EX-99 2 form8k042006ex99a.htm EXHIBIT 99-A

Exhibit 99-a

 

For Immediate Release

April 20, 2006

 

BellSouth Reports First Quarter Earnings

 

•

Normalized earnings per share of 54 cents, up 20 percent

 

•

Record DSL net additions, 3.1 million total DSL customers

 

•

Strong customer growth, revenue and margin from Cingular

 

ATLANTA – BellSouth Corporation (NYSE: BLS) announced first quarter 2006 earnings per share (EPS) from continuing operations of 43 cents, up 16 percent compared to the first quarter of 2005. Normalized EPS from continuing operations was 54 cents, a 20 percent increase compared to the first quarter of 2005. A list of normalizing items is provided in the table below.

 

“BellSouth’s strong earnings growth reflects improving trends in our operating results,” said Duane Ackerman, Chairman and Chief Executive Officer. “During the quarter, our revenue growth was driven by the addition of broadband and wireless customers, which demonstrated the strength of our portfolio in the marketplace.”

 

Normalized Results from Continuing Operations

Normalized results from continuing operations include BellSouth’s 40 percent proportionate share of Cingular’s revenues and expenses which are recognized as equity earnings for purposes of GAAP reporting. Normalized results also exclude the impact of significant nonoperational or nonrecurring items.

 

For the first quarter of 2006, normalized revenue was $8.7 billion, up 4.5 percent year-over-year generated by growth in Communications Group, Cingular and Advertising & Publishing. Operating margins were 21.9 percent, improving year-over-year and sequentially. Normalized net income of $983 million grew 20 percent compared to the first quarter of 2005 driven primarily by Cingular’s improved profitability.

 

Reported Results from Continuing Operations

For the first quarter of 2006, BellSouth’s consolidated reported revenue from continuing operations totaled $5.2 billion, up 1.6 percent compared to the same quarter of 2005. Income from continuing operations was $784 million compared to $683 million in the same quarter of the previous year.

 

 


 

 

For the first quarter of 2006, operating free cash flow (defined as net cash provided by operating activities less capital expenditures) was $551 million. Capital expenditures for the quarter amounted to $1.08 billion, including approximately $135 million of incremental expenditures for Katrina restoration efforts. Net of storm impacts, increased levels of capital expenditures were driven by planned 2006 acceleration of broadband investments toward the first half of the year.

 

Proposed Merger with AT&T

On March 5, 2006, BellSouth and AT&T announced an agreement to merge the two companies in a combination that will create a more effective and efficient provider of wireless, broadband, video, voice and data products. We currently expect the merger to close by the end of 2006.

 

The combination creates economies of scale to better enable investments in new technologies and to pursue opportunities in the broadband and enterprise markets, including integration of wireline/wireless product offerings. The combination of the two companies is expected to create enhanced marketing opportunities, significant network synergies and reduced overhead costs. The merger with AT&T is an excellent opportunity to take two complementary asset portfolios and make them stronger to benefit shareholders, customers and employees.

 

“To be successful in the marketplace, a company must innovate and deliver new services that customers want,” said Duane Ackerman. “The proposed merger of AT&T and BellSouth will create new potential for innovation and the ability to deliver those services with a more cost efficient operating structure. The communications industry is a world full of possibilities, and I believe that we now stand at the beginning of a great new day for communications in America.”

 

 


 

 

Communications Group

Communications Group revenue was $4.7 billion in the first quarter of 2006, a 1.3 percent increase compared to the same quarter of 2005. All retail business segments delivered improving revenue trends both year-over-year and sequentially driven by strong growth from data and long distance.

 

During the first quarter, BellSouth added a record 263,000 net new broadband DSL customers and served more than 3.1 million total customers at quarter-end. BellSouth offers four FastAccess services with simple pricing to meet market demand for a variety of speeds and prices. The company continues to see growth in demand and migrations towards higher speeds of DSL service. With improving churn and stable average revenue per unit, DSL continues to be a key value driver for BellSouth.

 

For the first quarter, network data revenue was $1.3 billion, up 9.0 percent from the same period of the prior year. Retail data revenue grew 15.8 percent from the same period last year driven by a 31.8 percent increase in retail DSL revenue and ongoing growth in revenue from emerging retail data services such as BellSouth® Metro Ethernet Service and BellSouth® Virtual Private Network. Total wholesale data was stable as demand for wholesale services from wireless carriers remained strong.

 

Customers continue to combine local and long distance voice, DSL, DIRECTV® and Cingular Wireless under the BellSouth Answers® bundles. BellSouth added 179,000 long distance customers and now serves almost 7.4 million long distance customers, a 59 percent penetration of its mass-market customer base. Once again, the company had strong growth in customers choosing to add DIRECTV® service to their BellSouth bundles, adding 105,000 customers. Through the first quarter of this year, 628,000 customers have included DIRECTV® service in their communications packages. By the end of first quarter 2006, more than 5 million residential customers had a BellSouth Answers® bundle, nearly 45 percent penetration of its retail residential lines.

 

As of March 31, 2006, total access lines were 19.8 million, down 238,000 compared to Dec. 31, 2005. Residential access line loss continues to be primarily driven by wireless substitution and, to a lesser extent, by competition from cable telephony providers. Retail residential access lines were down 120,000. Retail business access lines increased 21,000 driven by Small Business gains. Wholesale lines resold by BellSouth competitors were down 137,000 compared to Dec. 31, 2005.

 

Communications Group operating margin was 23.6 percent compared to 24.2 percent for the same quarter of the previous year. Margins were negatively impacted as the company incurred approximately $85 million in incremental expenses completing the network repairs associated with damage caused by Hurricane Wilma which struck southern Florida in late October 2005.

 

 


 

 

Summary Impacts of Hurricane Katrina

During the first quarter of 2006, BellSouth recognized incremental expenses associated with Hurricane Katrina of $94 million which is net of $20 million in insurance recoveries during the quarter. BellSouth also incurred approximately $135 million of incremental capital expenditures for Katrina restoration. Since the third quarter of 2005, BellSouth has incurred approximately $730 million for Katrina-related network restoration expense and capital spending. We expect a portion of the cost associated with the Hurricane Katrina recovery effort to be covered by insurance. While the exact amount has not been determined, our current estimate of the total amount of covered losses that will be covered by insurance, net of our deductible, is approximately $250 million. The actual recovery will vary depending on the outcome of the insurance loss adjustment effort.

 

 

Cingular Wireless

Cingular Wireless was the primary contributor to BellSouth’s earnings growth in the first quarter of 2006 as the benefits of scale and synergies created in its acquisition of AT&T Wireless are being realized. Cingular, the nation’s largest wireless provider, added 1.7 million net new customers during the first quarter of 2006, reaching 55.8 million total subscribers. Retail customer additions were 1.05 million for the quarter with nearly 90 percent coming from post-paid net additions. Overall monthly subscriber churn for the quarter was 1.9 percent, the lowest level ever, and post-paid churn also improved to a record 1.6 percent.

 

Cingular’s continued strong performance in customer additions and churn improvement can be attributed to improved service quality as the company integrates its networks, marketing campaigns that reinforce service improvements including “fewest dropped calls,” and a steady stream of innovative products and services.

 

In the first quarter of 2006, Cingular's revenues were $9.0 billion, an improvement of 9.1 percent over the same quarter a year ago and up 1.5 percent sequentially.

 

Average revenue per user (ARPU) in the first quarter of 2006 was $48.48, down 2.3 percent from the year-ago first quarter. The decline in ARPU can be primarily attributed to the recent increase in reseller customers, which typically carry a lower ARPU. Excluding the impacts of growth in reseller customers, Cingular ARPU improved year-over-year driven by growth in data services. Data ARPU continued its strong growth in the first quarter of 2006, increasing 41.1 percent to $5.22 compared to the first quarter of the previous year and up 10.8 percent sequentially.

 

For the first quarter of 2006, normalized operating income before depreciation and amortization (OIBDA) margin was 31.9 percent, which was a 640 basis point improvement compared to the first quarter of 2005. Cingular’s steady margin improvement is indicative of progress on its integration plans.

 

 


 

 

Advertising & Publishing

Reflecting continued momentum in the business, Advertising & Publishing revenue grew in the first quarter of 2006. Revenue was $506 million, up 3 percent compared to the same quarter of 2005 driven by growth in both print and online advertising services. Operating margins remained strong at 44.7 percent for the first quarter of 2006.

 

Normalizing Items

For the first quarter of 2006, the difference between reported (GAAP) EPS from continuing operations and normalized EPS is shown in the following table. A full income statement reconciliation is included in the attached exhibits.

 

 

 

1Q06

GAAP Diluted EPS – Income from continuing operations

 

$0.43

 

 

 

Hurricane Katrina-related expenses

 

$0.03

Wireless merger integration costs

 

$0.03

Wireless merger intangible amortization

 

$0.05

 

 

 

Normalized Diluted EPS – Income from continuing operations

 

$0.54

 

 

Hurricane Katrina-related expenses – Represents incremental labor and material costs primarily related to service restoration and network repairs in BellSouth’s wireline business. These expenses have been reduced by partial insurance recoveries during the first quarter.

 

Wireless merger integration costs – Represents BellSouth’s 40 percent share of wireless merger integration costs incurred in connection with the Cingular/AT&T Wireless merger. Integration costs include one-time cash outlays or specified non-cash charges, including accelerated depreciation, directly related to rationalization of the wireless network, sales distribution channels, the workforce, information technology systems and real estate.

 

Wireless merger intangible amortization – Represents BellSouth's 40 percent share of the non-cash amortization of intangibles, primarily customer lists, that were created in Cingular's acquisition of AT&T Wireless.

 

 


 

 

About BellSouth Corporation

 

BellSouth Corporation is a Fortune 500 communications company headquartered in Atlanta, Georgia. BellSouth has joint control and 40 percent ownership of Cingular Wireless, the nation's largest wireless voice and data provider with 55.8 million customers.

 

Backed by award-winning customer service, BellSouth offers the most comprehensive and innovative package of voice and data services available in the market. Through BellSouth Answers®, residential and small business customers can bundle their local and long distance service with dial-up and high-speed DSL Internet access, satellite television and Cingular® Wireless service. For businesses, BellSouth provides secure, reliable local and long distance voice and data networking solutions. BellSouth also offers print and online directory advertising through The Real Yellow Pages® and YELLOWPAGES.COM™ from BellSouth.

 

BellSouth believes that diversity and fostering an inclusive environment are critical in maintaining a competitive advantage in today's global marketplace. More information about BellSouth can be found at http://www.bellsouth.com. Investor information can be found at http://www.bellsouth.com/investor.

 

Further information about BellSouth and Cingular’s first quarter earnings can be accessed at www.bellsouth.com/investor. The press release, financial statements and Investor News summarizing highlights of the quarter are available at www.bellsouth.com/investor starting today at 8 a.m. Eastern Time (ET).

 

BellSouth will host a conference call with investors today at 10 a.m. (ET).

Dial-in information for the conference call is as follows:

Domestic: 888-370-1863

International: 706-634-1735

 

The conference call will also be webcast live beginning at 10 a.m. (ET) on our Web site at www.bellsouth.com/investor. The webcast will be archived on our Web site.

 

A replay of the call will be available through April 27, 2006, and can be accessed by dialing:

Domestic: 800-642-1687 - Conference ID: 7031218

International: 706-645-9291 - Conference ID: 7031218

 

 

For More Information Contact:

Brent Fowler, Media Relations at 404-249-2839

BellSouth Investor Relations at 800-241-3419

 

 


 

 

In addition to historical information, this document may contain forward-looking statements regarding events and financial trends. Factors that could affect our future results and could cause our actual results to differ materially from those expressed or implied in the forward-looking statements include: (i) a change in economic conditions in markets where we operate or have material investments which would affect demand for our services; (ii) the intensity of competitive activity and its resulting impact on pricing strategies and new product offerings; (iii) higher than anticipated cash requirements for investments, new business initiatives and acquisitions; (iv) unfavorable regulatory actions and (v) those factors contained in the Company's periodic reports.

 

Factors that could prevent or delay completion of the proposed merger with AT&T, could affect the future results of the merged company and could cause the merged company’s actual results to differ from those expressed in the forward-looking statements include: (i) our and AT&T’s ability to obtain governmental approvals of the proposed merger on the proposed terms and contemplated schedule; (ii) the failure of AT&T shareholders to approve the issuance of AT&T common shares in the merger or the failure of our shareholders to approve the merger; (iii) the risk that the businesses of AT&T and BellSouth will not be integrated successfully or as quickly as expected; (iv) the risk that the cost savings and any other synergies from the merger, including any savings and other synergies relating to the resulting sole ownership of Cingular Wireless LLC, may not be fully realized or may take longer to realize than expected; (v) disruption from the merger making it more difficult to maintain relationships with customers, employees or suppliers; and (vi) those factors contained in the preliminary proxy statement relating to the proposed merger filed with the SEC.

 

The forward-looking information in this document is given as of this date only, and BellSouth assumes no duty to update this information.

This document may also contain certain non-GAAP financial measures. The most directly comparable GAAP financial measures, and a full reconciliation of non-GAAP to GAAP financial information, are attached hereto and provided on the Company's investor relations website, www.bellsouth.com/investor.

NOTE: In connection with the proposed merger, AT&T Inc. (“AT&T”) filed a registration statement on Form S-4 (Registration No. 333-132904), containing a joint proxy statement/prospectus of AT&T and BellSouth Corporation (“BellSouth”), with the Securities and Exchange Commission (the “SEC”) on March 31, 2006. Investors are urged to read the registration statement and the joint proxy statement/prospectus contained therein (including all amendments and supplements to it) because it contains important information. Investors may obtain free copies of the registration statement and joint proxy statement/prospectus, as well as other filings containing information about AT&T and BellSouth, without charge, at the SEC’s Web site ( www.sec.gov). Copies of AT&T’s filings may also be obtained without charge from AT&T at AT&T’s Web site ( www.att.com) or by directing a request to AT&T Inc. Stockholder Services, 175 E. Houston, San Antonio, Texas 78205. Copies of BellSouth’s filings may be obtained without charge from BellSouth at BellSouth’s Web site (www.bellsouth.com) or by directing a request to BellSouth at Investor Relations, 1155 Peachtree Street, N.E., Atlanta, Georgia 30309.

 

AT&T, BellSouth and their respective directors and executive officers and other members of management and employees are potential participants in the solicitation of proxies in respect of the proposed merger. Information regarding AT&T’s directors and executive officers is available in AT&T’s 2005 Annual Report on Form 10-K filed with the SEC on March 1, 2006 and AT&T’s proxy statement for its 2006 annual meeting of stockholders, filed with the SEC on March 10, 2006, and information regarding BellSouth’s directors and executive officers is available in BellSouth’s 2005 Annual Report on Form 10-K filed with the SEC on February 28, 2006 and BellSouth’s proxy statement for its 2006 annual meeting of shareholders, filed with the SEC on March 3, 2006. Additional information regarding the interests of such potential participants is included in the registration statement and joint proxy statement/prospectus contained therein, and other relevant documents filed with the SEC.

 

 


 

 

 

BellSouth Corporation

Consolidated Statements of Income - Reported Basis (unaudited)

(amounts in millions, except per share data)

Note to Readers: See Normalization Earnings Summary and Reconciliation to GAAP results on pages 3 and 4 for a summary of unusual items included in Reported Basis results.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1Q06

1Q05

Growth

4Q05

Growth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Revenues

 

 

 

 

 

 

 

 

Communications group

 

$4,653

$4,593

1.3%

$4,702

-1.0%

 

 

Advertising and publishing

 

503

488

3.1%

525

-4.2%

 

 

All other

 

15

10

50.0%

15

0.0%

 

 

 

Total Operating Revenues

 

5,171

5,091

1.6%

5,242

-1.4%

 

Operating Expenses

 

 

 

 

 

 

 

 

Cost of services and products

 

2,122

1,920

10.5%

2,205

-3.8%

 

 

Selling, general & administrative expenses

 

918

894

2.7%

1,040

-11.7%

 

 

Depreciation and amortization

 

893

918

-2.7%

905

-1.3%

 

 

Provision for restructuring and asset impairments

 

(8)

7

*

95

*

 

 

 

Total Operating Expenses

 

3,925

3,739

5.0%

4,245

-7.5%

 

Operating Income

 

1,246

1,352

-7.8%

997

25.0%

 

Interest Expense

 

279

291

-4.1%

274

1.8%

 

Other Income (Expense), net

 

194

(24)

*

144

34.7%

 

Income from Continuing Operations before Income

 

 

 

 

 

 

 

Taxes

 

1,161

1,037

12.0%

867

33.9%

 

Provision for Income Taxes

 

377

354

6.5%

249

51.4%

 

Income from Continuing Operations

 

784

683

14.8%

618

26.9%

 

Income (Loss) from Discontinued Operations, net of tax

 

-

381

*

-

*

 

 

 

Net Income

 

$784

$1,064

-26.3%

$618

26.9%

 

Diluted:

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding

 

1,804

1,836

-1.7%

1,818

-0.8%

 

 

Earnings Per Share:

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

$0.43

$0.37

16.2%

$0.34

26.5%

 

 

Income from Discontinued Operations

 

$0.00

$0.21

*

$0.00

*

 

 

Net Income

 

$0.43

$0.58

-25.9%

$0.34

26.5%

 

* - Not meaningful.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Financial and Operating Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$1,246

$1,352

-7.8%

$997

25.0%

 

Operating margin

 

24.1%

26.6%

-250 bps

19.0%

510 bps

 

 

 

 

 

 

 

 

 

 

 

Declared dividends per share

 

$0.29

$0.27

7.4%

$0.29

0.0%

 

 

 

 

 

 

 

 

 

Capital expenditures excluding Hurricane Katrina

 

$945

$750

26.0%

$803

17.7%

 

Total capital expenditures

 

$1,081

$750

44.1%

$992

9.0%

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding

 

1,807

1,831

-1.3%

1,798

0.5%

 

Book value per share

 

$13.33

$12.93

3.1%

$13.09

1.8%

 

 

 

 


 

 

BellSouth Corporation

Consolidated Statements of Income - Normalized Basis (unaudited)

(amounts in millions, except per share data)

Note to Readers: Our reported results, as shown on page 1, are prepared in accordance with generally accepted accounting principles (GAAP). The normalized results presented below exclude the impact of certain non-recurring or non-operating items, the details of which are provided on pages 3 and 4 of this release. In addition, the normalized results reflect our 40% proportionate share of Cingular's results, the presentation of which is not allowed under GAAP. Normalized results exclude discontinued operations from all periods. Certain reclassifications have been made to prior periods to conform to the current presentation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1Q06

1Q05

Growth

4Q05

Growth

 

 

 

 

 

 

 

 

 

 

 

Operating Revenues

 

 

 

 

 

 

 

 

Communications group

 

$4,574

$4,521

1.2%

$4,576

0.0%

 

 

Wireless

 

3,592

3,292

9.1%

3,539

1.5%

 

 

Advertising and publishing

 

503

488

3.1%

525

-4.2%

 

 

All other

 

15

10

50.0%

16

-6.3%

 

 

 

Total Operating Revenues

 

8,684

8,311

4.5%

8,656

0.3%

 

Operating Expenses

 

 

 

 

 

 

 

 

Cost of services and products

 

3,406

3,231

5.4%

3,370

1.1%

 

 

Selling, general, & administrative expenses

 

2,024

2,053

-1.4%

2,135

-5.2%

 

 

Depreciation and amortization

 

1,354

1,392

-2.7%

1,359

-0.4%

 

 

 

Total Operating Expenses

 

6,784

6,676

1.6%

6,864

-1.2%

 

Operating Income

 

1,900

1,635

16.2%

1,792

6.0%

 

Interest Expense

 

381

403

-5.5%

377

1.1%

 

Other Income (Expense), net

 

23

74

-68.9%

48

-52.1%

 

Income Before Income Taxes

 

1,542

1,306

18.1%

1,463

5.4%

 

Provision for Income Taxes

 

559

488

14.5%

498

12.2%

 

 

 

Net Income

 

$983

$818

20.2%

$965

1.9%

 

Diluted:

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding

 

1,804

1,836

-1.7%

1,818

-0.8%

 

 

Earnings Per Share

 

$0.54

$0.45

20.0%

$0.53

1.9%

 

* - Not meaningful.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Financial and Operating Data

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$1,900

$1,635

16.2%

$1,792

6.0%

 

Operating margin

 

21.9%

19.7%

220 bps

20.7%

120 bps

 

 

 

 

 

 

 

 

 

 

 

Declared dividends per share

 

$0.29

$0.27

7.4%

$0.29

0.0%

 

 

 

 

 

 

 

 

 

Capital expenditures excluding Hurricane Katrina

 

$945

$750

26.0%

$803

17.7%

 

Total capital expenditures

 

$1,081

$750

44.1%

$992

9.0%

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding

 

1,807

1,831

-1.3%

1,798

0.5%

 

Book value per share

 

$13.33

$12.93

3.1%

$13.09

1.8%

 

Total employees

 

62,979

62,636

0.5%

63,066

-0.1%

 

 

 


 

 

 

BellSouth Corporation

Normalized Earnings Summary and Reconciliation to Reported Results

(amounts in millions, except per share data)

First Quarter 2006

 

 

Normalizing Items

 

 

 

 

 

 

Discon-

Contin-

 

Wireless

Wireless

Hurri-

 

 

 

 

 

 

tinued

uing

 

Merger

Merger

cane-

 

 

 

 

 

 

Opera-

Opera-

 

Integration

Intangible

related

 

 

 

 

 

 

tions

tions

Cingular

Costs

Amort.

Expenses

 

 

 

 

 

GAAP

A

(GAAP-A)

B

C

D

E

Normalized

 

 

 

 

 

 

 

 

 

 

Operating Revenues

 

$5,171

$-

$5,171

$3,513

$- 

$-

$- 

$8,684

Operating Expenses

 

3,925

-

3,925

3,190

(94)

(143)

(94)

6,784

Operating Income

 

1,246

-

1,246

323

94

143

94

1,900

Interest Expense

 

279

-

279

102

-

-

-

381

Other Income (Expense), net

 

194

-

194

(171)

-

-

-

23

Income from Continuing  Operations before Income Taxes 

 

1,161

-

1,161

50

94

143

94

1,542

Provision for Income Taxes

 

377

-

377

50

38

58

36

559

Income from Continuing Operations

 

784

-

784

-

56

85

58

983

Income (Loss) from  Discontinued Operations,  net of tax

 

-

-

-

-

-

-

-

-

 

Net Income

 

$784

$0

$784

$0

$56

$85

$58

$983

Diluted Earnings Per  Share

 

$0.43

$-

$0.43

$-

$0.03

$0.05

$0.03

$0.54

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

 

BellSouth Corporation

Normalized Earnings Summary and Reconciliation to Reported Results

(amounts in millions, except per share data)

 

 

 

 

 

 

 

 

 

 

 

First Quarter 2005

 

 

 

 

Normalizing Items

 

 

 

 

 

 

Discon-

Contin-

 

Wireless

Wireless

 

 

 

 

 

 

 

tinued

uing

 

Merger

Merger

Debt

 

 

 

 

 

 

Opera-

Opera-

 

Integration

Intangible

Exting.

 

 

 

 

 

 

tions

tions

Cingular

Costs

Amort.

Costs

 

 

 

 

 

GAAP

A

(GAAP-A)

B

C

D

F

Normalized

 

 

 

 

 

 

 

 

 

 

Operating Revenues

 

$5,091

$-

$5,091

$3,220

$-

$- 

$- 

$8,311

Operating Expenses

 

3,739

-

3,739

3,175

(42)

(196)

-

6,676

Operating Income

 

1,352

-

1,352

45

42

196

-

1,635

Interest Expense

 

291

-

291

112

-

-

-

403

Other Income (Expense), net

 

(24)

-

(24)

76

-

-

22

74

Income from Continuing  Operations before Income  Taxes 

 

1,037

-

1,037

9

42

196

22

1,306

Provision for Income Taxes

 

354

-

354

9

21

96

8

488

Income from Continuing  Operations

 

683

-

683

-

21

100

14

818

Income (Loss) from  Discontinued  Operations,  net of tax

 

381

(381)

-

-

-

-

-

-

 

Net Income

 

$1,064

($381)

$683

$-

$21

$100

$14

$818

Diluted Earnings Per Share

 

$0.58

($0.21)

$0.37

$-

$0.01

$0.06

$0.01

$0.45

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

 

BellSouth Corporation

Notes to Normalized Financial and Operating Data (pages 3 and 4)

(amounts in millions, except per share data)

 

Our normalized earnings have been adjusted for the following:

 

 

(a)

Discontinued Operations - In March 2004, we announced our intention to sell our 10 Latin American properties. Accordingly, results of the Latin American operations are shown as Discontinued Operations and thus excluded from normalized results. The 1st quarter 2005 results include an after-tax gain of $390 related to the final 2 properties that were closed in January.

 

 

(b)

The periods presented have been adjusted to include our 40% proportional share of Cingular Wireless' operating results, net of eliminations for amounts charged by other BellSouth companies to Cingular.

 

 

(c)

Wireless Merger Integration Costs – Represents BellSouth’s 40% share of wireless merger integration costs incurred in connection with the Cingular/AT&T Wireless merger. Integration costs include one-time cash outlays or specified non-cash charges, including accelerated depreciation, directly related to rationalization of the wireless network, sales distribution channels, the workforce, information technology systems and real estate.

 

 

(d)

Wireless Merger Intangible Amortization – Represents BellSouth’s 40% share of the non-cash amortization of intangibles, primarily customer lists, that were created in Cingular’s acquisition of AT&T Wireless.

 

 

(e)

Hurricane Katrina-related Expenses - Represents incremental labor and material costs primarily related to service restoration and network repairs in BellSouth's wireline business. These expenses have been reduced by partial insurance recoveries during the 1st quarter of 2006.

 

 

(f)

Debt Extinguishment Costs - Represents one-time expenses associated with the early extinguishment of $400 of long-term debt in the 1st quarter of 2005.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

 

BellSouth Corporation

Consolidated Balance Sheets (unaudited)

(amounts in millions, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

Dec. 31,

 

Change vs.

 

 

 

 

 

2006

 

2005

 

Prior Year

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$247

 

$427

 

($180)

 

 

Short-term investments

 

54

 

-

 

54

 

 

Accounts receivable, net of allowance for uncollectibles of  $281 and $289

 

2,409

 

2,555

 

(146)

 

 

Material and supplies

 

412

 

385

 

27

 

 

Other current assets

 

982

 

842

 

140

 

 

 

Total Current Assets

 

4,104

 

4,209

 

(105)

 

 

 

 

 

 

 

 

 

Investment in and advances to Cingular Wireless

 

21,882

 

21,274

 

608

 

Property, plant and equipment, net

 

21,870

 

21,723

 

147

 

Other assets

 

8,199

 

7,814

 

385

 

Intangible assets, net

 

1,595

 

1,533

 

62

 

Total Assets

 

$57,650

 

$56,553

 

$1,097

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Debt maturing within one year

 

$4,408

 

$4,109

 

$299

 

 

Accounts payable

 

1,041

 

1,040

 

1

 

 

Other current liabilities

 

3,686

 

3,505

 

181

 

 

 

Total Current Liabilities

 

9,135

 

8,654

 

481

 

 

 

 

 

 

 

 

 

Long-Term Debt

 

13,062

 

13,079

 

(17)

 

 

 

 

 

 

 

 

 

Noncurrent Liabilities:

 

 

 

 

 

 

 

 

Deferred income taxes

 

6,727

 

6,607

 

120

 

 

Other noncurrent liabilities

 

4,641

 

4,679

 

(38)

 

 

 

Total Noncurrent Liabilities

 

11,368

 

11,286

 

82

 

 

 

 

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

 

 

 

Common stock, $1 par value

 

2,020

 

2,020

 

-

 

 

Paid-in capital

 

7,931

 

7,960

 

(29)

 

 

Retained earnings

 

20,612

 

20,383

 

229

 

 

Accumulated other comprehensive income

 

32

 

(14)

 

46

 

 

Shares held in trust and treasury

 

(6,510)

 

(6,815)

 

305

 

 

 

Total Shareholders’ Equity

 

24,085

 

23,534

 

551

 

Total Liabilities and Shareholders’ Equity

 

$57,650

 

$56,553

 

$1,097

 

 

 

 


 

 

BellSouth Corporation

Consolidated Statements of Cash Flows (unaudited)

(amounts in millions, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1Q06

1Q05

4Q05

 

 

 

 

 

 

 

 

 

Cash Flows from Operating Activities:

 

 

 

 

 

Income from Continuing Operations

 

$784

$683

$618

 

Adjustments to income from continuing operations:

 

 

 

 

 

 

Depreciation and amortization

 

893

918

905

 

 

Provision for uncollectibles

 

87

85

90

 

 

Net losses (earnings) of equity affiliates

 

(139)

80

(80)

 

 

Deferred income taxes

 

59

(45)

255

 

 

Pension income

 

(130)

(133)

(133)

 

 

Stock-settled compensation expense

 

17

25

24

 

 

Loss on extinguishment of debt

 

-

22

-

 

Net change in:

 

 

 

 

 

 

Accounts receivable and other current assets

 

(79)

(84)

(179)

 

 

Accounts payable and other current liabilities

 

78

23

(781)

 

 

Deferred charges and other assets

 

(23)

20

(49)

 

 

Other liabilities and deferred credits

 

78

103

103

 

Other reconciling items, net

 

7

(5)

1

 

 

Net cash provided by operating activities

 

1,632

1,692

774

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

Capital expenditures

 

(1,081)

(750)

(992)

 

Purchase of short-term investments

 

(308)

(186)

(789)

 

Proceeds from sale of short-term investments

 

254

202

1,155

 

Investments in debt and equity securities

 

(200)

(32)

(129)

 

Net (advances to) repayments from Cingular

 

(466)

400

(109)

 

Proceeds from sale of securities and operations

 

 

929

42

 

Other investing activities, net

 

(12)

(3)

11

 

 

Net cash provided by (used for) investing activities

 

(1,813)

560

(811)

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

Net borrowings (repayments) of short-term debt

 

713

(1,074)

247

 

Repayments of long-term debt

 

(417)

(662)

(13)

 

Dividends paid

 

(521)

(494)

(531)

 

Purchase of treasury shares

 

(50)

(77)

(959)

 

Proceeds from issuing common stock

 

260

19

55

 

Other financing activities, net

 

16

(13)

1

 

 

Net cash used for financing activities

 

1

(2,301)

(1,200)

 

 

 

 

 

 

 

Net Increase/(Decrease) in Cash from Continuing Operations

 

(180)

(49)

(1,237)

 

Net Increase/(Decrease) in Cash from Discontinued Operations

 

-

(115)

-

 

 

Net Increase/(Decrease) in Cash and Cash Equivalents

 

(180)

(164)

(1,237)

 

Cash and Cash Equivalents at Beginning of Period

 

427

680

1,664

 

Cash and Cash Equivalents at End of Period

 

$247

$516

$427

 

 

 


 

 

 

BellSouth Corporation

Results by Segment (amounts in millions) (unaudited)

 

 

Communications Group(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1Q06

1Q05

Growth

4Q05

Growth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Revenues

 

 

 

 

 

 

 

 

Voice

 

$3,129

$3,154

-0.8%

$3,131

-0.1%

 

 

Data

 

1,264

1,160

9.0%

1,252

1.0%

 

 

Other    

 

286

304

-5.9%

298

-4.0%

 

 

 

Total Operating Revenues

 

4,679

4,618 

1.3%

4,681

0.0%

 

Operating Expenses

 

 

 

 

 

 

 

 

Cost of services and products

 

1,959

1,853

5.7%

1,908

2.7%

 

 

Selling, general, & administrative expenses

 

729

738

-1.2%

847

-13.9%

 

 

Depreciation and amortization

 

886

910

-2.6%

899

-1.4%

 

 

 

Total Operating Expenses

 

3,574

3,501

2.1%

3,654

-2.2%

 

Segment Operating Income

 

1,105

1,117

-1.1%

1,027

7.6%

 

Interest Expense

 

107

98

9.2%

99

8.1%

 

Other Income (Expense), net

 

7

11

-36.4%

23

-69.6%

 

Income Before Income Taxes 

 

1,005

1,030

-2.4%

951

5.7%

 

Provision for Income Taxes

 

351

366

-4.1%

343

2.3%

 

 

 

Segment Net Income (1)

 

$654

$664

-1.5%

$608

7.6%

 

* - Not meaningful.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Financial and Operating Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(amounts in millions)

 

 

 

 

 

 

 

Segment operating income

 

$1,105

$1,117

-1.1%

$1,027

7.6%

 

Segment operating margin

 

23.6%

24.2%

-60 bps

21.9%

170 bps

 

 

 

 

 

 

 

 

 

 

 

DSL revenues

 

$382

$293

30.4%

$353

8.2%

 

Long distance revenues

 

$639

$578

10.6%

$630

1.4%

 

 

 

 

 

 

 

 

 

 

 

Switched Access MOUs

 

15,324

16,130

-5.0%

15,310

0.1%

 

BSLD MOUs

 

6,626

6,011

10.2%

6,539

1.3%

 

 

Total Access minutes of use

 

21,950

22,141

-0.9%

21,849

0.5%

 

 

 

 

 

 

 

 

 

Capital expenditures excluding Hurricane Katrina

 

$936

$742

26.1%

$794

17.9%

 

Total capital expenditures

 

$1,072

$742

44.5%

$983

9.1%

 

(amounts in thousands)

 

 

 

 

 

 

 

Wholesale lines

 

2,087

2,884

-27.6%

2,224

-6.2%

 

DSL customers

 

3,145

2,349

33.9%

2,882

9.1%

 

LD customers

 

7,358

6,470

13.7%

7,179

2.5%

 

 

 

 

 

 

 

 

 

Consumer ARPU (3)

 

$62.05

$58.23

6.6%

$60.53

2.5%

 

 

 

 


 

 

BellSouth Corporation

Results by Segment (unaudited)

Supplemental Operating Data (in thousands)

 

 

 

Communications Group – Network Access Lines in Service Reported (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1Q06

1Q05

Growth

4Q05

Growth

 

Access lines

 

 

 

 

 

 

 

 

Residence

 

 

 

 

 

 

 

 

 

Retail

 

 

 

 

 

 

 

 

 

 

Primary

 

11,231

11,751

-4.4%

11,319

-0.8%

 

 

 

 

Additional

 

1,131

1,304

-13.3%

1,163

-2.8%

 

 

 

 

Total Retail Residence

 

12,362

13,055

-5.3%

12,482

-1.0%

 

 

 

Wholesale

 

 

 

 

 

 

 

 

 

 

Total Wholesale Voice Lines

 

1,392

2,020

-31.1%

1,488

-6.5%

 

 

Total Residence

 

13,754

15,075

-8.8%

13,970

-1.5%

 

 

 

 

 

 

 

 

 

 

Business

 

 

 

 

 

 

 

 

 

Retail

 

 

 

 

 

 

 

 

 

 

Total Retail Business

 

5,327

5,251

1.4%

5,306

0.4%

 

 

 

Wholesale

 

 

 

 

 

 

 

 

 

 

Total Wholesale Voice Lines

 

629

797

-21.1%

668

-5.8%

 

 

Total Business

 

5,956

6,048

-1.5%

5,974

-0.3%

 

 

 

 

 

 

 

 

 

 

Other Retail/Wholesale Lines

 

 

 

 

 

 

 

 

 

 

Retail

 

23

29

-20.7%

25

-8.0%

 

 

 

 

Wholesale

 

66

67

-1.5%

68

-2.9%

 

 

Total Other Retail/Wholesale Lines

 

89

96

-7.3%

93

-4.3%

 

 

 

 

 

 

 

 

 

 

Total Access Lines in Service

 

19,799

21,219

-6.7%

20,037

-1.2%

 

 

 

 

 

 

 

 

 

 

ISDN line equivalents

 

 

 

 

 

 

 

 

 

 

Residence

 

6

9

-33.3%

6

0.0%

 

 

 

 

Business

 

1,456

1,416

2.8%

1,465

-0.6%

 

 

Total ISDN Adjusted ALIS

 

21,261

22,644

-6.1%

21,508

-1.1%

 

Access Line Equivalents (b)

 

 

 

 

 

 

 

 

Selected digital data services:

 

 

 

 

 

 

 

 

 

 

Unbundled Loops

 

340

267

27.3%

306

11.1%

 

 

 

 

DS0 and ADSL

 

19,124

14,369

33.1%

17,558

8.9%

 

 

 

 

DS1

 

8,225

7,861

4.6%

8,214

0.1%

 

 

 

 

DS3 & higher

 

35,501

32,448

9.4%

34,925

1.6%

 

 

Total digital data lines in service

 

63,190

54,945

15.0%

61,003

3.6%

 

 

 

 

 

 

 

 

 

Total equivalent access lines in service

 

84,451

77,589

8.8%

82,511

2.4%

 

 

 

* - Not meaningful.

 

(a)

Prior period operating data are often revised at later dates to reflect updated information. The above information reflects the latest data available for the periods indicated.

(b)

Access line equivalents represent a conversion of non-switched data circuits to a switched access line basis and is presented for comparability purposes. Equivalents are calculated by converting high-speed/high-capacity circuits to the equivalent of a switched access line based on transport capacity. While the revenues generated by access line equivalents have a directional relationship with these counts, revenue growth rates cannot be compared to line growth rates on an equivalent basis.

 

 


 

 

 

BellSouth Corporation

Results by Segment (amounts in millions) (unaudited)

 

 

Wireless Segment (1) (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1Q06

1Q05

Growth

4Q05

Growth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Revenues

 

 

 

 

 

 

 

 

Service revenues (2)

 

$3,202

$2,968

7.9%

$3,111

2.9%

 

 

Equipment and other revenues

 

390

324

20.4%

428

-8.9%

 

 

 

Total Operating Revenues

 

3,592

3,292

9.1%

3,539

1.5%

 

Operating Expenses

 

 

 

 

 

 

 

 

Cost of services and products

 

1,452

1,375

5.6%

1,467

-1.0%

 

 

Selling, general, & administrative expenses

 

1,119

1,159

-3.5%

1,108

1.0%

 

 

Depreciation and amortization

 

461

474

-2.7%

454

1.5%

 

 

 

Total Operating Expenses

 

3,032

3,008

0.8%

3,029

0.1%

 

Segment Operating Income

 

560

284

97.2%

510

9.8%

 

Interest Expense

 

119

135

-11.9%

117

1.7%

 

Other Income (Expense), net

 

(12)

4

*

(3)

*

 

Income Before Income Taxes 

 

429

153

180.4%

390

10.0%

 

Provision for Income Taxes

 

186

86

116.3%

166

12.0%

 

 

 

Segment Net Income (1)

 

$243

$67

262.7%

$224

8.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Financial and Operating Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(amounts in millions, except customer data in thousands)

 

 

 

 

 

 

 

Segment operating income

 

$560

$284

97.2%

$510

9.8%

 

Segment operating margin

 

15.6%

8.6%

700 bps

14.4%

120 bps

 

Cellular/PCS Operating Metrics (100% Cingular)**:

 

 

 

 

 

 

 

 

Total Customers (7)

 

55,810

50,350

10.8%

54,144

3.1%

 

 

Net Customer Additions (7)

 

1,679

1,367

22.8%

1,820

-7.7%

 

 

Partitioned Customers and/or Adjustments (7)

 

(13)

(149)

*

32

*

 

 

Churn (8)

 

1.9%

2.2%

-30 bps

2.1%

-20 bps

 

 

Wireless Service ARPU (3)

 

$48.48

$49.60

-2.3%

$48.86

-0.8%

 

 

Minutes of Use Per Subscriber (4)

 

698

628

11.1%

700

-0.3%

 

 

Licensed POPs (5)

 

296

293

1.0%

294

0.7%

 

 

Penetration (6)

 

19.8%

17.7%

210 bps

18.9%

90 bps

 

* - Not meaningful.

 

 

 

 

 

 

 

** - These metrics and calculations are not impacted by the 1Q06 normalization of wireless merger integration costs and wireless merger intangible amortization.

 

 

(a) The wireless segment is comprised of BellSouth’s 40% share of the reported results of Cingular Wireless.

 


 

 

 

BellSouth Corporation

Results by Segment (amounts in millions) (unaudited)

 

 

Advertising & Publishing (1) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1Q06

1Q05

Growth

4Q05

Growth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Revenues

 

 

 

 

 

 

 

 

Advertising and publishing revenues

 

$487

$475

2.5%

$475

2.5%

 

 

Commission revenues

 

19

16

18.8%

54

-64.8%

 

 

 

Total Operating Revenues

 

506

491

3.1%

529

-4.3%

 

Operating Expenses

 

 

 

 

 

 

 

 

Cost of services

 

93

90

3.3%

91

2.2%

 

 

Selling, general, & administrative expenses

 

179

163

9.8%

186

-3.8%

 

 

Depreciation and amortization

 

8

7

14.3%

7

14.3%

 

 

 

Total Operating Expenses

 

280

260

7.7%

284

-1.4%

 

Segment Operating Income

 

226

231

-2.2%

245

-7.8%

 

Interest Expense

 

5

3

66.7%

4

25.0%

 

Other Income (Expense), net

 

(2)

(1)

-100.0%

(1)

-100.0%

 

Income Before Income Taxes 

 

219

227

-3.5%

240

-8.8%

 

Provision for Income Taxes

 

79

86

-8.1%

86

-8.1%

 

 

 

Segment Net Income (1)

 

$140

$141

-0.7%

$154

-9.1%

 

 

 

 

 

 

 

 

 

Segment operating income

 

$226

$231

-2.2%

$245

-7.8%

 

Segment operating margin

 

44.7%

47.0%

-230 bps

46.3%

-160 bps

 

* - Not meaningful.

 

 

 

 

 

 

 

 

 


 

 

 

BellSouth Corporation

Notes

 

 

(1)

Segment net income (loss) is based on normalized results which exclude certain one-time transactions and certain corporate intercompany billings. Certain intersegment revenues are not eliminated for purposes of management reporting.

 

 

 

(2)

Wireless service revenues include activation fees, access, airtime, roaming, long distance and value added services. Roaming revenues are included on a gross basis for the Wireless segment.

 

 

 

(3)

Management uses average revenue per unit (ARPU) as an indicator of operating performance of the business.

 

Consumer ARPU is defined as consumer revenues during the period divided by average primary access lines during the period.

 

Wireless Service ARPU is defined as Cellular/PCS service revenues during the period divided by average Cellular/PCS subscribers during the period. This metric is used to compare the recurring revenue amounts being generated on our network to prior periods and internal targets. We believe that each of these metrics provides useful information concerning the performance of our initiatives to attract and retain high value customers and the use of our network.

 

 

 

 

 

(4)

Effective with the 1Q05 reporting period, the Total Minutes of Use per Cellular/PCS Subscriber (MOUs) definition has been revised to exclude SMS activity. Effective 2Q05 the MOU definition was changed, and prior period results recast, to include Local MOUs and Outcollect MOUs in the numerator. Prior to the change, the numerator was defined as Local MOUs.

 

 

(5)

Licensed POPs refers to the number of people residing in areas where Cingular and its partners have licenses to provide cellular or PCS service including areas where Cingular has not yet commenced service. Licensed POPs have been restated in periods 4Q04 through 2Q05 due to a reconciliation of respective licenses.

 

 

(6)

Penetration calculation for 1Q06 is based on licensed “operational” POPs of 282 million.

 

 

(7)

Cellular/PCS customers include customers served through reseller agreements. Cingular revised its customer counts and related data for the 4Q04 through 2Q05 reporting periods to correct reporting of certain subscriber activity.

 

 

(8)

Cellular/PCS churn is calculated by dividing the aggregate number of Cellular/PCS customers who cancel service during each month in a period by the total number of Cellular/PCS customers at the beginning of each month in that period.

 

 

 


 

 

BellSouth Corporation

Non-GAAP Measures – Reconciliation (amounts in millions) (unaudited)

 

Segment Net Income Reconciliation to GAAP Net Income

 

 

 

 

 

 

 

 

 

1Q06

1Q05

4Q05

 

Communications Group segment Net Income

 

$654

$664

$608

 

Wireless segment Net Income

 

243

67

224

 

Advertising and Publishing Group segment Net Income

 

140

141

154

 

Corporate, eliminations and other

 

(54)

(54)

(21)

 

Normalized Net Income

 

983

818

965

 

 

Add back Excluded non-recurring or non-operational items (a)

 

(199)

246

(347)

 

Consolidated GAAP Net Income

 

$784

$1,064

$618

 

 

 

 

 

 

 

Free Cash Flow

 

 

 

 

 

 

 

 

1Q06

1Q05

4Q05

 

Net cash provided by Operating Activities

 

$1,632

$1,692

$774

 

 

Less Capital Expenditures

 

(1,081)

(750)

(992)

 

Operating Free Cash Flow

 

$551

$942

($218)

 

 

 

 

 

 

 

 

Net Debt

 

March 31,

Dec. 31,

 

 

 

 

 

2006

2005

 

 

Total Debt

 

$17,470

$17,188

 

 

 

Less Cash

 

(247)

(427)

 

 

Net Debt

 

$17,223

$16,761

 

 

 

 

 

 

 

 

 

Communications Group Operating Income before Depreciation and Amortization

 

 

 

 

1Q06

1Q05

4Q05

 

Operating Revenues

 

$4,679

$4,618

$4,681

 

Operating Income

 

1,105

1,117

1,027

 

 

Add back Depreciation and Amortization

 

886

910

899

 

Operating Income before Depreciation and Amortization

 

$1,991

$2,027

$1,926

 

Margin

 

42.6%

43.9%

41.1%

 

 

 

 

 

 

 

 

Wireless Operating Income before Depreciation and Amortization

 

 

 

 

 

1Q06

1Q05

4Q05

 

Service Revenues

 

$3,202

$2,968

$3,111

 

Equipment and Other Revenues

 

390

324

428

 

Operating Revenues

 

3,592

3,292

3,539

 

Operating Income

 

560

284

510

 

Operating Margin (Operating Income divided by Operating Revenues) (b)

 

15.6%

8.6%

14.4%

 

 

Add back Depreciation and Amortization

 

461

474

454

 

Operating Income before Depreciation and Amortization

 

$1,021

$758

$964

 

Margin (Operating Income before Depr & Amort divided by Service Revenues) (b)

 

31.9%

25.5%

31.0%

 

 

 

 

 

 

 

 

(a) See pages 3 and 4 for detail of excluded items.

(b) Margin calculations for our wireless segment represent 40% of Cingular’s margin calculations adjusted for related normalized items as presented on pages 3-4.

 

 


 

 

 

BellSouth Corporation

 

Hurricane Katrina Revenue Impacts

 

(amounts in millions, except per share data)

 

Advertising & Publishing:  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1Q06

1Q05

Growth

4Q05

Growth

 

 

 

 

 

 

 

 

 

 

 

As reported (with Katrina customer bill credits):

 

 

 

 

 

 

 

 

Operating revenues

 

$506

$491

3.1%

$529

-4.3%

 

 

 

 

 

 

 

 

 

Pro forma (without Katrina customer bill credits):

 

 

 

 

 

 

 

 

Operating revenues

 

$506

$491

3.1%

$545

-7.2%

 

 

 

 

 

 

 

 

 

Impact of Hurricane Katrina bill credits on:

 

 

 

 

 

 

 

 

Operating revenues

 

$-

$-

0 bps 

($16)

290 bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

 

BellSouth Corporation

 

Cingular Amortization Reconciliation

 

(amounts in millions, except per share data)

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4Q04

2004

 

1Q05

2Q05

3Q05

 

 

 

 

 

 

 

 

 

 

Normalized D&A – as originally disclosed

 

$1,472

$4,868 

 

$1,588 

$1,524 

$1,501

 

Wireless merger intangible amortization

 

($159)

($159)

 

($196)

($179)

($158)

 

 

Normalized D&A

 

$1,313

$4,709 

 

$1,392 

$1,345 

$1,343

 

 

 

 

 

 

 

 

Normalized Operating Income – as originally disclosed

 

$1,270

$6,272

 

$1,439

$1,634

$1,659

 

Wireless merger intangible amortization

 

$159

$159

 

$196

$179

$158

 

 

Normalized Operating Income

 

$1,429

$6,431

 

$1,635

$1,813

$1,817

 

 

 

 

 

 

 

 

Normalized Operating Margin – as originally disclosed

 

16.0%

22.4%

 

17.3%

19.2%

19.5%

 

Wireless merger intangible amortization

 

2.0%

0.6%

 

2.4%

2.1%

1.9%

 

 

Normalized Operating Margin

 

18.0%

23.0%

 

19.7%

21.3%

21.4%

 

 

 

 

 

 

 

 

 

Normalized Earnings Per Share – as originally disclosed

 

$0.35

$1.83

 

$0.39

$0.46

$0.46

 

Wireless merger intangible amortization

 

$0.04

$0.04

 

$0.06

$0.05

$0.05

 

 

Normalized Earnings Per Share

 

$0.39

$1.87

 

$0.45

$0.51

$0.51

 

 

 

 

 

 

 

 

 

 

Wireless Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4Q04

2004

 

1Q05

2Q05

3Q05

 

 

 

 

 

 

 

 

 

 

Normalized D&A – as originally disclosed

 

$556

$1,232

 

$670 

$608 

$579

 

Wireless merger intangible amortization

 

($159)

($159)

 

($196)

($179)

($158)

 

 

Normalized D&A

 

$397

$1,073

 

$474 

$429 

$421

 

 

 

 

 

 

 

 

Normalized Operating Income – as originally disclosed

 

$27

$736

 

$88

$283

$397

 

Wireless merger intangible amortization

 

$159

$159

 

$196

$179

$158

 

 

Normalized Operating Income

 

$186

$895

 

$284

$462

$555

 

 

 

 

 

 

 

 

Normalized Operating Margin – as originally disclosed

 

0.9%

9.4%

 

2.7%

8.2%

11.3%

 

Wireless merger intangible amortization

 

5.6%

2.0%

 

5.9%

5.2%

4.6%

 

 

Normalized Operating Margin

 

6.5%

11.4%

 

8.6%

13.4%

15.9%

 

 

 

 

 

 

 

 

 

 

Wireless merger intangible amortization – Represents BellSouth’s 40 percent share of the non-cash amortization of intangibles, primarily customer lists, that were created in Cingular’s acquisition of AT&T Wireless.