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| Name | Symbol | Market | Type |
|---|---|---|---|
| At&t Inc 5.500% | LSE:58KN | London | Bond |
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From Nov 2019 to Nov 2024
TIDM58KN
RNS Number : 5616Q
AT & T Inc.
06 June 2018
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) April 25, 2018
AT&T INC.
(Exact Name of Registrant as Specified in Charter)
Hot Features
Premium
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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (--230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (--240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Item 2.02 Results of Operations and Financial Condition.
The registrant announced on April 25, 2018, its results of operations for the first quarter of 2018. 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 April 25, 2018 reporting financial results for the first quarter ended
March 31, 2018.
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: April 25, By: /s/ Debra L. Dial
2018 Debra L. Dial
Senior Vice President and Controller
AT&T Reports First-Quarter Results
-- Diluted EPS of $0.75 as reported and $0.85 as adjusted, compared to $0.56 and $0.74 in the year-ago quarter
-- Consolidated revenues of $38.0 billion -- Cash from operations of $8.9 billion -- Capital expenditures of $6.1 billion -- Free cash flow of $2.8 billion
Company Maintains Full-Year Guidance
-- 3.2 million total wireless net adds:
o 2.6 million in U.S., driven by connected devices and prepaid
o 543,000 in Mexico
-- U.S. wireless results:
o Strong year-over-year improvement in postpaid phone net adds
o Continued prepaid growth with 192,000 phone net adds
o Nearly 500,000 branded smartphones added to base
o Best-ever first-quarter postpaid phone churn of 0.84%
-- Entertainment Group results:
o 312,000 DIRECTV NOW net adds to reach nearly 1.5 million subscribers
o 125,000 total video net adds with DIRECTV NOW stabilizing total video customer base since DIRECTV acquisition
o 154,000 IP broadband net adds; 82,000 total broadband net adds; more than 8 million customer locations passed with fiber
Note: AT&T's first-quarter earnings conference call will be webcast at 4:30 p.m. ET on Wednesday, April 25, 2018. The webcast and related materials will be available on AT&T's Investor Relations website at https://investors.att.com.
dALLAS, April 25, 2018 - AT&T Inc. (NYSE:T) reported solid wireless and international results in the first quarter. Highlights include solid prepaid phone gains, record-low first-quarter postpaid phone churn and continued DIRECTV NOW subscriber growth.
"We're off to a good start in 2018, both in growing our customer base and in building the world's premier gigabit network," said Randall Stephenson, AT&T Chairman and CEO. "Our investment in customer growth and our integrated service offerings helped drive solid first-quarter subscriber gains across our wireless, video and broadband businesses. We also moved quickly to deploy FirstNet, and we expect the buildout to accelerate as we go forward. Our fiber deployments for business and residential customers now pass more than 16 million customer locations. And we're set to launch our next-generation DIRECTV NOW platform, which will offer cloud DVR and an additional video stream."
Consolidated Financial Results
As noted in an 8-K filed last month, AT&T adopted new U.S. accounting standards that deal with revenue recognition (ASC 606), post-employment benefit costs and certain cash receipts on installment receivables. These changes impact the company's income statements and cash flows. With the adoption of ASC 606, the company made a policy decision to record Universal Service Fees (USF) and other regulatory fees on a net basis. The company is providing comparable results in addition to GAAP to help investors better understand the impact on financials from ASC 606 and the policy decision. Historical income statements and cash flows have been recast to show only the impact of the adoption of the other two accounting standards.
AT&T's consolidated revenues for the first quarter totaled $38.0 billion versus $39.4 billion in the year-ago quarter, primarily due to the impact of ASC 606 which included netting of USF with operating expenses. On a comparative basis, declines in legacy wireline services, domestic video, and wireless service revenues, were partially offset by growth in wireless equipment and strategic business services. On a comparative basis, revenues were $38.9 billion, a decrease of 1.1%.
Operating expenses were $31.8 billion versus $33.0 billion primarily due to the netting of USF and other regulatory fee revenues and the deferral of commissions under ASC 606. Excluding those impacts, operating expenses were $33.4 billion, an increase of about $350 million due to higher wireless equipment costs.
Versus results from the first quarter of 2017, operating income was $6.2 billion versus $6.4 billion; and operating income margin was 16.3% versus 16.1%. On a comparative basis, operating income was $5.6 billion and operating income margin was 14.3%. When adjusting for a non-cash actuarial gain on benefit plans, amortization, merger- and integration-related expenses and other items, operating income was $7.5 billion, or $6.9 billion on a comparative basis, versus $7.6 billion in the year-ago quarter and operating income margin was 19.7%, or 17.7% on a comparative basis, versus 19.4% in the year-ago quarter.
First-quarter net income attributable to AT&T was $4.7 billion, or $0.75 per diluted share, versus $3.5 billion, or $0.56 per diluted share, in the year-ago quarter. Adjusting for a $0.12 non-cash actuarial gain on benefit plans and $0.22 of costs for amortization, merger- and integration-related expenses and other items, earnings per diluted share was $0.85 compared to an adjusted $0.74 in the year-ago quarter, a 14.9% increase.
Cash from operating activities was $8.9 billion, and capital expenditures were $6.1 billion. Capital expenditures included about $140 million in FirstNet capital costs and no FirstNet reimbursements. Free cash flow - cash from operating activities minus capital expenditures - was $2.8 billion for the quarter.
*About AT&T
AT&T Inc. (NYSE:T) is a holding company. 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. Additional information about AT&T Inc. is available at about.att.com.
(c) 2018 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.
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 https://investors.att.com.
For more information, contact:
Name: Erin McGrath
AT&T Corporate Communications
Phone: 214-862-0651
Email: Erin.McGrath@att.com
AT&T Inc.
Financial Data
Consolidated Statements of Income
Dollars in millions except per share amounts Three Months Ended
Unaudited March 31,
----------------------
2018 2017
As Adjusted Percent Change
----------------------------------------------------- ------- ------------ --------------
Operating Revenues
Service $ 33,646 $ 36,456 -7.7%
Equipment 4,392 2,909 51.0%
----------------------------------------------------- ------- ------------
Total Operating Revenues 38,038 39,365 -3.4%
------------------------------------------------------ ------- ------------
Operating Expenses
Cost of services and sales
Equipment 4,848 3,848 26.0%
Broadcast, programming and operations 5,166 4,974 3.9%
Other cost of services (exclusive of depreciation
and amortization shown separately below) 7,932 9,288 -14.6%
Selling, general and administrative 7,897 8,772 -10.0%
Depreciation and amortization 5,994 6,127 -2.2%
------------------------------------------------------ ------- ------------
Total Operating Expenses 31,837 33,009 -3.6%
------------------------------------------------------ ------- ------------
Operating Income 6,201 6,356 -2.4%
------------------------------------------------------ ------- ------------
Interest Expense (1,771) (1,293) 37.0%
Equity in Net Income (Loss) of Affiliates 9 (173) -%
Other Income (Expense) - Net 1,702 488 -%
------------------------------------------------------ ------- ------------
Income Before Income Taxes 6,141 5,378 14.2%
Income Tax Expense 1,382 1,804 -23.4%
------------------------------------------------------ ------- ------------
Net Income 4,759 3,574 33.2%
------------------------------------------------------ ------- ------------
Less: Net Income Attributable to
Noncontrolling Interest (97) (105) 7.6%
------------------------------------------------------ ------- ------------
Net Income Attributable to AT&T $ 4,662 $ 3,469 34.4%
====================================================== ======= ============
Basic Earnings Per Share Attributable to AT&T $ 0.75 $ 0.56 33.9%
Weighted Average Common
Shares Outstanding (000,000) 6,161 6,166 -0.1%
Diluted Earnings Per Share Attributable to
AT&T $ 0.75 $ 0.56 33.9%
Weighted Average Common
Shares Outstanding with Dilution (000,000) 6,180 6,186 -0.1%
------------------------------------------------------ ------- ------------ --------------
AT&T Inc.
Financial Data
Consolidated Balance Sheets
Dollars in millions
Unaudited for 2018 Mar. 31, Dec. 31,
2018 2017
-------------------------------------------------------------- -------- --------
Assets
Current Assets
Cash and cash equivalents $ 48,872 $ 50,498
Accounts receivable - net of allowances for doubtful accounts
of $642 and $663 16,290 16,522
Prepaid expenses 1,335 1,369
Other current assets 12,008 10,757
--------------------------------------------------------------- -------- --------
Total current assets 78,505 79,146
--------------------------------------------------------------- -------- --------
Property, Plant and Equipment - Net 125,124 125,222
Goodwill 105,482 105,449
Licenses 96,556 96,136
Customer Lists and Relationships - Net 9,878 10,676
Other Intangible Assets - Net 7,201 7,464
Investments in and Advances to Equity Affiliates 2,623 1,560
Other Assets 20,943 18,444
--------------------------------------------------------------- -------- --------
Total Assets $ 446,312 $ 444,097
=============================================================== ======== ========
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year $ 29,322 $ 38,374
Accounts payable and accrued liabilities 31,569 34,470
Advanced billings and customer deposits 5,081 4,213
Accrued taxes 1,534 1,262
Dividends payable 3,074 3,070
--------------------------------------------------------------- -------- --------
Total current liabilities 70,580 81,389
--------------------------------------------------------------- -------- --------
Long-Term Debt 133,724 125,972
--------------------------------------------------------------- -------- --------
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes 45,730 43,207
Postemployment benefit obligation 30,116 31,775
Other noncurrent liabilities 19,117 19,747
--------------------------------------------------------------- -------- --------
Total deferred credits and other noncurrent liabilities 94,963 94,729
--------------------------------------------------------------- -------- --------
Stockholders' Equity
Common stock 6,495 6,495
Additional paid-in capital 89,404 89,563
Retained earnings 55,018 50,500
Treasury stock (12,432) (12,714)
Accumulated other comprehensive income 7,404 7,017
Noncontrolling interest 1,156 1,146
--------------------------------------------------------------- -------- --------
Total stockholders' equity 147,045 142,007
--------------------------------------------------------------- -------- --------
Total Liabilities and Stockholders' Equity $ 446,312 $ 444,097
=============================================================== ======== ========
AT&T Inc.
Financial Data
Consolidated Statements of Cash Flows
Dollars in millions Three Months Ended
Unaudited March 31,
----------------------
2018 2017
As Adjusted
-------------------------------------------------------------------- ------- ------------
Operating Activities
Net income $ 4,759 $ 3,574
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 5,994 6,127
Undistributed earnings from investments in equity affiliates (2) 182
Provision for uncollectible accounts 438 393
Deferred income tax expense 1,222 480
Net (gain) loss from investments, net of impairments 2 61
Actuarial (gain) loss on pension and postretirement benefits (930) -
Changes in operating assets and liabilities:
Accounts receivable (439) 445
Other current assets 614 229
Accounts payable and other accrued liabilities (1,962) (1,582)
Equipment installment receivables and related sales 505 394
Deferred customer contract acquisition and fulfillment costs (826) (436)
Retirement benefit funding (140) (140)
Other - net (288) (762)
--------------------------------------------------------------------- ------- ------------
Total adjustments 4,188 5,391
--------------------------------------------------------------------- ------- ------------
Net Cash Provided by Operating Activities 8,947 8,965
--------------------------------------------------------------------- ------- ------------
Investing Activities
Capital expenditures:
Purchase of property and equipment (5,957) (5,784)
Interest during construction (161) (231)
Acquisitions, net of cash acquired (234) (162)
Dispositions 56 6
Sales (purchases) of securities, net (116) 17
Advances to and investments in equity affiliates, net (1,007) -
Cash collections of deferred purchase price 267 185
Net Cash Used in Investing Activities (7,152) (5,969)
------- ------------
Financing Activities
Issuance of long-term debt 2,565 12,440
Repayment of long-term debt (4,911) (3,053)
Purchase of treasury stock (145) (177)
Issuance of treasury stock 11 21
Dividends paid (3,070) (3,009)
Other 2,048 (173)
--------------------------------------------------------------------- ------- ------------
Net Cash (Used in) Provided by Financing Activities (3,502) 6,049
--------------------------------------------------------------------- ------- ------------
Net (decrease) increase in cash and cash equivalents and restricted
cash (1,707) 9,045
Cash and cash equivalents and restricted cash beginning of
year 50,932 5,935
--------------------------------------------------------------------- ------- ------------
Cash and Cash Equivalents and Restricted Cash End of Period $ 49,225 $ 14,980
===================================================================== ======= ============
AT&T Inc.
Consolidated Supplementary Data
Supplementary Financial Data
Dollars in millions except per share amounts Three Months Ended
Unaudited March 31, Percent
--------------------
2018 2017 Change
------------------------------------------------- --------- -------- ---------
Capital expenditures
Purchase of property and equipment $ 5,957 $ 5,784 3.0%
Interest during construction 161 231 -30.3%
------------------------------------------------- --------- --------
Total Capital Expenditures $ 6,118 $ 6,015 1.7%
-------------------------------------------------- --------- --------
Dividends Declared per Share $ 0.50 $ 0.49 2.0%
End of Period Common Shares Outstanding (000,000) 6,148 6,147 -%
Debt Ratio 52.6% 51.6% 100 BP
Total Employees 249,240 264,530 -5.8%
-------------------------------------------------- --------- -------- -----
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited March 31, Percent
--------------------
2018 2017 Change
----------------------------------------- --------- --------- ---------
Wireless Subscribers
Domestic 143,832 133,804 7.5%
Mexico 15,642 12,606 24.1%
------------------------------------------ --------- ---------
Total Wireless Subscribers 159,474 146,410 8.9%
------------------------------------------ --------- ---------
Total Branded Wireless Subscribers 108,566 103,118 5.3%
Video Connections
Domestic 25,394 25,399 -%
Latin America 13,573 13,678 -0.8%
------------------------------------------ --------- ---------
Total Video Connections 38,967 39,077 -0.3%
------------------------------------------ --------- ---------
Broadband Connections
IP 14,637 14,110 3.7%
DSL 1,138 1,585 -28.2%
------------------------------------------ --------- ---------
Total Broadband Connections 15,775 15,695 0.5%
------------------------------------------ --------- ---------
Voice Connections
Network Access Lines 11,288 13,363 -15.5%
U-verse VoIP Connections 5,585 5,858 -4.7%
------------------------------------------ --------- ---------
Total Retail Voice Connections 16,873 19,221 -12.2%
========================================== ========= ========= =====
Three Months Ended
March 31, Percent
--------------------
2018 2017 Change
----------------------------------------- --------- --------- ---------
Wireless Net Additions
Domestic 2,630 2,078 26.6%
Mexico 543 633 -14.2%
------------------------------------------ --------- ---------
Total Wireless Net Additions 3,173 2,711 17.0%
------------------------------------------ --------- ---------
Total Branded Wireless Net Additions 858 735 16.7%
Video Net Additions
Domestic 124 (161) -%
Latin America (15) 91 -%
------------------------------------------ --------- ---------
Total Video Net Additions 109 (70) -%
------------------------------------------ --------- ---------
Broadband Net Additions
IP 150 246 -39.0%
DSL (94) (156) 39.7%
------------------------------------------ --------- ---------
Total Broadband Net Additions 56 90 -37.8%
------------------------------------------ --------- --------- -----
CONSUMER MOBILITY
The Consumer Mobility segment provides nationwide wireless service to consumers and wholesale
and resale wireless subscribers located in the U.S. or in U.S. territories. We provide voice
and data services, including high-speed internet, and video services.
-------------------------------------------------------------------------------------------------------------
Segment Results
Dollars in millions Three Months Ended
Unaudited March 31, Percent
-------------------------------
2018 2017 Change
---------------------------------------------------------- ---------- --- --------- --- -----------
Segment Operating Revenues
Service $ 11,612$ 12,465 -6.8%
Equipment 3,374 2,341 44.1%
---------------------------------------------------------- ---------- --- --------- ---
Total Segment Operating Revenues 14,986 14,806 1.2%
----------------------------------------------------------- ---------- --- --------- ---
Segment Operating Expenses
Operations and support 8,524 8,560 -0.4%
Depreciation and amortization 1,807 1,716 5.3%
----------------------------------------------------------- ---------- --- --------- ---
Total Segment Operating Expenses 10,331 10,276 0.5%
----------------------------------------------------------- ---------- --- --------- ---
Segment Operating Income 4,655 4,530 2.8%
Equity in Net Income of Affiliates - - -%
----------------------------------------------------------- ---------- --- --------- ---
Segment Contribution $ 4,655$ 4,530 2.8%
=========================================================== ========== ========= ===
Segment Operating Income Margin 31.1% 30.6% 50 BP
----------------------------------------------------------- ---------- --------- ------ ---
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited March 31, Percent
--------------------
2018 2017 Change
----------------------------------------- --------- --------- ---------
Consumer Mobility Subscribers
Postpaid 65,489 65,692 -0.3%
Prepaid 14,928 13,844 7.8%
------------------------------------------ --------- ---------
Branded 80,417 79,536 1.1%
Reseller 8,910 10,549 -15.5%
Total Consumer Mobility Subscribers 89,327 90,085 -0.8%
========================================== ========= ========= =====
Three Months Ended
March 31, Percent
--------------------
2018 2017 Change
----------------------------------------- --------- --------- ---------
Consumer Mobility Net Additions
Postpaid (64) (282) 77.3%
Prepaid 192 282 -31.9%
------------------------------------------ --------- ---------
Branded 128 - -%
Reseller (390) (587) 33.6%
Total Consumer Mobility Net Additions (262) (587) 55.4%
--------- ---------
BUSINESS SOLUTIONS
The Business Solutions segment provides services to business customers, including multinational
companies; governmental and wholesale customers. We provide advanced IP-based services including
Virtual Private Networks (VPN); Ethernet-related products and broadband, collectively referred
to as strategic business services; as well as traditional data and voice products. We provide
a complete communications solution to our business customers.
-----------------------------------------------------------------------------------------------------------------
Segment Results
Dollars in millions Three Months Ended
Unaudited March 31, Percent
---------------------------
2018 2017 Change
----------------------------------------------------------------- -------- --- ------- --- ------------
Segment Operating Revenues
Wireless service $ 1,791$ 2,003 -10.6%
Strategic services 3,138 2,974 5.5%
Legacy voice and data services 2,839 3,549 -20.0%
Other service and equipment 839 878 -4.4%
Wireless equipment 578 288 -%
----------------------------------------------------------------- -------- --- ------- ---
Total Segment Operating Revenues 9,185 9,692 -5.2%
------------------------------------------------------------------ -------- --- ------- ---
Segment Operating Expenses
Operations and support 5,638 6,040 -6.7%
Depreciation and amortization 1,462 1,465 -0.2%
------------------------------------------------------------------ -------- --- ------- ---
Total Segment Operating Expenses 7,100 7,505 -5.4%
------------------------------------------------------------------ -------- --- ------- ---
Segment Operating Income 2,085 2,187 -4.7%
Equity in Net Income (Loss) of Affiliates (1) - -%
------------------------------------------------------------------ -------- --- ------- ---
Segment Contribution $ 2,084$ 2,187 -4.7%
================================================================== ======== ======= ===
Segment Operating Income Margin 22.7% 22.6% 10 BP
------------------------------------------------------------------ -------- ------- ------- ---
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited March 31, Percent
--------------------
2018 2017 Change
------------------------------------------------ --------- --------- ---------
Business Solutions Wireless Subscribers
Postpaid 11,942 11,243 6.2%
Prepaid 743 - -%
------------------------------------------------- --------- ---------
Branded 12,685 11,243 12.8%
Reseller 92 76 21.1%
Connected Devices 41,728 32,400 28.8%
------------------------------------------------- --------- ---------
Total Business Mobility Subscribers 54,505 43,719 24.7%
================================================= ========= ========= =====
Business Solutions IP Broadband Connections 1,021 980 4.2%
================================================== ========= ========= =====
Three Months Ended
March 31, Percent
--------------------
2018 2017 Change
------------------------------------------------ --------- --------- ---------
Business Solutions Wireless Net Additions
Postpaid 113 88 28.4%
Prepaid 49 - -%
------------------------------------------------- --------- ---------
Branded 162 88 84.1%
Reseller 2 5 -60.0%
Connected Devices 2,728 2,572 6.1%
------------------------------------------------- --------- ---------
Total Business Solutions Wireless Net Additions 2,892 2,665 8.5%
------------------------------------------------- --------- ---------
Business Solutions IP Broadband
Net Additions (4) 4 -%
------------------------------------------------- --------- ---------
ENTERTAINMENT GROUP
The Entertainment Group segment provides video, internet, voice communication, and interactive
and targeted advertising services to customers located in the U.S. or in U.S. territories.
Segment Results
Dollars in millions Three Months Ended
Unaudited March 31, Percent
-----------------------------
2018 2017 Change
------------------------------------------------------------- --------- --- --------- -----------
Segment Operating Revenues
Video entertainment $ 8,359$ 9,020 -7.3%
High-speed internet 1,878 1,941 -3.2%
Legacy voice and data services 819 1,031 -20.6%
Other service and equipment 521 609 -14.4%
------------------------------------------------------------- --------- --- ---------
Total Segment Operating Revenues 11,577 12,601 -8.1%
-------------------------------------------------------------- --------- --- ---------
Segment Operating Expenses
Operations and support 8,939 9,605 -6.9%
Depreciation and amortization 1,312 1,420 -7.6%
-------------------------------------------------------------- --------- --- ---------
Total Segment Operating Expenses 10,251 11,025 -7.0%
-------------------------------------------------------------- --------- --- ---------
Segment Operating Income 1,326 1,576 -15.9%
Equity in Net Income (Loss) of Affiliates 9 (6) -%
-------------------------------------------------------------- --------- --- ---------
Segment Contribution $ 1,335$ 1,570 -15.0%
============================================================== ========= =========
Segment Operating Income Margin 11.5% 12.5% -100 BP
-------------------------------------------------------------- --------- --------- -------
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited March 31, Percent
--------------------
2018 2017 Change
------------------------------------------------------------------- --------- --------- ---------
Video Connections
Satellite 20,270 21,012 -3.5%
U-verse 3,632 4,020 -9.7%
DIRECTV NOW 1,467 339 -%
-------------------------------------------------------------------- --------- ---------
Total Video Connections 25,369 25,371 -%
-------------------------------------------------------------------- --------- ---------
Broadband Connections
IP 13,616 13,130 3.7%
DSL 816 1,164 -29.9%
-------------------------------------------------------------------- --------- ---------
Total Broadband Connections 14,432 14,294 1.0%
-------------------------------------------------------------------- --------- ---------
Voice Connections
Retail Consumer Switched Access Lines 4,535 5,533 -18.0%
U-verse Consumer VoIP Connections 5,105 5,470 -6.7%
-------------------------------------------------------------------- --------- ---------
Total Retail Consumer Voice Connections 9,640 11,003 -12.4%
==================================================================== ========= ========= =====
Three Months Ended
March 31, Percent
--------------------
2018 2017 Change
------------------------------------------------------------------- --------- --------- ---------
Video Net Additions(1)
Satellite (188) - -%
U-verse 1 (233) -%
DIRECTV NOW 312 72 -%
-------------------------------------------------------------------- --------- ---------
Total Video Net Additions 125 (161) -%
-------------------------------------------------------------------- --------- ---------
Broadband Net Additions
IP 154 242 -36.4%
DSL (72) (127) 43.3%
-------------------------------------------------------------------- --------- ---------
Total Broadband Net Additions 82 115 -28.7%
-------------------------------------------------------------------- --------- ---------
(1) Includes the impact of customers that migrated to DIRECTV NOW.
-------------------------------------------------------------------- --------- --------- -----
INTERNATIONAL
The International segment provides entertainment services in Latin America and wireless services
in Mexico. Video entertainment services are provided to primarily residential customers using
satellite technology. We utilize our regional and national wireless networks in Mexico to
provide consumer and business customers with wireless data and voice communication services.
Our international subsidiaries conduct business in their local currency and operating results
are converted to U.S. dollars using official exchange rates.
----------------------------------------------------------------------------------------------------------------
Segment Results
Dollars in millions Three Months Ended
Unaudited March 31, Percent
---------------------------
2018 2017 Change
---------------------------------------------------------------- -------- --- ------- --- ------------
Segment Operating Revenues
Video entertainment $ 1,354$ 1,341 1.0%
Wireless service 404 475 -14.9%
Wireless equipment 267 113 136.3%
---------------------------------------------------------------- -------- --- ------- ---
Total Segment Operating Revenues 2,025 1,929 5.0%
----------------------------------------------------------------- -------- --- ------- ---
Segment Operating Expenses
Operations and support 1,804 1,759 2.6%
Depreciation and amortization 332 290 14.5%
----------------------------------------------------------------- -------- --- ------- ---
Total Segment Operating Expenses 2,136 2,049 4.2%
----------------------------------------------------------------- -------- --- ------- ---
Segment Operating Income (Loss) (111) (120) 7.5%
Equity in Net Income (Loss) of Affiliates - 20 -%
----------------------------------------------------------------- -------- --- ------- ---
Segment Contribution $ (111)$ (100) -11.0%
================================================================= ======== ======= ===
Segment Operating Income Margin (5.5)% (6.2)% 70 BP
----------------------------------------------------------------- -------- ------- ------- ---
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited March 31, Percent
--------------------
2018 2017 Change
-------------------------------------------- --------- --------- ---------
Mexican Wireless Subscribers
Postpaid 5,607 5,095 10.0%
Prepaid 9,857 7,244 36.1%
--------------------------------------------- --------- ---------
Branded 15,464 12,339 25.3%
Reseller 178 267 -33.3%
--------------------------------------------- --------- ---------
Total Mexican Wireless Subscribers 15,642 12,606 24.1%
--------------------------------------------- --------- ---------
Latin America Satellite Subscribers
--------------------------------------------- --------- ---------
Total Latin America Satellite Subscribers 13,573 13,678 -0.8%
============================================= ========= ========= =====
Three Months Ended
March 31, Percent
--------------------
2018 2017 Change
-------------------------------------------- --------- --------- ---------
Mexican Wireless Net Additions
Postpaid 109 130 -16.2%
Prepaid 459 517 -11.2%
--------------------------------------------- --------- ---------
Branded 568 647 -12.2%
Reseller (25) (14) -78.6%
--------------------------------------------- --------- ---------
Total Mexican Wireless Net Additions 543 633 -14.2%
--------------------------------------------- --------- ---------
Latin America Satellite Net Additions
Total Latin America Satellite Net Additions (15) 91 -%
--------------------------------------------- --------- ---------
SUPPLEMENTAL OPERATING INFORMATION - AT&T MOBILITY
As a supplemental discussion of our operating results, for comparison purposes, we are providing
a view of our combined domestic wireless operations (AT&T Mobility).
----------------------------------------------------------------------------------------------------------------
Operating Results
Dollars in millions Three Months Ended
Unaudited March 31, Percent
------------------------------------
2018 2017 Change
------------------------------------------------------- ------------ ---- ----------- --- ------------
Operating Revenues
Service $ 13,403$ 14,468 -7.4%
Equipment 3,952 2,629 50.3%
------------------------------------------------------- ------------ ---- ----------- ---
Total Operating Revenues 17,355 17,097 1.5%
-------------------------------------------------------- ------------ ---- ----------- ---
Operating Expenses
Operations and support 10,102 9,885 2.2%
Depreciation and amortization 2,095 1,992 5.2%
-------------------------------------------------------- ------------ ---- ----------- ---
Total Operating Expenses 12,197 11,877 2.7%
-------------------------------------------------------- ------------ ---- ----------- ---
Operating Income $ 5,158$ 5,220 -1.2%
======================================================== ============ === =========== ===
Operating Income Margin 29.7% 30.5% -80 BP
-------------------------------------------------------- ------------ --- ----------- ------- ---
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited March 31, Percent
--------------------
2018 2017 Change
----------------------------------------- --------- --------- ---------
AT&T Mobility Subscribers
Postpaid 77,431 76,935 0.6%
Prepaid 15,671 13,844 13.2%
------------------------------------------ --------- ---------
Branded 93,102 90,779 2.6%
Reseller 9,002 10,625 -15.3%
Connected Devices 41,728 32,400 28.8%
------------------------------------------ --------- ---------
Total AT&T Mobility Subscribers 143,832 133,804 7.5%
------------------------------------------ --------- ---------
Domestic Licensed POPs (000,000) 329 325 1.2%
========================================== ========= ========= =====
Three Months Ended
March 31, Percent
--------------------
2018 2017 Change
----------------------------------------- --------- --------- ---------
AT&T Mobility Net Additions
Postpaid 49 (194) -%
Prepaid 241 282 -14.5%
------------------------------------------ --------- ---------
Branded 290 88 -%
Reseller (388) (582) 33.3%
Connected Devices 2,728 2,572 6.1%
------------------------------------------ --------- ---------
Total AT&T Mobility Net Additions 2,630 2,078 26.6%
------------------------------------------ --------- ---------
M&A Activity, Partitioned Customers and
Other Adjustments 1 (2,723) -%
Branded Churn 1.65% 1.71% -6 BP
Postpaid Churn 1.06% 1.12% -6 BP
Postpaid Phone Only Churn 0.84% 0.90% -6 BP
------------------------------------------ --------- ---------
SUPPLEMENTAL SEGMENT RECONCILIATION
Three Months Ended
Dollars in millions
Unaudited
March 31, 2018
-------------------- -------- ---------- ------ ------------ --------- ---------- --------------
Operations Depreciation Equity in
and and Operating Net Income
Support Amortization Income (Loss) of Segment
Revenues Expenses EBITDA (Loss) Affiliates Contribution
-------------------- -------- ---------- ------ ------------ --------- ---------- --------------
Consumer Mobility $ 14,986 $ 8,524 $ 6,462 $ 1,807 $ 4,655 $ - $ 4,655
Business Solutions 9,185 5,638 3,547 1,462 2,085 (1) 2,084
Entertainment Group 11,577 8,939 2,638 1,312 1,326 9 1,335
International 2,025 1,804 221 332 (111) - (111)
-------------------- -------- ---------- ------ ------------ --------- ---------- --------------
Segment Total 37,773 24,905 12,868 4,913 7,955 $ 8 $ 7,963
==================== ======== ========== ====== ============ ========= ========== ==============
Corporate and Other 265 691 (426) 19 (445)
Acquisition-related
items - 67 (67) 1,062 (1,129)
Certain Significant
items - 180 (180) - (180)
-------------------- -------- ---------- ------ ------------ ---------
AT&T Inc. $ 38,038 $ 25,843 $12,195 $ 5,994 $ 6,201
==================== ======== ========== ====== ============ =========
March 31, 2017
-------------------- -------- ---------- ------ ------------ --------- ---------- --------------
Operations Depreciation Equity in
and and Operating Net Income
Support Amortization Income (Loss) of Segment
Revenues Expenses EBITDA (Loss) Affiliates Contribution
-------------------- -------- ---------- ------ ------------ --------- ---------- --------------
Consumer Mobility $ 14,806 $ 8,560 $ 6,246 $ 1,716 $ 4,530 $ - $ 4,530
Business Solutions 9,692 6,040 3,652 1,465 2,187 - 2,187
Entertainment Group 12,601 9,605 2,996 1,420 1,576 (6) 1,570
International 1,929 1,759 170 290 (120) 20 (100)
-------------------- -------- ---------- ------ ------------ --------- ---------- --------------
Segment Total 39,028 25,964 13,064 4,891 8,173 $ 14 $ 8,187
==================== ======== ========== ====== ============ ========= ========== ==============
Corporate and Other 337 829 (492) 34 (526)
Acquisition-related
items - 207 (207) 1,202 (1,409)
Certain Significant
items - (118) 118 - 118
-------------------- -------- ---------- ------ ------------ ---------
AT&T Inc. $ 39,365 $ 26,882 $12,483 $ 6,127 $ 6,356
==================== ======== ========== ====== ============ =========
As a supplemental discussion of our operating results, we are providing results under the
comparative historical accounting method prior to our adoption of ASC 606.
SUPPLEMENTAL INCOME STATEMENT
--------------------------------------------------------------------------------------------------------
Supplemental Consolidated Statements of Income
Dollars in millions except per share Three Months Ended
amounts
Unaudited March 31,
--------------------------------------------------
Historical Percent
2018 Impact of ASC 606 2018 2017 Change
--------------------------------------- ------- ----------------- ---------- ------- ---------
Operating Revenues
Service $ 33,646 $ (1,423) $ 35,069 $ 36,456 -3.8%
Equipment 4,392 531 3,861 2,909 32.7%
--------------------------------------- ------- ----------------- ---------- -------
Total Operating Revenues 38,038 (892) 38,930 39,365 -1.1%
---------------------------------------- ------- ----------------- ---------- -------
Operating Expenses
Cost of services and sales
Equipment 4,848 - 4,848 3,848 26.0%
Broadcast, programming and operations 5,166 - 5,166 4,974 3.9%
Other cost of services (exclusive of
depreciation
and amortization shown separately
below) 7,932 (929) 8,861 9,288 -4.6%
Selling, general and administrative 7,897 (600) 8,497 8,772 -3.1%
Depreciation and amortization 5,994 - 5,994 6,127 -2.2%
---------------------------------------- ------- ----------------- ---------- -------
Total Operating Expenses 31,837 (1,529) 33,366 33,009 1.1%
---------------------------------------- ------- ----------------- ---------- -------
Operating Income 6,201 637 5,564 6,356 -12.5%
---------------------------------------- ------- ----------------- ---------- -------
Interest Expense (1,771) - (1,771) (1,293) 37.0%
Equity in Net Income (Loss) of
Affiliates 9 - 9 (173) -%
Other Income (Expense) - Net 1,702 - 1,702 488 -%
---------------------------------------- ------- ----------------- ---------- -------
Income Before Income Taxes 6,141 637 5,504 5,378 2.3%
Income Tax Expense 1,382 156 1,226 1,804 -32.0%
---------------------------------------- ------- ----------------- ---------- -------
Net Income 4,759 481 4,278 3,574 19.7%
---------------------------------------- ------- ----------------- ---------- -------
Less: Net Income Attributable to
Noncontrolling Interest (97) (6) (91) (105) 13.3%
---------------------------------------- ------- ----------------- ---------- -------
Net Income Attributable to AT&T $ 4,662 $ 475 $ 4,187 $ 3,469 20.7%
======================================== ======= ================= ========== =======
Basic Earnings Per Share Attributable to
AT&T $ 0.75 $ 0.07 $ 0.68 $ 0.56 21.4%
Weighted Average Common
Shares Outstanding (000,000) 6,161 - 6,161 6,166 -0.1%
Diluted Earnings Per Share Attributable
to AT&T $ 0.75 $ 0.07 $ 0.68 $ 0.56 21.4%
Weighted Average Common
Shares Outstanding with Dilution
(000,000) 6,180 - 6,180 6,186 -0.1%
---------------------------------------- ------- ----------------- ---------- ------- -----
SUPPLEMENTAL CONSUMER MOBILITY
Supplemental Segment Results
Dollars in millions Three Months Ended
Unaudited March 31,
------------------------------------------------
Historical Percent
2018 Impact of ASC 606 2018 2017 Change
------------------------------------ ------ ----------------- ---------- ------ ---------
Segment Operating Revenues
Service $11,612 $ (612) $ 12,224 $12,465 -1.9%
Equipment 3,374 331 3,043 2,341 30.0%
------------------------------------ ------ ----------------- ---------- ------
Total Segment Operating Revenues 14,986 (281) 15,267 14,806 3.1%
------------------------------------- ------ ----------------- ---------- ------
Segment Operating Expenses
Operations and support 8,524 (650) 9,174 8,560 7.2%
------------------------------------- ------ ----------------- ---------- ------
EBITDA 6,462 369 6,093 6,246 -2.4%
------------------------------------- ------ ----------------- ---------- ------
Depreciation and amortization 1,807 - 1,807 1,716 5.3%
------------------------------------- ------ ----------------- ---------- ------
Total Segment Operating Expenses 10,331 (650) 10,981 10,276 6.9%
------------------------------------- ------ ----------------- ---------- ------
Segment Operating Income 4,655 369 4,286 4,530 -5.4%
Equity in Net Income of Affiliates - - - - -%
------------------------------------- ------ ----------------- ---------- ------
Segment Contribution $ 4,655 $ 369 $ 4,286 $ 4,530 -5.4%
===================================== ====== ================= ========== ====== =====
Operating Income Margin 31.1% 28.1% 30.6% -250 BP
EBITDA Margin 43.1% 39.9% 42.2% -230 BP
EBITDA Service Margin 55.6% 49.8% 50.1% -30 BP
SUPPLEMENTAL BUSINESS SOLUTIONS
Supplemental Segment Results
Dollars in millions Three Months Ended
Unaudited March 31,
----------------------------------------------
Historical Percent
2018 Impact of ASC 606 2018 2017 Change
------------------------------------ ----- ----------------- ---------- ----- ---------
Segment Operating Revenues
Wireless service $1,791 $ (203) $ 1,994 $2,003 -0.4%
Fixed strategic services 3,138 (2) 3,140 2,974 5.6%
Legacy voice and data services 2,839 (267) 3,106 3,549 -12.5%
Other service and equipment 839 (69) 908 878 3.4%
Wireless equipment 578 190 388 288 34.7%
------------------------------------ ----- ----------------- ---------- -----
Total Segment Operating Revenues 9,185 (351) 9,536 9,692 -1.6%
------------------------------------- ----- ----------------- ---------- -----
Segment Operating Expenses
Operations and support 5,638 (423) 6,061 6,040 0.3%
------------------------------------- ----- ----------------- ---------- -----
EBITDA 3,547 72 3,475 3,652 -4.8%
------------------------------------- ----- ----------------- ---------- -----
Depreciation and amortization 1,462 - 1,462 1,465 -0.2%
------------------------------------- ----- ----------------- ---------- -----
Total Segment Operating Expenses 7,100 (423) 7,523 7,505 0.2%
------------------------------------- ----- ----------------- ---------- -----
Segment Operating Income 2,085 72 2,013 2,187 -8.0%
Equity in Net Income of Affiliates (1) - (1) - -%
------------------------------------- ----- ----------------- ---------- -----
Segment Contribution $2,084 $ 72 $ 2,012 $2,187 -8.0%
===================================== ===== ================= ========== ===== =====
Operating Income Margin 22.7% 21.1% 22.6% -150 BP
EBITDA Margin 38.6% 36.4% 37.7% -130 BP
SUPPLEMENTAL ENTERTAINMENT GROUP
Supplemental Segment Results
Dollars in millions Three Months Ended
Unaudited March 31,
------------------------------------------------
Historical Percent
2018 Impact of ASC 606 2018 2017 Change
----------------------------------------- ------ ----------------- ---------- ------ ---------
Segment Operating Revenues
Video entertainment $ 8,359 $ (106) $ 8,465 $ 9,020 -6.2%
High-speed internet 1,878 - 1,878 1,941 -3.2%
Legacy voice and data services 819 (35) 854 1,031 -17.2%
Other service and equipment 521 (72) 593 609 -2.6%
----------------------------------------- ------ ----------------- ---------- ------
Total Segment Operating Revenues 11,577 (213) 11,790 12,601 -6.4%
------------------------------------------ ------ ----------------- ---------- ------
Segment Operating Expenses
Operations and support 8,939 (414) 9,353 9,605 -2.6%
------------------------------------------ ------ ----------------- ---------- ------
EBITDA 2,638 201 2,437 2,996 -18.7%
------------------------------------------ ------ ----------------- ---------- ------
Depreciation and amortization 1,312 - 1,312 1,420 -7.6%
------------------------------------------ ------ ----------------- ---------- ------
Total Segment Operating Expenses 10,251 (414) 10,665 11,025 -3.3%
------------------------------------------ ------ ----------------- ---------- ------
Segment Operating Income 1,326 201 1,125 1,576 -28.6%
Equity in Net Income (Loss) of Affiliates 9 - 9 (6) -%
------------------------------------------ ------ ----------------- ---------- ------
Segment Contribution $ 1,335 $ 201 $ 1,134 $ 1,570 -27.8%
========================================== ====== ================= ========== ====== =====
Operating Income Margin 11.5% 9.5% 12.5% -300 BP
EBITDA Margin 22.8% 20.7% 23.8% -310 BP
SUPPLEMENTAL INTERNATIONAL
Supplemental Segment Results
Dollars in millions Three Months Ended
Unaudited March 31,
-----------------------------------
Impact Historical Percent
of 2018 Change
ASC
2018 606 2017
------------------------------------------ ----- ------ ---------- ----- ---------
Segment Operating Revenues
Video entertainment $1,354 $ - $ 1,354 $1,341 1.0%
Wireless service 404 (50) 454 475 -4.4%
Wireless equipment 267 10 257 113 -%
------------------------------------------ ----- ------ ---------- -----
Total Segment Operating Revenues 2,025 (40) 2,065 1,929 7.1%
------------------------------------------- ----- ------ ---------- -----
Segment Operating Expenses
Operations and support 1,804 (35) 1,839 1,759 4.5%
------------------------------------------- ----- ------ ---------- -----
EBITDA 221 (5) 226 170 32.9%
------------------------------------------- ----- ------ ---------- -----
Depreciation and amortization 332 - 332 290 14.5%
------------------------------------------- ----- ------ ---------- -----
Total Segment Operating Expenses 2,136 (35) 2,171 2,049 6.0%
------------------------------------------- ----- ------ ---------- -----
Segment Operating Income (Loss) (111) (5) (106) (120) 11.7%
Equity in Net Income (Loss) of Affiliates - - - 20 -%
------------------------------------------- ----- ------ ---------- -----
Segment Contribution $(111) $ (5) $ (106) $(100) -6.0%
=========================================== ===== ====== ========== ===== =====
Operating Income Margin -5.5% -5.1% -6.2% 110 BP
EBITDA Margin 10.9% 10.9% 8.8% 210 BP
SUPPLEMENTAL AT&T MOBILITY
Supplemental Operating Results
Dollars in millions Three Months Ended
Unaudited March 31,
------------------------------------------------
Historical Percent
2018 Impact of ASC 606 2018 2017 Change
------------------------------ ------ ----------------- ---------- ------ ---------
Operating Revenues
Service $13,403 $ (814) $ 14,217 $14,468 -1.7%
Equipment 3,952 521 3,431 2,629 30.5%
------------------------------ ------ ----------------- ---------- ------
Total Operating Revenues 17,355 (293) 17,648 17,097 3.2%
------------------------------- ------ ----------------- ---------- ------
Operating Expenses
Operations and support 10,102 (712) 10,814 9,885 9.4%
------------------------------- ------ ----------------- ---------- ------
EBITDA 7,253 419 6,834 7,212 -5.2%
------------------------------- ------ ----------------- ---------- ------
Depreciation and amortization 2,095 - 2,095 1,992 5.2%
------------------------------- ------ ----------------- ---------- ------
Total Operating Expenses 12,197 (712) 12,909 11,877 8.7%
------------------------------- ------ ----------------- ---------- ------
Operating Income $ 5,158 $ 419 $ 4,739 $ 5,220 -9.2%
------------------------------- ------ ----------------- ---------- ------ -----
Operating Income Margin 29.7% 26.9% 30.5% -360 BP
EBITDA Margin 41.8% 38.7% 42.2% -350 BP
EBITDA Service Margin 54.1% 48.1% 49.8% -170 BP
SUPPLEMENTAL LATIN AMERICA
Supplemental Latin America Results
Dollars in millions Three Months Ended
Unaudited March 31,
-----------------------------------
Impact Historical Percent
of 2018 Change
ASC
2018 606 2017
------------------------------------------ ----- ------ ---------- ----- ---------
Operating Revenues
Video entertainment $1,354 $ - $ 1,354 $1,341 1.0%
------------------------------------------ ----- ------ ---------- -----
Total Operating Revenues 1,354 - 1,354 1,341 1.0%
------------------------------------------- ----- ------ ---------- -----
Operating Expenses
Operations and support 1,001 (31) 1,032 1,050 -1.7%
------------------------------------------- ----- ------ ---------- -----
EBITDA 353 31 322 291 10.7%
------------------------------------------- ----- ------ ---------- -----
Depreciation and amortization 205 - 205 214 -4.2%
------------------------------------------- ----- ------ ---------- -----
Total Operating Expenses 1,206 (31) 1,237 1,264 -2.1%
------------------------------------------- ----- ------ ---------- -----
Operating Income (Loss) 148 31 117 77 51.9%
Equity in Net Income (Loss) of Affiliates - - - 20 -%
------------------------------------------- ----- ------ ---------- -----
Operating Contribution $ 148 $ 31 $ 117 $ 97 20.6%
=========================================== ===== ====== ========== ===== =====
Operating Income Margin 10.9% 8.6% 5.7% 290 BP
EBITDA Margin 26.1% 23.8% 21.7% 210 BP
SUPPLEMENTAL MEXICO
Supplemental Mexico Results
Dollars in millions Three Months Ended
Unaudited March 31,
-------------------------------------
Impact Historical Percent
of 2018 Change
ASC
2018 606 2017
------------------------------ ------ ------ ---------- ------ ---------
Operating Revenues
Wireless service $ 404 $ (50) $ 454 $ 475 -4.4%
Wireless equipment 267 10 257 113 -%
------------------------------ ------ ------ ---------- ------
Total Operating Revenues 671 (40) 711 588 20.9%
------------------------------- ------ ------ ---------- ------
Operating Expenses
Operations and support 803 (4) 807 709 13.8%
------------------------------- ------ ------ ---------- ------
EBITDA (132) (36) (96) (121) 20.7%
------------------------------- ------ ------ ---------- ------
Depreciation and amortization 127 - 127 76 67.1%
------------------------------- ------ ------ ---------- ------
Total Operating Expenses 930 (4) 934 785 19.0%
------------------------------- ------ ------ ---------- ------
Operating Income (Loss) (259) (36) (223) (197) -13.2%
Operating Contribution $ (259) $ (36) $ (223) $ (197) -13.2%
=============================== ====== ====== ========== ====== =====
Operating Income Margin -38.6% -31.4% -33.5% 210 BP
EBITDA Margin -19.7% -13.5% -20.6% 710 BP
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 adoption of new accounting standards; ASU No. 2017-07, "Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost," ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments," and ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash; and our realignment of certain responsibilities and operations within our segments, the most significant of which is to report wireless accounts with employer discounts in our Consumer Mobility segment.
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
March 31,
--------------------
2018 2017
------------------------------------------ ---------
Net cash provided by operating activities $ 8,947 $ 8,965
Less: Capital expenditures (6,118) (6,015)
------------------------------------------ --------- --------
Free Cash Flow 2,829 2,950
------------------------------------------ --------- --------
Less: Dividends paid (3,070) (3,009)
------------------------------------------ --------- --------
Free Cash Flow after Dividends $ (241) $ (59)
------------------------------------------ --------- --------
Free Cash Flow Dividend Payout Ratio 108.5% 102.0%
------------------------------------------ --------- --------
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) and our supplemental presentation of the Mexico Wireless and Latin America operations of our International segment, 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. Management uses Mexico Wireless EBITDA in evaluating profitability trends after our two Mexico wireless acquisitions in 2015, and our investments in building a nationwide LTE network by end of 2018. Management uses Latin America EBITDA in evaluating the ability of our Latin America operations to generate cash to finance its own operations.
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. 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
March 31,
--------------------
2018 2017
-------------------------------------------- ----------
Net Income $ 4,759 $ 3,574
Additions:
Income Tax (Benefit) Expense 1,382 1,804
Interest Expense 1,771 1,293
Equity in Net (Income) Loss of Affiliates (9) 173
Other (Income) Expense - Net (1,702) (488)
Depreciation and amortization 5,994 6,127
-------------------------------------------- ---------- -------
EBITDA 12,195 12,483
-------------------------------------------- ---------- -------
Total Operating Revenues 38,038 39,365
Service Revenues 33,646 36,456
EBITDA Margin 32.1% 31.7%
EBITDA Service Margin 36.2% 34.2%
-------------------------------------------- ---------- -------
Segment EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions Three Months Ended
March 31,
--------------------
2018 2017
------------------------------------------ ---------
Consumer Mobility Segment
------------------------------------------ --------- --------
Segment Contribution $ 4,655 $ 4,530
Additions:
Depreciation and amortization 1,807 1,716
------------------------------------------ --------- --------
EBITDA 6,462 6,246
------------------------------------------ --------- --------
Total Segment Operating Revenues 14,986 14,806
Service Revenues 11,612 12,465
Segment Operating Income Margin 31.1% 30.6%
EBITDA Margin 43.1% 42.2%
EBITDA Service Margin 55.6% 50.1%
Business Solutions Segment
------------------------------------------ --------- --------
Segment Contribution $ 2,084 $ 2,187
Additions:
Equity in Net (Income) Loss of Affiliates 1 -
Depreciation and amortization 1,462 1,465
------------------------------------------ --------- --------
EBITDA 3,547 3,652
------------------------------------------ --------- --------
Total Segment Operating Revenues 9,185 9,692
Segment Operating Income Margin 22.7% 22.6%
EBITDA Margin 38.6% 37.7%
Entertainment Group Segment
------------------------------------------ --------- --------
Segment Contribution $ 1,335 $ 1,570
Additions:
Equity in Net (Income) Loss of Affiliates (9) 6
Depreciation and amortization 1,312 1,420
------------------------------------------ --------- --------
EBITDA 2,638 2,996
------------------------------------------ --------- --------
Total Segment Operating Revenues 11,577 12,601
Segment Operating Income Margin 11.5% 12.5%
EBITDA Margin 22.8% 23.8%
International Segment
------------------------------------------ --------- --------
Segment Contribution $ (111) $ (100)
Additions:
Equity in Net (Income) of Affiliates - (20)
Depreciation and amortization 332 290
------------------------------------------ --------- --------
EBITDA 221 170
------------------------------------------ --------- --------
Total Segment Operating Revenues 2,025 1,929
Segment Operating Income Margin -5.5% -6.2%
EBITDA Margin 10.9% 8.8%
Supplemental AT&T Mobility EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions Three Months Ended
March 31,
--------------------
2018 2017
------------------------------------------------------- ---------
AT&T Mobility
------------------------------------------------------- --------- --------
Operating Income $ 5,158 $ 5,220
Add: Depreciation and amortization 2,095 1,992
------------------------------------------------------- --------- --------
EBITDA 7,253 7,212
------------------------------------------------------- --------- --------
Total Operating Revenues 17,355 17,097
Service Revenues 13,403 14,468
Operating Income Margin 29.7% 30.5%
EBITDA Margin 41.8% 42.2%
EBITDA Service Margin 54.1% 49.8%
------------------------------------------------------- --------- --------
Supplemental Latin America EBITDA and EBITDA Margin
Dollars in millions Three Months Ended
March 31,
--------------------
2018 2017
---------------------------------------- ---------
International - Latin America
---------------------------------------- --------- --------
Operating Income $ 148 $ 77
Add: Depreciation and amortization 205 214
---------------------------------------- --------- --------
EBITDA 353 291
---------------------------------------- --------- --------
Total Operating Revenues 1,354 1,341
Operating Income Margin 10.9% 5.7%
EBITDA Margin 26.1% 21.7%
---------------------------------------- --------- --------
Supplemental Mexico EBITDA and EBITDA Margin
Dollars in millions Three Months Ended
March 31,
--------------------
2018 2017
------------------------------------- ---------
International - Mexico
------------------------------------- --------- --------
Operating Income (Loss) $ (259) $ (197)
Add: Depreciation and amortization 127 76
------------------------------------- --------- --------
EBITDA (132) (121)
------------------------------------- --------- --------
Total Operating Revenues 671 588
Operating Income Margin -38.6% -33.5%
EBITDA Margin -19.7% -20.6%
------------------------------------- --------- --------
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, unless earlier remeasurement is required (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 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% for transactions prior to tax reform and 25% for transactions after tax reform.
Adjusting Items
Dollars in millions Three Months Ended
March 31,
--------------------
2018 2017
-------------------------------------------------------------------------------- ---------
Operating Expenses
Time Warner and other merger costs $ 67 $ 41
Employee separation costs 51 -
Natural disaster costs 104 -
DIRECTV merger integration costs - 127
Mexico merger integration costs - 39
(Gain) loss on transfer of wireless spectrum - (118)
Venezuela devaluation 25 -
-------------------------------------------------------------------------------- --------- --------
Adjustments to Operations and Support Expenses 247 89
-------------------------------------------------------------------------------- --------- --------
Amortization of intangible assets 1,062 1,202
Adjustments to Operating Expenses 1,309 1,291
---------
Other
Merger-related interest and fees(1) 393 109
Actuarial (gain) loss (930) -
(Gain) loss on sale of assets, impairments and other adjustments - 257
-------------------------------------------------------------------------------- --------- --------
Adjustments to Income Before Income Taxes 772 1,657
-------------------------------------------------------------------------------- --------- --------
Tax impact of adjustments 173 556
-------------------------------------------------------------------------------- --------- --------
Adjustments to Net Income $ 599 $ 1,101
-------------------------------------------------------------------------------- --------- --------
(1) Includes interest expense incurred on debt issued and interest income earned on cash held
prior to the close of
merger transactions.
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,
Dollars in millions Three Months Ended
March 31,
--------------------
2018 2017
-------------------------------------------------------------------------- ---------
Operating Income $ 6,201 $ 6,356
Adjustments to Operating Expenses 1,309 1,291
-------------------------------------------------------------------------- --------- --------
Adjusted Operating Income 7,510 7,647
-------------------------------------------------------------------------- --------- --------
EBITDA 12,195 12,483
Adjustments to Operations and Support Expenses 247 89
-------------------------------------------------------------------------- --------- --------
Adjusted EBITDA 12,442 12,572
-------------------------------------------------------------------------- --------- --------
Total Operating Revenues 38,038 39,365
Service Revenues 33,646 36,456
Operating Income Margin 16.3% 16.1%
Adjusted Operating Income Margin 19.7% 19.4%
Adjusted EBITDA Margin 32.7% 31.9%
Adjusted EBITDA Service Margin 37.0% 34.5%
-------------------------------------------------------------------------- --------- --------
Supplemental Operating Income under Historical Accounting Method 5,564
Adjustments to Operating Expenses 1,309
-------------------------------------------------------------------------- ---------
Adjusted Supplemental Operating Income under Historical Accounting Method 6,873
-------------------------------------------------------------------------- ---------
Supplmental Operating Revenues under Historical Accounting Method 38,930
Adjusted Supplemental Operating Income Margin under Historical
Accounting Method 17.7%
--------------------------------------------------------------------------- --------- --------
Adjusted Diluted EPS
Three Months Ended
March 31,
--------------------
2018 2017
---------------------------------------------------------------------------------------- ----------
Diluted Earnings Per Share (EPS) $ 0.75 $ 0.56
Amortization of intangible assets 0.13 0.13
Merger integration items(1) 0.06 0.03
(Gain) loss of sale of assets, impairments and other adjustments(2) 0.03 0.02
Actuarial (gain) loss(3) (0.12) -
---------------------------------------------------------------------------------------- ---------- -------
Adjusted EPS $ 0.85 $ 0.74
---------------------------------------------------------------------------------------- ---------- -------
Year-over-year growth - Adjusted 14.9%
---------------------------------------------------------------------------------------- ---------- -------
Weighted Average Common Shares Outstanding
with Dilution (000,000) 6,180 6,186
---------------------------------------------------------------------------------------- ---------- -------
(1) Includes combined merger integration items and merger-related interest income and expense.
(2) Includes natural disaster, employee-related and other costs.
(3) Includes adjustments for actuarial gains or losses ($930 million in the first quarter
of 2018) associated with our postemployment benefit plan, which we immediately recognize in
the income statement, pursuant to our accounting policy for the recognition of actuarial gains/losses.
As a result, adjusted EPS reflects an expected return on plan assets of $77 million (based
on an average expected return on plan assets of 5.75% for our VEBA trusts), rather than the
actual return on plan assets of $31 million loss (VEBA return of (3.08)%), included in the
GAAP measure of income.
Net Debt to Adjusted EBITDA
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 Adjusted EBITDA. 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 Adjusted EBITDA.
Net Debt to Adjusted EBITDA
Dollars in millions Three Months Ended
------------------
Mar. 31, YTD
2018 2018
--------------------------------------------- ------------------ -------
Adjusted EBITDA $ 12,442 $ 12,442
Add back severance (51) (51) Net Debt Adjusted EBITDA 12,391 12,391 Annualized Adjusted EBITDA 49,564 End-of-period current debt 29,322 End-of-period long-term debt 133,724 Total End-of-Period Debt 163,046 Less: Cash and Cash Equivalents 48,872 Net Debt Balance 114,174 --------------------------------------------- ------------------ ------- Annualized Net Debt to Adjusted EBITDA Ratio 2.30 --------------------------------------------- ------------------ -------
Supplemental Operational Measures
We provide a supplemental discussion of our domestic wireless operations that is calculated by combining our Consumer Mobility and Business Solutions segments, and then adjusting to remove non-wireless operations. The following table presents a reconciliation of our supplemental AT&T Mobility results.
Supplemental Operational Measure
Three Months Ended
March 31, 2018 March 31, 2017
------------------------------------------------ ----------------------------------------------------
Consumer Business AT&T Consumer Business AT&T
Mobility Solutions Adjustments(1) Mobility Mobility Solutions Adjustments(1) Mobility
--------------- -------- --------- -------------- -------- -------- --------- -------------- ------------
Operating
Revenues
Wireless
service $ 11,612 $ 1,791 $ - $ 13,403 $ 12,465 $ 2,003 $ - $ 14,468
Strategic
services - 3,138 (3,138) - - 2,974 (2,974) -
Legacy voice
and data
services - 2,839 (2,839) - - 3,549 (3,549) -
Other service
and
equipment - 839 (839) - - 878 (878) -
Wireless
equipment 3,374 578 - 3,952 2,341 288 - 2,629
--------------- -------- --------- -------------- -------- -------- --------- -------------- ------------
Total Operating
Revenues 14,986 9,185 (6,816) 17,355 14,806 9,692 (7,401) 17,097
--------------- -------- --------- -------------- -------- -------- --------- -------------- ------------
Operating
Expenses
Operations
and support 8,524 5,638 (4,060) 10,102 8,560 6,040 (4,715) 9,885
EBITDA 6,462 3,547 (2,756) 7,253 6,246 3,652 (2,686) 7,212
Depreciation
and
amortization 1,807 1,462 (1,174) 2,095 1,716 1,465 (1,189) 1,992
--------------- -------- --------- -------------- -------- -------- --------- -------------- ------------
Total Operating
Expenses 10,331 7,100 (5,234) 12,197 10,276 7,505 (5,904) 11,877
--------------- -------- --------- -------------- -------- -------- --------- -------------- ------------
Operating
Income $ 4,655 $ 2,085 $ (1,582) $ 5,158 $ 4,530 $ 2,187 $ (1,497) $ 5,220
--------------- -------- --------- -------------- -------- -------- --------- -------------- ------------
(1) Business wireline operations reported in Business Solutions segment.
Supplemental International
We provide a supplemental presentation of the Mexico Wireless and Latin America operations within our International segment. The following table presents a reconciliation of our International segment.
Supplemental International
Three Months Ended
March 31, 2018 March 31, 2017
-------------------------------------- --------------------------------------
Latin America Mexico International Latin America Mexico International
---------------------- ------------- ------ ------------- ------------- ------ -------------
Operating Revenues
Video service $ 1,354 $ - $ 1,354 $ 1,341 $ - $ 1,341
Wireless service - 404 404 - 475 475
Wireless equipment - 267 267 - 113 113
---------------------- ------------- ------ ------------- ------------- ------ -------------
Total Operating
Revenues 1,354 671 2,025 1,341 588 1,929
---------------------- ------------- ------ ------------- ------------- ------ -------------
Operating Expenses
Operations and
support 1,001 803 1,804 1,050 709 1,759
Depreciation and
amortization 205 127 332 214 76 290
---------------------- ------------- ------ ------------- ------------- ------ -------------
Total Operating
Expenses 1,206 930 2,136 1,264 785 2,049
---------------------- ------------- ------ ------------- ------------- ------ -------------
Operating Income
(Loss) 148 (259) (111) 77 (197) (120)
---------------------- ------------- ------ ------------- ------------- ------ -------------
Equity in Net Income
of Affiliates - - - 20 - 20
---------------------- ------------- ------ ------------- ------------- ------ -------------
Segment Contribution $ 148 $ (259) $ (111) $ 97 $ (197) $ (100)
---------------------- ------------- ------ ------------- ------------- ------ -------------
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
QRFEAKKKEFFPEFF
(END) Dow Jones Newswires
June 06, 2018 12:16 ET (16:16 GMT)
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