AT&T Wireless 2012 Annual Report Download - page 53

AT&T Inc. | 51
A significant amount of our cash outflows are related to tax
items and benefits paid for current and former employees.
Total taxes incurred, collected and remitted by AT&T during
2012, 2011, and 2010 were $19,703, $19,224 and $24,614.
These taxes include income, franchise, property, sales, excise,
payroll, gross receipts and various other taxes and fees.
Total health and welfare benefits provided to certain active
and retired employees and their dependents totaled $5,300
in 2012, with $1,842 paid from plan assets. Of those
benefits, $4,427 related to medical and prescription drug
benefits. During 2012, we paid $5,729 of pension benefits
out of plan assets.
In October 2012, we filed an application with the U.S.
Department of Labor (DOL) for approval to contribute a
preferred equity interest in our Mobility business to the trust
used to pay pension benefits under plans sponsored by AT&T.
The preferred interest does not have any voting rights, has
a fair market value estimated at $9,500 and a liquidation
value of $8,000 and is entitled to receive cumulative cash
distributions of $560 per annum. So long as we make the
distributions, we will have no limitations on our ability to
declare a dividend or repurchase shares.
At December 31, 2012, the present value of AT&T’s pension
liabilities exceeded the fair value of trust assets by
approximately $13,851. The preferred equity interest is
estimated to be valued at $9,500 upon contribution and will
significantly improve the funding for the plans, enhancing
the strength of the trust for AT&T’s employees and retirees.
Prior to the contribution of the preferred interest, the
estimated required contribution for 2013 is approximately
$300. We will continue to work with the DOL to obtain
approval before the end of 2013. If we receive DOL approval
before the due date, including extensions, for our 2012
income tax return, we expect to deduct the contribution
on our 2012 return. Our current income tax liability at
December 31, 2012, reflects a deduction for the pension
contribution.
CONTRACTUAL OBLIGATIONS,
COMMITMENTS AND CONTINGENCIES
Current accounting standards require us to disclose our
material obligations and commitments to making future
payments under contracts, such as debt and lease
agreements, 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
• We fail to comply with other covenants under the
agreement for a specified period after notice.
• We fail to make certain minimum funding payments
under ERISA.
• Our bankruptcy or insolvency.
Both the Five-Year Agreement and the Four-Year Agreement
contain provisions permitting subsidiaries to be added as
additional borrowers, with or without a guarantee by AT&T Inc.
The terms of the guarantee are set forth in the agreements.
Four-Year Agreement
The obligations of the lenders under the Four-Year Agreement
to provide advances will terminate on December 11, 2016,
unless prior to that date either: (i) AT&T and, if applicable,
a Co-Borrower, reduces to $0 the commitments of the
lenders under the Agreement or (ii) certain events of default
occur. The Agreement also provides that AT&T and lenders
representing more than 50% of the facility amount may
agree to extend their commitments under the Four-Year
Agreement for two additional one-year periods beyond
the December 11, 2016, termination date, under certain
circumstances. We also can request the lenders to further
increase their commitments (i.e., raise the available credit)
up to an additional $2,000 provided no event of default
has occurred.
Five-Year Agreement
The obligations of the lenders under the Five-Year Agreement
to provide advances will terminate on December 11, 2017,
unless prior to that date either: (i) AT&T, and if applicable, a
Co-Borrower, reduce to $0 the commitments of the lenders,
or (ii) certain events of default occur. We and lenders
representing more than 50% of the facility amount may agree
to extend their commitments for two one-year periods
beyond the December 11, 2017, termination date, under
certain circumstances. We also can request the lenders to
further increase their commitments (i.e., raise the available
credit) up to an additional $2,000 provided no event of
default has occurred.
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
América Móvil. At December 31, 2012, our debt ratio was
43.0%, compared to 38.0% at December 31, 2011, and 37.1%
at December 31, 2010. The debt ratio is affected by the same
factors that affect total capital, and reflects our recent debt
issuances and stock repurchases. Total capital decreased
$8,011 in 2012 compared to a decrease of $7,567 in 2011.
The 2012 capital decrease was primarily due to the stock
repurchases of $12,752, which increased our debt ratio
in 2012.