AT&T Delivers Strong Second-Quarter Earnings Growth Driven by Merger Integration Progress, Solid Wireline Execution, Advances at Cingular Wireless.SAN ANTONIO San Antonio (săn ăntō`nēō, əntōn`), city (1990 pop. 935,933), seat of Bexar co., S central Tex., at the source of the San Antonio River; inc. 1837. -- AT&T Inc. (NYSE NYSE See: New York Stock Exchange : T): --$0.46 reported earnings per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, up 53.3 percent versus the year-earlier second quarter --$0.58 earnings per diluted share before merger-related costs, up 34.9 percent versus comparable results in the second quarter of 2005 --Consolidated operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. margin up substantially to 16.5 percent on a reported basis, 19.0 percent before merger-related costs; full-year margin outlook raised --Cash from operating activities up 24.1 percent versus the second quarter of 2005 to $4.7 billion --1.5 million second-quarter net subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. gain at Cingular Wireless to reach 57.3 million; 1.7 percent total subscriber churn churn: see butter. , 1.5 percent postpaid post·paid adj. With the postage having been paid in advance. postpaid Adverb, adj with the postage prepaid Adj. 1. - both down significantly over past three quarters Note: AT&T's second-quarter earnings conference call will be broadcast live via the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at 10 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT on Tuesday Tuesday: see week. , July July: see month. 25, 2006, at www.att.com/investor.relations. AT&T Inc. (NYSE: T) today reported strong second-quarter earnings growth driven by progress in merger integration, solid execution in wireline operations and increased contributions from Cingular Wireless, which is 60-percent owned by AT&T. AT&T's second-quarter earnings per diluted share were $0.46 on a reported basis, up 53.3 percent versus the year-earlier quarter. Before merger-related costs, earnings per diluted share were $0.58, up 34.9 percent versus comparable adjusted results in the second quarter of 2005. This marked AT&T's fifth consecutive quarter of double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. growth in earnings per share before merger-related costs. Second-quarter net income totaled $1.8 billion on a reported basis, up 80.8 percent from the year-earlier quarter. Before merger-related costs, earnings were $2.3 billion, up 59.6 percent from pre-merger results in the second quarter of 2005. Cash from operating activities totaled $4.7 billion, up 24.1 percent versus the year-earlier second quarter. "We delivered another strong quarter, with excellent growth in both earnings and cash flow," said Edward Edward killed his father at his mother’s instigation. [Br. Balladry: Edward in Benét, 302] See : Patricide E. Whitacre Jr., AT&T chairman and chief executive officer. "Cingular generated solid subscriber growth and its best-ever churn. Enterprise trends continue to be encouraging. Regional wireline revenues extended their growth record. Our SBC/AT&T merger integration projects are very much on plan, generating synergies and benefiting customers. "These results demonstrate strong momentum as we look forward to the second half of the year and completion of our pending acquisition of BellSouth
tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. approvals necessary for closing the transaction this fall. "Now that the shareowner share·own·er n. See shareholder. Noun 1. shareowner - someone who holds shares of stock in a corporation shareholder, stockholder investor - someone who commits capital in order to gain financial returns votes are complete, we plan to ramp up Ramp Up To increase a company's operations in anticipation of increased demand. Notes: A company might 'ramp up' operations if they just signed a contract creating substantially more demand for their product. See also: Demand, Economies of Scale the share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program we outlined in March," Whitacre said. "We expect to buy back $10 billion of our shares by the end of 2007, with approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $2 billion to $3 billion coming this year." Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Financial Results On Nov. 18, 2005, SBC (1) (SBC Communications Inc., San Antonio, TX, www.sbc.com) A large, national telecommunications company that grew from a multitude of local and regional companies, including Southwestern Bell, Pacific Bell and Nevada Bell, into a single, unified brand by 2002. Communications Inc. completed its acquisition of AT&T Corp. and adopted AT&T Inc. as its name. Reported results for the second quarter of 2006 include costs related to this merger as well as Cingular Wireless' fourth-quarter 2004 acquisition of AT&T Wireless. In the second quarter, AT&T's portion of Cingular's $499 million of merger integration and noncash intangible amortization costs amounted to $0.05 per diluted share, and SBC/AT&T merger integration and noncash intangible amortization costs amounted to $397 million, or $0.07 per diluted share. --On a reported basis, AT&T's second-quarter earnings per diluted share were $0.46, up 53.3 percent from $0.30 in the second quarter of 2005. --Excluding the items noted above, second-quarter adjusted earnings were $0.58 per diluted share, up 34.9 percent versus comparable adjusted earnings of $0.43 per diluted share in the year-earlier quarter. Adjusted results for the second quarter of 2005 exclude AT&T's portion of Cingular's $649 million of merger integration and noncash intangible amortization costs, which amounted to $0.08 per diluted share, and an AT&T merger-related charge of $236 million, or $0.05 per diluted share, for termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. of agreements with WilTel Communications WilTel Communications (formerly known as Williams Communications, which was formerly part of The Williams Companies, Inc) is a telco and Tier 2 Internet Service Provider with its own MPLS-enabled OC-192 optical wave division multiplexing backbone network. . Major drivers of earnings-per-share growth were increased contributions from Cingular Wireless and AT&T's wireline operations, partially offset by an increased number of shares outstanding due to the acquisition of AT&T Corp. Reported results for the second quarter of 2005 do not include results from AT&T Corp. AT&T's reported second-quarter 2006 net income was $1.8 billion versus a pre-merger $1.0 billion in the year-earlier second quarter. Excluding the items noted above, second-quarter earnings were $2.3 billion, compared with second-quarter 2005 earnings of $1.4 billion before merger-related costs. Second-quarter consolidated revenues totaled $15.8 billion, up 53.2 percent from a pre-merger $10.3 billion in the second quarter of 2005 and up 0.1 percent sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen . Second-quarter operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. totaled $13.2 billion on a reported basis, up from a pre-merger $8.8 billion in the year-earlier quarter but down 2.9 percent sequentially. Expense trends reflect early results from SBC/AT&T integration and progress in operational initiatives. Second-quarter operating income totaled $2.6 billion on a reported basis, up 71.5 percent from a pre-merger $1.5 billion in the year-earlier quarter. Before merger-related costs, operating income was $3.0 billion, up 71.1 percent versus $1.8 billion in the year-earlier quarter. AT&T's second-quarter operating income margin was 16.5 percent on a reported basis, up from 14.7 percent in the year-earlier second quarter. Before merger-related expenses, AT&T's operating income margin was 19.0 percent versus 17.0 percent in the second quarter of 2005. AT&T's second-quarter cash from operating activities totaled $4.7 billion, up 24.1 percent from $3.8 billion the year-earlier quarter. Year to date, cash from operations totaled $7.2 billion, up 42.0 percent from $5.0 billion in the first half of 2005. Wireline Highlights AT&T's wireline segment includes the combined former SBC and former AT&T Corp. wireline operations. Second-quarter 2006 wireline results reflect continued solid progress in merger integration, expanded margins and revenue trends that were consistent with first-quarter 2006 results. Total wireline revenues in the second quarter were $14.8 billion, up 59.3 percent versus a pre-merger $9.3 billion reported in the second quarter of 2005 and up 0.1 percent from results in the first quarter of this year. In addition to reported results, AT&T is providing supplementary quarterly wireline revenue comparisons to pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma results for 2005 to give investors additional background on trends in the business. These pro forma revenues combine results from the former SBC and the former AT&T Corp., with segments and categories consistent in all periods. Versus pro forma results for the second quarter of 2005, AT&T's second-quarter 2006 wireline revenues declined 5.0 percent. This compares with a 5.5 percent year-over-year pro forma decline in the first quarter of this year. More than two-thirds of AT&T's year-over-year wireline revenue decline in the second quarter came from former AT&T Corp. national mass markets - primarily stand-alone (jargon) stand-alone - Capable of operating without other programs, libraries, computers, hardware, networks, etc. Exactly what is absent is presumed to be obvious from context. "We only run Windows on stand-alone PCs because it's too dangerous to run it on networked ones." long distance and local bundled bun·dle n. 1. A group of objects held together, as by tying or wrapping. 2. Something wrapped or tied up for carrying; a package. 3. Biology A cluster or strand of closely bound muscle or nerve fibers. services - where AT&T Corp. discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: proactive marketing in 2004. Excluding results from this customer category, wireline revenues declined 1.8 percent year over year and grew 0.7 percent sequentially. Wireline second-quarter customer highlights include: --Solid growth in regional small/medium-business revenues - up 4.9 percent versus pro forma results for the year-earlier quarter to $2.0 billion. This growth reflects positive trends in both data and voice services. Data revenues in this category grew 14.3 percent, driven by strength in transport and IP-based services. --Continued growth in regional consumer revenues - up 1.5 percent to $3.6 billion, driven by a 637,000 increase in consumer connections over the past year to 33.1 million. Consumer connections is a measure that combines retail access lines plus DSL DSL in full Digital Subscriber Line Broadband digital communications connection that operates over standard copper telephone wires. It requires a DSL modem, which splits transmissions into two frequency bands: the lower frequencies for voice (ordinary lines and video connections. Total DSL lines increased by 342,000 to 7.8 million - up more than 1.8 million, or 30.3 percent, over the past year. AT&T | DISH Network See DBS. satellite television connections increased by 42,000 to reach 533,000 in service. Additional lines declined by 106,000, consistent with results over the past several quarters, in large part due to the migration from dial-up Internet access See dial-up. to DSL. Primary consumer lines declined by 320,000, reflecting second-quarter seasonality in addition to migrations to wireless, cable and other competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. . Primary consumer line and DSL line disconnections are both typically higher in the second quarter due to end-of-college-year moves. In June June: see month. , the company announced the initial expansion of its AT&T U-verse AT&T U-verse is the brand name for a group of services provided over Internet Protocol (IP), including television service, Internet access, and eventually voice telephone service. (SM) services in San Antonio, the first market where the services are commercially available. AT&T U-verse services include next-generation television (IPTV (Internet Protocol TV) Also called "TV over IP," IPTV delivers scheduled TV programs and video-on-demand (VOD) via the IP protocol and digital streaming techniques used to watch video on the Internet. ) and high speed Internet offerings powered by Project Lightspeed, the company's initiative to expand its fiber-optics network deeper into neighborhoods. AT&T is pleased with initial results and expects to offer its U-verse services in 15 to 20 markets (metropolitan statistical areas) within its traditional 13-state wireline area by the end of 2006. Markets beyond San Antonio are expected to be launched late in the fourth quarter, generally following the deployment Installing, setting up, testing and running. This military term, which means the placement of troops and equipment in the field, is widely used with computers as an alternate to the word "implementation. plan being used in San Antonio. --Stabilizing enterprise revenues of $4.4 billion - essentially flat with results in the first quarter of this year, reflecting continued strong volume growth along with double-digit growth in IP data services. The second quarter's 0.3 percent sequential One after the other in some consecutive order such as by name or number. decline in enterprise revenues compares with a sequential decline of 3.8 percent in the first quarter of this year. Versus pro forma results for the second quarter of 2005, enterprise revenues declined 7.5 percent. Excluding revenues from a payphone payphone Noun a coin-operated telephone payphone pay n → Münztelefon nt; (card phone) → Kartentelefon nt unit that the former AT&T Corp. sold in June of 2005, enterprise revenues would have declined 6.9 percent. Wireline revenue comparisons reflect the movement of certain accounts during the second quarter of 2006 between customer categories, resulting in reclassified revenues between those categories for the current and past quarters. These movements correspond with changes in how the company serves customers as it continues to integrate operations. The changes affect previously reported revenues and trends in several customer categories and include moving $138 million of fourth-quarter 2004 carrier revenues from the enterprise customer category to wholesale. Total quarterly wireline revenues and product revenues were not affected by the changes. Additional adjustments may take place in future quarters as the company further integrates operations. Financial data that include the changes are on the Investor Relations Investor relations The process by which the corporation communicates with its investors. page of AT&T's Web site under the heading "Financial & Operational Results." Wireless Results Cingular Wireless' second-quarter results were driven by continued strong subscriber growth, its lowest-ever churn levels and further margin expansion as it integrates operations and strengthens network performance. In the second quarter: --Cingular posted a net subscriber gain of 1.5 million and ended the quarter with 57.3 million subscribers, an increase of 5.9 million over the past four quarters. Net postpaid subscriber additions in the second quarter totaled more than 1 million. --Average monthly churn was 1.7 percent overall, down 50 basis points versus the year-earlier second quarter and down 20 basis points sequentially. This marked Cingular's third consecutive quarter with a 20 basis-point sequential decline in overall churn. Postpaid churn improved to 1.5 percent, down 30 basis points versus the year-earlier quarter and down 10 basis points sequentially. --Driven by subscriber gains and robust growth in data revenues, Cingular's total revenues grew to $9.2 billion, up 7.1 percent versus the year-earlier second quarter and up 2.7 percent from the first quarter this year. Cingular's data revenues increased 51.2 percent year over year and 13.3 percent sequentially. Cingular's data ARPU (Average Revenue Per User) A calculation often used to determine the overall value of an application. It is also used to rate particular customers, especially in the wireless space, by comparing someone's account to the overall average. (average revenue per user) was $5.77 in the second quarter, up 38.7 percent versus the year-earlier second quarter and up 10.5 percent sequentially. Postpaid data ARPU was nearly $6.60. --On a reported basis, Cingular's second-quarter operating expenses were $8.2 billion, up 1.2 percent from the second quarter of 2005. Before merger-related costs of $499 million, operating expenses were $7.7 billion. Most of Cingular's merger-related costs in the second quarter were noncash. The $499 million total included $336 million in noncash amortization of intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. as part of the acquisition of AT&T Wireless, $77 million in noncash merger integration costs, and $86 million in cash integration costs. --Cingular's reported operating income for the second quarter of 2006 was $1.0 billion, up from $504 million in the year-earlier second quarter and $807 million in the first quarter of 2006. Operating income before merger-related costs was $1.5 billion, up from $1.2 billion in the year-ago second quarter and $1.4 billion in the first quarter of 2006. As required by Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting for joint ventures, AT&T includes Cingular Wireless' results in the Equity in Net Income of Affiliates line of its Consolidated Statements of Income rather than in consolidated revenues and expenses. Cingular's detailed financial results are shown in AT&T's Statements of Segment Income. BellSouth Acquisition, Expanded Share Repurchase On July 21, 2006, AT&T Inc. and BellSouth Corporation received approval from their stockholders for AT&T to acquire BellSouth. The acquisition is subject to approval by regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities and to other customary closing conditions. AT&T expects to receive the remaining approvals needed for the transaction to close by this fall. AT&T announced in March that it expects to buy back $10 billion of its common shares by the end of 2007, and it expects approximately $2 billion to $3 billion of the repurchases to occur during 2006. This repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. is intended to approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. the share premium paid to BellSouth stockholders as part of this transaction. The timing and nature of these repurchases will depend on market conditions and applicable securities laws. Updated Financial Outlook Based on first-half results and current trends, AT&T has updated portions of the 2006 financial outlook it provided in January January: see month. . --AT&T now expects its full-year adjusted consolidated operating income margin to be in the 17 percent to 18 percent range, up from its previous outlook of 15 percent to 16 percent. --AT&T now expects to achieve full-year 2006 operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. synergies from SBC/AT&T merger integration of $700 million to $900 million, up from its previous target range of $600 million to $700 million. Through the end of the second quarter, approximately $300 million of expense synergies had been realized. --In January, pension and retiree costs were expected to dilute di·lute v. To reduce a solution or mixture in concentration, quality, strength, or purity, as by adding water. adj. Thinned or weakened by diluting. full-year earnings per share by $0.06 to $0.08. AT&T now expects pension and retiree costs to dilute 2006 earnings by $0.04 to $0.06. --Project Lightspeed costs are now expected to reduce earnings per share in 2006 by $0.05 to $0.07, down from the $0.08 to $0.10 in January's outlook, reflecting timing of scaled launch occurring later in the year. --Driven by demand for data services, capital expenditures in 2006 are expected to be at the high end or slightly above the previously outlined $8 billion to $8.5 billion - in the low teens as a percentage of revenues. This total includes capital for merger integration projects and Project Lightspeed deployment. --AT&T's outlook for 2006 free cash flow after dividends is now expected to be in the mid- mid- pref. Middle: midbrain. $2 billion range, up from its January outlook of approximately $2 billion, even with the majority of AT&T/SBC merger integration costs occurring this year. (Free cash flow after dividends is cash from operations plus AT&T's proportionate pro·por·tion·ate adj. Being in due proportion; proportional. tr.v. pro·por·tion·at·ed, pro·por·tion·at·ing, pro·por·tion·ates To make proportionate. share of Cingular free cash flow less capital expenditures and dividends.) These updated expectations do not include any expected impacts from AT&T's pending acquisition of BellSouth. As outlined in March when its plans to acquire BellSouth were announced, AT&T continues to expect double-digit adjusted EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. growth in each of the next three years, starting with 2006, along with significant growth in free cash flow after dividends. (After the BellSouth merger, free cash flow after dividends will be cash from operations less capital expenditures and dividends.) This AT&T release and other news announcements are available as part of an RSS feed Summaries of Web site content that are published in the RSS format for download. See RSS. at www.att.com/rss. About AT&T AT&T Inc. is one of the world's largest telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. holding companies and is the largest in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Operating globally under the AT&T brand, AT&T companies are recognized as the leading worldwide providers of IP-based communications services to business and as leading U.S. providers of high speed DSL Internet, local and long distance voice, and directory publishing and advertising services. AT&T Inc. holds a 60 percent ownership interest in Cingular Wireless, which is the No. 1 U.S. wireless services provider with 57.3 million wireless customers. Additional information about AT&T Inc. and AT&T products and services is available at www.att.com. Cautionary Language Concerning Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Information set forth in this news release contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results may differ materially. A discussion of factors that may affect future results is contained in AT&T's filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update or revise statements contained in this news release based on new information or otherwise. This news release may contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). financial measures are available on the company's Web site at www.att.com/investor.relations. Accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. financial statements follow. Note that second-quarter 2005 results are reported and do not reflect any contribution from the former AT&T Corp. Previously released 2005 Pro Forma comparisons are available on AT&T's Investor Relations Web site at www.att.com/investor.relations.
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Financial Data
AT&T Inc.
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Consolidated Statements of Income
Dollars in millions except per share amounts
----------------------------------------------------------------------
Unaudited Three Months Ended Six Months Ended
---------------------------- ----------------------------
6/30/2006 6/30/2005 % Chg 6/30/2006 6/30/2005 % Chg
----------------------------------------- ----------------------------
Operating Revenues
Voice $ 8,618 $ 5,760 49.6% $ 17,340 $ 11,612 49.3%
Data 4,477 2,438 83.6% 8,919 4,829 84.7%
Directory 909 901 0.9% 1,810 1,806 0.2%
Other 1,806 1,218 48.3% 3,536 2,304 53.5%
----------------------------------------- ----------------------------
Total Operating
Revenues 15,810 10,317 53.2% 31,605 20,551 53.8%
----------------------------------------- ----------------------------
Operating Expenses
Cost of sales
(exclusive of
depreciation and
amortization
shown separately
below) 6,928 4,401 57.4% 14,056 8,789 59.9%
Selling, general
and
administrative 3,792 2,589 46.5% 7,776 5,054 53.9%
Depreciation and
amortization 2,486 1,809 37.4% 4,978 3,634 37.0%
----------------------------------------- ----------------------------
Total Operating
Expenses 13,206 8,799 50.1% 26,810 17,477 53.4%
----------------------------------------- ----------------------------
Operating
Income 2,604 1,518 71.5% 4,795 3,074 56.0%
----------------------------------------- ----------------------------
Interest Expense 472 349 35.2% 936 702 33.3%
Interest Income 95 100 -5.0% 180 209 -13.9%
Equity in Net
Income of
Affiliates 455 181 - 789 123 -
Other Income
(Expense) - Net 15 34 -55.9% 26 81 -67.9%
----------------------------------------- ----------------------------
Income Before
Income Taxes 2,697 1,484 81.7% 4,854 2,785 74.3%
Income Taxes 889 484 83.7% 1,601 900 77.9%
----------------------------------------- ----------------------------
Net Income $ 1,808 $ 1,000 80.8% $ 3,253 $ 1,885 72.6%
========================================= ============================
Basic Earnings Per Share:
Net Income $ 0.47 $ 0.30 56.7% $ 0.84 $ 0.57 47.4%
Weighted Average
Common Shares
Outstanding
(000,000) 3,886 3,302 17.7% 3,884 3,303 17.6%
Diluted Earnings Per Share:
Net Income $ 0.46 $ 0.30 53.3% $ 0.83 $ 0.57 45.6%
Weighted Average
Common Shares
Outstanding with
Dilution
(000,000) 3,905 3,312 17.9% 3,903 3,314 17.8%
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Financial Data
AT&T Inc.
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Statements of Segment Income
Dollars in millions
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Unaudited
Three Months Ended Six Months Ended
------------------------- --------------------------
Wireline 6/30/2006 6/30/2005 % Chg 6/30/2006 6/30/2005 % Chg
------------------------------------------- --------------------------
Segment Operating
Revenues
Voice $8,618 $5,760 49.6% $17,340 $11,612 49.3%
Data 4,477 2,438 83.6% 8,919 4,829 84.7%
Other 1,655 1,059 56.3% 3,230 1,998 61.7%
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Total Segment
Operating
Revenues 14,750 9,257 59.3% 29,489 18,439 59.9%
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Segment Operating
Expenses
Cost of sales 6,655 4,139 60.8% 13,511 8,262 63.5%
Selling, general
and
administrative 3,534 2,314 52.7% 7,235 4,484 61.4%
Depreciation and
amortization 2,427 1,757 38.1% 4,857 3,530 37.6%
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Total Segment
Operating
Expenses 12,616 8,210 53.7% 25,603 16,276 57.3%
------------------------------------------- --------------------------
Segment Income $2,134 $1,047 - $3,886 $2,163 79.7%
=========================================== ==========================
Cingular (a)
------------------------------------------- --------------------------
Segment Operating
Revenues
Service revenues $8,295 $7,719 7.5% $16,300 $15,138 7.7%
Equipment sales 923 890 3.7% 1,898 1,700 11.6%
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Total Segment
Operating
Revenues 9,218 8,609 7.1% 18,198 16,838 8.1%
------------------------------------------- --------------------------
Segment Operating Expenses
Cost of services
and equipment
sales 3,846 3,523 9.2% 7,493 6,962 7.6%
Selling, general
and
administrative 2,757 2,953 -6.6% 5,603 5,954 -5.9%
Depreciation and
amortization 1,598 1,629 -1.9% 3,278 3,304 -0.8%
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Total Segment
Operating
Expenses 8,201 8,105 1.2% 16,374 16,220 0.9%
------------------------------------------- --------------------------
Segment Operating
Income 1,017 504 - 1,824 618 -
Other Income
(Expense) - Net (335) (333)-0.6% (664) (665) 0.2%
------------------------------------------- --------------------------
Segment Income
(Loss) $682 $171 - $1,160 $(47) -
=========================================== ==========================
(a) Results reflect 100% of Cingular Wireless' actual results
Directory
------------------------------------------- --------------------------
Segment Operating
Revenues $925 $925 - $1,848 $1,854 -0.3%
------------------------------------------- --------------------------
Segment Operating Expenses
Cost of sales 288 276 4.3% 576 556 3.6%
Selling, general
and
administrative 147 156 -5.8% 306 320 -4.4%
Depreciation and
amortization - 1 - 1 3 -66.7%
------------------------------------------- --------------------------
Total Segment
Operating
Expenses 435 433 0.5% 883 879 0.5%
------------------------------------------- --------------------------
Segment Operating
Income 490 492 -0.4% 965 975 -1.0%
Equity in Net
Income (Loss) of
Affiliates (6) - - (11) (1) -
------------------------------------------- --------------------------
Segment Income $484 $492 -1.6% $954 $974 -2.1%
=========================================== ==========================
Other (b)
------------------------------------------- --------------------------
Segment Operating
Revenues $197 $178 10.7% $400 $347 15.3%
Segment Operating
Expenses 218 198 10.1% 457 410 11.5%
------------------------------------------- --------------------------
Segment Operating
Income (Loss) (21) (20)-5.0% (57) (63) 9.5%
Equity in Net
Income of
Affiliates 461 182 - 800 124 -
------------------------------------------- --------------------------
Segment Income $440 $162 - $743 $61 -
=========================================== ==========================
(b) Equity in Net Income of Affiliates includes our 60% proportionate
share of Cingular's results
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Financial Data
AT&T Inc.
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Consolidated Balance Sheets
Dollars in millions except per share amounts
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6/30/06 12/31/05
Unaudited
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Assets
Current Assets
Cash and cash equivalents $1,097 $1,224
Accounts receivable - net of allowances for
uncollectibles of $1,039 and $1,176 8,484 9,351
Prepaid expenses 1,144 1,029
Deferred income taxes 1,876 2,011
Other current assets 1,034 1,039
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Total current assets 13,635 14,654
----------------------------------------------------------------------
Property, plant and equipment - at cost 151,716 149,238
Less: accumulated depreciation and amortization 93,365 90,511
----------------------------------------------------------------------
Property, Plant and Equipment - Net 58,351 58,727
----------------------------------------------------------------------
Goodwill 13,433 14,055
Intangible Assets - Net 7,978 8,503
Investments in Equity Affiliates 2,147 2,031
Investments in and Advances to Cingular Wireless 32,656 31,404
Other Assets 16,150 16,258
----------------------------------------------------------------------
Total Assets $144,350 $145,632
======================================================================
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year $3,314 $4,455
Accounts payable and accrued liabilities 15,472 17,088
Accrued taxes 2,955 2,586
Dividends payable 1,291 1,289
----------------------------------------------------------------------
Total current liabilities 23,032 25,418
----------------------------------------------------------------------
Long-Term Debt 27,159 26,115
----------------------------------------------------------------------
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes 14,886 15,713
Postemployment benefit obligation 18,461 18,133
Unamortized investment tax credits 195 209
Other noncurrent liabilities 5,148 5,354
----------------------------------------------------------------------
Total deferred credits and other noncurrent
liabilities 38,690 39,409
----------------------------------------------------------------------
Stockholders' Equity
Common shares issued ($1 par value) 4,065 4,065
Capital in excess of par value 27,217 27,499
Retained earnings 29,771 29,106
Treasury shares (at cost) (5,002) (5,406)
Additional minimum pension liability adjustment (218) (218)
Accumulated other comprehensive income (364) (356)
----------------------------------------------------------------------
Total stockholders' equity 55,469 54,690
----------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $144,350 $145,632
======================================================================
----------------------------------------------------------------------
Financial Data
AT&T Inc.
----------------------------------------------------------------------
Consolidated Statements of Cash Flows
Dollars in millions, increase (decrease) in cash and cash equivalents
----------------------------------------------------------------------
Unaudited Six Months Ended
6/30/06 6/30/05
----------------------------------------------------------------------
Operating Activities
Net income $ 3,253 $ 1,885
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,978 3,634
Undistributed earnings from investments in
equity affiliates (752) (87)
Provision for uncollectible accounts 320 413
Amortization of investment tax credits (14) (11)
Deferred income tax (benefit) expense 65 (264)
Net gain on sales of investments (10) (75)
Changes in operating assets and liabilities:
Accounts receivable 545 217
Other current assets (84) (14)
Accounts payable and accrued liabilities (1,431) (1,123)
Stock-based compensation tax benefit (5) (3)
Other - net 288 465
----------------------------------------------------------------------
Total adjustments 3,900 3,152
----------------------------------------------------------------------
Net Cash Provided by Operating Activities 7,153 5,037
----------------------------------------------------------------------
Investing Activities
Construction and capital expenditures (4,042) (2,329)
Receipts from (investments in) affiliates - net (717) 1,179
Maturities of held-to-maturity securities 3 98
Dispositions 55 86
Acquisitions (115) (169)
Proceeds from note repayment - 37
Other 4 -
----------------------------------------------------------------------
Net Cash Used in Investing Activities (4,812) (1,098)
----------------------------------------------------------------------
Financing Activities
Net change in short-term borrowings with
original maturities of three months or less 1,020 (882)
Repayment of other short-term borrowings (3) -
Issuance of long-term debt 1,491 -
Repayment of long-term debt (2,540) (1,037)
Purchase of treasury shares (148) (235)
Issuance of treasury shares 236 298
Dividends paid (2,581) (2,130)
Stock-based compensation tax benefit 5 3
Other 52 -
----------------------------------------------------------------------
Net Cash Used in Financing Activities (2,468) (3,983)
----------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents from continuing operations (127) (44)
Net Cash Used in Operating Activities from
Discontinued Operations - (310)
----------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents (127) (354)
Cash and cash equivalents beginning of year 1,224 760
----------------------------------------------------------------------
Cash and Cash Equivalents End of Period $ 1,097 $ 406
======================================================================
Financial Data
AT&T Inc.
----------------------------------------------------------------------
Supplementary Operating Data
Dollars in millions except per share amounts
----------------------------------------------------------------------
Unaudited Three Months Ended Six Months Ended
-------------------- --------------------
6/30/2006 6/30/2005 6/30/2006 6/30/2005
------------------------------------------------- --------------------
In-Region (1)
Total Consumer Retail Connections (000)
Retail Consumer Access
Lines 25,990 27,144
Consumer DSL Lines 6,570 4,908
Video Subscribers (2) 533 404
--------------------
Total Consumer Retail
Connections (000) 33,093 32,456
====================
Switched Access Lines
(000)
Retail Consumer -
Primary 22,310 23,036
Retail Consumer -
Additional 3,680 4,108
Retail Business 17,282 17,513
--------------------
Retail 43,272 44,657
Wholesale (3) 4,358 5,977
Coin (4) 281 398
--------------------
Total Switched
Access Lines (000) 47,911 51,032
====================
Unbundled Loops (000) 1,640 1,526
DSL Lines in Service (000) 7,774 5,968
Net DSL Line Additions
(000) 342 360 853 864
Video Subscribers (000)(2) 533 404
Net Video Subscriber
Additions (000) (2) 42 10 76 81
Cingular Wireless (5, 6)
Wireless Voice Customers
(000) 57,308 51,442
Net Customer Additions
(000) 1,498 952 3,177 2,319
M&A Activity, Partitioned
Customers and Other Adjs. - 140 (13) (9)
POPs (000,000) 296 294
----------------------------------------------------------------------
(1)In-region represents access lines served by AT&T's incumbent local
exchange companies.
(2)Video Subscribers include sales under agency agreement with
EchoStar.
(3)Wholesale lines at 6-30-06 include approximately 1.39 million lines
purchased by AT&T Corp.
(4)Coin includes both retail and wholesale access lines.
(5)Amounts represent 100% of the results from Cingular Wireless.
(6)Prior year amounts restated to conform to current period reporting
methodology.
----------------------------------------------------------------------
Non-GAAP Financial Data
AT&T Inc.
----------------------------------------------------------------------
Supplemental Consolidated Income Statements
Dollars in millions
----------------------------------------------------------------------
Unaudited
Three Months Ended Six Months Ended
------------------------- ----------------------
6/30/06 6/30/05 % Chg 6/30/06 6/30/05 % Chg
----------------------------------------------- ----------------------
Total Operating
Revenues $24,663 $18,721 31.7% $49,056 $37,002 32.6%
----------------------------------------------- ----------------------
Operating Expenses
Cost of sales
(exclusive of
depreciation and
amortization shown
separately below) 10,409 7,719 34.8% 20,802 15,364 35.4%
Selling, general and
administrative 6,549 5,542 18.2% 13,379 11,008 21.5%
Depreciation and
amortization 4,084 3,438 18.8% 8,256 6,938 19.0%
----------------------------------------------- ----------------------
Total Operating
Expenses 21,042 16,699 26.0% 42,437 33,310 27.4%
----------------------------------------------- ----------------------
Operating Income 3,621 2,022 79.1% 6,619 3,692 79.3%
----------------------------------------------- ----------------------
Interest Expense 695 586 18.6% 1,389 1,186 17.1%
Interest Income 23 29 -20.7% 45 65 -30.8%
Minority Interest (358) (111) - (550) (40) -
Equity in Net Income
of Affiliates 131 94 39.4% 253 182 39.0%
Other Income (Expense)
- Net 19 50 -62.0% 36 99 -63.6%
----------------------------------------------- ----------------------
Income Before Income
Taxes 2,741 1,498 83.0% 5,014 2,812 78.3%
----------------------------------------------- ----------------------
Income Taxes 933 498 87.3% 1,761 927 90.0%
----------------------------------------------- ----------------------
Net Income $1,808 $1,000 80.8% $3,253 $1,885 72.6%
=============================================== ======================
As required by GAAP rules for joint ventures, AT&T reflects
Cingular's results in the Equity in Net Income of Affiliates line
of its Consolidated Statements of Income rather than in revenues
and expenses. To facilitate peer comparisons, and in recognition
of AT&T's majority economic ownership of the nation's largest
wireless provider and Cingular's increased significance to AT&T's
overall operations, AT&T provides a supplemental consolidated
income statement that includes full consolidation of Cingular's
operating results. This supplemental information also includes
reconciliations to AT&T's Consolidated Statements of Income on the
following page.
Certain amounts in prior-period supplemental financial information
have been reclassified to conform to the current period's
presentation.
----------------------------------------------------------------------
Non-GAAP Financial Data Reconciliation
AT&T Inc.
----------------------------------------------------------------------
Supplemental Consolidated Income Statements
For the Three Months Ended 6/30/06
Dollars in millions
----------------------------------------------------------------------
Unaudited Reported Non-GAAP
---------------- -------------------------
Consolidating Supplemental
AT&T Cingular Adjustments Consolidated
----------------------------------------------------------------------
Total Operating Revenues $15,810 $9,218 $(365) $24,663
----------------------------------------------------------------------
Operating Expenses
Cost of sales (exclusive
of depreciation and
amortization shown
separately below) 6,928 3,846 (365) 10,409
Selling, general and
administrative 3,792 2,757 - 6,549
Depreciation and
amortization 2,486 1,598 - 4,084
----------------------------------------------------------------------
Total Operating Expenses 13,206 8,201 (365) 21,042
----------------------------------------------------------------------
Operating Income 2,604 1,017 - 3,621
----------------------------------------------------------------------
Interest Expense 472 298 (75) 695
Interest Income 95 3 (75) 23
Minority Interest (1) (43) (314) (358)
Equity in Net Income of
Affiliates 455 - (324) 131
Other Income (Expense) - Net 16 3 - 19
----------------------------------------------------------------------
Income Before Income Taxes 2,697 682 (638) 2,741
----------------------------------------------------------------------
Income Taxes 889 142 (98) 933
----------------------------------------------------------------------
Net Income $1,808 $540 $(540) $1,808
======================================================================
For the Three Months Ended 6/30/05
Dollars in millions
----------------------------------------------------------------------
Unaudited Reported Non-GAAP
---------------- -------------------------
Consolidating Supplemental
AT&T Cingular Adjustments Consolidated
----------------------------------------------------------------------
Total Operating Revenues $10,317 $8,609 $(205) $18,721
----------------------------------------------------------------------
Operating Expenses
Cost of sales (exclusive
of depreciation and
amortization shown
separately below) 4,401 3,523 (205) 7,719
Selling, general and
administrative 2,589 2,953 - 5,542
Depreciation and
amortization 1,809 1,629 - 3,438
----------------------------------------------------------------------
Total Operating Expenses 8,799 8,105 (205) 16,699
----------------------------------------------------------------------
Operating Income 1,518 504 - 2,022
----------------------------------------------------------------------
Interest Expense 349 326 (89) 586
Interest Income 100 18 (89) 29
Minority Interest (1) (41) (69) (111)
Equity in Net Income of
Affiliates 181 1 (88) 94
Other Income (Expense) - Net 35 15 - 50
----------------------------------------------------------------------
Income Before Income Taxes 1,484 171 (157) 1,498
----------------------------------------------------------------------
Income Taxes 484 24 (10) 498
----------------------------------------------------------------------
Net Income $1,000 $147 $(147) $1,000
======================================================================
----------------------------------------------------------------------
Non-GAAP Financial Data Reconciliation
AT&T Inc.
----------------------------------------------------------------------
Supplemental Consolidated Income Statements
For the Six Months Ended 6/30/06
Dollars in millions
----------------------------------------------------------------------
Unaudited Reported Non-GAAP
---------------- -------------------------
Consolidating Supplemental
AT&T Cingular Adjustments Consolidated
----------------------------------------------------------------------
Total Operating Revenues $31,605 $18,198 $(747) $49,056
----------------------------------------------------------------------
Operating Expenses
Cost of sales (exclusive
of depreciation and
amortization shown
separately below) 14,056 7,493 (747) 20,802
Selling, general and
administrative 7,776 5,603 - 13,379
Depreciation and
amortization 4,978 3,278 - 8,256
----------------------------------------------------------------------
Total Operating Expenses 26,810 16,374 (747) 42,437
----------------------------------------------------------------------
Operating Income 4,795 1,824 - 6,619
----------------------------------------------------------------------
Interest Expense 936 595 (142) 1,389
Interest Income 180 7 (142) 45
Minority Interest (2) (84) (464) (550)
Equity in Net Income of
Affiliates 789 - (536) 253
Other Income (Expense) - Net 28 8 - 36
----------------------------------------------------------------------
Income Before Income Taxes 4,854 1,160 (1,000) 5,014
----------------------------------------------------------------------
Income Taxes 1,601 266 (106) 1,761
----------------------------------------------------------------------
Net Income $3,253 $894 $(894) $3,253
======================================================================
For the Six Months Ended 6/30/05
Dollars in millions
----------------------------------------------------------------------
Unaudited Reported Non-GAAP
---------------- -------------------------
Consolidating Supplemental
AT&T Cingular Adjustments Consolidated
----------------------------------------------------------------------
Total Operating Revenues $20,551 $16,838 $(387) $37,002
----------------------------------------------------------------------
Operating Expenses
Cost of sales (exclusive
of depreciation and
amortization shown
separately below) 8,789 6,962 (387) 15,364
Selling, general and
administrative 5,054 5,954 - 11,008
Depreciation and
amortization 3,634 3,304 - 6,938
----------------------------------------------------------------------
Total Operating Expenses 17,477 16,220 (387) 33,310
----------------------------------------------------------------------
Operating Income 3,074 618 - 3,692
----------------------------------------------------------------------
Interest Expense 702 664 (180) 1,186
Interest Income 209 36 (180) 65
Minority Interest (1) (57) 18 (40)
Equity in Net Income of
Affiliates 123 3 56 182
Other Income (Expense) - Net 82 17 - 99
----------------------------------------------------------------------
Income (Loss) Before Income
Taxes 2,785 (47) 74 2,812
----------------------------------------------------------------------
Income Taxes 900 46 (19) 927
----------------------------------------------------------------------
Net Income (Loss) $1,885 $(93) $93 $1,885
======================================================================
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