DALLAS--(BUSINESS WIRE)--AT&T Inc. (NYSE:T) today reported first-quarter results, highlighted by continued robust mobile broadband growth with record first-quarter smartphone sales and a two-fold year-over-year increase in branded computing subscribers.
“We delivered another robust mobile broadband growth quarter for a very solid start to the year,” said Randall Stephenson, AT&T chairman and chief executive officer. “We posted double-digit wireless revenue growth, and we set new first-quarter records in total net adds, connected device net adds and smartphone sales. Growth in tablets and other branded computing subscribers also continues to be strong.
“Mobile broadband networks are driving unprecedented growth and innovation, and AT&T is playing a leading role in bringing these benefits to customers,” Stephenson said. “That’s why our agreement to acquire T-Mobile USA, which we announced in March, is so important. Combined, the two companies’ spectrum and network assets will allow us to simultaneously address spectrum issues created by this increased demand and improve customers’ network experience as volumes continue to grow.”
First-Quarter Financial Results
For the quarter ended March 31, 2011, AT&T's consolidated revenues totaled $31.2 billion, up more than $700 million, or 2.3 percent, versus the year-earlier quarter, marking the company's fifth consecutive quarter with a year-over-year revenue increase.
Compared with results for the first quarter of 2010, operating expenses were $25.4 billion versus $24.6 billion; operating income was $5.8 billion, down from $6.0 billion; and AT&T's operating income margin was 18.6 percent, compared to 19.6 percent.
First-quarter 2011 net income attributable to AT&T totaled $3.4 billion, or $0.57 per diluted share. These results compare with reported net income attributable to AT&T of $2.5 billion, or $0.41 per diluted share, in the first quarter of 2010. Excluding 2010 significant items, earnings per share for the first quarter of 2011 was stable with earnings per share of $0.58 per diluted share in the year-ago first quarter.
First-quarter 2011 cash from operating activities totaled $7.7 billion, and capital expenditures totaled $4.2 billion. Free cash flow — cash from operating activities minus capital expenditures — totaled $3.6 billion.
Wireless Operational Highlights
Led by strong performance in mobile broadband in the first quarter, AT&T delivered continued solid growth in its wireless business, including record first-quarter subscriber growth and stable churn. Highlights included:
Mobile Broadband Drives Solid Subscriber Gains. AT&T posted a net gain in total wireless subscribers of 2.0 million, to reach 97.5 million in service. This included gains in every customer category. First-quarter net adds reflect adoption of smartphones, increases in prepaid subscribers, strength in the reseller channel and a record first quarter for connected devices such as eReaders, security systems, fleet management systems and a host of other products. Retail net adds for the quarter include postpaid net adds of 62,000. Excluding the impacts of the Alltel and Centennial integration migrations, postpaid net adds were approximately 165,000. Prepaid net adds were 85,000. Connected device net adds were 1.3 million, and reseller net adds were 561,000.
Tablet Sales Drive Branded Computing Subscribers. AT&T had a strong quarter with branded computing subscribers, a new growth area for the company that includes tablets, aircards, MiFi devices, tethering plans and other data-only devices. AT&T added 421,000 of these devices to reach 3.4 million, twice as many as a year ago. Most of those new subscribers were tablets with 322,000 added in the quarter. More than 80 percent of those tablets were booked to the prepaid category.
Sequential Churn Stable. Churn levels were relatively stable sequentially. Total churn was 1.36 percent versus 1.30 percent in the first quarter of 2010 and 1.32 percent in the fourth quarter of 2010. Postpaid churn was 1.18 percent, compared to 1.07 percent in the year-ago first quarter and 1.15 percent in the fourth quarter of 2010. Excluding the impacts of the Alltel and Centennial migrations, postpaid churn was 1.12 percent for the quarter, compared with 1.05 percent in the year-ago quarter and 1.10 percent in the fourth quarter of 2010.
Smartphone Sales Remain Strong. AT&T had another strong quarter of smartphone sales. (Smartphones are voice and data devices with an advanced operating system to better manage data and Internet access.) More than 5.5 million smartphones were sold in the first quarter, the third-highest quarter ever and an increase of more than 60 percent year over year. During the quarter, 3.6 million iPhones were activated. Approximately 65 percent of postpaid sales were smartphones.
At the end of the quarter, 46.2 percent of AT&T's 68.1 million postpaid subscribers had smartphones, up from 34.7 percent a year earlier. The average ARPU for smartphones on AT&T's network is 1.8 times that of the company's other devices. More than 80 percent of smartphone subscribers are on FamilyTalk and/or business discount plans. Churn levels for these subscribers are significantly lower than for other postpaid subscribers.
Double-Digit Wireless Revenue Growth. Total wireless revenues, which include equipment sales, were up 10.2 percent year over year to $15.3 billion. Wireless service revenues increased 8.6 percent, to $14.0 billion, in the first quarter.
Wireless Data Revenues Lead Growth. Wireless data revenues — driven by messaging, Internet access, access to applications and related services — increased nearly $1 billion, or 23.9 percent, from the year-earlier quarter to $5.1 billion. AT&T postpaid wireless subscribers on monthly data plans increased by 18.7 percent over the past year. Versus the year-earlier quarter, total text messages carried on the AT&T network increased by more than 25 percent to 179.8 billion, and multimedia messages increased by 54.2 percent to 3.7 billion.
Postpaid ARPU Expansion. Driven by strong data growth, postpaid subscriber ARPU increased 2.4 percent versus the year-earlier quarter to $63.39. This marked the ninth consecutive quarter AT&T has posted a year-over-year increase in postpaid ARPU. Excluding the impact of the Alltel merger, postpaid ARPU growth would have been about 3 percent year over year. Postpaid data ARPU reached $23.35, up 16.0 percent versus the year-earlier quarter.
Wireless Margins Reflect Strong Smartphone Sales. First-quarter wireless margins reflected increased operating costs associated with strong smartphone sales, high customer upgrade levels and the Alltel and Centennial merger costs, offset in part by improved operating efficiencies and further revenue growth from the company’s base of high-quality smartphone subscribers. AT&T’s first-quarter wireless operating income margin was 25.8 percent versus 30.0 percent in the year-earlier quarter, and AT&T’s wireless EBITDA service margin was 39.0 percent, compared with 44.5 percent in the first quarter of 2010. Without customer migration costs from the Alltel and Centennial mergers, service margin would have been 40.5 percent. (EBITDA service margin is earnings before interest, taxes, depreciation and amortization, divided by total service revenues.) First-quarter wireless operating expenses totaled $11.4 billion, up 16.8 percent versus the year-earlier quarter, and wireless operating income was $3.9 billion, down 5.3 percent year over year.
Wireline Operational Highlights
AT&T's first-quarter wireline results were highlighted by continued growth in consumer revenues, sustained growth in revenues from strategic business services and solid cost management. Highlights included:
Growth in Wireline Consumer Revenues Continues. Driven by strength in IP data services, revenue from residential customers totaled $5.3 billion in the first quarter, up 0.5 percent year over year, the third consecutive quarter of year-over-year growth.
U-verse Drives Consumer Growth. AT&T U-verse TV added 218,000 subscribers to reach 3.2 million in service. In the first quarter, the AT&T U-verse High Speed Internet attach rate continued to run above 90 percent and nearly 60 percent of subscribers took AT&T U-verse Voice. More than three-fourths of AT&T U-verse TV subscribers have a triple- or quad-play option from AT&T. ARPU for U-verse triple-play customers was $168, up 14.3 percent year over year.
AT&T's U-verse deployment now reaches 28 million living units. Companywide penetration of eligible living units is 15.3 percent, and across areas marketed to for 30 months or more, overall penetration is 23.8 percent. AT&T's total video subscribers, which combine the company's U-verse and bundled satellite customers, reached 5.1 million at the end of the quarter, representing 20.6 percent of households served.
Wireline Broadband Growth Remains Strong. Driven by strength in AT&T U-verse High Speed Internet service and standalone broadband, AT&T posted a 175,000 net gain in wireline broadband connections. About two-thirds of consumers have a broadband plan of 3 Mbps or higher.
IP Data Growth Transforms Consumer. Increased AT&T U-verse penetration and a significant number of subscribers on triple- or quad-play options drove 26.1 percent year-over-year growth in IP revenues from residential customers (broadband, U-verse TV and U-verse Voice). IP revenues now represent 46.9 percent of total wireline consumer revenue, up from 37.4 percent in the first quarter of 2010.
Growth in Revenues Per Household. Wireline revenues per household served increased 6.5 percent versus the year-earlier first quarter and were up 1.4 percent sequentially (average revenue per household is total consumer wireline revenue divided by the average monthly households in service), driven by AT&T U-verse services. This marked AT&T’s 13th consecutive quarter with year-over-year growth in wireline consumer revenues per household.
Consumer Connection Trends. In the first quarter, AT&T posted a decline in total consumer revenue connections due primarily to expected declines in traditional voice access lines, consistent with broader industry trends and somewhat offset by increases in U-verse TV, broadband and VoIP (Voice over Internet Protocol) connections. AT&T U-verse Voice connections increased by 181,000 in the quarter and 716,000 over the past four quarters. Total consumer revenue connections at the end of the first quarter were 43.1 million, compared with 45.0 million at the end of the first quarter of 2010 and 43.4 million at the end of the fourth quarter of 2010.
Strongest Growth in Strategic Business Services in More than Two Years. Revenues from new-generation capabilities that lead AT&T's most advanced business solutions — including Ethernet, VPNs, hosting, IP conferencing and application services — grew 18.8 percent versus the year-earlier quarter, their strongest growth in more than two years, continuing AT&T’s strong trends in this category. Total business revenues were $9.3 billion, a decline of 4.5 percent versus the year-earlier quarter and down 2.0 percent sequentially, reflecting economic weakness in voice and legacy data products and the third-quarter 2010 sale of the company’s Japan assets. When normalized for the Japan sale, total business revenues declined 3.6 percent, about the same rate as normalized results for the fourth quarter of 2010 and improved from the year-ago quarter. Business service revenues, which exclude CPE, declined 4.4 percent year over year and were down slightly sequentially.
Growth in Business IP Revenues. Total business IP data revenues grew 8.5 percent versus the year-earlier first quarter, led by growth in VPN revenues. More than 70 percent of AT&T's frame customers have made the transition to IP-based solutions, which allow them to easily add managed services such as network security, cloud services and IP conferencing on top of their infrastructures. Total business data revenue growth was 0.3 percent when compared to a year earlier.
Wireline Operating Expenses Down 2.7 Percent Year Over Year. AT&T’s first-quarter wireline operating income margin was 11.5 percent, down slightly compared to 12.0 percent in the year-earlier quarter and 13.0 percent in the fourth quarter of 2010. Improved consumer revenue trends and execution of cost initiatives helped to partially offset declines in voice revenues and storm-related costs in the West. First-quarter total wireline revenues were $15.0 billion, down 3.2 percent versus the year-earlier quarter. First-quarter wireline operating expenses were $13.2 billion, down 2.7 percent versus the first quarter of 2010 and up 0.4 percent sequentially. Wireline operating income totaled $1.7 billion, compared to $1.9 billion in the first quarter of 2010 and $2.0 billion in the fourth quarter of 2010.
*AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc.
About AT&T
AT&T Inc. (NYSE:T) is a premier communications holding company. Its subsidiaries and affiliates – AT&T operating companies – are the providers of AT&T services in the United States and around the world. With a powerful array of network resources that includes the nation's fastest mobile broadband network, AT&T is a leading provider of wireless, Wi-Fi, high speed Internet and voice services. A leader in mobile broadband, AT&T also offers the best wireless coverage worldwide, offering the most wireless phones that work in the most countries. It also offers advanced TV services under the AT&T U-verse® and AT&T | DIRECTV brands. The company's suite of IP-based business communications services is one of the most advanced in the world. In domestic markets, AT&T Advertising Solutions and AT&T Interactive are known for their leadership in local search and advertising.
Additional information about AT&T Inc. and the products and services provided by AT&T subsidiaries and affiliates is available at http://www.att.com. This AT&T news release and other announcements are available at http://www.att.com/newsroom and as part of an RSS feed at www.att.com/rss. Or follow our news on Twitter at @ATT. Find us on Facebook at www.Facebook.com/ATT to discover more about our consumer and wireless services or at www.Facebook.com/ATTSmallBiz to discover more about our small business services.
© 2011 AT&T Intellectual Property. All rights reserved. Mobile broadband not available in all areas. AT&T, the AT&T logo and all other marks contained herein are trademarks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners.
Cautionary Language Concerning Forward-Looking Statements
Information set forth in this news release contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results may differ materially. A discussion of factors that may affect future results is contained in AT&T's filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update or revise statements contained in this news release based on new information or otherwise. This news release may contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available on the company's website at www.att.com/investor.relations. Accompanying financial statements follow.
NOTE: EBITDA is defined as earnings before interests, taxes, depreciation and amortization. EBITDA differs from Segment Operating Income (loss), as calculated in accordance with generally accepted accounting principles (GAAP), in that it excludes depreciation and amortization. EBITDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with GAAP. Our calculation of EBITDA, as presented, may differ from similarly titled measures reported by other companies.
NOTE: Free cash flow is defined as cash from operations minus capital expenditures. We believe this metric provides useful information to our investors because management regularly reviews free cash flow as an important indicator of how much cash is generated by normal business operations, including capital expenditures, and makes decisions based on it. Management also views it as a measure of cash available to pay debt and return cash to shareowners.
NOTE: Adjusted Operating Income and Adjusted Operating Income Margin are non-GAAP financial measures calculated by excluding from operating revenues and operating expenses significant items that are non-operational or non-recurring in nature. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends. Adjusted Operating Income and Adjusted Operating Income Margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. Our calculation of Adjusted Operating Income, as presented, may differ from similarly titled measures reported by other companies.
| Financial Data | |||||||||||
| AT&T Inc. | |||||||||||
| Consolidated Statements of Income | |||||||||||
| Dollars in millions except per share amounts | |||||||||||
| Unaudited | Three Months Ended | ||||||||||
| 3/31/2011 | 3/31/2010 | % Chg | |||||||||
| Operating Revenues | |||||||||||
| Wireless service | $ | 13,961 | $ | 12,850 | 8.6 | % | |||||
| Data | 7,180 | 6,651 | 8.0 | % | |||||||
| Voice | 6,551 | 7,483 | -12.5 | % | |||||||
| Directory | 868 | 1,041 | -16.6 | % | |||||||
| Other | 2,687 | 2,505 | 7.3 | % | |||||||
| Total Operating Revenues | 31,247 | 30,530 | 2.3 | % | |||||||
| Operating Expenses | |||||||||||
|
Cost of services and sales (exclusive of depreciation and amortization shown separately below) |
13,403 | 12,383 | 8.2 | % | |||||||
| Selling, general and administrative | 7,452 | 7,396 | 0.8 | % | |||||||
| Depreciation and amortization | 4,584 | 4,780 | -4.1 | % | |||||||
| Total Operating Expenses | 25,439 | 24,559 | 3.6 | % | |||||||
| Operating Income | 5,808 | 5,971 | -2.7 | % | |||||||
| Interest Expense | 846 | 765 | 10.6 | % | |||||||
| Equity in Net Income of Affiliates | 249 | 217 | 14.7 | % | |||||||
| Other Income (Expense) - Net | 59 | (22 | ) | - | |||||||
| Income from Continuing Operations Before Income Taxes | 5,270 | 5,401 | -2.4 | % | |||||||
| Income Tax Expense | 1,802 | 2,863 | -37.1 | % | |||||||
| Income from Continuing Operations | 3,468 | 2,538 | 36.6 | % | |||||||
| Income from Discontinued Operations, net of tax | - | 2 | - | ||||||||
| Net Income | 3,468 | 2,540 | 36.5 | % | |||||||
| Less: Net Income Attributable to Noncontrolling Interest | (60 | ) | (87 | ) | 31.0 | % | |||||
| Net Income Attributable to AT&T | $ | 3,408 | $ | 2,453 | 38.9 | % | |||||
|
Basic Earnings Per Share from Continuing Operations Attributable to AT&T |
$ | 0.57 | $ | 0.42 | 35.7 | % | |||||
|
Basic Earnings Per Share from Discontinued Operations Attributable to AT&T |
- | - | - | ||||||||
| Basic Earnings Per Share Attributable to AT&T | $ | 0.57 | $ | 0.42 | 35.7 | % | |||||
|
Weighted Average Common Shares Outstanding (000,000) |
5,925 | 5,905 | 0.3 | % | |||||||
|
Diluted Earnings Per Share from Continuing Operations Attributable to AT&T |
$ | 0.57 | $ | 0.41 | 39.0 | % | |||||
|
Diluted Earnings Per Share from Discontinued Operations Attributable to AT&T |
- | - | - | ||||||||
| Diluted Earnings Per Share Attributable to AT&T | $ | 0.57 | $ | 0.41 | 39.0 | % | |||||
|
Weighted Average Common Shares Outstanding with Dilution (000,000) |
5,945 | 5,935 | 0.2 | % | |||||||
| Financial Data | |||||||||||
| AT&T Inc. | |||||||||||
| Statements of Segment Income | |||||||||||
| Dollars in millions | |||||||||||
| Unaudited | |||||||||||
| Three Months Ended | |||||||||||
| Wireless | 3/31/2011 | 3/31/2010 | % Chg | ||||||||
| Segment Operating Revenues | |||||||||||
| Service | $ | 13,961 | $ | 12,850 | 8.6 | % | |||||
| Equipment | 1,348 | 1,047 | 28.7 | % | |||||||
| Total Segment Operating Revenues | 15,309 | 13,897 | 10.2 | % | |||||||
| Segment Operating Expenses | |||||||||||
| Operations and support | 9,858 | 8,173 | 20.6 | % | |||||||
| Depreciation and amortization | 1,505 | 1,558 | -3.4 | % | |||||||
| Total Segment Operating Expenses | 11,363 | 9,731 | 16.8 | % | |||||||
| Segment Operating Income | 3,946 | 4,166 | -5.3 | % | |||||||
| Equity in Net Income (Loss) of Affiliates | (4 | ) | 12 | - | |||||||
| Segment Income | $ | 3,942 | $ | 4,178 | -5.6 | % | |||||
| Segment Operating Income Margin | 25.8 | % | 30.0 | % | |||||||
| Wireline | |||||||||||
| Segment Operating Revenues | |||||||||||
| Data | $ | 7,180 | $ | 6,651 | 8.0 | % | |||||
| Voice | 6,551 | 7,483 | -12.5 | % | |||||||
| Other | 1,219 | 1,312 | -7.1 | % | |||||||
| Total Segment Operating Revenues | 14,950 | 15,446 | -3.2 | % | |||||||
| Segment Operating Expenses | |||||||||||
| Operations and support | 10,266 | 10,512 | -2.3 | % | |||||||
| Depreciation and amortization | 2,958 | 3,076 | -3.8 | % | |||||||
| Total Segment Operating Expenses | 13,224 | 13,588 | -2.7 | % | |||||||
| Segment Operating Income | 1,726 | 1,858 | -7.1 | % | |||||||
| Equity in Net Income of Affiliates | - | 5 | - | ||||||||
| Segment Income | $ | 1,726 | $ | 1,863 | -7.4 | % | |||||
| Segment Operating Income Margin | 11.5 | % | 12.0 | % | |||||||
| Advertising Solutions | |||||||||||
| Segment Operating Revenues | $ | 868 | $ | 1,041 | -16.6 | % | |||||
| Segment Operating Expenses | |||||||||||
| Operations and support | 573 | 664 | -13.7 | % | |||||||
| Depreciation and amortization | 105 | 138 | -23.9 | % | |||||||
| Total Segment Operating Expenses | 678 | 802 | -15.5 | % | |||||||
| Segment Income | $ | 190 | $ | 239 | -20.5 | % | |||||
| Segment Income Margin | 21.9 | % | 23.0 | % | |||||||
| Other | |||||||||||
| Segment Operating Revenues | $ | 120 | $ | 146 | -17.8 | % | |||||
| Segment Operating Expenses | 174 | 438 | -60.3 | % | |||||||
| Segment Operating Income (Loss) | (54 | ) | (292 | ) | 81.5 | % | |||||
| Equity in Net Income of Affiliates | 253 | 200 | 26.5 | % | |||||||
| Segment Income (Loss) from Continuing Operations | $ | 199 | $ | (92 | ) | - | |||||
| Financial Data | ||||||||
| AT&T Inc. | ||||||||
| Consolidated Balance Sheets | ||||||||
| Dollars in millions except per share amounts | ||||||||
| 3/31/11 | 12/31/10 | |||||||
| Unaudited | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 1,391 | $ | 1,437 | ||||
|
Accounts receivable - net of allowances for doubtful accounts of $949 and $957 |
13,246 | 13,610 | ||||||
| Prepaid expenses | 1,674 | 1,458 | ||||||
| Deferred income taxes | 1,157 | 1,170 | ||||||
| Other current assets | 2,269 | 2,276 | ||||||
| Total current assets | 19,737 | 19,951 | ||||||
| Property, Plant and Equipment - Net | 103,369 | 103,196 | ||||||
| Goodwill | 73,602 | 73,601 | ||||||
| Licenses | 50,396 | 50,372 | ||||||
| Customer Lists and Relationships - Net | 4,154 | 4,708 | ||||||
| Other Intangible Assets - Net | 5,423 | 5,440 | ||||||
| Investments in Equity Affiliates | 4,845 | 4,515 | ||||||
| Other Assets | 6,559 | 6,705 | ||||||
| Total Assets | $ | 268,085 | $ | 268,488 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Current Liabilities | ||||||||
| Debt maturing within one year | $ | 6,902 | $ | 7,196 | ||||
| Accounts payable and accrued liabilities | 18,349 | 20,055 | ||||||
| Advanced billing and customer deposits | 3,959 | 4,086 | ||||||
| Accrued taxes | 1,499 | 72 | ||||||
| Dividends payable | 2,545 | 2,542 | ||||||
| Total current liabilities | 33,254 | 33,951 | ||||||
| Long-Term Debt | 58,126 | 58,971 | ||||||
| Deferred Credits and Other Noncurrent Liabilities | ||||||||
| Deferred income taxes | 23,149 | 22,070 | ||||||
| Postemployment benefit obligation | 28,510 | 28,803 | ||||||
| Other noncurrent liabilities | 12,203 | 12,743 | ||||||
| Total deferred credits and other noncurrent liabilities | 63,862 | 63,616 | ||||||
| Stockholders' Equity | ||||||||
| Common stock | 6,495 | 6,495 | ||||||
| Additional paid-in capital | 91,636 | 91,731 | ||||||
| Retained earnings | 32,649 | 31,792 | ||||||
| Treasury stock | (20,949 | ) | (21,083 | ) | ||||
| Accumulated other comprehensive income | 2,713 | 2,712 | ||||||
| Noncontrolling interest | 299 | 303 | ||||||
| Total stockholders' equity | 112,843 | 111,950 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 268,085 | $ | 268,488 | ||||
| Financial Data | ||||||||
| AT&T Inc. | ||||||||
| Consolidated Statements of Cash Flows | ||||||||
| Dollars in millions | ||||||||
| Unaudited | Three months ended March 31, | |||||||
| 2011 | 2010 | |||||||
| Operating Activities | ||||||||
| Net income | $ | 3,468 | $ | 2,540 | ||||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization | 4,584 | 4,780 | ||||||
| Undistributed earnings from investments in equity affiliates | (233 | ) | (201 | ) | ||||
| Provision for uncollectible accounts | 292 | 350 | ||||||
|
Deferred income tax expense and noncurrent unrecognized tax benefits |
731 | 1,609 | ||||||
| Net (gain) loss from impairment and sale of investments | (41 | ) | 50 | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 72 | 395 | ||||||
| Other current assets | (196 | ) | 92 | |||||
| Accounts payable and accrued liabilities | (406 | ) | (2,043 | ) | ||||
| Net income attributable to noncontrolling interest | (60 | ) | (87 | ) | ||||
| Other - net | (479 | ) | (247 | ) | ||||
| Total adjustments | 4,264 | 4,698 | ||||||
| Net Cash Provided by Operating Activities | 7,732 | 7,238 | ||||||
| Investing Activities | ||||||||
| Construction and capital expenditures | ||||||||
| Capital expenditures | (4,133 | ) | (3,148 | ) | ||||
| Interest during construction | (35 | ) | (184 | ) | ||||
| Acquisitions, net of cash acquired | (54 | ) | (178 | ) | ||||
| Dispositions | 11 | 1 | ||||||
| (Purchases) and sales of securities, net | 127 | (20 | ) | |||||
| Other | 9 | 7 | ||||||
| Net Cash Used in Investing Activities | (4,075 | ) | (3,522 | ) | ||||
| Financing Activities | ||||||||
|
Net change in short-term borrowings with original maturities of three months or less |
(36 | ) | 323 | |||||
| Repayment of long-term debt | (1,264 | ) | (2,512 | ) | ||||
| Issuance of treasury shares | 18 | 3 | ||||||
| Dividends paid | (2,540 | ) | (2,479 | ) | ||||
| Other | 119 | (244 | ) | |||||
| Net Cash Used in Financing Activities | (3,703 | ) | (4,909 | ) | ||||
| Net decrease in cash and cash equivalents | (46 | ) | (1,193 | ) | ||||
| Cash and cash equivalents beginning of year | 1,437 | 3,741 | ||||||
| Cash and Cash Equivalents End of Period | $ | 1,391 | $ | 2,548 | ||||
| Financial Data | |||||||||||||
| AT&T Inc. | |||||||||||||
| Supplementary Operating and Financial Data | |||||||||||||
| Dollars in millions except per share amounts | |||||||||||||
| Unaudited | Three Months Ended | ||||||||||||
| 3/31/2011 | 3/31/2010 | % Chg | |||||||||||
| Wireless | |||||||||||||
| Volumes (000) | |||||||||||||
| Total | 97,519 | 86,987 | 12.1 | % | |||||||||
| Postpaid6 | 68,062 | 65,108 | 4.5 | % | |||||||||
| Prepaid6 | 6,613 | 5,377 | 23.0 | % | |||||||||
| Reseller6 | 12,241 | 10,717 | 14.2 | % | |||||||||
| Connected Devices6 | 10,603 | 5,785 | 83.3 | % | |||||||||
| Wireless Net Adds (000) | |||||||||||||
| Total | 1,984 | 1,857 | 6.8 | % | |||||||||
| Postpaid6 | 62 | 512 | -87.9 | % | |||||||||
| Prepaid6 | 85 | 24 | - | ||||||||||
| Reseller6 | 561 | 269 | - | ||||||||||
| Connected Devices6 | 1,276 | 1,052 | 21.3 | % | |||||||||
| M&A Activity, Partitioned Customers and Other Adjs. | (1 | ) | 10 | ||||||||||
| Wireless Churn | |||||||||||||
| Postpaid Churn6 | 1.18 | % | 1.07 | % | 11 BP | ||||||||
| Total Churn6 | 1.36 | % | 1.30 | % | 6 BP | ||||||||
| Other | |||||||||||||
| Licensed POPs (000,000) | 313 | 307 | 2.0 | % | |||||||||
| In-Region Wireline1 | |||||||||||||
| Voice | |||||||||||||
| Total Wireline Voice Connections | 42,457 | 47,385 | -10.4 | % | |||||||||
| Net Change | (1,106 | ) | (1,103 | ) | -0.3 | % | |||||||
| Broadband | |||||||||||||
| Total Wireline Broadband Connections | 16,485 | 16,044 | 2.7 | % | |||||||||
| Net Change | 175 | 255 | -31.4 | % | |||||||||
| Video | |||||||||||||
| U-verse | 3,205 | 2,296 | 39.6 | % | |||||||||
| Satellite | 1,886 | 2,127 | -11.3 | % | |||||||||
| Total Video Connections | 5,091 | 4,423 | 15.1 | % | |||||||||
| Net Change | 174 | 184 | -5.4 | % | |||||||||
| Consumer Revenue Connections | |||||||||||||
| Broadband3 | 14,515 | 13,989 | 3.8 | % | |||||||||
| Video Connections4 | 5,085 | 4,422 | 15.0 | % | |||||||||
| Voice2 | 23,479 | 26,633 | -11.8 | % | |||||||||
| Total Consumer Revenue Connections | 43,079 | 45,044 | -4.4 | % | |||||||||
| Net Change | (348 | ) | (243 | ) | -43.2 | % | |||||||
| AT&T Inc. | |||||||||||||
| Construction and capital expenditures | |||||||||||||
| Capital expenditures | $ | 4,133 | $ | 3,148 | 31.3 | % | |||||||
| Interest during construction | $ | 35 | $ | 184 | -81.0 | % | |||||||
| Dividends Declared per Share | $ | 0.43 | $ | 0.42 | 2.4 | % | |||||||
| End of Period Common Shares Outstanding (000,000) | 5,918 | 5,909 | 0.2 | % | |||||||||
| Debt Ratio5 | 36.6 | % | 40.5 | % | -390 BP | ||||||||
| Total Employees | 260,690 | 276,280 | -5.6 | % | |||||||||
|
1 |
In-region wireline represents access lines served by AT&T's incumbent local exchange companies. | ||||||||||||
|
2 |
Includes consumer U-verse Voice over Internet Protocol connections of 1,861 as of March 31, 2011. | ||||||||||||
|
3 |
Consumer wireline broadband connections include DSL lines, U-verse High Speed Internet access and satellite broadband. |
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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 |
Total long-term debt plus debt maturing within one year divided by total debt plus total stockholders' equity. | ||||||||||||
|
6 |
Prior year amounts restated to conform to current period reporting methodology. | ||||||||||||
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Note: For the end of 1Q11, total switched access lines were 40,596, retail business switched access lines totaled 16,656, and wholesale and coin switched access lines totaled 2,322. |
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| Financial Data | ||||||||||||||||||||
| AT&T Inc. | ||||||||||||||||||||
| Non-GAAP Wireless Reconciliation | ||||||||||||||||||||
| Wireless Segment EBITDA | ||||||||||||||||||||
| Dollars in millions | ||||||||||||||||||||
| Unaudited | ||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| 3/31/2010 | 6/30/2010 | 9/30/2010 | 12/31/2010 | 3/31/2011 | ||||||||||||||||
| Segment Operating Revenues | ||||||||||||||||||||
| Service | $ | 12,850 | $ | 13,186 | $ | 13,675 | $ | 13,799 | $ | 13,961 | ||||||||||
| Equipment | 1,047 | 1,056 | 1,505 | 1,382 | 1,348 | |||||||||||||||
| Total Segment Operating Revenues | 13,897 | 14,242 | 15,180 | 15,181 | 15,309 | |||||||||||||||
| Segment Operating Expenses | ||||||||||||||||||||
| Operations and support | 8,173 | 8,553 | 10,032 | 9,988 | 9,858 | |||||||||||||||
| Depreciation and amortization | 1,558 | 1,578 | 1,640 | 1,721 | 1,505 | |||||||||||||||
| Total Segment Operating Expenses | 9,731 | 10,131 | 11,672 | 11,709 | 11,363 | |||||||||||||||
| Segment Operating Income | 4,166 | 4,111 | 3,508 | 3,472 | 3,946 | |||||||||||||||
| Plus: Depreciation and amortization | 1,558 | 1,578 | 1,640 | 1,721 | 1,505 | |||||||||||||||
| EBITDA | 5,724 | 5,689 | 5,148 | 5,193 | 5,451 | |||||||||||||||
| EBITDA as a % of Service Revenue | 44.5 | % | 43.1 | % | 37.6 | % | 37.6 | % | 39.0 | % | ||||||||||
|
EBITDA is defined as Earnings Before Interest, Taxes, Depreciation and Amortization. Annual Service EBITDA Margin is calculated as the sum of quarterly EBITDA divided by the sum of quarterly Service Revenues. |
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| Financial Data | ||||||||
| AT&T Inc. | ||||||||
| Non-GAAP Financial Reconciliation | ||||||||
| Free Cash Flow | ||||||||
| Dollars in Millions | ||||||||
| Unaudited | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2010 | 2011 | |||||||
| Net cash provided by operating activities | $ | 7,238 | $ | 7,732 | ||||
| Less: Construction and capital expenditures | (3,332 | ) | (4,168 | ) | ||||
| Free Cash Flow | $ | 3,906 | $ | 3,564 | ||||
|
Free cash flow is defined as cash from operations minus capital expenditures. We believe these metrics provide useful information to our investors because management regularly reviews free cash flow as an important indicator of how much cash is generated by normal business operations, including capital expenditures, and makes decisions based on it. Management also views free cash flow as a measure of cash available to pay debt and return cash to shareowners. |
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| Free Cash Flow After Dividends | ||||||||
| Dollars in Millions | ||||||||
| Unaudited | ||||||||
| Three Months Ended | ||||||||
| 3/31/2010 | 3/31/2011 | |||||||
| Net cash provided by operating activities | $ | 7,238 | $ | 7,732 | ||||
| Less: Construction and capital expenditures | (3,332 | ) | (4,168 | ) | ||||
| Free Cash Flow | 3,906 | 3,564 | ||||||
| Less: Dividends paid | (2,479 | ) | (2,540 | ) | ||||
| Free Cash Flow After Dividends | $ | 1,427 | $ | 1,024 | ||||
| Financial Data | |||||||
| AT&T Inc. | |||||||
| Non-GAAP Financial Reconciliation | |||||||
| Annualized Net Debt-to-EBITDA Ratio | |||||||
| Dollars in millions | |||||||
| Unaudited | |||||||
| Three Months Ended | |||||||
| 3/31/2011 | 2011 YTD | ||||||
| Operating Revenues | $ | 31,247 | $ | 31,247 | |||
| Operating Expenses | 25,439 | 25,439 | |||||
| Total Operating Income | 5,808 | 5,808 | |||||
| Add Back Depreciation and Amortization | 4,584 | 4,584 | |||||
| Total Consolidated EBITDA | 10,392 | 10,392 | |||||
| Annualized Consolidated EBITDA* | 41,568 | ||||||
| End-of-period current debt | 6,902 | ||||||
| End-of-period long-term debt | 58,126 | ||||||
| Total End-of-Period Debt | 65,028 | ||||||
| (Premiums) Discounts on long-term debt | (163 | ) | |||||
| Normalized Debt Balance | 64,865 | ||||||
| Less Cash and Cash Equivalents | 1,391 | ||||||
| Normalized Net Debt Balance | 63,474 | ||||||
| Annualized Net Debt-to-EBITDA Ratio | 1.53 | ||||||
|
*EBITDA is annualized by dividing YTD EBITDA by YTD number of quarters and multiplying by four. |
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|
Note: 4Q11 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
EBITDA is defined as earnings before interest, taxes, depreciation and amortization. EBITDA service margin is calculated as EBITDA divided by service revenues. EBITDA differs from Segment Operating Income (Loss), as calculated in accordance with GAAP, in that it excludes depreciation and amortization. EBITDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with generally accepted accounting principles. Our calculation of EBITDA, as presented, may differ from similarly titled measures reported by other companies.
We believe these measures are relevant and useful information to our investors as they are part of AT&T Mobility’s internal management reporting and planning processes and are important metrics that AT&T Mobility’s management uses to evaluate the operating performance of its regional operations. These measures are used by management as a gauge of AT&T Mobility’s success in acquiring, retaining and servicing subscribers because we believe these measures reflect AT&T Mobility’s ability to generate and grow subscriber revenues while providing a high level of customer service in a cost-effective manner. Management also uses these measures as a method of comparing AT&T Mobility’s performance with that of many of its competitors. The financial and operating metrics which affect EBITDA include the key revenue and expense drivers for which AT&T Mobility’s operating managers are responsible and upon which we evaluate their performance.
EBITDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA excludes other income (expense) – net, minority interest in earnings of consolidated entities and equity in net income (loss) of affiliates, as these do not reflect the operating results of AT&T Mobility’s subscriber base and its national footprint that AT&T Mobility utilizes to obtain and service its customers. Equity in net income (loss) of affiliates represents AT&T Mobility’s proportionate share of the net income (loss) of affiliates in which it exercises significant influence, but does not control. As AT&T Mobility does not control these entities, our management excludes these results when evaluating the performance of our primary operations. EBITDA excludes interest expense and the provision for income taxes. Excluding these items eliminates the expenses associated with its capitalization and tax structures. Finally, EBITDA excludes depreciation and amortization, in order to eliminate the impact of capital investments.
We believe EBITDA as a percentage of service revenues to be a more relevant measure of AT&T Mobility’s operating margin than EBITDA as a percentage of total revenue. AT&T Mobility generally subsidizes a portion of its handset sales, all of which are recognized in the period in which AT&T Mobility sells the handset. This results in a disproportionate impact on its margin in that period. Management views this equipment subsidy as a cost to acquire or retain a subscriber, which is recovered through the ongoing service revenue that is generated by the subscriber. AT&T Mobility also uses service revenues to calculate margin to facilitate comparison, both internally and externally with its competitors, as they calculate their margins using services revenue as well.
There are material limitations to using these non-GAAP financial measures. EBITDA and EBITDA service margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies. Furthermore, these performance measures do not take into account certain significant items, including depreciation and amortization, interest expense, tax expense and equity in net income (loss) of affiliates, which directly affect AT&T Mobility’s net income. Management compensates for these limitations by carefully analyzing how its competitors present performance measures that are similar in nature to EBITDA as we present it, and considering the economic effect of the excluded expense items independently as well as in connection with its analysis of net income as calculated in accordance with GAAP. EBITDA and EBITDA service margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP.
FREE CASH FLOW DISCUSSION
Free cash flow is defined as cash from operations minus capital expenditures. Free cash flow after dividends is defined as cash from operations minus capital expenditures and dividends. Free cash flow yield is defined as cash from continuing operations less capital expenditures as a percentage of market capitalization computed on the last trading day of the quarter. Market capitalization is computed by multiplying the end of period stock price by the end of period shares outstanding. We believe these metrics provide useful information to our investors because management monthly reviews free cash flow as an important indicator of how much cash is generated by normal business operations, including capital expenditures, and makes decisions based on it. Management also views it as a measure of cash available to pay debt and return cash to shareowners.