BLS Reports 2nd Qtr Results
Bellsouth Corp
23 July 2002
For Immediate Release
July 22, 2002
For More Information Contact:
Jeff Battcher 404-713-0274
BellSouth Reports Second Quarter Earnings
July 22, 2002, ATLANTA - BellSouth Corporation (NYSE: BLS) reported earnings per
share (EPS) of 16 cents in the second quarter of 2002, compared to 47 cents in
the same quarter of 2001. Normalized for special items (see below), EPS in the
second quarter of 2002 was 53 cents, compared to normalized EPS of 58 cents in
the same quarter a year ago. Bad debt expense of $255 million in the second
quarter of 2002 impacted EPS an incremental 5 cents.
BellSouth's operating results continued to reflect weak demand for
communications services, both in the United States and Latin America. The impact
of market share loss in the US, as well as currency devaluations in Argentina
and Venezuela, also affected results. Business failures, including those in the
telecommunications industry, also continued to negatively affect both demand and
bad debt. In addition, BellSouth did not recognize revenues for wholesale
services provided to a non-paying CLEC (Competitive Local Exchange Carrier)
customer operating in Florida, further reducing EPS by 1 cent.
Free cash flow (defined as cash flow from operations less capital expenditures)
totaled $1.4 billion in the second quarter of 2002, and $2.4 billion
year-to-date. Total debt declined $1.0 billion during the second quarter, and
has been reduced $2.1 billion, or 10.4 percent, since the beginning of 2002. Net
debt is lower by 18.5 percent since the beginning of the year.
BellSouth adopted a new accounting rule for goodwill known as Financial
Accounting Standard No. 142 (FAS 142). The new rule resulted in a non-cash
charge that reduced the value of goodwill on the company's balance sheet by
approximately $1.3 billion. As required under the new rule, the effect of FAS
142 was recorded as an adjustment to BellSouth's first quarter 2002 results.
Communications Group
Total Communications Group revenues were $4.67 billion, compared to $4.79
billion in the second quarter of 2001, a decline of 2.4 percent. Data revenues
were $1.08 billion, a growth rate of 6.0 percent compared to $1.01 billion in
the second quarter of the previous year. Wholesale revenues from data transport
services for other communications providers increased approximately 4 percent.
Other data services, principally retail in nature, grew approximately 13
percent. In addition to consumer and business DSL, retail data services include
transport, access, storage, security and Web hosting for business customers.
BellSouth added 74,000 new DSL customers in the second quarter, raising its
total to 803,000 retail and wholesale broadband customers at June 30. This is an
annual growth rate of 111 percent.
Domestic Wireless / Cingular
BellSouth's domestic wireless revenues in the second quarter of 2002 were $1.5
billion, representing the company's 40 percent share of Cingular Wireless. This
is a gain of 6.1 percent compared to the same quarter a year ago. BellSouth's
share of Cingular operating income was $289 million in the quarter, compared to
$303 million in the same three months of 2001. Cingular ended the second quarter
with 22.2 million total Cellular/PCS customers, an annual growth rate of
approximately 5 percent.
In the second quarter of 2002, Cingular added 353,000 customers, spurred by the
introduction at the end of first quarter of several new national pricing and
service plans. This compared to net adds of 234,000 in the first three months of
the year.
Latin America Group
Consolidated Latin America revenues were $598 million in the second quarter of
2002, a decline of 20.2 percent compared to the same period of the prior year.
Revenues reflected the impacts of currency devaluations, principally in
Argentina and Venezuela, as well as weak economic conditions in those countries.
Reflecting BellSouth's focus on profitability in this challenging environment,
operating margins increased to 33.1 percent from 32.6 percent in the second
quarter of 2001. Free cash flow (FCF) for the Latin Segment was positive for
both the second quarter and first six months of 2002 and was significantly
higher than the same periods in 2001. BellSouth and its partners now serve a
total of 11.2 million customers in 11 Central and South American countries.
Additional Quarterly Highlights
Reported net income in the three months ended June 30, 2002 was $293 million,
compared to reported net income of $880 million in the second quarter of 2001.
Normalized net income in the second quarter of 2002 was $996 million, compared
to $1.085 billion in the same quarter a year ago.
Consolidated revenues, which do not include Cingular, were $5.78 billion in the
second quarter of 2002, compared to $5.99 billion in the same three months a
year earlier. Consolidated total operating expenses increased 2.3 percent on a
reported basis, but, adjusted for the increased bad debt expense, were down 0.9
percent. Normalized second quarter total operating revenues - which include
BellSouth's share of Cingular - were approximately $7.23 billion, a decline of
1.6 percent versus the second quarter of 2001. Excluding the impacts of currency
devaluations in Argentina and Venezuela, and the book shifts that benefited the
Advertising and Publishing Group, normalized revenue was flat compared to last
year.
Special Items
In the second quarter of 2002, the difference between reported EPS of 16 cents
and normalized EPS of 53 cents is the result of three special charges:
Foreign currency transaction losses 7 cents
Losses on equity investments 19 cents
Workforce reduction 12 cents
Effect of rounding (1 cent)
Total of special charges 37 cents
Foreign currency transaction losses - Associated with the remeasurement of U.S.
dollar-denominated liabilities in Latin America.
Losses on equity investments - BellSouth recognized charges for the further
impairment and open market sales of its remaining investment in Qwest
Communications International; an impairment in the value of an investment in
Guatemala; and the liquidation of an investment in Crown Castle International
Corp.
Workforce reduction - As announced May 17, BellSouth is in the process of
reducing its workforce by approximately 5,000 positions to reduce operating
costs in response to a slow economy, increased competition and regulatory
pricing pressures. The charge represents the accrual for severance payments and
employee benefit enhancements related to the workforce reduction.
Long Distance Launch
BellSouth launched long distance service in Georgia and Louisiana in late May.
In just over five weeks to the end of the quarter, the company acquired 147,000
consumer and business long distance customers, almost 4 percent of BellSouth's
residential customers in the two states.
2002 Guidance
The following updates to company guidance are provided for full year 2002:
Total operating revenue growth (including Cingular) -2% to -3%
Normalized earnings per share* $2.13 to $2.20
Capital expenditures (excluding Cingular) $3.7 to $3.9 billion
Data revenue growth Mid-single digits
DSL high-speed Internet customers at 12/31 1.0 million
*Includes effect of cessation of amortization of goodwill and indefinite-lived
assets under FAS 142. Excludes foreign currency transaction gains or losses.
About BellSouth Corporation
BellSouth Corporation is a Fortune 100 communications services company
headquartered in Atlanta, GA, serving more than 44 million customers in the
United States and 14 other countries.
Consistently recognized for customer satisfaction, BellSouth provides a full
array of broadband data and e-commerce solutions to business customers,
including Web hosting and other Internet services. In the residential market,
BellSouth offers DSL high-speed Internet access, advanced voice features and
other services. BellSouth also provides online and directory advertising
services, including BellSouth(R) Real PagesSM.com.
BellSouth owns 40 percent of Cingular Wireless, the nation's second largest
wireless company, which provides innovative wireless data and voice services.
Further information about BellSouth'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.
BellSouth will host a conference call with investors today at 10 a.m. Eastern
Time. Participating on the call will be BellSouth CFO Ron Dykes and Investor
Relations Director Greg Peterson. 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 July 29. The replay can be accessed by dialing:
Domestic: 800-642-1687 - Reservation number: 4431730
International: 706-645-9291 - Reservation number: 4431730
In addition to historical information, this document contains 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 and (iv) 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.
BellSouth Corporation
Consolidated Statements of Income - Normalized
Basis (unaudited)
(amounts in millions, except per share data)
Note to Readers: Our reported results have been significantly impacted by
several events, including the formation of Cingular Wireless and other one-time
items. To assist in your understanding of our results, we have prepared the
following normalized information, including the notes on page 3 which discuss
the impacts of these events. See page 4 for our reported results.
Year-to-Date
2Q02 2Q01 Growth 2002 2001 Growth
Operating Revenues
Communications group $ 4,586 $ 4,722 -2.9% $ 9,200 $ 9,334 -1.4%
Domestic wireless 1,500 1,414 6.1% 2,917 2,724 7.1%
Latin America 597 744 -19.8% 1,253 1,517 -17.4%
Domestic advertising and publishing 538 436 23.4% 917 870 5.4%
All other 14 35 -60.0% 31 69 -55.1%
Total Operating Revenues 7,235 7,351 -1.6% 14,318 14,514 -1.4%
Operating Expenses
Operational and support expenses 3,992 3,955 0.9% 7,897 7,895 0.0%
Depreciation and amortization 1,353 1,392 -2.8% 2,694 2,729 -1.3%
Total Operating Expenses 5,345 5,347 0.0% 10,591 10,624 -0.3%
Operating Income 1,890 2,004 -5.7% 3,727 3,890 -4.2%
Interest Expense 362 392 -7.7% 721 810 -11.0%
Other Income (Expense), net 50 59 N/M* 128 170 N/M*
Income Before Income Taxes 1,578 1,671 -5.6% 3,134 3,250 -3.6%
Provision for Income Taxes 582 586 -0.7% 1,122 1,147 -2.2%
Net Income $996 $1,085 -8.2% $2,012 $2,103 -4.3%
Diluted:
Weighted Average Common Shares Outstanding 1,882 1,886 -0.2% 1,885 1,886 -0.1%
Earnings Per Share $0.53 $0.58 -8.6% $1.07 $1.12 -4.5%
* - Not meaningful.
Selected Financial and Operating Data
EBITDA (5) $3,243 $3,396 -4.5% $6,421 $6,619 -3.0%
EBITDA margin (6) 44.8% 46.2% -140 bps 44.8% 45.6% -80 bps
Dividends per share $0.20 $0.19 5.3% $0.39 $0.38 2.6%
Capital expenditures $1,023 $1,667 -38.6% $2,028 $3,357 -39.6%
Common shares outstanding 1,873 1,874 -0.1%
Book value per share $9.48 $9.54 -0.6%
Debt ratio 50.3% 51.6% -130 bps
Total employees (7) 84,617 95,577 -11.5%
BellSouth Corporation
Normalized Earnings Summary and Reconciliation to
Reported Results
(amounts in millions, except per share data)
Second Quarter 2002 Normalizing
Items
GAAP A D G J Normalized
Operating Revenues $ 5,780 $ 1,455 $ - $ - $ - $ 7,235
Operating Expenses 4,535 1,167 - - (357) 5,345
Operating Income 1,245 288 - - 357 1,890
Interest Expense 301 61 - - - 362
Other Income (Expense), net (240) (227) 159 358 - 50
Income Before Income Taxes 704 - 159 358 357 1,578
Provision for Income Taxes 411 - 35 4 132 582
Net Income $293 $0 $124 $354 $225 $996
Diluted Earnings Per Share * $0.16 $0.00 $0.07 $0.19 $0.12 $0.53
Year-to-Date 2002 Normalizing
Items
GAAP A C D E F G J K Normalized
Operating Revenues $ 11,314 $ 2,841 $ - $ - $ - $ 163 $ - $ - $ - $ 14,318
Operating Expenses 8,661 2,287 - - - - - (357) - 10,591
Operating Income 2,653 554 - - - 163 - 357 - 3,727
Interest Expense 605 116 - - - - - - - 721
Other Income (Expense), net 578 (438) (1,339) 388 383 - 556 - 128
Income Before Taxes and Change 2,626 - (1,339) 388 383 163 556 357 - 3,134
in Accounting Principle
Provision for Income Taxes 1,178 - (482) 114 120 62 (2) 132 - 1,122
Cumulative effect of change in (1,285) - - - - - - - 1,285 -
accounting principle
Net Income $163 $0 ($857) $274 $263 $101 $558 $225 $1,285 $2,012
Diluted Earnings Per Share * $0.09 $0.00 ($0.45) $0.15 $0.14 $0.05 $0.30 $0.12 $0.68 $1.07
Second Quarter 2001 Normalizing
Items
GAAP A B G I L Normalized
Operating Revenues $ 5,985 $1,387 $ (15) $ - $ (6) $ - $ 7,351
Operating Expenses 4,435 1,085 (15) - (15) (143) 5,347
Operating Income 1,550 302 - - 9 143 2,004
Interest Expense 334 58 - - - - 392
Other Income (Expense), net 188 (244) - 115 - - 59
Income Before Income Taxes 1,404 - - 115 9 143 1,671
Provision for Income Taxes 524 - - 4 3 55 586
Net Income $880 $0 $0 $111 $6 $88 $1,085
Diluted Earnings Per Share $0.47 $0.00 $0.00 $0.06 $0.00 $0.05 $0.58
Year-to-Date 2001 Normalizing
Items
GAAP A B D G H I L Normalized
Operating Revenues $11,904 $2,672 $ (43) $ - $ - $ - $ (19) $ - $ 14,514
Operating Expenses 8,753 2,165 (43) - - (73) (35) (143) 10,624
Operating Income 3,151 507 - - - 73 16 143 3,890
Interest Expense 694 116 - - - - - - 810
Other Income (Expense), net 354 (391) - 50 157 - - - 170
Income Before Income Taxes 2,811 - - 50 157 73 16 143 3,250
Provision for Income Taxes 1,040 - - 18 2 26 6 55 1,147
Net Income $1,771 $0 $0 $32 $155 $47 $10 $88 $2,103
Diluted Earnings Per Share $0.94 $0.00 $0.00 $0.02 $0.08 $0.02 $0.01 $0.05 $1.12
* Normalized earnings per share for second quarter 2002 and year-to-date 2002 do
not sum due to rounding.
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) Gross versus net presentation - Communications group revenues for second quarter 2001 have been reduced by
$15 and by $43 for year-to-date 2001 to reflect a change in reporting of gross receipts taxes in Florida.
Beginning in the fourth quarter of 2001, we are required to account for the tax collected from customers as a
pass-through billing (I.e. net presentation). This adjustment is neutral to EBITDA as it reduces revenues and
expenses by an equal amount.
(c) 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.
(d) Losses on equity investments - Represents charges for the impairment of and open market sales of an equity
investment in Qwest Communications. Second quarter 2002 and year-to-date 2002 also include $63 impairment
related to an investment in Guatemala and $6 in losses for the liquidation of an investment in Crown Castle.
(e) 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.
(f) A&P 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.
(g) Foreign currency transaction losses - Represents net transaction losses incurred by our international
operations related to US Dollar denominated liabilities. These losses reflect the impact of the weakening of
those operations' local currencies against the U.S. Dollar which requires recognition in the current period
income statement. The second quarter of 2002 foreign currency transaction losses included a $78 million (4
cents per share) adjustment related to a miscalculation of foreign currency transaction losses in the first
quarter of 2002.
(h) Postretirement benefit expense - The amount shown represents expense for changes in postretirement
medical benefit obligations.
(i) Losses (gains) from Wireless Video Business - Represents losses incurred in 2001 related to the exit of
the wireless video entertainment business.
(j) Workforce Reduction - As announced May 17, BellSouth is in the process of reducing its workforce by up to
5,000 positions to reduce operating costs in response to a slow economy, increased competition and regulatory
pricing pressures. The charge represents the accrual for severance payments and employee benefit enhancements
related to the workforce reduction.
(k) Reflects a one-time charge related to the adoption of new accounting rules for goodwill, known as Financial
Accounting Standard No. 142 (FAS 142). The non-cash charge reduced the value of goodwill on the company's
balance sheet by approximately $1.3 billion. The effect of FAS 142 was recorded as an adjustment to
BellSouth's first quarter 2002 results.
(l) Adjustment to ISP Accrual - Represents the loss incurred for prior claims from competitive local exchange
carriers regarding reciprocal compensation for ISP traffic.
BellSouth Corporation
Consolidated Statements of Income - Reported
Basis (unaudited)
(amounts in millions, except per share data)
Year-To-Date
2Q02 2Q01 Growth 2002 2001 Growth
Operating Revenues
Communications group $ 4,631 $ 4,764 -2.8% $ 9,276 $ 9,429 -1.6%
Latin America 597 744 -19.8% 1,253 1,517 -17.4%
Domestic advertising and publishing 538 436 23.4% 754 870 -13.3%
All other 14 41 -65.9% 31 88 -64.8%
Total Operating Revenues 5,780 5,985 -3.4% 11,314 11,904 -5.0%
Operating Expenses
Operational and support expenses 3,008 3,232 -6.9% 5,973 6,393 -6.6%
Depreciation and amortization 1,170 1,203 -2.7% 2,331 2,360 -1.2%
Provision for restructuring and asset 357 - N/M* 357 - N/M*
impairments
Total Operating Expenses 4,535 4,435 2.3% 8,661 8,753 -1.1%
Operating Income 1,245 1,550 -19.7% 2,653 3,151 -15.8%
Interest Expense 301 334 -9.9% 605 694 -12.8%
Other Income (Expense), net (240) 188 N/M 578 354 N/M
Income Before Taxes and Accounting Change 704 1,404 -49.9% 2,626 2,811 -6.6%
Provision for Income Taxes 411 524 -21.6% 1,178 1,040 13.3%
Cumulative Effect of Change in Accounting - - N/M* (1,285) - N/M
Principle
Net Income $293 $880 -66.7% 163 $1,771 -90.8%
Diluted:
Weighted Average Common Shares Outstanding 1,882 1,886 -0.2% 1,885 1,886 -0.1%
Earnings Per Share $0.16 $0.47 -66.0% $0.09 $0.94 -90.4%
* - Not meaningful.
Selected Financial and Operating Data
EBITDA (5) $2,772 $2,753 0.7% $5,341 $5,511 -3.1%
EBITDA margin (6) 48.0% 46.0% 200 bps 47.2% 46.3% 90 bps
Return on average equity (annualized) 6.5% 19.9% -1340 bps 1.8% 20.3% -1850 bps
Return on average total capital (annualized) 5.8% 12.5% -670 bps 3.6% 12.9% -930 bps
BellSouth Corporation
Consolidated Balance Sheets (unaudited)
(amounts in millions, except per share data)
June 30, December 31,
2002 2001
Assets
Current Assets:
Cash and cash equivalents $2,114 $592
Accounts receivable, net of allowance for uncollectibles of $441 and 4,270 4,989
$466
Material and supplies 328 382
Other current assets 852 892
Total Current Assets 7,564 6,855
Investments and Advances 9,866 10,620
Property, Plant and Equipment, net 24,247 24,943
Deferred Charges and Other Assets 5,566 5,122
Goodwill 358 1,639
Intangible Assets, net 2,685 2,867
Total Assets $50,286 $52,046
Liabilities and Shareholders' Equity
Current Liabilities:
Debt maturing within one year $5,406 $5,111
Accounts payable 1,585 1,656
Other current liabilities 3,593 3,301
Total Current Liabilities 10,584 10,068
Long-Term Debt 12,635 15,014
Noncurrent Liabilities:
Deferred income taxes 4,076 3,206
Other noncurrent liabilities 5,247 5,161
Total Noncurrent Liabilities 9,323 8,367
Shareholders' Equity:
Common stock, $1 par value 2,020 2,020
Paid-in capital 6,878 6,875
Retained earnings 14,485 15,137
Accumulated other comprehensive income (476) (294)
Shares held in trust and treasury (5,104) (4,996)
Guarantee of ESOP debt (59) (145)
Total Shareholders' Equity 17,744 18,597
Total Liabilities and Shareholders' Equity $50,286 $52,046
BellSouth Corporation
Consolidated Statements of Cash Flows (unaudited)
(amounts in millions)
Year-To-Date
2Q02 2Q01 2002 2001
Cash Flows from Operating Activities:
Net income $ 293 $ 880 $ 163 $ 1,771
Adjustments to net income:
Depreciation and amortization 1,170 1,203 2,331 2,360
Provision for uncollectibles 255 113 411 219
Net losses (earnings) of equity affiliates (176) (106) (341) (190)
Dividends received from equity affiliates - 185 - 214
Minority interests in income of subsidiaries 4 5 (77) (10)
Deferred income taxes 198 140 809 156
Net losses on sale or impairment of equity 152 - 388 50
securities
Postretirement benefit curtailment charge - - - 72
related to Cingular
Brazil loan impairments - - 383 -
A&P unbilled receivable adjustment - - 163 -
Provision for restructurings and asset 357 - 357 -
impairments
Foreign currency transaction losses 358 115 556 157
Cumulative effect of change in accounting - - 1,285 -
principle
(Gain) loss on sale/disposal of operations - - (1,318) -
Net change in:
Accounts receivable and other current assets (108) 11 86 (199)
Accounts payable and other current liabilities 169 (180) (310) (287)
Deferred charges and other assets (270) (240) (455) (519)
Other liabilities and deferred credits 38 167 - 138
Other reconciling items, net (40) (39) 34 (5)
Net cash provided by operating activities 2,400 2,254 4,465 3,927
Cash Flows from Investing Activities:
Capital expenditures (1,023) (1,667) (2,028) (3,357)
Investments in and advances to equity affiliates - (45) (7) (160)
Purchase of wireless license - - - (10)
Proceeds from sale of equity securities 120 18 1,454 1,018
Purchases of short-term investments - - - (76)
Proceeds from disposition of short-term investments 2 1 2 108
Proceeds from repayment of loans and advances - 1 426 6
Investment in debt securities - - - (176)
Other investing activities, net 66 (57) 63 (42)
Net cash used for investing activities (835) (1,749) (90) (2,689)
Cash Flows from Financing Activities:
Net borrowing (repayments) of short-term debt (431) (1,265) (1,393) (2,251)
Proceeds from long-term debt 4 1,075 8 1,819
Repayments of long-term debt (558) (30) (568) (547)
Dividends paid (356) (361) (713) (712)
Purchase of treasury shares (189) - (189) -
Other financing activities, net 18 22 2 50
Net cash used for financing activities (1,512) (559) (2,853) (1,641)
Net Increase (Decrease) in Cash and Cash Equivalents 53 (54) 1,522 (403)
Cash and Cash Equivalents at Beginning of Period 2,061 712 592 1,061
Cash and Cash Equivalents at End of Period $ 2,114 $ 658 $ 2,114 $ 658
BellSouth Corporation
Results by Segment (amounts in millions) (unaudited)
Communications Group (1)
Year-To-Date
2Q02 2Q01 Growth 2002 2001 Growth
Operating Revenues
Local service $2,939 $2,952 -0.4% $5,880 $5,850 0.5%
Network access 1,182 1,224 -3.4% 2,387 2,459 -2.9%
Long distance 213 175 21.7% 418 346 20.8%
Other 337 434 -22.4% 668 801 -16.6%
Total Operating Revenues 4,671 4,785 -2.4% 9,353 9,456 -1.1%
Operating Expenses
Operational and support expenses 2,361 2,342 0.8% 4,665 4,527 3.0%
Depreciation and amortization 1,023 1,013 1.0% 2,038 1,989 2.5%
Total Operating Expenses 3,384 3,355 0.9% 6,703 6,516 2.9%
Operating Income 1,287 1,430 -10.0% 2,650 2,940 -9.9%
Interest Expense 120 165 -27.3% 245 333 -26.4%
Other Income, net (3) 5 N/M* (3) 17 N/M*
Income Before Income Taxes 1,164 1,270 -8.3% 2,402 2,624 -8.5%
Provision for Income Taxes 435 451 -3.5% 903 950 -4.9%
Segment Net Income(1) $729 $819 -11.0% $1,499 $1,674 -10.5%
* - Not meaningful.
Selected Financial and Operating Data
(amounts in millions)
EBITDA (5) $2,310 $2,443 -5.4% $4,688 $4,929 -4.9%
EBITDA margin (6) 49.5% 51.1% -160 bps 50.1% 52.1% -200 bps
Data service revenues $1,075 $1,014 6.0% $2,179 $1,982 9.9%
Calling feature revenues $589 $573 2.8% $1,181 $1,136 4.0%
Access minutes of use 25,073 27,986 -10.4% 50,656 56,416 -10.2%
Capital expenditures $918 $1,417 -35.2% $1,840 $2,894 -36.4%
IntraLata Toll Messages 97 111 -12.6% 193 222 -13.1%
Wholesale Lines (thousands) 2,070 1,501 37.9%
DSL customers (thousands) 803 381 110.8%
BellSouth Corporation
Results by Segment (unaudited)
Supplemental Operating Data (in thousands)
Communications Group - Network Access Lines In Service(b)
2Q02 2Q01 Growth
Access lines (b)
Residence
Retail
Primary 13,670 14,162 -3.5%
Additional 2,107 2,358 -10.6%
Total Retail Residence 15,777 16,520 -4.5%
Wholesale
Resale 402 491 -18.1%
UNE-P 586 114 414.0%
Total Wholesale Residence 988 605 63.3%
Total Residence 16,765 17,125 -2.1%
Business
Retail
Voice 5,887 6,399 -8.0%
ISDN 1,630 1,396 16.8%
Total Retail Business 7,517 7,795 -3.6%
Wholesale
Resale 130 246 -47.2%
UNE-P 532 271 96.3%
Total Wholesale Business 662 517 28.0%
Total Business 8,179 8,312 -1.6%
Other Retail / Wholesale Lines 194 229 -15.3%
Total Access Lines in Service 25,138 25,666 -2.1%
Access Line Equivalents (c)
Selected digital data services:
Unbundled Loops 398 376 5.9%
DS0 & ADSL 5,142 2,627 95.7%
DS1 6,721 6,246 7.6%
DS3 & higher 30,505 24,744 23.3%
Total digital data lines in service 42,766 33,993 25.8%
Total equivalent access lines in service 67,904 59,659 13.8%
(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 switced access line
based on transport capacity. While the revenues generated by access line equivalents have
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
2Q02 2Q01 Growth 2002 2001 Growth
Operating Revenues
Service revenues (4) $1,398 $1,312 6.6% $2,724 $2,517 8.2%
Equipment and other revenues 102 102 0.0% 193 207 -6.8%
Total Operating Revenues 1,500 1,414 6.1% 2,917 2,724 7.1%
Operating Expenses
Operational and support expenses 1,028 921 11.6% 1,999 1,846 8.3%
Depreciation and amortization 183 190 -3.7% 363 370 -1.9%
Total Operating Expenses 1,211 1,111 9.0% 2,362 2,216 6.6%
Operating Income 289 303 -4.6% 555 508 9.3%
Interest Expense 89 80 11.3% 179 160 11.9%
Other Income (Expense), net (41) (14) N/M (66) 6 N/M
Income Before Income Taxes 159 209 -23.9% 310 354 -12.4%
Provision for Income Taxes 60 82 -26.8% 119 137 -13.1%
Segment Net Income(1) $99 $127 -22.0% $191 $217 -12.0%
* - Not meaningful.
Selected Financial and Operating Data
(amounts in millions, except customer data in thousands)
EBITDA (5) $472 $493 -4.3% $918 $878 4.6%
EBITDA margin (6)(c) 33.8% 37.6% -380 bps 33.7% 34.9% -120 bps
Average monthly revenue per customer (8)(d) $52 $52 0.0% $51 $51 0.0%
Customer net adds in period:
Cellular and PCS 141 273 -48.4% 235 615 -61.8%
Data (Cingular Interactive) 9 13 -30.8% 22 47 -53.2%
Customers:
Cellular and PCS 8,873 8,487 4.5%
Data (Cingular Interactive) 315 276 14.1%
POPs 87,600 84,400 3.8%
Penetration rate (10) 11.2% 11.1% 10 bps
(a) The domestic wireless segment is comprised of BellSouth's 40% share of the
reported results of Cingular Wireless.
(b) Customer data for 2001 period, including POPs, penetration rate and average monthly revenue per customer, is
comprised of BellSouth's 40% share of the managed results of Cingular Wireless. Cingular managed POPs includes new
spectrum in New York and Salt Lake City. This additional spectrum is not factored into the penetration rate since
this spectrum was not operational during the periods presented.
(c) EBITDA margin denominator includes service revenues only.
(d) Average monthly revenue per customer excludes Cingular Interactive.
BellSouth Corporation
Results by Segment (amounts in millions) (unaudited)
Latin America Group (1)(2)
Year-To-Date
2Q02 2Q01 Growth 2002 2001 Growth
Operating Revenues
Service revenues (4) $481 $629 -23.5% $1,027 $1,271 -19.2%
Equipment and other revenues 98 97 1.0% 208 236 -11.9%
Advertising and publishing revenues 19 23 -17.4% 22 24 -8.3%
Total Operating Revenues 598 749 -20.2% 1,257 1,531 -17.9%
Operating Expenses
Operational and support expenses 400 505 -20.8% 878 1,135 -22.6%
Depreciation and amortization 118 155 -23.9% 236 309 -23.6%
Total Operating Expenses 518 660 -21.5% 1,114 1,444 -22.9%
Operating Income 80 89 N/M* 143 87 N/M*
Interest Expense 37 55 -32.7% 79 115 -31.3%
Other Income (Expense), net (14) (14) N/M (29) (13) N/M
Income Before Income Taxes 29 20 N/M 35 (41) N/M
Provision for Income Taxes 15 27 N/M 17 29 N/M
Segment Net Income(1) $14 ($7) N/M $18 ($70) N/M
* - Not meaningful.
Selected Financial and Operating Data
(amounts in millions, except customer data in thousands)
EBITDA (5) $198 $244 -18.9% $379 $396 -4.3%
EBITDA margin (6) 33.1% 32.6% 50 bps 30.2% 25.9% 430 bps
Average monthly revenue per customer (9) $20 $26 -23.1% $22 $27 -18.5%
Customer net adds in period (excluding (68) 224 -130.4% 255 939 -72.8%
ownership changes)
Customers (voice) 7,840 8,008 -2.1%
POPs 162,100 156,200 3.8%
Penetration rate (10) 4.8% 5.1% -30 bps
BellSouth Corporation
Proportionate Basis(3) - Selected Financial and Operating Data
(Amounts in millions, except customer data in thousands)
Latin America Group (1)(2)
Year-To-Date
2Q02 2Q01 Growth 2002 2001 Growth
Operating revenues $580 $701 -17.3% $1,200 $1,413 -15.1%
EBITDA (5) $190 $222 -14.4% $368 $376 -2.1%
EBITDA margin(6) 32.8% 31.7% 110 bps 30.7% 26.6% 410 bps
Average monthly revenue per customer (9) $20 $26 -23.1% $22 $27 -18.5%
Customer net adds in period (excluding 11 272 -96.0% 321 885 -63.7%
ownership changes)
Customers (voice) 7,716 7,566 2.0%
POPs 156,770 152,056 3.1%
Penetration rate (10) 4.9% 5.0% -10 bps
BellSouth Corporation
Worldwide Wireless (unaudited)
Customers and POPs by Country
(Proportionate Basis(3) in thousands)
Customers As of POPs As of
Country Brand 2Q02 2Q01 Growth 2Q02 2Q01 Growth
United States Cingular Wireless 8,873 8,487 4.5% 87,600 84,400 3.8%
Argentina Movicom BellSouth 905 1,126 -19.6% 24,375 23,270 4.7%
Brazil BCP 1,254 1,183 6.0% 20,801 20,704 0.5%
Chile BellSouth 1,020 800 27.5% 15,400 15,100 2.0%
Colombia BellSouth 863 777 11.1% 28,375 27,451 3.4%
Ecuador BellSouth 406 241 68.5% 11,443 11,086 3.2%
Guatemala BellSouth 87 29 N/M* 7,020 7,140 -1.7%
Nicaragua BellSouth 160 127 26.0% 2,581 2,581 --
Panama BellSouth 135 112 20.5% 1,311 1,223 7.2%
Peru BellSouth 468 373 25.5% 25,428 24,403 4.2%
Uruguay Movicom BellSouth 70 63 11.1% 966 966 --
Venezuela Telcel BellSouth 2,348 2,735 -14.1% 19,070 18,132 5.2%
Total Latin America 7,716 7,566 2.0% 156,770 152,056 3.1%
Denmark Sonofon 475 412 15.3% 2,465 2,465 --
Israel Cellcom 817 712 14.7% 2,119 2,119 --
1,292 1,124 14.9% 4,584 4,584 --
Total Worldwide Wireless 17,881 17,177 4.1% 248,954 241,040 3.3%
* - Not meaningful.
BellSouth Corporation
Results by Segment (amounts in millions) (unaudited)
Domestic Advertising & Publishing (1)
Year-To-Date
2Q02 2Q01 Growth 2002 2001 Growth
Total Operating Revenues $ 543 $ 443 22.6% $ 926 $ 880 5.2%
Operating Expenses
Operational and support expenses 296 241 22.8% 501 445 12.6%
Depreciation and amortization 8 6 33.3% 14 13 7.7%
Total Operating Expenses 304 247 23.1% 515 458 12.4%
Operating Income 239 196 21.9% 411 422 -2.6%
Interest Expense 3 3 0.0% 6 11 -45.5%
Other Income, net 1 - N/M* 1 4 N/M*
Income Before Income Taxes 237 193 22.8% 406 415 -2.2%
Provision for Income Taxes 91 74 23.0% 156 159 -1.9%
Segment Net Income(1) $146 $119 22.7% $250 $256 -2.3%
EBITDA (5) $247 $202 22.3% $425 $435 -2.3%
EBITDA margin (6) 45.5% 45.6% -10 bps 45.9% 49.4% -350 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) Proportionate basis financial and operating data reflect our ownership interest in the total
operating results for each of our wireless properties, both domestic and international, whether
or not consolidated for financial statement presentation purposes.
(4) Wireless service revenues includes activation fees, access, airtime, roaming, long distance and
value added services. Roaming revenues are included on a gross basis for the Domestic Wireless
segment and on a net basis for the Latin America segment.
(5) EBITDA is defined as operating revenues less operational and support expenses.
(6) EBITDA margin is calculated by dividing EBITDA by operating revenues.
(7) Prior period has been adjusted for the transfer of 12,377 employees from our former domestic
wireless operations.
(8) For the Domestic Wireless segment, average monthly revenue per customer is calculated by
dividing average monthly revenue by average customers. Average monthly revenue includes
activation fees, access, airtime, roaming (gross), long distance and value added services.
(9) For the Latin America segment, average monthly revenue per customer is calculated by dividing
average monthly revenue by average customers. Average monthly revenue includes activation fees,
access, airtime, roaming (net), long distance and value added services.
(10) Penetration rate is calculated by dividing customers by POPs (excludes POPs in markets where
service has not been initiated).
This information is provided by RNS
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