AT&T (T) 8-K Best-Ever Postpaid Churn Drives Strongest Postpaid

Financial Data
AT&T Inc.
Consolidated Statements of Income
Dollars in millions except per share amounts
Unaudited	Three Months Ended										Six Months Ended
		6/30/2014			6/30/2013			% Chg			6/30/2014			6/30/2013			% Chg
Operating Revenues		$	32,575		$	32,075			1.6	%	$	65,051		$	63,431			2.6	%
Operating Expenses
Cost of services and sales (exclusive of depreciation and      amortization shown separately below)			14,212			13,270			7.1	%		27,533			25,824			6.6	%
Selling, general and administrative			8,197			8,121			0.9	%		16,457			16,454			-
Depreciation and amortization			4,550			4,571			-0.5	%		9,167			9,100			0.7	%
Total Operating Expenses			26,959			25,962			3.8	%		53,157			51,378			3.5	%
Operating Income			5,616			6,113			-8.1	%		11,894			12,053			-1.3	%
Interest Expense			881			825			6.8	%		1,741			1,652			5.4	%
Equity in Net Income of Affiliates			102			218			-53.2	%		190			403			-52.9	%
Other Income (Expense) - Net			1,269			288			-			1,414			320			-
Income Before Income Taxes			6,106			5,794			5.4	%		11,757			11,124			5.7	%
Income Tax Expense			2,485			1,914			29.8	%		4,402			3,471			26.8	%
Net Income			3,621			3,880			-6.7	%		7,355			7,653			-3.9	%
Less: Net Income Attributable to Noncontrolling Interest			(74	)		(58	)		-27.6	%		(156	)		(131	)		-19.1	%
Net Income Attributable to AT&T		$	3,547		$	3,822			-7.2	%	$	7,199		$	7,522			-4.3	%
Basic Earnings Per Share Attributable to AT&T		$	0.68		$	0.71			-4.2	%	$	1.38		$	1.38			-
Weighted Average Common      Shares Outstanding (000,000)			5,204			5,381			-3.3	%		5,213			5,446			-4.3	%
Diluted Earnings Per Share Attributable to AT&T		$	0.68		$	0.71			-4.2	%	$	1.38		$	1.38			-
Weighted Average Common      Shares Outstanding with Dilution (000,000)			5,220			5,397			-3.3	%		5,229			5,463			-4.3	%

Financial Data
AT&T Inc.
Statements of Segment Income
Dollars in millions
Unaudited
	Three Months Ended									Six Months Ended
Wireless	6/30/2014			6/30/2013			% Chg			6/30/2014			6/30/2013			% Chg
Segment Operating Revenues
Service	$	15,148		$	15,370			-1.4	%	$	30,535		$	30,432			0.3	%
Equipment		2,782			1,921			44.8	%		5,261			3,550			48.2	%
Total Segment Operating Revenues		17,930			17,291			3.7	%		35,796			33,982			5.3	%
Segment Operating Expenses
Operations and support		11,568			10,770			7.4	%		22,450			20,950			7.2	%
Depreciation and amortization		2,035			1,843			10.4	%		3,966			3,678			7.8	%
Total Segment Operating Expenses		13,603			12,613			7.8	%		26,416			24,628			7.3	%
Segment Operating Income		4,327			4,678			-7.5	%		9,380			9,354			0.3	%
Equity in Net Income (Loss) of Affiliates		(29	)		(19	)		-52.6	%		(49	)		(37	)		-32.4	%
Segment Income	$	4,298		$	4,659			-7.7	%	$	9,331		$	9,317			0.2	%
Segment Operating Income Margin		24.1	%		27.1	%					26.2	%		27.5	%
Wireline
Segment Operating Revenues
Service	$	14,408		$	14,482			-0.5	%	$	28,797		$	28,863			-0.2	%
Equipment		229			291			-21.3	%		441			565			-21.9	%
Total Segment Operating Revenues		14,637			14,773			-0.9	%		29,238			29,428			-0.6	%
Segment Operating Expenses
Operations and support		10,700			10,417			2.7	%		21,157			20,752			2.0	%
Depreciation and amortization		2,514			2,722			-7.6	%		5,198			5,410			-3.9	%
Total Segment Operating Expenses		13,214			13,139			0.6	%		26,355			26,162			0.7	%
Segment Operating Income		1,423			1,634			-12.9	%		2,883			3,266			-11.7	%
Equity in Net Income of Affiliates		-			-			-			1			1			-
Segment Income	$	1,423		$	1,634			-12.9	%	$	2,884		$	3,267			-11.7	%
Segment Operating Income Margin		9.7	%		11.1	%					9.9	%		11.1	%

Financial Data
AT&T Inc.
Consolidated Balance Sheets
Dollars in millions
	6/30/14			12/31/13
	Unaudited
Assets
Current Assets
Cash and cash equivalents	$	11,305		$	3,339
Accounts receivable - net of allowances for doubtful accounts of $461 and $483		13,001			12,918
Prepaid expenses		928			960
Deferred income taxes		1,180			1,199
Other current assets		6,698			4,780
Total current assets		33,112			23,196
Property, Plant and Equipment - Net		114,360			110,968
Goodwill		70,094			69,273
Licenses		59,655			56,433
Other Intangible Assets - Net		6,380			5,779
Investments in Equity Affiliates		159			3,860
Other Assets		9,706			8,278
Total Assets	$	293,466		$	277,787
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year	$	10,482		$	5,498
Accounts payable and accrued liabilities		22,966			21,107
Advanced billing and customer deposits		3,990			4,212
Accrued taxes		3,962			1,774
Dividends payable		2,388			2,404
Total current liabilities		43,788			34,995
Long-Term Debt		73,570			69,290
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		36,835			36,308
Postemployment benefit obligation		30,070			29,946
Other noncurrent liabilities		16,578			15,766
Total deferred credits and other noncurrent liabilities		83,483			82,020
Stockholders' Equity
Common stock		6,495			6,495
Additional paid-in capital		91,057			91,091
Retained earnings		33,554			31,141
Treasury stock		(46,825	)		(45,619	)
Accumulated other comprehensive income		7,851			7,880
Noncontrolling interest		493			494
Total stockholders' equity		92,625			91,482
Total Liabilities and Stockholders' Equity	$	293,466		$	277,787

Financial Data
AT&T Inc.
Consolidated Statements of Cash Flows
Dollars in millions
Unaudited	Six months ended June 30,
	2014			2013
Operating Activities
Net income	$	7,355		$	7,653
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization		9,167			9,100
Undistributed earnings from investments in equity affiliates		(58	)		(198	)
Provision for uncollectible accounts		444			439
Deferred income tax expense		546			1,081
Net gain from sale of investments, net of impairments		(1,365	)		(260	)
Changes in operating assets and liabilities:
Accounts receivable		(566	)		(290	)
Other current assets		(771	)		784
Accounts payable and accrued liabilities		2,894			(340	)
Retirement benefit funding		(280	)		-
Other - net		(497	)		(258	)
Total adjustments		9,514			10,058
Net Cash Provided by Operating Activities		16,869			17,711
Investing Activities
Construction and capital expenditures:
Capital expenditures		(11,649	)		(9,665	)
Interest during construction		(118	)		(140	)
Acquisitions, net of cash acquired		(857	)		(1,182	)
Dispositions		4,921			825
Return of advances to and investments in equity affiliates		2			301
Other		-			(4	)
Net Cash Used in Investing Activities		(7,701	)		(9,865	)
Financing Activities
Net change in short-term borrowings with
original maturities of three months or less		134			-
Issuance of other short-term borrowings		-			1,476
Repayment of other short-term borrowings		-			(233	)
Issuance of long-term debt		8,564			6,416
Repayment of long-term debt		(3,508	)		(1,823	)
Purchase of treasury stock		(1,396	)		(9,217	)
Issuance of treasury stock		27			104
Dividends paid		(4,784	)		(4,930	)
Other		(239	)		41
Net Cash Used in Financing Activities		(1,202	)		(8,166	)
Net increase (decrease) in cash and cash equivalents		7,966			(320	)
Cash and cash equivalents beginning of year		3,339			4,868
Cash and Cash Equivalents End of Period	$	11,305		$	4,548

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									Six Months Ended
	6/30/2014			6/30/2013			% Chg			6/30/2014			6/30/2013			% Chg
Wireless
Subscribers and Connections
Total											116,634			107,884			8.1	%
Postpaid											74,332			71,278			4.3	%
Prepaid											11,343			7,084			60.1	%
Reseller											13,756			14,330			-4.0	%
Connected Devices											17,203			15,192			13.2	%
Wireless Net Adds
Total		634			632			0.3	%		1,696			923			83.7	%
Postpaid		1,026			551			86.2	%		1,651			847			94.9	%
Prepaid		(405	)		11			-			(455	)		(173	)		-
Reseller		(162	)		(414	)		60.9	%		(368	)		(666	)		44.7	%
Connected Devices		175			484			-63.8	%		868			915			-5.1	%
M&A Activity, Partitioned Customers and Other Adjs.		(14	)		1			-			4,562			4			-
Wireless Churn
Postpaid Churn		0.86	%		1.02	%	-16 BP				0.96	%		1.03	%	-7 BP
Total Churn		1.47	%		1.36	%	11 BP				1.43	%		1.37	%	6 BP
Other
Licensed POPs (000,000)											321			317			1.3	%
Wireline
Voice
Total Wireline Voice Connections											26,958			30,228			-10.8	%
Net Change		(758	)		(935	)		18.9	%		(1,531	)		(1,956	)		21.7	%
Broadband
Total Wireline Broadband Connections											16,448			16,453			-
Net Change		(55	)		(61	)		9.8	%		23			63			-63.5	%
Video
Total U-verse Video Connections											5,851			5,001			17.0	%
Net Change		190			233			-18.5	%		391			465			-15.9	%
Consumer Revenue Connections
Broadband1											14,780			14,660			0.8	%
U-verse Video Connections											5,831			4,986			16.9	%
Voice2											15,314			17,362			-11.8	%
Total Consumer Revenue Connections1											35,925			37,008			-2.9	%
Net Change		(299	)		(393	)		23.9	%		(465	)		(659	)		29.4	%
AT&T Inc.
Construction and capital expenditures:
Capital expenditures	$	5,933		$	5,413			9.6	%	$	11,649		$	9,665			20.5	%
Interest during construction	$	63		$	74			-14.9	%	$	118		$	140			-15.7	%
Dividends Declared per Share	$	0.46		$	0.45			2.2	%	$	0.92		$	0.90			2.2	%
End of Period Common Shares Outstanding (000,000)											5,191			5,335			-2.7	%
Debt Ratio3											47.6	%		46.6	%	100 BP
Total Employees											248,170			245,350			1.1	%
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 4,379 as of June 30, 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 2Q14, total switched access lines were 22,547; retail business switched access lines totaled 9,808; and wholesale,
national mass markets and coin switched access lines totaled 1,804. Restated switched access lines do not include ISDN lines.

Financial Data
AT&T Inc.
Non-GAAP Wireless Reconciliation
Wireless Segment EBITDA
Dollars in millions
Unaudited
	Three Months Ended
	6/30/13			9/30/13			12/31/13			3/31/14			6/30/14
Segment Operating Revenues
Service	$	15,370		$	15,460		$	15,660		$	15,387		$	15,148
Equipment		1,921			2,020			2,777			2,479			2,782
Total Segment Operating Revenues	$	17,291		$	17,480		$	18,437		$	17,866		$	17,930
Segment Operating Expenses
Operations and support		10,770			10,982			12,576			10,882			11,568
Depreciation and amortization		1,843			1,875			1,915			1,931			2,035
Total Segment Operating Expenses		12,613			12,857			14,491			12,813			13,603
Segment Operating Income		4,678			4,623			3,946			5,053			4,327
Segment Operating Income Margin		27.1	%		26.4	%		21.4	%		28.3	%		24.1	%
Plus: Depreciation and amortization		1,843			1,875			1,915			1,931			2,035
EBITDA1	$	6,521		$	6,498		$	5,861		$	6,984		$	6,362
EBITDA as a % of Service Revenues2		42.4	%		42.0	%		37.4	%		45.4	%		42.0	%
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 Wireless Reconciliation
Wireless Segment Adjusted EBITDA
Dollars in millions
Unaudited
	Three Months Ended
	6/30/13			6/30/14
Segment Operating Revenues
Service	$	15,370		$	15,148
Equipment		1,921			2,782
Total Segment Operating Revenues	$	17,291		$	17,930
Segment Operating Income		4,678			4,327
Segment Operating Income Margin		27.1	%		24.1	%
Plus: Depreciation and amortization		1,843			2,035
EBITDA1	$	6,521		$	6,362
Total EBITDA Margin		37.7	%		35.5	%
EBITDA as a % of Service Revenues2		42.4	%		42.0	%
Adjustments:
Leap integration expense		-			96
Adjusted EBITDA1	$	6,521		$	6,458
Total Adjusted EBITDA Margin		37.7	%		36.0	%
Adjusted EBITDA as a % of Service Revenues2		42.4	%		42.6	%
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
	June 30,
	2013			2014
Reported Diluted EPS	$	0.71		$	0.68
Adjustments:
Gain on sale of América Móvil shares		(0.04	)		(0.08	)
Leap Integration Costs		-			0.02
Adjusted Diluted EPS	$	0.67		$	0.62
Year-over-year growth - Adjusted					-7.5	%
Weighted Average Common Shares Outstanding
with Dilution (000,000)		5,397			5,220
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						Six Months Ended
	June 30,						June 30,
	2013			2014			2013			2014
Net cash provided by operating activities	$	9,512		$	8,070		$	17,711		$	16,869
Less: Construction and capital expenditures		(5,487	)		(5,996	)		(9,805	)		(11,767	)
Free Cash Flow	$	4,025		$	2,074		$	7,906		$	5,102
Free Cash Flow after Dividends
Dollars in millions
Unaudited
	Three Months Ended						Six Months Ended
	June 30,						June 30,
		2013			2014			2013			2014
Net cash provided by operating activities	$	9,512		$	8,070		$	17,711		$	16,869
Less: Construction and capital expenditures		(5,487	)		(5,996	)		(9,805	)		(11,767	)
Free Cash Flow		4,025			2,074			7,906			5,102
Less: Dividends paid		(2,428	)		(2,386	)		(4,930	)		(4,784	)
Free Cash Flow after Dividends	$	1,597		$	(312	)	$	2,976		$	318
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
Adjusted Operating Income Margin
Dollars in millions
Unaudited
	Three Months Ended
	June 30,
	2013			2014
Reported Operating Income	$	6,113		$	5,616
Reported Operating Income Margin		19.1	%		17.2	%
Adjustments:
Leap integration costs		-			(141	)
Adjusted Operating Income	$	6,113		$	5,757
Adjusted Operating Income Margin		19.1	%		17.7	%
Adjusted Operating Income and Adjusted Operating Income Margin are non-GAAP financial measures calculated by excluding from operating revenues and operating expenses 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 and Adjusted Operating Income Margin 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.

Financial Data
AT&T Inc.
Non-GAAP Consolidated Reconciliation
Annualized Net-Debt-to-Adjusted-EBITDA Ratio
Dollars in millions
Unaudited
	Three Months Ended
	3/31/14		6/30/14		2014 YTD
Operating Revenues	$	32,476	$	32,575	$	65,051
Operating Expenses		26,198		26,959		53,157
Total Operating Income		6,278		5,616		11,894
Add back Depreciation and Amortization		4,617		4,550		9,167
Consolidated Reported EBITDA		10,895		10,166		21,061
Add Back:
Leap integration costs1		81		97		178
Total Consolidated Adjusted EBITDA		10,976		10,263		21,239
Annualized Consolidated Adjusted EBITDA					$	42,478
End-of-period current debt						10,482
End-of-period long-term debt						73,570
Total End-of-Period Debt						84,052
Less Cash and Cash Equivalents						11,305
Net Debt Balance					$	72,747
Annualized Net-Debt-to-Adjusted-EBITDA Ratio						1.71
1 Adjustments include Operations and Support expenses included in Leap integration 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.