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Solid Growth In Earnings, Revenues And Margins, And $4.7 Billion Returned To Shareholders Highlight AT&T’s First-Quarter Results

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 and Adjusted Operating Income Margin are non-GAAP financial measures calculated by excluding from operating revenues and operating expenses significant items that are non-operational or non-recurring in nature. 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 and Adjusted Operating Income Margin 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 Operating Income, 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
        3/31/2012         3/31/2011       % Chg
Operating Revenues
Wireless service $ 14,566 $ 13,961 4.3 %
Data 7,795 7,171 8.7 %
Voice 5,893 6,550 -10.0 %
Directory 744 868 -14.3 %
Other       2,824         2,697       4.7 %
Total Operating Revenues       31,822         31,247       1.8 %
 
Operating Expenses

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

12,913 12,813 0.8 %
Selling, general and administrative 8,248 8,042 2.6 %
Depreciation and amortization       4,560         4,584       -0.5 %
Total Operating Expenses       25,721         25,439       1.1 %
Operating Income       6,101         5,808       5.0 %
Interest Expense 859 846 1.5 %
Equity in Net Income of Affiliates 223 249 -10.4 %
Other Income (Expense) - Net       52         59       -11.9 %
Income Before Income Taxes 5,517 5,270 4.7 %
Income Tax Expense       1,865         1,802       3.5 %
Net Income       3,652         3,468       5.3 %
Less: Net Income Attributable to Noncontrolling Interest       (68 )       (60 )     -13.3 %
Net Income Attributable to AT&T     $ 3,584       $ 3,408       5.2 %
 
           
Basic Earnings Per Share Attributable to AT&T $

0.60

      $

0.57

  5.3 %

Weighted Average Common Shares Outstanding (000,000)

5,918 5,925 -0.1 %
           
Diluted Earnings Per Share Attributable to AT&T $

0.60

      $

0.57

  5.3 %

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

5,940 5,945 -0.1 %
 
Financial Data            
 
AT&T Inc.
Statements of Segment Income
Dollars in millions
Unaudited
Three Months Ended
 
Wireless     3/31/2012     3/31/2011     % Chg
Segment Operating Revenues
Service $ 14,566 $ 13,961 4.3 %
Equipment       1,570         1,349       16.4 %
Total Segment Operating Revenues       16,136         15,310       5.4 %
 
Segment Operating Expenses
Operations and support 10,083 9,861 2.3 %
Depreciation and amortization       1,666         1,506       10.6 %
Total Segment Operating Expenses       11,749         11,367       3.4 %
Segment Operating Income 4,387 3,943 11.3 %
Equity in Net Loss of Affiliates       (13 )       (4 )     -  
Segment Income     $ 4,374       $ 3,939       11.0 %
 
Segment Operating Income Margin 27.2 % 25.8 %
 
Wireline                  
Segment Operating Revenues
Data $ 7,795 $ 7,171 8.7 %
Voice 5,893 6,550 -10.0 %
Other       1,240         1,330       -6.8 %
Total Segment Operating Revenues       14,928         15,051       -0.8 %
 
Segment Operating Expenses
Operations and support 10,297 10,312 -0.1 %
Depreciation and amortization       2,808         2,958       -5.1 %
Total Segment Operating Expenses       13,105         13,270       -1.2 %
Segment Income     $ 1,823       $ 1,781       2.4 %
 
Segment Operating Income Margin 12.2 % 11.8 %
 
Advertising Solutions                  
Segment Operating Revenues     $ 744       $ 868       -14.3 %
 
Segment Operating Expenses
Operations and support 547 572 -4.4 %
Depreciation and amortization       77         106       -27.4 %
Total Segment Operating Expenses       624         678       -8.0 %
Segment Income     $ 120       $ 190       -36.8 %
 
Segment Income Margin 16.1 % 21.9 %
 
Other                  
Segment Operating Revenues $ 14 $ 18 -22.2 %
Segment Operating Expenses       243         124       96.0 %
Segment Operating Loss (229 ) (106 ) -
Equity in Net Income of Affiliates       236         253       -6.7 %
Segment Income     $ 7       $ 147       -95.2 %
             
Financial Data        
 
AT&T Inc.            
Consolidated Balance Sheets
Dollars in millions except per share amounts
3/31/12 12/31/11
      Unaudited      
Assets
Current Assets
Cash and cash equivalents $ 2,442 $ 3,185

Accounts receivable - net of allowances for doubtful accounts of $784 and $878

13,167 13,606
Prepaid expenses 1,706 1,155
Deferred income taxes 1,463 1,470
Other current assets       1,987         3,611  
Total current assets 20,765 23,027
Property, Plant and Equipment - Net 107,231 107,087
Goodwill 70,929 70,842
Licenses 51,782 51,374
Customer Lists and Relationships - Net 2,385 2,757
Other Intangible Assets - Net 5,203 5,212
Investments in Equity Affiliates 4,302 3,718
Other Assets       6,759         6,327  
Total Assets     $ 269,356       $ 270,344  
 
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year $ 6,775 $ 3,453
Accounts payable and accrued liabilities 17,593 19,858
Advanced billing and customer deposits 3,966 3,872
Accrued taxes 1,601 1,003
Dividends payable       2,585         2,608  
Total current liabilities       35,520         30,794  
Long-Term Debt       58,934         61,300  
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes 26,136 25,748
Postemployment benefit obligation 34,113 34,011
Other noncurrent liabilities       12,466         12,694  
Total deferred credits and other noncurrent liabilities       72,715         72,453  
Stockholders' Equity
Common stock 6,495 6,495
Additional paid-in capital 91,032 91,156
Retained earnings 26,446 25,453
Treasury stock (22,460 ) (20,750 )
Accumulated other comprehensive income 3,386 3,180
Noncontrolling interest       288         263  
Total stockholders' equity       105,187         105,797  
Total Liabilities and Stockholders' Equity     $ 269,356       $ 270,344  
 
Financial Data      
 
AT&T Inc.
Consolidated Statements of Cash Flows
Dollars in millions
Unaudited Three Months Ended
      3/31/12   3/31/11
 
Operating Activities
Net income $ 3,652 $ 3,468

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

Depreciation and amortization 4,560 4,584
Undistributed earnings from investments in equity affiliates (223 ) (233 )
Provision for uncollectible accounts 328 292

Deferred income tax expense and noncurrent unrecognized tax benefits

337 731
Net gain from impairment and sale of investments (9 ) (41 )
Changes in operating assets and liabilities:
Accounts receivable 111 72
Other current assets 1,082 708
Accounts payable and accrued liabilities (1,573 ) (1,309 )
Other - net       (469 )     (540 )
Total adjustments       4,144       4,264  
Net Cash Provided by Operating Activities       7,796       7,732  
 
Investing Activities
Construction and capital expenditures:
Capital expenditures (4,261 ) (4,133 )
Interest during construction (65 ) (35 )
Acquisitions, net of cash acquired (433 ) (54 )
Dispositions 16 11
Sales of securities, net of investment 5 127
Other       1       9  
Net Cash Used in Investing Activities       (4,737 )     (4,075 )
 
Financing Activities

Net change in short-term borrowings with original maturities of three months or less

- (36 )
Issuance of long-term debt 2,986 -
Repayment of long-term debt (2,204 ) (1,264 )
Purchase of treasury stock (2,066 ) -
Issuance of treasury stock 218 18
Dividends paid (2,606 ) (2,540 )
Other       (130 )     119  
Net Cash Used in Financing Activities       (3,802 )     (3,703 )
Net decrease in cash and cash equivalents (743 ) (46 )
Cash and cash equivalents beginning of year       3,185       1,437  
Cash and Cash Equivalents End of Period     $ 2,442     $ 1,391  
   
Financial Data      
 
AT&T Inc.  
Supplementary Operating and Financial Data
Dollars in millions except per share amounts  
Unaudited Three Months Ended  
        3/31/2012   3/31/2011  

% Chg

 
 
Wireless
Volumes (000)        
Total     103,940       97,519   6.6 %
Postpaid 69,403 68,062 2.0 %
Prepaid 7,368 6,613 11.4 %
Reseller 13,869 12,241 13.3 %
Connected Devices 13,300 10,603 25.4 %
 
Wireless Net Adds (000)        
Total     726       1,984   -63.4 %
Postpaid 187 62 -
Prepaid 125 85 47.1 %
Reseller 184 561 -67.2 %
Connected Devices 230 1,276 -82.0 %
M&A Activity, Partitioned Customers and Other Adjs. (33 ) (1 ) -
 
Wireless Churn
Postpaid Churn 1.10 % 1.18 % -8 BP
Total Churn 1.47 % 1.36 % 11 BP
 
Other
Branded Computing Subscribers 1 5,776 3,434 68.2 %
Licensed POPs (000,000) 313 313 0.0 %
 
Wireline
Voice        
Total Wireline Voice Connections     37,878       42,457   -10.8 %
Net Change (1,134 ) (1,106 ) -2.5 %
 
Broadband        
Total Wireline Broadband Connections 2     16,530       16,486   0.3 %
Net Change 2 103 177 -41.8 %
 
Video        
U-verse 3,991 3,205 24.5 %
  Satellite     1,732       1,886   -8.2 %
Total Video Connections     5,723       5,091   12.4 %
Net Change 167 174 -4.0 %
 
Consumer Revenue Connections        
Broadband 3 14,595 14,515 0.6 %
Video Connections 4 5,706 5,085 12.2 %
Voice 5     20,537       23,479   -12.5 %
Total Consumer Revenue Connections     40,838       43,079   -5.2 %
Net Change (428 ) (348 ) -23.0 %
 
AT&T Inc.
Construction and capital expenditures
Capital expenditures $ 4,261 $ 4,133 3.1 %
Interest during construction $ 65 $ 35 85.7 %
Dividends Declared per Share $ 0.44 $ 0.43 2.3 %
End of Period Common Shares Outstanding (000,000) 5,875 5,918 -0.7 %
Debt Ratio 6 38.4 % 36.6 % 180 BP
Total Employees 252,330 260,690 -3.2 %
                   

1

Branded Computing Subscribers includes tablets, tethering plans, aircards, mobile Wi-Fi hotspots and other data-only devices.

2

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

3

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

4

Video connections include sales under agency agreements with EchoStar and DirecTV customers and U-verse connections.

5

Includes consumer U-verse Voice over Internet Protocol connections of 2,442 as of March 31, 2012.

6

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

Note: For the end of 1Q12, total switched access lines were 35,436, retail business switched access lines totaled 15,256 and wholesale and coin switched access lines totaled 2,085.

 
Financial Data
           
AT&T Inc.
Non-GAAP Wireless Reconciliation
Wireless Segment EBITDA
Dollars in millions
Unaudited
Three Months Ended
3/31/11   6/30/11   9/30/11   12/31/11   3/31/12
 
Segment Operating Revenues
Service $ 13,961 $ 14,157 $ 14,261 $ 14,347 $ 14,566
Equipment       1,349       1,446       1,345       2,349       1,570  
Total Segment Operating Revenues       15,310       15,603       15,606       16,696       16,136  
 
Segment Operating Expenses
Operations and support 9,861 9,786 9,376 12,598 10,083
Depreciation and amortization       1,506       1,615       1,620       1,588       1,666  
Total Segment Operating Expenses       11,367       11,401       10,996       14,186       11,749  
 
Segment Operating Income       3,943       4,202       4,610       2,510       4,387  
Segment Operating Income Margin 25.8 % 26.9 % 29.5 % 15.0 % 27.2 %
 
Plus: Depreciation and amortization       1,506       1,615       1,620       1,588       1,666  
EBITDA       5,449       5,817       6,230       4,098       6,053  
EBITDA as a % of Service Revenue 39.0 % 41.1 % 43.7 % 28.6 % 41.6 %
 

EBITDA is defined as Operating Income Before Depreciation and Amortization. Annual Service EBITDA Margin is calculated as the sum of quarterly EBITDA divided by the sum of quarterly Service Revenues.

 
         
Financial Data    
 
AT&T Inc.
Non-GAAP Financial Reconciliation        
Free Cash Flow
Dollars in Millions
Unaudited
Three Months Ended
    3/31/11   3/31/12
 
Net cash provided by operating activities $ 7,732 $ 7,796
 
Less: Construction and capital expenditures (4,168 ) (4,326 )
         
Free Cash Flow   $ 3,564     $ 3,470  
 

Free cash flow is defined as cash from operations minus construction and capital expenditures. 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.

         
Free Cash Flow after Dividends
Dollars in Millions
Unaudited
Three Months Ended
    3/31/11   3/31/12
 
Net cash provided by operating activities $ 7,732 $ 7,796
 
Less: Construction and capital expenditures (4,168 ) (4,326 )
         
Free Cash Flow     3,564       3,470  
 
Less: Dividends paid (2,540 ) (2,606 )
         
Free Cash Flow After Dividends   $ 1,024     $ 864  
           
Financial Data    
 
AT&T Inc.
Non-GAAP Financial Reconciliation          
Net-Debt-to-EBITDA Ratio
Dollars in millions
Unaudited

 

Three Months Ended

    3/31/12   2012 YTD  
 
Operating Revenues $ 31,822

$ 31,822

Operating Expenses 25,721 25,721
Total Operating Income 6,101 6,101
Add Back Depreciation and Amortization 4,560 4,560
Total Consolidated EBITDA 10,661 10,661
Annualized Consolidated EBITDA* 42,644
End-of-period current debt 6,775
End-of-period long-term debt 58,934
Total End-of-Period Debt 65,709
(Premiums) Discounts on long-term debt (42 )
Normalized Debt Balance 65,667
Less Cash and Cash Equivalents 2,442
Normalized Net Debt Balance 63,225
           
Net-Debt-to-EBITDA Ratio 1.48
 

*EBITDA is annualized by dividing YTD EBITDA by YTD number of quarters and multiplying by four.

 

Note: 4Q12 EBITDA will exclude the impact of benefit plan actuarial gains/losses in order to better represent AT&T's operational performance.

 

EBITDA DISCUSSION

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