AT&T Corp. said it returned to profitability in the third quarter with a net income of $520 million, in what may be the long-distance phone company's last independent earnings report.
Profit for the Bedminster, N.J., company amounted to 64 cents a share and included a charge of $92 million, or six cents a share, related to costs associated with airplane leases, as well as $20 million, or two cents a share, in merger costs, and a $41 million, or three-cents-a-share, pretax benefit from insurance proceeds related to business losses during 2001. Excluding the costs, the company's earnings were 69 cents a share.
A year earlier, AT&T reported a loss of $7.1 billion, or $8.99 a share, which included an $11.4 billion asset write-off, restructuring and other charges of $1.1 billion and a $46 million charge for airplane lease costs.
Third-quarter revenue declined 13% to $6.6 billion, from $7.6 billion a year earlier.
As it prepares for its takeover by SBC Communications Inc., AT&T is facing competitive pressures from other providers lowering prices in its enterprise market and from Internet and cable companies offering less-expensive phone service. Company executives, however, said they expect revenue declines to slow, with the figure for the year to total at least $26.5 billion, about $500 million above the range estimated by the company at the start of 2005.
"Since the current leadership team took over back in 2002, our volumes are the same and we're running the business with half the employees," said AT&T Chief Financial Officer Tom Horton in a phone interview. The company has 39,500 employees, Mr. Horton said.
AT&T and SBC executives have said they expect the $16 billion takeover deal to close by the end of the year.
Analysts said AT&T's results looked promising for its parent-to-be SBC. "Clearly, the past few quarters of above-expectation results have shown that the wheels have not come off at AT&T in advance of the merger," said Jeff Halpern of Sanford C. Bernstein & Sons in a research note.
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