BellSouth 3Q05 Charts
Bellsouth Corp
25 October 2005
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.
3Q05 3Q04 Growth 2Q05 Growth
Operating Revenues
Communications group $4,558 $4,590 -0.7% $4,598 -0.9%
Advertising and publishing 506 495 2.2% 527 -4.0%
All other 8 10 -20.0% 17 -52.9%
Total Operating Revenues 5,072 5,095 -0.5% 5,142 -1.4%
Operating Expenses
Cost of services and products 2,017 1,881 7.2% 1,925 4.8%
Selling, general &
administrative expenses 1,162 905 28.4% 951 22.2%
Depreciation and amortization 922 908 1.5% 916 0.7%
Total Operating Expenses 4,101 3,694 11.0% 3,792 8.1%
Operating Income 971 1,401 -30.7% 1,350 -28.1%
Interest Expense 274 220 24.5% 285 -3.9%
Other Income (Expense), net 512 136 276.5% 124 N/M*
Income from Continuing Operations
before Income Taxes and
Discontinued Operations 1,209 1,317 -8.2% 1,189 1.7%
Provision for Income Taxes 392 465 -15.7% 394 -0.5%
Income from Continuing Operations 817 852 -4.1% 795 2.8%
Income (Loss) from Discontinued
Operations, net of tax - (53) N/M* - N/M*
Net Income 817 799 2.3% 795 2.8%
Diluted:
Weighted Average Common Shares
Outstanding 1,836 1,835 0.1% 1,835 0.1%
Earnings Per Share:
Income from Continuing
Operations $0.44 $0.46 -4.3% $0.43 2.3%
Income from Discontinued
Operations $0.00 ($0.03) N/M* $0.00 N/M*
Net Income $0.44 $0.44 0.0% $0.43 2.3%
* - Not meaningful.
Selected Financial and Operating
Data
Operating income $971 $1,401 -30.7% $1,350 -28.1%
Operating margin 19.1% 27.5% -840 bps 26.3% -720 bps
Declared dividends per share $0.29 $0.27 7.4% $0.29 0.0%
Capital expenditures $886 $768 15.4% $829 6.9%
Common shares outstanding 1,831 1,831 0.0% 1,832 -0.1%
Book value per share $13.28 $11.94 11.2% $13.10 1.4%
Year-to-Date
2005 2004 Growth
Operating Revenues
Communications group $13,749 $13,643 0.8%
Advertising and publishing 1,521 1,481 2.7%
All other 35 30 16.7%
Total Operating Revenues 15,305 15,154 1.0%
Operating Expenses
Cost of services and products 5,862 5,468 7.2%
Selling, general & administrative
expenses 3,014 2,765 9.0%
Depreciation and amortization 2,756 2,720 1.3%
Total Operating Expenses 11,632 10,953 6.2%
Operating Income 3,673 4,201 -12.6%
Interest Expense 850 646 31.6%
Other Income (Expense), net 612 990 -38.2%
Income from Continuing Operations
before Income Taxes and
Discontinued Operations 3,435 4,545 -24.4%
Provision for Income Taxes 1,140 1,604 -28.9%
Income from Continuing Operations 2,295 2,941 -22.0%
Income (Loss) from Discontinued
Operations, net of tax 381 453 -15.9%
Net Income 2,676 3,394 -21.2%
Diluted:
Weighted Average Common Shares
Outstanding 1,835 1,836 -0.1%
Earnings Per Share:
Income from Continuing
Operations $1.25 $1.60 -21.9%
Income from Discontinued
Operations $0.21 $0.25 -16.0%
Net Income $1.46 $1.85 -21.1%
* - Not meaningful.
Selected Financial and Operating
Data
Operating income $3,673 $4,201 -12.6%
Operating margin 24.0% 27.7% -370 bps
Declared dividends per share $0.85 $0.79 7.6%
Capital expenditures $2,465 $2,134 15.5%
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.
Normalized results exclude discontinued operations from all periods.
Certain reclassifications have been made to prior periods to conform
to the current presentation.
3Q05 3Q04 Growth 2Q05 Growth
Operating Revenues
Communications group $4,480 $4,538 -1.3% $4,537 -1.3%
Domestic wireless 3,499 1,716 103.9% 3,443 1.6%
Advertising and publishing 506 495 2.2% 527 -4.0%
All other 9 11 -18.2% 16 -43.8%
Total Operating Revenues 8,494 6,760 25.7% 8,523 -0.3%
Operating Expenses
Cost of services and products 3,250 2,459 32.2% 3,268 -0.6%
Selling, general, &
administrative expenses 2,084 1,510 38.0% 2,097 -0.6%
Depreciation and amortization 1,501 1,137 32.0% 1,524 -1.5%
Total Operating Expenses 6,835 5,106 33.9% 6,889 -0.8%
Operating Income 1,659 1,654 0.3% 1,634 1.5%
Interest Expense 374 276 35.5% 392 -4.6%
Other Income (Expense), net 38 7 N/M* 58 -34.5%
Income Before Income Taxes 1,323 1,385 -4.5% 1,300 1.8%
Provision for Income Taxes 478 492 -2.8% 451 6.0%
Net Income $845 $893 -5.4% $849 -0.5%
Diluted:
Weighted Average Common Shares
Outstanding 1,836 1,835 0.1% 1,835 0.1%
Earnings Per Share $0.46 $0.49 -6.1% $0.46 0.0%
* - Not meaningful.
Selected Financial and Operating
Data
Operating income $1,659 $1,654 0.3% $1,634 1.5%
Operating margin 19.5% 24.5% -500 bps 19.2% 30 bps
Declared dividends per share $0.29 $0.27 7.4% $0.29 0.0%
Capital expenditures $886 $768 15.4% $829 6.9%
Common shares outstanding 1,831 1,831 0.0% 1,832 -0.1%
Book value per share $13.28 $11.94 11.2% $13.10 1.4%
Total employees 63,049 63,132 -0.1% 62,524 0.8%
Year-to-Date
2005 2004 Growth
Operating Revenues
Communications group $13,538 $13,543 0.0%
Domestic wireless 10,234 4,978 105.6%
Advertising and publishing 1,521 1,481 2.7%
All other 35 30 16.7%
Total Operating Revenues 25,328 20,032 26.4%
Operating Expenses
Cost of services and products 9,749 7,141 36.5%
Selling, general, &
administrative expenses 6,234 4,493 38.7%
Depreciation and amortization 4,613 3,396 35.8%
Total Operating Expenses 20,596 15,030 37.0%
Operating Income 4,732 5,002 -5.4%
Interest Expense 1,169 816 43.3%
Other Income (Expense), net 170 19 N/M*
Income Before Income Taxes 3,733 4,205 -11.2%
Provision for Income Taxes 1,321 1,486 -11.1%
Net Income $2,412 $2,719 -11.3%
Diluted:
Weighted Average Common Shares
Outstanding 1,835 1,836 -0.1%
Earnings Per Share $1.31 $1.48 -11.5%
* - Not meaningful.
Selected Financial and Operating
Data
Operating income $4,732 $5,002 -5.4%
Operating margin 18.7% 25.0% -630 bps
Declared dividends per share $0.85 $0.79 7.6%
Capital expenditures $2,465 $2,134 15.5%
BellSouth Corporation
Normalized Earnings Summary and Reconciliation to Reported Results
(amounts in millions, except per share data)
Third Quarter 2005
Discontinued Continuing
Operations Operations
GAAP C (GAAP-C)
Operating Revenues $5,072 $- $5,072
Operating Expenses 4,101 - 4,101
Operating Income 971 - 971
Interest Expense 274 - 274
Other Income (Expense), net 512 - 512
Income from Continuing Operations
before Income Taxes 1,209 - 1,209
Provision for Income Taxes 392 - 392
Income from Continuing Operations 817 - 817
Income (Loss) from Discontinued
Operations, net of tax - - -
Net Income $817 $0 $817
Diluted Earnings Per Share $0.44 $0.00 $0.44
Third Quarter 2005
Normalizing Items
Merger Hurri-
Integra- Debt cane Sale
tion Exting. related of
Cingular Costs Costs Expenses Cellcom
A E F G I Normalized
Operating Revenues $3,422 $- $- $- $- $8,494
Operating Expenses 3,158 (96) - (328) - 6,835
Operating Income 264 96 - 328 - 1,659
Interest Expense 100 - - - - 374
Other Income (Expense), net (123) - - - (351) 38
Income from Continuing
Operations before Income
Taxes 41 96 - 328 (351) 1,323
Provision for Income Taxes 41 40 - 128 (123) 478
Income from Continuing
Operations - 56 - 200 (228) 845
Income (Loss) from
Discontinued Operations, net
of tax - - - - - -
Net Income $0 $56 $0 $200 ($228) $845
Diluted Earnings Per Share $0.00 $0.03 $0.00 $0.11 ($0.12) $0.46
Year-to-Date 2005
Discontinued Continuing
Operations Operations
GAAP C (GAAP-C)
Operating Revenues $15,305 $- $15,305
Operating Expenses 11,632 - 11,632
Operating Income 3,673 - 3,673
Interest Expense 850 - 850
Other Income (Expense), net 612 - 612
Income from Continuing Operations
before Income Taxes 3,435 - 3,435
Provision for Income Taxes 1,140 - 1,140
Income from Continuing Operations 2,295 - 2,295
Income (Loss) from Discontinued
Operations, net of tax 381 (381) -
Net Income $2,676 ($381) $2,295
Diluted Earnings Per Share $1.46 ($0.21) $1.25
Year-to-Date 2005
Normalizing Items
Merger Hurri-
Integra- Debt cane Sale
tion Exting. related of
Cingular Costs Costs Expenses Cellcom
A E F G I Normalized
Operating Revenues $10,023 $- $- $- $- $25,328
Operating Expenses 9,511 (219) - (328) - 20,596
Operating Income 512 219 - 328 - 4,732
Interest Expense 319 - - - - 1,169
Other Income (Expense), net (133) - 42 - (351) 170
Income from Continuing
Operations before Income
Taxes 60 219 42 328 (351) 3,733
Provision for Income Taxes 60 100 16 128 (123) 1,321
Income from Continuing
Operations - 119 26 200 (228) 2,412
Income (Loss) from
Discontinued Operations,
net of tax - - - - - -
Net Income $0 $119 $26 $200 ($228) $2,412
Diluted Earnings Per Share $0.00 $0.06 $0.01 $0.11 ($0.12) $1.31
BellSouth Corporation
Normalized Earnings Summary and Reconciliation to Reported Results
(amounts in millions, except per share data)
Third Quarter 2004
Discontinued Continuing
Operations Operations
GAAP C (GAAP-C)
Operating Revenues $5,095 $- $5,095
Operating Expenses 3,694 - 3,694
Operating Income 1,401 - 1,401
Interest Expense 220 - 220
Other Income (Expense), net 136 - 136
Income from Continuing Operations
before Income Taxes 1,317 - 1,317
Provision for Income Taxes 465 - 465
Income from Continuing Operations 852 - 852
Income (Loss) from Discontinued
Operations, net of tax (53) 53 -
Net Income $799 $53 $852
Diluted Earnings Per Share * $0.44 $0.03 $0.46
* Normalized earnings per share for third quarter 2004 does not sum due
to rounding.
Third Quarter 2004
Normalizing Items
Hurri- Merger
cane Integra-
related tion/FV Rounding
Cingular Expenses Adj
A G H Normalized
Operating Revenues $1,664 $- $- $1 $6,760
Operating Expenses 1,479 (38) (29) - 5,106
Operating Income 185 38 29 1 1,654
Interest Expense 56 - - - 276
Other Income (Expense), net (129) - - - 7
Income from Continuing
Operations before Income
Taxes - 38 29 1 1,385
Provision for Income Taxes - 15 12 - 492
Income from Continuing
Operations - 23 17 1 893
Income (Loss) from Discontinued
Operations, net of tax - - - - -
Net Income $0 $23 $17 $1 $893
Diluted Earnings Per Share * $0.00 $0.01 $0.01 $0.01 $0.49
* Normalized earnings per share for third quarter 2004 does not sum due
to rounding.
Year-to-Date 2004
Discontinued Continuing
Operations Operations
GAAP C (GAAP-C)
Operating Revenues $15,154 $- $15,154
Operating Expenses 10,953 - 10,953
Operating Income 4,201 - 4,201
Interest Expense 646 - 646
Other Income (Expense), net 990 - 990
Income from Continuing Operations
before Income Taxes 4,545 - 4,545
Provision for Income Taxes 1,604 - 1,604
Income from Continuing Operations 2,941 - 2,941
Income (Loss) from Discontinued
Operations, net of tax 453 (453) -
Net Income $3,394 ($453) $2,941
Diluted Earnings Per Share $1.85 ($0.25) $1.60
Year-to-Date 2004
Normalizing Items
Hurri- Merger
Sale Regulatory cane Integra-
of Settle- related tion/FV
Cingular Sonofon ment Expenses Adj Rounding
A B D G H Normalized
Operating Revenues $4,827 $- $50 $- $- $1 $20,032
Operating Expenses 4,146 - (3) (38) (29) 1 15,030
Operating Income 681 - 53 38 29 - 5,002
Interest Expense 170 - - - - - 816
Other Income
(Expense), net (509) (462) - - - - 19
Income from
Continuing
Operations before
Income Taxes 2 (462) 53 38 29 - 4,205
Provision for
Income Taxes 2 (167) 20 15 12 - 1,486
Income from Continuing
Operations - (295) 33 23 17 - 2,719
Income (Loss) from
Discontinued
Operations, net
of tax - - - - - - -
Net Income $0 ($295) $33 $23 $17 $0 $2,719
Diluted Earnings
Per Share $0.00 ($0.16) $0.02 $0.01 $0.01 ($0.00) $1.48
BellSouth Corporation
Notes to Normalized Financial and Operating Data (pages 3 and 4)
(amounts in millions, except per share 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) Gain related to the sale of our operations in Denmark.
(c) 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. The first quarter 2005 results include an
after-tax gain of $390 related to the final 2 of the 10 properties
that were closed in January.
(d) Regulatory Settlement - In April 2004, BellSouth entered into a
settlement agreement with respect to previously disclosed litigation
(See 2004 10K for further discussion).
(e) Wireless merger integration costs - Represents BellSouth's 40% share
of tax-effected wireless merger integration costs of $105 incurred
during the 1st quarter 2005, $204 incurred during 2nd quarter 2005
and $240 incurred during 3rd quarter 2005 in connection with the
Cingular/AWE merger. Integration costs include one-time cash outlays
or specified non-cash charges, including accelerated depreciation,
directly related to rationalization of the wireless network, sales
distribution channels, the workforce, information technology systems
and real estate.
(f) Debt extinguishment costs - Represents one-time expenses associated
with the early extinguishment of $400 of long-term debt in
1st quarter 2005 and one-time expenses associated with the early
extinguishment of $300 of long-term debt in 2nd quarter 2005.
(g) Hurricane-related expenses - Represents 3rd quarter 2005 Hurricane
Katrina-related charges of $200 after-tax and consists of asset
impairment charges (based on preliminary damage assessments),
incremental labor and material costs related to service restoration
and network repairs, and incremental uncollectible expense. These
expenses are comprised of charges related to BellSouth's wireline
business and its 40% share of Cingular Wireless. Third quarter 2004
charges represent incremental labor and material costs in the
wireline business due to Hurricanes Charley, Frances, Ivan and
Jeanne.
(h) Wireless merger integration planning costs and fair value adjustment
- Represents BellSouth's 40% share of tax-effected wireless merger
integration planning costs of $43 incurred during the 3rd quarter
of 2004 in preparation for the Cingular/AWE merger. Also includes a
$31 fair value adjustment for the announced sale of Cingular
Interactive.
(i) Gain related to the sale of Cellcom, a cellular communications
operator in Israel.
BellSouth Corporation
Consolidated Balance Sheets (unaudited)
(amounts in millions, except per share data)
Change Change
vs. vs.
Sept. 30, Dec. 31 Prior June 30, Prior
2005 2004 Year 2005 Quarter
Assets
Current Assets:
Cash and cash equivalents $2,030 $680 $1,350 $485 $1,545
Short-term investments 0 16 (16) 0 0
Accounts receivable, net of
allowance for
uncollectibles of $297,
$317, and $287 2,443 2,559 (116) 2,480 (37)
Material and supplies 336 321 15 335 1
Other current assets 859 1,055 (196) 951 (92)
Assets of discontinued
operations 0 1,068 (1,068) 0 0
Total Current Assets 5,668 5,699 (31) 4,251 1,417
Investment in and advances to
Cingular Wireless 21,084 22,771 (1,687) 21,952 (868)
Property, plant and
equipment, net 21,670 22,039 (369) 21,853 (183)
Other assets 7,611 7,400 211 7,741 (130)
Intangible assets, net 1,517 1,587 (70) 1,529 (12)
Total Assets $57,550 $59,496 ($1,946) $57,326 $224
Liabilities and Shareholders'
Equity
Current Liabilities:
Debt maturing within
one year $2,582 $5,475 ($2,893) $3,293 ($711)
Accounts payable 1,030 1,047 (17) 1,027 3
Other current liabilities 4,081 3,018 1,063 3,444 637
Liabilities of discontinued
operations 0 830 (830) 0 0
Total Current Liabilities 7,693 10,370 (2,677) 7,764 (71)
Long-Term Debt 14,374 15,108 (734) 14,399 (25)
Noncurrent Liabilities:
Deferred income taxes 6,465 6,492 (27) 6,594 (129)
Other noncurrent liabilities 4,704 4,460 244 4,575 129
Total Noncurrent
Liabilities 11,169 10,952 217 11,169 0
Shareholders' Equity:
Common stock, $1 par value 2,020 2,020 0 2,020 0
Paid-in capital 7,861 7,840 21 7,836 25
Retained earnings 20,326 19,267 1,059 20,053 273
Accumulated other
comprehensive income (28) (157) 129 (70) 42
Shares held in trust and
treasury (5,865) (5,904) 39 (5,845) (20)
Total Shareholders' Equity 24,314 23,066 1,248 23,994 320
Total Liabilities and
Shareholders' Equity $57,550 $59,496 ($1,946) $57,326 $224
BellSouth Corporation
Consolidated Statements of Cash Flows (unaudited)
(amounts in millions, except per share data)
Year-To-Date
3Q05 3Q04 2Q05 2005 2004
Cash Flows from Operating
Activities:
Income from Continuing Operations $817 $852 $795 $2,295 $2,941
Adjustments to income from
continuing operations:
Depreciation and amortization 922 908 916 2,756 2,720
Provision for uncollectibles 93 90 80 258 285
Net losses (earnings) of equity
affiliates (97) (73) (68) (85) (328)
Deferred income taxes (66) 137 162 51 740
Asset impairments 166 - - 166 -
Pension income (133) (121) (133) (399) (363)
Stock-based compensation expense 22 29 23 70 87
Loss on extinguishment of debt - 14 20 42 14
(Gain) loss on sale/disposal of
operations (351) - - (351) (462)
Net change in:
Accounts receivable and other
current assets (11) (147) (79) (174) (271)
Accounts payable and other
current liabilities 618 (79) 368 1,009 24
Deferred charges and other
assets (39) 29 (60) (79) (33)
Other liabilities and deferred
credits 133 34 101 337 67
Other reconciling items, net 40 18 3 38 67
Net cash provided by operating
activities 2,114 1,691 2,128 5,934 5,488
Cash Flows from Investing
Activities:
Capital expenditures (886) (768) (829) (2,465) (2,134)
Purchase of short-term investments (76) (1,364) - (88) (3,210)
Proceeds from sale of short-term
investments 76 3,403 - 104 4,439
Investments in debt and equity
securities (53) (87) (71) (156) (503)
Net short term (advances to)
repayments from Cingular - - 266 666 -
Proceeds from sale of securities
and operations 656 6 15 1,600 565
Proceeds from repayment of loans
and advances 949 20 121 1,072 129
Settlement of derivatives on
advances - - - - (17)
Other investing activities, net (25) (8) (9) (39) (3)
Net cash provided by (used for)
investing activities 641 1,202 (507) 694 (734)
Cash Flows from Financing
Activities:
Net borrowing (repayments) of
short-term debt (480) 73 (556) (2,110) (266)
Proceeds from long-term debt - 2,993 - - 3,689
Repayments of long-term debt (233) (524) (605) (1,500) (745)
Dividends paid (532) (493) (494) (1,520) (1,407)
Purchase of treasury shares (54) - (6) (137) (99)
Other financing activities, net 89 (3) 9 104 48
Net cash used for financing
activities (1,210) 2,046 (1,652) (5,163) 1,220
Net Increase/(Decrease) in Cash
from Continuing Operations 1,545 4,939 (31) 1,465 5,974
Net Increase/(Decrease) in Cash
from Discontinued Operations - 84 - (115) (101)
Net Increase/(Decrease) in Cash
and Cash Equivalents 1,545 5,023 (31) 1,350 5,873
Cash and Cash Equivalents at
Beginning of Period 485 3,797 516 680 2,947
Cash and Cash Equivalents at End
of Period $2,030 $8,820 $485 $2,030 $8,820
BellSouth Corporation
Results by Segment (amounts in millions) (unaudited)
Communications Group (1)
3Q05 3Q04 Growth 2Q05 Growth
Operating Revenues
Voice $3,136 $3,121 0.5% $3,155 -0.6%
Data 1,166 1,144 1.9% 1,165 0.1%
Other 286 353 -19.0% 305 -6.2%
Total Operating Revenues 4,588 4,618 -0.6% 4,625 -0.8%
Operating Expenses
Cost of services and products 1,860 1,778 4.6% 1,850 0.5%
Selling, general, &
administrative expenses 793 731 8.5% 775 2.3%
Depreciation and amortization 914 901 1.4% 910 0.4%
Total Operating Expenses 3,567 3,410 4.6% 3,535 0.9%
Segment Operating Income 1,021 1,208 -15.5% 1,090 -6.3%
Interest Expense 94 95 -1.1% 100 -6.0%
Other Income (Expense), net 14 9 55.6% 20 -30.0%
Income Before Income Taxes 941 1,122 -16.1% 1,010 -6.8%
Provision for Income Taxes 330 406 -18.7% 350 -5.7%
Segment Net Income(1) $611 $716 -14.7% $660 -7.4%
Selected Financial and Operating
Data
(amounts in millions)
Segment operating income $1,021 $1,208 -15.5% $1,090 -6.3%
Segment operating margin 22.3% 26.2% -390 bps 23.6% -130 bps
Long distance revenues $608 $524 16.0% $580 4.8%
Switched Access MOUs 15,511 17,128 -9.4% 15,617 -0.7%
BSLD MOUs 6,660 5,673 17.4% 6,301 5.7%
Total Access minutes of use 22,171 22,801 -2.8% 21,918 1.2%
Capital expenditures $878 $759 15.7% $826 6.3%
(amounts in thousands)
Wholesale lines 2,453 3,077 -20.3% 2,665 -8.0%
DSL customers 2,678 1,872 43.1% 2,473 8.3%
LD customers 6,993 5,663 23.5% 6,771 3.3%
Consumer ARPU (3) $58.53 $56.65 3.3% $58.39 0.2%
BellSouth Corporation
Results by Segment (amounts in millions) (unaudited)
Communications Group (1)
Year-To-Date
2005 2004 Growth
Operating Revenues
Voice $9,445 $9,444 0.0%
Data 3,491 3,350 4.2%
Other 895 980 -8.7%
Total Operating Revenues 13,831 13,774 0.4%
Operating Expenses
Cost of services and products 5,563 5,243 6.1%
Selling, general, & administrative
expenses 2,306 2,234 3.2%
Depreciation and amortization 2,734 2,700 1.3%
Total Operating Expenses 10,603 10,177 4.2%
Segment Operating Income 3,228 3,597 -10.3%
Interest Expense 292 278 5.0%
Other Income (Expense), net 45 18 150.0%
Income Before Income Taxes 2,981 3,337 -10.7%
Provision for Income Taxes 1,046 1,209 -13.5%
Segment Net Income(1) $1,935 $2,128 -9.1%
Selected Financial and Operating Data
(amounts in millions)
Segment operating income $3,228 $3,597 -10.3%
Segment operating margin 23.3% 26.1% -280 bps
Long distance revenues $1,766 $1,443 22.4%
Switched Access MOUs 47,279 53,602 -11.8%
BSLD MOUs 18,972 15,245 24.4%
Total Access minutes of use 66,251 68,847 -3.8%
Capital expenditures $2,446 $2,111 15.9%
BellSouth Corporation
Results by Segment (unaudited)
Supplemental Operating Data (in thousands)
Communications Group - Network Access Lines In Service Reported (a)
3Q05 3Q04 Growth 2Q05 Growth
Access lines
Residence
Retail
Primary 11,465 11,815 -3.0% 11,595 -1.1%
Additional 1,206 1,388 -13.1% 1,257 -4.1%
Total Retail Residence 12,671 13,203 -4.0% 12,852 -1.4%
Wholesale
Resale 167 115 45.2% 151 10.6%
UNE-P 1,507 2,082 -27.6% 1,689 -10.8%
Total Wholesale
Residence 1,674 2,197 -23.8% 1,840 -9.0%
Total Residence 14,345 15,400 -6.9% 14,692 -2.4%
Business
Retail
Total Retail Business 5,289 5,258 0.6% 5,252 0.7%
Wholesale
Resale 59 66 -10.6% 59 0.0%
UNE-P 658 753 -12.6% 701 -6.1%
Total Wholesale Business 717 819 -12.5% 760 -5.7%
Total Business 6,006 6,077 -1.2% 6,012 -0.1%
Other Retail/Wholesale Lines
Retail 33 38 -13.2% 31 6.5%
Wholesale 62 61 1.6% 65 -4.6%
Total Other Retail/Wholesale
Lines 95 99 -4.0% 96 -1.0%
Total Access Lines in Service 20,446 21,576 -5.2% 20,800 -1.7%
ISDN line equivalents
Residence 7 10 -30.0% 7 0.0%
Business 1,440 1,462 -1.5% 1,421 1.3%
Total ISDN Adjusted ALIS 21,893 23,048 -5.0% 22,228 -1.5%
Access Line Equivalents (b)
Selected digital data services:
Unbundled Loops 308 326 -5.5% 298 3.4%
DS0 & ADSL 16,300 11,493 41.8% 15,079 8.1%
DS1 8,163 7,594 7.5% 8,028 1.7%
DS3 & higher 33,638 32,643 3.0% 32,861 2.4%
Total digital data lines
in service 58,409 52,056 12.2% 56,266 3.8%
Total equivalent access lines
in service 80,302 75,104 6.9% 78,494 2.3%
(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 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)
3Q05 3Q04 Growth 2Q05 Growth
Operating Revenues
Service revenues (2) $3,089 $1,548 99.5% $3,087 0.1%
Equipment and other revenues 410 168 144.0% 356 15.2%
Total Operating Revenues 3,499 1,716 103.9% 3,443 1.6%
Operating Expenses
Cost of services and products 1,395 665 109.8% 1,401 -0.4%
Selling, general, &
administrative expenses 1,128 609 85.2% 1,151 -2.0%
Depreciation and amortization 579 229 152.8% 608 -4.8%
Total Operating Expenses 3,102 1,503 106.4% 3,160 -1.8%
Segment Operating Income 397 213 86.4% 283 40.3%
Interest Expense 122 80 52.5% 130 -6.2%
Other Income (Expense), net (9) (46) 80.4% (4) -125.0%
Income Before Income Taxes 266 87 205.7% 149 78.5%
Provision for Income Taxes 117 33 254.5% 72 62.5%
Segment Net Income (1) $149 $54 175.9% $77 93.5%
Selected Financial and Operating
Data
(amounts in millions, except
customer data in thousands)
Segment operating income $397 $213 86.4% $283 40.3%
Segment operating margin 11.3% 12.4% -110 bps 8.2% 310 bps
Cellular/PCS Operating Metrics
(100% Cingular):
Total Customers 52,292 25,672 103.7% 51,442 1.7%
Net Customer Additions 867 657 32.0% 952 -8.9%
Partitioned Customers and/or
Adjustments (17) (29) 41.4% 140 -112.1%
Churn 2.3% 2.8% -50 bps 2.2% 10 bps
Wireless Service ARPU (3) $49.65 $50.25 -1.2% $50.51 -1.7%
Minutes Of Use Per
Subscriber(4) 727 598 21.6% 705 3.1%
Licensed POPs (5) 294 243 21.0% 294 0.0%
Penetration (5) 18.3% 11.4% 690 bps 18.0% 30 bps
* - Not meaningful.
PROFORMA 3Q05 3Q04 Growth 2Q05 Growth
Service Revenue 3,089 2,960 4.4% 3,087 0.1%
Total Revenue (40%) 3,499 3,295 6.2% 3,443 1.6%
Net Adds (100%) 867 808 7.3% 952 -8.9%
ARPU $49.65 $52.38 -5.2% $50.51 -1.7%
(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)
Domestic Wireless Segment (1)(a)
Year-To-Date
2005 2004 Growth
Operating Revenues
Service revenues (2) $9,144 $4,515 102.5%
Equipment and other revenues 1,090 463 135.4%
Total Operating Revenues 10,234 4,978 105.6%
Operating Expenses
Cost of services and products 4,171 1,851 125.3%
Selling, general, & administrative
expenses 3,438 1,742 97.4%
Depreciation and amortization 1,857 676 174.7%
Total Operating Expenses 9,466 4,269 121.7%
Segment Operating Income 768 709 8.3%
Interest Expense 387 239 61.9%
Other Income (Expense), net (9) (145) 93.8%
Income Before Income Taxes 372 325 14.5%
Provision for Income Taxes 179 123 45.5%
Segment Net Income (1) $193 $202 -4.5%
Selected Financial and Operating Data
(amounts in millions, except customer
data in thousands)
Segment operating income $768 $709 8.3%
Segment operating margin 7.5% 14.2% -670 bps
Cellular/PCS Operating Metrics (100%
Cingular):
Total Customers 52,292 25,672 103.7%
Net Customer Additions 3,186 1,639 94.4%
Partitioned Customers and/or
Adjustments (26) 6 N/M*
Churn 2.2% 2.7% -50 bps
Wireless Service ARPU (3) $49.92 $49.78 0.3%
Minutes Of Use Per Subscriber (4) 692 565 22.5%
Licensed POPs (5) 294 243 21.0%
Penetration (5) 18.3% 11.4% 690 bps
* - Not meaningful.
(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)
3Q05 3Q04 Growth 2Q05 Growth
Operating Revenues
Advertising and publishing
revenues $477 $471 1.3% $481 -0.8%
Commission revenues 32 27 18.5% 50 -36.0%
Total Operating Revenues 509 498 2.2% 531 -4.1%
Operating Expenses
Cost of services 94 89 5.6% 99 -5.1%
Selling, general, & administrative
expenses 175 173 1.2% 180 -2.8%
Depreciation and amortization 7 7 0.0% 7 0.0%
Total Operating Expenses 276 269 2.6% 286 -3.5%
Segment Operating Income 233 229 1.7% 245 -4.9%
Interest Expense 3 2 50.0% 2 50.0%
Other Income (Expense), net - - N/M* 1 -100.0%
Income Before Income Taxes 230 227 1.3% 244 -5.7%
Provision for Income Taxes 84 86 -2.3% 90 -6.7%
Segment Net Income (1) $146 $141 3.5% $154 -5.2%
Segment operating income $233 $229 1.7% $245 -4.9%
Segment operating margin 45.8% 46.0% -20 bps 46.1% -30 bps
* - Not meaningful.
BellSouth Corporation
Results by Segment (amounts in millions) (unaudited)
Advertising & Publishing (1)
Year-To-Date
2005 2004 Growth
Operating Revenues
Advertising and publishing
revenues $1,433 $1,403 2.1%
Commission revenues 98 88 11.4%
Total Operating Revenues 1,531 1,491 2.7%
Operating Expenses
Cost of services 283 259 9.3%
Selling, general, & administrative
expenses 518 496 4.4%
Depreciation and amortization 21 21 0.0%
Total Operating Expenses 822 776 5.9%
Segment Operating Income 709 715 -0.8%
Interest Expense 8 6 33.3%
Other Income (Expense), net - 1 -100.0%
Income Before Income Taxes 701 710 -1.3%
Provision for Income Taxes 260 272 -4.4%
Segment Net Income (1) $441 $438 0.7%
Segment operating income $709 $715 -0.8%
Segment operating margin 46.3% 48.0% -170 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. Certain 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) Total Minutes of Use per Cellular/PCS Subscriber definition was
changed effective with the 2Q05 reporting period. Prior to the
change, the numerator was defined as Local Minutes of Use. Effective
with this change, the numerator is now defined as including Local
Minutes of Use and Outcollect Minutes of Use.
(5) Licensed POPs refers to the number of people residing in areas where
Cingular and its partners have licenses to provide cellular or PCS
service including areas where Cingular has not yet commenced service.
Penetration calculation for 2Q05 and 3Q05 is based on licensed
"operational" POPs of 286 million for each quarter. POPs used for
the rate of penetration calculation excludes international.
BellSouth Corporation
Non-GAAP Measures - Reconciliation
(amounts in millions) (unaudited)
Segment Net Income Reconciliation to GAAP Net Income
Year-to-Date
3Q05 3Q04 2Q05 2005 2004
Communications group segment
net income $611 $716 $660 $1,935 $2,128
Domestic wireless group
segment net income 149 54 77 193 202
Advertising and publishing
group segment net income 146 141 154 441 438
Corporate, eliminations and
other (61) (18) (42) (157) (49)
Normalized net income 845 893 849 2,412 2,719
Add back Excluded non-
recurring or non-
operational items (a) (28) (94) (54) 264 675
Consolidated GAAP net income $817 $799 $795 $2,676 $3,394
Free Cash Flow Year-to-Date
3Q05 3Q04 2Q05 2005 2004
Net cash provided by
operating activities $2,114 $1,691 $2,128 $5,934 $5,488
Less Capital Expenditures (886) (768) (829) (2,465) (2,134)
Operating Free Cash Flow $1,228 $923 $1,299 $3,469 $3,354
Net Debt
Sept. 30, Dec. 31, June 30,
2005 2004 2005
Total Debt $16,956 $20,583 $17,692
Less Cash (2,030) (680) (485)
Net Debt $14,926 $19,903 $17,207
Communications Group
Operating Income before
Depreciation and
Amortization Year-to-Date
3Q05 3Q04 2Q05 2005 2004
Operating Revenues $4,588 $4,618 $4,625 $13,831 $13,774
Operating Income 1,021 1,208 1,090 3,228 3,597
Add back Depreciation and
amortization 914 901 910 2,734 2,700
Operating Income before
Depreciation and
Amortization $1,935 $2,109 $2,000 $5,962 $6,297
Margin 42.2% 45.7% 43.2% 43.1% 45.7%
Domestic Wireless Operating
Income before Depreciation
and Amortization Year-to-Date
3Q05 3Q04 2Q05 2005 2004
Service revenues $3,089 $1,548 $3,087 $9,144 $4,515
Equipment and other revenues 410 168 356 1,090 463
Operating revenues 3,499 1,716 3,443 10,234 4,978
Operating Income 397 213 283 768 709
Operating Margin (Operating
income divided by operating
revenues) (b) 11.3% 12.4% 8.2% 7.5% 14.2%
Add back Depreciation and
amortization 579 229 608 1,857 676
Operating Income before
Depreciation and
Amortization $976 $442 $891 $2,625 $1,385
Margin (Operating Income
before Depr & Amort divided
by service revenues) (b) 31.6% 28.6% 28.9% 28.7% 30.7%
Domestic Wireless Proforma
Revenue
3Q05 3Q04 2Q05
Operating Revenue $3,499 $1,716 $3,443
Add back Proforma
Adjustments (c) - 1,579 -
Total Operating Revenue
(Proforma) $3,499 $3,295 $3,443
Domestic Wireless Proforma ARPU
3Q05 3Q04 2Q05
Service revenues $3,089 $1,548 $3,087
Less Mobitex data revenues 7 22 8
Add back Proforma
Adjustments (c) - 1,412 -
Service revenue used to
calculate Proforma ARPU $3,082 $2,938 $3,079
ARPU (Proforma) $49.65 $52.38 $50.51
(a) See pages 3 and 4 for detail of excluded items.
(b) Margin calculations for our domestic wireless segment represents 40%
of Cingular's margin calculations adjusted for the related normalized
items as presented on pages 3-4.
(c) These adjustments are consistent in nature with those set forth in
Cingular's Form 8-K/A dated November 29, 2004.
BellSouth Corporation
Hurricane Katrina Revenue Impacts
(amounts in millions, except per share data)
Communications Group:
3Q05 3Q04 Growth 2Q05 Growth
As reported (with
Katrina customer bill
credits):
Operating revenues $4,588 $4,618 -0.6% $4,625 -0.8%
Operating income $1,021 $1,208 -15.5% $1,090 -6.3%
Operating margin 22.3% 26.2% -390 bps 23.6% -130 bps
Pro forma (without Katrina customer
bill credits):
Operating revenues $4,632 $4,618 0.3% $4,625 0.2%
Operating income $1,065 $1,208 -11.8% $1,090 -2.3%
Operating margin 23.0% 26.2% -320 bps 23.6% -60 bps
Impact of Hurricane Katrina bill
credits on:
Operating revenues $(44) $- -100 bps $- -100 bps
Operating income $(44) $- -360 bps $- -400 bps
Operating margin -0.7% 0.0% -70 bps 0.0% -70 bps
Communications Group:
Year-to-Date
2005 2004 Growth
As reported (with
Katrina customer bill
credits):
Operating revenues $13,831 $13,774 0.4%
Operating income $3,228 $3,597 -10.3%
Operating margin 23.3% 26.1% -280 bps
Pro forma (without Katrina customer
bill credits):
Operating revenues $13,875 $13,774 0.7%
Operating income $3,272 $3,597 -9.0%
Operating margin 23.6% 26.1% -250 bps
Impact of Hurricane Katrina bill
credits on:
Operating revenues $(44) $- -30 bps
Operating income $(44) $- -120 bps
Operating margin -0.3% 0.0% -30 bps
Domestic Wireless:
3Q05 3Q04 Growth 2Q05 Growth
As reported (with Katrina customer
bill credits):
Operating revenues $3,499 $1,716 103.9% $3,443 1.6%
Operating income $397 $213 86.4% $283 40.3%
Operating margin 11.3% 12.4% -110 bps 8.2% 310 bps
Pro forma (without Katrina customer
bill credits):
Operating revenues $3,511 $1,716 104.6% $3,443 2.0%
Operating income $409 $213 92.0% $283 44.5%
Operating margin 11.6% 12.4% -80 bps 8.2% 340 bps
Impact of Hurricane Katrina bill
credits on:
Operating revenues $(12) $- -70 bps $- -30 bps
Operating income $(12) $- -560 bps $- -420 bps
Operating margin -0.3% 0.0% -30 bps 0.0% -30 bps
Domestic Wireless:
Year-to-Date
2005 2004 Growth
As reported (with Katrina customer
bill credits):
Operating revenues $10,234 $4,978 105.6%
Operating income $768 $709 8.3%
Operating margin 7.5% 14.2% -670 bps
Pro forma (without Katrina customer
bill credits):
Operating revenues $10,246 $4,978 105.8%
Operating income $780 $709 10.0%
Operating margin 7.6% 14.2% -660 bps
Impact of Hurricane Katrina bill
credits on:
Operating revenues $(12) $- -20 bps
Operating income $(12) $- -170 bps
Operating margin -0.1% 0.0% -10 bps
Advertising & Publishing:
3Q05 3Q04 Growth 2Q05 Growth
As reported (with Katrina customer
bill credits):
Operating revenues $509 $498 2.2% $531 -4.1%
Operating income $233 $229 1.7% $245 -4.9%
Operating margin 45.8% 46.0% -20 bps 46.1% -30 bps
Pro forma (without Katrina customer
bill credits):
Operating revenues $516 $498 3.6% $531 -2.8%
Operating income $240 $229 4.8% $245 -2.0%
Operating margin 46.5% 46.0% 50 bps 46.1% 40 bps
Impact of Hurricane Katrina bill
credits on:
Operating revenues $(7) $- -140 bps $- -130 bps
Operating income $(7) $- -310 bps $- -290 bps
Operating margin -0.7% 0.0% -70 bps 0.0% -70 bps
Advertising & Publishing:
Year-to-Date
2005 2004 Growth
As reported (with Katrina customer
bill credits):
Operating revenues $1,531 $1,491 2.7%
Operating income $709 $715 -0.8%
Operating margin 46.3% 48.0% -170 bps
Pro forma (without Katrina customer
bill credits):
Operating revenues $1,538 $1,491 3.2%
Operating income $716 $715 0.1%
Operating margin 46.6% 48.0% -140 bps
Impact of Hurricane Katrina bill
credits on:
Operating revenues $(7) $- -50 bps
Operating income $(7) $- -100 bps
Operating margin -0.3% 0.0% -30 bps
SOURCE BellSouth Corporation
-0- 10/25/2005
/CONTACT: /
/First Call Analyst: /
/FCMN Contact: /
/Web site: http://www.bellsouth.com/
(BLS)
CO: BellSouth Corporation
ST: Georgia
IN: TLS CPR NET HEA
SU: ERN HSP
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