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| Name | Symbol | Market | Type |
|---|---|---|---|
| At&t Inc 5.500% | LSE:58KN | London | Bond |
| Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 121.921 | 0 | 01:00:00 |
From May 2019 to May 2024
TIDM58KN
RNS Number : 7826Y
AT & T Inc.
07 March 2017
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) January 25, 2017
AT&T INC.
(Exact Name of Registrant as Specified in Charter)
Hot Features
Premium
Delaware 1-8610 43-1301883
(State or Other (Commission (IRS Employer Identification
Jurisdiction File Number) No.)
of Incorporation)
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):
(X) 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 January 25, 2017, its results of operations for the fourth 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 January 25, 2017 reporting financial results for the fourth quarter ended
December 31, 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: January By: /s/ Debra L. Dial
25, 2017 Debra L. Dial
Senior Vice President and Controller
AT&T Reports Fourth-Quarter and Full-Year Results; AT&T Meets Full-Year Guidance
With Strong Customer Growth
Full Year
-- Consolidated revenues of $163.8 billion -- Operating income of $24.3 billion -- Net income attributable to AT&T of $13.0 billion
-- Diluted EPS of $2.10 as reported and $2.84 as adjusted, compared to $2.37 and $2.71 in the prior year
-- Cash from operations of $39.3 billion -- Free cash flow of $16.9 billion, up 6.8%
Fourth Quarter
-- Consolidated revenues of $41.8 billion -- Operating income of $4.2 billion -- Net income attributable to AT&T of $2.4 billion
-- Diluted EPS of $0.39 as reported and $0.66 as adjusted, compared to $0.65 and $0.63 in the year-ago quarter
-- Cash from operations of $10.1 billion -- Free cash flow of $3.7 billion, up 19.2% -- Fourth-quarter: 2.8 million wireless net adds
o 1.5 million U.S.
o 1.3 million Mexico
-- Full-year: 9.5 million wireless net adds
o 6.2 million U.S.
o 3.3 million Mexico
-- U.S. wireless fourth-quarter results:
o 1.1 million branded smartphones added to subscriber base
o Best-ever postpaid phone churn of 0.98%
o Wireless postpaid churn of 1.16%
o Strong operating margin of 24.7%; best-ever fourth-quarter service EBITDA margin of 45.4%
-- Strong DIRECTV NOW launch with more than 200,000 paid net adds -- 235,000 U.S. DIRECTV satellite net adds with stable linear TV subscriber base -- 149,000 IP broadband net adds with stable total broadband base -- Nearly 400 million North American 4G LTE POPs
Note: AT&T's fourth-quarter earnings conference call will be webcast at 4:30 p.m. ET on Wednesday, January 25, 2017. The webcast and related materials will be available on AT&T's Investor Relations website at www.att.com/investor.relations.
dALLAS, January 25, 2017 - AT&T Inc. (NYSE:T) today reported 2.8 million North American wireless net adds, strong DIRECTV NOW growth and solid adjusted operating margin and earnings gains, with continued free cash flow growth for the fourth quarter.
"2016 was a transformational year for AT&T, one in which we made tremendous progress toward our goal of becoming the global leader in telecom, media and technology," said Randall Stephenson, AT&T Chairman and CEO. "We launched DIRECTV NOW, our innovative over-the-top streaming service. Our 5G evolution plans and improved spectrum position are paving the way for the next-generation of super-fast mobile and fixed networks. And we shook-up the industry with our landscape-changing deal to acquire Time Warner, the logical next step in our strategy to bring together world-class content with best-in-class distribution which will drive innovation and more choice for consumers.
"At the same time, we performed at a high level in 2016 with growing revenues, expanding adjusted consolidated operating margins and solid adjusted earnings growth, and we hit our $1.5 billion DIRECTV cost-synergy target. We also delivered record cash from operations, which allowed us to return substantial value to investors and invest more in the U.S. economy."
Consolidated Financial Results
AT&T's consolidated revenues for the fourth quarter totaled $41.8 billion versus $42.1 billion in the year-ago quarter. Compared with results for the fourth quarter of 2015, operating expenses were $37.6 billion versus $34.6 billion; operating income was $4.2 billion versus $7.5 billion; and operating income margin was 10.2% versus 17.9%. When adjusting for amortization, merger- and integration-related and other items, operating income was $7.3 billion versus $7.1 billion; and operating income margin was 17.5%, up 70 basis points versus the year-ago quarter.
Fourth-quarter net income attributable to AT&T totaled $2.4 billion, or $0.39 per diluted share, compared to $4.0 billion, or $0.65 per diluted share, in the year-ago quarter. Adjusting for the $0.10 non-cash actuarial loss on benefit plans from the annual remeasurement process and $0.17 of costs for amortization, merger-and integration-related and other items, earnings per diluted share was $0.66 compared to an adjusted $0.63 in the year-ago quarter.
Cash from operating activities was $10.1 billion in the fourth quarter, and capital expenditures were $6.5 billion. Capital investment(1) for the quarter totaled $6.7 billion. Free cash flow - cash from operating activities minus capital expenditures - was $3.7 billion for the quarter, up 19.2% versus the year-ago quarter even with higher capital spending.
Full-Year Results
For full-year 2016, compared with 2015 results, AT&T's consolidated revenues totaled $163.8 billion versus $146.8 billion, up 11.6% for the year, driven by a full year of results from DIRECTV and gains in IP services and video. Operating expenses reflect actuarial gains and losses on benefit plans and were $139.4 billion compared with $122.0 billion, up 14.3%; net income attributable to AT&T was $13.0 billion versus $13.3 billion, down 2.8%; and earnings per diluted share was $2.10, compared with $2.37. With adjustments for both years, operating income was $31.8 billion versus $27.7 billion; operating income margin was 19.4% versus 18.8%; and earnings per share totaled $2.84, compared with $2.71, an increase of 4.8%.
AT&T's full-year cash from operating activities was a record $39.3 billion, up from $35.9 billion in 2015. Capital expenditures, including capitalized interest, totaled $22.4 billion, versus $20.0 billion in 2015. Capital investment for the full year was $22.9 billion versus $20.7 billion in 2015. Full-year free cash flow was $16.9 billion compared to $15.9 billion in 2015. The company's free cash flow dividend payout ratio for the full year was 70%.(2)
2017 Outlook
On a business-as-usual basis without the impact of Time Warner, AT&T expects in 2017:
-- Consolidated revenue growth in the low-single digits -- Adjusted EPS growth in the mid-single digit range -- Adjusted operating margin expansion -- Capital expenditures in the $22 billion range -- Free cash flow in the $18 billion range
Adjustments include non-cash mark-to-market benefit plan gain/loss, merger integration and amortization costs and other adjustments. Traditionally, the mark-to-market adjustment is the largest item, which is driven by interest rates and investment returns that are not reasonably estimable at this time. We expect amortization to be lower in 2017 compared to 2016.
(1) 4Q16 includes $267 million in capital purchases with favorable vendor payment terms.
(2) Free cash flow dividend payout ratio is dividends divided by free cash flow
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.
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 one of the world's largest providers 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) 2017 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; and voice roaming 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.
Information set forth in this communication, including financial estimates and statements as to the expected timing, completion and effects of the proposed merger between AT&T and Time Warner, constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and the rules, regulations and releases of the Securities and Exchange Commission. These forward-looking statements are subject to risks and uncertainties, and actual results might differ materially from those discussed in, or implied by, the forward-looking statements. Such forward-looking statements include, but are not limited to, statements about the benefits of the merger, including future financial and operating results, the combined company's plans, objectives, expectations and intentions, and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the management of AT&T and Time Warner and are subject to significant risks and uncertainties outside of our control.
Among the risks and uncertainties that could cause actual results to differ from those described in the forward-looking statements are the following: (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, (2) the risk that Time Warner stockholders may not adopt the merger agreement, (3) the risk that the necessary regulatory approvals may not be obtained or may be obtained subject to conditions that are not anticipated, (4) risks that any of the closing conditions to the proposed merger may not be satisfied in a timely manner, (5) risks related to disruption of management time from ongoing business operations due to the proposed merger, (6) failure to realize the benefits expected from the proposed merger and (7) the effect of the announcement of the proposed merger on the ability of Time Warner and AT&T to retain customers and retain and hire key personnel and maintain relationships with their suppliers, and on their operating results and businesses generally. Discussions of additional risks and uncertainties are and will be contained in AT&T's and Time Warner's filings with the Securities and Exchange Commission. Neither AT&T nor Time Warner is under any obligation, and each expressly disclaim any obligation, to update, alter, or otherwise revise any forward-looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events, or otherwise. Persons reading this communication are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof.
No Offer or Solicitation
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Additional Information and Where to Find It
In connection with the proposed merger, AT&T has filed a registration statement on Form S-4, containing a proxy statement/prospectus with the Securities and Exchange Commission ("SEC"). AT&T and Time Warner have made the proxy statement/prospectus available to their respective stockholders and AT&T and Time Warner will file other documents regarding the proposed merger with the SEC. This communication is not intended to be, and is not, a substitute for such filings or for any other document that AT&T or Time Warner may file with the SEC in connection with the proposed merger. STOCKHOLDERS OF TIME WARNER ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE REGISTRATION STATEMENT AND THE PROXY STATEMENT/PROSPECTUS, CAREFULLY BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT AT&T, TIME WARNER AND THE PROPOSED MERGER. Investors and security holders are able to obtain copies of the proxy statement/prospectus as well as other filings containing information about AT&T and Time Warner, without charge, at the SEC's website, http://www.sec.gov. Copies of documents filed with the SEC by AT&T will be made available free of charge on AT&T's investor relations website at http://phx.corporate-ir.net/phoenix.zhtml?c=113088&p=irol-sec. Copies of documents filed with the SEC by Time Warner will be made available free of charge on Time Warner's investor relations website at http://ir.timewarner.com/phoenix.zhtml?c=70972&p=irol-sec.
Participants in Solicitation
AT&T, Time Warner and certain of their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from the holders of Time Warner common stock in respect to the proposed merger. Information about the directors and executive officers of AT&T is set forth in the proxy statement for AT&T's 2016 Annual Meeting of Stockholders, which was filed with the SEC on March 11, 2016. Information about the directors and executive officers of Time Warner is set forth in the proxy statement for Time Warner's 2016 Annual Meeting of Stockholders, which was filed with the SEC on May 19, 2016. Investors may obtain additional information regarding the interest of such participants by reading the proxy statement/prospectus regarding the proposed merger and other relevant materials filed with the SEC. These documents will be available free of charge from the sources indicated above.
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.
Capital Investment
Capital Investment is a non-GAAP financial measure that adds to Capital expenditures the amount of vendor financing arrangements for capital improvements. These favorable payment terms are considered vendor financing arrangements and are reported as financing activities 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.
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.) 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%.
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.
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
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 Media Relations
Phone: (214) 757-7629
Email: fletcher.cook@att.com
AT&T Inc.
Financial Data
Consolidated Statements of Income
--------------------------------------------------------------------------------------
Dollars in Three Months Ended Twelve Months Ended
millions except
per share amounts
Unaudited December 31, Percent December 31, Percent
------------------ -----------------------
2016 2015 Change 2016 2015 Change
------------------ ------- ------- --------- ----------- --------
Operating Revenues
Service $37,369 $37,635 -0.7% $ 148,884 $131,677 13.1%
Equipment 4,472 4,484 -0.3% 14,902 15,124 -1.5%
------------------- ------ ------ ------- -------
Total Operating
Revenues 41,841 42,119 -0.7% 163,786 146,801 11.6%
------------------- ------ ------ ------- -------
Operating Expenses
Cost of
services and
sales
Equipment 5,667 5,868 -3.4% 18,757 19,268 -2.7%
Broadcast,
programming
and operations 5,612 5,645 -0.6% 19,851 11,996 65.5%
Other cost of
services
(exclusive of
depreciation
and
amortization
shown
separately
below) 9,840 8,178 20.3% 38,276 35,782 7.0%
Selling, general
and
administrative 9,984 8,419 18.6% 36,347 32,919 10.4%
Asset
abandonments
and impairments 361 - -% 361 35 -%
Depreciation and
amortization 6,129 6,477 -5.4% 25,847 22,016 17.4%
------------------- ------ ------ ------- -------
Total Operating
Expenses 37,593 34,587 8.7% 139,439 122,016 14.3%
------------------- ------ ------ ------- -------
Operating Income 4,248 7,532 -43.6% 24,347 24,785 -1.8%
------------------- ------ ------ ------- -------
Interest Expense 1,221 1,143 6.8% 4,910 4,120 19.2%
Equity in Net
Income of
Affiliates 41 31 32.3% 98 79 24.1%
Other Income
(Expense) - Net 123 (113) -% 277 (52) -%
------------------- ------ ------ ------- -------
Income Before
Income Taxes 3,191 6,307 -49.4% 19,812 20,692 -4.3%
Income Tax Expense 676 2,221 -69.6% 6,479 7,005 -7.5%
------------------- ------ ------ ------- -------
Net Income 2,515 4,086 -38.4% 13,333 13,687 -2.6%
------------------- ------ ------ ------- -------
Less: Net Income
Attributable to
Noncontrolling
Interest (78) (80) 2.5% (357) (342) -4.4%
------------------- ------ ------ ------- -------
Net Income
Attributable to
AT&T $ 2,437 $ 4,006 -39.2% $ 12,976 $ 13,345 -2.8%
=================== ====== ====== ======= =======
Basic Earnings Per
Share Attributable
to AT&T $ 0.39 $ 0.65 -40.0% $ 2.10 $ 2.37 -11.4%
Weighted Average
Common
Shares
Outstanding
(000,000) 6,161 6,165 -0.1% 6,168 5,628 9.6%
Diluted Earnings
Per Share
Attributable to
AT&T $ 0.39 $ 0.65 -40.0% $ 2.10 $ 2.37 -11.4%
Weighted Average
Common
Shares
Outstanding
with Dilution
(000,000) 6,181 6,187 -0.1% 6,189 5,646 9.6%
------------------- ------ ------ ----- ------- ------- -----
AT&T Inc.
Financial Data
Consolidated Balance Sheets
--------------------------------------------------------------------------------------------------------
Dollars in millions
Unaudited Dec. 31, Dec. 31,
2016 2015
------------------------------------------------------------------------------- -------- --------
Assets
Current Assets
Cash and cash equivalents $ 5,788 $ 5,121
Accounts receivable - net of allowances for doubtful accounts of $661 and $704 16,794 16,532
Prepaid expenses 1,555 1,072
Other current assets 14,232 13,267
-------------------------------------------------------------------------------- ------- -------
Total current assets 38,369 35,992
-------------------------------------------------------------------------------- ------- -------
Property, Plant and Equipment - Net 124,899 124,450
Goodwill 105,207 104,568
Licenses 94,176 93,093
Customer Lists and Relationships - Net 14,243 18,208
Other Intangible Assets - Net 8,441 9,409
Investments in Equity Affiliates 1,674 1,606
Other Assets 16,812 15,346
-------------------------------------------------------------------------------- ------- -------
Total Assets $403,821 $402,672
================================================================================ ======= =======
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year $ 9,832 $ 7,636
Accounts payable and accrued liabilities 31,138 30,372
Advanced billing and customer deposits 4,519 4,682
Accrued taxes 2,079 2,176
Dividends payable 3,008 2,950
-------------------------------------------------------------------------------- ------- -------
Total current liabilities 50,576 47,816
-------------------------------------------------------------------------------- ------- -------
Long-Term Debt 113,681 118,515
-------------------------------------------------------------------------------- ------- -------
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes 60,128 56,181
Postemployment benefit obligation 33,578 34,262
Other noncurrent liabilities 21,748 22,258
-------------------------------------------------------------------------------- ------- -------
Total deferred credits and other noncurrent liabilities 115,454 112,701
-------------------------------------------------------------------------------- ------- -------
Stockholders' Equity
Common stock 6,495 6,495
Additional paid-in capital 89,604 89,763
Retained earnings 34,734 33,671
Treasury stock (12,659) (12,592)
Accumulated other comprehensive income 4,961 5,334
Noncontrolling interest 975 969
-------------------------------------------------------------------------------- ------- -------
Total stockholders' equity 124,110 123,640
-------------------------------------------------------------------------------- ------- -------
Total Liabilities and Stockholders' Equity $403,821 $402,672
================================================================================ ======= =======
AT&T Inc.
Financial Data
Consolidated Statements of Cash Flows
--------------------------------------------------------------------------------------------------------------
Dollars in millions Twelve Months Ended
Unaudited December 31,
-------------------------
2016 2015
---------------------------------------------------------------------------------- ------------ -----------
Operating Activities
Net income $ 13,333 $ 13,687
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 25,847 22,016
Undistributed earnings from investments in equity affiliates (37) (49)
Provision for uncollectible accounts 1,474 1,416
Deferred income tax expense 2,947 4,117
Net (gain) loss from sale of investments, net of impairments (169) 91
Actuarial loss (gain) on pension and postretirement benefits 1,024 (2,152)
Asset abandonments and impairments 361 35
Changes in operating assets and liabilities:
Accounts receivable (1,003) 30
Other current assets 1,708 (1,182)
Accounts payable and accrued liabilities 118 1,354
Equipment installment receivables and related sales (576) (3,023)
Deferred fulfillment costs (2,359) (1,437)
Retirement benefit funding (910) (735)
Other - net (2,414) 1,712
----------------------------------------------------------------------------------- ------- -------
Total adjustments 26,011 22,193
----------------------------------------------------------------------------------- ------- -------
Net Cash Provided by Operating Activities 39,344 35,880
----------------------------------------------------------------------------------- ------- -------
Investing Activities
Capital expenditures:
Purchase of property and equipment (21,516) (19,218)
Interest during construction (892) (797)
Acquisitions, net of cash acquired (2,959) (30,759)
Dispositions 646 83
Sales of securities, net 506 1,545
Other - 2
----------------------------------------------------------------------------------- ------- -------
Net Cash Used in Investing Activities (24,215) (49,144)
----------------------------------------------------------------------------------- ------- -------
Financing Activities
Net change in short-term borrowings with original maturities of three months or
less - (1)
Issuance of long-term debt 10,140 33,969
Repayment of long-term debt (10,823) (10,042)
Purchase of treasury stock (512) (269)
Issuance of treasury stock 146 143
Dividends paid (11,797) (10,200)
Other (1,616) (3,818)
----------------------------------------------------------------------------------- ------- -------
Net Cash (Used in) Provided by Financing Activities (14,462) 9,782
----------------------------------------------------------------------------------- ------- -------
Net increase (decrease) in cash and cash equivalents 667 (3,482)
Cash and cash equivalents beginning of year 5,121 8,603
----------------------------------------------------------------------------------- ------- -------
Cash and Cash Equivalents End of Year $ 5,788 $ 5,121
=================================================================================== ======= =======
AT&T Inc.
Consolidated Supplementary Data
Supplementary Financial Data
--------------------------------------------------------------------------------------------
Dollars in Three Months Ended Twelve Months Ended
millions except
per share amounts
Unaudited December 31, Percent December 31, Percent
---------------------- --------------------------
2016 2015 Change 2016 2015 Change
----------------- ------------ -------- --------- -------- -------- ---------
Capital
expenditures
Purchase of
property and
equipment $ 6,233 $ 5,862 6.3% $ 21,516 $ 19,218 12.0%
Interest during
construction 223 231 -3.5% 892 797 11.9%
------------------ -------- ------- ------- -------
Total Capital
Expenditures $ 6,456 $ 6,093 6.0% $ 22,408 $ 20,015 12.0%
Dividends Declared
per Share $ 0.49 $ 0.48 2.1% $ 1.93 $ 1.89 2.1%
End of Period
Common Shares
Outstanding
(000,000) 6,139 6,145 -0.1%
Debt Ratio 49.9% 50.5% -60 BP
Total Employees 268,540 281,450 -4.6%
------------------ -------- ------- ----- ------- ------- -----
Supplementary Operating Data
--------------------------------------------------------------------------------------------
Subscribers and
connections in
thousands
Unaudited December 31, Percent
-------------------------
2016 2015 Change
----------------- -------- ------- ----- ------- ------- ---------
Wireless
Subscribers
Domestic 134,859 128,640 4.8%
Mexico 11,973 8,684 37.9%
------------------ -------- ------- ----- ------- -------
Total Wireless
Subscribers 146,832 137,324 6.9%
------------------ -------- ------- ----- ------- -------
Total Branded
Wireless
Subscribers 103,011 96,937 6.3%
Video Connections
Domestic 25,293 25,424 -0.5%
PanAmericana 7,206 7,066 2.0%
Brazil 5,249 5,444 -3.6%
------------------ -------- ------- ----- ------- -------
Total Video
Connections 37,748 37,934 -0.5%
------------------ -------- ------- ----- ------- -------
Broadband
Connections
IP 13,864 13,268 4.5%
DSL 1,741 2,510 -30.6%
------------------ -------- ------- ----- ------- -------
Total Broadband
Connections 15,605 15,778 -1.1%
------------------ -------- ------- ----- ------- -------
Voice Connections
Network Access
Lines 13,986 16,670 -16.1%
U-verse VoIP
Connections 5,787 5,453 6.1%
------------------ -------- ------- ----- ------- -------
Total Retail
Consumer Voice
Connections 19,773 22,123 -10.6%
================== ======== ======= ===== ======= ======= =====
Three Months Ended Twelve Months Ended
December 31, Percent December 31, Percent
---------------------- -----------------------
2016 2015 Change 2016 2015 Change
----------------- -------- ------- --------- -------- -------- ---------
Wireless Net
Additions
Domestic 1,522 2,234 -31.9% 6,196 8,059 -23.1%
Mexico 1,275 593 -% 3,289 (96) -%
------------------- -------- ------- -------- --------
Total Wireless Net
Additions 2,797 2,827 -1.1% 9,485 7,963 19.1%
------------------- -------- ------- -------- --------
Total Branded
Wireless Net
Additions 2,221 1,633 36.0% 6,102 3,038 -%
Video Net
Additions
Domestic (28) (26) -7.7% (131) (63) -%
PanAmericana 67 60 11.7% 140 76 84.2%
Brazil (88) (94) 6.4% (195) (223) 12.6%
------------------- -------- ------- -------- --------
Total Video Net
Additions (49) (60) 18.3% (186) (210) 11.4%
------------------- -------- ------- -------- --------
Broadband Net
Additions
IP 149 192 -22.4% 596 1,063 -43.9%
DSL (162) (246) 34.1% (769) (1,313) 41.4%
------------------- -------- ------- -------- --------
Total Broadband Net
Additions (13) (54) 75.9% (173) (250) 30.8%
------------------- -------- ------- ----- -------- -------- -----
BUSINESS SOLUTIONS
The Business Solutions segment provides services to business customers, including
multinational
companies; governmental and wholesale customers; and individual subscribers who purchase
wireless
services through employer-sponsored plans. 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
utilize
our wireless and wired networks (referred to as "wired" or "wireline") to provide a complete
communications solution to our business customers.
Segment Results
--------------------------------------------------------------------------------------------
Dollars in Three Months Ended
millions Twelve Months Ended
Unaudited December 31, Percent December 31, Percent
------------------------ ------------------------
2016 2015 Change 2016 2015 Change
----------------- ------- ------- --------- ------- ------- ---------
Segment Operating
Revenues
Wireless service $ 7,983 $ 7,684 3.9% $31,850 $30,687 3.8%
Fixed strategic
services 2,942 2,716 8.3% 11,389 10,461 8.9%
Legacy voice and
data services 3,797 4,387 -13.4% 16,364 18,468 -11.4%
Other service and
equipment 963 973 -1.0% 3,615 3,558 1.6%
Wireless equipment 2,348 2,454 -4.3% 7,770 7,953 -2.3%
------------------ ------ ------ ------ ------
Total Segment
Operating
Revenues 18,033 18,214 -1.0% 70,988 71,127 -0.2%
------------------ ------ ------ ------ ------
Segment Operating
Expenses
Operations and
support expenses 11,746 11,980 -2.0% 44,330 44,946 -1.4%
Depreciation and
amortization 2,264 2,513 -9.9% 9,832 9,789 0.4%
------------------ ------ ------ ------ ------
Total Segment
Operating
Expenses 14,010 14,493 -3.3% 54,162 54,735 -1.0%
------------------ ------ ------ ------ ------
Segment Operating
Income 4,023 3,721 8.1% 16,826 16,392 2.6%
Equity in Net
Income of
Affiliates - - -% - - -%
----------------- ------ ------ ------ ------
Segment
Contribution $ 4,023 $ 3,721 8.1% $16,826 $16,392 2.6%
================== ====== ====== ====== ======
Segment Operating
Income Margin 22.3% 20.4% 190 BP 23.7% 23.0% 70 BP
------------------ ------ ------ ----- ------ ------ -----
Supplementary Operating Data
--------------------------------------------------------------------------------------------
Subscribers and
connections in
thousands
Unaudited December 31, Percent
------------------------
2016 2015 Change
----------------- ------ ------ ----- ------ ------ ---------
Business
Solutions
Wireless
Subscribers
Postpaid/Branded 50,688 48,290 5.0%
Reseller 65 85 -23.5%
Connected Devices 30,649 25,284 21.2%
------------------ ------ ------ ----- ------ ------
Total Business
Solutions
Wireless
Subscribers 81,402 73,659 10.5%
------------------ ------ ------ ----- ------ ------
Business Solutions
IP Broadband
Connections 977 911 7.2%
================== ====== ====== ===== ====== ====== =====
Three Months Ended Twelve Months Ended
December 31, Percent December 31, Percent
----------------------- -----------------------
2016 2015 Change 2016 2015 Change
----------------- ----- --- ------ --------- ------ --- ------ -------
Business
Solutions
Wireless Net
Additions
Postpaid/Branded 250 353 -29.2% 759 1,203 -36.9%
Reseller 1 (1) -% (33) 13 -%
Connected Devices 1,263 1,211 4.3% 5,330 5,315 0.3%
------------------- ----- --- ------ ------ --- ------
Total Business
Solutions Wireless
Net Additions 1,514 1,563 -3.1% 6,056 6,531 -7.3%
------------------- ----- --- ------ ------ --- ------
Business Solutions
Wireless Postpaid
Churn 1.11% 1.10% 1 BP 1.00% 0.99% 1 BP
------------------- ----- ------ ------ ------
Business Solutions
IP Broadband
Net Additions 14 19 -26.3% 66 89 -25.8%
------------------- ----- --- ------ ----- ------ --- ------ -------
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.
We utilize our copper and IP-based wired network and/or our satellite technology.
Segment Results
------------------------------------------------------------------------------------------------
Dollars in Three Months Ended Twelve Months Ended
millions
Unaudited December 31, Percent December 31, Percent
--------------------------- ---------------------------
2016 2015 Change 2016 2015 Change
--------------- -------------- ----------- --------- ---------- ------- ---------
Segment
Operating
Revenues
Video
entertainment $ 9,567 $ 9,247 3.5% $ 36,460 $20,271 79.9%
High-speed
internet 1,910 1,740 9.8% 7,472 6,601 13.2%
Legacy voice and
data services 1,104 1,367 -19.2% 4,829 5,914 -18.3%
Other service
and equipment 625 640 -2.3% 2,534 2,508 1.0%
---------------- ------ ------ ------ ------
Total
Segment
Operating
Revenues 13,206 12,994 1.6% 51,295 35,294 45.3%
---------------- ------ ------ ------ ------
Segment
Operating
Expenses
Operations and
support
expenses 10,463 10,123 3.4% 39,338 28,345 38.8%
Depreciation and
amortization 1,381 1,426 -3.2% 5,862 4,945 18.5%
---------------- ------ ------ ------ ------
Total
Segment
Operating
Expenses 11,844 11,549 2.6% 45,200 33,290 35.8%
---------------- ------ ------ ------ ------
Segment
Operating
Income 1,362 1,445 -5.7% 6,095 2,004 -%
Equity in Net
Income (Loss)
of Affiliates 8 12 -33.3% 9 (4) -%
---------------- ------ ------ ------ ------
Segment
Contribution $ 1,370 $ 1,457 -6.0% $ 6,104 $ 2,000 -%
================ ====== ====== ====== ======
Segment
Operating
Income Margin 10.3% 11.1% -80 BP 11.9% 5.7% 620 BP
---------------- ------ ------ ----- ------ ------ -----
Supplementary Operating Data
------------------------------------------------------------------------------------------------
Subscribers and
connections in
thousands
Unaudited December 31, Percent
---------------------------
2016 2015 Change
--------------- ------ ------ ----- ------ ------ ---------
Video
Connections
Satellite 21,012 19,784 6.2%
U-verse 4,253 5,614 -24.2%
---------------- ------ ------ ----- ------ ------
Total Video
Connections 25,265 25,398 -0.5%
---------------- ------ ------ ----- ------ ------
Broadband
Connections
IP 12,888 12,356 4.3%
DSL 1,291 1,930 -33.1%
---------------- ------ ------ ----- ------ ------
Total Broadband
Connections 14,179 14,286 -0.7%
---------------- ------ ------ ----- ------ ------
Voice
Connections
Retail Consumer
Switched Access
Lines 5,853 7,286 -19.7%
U-verse Consumer
VoIP
Connections 5,425 5,212 4.1%
---------------- ------ ------ ----- ------ ------
Total Retail
Consumer Voice
Connections 11,278 12,498 -9.8%
================ ====== ====== ===== ====== ====== =====
Three Months Ended Twelve Months
Ended
December 31, Percent December 31, Percent
---------------------- ------------------
2016 2015 Change 2016 2015 Change
------------------- ----------- -------- --------- -------- -------- ---------
Video Net
Additions(1)
Satellite 235 214 9.8% 1,228 240 -%
U-verse (262) (240) -9.2% (1,361) (306) -%
------------------- ------- ------- ------- -------
Total Video Net
Additions (27) (26) -3.8% (133) (66) -%
------------------- ------- ------- ------- -------
(1) Includes
customers
that migrated
to DIRECTV
NOW
Broadband Net
Additions
IP 136 171 -20.5% 532 973 -45.3%
DSL (133) (208) 36.1% (639) (1,130) 43.5%
------------------- ------- ------- ------- -------
Total Broadband Net
Additions 3 (37) -% (107) (157) 31.8%
------------------- ------- ------- ----- ------- ------- -----
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 utilize our
U.S. wireless network to provide voice and data services, including high-speed internet, video,
and home monitoring services.
Segment Results
--------------------------------------------------------------------------------------------------
Dollars in Three Months Ended
millions Twelve Months Ended
Unaudited December 31, Percent December 31, Percent
------------------------------ ---------------------------
2016 2015 Change 2016 2015 Change
-------------- ---------- --- --------- --------- ---------- ------- ---------
Segment
Operating
Revenues
Service $ 6,731 $ 7,131 -5.6% $ 27,536 $29,150 -5.5%
Equipment 1,688 1,618 4.3% 5,664 5,916 -4.3%
--------------- ------ --- ----- ------ ------
Total
Segment
Operating
Revenues 8,419 8,749 -3.8% 33,200 35,066 -5.3%
--------------- ------ --- ----- ------ ------
Segment
Operating
Expenses
Operations and
support
expenses 5,316 5,669 -6.2% 19,659 21,477 -8.5%
Depreciation
and
amortization 918 939 -2.2% 3,716 3,851 -3.5%
--------------- ------ --- ----- ------ ------
Total
Segment
Operating
Expenses 6,234 6,608 -5.7% 23,375 25,328 -7.7%
--------------- ------ --- ----- ------ ------
Segment
Operating
Income 2,185 2,141 2.1% 9,825 9,738 0.9%
Equity in Net
Income of
Affiliates - - -% - - -%
-------------- ------ --- ----- ------ ------
Segment
Contribution $ 2,185 $ 2,141 2.1% $ 9,825 $ 9,738 0.9%
=============== ====== === ===== ====== ======
Segment
Operating
Income Margin 26.0% 24.5% 150 BP 29.6% 27.8% 180 BP
--------------- ------ ----- ----- ------ ------ -----
Supplementary Operating Data
--------------------------------------------------------------------------------------------------
Subscribers
and
connections in
thousands
Unaudited December 31, Percent
---------------------------
2016 2015 Change
-------------- ------ --- ----- ----- ---------- ---------- ---------
Consumer
Mobility
Subscribers
Postpaid 27,095 28,814 -6.0%
Prepaid 13,536 11,548 17.2%
--------------- ------ --- ----- ----- ------ ------
Branded 40,631 40,362 0.7%
Reseller 11,884 13,690 -13.2%
Connected
Devices 942 929 1.4%
--------------- ------ --- ----- ----- ------ ------
Total Consumer
Mobility
Subscribers 53,457 54,981 -2.8%
=============== ====== === ===== ===== ====== ====== =====
Three Months Ended Twelve Months Ended
December 31, Percent December 31, Percent
------------------------- -------------------------
2016 2015 Change 2016 2015 Change
--------------- ----------- ----------- --------- ------------- ---------- ---------
Consumer
Mobility Net
Additions
Postpaid 270 174 55.2% 359 463 -22.5%
Prepaid 406 469 -13.4% 1,575 1,364 15.5%
----------------- ------ --- ------ --- -------- --- ------
Branded 676 643 5.1% 1,934 1,827 5.9%
Reseller (673) 50 -% (1,813) (168) -%
Connected Devices 5 (22) -% 19 (131) -%
----------------- ------ --- ------ -------- --- ------
Total Consumer
Mobility Net
Additions 8 671 -98.8% 140 1,528 -90.8%
----------------- ------ --- ------ --- -------- --- ------
Total Churn 2.43% 1.97% 46 BP 2.15% 1.94% 21 BP
Postpaid Churn 1.25% 1.31% -6 BP 1.19% 1.25% -6 BP
----------------- ------ ------ ----- -------- ------ -----
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 Three Months Ended
millions Twelve Months Ended
Unaudited December 31, Percent December 31, Percent
------------------------------ ---------------------------
2016 2015 Change 2016 2015 Change
-------------- --------------- ------------- --------- -------------- ----------- ---------
Segment
Operating
Revenues
Video
entertainment $ 1,261 $ 1,206 4.6% $ 4,910 $ 2,151 -%
Wireless
service 477 494 -3.4% 1,905 1,647 15.7%
Wireless
equipment 171 149 14.8% 468 304 53.9%
--------------- ------ --- ----- ------ ------
Total
Segment
Operating
Revenues 1,909 1,849 3.2% 7,283 4,102 77.5%
--------------- ------ --- ----- ------ ------
Segment
Operating
Expenses
Operations and
support
expenses 1,879 1,799 4.4% 6,830 3,930 73.8%
Depreciation
and
amortization 298 309 -3.6% 1,166 655 78.0%
--------------- ------ --- ----- ------ ------
Total
Segment
Operating
Expenses 2,177 2,108 3.3% 7,996 4,585 74.4%
--------------- ------ --- ----- ------ ------
Segment
Operating
Income (Loss) (268) (259) -3.5% (713) (483) -47.6%
Equity in Net
Income (Loss)
of Affiliates 28 (1) -% 52 (5) -%
--------------- ------ --- ----- ------ ------
Segment
Contribution $ (240) $ (260) 7.7% $ (661) $ (488) -35.5%
=============== ====== ===== ====== ======
Segment
Operating
Income Margin (14.0)% (14.0)% - BP (9.8)% (11.8)% 200 BP
--------------- ------ ----- ----- ------ ------ -----
Supplementary Operating Data
--------------------------------------------------------------------------------------------------
Subscribers
and
connections in
thousands
Unaudited December 31, Percent
---------------------------
2016 2015 Change
-------------- ------ --- ----- ----- ---------- ---------- ---------
Mexican
Wireless
Subscribers
Postpaid 4,965 4,289 15.8%
Prepaid 6,727 3,995 68.4%
--------------- ------ --- ----- ----- ------ ------
Branded 11,692 8,284 41.1%
Reseller 281 400 -29.8%
--------------- ------ --- ----- ----- ------ ------
Total Mexican
Wireless
Subscribers 11,973 8,684 37.9%
--------------- ------ --- ----- ----- ------ ------
Latin America
Satellite
Subscribers
PanAmericana 7,206 7,066 2.0%
SKY Brazil 5,249 5,444 -3.6%
--------------- ------ --- ----- ----- ------ ------
Total Latin
America
Satellite
Subscribers 12,455 12,510 -0.4%
=============== ====== === ===== ===== ====== ====== =====
Three Months Ended Twelve Months Ended
December 31, Percent December 31, Percent
----------------------- -----------------------
2016 2015 Change 2016 2015 Change
--------------- -------------- ------ --------- ------------- -------- ---------
Mexican
Wireless Net
Additions
Postpaid 233 130 79.2% 677 177 -%
Prepaid 1,062 508 -% 2,732 (169) -%
----------------- ---------- ----- --------- -------
Branded 1,295 638 -% 3,409 8 -%
Reseller (20) (45) 55.6% (120) (104) -15.4%
----------------- ---------- ----- --------- -------
Total Mexican
Wireless Net
Additions 1,275 593 -% 3,289 (96) -%
----------------- ---------- ----- --------- -------
Latin America
Satellite Net
Additions
PanAmericana 67 60 11.7% 140 76 84.2%
SKY Brazil (88) (94) 6.4% (195) (223) 12.6%
----------------- ---------- ----- --------- -------
Total Latin
America
Satellite Net
Additions (21) (34) 38.2% (55) (147) 62.6%
----------------- ---------- ----- ----- --------- ------- -----
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 Twelve Months Ended
Unaudited December 31, Percent December 31, Percent
------------------------- -------------------------
2016 2015 Change 2016 2015 Change
-------------- ---------------- ----------- --------- --------------- ------------ ---------
Operating
Revenues
Service $ 14,713 $14,815 -0.7% $ 59,386 $ 59,837 -0.8%
Equipment 4,037 4,071 -0.8% 13,435 13,868 -3.1%
--------------- ------- ------ ------- -------
Total
Operating
Revenues 18,750 18,886 -0.7% 72,821 73,705 -1.2%
--------------- ------- ------ ------- -------
Operating
Expenses
Operations and
support
expenses 12,064 12,479 -3.3% 43,886 45,789 -4.2%
Depreciation
and
amortization 2,048 2,031 0.8% 8,292 8,113 2.2%
--------------- ------- ------ ------- -------
Total
Operating
Expenses 14,112 14,510 -2.7% 52,178 53,902 -3.2%
--------------- ------- ------ ------- -------
Operating
Income 4,638 4,376 6.0% 20,643 19,803 4.2%
Equity in Net
Income of
Affiliates - - -% - - -%
-------------- ------- ------ ------- -------
Operating
Contribution $ 4,638 $ 4,376 6.0% $ 20,643 $ 19,803 4.2%
=============== ======= ====== ======= =======
Operating
Income Margin 24.7% 23.2% 150 BP 28.3% 26.9% 140 BP
--------------- ------- ------ ----- ------- ------- -----
Supplementary Operating Data
--------------------------------------------------------------------------------------------------
Subscribers
and
connections in
thousands
Unaudited December 31, Percent
-------------------------
2016 2015 Change
-------------- ------- ------ ----- ----------- ----------- ---------
AT&T Mobility
Subscribers
Postpaid 77,783 77,105 0.9%
Prepaid 13,536 11,548 17.2%
--------------- ------- ------ ----- ------- -------
Branded 91,319 88,653 3.0%
Reseller 11,949 13,774 -13.2%
Connected
Devices 31,591 26,213 20.5%
--------------- ------- ------ ----- ------- -------
Total AT&T
Mobility
Subscribers 134,859 128,640 4.8%
--------------- ------- ------ ----- ------- -------
Domestic
Licensed POPs
(000,000) 322 321 0.3%
=============== ======= ====== ===== ======= ======= =====
Three Months Ended Twelve Months Ended
December 31, Percent December 31, Percent
-------------------------- -------------------------
2016 2015 Change 2016 2015 Change
----------------- ------------ ---------- --------- ------------- ---------- ---------
AT&T Mobility Net
Additions
Postpaid 520 526 -1.1% 1,118 1,666 -32.9%
Prepaid 406 469 -13.4% 1,575 1,364 15.5%
------------------- ------- --- ------ -------- --- ------
Branded 926 995 -6.9% 2,693 3,030 -11.1%
Reseller (672) 50 -% (1,846) (155) -%
Connected Devices 1,268 1,189 6.6% 5,349 5,184 3.2%
------------------- ------- --- ------ -------- --- ------
Total AT&T Mobility
Net Additions 1,522 2,234 -31.9% 6,196 8,059 -23.1%
------------------- ------- --- ------ -------- --- ------
M&A Activity,
Partitioned
Customers and
Other Adjustments (1) - -% 23 27 -14.8%
Total Churn 1.71% 1.50% 21 BP 1.48% 1.39% 9 BP
Branded Churn 1.74% 1.72% 2 BP 1.62% 1.63% -1 BP
Postpaid Churn 1.16% 1.18% -2 BP 1.07% 1.09% -2 BP
Postpaid Phone Only
Churn 0.98% 1.07% -9 BP 0.92% 0.99% -7 BP
------------------- ------- ------ ----- -------- ------ -----
SUPPLEMENTAL SEGMENT RECONCILIATION
Three Months Ended
----------------------------------------------------------------------------------------------------------------------
Dollars in millions
Unaudited
December 31, 2016
-------------------- ---------- ----------- ------- ------------- ---------- ----------- -------------
Equity in
Operations Depreciation Operating Net Income
and Support and Income (Loss) of Segment
Revenues Expenses EBITDA Amortization (Loss) Affiliates Contribution
-------------------- ---------- ----------- ------- ------------- ---------- ----------- -------------
Business Solutions $ 18,033 $ 11,746 $ 6,287 $ 2,264 $ 4,023 $ - $ 4,023
Entertainment Group 13,206 10,463 2,743 1,381 1,362 8 1,370
Consumer Mobility 8,419 5,316 3,103 918 2,185 - 2,185
International 1,909 1,879 30 298 (268) 28 (240)
--------------------- ------ ---------- ------ ------------ --------- ---------- ------------
Segment Total 41,567 29,404 12,163 4,861 7,302 $ 36 $ 7,338
===================== ====== ========== ====== ============ ========= ========== ============
Corporate and Other 284 233 51 11 40
Acquisition-related
items - 385 (385) 1,228 (1,613)
Certain Significant
items (10) 1,442 (1,452) 29 (1,481)
--------------------- ------ ---------- ------ ------------ ---------
AT&T Inc. $ 41,841 $ 31,464 $10,377 $ 6,129 $ 4,248
===================== ====== ========== ====== ============ =========
December 31, 2015
-------------------- ------ ---------- ------ ------------ --------- ---------- ------------
Equity in
Operations Depreciation Operating Net Income
and Support and Income (Loss) of Segment
Revenues Expenses EBITDA Amortization (Loss) Affiliates Contribution
-------------------- ---------- ----------- ------- ------------- ---------- ----------- -------------
Business Solutions $ 18,214 $ 11,980 $ 6,234 $ 2,513 $ 3,721 $ - $ 3,721
Entertainment Group 12,994 10,123 2,871 1,426 1,445 12 1,457
Consumer Mobility 8,749 5,669 3,080 939 2,141 - 2,141
International 1,849 1,799 50 309 (259) (1) (260)
--------------------- ------ ---------- ------ ------------ --------- ---------- ------------
Segment Total 41,806 29,571 12,235 5,187 7,048 $ 11 $ 7,059
===================== ====== ========== ====== ============ ========= ========== ============
Corporate and Other 313 272 41 17 24
Acquisition-related
items - 383 (383) 1,273 (1,656)
Certain Significant
items - (2,116) 2,116 - 2,116
--------------------- ------ ---------- ------ ------------ ---------
AT&T Inc. $ 42,119 $ 28,110 $14,009 $ 6,477 $ 7,532
===================== ====== ========== ====== ============ =========
Twelve Months Ended
--------------------------------------------------------------------------------------------------------------------
Dollars in millions
Unaudited
December 31, 2016
-------------------- ------- ---------- ------ ------------ --------- ---------- ------------
Equity in
Operations Depreciation Operating Net Income
and Support and Income (Loss) of Segment
Revenues Expenses EBITDA Amortization (Loss) Affiliates Contribution
-------------------- -------- ----------- ------- ------------- ---------- ----------- -------------
Business Solutions $ 70,988 $ 44,330 $26,658 $ 9,832 $ 16,826 $ - $ 16,826
Entertainment Group 51,295 39,338 11,957 5,862 6,095 9 6,104
Consumer Mobility 33,200 19,659 13,541 3,716 9,825 - 9,825
International 7,283 6,830 453 1,166 (713) 52 (661)
--------------------- ------- ---------- ------ ------------ --------- ---------- ------------
Segment Total 162,766 110,157 52,609 20,576 32,033 $ 61 $ 32,094
===================== ======= ========== ====== ============ ========= ========== ============
Corporate and Other 1,043 1,173 (130) 65 (195)
Acquisition-related
items - 1,203 (1,203) 5,177 (6,380)
Certain Significant
items (23) 1,059 (1,082) 29 (1,111)
--------------------- ------- ---------- ------ ------------ ---------
AT&T Inc. $163,786 $ 113,592 $50,194 $ 25,847 $ 24,347
===================== ======= ========== ====== ============ =========
December 31, 2015
-------------------- ------- ---------- ------ ------------ --------- ---------- ------------
Equity in
Operations Depreciation Operating Net Income
and Support and Income (Loss) of Segment
Revenues Expenses EBITDA Amortization (Loss) Affiliates Contribution
-------------------- -------- ----------- ------- ------------- ---------- ----------- -------------
Business Solutions $ 71,127 $ 44,946 $26,181 $ 9,789 $ 16,392 $ - $ 16,392
Entertainment Group 35,294 28,345 6,949 4,945 2,004 (4) 2,000
Consumer Mobility 35,066 21,477 13,589 3,851 9,738 - 9,738
International 4,102 3,930 172 655 (483) (5) (488)
--------------------- ------- ---------- ------ ------------ --------- ---------- ------------
Segment Total 145,589 98,698 46,891 19,240 27,651 $ (9) $ 27,642
===================== ======= ========== ====== ============ ========= ========== ============
Corporate and Other 1,297 1,057 240 64 176
Acquisition-related
items (85) 1,987 (2,072) 2,712 (4,784)
Certain Significant
items - (1,742) 1,742 - 1,742
--------------------- ------- ---------- ------ ------------ ---------
AT&T Inc. $146,801 $ 100,000 $46,801 $ 22,016 $ 24,785
===================== ======= ========== ====== ============ =========
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 Twelve Months Ended
December 31, December 31,
-------------------- ---------------------
2016 2015 2016 2015
------------------------------------------ --------- -------- -------- --------
Net cash provided by operating activities $ 10,142 $ 9,185 $ 39,344 $ 35,880
Less: Capital expenditures (6,456) (6,093) (22,408) (20,015)
------------------------------------------ --------- -------- -------- --------
Free Cash Flow 3,686 3,092 16,936 15,865
------------------------------------------ --------- -------- -------- --------
Less: Dividends paid (2,947) (2,889) (11,797) (10,200)
------------------------------------------ --------- -------- -------- --------
Free Cash Flow after Dividends $ 739 $ 203 $ 5,139 $ 5,665
------------------------------------------ --------- -------- -------- --------
Free Cash Flow Dividend Payout Ratio 80.0% 93.4% 69.7% 64.3%
------------------------------------------ --------- -------- -------- --------
Capital Investment
Capital Investment is a non-GAAP financial measure that adds to Capital expenditures the amount of vendor financing arrangements for capital improvements. These favorable payment terms are considered vendor financing arrangements and are reported as financing activities 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 Twelve Months Ended
December 31, December 31,
-------------------- ---------------------
2016 2015 2016 2015
--------------------- --------- -------- -------- --------
Capital Expenditures $ 6,456 $ 6,093 $ 22,408 $ 20,015
Vendor Financing 267 684 492 684
--------------------- --------- -------- -------- --------
Capital Investment $ 6,723 $ 6,777 $ 22,900 $ 20,699
--------------------- --------- -------- -------- --------
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 Three Months Ended Twelve Months Ended
millions
December 31, December 31,
-------------------------------- ----------------------------
2016 2015 2016 2015
---------------- ----- ------ -------- ------- ------ -------- -------- -------
Net Income $ 2,515 $ 4,086 $ 13,333 $ 13,687
Additions:
Income Tax
Expense 676 2,221 6,479 7,005
Interest
Expense 1,221 1,143 4,910 4,120
Equity in Net
(Income) of
Affiliates (41) (31) (98) (79)
Other
(Income)
Expense -
Net (123) 113 (277) 52
Depreciation
and
amortization 6,129 6,477 25,847 22,016
---------------- ----- ------ -------- ------- ------ -------- -------- -------
EBITDA 10,377 14,009 50,194 46,801
---------------- ----- ------ -------- ------- ------ -------- -------- -------
Total Operating
Revenues 41,841 42,119 163,786 146,801
Service Revenues 37,369 37,635 148,884 131,677
EBITDA Margin 24.8% 33.3% 30.6% 31.9%
EBITDA Service
Margin 27.8% 37.2% 33.7% 35.5%
---------------- ----- ------ -------- ------- ------ -------- -------- -------
Segment EBITDA, EBITDA Margin and EBITDA Service Margin
------------------------------------------------------------------------------------------
Dollars in millions Three Months Ended Twelve Months Ended
December 31, December 31,
------ ------------------------- -------- ------------------
2016 2015 2016 2015
----------------------- ------ -------- ------- ------ -------- -------- -------
Business Solutions
Segment
----------------------- ------ -------- ------- ------ -------- -------- -------
Segment Contribution $ 4,023 $ 3,721 $ 16,826 $ 16,392
Additions:
Depreciation and
amortization 2,264 2,513 9,832 9,789
----------------------- ------ -------- ------- ------ -------- -------- -------
EBITDA 6,287 6,234 26,658 26,181
----------------------- ------ -------- ------- ------ -------- -------- -------
Total Segment Operating
Revenues 18,033 18,214 70,988 71,127
Segment Operating
Income Margin 22.3% 20.4% 23.7% 23.0%
EBITDA Margin 34.9% 34.2% 37.6% 36.8%
Entertainment Group
Segment
----------------------- ------ -------- ------- ------ -------- -------- -------
Segment Contribution $ 1,370 $ 1,457 $ 6,104 $ 2,000
Additions:
Equity in Net (Income)
of Affiliates (8) (12) (9) 4
Depreciation and
amortization 1,381 1,426 5,862 4,945
----------------------- ------ -------- ------- ------ -------- -------- -------
EBITDA 2,743 2,871 11,957 6,949
----------------------- ------ -------- ------- ------ -------- -------- -------
Total Segment Operating
Revenues 13,206 12,994 51,295 35,294
Segment Operating
Income Margin 10.3% 11.1% 11.9% 5.7%
EBITDA Margin 20.8% 22.1% 23.3% 19.7%
Consumer Mobility
Segment
----------------------- ------ -------- ------- ------ -------- -------- -------
Segment Contribution $ 2,185 $ 2,141 $ 9,825 $ 9,738
Additions:
Depreciation and
amortization 918 939 3,716 3,851
----------------------- ------ -------- ------- ------ -------- -------- -------
EBITDA 3,103 3,080 13,541 13,589
----------------------- ------ -------- ------- ------ -------- -------- -------
Total Segment Operating
Revenues 8,419 8,749 33,200 35,066
Service Revenues 6,731 7,131 27,536 29,150
Segment Operating
Income Margin 26.0% 24.5% 29.6% 27.8%
EBITDA Margin 36.9% 35.2% 40.8% 38.8%
EBITDA Service Margin 46.1% 43.2% 49.2% 46.6%
International Segment
----------------------- ------ -------- ------- ------ -------- -------- -------
Segment Contribution $ (240) $ (260) $ (661) $ (488)
Additions:
Equity in Net (Income)
of Affiliates (28) 1 (52) 5
Depreciation and
amortization 298 309 1,166 655
----------------------- ------ -------- ------- ------ -------- -------- -------
EBITDA 30 50 453 172
----------------------- ------ -------- ------- ------ -------- -------- -------
Total Segment Operating
Revenues 1,909 1,849 7,283 4,102
Segment Operating
Income Margin -14.0% -14.0% -9.8% -11.8%
EBITDA Margin 1.6% 2.7% 6.2% 4.2%
----------------------- ------ -------- ------- ------ -------- -------- -------
Supplemental AT&T Mobility EBITDA, EBITDA Margin and EBITDA Service Margin
---------------------------------------------------------------------------------------------------
Dollars in millions Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------- -------------------
2016 2015 2016 2015
-------------------------------------------- --------- ------- -------- --------
AT&T Mobility
-------------------------------------------- --------- ------- -------- --------
Operating Contribution $ 4,638 $ 4,376 $ 20,643 $ 19,803
Add: Depreciation and amortization 2,048 2,031 8,292 8,113
-------------------------------------------- --------- ------- -------- --------
EBITDA 6,686 6,407 28,935 27,916
-------------------------------------------- --------- ------- -------- --------
Total Segment Operating Revenues 18,750 18,886 72,821 73,705
Service Revenues 14,713 14,815 59,386 59,837
Segment Operating Income Margin 24.7% 23.2% 28.3% 26.9%
EBITDA Margin 35.7% 33.9% 39.7% 37.9%
EBITDA Service Margin 45.4% 43.2% 48.7% 46.7%
-------------------------------------------- --------- ------- -------- --------
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 Twelve Months Ended
December 31, December 31,
---------------------- -------------------
2016 2015 2016 2015
----------------------------------------------------------- ------- --------- ------- ---------
Operating Revenues
Merger related deferred revenue $ - $ - $ - $ 85
Storm revenue credits 10 - 23 -
----------------------------------------------------------- ------- --------- ------- ---------
Adjustments to Operating Revenues 10 - 23 85
----------------------------------------------------------- ------- --------- ------- ---------
Operating Expenses
DIRECTV and other video merger integration costs 259 165 754 502
Mexico merger integration costs 78 84 309 167
Time Warner merger costs 47 - 47 -
Wireless merger integration costs 1 79 93 649
Leap network decommissioning - 55 - 669
Asset abandonments and impairments 361 - 361 35
Storm costs 27 - 44 -
Employee separation costs 30 36 344 375
Actuarial (gain) loss 1,024 (2,152) 1,024 (2,152)
(Gain) loss on transfer of wireless spectrum - - (714) -
----------------------------------------------------------- ------- --------- ------- ---------
Adjustments to Operations and Support Expenses 1,827 (1,733) 2,262 245
----------------------------------------------------------- ------- --------- ------- --------- Amortization of intangible assets 1,228 1,272 5,177 2,556 Impairments 29 - 29 - ----------------------------------------------------------- ------- --------- ------- --------- Adjustments to Operating Expenses 3,084 (461) 7,468 2,801 ----------------------------------------------------------- ------- --------- ------- --------- Other DIRECTV-related interest expense and exchange fees (1) - - 16 142 (Gain) loss on sale of investments and impairments 28 132 32 132 ----------------------------------------------------------- ------- --------- ------- --------- Adjustments to Income Before Income Taxes 3,122 (329) 7,539 3,160 ----------------------------------------------------------- ------- --------- ------- --------- Tax impact of adjustments 1,097 (206) 2,618 996 Tax-related benefits(2) 359 - 359 228 ----------------------------------------------------------- ------- --------- ------- --------- Adjustments to Net Income $ 1,666 $ (123) $ 4,562 $ 1,936 ----------------------------------------------------------- ------- --------- ------- --------- (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) 2016 includes merger-related restructuring of investment in Mexico.
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 Twelve Months Ended
December 31, December 31,
----------------------- -------------------
2016 2015 2016 2015
---------------------------------------------------------- -------- --------- -------- --------
Operating Income $ 4,248 $ 7,532 $ 24,347 $ 24,785
Adjustments to Operating Revenues 10 - 23 85
Adjustments to Operating Expenses 3,084 (461) 7,468 2,801
---------------------------------------------------------- -------- --------- -------- --------
Adjusted Operating Income(1) 7,342 7,071 31,838 27,671
---------------------------------------------------------- -------- --------- -------- --------
EBITDA 10,377 14,009 50,194 46,801
Adjustments to Operating Revenues 10 - 23 85
Adjustments to Operations and Support Expenses 1,827 (1,733) 2,262 245
---------------------------------------------------------- -------- --------- -------- --------
Adjusted EBITDA(1) 12,214 12,276 52,479 47,131
---------------------------------------------------------- -------- --------- -------- --------
Total Operating Revenues 41,841 42,119 163,786 146,801
Adjustments to Operating Revenues 10 - 23 85
---------------------------------------------------------- -------- --------- -------- --------
Total Adjusted Operating Revenue 41,851 42,119 163,809 146,886
---------------------------------------------------------- -------- --------- -------- --------
Service Revenues 37,369 37,635 148,884 131,677
Adjustments to Operating Revenues 10 - 23 85
---------------------------------------------------------- -------- --------- -------- --------
Adjusted Service Revenues 37,379 37,635 148,907 131,762
---------------------------------------------------------- -------- --------- -------- --------
Operating Income Margin 10.2% 17.9% 14.9% 16.9%
Adjusted Operating Income Margin(1) 17.5% 16.8% 19.4% 18.8%
Adjusted EBITDA Margin(1) 29.2% 29.1% 32.0% 32.1%
Adjusted EBITDA Service Margin(1) 32.7% 32.6% 35.2% 35.8%
---------------------------------------------------------- -------- --------- -------- --------
(1) Adjusted Operating Income, Adjusted EBITDA and associated margins exclude all actuarial
gains or losses ($1.0 billion loss in 2016) associated with our pension and postemployment
benefit plans, which we immediately recognize in the income statement, pursuant to our accounting
policy for the recognition of actuarial gains/losses. As a result, Adjusted Operating Income
and Margin reflect an expected return on plan assets of $3.5 billion (based on an average
expected return on plan assets of 7.75% for our pension trust and 5.75% for our VEBA trusts),
rather than the actual return on plan assets of $3.5 billion (actual pension return of 7.8%
and VEBA return of 6.7%), as included in the GAAP measure of income.
Adjusted Diluted EPS
------------------------------------------------------------------------------------------------------------------
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------- -------------------
2016 2015 2016 2015
----------------------------------------------------------- -------- -------- -------- --------
Diluted Earnings Per Share (EPS) $ 0.39 $ 0.65 $ 2.10 $ 2.37
Amortization of intangible assets 0.13 0.14 0.55 0.30
Merger integration and other items(1) 0.04 0.06 0.13 0.28
Employee separation costs - - 0.04 0.04
Asset abandonments and impairments 0.05 - 0.04 -
Actuarial (gain) loss 0.10 (0.22) 0.10 (0.24)
Storm related and other items 0.01 - 0.01 -
Gain (loss) on transfer of wireless spectrum - - (0.07) -
Tax-related benefits (0.06) - (0.06) (0.04)
----------------------------------------------------------- -------- -------- -------- --------
Adjusted EPS $ 0.66 $ 0.63 $ 2.84 $ 2.71
----------------------------------------------------------- -------- -------- -------- --------
Year-over-year growth - Adjusted 4.8% 4.8%
----------------------------------------------------------- -------- -------- -------- -------- Weighted Average Common Shares Outstanding with Dilution (000,000) 6,181 6,187 6,189 5,646 ----------------------------------------------------------- -------- -------- -------- -------- (1) Includes combined merger integration items, Leap network decommissioning, and DIRECTV-related interest expense and exchange fees.
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 Twelve Months Ended
December 31, December 31,
-------------------- -------------------
2016 2015 2016 2015
--------------------------------------------- ---------- ------- -------- --------
Segment Operating Revenues $ 13,206 $ 12,994 $ 51,295 $ 35,294
DIRECTV Operating Revenues(1) - 14,864
Adjustments:
Other DIRECTV operations - 182
Revenue recognition - 229
Intercompany eliminations - (40)
--------------------------------------------- ---------- ------- -------- --------
Adjusted Segment Operating Revenues $ 13,206 $ 12,994 $ 51,295 $ 50,529
--------------------------------------------- ---------- ------- -------- --------
Year-over-year growth - Adjusted 1.6% 1.5%
--------------------------------------------- ---------- ------- -------- --------
(1) Includes results from July 1, 2015 through July 24, 2015 acquisition date.
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 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, Jun. 30 Sep. 30 Dec. 31 YTD 2016
--------
2016 2016 2016 2016
--------------------------------------------- -------- ------- ------- ------- --------
Adjusted EBITDA $ 13,279 $ 13,397 $ 13,589 $ 12,214 $ 52,479
Add back severance (25) (29) (260) (30) (344)
Net Debt Adjusted EBITDA 13,254 13,368 13,329 12,184 52,135
Annualized Net Debt Adjusted EBITDA 52,135
End-of-period current debt 9,832
End-of-period long-term debt 113,681
Total End-of-Period Debt 123,513
Less: Cash and Cash Equivalents 5,788
Net Debt Balance 117,725
--------------------------------------------- -------- ------- ------- ------- --------
Annualized Net Debt to Adjusted EBITDA Ratio 2.26
--------------------------------------------- -------- ------- ------- ------- --------
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACSOKODPPBKDBNK
(END) Dow Jones Newswires
March 07, 2017 11:03 ET (16:03 GMT)
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