AT&T (T) 8-K Results of Operations and Financial Condition

Financial Data
AT&T Inc.
Consolidated Statements of Income
Dollars in millions except per share amounts
Unaudited	Three Months Ended								Nine Months Ended
	9/30/2007			9/30/2006		% Chg			9/30/2007		9/30/2006		% Chg
Operating Revenues
Voice	$	10,164		$	8,400		21.0	%	$	30,997	$	25,524		21.4	%
Data		5,880			4,598		27.9	%		17,281		13,633		26.8	%
Wireless service		9,834			8		-			28,417		24		-
Directory		1,240			906		36.9	%		3,417		2,716		25.8	%
Other		3,014			1,726		74.6	%		8,467		5,267		60.8	%
Total Operating Revenues		30,132			15,638		92.7	%		88,579		47,164		87.8	%
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)		11,591			6,923		67.4	%		34,321		21,450		60.0	%
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		95.2	%		73,667		39,452		86.7	%
Operating Income		5,304			2,917		81.8	%		14,912		7,712		93.4	%
Interest Expense		887			442		-			2,639		1,378		91.5	%
Equity in Net Income of Affiliates		162			649		-75.0	%		545		1,438		-62.1	%
Other Income (Expense) - Net		(17	)		109		-			614		315		94.9	%
Income Before Income Taxes		4,562			3,233		41.1	%		13,432		8,087		66.1	%
Income Taxes		1,499			1,068		40.4	%		4,617		2,669		73.0	%
Net Income	$	3,063		$	2,165		41.5	%	$	8,815	$	5,418		62.7	%
Basic Earnings Per Share
Net Income	$	0.50		$	0.56		-10.7	%	$	1.43	$	1.40		2.1	%
Weighted Average Common
Shares Outstanding (000,000)		6,088			3,873		57.2	%		6,152		3,880		58.6	%
Diluted Earnings Per Share
Net Income	$	0.50		$	0.56		-10.7	%	$	1.42	$	1.39		2.2	%
Weighted Average Common
Shares Outstanding with Dilution (000,000)		6,129			3,892		57.5	%		6,196		3,900		58.9	%

Financial Data
AT&T Inc.
Statements of Segment Income
Dollars in millions
Unaudited
	Three Months Ended									Nine Months Ended
Wireline	9/30/2007			9/30/2006			% Chg			9/30/2007			9/30/2006			% Chg
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	%
Wireless *
Segment Operating Revenues
Service revenues	$	9,860		$	8,670			13.7	%	$	28,492		$	24,985			14.0	%
Equipment sales		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	%
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	%
* Results include 100% of AT&T's actual wireless results.
** Includes minority interest recorded as Other Income (Expense) - Net on the Consolidated Statements of Income.
Advertising & Publishing
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	%
Other ***
Segment Operating Revenues	$	562		$	469			19.8	%	$	1,664		$	1,390			19.7	%
Segment Operating Expenses		440			391			12.5	%		1,468			1,137			29.1	%
Segment Operating Income		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	%
*** Equity in Net Income of Affiliates includes our 60% proportionate share of wireless results in 2006.

Financial Data
AT&T Inc.
Consolidated Balance Sheets
Dollars in millions except per share amounts
	9/30/07			12/31/06
	Unaudited
Assets
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 - 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

Financial Data
AT&T Inc.
Consolidated Statements of Cash Flows
Dollars in millions, increase (decrease) in cash and cash equivalents
Unaudited		Nine Months Ended
	9/30/07			9/30/06
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

Financial Data
AT&T Inc.
Supplementary Operating and Financial Data
Dollars in millions except per share amounts
Unaudited	Three Months Ended								Nine Months Ended
	9/30/2007			9/30/2006			% Chg		9/30/2007			9/30/2006			% Chg
Wireless
Wireless Customers (000)										65,666			58,666			11.9	%
Net Customer Additions (000)		1,993			1,358			46.8%		4,640			4,535			2.3	%
M&A Activity, Partitioned Customers and Other Adjs. (000)		-			-			-		64			(13	)		-
Postpaid Customers (000)										52,689			49,127			7.3	%
Net Postpaid Customer Additions (000)		1,212			928			30.6%		2,804			2,869			-2.3	%
Postpaid Churn		1.3%			1.5	%	-20 BP			1.3%			1.5%		-20 B		P
Licensed POPs (000,000)										299			296			1.0	%
In-Region Wireline 1
Total Consumer Revenue Connections (000)
Retail Consumer Access Lines										35,811			25,641			39.7	%
Consumer Broadband Connections 2										11,716			6,913			69.5	%
Video Connections: 3
Satellite Connections										1,986			640			-
U-verse Video Connections										126			3			-
Total Consumer Revenue Connections (000)										49,639			33,197			49.5	%
Net Consumer Revenue Connections Changes (000)		83			43			93.0%		731			194			-
Switched Access Lines (000)
Retail Consumer - Primary										31,691			22,068			43.6	%
Retail Consumer - Additional 6										4,120			3,573			15.3	%
Retail Business 6										22,942			16,689			37.5	%
Retail 6										58,753			42,330			38.8	%
Wholesale 4, 6										3,849			4,493			-14.3	%
Coin 5										269			264			1.9	%
Total Switched Access Lines (000)										62,871			47,087			33.5	%
Net Switched Access Line Changes (000)		(1,207	)		(824	)		-46.5%		(3,598	)		(2,326	)		-54.7	%
Total Broadband Connections (000) 2, 6										13,760			8,155			68.7	%
Net Broadband Connections Changes (000) 2		499			379			31.7%		1,590			1,234			28.8	%
Video Connections (000) 3, 6										2,112			643			-
Net Video Connections Changes (000) 3		215			53			-		602			130			-
AT&T Inc.
Capital Expenditures	$	4,664		$	2,116			-	$	12,124		$	6,158			96.9	%
Dividends Declared per Share	$	0.3550		$	0.3325			6.8%	$	1.0650		$	0.9975			6.8	%
End of Period Common Shares Outstanding (000,000)										6,072			3,853			57.6	%
Debt Ratio 7										35.3%			36.3%		-100 B		P
Total Employees										303,670			179,420			69.3	%

1	In-region Wireline represents access lines served by AT&T's incumbent local exchange companies.
2	Broadband connections include DSL lines, U-verse high speed Internet access and satellite broadband.
3	Video connections include sales under agency agreements with EchoStar and DirecTV customers and U-verse connections.
4	Wholesale lines include 0.3 million lines purchased by AT&T Corp. at 9/30/07.
5	Coin includes both retail and wholesale access lines.
6	Prior year amounts restated to conform to current period reporting methodology.
7	Total long-term debt plus debt maturing within one year divided by total debt plus total stockholders' equity.

AT&T Inc.
Non-GAAP Consolidated Reconciliations
Reconciliation of Free Cash Flow after Dividends
Dollars in Millions
unaudited
September 30, 2007	Three Months Ended			Nine Months Ended
Net cash provided by operating activities	$	9,219		$	24,220
Less: Construction and capital expenditures		(4,664	)		(12,124	)
Less: Dividends Paid		(2,170	)		(6,584	)
Free Cash Flow after Dividends	$	2,385		$	5,512

Free cash flow after dividends is defined as cash from operations minus capital expenditures and dividends. Management reviews free cash flow monthly as an important indicator of how much cash is generated by normal business operations, including capital expenditures, and makes business decisions based on this measure. Management also views free cash flow as a measure of cash available to pay debt and return value to shareowners.

AT&T Inc.
Non-GAAP Wireless Reconciliations
Wireless Segment AdjustedOIBDA
Dollars in Millions
unaudited
Quarter Ended September 30, 2007
			Adjusting Items
	GAAP			Integration Costs			Intangible Amortization			Adjusted
Service Revenues	$	9,860								$	9,860
Equipment Revenues		1,077									1,077
Total Operating Revenues	$	10,937		$	-		$	-		$	10,937
Operating Expenses
Cost of Services and Equipment Sales		4,079			(60	)		-			4,019
Selling, General and Administrative		3,183			(117	)		-			3,066
Depreciation and Amortization		1,709			(83	)		(658	)		968
Total Operating Expenses		8,971			(260	)		(658	)		8,053
Operating Income		1,966									2,884
Plus: Depreciation and Amortization		1,709									968
OIBDA		3,675									3,852
OIBDA as a % of Service Revenue		37.3%									39.1%
Quarter Ended September 30, 2006
			Adjusting Items
	GAAP			Integration Costs			Intangible Amortization			Adjusted
Service Revenues	$	8,670								$	8,670
Equipment Revenues		891									891
Total Operating Revenues	$	9,561		$	-		$	-		$	9,561
Operating Expenses
Cost of Services and Equipment Sales		3,725			(65	)		-			3,660
Selling, General and Administrative		2,836			(22	)		-			2,814
Depreciation and Amortization		1,582			(52	)		(314	)		1,216
Total Operating Expenses		8,143			(139	)		(314	)		7,690
Operating Income		1,418									1,871
Plus: Depreciation and Amortization		1,582									1,216
OIBDA		3,000									3,087
OIBDA as a % of Service Revenue		34.6%									35.6%

OIBDA is defined as operating income (loss) before depreciation and amortization.  OIBDA differs from segment operating income (loss), as calculated in accordance with GAAP, in that it excludes depreciation and amortization.  OIBDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment, or other discretionary uses.  OIBDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with GAAP.  Our calculation of OIBDA, as presented, may differ from similarly titled measures reported by other companies.