TIDM58KN
RNS Number : 7285H
AT & T Inc.
19 August 2016
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported) July 21,
2016
AT&T INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 1-8610 43-1301883
----------------------------- ---------------- ----------------------------
(State or Other Jurisdiction (Commission File (IRS Employer Identification
of Incorporation) Number) No.)
208 S. Akard St., Dallas, Texas 75202
----------------------------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (210)
821-4105
__________________________________
(Former Name or Former Address, if Changed Since Last
Report)
Check the appropriate box below if the Form 8-K filing is
intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions (see General
Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act (17 CFR 240-14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under
the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
The registrant announced on July 21, 2016, its results of
operations for the second quarter of 2016. The text of the press
release and accompanying financial information are attached as
exhibits and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
The following exhibits are furnished as part of this report:
(d) Exhibits
99.1 Press release dated July 21, 2016 reporting financial
results for the second quarter ended June 30, 2016.
99.2 AT&T Inc. selected financial statements and operating
data.
99.3 Discussion and reconciliation of non-GAAP measures.
Signature
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
AT&T INC.
Date: July 21, 2016 By: /s/ Debra L. Dial_________________
Debra L. Dial
Senior Vice President and Controller
AT&T Reports Second-Quarter Results
Including DIRECTV Acquisition
-- Consolidated revenues
of $40.5 billion, up
more than 22%
-- Operating income up
13.6%
-- Net income up 10.6%
-- Cash from operations
of $10.3 billion, up
12.5%
-- Free cash flow of $4.8
billion, up 8.4%
-- Diluted EPS of $0.55
as reported and $0.72
diluted adjusted EPS
compared to $0.59 and
$0.70 in the year-ago
quarter
-- 2.1 million wireless net adds
driven by connected devices,
Mexico and Cricket
-- U.S. wireless postpaid churn
of 0.97%, second-lowest ever
-- U.S. wireless operating margins
expand; best-ever U.S. wireless
EBITDA margins
-- 342,000 U.S. DIRECTV net adds;
38,000 global TV net adds
o Nearly 1 million U.S.
satellite net adds since
acquisition of DIRECTV
-- 74,000 IP broadband net adds
-- Nearly 800,000 U.S.-branded
smartphones added to subscriber
base, more than offsetting
a nearly 600,000 decline in
U.S.-branded feature phone
base
-- 185,000 U.S.-branded (postpaid
and prepaid) phone net adds
-- 380 million North American
4G LTE POPs
-- Year-to-date cash from operations
up 14.5%; year-to-date free
cash flow up 11.6%
-- Full-year guidance on track
to meet or exceed expectations
Note: AT&T's second-quarter earnings conference call will be
webcast at 4:30 p.m. ET on Thursday, July 21, 2016. The webcast and
related materials will be available on AT&T's Investor
Relations website at www.att.com/investor.relations
DALLAS, July 21, 2016 - AT&T Inc. (NYSE:T) today reported
revenue, net income, adjusted EPS and free cash flow growth for the
second quarter.
July 21, 2016
(c) 2016 AT&T Intellectual Property. All rights reserved.
AT&T and the Globe logo are registered trademarks of AT&T
Intellectual Property.
"One year after our acquisition of DIRECTV, the success of the
integration has exceeded our expectations," said Randall
Stephenson, AT&T chairman and CEO. "Cost synergies are ahead of
target, we've added nearly 1 million DIRECTV subscribers since the
acquisition, and our new video streaming services are scheduled to
roll out later this year. We plan to serve every segment of the
video industry and offer customers their favorite content virtually
wherever and whenever they want it.
"Second-quarter results continued our strong track record of
delivering revenue, adjusted earnings and free cash flow growth.
This steady execution done at scale gives us the financial strength
to grow our business while returning substantial value to our
shareholders."
Consolidated Financial Results
AT&T's consolidated revenues for the second quarter totaled
$40.5 billion, up more than 22% versus the year-earlier period
largely due to the July 24, 2015 acquisition of DIRECTV. Compared
with results for the second quarter of 2015, operating expenses
were $34.0 billion versus $27.2 billion; operating income was $6.6
billion versus $5.8 billion; and operating income margin was 16.2%
versus 17.5%. When adjusting for amortization, merger- and
integration-related costs and other expenses, operating income was
$8.1 billion versus $6.5 billion; and operating income margin was
20.1%, up 30 basis points from a year ago.
Second-quarter net income attributable to AT&T totaled $3.4
billion, or $0.55 per diluted share, compared to $3.1 billion, or
$0.59 per diluted share, in the year-ago quarter. Adjusting for
$0.17 of amortization, merger-and integration-related costs and
other expenses, earnings per diluted share was $0.72 compared to an
adjusted $0.70 in the year-ago quarter.
Cash from operating activities was $10.3 billion in the second
quarter, and capital investment(1) totaled $5.6 billion. Free cash
flow - cash from operating activities minus capital expenditures -
was $4.8 billion, up 8.4% year over year.
For detailed segment results, please go to the Investor Briefing
and Financial and Operational Results on the AT&T Investor
Relations website.
(1) 2Q16 includes $95 million in capital purchases in Mexico
with favorable vendor payment terms.
AT&T products and services are provided or offered by
subsidiaries and affiliates of AT&T Inc. under the AT&T
brand and not by AT&T Inc.
July 21, 2016
(c) 2016 AT&T Intellectual Property. All rights reserved.
AT&T and the Globe logo are registered trademarks of AT&T
Intellectual Property.
Page 2
About AT&T
AT&T Inc. (NYSE:T) helps millions around the globe connect
with leading entertainment, mobile, high-speed Internet and voice
services. We're the world's largest provider of pay TV. We have TV
customers in the U.S. and 11 Latin American countries. We offer the
best global coverage of any U.S. wireless provider*. And we help
businesses worldwide serve their customers better with our mobility
and highly secure cloud solutions.
Additional information about AT&T products and services is
available at http://about.att.com. Follow our news on Twitter at
@ATT, on Facebook at http://www.facebook.com/att and YouTube at
http://www.youtube.com/att.
(c) 2016 AT&T Intellectual Property. All rights reserved.
AT&T, the Globe logo and other marks are trademarks and service
marks of AT&T Intellectual Property and/or AT&T affiliated
companies. All other marks contained herein are the property of
their respective owners.
*Global coverage claim based on offering discounted voice and
data roaming; LTE roaming; voice roaming; and world-capable
smartphone and tablets in more countries than any other U.S. based
carrier. International service required. Coverage not available in
all areas. Coverage may vary per country and be limited/restricted
in some countries.
Cautionary Language Concerning Forward-Looking Statements
Information set forth in this news release contains financial
estimates and other forward-looking statements that are subject to
risks and uncertainties, and actual results might differ
materially. A discussion of factors that may affect future results
is contained in AT&T's filings with the Securities and Exchange
Commission. AT&T disclaims any obligation to update and revise
statements contained in this news release based on new information
or otherwise.
This news release may contain certain non-GAAP financial
measures. Reconciliations between the non-GAAP financial measures
and the GAAP financial measures are available on the company's
website at www.att.com/investor.relations.
The "quiet period" for FCC Spectrum Auction 1000 (also known as
the 600 MHz incentive auction) is now in effect. During the quiet
period, auction applicants are required to avoid discussions of
bids, bidding strategy and post-auction market structure with other
auction applicants.
Free Cash Flow
Free cash flow is defined as cash from operations minus Capital
expenditures. Free cash flow after dividends is defined as cash
from operations minus Capital expenditures and dividends. Free cash
flow dividend payout ratio is defined as the percentage of
dividends paid to free cash flow. We believe these metrics provide
useful information to our investors because management views free
cash flow as an important indicator of how much cash is generated
by routine business operations, including Capital expenditures, and
makes decisions based on it. Management also views free cash flow
as a measure of cash available to pay debt and return cash to
shareowners.
July 21, 2016
(c) 2016 AT&T Intellectual Property. All rights reserved.
AT&T and the Globe logo are registered trademarks of AT&T
Intellectual Property.
Page 3
Capital Investment
Capital Investment is a non-GAAP financial measure that adds to
Capital expenditures the amount of vendor financing arrangements
for capital improvements to our wireless network in Mexico. These
favorable payment terms are considered vendor financing
arrangements and are reported as repayments of debt instead of
Capital expenditures. Management believes that Capital Investment
provides relevant and useful information to investors and other
users of our financial data in evaluating long-term investment in
our business.
EBITDA
Our calculation of EBITDA, as presented, may differ from
similarly titled measures reported by other companies. For
AT&T, EBITDA excludes other income (expense) - net, and equity
in net income (loss) of affiliates, as these do not reflect the
operating results of our subscriber base or operations that are not
under our control. Equity in net income (loss) of affiliates
represents the proportionate share of the net income (loss) of
affiliates in which we exercise significant influence, but do not
control. Because we do not control these entities, management
excludes these results when evaluating the performance of our
primary operations. EBITDA also excludes interest expense and the
provision for income taxes. Excluding these items eliminates the
expenses associated with our capital and tax structures. Finally,
EBITDA excludes depreciation and amortization in order to eliminate
the impact of capital investments. EBITDA does not give effect to
cash used for debt service requirements and thus does not reflect
available funds for distributions, reinvestment or other
discretionary uses. EBITDA is not presented as an alternative
measure of operating results or cash flows from operations, as
determined in accordance with U.S. generally accepted accounting
principles (GAAP).
EBITDA service margin is calculated as EBITDA divided by service
revenues.
When discussing our segment results, EBITDA excludes equity in
net income (loss) of affiliates, and depreciation and amortization
from segment contribution. For our supplemental presentation of our
combined domestic wireless operations (AT&T Mobility), EBITDA
excludes depreciation and amortization from Operating Income.
These measures are used by management as a gauge of our success
in acquiring, retaining and servicing subscribers because we
believe these measures reflect AT&T's ability to generate and
grow subscriber revenues while providing a high level of customer
service in a cost-effective manner. Management also uses these
measures as a method of comparing segment performance with that of
many of its competitors. The financial and operating metrics which
affect EBITDA include the key revenue and expense drivers for which
segment managers are responsible and upon which we evaluate their
performance.
We believe EBITDA Service Margin (EBITDA as a percentage of
service revenues) to be a more relevant measure than EBITDA Margin
(EBITDA as a percentage of total revenue) for our Consumer Mobility
segment operating margin and our supplemental AT&T Mobility
operating margin. For the periods covered by this report, we
subsidized a portion of some of our wireless handset sales, which
are recognized in the period in which we sell the handset.
Management views this equipment subsidy as a cost to acquire or
retain a subscriber, which is recovered through the ongoing service
revenue that is generated by the subscriber. We also use wireless
service revenues to calculate margin to facilitate comparison, both
internally and externally with our wireless competitors, as they
calculate their margins using wireless service revenues as
well.
July 21, 2016
(c) 2016 AT&T Intellectual Property. All rights reserved.
AT&T and the Globe logo are registered trademarks of AT&T
Intellectual Property.
Page 4
There are material limitations to using these non-GAAP financial
measures. EBITDA, EBITDA margin and EBITDA service margin, as we
have defined them, may not be comparable to similarly titled
measures reported by other companies. Furthermore, these
performance measures do not take into account certain significant
items, including depreciation and amortization, interest expense,
tax expense and equity in net income (loss) of affiliates.
Management compensates for these limitations by carefully analyzing
how its competitors present performance measures that are similar
in nature to EBITDA as we present it, and considering the economic
effect of the excluded expense items independently as well as in
connection with its analysis of net income as calculated in
accordance with GAAP. EBITDA, EBITDA margin and EBITDA service
margin should be considered in addition to, but not as a substitute
for, other measures of financial performance reported in accordance
with GAAP.
Adjusting Items
Adjusting items include revenues and costs we consider
nonoperational in nature, such as items arising from asset
acquisitions or dispositions. We also adjust for net actuarial
gains or losses associated with our pension and postemployment
benefit plans due to the often significant impact on our
fourth-quarter results (we immediately recognize this gain or loss
in the income statement, pursuant to our accounting policy for the
recognition of actuarial gains and losses.) As a result, our
adjusted results reflect an expected return on plan assets rather
than the actual return on plan assets, as included in the GAAP
measure of income.
The tax impact of adjusting items is calculated using the
effective tax rate during the quarter except for (1) adjustments
related to Mexico operations, which are taxed at the 30% marginal
rate for Mexico and (2) adjustments that, given their magnitude can
drive a change in the effective tax rate, reflect the actual tax
expense or combined marginal rate of approximately 38%.
Adjusted Operating Income, Adjusted Operating Income Margin,
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service
margin and Adjusted diluted EPS are non-GAAP financial measures
calculated by excluding from operating revenues, operating expenses
and income tax expense certain significant items that are
non-operational or non-recurring in nature, including dispositions
and merger integration and transaction costs. Management believes
that these measures provide relevant and useful information to
investors and other users of our financial data in evaluating the
effectiveness of our operations and underlying business trends.
Adjusted Operating Revenues, Adjusted Operating Income, Adjusted
Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin,
Adjusted EBITDA service margin and Adjusted diluted EPS should be
considered in addition to, but not as a substitute for, other
measures of financial performance reported in accordance with GAAP.
AT&T's calculation of Adjusted items, as presented, may differ
from similarly titled measures reported by other companies.
July 21, 2016
(c) 2016 AT&T Intellectual Property. All rights reserved.
AT&T and the Globe logo are registered trademarks of AT&T
Intellectual Property.
Page 5
Entertainment Group Segment Adjusted Operating Revenues includes
the external operating revenues from DIRECTV U.S. as reported in
the DIRECTV Form 10-Q/A dated June 30, 2015 adjusted to (1) include
operations reported in other DIRECTV operating segments that
AT&T has chosen to manage in our Entertainment Group segment,
(2) conform DIRECTV's practice of recognizing revenue to be
received under contractual commitments on a straight line basis
over the minimum contract period to AT&T's method of limiting
the revenue recognized to the monthly amounts billed and (3)
eliminate intercompany transactions from DIRECTV U.S. and the
Entertainment Group segment. Adjusting Entertainment Group segment
operating revenues provides for comparability between periods.
Net Debt to Adjusted EBITDA Discussion
Net Debt to EBITDA ratios are non-GAAP financial measures
frequently used by investors and credit rating agencies and
management believes these measures provide relevant and useful
information to investors and other users of our financial data. The
Net Debt to Adjusted EBITDA ratio is calculated by dividing the Net
Debt by annualized Net Debt Adjusted EBITDA. Annualized Net Debt
Adjusted EBITDA excludes severance-related adjustments as described
in our credit agreements. Net Debt is calculated by subtracting
cash and cash equivalents and certificates of deposit and time
deposits that are greater than 90 days, from the sum of debt
maturing within one year and long-term debt. Annualized Adjusted
EBITDA is calculated by annualizing the year-to-date Net Debt
Adjusted EBITDA.
For more information, contact:
Name: Fletcher Cook
AT&T Corporate Communications
Phone: (214) 757-7629
Email: fletcher.cook@att.com
Name: McCall Butler
AT&T Corporate Communications
Phone: (917) 209-5792
Email: butlerm@att.com
July 21, 2016
(c) 2016 AT&T Intellectual Property. All rights reserved.
AT&T and the Globe logo are registered trademarks of AT&T
Intellectual Property.
Page 6
Financial Data
AT&T Inc.
-------------------- ---------- ---------- ----- ---------- ---------- ----
Consolidated
Statements
of Income
Dollars in millions
except per share
amounts
-------------------- ---------- ---------- ----- ---------- ---------- ----
Unaudited Three Months Ended Six Months Ended
----------------------------------- ------------------------------------
6/30/2016 6/30/2015 % Chg 6/30/2016 6/30/2015 % Chg
-------------------- ----------- ----------- --------- ----------- ----------- ----------
Operating Revenues
Service $ 37,142 $ 29,541 25.7% $ 74,243 $ 58,503 26.9%
Equipment 3,378 3,474 -2.8% 6,812 7,088 -3.9%
--------------------- ------ ------ ------ ------
Total Operating
Revenues 40,520 33,015 22.7% 81,055 65,591 23.6%
--------------------- ------ ------ ------ ------
Operating Expenses
Cost of services
and sales
Equipment 4,260 4,353 -2.1% 8,635 8,899 -3.0%
Broadcast,
programming
and
operations 4,701 1,148 - 9,330 2,270 -
Other cost of
services
(exclusive
of
depreciation
and
amortization
shown
separately
below) 9,514 9,578 -0.7% 18,910 18,390 2.8%
Selling, general
and administrative 8,909 7,467 19.3% 17,350 15,428 12.5%
Depreciation
and amortization 6,576 4,696 40.0% 13,139 9,274 41.7%
--------------------- ------ ------ ------ ------
Total Operating
Expenses 33,960 27,242 24.7% 67,364 54,261 24.1%
--------------------- ------ ------ ------ ------
Operating Income 6,560 5,773 13.6% 13,691 11,330 20.8%
--------------------- ------ ------ ------ ------
Interest Expense 1,258 932 35.0% 2,465 1,831 34.6%
Equity in Net
Income of Affiliates 28 33 -15.2% 41 33 24.2%
Other Income
(Expense)
- Net 91 48 89.6% 161 118 36.4%
--------------------- ------ ------ ------ ------
Income Before
Income Taxes 5,421 4,922 10.1% 11,428 9,650 18.4%
Income Tax Expense 1,906 1,738 9.7% 4,028 3,127 28.8%
--------------------- ------ ------ ------ ------
Net Income 3,515 3,184 10.4% 7,400 6,523 13.4%
--------------------- ------ ------ ------ ------
Less: Net Income
Attributable to
Noncontrolling
Interest (107) (102) -4.9% (189) (178) -6.2%
--------------------- ------ ------ ------ ------
Net Income
Attributable
to AT&T $ 3,408 $ 3,082 10.6% $ 7,211 $ 6,345 13.6%
===================== ====== ====== ====== ======
Basic Earnings
Per Share
Attributable
to AT&T $ 0.55 $ 0.59 -6.8% $ 1.17 $ 1.22 -4.1%
Weighted Average
Common
Shares Outstanding
(000,000) 6,174 5,204 18.6% 6,173 5,204 18.6%
Diluted Earnings
Per Share
Attributable
to AT&T $ 0.55 $ 0.59 -6.8% $ 1.17 $ 1.22 -4.1%
Weighted Average
Common
Shares Outstanding
with Dilution
(000,000) 6,195 5,220 18.7% 6,193 5,220 18.6%
Financial Data
AT&T Inc.
----------------------------------------------------------------------------------------------
Statements of Segment Income
Dollars in
millions
----------------- ------- ------- ----- ------- ------- -----
Unaudited
Three Months Ended Six Months Ended
----------------------------------- -------------------------------------
6/30/2016 6/30/2015 % Chg 6/30/2016 6/30/2015 % Chg
----------------- ----------- ----------- --------- ----------- ----------- ---------
Business
Solutions
----------------- ------- ------- ----- ------- ------- -----
Segment Operating
Revenues
Wireless
service $ 7,963 $ 7,756 2.7% $15,818 $15,271 3.6%
Fixed strategic
services 2,797 2,580 8.4% 5,559 5,099 9.0%
Legacy voice
and data
services 4,158 4,681 -11.2% 8,521 9,465 -10.0%
Other service
and equipment 886 854 3.7% 1,744 1,700 2.6%
Wireless
equipment 1,775 1,793 -1.0% 3,546 3,686 -3.8%
------------------ ------ ------ ----- ------ ------ -----
Total Segment
Operating
Revenues 17,579 17,664 -0.5% 35,188 35,221 -0.1%
------------------ ------ ------ ----- ------ ------ -----
Segment Operating
Expenses
Operations and
support expenses 10,857 10,972 -1.0% 21,659 22,045 -1.8%
Depreciation
and amortization 2,521 2,460 2.5% 5,029 4,802 4.7%
------------------ ------ ------ ----- ------ ------ -----
Total Segment
Operating
Expenses 13,378 13,432 -0.4% 26,688 26,847 -0.6%
------------------ ------ ------ ----- ------ ------ -----
Segment Operating
Income 4,201 4,232 -0.7% 8,500 8,374 1.5%
Equity in Net
Income of
Affiliates - - - - - -
----------------- ------ ------ ----- ------ ------ -----
Segment
Contribution $ 4,201 $ 4,232 -0.7% $ 8,500 $ 8,374 1.5%
================== ====== ====== ===== ====== ====== =====
Segment Operating
Income Margin 23.9% 24.0% 24.2% 23.8%
Entertainment
Group
----------------- ------ ------ ----- ------ ------ -----
Segment Operating
Revenues
Video
entertainment $ 8,963 $ 1,991 - $17,867 $ 3,862 -
High-speed
internet 1,867 1,623 15.0% 3,670 3,176 15.6%
Legacy voice
and data
services 1,244 1,516 -17.9% 2,557 3,128 -18.3%
Other service
and equipment 637 652 -2.3% 1,275 1,276 -0.1%
------------------ ------ ------ ----- ------ ------ -----
Total Segment
Operating
Revenues 12,711 5,782 - 25,369 11,442 -
------------------ ------ ------ ----- ------ ------ -----
Segment Operating
Expenses
Operations and
support expenses 9,569 4,913 94.8% 19,147 9,772 95.9%
Depreciation
and amortization 1,489 1,065 39.8% 2,977 2,130 39.8%
------------------ ------ ------ ----- ------ ------ -----
Total Segment
Operating
Expenses 11,058 5,978 85.0% 22,124 11,902 85.9%
------------------ ------ ------ ----- ------ ------ -----
Segment Operating
Income (Loss) 1,653 (196) - 3,245 (460) -
Equity in Net
Income (Loss)
of Affiliates (2) (12) 83.3% 1 (18) -
------------------ ------ ------ ----- ------ ------ -----
Segment
Contribution $ 1,651 $ (208) - $ 3,246 $ (478) -
================== ====== ====== ===== ====== ====== =====
Segment Operating
Income Margin 13.0% -3.4% 12.8% -4.0%
Financial Data
AT&T Inc.
-------------------------------------------------------------------------------------------------------- ----
Statements of Segment Income
Dollars in millions
-------------------------------------------------------------------------------------------------------- ----
Unaudited
Three Months Ended Six Months Ended
------------------------------------------- ---------------------------------------------
6/30/2016 6/30/2015 % Chg 6/30/2016 6/30/2015 % Chg
----------------- ----------- ----------- ----- ----------- ----------- -----
Consumer Mobility
----------------- ----------- ----------- ----- ----------- ----------- -----
Segment Operating
Revenues
Service $ 6,948 $ 7,359 -5.6% $ 13,891 $ 14,656 -5.2 %
Equipment 1,238 1,396 -11.3% 2,623 2,877 -8.8 %
------------------ ------- ------- ----- ------- ------- -----
Total Segment
Operating
Revenues 8,186 8,755 -6.5% 16,514 17,533 -5.8 %
------------------ ------- ------- ----- ------- ------- -----
Segment Operating
Expenses
Operations
and support
expenses 4,680 5,202 -10.0% 9,592 10,743 -10.7 %
Depreciation
and amortization 932 934 -0.2% 1,854 1,936 -4.2 %
------------------ ------- ------- ----- ------- ------- -----
Total Segment
Operating
Expenses 5,612 6,136 -8.5% 11,446 12,679 -9.7 %
------------------ ------- ------- ----- ------- ------- -----
Segment Operating
Income 2,574 2,619 -1.7% 5,068 4,854 4.4 %
Equity in Net
Income of
Affiliates - - - - - -
----------------- ------- ------- ----- ------- ------- -----
Segment
Contribution $ 2,574 $ 2,619 -1.7% $ 5,068 $ 4,854 4.4 %
================== ======= ======= ===== ======= ======= =====
Segment Operating
Income Margin 31.4% 29.9% 30.7% 27.7%
International
----------------- ------- ------- ----- ------- ------- -----
Segment Operating
Revenues
Video
entertainment $ 1,222 $ - - $ 2,352 $ - -
Wireless
service 489 444 10.1% 944 659 43.2 %
Wireless
equipment 117 47 - 199 68 -
------------------ ------- ------- ----- ------- ------- -----
Total Segment
Operating
Revenues 1,828 491 - 3,495 727 -
------------------ ------- ------- ----- ------- ------- -----
Segment Operating
Expenses
Operations
and support
expenses 1,723 529 - 3,311 747 -
Depreciation
and amortization 298 93 - 575 121 -
------------------ ------- ------- ----- ------- ------- -----
Total Segment
Operating
Expenses 2,021 622 - 3,886 868 -
------------------ ------- ------- ----- ------- ------- -----
Segment Operating (391
Income (Loss) (193) (131) -47.3% ) (141) -
Equity in Net
Income of
Affiliates 9 - - 23 - -
------------------ ------- ------- ----- ------- ------- -----
Segment (368
Contribution $ (184) $ (131) -40.5% $ ) $ (141) -
================== ======= ======= ===== ======= ======= =====
Segment Operating
Income Margin -10.6% -26.7% -11.2% -19.4%
Financial Data
AT&T Inc.
---------------------------------------------------------------------------
Consolidated Balance Sheets
Dollars in millions
---------------------------------------------------------------------------
6/30/16 12/31/15
Unaudited
-------------------------------------------------- --------- --------
Assets
Current Assets
Cash and cash equivalents $ 7,208 $ 5,121
Accounts receivable - net of allowances
for doubtful accounts of $642 and $704 15,830 16,532
Prepaid expenses 1,197 1,072
Other current assets 11,770 13,267
--------------------------------------------------- ------- -------
Total current assets 36,005 35,992
--------------------------------------------------- ------- -------
Property, Plant and Equipment - Net 123,537 124,450
Goodwill 105,252 104,568
Licenses 94,098 93,093
Customer Lists and Relationships - Net 16,259 18,208
Other Intangible Assets - Net 9,107 9,409
Investments in Equity Affiliates 1,677 1,606
Other Assets 15,873 15,346
--------------------------------------------------- ------- -------
Total Assets $401,808 $402,672
=================================================== ======= =======
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year $ 9,528 $ 7,636
Accounts payable and accrued liabilities 26,746 30,372
Advanced billing and customer deposits 4,465 4,682
Accrued taxes 2,773 2,176
Dividends payable 2,953 2,950
--------------------------------------------------- ------- -------
Total current liabilities 46,465 47,816
--------------------------------------------------- ------- -------
Long-Term Debt 117,308 118,515
--------------------------------------------------- ------- -------
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes 57,983 56,181
Postemployment benefit obligation 34,023 34,262
Other noncurrent liabilities 21,425 22,258
--------------------------------------------------- ------- -------
Total deferred credits and other noncurrent
liabilities 113,431 112,701
--------------------------------------------------- ------- -------
Stockholders' Equity
Common stock 6,495 6,495
Additional paid-in capital 89,486 89,763
Retained earnings 34,950 33,671
Treasury stock (12,343) (12,592)
Accumulated other comprehensive income 5,047 5,334
Noncontrolling interest 969 969
--------------------------------------------------- ------- -------
Total stockholders' equity 124,604 123,640
--------------------------------------------------- ------- -------
Total Liabilities and Stockholders' Equity $401,808 $402,672
=================================================== ======= =======
Financial Data
AT&T Inc.
----------------------------------------------------------------------
Consolidated Statements of Cash Flows
Dollars in millions
(Unaudited)
----------------------------------------------------------------------
Six months ended
June 30,
2016 2015
--------------------------------------------- --------- -----------
Operating Activities
Net income $ 7,400 $ 6,523
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 13,139 9,274
Undistributed earnings from investments
in equity affiliates (22) (23)
Provision for uncollectible accounts 705 535
Deferred income tax expense 1,767 1,244
Net gain from sale of investments, net
of impairments (85) (50)
Changes in operating assets and liabilities:
Accounts receivable 543 434
Other current assets 1,069 732
Accounts payable and accrued liabilities (3,059) (1,125)
Retirement benefit funding (280) (455)
Other - net (2,970) (1,191)
---------------------------------------------- ------- -------
Total adjustments 10,807 9,375
---------------------------------------------- ------- -------
Net Cash Provided by Operating Activities 18,207 15,898
---------------------------------------------- ------- -------
Investing Activities
Capital expenditures:
Purchase of property and equipment (9,702) (8,328)
Interest during construction (437) (339)
Acquisitions, net of cash acquired (485) (20,954)
Dispositions 107 72
Sales of securities, net 500 1,890
Other - (1)
---------------------------------------------- ------- -------
Net Cash Used in Investing Activities (10,017) (27,660)
---------------------------------------------- ------- -------
Financing Activities
Issuance of long-term debt 10,140 33,958
Repayment of long-term debt (9,129) (2,919)
Purchase of treasury stock (197) -
Issuance of treasury stock 119 20
Dividends paid (5,899) (4,873)
Other (1,137) (2,071)
---------------------------------------------- ------- -------
Net Cash (Used in) Provided by Financing
Activities (6,103) 24,115
---------------------------------------------- ------- -------
Net increase in cash and cash equivalents 2,087 12,353
Cash and cash equivalents beginning of
year 5,121 8,603
---------------------------------------------- ------- -------
Cash and Cash Equivalents End of Period $ 7,208 $ 20,956
============================================== ======= =======
Financial Data
AT&T Inc.
-----------------------------------------------------------------------------------------------
Supplementary Operating and Financial Data
Dollars in millions except per share amounts, subscribers
and connections in (000s)
-----------------------------------------------------------------------------------------------
Unaudited Three Months Ended Six Months Ended
------------------------------------ -------------------------------------
6/30/2016 6/30/2015 % Chg 6/30/2016 6/30/2015 % Chg
---------------- ------------ ----------- --------- ----------- ----------- -----------
Business
Solutions
Wireless
Subscribers 77,545 69,178 12.1%
----------------- -------- ------- ----- ------- ------- -----
Postpaid 49,432 46,697 5.9%
------------------ ------- ------- ----- ------- ------- -----
Branded
Subscribers 49,432 46,697 5.9%
------------------ ------- ------- ----- ------- ------- -----
Reseller 52 19 -
Connected Devices 28,061 22,462 24.9%
Business
Solutions
Wireless Net
Adds 1,371 1,769 -22.5% 3,060 3,093 -1.1%
----------------- ------- ------- ----- ------- ------- -----
Postpaid 185 288 -35.8% 318 585 -45.6%
------------------ ------- ------- ----- ------- ------- -----
Branded Net
Adds 185 288 -35.8% 318 585 -45.6%
------------------ ------- ------- ----- ------- ------- -----
Reseller (13) 3 - (35) 6 -
Connected Devices 1,199 1,478 -18.9% 2,777 2,502 11.0%
Business
Wireless
Postpaid
Churn 0.91% 0.91% - 0.97% 0.90% 7 BP
Consumer Mobility
Subscribers 54,260 54,724 -0.8%
----------------- ------- ------- ----- ------- ------- -----
Postpaid 27,862 29,844 -6.6%
Prepaid 12,633 10,438 21.0%
------------------ ------- ------- ----- ------- ------- -----
Branded
Subscribers 40,495 40,282 0.5%
------------------ ------- ------- ----- ------- ------- -----
Reseller 12,869 13,487 -4.6%
Connected Devices 896 955 -6.2%
Consumer Mobility
Net Adds (10) 325 - 82 219 -62.6%
----------------- ------- ------- ----- ------- ------- -----
Postpaid 72 122 -41.0% 68 266 -74.4%
Prepaid 365 331 10.3% 865 429 -
------------------ ------- ------- ----- ------- ------- -----
Branded Net
Adds 437 453 -3.5% 933 695 34.2%
------------------ ------- ------- ----- ------- ------- -----
Reseller (446) (98) - (824) (367) -
Connected Devices (1) (30) 96.7% (27) (109) 75.2%
Consumer
Mobility
Postpaid
Churn 1.09% 1.16% -7 BP 1.16% 1.18% -2 BP
Total Consumer
Mobility
Churn 1.96% 1.86% 10 BP 2.04% 1.95% 9 BP
Entertainment
Group 51,291 33,686 52.3%
----------------- ------- ------- ----- ------- ------- -----
Video Connections 25,295 5,946 -
----------------- ------- ------- ----- ------- ------- -----
Satellite 20,454 - -
U-verse 4,841 5,946 -18.6%
Video Net Adds (49) (23) - (103) 26 -
----------------- ------- ------- ----- ------- ------- -----
Satellite 342 - - 670 - -
U-verse (391) (23) - (773) 26 -
Broadband
Connections 14,181 14,428 -1.7%
----------------- ------- ------- ----- ------- ------- -----
IP 12,596 12,013 4.9%
DSL 1,585 2,415 -34.4%
Broadband Net
Adds (110) (107) -2.8% (105) (14) -
----------------- ------- ------- ----- ------- ------- -----
IP 54 217 -75.1% 240 630 -61.9%
DSL (164) (324) 49.4% (345) (644) 46.4%
Total Wireline
Voice
Connections 11,815 13,312 -11.2%
----------------- ------- ------- ----- ------- ------- -----
AT&T
International
----------------- ------- ------- ----- ------- ------- -----
Mexican Wireless
Subscribers and
Connections
----------------- ------- ------- ----- ------- ------- -----
Subscribers 9,955 8,550 16.4%
Net Adds 742 (170) - 1,271 (458) -
Total Churn 5.83% 6.81% -98 BP 5.65% 7.36% -171 BP
Video Subscribers
and Connections
----------------- ------- ------- ----- ------- ------- -----
Latin America
Video Subscribers 12,523 - -
------------------ ------- ------- ----- ------- ------- -----
Pan
Americana 7,175 - -
Brazil 5,348 - -
Video Subscribers
and Connections
Net Adds
----------------- ------- ------- ----- ------- ------- -----
Latin America
Video Subscribers 87 - - 14 - -
------------------ ------- ------- ----- ------- ------- -----
Pan
Americana 81 - - 109 - -
Brazil 6 - - (95) - -
Financial Data
AT&T Inc.
--------------------------------------------------------------------------------------------------------- ----
Supplementary Operating and Financial Data
Dollars in millions except per share amounts, subscribers
and connections in (000s)
--------------------------------------------------------------------------------------------------------- ----
Unaudited Three Months Ended Six Months Ended
------------------------------------- -------------------------------------------
6/30/2016 6/30/2015 % Chg 6/30/2016 6/30/2015 % Chg
--------- --------------- ----------- ------------- --------- ---------------- ------------ -----------
AT&T Total Subscribers
and Connections
-------------------------- ------ --- --------- ----- -------- ------ -------- -----
AT&T Mobility Subscribers 131,805 123,902 6.4 %
-------------------------- ------ --- --------- ----- ------- ------ ------- -----
Postpaid 77,295 76,541 1.0 %
Prepaid 12,633 10,438 21.0 %
---------------- ------ --- --------- ----- ------- ------ ------- -----
Branded
Subscribers 89,928 86,979 3.4 %
---------------- ------ --- --------- ----- ------- ------ ------- -----
Reseller 12,920 13,506 -4.3 %
Connected
Devices 28,957 23,417 23.7 %
AT&T Mobility Net Adds 1,361 2,094 -35.0 % 3,142 3,312 -5.1 %
--- ----- ------- ------ ------- -----
Postpaid 257 410 -37.3 % 386 851 -54.6 %
Prepaid 365 331 10.3 % 865 429 -
---------------- --- ----- ------- ------ ------- -----
Branded Net
Adds 622 741 -16.1 % 1,251 1,280 -2.3 %
---------------- --- ----- ------- ------ ------- -----
Reseller (459) (95 ) - (859) (361 ) -
Connected
Devices 1,198 1,448 -17.3 % 2,750 2,393 14.9 %
M&A Activity,
Partitioned Customers
and Other Adjs. (1) 36 - 23 36 -36.1 %
AT&T Mobility Churn
Postpaid Churn 0.97% 1.01 % -4 BP 1.04% 1.01 % 3 BP
Total Churn 1.35% 1.31 % 4 BP 1.38% 1.36 % 2 BP
Other
Domestic Licensed POPs
(000,000) 322 321 0.3 %
Total Video Subscribers 37,846 5,971 -
-------------------------- --- ----- ------- ------ ------- -----
Domestic 25,323 5,971 -
Pan Americana 7,175 - -
Brazil 5,348 - -
Total Video Net Adds 38 (22 ) - (87) 28 -
--- ----- ------- ----- ------- -----
Domestic (49) (22 ) - (101) 28 -
Pan Americana 81 - - 109 - -
Brazil 6 - - (95) - -
Total Broadband
Connections 15,641 15,961 -2.0 %
-------------------------- --- ----- ------- ------ ------- -----
IP 13,544 12,885 5.1 %
DSL 2,097 3,076 -31.8 %
Broadband Net Adds (123) (136 ) 9.6 % (137) (67 ) -
-------------------------- ----- ------- ----- ------- -----
IP 74 241 -69.3 % 276 680 -59.4 %
DSL (197) (377 ) 47.7 % (413) (747 ) 44.7 %
Total Wireline Voice
Connections 20,877 23,497 -11.2 %
Total Wireless
Subscribers 141,760 132,452 7.0 %
-------------------------- --- ----- ------- ------ ------- -----
Domestic Wireless
Subscribers 131,805 123,902 6.4 %
Mexican Wireless
Subscribers 9,955 8,550 16.4 %
Branded Subscribers 99,557 95,049 4.7 %
Branded Net Adds 1,401 741 89.1 % 2,596 1,280 -
AT&T Inc.
Capital expenditures:
Purchase of
property and
equipment $5,251 $ 4,480 17.2 % $ 9,702 $ 8,328 16.5 %
Interest during
construction $ 219 $ 216 1.4 % $ 437 $ 339 28.9 %
Dividends Declared per
Share $ 0.48 $ 0.47 2.1 % $ 0.96 $ 0.94 2.1 %
End of Period Common
Shares Outstanding
(000,000) 6,152 5,193 18.5 %
Debt Ratio(1,2) 50.4% 55.5 % -510 BP
Total Employees 277,200 250,730 10.6 %
(1) Prior year amounts restated to conform to
current period reporting methodology.
(2) Total long-term debt plus debt maturing within one year divided by total
debt plus total stockholders'
equity.
Note: For the end of 2Q16, total
switched access lines were 15,285.
Business Solutions and Consumer Mobility may not total to AT&T
Mobility due to rounding.
Financial Data
AT&T Inc.
Segment Supplemental - QTD
Dollars in millions
Unaudited
For the three months ended June 30, 2016
Revenues Operations EBITDA Depreciation Operating Equity in Net Segment
and Support and Income Income (Loss) Contribution
Expenses Amortization (Loss) of Affiliates
Business Solutions $ 17,579 $ 10,857 $ 6,722 $ 2,521 $ 4,201 $ - $ 4,201
Entertainment Group 12,711 9,569 3,142 1,489 1,653 (2) 1,651
Consumer Mobility 8,186 4,680 3,506 932 2,574 - 2,574
International 1,828 1,723 105 298 (193) 9 (184)
Segment Total 40,304 26,829 13,475 5,240 8,235 $ 7 $ 8,242
Corporate and Other 216 293 (77) 20 (97)
Acquisition-related
items - 233 (233) 1,316 (1,549)
Certain Significant
items - 29 (29) - (29)
AT&T Inc. $ 40,520 $ 27,384 $13,136 $ 6,576 $ 6,560
For the three months ended June 30, 2015
Revenues Operations EBITDA Depreciation Operating Equity in Net Segment
and Support and Income Income (Loss) Contribution
Expenses Amortization (Loss) of Affiliates
Business Solutions $ 17,664 $ 10,972 $ 6,692 $ 2,460 $ 4,232 $ - $ 4,232
Entertainment Group 5,782 4,913 869 1,065 (196) (12) (208)
Consumer Mobility 8,755 5,202 3,553 934 2,619 - 2,619
International 491 529 (38) 93 (131) - (131)
Segment Total 32,692 21,616 11,076 4,552 6,524 $(12) $ 6,512
Corporate and Other 323 236 87 24 63
Acquisition-related
items - 694 (694) 120 (814)
Certain Significant
items - - - - -
AT&T Inc. $ 33,015 $ 22,546 $10,469 $ 4,696 $ 5,773
Financial Data
AT&T Inc.
Segment Supplemental - YTD
Dollars in millions
Unaudited
For the six months ended June 30, 2016
Revenues Operations EBITDA Depreciation Operating Equity in Net Segment
and Support and Income Income of Contribution
Expenses Amortization (Loss) Affiliates
Business Solutions $ 35,188 $ 21,659 $13,529 $ 5,029 $ 8,500 $ - $ 8,500
Entertainment Group 25,369 19,147 6,222 2,977 3,245 1 3,246
Consumer Mobility 16,514 9,592 6,922 1,854 5,068 - 5,068
International 3,495 3,311 184 575 (391) 23 (368)
Segment Total 80,566 53,709 26,857 10,435 16,422 $ 24 $ 16,446
Corporate and Other 489 670 (181) 37 (218)
Acquisition-related
items - 528 (528) 2,667 (3,195)
Certain Significant
items - (682) 682 - 682
AT&T Inc. $ 81,055 $ 54,225 $26,830 $ 13,139 $13,691
For the six months ended June 30, 2015
Revenues Operations EBITDA Depreciation Operating Equity in Net Segment
and Support and Income Income (Loss) Contribution
Expenses Amortization (Loss) of Affiliates
Business Solutions $ 35,221 $ 22,045 $13,176 $ 4,802 $ 8,374 $ - $ 8,374
Entertainment Group 11,442 9,772 1,670 2,130 (460) (18) (478)
Consumer Mobility 17,533 10,743 6,790 1,936 4,854 - 4,854
International 727 747 (20) 121 (141) - (141)
Segment Total 64,923 43,307 21,616 8,989 12,627 $(18) $ 12,609
Corporate and Other 668 470 198 44 154
Acquisition-related
items - 993 (993) 241 (1,234)
Certain Significant
items - 217 (217) - (217)
AT&T Inc. $ 65,591 $ 44,987 $20,604 $ 9,274 $11,330
Financial Data
AT&T Inc.
----------------------------------------------------------------------------------------------
Supplemental AT&T Mobility Results
Dollars in millions
----------------------------------------------------------------------------------------------
Unaudited
Three Months Ended Six Months Ended
6/30/2016 6/30/2015 % Chg 6/30/2016 6/30/2015 % Chg
AT&T Mobility
Operating Revenues
Service $14,912 $15,115 -1.3% $29,710 $29,927 -0.7%
Equipment 3,013 3,189 -5.5% 6,169 6,563 -6.0%
Total Operating
Revenues 17,925 18,304 -2.1% 35,879 36,490 -1.7%
Operating Expenses
Operations and
support expenses 10,502 10,973 -4.3% 21,126 22,445 -5.9%
Depreciation and
amortization 2,081 2,031 2.5% 4,137 4,036 2.5%
Total Operating
Expenses 12,583 13,004 -3.2% 25,263 26,481 -4.6%
Operating Income $ 5,342 $ 5,300 0.8% $10,616 $10,009 6.1%
Operating Income
Margin 29.8% 29.0% 29.6% 27.4%
Exhibit 99.3
Discussion and Reconciliation of Non-GAAP Measures
We believe the following measures are relevant and useful
information to investors as they are part of AT&T's internal
management reporting and planning processes and are important
metrics that management uses to evaluate the operating performance
of AT&T and its segments. Management also uses these measures
as a method of comparing performance with that of many of our
competitors.
Certain amounts have been conformed to the current period's
presentation, including our change in accounting to capitalize
customer set-up and installation costs and amortize them over the
expected economic life of the customer relationship.
Free Cash Flow
Free cash flow is defined as cash from operations minus Capital
expenditures. Free cash flow after dividends is defined as cash
from operations minus Capital expenditures and dividends. Free cash
flow dividend payout ratio is defined as the percentage of
dividends paid to free cash flow. We believe these metrics provide
useful information to our investors because management views free
cash flow as an important indicator of how much cash is generated
by routine business operations, including Capital expenditures, and
makes decisions based on it. Management also views free cash flow
as a measure of cash available to pay debt and return cash to
shareowners.
Free Cash Flow and Free Cash Flow Dividend Payout Ratio
Dollars in millions Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
Net cash provided by operating activities $10,307 $ 9,160 $ 18,207 $15,898
Less: Capital expenditures (5,470) (4,696) (10,139) (8,667)
Free Cash Flow 4,837 4,464 8,068 7,231
Less: Dividends paid (2,952) (2,439) (5,899) (4,873)
Free Cash Flow after Dividends $ 1,885 $ 2,025 $ 2,169 $ 2,358
Free Cash Flow Dividend Payout Ratio 61.0% 54.6% 73.1% 67.4%
Capital Investment
Capital Investment is a non-GAAP financial measure that adds to
Capital expenditures the amount of vendor financing arrangements
for capital improvements to our wireless network in Mexico. These
favorable payment terms are considered vendor financing
arrangements and are reported as repayments of debt instead of
Capital expenditures. Management believes that Capital Investment
provides relevant and useful information to investors and other
users of our financial data in evaluating long-term investment in
our business.
Capital Investment
Dollars in millions Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
Capital expenditures $ 5,470 $ 4,696 $ 10,139 $ 8,667
Vendor financing 95 - 138 -
Capital Investment $ 5,565 $ 4,696 $ 10,277 $ 8,667
EBITDA
Our calculation of EBITDA, as presented, may differ from
similarly titled measures reported by other companies. For
AT&T, EBITDA excludes other income (expense) - net, and equity
in net income (loss) of affiliates, as these do not reflect the
operating results of our subscriber base or operations that are not
under our control. Equity in net income (loss) of affiliates
represents the proportionate share of the net income (loss) of
affiliates in which we exercise significant influence, but do not
control. Because we do not control these entities, management
excludes these results when evaluating the performance of our
primary operations. EBITDA also excludes interest expense and the
provision for income taxes. Excluding these items eliminates the
expenses associated with our capital and tax structures. Finally,
EBITDA excludes depreciation and amortization in order to eliminate
the impact of capital investments. EBITDA does not give effect to
cash used for debt service requirements and thus does not reflect
available funds for distributions, reinvestment or other
discretionary uses. EBITDA is not presented as an alternative
measure of operating results or cash flows from operations, as
determined in accordance with U.S. generally accepted accounting
principles (GAAP).
EBITDA service margin is calculated as EBITDA divided by service
revenues.
When discussing our segment results, EBITDA excludes equity in
net income (loss) of affiliates, and depreciation and amortization
from segment contribution. For our supplemental presentation of our
combined domestic wireless operations (AT&T Mobility), EBITDA
excludes depreciation and amortization from Operating Income.
These measures are used by management as a gauge of our success
in acquiring, retaining and servicing subscribers because we
believe these measures reflect AT&T's ability to generate and
grow subscriber revenues while providing a high level of customer
service in a cost-effective manner. Management also uses these
measures as a method of comparing segment performance with that of
many of its competitors. The financial and operating metrics which
affect EBITDA include the key revenue and expense drivers for which
segment managers are responsible and upon which we evaluate their
performance.
We believe EBITDA Service Margin (EBITDA as a percentage of
service revenues) to be a more relevant measure than EBITDA Margin
(EBITDA as a percentage of total revenue) for our Consumer Mobility
segment operating margin and our supplemental AT&T Mobility
operating margin. For the periods covered by this report, we
subsidized a portion of some of our wireless handset sales, which
are recognized in the period in which we sell the handset.
Management views this equipment subsidy as a cost to acquire or
retain a subscriber, which is recovered through the ongoing service
revenue that is generated by the subscriber. We also use wireless
service revenues to calculate margin to facilitate comparison, both
internally and externally with our wireless competitors, as they
calculate their margins using wireless service revenues as
well.
There are material limitations to using these non-GAAP financial
measures. EBITDA, EBITDA margin and EBITDA service margin, as we
have defined them, may not be comparable to similarly titled
measures reported by other companies. Furthermore, these
performance measures do not take into account certain significant
items, including depreciation and amortization, interest expense,
tax expense and equity in net income (loss) of affiliates.
Management compensates for these limitations by carefully analyzing
how its competitors present performance measures that are similar
in nature to EBITDA as we present it, and considering the economic
effect of the excluded expense items independently as well as in
connection with its analysis of net income as calculated in
accordance with GAAP. EBITDA, EBITDA margin and EBITDA service
margin should be considered in addition to, but not as a substitute
for, other measures of financial performance reported in accordance
with GAAP.
EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
Net Income $ 3,515 $ 3,184 $ 7,400 $ 6,523
Additions:
Income Tax Expense 1,906 1,738 4,028 3,127
Interest Expense 1,258 932 2,465 1,831
Equity in Net (Income) of Affiliates (28) (33) (41) (33)
Other (Income) Expense - Net (91) (48) (161) (118)
Depreciation and amortization 6,576 4,696 13,139 9,274
EBITDA 13,136 10,469 26,830 20,604
Total Operating Revenues 40,520 33,015 81,055 65,591
Service Revenues 37,142 29,541 74,243 58,503
EBITDA Margin 32.4% 31.7% 33.1% 31.4%
EBITDA Service Margin 35.4% 35.4% 36.1% 35.2%
Segment EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
Business Solutions Segment
Segment Contribution $ 4,201 $ 4,232 $ 8,500 $ 8,374
Additions:
Equity in Net (Income) Loss of Affiliates - - - -
Depreciation and amortization 2,521 2,460 5,029 4,802
EBITDA 6,722 6,692 13,529 13,176
Total Segment Operating Revenues 17,579 17,664 35,188 35,221
Segment Operating Income Margin 23.9% 24.0% 24.2% 23.8%
EBITDA Margin 38.2% 37.9% 38.4% 37.4%
Entertainment Group Segment
Segment Contribution $ 1,651 $ (208) $ 3,246 $ (478)
Additions:
Equity in Net (Income) Loss of Affiliates 2 12 (1) 18
Depreciation and amortization 1,489 1,065 2,977 2,130
EBITDA 3,142 869 6,222 1,670
Total Segment Operating Revenues 12,711 5,782 25,369 11,442
Segment Operating Income Margin 13.0% -3.4% 12.8% -4.0%
EBITDA Margin 24.7% 15.0% 24.5% 14.6%
Consumer Mobility Segment
Segment Contribution $ 2,574 $ 2,619 $ 5,068 $ 4,854
Additions:
Equity in Net (Income) Loss of Affiliates - - - -
Depreciation and amortization 932 934 1,854 1,936
EBITDA 3,506 3,553 6,922 6,790
Total Segment Operating Revenues 8,186 8,755 16,514 17,533
Service Revenues 6,948 7,359 13,891 14,656
Segment Operating Income Margin 31.4% 29.9% 30.7% 27.7%
EBITDA Margin 42.8% 40.6% 41.9% 38.7%
EBITDA Service Margin 50.5% 48.3% 49.8% 46.3%
International Segment
Segment Contribution $ (184) $ (131) $ (368) $ (141)
Additions:
Equity in Net (Income) Loss of Affiliates (9) - (23) -
Depreciation and amortization 298 93 575 121
EBITDA 105 (38) 184 (20)
Total Segment Operating Revenues 1,828 491 3,495 727
Segment Operating Income Margin -10.6% -26.7% -11.2% -19.4%
EBITDA Margin 5.7% -7.7% 5.3% -2.8%
Supplemental AT&T Mobility EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
AT&T Mobility
Operating Income $ 5,342 $ 5,300 $10,616 $10,009
Add: Depreciation and amortization 2,081 2,031 4,137 4,036
EBITDA 7,423 7,331 14,753 14,045
Total Operating Revenues 17,925 18,304 35,879 36,490
Service Revenues 14,912 15,115 29,710 29,927
Operating Income Margin 29.8% 29.0% 29.6% 27.4%
EBITDA Margin 41.4% 40.1% 41.1% 38.5%
EBITDA Service Margin 49.8% 48.5% 49.7% 46.9%
Adjusting Items
Adjusting items include revenues and costs we consider
nonoperational in nature, such as items arising from asset
acquisitions or dispositions. We also adjust for net actuarial
gains or losses associated with our pension and postemployment
benefit plans due to the often significant impact on our
fourth-quarter results (we immediately recognize this gain or loss
in the income statement, pursuant to our accounting policy for the
recognition of actuarial gains and losses.) Consequently, our
adjusted results reflect an expected return on plan assets rather
than the actual return on plan assets, as included in the GAAP
measure of income.
The tax impact of adjusting items is calculated using the
effective tax rate during the quarter except for (1) adjustments
related to Mexico operations, which are taxed at the 30% marginal
rate for Mexico and (2) adjustments that, given their magnitude can
drive a change in the effective tax rate, reflect the actual tax
expense or combined marginal rate of approximately 38%.
Adjusting Items
Dollars in millions Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
Operating Expenses
DIRECTV and other video merger integration
costs $ 133 $ 92 $ 306 $ 164
Mexico merger integration costs 66 24 147 41
Wireless merger integration costs 33 215 75 424
Leap network decommissioning - 364 - 364
Employee separation costs 29 - 54 217
Gain on transfer of wireless spectrum - - (736) -
Adjustments to Operations and Support Expenses 261 695 (154) 1,210
Amortization of intangible assets 1,316 63 2,667 113
Adjustments to Operating Expenses 1,577 758 2,513 1,323
Other
DIRECTV-related interest expense and exchange
fees(1) - 104 16 104
(Gain) loss on sale of investments(2) - - 4 -
Adjustments to Income Before Income Taxes 1,577 862 2,533 1,427
Tax impact of adjustments 550 301 881 497
Tax-related items - - - 262
Adjustments to Net Income $ 1,027 $ 561 $ 1,652 $ 668
(1) Includes interest expense incurred on the debt issued prior
to the close of the DIRECTV transaction and fees associated with
the exchange of DIRECTV notes for AT&T notes.
(2) Residual effect of previously adjusted item.
Adjusted Operating Income, Adjusted Operating Income Margin,
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service
margin and Adjusted diluted EPS are non-GAAP financial measures
calculated by excluding from operating revenues, operating expenses
and income tax expense certain significant items that are
non-operational or non-recurring in nature, including dispositions
and merger integration and transaction costs. Management believes
that these measures provide relevant and useful information to
investors and other users of our financial data in evaluating the
effectiveness of our operations and underlying business trends.
Adjusted Operating Revenues, Adjusted Operating Income, Adjusted
Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin,
Adjusted EBITDA service margin and Adjusted diluted EPS should be
considered in addition to, but not as a substitute for, other
measures of financial performance reported in accordance with GAAP.
AT&T's calculation of Adjusted items, as presented, may differ
from similarly titled measures reported by other companies.
Adjusted Operating Income, Adjusted Operating Income Margin,
Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EBITDA Service Margin
Dollars in millions Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
Operating Income $ 6,560 $ 5,773 $13,691 $11,330
Adjustments to Operating Expenses 1,577 758 2,513 1,323
Adjusted Operating Income 8,137 6,531 16,204 12,653
EBITDA 13,136 10,469 26,830 20,604
Adjustments to Operations and Support Expenses 261 695 (154) 1,210
Adjusted EBITDA 13,397 11,164 26,676 21,814
Total Operating Revenues 40,520 33,015 81,055 65,591
Service Revenues 37,142 29,541 74,243 58,503
Operating Income Margin 16.2% 17.5% 16.9% 17.3%
Adjusted Operating Income Margin 20.1% 19.8% 20.0% 19.3%
Adjusted EBITDA Margin 33.1% 33.8% 32.9% 33.3%
Adjusted EBITDA Service Margin 36.1% 37.8% 35.9% 37.3%
Adjusted Diluted EPS
Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
Diluted Earnings Per Share (EPS) $ 0.55 $ 0.59 $ 1.17 $ 1.22
Amortization of intangible assets 0.14 0.01 0.28 0.01
Merger integration and other costs (1) 0.03 0.10 0.06 0.16
Gain on transfer of wireless spectrum - - (0.08) -
Tax-related items - - - (0.05)
Adjusted EPS $ 0.72 $ 0.70 $ 1.43 $ 1.34
Year-over-year growth - Adjusted 2.9% 6.7%
Weighted Average Common Shares Outstanding
with Dilution (000,000) 6,195 5,220 6,193 5,220
(1) Includes combined merger and integration costs, Leap network
decommissioning, DIRECTV-related interest expense and exchange
fees, employee separation charges and other costs.
Entertainment Group Segment Adjusted Operating Revenues includes
the external operating revenues from DIRECTV U.S. as reported in
the DIRECTV Form 10-Q/A dated June 30, 2015 adjusted to (1) include
operations reported in other DIRECTV operating segments that
AT&T has chosen to manage in our Entertainment Group segment,
(2) conform DIRECTV's practice of recognizing revenue to be
received under contractual commitments on a straight line basis
over the minimum contract period to AT&T's method of limiting
the revenue recognized to the monthly amounts billed and (3)
eliminate intercompany transactions from DIRECTV U.S. and the
Entertainment Group segment. Adjusting Entertainment Group segment
operating revenues provides for comparability between periods.
Entertainment Group Adjusted Operating Revenues
Dollars in millions Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
Segment Operating Revenues $ 12,711 $ 5,782 $25,369 $11,442
DIRECTV Operating Revenues 6,708 13,164
Adjustments:
Other DIRECTV operations 94 182
Revenue recognition 99 194
Intercompany eliminations (18) (34)
Adjusted Segment Operating Revenues $ 12,711 $ 12,665 $25,369 $24,948
Year-over-year growth - Adjusted 0.4% 1.7%
Net Debt to Adjusted EBITDA Discussion
Net Debt to EBITDA ratios are non-GAAP financial measures
frequently used by investors and credit rating agencies and
management believes these measures provide relevant and useful
information to investors and other users of our financial data. The
Net Debt to Adjusted EBITDA ratio is calculated by dividing the Net
Debt by annualized Net Debt Adjusted EBITDA. Annualized Net Debt
Adjusted EBITDA excludes severance-related adjustments as described
in our credit agreements. Net Debt is calculated by subtracting
cash and cash equivalents and certificates of deposit and time
deposits that are greater than 90 days, from the sum of debt
maturing within one year and long-term debt. Annualized Adjusted
EBITDA is calculated by annualizing the year-to-date Net Debt
Adjusted EBITDA.
Net Debt to Adjusted EBITDA
Dollars in millions
Three Months Ended
Mar. 31, 2016 Jun. 30, 2016 YTD 2016
Adjusted EBITDA $ 13,279 $ 13,397 $ 26,676
Add back severance (25) (29) (54)
Net Debt Adjusted EBITDA 13,254 13,368 26,622
Annualized Net Debt Adjusted EBITDA 53,244
End-of-period current debt 9,528
End-of-period long-term debt 117,308
Total End-of-Period Debt 126,836
Less Cash and Cash Equivalents 7,208
Net Debt Balance 119,628
Annualized Net Debt to Adjusted EBITDA Ratio 2.25
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR AKCDDBBKBOFD
(END) Dow Jones Newswires
August 22, 2016 02:00 ET (06:00 GMT)
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