AT&T Wireless 2008 Annual Report Download - page 44

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Dollars in millions except per share amounts
42
| AT&T Annual Report 2008
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 43.8%,
35.7%, and 34.1% at December 31, 2008, 2007 and 2006.
The debt ratio is affected by the same factors that affect
total capital. Total capital decreased $8,144 in 2008 compared
to an increase of $4,146 in 2007. The 2008 total capital
decrease was due to a $16,677 decrease in accumulated
other comprehensive loss that reflects a decrease in
retirement plans funded status partially offset by an increase
in debt of $10,876 related to our financing activities.
Our stockholders’ equity balance was down $19,020
primarily due to the decrease in retirement plan funded
status discussed above.
The primary factor contributing to the increase in our
2007 debt ratio was the increase in debt of $4,319 related
to our financing activities. Our stockholders’ equity balance
decreased $173 and included our increase in net income and
current adjustments for unrealized pension and postretirement
gains, which were more than offset by our increased share
repurchase activity and dividend distributions.
CO N TRACTUA L OBLIGATIO N S , CO MMITM E N TS AND CONT I N GENCI E S
Current accounting standards require us to disclose our
material obligations and commitments to making future
payments under contracts, such as debt and lease agree-
ments, and under contingent commitments, such as debt
guarantees. We occasionally enter into third-party debt
guarantees, but they are not, nor are they reasonably likely
to become, material. We disclose our contractual long-term
debt repayment obligations in Note 8 and our operating
lease payments in Note 5. Our contractual obligations
do not include expected pension and postretirement
payments as we maintain pension funds and Voluntary
Employee Beneficiary Association trusts to fully or partially
fund these benefits (see Note 11). In the ordinary course of
business, we routinely enter into commercial commitments
for various aspects of our operations, such as plant additions
and office supplies. However, we do not believe that the
commitments will have a material effect on our financial
condition, results of operations or cash flows.
Our contractual obligations as of December 31, 2008, are
in the following table. The purchase obligations that follow
are those for which we have guaranteed funds and will be
funded with cash provided by operations or through incre-
mental borrowings. The minimum commitment for certain
obligations is based on termination penalties that could be
paid to exit the contract. Since termination penalties would
not be paid every year, such penalties are excluded from the
table. Other long-term liabilities were included in the table
based on the year of required payment or an estimate of
the year of payment. Such estimate of payment is based
on a review of past trends for these items, as well as a
forecast of future activities. Certain items were excluded from
the following table as the year of payment is unknown and
could not be reliably estimated since past trends were not
deemed to be an indicator of future payment.
We entered into fixed-to-fixed cross-currency swaps on
our 2015 euro-denominated debt instruments to hedge our
exposure to changes in foreign currency exchange rates.
These hedges also include interest rate swaps of a fixed
euro-denominated interest rate to a fixed U.S.-denominated
interest rate, which results in a U.S.-denominated semiannual
rate of 5.77%.
During 2008, debt repayments totaled $4,010 and
consisted of:
 • $3,915relatedtodebtrepaymentswithaweighted-
average interest rate of 3.98%.
 • $66relatedtorepaymentsofEdgeWirelesstermloan.
 • $29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.
One of the participating banks is Lehman Brothers Bank, Inc.,
which recently declared bankruptcy. We are unable to
determine the status of its stated commitment of $595 at this
time. 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
subsidiary pledge assets or otherwise permits a lien on its
properties, 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, 2008,
we had no borrowings outstanding under this agreement
(see Note 8).
During 2008, proceeds of $319 from the issuance of
treasury shares were related to the settlement of share-based
awards.
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.
In February of 2009, we issued $1,000 of 4.85% global
notes due 2014, $2,250 of 5.8% global notes due 2019
and $2,250 of 6.55% global notes due 2039.
We plan to fund our 2009 financing activities through a
combination of debt issuances and cash from operations.
Our financing activities emphasis will be on the repayment of
debt. We will continue to examine opportunities to fund our
activities by issuing debt at favorable rates and with cash from
the disposition of certain other non-strategic investments.