-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NYbhMED3MmfvYJ+T8PxLAtSiwEmW7whhlBVDyqiplvWZyQFkEAh4OnwpJHpMs2vj 2FKBwlRSAlkqgjq2xscj4w== 0000005907-05-000083.txt : 20050421 0000005907-05-000083.hdr.sgml : 20050421 20050421154228 ACCESSION NUMBER: 0000005907-05-000083 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050420 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050421 DATE AS OF CHANGE: 20050421 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AT&T CORP CENTRAL INDEX KEY: 0000005907 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 134924710 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-01105 FILM NUMBER: 05764743 BUSINESS ADDRESS: STREET 1: ONE AT&T WAY CITY: BEDMINSTER STATE: NJ ZIP: 07921 BUSINESS PHONE: 9082212000 MAIL ADDRESS: STREET 1: ONE AT&T WAY CITY: BEDMINSTER STATE: NJ ZIP: 07921 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN TELEPHONE & TELEGRAPH CO DATE OF NAME CHANGE: 19920703 8-K 1 firstq2005eightk042005.txt 8-K REPORT DATED 04/20/2005 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 20, 2005 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) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (See General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) SECTION 1. REGISTRANT'S BUSINESS AND OPERATIONS Item 1.01. Entry into a Material Definitive Agreement On April 20, 2005, our Board of Directors approved the standard annual award of AT&T restricted stock units to each non-employee Director who is elected to the Board of Directors at the AT&T 2005 Annual Meeting of Shareholders. The date of grant will be the date of such Annual Meeting, currently expected to occur in June 2005, and the value of the grant will be $100,000 based on the price of AT&T common stock on the date of the grant. The Company is filing as an exhibit to this Form 8-K the form of restricted stock unit award agreement that the Board of Directors has approved for awards to non-employee Directors during 2005. SECTION 2. FINANCIAL INFORMATION Item 2.02. Results of Operations and Financial Condition On April 21, 2005, AT&T Corp. issued a press release announcing its first quarter 2005 financial results. A copy of the press release is being furnished as Exhibit 99.1 to this Form 8-K. Such information 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. SECTION 9. FINANCIAL STATEMENTS AND EXHIBITS Item 9.01. Financial Statements and Exhibits (c) Exhibits. The following exhibits are being filed or furnished herewith: Exhibit No. Description 10 Form of Restricted Stock Unit Award Agreement for Non-Employee Directors 99.1 Press Release of AT&T Corp. dated April 21, 2005 announcing AT&T Corp.'s financial results for its first quarter 2005 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 hereunto duly authorized. AT&T CORP. /s/ Robert S. Feit ---------------------------------- By: Robert S. Feit Vice President - Law and Secretary April 21, 2005 EXHIBIT INDEX Exhibit No. Description 10 Form of Restricted Stock Unit Award Agreement for Non-Employee Directors 99.1 Press Release of AT&T Corp. dated April 21, 2005 announcing AT&T Corp.'s financial results for its first quarter 2005 EX-10 2 exh10eightk042005.txt RSTRCTD STK UNIT AWARD AGMT FOR NON-EMP DIRECTORS Exhibit 10 Appendix A [GRAPHIC OMITTED][GRAPHIC OMITTED] Pursuant to Section 10 of the AT&T 2004 Long Term Incentive Program (the "Plan") of AT&T Corp. ("AT&T" or the "Company"), and in accordance with the terms and conditions of the Plan, a copy of which is available to you*, and your agreement to the further terms, conditions and restrictions set forth below, you have been granted, as of the date of grant set forth below, a number of restricted stock units ("Restricted Stock Units"), as set forth below. Each Restricted Stock Unit, upon termination of the restrictions related thereto will be converted into one share of AT&T common stock ("Share"). The Plan is hereby incorporated by reference and made a part hereof. The grant and this Agreement are subject to all terms and conditions of the Plan, and the parties agree to be bound by the terms thereof. In the event of any conflict between the provisions of this Agreement and the provisions of the Plan, the provisions of the Plan shall control. The AT&T Board of Directors and the Committee shall have the right, in its discretion, to alter or amend the Plan and this Agreement, from time to time, consistent with the terms of the Plan. The term "AT&T/SBC Board of Directors" as used in this Agreement (i) in the event that you have continued as a member of the Board of Directors of SBC Communications, Inc. ("SBC") after the consummation of the proposed acquisition of AT&T by SBC, shall mean the SBC Board of Directors, and (ii) in all other cases, shall mean the Board of Directors of AT&T. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan. - -------------------------------------------------------------------------------- Participant - -------------------------------------------------------------------------------- Social Security Number xxx-xx-xxxx - -------------------------------------------------------------------------------- Number of Restricted Stock Units Granted - -------------------------------------------------------------------------------- Date of Grant - -------------------------------------------------------------------------------- Scheduled Subject to your continued tenure as a member of the AT&T/SBC Vesting Dates Board of Directors and subject to early vesting ("Early Vesting") in certain circumstances as set forth in this Agreement, the Restricted Stock Units shall vest and become nonforfeitable as follows (each, a "Scheduled Vesting Date"): |X| 50% of this Restricted Stock Unit Award will vest on the second anniversary date of this grant; |X| 25% of this Restricted Stock Unit Award will vest on the third anniversary date of this grant; and |X| the final 25% of this Restricted Stock Unit Award will vest on the fourth anniversary date of this grant. All Shares will be rounded down to the nearest whole Share and all rounded Shares will become vested in the final period. - -------------------------------------------------------------------------------- Effectiveness This Restricted Stock Unit Award Agreement (this "Agreement") of Agreement shall be effective only if and when AT&T receives your acceptance of the terms of this Agreement as required below. - -------------------------------------------------------------------------------- Fair Market Fair Market Value shall mean the average of the high and low Value per Share sale prices of AT&T common stock trading on the New York Stock Exchange on any date of determination (or, if no sales are reported on such date, the average of the high and low per Share sale prices of AT&T common stock trading on the New York Stock Exchange on the next trading date). - -------------------------------------------------------------------------------- Book Entry As soon as administratively practicable after any Restricted of Shares Stock Units vest, AT&T will deliver to you or your legal representative a statement reflecting ownership of the corresponding Shares in book entry form. You are responsible for complying with any securities and exchange control laws or any other legal requirements applicable to you in connection with the vesting and/or distribution of Shares in respect of the Restricted Stock Units. - -------------------------------------------------------------------------------- Dividend A cash payment in an amount equal to the dividend payable on Equivalent one Share, on the record date for such dividend, will be made Payments to you for each Restricted Stock Unit held by you that has not been forfeited, cancelled or converted to a Share as soon as reasonably practicable following such dividend record date. - -------------------------------------------------------------------------------- * copies of all applicable documents are included with this award agreement - -------------------------------------------------------------------------------- Termination of Your termination of tenure as a member of the AT&T/SBC Board Tenure and this of Directors, will cause all Restricted Stock Units not Restricted Stock previously vested to be cancelled effective with your Unit Award termination date, except as described below: Agreement Retirement a) upon retirement from the AT&T/SBC Board of Directors, then this Award shall be subject to Early Vesting in full. Disability b) upon termination of tenure as a member of the AT&T/SBC Board of Directors due to disability, then this Award shall be subject to Early Vesting in full. Death c) upon termination of tenure as a member of the AT&T/SBC Board of Directors due to death, then this Award shall be subject to Early Vesting in full. Other d) upon consummation of the acquisition of AT&T by SBC, if you do not continue as a member of the SBC Board of Directors, then this Award shall be subject to Early Vesting in full. - -------------------------------------------------------------------------------- Early Vesting Any portion of this Restricted Stock Unit that becomes subject to vesting prior to a Scheduled Vesting Date in accordance with Termination of Tenure and this Restricted Stock Unit Award Agreement, above. - -------------------------------------------------------------------------------- Distribution In the case of your death, any distribution of Shares in upon Death respect of the Restricted Stock Units granted hereunder shall be made to your estate. You may, in accordance with procedures established by the Committee, designate one or more beneficiaries to receive all or part of any distribution to be made hereunder in case of your death, and you may change or revoke such designation at any time. In the event of your death, any distribution hereunder that is subject to such a designation (to the extent such designation is valid and enforceable under applicable law) shall be made to such beneficiary or beneficiaries in accordance with this Agreement. If there shall be any question as to the legal right of any beneficiary to receive a distribution hereunder, the amount in question shall be distributed to your estate, in which event neither AT&T nor any Affiliate shall have any further liability to anyone with respect to such distribution. - -------------------------------------------------------------------------------- Change in Upon a Change in Control (as defined in Section 2(e) of the Control Plan), other than the consummation of the acquisition of AT&T by SBC pursuant to the Agreement and Plan of Merger dated January 30, 2005, this Restricted Stock Unit Award will vest immediately in full in accordance with Section 11(e) of the Plan, and the Shares in respect of such Restricted Stock Units will be distributed immediately. - -------------------------------------------------------------------------------- Transferability At all times prior to the vesting of a Restricted Stock Unit, such Restricted Stock Unit shall be nontransferable and may not be pledged, assigned or alienated in any way. - -------------------------------------------------------------------------------- * copies of all applicable documents are included with this award agreement - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Other Corporate Anything in this Agreement to the contrary notwithstanding, Provisions if, at any time specified herein for the issuance of Shares to you, any law, regulation or requirement of any governmental authority having jurisdiction shall require either the Company or you to take any action in connection with the Shares then to be issued, the issuance of such Shares shall be deferred until such action shall have been taken. Any dispute or disagreement which shall arise under, or as a result of, or pursuant to, this Agreement shall be determined by the AT&T Board of Directors or the Committee in its absolute and uncontrolled discretion, and any such determination or any other determination by the AT&T Board of Directors or the Committee under or pursuant to this Agreement and any interpretation by the AT&T Board of Directors or the Committee of the terms of this Agreement shall be final, binding and conclusive on all persons affected thereby. Any determinations or decisions made or actions taken arising out of or in connection with the interpretation and administration of this Agreement and the Plan by the AT&T Board of Directors or the Committee shall be final and conclusive. The AT&T Board of Directors or the Committee may amend this Agreement provided that no such amendment shall impair your rights hereunder without your consent. You shall not have the right to vote the Shares underlying the Restricted Stock Units or, except as set forth above with respect to dividend equivalents, any other rights as a holder of Shares until such time as the Restricted Stock Units shall have vested and the Shares underlying the vested Restricted Stock Units shall have been delivered to you. The validity, construction and effect of this Agreement shall be determined in accordance with the laws of the State of New York and applicable Federal law. - -------------------------------------------------------------------------------- Please indicate your acceptance of the terms of this Restricted Stock Unit Award Agreement and acknowledge that you have reviewed copies of the Plan, and the Guideline summary, in each case as currently in effect and available to you*, by signing at the place provided and returning original of this Restricted Stock Unit Award Agreement. ACCEPTED AND AGREED: /s/ Mirian Graddick-Weir - -------------------------------------------------------------------------------- AT&T Corp. Participant Signature * copies of all applicable documents are included with this award agreement EX-99 3 exh991eightk042005.txt EXH 99.1 - PRESS RELEASE DATED 04/21/2005 Exhibit 99.1 [AT&T Logo Omitted] News Release - -------------------------------------------------------------------------------- FOR RELEASE THURSDAY, APRIL 21, 2005 AT&T Announces First-Quarter 2005 Earnings o First-quarter earnings per diluted share of $0.66 o Consolidated revenue of $7.0 billion o Operating income of $1.1 billion BEDMINSTER, N.J. -- AT&T (NYSE: T) today reported net income of $529 million, or earnings per diluted share of $0.66, for the first quarter of 2005. Net income included an after-tax benefit from lower depreciation of $333 million, or $0.41 per share, as a result of the asset impairment charges taken in the third quarter of 2004. The company's current-quarter net income compares to net income of $304 million, or earnings per diluted share of $0.38, in the first quarter of 2004. Net income in 2004 included a tax benefit related to a prior investment, losses on the early retirement of debt and asset impairment and net restructuring and other charges, which collectively increased net income by $71 million, or $0.09 per share. "AT&T continues to take targeted, strategic actions to elevate our operational and financial strength in advance of our pending merger with SBC Communications," said AT&T Chairman and Chief Executive Officer David W. Dorman. "Our first-quarter results demonstrate the significant progress we're making in transforming this company for long-term networking and technology leadership in the face of a very challenging pricing environment for traditional voice and data services." AT&T reported first-quarter 2005 consolidated revenue of $7.0 billion, which included $5.3 billion from AT&T Business and $1.7 billion from AT&T Consumer. Consolidated revenue declined 12.2 percent versus the first quarter of 2004, primarily due to continued declines in long distance (LD) voice and data revenue. The company reported consolidated EBITDA of $1.7 billion in the first quarter of 2005 for a margin of 24.3 percent. This compares to consolidated EBITDA of $1.7 billion and a margin of 21.8 percent in the prior-year first quarter, excluding asset impairment and net restructuring and other charges of $0.2 billion. The company reported that success in cutting costs, including savings from ongoing headcount reduction efforts and strategic reductions in marketing expenses in AT&T Consumer contributed to strong margin performance for the quarter. AT&T's first-quarter 2005 operating income totaled $1.1 billion, yielding a consolidated operating margin of 15.3 percent. The operating margin was positively impacted by a benefit from lower depreciation of $540 million, resulting from the asset impairment charges taken during the third quarter of 2004. The company's current-quarter performance compares to consolidated operating income of $281 million and a margin of 3.5 percent in the prior-year first quarter, which included $213 million of asset impairment and net restructuring and other charges. AT&T UNIT HIGHLIGHTS AT&T Business o Revenue was $5.3 billion, a decline of 9.4 percent from the prior-year first quarter, primarily due to ongoing pricing pressure in traditional voice and data services, and declines in retail volumes. Revenue was positively impacted by approximately 1.0 percentage point due to a customer disconnect of prepaid network capacity and higher equipment sales. o Long distance voice revenue decreased 17.0 percent from the prior-year first quarter, driven by continued pricing pressure and a decline in overall volumes, primarily reflecting a decline in retail minutes. o Local voice revenue declined 4.6 percent from the prior-year first quarter reflecting declines in reciprocal compensation revenue and our "All-In-One" bundled offer. As previously announced, AT&T has adjusted its strategy to be more selective in approaching the small business market, placing a greater focus on profitability over overall market share. This quarter, AT&T began to see the impact of this strategic change as the number of local access lines declined. o Data revenue declined 7.6 percent from the prior-year first quarter, reflecting the impact of pricing pressure. Data revenue was positively impacted by approximately 2.0 percentage points due to a customer disconnect of prepaid network capacity. o IP&E-services revenue grew 6.6 percent over the prior-year first quarter, reflecting AT&T's ongoing transformation to next-generation networking services such as Enhanced Virtual Private Network (E-VPN) and IP-enabled frame relay services, though declined sequentially. Approximately half of the sequential decline was attributable to a contract renewal at current market rates for a significant customer in one of the more mature products within the IP&E-services portfolio. o Outsourcing, professional services and other revenue grew 0.4 percent from the prior-year first quarter, reflecting continued strength in government professional services and increased equipment sales. There was an approximate 2.0 percentage point benefit to the total growth rate associated with equipment sales. o Operating income totaled $588 million in the period, yielding an operating margin of 11.0 percent, which was positively impacted by a $509 million net benefit from lower depreciation as a result of the asset-impairment charges taken during the third quarter of 2004. This compared with operating income of $83 million and an operating margin of 1.4 percent in the prior-year first quarter, which was negatively impacted by $91 million of asset impairment and net restructuring and other charges. o EBITDA was $1.2 billion during the quarter, yielding a margin of 22.3%. This compares with EBITDA of $1.4 billion, yielding a margin of 23.3%, excluding asset impairment and net restructuring and other charges, in the prior-year quarter. o Capital expenditures were $332 million as AT&T Business continues to upgrade its network and integrate its systems to further rationalize the company's cost structure, improve the customer experience and support growth in next-generation products and services. o In addition to numerous other industry accolades received during the quarter, AT&T received the "Best Customer Portal" award for its AT&T BusinessDirect(R) service from Yankee Group; and was also named "#1 U.S. IP VPN Service Provider" by In-Stat/MDR. o During the first quarter, a number of sizable customer wins and contract extensions were signed with such leading companies as Eastman Kodak, Merrill Lynch, Staples and Circuit City, among many others. AT&T Consumer o Revenue was $1.7 billion, a decline of 20.0 percent versus the prior-year first quarter, driven by lower standalone LD voice revenue resulting from the continued impact of competition as well as wireless and Internet substitution, partially offset by targeted price increases. o Operating income totaled $575 million, yielding an operating margin of 34.1 percent, compared with operating income of $371 million and an operating margin of 17.6 percent in the prior-year first quarter. Current-quarter operating income was positively impacted by a $31 million net benefit from lower depreciation as a result of the asset impairment charges taken during the third quarter of 2004. o The year-over-year margin increase reflects a dramatic reduction in sales and marketing expenses, primarily attributable to our change in strategic focus, as well as reduced bad debt and customer care expenses. In addition, targeted pricing actions contributed to the margin improvement. o At the end of the first quarter, AT&T Consumer had approximately 22.7 million standalone LD and bundled customers. OTHER CONSOLIDATED FINANCIAL HIGHLIGHTS o Free cash flow was $479 million for the quarter. Free cash flow is defined as cash flows provided by operating activities of $805 million less cash used for capital expenditures and other additions of $326 million. o AT&T ended the quarter with net debt of $5.6 billion, a $0.4 billion decrease from the end of the fourth quarter of 2004 and a $2.8 billion reduction from the prior year first quarter. Net debt is defined as total debt of $9.4 billion less cash of $3.7 billion and net foreign debt fluctuations of $0.1 billion. o Consolidated capital expenditures for the quarter were $335 million. o AT&T accepted $1.25 billion of bonds tendered in a buyback offer that the company completed in early April 2005. The buyback will reduce interest expense by $0.1 billion throughout the remainder of 2005 and will result in a second quarter pretax loss of $0.2 billion recorded in other income (expense). 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. Other Definitions and Notes EBITDA - represents operating income plus depreciation and amortization. Foreign currency fluctuations - represents mark-to-market adjustments, net of cash collateral collected, that increased the debt balance by approximately $0.1 billion at March 31, 2005, on non-U.S. denominated debt of about $0.6 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, 2005 2004 REVENUE AT&T Business $ 5,319 $ 5,872 AT&T Consumer 1,685 2,107 Corporate and Other 11 11 ---------------------------- Total Revenue 7,015 7,990 OPERATING EXPENSES Access and other connection 2,404 2,638 Costs of services and products 1,628 1,864 Selling, general and administrative 1,277 1,744 Depreciation and amortization 636 1,250 Asset impairment and net restructuring and other charges - 213 ---------------------------- Total operating expenses 5,945 7,709 Operating income 1,070 281 Other income (expense), net 30 (174) Interest (expense) (203) (228) ---------------------------- Income (loss) before income taxes and net (losses) related to equity investments 897 (121) (Provision) benefit for income taxes (368) 426 Net (losses) related to equity investments - (1) ---------------------------- Net income $ 529 $ 304 ============================ Weighted-average common shares (millions) 800 793 Weighted-average common shares and potential common shares (millions) 806 796 Earnings per basic and diluted share $ 0.66 $ 0.38 Dividends declared per share $ 0.2375 $ 0.2375
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AT&T Corp. Consolidated Statements of Operations (Unaudited) Dollars in millions (except per share amounts) 1Q05 4Q04 3Q04 2Q04 1Q04 2004 REVENUE AT&T Business $ 5,319 $ 5,454 $ 5,645 $ 5,611 $ 5,872 $22,582 AT&T Consumer 1,685 1,806 1,980 2,011 2,107 7,904 Corporate and Other 11 13 13 14 11 51 Total revenue 7,015 7,273 7,638 7,636 7,990 30,537 OPERATING EXPENSES Access and other connection 2,404 2,924 2,411 2,481 2,638 10,454 Costs of services and products 1,628 1,668 1,783 1,759 1,864 7,074 Selling, general and administrative 1,277 1,397 1,653 1,763 1,744 6,557 Depreciation and amortization 636 640 647 1,231 1,250 3,768 Asset impairment and net restructuring and other charges - 36 12,469 54 213 12,772 Total operating expenses 5,945 6,665 18,963 7,288 7,709 40,625 Operating income (loss) 1,070 608 (11,325) 348 281 (10,088) Other income (expense), net 30 28 (34) 36 (174) (144) Interest (expense) (203) (192) (192) (191) (228) (803) Income (loss) before income taxes, minority interest income and net earnings (losses) related to equity investments 897 444 (11,551) 193 (121) (11,035) (Provision) benefit for income taxes (368) (181) 4,402 (87) 426 4,560 Minority interest income - - - 1 - 1 Net earnings (losses) related to equity investments - 3 2 1 (1) 5 Net income (loss) $ 529 $ 266 $ (7,147) $ 108 $ 304 $ (6,469) Weighted-average common shares (millions) 800 797 795 794 793 795 Weighted-average common shares and potential common shares (millions) 806 803 795 797 796 795 Earnings (loss) per basic and diluted share $ 0.66 $ 0.33 $ (8.99) $ 0.14 $ 0.38 $ (8.14)
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AT&T Corp. Historical Segment Data (Unaudited) Dollars in millions 1Q05 4Q04 3Q04 2Q04 1Q04 2004 AT&T Business LD Voice $ 2,168 $ 2,163 $ 2,364 $ 2,386 $ 2,613 $ 9,526 Local Voice 371 490 390 404 389 1,673 Total Voice 2,539 2,653 2,754 2,790 3,002 11,199 Data Services 1,585 1,595 1,693 1,690 1,715 6,693 IP&E-Services 589 625 587 565 553 2,330 Total Data and IP&E-Services 2,174 2,220 2,280 2,255 2,268 9,023 Outsourcing, Professional Services & Other 606 581 611 566 602 2,360 Total revenue 5,319 5,454 5,645 5,611 5,872 22,582 Operating income (loss) (1) (5) 588 781 (11,095) 152 83 (10,079) Operating margin 11.0% 14.3% (196.5%) 2.7% 1.4% (44.6%) Capital expenditures 332 377 391 463 470 1,701 Depreciation & amortization (5) 601 607 610 1,176 1,192 3,585 Total Data and IP&E-Services - % managed 32% 33% 32% 32% 32% 32% Total Data and IP&E-Services - % international 16% 16% 15% 15% 15% 15% LD volume growth - yr/yr -3% -2% -2% 0% 2% 0% LD volume % wholesale 57% 57% 56% 54% 54% 55% - ------------------------------------------------------------------------------------------------------------------------------------ AT&T Consumer Standalone LD, Transactional and Other Services $ 1,025 $ 1,116 $ 1,256 $ 1,327 $ 1,462 $ 5,161 Bundled Services 660 690 724 684 645 2,743 Total revenue 1,685 1,806 1,980 2,011 2,107 7,904 Operating income (loss) (2) (5) (6) 575 (60) 281 240 371 832 Operating margin 34.1% (3.3%) 14.2% 11.9% 17.6% 10.5% Capital expenditures - 5 9 15 13 42 Depreciation & amortization (5) 12 13 15 33 32 93 Local customers (in thousands) 3,859 4,156 4,477 4,677 4,364 4,156 - ------------------------------------------------------------------------------------------------------------------------------------ Corporate and Other Revenue $ 11 $ 13 $ 13 $ 14 $ 11 $ 51 Operating (loss) (3) (93) (113) (511) (44) (173) (841) Capital expenditures 3 14 6 2 2 24 Depreciation & amortization 23 20 22 22 26 90 - ------------------------------------------------------------------------------------------------------------------------------------ Total AT&T Revenue $ 7,015 $ 7,273 $ 7,638 $ 7,636 $ 7,990 $30,537 Operating income (loss) (4) (6) 1,070 608 (11,325) 348 281 (10,088) Operating margin 15.3% 8.4% (148.3%) 4.6% 3.5% (33.0%) Capital expenditures 335 396 406 480 485 1,767 Depreciation & amortization (5) 636 640 647 1,231 1,250 3,768 (1) Includes asset impairment and net restructuring and other charges of $9M in 4Q04, $11,859M in 3Q04, $52M in 2Q04 and $91M in 1Q04, totaling $12,011M in 2004. (2) Includes asset impairment and net restructuring and other charges of $188M in 3Q04 and $1M in 1Q04, totaling $189M in 2004. (3) Includes asset impairment and net restructuring and other charges of $27M in 4Q04, $422M in 3Q04, $2M in 2Q04 and $121M in 1Q04, totaling $572M in 2004. (4) Includes asset impairment and net restructuring and other charges of $36M in 4Q04, $12,469M in 3Q04, $54M in 2Q04 and $213M in 1Q04, totaling $12,772M in 2004. (5) As a result of the third-quarter 2004 asset impairment charge, first-quarter 2005, fourth-quarter 2004 and third-quarter 2004 depreciation and amortization expense decreased by $533 million, $538 million and $527 million, respectively, for AT&T Business and $7 million, $8 million and $10 million, respectively, for AT&T Consumer. In addition, as a result of the transport service arrangement between AT&T Business and AT&T Consumer, network-related charges from AT&T Business (recorded as contra-expense) to AT&T Consumer were reduced by $24 million, $30 million and $28 million in the first-quarter 2005, fourth-quarter 2004 and third-quarter 2004, respectively, as a result of the lower depreciation and amortization expense recorded by AT&T Business. This resulted in a reduction in AT&T Business' operating income and an increase in AT&T Consumer's operating income. (6) Includes $553M additional prepaid card accrual in 4Q04. - ------------------------------------------------------------------------------------------------------------------------------------
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AT&T Corp. Consolidated Balance Sheets (Unaudited) Dollars in millions March 31, December 31, 2005 2004 ASSETS Cash and cash equivalents $ 3,705 $ 3,698 Accounts receivable, less allowances of $473 and $523 3,112 3,195 Deferred income taxes 1,094 1,111 Other current assets 802 1,383 ------------------------------- Total Current Assets 8,713 9,387 Property, plant and equipment, net of accumulated depreciation of $1,936 and $1,588 11,203 11,509 Goodwill 4,838 4,888 Other purchased intangible assets, net of accumulated amortization of $405 and $428 348 375 Prepaid pension costs 4,048 3,991 Other assets 2,546 2,654 ------------------------------- TOTAL ASSETS $ 31,696 $ 32,804 =============================== LIABILITIES Accounts payable and accrued expenses $ 2,626 $ 2,716 Compensation and benefit-related liabilities 1,724 2,193 Debt maturing within one year 1,982 1,886 Other current liabilities 2,603 2,293 ------------------------------- Total Current Liabilities 8,935 9,088 Long-term debt 7,468 8,779 Long-term compensation and benefit-related liabilities 3,406 3,322 Deferred income taxes 1,358 1,356 Other long-term liabilities and deferred credits 3,113 3,240 ------------------------------- Total Liabilities 24,280 25,785 ------------------------------- SHAREOWNERS' EQUITY Common Stock, $1 par value, authorized 2,500,000,000 shares; issued and outstanding 800,823,621 shares (net of 171,983,367 treasury shares) at March 31, 2005 and 798,570,623 shares (net of 171,983,367 treasury shares) at December 31, 2004 801 799 Additional paid-in capital 27,049 27,170 Accumulated deficit (20,651) (21,180) Accumulated other comprehensive income 217 230 ------------------------------- Total Shareowners' Equity 7,416 7,019 ------------------------------- TOTAL LIABILITIES & SHAREOWNERS' EQUITY $ 31,696 $ 32,804 =============================== - --------------------------------------------------------------------------------
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AT&T Corp. Consolidated Statements of Cash Flows (Unaudited) Dollars in millions Three Months Ended March 31, 2005 2004 Operating Activities Net income $ 529 $ 304 Adjustments to reconcile net income to net cash provided by operating activities: Net losses (gains) on sales of businesses and investments 9 (11) Loss on early extinguishment of debt - 274 Asset impairment and net restructuring and other charges - 201 Depreciation and amortization 636 1,250 Provision for uncollectible receivables 48 146 Deferred income taxes 21 (295) (Increase) decrease in receivables (126) 18 (Decrease) increase in accounts payable and accrued expenses (140) 7 Net change in other operating assets and liabilities (146) (443) Other adjustments, net (26) (102) ----------------------- Net Cash Provided by Operating Activities 805 1,349 ----------------------- Investing Activities Capital expenditures and other additions (326) (546) Proceeds from sale or disposal of property, plant and equipment 5 9 Investment distributions and sales 7 14 Net dispositions of businesses, net of cash disposed - 8 Decrease (increase) in restricted cash 546 (2) Other investing activities, net 8 10 ----------------------- Net Cash Provided by (Used in) Investing Activities 240 (507) ----------------------- Financing Activities Retirement of long-term debt, including redemption premiums (1,032) (2,781) (Decrease) increase in short-term borrowings, net (98) 35 Issuance of AT&T common shares 32 22 Dividends paid on common stock (190) (188) Other financing activities, net 250 295 ----------------------- Net Cash (Used in) Financing Activities (1,038) (2,617) ----------------------- Net increase (decrease) in cash and cash equivalents 7 (1,775) Cash and cash equivalents at beginning of year 3,698 4,353 ----------------------- Cash and Cash Equivalents at End of Period $ 3,705 $ 2,578 ======================= - ------------------------------------------------------------------------------------------------------------------------------------
Reconciliation of Non-GAAP Measures AT&T is providing information on net debt, EBITDA and related margins, and free cash flows because these measures are commonly used by the investment community for evaluation purposes. Net debt, EBITDA, and free cash flows should be considered in addition to, but not in lieu of, other measures of liquidity, profitability and cash flows reported in accordance with generally accepted accounting principles. Additionally, they may not be comparable to similarly captioned measures reported by other companies. Net Debt - --------------------------------------------------------------------------------
Net debt is defined as total debt, less cash and net foreign debt fluctuations: (dollars in millions) March 31, 2005 Total debt $9,450 Less: Cash 3,705 Foreign debt fluctuations 144 -------------- Net debt $5,601 ============== - --------------------------------------------------------------------------------
AT&T Business EBITDA, Excluding Asset Impairment and Net Restructuring and Other Charges, to Operating Income - --------------------------------------------------------------------------------
(dollars in millions) For the three months ended March 31, 2005 March 31, 2004 EBITDA and margin (1) $1,189 22.3% $1,366 23.3% Depreciation and amortization (601) (1,192) Asset impairment and net restructuring and other charges - (91) -------------- -------------- Operating income and margin $588 11.0% $83 1.4% ============== ============== - -------------------------------------------------------------------------------- (1) Excluding asset impairment and net restructuring and other charges.
Reconciliation of Non-GAAP Measures EBITDA, Excluding Asset Impairment and Net Restructuring and Other Charges, to Net Income - --------------------------------------------------------------------------------
(dollars in millions) For the three months ended March 31, March 31, 2005 2004 EBITDA margin (1) 24.3% 21.8% EBITDA (1) $1,706 $1,744 Depreciation and amortization (636) (1,250) Asset impairment and net restructuring and other charges - (213) --------- --------- Subtotal operating income $1,070 $ 281 --------- --------- Other income (expense), net 30 (174) Interest (expense) (203) (228) (Provision) benefit for income taxes (368) 426 Net (losses) related to equity investments - (1) --------- --------- Net income $ 529 $ 304 ========= ========= (1) Excluding asset impairment and net restructuring and other charges. - --------------------------------------------------------------------------------
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 888-428-4480 to access the call. Callers outside the U.S. should dial + 1-612-332-0630. 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 21 through 12:00AM on Tuesday, April 27. To access the audio rebroadcast, U.S. callers can dial 800-475-6701, access code 763283. Callers outside the U.S. should dial +1-320-365-3844, access code 763283. 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. # # # -----END PRIVACY-ENHANCED MESSAGE-----