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: April 23, 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: (800) 257-7865
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
Form 8-K AT&T Corp.
April 23, 2003
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS
Exhibit 99 - Press release dated April 23, 2003.
ITEM 9. REGULATION FD DISCLOSURE.
On April 23, 2003, AT&T Corp. issued a press release announcing first
quarter 2003 earnings. A copy of the press release is attached as Exhibit 99.
This information furnished under "Item 9. Regulation FD Disclosure" is intended
to be furnished under "Item 12. Results of Operations and Financial Condition"
in accordance with SEC Release No. 33-8216.
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.
Form 8-K AT&T Corp.
April 23, 2003
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: Vice President - Law and Secretary
April 23, 2003
EXHIBIT 99
[AT&T LOGO OMITTED]
News Release
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FOR RELEASE WEDNESDAY, APRIL 23, 2003
AT&T Announces First Quarter 2003 Earnings
o Earnings per diluted share from continuing operations of $0.67, compared
to $0.60 per diluted share in the prior year first quarter
o Consolidated revenue of $9.0 billion for the quarter
o Operating income of $1.2 billion for the quarter
BEDMINSTER, N.J. -- AT&T (NYSE: T) today reported income from continuing
operations of $529 million, or earnings per diluted share of $0.67, for the
first quarter of 2003. The company's current quarter income from continuing
operations compares favorably to income of $446 million, or earnings per diluted
share of $0.60, in the first quarter of 2002.
First quarter 2003 net income of $571 million, or earnings per diluted share of
$0.73, included income of $42 million, or $0.06, related to the cumulative
effect of the adoption of a new accounting standard. First quarter 2002 net loss
of $975 million, or $1.32 per diluted share, included losses of $0.76 and $1.16
from discontinued operations and the cumulative effect of the adoption of a new
accounting standard, respectively.
"AT&T's solid first quarter results demonstrate our continued success in
executing in the marketplace, taking market share and growing key areas of our
business despite ongoing economic weakness and a difficult telecom services
operating environment," said AT&T Chairman and CEO David W. Dorman. "We remain
focused on meeting customer needs and further differentiating AT&T through
targeted investments aimed at improving our network capabilities and cost
structure in ways that our competitors simply cannot match."
AT&T reported first quarter 2003 consolidated revenue of $9.0 billion, which
included $6.4 billion from AT&T Business Services and $2.5 billion from AT&T
Consumer Services. This represents a decline of 5.9 percent versus the first
quarter of 2002, primarily due to continued declines in long distance (LD) voice
services, partially offset by growth in several key segments of AT&T Business
Services, as well as the continued success of AT&T Consumer Services' bundled
local and LD offering. AT&T Business Services revenue declined by 1.4 percent
compared with the prior year first quarter, while AT&T Consumer Services revenue
declined by 17.8 percent.
AT&T's first quarter 2003 operating income totaled $1.2 billion, resulting in a
consolidated operating margin of 13.0 percent. AT&T Business Services posted
operating income of $600 million, yielding a margin of 9.3 percent, while AT&T
Consumer Services generated operating income of $632 million, yielding a margin
of 24.9 percent.
Outlook
AT&T expects that it will meet or exceed its previously stated 2003 consolidated
revenue growth and operating income margin guidance. The company has lowered its
guidance for 2003 capital expenditures from a prior range of $3.3 to $3.5
billion to around $3.0 billion.
AT&T UNIT HIGHLIGHTS
Effective with the current reporting period, AT&T is providing additional
product-line revenue detail as part of its quarterly financial disclosures.
Within AT&T Business Services, the company is now providing quarterly revenue
for long distance voice, local voice, data services, Internet protocol &
enhanced services (IP&E-services), outsourcing, professional services & other as
well as additional operational details. Within AT&T Consumer Services, the
company is now providing quarterly revenue for standalone long distance,
transactional & other services, as well as bundled services.
AT&T Business Services
o Revenue was $6.4 billion, a decline of 1.4 percent from the prior year
first quarter. The unit's revenue performance reflects continued
weakness in retail demand and overall telecommunications spending,
partially offset by strong growth in local, wholesale and IP&E-services
revenue.
o The managed component of total data services, and IP&E-services revenue
grew nearly 7 percent from the prior year first quarter and now
comprises 30 percent of this revenue total.
o Total data services revenue declined 0.9 percent and IP&E-services
revenue grew 9.1 percent, from the prior year quarter.
o Local voice revenue grew approximately 25 percent from the prior year
first quarter. Local access lines grew approximately 24 percent versus
the first quarter of 2002, with approximately 157,000 lines being added
in the 2003 first quarter. Local access lines totaled nearly 3.8
million at the end of the current reporting period.
o Long distance voice revenue declined 2.9 percent on a year-over-year
basis, driven by continued pricing pressure and weakness in retail
demand, partially offset by growth in wholesale revenue. Volumes grew
approximately 12 percent on a year-over-year basis, driven by strong
wholesale growth, which more than offset the decline in retail volumes.
o Operating income totaled $600 million. Operating margin was 9.3
percent, compared with 13.3 percent in the prior year first quarter.
This decline is primarily due to continued pricing pressure, weak
retail demand resulting from a soft economy, and a mix shift from
higher margin retail LD service to lower margin wholesale service.
AT&T Consumer Services
o Revenue was $2.5 billion, a decline of 17.8 percent versus the prior
year first quarter, driven by the continued impact of wireless and
Internet substitution, competition and customer migration to lower
priced products and calling plans. The revenue decline was partially
offset by growth in bundled revenue, which nearly doubled compared to
the prior year first quarter and now represents approximately 17
percent of total AT&T Consumer revenue.
o Operating income totaled $632 million, yielding an operating margin of
24.9 percent, compared with 26.6 percent in the prior year first
quarter. The year-over-year decline reflects the impact of
substitution, competition, and mix shift, mitigated by the successful
management of expenses.
o At the end of the first quarter, AT&T Consumer provided local service
to approximately 2.8 million customers, an increase of more than 119
percent from the prior year first quarter. During the current reporting
period, AT&T announced an expanded presence in Georgia as well as its
intention to enter the District of Columbia, Indiana and Massachusetts
markets. The company expects to offer local service in 11 markets by
the second quarter of 2003.
OTHER CONSOLIDATED FINANCIAL HIGHLIGHTS
o AT&T ended the quarter with net debt of $12.0 billion. Net debt is
defined as total debt of $18.1 billion less cash of $4.9 billion,
restricted cash of $0.5 billion and foreign debt fluctuations of $0.8
billion.
o Capital expenditures for the first quarter were $662 million.
o The effective tax rate for the first quarter of 35.2 percent was
positively impacted by the recognition of tax benefits recorded in
connection with the exchange and sale of AT&T's remaining interest in
AT&T Wireless. The tax rate excluding these transactions would have
been 40.5 percent.
o AT&T realized a $20 million net reduction in operating expenses during
the first quarter of 2003 due to its adoption of Statement of Financial
Accounting Standards No. 143, "Accounting for Asset Retirement
Obligations."
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 included 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 - includes $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 that
increased the debt balance by approximately $0.8 billion at March 31, 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.
Monetization - represents debt that was exchangeable into, and collateralized
by, shares of AT&T Wireless.
Income Statement
AT&T Corp. Consolidated Statements of Income (Unaudited)
Dollars in millions (except per share amounts)
Three Months Ended March 31,
2003 2002 Change
REVENUE
AT&T Business Services $ 6,437 $ 6,528 (1.4%)
AT&T Consumer Services 2,536 3,086 (17.8%)
Corporate and Other 13 (66) 119.7%
Total Revenue 8,986 9,548 (5.9%)
OPERATING EXPENSES
Access and other connection 2,698 2,788 (3.2%)
Costs of services and products 2,011 2,014 (0.1%)
Selling, general and administrative 1,921 1,937 (0.8%)
Depreciation and amortization 1,186 1,175 1.0%
Net restructuring and other charges 4 - NA
Total operating expenses 7,820 7,914 (1.2%)
Operating Income 1,166 1,634 (28.7%)
Other income (expense), net 10 (55) 118.9%
Interest (expense) (332) (396) (16.0%)
Income from continuing operations before income taxes,
minority interest income, and net earnings (losses) related to
equity investments 844 1,183 (28.7%)
(Provision) for income taxes (297) (479) (38.0%)
Minority interest income 1 20 (96.6%)
Net (losses) related to equity investments (19) (278) 93.2%
Income from continuing operations 529 446 18.5%
(Loss) from discontinued operations - net of taxes - (565) 100.0%
Cumulative effect of accounting changes - net of taxes 42 (856) 104.9%
Net income (loss) $ 571 $(975) 158.6%
Weighted-average common shares (millions) 784 709
Weighted-average common shares and potential common shares
(millions) 785 738
PER BASIC SHARE:
Earnings from continuing operations $ 0.67 $ 0.63 6.3%
(Loss) from discontinued operations - (0.80) 100.0%
Cumulative effect of accounting changes 0.06 (1.21) 105.0%
Earnings (loss) per basic share $ 0.73 $(1.38) 152.9%
PER DILUTED SHARE:
Earnings from continuing operations $ 0.67 $ 0.60 11.7%
(Loss) from discontinued operations - (0.76) 100.0%
Cumulative effect of accounting changes 0.06 (1.16) 105.2%
Earnings (loss) per diluted share $ 0.73 $ (1.32) 155.3%
Dividends declared per share $ 0.1875 $ 0.1875
Quarterly Income Statements
AT&T Corp. Consolidated Statements of Income (Unaudited)
Dollars in millions (except per share amounts)
1Q03 4Q02 3Q02 2Q02 1Q02 2002
REVENUE
AT&T Business Services $ 6,437 $ 6,588 $ 6,700 $ 6,742 $ 6,528 $26,558
AT&T Consumer Services 2,536 2,736 2,794 2,911 3,086 11,527
Corporate and Other 13 (34) (85) (73) (66) (258)
Total revenue 8,986 9,290 9,409 9,580 9,548 37,827
OPERATING EXPENSES
Access and other connection 2,698 2,576 2,679 2,747 2,788 10,790
Costs of services and products 2,011 2,197 2,066 2,086 2,014 8,363
Selling, general and administrative 1,921 2,077 2,032 1,942 1,937 7,988
Depreciation and amortization 1,186 1,257 1,243 1,213 1,175 4,888
Net restructuring and other charges 4 1,463 (26) - - 1,437
Total operating expenses 7,820 9,570 7,994 7,988 7,914 33,466
Operating income (loss) 1,166 (280) 1,415 1,592 1,634 4,361
Other income (expense), net 10 208 (180) (50) (55) (77)
Interest (expense) (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 844 (433) 880 1,206 1,183 2,836
(Provision) for income taxes (297) (225) (370) (513) (479) (1,587)
Minority interest income 1 33 28 33 20 114
Net (losses) earnings related to equity investments (19) 14 (13) (123) (278) (400)
Income (loss) from continuing operations 529 (611) 525 603 446 963
(Loss) from discontinued operations - net of taxes - (197) (318) (13,433) (565) (14,513)
Gain on disposition of discontinued operations - net
of taxes - 1,324 - - - 1,324
Income (loss) before cumulative effect of accounting
changes 529 516 207 (12,830) (119) (12,226)
Cumulative effect of accounting changes, net of taxes 42 - - - (856) (856)
Net income (loss) $ 571 $ 516 $ 207 $ (12,830) $ (975) $ (13,082)
Weighted-average common shares (millions) 784 776 770 730 709 746
Weighted-average common shares and potential common
shares (millions) 785 776 788 750 738 766
PER BASIC SHARE:
Earnings (loss) from continuing operations $ 0.67 $ (0.79) $ 0.68 $ 0.83 $ 0.63 $ 1.29
(Loss) from discontinued operations - (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 0.06 - - - (1.21) (1.15)
Earnings (loss) per basic share $ 0.73 $ 0.66 $ 0.27 $ (17.58) $ (1.38) $ (17.53)
PER DILUTED SHARE:
Earnings (loss) from continuing operations $ 0.67 $ (0.79) $ 0.67 $ 0.80 $ 0.60 $ 1.26
(Loss) from discontinued operations - (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 0.06 - - - (1.16) (1.12)
Earnings (loss) per diluted share $ 0.73 $ 0.66 $ 0.26 $ (17.11) $ (1.32) $ (17.08)
Historical Segment Data
Segment Disclosures (Unaudited)
Dollars in millions
1Q03 4Q02 3Q02 2Q02 1Q02 2002
AT&T Business Services
LD Voice $ 2,961 $ 2,853 $ 3,129 $ 3,224 $ 3,048 $12,254
Local Voice 335 336 274 277 268 1,155
Total Voice 3,296 3,189 3,403 3,501 3,316 13,409
Data Services 2,000 2,079 2,086 2,077 2,018 8,260
IP&E-Services 445 442 421 406 408 1,677
Total Data Services, IP&E-Services 2,445 2,521 2,507 2,483 2,426 9,937
Outsourcing, Professional Services & Other 696 878 790 758 786 3,212
Total Revenue 6,437 6,588 6,700 6,742 6,528 26,558
Operating Income (Loss)(1) 600 (612) 854 856 867 1,965
Operating Margin 9.3% (9.3%) 12.7% 12.7% 13.3% 7.4%
Capital Expenditures 636 1,297 912 930 575 3,714
Depreciation & Amortization 1,126 1,173 1,128 1,141 1,104 4,546
Total Data Services, IP&E-Services - % managed 30% 30% 29% 29% 29% 29%
Total Data Services, IP&E-Services - % international 14% 15% 14% 15% 13% 14%
LD Volume Growth - Yr/Yr 12% 7% 2% (1%) (1%) N/A
LD Volume % Wholesale 45% 42% 38% 34% 33% 37%
AT&T Consumer Services
Standalone LD, Transactional and Other Services $ 2,112 $ 2,375 $ 2,499 $ 2,670 $ 2,869 $10,413
Bundled Services 424 361 295 241 217 1,114
Total Revenue 2,536 2,736 2,794 2,911 3,086 11,527
Operating Income(2) 632 389 595 787 821 2,592
Operating Margin 24.9% 14.2% 21.3% 27.0% 26.6% 22.5%
Capital Expenditures 22 32 34 33 28 127
Depreciation & Amortization 35 57 89 43 41 230
Local Customers (in thousands) 2,778 2,423 1,916 1,549 1,266 2,423
Bundled Households (in millions) 32.2 32.2 32.2 17.6 13.1 32.2
Corporate and Other
Revenue $ 13 $ (34) $ (85) $ (73) $ (66) $ (258)
Operating Income (Loss)(3) (66) (57) (34) (51) (54) (196)
Capital Expenditures 4 17 23 13 10 63
Depreciation & Amortization 25 27 26 29 30 112
Total AT&T
Revenue $ 8,986 $ 9,290 $ 9,409 $ 9,580 $ 9,548 $37,827
Operating Income (Loss)(4) 1,166 (280) 1,415 1,592 1,634 4,361
Operating Margin 13.0% (3.0%) 15.0% 16.6% 17.1% 11.5%
Capital Expenditures 662 1,346 969 976 613 3,904
Depreciation & Amortization 1,186 1,257 1,243 1,213 1,175 4,888
(1) Includes business restructuring and asset impairment (charges) benefits of ($1,230M) in 4Q02 and $27M in 3Q02.
(2) Includes business restructuring and asset impairment (charges) benefits of ($223M) in 4Q02 and $12M in 3Q02.
(3) Includes business restructuring (charges) of ($10M) in 4Q02 and ($13M) in 3Q02.
(4) Includes business restructuring and asset impairment (charges) benefits of ($1,463M) in 4Q02 and $26M in 3Q02.
AT&T Corp. Consolidated Balance Sheets (Unaudited)
Dollars in millions
March 31, December 31, %
2003 2002 Change
ASSETS
Cash and cash equivalents $ 4,900 $ 8,014 -38.9%
Accounts receivable, less allowances of $697 and $669 5,028 5,286 -4.9%
Deferred income taxes 779 910 -14.4%
Other current assets 1,150 1,693 -32.1%
Total Current Assets 11,857 15,903 -25.4%
Property, plant and equipment, net of accumulated
depreciation of $32,096 and $31,021 25,246 25,604 -1.4%
Goodwill 4,660 4,626 0.7%
Other purchased intangible assets, net of accumulated
depreciation of $262 and $244 542 556 -2.6%
Prepaid pension costs 3,655 3,596 1.6%
Other assets 4,463 4,987 -10.5%
TOTAL ASSETS $ 50,423 $ 55,272 -8.8%
LIABILITIES
Accounts payable $ 3,384 $ 3,819 -11.4%
Payroll and benefit-related liabilities 941 1,519 -38.0%
Debt maturing within one year 4,346 3,762 15.5%
Other current liabilities 3,046 2,924 4.2%
Total Current Liabilities 11,717 12,024 -2.5%
Long-term debt 13,786 18,812 -26.7%
Long-term benefit-related liabilities 4,095 4,001 2.3%
Deferred income taxes 4,768 4,739 0.6%
Other long-term liabilities and deferred credits 3,359 3,384 -0.7%
Total Liabilities 37,725 42,960 -12.2%
SHAREOWNERS' EQUITY
AT&T Common Stock, $1 par value, authorized 6,000,000,000 shares;
issued and outstanding 785,563,631 shares (net of 171,748,905
treasury shares) at March 31, 2003 and 783,037,580 shares
(net of 171,801,716 treasury shares) at December 31, 2002 786 783 0.3%
Additional paid-in capital 28,079 28,163 -0.3%
Accumulated deficit (15,995) (16,566) 3.4%
Accumulated other comprehensive loss (172) (68) -153.5%
Total Shareowners' Equity 12,698 12,312 3.1%
TOTAL LIABILITIES & SHAREOWNERS' EQUITY $ 50,423 $ 55,272 -8.8%
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
website beginning later today. The website address is http://www.att.com/ir. An
audio rebroadcast of the conference call will be available beginning in the
afternoon on Wednesday, April 23 until midnight on Friday, April 25. To access
the replay, please visit http://www.att.com/ir, or U.S. callers can dial
800-475-6701, access code 661276. Callers outside the U.S. should dial
+1-320-365-3844, access code 661276.
The foregoing 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 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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