BellSouth 4th Quarter Earning
Bellsouth Corp
22 January 2004
For Immediate Release
January 22, 2004
For More Information Contact:
Jeff Battcher, Media Relations at 404-249-2793
BellSouth Investor Relations at 800-241-3419
BellSouth Reports Fourth Quarter Earnings
• 4 million long distance customers
• 1.5 million high-speed Internet customers
• 642,000 Cingular Wireless net additional customers
• 345,000 Latin America net additional customers
ATLANTA - BellSouth Corporation (NYSE: BLS) reported earnings per share (EPS) of
43 cents in the fourth quarter of 2003, including special charges totaling 8
cents (see below). This compared to reported EPS of 31 cents in the fourth
quarter of 2002, which included special charges totaling 14 cents (see below).
For the fourth quarter, consolidated revenues increased 0.9 percent to $5.7
billion compared to the same quarter of the previous year. Net income was $787
million compared to $574 million in the same quarter a year ago.
In accordance with Generally Accepted Accounting Principles (GAAP), BellSouth's
reported consolidated revenues and consolidated operating expenses do not
include the company's 40 percent share of Cingular Wireless. Normalized results
include BellSouth's 40 percent proportionate share of Cingular's revenues and
expenses.
Normalized EPS of 51 cents increased 13.3 percent in the fourth quarter of 2003
compared to 45 cents in the same quarter a year ago. Normalized revenues were
$7.3 billion, an increase of 4.1 percent versus the fourth quarter of 2002.
Normalized net income was $949 million, compared to $846 million in the same
quarter a year ago.
Full Year Results
For the full year of 2003, BellSouth reported EPS of $2.11. This compared to 71
cents in 2002, which included special charges totaling $1.32 outlined in the
attached financial statements. For the full year, consolidated revenues
increased 0.9 percent to $22.6 billion. Reported net income was $3.9 billion
compared to $1.3 billion the previous year. Normalized EPS was $2.07 compared to
$2.03 in 2002. Including Cingular, revenues were up slightly versus 2002 at
$28.7 billion. Normalized net income was $3.8 billion for the year, up slightly
compared to 2002.
Operating free cash flow (defined as cash flow from operations less capital
expenditures) totaled $5.3 billion for the full year. Capital expenditures for
2003 were $3.2 billion, a reduction of 15.5 percent compared to 2002. Total debt
at December 31, 2003 was $15.0 billion, a reduction of $2.4 billion since the
first of the year.
In November, BellSouth's Board of Directors declared an 8.7 percent increase in
the quarterly common stock dividend, payable February 2, 2004. Over the last
seven quarters, the company has increased its quarterly dividend 31.6 percent to
25 cents per common share.
Communications Group
In 2003, BellSouth Long Distance and DSL high-speed Internet service revenue
growth offset access line declines holding Communications Group revenues nearly
flat at $18.4 billion compared to 2002. In the fourth quarter, revenues
increased 2.1 percent to $4.6 billion compared to $4.5 billion in the same
quarter the previous year. Operating margin for the quarter improved to 25.7
percent compared to 24.6 percent in the same quarter last year.
In the fourth quarter, BellSouth AnswersSM packages increased to more than 3
million, which represents a 24 percent penetration of primary access lines.
Answers combines customers' local, long distance, Internet and wireless services
all on one bill. BellSouth(R) Unlimited AnswersSM contributed to the growth in
package customers with subscribers exceeding 1 million at the end of fourth
quarter. Unlimited Answers allows customers to call anywhere in the United
States anytime for a flat monthly fee.
BellSouth added approximately 3 million long distance customers during 2003, for
a total of 3.96 million customers and almost 30 percent penetration of its
mass-market customers by year-end. During the fourth quarter, about 40 percent
of new customers included international long distance in their calling plans.
This was due in part to the October introduction of BellSouth's International
Advantage Plan, which offers residential customers competitive flat rates at any
time of day to many countries including Canada and Mexico.
BellSouth added 126,000 net DSL customers in the fourth quarter of 2003,
compared to 97,000 customer additions in the fourth quarter of 2002, bringing
its end of year total subscribers to 1.46 million. BellSouth(R) FastAccess(R)
DSL Lite contributed to this increase. BellSouth's Internet access portfolio
offers customers an easy migration path from dial-up Internet access to two
different tiers of high-speed Internet access with the option to add features
like home networking and parental controls. Lead by DSL, data revenues of $1.1
billion grew 4.0 percent in the fourth quarter of 2003 compared to the same
quarter of 2002.
Total access lines of 23.7 million at December 31 declined 3.6 percent compared
to a year earlier, impacted by the economy, competition and technology
substitution. Residence and business access lines served by BellSouth
competitors under UNE-P (unbundled network elements-platform) increased by
199,000 in the fourth quarter.
Domestic Wireless / Cingular
Cingular Wireless added 642,000 net cellular/PCS customers in the fourth
quarter. Cingular's focus on calling plans tailored to local markets and
co-branding and bundling programs with its parent companies were significant
contributors to growth at Cingular, which ended the quarter with more than 24
million cellular/PCS customers.
As disclosed in Cingular's press release, the company changed its presentation
of Universal Service Fund (USF) payments and receipts to a gross basis.
Reflecting this change,
BellSouth's share of Cingular's revenues was $1.6 billion, a gain of 5.7 percent
compared to the same quarter a year ago. Segment operating income was $131
million for the quarter compared to $284 million in 2002. Fourth quarter
operating margins were impacted by significantly higher gross customer
additions, extensive customer retention programs, increased advertising and
costs associated with launching wireless local number portability. For the full
year of 2003, segment operating income totaled $915 million compared to $1.1
billion in 2002.
Cingular continues to upgrade network efficiency and capability through movement
of its subscriber base to GSM/GPRS and deployment of EDGE. By the end of 2003,
the company's GSM/GPRS network was available to 93 percent of its potential
customers and with approximately 57 percent of subscriber minutes traveling on
this upgraded network.
Latin America Group
Growth in customers, revenues and margins continued in the Latin America
wireless group during the fourth quarter of 2003. Wireless customers increased
345,000 on a consolidated basis. Year-over-year, customers increased 1.5
million, or 18.6 percent. BellSouth's Latin America group served 9.7 million
customers at year-end.
Consolidated Latin America revenues increased 30.9 percent to $636 million in
the fourth quarter of 2003 compared to the same three months of the previous
year. Strong customer growth in Venezuela, Argentina, Chile and Columbia drove
the increase in segment revenues. Focusing on growing revenues, improving
operating margins and targeting capital deployments contributed to positive
operating free cash flow in 2003. Segment net income was $62 million in the
fourth quarter and $161 million for the full year.
During the fourth quarter, BellSouth entered into a debt purchase agreement with
senior secured creditors of BCP, a wireless company in Sao Paulo, Brazil. As a
result of the agreement, BellSouth sold its entire interest in BCP and
recognized a total net loss associated with the sale of $161 million.
Advertising & Publishing
Advertising & Publishing revenues were $522 million in the fourth quarter of
2003, a decrease of 6.1 percent compared to the same quarter a year ago,
resulting in part from reduced spending on advertising and continued
competition. Segment net income of $147 million was 24.6 percent higher than the
fourth quarter of 2002, primarily the result of improvement in uncollectibles
expense. Full year operating revenues declined 5.0 percent and net income
improved 10.1 percent.
Special Items
In the fourth quarter of 2003, the difference between reported (GAAP) EPS of 43
cents and normalized EPS of 51 cents is the result of three special items:
Foreign currency transaction gains 1 cent Gain
Pension settlement / severance costs 1 cent Charge
Sale of Brazil SP 9 cents Charge
Effect of Rounding 1 cent
Total of special items 8 cents Charge
Foreign currency transaction gains - Primarily associated with the remeasurement
of U.S. dollar-denominated liabilities in Latin America.
Pension settlement / severance costs - This charge represents the net severance
related costs recorded in the fourth quarter associated with workforce
reductions, offset by pension settlement gains associated with workforce
reductions.
Sale of Brazil SP - Loss on sale of Brazil SP.
In the fourth quarter of 2002, special charges totaled 14 cents per share, after
rounding, for: asset impairments (11 cents); workforce reduction (3 cents);
disposition of Listel (3 cents); foreign currency transaction losses (1 cent)
and an adjustment of 4 cents to Advertising & Publishing results to reflect the
2003 accounting change.
About BellSouth Corporation
BellSouth Corporation is a Fortune 100 communications services company
headquartered in Atlanta, Georgia. BellSouth and its affiliates serve more than
45 million local, long distance, Internet and wireless customers in the United
States and 13 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's fourth 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.
BellSouth will host a conference call with investors today at 10 a.m. Eastern
Time. Participating will be BellSouth CFO, Ron Dykes and Investor Relations Vice
President, Nancy Davis. Dial-in information for the conference call is:
Domestic: 888-370-1863
International: 706-634-1735
A replay of the call will be available beginning at approximately 1 p.m. Eastern
Time today, through January 29, 2004. The replay can be accessed by dialing:
Domestic: 800-642-1687 - Reservation number: 4367951
International: 706-645-9291 - Reservation number: 4367951
The conference call will also be web cast live beginning at 10:00 a.m. (ET) on
our website at www.bellsouth.com/investor. A replay of the call will be
available on the website through January 29, 2004.
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)
currency devaluations and continued economic weakness in certain international
markets in which we operate or have material investments; (iii) the intensity of
competitive activity and its resulting impact on pricing strategies and new
product offerings; (iv) higher than anticipated cash requirements for
investments, new business initiatives and acquisitions; (v) unfavorable
regulatory actions 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.
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.
Year-to-Date
4Q03 4Q02 Growth 3Q03 Growth 2003 2002 Growth
Operating Revenues
Communications group $ 4,576 $ 4,481 2.1% $ 4,626 -1.1% $ 18,255 $ 18,226 0.2%
Latin America 635 486 30.7% 587 8.2% 2,294 2,233 2.7%
Advertising and publishing 518 709 -26.9% 501 3.4% 2,033 1,921 5.8%
All other 13 16 -18.8% 14 -7.1% 53 60 -11.7%
Total Operating Revenues 5,742 5,692 0.9% 5,728 0.2% 22,635 22,440 0.9%
Operating Expenses
Cost of services and products 2,009 1,855 8.3% 2,038 -1.4% 7,988 7,573 5.5%
Selling, general & administrative
expenses 1,136 1,238 -8.2% 1,032 10.1% 4,353 4,481 -2.9%
Depreciation and amortization 1,043 1,151 -9.4% 1,052 -0.9% 4,179 4,643 -10.0%
Provision for restructuring
and asset impairments 16 312 -94.9% 52 -69.2% 209 997 -79.0%
Total Operating Expenses 4,204 4,556 -7.7% 4,174 0.7% 16,729 17,694 -5.5%
Operating Income 1,538 1,136 35.4% 1,554 -1.0% 5,906 4,746 24.4%
Interest Expense 243 292 -16.8% 260 -6.5% 1,048 1,188 -11.8%
Other Income (Expense), net 1 68 -98.5% 148 -99.3% 742 858 -13.5%
Income Before Taxes and
Accounting Change 1,296 912 42.1% 1,442 -10.1% 5,600 4,416 26.8%
Provision for Income Taxes 509 338 50.6% 506 0.6% 2,011 1,808 11.2%
Income Before Cumulative Effect Change 787 574 37.1% 936 -15.9% 3,589 2,608 37.6%
Cumulative Effect of Changes in
Accounting Principle - - - 315 (1,285) 124.5%
Net Income $787 $574 37.1% $936 -15.9% $3,904 $1,323 195.1%
Diluted:
Weighted Average Common Shares
Outstanding 1,845 1,865 -1.1% 1,851 -0.3% 1,852 1,876 -1.3%
Earnings Per Share $0.43 $0.31 38.7% $0.51 -15.7% $2.11 $0.71 197.2%
Selected Financial and
Operating Data
Operating income $1,538 $1,136 35.4% $1,554 -1.0% $5,906 $4,746 24.4%
Operating margin 26.8% 20.0% 680 bps 27.1% -30 bps 26.1% 21.1% 500 bps
Declared dividends per share $0.25 $0.20 25.0% $0.23 8.7% $0.92 $0.79 16.5%
Capital expenditures $1,076 $922 16.7% $764 40.8% $3,200 $3,785 -15.5%
Common shares outstanding 1,830 1,860 -1.6% 1,848 -1.0%
Book value per share $10.77 $9.63 11.8% $10.65 1.1%
Debt ratio 43.1% 49.2% -610 bps 43.2% -10 bps
Total employees 75,743 77,020 -1.7% 76,009 -0.3%
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. Certain reclassifications have been made to prior periods to conform to the current presentation.
Year-to-Date
4Q03 4Q02 Growth 3Q03 Growth 2003 2002 Growth
Operating Revenues
Communications group $ 4,528 $ 4,441 2.0% $ 4,583 -1.2% $ 18,084 $ 18,180 -0.5%
Domestic wireless 1,565 1,481 5.7% 1,624 -3.6% 6,193 5,961 3.9%
Latin America 635 486 30.7% 587 8.2% 2,294 2,233 2.7%
Advertising and publishing 518 548 -5.5% 501 3.4% 2,033 2,134 -4.7%
All other 14 15 -6.7% 14 0.0% 54 59 -8.5%
Total Operating Revenues 7,260 6,971 4.1% 7,309 -0.7% 28,658 28,567 0.3%
Operating Expenses
Cost of services and products 2,574 2,276 13.1% 2,642 -2.6% 10,105 9,447 7.0%
Selling, general, & administrative expenses 1,728 1,726 0.1% 1,605 7.7% 6,507 6,632 -1.9%
Depreciation and amortization 1,271 1,338 -5.0% 1,261 0.8% 5,014 5,383 -6.9%
Total Operating Expenses 5,573 5,340 4.4% 5,508 1.2% 21,626 21,462 0.8%
Operating Income 1,687 1,631 3.4% 1,801 -6.3% 7,032 7,105 -1.0%
Interest Expense 302 357 -15.4% 316 -4.4% 1,295 1,426 -9.2%
Other Income (Expense), net 71 31 129.0% 24 195.8% 195 213 -8.5%
Income Before Income Taxes 1,456 1,305 11.6% 1,509 -3.5% 5,932 5,892 0.7%
Provision for Income Taxes 507 459 10.5% 529 -4.2% 2,091 2,075 0.8%
Net Income $949 $846 12.2% $980 -3.2% $3,841 $3,817 0.6%
Diluted:
Weighted Average Common Shares Outstanding 1,845 1,865 -1.1% 1,851 -0.3% 1,852 1,876 -1.3%
Earnings Per Share $0.51 $0.45 13.3% $0.53 -3.8% $2.07 $2.03 2.0%
Selected Financial and Operating Data
Operating income $1,687 $1,631 3.4% $1,801 -6.3% $7,032 $7,105 -1.0%
Operating margin 23.2% 23.4% -20 bps 24.6% -140 bps 24.5% 24.9% -40 bps
Declared dividends per share $0.25 $0.20 25.0% $0.23 8.7% $0.92 $0.79 16.5%
Capital expenditures $1,076 $922 16.7% $764 40.8% $3,200 $3,785 -15.5%
Common shares outstanding 1,830 1,860 -1.6% 1,848 -1.0%
Book value per share $10.77 $9.63 11.8% $10.65 1.1%
Debt ratio 43.1% 49.2% -610 bps 43.2% -10 bps
Total employees 75,743 77,020 -1.7% 76,009 -0.3%
BellSouth Corporation
Normalized Earnings Summary and Reconciliation to Reported
Results
(amounts in millions, except
per share data)
Fourth Quarter 2003 Normalizing Items
FX Losses Pension/ Sale of
Cingular (Gains) Severance Brazil SP
GAAP A F J K Normalized
Operating Revenues $ 5,742 $ 1,518 $ - $ - $ - $ 7,260
Operating Expenses 4,204 1,385 - (16) - 5,573
Operating Income 1,538 133 - 16 - 1,687
Interest Expense 243 59 - - - 302
Other Income (Expense), net 1 (70) (14) - 154 71
Income Before Taxes and 1,296 4 (14) 16 154 1,456
Accounting Change
Provision for Income Taxes 509 4 (5) 6 (7) 507
Net Income Before Cumulative 787 - (9) 10 161 949
Effect Change
Cumulative Effect of Change in - - - - - -
Accounting Principle
Net Income $787 $0 ($9) $10 $161 $949
Diluted Earnings Per Share * $0.43 $0.00 ($0.00) $0.01 $0.09 $0.51
* Normalized earnings per share for fourth quarter 2003 does not sum due to
rounding.
Year-to-Date 2003 Normalizing Items
FX Losses A&P Pension/ Sale of Asset
Cingular (Gains) Acctg. FAS 143 Severance Brazil Impairment
Change NE/SP
GAAP A F G I J K L Normalized
Operating
Revenues $ 22,635 $ 6,023 $ - $ - $ - $ - $ - $ - $ 28,658
Operating 16,729 5,106 - - - (157) - (52) 21,626
Expenses
Operating 5,906 917 - - - 157 - 52 7,032
Income
Interest 1,048 247 - - - - - - 1,295
Expense
Other Income 742 (658) (118) - - - 229 - 195
(Expense),
net
Income 5,600 12 (118) - - 157 229 52 5,932
Before Taxes
and
Accounting
Change
Provision 2,011 12 (8) - - 61 (5) 20 2,091
for Income
Taxes
Net Income 3,589 - (110) - - 96 234 32 3,841
Before
Cumulative
Effect
Change
Cumulative 315 - - 501 (816) - - - -
Effect of
Change in
Accounting
Principle
Net Income $3,904 $0 ($110) $501 ($816) $96 $234 $32 $3,841
Diluted $2.11 $0.00 ($0.06) $0.27 ($0.44) $0.05 $0.13 $0.02 $2.07
Earnings Per
Share *
* Normalized earnings per share for year-to-date 2003 does not sum due to
rounding.
Fourth Quarter 2002 Normalizing Items
FX Losses A&P Pension/ Disposition Asset
Cingular (Gains) Acctg. Severance of Listel Impairments
Change
GAAP A F G J K L Normalized
Operating
Revenues $ 5,692 $ 1,441 $ - $ (162) $ - $ - $ - $ 6,971
Operating 4,556 1,235 - (54) (105) - (292) 5,340
Expenses
Operating 1,136 206 - (108) 105 - 292 1,631
Income
Interest 292 65 - - - - - 357
Expense
Other Income 68 (141) 33 - - 74 (3) 31
(Expense),
net
Income 912 - 33 (108) 105 74 289 1,305
Before Taxes
and
Accounting
Change
Provision 338 - 7 (41) 41 23 91 459
for Income
Taxes
Net Income 574 - 26 (67) 64 51 198 846
Before
Cumulative
Effect
Change
Cumulative - - - - - - - -
Effect of
Change in
Accounting
Principle
Net Income $574 $0 $26 ($67) $64 $51 $198 $846
Diluted $0.31 $0.00 $0.01 ($0.04) $0.03 $0.03 $0.11 $0.45
Earnings Per
Share
Year-to-Date 2002 Normalizing Items
Losses on Brazil Loan Unbilled FX Losses A&P
Cingular E-Plus Equity Impairments Rec. Adj. (Gains) Acctg.
Invest. Change
GAAP A B C D E F G
Operating $ 22,440 $ 5,807 $ - $ - $ - $ 163 $ - $ 49
Revenues
Operating 17,694 4,799 - - - - - 50
Expenses
Operating 4,746 1,008 - - - 163 - (1)
Income
Interest 1,188 244 - - - - - -
Expense
Other Income 858 (764) (1,339) 388 383 - 579 -
(Expense), net
Income Before 4,416 - (1,339) 388 383 163 579 (1)
Taxes and
Accounting
Change
Provision for 1,808 - (482) 114 120 62 (18) -
Income Taxes
Net Income 2,608 - (857) 274 263 101 597 (1)
Before
Cumulative
Effect Change
Cumulative (1,285) - - - - - - -
Effect of
Change in
Accounting
Principle
Net Income $1,323 $0 ($857) $274 $263 $101 $597 ($1)
Diluted $0.71 $0.00 ($0.46) $0.15 $0.14 $0.05 $0.32 ($0.00)
Earnings Per
Share *
* Normalized earnings per share for year-to-date 2002 does not sum due to rounding.
Year-to-Date 2002
Pension/ Disposition Asset Early Exting. Florida
FAS 142 Severance of Listel Impairments of Debt Late Pay
H J K L M N Normalized
Operating Revenues $ - $ - $ - $ - $ - $ 108 $ 28,567
Operating Expenses - (654) - (427) - - 21,462
Operating Income - 654 - 427 - 108 7,105
Interest Expense - - - - - (6) 1,426
Other Income - - 74 (3) 37 - 213
(Expense), net
Income Before Taxes - 654 74 424 37 114 5,892
and Accounting
Change
Provision for Income - 248 23 141 15 44 2,075
Taxes
Net Income Before - 406 51 283 22 70 3,817
Cumulative Effect
Change
Cumulative Effect of 1,285 - - - - - -
Change in Accounting
Principle
Net Income $1,285 $406 $51 $283 $22 $70 $3,817
Diluted Earnings Per $0.68 $0.22 $0.03 $0.15 $0.01 $0.04 $2.03
Share *
BellSouth Corporation
Notes to Normalized Financial and Operating Data (pages 3 and 4)
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 proportional eliminations for amounts charged by
other BellSouth companies to Cingular.
(b) Gain on E-Plus conversion and sale of KPN stock - In March
2002, we exchanged our 22.5% investment in E-Plus, a German
wireless carrier, for 234.7 million shares of KPN Royal. As
a result of this exchange, we recorded a pretax gain of
1,335 to recognize the difference between the fair value of
the KPN shares obtained and our investment balance in
E-Plus. In addition, we subsequently sold the KPN shares for
cash proceeds of $1,076 and recognized a pretax loss of $27.
The amount shown also includes income of $20 generated from
the settlement of forward contracts associated with advances
to E-Plus. These advances were restructured in conjunction
with the ownership exchange.
(c) Losses on equity investments - Represents charges for the
impairment of and open market sales of an equity investment
in Qwest Communications. Also includes $63 impairment
related to an investment in Guatemala and $6 in losses for
the liquidation of an investment in Crown Castle.
(d) Brazil loan impairments - Represents recognition of an
impairment on shareholder loans to our Brazilian equity
investments, as well as the recognition of a guarantee on a
portion of those operations' debt.
(e) Unbilled receivable adjustment - During first quarter 2002,
BellSouth determined that the unbilled receivable balance at
its advertising and publishing subsidiary was overstated. As
a result, BellSouth recorded a reduction to advertising and
publishing revenues.
(f) Foreign currency transaction (gains) losses - Represents net
transaction (gains) losses incurred by our Latin American
operations related primarily to US Dollar denominated
liabilities. These (gains) losses reflect the impact of the
strengthening) weakening of those operations' local
currencies against the U.S. Dollar which requires
recognition in the current period income statement.
(g) 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. The 2002 amounts reflect our recasting
of prior year results to present the advertising and
publishing segment on a comparable basis year-over-year.
(h) Adoption of Financial Accounting Standard No. 142 (FAS 142)
- Represents a one-time charge related to the adoption of
new accounting rules for goodwill. The non-cash charge
reduced the value of goodwill on the company's balance sheet
by approximately $1.3 billion.
(i) 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.
(j) Pension/Severance Costs - Represents severance accruals
recorded to reflect workforce reductions in an effort to
reduce operating costs. The accruals include cash severance,
outplacement costs and payroll taxes. Amounts also include
pension settlements as the number of employees who separated
and elected to receive lump-sum retirement benefits exceeded
thresholds which required current recognition of deferred
amounts related to these benefits.
(k) Loss on sale of Brazil NE, Brazil SP and Listel (BellSouth's
Brazilian yellow pages operation).
(l) Service curtailments/Asset impairments - The 2003 charge for
asset impairment represents the write-off of capitalized
software related to an abandoned systems project. Prior
periods represent charges related to the impairment of MMDS
spectrum previously held for sale ($150 after tax),
impairments related to Cingular Wireless's TDMA network
assets and Mobitex data business ($48 after tax) and the
decision to eliminate sales of certain services: wholesale
long distance ($17 after tax), e-business services ($44
after tax), multi-media internet exchange ($20 after tax)
and public communications (pay phones) ($4 after tax).
Charges relate to asset impairments, early termination
penalties on contracts and leases, and severance for
affected employees.
(m) Early extinguishment of debt - Represents one-time expenses
associated with the early extinguishment of $620 million of
long-term debt.
(n) Florida late payment fees - On October 31, 2002, the Florida
Supreme Court, by a 5-2 vote affirmed the decision of the
Florida Public Service Commission regarding our dispute over
late payment fees. This will require a one-time refund to
affected customers in Florida. Based on this decision, we
recorded a reduction to revenues of $108 plus interest
expense of $6 in the third quarter of 2002.
BellSouth Corporation
Consolidated Balance Sheets (unaudited)
(amounts in millions, except per share data)
December December Change vs. September Change
31, 31, 30, vs.
2003 2002 Prior Year 2003 Prior
Quarter
Assets
Current Assets:
Cash and cash equivalents $4,556 $2,482 $2,074 $5,025 ($469)
Accounts receivable, net of 2,847 4,129 (1,282) 3,013 (166)
allowance for uncollectibles of
$438, $476, and $461
Material and supplies 375 313 62 329 46
Other current assets 990 938 52 932 58
Total Current Assets 8,768 7,862 906 9,299 (531)
Investments and Advances 8,552 9,741 (1,189) 8,394 158
Property, Plant and Equipment, net 23,807 23,445 362 23,765 42
Deferred Charges and Other Assets 5,855 5,726 129 5,756 99
Goodwill 342 347 (5) 346 (4)
Intangible Assets, net 2,297 2,358 (61) 2,262 35
Total Assets $49,621 $49,479 $142 $49,822 ($201)
Liabilities and Shareholders' Equity
Current Liabilities:
Debt maturing within one year $3,491 $5,114 ($1,623) $3,347 $144
Accounts payable 1,258 1,572 (314) 1,294 (36)
Other current liabilities 3,628 2,897 731 3,701 (73)
Total Current Liabilities 8,377 9,583 (1,206) 8,342 35
Long-Term Debt 11,489 12,283 (794) 11,646 (157)
Noncurrent Liabilities:
Deferred income taxes 5,349 4,452 897 5,352 (3)
Other noncurrent liabilities 4,694 5,255 (561) 4,810 (116)
Total Noncurrent Liabilities 10,043 9,707 336 10,162 (119)
Shareholders' Equity:
Common stock, $1 par value 2,020 2,020 0 2,020 0
Paid-in capital 7,729 7,546 183 7,656 73
Retained earnings 16,540 14,531 2,009 16,251 289
Accumulated other comprehensive (585) (740) 155 (771) 186
income
Shares held in trust and treasury (5,992) (5,372) (620) (5,488) (504)
Guarantee of ESOP debt 0 (79) 79 4 (4)
Total Shareholders' Equity 19,712 17,906 1,806 19,672 40
Total Liabilities and Shareholders' Equity $49,621 $49,479 $142 $49,822 ($201)
BellSouth Corporation
Consolidated Statements of Cash Flows (unaudited)
(amounts in millions, except per share data)
Year-To-Date
4Q03 4Q02 3Q03 2003 2002
Cash Flows from Operating Activities:
Net income $ 787 $ 574 $ 936 $ 3,904 $ 1,323
Adjustments to net income:
Depreciation and 1,043 1,151 1,052 4,179 4,643
amortization
Provision for 140 233 117 563 850
uncollectibles
Net losses (earnings) of (30) (88) (82) (465) (80)
equity affiliates
Minority interests in 17 6 18 47 (74)
income of subsidiaries
Deferred income taxes (5) 189 275 958 1,179
Net (gains) losses on sale (49) (39) (1) (42) 349
or impairment of equity
securities
Pension income (134) (208) (134) (535) (826)
Pension settlement (gains) (40) 60 - 47 167
losses
Curtailment and - - - - 60
termination benefits
charges
Stock-based compensation 35 39 35 137 171
Unbilled receivable - - - - 163
adjustment
Asset impairments - 221 52 52 302
Foreign currency (22) 42 7 (159) 679
transaction (gains) losses
Cumulative effect of - - - (539) 1,285
changes in accounting
principle
(Gain) loss on 154 74 - 229 (1,261)
sale/disposal of
operations
Net change in:
Accounts receivable and (63) (195) (68) (132) (204)
other current assets
Accounts payable and other (140) (401) 228 199 (463)
current liabilities
Deferred charges and other 48 53 128 290 30
assets
Other liabilities and (145) 13 (100) (284) 4
deferred credits
Other reconciling items, net 38 (11) 6 80 (51)
Net cash provided by operating activities 1,634 1,713 2,469 8,529 8,246
Cash Flows from Investing Activities:
Capital expenditures (1,076) (922) (764) (3,200) (3,785)
Investments in and advances to equity affiliates - (28) - - (309)
Investments in debt and equity securities (200) (8) (40) (261) (36)
Proceeds from sale of securities and operations 154 1 1 236 1,473
Proceeds from repayment of loans and advances - 453 - 1,899 885
Settlement of derivatives on advances - - - (352) 85
Other investing activities, net (3) (12) (9) (20) (20)
Net cash provided by (used for) investing activities (1,125) (516) (812) (1,698) (1,707)
Cash Flows from Financing Activities:
Net borrowing (repayments) of short-term debt (16) (278) (30) (427) (1,408)
Proceeds from long-term debt - 9 - 1 17
Repayments of long-term debt (39) (4) (307) (1,932) (1,223)
Dividends paid (425) (372) (424) (1,608) (1,460)
Purchase of treasury shares (536) (136) - (858) (591)
Other financing activities, net 38 16 7 67 16
Net cash used for financing activities (978) (765) (754) (4,757) (4,649)
Net Increase (Decrease) in Cash and Cash Equivalents (469) 432 903 2,074 1,890
Cash and Cash Equivalents at Beginning of Period 5,025 2,050 4,122 2,482 592
Cash and Cash Equivalents at End of Period $ 4,556 $ 2,482 $ 5,025 $ 4,556 $ 2,482
BellSouth Corporation
Results by Segment (amounts in
millions) (unaudited)
Communications Group (1)
Year-To-Date
4Q03 4Q02 Growth 3Q03 Growth 2003 2002 Growth
Operating Revenues
Voice $3,132 $3,056 2.5% $3,184 -1.6% $12,622 $12,498 1.0%
Data 1,099 1,057 4.0% 1,118 -1.7% 4,371 4,276 2.2%
Other 387 408 -5.1% 366 5.7% 1,455 1,715 -15.2%
Total Operating Revenues 4,618 4,521 2.1% 4,668 -1.1% 18,448 18,489 -0.2%
Operating Expenses
Cost of services and 1,698 1,597 6.3% 1,720 -1.3% 6,755 6,525 3.5%
products
Selling, general, & 792 772 2.6% 755 4.9% 3,079 2,887 6.7%
administrative expenses
Depreciation and 941 1,041 -9.6% 949 -0.8% 3,771 4,161 -9.4%
amortization
Total Operating Revenues 3,431 3,410 0.6% 3,424 0.2% 13,605 13,573 0.2%
Segment Operating Income 1,187 1,111 6.8% 1,244 -4.6% 4,843 4,916 -1.5%
Interest Expense 90 134 -32.8% 98 -8.2% 407 498 -18.3%
Other Income (Expense), net 10 1 N/M* 7 42.9% 38 4 N/M
Income Before Income Taxes 1,107 978 13.2% 1,153 -4.0% 4,474 4,422 1.2%
Provision for Income Taxes 393 374 5.1% 426 -7.7% 1,645 1,671 -1.6%
Segment Net Income(1) $714 $604 18.2% $727 -1.8% $2,829 $2,751 2.8%
* - Not meaningful.
Selected Financial and Operating Data
(amounts in millions)
Segment operating income $1,187 $1,111 6.8% $1,244 -4.6% $4,843 $4,916 -1.5%
Segment operating margin 25.7% 24.6% 110 bps 26.6% -90 bps 26.3% 26.6% -30 bps
Long distance revenues $411 $227 81.1% $381 7.9% $1,354 $862 57.1%
Access minutes of use 22,903 23,324 -1.8% 23,390 -2.1% 92,141 98,571 -6.5%
Capital expenditures $901 $760 18.6% $692 30.2% $2,824 $3,337 -15.4%
(amounts in thousands)
Wholesale Lines 3,039 2,385 27.4% 2,873 5.8%
DSL customers 1,462 1,021 43.2% 1,336 9.4%
LD customers 3,960 1,002 295.2% 3,440 15.1%
Consumer ARPU (5) $53.28 $49.10 8.5% $53.46 -0.3%
BellSouth Corporation
Results by Segment (unaudited)
Supplemental Operating Data (in thousands)
Communications Group - Network Access Lines In Service(a)(b)
4Q03 4Q02 Growth 3Q03 Growth
Access lines (b)
Residence
Retail
Primary 12,479 13,260 -5.9% 12,684 -1.6%
Additional 1,601 1,926 -16.9% 1,671 -4.2%
Total Retail Residence 14,080 15,186 -7.3% 14,355 -1.9%
Wholesale
Resale 177 342 -48.2% 198 -10.6%
UNE-P 1,696 934 81.6% 1,534 10.6%
Total Wholesale Residence 1,873 1,276 46.8% 1,732 8.1%
Total Residence 15,953 16,462 -3.1% 16,087 -0.8%
Business
Retail
Voice 5,417 5,687 -4.7% 5,484 -1.2%
ISDN 1,440 1,567 -8.1% 1,432 0.6%
Total Retail Business 6,857 7,254 -5.5% 6,916 -0.9%
Wholesale
Resale 79 94 -16.0% 82 -3.7%
UNE-P 693 611 13.4% 660 5.0%
Total Wholesale Business 772 705 9.5% 742 4.0%
Total Business 7,629 7,959 -4.1% 7,658 -0.4%
Other Retail/Wholesale Lines
Retail 97 155 -37.4% 113 -14.2%
Wholesale 50 27 85.2% 46 8.7%
Total Other Retail/Wholesale Lines 147 182 -19.2% 159 -7.5%
Total Access Lines in Service 23,729 24,603 -3.6% 23,904 -0.7%
Access Line Equivalents (c)
Selected digital data services:
Unbundled 344 377 -8.8% 353 -2.5%
Loops
DS0 & ADSL 9,051 6,437 40.6% 8,301 9.0%
DS1 7,178 6,908 3.9% 7,088 1.3%
DS3 & 31,534 31,704 -0.5% 31,309 0.7%
higher
Total digital data lines in service 48,107 45,426 5.9% 47,051 2.2%
Total equivalent access lines in service 71,836 70,029 2.6% 70,955 1.2%
(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 (converted at 1.5:1), Primary Rate ISDN (converted at 24:1)
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.
BellSouth Corporation
Results by Segment (amounts in
millions) (unaudited)
Domestic Wireless Segment (1)(a)
Year-To-Date
4Q03 4Q02 Growth 3Q03 Growth 2003 2002 Growth
Operating Revenues
Service revenues (3)(b) $1,414 $1,384 2.2% $1,471 -3.9% $5,689 $5,569 2.2%
Equipment and other revenue 151 97 55.7% 153 -1.3% 504 392 28.6%
Total Operating Revenues 1,565 1,481 5.7% 1,624 -3.6% 6,193 5,961 3.9%
Operating Expenses
Cost of services and 607 484 25.4% 643 -5.6% 2,273 1,965 15.7%
products (b)
Selling, general, & 599 526 13.9% 577 3.8% 2,170 2,170 0.0%
administrative expenses
Depreciation and 228 187 21.9% 209 9.1% 835 740 12.8%
amortization
Total Operating Expenses 1,434 1,197 19.8% 1,429 0.3% 5,278 4,875 8.3%
Segment Operating Income 131 284 -53.9% 195 -32.8% 915 1,086 -15.7%
Interest Expense 82 93 -11.8% 79 3.8% 343 364 -5.8%
Other Income (Expense), net (38) (30) -26.7% (44) 13.6% (152) (141) -7.8%
Income Before Income Taxes 11 161 -93.2% 72 -84.7% 420 581 -27.7%
Provision for Income Taxes (1) 63 -101.6% 28 -103.6% 159 224 -29.0%
Segment Net Income(1) $12 $98 -87.8% $44 -72.7% $261 $357 -26.9%
Selected Financial and Operating Data
(amounts in millions, except customer
data in thousands)
Segment operating income $131 $284 -53.9% $195 -32.8% $915 $1,086 -15.7%
Segment operating margin 8.4% 19.2% -1080 bps 12.0% -360 bps 14.8% 18.2% -340 bps
Cellular/PCS Operating Metrics:
Total Customers 9,611 8,770 9.6% 9,354 2.7% 9,611 8,770 9.6%
Net Customer Additions 257 (48) 635.4% 298 -13.8% 846 144 487.5%
Partitioned Customers 0 13 -100.0% 0 N/M* 6 13 -53.8%
and/or Adjustments
Churn 2.8% 2.7% 10 bps 2.8% 0 bps 2.7% 2.8% -10 bps
Wireless Service ARPU (5) $49.03 $51.84 -5.4% $52.43 -6.5% $51.32 $52.14 -1.6%
Minutes Of Use Per 475 406 17.0% 456 4.2% 446 390 14.4%
Subscriber
Licensed POPs (6) 94 88 6.8% 94 0.0% 94 88 6.8%
Penetration (6) 10.8% 10.1% 70 bps 10.6% 20 bps 10.8% 10.1% 70 bps
Cingular Interactive Operating Metrics:
Total Customers 316 327 -3.4% 315 0.3% 316 327 -3.4%
Net Customer Additions - 6 -100.0% - N/M (12) 34 -135.3%
* - Not meaningful.
(a) The domestic wireless segment is comprised of BellSouth's 40% share of
the reported results of Cingular Wireless.
(b) In an effort to be consistent with emerging industry practices, the
income statement for all periods presented has been changed to reflect
billings to our customers for the Universal Service Fund (USF) and
other regulatory fees as "Service revenues" and the related payments
into the associated regulatory funds as "Cost of services" expenses.
Operating income and net income for all prior periods have been
unaffected. Following are the amounts used to adjust the 2002-2003
historical financial results (included in amounts above).
Service revenues 39 18 116.7% 42 -7.1% 135 70 92.9%
Cost of services and products 39 18 116.7% 42 -7.1% 135 70 92.9%
BellSouth Corporation
Results by Segment (amounts in
millions) (unaudited)
Latin America Group (1)(2)
Year-To-Date
4Q03 4Q02 Growth 3Q03 Growth 2003 2002 Growth
Operating Revenues
Service revenues (3) $531 $411 29.2% $494 7.5% $1,928 $1,878 2.7%
Equipment and other revenues 105 70 50.0% 94 11.7% 370 320 15.6%
Advertising and - 5 -100.0% - N/M* - 40 -100.0%
publishing revenues
Total 636 486 30.9% 588 8.2% 2,298 2,238 2.7%
Operating Revenues
Operating Expenses
Cost of services and products 246 172 43.0% 249 -1.2% 996 841 18.4%
Selling, general, &
administrative expenses 165 132 25.0% 151 9.3% 606 678 -10.6%
Depreciation and amortization 93 98 -5.1% 91 2.2% 367 440 -16.6%
Total Operating Expenses 504 402 25.4% 491 2.6% 1,969 1,959 0.5%
Segment Operating Income 132 84 57.1% 97 36.1% 329 279 17.9%
Interest Expense 25 30 -16.7% 31 -19.4% 121 138 -12.3%
Other Income (Expense), net (13) (9) -44.4% (4) -225.0% (20) (61) 67.2%
Income Before Income Taxes 94 45 108.9% 62 51.6% 188 80 135.0%
Provision for Income Taxes 32 6 N/M 14 128.6% 27 (28) 196.4%
Segment Net Income(1) $62 $39 59.0% $48 29.2% $161 $108 49.1%
* - Not meaningful.
Selected Financial and Operating
Data
(amounts in millions, except
customer data in thousands)
Segment operating income $132 $84 57.1% $97 36.1% $329 $279 17.9%
Segment operating margin 20.8% 17.3% 350 bps 16.5% 430 bps 14.3% 12.5% 180 bps
Average monthly revenue per customer $19 $17 11.8% $18 5.6% $18 $19 -5.3%
(3)
Customer net adds in period (a) 345 259 33.2% 421 -18.1% 1,515 362 N/M
Customers (voice) (a) 9,696 8,172 18.6% 9,351 3.7% 9,696 8,172 18.6%
POPs 160,600 162,100 -0.9% 160,600 0.0% 160,600 162,100 -0.9%
Penetration rate (4) 6.0% 5.0% 100 bps 5.8% 20 bps 6.0% 5.0% 100 bps
(a) The beginning balance of 3Q02 customers was adjusted to include 225
customers related to fixed wireless customers in Venezuela.
Year-to-date net adds for 2002 would have been 143 higher. Annual
growth in net adds would have been 200%.
BellSouth Corporation
Worldwide Wireless (unaudited)
Customers and POPs by Country (in thousands)
Ownership
Percentage
As of Total Customers Total POPs
As of As of
Country Brand 4Q03 4Q03 4Q02 Growth 3Q03 Growth 4Q03 4Q02 Growth 3Q03 Growth
United Cingular 40.0% 24,027 21,925 9.6% 23,385 2.7% 236,000 219,000 7.8% 236,000 0.0%
States Wireless
Argentina Movicom 86.7% 1,487 1,320 12.7% 1,391 6.9% 37,400 37,500 -0.3% 37,400 0.0%
BellSouth
Chile BellSouth 100.0% 1,301 1,032 26.1% 1,238 5.1% 15,300 15,400 -0.6% 15,300 0.0%
Colombia Celumovil 66.0% 1,915 1,349 42.0% 1,824 5.0% 40,300 43,000 -6.3% 40,300 0.0%
BellSouth
Ecuador BellSouth 89.4% 816 632 29.1% 833 -2.0% 13,200 12,800 3.1% 13,200 0.0%
Guatemala BellSouth 60.0% 252 193 30.6% 246 2.4% 13,000 11,700 11.1% 13,000 0.0%
Nicaragua BellSouth 89.0% 229 201 13.9% 262 -12.6% 2,900 2,900 0.0% 2,900 0.0%
Panama BellSouth 43.7% 420 335 25.4% 405 3.7% 2,800 3,000 -6.7% 2,800 0.0%
Peru BellSouth 97.4% 642 530 21.1% 614 4.6% 27,500 26,100 5.4% 27,500 0.0%
Uruguay Movicom 46.0% 146 143 2.1% 143 2.1% 2,100 2,100 0.0% 2,100 0.0%
BellSouth
Venezuela Telcel 78.2% 3,307 3,107 6.4% 3,189 3.7% 24,000 24,400 -1.6% 24,000 0.0%
BellSouth
Total 10,515 8,842 18.9% 10,145 3.6% 178,500 178,900 -0.2% 178,500 0.0%
Latin
America
Denmark Sonofon 46.5% 1,367 1,135 20.4% 1,305 4.8% 5,300 5,300 0.0% 5,300 0.0%
Israel Cellcom 34.8% 2,283 2,446 -6.7% 2,614 -12.7% 6,100 6,100 0.0% 6,100 0.0%
Total Europe 3,650 3,581 1.9% 3,919 -6.9% 11,400 11,400 0.0% 11,400 0.0%
Total Worldwide 38,192 34,348 11.2% 37,449 2.0% 425,900 409,300 4.1% 425,900 0.0%
Wireless
BellSouth Corporation
Results by Segment (amounts in
millions) (unaudited)
Advertising & Publishing (1)
Year-To-Date
4Q03 4Q02 Growth 3Q03 Growth 2003 2002 Growth
Operating Revenues
Advertising and 470 497 -5.4% 475 -1.1% 1,906 2,010 -5.2%
publishing revenues
Commission revenues 52 59 -11.9% 30 73.3% 144 147 -2.0%
Total Operating Revenues 522 556 -6.1% 505 3.4% 2,050 2,157 -5.0%
Operating Expenses
Cost of services 91 86 5.8% 94 -3.2% 345 351 -1.7%
Selling, general, &
administrative expenses 184 265 -30.6% 168 9.5% 706 879 -19.7%
Depreciation and 7 8 -12.5% 5 40.0% 26 29 -10.3%
amortization
Total Operating Expenses 282 359 -21.4% 267 5.6% 1,077 1,259 -14.5%
Segment Operating Income 240 197 21.8% 238 0.8% 973 898 8.4%
Interest Expense 2 3 -33.3% 1 100.0% 7 12 -41.7%
Other Income (Expense), net 1 (2) 150.0% - N/M* 2 (1) 300.0%
Income Before Income Taxes 239 192 24.5% 237 0.8% 968 885 9.4%
Provision for Income Taxes 92 74 24.3% 90 2.2% 368 340 8.2%
Segment Net Income(1) $147 $118 24.6% $147 0.0% $600 $545 10.1%
Segment operating income $240 $197 21.8% $238 0.8% $973 $898 8.4%
Segment operating margin 46.0% 35.4% 1060 bps 47.1% -110 bps 47.5% 41.6% 590 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. Intersegment revenues are not eliminated for purposes of
management reporting.
(2) Results for the Latin America segment are reported one month in arrears.
(3) 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. Average monthly revenue
per customer is calculated by dividing average monthly service revenue
by average customers.
(4) Penetration rate is calculated by dividing customers by POPs (excludes
POPs in markets where service has not been initiated).
(5) 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.
(6) 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 included in the penetration calculation,
beginning in the third quarter of 2002.
BellSouth Corporation
Non-GAAP Measures - Reconciliation
(amounts in millions) (unaudited)
Segment Net Income Reconciliation to
GAAP Net Income
Year-to-Date
4Q03 4Q02 3Q03 2003 2002
Communications group segment net income $ 714 $ 604 $ 727 $ 2,829 $ 2,751
Domestic wireless group segment net 12 98 44 261 357
income (a)
Latin America group segment net income 62 39 48 161 108
Advertising and publishing group 147 118 147 600 545
segment net income
Corporate, eliminations and other 14 (13) 14 (10) 56
Normalized net income 949 846 980 3,841 3,817
Add back Excluded non-recurring or (162) (272) (44) 63 (2,494)
non-operational items (b)
Consolidated GAAP net income $ 787 $ 574 $ 936 $ 3,904 $ 1,323
Free Cash Flow Year-to-Date
4Q03 4Q02 3Q03 2003 2002
Net cash provided by operating $ 1,634 $ 1,713 $ 2,469 $ 8,529 $ 8,246
activities
Less Capital Expenditures (1,076) (922) (764) (3,200) (3,785)
Operating Free Cash Flow $ 558 $ 791 $ 1,705 $ 5,329 $ 4,461
Net Debt
December 31, December 31, September 30,
2003 2002 2003
Total Debt $ 14,980 $ 17,397 $ 14,993
Less Cash (4,556) (2,482) (5,025)
Net Debt $ 10,424 $ 14,915 $ 9,968
Communications Group Operating Income Year-to-Date
before Depreciation and Amortization
4Q03 4Q02 3Q03 2003 2002
Operating Revenues $ 4,618 $ 4,521 $ 4,668 $ 18,448 $ 18,489
Operating Income 1,187 1,111 1,244 4,843 4,916
Add back Depreciation and amortization 941 1,041 949 3,771 4,161
Operating Income before Depreciation $ 2,128 $ 2,152 $ 2,193 $ 8,614 $ 9,077
and Amortization
Margin 46.1% 47.6% 47.0% 46.7% 49.1%
(a) The domestic wireless segment is comprised of BellSouth's 40% share of
the reported results of Cingular Wireless.
(b) See pages 3 and 4 for detail of excluded items.
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