Big Vegas companies post strong quarterly profits

Tuesday, April 18, 2000 | 11:18 a.m.

SUN STAFF AND WIRE REPORTS

Several big companies operating in Las Vegas today reported strong first-quarter earnings as they benefited from the booming U.S. and Nevada economies.

Among those posting higher profits today were Sprint, the dominant local phone company in Las Vegas; Wells Fargo & Co., the second-largest bank in Nevada; and Southwest Airlines, the busiest airline at McCarran International Airport in Las Vegas.

Sprint, the No. 3 U.S. long distance company that is being bought by MCI WorldCom Inc., reported double-digit growth in each of its core business units and strong subscriber growth in its PCS wireless division.

Kansas City, Mo.-based Sprint reported a quarterly profit of $1.12 billion, or $1.25 a share, compared with $406 million or 46 cents a share in the year-ago period. Revenue jumped 7.1 percent to $4.4 billion.

Results for the latest quarter included income of $675 million or 75 cents a share from discontinued operations, while year-ago results included a loss from discontinued operations of $28 million or 3 cents.

Sprint's latest results also included a gain of $26 million on investment activities.

Excluding these items, Sprint said it would have posted earnings from continuing operations of 65 cents per diluted share vs. 55 cents a year ago. The mean estimate of eight analysts surveyed by First Call/Thomson Financial was for earnings from continuing operations, excluding special items, of around 47 cents a share.

Sprint said its PCS Group had outstanding subscriber growth, with net customer additions of 831,000 -- the equivalent of adding a new customer every 10 seconds in the quarter. Sprint PCS ended the quarter with more than 6.5 million customers nationwide and exceeded $1 billion in quarterly revenue for the first time.

Capital expenditures were $693 million for the quarter as the buildout continued of PCS's national network.

Sprint PCS's net loss for the quarter was $513 million or 54 cents a share vs. a loss of $626 million or 73 cents in the year-ago quarter.

Wells Fargo

San Francisco-based Wells Fargo & Co.'s profits topped $1 billion in the first quarter as its 1998 merger with Norwest continued to progress smoothly.

The bank first-quarter net income totaled $1.01 billion, or 61 cents per share, beating analysts' average estimate by a penny, according to a survey by First Call/Thomson Financial. The profit represented a 14 percent increase from the first quarter last year when Wells Fargo earned $884 million, or 53 cents a share.

Most key measures of the bank's financial performance rose in the quarter, indicating that the November 1998 marriage between San Francisco-based Wells and Minneapolis-based Norwest is functioning better than many recent big bank mergers.

While Wells has completed the mergers in several small Western states, the bank still hasn't converted the customers in California, the company's stronghold, to the new system being used by the merged bank.

Wells executives said the bank attracted more customers in most lines of business. Loans climbed by 15 percent from the first quarter of 1999 and more than 100,000 new customers signed up for the Wells' Internet banking service, a trend that could help lower costs over the long haul. The bank said it now has 1.7 million Internet banking customers and roughly one in every four of those use the service to pay their bills online.

Home mortgages, a major part of the bank's business, showed some sluggishness in the first quarter as rising interest rates discouraged refinancing activity. The bank's mortgage division earned $67 million in the quarter, up just 2 percent from the previous year.

Later this year, Wells expects to add about 1 million new customers through the recently announced acquisitions of Michigan Financial Corp., First Commerce Bancshares of Nebraska, National Bancorp of Alaska and Salt Lake City-based First Security Corp.

Net-interest income in the first quarter was $2.46 billion, up almost 7 percent from $2.28 billion in the year-ago period.

Noninterest income totaled $1.91 billion, a jump of almost 11 percent from the year-ago results of $1.73 billion.

Those results included $885 million in one-time gains realized from venture capital investments that Wells has made in other businesses, primarily near its San Francisco headquarters. Those gains were largely offset by $602 million in losses on the sales of securities in the bank's investment portfolio and a $160 million writedown in its auto leases to reflecting declining used car values.

Southwest Airlines

Dallas-based Southwest Airlines reported a first-quarter profit, before a chance in an accounting principle, of $95.6 million or 18 cents per share, vs $95.8 million or 18 cents in the year-ago quarter.

Southwest said the latest-quarter results beat First Call's consensus estimate of 16 cents per share.

Revenue increased 15.5 percent to $1.24 billion.

"Despite significantly higher jet fuel prices, which were more than double year-ago levels, and the adverse impact on passenger traffic in early January from Y2K apprehensions, our first quarter 2000 earnings per share (before the accounting change) equaled our record first quarter 1999 performance of 18 cents diluted net income per share," said Southwest Chairman and Chief Executive Herbert Kelleher.

"Traffic and unit revenue trends remain strong and, based on results thus far, we expect favorable load factor and unit revenue comparisons again in April 2000. Bookings for May and June are strong at this point," Kelleher said, adding more than 25 percent of first quarter passenger revenues came through Internet travel bookings on Southwest's website. That totaled more than $300 million, up more than 100 percent from the first quarter of 1999.

"We are well on our way to exceed $1 billion in e-commerce revenues for 2000," the Southwest CEO said.