EX-99.1 3 y66225exv99w1.txt UNAUDITED PRO FORMA COMB. COND. FINANCIAL RESULTS EXHIBIT 99.1 AT&T UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS The unaudited pro forma combined condensed financial statements set forth below for AT&T give effect to the Liberty Media Group distribution and the AT&T Broadband distribution (collectively, the AT&T restructuring events), as if such events had been completed on January 1, 1999 for income statement purposes, and at September 30, 2002 for balance sheet purposes, subject to the assumptions and adjustments in the accompanying notes to the pro forma financial statements. Upon the distribution of AT&T Broadband, AT&T will report AT&T Broadband as a Discontinued Operation, in accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." For accounting purposes, the spin-off (the distribution) of AT&T Broadband is considered a non pro-rata distribution and was recorded at fair value resulting in the recognition of a gain by AT&T upon the distribution date. The split-off of Liberty Media Group, which was completed on August 10, 2001, was a pro-rata distribution and was therefore recorded at historical cost. Since Liberty Media Group was split-off from AT&T on August 10, 2001, no 2002 balance sheet or income statement pro forma adjustments were made for Liberty Media Group. See the Notes to the Unaudited Pro Forma Combined Condensed Financial Statements for additional disclosure of potential material nonrecurring charges and credits directly attributable to the events as noted above which are not reflected in the pro forma financial statements. The pro forma adjustments included herein are based on available information and certain assumptions that management believes are reasonable and are described in the accompanying notes to the pro forma financial statements. The Unaudited Pro Forma Combined Condensed Financial Statements do not necessarily represent what AT&T's financial position or results of operations would have been had the AT&T Broadband distribution or the Liberty Media Group distribution occurred on such dates or to project AT&T's financial position or results of operations at or for any future date or period. In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma financial information have been made. The Unaudited Pro Forma Combined Condensed Financial Statements should be read in conjunction with the historical financial statements of AT&T. AT&T CORP. UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AT SEPTEMBER 30, 2002
AT&T BROADBAND HISTORICAL GROUP OTHER PRO FORMA AT&T(a) DISTRIBUTION(e) ADJUSTMENTS(g) AT&T ---------- --------------- -------------- --------- (DOLLARS IN MILLIONS) ASSETS Cash and cash equivalents............................. $ 6,926 $ -- $ 70 $ 11,314 4,318 (f) Receivables -- net.................................... 7,284 (796) -- 6,488 Investments........................................... 459 (459) -- -- Taxes receivable...................................... -- (443) 443 -- Deferred income taxes................................. 2,048 -- 483 2,531 Other current assets.................................. 995 (384) -- 611 7,823 (f) (7,823)(f) Property, plant and equipment -- net.................. 41,364 (15,263) -- 26,101 Franchise costs -- net................................ 29,084 (29,084) -- -- Goodwill -- net....................................... 20,517 (15,162) (46) 5,309 Other purchased intangibles -- net.................... 2,003 (1,416) -- 587 Investments and related advances...................... 17,920 (17,321) -- 599 Prepaid pension costs................................. 3,522 -- -- 3,522 Other assets.......................................... 5,916 (2,093) 19 3,842 1,554 (c) (1,554)(c) -------- --------- ----- -------- Total Assets...................................... $138,038 $ (78,103) $ 969 $ 60,904 ======== ========= ===== ======== LIABILITIES Accounts payable...................................... 4,342 (775) 70 3,637 Payroll and benefit-related liabilities............... 1,599 (375) -- 1,224 Debt maturing within one year......................... 6,560 (10,152) -- 4,231 7,823 (f) AT&T Canada obligation................................ 3,525 -- -- 3,525 Other current liabilities............................. 4,652 (2,032) 947 3,567 Long-term debt........................................ 36,371 (12,701) -- 20,165 (3,505) (f) Long-term benefit-related liabilities................. 3,707 -- (146) 3,561 Deferred income taxes................................. 24,452 (20,219) 154 4,319 (68)(d) Other long-term liabilities and deferred credits...... 3,868 (811) 196 3,432 179(d) -------- --------- ----- -------- Total Liabilities................................. 89,076 (42,636) 1,221 47,661 Minority interest..................................... 1,371 (1,214) -- 157 Company-obligated convertible quarterly income preferred securities of subsidiary trust holding solely subordinated debt securities of AT&T......... 4,728 (4,728) -- -- SHAREOWNERS' EQUITY Common Stock: AT&T common stock, $1 par value, authorized 6,000,000,000 shares; issued and outstanding 770,217,000 shares.................................. 770 -- -- 770 Additional paid-in capital............................ 59,310 (29,594) (184) 27,799 (1,554)(c) (179)(d) Accumulated deficit................................... (17,082) 1,554 (c) (68) (15,528) 68 (d) Accumulated other comprehensive loss.................. (135) 180 -- 45 -------- --------- ----- -------- Total shareowners' equity......................... 42,863 (29,525) (252) 13,086 Total Liabilities & Shareowners' Equity........... $138,038 $ (78,103) $ 969 $ 60,904 ======== ========= ===== ========
See Notes To AT&T Unaudited Pro Forma Combined Condensed Financial Statements AT&T CORP. UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
AT&T BROADBAND HISTORICAL GROUP OTHER PRO FORMA AT&T(a) DISTRIBUTION(e) ADJUSTMENTS(g) AT&T ---------- --------------- -------------- --------- (DOLLARS IN MILLIONS) Revenue................................... $ 36,044 $ (7,512) $ 6 $28,538 OPERATING EXPENSES Costs of services and products............ 9,962 (3,889) 93 6,166 Access and other connection............... 8,267 -- (52) 8,215 Selling, general and administrative....... 7,902 (2,037) 45 5,910 Depreciation and amortization............. 5,835 (2,204) -- 3,631 Net restructuring and other charges....... 30 (56) -- (26) Goodwill and franchise impairment charges................................. 16,479 (16,525) 46 -- -------- -------- ---- ------- Total operating expenses.................. 48,475 (24,711) 132 23,896 Operating (loss) income................... (12,431) 17,199 (126) 4,642 Other (expense)........................... (935) 649 -- (286) Interest (expense)........................ (2,231) 1,111 33 (1,087) (Loss) income from continuing operations before income taxes, minority interest and dividends on subsidiary preferred stock, and net (losses) related to equity investments...................... (15,597) 18,959 (93) 3,269 Benefit (provision) for income taxes...... 4,053 (5,536) 121 (1,362) Minority interest and dividends on subsidiary preferred stock.............. (126) 206 1 81 Net (losses) related to other equity investments............................. (1,032) 615 3 (414) -------- -------- ---- ------- Net (loss) earnings from continuing operations attributable to common shareowners............................. $(12,702) $ 14,244 $ 32 $ 1,574 ======== ======== ==== ======= AT&T COMMON STOCK GROUP: (Loss) earnings from continuing operations.............................. $(12,702) $ 1,574 (i) Weighted average shares outstanding -- basic.................... 736 736 Basic (loss) earnings per share........... $(17.25) $ 2.14 (h) (Loss) earnings from continuing operations.............................. $(12,702) $ 1,574 (i) Weighted average shares outstanding -- diluted.................. 736 759 (k) Diluted (loss) earnings per share......... $(17.25) $ 2.07 (h)
See Notes To AT&T Unaudited Pro Forma Combined Condensed Financial Statements AT&T CORP. UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
LIBERTY MEDIA AT&T BROADBAND HISTORICAL GROUP GROUP OTHER PRO FORMA AT&T(a) DISTRIBUTION(b) DISTRIBUTION(e) ADJUSTMENTS(g) AT&T ---------- --------------- --------------- -------------- --------- (DOLLARS IN MILLIONS) Revenue................................ $39,773 $ -- $(7,756) $ 12 $32,029 OPERATING EXPENSES Costs of services and products......... 10,458 -- (4,245) 86 6,299 Access and other connection............ 9,289 -- -- (34) 9,255 Selling, general and administrative.... 7,953 -- (1,951) 40 6,042 Depreciation and amortization.......... 7,036 -- (3,633) -- 3,403 Net restructuring and other charges.... 1,494 -- (1,494) -- -- ------- ------ ------- ---- ------- Total operating expenses............... 36,230 -- (11,323) 92 24,999 Operating income....................... 3,543 -- 3,567 (80) 7,030 Other (expense) income................. (771) -- 2,156 -- 1,385 Interest (expense)..................... (2,426) -- 1,347 (1) (1,080) Income from continuing operations before income taxes, minority interest and dividends on subsidiary preferred stock, and net (losses) related to equity investments........ 346 -- 7,070 (81) 7,335 Benefit (provision) for income taxes... 288 -- (3,214) 169 (2,757) Minority interest and dividends on subsidiary preferred stock........... 1,015 -- (905) (18) 92 Equity (losses) from Liberty Media Group................................ (2,711) 2,711 -- -- -- Net (losses) related to other equity investments.......................... (4,389) -- 37 (31) (4,383) (Loss) income from continuing operations........................... (5,451) 2,711 2,988 39 287 Dividend requirements of preferred stock................................ (652) -- -- -- (652) Premium on exchange of AT&T Wireless tracking stock....................... (80) -- -- -- (80) ------- ------ ------- ---- ------- Net (loss) from continuing operations attributable to common shareowners... $(6,183) $2,711 $ 2,988 $ 39 $ (445) ======= ====== ======= ==== ======= AT&T COMMON STOCK GROUP: (Loss) from continuing operations...... $(3,472) $ (445)(i) Weighted average shares outstanding -- basic & diluted....... 735 746 (j) Basic and diluted (loss) per share..... $ (4.72) $ (0.60)(h) LIBERTY MEDIA GROUP: Basic and diluted (loss) per share..... $ (1.05)
See Notes To AT&T Unaudited Pro Forma Combined Condensed Financial Statements 1 AT&T CORP. UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001
AT&T LIBERTY MEDIA BROADBAND HISTORICAL GROUP GROUP OTHER PRO FORMA AT&T(a) DISTRIBUTION(b) DISTRIBUTION(e) ADJUSTMENTS(g) AT&T ---------- --------------- --------------- -------------- --------- (DOLLARS IN MILLIONS) Revenue........................ $52,314 $ -- $(10,132) $14 $42,196 OPERATING EXPENSES Costs of services and products..................... 13,960 -- (5,459) 120 8,621 Access and other connection.... 12,136 -- -- (51) 12,085 Selling, general and administrative............... 10,596 -- (2,582) 52 8,066 Depreciation and amortization................. 9,338 -- (4,780) -- 4,558 Net restructuring and other charges...................... 2,530 -- (1,494) -- 1,036 ------- ------ -------- ---- ------- Total operating expenses....... 48,560 -- (14,315) 121 34,366 Operating income............... 3,754 -- 4,183 (107) 7,830 Other (expense) income......... (1,547) -- 2,874 -- 1,327 Interest (expense)............. (3,242) -- 1,735 14 (1,493) (Loss) income from continuing operations before income taxes, minority interest and dividends on subsidiary preferred stock, and net (losses) related to equity investments. ................ (1,035) -- 8,792 (93) 7,664 Benefit (provision) for income taxes........................ 791 -- (3,857) 175 (2,891) Minority interest and dividends on subsidiary preferred stock........................ 963 -- (833) 1 131 Equity (losses) from Liberty Media Group.................. (2,711) 2,711 -- -- -- Net (losses) related to other equity investments........... (4,850) -- 69 (55) (4,836) (Loss) income from continuing operations................... (6,842) 2,711 4,171 28 68 Dividend requirements of preferred stock.............. (652) -- -- -- (652) Premium on exchange of AT&T Wireless tracking stock...... (80) -- -- -- (80) ------- ------ -------- ---- ------- Net (loss) from continuing operations attributable to common shareowners........... $(7,574) $2,711 $ 4,171 $ 28 $ (664) ======= ====== ======== ==== ======= AT&T COMMON STOCK GROUP: (Loss) from continuing operations................... $(4,863) $ (664)(i) Weighted average shares outstanding -- basic & diluted...................... 729 739 (j) Basic and diluted (loss) per share........................ $ (6.67) $ (0.90)(h) LIBERTY MEDIA GROUP: Basic and diluted (loss) per share........................ $ (1.05)
See Notes To AT&T Unaudited Pro Forma Combined Condensed Financial Statements AT&T CORP. UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2000
AT&T LIBERTY MEDIA BROADBAND HISTORICAL GROUP GROUP OTHER PRO FORMA AT&T(a) DISTRIBUTION(b) DISTRIBUTION(e) ADJUSTMENTS(g) AT&T ---------- --------------- --------------- -------------- --------- (DOLLARS IN MILLIONS) Revenue........................ $55,283 $ -- $(8,445) $ 12 $46,850 OPERATING EXPENSES Costs of services and products..................... 12,795 -- (4,600) 41 8,236 Access and other connection.... 13,140 -- -- (1) 13,139 Selling, general and administrative............... 9,502 -- (2,180) 63 7,385 Depreciation and amortization................. 8,589 -- (4,051) -- 4,538 Net restructuring and other charges...................... 7,029 -- (6,270) -- 759 ------- ------- ------- ---- ------- Total operating expenses....... 51,055 -- (17,101) 103 34,057 Operating income............... 4,228 -- 8,656 (91) 12,793 Other income................... 1,150 -- 39 -- 1,189 Interest (expense)............. (2,964) -- 1,323 138 (1,503) Income from continuing operations before income taxes, minority interest and dividends on subsidiary preferred stock, and net (losses) earnings related to equity investments........ 2,414 -- 10,018 47 12,479 (Provision) for income taxes... (3,284) -- (1,183) (19) (4,486) Minority interest and dividends on subsidiary preferred stock........................ 4,103 -- (4,062) -- 41 Equity earnings from Liberty Media Group.................. 1,488 (1,488) -- -- -- Net (losses) earnings related to other equity investments.. (588) -- 597 1 10 ------- ------- ------- ---- ------- Net income from continuing operations attributable to common shareowners........... $ 4,133 $(1,488) $ 5,370 $ 29 $ 8,044 ======= ======= ======= ==== ======= AT&T COMMON STOCK GROUP: Earnings from continuing operations................... $ 2,645 $ 8,044 (i) Weighted average shares outstanding -- basic......... 697 705 (j) Basic earnings per share....... $ 3.79 $ 11.41 (h) Earnings from continuing operations................... $ 2,677 $ 8,044 (i) Weighted average shares outstanding -- diluted....... 709 731 (k) Diluted earnings per share..... $ 3.77 $ 11.01 (h) LIBERTY MEDIA GROUP: Basic and diluted earnings per share........................ $ 0.58
See Notes To AT&T Unaudited Pro Forma Combined Condensed Financial Statements AT&T CORP. UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1999
AT&T LIBERTY MEDIA BROADBAND HISTORICAL GROUP GROUP OTHER PRO FORMA AT&T(a) DISTRIBUTION(b) DISTRIBUTION(e) ADJUSTMENTS(g) AT&T ---------- --------------- --------------- -------------- --------- (DOLLARS IN MILLIONS) Revenue........................ $54,687 $ -- $(5,080) $ 1 $49,608 OPERATING EXPENSES Costs of services and products..................... 11,013 -- (2,686) 13 8,340 Access and other connection.... 14,439 -- -- -- 14,439 Selling, general and administrative............... 10,608 -- (1,253) 81 9,436 Depreciation and amortization................. 6,194 -- (1,674) -- 4,520 Net restructuring and other charges...................... 975 -- (644) -- 331 ------- ------ ------- --- ------- Total operating expenses....... 43,229 -- (6,257) 94 37,066 Operating income............... 11,458 -- 1,177 (93) 12,542 Other income................... 826 -- (50) -- 776 Interest (expense)............. (1,503) -- 705 24 (774) Income from continuing operations before income taxes, minority interest and dividends on subsidiary preferred stock, and net (losses) related to equity investments.................. 10,781 -- 1,832 (69) 12,544 (Provision) for income taxes... (4,016) -- (465) 25 (4,456) Minority interest and dividends on subsidiary preferred stock........................ (126) -- 126 -- -- Equity (losses) from Liberty Media Group.................. (2,022) 2,022 -- -- -- Net (losses) related to other equity investments........... (756) -- 707 1 (48) ------- ------ ------- --- ------- Net income from continuing operations attributable to common shareowners........... $ 3,861 $2,022 $ 2,200 $(43) $ 8,040 ======= ====== ======= === ======= AT&T COMMON STOCK GROUP: Earnings from continuing operations................... $ 5,883 $ 8,040 (i) Weighted average shares outstanding -- basic......... 616 623 (j) Basic earnings per share....... $ 9.54 $ 12.90 (h) Earnings from continuing operations................... $ 5,909 $ 8,040 (i) Weighted average shares outstanding -- diluted....... 630 638 (k) Diluted earnings per share..... $ 9.37 $ 12.61 (h) LIBERTY MEDIA GROUP: Basic and diluted (loss) per share........................ $ (0.80)
See Notes To AT&T Unaudited Pro Forma Combined Condensed Financial Statements AT&T CORP. NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (a) These columns reflect the historical results of operations and financial position of AT&T Corp. We have restated certain prior period amounts to conform to our current presentation in connection with the adoption of Emerging Issues Task Force Issue No. 01-9, "Accounting for Consideration Given by a Vendor to a Customer," and to reflect a one-for-five reverse stock split declared by the AT&T Board on November 14, 2002. (b) These adjustments deduct the historical results of operations of Liberty Media Group to reflect the split-off of Liberty Media Group from AT&T. (c) This entry reflects the fair value adjustment for accounting purposes which would have been recorded had the distribution of AT&T Broadband occurred on September 30, 2002, utilizing the stock price on the date of distribution. Comcast owned shares of AT&T common stock ("T") at the time of the AT&T Broadband distribution. Pursuant to certain provisions of the merger agreement, these shares were converted into exchangeable preferred stock of AT&T and Comcast did not participate in the AT&T Broadband distribution. Therefore the distribution was a non pro-rata transaction among the "T" shareholders accounted for at fair value. The distribution has been reflected in the pro forma balance sheet at fair value, resulting in a nonrecurring gain upon distribution equal to the excess of the fair value of AT&T Broadband over AT&T's carrying value of the net assets of AT&T Broadband to be distributed. The actual gain will be determined based on the stock price of the Comcast shares received pursuant to the merger agreement and the net assets of AT&T Broadband on the distribution date of November 18, 2002. Due to the fact that the gain is a one-time event, its effects have not been included as a pro forma adjustment to the income statement; however it has been included as a pro forma adjustment to accumulated deficit on the pro forma balance sheet. The estimated gain is calculated as follows (dollars in millions): Fair value of Comcast Corp. shares to be received in the transaction (1,232,866,989 shares at a stock price of $25.209 per share on November 18, 2002)................... $31,079 Carrying value of AT&T Broadband net assets to be distributed as of September 30, 2002 ..................... 29,525 ------- Gain on distribution........................................ $ 1,554 =======
(d) These entries represent adjustments to AT&T Broadband's combined attributed net assets pursuant to the Merger Agreement. The Merger Agreement stipulates that AT&T will retain certain liabilities currently reflected in the AT&T Broadband financial statements. Accordingly, these liabilities were transferred to AT&T along with the related deferred income taxes. (e) These adjustments deduct the historical results of operations and the historical financial position of AT&T Broadband to reflect the spin-off of AT&T Broadband from AT&T. The distribution is being accounted for as a fair value transaction and as such the fair value of the net assets of AT&T Broadband have been recorded as a reduction to additional-paid-in capital, given the deficit that exists in retained earnings. (f) These adjustments reflect the repayment of the intercompany loan balance from AT&T Broadband. The repayment of intercompany indebtedness is contained in the Separation and Distribution Agreement between AT&T and AT&T Broadband Corp. The repayment was accomplished through completion of the exchange offer whereby approximately $3.5 billion of AT&T debt was exchange for Comcast debt, with the remainder paid in cash. (g) Reflects certain Inter-Group transactions appropriately reflected in the separate financial statements of AT&T after excluding AT&T Broadband on a pro forma basis that were eliminated in the AT&T consolidated financial statements and were therefore not reflected in AT&T's historical results and financial position. These transactions include adjustments to properly reflect the stand-alone tax rates of AT&T subsequent to the distribution of AT&T Broadband. These entries also reflect the reclassification of certain items appropriately reflected on the separate financial statements of AT&T Broadband and other discontinued operations adjustments. (h) Pursuant to the Merger Agreement, prior to the AT&T Broadband spin-off, shares of AT&T common stock held by Comcast (currently 41.5 million shares on a pre-split basis) were exchanged on a one-for-one basis into a newly created series of AT&T exchangeable preferred stock. The AT&T exchangeable preferred stock will be mandatorily exchangeable 23 trading days after the closing of the Comcast merger into shares of AT&T common stock utilizing a conversion formula. The conversion formula will provide Comcast with an interest in AT&T that is equal in value to the interest Comcast held in AT&T prior to the Comcast merger, subject to a maximum share issuance of 10% of the outstanding shares of AT&T common stock. The conversion formula is computed as the combination of average post closing AT&T Comcast Class A common stock and AT&T common stock trading values divided by average AT&T common stock trading values utilizing ten randomly selected trading days after the closing of the Comcast merger. At September 30, 2002, the maximum additional shares that Comcast could receive would be approximately 69 million shares on a post-split basis, resulting in earnings (loss) per basic share of $1.96 and $(0.55) for the nine months ended September 30, 2002 and 2001, respectively, and $(0.82), $10.39 and $11.62 for the years ended December 31, 2001, 2000 and 1999, respectively. (Loss) earnings per diluted share on the same basis would be $1.90 and $(0.55) for the nine months ended September 30, 2002 and 2001, respectively, and $(0.82), $10.06 and $11.37 for the years ended December 31, 2001, 2000 and 1999, respectively. (i) AT&T has completed its exchange of approximately $4.7 billion of certain AT&T notes for new AT&T notes that, pursuant to the completion of the AT&T Comcast transaction, now contain higher interest rates. The income figures currently reflected do not contemplate the impact of the exchange. Based on the revised interest rates of the exchanged debt, annual net income will decrease by approximately $8.9 million. (j) The Merger Agreement called for the redemption by AT&T of the TCI Pacific Communications, Inc. Class A Senior Cumulative Exchangeable Preferred Stock for AT&T common stock. Accordingly, outstanding shares on a pro forma basis are adjusted to include 10 million, 10 million, 8 million, and 7 million for the nine months ended September 30, 2001 and the years ended December 31, 2001, 2000 and 1999, respectively, related to the assumed redemption of these shares on January 1, 1999. (k) Fully diluted shares reflect adjustments for items that were anti-dilutive for historical AT&T, but are dilutive to AT&T less AT&T Broadband.