RNS Number:8983X
Bellsouth Corp
22 April 2004
BellSouth Reports First Quarter Earnings
* 636,000 long distance customers net additions
* 156,000 DSL customer net additions
* 554,000 Cingular Wireless customers net additions
ATLANTA - Bellsouth Corporation (NYSE: BLS) announced first quarter 2004
earnings per share (EPS) from continuing operations of 63 cents, including
special items totaling 15 cents (see below). This compared to 46 cents in the
first quarter of 2003, including special items totaling 4 cents (see below).
For the first quarter, consolidated revenues from continuing operations were
$5.0 billion, 0.8 percent lower than the same quarter of the previous year.
Income from continuing operations was $1.2 billion compared to $850 million in
the same quarter a year ago.
Operating free cash flow from continuing operations (defined as cash flow from
operations less capital expenditures) totaled $1.1 billion. Capital expenditures
for continuing operations in the first quarter of 2004 were $635 million
compared to $588 million in 2003.
In accordance with Generally Accepted Accounting Principles (GAAP), Bellsouth's
reported consolidated revenues and consolidated operating expenses from
continuing operations do not include the company's 40 percent share of Cingular
Wireless.
Normalized results from continuing operations include Bellsouth's 40 percent
proportionate share of Cingular's revenues and expenses. Normalized EPS was 48
cents in the first quarter of 2004 compared to 50 cents in the same quarter a
year ago. Normalized revenues were $6.6 billion, an increase of 2.0 percent
versus the first quarter of 2003. Normalized net income was $888 million,
compared to $924 million in the same quarter a year ago.
Communications Group
Growth in revenues from long distance and DSL offset access line declines
holding Communications Group revenues flat at $4.6 billion compared to 2003.
Operating margin for the quarter was 25.6 percent compared 26.3 percent for the
full year in 2003.
BellSouth added 636,000 long distance customers during the first quarter of 2004,
for a total of 4.6 million and almost 35 percent penetration of its mass-market
customers by quarter-end. This progress was driven by Unlimited long distance
plans and new flat rate calling plans.
BellSouth added 156,000 net DSL customers for a total of 1.6 million at quarter-
end. Led by DSL, data revenues were $1.1 billion, up slightly compared to the
same quarter of 2003.
Total access lines of 22.1 million at March 31 declined 3.6 percent compared to
a year earlier. Residence and business access lines served by BellSouth
competitors under UNE-P (unbundled network elements-platform) increased by
301,000 in the first quarter.
Domestic Wireless / Cingular
Cingular Wireless continued strong customer growth with 554,000 net cellular/PCS
customers in the first quarter.
BellSouth's share of Cingular's revenues was $1.6 billion, a gain of 8.4 percent
compared to the same quarter a year ago. Segment operating income was $224
million for the quarter compared to $286 million in 2003. First quarter
operating margin was 14.2 percent compared to 19.7 percent in the first quarter
of 2003 and a 580 basis point improvement over the fourth quarter of 2003.
Cingular is moving towards completing the deployment of its nationwide network
of next-generation GSM/GPRS technology. By the end of the first quarter of 2004,
the company's GSM/GPRS network covered 94 percent of the company's operational
POPs, and Cingular expects to achieve 100 percent network coverage by July 2004.
At the end of the first quarter, over 53 percent of Cingular's handsets were GSM
capable and approximately 66 percent of Cingular's total minutes are carried on
its GSM network.
When Cingular's pending acquisition of AT&T Wireless is complete, Cingular will
become the nation's leading wireless carrier providing a strong platform for
growth to BellSouth. The assets that Cingular and AT&T Wireless will bring
together have an outstanding strategic fit and the new Cingular will be capable
of delivering a new level of world-class service, products and features to
wireless customers with better service quality, broader coverage, more data
services, and more choices.
Advertising & Publishing
Advertising & Publishing revenues were $482 million in the first quarter of 2004,
a decrease of 3.2 percent compared to the same quarter a year ago, resulting
from the lingering effects of a slow economy in 2003 and continued competition.
Operating margins for the first quarter of 2004 improved slightly over the first
quarter of 2003 driven by improvements in uncollectibles expense. Segment net
income was $147 million compared to $149 million in the first quarter of 2003.
Discontinued Operations: Latin America Group
On March 8, 2004, BellSouth announced that it had signed a definitive agreement
with Telefonica Moviles, the wireless affiliate of Telefonica, S.A., to sell
BellSouth's interests in its 10 Latin American operations. The transaction is
expected to close in stages as closing conditions are met with the final closing
expected to occur in the second half of 2004.
Following generally accepted accounting principles (GAAP); the company's
financial statements reflect results for the Latin American segment in the line
item titled Discontinued Operations.
In the first quarter of 2004, BellSouth reported income from discontinued
operations of 24 cents per share compared to 3 cents per share in 2003. Income
from discontinued operations was $449 million and includes an $11 million gain
from foreign currency and a one-time tax benefit of $424 million.
The BellSouth Latin American operations added 954,000 customers in the first
quarter of 2004 for a total of 10.6 million customers served at the quarter-end.
Latin American operations produced $677 million in revenue for the first quarter
of 2004.
2003 Accounting Changes
In the first quarter of 2003, BellSouth adopted Statement of Financial
Accounting Standards (SFAS) No. 143, "Accounting for Asset Retirement
Obligations." The adoption of SFAS 143 resulted in a one-time increase in net
income of $816 million (44 cents per share). BellSouth also changed the method
for recognizing revenues and expenses in its directory publishing business
from the issue basis method to the deferral method. The change resulted in a
one-time decrease to net income of $501 million, or 27 cents per share, in the
first quarter of 2003. Together, these changes result in a gain of 17 cents to
2003 earnings per share.
Special Items
In the first quarter of 2004, the difference between reported (GAAP) EPS from
continuing operations and normalized EPS is shown in the following table:
1Q04 1Q03
GAAP Diluted EPS - from continuing operations $0.63 $0.46
Pension Settlement / Severance Costs 0.04
Sale of Denmark operations (0.16)
SC Regulatory Settlement 0.02
Diluted EPS - Normalized from continuing operations (1)$0.48 $0.50
(1) Diluted EPS- Normalized from continuing operations may not sum due to
rounding
Pension Settlement / Severance Costs - Costs associated with workforce
reductions in 2002 and 2003.
Sale of Denmark operations - Gain on sale of Sonofon, Denmark operations
SC Regulatory Settlement - In April 2004, BellSouth entered into a settlement
agreement with the South Carolina Consumer Advocate with respect to previously
disclosed litigation (See 2003 10K). The settlement requires among other
things, that BellSouth refund $50 million to its South Carolina customers. The
refund was recorded in the first quarter 2004 as a reduction to revenue.
About BellSouth Corporation
BellSouth Corporation is a Fortune 100 communications services company
headquartered in Atlanta, Georgia. BellSouth serves nearly 50 million local,
long distance, Internet and wireless customers in the United States and 12 other
countries.
Consistently recognized for customer satisfaction, BellSouth provides complete
communications solutions to the residential and business markets. In the
residential market, BellSouth offers DSL high-speed Internet access and long
distance, advanced voice features and other services. The company's BellSouth
AnswersSM package combines local and long distance service with an array of
calling features; wireless data, voice and e-mail services; and high-speed DSL
or dial-up Internet service and Cingular Wireless. In the business market,
BellSouth serves small, medium and large businesses providing secure, reliable
local and long distance voice and data networking solutions. BellSouth also
provides online and directory advertising services through BellSouth(R)
RealPages. comSM and The Real Yellow Pages(R).
BellSouth owns 40 percent of Cingular Wireless, the nation's second largest
wireless company, which provides innovative wireless voice and data services.
Further information about BellSouth and Cingular's first quarter earnings can be
accessed at www.bellsouth.com/investor. The press release, financial statements
and BLS Investor News summarizing highlights of the quarter are available on the
BellSouth Investor Relations web site starting today at 8 a.m. Eastern Time (ET).
BellSouth will host a conference call with investors today at 10 a.m. (ET).
Participating will be BellSouth CFO, Ron Dykes and Investor Relations Vice
President, Nancy Davis. Dial-in information for the conference call is as
follows:
Domestic: 888-370-1863
International: 706-634-1735
The conference call will also be web cast live beginning at 10:00 a.m. (ET) on
our website at www.bellsouth.com/investor. The web cast will be archived on our
website beginning at approximately 1p.m. (ET) today.
A replay of the call will be available beginning at approximately 1 p.m. (ET)
today, through April 29, 2004 and can be accessed by dialing:
Domestic: 800-642-1687 - Reservation number: 6093719
International: 706-645-9291 - Reservation number: 6093719
In addition to historical information, this document may contain forward-looking
statements regarding events and financial trends. Factors that could affect
future results and could cause actual results to differ materially from those
expressed or implied in the forward-looking statements include: (i) a change in
economic conditions in domestic or international 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; (v) currency devaluations and continued economic
weakness in certain international markets in which we operate or have material
investments; and (vi) those factors contained in the Company's periodic reports
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 web site, www.bellsouth.com/investor.
For More Information Contact:
Jeff Battcher, Media Relations at 404-249-2793
BellSouth Investor Relations at 800-241-3419
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 page 3 for a summary of unusual items included in Reported Basis
results.
1Q04 1Q03 Growth 4Q03 Growth
Operating Revenues
Communications group $ 4,485 $ 4,508 -0.5% $ 4,576 -2.0%
Advertising and publishing 479 494 -3.0% 518 -7.5%
All other 12 12 0.0% 13 -7.7%
Total Operating Revenues 4,976 5,014 -0.8% 5,107 -2.6%
Operating Expenses
Cost of services and products 1,798 1,675 7.3% 1,762 2.0%
Selling, general & administrative 909 919 -1.1% 980 -7.2%
Depreciation and amortization 898 949 -5.4% 950 -5.5%
Provision for restructuring
and asset impairments 13 120 -89.2% 16 -18.8%
Total Operating Expenses 3,618 3,663 -1.2% 3,708 -2.4%
Operating Income 1,358 1,351 0.5% 1,399 -2.9%
Interest Expense 215 258 -16.7% 222 -3.2%
Other Income (Expense), net 630 247 155.1% 108 N/M*
Income from Continuing Operations
before Income Taxes, Discontinued
Operations and Cumulative Effect of
Changes in Accounting Principles 1,773 1,340 32.3% 1,285 38.0%
Provision for Income Taxes 623 490 27.1% 449 38.8%
Income from Continuing Operations
before Discontinued Operations and
Cumulative Effect of Changes in
Accounting Principles 1,150 850 35.3% 836 37.6%
Income (Loss) from Discontinued
Operations, net of tax 449 65 590.8% (49) 1016.3%
Income Before Cumulative Effect of
Changes in Accounting Principles 1,599 915 74.8% 787 103.2%
Cumulative Effect of Changes in
Accounting Principles, net of tax - 315 -100.0% - N/M
Net Income 1,599 1,230 30.0% 787 103.2%
Diluted:
Weighted Average Common Shares
Outstanding 1,838 1,861 -1.2% 1,845 -0.4%
Earnings Per Share:
Income from Continuing
Operations $0.63 $0.46 37.0% $0.45 40.0%
Income from Discontinued
Operations $0.24 $0.03 N/M ($0.03) N/M
Cumulative Effect of Changes in
Accounting Principles $0.00 $0.17 -100.0% $0.00 N/M
Net Income $0.87 $0.66 31.8% $0.43 102.3%
* - Not meaningful.
Selected Financial and Operating Data - Continuing Operations
Operating income $1,358 $1,351 0.5% $1,399 -2.9%
Operating margin 27.3% 26.9% 40 bps 27.4% -10 bps
Dividends per share $0.25 $0.21 19.0% $0.25 0.0%
Capital expenditures $635 $588 8.0% $948 -33.0%
Common shares outstanding 1,834 1,847 -0.7% 1,830 0.2%
Book value per share $11.48 $9.96 15.3% $10.77 6.6%
BellSouth Corporation
Consolidated Statements of Income from Continuing Operations - 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 page 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.
1Q04 1Q03 Growth 4Q03 Growth
Operating Revenues
Communications group $ 4,488 $ 4,469 0.4% $ 4,528 -0.9%
Domestic wireless 1,577 1,455 8.4% 1,565 0.8%
Domestic advertising and
publishing 479 494 -3.0% 518 -7.5%
All other 12 12 0.0% 14 -14.3%
Total Operating Revenues 6,556 6,430 2.0% 6,625 -1.0%
Operating Expenses
Cost of services and products 2,339 2,125 10.1% 2,327 0.5%
Selling, general, &
administrative expenses 1,464 1,404 4.3% 1,572 -6.9%
Depreciation and amortization 1,119 1,144 -2.2% 1,179 -5.1%
Total Operating Expenses 4,922 4,673 5.3% 5,078 -3.1%
Operating Income 1,634 1,757 -7.0% 1,547 5.6%
Interest Expense 272 326 -16.6% 281 -3.2%
Other Income (Expense), net 4 30 -86.7% 39 -89.7%
Income Before Income Taxes 1,366 1,461 -6.5% 1,305 4.7%
Provision for Income Taxes 478 537 -11.0% 459 4.1%
Net Income $ 888 $ 924 -3.9% $846 5.0%
Diluted:
Weighted Average Common Shares
Outstanding 1,838 1,861 -1.2% 1,845 -0.4%
Earnings Per Share $0.48 $0.50 -4.0% $0.46 4.3%
Selected Financial and Operating Data - Continuing Operations
Operating income $1,634 $1,757 -7.0% $1,547 5.6%
Operating margin 24.9% 27.3% -240 bps 23.4% 150 bps
Declared dividends per share $0.25 $0.21 19.0% $0.25 0.0%
Capital expenditures $635 $588 8.0% $948 -33.0%
Common shares outstanding 1,834 1,847 -0.7% 1,830 0.2%
Book value per share $11.48 $9.96 15.3% $10.77 6.6%
Total employees 64,651 67,342 -4.0% 65,842 -1.8%
BellSouth Corporation
Normalized Earnings Summary and Reconciliation to Reported Results
(amounts in millions, except per share data)
First Quarter 2004 Normalizing Items
Sale of Discontinued SC
Cingular Sonofon Operations Settlement
GAAP A E F G Normalized
Operating Revenues $ 4,976 $ 1,530 $ 50 $ 6,556
Operating Expenses 3,618 1,307 (3) 4,922
Operating Income 1,358 223 - - 53 1,634
Interest Expense 215 57 272
Other Income (Expense),
net 630 (164) (462) 4
Income from Continuing
Operations before Income
Taxes 1,773 2 (462) - 53 1,366
Provision for Income
Taxes 623 2 (167) 20 478
Income from Continuing
Operations 1,150 - (295) - 33 888
Income (Loss) from
Discontinued Operations,
net of tax 449 (449) -
Net Income $1,599 $0 ($295) ($449) $33 $888
Diluted Earnings Per
Share * $0.87 $0.00 ($0.16) ($0.24) $0.02 $0.48
* Normalized earnings per share for first quarter 2004 does not sum due to
rounding.
First Quarter 2003 Normalizing Items
A&P Pension/ Discontinued
Cingular Acctg. Change FAS143 Severance Operations
GAAP A B C D F Normalized
Operating Revenues $ 5,014 $ 1,416 $ 6,430
Operating Expenses 3,663 1,130 (120) 4,673
Operating Income 1,351 286 - - 120 - 1,757
Interest Expense 258 68 326
Other Income (Expense),
net 247 (217) 30
Income from Continuing
Operations before Income
Taxes 1,340 1 - - 120 - 1,461
Provision for Income
Taxes 490 1 46 537
Income from Continuing
Operations 850 - - - 74 - 924
Income (Loss) from
Discontinued Operations,
net of tax 65 (65) -
Income Before Cumulative
Effect of Changes in
Accounting Principles 915 - - - 74 (65) 924
Cumulative Effect of
Changes in Accounting
Principles 315 501 (816) -
Net Income $1,230 $0 $501 ($816) $74 ($65) $924
Diluted Earnings Per
Share $0.66 $0.00 $0.27 ($0.44) $0.04 ($0.03) $0.50
BellSouth Corporation
Notes to Normalized Financial and Operating Data
Our normalized earnings have been adjusted for the following:
(a) 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.
(b) Change in method of accounting related to our directory publishing business
from the issue basis method to the deferral method - The 2003 amount is a
one-time charge to net income of $501.
(c) Adoption of Financial Accounting Standard No. 143 (FAS 143) - Represents a
one-time charge related to the adoption of new accounting rules associated
with obligations related to the retirement of long-lived assets. The
adjustment resulted in a one-time increase to net income of $816.
(d) Pension/Severance Costs - During 2003, the number of employees who
voluntarily separated and elected to receive lump-sum retirement benefits
exceeded thresholds that require current recognition of deferred losses
related to these employees. These costs include $33 after-tax of severance
related costs.
(e) Gain related to the sale of our operations in Denmark.
(f) Discontinued Operations - In March 2004, we announced our intention to sell
our Latin American properties. Accordingly, the prior period results have
been recast to reflect the Latin American operations as Discontinued
Operations and thus excluded from normalized results. These amounts are
reported net of a $405 tax benefit in the first quarter of 2004 and of a
$16 tax benefit in the first quarter of 2003.
(g) SC Regulatory Settlement - In April 2004, BellSouth entered into a
settlement agreement with the South Carolina Consumer Advocate with respect
to previously disclosed litigation (See 2003 10k). The settlement requires
among other things, that BellSouth refund $50 million to its South Carolina
customers. The refund was recorded in the first quarter 2004 as a reduction
to revenue.
BellSouth Corporation
Consolidated Balance Sheets (unaudited)
(amounts in millions, except per share data)
March 31, December 31, Change vs.
2004 2003 Prior Year-End
Assets
Current Assets:
Cash and cash equivalents $5,368 $4,556 $812
Accounts receivable, net of
allowance for uncollectibles
of $396 and $496 2,385 2,870 (485)
Material and supplies 293 375 (82)
Other current assets 887 1,048 (161)
Assets of discontinued
operations 3,796 0 3,796
Total Current Assets 12,729 8,849 3,880
Investments and Advances 8,206 8,552 (346)
Property, Plant and Equipment,
net 22,282 23,807 (1,525)
Deferred Charges and Other
Assets 5,938 5,855 83
Goodwill 249 342 (93)
Intangible Assets, net 1,525 2,297 (772)
Total Assets $50,929 $49,702 $1,227
Liabilities and Shareholders' Equity
Current Liabilities:
Debt maturing within one year $2,508 $3,491 ($983)
Accounts payable 1,047 1,339 (292)
Other current liabilities 3,059 3,628 (569)
Liabilities of discontinued
operations 2,582 0 2,582
Total Current Liabilities 9,196 8,458 738
Long-Term Debt 10,616 11,489 (873)
Noncurrent Liabilities:
Deferred income taxes 5,694 5,349 345
Other noncurrent liabilities 4,367 4,694 (327)
Total Noncurrent
Liabilities 10,061 10,043 18
Shareholders' Equity:
Common stock, $1 par value 2,020 2,020 0
Paid-in capital 7,708 7,729 (21)
Retained earnings 17,626 16,540 1,086
Accumulated other
comprehensive income (471) (585) 114
Shares held in trust and
treasury (5,827) (5,992) 165
Total Shareholders' Equity 21,056 19,712 1,344
Total Liabilities and
Shareholders' Equity $50,929 $49,702 $1,227
BellSouth Corporation
Consolidated Statements of Cash Flows (unaudited)
(amounts in millions)
1Q04 1Q03 4Q03
Cash Flows from Operating Activities:
Income from Continuing Operations $ 1,150 $ 850 $ 836
Adjustments to income from continuing operations:
Depreciation and amortization 898 949 950
Provision for uncollectibles 115 159 125
Net losses (earnings) of equity affiliates (104) (171) (25)
Deferred income taxes 169 270 (12)
Pension income (121) (134) (133)
Pension settlement losses - 67 (40)
Stock-based compensation expense 28 27 32
(Gain) loss on sale/disposal of operations (462) - -
Net change in:
Accounts receivable and other current assets (14) (106) (89)
Account payable and other current liabilities 41 (33) (233)
Deferred charges and other assets (25) 86 46
Other liabilities and deferred credits 3 (56) (143)
Other reconciling items, net 50 2 14
Net cash provided by operating activities 1,728 1,910 1,328
Cash Flows from Investing Activities:
Capital expenditures (635) (588) (948)
Investments in debt and equity securities (140) (14) (167)
Proceeds from sale of securities and operations 559 - -
Proceeds from repayment of loans and advances 109 - -
Settlement of derivatives on advances (17) - -
Other investing activities, net (5) (3) (1)
Net cash provided by (used for) investing activities (129) (605) (1,116)
Cash Flows from Financing Activities:
Net borrowing (repayments) of short-term debt (362) (212) (8)
Repayments of long-term debt (7) (512) (13)
Dividends paid (457) (371) (425)
Purchase of treasury shares - (255) (536)
Other financing activities, net 48 13 38
Net cash used for financing activities (778) (1,337) (944)
Net Increase/(Decrease) in Cash from Continuing
Operations 821 (32) (732)
Net Increase/(Decrease) in Cash from Discontinued
Operations (9) (8) 263
Net Increase in Cash and Cash Equivalents 812 (40) (469)
Cash and Cash Equivalents at Beginning of Period 4,556 2,482 5,025
Cash and Cash Equivalents at End of Period $ 5,368 $ 2,442 $ 4,556
BellSouth Corporation
Results by Segment (amounts in millions) (unaudited)
Communications Group (1)
1Q04 1Q03 Growth 4Q03 Growth
Operating Revenues
Voice $3,169 $ 3,163 0.2% $3,164 0.2%
Data 1,092 1,090 0.2% 1,094 -0.2%
Other 314 323 -2.8% 360 -12.8%
Total Operating Revenues 4,575 4,576 0.0% 4,618 -0.9%
Operating Expenses
Cost of services and
products 1,745 1,625 7.4% 1,698 2.8%
Selling, general, &
administrative expenses 772 764 1.0% 792 -2.5%
Depreciation and amortization 888 937 -5.2% 941 -5.6%
Total Operating Expenses 3,405 3,326 2.4% 3,431 -0.8%
Segment Operating Income 1,170 1,250 -6.4% 1,187 -1.4%
Interest Expense 91 118 -22.9% 90 1.1%
Other Income (Expense), net 6 3 100.0% 10 -40.0%
Income Before Income Taxes 1,085 1,135 -4.4% 1,107 -2.0%
Provision for Income Taxes 398 426 -6.6% 393 1.3%
Segment Net Income(1) $687 $ 709 -3.1% $714 -3.8%
Selected Financial and Operating Data
(amounts in millions)
Segment operating income $1,170 $1,250 -6.4% $1,187 -1.4%
Segment operating margin 25.6% 27.3% -170 bps 25.7% -10 bps
Long distance revenues $440 $257 71.2% $411 7.1%
Access minutes of use 23,293 22,795 2.2% 22,903 1.7%
Capital expenditures $612 $566 8.1% $901 -32.1%
(amounts in thousands)
Wholesale Lines 2,960 2,171 36.3% 2,682 10.4%
DSL customers 1,618 1,122 44.2% 1,462 10.7%
LD customers 4,596 1,930 138.1% 3,960 16.1%
Consumer ARPU (4) $53.68 $49.93 7.5% $53.20 0.9%
BellSouth Corporation
Results by Segment (unaudited)
Supplemental Operating Data (in thousands)
Communications Group - Network Access Lines In Service Reported (a)
1Q04 1Q03 Growth 4Q03 Growth
Access lines
Residence
Retail
Primary 12,200 13,115 -7.0% 12,466 -2.1%
Additional 1,525 1,849 -17.5% 1,601 -4.7%
Total Retail Residence 13,725 14,964 -8.3% 14,067 -2.4%
Wholesale
Resale 160 296 -45.9% 177 -9.6%
UNE-P 1,963 1,156 69.8% 1,696 15.7%
Total Wholesale
Residence 2,123 1,452 46.2% 1,873 13.3%
Total Residence 15,848 16,416 -3.5% 15,940 -0.6%
Business
Retail
Total Retail Business 5,354 5,621 -4.8% 5,417 -1.2%
Wholesale
Resale 67 77 -13.0% 73 -8.2%
UNE-P 714 614 16.3% 686 4.1%
Total Wholesale Business 781 691 13.0% 759 2.9%
Total Business 6,135 6,312 -2.8% 6,176 -0.7%
Other Retail/Wholesale Lines
Retail 48 146 -67.1% 97 -50.5%
Wholesale 56 28 100.0% 50 12.0%
Total Other Retail/Wholesale
Lines 104 174 -40.2% 147 -29.3%
Total Access Lines in
Service 22,087 22,902 -3.6% 22,263 -0.8%
ISDN line equivalents
Residence 12 17 -29.4% 13 -7.7%
Business 1,457 1,592 -8.5% 1,453 0.3%
Total ISDN Adjusted ALIS 23,556 24,511 -3.9% 23,729 -0.7%
(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.
BellSouth Corporation
Results by Segment (amounts in millions) (unaudited)
Domestic Wireless Segment (1)(a)
1Q04 1Q03 Growth 4Q03 Growth
Operating Revenues
Service revenues (2) $1,423 $1,357 4.9% $1,414 0.6%
Equipment and other revenues 154 98 57.1% 151 2.0%
Total Operating Revenues 1,577 1,455 8.4% 1,565 0.8%
Operating Expenses
Cost of services and products 584 487 19.9% 607 -3.8%
Selling, general, &
administrative expenses 548 487 12.5% 599 -8.5%
Depreciation and amortization 221 195 13.3% 228 -3.1%
Total Operating Expenses 1,353 1,169 15.7% 1,434 -5.6%
Segment operating income 224 286 -21.7% 131 71.0%
Interest Expense 79 90 -12.2% 82 -3.7%
Other Income (Expense), net (47) (31) -51.6% (38) -23.7%
Income Before Income Taxes 98 165 -40.6% 11 N/M*
Provision for Income Taxes 39 64 -39.1% (1) N/M
Segment Net Income(1) $59 $101 -41.6% $12 391.7%
* - Not meaningful.
Selected Financial and Operating Data
(amounts in millions, except customer data in thousands)
Segment Operating Income $224 $286 -21.7% $131 71.0%
Segment operating margin 14.2% 19.7% -550 bps 8.4% 580 bps
Cellular/PCS Operating Metrics:
Total Customers 9,847 8,846 11.3% 9,611 2.5%
Net Customer Additions 222 76 192.1% 257 -13.6%
Partitioned Customers and/or
Adjustments 15 - N/M - N/M
Churn 2.7% 2.6% 10 bps 2.8% -10 bps
Wireless Service ARPU (3) $47.95 $50.76 -5.5% $49.03 -2.2%
Minutes Of Use Per
Subscriber 488 405 20.5% 475 2.7%
Licensed POPs (4) 96 94 2.1% 94 2.1%
Penetration (4) 10.9% 10.0% 90 bps 10.8% 10 bps
Cingular Interactive Operating Metrics:
Total Customers 307 334 -8.1% 316 -2.8%
Net Customer Additions (8) 7 -214.3% - N/M
(a) The domestic 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)
1Q04 1Q03 Growth 4Q03 Growth
Operating Revenues
Advertising and publishing
revenues 466 $ 481 -3.1% 470 -0.9%
Commission revenues 16 17 -5.9% 52 -69.2%
Total Operating Revenues 482 $ 498 -3.2% 522 -7.7%
Operating Expenses
Cost of services 80 78 2.6% 91 -12.1%
Selling, general, &
administrative expenses 156 170 -8.2% 184 -15.2%
Depreciation and amortization 7 7 0.0% 7 0.0%
Total Operating Expenses 243 255 -4.7% 282 -13.8%
Segment Operating Income 239 243 -1.6% 240 -0.4%
Interest Expense 2 2 0.0% 2 0.0%
Other Income (Expense), net - (1) 100.0% 1 -100.0%
Income Before Income Taxes 237 240 -1.3% 239 -0.8%
Provision for Income Taxes 90 91 -1.1% 92 -2.2%
Segment Net Income(1) $147 $149 -1.3% $147 0.0%
Segment operating income $239 $243 -1.6% $240 -0.4%
Segment operating margin 49.6% 48.8% 80 bps 46.0% 360 bps
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) 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. Average
monthly revenue per customer is calculated by dividing average monthly
service revenue by average customers.
(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 - Cellular/PCS 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) Licensed POPs refers to the number of people residing in areas where
Cingular and its partners, Salmon and T-Mobile USA, Inc., have licenses to
provide cellular or PCS service, including the New York City metropolitan
area, and in areas where Cingular has not yet commenced service, such as
the Salt Lake City area. As a result of the consolidation of Salmon,
effective January 1, 2003, Salmon's licensed POPs of 4 million (BellSouth's
40% share) are included in the 2003 total licensed POPs. Penetration
calculation is based upon licensed operational POPs of 89 million
(BellSouth's 40% share). The New York City metropolitan area is also
included in the penetration calculation.
BellSouth Corporation
Non-GAAP Measures - Reconciliation
(amounts in millions) (unaudited)
Segment Net Income Reconciliation to GAAP Net Income
1Q04 1Q03 4Q03
Communications group segment net income $ 687 $ 709 $ 714
Domestic wireless group segment net income 59 101 12
Advertising and publishing group segment net income 147 149 147
Corporate, eliminations and other (5) (35) (27)
Normalized net income 888 924 846
Add back Excluded non-recurring or non-operational
items (a) 711 306 (59)
Consolidated GAAP net income $ 1,599 $ 1,230 $ 787
Free Cash Flow
1Q04 1Q03 4Q03
Net cash provided by operating activities $ 1,728 $ 1,910 $ 1,328
Less Capital Expenditures (635) (588) (948)
Operating Free Cash Flow $ 1,093 $ 1,322 $ 380
Net Debt
March 31, December 31,
2004 2003
Total Debt $ 13,124 $ 14,980
Less Cash (5,368) (4,556)
Net Debt $ 7,756 $ 10,424
Communications Group Operating Income before Depreciation and Amortization
1Q04 1Q03 4Q03
Operating Revenues $ 4,575 $ 4,576 $ 4,618
Operating Income 1,170 1,250 1,187
Add back Depreciation and amortization 888 937 941
Operating Income before Depreciation and
Amortization $ 2,058 $ 2,187 $ 2,128
Margin 45.0% 47.8% 46.1%
(a) See pages 3 and 4 for detail of excluded items.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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