3rd Qtr & 9 Mths Rslts - Strong Q3 -Part 3
GTE CORPORATION
21 October 1999
PART THREE
GTE CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA AND OPERATING STATISTICS
(In Millions)
Unaudited
Third Quarter 1999
---------------------------------
INTERNATIONAL OPERATIONS Reported Adjustments Adjusted
--------------- ------------------------------------------------
Financial data
Revenues and sales
Local services $ 95 $ - $ 95
Toll services 77 - 77
Wireless services 129 - 129
Directory services and other 170 - 170
---------------------------------
Total revenues $ 471 $ - $ 471
=================================
Operating income $ 101 $ - $ 101
Depreciation and amortization 57 - 57
---------------------------------
Operating cash flow $ 158 $ - $ 158
=================================
Operating cash flow margin 33.5 % - 33.5 %
Equity income $ 82 $ - $ 82
Net income 144 - 144
Capital expenditures 48 - 48
Proportionate revenues (16) 981 - 981
GTE CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA AND OPERATING STATISTICS
(In Millions)
Unaudited
Third Quarter 1998
---------------------------------
INTERNATIONAL OPERATIONS Reported Adjustments(15) Adjusted
------------------- -------------------------------------------
Financial data
----------------
Revenues and sales
Local services $ 295 $ (220) $ 75
Toll services 217 (142) 75
Wireless services 84 51 135
Directory services and other 229 (119) 110
---------------------------------
Total revenues $ 825 $ (430) $ 395
=================================
Operating income $ 235 $ (152) $ 83
Depreciation and amortization 108 (50) 58
---------------------------------
Operating cash flow $ 343 $ (202) $ 141
=================================
Operating cash flow margin 41.6 % - 35.7 %
Equity income $ 23 $ 40 $ 63
Net income 114 - 114
Capital expenditures 132 (38) 94
Proportionate revenues (16) 751 - 751
GTE CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA AND OPERATING STATISTICS
(In Millions)
Unaudited
Third Quarter Adjusted
----------------------- Adjusted
INTERNATIONAL OPERATIONS 1999 1998 % Change
-----------------------------------------------------------------
Financial data
----------------
Revenues and sales
Local services $ 95 $ 75 26.7
Toll services 77 75 2.7
Wireless services 129 135 (4.4)
Directory services and other 170 110 54.5
--------------------------------
Total revenues $ 471 $ 395 19.2
================================
Operating income $ 101 $ 83 21.7
Depreciation and amortization 57 58 (1.7)
--------------------------------
Operating cash flow $ 158 $ 141 12.1
================================
Operating cash flow margin 33.5 % 35.7 % -
Equity income $ 82 $ 63 30.2
Net income 144 114 26.3
Capital expenditures 48 94 (48.9)
Proportionate revenues (16) 981 751 30.6
GTE CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA AND OPERATING STATISTICS
(In Millions, Except Operating Statistics)
Unaudited
Nine Months
Ended September 30, 1999
------------------------------
INTERNATIONAL OPERATIONS (continued)
Reported Adjustments(17) Adjusted
-----------------------------------------------------------------
Financial data
----------------
Revenues and sales
Local services $ 263 $ - $ 263
Toll services 218 - 218
Wireless services 417 - 417
Directory services and other 423 - 423
-------------------------------
Total revenues $ 1,321 $ - $1,321
===============================
Operating income $ 788 $ (513) $ 275
Special items (513) 513 -
Depreciation and amortization 177 - 177
-------------------------------
Operating cash flow $ 452 $ - $ 452
===============================
Operating cash flow margin 34.2 % - 34.2 %
Equity income $ 234 $ - $ 234
Net income (loss) 707 (308) 399
Capital expenditures 201 - 201
Proportionate revenues (21) 2,746 - 2,746
Operating statistics (thousands) (22)
-------------------------------------
September 30,
------------------- Percent
1999 1998 Change
------------------------------
Access lines at 100%:
Consolidated subsidiaries 1,014 992 2.2
Unconsolidated subsidiaries 8,233 5,296 55.5
------------------------------
Total 9,247 6,288 47.1
==============================
Proportionate access lines: (21)
Consolidated subsidiaries 863 845 2.1
Unconsolidated subsidiaries 2,360 1,993 18.4
------------------------------
Total 3,223 2,838 13.6
==============================
Wireless customers at 100%:
Consolidated subsidiaries 994 640 55.3
Unconsolidated subsidiaries 4,566 1,812 152.0
------------------------------
Total 5,560 2,452 126.8
==============================
Proportionate wireless customers: (21)
Consolidated subsidiaries 658 358 83.8
Unconsolidated subsidiaries 951 470 102.3
------------------------------
Total 1,609 828 94.3
==============================
Adjusted POPs (millions): (23)
Consolidated subsidiaries 24.2 15.4 57.1
Unconsolidated subsidiaries 10.5 8.4 25.0
------------------------------
Total 34.7 23.8 45.8
==============================
GTE CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA AND OPERATING STATISTICS
(In Millions)
Unaudited
Nine Months
Ended September 30, 1998
--------------------------------
INTERNATIONAL OPERATIONS (continued)
Reported Adjustments Adjusted
-------------------------------------------------------------
Financial data
----------------
Revenues and sales
Local services $ 915 $ (693) (18) $ 222
Toll services 686 (452) (18) 234
Wireless services 227 172 (18) 399
Directory services and other 557 (275) (18) 282
--------------------------------
Total revenues $2,385 $(1,248) $1,137
================================
Operating income $ 598 $ (403) (18)(19)$ 195
Special items 38 (38) (19) -
Depreciation and amortization 327 (156) (18) 171
--------------------------------
Operating cash flow $ 963 $ (597) $ 366
================================
Operating cash flow margin 40.4 % - 32.2 %
Equity income $ 68 $ 121 (18) $ 189
Net income (loss) (30) 338 (19)(20) 308
Capital expenditures 456 (177) (18) 279
Proportionate revenues (21) 2,138 - 2,138
GTE CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA AND OPERATING STATISTICS
(In Millions)
Unaudited
Adjusted Nine
Months Ended September 30,
------------------------- Adjusted
INTERNATIONAL OPERATIONS (continued) 1999 1998 % Change
------------------------------------------------------------------
Financial data
----------------
Revenues and sales
Local services $ 263 $ 222 18.5
Toll services 218 234 (6.8)
Wireless services 417 399 4.5
Directory services and other 423 282 50.0
---------------------------------
Total revenues $ 1,321 $ 1,137 16.2
=================================
Operating income $ 275 $ 195 41.0
Special items - - -
Depreciation and amortization 177 171 3.5
---------------------------------
Operating cash flow $ 452 $ 366 23.5
=================================
Operating cash flow margin 34.2 % 32.2 % -
Equity income $ 234 $ 189 23.8
Net income 399 308 29.5
Capital expenditures 201 279 (28.0)
Proportionate revenues (21) 2,746 2,138 28.4
GTE CORPORATION AND SUBSIDIARIES
NOTES TO SELECTED FINANCIAL DATA AND OPERATING STATISTICS
(1) Financial data is shown on an adjusted basis, as defined in
the Notes to Consolidated Adjusted Statements of Income.
(2) Operating statistics are shown on a reported basis.
(3) Excluding special items and extraordinary charges, return on
equity would have been 36.1% and 34.2%, while return on
investment would have been 14.6% and 13.8% in 1999 and 1998,
respectively.
(4) Special access lines for 1998 have been restated to be
consistent with 1999 reporting.
(5) Includes lines resold to GTE's CLEC of 158,000 in 1999 and
44,000 in 1998.
(6) Lines have been adjusted to reflect Voice Grade Equivalents.
VGEs used in the calculation are: one Basic Rate ISDN = 2.25 lines
and one Primary Rate ISDN = 24 lines in the above table.
(7) 1999 includes cellular incollect revenues. Growth in total
revenues, adjusting 1998 results to reflect this change, would
have been 10.8% and 5.1% for the third 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.
(8) Represents results of domestic cellular operations only.
(9) Cellular incollect costs have been excluded from cash
operating expense per customer per month.
(10) Represents population served times GTE's ownership interest.
(11) Represents subscribers divided by total population in
domestic markets only.
(12) A component of Internetworking, BBN Technologies, has been
reclassified to Other National Operations. Related third quarter
revenues of $46 million and $51 million, and year-to-date
revenues of $148 million and $151 million in 1999 and 1998,
respectively, as well as other prior period amounts have been
reclassified to conform to the 1999 presentation. For
comparative purposes, 1998 results for Technology and Systems and
Total National Operations are shown on an adjusted basis. (See
Note (1) to Consolidated Adjusted Statements of Income).
(13) Includes elimination of revenues representing transactions
between units included in GTE's National Operations.
(14) Third quarter 1999 results exclude the net pretax gain of
$705 million primarily related to the sale of Government Systems,
partially offset by a special charge related to the impairment of
assets associated with new product development. Year-to-date
results exclude this net gain, as well as special charges of $179
million and $659 million recorded during the first quarters of
1999 and 1998, respectively.
(15) Represents adjustments to reflect the deconsolidation of BC
TELECOM and the consolidation of CTI, consistent with 1999
reporting. See Note (2) to Consolidated Adjusted Statements of
Income.
(16) Results shown with proportional adjustment for GTE's
ownership interest. GTE's ownership interest in CTI Holdings was
58% in third quarter 1999 compared with 47.6% in third 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, third quarter 1999
proportionate revenue growth would have been 9.6%.
(17) Represents adjustments to exclude the gain of $513 million
pretax ($308 million after-tax) on the merger of BC TELECOM and
TELUS.
(18) Represents adjustments to reflect the deconsolidation of BC
TELECOM and the consolidation of CTI, consistent with 1999
reporting. See Note (2) to Consolidated Adjusted Statements of
Income.
(19) Includes adjustment to exclude first quarter 1998 special
charges of $38 million, primarily related to the write-off of
impaired assets in Latin America.
(20) 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.
(21) Results shown with proportional adjustment for GTE's
ownership interest. GTE's ownership interest in CTI Holdings was
58% during 1999 compared with 25.5%, 41.9% and 47.6% in the first,
second and third 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 9.4%.
(22) Operating statistics reflect reclassifications for the
consolidation of CTI Holdings and the deconsolidation of BC
TELECOM, consistent with 1999 reporting.
(23) Represents population covered times GTE's ownership interest.
GTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (1)
(In Millions)
Unaudited
September 30, December 31,
1999 1998
--------------------------
ASSETS
Current assets
Cash and cash equivalents (2) $ 3,555 $ 467
Receivables, net 4,753 4,785
Net assets held for sale (3) 1,752 274
Other 1,466 1,255
--------------------------
Total current assets 11,526 6,781
--------------------------
Property, plant and equipment,
net (3) 22,220 24,866
Prepaid pension costs 5,657 4,927
Franchises, goodwill and other
intangibles, net 3,545 3,144
Investments in unconsolidated
companies 3,880 2,210
Other assets 1,437 1,687
--------------------------
Total assets $ 48,265 $ 43,615
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term obligations, including
current maturities (2) $ 7,105 $ 4,148
Accounts payable and accrued
expenses 4,080 4,138
Other 2,477 2,069
--------------------------
Total current liabilities 13,662 10,355
--------------------------
Long-term debt 14,278 15,418
Employee benefit plans 4,317 4,404
Deferred income taxes 2,953 1,948
Minority interests 1,483 1,984
Other liabilities 649 740
--------------------------
Total liabilities 37,342 34,849
--------------------------
Shareholders' equity
Common stock 50 50
Additional paid-in capital 8,624 7,884
Retained earnings 4,399 2,740
Accumulated other comprehensive
loss (367) (375)
Guaranteed ESOP obligations (467) (509)
Treasury stock (1,316) (1,024)
--------------------------
Total shareholders' equity 10,923 8,766
--------------------------
Total liabilities and shareholders'
equity $ 48,265 $ 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 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) Increase in cash and cash equivalents and short-term
obligations at September 30, 1999 reflects approximately $3.25
billion required for the closing of the purchase of the
Ameritech Cellular properties. This transaction, initially
scheduled to be completed on September 30, 1999, closed on
October 8, 1999.
(3) At December 31, 1998 the amount reflects net assets held for
sale associated with GTE Government Systems and Airfone. At
December 31, 1998, the net book value of the approximately 1.6
million access lines was reflected in 'Property, plant and
equipment, net.' Based on the signing of definitive
agreements in 1999, the net book value of the access lines has
been reclassified to 'Net assets held for sale'. At September
30, 1999 the amount primarily reflects net assets held for
sale associated with GTE Airfone and the 1.6 million access
lines.
GTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (1)
(In Millions)
Unaudited
Nine Months
Ended September 30,
------------------------
1999 1998
------------------------
OPERATIONS
Income before extraordinary charges $ 3,056 $ 1,637
Adjustments to reconcile income before
extraordinary charges to net cash from
operations:
Depreciation and amortization 2,746 2,875
Special items (1,026) 755
Change in current assets and current
liabilities, excluding the effects of
acquisitions and dispositions (264) (585)
Deferred taxes and other - net 38 39
------------------------
Net cash from operations 4,550 4,721
------------------------
INVESTING
Capital expenditures (3,304) (3,951)
Acquisitions and investments (538) (130)
Proceeds from sales of assets 1,036 167
Other - net (55) 77
------------------------
Net cash used in investing (2,861) (3,837)
------------------------
FINANCING
Dividends paid (1,367) (1,354)
Long-term debt issued 3,222 3,488
Long-term debt retired (1,012) (1,892)
Increase (decrease) in short-term
obligations, excluding current maturities 399 (1,140)
Other - net 217 234
------------------------
Net cash from (used in) financing 1,399 (664)
------------------------
Increase in cash and cash equivalents 3,088 220
Cash and cash equivalents:
Beginning of period 467 551
------------------------
End of period $ 3,555 $ 771
========================
(1) Results are shown on a reported basis.
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