DALLAS--(BUSINESS WIRE)--AT&T Inc. (NYSE:T) today reported fourth-quarter results highlighted by revenue growth, record wireless net adds, strong U-verse services sales and gains in IP-based and strategic business services revenues.
“We had another strong quarter and a solid year,” said Randall Stephenson, AT&T chairman and chief executive officer. “Our major growth platforms – mobile broadband, U-verse and strategic business services – continue to set the pace for the industry, and we’re still early in the growth cycle for all of these areas. Progress across these growth platforms, combined with continued progress on our cost-improvement initiatives, drive our positive outlook.
“2011 is the year when we’ll take mobile broadband to the next level,” Stephenson said. “We’re seeing 4G speeds today in areas of key markets, we’ve accelerated our LTE deployment plans, and we expect to add 20 4G devices to our lineup this year. AT&T has led the mobile broadband revolution, and we are well positioned to drive the industry’s next waves of innovation and growth.”
Fourth-Quarter Financial Results
For the quarter ended December 31, 2010, AT&T's consolidated revenues totaled $31.4 billion, up $653 million, or 2.1 percent, versus the year-earlier quarter, marking the company's fourth consecutive quarter with a year-over-year revenue increase.
Compared with results for the fourth quarter of 2009, operating expenses were $29.3 billion versus $26.1 billion; operating income was $2.1 billion, down from $4.6 billion; and AT&T's operating income margin was 6.7 percent, compared to 14.9 percent. Excluding fourth-quarter significant items, operating expenses were $25.8 billion versus $25.6 billion, operating income was $5.6 billion, compared to $5.1 billion, and operating income margin was 17.7 percent, compared to 16.6 percent.
Fourth-quarter 2010 net income attributable to AT&T totaled $1.1 billion, or $0.18 per diluted share. Excluding a one-time charge of $0.26 from a previously disclosed pension accounting change; a $0.09 charge for severance costs; and a $0.02 charge for asset impairments, adjusted earnings per share was $0.55. These results compare with reported net income attributable to AT&T of $2.7 billion, or $0.46 per diluted share, in the fourth quarter of 2009. Excluding significant items, earnings per share for the fourth quarter of 2009 was $0.50 per diluted share. Excluding significant items, fourth-quarter 2010 earnings per share was up 10.0 percent versus the fourth quarter of 2009.
Fourth-quarter 2010 cash from operating activities totaled $9.6 billion, and capital expenditures totaled $6.6 billion. Free cash flow — cash from operating activities minus capital expenditures — totaled $3.1 billion.
Full-Year Results, Outlook
For the full year 2010, compared with 2009 results, AT&T's consolidated revenues totaled $124.3 billion versus $122.5 billion; operating expenses were $104.7 billion, compared with $101.5 billion; net income attributable to AT&T was $19.9 billion versus $12.1 billion; and earnings per diluted share was $3.35 compared with $2.05. Earnings per share, excluding significant items, totaled $2.29, compared with $2.07, an increase of 10.6 percent for the year.
Compared with 2009 results, AT&T's full-year cash from operating activities totaled $35.0 billion, up from $34.4 billion. Capital expenditures, including capitalized interest, totaled $20.3 billion versus $17.3 billion, including a more than 50 percent increase in wireless-related capital investment versus the year earlier, as AT&T aggressively deployed next-generation wireless broadband networks; and free cash flow totaled $14.7 billion, compared with $17.1 billion.
In 2011, AT&T expects consolidated revenue growth in conjunction with an expansion in consolidated, wireline and wireless operating margins, including wireless service margins. Achieving these targets will lead to expected mid-single digit or better earnings per share growth versus 2010 earnings, excluding changes in capitalized interest. (In 2011, AT&T will no longer capitalize interest expense attributable to the company's LTE-related spectrum purchases. The impact of the change would have reduced earnings per share by $0.07 in 2010. Therefore, projected earnings growth is based on a 2010 earnings per share number of $2.22.)
AT&T also expects modest improvement in free cash flow, with capital expenditures in the low-to-mid $19 billion range, as increases in wireless spending will be offset by lower wireline capital expenditures and the elimination of capitalized interest in LTE spectrum.
Wireless Operational Highlights
Led by record subscriber additions, AT&T delivered continued strong growth in its wireless business in the fourth quarter, including wireless service revenue gains. The fourth quarter was also the first quarter in the company’s history in which wireless revenues exceeded wireline revenues. Highlights included:
Best-Ever Subscriber Gain. AT&T posted a net gain in total wireless subscribers of 2.8 million, to reach 95.5 million in service, the best net gain in the company’s history. Full-year wireless net adds totaled 8.9 million (adjusted for mergers and acquisitions), the company’s best-ever annual total. Fourth-quarter net add growth reflects rapid adoption of smartphones, increases in prepaid subscribers, strength in the reseller channel and a record quarter in connected devices such as eReaders, security systems, fleet management and a host of other products. AT&T also had a another strong tablet quarter, a new growth area for the company. It added 442,000 iPad- and Android-based tablets to its network, with more than 90 percent of these booked to the prepaid category.
Retail net adds for the quarter include postpaid net adds of 400,000 and prepaid net adds of 307,000. Connected device net adds were 1.5 million, and reseller net adds were 595,000.
Churn at Record Fourth-Quarter Levels. Postpaid churn was 1.15 percent, matching last year’s best-ever fourth-quarter record. Total churn was a record-low fourth-quarter level of 1.32 percent versus 1.42 percent in the fourth quarter of 2009.
Continued Strength in Integrated Device Sales. AT&T continued to grow its base of integrated device subscribers. More than 7.4 million postpaid integrated devices were sold in the fourth quarter, including the second-largest quarterly number of upgrades in the company’s history. Integrated device sales included 4.1 million iPhone activations. More than 80 percent of postpaid sales were integrated devices. (Integrated devices are handsets with QWERTY or virtual keyboards in addition to voice functionality and are a key driver of wireless data usage.)
At the end of the quarter, 61.0 percent of AT&T's 68.0 million postpaid subscribers had integrated devices, up from 46.8 percent a year earlier. The average ARPU for integrated devices on AT&T's network is 1.7 times that of the company's non-integrated device base. More than 80 percent of integrated device subscribers are on FamilyTalk and/or business discount plans. Churn levels for these subscribers are significantly lower than for other postpaid subscribers.
Continued Strong Wireless Revenue Growth. Wireless service revenues increased 9.6 percent, to $13.8 billion, in the fourth quarter. Total wireless revenues, which include equipment sales, were up 9.9 percent year over year to $15.2 billion.
Robust Growth in Wireless Data Revenues. Wireless data revenues — driven by messaging, Internet access, access to applications and related services — increased $1.1 billion, or 27.4 percent, from the year-earlier quarter to $4.9 billion. AT&T postpaid wireless subscribers on monthly data plans increased by 20.4 percent over the past year. Versus the year-earlier quarter, total text messages carried on the AT&T network increased by nearly 29 percent to 173.1 billion, and multimedia messages increased by 75.0 percent to 3.9 billion.
Further Postpaid ARPU Growth. Driven by strong data growth, postpaid subscriber ARPU increased 2.2 percent versus the year-earlier quarter to $62.88. This marked the eighth consecutive quarter AT&T has posted a year-over-year increase in postpaid ARPU. Postpaid data ARPU reached $22.64, up 17.8 percent versus the year-earlier quarter.
Wireless Margins. Fourth-quarter wireless margins reflected increased operating costs associated with strong integrated device activations and high customer upgrade levels, offset in part by improved operating efficiencies and further revenue growth from the company’s base of high-quality integrated device subscribers. AT&T’s fourth-quarter wireless operating income margin was 22.9 percent versus 25.9 percent in the year-earlier quarter, and AT&T’s wireless OIBDA service margin was 37.6 percent, compared with 40.7 percent in the fourth quarter of 2009 and flat sequentially. (OIBDA service margin is operating income before depreciation and amortization, divided by total service revenues.) Fourth-quarter wireless operating expenses totaled $11.7 billion, up 14.3 percent versus the year-earlier quarter, and wireless operating income was $3.5 billion, down 2.8 percent year over year.
Wireline Operational Highlights
AT&T's fourth-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. Driven by strength in IP data services, revenue from residential customers totaled $5.3 billion in the fourth quarter, up 0.7 percent year over year, their second consecutive year-over-year increase.
Continued U-verse Service Gains Driving Consumer Growth. AT&T U-verse TV had its best quarter of the year, adding 246,000 subscribers to reach nearly 3 million in service. In the fourth quarter, the AT&T U-verse High Speed Internet attach rate continued to run above 90 percent, and 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 more than $160.
AT&T's U-verse deployment now reaches more than 27 million living units. Companywide penetration of eligible living units is 14.2 percent, and across areas marketed to for 30 months or more, overall penetration is more than 22 percent. AT&T's total video subscribers, which combine the company's U-verse and bundled satellite customers, reached 4.9 million at the end of the quarter, representing 19.7 percent of households served.
Improved Wireline Broadband Growth. Driven by strength in AT&T U-verse High Speed Internet service and standalone broadband, AT&T posted a 210,000 net gain in wireline broadband connections. About two-thirds of consumers have a broadband plan of 3 Mbps or higher.
U-verse Revenues Up 73.4 Percent. Increased AT&T U-verse penetration drove 28.5 percent year-over-year growth in IP revenues from residential customers (broadband, U-verse TV and U-verse Voice). U-verse continues to drive a transformation in AT&T’s consumer area, reflected by the fact that IP revenues now represent 45.0 percent of AT&T's consumer wireline revenues, up from 35.3 percent in the year-earlier quarter and up from 25.6 percent in the fourth quarter of 2008. In the fourth quarter, AT&T U-verse revenues were $1.3 billion, 73.4 percent higher than in the fourth quarter of 2009.
Further Growth in Revenues Per Household. Driven by AT&T U-verse services, wireline revenues per household served increased 7.5 percent versus the year-earlier fourth quarter and were up 0.4 percent sequentially. This marked AT&T’s 12th consecutive quarter with year-over-year growth in wireline consumer revenues per household.
Consumer Connection Trends. In the fourth 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 and VoIP (Voice over Internet Protocol) connections. AT&T U-verse Voice connections increased by 186,000 in the quarter and 726,000 over the past four quarters. Total consumer revenue connections at the end of the fourth quarter were 43.4 million, compared with 45.3 million at the end of the fourth quarter of 2009 and 43.7 million at the end of the third quarter of 2010.
17.1 Percent Growth in Strategic Business Services Revenues. Revenues from new-generation capabilities that lead AT&T's most advanced business solutions — including Ethernet, VPNs, hosting, IP conferencing and application services — grew 17.1 percent versus the year-earlier quarter, their strongest growth during the year, and were up 5.5 percent from the third quarter of 2010, continuing AT&T’s strong trends in this category. Total business revenues were $9.4 billion, a decline of 4.5 percent versus the year-earlier quarter, reflecting economic weakness in voice and legacy data products, and the third-quarter sale of the company’s Japan assets. Business service revenues, which exclude CPE, declined 4.3 percent year over year and decreased slightly sequentially, down 1.2 percent.
Improved Growth in Business IP Revenues. Total business IP data revenues grew 9.0 percent versus the year-earlier fourth quarter, led by growth in VPN revenues. Global Enterprise Solutions IP data revenues grew 11.0 percent. 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. This generated total business data revenue growth of 1.1 percent, the largest growth in this category in four quarters.
Improved Wireline Margin Trends. AT&T’s fourth-quarter wireline operating income margin was 13.0 percent, compared with 12.3 percent in the year-earlier quarter and 13.0 percent in the third quarter of 2010. Fourth-quarter total wireline revenues were $15.1 billion, down 3.2 percent versus the year-earlier quarter. Fourth-quarter wireline operating expenses were $13.1 billion, down 3.9 percent versus the fourth quarter of 2009 and down 1.1 percent sequentially. Wireline operating income totaled $2.0 billion, compared to $1.9 billion in the fourth quarter of 2009 and $2.0 billion in the third quarter of 2010.
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® 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. In 2010, AT&T again ranked among the 50 Most Admired Companies by FORTUNE® magazine.
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.
*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.
© 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.
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 Web site at www.att.com/investor.relations. Accompanying financial statements follow.
NOTE: OIBDA is defined as operating income (loss) before depreciation and amortization. OIBDA differs from Segment Operating Income (loss), as calculated in accordance with generally accepted accounting principles (GAAP), in that it excludes depreciation and amortization. OIBDA 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. OIBDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with GAAP. Our calculation of OIBDA, 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 | Twelve Months Ended | ||||||||||||||||||||||||||
| 12/31/2010 | 12/31/2009 | % Chg | 12/31/2010 | 12/31/2009 | % Chg | |||||||||||||||||||||||
| Operating Revenues | ||||||||||||||||||||||||||||
| Wireless service | $ | 13,799 | $ | 12,585 | 9.6 | % | $ | 53,510 | $ | 48,563 | 10.2 | % | ||||||||||||||||
| Voice | 6,644 | 7,623 | -12.8 | % | 28,315 | 32,324 | -12.4 | % | ||||||||||||||||||||
| Data | 7,072 | 6,508 | 8.7 | % | 27,479 | 25,561 | 7.5 | % | ||||||||||||||||||||
| Directory | 926 | 1,102 | -16.0 | % | 3,935 | 4,724 | -16.7 | % | ||||||||||||||||||||
| Other | 2,920 | 2,890 | 1.0 | % | 11,041 | 11,341 | -2.6 | % | ||||||||||||||||||||
| Total Operating Revenues | 31,361 | 30,708 | 2.1 | % | 124,280 | 122,513 | 1.4 | % | ||||||||||||||||||||
| Operating Expenses | ||||||||||||||||||||||||||||
|
Cost of services and sales (exclusive of depreciation and amortization shown separately below) |
13,897 | 12,973 | 7.1 | % | 52,263 | 50,571 | 3.3 | % | ||||||||||||||||||||
| Selling, general and administrative | 10,469 | 8,205 | 27.6 | % | 33,065 | 31,427 | 5.2 | % | ||||||||||||||||||||
| Depreciation and amortization | 4,907 | 4,966 | -1.2 | % | 19,379 | 19,515 | -0.7 | % | ||||||||||||||||||||
| Total Operating Expenses | 29,273 | 26,144 | 12.0 | % | 104,707 | 101,513 | 3.1 | % | ||||||||||||||||||||
| Operating Income | 2,088 | 4,564 | -54.3 | % | 19,573 | 21,000 | -6.8 | % | ||||||||||||||||||||
| Interest Expense | 746 | 795 | -6.2 | % | 2,994 | 3,368 | -11.1 | % | ||||||||||||||||||||
| Equity in Net Income of Affiliates | 133 | 185 | -28.1 | % | 762 | 734 | 3.8 | % | ||||||||||||||||||||
| Other Income (Expense) - Net | 72 | 107 | -32.7 | % | 897 | 152 | - | |||||||||||||||||||||
| Income from Continuing Operations Before Income Taxes | 1,547 | 4,061 | -61.9 | % | 18,238 | 18,518 | -1.5 | % | ||||||||||||||||||||
| Income Tax (Benefit) Expense | 388 | 1,271 | -69.5 | % | (1,162 | ) | 6,091 | - | ||||||||||||||||||||
| Income from Continuing Operations | 1,159 | 2,790 | -58.5 | % | 19,400 | 12,427 | 56.1 | % | ||||||||||||||||||||
| Income from Discontinued Operations, net of tax | 2 | 14 | -85.7 | % | 779 | 20 | - | |||||||||||||||||||||
| Net Income | 1,161 | 2,804 | -58.6 | % | 20,179 | 12,447 | 62.1 | % | ||||||||||||||||||||
| Less: Net Income Attributable to Noncontrolling Interest | (72 | ) | (74 | ) | 2.7 | % | (315 | ) | (309 | ) | -1.9 | % | ||||||||||||||||
| Net Income Attributable to AT&T | $ | 1,089 | $ | 2,730 | -60.1 | % | $ | 19,864 | $ | 12,138 | 63.7 | % | ||||||||||||||||
|
Basic Earnings Per Share from Continuing Operations Attributable to AT&T |
$ | 0.18 | $ | 0.46 | -60.9 | % | $ | 3.23 | $ | 2.06 | 56.8 | % | ||||||||||||||||
|
Basic Earnings Per Share from Discontinued Operations Attributable to AT&T |
- | - | - | 0.13 | - | - | ||||||||||||||||||||||
| Basic Earnings Per Share Attributable to AT&T | $ | 0.18 | $ | 0.46 | -60.9 | % | $ | 3.36 | $ | 2.06 | 63.1 | % | ||||||||||||||||
|
Weighted Average Common Shares Outstanding (000,000) |
5,915 | 5,901 | 0.2 | % | 5,913 | 5,900 | 0.2 | % | ||||||||||||||||||||
|
Diluted Earnings Per Share from Continuing Operations Attributable to AT&T |
$ | 0.18 | $ | 0.46 | -60.9 | % | $ | 3.22 | $ | 2.05 | 57.1 | % | ||||||||||||||||
|
Diluted Earnings Per Share from Discontinued Operations Attributable to AT&T |
- | - | - | 0.13 | - | - | ||||||||||||||||||||||
| Diluted Earnings Per Share Attributable to AT&T | $ | 0.18 | $ | 0.46 | -60.9 | % | $ | 3.35 | $ | 2.05 | 63.4 | % | ||||||||||||||||
|
Weighted Average Common Shares Outstanding with Dilution (000,000) |
5,941 | 5,927 | 0.2 | % | 5,938 | 5,924 | 0.2 | % | ||||||||||||||||||||
| Financial Data | ||||||||||||||||||||||||||||
| AT&T Inc. | ||||||||||||||||||||||||||||
| Statements of Segment Income | ||||||||||||||||||||||||||||
| Dollars in millions | ||||||||||||||||||||||||||||
| Unaudited | ||||||||||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
| Wireless | 12/31/2010 | 12/31/2009 | % Chg | 12/31/2010 | 12/31/2009 | % Chg | ||||||||||||||||||||||
| Segment Operating Revenues | ||||||||||||||||||||||||||||
| Service | $ | 13,799 | $ | 12,585 | 9.6 | % | $ | 53,510 | $ | 48,563 | 10.2 | % | ||||||||||||||||
| Equipment | 1,382 | 1,232 | 12.2 | % | 4,990 | 4,941 | 1.0 | % | ||||||||||||||||||||
| Total Segment Operating Revenues | 15,181 | 13,817 | 9.9 | % | 58,500 | 53,504 | 9.3 | % | ||||||||||||||||||||
| Segment Operating Expenses | ||||||||||||||||||||||||||||
| Operations and support | 9,988 | 8,695 | 14.9 | % | 36,746 | 33,631 | 9.3 | % | ||||||||||||||||||||
| Depreciation and amortization | 1,721 | 1,550 | 11.0 | % | 6,497 | 6,043 | 7.5 | % | ||||||||||||||||||||
| Total Segment Operating Expenses | 11,709 | 10,245 | 14.3 | % | 43,243 | 39,674 | 9.0 | % | ||||||||||||||||||||
| Segment Operating Income | 3,472 | 3,572 | -2.8 | % | 15,257 | 13,830 | 10.3 | % | ||||||||||||||||||||
| Equity in Net Income (Loss) of Affiliates | (5 | ) | 9 | - | 9 | 9 | - | |||||||||||||||||||||
| Segment Income | $ | 3,467 | $ | 3,581 | -3.2 | % | $ | 15,266 | $ | 13,839 | 10.3 | % | ||||||||||||||||
| Segment Operating Income Margin | 22.9 | % | 25.9 | % | 26.1 | % | 25.8 | % | ||||||||||||||||||||
| Wireline | ||||||||||||||||||||||||||||
| Segment Operating Revenues | ||||||||||||||||||||||||||||
| Voice | $ | 6,644 | $ | 7,623 | -12.8 | % | $ | 28,315 | $ | 32,324 | -12.4 | % | ||||||||||||||||
| Data | 7,072 | 6,508 | 8.7 | % | 27,479 | 25,561 | 7.5 | % | ||||||||||||||||||||
| Other | 1,394 | 1,483 | -6.0 | % | 5,408 | 5,629 | -3.9 | % | ||||||||||||||||||||
| Total Segment Operating Revenues | 15,110 | 15,614 | -3.2 | % | 61,202 | 63,514 | -3.6 | % | ||||||||||||||||||||
| Segment Operating Expenses | ||||||||||||||||||||||||||||
| Operations and support | 10,055 | 10,470 | -4.0 | % | 41,008 | 42,352 | -3.2 | % | ||||||||||||||||||||
| Depreciation and amortization | 3,092 | 3,217 | -3.9 | % | 12,371 | 12,743 | -2.9 | % | ||||||||||||||||||||
| Total Segment Operating Expenses | 13,147 | 13,687 | -3.9 | % | 53,379 | 55,095 | -3.1 | % | ||||||||||||||||||||
| Segment Operating Income | 1,963 | 1,927 | 1.9 | % | 7,823 | 8,419 | -7.1 | % | ||||||||||||||||||||
| Equity in Net Income of Affiliates | 4 | - | - | 11 | 17 | -35.3 | % | |||||||||||||||||||||
| Segment Income | $ | 1,967 | $ | 1,927 | 2.1 | % | $ | 7,834 | $ | 8,436 | -7.1 | % | ||||||||||||||||
| Segment Operating Income Margin | 13.0 | % | 12.3 | % | 12.8 | % | 13.3 | % | ||||||||||||||||||||
| Advertising Solutions | ||||||||||||||||||||||||||||
| Segment Operating Revenues | $ | 926 | $ | 1,102 | -16.0 | % | $ | 3,935 | $ | 4,724 | -16.7 | % | ||||||||||||||||
| Segment Operating Expenses | ||||||||||||||||||||||||||||
| Operations and support | 626 | 650 | -3.7 | % | 2,583 | 2,743 | -5.8 | % | ||||||||||||||||||||
| Depreciation and amortization | 104 | 150 | -30.7 | % | 497 | 650 | -23.5 | % | ||||||||||||||||||||
| Total Segment Operating Expenses | 730 | 800 | -8.8 | % | 3,080 | 3,393 | -9.2 | % | ||||||||||||||||||||
| Segment Income | $ | 196 | $ | 302 | -35.1 | % | $ | 855 | $ | 1,331 | -35.8 | % | ||||||||||||||||
| Segment Income Margin | 21.2 | % | 27.4 | % | 21.7 | % | 28.2 | % | ||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||
| Segment Operating Revenues | $ | 144 | $ | 175 | -17.7 | % | $ | 643 | $ | 771 | -16.6 | % | ||||||||||||||||
| Segment Operating Expenses | 1,166 | 1,197 | -2.6 | % | 2,484 | 3,136 | -20.8 | % | ||||||||||||||||||||
| Segment Operating Income (Loss) | (1,022 | ) | (1,022 | ) | - | (1,841 | ) | (2,365 | ) | 22.2 | % | |||||||||||||||||
| Equity in Net Income of Affiliates | 134 | 176 | -23.9 | % | 742 | 708 | 4.8 | % | ||||||||||||||||||||
| Segment Income (Loss) from Continuing Operations | $ | (888 | ) | $ | (846 | ) | -5.0 | % | $ | (1,099 | ) | $ | (1,657 | ) | 33.7 | % | ||||||||||||
| Financial Data | ||||||||||
| AT&T Inc. | ||||||||||
| Consolidated Balance Sheets | ||||||||||
| Dollars in millions except per share amounts | ||||||||||
| 12/31/10 | 12/31/09 | |||||||||
| Unaudited | ||||||||||
| Assets | ||||||||||
| Current Assets | ||||||||||
| Cash and cash equivalents | $ | 1,437 | $ | 3,741 | ||||||
|
Accounts receivable - net of allowances for doubtful accounts of $957 and $1,202 |
13,610 | 14,845 | ||||||||
| Prepaid expenses | 1,458 | 1,562 | ||||||||
| Deferred income taxes | 1,170 | 1,247 | ||||||||
| Other current assets | 2,276 | 3,792 | ||||||||
| Total current assets | 19,951 | 25,187 | ||||||||
| Property, Plant and Equipment - Net | 103,963 | 100,286 | ||||||||
| Goodwill | 73,601 | 72,782 | ||||||||
| Licenses | 50,372 | 48,741 | ||||||||
| Customer Lists and Relationships - Net | 4,708 | 7,393 | ||||||||
| Other Intangible Assets - Net | 5,440 | 5,494 | ||||||||
| Investments in Equity Affiliates | 4,515 | 2,921 | ||||||||
| Other Assets | 6,704 | 6,275 | ||||||||
| Total Assets | $ | 269,254 | $ | 269,079 | ||||||
| Liabilities and Stockholders' Equity | ||||||||||
| Current Liabilities | ||||||||||
| Debt maturing within one year | $ | 7,196 | $ | 7,361 | ||||||
| Accounts payable and accrued liabilities | 20,055 | 21,260 | ||||||||
| Advanced billing and customer deposits | 4,086 | 4,170 | ||||||||
| Accrued taxes | 72 | 1,681 | ||||||||
| Dividends payable | 2,542 | 2,479 | ||||||||
| Total current liabilities | 33,951 | 36,951 | ||||||||
| Long-Term Debt | 58,971 | 64,720 | ||||||||
| Deferred Credits and Other Noncurrent Liabilities | ||||||||||
| Deferred income taxes | 22,361 | 23,870 | ||||||||
| Postemployment benefit obligation | 28,803 | 27,847 | ||||||||
| Other noncurrent liabilities | 12,743 | 13,226 | ||||||||
| Total deferred credits and other noncurrent liabilities | 63,907 | 64,943 | ||||||||
| Stockholders' Equity | ||||||||||
| Common stock | 6,495 | 6,495 | ||||||||
| Additional paid-in capital | 91,731 | 91,707 | ||||||||
| Retained earnings | 32,268 | 22,419 | ||||||||
| Treasury stock | (21,083 | ) | (21,260 | ) | ||||||
| Accumulated other comprehensive income | 2,711 | 2,679 | ||||||||
| Noncontrolling interest | 303 | 425 | ||||||||
| Total stockholders' equity | 112,425 | 102,465 | ||||||||
| Total Liabilities and Stockholders' Equity | $ | 269,254 | $ | 269,079 | ||||||
| Financial Data | |||||||||||||||
| AT&T Inc. | |||||||||||||||
| Consolidated Statements of Cash Flows | |||||||||||||||
| Dollars in millions, increase (decrease) in cash and cash equivalents | |||||||||||||||
| Unaudited | |||||||||||||||
| 2010 | 2009 | 2008 | |||||||||||||
| Operating Activities | |||||||||||||||
| Net income (loss) | $ | 20,179 | $ | 12,447 | $ | (2,364 | ) | ||||||||
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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| Depreciation and amortization | 19,379 | 19,515 | 19,673 | ||||||||||||
| Undistributed earnings from investments in equity affiliates | (603 | ) | (419 | ) | (654 | ) | |||||||||
| Provision for uncollectible accounts | 1,334 | 1,762 | 1,795 | ||||||||||||
|
Deferred income tax expense (benefit) and noncurrent unrecognized tax benefits |
(3,280 | ) | 1,885 | (4,202 | ) | ||||||||||
| Net (gain) loss from impairment and sale of investments | (802 | ) | - | 517 | |||||||||||
| Remeasurement of pension and postretirement benefits | 2,521 | 215 | 25,150 | ||||||||||||
| (Income) Loss from discontinued operations | (779 | ) | (20 | ) | 2 | ||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||
| Accounts receivable | (99 | ) | (490 | ) | (1,475 | ) | |||||||||
| Other current assets | 717 | (617 | ) | 1,854 | |||||||||||
| Accounts payable and accrued liabilities | (2,414 | ) | 943 | (4,456 | ) | ||||||||||
| Net income attributable to noncontrolling interest | (315 | ) | (309 | ) | (261 | ) | |||||||||
| Other - net | (845 | ) | (507 | ) | (1,969 | ) | |||||||||
| Total adjustments | 14,814 | 21,958 | 35,974 | ||||||||||||
| Net Cash Provided by Operating Activities | 34,993 | 34,405 | 33,610 | ||||||||||||
| Investing Activities | |||||||||||||||
| Construction and capital expenditures: | |||||||||||||||
| Capital expenditures | (19,530 | ) | (16,554 | ) | (19,631 | ) | |||||||||
| Interest during construction | (772 | ) | (740 | ) | (659 | ) | |||||||||
| Acquisitions, net of cash acquired | (2,906 | ) | (983 | ) | (10,972 | ) | |||||||||
| Dispositions | 1,830 | 287 | 1,615 | ||||||||||||
| (Purchases) and sales of securities, net | (100 | ) | 55 | 68 | |||||||||||
| Sale of other investments | - | - | 436 | ||||||||||||
| Other | 29 | 52 | 45 | ||||||||||||
| Net Cash Used in Investing Activities | (21,449 | ) | (17,883 | ) | (29,098 | ) | |||||||||
| Financing Activities | |||||||||||||||
|
Net change in short-term borrowings with original maturities of three months or less |
1,592 | (3,910 | ) | 2,017 | |||||||||||
| Issuance of long-term debt | 2,235 | 8,161 | 12,416 | ||||||||||||
| Repayment of long-term debt | (9,294 | ) | (8,652 | ) | (4,009 | ) | |||||||||
| Purchase of treasury shares | - | - | (6,077 | ) | |||||||||||
| Issuance of treasury shares | 50 | 28 | 319 | ||||||||||||
| Dividends paid | (9,916 | ) | (9,670 | ) | (9,507 | ) | |||||||||
| Share-based payment excess tax benefit | - | - | 15 | ||||||||||||
| Other | (515 | ) | (465 | ) | 136 | ||||||||||
| Net Cash Used in Financing Activities | (15,848 | ) | (14,508 | ) | (4,690 | ) | |||||||||
| Net increase (decrease) in cash and cash equivalents | (2,304 | ) | 2,014 | (178 | ) | ||||||||||
| Cash and cash equivalents beginning of year | 3,741 | 1,727 | 1,905 | ||||||||||||
| Cash and Cash Equivalents End of Year | $ | 1,437 | $ | 3,741 | $ | 1,727 | |||||||||
| Financial Data | ||||||||||||||||||||||||||||||
| AT&T Inc. | ||||||||||||||||||||||||||||||
| Supplementary Operating and Financial Data | ||||||||||||||||||||||||||||||
| Dollars in millions except per share amounts | ||||||||||||||||||||||||||||||
| Unaudited | Three Months Ended | Twelve Months Ended | ||||||||||||||||||||||||||||
| 12/31/2010 | 12/31/2009 | % Chg | 12/31/2010 | 12/31/2009 | % Chg | |||||||||||||||||||||||||
| Wireless | ||||||||||||||||||||||||||||||
| Wireless Customers (000) | 95,536 | 85,120 | 12.2 | % | ||||||||||||||||||||||||||
| Net Customer Additions (000) | 2,803 | 2,661 | 5.3 | % | 8,853 | 7,278 | 21.6 | % | ||||||||||||||||||||||
| M&A Activity, Partitioned Customers and Other Adjs. (000) | (28 | ) | 863 | 1,563 | 833 | |||||||||||||||||||||||||
| Total Churn7 | 1.32 | % | 1.42 | % | -10 BP | 1.31 | % | 1.47 | % | -16 BP | ||||||||||||||||||||
| Postpaid Customers (000)7 | 68,041 | 64,627 | 5.3 | % | ||||||||||||||||||||||||||
| Net Postpaid Customer Additions (000)7 | 400 | 841 | -52.4 | % | 2,153 | 4,199 | -48.7 | % | ||||||||||||||||||||||
| Postpaid Churn7 | 1.15 | % | 1.15 | % | 0 BP | 1.09 | % | 1.13 | % | -4 BP | ||||||||||||||||||||
| Licensed POPs (000,000) | 308 | 306 | 0.7 | % | ||||||||||||||||||||||||||
| Prepaid Customers (including tablets) (000)7 | 6,524 | 5,350 | 21.9 | % | ||||||||||||||||||||||||||
| Net Prepaid Customer Additions (including tablets) (000)7 | 307 | (58 | ) | 952 | (801 | ) | ||||||||||||||||||||||||
| Connected Devices Customers (000)7 | 9,326 | 4,704 | 98.3 | % | ||||||||||||||||||||||||||
| Net Connected Devices Customer Additions (000)7 | 1,501 | 1,394 | 7.7 | % | 4,608 | 2,077 | ||||||||||||||||||||||||
| In-Region Wireline 1 | ||||||||||||||||||||||||||||||
| Total Consumer Revenue Connections (000) | ||||||||||||||||||||||||||||||
| Retail Consumer Voice Connections 2 | 24,195 | 27,332 | -11.5 | % | ||||||||||||||||||||||||||
| Consumer Wireline Broadband Connections 3 | 14,320 | 13,717 | 4.4 | % | ||||||||||||||||||||||||||
| Video Connections: 4 | ||||||||||||||||||||||||||||||
| Satellite Connections | 1,930 | 2,174 | -11.2 | % | ||||||||||||||||||||||||||
| U-verse Video Connections | 2,985 | 2,064 | 44.6 | % | ||||||||||||||||||||||||||
| Total Consumer Revenue Connections (000) | 43,430 | 45,287 | -4.1 | % | ||||||||||||||||||||||||||
| Net Consumer Revenue Connection Changes (000) | (303 | ) | (372 | ) | 18.5 | % | (1,857 | ) | (1,756 | ) | -5.8 | % | ||||||||||||||||||
| Broadband and Video | ||||||||||||||||||||||||||||||
| Total Broadband Connections (000) 5 | 17,755 | 17,254 | 2.9 | % | ||||||||||||||||||||||||||
| Net Broadband Connection Changes (000) 5 | 193 | 171 | 12.9 | % | 501 | 989 | -49.3 | % | ||||||||||||||||||||||
| Total Video Connections (000) 4 | 4,917 | 4,239 | 16.0 | % | ||||||||||||||||||||||||||
|
Net Video Connection Changes (000) 4 |
182 | 227 | -19.8 | % | 678 | 1,004 | -32.5 | % | ||||||||||||||||||||||
| AT&T Inc. | ||||||||||||||||||||||||||||||
| Construction and capital expenditures | ||||||||||||||||||||||||||||||
| Capital expenditures | $ | 6,360 | $ | 5,520 | 15.2 | % | $ | 19,530 | $ | 16,554 | 18.0 | % | ||||||||||||||||||
| Interest during construction | $ | 195 | $ | 187 | 4.3 | % | $ | 772 | $ | 740 | 4.3 | % | ||||||||||||||||||
| Dividends Declared per Share | $ | 0.4300 | $ | 0.4200 | 2.4 | % | $ | 1.6900 | $ | 1.6500 | 2.4 | % | ||||||||||||||||||
| End of Period Common Shares Outstanding (000,000) | 5,911 | 5,902 | 0.2 | % | ||||||||||||||||||||||||||
| Debt Ratio 6 | 37.0 | % | 41.3 | % | -430 BP | |||||||||||||||||||||||||
| Total Employees | 266,590 | 282,720 | -5.7 | % | ||||||||||||||||||||||||||
|
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 1,680 as of December 31, 2010. | |||||||||||||||||||||||||||||
|
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 broadband connections include DSL lines, U-verse High Speed Internet access, satellite broadband and 3G LaptopConnect cards. |
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|
6 |
Total long-term debt plus debt maturing within one year divided by total debt plus total stockholders' equity. | |||||||||||||||||||||||||||||
|
7 |
Prior year amounts restated to conform to current period reporting methodology. | |||||||||||||||||||||||||||||
| Note: For the end of 4Q10, total switched access lines were 43,678, retail business switched access lines totaled 18,733, and wholesale and coin switched access lines totaled 2,430. These include 1,699 retail business and 95 wholesale lines that are used solely by AT&T or our subsidiaries. | ||||||||||||||||||||||||||||||
| Financial Data | |||||||||||||||||||||||||
| AT&T Inc. | |||||||||||||||||||||||||
| Non-GAAP Wireless Reconciliation | |||||||||||||||||||||||||
| Wireless Segment OIBDA | |||||||||||||||||||||||||
| Dollars in millions | |||||||||||||||||||||||||
| Unaudited | |||||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||||
| 12/31/2009 | 3/31/2010 | 6/30/2010 | 9/30/2010 | 12/31/2010 | |||||||||||||||||||||
| Segment Operating Revenues | |||||||||||||||||||||||||
| Service | $ | 12,585 | $ | 12,850 | $ | 13,186 | $ | 13,675 | $ | 13,799 | |||||||||||||||
| Equipment | 1,232 | 1,047 | 1,056 | 1,505 | 1,382 | ||||||||||||||||||||
| Total Segment Operating Revenues | 13,817 | 13,897 | 14,242 | 15,180 | 15,181 | ||||||||||||||||||||
| Segment Operating Expenses | |||||||||||||||||||||||||
| Operations and support | 8,695 | 8,173 | 8,553 | 10,032 | 9,988 | ||||||||||||||||||||
| Depreciation and amortization | 1,550 | 1,558 | 1,578 | 1,640 | 1,721 | ||||||||||||||||||||
| Total Segment Operating Expenses | 10,245 | 9,731 | 10,131 | 11,672 | 11,709 | ||||||||||||||||||||
| Segment Operating Income | 3,572 | 4,166 | 4,111 | 3,508 | 3,472 | ||||||||||||||||||||
| Plus: Depreciation and amortization | 1,550 | 1,558 | 1,578 | 1,640 | 1,721 | ||||||||||||||||||||
| OIBDA | 5,122 | 5,724 | 5,689 | 5,148 | 5,193 | ||||||||||||||||||||
| OIBDA as a % of Service Revenue | 40.7 | % | 44.5 | % | 43.1 | % | 37.6 | % | 37.6 | % | |||||||||||||||
|
OIBDA is defined as operating income (loss) before depreciation and amortization. EBITDA is defined as Earnings Before Interest, Taxes, Depreciation and Amortization. This term is often used as a substitute for OIBDA. OIBDA differs from segment operating income (loss), as calculated in accordance with generally accepted accounting principles (GAAP), in that it excludes depreciation and amortization. OIBDA 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. OIBDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with GAAP. Our calculation of OIBDA, as presented, may differ from similarly titled measures reported by other companies. |
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| Financial Data | ||||||||||||||||||||||||||||||
| AT&T Inc. | ||||||||||||||||||||||||||||||
| Non-GAAP Financial Reconciliation | ||||||||||||||||||||||||||||||
| Free Cash Flow | ||||||||||||||||||||||||||||||
| Dollars in Millions | ||||||||||||||||||||||||||||||
| Unaudited | ||||||||||||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||||||||||||
| 2009 | 2010 | 2009 | 2010 | |||||||||||||||||||||||||||
| Net cash provided by operating activities | $ | 8,962 | $ | 9,643 | $ | 34,405 | $ | 34,993 | ||||||||||||||||||||||
| Less: Construction and capital expenditures | (5,707 | ) | (6,555 | ) | (17,294 | ) | (20,302 | ) | ||||||||||||||||||||||
| Free Cash Flow | $ | 3,255 | $ | 3,088 | $ | 17,111 | $ | 14,691 | ||||||||||||||||||||||
|
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. |
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| Free Cash Flow After Dividends | ||||||||||||||||||||||||||||||
| Dollars in Millions | ||||||||||||||||||||||||||||||
| Unaudited | ||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||
| 9/30/2009 | 12/31/2009 | 3/31/2010 | 6/30/2010 | 9/30/2010 | 12/31/2010 | |||||||||||||||||||||||||
| Net cash provided by operating activities | $ | 9,671 | $ | 8,962 | $ | 7,237 | $ | 8,573 | $ | 9,540 | $ | 9,643 | ||||||||||||||||||
| Less: Construction and capital expenditures | (4,202 | ) | (5,707 | ) | (3,331 | ) | (4,904 | ) | (5,512 | ) | (6,555 | ) | ||||||||||||||||||
| Free Cash Flow | 5,469 | 3,255 | 3,906 | 3,669 | 4,028 | 3,088 | ||||||||||||||||||||||||
| Less: Dividends paid | (2,418 | ) | (2,418 | ) | (2,479 | ) | (2,481 | ) | (2,476 | ) | (2,480 | ) | ||||||||||||||||||
| Free Cash Flow After Dividends | $ | 3,051 | $ | 837 | $ | 1,427 | $ | 1,188 | $ | 1,552 | $ | 608 | ||||||||||||||||||
| Financial Data | |||||||||||||||||||||
| AT&T Inc. | |||||||||||||||||||||
| Non-GAAP Financial Reconciliation | |||||||||||||||||||||
| Annualized Net Debt-to-Adjusted EBITDA Ratio | |||||||||||||||||||||
| Dollars in millions | |||||||||||||||||||||
| Unaudited | |||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||
| 3/31/2010 | 6/30/2010 | 9/30/2010 | 12/31/2010 | 2010 | |||||||||||||||||
| Operating Revenues | $ | 30,530 | $ | 30,808 | $ | 31,581 | $ | 31,361 | $ | 124,280 | |||||||||||
| Operating Expenses | 24,559 | 24,725 | 26,150 | 29,273 | 104,707 | ||||||||||||||||
| Total Operating Income | 5,971 | 6,083 | 5,431 | 2,088 | 19,573 | ||||||||||||||||
| Add Back Depreciation and Amortization | 4,780 | 4,819 | 4,873 | 4,907 | 19,379 | ||||||||||||||||
| Consolidated Reported EBITDA | 10,751 | 10,902 | 10,304 | 6,995 | 38,952 | ||||||||||||||||
| Add Back Actuarial Loss | 2,521 | 2,521 | |||||||||||||||||||
| Consolidated Adjusted EBITDA* | 10,751 | 10,902 | 10,304 | 9,516 | 41,473 | ||||||||||||||||
| End-of-period current debt | 7,196 | ||||||||||||||||||||
| End-of-period long-term debt | 58,971 | ||||||||||||||||||||
| Total End-of-Period Debt | 66,167 | ||||||||||||||||||||
| (Premiums) Discounts on long-term debt | (185 | ) | |||||||||||||||||||
| Normalized Debt Balance | 65,982 | ||||||||||||||||||||
| Less Cash and Cash Equivalents | 1,437 | ||||||||||||||||||||
| Normalized Net Debt Balance | 64,545 | ||||||||||||||||||||
| Annualized Net Debt-to-Adjusted EBITDA Ratio | 1.56 | ||||||||||||||||||||
|
*Adjusted EBITDA excludes the impact of the 4Q10 actuarial loss in order to better represent AT&T's operational performance. |
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| Financial Data | ||||||||||||||||||||
| AT&T Inc. | ||||||||||||||||||||
| Non-GAAP Financial Reconciliation | ||||||||||||||||||||
| Adjusted Operating Income Margin | ||||||||||||||||||||
| Dollars in millions | ||||||||||||||||||||
| Unaudited | ||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| 12/31/09 | 12/31/10 | 12/31/09 | 12/31/10 | |||||||||||||||||
| Operating Revenues | $ | 30,708 | $ | 31,361 | $ | 122,513 | $ | 124,280 | ||||||||||||
| Operating Expenses | 26,144 | 29,273 | 101,513 | 104,707 | ||||||||||||||||
| Total Operating Income | 4,564 | 2,088 | 21,000 | 19,573 | ||||||||||||||||
| Add Back: | ||||||||||||||||||||
| Actuarial Loss | 215 | 2,521 | 215 | 2,521 | ||||||||||||||||
| Severance Costs | 330 | 769 | 519 | 769 | ||||||||||||||||
| Asset Impairments | - | 173 | - | 173 | ||||||||||||||||
| Adjusted Operating Income | 5,109 | 5,551 | 21,734 | 23,036 | ||||||||||||||||
|
Adjusted Operating Income Margin |
16.6 | % | 17.7 | % | 17.7 | % | 18.5 | % | ||||||||||||
|
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. |
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|
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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OIBDA DISCUSSION
OIBDA is defined as operating income (loss) before depreciation and amortization. OIBDA margin is calculated as OIBDA divided by service revenues. OIBDA differs from Segment Operating Income (Loss), as calculated in accordance with GAAP, in that it excludes depreciation and amortization. OIBDA 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. OIBDA 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 OIBDA, 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 OIBDA include the key revenue and expense drivers for which AT&T Mobility’s operating managers are responsible and upon which we evaluate their performance.
OIBDA 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. OIBDA excludes other, 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. OIBDA excludes interest expense and the provision for income taxes. Excluding these items eliminates the expenses associated with its capitalization and tax structures. Finally, OIBDA excludes depreciation and amortization, in order to eliminate the impact of capital investments.
We believe OIBDA as a percentage of service revenues to be a more relevant measure of AT&T Mobility’s operating margin than OIBDA 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. OIBDA and OIBDA 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 OIBDA 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. OIBDA and OIBDA 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.
ADJUSTING ITEMS DISCUSSION
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.