TIDM58KM

RNS Number : 4090F

AT & T Inc.

22 April 2011

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 
 
 

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of report (Date of earliest event reported) April 20, 2011

AT&T INC.

(Exact Name of Registrant as Specified in Charter)

 
        Delaware                    1-8610                  43-1301883 
     (State or Other       (Commission File Number)        (IRS Employer 
     Jurisdiction of                                    Identification No.) 
      Incorporation) 
 
 
     208 S. Akard St., Dallas, Texas         75202 
(Address of Principal Executive Offices)   (Zip Code) 
 

Registrant's telephone number, including area code (210) 821-4105

 
 
 (Former Name or Former Address, if Changed Since Last 
                        Report) 
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 
o  Written communications pursuant to Rule 425 under 
    the Securities Act (17 CFR 230.425) 
 
 
o  Soliciting material pursuant to Rule 14a-12 under 
    the Exchange Act (17 CFR 240.14a-12) 
 
 
o  Pre-commencement communications pursuant to Rule 14d-2(b) 
    under the Exchange Act (17 CFR 240-14d-2(b)) 
 
 
o  Pre-commencement communications pursuant to Rule 13e-4(c) 
    under the Exchange Act (17 CFR 240.13e-4(c)) 
 

Item 2.02 Results of Operations and Financial Condition.

The registrant announced on April 20, 2011, its results of operations for the first quarter of 2011. The text of the press release and accompanying financial information are attached as exhibits and incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

The following exhibits are furnished as part of this report:

(d) Exhibits

 
99.1  Press release dated April 20, 2011 reporting financial 
       results for the first quarter ended March 31, 2011. 
 
 
99.2  AT&T Inc. selected financial statements and operating 
       data. 
 
99.3  Discussion of EBITDA, Free Cash Flow, Free Cash Flow 
       Yield, and Free Cash Flow after Dividends 
 
 

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
                                             AT&T INC. 
 
 
 
Date: April 20, 2011                                      By: /s/ John J. 
                                                          Stephens John J. 
                                                          Stephens Senior Vice 
                                                          President and 
                                                          Controller 
 

For more information, contact:

McCall Butler

917-209-5792

mbutler@attnews.us

10.2 Percent Wireless Revenue Growth, Record Net Adds and Smartphone Sales Highlight AT&T's First-Quarter Results

 
--  $0.57 diluted EPS, compared to $0.41 diluted EPS, 
     and $0.58 per diluted share when excluding significant 
     items, in first quarter of 2010 
 
 
--  Consolidated revenues of $31.2 billion in the first 
     quarter, up more than $700 million, or 2.3 percent, 
     versus the year-earlier period 
 
 
--  10.2 percent growth in wireless revenues, with an 
     8.6 percent increase in wireless service revenues 
 
 
--  Best-ever first-quarter increase in total wireless 
     subscribers, up 2.0 million to reach 97.5 million 
     subscribers in service, with gains in every category 
 
 
--  Best-ever first-quarter smartphone sales of more than 
     5.5 million 
 
 
--  iPhone activations increased nearly 1 million year 
     over year to 3.6 million, with 23 percent of subscribers 
     new to AT&T; iPhone subscriber churn unchanged year 
     over year 
 
 
--  Best-ever first-quarter connected device net adds 
     of 1.3 million 
 
 
--  Branded computing subscribers (includes tablets, aircards 
     and other data-only devices) up 421,000, doubling 
     since the first quarter of 2010 to reach 3.4 million 
 
 
--  23.9 percent growth in wireless data revenues, up 
     almost $1 billion versus the year-earlier quarter 
 
 
--  Postpaid subscriber ARPU (average monthly revenues 
     per subscriber) up 2.4 percent to $63.39, the ninth 
     consecutive quarter with a year-over-year increase 
 
 
--  Postpaid churn stable excluding the impacts of the 
     Alltel and Centennial integration 
 
 
--  Third consecutive quarter of year-over-year growth 
     in wireline consumer revenues, driven by AT&T U-verse(R) 
     services 
 
 
--  218,000 net gain in AT&T U-verse TV subscribers to 
     reach 3.2 million in service, with continued high 
     broadband and voice attach rates 
 
 
--  26.1 percent growth in wireline consumer IP data revenues, 
     driven by AT&T U-verse expansion 
 
 
--  175,000 net gain in wireline broadband connections 
 
 
--  Strategic business services revenues continue to increase, 
     up 18.8 percent year over year, the best performance 
     in more than two years 
 

Note: AT&T's first-quarter earnings conference call will be broadcast live via the Internet at 10 a.m. ET on Wednesday, April 20, 2011, at www.att.com/investor.relations.

DALLAS, April 20, 2011 - AT&T Inc. (NYSE:T) today reported first-quarter results, highlighted by continued robust mobile broadband growth with record first-quarter smartphone sales and a two-fold year-over-year increase in branded computing subscribers.

"We delivered another robust mobile broadband growth quarter for a very solid start to the year," said Randall Stephenson, AT&T chairman and chief executive officer. "We posted double-digit wireless revenue growth, and we set new first-quarter records in total net adds, connected device net adds and smartphone sales. Growth in tablets and other branded computing subscribers also continues to be strong.

"Mobile broadband networks are driving unprecedented growth and innovation, and AT&T is playing a leading role in bringing these benefits to customers," Stephenson said. "That's why our agreement to acquire T-Mobile USA, which we announced in March, is so important. Combined, the two companies' spectrum and network assets will allow us to simultaneously address spectrum issues created by this increased demand and improve customers' network experience as volumes continue to grow."

First-Quarter Financial Results

For the quarter ended March 31, 2011, AT&T's consolidated revenues totaled $31.2 billion, up more than $700 million, or 2.3 percent, versus the year-earlier quarter, marking the company's fifth consecutive quarter with a year-over-year revenue increase.

Compared with results for the first quarter of 2010, operating expenses were $25.4 billion versus $24.6 billion; operating income was $5.8 billion, down from $6.0 billion; and AT&T's operating income margin was 18.6 percent, compared to 19.6 percent.

First-quarter 2011 net income attributable to AT&T totaled $3.4 billion, or $0.57 per diluted share. These results compare with reported net income attributable to AT&T of $2.5 billion, or $0.41 per diluted share, in the first quarter of 2010. Excluding 2010 significant items, earnings per share for the first quarter of 2011 was stable with earnings per share of $0.58 per diluted share in the year-ago first quarter.

First-quarter 2011 cash from operating activities totaled $7.7 billion, and capital expenditures totaled $4.2 billion. Free cash flow - cash from operating activities minus capital expenditures - totaled $3.6 billion.

Wireless Operational Highlights

Led by strong performance in mobile broadband in the first quarter, AT&T delivered continued solid growth in its wireless business, including record first-quarter subscriber growth and stable churn. Highlights included:

Mobile Broadband Drives Solid Subscriber Gains. AT&T posted a net gain in total wireless subscribers of 2.0 million, to reach 97.5 million in service. This included gains in every customer category. First-quarter net adds reflect adoption of smartphones, increases in prepaid subscribers, strength in the reseller channel and a record first quarter for connected devices such as eReaders, security systems, fleet management systems and a host of other products. Retail net adds for the quarter include postpaid net adds of 62,000. Excluding the impacts of the Alltel and Centennial integration migrations, postpaid net adds were approximately 165,000. Prepaid net adds were 85,000. Connected device net adds were 1.3 million, and reseller net adds were 561,000.

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Tablet Sales Drive Branded Computing Subscribers. AT&T had a strong quarter with branded computing subscribers, a new growth area for the company that includes tablets, aircards, MiFi devices, tethering plans and other data-only devices. AT&T added 421,000 of these devices to reach 3.4 million, twice as many as a year ago. Most of those new subscribers were tablets with 322,000 added in the quarter. More than 80 percent of those tablets were booked to the prepaid category.

Sequential Churn Stable. Churn levels were relatively stable sequentially. Total churn was 1.36 percent versus 1.30 percent in the first quarter of 2010 and 1.32 percent in the fourth quarter of 2010. Postpaid churn was 1.18 percent, compared to 1.07 percent in the year-ago first quarter and 1.15 percent in the fourth quarter of 2010. Excluding the impacts of the Alltel and Centennial migrations, postpaid churn was 1.12 percent for the quarter, compared with 1.05 percent in the year-ago quarter and 1.10 percent in the fourth quarter of 2010.

Smartphone Sales Remain Strong. AT&T had another strong quarter of smartphone sales. (Smartphones are voice and data devices with an advanced operating system to better manage data and Internet access.) More than 5.5 million smartphones were sold in the first quarter, the third-highest quarter ever and an increase of more than 60 percent year over year. During the quarter, 3.6 million iPhones were activated. Approximately 65 percent of postpaid sales were smartphones.

At the end of the quarter, 46.2 percent of AT&T's 68.1 million postpaid subscribers had smartphones, up from 34.7 percent a year earlier. The average ARPU for smartphones on AT&T's network is 1.8 times that of the company's other devices. More than 80 percent of smartphone subscribers are on FamilyTalk and/or business discount plans. Churn levels for these subscribers are significantly lower than for other postpaid subscribers.

Double-Digit Wireless Revenue Growth.Total wireless revenues, which include equipment sales, were up 10.2 percent year over year to $15.3 billion. Wireless service revenues increased 8.6 percent, to $14.0 billion, in the first quarter.

Wireless Data Revenues Lead Growth.Wireless data revenues - driven by messaging, Internet access, access to applications and related services - increased nearly $1 billion, or 23.9 percent, from the year-earlier quarter to $5.1 billion. AT&T postpaid wireless subscribers on monthly data plans increased by 18.7 percent over the past year. Versus the year-earlier quarter, total text messages carried on the AT&T network increased by more than 25 percent to 179.8 billion, and multimedia messages increased by 54.2 percent to 3.7 billion.

Postpaid ARPU Expansion. Driven by strong data growth, postpaid subscriber ARPU increased 2.4 percent versus the year-earlier quarter to $63.39. This marked the ninth consecutive quarter AT&T has posted a year-over-year increase in postpaid ARPU. Excluding the impact of the Alltel merger, postpaid ARPU growth would have been about 3 percent year over year. Postpaid data ARPU reached $23.35, up 16.0 percent versus the year-earlier quarter.

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Wireless Margins Reflect Strong Smartphone Sales. First-quarter wireless margins reflected increased operating costs associated with strong smartphone sales, high customer upgrade levels and the Alltel and Centennial merger costs, offset in part by improved operating efficiencies and further revenue growth from the company's base of high-quality smartphone subscribers. AT&T's first-quarter wireless operating income margin was 25.8 percent versus 30.0 percent in the year-earlier quarter, and AT&T's wireless EBITDA service margin was 39.0 percent, compared with 44.5 percent in the first quarter of 2010. Without customer migration costs from the Alltel and Centennial mergers, service margin would have been 40.5 percent. (EBITDA service margin is earnings before interest, taxes, depreciation and amortization, divided by total service revenues.) First-quarter wireless operating expenses totaled $11.4 billion, up 16.8 percent versus the year-earlier quarter, and wireless operating income was $3.9 billion, down 5.3 percent year over year.

Wireline Operational Highlights

AT&T's first-quarter wireline results were highlighted by continued growth in consumer revenues, sustained growth in revenues from strategic business services and solid cost management. Highlights included:

Growth in Wireline Consumer Revenues Continues. Driven by strength in IP data services, revenue from residential customers totaled $5.3 billion in the first quarter, up 0.5 percent year over year, the third consecutive quarter of year-over-year growth.

U-verse Drives Consumer Growth. AT&T U-verse TV added 218,000 subscribers to reach 3.2 million in service. In the first quarter, the AT&T U-verse High Speed Internet attach rate continued to run above 90 percent and nearly 60 percent of subscribers took AT&T U-verse Voice. More than three-fourths of AT&T U-verse TV subscribers have a triple- or quad-play option from AT&T. ARPU for U-verse triple-play customers was $168, up 14.3 percent year over year.

AT&T's U-verse deployment now reaches 28 million living units. Companywide penetration of eligible living units is 15.3 percent, and across areas marketed to for 30 months or more, overall penetration is 23.8 percent. AT&T's total video subscribers, which combine the company's U-verse and bundled satellite customers, reached 5.1 million at the end of the quarter, representing 20.6 percent of households served.

Wireline Broadband Growth Remains Strong. Driven by strength in AT&T U-verse High Speed Internet service and standalone broadband, AT&T posted a 175,000 net gain in wireline broadband connections. About two-thirds of consumers have a broadband plan of 3 Mbps or higher.

IP Data Growth Transforms Consumer. Increased AT&T U-verse penetration and a significant number of subscribers on triple- or quad-play options drove 26.1 percent year-over-year growth in IP revenues from residential customers (broadband, U-verse TV and U-verse Voice). IP revenues now represent 46.9 percent of total wireline consumer revenue, up from 37.4 percent in the first quarter of 2010.

4

Growth in Revenues Per Household. Wireline revenues per household served increased 6.5 percent versus the year-earlier first quarter and were up 1.4 percent sequentially (average revenue per household is total consumer wireline revenue divided by the average monthly households in service), driven by AT&T U-verse services. This marked AT&T's 13th consecutive quarter with year-over-year growth in wireline consumer revenues per household.

Consumer Connection Trends. In the first quarter, AT&T posted a decline in total consumer revenue connections due primarily to expected declines in traditional voice access lines, consistent with broader industry trends and somewhat offset by increases in U-verse TV, broadband and VoIP (Voice over Internet Protocol) connections. AT&T U-verse Voice connections increased by 181,000 in the quarter and 716,000 over the past four quarters. Total consumer revenue connections at the end of the first quarter were 43.1 million, compared with 45.0 million at the end of the first quarter of 2010 and 43.4 million at the end of the fourth quarter of 2010.

Strongest Growth in Strategic Business Services in More than Two Years. Revenues from new-generation capabilities that lead AT&T's most advanced business solutions - including Ethernet, VPNs, hosting, IP conferencing and application services - grew 18.8 percent versus the year-earlier quarter, their strongest growth in more than two years, continuing AT&T's strong trends in this category. Total business revenues were $9.3 billion, a decline of 4.5 percent versus the year-earlier quarter and down 2.0 percent sequentially, reflecting economic weakness in voice and legacy data products and the third-quarter 2010 sale of the company's Japan assets. When normalized for the Japan sale, total business revenues declined 3.6 percent, about the same rate as normalized results for the fourth quarter of 2010 and improved from the year-ago quarter. Business service revenues, which exclude CPE, declined 4.4 percent year over year and were down slightly sequentially.

Growth in Business IP Revenues. Total business IP data revenues grew 8.5 percent versus the year-earlier first quarter, led by growth in VPN revenues. More than 70 percent of AT&T's frame customers have made the transition to IP-based solutions, which allow them to easily add managed services such as network security, cloud services and IP conferencing on top of their infrastructures. Total business data revenue growth was 0.3 percent when compared to a year earlier.

Wireline Operating Expenses Down 2.7 Percent Year Over Year. AT&T's first-quarter wireline operating income margin was 11.5 percent, down slightly compared to 12.0 percent in the year-earlier quarter and 13.0 percent in the fourth quarter of 2010. Improved consumer revenue trends and execution of cost initiatives helped to partially offset declines in voice revenues and storm-related costs in the West. First-quarter total wireline revenues were $15.0 billion, down 3.2 percent versus the year-earlier quarter. First-quarter wireline operating expenses were $13.2 billion, down 2.7 percent versus the first quarter of 2010 and up 0.4 percent sequentially. Wireline operating income totaled $1.7 billion, compared to $1.9 billion in the first quarter of 2010 and $2.0 billion in the fourth quarter of 2010.

5

 
Web Site Links:                         Related Media Kits: 
--------------------------------------  -------------------------------------- 
AT&T Web Site                           AT&T 2010 Annual Report AT&T Investor 
 AT&T Investor Relations                Relations Events and Presentations 
 2011 AT&T Events Calendar 
Related Releases:                       Related Fact Sheets: 
--------------------------------------  -------------------------------------- 
AT&T Declares Quarterly Dividend AT&T   AT&T Historical Dividend Data 
to Release First-Quarter 2011 Earnings 
April 20 AT&T to Hold 2011 Annual 
Meeting of Stockholders in Little Rock 
AT&T Reports Record 2.8 Million 
Wireless Net Adds, Strong U-verse 
Sales, Continued Revenue Gains in the 
Fourth Quarter 
 

*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. Its subsidiaries and affiliates - AT&T operating companies - are the providers of AT&T services in the United States and around the world. With a powerful array of network resources that includes the nation's fastest mobile broadband network, AT&T is a leading provider of wireless, Wi-Fi, high speed Internet and voice services. A leader in mobile broadband, AT&T also offers the best wireless coverage worldwide, offering the most wireless phones that work in the most countries. It also offers advanced TV services under the AT&T U-verse(R) and AT&T | DIRECTV brands. The company's suite of IP-based business communications services is one of the most advanced in the world. In domestic markets, AT&T Advertising Solutions and AT&T Interactive are known for their leadership in local search and advertising.

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. This AT&T news release and other announcements are available at http://www.att.com/newsroom and as part of an RSS feed at www.att.com/rss. Or follow our news on Twitter at @ATT. Find us on Facebook at www.Facebook.com/ATT to discover more about our consumer and wireless services or at www.Facebook.com/ATTSmallBiz to discover more about our small business services.

(c) 2011 AT&T Intellectual Property. All rights reserved. Mobile broadband not available in all areas. 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.

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NOTE: EBITDA is defined as earnings before interests, taxes, depreciation and amortization. EBITDA differs from Segment Operating Income (loss), as calculated in accordance with 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.

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Exhibit 99.2

 
Financial Data 
 
AT&T Inc. 
---------------------------------  -----------   -----------   ----- 
Consolidated Statements of Income 
Dollars in millions except per 
share amounts 
---------------------------------  -----------   -----------   ----- 
Unaudited                                   Three Months Ended 
                                   ------------------------------------- 
                                     3/31/2011     3/31/2010       % Chg 
---------------------------------  -----------   -----------   --------- 
Operating Revenues 
Wireless service                   $    13,961   $    12,850     8.6% 
Data                                     7,180         6,651     8.0% 
Voice                                    6,551         7,483   -12.5% 
Directory                                  868         1,041   -16.6% 
Other                                    2,687         2,505     7.3% 
---------------------------------      -------       -------   ----- 
Total Operating Revenues                31,247        30,530     2.3% 
---------------------------------      -------       -------   ----- 
 
Operating Expenses 
Cost of services and sales 
(exclusive of depreciation and 
   amortization shown separately 
    below)                              13,403        12,383     8.2% 
Selling, general and 
 administrative                          7,452         7,396     0.8% 
Depreciation and amortization            4,584         4,780    -4.1% 
---------------------------------      -------       -------   ----- 
Total Operating Expenses                25,439        24,559     3.6% 
---------------------------------      -------       -------   ----- 
Operating Income                         5,808         5,971    -2.7% 
---------------------------------      -------       -------   ----- 
Interest Expense                           846           765    10.6% 
Equity in Net Income of 
 Affiliates                                249           217    14.7% 
Other Income (Expense) - Net                59           (22)      - 
---------------------------------      -------       -------   ----- 
Income from Continuing Operations 
 Before Income Taxes                     5,270         5,401    -2.4% 
Income Tax Expense                       1,802         2,863   -37.1% 
---------------------------------      -------       -------   ----- 
Income from Continuing Operations        3,468         2,538    36.6% 
---------------------------------      -------       -------   ----- 
Income from Discontinued 
 Operations, net of tax                      -             2       - 
---------------------------------      -------       -------   ----- 
Net Income                               3,468         2,540    36.5% 
---------------------------------      -------       -------   ----- 
Less: Net Income Attributable to 
 Noncontrolling Interest                   (60)          (87)   31.0% 
---------------------------------      -------       -------   ----- 
Net Income Attributable to AT&T    $     3,408   $     2,453    38.9% 
=================================      =======       =======   ===== 
 
 
Basic Earnings Per Share from 
Continuing 
Operations Attributable to AT&T    $      0.57   $      0.42    35.7% 
Basic Earnings Per Share from 
Discontinued 
Operations Attributable to AT&T              -             -       - 
                                       -------       ------- 
Basic Earnings Per Share 
 Attributable to AT&T              $      0.57   $      0.42    35.7% 
                                       =======       ======= 
Weighted Average Common 
Shares Outstanding (000,000)             5,925         5,905     0.3% 
 
Diluted Earnings Per Share from 
Continuing 
Operations Attributable to AT&T    $      0.57   $      0.41    39.0% 
Diluted Earnings Per Share from 
Discontinued 
Operations Attributable to AT&T              -             -       - 
                                       -------       ------- 
Diluted Earnings Per Share 
 Attributable to AT&T              $      0.57   $      0.41    39.0% 
                                       =======       ======= 
Weighted Average Common 
Shares Outstanding with Dilution 
 (000,000)                               5,945         5,935     0.2% 
 
 
 
Financial Data 
 
AT&T Inc. 
-------------------------------  -----------      -----------      ----- 
Statements of Segment Income 
Dollars in millions 
-------------------------------  -----------      -----------      ----- 
Unaudited 
                                             Three Months Ended 
                                 ------------------------------------------- 
 
Wireless                          3/31/2011        3/31/2010           % Chg 
-------------------------------  -----------      -----------      --------- 
Segment Operating Revenues 
Service                          $    13,961      $    12,850        8.6% 
Equipment                              1,348            1,047       28.7% 
-------------------------------      -------          -------      ----- 
Total Segment Operating 
 Revenues                             15,309           13,897       10.2% 
-------------------------------      -------          -------      ----- 
 
Segment Operating Expenses 
Operations and support                 9,858            8,173       20.6% 
Depreciation and amortization          1,505            1,558       -3.4% 
-------------------------------      -------          -------      ----- 
Total Segment Operating 
 Expenses                             11,363            9,731       16.8% 
-------------------------------      -------          -------      ----- 
Segment Operating Income               3,946            4,166       -5.3% 
Equity in Net Income (Loss) of 
 Affiliates                               (4)              12          - 
-------------------------------      -------          -------      ----- 
Segment Income                   $     3,942      $     4,178       -5.6% 
===============================      =======          =======      ===== 
 
Segment Operating Income Margin         25.8%            30.0% 
 
Wireline 
-------------------------------      -------          -------      ----- 
Segment Operating Revenues 
Data                             $     7,180      $     6,651        8.0% 
Voice                                  6,551            7,483      -12.5% 
Other                                  1,219            1,312       -7.1% 
-------------------------------      -------          -------      ----- 
Total Segment Operating 
 Revenues                             14,950           15,446       -3.2% 
-------------------------------      -------          -------      ----- 
 
Segment Operating Expenses 
Operations and support                10,266           10,512       -2.3% 
Depreciation and amortization          2,958            3,076       -3.8% 
-------------------------------      -------          -------      ----- 
Total Segment Operating 
 Expenses                             13,224           13,588       -2.7% 
-------------------------------      -------          -------      ----- 
Segment Operating Income               1,726            1,858       -7.1% 
Equity in Net Income of 
 Affiliates                                -                5          - 
-------------------------------      -------          -------      ----- 
Segment Income                   $     1,726      $     1,863       -7.4% 
===============================      =======          =======      ===== 
 
Segment Operating Income Margin         11.5%            12.0% 
 
Advertising Solutions 
-------------------------------      -------          -------      ----- 
Segment Operating Revenues       $       868      $     1,041      -16.6% 
-------------------------------      -------          -------      ----- 
 
Segment Operating Expenses 
Operations and support                   573              664      -13.7% 
Depreciation and amortization            105              138      -23.9% 
-------------------------------      -------          -------      ----- 
Total Segment Operating 
 Expenses                                678              802      -15.5% 
-------------------------------      -------          -------      ----- 
Segment Income                   $       190      $       239      -20.5% 
===============================      =======          =======      ===== 
 
Segment Income Margin                   21.9%            23.0% 
 
Other 
-------------------------------      -------          -------      ----- 
Segment Operating Revenues       $       120      $       146      -17.8% 
Segment Operating Expenses               174              438      -60.3% 
-------------------------------      -------          -------      ----- 
Segment Operating Income (Loss)          (54)            (292)      81.5% 
Equity in Net Income of 
 Affiliates                              253              200       26.5% 
-------------------------------      -------          -------      ----- 
Segment Income (Loss) from 
 Continuing Operations           $       199      $       (92)         - 
===============================      =======          =======      ===== 
 
 
Financial Data 
 
AT&T Inc. 
-----------------------------------------------  -----------   -------- 
Consolidated Balance Sheets 
Dollars in millions except per share amounts 
-----------------------------------------------  -----------   -------- 
                                                     3/31/11   12/31/10 
                                                   Unaudited 
-----------------------------------------------  -----------   -------- 
 
Assets 
Current Assets 
Cash and cash equivalents                        $     1,391   $  1,437 
Accounts receivable - net of allowances for 
doubtful accounts of $949 and $957                    13,246     13,610 
Prepaid expenses                                       1,674      1,458 
Deferred income taxes                                  1,157      1,170 
Other current assets                                   2,269      2,276 
-----------------------------------------------      -------    ------- 
Total current assets                                  19,737     19,951 
-----------------------------------------------      -------    ------- 
Property, Plant and Equipment - Net                  103,369    103,196 
Goodwill                                              73,602     73,601 
Licenses                                              50,396     50,372 
Customer Lists and Relationships - Net                 4,154      4,708 
Other Intangible Assets - Net                          5,423      5,440 
Investments in Equity Affiliates                       4,845      4,515 
Other Assets                                           6,559      6,705 
-----------------------------------------------      -------    ------- 
Total Assets                                     $   268,085   $268,488 
===============================================      =======    ======= 
 
Liabilities and Stockholders' Equity 
Current Liabilities 
Debt maturing within one year                    $     6,902   $  7,196 
Accounts payable and accrued liabilities              18,349     20,055 
Advanced billing and customer deposits                 3,959      4,086 
Accrued taxes                                          1,499         72 
Dividends payable                                      2,545      2,542 
-----------------------------------------------      -------    ------- 
Total current liabilities                             33,254     33,951 
-----------------------------------------------      -------    ------- 
Long-Term Debt                                        58,126     58,971 
-----------------------------------------------      -------    ------- 
Deferred Credits and Other Noncurrent 
Liabilities 
Deferred income taxes                                 23,149     22,070 
Postemployment benefit obligation                     28,510     28,803 
Other noncurrent liabilities                          12,203     12,743 
-----------------------------------------------      -------    ------- 
Total deferred credits and other noncurrent 
 liabilities                                          63,862     63,616 
-----------------------------------------------      -------    ------- 
Stockholders' Equity 
Common stock                                           6,495      6,495 
Additional paid-in capital                            91,636     91,731 
Retained earnings                                     32,649     31,792 
Treasury stock                                       (20,949)   (21,083) 
Accumulated other comprehensive income                 2,713      2,712 
Noncontrolling interest                                  299        303 
-----------------------------------------------      -------    ------- 
Total stockholders' equity                           112,843    111,950 
-----------------------------------------------      -------    ------- 
Total Liabilities and Stockholders' Equity       $   268,085   $268,488 
===============================================      =======    ======= 
 
 
Financial Data 
 
AT&T Inc. 
--------------------------------------  ---------------      -------------- 
Consolidated Statements of Cash Flows 
Dollars in millions 
--------------------------------------  ---------------      -------------- 
Unaudited                                    Three months ended March 31, 
                                             2011                 2010 
--------------------------------------  ---------------      -------------- 
Operating Activities 
Net income                              $         3,468      $        2,540 
Adjustments to reconcile net income to 
net cash provided by operating 
activities: 
Depreciation and amortization                     4,584               4,780 
Undistributed earnings from 
 investments in equity affiliates                  (233)               (201) 
Provision for uncollectible accounts                292                 350 
Deferred income tax expense and 
noncurrent 
unrecognized tax benefits                           731               1,609 
Net (gain) loss from impairment and 
 sale of investments                                (41)                 50 
Changes in operating assets and 
liabilities: 
Accounts receivable                                  72                 395 
Other current assets                               (196)                 92 
Accounts payable and accrued 
 liabilities                                       (406)             (2,043) 
Net income attributable to 
 noncontrolling interest                            (60)                (87) 
Other - net                                        (479)               (247) 
--------------------------------------      -----------          ---------- 
Total adjustments                                 4,264               4,698 
--------------------------------------      -----------          ---------- 
Net Cash Provided by Operating 
 Activities                                       7,732               7,238 
--------------------------------------      -----------          ---------- 
 
Investing Activities 
Construction and capital expenditures 
Capital expenditures                             (4,133)             (3,148) 
Interest during construction                        (35)               (184) 
Acquisitions, net of cash acquired                  (54)               (178) 
Dispositions                                         11                   1 
(Purchases) and sales of securities, 
 net                                                127                 (20) 
Other                                                 9                   7 
--------------------------------------      -----------          ---------- 
Net Cash Used in Investing Activities            (4,075)             (3,522) 
--------------------------------------      -----------          ---------- 
 
Financing Activities 
Net change in short-term borrowings 
with 
original maturities of three months or 
 less                                               (36)                323 
Repayment of long-term debt                      (1,264)             (2,512) 
Issuance of treasury shares                          18                   3 
Dividends paid                                   (2,540)             (2,479) 
Other                                               119                (244) 
--------------------------------------      -----------          ---------- 
Net Cash Used in Financing Activities            (3,703)             (4,909) 
--------------------------------------      -----------          ---------- 
Net decrease in cash and cash 
 equivalents                                        (46)             (1,193) 
Cash and cash equivalents beginning of 
 year                                             1,437               3,741 
--------------------------------------      -----------          ---------- 
Cash and Cash Equivalents End of 
 Period                                 $         1,391      $        2,548 
======================================      ===========          ========== 
 
 
Financial Data 
 
AT&T Inc. 
-------------------------------  -----------      -----------      ----- 
Supplementary Operating and 
Financial Data 
Dollars in millions except per 
share amounts 
-------------------------------  -----------      -----------      ----- 
Unaudited                                    Three Months Ended 
                                 ------------------------------------------- 
                                   3/31/2011        3/31/2010          % Chg 
-------------------------------  -----------      -----------      --------- 
 
Wireless 
Volumes (000) 
-------------------------------  -----------      -----------      ----- 
    Total                             97,519           86,987       12.1% 
-------------------------------      -------          -------      ----- 
        Postpaid6                     68,062           65,108        4.5% 
        Prepaid6                       6,613            5,377       23.0% 
        Reseller6                     12,241           10,717       14.2% 
        Connected Devices6            10,603            5,785       83.3% 
 
Wireless Net Adds (000) 
-------------------------------      -------          -------      ----- 
    Total                              1,984            1,857        6.8% 
-------------------------------      -------          -------      ----- 
        Postpaid6                         62              512      -87.9% 
        Prepaid6                          85               24          - 
        Reseller6                        561              269          - 
        Connected Devices6             1,276            1,052       21.3% 
    M&A Activity, Partitioned 
     Customers and Other Adjs.            (1)              10 
 
Wireless Churn 
    Postpaid Churn6                     1.18%            1.07%         11 BP 
    Total Churn6                        1.36%            1.30%          6 BP 
 
Other 
    Licensed POPs (000,000)              313              307        2.0% 
 
In-Region Wireline1 
Voice 
-------------------------------      -------          ------- 
    Total Wireline Voice 
     Connections                      42,457           47,385      -10.4% 
-------------------------------      -------          ------- 
        Net Change                    (1,106)          (1,103)      -0.3% 
 
Broadband 
-------------------------------      -------          ------- 
    Total Wireline Broadband 
     Connections                      16,485           16,044        2.7% 
-------------------------------      -------          ------- 
        Net Change                       175              255      -31.4% 
 
Video 
        U-verse                        3,205            2,296       39.6% 
        Satellite                      1,886            2,127      -11.3% 
-------------------------------      -------          ------- 
    Total Video Connections            5,091            4,423       15.1% 
-------------------------------      -------          ------- 
        Net Change                       174              184       -5.4% 
 
Consumer Revenue Connections 
    Broadband3                        14,515           13,989        3.8% 
    Video Connections4                 5,085            4,422       15.0% 
    Voice2                            23,479           26,633      -11.8% 
                                     -------          ------- 
Total Consumer Revenue 
 Connections                          43,079           45,044       -4.4% 
                                     =======          ======= 
    Net Change                          (348)            (243)     -43.2% 
 
AT&T Inc. 
    Construction and capital 
    expenditures 
        Capital expenditures     $     4,133      $     3,148       31.3% 
        Interest during 
         construction            $        35      $       184      -81.0% 
    Dividends Declared per 
     Share                       $      0.43      $      0.42        2.4% 
    End of Period Common Shares 
     Outstanding (000,000)             5,918            5,909        0.2% 
    Debt Ratio5                         36.6%            40.5%       -390 BP 
    Total Employees                  260,690          276,280       -5.6% 
 
 
 
1  In-region wireline represents access lines served 
    by AT&T's incumbent local exchange companies. 
2  Includes consumer U-verse Voice over Internet Protocol 
    connections of 1,861 as of March 31, 2011. 
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  Total long-term debt plus debt maturing within one 
    year divided by total debt plus total stockholders' 
    equity. 
6  Prior year amounts restated to conform to current 
    period reporting methodology. 
   Note: For the end of 1Q11, total switched access lines 
    were 40,596, retail business switched access lines 
    totaled 16,656, and wholesale 
      and coin switched access lines totaled 
      2,322. 
 
 
 
Financial Data 
 
AT&T Inc. 
Non-GAAP 
Wireless 
Reconciliation 
---------------  -----------      -----------      -----------      ------------      ----------- 
Wireless 
Segment EBITDA 
Dollars in 
millions 
Unaudited 
                                                  Three Months Ended 
                   3/31/2010        6/30/2010        9/30/2010        12/31/2010        3/31/2011 
                 -----------      -----------      -----------      ------------      ----------- 
 
Segment 
Operating 
Revenues 
Service          $    12,850      $    13,186      $    13,675      $     13,799      $    13,961 
Equipment              1,047            1,056            1,505             1,382            1,348 
---------------      -------          -------          -------          --------          ------- 
Total Segment 
 Operating 
 Revenues             13,897           14,242           15,180            15,181           15,309 
---------------      -------          -------          -------          --------          ------- 
 
Segment 
Operating 
Expenses 
Operations and 
 support               8,173            8,553           10,032             9,988            9,858 
Depreciation 
 and 
 amortization          1,558            1,578            1,640             1,721            1,505 
---------------      -------          -------          -------          --------          ------- 
Total Segment 
 Operating 
 Expenses              9,731           10,131           11,672            11,709           11,363 
---------------      -------          -------          -------          --------          ------- 
 
Segment 
 Operating 
 Income                4,166            4,111            3,508             3,472            3,946 
 
Plus: 
 Depreciation 
 and 
 amortization          1,558            1,578            1,640             1,721            1,505 
---------------      -------          -------          -------          --------          ------- 
EBITDA                 5,724            5,689            5,148             5,193            5,451 
---------------      -------          -------          -------          --------          ------- 
EBITDA as a % 
 of Service 
 Revenue                44.5%            43.1%            37.6%             37.6%            39.0% 
 

EBITDA is defined as Earnings Before Interest, Taxes, 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 
                                                     March 31, 
                                                     2010      2011 
--------------------------------------------  -----------   ------- 
 
Net cash provided by operating activities     $     7,238   $ 7,732 
 
Less: Construction and capital expenditures        (3,332)   (4,168) 
 
Free Cash Flow                                $     3,906   $ 3,564 
--------------------------------------------      -------    ------ 
 

Free cash flow is defined as cash from operations minus 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 
                                                3/31/2010     3/31/2011 
--------------------------------------------  -----------   ----------- 
 
Net cash provided by operating activities     $     7,238   $     7,732 
 
Less: Construction and capital expenditures        (3,332)       (4,168) 
 
Free Cash Flow                                      3,906         3,564 
--------------------------------------------      -------       ------- 
 
Less: Dividends paid                               (2,479)       (2,540) 
 
Free Cash Flow After Dividends                $     1,427   $     1,024 
--------------------------------------------      -------       ------- 
 
 
Financial Data 
 
AT&T Inc. 
Non-GAAP Financial Reconciliation 
---------------------------------------  -------------  ---------- 
Annualized Net Debt-to-EBITDA Ratio 
Dollars in millions 
Unaudited 
                                         Three Months Ended 
                                             3/31/2011    2011 YTD 
---------------------------------------  -------------  ---------- 
 
Operating Revenues                       $      31,247  $   31,247 
Operating Expenses                              25,439      25,439 
Total Operating Income                           5,808       5,808 
Add Back Depreciation and Amortization           4,584       4,584 
Total Consolidated EBITDA                       10,392      10,392 
Annualized Consolidated EBITDA*                             41,568 
End-of-period current debt                                   6,902 
End-of-period long-term debt                                58,126 
Total End-of-Period Debt                                    65,028 
(Premiums) Discounts on long-term debt                        (163) 
Normalized Debt Balance                                     64,865 
Less Cash and Cash Equivalents                               1,391 
Normalized Net Debt Balance                                 63,474 
 
Annualized Net Debt-to-EBITDA Ratio                           1.53 
 
 

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

Note: 4Q11 EBITDA will exclude the impact of benefit plan actuarial gains/losses in order to better represent AT&T's operational performance.

EXHIBIT 99.3

EBITDA DISCUSSION

EBITDA is defined as earnings before interest, taxes, 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 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 generally accepted accounting principles. 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 Mobility's internal management reporting and planning processes and are important metrics that AT&T Mobility's management uses to evaluate the operating performance of its regional operations. These measures are used by management as a gauge of AT&T Mobility's success in acquiring, retaining and servicing subscribers because we believe these measures reflect AT&T Mobility'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 AT&T Mobility'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, minority interest in earnings of consolidated entities and equity in net income (loss) of affiliates, as these do not reflect the operating results of AT&T Mobility's subscriber base and its national footprint that AT&T Mobility utilizes to obtain and service its 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 AT&T Mobility's operating margin than EBITDA as a percentage of total revenue. AT&T Mobility generally subsidizes a portion of its handset sales, all of which are recognized in the period in which AT&T Mobility sells the handset. This results in a disproportionate impact on its margin in that period. 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. AT&T Mobility also uses service revenues to calculate margin to facilitate comparison, both internally and externally with its competitors, as they calculate their margins using services revenue 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 AT&T Mobility's net 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 capital expenditures. Free cash flow after dividends is defined as cash from operations minus capital expenditures and dividends. Free cash flow yield is defined as cash from continuing operations less 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 monthly 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.

This information is provided by RNS

The company news service from the London Stock Exchange

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