Edgar Filing: AT&T INC.

att2q0910q.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, 2009

		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, 2009, there were 5,900 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,
	2009			2008			2009			2008
Operating Revenues
Wireless service	$	11,960		$	10,894		$	23,606		$	21,499
Voice		8,256			9,519			16,762			19,212
Data		6,307			6,054			12,557			12,026
Directory		1,211			1,383			2,460			2,781
Other		3,000			3,016			5,920			6,092
Total operating revenues		30,734			30,866			61,305			61,610
Operating Expenses
Cost of sales (exclusive of depreciation and amortization shown separately below)		12,478			11,897			24,720			23,892
Selling, general and administrative		7,847			7,444			15,553			15,310
Depreciation and amortization		4,903			4,958			9,789			9,861
Total operating expenses		25,228			24,299			50,062			49,063
Operating Income		5,506			6,567			11,243			12,547
Other Income (Expense)
Interest expense		(879	)		(854	)		(1,728	)		(1,719	)
Equity in net income of affiliates		231			212			368			455
Other income (expense) – net		31			29			16			120
Total other income (expense)		(617	)		(613	)		(1,344	)		(1,144	)
Income Before Income Taxes		4,889			5,954			9,899			11,403
Income taxes		1,613			2,111			3,422			4,041
Net Income		3,276			3,843			6,477			7,362
Less: Net Income Attributable to Noncontrolling Interest		(78	)		(71	)		(153	)		(129	)
Net Income Attributable to AT&T	$	3,198		$	3,772		$	6,324		$	7,233

Basic Earnings Per Share Attributable to AT&T	$	0.54		$	0.64		$	1.07		$	1.21
Diluted Earnings Per Share Attributable to AT&T	$	0.54		$	0.63		$	1.07		$	1.21
Weighted Average Number of Common
Shares Outstanding – Basic (in millions)		5,900			5,926			5,898			5,962
Dividends Declared Per Common Share	$	0.410		$	0.400		$	0.820		$	0.800

See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED BALANCE SHEETS
Dollars in millions except per share amounts
	June 30,			December 31,
	2009			2008
Assets	(Unaudited)
Current Assets
Cash and cash equivalents	$	7,348		$	1,792
Accounts receivable – net of allowances for
uncollectibles of $1,269 and $1,270		14,846			16,047
Prepaid expenses		1,786			1,538
Deferred income taxes		964			1,014
Other current assets		1,996			2,165
Total current assets		26,940			22,556
Property, plant and equipment		222,926			218,579
Less: accumulated depreciation and amortization		(124,697	)		(119,491	)
Property, Plant and Equipment – Net		98,229			99,088
Goodwill		71,691			71,829
Licenses		47,674			47,306
Customer Lists and Relationships – Net		8,682			10,582
Other Intangible Assets – Net		5,773			5,824
Investments in Equity Affiliates		2,749			2,332
Other Assets		6,180			5,728
Total Assets	$	267,918		$	265,245

Liabilities and Stockholders’ Equity
Current Liabilities
Debt maturing within one year	$	10,155		$	14,119
Accounts payable and accrued liabilities		18,046			20,032
Advanced billing and customer deposits		3,932			3,849
Accrued taxes		1,667			1,874
Dividends payable		2,419			2,416
Total current liabilities		36,219			42,290
Long-Term Debt		66,565			60,872
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		20,354			19,196
Postemployment benefit obligation		31,985			31,930
Other noncurrent liabilities		13,783			14,207
Total deferred credits and other noncurrent liabilities		66,122			65,333

Stockholders’ Equity
Common shares issued ($1 par value)		6,495			6,495
Capital in excess of par value		91,637			91,728
Retained earnings		38,069			36,591
Treasury shares (at cost)		(21,284	)		(21,410	)
Accumulated other comprehensive loss		(16,308	)		(17,057	)
Noncontrolling interest		403			403
Total stockholders’ equity		99,012			96,750
Total Liabilities and Stockholders’ Equity	$	267,918		$	265,245

See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in millions, increase (decrease) in cash and cash equivalents
(Unaudited)
	Six months ended
	June 30,
	2009			2008
Operating Activities
Net income	$	6,477		$	7,362
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization		9,789			9,861
Provision for uncollectible accounts		976			860
Deferred income tax expense		744			1,384
Net loss from impairment and sale of investments		74			-
Changes in operating assets and liabilities:
Accounts receivable		226			(776	)
Other current assets		(105	)		274
Accounts payable and accrued liabilities		(887	)		(5,117	)
Stock-based compensation tax benefit		-			(14	)
Other - net		(1,492	)		(329	)
Total adjustments		9,325			6,143
Net Cash Provided by Operating Activities		15,802			13,505

Investing Activities
Construction and capital expenditures
Capital expenditures		(7,036	)		(9,320	)
Interest during construction		(368	)		(257	)
Acquisitions, net of cash acquired		(55	)		(10,087	)
Dispositions		199			623
Proceeds from sale of securities, net of investments		(21	)		(73	)
Other		38			41
Net Cash Used in Investing Activities		(7,243	)		(19,073	)

Financing Activities
Net change in short-term borrowings with
original maturities of three months or less		(3,915	)		6,590
Issuance of long-term debt		8,161			10,924
Repayment of long-term debt		(2,037	)		(1,605	)
Purchase of treasury shares		-			(6,077	)
Issuance of treasury shares		4			310
Dividends paid		(4,834	)		(4,802	)
Stock-based compensation tax benefit		-			14
Other		(382	)		(125	)
Net Cash Provided by (Used in) Financing Activities		(3,003	)		5,229
Net increase (decrease) in cash and cash equivalents		5,556			(339	)
Cash and cash equivalents beginning of year		1,792			1,970
Cash and Cash Equivalents End of Period	$	7,348		$	1,631

Cash paid (refunded) during the six months ended June 30 for:
Interest	$	2,219		$	1,863
Income taxes, net of refunds	$	2,295		$	4,730

See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
Dollars and shares in millions, except per share amounts
(Unaudited)
	Six months ended
	June 30, 2009
	Shares			Amount
Common Stock
Balance at beginning of year		6,495		$	6,495
Balance at end of period		6,495		$	6,495

Capital in Excess of Par Value
Balance at beginning of year				$	91,728
Issuance of shares					26
Share-based payments					(117	)
Balance at end of period				$	91,637

Retained Earnings
Balance at beginning of year				$	36,591
Net income attributable to AT&T ($1.07 per diluted share)					6,324
Dividends to stockholders ($0.82 per share)					(4,837	)
Other					(9	)
Balance at end of period				$	38,069

Treasury Shares
Balance at beginning of year		(602	)	$	(21,410	)
Purchase of shares		-			-
Issuance of shares		7			126
Balance at end of period		(595	)	$	(21,284	)

Accumulated Other Comprehensive Income (Loss), net of tax
Balance at beginning of year				$	(17,057	)
Other comprehensive income (see Note 2)					749
Balance at end of period				$	(16,308	)

Noncontrolling interest at beginning of year				$	403
Net income					153
Distributions					(145	)
Translation adjustments					(8	)
Noncontrolling interest at end of period				$	403

Total stockholders equity as of December 31, 2008				$	96,750
Changes attributable to AT&T stockholders					2,262
Changes attributable to noncontrolling interest					-
Total stockholders equity as of June 30, 2009				$	99,012
See Notes to Consolidated Financial Statements.

AT&T INC.

JUNE 30, 2009

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.” The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission that permit reduced disclosure for interim periods. We believe that these consolidated financial statements include all adjustments (consisting only of normal recurring accruals) necessary to present fairly the results for the interim periods shown. The results for the interim periods are not necessarily indicative of results 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, 2008.

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 and wireline communications services and equipment, managed networking, wholesale services and advertising solutions.

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.

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. We have reclassified certain amounts in prior-period financial statements to conform to the current period’s presentation.

In December 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51” (FAS 160). FAS 160 requires noncontrolling interests held by parties other than the parent in subsidiaries to be clearly identified, labeled, and presented in the consolidated statement of financial position within equity, but separate from the parent’s equity. For us, FAS 160 became effective January 1, 2009, with restatement of prior financial statements.

In April 2009, the FASB issued FASB Staff Position FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (FSP FAS 107-1 and APB 28-1), FASB Staff Position FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (FSP FAS 157-4), and FASB Staff Position FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (FSP FAS 115-2 and FAS 124-2). These staff positions require enhanced disclosures on financial instruments, and are effective for interim and annual reporting periods beginning in our second quarter and have increased quarterly disclosures but did not have an impact on our financial position and results of operations (see Note 6).

Valuation and Other Adjustments In accordance with Statement of Financial Accounting Standards No. 112, “Employers’ Accounting for Postemployment Benefits” (FAS 112), we establish obligations for expected termination benefits provided under existing plans to former or inactive employees after employment but before retirement. These benefits include severance payments, workers’ compensation, disability, medical continuation coverage and other benefits. At June 30, 2009, we had severance accruals under FAS 112 of $400. At December 31, 2008, we had severance accruals of $752.

AT&T INC.

JUNE 30, 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Included in the current liabilities reported on our consolidated balance sheet are accruals established prior to 2009 under Emerging Issues Task Force (EITF) Issue No. 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination” (EITF 95-3). The liabilities include accruals for severance, lease terminations and equipment removal costs associated with our acquisitions of AT&T Corp., BellSouth Corporation (BellSouth) and Dobson Communications Corporation. Following is a summary of the accruals recorded under EITF 95-3 at December 31, 2008, cash payments made during 2009 and the adjustments thereto.

	12/31/08		Cash			Adjustments			6/30/09
	Balance		Payments			and Accruals			Balance
Severance accruals paid from:
Company funds	$	140	$	(89	)	$	(23	)	$	28
Pension and postemployment benefit plans		103		(3	)		-			100
Lease terminations		387		(37	)		(11	)		339
Equipment removal and other related costs		88		(36	)		(10	)		42
Total	$	718	$	(165	)	$	(44	)	$	509

New Accounting Standards

FAS 165 In May 2009, the FASB issued Statement of Financial Accounting Standards No. 165, “Subsequent Events” (FAS 165). FAS 165 establishes general standards of accounting for and disclosing events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This statement is effective for interim and annual periods ending after June 15, 2009. In preparing the accompanying unaudited consolidated financial statements, the Company has reviewed, as determined necessary by the Company’s management, events that have occurred after June 30, 2009, up until the issuance of the financial statements, which occurred on August 5, 2009.

FAS 166 In June 2009, the FASB issued Statement of Financial Accounting Standards No. 166, “Accounting for Transfers of Financial Assets – an amendment of FASB Statement No. 140” (FAS 166). FAS 166 amends FASB Statement of Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” (FAS 140), removing the concept of a qualifying special-purpose entity, and removing the exception from applying FASB Interpretation No. 46(R) (revised December 2003), “Consolidation of Variable Interest Entities” (FIN 46(R)), to qualifying special-purpose entities. This statement is effective for both interim and annual periods as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, and its impact will vary with each future transfer of financial assets.

FAS 167 In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, “Amendments to FASB Interpretation No. 46(R)” (FAS 167). FAS 167 amends FIN 46(R), to require an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity. This statement is effective for both interim and annual periods as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, and we are currently evaluating its impact on our financial position and results of operations.

AT&T INC.

JUNE 30, 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 2. COMPREHENSIVE INCOME

The components of our comprehensive income for the three and six months ended June 30, 2009 and 2008 include net income, adjustments to stockholders’ equity for the foreign currency translation adjustment, net unrealized gain (loss) on available-for-sale securities, net unrealized gain (loss) on cash flow hedges and defined benefit postretirement plans. The foreign currency translation adjustment was due to exchange rate fluctuations in our foreign affiliates’ local currencies and the reclassification adjustment on cash flow hedges was due to the amortization of losses from our interest rate forward contracts.

Following is our comprehensive income with the respective tax impacts for the three months and six months periods ending June 30, 2009 and 2008:

	Three months ended						Six months ended
	June 30,						June 30,
	2009			2008			2009			2008
Net income	$	3,276		$	3,843		$	6,477		$	7,362
Other comprehensive income, net of tax:
Foreign currency translation adjustment (includes $1, $8, $8 and $(4) attributable to noncontrolling interest), net of taxes of $63, $17, $44 and $60		119			31			84			109
Net unrealized gains (losses) on securities:
Unrealized gains (losses), net of taxes of $63, $14, $15 and $(35)		119			26			29			(64	)
Less reclassification adjustment realized in net income, net of taxes of $0, $19, $41 and $(9)		-			34			77			(16	)
Net unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses), net of taxes of $121, $(10), $195 and $(52)		222			(18	)		368			(96	)
Unrealized gain (loss) on rate locks, net of taxes of $7, $(2), $29 and $(2)		12			(3	)		50			(3	)
Reclassification adjustment for losses on cash flow hedges included in net income, net of taxes of $1, $3, $4 and $4		4			5			7			9
Defined benefit postretirement plans:
Amortization of net actuarial (gain) loss and prior service benefit included in net income, net of taxes of $37, $(17), $67 and $(33)		69			(31	)		126			(59	)
Other		1			-			-			-
Other comprehensive income (loss)		546			44			741			(120	)
Less: Total comprehensive income attributable to the noncontrolling interest		(77	)		(63	)		(145	)		(133	)
Total Comprehensive IncomeAttributable to AT&T	$	3,745		$	3,824		$	7,073		$	7,109

AT&T INC.

JUNE 30, 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 3. EARNINGS PER SHARE

A reconciliation of the numerators and denominators of basic earnings per share and diluted earnings per share for net income for the three and six months ended June 30, 2009 and 2008 are shown in the table below:

	Three months ended				Six months ended
	June 30,				June 30,
	2009		2008		2009		2008
Numerators
Numerator for basic earnings per share:
Net income attributable to AT&T	$	3,198	$	3,772	$	6,324	$	7,233
Dilutive potential common shares:
Other stock-based compensation		2		2		5		4
Numerator for diluted earnings per share	$	3,200	$	3,774	$	6,329	$	7,237
Denominators (000,000)
Denominator for basic earnings per share:
Weighted-average number of common
shares outstanding		5,900		5,926		5,898		5,962
Dilutive potential common shares:
Stock options		3		15		3		15
Other stock-based compensation		20		21		22		20
Denominator for diluted earnings per share		5,923		5,962		5,923		5,997
Basic earnings per share	$	0.54	$	0.64	$	1.07	$	1.21
Diluted earnings per share	$	0.54	$	0.63	$	1.07	$	1.21

At June 30, 2009, we had issued and outstanding options to purchase approximately 183 million shares of AT&T common stock. The exercise prices of options to purchase a weighted average of 164 million shares in the second quarter and 171 million for the first six months were above the average market price of AT&T stock. Accordingly, we did not include these amounts in determining the dilutive potential common shares for the respective period. At June 30, 2009, the exercise prices of 16 million share options were below market price.

At June 30, 2008, we had issued and outstanding options to purchase approximately 209 million shares of AT&T common stock. The exercise prices of options to purchase a weighted average of 104 million shares in the second quarter and 110 million for the first six months were above the average market price of AT&T stock. Accordingly, we did not include these amounts in determining the dilutive potential common shares for the respective period. At June 30, 2008, the exercise prices of 105 million share options were below market price.

AT&T INC.

JUNE 30, 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

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 various operating segments based on segment income before income taxes, reviewing operating revenues, operating expenses (depreciation and non-depreciation) and equity income for each segment. We make our capital allocations decisions primarily based on the network (wireless or wireline) providing services. 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 the calculation of each segment’s percentage of our consolidated results. We have four reportable segments: (1) wireless, (2) wireline, (3) advertising solutions and (4) other.

The wireless segment uses our nationwide network to provide consumer and business customers with wireless voice and advanced data communications services.

The wireline segment uses our regional, national and global network to provide consumer and business customers with landline voice and data communications services, AT&T U-verseSM TV, high-speed broadband and voice services (U-verse) and managed networking to business customers. Additionally, we offer satellite television services through our agency arrangements.

The advertising solutions segment publishes Yellow and White Pages directories and sells advertising in various media, including directory and Internet-based advertising, and local search.

The other segment includes results from Sterling Commerce Inc., customer information services and all corporate and other operations. This segment includes our portion of the results from our international equity investments. Also included in the other segment are impacts of management decisions affecting the company for which management does not evaluate the individual operating segments.

In the following tables, we show how our segment results are reconciled to our consolidated results. The Wireless, Wireline, Advertising Solutions and Other columns represent the segment results of each operating segment. The Consolidation and Elimination column adds in those line items that we manage on a consolidated basis only: interest expense and other income (expense) – net. This column also eliminates any intersegment transactions included in each segment’s results.

Segment assets for the six months ended June 30, 2009 are materially unchanged from the year ended December 31, 2008 with the exception of other segment assets. Our other segment assets totaled $14,671, which increased $5,969, or 68.6%, primarily due to an increase in cash.

AT&T INC.

JUNE 30, 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended June 30, 2009
					Advertising				Consolidation			Consolidated
	Wireless		Wireline		Solutions		Other		and Elimination			Results
Revenues from external customers	$	13,222	$	15,945	$	1,211	$	356	$	-		$	30,734
Intersegment revenues		23		581		20		68		(692	)		-
Total segment operating revenues		13,245		16,526		1,231		424		(692	)		30,734
Operations and support expenses		8,658		11,265		751		343		(692	)		20,325
Depreciation and amortization expenses		1,436		3,258		166		43		-			4,903
Total segment operating expenses		10,094		14,523		917		386		(692	)		25,228
Segment operating income		3,151		2,003		314		38		-			5,506
Interest expense		-		-		-		-		879			879
Equity in net income of affiliates		-		4		-		226		1			231
Other income (expense) – net		-		-		-		-		31			31
Segment income before income taxes	$	3,151	$	2,007	$	314	$	264	$	(847	)	$	4,889

For the six months ended June 30, 2009
					Advertising					Consolidation			Consolidated
	Wireless		Wireline		Solutions		Other			and Elimination			Results
Revenues from external customers	$	26,060	$	32,059	$	2,460	$	726		$	-		$	61,305
Intersegment revenues		45		1,145		40		135			(1,365	)		-
Total segment operating revenues		26,105		33,204		2,500		861			(1,365	)		61,305
Operations and support expenses		16,743		22,562		1,500		833			(1,365	)		40,273
Depreciation and amortization expenses		2,870		6,498		342		79			-			9,789
Total segment operating expenses		19,613		29,060		1,842		912			(1,365	)		50,062
Segment operating income (loss)		6,492		4,144		658		(51	)		-			11,243
Interest expense		-		-		-		-			1,728			1,728
Equity in net income of affiliates		-		8		-		359			1			368
Other income (expense) – net		-		-		-		-			16			16
Segment income before income taxes	$	6,492	$	4,152	$	658	$	308		$	(1,711	)	$	9,899

AT&T INC.

JUNE 30, 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended June 30, 2008
					Advertising					Consolidation			Consolidated
	Wireless		Wireline		Solutions		Other			and Elimination			Results
Revenues from external customers	$	11,977	$	17,059	$	1,383	$	447		$	-		$	30,866
Intersegment revenues		56		549		24		65			(694	)		-
Total segment operating revenues		12,033		17,608		1,407		512			(694	)		30,866
Operations and support expenses		7,523		11,192		771		547			(692	)		19,341
Depreciation and amortization expenses		1,446		3,281		203		30			(2	)		4,958
Total segment operating expenses		8,969		14,473		974		577			(694	)		24,299
Segment operating income (loss)		3,064		3,135		433		(65	)		-			6,567
Interest expense		-		-		-		-			854			854
Equity in net income of affiliates		3		3		-		206			-			212
Other income (expense) – net		-		-		-		-			29			29
Segment income before income taxes	$	3,067	$	3,138	$	433	$	141		$	(825	)	$	5,954

For the six months ended June 30, 2008
					Advertising					Consolidation			Consolidated
	Wireless		Wireline		Solutions		Other			and Elimination			Results
Revenues from external customers	$	23,762	$	34,146	$	2,781	$	921		$	-		$	61,610
Intersegment revenues		96		1,086		43		135			(1,360	)		-
Total segment operating revenues		23,858		35,232		2,824		1,056			(1,360	)		61,610
Operations and support expenses		14,912		22,685		1,558		1,406			(1,359	)		39,202
Depreciation and amortization expenses		2,926		6,462		415		59			(1	)		9,861
Total segment operating expenses		17,838		29,147		1,973		1,465			(1,360	)		49,063
Segment operating income (loss)		6,020		6,085		851		(409	)		-			12,547
Interest expense		-		-		-		-			1,719			1,719
Equity in net income of affiliates		5		9		-		441			-			455
Other income (expense) – net		-		-		-		-			120			120
Segment income before income taxes	$	6,025	$	6,094	$	851	$	32		$	(1,599	)	$	11,403

AT&T INC.

JUNE 30, 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 5. PENSION AND POSTRETIREMENT BENEFITS

Substantially all of our employees are covered by one of various noncontributory pension and death benefit plans. We also provide certain medical, dental and life insurance benefits to substantially all 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. No significant cash contributions are required under ERISA regulations during 2009.

The following details pension and postretirement benefit costs included in operating expenses (in cost of sales and selling, general and administrative expenses) in the accompanying Consolidated Statements of Income. We account for these costs in accordance with Statement of Financial Accounting Standards No. 87, “Employers’ Accounting for Pensions” and Statement of Financial Accounting Standards No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions.” In the following table, gains are denoted with parentheses and losses are not. A portion of these expenses is effectively capitalized as part of the benefit load on internal construction and capital expenditures, historically averaging approximately 10%.

	Three months ended						Six months ended
	June 30,						June 30,
	2009			2008			2009			2008
Pension (benefit) cost:
Service cost – benefits earned during the period	$	272		$	293		$	544		$	586
Interest cost on projected benefit obligation		845			829			1,690			1,659
Expected return on assets		(1,141	)		(1,401	)		(2,281	)		(2,801	)
Amortization of prior service cost		28			33			55			66
Recognized actuarial loss		166			4			332			6
Net pension (benefit) cost	$	170		$	(242	)	$	340		$	(484	)

Postretirement (benefit) cost:
Service cost – benefits earned during the period	$	88		$	107		$	176		$	214
Interest cost on accumulated postretirement
benefit obligation		631			639			1,261			1,275
Expected return on assets		(239	)		(332	)		(478	)		(664	)
Amortization of prior service benefit		(89	)		(89	)		(179	)		(179	)
Recognized actuarial loss		-			-			-			-
Postretirement (benefit) cost	$	391		$	325		$	780		$	646

Combined net pension and postretirement cost	$	561		$	83		$	1,120		$	162

Our combined net pension and postretirement cost increased $478 in the second quarter and $958 for the first six months of 2009. The increase was due to lower expected return on assets and an increase in amortization of unrecognized actuarial losses, both primarily from investment losses in 2008. As allowed under GAAP, we use a method in which gains and losses are amortized only when the net gains or losses exceed 10 percent of the greater of the projected benefit obligation or the market-related value of assets (MRVA). Under GAAP, the expected long-term rate of return is calculated on the MRVA. GAAP requires that actual gains and losses on pension and postretirement plan assets be recognized in the MRVA equally over a period of up to five years. However, we use a methodology, allowed under GAAP, under which we hold the MRVA to within 20% of the actual fair value of plan assets, which can have the effect of accelerating the recognition of excess actual gains and losses in the MRVA in less than five years. The use of this policy increased pre-capitalization pension and postretirement cost by approximately $400 in the second quarter and $800 for the first six months of 2009. This methodology did not have a significant effect on our 2008 combined net pension and postretirement benefits.

We have varying types of pension programs providing benefits for substantially all of certain non-U.S. operations. In addition to the pension and postretirement costs above, we recorded net pension benefit cost for non-U.S. plans of ($4) in the second quarter and ($3) for the first six months of 2009 and $3 in the second quarter and $7 for the first six months of 2008.

AT&T INC.

JUNE 30, 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

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 $41 in the second quarter, $35 of which was interest cost and $83 for the first six months of 2009, $70 of which was interest cost. Net supplemental retirement pension benefits cost was $45 in the second quarter, $36 of which was interest cost and $91 for the first six months of 2008, $71 of which was interest cost.

NOTE 6. 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 at June 30, 2009:

	2009
	Carrying			Fair
	Amount			Value
Notes and debentures		$	76,522		$	77,529
Commercial paper			-			-
Bank borrowings			28			28
Available-for-sale equity securities			1,751			1,751

Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (FAS 157) requires disclosures for financial assets and liabilities that are remeasured at fair value at least annually. FAS 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Substantially all of our available-for-sale securities are valued using quoted market prices (referred to as Level 1). Adjustments to fair value are recorded in other comprehensive income (OCI) until the investment is sold or experiences an other-than-temporary decline in fair value (see Note 2). All of our derivatives are Level 2.

The fair values of our notes and debentures were estimated based on quoted market prices, where available, or on the net present value method of expected future cash flows using current interest rates. The carrying value of debt with an original maturity of less than one year approximates market value.

Our available-for-sale equity securities are carried at fair value, and realized gains and losses on these equity securities were included in “Other income (expense) – net” in the consolidated statements of income. The fair value of our available-for-sale equity securities was principally determined based on quoted market prices, and the carrying amount of the remaining securities approximates fair value. These securities include $1,350 of equities, $311 in government fixed income bonds and $90 of other securities.

Our short-term investments, other short-term and long-term held-to-maturity investments and customer deposits are recorded at amortized cost, and the carrying amounts approximate fair values.

Derivatives We use interest rate swaps, interest rate forward contracts and foreign currency exchange contracts to manage our market risk to changes in interest rates and foreign exchange rates. We do not use financial instruments for trading or speculative purposes. The majority of our derivatives are designated as fair value hedges or cash flow hedges.

Fair Value Hedging We designate our fixed-to-floating interest rates 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. Unrealized gains or losses on interest rate swaps are recorded at fair market value as assets or liabilities, respectively. 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. 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.

AT&T INC.

JUNE 30, 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

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

We designate our combined interest rate foreign currency swap agreements (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 period. In the period ending June 30, 2009, no material ineffectiveness was measured. In April 2009, we entered into additional fixed-to-fixed cross-currency swaps, concurrent with our debt issuance of £750 (equivalent of $1,107 when issued) of 5.875% global notes due 2017 and £1,100 (equivalent of $1,621 when issued) of 7.0% global notes due 2040.

Periodically, we enter into and designate interest rate locks to partially hedge the risk of changes in interest payments attributable to changes in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt. Gains and losses at the time 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 income. In the period ending June 30, 2009, no material ineffectiveness was measured. Over the next 12 months, we expect to reclassify $21 from Other Comprehensive Income to interest expense due to the amortization of net losses on historical rate locks. Our unutilized rate locks carry mandatory early terminations, the latest occurring in April 2011.

The balance of the derivative loss in accumulated other comprehensive income was $58 at June 30, 2009 and $483 at December 31, 2008.

Periodically, we enter into foreign exchange contracts to manage our exposure to changes in currency exchange rates related to foreign currency-denominated transactions. We may or may not choose to designate these derivatives as hedging instruments under FAS 133 depending on size and duration. As of June 30, 2009, we had no outstanding foreign exchange contracts.

Collateral and Credit-Risk Contingency We have entered into agreements with most of our derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. At June 30, 2009, we held $168 of counterparty collateral (a receipt liability). Under the agreements, if our credit rating had been downgraded one rating level, we would have been required to post collateral of $1 (a deposit asset). 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 size and value of our outstanding derivative positions:

Volume of Derivative Activity

	June 30, 2009
	Notional Value		Fair Value

Interest rate swaps	$	6,750	$	374
Cross-currency swaps		7,502		68
Rate locks		2,100		20

AT&T INC.

JUNE 30, 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Following are our derivative instruments and their related hedged items affecting our financial position and performance:

Fair Value of Derivatives in Consolidated Balance Sheet

Derivatives designated as hedging instruments and reflected as other assets, other liabilities and, for a portion of interest rate swaps, accounts receivable.

Asset Derivatives	June 30, 2009
Derivatives designated as hedging instruments under Statement 133

Interest rate swaps	$	374
Cross-currency swaps		536
Rate locks		47
Total	$	957

	June 30,
Liability Derivatives	2009

Cross-currency swaps	$	(468	)
Rate locks		(27	)
Total	$	(495	)

Effect of Derivatives on the Income Statement

	Three months ending			Six months ending
Derivatives in Statement 133 Fair Value Hedging Relationships	June 30, 2009			June 30, 2009

Interest expense (increase) decrease
Gain/(Loss) on swap – interest rate swaps	$	(169	)	$	(220	)
Gain/(Loss) on long-term debt – interest rate swaps		169			220
In addition, the net swap settlements that accrued and settled in the three and six months ended June 30, 2009 were also reported as reductions of interest expense.

Derivatives in Statement 133 Cash Flows Value Hedging Relationships

Rate locks:
Gain/(Loss) recognized in OCI	$	19		$	79
Interest income (expense) reclassified from OCI into income		(5	)		(11	)

Cross-currency swaps:
Gain/(Loss) recognized in OCI		343			563
Other income (expense) reclassified from OCI into Income		-			-

Derivatives not designated as hedging instruments under Statement 133

Other income – foreign exchange contracts	$	(9	)	$	1

AT&T INC.

JUNE 30, 2009

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 in both the United States and internationally providing telecommunications services and equipment as well as advertising services. 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, 2008. In the tables throughout this section, percentage increases and decreases that are not considered meaningful are denoted with a dash.

Consolidated Results Our financial results in the second quarter and for the first six months of 2009 and 2008 are summarized as follows:

	Second Quarter							Six-Month Period
	2009		2008		Percent Change			2009		2008		Percent Change
	2009		2008		Percent Change			2009		2008		Percent Change
Operating Revenues	$	30,734	$	30,866		(0.4	)%	$	61,305	$	61,610		(0.5	)%
Operating expenses
Cost of sales		12,478		11,897		4.9			24,720		23,892		3.5
Selling, general and administrative		7,847		7,444		5.4			15,553		15,310		1.6
Depreciation and amortization		4,903		4,958		(1.1	)		9,789		9,861		(0.7	)
Total Operating Expenses		25,228		24,299		3.8			50,062		49,063		2.0
Operating income		5,506		6,567		(16.2	)		11,243		12,547		(10.4	)
Income before income taxes		4,889		5,954		(17.9	)		9,899		11,403		(13.2	)
Net Income Attributable to AT&T	$	3,198	$	3,772		(15.2	)%	$	6,324	$	7,233		(12.6	)%

Overview

Operating income Our operating income decreased $1,061, or 16.2%, in the second quarter and $1,304, or 10.4%, for the first six months of 2009, primarily due to the decline in voice revenues along with an increase in pension and other postemployment benefits (OPEB) expense, partially offset by continued growth in wireless service revenues. Operating income also decreased in part due to higher cost of sales in our wireless segment mainly attributed to the continued success of the Apple iPhone 3G and the successful launch on June 19th of the Apple iPhone 3GS (collectively, the Apple iPhone). These factors were the primary causes of our operating income margin decreasing from 21.3% to 17.9% in the second quarter and from 20.4% to 18.3% for the first six months.

Operating revenues Our operating revenues decreased $132, or 0.4%, in the second quarter and $305, or 0.5%, for the first six months primarily due to the continuing decline in voice revenues, resulting from an 12.1% decrease in total retail consumer voice connections, and a decline in directory revenue driven by lower print revenue. These were partially offset by continued growth in wireless service revenue due to an increase in average customers of 9.2%, driven in part by the continued success of the Apple iPhone 3G and other advanced integrated devices and the successful launch of the Apple iPhone 3GS, and an increase in wireline data revenue largely due to U-verse and broadband growth.

The decline in our voice revenues reflects continuing economic pressures on our consumer and business wireline customers as well as increasing competition. Consumers and businesses disconnected landlines and usage-based services also declined. Customers disconnecting landlines switched to wireless, Voice over Internet Protocol (VoIP) and cable offerings for voice and data. While we lose the voice revenues, we have the opportunity to increase wireless service revenues should the customer choose us as their wireless provider. We also continue to expand our VoIP service for customers who have access to our U-verse video service.

Cost of sales expenses increased $581, or 4.9%, in the second quarter and increased $828, or 3.5%, for the first six months. The increase in the second quarter and first six months was primarily due to higher equipment costs related to the continued success of the Apple iPhone 3G and other smartphones and the successful launch of the Apple iPhone 3GS along with an increase in pension and OPEB expense. The increase in pension and OPEB expense is due to lower expected return on assets and an increase in amortization of unrecognized actuarial losses, both primarily from investment losses in 2008. Partially offsetting these increases were decreases in employee-related costs due to workforce reductions as well as lower traffic compensation expense as usage-based services declined.

AT&T INC.

JUNE 30, 2009

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

Dollars in millions except per share amounts

The first six months also reflect lower equipment sales costs for traditional equipment sales as well as a decrease in expenses due to the renegotiation of our agreement with Yahoo! and lower volumes for usage-based services.

Selling, general and administrative expenses increased $403, or 5.4%, in the second quarter and increased $243, or 1.6%, for the first six months. The increase in the second quarter and first six months was primarily due to higher commissions expenses associated with the Apple iPhone and traditional upgrade sales and an increase in pension and OPEB expense. Selling, general and administrative expenses also increased due to higher customer service costs resulting from wireless subscriber growth along with increased support for data services and integrated devices. These increases were partially offset by decreases in employee-related costs due to workforce reductions.

Depreciation and amortization expense decreased $55, or 1.1%, in the second quarter and decreased $72, or 0.7%, for the first six months. Depreciation and amortization remained relatively stable in the second quarter, and for the first six months, as the declining amortization of identifiable intangible assets, primarily customer relationships, was offset by increased depreciation resulting from capital additions.

Interest expense increased $25, or 2.9%, in the second quarter and $9, or 0.5%, for the first six months of 2009. Interest expense was higher in the second quarter resulting from an increase in our weighted average interest rate, related to a change in our mix of debt, partially offset by a decrease in our average debt balances. For the six months, the increase in the second quarter was offset by first quarter’s decrease resulting in interest expense remaining relatively unchanged with an increase in our average debt balances being offset by a decrease in our weighted average interest rate and higher interest charged during construction. Interest during construction is primarily related to preparing wireless spectrum for advanced services and is higher in 2009 due to acquisition of significant amounts of spectrum for advanced services late in the first quarter of 2008.

Equity in net income of affiliates increased $19, or 9.0%, in the second quarter and decreased $87, or 19.1%, for the first six months of 2009. The second quarter increase is primarily due to improved results at América Móvil, S.A. de C.V. (América Móvil). The year to date decrease is primarily due to foreign exchange translation losses at América Móvil, Telefonos de Mexico, S.A. de C.V. (Telmex) and Telmex Internacional, S.A.B. de C.V. (Telmex Internacional).

Other income (expense) – net We had other income of $31 in the second quarter and $16 for the first six months of 2009, compared to other income of $29 in the second quarter and $120 for the first six months of 2008. Results in the second quarter of 2009 included $50 in interest and lease gains partially offset by $14 of foreign exchange losses. Results in the second quarter of 2008 included income of $45 related to interest, dividend and leveraged lease income partially offset by $19 of losses on sale of investments.

Results for the first six months of 2009 included $119 gains on sale of securities and professional services business, dividend, interest, and leveraged lease income partially offset by $102 related to asset impairment. Results for the first six months of 2008 primarily included income of $117 of interest, dividend and leveraged lease income.

Income taxes decreased $498, or 23.6%, in the second quarter and $619, or 15.3%, for the first six months of 2009. The decrease in income taxes in the second quarter and for the first six months was primarily due to lower income before income taxes. In addition, during the second quarter, the Internal Revenue Service (IRS) completed the examination phase of several audits. As a result, we recorded a net favorable adjustment. This has a positive effect on our effective tax rates, which were 33.0% in the second quarter of 2009 compared to 35.5% in the second quarter of 2008, and 34.6% for the first six months of 2009 compared to 35.4% for the first six months of 2008. In July 2009, in the case regarding the tax treatment of Universal Service Fund receipts on our 1998 and 1999 tax returns, the U.S. District Court granted the Government’s motion for summary judgment and entered final judgment for the Government. We appealed the final judgment to the United States Court of Appeals for the Fifth Circuit.

AT&T INC.

JUNE 30, 2009

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,
	2009			2008
Wireless customers (000)		79,600			72,882
Postpaid wireless customers (000)		62,096			57,043
Consumer revenue connections (000) 1,2		46,289			48,416
Network access lines in service (000) 2		52,379			58,860
Broadband connections (000) 2,3,7		16,945			15,631
Video connections (000) 4		3,787			2,784
Debt ratio 5,7,8		43.7	%		41.6	%
Ratio of earnings to fixed charges 6		4.6			5.5
Number of AT&T employees		288,660			307,550

1	Consumer revenue connections includes retail access lines, U-verse voice over IP connections, broadband and video.
2	Represents services by AT&T’s local exchange companies (ILECs) and affiliates.
3	Broadband connections
4	Video connections include customers that have satellite service under our agency arrangements and U-verse video connections (of 1,577 in 2009 and 549 in 2008).
5	See our “Liquidity and Capital Resources” section for discussion.
6	See Exhibit 12.
7	Prior year amounts restated to conform to current period reporting methodology.
8	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 does not consider cash on hand available to pay down debt. Cash on hand was $7,348 as of June 30, 2009, and $1,792 as of December 31, 2008.

Segment Results

Our segments represent 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 various operating segments based on segment income before income taxes, reviewing operating revenues, expenses (depreciation and non-depreciation) and equity income for each segment. We make our capital allocations decisions primarily based on the network (wireless or wireline) providing services. 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 four reportable segments: (1) wireless, (2) wireline, (3) advertising solutions and (4) other.

The wireless segment uses our nationwide network to provide consumer and business customers with wireless voice and advanced data communications services.

The advertising solutions segment publishes Yellow and White Pages directories and sells advertising in various media, including directory and Internet-based advertising, and local search.

The other segment includes results from Sterling Commerce Inc. (Sterling), customer information services and all corporate and other operations. The other segment includes our portion of the results from our international equity investments. Also included in the other segment are impacts of management decisions affecting the company for which management does not evaluate the individual operating segments.

The following tables show components of results of operations by segment. Significant segment results are discussed following each table. Capital expenditures are discussed in “Liquidity and Capital Resources.”

AT&T INC.

JUNE 30, 2009

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
	2009		2008		Percent Change			2009		2008		Percent Change
	2009		2008		Percent Change			2009		2008		Percent Change
Segment operating revenues
Service	$	11,983	$	10,951		9.4	%	$	23,651	$	21,596		9.5	%
Equipment		1,262		1,082		16.6			2,454		2,262		8.5
Total Segment Operating Revenues		13,245		12,033		10.1			26,105		23,858		9.4
Segment operating expenses
Operations and support		8,658		7,523		15.1			16,743		14,912		12.3
Depreciation and amortization		1,436		1,446		(0.7	)		2,870		2,926		(1.9	)
Total Segment Operating Expenses		10,094		8,969		12.5			19,613