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AT&T INC. Annual Report, Year Ended Feb 25, 2009

Filing Date
Filed February 25, 2009
Period End
February 25, 2009
Securities
TT-PCTBBT-PA
One revenue dollarkept$0.10
In the record · 2016–202610-K1110-Q348-K281

T filed 11 annual reports (10-K), 34 quarterly reports (10-Q) and 281 current reports (8-K) between 2016 and 2026.

  1. Deal closed8-K · Aug ’18Aug ’18
  2. Leadership change8-K · Apr ’20Apr ’20
  3. Deal closed8-K · Apr ’22Apr ’22
  4. Material agreement8-K · Nov ’25Nov ’25

01—Abstract

Summary

Summary of the 10-K filed February 25, 2009. Cited figures are marked; the original filing is the authoritative source.

AT&T's 2008 10-K shows a company that grew revenue modestly and operating income strongly, while its balance sheet took a large hit from pension losses and its core wireline voice business continued to erode.

Consolidated operating revenues rose 4.3% to $124.0 billiona, and operating income climbed 13.0% to $23.1 billion, with the operating margin expanding from 16.3% in 2006 to 18.6% in 2008. Net income increased 7.7% to $12.9 billion, and diluted EPS rose 11.3% to $2.16. Growth was driven by the wireless segment, which posted segment revenue up 15.6%, segment income up 58.4% to $10.8 billion, and a 77 million customer base that now accounts for 46% of segment income.

Wireline, by contrast, saw segment income fall 7.0% as voice revenue declined 8.2% from access line losses to cable, VoIP and wireless substitution. The most important balance sheet development is the deterioration of retirement plan funding. Stockholders' equity fell from $115.4 billion to $96.3 billionb, and the debt ratio rose from 35.7% to 43.8%, driven by a $16.7 billion swing in accumulated other comprehensive loss from pension and postretirement plan investment losses.

Management expects pension and retiree benefit costs to rise significantly in 2009 and plans to focus on debt reduction rather than buybacks, having repurchased 164 million shares for $6.1 billionc in 2008. Free cash flow was constrained by roughly $20 billion in capital expenditures, which included $9.5 billion for spectrum licenses, including the 700 MHz auction.

Looking ahead, management guides to modest 2009 revenue growth driven by wireless and broadband, while acknowledging a challenging economy and rising competition. Key risks include a potential work stoppage as the CWA contracts for roughly 80,000 wireline employees expire in April 2009, municipal litigation over U-verse video deployment, and the pending Centennial Communications acquisition for about $944 milliond plus roughly $2 billion of net debt.

02—Key points

Key Highlights

  1. Consolidated operating revenues grew 4.3% to $124.0 billion in 2008, and operating income rose 13.0% to $23.1 billion, lifting the operating margin to 18.6% from 16.3% in 2006.
  2. Net income increased 7.7% to $12.9 billion, with diluted EPS of $2.16 versus $1.94 in 2007; dividends declared were $1.61 per share, and the quarterly dividend was raised 2.5% to $0.41.
  3. Wireless was the growth engine: segment revenues rose 15.6% to $49.3 billion, segment income grew 58.4% to $10.8 billion, and the company served 77 million wireless customers, with data revenue up 52.5%, boosted by the Apple iPhone 3G.
  4. Wireline remains under pressure: voice revenue fell 8.2% on access line losses, and segment income declined 7.0% to $11.2 billion, partly offset by 5.3% data growth and 1.045 million U-verse video customers.
  5. Pension losses sharply reduced equity: stockholders' equity fell to $96.3 billion from $115.4 billion, the debt ratio rose to 43.8% from 35.7%, and management expects significantly higher pension and retiree benefit costs in 2009.
  6. Cash flow and capital allocation: operating cash flow was $33.7 billion, capex was $20.3 billion including $9.5 billion for spectrum, and management plans to prioritize debt reduction over share repurchases in 2009.
  7. Notable risks and events: roughly 80,000 wireline union employees' contracts expire in April 2009, U-verse faces municipal franchise litigation, and the $944 million Centennial Communications acquisition is expected to close by mid-2009.

03—One dollar

Follow one dollar

Of each $1.00 of revenue in FY2009, AT&T Inc. kept $0.10.

  1. Revenue$122.51B100.0%
  2. Cost of revenue−$50.64B41.3%
  3. Gross profit$71.87B58.7%
  4. Operating costs−$50.87B41.5%
  5. Operating income$21.00B17.1%
  6. Interest, other & tax−$8.86B7.2%
  7. Net income$12.14B9.9%
Computed from 10-KFY2009filed February 25, 2009Computed from this filing’s revenue, gross profit, operating income and net income · right columngrey figure: share of revenue

Where FY2009 revenue went

$122.51B
  • Cost of revenue: $50.64B, 41% of revenue
  • SG&A: $31.36B, 26% of revenue
  • Other operating costs: $19.52B, 16% of revenue
  • Net income: $12.14B, 9.9% of revenue
  • Interest, other & tax: $8.86B, 7.2% of revenue

Kept 9.9% as net income

Full revenue history →

04—Financials

Financial Highlights

Figures from 10-KFY2009filed February 25, 2009
Revenue$122.51B58.7% Gross MarginNet Income$12.14B9.9% Net MarginEPS (Diluted)$2.05Total Assets$268.31BCash & Equivalents$3.28BFree Cash Flow$34.41B

Financial Statements

FY2009 against FY2008

Line itemFY2009FY2008Change
Revenue$122.51B$123.44B−0.8%
Cost of Revenue$50.64B$56.69B−10.7%
Gross Profit$71.87B$66.75B+7.7%
SG&A Expenses$31.36B$48.77B−35.7%
Operating Expenses$101.51B$125.13B−18.9%
Operating Income$21.00B-$1.69B+1342.6%
Interest Expense$3.37B$3.37B0.0%
Net Income$12.14B-$2.63B+562.4%
EPS (Basic)$2.06$-0.44+568.2%
EPS (Diluted)$2.05$-0.44+565.9%
Shares Outstanding (Basic)5.90B——
Shares Outstanding (Diluted)5.92B5.96B−0.6%

05—Questions

Frequently Asked Questions

  1. How did AT&T's core business perform in 2008?

    Overall results were solid. Revenue rose 4.3% to $124.0 billion and operating income rose 13.0% to $23.1 billion, but the growth came almost entirely from wireless. Wireless segment income rose 58.4%, while wireline segment income fell 7.0% as voice revenue declined 8.2%.

  2. Why did shareholders' equity drop so much in 2008?

    Equity fell from $115.4 billion to $96.3 billion, mainly because of investment losses in the company's pension and postretirement plan assets, which flowed through accumulated other comprehensive loss. The swing in that line was about $16.7 billion, and the drop pushed the debt ratio up to 43.8%.

  3. What should investors expect for 2009?

    Management expects modest revenue growth driven by wireless and broadband, with operating margin stable excluding pension pressure. Pension and retiree benefit costs are expected to rise significantly, growth initiatives will add expense, and management will focus on reducing debt rather than repurchasing shares.

  4. What are the main risks flagged in the filing?

    Key risks include a worsening economy that could hurt customer demand and bad debt, intensifying competition from cable, VoIP and wireless substitution in wireline, higher benefit plan costs, potential union work stoppages when contracts expire in 2009, and municipal or regulatory challenges to U-verse video deployment.

06—Continue

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