DALLAS--(BUSINESS WIRE)--AT&T Inc. (NYSE:T) today reported first-quarter results highlighted by strong 4G mobile data sales and wireless margins, and solid revenue and earnings growth.
“We continue to capitalize on our terrific momentum in mobile Internet,” said Randall Stephenson, AT&T chairman and chief executive officer. “Smartphone and branded computing device sales continue to set a record pace, mobile data revenues were up nearly 20 percent, and we achieved this growth with expanding margins. These results add confidence in our outlook for the year.”
First-Quarter Financial Results
For the quarter ended March 31, 2012, AT&T's consolidated revenues totaled $31.8 billion, up $575 million, or 1.8 percent, versus the year-earlier quarter.
Compared with results for the first quarter of 2011, operating expenses were $25.7 billion versus $25.4 billion; operating income was $6.1 billion, up from $5.8 billion; and operating income margin was 19.2 percent, compared to 18.6 percent.
First-quarter 2012 net income attributable to AT&T totaled $3.6 billion, or $0.60 per diluted share, up from $3.4 billion, or $0.57 per diluted share, in the year-earlier quarter.
First-quarter 2012 cash from operating activities totaled $7.8 billion, and capital expenditures totaled $4.3 billion. Free cash flow — cash from operating activities minus capital expenditures — totaled $3.5 billion. During the first quarter, AT&T began repurchasing shares under its outstanding 300 million share buyback authorization. The company repurchased 67.7 million of its shares for $2.1 billion in the quarter.
WIRELESS OPERATIONAL HIGHLIGHTS
Led by mobile data growth in the first quarter, AT&T delivered strong smartphone and branded computing device sales with solid data revenue growth, lower postpaid churn and expanding margins. Highlights included:
Wireless Data Revenues Increase $1 Billion. Total wireless revenues, which include equipment sales, were up 5.4 percent year over year to $16.1 billion. Wireless service revenues increased 4.3 percent, to $14.6 billion, in the first quarter. Wireless data revenues — driven by Internet access, access to applications, messaging and related services — increased by more than $1 billion, or 19.9 percent, from the year-earlier quarter to $6.1 billion. First-quarter wireless operating expenses totaled $11.7 billion, up 3.4 percent versus the year-earlier quarter, and wireless operating income was $4.4 billion, up 11.3 percent year over year.
Wireless Margins Expand Even With Strong Smartphone Sales. First-quarter wireless margins grew significantly, driven by improved operating efficiencies and further revenue gains from the company’s 41 million high-quality smartphone subscribers. AT&T’s first-quarter wireless operating income margin was 27.2 percent versus 25.8 percent in the year-earlier quarter, and AT&T’s wireless EBITDA service margin was 41.6 percent, compared with 39.0 percent in the first quarter of 2011. (EBITDA service margin is operating income before depreciation and amortization, divided by total service revenues.)
Subscriber Gains in Every Category. AT&T posted a net increase in total wireless subscribers of 726,000 in the first quarter to reach 103.9 million in service. This included gains in every customer category. Subscriber additions for the quarter include postpaid net adds of 187,000. Prepaid net adds were 125,000, connected device net adds were 230,000 and reseller net adds were 184,000. First-quarter net adds reflect continued adoption of smartphones and sales of tablets.
Smartphone Sales Exceed First-Quarter Record. AT&T sold 5.5 million smartphones, exceeding a first-quarter sales record set last year. Smartphones represented more than 78 percent of postpaid device sales. At the end of the quarter, 59.3 percent, or 41.2 million, of AT&T's postpaid subscribers had smartphones, up from 46.2 percent and 31.5 million a year earlier. AT&T’s ARPU for smartphones is 90 percent higher than for non-smartphone subscribers. About 88 percent of smartphone subscribers are on FamilyTalk® or business plans. Churn levels for these subscribers are significantly lower than for other postpaid subscribers. About 30 percent of AT&T’s postpaid smartphone customers use a 4G-capable device.
Both Android and iPhone device sales remain strong. iPhone sales were helped by AT&T’s 4G network, which lets iPhone 4S download three-times faster than other U.S. carriers’ networks. In the quarter, the company activated 4.3 million iPhones, with 21 percent new to AT&T.
Strong Branded Computing Sales. AT&T had its best-ever first-quarter sales for branded computing subscribers, a new wireless data revenue growth area for the company that includes tablets, tethering plans, aircards, mobile Wi-Fi hot spots and other data-only devices. AT&T added 460,000 of these devices to reach 5.8 million, up almost 70 percent in total subscribers from a year ago. During the quarter, 240,000 tablets were added, about three-quarters of which were postpaid.
61 Percent of Smartphone Subscribers on Tiered Data Plans. The number of subscribers on tiered data plans also continues to increase. About 25 million, or 61 percent, of all smartphone subscribers are on tiered data plans compared to 38 percent a year ago, and more than 70 percent have chosen the higher-tiered plans. AT&T’s postpaid wireless subscribers on data plans increased by 15.1 percent over the past year.
Industry-Leading Postpaid ARPU Continues Growth. Postpaid subscriber ARPU increased 1.7 percent versus the year-earlier quarter to $64.46. AT&T continues to lead the industry with postpaid subscriber ARPU. This marked the 13th consecutive quarter AT&T has posted a year-over-year increase in postpaid ARPU. Postpaid data ARPU reached $26.92, up 15.3 percent versus the year-earlier quarter.
Postpaid Churn Improves. Postpaid churn reached its lowest level in seven quarters. For the first quarter, postpaid churn was 1.10 percent, compared to 1.18 percent in the year-ago first quarter and 1.21 percent in the fourth quarter of 2011. Total churn was up, at 1.47 percent versus 1.36 percent in the first quarter of 2011 and 1.39 percent in the fourth quarter of 2011, due to higher reseller and connected device churn.
WIRELINE OPERATIONAL HIGHLIGHTS
AT&T's first-quarter wireline results were led by continued improving trends in business and strong growth in U-verse revenues. Highlights included:
Wireline Operating Income Improves. AT&T’s wireline operating income totaled $1.8 billion, 2.4 percent higher than the first quarter of 2011 and down 1.2 percent versus the fourth quarter of 2011. First-quarter wireline operating income margin was 12.2 percent, compared to 11.8 percent in the year-earlier quarter. Total first-quarter wireline revenues were $14.9 billion, down 0.8 percent versus the year-earlier quarter and down slightly sequentially. First-quarter wireline operating expenses were $13.1 billion, down 1.2 percent versus the first quarter of 2011 and down slightly sequentially. Improved consumer and business strategic services revenue trends and execution of cost initiatives helped to partially offset declines in voice revenues.
Business Revenues Continue Improving Trends. Business revenues had their best year-over-year comparison in the last three years. Total business revenues were $9.2 billion, down 0.8 percent versus the year-earlier quarter. Business service revenues declined 0.3 percent year over year, compared to a year-over-year decline of 4.4 percent in the year-ago quarter, and were essentially flat sequentially. Declines in legacy products were largely offset by continued strong growth in strategic business services.
Business Data Revenue Growth Accelerates. Revenues from strategic business services, the new-generation capabilities that lead AT&T's most advanced business solutions — including Ethernet, VPNs, hosting, IP conferencing and application services — grew 19.0 percent versus the year-earlier quarter, continuing strong trends in this area. This now represents a $6.2 billion annualized revenue stream. Total business data revenue growth accelerated to 4.2 percent year over year, the strongest showing in four years.
U-verse Drives Consumer Revenue Growth. Continued strong growth in consumer IP data services in the first quarter offset lower revenues from voice and legacy products. Driven by strength in IP data services, revenues from residential customers totaled $5.4 billion, an increase of 1.0 percent versus the first quarter a year ago. The first quarter marked the seventh consecutive quarter of year-over-year growth in wireline consumer revenues. U-verse continues to drive a transformation in wireline consumer, reflected by the fact that consumer broadband, video and voice over IP revenues now represent 55 percent of wireline consumer revenues, up from 47 percent in the year-earlier quarter. Increased AT&T U-verse penetration and a significant number of subscribers on triple- or quad-play options drove 17.5 percent year-over-year growth in IP revenues from residential customers (broadband, U-verse TV and U-verse Voice) and 3.8 percent sequential quarterly growth. Consumer U-verse revenues grew 38.2 percent compared with the year-ago first quarter and were up 8.5 percent versus the fourth quarter of 2011.
U-verse Tops 6 Million Subscriber Mark. Total AT&T U-verse subscribers (TV and High Speed Internet) reached 6.2 million in the first quarter. AT&T U-verse TV added 200,000 subscribers to reach 4.0 million in service. In the first quarter, the AT&T U-verse High Speed Internet attach rate was more than 90 percent and about half of new subscribers took AT&T U-verse Voice. About 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 $169, up slightly year over year. Penetration of eligible living units continues to grow and was at 16.8 percent in the first quarter, and 27.1 percent across areas marketed to for 42 months or more. AT&T U-verse High Speed Internet delivered a first-quarter net gain of 718,000 subscribers to reach a total of 5.9 million, more than offsetting losses from DSL. Overall, AT&T added 103,000 wireline broadband connections. About 45 percent of consumers have a broadband plan delivering speeds up to 6 Mbps or higher versus 35 percent in the year-ago quarter.
AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc.
About AT&T
AT&T Inc. (NYSE:T) is a premier communications holding company 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 around the world. 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. In domestic markets, AT&T Advertising Solutions and AT&T Interactive are known for their leadership in local search and advertising.
Additional information about AT&T Inc. and the products and services provided by AT&T subsidiaries and affiliates is available at http://www.att.com. This AT&T news release and other announcements are available at http://www.att.com/newsroom and as part of an RSS feed at www.att.com/rss. Or follow our news on Twitter at @ATT.
© 2012 AT&T Intellectual Property. All rights reserved. 4G not available everywhere. AT&T, the AT&T logo and all other marks contained herein are trademarks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners.
Cautionary Language Concerning Forward-Looking Statements
Information set forth in this news release contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results may differ materially. A discussion of factors that may affect future results is contained in AT&T's filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update or revise statements contained in this news release based on new information or otherwise. This news release may contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available on the company's website at www.att.com/investor.relations. Accompanying financial statements follow.
NOTE: EBITDA is defined as operating income before depreciation and amortization. EBITDA differs from Segment Operating Income (loss), as calculated in accordance with U.S. generally accepted accounting principles (GAAP), in that it excludes depreciation and amortization. EBITDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with GAAP. Our calculation of EBITDA, as presented, may differ from similarly titled measures reported by other companies.
NOTE: Free cash flow is defined as cash from operations minus capital expenditures. We believe this metric provides useful information to our investors because management regularly reviews free cash flow as an important indicator of how much cash is generated by normal business operations, including capital expenditures, and makes decisions based on it. Management also views it as a measure of cash available to pay debt and return cash to shareowners.
NOTE: Adjusted Operating Income and Adjusted Operating Income Margin are non-GAAP financial measures calculated by excluding from operating revenues and operating expenses significant items that are non-operational or non-recurring in nature. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends. Adjusted Operating Income and Adjusted Operating Income Margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. Our calculation of Adjusted Operating Income, as presented, may differ from similarly titled measures reported by other companies.
| Financial Data | ||||||||||||||
| AT&T Inc. | ||||||||||||||
| Consolidated Statements of Income | ||||||||||||||
| Dollars in millions except per share amounts | ||||||||||||||
| Unaudited | Three Months Ended | |||||||||||||
| 3/31/2012 | 3/31/2011 | % Chg | ||||||||||||
| Operating Revenues | ||||||||||||||
| Wireless service | $ | 14,566 | $ | 13,961 | 4.3 | % | ||||||||
| Data | 7,795 | 7,171 | 8.7 | % | ||||||||||
| Voice | 5,893 | 6,550 | -10.0 | % | ||||||||||
| Directory | 744 | 868 | -14.3 | % | ||||||||||
| Other | 2,824 | 2,697 | 4.7 | % | ||||||||||
| Total Operating Revenues | 31,822 | 31,247 | 1.8 | % | ||||||||||
| Operating Expenses | ||||||||||||||
|
Cost of services and sales (exclusive of depreciation and amortization shown separately below) |
12,913 | 12,813 | 0.8 | % | ||||||||||
| Selling, general and administrative | 8,248 | 8,042 | 2.6 | % | ||||||||||
| Depreciation and amortization | 4,560 | 4,584 | -0.5 | % | ||||||||||
| Total Operating Expenses | 25,721 | 25,439 | 1.1 | % | ||||||||||
| Operating Income | 6,101 | 5,808 | 5.0 | % | ||||||||||
| Interest Expense | 859 | 846 | 1.5 | % | ||||||||||
| Equity in Net Income of Affiliates | 223 | 249 | -10.4 | % | ||||||||||
| Other Income (Expense) - Net | 52 | 59 | -11.9 | % | ||||||||||
| Income Before Income Taxes | 5,517 | 5,270 | 4.7 | % | ||||||||||
| Income Tax Expense | 1,865 | 1,802 | 3.5 | % | ||||||||||
| Net Income | 3,652 | 3,468 | 5.3 | % | ||||||||||
| Less: Net Income Attributable to Noncontrolling Interest | (68 | ) | (60 | ) | -13.3 | % | ||||||||
| Net Income Attributable to AT&T | $ | 3,584 | $ | 3,408 | 5.2 | % | ||||||||
| Basic Earnings Per Share Attributable to AT&T | $ |
0.60 |
$ |
0.57 |
5.3 | % | ||||||||
|
Weighted Average Common Shares Outstanding (000,000) |
5,918 | 5,925 | -0.1 | % | ||||||||||
| Diluted Earnings Per Share Attributable to AT&T | $ |
0.60 |
$ |
0.57 |
5.3 | % | ||||||||
|
Weighted Average Common Shares Outstanding with Dilution (000,000) |
5,940 | 5,945 | -0.1 | % | ||||||||||
| Financial Data | ||||||||||||||
| AT&T Inc. | ||||||||||||||
| Statements of Segment Income | ||||||||||||||
| Dollars in millions | ||||||||||||||
| Unaudited | ||||||||||||||
| Three Months Ended | ||||||||||||||
| Wireless | 3/31/2012 | 3/31/2011 | % Chg | |||||||||||
| Segment Operating Revenues | ||||||||||||||
| Service | $ | 14,566 | $ | 13,961 | 4.3 | % | ||||||||
| Equipment | 1,570 | 1,349 | 16.4 | % | ||||||||||
| Total Segment Operating Revenues | 16,136 | 15,310 | 5.4 | % | ||||||||||
| Segment Operating Expenses | ||||||||||||||
| Operations and support | 10,083 | 9,861 | 2.3 | % | ||||||||||
| Depreciation and amortization | 1,666 | 1,506 | 10.6 | % | ||||||||||
| Total Segment Operating Expenses | 11,749 | 11,367 | 3.4 | % | ||||||||||
| Segment Operating Income | 4,387 | 3,943 | 11.3 | % | ||||||||||
| Equity in Net Loss of Affiliates | (13 | ) | (4 | ) | - | |||||||||
| Segment Income | $ | 4,374 | $ | 3,939 | 11.0 | % | ||||||||
| Segment Operating Income Margin | 27.2 | % | 25.8 | % | ||||||||||
| Wireline | ||||||||||||||
| Segment Operating Revenues | ||||||||||||||
| Data | $ | 7,795 | $ | 7,171 | 8.7 | % | ||||||||
| Voice | 5,893 | 6,550 | -10.0 | % | ||||||||||
| Other | 1,240 | 1,330 | -6.8 | % | ||||||||||
| Total Segment Operating Revenues | 14,928 | 15,051 | -0.8 | % | ||||||||||
| Segment Operating Expenses | ||||||||||||||
| Operations and support | 10,297 | 10,312 | -0.1 | % | ||||||||||
| Depreciation and amortization | 2,808 | 2,958 | -5.1 | % | ||||||||||
| Total Segment Operating Expenses | 13,105 | 13,270 | -1.2 | % | ||||||||||
| Segment Income | $ | 1,823 | $ | 1,781 | 2.4 | % | ||||||||
| Segment Operating Income Margin | 12.2 | % | 11.8 | % | ||||||||||
| Advertising Solutions | ||||||||||||||
| Segment Operating Revenues | $ | 744 | $ | 868 | -14.3 | % | ||||||||
| Segment Operating Expenses | ||||||||||||||
| Operations and support | 547 | 572 | -4.4 | % | ||||||||||
| Depreciation and amortization | 77 | 106 | -27.4 | % | ||||||||||
| Total Segment Operating Expenses | 624 | 678 | -8.0 | % | ||||||||||
| Segment Income | $ | 120 | $ | 190 | -36.8 | % | ||||||||
| Segment Income Margin | 16.1 | % | 21.9 | % | ||||||||||
| Other | ||||||||||||||
| Segment Operating Revenues | $ | 14 | $ | 18 | -22.2 | % | ||||||||
| Segment Operating Expenses | 243 | 124 | 96.0 | % | ||||||||||
| Segment Operating Loss | (229 | ) | (106 | ) | - | |||||||||
| Equity in Net Income of Affiliates | 236 | 253 | -6.7 | % | ||||||||||
| Segment Income | $ | 7 | $ | 147 | -95.2 | % | ||||||||
| Financial Data | ||||||||||
| AT&T Inc. | ||||||||||
| Consolidated Balance Sheets | ||||||||||
| Dollars in millions except per share amounts | ||||||||||
| 3/31/12 | 12/31/11 | |||||||||
| Unaudited | ||||||||||
| Assets | ||||||||||
| Current Assets | ||||||||||
| Cash and cash equivalents | $ | 2,442 | $ | 3,185 | ||||||
|
Accounts receivable - net of allowances for doubtful accounts of $784 and $878 |
13,167 | 13,606 | ||||||||
| Prepaid expenses | 1,706 | 1,155 | ||||||||
| Deferred income taxes | 1,463 | 1,470 | ||||||||
| Other current assets | 1,987 | 3,611 | ||||||||
| Total current assets | 20,765 | 23,027 | ||||||||
| Property, Plant and Equipment - Net | 107,231 | 107,087 | ||||||||
| Goodwill | 70,929 | 70,842 | ||||||||
| Licenses | 51,782 | 51,374 | ||||||||
| Customer Lists and Relationships - Net | 2,385 | 2,757 | ||||||||
| Other Intangible Assets - Net | 5,203 | 5,212 | ||||||||
| Investments in Equity Affiliates | 4,302 | 3,718 | ||||||||
| Other Assets | 6,759 | 6,327 | ||||||||
| Total Assets | $ | 269,356 | $ | 270,344 | ||||||
| Liabilities and Stockholders' Equity | ||||||||||
| Current Liabilities | ||||||||||
| Debt maturing within one year | $ | 6,775 | $ | 3,453 | ||||||
| Accounts payable and accrued liabilities | 17,593 | 19,858 | ||||||||
| Advanced billing and customer deposits | 3,966 | 3,872 | ||||||||
| Accrued taxes | 1,601 | 1,003 | ||||||||
| Dividends payable | 2,585 | 2,608 | ||||||||
| Total current liabilities | 35,520 | 30,794 | ||||||||
| Long-Term Debt | 58,934 | 61,300 | ||||||||
| Deferred Credits and Other Noncurrent Liabilities | ||||||||||
| Deferred income taxes | 26,136 | 25,748 | ||||||||
| Postemployment benefit obligation | 34,113 | 34,011 | ||||||||
| Other noncurrent liabilities | 12,466 | 12,694 | ||||||||
| Total deferred credits and other noncurrent liabilities | 72,715 | 72,453 | ||||||||
| Stockholders' Equity | ||||||||||
| Common stock | 6,495 | 6,495 | ||||||||
| Additional paid-in capital | 91,032 | 91,156 | ||||||||
| Retained earnings | 26,446 | 25,453 | ||||||||
| Treasury stock | (22,460 | ) | (20,750 | ) | ||||||
| Accumulated other comprehensive income | 3,386 | 3,180 | ||||||||
| Noncontrolling interest | 288 | 263 | ||||||||
| Total stockholders' equity | 105,187 | 105,797 | ||||||||
| Total Liabilities and Stockholders' Equity | $ | 269,356 | $ | 270,344 | ||||||
| Financial Data | |||||||||
| AT&T Inc. | |||||||||
| Consolidated Statements of Cash Flows | |||||||||
| Dollars in millions | |||||||||
| Unaudited | Three Months Ended | ||||||||
| 3/31/12 | 3/31/11 | ||||||||
| Operating Activities | |||||||||
| Net income | $ | 3,652 | $ | 3,468 | |||||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|||||||||
| Depreciation and amortization | 4,560 | 4,584 | |||||||
| Undistributed earnings from investments in equity affiliates | (223 | ) | (233 | ) | |||||
| Provision for uncollectible accounts | 328 | 292 | |||||||
|
Deferred income tax expense and noncurrent unrecognized tax benefits |
337 | 731 | |||||||
| Net gain from impairment and sale of investments | (9 | ) | (41 | ) | |||||
| Changes in operating assets and liabilities: | |||||||||
| Accounts receivable | 111 | 72 | |||||||
| Other current assets | 1,082 | 708 | |||||||
| Accounts payable and accrued liabilities | (1,573 | ) | (1,309 | ) | |||||
| Other - net | (469 | ) | (540 | ) | |||||
| Total adjustments | 4,144 | 4,264 | |||||||
| Net Cash Provided by Operating Activities | 7,796 | 7,732 | |||||||
| Investing Activities | |||||||||
| Construction and capital expenditures: | |||||||||
| Capital expenditures | (4,261 | ) | (4,133 | ) | |||||
| Interest during construction | (65 | ) | (35 | ) | |||||
| Acquisitions, net of cash acquired | (433 | ) | (54 | ) | |||||
| Dispositions | 16 | 11 | |||||||
| Sales of securities, net of investment | 5 | 127 | |||||||
| Other | 1 | 9 | |||||||
| Net Cash Used in Investing Activities | (4,737 | ) | (4,075 | ) | |||||
| Financing Activities | |||||||||
|
Net change in short-term borrowings with original maturities of three months or less |
- | (36 | ) | ||||||
| Issuance of long-term debt | 2,986 | - | |||||||
| Repayment of long-term debt | (2,204 | ) | (1,264 | ) | |||||
| Purchase of treasury stock | (2,066 | ) | - | ||||||
| Issuance of treasury stock | 218 | 18 | |||||||
| Dividends paid | (2,606 | ) | (2,540 | ) | |||||
| Other | (130 | ) | 119 | ||||||
| Net Cash Used in Financing Activities | (3,802 | ) | (3,703 | ) | |||||
| Net decrease in cash and cash equivalents | (743 | ) | (46 | ) | |||||
| Cash and cash equivalents beginning of year | 3,185 | 1,437 | |||||||
| Cash and Cash Equivalents End of Period | $ | 2,442 | $ | 1,391 | |||||
| Financial Data | |||||||||||||
| AT&T Inc. | |||||||||||||
| Supplementary Operating and Financial Data | |||||||||||||
| Dollars in millions except per share amounts | |||||||||||||
| Unaudited | Three Months Ended | ||||||||||||
| 3/31/2012 | 3/31/2011 |
% Chg |
|||||||||||
| Wireless | |||||||||||||
| Volumes (000) | |||||||||||||
| Total | 103,940 | 97,519 | 6.6 | % | |||||||||
| Postpaid | 69,403 | 68,062 | 2.0 | % | |||||||||
| Prepaid | 7,368 | 6,613 | 11.4 | % | |||||||||
| Reseller | 13,869 | 12,241 | 13.3 | % | |||||||||
| Connected Devices | 13,300 | 10,603 | 25.4 | % | |||||||||
| Wireless Net Adds (000) | |||||||||||||
| Total | 726 | 1,984 | -63.4 | % | |||||||||
| Postpaid | 187 | 62 | - | ||||||||||
| Prepaid | 125 | 85 | 47.1 | % | |||||||||
| Reseller | 184 | 561 | -67.2 | % | |||||||||
| Connected Devices | 230 | 1,276 | -82.0 | % | |||||||||
| M&A Activity, Partitioned Customers and Other Adjs. | (33 | ) | (1 | ) | - | ||||||||
| Wireless Churn | |||||||||||||
| Postpaid Churn | 1.10 | % | 1.18 | % | -8 BP | ||||||||
| Total Churn | 1.47 | % | 1.36 | % | 11 BP | ||||||||
| Other | |||||||||||||
| Branded Computing Subscribers1 | 5,776 | 3,434 | 68.2 | % | |||||||||
| Licensed POPs (000,000) | 313 | 313 | 0.0 | % | |||||||||
| Wireline | |||||||||||||
| Voice | |||||||||||||
| Total Wireline Voice Connections | 37,878 | 42,457 | -10.8 | % | |||||||||
| Net Change | (1,134 | ) | (1,106 | ) | -2.5 | % | |||||||
| Broadband | |||||||||||||
| Total Wireline Broadband Connections2 | 16,530 | 16,486 | 0.3 | % | |||||||||
| Net Change2 | 103 | 177 | -41.8 | % | |||||||||
| Video | |||||||||||||
| U-verse | 3,991 | 3,205 | 24.5 | % | |||||||||
| Satellite | 1,732 | 1,886 | -8.2 | % | |||||||||
| Total Video Connections | 5,723 | 5,091 | 12.4 | % | |||||||||
| Net Change | 167 | 174 | -4.0 | % | |||||||||
| Consumer Revenue Connections | |||||||||||||
| Broadband3 | 14,595 | 14,515 | 0.6 | % | |||||||||
| Video Connections4 | 5,706 | 5,085 | 12.2 | % | |||||||||
| Voice5 | 20,537 | 23,479 | -12.5 | % | |||||||||
| Total Consumer Revenue Connections | 40,838 | 43,079 | -5.2 | % | |||||||||
| Net Change | (428 | ) | (348 | ) | -23.0 | % | |||||||
| AT&T Inc. | |||||||||||||
| Construction and capital expenditures | |||||||||||||
| Capital expenditures | $ | 4,261 | $ | 4,133 | 3.1 | % | |||||||
| Interest during construction | $ | 65 | $ | 35 | 85.7 | % | |||||||
| Dividends Declared per Share | $ | 0.44 | $ | 0.43 | 2.3 | % | |||||||
| End of Period Common Shares Outstanding (000,000) | 5,875 | 5,918 | -0.7 | % | |||||||||
| Debt Ratio6 | 38.4 | % | 36.6 | % | 180 BP | ||||||||
| Total Employees | 252,330 | 260,690 | -3.2 | % | |||||||||
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1 |
Branded Computing Subscribers includes tablets, tethering plans, aircards, mobile Wi-Fi hotspots and other data-only devices. |
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2 |
Prior-year amounts restated to conform to current period reporting methodology. | ||||||||||||
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3 |
Consumer wireline broadband connections include DSL lines, U-verse High Speed Internet access and satellite broadband. |
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4 |
Video connections include sales under agency agreements with EchoStar and DirecTV customers and U-verse connections. |
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5 |
Includes consumer U-verse Voice over Internet Protocol connections of 2,442 as of March 31, 2012. | ||||||||||||
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6 |
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 1Q12, total switched access lines were 35,436, retail business switched access lines totaled 15,256 and wholesale and coin switched access lines totaled 2,085. |
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| Financial Data | |||||||||||||||||||||
| AT&T Inc. | |||||||||||||||||||||
| Non-GAAP Wireless Reconciliation | |||||||||||||||||||||
| Wireless Segment EBITDA | |||||||||||||||||||||
| Dollars in millions | |||||||||||||||||||||
| Unaudited | |||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||
| 3/31/11 | 6/30/11 | 9/30/11 | 12/31/11 | 3/31/12 | |||||||||||||||||
| Segment Operating Revenues | |||||||||||||||||||||
| Service | $ | 13,961 | $ | 14,157 | $ | 14,261 | $ | 14,347 | $ | 14,566 | |||||||||||
| Equipment | 1,349 | 1,446 | 1,345 | 2,349 | 1,570 | ||||||||||||||||
| Total Segment Operating Revenues | 15,310 | 15,603 | 15,606 | 16,696 | 16,136 | ||||||||||||||||
| Segment Operating Expenses | |||||||||||||||||||||
| Operations and support | 9,861 | 9,786 | 9,376 | 12,598 | 10,083 | ||||||||||||||||
| Depreciation and amortization | 1,506 | 1,615 | 1,620 | 1,588 | 1,666 | ||||||||||||||||
| Total Segment Operating Expenses | 11,367 | 11,401 | 10,996 | 14,186 | 11,749 | ||||||||||||||||
| Segment Operating Income | 3,943 | 4,202 | 4,610 | 2,510 | 4,387 | ||||||||||||||||
| Segment Operating Income Margin | 25.8 | % | 26.9 | % | 29.5 | % | 15.0 | % | 27.2 | % | |||||||||||
| Plus: Depreciation and amortization | 1,506 | 1,615 | 1,620 | 1,588 | 1,666 | ||||||||||||||||
| EBITDA | 5,449 | 5,817 | 6,230 | 4,098 | 6,053 | ||||||||||||||||
| EBITDA as a % of Service Revenue | 39.0 | % | 41.1 | % | 43.7 | % | 28.6 | % | 41.6 | % | |||||||||||
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EBITDA is defined as Operating Income Before Depreciation and Amortization. Annual Service EBITDA Margin is calculated as the sum of quarterly EBITDA divided by the sum of quarterly Service Revenues. |
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| Financial Data | ||||||||
| AT&T Inc. | ||||||||
| Non-GAAP Financial Reconciliation | ||||||||
| Free Cash Flow | ||||||||
| Dollars in Millions | ||||||||
| Unaudited | ||||||||
| Three Months Ended | ||||||||
| 3/31/11 | 3/31/12 | |||||||
| Net cash provided by operating activities | $ | 7,732 | $ | 7,796 | ||||
| Less: Construction and capital expenditures | (4,168 | ) | (4,326 | ) | ||||
| Free Cash Flow | $ | 3,564 | $ | 3,470 | ||||
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Free cash flow is defined as cash from operations minus construction and capital expenditures. We believe these metrics provide useful information to our investors because management regularly reviews free cash flow as an important indicator of how much cash is generated by normal business operations, including capital expenditures, and makes decisions based on it. Management also views free cash flow as a measure of cash available to pay debt and return cash to shareowners. |
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| Free Cash Flow after Dividends | ||||||||
| Dollars in Millions | ||||||||
| Unaudited | ||||||||
| Three Months Ended | ||||||||
| 3/31/11 | 3/31/12 | |||||||
| Net cash provided by operating activities | $ | 7,732 | $ | 7,796 | ||||
| Less: Construction and capital expenditures | (4,168 | ) | (4,326 | ) | ||||
| Free Cash Flow | 3,564 | 3,470 | ||||||
| Less: Dividends paid | (2,540 | ) | (2,606 | ) | ||||
| Free Cash Flow After Dividends | $ | 1,024 | $ | 864 | ||||
| Financial Data | |||||
| AT&T Inc. | |||||
| Non-GAAP Financial Reconciliation | |||||
| Net-Debt-to-EBITDA Ratio | |||||
| Dollars in millions | |||||
| Unaudited | |||||
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Three Months Ended |
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| 3/31/12 | 2012 YTD | ||||
| Operating Revenues | $ 31,822 |
$ 31,822 |
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| Operating Expenses | 25,721 | 25,721 | |||
| Total Operating Income | 6,101 | 6,101 | |||
| Add Back Depreciation and Amortization | 4,560 | 4,560 | |||
| Total Consolidated EBITDA | 10,661 | 10,661 | |||
| Annualized Consolidated EBITDA* | 42,644 | ||||
| End-of-period current debt | 6,775 | ||||
| End-of-period long-term debt | 58,934 | ||||
| Total End-of-Period Debt | 65,709 | ||||
| (Premiums) Discounts on long-term debt | (42 | ) | |||
| Normalized Debt Balance | 65,667 | ||||
| Less Cash and Cash Equivalents | 2,442 | ||||
| Normalized Net Debt Balance | 63,225 | ||||
| Net-Debt-to-EBITDA Ratio | 1.48 | ||||
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*EBITDA is annualized by dividing YTD EBITDA by YTD number of quarters and multiplying by four. |
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Note: 4Q12 EBITDA will exclude the impact of benefit plan actuarial gains/losses in order to better represent AT&T's operational performance. |
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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.