(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, 2007
|
|||
or
|
|||
o
|
Transition
Report Pursuant to Section 13 or 15(d) of the
|
||
Securities
Exchange Act of 1934
|
PART
I - FINANCIAL INFORMATION
|
||||||||||||||||
Item
1. Financial Statements
|
||||||||||||||||
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,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Operating
Revenues
|
||||||||||||||||
Voice
|
$ |
10,164
|
$ |
8,400
|
$ |
30,997
|
$ |
25,524
|
||||||||
Data
|
5,880
|
4,598
|
17,281
|
13,633
|
||||||||||||
Wireless
service
|
9,834
|
8
|
28,417
|
24
|
||||||||||||
Directory
|
1,240
|
906
|
3,417
|
2,716
|
||||||||||||
Other
|
3,014
|
1,726
|
8,467
|
5,267
|
||||||||||||
Total
operating revenues
|
30,132
|
15,638
|
88,579
|
47,164
|
||||||||||||
Operating
Expenses
|
||||||||||||||||
Cost
of sales (exclusive of depreciation and
|
||||||||||||||||
amortization
shown separately below)
|
11,591
|
6,923
|
34,321
|
21,450
|
||||||||||||
Selling,
general and administrative
|
7,915
|
3,361
|
22,992
|
10,587
|
||||||||||||
Depreciation
and amortization
|
5,322
|
2,437
|
16,354
|
7,415
|
||||||||||||
Total
operating expenses
|
24,828
|
12,721
|
73,667
|
39,452
|
||||||||||||
Operating
Income
|
5,304
|
2,917
|
14,912
|
7,712
|
||||||||||||
Other
Income (Expense)
|
||||||||||||||||
Interest
expense
|
(887 | ) | (442 | ) | (2,639 | ) | (1,378 | ) | ||||||||
Equity
in net income of affiliates
|
162
|
649
|
545
|
1,438
|
||||||||||||
Other
income (expense) – net
|
(17 | ) |
109
|
614
|
315
|
|||||||||||
Total
other income (expense)
|
(742 | ) |
316
|
(1,480 | ) |
375
|
||||||||||
Income
Before Income Taxes
|
4,562
|
3,233
|
13,432
|
8,087
|
||||||||||||
Income
taxes
|
1,499
|
1,068
|
4,617
|
2,669
|
||||||||||||
Net
Income
|
$ |
3,063
|
$ |
2,165
|
$ |
8,815
|
$ |
5,418
|
||||||||
Earnings
Per Common Share
|
||||||||||||||||
Net
Income
|
$ |
0.50
|
$ |
0.56
|
$ |
1.43
|
$ |
1.40
|
||||||||
Earnings
Per Common Share - Assuming Dilution
|
||||||||||||||||
Net
Income
|
$ |
0.50
|
$ |
0.56
|
$ |
1.42
|
$ |
1.39
|
||||||||
Weighted
Average Number of Common
|
||||||||||||||||
Shares
Outstanding – Basic (in millions)
|
6,088
|
3,873
|
6,152
|
3,880
|
||||||||||||
Dividends
Declared Per Common Share
|
$ |
0.3550
|
$ |
0.3325
|
$ |
1.065
|
$ |
0.9975
|
AT&T
INC.
|
||||||||
CONSOLIDATED
BALANCE SHEETS
|
||||||||
Dollars
in millions except per share amounts
|
||||||||
September
30,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
Assets
|
(Unaudited)
|
|||||||
Current
Assets
|
||||||||
Cash
and cash equivalents
|
$ |
2,714
|
$ |
2,418
|
||||
Accounts
receivable – net of allowances for
|
||||||||
uncollectibles
of $1,362 and
$1,276
|
16,305
|
16,194
|
||||||
Prepaid
expenses
|
1,900
|
1,477
|
||||||
Deferred
income taxes
|
2,433
|
3,034
|
||||||
Other
current assets
|
2,191
|
2,430
|
||||||
Total
current assets
|
25,543
|
25,553
|
||||||
Property,
plant and equipment
|
206,818
|
202,149
|
||||||
Less:
accumulated depreciation and
amortization
|
112,372
|
107,553
|
||||||
Property,
Plant and Equipment – Net
|
94,446
|
94,596
|
||||||
Goodwill
|
66,847
|
67,657
|
||||||
Licenses
|
35,687
|
34,252
|
||||||
Customer
Lists and Relationships – Net
|
15,361
|
18,922
|
||||||
Other
Intangible Assets – Net
|
6,001
|
6,566
|
||||||
Investments
in Equity Affiliates
|
2,403
|
1,995
|
||||||
Postemployment
Benefit
|
14,779
|
14,228
|
||||||
Other
Assets
|
6,901
|
6,865
|
||||||
Total
Assets
|
$ |
267,968
|
$ |
270,634
|
||||
Liabilities
and Stockholders’ Equity
|
||||||||
Current
Liabilities
|
||||||||
Debt
maturing within one year
|
$ |
6,026
|
$ |
9,733
|
||||
Accounts
payable and accrued liabilities
|
20,239
|
22,106
|
||||||
Advanced
billing and customer deposits
|
3,471
|
3,402
|
||||||
Accrued
taxes
|
6,282
|
3,026
|
||||||
Dividends
payable
|
2,156
|
2,215
|
||||||
Total
current liabilities
|
38,174
|
40,482
|
||||||
Long-Term
Debt
|
54,585
|
50,063
|
||||||
Deferred
Credits and Other Noncurrent Liabilities
|
||||||||
Deferred
income taxes
|
22,595
|
27,406
|
||||||
Postemployment
benefit obligation
|
28,756
|
28,901
|
||||||
Unamortized
investment tax credits
|
158
|
181
|
||||||
Other
noncurrent liabilities
|
12,526
|
8,061
|
||||||
Total
deferred credits and other noncurrent liabilities
|
64,035
|
64,549
|
||||||
Stockholders’
Equity
|
||||||||
Common
shares issued ($1 par value)
|
6,495
|
6,495
|
||||||
Capital
in excess of par value
|
91,534
|
91,352
|
||||||
Retained
earnings
|
32,606
|
30,375
|
||||||
Treasury
shares (at cost)
|
(14,411 | ) | (7,368 | ) | ||||
Accumulated
other comprehensive income
|
(5,050 | ) | (5,314 | ) | ||||
Total
stockholders’ equity
|
111,174
|
115,540
|
||||||
Total
Liabilities and Stockholders’ Equity
|
$ |
267,968
|
$ |
270,634
|
AT&T
INC.
|
||||||||
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
||||||||
Dollars
in millions, increase (decrease) in cash and cash
equivalents
|
||||||||
(Unaudited)
|
||||||||
Nine
months
ended
|
||||||||
September
30,
|
||||||||
2007
|
2006
|
|||||||
Operating
Activities
|
||||||||
Net
income
|
$ |
8,815
|
$ |
5,418
|
||||
Adjustments
to reconcile net income to net cash
|
||||||||
provided
by operating
activities:
|
||||||||
Depreciation
and
amortization
|
16,354
|
7,415
|
||||||
Undistributed
earnings from
investments in equity affiliates
|
(434 | ) | (1,359 | ) | ||||
Provision
for uncollectible
accounts
|
1,142
|
450
|
||||||
Amortization
of investment tax
credits
|
(23 | ) | (21 | ) | ||||
Deferred
income tax (benefit)
expense
|
486
|
(269 | ) | |||||
Net
gain on sales of
investments
|
(29 | ) | (10 | ) | ||||
Gain
on license exchange
|
(409 | ) |
-
|
|||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
(1,253 | ) |
249
|
|||||
Other
current assets
|
(661 | ) |
42
|
|||||
Accounts
payable and accrued liabilities
|
(46 | ) | (1,819 | ) | ||||
Stock-based
compensation tax benefit
|
(149 | ) | (10 | ) | ||||
Other
-
net
|
427
|
507
|
||||||
Total
adjustments
|
15,405
|
5,175
|
||||||
Net
Cash Provided by Operating Activities
|
24,220
|
10,593
|
||||||
Investing
Activities
|
||||||||
Construction
and capital expenditures
|
(12,124 | ) | (6,158 | ) | ||||
Net
investments in affiliates
|
-
|
(633 | ) | |||||
Dispositions
|
993
|
72
|
||||||
Acquisitions,
net of cash acquired
|
(233 | ) | (115 | ) | ||||
Proceeds
from sale of marketable securities
|
471
|
-
|
||||||
Proceeds
from sale of debt and equity securities
|
414
|
-
|
||||||
Investments
in debt and equity securities
|
(301 | ) |
-
|
|||||
Other
|
28
|
8
|
||||||
Net
Cash Used in Investing Activities
|
(10,752 | ) | (6,826 | ) | ||||
Financing
Activities
|
||||||||
Net
change in short-term borrowings with original
|
||||||||
maturities
of three months or
less
|
(4,279 | ) |
2,336
|
|||||
Issuance
of long-term debt
|
7,898
|
1,491
|
||||||
Repayment
of long-term debt
|
(3,008 | ) | (2,882 | ) | ||||
Purchase
of treasury shares
|
(8,912 | ) | (1,359 | ) | ||||
Issuance
of treasury shares
|
1,736
|
463
|
||||||
Dividends
paid
|
(6,584 | ) | (3,873 | ) | ||||
Stock-based
compensation tax benefit
|
149
|
10
|
||||||
Other
|
(172 | ) |
74
|
|||||
Net
Cash Used in Financing Activities
|
(13,172 | ) | (3,740 | ) | ||||
Net
increase in cash and cash equivalents
|
296
|
27
|
||||||
Cash
and cash equivalents beginning of year
|
2,418
|
1,224
|
||||||
Cash
and Cash Equivalents End of Period
|
$ |
2,714
|
$ |
1,251
|
||||
Cash
paid during the nine months ended September 30 for:
|
||||||||
Interest
|
$ |
2,518
|
$ |
1,503
|
||||
Income
taxes, net of
refunds
|
$ |
2,028
|
$ |
2,249
|
AT&T
INC.
|
||||||||
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY
|
||||||||
Dollars
and shares in millions, except per share amounts
|
||||||||
(Unaudited)
|
||||||||
Nine
months ended
|
||||||||
September
30, 2007
|
||||||||
Shares
|
Amount
|
|||||||
Common
Stock
|
||||||||
Balance
at beginning of year
|
6,495
|
$ |
6,495
|
|||||
Balance
at end of period
|
6,495
|
$ |
6,495
|
|||||
Capital
in Excess of Par Value
|
||||||||
Balance
at beginning of year
|
$ |
91,352
|
||||||
Issuance
of shares
|
134
|
|||||||
Stock
based compensation
|
48
|
|||||||
Balance
at end of period
|
$ |
91,534
|
||||||
Retained
Earnings
|
||||||||
Balance
at beginning of year
|
$ |
30,375
|
||||||
Net
income ($1.42 per diluted share)
|
8,815
|
|||||||
Dividends
to stockholders ($1.065 per share)
|
(6,525 | ) | ||||||
Adoption
of FIN 48
|
(50 | ) | ||||||
Other
|
(9 | ) | ||||||
Balance
at end of period
|
$ |
32,606
|
||||||
Treasury
Shares
|
||||||||
Balance
at beginning of year
|
(256 | ) | $ | (7,368 | ) | |||
Purchase
of shares
|
(230 | ) | (8,912 | ) | ||||
Issuance
of shares
|
63
|
1,869
|
||||||
Balance
at end of period
|
(423 | ) | $ | (14,411 | ) | |||
Accumulated
Other Comprehensive Income, net of tax
|
||||||||
Balance
at beginning of year
|
$ | (5,314 | ) | |||||
Purchase
accounting adjustment to apply FAS 158, net of tax
|
46
|
|||||||
Other
comprehensive income (loss) (see Note 3)
|
218
|
|||||||
Balance
at end of period
|
$ | (5,050 | ) | |||||
See Notes to Consolidated Financial Statements |
.
|
BellSouth
Purchase Price Allocation
|
||||||||||||
As
of
|
As
of
|
|||||||||||
12/31/06
|
Adjustments
|
9/30/07
|
||||||||||
Assets
acquired
|
||||||||||||
Current
assets
|
$ |
4,875
|
$ |
42
|
$ |
4,917
|
||||||
Property,
plant and equipment
|
18,498
|
249
|
18,747
|
|||||||||
Intangible
assets not subject to amortization:
|
||||||||||||
Trademark/name
|
330
|
-
|
330
|
|||||||||
Licenses
|
214
|
100
|
314
|
|||||||||
Intangible
assets subject to amortization:
|
||||||||||||
Customer
lists and relationships
|
9,230
|
145
|
9,375
|
|||||||||
Patents
|
100
|
-
|
100
|
|||||||||
Trademark/name
|
211
|
-
|
211
|
|||||||||
Investments
in AT&T Mobility
|
32,759
|
-
|
32,759
|
|||||||||
Other
investments
|
2,446
|
(3 | ) |
2,443
|
||||||||
Other
assets
|
11,211
|
(97 | ) |
11,114
|
||||||||
Goodwill
|
26,467
|
(92 | ) |
26,375
|
||||||||
Total
assets acquired
|
106,341
|
344
|
106,685
|
|||||||||
Liabilities
assumed
|
||||||||||||
Current
liabilities, excluding
current
portion of long-term debt
|
5,288
|
(528 | ) |
4,760
|
||||||||
Long-term
debt
|
15,628
|
(4 | ) |
15,624
|
||||||||
Deferred
income taxes
|
10,318
|
797
|
11,115
|
|||||||||
Postemployment
benefit obligation
|
7,086
|
(70 | ) |
7,016
|
||||||||
Other
noncurrent liabilities
|
1,223
|
128
|
1,351
|
|||||||||
Total
liabilities assumed
|
39,543
|
323
|
39,866
|
|||||||||
Net
assets acquired
|
$ |
66,798
|
$ |
21
|
$ |
66,819
|
Fair
Value Adjustments
AT&T
Mobility
|
||||||||||||
As
of
|
As
of
|
|||||||||||
12/31/06
|
Adjustments
|
9/30/07
|
||||||||||
Assets
acquired
|
||||||||||||
Current
assets
|
$ |
6,988
|
$ |
3
|
$ |
6,991
|
||||||
Property,
plant and equipment
|
19,687
|
(411 | ) |
19,276
|
||||||||
Intangible
assets not subject to amortization:
|
||||||||||||
Licenses
|
33,979
|
887
|
34,866
|
|||||||||
Intangible
assets subject to amortization:
|
||||||||||||
Customer
lists and relationships
|
7,583
|
479
|
8,062
|
|||||||||
Trademark/names
|
343
|
(127 | ) |
216
|
||||||||
Other
|
176
|
(44 | ) |
132
|
||||||||
Other
assets
|
1,086
|
2
|
1,088
|
|||||||||
Goodwill
|
27,429
|
(377 | ) |
27,052
|
||||||||
Total
assets acquired
|
97,271
|
412
|
97,683
|
|||||||||
Liabilities
assumed
|
||||||||||||
Current
liabilities, excluding
current
portion of long-term debt
|
7,014
|
384
|
7,398
|
|||||||||
Intercompany
debt
|
9,043
|
-
|
9,043
|
|||||||||
Long-term
debt
|
12,559
|
-
|
12,559
|
|||||||||
Deferred
income taxes
|
5,459
|
71
|
5,530
|
|||||||||
Postemployment
benefit obligation
|
301
|
93
|
394
|
|||||||||
Other
noncurrent liabilities
|
2,007
|
(92 | ) |
1,915
|
||||||||
Total
liabilities assumed
|
36,383
|
456
|
36,839
|
|||||||||
Net
assets acquired
|
$ |
60,888
|
$ | (44 | ) | $ |
60,844
|
12/31/06
|
Cash
|
Additional
|
9/30/07
|
|||||||||||||||||
Balance
|
Payments
|
Accruals
|
Adj.
|
Balance
|
||||||||||||||||
Severance
accruals paid from:
|
||||||||||||||||||||
Company
funds
|
$ |
986
|
$ | (348 | ) | $ |
16
|
$ | (72 | ) | $ |
582
|
||||||||
Pension
and postemployment
benefit
plans
|
183
|
(39 | ) |
-
|
-
|
144
|
||||||||||||||
Lease
terminations
|
146
|
(72 | ) |
220
|
24
|
318
|
||||||||||||||
Equipment
removal and other related costs
|
117
|
(110 | ) |
152
|
(28 | ) |
131
|
|||||||||||||
Total
|
$ |
1,432
|
$ | (569 | ) | $ |
388
|
$ | (76 | ) | $ |
1,175
|
Three
months ended
|
Nine
months ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Net
income
|
$ |
3,063
|
$ |
2,165
|
$ |
8,815
|
$ |
5,418
|
||||||||
Other
comprehensive income, net of tax:
|
||||||||||||||||
Foreign
currency translation adjustment
|
(14 | ) |
29
|
4
|
(16 | ) | ||||||||||
Net
unrealized gains (losses) on securities:
|
||||||||||||||||
Unrealized
gains
(losses)
|
(15 | ) | (17 | ) |
134
|
17
|
||||||||||
Reclassification
adjustment for gains realized in net income
|
3
|
-
|
(37 | ) | (8 | ) | ||||||||||
Net
unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses)
|
(15 | ) |
-
|
(51 | ) |
2
|
||||||||||
Reclassification
adjustment for losses realized in net income
|
5
|
4
|
13
|
12
|
||||||||||||
Defined
benefit postretirement plans:
|
||||||||||||||||
Amortization of net actuarial loss included in net income
|
87
|
-
|
262
|
-
|
||||||||||||
Amortization of prior service benefit included in net
income
|
(35 | ) |
-
|
(106 | ) |
-
|
||||||||||
Other
|
-
|
-
|
(1 | ) |
1
|
|||||||||||
Other
comprehensive income
|
16
|
16
|
218
|
8
|
||||||||||||
Total
Comprehensive Income
|
$ |
3,079
|
$ |
2,181
|
$ |
9,033
|
$ |
5,426
|
Three
months ended
|
Nine
months ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Numerators
|
||||||||||||||||
Numerator
for basic earnings per share:
|
||||||||||||||||
Income
from continuing
operations
|
$ |
3,063
|
$ |
2,165
|
$ |
8,815
|
$ |
5,418
|
||||||||
Dilutive
potential common
shares:
|
||||||||||||||||
Other
stock-based compensation
|
2
|
2
|
6
|
5
|
||||||||||||
Numerator
for diluted earnings per share
|
$ |
3,065
|
$ |
2,167
|
$ |
8,821
|
$ |
5,423
|
||||||||
Denominators
(000,000)
|
||||||||||||||||
Denominator
for basic earnings per share:
|
||||||||||||||||
Weighted-average
number of
common
|
||||||||||||||||
shares
outstanding
|
6,088
|
3,873
|
6,152
|
3,880
|
||||||||||||
Dilutive
potential common
shares:
|
||||||||||||||||
Stock
options
|
26
|
5
|
25
|
4
|
||||||||||||
Other
stock-based
compensation
|
15
|
14
|
19
|
16
|
||||||||||||
Denominator
for diluted earnings per share
|
6,129
|
3,892
|
6,196
|
3,900
|
||||||||||||
Basic
earnings per share
|
||||||||||||||||
Net
income
|
$ |
0.50
|
$ |
0.56
|
$ |
1.43
|
$ |
1.40
|
||||||||
Diluted
earnings per share
|
||||||||||||||||
Net
income
|
$ |
0.50
|
$ |
0.56
|
$ |
1.42
|
$ |
1.39
|
For
the three months ended September 30, 2007
|
||||||||||||||||||||||||
|
Consolidation
|
|
||||||||||||||||||||||
Wireline
|
Wireless
|
Advertising
& Publishing |
Other
|
and
Elimination
|
Consolidated Results |
|||||||||||||||||||
Revenues
from external customers
|
$ |
17,471
|
$ |
10,911
|
$ |
1,436
|
$ |
510
|
$ | (196 | ) | $ |
30,132
|
|||||||||||
Intersegment
revenues
|
469
|
26
|
21
|
52
|
(568 | ) |
-
|
|||||||||||||||||
Total
segment operating revenues
|
17,940
|
10,937
|
1,457
|
562
|
(764 | ) |
30,132
|
|||||||||||||||||
Operations
and support expenses
|
11,725
|
7,262
|
755
|
399
|
(635 | ) |
19,506
|
|||||||||||||||||
Depreciation
and amortization expenses
|
3,333
|
1,709
|
238
|
41
|
1
|
5,322
|
||||||||||||||||||
Total
segment operating expenses
|
15,058
|
8,971
|
993
|
440
|
(634 | ) |
24,828
|
|||||||||||||||||
Segment
operating income
|
2,882
|
1,966
|
464
|
122
|
(130 | ) |
5,304
|
|||||||||||||||||
Interest
expense
|
-
|
-
|
-
|
-
|
887
|
887
|
||||||||||||||||||
Equity
in net income (loss) of affiliates 1
|
-
|
(40 | ) |
-
|
159
|
43
|
162
|
|||||||||||||||||
Other
income (expense) – net
|
-
|
-
|
-
|
-
|
(17 | ) | (17 | ) | ||||||||||||||||
Segment
income before income taxes
|
$ |
2,882
|
$ |
1,926
|
$ |
464
|
$ |
281
|
$ | (991 | ) | $ |
4,562
|
At
September 30, 2007 or for the nine months ended
|
||||||||||||||||||||||||
|
Consolidation
|
|
||||||||||||||||||||||
Wireline
|
Wireless
|
Advertising
& Publishing |
Other
|
and
Elimination
|
Consolidated Results |
|||||||||||||||||||
Revenues
from external customers
|
$ |
52,425
|
$ |
31,254
|
$ |
4,328
|
$ |
1,483
|
$ | (911 | ) | $ |
88,579
|
|||||||||||
Intersegment
revenues
|
1,494
|
75
|
50
|
181
|
(1,800 | ) |
-
|
|||||||||||||||||
Total
segment operating revenues
|
53,919
|
31,329
|
4,378
|
1,664
|
(2,711 | ) |
88,579
|
|||||||||||||||||
Operations
and support expenses
|
34,958
|
20,826
|
2,281
|
1,340
|
(2,092 | ) |
57,313
|
|||||||||||||||||
Depreciation
and amortization expenses
|
10,073
|
5,410
|
743
|
128
|
-
|
16,354
|
||||||||||||||||||
Total
segment operating expenses
|
45,031
|
26,236
|
3,024
|
1,468
|
(2,092 | ) |
73,667
|
|||||||||||||||||
Segment
operating income
|
8,888
|
5,093
|
1,354
|
196
|
(619 | ) |
14,912
|
|||||||||||||||||
Interest
expense
|
-
|
-
|
-
|
-
|
2,639
|
2,639
|
||||||||||||||||||
Equity
in net income (loss) of affiliates 1
|
-
|
(131 | ) |
-
|
533
|
143
|
545
|
|||||||||||||||||
Other
income (expense) – net
|
-
|
-
|
-
|
-
|
614
|
614
|
||||||||||||||||||
Segment
income before income taxes
|
$ |
8,888
|
$ |
4,962
|
$ |
1,354
|
$ |
729
|
$ | (2,501 | ) | $ |
13,432
|
|||||||||||
Segment
Assets
|
$ |
170,477
|
$ |
96,158
|
$ |
9,508
|
$ |
172,455
|
$ | (180,630 | ) | $ |
267,968
|
For
the three months ended September 30, 2006
|
||||||||||||||||||||||||||||
|
Consolidation
|
|
||||||||||||||||||||||||||
Wireline
|
Wireless
|
Advertising
& Publishing |
Other
|
and
Elimination
|
Wireless Elimination |
Consolidated Results |
||||||||||||||||||||||
Revenues
from external customers
|
$ |
14,305
|
$ |
9,561
|
$ |
907
|
$ |
418
|
$ |
-
|
$ | (9,553 | ) | $ |
15,638
|
|||||||||||||
Intersegment
revenues
|
1
|
-
|
6
|
51
|
(58 | ) |
-
|
-
|
||||||||||||||||||||
Total
segment operating revenues
|
14,306
|
9,561
|
913
|
469
|
(58 | ) | (9,553 | ) |
15,638
|
|||||||||||||||||||
Operations
and support expenses
|
9,563
|
6,561
|
431
|
349
|
(59 | ) | (6,561 | ) |
10,284
|
|||||||||||||||||||
Depreciation
and amortization expenses
|
2,387
|
1,582
|
1
|
42
|
2
|
(1,577 | ) |
2,437
|
||||||||||||||||||||
Total
segment operating expenses
|
11,950
|
8,143
|
432
|
391
|
(57 | ) | (8,138 | ) |
12,721
|
|||||||||||||||||||
Segment
operating income
|
2,356
|
1,418
|
481
|
78
|
(1 | ) | (1,415 | ) |
2,917
|
|||||||||||||||||||
Interest
expense
|
-
|
-
|
-
|
-
|
442
|
-
|
442
|
|||||||||||||||||||||
Equity
in net income (loss) of affiliates 1
|
-
|
(36 | ) | (2 | ) |
644
|
1
|
42
|
649
|
|||||||||||||||||||
Other
income (expense) – net
|
-
|
-
|
-
|
-
|
109
|
-
|
109
|
|||||||||||||||||||||
Segment
income before income taxes
|
$ |
2,356
|
$ |
1,382
|
$ |
479
|
$ |
722
|
$ | (333 | ) | $ | (1,373 | ) | $ |
3,233
|
For
the nine months ended September 30, 2006
|
||||||||||||||||||||||||||||
|
Consolidation
|
|
|
|||||||||||||||||||||||||
Wireline
|
Wireless
|
Advertising
& Publishing |
Other
|
and
Elimination
|
Wireless Elimination |
Consolidated Results |
||||||||||||||||||||||
Revenues
from external customers
|
$ |
43,161
|
$ |
27,774
|
$ |
2,716
|
$ |
1,263
|
$ |
-
|
$ | (27,750 | ) | $ |
47,164
|
|||||||||||||
Intersegment
revenues
|
2
|
-
|
30
|
127
|
(159 | ) |
-
|
-
|
||||||||||||||||||||
Total
segment operating revenues
|
43,163
|
27,774
|
2,746
|
1,390
|
(159 | ) | (27,750 | ) |
47,164
|
|||||||||||||||||||
Operations
and support expenses
|
29,888
|
19,657
|
1,298
|
1,010
|
(159 | ) | (19,657 | ) |
32,037
|
|||||||||||||||||||
Depreciation
and amortization expenses
|
7,266
|
4,874
|
2
|
127
|
-
|
(4,854 | ) |
7,415
|
||||||||||||||||||||
Total
segment operating expenses
|
37,154
|
24,531
|
1,300
|
1,137
|
(159 | ) | (24,511 | ) |
39,452
|
|||||||||||||||||||
Segment
operating income
|
6,009
|
3,243
|
1,446
|
253
|
-
|
(3,239 | ) |
7,712
|
||||||||||||||||||||
Interest
expense
|
-
|
-
|
-
|
-
|
1,378
|
-
|
1,378
|
|||||||||||||||||||||
Equity
in net income (loss) of affiliates 1
|
-
|
(99 | ) | (13 | ) |
1,421
|
2
|
127
|
1,438
|
|||||||||||||||||||
Other
income (expense) – net
|
-
|
-
|
-
|
-
|
315
|
-
|
315
|
|||||||||||||||||||||
Segment
income before income taxes
|
$ |
6,009
|
$ |
3,144
|
$ |
1,433
|
$ |
1,674
|
$ | (1,061 | ) | $ | (3,112 | ) | $ |
8,087
|
Three
months ended
|
Nine
months ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Pension
cost:
|
||||||||||||||||
Service
cost – benefits earned
during the period
|
$ |
314
|
$ |
262
|
$ |
943
|
$ |
787
|
||||||||
Interest
cost on projected
benefit obligation
|
803
|
627
|
2,411
|
1,881
|
||||||||||||
Expected
return on
assets
|
(1,367 | ) | (1,008 | ) | (4,101 | ) | (2,992 | ) | ||||||||
Amortization
of prior service
cost
|
36
|
37
|
107
|
112
|
||||||||||||
Recognized actuarial loss
|
61
|
91
|
181
|
271
|
||||||||||||
Net
pension cost
(benefit)
|
$ | (153 | ) | $ |
9
|
$ | (459 | ) | $ |
59
|
||||||
Postretirement
benefit cost:
|
||||||||||||||||
Service
cost – benefits earned
during the period
|
$ |
127
|
$ |
108
|
$ |
381
|
$ |
326
|
||||||||
Interest
cost on accumulated
postretirement
|
||||||||||||||||
benefit
obligation
|
644
|
485
|
1,931
|
1,457
|
||||||||||||
Expected
return on
assets
|
(336 | ) | (234 | ) | (1,010 | ) | (701 | ) | ||||||||
Amortization
of prior service
benefit
|
(90 | ) | (90 | ) | (270 | ) | (269 | ) | ||||||||
Recognized
actuarial
loss
|
72
|
119
|
220
|
354
|
||||||||||||
Postretirement
benefit
cost
|
$ |
417
|
$ |
388
|
$ |
1,252
|
$ |
1,167
|
||||||||
Combined net pension and postretirement cost
|
$ |
264
|
$ |
397
|
$ |
793
|
$ |
1,226
|
Third
Quarter
|
Nine-Month
Period
|
|||||||||||||||||||||||
Percent
|
Percent
|
|||||||||||||||||||||||
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
|||||||||||||||||||
Operating
revenues
|
$ |
30,132
|
$ |
15,638
|
92.7 | % | $ |
88,579
|
$ |
47,164
|
87.8 | % | ||||||||||||
Operating
expenses
|
24,828
|
12,721
|
95.2
|
73,667
|
39,452
|
86.7
|
||||||||||||||||||
Operating
income
|
5,304
|
2,917
|
81.8
|
14,912
|
7,712
|
93.4
|
||||||||||||||||||
Income
before income taxes
|
4,562
|
3,233
|
41.1
|
13,432
|
8,087
|
66.1
|
||||||||||||||||||
Net
Income
|
3,063
|
2,165
|
41.5
|
8,815
|
5,418
|
62.7
|
September
30,
|
||||||||
2007
|
2006
|
|||||||
Wireless customers
(000)1
|
65,666
|
58,666
|
||||||
In-region
consumer revenue connections (000)2,7
|
49,639
|
33,197
|
||||||
In-region
network access lines in service (000)3
|
62,871
|
47,087
|
||||||
In-region
wholesale lines (000)3,7
|
3,849
|
4,493
|
||||||
In-region
broadband connections (000)3,4,7
|
13,760
|
8,155
|
||||||
In-region
video connections (000)3,5,7
|
2,112
|
643
|
||||||
Debt
ratio6
|
35.3 | % | 36.3 | % | ||||
Number
of AT&T employees
|
303,670
|
179,420
|
Third
Quarter
|
Nine-Month
Period
|
|||||||||||||||||||||||
Actual
|
Pro
Forma
|
Percent
|
Actual
|
Pro
Forma
|
Percent
|
|||||||||||||||||||
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
|||||||||||||||||||
Segment
operating revenues
|
||||||||||||||||||||||||
Voice
|
$ |
10,164
|
$ |
10,850
|
(6.3 | )% | $ |
30,997
|
$ |
32,955
|
(5.9 | )% | ||||||||||||
Data
|
5,880
|
5,579
|
5.4
|
17,281
|
16,521
|
4.6
|
||||||||||||||||||
Wireless
service
|
9,834
|
8,646
|
13.7
|
28,417
|
24,910
|
14.1
|
||||||||||||||||||
Directory
|
1,240
|
1,456
|
(14.8 | ) |
3,417
|
4,332
|
(21.1 | ) | ||||||||||||||||
Other
|
3,014
|
2,861
|
5.3
|
8,467
|
8,778
|
(3.5 | ) | |||||||||||||||||
Total
Operating Revenues
|
$ |
30,132
|
$ |
29,392
|
2.5 | % | $ |
88,579
|
$ |
87,496
|
1.2 | % |
Third
Quarter
|
Nine-Month
Period
|
|||||||||||||||||||||||
Percent
|
Percent
|
|||||||||||||||||||||||
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
|||||||||||||||||||
Segment
operating revenues
|
||||||||||||||||||||||||
Voice
|
$ |
10,356
|
$ |
8,400
|
23.3 | % | $ |
31,619
|
$ |
25,524
|
23.9 | % | ||||||||||||
Data
|
6,076
|
4,598
|
32.1
|
17,918
|
13,633
|
31.4
|
||||||||||||||||||
Other
|
1,508
|
1,308
|
15.3
|
4,382
|
4,006
|
9.4
|
||||||||||||||||||
Total
Segment Operating Revenues
|
17,940
|
14,306
|
25.4
|
53,919
|
43,163
|
24.9
|
||||||||||||||||||
Segment
operating expenses
|
||||||||||||||||||||||||
Cost
of sales
|
7,620
|
6,495
|
17.3
|
22,801
|
20,072
|
13.6
|
||||||||||||||||||
Selling,
general and administrative
|
4,105
|
3,068
|
33.8
|
12,157
|
9,816
|
23.8
|
||||||||||||||||||
Depreciation
and amortization
|
3,333
|
2,387
|
39.6
|
10,073
|
7,266
|
38.6
|
||||||||||||||||||
Total
Segment Operating Expenses
|
15,058
|
11,950
|
26.0
|
45,031
|
37,154
|
21.2
|
||||||||||||||||||
Segment
Income
|
$ |
2,882
|
$ |
2,356
|
22.3 | % | $ |
8,888
|
$ |
6,009
|
47.9 | % |
·
|
Local
voice revenues increased $1,661, or 37.4%, in the third quarter and
$5,230, or 39.1%, for the first nine months of 2007 due to the
acquisition of BellSouth, which increased local voice revenues
approximately $1,990 in the third quarter and $6,070 for the first
nine
months of 2007. Local voice revenues also increased in the third
quarter
due to pricing increases for regional telephone service, custom calling
features and inside wire maintenance agreements. These increases
were
partially offset by expected declines in revenues from ATTC’s mass-market
customers to which no proactive marketing occurs. Local voice revenues
were also negatively impacted by continued declines in customer demand
for
sales of calling features and inside wire agreements. We expect our
local
voice revenue to continue to be negatively affected by increased
competition, including customers shifting to competitors’ alternative
technology and the disconnection of additional lines for DSL service
and
other reasons.
|
·
|
Long-distance
revenues increased $230, or 6.4%, in the third quarter and $594,
or 5.4%,
for the first nine months of 2007 due to the acquisition of BellSouth,
which increased long-distance revenues approximately $535 and $1,555
respectively. Contributing to the increases were continuing higher
long-distance penetration levels in our original 13 states in the
third
quarter. These increases were primarily offset by a continuing decrease
in
demand for long-distance service, mostly due to an expected decline
in
ATTC’s mass-market customers, mentioned previously. Our long-distance
revenue increase was also partially offset in the third quarter by
competitive pricing for large-business customers and a decrease in
demand
for prepaid calling cards.
|
·
|
Local
wholesale revenues increased $65, or 17.2%, in the third quarter
and $271,
or 23.1%, for the first nine months of 2007 primarily due to the
acquisition of BellSouth, which increased local wholesale revenues
approximately $150 in the third quarter and $470 for the first nine
months. This increase was partially offset by lower demand for local
wholesale services primarily due to the decreased demand for resold
lines
provided to competitors. However, this decrease in demand for our
local
wholesale lines was partially offset by price increases as we negotiate
long-term contracts.
|
·
|
Higher
expenses of $165 in the third quarter and for the first nine months
due to
a change in our policy regarding the timing for earning vacation
days made
in the third quarter of 2006, which reduced expense in
2006.
|
·
|
Higher
nonemployee-related expenses, such as contract services, agent commissions
and materials and supplies costs, of $75 in the third quarter and
$351 for
the first nine months.
|
·
|
Contract
termination and severance charges of $48 incurred in the third quarter
and
for the first nine months of 2007.
|
·
|
Salary
and wage merit increases and other bonus accrual adjustments of $19
in the
third quarter and $174 for the first nine
months.
|
·
|
Lower
traffic compensation expenses (for access to another carrier’s network) of
$165 in the third quarter and $662 for the first nine months primarily
due
to migration of long-distance calls onto our network and a lower
volume of
national mass-market customers.
|
·
|
Lower
benefit expenses, consisting primarily of our combined net pension
and
postretirement cost, of $106 in the third quarter and $395 for the
first
nine months, primarily due to the increase of our discount rate from
5.75%
to 6.00% (a decrease to expense) and favorable asset returns resulting
in
a decrease in the recognition of net losses. Other benefits decreased
primarily due to workforce
reductions.
|
·
|
Lower
cost of equipment sales and related network integration services
of $178
for the first nine months primarily due to less emphasis on sales
of
lower-margin equipment. Costs associated with equipment for large-business
customers (as well as DSL) typically are greater than costs associated
with services that are provided over multiple
years.
|
·
|
Lower
expenses of $30 in the third quarter and $163 for the first nine
months
due to the discontinuance of DSL Universal Service Fund fees, which
began
in the third quarter of 2006.
|
·
|
Higher
expenses of $185 in the third quarter and for the first nine months
related to legal proceedings.
|
·
|
Higher
expenses of $70 in the third quarter and for the first nine months
due to
a change in our policy regarding the timing for earning vacation
days made
in the third quarter of 2006, which reduced expense in
2006.
|
·
|
Higher
provision for uncollectible accounts of $18 in the third quarter
and $43
for the first nine months.
|
·
|
Salary
and wage merit increases and other bonus accrual adjustments of $13
in the
third quarter and $84 for the first nine
months.
|
·
|
Lower
employee levels decreased expenses (primarily salary and wages) by
$40 in
the third quarter and $203 for the first nine
months.
|
·
|
Lower
nonemployee-related expenses, such as contract services, agent commissions
and materials and supplies costs, of $55 for the first nine
months.
|
·
|
Lower
advertising expense of $13 for the first nine
months.
|
Three-Month
Period Ended
|
||||||||||||
September
30,
2007
|
June
30,
2007
|
March
31,
2007
|
||||||||||
Segment
operating revenues
|
||||||||||||
Voice
|
$ |
10,356
|
$ |
10,586
|
$ |
10,677
|
||||||
Data
|
6,076
|
5,980
|
5,862
|
|||||||||
Other
|
1,508
|
1,427
|
1,447
|
|||||||||
Total
Segment Operating Revenues
|
17,940
|
17,993
|
17,986
|
|||||||||
Segment
operating expenses
|
||||||||||||
Cost
of sales
|
7,620
|
7,623
|
7,558
|
|||||||||
Selling,
general and administrative
|
4,105
|
3,959
|
4,093
|
|||||||||
Depreciation
and amortization
|
3,333
|
3,300
|
3,440
|
|||||||||
Total
Segment Operating Expenses
|
15,058
|
14,882
|
15,091
|
|||||||||
Segment
Income
|
$ |
2,882
|
$ |
3,111
|
$ |
2,895
|
In-Region
1
|
||||||||||||||||||||
Actual
|
Actual
|
Actual
|
Actual
|
Pro
forma
|
||||||||||||||||
September
30,
|
June
30,
|
March
31,
|
September
30,
|
September
30,
|
||||||||||||||||
(in
000’s)
|
2007
|
2007
|
2007
|
2006
|
2006
|
|||||||||||||||
Switched
Access Lines
|
||||||||||||||||||||
Retail
Consumer 2
|
35,811
|
36,399
|
36,706
|
25,641
|
37,588
|
|||||||||||||||
Retail
Business 2
|
22,942
|
23,051
|
23,160
|
16,689
|
23,271
|
|||||||||||||||
Retail
Subtotal2
|
58,753
|
59,450
|
59,866
|
42,330
|
60,859
|
|||||||||||||||
Percent
of total switched access lines
|
93.5 | % | 92.8 | % | 91.5 | % | 89.9 | % | 90.1 | % | ||||||||||
Sold
to ATTC
|
327
|
567
|
1,105
|
1,216
|
1,487
|
|||||||||||||||
Sold
to other CLECs 2,3
|
3,522
|
3,766
|
4,144
|
3,277
|
4,836
|
|||||||||||||||
Wholesale
Subtotal2
|
3,849
|
4,333
|
5,249
|
4,493
|
6,323
|
|||||||||||||||
Percent
of total switched access lines
|
6.1 | % | 6.8 | % | 8.0 | % | 9.5 | % | 9.4 | % | ||||||||||
Payphone
(Retail and Wholesale) 4
|
269
|
295
|
314
|
264
|
347
|
|||||||||||||||
Percent
of total switched access lines
|
0.4 | % | 0.4 | % | 0.5 | % | 0.6 | % | 0.5 | % | ||||||||||
Total
Switched Access Lines
|
62,871
|
64,078
|
65,429
|
47,087
|
67,529
|
|||||||||||||||
Total
Broadband Connections 5
|
13,760
|
13,261
|
12,861
|
8,155
|
11,604
|
|||||||||||||||
Satellite
service 6
|
1,986
|
1,846
|
1,684
|
640
|
1,396
|
|||||||||||||||
U-verse
video
|
126
|
51
|
13
|
3
|
3
|
|||||||||||||||
Video
Connections
|
2,112
|
1,897
|
1,697
|
643
|
1,399
|
Third
Quarter
|
Nine-Month
Period
|
|||||||||||||||||||||||
Percent
|
Percent
|
|||||||||||||||||||||||
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
|||||||||||||||||||
Segment
operating revenues
|
||||||||||||||||||||||||
Service
revenues
|
$ |
9,860
|
$ |
8,670
|
13.7 | % | $ |
28,492
|
$ |
24,985
|
14.0 | % | ||||||||||||
Equipment
revenues
|
1,077
|
891
|
20.9
|
2,837
|
2,789
|
1.7
|
||||||||||||||||||
Total
Segment Operating Revenues
|
10,937
|
9,561
|
14.4
|
31,329
|
27,774
|
12.8
|
||||||||||||||||||
Segment
operating expenses
|
||||||||||||||||||||||||
Cost
of services and equipment
sales
|
4,079
|
3,725
|
9.5
|
11,690
|
11,218
|
4.2
|
||||||||||||||||||
Selling,
general and administrative
|
3,183
|
2,836
|
12.2
|
9,136
|
8,439
|
8.3
|
||||||||||||||||||
Depreciation
and amortization
|
1,709
|
1,582
|
8.0
|
5,410
|
4,874
|
11.0
|
||||||||||||||||||
Total
Segment Operating Expenses
|
8,971
|
8,143
|
10.2
|
26,236
|
24,531
|
7.0
|
||||||||||||||||||
Segment
Operating Income
|
1,966
|
1,418
|
38.6
|
5,093
|
3,243
|
57.0
|
||||||||||||||||||
Minority
Interest and Equity in Net
Income
(Loss) of
Affiliates*
|
(40 | ) | (36 | ) | (11.1 | ) | (131 | ) | (99 | ) | (32.3 | ) | ||||||||||||
Segment
Income
|
$ |
1,926
|
$ |
1,382
|
39.4 | % | $ |
4,962
|
$ |
3,144
|
57.8 | % |
·
|
Data
revenue increases of $707 in the third quarter and $1,952 for the
first
nine months due to the increased number of data users and an increase
in
data ARPU of 47.8% in the third quarter and 50.1% for the first nine
months, which primarily resulted from increased use of text messaging,
email, data access and media bundling services. Our significant data
growth also reflects an increased number of subscribers using our
3G
(third generation) network. At September 30, 2007, we had nearly
7 million
customers using 3G devices, nearly triple the amount of subscribers
at
March 31, 2007. Data service revenues represented 17.3% of wireless
service revenues in 2007 compared to 11.9% in
2006.
|
·
|
Voice
revenue increases of $473 in the third quarter and $1,518 for the
first
nine months of 2007, primarily due to an increase in the number of
wireless customers of approximately 11.9%, partially offset by a
decline
in voice ARPU of 4.6% in the third quarter and 4.0% for the first
nine
months. Included in voice revenues were increases in long-distance
and net
roaming revenue due to increased international
usage.
|
·
|
Selling
expenses increased $189 in the third quarter and $355 for the first
nine
months due to increases in sales and advertising expenses and iPhone
launch preparation costs, partially offset by a decrease in net commission
expense, which was consistent with the increase in prepaid plan sales
as a
percentage of total retail sales.
|
·
|
Customer
service and other expense increased $90 in the third quarter and
$195 for
the first nine months primarily due to increased bad debt expenses
and
other costs, partially offset by a decline in billing expenses, lower
information technology and customer service
expenses.
|
·
|
Upgrade
commission and residual expense increased $68 in the third quarter
and
$147 for the first nine months due to increased prepaid plan costs
and
higher handset upgrade activity.
|
Third
Quarter
|
Nine-Month
Period
|
|||||||||||||||||||||||
Percent
|
Percent
|
|||||||||||||||||||||||
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
|||||||||||||||||||
Total
Segment Operating Revenues
|
$ |
1,457
|
$ |
913
|
59.6 | % | $ |
4,378
|
$ |
2,746
|
59.4 | % | ||||||||||||
Segment
operating expenses
|
||||||||||||||||||||||||
Cost
of sales
|
440
|
277
|
58.8
|
1,281
|
853
|
50.2
|
||||||||||||||||||
Selling,
general and administrative
|
315
|
154
|
-
|
1,000
|
445
|
-
|
||||||||||||||||||
Depreciation
and amortization
|
238
|
1
|
-
|
743
|
2
|
-
|
||||||||||||||||||
Total
Segment Operating Expenses
|
993
|
432
|
-
|
3,024
|
1,300
|
-
|
||||||||||||||||||
Segment
Operating Income
|
464
|
481
|
(3.5 | ) |
1,354
|
1,446
|
(6.4 | ) | ||||||||||||||||
Equity
in Net Income (Loss) of Affiliates
|
-
|
(2 | ) |
-
|
-
|
(13 | ) |
-
|
||||||||||||||||
Segment
Income
|
$ |
464
|
$ |
479
|
(3.1 | )% | $ |
1,354
|
$ |
1,433
|
(5.5 | )% |
Third
Quarter
|
Nine-Month
Period
|
|||||||||||||||||||||||
Percent
|
Percent
|
|||||||||||||||||||||||
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
|||||||||||||||||||
Total
Segment Operating Revenues
|
$ |
562
|
$ |
469
|
19.8 | % | $ |
1,664
|
$ |
1,390
|
19.7 | % | ||||||||||||
Total
Segment Operating Expenses
|
440
|
391
|
12.5
|
1,468
|
1,137
|
29.1
|
||||||||||||||||||
Segment
Operating Income (Loss)
|
122
|
78
|
56.4
|
196
|
253
|
(22.5 | ) | |||||||||||||||||
Equity
in Net Income of Affiliates
|
159
|
644
|
(75.3 | ) |
533
|
1,421
|
(62.5 | ) | ||||||||||||||||
Segment
Income
|
$ |
281
|
$ |
722
|
(61.1 | )% | $ |
729
|
$ |
1,674
|
(56.5 | )% |
Third
Quarter
|
Nine-Month
Period
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
América
Móvil
|
$ |
91
|
$ |
79
|
$ |
311
|
$ |
200
|
||||||||
Telmex
|
60
|
54
|
200
|
167
|
||||||||||||
AT&T
Mobility
|
-
|
508
|
-
|
1,045
|
||||||||||||
Other
|
8
|
3
|
22
|
9
|
||||||||||||
Other
Segment Equity in Net
Income
of Affiliates
|
$ |
159
|
$ |
644
|
$ |
533
|
$ |
1,421
|
·
|
$536
from the sale of properties and other
assets.
|
·
|
$301
from the completion of the sale of Education Broadband Service and
Broadband Radio Service spectrum to Clearwire Corporation, which
includes
interest.
|
·
|
$68
from the sale of cost investments.
|
·
|
$44
from the sale of wireless towers.
|
·
|
$44
related to T-Mobile’s exercise of its option to purchase an additional 10
MHz of spectrum in the San Diego
market.
|
·
|
$2,000
of 6.5% notes due in 2037.
|
·
|
€1.25
billion of 4.375% notes due in 2013 (equivalent to U.S. $1,641 when
issued).
|
·
|
$1,500
of floating-rate notes due in 2010.
|
·
|
$1,200
of 6.375% notes due in 2056.
|
·
|
£600
million of 5.5% notes due in 2027 (equivalent to U.S. $1,158 when
issued).
|
·
|
$500
of 5.625% notes due in 2016.
|
·
|
$4,279
related to repayments of commercial paper and other short-term bank
borrowings.
|
·
|
$2,984
related to debt repayments with a weighted average interest rate
of 6.2%,
which included the early redemption of debt related to a put exercise
on
$1,000 of our 4.2% Puttable Reset Securities and called debt of $500
with
an interest rate of 7.0%.
|
·
|
$24
related to scheduled principal payments on other debt and repayments
of
other borrowings.
|
·
|
Increased
debt due to the BellSouth and AT&T Mobility debt we now reflect on our
balance sheet following the acquisition, as well as debt issuances
during
the first nine months of 2007.
|
·
|
An
increase in stockholders’ equity due to our acquisition of BellSouth in
the fourth quarter of 2006.
|
·
|
A
decline in stockholders’ equity related to share repurchases and dividend
payments totaling nearly $15,500.
|
·
|
A
decrease in stockholders’ equity of approximately $5,000 due to the
December 2006 adoption of Statement of Financial Accounting Standards
No.
158, “Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statements No. 87, 88,
106 and
132(R)” (FAS 158).
|
·
|
Adverse
economic changes in the markets served by us or in countries in which
we
have significant investments.
|
·
|
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 U.S. and foreign securities markets, resulting in worse-than-assumed
investment returns and discount rates, and adverse medical cost
trends.
|
·
|
The
final outcome of Federal Communications Commission proceedings and
reopenings of such proceedings and judicial review, if any, of such
proceedings, including issues relating to access charges, broadband
deployment, unbundled loop and transport elements and wireless
services.
|
·
|
The
final outcome of regulatory proceedings in the states in which we
operate
and reopenings of such proceedings, and judicial review, if any,
of such
proceedings, including proceedings relating to interconnection terms,
access charges, universal service, unbundled network elements and
resale
and wholesale rates, broadband deployment including our U-verse services,
performance measurement plans, service standards and traffic
compensation.
|
·
|
Enactment
of additional state, federal and/or foreign regulatory and tax laws
and
regulations pertaining to our subsidiaries and foreign
investments.
|
·
|
Our
ability to absorb revenue losses caused by increasing competition,
including offerings using alternative technologies (e.g., cable,
wireless
and VoIP), and our ability to maintain capital
expenditures.
|
·
|
The
extent of competition and the resulting pressure on 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 wireline and wireless
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
timing, extent and cost of deployment of our U-verse services (our
Lightspeed initiative); the development of attractive and profitable
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.
|
·
|
The
outcome of pending or threatened litigation including patent claims
against third parties doing business with
us.
|
·
|
The
impact on our networks and business of major equipment failures,
severe
weather conditions, natural disasters 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 access
to
additional spectrum; network upgrades and technological
advancements.
|
·
|
The
impact of our acquisition of BellSouth, including the risk that the
businesses will not be integrated successfully; the risk that the
cost
savings and any other synergies from the acquisition may take longer
to
realize than expected or may not be fully realized; and the disruption
from the acquisition may make it more difficult to maintain relationships
with customers, employees or
suppliers.
|
·
|
The
impact of our acquisition of ATTC, including the risk that the businesses
will not be integrated successfully; the risk that the cost savings
and
any other synergies from the acquisition may not be fully realized
or may
take longer to realize than expected; disruption from the integration
process making it more difficult to maintain relationships with customers,
employees or suppliers; and competition and its effect on pricing,
spending, third-party relationships and
revenues.
|
·
|
Changes
in our corporate strategies, such as changing network requirements
or
acquisitions and dispositions, to respond to competition and regulatory,
legislative and technological
developments.
|
(a)
|
During
the third quarter of 2007, non-employee directors acquired from AT&T
shares of common stock pursuant to AT&T’s Non-Employee Director Stock
and Deferral Plan. Under the plan, a director may make an annual
election
to receive all or part of his or her: (1) annual retainer in
the form of AT&T shares or deferred stock units (DSUs) and (2) fees in
the form of DSUs. DSUs are convertible into AT&T shares. Under the
plan, each Director will receive an annual grant of DSUs during the
second
quarter. In the third quarter an aggregate of 11,940 AT&T shares and
DSUs were acquired by non-employee directors at prices ranging from
$39.16
to $42.31, in each case the fair market value of the shares on the
date of
acquisition. The issuances of shares and DSUs were exempt from
registration pursuant to Section 4(2) of the Securities
Act.
|
(c)
|
On
March 4, 2006, our Board of Directors authorized the repurchase of
up to
400 million shares of AT&T common stock; this authorization expires at
the end of 2008. In July 2007, we completed our $10,000 buy back
of common
shares that was announced in March 2006. We repurchased 50.5 million
shares in the third quarter at a cost of $2,008. Total share repurchases
under this plan through the third quarter totaled approximately 314
million shares. At September 30, 2007, we had 86.2 million shares
remaining under our current repurchase authorization, and expect
to
continue repurchases during the fourth quarter of 2007. We have
repurchased, and intend to continue to repurchase, a portion of the
shares
pursuant to plans that comply with the requirements of Rule 10b5-1(c)
under the Securities Exchange Act of 1934. We will fund our share
repurchases through a combination of cash from operations, borrowings
dependent upon market conditions, and cash from the disposition of
certain
non-strategic investments.
|
Purchase
Period
|
Total
Number
of
Shares Purchased
|
Average
Price
Paid
per
Share1
|
Total
Number of
Shares
Purchased as
Part
of Publicly Announced Plans or Programs
|
Maximum
Number of Shares that May Yet Be Purchased Under the Plans or
Programs
|
July
2, 2007 –
July
16, 2007
|
11,030,000
|
$ 40.61
|
11,030,000
|
125,708,783
|
August
2, 2007 –
August
31, 2007
|
24,000,000
|
$ 39.06
|
24,000,000
|
101,708,783
|
September 4,
2007 –
September
28, 2007
|
15,500,000
|
$ 40.14
|
15,500,000
|
86,208,783
|
Total
|
50,530,000
|
$ 39.73
|
50,530,000
|
86,208,783
|
3
|
Bylaws
amended June 29, 2007 (Exhibit 3 to Form 8-K dated July 2,
2007.)
|
10-a
|
BellSouth
Corporation Directors’ Compensation Deferral Plan, as amended and restated
effective as of January 1, 2005.
|
10-b
|
Amendment
to Cingular Wireless Long-Term Compensation Plan (Exhibit 10.1 to
Form 8-K
dated October 19, 2007.)
|
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
|