AT&T (T) 8-K The New AT&T Delivers Strong Fourth Quarter, With Growth

Financial Data

AT&T Inc.

Consolidated Statements of Income

Dollars in millions except per share amounts

Unaudited Three Months Ended Twelve Months Ended

12/31/05 12/31/04 % Chg 12/31/05 12/31/04 % Chg

Operating Revenues
Voice	$	5,048		$	5,092		-0.9	%	$	20,037	$	20,796	-3.6	%
Data		4,134			2,877		43.7	%		12,964		10,984	18.0	%
Long-distance voice		2,192			868		-			4,964		3,297	50.6	%
Directory advertising		930			963		-3.4	%		3,786		3,832	-1.2	%
Other		662			487		35.9	%		2,111		1,878	12.4	%
Total Operating Revenues		12,966			10,287		26.0	%		43,862		40,787	7.5	%
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)		6,014			4,613		30.4	%		19,190		17,515	9.6	%
Selling, general and administrative		3,614			2,563		41.0	%		10,861		9,807	10.7	%
Depreciation and amortization		2,206			1,864		18.3	%		7,643		7,564	1.0	%
Total Operating Expenses		11,834			9,040		30.9	%		37,694		34,886	8.0	%
Operating Income		1,132			1,247		-9.2	%		6,168		5,901	4.5	%
Interest Expense		405			318		27.4	%		1,456		1,023	42.3	%
Interest Income		92			116		-20.7	%		383		492	-22.2	%
Equity in Net Income (Loss) of Affiliates		267			(298	)	-			609		873	-30.2	%
Other Income (Expense) - Net		3			60		-95.0	%		14		922	-98.5	%
Income Before Income Taxes		1,089			807		34.9	%		5,718		7,165	-20.2	%
Income Tax (Benefit)		(566	)		119		-			932		2,186	-57.4	%
Income From Continuing Operations		1,655			688		-			4,786		4,979	-3.9	%
Income From Discontinued Operations, net of tax		-			-		-			-		908	-
Net Income	$	1,655		$	688		-		$	4,786	$	5,887	-18.7	%
Basic Earnings Per Share:
Income from Continuing Operations	$	0.46		$	0.21		-		$	1.42	$	1.50	-5.3	%
Net Income	$	0.46		$	0.21		-		$	1.42	$	1.78	-20.2	%
Weighted Average Common
Shares Outstanding (000,000)		3,569			3,307		7.9	%		3,368		3,310	1.8	%
Diluted Earnings Per Share:
Income from Continuing Operations	$	0.46		$	0.21		-		$	1.42	$	1.50	-5.3	%
Net Income	$	0.46		$	0.21		-		$	1.42	$	1.77	-19.8	%
Weighted Average Common
Shares Outstanding with Dilution (000,000)		3,580			3,317		7.9	%		3,379		3,322	1.7	%

Financial Data

AT&T Inc.

Statements of Segment Income

Dollars in millions

Unaudited

Three Months Ended Twelve Months Ended

Wireline		12/31/05		12/31/04	% Ch	g		12/31/05		12/31/04	% Ch	g
Segment Operating Revenues
Voice	$	4,915	$	5,092	-3.5	%	$	19,904	$	20,796	-4.3	%
Data		3,100		2,877	7.8	%		11,930		10,984	8.6	%
Long-distance voice		984		868	13.4	%		3,756		3,297	13.9	%
Other		428		469	-8.7	%		1,855		1,810	2.5	%
Total Segment Operating Revenues		9,427		9,306	1.3	%		37,445		36,887	1.5	%
Segment Operating Expenses
Cost of sales		4,396		4,401	-0.1	%		16,814		16,603	1.3	%
Selling, general and administrative
Selling		1,764		1,807	-2.4	%		6,538		6,747	-3.1	%
General and administrative		1,017		620	64.0	%		2,967		2,459	20.7	%
Selling, general and administrative		2,781		2,427	14.6	%		9,505		9,206	3.2	%
Depreciation and amortization		1,766		1,836	-3.8	%		7,121		7,454	-4.5	%
Total Segment Operating Expenses		8,943		8,664	3.2	%		33,440		33,263	0.5	%
Segment Income	$	484	$	642	-24.6	%	$	4,005	$	3,624	10.5	%

AT&T Corp.*
Segment Operating Revenues
Voice	$	361	$	-	-	$	361	$	-	-
Data		1,129		-	-		1,129		-	-
Long-distance voice		1,208		-	-		1,208		-	-
Other		189		-	-		189		-	-
Total Segment Operating Revenues		2,887		-	-		2,887		-	-
Segment Operating Expenses
Cost of sales		1,686		-	-		1,686		-	-
Selling, general and administrative
Selling		587		-	-		587		-	-
General and administrative		82		-	-		82		-	-
Selling, general and administrative		669		-	-		669		-	-
Depreciation and amortization		414		-	-		414		-	-
Total Segment Operating Expenses		2,769		-	-		2,769		-	-
Segment Operating Income		118		-	-		118		-	-
Equity in Net Income of Affiliates		2		-	-		2		-	-
Segment Income	$	120	$	-	-	$	120	$	-	-

^* Reflects 100% of results from AT&T Corp. following the November 18, 2005 acquisition

Cingular**
Segment Operating Revenues
Service revenues	$	7,779		$	6,313		23.2	%	$	30,638		$	17,602		74.1	%
Equipment sales		1,070			806		32.8	%		3,795			1,963		93.3	%
Total Segment Operating Revenues		8,849			7,119		24.3	%		34,433			19,565		76.0	%
Segment Operating Expenses
Cost of services and equipment sales		3,758			2,939		27.9	%		14,387			7,611		89.0	%
Selling, general and administrative		2,812			2,947		-4.6	%		11,647			7,349		58.5	%
Depreciation and amortization		1,730			1,386		24.8	%		6,575			3,077		-
Total Segment Operating Expenses		8,300			7,272		14.1	%		32,609			18,037		80.8	%
Segment Operating Income (Loss)		549			(153	)	-			1,824			1,528		19.4	%
Other Income (Expense) - Net		(297	)		(404	)	26.5	%		(1,293	)		(1,385	)	6.6	%
Segment Income (Loss)	$	252		$	(557	)	-		$	531		$	143		-

^** Results reflect 100% of Cingular Wireless’ actual results

Directory
Segment Operating Revenues	$	928		$	953	-2.6	%	$	3,714		$	3,759	-1.2	%
Segment Operating Expenses
Cost of sales		277			258	7.4	%		1,103			1,022	7.9	%
Selling, general and administrative
Selling		46			82	-43.9	%		238			235	1.3	%
General and administrative		91			93	-2.2	%		374			387	-3.4	%
Selling, general and administrative		137			175	-21.7	%		612			622	-1.6	%
Depreciation and amortization		1			2	-50.0	%		5			9	-44.4	%
Total Segment Operating Expenses		415			435	-4.6	%		1,720			1,653	4.1	%
Segment Operating Income		513			518	-1.0	%		1,994			2,106	-5.3	%
Equity in Net Income (Loss) of Affiliates		(4	)		-	-			(5	)		-	-
Segment Income	$	509		$	518	-1.7	%	$	1,989		$	2,106	-5.6	%

International
Segment Operating Revenues	$	2		$	5		-60.0	%	$	10		$	22		-54.5	%
Segment Operating Expenses		15			12		25.0	%		28			31		-9.7	%
Segment Operating Loss		(13	)		(7	)	-85.7	%		(18	)		(9	)	-
Equity in Net Income of Affiliates		148			99		49.5	%		395			812		-51.4	%
Segment Income	$	135		$	92		46.7	%	$	377		$	803		-53.1	%

Financial Data

AT&T Inc.

Consolidated Balance Sheets

Dollars in millions except per share amounts 12/31/05 12/31/04

Unaudited

Assets
Current Assets
Cash and cash equivalents	$	1,224		$	760
Accounts receivable - net of allowances for
uncollectibles of $1,176 and $1,001		9,351			6,901
Prepaid expenses		1,029			746
Deferred income taxes		2,011			566
Other current assets		1,039			989
Total current assets		14,654			9,962
Property, plant and equipment - at cost		149,238			136,177
Less: accumulated depreciation and amortization		90,511			86,131
Property, Plant and Equipment - Net		58,727			50,046
Goodwill		14,055			1,625
Investments in Equity Affiliates		2,031			1,798
Investments in and Advances to Cingular Wireless		31,404			33,687
Other Assets		24,761			13,147
Total Assets	$	145,632		$	110,265
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year	$	4,455		$	5,734
Accounts payable and accrued liabilities		17,088			11,459
Accrued taxes		2,586			1,787
Dividends payable		1,289			1,065
Liabilities of discontinued operations		-			310
Total current liabilities		25,418			20,355
Long-Term Debt		26,115			21,231
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		15,713			15,621
Postemployment benefit obligation		18,133			9,076
Unamortized investment tax credits		209			188
Other noncurrent liabilities		5,354			3,290
Total deferred credits and other noncurrent liabilities		39,409			28,175
Stockholders' Equity
Common shares issued ($1 par value)		4,065			3,433
Capital in excess of par value		27,499			13,350
Retained earnings		29,106			28,806
Treasury shares (at cost)		(5,406	)		(4,535	)
Additional minimum pension liability adjustment		(218	)		(190	)
Accumulated other comprehensive income		(356	)		(360	)
Total stockholders' equity		54,690			40,504
Total Liabilities and Stockholders' Equity	$	145,632		$	110,265

Financial Data

AT&T Inc.

Consolidated Statements of Cash Flows

Dollars in millions, increase (decrease) in cash and cash equivlents

Unaudited Twelve Months Ended

12/31/05 12/31/04 12/31/03

Operating Activities
Net income	$	4,786		$	5,887		$	8,505
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization		7,643			7,564			7,870
Undistributed earnings from investments in equity affiliates		(451	)		(542	)		(965	)
Provision for uncollectible accounts		744			761			846
Amortization of investment tax credits		(21	)		(32	)		(24	)
Deferred income tax (benefit) expense		(658	)		646			3,446
Net gain on sales of investments		(135	)		(939	)		(1,775	)
Extraordinary item, net of tax		-			-			7
Cumulative effect of accounting changes, net of tax		-			-			(2,541	)
Income from discontinued operations, net of tax		-			(908	)		(112	)
Retirement benefit funding		-			(2,232	)		(1,645	)
Changes in operating assets and liabilities:
Accounts receivable		(94	)		282			(2,121	)
Other current assets		34			(102	)		(14	)
Accounts payable and accrued liabilities		84			414			2,293
Stock-based compensation tax benefit		(3	)		(5	)		(1	)
Other - net		1,045			156			(363	)
Total adjustments		8,188			5,063			4,901
Net Cash Provided by Operating Activities		12,974			10,950			13,406
Investing Activities
Construction and capital expenditures		(5,576	)		(5,099	)		(5,219	)
Receipts from (investments in) affiliates - net		2,436			(22,660	)		-
Purchases of held-to-maturity securities		-			(135	)		(710	)
Maturities of held-to-maturity securities		99			499			248
Dispositions		526			6,672			3,020
Acquisitions, net of cash acquired		1,504			(74	)		(8	)
Proceeds from note repayment		37			50			-
Purchase of other investments		-			-			(436	)
Net Cash Used in Investing Activities		(974	)		(20,747	)		(3,105	)
Financing Activities
Net change in short-term borrowings with
original maturities of three months or less		(4,119	)		3,398			(78	)
Repayment of other short-term borrowings		-			-			(1,070	)
Issuance of long-term debt		1,973			6,461			-
Repayment of long-term debt		(2,682	)		(881	)		(3,148	)
Purchase of treasury shares		(1,843	)		(448	)		(490	)
Issuance of treasury shares		432			216			102
Repurchase of preferred shares of subsidiaries		(728	)		-			-
Dividends paid		(4,256	)		(4,141	)		(4,539	)
Stock-based compensation tax benefit		3			5			1
Other		(6	)		-			-
Net Cash (Used in) Provided by Financing Activities		(11,226	)		4,610			(9,222	)
Net increase (decrease) in cash and cash equivalents
from continuing operations		774			(5,187	)		1,079
Net increase (decrease) in cash and cash equivalents
from discontinued operations		(310	)		1,141			156
Net increase (decrease) in cash and cash equivalents		464			(4,046	)		1,235
Cash and cash equivalents beginning of year		760			4,806			3,571
Cash and Cash Equivalents End of Year	$	1,224		$	760		$	4,806

Financial Data

AT&T Inc.

Supplementary Operating Data

Unaudited Three Months Ended Twelve Months Ended

12/31/05 12/31/04 12/31/05 12/31/04

Wireline Segment
Switched Access Lines (000)
Retail Consumer - Primary			22,793	23,206
Retail Consumer - Additional			3,890	4,322
Retail Business			17,457	17,552
Retail			44,140	45,080
UNE-P			4,300	6,497
Resale			638	349
Wholesale1			4,938	6,846
Coin2			335	430
Total Switched Access Lines (000)			49,413	52,356
Unbundled Loops (000)			1,695	1,537
Long Distance Lines in Service (000)			23,507	20,868
DSL Lines in Service (000)			6,921	5,104
Net DSL Line Additions (000)	425	425	1,817	1,589
Video Subscribers (000)			457	323
Net Video Subscriber Additions (000)	38	97	134	323
Cingular Wireless3
Wireless Voice Customers (000)			54,144	49,132
Net Customer Additions (000)	1,820	1,699	5,006	3,338
M&A Activity, Partitioned Customers and Other Adjs	32	21,761	6	21,767
POPs (000,000)			294	291

⁽¹⁾  Wholesale lines at 12-31-05 include approximately 1.64 million UNE-P and resale lines that are being sold to AT&T Corp.
⁽²⁾  Coin includes both retail and wholesale access lines.
⁽³⁾  Amounts represent 100% results of Cingular Wireless.

Non-GAAP Financial Data

AT&T Inc.

Supplemental Consolidated Income Statements

Dollars in millions

Unaudited

Three Months Ended Twelve Months Ended

12/31/05 12/31/04 % Chg 12/31/05 12/31/04 % Chg

Total Operating Revenues	$	21,553		$	17,240		25.0	%	$	77,426		$	59,750		29.6	%
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)		9,510			7,407		28.4	%		32,708			24,529		33.3	%
Selling, general and administrative		6,426			5,509		16.6	%		22,508			17,154		31.2	%
Depreciation and amortization		3,936			3,254		21.0	%		14,218			10,643		33.6	%
Total Operating Expenses		19,872			16,170		22.9	%		69,434			52,326		32.7	%
Operating Income		1,681			1,070		57.1	%		7,992			7,424		7.7	%
Interest Expense		634			531		19.4	%		2,402			1,567		53.3	%
Interest Income		34			35		-2.9	%		118			148		-20.3	%
Minority Interest		(108	)		233		-			(316	)		(146	)	-
Equity in Net Income (Loss) of Affiliates		145			(97	)	-			414			347		19.3	%
Other Income (Expense) - Net		-			61		-			31			925		-96.6	%
Income Before Income Taxes		1,118			771		45.0	%		5,837			7,131		-18.1	%
Income Tax (Benefit)		(537	)		83		-			1,051			2,152		-51.2	%
Income From Continuing Operations		1,655			688		-			4,786			4,979		-3.9	%
Income From Discontinued Operations, net of tax		-			-		-			-			908		-
Net Income	$	1,655		$	688		-		$	4,786		$	5,887		-18.7	%

As required by GAAP rules for joint ventures, AT&T reflects Cingular’s results in the Equity in Net Income of Affiliates line of its Consolidated Statements of Income rather than in revenues and expenses. To facilitate peer comparisons, and in recognition of AT&T’s majority economic ownership of the nation’s largest wireless provider and Cingular’s increased significance to AT&T’s overall operations, AT&T provides a supplemental consolidated income statement that includes full consolidation of Cingular’s operating results. This supplemental information also includes reconciliations to AT&T’s Consolidated Statements of Income on the following page.

Certain amounts in prior-period supplemental financial information have been reclassified to conform to the current period’s presentation.

Non-GAAP Financial Data Reconciliation

AT&T Inc.

Supplemental Consolidated Income Statements

For the Three Months Ended 12/31/05

Dollars in millions

Unaudited                      Reported                                          Non-GAAP                    

								Consolidatin	g		Supplemental
		AT&T			Cingular			Adjustment	s		Consolidated
Total Operating Revenues	$	12,966		$	8,849		$	(262	)	$	21,553
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)		6,014			3,758			(262	)		9,510
Selling, general and administrative		3,614			2,812			-			6,426
Depreciation and amortization		2,206			1,730			-			3,936
Total Operating Expenses		11,834			8,300			(262	)		19,872
Operating Income		1,132			549			-			1,681
Interest Expense		405			292			(63	)		634
Interest Income		92			5			(63	)		34
Minority Interest		(1	)		(7	)		(100	)		(108	)
Equity in Net Income (Loss) of Affiliates		267			1			(123	)		145
Other Income (Expense) - Net		4			(4	)		-			-
Income Before Income Taxes		1,089			252			(223	)		1,118
Income Tax (Benefit)		(566	)		48			(19	)		(537	)
Net Income	$	1,655		$	204		$	(204	)	$	1,655

For the Three Months Ended 12/31/04

Dollars in millions

Unaudited                      Reported                                          Non-GAAP                    

								Consolidatin	g		Supplemental
		AT&T			Cingular			Adjustment	s		Consolidated
Total Operating Revenues	$	10,287		$	7,119		$	(166	)	$	17,240
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)		4,613			2,939			(145	)		7,407
Selling, general and administrative		2,563			2,947			(1	)		5,509
Depreciation and amortization		1,864			1,386			4			3,254
Total Operating Expenses		9,040			7,272			(142	)		16,170
Operating Income		1,247			(153	)		(24	)		1,070
Interest Expense		318			303			(90	)		531
Interest Income		116			9			(90	)		35
Minority Interest		1			2			230			233
Equity in Net Income (Loss) of Affiliates		(298	)		(114	)		315			(97	)
Other Income (Expense) - Net		59			2			-			61
Income Before Income Taxes		807			(557	)		521			771
Income Tax (Benefit)		119			(62	)		26			83
Net Income	$	688		$	(495	)	$	495		$	688

Non-GAAP Financial Data Reconciliation

AT&T Inc.

Supplemental Consolidated Income Statements

For the Twelve Months Ended 12/31/05

Dollars in millions

Unaudited                      Reported                                          Non-GAAP                    

								Consolidatin	g		Supplemental
		AT&T			Cingular			Adjustment	s		Consolidated
Total Operating Revenues	$	43,862		$	34,433		$	(869	)	$	77,426
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)		19,190			14,387			(869	)		32,708
Selling, general and administrative		10,861			11,647			-			22,508
Depreciation and amortization		7,643			6,575			-			14,218
Total Operating Expenses		37,694			32,609			(869	)		69,434
Operating Income		6,168			1,824			-			7,992
Interest Expense		1,456			1,260			(314	)		2,402
Interest Income		383			49			(314	)		118
Minority Interest		(2	)		(102	)		(212	)		(316	)
Equity in Net Income (Loss) of Affiliates		609			5			(200	)		414
Other Income (Expense) - Net		16			15			-			31
Income Before Income Taxes		5,718			531			(412	)		5,837
Income Tax (Benefit)		932			198			(79	)		1,051
Net Income	$	4,786		$	333		$	(333	)	$	4,786

For the Twelve Months Ended 12/31/04

Dollars in millions

Unaudited                      Reported                                          Non-GAAP                    

							Consolidatin	g		Supplemental
		AT&T		Cingular			Adjustment	s		Consolidated
Total Operating Revenues	$	40,787	$	19,565		$	(602	)	$	59,750
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)		17,515		7,611			(597	)		24,529
Selling, general and administrative		9,807		7,349			(2	)		17,154
Depreciation and amortization		7,564		3,077			2			10,643
Total Operating Expenses		34,886		18,037			(597	)		52,326
Operating Income		5,901		1,528			(5	)		7,424
Interest Expense		1,023		900			(356	)		1,567
Interest Income		492		12			(356	)		148
Minority Interest		1		(86	)		(61	)		(146	)
Equity in Net Income (Loss) of Affiliates		873		(415	)		(111	)		347
Other Income (Expense) - Net		921		4			-			925
Income Before Income Taxes		7,165		143			(177	)		7,131
Income Tax (Benefit)		2,186		(58	)		24			2,152
Income From Continuing Operations		4,979		201			(201	)		4,979
Income From Discontinued Operations, net of tax		908		-			-			908
Net Income	$	5,887	$	201		$	(201	)	$	5,887