(Mark One)
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
|
||
For the quarterly period ended September 30, 2013
|
|||
or
|
|||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
|
||
Large accelerated filer
|
[X]
|
|
Accelerated filer
|
[ ]
|
Non-accelerated filer
|
[ ]
|
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
[ ]
|
AT&T INC.
|
|||||||||||
CONSOLIDATED STATEMENTS OF INCOME
|
|||||||||||
Dollars in millions except per share amounts
|
|||||||||||
(Unaudited)
|
|||||||||||
|
|
Three months ended
|
|
|
Nine months ended
|
||||||
|
|
September 30,
|
|
|
September 30,
|
||||||
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
Operating Revenues
|
$
|
32,158
|
|
$
|
31,459
|
|
$
|
95,589
|
|
$
|
94,856
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services and sales (exclusive of depreciation
|
|
|
|
|
|
|
|
|
|
|
|
and amortization shown separately below)
|
|
13,403
|
|
|
12,602
|
|
|
39,227
|
|
|
37,673
|
Selling, general and administrative
|
|
7,952
|
|
|
8,308
|
|
|
24,406
|
|
|
24,657
|
Depreciation and amortization
|
|
4,615
|
|
|
4,512
|
|
|
13,715
|
|
|
13,571
|
Total operating expenses
|
|
25,970
|
|
|
25,422
|
|
|
77,348
|
|
|
75,901
|
Operating Income
|
|
6,188
|
|
|
6,037
|
|
|
18,241
|
|
|
18,955
|
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
(829)
|
|
|
(824)
|
|
|
(2,481)
|
|
|
(2,624)
|
Equity in net income of affiliates
|
|
91
|
|
|
182
|
|
|
494
|
|
|
537
|
Other income (expense) – net
|
|
50
|
|
|
47
|
|
|
370
|
|
|
122
|
Total other income (expense)
|
|
(688)
|
|
|
(595)
|
|
|
(1,617)
|
|
|
(1,965)
|
Income Before Income Taxes
|
|
5,500
|
|
|
5,442
|
|
|
16,624
|
|
|
16,990
|
Income tax expense
|
|
1,595
|
|
|
1,741
|
|
|
5,066
|
|
|
5,672
|
Net Income
|
|
3,905
|
|
|
3,701
|
|
|
11,558
|
|
|
11,318
|
Less: Net Income Attributable to Noncontrolling Interest
|
|
(91)
|
|
|
(66)
|
|
|
(222)
|
|
|
(197)
|
Net Income Attributable to AT&T
|
$
|
3,814
|
|
$
|
3,635
|
|
$
|
11,336
|
|
$
|
11,121
|
Basic Earnings Per Share Attributable to AT&T
|
$
|
0.72
|
|
$
|
0.63
|
|
$
|
2.10
|
|
$
|
1.90
|
Diluted Earnings Per Share Attributable to AT&T
|
$
|
0.72
|
|
$
|
0.63
|
|
$
|
2.09
|
|
$
|
1.90
|
Weighted Average Number of Common Shares
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding – Basic (in millions)
|
|
5,315
|
|
|
5,771
|
|
|
5,402
|
|
|
5,848
|
Weighted Average Number of Common Shares
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding – with Dilution (in millions)
|
|
5,331
|
|
|
5,792
|
|
|
5,419
|
|
|
5,869
|
Dividends Declared Per Common Share
|
$
|
0.45
|
|
$
|
0.44
|
|
$
|
1.35
|
|
$
|
1.32
|
See Notes to Consolidated Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
AT&T INC.
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
||
Dollars in millions
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
||||||||
|
September 30,
|
|
September 30,
|
||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||
Net income
|
$
|
3,905
|
|
$
|
3,701
|
|
$
|
11,558
|
|
$
|
11,318
|
Other comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency:
|
|
|
|
|
|
|
|
|
|
|
|
Translation adjustment (includes $(1), $0, $(2) and $0 attributable
to noncontrolling interest), net of taxes of $(21), $33, $(86)
and $109
|
|
(37)
|
|
|
57
|
|
|
(155)
|
|
|
199
|
Reclassification adjustment included in net income, net of
taxes of $0, $0, $19 and $0
|
|
-
|
|
|
-
|
|
|
34
|
|
|
-
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains (losses), net of taxes of $38, $31, $84
and $58
|
|
69
|
|
|
59
|
|
|
155
|
|
|
108
|
Reclassification adjustment realized in net income, net of
taxes of $(2), $(28), $(7) and $(34)
|
|
(3)
|
|
|
(51)
|
|
|
(13)
|
|
|
(63)
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains (losses), net of taxes of $171, $126, $286
and $68
|
|
316
|
|
|
232
|
|
|
526
|
|
|
125
|
Reclassification adjustment included in net income, net of
taxes of $4, $4, $12 and $11
|
|
7
|
|
|
8
|
|
|
22
|
|
|
21
|
Defined benefit postretirement plans:
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains (losses) from equity method investees
arising during period, net of taxes of $0, $0, $0 and $(29)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(53)
|
Reclassification adjustment included in net income, net of taxes
of $0, $0, $5 and $0
|
|
-
|
|
|
-
|
|
|
8
|
|
|
-
|
Amortization of net prior service credit included in net income,
net of taxes of $(109), $(84), $(327) and ($255)
|
|
(178)
|
|
|
(137)
|
|
|
(533)
|
|
|
(411)
|
Other
|
|
-
|
|
|
(1)
|
|
|
-
|
|
|
-
|
Other comprehensive income (loss)
|
|
174
|
|
|
167
|
|
|
44
|
|
|
(74)
|
Total comprehensive income
|
|
4,079
|
|
|
3,868
|
|
|
11,602
|
|
|
11,244
|
Less: Total comprehensive income attributable to
noncontrolling interest
|
|
(90)
|
|
|
(66)
|
|
|
(220)
|
|
|
(197)
|
Total Comprehensive Income Attributable to AT&T
|
$
|
3,989
|
|
$
|
3,802
|
|
$
|
11,382
|
|
$
|
11,047
|
See Notes to Consolidated Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
AT&T INC.
|
|||||
CONSOLIDATED BALANCE SHEETS
|
|||||
Dollars in millions except per share amounts
|
|||||
|
September 30,
|
|
December 31,
|
||
|
2013
|
|
2012
|
||
Assets
|
(Unaudited)
|
|
|
|
|
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
|
|
282,445
|
|
|
270,907
|
Less: accumulated depreciation and amortization
|
|
(170,021)
|
|
|
(161,140)
|
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 ($1 par value, 14,000,000,000 authorized at September 30, 2013 and
|
|
|
|
|
|
December 31, 2012: issued 6,495,231,088 at September 30, 2013 and December 31, 2012)
|
|
6,495
|
|
|
6,495
|
Additional paid-in capital
|
|
91,021
|
|
|
91,038
|
Retained earnings
|
|
26,648
|
|
|
22,481
|
Treasury stock (1,214,987,626 at September 30, 2013 and 913,836,325
|
|
|
|
|
|
at December 31, 2012, at cost)
|
|
(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
|
See Notes to Consolidated Financial Statements.
|
|
|
|
|
|
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
|
Cash paid during the nine months ended September 30 for:
|
|
|
|
|
|
Interest
|
$
|
2,980
|
|
$
|
3,214
|
Income taxes, net of refunds
|
$
|
1,573
|
|
$
|
390
|
See Notes to Consolidated Financial Statements.
|
AT&T INC.
|
||||
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
|
||||
Dollars and shares in millions except per share amounts
|
||||
(Unaudited)
|
||||
|
September 30, 2013
|
|||
|
Shares
|
|
Amount
|
|
Common Stock
|
|
|
|
|
Balance at beginning of year
|
6,495
|
|
$
|
6,495
|
Issuance of stock
|
-
|
|
|
-
|
Balance at end of period
|
6,495
|
|
$
|
6,495
|
|
|
|
|
|
Additional Paid-In Capital
|
|
|
|
|
Balance at beginning of year
|
|
|
$
|
91,038
|
Issuance of treasury stock
|
|
|
|
(8)
|
Share-based payments
|
|
|
|
(9)
|
Balance at end of period
|
|
|
$
|
91,021
|
|
|
|
|
|
Retained Earnings
|
|
|
|
|
Balance at beginning of year
|
|
|
$
|
22,481
|
Net income attributable to AT&T ($2.09 per diluted share)
|
|
|
|
11,336
|
Dividends to stockholders ($1.35 per share)
|
|
|
|
(7,169)
|
Balance at end of period
|
|
|
$
|
26,648
|
|
|
|
|
|
Treasury Stock
|
|
|
|
|
Balance at beginning of year
|
(914)
|
|
$
|
(32,888)
|
Repurchase of common stock
|
(312)
|
|
|
(11,134)
|
Issuance of treasury stock
|
11
|
|
|
291
|
Balance at end of period
|
(1,215)
|
|
$
|
(43,731)
|
|
|
|
|
|
Accumulated Other Comprehensive Income Attributable to AT&T, net of tax
|
|
|
|
|
Balance at beginning of year
|
|
|
$
|
5,236
|
Other comprehensive income attributable to AT&T
|
|
|
|
46
|
Balance at end of period
|
|
|
$
|
5,282
|
|
|
|
|
|
Noncontrolling Interest
|
|
|
|
|
Balance at beginning of year
|
|
|
$
|
333
|
Net income attributable to noncontrolling interest
|
|
|
|
222
|
Distributions
|
|
|
|
(161)
|
Acquisitions of noncontrolling interests
|
|
|
|
23
|
Translation adjustments attributable to noncontrolling interest, net of taxes
|
|
|
|
(2)
|
Balance at end of period
|
|
|
$
|
415
|
|
|
|
|
|
Total Stockholders’ Equity at beginning of year
|
|
|
$
|
92,695
|
Total Stockholders’ Equity at end of period
|
|
|
$
|
86,130
|
See Notes to Consolidated Financial Statements.
|
|
|
Three months ended
|
|
Nine months ended
|
||||||||
|
September 30,
|
|
September 30,
|
||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||
Numerators
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
3,905
|
|
$
|
3,701
|
|
$
|
11,558
|
|
$
|
11,318
|
Net income attributable to noncontrolling interest
|
|
(91)
|
|
|
(66)
|
|
|
(222)
|
|
|
(197)
|
Net income attributable to AT&T
|
|
3,814
|
|
|
3,635
|
|
|
11,336
|
|
|
11,121
|
Dilutive potential common shares:
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payment
|
|
3
|
|
|
3
|
|
|
9
|
|
|
9
|
Numerator for diluted earnings per share
|
$
|
3,817
|
|
$
|
3,638
|
|
$
|
11,345
|
|
$
|
11,130
|
Denominators (000,000)
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
5,315
|
|
|
5,771
|
|
|
5,402
|
|
|
5,848
|
Dilutive potential common shares:
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payment
|
|
16
|
|
|
21
|
|
|
17
|
|
|
21
|
Denominator for diluted earnings per share
|
|
5,331
|
|
|
5,792
|
|
|
5,419
|
|
|
5,869
|
Basic earnings per share attributable to AT&T
|
$
|
0.72
|
|
$
|
0.63
|
|
$
|
2.10
|
|
$
|
1.90
|
Diluted earnings per share attributable to AT&T
|
$
|
0.72
|
|
$
|
0.63
|
|
$
|
2.09
|
|
$
|
1.90
|
At September 30, 2013 and for the period ended:
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Foreign
Currency
Translation
Adjustment
|
|
|
Net
Unrealized
Gain (Loss)
on Available-
for-Sale
Securities
|
|
|
Net
Unrealized
Gains
(Losses) on
Cash Flow
Hedges
|
|
|
Defined Benefit
Postretirement
Plans
|
|
Accumulated
Other
Comprehensive
Income
|
||
Balance as of January 1, 2013
|
$
|
(284)
|
|
$
|
272
|
|
$
|
(110)
|
|
$
|
5,358
|
|
$
|
5,236
|
|
Other comprehensive income
(loss) before reclassifications
|
|
(153)
|
|
|
155
|
|
|
526
|
|
|
-
|
|
|
528
|
|
Amounts reclassified
from accumulated OCI
|
|
34
|
1
|
|
(13)
|
2
|
|
22
|
3
|
|
(525)
|
4
|
|
(482)
|
|
Net other comprehensive
income (loss)
|
|
(119)
|
|
|
142
|
|
|
548
|
|
|
(525)
|
|
|
46
|
|
Balance as of September 30, 2013
|
$
|
(403)
|
|
$
|
414
|
|
$
|
438
|
|
$
|
4,833
|
|
$
|
5,282
|
|
1
|
Pre-tax translation loss reclassifications are included in Other income (expense) - net in the consolidated statements of income.
|
||||||||||||||
2
|
Realized gains are included in Other income (expense) - net in the consolidated statements of income.
|
||||||||||||||
3
|
Realized (gains) losses are included in interest expense in the consolidated statements of income. See Note 6 for additional information.
|
||||||||||||||
4
|
The amortization of prior service credits associated with postretirement benefits, net of amounts capitalized as part of construction labor, are included in Cost of services and sales and Selling, general and administrative in the consolidated statements of income (see Note 5). Actuarial loss
|
||||||||||||||
|
reclassifications related to our equity method investees are included in Other income (expense) - net in the consolidated statements of income.
|
For the three months ended September 30, 2013
|
Advertising |
Consolidated
Results
|
|||||||||||||||
Wireless
|
Wireline
|
Solutions |
Other
|
Consolidations
|
|||||||||||||
Data
|
$
|
5,509
|
$
|
8,457
|
$
|
- |
$
|
-
|
$
|
-
|
$
|
13,966
|
|||||
Voice, text and other
|
9,951
|
5,023
|
- |
-
|
-
|
14,974
|
|||||||||||
Equipment and other
|
2,020
|
1,190
|
- |
8
|
-
|
3,218
|
|||||||||||
Total segment operating revenues
|
17,480
|
14,670
|
- |
8
|
-
|
32,158
|
|||||||||||
Operations and support expenses
|
10,982
|
10,385
|
- |
(12)
|
-
|
21,355
|
|||||||||||
Depreciation and amortization expenses
|
1,875
|
2,736
|
- |
4
|
-
|
4,615
|
|||||||||||
Total segment operating expenses
|
12,857
|
13,121
|
- |
(8)
|
-
|
25,970
|
|||||||||||
Segment operating income (loss)
|
4,623
|
1,549
|
- |
16
|
-
|
6,188
|
|||||||||||
Interest expense
|
-
|
-
|
- |
-
|
829
|
829
|
|||||||||||
Equity in net income (loss) of affiliates
|
(18)
|
-
|
- |
109
|
-
|
91
|
|||||||||||
Other income (expense) – net
|
-
|
-
|
- |
-
|
50
|
50
|
|||||||||||
Segment income (loss) before
income taxes
|
$
|
4,605
|
$
|
1,549
|
$
|
- |
$
|
125
|
$
|
(779)
|
$
|
5,500
|
|||||
For the nine months ended September 30, 2013
|
Advertising |
Consolidated
Results
|
|||||||||||||||
Wireless
|
Wireline
|
Solutions |
Other
|
Consolidations
|
|||||||||||||
Data
|
$
|
15,990
|
$
|
25,019
|
$
|
- |
$
|
-
|
$
|
-
|
$
|
41,009
|
|||||
Voice, text and other
|
29,902
|
15,470
|
- |
-
|
-
|
45,372
|
|||||||||||
Equipment and other
|
5,570
|
3,609
|
- |
29
|
-
|
9,208
|
|||||||||||
Total segment operating revenues
|
51,462
|
44,098
|
- |
29
|
-
|
95,589
|
|||||||||||
Operations and support expenses
|
31,932
|
31,137
|
- |
564
|
-
|
63,633
|
|||||||||||
Depreciation and amortization expenses
|
5,553
|
8,146
|
- |
16
|
-
|
13,715
|
|||||||||||
Total segment operating expenses
|
37,485
|
39,283
|
- |
580
|
-
|
77,348
|
|||||||||||
Segment operating income (loss)
|
13,977
|
4,815
|
- |
(551)
|
-
|
18,241
|
|||||||||||
Interest expense
|
-
|
-
|
- |
-
|
2,481
|
2,481
|
|||||||||||
Equity in net income (loss) of affiliates
|
(55)
|
1
|
- |
548
|
-
|
494
|
|||||||||||
Other income (expense) – net
|
-
|
-
|
- |
-
|
370
|
370
|
|||||||||||
Segment income (loss) before
income taxes
|
$
|
13,922
|
$
|
4,816
|
$
|
- |
$
|
(3)
|
$
|
(2,111)
|
$
|
16,624
|
For the three months ended September 30, 2012
|
Advertising |
Consolidated
Results
|
|||||||||||||||
Wireless
|
Wireline
|
Solutions |
Other
|
Consolidations
|
|||||||||||||
Data
|
$
|
4,686
|
$
|
7,987
|
$
|
- |
$
|
-
|
$
|
-
|
$
|
12,673
|
|||||
Voice, text and other
|
10,220
|
5,563
|
- |
-
|
-
|
15,783
|
|||||||||||
Equipment and other
|
1,726
|
1,264
|
- |
13
|
-
|
3,003
|
|||||||||||
Total segment operating revenues
|
16,632
|
14,814
|
- |
13
|
-
|
31,459
|
|||||||||||
Operations and support expenses
|
10,432
|
10,246
|
- |
232
|
-
|
20,910
|
|||||||||||
Depreciation and amortization expenses
|
1,730
|
2,774
|
- |
8
|
-
|
4,512
|
|||||||||||
Total segment operating expenses
|
12,162
|
13,020
|
- |
240
|
-
|
25,422
|
|||||||||||
Segment operating income (loss)
|
4,470
|
1,794
|
- |
(227)
|
-
|
6,037
|
|||||||||||
Interest expense
|
-
|
-
|
- |
-
|
824
|
824
|
|||||||||||
Equity in net income (loss) of affiliates
|
(17)
|
-
|
- |
199
|
-
|
182
|
|||||||||||
Other income (expense) – net
|
-
|
-
|
- |
-
|
47
|
47
|
|||||||||||
Segment income (loss) before
income taxes
|
$
|
4,453
|
$
|
1,794
|
$
|
- |
$
|
(28)
|
$
|
(777)
|
$
|
5,442
|
|||||
For the nine months ended September 30, 2012
|
Advertising |
Consolidated
Results
|
|||||||||||||||
Wireless
|
Wireline
|
Solutions |
Other
|
Consolidations
|
|||||||||||||
Data
|
$
|
13,392
|
$
|
23,722
|
$
|
- |
$
|
-
|
$
|
-
|
$
|
37,114
|
|||||
Voice, text and other
|
30,845
|
17,151
|
- |
-
|
-
|
47,996
|
|||||||||||
Equipment and other
|
4,884
|
3,777
|
1,049 |
36
|
-
|
9,746
|
|||||||||||
Total segment operating revenues
|
49,121
|
44,650
|
1,049 |
36
|
-
|
94,856
|
|||||||||||
Operations and support expenses
|
30,000
|
30,849
|
773 |
708
|
-
|
62,330
|
|||||||||||
Depreciation and amortization expenses
|
5,092
|
8,348
|
106 |
25
|
-
|
13,571
|
|||||||||||
Total segment operating expenses
|
35,092
|
39,197
|
879 |
733
|
-
|
75,901
|
|||||||||||
Segment operating income (loss)
|
14,029
|
5,453
|
170 |
(697)
|
-
|
18,955
|
|||||||||||
Interest expense
|
-
|
-
|
- |
-
|
2,624
|
2,624
|
|||||||||||
Equity in net income (loss) of affiliates
|
(45)
|
(1)
|
- |
583
|
-
|
537
|
|||||||||||
Other income (expense) – net
|
-
|
-
|
- |
-
|
122
|
122
|
|||||||||||
Segment income (loss) before
income taxes
|
$
|
13,984
|
$
|
5,452
|
$
|
170 |
$
|
(114)
|
$
|
(2,502)
|
$
|
16,990
|
|
Three months ended
|
|
Nine months ended
|
||||||||
|
September 30,
|
|
September 30,
|
||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||
Pension cost:
|
|
|
|
|
|
|
|
|
|
|
|
Service cost – benefits earned during the period
|
$
|
331
|
|
$
|
301
|
|
$
|
991
|
|
$
|
915
|
Interest cost on projected benefit obligation
|
|
608
|
|
|
700
|
|
|
1,822
|
|
|
2,100
|
Expected return on assets
|
|
(828)
|
|
|
(880)
|
|
|
(2,484)
|
|
|
(2,640)
|
Amortization of prior service (credit)
|
|
(25)
|
|
|
(3)
|
|
|
(71)
|
|
|
(11)
|
Net pension cost
|
$
|
86
|
|
$
|
118
|
|
$
|
258
|
|
$
|
364
|
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement cost:
|
|
|
|
|
|
|
|
|
|
|
|
Service cost – benefits earned during the period
|
$
|
95
|
|
$
|
81
|
|
$
|
286
|
|
$
|
247
|
Interest cost on accumulated postretirement benefit obligation
|
|
389
|
|
|
446
|
|
|
1,168
|
|
|
1,340
|
Expected return on assets
|
|
(177)
|
|
|
(200)
|
|
|
(533)
|
|
|
(601)
|
Amortization of prior service (credit)
|
|
(263)
|
|
|
(215)
|
|
|
(788)
|
|
|
(647)
|
Net postretirement cost
|
$
|
44
|
|
$
|
112
|
|
$
|
133
|
|
$
|
339
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined net pension and postretirement cost
|
$
|
130
|
|
$
|
230
|
|
$
|
391
|
|
$
|
703
|
Level 1
|
Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that we have the ability to access.
|
Level 2
|
Inputs to the valuation methodology include:
|
·
|
Quoted prices for similar assets and liabilities in active markets.
|
·
|
Quoted prices for identical or similar assets or liabilities in inactive markets.
|
·
|
Inputs other than quoted market prices that are observable for the asset or liability.
|
·
|
Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
Level 3
|
Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
|
·
|
Fair value is often based on developed models in which there are few, if any, external observations.
|
|
September 30, 2013
|
|
December 31, 2012
|
||||||||
|
Carrying
|
|
Fair
|
|
Carrying
|
|
Fair
|
||||
|
Amount
|
|
Value
|
|
Amount
|
|
Value
|
||||
Notes and debentures
|
$
|
74,103
|
|
$
|
79,156
|
|
$
|
69,578
|
|
$
|
81,310
|
Commercial paper
|
|
1,851
|
|
|
1,851
|
|
|
-
|
|
|
-
|
Bank borrowings
|
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
Investment securities
|
|
2,525
|
|
|
2,525
|
|
|
2,218
|
|
|
2,218
|
|
|
September 30, 2013
|
||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||
Available-for-Sale Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic equities
|
$
|
1,065
|
|
$
|
-
|
|
$
|
-
|
|
$
|
1,065
|
|
International equities
|
|
583
|
|
|
-
|
|
|
-
|
|
|
583
|
|
Fixed income bonds
|
|
-
|
|
|
815
|
|
|
-
|
|
|
815
|
|
Asset Derivatives1
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
-
|
|
|
216
|
|
|
-
|
|
|
216
|
|
Cross-currency swaps
|
|
-
|
|
|
1,657
|
|
|
-
|
|
|
1,657
|
|
Liability Derivatives1
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
-
|
|
|
(4)
|
|
|
-
|
|
|
(4)
|
|
Cross-currency swaps
|
|
-
|
|
|
(557)
|
|
|
-
|
|
|
(557)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||
Available-for-Sale Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic equities
|
$
|
873
|
|
$
|
-
|
|
$
|
-
|
|
$
|
873
|
|
International equities
|
|
469
|
|
|
-
|
|
|
-
|
|
|
469
|
|
Fixed income bonds
|
|
-
|
|
|
837
|
|
|
-
|
|
|
837
|
|
Asset Derivatives1
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
-
|
|
|
287
|
|
|
-
|
|
|
287
|
|
Cross-currency swaps
|
|
-
|
|
|
752
|
|
|
-
|
|
|
752
|
|
Foreign exchange contracts
|
|
-
|
|
|
1
|
|
|
-
|
|
|
1
|
|
Liability Derivatives1
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross-currency swaps
|
|
-
|
|
|
(672)
|
|
|
-
|
|
|
(672)
|
|
1
|
Derivatives designated as hedging instruments are reflected as Other assets, Other noncurrent liabilities and, for a portion of interest rate swaps, Other current assets.
|
|
September 30,
|
December 31,
|
||||||
|
2013
|
2012
|
||||||
Interest rate swaps
|
$ | 4,750 | $ | 3,000 | ||||
Cross-currency swaps
|
14,136 | 12,071 | ||||||
Foreign exchange contracts
|
4 | 51 | ||||||
Total
|
$ | 18,890 | $ | 15,122 |
Following is the related hedged items affecting our financial position and performance:
|
||||||||||||||||
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|
|
|
|
||||||||||||
Effect of Derivatives on the Consolidated Statements of Income
|
|
|
|
|||||||||||||
Fair Value Hedging Relationships
|
Three months ended
|
Nine months ended
|
||||||||||||||
September 30,
2013
|
September 30,
2012
|
September 30,
2013
|
September 30,
2012
|
|||||||||||||
Interest rate swaps (Interest expense):
|
|
|
|
|
||||||||||||
Gain (Loss) on interest rate swaps
|
$ | 9 | $ | (21 | ) | $ | (78 | ) | $ | (158 | ) | |||||
Gain (Loss) on long-term debt
|
(9 | ) | 21 | 78 | 158 |
Three months ended
|
Nine months ended
|
|||||||||||||||
Cash Flow Hedging Relationships
|
September 30,
2013
|
September 30,
2012
|
September 30,
2013
|
September 30,
2012
|
||||||||||||
Cross-currency swaps:
|
|
|
|
|
||||||||||||
Gain (Loss) recognized in accumulated OCI
|
$ | 482 | $ | 355 | $ | 807 | $ | 190 | ||||||||
|
||||||||||||||||
Interest rate locks:
|
||||||||||||||||
Interest income (expense) reclassified from
accumulated OCI into income
|
(11 | ) | (12 | ) | (34 | ) | (32 | ) | ||||||||
|
||||||||||||||||
Foreign exchange contracts:
|
||||||||||||||||
Gain (Loss) recognized in accumulated OCI
|
5 | 3 | 5 | 3 |
|
Third Quarter
|
Nine-Month Period
|
||||||||||||||||||||||
|
2013
|
2012
|
Percent
Change
|
2013
|
2012
|
Percent
Change
|
||||||||||||||||||
|
||||||||||||||||||||||||
Operating Revenues
|
$ | 32,158 | $ | 31,459 | 2.2 | % | $ | 95,589 | $ | 94,856 | 0.8 | % | ||||||||||||
Operating expenses
|
||||||||||||||||||||||||
Cost of services and sales
|
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 | ) | |||||||||||||||||
Income Before Income Taxes
|
5,500 | 5,442 | 1.1 | 16,624 | 16,990 | (2.2 | ) | |||||||||||||||||
Net Income
|
3,905 | 3,701 | 5.5 | 11,558 | 11,318 | 2.1 | ||||||||||||||||||
Net Income Attributable to AT&T
|
$ | 3,814 | $ | 3,635 | 4.9 | % | $ | 11,336 | $ | 11,121 | 1.9 | % |
Selected Financial and Operating Data
|
|
|
|
|
September 30,
|
||
|
2013
|
|
2012
|
Wireless subscribers (000)
|
109,460
|
|
105,871
|
Network access lines in service (000)
|
25,680
|
|
30,443
|
Total wireline broadband connections (000)
|
16,427
|
|
16,392
|
Debt ratio1
|
46.9%
|
|
38.6%
|
Ratio of earnings to fixed charges2
|
5.43
|
|
5.36
|
Number of AT&T employees
|
246,740
|
|
241,130
|
|
1 Debt ratios are calculated by dividing total debt (debt maturing within one year plus long-term debt) by total capital (total debt plus total stockholders’ equity) and do not consider cash available to pay down debt. See our “Liquidity and Capital Resources” section for discussion.
|
|
2 See exhibit 12.
|
Wireless
|
|
|
|
|
|
|
||||||||||||||||||
Segment Results
|
|
|
|
|
|
|
||||||||||||||||||
|
Third Quarter
|
Nine-Month Period
|
||||||||||||||||||||||
|
2013
|
2012
|
Percent
Change
|
2013
|
2012
|
Percent
Change
|
||||||||||||||||||
|
||||||||||||||||||||||||
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) | % |
The following table highlights other key measures of performance for the Wireless segment:
|
|||||||||||||||||||||||||
Third Quarter
|
Nine-Month Period
|
||||||||||||||||||||||||
|
|
|
Percent
|
|
|
Percent
|
|||||||||||||||||||
(Subscribers in 000s) | 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||||||||||
Wireless Subscribers1
|
|
|
|
109,460 | 105,871 | 3.4 | % | ||||||||||||||||||
|
Gross Subscriber Additions2
|
5,251 | 4,914 | 6.9 | % | 14,978 | 15,162 | (1.2) | |||||||||||||||||
|
Net Subscriber Additions2
|
989 | 678 | 45.9 | 1,912 | 2,670 | (28.4) | ||||||||||||||||||
|
Total Churn3
|
1.31 | % | 1.34 | % |
(3) BP
|
1.35 | % | 1.33 | % |
2 BP
|
||||||||||||||
|
|
||||||||||||||||||||||||
Postpaid Smartphone Subscribers
|
50,637 | 44,528 | 13.7 | % | |||||||||||||||||||||
Postpaid Data-Centric Device and Other
Phone Subscribers
|
21,395 | 25,219 | (15.2) | ||||||||||||||||||||||
Total Postpaid Subscribers
|
72,032 | 69,747 | 3.3 | ||||||||||||||||||||||
|
Net Postpaid Subscriber Additions2
|
363 | 151 | - | 1,210 | 658 | 83.9 | ||||||||||||||||||
|
Postpaid Churn3
|
1.07 | % | 1.08 | % |
(1) BP
|
1.04 | % | 1.05 | % |
(1) BP
|
||||||||||||||
|
|
||||||||||||||||||||||||
Prepaid Subscribers
|
7,425 | 7,545 | (1.6) | % | |||||||||||||||||||||
|
Net Prepaid Subscriber Additions2
|
192 | 77 | - | 19 | 294 | (93.5) | ||||||||||||||||||
|
|
||||||||||||||||||||||||
Reseller Subscribers
|
14,089 | 14,573 | (3.3) | % | |||||||||||||||||||||
|
Net Reseller Subscriber Additions2
|
(285 | ) | 137 | - | (951 | ) | 793 | - | ||||||||||||||||
|
|
||||||||||||||||||||||||
Connected Device Subscribers4
|
15,914 | 14,006 | 13.6 | % | |||||||||||||||||||||
|
Net Connected Device Subscriber
Additions
|
719 | 313 | - | 1,634 | 925 | 76.6 | ||||||||||||||||||
1
|
Represents 100% of AT&T Mobility wireless subscribers.
|
||||||||||||||||||||||||
2
|
Excludes merger and acquisition-related additions during the period.
|
||||||||||||||||||||||||
3
|
Calculated by dividing the aggregate number of wireless subscribers who canceled service during a period divided by the total number of wireless subscribers at the beginning of that period. The churn rate for the period is equal to the average of the churn rate for each month of that period.
|
||||||||||||||||||||||||
4
|
Includes data-centric devices such as eReaders, automobile monitoring systems, and fleet management - excludes tablet subscribers, which are primarily reflected in our postpaid subscriber category, with the remainder in prepaid.
|
·
|
Equipment costs increased $521 and $1,526 reflecting an increase in upgrade activity and total device sales, as well as the sales of more expensive smartphones.
|
·
|
Commission expenses increased $105 and $316 due primarily to higher upgrade activity and total device sales and a year-over-year increase in smartphone sales as a percentage of total device sales.
|
·
|
Selling expenses (other than commissions) and administrative expenses increased $36 and $377 due primarily to increases of: $35 and $197 in employee-related costs; $138 in advertising costs for the first nine months of 2013; and $40 and $148 in information technology costs in conjunction with ongoing support systems development. Partially offsetting these increases were bad debt expense declines of $36 and $138.
|
·
|
Network system costs increased $32 and $187 due to higher personnel-related network support costs and cell site related costs in conjunction with our network enhancement efforts.
|
·
|
Interconnect and long-distance costs decreased $114 and $326 due to third-party credits and lower usage costs in the current period.
|
·
|
USF fees decreased $4 and $102 primarily due to federal rate decreases, which are offset by lower USF revenues.
|
Wireline
|
|
|
|
|
|
|
||||||||||||||||||
Segment Results
|
|
|
|
|
|
|
||||||||||||||||||
|
Third Quarter
|
Nine-Month Period
|
||||||||||||||||||||||
|
2013
|
2012
|
Percent
Change
|
2013
|
2012
|
Percent
Change
|
||||||||||||||||||
|
||||||||||||||||||||||||
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 | ) % |
·
|
IP data revenues (excluding strategic business services below) increased $428, or 11.5%, in the third quarter and $1,237, or 11.4%, for the first nine months of 2013 primarily driven by higher U-verse penetration, customer additions, and migration from our legacy voice and DSL services. In the third quarter and for the first nine months U-verse revenue from consumer customers increased $318 and $957 for high speed Internet access, $244 and $736 for video and $76 and $198 for voice, respectively. These increases were partially offset by a decrease of $191 and $557 in DSL revenue as customers continue to shift to our U-verse or competitors’ high speed Internet access offerings. We expect DSL revenue to continue to decline as a percentage of our overall data revenues.
|
·
|
Strategic business services, which include VPNs, Ethernet, hosting, IP conferencing, VoIP, Ethernet-access to Managed Internet Service (EaMIS), security services, and U-verse services provided to business customers, increased $293, or 15.7%, in the third quarter and $772, or 14.1%, for the first nine months of 2013 primarily driven by migration from our legacy services. In the third quarter and for the first nine months revenue from Ethernet increased $76 and $215, VPN increased by $116 and $251, U-verse services increased $32 and $103, VoIP increased $27 and $78 and EaMIS increased $22 and $78, respectively.
|
·
|
Traditional data revenues, which include circuit-based and packet-switched data services, decreased $251, or 10.5%, in the third quarter and $719, or 9.7%, for the first nine months of 2013. This decrease was primarily due to lower demand as customers continue to shift to more advanced IP-based technology such as Ethernet, VPN, U-verse High Speed Internet access and managed Internet services. We expect these traditional services to continue to decline as a percentage of our overall data revenues.
|
·
|
Local voice revenues decreased $341, or 9.9%, in the third quarter and $1,051, or 9.9%, for the first nine months of 2013. The decrease was driven primarily by a 15.6% decline in total switched access lines. We expect our local voice revenue to continue to be negatively affected by competition from alternative technologies, primarily wireless and VoIP.
|
·
|
Long-distance revenues decreased $192, or 10.3%, in the third quarter and $617, or 10.7%, for the first nine months of 2013. Lower demand for long-distance service from our business and consumer customers decreased revenues $158 in the third quarter and $514 for the first nine months of 2013. Additionally, expected declines in the number of our national mass-market customers decreased revenues $33 in the third quarter and $103 for the first nine months of 2013.
|
|
September 30,
|
September 30,
|
Percent
|
|||||||||
(in 000s)
|
2013
|
2012
|
Change
|
|||||||||
U-verse High Speed Internet
|
9,745 | 7,108 | 37.1 | % | ||||||||
DSL and Other Broadband Connections
|
6,682 | 9,284 | (28.0 | ) | ||||||||
Total Wireline Broadband Connections1
|
16,427 | 16,392 | 0.2 | |||||||||
|
||||||||||||
Total U-verse Video Connections
|
5,266 | 4,344 | 21.2 | |||||||||
|
||||||||||||
Retail Consumer Switched Access Lines
|
13,133 | 16,486 | (20.3 | ) | ||||||||
U-verse Consumer VoIP Connections
|
3,616 | 2,733 | 32.3 | |||||||||
Total Retail Consumer Voice Connections
|
16,749 | 19,219 | (12.9 | ) | ||||||||
|
||||||||||||
Switched Access Lines
|
||||||||||||
Retail Consumer
|
13,133 | 16,486 | (20.3 | ) | ||||||||
Retail Business
|
10,633 | 11,784 | (9.8 | ) | ||||||||
Retail Subtotal
|
23,766 | 28,270 | (15.9 | ) | ||||||||
|
||||||||||||
Wholesale Subtotal
|
1,654 | 1,848 | (10.5 | ) | ||||||||
|
||||||||||||
Total Switched Access Lines2
|
25,680 | 30,443 | (15.6 | ) % |
1
|
Total wireline broadband connections include DSL, U-verse High Speed Internet and satellite broadband.
|
2
|
Total switched access lines includes access lines provided to national mass markets and private payphone service providers of 260 at September 30, 2013 and 325 at September 30, 2012.
|
Advertising Solutions
|
|
|
|
|
|
|
||||||||||||||||||
Segment Results
|
|
|
|
|
|
|
||||||||||||||||||
|
Third Quarter
|
Nine-Month Period
|
||||||||||||||||||||||
|
2013
|
2012
|
Percent
Change
|
2013
|
2012
|
Percent
Change
|
||||||||||||||||||
Total Segment Operating Revenues
|
$ | - | $ | - | - | $ | - | $ | 1,049 | - | ||||||||||||||
Segment operating expenses
|
||||||||||||||||||||||||
Operations and support
|
- | - | - | - | 773 | - | ||||||||||||||||||
Depreciation and amortization
|
- | - | - | - | 106 | - | ||||||||||||||||||
Total Segment Operating Expenses
|
- | - | - | - | 879 | - | ||||||||||||||||||
Segment Income
|
$ | - | $ | - | - | $ | - | $ | 170 | - |
Other
|
|
|
|
|
|
|
||||||||||||||||||
Segment Results
|
|
|
|
|
|
|
||||||||||||||||||
|
Third Quarter
|
Nine-Month Period
|
||||||||||||||||||||||
|
2013
|
2012
|
Percent Change
|
2013
|
2012
|
Percent Change
|
||||||||||||||||||
|
||||||||||||||||||||||||
Total Segment Operating Revenues
|
$ | 8 | $ | 13 | (38.5) | % | $ | 29 | $ | 36 | (19.4) | % | ||||||||||||
Total 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 | % |
|
|
Third Quarter
|
|
Nine-Month Period
|
||||||||
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||
América Móvil
|
$
|
85
|
|
$
|
126
|
|
$
|
410
|
|
$
|
490
|
|
YP Holdings
|
|
23
|
|
|
75
|
|
|
138
|
|
|
94
|
|
Other
|
|
1
|
|
|
(2)
|
|
|
-
|
|
|
(1)
|
|
Other Segment Equity in Net Income of Affiliates
|
$
|
109
|
|
$
|
199
|
|
$
|
548
|
|
$
|
583
|
·
|
February 2013 issuance of $1,000 of 0.900% global notes due 2016 and $1,250 of floating rate notes due 2016. The floating rate for the note is based upon the three-month London Interbank Offered Rate (LIBOR), reset quarterly, plus 38.5 basis points.
|
·
|
March 2013 issuance of $500 of 1.400% global notes due 2017.
|
·
|
March 2013 issuance of €1,250 of 2.500% global notes due 2023 (equivalent to $1,626 when issued) and €400 of 3.550% global notes due 2032 (equivalent to $520 when issued).
|
·
|
May 2013 issuance of £1,000 of 4.250% global notes due 2043 (equivalent to approximately $1,560 when issued).
|
·
|
$1,000 of annual put reset securities issued by BellSouth Corporation (BellSouth) that may be put back to us each April until maturity in 2021.
|
·
|
An accreting zero-coupon note that may be redeemed each May until maturity in 2022. If the zero-coupon note (issued for principal of $500 in 2007) is held to maturity, the redemption amount will be $1,030.
|
·
|
Adverse economic and/or capital access changes in the markets served by us or in countries in which we have significant investments, including the impact on customer demand and our ability and our suppliers’ ability to access financial markets at favorable rates and terms.
|
·
|
Changes in available technology and the effects of such changes, including product substitutions and deployment costs.
|
·
|
Increases in our benefit plans’ costs, including increases due to adverse changes in the United States and foreign securities markets, resulting in worse-than-assumed investment returns and discount rates, adverse medical cost trends, unfavorable or delayed implementation of healthcare legislation, regulations or related court decisions; and our inability to receive retroactive approval from the DOL of our voluntary contribution of a preferred interest in our wireless business.
|
·
|
The final outcome of FCC and other federal or state agency proceedings (including judicial review, if any, of such proceedings) involving issues that are important to our business, including, without limit, intercarrier compensation, interconnection obligations, the transition from legacy technologies to IP-based infrastructure, universal service, broadband deployment, E911 services, competition policy, net neutrality, unbundled network elements and other wholesale obligations, availability of new spectrum from the FCC on fair and balanced terms, wireless license awards and renewals.
|
·
|
The final outcome of state and federal legislative efforts involving issues that are important to our business, including deregulation of IP-based services, relief from Carrier of Last Resort obligations, and elimination of state commission review of the withdrawal of services.
|
·
|
Enactment of additional state, federal and/or foreign regulatory and tax laws and regulations pertaining to our subsidiaries and foreign investments, including laws and regulations that reduce our incentive to invest in our networks, resulting in lower revenue growth and/or higher operating costs.
|
·
|
Our ability to absorb revenue losses caused by increasing competition, including offerings that use alternative technologies (e.g., cable, wireless and VoIP) and our ability to maintain capital expenditures.
|
·
|
The extent of competition and the resulting pressure on customer and access line totals and wireline and wireless operating margins.
|
·
|
Our ability to develop attractive and profitable product/service offerings to offset increasing competition in our wireless and wireline markets.
|
·
|
The ability of our competitors to offer product/service offerings at lower prices due to lower cost structures and regulatory and legislative actions adverse to us, including state regulatory proceedings relating to unbundled network elements and nonregulation of comparable alternative technologies (e.g., VoIP).
|
·
|
The continued development of attractive and profitable U-verse service offerings; the extent to which regulatory, franchise fees and build-out requirements apply to this initiative; and the availability, cost and/or reliability of the various technologies and/or content required to provide such offerings.
|
·
|
Our continued ability to attract and offer a diverse portfolio of wireless devices, some on an exclusive basis.
|
·
|
The availability and cost of additional wireless spectrum and regulations and conditions relating to spectrum use, licensing, obtaining additional spectrum, technical standards and deployment and usage, including network management rules.
|
·
|
Our ability to manage growth in wireless data services, including network quality and acquisition of adequate spectrum at reasonable costs and terms.
|
·
|
The outcome of pending, threatened or potential litigation, including patent and product safety claims by or against third parties.
|
·
|
The impact on our networks and business from major equipment failures; security breaches related to the network or customer information; our inability to obtain handsets, equipment/software or have handsets, equipment/software serviced in a timely and cost-effective manner from suppliers; or severe weather conditions, natural disasters, pandemics, energy shortages, wars or terrorist attacks.
|
·
|
The issuance by the Financial Accounting Standards Board or other accounting oversight bodies of new accounting standards or changes to existing standards.
|
·
|
The issuance by the Internal Revenue Service and/or state tax authorities of new tax regulations or changes to existing standards and actions by federal, state or local tax agencies and judicial authorities with respect to applying applicable tax laws and regulations and the resolution of disputes with any taxing jurisdictions.
|
·
|
Our ability to adequately fund our wireless operations, including payment for additional spectrum network upgrades and technological advancements.
|
·
|
Changes in our corporate strategies, such as changing network requirements or acquisitions and dispositions, which may require significant amounts of cash or stock, to respond to competition and regulatory, legislative and technological developments.
|
·
|
The uncertainty surrounding further congressional action to address spending reductions, which may result in a significant reduction in government spending and reluctance of businesses and consumers to spend in general and on our products and services specifically, due to this fiscal uncertainty.
|
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
(c) A summary of our repurchases of common stock during the third quarter of 2013 is as follows:
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
(a)
Total Number of
Shares (or Units)
Purchased 1,2
|
|
(b)
Average Price Paid
Per Share (or Unit)
|
|
(c)
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs 1
|
|
(d)
Maximum Number (or
Approximate Dollar
Value) of Shares (or
Units) That May Yet Be
Purchased Under The
Plans or Programs
|
||
|
|
|
|
|
|
|
|
|
|
|
July 1, 2013 -
July 31, 2013
|
|
24,608,211
|
|
$
|
35.62
|
|
24,600,000
|
|
246,947,551
|
|
August 1, 2013 -
August 31, 2013
|
|
16,500,137
|
|
|
34.26
|
|
16,500,000
|
|
230,447,551
|
|
September 1, 2013 -
September 30, 2013
|
|
14,001,278
|
|
|
33.93
|
|
14,000,000
|
|
216,447,551
|
|
Total
|
|
55,109,626
|
|
$
|
34.78
|
|
55,100,000
|
|
|
|
1
|
In March 2013, our Board of Directors authorized the repurchase of up to 300 million shares of our common stock. In July 2012, our Board of Directors also authorized the repurchase of up to 300 million shares of our common stock, which we completed in May 2013.
|
|||||||||
|
The March 2013 authorization has no expiration date.
|
|||||||||
2
|
Of the shares repurchased, 9,626 shares were acquired through the withholding of taxes on the vesting of restricted stock or through the payment in stock of taxes on the exercise price of options.
|
10-qqq
|
Agreement and Plan of Merger, dated as of July 12, 2013, by and among Leap Wireless International, Inc., AT&T Inc., Laser, Inc. and Mariner Acquisition Sub Inc. (Exhibit 10.1 to Form 8-K dated July 12, 2013.)
|
10-rrr
|
Form of Voting Agreement, dated as of July 12, 2013, by and among AT&T Inc., Leap Wireless International, Inc. and the stockholders listed on Schedule I thereto. (Exhibit 10.2 to Form 8-K dated July 12, 2013.)
|
10-sss
|
Form of CVR Agreement, by and among AT&T Inc., Leap Wireless International, Inc., Laser, Inc. and the Rights Agent. (Exhibit 10.3 to Form 8-K dated July 12, 2013.)
|
12
|
Computation of Ratios of Earnings to Fixed Charges
|
31
|
Rule 13a-14(a)/15d-14(a) Certifications
31.1 Certification of Principal Executive Officer
31.2 Certification of Principal Financial Officer
|
32
|
Section 1350 Certifications
|
101
|
XBRL Instance Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXHIBIT 12 | ||||
AT&T INC.
|
||||||||||||||||||||||
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
|
||||||||||||||||||||||
Dollars in Millions
|
||||||||||||||||||||||
|
|
Nine Months Ended
|
|
|
||||||||||||||||||
September 30, | Year Ended December 31, | |||||||||||||||||||||
|
|
2013
|
|
2012
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
|
|
20081
|
|||||||
Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
$
|
16,624
|
|
$
|
16,990
|
|
$
|
10,439
|
|
$
|
6,716
|
|
$
|
18,238
|
|
$
|
18,518
|
|
$
|
(4,572)
|
||
Equity in net income of affiliates included above
|
|
(494)
|
|
|
(537)
|
|
|
(752)
|
|
|
(784)
|
|
|
(762)
|
|
|
(734)
|
|
|
(819)
|
||
Fixed charges
|
|
3,651
|
|
|
3,739
|
|
|
4,943
|
|
|
4,900
|
|
|
4,786
|
|
|
5,071
|
|
|
4,943
|
||
Distributed income of equity affiliates
|
|
262
|
|
|
54
|
|
|
137
|
|
|
161
|
|
|
161
|
|
|
317
|
|
|
164
|
||
Interest
|
|
(213)
|
|
|
(197)
|
|
|
(263)
|
|
|
(162)
|
|
|
(772)
|
|
|
(740)
|
|
|
(659)
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings, as adjusted
|
$
|
19,830
|
|
$
|
20,049
|
|
$
|
14,504
|
|
$
|
10,831
|
|
$
|
21,651
|
|
$
|
22,432
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
$
|
2,481
|
|
$
|
2,624
|
|
$
|
3,444
|
|
$
|
3,535
|
|
$
|
2,994
|
|
$
|
3,368
|
|
$
|
3,369
|
||
Interest capitalized
|
|
213
|
|
|
197
|
|
|
263
|
|
|
162
|
|
|
772
|
|
|
740
|
|
|
659
|
||
Dividends on preferred securities
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4
|
||
Portion of rental expense representative of interest factor
|
|
957
|
|
|
918
|
|
|
1,236
|
|
|
1,203
|
|
|
1,020
|
|
|
963
|
|
|
911
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Fixed Charges
|
$
|
3,651
|
|
$
|
3,739
|
|
$
|
4,943
|
|
$
|
4,900
|
|
$
|
4,786
|
|
$
|
5,071
|
|
$
|
4,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of Earnings to Fixed Charges
|
|
5.43
|
|
|
5.36
|
|
|
2.93
|
|
|
2.21
|
|
|
4.52
|
|
|
4.42
|
|
|
-
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Earnings were not sufficient to cover fixed charges in 2008. The deficit was $943.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
I have reviewed this report on Form 10-Q of AT&T Inc.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
1.
|
I have reviewed this report on Form 10-Q of AT&T Inc.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
November 1, 2013 |
November 1, 2013
|
By: |
/s/ Randall Stephenson
|
By: /s/ John J. Stephens
|
Randall Stephenson
|
John J. Stephens
|
|
Chairman of the Board, Chief Executive Officer
and President
|
Senior Executive Vice President
and Chief Financial Officer
|
|
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