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 (Date of earliest event reported): October 15, 1998
SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
Connecticut 1-9157 06-1157778
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
227 Church Street, New Haven, Connecticut 06510
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 771-5200
Not Applicable
(Former name or former address, if changed since last report)
- 1 -
Item 5. Other Events.
The registrant announced today that third quarter net income for 1998
was $54.5 million, compared with $49.1 million in the third quarter
of 1997. Diluted earnings per share were $.79 for the quarter versus
$.74 during the same period last year.
Affecting third quarter 1998 was the approximately $8 million negative
impact of a 26-day strike partially offset by approximately $6 million
from the change in accounting for Publishing previously announced in first
quarter, 1998.
Consolidated revenues and sales for the quarter were $540.3 million,
up 6.0%.
Consolidated operating expenses for the third quarter increased to
$325.7 million, up 8.1%.
The news release providing the announcement is filed as an exhibit
hereto and is incorporated herein by reference.
Item 7. Financial Statements, Pro forma Financial
Information and Exhibits.
Exhibit 20. News release issued October 15, 1998.
- 2 -
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.
SOUTHERN NEW ENGLAND
TELECOMMUNICATIONS CORPORATION
Dated: October 15, 1998 By: /s/ Madelyn M. DeMatteo
Madelyn M. DeMatteo
Secretary
- 3 -
SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION
FORM 8-K
EXHIBIT INDEX
Exhibit
Number
20 News release issued October 15, 1998.
SNET LOGO NEWS RELEASE
227 Church Street
New Haven, Connecticut 06510
October 15, 1998
For more information contact: Kevin Moore
(203) 771-2136
SNET Third Quarter Net Income $54.5 Million;
Diluted Earnings Per Share $.79
New Haven, Conn., Southern New England Telecommunications
Corporation (SNET) -- (NYSE: SNG) -- announced today that
third quarter net income for 1998 was $54.5 million,
compared with $49.1 million in the third quarter of 1997.
Diluted earnings per share were $.79 for the quarter versus
$.74 during the same period last year.
Affecting third quarter 1998 was the approximately $8
million negative impact of a 26-day strike partially offset
by approximately $6 million from the change in accounting
for Publishing previously announced in first quarter, 1998.
Daniel J. Miglio, SNET's chairman and chief executive
officer, said, "Fortunately, the recent strike is behind us
and we are all diligently working to get customer service
back on track.
"We are looking forward to our imminent merger with SBC
Communications," he added. "In September, we received the
Connecticut Department of Public Utility Control's final
approval of the merger and we are awaiting a decision by the
Federal Communications Commission, which is expected soon."
-more-
-2-
REVENUES
Consolidated revenues and sales for the quarter were $540.3
million, up 6.0%.
Wireline revenues grew to $428.0 million, an increase
of 1.1%. Local service revenues were up 3.5%, primarily
the result of a 3.9% gain in access lines. Line growth
in the third quarter was less than recent quarters due to
strike-related delays in getting new lines installed.
Network access revenues increased 6.2%, primarily a result
of growth in minutes of use, somewhat offset by the effects
of the FCC's access reform. In-state toll revenues decreased
10.0%, reflecting the continued competitive marketplace in
Connecticut. Revenues from the interstate/international
long-distance business grew 6.5%, due primarily to a significant
increase in customers. We now serve 44% of the lines for
interstate service in our state.
Wireless revenues were $66.9 million, up 14.8%, reflecting a
12.9% growth in the subscriber base to 483,000 customers.
Our growth is bolstered by the continued deployment of digital
technology.
Information and Entertainment revenues grew by 38.5% to $65.5
million, due primarily to the change in accounting for Publishing
announced in the first quarter and growth in our cable TV and
Internet businesses. We now serve 107,000 Internet customers
and 21,000 cable TV customers.
EXPENSES
Consolidated operating expenses for the third quarter
increased to $325.7 million, up 8.1%. Net strike-related
expenses were approximately $8.0 million, reflecting
management overtime, contractors, security and continued
benefits to striking employees, less wages not paid to those
striking employees.
-more-
-3-
Wireline operating expenses rose $16.0 million, or 6.1%, due
primarily to strike-related costs and regulatory mandates
such as local number portability.
Wireless operating expenses increased $7.5 million, or 19.9%
to support customer growth including the promotion of digital
service.
Information and Entertainment operating expenses rose by $12.1
million, or 46.5%, due to the previously discussed change in
Publishing accounting as well as increased costs to grow the
customer base for cable TV and Internet.
Depreciation and amortization expenses were $89.7 million,
down 5.6%, due primarily to the absence of depreciation on
analog switching equipment. The analog technology is being
replaced by digital switching and as of June 30, 1998 the
older analog equipment was fully depreciated.
Interest expense was essentially flat at $21.9 million.
Income taxes were $32.7 million, up $3.3 million or 11.2%,
the result of higher pre-tax income.
OUTSTANDING SHARES
The weighted average number of outstanding shares for the
quarter for basic and diluted EPS increased by 3.0% and 3.6%
respectively, primarily the result of the exercise of
employee stock options during 1998.
SNET is a leading information, communication and
entertainment company in Connecticut, offering a full range
of wireline products including SNET All Distance[R] service as
well as wireless voice and data services, Internet access
and cable TV. The company is building I-SNET[R], a statewide
broadband information superhighway. In the latest J.D.
Power national customer satisfaction survey, SNET was ranked
the number one long-distance company in America among
mainstream users for the second straight year.
SNET
Preliminary Summary of Consolidated Results
For the Three Months Ended September 30, 1998
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
For the 3 Months Ended Percent
September 30, Change
1998 1997
INCOME STATEMENT
Revenues and Sales $540.3 $509.7 6.0%
Costs and Expenses:
Operating and maintenance 325.7 301.3 8.1%
Depreciation
and amortization 89.7 95.0 (5.6%)
Taxes other than income 13.9 14.2 (2.1%)
Total Costs and Expenses 429.3 410.5 4.6%
Operating Income 111.0 99.2 11.9%
Interest expense 21.9 22.4 (2.2%)
Other income, net (1.9) 1.7
Income Before Income Taxes 87.2 78.5 11.1%
Income taxes 32.7 29.4 11.2%
Net Income $54.5 $49.1 11.0%
Weighted Average Basic Common Shares
Outstanding (thousands)* 68,340 66,332 3.0%
Weighted Average Diluted Common Shares
Outstanding (thousands)* 68,862 66,498 3.6%
* Effective December 31, 1997, SNET adopted Statement of
Financial Accounting Standards (SFAS) No. 128,"Earnings per
Share." Under SFAS No. 128, basic earnings per common share
is computed by dividing income by the weighted average number
of common shares outstanding during the period. In order to
compute diluted earnings per share, the weighted average
number of common shares is increased by the effect of all
potential common shares outstanding during the period.
As required by SFAS No.128, all periods presented have been
restated to conform to the provisions of the new standard.
SNET
Preliminary Summary of Consolidated Results
For the Three Months Ended September 30, 1998
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
For the 3 Months Ended Percent
September 30, Change
1998 1997
BASIC EARNINGS PER COMMON SHARE*
Net Income** $0.80 $0.74 8.1%
DILUTED EARNINGS PER COMMON SHARE*
Net Income** $0.79 $0.74 6.8%
STATISTICS
Access Lines in Service
(thousands) 2,345 2,257 3.9%
Interstate Minutes of Use
(millions) 2,187 2,097 4.3%
* Effective December 31, 1997, SNET adopted Statement of
Financial Accounting Standards (SFAS) No. 128,"Earnings per
Share." Under SFAS No. 128, basic earnings per common share
is computed by dividing income by the weighted average number
of common shares outstanding during the period. In order to
compute diluted earnings per share, the weighted average
number of common shares is increased by the effect of all
potential common shares outstanding during the period.
As required by SFAS No.128, all periods presented have been
restated to conform to the provisions of the new standard.
** 1997 amount does not include the accounting change. If the
accounting change had been applied to 1997, Basic and Diluted
Earnings Per Share Before Extraordinary Charge and Accounting
Change for the period would have been $.80. The Basic and
Diluted Earnings Per Share percent change for the period would
have been 0.0% and (1.3%), respectively.
SNET
Preliminary Summary of Consolidated Results
For the Nine Months Ended September 30, 1998
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
For the 9 Months Ended Percent
September 30, Change
1998 1997
INCOME STATEMENT
Revenues and Sales $1,606.0 $1,494.0 7.5%
Costs and Expenses:
Operating and maintenance 953.5 878.2 8.6%
Depreciation
and amortization 280.5 281.0 (.2%)
Taxes other than income 40.3 40.7 (1.0%)
Total Costs and Expenses 1,274.3 1,199.9 6.2%
Operating Income 331.7 294.1 12.8%
Interest expense 66.8 67.5 (1.0%)
Other income, net (2.5) 5.7
Income Before Income Taxes 262.4 232.3 13.0%
Income taxes 98.4 87.1 13.0%
Income Before Extraordinary
Charge and Accounting
Change 164.0 145.2 12.9%
Extraordinary Charge,
Net of Tax - (3.7)
Accounting Change, Net of
Tax 15.5 -
Net Income $179.5 $141.5 26.9%
Weighted Average Basic Common Shares
Outstanding (thousands)* 67,867 66,011 2.8%
Weighted Average Diluted Common Shares
Outstanding (thousands)* 68,501 66,114 3.6%
* Effective December 31, 1997, SNET adopted Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share." Under SFAS No. 128, basic earnings per common share
is computed by dividing income by the weighted average number
of common shares outstanding during the period. In order to
compute diluted earnings per share, the weighted average
number of common shares is increased by the effect of all
potential common shares outstanding during the period.
As required by SFAS No.128, all periods presented have been
restated to conform to the provisions of the new standard.
SNET
Preliminary Summary of Consolidated Results
For the Nine Months Ended September 30, 1998
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
For the 9 Months Ended Percent
September 30, Change
1998 1997
BASIC EARNINGS PER COMMON SHARE*
Income Before
Extraordinary Charge and
Accounting Change** $2.42 $2.20 10.0%
Extraordinary Charge,
Net of Tax - (0.06)
Accounting Change, Net of Tax .23 -
Net Income $2.65 $2.14 23.8%
DILUTED EARNINGS PER COMMON SHARE*
Income Before
Extraordinary Charge and
Accounting Change** $2.39 $2.20 8.6%
Extraordinary Charge,
Net of Tax - (0.06)
Accounting Change, Net of Tax .23 -
Net Income $2.62 $2.14 22.4%
* Effective December 31, 1997, SNET adopted Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share." Under SFAS No. 128, basic earnings per common share
is computed by dividing income by the weighted average number
of common shares outstanding during the period. In order to
compute diluted earnings per share, the weighted average
number of common shares is increased by the effect of all
potential common shares outstanding during the period.
As required by SFAS No.128, all periods presented have been
restated to conform to the provisions of the new standard.
** 1997 amount does not include the accounting change. If the
accounting change had been applied to 1997, Basic and Diluted
Earnings Per Share Before Extraordinary Charge and Accounting
Change for the period would have been $2.33. The Basic and
Diluted Earnings Per Share percent change for the period would
have been 3.8% and 2.6%, respectively.
SNET
Preliminary Operating and Financial Statistics
(Unaudited)
Percent
At September 30, Change
1998 1997
Total Assets (millions) $2,841.9 $2,774.3 2.4%
Long-term Debt (millions) $1,140.5 $1,184.1 (3.7%)
Access Lines in Service
(thousands) 2,345 2,257 3.9%
For the 9 Months Ended Percent
September 30, Change
1998 1997
Dividends Per Common Share $1.32 $1.32
Book Value Per Common Share $11.45 $8.50 34.7%
Interstate Minutes of Use
(millions) 6,519 6,198 5.2%
