DALLAS--(BUSINESS WIRE)--AT&T Inc. (NYSE:T) today reported solid third-quarter results with strong revenue and earnings growth driven by continued gains in the company’s key growth drivers — mobile and IP data, U-verse and strategic business services.
“We’re setting the standard for 4G LTE speeds and network reliability. Our fiber and U-verse expansion projects are ahead of schedule bringing high-speed broadband to millions more customers,” said Randall Stephenson, AT&T chairman and CEO. “With these initiatives, we’re seeing excellent growth across our major platforms — mobility, U-verse and strategic business services.”
Third-Quarter Financial Results
For the quarter ended September 30, 2013, AT&T's consolidated revenues totaled $32.2 billion, up 2.2 percent versus the year-earlier quarter.
Compared with results for the third quarter of 2012, operating expenses were $26.0 billion versus $25.4 billion; operating income was $6.2 billion versus $6.0 billion; and operating income margin was unchanged at 19.2 percent. Third-quarter 2013 net income attributable to AT&T totaled $3.8 billion compared to $3.6 billion in the year-earlier quarter. Earnings per share was $0.72 per diluted share versus $0.63 per diluted share in the year-earlier quarter, a 14.3 percent increase. Adjusted for gains of 3 cents from a previously disclosed transfer of spectrum and 3 cents from income tax items, earnings per diluted share was $0.66 compared to $0.62 in the year-ago quarter, up 6.5 percent.
Third-quarter 2013 cash from operating activities totaled $9.2 billion, and capital expenditures totaled $6.0 billion. Free cash flow — cash from operating activities minus capital expenditures — totaled $3.2 billion. During the third quarter, the company repurchased 55 million shares for $1.9 billion. At the end of the quarter, 216 million shares remained on the current authorization. The company expects to make future repurchases opportunistically.
As part of its Project VIP-related LTE deployment, the company now covers nearly 250 million POPs in more than 435 markets with the nation’s fastest, and now most reliable, 4G LTE network, according to independent third-party data. The company’s LTE network is expected to cover approximately 270 million POPs by year-end 2013 and to be substantially complete by the summer of 2014.
WIRELESS OPERATIONAL HIGHLIGHTS
In the third quarter, AT&T added nearly 1 million subscribers, delivered strong wireless revenue growth and postpaid ARPU gains, and continued to expand its high-value smartphone base. Highlights included:
Continued Growth in Wireless Revenues. Total wireless revenues, which include equipment sales, were up 5.1 percent year over year to $17.5 billion. Wireless service revenues increased 3.7 percent in the third quarter to $15.5 billion. Wireless data revenues increased 17.6 percent from the year-earlier quarter to $5.5 billion. Third-quarter wireless operating expenses totaled $12.9 billion, up 5.7 percent versus the year-earlier quarter, and wireless operating income was $4.6 billion, up 3.4 percent year over year.
Phone-Only Postpaid ARPU Increases 3.1 Percent. Postpaid phone-only ARPU increased 3.1 percent versus the year-earlier quarter. Total postpaid subscriber ARPU, which includes high-margin but lower-ARPU tablets, increased 1.5 percent versus the year-earlier quarter. This marked the 19th consecutive quarter AT&T has posted a year-over-year increase in postpaid ARPU. Postpaid data ARPU increased 16.7 percent versus the year-earlier quarter.
Nearly 1 Million Net Subscribers Added. AT&T posted a net increase in total wireless subscribers of 989,000 in the third quarter. Subscriber additions for the quarter included postpaid net adds of 363,000, more than twice as many as the year-ago quarter. Postpaid net adds include 178,000 smartphones and 388,000 tablets. Prepaid gained 192,000 subscribers following the introduction of LTE-capable GoPhones and new pricing plans. When including acquisitions, the company added more than 1 million retail postpaid and prepaid subscribers in the quarter. Connected device net adds were 719,000. Reseller revenues increased year over year; however, reseller had a net loss of 285,000 subscribers primarily due to losses in low-revenue 2G subscriber accounts.
Smartphone Base Continues to Expand. AT&T added 1.2 million postpaid smartphone subscribers in the third quarter. At the end of the quarter, 75 percent, or 50.6 million, of AT&T's postpaid phone subscribers had smartphones, up from 66 percent, or 44.5 million, a year earlier. The company sold a third-quarter record 6.7 million smartphones. Smartphones accounted for a record 89 percent of postpaid phone sales in the quarter. AT&T’s ARPU for smartphones is more than twice that of non-smartphone subscribers. About 42 percent of AT&T’s postpaid smartphone customers now use an LTE device and 70 percent use a 4G-capable device (LTE/HSPA+).
Mobile Share Gains Continue. The number of subscribers on usage-based data plans (tiered data and Mobile Share plans) continues to increase. About 72 percent, or 36.4 million, of postpaid smartphone subscribers are on usage-based data plans. This compares to 64 percent, or 28.5 million, a year ago. About 80 percent of customers on usage-based data plans have chosen the medium- and higher-data plans: 22 percent have chosen the higher plans, compared to 9 percent in the year-ago quarter, and 58 percent have chosen the medium-priced plans.
Since Mobile Share plans were first introduced a year ago, more than 16 million connections, or more than 22 percent of postpaid subscribers, have moved to Mobile Share plans. The number of Mobile Share accounts reached 5.3 million in the third quarter with an average of about three devices per account. Take rates on the higher-data plans continue to be strong with 30 percent of Mobile Share accounts choosing 10 gigabyte or higher plans. About 15 percent of Mobile Share subscribers came from unlimited plans.
Total and Postpaid Churn Stable. In the third quarter, postpaid churn was down slightly to 1.07 percent compared to 1.08 percent in the year-ago quarter and increased from 1.02 percent in the second quarter of 2013. Total churn was 1.31 percent versus 1.34 percent in the year-ago quarter and 1.36 percent in the second quarter of 2013. 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.
Wireless Margins Reflect Record Smartphone Sales. Wireless margins reflect record third-quarter smartphone sales, strong upgrades and further revenue gains from the company’s growing high-quality smartphone subscriber base. AT&T’s third-quarter wireless operating income margin was 26.4 percent versus 26.9 percent in the year-earlier quarter. AT&T’s wireless EBITDA service margin was 42.0 percent, compared with 41.6 percent in the third quarter of 2012. (EBITDA service margin is operating income before depreciation and amortization, divided by total service revenues.)
WIRELINE OPERATIONAL HIGHLIGHTS
AT&T's third-quarter wireline results were led by U-verse reaching 10 million total subscribers, solid wireline consumer revenue growth and accelerating growth in strategic business services. Highlights included:
U-verse Has First Billion-Dollar Revenue Month. Total third-quarter wireline revenues were $14.7 billion, down 1.0 percent versus the year-earlier quarter and down 0.7 percent sequentially. Total U-verse revenues grew 28.1 percent year over year and were up 4.4 percent versus the second quarter of 2013. U-verse also had its first-ever billion-dollar revenue month. Third-quarter wireline operating expenses were $13.1 billion, up 0.8 percent versus the third quarter of 2012 and stable sequentially. AT&T’s wireline operating income totaled $1.5 billion, down 13.7 percent versus the third quarter of 2012. Third-quarter wireline operating income margin was 10.6 percent, compared to 12.1 percent in the year-earlier quarter, down primarily due to customer growth-related costs and costs incurred as part of Project VIP.
Consumer Revenues Increase 2.4 Percent. Revenues from residential customers totaled $5.6 billion, an increase of 2.4 percent versus the third quarter a year ago and stable sequentially. Continued strong growth in consumer IP data services in the third quarter more than offset lower revenues from voice and legacy products. U-verse, which includes TV, high speed Internet and voice over IP, now represents 54 percent of wireline consumer revenues, up from 43 percent in the year-earlier quarter. Consumer U-verse revenues grew 27.2 percent year over year and were up 4.7 percent versus the second quarter of 2013.
U-verse Reaches 10 Million Subscribers. Total U-verse subscribers (TV and high speed Internet) reached 10 million in the third quarter. U-verse TV had its second-highest net adds ever and best net adds in almost five years, adding 265,000 subscribers to reach 5.3 million in service. AT&T now has more pay TV subscribers than any other telecommunications company. U-verse high speed Internet had a net gain of 655,000 subscribers to reach a total of 9.7 million, an increase of 37 percent from the year-ago quarter. Overall, the company had a net loss of 26,000 wireline broadband subscribers in the quarter; these increased slightly year over year. Total wireline broadband ARPU was up more than 8 percent year over year. Total U-verse high speed Internet subscribers now represent 59 percent of all wireline broadband subscribers compared with 43 percent in the year-earlier quarter.
About 60 percent of U-verse broadband subscribers have a plan delivering speeds up to 12 Mbps or higher. In the third quarter, more than 90 percent of new U-verse TV customers also signed up for U-verse high speed Internet. 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 20.8 percent at the end of the third quarter.
Strategic Business Services Show Strong Growth. Total revenues from business customers were $8.8 billion, down 2.6 percent versus the year-earlier quarter and down 0.9 percent compared with the second quarter of 2013. Business service revenues declined 2.0 percent year over year. 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 15.7 percent versus the year-earlier quarter. These services represent an $8.6 billion annualized revenue stream and represents more than 24 percent of wireline business revenues. During the third quarter, the company also added a record 97,000 business U-verse high speed broadband subscribers.
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.
* 4G LTE speed claim based on national carriers’ average 4G LTE download speeds. AT&T’s 4G LTE reliability claim based on analysis of data network connection and data transaction success rates reported by Nielsen during network tests conducted across 211 markets from July 2012 to July 2013, and compares carriers with nationwide 4G LTE networks.
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 fastest and most reliable 4G LTE 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 service with the AT&T U-verse® brand. 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. 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, 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 | Nine Months Ended | |||||||||||||||||||||
| 9/30/2013 | 9/30/2012 | % Chg | 9/30/2013 | 9/30/2012 | % Chg | ||||||||||||||||||
| Operating Revenues | $ | 32,158 | $ | 31,459 | 2.2 | % | $ | 95,589 | $ | 94,856 | 0.8 | % | |||||||||||
| Operating Expenses | |||||||||||||||||||||||
|
Cost of services and sales (exclusive of depreciation and amortization shown separately below) |
13,403 | 12,602 | 6.4 | % | 39,227 | 37,673 | 4.1 | % | |||||||||||||||
| Selling, general and administrative | 7,952 | 8,308 | -4.3 | % | 24,406 | 24,657 | -1.0 | % | |||||||||||||||
| Depreciation and amortization | 4,615 | 4,512 | 2.3 | % | 13,715 | 13,571 | 1.1 | % | |||||||||||||||
| Total Operating Expenses | 25,970 | 25,422 | 2.2 | % | 77,348 | 75,901 | 1.9 | % | |||||||||||||||
| Operating Income | 6,188 | 6,037 | 2.5 | % | 18,241 | 18,955 | -3.8 | % | |||||||||||||||
| Interest Expense | 829 | 824 | 0.6 | % | 2,481 | 2,624 | -5.4 | % | |||||||||||||||
| Equity in Net Income of Affiliates | 91 | 182 | -50.0 | % | 494 | 537 | -8.0 | % | |||||||||||||||
| Other Income (Expense) - Net | 50 | 47 | 6.4 | % | 370 | 122 | - | ||||||||||||||||
| Income Before Income Taxes | 5,500 | 5,442 | 1.1 | % | 16,624 | 16,990 | -2.2 | % | |||||||||||||||
| Income Tax Expense | 1,595 | 1,741 | -8.4 | % | 5,066 | 5,672 | -10.7 | % | |||||||||||||||
| Net Income | 3,905 | 3,701 | 5.5 | % | 11,558 | 11,318 | 2.1 | % | |||||||||||||||
| Less: Net Income Attributable to Noncontrolling Interest | (91 | ) | (66 | ) | -37.9 | % | (222 | ) | (197 | ) | -12.7 | % | |||||||||||
| Net Income Attributable to AT&T | $ | 3,814 | $ | 3,635 | 4.9 | % | $ | 11,336 | $ | 11,121 | 1.9 | % | |||||||||||
| Basic Earnings Per Share Attributable to AT&T | $ | 0.72 | $ | 0.63 | 14.3 | % | $ | 2.10 | $ | 1.90 | 10.5 | % | |||||||||||
|
Weighted Average Common Shares Outstanding (000,000) |
5,315 | 5,771 | -7.9 | % | 5,402 | 5,848 | -7.6 | % | |||||||||||||||
| Diluted Earnings Per Share Attributable to AT&T | $ | 0.72 | $ | 0.63 | 14.3 | % | $ | 2.09 | $ | 1.90 | 10.0 | % | |||||||||||
|
Weighted Average Common Shares Outstanding with Dilution (000,000) |
5,331 | 5,792 | -8.0 | % | 5,419 | 5,869 | -7.7 | % | |||||||||||||||
| Financial Data | ||||||||||||||||||||||||||||
| AT&T Inc. | ||||||||||||||||||||||||||||
| Statements of Segment Income | ||||||||||||||||||||||||||||
| Dollars in millions | ||||||||||||||||||||||||||||
| Unaudited | ||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||
| Wireless | 9/30/2013 | 9/30/2012 | % Chg | 9/30/2013 | 9/30/2012 | % Chg | ||||||||||||||||||||||
| Segment Operating Revenues | ||||||||||||||||||||||||||||
| Data | $ | 5,509 | $ | 4,686 | 17.6 | % | $ | 15,990 | $ | 13,392 | 19.4 | % | ||||||||||||||||
| Voice, text and other service | 9,951 | 10,220 | -2.6 | % | 29,902 | 30,845 | -3.1 | % | ||||||||||||||||||||
| Equipment | 2,020 | 1,726 | 17.0 | % | 5,570 | 4,884 | 14.0 | % | ||||||||||||||||||||
| Total Segment Operating Revenues | 17,480 | 16,632 | 5.1 | % | 51,462 | 49,121 | 4.8 | % | ||||||||||||||||||||
| Segment Operating Expenses | ||||||||||||||||||||||||||||
| Operations and support | 10,982 | 10,432 | 5.3 | % | 31,932 | 30,000 | 6.4 | % | ||||||||||||||||||||
| Depreciation and amortization | 1,875 | 1,730 | 8.4 | % | 5,553 | 5,092 | 9.1 | % | ||||||||||||||||||||
| Total Segment Operating Expenses | 12,857 | 12,162 | 5.7 | % | 37,485 | 35,092 | 6.8 | % | ||||||||||||||||||||
| Segment Operating Income | 4,623 | 4,470 | 3.4 | % | 13,977 | 14,029 | -0.4 | % | ||||||||||||||||||||
| Equity in Net Income (Loss) of Affiliates | (18 | ) | (17 | ) | -5.9 | % |
(55 |
) | (45 | ) | -22.2 | % | ||||||||||||||||
| Segment Income | $ | 4,605 | $ | 4,453 | 3.4 | % | $ | 13,922 | $ | 13,984 | -0.4 | % | ||||||||||||||||
| Segment Operating Income Margin | 26.4 |
% |
|
|
26.9 | % | 27.2 |
% |
|
28.6 | % | |||||||||||||||||
| Wireline | ||||||||||||||||||||||||||||
| Segment Operating Revenues | ||||||||||||||||||||||||||||
| Data | $ | 8,457 | $ | 7,987 | 5.9 | % | $ | 25,019 | $ | 23,722 | 5.5 | % | ||||||||||||||||
| Voice | 5,023 | 5,563 | -9.7 | % | 15,470 | 17,151 | -9.8 | % | ||||||||||||||||||||
| Other | 1,190 | 1,264 | -5.9 | % | 3,609 | 3,777 | -4.4 | % | ||||||||||||||||||||
| Total Segment Operating Revenues | 14,670 | 14,814 | -1.0 | % | 44,098 | 44,650 | -1.2 | % | ||||||||||||||||||||
| Segment Operating Expenses | ||||||||||||||||||||||||||||
| Operations and support | 10,385 | 10,246 | 1.4 | % | 31,137 | 30,849 | 0.9 | % | ||||||||||||||||||||
| Depreciation and amortization | 2,736 | 2,774 | -1.4 | % | 8,146 | 8,348 | -2.4 | % | ||||||||||||||||||||
| Total Segment Operating Expenses | 13,121 | 13,020 | 0.8 | % | 39,283 | 39,197 | 0.2 | % | ||||||||||||||||||||
| Segment Operating Income | 1,549 | 1,794 | -13.7 | % | 4,815 | 5,453 | -11.7 | % | ||||||||||||||||||||
| Equity in Net Income (Loss) of Affiliates | - | - | - | 1 | (1 | ) | - | |||||||||||||||||||||
| Segment Income | $ | 1,549 | $ | 1,794 | -13.7 | % | $ | 4,816 | $ | 5,452 | -11.7 | % | ||||||||||||||||
| Segment Operating Income Margin | 10.6 |
% |
|
|
12.1 | % | 10.9 |
% |
|
12.2 | % | |||||||||||||||||
| Advertising Solutions | ||||||||||||||||||||||||||||
| Segment Operating Revenues | $ | - | $ | - | - | $ | - | $ | 1,049 | - | ||||||||||||||||||
| Segment Operating Expenses | ||||||||||||||||||||||||||||
| Operations and support | - | - | - | - | 773 | - | ||||||||||||||||||||||
| Depreciation and amortization | - | - | - | - | 106 | - | ||||||||||||||||||||||
| Total Segment Operating Expenses | - | - | - | - | 879 | - | ||||||||||||||||||||||
| Segment Income | $ | - | $ | - | - | $ | - | $ | 170 | - | ||||||||||||||||||
| Segment Income Margin | - | - | - | 16.2 | % | |||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||
| Segment Operating Revenues | $ | 8 | $ | 13 | -38.5 | % | $ | 29 | $ | 36 | -19.4 | % | ||||||||||||||||
| Segment Operating Expenses | (8 | ) | 240 | - | 580 | 733 | -20.9 | % | ||||||||||||||||||||
| Segment Operating Income (Loss) | 16 | (227 | ) | - | (551 | ) | (697 | ) | 20.9 | % | ||||||||||||||||||
| Equity in Net Income of Affiliates | 109 | 199 | -45.2 | % | 548 | 583 | -6.0 | % | ||||||||||||||||||||
| Segment Income (Loss) | $ | 125 | $ | (28 | ) | - | $ | (3 | ) | $ | (114 | ) | 97.4 | % | ||||||||||||||
| Financial Data | ||||||||||
| AT&T Inc. | ||||||||||
| Consolidated Balance Sheets | ||||||||||
| Dollars in millions | ||||||||||
| 9/30/13 | 12/31/12 | |||||||||
| Unaudited | ||||||||||
| Assets | ||||||||||
| Current Assets | ||||||||||
| Cash and cash equivalents | $ | 1,371 | $ | 4,868 | ||||||
| Accounts receivable - net of allowances for doubtful accounts of $491 and $547 | 12,444 | 12,657 | ||||||||
| Prepaid expenses | 1,022 | 1,035 | ||||||||
| Deferred income taxes | 682 | 1,036 | ||||||||
| Other current assets | 2,916 | 3,110 | ||||||||
| Total current assets | 18,435 | 22,706 | ||||||||
| Property, Plant and Equipment - Net | 112,424 | 109,767 | ||||||||
| Goodwill | 70,014 | 69,773 | ||||||||
| Licenses | 56,304 | 52,352 | ||||||||
| Customer Lists and Relationships - Net | 876 | 1,391 | ||||||||
| Other Intangible Assets - Net | 5,020 | 5,032 | ||||||||
| Investments in and Advances to Equity Affiliates | 3,949 | 4,581 | ||||||||
| Other Assets | 7,577 | 6,713 | ||||||||
| Total Assets | $ | 274,599 | $ | 272,315 | ||||||
| Liabilities and Stockholders' Equity | ||||||||||
| Current Liabilities | ||||||||||
| Debt maturing within one year | $ | 7,873 | $ | 3,486 | ||||||
| Accounts payable and accrued liabilities | 20,433 | 20,494 | ||||||||
| Advanced billing and customer deposits | 4,013 | 4,225 | ||||||||
| Accrued taxes | 1,488 | 1,026 | ||||||||
| Dividends payable | 2,376 | 2,556 | ||||||||
| Total current liabilities | 36,183 | 31,787 | ||||||||
| Long-Term Debt | 68,350 | 66,358 | ||||||||
| Deferred Credits and Other Noncurrent Liabilities | ||||||||||
| Deferred income taxes | 30,666 | 28,491 | ||||||||
| Postemployment benefit obligation | 42,036 | 41,392 | ||||||||
| Other noncurrent liabilities | 11,234 | 11,592 | ||||||||
| Total deferred credits and other noncurrent liabilities | 83,936 | 81,475 | ||||||||
| Stockholders' Equity | ||||||||||
| Common stock | 6,495 | 6,495 | ||||||||
| Additional paid-in capital | 91,021 | 91,038 | ||||||||
| Retained earnings | 26,648 | 22,481 | ||||||||
| Treasury stock | (43,731 | ) | (32,888 | ) | ||||||
| Accumulated other comprehensive income | 5,282 | 5,236 | ||||||||
| Noncontrolling interest | 415 | 333 | ||||||||
| Total stockholders' equity | 86,130 | 92,695 | ||||||||
| Total Liabilities and Stockholders' Equity | $ | 274,599 | $ | 272,315 | ||||||
| Financial Data | ||||||||||
| AT&T Inc. | ||||||||||
| Consolidated Statements of Cash Flows | ||||||||||
| Dollars in millions | ||||||||||
| Unaudited | Nine Months Ended September 30, | |||||||||
| 2013 | 2012 | |||||||||
| Operating Activities | ||||||||||
| Net income | $ | 11,558 | $ | 11,318 | ||||||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||
| Depreciation and amortization | 13,715 | 13,571 | ||||||||
| Undistributed earnings from investments in equity affiliates | (232 | ) | (483 | ) | ||||||
| Provision for uncollectible accounts | 653 | 835 | ||||||||
|
Deferred income tax expense and noncurrent unrecognized tax benefits |
2,389 | 3,441 | ||||||||
| Net (gain) loss from sale of investments, net of impairments | (272 | ) | (27 | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||||
| Accounts receivable | (440 | ) | (571 | ) | ||||||
| Other current assets | 520 | 1,581 | ||||||||
| Accounts payable and accrued liabilities | (420 | ) | (156 | ) | ||||||
| Retirement benefit funding | (175 | ) | - | |||||||
| Other - net | (417 | ) | (853 | ) | ||||||
| Total adjustments | 15,321 | 17,338 | ||||||||
| Net Cash Provided by Operating Activities | 26,879 | 28,656 | ||||||||
| Investing Activities | ||||||||||
| Construction and capital expenditures: | ||||||||||
| Capital expenditures | (15,565 | ) | (13,619 | ) | ||||||
| Interest during construction | (213 | ) | (197 | ) | ||||||
| Acquisitions, net of cash acquired | (4,025 | ) | (551 | ) | ||||||
| Dispositions | 846 | 807 | ||||||||
| Sales (purchases) of securities, net | - | 311 | ||||||||
| Return of advances to and investments in equity affiliates | 301 | - | ||||||||
| Other | (4 | ) | (2 | ) | ||||||
| Net Cash Used in Investing Activities | (18,660 | ) | (13,251 | ) | ||||||
| Financing Activities | ||||||||||
|
Net change in short-term borrowings with original maturities of three months or less |
1,851 | - | ||||||||
| Issuance of other short-term borrowings | 1,476 | - | ||||||||
| Repayment of other short-term borrowings | (1,476 | ) | - | |||||||
| Issuance of long-term debt | 6,416 | 6,935 | ||||||||
| Repayment of long-term debt | (2,131 | ) | (8,042 | ) | ||||||
| Purchase of treasury stock | (11,134 | ) | (8,374 | ) | ||||||
| Issuance of treasury stock | 108 | 460 | ||||||||
| Dividends paid | (7,325 | ) | (7,738 | ) | ||||||
| Other | 499 | 98 | ||||||||
| Net Cash Used in Financing Activities | (11,716 | ) | (16,661 | ) | ||||||
| Net decrease in cash and cash equivalents | (3,497 | ) | (1,256 | ) | ||||||
| Cash and cash equivalents beginning of year | 4,868 | 3,045 | ||||||||
| Cash and Cash Equivalents End of Period | $ | 1,371 | $ | 1,789 | ||||||
| Financial Data | ||||||||||||||||||||||||||
| AT&T Inc. | ||||||||||||||||||||||||||
| Supplementary Operating and Financial Data | ||||||||||||||||||||||||||
|
Dollars in millions except per share amounts, subscribers and connections in (000s) |
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| Unaudited | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
| 9/30/2013 | 9/30/2012 | % Chg | 9/30/2013 | 9/30/2012 | % Chg | |||||||||||||||||||||
| Wireless | ||||||||||||||||||||||||||
| Subscribers and Connections | ||||||||||||||||||||||||||
| Total | 109,460 | 105,871 | 3.4 | % | ||||||||||||||||||||||
| Postpaid | 72,032 | 69,747 | 3.3 | % | ||||||||||||||||||||||
| Prepaid | 7,425 | 7,545 | -1.6 | % | ||||||||||||||||||||||
| Reseller | 14,089 | 14,573 | -3.3 | % | ||||||||||||||||||||||
| Connected Devices | 15,914 | 14,006 | 13.6 | % | ||||||||||||||||||||||
| Wireless Net Adds | ||||||||||||||||||||||||||
| Total | 989 | 678 | 45.9 | % | 1,912 | 2,670 | -28.4 | % | ||||||||||||||||||
| Postpaid | 363 | 151 | - | 1,210 | 658 | 83.9 | % | |||||||||||||||||||
| Prepaid | 192 | 77 | - | 19 | 294 | -93.5 | % | |||||||||||||||||||
| Reseller | (285 | ) | 137 | - | (951 | ) | 793 | - | ||||||||||||||||||
| Connected Devices | 719 | 313 | - | 1,634 | 925 | 76.6 | % | |||||||||||||||||||
| M&A Activity, Partitioned Customers and Other Adjs. | 587 | (13 | ) | - | 591 | (46 | ) | - | ||||||||||||||||||
| Wireless Churn | ||||||||||||||||||||||||||
| Postpaid Churn | 1.07 | % | 1.08 | % | -1 BP | 1.04 | % | 1.05 | % | -1 BP | ||||||||||||||||
| Total Churn | 1.31 | % | 1.34 | % | -3 BP | 1.35 | % | 1.33 | % | 2 BP | ||||||||||||||||
| Other | ||||||||||||||||||||||||||
| Licensed POPs (000,000) | 317 | 313 | 1.3 | % | ||||||||||||||||||||||
| Wireline | ||||||||||||||||||||||||||
| Voice | ||||||||||||||||||||||||||
| Total Wireline Voice Connections1 | 29,296 | 33,176 | -11.7 | % | ||||||||||||||||||||||
| Net Change | (932 | ) | (995 | ) | 6.3 | % | (2,888 | ) | (3,156 | ) | 8.5 | % | ||||||||||||||
| Broadband | ||||||||||||||||||||||||||
| Total Wireline Broadband Connections | 16,427 | 16,392 | 0.2 | % | ||||||||||||||||||||||
| Net Change | (26 | ) | (42 | ) | 38.1 | % | 37 | (35 | ) | - | ||||||||||||||||
| Video | ||||||||||||||||||||||||||
| Total U-verse Video Connections | 5,266 | 4,344 | 21.2 | % | ||||||||||||||||||||||
| Net Change | 265 | 198 | 33.8 | % | 730 | 553 | 32.0 | % | ||||||||||||||||||
| Consumer Revenue Connections | ||||||||||||||||||||||||||
| Broadband2 | 14,665 | 14,501 | 1.1 | % | ||||||||||||||||||||||
| U-verse Video Connections1 | 5,249 | 4,333 | 21.1 | % | ||||||||||||||||||||||
| Voice1,3 | 16,749 | 19,219 | -12.9 | % | ||||||||||||||||||||||
| Total Consumer Revenue Connections1 | 36,663 | 38,053 | -3.7 | % | ||||||||||||||||||||||
| Net Change | (345 | ) | (466 | ) | 26.0 | % | (1,004 | ) | (1,453 | ) | 30.9 | % | ||||||||||||||
| AT&T Inc. | ||||||||||||||||||||||||||
| Construction and capital expenditures | ||||||||||||||||||||||||||
| Capital expenditures | $ | 5,900 | $ | 4,877 | 21.0 | % | $ | 15,565 | $ | 13,619 | 14.3 | % | ||||||||||||||
| Interest during construction | $ | 73 | $ | 67 | 9.0 | % | $ | 213 | $ | 197 | 8.1 | % | ||||||||||||||
| Dividends Declared per Share | $ | 0.45 | $ | 0.44 | 2.3 | % | $ | 1.35 | $ | 1.32 | 2.3 | % | ||||||||||||||
| End of Period Common Shares Outstanding (000,000) | 5,280 | 5,707 | -7.5 | % | ||||||||||||||||||||||
| Debt Ratio4 | 46.9 | % | 38.6 | % | 830 BP | |||||||||||||||||||||
| Total Employees | 246,740 | 241,130 | 2.3 | % | ||||||||||||||||||||||
|
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 3,616 as of September 30, 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 3Q13, total switched access lines were 25,680, retail business switched access lines totaled 10,633, and wholesale, national mass markets and coin switched access lines totaled 1,914. Restated switched access lines do not include ISDN lines. |
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| Financial Data | ||||||||||||||||||||
| AT&T Inc. | ||||||||||||||||||||
| Non-GAAP Wireless Reconciliation | ||||||||||||||||||||
| Wireless Segment EBITDA | ||||||||||||||||||||
| Dollars in millions | ||||||||||||||||||||
| Unaudited | ||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| 9/30/12 | 12/31/12 | 3/31/13 | 6/30/13 | 9/30/13 | ||||||||||||||||
| Segment Operating Revenues | ||||||||||||||||||||
| Data | $ | 4,686 | $ | 4,905 | $ | 5,125 | $ | 5,356 | $ | 5,509 | ||||||||||
| Voice, text and other service | 10,220 | 10,044 | 9,937 | 10,014 | 9,951 | |||||||||||||||
| Equipment | 1,726 | 2,693 | 1,629 | 1,921 | 2,020 | |||||||||||||||
| Total Segment Operating Revenues | 16,632 | 17,642 | 16,691 | 17,291 | 17,480 | |||||||||||||||
| Segment Operating Expenses | ||||||||||||||||||||
| Operations and support | 10,432 | 13,296 | 10,180 | 10,770 | 10,982 | |||||||||||||||
| Depreciation and amortization | 1,730 | 1,781 | 1,835 | 1,843 | 1,875 | |||||||||||||||
| Total Segment Operating Expenses | 12,162 | 15,077 | 12,015 | 12,613 | 12,857 | |||||||||||||||
| Segment Operating Income | 4,470 | 2,565 | 4,676 | 4,678 | 4,623 | |||||||||||||||
| Segment Operating Income Margin | 26.9 | % | 14.5 | % | 28.0 | % | 27.1 | % | 26.4 | % | ||||||||||
| Plus: Depreciation and amortization | 1,730 | 1,781 | 1,835 | 1,843 | 1,875 | |||||||||||||||
| EBITDA | $ | 6,200 | $ | 4,346 | $ | 6,511 | $ | 6,521 | $ | 6,498 | ||||||||||
|
EBITDA as a % of Service Revenues1 |
41.6 | % | 29.1 | % | 43.2 | % | 42.4 | % | 42.0 | % | ||||||||||
| 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. |
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| Financial Data | ||||||||||||||||
| AT&T Inc. | ||||||||||||||||
| Non-GAAP Consolidated Reconciliation | ||||||||||||||||
| Free Cash Flow | ||||||||||||||||
| Dollars in millions | ||||||||||||||||
| Unaudited | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2012 | 2013 | 2012 | 2013 | |||||||||||||
| Net cash provided by operating activities | $ | 11,331 | $ | 9,168 | $ | 28,656 | $ | 26,879 | ||||||||
| Less: Construction and capital expenditures | (4,944 | ) | (5,973 | ) | (13,816 | ) | (15,778 | ) | ||||||||
| Free Cash Flow | $ | 6,387 | $ | 3,195 | $ | 14,840 | $ | 11,101 | ||||||||
| Free Cash Flow after Dividends | ||||||||||||||||
| Dollars in millions | ||||||||||||||||
| Unaudited | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2012 | 2013 | 2012 | 2013 | |||||||||||||
| Net cash provided by operating activities | $ | 11,331 | $ | 9,168 | $ | 28,656 | $ | 26,879 | ||||||||
| Less: Construction and capital expenditures | (4,944 | ) | (5,973 | ) | (13,816 | ) | (15,778 | ) | ||||||||
| Free Cash Flow | 6,387 | 3,195 | 14,840 | 11,101 | ||||||||||||
| Less: Dividends paid | (2,551 | ) | (2,395 | ) | (7,738 | ) | (7,325 | ) | ||||||||
| Free Cash Flow After Dividends | $ | 3,836 | $ | 800 | $ | 7,102 | $ | 3,776 | ||||||||
| 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. |
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| Financial Data | ||||||||||||
| AT&T Inc. | ||||||||||||
| Non-GAAP Consolidated Reconciliation | ||||||||||||
| Annualized Net-Debt-to-EBITDA Ratio | ||||||||||||
| Dollars in millions | ||||||||||||
| Unaudited | ||||||||||||
| Three Months Ended | ||||||||||||
| 3/31/13 | 6/30/13 | 9/30/13 | 2013 YTD | |||||||||
| Operating Revenues | $ | 31,356 | $ | 32,075 | $ | 32,158 | $ | 95,589 | ||||
| Operating Expenses | 25,416 | 25,962 | 25,970 | 77,348 | ||||||||
| Total Operating Income | 5,940 | 6,113 | 6,188 | 18,241 | ||||||||
| Add Back Depreciation and Amortization | 4,529 | 4,571 | 4,615 | 13,715 | ||||||||
| Total Consolidated EBITDA | 10,469 | 10,684 | 10,803 | 31,956 | ||||||||
| Annualized Consolidated EBITDA1 | 42,608 | |||||||||||
| End-of-period current debt | 7,873 | |||||||||||
| End-of-period long-term debt | 68,350 | |||||||||||
| Total End-of-Period Debt | 76,223 | |||||||||||
| Less Cash and Cash Equivalents | 1,371 | |||||||||||
| Net Debt Balance | 74,852 | |||||||||||
| Annualized Net-Debt-to-EBITDA Ratio | 1.76 | |||||||||||
| Net-Debt-to-EBITDA ratios are non-GAAP financial measures frequently used by investors and credit rating agencies. Management believes these measures provide relevant and useful information to investors and other users of our financial data. Net Debt is calculated by subtracting cash and cash equivalents from the sum of debt maturing within one year and long-term debt. The Net-Debt-to-EBITDA ratio is calculated by dividing the Net Debt by annualized EBITDA. | ||||||||||||
|
1 Annualized EBITDA is calculated by annualizing the year-to-date EBITDA. |
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| Financial Data | ||||||||||||||||||
| AT&T Inc. | ||||||||||||||||||
| Non-GAAP Consolidated Reconciliation | ||||||||||||||||||
| Adjusted Diluted EPS | ||||||||||||||||||
| AT&T Inc. | ||||||||||||||||||
| Unaudited | ||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2012 | 2013 | 2012 | 2013 | |||||||||||||||
| Reported Diluted EPS | $ | 0.63 | $ | 0.72 | $ | 1.90 | $ | 2.09 | ||||||||||
| Adjustments: | ||||||||||||||||||
| Removal of Advertising Solutions | (0.01 | ) | - | (0.03 | ) | - | ||||||||||||
| Impact of previously disclosed transfer of spectrum | - | (0.03 | ) | - | (0.03 | ) | ||||||||||||
| Income tax settlement/items | - | (0.03 | ) | - | (0.05 | ) | ||||||||||||
| América Móvil - Gain from sale of shares | - | - | - | (0.04 | ) | |||||||||||||
| Adjusted Diluted EPS | $ | 0.62 | $ | 0.66 | $ | 1.87 | $ | 1.97 | ||||||||||
| Year-over-year growth - Adjusted | 6.5 | % | 5.3 | % | ||||||||||||||
|
Weighted Average Common Shares Outstanding with Dilution (000,000) |
5,792 | 5,331 | 5,869 | 5,419 | ||||||||||||||
|
Adjusted Diluted EPS is a non-GAAP financial measure calculated by excluding from operating revenues, operating expenses and equity in net income of affiliates certain significant items that are non-operational or non-recurring in nature, including dispositions. Management believes that this measure provides relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends. |
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|
Adjusted Diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. Our calculation of Adjusted Diluted EPS, as presented, may differ from similarly titled measures reported by other companies. |
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| Financial Data | |||||||||||||||
| AT&T Inc. | |||||||||||||||
| Non-GAAP Financial Reconciliation | |||||||||||||||
| Adjusted Operating Revenues | |||||||||||||||
| Dollars in millions | |||||||||||||||
| Unaudited | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| 2012 | 2013 | 2012 | 2013 | ||||||||||||
| Reported Operating Revenues | $ | 31,459 | $ | 32,158 | $ | 94,856 | $ | 95,589 | |||||||
| Adjustments: | |||||||||||||||
| Removal of Advertising Solutions | - | - | (1,049 | ) | - | ||||||||||
| Adjusted Operating Revenues | $ | 31,459 | $ | 32,158 | $ | 93,807 | $ | 95,589 | |||||||
| Year-over-year growth - Adjusted | 2.2 | % | 1.9 | % | |||||||||||
|
Adjusted Operating Revenues is a non-GAAP financial measure calculated by excluding from operating revenues significant items that are non-operational or non-recurring in nature, including dispositions. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends. |
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|
Adjusted Operating Revenues should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. Our calculations of Adjusted Operating Revenues may differ from similarly titled measures reported by other companies. |
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| Financial Data | ||||||
| AT&T Inc. | ||||||
| Non-GAAP Financial Reconciliation | ||||||
| Adjusted Operating Income Margin | ||||||
| Dollars in millions | ||||||
| Unaudited | ||||||
|
|
Three Months Ended |
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|
|
September 30, |
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|
2013 |
||||||
| Reported Operating Income | $ | 6,188 | ||||
| Reported Operating Income Margin | 19.2 | % | ||||
| Adjustments: | ||||||
| Impact of previously disclosed transfer of spectrum | 229 | |||||
| Adjusted Operating Income | $ | 5,959 | ||||
| Adjusted Operating Income Margin | 18.5 | % | ||||
|
Adjusted Operating Income and Adjusted Operating Income Margin are non-GAAP financial measures calculated by excluding from operating revenues and operating expenses 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. |
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|
Adjusted Operating Income and Adjusted Operating Income Margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. Our calculations of Adjusted Operating Revenues may differ from similarly titled measures reported by other companies. |
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EBITDA DISCUSSION
For AT&T, EBITDA is defined as operating income before depreciation and amortization. EBITDA service margin is calculated as EBITDA divided by service revenues. EBITDA differs from Segment Operating Income (Loss), as calculated in accordance with 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.
We believe these measures are relevant and useful information to our investors as they are part of AT&T’s internal management reporting and planning processes and are important metrics that management uses to evaluate the operating performance of its wireless operations. These measures are used by management as a gauge of our success in acquiring, retaining and servicing wireless subscribers because we believe these measures reflect AT&T’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 our Wireless segment’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 our wireless subscriber base and national footprint that we utilizes to obtain and service our 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 our Wireless segment operating margin than EBITDA as a percentage of total revenue. We generally subsidize a portion of our wireless handset sales, all of which are recognized in the period in which we sell the handset. 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. We also use wireless service revenues to calculate margin to facilitate comparison, both internally and externally with our wireless competitors, as they calculate their margins using wireless 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 our Wireless segment 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 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, Adjusted Operating Income, Adjusted Operating Income Margin and Adjusted diluted EPS are non-GAAP financial measures calculated by excluding from operating revenues, operating expenses 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, Adjusted Operating Income, 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 diluted EPS, as presented, may differ from similarly titled measures reported by other companies.
