AT&T (T) 8-K AT&T Reports 2 Million Wireless Net Adds, Record-Low Third-Quarter

Financial Data
AT&T Inc.
Consolidated Statements of Income
Dollars in millions except per share amounts
Unaudited	Three Months Ended									Nine Months Ended
	9/30/2014			9/30/2013			% Chg			9/30/2014			9/30/2013			% Chg
Operating Revenues	$	32,957		$	32,158			2.5	%	$	98,008		$	95,589			2.5	%
Operating Expenses
Cost of services and sales (exclusive of depreciation and      amortization shown separately below)		14,541			13,403			8.5	%		42,074			39,227			7.3	%
Selling, general and administrative		8,475			7,952			6.6	%		24,932			24,406			2.2	%
Depreciation and amortization		4,539			4,615			-1.6	%		13,706			13,715			-0.1	%
Total Operating Expenses		27,555			25,970			6.1	%		80,712			77,348			4.3	%
Operating Income		5,402			6,188			-12.7	%		17,296			18,241			-5.2	%
Interest Expense		1,016			829			22.6	%		2,757			2,481			11.1	%
Equity in Net Income (Loss) of Affiliates		(2	)		91			-			188			494			-61.9	%
Other Income (Expense) - Net		42			50			-16.0	%		1,456			370			-
Income Before Income Taxes		4,426			5,500			-19.5	%		16,183			16,624			-2.7	%
Income Tax Expense		1,367			1,595			-14.3	%		5,769			5,066			13.9	%
Net Income		3,059			3,905			-21.7	%		10,414			11,558			-9.9	%
Less: Net Income Attributable to Noncontrolling Interest		(57	)		(91	)		37.4	%		(213	)		(222	)		4.1	%
Net Income Attributable to AT&T	$	3,002		$	3,814			-21.3	%	$	10,201		$	11,336			-10.0	%
Basic Earnings Per Share Attributable to AT&T	$	0.58		$	0.72			-19.4	%	$	1.96		$	2.10			-6.7	%
Weighted Average Common      Shares Outstanding (000,000)		5,198			5,315			-2.2	%		5,208			5,402			-3.6	%
Diluted Earnings Per Share Attributable to AT&T	$	0.58		$	0.72			-19.4	%	$	1.95		$	2.09			-6.7	%
Weighted Average Common      Shares Outstanding with Dilution (000,000)		5,214			5,331			-2.2	%		5,224			5,419			-3.6	%

Financial Data
AT&T Inc.
Statements of Segment Income
Dollars in millions
Unaudited
	Three Months Ended									Nine Months Ended
Wireless	9/30/2014			9/30/2013			% Chg			9/30/2014			9/30/2013			% Chg
Segment Operating Revenues
Service	$	15,423		$	15,460			-0.2	%	$	45,958		$	45,892			0.1	%
Equipment		2,914			2,020			44.3	%		8,175			5,570			46.8	%
Total Segment Operating Revenues		18,337			17,480			4.9	%		54,133			51,462			5.2	%
Segment Operating Expenses
Operations and support		11,855			10,982			7.9	%		34,305			31,932			7.4	%
Depreciation and amortization		1,965			1,875			4.8	%		5,931			5,553			6.8	%
Total Segment Operating Expenses		13,820			12,857			7.5	%		40,236			37,485			7.3	%
Segment Operating Income		4,517			4,623			-2.3	%		13,897			13,977			-0.6	%
Equity in Net Income (Loss) of Affiliates		(26	)		(18	)		-44.4	%		(75	)		(55	)		-36.4	%
Segment Income	$	4,491		$	4,605			-2.5	%	$	13,822		$	13,922			-0.7	%
Segment Operating Income Margin		24.6	%		26.4	%					25.7	%		27.2	%
Wireline
Segment Operating Revenues
Service	$	14,368		$	14,403			-0.2	%	$	43,165		$	43,266			-0.2	%
Equipment		247			267			-7.5	%		688			832			-17.3	%
Total Segment Operating Revenues		14,615			14,670			-0.4	%		43,853			44,098			-0.6	%
Segment Operating Expenses
Operations and support		10,761			10,385			3.6	%		31,918			31,137			2.5	%
Depreciation and amortization		2,571			2,736			-6.0	%		7,769			8,146			-4.6	%
Total Segment Operating Expenses		13,332			13,121			1.6	%		39,687			39,283			1.0	%
Segment Operating Income		1,283			1,549			-17.2	%		4,166			4,815			-13.5	%
Equity in Net Income of Affiliates		1			-			-			2			1			-
Segment Income	$	1,284		$	1,549			-17.1	%	$	4,168		$	4,816			-13.5	%
Segment Operating Income Margin		8.8	%		10.6	%					9.5	%		10.9	%

Financial Data
AT&T Inc.
Consolidated Balance Sheets
Dollars in millions
	9/30/14			12/31/13
	Unaudited
Assets
Current Assets
Cash and cash equivalents	$	2,458		$	3,339
Accounts receivable - net of allowances for doubtful accounts of $482 and $483		13,445			12,918
Prepaid expenses		869			960
Deferred income taxes		1,030			1,199
Other current assets		8,033			4,780
Total current assets		25,835			23,196
Property, Plant and Equipment - Net		115,134			110,968
Goodwill		70,131			69,273
Licenses		60,784			56,433
Other Intangible Assets - Net		6,252			5,779
Investments in and Advances to Equity Affiliates		166			3,860
Other Assets		9,637			8,278
Total Assets	$	287,939		$	277,787
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year	$	5,109		$	5,498
Accounts payable and accrued liabilities		24,119			21,107
Advanced billing and customer deposits		4,038			4,212
Accrued taxes		4,328			1,774
Dividends payable		2,385			2,404
Total current liabilities		39,979			34,995
Long-Term Debt		70,516			69,290
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		37,393			36,308
Postemployment benefit obligation		29,918			29,946
Other noncurrent liabilities		17,014			15,766
Total deferred credits and other noncurrent liabilities		84,325			82,020
Stockholders' Equity
Common stock		6,495			6,495
Additional paid-in capital		91,064			91,091
Retained earnings		34,165			31,141
Treasury stock		(47,037	)		(45,619	)
Accumulated other comprehensive income		7,926			7,880
Noncontrolling interest		506			494
Total stockholders' equity		93,119			91,482
Total Liabilities and Stockholders' Equity	$	287,939		$	277,787

Financial Data
AT&T Inc.
Consolidated Statements of Cash Flows
Dollars in millions
Unaudited	Nine Months Ended September 30,
	2014			2013
Operating Activities
Net income	$	10,414		$	11,558
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization		13,706			13,715
Undistributed earnings from investments in equity affiliates		(45	)		(232	)
Provision for uncollectible accounts		692			653
Deferred income tax expense		1,304			2,505
Net gain from sale of investments, net of impairments		(1,374	)		(272	)
Changes in operating assets and liabilities:
Accounts receivable		(1,269	)		(440	)
Other current assets		(813	)		520
Accounts payable and accrued liabilities		4,763			(420	)
Retirement benefit funding		(420	)		(175	)
Other - net		(1,365	)		(533	)
Total adjustments		15,179			15,321
Net Cash Provided by Operating Activities		25,593			26,879
Investing Activities
Construction and capital expenditures:
Capital expenditures		(16,829	)		(15,565	)
Interest during construction		(178	)		(213	)
Acquisitions, net of cash acquired		(2,053	)		(4,025	)
Dispositions		6,074			846
Purchases of securities, net		(1,996	)		-
Return of advances to and investments in equity affiliates		3			301
Other		(1	)		(4	)
Net Cash Used in Investing Activities		(14,980	)		(18,660	)
Financing Activities
Net change in short-term borrowings with
original maturities of three months or less		(16	)		1,851
Issuance of other short-term borrowings		-			1,476
Repayment of other short-term borrowings		-			(1,476	)
Issuance of long-term debt		8,564			6,416
Repayment of long-term debt		(10,376	)		(2,131	)
Purchase of treasury stock		(1,617	)		(11,134	)
Issuance of treasury stock		34			108
Dividends paid		(7,170	)		(7,325	)
Other		(913	)		499
Net Cash Used in Financing Activities		(11,494	)		(11,716	)
Net decrease in cash and cash equivalents		(881	)		(3,497	)
Cash and cash equivalents beginning of year		3,339			4,868
Cash and Cash Equivalents End of Period	$	2,458		$	1,371

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									Nine Months Ended
	9/30/2014			9/30/2013			% Chg			9/30/2014			9/30/2013			% Chg
Wireless
Subscribers and Connections
Total											118,650			109,460			8.4	%
Postpaid											75,105			72,032			4.3	%
Prepaid											11,179			7,425			50.6	%
Reseller											13,884			14,089			-1.5	%
Connected Devices											18,482			15,914			16.1	%
Wireless Net Adds
Total		2,007			989			-			3,703			1,912			93.7	%
Postpaid		785			363			-			2,436			1,210			-
Prepaid		(140	)		192			-			(595	)		19			-
Reseller		87			(285	)		-			(281	)		(951	)		70.5	%
Connected Devices		1,275			719			77.3	%		2,143			1,634			31.2	%
M&A Activity, Partitioned Customers and Other Adjs.		9			587			-98.5	%		4,571			591			-
Wireless Churn
Postpaid Churn		0.99	%		1.07	%	-8 BP				0.97	%		1.04	%	-7 BP
Total Churn		1.36	%		1.31	%	5 BP				1.41	%		1.35	%	6 BP
Other
Licensed POPs (000,000)											321			317			1.3	%
Wireline
Voice
Total Wireline Voice Connections											26,220			29,296			-10.5	%
Net Change		(738	)		(932	)		20.8	%		(2,269	)		(2,888	)		21.4	%
Broadband
Total Wireline Broadband Connections											16,486			16,427			0.4	%
Net Change		38			(26	)		-			61			37			64.9	%
Video
Total U-verse Video Connections											6,067			5,266			15.2	%
Net Change		216			265			-18.5	%		607			730			-16.8	%
Consumer Revenue Connections
Broadband1											14,844			14,665			1.2	%
U-verse Video Connections											6,045			5,249			15.2	%
Voice2											14,880			16,749			-11.2	%
Total Consumer Revenue Connections1											35,769			36,663			-2.4	%
Net Change		(156	)		(345	)		54.8	%		(621	)		(1,004	)		38.1	%
AT&T Inc.
Construction and capital expenditures:
Capital expenditures	$	5,180		$	5,900			-12.2	%	$	16,829		$	15,565			8.1	%
Interest during construction	$	60		$	73			-17.8	%	$	178		$	213			-16.4	%
Dividends Declared per Share	$	0.46		$	0.45			2.2	%	$	1.38		$	1.35			2.2	%
End of Period Common Shares Outstanding (000,000)											5,185			5,280			-1.8	%
Debt Ratio3											44.8	%		46.9	%	-210 BP
Total Employees											247,700			246,740			0.4	%

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 4,698 as of September 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 3Q14, total switched access lines were 21,464; retail business switched access lines totaled 9,509; and wholesale,
		national mass markets and coin switched access lines totaled 1,773. 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
	9/30/13			12/31/13			3/31/14			6/30/14			9/30/14
Segment Operating Revenues
Service	$	15,460		$	15,660		$	15,387		$	15,148		$	15,423
Equipment		2,020			2,777			2,479			2,782			2,914
Total Segment Operating Revenues	$	17,480		$	18,437		$	17,866		$	17,930		$	18,337
Segment Operating Expenses
Operations and support		10,982			12,576			10,882			11,568			11,855
Depreciation and amortization		1,875			1,915			1,931			2,035			1,965
Total Segment Operating Expenses		12,857			14,491			12,813			13,603			13,820
Segment Operating Income		4,623			3,946			5,053			4,327			4,517
Segment Operating Income Margin		26.4	%		21.4	%		28.3	%		24.1	%		24.6	%
Plus: Depreciation and amortization		1,875			1,915			1,931			2,035			1,965
EBITDA1	$	6,498		$	5,861		$	6,984		$	6,362		$	6,482
EBITDA as a % of Service Revenues2		42.0	%		37.4	%		45.4	%		42.0	%		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
	9/30/13			9/30/14
Segment Operating Revenues
Service	$	15,460		$	15,423
Equipment		2,020			2,914
Total Segment Operating Revenues	$	17,480		$	18,337
Segment Operating Income		4,623			4,517
Segment Operating Income Margin		26.4	%		24.6	%
Plus: Depreciation and amortization		1,875			1,965
EBITDA1	$	6,498		$	6,482
Total EBITDA Margin		37.2	%		35.3	%
EBITDA as a % of Service Revenues2		42.0	%		42.0	%
Adjustments:
Wireless integration expense3		-			171
Adjusted EBITDA1	$	6,498		$	6,653
Total Adjusted EBITDA Margin		37.2	%		36.3	%
Adjusted EBITDA as a % of Service Revenues2		42.0	%		43.1	%

¹ EBITDA is defined as Operating Income Before Depreciation and Amortization.

² Service revenues include Wireless data, voice, text and other service revenues.

³ Operations and Support expenses for Leap and Alltel wireless integration costs.

Financial Data
AT&T Inc.
Non-GAAP Consolidated Reconciliation
Adjusted Diluted EPS
Unaudited
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2013			2014			2013			2014
Reported Diluted EPS	$	0.72		$	0.58		$	2.09		$	1.95
Adjustments:
Merger and integration costs1		-			0.03			-			0.07
Early debt redemption costs		-			0.02			-			0.02
Tax and spectrum transfer		(0.06	)		-			(0.08	)		-
América Móvil - Gain on AMX shares sale		-			-			(0.04	)		(0.08	)
Adjusted Diluted EPS	$	0.66		$	0.63		$	1.97		$	1.96
Year-over-year growth - Adjusted					-4.5	%					-0.5	%
Weighted Average Common Shares Outstanding
with Dilution (000,000)		5,331			5,214			5,419			5,224
1 Includes Leap and Alltel wireless integration costs and DIRECTV merger costs.
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						Nine Months Ended
	September 30,							September 30,
		2013			2014			2013			2014
Net cash provided by operating activities		$	9,168		$	8,724		$	26,879		$	25,593
Less: Construction and capital expenditures			(5,973	)		(5,240	)		(15,778	)		(17,007	)
Free Cash Flow		$	3,195		$	3,484		$	11,101		$	8,586
Free Cash Flow after Dividends
Dollars in millions
Unaudited
		Three Months Ended						Nine Months Ended
		September 30,						September 30,
			2013			2014			2013			2014
Net cash provided by operating activities		$	9,168		$	8,724		$	26,879		$	25,593
Less: Construction and capital expenditures			(5,973	)		(5,240	)		(15,778	)		(17,007	)
Free Cash Flow			3,195			3,484			11,101			8,586
Less: Dividends paid			(2,395	)		(2,386	)		(7,325	)		(7,170	)
Free Cash Flow after Dividends		$	800		$	1,098		$	3,776		$	1,416
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
	Three Months Ended
	3/31/14		6/30/14		9/30/14		2014 YTD
Operating Revenues	$	32,476	$	32,575	$	32,957	$	98,008
Operating Expenses		26,198		26,959		27,555		80,712
Total Operating Income		6,278		5,616		5,402		17,296
Add back Depreciation and Amortization		4,617		4,550		4,539		13,706
Consolidated Reported EBITDA		10,895		10,166		9,941		31,002
Add Back:
Merger and wireless integration costs1		81		97		213		391
Total Consolidated Adjusted EBITDA		10,976		10,263		10,154		31,393
Annualized Consolidated Adjusted EBITDA							$	41,857
End-of-period current debt								5,109
End-of-period long-term debt								70,516
Total End-of-Period Debt								75,625
Less Cash and Cash Equivalents								2,458
Less Bank Securities - Certificates of Deposit & Time Deposits2								1,890
Net Debt Balance							$	71,277
Annualized Net-Debt-to-Adjusted-EBITDA Ratio								1.70
1 Adjustments include Operations and Support expenses for Leap and Alltel wireless integration costs and DIRECTV merger costs. 2 Bank Securities are included in "Other current assets" on the Consolidated Balance Sheets. 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.

Financial Data
AT&T Inc.
Non-GAAP Consolidated Reconciliation
Adjusted Operating Income Margin
Dollars in millions
Unaudited
	Three Months Ended
	September 30,
	2013			2014
Reported Operating Income	$	6,188		$	5,402
Reported Operating Income Margin		19.2	%		16.4	%
Adjustments:
Merger and integration costs1		-			(255	)
Spectrum transfer		229			-
Adjusted Operating Income	$	5,959		$	5,657
Adjusted Operating Income Margin		18.5	%		17.2	%

¹ Includes Leap and Alltel wireless integration costs and DIRECTV merger costs.

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.