AT&T (T) 8-K Strong Wireless Revenue Gains and Record Free Cash Flow

Financial Data
AT&T Inc.
Consolidated Statements of Income
Dollars in millions except per share amounts
Unaudited	Three Months Ended									Nine Months Ended
	9/30/2012			9/30/2011			% Chg			9/30/2012			9/30/2011			% Chg
Operating Revenues
Wireless service	$	14,906		$	14,261			4.5	%	$	44,237		$	42,379			4.4	%
Data		7,977			7,459			6.9	%		23,695			21,979			7.8	%
Voice		5,565			6,242			-10.8	%		17,155			19,132			-10.3	%
Directory		-			803			-			1,049			2,512			-58.2	%
Other		3,011			2,713			11.0	%		8,720			8,218			6.1	%
Total Operating Revenues		31,459			31,478			-0.1	%		94,856			94,220			0.7	%
Operating Expenses
Cost of services and sales (exclusive of depreciation and      amortization shown separately below)		12,718			12,656			0.5	%		38,000			38,225			-0.6	%
Selling, general and administrative		8,192			7,969			2.8	%		24,330			23,983			1.4	%
Depreciation and amortization		4,512			4,618			-2.3	%		13,571			13,804			-1.7	%
Total Operating Expenses		25,422			25,243			0.7	%		75,901			76,012			-0.1	%
Operating Income		6,037			6,235			-3.2	%		18,955			18,208			4.1	%
Interest Expense		824			889			-7.3	%		2,624			2,583			1.6	%
Equity in Net Income of Affiliates		182			193			-5.7	%		537			649			-17.3	%
Other Income (Expense) - Net		47			46			2.2	%		122			132			-7.6	%
Income Before Income Taxes		5,442			5,585			-2.6	%		16,990			16,406			3.6	%
Income Tax Expense		1,741			1,899			-8.3	%		5,672			5,594			1.4	%
Net Income		3,701			3,686			0.4	%		11,318			10,812			4.7	%
Less: Net Income Attributable to Noncontrolling Interest		(66	)		(63	)		-4.8	%		(197	)		(190	)		-3.7	%
Net Income Attributable to AT&T	$	3,635		$	3,623			0.3	%	$	11,121		$	10,622			4.7	%
Basic Earnings Per Share Attributable to AT&T	$	0.63		$	0.61			3.3	%	$	1.90		$	1.79			6.1	%
Weighted Average Common      Shares Outstanding (000,000)		5,771			5,936			-2.8	%		5,848			5,931			-1.4	%
Diluted Earnings Per Share Attributable to AT&T	$	0.63		$	0.61			3.3	%	$	1.90		$	1.79			6.1	%
Weighted Average Common      Shares Outstanding with Dilution (000,000)		5,792			5,954			-2.7	%		5,869			5,950			-1.4	%

Financial Data
AT&T Inc.
Statements of Segment Income
Dollars in millions
Unaudited
	Three Months Ended									Nine Months Ended
Wireless	9/30/2012			9/30/2011			% Chg			9/30/2012			9/30/2011			% Chg
Segment Operating Revenues
Service	$	14,906		$	14,261			4.5	%	$	44,237		$	42,379			4.4	%
Equipment		1,726			1,345			28.3	%		4,884			4,140			18.0	%
Total Segment Operating Revenues		16,632			15,606			6.6	%		49,121			46,519			5.6	%
Segment Operating Expenses
Operations and support		10,549			9,376			12.5	%		30,337			29,023			4.5	%
Depreciation and amortization		1,730			1,620			6.8	%		5,092			4,741			7.4	%
Total Segment Operating Expenses		12,279			10,996			11.7	%		35,429			33,764			4.9	%
Segment Operating Income		4,353			4,610			-5.6	%		13,692			12,755			7.3	%
Equity in Net Income (Loss) of Affiliates		(17	)		(8	)		-			(45	)		(19	)		-
Segment Income	$	4,336		$	4,602			-5.8	%	$	13,647		$	12,736			7.2	%
Segment Operating Income Margin		26.2	%		29.5	%					27.9	%		27.4	%
Wireline
Segment Operating Revenues
Data	$	7,977		$	7,459			6.9	%	$	23,695		$	21,979			7.8	%
Voice		5,565			6,242			-10.8	%		17,155			19,132			-10.3	%
Other		1,271			1,354			-6.1	%		3,795			4,025			-5.7	%
Total Segment Operating Revenues		14,813			15,055			-1.6	%		44,645			45,136			-1.1	%
Segment Operating Expenses
Operations and support		10,134			10,295			-1.6	%		30,516			30,752			-0.8	%
Depreciation and amortization		2,774			2,892			-4.1	%		8,348			8,726			-4.3	%
Total Segment Operating Expenses		12,908			13,187			-2.1	%		38,864			39,478			-1.6	%
Segment Operating Income		1,905			1,868			2.0	%		5,781			5,658			2.2	%
Equity in Net Income (Loss) of Affiliates		-			-			-			(1	)		-			-
Segment Income	$	1,905		$	1,868			2.0	%	$	5,780		$	5,658			2.2	%
Segment Operating Income Margin		12.9	%		12.4	%					12.9	%		12.5	%
Advertising Solutions
Segment Operating Revenues	$	-		$	803			-		$	1,049		$	2,512			-58.2	%
Segment Operating Expenses
Operations and support		-			554			-			773			1,707			-54.7	%
Depreciation and amortization		-			94			-			106			301			-64.8	%
Total Segment Operating Expenses		-			648			-			879			2,008			-56.2	%
Segment Income	$	-		$	155			-		$	170		$	504			-66.3	%
Segment Income Margin		-			19.3	%					16.2	%		20.1	%
Other
Segment Operating Revenues	$	14		$	14			-		$	41		$	53			-22.6	%
Segment Operating Expenses		235			412			-43.0	%		729			762			-4.3	%
Segment Operating Income (Loss)		(221	)		(398	)		44.5	%		(688	)		(709	)		3.0	%
Equity in Net Income of Affiliates		199			201			-1.0	%		583			668			-12.7	%
Segment Income (Loss)	$	(22	)	$	(197	)		88.8	%	$	(105	)	$	(41	)		-

Financial Data
AT&T Inc.
Consolidated Balance Sheets
Dollars in millions except per share amounts
	9/30/12			12/31/11
	Unaudited
Assets
Current Assets
Cash and cash equivalents	$	2,217		$	3,185
Accounts receivable - net of allowances for    doubtful accounts of $606 and $878		12,398			13,606
Prepaid expenses		1,337			1,155
Deferred income taxes		1,312			1,470
Other current assets		1,694			3,611
Total current assets		18,958			23,027
Property, Plant and Equipment - Net		108,217			107,087
Goodwill		69,762			70,842
Licenses		52,082			51,374
Customer Lists and Relationships - Net		1,622			2,757
Other Intangible Assets - Net		5,038			5,212
Investments in and Advances to Equity Affiliates		4,563			3,718
Other Assets		6,607			6,327
Total Assets	$	266,849		$	270,344
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year	$	3,433		$	3,453
Accounts payable and accrued liabilities		18,936			19,858
Advanced billing and customer deposits		3,709			3,872
Accrued taxes		2,209			1,003
Dividends payable		2,511			2,608
Total current liabilities		30,798			30,794
Long-Term Debt		60,314			61,300
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		29,092			25,748
Postemployment benefit obligation		33,842			34,011
Other noncurrent liabilities		11,529			12,694
Total deferred credits and other noncurrent liabilities		74,463			72,453
Stockholders' Equity
Common stock		6,495			6,495
Additional paid-in capital		90,982			91,156
Retained earnings		28,907			25,453
Treasury stock		(28,533	)		(20,750	)
Accumulated other comprehensive income		3,106			3,180
Noncontrolling interest		317			263
Total stockholders' equity		101,274			105,797
Total Liabilities and Stockholders' Equity	$	266,849		$	270,344

Financial Data
AT&T Inc.
Consolidated Statements of Cash Flows
Dollars in millions
Unaudited	Nine Months Ended September 30,
	2012			2011
Operating Activities
Net income	$	11,318		$	10,812
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization		13,571			13,804
Undistributed earnings from investments in equity affiliates		(483	)		(539	)
Provision for uncollectible accounts		835			805
Deferred income tax expense and noncurrent
unrecognized tax benefits		3,441			4,942
Net (gain) loss from sale of investments, net of impairments		(27	)		(57	)
Changes in operating assets and liabilities:
Accounts receivable		(450	)		(573	)
Other current assets		1,459			1,342
Accounts payable and accrued liabilities		387			(2,533	)
Other - net		(1,107	)		(853	)
Total adjustments		17,626			16,338
Net Cash Provided by Operating Activities		28,944			27,150
Investing Activities
Construction and capital expenditures:
Capital expenditures		(13,619	)		(14,625	)
Interest during construction		(197	)		(119	)
Acquisitions, net of cash acquired		(551	)		(430	)
Dispositions		807			76
Sales (purchases) of securities, net		311			45
Other		(2	)		28
Net Cash Used in Investing Activities		(13,251	)		(15,025	)
Financing Activities
Net change in short-term borrowings with
original maturities of three months or less		-			(1,620	)
Issuance of long-term debt		6,935			7,935
Repayment of long-term debt		(8,042	)		(1,298	)
Purchase of treasury stock		(8,374	)		-
Issuance of treasury stock		460			216
Dividends paid		(7,738	)		(7,627	)
Other		98			(406	)
Net Cash Used in Financing Activities		(16,661	)		(2,800	)
Net (decrease) increase in cash and cash equivalents		(968	)		9,325
Cash and cash equivalents beginning of year		3,185			1,437
Cash and Cash Equivalents End of Period	$	2,217		$	10,762

Financial Data
AT&T Inc.
Supplementary Operating and Financial Data
Dollars in millions except per share amounts
Unaudited		Three Months Ended								Nine Months Ended
		9/30/2012			9/30/2011			% Chg		9/30/2012			9/30/2011			% Chg
Wireless
Volumes (000)
	Total										105,871			100,738		5.1	%
	Postpaid										69,747			68,614		1.7	%
	Prepaid										7,545			7,059		6.9	%
	Reseller										14,573			13,028		11.9	%
	Connected Devices										14,006			12,037		16.4	%
Wireless Net Adds (000)
	Total		678			2,123		-68.1	%		2,670			5,202		-48.7	%
	Postpaid		151			319		-52.7	%		658			712		-7.6	%
	Prepaid		77			293		-73.7	%		294			515		-42.9	%
	Reseller		137			473		-71.0	%		793			1,282		-38.1	%
	Connected Devices		313			1,038		-69.8	%		925			2,693		-65.7	%
	M&A Activity, Partitioned Customers and Other Adjs.		(13	)		-		-			(46	)		-		-
Wireless Churn
	Postpaid Churn		1.08	%		1.15	%	-7 BP			1.05	%		1.16	%	-11 BP
	Total Churn		1.34	%		1.28	%	6 BP			1.33	%		1.36	%	-3 BP
Other
	Branded Computing Subscribers1										6,419			4,537		41.5	%
	Licensed POPs (000,000)										313			313		0.0	%
Wireline
Voice
	Total Wireline Voice Connections										35,821			40,098		-10.7	%
	Net Change		(1,020	)		(1,200	)	15.0	%		(3,191	)		(3,465	)	7.9	%
Broadband
	Total Wireline Broadband Connections										16,392			16,476		-0.5	%
	Net Change2		(42	)		3		-			(35	)		167		-
Video
	U-verse										4,344			3,583		21.2	%
	Satellite										1,633			1,809		-9.7	%
	Total Video Connections										5,977			5,392		10.8	%
	Net Change		147			133		10.5	%		421			475		-11.4	%
Consumer Revenue Connections
	Broadband3										14,501			14,530		-0.2	%
	Video Connections4										5,954			5,381		10.6	%
	Voice5										19,222			21,941		-12.4	%
Total Consumer Revenue Connections											39,677			41,852		-5.2	%
	Net Change		(518	)		(652	)	20.6	%		(1,589	)		(1,575	)	-0.9	%
AT&T Inc.
	Construction and capital expenditures
	Capital expenditures	$	4,877		$	5,220		-6.6	%	$	13,619		$	14,625		-6.9	%
	Interest during construction	$	67		$	42		59.5	%	$	197		$	119		65.5	%
	Dividends Declared per Share	$	0.44		$	0.43		2.3	%	$	1.32		$	1.29		2.3	%
	End of Period Common Shares Outstanding (000,000)										5,707			5,926		-3.7	%
	Debt Ratio6										38.6	%		38.5	%	10 BP
	Total Employees										241,130			256,210		-5.9	%
1	Branded Computing Subscribers includes tablets, tethering plans, aircards, mobile Wi-Fi hot spots and other data-only devices.
2	Prior year amounts restated to conform to current period reporting methodology.
3	Consumer wireline broadband connections include DSL lines, U-verse High Speed Internet access and satellite broadband.
4	Video connections include sales under agency agreements with EchoStar and DirecTV customers and U-verse connections.
5	Includes consumer U-verse Voice over Internet Protocol connections of 2,733 as of September 30, 2012.
6	Total long-term debt plus debt maturing within one year divided by total debt plus total stockholders' equity.
	Note: For the end of 3Q12, total switched access lines were 33,088, retail business switched access lines totaled 14,619, and wholesale
	and coin switched access lines totaled 1,980.

Financial Data
AT&T Inc.
Non-GAAP Wireless Reconciliation
Wireless Segment EBITDA
Dollars in millions
Unaudited
	Three Months Ended
	9/30/11			12/31/11			3/31/12			6/30/12			9/30/12
Segment Operating Revenues
Service	$	14,261		$	14,347		$	14,566		$	14,765		$	14,906
Equipment		1,345			2,349			1,570			1,588			1,726
Total Segment Operating Revenues		15,606			16,696			16,136			16,353			16,632
Segment Operating Expenses
Operations and support		9,376			12,598			10,083			9,705			10,549
Depreciation and amortization		1,620			1,588			1,666			1,696			1,730
Total Segment Operating Expenses		10,996			14,186			11,749			11,401			12,279
Segment Operating Income		4,610			2,510			4,387			4,952			4,353
Segment Operating Income Margin		29.5	%		15.0	%		27.2	%		30.3	%		26.2	%
Plus: Depreciation and amortization		1,620			1,588			1,666			1,696			1,730
EBITDA		6,230			4,098			6,053			6,648			6,083
EBITDA as a % of Service Revenue		43.7	%		28.6	%		41.6	%		45.0	%		40.8	%
EBITDA is defined as Operating Income Before Depreciation and Amortization.

Financial Data
AT&T Inc.
Non-GAAP Financial Reconciliation
Free Cash Flow
Dollars in Millions
Unaudited
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2012			2011			2012
Net cash provided by operating activities	$	10,393		$	11,485		$	27,150		$	28,944
Less: Construction and capital expenditures		(5,262	)		(4,944	)		(14,744	)		(13,816	)
Free Cash Flow	$	5,131		$	6,541		$	12,406		$	15,128
Free cash flow is defined as cash from operations minus construction and capital expenditures. We believe these metrics provide useful information to our investors because management regularly reviews free cash flow as an important indicator of how much cash is generated by normal business operations, including capital expenditures, and makes decisions based on it. Management also views free cash flow as a measure of cash available to pay debt and return cash to shareowners.
Free Cash Flow after Dividends
Dollars in Millions
Unaudited
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
		2011			2012			2011			2012
Net cash provided by operating activities	$	10,393		$	11,485		$	27,150		$	28,944
Less: Construction and capital expenditures		(5,262	)		(4,944	)		(14,744	)		(13,816	)
Free Cash Flow		5,131			6,541			12,406			15,128
Less: Dividends paid		(2,545	)		(2,551	)		(7,627	)		(7,738	)
Free Cash Flow After Dividends	$	2,586		$	3,990		$	4,779		$	7,390

Financial Data
AT&T Inc.
Non-GAAP Financial Reconciliation
Annualized Net-Debt-to-EBITDA Ratio
Dollars in millions
Unaudited
	Three Months Ended
	3/31/12		6/30/12		9/30/12		2012 YTD
Operating Revenues	$	31,822	$	31,575	$	31,459	$	94,856
Operating Expenses		25,721		24,758		25,422		75,901
Total Operating Income		6,101		6,817		6,037		18,955
Add Back Depreciation and Amortization		4,560		4,499		4,512		13,571
Total Consolidated EBITDA		10,661		11,316		10,549		32,526
Annualized Consolidated EBITDA*								43,368
End-of-period current debt								3,433
End-of-period long-term debt								60,314
Total End-of-Period Debt								63,747
(Premiums) Discounts on long-term debt								(32	)
Normalized Debt Balance								63,715
Less Cash and Cash Equivalents								2,217
Normalized Net Debt Balance								61,498
Annualized Net-Debt-to-EBITDA Ratio								1.42
*EBITDA is annualized by dividing YTD EBITDA by YTD number of quarters and multiplying by four. Note: 4Q12 EBITDA will exclude the impact of benefit plan actuarial gains/losses in order to better represent AT&T's operational performance.

Financial Data
AT&T Inc.
Non-GAAP Financial Reconciliation
Adjusted Diluted EPS
Unaudited
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2012			2011			2012
Reported Diluted EPS	$	0.61		$	0.63		$	1.79		$	1.90
Significant Items:
Advertising Solutions		(0.02	)		(0.01	)		(0.06	)		(0.03	)
Adjusted Diluted EPS	$	0.59		$	0.62		$	1.73		$	1.87
Year-over-year growth - without Ad Solutions					5.1	%					8.1	%
Weighted Average Common Shares Outstanding
with Dilution (000,000)		5,954			5,792			5,950			5,869
Adjusted diluted EPS is a non-GAAP financial measure calculated by excluding from operating revenues, operating expenses and equity in net income of affiliates certain significant items that are non-operational or non-recurring in nature, including dispositions. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends. Adjusted diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. Our calculation of Adjusted diluted EPS, as presented, may differ from similarly titled measures reported by other companies.

Reconciliation of Consolidated Operating Income excluding Advertising Solutions Segment
AT&T Inc.
Dollars in millions	Three Months Ended
Unaudited	12/31/10			3/31/11			6/30/11			9/30/11			12/31/11			3/31/12			6/30/12			9/30/12
Operating Revenues - reported	$	31,361		$	31,247		$	31,495		$	31,478		$	32,503		$	31,822		$	31,575		$	31,459
less: Advertising Solutions		926			868			841			803			781			744			305			-
Operating Revenues - without Ad Solutions		30,435			30,379			30,654			30,675			31,722			31,078			31,270			31,459
Year-over-year growth - reported														3.6	%		1.8	%		0.3	%		-0.1	%
Year-over-year growth - without Ad Solutions														4.2	%		2.3	%		2.0	%		2.6	%
Operating Expenses
Cost of services and sales (exclusive of depreciation and
amortization shown separately below) - reported		13,766			12,813			12,756			12,656			16,950			12,913			12,369			12,718
less: Advertising Solutions		319			344			322			276			289			314			130			-
Cost of services and sales (exclusive of depreciation and
amortization shown separately below) - without Ad Solutions		13,447			12,469			12,434			12,380			16,661			12,599			12,239			12,718
Selling, general and administrative - reported		10,515			8,042			7,972			7,969			17,060			8,248			7,890			8,192
less: Advertising Solutions		308			228			259			278			269			233			96			-
Selling, general and administrative - without Ad Solutions		10,207			7,814			7,713			7,691			16,791			8,015			7,794			8,192
Impairment of intangible assets - reported		85			-			-			-			2,910			-			-			-
less: Advertising Solutions		-			-			-			-			2,910			-			-			-
Impairment of intangible assets - without Ad Solutions		85			-			-			-			-			-			-			-
Depreciation and amortization - reported		4,907			4,584			4,602			4,618			4,573			4,560			4,499			4,512
less: Advertising Solutions		103			106			101			94			85			77			29			-
Depreciation and amortization - without Ad Solutions		4,804			4,478			4,501			4,524			4,488			4,483			4,470			4,512
Total Operating Expenses - reported		29,273			25,439			25,330			25,243			41,493			25,721			24,758			25,422
less: Advertising Solutions		730			678			682			648			3,553			624			255			-
Total Operating Expenses - without Ad Solutions		28,543			24,761			24,648			24,595			37,940			25,097			24,503			25,422
Operating Income (Loss) - reported	$	2,088		$	5,808		$	6,165		$	6,235		$	(8,990	)	$	6,101		$	6,817		$	6,037
less: Advertising Solutions		196			190			159			155			(2,772	)		120			50			-
Operating Income (Loss) - without Ad Solutions		1,892			5,618			6,006			6,080			(6,218	)		5,981			6,767			6,037
Operating Income margin - reported		6.7	%		18.6	%		19.6	%		19.8	%		-27.7	%		19.2	%		21.6	%		19.2	%
Operating Income margin - without Ad Solutions		6.2	%		18.5	%		19.6	%		19.8	%		-19.6	%		19.2	%		21.6	%		19.2	%
Reconciliation of Net Income and Diluted Earnings Per Share Attributable to AT&T excluding Advertising Solutions Segment
AT&T Inc.
Dollars in millions except per share amounts	Three Months Ended
Unaudited	12/31/10			3/31/11			6/30/11			9/30/11			12/31/11			3/31/12			6/30/12			9/30/12
Net Income Attributable to AT&T - reported	$	1,089			3,408			3,591			3,623			(6,678	)		3,584			3,902			3,635
Adjustments for Advertising Solutions
Less: Advertising Solution Segment Operating Income		196			190			159			155			(2,772	)		120			50			-
Less: Equity in Net Income of Affiliates from YP Holdings		-			-			-			-			-			-			19			75
Tax expense (benefit)		65			65			54			53			(9	)		41			24			24
less: Advertising Solutions		131			125			105			102			(2,763	)		79			45			51
Net Income Attributable to AT&T - without Ad Solutions		958			3,283			3,486			3,521			(3,915	)		3,505			3,857			3,584
Weighted Average Common Shares Outstanding
with Dilution (000,000)		5,941			5,945			5,953			5,954			5,955			5,940			5,876			5,792
Diluted Earnings Per Share - reported	$	0.18		$	0.57		$	0.60		$	0.61		$	(1.12	)	$	0.60		$	0.66		$	0.63
Year-over-year growth - reported														-			5.3	%		10.0	%		3.3	%
Diluted Earnings Per Share - without Ad Solutions	$	0.16		$	0.55		$	0.59		$	0.59		$	(0.66	)	$	0.59		$	0.66		$	0.62
Year-over-year growth - without Ad Solutions														-			7.3	%		11.9	%		5.1	%
Adjusted Operating Income, Adjusted Operating Expenses, Adjusted Operating Revenues, Adjusted Operating Income Margin and Adjusted diluted EPS are non-GAAP financial measures calculated by excluding from operating revenues, operating expenses and equity in net income of affiliates certain significant items that are non-operational or non-recurring in nature, including dispositions. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends.
Adjusted Operating Income, Adjusted Operating Expenses, Adjusted Operating Revenues, Adjusted Operating Income Margin and Adjusted diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. Our calculations of Adjusted Operating Income and Adjusted diluted EPS, as presented, may differ from similarly titled measures reported by other companies.