AT&T Posts Strong Second-Quarter Results Led by Accelerated Wireless Growth, Solid Regional Results and a Significant Improvement in Enterprise Trends
Tue Jul 24 15:03:00 2007
-- $0.47 reported earnings per diluted share, versus $0.46 in the year-earlier quarter
-- $0.70 adjusted earnings per diluted share, up from $0.58 in the second quarter of 2006
-- 1.5 million net gain in wireless subscribers to reach 63.7 million, with further improvement in wireless churn to 1.6 percent overall and 1.2 percent for postpaid subscribers
-- 14.9 percent growth in wireless service revenues with wireless data revenues up 66.9 percent and service ARPU (average revenues per user) up 3.6 percent
-- Substantial improvement in enterprise customer revenue trends driven by accelerated growth in IP-based data services
-- 200,000 net increase in satellite and AT&T U-verse(SM) video subscribers; U-verse video ramp to 51,000 subscribers at the end of June, up from 13,000 at the end of the first quarter
Note: AT&T's second-quarter earnings conference call will be broadcast live via the Internet at 10 a.m. EDT on Tuesday, July 24, 2007 at http://www.att.com/investor.relations.
SAN ANTONIO, July 24 /PRNewswire-FirstCall/ -- AT&T Inc. (NYSE:T)
today posted its ninth consecutive quarter of double-digit growth in adjusted earnings per share as it ramped revenue growth and delivered continued strong execution in merger integration. Results were led by accelerated growth in wireless and IP (Internet Protocol)-based services along with substantial improvement in enterprise revenue trends.
AT&T is the United States' wireless leader, with 63.7 million subscribers, and one of the world's leading providers of business communications services, with high quality networks and a growing array of advanced services.
AT&T's second-quarter 2007 reported earnings per diluted share were $0.47 versus $0.46 in the year-earlier quarter. Adjusted earnings per share, which exclude costs and accounting effects related to major acquisitions, were $0.70, up 20.7 percent versus adjusted earnings per share of $0.58 in the year-earlier quarter.
"AT&T has a strong foundation for growth in wireless and IP-based services, and in the second quarter we improved our trajectory in key areas," said Randall Stephenson, AT&T chairman and chief executive officer. "Wireless revenue growth accelerated for the fourth consecutive quarter. Our U-verse video service has begun to ramp aggressively. And we took a major step up toward revenue growth in enterprise services, where AT&T has tremendous assets and great potential.
"Mobility is a major growth engine for AT&T," Stephenson said. "Our launch with Apple of the breakthrough iPhone has quickly redefined customer expectations for their wireless experience, initial response was unprecedented, and sales in July continue to be strong. On June 29, we also announced an agreement to acquire Dobson Communications, which will further expand our wireless coverage in key rural and suburban areas.
"At AT&T, our goals are to lead in innovation and drive sustainable growth across all our businesses," Stephenson said. "We have good momentum heading into the second half of the year, our assets position us well for the long term, and I am excited about the opportunities ahead."
Ramp in Revenue Growth
In the second quarter of 2007, AT&T reported revenues of $29.5 billion, up from $15.8 billion in the year-earlier quarter, prior to AT&T's acquisition of BellSouth Corporation and the accompanying consolidation of wireless results.
In addition to historical reported results, to provide further basis for comparison, AT&T provides pro forma results, which combine revenues from AT&T, BellSouth and Cingular Wireless consistently for all periods. On this basis, AT&T's second-quarter 2007 revenues totaled $29.8 billion, up 2.0 percent versus results for the year-earlier quarter. This increase is up from year- over-year pro forma revenue growth of 1.7 percent for the first quarter of 2007 and 1.3 percent for the quarter before that.
This ramp in revenue growth reflects AT&T's strengthened double-digit gain in wireless revenues along with substantially improved trends in enterprise services. In addition, AT&T's regional business revenues delivered continued solid growth, regional consumer revenues were up modestly reflecting growth in total consumer connections, and Advertising & Publishing revenues were stable. These results more than offset anticipated declines in wholesale and national mass markets, where trends were in line with recent quarters.
Continued Strong Growth in Adjusted Earnings Per Share
AT&T's reported net income for the second quarter totaled $2.9 billion, compared with $1.8 billion in the year-earlier quarter. Reported earnings per diluted share totaled $0.47 versus $0.46 in the second quarter of 2006.
Compared with reported results in the second quarter of 2006, AT&T's reported operating expenses were $24.5 billion, up from $13.2 billion; reported operating income was $4.9 billion, up from $2.6 billion; and AT&T's reported operating income margin was 16.8 percent versus 16.5 percent.
AT&T's adjusted second-quarter earnings, which exclude costs and accounting effects associated with major acquisitions, were $4.3 billion, or $0.70 per diluted share, up from $2.3 billion, or $0.58 per diluted share, in the year-earlier quarter. Second-quarter adjusted earnings per share reflect improved revenue trends combined with solid execution to realize merger synergies, with a one cent benefit from state tax law changes and a one cent benefit from the sale of non-strategic assets.
AT&T's adjusted operating income for the second quarter of 2007 was $7.1 billion, compared with $3.0 billion in the year-earlier quarter. AT&T's adjusted operating income margin was 23.9 percent, up from 19.0 percent in the second quarter of 2006. AT&T expects to continue to operate at the top end of its previously provided outlook for a 2007 adjusted operating income margin range of 23 percent to 24 percent.
Costs for AT&T's U-verse initiative, which delivers advanced television and high speed Internet services, continue to be in line with the company's previous outlook. AT&T's major merger integration initiatives continue on schedule, and merger synergies continue to run ahead of the company's original outlook. Cost savings from BellSouth and AT&T Corp. merger integration in the first half of 2007 totaled $1.9 billion, approximately one-third capital and two-thirds expense. AT&T continues to expect synergies from these mergers will reach more than $3 billion for the full year 2007, growing to more than $5 billion in 2008.
Share Repurchase Plan Completed Ahead of Schedule
AT&T repurchased 98 million of its shares in the second quarter for $3.9 billion and ended the quarter with 6.1 billion shares outstanding. In March 2006, AT&T announced a plan to buy back $10 billion of its common shares by the end of 2007. AT&T reached the $10 billion target ahead of schedule, in early July. AT&T has approximately 125 million shares remaining in its current repurchase authorization and expects to continue repurchases during the second half of 2007. The timing and nature of repurchases are subject to market conditions and applicable securities laws.
Second-Quarter Operational Highlights
Wireless
AT&T operates the United States' largest wireless digital voice and data network, and through roaming alliances around the world, AT&T provides the largest global presence among U.S. wireless carriers. In the second quarter, AT&T's wireless growth accelerated, led by solid subscriber gains and robust growth in data services.
-- Wireless service revenues grew 14.9 percent versus the year-earlier
quarter to $9.5 billion. Total wireless revenues, which in addition to
services include revenues from sales of handsets and accessories, were
up 12.7 percent to $10.4 billion. This marked AT&T's fourth consecutive
quarter of improved growth rates in wireless revenues.
-- Wireless data revenues increased 66.9 percent versus the year-earlier
quarter to $1.7 billion - driven by strong increases in both consumer
and business data usage including messaging, downloads, media bundles,
laptop connectivity, smart phone connectivity and enterprise vertical
market solutions. At the end of second quarter, AT&T's wireless
operations had nearly 37 million active data users, up 39 percent over
the past year. During the quarter, these customers sent 277 million
multimedia messages and nearly 18 billion text messages, with both
volumes more than double totals in the year-earlier second quarter.
-- Boosted by strong data growth, AT&T's wireless service ARPU posted its
best year-over-year growth in several years. Total service ARPU in the
second quarter was $50.63, up 3.6 percent. Postpaid ARPU growth was
even stronger, up approximately 6 percent.
-- AT&T posted a second-quarter net gain in wireless subscribers of
1.5 million to reach 63.7 million in service, up 6.4 million over the
past year. Net adds were up more than 22 percent versus AT&T's gain in
the first quarter of this year and in line with results in the
year-earlier second quarter. Postpaid net adds totaled 912,000, up more
than 34 percent from results in the first quarter of this year.
-- Sales of the Apple iPhone have been robust. The June 29 launch allowed
for less than two days of sales and activations before the end of the
quarter. In that time, AT&T activated 146,000 iPhone subscribers, more
than 40 percent of them new subscribers. Sales of the iPhone continue
to be strong in July with store traffic above historical levels.
-- Strong network coverage and attractive handset selection contributed to
further improvements in subscriber churn in the second quarter. Average
monthly subscriber churn for AT&T's postpaid wireless customer base was
1.2 percent, down from 1.5 percent in the year-earlier quarter and
1.3 percent in the first quarter of 2007. Total churn, including
prepaid and reseller results, was 1.6 percent, down from 1.7 percent in
the year-earlier quarter and in the first quarter of 2007.
-- AT&T posted strong growth in wireless operating income in the second
quarter, driven by revenue gains, strong execution of merger
initiatives and continuing operational improvements. On a reported
basis, second-quarter wireless operating expenses totaled $8.8 billion,
up 7.1 percent versus the year-earlier quarter, and operating income
was $1.6 billion, up 57.7 percent from $1.0 billion in the second
quarter of 2006. Before merger-related costs, second-quarter wireless
operating expenses totaled $7.8 billion, up 1.3 percent versus the
year-earlier quarter, and operating income was $2.6 billion, up
70.6 percent from $1.5 billion in the second quarter of 2006.
-- AT&T's reported wireless operating income margin for the second quarter
was 15.4 percent, up from 11.0 percent in the year-earlier quarter.
Before merger-related costs, AT&T's wireless operating income margin
was 24.9 percent, up from 16.4 percent in the second quarter of 2006.
-- AT&T's unadjusted second-quarter wireless OIBDA service margin was
35.8 percent, up from 31.6 percent in the year-earlier quarter. Before
merger-related costs, AT&T's wireless OIBDA service margin was
37.5 percent, up from 32.6 percent for the year-earlier quarter. From
first-quarter 2007 levels, OIBDA service margins declined 170 basis
points on an unadjusted basis and 140 basis points before
merger-related costs, reflecting increased customer acquisition costs,
including handset discounts and a higher percentage of advanced
handsets in the sales mix, and costs required to prepare for the
June 29 launch of the Apple iPhone. For the full year 2008, AT&T
expects to achieve an average adjusted wireless OIBDA service margin in
the low 40 percent range. (OIBDA service margin is operating income
before depreciation and amortization, divided by total service
revenues.)
Wireline
AT&T's second-quarter wireline results included significant improvement in enterprise revenue trends, continued solid regional results and an accelerated ramp in U-verse video subscriber growth. Second-quarter wireline highlights are based on pro forma revenue and volume comparisons that combine results from AT&T and BellSouth in all periods and include ongoing shifts in customer categories to reflect AT&T's management of customer relationships.
-- AT&T's enterprise revenue trends improved substantially in the second
quarter, driven by strong double-digit growth in IP data revenues.
Total enterprise revenues were $4.8 billion, up 2.0 percent
sequentially and down 2.1 percent versus the year-earlier quarter. This
represents an improvement from declines in the first quarter of this
year of 4.1 percent sequentially and 4.0 percent versus the
year-earlier quarter. Recurring service enterprise revenues, which
exclude CPE revenues as well as results from acquired and divested
assets, were up 1.9 percent sequentially and down 0.9 percent versus
the second quarter of 2006. This follows a sequential decline of
1.6 percent and a year-over-year decline of 3.1 percent in the
preceding quarter. Enterprise data revenues, which make up 49 percent
of the category, grew 2.7 percent sequentially and 2.5 percent versus
the year-earlier quarter.
-- Regional business revenues increased 4.5 percent versus the
year-earlier second quarter with growth in both voice and data
services. Regional business revenues from small and midsized firms
increased more than 6 percent, consistent with year-over-year growth in
the first quarter of this year. Regional business voice revenues posted
low-single-digit percentage growth, with increased access lines,
improved ARPU and low customer churn. Regional business data revenues,
which make up 29 percent of the category, delivered high-single-digit
growth, led by gains in broadband, managed Internet, Ethernet and VPN
services.
-- Regional consumer revenues increased 0.4 percent, driven by a net gain
of 946,000 regional consumer connections (retail access lines, high
speed Internet plus video connections) over the past year. This growth
in connections reflects gains in high speed Internet and video, which
more than offset net declines in traditional access lines. Consumer
primary lines declined by 193,000 in the second quarter versus a pro
forma decline of 528,000 for the year-earlier quarter. These totals in
part reflect national mass market migrations from wholesale; excluding
these migrations, the change in total consumer switched access lines
was generally consistent with year-earlier results, despite a nearly
30 percent increase in cable telephony coverage in AT&T's footprint.
-- AT&T posted strong video growth in the second quarter. U-verse services
are now available in parts of 23 metro areas, and sales and
installations have ramped significantly. At the end of the second
quarter, AT&T had 51,000 U-verse video subscribers, up from 13,000
three months earlier. Total video connections, which include AT&T
U-verse service and bundled satellite television service, increased by
200,000 in the second quarter to 1.9 million. At the end of the second
quarter, 5.9 percent of AT&T's primary consumer lines also had a video
solution from AT&T, up from 3.8 percent a year earlier.
-- AT&T's high speed Internet connections, which include DSL, AT&T U-verse
high speed Internet and satellite broadband services, increased by
400,000 in the quarter, reflecting typical seasonality due to
end-of-school-year disconnects. At the end of the quarter, AT&T had
13.3 million consumer and business high speed Internet connections, up
2.2 million, or 20.0 percent, versus pro forma totals a year earlier.
Across AT&T's regional operations, 35.0 percent of its consumer primary
lines now have the company's broadband service, up from 27.8 percent
one year earlier.
Additional Background on Adjusted and Pro Forma Results
AT&T's reported results for the second quarter of 2006 do not include revenues and expenses from BellSouth Corporation, which AT&T acquired on Dec. 29, 2006, or from Cingular Wireless, whose results before the BellSouth transaction were accounted for as part of a joint venture. To give investors further basis for comparison, in addition to historical reported results, AT&T has provided supplementary pro forma results for 2005 and 2006, which combine revenues from AT&T, BellSouth and Cingular Wireless in all periods. These pro forma results are available at http://www.att.com/investor.relations.
AT&T's adjusted earnings for the second quarter of 2007 exclude: (1) pretax integration and amortization costs totaling $2.0 billion, or $0.21 per share, related to AT&T's 2006 acquisition of BellSouth Corporation, its 2005 acquisition of AT&T Corp., and Cingular Wireless' 2004 acquisition of AT&T Wireless; and (2) a reduction to operating income of $187 million, amounting to $0.02 per share, due to the merger-related purchase accounting treatment of deferred Advertising & Publishing revenues and associated expenses. Adjusted results for the second quarter of 2006 excluded pretax merger-related costs totaling $697 million, or $0.12 per diluted share.
AT&T's 2007 Advertising & Publishing results are affected by the BellSouth acquisition. Prior to its acquisition by AT&T, BellSouth amortized the revenues and expenses of printed directory advertising books over the life of the directories, typically 12 months. In accordance with purchase accounting rules, BellSouth's deferred revenues and expenses for all directories delivered prior to the close of the merger have been eliminated in consolidated results. In 2007, eliminating this amortization results in reductions to consolidated revenues, expenses and net income from the pre- acquisition BellSouth directory operations, but the adjustment does not affect cash from operations. These adjustments reduced second-quarter 2007 consolidated revenues by $306 million and consolidated operating expenses by $119 million.
AT&T continues to manage its print directory business using amortized results. As a result, amortized results are shown in the Advertising & Publishing segment on AT&T's Statement of Segment Income. In 2008, consolidated and segment results will both reflect amortization accounting.
AT&T's Advertising & Publishing revenues as shown in AT&T's Statement of Segment Income, totaled $1.5 billion in the second quarter, operating expenses were $1.1 billion and operating income was $423 million.
Also excluding merger-related intangible amortization and integration costs, second-quarter Advertising & Publishing operating expenses were $800 million and operating income was $678 million.
This AT&T news release and other announcements are available as part of an RSS feed at http://www.att.com/rss.
About AT&T AT&T Inc. is a premier communications holding company. Its subsidiaries and affiliates, AT&T operating companies, are the providers of AT&T services in the United States and around the world. Among their offerings are the world's most advanced IP-based business communications services and the nation's leading wireless, high speed Internet access and voice services. In domestic markets, AT&T is known for the directory publishing and advertising sales leadership of its Yellow Pages and YELLOWPAGES.COM organizations, and the AT&T brand is licensed to innovators in such fields as communications equipment. As part of its three-screen integration strategy, AT&T is expanding its TV entertainment offerings. 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/.
(C) 2007 AT&T Knowledge Ventures. All rights reserved. AT&T is a registered trademark of AT&T Knowledge Ventures. Subsidiaries and affiliates of AT&T Inc. provide products and services under the AT&T brand. For more information, please review this announcement in the AT&T newsroom at http://www.att.com/newsroom.
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 Web site at http://www.att.com/investor.relations.
Accompanying financial statements follow. Previously released pro forma comparisons are available on AT&T's Investor Relations Web site at http://www.att.com/investor.relations.
NOTE: OIBDA is defined as operating income (loss) before depreciation and amortization. OIBDA differs from Segment operating Income (loss), as calculated in accordance with GAAP, in that it excludes depreciation and amortization. OIBDA 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. OIBDA 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 OIBDA, as presented, may differ from similarly titled measures reported by other companies.
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Financial Data
AT&T Inc.
-------------------------------------------------------------------------
Consolidated Statements of Income
Dollars in millions except per share amounts
--------------------------------------------- --------------------------
Unaudited Three Months Ended Six Months Ended
-------------------------- --------------------------
6/30/2007 6/30/2006 % Chg 6/30/2007 6/30/2006 % Chg
--------------------------------------------- --------------------------
Operating Revenues
Voice $10,378 $8,509 22.0% $20,833 $17,124 21.7%
Data 5,746 4,534 26.7% 11,401 9,035 26.2%
Wireless service 9,513 8 - 18,583 16 -
Directory 1,155 909 27.1% 2,177 1,810 20.3%
Other 2,686 1,810 48.4% 5,453 3,541 54.0%
--------------------------------------------- --------------------------
Total Operating
Revenues 29,478 15,770 86.9% 58,447 31,526 85.4%
--------------------------------------------- --------------------------
Operating Expenses
Cost of sales
(exclusive of
depreciation
and amortization
shown separately
below) 11,478 7,163 60.2% 22,730 14,527 56.5%
Selling, general
and administrative 7,640 3,517 - 15,077 7,226 -
Depreciation and
amortization 5,416 2,486 - 11,032 4,978 -
--------------------------------------------- --------------------------
Total Operating
Expenses 24,534 13,166 86.3% 48,839 26,731 82.7%
--------------------------------------------- --------------------------
Operating Income 4,944 2,604 89.9% 9,608 4,795 -
--------------------------------------------- --------------------------
Interest Expense 879 472 86.2% 1,752 936 87.2%
Interest Income 39 95 -58.9% 74 180 -58.9%
Equity in Net Income
of Affiliates 210 455 -53.8% 383 789 -51.5%
Other Income
(Expense) - Net 88 15 - 557 26 -
--------------------------------------------- --------------------------
Income Before Income
Taxes 4,402 2,697 63.2% 8,870 4,854 82.7%
Income Taxes 1,498 889 68.5% 3,118 1,601 94.8%
--------------------------------------------- --------------------------
Net Income $2,904 $1,808 60.6% $5,752 $3,253 76.8%
============================================= ==========================
Basic Earnings Per
Share:
Net Income $0.47 $0.47 - $0.93 $0.84 10.7%
Weighted Average
Common Shares
Outstanding
(000,000) 6,145 3,886 58.1% 6,184 3,884 59.2%
Diluted Earnings Per
Share:
Net Income $0.47 $0.46 2.2% $0.92 $0.83 10.8%
Weighted Average
Common Shares
Outstanding
with Dilution
(000,000) 6,195 3,905 58.6% 6,230 3,903 59.6%
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Financial Data
AT&T Inc.
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Statements of Segment Income
Dollars in millions
-------------------------------------------------------------------------
Unaudited
Three Months Ended Six Months Ended
------------------------- -------------------------
Wireline 6/30/2007 6/30/2006 % Chg 6/30/2007 6/30/2006 % Chg
----------------------------------------------- -------------------------
Segment Operating
Revenues
Voice $10,586 $8,509 24.4% $21,263 $17,124 24.2%
Data 5,980 4,534 31.9% 11,842 9,035 31.1%
Other 1,427 1,393 2.4% 2,874 2,698 6.5%
----------------------------------------------- -------------------------
Total Segment
Operating Revenues 17,993 14,436 24.6% 35,979 28,857 24.7%
----------------------------------------------- -------------------------
Segment Operating
Expenses
Cost of sales 7,623 6,681 14.1% 15,181 13,577 11.8%
Selling, general and
administrative 3,959 3,303 19.9% 8,052 6,748 19.3%
Depreciation and
amortization 3,300 2,438 35.4% 6,740 4,879 38.1%
----------------------------------------------- -------------------------
Total Segment
Operating Expenses 14,882 12,422 19.8% 29,973 25,204 18.9%
----------------------------------------------- -------------------------
Segment Income $3,111 $2,014 54.5% $6,006 $3,653 64.4%
=============================================== =========================
Wireless *
----------------------------------------------- -------------------------
Segment Operating
Revenues
Service revenues $9,540 $8,302 14.9% $18,632 $16,315 14.2%
Equipment sales 855 923 -7.4% 1,760 1,898 -7.3%
----------------------------------------------- -------------------------
Total Segment
Operating Revenues 10,395 9,225 12.7% 20,392 18,213 12.0%
----------------------------------------------- -------------------------
Segment Operating
Expenses
Cost of services and
equipment sales 3,941 3,846 2.5% 7,611 7,493 1.6%
Selling, general and
administrative 3,040 2,757 10.3% 5,953 5,603 6.2%
Depreciation and
amortization 1,810 1,605 12.8% 3,701 3,292 12.4%
----------------------------------------------- -------------------------
Total Segment
Operating Expenses 8,791 8,208 7.1% 17,265 16,388 5.4%
----------------------------------------------- -------------------------
Segment Operating
Income 1,604 1,017 57.7% 3,127 1,825 71.3%
Equity in Net Income
(Loss) of Affiliates ** (50) (28) -78.6% (91) (63) -44.4%
----------------------------------------------- -------------------------
Segment Income $1,554 $989 57.1% $3,036 $1,762 72.3%
=============================================== =========================
* Results include 100% of AT&T Mobility's actual results
** Includes minority interest recorded as Other Income (Expense) - Net on
the Consolidated Statements of Income
Advertising & Publishing
----------------------------------------------- -------------------------
Segment Operating
Revenues $1,478 $918 61.0% $2,921 $1,833 59.4%
----------------------------------------------- -------------------------
Segment Operating
Expenses
Cost of sales 386 288 34.0% 841 576 46.0%
Selling, general and
administrative 406 140 - 685 291 -
Depreciation and
amortization 263 - - 505 1 -
----------------------------------------------- -------------------------
Total Segment
Operating Expenses 1,055 428 - 2,031 868 -
----------------------------------------------- -------------------------
Segment Operating
Income 423 490 -13.7% 890 965 -7.8%
Equity in Net Income
(Loss) of Affiliates - (6) - - (11) -
----------------------------------------------- -------------------------
Segment Income $423 $484 -12.6% $890 $954 -6.7%
=============================================== =========================
Other ***
----------------------------------------------- -------------------------
Segment Operating
Revenues $558 $455 22.6% $1,102 $921 19.7%
Segment Operating
Expenses 564 356 58.4% 1,028 746 37.8%
----------------------------------------------- -------------------------
Segment Operating
Income (Loss) (6) 99 - 74 175 -57.7%
Equity in Net Income of
Affiliates 202 446 -54.7% 374 777 -51.9%
----------------------------------------------- -------------------------
Segment Income $196 $545 -64.0% $448 $952 -52.9%
=============================================== =========================
*** Equity in Net Income of Affiliates includes our 60% proportionate
share of AT&T Mobility's results in 2006
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Financial Data
AT&T Inc.
-------------------------------------------------------------------------
Consolidated Balance Sheets
Dollars in millions except per share amounts
-------------------------------------------------------------------------
6/30/07 12/31/06
Unaudited
-------------------------------------------------------------------------
Assets
Current Assets
Cash and cash equivalents $2,570 $2,418
Accounts receivable - net of
allowances for uncollectibles
of $1,371 and $1,276 15,368 16,194
Prepaid expenses 1,743 1,477
Deferred income taxes 2,360 3,034
Other current assets 2,352 2,430
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Total current assets 24,393 25,553
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Property, Plant and Equipment - Net 94,055 94,596
Goodwill 67,072 67,657
Licenses 35,370 34,252
Customer Lists and Relationships - Net 16,683 18,922
Other Intangible Assets - Net 6,064 6,566
Investments in Equity Affiliates 2,342 1,995
Postemployment Benefit 14,519 14,228
Other Assets 6,848 6,865
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Total Assets $267,346 $270,634
=========================================================================
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year $7,701 $9,733
Accounts payable and accrued liabilities 22,738 25,508
Accrued taxes 5,932 3,026
Dividends payable 2,168 2,215
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Total current liabilities 38,539 40,482
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Long-Term Debt 53,970 50,063
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Deferred Credits and Other Noncurrent
Liabilities
Deferred income taxes 20,475 27,406
Postemployment benefit obligation 28,609 28,901
Unamortized investment tax credits 166 181
Other noncurrent liabilities 13,926 8,061
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Total deferred credits and other
noncurrent liabilities 63,176 64,549
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Stockholders' Equity
Common shares issued ($1 par value) 6,495 6,495
Capital in excess of par value 91,277 91,352
Retained earnings 31,706 30,375
Treasury shares (at cost) (12,751) (7,368)
Accumulated other comprehensive income (5,066) (5,314)
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Total stockholders' equity 111,661 115,540
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Total Liabilities and
Stockholders' Equity $267,346 $270,634
=========================================================================
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Financial Data
AT&T Inc.
-------------------------------------------------------------------------
Consolidated Statements of Cash Flows
Dollars in millions, increase (decrease) in cash and cash equivalents
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Unaudited Six Months Ended
6/30/07 6/30/06
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Operating Activities
Net income $5,752 $3,253
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 11,032 4,978
Undistributed earnings from
investments in equity affiliates (344) (752)
Provision for uncollectible accounts 738 320
Amortization of investment tax credits (15) (14)
Deferred income tax (benefit) expense (546) 65
Net gain on sales of investments (64) (10)
Gain on license exchange (409) -
Changes in operating assets and liabilities:
Accounts receivable 87 545
Other current assets (665) (84)
Accounts payable and accrued liabilities (287) (1,376)
Stock-based compensation tax benefit (107) (5)
Other - net (171) 233
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Total adjustments 9,249 3,900
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Net Cash Provided by Operating Activities 15,001 7,153
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Investing Activities
Construction and capital expenditures (7,460) (4,042)
Net investments in affiliates - (717)
Dispositions 520 55
Acquisitions, net of cash acquired (221) (115)
Proceeds from sale of marketable securities 471 -
Proceeds from sale of debt and equity securities 227 -
Investments in debt and equity securities (189) -
Other 17 7
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Net Cash Used in Investing Activities (6,635) (4,812)
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Financing Activities
Net change in short-term borrowings with
original maturities of three months or less (1,993) 1,020
Issuance of long-term debt 5,924 1,491
Repayment of long-term debt (2,065) (2,540)
Purchase of treasury shares (6,904) (148)
Issuance of treasury shares 1,252 236
Dividends paid (4,414) (2,581)
Stock-based compensation tax benefit 107 5
Other (121) 49
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Net Cash Used in Financing Activities (8,214) (2,468)
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Net increase (decrease) in cash and
cash equivalents 152 (127)
Cash and cash equivalents beginning of year 2,418 1,224
-------------------------------------------------------------------------
Cash and Cash Equivalents End of Period $2,570 $1,097
=========================================================================
-------------------------------------------------------------------------
Financial Data
AT&T Inc.
-------------------------------------------------------------------------
Supplementary Operating Data
Dollars in millions
----------------------------------------------------- -------------------
Unaudited Three Months Ended Six Months Ended
------------------- -------------------
6/30/2007 6/30/2006 6/30/2007 6/30/2006
----------------------------------------------------- -------------------
In-Region (1)
Total Consumer Revenue Connections
(000)
Retail Consumer Access Lines 36,398 25,990
Broadband Connections:
Consumer DSL Lines 11,202 6,570
U-verse High Speed Internet Access 50 1
Satellite Broadband 8 -
Video Connections: (2)
DISH/ DirecTV Connections 1,846 590
U-verse Video Connections 51 -
-------------------
Total Consumer Revenue
Connections (000) 49,555 33,151
===================
Switched Access Lines (000)
Retail Consumer - Primary 32,159 22,310
Retail Consumer - Additional 4,239 3,680
Retail Business (5) 23,043 16,727
-------------------
Retail (5) 59,441 42,717
Wholesale (3, 5) 4,342 4,913
Coin (4) 295 281
-------------------
Total Switched
Access Lines (000) 64,078 47,911
===================
Unbundled Loops (000) 2,081 1,640
DSL Lines in Service (000) 13,203 7,774
Net DSL Line Additions (000) 361 342 1,042 853
Video Connections (000) (2) 1,897 590
Net Video Connection Additions
(000) (2) 200 41 387 77
Wireless
Wireless Voice Customers (000) 63,673 57,308
Net Customer Additions (000) 1,456 1,498 2,647 3,177
M&A Activity, Partitioned Customers
and Other Adjustments - - 64 (13)
POPs (000,000) 299 296
-------------------------------------------------------------------------
(1) In-region represents access lines served by AT&T's incumbent local
exchange companies.
(2) Video Connections include sales under agency agreement with EchoStar
and DirecTV customers and U-verse connections.
(3) Wholesale lines include 0.6 million lines purchased by AT&T Corp. at
6/30/07.
(4) Coin includes both retail and wholesale access lines.
(5) Prior year amounts restated to conform to current period reporting
methodology.
-------------------------------------------------------------------------
Financial Data
AT&T Inc.
Non-GAAP Wireless Reconciliations
-------------------------------------------------------------------------
Wireless Segment Adjusted(1) OIBDA
Dollars in Millions
unaudited
Quarter Ended June 30, 2007
-------------------------------------------------------------------------
Adjusting Items
Integration Intangible
GAAP Costs Amortization Adjusted
-------- ----------- ------------ ---------
Service Revenue $9,540 $9,540
Equipment Revenue 855 855
------------------------- -------- ---------- ------------ ---------
Total Operating Revenues $10,395 $- $- $10,395
------------------------- -------- ---------- ------------ ---------
Operating Expenses
Cost of Services and
Equipment Sales 3,941 (48) - 3,921
Selling, General and
Administrative 3,040 (115) - 2,897
Depreciation and
Amortization 1,810 (83) (737) 990
Total Operating Expenses 8,791 (246) (737) 7,808
Operating Income 1,604 2,587
Plus: Depreciation and
Amortization 1,810 990
OIBDA 3,414 3,577
-------------------------------------------------------------------------
OIBDA as a % of Service
Revenue 35.8% 37.5%
=========================================================================
Quarter Ended June 30, 2006
-------------------------------------------------------------------------
Adjusting Items
Integration Intangible
GAAP Costs Amortization Adjusted
-------- ----------- ------------ ---------
Service Revenue $8,302 $8,302
Equipment Revenue 923 923
------------------------- -------- ---------- ------------ ---------
Total Operating Revenues $9,225 $- $- $9,225
------------------------- -------- ---------- ------------ ---------
Operating Expenses
Cost of Services and
Equipment Sales 3,846 (67) - 3,779
Selling, General and
Administrative 2,757 (19) - 2,738
Depreciation and
Amortization 1,605 (77) (336) 1,192
------------------------- -------- ---------- ------------ ---------
Total Operating Expenses 8,208 (163) (336) 7,709
------------------------- -------- ---------- ------------ ---------
Operating Income 1,017 1,516
Plus: Depreciation and
Amortization 1,605 1,192
OIBDA 2,622 2,708
-------------------------------------------------------------------------
OIBDA as a % of Service
Revenue 31.6% 32.6%
=========================================================================
(1) OIBDA is defined as operating income (loss) before depreciation and
amortization. OIBDA differs from segment operating income (loss), as
calculated in accordance with GAAP, in that it excludes depreciation
and amortization. OIBDA 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. OIBDA is
not presented as an alternative measure of operating results or cash
flows from operations, as determined in accordance with GAAP. Our
calculation of OIBDA, as presented, may differ from similarly titled
measures reported by other companies.
First Call Analyst:
FCMN Contact: rgatlin@attnews.us
Source: AT&T Inc.
CONTACT: McCall Butler for AT&T Inc., +1-703-731-3735,
mbutler@attnews.us
Web site: http://www.att.com/
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