att2q10.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, 2010
 
       
   
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, 2010, there were 5,909 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,
 
   
2010
   
2009
   
2010
   
2009
 
Operating Revenues
                       
Wireless service
  $ 13,186     $ 11,960     $ 26,036     $ 23,606  
Voice
    7,219       8,255       14,698       16,758  
Data
    6,848       6,323       13,479       12,605  
Directory
    1,007       1,211       2,048       2,460  
Other
    2,548       2,865       5,077       5,642  
Total operating revenues
    30,808       30,614       61,338       61,071  
Operating Expenses
                               
Cost of services and sales (exclusive of depreciation and amortization shown separately below)
    12,381       12,557       24,716       24,758  
Selling, general and administrative
    7,475       7,682       14,863       15,340  
Depreciation and amortization
    4,838       4,875       9,638       9,733  
Total operating expenses
    24,694       25,114       49,217       49,831  
Operating Income
    6,114       5,500       12,121       11,240  
Other Income (Expense)
                               
Interest expense
    (754 )     (876 )     (1,519 )     (1,722 )
Equity in net income of affiliates
    195       231       412       368  
Other income (expense) – net
    723       30       700       15  
Total other income (expense)
    164       (615 )     (407 )     (1,339 )
Income from Continuing Operations Before Income Taxes
    6,278       4,885       11,714       9,901  
Income taxes
    2,173       1,612       5,048       3,423  
Income from Continuing Operations
    4,105       3,273       6,666       6,478  
Income (Loss) from Discontinued Operations, net of tax
    (4 )     3       (3 )     (1 )
Net Income
    4,101       3,276       6,663       6,477  
Less: Net Income Attributable to Noncontrolling Interest
    (78 )     (78 )     (165 )     (153 )
Net Income Attributable to AT&T
  $ 4,023     $ 3,198     $ 6,498     $ 6,324  
Basic Earnings Per Share from Continuing Operations Attributable to AT&T
  $ 0.68     $ 0.54     $ 1.10     $ 1.07  
Basic Earnings Per Share from Discontinued Operations Attributable to AT&T
    -       -       -       -  
Basic Earnings Per Share Attributable to AT&T
  $ 0.68     $ 0.54     $ 1.10     $ 1.07  
Diluted Earnings Per Share from Continuing Operations Attributable to AT&T
  $ 0.68     $ 0.54     $ 1.10     $ 1.07  
Diluted Earnings Per Share from Discontinued Operations Attributable to AT&T
    -       -       -       -  
Diluted Earnings Per Share Attributable to AT&T
  $ 0.68     $ 0.54     $ 1.10     $ 1.07  
Weighted Average Number of Common Shares Outstanding Basic (in millions)
    5,909       5,900       5,907       5,898  
Weighted Average Number of Common Shares Outstanding with Dilution (in millions)
    5,937       5,923       5,936       5,923  
Dividends Declared Per Common Share
  $ 0.42     $ 0.41     $ 0.84     $ 0.82  
See Notes to Consolidated Financial Statements.

 

 

AT&T INC.
 
CONSOLIDATED BALANCE SHEETS
 
Dollars in millions except per share amounts
           
   
June 30,
2010
   
December 31,
2009
 
Assets
 
(Unaudited)
       
Current Assets
           
Cash and cash equivalents
  $ 1,377     $ 3,741  
Accounts receivable – net of allowances for doubtful accounts of $1,084 and $1,202
    13,780       14,845  
Prepaid expenses
    1,666       1,562  
Deferred income taxes
    1,225       1,247  
Other current assets
    3,344       3,792  
Total current assets
    21,392       25,187  
Property, plant and equipment
    236,187       230,295  
Less: accumulated depreciation and amortization
    (135,885 )     (130,242 )
Property, Plant and Equipment – Net
    100,302       100,053  
Goodwill
    73,484       72,782  
Licenses
    49,957       48,741  
Customer Lists and Relationships – Net
    6,047       7,393  
Other Intangible Assets – Net
    5,539       5,494  
Investments in Equity Affiliates
    4,346       2,921  
Other Assets
    6,489       6,275  
Total Assets
  $ 267,556     $ 268,846  
                 
Liabilities and Stockholders’ Equity
               
Current Liabilities
               
Debt maturing within one year
  $ 9,721     $ 7,361  
Accounts payable and accrued liabilities
    18,157       21,260  
Advanced billing and customer deposits
    3,943       4,170  
Accrued taxes
    1,879       1,681  
Dividends payable
    2,482       2,479  
Total current liabilities
    36,182       36,951  
Long-Term Debt
    60,277       64,720  
Deferred Credits and Other Noncurrent Liabilities
               
Deferred income taxes
    25,615       23,781  
Postemployment benefit obligation
    27,421       27,847  
Other noncurrent liabilities
    14,578       13,226  
Total deferred credits and other noncurrent liabilities
    67,614       64,854  
                 
Stockholders’ Equity
               
Common stock ($1 par value, 14,000,000,000 authorized at June 30, 2010 and December 31, 2009: issued 6,495,231,088 at June 30, 2010 and December 31, 2009)
    6,495       6,495  
Additional paid-in capital
    91,628       91,707  
Retained earnings
    40,909       39,366  
Treasury stock (586,184,637 at June 30, 2010 and 593,300,187 at December 31, 2009, at cost)
    (21,134 )     (21,260 )
Accumulated other comprehensive loss
    (14,852 )     (14,412 )
Noncontrolling interest
    437       425  
Total stockholders’ equity
    103,483       102,321  
Total Liabilities and Stockholders’ Equity
  $ 267,556     $ 268,846  
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,
 
   
2010
   
2009
 
Operating Activities
           
Net income
  $ 6,663     $ 6,477  
Adjustments to reconcile net income to
               
net cash provided by operating activities:
               
Depreciation and amortization
    9,638       9,733  
Undistributed earnings from investments in equity affiliates
    (378 )     (339 )
Bad debt expense
    671       975  
Deferred income tax expense
    2,076       746  
Net (gain) loss from impairment and sale of investments
    (641 )     92  
Changes in operating assets and liabilities:
               
Accounts receivable
    394       169  
Other current assets
    389       (58 )
Accounts payable and accrued liabilities
    (3,063 )     (2,054 )
Net income attributable to noncontrolling interest
    (165 )     (153 )
Other - net
    226       184  
Total adjustments
    9,147       9,295  
Net Cash Provided by Operating Activities
    15,810       15,772  
                 
Investing Activities
               
Construction and capital expenditures
               
Capital expenditures
    (7,856 )     (7,017 )
Interest during construction
    (379 )     (368 )
Acquisitions, net of cash acquired
    (2,554 )     (55 )
Dispositions
    14       199  
(Purchases) and sales of securities, net
    (545 )     4  
Other
    17       14  
Net Cash Used in Investing Activities
    (11,303 )     (7,223 )
                 
Financing Activities
               
Net change in short-term borrowings with original maturities of three months or less
    3,280       (3,915 )
Issuance of long-term debt
    -       8,161  
Repayment of long-term debt
    (4,661 )     (2,036 )
Issuance of treasury stock
    5       4  
Dividends paid
    (4,960 )     (4,834 )
Other
    (535 )     (381 )
Net Cash Used in Financing Activities
    (6,871 )     (3,001 )
Net increase (decrease) in cash and cash equivalents
    (2,364 )     5,548  
Cash and cash equivalents beginning of year
    3,741       1,727  
Cash and Cash Equivalents End of Period
  $ 1,377     $ 7,275  
                 
Cash paid during the six months ended June 30 for:
               
Interest
  $ 2,390     $ 2,219  
Income taxes, net of refunds
  $ 2,449     $ 2,295  
See Notes to Consolidated Financial Statements.

 

 

AT&T Inc.
 
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
 
Dollars and shares in millions except per share amounts
 
 
June 30, 2010
 
 
Shares
 
Amount
 
Common Stock
       
Balance at beginning of year
  6,495   $ 6,495  
Balance at end of period
  6,495   $ 6,495  
             
Additional Paid-In Capital
           
Balance at beginning of year
      $ 91,707  
Issuance of treasury shares
        68  
Share-based payments
        (147 )
Balance at end of period
      $ 91,628  
             
Retained Earnings
           
Balance at beginning of year
      $ 39,366  
Net income attributable to AT&T ($1.10 per share)
        6,498  
Dividends to stockholders ($0.84 per share)
        (4,963 )
Other
        8  
Balance at end of period
      $ 40,909  
             
Treasury Stock
           
Balance at beginning of year
  (593 ) $ (21,260 )
Issuance of shares
  7     126  
Balance at end of period
  (586 ) $ (21,134 )
             
Accumulated Other Comprehensive Income (Loss) Attributable to AT&T, net of tax:
           
Balance at beginning of year
      $ (14,412 )
Other comprehensive income attributable to AT&T (see Note 2)
        (440 )
Balance at end of period
      $ (14,852 )
             
Noncontrolling Interest:
           
Balance at beginning of year
      $ 425  
Net income attributable to noncontrolling interest
        165  
Distributions
        (151 )
Translation adjustments applicable to noncontrolling interest, net of taxes
        (2 )
Balance at end of period
      $ 437  
             
Total Stockholders’ Equity at beginning of year
      $ 102,321  
Total Stockholders’ Equity at end of period
      $ 103,483  
See Notes to Consolidated Financial Statements.
           



 

 
AT&T INC.
JUNE 30, 2010

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 Regulation S-X and other applicable rules of the Securities and Exchange Commission  that permit reduced disclosures for interim reporting. We believe that these consolidated financial statements include all adjustments (consisting only of normal recurring accruals) necessary to present fairly the results for the presented interim periods. The results for the interim periods are not necessarily indicative of those 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, 2009.

In preparing the accompanying unaudited consolidated financial statements, we have reviewed all known events that have occurred after June 30, 2010, and through the date that our Form 10-Q was available for issuance for possible inclusion in this Form 10-Q (see Note 8).

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 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—see Note 4 for a discussion of our change in approach to intersegment activity, effective January 1, 2010, and see Note 7 for a discussion of changes in reporting related to discontinued operations.

Recent Accounting Standards

Fair Value Measurements and Disclosures  In January 2010, the FASB issued “Fair Value Measurements and Disclosures—Improving Disclosures about Fair Value Measurements” (Accounting Standards Update (ASU) 2010-06), which requires new disclosures and explanations for transfers of financial assets and liabilities between certain levels in the fair value hierarchy. ASU 2010-06 also clarifies that fair value measurement disclosures are required for each class of financial asset and liability, which may be a subset of a caption in the consolidated balance sheets, and those disclosures should include a discussion of inputs and valuation techniques. For financial assets and liabilities subject to lowest-level measurements, ASU 2010-06 further requires that we separately present purchases, sales, issuances, and settlements instead of netting these changes. With respect to matters other than lowest-level measurements, we adopted ASU 2010-06 beginning with the quarter ended March 31, 2010, with the remaining disclosure requirements becoming effective for fiscal years and interim periods beginning on or after December 15, 2010 (i.e., the quarter ending March 31, 2011, for us). See Note 6 for fair value measurements and disclosures for our investment securities and derivatives.

 

 
AT&T INC.
JUNE 30, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts


Valuation and Other Adjustments Included in the current liabilities reported on our consolidated balance sheets are acquisition-related accruals established prior to 2009. 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 (Dobson). Following is a summary of the accruals recorded at December 31, 2009, cash payments made during 2010, and the adjustments thereto:

   
12/31/09
   
Cash
   
Adjustments
   
6/30/10
 
   
Balance
   
Payments
   
and Accruals
   
Balance
 
Severance accruals paid from:
                       
Company funds
  $ 6     $ (2 )   $ (2 )   $ 2  
Pension and postemployment
benefit plans
    98       (2 )     -       96  
Lease terminations1
    212       (19 )     (61 )     132  
Equipment removal and other related costs1
    23       (1 )     (20 )     2  
Total
  $ 339     $ (24 )   $ (83 )   $ 232  
1The “Adjustments and Accruals” related to the BellSouth and Dobson acquisitions and resulted in goodwill reductions.

Employee Separations  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. We had severance accruals of $290 at June 30, 2010 and $676 at December 31, 2009. The decrease in balance was due to payments during the period.

Income Taxes  In March 2010, the President of the United States signed into law comprehensive health care reform legislation under the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, which included a change in the tax treatment related to Medicare Part D subsidies. We recorded a $995, or $0.17 per diluted share, charge to income tax expense in our consolidated statement of income during the first quarter of 2010 and increased our deferred income taxes liability balance to reflect the impact of this change. The charge also contributed to an increase in our effective tax rate to 43.1% for the six months ended June 30, 2010, compared to 34.6% for the same period in 2009.


 

 
AT&T INC.
JUNE 30, 2010

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, 2010 and 2009 include net income, foreign currency translation adjustments and net unrealized gains (losses) on available-for-sale securities, net unrealized gains (losses) 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 locks.

Following is our comprehensive income with the respective tax impacts for the three months and six months periods ended June 30, 2010 and 2009:

   
Three months ended
   
Six months ended
 
   
June 30,
   
June 30,
 
   
2010
   
2009
   
2010
   
2009
 
Net income
  $ 4,101     $ 3,276     $ 6,663     $ 6,477  
Other comprehensive income, net of tax:
                               
Foreign currency translation adjustments (includes $(1), $(1), $(2) and $(8) attributable to noncontrolling interest), net of taxes of $12, $63, $62 and $43
    22       119       115       82  
Net unrealized gains (losses) on securities:
                               
Unrealized gains (losses), net of taxes of $(62), $63, $(14) and $15
    (115 )     119       (25 )     29  
Less reclassification adjustment realized in net income, net of taxes of $(16), $0, $(29) and $41
    (30 )     -       (55 )     77  
Net unrealized gains (losses) on cash flow hedges:
                               
Unrealized gains (losses) on rate locks and cross currency swaps net of taxes of $(257), $128, $(273) and $224
    (472 )     234       (502 )     418  
Reclassification adjustment for losses on cash flow hedges included in net income, net of taxes of $2, $1, $4 and $4
    3       4       6       7  
Defined benefit postretirement plans:
                               
Amortization of net actuarial gain and prior service cost included in net income, net of taxes of $5, $37, $11 and $67
    8       69       19       126  
Other
    -       1       -       -  
Other comprehensive income (loss)
    (584 )     546       (442 )     739  
Total comprehensive income
    3,517       3,822       6,221       7,216  
Less: Total comprehensive income attributable to noncontrolling interest
    (77 )     (77 )     (163 )     (145 )
Total Comprehensive IncomeAttributable to AT&T
  $ 3,440     $ 3,745     $ 6,058     $ 7,071  









 

 
AT&T INC.
JUNE 30, 2010

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 attributable to AT&T for the three and six months ended June 30, 2010 and 2009, are shown in the table below:

   
Three months ended
   
Six months ended
 
   
June 30,
   
June 30,
 
   
2010
   
2009
   
2010
   
2009
 
Numerators
                       
Numerator for basic earnings per share:
                       
Net income attributable to AT&T
  $ 4,023     $ 3,198     $ 6,498     $ 6,324  
Dilutive potential common shares:
                               
Other share-based payment
    2       2       4       5  
Numerator for diluted earnings per share
  $ 4,025     $ 3,200     $ 6,502     $ 6,329  
Denominators (000,000)
                               
Denominator for basic earnings per share:
                               
Weighted-average number of common shares outstanding
    5,909       5,900       5,907       5,898  
Dilutive potential common shares:
                               
Stock options
    3       3       3       3  
Other share-based payment
    25       20       26       22  
Denominator for diluted earnings per share
    5,937       5,923       5,936       5,923  
Basic earnings per share attributable to AT&T
  $ 0.68     $ 0.54     $ 1.10     $ 1.07  
Diluted earnings per share attributable to AT&T
  $ 0.68     $ 0.54     $ 1.10     $ 1.07  

At June 30, 2010, we had issued and outstanding options to purchase approximately 143 million shares of AT&T common stock. The exercise prices of 127 million shares were above the market price of AT&T stock at June 30, 2010. Accordingly, we did not include these amounts in determining the dilutive potential common shares for the period. At June 30, 2010, the exercise prices of 12 million stock options were below market price.

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 164 million shares were above the market price of AT&T stock at June 30, 2009. Accordingly, we did not include these amounts in determining the dilutive potential common shares for the period. At June 30, 2009, the exercise prices of 16 million stock options were below market price.


 

 
AT&T INC.
JUNE 30, 2010

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. 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. The customers and long-lived assets of our reportable segments are predominantly in the United States. 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 receive commissions on sales of satellite television services offered through our agency arrangements.

The Advertising Solutions segment includes our directory operations, which publish Yellow and White Pages directories and sell directory advertising and Internet-based advertising and local search.

The Other segment includes results from 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 corporate-wide decisions for which the individual operating segments are not being evaluated. In May 2010, we announced the sale of Sterling Commerce Inc. (Sterling). The Other segment results for all periods shown have been restated to exclude the results of Sterling, which are now reflected in discontinued operations (see Note 7).

Historically, the intersegment activity had been reported as revenue in the billing segment and offsetting operating expense in the purchasing segment. Upon consolidation, the intersegment revenue and expense were eliminated with the consolidated results reflecting the cash operating and depreciation expense of providing the intersegment service. As part of AT&T’s ongoing initiatives to manage its business from an external customer perspective, we no longer report intersegment revenue and instead report the cash operating and depreciation expense related to intersegment activity in the purchasing segment which provided services to the external customer. While this change did not impact AT&T’s total consolidated results, the impact to each operating segment varied. In particular, the Wireless segment, as a purchaser of network, IT and other services from the Wireline segment, experienced a reduction in cash operating expense partially offset by increased depreciation expense with the net result being increased operating margins. This change was effective with the reporting of operating results for the quarter ended March 31, 2010. We have restated prior-period segment information to conform to the current period’s presentation.

In the following tables, we show how our segment results are reconciled to our consolidated results reported. The Wireless, Wireline, Advertising Solutions and Other columns represent the segment results of each such operating segment. The consolidation column adds in those line items that we manage on a consolidated basis only: interest expense and other income (expense) – net.

Segment assets as of June 30, 2010 are materially unchanged from the year ended December 31, 2009 with the exception of Wireless segment assets. Our Wireless segment assets totaled $119,496, which increased $2,969, or 2.5%, primarily due to increases in goodwill and licenses related to purchase of certain Verizon Wireless properties (See Note 7).


10 
 

 
AT&T INC.
JUNE 30, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts


For the three months ended June 30, 2010
                               
               
Advertising
               
Consolidated
 
   
Wireless
   
Wireline
   
Solutions
   
Other
   
Consolidations
   
Results
 
Total segment operating revenues
  $ 14,242     $ 15,396     $ 1,007     $ 163     $ -     $ 30,808  
Operations and support expenses
    8,562       10,389       673       232       -       19,856  
Depreciation and amortization expenses
    1,578       3,123       132       5       -       4,838  
Total segment operating expenses
    10,140       13,512       805       237       -       24,694  
Segment operating income (loss)
    4,102       1,884       202       (74 )     -       6,114  
Interest expense
    -       -       -       -       754       754  
Equity in net income of affiliates
    7       -       -       188       -       195  
Other income
    -       -       -       -       723       723  
Segment income before income taxes
  $ 4,109     $ 1,884     $ 202     $ 114     $ (31 )   $ 6,278  

For the six months ended June 30, 2010
                               
               
Advertising
               
Consolidated
 
   
Wireless
   
Wireline
   
Solutions
   
Other
   
Consolidations
   
Results
 
Total segment operating revenues
  $ 28,139     $ 30,817     $ 2,048     $ 334     $ -     $ 61,338  
Operations and support expenses
    16,745       21,006       1,348       480       -       39,579  
Depreciation and amortization expenses
    3,136       6,219       270       13       -       9,638  
Total segment operating expenses
    19,881       27,225       1,618       493       -       49,217  
Segment operating income (loss)
    8,258       3,592       430       (159 )     -       12,121  
Interest expense
    -       -       -       -       1,519       1,519  
Equity in net income of affiliates
    20       5       -       387       -       412  
Other income
    -       -       -       -       700       700  
Segment income before income taxes
  $ 8,278     $ 3,597     $ 430     $ 228     $ (819 )   $ 11,714  






11 
 

 
AT&T INC.
JUNE 30, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts



For the three months ended June 30, 2009
                               
               
Advertising
               
Consolidated
 
   
Wireless
   
Wireline
   
Solutions
   
Other
   
Consolidations
   
Results
 
Total segment operating revenues
  $ 13,222     $ 15,989     $ 1,211     $ 192     $ -     $ 30,614  
Operations and support expenses
    8,428       10,924       706       181       -       20,239  
Depreciation and amortization expenses
    1,504       3,194       166       11       -       4,875  
Total segment operating expenses
    9,932       14,118       872       192       -       25,114  
Segment operating income (loss)
    3,290       1,871       339       -       -       5,500  
Interest expense
    -       -       -       -       876       876  
Equity in net income of affiliates
    -       5       -       226       -       231  
Other income (expense) – net
    -       (1 )     -       -       31       30  
Segment income before income taxes
  $ 3,290     $ 1,875     $ 339     $ 226     $ (845 )   $ 4,885  

For the six months ended June 30, 2009
                               
               
Advertising
               
Consolidated
 
   
Wireless
   
Wireline
   
Solutions
   
Other
   
Consolidations
   
Results
 
Total segment operating revenues
  $ 26,060     $ 32,151     $ 2,460     $ 400     $ -     $ 61,071  
Operations and support expenses
    16,314       21,856       1,427       501       -       40,098  
Depreciation and amortization expenses
    3,003       6,368       342       20       -       9,733  
Total segment operating expenses
    19,317       28,224       1,769       521       -       49,831  
Segment operating income (loss)
    6,743       3,927       691       (121 )     -       11,240  
Interest expense
    -       -       -       -       1,722       1,722  
Equity in net income of affiliates
    -       8       -       360       -       368  
Other income (expense) – net
    -       (1 )     -       -       16       15  
Segment income before income taxes
  $ 6,743     $ 3,934     $ 691     $ 239     $ (1,706 )   $ 9,901  



12 
 

 
AT&T INC.
JUNE 30, 2010

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 2010.

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. In the following table, gains are denoted with parentheses. A portion of these expenses is 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,
 
   
2010
   
2009
   
2010
   
2009
 
Pension (benefit) cost:
                       
Service cost – benefits earned during the period
  $ 269     $ 272     $ 538     $ 544  
Interest cost on projected benefit obligation
    788       845       1,575       1,690  
Expected return on assets
    (1,143 )     (1,141 )     (2,286 )     (2,281 )
Amortization of prior service (benefit) cost
    (4 )     28       (8 )     55  
Recognized actuarial loss
    171       166       342       332  
Net pension cost
  $ 81     $ 170     $ 161     $ 340  
                                 
Postretirement (benefit) cost:
                               
Service cost – benefits earned during the period
  $ 87     $ 88     $ 174     $ 176  
Interest cost on accumulated postretirement
                               
benefit obligation
    566       631       1,129       1,261  
Expected return on assets
    (285 )     (239 )     (569 )     (478 )
Amortization of prior service benefit
    (157 )     (89 )     (313 )     (179 )
Recognized actuarial gain
    (1 )     -       (3 )     -  
Postretirement cost
  $ 210     $ 391     $ 418     $ 780  
                                 
Combined net pension and postretirement cost
  $ 291     $ 561     $ 579     $ 1,120  

Our combined net pension and postretirement cost decreased $270 in the second quarter and $541 for the first six months of 2010. The decrease was primarily related to lower interest costs due to a lower net obligation, as a result of retiree medical and drug coverage changes, partially offset by a change in the discount rate from 7% to 6.5%. An increase in amortization of prior service benefit, driven by the utilization of market interest rates for lump sum pension distributions, under the Pension Protection Act and changes in future retiree benefits, also contributed to the decrease in combined net pension and postretirement cost. We use a method in which gains and losses are amortized only when the net gains or losses exceed 10% of the greater of the projected benefit obligation or the market-related value of assets (MRVA). The expected long-term rate of return is calculated on the MRVA. Actual gains and losses on pension and postretirement plan assets are generally recognized in the MRVA equally over a period of up to five years. However, we use a methodology 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. Due to investment losses on plan assets experienced in 2008, this methodology contributed $1,577 to our combined net pension and postretirement costs in 2009. This methodology will not have a material impact on our combined net pension and postretirement cost in 2010.

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 cost for non-U.S. plans of ($1) in the second quarter and $1 for the first six months of 2010 and ($4) in the second quarter and ($3) for the first six months of 2009.

13
 

 
AT&T INC.
JUNE 30, 2010

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 $42 in the second quarter, of which $33 was interest cost, and $84 for the first six months of 2010, of which $67 was interest cost. In 2009, net supplemental retirement pension benefits cost was $41 in the second quarter, $35 of which was interest cost, and $83 for the first six months, $70 of which was interest cost.

NOTE 6. FAIR VALUE MEASUREMENTS AND DISCLOSURE

The Fair Value Measurement and Disclosure framework provides a three-tiered fair value hierarchy that gives highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1
Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that AT&T has the ability to access.
   
Level 2
Inputs to the valuation methodology include:
· Quoted prices for similar assets and liabilities in active markets;
· Quoted prices for identical or similar assets or liabilities in inactive markets;
· Inputs other than quoted market prices that are observable for the asset or liability;
· Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
   
 
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
   
Level 3
Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
· Fair value is often based on internally developed models in which there are few, if any, external observations.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used should maximize the use of observable inputs and minimize the use of unobservable inputs.

The valuation methodologies described above may produce a fair value calculation that may not be indicative of future net realizable value or reflective of future fair values. AT&T believes its valuation methods are appropriate and consistent with other market participants. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the methodologies used at June 30, 2010 and December 31, 2009.


14 
 

 
AT&T INC.
JUNE 30, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts


Long-Term Debt and Other 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:

 
June 30,
 
December 31,
 
 
2010
 
2009
 
 
Carrying
 
Fair
 
Carrying
 
Fair
 
 
Amount
 
Value
 
Amount
 
Value
 
Notes and debentures
  $ 66,448     $ 72,447     $ 71,811     $ 75,212  
Commercial paper
    3,278       3,278       -       -  
Bank borrowings
    35       35       33       33  
Investment securities
    2,132       2,132       1,885       1,885  

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.

Investment Securities

Our investment securities consist of primarily available-for-sale instruments, which include equities, fixed income bonds and other securities. Substantially all the fair values of our available-for-sale securities were estimated based on quoted market prices.  Realized gains and losses on these securities are included in “Other income (expense) – net” in the consolidated statements of income using the specific identification method. Unrealized gains and losses, net of tax, on available-for-sale securities are recorded in accumulated other comprehensive income (accumulated OCI). Unrealized losses that are considered other than temporary are recorded in other income (expense) – net, with the corresponding reduction to the carrying basis of the investment.

Our short-term investments, other short- and long-term held-to-maturity investments (including money market securities) and customer deposits are recorded at amortized cost, and the respective carrying amounts approximate fair values.

Our investment securities maturing within one year are recorded in “Other current assets,” and instruments with maturities of more than one year are recorded in “Other Assets” on the consolidated balance sheets.

Following is the fair value leveling for available-for-sale securities and derivatives as of June 30, 2010 and December 31, 2009:

   
June 30, 2010
 
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Available-for-Sale Securities
                       
Domestic equities
  $ 942     $ -     $ -     $ 942  
International equities
    395       -       -       395  
Fixed income bonds
    -       690       -       690  
Asset Derivatives
                               
Interest rate swaps
    -       602       -       602  
Cross-currency swaps
    -       108       -       108  
Foreign exchange contracts
    -       5       -       5  
Liability Derivatives
                               
Cross-currency swaps
    -       (1,014 )     -       (1,014 )
Interest rate locks
    -       (290 )     -       (290 )
Foreign exchange contracts
    -       (21 )     -       (21 )
                                 
 

15 
 

 
AT&T INC.
JUNE 30, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts


 
   
December 31, 2009
 
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Available-for-Sale Securities
                       
Domestic equities
  $ 1,047     $ -     $ -     $ 1,047  
International equities
    412       -       -       412  
Fixed income bonds
    -       341       -       341  
Asset Derivatives
                               
Interest rate swaps
    -       399       -       399  
Cross-currency swaps
    -       635       -       635  
Interest rate locks
    -       150       -       150  
Foreign exchange contracts
    -       2       -       2  
Liability Derivatives
                               
Cross-currency swaps
    -       (390 )     -       (390 )
Interest rate locks
    -       (6 )     -       (6 )
Foreign exchange contracts
    -       (7 )     -       (7 )
                                 

Derivative Financial Instruments

We employ derivatives to manage certain market risks, primarily interest rate risk and foreign currency exchange risk. This includes the use of interest rate swaps, interest rate locks, foreign exchange forward contracts and combined interest rate foreign exchange contracts (cross-currency swaps). We do not use derivatives for trading or speculative purposes. We record derivatives on our consolidated balance sheets at fair value which is derived from observable market data, including yield curves and foreign exchange rates (all of our derivatives are Level 2). Cash flows associated with derivative instruments are presented in the same category on the consolidated statements of cash flows as the item being hedged.

The majority of our derivatives are designated either as a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge), or as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). Only a portion of our foreign exchange forward contracts is not designated to receive hedge accounting.
 
Fair Value Hedging We designate our fixed-to-floating interest rate 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. 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. Accrued and realized gains or losses from interest rate swaps impact interest expense on the consolidated statements of income. Unrealized gains on interest rate swaps are recorded at fair market value as assets, and unrealized losses on interest rate swaps are recorded at fair market value as liabilities. We record changes in the fair value of the swaps, along with the changes in the fair value of the hedged asset or liability that is attributable to the hedged risk. 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, though they net to zero. Realized gains or losses upon early termination of our fair value hedges would be recognized in interest expense.
 
Cash Flow Hedging Unrealized gains on derivatives designated as cash flow hedges are recorded at fair value as assets, and unrealized losses on derivatives designated as cash flow hedges are recorded at fair value as liabilities, both for the period they are outstanding. For derivative instruments designated as cash flow hedges, the effective portion is reported as a component of accumulated OCI 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 other income - expense in each period.

We designate our 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 quarter. In the six months ended June 30, 2010 and June 30, 2009, no ineffectiveness was measured.

16
 

 
AT&T INC.
JUNE 30, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts


Periodically, we enter into and designate interest rate locks to partially hedge the risk of changes in interest payments attributable to increases in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt. We designate our interest rate locks as cash flow hedges. Gains and losses when 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 second quarter, we settled $200 of notional rate locks without utilizing them in a debt issuance. The total impact to interest expense was $(5). We are confident our remaining rate locks will be utilized given our probable refinancing needs over the next two years. No other ineffectiveness was measured in the six months ended June 30, 2010. Over the next 12 months, we expect to reclassify $16 from accumulated OCI to interest expense due to the amortization of net losses on historical interest rate locks. Our unutilized interest rate locks carry mandatory early terminations, the latest occurring in April 2012.

We hedge a large portion of the exchange risk involved in anticipation of highly probable foreign currency-denominated transactions. In anticipation of these transactions, we often enter into foreign exchange contracts to provide currency at a fixed rate. Some of these instruments are designated as cash flow hedges while others remain non-designated, largely based on size and duration. Gains and losses at the time we settle or take delivery on our designated foreign exchange contracts are amortized into income over the next few months as the hedged funds are spent by our foreign subsidiaries, except where a material amount is deemed to be ineffective, which would be immediately reclassified to income. In the six months ended June 30, 2010, no ineffectiveness was measured. No transactions were designated in the first half of 2009.

Non-designated and Discontinued Hedging Instruments Changes in the fair value of non-designated derivatives are recorded in other income (expense) – net, along with the change in fair value of the underlying asset or liability, as applicable. When hedge accounting is discontinued, the derivative is adjusted for changes in fair value through other income (expense) – net. For fair value hedges, the swap asset or liability and the underlying hedged liability or asset will no longer be adjusted for changes in fair value, and the net adjustment to the hedged item at that time will be amortized into earnings over the remaining life of the hedged item. For cash flow hedges, gains and losses that were in accumulated OCI as a component of stockholders' equity in connection with hedged assets or liabilities or forecasted transactions will be recognized in other income (expense) - net, in the same period the hedged item affects earnings.

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, 2010, we had posted collateral of $168 (a deposit asset). Under the agreements, if our credit rating had been downgraded one rating level, we would have been required to post additional collateral of $232. At December 31, 2009, we held $222 of counterparty collateral. 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 notional amount of our outstanding derivative positions:

   
June 30,
   
December 31,
 
   
2010
   
2009
 
             
Interest rate swaps
  $ 11,250     $ 9,000  
Cross-currency swaps
    7,502       7,502  
Interest rate locks
    3,400       3,600  
Foreign exchange contracts
    229       293  
Total
  $ 22,381     $ 20,395  


17 
 

 
AT&T INC.
JUNE 30, 2010

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

   
June 30,
   
December 31,
 
Asset Derivatives
 
2010
   
2009
 
             
Interest rate swaps
  $ 602     $ 399  
Cross-currency swaps
    108       635  
Interest rate locks
    -       150  
Foreign exchange contracts
    5       2  
Total
  $ 715     $ 1,186  

   
June 30,
   
December 31,
 
Liability Derivatives
 
2010
   
2009
 
             
Cross-currency swaps
  $ (1,014 )   $ (390 )
Interest rate locks
    (290 )     (6 )
Foreign exchange contracts
    (21 )     (7 )
Total
  $ (1,325 )   $ (403 )

Effect of Derivatives on the Consolidated Statements of Income
   
Three months ended
   
Three months ended
   
Six months ended
   
Six months ended
 
Fair Value Hedging Relationships
 
June 30, 2010
   
June 30, 2009
   
June 30, 2010
   
June 30, 2009
 
                         
Interest rate swaps (Interest expense):
                       
Gain (Loss) on interest rate swaps
  $ 142     $ (169 )   $ 194     $ (220 )
Gain (Loss) on long-term debt
    (142 )     169       (194 )     220  

In addition, the net swap settlements that accrued and settled in the quarter ended June 30 were also reported as reductions of interest expense.

   
Three months ended
   
Three months ended
   
Six months ended
   
Six months ended
 
Cash Flow Hedging Relationships
 
June 30, 2010
   
June 30, 2009
   
June 30, 2010
   
June 30, 2009
 
                         
Cross-currency swaps:
                       
Gain (Loss) recognized in accumulated OCI
  $ (345 )   $ 343     $ (324 )   $ 563  
Other income (expense) reclassified from accumulated OCI into income
    -       -       -       -  
                                 
Interest rate locks:
                               
Gain (Loss) recognized in accumulated OCI
    (379 )     19       (433 )     79  
Interest income (expense) reclassified from accumulated OCI into income
    (6 )     (5 )     (11 )     (11 )
                                 
Foreign exchange contracts:
                               
Gain (Loss) recognized in accumulated OCI
    (3 )     -       (16 )     -  
Other income (expense) reclassified from accumulated OCI into income
    -       -       -       -  

Non-designated Hedging Instruments
Three months ended
 
Three months ended
 
Six months ended
 
Six months ended
 
 
June 30, 2010
 
June 30, 2009
 
June 30, 2010
 
June 30, 2009
 
                         
Foreign exchange contracts Other income (expense)
  $ -     $ 8     $ -     $ (2 )

The balance of the unrealized derivative gain (loss) in accumulated OCI was $(354) at June 30, 2010 and $142 at December 31, 2009.
 

18 
 

 
AT&T INC.
JUNE 30, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts


NOTE 7. ACQUISITIONS, DISPOSITIONS, AND OTHER ADJUSTMENTS

Acquisitions

Wireless Properties Transaction  In May 2009, we announced a definitive agreement to acquire certain wireless properties, including Federal Communications Commission (FCC) licenses and network assets, from Verizon Wireless. On June 22, 2010, we acquired these assets for $2,372 in cash and increased goodwill by $972. The assets primarily represent former Alltel Wireless assets and serve approximately 1.6 million subscribers in 79 service areas across 18 states. The preliminary fair value of the acquired net assets of $1,400 included $364 of property plant and equipment, $776 of FCC licenses, and $194 of customer lists and other intangible assets.

Dispositions

Sale of Sterling Operations  In May 2010, we announced a definitive agreement to sell our Sterling subsidiary to International Business Machines Corporation (IBM), an unrelated party, for $1,400 in cash. Sterling provides business applications and integration solutions to approximately 18,000 customers worldwide. The sale is subject to regulatory approvals and the satisfaction of customary closing conditions. We also entered into a transition services agreement with IBM related to short-term support of Sterling’s operations after the sale, and an enterprise license agreement, under which we would purchase software from Sterling.

We are treating Sterling as a discontinued operation as of May 24, 2010, the measurement date, as we have determined that the cash inflows under the transition services agreement and our cash outflows under the enterprise license agreement will not constitute significant continuing involvement with Sterling’s operations after the sale. As of the measurement date, we have applied held-for-sale treatment to Sterling’s assets and liabilities, as we believe that the sale is probable and anticipate that it will occur by September 30, 2010. Accordingly, we have reclassified Sterling’s operating results, for all historical periods, to Net income from discontinued operations in the accompanying consolidated statements of income. We have included Sterling’s assets in Other current assets—and the related liabilities in Accounts payable and accrued liabilities—in our consolidated balance sheets as of June 30, 2010, and December 31, 2009. While we committed to sell Sterling in 2010, we have elected to classify Sterling’s assets and liabilities as of December 31, 2009, in the same manner as those as of the measurement date for comparability. Sterling’s assets and liabilities included the following as of the indicated periods:

   
June 30, 2010
   
December 31, 2009
 
Assets held for sale:
           
Current assets
  $ 278     $ 333  
Property, plant and equipment
    36       40  
Goodwill and other intangible assets
    649       672  
Other assets
    39       47  
Total assets
  $ 1,002     $ 1,092  
                 
Liabilities related to assets held for sale:
               
Current liabilities
  $ 294     $ 365  
Other liabilities
    122       126  
Total liabilities</