 1813–90, b. West Springfield, Mass., prospered at investment banking. , Merrill Lynch Merrill Lynch & Co., Inc. (NYSE: MER TYO: 8675 ), through its subsidiaries and affiliates, provides capital markets services, investment banking and advisory services, wealth management, asset management, insurance, banking and related products and services on a global basis. , and MasterCard International. This includes about $1 billion in contracts signed by AT&T Solutions in the first quarter of 1998, to provide major global data networking services to Citicorp and McGraw-Hill. Although not included within the revenue, AT&T Solutions also manages AT&T's internal network infrastructure, an operation that provides information technology (IT) services and generated $386 million in internal billings for the quarter. EBIT for AT&T Solutions was negative $12 million for the quarter, up from negative $53 million in the first quarter of 1997, a 77.6- percent improvement compared to a year ago that reflects revenue growth and aggressive cost management. Also included is the impact of the realignment re·a·lign tr.v. re·a·ligned, re·a·lign·ing, re·a·ligns 1. To put back into proper order or alignment. 2. To make new groupings of or working arrangements between. of certain networking management start- up operations into the outsourcing practice of AT&T Solutions. AT&T Solutions achieved a significant year-over-year improvement in EBIT as a result of revenue growth and lower SG&A expenses, and remains on target to turn profitable in 1998. On-line services include AT&T WorldNet Internet access See how to access the Internet. service and website hosting. Revenue from on-line services increased 97.4 percent, compared to the first quarter of 1997, to $79 million. The increase was due primarily to continued growth in residential subscribers to AT&T WorldNet, as well as a 57-percent increase in average revenue per customer. The increase in revenue per user resulted from the expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created of AT&T WorldNet's initial promotional price programs and an increase in the percentage of customers paying $19.95 for up to 150 hours of use per month. In the first quarter of 1998, EBIT was negative $109 million, an improvement of 31.7 percent, compared to the first quarter of 1997. EBIT growth reflects revenue increases as well as network and customer care cost efficiencies. International operations and ventures include AT&T's consolidated foreign operations such as AT&T Communications Services UK and the company's transit and reorigination businesses. The equity earnings or losses of AT&T's non-consolidated international joint ventures and alliances, such as Alestra in Mexico, AT&T Canada Long Distance Services, and AT&T-Unisource, are also included. Revenue from consolidated international businesses increased $31 million, or 20.7 percent, in the current quarter, compared to the first quarter of 1997. EBIT from international operations and ventures was negative $63 million for the quarter, an improvement of 50.8 percent from negative $128 million in the first quarter of 1997. The improvement was due to revenue growth as well as lower equity losses from ventures and the company's focus on divesting non- strategic businesses. -0- NOTE TO FINANCIAL MEDIA: AT&T Chairman C. Michael Armstrong and Chief Financial Officer Dan Somers will discuss the company's performance in a two-way conference call for financial analysts and reporters at 8:30 a.m. Eastern time today. From the U.S., callers should dial 1-800-260-0718 to access the call. Callers outside the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. should dial 612-332-0335. An audio rebroadcast of the conference call will be available from 11:30 a.m. Eastern time on Monday, April 20 until midnight on Wednesday, April 22. To listen to the audio rebroadcast, U.S. callers can dial 1-800-475-6701 and enter the access code 385789. From outside the U.S., the rebroadcast is available by dialing 320-365- 3844, and then entering the access code 385789. In addition, internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the rebroadcasts of the call will be available on the AT&T web site beginning at noon today at http://www.att.com/ir/. -0-
AT&T
Consolidated Statements of Income (Note 1)
(Unaudited)
For the Three Months
Dollars in Millions Ended March 31,
(except per share amounts) 1998 1997
Revenues.............................. $ 12,631 $ 12,548
Operating Expenses
Access and other interconnection.... 3,909 4,252
Network and other communications
services ......................... 2,264 2,134
Depreciation and amortization....... 1,016 930
Selling, general and administrative. 3,451 3,593
Asset impairment and restructuring 601 -
charge ...........................
Total Operating Expenses.............. 11,241 10,909
Operating Income...................... 1,390 1,639
Other income - net.................... 700 168
Interest expense...................... 48 52
Income from continuing operations
before income taxes................. 2,042 1,755
Provision for income taxes............ 726 667
Income from continuing operations..... 1,316 1,088
Income from discontinued operations
(net of taxes of $6 in 1998 and $25
in 1997)............................ 10 38
Net Income ........................... $ 1,326 $ 1,126
Weighted average common shares and
potential common shares (millions)(a) 1,639 1,628
Per Common Share - Basic:
Income from continuing operations..... $ 0.81 $ 0.67
Income from discontinued operations... $ 0.01 $ 0.02
Net Income............................ $ 0.82 $ 0.69
Per Common Share - Diluted:
Income from continuing operations..... $ 0.80 $ 0.67
Income from discontinued operations... $ 0.01 $ 0.02
Net Income............................ $ 0.81 $ 0.69
Dividends declared per common share $ 0.33 $ 0.33
(a) Amounts represent the weighted-average shares assuming
dilution from the potential exercise of outstanding stock options
(including SARS). Amounts are reduced by 16 and 4 million shares for
1998 and 1997 respectively, assuming no dilution.
Note 1: Prior period amounts have been reclassified to conform to
current presentation.
CONTACT: Eileen M. Connolly - AT&T 908-221-6731 econnolly@att.com or Norman Booth - AT&T 908-221-6302 nbooth@att.com |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion