DALLAS--(BUSINESS WIRE)--AT&T Inc. (NYSE:T) today reported strong earnings per share and cash flows in the first-quarter driven by strong mobile data growth, solid postpaid net adds and continued strong gains in U-verse services.
“Our wireless network performance continues to be terrific,” said Randall Stephenson, AT&T chairman and CEO. “And that helped drive our best ever first quarter for smartphone sales, improved wireless churn and strong growth in mobile data revenues. We also posted record sales of our U-verse high-speed IP service. Across all of these areas, we’ve built a solid foundation for future growth in mobile Internet and IP broadband, which will only expand as we progress with Project VIP.”
First-Quarter Financial Results
For the quarter ended March 31, 2013, AT&T’s consolidated revenues totaled $31.4 billion, down 1.5 percent versus the year-earlier quarter and up 0.9 percent when excluding revenues from the divested Advertising Solutions business unit.
Compared with results for the first quarter of 2012, operating expenses were $25.4 billion versus $25.7 billion; operating income was $5.9 billion versus $6.1 billion; and operating income margin was 18.9 percent, compared to 19.2 percent.
First-quarter 2013 net income attributable to AT&T totaled $3.7 billion, or $0.67 per diluted share, up from $3.6 billion, or $0.60 per diluted share, in the year-earlier quarter. Adjusted for an income tax settlement of 3 cents and the sale of Advertising Solutions, earnings per share was $0.64 versus $0.59 in the year-ago quarter, an increase of 8.5 percent.
First-quarter 2013 cash from operating activities totaled $8.2 billion, and capital expenditures totaled $4.3 billion. Free cash flow — cash from operating activities minus capital expenditures — totaled $3.9 billion.
The company continues to expect capital expenditures for 2013 to be in the $21 billion range and now expects capital expenditures for 2014 and 2015 each to be in the $20 billion range with no reduction in the Project Velocity IP (VIP) broadband expansion. Previously, the company expected capital spending of $22 billion annually in 2014 and 2015. The company is achieving savings through greater integration efficiencies in Project VIP, accelerating LTE build in 2013 and other ongoing initiatives. As part of its Project VIP-related LTE deployment, the company currently covers nearly 200 million POPs with its award-winning LTE network and expects to reach nearly 90 percent of its planned 300 million POP LTE deployment by the end of 2013. AT&T’s 4G network now covers more than 292 million POPs, including LTE and HSPA+, all with expanded backhaul to support fast data speeds.
AT&T’s overall wireless network performance – call, text, data – ranked or tied for #1 in 14 markets of 23 surveyed year to date 2013 by RootMetrics. In the second half of 2012, RootMetrics ranked AT&T’s overall wireless network performance 1st or tied for 1st in more than 70 percent of the 47 markets RootMetrics surveyed where AT&T had deployed LTE. RootMetrics surveyed a total of 77 markets in the second half of 2012.
Share Repurchases
During the quarter, the AT&T board of directors approved a third 300 million share repurchase authorization. Since the beginning of 2012, the company has been buying back shares under two previous 300 million share repurchase authorizations. The first repurchase authorization was completed in the fourth quarter of 2012. During the first quarter, the company repurchased an additional 168 million shares for $5.9 billion under the second authorization. At the end of the quarter, about 61 million shares remained on the second authorization which is expected to be completed in the second quarter. The company expects to make future repurchases opportunistically, which will slow the pace of buybacks compared to recent activity.
WIRELESS OPERATIONAL HIGHLIGHTS
AT&T delivered solid revenue growth, record first-quarter smartphone sales and strong postpaid gains with low churn. Highlights included:
Wireless Revenues Continue Solid Growth. Total wireless revenues, which include equipment sales, were up 3.4 percent year over year to $16.7 billion. Wireless service revenues increased 3.4 percent in the first quarter, to $15.1 billion. Wireless data revenues increased 21.0 percent from the year-earlier quarter to $5.1 billion. First-quarter wireless operating expenses totaled $12.0 billion, up 3.2 percent versus the year-earlier quarter, and wireless operating income was $4.7 billion, up 4.1 percent year over year.
Tablets Drive Postpaid Gains. AT&T posted a net increase in total wireless subscribers of 291,000 in the first quarter. Subscriber additions for the quarter included postpaid net adds of 296,000. Postpaid net adds reflect 365,000 postpaid tablets added in the quarter. Connected device net adds were 431,000. Prepaid had a net loss of 184,000 subscribers primarily due to declines in session-based tablets and declines in GoPhone. Reseller had a net loss of 252,000 primarily due to our resellers’ rationalization of their low or no usage accounts.
Phone-Only Postpaid ARPU Increases 2 Percent. Postpaid traditional phone-only ARPU increased 2 percent versus the year-earlier quarter. Total postpaid subscriber ARPU, which includes high-margin but lower-ARPU tablets, increased 0.9 percent versus the year-earlier quarter. This marked the 17th consecutive quarter AT&T has posted a year-over-year increase in postpaid ARPU. Postpaid data ARPU increased 18.0 percent versus the year-earlier quarter.
Smartphone Base Continues to Expand. AT&T added 1.2 million postpaid smartphone subscribers in the first quarter. At the end of the quarter, 72 percent, or 48.3 million, of AT&T’s postpaid phone subscribers had smartphones, up from 61 percent, or 41.2 million, a year earlier. The company sold a first-quarter record 6.0 million smartphones. Smartphones represented 81 percent of postpaid device sales and 88 percent of postpaid phone sales in the quarter. AT&T’s ARPU for smartphones is about twice that of non-smartphone subscribers, and about 90 percent of postpaid subscribers are on FamilyTalk®, Mobile Share or business plans. Churn levels for these subscribers are significantly lower than for other postpaid subscribers. About 60 percent of AT&T’s postpaid smartphone customers now use a 4G-capable device, with more than half of those using LTE devices.
Almost 10 Million Postpaid Subscribers on Mobile Share Plans. The number of subscribers on usage-based data plans (tiered data and Mobile Share plans) continues to increase. Almost 70 percent, or 33.5 million, of postpaid smartphone subscribers are on usage-based data plans. This compares to 61 percent, or 25.1 million, a year ago and 38 percent two years ago. Three-quarters of customers on tiered data plans have chosen the higher-priced plans.
Almost 10 million connections, or about 14 percent of postpaid subscribers, are on Mobile Share plans. The number of Mobile Share accounts reached 3.3 million in the first quarter with an average of about three devices per account. Take rates on the higher-data plans continue to be much stronger than expected with more than a quarter of Mobile Share accounts choosing 10 gigabytes or higher. More than 15 percent of new Mobile Share subscribers came from unlimited plans in the quarter. Since the inception of Mobile Share, more than 1 million connections have come from unlimited plans.
Postpaid Churn Improves. Postpaid churn was 1.04 percent, down from 1.10 percent in the first quarter a year ago, and from 1.19 percent in the fourth quarter of 2012. Total churn also was down: 1.38 percent versus 1.47 percent in the first quarter of 2012 and 1.42 percent in the fourth quarter of 2012.
Wireless Margins Expand with Strong Smartphone Sales. First-quarter wireless margins grew, driven by improved operating efficiencies and further revenue gains from the company’s high-quality smartphone subscribers. AT&T’s first-quarter wireless operating income margin was 28.0 percent versus 27.8 percent in the year-earlier quarter. AT&T’s wireless EBITDA service margin was 43.2 percent, compared with 42.3 percent in the first quarter of 2012. (EBITDA service margin is operating income before depreciation and amortization, divided by total service revenues.)
WIRELINE OPERATIONAL HIGHLIGHTS
AT&T’s first-quarter wireline results were led by strong U-verse TV and high speed Internet gains, solid wireline consumer revenue growth and the best broadband gains in eight quarters. Highlights included:
Consumer Revenue Gains Help Offset Business Pressure. Total first-quarter wireline revenues were $14.7 billion, down 1.8 percent versus the year-earlier quarter and down 1.8 percent sequentially. First-quarter wireline operating expenses were $13.0 billion, down 1.4 percent versus the first quarter of 2012 and down 0.8 percent sequentially. AT&T’s wireline operating income totaled $1.6 billion, down 5.1 percent from the first quarter of 2012. Positive consumer revenue trends helped to partially offset declines in revenues from business customers. First-quarter wireline operating income margin was 11.1 percent, compared to 11.5 percent in the year-earlier quarter.
Best-Ever High Speed IP Broadband Growth. Total U-verse revenues grew 31.5 percent year over year and were up 5.0 percent versus the fourth quarter of 2012. Total U-verse subscribers (TV and high speed Internet) reached 8.7 million in the first quarter. U-verse TV added 232,000 subscribers, its best net gain in nine quarters, to reach 4.8 million in service. U-verse High Speed Internet delivered a best-ever net gain of 731,000 subscribers to reach a total of 8.4 million. Overall, the company added 124,000 wireline broadband subscribers, the best quarterly increase in eight quarters. Total broadband ARPU was up more than 9 percent year over year. Total U-verse High Speed Internet subscribers now represent more than half of all wireline broadband subscribers.
Consumer Revenues Continue Growth. Revenues from residential customers totaled $5.5 billion, an increase of 2.0 percent versus the first quarter a year ago. Continued strong growth in consumer IP data services in the first quarter more than offset lower revenues from voice and legacy products. U-verse continues to transform wireline consumer. U-verse revenues now represent 48 percent of wireline consumer revenues, up from 38 percent in the year-earlier quarter and 27 percent two years ago. Consumer U-verse revenues grew 30.8 percent year over year and were up 4.9 percent versus the fourth quarter of 2012. Increased AT&T U-verse penetration and a significant number of subscribers purchasing multiple services drove 15.9 percent year-over-year growth in IP revenues from residential customers (broadband, U-verse TV and U-verse Voice).
More than 56 percent of U-verse broadband subscribers have a plan delivering speeds up to 10 Mbps or higher — up from 50 percent in the year-ago quarter. More than 90 percent of new U-verse TV customers also signed up for U-verse High Speed Internet in the first quarter. About 70 percent of AT&T U-verse TV subscribers take three or four services from AT&T. ARPU for U-verse triple-play customers continues to be more than $170. U-verse TV penetration of customer locations continues to grow and was at 19.4 percent at the end of the first quarter.
Strategic Business Services Lead Wireline Business. Total business revenues were $8.9 billion, down 3.4 percent versus the year-earlier quarter, and business service revenues declined 3.5 percent year over year. Both reflected a slow economy and weak government and business spending. Overall, declines in legacy products were partially offset by continued double-digit growth in strategic business services. Revenues from these services, the next-generation capabilities that lead AT&T’s most advanced business solutions — including VPN, Ethernet, hosting and other advanced IP services — grew 10.8 percent versus the year-earlier quarter. These services represent a $7.9 billion annualized revenue stream.
AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc.
About AT&T
AT&T Inc. (NYSE:T) is a premier communications holding company and one of the most honored companies in the world. Its subsidiaries and affiliates – AT&T operating companies – are the providers of AT&T services in the United States and internationally. With a powerful array of network resources that includes the nation’s largest 4G network, AT&T is a leading provider of wireless, Wi-Fi, high speed Internet, voice and cloud-based services. A leader in mobile Internet, AT&T also offers the best wireless coverage worldwide of any U.S. carrier, offering the most wireless phones that work in the most countries. It also offers advanced TV services under the AT&T U-verse® and AT&T │DIRECTV brands. The company’s suite of IP-based business communications services is one of the most advanced in the world.
Additional information about AT&T Inc. and the products and services provided by AT&T subsidiaries and affiliates is available at http://www.att.com/aboutus or follow our news on Twitter at @ATT, on Facebook at http://www.facebook.com/att and YouTube at http://www.youtube.com/att.
© 2013 AT&T Intellectual Property. All rights reserved. 4G not available everywhere. AT&T, the AT&T logo and all other marks contained herein are trademarks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners.
Cautionary Language Concerning Forward-Looking Statements
Information set forth in this news release contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results may differ materially. A discussion of factors that may affect future results is contained in AT&T’s filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update or revise statements contained in this news release based on new information or otherwise. This news release may contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available on the company’s website at www.att.com/investor.relations. Accompanying financial statements follow.
NOTE: Traditional phones include those devices that are mobile in nature and voice calls can be made and do not include computing devices or mobile home phones.
NOTE: EBITDA is defined as operating income before depreciation and amortization. EBITDA differs from Segment Operating Income (loss), as calculated in accordance with U.S. generally accepted accounting principles (GAAP), in that it excludes depreciation and amortization. EBITDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with GAAP. Our calculation of EBITDA, as presented, may differ from similarly titled measures reported by other companies.
NOTE: Free cash flow is defined as cash from operations minus capital expenditures. We believe this metric provides useful information to our investors because management regularly reviews free cash flow as an important indicator of how much cash is generated by normal business operations, including capital expenditures, and makes decisions based on it. Management also views it as a measure of cash available to pay debt and return cash to shareowners.
NOTE: Adjusted Operating Income, Adjusted Operating Expenses, Adjusted Operating Revenues, Adjusted Operating Income Margin and Adjusted diluted EPS are non-GAAP financial measures calculated by excluding from operating revenues, operating expenses and equity in net income of affiliates certain significant items that are non-operational or non-recurring in nature, including dispositions. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends. Adjusted Operating Income, Adjusted Operating Expenses, Adjusted Operating Revenues, Adjusted Operating Income Margin and Adjusted diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. Our calculations of Adjusted Operating Income and Adjusted diluted EPS, as presented, may differ from similarly titled measures reported by other companies.
| Financial Data | |||||||||||||||
| AT&T Inc. | |||||||||||||||
| Consolidated Statements of Income | |||||||||||||||
| Dollars in millions except per share amounts | |||||||||||||||
| Unaudited | Three Months Ended | ||||||||||||||
| 3/31/2013 | 3/31/2012 | % Chg | |||||||||||||
| Operating Revenues | $ | 31,356 | $ | 31,822 | -1.5 | % | |||||||||
| Operating Expenses | |||||||||||||||
|
Cost of services and sales (exclusive of depreciation and amortization shown separately below) |
12,554 | 12,817 | -2.1 | % | |||||||||||
| Selling, general and administrative | 8,333 | 8,344 | -0.1 | % | |||||||||||
| Depreciation and amortization | 4,529 | 4,560 | -0.7 | % | |||||||||||
| Total Operating Expenses | 25,416 | 25,721 | -1.2 | % | |||||||||||
| Operating Income | 5,940 | 6,101 | -2.6 | % | |||||||||||
| Interest Expense | 827 | 859 | -3.7 | % | |||||||||||
| Equity in Net Income of Affiliates | 185 | 223 | -17.0 | % | |||||||||||
| Other Income (Expense) - Net | 32 | 52 | -38.5 | % | |||||||||||
| Income Before Income Taxes | 5,330 | 5,517 | -3.4 | % | |||||||||||
| Income Tax Expense | 1,557 | 1,865 | -16.5 | % | |||||||||||
| Net Income | 3,773 | 3,652 | 3.3 | % | |||||||||||
| Less: Net Income Attributable to Noncontrolling Interest | (73 | ) | (68 | ) | -7.4 | % | |||||||||
| Net Income Attributable to AT&T | $ | 3,700 | $ | 3,584 | 3.2 | % | |||||||||
| Basic Earnings Per Share Attributable to AT&T | $ | 0.67 | $ | 0.60 | 11.7 | % | |||||||||
|
Weighted Average Common Shares Outstanding (000,000) |
5,513 | 5,918 | -6.8 | % | |||||||||||
| Diluted Earnings Per Share Attributable to AT&T | $ | 0.67 | $ | 0.60 | 11.7 | % | |||||||||
|
Weighted Average Common Shares Outstanding with Dilution (000,000) |
5,530 | 5,940 | -6.9 | % | |||||||||||
| Financial Data | |||||||||||||||
| AT&T Inc. | |||||||||||||||
| Statements of Segment Income | |||||||||||||||
| Dollars in millions | |||||||||||||||
| Unaudited | |||||||||||||||
| Three Months Ended | |||||||||||||||
| Wireless | 3/31/2013 | 3/31/2012 | % Chg | ||||||||||||
| Segment Operating Revenues | |||||||||||||||
| Data | $ | 5,125 | $ | 4,235 | 21.0 | % | |||||||||
| Voice, text and other service | 9,937 | 10,331 | -3.8 | % | |||||||||||
| Equipment | 1,629 | 1,570 | 3.8 | % | |||||||||||
| Total Segment Operating Revenues | 16,691 | 16,136 | 3.4 | % | |||||||||||
| Segment Operating Expenses | |||||||||||||||
| Operations and support | 10,180 | 9,978 | 2.0 | % | |||||||||||
| Depreciation and amortization | 1,835 | 1,666 | 10.1 | % | |||||||||||
| Total Segment Operating Expenses | 12,015 | 11,644 | 3.2 | % | |||||||||||
| Segment Operating Income | 4,676 | 4,492 | 4.1 | % | |||||||||||
| Equity in Net Income (Loss) of Affiliates | (18 | ) | (13 | ) | -38.5 | % | |||||||||
| Segment Income | $ | 4,658 | $ | 4,479 | 4.0 | % | |||||||||
| Segment Operating Income Margin | 28.0 |
% |
|
27.8 |
% |
|
|||||||||
| Wireline | |||||||||||||||
| Segment Operating Revenues | |||||||||||||||
| Data | $ | 8,162 | $ | 7,800 | 4.6 | % | |||||||||
| Voice | 5,306 | 5,892 | -9.9 | % | |||||||||||
| Other | 1,187 | 1,237 | -4.0 | % | |||||||||||
| Total Segment Operating Revenues | 14,655 | 14,929 | -1.8 | % | |||||||||||
| Segment Operating Expenses | |||||||||||||||
| Operations and support | 10,335 | 10,402 | -0.6 | % | |||||||||||
| Depreciation and amortization | 2,688 | 2,808 | -4.3 | % | |||||||||||
| Total Segment Operating Expenses | 13,023 | 13,210 | -1.4 | % | |||||||||||
| Segment Operating Income | 1,632 | 1,719 | -5.1 | % | |||||||||||
| Equity in Net Income of Affiliates | 1 | - | - | ||||||||||||
| Segment Income | $ | 1,633 | $ | 1,719 | -5.0 | % | |||||||||
| Segment Operating Income Margin | 11.1 |
% |
|
11.5 |
% |
|
|||||||||
| Advertising Solutions | |||||||||||||||
| Segment Operating Revenues | $ | - | $ | 744 | - | ||||||||||
| Segment Operating Expenses | |||||||||||||||
| Operations and support | - | 547 | - | ||||||||||||
| Depreciation and amortization | - | 77 | - | ||||||||||||
| Total Segment Operating Expenses | - | 624 | - | ||||||||||||
| Segment Income | $ | - | $ | 120 | - | ||||||||||
| Segment Income Margin | - | 16.1 |
% |
|
|||||||||||
| Other | |||||||||||||||
| Segment Operating Revenues | $ | 10 | $ | 13 | -23.1 | % | |||||||||
| Segment Operating Expenses | 378 | 243 | 55.6 | % | |||||||||||
| Segment Operating Income (Loss) | (368 | ) | (230 | ) | -60.0 | % | |||||||||
| Equity in Net Income of Affiliates | 202 | 236 | -14.4 | % | |||||||||||
| Segment Income (Loss) | $ | (166 | ) | $ | 6 | - | |||||||||
| Financial Data | |||||||||||
| AT&T Inc. | |||||||||||
| Consolidated Balance Sheets | |||||||||||
| Dollars in millions | |||||||||||
| 03/31/2013 | 12/31/2012 | ||||||||||
| Unaudited | |||||||||||
| Assets | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | 3,875 | $ | 4,868 | |||||||
|
Accounts receivable - net of allowances for doubtful accounts of $547 and $547 |
12,100 | 12,657 | |||||||||
| Prepaid expenses | 1,021 | 1,035 | |||||||||
| Deferred income taxes | 980 | 1,036 | |||||||||
| Other current assets | 2,396 | 3,110 | |||||||||
| Total current assets | 20,372 | 22,706 | |||||||||
| Property, Plant and Equipment - Net | 109,702 | 109,767 | |||||||||
| Goodwill | 69,772 | 69,773 | |||||||||
| Licenses | 53,507 | 52,352 | |||||||||
| Customer Lists and Relationships - Net | 1,190 | 1,391 | |||||||||
| Other Intangible Assets - Net | 5,022 | 5,032 | |||||||||
| Investments in and Advances to Equity Affiliates | 4,998 | 4,581 | |||||||||
| Other Assets | 6,431 | 6,713 | |||||||||
| Total Assets | $ | 270,994 | $ | 272,315 | |||||||
|
Liabilities and Stockholders’ Equity |
|||||||||||
| Current Liabilities | |||||||||||
| Debt maturing within one year | $ | 3,446 | $ | 3,486 | |||||||
| Accounts payable and accrued liabilities | 17,523 | 20,494 | |||||||||
| Advanced billing and customer deposits | 4,167 | 4,225 | |||||||||
| Accrued taxes | 2,210 | 1,026 | |||||||||
| Dividends payable | 2,440 | 2,556 | |||||||||
| Total current liabilities | 29,786 | 31,787 | |||||||||
| Long-Term Debt | 70,686 | 66,358 | |||||||||
| Deferred Credits and Other Noncurrent Liabilities | |||||||||||
| Deferred income taxes | 28,918 | 28,491 | |||||||||
| Postemployment benefit obligation | 41,663 | 41,392 | |||||||||
| Other noncurrent liabilities | 11,603 | 11,592 | |||||||||
| Total deferred credits and other noncurrent liabilities | 82,184 | 81,475 | |||||||||
|
Stockholders’ Equity |
|||||||||||
| Common stock | 6,495 | 6,495 | |||||||||
| Additional paid-in capital | 90,940 | 91,038 | |||||||||
| Retained earnings | 23,787 | 22,481 | |||||||||
| Treasury stock | (38,568 | ) | (32,888 | ) | |||||||
| Accumulated other comprehensive income | 5,344 | 5,236 | |||||||||
| Noncontrolling interest | 340 | 333 | |||||||||
|
Total stockholders’ equity |
88,338 | 92,695 | |||||||||
|
Total Liabilities and Stockholders’ Equity |
$ | 270,994 | $ | 272,315 | |||||||
| Financial Data | |||||||||||
| AT&T Inc. | |||||||||||
| Consolidated Statements of Cash Flows | |||||||||||
| Dollars in millions | |||||||||||
| Unaudited | Three Months Ended March 31, | ||||||||||
| 2013 | 2012 | ||||||||||
| Operating Activities | |||||||||||
| Net income | $ | 3,773 | $ | 3,652 | |||||||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|||||||||||
| Depreciation and amortization | 4,529 | 4,560 | |||||||||
| Undistributed earnings from investments in equity affiliates | (185 | ) | (223 | ) | |||||||
| Provision for uncollectible accounts | 262 | 328 | |||||||||
|
Deferred income tax expense and noncurrent unrecognized tax benefits |
509 | 337 | |||||||||
| Net (gain) loss from sale of investments, net of impairments | (11 | ) | (9 | ) | |||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | 295 | 73 | |||||||||
| Other current assets | 864 | 1,120 | |||||||||
| Accounts payable and accrued liabilities | (1,675 | ) | (1,655 | ) | |||||||
| Other - net | (162 | ) | (338 | ) | |||||||
| Total adjustments | 4,426 | 4,193 | |||||||||
| Net Cash Provided by Operating Activities | 8,199 | 7,845 | |||||||||
| Investing Activities | |||||||||||
| Construction and capital expenditures: | |||||||||||
| Capital expenditures | (4,252 | ) | (4,261 | ) | |||||||
| Interest during construction | (66 | ) | (65 | ) | |||||||
| Acquisitions, net of cash acquired | (1,045 | ) | (433 | ) | |||||||
| Dispositions | 5 | 16 | |||||||||
| Sales (purchases) of securities, net | - | 5 | |||||||||
| Other | 1 | 1 | |||||||||
| Net Cash Used in Investing Activities | (5,357 | ) | (4,737 | ) | |||||||
| Financing Activities | |||||||||||
|
Net change in short-term borrowings with original maturities of three months or less |
274 | - | |||||||||
| Issuance of other short-term borrowings | 1,474 | - | |||||||||
| Issuance of long-term debt | 4,875 | 2,986 | |||||||||
| Repayment of long-term debt | (1,791 | ) | (2,204 | ) | |||||||
| Purchase of treasury stock | (5,911 | ) | (2,066 | ) | |||||||
| Issuance of treasury stock | 56 | 218 | |||||||||
| Dividends paid | (2,502 | ) | (2,606 | ) | |||||||
| Other | (310 | ) | (130 | ) | |||||||
| Net Cash Used in Financing Activities | (3,835 | ) | (3,802 | ) | |||||||
| Net decrease in cash and cash equivalents | (993 | ) | (694 | ) | |||||||
| Cash and cash equivalents beginning of year | 4,868 | 3,045 | |||||||||
| Cash and Cash Equivalents End of Period | $ | 3,875 | $ | 2,351 | |||||||
| Financial Data | ||||||||||||||||
| AT&T Inc. | ||||||||||||||||
| Supplementary Operating and Financial Data | ||||||||||||||||
| Dollars in millions except per share amounts, subscribers and connections in (000s) | ||||||||||||||||
| Unaudited | Three Months Ended | |||||||||||||||
| 3/31/2013 | 3/31/2012 | % Chg | ||||||||||||||
| Wireless | ||||||||||||||||
| Volumes | ||||||||||||||||
| Total | 107,251 | 103,940 | 3.2 | % | ||||||||||||
| Postpaid | 70,749 | 69,403 | 1.9 | % | ||||||||||||
| Prepaid | 7,104 | 7,368 | -3.6 | % | ||||||||||||
| Reseller | 14,702 | 13,869 | 6.0 | % | ||||||||||||
| Connected Devices | 14,696 | 13,300 | 10.5 | % | ||||||||||||
| Wireless Net Adds | ||||||||||||||||
| Total | 291 | 726 | -59.9 | % | ||||||||||||
| Postpaid | 296 | 187 | 58.3 | % | ||||||||||||
| Prepaid | (184 | ) | 125 | - | ||||||||||||
| Reseller | (252 | ) | 184 | - | ||||||||||||
| Connected Devices | 431 | 230 | 87.4 | % | ||||||||||||
| M&A Activity, Partitioned Customers and Other Adjs. | 3 | (33 | ) | - | ||||||||||||
| Wireless Churn | ||||||||||||||||
| Postpaid Churn | 1.04 | % | 1.10 | % | -6 BP | |||||||||||
| Total Churn | 1.38 | % | 1.47 | % | -9 BP | |||||||||||
| Other | ||||||||||||||||
| Licensed POPs (000,000) | 317 | 313 | 1.3 | % | ||||||||||||
| Wireline | ||||||||||||||||
| Voice | ||||||||||||||||
| Total Wireline Voice Connections1 | 31,163 | 35,206 | -11.5 | % | ||||||||||||
| Net Change | (1,021 | ) | (1,126 | ) | 9.3 | % | ||||||||||
| Broadband | ||||||||||||||||
| Total Wireline Broadband Connections | 16,514 | 16,530 | -0.1 | % | ||||||||||||
| Net Change | 124 | 103 | 20.4 | % | ||||||||||||
| Video | ||||||||||||||||
| Total U-verse Video Connections | 4,768 | 3,991 | 19.5 | % | ||||||||||||
| Net Change | 232 | 200 | 16.0 | % | ||||||||||||
| Consumer Revenue Connections | ||||||||||||||||
| Broadband2 | 14,686 | 14,595 | 0.6 | % | ||||||||||||
| U-verse Video Connections1 | 4,755 | 3,983 | 19.4 | % | ||||||||||||
| Voice1,3 | 17,960 | 20,534 | -12.5 | % | ||||||||||||
| Total Consumer Revenue Connections1 | 37,401 | 39,112 | -4.4 | % | ||||||||||||
| Net Change | (266 | ) | (394 | ) | 32.5 | % | ||||||||||
| AT&T Inc. | ||||||||||||||||
| Construction and capital expenditures | ||||||||||||||||
| Capital expenditures | $ | 4,252 | $ | 4,261 | -0.2 | % | ||||||||||
| Interest during construction | $ | 66 | $ | 65 | 1.5 | % | ||||||||||
| Dividends Declared per Share | $ | 0.45 | $ | 0.44 | 2.3 | % | ||||||||||
| End of Period Common Shares Outstanding (000,000) | 5,423 | 5,875 | -7.7 | % | ||||||||||||
| Debt Ratio4 | 45.6 | % | 38.4 | % | 720 BP | |||||||||||
| Total Employees | 243,340 | 252,330 | -3.6 | % | ||||||||||||
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1 Prior year amounts restated to conform to current period reporting methodology. |
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2 Consumer wireline broadband connections include DSL lines, U-verse High Speed Internet access and satellite broadband. |
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3 Includes consumer U-verse Voice over Internet Protocol connections of 3,120 as of March 31, 2013. |
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4 Total long-term debt plus debt maturing within one year divided by total debt plus total stockholders’ equity. |
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Note: For the end of 1Q13, total switched access lines were 28,043, retail business switched access lines totaled 11,185, and wholesale, national mass markets and coin switched access lines totaled 2,018. Restated switched access lines do not include ISDN lines. |
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| Financial Data | |||||||||||||||||||||
| AT&T Inc. | |||||||||||||||||||||
| Non-GAAP Wireless Reconciliation | |||||||||||||||||||||
| Wireless Segment EBITDA | |||||||||||||||||||||
| Dollars in millions | |||||||||||||||||||||
| Unaudited | |||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||
| 3/31/12 | 6/30/12 | 9/30/12 | 12/31/12 | 3/31/13 | |||||||||||||||||
| Segment Operating Revenues | |||||||||||||||||||||
| Data | 4,235 | 4,471 | 4,686 | 4,905 | 5,125 | ||||||||||||||||
| Voice, text and other service | 10,331 | 10,294 | 10,220 | 10,044 | 9,937 | ||||||||||||||||
| Equipment | 1,570 | 1,588 | 1,726 | 2,693 | 1,629 | ||||||||||||||||
| Total Segment Operating Revenues | 16,136 | 16,353 | 16,632 | 17,642 | 16,691 | ||||||||||||||||
| Segment Operating Expenses | |||||||||||||||||||||
| Operations and support | 9,978 | 9,590 | 10,432 | 13,296 | 10,180 | ||||||||||||||||
| Depreciation and amortization | 1,666 | 1,696 | 1,730 | 1,781 | 1,835 | ||||||||||||||||
| Total Segment Operating Expenses | 11,644 | 11,286 | 12,162 | 15,077 | 12,015 | ||||||||||||||||
| Segment Operating Income | 4,492 | 5,067 | 4,470 | 2,565 | 4,676 | ||||||||||||||||
| Segment Operating Income Margin | 27.8 | % | 31.0 | % | 26.9 | % | 14.5 | % | 28.0 | % | |||||||||||
| Plus: Depreciation and amortization | 1,666 | 1,696 | 1,730 | 1,781 | 1,835 | ||||||||||||||||
| EBITDA | 6,158 | 6,763 | 6,200 | 4,346 | 6,511 | ||||||||||||||||
| EBITDA as a % of Service Revenues1 | 42.3 | % | 45.8 | % | 41.6 | % | 29.1 | % | 43.2 | % | |||||||||||
| EBITDA is defined as Operating Income Before Depreciation and Amortization. | |||||||||||||||||||||
| 1 Service revenues is defined as Wireless data and voice, text and other service revenues. | |||||||||||||||||||||
| Financial Data | |||||||||||
| AT&T Inc. | |||||||||||
| Non-GAAP Financial Reconciliation | |||||||||||
| Free Cash Flow | |||||||||||
| Dollars in Millions | |||||||||||
| Unaudited | |||||||||||
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| 2012 | 2013 | ||||||||||
| Net cash provided by operating activities | $ | 7,845 | $ | 8,199 | |||||||
| Less: Construction and capital expenditures | (4,326 | ) | (4,318 | ) | |||||||
| Free Cash Flow | $ | 3,519 | $ | 3,881 | |||||||
| Free Cash Flow after Dividends | |||||||||||
| Dollars in Millions | |||||||||||
| Unaudited | |||||||||||
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| 2012 | 2013 | ||||||||||
| Net cash provided by operating activities | $ | 7,845 | $ | 8,199 | |||||||
| Less: Construction and capital expenditures | (4,326 | ) | (4,318 | ) | |||||||
| Free Cash Flow | 3,519 | 3,881 | |||||||||
| Less: Dividends paid | (2,606 | ) | (2,502 | ) | |||||||
| Free Cash Flow After Dividends | $ | 913 | $ | 1,379 | |||||||
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Free cash flow includes reimbursements of certain postretirement benefits paid. |
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Free cash flow is defined as cash from operations minus construction and capital expenditures. Free cash flow after dividends is defined as cash from operations minus construction, capital expenditures and dividends. We believe these metrics provide useful information to our investors because management regularly reviews free cash flow as an important indicator of how much cash is generated by normal business operations, including capital expenditures, and makes decisions based on it. Management also views free cash flow as a measure of cash available to pay debt and return cash to shareowners. |
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| Financial Data | |||||||||
| AT&T Inc. | |||||||||
| Non-GAAP Consolidated Reconciliation | |||||||||
| Annualized Net-Debt-to-EBITDA Ratio | |||||||||
| Dollars in millions | |||||||||
| Unaudited | |||||||||
| 3/31/13 | 2013 YTD | ||||||||
| Operating Revenues | $ | 31,356 | $ | 31,356 | |||||
| Operating Expenses | 25,416 | 25,416 | |||||||
| Total Operating Income | 5,940 | 5,940 | |||||||
| Add Back Depreciation and Amortization | 4,529 | 4,529 | |||||||
| Total Consolidated EBITDA | 10,469 | 10,469 | |||||||
| Annualized Consolidated EBITDA* | 41,876 | ||||||||
| End-of-period current debt | 3,446 | ||||||||
| End-of-period long-term debt | 70,686 | ||||||||
| Total End-of-Period Debt | 74,132 | ||||||||
| Less Cash and Cash Equivalents | 3,875 | ||||||||
| Net Debt Balance | 70,257 | ||||||||
| Annualized Net-Debt-to-EBITDA Ratio | 1.68 | ||||||||
| Net Debt to EBITDA ratios are non-GAAP financial measures frequently used by investors and credit rating agencies and management believes these measures provide relevant and useful information to investors and other users of our financial data. The Net Debt to EBITDA ratio is calculated by dividing the Net Debt by annualized EBITDA. Net Debt is calculated by subtracting cash and cash equivalents from the sum of debt maturing within one year and long-term debt. Annualized EBITDA is calculated by annualizing the year-to-date EBITDA. | |||||||||
| Financial Data | |||||||||||
| AT&T Inc. | |||||||||||
| Non-GAAP Financial Reconciliation | |||||||||||
| Adjusted Operating Revenues | |||||||||||
| Dollars in Millions | |||||||||||
| Unaudited | |||||||||||
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| 2012 | 2013 | ||||||||||
| Reported Operating Revenues | $ | 31,822 | $ | 31,356 | |||||||
| Adjustments: | |||||||||||
| Removal of Advertising Solutions | (744 | ) | - | ||||||||
| Adjusted Operating Revenues | $ | 31,078 | $ | 31,356 | |||||||
| Year-over-year growth - Adjusted | 0.9 | % | |||||||||
|
Adjusted Operating Revenues is a non-GAAP financial measure calculated by excluding from operating revenues significant items that are non-operational or non-recurring in nature, including dispositions. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends. |
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Adjusted Operating Revenues should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. Our calculations of Adjusted Operating Revenues may differ from similarly titled measures reported by other companies. |
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| Financial Data | |||||||||||
| AT&T Inc. | |||||||||||
| Non-GAAP Financial Reconciliation | |||||||||||
| Adjusted Diluted EPS | |||||||||||
| Unaudited | |||||||||||
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| 2012 | 2013 | ||||||||||
| Reported Diluted EPS | $ | 0.60 | $ | 0.67 | |||||||
| Adjustments: | |||||||||||
| Removal of Advertising Solutions | (0.01 | ) | - | ||||||||
| Income Tax Settlement | - | (0.03 | ) | ||||||||
| Adjusted Diluted EPS | $ | 0.59 | $ | 0.64 | |||||||
| Year-over-year growth - Adjusted | 8.5 | % | |||||||||
|
Weighted Average Common Shares Outstanding with Dilution (000,000) |
5,940 | 5,530 | |||||||||
|
Adjusted diluted EPS is a non-GAAP financial measure calculated by excluding from operating revenues, operating expenses and equity in net income of affiliates certain significant items that are non-operational or non-recurring in nature, including dispositions. Management believes that this measure provides relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends. |
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Adjusted diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. Our calculation of Adjusted diluted EPS, as presented, may differ from similarly titled measures reported by other companies. |
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EBITDA DISCUSSION
For AT&T, EBITDA is defined as operating income before depreciation and amortization. EBITDA service margin is calculated as EBITDA divided by service revenues. EBITDA differs from Segment Operating Income (Loss), as calculated in accordance with 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, net income attributable to noncontrolling interest 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 service revenues as well.
There are material limitations to using these non-GAAP financial measures. EBITDA and EBITDA service margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies. Furthermore, these performance measures do not take into account certain significant items, including depreciation and amortization, interest expense, tax expense and equity in net income (loss) of affiliates, which directly affect 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 construction and capital expenditures. Free cash flow after dividends is defined as cash from operations minus construction, capital expenditures and dividends. Free cash flow yield is defined as cash from continuing operations less construction and capital expenditures as a percentage of market capitalization computed on the last trading day of the quarter. Market capitalization is computed by multiplying the end of period stock price by the end of period shares outstanding. We believe these metrics provide useful information to our investors because management 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.
NET DEBT TO EBITDA DISCUSSION
Net Debt to EBITDA ratios are non-GAAP financial measures frequently used by investors and credit rating agencies and management believes these measures provide relevant and useful information to investors and other users of our financial data. The Net Debt to EBITDA ratio is calculated by dividing the Net Debt by annualized EBITDA. Net Debt is calculated by subtracting cash and cash equivalents from the sum of debt maturing within one year and long-term debt. Annualized EBITDA is calculated by annualizing the year-to-date EBITDA.
ADJUSTING ITEMS DISCUSSION
Adjusted Operating Revenues and Adjusted diluted EPS are non-GAAP financial measures calculated by excluding from operating revenues and income tax expense certain significant items that are non-operational or non-recurring in nature, including dispositions. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends.
Adjusted Operating Revenues and Adjusted diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. Our calculations of Adjusted diluted EPS, as presented, may differ from similarly titled measures reported by other companies.
