News Release
FOR RELEASE THURSDAY, July 22, 2004
AT&T Announces Second-Quarter 2004 Earnings,Company
to Stop Investing in Traditional Consumer Services;
Concentrate Efforts on Business Markets
o Second-quarter earnings per diluted share of $0.14
o Consolidated revenue of $7.6 billion
o Operating income of $348 million
o Second-quarter cash from operating activities of $1.1 billion
BEDMINSTER, N.J. — AT&T (NYSE: T) today reported net income of $108 million, or earnings per diluted share of $0.14, for the second quarter of 2004. This compares to net income of $536 million, or earnings per diluted share of $0.68, in the second quarter of 2003.
The company also announced that it is shifting its focus away from traditional consumer services such as wireline residential telephone services, and concentrating its growth efforts going forward on business markets and emerging technologies, such as Voice over Internet Protocol (VoIP), that can serve businesses as well as consumers. The shift plays to AT&T’s strength as an innovator in communications and a leader in serving the complex networking and technology needs of businesses.
“AT&T is the leading provider of communications services to business customers, offering a full range of leading-edge networking and communications solutions on a global basis,” said David W. Dorman, AT&T’s Chairman and CEO, who noted that nearly 75% of AT&T’s revenue is now generated by AT&T Business. “We intend to widen the gap between AT&T and our competitors in the business market, while also improving our industry-leading cost structure and financial strength.”
As a result of recent changes in regulatory policy governing local telephone service, AT&T will no longer be competing for residential local and standalone long distance (LD) customers. The company stressed that existing residential customers will continue to receive the quality service they expect from AT&T; however, the company will no longer be investing to acquire new customers in this segment.
“This decision means that AT&T will focus on lines of business where we are a clear leader, where we control our own destiny and where we have distinct competitive advantages,” said Dorman. “Despite the near-term challenges associated with a difficult industry environment, we are confident that AT&T’s cost structure, customer base, strong balance sheet and cash flow give us the flexibility to continue investing for success in the long run.”
AT&T reported second-quarter 2004 consolidated revenue of $7.6 billion, which included $5.6 billion from AT&T Business and $2.0 billion from AT&T Consumer. Consolidated revenue declined 13.2 percent versus the second quarter of 2003, primarily due to continued declines in LD voice revenue.
AT&T’s second-quarter 2004 operating income totaled $348 million, resulting in a consolidated operating margin of 4.6 percent. Operating income included $54 million of net restructuring and other charges taken during the quarter primarily related to employee separations. This quarter the company also reported that it generated $1.1 billion in cash from operations while spending $0.5 billion on capital expenditures.
AT&T UNIT HIGHLIGHTS
AT&T Business
o | Revenue was $5.6 billion, a decline of 12.7 percent from the prior-year second quarter. Pricing pressure and mix shift from retail to wholesale negatively affected the unit’s revenue performance. |
o | Long distance voice revenue decreased 17.6 percent from the prior-year second quarter, driven by continued pricing pressure as well as a continued mix shift in volume from retail to wholesale. Volumes were flat on a quarter-over-quarter basis, with growth in wholesale volumes offset by a decline in retail volumes. |
o | Local voice revenue grew 5.0 percent from the prior-year second quarter. Local access lines totaled more than 4.6 million at the end of the current period, representing an increase of over 85,000 lines from the end of the first quarter of 2004. |
o | Data revenue declined 10.4 percent from the prior-year second quarter. Revenue was negatively affected by pricing pressure, weak demand and technology migration. |
o | IP&E-services revenue grew 2.3 percent over the prior-year second quarter. The quarter-over-quarter growth was primarily driven by strength in advanced services, including Enhanced Virtual Private Network and IP-enabled frame. |
o | Outsourcing, professional services and other revenue declined 18.9 percent from the prior-year second quarter, due to customers reducing scope and terminating outsourcing contracts. |
o | Operating income totaled $152 million in the period, yielding an operating margin of 2.7 percent. Second-quarter 2004 operating income included net restructuring and other charges of $52 million related to employee separations. The operating margin declined from the prior-year second quarter, reflecting the ongoing mix shift from retail LD products toward advanced and wholesale services. |
o | The sequential increase in second-quarter operating margin was primarily driven by favorable access settlements. In the second half of 2004, we expect the operating margin to be eroded by continuing pricing pressure in the enterprise segment, RBOC share gains in the small and medium business markets and the customary impact of seasonality. |
o | Capital expenditures were $463 million as AT&T Business continued to invest in its network and systems to drive continued cost efficiencies and expand its customer-focused networking capabilities. |
o | AT&T Business showed an improvement in market share trends at the high end of the market, consistent with its strategy of keeping and building its enterprise customer base. |
o | During the second quarter, a number of sizable customer wins and contract extensions were signed with companies including Lockheed Martin, Deutsche Bank and Providea, as well as The United States Army and The Internal Revenue Service, among many others. |
AT&T Consumer
o | Revenue was $2.0 billion, a decline of 14.6 percent versus the prior-year second quarter, driven by lower standalone LD voice revenue as a result of the continued impact of competition, wireless and Internet substitution and customer migration to lower-priced products and calling plans, partially offset by targeted price increases. |
o | Operating income totaled $240 million, yielding an operating margin of 11.9 percent. The margin decline from the prior-year second quarter was largely due to ongoing substitution and competition. In addition, increased spending for marketing and new initiatives such as VoIP contributed to the margin decline. Such declines were partially offset by the effects of pricing actions. |
o | According to industry estimates, more than 40% of American households have now migrated to some combination of bundled communications services. Recent regulatory decisions make it financially infeasible for AT&T to offer a competitive bundle of services to consumers. AT&T has determined that it cannot effectively compete against bundled competition by selling only standalone LD. |
o | As of June 30, 2004 AT&T Consumer offered its residential VoIP AT&T CallVantageSM Service in 72 major markets throughout the U.S. Recently, the company expanded the availability of its offer to 100 major markets in 32 states and Washington D.C. |
OTHER CONSOLIDATED FINANCIAL HIGHLIGHTS
o | Free cash flow was $0.6 billion for the quarter. Free cash flow is defined as cash flow provided by operating activities of $1.1 billion less cash used for capital expenditures and other additions of $0.5 billion. |
o | AT&T ended the quarter with net debt of $7.9 billion, a $0.5 billion decrease from the end of the first quarter of 2004. Net debt is defined as total debt of $11.2 billion less cash of $2.5 billion, restricted cash of $0.5 billion and net foreign debt fluctuations of $0.3 billion. |
DEFINITIONS and NOTES
AT&T Business
LD Voice — includes all of AT&T’s domestic and international LD revenue, including Intralata 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.
DataServices- includes bandwidth services (dedicated private line services through high-capacity optical transport), frame relay and asynchronous transfer mode (ATM) revenue for LD and local, as well as revenue for managed data services.
Internet Protocol & Enhanced Services (IP&E-services) —includes all services that ride on the IP common backbone or that use IP technology, including managed IP services, as well as application services (e.g., hosting, security).
Outsourcing, Professional Services & 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 revenue (and eliminations) not previously defined.
Data, IP&E-Services — Percent Managed — managed services 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, or an IP&E-service installed or wholly delivered outside the United States.
AT&T Consumer
BundledServices – includes any customer with a local relationship as a starting point, and all other AT&T subscription-based voice products provided to that customer.
Standalone LD, Transactional & Other Services —includes any customer with solely a long distance relationship, non-voice products, or a non subscription-based relationship.
Local Customers —residentialcustomers that subscribe to 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 current assets” on the balance sheet.
Foreign currency fluctuations — represents mark-to-market adjustments, net of cash collateral collected, that increased the debt balance by approximately $0.3 billion at June 30, 2004, on non-U.S. denominated debt of about $1.8 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 current assets” and “other assets” on the balance sheet.
AT&T Corp. Consolidated Statements of Income (Unaudited)
Dollars in millions (except per share amounts)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 | 2003 | 2004 | 2003 | |||||||||||
REVENUE (1) | ||||||||||||||
AT&T Business | $ | 5,611 | $ | 6,428 | $ | 11,483 | $ | 12,887 | ||||||
AT&T Consumer | 2,011 | 2,354 | 4,118 | 4,868 | ||||||||||
Corporate and Other | 14 | 13 | 25 | 26 | ||||||||||
Total Revenue | 7,636 | 8,795 | 15,626 | 17,781 | ||||||||||
OPERATING EXPENSES | ||||||||||||||
Access and other connection | 2,481 | 2,708 | 5,119 | 5,406 | ||||||||||
Costs of services and products | 1,759 | 1,958 | 3,623 | 3,969 | ||||||||||
Selling, general and administrative | 1,763 | 1,837 | 3,507 | 3,758 | ||||||||||
Depreciation and amortization | 1,231 | 1,197 | 2,481 | 2,383 | ||||||||||
Net restructuring and other charges | 54 | 66 | 267 | 70 | ||||||||||
Total operating expenses | 7,288 | 7,766 | 14,997 | 15,586 | ||||||||||
Operating income | 348 | 1,029 | 629 | 2,195 | ||||||||||
Other income (expense), net | 36 | 86 | (138 | ) | 96 | |||||||||
Interest (expense) | (191 | ) | (296 | ) | (419 | ) | (628 | ) | ||||||
Income before income taxes, minority interest income, net earnings | ||||||||||||||
related to equity investment and cumulative effect of accounting change | 193 | 819 | 72 | 1,663 | ||||||||||
(Provision) benefit for income taxes | (87 | ) | (308 | ) | 339 | (605 | ) | |||||||
Minority interest income | 1 | -- | 1 | 1 | ||||||||||
Net earnings related to equity investments | 1 | 25 | -- | 6 | ||||||||||
Income before cumulative effect of accounting change | 108 | 536 | 412 | 1,065 | ||||||||||
Cumulative effect of accounting change - net of taxes | -- | -- | -- | 42 | ||||||||||
Net income | $ | 108 | $ | 536 | $ | 412 | $ | 1,107 | ||||||
Weighted-average common shares (millions) | 794 | 787 | 794 | 786 | ||||||||||
Weighted-average common shares and potential common shares (millions) | 797 | 787 | 796 | 786 | ||||||||||
PER BASIC AND DILUTED SHARE: | ||||||||||||||
Earnings before cumulative effect of accounting change | $ | 0.14 | $ | 0.68 | $ | 0.52 | $ | 1.36 | ||||||
Cumulative effect of accounting change | $ | -- | $ | -- | $ | -- | $ | 0.05 | ||||||
Earnings per basic and diluted share | $ | 0.14 | $ | 0.68 | $ | 0.52 | $ | 1.41 | ||||||
Dividends declared per share | $ | 0.2375 | $ | 0.1875 | $ | 0.4750 | $ | 0.3750 |
(1) Prior period amounts have been restated to reflect the transfer of the remaining payphone business from AT&T Consumer to AT&T Business.
AT&T Corp. Consolidated Statements of Income (Unaudited)
Dollars in millions (except per share amounts)
2Q04 | 1Q04 | 4Q03 | 3Q03 | 2Q03 | 1Q03 | 2003 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
REVENUE (1) | |||||||||||||||||||||||
AT&T Business | $ | 5,611 | $ | 5,872 | $ | 5,887 | $ | 6,301 | $ | 6,428 | $ | 6,459 | $ | 25,075 | |||||||||
AT&T Consumer | 2,011 | 2,107 | 2,198 | 2,334 | 2,354 | 2,514 | 9,400 | ||||||||||||||||
Corporate and Other | 14 | 11 | 14 | 14 | 13 | 13 | 54 | ||||||||||||||||
Total revenue | 7,636 | 7,990 | 8,099 | 8,649 | 8,795 | 8,986 | 34,529 | ||||||||||||||||
OPERATING EXPENSES | |||||||||||||||||||||||
Access and other connection | 2,481 | 2,638 | 2,606 | 2,785 | 2,708 | 2,698 | 10,797 | ||||||||||||||||
Costs of services and products | 1,759 | 1,864 | 1,702 | 1,954 | 1,958 | 2,011 | 7,625 | ||||||||||||||||
Selling, general and administrative | 1,763 | 1,744 | 1,828 | 1,793 | 1,837 | 1,921 | 7,379 | ||||||||||||||||
Depreciation and amortization | 1,231 | 1,250 | 1,263 | 1,224 | 1,197 | 1,186 | 4,870 | ||||||||||||||||
Net restructuring and other charges | 54 | 213 | 67 | 64 | 66 | 4 | 201 | ||||||||||||||||
Total operating expenses | 7,288 | 7,709 | 7,466 | 7,820 | 7,766 | 7,820 | 30,872 | ||||||||||||||||
Operating income | 348 | 281 | 633 | 829 | 1,029 | 1,166 | 3,657 | ||||||||||||||||
Other income (expense), net | 36 | (174 | ) | 102 | (7 | ) | 86 | 10 | 191 | ||||||||||||||
Interest (expense) | (191 | ) | (228 | ) | (241 | ) | (289 | ) | (296 | ) | (332 | ) | (1,158 | ) | |||||||||
Income (loss) from continuing operations before income | |||||||||||||||||||||||
taxes, minority interest income and net earnings(losses) | |||||||||||||||||||||||
related to equity investments | 193 | (121 | ) | 494 | 533 | 819 | 844 | 2,690 | |||||||||||||||
(Provision) benefit for income taxes | (87 | ) | 426 | (139 | ) | (72 | ) | (308 | ) | (297 | ) | (816 | ) | ||||||||||
Minority interest income | 1 | -- | -- | -- | -- | 1 | 1 | ||||||||||||||||
Net earnings (losses) related to equity investments | 1 | (1 | ) | (15 | ) | (3 | ) | 25 | (19 | ) | (12 | ) | |||||||||||
Income from continuing operations | 108 | 304 | 340 | 458 | 536 | 529 | 1,863 | ||||||||||||||||
(Loss) from discontinued operations - net of taxes | -- | -- | -- | (13 | ) | -- | -- | (13 | ) | ||||||||||||||
Income before cumulative effect of accounting changes | 108 | 304 | 340 | 445 | 536 | 529 | 1,850 | ||||||||||||||||
Cumulative effect of accounting changes, net of taxes | -- | -- | -- | (27 | ) | -- | 42 | 15 | |||||||||||||||
Net income | $ | 108 | $ | 304 | $ | 340 | $ | 418 | $ | 536 | $ | 571 | $ | 1,865 | |||||||||
Weighted-average common shares (millions) | 794 | 793 | 791 | 789 | 787 | 784 | 788 | ||||||||||||||||
Weighted-average common shares and potential common shares | |||||||||||||||||||||||
millions | 797 | 796 | 793 | 791 | 787 | 785 | 789 | ||||||||||||||||
PER BASIC SHARE: | |||||||||||||||||||||||
Earnings from continuing operations | $ | 0.14 | $ | 0.38 | $ | 0.43 | $ | 0.58 | $ | 0.68 | $ | 0.67 | $ | 2.37 | |||||||||
(Loss) from discontinued operations | -- | -- | -- | (0.02 | ) | -- | -- | (0.02 | ) | ||||||||||||||
Cumulative effect of accounting changes | -- | -- | -- | (0.03 | ) | -- | 0.06 | 0.02 | |||||||||||||||
Earnings per basic share | $ | 0.14 | $ | 0.38 | $ | 0.43 | $ | 0.53 | $ | 0.68 | $ | 0.73 | $ | 2.37 | |||||||||
PER DILUTED SHARE: | |||||||||||||||||||||||
Earnings from continuing operations | $ | 0.14 | $ | 0.38 | $ | 0.43 | $ | 0.58 | $ | 0.68 | $ | 0.67 | $ | 2.36 | |||||||||
(Loss) from discontinued operations | -- | -- | -- | (0.02 | ) | -- | -- | (0.02 | ) | ||||||||||||||
Cumulative effect of accounting changes | -- | -- | -- | (0.03 | ) | -- | 0.06 | 0.02 | |||||||||||||||
Earnings per diluted share | $ | 0.14 | $ | 0.38 | $ | 0.43 | $ | 0.53 | $ | 0.68 | $ | 0.73 | $ | 2.36 |
(1) Prior period amounts have been restated to reflect the transfer of the remaining payphone business from AT&T Consumer to AT&T Business.
AT&T Corp. Historical Segment Data (Unaudited)
Dollars in millions
2Q04 | 1Q04 | 4Q03 | 3Q03 | 2Q03 | 1Q03 | 2003 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
AT&T Business (1) | |||||||||||||||||||||||
LD Voice | $ | 2,386 | $ | 2,613 | $ | 2,501 | $ | 2,820 | $ | 2,895 | $ | 2,983 | $ | 11,199 | |||||||||
Local Voice | 404 | 389 | 386 | 379 | 384 | 335 | 1,484 | ||||||||||||||||
Total Voice | 2,790 | 3,002 | 2,887 | 3,199 | 3,279 | 3,318 | 12,683 | ||||||||||||||||
Data Services | 1,785 | 1,797 | 1,940 | 1,949 | 1,993 | 2,000 | 7,882 | ||||||||||||||||
IP&E-Services | 470 | 471 | 460 | 476 | 459 | 445 | 1,840 | ||||||||||||||||
Total Data and IP&E-Services | 2,255 | 2,268 | 2,400 | 2,425 | 2,452 | 2,445 | 9,722 | ||||||||||||||||
Outsourcing, Professional Services & Other | 566 | 602 | 600 | 677 | 697 | 696 | 2,670 | ||||||||||||||||
Total Revenue | 5,611 | 5,872 | 5,887 | 6,301 | 6,428 | 6,459 | 25,075 | ||||||||||||||||
Operating Income(2) | 152 | 83 | 282 | 413 | 601 | 599 | 1,895 | ||||||||||||||||
Operating Margin | 2.7 | % | 1.4 | % | 4.8 | % | 6.6 | % | 9.3 | % | 9.3 | % | 7.6 | % | |||||||||
Capital Expenditures(6) | 463 | 470 | 740 | 995 | 763 | 636 | 3,134 | ||||||||||||||||
Depreciation & Amortization | 1,176 | 1,192 | 1,200 | 1,162 | 1,133 | 1,126 | 4,621 | ||||||||||||||||
Total Data and IP&E-Services - % managed | 34 | % | 33 | % | 33 | % | 33 | % | 31 | % | 30 | % | 32 | % | |||||||||
Total Data and IP&E-Services - % international | 15 | % | 15 | % | 14 | % | 14 | % | 14 | % | 14 | % | 14 | % | |||||||||
LD Volume Growth - Yr/Yr | 0 | % | 2 | % | 7 | % | 15 | % | 12 | % | 12 | % | 11 | % | |||||||||
LD Volume % Wholesale | 54 | % | 54 | % | 53 | % | 51 | % | 47 | % | 45 | % | 50 | % | |||||||||
AT&T Consumer (1) | |||||||||||||||||||||||
Standalone LD, Transactional and Other Services | $ | 1,327 | $ | 1,462 | $ | 1,604 | $ | 1,813 | $ | 1,894 | $ | 2,090 | $ | 7,401 | |||||||||
Bundled Services | 684 | 645 | 594 | 521 | 460 | 424 | 1,999 | ||||||||||||||||
Total Revenue | 2,011 | 2,107 | 2,198 | 2,334 | 2,354 | 2,514 | 9,400 | ||||||||||||||||
Operating Income(3) | 240 | 371 | 435 | 503 | 485 | 633 | 2,056 | ||||||||||||||||
Operating Margin | 11.9 | % | 17.6 | % | 19.8 | % | 21.6 | % | 20.6 | % | 25.2 | % | 21.9 | % | |||||||||
Capital Expenditures | 15 | 13 | 19 | 14 | 19 | 22 | 74 | ||||||||||||||||
Depreciation & Amortization | 33 | 32 | 35 | 35 | 36 | 35 | 141 | ||||||||||||||||
Local Customers (in thousands) | 4,677 | 4,364 | 3,950 | 3,547 | 3,130 | 2,778 | 3,950 | ||||||||||||||||
Corporate and Other (1) | |||||||||||||||||||||||
Revenue | $ | 14 | $ | 11 | $ | 14 | $ | 14 | $ | 13 | $ | 13 | $ | 54 | |||||||||
Operating (Loss)(4) | (44 | ) | (173 | ) | (84 | ) | (87 | ) | (57 | ) | (66 | ) | (294 | ) | |||||||||
Capital Expenditures(6) | 2 | 2 | 13 | 198 | 8 | 4 | 223 | ||||||||||||||||
Depreciation & Amortization | 22 | 26 | 28 | 27 | 28 | 25 | 108 | ||||||||||||||||
Total AT&T | |||||||||||||||||||||||
Revenue | $ | 7,636 | $ | 7,990 | $ | 8,099 | $ | 8,649 | $ | 8,795 | $ | 8,986 | $ | 34,529 | |||||||||
Operating Income(5) | 348 | 281 | 633 | 829 | 1,029 | 1,166 | 3,657 | ||||||||||||||||
Operating Margin | 4.6 | % | 3.5 | % | 7.8 | % | 9.6 | % | 11.7 | % | 13.0 | % | 10.6 | % | |||||||||
Capital Expenditures(6) | 480 | 485 | 772 | 1,207 | 790 | 662 | 3,431 | ||||||||||||||||
Depreciation & Amortization | 1,231 | 1,250 | 1,263 | 1,224 | 1,197 | 1,186 | 4,870 |
(1) Prior period amounts have been restated to reflect the transfer of the remaining payphone business from AT&T Consumer to AT&T Business.
(2) Includes net business restructuring and asset impairment (charges) of ($52M) in 2Q04, ($91M) in 1Q04, ($33M) in 4Q03, ($53M) in 3Q03, ($47M) in 2Q03 and ($4M)
in 1Q03, totaling ($137M) in 2003.
(3) Includes net business restructuring and asset impairment (charges) of ($1M) in 1Q04, ($17M) in 4Q03, ($4M) in 3Q03 and ($5M) in 2Q03, totaling ($26M) in 2003.
(4) Includes net business restructuring and asset impairment (charges) of ($2M) in 2Q04, ($121M) in 1Q04, ($17M) in 4Q03, ($7M) in 3Q03 and ($14M) in 2Q03, totaling
($38M) in 2003.
(5) Includes net business restructuring and asset impairment (charges) of ($54M) in 2Q04, ($213M) in 1Q04, ($67M) in 4Q03, ($64M) in 3Q03, ($66M) in 2Q03 and ($4M)
in 1Q03, totaling ($201M) in 2003.
(6) Includes $433M in 3Q03 related to the adoption of FIN 46 of which $241M is included in Business and $192M is included in Corporate and Other.
AT&T Corp. Consolidated Balance Sheets (Unaudited)
Dollars in millions
June 30, 2004 | December 31, 2003 | |||||||
---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||
Cash and cash equivalents | $ | 2,459 | $ | 4,353 | ||||
Accounts receivable, less allowances of $608 and $579 | 3,661 | 4,036 | ||||||
Deferred income taxes | 971 | 715 | ||||||
Other current assets | 1,397 | 744 | ||||||
Total Current Assets | 8,488 | 9,848 | ||||||
Property, plant and equipment, net of accumulated | ||||||||
depreciation of $36,191 and $34,300 | 22,833 | 24,376 | ||||||
Goodwill | 4,781 | 4,801 | ||||||
Other purchased intangible assets, net of accumulated amortization | ||||||||
of $381 and $320 | 437 | 499 | ||||||
Prepaid pension costs | 4,004 | 3,861 | ||||||
Other assets | 3,275 | 4,603 | ||||||
TOTAL ASSETS | $ | 43,818 | $ | 47,988 | ||||
LIABILITIES | ||||||||
Accounts payable and accrued expenses | $ | 2,920 | $ | 3,256 | ||||
Compensation and benefit-related liabilities | 1,458 | 1,783 | ||||||
Debt maturing within one year | 1,913 | 1,343 | ||||||
Other current liabilities | 2,274 | 2,501 | ||||||
Total Current Liabilities | 8,565 | 8,883 | ||||||
Long-term debt | 9,299 | 13,066 | ||||||
Long-term compensation and benefit-related liabilities | 3,449 | 3,528 | ||||||
Deferred income taxes | 5,452 | 5,395 | ||||||
Other long-term liabilities and deferred credits | 2,998 | 3,160 | ||||||
Total Liabilities | 29,763 | 34,032 | ||||||
SHAREOWNERS' EQUITY | ||||||||
Common Stock, $1 par value, authorized 2,500,000,000 shares; | ||||||||
issued and outstanding 794,593,329 shares (net of 171,981,708 | ||||||||
treasury shares) at June 30, 2004 and 791,911,022 shares (net of | ||||||||
172,179,303 treasury shares) at December 31, 2003 | 795 | 792 | ||||||
Additional paid-in capital | 27,437 | 27,722 | ||||||
Accumulated deficit | (14,299 | ) | (14,707 | ) | ||||
Accumulated other comprehensive income | 122 | 149 | ||||||
Total Shareowners' Equity | 14,055 | 13,956 | ||||||
TOTAL LIABILITIES & SHAREOWNERS' EQUITY | $ | 43,818 | $ | 47,988 | ||||
AT&T Corp. Consolidated Statements of Cash Flows (Unaudited)
Dollar in millions
Six Months Ended June 30, | ||||||||
---|---|---|---|---|---|---|---|---|
2004 | 2003 | |||||||
Operating Activities | ||||||||
Net income | $ | 412 | $ | 1,107 | ||||
Deduct: | ||||||||
Cumulative effect of accounting change - net of income taxes | -- | 42 | ||||||
Income before cumulative effect of accounting change | 412 | 1,065 | ||||||
Adjustments to reconcile income before cumulative effect of accounting | ||||||||
change to net cash provided by operating activities: | ||||||||
Net gains on sales of businesses and investments | (14 | ) | (37 | ) | ||||
Loss on early extinguishment of debt | 274 | 2 | ||||||
Net restructuring and other charges | 226 | 70 | ||||||
Depreciation and amortization | 2,481 | 2,383 | ||||||
Provision for uncollectible receivables | 265 | 406 | ||||||
Deferred income taxes | (181 | ) | 376 | |||||
Net pretax losses related to equity investments | -- | (33 | ) | |||||
Decrease in receivables | 98 | 140 | ||||||
(Decrease) in accounts payable and accrued expenses | (189 | ) | (308 | ) | ||||
Net change in other operating assets and liabilities | (770 | ) | 336 | |||||
Other adjustments, net | (139 | ) | (47 | ) | ||||
Net Cash Provided by Operating Activities | 2,463 | 4,353 | ||||||
Investing Activities | ||||||||
Capital expenditures and other additions | (1,018 | ) | (1,629 | ) | ||||
Proceeds from sale or disposal of property, plant and equipment | 25 | 23 | ||||||
Investment distributions and sales | 36 | 101 | ||||||
Net dispositions (acquisitions) of businesses, net of cash disposed/acquired | 8 | (158 | ) | |||||
Increase in restricted cash | (1 | ) | (30 | ) | ||||
Other investing activities, net | 6 | (27 | ) | |||||
Net Cash Used in Investing Activities | (944 | ) | (1,720 | ) | ||||
Financing Activities | ||||||||
Retirement of long-term debt, including redemption premiums | (3,210 | ) | (4,039 | ) | ||||
(Decrease) in short-term borrowings, net | (195 | ) | (1,270 | ) | ||||
Issuance of AT&T common shares | 33 | 64 | ||||||
Dividends paid on common stock | (377 | ) | (294 | ) | ||||
Other financing activities, net | 336 | 148 | ||||||
Net Cash Used in Financing Activities | (3,413 | ) | (5,391 | ) | ||||
Net (decrease) in cash and cash equivalents | $ | (1,894 | ) | (2,758 | ) | |||
Cash and cash equivalents at beginning of year | 4,353 | 8,014 | ||||||
Cash and Cash Equivalents at End of Period | $ | 2,459 | $ | 5,256 | ||||
AT&T Corp. Reconciliation of Non-GAAP Measures
Net debt is defined as total debt, less cash, restricted cash and net foreign debt fluctuations:
June 30, 2004 | |||||
---|---|---|---|---|---|
Total Debt | $ | 11,212 | |||
Less: Cash | 2,459 | ||||
Restricted cash | 503 | ||||
Foreign debt fluctuations | 349 | ||||
Net Debt | $ | 7,901 | |||
Reconciliation of EBITDA to net income for the twelve months ended
June 30, 2004:
(dollars in millions)
Net Debt/EBITDA as of June 30, 2004 1.1x
Margin
EBITDA | $ | 7,059 | 21 | .8% | ||||
Depreciation and amortization | (4,968 | ) | ||||||
Subtotal Operating Income | 2,091 | 6 | .5% | |||||
Other (expense), net | (43 | ) | ||||||
Interest (expense) | (949 | ) | ||||||
Benefit (provision) for taxes | 128 | |||||||
Minority interest income | 1 | |||||||
Net (losses) related to equity investments | (18 | ) | ||||||
Income from continuing operations | 1,210 | |||||||
(Loss) from discontinued operations, net of taxes | (13 | ) | ||||||
Cumulative effect of accounting changes, net of taxes | (27 | ) | ||||||
Net income | $ | 1,170 | 3 | .6% | ||||
This document contains certain financial measures calculated in accordance with generally accepted accounting principles (GAAP), which have been adjusted to result in non-GAAP measures. These non-GAAP financial measures reflect measures of liquidity and profitability commonly used by the investment community for evaluation purposes. These measures should be considered in addition to, but not in lieu of financial measures reported under GAAP.
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 888-428-4473 to access the call. Callers outside the U.S. should dial + 1-651-291-0561.
In addition, Internet rebroadcasts of the call will be available on the AT&T web site beginning later today. The web site address iswww.att.com/ir. An audio rebroadcast of the conference call will also be available beginning at 12:30PM on Thursday, July 22 through 12:00AM on Tuesday, July 27. To access the audio rebroadcast, U.S. callers can dial 800-475-6701, access code 696623. Callers outside the U.S. should dial +1-320-365-3844, access code 696623.
The foregoing contains “forward-looking statements” 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. These risk factors include the impact of increasing competition, continued capacity oversupply, regulatory uncertainty and the effects of technological substitution, among other risks. For a more detailed description of the factors that could cause such a difference, please see AT&T’s10-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.
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