AT&T Corp. nearly tripled its second-quarter profit to $307 million as lower depreciation costs offset another sharp revenue drop and costs from the long distance phone company’s deal to be acquired by SBC Communications Inc.
The profit reported Wednesday, amounting to 38 cents per share, compared with net income of $108 million, or 14 cents a share, during the same quarter in 2004.
Second-quarter revenues slid 11.5 percent to $6.76 billion, down from $7.64 billion a year earlier, as price competition, rival companies, cell phones and Internet-based calling continued to weigh on the long-distance voice and data business.
The latest results reflected one-time expenses totaling about $300 million, or 24 cents per share, to cover the early repurchase of $1.25 billion in debt, costs related to the SBC deal and restructuring charges.
The year-ago results included restructuring costs of $54 million, or 4 cents a share.
Once again, AT&T’s results were bolstered by last year’s decision to lower the book value of the company’s long-distance network and other assets by $11 billion, a move that sharply reduces the estimated cost from wear and tear.
In the second quarter, the savings from this reduced depreciation totaled $548 million, or 42 cents a share, without which the company would have shown a loss for the period.
The results edged most Wall Street forecasts. AT&T’s stock price rose 4 cents to $19.19 in extended trading following the report, which was released after Wednesday’s close on the New York Stock Exchange. The stock had risen 3 cents in regular trading.
Revenue from services to businesses fell 8.1 percent to $5.16 billion, driven partly by customer losses, AT&T said. But operating income rose to $528 million compared with $152 million a year earlier, as the sharp reduction in depreciation expense helped nearly quadruple the unit’s profit margin to 10.2 percent.
Consumer revenues tumbled 20.8 percent to $1.59 billion but profit margins soared again thanks to the elimination of hefty marketing expenses following last year’s decision to stop seeking new residential customers. Operating income totaled $489 million for a profit margin of 30.7 percent, compared with $240 million and 11.9 percent a year earlier.
After the report, Chief Financial Officer Tom Horton slightly boosted AT&T’s forecast for the full year’s results, saying revenues would total “at or slightly above” the company’s prior estimate of $25 billion to $26 billion.
AT&T Chief Executive David Dorman attributed the improved outlook primarily to the consumer side of the company, which he said has lost fewer customers than expected despite the halt in marketing and retention efforts.
For the first half of 2005, AT&T earned $836 million, or $1.04 per share, on revenues of $13.78 billion. That compares with a net profit of $412 million, or 52 cents a share, on revenue of $15.63 billion in the first six months of 2004.