EXHIBIT 99.14
Unaudited Pro Forma Combined Consolidated Financial Statements
(Dollars in Millions)
The following unaudited pro forma combined consolidated balance sheet as of
September 30, 2004 and the unaudited pro forma combined consolidated statements
of income for the year ended December 31, 2003 and for the nine months ended
September 30, 2004 are based on the historical financial statements of Cingular
Wireless LLC (Cingular) and AT&T Wireless Services, Inc. (AT&T Wireless) after
giving effect to the merger as a purchase of AT&T Wireless by Cingular using the
purchase method of accounting and the assumptions and adjustments described in
the accompanying notes to the unaudited pro forma combined consolidated
financial statements. The merger was completed on October 26, 2004.
The unaudited pro forma combined consolidated balance sheet as of September 30,
2004 is presented to give effect to the merger as if it occurred on September
30, 2004 and combines the historical balance sheets of Cingular and AT&T
Wireless at September 30, 2004. The unaudited pro forma combined consolidated
statements of income of Cingular and AT&T Wireless for the year ended December
31, 2003 and for the nine months ended September 30, 2004 are presented as if
the combination had taken place on January 1, 2003 and combines the historical
results of Cingular and AT&T Wireless for the respective periods. As Cingular is
considered the acquiror, the historical bases of Cingular's assets and
liabilities were not affected by the AT&T Wireless transaction.
Under the purchase method of accounting, the total estimated purchase price,
calculated as described in Note 1 to these unaudited pro forma combined
consolidated financial statements, is allocated to the AT&T Wireless'
identifiable tangible and intangible assets acquired, based on their fair values
as of the acquisition date. Independent valuation specialists are currently
conducting an independent valuation in order to assist management of Cingular in
determining the fair values of a significant portion of these assets. The
preliminary work performed by the independent valuation specialists has been
considered in management's estimates of the fair values reflected in these
unaudited pro forma combined consolidated financial statements. The actual
amounts ultimately recorded may differ materially from the information presented
in these unaudited pro forma combined consolidated financial statements based on
the final valuation, the impact of ongoing integration activities and AT&T
Wireless' net tangible and intangible assets that existed as of the date of the
acquisition. Management currently knows of no events or circumstances other than
those disclosed in these notes that would require a material change to the
preliminary purchase price allocation.
Management plans to exit certain activities of AT&T Wireless, including
disposing of assets required to be divested by the Federal Communications
Commission (FCC) and the United States Department of Justice (DOJ) in connection
with their approvals of the acquisition of AT&T Wireless, and to integrate the
AT&T Wireless businesses with those of Cingular. These plans affect many areas
of the combined company, including sales and marketing, network, information
technology, customer care, supply chain and finance. In the third quarter of
2004, Cingular incurred $43 of integration planning costs. Cingular expects to
incur significant costs over the next several years associated with exiting
activities of AT&T Wireless and integrating the businesses. Management's
development of these plans are still in process. The impact of these plans,
assuming they were in place at the acquisition date of AT&T Wireless, could
increase or decrease the amount of goodwill and intangible assets recognized
by Cingular in accordance with Emerging Issues Task Force No. 95-3,
"Recognition of Liabilities in Connection with a Purchase Business Combination."
The unaudited pro forma combined consolidated financial statements exclude
any benefits that may result from synergies that may be derived or the
elimination of duplicative efforts.
The unaudited pro forma combined consolidated financial statements should be
read in conjunction with the historical consolidated financial statements and
accompanying notes contained in Cingular's Annual Report on Form 10-K for its
fiscal year ended December 31, 2003 and Quarterly Report on Form 10-Q for its
quarter ended September 30, 2004 and AT&T Wireless' Annual Report on Form 10-K
for its fiscal year ended December 31, 2003 and Quarterly Report on Form 10-Q
for its quarter ended June 30, 2004. The unaudited pro forma combined
consolidated financial statements are not intended to represent or be indicative
of the consolidated results of operations or financial condition of Cingular
that would have been reported had the merger been completed as of the dates
presented, and should not be taken as representative of the future consolidated
results of operations or financial condition of Cingular.
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRO FORMA PRESENTATION
On October 26, 2004, Cingular Wireless Corporation (CWC) acquired AT&T Wireless
for an aggregate consideration of $41,264 in cash. Under the terms of the
Agreement and Plan of Merger (Merger Agreement) dated February 17, 2004, each
common shareholder of AT&T Wireless received $15 (whole dollars) in cash per
common share and the AT&T Wireless preferred shareholders received the then
applicable liquidation preference of their preferred shares. SBC Communications
Inc. (SBC) and BellSouth Corporation (BellSouth), Cingular's members, provided
equity financing to fund a significant portion of the merger consideration paid
to AT&T Wireless shareholders. The remaining merger consideration paid to
shareholders of AT&T Wireless was funded from AT&T Wireless' cash on hand at the
date of closing. Proportionate equity ownership and management control of
Cingular remains unchanged after the acquisition. Following the acquisition, CWC
sold to Cingular all of its interest in AT&T Wireless. Accordingly, AT&T
Wireless is now a direct wholly-owned subsidiary of Cingular. The acquisition of
AT&T Wireless is being accounted for as a purchase in accordance with Statement
of Financial Accounting Standards (SFAS) No. 141, Business Combinations (SFAS
141).
Under the purchase method of accounting, the total purchase price as shown in
the table below is allocated to AT&T Wireless' net tangible and intangible
assets based on their fair values as of the date of the completion of the
merger. Based on the preliminary independent valuation, and subject to the final
valuation, the impact of ongoing integration activities and AT&T Wireless' net
tangible and intangible assets that existed as of the date of acquisition, the
purchase price is preliminarily allocated at September 30, 2004 as follows:
<Table>
Property, plant and equipment $10,985
Amortizable intangible assets 5,321
Licenses 15,366
Goodwill 20,405
Long term debt (12,152)
Net deferred tax liability (4,416)
Net working capital, excluding cash and debt (773)
Other, net 2,070
-------
Total preliminary estimated purchase price allocation 36,806
Plus: Cash on hand to fund purchase of shares 4,458
-------
Total purchase price $41,264
=======
</Table>
Of the total purchase price, a preliminary estimate of approximately $10,985 has
been allocated to property, plant and equipment and approximately $5,321 has
been allocated to amortizable intangible assets acquired. The depreciation and
amortization effect of the fair value adjustment to property, plant, and
equipment and the amortization related to the amortizable intangible assets are
reflected as adjustments to the unaudited pro forma combined consolidated
statements of income.
The majority of amounts allocated to amortizable intangible assets pertains to
customer relationship intangibles, which primarily represent underlying customer
relationships with AT&T Wireless' postpaid subscriber base, as well as
contractual customer services relationships with large business customers.
Cingular expects to amortize the fair value of these customer relationship
assets on an accelerated basis over an average estimated life of five years.
Annual amortization expense over the five year period is estimated at
approximately $1,800 in Year 1, $1,400 in Year 2, $1,000 in Year 3, $600 in
Year 4 and $200 in Year 5. Other amortizable assets of approximately $300
consist primarily of rights to the AT&T Wireless trade and product names, and
fair value adjustments related to AT&T Wireless' lease portfolio.
Approximately $15,366 has been allocated to licenses. Goodwill of $20,405
represents the excess of the purchase price of the acquired business over the
fair value of the underlying identifiable net tangible and intangible assets at
the acquisition date.
Fair value adjustments of approximately $2,000 have been made to the carrying
value of the long term debt that was assumed in Cingular's acquisition of AT&T
Wireless. These adjustments will be amortized as a reduction to interest expense
over the term of each debt issue to reflect an effective interest rate that is
indicative of market conditions at the time of the acquisition.
In accordance with the SFAS No. 142, "Goodwill and Other Intangible Assets,"
goodwill and intangible assets with indefinite lives resulting from business
combinations completed subsequent to June 30, 2001 will not be amortized but
instead will be tested for impairment at least annually (more frequently if
certain indicators are present). In the event that management determines that
the value of goodwill or intangible assets with indefinite lives has become
impaired, Cingular will record an accounting charge for the amount of impairment
during the fiscal quarter in which the determination is made.
2. PRO FORMA ADJUSTMENTS
Pro forma adjustments are necessary to reflect the purchase price, to adjust
amounts related to AT&T Wireless' net tangible and intangible assets to a
preliminary estimate of their fair values, to reflect the amortization expense
related to the estimated amortizable intangible assets, changes in depreciation
and amortization expense resulting from the estimated fair value adjustments to
net tangible assets, conforming accounting adjustments, the impacts of other
acquisitions and dispositions related to the acquisition of AT&T Wireless and
the income tax effect related to the pro forma adjustments.
Intercompany balances and transactions between Cingular and AT&T Wireless,
largely related to roaming activity, have been eliminated. Certain
reclassifications have been made to conform AT&T Wireless' historical amounts
to Cingular's presentation.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2004
AT&T Purchase
Cingular Wireless Accounting Acquisitions
-------- -------- ---------- ------------
(a) (a) (o)
Current Assets:
Cash and cash equivalents $ 88 $ 4,458 $ (4,458) (b) $ (175)
Accounts receivable -- net of allowance
for doubtful accounts 1,611 1,968 -- 27
Due from affiliates, net 21 1 -- --
Inventories 274 200 -- 6
Prepaid expenses and other current assets 285 675 (68) (c) 2
-------- -------- -------- -------
Total current assets 2,279 7,302 (4,526) (140)
-------- -------- -------- -------
Property, plant and equipment, net 11,084 16,098 (5,113) (d) 224
FCC licenses, net 9,197 14,501 865 (e) 311
Goodwill 849 7,444 13,037 (f) 583
Other intangible assets, net 69 236 5,085 (g) 72
Investments in and advances to equity affiliates 2,264 1,202 1,204 (h) --
Other assets 265 204 152 (i) --
-------- -------- -------- -------
Total assets $ 26,007 $ 46,987 $ 10,704 $ 1,050
======== ======== ======== =======
Current liabilities:
Debt maturing within one year 17 259 6 (j) --
Accounts payable 615 922 -- 16
Advanced billing and customer deposits 612 97 -- --
Accrued liabilities 1,606 1,704 543 (k) --
-------- -------- -------- -------
Total current liabilities 2,850 2,982 549 16
-------- -------- -------- -------
Long-term debt:
Debt due to affiliates 9,678 -- -- --
Other long-term debt 2,974 10,218 1,669 (l) --
-------- -------- -------- -------
Total long-term debt 12,652 10,218 1,669 --
-------- -------- -------- -------
Deferred income tax liability 186 4,775 -- --
Other noncurrent liabilities 490 327 328 (m) --
-------- -------- -------- -------
Total liabilities 16,178 18,302 2,546 16
-------- -------- -------- -------
Minority interests in consolidated entities 631 37 -- --
-------- -------- -------- -------
Members' capital:
Members' capital 9,377 28,625 8,181 (n) 1,034
Receivable for properties to be contributed (178) -- -- --
Accumulated other comprehensive loss (1) 23 (23) (n) --
-------- -------- -------- -------
Total members' capital 9,198 28,648 8,158 1,034
-------- -------- -------- -------
Total liabilities and members' capital $ 26,007 $ 46,987 $ 10,704 $ 1,050
======== ======== ======== =======
Income Pro Forma
Dispositions Intercompany Taxes Consolidated
------------ ------------ ------ ------------
(p) (s)
Current Assets:
Cash and cash equivalents $ 3,068 $ -- $ -- $ 2,981
Accounts receivable-- net of allowance
for doubtful accounts (48) (66) (q) -- 3,492
Due from affiliates, net -- -- -- 22
Inventories (3) -- -- 477
Prepaid expenses and other current assets (1) -- (283) 610
------- ----- ------- -------
Total current assets 3,016 (66) (283) 7,582
------- ----- ------- -------
Property, plant and equipment, net (574) 31 (r) -- 21,750
FCC licenses, net (570) 6 (r) -- 24,310
Goodwill (607) -- (r) (76) 21,230
Other intangible assets, net (148) -- -- 5,314
Investments in and advances to equity affiliates (2,427) (37) (r) -- 2,206
Other assets (2) -- -- 619
------- ----- ------- -------
Total assets $(1,312) $ (66) $ (359) $83,011
======= ===== ======= =======
Current liabilities:
Debt maturing within one year -- -- -- 282
Accounts payable (2) (66) (q) -- 1,485
Advanced billing and customer deposits -- -- -- 709
Accrued liabilities -- -- -- 3,853
------- ----- ------- -------
Total current liabilities (2) (66) -- 6,329
------- ----- ------- -------
Long-term debt:
Debt due to affiliates -- -- -- 9,678
Other long-term debt -- -- -- 14,861
------- ----- ------- -------
Total long-term debt -- -- -- 24,539
------- ----- ------- -------
Deferred income tax liability -- -- (359) 4,602
Other noncurrent liabilities (194) -- -- 951
------- ----- ------- -------
Total liabilities (196) (66) (359) 36,421
------- ----- ------- -------
Minority interests in consolidated entities -- -- -- 668
------- ----- ------- -------
Members' capital:
Members' capital (1,116) -- -- 46,101
Receivable for properties to be contributed -- -- -- (178)
Accumulated other comprehensive loss -- -- -- (1)
------- ----- ------- -------
Total members' capital (1,116) -- -- 45,922
------- ----- ------- -------
Total liabilities and members' capital $(1,312) $ (66) $ (359) $83,011
======= ===== ======= =======
See accompanying notes to unaudited pro forma combined consolidated
balance sheet.
CINGULAR WIRELESS LLC
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
a) These columns reflect the historical balance sheets of the respective
companies. Certain reclassifications have been made to the historical
financial statements of AT&T Wireless to conform to the presentation
used by Cingular.
b) Adjustment to reduce the existing AT&T Wireless cash on hand and
reflect it as part of the total merger consideration paid.
See also Note "n" below.
c) Adjustment to remove the existing AT&T Wireless current portion of
deferred acquisition costs associated with Securities and Exchange
Commission (SEC) Staff Accounting Bulletin Number 101 (SAB 101),
Revenue Recognition in Financial Statements, in accordance with
Emerging Issues Task Force No. 01-3, "Accounting in a Business
Combination for Deferred Revenue of an Acquiree."
d) Adjustment to record the difference between the preliminary estimate
of the fair value and the historical amount of AT&T Wireless'
property, plant and equipment. Preliminary estimate does not include
the potential changes related to integration of the Cingular and AT&T
Wireless networks and other assets.
e) Adjustment to record the difference between the preliminary estimate
of the fair value and the historical amount of AT&T Wireless' licenses.
f) Adjustment to record the difference between the preliminary estimate
of goodwill resulting from the valuation of AT&T Wireless' assets and
liabilities and other purchase accounting adjustments and the existing
historical AT&T Wireless' goodwill.
g) Adjustment to record the difference between the preliminary estimate
of the fair value and the historical amount of AT&T Wireless' other
intangibles, including customer relationships, rights to the AT&T
Wireless trade name, product names and other intangibles.
h) Adjustment to record the difference between the preliminary estimate of
the fair value and the historical amount of AT&T Wireless' equity
investments. No pro forma adjustment has been made related to AT&T
Wireless' sale of its interests in Rogers Wireless Communications, Inc.
on October 13, 2004 for approximately $1,360 in cash.
i) Adjustment to record the difference between the preliminary estimate
of the fair value and the historical amount of AT&T Wireless' other
non-current assets. The primary components of the adjustment include
an increase to reflect current market conditions of existing AT&T
Wireless leasing arrangements and decreases to remove deferred
financing costs and the existing non-current portion of
deferred acquisition costs associated with SAB 101. See also
Note "c" above.
j) Adjustment to record the difference between the preliminary estimate
of the fair value and the historical amount of AT&T Wireless' current
portion of long-term debt. See Note "l" below for further discussion of
the AT&T Wireless debt adjustment.
k) Adjustment to record the difference between the preliminary estimate
of the fair value and the historical amount of AT&T Wireless' accrued
liabilities. The primary components of the adjustment include an
increase for one-time merger-related compensation and other fee
accruals and decreases to remove the existing current portion of
deferred activation fee revenues associated with SAB 101 (see also
Note "c" above) and the removal and/or fair value adjustment to other
AT&T Wireless accrued liabilities.
l) Adjustment to record the difference between the preliminary estimate of
the fair value and the historical amount of AT&T Wireless' long-term
debt. The adjustment to both current and long-term debt reflects a
$2,000 increase to the recorded book value of the existing
AT&T Wireless debt, offset by purchase accounting adjustments to remove
existing debt premium/discounts, mandatorily
redeemable preferred stock and the balance of a fair value adjustment
related to a debt hedging instrument recorded prior to the
implementation of SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, that was being amortized against interest
expense.
m) Adjustment to record the difference between the preliminary estimate of
the fair value and the historical amount of AT&T Wireless' other
non-current liabilities. The primary components include increases to
reflect current market conditions of existing AT&T Wireless leasing
arrangements, fair value adjustments to existing AT&T Wireless
exclusivity agreements and a fair value adjustment to the put option
related to Alaska Native Wireless, LLC, an existing AT&T Wireless
consolidated variable interest entity. The total adjustment also
includes purchase accounting adjustments to remove the existing
non-current portion of deferred activation fee revenues associated with
SAB 101 (see also Note "c" above) and the removal of certain existing
deferred rent liabilities.
n) Adjustments to the AT&T Wireless total equity to reflect the net
increase related to the total merger consideration paid of $41,264
and the use of existing cash on hand. See also Note "b" above.
o) In July 2004, AT&T Wireless and Triton PCS (Triton) signed a definitive
agreement to terminate their stockholders' agreement, which would
terminate a market exclusivity arrangement between the parties. In
exchange for termination of the stockholders' agreement, AT&T Wireless
agreed to surrender to Triton its equity interest in Triton. In
September 2004, Cingular, AT&T Wireless and Triton signed a definitive
agreement providing for the acquisition by Cingular of Triton's
wireless properties in Virginia in exchange for AT&T Wireless'
properties in North Carolina and Puerto Rico.
The underlying assets and liabilities and purchase accounting
adjustments associated with Cingular's acquisition of the Triton
Virginia operations, including the exchange of $175 of cash, are
reflected in the "Acquisitions" column of the pro forma financials.
p) The "Dispositions" adjustments reflect the aggregate of the following
items:
In May 2004, Cingular and T-Mobile USA, Inc. (T-Mobile) entered into an
agreement, subject to regulatory and other customary closing
conditions, to dissolve GSM Facilities, LLC (GSMF) and distribute the
related network assets. Under the terms of the agreement, Cingular will
sell its ownership of the California/Nevada network assets to T-Mobile
for approximately $2,500 in cash, which must be used to fund capital
expenditures for the six month period ending in June 2005 to receive
favorable tax treatment. The ownership of the New York City network
assets will return to T-Mobile. The spectrum exchange is expected to
close no later than the first quarter of 2005. In connection with the
dissolution of the venture, Cingular and T-Mobile will exchange
spectrum at a future date; this transaction has not been reflected in
these pro forma financial statements. Adjustments reflect the sale of
the California/Nevada network based upon the carrying amount of
Cingular's investment in GSMF as of September 30, 2004.
The assets and liabilities associated with Cingular's existing North
Carolina and Puerto Rico businesses acquired from AT&T Wireless, and
the exchange of AT&T Wireless' equity interest in Triton for release
from the previously existing market exclusivity arrangement, are
reflected as "Dispositions." See Note "o" above for additional
information regarding the Triton transaction. Amounts reflect the
estimated purchase accounting impacts to the underlying assets and
liabilities of these operations.
Adjustments also incorporate the removal of the assets and liabilities
of certain interests in a number of operating businesses and licenses
required to be divested by the DOJ and the FCC as a condition to
Cingular's acquisition of AT&T Wireless. Some amounts are based upon
preliminary estimates of fair values and are subject to change. On
November 26, 2004, Cingular announced an agreement to sell certain of
these assets and interests.
q) Adjustments reflect the elimination of intercompany roaming activity
between Cingular, AT&T Wireless and the Triton properties to be
acquired.
r) Adjustments to convert equity accounting impacts of Cingular's and AT&T
Wireless' investments in a jointly-controlled and equally-owned venture
formed in January 2002 to presentation as a consolidated entity in the
financial statements.
s) Adjustments reflect the incremental deferred taxes required under SFAS
No. 109, Accounting for Income Taxes, for the difference between the
revised book value, i.e., fair value, of AT&T Wireless assets other
than goodwill and liabilities recorded under purchase accounting and
the carryover tax basis of those assets and liabilities. Subsequent to
the acquisition, the majority of the net assets and operations of AT&T
Wireless and Cingular were contributed to a new limited liability
entity, with earnings from that entity flowing to the owners in
accordance with their respective ownership interests. The transaction
structure retains the tax-paying status of AT&T Wireless as a 45%
owner of this new limited liability entity. Cingular owns the remaining
55% of this new limited liability entity. Both the new limited
liability entity and Cingular are partnerships for income tax purposes
wherein income tax items generally flow through to Cingular's members
and are taxed at the member level pursuant to federal and state income
tax laws.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2003
Pro
Forma
AT&T Purchase Acqui- Dispo- Inter- Consoli-
Cingular Wireless Accounting sitions sitions company Other Taxes dated
-------- -------- ---------- ------- ------- ------- ------ ------ ---------
(a) (a) (b) (c) (d)
OPERATING REVENUES
Service revenues $14,223 $15,659 $ 4 $ 271 $ (588) $ (638)(e) $ (51)(g) $ -- $ 28,886
6 (f)
Equipment sales 1,260 1,036 -- 93 (37) -- -- -- 2,352
------- ------- ------ ----- ------ ------ ------ ----- --------
Total operating revenues 15,483 16,695 4 364 (625) (632) (51) -- 31,238
OPERATING EXPENSES
Cost of service 3,652 4,749 -- 101 52 (638)(e) (553)(h) -- 7,395
6 (f) 26 (g)
Cost of equipment sales 2,031 2,054 -- 41 (63) -- -- -- 4,063
Selling, general, and admin. 5,422 5,415 (4) 99 (205) -- 553 (h) 20(l) 11,300
Depreciation and amortization 2,089 3,264 827 71 (130) 3 (f) -- -- 6,124
------- ------- ------ ----- ------ ------ ------ ----- --------
Total operating expenses 13,194 15,482 823 312 (346) (629) 26 20 28,882
------- ------- ------ ----- ------ ------ ------ ----- --------
OPERATING INCOME 2,289 1,213 (819) 52 (279) (3) (77) (20) 2,356
OTHER INCOME (EXPENSES)
Interest expense (856) (789) 215 -- -- -- 26 (i) -- (1,404)
Minority interest (101) -- -- -- -- -- (8)(j) -- (109)
Equity in net loss of affil. (323) 98 -- -- 325 3 (f) 119 (k) -- 222
Other, net 41 32 -- -- -- -- 8 (j) -- 81
------- ------- ------ ----- ------ ------ ------ ----- --------
Total other income
(expense) (1,239) (659) 215 -- 325 3 145 -- (1,210)
------- ------- ------ ----- ------ ------ ------ ----- --------
INCOME BEFORE PROVISION FOR
INCOME TAXES 1,050 554 (604) 52 46 -- 68 (20) 1,146
Provision for income taxes 28 112 -- -- -- -- 119 (k) 43(m) 302
------- ------- ------ ----- ------ ------ ------ ----- --------
NET INCOME $ 1,022 $ 442 $ (604) $ 52 $ 46 $ -- $ (51) $ (63) $ 844
======= ======= ====== ===== ====== ====== ====== ===== ========
See accompanying notes to unaudited pro forma combined consolidated statements of income.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
AT&T Purchase Inter-
Cingular Wireless Accounting Acquisitions Dispositions company
-------- -------- ---------- ----------- ------------ --------
(a) (a) (b) (c) (d)
OPERATING REVENUES
Service revenues $11,197 $ 11,430 $ 3 $ 203 $ (477) $ (469)(e)
$ 9 (f)
Equipment sales 1,157 1,077 -- 75 (35) --
------- -------- ----- ----- ------ ------
Total operating revenues 12,354 12,507 3 278 (512) (460)
OPERATING EXPENSES
Cost of service 2,937 3,353 -- 78 16 (469)(e)
11 (f)
Cost of equipment sales 1,627 1,751 -- 35 (53) --
Selling, general, and admin. 4,401 4,164 (3) 74 (167) --
Depreciation and amortization 1,689 2,649 200 49 (91) 3 (f)
------- -------- ----- ----- ------ ------
Total operating expenses 10,654 11,917 197 236 (295) (455)
------- -------- ----- ----- ------ ------
OPERATING INCOME 1,700 590 (194) 42 (217) (5)
OTHER INCOME (EXPENSES)
Interest expense (597) (580) 122 -- -- --
Minority interest (88) -- -- -- -- --
Equity in net loss of affil. (293) 86 -- -- 293 5 (f)
Other, net 5 39 -- -- -- --
------- -------- ----- ----- ------ ------
Total other income
(expense) (973) (455) 122 -- 293 5
------- -------- ----- ----- ------ ------
INCOME BEFORE PROVISION FOR
INCOME TAXES 727 135 (72) 42 76 --
Provision for income taxes 4 15 -- -- -- --
------- -------- ----- ----- ------ ------
NET INCOME $ 723 $ 120 $ (72) $ 42 $ 76 $ --
======= ======== ===== ===== ====== ======
Pro
Forma
Consoli-
Other Taxes dated
----- -------- ----------
OPERATING REVENUES
Service revenues $ (42) (g) $ -- $ 21,854
Equipment sales -- -- 2,274
----- ------ --------
Total operating revenues (42) -- 24,128
OPERATING EXPENSES
Cost of service (336) (h) -- 5,606
16 (g)
Cost of equipment sales -- -- 3,360
Selling, general, and admin. 336 (h) 15 (l) 8,820
Depreciation and amortization -- -- 4,499
----- ------ --------
Total operating expenses 16 15 22,285
----- ------ --------
OPERATING INCOME (58) (15) 1,843
OTHER INCOME (EXPENSES)
Interest expense 19 (i) -- (1,036)
Minority interest -- (j) -- (88)
Equity in net loss of affil. (46) (k) -- 45
Other, net -- (j) -- 44
----- ------ --------
Total other income
(expense) (27) -- (1,035)
----- ------ --------
INCOME BEFORE PROVISION FOR
INCOME TAXES (85) (15) 808
Provision for income taxes (46) (k) 185 (m) 158
----- ------ --------
NET INCOME $ (39) $ (200) $ 650
===== ====== ========
See accompanying notes to unaudited pro forma combined consolidated
statements of income.
CINGULAR WIRELESS LLC
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
a) These columns reflect the historical statements of income of the
respective companies.
b) Cingular's acquisition of AT&T Wireless was recorded under the
purchase method of accounting, as required by SFAS 141.
The income statement impacts of the purchase accounting adjustments
are presented on an incremental basis to amounts reflected in AT&T
Wireless' historical results and consist of the following:
(Increase)/Decrease to Income
----------------------------------------
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 2003 SEPTEMBER 30, 2004
----------------- ------------------
Favorable / unfavorable lease terms on (4) (3)
colocations
Favorable / unfavorable lease terms on (4) (3)
lease portfolio
Amortization of customer relationship, 1,797 1,010
tower rights, and trade name
and product name intangibles
Adjustments to depreciation expense (970) (810)
associated with the valuation
of AT&T Wireless' property,
plant and equipment
Amortization of debt fair value adjustment (215) (122)
c) In July 2004, AT&T Wireless and Triton signed a definitive agreement to
terminate their stockholders' agreement, which would terminate a market
exclusivity arrangement between the parties. In exchange for
termination of the stockholders' agreement, AT&T Wireless agreed to
surrender to Triton its equity interest in Triton. In September 2004,
Cingular, AT&T Wireless and Triton signed a definitive agreement
providing for the acquisition by Cingular of Triton's wireless
properties in Virginia in exchange for AT&T Wireless' properties in
North Carolina and Puerto Rico. These adjustments reflect the operating
results of the Triton Virginia properties, adjusted to include purchase
accounting impacts.
d) The "Dispositions" adjustments reflects the aggregate of the following:
In May 2004, Cingular and T-Mobile entered into an agreement, subject
to regulatory and other customary closing conditions, to dissolve GSMF
and distribute the related network assets. Under the terms of the
agreement, Cingular will sell its ownership of the California/Nevada
network assets to T-Mobile for cash. The ownership of the New York City
network assets will return to T-Mobile. The transaction is expected to
close no later than the first quarter of 2005. In connection with the
dissolution of the venture, Cingular and T-Mobile will exchange
spectrum at a future date; this spectrum exchange has not been
reflected in these pro forma financial statements. Adjustments reflect
removal of historical equity income and network services expenses
recorded under the GSMF joint venture and include expense that would
have been recorded under the terms of the new wholesale agreement for
network traffic on California/Nevada and New York City networks.
The operating results and purchase accounting adjustments associated
with Cingular's existing North Carolina and Puerto Rico businesses
acquired from AT&T Wireless (see Note "c" above) have been removed.
Adjustment also reflects the operating results and related purchase
accounting impacts of certain interests in a number of operating
businesses and licenses required to be divested by the DOJ and the FCC
as a condition to Cingular's acquisition of AT&T Wireless. Some amounts
are based upon preliminary estimates of fair values and are subject to
change. On November 26, 2004, Cingular announced an agreement to sell
certain of these assets and interests.
e) Adjustment reflects the elimination of intercompany roaming activity
between Cingular, AT&T Wireless, and the Triton properties to be
acquired.
f) Adjustments to convert equity accounting impacts of Cingular's and AT&T
Wireless' investments in a jointly-controlled and equally-owned venture
formed in January 2002 to presentation as a consolidated entity in the
financial statements.
g) Adjustments reflect conforming accounting adjustments to reflect the
change of AT&T Wireless related items to the respective Cingular
accounting policy.
h) Adjustments reflect the reclassification of AT&T Wireless' bad debt
expense from Cost of Services to Selling, General and Administrative;
such presentation is consistent with Cingular's classification of bad
debts expense in the income statement.
i) Adjustment reflects the reversal of the accretion on AT&T Wireless'
Series C and E preferred stock. The Series E preferred stock was called
in June 2004 and the Series C preferred stock was cancelled upon the
acquisition of AT&T Wireless.
j) Adjustments reflect reclassification of AT&T Wireless' minority
interest from "Other, net" to "Minority interest" in the income
statement; such presentation is consistent with Cingular's
classification of minority interest in its financial statements. The
2004 reclassification amount is insignificant.
k) Adjustment reflects the reclassification of United States federal and
state income tax expense associated with income/loss from AT&T
Wireless' investment in equity affiliates to conform to the
presentation currently used by Cingular.
l) Adjustment reflects incremental franchise tax as assessed on the
recorded assets of AT&T Wireless after applying purchase accounting
impacts.
m) Adjustments reflect the incremental income taxes that would have been
recorded for pro forma results of operations under the transaction
structure adopted for Cingular's acquisition of AT&T Wireless,
including the impact of the pro forma adjustments described in Notes
"b" through "l." Adjustment to income tax expense reflects the new
combined company legal entity structure. In this new structure the
majority of the operations are in partnership form. Income tax expense
is a result of a corporate partner in the structure. See Note "s" in
Notes to Unaudited Pro Forma Combined Consolidated Balance Sheet for
additional information.