Embarq 4Q profit flat on lower sales
KANSAS CITY, Mo. (AP) – Embarq Corp., the nation's fourth-largest traditional telephone provider, on Thursday said its fourth-quarter profits stayed level as cost cuts helped offset lower sales and a shrinking customer base.
Tom Gerke, chief executive for the Overland Park, Kan.-based company, said the results were gratifying considering the struggling economy has weighed heavily on his fellow landline competitors, and that his management team is working on the company's upcoming sale to Louisiana-based CenturyTel Inc.
"I'm really pumped up about our focus on our operations. I'm pumped up that we have a strategic transaction in the pipeline, and we're proceeding smoothly on the approval process," Gerke said.
Embarq, which spun off from Sprint Nextel Corp. in 2006, reported earning $191 million, or $1.34 per share, during the quarter, compared with $190 million, or $1.23 per share, during the same period a year ago.
The current-year results included $5 million in one-time costs tied to job cuts, compared with $36 million in similar costs during the year-ago quarter.
Analysts surveyed by Thomson Reuters had expected earnings of $1.25 per share.
Revenue during the quarter fell 6 percent, from $1.58 billion to $1.48 billion, missing analysts' expectations of $1.49 billion.
The company attributed the revenue decline to a 9.8 percent drop in access lines, which fell by 157,000 to 5.7 million. The drop was far larger than the 91,000 lines lost during the year-ago period but smaller than the 169,000 lines lost in the third quarter.
Line loss has accelerated in recent years as consumers are switching from traditional landline phones to wireless and Internet telephone services. Also, the collapsed housing market has reduced the number of new homes requesting phone service.
The revenue decline was offset somewhat by a 12 percent decrease in operating expenses and the addition of 24,000 high-speed Internet subscribers and 13,000 satellite TV subscribers.
For the year, the company earned $769 million, or $5.22 per share, compared with $683 million, or $4.44 per share, during 2007. Analysts had expected annual earnings of $5.10 per share.
Annual revenues dipped 3.8 percent from $6.37 billion to $6.12 billion, missing analysts' expectations of $6.14 billion.
Embarq shareholders last month voted in favor of a plan to sell the company to CenturyTel Inc. in a stock-only deal worth more than $5 billion at Thursday's share prices.
The company also announced last month that it plans to sell its supply chain and distribution subsidiary Embarq Logistics to Fairbault, Minn.-based KGP Telecommunications Inc. for an undisclosed amount. The division reported a 17.7 percent decline in revenue during the quarter.
Looking ahead, the company said it expects telecommunications revenue of between $2.68 billion and $2.72 billion during the first half of the fiscal year, a decline from the $2.9 billion recorded during the first half of 2008. Company executives expect to close the sale to CenturyTel in the second quarter.
Embarq released its earnings after the markets closed Thursday. During trading, the company's shares lost 18 cents, to $35.37.