AT&T Wireless 2013 Annual Report Download - page 32

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Dollars in millions except per share amounts
30 | AT&T Inc.
$3,000 revolving credit agreement that was entered into
in 2012, with a syndicate of banks that is available until
December 2017 (December 2017 Facility). In the event
advances are made under either agreement, those advances
would be used for general corporate purposes. Advances
are not conditioned on the absence of a material adverse
change. All advances must be repaid no later than the
date on which lenders are no longer obligated to make
any advances under each agreement. Under each
agreement, we can terminate, in whole or in part, amounts
committed by the lenders in excess of any outstanding
advances; however, we cannot reinstate any such
terminated commitments. At December 31, 2013, we had
no advances outstanding under either agreement and were
in compliance with all covenants under each agreement.
Advances under both agreements would bear interest,
at AT&T’s option, either:
• at a variable annual rate equal to (1) the highest of:
(a)the base (or prime) rate of the bank affiliate of
Citibank, N.A. which is serving as administrative agent
under the Agreement, (b) 0.50% per annum above the
Federal funds rate, and (c) the LIBOR applicable to
U.S.dollars for a period of one month plus 1.00% per
annum, plus (2) an applicable margin, as set forth in
the Agreement (Applicable Margin); or
• at a rate equal to: (i) the LIBOR for a period of one,
two, three or six months, as applicable, plus (ii) the
Applicable Margin.
The Applicable Margin for both agreements will equal
0.565%, 0.680%, or 0.910% per annum, depending on
AT&T’s credit rating.
Under each agreement AT&T will pay a facility fee of
0.060%, 0.070% or 0.090% per annum, depending on
AT&T’s credit rating, of the amount of lender commitments.
Both agreements require that, if at any time AT&T or a
subsidiary pledges assets or otherwise permits a lien on its
properties, advances under the agreement will be ratably
secured, subject to specified exceptions. Both agreements
also contain a financial ratio covenant that provides that
AT&T will maintain, as of the last day of each fiscal quarter,
a debt-to-EBITDA (earnings before interest, income taxes,
depreciation and amortization, and other modifications
described in the agreements) ratio of not more than 3.0
to 1, for the four quarters then ended.
Defaults under both agreements permit the lenders to
accelerate required repayment and would increase the
Applicable Margin by 2.00% per annum. Defaults include
noncompliance with the two covenants above, other
representations and warranties and the following:
• We fail to pay principal or interest, or other amounts
under the agreement beyond any grace period.
During 2013, we redeemed $7,698 in debt, primarily
consisting of the following repayments:
• March 2013 repayment of €1,250 4.375% notes
(equivalent to $1,641 when repaid) and $147 of
6.5% notes.
• July 2013 early redemption of $300 of 7.375% notes
originally due in July 2043.
• October 2013 early redemption of $550 of 6.625%
notes originally due in October 2034.
• We also completed debt tender offers covering $5,000
of various notes with stated rates of 5.20% to 8.75%
for $5,556 in cash payments.
At December 31, 2013, we had $5,498 of debt maturing
within one year, substantially all of which was related to
long-term debt issuances. Debt maturing within one year
includes the following notes that may be put back to us
by the holders:
• $1,000 of annual put reset securities issued by
BellSouth Corporation that may be put back to us
each April until maturity in 2021.
• An accreting zero-coupon note that may be redeemed
each May until maturity in 2022. If the zero-coupon
note (issued for principal of $500 in 2007) is held to
maturity, the redemption amount will be $1,030.
In December 2010, our Board of Directors authorized the
repurchase of up to 300 million shares of AT&T common
stock. We began buying back stock under this program in
the first quarter of 2012 and completed the authorized
repurchase that year. In July 2012, the Board of Directors
approved a second authorization to repurchase 300 million
shares, which we completed in May 2013. In March 2013,
our Board of Directors approved a third authorization to
repurchase 300 million shares of our common stock,
which has no expiration date. During 2013, we repurchased
366million shares for $13,028 under the two most recent
authorizations. At the end of 2013, we had approximately
163 million shares remaining on the March 2013
authorization. We expect to make future repurchases
opportunistically.
The emphasis of our 2014 financing activities will be the
payment of dividends, subject to approval by our Board of
Directors, the repayment of debt and share repurchases.
We plan to fund these activities through a combination
of cash from operations, debt issuances, and asset sales.
The timing and mix of debt issuance will be guided by
credit market conditions and interest rate trends.
Credit Facilities
On December 11, 2013, we amended and extended for
an additional two-year term our existing $5,000 revolving
credit agreement with a syndicate of banks until December
2018 (December 2018 Facility). We also have an existing