EX-99.A 7 g72203ex99-a.txt THIRD QUARTER 2001 FINANCIAL RESULTS BellSouth Corporation Consolidated Statements of Income - Reported Basis (unaudited) (amounts in millions, except per share data)
3Q01 3Q00(10) Growth Operating Revenues Communications group $ 4,770 $4,565 4.5% Domestic wireless -- 963 -100.0% Latin America 710 757 -6.2% Domestic advertising and publishing 493 539 -8.5% All other 40 26 53.8% Total Operating Revenues 6,013 6,850 -12.2% Operating Expenses Operational and support expenses 3,138 3,612 -13.1% Depreciation and amortization 1,178 1,301 -9.5% Severance accrual -- -- N/M* Total Operating Expenses 4,316 4,913 -12.2% Operating Income 1,697 1,937 -12.4% Interest Expense 304 344 -11.6% Other Income, net (1,336) 31 N/M Income Before Income Taxes 57 1,624 -96.5% Provision for Income Taxes 50 588 -91.5% Net Income $ 7 $1,036 -99.3% Diluted: Weighted Average Common Shares Outstanding 1,887 1,885 0.1% Earnings Per Share $ 0.00 $ 0.55 N/M
* - Not meaningful. Selected Financial and Operating Data EBITDA(5) $ 2,875 $ 3,238 -11.2% EBITDA margin(6) 47.8% 47.3% 50bps Return on average equity (annualized) 0.2% 25.0% N/M Return on average total capital (annualized) 2.8% 15.5% N/M Digital and data revenues $ 1,142 $ 894 27.7% Dividends per share $ 0.19 $ 0.19 -- Capital expenditures $ 1,367 $ 1,672 -18.2% Common shares outstanding 1,877 1,866 0.6% Book value per share $ 9.61 $ 8.84 8.7% Debt ratio 52.6% 54.8% -220bps Total employees 103,055 102,191 0.8%
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Year-to-Date 2001 2000(10) Growth Operating Revenues Communications group $ 14,199 $ 13,679 3.8% Domestic wireless -- 2,766 -100.0% Latin America 2,227 2,124 4.8% Domestic advertising and publishing 1,363 1,329 2.6% All other 128 93 37.6% Total Operating Revenues 17,917 19,991 -10.4% Operating Expenses Operational and support expenses 9,531 10,647 -10.5% Depreciation and amortization 3,538 3,759 -5.9% Severance accrual -- 78 N/M Total Operating Expenses 13,069 14,484 -9.8% Operating Income 4,848 5,507 -12.0% Interest Expense 998 982 1.6% Other Income, net (982) 313 N/M Income Before Income Taxes 2,868 4,838 -40.7% Provision for Income Taxes 1,090 1,737 -37.2% Net Income $ 1,778 $ 3,101 -42.7% Diluted: Weighted Average Common Shares Outstanding 1,886 1,894 -0.4% Earnings Per Share $ 0.94 $ 1.64 -42.7%
* - Not meaningful. Selected Financial and Operating Data EBITDA(5) $ 8,386 $ 9,344 -10.3% EBITDA margin(6) 46.8% 46.7% 10bps Return on average equity (annualized) 13.4% 25.8% N/M Return on average total capital (annualized) 9.5% 15.9% N/M Digital and data revenues $ 3,265 $ 2,574 26.8% Dividends per share $ 0.57 $ 0.57 -- Capital expenditures $ 4,724 $ 4,940 -4.4%
Page 2 BellSouth Corporation Notes to Financial and Operating Data (amounts in millions, except per share data) BellSouth's consolidated results included herein reflect the impacts of the following items: (a) Loss on writedown of investments - Represents the loss incurred to recognize other-than-temporary declines in the market values of several investments accounted for under the cost method. This loss reduced net income by $1,017, or $0.54 per share for the third quarter and year-to-date 2001 periods. (b) Adjustment to ISP Accrual - Represents the loss incurred during the second quarter of 2001 for prior claims from competitive local exchange carriers regarding reciprocal compensation for ISP traffic. This loss reduced net income by $88, or $0.05 per share for the 2001 year-to-date period. (c) Postretirement benefit expense - The amount shown represents expense recognized in the first quarter of 2001 for changes in postretirement medical benefit obligations. This expense reduced net income by $47, or $0.02 per share for the 2001 year-to-date period. (d) Loss on sale of Qwest common stock - Represents losses incurred during the first and third quarter of 2001 from the sale of portions of our investment in Qwest common stock. These losses reduced our third quarter 2001 net income by $52, or $0.03 per share and reduced our year-to-date 2001 net income by $84, or $0.04 per share. (e) Losses incurred as we exit the wireless video entertainment business, which reduced net income by $6 for third quarter 2001 and reduced net income by $16, or $0.01 per share for the 2001 year-to-date period. (f) Gain on E-Plus Restructuring - Represents income related to the restructuring of our ownership interest in German wireless operator E-Plus during first quarter 2000. This transaction increased net income by $68, or $0.04 per share for the 2000 year-to-date period. (g) Severance Accrual - Represents expense recorded during first quarter 2000 as a result of our plan to reduce our domestic general and administrative staff. This loss reduced net income by $48, or $0.03 per share for the 2000 year-to-date period. (h) Gain on Sale of SkyCell - Represents a gain from the sale of our 24.5% ownership interest in a wireless service provider in India. This transaction increased our third quarter and year-to-date 2001 net income by $19, or $0.01 per share. Page 3 BellSouth Corporation Consolidated Balance Sheets (unaudited) (amounts in millions, except per share data)
September 30, December 31, 2001 2000 Assets Current Assets: Cash and cash equivalents $ 854 $ 1,061 Accounts receivable, net of allowance for uncollectibles of $428 and $377 5,192 5,157 Material and supplies 377 379 Other current assets 738 809 Total Current Assets 7,161 7,406 Investments and Advances 10,500 11,010 Property, Plant and Equipment, net 25,233 24,157 Deferred Charges and Other Assets 4,876 4,180 Intangible Assets, net 4,273 4,172 Total Assets $ 52,043 $ 50,925 Liabilities and Shareholders' Equity Current Liabilities: Debt maturing within one year $ 6,961 $ 7,569 Accounts payable 1,627 2,233 Other current liabilities 4,241 3,468 Total Current Liabilities 12,829 13,270 Long-Term Debt 13,105 12,463 Noncurrent Liabilities: Deferred income taxes 3,078 3,580 Other noncurrent liabilities 4,991 4,700 Total Noncurrent Liabilities 8,069 8,280 Shareholders' Equity: Common stock, $1 par value 2,020 2,020 Paid-in capital 6,766 6,740 Retained earnings 14,704 14,074 Accumulated other comprehensive income (277) (488) Shares held in trust and treasury (5,034) (5,222) Guarantee of ESOP debt (139) (212) Total Shareholders' Equity 18,040 16,912 Total Liabilities and Shareholders' Equity $ 52,043 $ 50,925
Page 4 BellSouth Corporation Results by Segment (amounts in millions) (unaudited) Communications Group(1)
3Q01 3Q00 Growth Operating Revenues Local service $3,003 $2,888 4.0% Network access 1,252 1,154 8.5% Long distance 192 178 7.9% Other 360 418 -13.9% Total Operating Revenues 4,807 4,638 3.6% Operating Expenses Operational and support expenses 2,439 2,168 12.5% Depreciation and amortization 1,014 962 5.4% Total Operating Expenses 3,453 3,130 10.3% Operating Income 1,354 1,508 -10.2% Interest Expense 139 180 -22.8% Other Income, net 9 1 N/M* Income Before Income Taxes 1,224 1,329 -7.9% Provision for Income Taxes 458 492 -6.9% Segment Net Income(1) $ 766 $ 837 -8.5%
* - Not meaningful. Selected Financial and Operating Data
(amounts in millions) EBITDA(5) $ 2,368 $ 2,470 -4.1% EBITDA margin(6) 49.3% 53.3% -400bps Calling feature revenues $ 580 $ 551 5.3% Access minutes of use 26,922 28,859 -6.7% Toll messages 109 125 -12.8% Capital expenditures $ 1,138 $ 1,317 -13.6%
Equivalent access lines in service (thousands): Access lines 25,574 25,942 -1.4% Access line equivalents 36,693 24,937 47.1% Total equivalent access lines in service 62,267 50,879 22.4% Wholesale Lines 1,596 1,188 34.3% Internet customers (thousands) 1,141 871 31.0% DSL customers (thousands) 463 134 245.5%
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Year-to-Date 2001 2000 Growth Operating Revenues Local service $ 8,877 $8,607 3.1% Network access 3,715 3,596 3.3% Long distance 539 517 4.3% Other 1,161 1,161 0.0% Total Operating Revenues 14,292 13,881 3.0% Operating Expenses Operational and support expenses 6,995 6,516 7.4% Depreciation and amortization 3,003 2,813 6.8% Total Operating Expenses 9,998 9,329 7.2% Operating Income 4,294 4,552 -5.7% Interest Expense 472 519 -9.1% Other Income, net 26 8 N/M Income Before Income Taxes 3,848 4,041 -4.8% Provision for Income Taxes 1,408 1,501 -6.2% Segment Net Income(1) $ 2,440 $2,540 -3.9%
* - Not meaningful. Selected Financial and Operating Data
(amounts in millions) EBITDA(5) $ 7,297 $ 7,365 -0.9% EBITDA margin(6) 51.1% 53.1% -200bps Calling feature revenues $ 1,724 $ 1,598 7.9% Access minutes of use 83,338 86,786 -4.0% Toll messages 331 390 -15.1% Capital expenditures $ 4,032 $ 3,802 6.0%
Page 6 BellSouth Corporation Results by Segment (unaudited) Supplemental Operating Data (in thousands) Communications Group-- Network Access Lines In Service(a)
3Q01 3Q00 Growth Access lines(b) Residence 16,915 17,205 -1.7% Business 8,441 8,481 -0.5% Other 218 256 -14.8% Total access lines in service 25,574 25,942 -1.4% Access line equivalents(c) Selected digital data services: DS0 & ADSL 3,507 1,422 146.6% DS1 6,465 5,359 20.6% DS3 & higher 26,721 18,156 47.2% Total digital data lines in service 36,693 24,937 47.1% Total equivalent access lines in service 62,267 50,879 22.4%
(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 counts include amounts for switched access lines, Basic Rate ISDN, Primary Rate ISDN and UNE Combos. (c) 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. Page 7 BellSouth Corporation Results by Segment (amounts in millions) (unaudited) Domestic Wireless Segment (1)(a)
3Q01 3Q00 Growth Operating Revenues Service revenues(4) $1,365 $ 995 37.2% Equipment and other revenues 100 76 31.6% Total Operating Revenues 1,465 1,071 36.8% Operating Expenses Operational and support expenses 975 776 25.6% Depreciation and amortization 199 151 31.8% Total Operating Expenses 1,174 927 26.6% Operating Income 291 144 102.1% Interest Expense 80 29 N/M* Other Income (Expense), net (2) 44 N/M Income Before Income Taxes 209 159 31.4% Provision for Income Taxes 81 61 32.8% Segment Net Income(1) $ 128 $ 98 30.6%
* - Not meaningful. Selected Financial and Operating Data(b)
(amounts in millions, except customer data in thousands) EBITDA(5) $ 490 $ 295 66.1% EBITDA margin(6)(c) 35.9% 29.6% 630bps Average monthly revenue per customer(7)(d) $ 53 $ 60 -11.7% Customer net adds in period: Cellular and PCS 24 229 -89.5% Data (Cingular Interactive) 3 80 -96.3% Customers: Cellular and PCS 8,512 5,711 49.0% Data (Cingular Interactive) 279 462 -39.6% POPs 84,400 57,034 48.0% Penetration rate(9) 11.1% 10.3% 80bps
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Year-to-Date 2001 2000 Growth Operating Revenues Service revenues(4) $3,882 $2,832 37.1% Equipment and other revenues 307 225 36.4% Total Operating Revenues 4,189 3,057 37.0% Operating Expenses Operational and support expenses 2,821 2,226 26.7% Depreciation and amortization 569 472 20.6% Total Operating Expenses 3,390 2,698 25.6% Operating Income 799 359 122.6% Interest Expense 244 83 N/M Other Income (Expense), net 8 117 N/M Income Before Income Taxes 563 393 43.3% Provision for Income Taxes 218 148 47.3% Segment Net Income(1) $ 345 $ 245 40.8%
* - Not meaningful. Selected Financial and Operating Data(b)
(amounts in millions, except customer data in thousands) EBITDA(5) $1,368 $ 831 64.6% EBITDA margin(6)(c) 35.2% 29.3% 590bps Average monthly revenue per customer(7)(d) $ 52 $ 60 -13.3% Customer net adds in period: Cellular and PCS 639 824 -22.5% Data (Cingular Interactive) 50 238 -79.0%
(a) The 2000 periods are comprised of BellSouth's wireless voice and wireless data operations. The 2001 periods are comprised of BellSouth's 40% share of the reported results of Cingular Wireless. (b) Customer data for the 2001 periods, including POPs, penetration rate and average monthly revenue per customer, is comprised of BellSouth's 40% share of the managed results of Cingular Wireless. (c) EBITDA margin denominator includes service revenues only. (d) Average monthly revenue per customer excludes Cingular Interactive (formerly BellSouth Wireless Data). Page 9 BellSouth Corporation Results by Segment (amounts in millions) (unaudited) Latin America Group(1)(2)
3Q01 3Q00 Growth Operating Revenues Service revenues(4) $ 591 $ 613 -3.6% Equipment and other revenues 91 110 -17.3% Advertising and publishing revenues 34 49 -30.6% Total Operating Revenues 716 772 -7.3% Operating Expenses Operational and support expenses 492 581 -15.3% Depreciation and amortization 138 167 -17.4% Total Operating Expenses 630 748 -15.8% Operating Income 86 24 258.3% Interest Expense 51 52 -1.9% Other Income (Expense), net (67) (37) N/M* Income Before Income Taxes (32) (65) N/M Provision for Income Taxes 20 (3) N/M Segment Net Income(1) $ (52) $ (62) N/M
* - Not meaningful. Selected Financial and Operating Data
(amounts in millions, except customer data in thousands) EBITDA(5) $ 224 $ 191 17.3% EBITDA margin(6) 31.3% 24.7% 660bps Average monthly revenue per customer(8) $ 24 $ 31 -22.6% Customer net adds in period (excluding ownership changes) 84 365 -77.0% Customers (voice) 8,092 6,668 21.4% POPs 156,200 156,200 0.0% Penetration rate(9) 5.2% 4.3% 90bps
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Year-to-Date 2001 2000 Growth Operating Revenues Service revenues(4) $ 1,862 $ 1,762 5.7% Equipment and other revenues 327 315 3.8% Advertising and publishing revenues 58 94 -38.3% Total Operating Revenues 2,247 2,171 3.5% Operating Expenses Operational and support expenses 1,627 1,684 -3.4% Depreciation and amortization 447 423 5.7% Total Operating Expenses 2,074 2,107 -1.6% Operating Income 173 64 170.3% Interest Expense 166 111 49.5% Other Income (Expense), net (236) (83) N/M Income Before Income Taxes (229) (130) N/M Provision for Income Taxes 48 (14) N/M Segment Net Income(1) $ (277) $ (116) N/M
* - Not meaningful. Selected Financial and Operating Data
(amounts in millions, except customer data in thousands) EBITDA(5) $ 620 $ 487 27.3% EBITDA margin(6) 27.6% 22.4% 520bps Average monthly revenue per customer(8) $ 26 $ 32 -18.8% Customer net adds in period (excluding ownership changes) 1,023 1,680 -39.1%
Page 11 BellSouth Corporation Proportionate Basis(3) -- Selected Financial and Operating Data (Amounts in millions, except customer data in thousands) Latin America Group(1)(2)
3Q01 3Q00 Growth Operating revenues $ 657 $ 727 -9.6% EBITDA(5) $ 203 $ 188 8.0% EBITDA margin(6) 30.9% 25.9% 500bps Average monthly revenue per customer(8) $ 24 $ 31 -22.6% Customer net adds in period (excluding ownership changes) 212 399 -46.9% Customers (voice) 8,109 6,541 24.0% POPs 156,961 156,586 0.2% Penetration rate(9) 5.2% 4.4% 80bps Year-to-Date 2001 2000 Growth Operating revenues $ 2,070 $ 2,086 -0.8% EBITDA(5) $ 579 $ 476 21.6% EBITDA margin(6) 28.0% 22.8% 520bps Average monthly revenue per customer(8) $ 26 $ 33 -21.2% Customer net adds in period (excluding ownership changes) 1,184 1,672 -29.2%
Page 12 BellSouth Corporation Worldwide Wireless (unaudited) Customers and POPs by Country (Proportionate Basis(3) in thousands)
Customers As of Country Brand 3Q01 3Q00 Growth United States Cingular Wireless / 8,512 6,151 38.4% BellSouth Mobility Argentina Movicom BellSouth 1,121 1,005 11.5% Brazil Various* 1,615 1,250 29.2% Chile BellSouth 827 602 37.4% Colombia BellSouth 767 490 56.5% Ecuador BellSouth 276 186 48.4% Guatemala BellSouth 39 - N/M** Nicaragua BellSouth 136 67 103.0% Panama BellSouth 127 81 56.8% Peru BellSouth 388 357 8.7% Uruguay Movicom BellSouth 63 60 5.0% Venezuela Telcel BellSouth 2,750 2,443 12.6% Total Latin America 8,109 6,541 24.0% Denmark Sonofon 438 357 22.7% Germany e-plus 1,694 1,231 37.6% India SkyCell*** - 8 -100.0% Israel Cellcom 746 606 23.1% 2,878 2,202 30.7% Total Worldwide Wireless 19,499 14,894 30.9% POPs As of Country Brand 3Q01 3Q00 Growth United States Cingular Wireless / 84,400 59,427 42.0% BellSouth Mobility Argentina Movicom BellSouth 23,270 23,270 -- Brazil Various* 25,461 25,234 0.9% Chile BellSouth 15,100 15,100 -- Colombia BellSouth 27,451 27,451 -- Ecuador BellSouth 11,086 11,086 -- Guatemala BellSouth 7,140 7,140 -- Nicaragua BellSouth 2,581 2,581 -- Panama BellSouth 1,223 1,223 -- Peru BellSouth 24,551 24,403 0.6% Uruguay Movicom BellSouth 966 966 -- Venezuela Telcel BellSouth 18,132 18,132 --
Page 13 Total Latin America 156,961 156,586 0.2% Denmark Sonofon 2,465 2,465 -- Germany e-plus 18,568 18,568 -- India SkyCell*** - 1,348 N/M Israel Cellcom 2,119 2,119 -- 23,152 24,500 -- Total Worldwide Wireless 264,513 240,513 10.0%
* - BCP in Sao Paulo and Northeast regions; TCO. ** - Not meaningful. *** - Sold in third quarter 2001. Page 14 BellSouth Corporation Results by Segment (amounts in millions) (unaudited) Domestic Advertising & Publishing(1)
3Q01 3Q00 Growth Total Operating Revenues $ 496 $ 545 -9.0% Operating Expenses Operational and support expenses 232 244 -4.9% Depreciation and amortization 7 8 -12.5% Total Operating Expenses 239 252 -5.2% Operating Income 257 293 -12.3% Interest Expense 2 1 100.0% Other Income, net 1 1 N/M* Income Before Income Taxes 256 293 -12.6% Provision for Income Taxes 98 112 -12.5% Segment Net Income(1) $ 158 $ 181 -12.7% EBITDA(5) $ 264 $ 301 -12.3% EBITDA margin(6) 53.2% 55.2% -200bps
* - Not meaningful.
Year-to-Date 2001 2000 Growth Total Operating Revenues $1,376 $1,346 2.2% Operating Expenses Operational and support expenses 677 672 0.7% Depreciation and amortization 20 22 -9.1% Total Operating Expenses 697 694 0.4% Operating Income 679 652 4.1% Interest Expense 13 10 30.0% Other Income, net 5 1 N/M Income Before Income Taxes 671 643 4.4% Provision for Income Taxes 257 244 5.3% Segment Net Income(1) $ 414 $ 399 3.8% EBITDA(5) $ 699 $ 674 3.7% EBITDA margin(6) 50.8% 50.1% 70bps
* - Not meaningful. Page 15 BellSouth Corporation Notes (1) Segment net income (loss) is based on normalized results which exclude certain one-time transactions and certain corporate intercompany billings. Intersegment revenues are not eliminated for purposes of management reporting. (2) Results for the Latin America segment are reported one month in arrears. (3) Proportionate basis financial and operating data reflect our ownership interest in the total operating results for each of our wireless properties, both domestic and international, whether or not consolidated for financial statement presentation purposes. (4) Wireless service revenues includes activation fees, access, airtime, roaming, long distance and value added services. Roaming revenues are included on a gross basis for the Domestic Wireless segment and on a net basis for the Latin America segment. (5) EBITDA is defined as operating revenues less operational and support expenses. (6) EBITDA margin is calculated by dividing EBITDA by operating revenues. (7) For the Domestic Wireless segment, Average monthly revenue per customer is calculated by dividing average monthly revenue by average customers. Average monthly revenue includes activation fees, access, airtime, roaming (gross), long distance and value added services. (8) For the Latin America segment, Average monthly revenue per customer is calculated by dividing average monthly revenue by average customers. Average monthly revenue includes activation fees, access, airtime, roaming (net), long distance and value added services. (9) Penetration rate is calculated by dividing customers by POPs (excludes POPs in markets where service has not been initiated). (10) During fourth quarter 2000, we adopted a new method of recognizing revenues and expenses derived from installation and activation activities. We did this to comply with new accounting guidance contained in SAB101, which requires that revenues from such activities be deferred and recognized over the estimated life of the relationship with the customer. As required by SAB101, we retroactively adopted the new method effective January 1, 2000. The retroactive adoption decreased our previously reported revenues and expenses equally by $53 for third quarter 2000 and $151 for the year-to-date period. The adoption did not affect our reported earnings for any 2000 period. Page 16