AT&T Wireless 2007 Annual Report Download - page 48

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Dollars in millions except per share amounts
46
| 2007 AT&T Annual Report
At December 31, 2007, we had $6,860 of debt maturing
within one year, which included $4,939 of long-term debt
maturities and $1,921 of commercial paper borrowings and
other borrowings. All of our commercial paper borrowings are
due within 90 days. We continue to examine our mix of
short- and long-term debt in light of interest rate trends.
During 2007, we received net proceeds of $11,367 from
the issuance of $11,499 in long-term debt. Debt proceeds
were used for general corporate purposes and parts of the
proceeds were used for repurchases of our common stock.
Long-term debt issuances consisted of:
• $2,000 of 6.3% global notes due in 2038.
• $2,000 of 6.5% global notes due in 2037.
• €1.25 billion of 4.375% notes due in 2013 (equivalent
to U.S. $1,641 when issued).
• $1,500 of floating-rate notes due in 2010.
• $1,200 of 6.375% retail notes due in 2056.
• £600 million of 5.5% notes due in 2027 (equivalent
to U.S. $1,158 when issued).
• $1,000 of 4.95% global notes due in 2013.
• $500 of 5.625% notes due in 2016.
• $500 of zero-coupon puttable notes due in 2022.
In February 2008, we received net proceeds of $3,972 from
the issuance of $4,000 in long-term debt. The long-term debt
issued consisted of the following:
• $2,500 of 5.5% global notes due in 2018.
• $750 of 4.95% global notes due in 2013.
• $750 of 6.3% global notes due in 2038.
Beginning in May 2009, the $500 zero-coupon puttable
note may be presented for redemption by the holder at
specified dates but not more frequently than annually,
excluding 2011. If the note is held to maturity in 2022, the
redemption amount will be $1,030.
We entered into fixed-to-fixed cross-currency swaps on our
two foreign-currency-denominated debt instruments to hedge
our exposure to changes in foreign currency exchange rates.
These hedges also include interest rate swaps of a fixed
foreign-denominated rate to a fixed U.S.-denominated interest
rate, which results in a U.S.-denominated rate of 5.31% on
our Euro-denominated notes and 5.97% on our British pound
sterling-denominated notes.
During 2007, debt repayments totaled $10,183 and
consisted of:
• $3,871 related to debt repayments with a weighted-
average interest rate of 6.1%, which included the early
redemption of debt related to a put exercise on $1,000
of our 4.2% Puttable Reset Securities and called debt of
$500 with an interest rate of 7.0%.
• $3,411 related to repayments of commercial paper and
other short-term bank borrowings.
• $1,735 related to the early redemption of Dobson debt
acquired with a par value of $1,599 and a weighted-
average interest rate of 9.1%.
• $904 related to the early repayment of a Dobson
long-term credit facility.
• $218 related to the early redemption of a convertible
note held by Dobson.
• $44 related to scheduled principal payments on other
debt and repayments of other borrowings.
We have a five-year $10,000 credit agreement with a
syndicate of investment and commercial banks, which we
have the right to increase up to an additional $2,000, provided
no event of default under the credit agreement has occurred.
The current agreement will expire in July 2011. We also
have the right to terminate, in whole or in part, amounts
committed by the lenders under this agreement in excess
of any outstanding advances; however, any such terminated
commitments may not be reinstated. Advances under this
agreement may be used for general corporate purposes,
including support of commercial paper borrowings and other
short-term borrowings. There is no material adverse change
provision governing the drawdown of advances under this
credit agreement. This agreement contains a negative pledge
covenant, which requires that, if at any time we or a subsid-
iary pledge assets or otherwise permits a lien on its proper-
ties, advances under this agreement will be ratably secured,
subject to specified exceptions. We must maintain a debt-to-
EBITDA (earnings before interest, income taxes, depreciation
and amortization, and other modifications described in the
agreement) financial ratio covenant of not more than three-
to-one as of the last day of each fiscal quarter for the four
quarters then ended. We comply with all covenants under the
agreement. At December 31, 2007, we had no borrowings
outstanding under this agreement. (See Note 8)
During 2007, proceeds of $1,986 from the issuance of
treasury shares were related to the exercise of stock-based
compensation.
During 2007, we paid $190 to minority interest holders
and $47 to terminate interest rate swaps with notional
amounts totaling $1,800 acquired as a result of our
acquisition of BellSouth.
Other
Our total capital consists of debt (long-term debt and
debt maturing within one year) and stockholders’ equity.
Our capital structure does not include debt issued by our
international equity investees. Our debt ratio was 35.7%,
34.1% and 35.9% at December 31, 2007, 2006 and 2005.
The debt ratio is affected by the same factors that affect
total capital. Total capital increased $4,146 in 2007 compared
to more than $90,000 in 2006. The 2007 total capital
increase was due to an increase in debt of $4,319 related
to our financing activities. Our stockholders’ equity balance
was down $173 and included our increase in net income and
current adjustments for unrealized pension and postretire-
ment gains, which were more than offset by our increased
share repurchase activity and dividend distributions.
The primary factor contributing to the decline in our 2006
debt ratio was the acquisition of BellSouth, which increased
our stockholders’ equity approximately 105% and our total
long-term debt by 96%. The 2006 total capital increase was
primarily due to the purchase of BellSouth (see Note 2).
For 2006, our common stock outstanding and capital in
excess of par value increased by $60,850 and our current
and long-term debt increased by $29,226. The increase in
total debt was primarily due to acquired debt from BellSouth
and AT&T Mobility of $28,321, an increase in commercial
paper and other short-term borrowings of $3,649 and debt
issuances of $1,500, partially offset by long-term debt
repayments of $4,242 during 2006. Stockholders’ equity
also increased due to our net income and was partially offset
by dividend payments and our repurchases of common shares
through our stock repurchase program.