AT&T (T) 8-K AT&T Reports 20 Percent Adjusted EPS Growth, Record-Low Fourth-Quarter Postpaid Churn, Solid Smartphone Gains and Continued

Financial Data
AT&T Inc.
Consolidated Statements of Income
Dollars in millions except per share amounts
Unaudited	Three Months Ended								Twelve Months Ended
	12/31/2013			12/31/2012			% Chg		12/31/2013			12/31/2012			% Chg
Operating Revenues	$	33,163		$	32,578		1.8	%	$	128,752		$	127,434		1.0	%
Operating Expenses
Cost of services and sales (exclusive of depreciation and      amortization shown separately below)		12,237			17,555		-30.3	%		51,464			55,228		-6.8	%
Selling, general and administrative		4,008			16,409		-75.6	%		28,414			41,066		-30.8	%
Depreciation and amortization		4,680			4,572		2.4	%		18,395			18,143		1.4	%
Total Operating Expenses		20,925			38,536		-45.7	%		98,273			114,437		-14.1	%
Operating Income (Loss)		12,238			(5,958	)	-			30,479			12,997		-
Interest Expense		1,459			820		77.9	%		3,940			3,444		14.4	%
Equity in Net Income of Affiliates		148			215		-31.2	%		642			752		-14.6	%
Other Income (Expense) - Net		226			12		-			596			134		-
Income (Loss) Before Income Taxes		11,153			(6,551	)	-			27,777			10,439		-
Income Tax Expense (Benefit)		4,158			(2,772	)	-			9,224			2,900		-
Net Income (Loss)		6,995			(3,779	)	-			18,553			7,539		-
Less: Net Income Attributable to Noncontrolling Interest		(82	)		(78	)	-5.1	%		(304	)		(275	)	-10.5	%
Net Income (Loss) Attributable to AT&T	$	6,913		$	(3,857	)	-		$	18,249		$	7,264		-
Basic Earnings Per Share Attributable to AT&T	$	1.31		$	(0.68	)	-		$	3.39		$	1.25		-
Weighted Average Common      Shares Outstanding (000,000)		5,267			5,661		-7.0	%		5,368			5,801		-7.5	%
Diluted Earnings Per Share Attributable to AT&T	$	1.31		$	(0.68	)	-		$	3.39		$	1.25		-
Weighted Average Common      Shares Outstanding with Dilution (000,000)		5,283			5,680		-7.0	%		5,385			5,821		-7.5	%

Financial Data
AT&T Inc.
Statements of Segment Income
Dollars in millions
Unaudited
	Three Months Ended									Twelve Months Ended
Wireless	12/31/2013			12/31/2012			% Chg			12/31/2013			12/31/2012			% Chg
Segment Operating Revenues
Data	$	5,729		$	4,905			16.8	%	$	21,719		$	18,297			18.7	%
Voice, text and other service		9,931			10,044			-1.1	%		39,833			40,889			-2.6	%
Equipment		2,777			2,693			3.1	%		8,347			7,577			10.2	%
Total Segment Operating Revenues		18,437			17,642			4.5	%		69,899			66,763			4.7	%
Segment Operating Expenses
Operations and support		12,576			13,296			-5.4	%		44,508			43,296			2.8	%
Depreciation and amortization		1,915			1,781			7.5	%		7,468			6,873			8.7	%
Total Segment Operating Expenses		14,491			15,077			-3.9	%		51,976			50,169			3.6	%
Segment Operating Income		3,946			2,565			53.8	%		17,923			16,594			8.0	%
Equity in Net Income (Loss) of Affiliates		(20	)		(17	)		-17.6	%		(75	)		(62	)		-21.0	%
Segment Income	$	3,926		$	2,548			54.1	%	$	17,848		$	16,532			8.0	%
Segment Operating Income Margin		21.4	%		14.5	%					25.6	%		24.9	%
Wireline
Segment Operating Revenues
Data	$	8,574		$	8,119			5.6	%	$	33,593		$	31,841			5.5	%
Voice		4,863			5,463			-11.0	%		20,333			22,614			-10.1	%
Other		1,279			1,341			-4.6	%		4,888			5,118			-4.5	%
Total Segment Operating Revenues		14,716			14,923			-1.4	%		58,814			59,573			-1.3	%
Segment Operating Expenses
Operations and support		10,501			10,358			1.4	%		41,638			41,207			1.0	%
Depreciation and amortization		2,761			2,775			-0.5	%		10,907			11,123			-1.9	%
Total Segment Operating Expenses		13,262			13,133			1.0	%		52,545			52,330			0.4	%
Segment Operating Income		1,454			1,790			-18.8	%		6,269			7,243			-13.4	%
Equity in Net Income (Loss) of Affiliates		1			-			-			2			(1	)		-
Segment Income	$	1,455		$	1,790			-18.7	%	$	6,271		$	7,242			-13.4	%
Segment Operating Income Margin		9.9	%		12.0	%					10.7	%		12.2	%
Advertising Solutions
Segment Operating Revenues	$	-		$	-			-		$	-		$	1,049			-
Segment Operating Expenses
Operations and support		-			-			-			-			773			-
Depreciation and amortization		-			-			-			-			106			-
Total Segment Operating Expenses		-			-			-			-			879			-
Segment Income	$	-		$	-			-		$	-		$	170			-
Segment Income Margin		-			-						-			16.2	%
Other
Segment Operating Revenues	$	10		$	13			-23.1	%	$	39		$	49			-20.4	%
Segment Operating Expenses		756			332			-			1,336			1,065			25.4	%
Segment Operating Income (Loss)		(746	)		(319	)		-			(1,297	)		(1,016	)		-27.7	%
Equity in Net Income of Affiliates		167			232			-28.0	%		715			815			-12.3	%
Segment Income (Loss)	$	(579	)	$	(87	)		-		$	(582	)	$	(201	)		-

Financial Data
AT&T Inc.
Consolidated Balance Sheets
Dollars in millions
	December 31,
	2013			2012
	Unaudited
Assets
Current Assets
Cash and cash equivalents	$	3,339		$	4,868
Accounts receivable - net of allowances for doubtful accounts of $483 and $547		12,918			12,657
Prepaid expenses		960			1,035
Deferred income taxes		1,199			1,036
Other current assets		4,780			3,110
Total current assets		23,196			22,706
Property, Plant and Equipment - Net		110,968			109,767
Goodwill		69,273			69,773
Licenses		56,433			52,352
Customer Lists and Relationships - Net		763			1,391
Other Intangible Assets - Net		5,016			5,032
Investments in and Advances to Equity Affiliates		3,860			4,581
Other Assets		8,278			6,713
Total Assets	$	277,787		$	272,315
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year	$	5,498		$	3,486
Accounts payable and accrued liabilities		21,107			20,494
Advanced billing and customer deposits		4,212			4,225
Accrued taxes		1,774			1,026
Dividends payable		2,404			2,556
Total current liabilities		34,995			31,787
Long-Term Debt		69,290			66,358
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		36,308			28,491
Postemployment benefit obligation		29,946			41,392
Other noncurrent liabilities		15,766			11,592
Total deferred credits and other noncurrent liabilities		82,020			81,475
Stockholders' Equity
Common stock		6,495			6,495
Additional paid-in capital		91,091			91,038
Retained earnings		31,141			22,481
Treasury stock		(45,619	)		(32,888	)
Accumulated other comprehensive income		7,880			5,236
Noncontrolling interest		494			333
Total stockholders' equity		91,482			92,695
Total Liabilities and Stockholders' Equity	$	277,787		$	272,315

Financial Data
AT&T Inc.
Consolidated Statements of Cash Flows
Dollars in millions
Unaudited	Twelve Months Ended December 31,
	2013			2012
Operating Activities
Net income	$	18,553		$	7,539
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization		18,395			18,143
Undistributed earnings from investments in equity affiliates		(324	)		(615	)
Provision for uncollectible accounts		954			1,117
Deferred income tax expense		6,242			1,747
Net (gain) loss from sale of investments, net of impairments		(492	)		(19	)
Actuarial (gain) loss on pension and postretirement benefits		(7,584	)		9,994
Changes in operating assets and liabilities:
Accounts receivable		(1,329	)		(1,365	)
Other current assets		412			1,017
Accounts payable and accrued liabilities		(152	)		1,798
Retirement benefit funding		(209	)		-
Other - net		330			(180	)
Total adjustments		16,243			31,637
Net Cash Provided by Operating Activities		34,796			39,176
Investing Activities
Construction and capital expenditures:
Capital expenditures		(20,944	)		(19,465	)
Interest during construction		(284	)		(263	)
Acquisitions, net of cash acquired		(4,113	)		(828	)
Dispositions		1,923			812
Sales (purchases) of securities, net		-			65
Return of advances to and investments in equity affiliates		301			-
Other		(7	)		(1	)
Net Cash Used in Investing Activities		(23,124	)		(19,680	)
Financing Activities
Net change in short-term borrowings with
original maturities of three months or less		20			1
Issuance of other short-term borrowings		1,476			-
Repayment of other short-term borrowings		(1,476	)		-
Issuance of long-term debt		12,040			13,486
Repayment of long-term debt		(7,698	)		(8,733	)
Issuance of other long-term financing obligations		4,796			-
Purchase of treasury stock		(13,028	)		(12,752	)
Issuance of treasury stock		114			477
Dividends paid		(9,696	)		(10,241	)
Other		251			89
Net Cash Used in Financing Activities		(13,201	)		(17,673	)
Net (decrease) increase in cash and cash equivalents		(1,529	)		1,823
Cash and cash equivalents beginning of year		4,868			3,045
Cash and Cash Equivalents End of Year	$	3,339		$	4,868

Financial Data
AT&T Inc.
Supplementary Operating and Financial Data
Dollars in millions except per share amounts, subscribers and connections in (000s)
Unaudited		Three Months Ended									Twelve Months Ended
		12/31/2013			12/31/2012			% Chg			12/31/2013			12/31/2012			% Chg
Wireless
Subscribers and Connections
	Total											110,376			106,957			3.2	%
	Postpaid											72,638			70,497			3.0	%
	Prepaid											7,384			7,328			0.8	%
	Reseller											14,028			14,875			-5.7	%
	Connected Devices											16,326			14,257			14.5	%
Wireless Net Adds
	Total		809	��		1,094			-26.1	%		2,721			3,764			-27.7	%
	Postpaid		566			780			-27.4	%		1,776			1,438			23.5	%
	Prepaid		(32	)		(166	)		80.7	%		(13	)		128			-
	Reseller		(123	)		234			-			(1,074	)		1,027			-
	Connected Devices		398			246			61.8	%		2,032			1,171			73.5	%
	M&A Activity, Partitioned Customers and Other Adjs.		107			(8	)		-			698			(54	)		-
Wireless Churn
	Postpaid Churn		1.11	%		1.19	%	-8 BP				1.06	%		1.09	%	-3 BP
	Total Churn		1.43	%		1.42	%	1 BP				1.37	%		1.35	%	2 BP
Other
	Licensed POPs (000,000)											317			313			1.3	%
Wireline
Voice
	Total Wireline Voice Connections1											28,489			32,184			-11.5	%
	Net Change		(807	)		(992	)		18.6	%		(3,695	)		(4,148	)		10.9	%
Broadband
	Total Wireline Broadband Connections											16,425			16,390			0.2	%
	Net Change		(2	)		(2	)		-			35			(37	)		-
Video
	Total U-verse Video Connections											5,460			4,536			20.4	%
	Net Change		194			192			1.0	%		924			745			24.0	%
Consumer Revenue Connections
	Broadband2											14,697			14,531			1.1	%
	U-verse Video Connections1											5,442			4,524			20.3	%
	Voice1,3											16,251			18,612			-12.7	%
Total Consumer Revenue Connections1												36,390			37,667			-3.4	%
	Net Change		(273	)		(386	)		29.3	%		(1,277	)		(1,839	)		30.6	%
AT&T Inc.
	Construction and capital expenditures:
	Capital expenditures	$	5,379		$	5,846			-8.0	%	$	20,944		$	19,465			7.6	%
	Interest during construction	$	71		$	66			7.6	%	$	284		$	263			8.0	%
	Dividends Declared per Share	$	0.46		$	0.45			2.2	%	$	1.81		$	1.77			2.3	%
	End of Period Common Shares Outstanding (000,000)											5,226			5,581			-6.4	%
	Debt Ratio4											45.0	%		43.0	%	200 BP
	Total Employees											243,360			241,810			0.6	%
1	Prior year amounts restated to conform to current period reporting methodology.
2	Consumer wireline broadband connections include DSL lines, U-verse High Speed Internet access and satellite broadband.
3	Includes consumer U-verse Voice over Internet Protocol connections of 3,848 as of December 31, 2013.
4	Total long-term debt plus debt maturing within one year divided by total debt plus total stockholders' equity.
	Note: For the end of 4Q13, total switched access lines were 24,639, retail business switched access lines totaled 10,364, and wholesale,
	national mass markets and coin switched access lines totaled 1,872. Restated switched access lines do not include ISDN lines.

Financial Data
AT&T Inc.
Non-GAAP Financial Reconciliation
Adjusted Operating Revenues, Operating Income and Margin
Dollars in millions
Unaudited
	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2012			2013			2012			2013
Reported Operating Revenues	$	32,578		$	33,163		$	127,434		$	128,752
Adjustments:
Removal of Advertising Solutions		-			-			(1,049	)		-
Storm Impacts		27			-			27			-
Adjusted Operating Revenues	$	32,605		$	33,163		$	126,412		$	128,752
Year-over-year growth - Adjusted					1.7	%					1.9	%
Adjusted Operating Revenues is a non-GAAP financial measure calculated by excluding from operating revenues 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 Revenues 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 Revenues may differ from similarly titled measures reported by other companies.
Adjusted Operating Income
Dollars in millions
Unaudited
	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
		2012			2013			2012			2013
Reported Operating Income	$	(5,958	)	$	12,238		$	12,997		$	30,479
Adjustments:
Removal of Advertising Solutions		-			-			(170	)		-
Storm Impacts		176			-			176			-
Actuarial (gain) / loss on benefit plan		9,994			(7,584	)		9,994			(7,584	)
Employee separation charges		-			501			-			501
Gain on transfer of wireless spectrum		-			-			-			(229	)
Adjusted Operating Income	$	4,212		$	5,155		$	22,997		$	23,167
Year-over-year growth - Adjusted					22.4	%					0.7	%
Adjusted Operating Income Margin*		12.9	%		15.5	%		18.2	%		18.0	%
Adjusted Operating Income and Margin are non-GAAP financial measure calculated by excluding from operating revenues and operating expenses significant items that are non-operational or non-recurring in nature. 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 and Margin exclude all actuarial gains or losses ($7.6 billion gain in 2013) associated with our pension and postemployment benefit plans, which we immediately recognize in the income statement, pursuant to our accounting policy for the recognition of actuarial gains/losses. As a result, Adjusted Operating Income and Margin reflect an expected return on plan assets of $4.0 billion (based on an average expected return on plan assets of 7.75%), rather than the actual return on plan assets of $7.2 billion (actual return of 14.1%), as included in the GAAP measure of income. Adjusted Operating Income and Margin 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 Operating Income and Margin, as presented, may differ from similarly titled measures reported by other companies. *Adjusted Operating Income Margin is calculated by dividing Adjusted Operating Income by Adjusted Operating Revenues.

Financial Data
AT&T Inc.
Non-GAAP Consolidated Reconciliation
Adjusted Operating Expenses
Dollars in Millions
Unaudited
	Three Months Ended
	December 31,
	2012			2013
Reported Operating Expenses	$	38,536		$	20,925
Adjustments:
Storm Impacts		(149	)		-
Actuarial gain / (loss) on benefit plan		(9,994	)		7,584
Employee separation charges		-			(501	)
Adjusted Operating Expenses	$	28,393		$	28,008
Year-over-year growth - Adjusted					-1.4%
Adjusted Operating Expenses is a non-GAAP financial measure calculated by excluding from operating expenses significant items that are non-operational or non-recurring in nature. Management believes that this measure provides 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 Expenses excludes all actuarial gains ($7.6 billion in 2013) associated with our pension and postemployment benefit plans, which we immediately recognize in the income statement, pursuant to our accounting policy for the recognition of actuarial gains/losses. As a result, the Adjusted Operating Expenses reflects an expected return on plan assets of $4.0 billion (based on an average expected return on plan assets of 7.75%), rather than the actual return on plan assets of $7.2 billion (actual return of 14.1%), as included in the GAAP measure of income. Adjusted Operating Expenses 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 Operating Expenses, as presented, may differ from similarly titled measures reported by other companies.

Financial Data
AT&T Inc.
Non-GAAP Wireless Reconciliation
Wireless Segment EBITDA
Dollars in millions
Unaudited
	Three Months Ended															Twelve Months Ended
	12/31/12			3/31/13			6/30/13			9/30/13			12/31/13			12/31/12			12/31/13
Segment Operating Revenues
Data	$	4,905		$	5,125		$	5,356		$	5,509		$	5,729		$	18,297		$	21,719
Voice, text and other service		10,044			9,937			10,014			9,951			9,931			40,889			39,833
Equipment		2,693			1,629			1,921			2,020			2,777			7,577			8,347
Total Segment Operating Revenues		17,642			16,691			17,291			17,480			18,437			66,763			69,899
Segment Operating Expenses
Operations and support		13,296			10,180			10,770			10,982			12,576			43,296			44,508
Depreciation and amortization		1,781			1,835			1,843			1,875			1,915			6,873			7,468
Total Segment Operating Expenses		15,077			12,015			12,613			12,857			14,491			50,169			51,976
Segment Operating Income		2,565			4,676			4,678			4,623			3,946			16,594			17,923
Segment Operating Income Margin		14.5	%		28.0	%		27.1	%		26.4	%		21.4	%		24.9	%		25.6	%
Plus: Depreciation and amortization		1,781			1,835			1,843			1,875			1,915			6,873			7,468
EBITDA	$	4,346		$	6,511		$	6,521		$	6,498		$	5,861		$	23,467		$	25,391
EBITDA as a % of Service Revenues1		29.1	%		43.2	%		42.4	%		42.0	%		37.4	%		40	%		41.3	%
EBITDA is defined as Operating Income Before Depreciation and Amortization. 1Service revenues is defined as Wireless data and voice, text and other service revenues.

Financial Data
AT&T Inc.
Non-GAAP Consolidated Reconciliation
Adjusted Diluted EPS
AT&T Inc.
Unaudited
	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2012			2013			2012			2013
Reported Diluted EPS	$	(0.68	)	$	1.31		$	1.25		$	3.39
Adjustments:
Removal of Advertising Solutions		-			-			(0.03	)		-
Storm Impacts		0.02			-			0.02			-
Actuarial (gain) / loss on benefit plan		1.10			(0.89	)		1.07			(0.88	)
Gain on transfer of wireless spectrum		-			-			-			(0.03	)
Income tax settlement/items		-			-			-			(0.05	)
Early debt redemption costs		-			0.07			-			0.07
Employee separation charges		-			0.06			-			0.06
América Móvil - Gain from sale of shares		-			(0.02	)		-			(0.06	)
Adjusted Diluted EPS	$	0.44		$	0.53		$	2.31		$	2.50
Year-over-year growth - Adjusted					20.5	%					8.2	%
Weighted Average Common Shares Outstanding
with Dilution (000,000)		5,680			5,283			5,821			5,385
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 this measure provides 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.

Financial Data
AT&T Inc.
Non-GAAP Consolidated Reconciliation
Free Cash Flow
Dollars in millions
Unaudited
	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2012			2013			2012			2013
Net cash provided by operating activities	$	10,520		$	7,917		$	39,176		$	34,796
Less: Construction and capital expenditures		(5,912	)		(5,450	)		(19,728	)		(21,228	)
Free Cash Flow	$	4,608		$	2,467		$	19,448		$	13,568
Free Cash Flow after Dividends
Dollars in millions
Unaudited
	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
		2012			2013			2012			2013
Net cash provided by operating activities	$	10,520		$	7,917		$	39,176		$	34,796
Less: Construction and capital expenditures		(5,912	)		(5,450	)		(19,728	)		(21,228	)
Free Cash Flow		4,608			2,467			19,448			13,568
Less: Dividends paid		(2,503	)		(2,371	)		(10,241	)		(9,696	)
Free Cash Flow After Dividends	$	2,105		$	96		$	9,207		$	3,872
Free cash flow includes reimbursements of certain postretirement benefits paid. Free cash flow is defined as cash from operations minus construction and capital expenditures. Free cash flow after dividends is defined as cash from operations minus construction, capital expenditures and dividends. 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.

Financial Data
AT&T Inc.
Non-GAAP Consolidated Reconciliation
Net-Debt-to-Adjusted-EBITDA Ratio
Dollars in millions
Unaudited
	Three Months Ended
	3/31/13		6/30/13		9/30/13		12/31/13			2013
Operating Revenues	$	31,356	$	32,075	$	32,158	$	33,163		$	128,752
Operating Expenses		25,416		25,962		25,970		20,925			98,273
Total Operating Income		5,940		6,113		6,188		12,238			30,479
Add Back Depreciation and Amortization		4,529		4,571		4,615		4,680			18,395
Consolidated Reported EBITDA		10,469		10,684		10,803		16,918			48,874
Add back:
Actuarial (gain) / loss on benefit plan								(7,584	)		(7,584	)
Consolidated Adjusted EBITDA		10,469		10,684		10,803		9,334			41,290
End-of-period current debt											5,498
End-of-period long-term debt											69,290
Total End-of-Period Debt											74,788
Less Cash and Cash Equivalents											3,339
Net Debt Balance											71,449
Net-Debt-to-Adjusted-EBITDA Ratio											1.73
Net-Debt-to-EBITDA ratios are non-GAAP financial measures frequently used by investors and credit rating agencies. Management believes these measures provide relevant and useful information to investors and other users of our financial data. Net Debt is calculated by subtracting cash and cash equivalents from the sum of debt maturing within one year and long-term debt. The Net-Debt-to-EBITDA ratio is calculated by dividing the Net Debt by annualized EBITDA. Adjusted EBITDA excludes all actuarial gains or losses ($7.6 billion gain in 2013) associated with our pension and postemployment benefit plans, which we immediately recognize in the income statement, pursuant to our accounting policy for the recognition of actuarial gains/losses. As a result, Adjusted EBITDA reflects an expected return on plan assets of $4.0 billion (based on an average expected return on plan assets of 7.75%), rather than the actual return on plan assets of $7.2 billion (actual return of 14.1%), as included in the GAAP measure of income. Our calculation of Adjusted EBITDA, as presented, may differ from similarly titled measures reported by other companies.