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AT&T INC. Annual Report, Year Ended Dec 31, 2002

Filing Date
Filed March 14, 2003
Period End
December 31, 2002
Securities
TT-PCTBBT-PA
In the record · 2016–202610-K1110-Q348-K281

T filed 11 annual reports (10-K), 34 quarterly reports (10-Q) and 281 current reports (8-K) between 2016 and 2026.

  1. Deal closed8-K · Aug ’18Aug ’18
  2. Leadership change8-K · Apr ’20Apr ’20
  3. Deal closed8-K · Apr ’22Apr ’22
  4. Material agreement8-K · Nov ’25Nov ’25

01—Abstract

Summary

Summary of the 10-K filed March 14, 2003. Cited figures are marked; the original filing is the authoritative source.

SBC Communications Inc. reported 2002 operating revenues of $43.14 billiona, down 6.0% from $45.91 billion in 2001, and operating income of $8.62 billion, down from $10.51 billion.

The decline was attributed primarily to lost retail access lines to below-cost UNE-P wholesale lines, a weak U.S. economy, and increased competition including technology substitution. Net income was $5.65 billionb, or $1.69 per diluted share, after a $1.82 billion non-cash cumulative effect charge from adopting FAS 142 (goodwill impairment, primarily $1.79 billion at Sterling Commerce). Income before extraordinary items and accounting changes rose to $7.47 billion from $7.03 billion, aided by gains on international investments, including the Bell Canada redemption.

Cash generation remained strong, with operating cash flow of $15.21 billion and capital expenditures cut to $6.81 billionc from $11.19 billion. Management expects 2003 capital spending of $5 to $6 billion and expects total consolidated revenue to decline slightly in 2003, with total operating expenses rising significantly due mainly to pension and postretirement costs estimated at $1.8 to $2.0 billion. Long-term debt was $18.54 billion at year-end, and the debt ratio fell to 39.9% from 44.3%.

The company also sold its Cegetel stake to Vodafone for about $2.27 billiond in January 2003. The filing highlights significant regulatory uncertainty. The FCC's February 2003 Triennial Review, whose full text was not yet released when the filing was made, largely defers UNE-P decisions to the states.

Management stated it expects the decision may have an overall unfavorable effect on results. The company also disclosed a pending 2001 comprehensive review and ongoing antitrust class actions, though it believes an adverse material outcome is unlikely.

02—Key points

Key Highlights

  1. Operating revenues fell 6.0% to $43.14 billion in 2002, driven by access-line losses to UNE-P competitors, a weak economy, and technology substitution.
  2. Operating income declined 17.9% to $8.62 billion, with combined special charges of $872 million for work-force reductions and pension and severance costs.
  3. Net income was $5.65 billion ($1.69 diluted EPS) after a $1.82 billion non-cash cumulative effect charge from adopting FAS 142; income before accounting changes rose to $7.47 billion.
  4. Capital expenditures fell to $6.81 billion from $11.19 billion, and 2003 capital spending is guided to $5 to $6 billion.
  5. Long-term debt rose to $18.54 billion, while the debt ratio improved to 39.9% from 44.3%.
  6. Cingular Wireless (60% owned, equity method) served about 21.9 million subscribers at year-end 2002; the Cegetel sale to Vodafone closed in January 2003 for about $2.27 billion.
  7. Management expects total consolidated revenue to decline slightly in 2003 and total operating expenses to increase significantly, largely from pension and postretirement costs of $1.8 to $2.0 billion.

03—Questions

Frequently Asked Questions

  1. Why did SBC's revenue and operating income decline in 2002?

    Management attributed the decline primarily to the loss of retail access lines to competitors using below-cost UNE-P wholesale lines, the weak U.S. economy, and increased competition including technology substitution. Special items, including work-force-reduction and severance charges, also reduced operating income.

  2. What is the impact of the FCC Triennial Review on SBC?

    The FCC's February 2003 Triennial Review largely defers UNE-P decisions to the states and presumes competitors are impaired without access to unbundled switching for most customers. Management said the text was not yet released, and it expects the decision may have an overall unfavorable effect on its results and financial position, with likely appeals.

  3. How did the accounting change affect 2002 net income?

    Adoption of FAS 142 on January 1, 2002 resulted in a cumulative effect charge of $1.82 billion, net of a $5 million tax benefit, mainly a $1.79 billion goodwill impairment at Sterling Commerce. Income before this charge and extraordinary items was $7.47 billion, or $2.23 per diluted share.

  4. What are SBC's capital spending and debt plans?

    Capital expenditures totaled $6.81 billion in 2002 and are expected to be $5 to $6 billion in 2003, excluding Cingular. Long-term debt was $18.54 billion at year-end 2002. Management said it expects to fund expenditures with operating cash flow and incremental borrowings, and it planned to use the Bell Canada and Cegetel sale proceeds to reduce debt or for general corporate purposes.

04—Continue

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