SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: October 21, 2003
AT&T CORP.
(Exact Name of Registrant as Specified in Charter)
New York
(State or Other Jurisdiction of Incorporation)
1-1105 13-4924710
(Commission File Number) (IRS Employer Identification No.)
One AT&T Way
Bedminster, New Jersey 07921
(Address of Principal Executive (Zip Code)
Offices)
Registrant's telephone number, including area code: (908) 221-2000
Not Applicable
(Former Name or Former Address, If Changed Since Last Report)
A New York Commission File I.R.S. Employer
Corporation No. 1-1105 No. 13-4924710
ITEM 5. OTHER EVENTS
What are we disclosing?
On October 22, 2003, our Senior Executive Vice President and Chief Financial
Officer, Thomas W. Horton, made the following comments in regard to the fourth
quarter 2003 outlook during the Company's earnings conference call.
Year to date Business Services revenue has declined by 4.2%, similar to last
year's reported rate of decline of 4.1%. However, if we look ahead to the fourth
quarter, we see growing pricing pressure, continued weak demand and the normal
effects of seasonality, which will all pressure our top line on a sequential
basis. So, we expect the full-year decline in 2003 to be higher than our
year-to-date decline of 4.2%.
We expect to see margin pressure from RBOC entry and bundled pricing activities
to put further pressure on consumer margins going forward. Specifically, we
expect some competitors to be very aggressive this quarter as they begin their
much-anticipated entry into new states. This coupled with the increase in
expense to facilitate our aggressive state entry should translate into fourth
quarter margin pressure on a sequential basis.
We now expect to reduce total headcount by 10% this year versus 2002. At the end
of the third quarter, substantially all of these targeted headcount reductions
were completed. In total, these reductions will correspond to an annual cost
savings of approximately $650 million dollars during 2004. We understand that to
even maintain our margin in the current economic and pricing environment, we
need to continue driving costs from the business through automation and
operational efficiencies.
We now expect our net debt balance to be under $9 billion by year-end. Expected
net debt consists of estimated total debt of $14.1 billion, net of estimated
cash (including restricted cash) and estimated foreign exchange fluctuations of
at least $5.2 billion. The components of net debt may fluctuate as we evaluate
debt and cash management strategies; however these shifts should not have a
significant impact on net debt.
****
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) EXHIBITS
Exhibit 99 - Press release dated October 21, 2003.
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS
On October 21, 2003, AT&T Corp. issued a press release announcing third quarter
earnings. A copy of the press release is attached as Exhibit 99.
The information in this Form 8-K and the Exhibit attached hereto shall not be
deemed "filed" for purposes of Section 18 of the Securities Act of 1934, nor
shall it be deemed incorporated by reference in any filing under the Securities
Act of 1933, except as shall be expressly set forth by specific reference in
such filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AT&T CORP.
/s/ Robert S. Feit
----------------------------------
By: Robert S. Feit
Vice President - Law and Secretary
October 21, 2003
Exhibit 99
[AT&T LOGO OMITTED]
News Release
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FOR RELEASE TUESDAY, OCTOBER 21, 2003
SECTION 1.01. AT&T Announces Third Quarter 2003 Earnings
------------------------------------------
o Third quarter earnings per diluted share from continuing operations of $0.58
o Consolidated revenue of $8.6 billion
o Operating income of $829 million
BEDMINSTER, N.J. -- AT&T (NYSE: T) today reported income from continuing
operations 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.
"AT&T's third quarter results demonstrate our ability to successfully execute in
a difficult environment by maintaining our focus on controlling costs,
streamlining processes and delighting our customers," said AT&T Chairman and
Chief Executive Officer David W. Dorman. "We continue to operate from a position
of leadership and strength, and we remain among the best positioned in our
industry for a recovery in employment growth and improved telecom sector
spending and demand."
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. 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 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 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 W. Horton. "This quarter's significant free cash flow allowed us to
reduce net debt by $1.5 billion and reduce our year-end 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
o 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
spending, partially offset by strong growth in wholesale volumes, local
voice and IP&E-services revenue.
o 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.
o Local voice revenue grew approximately 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.
o IP&E-services revenue grew 13.0 percent, while data services revenue
declined 6.5 percent from the prior year quarter.
o 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.
o 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 in the
current period.
AT&T Consumer Services
o 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 substitution, 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.
o 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.
o 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, Minnesota and Arizona. As of September 30,
2003, local service was available in 15 markets. The company plans to be
testing or actively marketing its residential One Rate USAsm bundled
service in 35 states by year-end.
OTHER CONSOLIDATED FINANCIAL HIGHLIGHTS
o In September 2003, in conjunction with our review of accounting and
internal control systems, the Company determined that the liability on the
balance sheet relating to costs incurred in 2001 and 2002 pertaining 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) 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.
o Third quarter 2003 income from continuing operations of $458 million
included pretax net restructuring 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.
o Other income (expense) of ($7) million in the third quarter primarily
consisted of losses from the early extinguishment of debt, primarily offset
by investment-related income.
o The third quarter income tax provision reflected an approximate $120
million benefit relating to final governmental approval of Research and
Experimentation tax credit claims from prior years.
o As of July 1, 2003, AT&T adopted Financial Accounting Standards Board
Interpretation No. 46 (FIN 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.
o 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.
o In July of 2003, AT&T announced a $2 billion debt repurchase program.
During the quarter, AT&T redeemed two 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 22, 2003. In addition, AT&T exercised its
right to repay $0.5 billion of debt associated with leases capitalized in
conjunction with the adoption of FIN 46. The pretax loss recorded in the
third quarter from these events was $0.1 billion.
o Free cash flow was $2.0 billion for the third quarter, which included $0.6
billion of tax refunds. 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.
o 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.
o The third quarter loss from discontinued operations reflects an estimated
loss on certain environmental clean-up matters associated with the business
of NCR Corp., which was spun-off from AT&T in 1996. In accordance with the
separation and distribution agreement between AT&T and NCR, AT&T shares in
certain costs associated with potential litigation liabilities. AT&T
recorded its estimated 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 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 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 Services revenue (and eliminations) not previously
defined. Also includes revenue from AT&T Latin America prior to the first
quarter of 2003.
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 Services
Bundled Services - 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 - residential customers who subscribe to 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" on the balance sheet.
Foreign currency fluctuations - represents mark-to-market adjustments, net of
cash collateral collected, that increased the debt balance by approximately $0.9
billion at September 30, 2003, on non-U.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
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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
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AT&T Corp. Consolidated Statements of Income (Unaudited)
Dollars in millions (except per share amounts)
----------------------------------------------------------------------------
3Q03 2Q03 1Q03 4Q02 3Q02 2Q02 1Q02 2002
----------------------------------------------------------------------------
REVENUE
AT&T Business Services $6,282 $6,406 $6,437 $6,588 $6,700 $ 6,742 $ 6,528 $ 26,558
AT&T Consumer Services 2,353 2,376 2,536 2,736 2,794 2,911 3,086 11,527
Corporate and Other 14 13 13 (34) (85) (73) (66) (258)
Total revenue 8,649 8,795 8,986 9,290 9,409 9,580 9,548 37,827
OPERATING EXPENSES
Access and other connection 2,785 2,708 2,698 2,576 2,679 2,747 2,788 10,790
Costs of services and products 1,954 1,958 2,011 2,197 2,066 2,086 2,014 8,363
Selling, general and administrative 1,793 1,837 1,921 2,077 2,032 1,942 1,937 7,988
Depreciation and amortization 1,224 1,197 1,186 1,257 1,243 1,213 1,175 4,888
Net restructuring and other charges 64 66 4 1,463 (26) - - 1,437
Total operating expenses 7,820 7,766 7,820 9,570 7,994 7,988 7,914 33,466
Operating income (loss) 829 1,029 1,166 (280) 1,415 1,592 1,634 4,361
Other (expense)/income, net (7) 86 10 208 (180) (50) (55) (77)
Interest (expense) (289) (296) (332) (361) (355) (336) (396) (1,448)
Income (loss) from continuing operations before
income taxes, minority interest income, and net
earnings (losses) related to equity investments 533 819 844 (433) 880 1,206 1,183 2,836
(Provision) for income taxes (72) (308) (297) (225) (370) (513) (479) (1,587)
Minority interest income - - 1 33 28 33 20 114
Net (losses) earnings related to equity investments (3) 25 (19) 14 (13) (123) (278) (400)
Income (loss) from continuing operations 458 536 529 (611) 525 603 446 963
(Loss) from discontinued operations - net of income
taxes (13) - - (197) (318) (13,433) (565) (14,513)
Gain on disposition of discontinued operations - net
of income taxes - - - 1,324 - - - 1,324
Income (loss) before cumulative effect of accounting
changes 445 536 529 516 207 (12,830) (119) (12,226)
Cumulative effect of accounting changes, net of
income tax (27) - 42 - - - (856) (856)
Net income (loss) $ 418 $ 536 $ 571 $ 516 $ 207 $(12,830) $ (975) $(13,082)
Weighted-average common shares (millions) 789 787 784 776 770 730 709 746
Weighted-average common shares and potential common
shares 791 787 785 776 788 750 738 766
PER BASIC SHARE:
Earnings (loss) from continuing operations $ 0.58 $ 0.68 $ 0.67 $(0.79) $ 0.68 $ 0.83 $ 0.63 $ 1.29
(Loss) from discontinued operations (0.02) - - (0.26) (0.41) (18.41) (0.80) (19.44)
Gain on disposition of discontinued operations - - - 1.71 - - - 1.77
Cumulative effect of accounting changes (0.03) - 0.06 - - - (1.21) (1.15)
Earnings (loss) per basic share $ 0.53 $ 0.68 $ 0.73 $ 0.66 $ 0.27 $ (17.58) $ (1.38) $ (17.53)
PER DILUTED SHARE:
Earnings (loss) from continuing operations $ 0.58 $ 0.68 $ 0.67 $(0.79) $ 0.67 $ 0.80 $ 0.60 $ 1.26
(Loss) from discontinued operations (0.02) - - (0.26) (0.41) (17.91) (0.76) (18.95)
Gain on disposition of discontinued operations - - - 1.71 - - - 1.73
Cumulative effect of accounting changes (0.03) - 0.06 - - - (1.16) (1.12)
Earnings (loss) per diluted share $ 0.53 $ 0.68 $ 0.73 $ 0.66 $ 0.26 $ (17.11) $ (1.32) $ (17.08)
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Historical Segment Data
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Segment Disclosures (Unaudited)
Dollars in Millions
3Q03 2Q03 1Q03 4Q02 3Q02 2Q02 1Q02 2002
AT&T Business Services
LD Voice $ 2,801 $ 2,873 $ 2,961 $ 2,853 $ 3,129 $ 3,224 $ 3,048 $ 12,254
Local Voice 379 384 335 336 274 277 268 1,155
Total Voice 3,180 3,257 3,296 3,189 3,403 3,501 3,316 13,409
Data Services 1,949 1,993 2,000 2,079 2,086 2,077 2,018 8,260
IP&E-Services 476 459 445 442 421 406 408 1,677
Total Data Services, IP&E-Services 2,425 2,452 2,445 2,521 2,507 2,483 2,426 9,937
Outsourcing, Professional Services & Other 677 697 696 878 790 758 786 3,212
Total Revenue 6,282 6,406 6,437 6,588 6,700 6,742 6,528 26,558
Operating Income (Loss)(1) 417 597 600 (612) 854 856 867 1,965
Operating Margin 6.6% 9.3% 9.3% (9.3%) 12.7% 12.7% 13.3% 7.4%
Capital Expenditures(5) 995 763 636 1,297 912 930 575 3,714
Depreciation & Amortization 1,162 1,133 1,126 1,173 1,128 1,141 1,104 4,546
Total Data Services, IP&E-Services
- % managed 33% 31% 30% 30% 29% 29% 29% 29%
Total Data Services, IP&E-Services
- % international 14% 14% 14% 15% 14% 15% 13% 14%
LD Volume Growth - Yr/Yr 15% 12% 12% 7% 2% (1%) (1%) 2%
LD Volume % Wholesale 51% 47% 45% 42% 38% 34% 33% 37%
AT&T Consumer Services
Standalone LD, Transactional and Other Services $ 1,832 $ 1,916 $ 2,112 $ 2,375 $ 2,499 $ 2,670 $ 2,869 $ 10,413
Bundled Services 521 460 424 361 295 241 217 1,114
Total Revenue 2,353 2,376 2,536 2,736 2,794 2,911 3,086 11,527
Operating Income(2) 500 489 632 389 595 787 821 2,592
Operating Margin 21.2% 20.6% 24.9% 14.2% 21.3% 27.0% 26.6% 22.5%
Capital Expenditures 14 19 22 32 34 33 28 127
Depreciation & Amortization 35 36 35 57 89 43 41 230
Local Customers (in thousands) 3,547 3,130 2,778 2,423 1,916 1,549 1,266 2,423
Bundled Households (in millions) 47.7 40.1 32.2 32.2 32.2 17.6 13.1 32.2
Corporate and Other
Revenue $ 14 $ 13 $ 13 $ (34) $ (85) $ (73) $ (66) $ (258)
Operating (Loss)(3) (88) (57) (66) (57) (34) (51) (54) (196)
Capital Expenditures(5) 198 8 4 17 23 13 10 63
Depreciation & Amortization 27 28 25 27 26 29 30 112
Total AT&T
Revenue $8,649 $8,795 $8,986 $9,290 $9,409 $9,580 $9,548 $37,827
Operating Income (Loss)(4) 829 1,029 1,166 (280) 1,415 1,592 1,634 4,361
Operating Margin 9.6% 11.7% 13.0% (3.0%) 15.0% 16.6% 17.1% 11.5%
Capital Expenditures(5) 1,207 790 662 1,346 969 976 613 3,904
Depreciation & Amortization 1,224 1,197 1,186 1,257 1,243 1,213 1,175 4,888
<FN>
(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
</FN>
Balance Sheet
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AT&T Corp. Consolidated Balance Sheets (Unaudited)
Dollars in Millions
September 30, December 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%)
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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%)
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TOTAL ASSETS $ 51,307 $ 55,272 (7.2%)
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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%)
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Total Liabilities 37,768 42,960 (12.1%)
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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, October 21 until 11:59PM on Thursday, 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" 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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