What is the primary reason for the significant net loss in the first quarter of 2002?

The primary reason for the reported net loss of $81 million is the adoption of Statement of Financial Accounting Standards No. 142 (FAS 142) on January 1, 2002. This new standard requires companies to test goodwill for impairment rather than amortizing it. SBC Communications Inc. recorded a $1,791 million impairment charge related to goodwill associated with its investment in Sterling Commerce, Inc., which resulted in the reported net loss.

How did the company's revenues perform compared to the previous year?

Total operating revenues decreased by 6.0% to $10,522 million in the first quarter of 2002, compared to $11,190 million in the same period of 2001. This decline was influenced by several factors, including lower equipment sales, changes in directory publication timing, the weak U.S. economy, and increased competition.

What is the outlook for the wireless segment, specifically Cingular Wireless?

The wireless segment, primarily driven by Cingular Wireless, showed positive momentum. Normalized operating revenues increased by 4.7% to $2,126 million. Cingular Wireless customer numbers grew to 21.8 million, with a focus on digital customer growth and higher access rate plans. The company noted that customer additions were lower year-over-year due to a strategy to de-emphasize less profitable prepaid and analog services.

What impact has the adoption of FAS 142 had on the company's financial reporting beyond the goodwill impairment?

Beyond the goodwill impairment charge, the adoption of FAS 142 means that goodwill is no longer amortized. For the first quarter of 2001, this change would have reduced reported operating expenses by approximately $56 million and increased income before extraordinary item and cumulative effect of accounting change by approximately $117 million, or $0.03 per share, if applied retroactively. This non-amortization of goodwill is a key factor in the company's financial reporting going forward.

AT&T INC. 10-Q Quarterly Report Q1 FY2002

Summary

AT&T Inc. (formerly SBC Communications Inc.) reported a net loss of $81 million, or $(0.02) per share, for the first quarter ended March 31, 2002. This contrasts sharply with a net income of $1,854 million, or $0.55 per share, in the prior year's quarter. The significant decline is primarily attributed to a $1,791 million charge related to the adoption of the new accounting standard FAS 142, which requires the impairment of goodwill rather than its amortization. Excluding this accounting change, the company's adjusted net income was essentially flat year-over-year on a per-share basis, reflecting ongoing challenges in its core business. Despite the reported loss, operational revenues saw a decrease of 6.0% to $10,522 million compared to the first quarter of 2001. This decline was driven by reduced demand in the wireline segment due to economic weakness and competition, as well as a drop in directory advertising. However, the wireless segment showed growth, with Cingular Wireless customer numbers increasing, though other revenue streams within wireless declined. The company also announced a dividend increase, signaling confidence in its future cash flows despite the current headwinds.

Key Highlights

1Reported a net loss of $81 million for Q1 2002, a significant drop from a net income of $1,854 million in Q1 2001, largely due to a $1.791 billion goodwill impairment charge from adopting FAS 142.
2Total operating revenues decreased by 6.0% to $10,522 million compared to the prior year's quarter.
3The wireline segment experienced a 3.3% decline in normalized operating revenues, impacted by increased competition and a weak economy.
4The wireless segment, primarily Cingular Wireless, saw a 4.7% increase in normalized operating revenues, with customer numbers growing to 21.8 million.
5The company's debt ratio slightly increased to 47.1% from 46.9%.
6Cash provided by operating activities remained strong at $2,262 million, indicating continued operational cash generation despite the net loss.
7Dividends declared per common share increased to $0.27 from $0.25625 in the prior year's quarter.

AT&T INC. Quarterly Report for Q1 Ended Mar 31, 2002

Summary

Key Highlights

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