EXHIBIT 99
News Release
- --------------------------------------------------------------------------------
FOR RELEASE THURSDAY, APRIL 22, 2004
AT&T Announces First-Quarter 2004 Earnings
o First-quarter earnings per diluted share of $0.38
o Consolidated revenue of $8.0 billion
o Operating income of $281 million
BEDMINSTER, N.J. -- AT&T (NYSE: T) today reported net income of $304 million, or
earnings per diluted share of $0.38, for the first quarter of 2004. The
company's current-quarter net income included a tax benefit related to a prior
investment, losses on the early retirement of debt and net restructuring and
other charges. This compares to net income of $571 million, or earnings per
diluted share of $0.73, in the first quarter of 2003. Net income for the first
quarter of 2003 included income related to the cumulative effect of the adoption
of a new accounting standard.
"AT&T continues to manage through a difficult industry environment characterized
by oversupply and intense pricing pressure," said AT&T Chairman and Chief
Executive Officer David W. Dorman. "We remain focused on leading the technology
transformation in telecom, diversifying our product offerings to include new
offers such as VoIP and wireless, improving our cost structure and building on
our financial strength."
AT&T reported first-quarter 2004 consolidated revenue of $8.0 billion, which
included $5.9 billion from AT&T Business and $2.1 billion from AT&T Consumer.
Consolidated revenue declined 11.1 percent versus the first quarter of 2003,
primarily due to continued declines in long distance (LD) voice and data
revenue, partially offset by the continued success of AT&T Consumer's bundled
local and LD offering, as well as growth in several key markets of AT&T
Business.
AT&T's first-quarter 2004 operating income totaled $281 million, resulting in a
consolidated operating margin of 3.5 percent. Operating income included $213
million of net restructuring and other charges taken during the quarter related
to streamlining of the company's real estate assets as well as employee
separations.
AT&T UNIT HIGHLIGHTS
AT&T Business
o Revenue was $5.9 billion, a decline of 9.1 percent from the prior-year
first quarter. Pricing pressure, competition and demand weakness in retail
LD voice and data negatively affected the unit's revenue performance.
Declines were partially offset by growth in revenue from local voice and
Internet Protocol & Enhanced-services (IP&E) revenue.
o Long distance voice revenue decreased 12.4 percent from the prior-year
first quarter, driven by continued pricing pressure as well as a continued
mix shift in volume from retail to wholesale. Volumes grew 2.0 percent on a
year-over-year basis, driven by strong wholesale volume growth, which more
than offset the decline in retail volumes.
o Local voice revenue grew 16.0 percent from the prior-year first quarter.
Local access lines totaled more than 4.5 million at the end of the current
period, representing an increase of nearly 84,000 lines from the end of
2003.
o Data revenue declined 10.1 percent from the prior-year first quarter.
Growth rates were negatively affected by pricing pressure, competitive
losses, weak demand and technology migration.
o IP&E-services revenue grew 5.9 percent over the prior-year first quarter.
Growth for the first quarter was primarily driven by strength in advanced
services, including Enhanced Virtual Private Network and IP-enabled frame.
o The managed component of total data services and IP&E-services revenue grew
almost 2 percent from the prior-year first quarter and comprised
approximately 33 percent of this revenue for the period.
o Outsourcing, professional services and other revenue declined 13.4 percent
from the prior-year first quarter, due to customers reducing scope and
terminating outsourcing contracts, partially offset by growth in government
professional services.
o Operating income totaled $83 million in the period, yielding an operating
margin of 1.4 percent, compared with operating income of $599 million and
an operating margin of 9.3 percent in the prior year first quarter. First
quarter 2004 operating income included net restructuring and other charges
of $91 million, including $51 million for employee separations and $40
million of facilities related charges, which impacted margin by about 1.6
percentage points. The margin decline includes the lingering effects of
share loss of higher margin retail LD voice and data products, which
primarily occurred last year before the company implemented a change to its
pricing strategy. Mix shift toward lower margin advanced and wholesale
services also contributed to the operating income margin decline.
o Capital expenditures were $470 million as AT&T Business continues to expand
its networking capabilities beyond traditional LD voice and data services
and to improve the customer experience. In addition to numerous other
industry accolades received during the quarter, AT&T was named "Best in
Class on Overall Satisfaction for Managed Data Networking Services" by
Telemark Consulting and also received the J.D. Power & Associates Award for
Business Local Telephone Service.
AT&T Consumer
o Revenue was $2.1 billion, a decline of 16.2 percent versus the prior-year
first 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. These revenue declines were also
partially offset by growth in bundled revenue which grew by 52 percent
compared to the prior-year first quarter, and now represents more than 30
percent of AT&T Consumer's total revenue.
o Operating income totaled $371 million, yielding an operating margin of 17.6
percent, compared with operating income of $633 million and an operating
margin of 25.2 percent in the prior year first quarter. The
quarter-over-quarter margin decline reflects the impact of substitution,
competition and product mix shift, partially offset by pricing actions
taken.
o As of March 31, 2004, bundled local and LD services were available in 46
states covering more than 73 million households. In addition, AT&T now
offers residential digital subscriber line (DSL) high-speed Internet
service as part of its bundle of services in 25 states.
o AT&T launched its residential Voice-over-Internet Protocol (VoIP) service
in selected markets in New Jersey, Texas, California and New York. The
company plans to offer the service in 100 markets by the end of 2004.
OTHER CONSOLIDATED FINANCIAL HIGHLIGHTS
o First-quarter 2004 operating income of $281 million included net
restructuring and other charges of $213 million. Of this amount, $161
million was facilities related, including the write-down of certain owned
properties that will be sold and reserves for leased facilities that will
not be utilized. In addition, $52 million of the charges are associated
with separation of employees.
o Other expense of $174 million in the first quarter included losses on the
early retirement of debt, partially offset by settlements and
investment-related income.
o In the first quarter of 2004, AT&T completed its repurchase of $1.2 billion
of dollar-denominated 6.5 percent Notes, as well as $0.9 billion of
Euro-denominated 6.0 percent Notes, both of which were due in November 2006
(the $0.9 billion of Euro-denominated notes represents the original U.S.
dollar issuance amount and excludes foreign currency mark-to-market
adjustments which were hedged). This early retirement of debt resulted in
the recognition of a $274 million loss.
o In the first quarter of 2004, in conjunction with the AT&T Latin America
plan of liquidation becoming effective, the company recorded an income tax
benefit of $371 million.
o Free cash flow was $0.8 billion for the quarter. Free cash flow is defined
as cash flow provided by operating activities of $1.3 billion less cash
used for capital expenditures and other additions of $0.5 billion.
o AT&T ended the quarter with net debt of $8.4 billion, representing a $0.4
billion decrease from year-end 2003. Net debt is defined as total debt of
$11.9 billion less cash of $2.6 billion, restricted cash of $0.5 billion
and net foreign debt fluctuations of $0.4 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.
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.
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
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 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 $0.4
billion at March 31, 2004, on non-U.S. denominated debt of about $2.1 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
March 31,
2004 2003
REVENUE (1)
AT&T Business $ 5,872 $ 6,459
AT&T Consumer 2,107 2,514
Corporate and Other 11 13
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Total Revenue 7,990 8,986
OPERATING EXPENSES
Access and other connection 2,638 2,698
Costs of services and products 1,864 2,011
Selling, general and administrative 1,744 1,921
Depreciation and amortization 1,250 1,186
Net restructuring and other charges 213 4
------- -------
Total operating expenses 7,709 7,820
Operating income 281 1,166
Other (expense) income, net (174) 10
Interest (expense) (228) (332)
------- -------
(Loss) income before income taxes, minority interest income, net (losses)
related to equity investments and cumulative effect of accounting change (121) 844
Benefit (provision) for income taxes 426 (297)
Minority interest income - 1
Net (losses) related to equity investments (1) (19)
------- -------
Income before cumulative effect of accounting change 304 529
Cumulative effect of accounting change - net of taxes - 42
------- -------
Net income $ 304 $ 571
======= =======
Weighted-average common shares (millions) 793 784
Weighted-average common shares and potential common shares (millions) 796 785
PER BASIC SHARE:
Earnings before cumulative effect of accounting change $ 0.38 $ 0.67
Cumulative effect of accounting change - 0.06
------- -------
Earnings per basic share $ 0.38 $ 0.73
======= =======
PER DILUTED SHARE:
Earnings before cumulative effect of accounting change $ 0.38 $ 0.67
Cumulative effect of accounting change - 0.06
------- -------
Earnings per diluted share $ 0.38 $ 0.73
======= =======
Dividends declared per share $0.2375 $0.1875
<FN>
(1) Prior period amounts have been restated to reflect the transfer of the remaining payphone business from AT&T Consumer to
AT&T Business.
</FN>
AT&T Corp. Consolidated Statements of Income (Unaudited)
Dollars in millions (except per share amounts)
1Q04 4Q03 3Q03 2Q03 1Q03 2003
REVENUE (1)
-----------
AT&T Business $ 5,872 $ 5,887 $ 6,301 $ 6,428 $ 6,459 $ 25,075
AT&T Consumer 2,107 2,198 2,334 2,354 2,514 9,400
Corporate and Other 11 14 14 13 13 54
Total revenue 7,990 8,099 8,649 8,795 8,986 34,529
OPERATING EXPENSES
Access and other connection 2,638 2,606 2,785 2,708 2,698 10,797
Costs of services and products 1,864 1,702 1,954 1,958 2,011 7,625
Selling, general and administrative 1,744 1,828 1,793 1,837 1,921 7,379
Depreciation and amortization 1,250 1,263 1,224 1,197 1,186 4,870
Net restructuring and other charges 213 67 64 66 4 201
Total operating expenses 7,709 7,466 7,820 7,766 7,820 30,872
Operating income 281 633 829 1,029 1,166 3,657
Other (expense) income, net (174) 102 (7) 86 10 191
Interest (expense) (228) (241) (289) (296) (332) (1,158)
(Loss) income from continuing operations before income
taxes, minority interest income, and net (losses)
earnings related to equity investments (121) 494 533 819 844 2,690
Benefit (provision) for income taxes 426 (139) (72) (308) (297) (816)
Minority interest income - - - - 1 1
Net (losses) earnings related to equity investments (1) (15) (3) 25 (19) (12)
Income from continuing operations 304 340 458 536 529 1,863
(Loss) from discontinued operations - net of taxes - - (13) - - (13)
Income before cumulative effect of accounting changes 304 340 445 536 529 1,850
Cumulative effect of accounting changes, net of taxes - - (27) - 42 15
Net income $ 304 $ 340 $ 418 $ 536 $ 571 $ 1,865
Weighted-average common shares (millions) 793 791 789 787 784 788
Weighted-average common shares and potential common
shares (millions)
796 793 791 787 785 789
PER BASIC SHARE:
Earnings from continuing operations $ 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
$ 0.38 $ 0.43 $ 0.53 $ 0.68 $ 0.73 $ 2.37
PER DILUTED SHARE:
Earnings from continuing operations $ 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 $ 0.38 $ 0.43 $ 0.53 $ 0.68 $ 0.73 $ 2.36
<FN>
(1) Prior period amounts have been restated to reflect the transfer of the remaining payphone business from AT&T Consumer to AT&T
Business.
</FN>
Historical Segment Data (Unaudited)
Dollars in millions
1Q04 4Q03 3Q03 2Q03 1Q03 2003
AT&T Business (1)
LD Voice $ 2,613 $ 2,501 $ 2,820 $ 2,895 $ 2,983 $ 11,199
Local Voice 389 386 379 384 335 1,484
Total Voice 3,002 2,887 3,199 3,279 3,318 12,683
Data Services 1,797 1,940 1,949 1,993 2,000 7,882
IP&E-Services 471 460 476 459 445 1,840
Total Data and IP&E-Services 2,268 2,400 2,425 2,452 2,445 9,722
Outsourcing, Professional Services & Other 602 600 677 697 696 2,670
Total Revenue 5,872 5,887 6,301 6,428 6,459 25,075
Operating Income(2) 83 282 413 601 599 1,895
Operating Margin 1.4% 4.8% 6.6% 9.3% 9.3% 7.6%
Capital Expenditures(6) 470 740 995 763 636 3,134
Depreciation & Amortization 1,192 1,200 1,162 1,133 1,126 4,621
Total Data and IP&E-Services - % managed 33% 33% 33% 31% 30% 32%
Total Data and IP&E-Services - % international 15% 14% 14% 14% 14% 14%
LD Volume Growth - Yr/Yr 2% 7% 15% 12% 12% 11%
LD Volume % Wholesale 54% 53% 51% 47% 45% 50%
AT&T Consumer (1)
Standalone LD, Transactional and Other Services $ 1,462 $ 1,604 $ 1,813 $ 1,894 $ 2,090 $ 7,401
Bundled Services 645 594 521 460 424 1,999
Total Revenue 2,107 2,198 2,334 2,354 2,514 9,400
Operating Income(3) 371 435 503 485 633 2,056
Operating Margin 17.6% 19.8% 21.6% 20.6% 25.2% 21.9%
Capital Expenditures 13 19 14 19 22 74
Depreciation & Amortization 32 35 35 36 35 141
Local Customers (in thousands) 4,364 3,950 3,547 3,130 2,778 3,950
Bundled Households (in millions) 73.7 60.7 47.7 40.1 32.2 60.7
Corporate and Other (1)
Revenue $ 11 $ 14 $ 14 $ 13 $ 13 $ 54
Operating (Loss)(4) (173) (84) (87) (57) (66) (294)
Capital Expenditures(6) 2 13 198 8 4 223
Depreciation & Amortization 26 28 27 28 25 108
Total AT&T
Revenue $ 7,990 $ 8,099 $ 8,649 $ 8,795 $ 8,986 $ 34,529
Operating Income(5) 281 633 829 1,029 1,166 3,657
Operating Margin 3.5% 7.8% 9.6% 11.7% 13.0% 10.6%
Capital Expenditures(6) 485 772 1,207 790 662 3,431
Depreciation & Amortization 1,250 1,263 1,224 1,197 1,186 4,870
<FN>
(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 ($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 ($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 ($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.
</FN>
AT&T Corp. Consolidated Balance Sheets (Unaudited)
Dollars in millions
March 31, December 31,
2004 2003
ASSETS
Cash and cash equivalents $ 2,578 $ 4,353
Accounts receivable, less allowances of $632 and $579 3,870 4,036
Deferred income taxes 1,021 715
Other current assets 1,476 744
-------- --------
Total Current Assets 8,945 9,848
Property, plant and equipment, net of accumulated
depreciation of $35,388 and $34,300 23,479 24,376
Goodwill 4,779 4,801
Other purchased intangible assets, net of accumulated
depreciation of $352 and $320 466 499
Prepaid pension costs 3,937 3,861
Other assets 3,413 4,603
-------- --------
TOTAL ASSETS $ 45,019 $ 47,988
======== ========
LIABILITIES
Accounts payable and accrued expenses $ 3,112 $ 3,256
Compensation and benefit-related liabilities 1,425 1,783
Debt maturing within one year 2,315 1,343
Other current liabilities 2,463 2,501
-------- --------
Total Current Liabilities 9,315 8,883
Long-term debt 9,572 13,066
Long-term compensation and benefit-related liabilities 3,562 3,528
Deferred income taxes 5,388 5,395
Other long-term liabilities and deferred credits 3,086 3,160
-------- --------
Total Liabilities 30,923 34,032
-------- --------
SHAREOWNERS' EQUITY
AT&T Common Stock, $1 par value, authorized 2,500,000,000
shares; issued and outstanding 793,838,486 shares (net of
171,969,147 treasury shares) at March 31, 2004 and
791,911,022 shares (net of 172,179,303 treasury shares)
at December 31, 2003 794 792
Additional paid-in capital 27,589 27,722
Accumulated deficit (14,407) (14,707)
Accumulated other comprehensive income 120 149
-------- --------
Total Shareowners' Equity 14,096 13,956
-------- --------
TOTAL LIABILITIES & SHAREOWNERS' EQUITY $ 45,019 $ 47,988
======== ========
Reconciliation of Non-GAAP Measures
Net debt is defined as total debt, less cash, restricted cash and net foreign
debt fluctuations:
March 31, 2004
Total Debt $ 11,887
Less: Cash 2,578
Restricted cash 504
Foreign debt fluctuations 382
--------------
Net Debt $ 8,423
==============
Reconciliation of EBITDA to net income for the twelve months ended
March 31, 2004:
(dollars in millions)
Net Debt/EBITDA as of March 31, 2004 1.1x
Margin
EBITDA $ 7,706 23.0%
Depreciation and amortization (4,934)
---------------------
Subtotal Operating Income 2,772 8.3%
Other income (expense), net 7
Interest (expense) (1,054)
(Provision) for taxes (93)
Net earnings related to equity investments 6
Income from continuing operations 1,638
(Loss) from discontinued operations, net of taxes (13)
Cumulative effect of accounting changes, net of taxes (27)
---------------------
Net income $ 1,598 4.8%
=====================
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 +
1-601-291-0561.
In addition, Internet rebroadcasts of the call will be available on the AT&T Web
site beginning later today. The Web site address is www.att.com/ir. An audio
rebroadcast of the conference call will also be available beginning at 12:30PM
on Thursday, April 22 through 12:00AM on Tuesday, April 27. To access the audio
rebroadcast, U.S. callers can dial 800-475-6701, access code 696620. Callers
outside the U.S. should dial +1-320-365-3844, access code 696620.
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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