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
		3/31/2014			3/31/2013			% Chg
Operating Revenues		$	32,476		$	31,356			3.6	%
Operating Expenses
Cost of services and sales (exclusive of depreciation and      amortization shown separately below)			13,321			12,554			6.1	%
Selling, general and administrative			8,260			8,333			-0.9	%
Depreciation and amortization			4,617			4,529			1.9	%
Total Operating Expenses			26,198			25,416			3.1	%
Operating Income			6,278			5,940			5.7	%
Interest Expense			860			827			4.0	%
Equity in Net Income of Affiliates			88			185			-52.4	%
Other Income (Expense) - Net			145			32			-
Income Before Income Taxes			5,651			5,330			6.0	%
Income Tax Expense			1,917			1,557			23.1	%
Net Income			3,734			3,773			-1.0	%
Less: Net Income Attributable to Noncontrolling Interest			(82	)		(73	)		-12.3	%
Net Income Attributable to AT&T		$	3,652		$	3,700			-1.3	%
Basic Earnings Per Share Attributable to AT&T		$	0.70		$	0.67			4.5	%
Weighted Average Common      Shares Outstanding (000,000)			5,222			5,513			-5.3	%
Diluted Earnings Per Share Attributable to AT&T		$	0.70		$	0.67			4.5	%
Weighted Average Common      Shares Outstanding with Dilution (000,000)			5,238			5,530			-5.3	%

Financial Data
AT&T Inc.
Statements of Segment Income
Dollars in millions
Unaudited
	Three Months Ended
Wireless	3/31/2014			3/31/2013			% Chg
Segment Operating Revenues
Service	$	15,387		$	15,062			2.2	%
Equipment		2,479			1,629			52.2	%
Total Segment Operating Revenues		17,866			16,691			7.0	%
Segment Operating Expenses
Operations and support		10,882			10,180			6.9	%
Depreciation and amortization		1,931			1,835			5.2	%
Total Segment Operating Expenses		12,813			12,015			6.6	%
Segment Operating Income		5,053			4,676			8.1	%
Equity in Net Income (Loss) of Affiliates		(20	)		(18	)		-11.1	%
Segment Income	$	5,033		$	4,658			8.1	%
Segment Operating Income Margin		28.3	%		28.0	%
Wireline
Segment Operating Revenues
Service	$	14,389		$	14,381			0.1	%
Equipment		212			274			-22.6	%
Total Segment Operating Revenues		14,601			14,655			-0.4	%
Segment Operating Expenses
Operations and support		10,457			10,335			1.2	%
Depreciation and amortization		2,684			2,688			-0.1	%
Total Segment Operating Expenses		13,141			13,023			0.9	%
Segment Operating Income		1,460			1,632			-10.5	%
Equity in Net Income of Affiliates		1			1			-
Segment Income	$	1,461		$	1,633			-10.5	%
Segment Operating Income Margin		10.0	%		11.1	%

Financial Data
AT&T Inc.
Consolidated Balance Sheets
Dollars in millions
	3/31/2014			12/31/2013
	Unaudited
Assets
Current Assets
Cash and cash equivalents	$	3,611		$	3,339
Accounts receivable - net of allowances for doubtful accounts of $483 and $483		13,120			12,918
Prepaid expenses		1,000			960
Deferred income taxes		1,171			1,199
Other current assets		5,187			4,780
Total current assets		24,089			23,196
Property, Plant and Equipment - Net		112,809			110,968
Goodwill		69,720			69,273
Licenses		59,584			56,433
Other Intangible Assets - Net		6,515			5,779
Investments in Equity Affiliates		3,613			3,860
Other Assets		9,010			8,278
Total Assets	$	285,340		$	277,787
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year	$	8,301		$	5,498
Accounts payable and accrued liabilities		22,234			21,107
Advanced billing and customer deposits		4,121			4,212
Accrued taxes		2,784			1,774
Dividends payable		2,390			2,404
Total current liabilities		39,830			34,995
Long-Term Debt		71,575			69,290
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		36,448			36,308
Postemployment benefit obligation		30,029			29,946
Other noncurrent liabilities		16,089			15,766
Total deferred credits and other noncurrent liabilities		82,566			82,020
Stockholders' Equity
Common stock		6,495			6,495
Additional paid-in capital		91,027			91,091
Retained earnings		32,402			31,141
Treasury stock		(46,684	)		(45,619	)
Accumulated other comprehensive income		7,666			7,880
Noncontrolling interest		463			494
Total stockholders' equity		91,369			91,482
Total Liabilities and Stockholders' Equity	$	285,340		$	277,787

Financial Data
AT&T Inc.
Consolidated Statements of Cash Flows
Dollars in millions
Unaudited	Three months ended March 31,
	2014			2013
Operating Activities
Net income	$	3,734		$	3,773
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization		4,617			4,529
Undistributed earnings from investments in equity affiliates		17			(185	)
Provision for uncollectible accounts		241			262
Deferred income tax expense		578			433
Net (gain) loss from sale of investments, net of impairments		(122	)		(11	)
Changes in operating assets and liabilities:
Accounts receivable		(498	)		295
Other current assets		(340	)		864
Accounts payable and accrued liabilities		1,025			(1,675	)
Retirement benefit funding		(140	)		-
Other - net		(313	)		(86	)
Total adjustments		5,065			4,426
Net Cash Provided by Operating Activities		8,799			8,199
Investing Activities
Construction and capital expenditures:
Capital expenditures		(5,716	)		(4,252	)
Interest during construction		(55	)		(66	)
Acquisitions, net of cash acquired		(662	)		(1,045	)
Dispositions		351			5
Other		-			1
Net Cash Used in Investing Activities		(6,082	)		(5,357	)
Financing Activities
Net change in short-term borrowings with
original maturities of three months or less		(17	)		274
Issuance of other short-term borrowings		-			1,474
Issuance of long-term debt		2,987			4,875
Repayment of long-term debt		(1,867	)		(1,791	)
Purchase of treasury stock		(1,237	)		(5,911	)
Issuance of treasury stock		13			56
Dividends paid		(2,398	)		(2,502	)
Other		74			(310	)
Net Cash Used in Financing Activities		(2,445	)		(3,835	)
Net increase (decrease) in cash and cash equivalents		272			(993	)
Cash and cash equivalents beginning of year		3,339			4,868
Cash and Cash Equivalents End of Period	$	3,611		$	3,875

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
		3/31/2014			3/31/2013			% Chg
Wireless
Subscribers and Connections
	Total		116,014			107,251			8.2	%
	Postpaid		73,291			70,749			3.6	%
	Prepaid		11,812			7,104			66.3	%
	Reseller		13,886			14,702			-5.6	%
	Connected Devices		17,025			14,696			15.8	%
Wireless Net Adds
	Total		1,062			291			-
	Postpaid		625			296			-
	Prepaid		(50	)		(184	)		72.8	%
	Reseller		(206	)		(252	)		18.3	%
	Connected Devices		693			431			60.8	%
	M&A Activity, Partitioned Customers and Other Adjs.		4,576			3			-
Wireless Churn
	Postpaid Churn		1.07	%		1.04	%	3 BP
	Total Churn		1.39	%		1.38	%	1 BP
Other
	Licensed POPs (000,000)		321			317			1.3	%
Wireline
Voice
	Total Wireline Voice Connections		27,716			31,163			-11.1	%
	Net Change		(773	)		(1,021	)		24.3	%
Broadband
	Total Wireline Broadband Connections		16,503			16,514			-0.1	%
	Net Change		78			124			-37.1	%
Video
	Total U-verse Video Connections		5,661			4,768			18.7	%
	Net Change		201			232			-13.4	%
Consumer Revenue Connections
	Broadband1		14,807			14,686			0.8	%
	U-verse Video Connections		5,642			4,755			18.7	%
	Voice2		15,775			17,960			-12.2	%
Total Consumer Revenue Connections1			36,224			37,401			-3.1	%
	Net Change		(166	)		(266	)		37.6	%
AT&T Inc.
	Construction and capital expenditures
	Capital expenditures	$	5,716		$	4,252			34.4	%
	Interest during construction	$	55		$	66			-16.7	%
	Dividends Declared per Share	$	0.46		$	0.45			2.2	%
	End of Period Common Shares Outstanding (000,000)		5,195			5,423			-4.2	%
	Debt Ratio3		46.6	%		45.6	%	100 BP
	Total Employees		246,730			243,340			1.4	%
1	Consumer wireline broadband connections include DSL lines, U-verse High Speed Internet access and satellite broadband.
2	Includes consumer U-verse Voice over Internet Protocol connections of 4,120 as of Match 31, 2014.
3	Total long-term debt plus debt maturing within one year divided by total debt plus total stockholders' equity.
	Note: For the end of 1Q14, total switched access lines were 23,582, retail business switched access lines totaled 10,088, and wholesale,
	national mass markets and coin switched access lines totaled 1,839.

Financial Data
AT&T Inc.
Non-GAAP Wireless Reconciliation
Wireless Segment EBITDA
Dollars in millions
Unaudited
	Three Months Ended
	3/31/13			6/30/13			9/30/13			12/31/13			3/31/14
Segment Operating Revenues
Service	$	15,062		$	15,370		$	15,460		$	15,660		$	15,387
Equipment		1,629			1,921			2,020			2,777			2,479
Total Segment Operating Revenues	$	16,691		$	17,291		$	17,480		$	18,437		$	17,866
Segment Operating Expenses
Operations and support		10,180			10,770			10,982			12,576			10,882
Depreciation and amortization		1,835			1,843			1,875			1,915			1,931
Total Segment Operating Expenses		12,015			12,613			12,857			14,491			12,813
Segment Operating Income		4,676			4,678			4,623			3,946			5,053
Segment Operating Income Margin		28.0	%		27.1	%		26.4	%		21.4	%		28.3	%
Plus: Depreciation and amortization		1,835			1,843			1,875			1,915			1,931
EBITDA1	$	6,511		$	6,521		$	6,498		$	5,861		$	6,984
EBITDA as a % of Service Revenues2		43.2	%		42.4	%		42.0	%		37.4	%		45.4	%
1EBITDA is defined as Operating Income Before Depreciation and Amortization. 2Service revenues include Wireless data, voice, text and other service revenues.

Financial Data
AT&T Inc.
Non-GAAP Consolidated Reconciliation
Adjusted Diluted EPS
Unaudited
		Three Months Ended
		March 31,
		2013		2014
Reported Diluted EPS	$	0.67	$	0.70
Adjustments:
Income Tax Settlement		(0.03)		-
Leap Transaction-related Costs		-		0.01
Adjusted Diluted EPS	$	0.64	$	0.71
Year-over-year growth - Adjusted				10.9%
Weighted Average Common Shares Outstanding
with Dilution (000,000)		5,530		5,238
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
	March 31,
	2013			2014
Net cash provided by operating activities	$	8,199		$	8,799
Less: Construction and capital expenditures		(4,318	)		(5,771	)
Free Cash Flow	$	3,881		$	3,028
Free Cash Flow after Dividends
Dollars in millions
Unaudited
	Three Months Ended
	March 31,
		2013			2014
Net cash provided by operating activities	$	8,199		$	8,799
Less: Construction and capital expenditures		(4,318	)		(5,771	)
Free Cash Flow		3,881			3,028
Less: Dividends paid		(2,502	)		(2,398	)
Free Cash Flow after Dividends	$	1,379		$	630
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
Annualized Net-Debt-to-Adjusted-EBITDA Ratio
Dollars in millions
Unaudited
		3/31/14		2014 YTD
Operating Revenues	$	32,476	$	32,476
Operating Expenses		26,198		26,198
Total Operating Income		6,278		6,278
Add back Depreciation and Amortization		4,617		4,617
Consolidated Reported EBITDA		10,895		10,895
Add Back:
Leap Transaction-related Cost1		81		81
Total Consolidated Adjusted EBITDA		10,976		10,976
Annualized Consolidated Adjusted EBITDA	$	43,904	$	43,904
End-of-period current debt				8,301
End-of-period long-term debt				71,575
Total End-of-Period Debt				79,876
Less Cash and Cash Equivalents				3,611
Net Debt Balance			$	76,265
Annualized Net-Debt-to-Adjusted-EBITDA Ratio				1.74
1 Adjustments include Operations and Support expenses included in Leap Transaction-related Costs. 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. Annualized EBITDA is calculated by annualizing the year-to-date EBITDA. Our calculation of EBITDA, as presented, may differ from similarly titled measures reported by other companies.