Pacific Telesis Net Dips 12% for Year; Special Costs Cited

Citing special fourth-quarter expenses, Pacific Telesis Group said Monday that its earnings last year dropped 12% to $950 million on revenue that rose 2% to $9.13 billion. Without the one-time charges, the San Francisco-based company’s net income would have increased 8% to $1.14 billion.

In the last three months of 1987, Pacific Telesis earned $150 million, down 37% from a year earlier. But the company, which is the parent of Pacific Bell, California’s largest local phone company, saw its fourth-quarter revenue climb 10%, to $2.41 billion.

Business at Pacific Bell and Nevada Bell, Pacific Telesis’ other major subsidiary, continued growing in the quarter. Fees for providing long-distance phone companies access to its networks were up, as was revenue from toll calls and local telephone service.

“California growth has usually outpaced the rest of the nation, and we think this will continue,” Chief Executive Donald E. Guinn said in a prepared statement.

But, he added, Pacific Telesis in the fourth quarter deducted $217 million from its earnings to cover the cost of incentives paid to more than 3,000 managers, mostly from Pacific Bell, who took early retirement. Guinn said the early-retirement program will save about $130 million to $170 million in 1988 payroll costs.

The company also took a $49.2-million charge in the fourth quarter to reflect a retroactive rate cut for 1986 ordered last month by the California Public Utilities Commission. Pacific Telesis had previously reduced 1987 revenue by $108 million because of an earlier PUC order.

Finally, PacTel Communications, which sells computers and phone systems, began a reorganization in the fourth quarter to focus on marketing to major business customers. The shift in strategy prompted the closing of 15 of its 24 PacTel InfoSystems stores in Southern California and elsewhere along the West Coast. The move cost the company $45 million after taxes.

Stock Closes Up

“The early-retirement and restructuring programs will allow us to continue to improve cost effectiveness and enhance our profitability in 1988 and beyond,” said Guinn, who will step down as chief executive and chairman this year.

“We will continue to pursue growth opportunities within our California and Nevada markets and in other targeted markets, particularly in PacTel Personal Communications, our cellular and paging subsidiary,” Guinn said.

In trading on the New York Stock Exchange, Pacific Telesis’ stock closed at $27.375 a share, up 62.5 cents.