Sprint profit up — WSJ says execs forced out

Amy Shafer

Wednesday, Feb. 5, 2003 | 9:44 a.m.

KANSAS CITY, Mo. -- Sprint Corp., facing reports that its two top executives were being forced out over their use of a questionable type of tax shelter, reported fourth-quarter earnings today of $39 million.

The profit was a substantial improvement over the $1.2 billion loss the phone company reported during the same period a year earlier. The company credited cost-cutting measures, which have included 17,000 layoffs since October 2001.

Overall revenue rose to $6.53 billion from $6.52 billion a year earlier.

Earnings from its wireline division fell short of Wall Street expectations, while the loss in its wireless business was smaller than expected. The divisions trade separately.

Sprint confirmed Sunday that William T. Esrey, its longtime chief executive and chairman, will be stepping down. The company has not said why or when Esrey, 63, will leave, but his resignation was not unexpected because he was diagnosed with lymphoma in November.

The Wall Street Journal, citing unnamed sources, today reported that Esrey and Ronald T. LeMay, Sprint's president and chief operating officer, were being forced out as part of a boardroom dispute over their use of a questionable type of tax shelter that is under scrutiny by the Internal Revenue Service.

Sprint executives would not comment on the report. Sprint is the main local phone company in Las Vegas.

"Management is focused on the operations and running of this company," Esrey said during a conference call with investors Wednesday morning. "If there's anything appropriate to say, we will say them at the appropriate time, but not on this call."

Sprint is seeking Gary Forsee, a vice chairman at BellSouth Corp. and former Sprint executive, to replace Esrey. However, a Georgia judge over the weekend issued a temporary restraining order that prevents Forsee from leaving BellSouth to replace Esrey. A hearing on the lawsuit was scheduled for Wednesday afternoon in Atlanta.

Tim Horan, an analyst with CIBC World Markets, saw a bright spot in The Journal's report.

"There could have been accounting issues related to the company and it could have been a thousand times worse," Horan said.

Meanwhile, Sprint's wireline division, Sprint FON, reported earnings today of $294 million, or 33 cents per share, for the quarter that ended Dec. 31, compared with a loss of $906 million, or $1.02 per share, a year earlier.

Excluding one-time items, FON made $388 million, or 37 cents per share. Analysts had predicted earnings of 38 cents per share.

Sprint FON reported sales of $3.6 billion, down from the $3.8 billion it reported in the fourth quarter of 2001.

The company's wireless division, PCS, lost $255 million, or 25 cents per share, compared with a loss of $328 million, or 33 cents per share during the fourth quarter of 2001.

Excluding one-time charges, PCS lost 18 cents per share. Analysts surveyed by Thomson First Call had expected a loss of 22 cents for PCS.

The wireless division reported operating revenues of $3 billion, up from $2.8 billion.

For the year, Sprint reported earnings of $630 million, versus a loss of $1.4 billion in 2001. Revenue rose to $26.6 billion from $25.5 billion in 2001.

FON made $1.2 billion, up from a $147 million loss, while PCS lost $528 million, compared with a loss of $1.2 billion the year before.

"This year has been significant on three major fronts -- improving our operating performance, vigilant cost containment and a significantly improved balance sheet," Esrey said in a news release. "Our progress in these areas positions us favorably in 2003."

In morning trading today on the New York Stock Exchange, Sprint FON shares were up 67 cents, or 5.4 percent, to $13.03 while Sprint PCS shares gained 27 cents, or 7.3 percent, to $3.96.