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Press release from Business Wire

AT&T Reports Solid Revenue Growth on Strong Wireless Gains Driven by Quality Network Performance and Continued U-verse Growth

<ul> <li class='bwlistitemmargb'> $0.71 diluted EPS compared to $0.66 diluted EPS in the second quarter of 2012, up 7.6 percent. Excluding significant items, EPS was $0.67 </li> <li class='bwlistitemmargb'> Consolidated revenues of $32.1 billion, up 1.6 percent versus reported results for the year-earlier period, and up 2.6 percent adjusting for the sale of Advertising Solutions </li> <li class='bwlistitemmargb'> More than 2 million new wireless and wireline high speed broadband connections </li> </ul> <p> <b>Nation's Fastest and Most Reliable 4G LTE Network Driving Subscriber and Usage Growth</b> </p> <ul> <li class='bwlistitemmargb'> 551,000 wireless postpaid net adds, best second-quarter postpaid net adds in four years </li> <li class='bwlistitemmargb'> 35 percent of postpaid smartphone base LTE capable </li> <li class='bwlistitemmargb'> Smartphone data usage per device up 50 percent year over year </li> <li class='bwlistitemmargb'> LTE network expected to cover nearly 270 million POPs in 400 markets by year-end </li> <li class='bwlistitemmargb'> LTE network build expected to be substantially complete by summer 2014 </li> </ul> <p> <b>Strong Wireless Revenue Growth, Record Second-Quarter Smartphone Sales</b> </p> <ul> <li class='bwlistitemmargb'> Wireless revenues up 5.7 percent, service revenues up 4.1 percent versus the year-ago quarter </li> <li class='bwlistitemmargb'> Wireless data revenues up 19.8 percent versus the year-earlier period </li> <li class='bwlistitemmargb'> Wireless operating income margin of 27.1 percent; wireless EBITDA service margin of 42.4 percent reflecting record second-quarter smartphone sales of 6.8 million, including record Android sales </li> <li class='bwlistitemmargb'> Added 1.2 million new smartphone subscribers; smartphones 88 percent of postpaid phone sales </li> <li class='bwlistitemmargb'> Total postpaid ARPU up 1.8 percent; phone-only ARPU up 3.0 percent </li> </ul> <p> <b>Wireline Transformation to IP Continues: U-verse</b><sup><b>®</b></sup><b> More Than 50 Percent of Wireline Consumer Revenues; Strong Growth in Strategic Business Services Revenues</b> </p> <ul> <li class='bwlistitemmargb'> Wireline consumer revenue growth of 2.4 percent versus the year-earlier period </li> <li class='bwlistitemmargb'> Total U-verse revenues, including business, up 30.1 percent year over year; U-verse more than half of wireline consumer revenues </li> <li class='bwlistitemmargb'> 9.4 million total U-verse subscribers (TV and high speed Internet) in service; 641,000 high speed Internet subscribers added; 233,000 U-verse TV subscribers added, topping 5 million </li> <li class='bwlistitemmargb'> Total wireline broadband data ARPU up 9 percent year over year </li> <li class='bwlistitemmargb'> Continued strength in strategic business services revenues, up more than 15 percent year over year </li> </ul> <p> <i>Note: AT&T's second-quarter earnings conference call will be broadcast live via the Internet at 4:30 p.m. ET on Tuesday, July 23, 2013, at </i><a href='http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.att.com%2Finvestor.relations&esheet=50675636&lan=en-US&anchor=www.att.com%2Finvestor.relations&index=1&md5=f80a917f9994dd5040c59796a19f462a'><i>www.att.com/investor.relations</i></a><i>.</i> </p>

Tuesday, July 23, 2013

AT&T Reports Solid Revenue Growth on Strong Wireless Gains Driven by Quality Network Performance and Continued U-verse Growth

16:01 EDT Tuesday, July 23, 2013

DALLAS (Business Wire) -- AT&T Inc. (NYSE:T) today reported continued earnings gains for the second quarter with increasing revenue growth driven by strong mobile data growth, solid postpaid net adds and continued strong gains in wireline consumer and U-verse services.

“This was a solid quarter for revenue and customer additions across our key growth platforms,” said Randall Stephenson, AT&T chairman and CEO. “Our 4G LTE network is the fastest and the most reliable in the nation, and deployment is ahead of schedule. That contributed to a step-up in postpaid subscriber gains, and strong mobile data revenue growth of nearly 20 percent. Growth in U-verse and strategic business services also continued to be strong — adding to our momentum.”

Second-Quarter Financial Results

For the quarter ended June 30, 2013, AT&T's consolidated revenues totaled $32.1 billion, up 1.6 percent versus the year-earlier quarter and up 2.6 percent when excluding revenues from the divested Advertising Solutions business unit.

Compared with results for the second quarter of 2012, operating expenses were $26.0 billion versus $24.8 billion; operating income was $6.1 billion versus $6.8 billion; and operating income margin was 19.1 percent, compared to 21.6 percent.

Second-quarter 2013 net income attributable to AT&T totaled $3.8 billion, or $0.71 per diluted share, compared to $3.9 billion, or $0.66 per diluted share, in the year-earlier quarter, up 7.6 percent. Adjusted for a gain of 4 cents on sales of América Móvil shares, earnings per diluted share was $0.67.

Second-quarter 2013 cash from operating activities totaled $9.5 billion, and capital expenditures totaled $5.5 billion. Free cash flow — cash from operating activities minus capital expenditures — totaled $4.0 billion.

As part of its Project VIP-related LTE deployment, the company now covers more than 225 million POPs with the nation's fastest, and now most reliable, 4G LTE network, according to independent third-party data. The company's LTE network is expected to cover nearly 270 million POPs in 400 markets by year-end 2013, and its LTE deployment is expected to be substantially complete by the summer of 2014. During the quarter, both PCWorld and PC Magazine named AT&T's 4G LTE network the nation's fastest.

Share Repurchases

During the second quarter, the company completed its second 300 million share repurchase authorization and began buying back shares under its third 300 million share authorization. The company repurchased 89 million shares for $3.3 billion in the second quarter. At the end of the quarter, 272 million shares remained on the current authorization. The company expects to make future repurchases opportunistically.

WIRELESS OPERATIONAL HIGHLIGHTS

AT&T delivered solid revenue growth, strong postpaid subscriber and ARPU gains, and continued expansion of its high-value smartphone base. Highlights included:

Solid Growth in Wireless Revenues. Total wireless revenues, which include equipment sales, were up 5.7 percent year over year to $17.3 billion. Wireless service revenues increased 4.1 percent in the second quarter, to $15.4 billion. Wireless data revenues increased 19.8 percent from the year-earlier quarter to $5.4 billion. Second-quarter wireless operating expenses totaled $12.6 billion, up 11.8 percent versus the year-earlier quarter, and wireless operating income was $4.7 billion, down 7.7 percent year over year.

More than 550,000 Postpaid Subscribers Added. AT&T posted a net increase in total wireless subscribers of 632,000 in the second quarter. Subscriber additions for the quarter included postpaid net adds of 551,000, the best second-quarter postpaid net adds in four years and a more than 70 percent increase from the year-ago quarter. Postpaid net adds include 398,000 postpaid tablets added in the quarter. Connected device net adds were 484,000. Prepaid gained 11,000 subscribers even with declines in session-based tablets. Reseller had a net loss of 414,000 primarily due to losses in low-revenue accounts, but revenues increased almost 30 percent year over year.

Phone-Only Postpaid ARPU Increases 3.0 Percent. Postpaid phone-only ARPU increased 3.0 percent versus the year-earlier quarter. Total postpaid subscriber ARPU, which includes high margin but lower-ARPU tablets, increased 1.8 percent versus the year-earlier quarter. This marked the 18th consecutive quarter AT&T has posted a year-over-year increase in postpaid ARPU. Postpaid data ARPU increased 17.6 percent versus the year-earlier quarter.

Smartphone Base Continues to Expand. AT&T added 1.2 million postpaid smartphone subscribers in the second quarter. At the end of the quarter, 73 percent, or 49.5 million, of AT&T's postpaid phone subscribers had smartphones, up from 64 percent, or 43.1 million, a year earlier. The company sold a second-quarter record 6.8 million smartphones, including a record number of Android sales, and smartphones accounted for 88 percent of postpaid phone sales in the quarter. AT&T's ARPU for smartphones is more than twice that of non-smartphone subscribers, and about 90 percent of postpaid subscribers are on FamilyTalk®, Mobile Share or business plans. Churn levels for these subscribers are significantly lower than for other postpaid subscribers. More than 35 percent of AT&T's postpaid smartphone customers now use an LTE device. And about 65 percent use a 4G-capable device (LTE/HSPA+).

More Than 70 Percent of Postpaid Smartphones on Usage-Based Plan. The number of subscribers on usage-based data plans (tiered data and Mobile Share plans) continues to increase. More than 70 percent, or 35.1 million, of postpaid smartphone subscribers are on usage-based data plans. This compares to 62 percent, or 26.6 million, a year ago and 45 percent two years ago. About 80 percent of customers on usage-based data plans have chosen the higher-priced plans.

More than 13 million connections, or more than 18 percent of postpaid subscribers, are on Mobile Share plans. The number of Mobile Share accounts reached 4.3 million in the second quarter with an average of about three devices per account. Take rates on the higher-data plans continue to be strong with more than 25 percent of Mobile Share accounts choosing 10 gigabytes or higher plans. More than 15 percent of Mobile Share subscribers came from unlimited plans.

Postpaid Churn Shows Sequential Improvement. Postpaid churn was 1.02 percent, up slightly from the year-ago quarter and down slightly from the first quarter of 2013. Total churn increased year over year, due mostly to increases in reseller churn, but was down slightly sequentially.

Wireless Margins Reflect Record Smartphone Sales. Second-quarter wireless margins reflect record second-quarter smartphone sales, strong upgrades and further revenue gains from the company's high-quality smartphone subscriber base. AT&T's second-quarter wireless operating income margin was 27.1 percent versus 31.0 percent in the year-earlier quarter. AT&T's wireless EBITDA service margin was 42.4 percent, compared with 45.8 percent in the second quarter of 2012. (EBITDA service margin is operating income before depreciation and amortization, divided by total service revenues.)

WIRELINE OPERATIONAL HIGHLIGHTS

AT&T's second-quarter wireline results were led by strong U-verse TV and high speed Internet gains, solid wireline consumer revenue growth and increasing growth in strategic business services. Highlights included:

Wireline Revenues Grow Sequentially. Total second-quarter wireline revenues were $14.8 billion, down 0.9 percent versus the year-earlier quarter and up 0.8 percent sequentially. Total U-verse revenues grew 30.1 percent year over year and were up 9.0 percent versus the first quarter of 2013. Second-quarter wireline operating expenses were $13.1 billion, up 1.3 percent versus the second quarter of 2012 and up 0.9 percent sequentially. AT&T's wireline operating income totaled $1.6 billion, down 15.8 percent versus the second quarter of 2012 and flat sequentially. Second-quarter wireline operating income margin was 11.1 percent, compared to 13.0 percent in the year-earlier quarter, but flat versus the first quarter of 2013.

U-verse Now 51 Percent of Consumer Revenues. Revenues from residential customers totaled $5.6 billion, an increase of 2.4 percent versus the second quarter a year ago and up 1.8 percent versus the first quarter of 2013. Continued strong growth in consumer IP data services in the second quarter more than offset lower revenues from voice and legacy products. U-verse, which includes TV, high speed Internet and voice over IP, now represents 51 percent of wireline consumer revenues, up from 41 percent in the year-earlier quarter. Consumer U-verse revenues grew 28.4 percent year over year and were up 8.2 percent versus the first quarter of 2013.

U-verse Hits 9.4 Million Subscribers. Total U-verse subscribers (TV and high speed Internet) reached 9.4 million in the second quarter. U-verse TV added 233,000 subscribers to top 5.0 million in service. U-verse high speed Internet had a net gain of 641,000 subscribers to reach a total of 9.1 million. Overall, the company had a net loss of 61,000 wireline broadband subscribers, an improvement over last year's loss but still reflecting typical seasonal pressures. Total wireline broadband ARPU was up 9 percent year over year. Total U-verse high speed Internet subscribers now represent 55 percent of all wireline broadband subscribers compared with 40 percent in the year-earlier quarter.

About 59 percent of U-verse broadband subscribers have a plan delivering speeds up to 10 Mbps or higher — up from 52 percent in the year-ago quarter. In the second quarter, more than 90 percent of new U-verse TV customers also signed up for U-verse high speed Internet. About 70 percent of AT&T U-verse TV subscribers take three or four services from AT&T. ARPU for U-verse triple-play customers continues to be more than $170. U-verse TV penetration of customer locations continues to grow and was at 20.1 percent at the end of the second quarter.

Business Revenues Grow Sequentially. Total revenues from business customers were $8.9 billion, down 2.2 percent versus the year-earlier quarter and up slightly compared with the first quarter of 2013. Business service revenues declined 2.1 percent year over year. Overall, declines in legacy products were partially offset by continued double-digit growth in strategic business services. Revenues from these services, the next-generation capabilities that lead AT&T's most advanced business solutions — including VPN, Ethernet, hosting and other advanced IP services — grew more than 15 percent versus the year-earlier quarter. These services represent an $8.4 billion annualized revenue stream.

AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc.

About AT&T

AT&T Inc. (NYSE:T) is a premier communications holding company and one of the most honored companies in the world. Its subsidiaries and affiliates – AT&T operating companies – are the providers of AT&T services in the United States and internationally. With a powerful array of network resources that includes the nation's largest 4G network, AT&T is a leading provider of wireless, Wi-Fi, high speed Internet, voice and cloud-based services. A leader in mobile Internet, AT&T also offers the best wireless coverage worldwide of any U.S. carrier, offering the most wireless phones that work in the most countries. It also offers advanced TV services under the AT&T U-verse® and AT&T │DIRECTV brands. The company's suite of IP-based business communications services is one of the most advanced in the world.

Additional information about AT&T Inc. and the products and services provided by AT&T subsidiaries and affiliates is available at http://www.att.com/aboutus or follow our news on Twitter at @ATT, on Facebook at http://www.facebook.com/att and YouTube at http://www.youtube.com/att.

© 2013 AT&T Intellectual Property. All rights reserved. 4G not available everywhere. AT&T, the AT&T logo and all other marks contained herein are trademarks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners.

Cautionary Language Concerning Forward-Looking Statements

Information set forth in this news release contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results may differ materially. A discussion of factors that may affect future results is contained in AT&T's filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update or revise statements contained in this news release based on new information or otherwise. This news release may contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available on the company's website at www.att.com/investor.relations . Accompanying financial statements follow.

NOTE: EBITDA is defined as operating income before depreciation and amortization. EBITDA differs from Segment Operating Income (loss), as calculated in accordance with U.S. generally accepted accounting principles (GAAP), in that it excludes depreciation and amortization. EBITDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with GAAP. Our calculation of EBITDA, as presented, may differ from similarly titled measures reported by other companies.

NOTE: Free cash flow is defined as cash from operations minus capital expenditures. We believe this metric provides useful information to our investors because management regularly reviews free cash flow as an important indicator of how much cash is generated by normal business operations, including capital expenditures, and makes decisions based on it. Management also views it as a measure of cash available to pay debt and return cash to shareowners.

NOTE: Adjusted Operating Income, Adjusted Operating Expenses, Adjusted Operating Revenues, Adjusted Operating Income Margin and Adjusted diluted EPS are non-GAAP financial measures calculated by excluding from operating revenues, operating expenses and equity in net income of affiliates certain significant items that are non-operational or non-recurring in nature, including dispositions. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends. Adjusted Operating Income, Adjusted Operating Expenses, Adjusted Operating Revenues, Adjusted Operating Income Margin and Adjusted diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. Our calculations of Adjusted Operating Income and Adjusted diluted EPS, as presented, may differ from similarly titled measures reported by other companies.

                                     
Financial Data                
 
AT&T Inc.                                    
Consolidated Statements of Income
Dollars in millions except per share amounts                                    
Unaudited Three Months Ended Six Months Ended
        6/30/2013     6/30/2012     % Chg   6/30/2013     6/30/2012   % Chg
Operating Revenues $ 32,075 $ 31,575 1.6 % $ 63,431 $ 63,397 0.1 %
 
Operating Expenses

Cost of services and sales (exclusive of depreciation and amortization shown separately below)

13,270 12,254 8.3 % 25,824 25,071 3.0 %
Selling, general and administrative 8,121 8,005 1.4 % 16,454 16,349 0.6 %
Depreciation and amortization       4,571       4,499     1.6 %   9,100       9,059     0.5 %
Total Operating Expenses       25,962       24,758     4.9 %   51,378       50,479     1.8 %
Operating Income       6,113       6,817     -10.3 %   12,053       12,918     -6.7 %
Interest Expense 825 941 -12.3 % 1,652 1,800 -8.2 %
Equity in Net Income of Affiliates 218 132 65.2 % 403 355 13.5 %
Other Income (Expense) - Net       288       23     -     320       75     -  
Income Before Income Taxes 5,794 6,031 -3.9 % 11,124 11,548 -3.7 %
Income Tax Expense       1,914       2,066     -7.4 %   3,471       3,931     -11.7 %
Net Income       3,880       3,965     -2.1 %   7,653       7,617     0.5 %
Less: Net Income Attributable to Noncontrolling Interest       (58 )     (63 )   7.9 %   (131 )     (131 )   -  
Net Income Attributable to AT&T     $ 3,822     $ 3,902     -2.1 % $ 7,522     $ 7,486     0.5 %
 
 
Basic Earnings Per Share Attributable to AT&T $ 0.71 $ 0.67 6.0 % $ 1.38 $ 1.27 8.7 %

Weighted Average Common Shares Outstanding (000,000)

5,381 5,855 -8.1 % 5,446 5,886 -7.5 %
 
Diluted Earnings Per Share Attributable to AT&T $ 0.71 $ 0.66 7.6 % $ 1.38 $ 1.27 8.7 %

Weighted Average Common Shares Outstanding with Dilution (000,000)

      5,397       5,876     -8.2 %       5,463       5,907     -7.5 %
 
                                                                 
Financial Data                              
 
AT&T Inc.                                                              
Statements of Segment Income
Dollars in millions                                                              
Unaudited
Three Months Ended Six Months Ended
 
Wireless           6/30/2013         6/30/2012     % Chg   6/30/2013         6/30/2012     % Chg
Segment Operating Revenues
Data $ 5,356 $ 4,471 19.8 % $ 10,481 $ 8,706 20.4 %
Voice, text and other service 10,014 10,294 -2.7 % 19,951 20,625 -3.3 %
Equipment           1,921           1,588         21.0 %   3,550           3,158         12.4 %
Total Segment Operating Revenues           17,291           16,353         5.7 %   33,982           32,489         4.6 %
 
Segment Operating Expenses
Operations and support 10,770 9,590 12.3 % 20,950 19,568 7.1 %
Depreciation and amortization           1,843           1,696         8.7 %   3,678           3,362         9.4 %
Total Segment Operating Expenses           12,613           11,286         11.8 %   24,628           22,930         7.4 %
Segment Operating Income 4,678 5,067 -7.7 % 9,354 9,559 -2.1 %
Equity in Net Income (Loss) of Affiliates           (19 )         (15 )       -26.7 %   (37 )         (28 )       -32.1 %
Segment Income         $ 4,659         $ 5,052         -7.8 % $ 9,317         $ 9,531         -2.2 %
 
Segment Operating Income Margin 27.1

%

 

31.0 % 27.5

%

 

29.4 %
 
Wireline                                                        
Segment Operating Revenues
Data $ 8,400 $ 7,935 5.9 % $ 16,562 $ 15,735 5.3 %
Voice 5,141 5,696 -9.7 % 10,447 11,588 -9.8 %
Other           1,232           1,276         -3.4 %   2,419           2,513         -3.7 %
Total Segment Operating Revenues           14,773           14,907         -0.9 %   29,428           29,836         -1.4 %
 
Segment Operating Expenses
Operations and support 10,417 10,201 2.1 % 20,752 20,603 0.7 %
Depreciation and amortization           2,722           2,766         -1.6 %   5,410           5,574         -2.9 %
Total Segment Operating Expenses           13,139           12,967         1.3 %   26,162           26,177         -0.1 %
Segment Operating Income 1,634 1,940 -15.8 % 3,266 3,659 -10.7 %
Equity in Net Income (Loss) of Affiliates           -           (1 )       -     1           (1 )       -  
Segment Income         $ 1,634         $ 1,939         -15.7 % $ 3,267         $ 3,658         -10.7 %
 
Segment Operating Income Margin 11.1

%

 

13.0 % 11.1

%

 

12.3 %
 
Advertising Solutions                                                        
Segment Operating Revenues         $ -         $ 305         -   $ -         $ 1,049         -  
 
Segment Operating Expenses
Operations and support - 226 - - 773 -
Depreciation and amortization           -           29         -     -           106         -  
Total Segment Operating Expenses           -           255         -     -           879         -  
Segment Income         $ -         $ 50         -   $ -         $ 170         -  
 
Segment Income Margin - 16.4 % - 16.2 %
 
Other                                                        
Segment Operating Revenues $ 11 $ 10 10.0 % $ 21 $ 23 -8.7 %
Segment Operating Expenses           210           250         -16.0 %   588           493         19.3 %
Segment Operating Income (Loss) (199 ) (240 ) 17.1 % (567 ) (470 ) -20.6 %
Equity in Net Income of Affiliates           237           148         60.1 %   439           384         14.3 %
Segment Income (Loss)         $ 38         $ (92 )       -   $ (128 )       $ (86 )       -48.8 %
 
             
Financial Data    
 
AT&T Inc.            
Consolidated Balance Sheets
Dollars in millions            
6/30/13 12/31/12
      Unaudited      
 
Assets
Current Assets
Cash and cash equivalents $ 4,548 $ 4,868
Accounts receivable - net of allowances for doubtful accounts of $520 and $547 12,508 12,657
Prepaid expenses 1,038 1,035
Deferred income taxes 953 1,036
Other current assets     2,381       3,110  
Total current assets     21,428       22,706  
Property, Plant and Equipment - Net 110,734 109,767
Goodwill 69,770 69,773
Licenses 53,665 52,352
Customer Lists and Relationships - Net 1,015 1,391
Other Intangible Assets - Net 5,018 5,032
Investments in and Advances to Equity Affiliates 3,888 4,581
Other Assets     6,575       6,713  
Total Assets   $ 272,093     $ 272,315  
 
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year $ 3,256 $ 3,486
Accounts payable and accrued liabilities 19,438 20,494
Advanced billing and customer deposits 4,029 4,225
Accrued taxes 2,065 1,026
Dividends payable     2,401       2,556  
Total current liabilities     31,189       31,787  
Long-Term Debt     71,917       66,358  
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes 29,400 28,491
Postemployment benefit obligation 41,994 41,392
Other noncurrent liabilities     11,278       11,592  
Total deferred credits and other noncurrent liabilities     82,672       81,475  
Stockholders' Equity
Common stock 6,495 6,495
Additional paid-in capital 90,985 91,038
Retained earnings 25,212 22,481
Treasury stock (41,819 ) (32,888 )
Accumulated other comprehensive income 5,107 5,236
Noncontrolling interest     335       333  
Total stockholders' equity     86,315       92,695  
Total Liabilities and Stockholders' Equity   $ 272,093     $ 272,315  
 
             
Financial Data    
 
AT&T Inc.            
Consolidated Statements of Cash Flows
Dollars in millions            
Unaudited Six Months Ended June 30,
      2013     2012
 
Operating Activities
Net income $ 7,653 $ 7,617

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 9,100 9,059
Undistributed earnings from investments in equity affiliates (198 ) (355 )
Provision for uncollectible accounts 439 572

Deferred income tax expense and noncurrent unrecognized tax benefits

926 (639 )
Net (gain) loss from sale of investments, net of impairments (260 ) 2
Changes in operating assets and liabilities:
Accounts receivable (290 ) (460 )
Other current assets 784 1,468
Accounts payable and accrued liabilities (340 ) 592
Other - net     (103 )     (531 )
Total adjustments     10,058       9,708  
Net Cash Provided by Operating Activities     17,711       17,325  
 
Investing Activities
Construction and capital expenditures:
Capital expenditures (9,665 ) (8,742 )
Interest during construction (140 ) (130 )
Acquisitions, net of cash acquired (1,182 ) (477 )
Dispositions 825 800
Sales (purchases) of securities, net - 124
Return of advances to and investments in equity affiliates 301 -
Other     (4 )     -  
Net Cash Used in Investing Activities     (9,865 )     (8,425 )
 
Financing Activities
Issuance of other short-term borrowings 1,476 -
Repayment of other short-term borrowings (233 ) -
Issuance of long-term debt 6,416 6,935
Repayment of long-term debt (1,823 ) (7,035 )
Purchase of treasury stock (9,217 ) (4,623 )
Issuance of treasury stock 104 376
Dividends paid (4,930 ) (5,187 )
Other     41       (534 )
Net Cash Used in Financing Activities     (8,166 )     (10,068 )
Net decrease in cash and cash equivalents (320 ) (1,168 )
Cash and cash equivalents beginning of year     4,868       3,045  
Cash and Cash Equivalents End of Period   $ 4,548     $ 1,877  
 
                             
Financial Data                
 
AT&T Inc.                            
Supplementary Operating and Financial Data
Dollars in millions except per share amounts, subscribers and connections in (000s)        
Unaudited Three Months Ended Six Months Ended
          6/30/2013   6/30/2012   % Chg 6/30/2013   6/30/2012   % Chg
 
Wireless
Subscribers and Connections                
Total             107,884       105,206   2.5 %
Postpaid 71,278 69,666 2.3 %
Prepaid 7,084 7,473 -5.2 %
Reseller 14,330 14,382 -0.4 %
Connected Devices 15,192 13,685 11.0 %
 
Wireless Net Adds                
Total       632       1,266   -50.1 %   923       1,992   -53.7 %
Postpaid 551 320 72.2 % 847 507 67.1 %
Prepaid 11 92 -88.0 % (173 ) 217 -
Reseller (414 ) 472 - (666 ) 656 -
Connected Devices 484 382 26.7 % 915 612 49.5 %
M&A Activity, Partitioned Customers and Other Adjs. 1 - - 4 (33 ) -
 
Wireless Churn
Postpaid Churn 1.02 % 0.97 % 5 BP 1.03 % 1.03 % 0 BP
Total Churn 1.36 % 1.18 % 18 BP 1.37 % 1.32 % 5 BP
 
Other
Licensed POPs (000,000) 317 313 1.3 %
 
Wireline
Voice                  
Total Wireline Voice Connections1             30,228       34,171   -11.5 %
Net Change (935 ) (1,035 ) 9.7 % (1,956 ) (2,161 ) 9.5 %
 
Broadband                
Total Wireline Broadband Connections             16,453       16,434   0.1 %
Net Change (61 ) (96 ) 36.5 % 63 7 -
 
Video                  
Total U-verse Video Connections             5,001       4,146   20.6 %
Net Change 233 155 50.3 % 465 355 31.0 %
 
Consumer Revenue Connections                
Broadband2 14,660 14,517 1.0 %
U-verse Video Connections1 4,986 4,137 20.5 %
Voice1,3             17,362       19,865   -12.6 %
Total Consumer Revenue Connections 1             37,008       38,519   -3.9 %
Net Change (393 ) (593 ) 33.7 % (659 ) (987 ) 33.2 %
 
AT&T Inc.
Construction and capital expenditures
Capital expenditures $ 5,413 $ 4,481 20.8 % $ 9,665 $ 8,742 10.6 %
Interest during construction $ 74 $ 65 13.8 % $ 140 $ 130 7.7 %
Dividends Declared per Share $ 0.45 $ 0.44 2.3 % $ 0.90 $ 0.88 2.3 %
End of Period Common Shares Outstanding (000,000) 5,335 5,805 -8.1 %
Debt Ratio4 46.6 % 38.4 % 820 BP
Total Employees 245,350 242,380 1.2 %
                                 

(1)

Prior year amounts restated to conform to current period reporting methodology.

(2)

Consumer wireline broadband connections include DSL lines, U-verse High Speed Internet access and satellite broadband.

(3)

Includes consumer U-verse Voice over Internet Protocol connections of 3,379 as of June 30, 2013.

(4)

Total long-term debt plus debt maturing within one year divided by total debt plus total stockholders' equity.

Note: For the end of 2Q13, total switched access lines were 26,849, retail business switched access lines totaled 10,905, and wholesale, national mass markets and coin switched access lines totaled 1,961. Restated switched access lines do not include ISDN lines.

 
                         
Financial Data              
 
AT&T Inc.
Non-GAAP Wireless Reconciliation                        
Wireless Segment EBITDA
Dollars in millions
Unaudited
Three Months Ended
6/30/12   9/30/12   12/31/12   3/31/13   6/30/13
 
Segment Operating Revenues
Data $ 4,471 $ 4,686 $ 4,905 $ 5,125 $ 5,356
Voice, text and other service 10,294 10,220 10,044 9,937 10,014
Equipment         1,588       1,726       2,693       1,629       1,921  
Total Segment Operating Revenues         16,353       16,632       17,642       16,691       17,291  
 
Segment Operating Expenses
Operations and support 9,590 10,432 13,296 10,180 10,770
Depreciation and amortization         1,696       1,730       1,781       1,835       1,843  
Total Segment Operating Expenses         11,286       12,162       15,077       12,015       12,613  
Segment Operating Income         5,067       4,470       2,565       4,676       4,678  
Segment Operating Income Margin 31.0 % 26.9 % 14.5 % 28.0 % 27.1 %
 
Plus: Depreciation and amortization         1,696       1,730       1,781       1,835       1,843  
EBITDA       $ 6,763     $ 6,200     $ 4,346     $ 6,511     $ 6,521  
EBITDA as a % of Service Revenues 45.8 % 41.6 % 29.1 % 43.2 % 42.4 %
 
EBITDA is defined as Operating Income Before Depreciation and Amortization.
 
                     
Financial Data            
 
AT&T Inc.
Non-GAAP Consolidated Reconciliation                    
Free Cash Flow
Dollars in millions
Unaudited
Three Months Ended Six Months Ended
June 30, June 30,
        2012   2013   2012   2013
Net cash provided by operating activities $ 9,480 $ 9,512 $ 17,325 $ 17,711
Less: Construction and capital expenditures         (4,546 )     (5,487 )     (8,872 )     (9,805 )
Free Cash Flow       $ 4,934     $ 4,025     $ 8,453     $ 7,906  
 
 
 
                     
Free Cash Flow after Dividends
Dollars in millions
Unaudited
Three Months Ended Six Months Ended
June 30, June 30,
        2012   2013   2012   2013
Net cash provided by operating activities $ 9,480 $ 9,512 $ 17,325 $ 17,711
Less: Construction and capital expenditures         (4,546 )     (5,487 )     (8,872 )     (9,805 )
Free Cash Flow         4,934       4,025       8,453       7,906  
Less: Dividends paid         (2,581 )     (2,428 )     (5,187 )     (4,930 )
Free Cash Flow After Dividends       $ 2,353     $ 1,597     $ 3,266     $ 2,976  
 

Free cash flow includes reimbursements of certain postretirement benefits paid.

 

Free cash flow is defined as cash from operations minus construction and capital expenditures. Free cash flow after dividends is defined as cash from operations minus construction, capital expenditures and dividends. We believe these metrics provide useful information to our investors because management regularly reviews free cash flow as an important indicator of how much cash is generated by normal business operations, including capital expenditures, and makes decisions based on it. Management also views free cash flow as a measure of cash available to pay debt and return cash to shareowners.

 
                   
Financial Data            
 
AT&T Inc.
Non-GAAP Consolidated Reconciliation                  
Annualized Net-Debt-to-EBITDA Ratio
Dollars in millions
Unaudited
Three Months Ended
          3/31/2013   6/30/13   2013 YTD
Operating Revenues $ 31,356 $ 32,075 $ 63,431
Operating Expenses 25,416 25,962 51,378
Total Operating Income 5,940 6,113 12,053
Add Back Depreciation and Amortization 4,529 4,571 9,100
Total Consolidated EBITDA 10,469 10,684 21,153

Annualized Consolidated EBITDA 1

42,306
End-of-period current debt 3,256
End-of-period long-term debt 71,917
Total End-of-Period Debt 75,173
Less Cash and Cash Equivalents 4,548
Net Debt Balance                   70,625
Annualized Net-Debt-to-EBITDA Ratio                   1.67
 
Net-Debt-to-EBITDA ratios are non-GAAP financial measures frequently used by investors and credit rating agencies. Management believes these measures provide relevant and useful information to investors and other users of our financial data. Net Debt is calculated by subtracting cash and cash equivalents from the sum of debt maturing within one year and long-term debt. The Net-Debt-to-EBITDA ratio is calculated by dividing the Net Debt by annualized EBITDA.
 
 

1Annualized EBITDA is calculated by annualizing the year-to-date EBITDA.

 
                 
Financial Data            
 
AT&T Inc.
Non-GAAP Consolidated Reconciliation                
Adjusted Diluted EPS
AT&T Inc.
Unaudited
Three Months Ended
June 30,
          2012     2013
 
Reported Diluted EPS $ 0.66 $ 0.71
Adjustments:

América Móvil - Gain from sale of shares

          -       (0.04 )
Adjusted Diluted EPS         $ 0.66     $ 0.67  
Year-over-year growth - Adjusted                 1.5 %

Weighted Average Common Shares Outstanding with Dilution (000,000)

          5,876       5,397  
 

Adjusted Diluted EPS is a non-GAAP financial measure calculated by excluding from operating revenues, operating expenses and equity in net income of affiliates certain significant items that are non-operational or non-recurring in nature, including dispositions. Management believes that this measure provides relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends.

 

Adjusted Diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. Our calculation of Adjusted Diluted EPS, as presented, may differ from similarly titled measures reported by other companies.

 
                     
Financial Data            
 
AT&T Inc.
Non-GAAP Financial Reconciliation                    
Adjusted Operating Revenues
Dollars in millions
Unaudited
Three Months Ended Six Months Ended
June 30, June 30,
        2012   2013   2012   2013
 
Reported Operating Revenues $ 31,575 $ 32,075 $ 63,397 $ 63,431
Adjustments:
Removal of Advertising Solutions         (305 )     -       (1,049 )     -  
Adjusted Operating Revenues       $ 31,270     $ 32,075     $ 62,348     $ 63,431  
Year-over-year growth - Adjusted             2.6 %         1.7 %
 

Adjusted Operating Revenues is a non-GAAP financial measure calculated by excluding from operating revenues significant items that are non-operational or non-recurring in nature, including dispositions. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends.

 

Adjusted Operating Revenues should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. Our calculations of Adjusted Operating Revenues may differ from similarly titled measures reported by other companies.

 

EBITDA DISCUSSION

For AT&T, EBITDA is defined as operating income before depreciation and amortization. EBITDA service margin is calculated as EBITDA divided by service revenues. EBITDA differs from Segment Operating Income (Loss), as calculated in accordance with U.S. generally accepted accounting principles (GAAP), in that it excludes depreciation and amortization. EBITDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with GAAP. Our calculation of EBITDA, as presented, may differ from similarly titled measures reported by other companies.

We believe these measures are relevant and useful information to our investors as they are part of AT&T's internal management reporting and planning processes and are important metrics that management uses to evaluate the operating performance of its wireless operations. These measures are used by management as a gauge of our success in acquiring, retaining and servicing wireless subscribers because we believe these measures reflect AT&T's ability to generate and grow subscriber revenues while providing a high level of customer service in a cost-effective manner. Management also uses these measures as a method of comparing our Wireless segment's performance with that of many of its competitors. The financial and operating metrics which affect EBITDA include the key revenue and expense drivers for which AT&T Mobility's operating managers are responsible and upon which we evaluate their performance.

EBITDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA excludes other income (expense) – net, net income attributable to noncontrolling interest and equity in net income (loss) of affiliates, as these do not reflect the operating results of our wireless subscriber base and national footprint that we utilizes to obtain and service our customers. Equity in net income (loss) of affiliates represents AT&T Mobility's proportionate share of the net income (loss) of affiliates in which it exercises significant influence, but does not control. As AT&T Mobility does not control these entities, our management excludes these results when evaluating the performance of our primary operations. EBITDA excludes interest expense and the provision for income taxes. Excluding these items eliminates the expenses associated with its capitalization and tax structures. Finally, EBITDA excludes depreciation and amortization, in order to eliminate the impact of capital investments.

We believe EBITDA as a percentage of service revenues to be a more relevant measure of our Wireless segment operating margin than EBITDA as a percentage of total revenue. We generally subsidize a portion of our wireless handset sales, all of which are recognized in the period in which we sell the handset. Management views this equipment subsidy as a cost to acquire or retain a subscriber, which is recovered through the ongoing service revenue that is generated by the subscriber. We also use wireless service revenues to calculate margin to facilitate comparison, both internally and externally with our wireless competitors, as they calculate their margins using wireless service revenues as well.

There are material limitations to using these non-GAAP financial measures. EBITDA and EBITDA service margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies. Furthermore, these performance measures do not take into account certain significant items, including depreciation and amortization, interest expense, tax expense and equity in net income (loss) of affiliates, which directly affect our Wireless segment income. Management compensates for these limitations by carefully analyzing how its competitors present performance measures that are similar in nature to EBITDA as we present it, and considering the economic effect of the excluded expense items independently as well as in connection with its analysis of net income as calculated in accordance with GAAP. EBITDA and EBITDA service margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP.

FREE CASH FLOW DISCUSSION

Free cash flow is defined as cash from operations minus construction and capital expenditures. Free cash flow after dividends is defined as cash from operations minus construction, capital expenditures and dividends. Free cash flow yield is defined as cash from continuing operations less construction and capital expenditures as a percentage of market capitalization computed on the last trading day of the quarter. Market capitalization is computed by multiplying the end of period stock price by the end of period shares outstanding. We believe these metrics provide useful information to our investors because management reviews free cash flow as an important indicator of how much cash is generated by normal business operations, including capital expenditures, and makes decisions based on it. Management also views it as a measure of cash available to pay debt and return cash to shareowners.

NET DEBT TO EBITDA DISCUSSION

Net Debt to EBITDA ratios are non-GAAP financial measures frequently used by investors and credit rating agencies and management believes these measures provide relevant and useful information to investors and other users of our financial data. The Net Debt to EBITDA ratio is calculated by dividing the Net Debt by annualized EBITDA. Net Debt is calculated by subtracting cash and cash equivalents from the sum of debt maturing within one year and long-term debt. Annualized EBITDA is calculated by annualizing the year-to-date EBITDA.

ADJUSTING ITEMS DISCUSSION

Adjusted Operating Revenues and Adjusted diluted EPS are non-GAAP financial measures calculated by excluding from operating revenues and income tax expense certain significant items that are non-operational or non-recurring in nature, including dispositions. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends.

Adjusted Operating Revenues and Adjusted diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. Our calculations of Adjusted diluted EPS, as presented, may differ from similarly titled measures reported by other companies.

AT&T Inc.
McCall Butler, 917-209-5792
mbutler@connected.att-mail.com

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