EX-99.2 3 ex99-2.txt MEDIAONE GROUP, INC. FINANCIAL RESULTS 1 EXHIBIT 99.2 MEDIAONE GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, -------------------------- DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS 2000 1999 --------------------------------------------- --------- --------- Sales and other revenues: Domestic cable and broadband $ 706 $ 654 Corporate and other -- 11 --------- --------- Total sales and other revenues 706 665 --------- --------- Operating expenses: Cost of sales and other revenues 296 269 Selling, general and administrative expenses 171 185 Depreciation and amortization 379 250 --------- --------- Total operating expenses 846 704 --------- --------- Operating loss (140) (39) Interest expense (147) (96) Equity losses in unconsolidated ventures (71) (115) Gains (losses) on investments: Sales and exchanges of domestic investments 191 70 Sales of international investments 1,993 124 PrimeStar investment -- (65) Minority interest expense in Centaur Funding (25) (25) Guaranteed minority interest expense (24) (24) Merger costs (19) (15) Other income - net 155 37 --------- --------- Income (loss) before income taxes 1,913 (148) (Provision) benefit for income taxes (755) 37 --------- --------- NET INCOME (LOSS) $ 1,158 $ (111) ========= ========= Preferred stock dividends and accretion (1) (14) --------- --------- EARNINGS (LOSS) AVAILABLE FOR COMMON STOCK $ 1,157 $ (125) ========= ========= Basic earnings (loss) per common share $ 1.80 $ (0.21) ========= ========= Diluted earnings (loss) per common share $ 1.78 $ (0.21) ========= ========= AVERAGE COMMON SHARES OUTSTANDING (THOUSANDS): Basic average common shares outstanding 642,947 603,813 ========= ========= Diluted average common shares outstanding 651,110 603,813 ========= =========

See Notes to Consolidated Financial Statements 2 MEDIAONE GROUP, INC. CONSOLIDATED BALANCE SHEETS

MARCH 31, DECEMBER 31, DOLLARS IN MILLIONS 2000 1999 ------------------- ----------- ------------ (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $ 7,540 $ 7,471 Accounts and notes receivable - net 374 489 Current portion of deferred tax asset 68 69 Prepaid and other 26 29 Marketable securities 66 62 ------- ------- Total current assets 8,074 8,120 ------- ------- Property, plant and equipment - net 5,369 5,090 Investment in Vodafone Group 9,725 8,718 Investment in Time Warner Entertainment 2,609 2,597 Net investment in international ventures held for sale 820 938 Intangible assets - net 11,329 11,507 Other assets 3,152 2,816 ------- ------- Total assets $41,078 $39,786 ======= =======

See Notes to Consolidated Financial Statements. 2 3 MEDIAONE GROUP, INC. CONSOLIDATED BALANCE SHEETS (CONTINUED)

MARCH 31, DECEMBER 31, DOLLARS IN MILLIONS 2000 1999 ------------------- ------- ------- (UNAUDITED) LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Short-term debt $ 1,505 $ 1,506 Accounts payable 292 350 Employee compensation 75 92 Deferred revenue and customer deposits 186 174 Current income taxes payable 937 1,552 Other 483 571 ------- ------- Total current liabilities 3,478 4,245 ------- ------- Long-term debt 9,119 8,673 Deferred income taxes 7,998 7,711 Deferred credits and other 349 168 Commitments and contingencies Minority interest in Centaur Funding 1,115 1,113 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely Company-guaranteed subordinated debentures 1,060 1,060 Preferred stock subject to mandatory redemption 50 50 Shareowners' equity: Common shares 10,943 11,448 Retained earnings 5,280 4,123 Accumulated other comprehensive income 1,686 1,195 ------- ------- Total shareowners' equity 17,909 16,766 ------- ------- Total liabilities and shareowners' equity $41,078 $39,786 ======= =======

See Notes to Consolidated Financial Statements. 3 4 MEDIAONE GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2000 1999 ---------------------------- ------- ------- DOLLARS IN MILLIONS OPERATING ACTIVITIES Net income (loss) $ 1,158 $ (111) Adjustments to net income (loss): Depreciation and amortization 379 250 Equity losses in unconsolidated ventures 71 115 (Gains) losses on investments: Sales and exchanges of domestic investments (191) (70) Sales of international investments (1,993) (124) PrimeStar investment -- 65 Deferred income taxes (23) (18) Changes in operating assets and liabilities: Accounts and notes receivable, and other current assets 120 (77) Accounts payable and accrued liabilities (155) 37 Current income taxes payable (615) 346 Other - net 29 45 ------- ------- Cash (used for) provided by operating activities (1,220) 458 ------- ------- INVESTING ACTIVITIES Expenditures for property, plant and equipment (462) (401) Investment in international ventures (14) (55) Proceeds from sales of investments 2,289 304 Other - net 3 11 ------- ------- Cash provided by (used for) investing activities 1,816 (141) ------- ------- FINANCING ACTIVITIES Net repayments of short-term debt -- (160) Repayments of long-term debt -- (3) Proceeds from issuance of common stock 57 23 Dividends paid on preferred stock (1) (13) Purchases of treasury stock (583) (47) ------- ------- Cash used for financing activities (527) (200) ------- ------- CASH AND CASH EQUIVALENTS Increase 69 117 Beginning balance 7,471 415 ------- ------- Ending balance $ 7,540 $ 532 ======= =======

See Notes to Consolidated Financial Statements. 4 5 MEDIAONE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2000 (DOLLARS IN MILLIONS) (UNAUDITED) NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation. The Consolidated Financial Statements have been prepared by MediaOne Group, Inc. ("MediaOne Group" or the "Company") pursuant to the interim reporting rules and regulations of the Securities and Exchange Commission ("SEC") and include the accounts of MediaOne Group and its consolidated subsidiaries. Certain information and footnote disclosures normally accompanying financial statements prepared in accordance with generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to such SEC rules and regulations. In the opinion of MediaOne Group's management, the Consolidated Financial Statements include all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial information set forth therein. It is suggested that these Consolidated Financial Statements be read in conjunction with the Company's 1999 Consolidated Financial Statements and notes thereto included in MediaOne Group's Form 10-K filed with the SEC on March 23, 2000. Certain reclassifications within the Consolidated Financial Statements have been made to conform to the current year presentation. NOTE 2: AT&T MERGER On May 6, 1999, MediaOne Group entered into an agreement with AT&T Corp. ("AT&T") to merge its operations with those of AT&T. The merger is expected to close in mid-2000, subject to legal and regulatory approval. NOTE 3: DOMESTIC ASSET DISPOSITIONS, EXCHANGES AND OTHER On March 1, 2000, MediaOne Group sold its investment in shares of Motorola, Inc. ("Motorola") for gross proceeds of $41, resulting in a net pretax gain of $24. The Motorola shares were received in January 2000 as a result of the exercise of certain General Instrument Corporation ("GI") warrants held by the Company, which were converted to Motorola shares as a result of the merger of GI into Motorola. 5 6 MEDIAONE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN MILLIONS) (UNAUDITED) On March 10, 2000, the Company's interest in the Trip.com, an online travel services company, was merged into Galileo International, Inc. ("Galileo"). The Company's interest was converted into stock of Galileo and approximately $30 in cash, resulting in a net pretax gain of $85. Also during March 2000, the Company's investments in Preview Travel and IPIX were merged and exchanged into investments in Travelocity.com and Bamboo.com, respectively, resulting in total net pretax gains of $82. The new investments will be accounted for under the cost method of accounting, as available for sale securities, with changes in the fair market value of the investment being recorded in equity as a component of other comprehensive income. NOTE 4: OPERATING SEGMENTS In accordance with Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and Related Information," the following table presents selected information for MediaOne Group's operating segments for the three month periods ended March 31, 2000 and 1999. "Sales and Other Revenues" and earnings before interest, taxes, depreciation, amortization and other ("EBITDA") for the domestic segment are presented on a proportionate basis. Proportionate results reflect the relative weight of MediaOne Group's ownership in each of its respective domestic equity ventures together with the consolidated results of its subsidiaries. The computation of EBITDA also excludes gains on asset sales, equity losses, guaranteed minority interest expense and minority interest expense in Centaur Funding. Adjustments made to Sales and Other Revenues and EBITDA to arrive at proportionate results are reversed in the column labeled "Eliminations and Adjustments," in conformity with SFAS No. 131, so that in total, Sales and Other Revenues and EBITDA reflect consolidated results. Beginning in 2000, the Company no longer evaluates the proportionate results of its international interests when assessing performance and allocating resources due to the sale of a significant portion of these international investments. Amounts previously disclosed for 1999 have been reclassified to conform with the current year presentation. 6 7 MEDIAONE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN MILLIONS) (UNAUDITED) Operating Results:

DOMESTIC CABLE & BROADBAND MEDIAONE OF MULTIMEDIA ELIMINATIONS DELAWARE (1) VENTURES (2) INTERNATIONAL OTHER & ADJUSTMENTS CONSOLIDATED ---------------------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 31, 2000 Sales and other revenues $ 706 $ 841 $ -- $ -- $ (841) $ 706 EBITDA(3) 261 216 (1) (20) (217) 239 Equity gains (losses) in unconsolidated ventures -- -- (85) -- 14 (71) Net income (loss) (4) (123) 6 1,219 56 -- 1,158 ------- ------- ------- ------- ------- ------- THREE MONTHS ENDED MARCH 31, 1999 Sales and other revenues $ 654 $ 748 $ 10 $ 1 $ (748) $ 665 EBITDA(3) 241 243 (12) (16) (245) 211 Equity gains (losses) in unconsolidated ventures -- -- (108) -- (7) (115) Net income (loss) (74) 4 (18) (23) -- (111) ------- ------- ------- ------- ------- -------

(1) MediaOne of Delaware represents the operations of the Company's domestic cable and broadband subsidiary. (2) Multimedia Ventures includes MediaOne Group's 25.51 percent equity interest in TWE, as well as related overheads. The reported TWE results are prepared in accordance with GAAP and have not been adjusted to report TWE investments accounted for under the equity method on a proportionate basis. (3) The Company believes EBITDA is an important indicator of the operating performance of its businesses and should not be considered an alternative to operating or net income as an indicator of the performance of MediaOne Group's businesses, or as an alternative to cash flows from operating activities as a measure of liquidity, in each case determined in accordance with GAAP. (4) Consolidated net income for the three month period of 2000 includes one time gains recognized on investment sales and exchanges of $1,344, including $1,226 of one time gains on sales of international investments. Total Assets: Total assets are those assets and investments that are used in, or pertain to, each segment's operations, as follows:

DOMESTIC CABLE & BROADBAND ---------------------------- MEDIAONE OF MULTIMEDIA DELAWARE (1) VENTURES (2) INTERNATIONAL OTHER CONSOLIDATED --------------------------------------------------------------------------------------------------- TOTAL ASSETS AS OF: March 31, 2000 $17,287 $ 2,639 $ 1,491 $19,661 $41,078 December 31, 1999 17,270 2,629 1,885 18,002 39,786 ------- ------- ------- ------- -------

(1) MediaOne of Delaware represents the operations of the Company's domestic cable and broadband subsidiary. (2) Multimedia Ventures includes MediaOne Group's 25.51 percent equity interest in TWE. 7 8 MEDIAONE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN MILLIONS) (UNAUDITED) The "Other" column includes primarily cash, debt and equity securities, domestic Internet related investments, and other corporate assets. The increase in Other total assets of $1,659, or 9.2 percent, during 2000 is due primarily to changes in the fair market value of the Company's investments in marketable equity securities, including Vodafone Group Public Limited Company ("Vodafone") American Depository Receipts ("ADRs") and preferred stock. Revenue and EBITDA amounts for the three month period of 2000 represent results from the Company's domestic operations. For the same period in 1999, these results represented primarily domestic operations. NOTE 5: NET INVESTMENT IN INTERNATIONAL VENTURES On February 15, 2000, MediaOne Group sold its 25 percent interest in Singapore Cablevision ("Singapore") to Singapore Technologies for gross proceeds of $218, resulting in a net pretax gain of $199. On March 23, 2000, MediaOne Group sold its interests in certain of its Central European wireless ventures for proceeds of $2 billion, resulting in a net pretax gain of $1,794. The ventures sold included Polska Telefonia Cyfrowa, a wireless operator located in Poland, and Westel 900 and Westel Radiotelefon, wireless operators located in Hungary. On March 21, 2000, the Company signed an agreement to sell its interest in the Russian Telecommunications Development Corporation ("RTDC"), a Russian venture which holds various wireless investments, to MCT Corporation. In 1999, the Company incurred a $43 charge as a result of the decision to exit its international businesses. The exit charge included employee severance and foreign income tax settlement costs ("Severance Costs") of $33 for approximately 120 people, and lease termination, relocation and other costs ("Other Costs") of $10. During first quarter 2000, the Company paid $2 of Severance Costs, $1 of Other Costs, and 15 people left under the exit plan. Since the inception of the charge, the Company has paid a total of $7 of Severance Costs, $2 of Other Costs, and approximately 60 people have left under the exit plan. 8 9 MEDIAONE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN MILLIONS) (UNAUDITED) NOTE 6: SHAREOWNERS' EQUITY Following is a rollforward of shareowners' equity since the end of 1999:

ACCUMULATED OTHER COMMON RETAINED COMPREHENSIVE SHARES EARNINGS INCOME -------------------------------------------------------------- ----------------- ---------------- ------------------- Balance at December 31, 1999 $ 11,448 $ 4,123 $ 1,195 Net income 1,158 Issuance of MediaOne Group Stock 30 Purchase of treasury stock (583) Preferred stock dividends (1) Market value adjustments for debt and equity securities, and Exchangeable Notes,(1) net of reclassification adjustments and income taxes 445 Foreign currency translation, net of income taxes 46 Other 48 -------- ------- ------- Balance at March 31, 2000 $ 10,943 $ 5,280 $ 1,686 ======== ======= =======

(1) The "Exchangeable Notes" represent debt exchangeable into Vodafone ADRs, and/or the cash value of Vodafone ADRs. Common Stock. Other activity during 2000 represents a gain of $27 on the exercise of a call option on MediaOne Group Stock and $21 of tax benefits on employee stock option exercises. Share Repurchase. During the three month period ended March 31, 2000, MediaOne Group purchased and placed into treasury 9,448,900 shares of MediaOne Group Stock, at an average purchase price of $61.69 per share and a total cost basis of $583. The share repurchases were transacted under a 25 million share repurchase plan authorized in 1998 by the Company's Board of Directors. 9 10 MEDIAONE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN MILLIONS) (UNAUDITED) Comprehensive Income. Total comprehensive income and the components of comprehensive income follow:

THREE MONTHS ENDED MARCH 31, ------------------------ 2000 1999 ------- ------- Net income (loss) $ 1,158 $ (111) Other comprehensive income, before tax: Foreign currency translation adjustment (11) (65) Unrealized gains on debt and equity securities, and Exchangeable Notes 823 899 Reclassification for (gains) losses realized in net income (loss) (10) (105) Income tax provision related to items of other comprehensive income (311) (281) ------- ------- Total other comprehensive income, net of tax 491 448 ======= ======= Total comprehensive income $ 1,649 $ 337 ======= =======

The majority of the unrealized gains on debt and equity securities during the three month period of 2000 relate to the Company's investment in Vodafone ADRs and preferred stock, as well as its investment in shares of Time Warner Telecom, Inc. ("TW Telecom"). Of the reclassifications for gains and losses realized in 2000, $97 pretax ($62 after tax) relate to gains realized upon the sale of Motorola shares and upon the exchange of various Internet investments, and $87 pretax ($54 after tax) relate to foreign currency translation losses on the sale of various international investments during the period. The majority of the unrealized gains and losses on debt and equity securities during 1999 related to the Company's investment in AirTouch Communications, Inc. common and preferred stock. The reclassification in 1999 related to the sale of the Company's investment in shares of Cable & Wireless Optus Limited ("Optus"). 10 11 MEDIAONE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN MILLIONS) (UNAUDITED) NOTE 7: EARNINGS PER SHARE The following table reflects the computation of MediaOne Group's basic and diluted earnings (loss) per share in accordance with SFAS No. 128, "Earnings Per Share." The 1999 diluted loss per share and related share amounts do not include potential share issuances associated with stock options and the Company's then outstanding convertible Series D preferred shares since the effect would have been antidilutive on the net loss for the period.

Three Months Ended March 31, ---------------------------- 2000 1999 --------- --------- Net income (loss) $ 1,158 $ (111) Preferred stock dividends and accretion (1) (14) --------- --------- Earnings (loss) available to common stock shareowners used for basic and diluted earnings (loss) per share $ 1,157 $ (125) ========= ========= Weighted average number of shares used for basic earnings (loss) per share 642,947 603,813 Effect of dilutive securities - stock options 8,163 -- --------- --------- Weighted average number of shares used for diluted earnings (loss) per share 651,110 603,813 ========= ========= Basic earnings (loss) per common share $ 1.80 $ (0.21) ========= ========= Diluted earnings (loss) per common share $ 1.78 $ (0.21) ========= =========

NOTE 8: SUBSEQUENT EVENTS During April 2000, MediaOne Group sold its Japanese cable and telephony investment for proceeds of $280, including the repayment of $71 in capital contributions made to the Japanese venture after June 30, 1999, plus interest earned on these contributions. In addition, MediaOne Group was released from guarantees given to support debt at the Japanese venture, which, as of March 31, 2000, totaled approximately $150. MediaOne Group also agreed to sell an investment in a Japanese cellular company, which is expected to close during the second quarter of 2000. 11 12 MEDIAONE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN MILLIONS) (UNAUDITED) In April 2000, in accordance with the merger agreement between Telewest Communications plc ("Telewest") and Flextech plc ("Flextech), MediaOne Group received approximately 39,762,000 shares of Telewest in exchange for its investment in Flextech shares. The Company now owns an approximate 23 percent interest in Telewest. In addition, an agreement entered into by the Company in the fourth quarter of 1999 to sell its interest in Flextech shares has expired. On April 28, 2000, MediaOne Group sold 9 million shares of its investment in TW Telecom for gross proceeds of $450, thereby decreasing its investment in TW Telecom to approximately 6.3 million shares. The Company also granted a thirty-day option to the underwriters to purchase up to an additional 500,000 shares of TW Telecom, if needed, under the same terms and conditions. 12