TIDM58KN
RNS Number : 0137G
AT & T Inc.
23 May 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) April 25,
2017
AT&T INC.
(Exact Name of Registrant as Specified in Charter)
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):
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 April 25, 2017, its results of
operations for the first quarter of 2017. 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, 2017 reporting financial results for the first quarter ended
March 31, 2017.
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 By: /s/ Debra L. Dial
25, 2017 Debra L. Dial
Senior Vice President and Controller
AT&T Reports First-Quarter Results
Updates Guidance Following FirstNet Award
-- Consolidated revenues of $39.4 billion
-- Operating income of $6.9 billion
-- Net income attributable to AT&T of $3.5 billion
-- Diluted EPS of $0.56 as reported and $0.74 as adjusted,
compared to $0.61 and $0.72 in the year-ago quarter
-- Cash from operations of $9.2 billion
-- Free cash flow of $3.2 billion
-- 2.7 million wireless net adds
o 2.1 million U.S., driven by prepaid and connected devices
o 633,000 Mexico
-- U.S. wireless first-quarter results:
o Best-ever first-quarter postpaid phone churn of 0.90%
o Wireless postpaid churn of 1.12%, including pressure from
tablets
o Strong operating margin of 30.1%; best-ever EBITDA margin of
41.8%; EBITDA wireless service margin of 49.3%
-- Entertainment Group first-quarter results:
o Strong broadband gains with 242,000 IP broadband net adds;
115,000 total broadband net adds
o 4.6 million AT&T Fiber customer locations with plans to
add 2 million in 2017
o DIRECTV NOW gains help offset linear TV subscriber decline
Note: AT&T's first-quarter earnings conference call will be
webcast at 4:30 p.m. ET on Tuesday, April 25, 2017. The webcast and
related materials will be available on AT&T's Investor
Relations website at www.att.com/investor.relations.
dALLAS, April 25, 2017 - AT&T Inc. (NYSE:T) today announced
continued adjusted margin expansion and solid adjusted earnings
growth for the first quarter. The quarter also was marked by
several decisive strategic moves that helped broaden the company's
spectrum portfolio.
"In a very competitive quarter, we continued to execute on our
goals of driving efficiencies in our business while growing
adjusted earnings per share. But just as important, the strategic
moves we've made over the last few months to expand our wireless
capacity and fortify our 5G leadership will be felt for years to
come," said Randall Stephenson, AT&T Chairman and CEO.
"FirstNet gives us access to 20 megahertz of valuable, low-band
spectrum and allows us to deploy our spectrum assets more
efficiently as we build a high-quality, mobile broadband network
for our first responders. And our planned acquisitions of Fiber
Tower and Straight Path will add valuable millimeter wave spectrum
assets to our 5G tool kit as we lead the way to the next generation
of wireless technology."
Consolidated Financial Results
AT&T's consolidated revenues for the first quarter totaled
$39.4 billion versus $40.5 billion in the year-ago quarter,
primarily due to record-low equipment sales in wireless. Compared
with results for the first quarter of 2016, operating expenses were
$32.5 billion versus $33.4 billion; operating income was $6.9
billion versus $7.1 billion; and operating income margin was 17.4%
versus 17.6%. When adjusting for amortization, merger- and
integration-related and other items, operating income was $8.2
billion versus $8.1 billion; and operating income margin was 20.7%,
up 80 basis points versus the year-ago quarter.
First-quarter net income attributable to AT&T totaled $3.5
billion, or $0.56 per diluted share, compared to $3.8 billion, or
$0.61 per diluted share, in the year-ago quarter. Adjusting for
$0.18 of costs for amortization, merger- and integration-related
and other items, earnings per diluted share was $0.74 compared to
an adjusted $0.72 in the year-ago quarter.
Cash from operating activities was $9.2 billion in the first
quarter, and capital expenditures were $6.0 billion. Free cash flow
- cash from operating activities minus capital expenditures - was
$3.2 billion for the quarter.
Updated 2017 Outlook
The company is updating its 2017 guidance. On a business as
usual basis without the impact of Time Warner, AT&T
expects:
-- 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
The company is no longer providing consolidated revenue guidance
primarily due to the unpredictability of wireless handset
sales.
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.
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, business, mobile and high speed
internet services. We offer the nation's best data network* and the
best global coverage of any U.S. wireless provider.** 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. Nearly 3.5 million
companies, from small to large businesses around the globe, turn to
AT&T for our highly secure smart solutions.
Additional information about AT&T products and services is
available at about.att.com. Follow our news on Twitter at @ATT, on
Facebook at facebook.com/att and YouTube at 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.
(*) Claim based on the Nielsen Certified Data Network Score.
Score includes data reported by wireless consumers in the Nielsen
Mobile Insights survey, network measurements from Nielsen Mobile
Performance and Nielsen Drive Test Benchmarks for Q3+Q4 2016 across
121 markets.
(**) 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 communication, including financial
estimates and statements as to the expected timing, completion and
effects of the proposed merger between AT&T Inc. and Straight
Path Communications, Inc., constitute forward-looking statements
within the meaning of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These estimates and
statements are subject to risks and uncertainties, and actual
results might differ materially. Such estimates and 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 Inc. and Straight Path Communications, Inc.
and are subject to significant risks and uncertainties outside of
our control. This presentation 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. 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 Straight Path Communications, Inc.
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, and (4)
risks that any of the closing conditions to the proposed merger may
not be satisfied in a timely manner. Discussions of additional
risks and uncertainties are contained in AT&T Inc.'s and
Straight Path Communications, Inc.'s filings with the Securities
and Exchange Commission. Neither AT&T Inc. nor Straight Path
Communications, Inc. is under any obligation, and each expressly
disclaims 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 announcement are
cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date hereof.
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.
Additional Information and Where to Find It
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. This communication may be deemed to be
solicitation material in respect of the proposed merger between
AT&T Inc. and Straight Path Communications, Inc. In connection
with the proposed merger, AT&T Inc. intends to file a
registration statement on Form S-4, containing a proxy
statement/prospectus with the Securities and Exchange Commission
("SEC"). STOCKHOLDERS OF STRAIGHT PATH COMMUNICATIONS, INC. ARE
URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING
THE PROXY STATEMENT/PROSPECTUS, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED MERGER. Investors and security
holders will be able to obtain copies of the proxy
statement/prospectus as well as other filings containing
information about AT&T Inc. and Straight Path Communications,
Inc., without charge, at the SEC's website at http://www.sec.gov.
Copies of documents filed with the SEC by AT&T Inc. will be
made available free of charge on AT&T Inc.'s investor relations
website at http://www.att.com. Copies of documents filed with the
SEC by Straight Path Communications, Inc. will be made available
free of charge on Straight Path Communications, Inc.'s investor
relations website at http://spathinc.com/investors/.
Participants in Solicitation
AT&T Inc. and its directors and executive officers, and
Straight Path Communications, Inc. and its directors and executive
officers, may be deemed to be participants in the solicitation of
proxies from the holders of Straight Path Communications, Inc.
common stock in respect of the proposed merger. Information about
the directors and executive officers of AT&T Inc. is set forth
in the proxy statement for AT&T Inc.'s 2017 Annual Meeting of
Stockholders, which was filed with the SEC on March 10, 2017.
Information about the directors and executive officers of Straight
Path Communications, Inc. is set forth in the proxy statement for
Straight Path Communications, Inc.'s 2017 Annual Meeting of
Stockholders, which was filed with the SEC on November 22, 2016.
Investors may obtain additional information regarding the interest
of such participants by reading the proxy statement/prospectus
regarding the proposed merger when it becomes available.
For more information, contact:
Fletcher Cook - AT&T Global Media Relations
Email: fletcher.cook@att.com
Phone: (214) 757-7629
Eric Ryan - AT&T Global Media Relations
Email: eric.ryan.1@att.com
Phone: (929) 273-8434
AT&T Inc.
Financial Data
Consolidated Statements of Income
------------------------------------------------------------------------------------------
Dollars in millions except per share amounts Three Months Ended
Unaudited March 31, Percent
----------------------
2017 2016 Change
------------------------------------------------------ ------------ -------- ---------
Operating Revenues
Service $ 36,456 $37,101 -1.7%
Equipment 2,909 3,434 -15.3%
------------------------------------------------------- ------- ------
Total Operating Revenues 39,365 40,535 -2.9%
------------------------------------------------------- ------- ------
Operating Expenses
Cost of services and sales
Equipment 3,848 4,375 -12.0%
Broadcast, programming and operations 4,974 4,629 7.5%
Other cost of services (exclusive of depreciation
and amortization shown separately below) 9,065 9,396 -3.5%
Selling, general and administrative 8,487 8,441 0.5%
Depreciation and amortization 6,127 6,563 -6.6%
------------------------------------------------------- ------- ------
Total Operating Expenses 32,501 33,404 -2.7%
------------------------------------------------------- ------- ------
Operating Income 6,864 7,131 -3.7%
------------------------------------------------------- ------- ------
Interest Expense (1,293) (1,207) -7.1%
Equity in Net Income (Loss) of Affiliates (173) 13 -%
Other Income (Expense) - Net (20) 70 -%
------------------------------------------------------- ------- ------
Income Before Income Taxes 5,378 6,007 -10.5%
Income Tax Expense 1,804 2,122 -15.0%
------------------------------------------------------- ------- ------
Net Income 3,574 3,885 -8.0%
------------------------------------------------------- ------- ------
Less: Net Income Attributable to
Noncontrolling Interest (105) (82) -28.0%
------------------------------------------------------- ------- ------
Net Income Attributable to AT&T $ 3,469 $ 3,803 -8.8%
======================================================= ======= ======
Basic Earnings Per Share Attributable to AT&T $ 0.56 $ 0.62 -9.7%
Weighted Average Common
Shares Outstanding (000,000) 6,166 6,172 -0.1%
Diluted Earnings Per Share Attributable to AT&T $ 0.56 $ 0.61 -8.2%
Weighted Average Common
Shares Outstanding with Dilution (000,000) 6,186 6,190 -0.1%
------------------------------------------------------- ------- ------ -----
AT&T Inc.
Financial Data
Consolidated Balance Sheets
--------------------------------------------------------------------------------------------------------
Dollars in millions
Unaudited Mar. 31, Dec. 31,
2017 2016
------------------------------------------------------------------------------- --------- -----------
Assets
Current Assets
Cash and cash equivalents $ 14,884 $ 5,788
Accounts receivable - net of allowances for doubtful accounts of $699 and $661 15,078 16,794
Prepaid expenses 1,418 1,555
Other current assets 14,347 14,232
-------------------------------------------------------------------------------- ------- -------
Total current assets 45,727 38,369
-------------------------------------------------------------------------------- ------- -------
Property, Plant and Equipment - Net 125,292 124,899
Goodwill 105,593 105,207
Licenses 94,617 94,176
Customer Lists and Relationships - Net 13,366 14,243
Other Intangible Assets - Net 8,295 8,441
Investments in Equity Affiliates 1,551 1,674
Other Assets 17,462 16,812
-------------------------------------------------------------------------------- ------- -------
Total Assets $411,903 $403,821
================================================================================ ======= =======
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year $ 12,681 $ 9,832
Accounts payable and accrued liabilities 27,120 31,138
Advanced billing and customer deposits 4,493 4,519
Accrued taxes 3,384 2,079
Dividends payable 3,012 3,008
-------------------------------------------------------------------------------- ------- -------
Total current liabilities 50,690 50,576
-------------------------------------------------------------------------------- ------- -------
Long-Term Debt 120,568 113,681
-------------------------------------------------------------------------------- ------- -------
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes 61,100 60,128
Postemployment benefit obligation 33,404 33,578
Other noncurrent liabilities 21,160 21,748
-------------------------------------------------------------------------------- ------- -------
Total deferred credits and other noncurrent liabilities 115,664 115,454
-------------------------------------------------------------------------------- ------- -------
Stockholders' Equity
Common stock 6,495 6,495
Additional paid-in capital 89,411 89,604
Retained earnings 35,175 34,734
Treasury stock (12,400) (12,659)
Accumulated other comprehensive income 5,160 4,961
Noncontrolling interest 1,140 975
-------------------------------------------------------------------------------- ------- -------
Total stockholders' equity 124,981 124,110
-------------------------------------------------------------------------------- ------- -------
Total Liabilities and Stockholders' Equity $411,903 $403,821
================================================================================ ======= =======
AT&T Inc.
Financial Data
Consolidated Statements of Cash Flows
Dollars in millions Three Months Ended
Unaudited March 31,
2017 2016
Operating Activities
Net income $ 3,574 $ 3,885
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 6,127 6,563
Undistributed loss (earnings) from investments in equity affiliates 182 (13)
Provision for uncollectible accounts 393 374
Deferred income tax expense 480 1,346
Net loss (gain) from sale of investments, net of impairments 61 (44)
Changes in operating assets and liabilities:
Accounts receivable 445 43
Other current assets 228 1,319
Accounts payable and other accrued liabilities (1,778) (3,990)
Equipment installment receivables and related sales 579 454
Deferred fulfillment costs (436) (542)
Retirement benefit funding (140) (140)
Other - net (497) (1,355)
Total adjustments 5,644 4,015
Net Cash Provided by Operating Activities 9,218 7,900
Investing Activities
Capital expenditures:
Purchase of property and equipment (5,784) (4,451)
Interest during construction (231) (218)
Acquisitions, net of cash acquired (162) (165)
Dispositions 6 81
Sales of securities, net - 445
Net Cash Used in Investing Activities (6,171) (4,308)
Financing Activities
Net change in short-term borrowings with original maturities of three months or less (1) -
Issuance of long-term debt 12,440 5,978
Repayment of long-term debt (3,053) (2,296)
Purchase of treasury stock (177) -
Issuance of treasury stock 21 89
Dividends paid (3,009) (2,947)
Other (172) 471
Net Cash Provided by Financing Activities 6,049 1,295
Net increase in cash and cash equivalents 9,096 4,887
Cash and cash equivalents beginning of year 5,788 5,121
Cash and Cash Equivalents End of Period $ 14,884 $10,008
AT&T Inc.
Consolidated Supplementary Data
Supplementary Financial Data
------------------------------------------------------------------------------------------
Dollars in millions except per share amounts Three Months Ended
Unaudited March 31, Percent
--------------------------
2017 2016 Change
-------------------------------------------------- ------------ ------------ ---------
Capital expenditures
Purchase of property and equipment $ 5,784 $ 4,451 29.9 %
Interest during construction 231 218 6.0 %
--------------------------------------------------- ------- -------
Total Capital Expenditures $ 6,015 $ 4,669 28.8 %
--------------------------------------------------- ------- -------
Dividends Declared per Share $ 0.49 $ 0.48 2.1 %
End of Period Common Shares Outstanding (000,000) 6,147 6,156 -0.1 %
Debt Ratio 51.6% 51.2% 40 BP
Total Employees 264,530 280,870 -5.8 %
--------------------------------------------------- ------- ------- -----
Supplementary Operating Data
------------------------------------------------------------------------------------------
Subscribers and connections in thousands
Unaudited March 31, Percent
--------------------------
2017 2016 Change
-------------------------------------------------- ----------- ----------- ---------
Wireless Subscribers
Domestic 134,218 130,445 2.9 %
Mexico 12,606 9,213 36.8 %
--------------------------------------------------- ------- -------
Total Wireless Subscribers 146,824 139,658 5.1 %
--------------------------------------------------- ------- -------
Total Branded Wireless Subscribers 103,532 98,158 5.5 %
Video Connections
Domestic 25,060 25,372 -1.2 %
PanAmericana 8,090 7,094 14.0 %
Brazil 5,588 5,342 4.6 %
--------------------------------------------------- ------- -------
Total Video Connections 38,738 37,808 2.5 %
--------------------------------------------------- ------- -------
Broadband Connections
IP 14,110 13,470 4.8 %
DSL 1,585 2,294 -30.9 %
--------------------------------------------------- ------- -------
Total Broadband Connections 15,695 15,764 -0.4 %
--------------------------------------------------- ------- -------
Voice Connections
Network Access Lines 13,363 15,975 -16.4 %
U-verse VoIP Connections 5,858 5,484 6.8 %
--------------------------------------------------- ------- -------
Total Retail Consumer Voice Connections 19,221 21,459 -10.4 %
=================================================== ======= ======= =====
Three Months Ended
March 31, Percent
-----------------------
2017 2016 Change
------------------------------------- ------------ -------- ---------
Wireless Net Additions
Domestic 2,081 1,781 16.8%
Mexico 633 529 19.7%
--------------------------------------- -------- -------
Total Wireless Net Additions 2,714 2,310 17.5%
--------------------------------------- -------- -------
Total Branded Wireless Net Additions 738 1,195 -38.2%
Video Net Additions
Domestic (233) (52) -%
PanAmericana 52 28 85.7%
Brazil 39 (101) -%
--------------------------------------- -------- -------
Total Video Net Additions (142) (125) -13.6%
--------------------------------------- -------- -------
Broadband Net Additions
IP 246 202 21.8%
DSL (156) (216) 27.8%
--------------------------------------- -------- -------
Total Broadband Net Additions 90 (14) -%
--------------------------------------- -------- ------- -----
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 millions Three Months Ended
Unaudited March 31, Percent
---------------------------------
2017 2016 Change
---------------------------------------------------------- ------------------ ------------- ------------
Segment Operating Revenues
Wireless service $ 7,929 $ 7,855 0.9 %
Fixed strategic services 2,974 2,751 8.1 %
Legacy voice and data services 3,630 4,373 -17.0 %
Other service and equipment 817 859 -4.9 %
Wireless equipment 1,498 1,771 -15.4 %
----------------------------------------------------------- --------- --- --------
Total Segment Operating Revenues 16,848 17,609 -4.3 %
----------------------------------------------------------- --------- --- --------
Segment Operating Expenses
Operations and support 10,176 10,802 -5.8 %
Depreciation and amortization 2,312 2,508 -7.8 %
----------------------------------------------------------- --------- --- --------
Total Segment Operating Expenses 12,488 13,310 -6.2 %
----------------------------------------------------------- --------- --- --------
Segment Operating Income 4,360 4,299 1.4 %
Equity in Net Income of Affiliates - - - %
---------------------------------------------------------- --------- --- --------
Segment Contribution $ 4,360 $ 4,299 1.4 %
=========================================================== ========= === ========
Segment Operating Income Margin 25.9% 24.4% 150 BP
----------------------------------------------------------- --------- -------- ------ ----
Supplementary Operating Data
------------------------------------------------------------------------------------------------------------
Subscribers and connections in thousands
Unaudited March 31, Percent
---------------------------------
2017 2016 Change
---------------------------------------------------------- -------------- ------------ ------------
Business Solutions Wireless Subscribers
Postpaid/Branded 50,839 48,844 4.1 %
Reseller 76 64 18.8 %
Connected Devices 31,439 26,863 17.0 %
----------------------------------------------------------- --------- --- --------
Total Business Solutions Wireless Subscribers 82,354 75,771 8.7 %
----------------------------------------------------------- --------- --- --------
Business Solutions IP Broadband Connections 980 928 5.6 %
=========================================================== ========= === ======== ====== ====
Three Months Ended
March 31, Percent
---------------------------
2017 2016 Change
--------------------------------------------------------------- ------------ ------------ -----------
Business Solutions Wireless Net Additions(1)
Postpaid/Branded (125) 133 - %
Reseller 6 (22) - %
Connected Devices 2,553 1,578 61.8 %
----------------------------------------------------------------- ------- --- ------- ---
Total Business Solutions Wireless Net Additions 2,434 1,689 44.1 %
----------------------------------------------------------------- ------- --- ------- ---
Business Solutions Wireless Postpaid Churn(1) 1.07% 1.02% 5 BP
----------------------------------------------------------------- ------- -------
Business Solutions IP Broadband
Net Additions 4 17 -76.5%
----------------------------------------------------------------- ------- --- ------- ---
(1) 2017 excludes the impact of the 2G shutdown, which was reflected in beginning of period
subscriber counts.
----------------------------------------------------------------------------------------------------------
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 millions Three Months Ended
Unaudited March 31, Percent
------------------------------------
2017 2016 Change
-------------------------------------------------------- ------------------ ---------------- -----------
Segment Operating Revenues
Video entertainment $ 9,020 $ 8,904 1.3 %
High-speed internet 1,941 1,803 7.7 %
Legacy voice and data services 1,056 1,313 -19.6 %
Other service and equipment 606 638 -5.0 %
--------------------------------------------------------- --------- --- --------
Total Segment Operating Revenues 12,623 12,658 -0.3 %
--------------------------------------------------------- --------- --- --------
Segment Operating Expenses
Operations and support 9,601 9,578 0.2 %
Depreciation and amortization 1,419 1,488 -4.6 %
--------------------------------------------------------- --------- --- --------
Total Segment Operating Expenses 11,020 11,066 -0.4 %
--------------------------------------------------------- --------- --- --------
Segment Operating Income 1,603 1,592 0.7 %
Equity in Net Income (Loss) of Affiliates (6) 3 - %
--------------------------------------------------------- --------- --------
Segment Contribution $ 1,597 $ 1,595 0.1 %
========================================================= ========= === ========
Segment Operating Income Margin 12.7% 12.6% 10 BP
--------------------------------------------------------- --------- -------- -------
Supplementary Operating Data
------------------------------------------------------------------------------------------------------------
Subscribers and connections in thousands
Unaudited March 31, Percent
------------------------------------
2017 2016 Change
-------------------------------------------------------- -------------- ------------ -----------
Linear Video Connections
Satellite 21,012 20,112 4.5 %
U-verse 4,020 5,232 -23.2 %
--------------------------------------------------------- --------- --- --------
Total Linear Video Connections 25,032 25,344 -1.2 %
--------------------------------------------------------- --------- --- --------
Broadband Connections
IP 13,130 12,542 4.7 %
DSL 1,164 1,749 -33.4 %
--------------------------------------------------------- --------- --- --------
Total Broadband Connections 14,294 14,291 - %
--------------------------------------------------------- --------- --- --------
Voice Connections
Retail Consumer Switched Access Lines 5,533 6,888 -19.7 %
U-verse Consumer VoIP Connections 5,470 5,225 4.7 %
--------------------------------------------------------- --------- --- --------
Total Retail Consumer Voice Connections 11,003 12,113 -9.2 %
========================================================= ========= === ======== =======
Three Months Ended
March 31, Percent
-----------------------
2017 2016 Change
---------------------------------------------- ------------- ------- ---------
Linear Video Net Additions(1)
Satellite - 328 - %
U-verse (233) (382) 39.0 %
------------------------------------------------ -------- ------
Total Linear Video Net Additions (233) (54) - %
------------------------------------------------ -------- ------
Broadband Net Additions
IP 242 186 30.1 %
DSL (127) (181) 29.8 %
------------------------------------------------ -------- ------
Total Broadband Net Additions 115 5 - %
------------------------------------------------ -------- --- ------
(1) Includes the impact of customers that migrated to DIRECTV NOW.
-----------------------------------------------------------------------------------
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 millions Three Months Ended
Unaudited March 31, Percent
------------------------------------
2017 2016 Change
-------------------------------------------------------- ------------------ ---------------- -------------
Segment Operating Revenues
Service $ 6,609 $ 6,943 -4.8 %
Equipment 1,131 1,385 -18.3 %
--------------------------------------------------------- --------- --- --------
Total Segment Operating Revenues 7,740 8,328 -7.1 %
--------------------------------------------------------- --------- --- --------
Segment Operating Expenses
Operations and support 4,528 4,912 -7.8 %
Depreciation and amortization 873 922 -5.3 %
--------------------------------------------------------- --------- --- --------
Total Segment Operating Expenses 5,401 5,834 -7.4 %
--------------------------------------------------------- --------- --- --------
Segment Operating Income 2,339 2,494 -6.2 %
Equity in Net Income of Affiliates - - - %
-------------------------------------------------------- --------- --- --------
Segment Contribution $ 2,339 $ 2,494 -6.2 %
========================================================= ========= === ========
Segment Operating Income Margin 30.2% 29.9% 30 BP
--------------------------------------------------------- --------- -------- ------- ----
Supplementary Operating Data
--------------------------------------------------------------------------------------------------------------
Subscribers and connections in thousands
Unaudited March 31, Percent
------------------------------------
2017 2016 Change
-------------------------------------------------------- -------------- ------------ -------------
Consumer Mobility Subscribers
Postpaid 26,510 28,294 -6.3 %
Prepaid 13,844 12,171 13.7 %
--------------------------------------------------------- --------- --- --------
Branded 40,354 40,465 -0.3 %
Reseller 10,549 13,313 -20.8 %
Connected Devices 961 896 7.3 %
--------------------------------------------------------- --------- --- --------
Total Consumer Mobility Subscribers 51,864 54,674 -5.1 %
========================================================= ========= === ======== ======= ====
Three Months Ended
March 31, Percent
---------------------------
2017 2016 Change
------------------------------------------------------------- ------------- ----------- -------
Consumer Mobility Net Additions(1)
Postpaid (66) (4) - %
Prepaid 282 500 -43.6 %
--------------------------------------------------------------- ------- ---- ------ ---
Branded 216 496 -56.5 %
Reseller (588) (378) -55.6 %
Connected Devices 19 (26) - %
--------------------------------------------------------------- ------- ---- ------
Total Consumer Mobility Net Additions (353) 92 - %
--------------------------------------------------------------- ------- --- ------ ---
Total Churn(1) 2.42% 2.11% 31 BP
Postpaid Churn(1) 1.22% 1.24% -2 BP
--------------------------------------------------------------- ------- --- ------
(1) 2017 excludes the impact of the 2G shutdown, which was reflected in beginning of period
subscriber counts.
----------------------------------------------------------------------------------------------------------
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
-----------------------------------------
2017 2016 Change
----------------------------------------------------- ---------------------- ----------------- -----------
Segment Operating Revenues
Video entertainment $ 1,341 $ 1,130 18.7 %
Wireless service 475 455 4.4 %
Wireless equipment 113 82 37.8 %
------------------------------------------------------ --------- --- --------
Total Segment Operating Revenues 1,929 1,667 15.7 %
------------------------------------------------------ --------- --- --------
Segment Operating Expenses
Operations and support 1,759 1,588 10.8 %
Depreciation and amortization 290 277 4.7 %
------------------------------------------------------ --------- --- --------
Total Segment Operating Expenses 2,049 1,865 9.9 %
------------------------------------------------------ --------- --- --------
Segment Operating Income (Loss) (120) (198) 39.4 %
Equity in Net Income (Loss) of Affiliates 20 14 42.9 %
------------------------------------------------------ --------- --- --------
Segment Contribution $ (100) $ (184) 45.7%
====================================================== ========= === ========
Segment Operating Income Margin (6.2) % (11.9) % 570 BP
------------------------------------------------------ --------- -------- -------
Supplementary Operating Data
--------------------------------------------------------------------------------------------------------------
Subscribers and connections in thousands
Unaudited March 31, Percent
-----------------------------------------
2017 2016 Change
----------------------------------------------------- ------------------ ------------- -----------
Mexican Wireless Subscribers
Postpaid 5,095 4,404 15.7 %
Prepaid 7,244 4,445 63.0 %
------------------------------------------------------ --------- --- --------
Branded 12,339 8,849 39.4 %
Reseller 267 364 -26.6 %
------------------------------------------------------ --------- --- --------
Total Mexican Wireless Subscribers 12,606 9,213 36.8 %
------------------------------------------------------ --------- --- --------
Latin America Satellite Subscribers
PanAmericana 8,090 7,094 14.0 %
SKY Brazil 5,588 5,342 4.6 %
------------------------------------------------------ --------- --- --------
Total Latin America Satellite Subscribers 13,678 12,436 10.0 %
====================================================== ========= === ======== =======
Three Months Ended
March 31, Percent
-----------------------
2017 2016 Change
--------------------------------------------------------------- ------------ -------- -----------
Mexican Wireless Net Additions
Postpaid 130 116 12.1 %
Prepaid 517 450 14.9 %
----------------------------------------------------------------- ------- --- -------
Branded 647 566 14.3 %
Reseller (14) (37) 62.2 %
----------------------------------------------------------------- ------- -------
Total Mexican Wireless Net Additions 633 529 19.7 %
----------------------------------------------------------------- ------- --- -------
Latin America Satellite Net Additions(1)
PanAmericana 52 28 85.7 %
SKY Brazil 39 (101) - %
----------------------------------------------------------------- ------- --- -------
Total Latin America Satellite Net Additions 91 (73) - %
----------------------------------------------------------------- ------- --- -------
(1) In 2017 we updated the methodology used to account for prepaid video connections. The
impact of this change is excluded.
------------------------------------------------------------------------------------------------------
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
-------------------------------------
2017 2016 Change
------------------------------------------------------- -------------------- --------------- -----------
Operating Revenues
Service $ 14,538 $ 14,798 -1.8 %
Equipment 2,629 3,156 -16.7 %
-------------------------------------------------------- ----------- --- ----------
Total Operating Revenues 17,167 17,954 -4.4 %
-------------------------------------------------------- ----------- --- ----------
Operating Expenses
Operations and support 9,998 10,624 -5.9 %
Depreciation and amortization 1,997 2,056 -2.9 %
-------------------------------------------------------- ----------- --- ----------
Total Operating Expenses 11,995 12,680 -5.4 %
-------------------------------------------------------- ----------- --- ----------
Operating Income 5,172 5,274 -1.9 %
======================================================== =========== === ==========
Operating Income Margin 30.1% 29.4% 70 BP
-------------------------------------------------------- ----------- ---------- -------
Supplementary Operating Data
------------------------------------------------------------------------------------------------------------
Subscribers and connections in thousands
Unaudited March 31, Percent
-------------------------------------
2017 2016 Change
------------------------------------------------------- ---------------- -------------- -----------
AT&T Mobility Subscribers
Postpaid 77,349 77,138 0.3 %
Prepaid 13,844 12,171 13.7 %
-------------------------------------------------------- ----------- --- ----------
Branded 91,193 89,309 2.1 %
Reseller 10,625 13,378 -20.6 %
Connected Devices 32,400 27,758 16.7 %
-------------------------------------------------------- ----------- --- ----------
Total AT&T Mobility Subscribers 134,218 130,445 2.9 %
-------------------------------------------------------- ----------- --- ----------
Domestic Licensed POPs (000,000) 325 322 0.9 %
======================================================== =========== === ========== =======
Three Months Ended
March 31, Percent
------------------------------
2017 2016 Change
---------------------------------------------------------- -------------- ------------- -------------
AT&T Mobility Net Additions
Postpaid (191) 129 - %
Prepaid 282 500 -43.6 %
------------------------------------------------------------ --------- --- -------- ---
Branded 91 629 -85.5 %
Reseller (582) (400) -45.5 %
Connected Devices 2,572 1,552 65.7 %
------------------------------------------------------------ --------- --- -------- ---
Total AT&T Mobility Net Additions 2,081 1,781 16.8 %
------------------------------------------------------------ --------- --- -------- ---
M&A Activity, Partitioned Customers and
Other Adjustments (2,723) 24 - %
Total Churn(1) 1.46% 1.42% 4 BP
Branded Churn(1) 1.71% 1.63% 8 BP
Postpaid Churn(1) 1.12% 1.10% 2 BP
Postpaid Phone Only Churn(1) 0.90% 0.96% -6 BP
------------------------------------------------------------ --------- --------
(1) 2017 excludes the impact of the 2G shutdown, which was reflected in beginning of period
subscriber counts.
==========================================================================================================
SUPPLEMENTAL SEGMENT RECONCILIATION
Three Months Ended
---------------------------------------------------------------------------------------------------------------------
Dollars in millions
Unaudited
March 31, 2017
---------------------------------------------------------------------------------------------------------------------
Equity in
Operations Depreciation Operating Net Income
and Support and Income (Loss) of Segment
Revenues Expenses EBITDA Amortization (Loss) Affiliates Contribution
-------------------- ---------- ----------- ------- ------------- ---------- ----------- -------------
Business Solutions $ 16,848 $ 10,176 $ 6,672 $ 2,312 $ 4,360 $ - $ 4,360
Entertainment Group 12,623 9,601 3,022 1,419 1,603 (6) 1,597
Consumer Mobility 7,740 4,528 3,212 873 2,339 - 2,339
International 1,929 1,759 170 290 (120) 20 (100)
--------------------- ------ ---------- ------ ------------ --------- ---------- ------------
Segment Total 39,140 26,064 13,076 4,894 8,182 $ 14 $ 8,196
===================== ====== ========== ====== ============ ========= ========== ============
Corporate and Other 225 221 4 31 (27)
Acquisition-related
items - 207 (207) 1,202 (1,409)
Certain Significant
items - (118) 118 - 118
--------------------- ------ ---------- ------ ------------ ---------
AT&T Inc. $ 39,365 $ 26,374 $12,991 $ 6,127 $ 6,864
===================== ====== ========== ====== ============ =========
March 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 $ 17,609 $ 10,802 $ 6,807 $ 2,508 $ 4,299 $ - $ 4,299
Entertainment Group 12,658 9,578 3,080 1,488 1,592 3 1,595
Consumer Mobility 8,328 4,912 3,416 922 2,494 - 2,494
International 1,667 1,588 79 277 (198) 14 (184)
--------------------- ------ ---------- ------ ------------ --------- ---------- ------------
Segment Total 40,262 26,880 13,382 5,195 8,187 $ 17 $ 8,204
===================== ====== ========== ====== ============ ========= ========== ============
Corporate and Other 273 377 (104) 17 (121)
Acquisition-related
items - 295 (295) 1,351 (1,646)
Certain Significant
items - (711) 711 - 711
--------------------- ------ ---------- ------ ------------ ---------
AT&T Inc
=====================================================================================================================
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.
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,
2017 2016
------------------------------------------ -------- --------
Net cash provided by operating activities $ 9,218 $ 7,900
Less: Capital expenditures (6,015) (4,669)
------------------------------------------ -------- --------
Free Cash Flow 3,203 3,231
------------------------------------------ -------- --------
Less: Dividends paid (3,009) (2,947)
------------------------------------------ -------- --------
Free Cash Flow after Dividends $ 194 $ 284
------------------------------------------ -------- --------
Free Cash Flow Dividend Payout Ratio 93.9% 91.2%
------------------------------------------ -------- --------
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.
1
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,
----------------------
2017 2016
--------------------------------------------- -------- -------
Net Income $ 3,574 $ 3,885
Additions:
Income Tax Expense 1,804 2,122
Interest Expense 1,293 1,207
Equity in Net (Income) Loss of Affiliates 173 (13)
Other (Income) Expense - Net 20 (70)
Depreciation and amortization 6,127 6,563
--------------------------------------------- -------- -------
EBITDA 12,991 13,694
--------------------------------------------- -------- -------
Total Operating Revenues 39,365 40,535
Service Revenues 36,456 37,101
EBITDA Margin 33.0% 33.8%
EBITDA Service Margin 35.6% 36.9%
--------------------------------------------- -------- -------
2
Segment EBITDA, EBITDA Margin and EBITDA Service Margin
------------------------------------------------------------------
Dollars in millions Three Months Ended
March 31,
----------------------
2017 2016
------------------------------------------ -------- -------
Business Solutions Segment
------------------------------------------ -------- -------
Segment Contribution $ 4,360 $ 4,299
Additions:
Depreciation and amortization 2,312 2,508
------------------------------------------ -------- -------
EBITDA 6,672 6,807
------------------------------------------ -------- -------
Total Segment Operating Revenues 16,848 17,609
Segment Operating Income Margin 25.9% 24.4%
EBITDA Margin 39.6% 38.7%
Entertainment Group Segment
------------------------------------------ -------- -------
Segment Contribution $ 1,597 $ 1,595
Additions:
Equity in Net (Income) Loss of Affiliates 6 (3)
Depreciation and amortization 1,419 1,488
------------------------------------------ -------- -------
EBITDA 3,022 3,080
------------------------------------------ -------- -------
Total Segment Operating Revenues 12,623 12,658
Segment Operating Income Margin 12.7% 12.6%
EBITDA Margin 23.9% 24.3%
Consumer Mobility Segment
------------------------------------------ -------- -------
Segment Contribution $ 2,339 $ 2,494
Additions:
Depreciation and amortization 873 922
------------------------------------------ -------- -------
EBITDA 3,212 3,416
------------------------------------------ -------- -------
Total Segment Operating Revenues 7,740 8,328
Service Revenues 6,609 6,943
Segment Operating Income Margin 30.2% 29.9%
EBITDA Margin 41.5% 41.0%
EBITDA Service Margin 48.6% 49.2%
International Segment
------------------------------------------ -------- -------
Segment Contribution $ (100) $ (184)
Additions:
Equity in Net (Income) of Affiliates (20) (14)
Depreciation and amortization 290 277
------------------------------------------ -------- -------
EBITDA 170 79
------------------------------------------ -------- -------
Total Segment Operating Revenues 1,929 1,667
Segment Operating Income Margin -6.2% -11.9%
EBITDA Margin 8.8% 4.7%
------------------------------------------ -------- -------
3
Supplemental AT&T Mobility EBITDA, EBITDA Margin and EBITDA Service Margin
---------------------------------------------------------------------------------
Dollars in millions Three Months Ended
March 31,
------------------------
2017 2016
------------------------------------------------------- --------- --------
AT&T Mobility
------------------------------------------------------- --------- --------
Operating Income $ 5,172 $ 5,274
Add: Depreciation and amortization 1,997 2,056
------------------------------------------------------- --------- --------
EBITDA 7,169 7,330
------------------------------------------------------- --------- --------
Total Operating Revenues 17,167 17,954
Service Revenues 14,538 14,798
Operating Income Margin 30.1% 29.4%
EBITDA Margin 41.8% 40.8%
EBITDA Service Margin 49.3% 49.5%
------------------------------------------------------- --------- --------
Supplemental Latin America EBITDA and EBITDA Margin
----------------------------------------------------------------
Dollars in millions Three Months Ended
March 31,
----------------------
2017 2016
---------------------------------------- -------- -------
International - Latin America
---------------------------------------- -------- -------
Operating Income $ 77 $ 53
Add: Depreciation and amortization 214 196
---------------------------------------- -------- -------
EBITDA 291 249
---------------------------------------- -------- -------
Total Operating Revenues 1,341 1,130
Operating Income Margin 5.7% 4.7%
EBITDA Margin 21.7% 22.0%
---------------------------------------- -------- -------
Supplemental Mexico EBITDA and EBITDA Margin
--------------------------------------------------------------
Dollars in millions Three Months Ended
March 31,
----------------------
2017 2016
-------------------------------------- -------- -------
International - Mexico
-------------------------------------- -------- -------
Operating Income $ (197) $ (251)
Add: Depreciation and amortization 76 81
-------------------------------------- -------- -------
EBITDA (121) (170)
-------------------------------------- -------- -------
Total Operating Revenues 588 537
Operating Income Margin -33.5% -46.7%
EBITDA Margin -20.6% -31.7%
-------------------------------------- -------- -------
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.
4
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 years prior to 2017, adjustments related to
Mexico operations were taxed at the 30% marginal rate for
Mexico.
Adjusting Items
-------------------------------------------------------------------------------------------------------------
Dollars in millions Three Months Ended
March 31,
----------------------
2017 2016
------------------------------------------------------------------------------------- --- ------- -------
Operating Expenses
DIRECTV and other video merger integration costs $ 127 $ 173
Mexico merger integration costs 39 81
Time Warner merger costs 41 -
Wireless merger integration costs - 42
Employee separation costs - 25
(Gain) loss on transfer of wireless spectrum (118) (736)
------------------------------------------------------------------------------------- --- ------- -------
Adjustments to Operations and Support Expenses 89 (415)
------------------------------------------------------------------------------------- --- ------- -------
Amortization of intangible assets 1,202 1,351
Adjustments to Operating Expenses 1,291 936
------------------------------------------------------------------------------------- --- ------- -------
Other
Merger related interest expense and exchange fees (1) 109 16
(Gain) loss on sale of assets, impairments and other adjustments 257 4
------------------------------------------------------------------------------------- --- ------- -------
Adjustments to Income Before Income Taxes 1,657 956
------------------------------------------------------------------------------------- --- ------- -------
Tax impact of adjustments 556 331
------------------------------------------------------------------------------------- --- ------- -------
Adjustments to Net Income $ 1,101 $ 625
------------------------------------------------------------------------------------- --- ------- -------
(1) Includes interest expense incurred on the debt issued prior to the close of merger transactions
and fees
associated with the exchange of DIRECTV notes for AT&T notes.
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
March 31,
----------------------
2017 2016
----------------------------------------------------------- --- ------- -------
Operating Income $ 6,864 $ 7,131
Adjustments to Operating Expenses 1,291 936
----------------------------------------------------------- --- ------- -------
Adjusted Operating Income 8,155 8,067
----------------------------------------------------------- --- ------- -------
EBITDA 12,991 13,694
Adjustments to Operations and Support Expenses 89 (415)
----------------------------------------------------------- --- ------- -------
Adjusted EBITDA 13,080 13,279
----------------------------------------------------------- --- ------- -------
Total Operating Revenues 39,365 40,535
Service Revenues 36,456 37,101
Operating Income Margin 17.4% 17.6%
Adjusted Operating Income Margin 20.7% 19.9%
Adjusted EBITDA Margin 33.2% 32.8%
Adjusted EBITDA Service Margin 35.9% 35.8%
----------------------------------------------------------- --- ------- -------
5
Adjusted Diluted EPS
--------------------------------------------------------------------------------------------------
Three Months Ended
March 31,
----------------------
2017 2016
-------------------------------------------------------------------------- -------- -------
Diluted Earnings Per Share (EPS) $ 0.56 $ 0.61
Amortization of intangible assets 0.13 0.14
Merger integration and other items(1) 0.03 0.03
Asset abandonments, impairments and other adjustments 0.03 0.02
(Gain) loss on transfer of wireless spectrum (0.01) (0.08)
-------------------------------------------------------------------------- -------- -------
Adjusted EPS $ 0.74 $ 0.72
-------------------------------------------------------------------------- -------- -------
Year-over-year growth - Adjusted 2.8%
-------------------------------------------------------------------------- -------- -------
Weighted Average Common Shares Outstanding
with Dilution (000,000) 6,186 6,190
-------------------------------------------------------------------------- -------- -------
(1) Includes combined merger integration items, merger-related interest expense and DIRECTV
exchange fees.
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
2017 2017
--------------------------------------------- --------------------- --------
Adjusted EBITDA $ 13,080 $ 13,080
Annualized Adjusted EBITDA 52,320
End-of-period current debt 12,681
End-of-period long-term debt 120,568
Total End-of-Period Debt 133,249
Less: Cash and Cash Equivalents 14,884
Net Debt Balance 118,365
--------------------------------------------- --- ---------------- -------
Annualized Net Debt to Adjusted EBITDA Ratio 2.26
--------------------------------------------- --- ---------------- -------
6
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, 2017 March 31, 2016
------------------------------------------------ ----------------------------------------------------
Consumer Business AT&T Consumer Business AT&T
Mobility Solutions Adjustments(1) Mobility Mobility Solutions Adjustments(1) Mobility
---------------- -------- --------- -------------- -------- -------- --------- -------------- ------------
Operating
Revenues
Wireless
service $ 6,609 $ 7,929 $ - $ 14,538 $ 6,943 $ 7,855 $ - $ 14,798
Fixed
strategic
services - 2,974 (2,974) - - 2,751 (2,751) -
Legacy voice
and data
services - 3,630 (3,630) - - 4,373 (4,373) -
Other service
and
equipment - 817 (817) - - 859 (859) -
Wireless
equipment 1,131 1,498 - 2,629 1,385 1,771 - 3,156
---------------- -------- --------- -------------- -------- -------- --------- -------------- ------------
Total Operating
Revenues 7,740 16,848 (7,421) 17,167 8,328 17,609 (7,983) 17,954
---------------- -------- --------- -------------- -------- -------- --------- -------------- ------------
Operating
Expenses
Operations
and support 4,528 10,176 (4,706) 9,998 4,912 10,802 (5,090) 10,624
EBITDA 3,212 6,672 (2,715) 7,169 3,416 6,807 (2,893) 7,330
Depreciation
and
amortization 873 2,312 (1,188) 1,997 922 2,508 (1,374) 2,056
---------------- -------- --------- -------------- -------- -------- --------- -------------- ------------
Total Operating
Expense 5,401 12,488 (5,894) 11,995 5,834 13,310 (6,464) 12,680
---------------- -------- --------- -------------- -------- -------- --------- -------------- ------------
Operating Income $ 2,339 $ 4,360 $ (1,527) $ 5,172 $ 2,494 $ 4,299 $ (1,519) $ 5,274
---------------- -------- --------- -------------- -------- -------- --------- -------------- ------------
(1) Non-wireless (fixed) operations reported in Business Solutions segment.
We provide a supplemental presentation of the Latin America and
Mexico Wireless operations within our International segment. The
following table presents a reconciliation of our International
segment.
Supplemental International
--------------------------------------------------------------------------------------------------------
Three Months Ended
March 31, 2017 March 31, 2016
-------------------------------------- --------------------------------------
Latin America Mexico International Latin America Mexico International
---------------------- ------------- ------ ------------- ------------- ------ -------------
Operating Revenues
Video Service $ 1,341 $ - $ 1,341 $ 1,130 $ - $ 1,130
Wireless Service - 475 475 - 455 455
Wireless Equipment - 113 113 - 82 82
---------------------- ------------- ------ ------------- ------------- ------ -------------
Total Operating
Revenues 1,341 588 1,929 1,130 537 1,667
---------------------- ------------- ------ ------------- ------------- ------ -------------
Operating Expenses
Operations and
support 1,050 709 1,759 881 707 1,588
Depreciation and
amortization 214 76 290 196 81 277
---------------------- ------------- ------ ------------- ------------- ------ -------------
Total Operating
Expense 1,264 785 2,049 1,077 788 1,865
---------------------- ------------- ------ ------------- ------------- ------ -------------
Operating Income 77 (197) (120) 53 (251) (198)
---------------------- ------------- ------ ------------- ------------- ------ -------------
Equity in Net Income
of Affiliates 20 - 20 14 - 14
---------------------- ------------- ------ ------------- ------------- ------ -------------
Segment Contribution $ 97 $ (197) $ (100) $ 67 $ (251) $ (184)
---------------------- ------------- ------ ------------- ------------- ------ -------------
7
This information is provided by RNS
The company news service from the London Stock Exchange
END
QRFEALSDALSXEFF
(END) Dow Jones Newswires
May 23, 2017 11:02 ET (15:02 GMT)
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