AT&T Wireless Increases Third Quarter Net Income by $27 Million in Response to FASB Directive; Net Income Increases to $156 Million.Business Editors REDMOND Redmond, city (1990 pop. 35,800), King co., W Wash., a suburb of Seattle, on Lake Sammamish; inc. 1912. Its economy centers around computer software (Microsoft Corp. , Wash.--(BUSINESS WIRE)--Nov. 10, 2003 AT&T Wireless (NYSE NYSE See: New York Stock Exchange :AWE AWE - Advanced WavEffect ) today reported a $27 million increase to its previously reported third quarter 2003 net income resulting from the indefinite INDEFINITE. That which is undefined; uncertain. INDEFINITE, NUMBER. A number which may be increased or diminished at pleasure. 2. When a corporation is composed of an indefinite number of persons, any number of them consisting of a majority of those deferral deferral - Waiting for quiet on the Ethernet. by the Financial Accounting Standards Board Financial Accounting Standards Board (FASB) Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). of an October October: see month. 8 directive Directive may refer to:
The October 8 directive addressed the method in which companies account for the value of their minority interests of 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: subsidiaries with finite finite - compact lives. The original directive, which changed the way the value of these minority interests is carried on a company's financial statements, required the company to take a $27 million, $0.01 per share, 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. charge in the third quarter. This was reflected as a cumulative effect from change in accounting principles in the results the company released October 22. The FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). last Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant issued FAS 150-3, which deferred the classification and measurement provisions of SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 150 related to minority interests of consolidated subsidiaries with finite lives. As a result, AT&T Wireless Services was required to revert re·vert v. 1. To return to a former condition, practice, subject, or belief. 2. To undergo genetic reversion. back to carrying its minority interests of consolidated subsidiaries with finite lives at their book value, instead of at fair value as required by the October 8 ruling. This change resulted in a reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its of the $27 million after-tax cumulative effect of change in accounting principle previously reflected in AT&T Wireless' third quarter net income. The reversal of this charge increased AT&T Wireless' net income available to common shareholders for the quarter to $156 million, or $0.06 per share. About AT&T Wireless AT&T Wireless (NYSE:AWE) is the second-largest wireless carrier, based on revenues, in 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. . With 21.855 million subscribers as of September September: see month. 30, 2003, and revenues of more than $16.5 billion over the past four quarters, AT&T Wireless delivers advanced high-quality mobile wireless communications wireless communications System using radio-frequency, infrared, microwave, or other types of electromagnetic or acoustic waves in place of wires, cables, or fibre optics to transmit signals or data. services, voice and data, to businesses and consumers, in the U.S. and internationally. For more information, please visit us at www.attwireless.com. This press release contains "forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. statements'' which are based on management's beliefs as well as on a number of assumptions concerning future events made by management with information that is currently available to management. 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. may include, without limitation, management's expectations regarding: our future financial and operating performance and financial condition, including the company's outlook for the fiscal year 2003 and subsequent periods; subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. growth; industry conditions; the strength of our balance sheet; our liquidity and needs for additional financing; and our ability to generate positive free cash flow. 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 Wireless' control, that could cause actual results to differ materially from such statements. Without limitation these factors include: the risks associated with the implementation of our technology migration strategy, our ability to continue to reduce costs and increase the efficiency of our distribution channels, the potential competitive impacts of industry consolidation or alternative technologies, potential impacts on revenue and ARPU (Average Revenue Per User) A calculation often used to determine the overall value of an application. It is also used to rate particular customers, especially in the wireless space, by comparing someone's account to the overall average. from competitive pricing and slowing penetration The successful unauthorized breach of a security perimeter. See penetration test. in the wireless industry, the effects of vigorous competition in the markets in which we operate, the risk of decreased consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. due to softening softening /sof·ten·ing/ (sof´en-ing) malacia. softening a change of consistency, with loss of firmness or hardness. economic conditions, acts of terrorism terrorism, the threat or use of violence, often against the civilian population, to achieve political or social ends, to intimidate opponents, or to publicize grievances. , and consumer response to new service offerings. For a more detailed description of the factors that could cause such a difference, please see AT&T Wireless' filings with the Securities and Exchange Commission, including the information under the heading "Additional Factors That May Affect Our Business, Future Operating Results and Financial Condition" and "Forward Looking Statements" in its quarterly report on Form 10-Q Form 10-Q See 10-Q. filed on August 11, 2003.
AT&T Wireless Services, Inc. and Subsidiaries
Consolidated Condensed Statements of Operations
In millions, except per share amounts - Unaudited
For the three months ended For the nine months ended
September 30, September 30,
2003 2002 Change 2003 2002 Change
REVENUE
Services $4,073 $ 3,765 8.2%$11,755 $10,745 9.4%
Equipment 301 298 1.4% 725 839 (13.5%)
Total revenue 4,374 4,063 7.7% 12,480 11,584 7.7%
OPERATING EXPENSES
Costs of services 1,267 1,173 8.1% 3,571 3,387 5.5%
Costs of equipment
sales 495 620 (20.1%) 1,437 1,702 (15.5%)
Selling, general and
administrative 1,321 1,200 10.1% 3,885 3,586 8.3%
Depreciation and
amortization 841 703 19.5% 2,311 2,029 13.9%
Impairment of licensing
costs 83 1,329 (93.7%) 83 1,329 (93.7%)
Total operating
expenses 4,007 5,025 (20.3%) 11,287 12,033 (6.2%)
OPERATING INCOME (LOSS) 367 (962) 138.1% 1,193 (449) 365.3%
Other income (expense) 16 (164) 109.9% 36 (188) 119.3%
Interest expense 202 180 12.6% 593 490 20.9%
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES AND NET EQUITY
(LOSSES) EARNINGS
FROM INVESTMENTS IN
UNCONSOLIDATED
SUBSIDIARIES 181 (1,306) 113.9% 636 (1,127) 156.5%
Provision (benefit) for
income taxes 9 (139) 106.4% 112 (70) 259.3%
Net equity (losses)
earnings
from investments in
unconsolidated
subsidiaries, net of
tax (16) (882) (98.1%) 2 (1,017) 100.2%
INCOME (LOSS) FROM
CONTINUING
OPERATIONS 156 (2,049) 107.6% 526 (2,074) 125.4%
INCOME FROM
DISCONTINUED
OPERATIONS, NET OF
TAX - 8 (100.0%) - 47 (100.0%)
INCOME (LOSS) BEFORE
CUMULATIVE EFFECT
OF CHANGE IN
ACCOUNTING
PRINCIPLE 156 (2,041) 107.6% 526 (2,027) 126.0%
CUMULATIVE EFFECT OF
CHANGE
IN ACCOUNTING
PRINCIPLE,
NET OF TAX - - - - (166)(100.0%)
NET INCOME (LOSS) 156 (2,041) 107.6% 526 (2,193) 124.0%
Accretion of
mandatorily
redeemable preferred
stock - 6 (100.0%) 13 13 (3.6%)
NET INCOME (LOSS)
AVAILABLE
TO COMMON SHAREHOLDERS$ 156 $(2,047) 107.6%$ 513 $(2,206) 123.3%
INCOME (LOSS) PER
BASIC AND
DILUTED SHARE:
Income (loss) from
continuing
operations
available to
common
shareholders $ 0.06 $ (0.76) $ 0.19 $ (0.77)
Income from
discontinued
operations $ - $ - $ - $ 0.01
Cumulative effect of
change in
accounting
principle $ - $ - $ - $ (0.06)
Net income (loss)
available to common
shareholders $ 0.06 $ (0.76) $ 0.19 $ (0.82)
WEIGHTED AVERAGE SHARES
USED TO COMPUTE INCOME
(LOSS) PER SHARE:
Basic 2,713 2,708 2,712 2,678
Diluted 2,718 2,708 2,714 2,678
AT&T Wireless Services, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
In millions, except per share amounts - Unaudited
September 30, December 31,
2003 2002 Change
ASSETS
Cash and cash equivalents $ 4,205 $ 2,353 78.7%
Short-term investments 132 - 100.0%
Accounts receivable, less
allowances of $277and $240 2,328 2,215 5.1%
Inventories 215 325 (34.0%)
Deferred income taxes 277 - 100.0%
Income tax receivable - 56 (100.0%)
Prepaid expenses and other
current assets 408 332 22.9%
TOTAL CURRENT ASSETS 7,565 5,281 43.2%
Property, plant and
equipment, net of
accumulated depreciation
and amortization
of $9,313 and $7,810 16,069 16,263 (1.2%)
Licensing costs 14,426 13,959 3.4%
Investments in and advances
to unconsolidated
subsidiaries 1,816 2,225 (18.4%)
Goodwill 7,311 7,199 1.6%
Other assets, net of
accumulated amortization of
$345 and $251 569 879 (35.2%)
TOTAL ASSETS $ 47,756 $ 45,806 4.3%
LIABILITIES
Accounts payable $ 988 $ 780 26.6%
Payroll and benefit-related
liabilities 499 465 7.2%
Advertising and promotion
accruals 137 173 (21.2%)
Business tax accruals 312 375 (16.9%)
Interest payable on
long-term debt 158 245 (35.6%)
Other current liabilities 1,143 1,055 8.5%
TOTAL CURRENT LIABILITIES 3,237 3,093 4.6%
Long-term debt 10,607 11,057 (4.1%)
Mandatorily redeemable
preferred stock
(liquidation value of $286
as of September 30, 2003) 171 - 100.0%
Deferred income taxes 4,867 3,788 28.5%
Other long-term liabilities 385 308 24.9%
TOTAL LIABILITIES 19,267 18,246 5.6%
MINORITY INTEREST 84 48 76.9%
MANDATORILY REDEEMABLE
PREFERRED STOCK
$0.01 par value,
1,000 shares authorized,
.233 shares issued and
outstanding
(liquidation value
of $273 as of
December 31, 2002) - 151 (100.0%)
MANDATORILY REDEEMABLE COMMON STOCK
$0.01 par value, 406
shares issued and
outstanding 7,664 7,664 -
SHAREHOLDERS' EQUITY
Common stock ($0.01 par
value, 10,000 shares
authorized,
2,308 and 2,303 shares
issued and outstanding) 23 23 0.2%
Additional paid-in capital 23,680 23,667 0.1%
Receivable from former
parent, AT&T (25) (461) (94.6%)
Accumulated deficit (2,948) (3,474) (15.1%)
Accumulated other
comprehensive income (loss) 11 (58) 118.9%
TOTAL SHAREHOLDERS' EQUITY 20,741 19,697 5.3%
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 47,756 $ 45,806 4.3%
AT&T Wireless Services, Inc. and Subsidiaries
Consolidated Condensed Statements of Cash Flows
In Millions - Unaudited
For the nine months ended September 30,
2003 2002
OPERATING ACTIVITIES
Net income (loss) $ 526 $ (2,193)
Deduct: Income from discontinued operations - 47
Net income (loss), excluding discontinued
operations 526 (2,240)
Adjustments to reconcile net income (loss),
excluding discontinued operations, to net
cash provided by operating activities of
continuing operations:
Cumulative effect of change in accounting
principle, net of tax - 166
Losses on early extinguishments of debt 40 20
Losses from impairments of cost method
unconsolidated subsidiaries - 245
Net gains on sale/exchange of assets,
businesses, and cost method unconsolidated
subsidiaries (53) (8)
Depreciation and amortization 2,311 2,029
Impairment of licensing costs 83 1,329
Amortization of debt premium/discount,
interest accretion, and deferred financing
fees 28 43
Deferred income taxes 137 (326)
Net equity (earnings) losses from
investments in
unconsolidated subsidiaries (9) 1,017
Provision for uncollectible receivables 395 414
Cash received from NOL carryback 511 -
Proceeds received from termination of
interest rate swap agreements 245 -
Increase in accounts receivable (498) (440)
Decrease in inventories 111 146
Decrease in accounts payable (47) (92)
Net change in other operating assets and
liabilities (47) (41)
NET CASH PROVIDED BY OPERATING ACTIVITIES
OF CONTINUING OPERATIONS 3,733 2,262
INVESTING ACTIVITIES
Capital expenditures and other additions (1,649) (3,031)
Net dispositions (acquisitions) of licenses 12 (32)
Distributions and sales of unconsolidated
subsidiaries 80 27
Contributions, advances, and purchases of
unconsolidated subsidiaries (57) (402)
Acquisitions of consolidated businesses,
including cash acquired (46) (75)
Purchases of held-to-maturity securities (115) -
Issuance of long-term note receivable to
unconsolidated subsidiary - (100)
Other investing activities, net 19 -
NET CASH USED IN INVESTING ACTIVITIES OF
CONTINUING OPERATIONS (1,756) (3,613)
FINANCING ACTIVITIES
Repayment of debt due to others (591) (1,619)
Proceeds from issuance of long-term debt to
others, net of
issuance costs - 2,959
Proceeds from AT&T Wireless Services common
stock issued 22 421
Cash received from former parent, AT&T 436 -
Other financing activities, net (8) (3)
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES OF CONTINUING OPERATIONS (141) 1,758
NET CASH USED BY DISCONTINUED
OPERATIONS - (8)
NET INCREASE IN CASH AND CASH
EQUIVALENTS 1,836 399
NET INCREASE IN CASH DUE TO ADOPTION OF FIN 46 16 -
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 2,353 3,352
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,205 $ 3,751
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