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: January 23, 2003
AT&T CORP.
(Exact Name of Registrant as Specified in Charter)
New York
(State or Other Jurisdiction of Incorporation)
1-1105 13-4924710
(Commission File Number) (IRS Employer Identification No.)
One AT&T Way
Bedminster, New Jersey 07921
(Address of Principal Executive (Zip Code)
Offices)
Registrant's telephone number, including area code: (800) 257-7865
Not Applicable
(Former Name or Former Address, If Changed Since Last Report)
A New York Commission File I.R.S. Employer
Corporation No. 1-1105 No.13-4924710
Form 8-K AT&T Corp.
January 23, 2003
ITEM 5. Other Events
On January 23, 2003, AT&T Corp. issued a press release statement relating to the
Company's earnings which is attached as Exhibit 99.1.
On January 23, 2003, AT&T Corp. issued a press release statement concerning an
offer to repurchase debt which is attached as Exhibit 99.2.
On January 23, 2003, Thomas W. Horton, Senior Executive Vice President and Chief
Financial Officer, issued a statement providing additional financial information
about AT&T Corp. A portion of Mr. Horton's statement is attached as Exhibit
99.4.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS
Exhibit 99.1 - AT&T Corp. Press Release dated January 23, 2003.
Exhibit 99.2 - AT&T Corp. Press Release dated January 23, 2003.
Exhibit 99.3 - AT&T Corp. certain financial data for the years, and for
each quarter in the years, ended December 31, 2002 and December 31, 2001.
Exhibit 99.4 - Statements of Thomas W. Horton made on January 23, 2003.
Form 8-K AT&T Corp.
January 23, 2003
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AT&T CORP.
/s/ N. S. Cyprus
----------------------------------
By: N. S. Cyprus
Vice President and Controller
January 23, 2003
EXHIBIT 99.1
[AT&T LOGO OMITTED]
News Release
--------------------------------------------------------------------------------
AT&T Reports Fourth-Quarter and Full-Year Results
FOR RELEASE THURSDAY, JANUARY 23, 2003
BEDMINSTER, N.J. - AT&T today announced its fourth-quarter and full-year 2002
results. The company's fourth-quarter earnings per diluted share, which reflect
a gain in discontinued operations from the disposition of AT&T Broadband,
partially offset by a loss from continuing operations resulting from
restructuring and asset impairment charges announced earlier this month, was
$0.66.
The company reported a loss from continuing operations, primarily resulting from
an asset impairment charge associated with the company's past investment in AT&T
Latin America (ALA), and also reflecting the impact of a restructuring charge
associated with planned employee separations and an asset impairment charge
related to the value of the company's DSL assets. The loss per diluted share
from continuing operations was $0.79.
Revenue for the quarter was $9.3 billion, a decline of 8.6 percent from the
year-ago quarter. The company attributes the revenue decline to continued
declines in long distance voice services, partially offset by growth in local
voice as well as data/Internet protocol (IP) and managed services.
"We had solid operating results in the fourth quarter, reflecting our execution
of the basics," said AT&T Chairman and CEO David W. Dorman. "We saw continued
growth in our local voice and data businesses, despite an unsettled economic
environment. We're entering 2003 with a strong focus on meeting customer needs,
improving shareowner value and maintaining our financial discipline and
flexibility."
Full Year 2002 Results
For the full year, the company reported a loss of $17.08 per diluted share,
which reflects a loss related to discontinued operations, a loss related to the
adoption of a new accounting standard and income from continuing operations.
The loss related to discontinued operations includes a $18.95 loss from
discontinued operations, partially offset by a gain of $1.73 per diluted share
from the disposal of discontinued operations. The loss related to the adoption
of the new accounting standard was $1.12 per diluted share. Income from
continuing operations was $1.26 per diluted share.
Full-year revenue was $37.8 billion, a decline of 10.4 percent from the previous
year.
UNIT HIGHLIGHTS
Note: all comparisons are to same reporting period in prior year
AT&T Business
o Fourth quarter revenue $6.6 billion, down 3.0 percent o Full year revenue
$26.6 billion, down 4.1 percent o Fourth quarter EBIT, loss of $331
million, down 3.5 percent
o Fourth quarter EBIT, excluding other income, equity earnings and ALA
charge, $451 million, up 26.7 percent o Fourth quarter EBIT margin,
excluding other income, equity earnings and ALA charge, 6.9 percent o Full
year EBIT, $1.6 billion, up 171.1 percent o Full year EBIT, excluding other
income, equity earnings and ALA charge, $3.1 billion, down 16.4 percent o
Full year EBIT margin, excluding other income, equity earnings and ALA
charge, 11.6 percent
o LD voice revenue declined about 10 percent in the quarter due to price
declines, volume increased nearly 7 percent, which reflects wholesale
volume growth and declining retail volumes o Local voice revenue grew more
than 25 percent in the quarter o Data/IP/Managed services revenue,
including customer premises equipment sales, grew about 3 percent in the
quarter
AT&T Consumer
o Fourth quarter revenue $2.7 billion, down 20.0 percent o Full year revenue
$11.5 billion, down 22.3 percent o Fourth quarter EBIT $395 million, down
62.7 percent
o Fourth quarter EBIT, excluding other income and equity earnings, $389
million, down 56.4 percent o Fourth quarter EBIT margin, excluding other
income and equity earnings, 14.2 percent o Full year EBIT $2.6 billion,
down 45.7 percent o Full year EBIT, excluding other income and equity
earnings, $2.6 billion, down 44.8 percent o Full year EBIT margin,
excluding other income and equity earnings, 22.5 percent
o Any Distance offer added more than 500,000 subscribers in the quarter and
at year-end had more than 2.4 million subscribers; subscriber base doubled
in 2002
OUTLOOK
AT&T said that it does not yet see a significant turnaround in the overall
business services industry, and, as a result, expects total telecom industry
spending will be down again in 2003. However, AT&T believes it is well
positioned to continue to take market share and therefore expects a slower rate
of revenue decline in 2003 compared to 2002. Other expectations for the
corporation include: o Full-year operating income margin decline, excluding ALA
charge, to be comparable to the 2002 decline o Diluted EPS for the first quarter
of 2003 in the range of $0.50 to $0.55 o Capital expenditures for 2003 to be
approximately $3.3 to $3.5 billion
AT&T Business expects a slower rate of revenue decline in 2003 compared to 2002.
AT&T Consumer expects the 2003 rate of revenue decline to be slightly better
than the decline in 2002.
4th Quarter at a Glance 4Q02 vs. 4Q01 4th Quarter Highlights
AT&T revenue $9.3B (8.6%) EPS $0.66
AT&T Business revenue $6.6B (3.0%) EPS from continuing operations ($0.79)
AT&T Consumer revenue $2.7B (20.0%)
EBIT $119M 11.6%
EBIT, excluding other
income, equity earnings
and ALA charge $783M (6.3%)
Capital expenditures $1.3B (21.4%)
Year at a Glance 2002 vs. 2001 Full-Year Highlights
AT&T revenue $37.8B (10.4%) EPS $(17.08)
AT&T Business revenue $26.6B (4.1%) EPS from continuing operations $ 1.26
AT&T Consumer revenue $11.5B (22.3%) Total assets $ 55.3B
EBIT $3.9B 157.8% Debt, net of cash,
EBIT, excluding other income, monetizations and fluctuations
equity earnings and ALA charge $5.5B (31.0%) in foreign debt value $ 12.9B
Capital expenditures $3.9B (30.8%)
The table below provides a reconciliation of EBIT and EBIT, excluding other
income, equity earnings and the ALA impairment charge, to the comparable
Generally Accepted Accounting Principle (GAAP) measure of Operating (Loss)
Income:
($ in millions) 4Q02 2002
EBIT $ 119 $ 3,886
Less:
Other income (expense) 208 (77)
Pretax net earnings (losses) related to
equity investments 158 (512)
Pretax minority interest income 33 114
Operating (Loss) Income $ (280) $ 4,361
EBIT, excluding other income,
equity earnings and ALA impairment charge $ 783 $ 5,485
Add:
ALA impairment charge (1,029) (1,029)
Less:
Pretax minority interest income* 34 95
Operating (Loss) Income $ (280) $ 4,361
* Excludes minority interest in other income
DEFINITIONS and NOTES
Note: Financial statements have been restated to reflect the one-for-five
reverse stock split and to reflect AT&T Broadband as a discontinued operation in
all periods presented. AT&T Broadband was spun off on November 18, 2002.
AT&T Group does not include the results of Liberty Media Group, which was
tracked as a separate class of stock through August 10, 2001, the split-off
date.
EBIT refers to earnings before interest, taxes, cumulative effect of accounting
changes, dividend requirements on preferred stock, premium on exchange of AT&T
Wireless tracking stock and discontinued operations.
EBIT, excluding other income and equity earnings, refers to EBIT, excluding
other income (expense), and pretax net equity earnings (losses) related to
equity investments.
EBIT,excluding other income, equity earnings and the ALA charge refers to EBIT,
excluding other income (expense), pretax net earnings (losses) related to equity
investments and the fourth-quarter charge related to AT&T's past investment in
AT&T Latin America.
EBIT margin, excluding other income and equity earnings refers to EBIT,
excluding other income (expense) and pretax net earnings (losses) related to
equity investments as a percentage of reported revenue.
EBIT margin, excluding other income, equity earnings and ALA charge refers to
EBIT, excluding other income (expense), pretax net earnings (losses) related to
equity investments and the fourth-quarter charge related to AT&T's past
investment in AT&T Latin America as a percentage of reported revenue.
EPS is earnings per diluted share.
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AT&T Group Combined Statements of Income (Unaudited)
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Dollars in millions (except per share amounts)
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For the Three Months For the Year
Ended December 31, Ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
2002 2001 2002 2001
------------------------------------------------------------------------------------------------------------------------------------
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Revenue $ 9,290 $ 10,168 $ 37,827 $ 42,197
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Operating Expenses
------------------------------------------------------------------------------------------------------------------------------------
Access and other connection 2,576 2,830 10,790 12,085
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Costs of services and products 2,197 2,322 8,363 8,621
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Selling, general and administrative 2,077 2,021 7,988 8,064
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Depreciation and amortization 1,257 1,156 4,888 4,559
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Net restructuring and other charges 1,463 1,036 1,437 1,036
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Total operating expenses 9,570 9,365 33,466 34,365
------------------------------------------------------------------------------------------------------------------------------------
Operating (loss) income (280) 803 4,361 7,832
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Other income (expense), net 208 (58) (77) 1,327
------------------------------------------------------------------------------------------------------------------------------------
Interest (expense) (361) (413) (1,448) (1,493)
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(Loss) income from continuing operations before
income taxes, minority
interest income, and net earnings (losses)
related to equity investments (433) 332 2,836 7,666
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(Provision) for income taxes (225) (134) (1,587) (2,890)
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Minority interest income 33 39 114 131
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Net earnings (losses) related to equity investments 14 (453) (400) (4,836)
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(Loss) income from continuing operations (611) (216) 963 71
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(Loss) from discontinued operations, net of taxes (197) (1,175) (14,513) (4,052)
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Gain on disposition of discontinued operations,
net of taxes 1,324 - 1,324 13,503
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Income (loss) before cumulative effect of
accounting changes 516 (1,391) (12,226) 9,522
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Cumulative effect of accounting changes, net of
taxes - - (856) 359
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Income (loss) of AT&T Group 516 (1,391) (13,082) 9,881
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Dividend requirements of preferred stock, net - - - (652)
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Premium on exchange of AT&T Wireless tracking stock - - - (80)
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Income (loss) attributable to common shareowners $516 $(1,391) $(13,082) 9,149
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AT&T Common Stock Group:
------------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) 516 (1,391) (13,082) 9,114
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Weighted-average shares (millions) 776 708 746 729
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Weighted-average shares and potential
common shares (millions)* 776 708 766 729
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AT&T Common Stock Group - per basic share:
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(Loss) earnings from continuing operations $(0.79) $(0.31) $1.29 (0.91)
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(Loss) from discontinued operations (0.26) (1.66) (19.44) (5.60)
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Gain on disposition of discontinued operations 1.71 - 1.77 18.53
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Cumulative effect of accounting changes - - (1.15) 0.49
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AT&T Common Stock Group earnings (loss) $0.66 $(1.97) $(17.53) 12.51
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AT&T Common Stock Group - per diluted share:
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(Loss) earnings from continuing operations $(0.79) $(0.31) $1.26 (0.91)
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(Loss) from discontinued operations (0.26) (1.66) (18.95) (5.60)
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Gain on disposition of discontinued operations 1.71 - 1.73 18.53
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Cumulative effect of accounting changes - - (1.12) 0.49
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AT&T Common Stock Group earnings (loss) $0.66 $(1.97) $(17.08) 12.51
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Dividends declared per share $ 0.1875 $ 0.1875 $ 0.75 $ 0.75
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AT&T Wireless Group:
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Earnings $ - $ - $ - 35
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Weighted-average shares (millions) - - - 438
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Weighted-average shares and potential
common shares (millions)* - - - 438
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Earnings per basic and common share $ - $ - $ - 0.08
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* Weighted-average shares assumes dilution from the potential conversion of debt and equity securities and the potential exercise of
outstanding stock options and other performance awards, unless they are anti-dilutive to earnings (loss) per diluted share.
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AT&T Group Combined Balance Sheets (Unaudited)
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Dollars in millions
----------------------------------------------------------------------------------------------------------------------------
At December 31,
2002 2001
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ASSETS
----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 8,014 $ 10,680
----------------------------------------------------------------------------------------------------------------------------
Accounts receivable, less allowances of $669 and $754 5,286 7,153
----------------------------------------------------------------------------------------------------------------------------
Other receivables 173 1,431
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Deferred income taxes 910 1,192
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Other current assets 1,520 622
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Total current assets from discontinued operations - 1,649
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TOTAL CURRENT ASSETS 15,903 22,727
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Property, plant and equipment, net of accumulated depreciation
of $31,021 and $29,088 25,604 26,803
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Goodwill, net of accumulated amortization in 2001 of $564 4,626 5,314
----------------------------------------------------------------------------------------------------------------------------
Prepaid pension costs 3,596 3,329
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Other assets 5,543 5,805
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Total non-current assets from discontinued operations - 101,503
----------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 55,272 $165,481
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LIABILITIES
----------------------------------------------------------------------------------------------------------------------------
Accounts payable $ 3,819 $ 4,156
----------------------------------------------------------------------------------------------------------------------------
Payroll and benefit-related liabilities 1,519 1,606
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Debt maturing within one year 3,762 10,134
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Other current liabilities 2,924 3,929
----------------------------------------------------------------------------------------------------------------------------
Total current liabilities from discontinued operations - 5,801
----------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 12,024 25,626
----------------------------------------------------------------------------------------------------------------------------
Long-term debt 18,812 24,025
----------------------------------------------------------------------------------------------------------------------------
Long-term benefit-related liabilities 4,001 3,459
----------------------------------------------------------------------------------------------------------------------------
Deferred income taxes 4,739 2,438
----------------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits 3,384 7,159
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Total non-current liabilities from discontinued operations - 43,071
----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 42,960 105,778
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----------------------------------------------------------------------------------------------------------------------------
Minority Interest from Discontinued Operations - 3,303
----------------------------------------------------------------------------------------------------------------------------
Company-Obligated Convertible Quarterly Income Preferred
Securities of Subsidiary Trust Holding Solely Subordinated
Debt Securities of AT&T from Discontinued Operations - 4,720
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SHAREOWNERS' EQUITY
----------------------------------------------------------------------------------------------------------------------------
AT&T Common Stock, $1 par value, authorized 6,000,000,000 shares;
issued and outstanding 783,037,580 shares (net of 171,801,716
treasury shares) at December 31, 2002 and 708,481,149 shares
(net of 170,349,286 treasury shares) at December 31, 2001 783 708
----------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 25,464 52,099
----------------------------------------------------------------------------------------------------------------------------
Accumulated deficit (13,867) (785)
----------------------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive loss (68) (342)
----------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREOWNERS' EQUITY 12,312 51,680
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TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $ 55,272 $165,481
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NOTE TO FINANCIAL MEDIA: AT&T executives will discuss the company's performance
in a two-way conference call for financial analysts at 8:15 a.m. ET today.
Reporters are invited to listen to the call. U.S. callers should dial
888-276-0010 to access the call. Callers outside the U.S. should dial + 1
612-326-1003.
In addition, Internet rebroadcasts of the call will be available on the AT&T
website beginning later today. The website address is http://www.att.com/ir. A
copy of the earnings commentary is also available online. An audio rebroadcast
of the conference call will be available beginning in the afternoon on Thursday,
January 23 until midnight on Saturday, January 25. To access the replay, please
visit http://www.att.com/ir, or U.S. callers can dial 800-475-6701, access code
661273. Callers outside the U.S. should dial +1 320-365-3844, access code
661273.
The foregoing are "forward-looking statements" which are based on management's
beliefs as well as on a number of assumptions concerning future events made by
and information currently available to management. Readers are cautioned not to
put undue reliance on such forward-looking statements, which are not a guarantee
of performance and are subject to a number of uncertainties and other factors,
many of which are outside AT&T's control, that could cause actual results to
differ materially from such statements. For a more detailed description of the
factors that could cause such a difference, please see AT&T's filings with the
Securities and Exchange Commission. AT&T disclaims any intention or obligation
to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. This information is presented solely to
provide additional information to further understand the results of AT&T.
# # #
EXHIBIT 99.2
[AT&T LOGO OMITTED]
News Release
--------------------------------------------------------------------------------
AT&T Announces Offer to Repurchase $4.3 Billion of Debt for Cash
FOR RELEASE Thursday, January 23, 2003
BEDMINSTER, N.J. - AT&T (NYSE: T) today announced that it has offered to
repurchase for cash any and all of its outstanding 6.375 percent Notes due March
15, 2004 and 6.50 percent Notes due March 15, 2013.
The offer will commence at 9 a.m. EST on Thursday, January 23, 2003 and expire
at 5 p.m. EST on Thursday, January 30, 2003, unless extended or terminated
earlier. Merrill Lynch and Morgan Stanley are acting as dealer managers and will
repurchase AT&T's securities at any time between 9 a.m. and 5 p.m. on any New
York Stock Exchange trading day during which the offer is open.
The securities will be repurchased at a price per $1,000 principal amount of
each security purchased. The purchase price applicable to securities properly
repurchased pursuant to the offer will be calculated in a manner intended to
result in a yield determined by reference to the yield to maturity based on the
bid side price of the applicable U.S. Treasury Security as listed below, plus
the corresponding fixed spread. Each price is calculated at the time of
acceptance of an offer. In addition, AT&T will pay accrued and unpaid interest
on the securities up to, but not including, the date of payment of the purchase
price for the securities.
The following table sets forth certain information relating to the securities
that are included in the offer to repurchase.
CUSIP/ISIN Aggregate Security Reference Bloomberg Fixed Hypothetical
Number Principa1 Treasury Reference Spread Purchase
Amount Security Page Price*
Outstanding
001957BE8 / $1,590,433,000 6.375% due 3.625% due BBT4 0.50% $1,050.96
US001957BE87 3/15/2004 3/31/04
001957BJ7 /
US001957BJ74 $2,736,528,000 6.50% due 4% due BBT1 2.20% $1,027.53
3/15/2013 11/15/12
*Hypothetical Purchase Price based on the yield to maturity of the Reference
Treasury Security as of 2:30 p.m. EST on January 22, 2003 and a settlement date
of January 27, 2003.
Information regarding the offers will be available on MCM Corporate Watch on
Telerate pages 64164 / 64165 and Bloomberg pages MCM 7889 / 7890.
Requests for documents may be directed to D.F. King & Co., Inc., the Information
Agent, at (212) 269-5550 or (866) 868-2409 in the U.S. or (011) 44-20-7920-9700
in Europe.
Questions regarding the offers should be directed to the dealer managers:
-Merrill Lynch & Co., at 888-654-8637 (toll free) or 212-449-4914 (call collect)
-Morgan Stanley, at 800-624-1808 (toll free) or 212-761-1959 (call collect)
To accept an offer, holders should contact:
For the 2004 NotesMorgan Stanley Dealer Sales Desk(201) 536-6709 (call collect)
Attn: Joe LetoorMorgan Stanley Corporate Bond Trading DeskU.S.: (212) 761-1324
(call collect)Attn: Tom Skove or Jason SantorielloEurope: (011) 44-20-7677-7870
Attn: Charles Cho For the 2013 NotesMerrill Lynch Dealer Sales Desk (212)
449-4627 (call collect)Attn: Gary KobesorMerrill Lynch Corporate Bond Trading
DeskU.S.: (212) 449-4694 (call collect)Attn: Josh Hershman or Dan Mena Europe:
(011) 44-20-7995-3762Attn: Bill McManus
The foregoing are "forward-looking statements" which are based on management's
beliefs as well as on a number of assumptions concerning future events made by
and information currently available to management. Readers are cautioned not to
put undue reliance on such forward-looking statements, which are not a guarantee
of performance and are subject to a number of uncertainties and other factors,
many of which are outside AT&T's control, that could cause actual results to
differ materially from such statements. For a more detailed description of the
factors that could cause such a difference, please see AT&T's filings with the
Securities and Exchange Commission. AT&T disclaims any intention or obligation
to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. This information is presented solely to
provide additional information to further understand the results of AT&T.
EXHIBIT 99.3
Following are unaudited quarterly income statements for AT&T. All prior period
information has been restated to reflect AT&T Broadband as a discontinued
operation. In addition, prior period share and per share data has been restated
to reflect the one-for-five reverse stock split.
AT&T Corp. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
Dollars in millions (except per share amounts)
4Q02 3Q02 2Q02 1Q02 2002 4Q01 3Q01 2Q01 1Q01 2001
REVENUE
AT&T Business Services $ 6,588 $6,700 $ 6,742 $6,528 $ 26,558 $ 6,791 $ 6,807 $ 7,011 $ 7,096 $27,705
AT&T Consumer Services 2,736 2,794 2,911 3,086 11,527 3,420 3,770 3,724 3,929 14,843
Corporate and Other (34) (85) (73) (66) (258) (43) (40) (133) (135) (351)
Total Revenue 9,290 9,409 9,580 9,548 37,827 10,168 10,537 10,602 10,890 42,197
OPERATING EXPENSES
Access and other connection 2,576 2,679 2,747 2,788 10,790 2,830 3,021 3,086 3,148 12,085
Costs of services and products 2,197 2,066 2,086 2,014 8,363 2,322 2,179 1,991 2,129 8,621
Selling, general and
administrative 2,077 2,032 1,942 1,937 7,988 2,021 1,891 2,119 2,033 8,064
Depreciation and amortization 1,257 1,243 1,213 1,175 4,888 1,156 1,133 1,141 1,129 4,559
Net restructuring and other
charges 1,463 (26) - - 1,437 1,036 - - - 1,036
Total operating expenses 9,570 7,994 7,988 7,914 33,466 9,365 8,224 8,337 8,439 34,365
Operating (loss) income (280) 1,415 1,592 1,634 4,361 803 2,313 2,265 2,451 7,832
Other income (expense), net 208 (180) (50) (55) (77) (58) 570 642 173 1,327
Interest (expense) (361) (355) (336) (396) (1,448) (413) (370) (289) (421) (1,493)
(Loss) income from continuing
operations before income taxes,
minority interest income, and
net earnings (losses) related
to other equity investments (433) 880 1,206 1,183 2,836 332 2,513 2,618 2,203 7,666
(Provision) for income taxes (225) (370) (513) (479) (1,587) (134) (891) (1,005) (860) (2,890)
Minority interest income 33 28 33 20 114 39 27 30 35 131
Equity earnings (losses) from
Liberty Media Group - - - - - - 111 (2,125) (697) (2,711)
Net earnings (losses) related
to other equity investments 14 (13) (123) (278) (400) (453) (3,307) (951) (125) (4,836)
(Loss) income from continuing
operations (611) 525 603 446 963 (216) (1,547) (1,433) 556 (2,640)
(Loss) from discontinued
operations - net of taxes (197) (318) (13,433) (565) (14,513) (1,175) (548) (525) (1,804) (4,052)
Gain on disposition of
discontinued operations - net
of taxes 1,324 - - - 1,324 - 13,503 - - 13,503
Income (loss) before cumulative
effect of accounting changes 516 207 (12,830) (119) (12,226) (1,391) 11,408 (1,958) (1,248) 6,811
Cumulative effect of accounting
changes, net of taxes - - - (856) (856) - - - 904 904
Net income (loss) 516 207 (12,830) (975) (13,082) (1,391) 11,408 (1,958) (344) 7,715
Dividend requirements of
preferred stock, net - - - - - - (235) (236) (181) (652)
Premium on exchange of AT&T
Wireless tracking stock - - - - - - - (80) - (80)
Net income (loss) attributable
to common shareowners $ 516 $ 207 $(12,830) $ (975) $(13,082) $ (1,391) $11,173 $(2,274) $ (525) $ 6,983
AT&T COMMON STOCK GROUP:
Income (loss) attributable to
common shareowners $ 516 $ 207 $(12,830) $ (975) $(13,082) $ (1,391) $11,062 $ (191) $ (366) $ 9,114
Weighted-average common shares
(millions) 776 770 730 709 746 708 707 739 761 729
Weighted-average common shares
and potential common shares
(millions) 776 788 750 738 766 708 707 782 809 729
Earnings (loss) per basic share:
(Loss) earnings from continuing
operations $ (0.79) $ 0.68 $ 0.83 $ 0.63 $ 1.29 $ (0.31) $ (2.68) $ 0.51 $ 1.41 $ (0.91)
(Loss)from discontinued
operations (0.26) (0.41) (18.41) (0.80) (19.44) (1.66) (0.77) (0.77) (2.36) (5.60)
Gain on disposition of
discontinued operations 1.71 - - - 1.77 - 19.10 - - 18.53
Cumulative effect of accounting
changes - - - (1.21) (1.15) - - - 0.47 0.49
Earnings (loss) per share $ 0.66 $ 0.27 $ (17.58) $(1.38) $ (17.53) $ (1.97) $ 15.65 $ (0.26) $ (0.48) $ 12.51
Earnings (loss) per diluted
share:
(Loss) earnings from continuing
operations $ (0.79) $ 0.67 $ 0.80 $ 0.60 $ 1.26 $ (0.31) $ (2.68) $ 0.48 $ 1.32 $ (0.91)
(Loss) from discontinued
operations (0.26) (0.41) (17.91) (0.76) (18.95) (1.66) (0.77) (0.72) (2.21) (5.60)
Gain on disposition of
discontinued operations 1.71 - - - 1.73 - 19.10 - - 18.53
Cumulative effect of
accounting changes - - - (1.16) (1.12) - - - 0.44 0.49
Earnings (loss) per share $ 0.66 $ 0.26 $ (17.11) $(1.32) $ (17.08) $ (1.97) $ 15.65 $ (0.24) $ (0.45) $ 12.51
AT&T WIRELESS GROUP:
Earnings (loss) - - - - - - - $ 42 $ (7) $ 35
Weighted-average common
shares and potential
common shares (millions) - - - - - - - 513 363 438
Earnings (loss) per basic
and diluted share - - - - - - - $ 0.08 $ (0.02) $ 0.08
LIBERTY MEDIA GROUP:
Earnings (loss) - - - - - - $ 111 $(2,125) $ (152) $(2,166)
Weighted-average common
shares and potential
common shares (millions) - - - - - - 2,588 2,588 2,574 2,582
Earnings (loss) per basic
and diluted share:
Earnings (loss) from
continuing operations - - - - - - $ 0.04 $ (0.82) $ (0.27) $ (1.05)
Cumulative effect of
accounting change - - - - - - - - 0.21 0.21
Earnings (loss) per share - - - - - - $ 0.04 $ (0.82) $ (0.06) $ (0.84)
EXHIBIT 99.4
Statements of Thomas W. Horton made on January 23, 2003
Over the past year, AT&T has reduced its net debt balance by more than $21
billion, to end the year with net debt of $12.9 billion, well ahead of our
guidance of a mid-teens level. As a result, our net-debt to EBITDA, excluding
the AT&T Latin America asset impairment charge at year-end was 1.25x.
*****
Effective with our next earnings call, we will no longer be providing quarterly
or annual EPS guidance.
*****
Reflected in our segment and corporate outlook are increases in two major
non-cash expenses that I would like to briefly highlight. The first is
associated with our pension plans. For the 2003 plan year, we have changed the
discount rate assumption from 7.25% to 6.50%. We have also reduced the long-term
expected return on plan assets rom 9.0% to 8.5% to reflect a moderation in
long-term returns in the financial markets. We believe that our assumptions are
appropriately conservative, relative to both our historical long-term average
returns and the assumptions used by other large companies. These changes in
assumptions are expected to reduce operating income in 2003 by approximately
$100 million. I'd also like to point out that our pension plans remain well
funded on the IRS (ERISA) basis and, as we have previously stated, we would not
be required to make any cash contributions to our pension plan in 2003. In
addition, we expect to have minimal, if any, cash contribution requirements in
2004. The second non-cash charge pertains to accounting for stock options and
the employee stock purchase plan. At this point, while there are a number of
variables to this calculation, we'd estimate the collective impact to be up to a
$70 million reduction in operating income in 2003. There will be a minimal
impact in the first quarter, and most of the impact will begin at the time of
our 2003 annual stock option grants in the second quarter.
Net Debt Reconciliation
dollars in billions
At December 31, 2002 2001
------------ ------------
Total debt $22.6 $34.2
Less cash * 8.5 10.7
------------ ------------
Net Debt 14.1 23.5
Less:
Monetizations 0.5 1.3
Fluctuations in Foreign Debt Value 0.7 (0.2)
------------ ------------
Sub-total 12.9 22.4
AT&T Broadband Total Debt net of
AT&T Broadband Monetizations - 12.1
------------ ------------
Net Debt excluding Monetizations and
------------ ------------
Fluctuations in Foreign Debt Values $12.9 $34.5
============ ============
* At December 31, 2002, cash includes $0.4 billion of restricted cash that
collateralizes a portion of private debt and is included in "Other Assets"
in the balance sheet.
Reconciliation of EBITDA.
The table below provides a reconciliation of EBITDA (earnings before interest,
taxes, depreciation and amortization and minority interest) excluding other
income (expense), pretax equity earnings, and the AT&T Latin America impairment
charge, to the comparable Generally Accepted Accounting Principle (GAAP) measure
of Operating Income.
($s in millions)
2002
------------
EBITDA excluding other income (expense), pretax
equity earnings and the AT&T Latin America
impairment charge $ 10,278
Add:
AT&T Latin America impairment charge (1,029)
Depreciation and amortization (4,888)
------------
Operating Income $ 4,361
============
The foregoing are "forward-looking statements" which are based on management's
beliefs as well as on a number of assumptions concerning future events made by
and information currently available to management. Readers are cautioned not to
put undue reliance on such forward-looking statements, which are not a guarantee
of performance and are subject to a number of uncertainties and other factors,
many of which are outside AT&T's control, that could cause actual results to
differ materially from such statements. For a more detailed description of the
factors that could cause such a difference, please see AT&T's filings with the
Securities and Exchange Commission. AT&T disclaims any intention or obligation
to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. This information is presented solely to
provide additional information to further understand the results of AT&T.