2nd Quarter Results - Part 2
GTE CORPORATION
27 July 1999
PART 2
GTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED ADJUSTED STATEMENTS OF INCOME
(In millions, except per share amounts) unaudited
Second Quarter 1999
Reported Adjustments Adjusted
Revenues and sales $6,288 $- $6,288
Operating costs and
expenses
Cost of services and
sales 2,705 - 2,705
Selling, general &
administrative 1,216 - 1,216
Depreciation and
amortization 906 - 906
-------- -------- --------
Total operating costs
and expenses 4,827 - 4,827
-------- -------- --------
Operating income 1,461 - 1,461
Other (income) expense
Interest - net 306 - 306
Other - net (54) - (54)
-------- -------- --------
Income before income taxes 1,209 - 1,209
Income taxes 433 - 433
-------- -------- --------
Net income $776 $- $776
======== ======== ========
Diluted earnings per common
share $ .79 $- $.79
Average number of
common shares outstanding -
assuming dilution 979 - 979
Second Quarter 1998
Reported Adjustments Adjusted Adjusted
%Change
Revenues and sales $6,277 $ (399)-1 $5,878 7.0
Operating costs and
expenses
Cost of services and
sales 2,671 (124)-1 2,547 6.2
Selling, general &
administrative 1,231 (77)-1 1,154 5.4
Depreciation and
amortization 943 (42)-1 901 .6
-------- -------- -------- ------
Total operating costs
and expenses 4,845 (243) 4,602 4.9
-------- -------- -------- ------
Operating income 1,432 (156) 1,276 14.5
Other (income) expense
Interest - net 311 (2)-1 309 (1.0)
Other - net 21 (93)-1 (72) (25.0)
-------- -------- -------- ------
Income before income taxes 1,100 (61) 1,039 16.4
Income taxes 427 (61)-1 366 18.3
-------- -------- -------- ------
Net income $673 $- $673 15.3
======== ======== ======== =======
Diluted earnings per common
share $.69 $- $.69 14.5
Average number of
common shares outstanding -
assuming dilution 972 - 972 .7
See accompanying Notes to Consolidated Adjusted Statements of
Income.
Consolidated Adjusted Statements of Income
(In Millions, except per share amounts) unaudited
Six months ended June 30 1999
Reported Adjustments Adjusted
Revenues and sales $12,167 $- $12,167
Operating costs and expenses
Cost of services and sales 5,322 - 5,322
Selling, general and
administrative 2,197 - 2,197
Depreciation and
amortization 1,826 - 1,826
Special items (321) 321 -2 -
-------- -------- --------
Total operating costs and
expenses 9,024 321 9,345
-------- -------- --------
Operating Income 3,143 (321) 2,822
Other (income) expense
Interest - net 615 - 615
Other -net (124) - (124)
-------- -------- --------
Income before income taxes 2,652 (321) 2,331
Income taxes 964 (132)-2 832
-------- -------- --------
Income before extraordinary
charges 1,688 (189) 1,499
Extraordinary charges (30) 30 -3 -
-------- -------- --------
Net income $1,658 $ (159) $1,499
======== ======== ========
Diluted earnings per common
share $1.70 $(.17) (2)(3) $1.53
Average number of common
shares outstanding -
assuming dilution 978 - 978
Six months ended June 30 1998
Reported Adjustments Adjusted Adjusted
% Change
Revenues and sales $12,162 $(818)-1 $11,344 7.3
Operating costs and
expenses
Cost of services and
sales 5,169 (267)-1 4,902 8.6
Selling, general and
administrative 2,302 (156)-1 2,146 2.4
Depreciation and
amortization 1,912 (106)-1 1,806 1.1
Special items 755 (755)-4 - -
-------- -------- ------- --------
Total operating costs and
expenses 10,138 (1,284) 8,854 5.5
-------- -------- ------- --------
Operating Income 2,024 466 2,490 13.3
Other (income) expense
Interest - net 600 - 600 2.5
Other -net 44 (175)-1 (131) (5.3)
-------- -------- ------- --------
Income before income taxes 1,380 641 2,021 15.3
Income taxes 565 159 (1)(4) 724 14.9
-------- -------- --------
Income before
extraordinary
charges 815 482 1,297 15.6
Extraordinary charges (320) 320 -5 - -
-------- -------- -------- --------
Net income $495 $802 $1,297 15.6
======== ======== ======== ========
Diluted earnings per
common share $.51 $.83 (4)(5) $1.34 14.2
Average number of common
shares outstanding -
assuming dilution 969 - 969 .9
See accompanying notes to consolidated adjusted statements of
income.
Notes to Consolidated Adjusted Statements of Income
-1 BC TELECOM, a majority-owned Canadian subsidiary of GTE,
merged with TELUS on January 31, 1999. GTE's ownership
interests in the merged company, TELUS is 26.7% therefore,
during the first quarter of 1999, GTE deconsolidated BC
TELECOM and began accounting for the investment in TELUS
using the equity method of accounting. In addition, during
the fourth quarter of 1998, GTE increased its ownership
interest in CTI Holdings, and Argentine wireless company, and
began accounting for CTI Holdings on a consolidated basis.
For consistency, second quarter and year to date 1998
revenues and expenses have been adjusted to reflect the
current method of accounting for these investments. Net
income and EPS are not affected by these adjustments.
-2 Reported results for 1999 include a pre tax gain of $513
million, recorded in the first quarter, associated with the
merger of BC TELECOM with TELUS on January 31, 1999. The
after-tax impact of this gain is $308 million, or $.32 per
diluted share.
Reported results for 1999 also include special charges of
$192 million ($119 million after tax, or $.12 per diluted
share) recorded in the first quarter, associated with
voluntary and involuntary employee separation programs
completed in early April 1999. The charges include
separation and related benefits such as outplacement and
benefit continuation costs.
-3 In March 1999, GTE Corporation called $338 million in high
coupon debt prior to stated maturity, resulting in an after-
tax extraordinary charge during the first quarter of $30
million, or $0.03 per diluted share.
-4 Reported results for 1998 include special charges of $755
million ($482 million after-tax, or $.50 per diluted share)
related to asset impairments, the costs of exiting certain
business activities and employee related costs recorded
during the first quarter of 1998.
-5 Reported results for 1998 include after-tax extraordinary
charges of $320 million, or $.33 per diluted share, resulting
from the discontinued use of Statement of Financial
Accounting Standards No.71, 'Accounting for the Effects of
Certain Types of Regulation' (SFAS No. 71), by GTE's Canadian
operations, and the early retirement of long-term debt and
preferred stock record during the first quarter of 1998.
Note: Reclassifications and restatements of prior period
operating statistics on the following schedules have been
made, where appropriate, to conform to the 1999 presentation.
Selected Financial Data and Operating Statistics
(In millions, except per share amounts) unaudited
Second Quarter
Consolidated operations 1999 1998 Percent Change
Financial data (1)
Revenues and sales (2) $6,288 $5,878 7.0
Operating income 1,461 1,276 14.5
Depreciation and
amortization 906 901 .6
-------- ------- --------
Operating cash flow $2,367 $2,177 8.7
======== ======= ========
Operating cash flow margin 37.6% 37.0% -
Capital expenditures $1,197 $1,388 (13.8)
Operating statistics (3)
Return on equity (4)
Return on investment (4)
Debt ratio
Per share data:
Book value
Dividends .47 .47 -
Common shares outstanding
at end of period
(thousands)
Six months ended June 30
Consolidated operations 1999 1998 Percent Change
Financial data (1)
Revenues and sales (2) $12,167 $11,344 7.3
Operating income $2,822 $2,490 13.3
Depreciation and
amortization 1,826 1,806 1.1
-------- ------- --------
Operating cash flow $4,648 $4,296 8.2
======== ======= ========
Operating cash flow margin 38.2% 37.9% -
Capital expenditures $2,132 $2,409 (11.5)
Operating statistics (3)
Return on equity (4) 38.4% 25.4% -
Return on investment (4) 15.3% 10.1% -
Debt ratio 62.1% 65.8% -
Per share data:
Book value $10.31 $8.12 27.0
Dividends .94 .94 -
Common shares outstanding
at end of period
(thousands) 976,286 963,242 1.4
-1 Financial data is shown an adjusted basis, as defined in
the Notes to Consolidated Adjusted Statements of Income.
-2 GTE announced the sale of two subsidiaries, GTE
Government Systems and GTE Airfone, which had combined
second quarter revenues of $417 million and $399
million, and year to date revenues of $806 million and
$778 million in 1999 and 1998, respectively. Adjusting
to exclude the results of GTE Government Systems and GTE
Airfone, second quarter and year to date revenue growth
would have been 7.2% and 7.5% respectively.
-3 Operating statistics are shown on a reported basis.
-4 Excluding special items and extraordinary charges,
return on equity would have been 36.9% and 34.7%, while
return on investment would have been 14.8% and 13.7% in
1999 and 1998, respectively.
Selected Financial Data and Operating Statistics
(In millions) unaudited
Second Quarter
National Operations 1999 1998 Percent Change
Network Services (1)
Financial Data
Revenues and sales
Local services $1,474 $1,460 1.0
Network access services
Interstate 895 840 6.5
Intrastate 507 488 3.9
Toll services 161 220 (26.8)
Directory services and
other 859 798 7.6
-------- -------- --------
Total revenues 3,896 3,806 2.4
Intersegment revenues (107) (78) -
--------- -------- ---------
Total external revenues $3,789 $3,728 1.6
========= ======== =========
Operating income $1,408 $1,233 15.1
Special charges - - -
Deprecation and
amortization 630 661 (4.7)
-------- -------- ----------
Operating cash flow $2,038 $1,884 8.2
======== ======== ==========
Operating cash flow
margin 52.3% 49.5% -
Operating income margin 36.1% 32.1% -
Capital expenditures $726 $878 (17.3)
Data revenues (included
above) 289 228 26.8
Operating Statistics
Access minutes of use
(millions):
Interstate 13,710 12,837 6.8
Intrastate 9,541 8,703 9.6
-------- -------- --------
Total access minutes of
use 23,251 21,540 7.9
======== ======== ========
Toll minutes intraLATA
(millions) 1,290 1,558 (17.2)
Six Months ended June 30
National Operations 1999 1998 Percent Change
Network Services (1)
Financial Data
Revenues and sales
Local services $2,941 $2,883 2.0
Network access services
Interstate 1,746 1,654 5.6
Intrastate 989 967 2.3
Toll services 339 459 (26.1)
Directory services and
other 1,564 1,442 8.5
-------- -------- --------
Total revenues 7,579 7,405 2.3
Intersegment revenues -198 -122 -
--------- -------- ---------
Total external revenues $7,381 $7,283 1.3
========= ======== =========
Operating income $2,555 $2,266 12.8
Special charges 113 171 -
Deprecation and
amortization 1,276 1,320 (3.3)
-------- -------- ----------
Operating cash flow $3,944 $3,757 5.0
======== ======== ==========
Operating cash flow
margin 52.05% 50.7% -
Operating income margin 35.2% 32.9% -
Capital expenditures $1,378 $1,603 (14.0)
Data revenues (included
above) 559 425 31.5
Operating Statistics
Access minutes of use
(millions)
Interstate 27,707 25,705 7.8
Intrastate 18,969 17,273 9.8
-------- -------- --------
Total access minutes of
use 46,676 42,978 8.6
======== ======== ========
Toll minutes intraLATA
(millions) 2,624 3,265 (19.6)
Access lines (thousands):
Switched
Residential 13,800 13,335 3.5
Business 5,884 5,438 8.2
------- -------- --------
Total Switched 19,684 18,773 4.9
Special (2) 5,116 3,793 34.9
------- -------- --------
Total access lines 24,800 22,566 9.9
======= ======== ========
Resale lines (3) 247 83 -
ISDN lines (4)
Basic rate 171 143 19.6
Primary rate 224 135 65.9
------- ------- -------
Total ISDNlines 395 278 42.1
======= ======= =======
-1 Results are shown on a reported basis.
-2 Special access lines for 1998 have been restated to
include a Sonet multiplier effect, consistent with
1999 reporting.
-3 Includes lines resold to GTE's CLEC of 122,000 in
1999 and 35,000 in 1998.
-4 Lines have been adjusted to reflect Voice Grade
Equivalents. VGE's used in the calculation are :
one Basic Rate ISDN - 2.25 lines and one Primary
Rate ISDN = 24 lines in the above table.
SELECTED FINANCIAL DATA AND OPERATING STATISTICS
(In Millions, Except Operating Statistics) Unaudited
National Operations (continued) Second Quarter Percent
1999 1998 Change
Wireless Products and Services (1)
Financial Data
Revenues and sales
Service revenues $763 $671 13.7
Equipment sales and other 106 98 9.2
------- -------- --------
Total Revenues 2 $870 $769 3.1
======= ======== ========
Operating Income $184 $173 6.4
Special charges - - -
Depreciation and amortization 114 109 4.6
------- -------- --------
Operating cash flow $298 $282 5.7
======= ======== ========
Operating cash flow margin 38.9% 39.3% -
Capital expenditures $104 $87 19.5
Operating Statistics
Average revenue per user per
month (3) $48 $49 (2.0)
Cash operating expense per
customer per month (3) 25 30 (16.7)
Wireless subscribers (thousands)
Adjusted POPs (millions) (4)
End of period penetration 3 5
National Operations Six Months Ended Percent
June 30 Change
1999 1998
Wireless Products and Services (1)
Financial Data
Revenues and sales
Service revenues $1,477 $1,321 11.8
Equipment sales and other 209 190 10.0
------- -------- --------
Total Revenues (2) $1,686 $1,511 11.6
======= ======== ========
Operating Income $320 $262 22.1
Special charges 24 91 -
Depreciation and amortization 228 217 5.1
------- -------- --------
Operating cash flow $572 $570 0.4
======= ======== ========
Operating cash flow margin 39.0% 40.8% -
Capital expenditures $168 $142 18.3
Operating Statistics
Average revenue per user per
month (3) $47 $48 (2.1)
Cash operating expense per
customer per month (3) 26 29 (10.3)
Wireless subscribers (thousands) 5,027 4,631 8.6
Adjusted POPs (millions)(4) 61.9 61.9 -
End of period penetration (3)(5) 10.0% 9.3% -
-1 Results are shown on a reported basis.
-2 1999 includes cellular incollect revenues. Growth in total
revenues, excluding this change, would have been 6.4% and 4.6%
for the second quarter and year-to-date periods, respectively.
Cellular incollect revenues have been excluded from average
revenue per user per month and operating cash flow margin
calculations.
-3 Represents results of domestic cellular operations only.
-4 Represents population served times GTE's ownership interest.
-5 Represents subscribers divided by total population in domestic
markets only
SELECTED FINANCIAL DATA AND OPERATING STATISTICS
(In Millions) Unaudited
National Operations Second Quarter Percent
1999 1998 Change
Data Products and Services (1)
Financial Data
Revenues and sales $227 $140 62.1
Intersegment revenues (18) (11) -
------- -------- --------
Total external revenues $209 $129 62.0
======= ======== ========
Operating loss $(132) $(148) 10.8
Depreciation and amortization 44 24 83.3
------- -------- --------
Operating cash flow $(88) $(124) 29.0
======= ======== ========
Capital expenditures £180 $170 5.9
Operating statistics (thousands)
Internet billable subscribers
Other National Operations (1)
Revenues and sales
Communications $350 $246 42.3
Technology and Systems 380 353 7.6
Other, including eliminations(2) 159 205 (22.4)
-------- -------- ---------
Total revenues $889 $804 10.6
======= ======== =========
Total National Revenues $5,882 $5,519 6.6
Total National Operating Income
(3) $1,354 $1,229 10.2
NATIONAL OPERATIONS Six Months Ended Percent
June 30 Change
1999 1998
Data Products and Services (1)
Financial Data
Revenues and sales $450 $263 71.1
Intersegment revenues (38) (17) -
Total external revenues ------- -------- --------
Total Revenues 2 $412 $246 67.5
======= ======== ========
Operating loss $(253) $(279) 9.3
Depreciation and amortization 85 55 54.5
------- -------- --------
Operating cash flow $168 $224 25.0
======= ======== ========
Capital expenditures $273 $232 17.7
Operating statistics (thousands)
Internet billable subscribers $517 $311 $66.2
Other National Operations (1)
Revenues and sales
Communications $691 $461 49.9
Technology and Systems 732 692 5.8
Other, including eliminations2 252 352 (28.4)
-------- -------- ---------
Total revenues $1,675 $1,505 11.3
======= ======== =========
Total National Revenues $11,390 $10,684 6.6
Total National Operating Income $2,542 $2,390 6.4
-1 Results are shown on a reported basis. A component of Data
Products and Services, BBN Technologies, has been reclassified
to Other National Operations. Related second quarter revenues of
$55 million and $51 million, and year to date revenues of $102
million and $100 million in 1999 and 1998, respectively, as well
as other prior period amounts have been reclassified to conform to
the 1999 presentation.
-2 Includes elimination of revenues representing transactions
between units included in GTE's National Operations.
-3 Year-to-date results exclude special charges of $179 million
and $659 million recorded during the first quarters of 1999
and 1998, respectively.
SELECTED FINANCIAL DATA AND OPERATING STATISTICS
(In Millions) unaudited
INTERNATIONAL OPERATIONS SECOND QUARTER 1999
Reported Adjustments Adjusted
Financial data
Revenues and sales
Local services $88 $- $88
Toll services 69 - 69
Wireless services 137 - 137
Directory services and other 152 - 152
-------- -------- --------
Total revenues $446 $- $446
======== ======== ========
Operating income $101 $- $101
Depreciation and amortization 58 - 58
-------- -------- --------
Operating cash flow $159 $- $159
======== ======== ========
Operating cash flow margin 35.7% - 35.7%
Equity income $70 $- $70
Net income 122 - 122
Capital expenditures 91 - 91
Proportionate revenues (2) 947 - 947
INTERNATIONAL OPERATIONS SECOND QUARTER 1998 Adjusted
% Change
Reported Adjustments Adjusted
Financial data
Revenues and sales
Local services $313 $(235) -1 $78 12.8
Toll services 229 (148) -1 81 (14.8)
Wireless services 74 62 -1 136 .7
Directory services
and other 177 (78) -1 99 53.5
-------- -------- -------- --------
Total revenues $793 $(399) $394 13.2
======== ======== ======== ========
Operating income $222 $(156) -1 $66 53.0
Depreciation and
amortization 97 (42) -1 55 5.5
-------- -------- -------- --------
Operating cash flow $319 $(198) $121 31.4
======== ======== ======== ========
Operating cash flow
margin 40.2% - 30.7% -
Equity income $30 $45 -1 $75 (6.7)
Net income 109 - 109 11.9
Capital expenditures 206 (81) -1 125 (27.2)
Proportionate revenues (2) 729 - 729 29.9
-1 Represents adjustments to reflect the deconsolidation of BC
TELECOM and the consolidation of CTI, consistent with 1999
reporting. See note (1) to Consolidated Adjusted Statements of
Income.
-2 Results shown with proportional adjustment for GTE's ownership
interest. GTE's ownership interest in CTI Holdings was 58% in
second quarter of 1999 compared with 41.9% in second quarter 1998.
Also, GTE completed its purchase of a 40% interest in the Puerto
Rico Telephone Company in March 1999. Normalizing for these
changes in ownership interest, second quarter 1999 proportionate
revenue growth would have been 6.8%
INTERNATIONAL OPERATIONS Six Months Ended June 30, 1999
(continued)
Reported Adjustments Adjusted
Financial data
Revenues and sales
Local services $168 $- $168
Toll services 141 - 141
Wireless services 288 - 288
Directory services and other 253 - 253
-------- -------- --------
Total revenues $850 $- $850
======== ======== ========
Operating income $687 $(513)-1 $174
Special items (513) 513 -1 -
Depreciation and amortization 120 - 120
-------- -------- --------
Operating cash flow $294 $- $294
======== ======== ========
Operating cash flow margin 34.6% - 34.6%
Equity income $152 $- $152
Net income (loss) 563 (308) -1 255
Capital expenditures 153 - 153
Proportionate revenues (5) 1,765 - 1,765
INTERNATIONAL OPERATIONS Six Months Ended June 30, 1998 Adjusted
(continued) % Change
Reported Adjustments Adjusted
Financial data
Revenues and sales
Local services $620 $(473) -2 $147 14.3
Toll services 469 (310) -2 159 (11.3)
Wireless services 143 121 -2 264 9.1
Directory services
and other 328 (156) -2 172 47.1
-------- -------- -------- --------
Total revenues $1,560 $(818) $742 14.6
======== ======== ======== ========
Operating income $363 $(251)(2,3) $112 55.4
Special items 38 (38) -3 - -
Depreciation and
amortization 219 (106) -2 113 6.2
-------- -------- -------- --------
Operating cash flow $620 $(395) $225 30.7
======== ======== ======== ========
Operating cash flow
margin 39.7% - 30.3% -
Equity income $45 $81 -2 $126 20.6
Net income (loss) (144) 338 (3,4) 194 31.4
Capital expenditures 324 (139) 2 185 (17.3)
Proportionate revenues (5) 1,387 - 1,387 27.3
Operating statistics (thousands) (6)
June 30 Percent
Change
1999 1998
Access lines at 100%
Consolidated subsidiaries 1,007 981 2.7
Unconsolidated subsidiaries 8,218 5,251 56.5
------- ------- -------
Total 9,225 6,232 48.0
======= ======= =======
Proportionate access lines: (5)
Consolidated subsidiaries 857 834 2.8
Unconsolidated subsidiaries 2,356 1,977 19.2
------- ------- -------
Total 3,213 2,811 14.3
======= ======= =======
Wireless customers at 100%:
Consolidated subsidiaries 923 604 52.8
Unconsolidated subsidiaries 3,544 1,573 125.3
------ ------ ------
Total 4,467 2,177 105.2
====== ====== ======
Proportionate wireless customers: (5)
Consolidated subsidiaries 607 310 95.8
Unconsolidated subsidiaries 791 428 84.8
------ ------- -------
Total 1,398 738 89.4
====== ======= =======
Adjusted POPs (millions): (7)
Consolidated subsidiaries 24.3 14.5 67.6
Unconsolidated subsidiaries 10.4 8.3 25.3
------- ------- -------
Total 34.7 22.8 52.2
======= ======= =======
-1 Represents adjustments to exclude the gain of $513 million
pretax ($308 million after-tax) on the merger of BC TELECOM and
TELUS
-2 Represents adjustments to reflect the deconsolidation of BC
TELECOM and the consolidated of CTI, consistent with 1999
reporting. See Note (1) to Consolidated Adjusted Statements of
income.
-3 Includes adjustment to exclude first quarter 1998 special
charges of $38 million, primarily related to the write-off of
impaired assets in Latin America.
-4 Includes adjustment to exclude first quarter 1998 extraordinary
charges of $300 million after-tax, related to the discontinuation
of SFAS No. 71 by GTE's Canadian operations.
-5 Results shown with proportional adjustment for GTE's ownership
interest. GTE's ownership interest in CTI Holdings was 58% in
first and second quarters of 1999 compared with 25.5% and 41.9% in
first and second quarters of 1998, respectively. Also, GTE
completed its purchase of a 40% interest in the Puerto Rico
Telephone Company in March 1999. Normalizing for these changes in
ownership interest, 1999 proportionate revenue growth would have
been 9.2%.
-6 Operating statistics reflect reclassifications for the
consolidated of CTI Holdings and the deconsolidation of BC
TELECOM, consistent with 1999 reporting.
-7 Represents population covered times GTE's ownership interest.
CONDENSED CONSOLIDATED BALANCE SHEETS (1)
In Millions unaudited
June 30 December
1999 31
1998
ASSETS
Current assets
Cash and cash equivalents $449 $467
Receivables, net 4,399 4,785
Net assets held for sale (2) 1,817 274
Other 1,192 1,255
-------- --------
Total current assets 7,857 6,781
-------- --------
Property, plant and equipment, net (2) 21,932 24,866
Prepaid pension costs 5,251 4,927
Franchises, goodwill and other
intangibles, net 3,288 3,144
Investments in unconsolidated companies 3,813 2,210
Other assets 1,623 1,687
-------- -------
Total assets $43,764 $43,615
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term obligations, including
current maturities $4,599 $4,148
Accounts payable and accrued expenses 3,657 4,138
Other 1,995 2,069
-------- --------
Total current liabilities 10,251 10,355
-------- --------
Long-term debt 14,297 15,418
Employee benefit plans 4,259 4,404
Deferred income taxes 2,718 1,948
Minority interests 1,490 1,984
Other liabilities 688 740
-------- -------
Total liabilities 33,703 34,849
-------- -------
Shareholders' equity
Common stock 50 50
Additional paid-in capital 8,301 7,884
Retained earnings 3,489 2,740
Accumulated other comprehensive loss (356) (375)
Guaranteed ESOP obligations (481) (509)
Treasury stock (942) (1,024)
-------- -------
Total shareholders' equity 10,061 8,766
-------- -------
Total liabilities and shareholders' equity $43,764 $43,615
======== =======
-1 Results are shown on a reported basis.
At December 31, 1998 GTE had a 50.8% ownership interest in BC
TELECOM. On January 31, 1999, BC TELECOM and TELUS Corporation
merged to form a public company called TELUS. GTE'S ownership
interest in the merged company, TELUS, is a 26.7% and, as such,
during the first quarter of 1999, GTE changed the accounting for
its investment from full consolidation to the equity method.
Certain decreases in the assets and liabilities from December 31,
1998 are primarily driven by the impacts of this transaction.
-2 At June 30, 1999, the amount reflects net assets held for sale
associated with GTE Government Systems, GTE Airfone and
approximately 1.6 million domestic access lines. At December 31,
1998, the net book value of the access lines was reflected in
'Property, plant and equipment, net'. At June 30, 1999, based on
the signing of definitive agreements, the net book value of access
lines has been reclassified to 'net assets held for sale'.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (1)
(In millions) unaudited
Six months Ended
June 30
1999 1998
OPERATIONS
Income before extraordinary charges $1,688 $815
Adjustments to reconcile income
before extraordinary charges to net
cash from operations:
Depreciation and amortization 1,826 1,912
Special items (321) 755
Change in current assets and
current liabilities excluding the
effects of acquisitions and
dispositions (326) (695)
Deferred taxes and other - net 3 (206)
-------- --------
Net cash from operations 2,870 2,581
-------- --------
INVESTING
Capital expenditures (2,132) (2,548)
Acquisitions and investments (537) (50)
Other - net 16 152
-------- --------
Net cash used in investing (2,653) (2,446)
FINANCING
Dividends paid (910) (901)
Other - net 675 1,168
-------- --------
Net cash from (used in financing) (235) 267
-------- --------
Increase (decrease) in cash and cash
equivalents (18) 402
Cash and cash equivalents
Beginning of period 467 551
-------- --------
End of period $449 $953
======== ========
-1 Results are shown on a reported basis.
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