AT&T Announces Third Quarter 2003 Earnings.Business Editors BEDMINSTER Bedminster may refer to:
AT&T (NYSE NYSE See: New York Stock Exchange : T) -- Third Quarter Earnings Per Diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. Share from Continuing Operations of $0.58 -- Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Revenue of $8.6 Billion -- Operating Income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $829 Million AT&T (NYSE: T) today reported income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the of $458 million, or earnings per diluted share of $0.58, for the third quarter of 2003. The company's current quarter income from continuing operations compares to income of $525 million, or earnings per diluted share of $0.67, in the third quarter of 2002. This quarter's net income of $418 million, or $0.53 per share, included a charge of $27 million, or $0.03 per share, related to the cumulative effect of the adoption of a new accounting standard and $13 million, or $0.02 per share, of losses from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. . "AT&T's third quarter results demonstrate our ability to successfully execute To run a program, which causes the computer to carry out its instructions. See executable code, instruction and EXE file. execute - execution in a difficult environment by maintaining our focus on controlling costs, streamlining processes and delighting de·light n. 1. Great pleasure; joy. 2. Something that gives great pleasure or enjoyment. v. de·light·ed, de·light·ing, de·lights v.intr. 1. our customers," said AT&T Chairman and Chief Executive Officer David W. Dorman Dorman is a surname originating in Germany with the spelling of Dohrman or Dohrmann, but mostly found in Austria, the United States, Canada and even Ukraine. It may refer to:
AT&T reported third quarter 2003 consolidated revenue of $8.6 billion, which included $6.3 billion from AT&T Business Services and $2.4 billion from AT&T Consumer Services Consumer Services refers to the formulation, deformulation, technical consulting and testing of most consumer products, such as food, herbs, beverages, vitamins, pharmaceuticals, cosmetics, hair products, household cleaners, [paints, plastics, metals, waxes, coatings, minerals, . This represents a consolidated revenue decline of 8.1 percent versus the third quarter of 2002, primarily due to continued declines in long distance (LD) voice revenue, partially offset by the continued success of AT&T Consumer Services' bundled bun·dle n. 1. A group of objects held together, as by tying or wrapping. 2. Something wrapped or tied up for carrying; a package. 3. Biology A cluster or strand of closely bound muscle or nerve fibers. local and LD offering, as well as growth in several key markets of AT&T Business Services. AT&T's third quarter 2003 operating income totaled $829 million, resulting in a consolidated operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: of 9.6 percent. AT&T Business Services posted operating income of $417 million, yielding a margin of 6.6 percent, while AT&T Consumer Services generated operating income of $500 million, yielding a margin of 21.2 percent. "AT&T is making solid progress in improving our cost structure and enhancing our overall financial flexibility and strength," said AT&T Chief Financial Officer Thomas (language) Thomas - A language compatible with the language Dylan(TM). Thomas is NOT Dylan(TM). The first public release of a translator to Scheme by Matt Birkholz, Jim Miller, and Ron Weiss, written at Digital Equipment Corporation's Cambridge Research Laboratory runs W. Horton Horton, river, c.275 mi (440 km) long, rising in a lake N of Great Bear Lake, Northwest Territories, Canada, and flowing NW to Franklin Bay, a part of the Beaufort Sea. . "This quarter's significant free cash flow allowed us to reduce net debt by $1.5 billion and reduce our year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. net debt target to less than $9 billion while continuing to invest in the future of our business." AT&T UNIT HIGHLIGHTS AT&T Business Services -- Revenue was $6.3 billion, a decline of 6.2 percent from the prior year third quarter. The unit's revenue performance reflects pricing pressure, weakness in retail LD and data demand and overall telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. spending, partially offset by strong growth in wholesale volumes, local voice and IP&E-services An umbrella term for services on the Internet. E-services include e-commerce transaction services for handling online orders, application hosting by application service providers (ASPs) and any processing capability that is obtainable on the Web. See e-speak. revenue. -- Long distance voice revenue declined 10.5 percent on a quarter-over-quarter basis, driven by continued pricing pressure, partially offset by volume growth. Volumes grew nearly 15 percent on a quarter-over-quarter basis, driven by strong wholesale growth, which more than offset the decline in retail volumes. -- Local voice revenue grew approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 38 percent from the prior year third quarter. Local access lines totaled over 4.3 million at the end of the current period, representing an increase of almost 97,000 lines from the second quarter of 2003. -- IP&E-services revenue grew 13.0 percent, while data services revenue declined 6.5 percent from the prior year quarter. -- The managed component of total data services and IP&E-services revenue grew about 10 percent from the prior year third quarter and now comprises approximately 33 percent of this total revenue. -- Operating income totaled $417 million. Operating margin was 6.6 percent, compared with 12.7 percent in the prior year third quarter. The decline is primarily due to pricing pressure, weak retail demand resulting from a soft economy, a mix shift from higher margin retail LD voice service to lower margin wholesale, data and IP&E services, a $125 million access expense adjustment, as well as a $53 million net restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. in the current period. AT&T Consumer Services -- Revenue was $2.4 billion, a decline of 15.8 percent versus the prior year third quarter, driven by lower LD revenue as a result of the continued impact of competition, wireless and Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the substitution Substitution Arsinoë put her own son in place of Orestes; her son was killed and Orestes was saved. [Gk. Myth.: Zimmerman, 32] Barabbas robber freed in Christ’s stead. [N.T.: Matthew 27:15–18; Swed. Lit. , and customer migration to lower priced products and calling plans. These declines were partially offset by growth in bundled revenue and pricing actions. Bundled revenue grew by 77 percent compared to the prior year third quarter, and now represents over 22 percent of AT&T Consumer Services' total revenue. -- Operating income totaled $500 million, yielding an operating margin of 21.2 percent, compared with 21.3 percent in the prior year third quarter. The slight quarter-over-quarter decline reflects the impact of substitution, competition and mix shift, largely offset by pricing actions taken during the quarter. -- At the end of the third quarter, AT&T Consumer provided local service to more than 3.5 million customers, an increase of 85 percent from the prior year third quarter. During the current reporting period, AT&T began offering service in Wisconsin Wisconsin, state, United States Wisconsin (wĭskŏn`sən, –sĭn), upper midwestern state of the United States. It is bounded by Lake Superior and the Upper Peninsula of Michigan, from which it is divided by the Menominee , Minnesota Minnesota, state, United States Minnesota (mĭn'ĭsō`tə), upper midwestern state of the United States. It is bordered by Lake Superior and Wisconsin (E), Iowa (S), South Dakota and North Dakota (W), and the Canadian provinces and Arizona Arizona (âr'əzō`nə), state in the southwestern United States. It is bordered by Utah (N), New Mexico (E), Mexico (S), and, across the Colorado R., Nevada and California (W). . As of September September: see month. 30, 2003, local service was available in 15 markets. The company plans to be testing or actively marketing its residential One Rate USA(sm) bundled service in 35 states by year-end. OTHER CONSOLIDATED FINANCIAL HIGHLIGHTS -- In September 2003, in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with our review of accounting and internal control systems, the Company determined that the liability on the balance sheet relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc costs incurred in 2001 and 2002 pertaining per·tain intr.v. per·tained, per·tain·ing, per·tains 1. To have reference; relate: evidence that pertains to the accident. 2. to access and other connection expense was understated by $125 million. Since the impact to prior years' annual financial statements was not material, the Company recorded an additional expense of $125 million ($77 million after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. ) in the third quarter to reflect the proper estimate of the liability. The expense, properly recorded in the respective prior periods, would have decreased annual income from continuing operations for 2001 and 2002 by $32 million, or $0.04 per diluted share, and $45 million, or $0.06 per diluted share, respectively.
The expense, properly recorded in the respective periods,
would have (decreased) increased quarterly income from
continuing operations for the three months ended September 30,
2001 by ($33) million, or ($0.04) per diluted share; for the
three months ended December 31, 2001 by $1 million, or $0.01
per diluted share; for the three months ended March 31, 2002
by ($64) million, or ($0.08) per diluted share; for the three
months ended June 30, 2002 by $12 million, or $0.02 per
diluted share; for the three months ended September 30, 2002
by $14 million, or $0.01 per diluted share; and for the three
months ended December 31, 2002 by ($7) million, or ($0.01) per
diluted share.
A review was conducted by outside legal counsel, under the
direction of the Audit Committee. This review found that two
employees, one lower-level and one mid-level management
employee, circumvented the internal controls process resulting
in the financial impacts noted above. The Company made the
appropriate personnel changes and enhanced its internal
controls accordingly.
-- Third quarter 2003 income from continuing operations of $458 million included pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern net restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and other charges of $64 million, primarily related to separation costs associated with management streamlining initiatives. The company expects to realize an additional charge for employee separations in the fourth quarter of 2003, although this charge is expected to be significantly less than the third quarter 2003 restructuring charge. -- Other income (expense) of ($7) million in the third quarter primarily consisted of losses from the early extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of debt, primarily offset by investment-related income. -- The third quarter income tax provision reflected an approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. $120 million benefit relating to final governmental approval of Research and Experimentation tax credit claims from prior years. -- As of July July: see month. 1, 2003, AT&T adopted Financial Accounting Standards Board Interpretation No. 46 (FIN fin, organ of locomotion characteristic of fish and consisting of thin tissue supported by cartilaginous or bony rays. In some fish, e.g., the eel, a single fin extends from the back, around the tail, and along the ventral surface. 46), "Consolidation of Variable Interest Entities - an Interpretation of Accounting Research Bulletin No. 51." The consolidation of two entities from which AT&T leases buildings resulted in the addition of $433 million of assets (principally the leased properties) and $477 million of liabilities (debt secured by the properties). This resulted in a charge of $27 million, net of income taxes, as the cumulative effect of an accounting change. -- AT&T ended the quarter with net debt of $9.3 billion, which includes $0.5 billion of debt associated with the adoption of FIN 46. Net debt is defined as total debt of $17.4 billion less cash of $6.8 billion, restricted cash of $0.5 billion and net foreign debt fluctuations of $0.9 billion. -- In July of 2003, AT&T announced a $2 billion debt repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. program. During the quarter, AT&T redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. two long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. issues totaling $0.5 billion. AT&T also called three additional debt issues totaling $1.1 billion to be redeemed on October October: see month. 22, 2003. In addition, AT&T exercised its right to repay $0.5 billion of debt associated with leases capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. in conjunction with the adoption of FIN 46. The pretax loss pretax loss A loss reported before tax benefits are considered. recorded in the third quarter from these events was $0.1 billion. -- Free cash flow was $2.0 billion for the third quarter, which included $0.6 billion of tax refunds Tax refund Money back from the government when too much tax has been paid or withheld from a salary. . Free cash flow is defined as cash flows provided by operating activities of $2.8 billion less cash used for capital expenditures and other additions of $0.8 billion. -- Capital expenditures for the third quarter were $1.2 billion, which includes $433 million for properties consolidated in connection with the adoption of FIN 46. -- The third quarter loss from discontinued operations reflects an estimated loss on certain environmental clean-up clean-up n → nettoyage m clean-up clean n to give sth a clean-up → etw gründlich sauber machen clean-up n matters associated with the business of NCR (NCR Corporation, Dayton, OH, www.ncr.com) A technology company specializing in financial terminal transactions, retail systems and data warehousing. Until the late 1990s, NCR was heavily invested in the hardware side of the industry, known worldwide as a major manufacturer of computers Corp., which was spun-off from AT&T in 1996. In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with the separation and distribution agreement between AT&T and NCR, AT&T shares in certain costs associated with potential litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. liabilities. AT&T recorded its estimated proportionate pro·por·tion·ate adj. Being in due proportion; proportional. tr.v. pro·por·tion·at·ed, pro·por·tion·at·ing, pro·por·tion·ates To make proportionate. share of the clean-up costs. DEFINITIONS and NOTES AT&T Business Services LD Voice - includes all of AT&T's domestic and international LD revenue, including Intralata Refers to a telephone call within the same LATA (same region). IntraLATA is local telephone service. InterLATA refers to a call from one LATA to another, which can be within a state or from state to state (interstate). See LATA. toll when purchased as part of an LD calling plan. Local Voice - includes all local calling and feature revenue, Intralata toll when purchased as part of a local calling plan, as well as Inter-carrier local revenue. Data Services - includes bandwidth bandwidth Measurement of the capacity of a communications signal. For digital signals, the bandwidth is the data speed or rate, measured in bits per second (bps). For analog signals, it is the difference between the highest and lowest frequency components, measured in hertz services (dedicated private line services through high-capacity optical transport), frame relay A high-speed packet switching protocol used in wide area networks (WANs). Providing a granular service of up to DS3 speed (45 Mbps), it has become popular for LAN to LAN connections across remote distances, and services are offered by most major carriers. and asynchronous transfer mode See ATM. (communications) Asynchronous Transfer Mode - (ATM, or "fast packet") A method for the dynamic allocation of bandwidth using a fixed-size packet (called a cell). See also ATM Forum, Wideband ATM. ATM acronyms. Indiana acronyms. (ATM) revenue for LD and local, as well as revenue for managed data services. Internet Protocol See Internet and TCP/IP. (networking) Internet Protocol - (IP) The network layer for the TCP/IP protocol suite widely used on Ethernet networks, defined in STD 5, RFC 791. IP is a connectionless, best-effort packet switching protocol. & Enhanced Services Enhanced service is service offered over commercial carrier transmission facilities used in interstate communications, that employs computer processing applications that act on the format, content, code, protocol, or similar aspects of the subscriber's transmitted information; (IP&E-services) - includes all services that ride on the IP common backbone backbone: see spinal column. The part of a network that handles the major traffic. It employs the highest-speed transmission paths in the network and may also run the longest distances. or that use IP technology, including managed IP services, as well as application services See ASP and Web services. (e.g., hosting, security). Outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. , Professional Services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. & Other - includes complex bundled solutions primarily in the wide area/local area network space, AT&T's professional services revenue associated with the company's federal government customers, as well as all other Business Services revenue (and eliminations) not previously defined. Also includes revenue from AT&T Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. prior to the first quarter of 2003. Data, IP&E-Services - Percent Managed - managed services An umbrella term for third-party monitoring and maintaining of computers, networks and software. The actual equipment may be inhouse or at the third-party's facilities, but the "managed" implies an ongoing effort; for example, making sure the equipment is running at a certain quality refers to AT&T's management of a client's network or network and applications including applications that extend to the customer premise equipment. Data, IP&E-Services - Percent International - a data service that either originates or terminates outside of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , or an IP&E-service installed or wholly delivered outside the United States. AT&T Consumer Services Bundled Services - includes any customer with a local relationship as a starting point Noun 1. starting point - earliest limiting point terminus a quo commencement, get-go, offset, outset, showtime, starting time, beginning, start, kickoff, first - the time at which something is supposed to begin; "they got an early start"; "she knew from the , and all other AT&T subscription-based voice products provided to that customer. Standalone stand·a·lone adj. Self-contained and usually independently operating: a standalone computer terminal. LD, Transactional & Other Services - includes any customer with solely a long distance relationship, non-voice products, or a non subscription-based relationship. Local Customers - residential customers who subscribe to Verb 1. subscribe to - receive or obtain regularly; "We take the Times every day" subscribe, take buy, purchase - obtain by purchase; acquire by means of a financial transaction; "The family purchased a new car"; "The conglomerate acquired a new company"; AT&T local service. Bundled Households - number of households in targeted markets where there is general availability of AT&T local service. Other Definitions and Notes Restricted cash - $0.5 billion of cash that collateralizes a portion of private debt and is included in "other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. " on the balance sheet. Foreign currency fluctuations - represents mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. adjustments, net of cash collateral collateral (kəlăt`ərəl), something of value given or pledged as security for payment of a loan. Collateral consists usually of financial instruments, such as stocks, bonds, and negotiable paper, rather than physical goods, although collected, that increased the debt balance by approximately $0.9 billion at September 30, 2003, on non-U non-U adj. Chiefly British Not characteristic of the upper class, especially in language usage. [non- + U2. .S. denominated debt of about $4.0 billion. AT&T has entered into foreign exchange hedges that substantially offset the fluctuations in the debt balance. The offsetting mark-to-market adjustments of the hedges are included in "other assets" on the balance sheet.
Income Statement
---------------------------------------------------------------------
AT&T Corp. Consolidated Statements of Operations (Unaudited)
Dollars in millions (except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
REVENUE
-------
AT&T Business Services 6,282 $ 6,700 $19,125 $ 19,970
AT&T Consumer Services 2,353 2,794 7,265 8,791
Corporate and Other 14 (85) 40 (224)
-------- ------- ------- --------
Total Revenue 8,649 9,409 26,430 28,537
OPERATING EXPENSES
------------------
Access and other connection 2,785 2,679 8,191 8,214
Costs of services and
products 1,954 2,066 5,923 6,166
Selling, general and
administrative 1,793 2,032 5,551 5,911
Depreciation and amortization 1,224 1,243 3,607 3,631
Net restructuring and
other charges 64 (26) 134 (26)
-------- ------- ------- --------
Total operating expenses 7,820 7,994 23,406 23,896
Operating Income 829 1,415 3,024 4,641
Other (expense) income, net (7) (180) 89 (285)
Interest (expense) (289) (355) (917) (1,087)
-------- ------- ------- --------
Income from continuing
operations before income
taxes, minority interest
income, and net earnings
(losses) related to equity
investments 533 880 2,196 3,269
(Provision) for income taxes (72) (370) (677) (1,362)
Minority interest income - 28 1 81
Net (losses) earnings related
to equity investments (3) (13) 3 (414)
-------- ------- ------- --------
Income from continuing
operations 458 525 1,523 1,574
(Loss) from discontinued
operations - net of
income taxes (13) (318) (13) (14,316)
-------- ------- ------- --------
Income (loss) before
cumulative effect of
accounting changes 445 207 1,510 (12,742)
Cumulative effect of
accounting changes -
net of income taxes (27) - 15 (856)
-------- ------- ------- --------
Net income (loss) 418 207 1,525 (13,598)
======== ======= ======= ========
Weighted-average common
shares (millions) 789 770 787 736
Weighted-average common
shares and potential common
shares (millions) 791 788 788 759
PER BASIC SHARE:
----------------
Earnings from continuing
operations $ 0.58 $ 0.68 $ 1.94 $ 2.14
(Loss) from discontinued
operations (0.02) (0.41) (0.02) (19.45)
Cumulative effect of
accounting changes (0.03) - 0.02 (1.16)
-------- ------- ------- --------
Earnings (loss) per basic
share $ 0.53 $ 0.27 $ 1.94 $ (18.47)
======== ======= ======= ========
PER DILUTED SHARE:
------------------
Earnings from continuing
operations $ 0.58 $ 0.67 $ 1.93 $ 2.07
(Loss) from discontinued
operations (0.02) (0.41) (0.01) (18.86)
Cumulative effect of
accounting changes (0.03) - 0.02 (1.13)
-------- ------- ------- --------
Earnings (loss) per
diluted share $ 0.53 $ 0.26 $ 1.94 $ (17.92)
======== ======= ======= ========
Dividends declared per share $0.2375 $0.1875 $0.6125 $ 0.5625
Quarterly Income Statements
----------------------------------------------------------------------
AT&T Corp. Consolidated Statements of Income (Unaudited)
Dollars in millions (except per share amounts)
---------------------------------
3Q03 2Q03 1Q03 4Q02
---------------------------------
REVENUE
-------------------------------------
AT&T Business Services $6,282 $6,406 $6,437 $6,588
AT&T Consumer Services 2,353 2,376 2,536 2,736
Corporate and Other 14 13 13 (34)
Total revenue 8,649 8,795 8,986 9,290
OPERATING EXPENSES
-------------------------------------
Access and other connection 2,785 2,708 2,698 2,576
Costs of services and products 1,954 1,958 2,011 2,197
Selling, general and administrative 1,793 1,837 1,921 2,077
Depreciation and amortization 1,224 1,197 1,186 1,257
Net restructuring and other charges 64 66 4 1,463
Total operating expenses 7,820 7,766 7,820 9,570
Operating income (loss) 829 1,029 1,166 (280)
Other (expense)/income, net (7) 86 10 208
Interest (expense) (289) (296) (332) (361)
Income (loss) from continuing
operations before income taxes,
minority interest income, and net
earnings (losses) related to equity
investments 533 819 844 (433)
(Provision) for income taxes (72) (308) (297) (225)
Minority interest income - - 1 33
Net (losses) earnings related to
equity investments (3) 25 (19) 14
Income (loss) from continuing
operations 458 536 529 (611)
(Loss) from discontinued operations -
net of income taxes (13) - - (197)
Gain on disposition of discontinued
operations - net of income taxes - - - 1,324
Income (loss) before cumulative
effect of accounting changes 445 536 529 516
Cumulative effect of accounting
changes, net of income taxes (27) - 42 -
Net income (loss) $418 $536 $571 $516
Weighted-average common shares
(millions) 789 787 784 776
Weighted-average common shares and
potential common shares (millions) 791 787 785 776
PER BASIC SHARE:
-------------------------------------
Earnings (loss) from continuing
operations $0.58 $0.68 $0.67 $(0.79)
(Loss) from discontinued operations (0.02) - - (0.26)
Gain on disposition of discontinued
operations - - - 1.71
Cumulative effect of accounting
changes (0.03) - 0.06 -
Earnings (loss) per basic share $0.53 $0.68 $0.73 $0.66
PER DILUTED SHARE:
-------------------------------------
Earnings (loss) from continuing
operations $0.58 $0.68 $0.67 $(0.79)
(Loss) from discontinued operations (0.02) - - (0.26)
Gain on disposition of discontinued
operations - - - 1.71
Cumulative effect of accounting
changes (0.03) - 0.06 -
Earnings (loss) per diluted share $0.53 $0.68 $0.73 $0.66
----------------------------------------------------------------------
Quarterly Income Statements
----------------------------------------------------------------------
AT&T Corp. Consolidated Statements of Income (Unaudited)
Dollars in millions (except per share amounts)
-------------------------------------
3Q02 2Q02 1Q02 2002
-------------------------------------
REVENUE
---------------------------------
AT&T Business Services $6,700 $6,742 $6,528 $26,558
AT&T Consumer Services 2,794 2,911 3,086 11,527
Corporate and Other (85) (73) (66) (258)
Total revenue 9,409 9,580 9,548 37,827
OPERATING EXPENSES
---------------------------------
Access and other connection 2,679 2,747 2,788 10,790
Costs of services and products 2,066 2,086 2,014 8,363
Selling, general and
administrative 2,032 1,942 1,937 7,988
Depreciation and amortization 1,243 1,213 1,175 4,888
Net restructuring and other
charges (26) - - 1,437
Total operating expenses 7,994 7,988 7,914 33,466
Operating income (loss) 1,415 1,592 1,634 4,361
Other (expense)/income, net (180) (50) (55) (77)
Interest (expense) (355) (336) (396) (1,448)
Income (loss) from continuing
operations before income taxes,
minority interest income, and
net earnings (losses) related to
equity investments 880 1,206 1,183 2,836
(Provision) for income taxes (370) (513) (479) (1,587)
Minority interest income 28 33 20 114
Net (losses) earnings related to
equity investments (13) (123) (278) (400)
Income (loss) from continuing
operations 525 603 446 963
(Loss) from discontinued
operations - net of income taxes (318) (13,433) (565) (14,513)
Gain on disposition of
discontinued operations - net of
income taxes - - - 1,324
Income (loss) before cumulative
effect of accounting changes 207 (12,830) (119) (12,226)
Cumulative effect of accounting
changes, net of income taxes - - (856) (856)
Net income (loss) $207 $(12,830) $(975)$(13,082)
Weighted-average common shares
(millions) 770 730 709 746
Weighted-average common shares
and potential common shares
(millions) 788 750 738 766
PER BASIC SHARE:
---------------------------------
Earnings (loss) from continuing
operations $0.68 $0.83 $0.63 $1.29
(Loss) from discontinued
operations (0.41) (18.41) (0.80) (19.44)
Gain on disposition of
discontinued operations - - - 1.77
Cumulative effect of accounting
changes - - (1.21) (1.15)
Earnings (loss) per basic share $0.27 $(17.58) $(1.38) $(17.53)
PER DILUTED SHARE:
---------------------------------
Earnings (loss) from continuing
operations $0.67 $0.80 $0.60 $1.26
(Loss) from discontinued
operations (0.41) (17.91) (0.76) (18.95)
Gain on disposition of
discontinued operations - - - 1.73
Cumulative effect of accounting
changes - - (1.16) (1.12)
Earnings (loss) per diluted share $0.26 $(17.11) $(1.32) $(17.08)
----------------------------------------------------------------------
Historical Segment Data
----------------------------------------------------------------------
Segment Disclosures (Unaudited)
Dollars in millions
3Q03 2Q03 1Q03 4Q02
AT&T Business Services
LD Voice $2,801 $2,873 $2,961 $2,853
Local Voice 379 384 335 336
Total Voice 3,180 3,257 3,296 3,189
Data Services 1,949 1,993 2,000 2,079
IP&E-Services 476 459 445 442
Total Data Services, IP&E-
Services 2,425 2,452 2,445 2,521
Outsourcing, Professional
Services & Other 677 697 696 878
Total Revenue 6,282 6,406 6,437 6,588
Operating Income (Loss)(1) 417 597 600 (612)
Operating Margin 6.6% 9.3% 9.3% (9.3%)
Capital Expenditures(5) 995 763 636 1,297
Depreciation & Amortization 1,162 1,133 1,126 1,173
Total Data Services, IP&E-
Services - % managed 33% 31% 30% 30%
Total Data Services, IP&E-
Services - % international 14% 14% 14% 15%
LD Volume Growth - Yr/Yr 15% 12% 12% 7%
LD Volume % Wholesale 51% 47% 45% 42%
----------------------------------------------------------------------
AT&T Consumer Services
Standalone LD, Transactional
and Other Services $1,832 $1,916 $2,112 $2,375
Bundled Services 521 460 424 361
Total Revenue 2,353 2,376 2,536 2,736
Operating Income(2) 500 489 632 389
Operating Margin 21.2% 20.6% 24.9% 14.2%
Capital Expenditures 14 19 22 32
Depreciation & Amortization 35 36 35 57
Local Customers (in thousands) 3,547 3,130 2,778 2,423
Bundled Households (in
millions) 47.7 40.1 32.2 32.2
----------------------------------------------------------------------
Corporate and Other
Revenue $14 $13 $13 $(34)
Operating (Loss)(3) (88) (57) (66) (57)
Capital Expenditures(5) 198 8 4 17
Depreciation & Amortization 27 28 25 27
----------------------------------------------------------------------
Total AT&T
Revenue $8,649 $8,795 $8,986 $9,290
Operating Income (Loss)(4) 829 1,029 1,166 (280)
Operating Margin 9.6% 11.7% 13.0% (3.0%)
Capital Expenditures(5) 1,207 790 662 1,346
Depreciation & Amortization 1,224 1,197 1,186 1,257
(1) Includes net business restructuring and asset impairment
(charges) benefits of ($53M) in 3Q03, ($47M) in 2Q03, ($4M) in
1Q03, ($1,230M) in 4Q02 and $27M in 3Q02.
(2) Includes net business restructuring and asset impairment
(charges) benefits of ($4M) in 3Q03, ($5M) in 2Q03, ($223M) in
4Q02 and $12M in 3Q02.
(3) Includes net business restructuring (charges) of ($7M) in
3Q03, ($14M) in 2Q03, ($10M) in 4Q02 and ($13M) in 3Q02.
(4) Includes net business restructuring and asset impairment
(charges) benefits of ($64M) in 3Q03, ($66M) in 2Q03, ($4M) in
1Q03, ($1,463M) in 4Q02 and $26M in 3Q02.
(5) Total AT&T capital expenditures includes $433M related to the
adoption of FIN 46 of which $241M is included in Business
Services and $192M is included in Corporate and Other
Historical Segment Data
----------------------------------------------------------------------
Segment Disclosures (Unaudited)
Dollars in millions
3Q02 2Q02 1Q02 2002
AT&T Business Services
LD Voice $3,129 $3,224 $3,048 $12,254
Local Voice 274 277 268 1,155
Total Voice 3,403 3,501 3,316 13,409
Data Services 2,086 2,077 2,018 8,260
IP&E-Services 421 406 408 1,677
Total Data Services, IP&E-
Services 2,507 2,483 2,426 9,937
Outsourcing, Professional
Services & Other 790 758 786 3,212
Total Revenue 6,700 6,742 6,528 26,558
Operating Income (Loss)(1) 854 856 867 1,965
Operating Margin 12.7% 12.7% 13.3% 7.4%
Capital Expenditures(5) 912 930 575 3,714
Depreciation & Amortization 1,128 1,141 1,104 4,546
Total Data Services, IP&E-
Services - % managed 29% 29% 29% 29%
Total Data Services, IP&E-
Services - % international 14% 15% 13% 14%
LD Volume Growth - Yr/Yr 2% (1%) (1%) 2%
LD Volume % Wholesale 38% 34% 33% 37%
----------------------------------------------------------------------
AT&T Consumer Services
Standalone LD, Transactional
and Other Services $2,499 $2,670 $2,869 $10,413
Bundled Services 295 241 217 1,114
Total Revenue 2,794 2,911 3,086 11,527
Operating Income(2) 595 787 821 2,592
Operating Margin 21.3% 27.0% 26.6% 22.5%
Capital Expenditures 34 33 28 127
Depreciation & Amortization 89 43 41 230
Local Customers (in thousands) 1,916 1,549 1,266 2,423
Bundled Households (in
millions) 32.2 17.6 13.1 32.2
----------------------------------------------------------------------
Corporate and Other
Revenue $(85) $(73) $(66) $(258)
Operating (Loss)(3) (34) (51) (54) (196)
Capital Expenditures(5) 23 13 10 63
Depreciation & Amortization 26 29 30 112
----------------------------------------------------------------------
Total AT&T
Revenue $9,409 $9,580 $9,548 $37,827
Operating Income (Loss)(4) 1,415 1,592 1,634 4,361
Operating Margin 15.0% 16.6% 17.1% 11.5%
Capital Expenditures(5) 969 976 613 3,904
Depreciation & Amortization 1,243 1,213 1,175 4,888
(1) Includes net business restructuring and asset impairment
(charges) benefits of ($53M) in 3Q03, ($47M) in 2Q03, ($4M) in
1Q03, ($1,230M) in 4Q02 and $27M in 3Q02.
(2) Includes net business restructuring and asset impairment
(charges) benefits of ($4M) in 3Q03, ($5M) in 2Q03, ($223M) in
4Q02 and $12M in 3Q02.
(3) Includes net business restructuring (charges) of ($7M) in
3Q03, ($14M) in 2Q03, ($10M) in 4Q02 and ($13M) in 3Q02.
(4) Includes net business restructuring and asset impairment
(charges) benefits of ($64M) in 3Q03, ($66M) in 2Q03, ($4M) in
1Q03, ($1,463M) in 4Q02 and $26M in 3Q02.
(5) Total AT&T capital expenditures includes $433M related to the
adoption of FIN 46 of which $241M is included in Business
Services and $192M is included in Corporate and Other
Balance Sheet
----------------------------------------------------------------------
AT&T Corp. Consolidated Balance Sheets (Unaudited)
Dollars in millions
September December
30, 31, %
2003 2002 Change
ASSETS
Cash and cash equivalents $6,751 $8,014 (15.8%)
Accounts receivable, less allowances
of $681 and $669 4,525 5,286 (14.4%)
Deferred income taxes 617 910 (32.2%)
Other current assets 1,109 1,693 (34.4%)
-----------------------
Total Current Assets 13,002 15,903 (18.2%)
Property, plant and equipment, net of
accumulated depreciation of
$33,689 and $31,021 24,719 25,604 (3.5%)
Goodwill 4,691 4,626 1.4%
Other purchased intangible assets, net
of accumulated
depreciation of $298 and $244 508 556 (8.6%)
Prepaid pension costs 3,791 3,596 5.4%
Other assets 4,596 4,987 (7.9%)
-----------------------
TOTAL ASSETS $51,307 $55,272 (7.2%)
=======================
LIABILITIES
Accounts payable $3,297 $3,819 (13.7%)
Payroll and benefit-related
liabilities 1,091 1,519 (28.2%)
Debt maturing within one year 4,647 3,762 23.5%
Other current liabilities 2,974 2,924 1.7%
-----------------------
Total Current Liabilities 12,009 12,024 (0.1%)
Long-term debt 12,759 18,812 (32.2%)
Long-term benefit-related liabilities 4,240 4,001 (6.0%)
Deferred income taxes 5,580 4,739 17.7%
Other long-term liabilities and
deferred credits 3,180 3,384 (6.0%)
-----------------------
Total Liabilities 37,768 42,960 (12.1%)
-----------------------
SHAREOWNERS' EQUITY
AT&T Common Stock, $1 par value,
authorized 6,000,000,000 shares;
issued and outstanding 789,220,022
shares (net of 171,692,349
treasury shares) at September 30, 2003
and 783,037,580 shares
(net of 171,801,716 treasury shares)
at December 31, 2002 789 783 0.8%
Additional paid-in capital 27,855 28,163 (1.1%)
Accumulated deficit (15,044) (16,566) 9.2%
Accumulated other comprehensive loss (61) (68) 9.2%
-----------------------
Total Shareowners' Equity 13,539 12,312 10.0%
-----------------------
TOTAL LIABILITIES & SHAREOWNERS'
EQUITY $51,307 $55,272 (7.2%)
=======================
NOTE TO FINANCIAL MEDIA: AT&T executives will discuss the company's performance in a two-way conference call for financial analysts at 8:15 a.m. ET today. Reporters are invited to listen to the call. U.S. callers should dial 888-276-0010 to access the call. Callers outside the U.S. should dial + 1-612-326-1003. In addition, Internet rebroadcasts of the call will be available on the AT&T Web site beginning later today. The Web site address is http://www.att.com/ir. An audio rebroadcast of the conference call will be available beginning at 11:15AM on Tuesday Tuesday: see week. , October 21 until 11:59PM on Thursday Thursday: see week. , October 23. To access the replay, please visit http://www.att.com/ir, or U.S. callers can dial 800-475-6701, access code 661284. Callers outside the U.S. should dial +1-320-365-3844, access code 661284. The foregoing, including statements relating to possible future dividends, are "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " which are based on management's beliefs as well as on a number of assumptions concerning future events made by and information currently available to management. Readers are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside AT&T's control, that could cause actual results to differ materially from such statements. For a more detailed description of the factors that could cause such a difference, please see AT&T's 10-K, 10-Q, 8-K and other filings with the Securities and Exchange Commission. AT&T disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This information is presented solely to provide additional information to further understand the results of AT&T. The declaration of future dividends is made at the discretion of AT&T's Board of Directors, which will consider AT&T's financial condition and all other relevant factors, and there can be no assurance as to the declaration and amount of future dividends, if any. |
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