<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
Date of Report - April 14, 1998
(Date of earliest event reported)
GTE CORPORATION
(Exact name of registrant as specified in its charter)
NEW YORK 1-2755 13-1678633
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
ONE STAMFORD FORUM
STAMFORD, CONNECTICUT 06904
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 965-2000
<PAGE>
GTE Corporation
FORM 8-K
ITEM OF INFORMATION
ITEM 7. Financial Statements and Exhibits
(c) Exhibits
99.1 - GTE's recently reported first quarter 1998 results.
<PAGE>
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.
GTE CORPORATION
(Registrant)
WILLIAM M. EDWARDS, III
(William M. Edwards, III)
Vice President and
Controller
Date: April 14, 1998
<PAGE>
Exhibit 99.1
From: Peter Thonis, 203/965-3326 (After 6 p.m. 800-759-8888, PIN 113-1814)
e-mail: [email protected]
Sharon Cohen-Hagar, 203/965-3188 (After 6 p.m. 203/849-8728)
e-mail: [email protected]
April 14, 1998
GTE Generates 11% Consolidated Revenue Growth
---------------------------------------------
and 10% Core EPS Growth in First Quarter, Before Previously Announced Charge
- ----------------------------------------------------------------------------
STAMFORD, Conn. - GTE Corp. today announced its first quarter, 1998 financial
results by reporting a record consolidated revenue growth of 11 percent and
earnings per share (EPS) growth of 10 percent from core operations, continuing
its double digit core EPS growth for the eleventh consecutive quarter.
During the quarter, consolidated revenues and sales increased to $5.88
billion, compared to $5.28 billion in the first quarter of 1997. Earnings per
share from core operations increased during the quarter to 76 cents on net
income of $733 million, as compared to 69 cents per share or $665 million
reported for the same period last year. Including the effects of the previously
announced after-tax, non-recurring charges of $802 million (83 cents per share)
and GTE's data initiatives (11 cents per share), a consolidated net loss of $178
million or 18 cents per share was reported.
GTE Chairman and CEO Charles R. Lee said, "GTE continues to enjoy
strong revenue growth throughout our operations as we invest in high-growth
opportunities that improve our competitive position. In fact, our first quarter
consolidated revenue growth is the highest percent improvement ever recorded by
GTE. We are successfully implementing our strategy to transform GTE into a
growing, market leading provider of telecommunications services and are on track
to achieve our financial objectives in 1998 and beyond."
- more -
<PAGE>
GTE - 2
"We continue to be pleased with the progress we are making in our data and
our national sales, service and marketing initiatives," Mr. Lee added. "In just
the first quarter, revenue from our data initiatives grew 22 percent from the
fourth quarter of 1997, and we expect to see strong growth in the future as we
roll out new services such as high-speed (ADSL) Internet access. Further, we
now have launched our national sales, service and marketing operations in four
states with plans to be in several more in 1998. At the same time, we are
carefully reviewing every opportunity to improve our competitive position by
adding new capabilities. In this dynamic and highly competitive industry, we
must remain flexible, with an ongoing focus on profitable growth and managing
costs."
CONSOLIDATED RESULTS
---------------------
GTE's consolidated revenues grew 11 percent to $5.88 billion in the quarter,
as compared to an increase of 7 percent in the first quarter of 1997. Major
contributors to this quarter's revenue growth include:
. Domestic access line growth of over 1.6 million, or 8 percent, including
5 percent growth in switched lines;
. Domestic access minutes of use growth of 2.7 billion, or 14 percent;
. Revenue growth of 25 percent in new and enhanced services, including
Caller ID, Call Waiting and voice messaging;
. 1.97 million new domestic customers added over the last 12 months for the
following services:
- Long distance... 1,002,000, surpassing the two million customer
milestone
- Wireless... 535,000
- Dial-up Internet access... 318,000
- Video and competitive services... 110,000
These volume improvements more than offset the expected continuing revenue
erosion in the local toll calling markets (intraLATA) due to competition as well
as price reductions GTE has implemented in those markets.
- more -
<PAGE>
GTE - 3
Consolidated operating income, excluding the pre-tax special charge of $755
million, was flat compared with the previous year. Even as GTE continued to
make critical investments consistent with its ongoing transformation to a growth
company, core operating income, which excludes both the pre-tax special charge
and the data initiatives, reached $1.49 billion in the first quarter, resulting
in 11 percent growth compared to $1.35 billion or an 8 percent increase in the
year-ago quarter. Investments include the cost of expanded distribution channels
in and out of franchise areas, the development of new products and services, and
customer acquisition and start-up costs in the long distance, digital wireless
and video markets. Without these opportunity investments, core operating income
growth would have exceeded 15 percent.
DOMESTIC OPERATIONS
-------------------
Revenues from domestic network services, including both GTE's wireline and
wireless operations, increased $228 million for the quarter to $3.8 billion.
Contributing to wireline growth was a 10 percent increase in business lines and
an 11 percent increase in second lines. Revenue from new services such as
CentraNet(R), vertical services, voice mail, CyberPOP and other enhanced
offerings increased $88 million or 25 percent. Additional wireline revenue from
start-up opportunity investments added almost $100 million over the year-ago
quarter with the long distance business generating growth of 168 percent or an
increase of $76 million and the video service offering adding $7 million over
the year-ago quarter.
Domestic wireless service revenues were $650 million, an increase of $33
million, or 5 percent. Consistent with industry trends, the impact of the 13
percent increase in subscribers in the wireless business was partially offset by
competitive price reductions, resulting in a $1 reduction in revenue per
subscriber per month from the fourth quarter of 1997. GTE helped to counter the
impact of these competitive price reductions by reducing certain operating and
acquisition costs. These actions improved operating cash flow margins from 35
percent to 42 percent this quarter while positioning the business to compete at
lower levels of revenue per customer.
- more -
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GTE - 4
Data initiatives generated revenues of $172 million, contributing to the
overall growth of GTE's National Operations. Important milestones included the
number of dial-up customers exceeding the 400,000 mark, as well as significant
expansion of GTE's new national, high-speed broadband network with the
deployment of more than 2,000 miles of fiber infrastructure completed by the end
of the first quarter. In the business market, GTE introduced two new product
offerings: the Reach Enterprise suite of applications providing secure e-
commerce and customer self-service, and the cost-saving IP FAX product.
INTERNATIONAL GROWTH
--------------------
International operations achieved revenue growth of $103 million, or 16
percent, contributing $767 million for the first quarter of 1998. This growth
was fueled by local price increases in the Canadian and Dominican operations,
wireless customer growth of 33 percent and access line growth of 5 percent, as
well as $50 million associated with new long-distance revenue settlement
arrangements in one of GTE's Canadian operations. Normalized revenue growth,
excluding these settlement arrangements, would have been 8 percent. The net
income, excluding special and extraordinary charges for the current quarter from
all international operations including affiliates, was $85 million, 15 percent
higher than the year-ago quarter, reflecting strong growth in the Canadian and
Dominican Republic operations as well as in CTI, a GTE affiliate in Argentina.
During the first quarter, the Taiwan nationwide PCS joint venture, in which GTE
holds a 12 percent interest, began commercial operations attracting nearly
400,000 customers.
ABOUT GTE
---------
With 1997 revenues of more than $23 billion, GTE is one of the world's
largest telecommunications companies and a leading provider of integrated
telecommunications services. In the United States, GTE provides local service
in 28 states and wireless service in 17 states; nationwide long-distance service
and internetworking services ranging from dial-up Internet access for
residential and small business consumers to Web-based applications for Fortune
500 companies; as well as video service in selected markets.
Outside the United States, the company serves over 7 million
telecommunications customers. In addition, GTE is also a leader in government
and defense communications systems and equipment, directories and
telecommunications-based information services, and aircraft-passenger
telecommunications.
###
35(98)
<PAGE>
GTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
First Quarter
---------------- %
1998 1997 Change
-------- ------- -------
<S> <C> <C> <C>
REVENUES AND SALES (a)
Local services $1,730 $1,605 7.8
Network access services 1,326 1,152 15.1
Toll services 591 643 (8.1)
Wireless services 718 677 6.1
Directory services 195 186 4.8
Other services and sales 1,325 1,018 30.2
------ ------ -----
Total revenues and sales 5,885 5,281 11.4
------ ------ -----
OPERATING COSTS AND EXPENSES
Cost of services and sales 2,498 1,952 28.0
Selling, general & administrative 1,071 1,027 4.3
Depreciation and amortization 969 956 1.4
Special charges (b) 755 - -
------ ------ -----
Total costs and expenses 5,293 3,935 34.5
------ ------ -----
OPERATING INCOME 592 1,346 (56.0)
------ ------ -----
OTHER (INCOME) EXPENSE
Interest - net 289 275 5.1
Other - net 23 20 15.0
------ ------ -----
Income before income taxes 280 1,051 (73.4)
Income taxes 138 386 (64.2)
------ ------ -----
INCOME BEFORE EXTRAORDINARY CHARGES 142 665 (78.6)
Extraordinary charges (c) (320) - -
------ ------ -----
NET INCOME (LOSS) (d) $ (178) $ 665 -
====== ====== =====
BASIC EARNINGS (LOSS) PER COMMON SHARE
Before extraordinary charges $ .15 $ .69 (78.3)
Extraordinary charges (c) (.33) - -
------ ------ -----
NET INCOME (LOSS) (d) $ (.18) $ .69 -
====== ====== =====
DILUTED EARNINGS (LOSS) PER COMMON SHARE
Before extraordinary charges $ .15 $ .69 (78.3)
Extraordinary charges (.33) - -
------ ------ -----
NET INCOME (LOSS) $ (.18) $ .69 -
====== ====== =====
AVERAGE COMMON SHARES OUTSTANDING
Basic 959 960 (.1)
Diluted 968 964 .4
</TABLE>
- ------------------------
See accompanying Notes to Consolidated Statements of Income.
<PAGE>
GTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED STATEMENTS OF INCOME
(a) Prior period amounts have been restated to conform to the 1998 presentation.
(b) Special charges reflect a pretax charge of $755 million ($482 million after-
tax) related to cost reductions, the write-down of HFC test market
technologies in the video business, a reserve for the disposition of Airfone
assets, and other items.
(c) The Canadian regulatory commission has issued a series of rulings
culminating in a final ruling in March 1998 which opens the Canadian
telecommunications market to full competition, making the continued use of
regulated accounting principles inappropriate for GTE's Canadian operations.
This change resulted in a noncash extraordinary charge totaling $300 million
after-tax. In addition, GTE has called $800 million in high-coupon debt and
preferred stock, resulting in a one-time charge of $20 million.
(d) Costs associated with the new data initiatives reduced net income by $109
million, or $.11 per share. Excluding these costs and the costs associated
with the special charges and extraordinary charges described above, net
income would have grown 10.2%, while earnings per share would have grown
10.1%.
<PAGE>
GTE CORPORATION AND SUBSIDIARIES
RESULTS ADJUSTED FOR SPECIAL ITEMS
(IN MILLIONS, EXCEPT PER-SHARE AMOUNTS)
First Quarter
-------------------- %
1998 1997 Change
--------- --------- ------
REVENUES:
- ---------
As reported $ 5,885 $ 5,281 11.4
Data initiatives 172 - -
-------- -------- -----
Core operations $ 5,713 $ 5,281 8.2
======== ======== =====
OPERATING INCOME (LOSS):
- ------------------------
As reported $ 592 $ 1,346 (56.0)
Data initiatives (142) - -
Special charges (755) - -
-------- -------- -----
Core operations $ 1,489 $ 1,346 10.6
======== ======== =====
NET INCOME (LOSS):
- ------------------
As reported $ (178) $ 665 -
Extraordinary charges (320) - -
-------- -------- -----
Income before extraordinary charges 142 665 (78.6)
-------- -------- -----
Data initiatives (109) - -
Special charges (482) - -
-------- -------- -----
Core operations $ 733 $ 665 10.2
======== ======== =====
BASIC EARNINGS (LOSS) PER COMMON SHARE:
- ---------------------------------------
As reported $ (.18) $ .69 -
Extraordinary charges (.33) - -
-------- -------- -----
Income before extraordinary charges .15 .69 (78.3)
-------- -------- -----
Data initiatives (.11) - -
Special charges (.50) - -
-------- -------- -----
Core operations $ .76 $ .69 10.1
======== ======== =====
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
- -----------------------------------------
As reported $ (.18) $ .69 -
Extraordinary charges (.33) - -
-------- -------- -----
Income before extraordinary charges .15 .69 (78.3)
-------- -------- -----
Data initiatives (.11) - -
Special charges (.50) - -
-------- -------- -----
Core operations $ .76 $ .69 10.1
======== ======== =====
<PAGE>
GTE CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL AND OPERATING DATA
(IN MILLIONS, EXCEPT PER-SHARE AMOUNTS)
First Quarter
------------------- %
1998 1997 Change
-------- -------- ------
CONSOLIDATED
- ------------
Operations:
Operating income $ 592 $ 1,346 (56.0)
Special charges 755 - -
Depreciation and amortization 969 956 1.4
-------- -------- -----
Operating cash flow $ 2,316 $ 2,302 .6
======== ======== =====
Operating cash flow margin (a) 39.4% 43.6% -
Capital expenditures $ 1,079 $ 800 34.9
Return on equity (b) 25.7% 40.4% -
Debt ratio 65.7% 62.8% -
Per Share Data:
Book value per share $ 7.89 $ 7.55 4.5
Dividends per share .47 .47 -
Common shares outstanding at
end of period (thousands) 960,912 957,062 .4
Network Statistics (c):
Access lines (thousands):
United States 21,949 20,309 8.1
International 3,459 3,294 5.0
-------- -------- -----
Consolidated access lines 25,408 23,603 7.6
======== ======== =====
Wireless subscribers (thousands):
United States 4,545 4,010 13.3
International 540 405 33.3
-------- -------- -----
Consolidated wireless subscribers 5,085 4,415 15.2
======== ======== =====
Adjusted POPs (millions):
United States (c) 62.0 61.2 1.3
International 9.4 8.7 8.0
-------- -------- -----
Consolidated adjusted POPs (d) 71.4 69.9 2.1
======== ======== =====
International affiliates (e):
Access lines (thousands) (c) 2,751 2,537 8.4
Wireless subscribers (thousands) 1,244 369 237.1
Adjusted POPs (millions) (d) 10.5 7.7 36.4
- ------------------------
See accompanying Notes to Selected Financial and Operating Data.
<PAGE>
GTE CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL AND OPERATING DATA
(IN MILLIONS, EXCEPT REVENUES PER SUBSCRIBER)
First Quarter
------------------ %
1998 1997 Change
-------- -------- ------
DOMESTIC NETWORK REVENUES (c)
- -----------------------------
Revenues:
Local network services $ 1,423 $ 1,348 5.6
Network access services
Interstate 842 720 16.9
Intrastate 485 424 14.4
Toll services 358 421 (15.0)
Wireless services 650 617 5.3
------- ------- -----
Total network revenues $ 3,758 $ 3,530 6.5
======= ======= =====
Domestic Wireline (c)
Revenues and sales $ 3,851 $ 3,521 9.4
Operating income $ 736 $ 1,074 (31.5)
Special charges 351 - -
Depreciation and amortization 687 702 (2.1)
------- ------- -----
Operating cash flow $ 1,774 $ 1,776 (.1)
======= ======= =====
Operating cash flow margin (a) 46.1% 50.4% -
Capital expenditures $ 820 $ 572 43.4
Access minutes of use (millions) (c):
Interstate 12,868 12,046 6.8
Intrastate 8,968 7,086 26.6
------- ------- -----
Total access minutes of use 21,836 19,132 14.1
======= ======= =====
Toll minutes - intralata (millions) (c) 1,712 2,429 (29.5)
======= ======= =====
Access lines (thousands):
Switched 18,578 17,613 5.5
Special 3,371 2,696 25.0
------- ------- -----
Total access lines 21,949 20,309 8.1
======= ======= =====
Domestic Wireless
Service revenues $ 650 $ 617 5.3
Operating income $ 79 $ 120 (34.2)
Special charges 91 - -
Depreciation and amortization 105 98 7.1
------- ------- -----
Operating cash flow $ 275 $ 218 26.1
======= ======= =====
Operating cash flow margin (a),(f) 42.3% 35.3% -
Capital expenditures $ 55 $ 50 10.0
Revenues per subscriber per month 48 53 (9.4)
End of period penetration (g) 9.2% 8.2% -
- ------------------------
See accompanying Notes to Selected Financial and Operating Data.
<PAGE>
GTE CORPORATION AND SUBSIDIARIES
NOTES TO SELECTED FINANCIAL AND OPERATING DATA
(a) Normalized to exclude special charges.
(b) Excluding the data initiatives, special charges and extraordinary charges,
return on equity would have been 40.0%.
(c) Prior period amounts have been restated to conform to the 1998
presentation.
(d) Represents population served times GTE's ownership interest.
(e) Represents network statistics of CANTV, CTI and Pacific Cellular
Corporation, GTE's unconsolidated investments in Venezuela, Argentina and
Taiwan, respectively.
(f) Represents operating cash flow divided by wireless service revenues.
(g) Represents subscribers divided by total population available in markets
operated by GTE's domestic cellular operations.
