Edgar Filing: AT&T INC.

q2_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

	x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended June 30, 2013

		or

	o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-8610

AT&T INC.

Incorporated under the laws of the State of Delaware

I.R.S. Employer Identification Number 43-1301883

208 S. Akard St., Dallas, Texas 75202

Telephone Number: (210) 821-4105

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	[X]		Accelerated filer	[ ]
Non-accelerated filer	[ ]	(Do not check if a smaller reporting company)	Smaller reporting company	[ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

At July 31, 2013 there were 5,311 million common shares outstanding.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

AT&T INC.
CONSOLIDATED STATEMENTS OF INCOME
Dollars in millions except per share amounts
(Unaudited)
	Three months ended						Six months ended
	June 30,						June 30,
	2013			2012			2013			2012
Operating Revenues	$	32,075		$	31,575		$	63,431		$	63,397
Operating Expenses
Cost of services and sales (exclusive of depreciation
and amortization shown separately below)		13,270			12,254			25,824			25,071
Selling, general and administrative		8,121			8,005			16,454			16,349
Depreciation and amortization		4,571			4,499			9,100			9,059
Total operating expenses		25,962			24,758			51,378			50,479
Operating Income		6,113			6,817			12,053			12,918
Other Income (Expense)
Interest expense		(825	)		(941	)		(1,652	)		(1,800	)
Equity in net income of affiliates		218			132			403			355
Other income (expense) – net		288			23			320			75
Total other income (expense)		(319	)		(786	)		(929	)		(1,370	)
Income Before Income Taxes		5,794			6,031			11,124			11,548
Income tax expense		1,914			2,066			3,471			3,931
Net Income		3,880			3,965			7,653			7,617
Less: Net Income Attributable to Noncontrolling Interest		(58	)		(63	)		(131	)		(131	)
Net Income Attributable to AT&T	$	3,822		$	3,902		$	7,522		$	7,486
Basic Earnings Per Share Attributable to AT&T	$	0.71		$	0.67		$	1.38		$	1.27
Diluted Earnings Per Share Attributable to AT&T	$	0.71		$	0.66		$	1.38		$	1.27
Weighted Average Number of Common Shares
Outstanding – Basic (in millions)		5,381			5,855			5,446			5,886
Weighted Average Number of Common Shares
Outstanding – with Dilution (in millions)		5,397			5,876			5,463			5,907
Dividends Declared Per Common Share	$	0.45		$	0.44		$	0.90		$	0.88
See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Dollars in millions
(Unaudited)
	Three months ended						Six months ended
	June 30,						June 30,
	2013			2012			2013			2012
Net income	$	3,880		$	3,965		$	7,653		$	7,617
Other comprehensive income, net of tax:
Foreign Currency:
Translation adjustments (includes $(1), $(1), $(1) and $0 attributable to noncontrolling interest), net of taxes of $(127), $(55), $(65) and $76		(239	)		(101	)		(118	)		142
Reclassification adjustment included in net income, net of taxes of $19, $0, $19 and $0		34			-			34			-
Available-for-sale securities:
Net unrealized gains (losses), net of taxes of $6, $(27), $46 and $27		11			(52	)		86			49
Reclassification adjustment realized in net income, net of taxes of $(1), $(3), $(5) and $(6)		(3	)		(6	)		(10	)		(12	)
Cash flow hedges:
Net unrealized gains (losses), net of taxes of $66, $(58), $115 and $(58)		120			(107	)		210			(107	)
Reclassification adjustment included in net income, net of taxes of $4, $4, $8 and $7		8			7			15			13
Defined benefit postretirement plans:
Net actuarial gain (loss) from equity method investees arising during period, net of taxes of $0, $(29), $0 and $(29)		-			(53	)		-			(53	)
Reclassification adjustment included in net income, net of taxes $5, $0, $5, and $0		8			-			8			-
Amortization of net prior service credit included in net income, net of taxes of $(109), $(87), $(218) and $(171)		(177	)		(137	)		(355	)		(274	)
Other		-			1			-			1
Other comprehensive loss		(238	)		(448	)		(130	)		(241	)
Total comprehensive income		3,642			3,517			7,523			7,376
Less: Total comprehensive income attributable to noncontrolling interest		(57	)		(62	)		(130	)		(131	)
Total Comprehensive Income Attributable to AT&T	$	3,585		$	3,455		$	7,393		$	7,245
See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED BALANCE SHEETS
Dollars in millions except per share amounts
	June 30,			December 31,
	2013			2012
Assets	(Unaudited)
Current Assets
Cash and cash equivalents	$	4,548		$	4,868
Accounts receivable - net of allowances for doubtful accounts of $520 and $547		12,508			12,657
Prepaid expenses		1,038			1,035
Deferred income taxes		953			1,036
Other current assets		2,381			3,110
Total current assets		21,428			22,706
Property, plant and equipment		276,833			270,907
Less: accumulated depreciation and amortization		(166,099	)		(161,140	)
Property, Plant and Equipment – Net		110,734			109,767
Goodwill		69,770			69,773
Licenses		53,665			52,352
Customer Lists and Relationships – Net		1,015			1,391
Other Intangible Assets – Net		5,018			5,032
Investments in and Advances to Equity Affiliates		3,888			4,581
Other Assets		6,575			6,713
Total Assets	$	272,093		$	272,315

Liabilities and Stockholders’ Equity
Current Liabilities
Debt maturing within one year	$	3,256		$	3,486
Accounts payable and accrued liabilities		19,438			20,494
Advanced billing and customer deposits		4,029			4,225
Accrued taxes		2,065			1,026
Dividends payable		2,401			2,556
Total current liabilities		31,189			31,787
Long-Term Debt		71,917			66,358
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		29,400			28,491
Postemployment benefit obligation		41,994			41,392
Other noncurrent liabilities		11,278			11,592
Total deferred credits and other noncurrent liabilities		82,672			81,475

Stockholders’ Equity
Common stock ($1 par value, 14,000,000,000 authorized at June 30, 2013 and
December 31, 2012: issued 6,495,231,088 at June 30, 2013 and December 31, 2012)		6,495			6,495
Additional paid-in capital		90,985			91,038
Retained earnings		25,212			22,481
Treasury stock (1,159,998,643 at June 30, 2013 and 913,836,325
at December 31, 2012, at cost)		(41,819	)		(32,888	)
Accumulated other comprehensive income		5,107			5,236
Noncontrolling interest		335			333
Total stockholders’ equity		86,315			92,695
Total Liabilities and Stockholders’ Equity	$	272,093		$	272,315
See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in millions
(Unaudited)
	Six months ended
	June 30,
	2013			2012
Operating Activities
Net income	$	7,653		$	7,617
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		9,100			9,059
Undistributed earnings from investments in equity affiliates		(198	)		(355	)
Provision for uncollectible accounts		439			572
Deferred income tax expense and noncurrent unrecognized tax benefits		926			(639	)
Net (gain) loss from sale of investments, net of impairments		(260	)		2
Changes in operating assets and liabilities:
Accounts receivable		(290	)		(460	)
Other current assets		784			1,468
Accounts payable and accrued liabilities		(340	)		592
Other - net		(103	)		(531	)
Total adjustments		10,058			9,708
Net Cash Provided by Operating Activities		17,711			17,325

Investing Activities
Construction and capital expenditures:
Capital expenditures		(9,665	)		(8,742	)
Interest during construction		(140	)		(130	)
Acquisitions, net of cash acquired		(1,182	)		(477	)
Dispositions		825			800
Sales (purchases) of securities, net		-			124
Return of advances to and investments in equity affiliates		301			-
Other		(4	)		-
Net Cash Used in Investing Activities		(9,865	)		(8,425	)

Financing Activities
Issuance of other short-term borrowings		1,476			-
Repayment of other short-term borrowings		(233	)		-
Issuance of long-term debt		6,416			6,935
Repayment of long-term debt		(1,823	)		(7,035	)
Purchase of treasury stock		(9,217	)		(4,623	)
Issuance of treasury stock		104			376
Dividends paid		(4,930	)		(5,187	)
Other		41			(534	)
Net Cash Used in Financing Activities		(8,166	)		(10,068	)
Net decrease in cash and cash equivalents		(320	)		(1,168	)
Cash and cash equivalents beginning of year		4,868			3,045
Cash and Cash Equivalents End of Period	$	4,548		$	1,877
Cash paid during the six months ended June 30 for:
Interest	$	2,002		$	2,133
Income taxes, net of refunds	$	591		$	127
See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
Dollars and shares in millions except per share amounts
(Unaudited)
	June 30, 2013
	Shares		Amount
Common Stock
Balance at beginning of year	6,495		$	6,495
Issuance of stock	-			-
Balance at end of period	6,495		$	6,495

Additional Paid-In Capital
Balance at beginning of year			$	91,038
Issuance of treasury stock				(8	)
Share-based payments				(45	)
Balance at end of period			$	90,985

Retained Earnings
Balance at beginning of year			$	22,481
Net income attributable to AT&T ($1.38 per diluted share)				7,522
Dividends to stockholders ($0.90 per share)				(4,791	)
Balance at end of period			$	25,212

Treasury Stock
Balance at beginning of year	(914	)	$	(32,888	)
Repurchase of common stock	(257	)		(9,217	)
Issuance of treasury stock	11			286
Balance at end of period	(1,160	)	$	(41,819	)

Accumulated Other Comprehensive Income Attributable to AT&T, net of tax
Balance at beginning of year			$	5,236
Other comprehensive loss attributable to AT&T				(129	)
Balance at end of period			$	5,107

Noncontrolling Interest
Balance at beginning of year			$	333
Net income attributable to noncontrolling interest				131
Distributions				(128	)
Translation adjustments attributable to noncontrolling interest, net of taxes				(1	)
Balance at end of period			$	335

Total Stockholders’ Equity at beginning of year			$	92,695
Total Stockholders’ Equity at end of period			$	86,315
See Notes to Consolidated Financial Statements.

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Dollars in millions except per share amounts

NOTE 1. PREPARATION OF INTERIM FINANCIAL STATEMENTS

Basis of Presentation Throughout this document, AT&T Inc. is referred to as “AT&T,” “we” or the “Company.” We believe that these consolidated financial statements include all adjustments, consisting only of normal recurring accruals, that are necessary to present fairly the results for the presented interim periods. The results for the interim periods are not necessarily indicative of those for the full year. You should read this document in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2012.

The consolidated financial statements include the accounts of the Company and our majority-owned subsidiaries and affiliates. Our subsidiaries and affiliates operate in the communications services industry both domestically and internationally, providing wireless communications services, traditional wireline voice services, data/broadband and Internet services, video services, telecommunications equipment, managed networking and wholesale services.

All significant intercompany transactions are eliminated in the consolidation process. Investments in partnerships and less than majority-owned subsidiaries where we have significant influence are accounted for under the equity method. Earnings from certain foreign equity investments accounted for using the equity method are included for periods ended within up to one month of our period end. We also record our proportionate share of our equity method investees’ other comprehensive income (OCI) items, including actuarial gains and losses on pension and other postretirement benefit obligations.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes, including estimates of probable losses and expenses. Actual results could differ from those estimates. Certain amounts have been reclassified to conform to the current period’s presentation.

Stock Repurchase Program In May 2013, we completed a repurchase authorization that was approved by our Board of Directors in July 2012. In March 2013, our Board of Directors authorized the repurchase of up to an additional 300 million shares of our common stock. During the first six months of 2013, we repurchased 257 million shares for $9,217 under these authorizations. At June 30, 2013, we had 272 million shares remaining under the March 2013 authorization. The authorization has no expiration date.

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 2. EARNINGS PER SHARE

A reconciliation of the numerators and denominators of basic earnings per share and diluted earnings per share for net income attributable to AT&T for the three and six months ended June 30, 2013 and 2012, are shown in the table below:

	Three months ended				Six months ended
	June 30,				June 30,
	2013		2012		2013		2012
Numerators
Numerator for basic earnings per share:
Net Income	$	3,880	$	3,965	$	7,653	$	7,617
Net income attributable to noncontrolling interest		(58)		(63)		(131)		(131)
Net Income attributable to AT&T		3,822		3,902		7,522		7,486
Dilutive potential common shares:
Share-based payment		2		2		6		6
Numerator for diluted earnings per share	$	3,824	$	3,904	$	7,528	$	7,492
Denominators (000,000)
Denominator for basic earnings per share:
Weighted average number of common shares outstanding		5,381		5,855		5,446		5,886
Dilutive potential common shares:
Share-based payment		16		21		17		21
Denominator for diluted earnings per share		5,397		5,876		5,463		5,907
Basic earnings per share attributable to AT&T	$	0.71	$	0.67	$	1.38	$	1.27
Diluted earnings per share attributable to AT&T	$	0.71	$	0.66	$	1.38	$	1.27

At June 30, 2013 and 2012, we had issued and outstanding options to purchase approximately 13 million and 22 million shares of AT&T common stock. For the quarter ended June 30, 2013 and 2012, the exercise prices of 2 million and 4 million shares were above the market price of AT&T stock for the respective periods. Accordingly, we did not include these amounts in determining the dilutive potential common shares. At June 30, 2013 and 2012, the exercise prices of 11 million and 17 million vested stock options were below market price.

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 3. OTHER COMPREHENSIVE INCOME

Changes in the balances of each component of other comprehensive income (OCI) included in accumulated OCI for the six months ended June 30, 2013, are presented below. All amounts are net of tax and exclude noncontrolling interest.

At June 30, 2013 and for the period ended:
			Foreign Currency Translation Adjustment			Net Unrealized Gain (Loss) on Available- for-Sale Securities			Net Unrealized Gains (Losses) on Cash Flow Hedges			Defined Benefit Postretirement Plans			Accumulated Other Comprehensive Income
Balance as of January 1, 2013		$	(284)		$	272		$	(110)		$	5,358		$	5,236
Other comprehensive income (loss) before reclassifications			(117)			86			210			-			179
Amounts reclassified from accumulated OCI			34	1		(10)	2		15	3		(347)	4		(308)
Net other comprehensive income (loss)			(83)			76			225			(347)			(129)
Balance as of June 30, 2013		$	(367)		$	348		$	115		$	5,011		$	5,107
1	Pre-tax translation loss reclassifications are included in Other income (expense) - net in the consolidated statements of income.
2	Pre-tax gains are included in Other income (expense) - net in the consolidated statements of income.
3	(Gains) losses are included in interest expense in the consolidated statements of income. See Note 6 for additional information.
4	Prior service credits associated with postretirement benefits, net of amounts capitalized as part of construction labor, are included in Cost of services and sales and Selling, general and administrative
	in the consolidated statements of income (see Note 5). Actuarial loss reclassifications related to our equity method investees are included in Other income (expense) - net in the consolidated
	statements of income.

NOTE 4. SEGMENT INFORMATION

Our segments are strategic business units that offer different products and services over various technology platforms and are managed accordingly. We analyze our operating segments based on segment income before income taxes. We make our capital allocation decisions based on the strategic needs of the business, needs of the network (wireless or wireline) provided services, and demands to provide emerging services to our customers. Actuarial gains and losses from pension and other postretirement benefits, interest expense and other income (expense) – net, are managed only on a total company basis and are, accordingly, reflected only in consolidated results. Therefore, these items are not included in each reportable segment’s results. The customers and long-lived assets of our reportable segments are predominantly in the United States. We have three reportable segments: (1) Wireless, (2) Wireline and (3) Other. Our operating results prior to May 9, 2012, also included our Advertising Solutions segment, which was subsequently sold.

The Wireless segment uses our nationwide network to provide consumer and business customers with wireless data and voice communications services. This segment includes our portion of the results from our mobile payment joint venture marketed as the Isis Mobile WalletTM (ISIS), which is accounted for as an equity method investment.

The Wireline segment uses our regional, national and global network to provide consumer and business customers with data and voice communications services, AT&T U-verse® high-speed broadband, video and voice services and managed networking to business customers. Additionally, we receive commissions on sales of satellite television services offered through our agency arrangements.

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

The Other segment includes our portion of the results from our international equity investments, our equity interest in YP Holdings LLC (YP Holdings), and costs to support corporate-driven activities and operations. Also included in the Other segment are impacts of corporate-wide decisions for which the individual operating segments are not being evaluated, including interest costs and expected return on plan assets for our pension and postretirement benefit plans.

In the following tables, we show how our segment results are reconciled to our consolidated results reported.

For the three months ended June 30, 2013						Advertising Solutions						Consolidated Results
		Wireless		Wireline		Advertising Solutions		Other		Consolidations		Consolidated Results
Data	$	5,356	$	8,400	$	-	$	-	$	-	$	13,756
Voice, text and other		10,014		5,141		-		-		-		15,155
Equipment and other		1,921		1,232		-		11		-		3,164
Total segment operating revenues		17,291		14,773		-		11		-		32,075
Operations and support expenses		10,770		10,417		-		204		-		21,391
Depreciation and amortization expenses		1,843		2,722		-		6		-		4,571
Total segment operating expenses		12,613		13,139		-		210		-		25,962
Segment operating income (loss)		4,678		1,634		-		(199)		-		6,113
Interest expense		-		-		-		-		825		825
Equity in net income (loss) of affiliates		(19)		-		-		237		-		218
Other income (expense) – net		-		-		-		-		288		288
Segment income (loss) before income taxes	$	4,659	$	1,634	$	-	$	38	$	(537)	$	5,794

For the six months ended June 30, 2013						Advertising Solutions						Consolidated Results
		Wireless		Wireline		Advertising Solutions		Other		Consolidations		Consolidated Results
Data	$	10,481	$	16,562	$	-	$	-	$	-	$	27,043
Voice, text and other		19,951		10,447		-		-		-		30,398
Equipment and other		3,550		2,419		-		21		-		5,990
Total segment operating revenues		33,982		29,428		-		21		-		63,431
Operations and support expenses		20,950		20,752		-		576		-		42,278
Depreciation and amortization expenses		3,678		5,410		-		12		-		9,100
Total segment operating expenses		24,628		26,162		-		588		-		51,378
Segment operating income (loss)		9,354		3,266		-		(567)		-		12,053
Interest expense		-		-		-		-		1,652		1,652
Equity in net income (loss) of affiliates		(37)		1		-		439		-		403
Other income (expense) – net		-		-		-		-		320		320
Segment income (loss) before income taxes	$	9,317	$	3,267	$	-	$	(128)	$	(1,332)	$	11,124

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended June 30, 2012						Advertising Solutions						Consolidated Results
		Wireless		Wireline		Advertising Solutions		Other		Consolidations		Consolidated Results
Data	$	4,471	$	7,935	$	-	$	-	$	-	$	12,406
Voice, text and other		10,294		5,696		-		-		-		15,990
Equipment and other		1,588		1,276		305		10		-		3,179
Total segment operating revenues		16,353		14,907		305		10		-		31,575
Operations and support expenses		9,590		10,201		226		242		-		20,259
Depreciation and amortization expenses		1,696		2,766		29		8		-		4,499
Total segment operating expenses		11,286		12,967		255		250		-		24,758
Segment operating income (loss)		5,067		1,940		50		(240)		-		6,817
Interest expense		-		-		-		-		941		941
Equity in net income (loss) of affiliates		(15)		(1)		-		148		-		132
Other income (expense) – net		-		-		-		-		23		23
Segment income (loss) before income taxes	$	5,052	$	1,939	$	50	$	(92)	$	(918)	$	6,031

For the six months ended June 30, 2012						Advertising Solutions						Consolidated Results
		Wireless		Wireline		Advertising Solutions		Other		Consolidations		Consolidated Results
Data	$	8,706	$	15,735	$	-	$	-	$	-	$	24,441
Voice, text and other		20,625		11,588		-		-		-		32,213
Equipment and other		3,158		2,513		1,049		23		-		6,743
Total segment operating revenues		32,489		29,836		1,049		23		-		63,397
Operations and support expenses		19,568		20,603		773		476		-		41,420
Depreciation and amortization expenses		3,362		5,574		106		17		-		9,059
Total segment operating expenses		22,930		26,177		879		493		-		50,479
Segment operating income (loss)		9,559		3,659		170		(470)		-		12,918
Interest expense		-		-		-		-		1,800		1,800
Equity in net income (loss) of affiliates		(28)		(1)		-		384		-		355
Other income (expense) – net		-		-		-		-		75		75
Segment income (loss) before income taxes	$	9,531	$	3,658	$	170	$	(86)	$	(1,725)	$	11,548

NOTE 5. PENSION AND POSTRETIREMENT BENEFITS

Substantially all of our employees are covered by one of our noncontributory pension plans. We also provide certain medical, dental, life insurance, and death benefits to certain retired employees under various plans and accrue actuarially determined postretirement benefit costs as active employees earn these benefits. Our objective in funding these plans, in combination with the standards of the Employee Retirement Income Security Act of 1974, as amended (ERISA), is to accumulate assets sufficient to meet the plans’ obligations to provide benefits to employees upon their retirement. During 2013, we have a required contribution to our pension plans of approximately $175.

In October 2012, we filed an application with the U.S. Department of Labor for approval to make a voluntary contribution of a preferred equity interest in our Mobility business to the trust used to pay qualified pension benefits under plans sponsored by AT&T. At the time we filed the application, the interest had a fair market value of $9,500. We anticipate approval in 2013, and expect to make the contribution at that time. As currently proposed, the preferred equity interest will constitute a qualified plan asset for ERISA funding purposes, but may not be included in plan assets in our consolidated financial statements upon contribution. Final determination of whether it will qualify as a plan asset for financial reporting purposes is subject to the final terms of the preferred equity interest.

We recognize actuarial gains and losses on pension and postretirement plan assets in our operating results at our annual measurement date of December 31, unless earlier remeasurements are required. The following table details pension and postretirement benefit costs included in operating expenses in the accompanying consolidated statements of income.

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

In the following table, expense credits are denoted with parentheses. A portion of these expenses is capitalized as part of internal construction projects, providing a small reduction in the net expense recorded.

	Three months ended				Six months ended
	June 30,				June 30,
	2013		2012		2013		2012
Pension cost:
Service cost – benefits earned during the period	$	330	$	304	$	660	$	614
Interest cost on projected benefit obligation		607		700		1,214		1,400
Expected return on assets		(828)		(880)		(1,656)		(1,760)
Amortization of prior service (credit)		(23)		(4)		(46)		(8)
Net pension cost	$	86	$	120	$	172	$	246

Postretirement cost:
Service cost – benefits earned during the period	$	96	$	82	$	191	$	166
Interest cost on accumulated postretirement benefit obligation		389		447		779		894
Expected return on assets		(178)		(201)		(356)		(401)
Amortization of prior service (credit)		(262)		(215)		(525)		(432)
Net postretirement cost	$	45	$	113	$	89	$	227

Combined net pension and postretirement cost	$	131	$	233	$	261	$	473

Our combined net pension and postretirement cost decreased $102 in the second quarter and $212 for the first six months of 2013. The decrease reflects lower interest costs, which are driven by the prior year’s declining bond rates and reflects higher amortization of prior service credits due to plan changes, including changes to retiree costs for continued healthcare coverage. This decrease is partially offset by lower expected long-term return on plan assets reflecting each plan’s asset mix and continued uncertainty in the securities markets and the U.S. economy.

We also provide senior- and middle-management employees with nonqualified, unfunded supplemental retirement and savings plans. Net supplemental retirement pension benefits cost, which is not included in the table above, was $28 in the second quarter of 2013, of which $26 was interest cost, and $55 for the first six months, of which $51 was interest cost. In 2012, net supplemental retirement pension benefits cost was $32 in the second quarter, of which $29 was interest cost, and $63 for the first six months, of which $58 was interest cost.

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 6. FAIR VALUE MEASUREMENTS AND DISCLOSURE

The Fair Value Measurement and Disclosure framework provides a three-tiered fair value hierarchy that gives highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1

Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that we have the ability to access.

Level 2

Inputs to the valuation methodology include:

·	Quoted prices for similar assets and liabilities in active markets.

·	Quoted prices for identical or similar assets or liabilities in inactive markets.

·	Inputs other than quoted market prices that are observable for the asset or liability.

·	Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3

Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

·	Fair value is often based on developed models in which there are few, if any, external observations.

The fair value measurements level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used should maximize the use of observable inputs and minimize the use of unobservable inputs.

The valuation methodologies described above may produce a fair value calculation that may not be indicative of future net realizable value or reflective of future fair values. We believe our valuation methods are appropriate and consistent with other market participants. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the methodologies used since December 31, 2012.

Long-Term Debt and Other Financial Instruments

The carrying amounts and estimated fair values of our long-term debt, including current maturities and other financial instruments, are summarized as follows:

	June 30, 2013				December 31, 2012
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Notes and debentures	$	73,664	$	79,581	$	69,578	$	81,310
Commercial paper		1,243		1,243		-		-
Bank borrowings		1		1		1		1
Investment securities		2,407		2,407		2,218		2,218

The carrying value of debt with an original maturity of less than one year approximates market value. The fair value measurements used for notes and debentures are considered Level 2.

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Investment Securities

Our investment securities include equities, fixed income bonds and other securities. A substantial portion of the fair values of our available-for-sale securities were estimated based on quoted market prices. Investments in securities not traded on a national securities exchange are valued using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. Realized gains and losses on securities are included in “Other income (expense) – net” in the consolidated statements of income using the specific identification method. Unrealized gains and losses, net of tax, on available-for-sale securities are recorded in accumulated other comprehensive income (accumulated OCI). Unrealized losses that are considered other than temporary are recorded in “Other income (expense) – net” with the corresponding reduction to the carrying basis of the investment. Fixed income investments of $113 have maturities of less than one year, $278 within one to three years, $184 within three to five years, and $256 for five or more years, which approximate fair value.

Our short-term investments (including money market securities) and customer deposits are recorded at amortized cost, and the respective carrying amounts approximate fair values. Our investment securities are recorded in “Other Assets” on the consolidated balance sheets.

Following is the fair value leveling for available-for-sale securities and derivatives as of June 30, 2013 and December 31, 2012:

		June 30, 2013
		Level 1		Level 2		Level 3		Total
Available-for-Sale Securities
Domestic equities		$	1,015	$	-	$	-	$	1,015
International equities			498		-		-		498
Fixed income bonds			-		831		-		831
Asset Derivatives1
Interest rate swaps			-		210		-		210
Cross-currency swaps			-		668		-		668
Liability Derivatives1
Interest rate swaps			-		(9)		-		(9)
Cross-currency swaps			-		(750)		-		(750)

		December 31, 2012
		Level 1		Level 2		Level 3		Total
Available-for-Sale Securities
Domestic equities		$	873	$	-	$	-	$	873
International equities			469		-		-		469
Fixed income bonds			-		837		-		837
Asset Derivatives1
Interest rate swaps			-		287		-		287
Cross-currency swaps			-		752		-		752
Foreign exchange contracts			-		1		-		1
Liability Derivatives1
Cross-currency swaps			-		(672)		-		(672)
1	Derivatives designated as hedging instruments are reflected as Other assets, Other noncurrent liabilities and, for a portion of interest rate swaps, Other current assets.

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Derivative Financial Instruments

We employ derivatives to manage certain market risks, primarily interest rate risk and foreign currency exchange risk. This includes the use of interest rate swaps, interest rate locks, foreign exchange forward contracts and combined interest rate foreign exchange contracts (cross-currency swaps). We do not use derivatives for trading or speculative purposes. We record derivatives on our consolidated balance sheets at fair value that is derived from observable market data, including yield curves and foreign exchange rates (all of our derivatives are Level 2). Cash flows associated with derivative instruments are presented in the same category on the consolidated statements of cash flows as the item being hedged.

The majority of our derivatives are designated either as a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge), or as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge).

Fair Value Hedging We designate our fixed-to-floating interest rate swaps as fair value hedges. The purpose of these swaps is to manage interest rate risk by managing our mix of fixed-rate and floating-rate debt. These swaps involve the receipt of fixed-rate amounts for floating interest rate payments over the life of the swaps without exchange of the underlying principal amount. Accrued and realized gains or losses from interest rate swaps impact interest expense on the consolidated statements of income. Unrealized gains on interest rate swaps are recorded at fair market value as assets, and unrealized losses on interest rate swaps are recorded at fair market value as liabilities. Changes in the fair value of the interest rate swaps offset changes in the fair value of the fixed-rate notes payable they hedge due to changes in the designated benchmark interest rate and are recognized in interest expense. Gains or losses realized upon early termination of our fair value hedges are recognized in interest expense. In the six months ended June 30, 2013 and June 30, 2012, no ineffectiveness was measured.

Cash Flow Hedging Unrealized gains on derivatives designated as cash flow hedges are recorded at fair value as assets, and unrealized losses on derivatives designated as cash flow hedges are recorded at fair value as liabilities, both for the period they are outstanding. For derivative instruments designated as cash flow hedges, the effective portion is reported as a component of accumulated OCI until reclassified into interest expense in the same period the hedged transaction affects earnings. The gain or loss on the ineffective portion is recognized as other income or expense in each period.

We designate our cross-currency swaps as cash flow hedges. We have entered into multiple cross-currency swaps to hedge our exposure to variability in expected future cash flows that are attributable to foreign currency risk generated from the issuance of our Euro and British pound sterling denominated debt. These agreements include initial and final exchanges of principal from fixed foreign denominations to fixed U.S. denominated amounts, to be exchanged at a specified rate, which was determined by the market spot rate upon issuance. They also include an interest rate swap of a fixed foreign-denominated rate to a fixed U.S. denominated interest rate. We evaluate the effectiveness of our cross-currency swaps each quarter. In the six months ended June 30, 2013 and June 30, 2012, no ineffectiveness was measured.

Periodically, we enter into and designate interest rate locks to partially hedge the risk of changes in interest payments attributable to increases in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt. We designate our interest rate locks as cash flow hedges. Gains and losses when we settle our interest rate locks are amortized into income over the life of the related debt, except where a material amount is deemed to be ineffective, which would be immediately reclassified to “Other income (expense) – net” in the consolidated statements of income. Over the next 12 months, we expect to reclassify $45 from accumulated OCI to interest expense due to the amortization of net losses on historical interest rate locks.

We may hedge a portion of the exchange risk involved in anticipation of highly probable foreign currency-denominated transactions. In anticipation of these transactions, we often enter into foreign exchange contracts to provide currency at a fixed rate. Some of these instruments are designated as cash flow hedges while others remain nondesignated, largely based on size and duration. Gains and losses at the time we settle or take delivery on our designated foreign exchange contracts are amortized into income in the same period the hedged transaction affects earnings, except where an amount is deemed to be ineffective, which would be immediately reclassified to “Other income (expense) – net” in the consolidated statements of income. In the six months ended June 30, 2013 and June 30, 2012, no ineffectiveness was measured.

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Collateral and Credit-Risk Contingency We have entered into agreements with our derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. At June 30, 2013, we had posted collateral of $35 (a deposit asset) and held collateral of $708 (a receipt liability). Under the agreements, if our credit rating had been downgraded one rating level by Moody’s Investors Service and Standards & Poor’s and two rating levels by Fitch, Inc., before the final collateral exchange in June, we would have been required to post additional collateral of $169. At December 31, 2012, we had posted collateral of $22 (a deposit asset) and held collateral of $543 (a receipt liability). We do not offset the fair value of collateral, whether the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable), against the fair value of the derivative instruments.

Following is the notional amount of our outstanding derivative positions:

	June 30,		December 31,
	2013		2012
Interest rate swaps	$	4,250	$	3,000
Cross-currency swaps		14,136		12,071
Foreign exchange contracts		4		51
Total	$	18,390	$	15,122

Following is the related hedged items affecting our financial position and performance:

Effect of Derivatives on the Consolidated Statements of Income
Fair Value Hedging Relationships	Three months ended								Six months ended
Fair Value Hedging Relationships	June 30, 2013				June 30, 2012				June 30, 2013				June 30, 2012
Interest rate swaps (Interest expense):
Gain (Loss) on interest rate swaps		$	(63	)		$	(76	)		$	(87	)		$	(137	)
Gain (Loss) on long-term debt			63				76				87				137

In addition, the net swap settlements that accrued and settled in the quarter ended June 30 were offset against interest expense.

	Three months ended						Six months ended
Cash Flow Hedging Relationships	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Cross-currency swaps:
Gain (Loss) recognized in accumulated OCI	$	184		$	(160	)	$	325		$	(165	)

Interest rate locks:
Interest income (expense) reclassified from accumulated OCI into income		(12	)		(11	)		(23	)		(20	)

Foreign exchange contracts:
Gain (Loss) recognized in accumulated OCI		2			(5	)		-			-

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 7. SUBSEQUENT EVENTS

On July 12, 2013, we announced an agreement to acquire Leap Wireless International, Inc. (Leap), a provider of prepaid wireless service, for fifteen dollars per outstanding share of Leap’s common stock, or approximately $1,260, plus one non-transferable contingent right that entitles each Leap stockholder to a share of the net proceeds of the future sale of the Chicago 700 MHz A-band FCC license held by Leap. As of June 30, 2013, Leap had approximately $2,700 of debt, net of cash.

Under the terms of the agreement, we will acquire all of Leap’s stock and, thereby, acquire all of its wireless properties, including spectrum licenses, network assets, retail stores and approximately 5 million subscribers. The agreement must be approved by Leap’s stockholders. The transaction also is subject to review by the FCC and the Department of Justice and to other customary closing conditions and is expected to close in approximately six to nine months from the announcement. The agreement also provides both parties with certain termination rights if the transaction does not close by July 11, 2014, extendable by either party to January 11, 2015 if required regulatory approvals have not been obtained. Under certain circumstances, Leap may be required to pay a termination fee or AT&T may be required to provide a three-year roaming agreement to Leap for LTE data coverage if the transaction does not close. If Leap enters into the roaming agreement, AT&T may purchase, or may be required by Leap to purchase, specified Leap spectrum assets.

AT&T INC.

JUNE 30, 2013

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Dollars in millions except per share amounts

RESULTS OF OPERATIONS

For ease of reading, AT&T Inc. is referred to as “we,” “AT&T” or the “Company” throughout this document, and the names of the particular subsidiaries and affiliates providing the services generally have been omitted. AT&T is a holding company whose subsidiaries and affiliates operate in the communications services industry both in the United States and internationally, providing wireless and wireline telecommunication services and equipment. You should read this discussion in conjunction with the consolidated financial statements, accompanying notes and management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2012. A reference to a “Note” in this section refers to the accompanying Notes to Consolidated Financial Statements. In the tables throughout this section, percentage increases and decreases that are not considered meaningful are denoted with a dash. Certain amounts have been reclassified to conform to the current period’s presentation.

Consolidated Results Our financial results in the second quarter and for the first six months of 2013 and 2012 are summarized as follows:

	Second Quarter							Six-Month Period
	2013		2012		Percent Change			2013		2012		Percent Change
	2013		2012		Percent Change			2013		2012		Percent Change
Operating Revenues	$	32,075	$	31,575		1.6	%	$	63,431	$	63,397		0.1	%
Operating expenses
Cost of services and sales		13,270		12,254		8.3			25,824		25,071		3.0
Selling, general and administrative		8,121		8,005		1.4			16,454		16,349		0.6
Depreciation and amortization		4,571		4,499		1.6			9,100		9,059		0.5
Total Operating Expenses		25,962		24,758		4.9			51,378		50,479		1.8
Operating Income		6,113		6,817		(10.3)			12,053		12,918		(6.7)
Income Before Income Taxes		5,794		6,031		(3.9)			11,124		11,548		(3.7)
Net Income		3,880		3,965		(2.1)			7,653		7,617		0.5
Net Income Attributable to AT&T	$	3,822	$	3,902		(2.1)	%	$	7,522	$	7,486		0.5	%

Overview

Operating income decreased $704, or 10.3%, in the second quarter and $865, or 6.7%, for the first six months of 2013. Both operating revenues and expenses in 2012 include results for our sold Advertising Solutions segment, which had a negative impact on comparisons to 2013 operating income. The decline in operating income also reflected increased handset upgrades, which contributed to higher wireless equipment and commission costs, increased expenses supporting AT&T U-verse® (U-verse) subscriber growth and declines in wireline voice and wireless voice and text revenues. Wireless data and equipment revenues and wireline data revenues helped to offset these impacts. Our operating income margin in the second quarter decreased from 21.6% in 2012 to 19.1% in 2013 and for the first six months decreased from 20.4% in 2012 to 19.0% in 2013.

Operating revenues increased $500, or 1.6%, in the second quarter and $34, or 0.1%, for the first six months of 2013. Wireless data and equipment revenues increased, reflecting the increasing percentage of wireless subscribers choosing smartphones. Continued growth in U-verse services from residential customers and strategic business services also contributed to higher operating revenues. The revenue increases were partially offset by the sale of the Advertising Solutions segment and continued declines in wireline voice and wireless voice and text revenues.

As the telecommunications industry continues to evolve from voice-oriented services into an industry driven by data-based services, technology, and efficiencies, our products, services and plans have also changed as we transition from traditional voice and basic data services to sophisticated, high-speed, IP-based alternatives. This transition of our offerings will result in continued growth in our wireless and wireline IP-based data revenues as we bundle and price plans with greater focus on the data services that our customers desire, provide new products and services, and transition customers from their current traditional services. We expect continued declines in voice revenues and our basic wireline data services as customers choose these next-generation services.

AT&T INC.

JUNE 30, 2013

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Dollars in millions except per share amounts

Cost of services and sales expenses increased $1,016, or 8.3%, in the second quarter and $753, or 3.0%, for the first six months of 2013. The increases were primarily due to increased wireless equipment costs related to handset upgrades, increased wireline costs attributable to U-verse subscriber growth and wireless network costs. The increases were partially offset by the sale of the Advertising Solutions segment, decreased wireless interconnect and long-distance costs and lower costs associated with Universal Service Fund (USF) fees.

Selling, general and administrative expenses increased $116, or 1.4%, in the second quarter and $105, or 0.6%, for the first six months of 2013. The increases were primarily due to increased commissions related to smartphone upgrades and higher advertising expenses, partially offset by the sale of the Advertising Solutions segment, decreased employee related expenses and lower financing-related costs associated with our pension and postretirement benefits (referred to as Pension/OPEB expenses).

Depreciation and amortization expense increased $72, or 1.6%, in the second quarter and $41, or 0.5%, for the first six months of 2013. Expenses increased due to ongoing capital spending for network upgrades and expansion, partially offset by fully depreciated assets and lower amortization of intangibles for customer lists related to acquisitions. The sale of our Advertising Solutions segment also contributed to lower depreciation and amortization expenses.

Interest expense decreased $116, or 12.3%, in the second quarter and $148, or 8.2%, for the first six months of 2013. Interest expense in 2012 was higher due to charges associated with the early redemption of debt. The decrease in 2013 also reflects lower average interest rates, partially offset by higher average debt balances.

Equity in net income of affiliates increased $86, or 65.2%, in the second quarter and $48, or 13.5%, for the first six months of 2013. Increased equity in net income of affiliates in the second quarter was due to increased earnings at América Móvil, S.A. de C.V. (América Móvil) and YP Holdings LLC (YP Holdings). Increased equity in net income of affiliates for the first six months was primarily due to increased earnings from YP Holdings, partially offset by foreign exchange impacts at América Móvil.

Other income (expense) – net We had other income of $288 in the second quarter and $320 for the first six months of 2013, compared to other income of $23 in the second quarter and $75 for the first six months of 2012. Results in the second quarter and for the first six months of 2013 included a net gain on the sale of América Móvil shares and other investments of $249 and $260, interest and dividend income of $23 and $40 and leveraged lease income of $10 and $15, respectively.

Other income in the second quarter and for the first six months of 2012 included interest and dividend income of $19 and $34 and leveraged lease income of $8 and $41 and a net loss on the sale of investments of $11 and $1, respectively.

Income taxes decreased $152, or 7.4%, in the second quarter and $460, or 11.7%, for the first six months of 2013. Our effective tax rate was 33.0% for the second quarter and 31.2% for the first six months of 2013, as compared to 34.3% for the second quarter and 34.0% for the first six months of 2012. The decrease in effective tax rate for both the second quarter and the first six months was primarily due to recognition of benefits related to tax audit settlements.

AT&T INC.

JUNE 30, 2013

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Dollars in millions except per share amounts

Selected Financial and Operating Data
	June 30,
	2013	2012
Wireless subscribers (000)	107,884	105,206
Network access lines in service (000)	26,849	31,604
Total wireline broadband connections (000)	16,453	16,434
Debt ratio1	46.6%	38.4%
Ratio of earnings to fixed charges2	5.45	5.36
Number of AT&T employees	245,350	242,380

1	Debt ratios are calculated by dividing total debt (debt maturing within one year plus long-term debt) by total capital (total debt plus total stockholders’ equity) and do not consider cash available to pay down debt. See our “Liquidity and Capital Resources” section for discussion.

2	See exhibit 12

Segment Results

Our segments are strategic business units that offer different products and services over various technology platforms and are managed accordingly. Our operating segment results presented in Note 4 and discussed below for each segment follow our internal management reporting. We analyze our operating segments based on segment income before income taxes. We make our capital allocation decisions based on the strategic needs of the business, needs of the network (wireless or wireline) provided services, and demands to provide emerging services to our customers. Actuarial gains and losses from pension and other postemployment benefits, interest expense and other income (expense) – net, are managed only on a total company basis and are, accordingly, reflected only in consolidated results. We have three reportable segments: (1) Wireless, (2) Wireline and (3) Other. Our operating results prior to May 9, 2012, also included Advertising Solutions, which was previously a reportable segment.

The Wireless segment uses our nationwide network to provide consumer and business customers with wireless data and voice communications services. This segment includes our portion of the results from our mobile payment joint venture marketed as the ISIS Mobile WalletTM (ISIS), which is accounted for as an equity method investment.

The Wireline segment uses our regional, national and global network to provide consumer and business customers with data and voice communications services, U-verse high-speed broadband, video, voice services, and managed networking to business customers. Additionally, we receive commissions on sales of satellite television services offered through our agency arrangements.

The Advertising Solutions segment included our directory operations, which published Yellow and White Pages directories and sold directory advertising, Internet-based advertising and local search through May 8, 2012.

The Other segment includes our portion of the results from our international equity investments, our equity interest in YP Holdings, and costs to support corporate-driven activities and operations. Also included in the Other segment are impacts of corporate-wide decisions for which the individual operating segments are not being evaluated, including interest costs and expected return on plan assets for our pension and postretirement benefit plans.

The following sections discuss our operating results by segment. Operations and support expenses include certain network planning and engineering expenses; information technology; our repair technicians and repair services; property taxes; bad debt expense; advertising costs; sales and marketing functions, including customer service centers; real estate costs, including maintenance and utilities on all buildings; credit and collection functions; and corporate support costs, such as finance, legal, human resources and external affairs. Pension and postretirement service costs, net of amounts capitalized as part of construction labor, are also included to the extent that they are associated with employees who perform these functions.

We discuss capital expenditures for each segment in “Liquidity and Capital Resources.”

AT&T INC.

JUNE 30, 2013

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Dollars in millions except per share amounts

Wireless
Segment Results
	Second Quarter							Six-Month Period
	2013		2012		Percent Change			2013		2012		Percent Change
	2013		2012		Percent Change			2013		2012		Percent Change
Segment operating revenues
Data	$	5,356	$	4,471		19.8	%	$	10,481	$	8,706		20.4	%
Voice, text and other service		10,014		10,294		(2.7)			19,951		20,625		(3.3)
Equipment		1,921		1,588		21.0			3,550		3,158		12.4
Total Segment Operating Revenues		17,291		16,353		5.7			33,982		32,489		4.6
Segment operating expenses
Operations and support		10,770		9,590		12.3			20,950		19,568		7.1
Depreciation and amortization		1,843		1,696