Solid Earnings Per Share and Cash Flows, Strong Mobile Data Growth and Record U-verse Broadband Gains Highlight AT&T’s First-Quarter Results

LTE Deployment Ahead of Schedule with Nearly 200 Million POPs Covered

  • $0.67 diluted EPS compared to $0.60 diluted EPS in the first quarter of 2012. Excluding significant items and adjusting for the sale of Advertising Solutions, EPS was $0.64 versus $0.59, up 8.5 percent
  • Consolidated revenues of $31.4 billion, down 1.5 percent versus reported results for the year-earlier period, and up 0.9 percent excluding the sale of Advertising Solutions
  • Strong cash from operations of $8.2 billion and free cash flow of $3.9 billion
  • More than 2 million new high speed IP broadband connections, both wireless and wireline

Strong Mobile Data Growth Drives Solid Wireless Gains

  • Wireless data revenues up 21.0 percent versus the year-earlier period; total wireless revenues and wireless service revenues both up 3.4 percent versus the year-ago quarter
  • Wireless operating income margin of 28.0 percent; wireless EBITDA service margin up significantly to 43.2 percent with record first-quarter smartphone sales
  • 296,000 wireless postpaid net adds; postpaid churn improves to 1.04 percent
  • 1.2 million new smartphone subscribers; smartphones 88 percent of postpaid phone sales
  • Postpaid data ARPU up 18.0 percent; postpaid phone-only subscriber ARPU up 2 percent
  • AT&T has the nation’s fastest 4G LTE network as supported by an independent third party
  • 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

Increasing U-verse® Gains Drive Wireline Consumer Revenue Growth

  • Wireline consumer revenue growth of 2.0 percent versus the year-earlier period; total U-verse revenues including business up 31.5 percent year over year
  • 8.7 million total U-verse subscribers (TV and high speed Internet) in service; 731,000 high speed Internet subscribers added, the best-ever quarterly gain; and a net gain of 232,000 U-verse TV subscribers, the strongest growth in nine quarters
  • Best total broadband net adds in two years; total wireline broadband data ARPU up more than 9 percent year over year

Note: AT&T’s first-quarter earnings conference call will be broadcast live via the Internet at 4:30 p.m. ET on Tuesday, April 23, 2013, at www.att.com/investor.relations.

DALLAS--()--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 %
 
 

1 Prior year amounts restated to conform to current period reporting methodology.

2 Consumer wireline broadband connections include DSL lines, U-verse High Speed Internet access and satellite broadband.

3 Includes consumer U-verse Voice over Internet Protocol connections of 3,120 as of March 31, 2013.

4 Total long-term debt plus debt maturing within one year divided by total debt plus total stockholders’ equity.

 

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.

 

   
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    
 

Free cash flow includes reimbursements of certain postretirement benefits paid.

 

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.

 
   
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.

 

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.

 
   
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.

 

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.

 

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.

Contacts

AT&T Inc.
McCall Butler, 917-209-5792
mbutler@connected.att-mail.com

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Contacts

AT&T Inc.
McCall Butler, 917-209-5792
mbutler@connected.att-mail.com