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): January 27, 1998
THE SOUTHERN NEW ENGLAND TELEPHONE COMPANY
(Exact name of registrant as specified in its charter)
Connecticut 1-6654 06-0542646
(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)
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Item 5. Other Events.
Southern New England Telecommunications Corporation, parent of the
registrant, announced today that fourth quarter net income was $52.3 million
or $0.79 per common share for basic earnings compared with last year's fourth
quarter net income of $44.3 million or $0.68 per common share.
Consolidated revenues and sales for the fourth quarter were up 7.4 percent
to $528.3 million. Consolidated operating and maintenance expenses for the
fourth quarter were up 5.1 percent to $314.4 million.
Net income for 1997 was $193.8 million, and basic earnings per share were
$2.93 compared with last year's net income of $192.8 million or basic earnings
per share of $2.95. The figures for 1997 include a first-quarter, extraordinary
after-tax charge of $3.7 million or $0.06 per share resulting from the early
redemption of debt. Income before the extraordinary charge was $197.5 million
or $2.99 per share.
Consolidated revenues and sales for 1997 were up 4.1 percent to $2,022.3
million. Consolidated operating and maintenance expenses for 1997 were up 3.8
percent to $1,192.6 million.
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 January 27, 1998.
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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.
THE SOUTHERN NEW ENGLAND
TELEPHONE COMPANY
Dated: January 27, 1998 By: /s/ Madelyn M. DeMatteo
Madelyn M. DeMatteo
Secretary
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THE SOUTHERN NEW ENGLAND TELEPHONE COMPANY
FORM 8-K
EXHIBIT INDEX
Exhibit
Number
20 News release issued January 27, 1998.
SNET News Release
227 Church Street
New Haven,Connecticut 06510
January 27, 1998
For more information
Analysts contact: Jim Magrone
(203) 771-4662
SNET ANNOUNCES BASIC EPS IS $0.79 FOR THE FOURTH QUARTER; BASIC
EPS FOR 1997 IS $2.99 BEFORE EXTRAORDINARY CHARGE
Southern New England Telecommunications Corporation (SNET) -
- - (NYSE: SNG) -- announced today that fourth quarter net
income was $52.3 million or $0.79 per common share for basic
earnings compared with last year's fourth quarter net income
of $44.3 million or $0.68 for basic earnings per common
share.
Daniel J. Miglio, SNET's chairman and chief executive
officer, said, "Fourth quarter earnings were solid
especially in view of increased competition and the
significant impacts of regulatory decisions."
Regulatory impacts, principally from an FCC-ordered access-
charge reduction and requirements of the Federal
Telecommunications Act totaled $17 million in the quarter.
In addition, quarterly figures include $4.8 million for Year
2000 expenses. The company's interstate/international long-
distance business continues to grow and now serves 41
percent of the Connecticut market. Margins in the wireless
business increased from 15 percent to 28 percent. Average
market share for SNET americast, the company's cable-TV
business, is about 20 percent for the towns served, ranging
to well over 40 percent. Our Internet access service has
doubled in size to close 1997 with over 85,000 customers.
Mr. Miglio added, "We are very enthusiastic about our
planned merger with SBC Communications. SBC, as the world's
most admired global telecommunications company, is an ideal
match that will maximize SNET's significant local strengths
and assure our long-term success. That makes the merger
good for our shareowners, customers, employees and retirees.
It will put us in the best possible position to serve
Connecticut's communications needs for the next century,
enhancing our ability to deliver excellent customer service
and an increasing array of exciting new products."
Revenues
Consolidated revenues and sales for the fourth quarter were
up 7.4 percent to $528.3 million. Wireline revenues rose
9.5 percent to $438.5 million. Revenues from SNET's
interstate/international long-distance business jumped 35.5
percent, fueled by a 24 percent increase in the number of
customers. Local-service revenues increased 4.5 percent, as
a result of strong access-line growth during the quarter.
Growth in minutes of use led a rise in network-access
revenues, which were up 15.2 percent. In-state toll
revenues decreased 8.4 percent, reflecting the full impact
of equal-access competition.
Wireless revenues were up 1.5 percent to $59.6 million,
reflecting growth in the customer base offset by a
decline in roaming rates.
Information and Entertainment revenues grew 5.0 percent
to $48.4 million, reflecting the increase in Internet
access customers and the company's cable-TV business,
which began operating in 1997.
Expenses
Consolidated operating and maintenance expenses for the
fourth quarter were up 5.1 percent to $314.4 million.
Wireline expenses rose $4.2 million, reflecting a
$6.5 million increase to support growth in SNET's
interstate/international long-distance business.
This was offset by reductions in the base telephony
business.
Wireless expenses dropped 9.3 percent or $4.6
million primarily because of lower distributor
payments and successful fraud reduction programs.
Information and Entertainment expenses rose 34.1
percent or $7.1 million mostly to support the SNET
americast rollout and, to a lesser extent, to
support the continuing growth in SNET Internet.
Depreciation and amortization expenses were up 8.8
percent or $7.9 million for the fourth quarter due to
higher levels of property, plant and equipment.
Interest expense was up 3.7 percent or $0.8 million.
1997 Results
Net income for 1997 was $193.8 million, and basic earnings
per share were $2.93 compared with last year's net income of
$192.8 million or basic earnings per share of $ 2.95. The
figures for 1997 include a first-quarter, extraordinary
after-tax charge of $3.7 million or $0.06 per share
resulting from the early redemption of debt. Income before
the extraordinary charge was $197.5 million or $2.99 per
share.
Earnings in 1997 reflect the absorption of approximately $33
million from regulatory actions and $14 million for Year
2000 expenses.
1997 Revenues
Consolidated revenues and sales for 1997 were up 4.1 percent
to $2,022.3 million. Wireline revenues rose 6.0 percent to
$1,665.7 million. They were boosted by a 40.4 percent sales
increase from the company's interstate/international long-
distance business where the customer base grew 24 percent.
Access-line growth continued to be strong, up 5.7 percent, a
figure that was augmented by the addition of 21,420 access
lines from SNET's acquisition of Woodbury Telephone. This,
along with higher revenues from vertical telephone services
like caller ID, call blocking and missed-call dialing drove
the 4.2 percent rise in local-service revenues. Interstate
and in-state minutes of use led the increase in network-
access revenues, which were up 10.6 percent. In-state toll
revenues declined 15.2 percent, reflecting the full annual
impact of equal-access competition and competitive
discounting.
Wireless revenues were up 3.7 percent to $227.4 million.
An increase of 16.6 percent in the customer base was
largely offset by a decline in roaming rates.
Information and Entertainment revenues grew 2.8 percent
to $189.4 million, primarily because of the company's
thriving Internet access business.
1997 Expenses
Consolidated operating and maintenance expenses for 1997
were up 3.8 percent to $1,192.6 million.
Wireline expenses rose 5.6 percent or $53.8
million. The majority of the increase bolstered
the strong growth in SNET's interstate/international
long-distance business.
Wireless expenses dropped 12.1 percent or $22.3
million because of lower distributor payments and
successful programs to reduce fraud and bad debt.
Information and Entertainment expenses rose 33.6
percent or $24.8 million largely to support the
rollout of SNET americast and also to further the
expansion of SNET Internet Access service.
Depreciation and amortization expenses were up 6.5
percent for the year because of higher levels of
property, plant and equipment. Interest expense was up
1.2 percent or $1.1 million.
SNET adopted Statement of Financial Accounting Standards
Number 128, "Earnings per Share," effective December 31,
1997. This statement established a new standard for the
calculation and presentation of earnings per share
information. Under the previous standard, SNET was only
required to present primary earnings per share. Under the
new standard, SNET is required to present basic earnings per
share (which is based on the number of actual common shares
outstanding) and diluted earnings per share (which takes
into account the effects of stock options).
Previously reported 1996 primary earnings per share were
$0.67 and $2.94 for the quarter and year respectively.
Fourth quarter 1997 diluted earnings per share were $0.78.
Diluted 1997 earnings per share were $2.98 before the
extraordinary charge and were $2.92 after the charge.
SNET is the leading information, communications 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.
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SNET
Preliminary Summary of Consolidated Results
For the Three Months Ended December 31, 1997
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
For the 3 Months Ended Percent
December 31, Change
1997 1996
INCOME STATEMENT
Revenues and Sales $528.3 $491.9 7.4%
Costs and Expenses:
Operating and maintenance 314.4 299.1 5.1%
Depreciation
and amortization 98.1 90.2 8.8%
Taxes other than income 12.4 13.2 (6.1%)
Total Costs and Expenses 424.9 402.5 5.6%
Operating Income 103.4 89.4 15.7%
Interest expense 22.3 21.5 3.7%
Other income, net 2.6 .7
Income Before Income Taxes 83.7 68.6 22.0%
Income taxes 31.4 24.3 29.2%
Net Income $52.3 $44.3 18.1%
Weighted Average Basic Common Shares
Outstanding (thousands)* 66,585 65,638 1.4%
Weighted Average Diluted Common Shares
Outstanding (thousands)* 66,959 65,735 1.9%
Basic Earnings per common share* $0.79 $0.68 16.2%
Diluted Earnings per common
share* $0.78 $0.67 16.4%
STATISTICS
Access Lines in Service
(thousands) 2,286 2,163 5.7%
Interstate Minutes of Use
(millions) 2,093 2,016 3.8%
* 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 Twelve Months Ended December 31, 1997
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
For the 12 Months Ended Percent
December 31, Change
1997 1996
INCOME STATEMENT
Revenues and Sales $2,022.3 $1,941.9 4.1%
Costs and Expenses:
Operating and maintenance 1,192.6 1,149.0 3.8%
Depreciation
and amortization 379.1 356.1 6.5%
Taxes other than income 53.1 54.6 (2.7%)
Total Costs and Expenses 1,624.8 1,559.7 4.2%
Operating Income 397.5 382.2 4.0%
Interest expense 89.8 88.7 1.2%
Other income, net 8.3 6.9 20.3%
Income Before Income Taxes 316.0 300.4 5.2%
Income taxes 118.5 107.6 10.1%
Income Before
Extraordinary Charge 197.5 192.8 2.4%
Extraordinary Charge,
Net of Tax (3.7) -
Net Income $193.8 $192.8 .5%
SNET
Preliminary Summary of Consolidated Results
For the Twelve Months Ended December 31, 1997
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
For the 12 Months Ended Percent
December 31, Change
1997 1996
Weighted Average Basic Common Shares
Outstanding (thousands)* 66,156 65,437 1.1%
Weighted Average Diluted Common Shares
Outstanding (thousands)* 66,322 65,604 1.1%
BASIC EARNINGS PER COMMON SHARE*
Income Before
Extraordinary Charge $2.99 $2.95 1.4%
Extraordinary Charge,
Net of Tax (0.06) -
Net Income $2.93 $2.95 (.7%)
DILUTED EARNINGS PER COMMON SHARE*
Income Before
Extraordinary Charge $2.98 $2.94 1.4%
Extraordinary Charge,
Net of Tax (0.06) -
Net Income $2.92 $2.94 (.7%)
STATISTICS
Access Lines in Service
(thousands) 2,286 2,163 5.7%
Interstate Minutes of Use
(millions) 8,291 7,906 4.9%
* 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
dilutive 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.
