REG - AT & T Inc. - 2015 10-K <Origin Href="QuoteRef">T.N</Origin> - Part 8
01/04/2016 16:03
- Part 8: For the preceding part double click ID:nRSZ3512Qg
Postretirement Plans Accumulated Other Comprehensive Income
Balance as of December 31, 2012 $ (284) $ 271 $ (110) $ 5,358 $ 5,235
Other comprehensive income (loss) before reclassifications (138) 258 525 2,765 3,410
Amounts reclassified from accumulated OCI 55 1 (79) 2 30 3 (771) 4 (765)
Net other comprehensive income (loss) (83) 179 555 1,994 2,645
Balance as of December 31, 2013 (367) 450 445 7,352 7,880
Other comprehensive income (loss) before reclassifications (75) 65 260 428 678
Amounts reclassified from accumulated OCI 416 1 (16) 2 36 3 (933) 4 (497)
Net other comprehensive income (loss) 341 49 296 (505) 181
Balance as of December 31, 2014 (26) 499 741 6,847 8,061
Other comprehensive income (loss) before reclassifications (1,172) - (763) 45 (1,890)
Amounts reclassified from accumulated OCI - 1 (15) 2 38 3 (860) 4 (837)
Net other comprehensive income (loss) (1,172) (15) (725) (815) (2,727)
Balance as of December 31, 2015 $ (1,198) $ 484 $ 16 $ 6,032 $ 5,334
1 Translation (gain) loss reclassifications are included in Other income (expense) - net in the consolidated statements of income.
2 (Gains) losses are included in Other income (expense) - net in the consolidated statements of income.
3 (Gains) losses are included in interest expense in the consolidated statements of income. See Note 10 for additional information.
4 The amortization of prior service credits associated with postretirement benefits, net of amounts capitalized as part of construction
labor, are included in Cost of services and sales and Selling, general and administrative in the consolidated statements of income
(see Note 12). Actuarial loss reclassifications related to our equity method investees are included in Other income (expense) - net
in the consolidated statements of income.
NOTE 4. SEGMENT INFORMATION
Our segments are strategic business units that offer products and services to different customer segments over various
technology platforms and/or in different geographies that are managed accordingly. Due to recent organizational changes and
our July 24, 2015 acquisition of DIRECTV, effective for the quarter ended September 30, 2015, we revised our operating
segments to align with our new management structure and organizational responsibilities. We analyze our operating segments
based on segment contribution, which consists of operating income, excluding acquisition-related costs and other
significant items (as discussed below), and equity in net income of affiliates for investments managed within each
operating segment. We have four reportable segments: (1) Business Solutions, (2) Entertainment Group, (3) Consumer Mobility
and (4) International.
We also evaluate segment performance based on segment operating income before depreciation and amortization, which we refer
to as EBITDA and/or EBITDA margin. We believe EBITDA to be a relevant and useful measurement to our investors as it is part
of our internal management reporting and planning processes and it is an important metric that management uses to evaluate
segment operating performance. 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.
The Business Solutions segment provides services to business, 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 network and are
marketed to provide a complete communications solution to our business customers.
The Entertainment Group segment provides video, Internet and voice communication services to residential customers located
in the U.S. or in U.S. territories. We utilize our copper and IP-based (referred to as "wired" or "wireline") wired network
and/or our satellite technology.
The Consumer Mobility segment provides nationwide wireless service to consumers, and wireless wholesale and resale
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 entertainment and home monitoring services.
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 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.
In reconciling items to consolidated operating income and income before income taxes, Corporate and Other includes: (1)
operations that are not considered reportable segments and that are no longer integral to our operations or which we no
longer actively market, and (2) impacts of corporate-wide decisions for which the individual operating segments are not
being evaluated, including interest costs and expected return on plan assets for our pension and postretirement benefit
plans.
Certain operating items are not allocated to our business segments:
· Acquisition-related items include (1) operations and support items associated with the merger and integration of
newly acquired businesses, and (2) the noncash amortization of intangible assets acquired in acquisitions.
· Certain significant items include (1) noncash actuarial gains and losses from pension and other postretirement
benefits, (2) employee separation charges associated with voluntary and/or strategic offers, (3) losses resulting from
abandonment or impairment of assets and (4) other items for which the segments are not being evaluated.
Interest expense and other income (expense) - net, are managed only on a total company basis and are, accordingly,
reflected only in consolidated results. Therefore, these items are also not included in each segment's reportable results.
Our operating assets are utilized by multiple segments and consist of our wireless and wired networks as well as an
international satellite fleet. We manage our assets to provide for the most efficient, effective and integrated service to
our customers, not by operating segment, and therefore asset information and capital expenditures by segment are not
presented. Depreciation is allocated based on network usage or asset utilization by segment.
For the year ended December 31, 2015
Revenue Operations and Support Expenses EBITDA Depreciationand Amortization Operating Income (Loss) Equity in NetIncome (Loss) ofAffiliates SegmentContribution
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
For the year ended December 31 2014
Revenue Operations and Support Expenses EBITDA Depreciationand Amortization Operating Income (Loss) Equity in NetIncome (Loss) ofAffiliates SegmentContribution
Business Solutions $ 70,606 $ 45,826 $ 24,780 $ 9,355 $ 15,425 $ - $ 15,425
Entertainment Group 22,233 18,992 3,241 4,473 (1,232) (2) (1,234)
Consumer Mobility 36,769 23,891 12,878 3,827 9,051 (1) 9,050
International - - - - - 153 153
Segment Total 129,608 88,709 40,899 17,655 23,244 $ 150 $ 23,394
Corporate and Other 2,839 2,471 368 105 263
Acquisition-related items - 785 (785) 487 (1,272)
Certain significant items - 9,997 (9,997) 26 (10,023)
AT&T Inc. $ 132,447 $ 101,962 $ 30,485 $ 18,273 $ 12,212
For the year ended December 31, 2013
Revenue Operations and Support Expenses EBITDA Depreciationand Amortization Operating Income (Loss) Equity in NetIncome (Loss) ofAffiliates SegmentContribution
Business Solutions $ 67,647 $ 43,442 $ 24,205 $ 8,965 $ 15,240 $ - $ 15,240
Entertainment Group 21,542 17,943 3,599 4,815 (1,216) - (1,216)
Consumer Mobility 36,243 22,545 13,698 3,683 10,015 - 10,015
International - - - - - 532 532
Segment Total 125,432 83,930 41,502 17,463 24,039 $ 532 $ 24,571
Corporate and Other 3,320 2,987 333 274 59
Acquisition-related items - - - 658 (658)
Certain significant items - (7,312) 7,312 - 7,312
AT&T Inc. $ 128,752 $ 79,605 $ 49,147 $ 18,395 $ 30,752
The following table is a reconciliation of operating income (loss) to "Income Before Income Taxes" reported on our consolidated statements of income:
2015 2014 2013
Business Solutions $ 16,392 $ 15,425 $ 15,240
Entertainment Group 2,000 (1,234) (1,216)
Consumer Mobility 9,738 9,050 10,015
International (488) 153 532
Segment Operating Income 27,642 23,394 24,571
Reconciling Items:
Corporate and Other 176 263 59
Merger and integration charges (2,072) (785) -
Amortization of intangibles acquired (2,712) (487) (658)
Actuarial gain (loss) 2,152 (7,869) 7,584
Employee separation charges (375) - (501)
Other (expenses) credits (35) - 229
Asset abandonments and impairments - (2,154) -
Segment equity in net income (loss) of affiliates 9 (150) (532)
AT&T Operating Income 24,785 12,212 30,752
Interest expense 4,120 3,613 3,940
Equity in net income of affiliates 79 175 642
Other income (expense) - net (52) 1,581 596
Income Before Income Taxes $ 20,692 $ 10,355 $ 28,050
The following table sets forth revenues earned from subscribers located in different geographic areas. Property is grouped by its physical location.
2015 2014 2013
Revenues Net Property, Plant & Equipment Revenues Net Property, Plant & Equipment Revenues Net Property, Plant & Equipment
United States $ 140,234 $ 118,515 $ 129,772 $ 112,092 $ 126,212 $ 110,090
Latin America
Brazil 1,224 1,384 142 33 136 41
Other 1,157 1,530 99 67 92 72
Mexico 2,046 2,369 94 20 90 24
Other 2,140 652 2,340 686 2,222 741
Total $ 146,801 $ 124,450 $ 132,447 $ 112,898 $ 128,752 $ 110,968
NOTE 5. ACQUISITIONS, DISPOSITIONS AND OTHER ADJUSTMENTS
Acquisitions
DIRECTV On July 24, 2015, we completed our acquisition of DIRECTV, a leading provider of digital television entertainment
services in both the United States and Latin America. The acquisition represents an opportunity for us to integrate a
unique and complementary set of assets and achieve substantial cost synergies over time, as well as generate revenue from
pay television in Latin America. Our distribution scale will enable us to offer consumers bundles including video,
high-speed broadband and mobile services, using all the sales channels of both companies. We believe the combined company
will be a content distribution leader across mobile, video and broadband platforms.
Under the merger agreement, each share of DIRECTV stock was exchanged for $28.50 cash plus 1.892 shares of our common
stock. After adjustment for shares issued to trusts consolidated by AT&T, share-based payment arrangements and fractional
shares, which were settled in cash, AT&T issued 954,407,524 shares to DIRECTV shareholders, giving them an approximate 16%
stake in the combined company, based on common shares outstanding. Based on our $34.29 per share closing stock price on
July 24, 2015, the aggregate value of consideration paid to DIRECTV shareholders was $47,409, including $32,727 of AT&T
stock and $14,378 in cash, $299 for share-based payment arrangements and $5 for DIRECTV shares previously purchased on the
open market by trusts consolidated by AT&T.
Our 2015 operating results include the results from DIRECTV following the acquisition date. The fair values of the assets
acquired and liabilities assumed were preliminarily determined using the income, cost and market approaches. The fair value
measurements were primarily based on significant inputs that are not observable in the market and are considered Level 3
under the Fair Value Measurement and Disclosure framework, other than long-term debt assumed in the acquisition (see Note
10). The income approach was primarily used to value the intangible assets, consisting primarily of acquired customer
relationships, orbital slots and trade names. The income approach estimates fair value for an asset based on the present
value of cash flows projected to be generated by the asset. Projected cash flows are discounted at a required rate of
return that reflects the relative risk of achieving the cash flows and the time value of money. The cost approach, which
estimates value by determining the current cost of replacing an asset with another of equivalent economic utility, was used
primarily for plant, property and equipment. The cost to replace a given asset reflects the estimated reproduction or
replacement cost for the property, less an allowance for loss in value due to depreciation. Our December 31, 2015
consolidated balance sheet includes the assets and liabilities of DIRECTV, which have been measured at fair value.
The following table summarizes the preliminary estimated fair values of the DIRECTV assets acquired and liabilities assumed
and related deferred income taxes as of the acquisition date.
Assets acquired
Cash $ 4,797
Accounts receivable 2,011
All other current assets 1,535
Property, plant and equipment (including satellites) 9,301
Intangible assets not subject to amortization
Orbital slots 11,946
Trade name 1,382
Intangible assets subject to amortization
Customer lists and relationships 19,505
Trade name 2,905
Other 457
Investments and other assets 2,360
Goodwill 34,427
Total assets acquired 90,626
Liabilities assumed
Current liabilities, excluding current portion of long-term debt 5,693
Long-term debt 20,585
Other noncurrent liabilities 16,585
Total liabilities assumed 42,863
Net assets acquired 47,763
Noncontrolling interest (354)
Aggregate value of consideration paid $ 47,409
These estimates are preliminary in nature and subject to adjustments, which could be material. Any necessary adjustments
will be finalized within one year from the date of acquisition. Substantially all the receivables acquired are expected to
be collectable. We have not identified any material unrecorded pre-acquisition contingencies where the related asset,
liability or impairment is probable and the amount can be reasonably estimated. Goodwill is calculated as the difference
between the acquisition date fair value of the consideration transferred and the fair value of the net assets acquired, and
represents the future economic benefits that we expect to achieve as a result of acquisition. Prior to the finalization of
the purchase price allocation, if information becomes available that would indicate it is probable that such events had
occurred and the amounts can be reasonably estimated, such items will be included in the final purchase price allocation
and may change goodwill. Purchased goodwill is not expected to be deductible for tax purposes. The goodwill was allocated
to our Entertainment Group and International segments.
For the 160-day period ended December 31, 2015, our consolidated statement of income included $14,561 of revenues and $(46)
of operating income, which included $2,254 of intangible amortization from DIRECTV, and its affiliates. The following
unaudited pro forma consolidated results of operations assume that the acquisition of DIRECTV was completed as of January
1, 2014.
(Unaudited)
Year Ended
December 31,
2015 2014
Total operating revenues1 $ 165,694 $ 165,595
Net Income Attributable to AT&T 12,683 6,412
Basic Earnings Per Share Attributable to AT&T $ 2.06 $ 1.04
Diluted Earnings Per Share Attributable to AT&T $ 2.06 $ 1.04
1 Reflects revenue declines resulting from our fourth-quarter 2014 sale of our Connecticut wireline operations.
Nonrecurring adjustments included in the pro forma results above consist of the following: At June 30, 2015, due to the
continued economic uncertainty and lack of liquidity in all three of the official currency exchange mechanisms in
Venezuela, DIRECTV changed the exchange rate used to measure its Venezuelan subsidiary's monetary assets and liabilities
into U.S. dollars from Sistema Complementario de Administración de Divisas (SICAD) to Sistema Marginal de Divisas (SIMADI).
The significant change in exchange rates also required the reevaluation of the recoverability of fixed and intangible
assets and inventory, which resulted in an impairment charge of $1,060 recorded in DIRECTV's consolidated statement of
operations for the six-month period ended June 30, 2015. Prior to DIRECTV's June 30, 2015 change to the SIMADI exchange
rate, operating results for the six months ended June 30, 2015 were measured using the SICAD exchange rate which resulted
in revenues in Venezuela of approximately $500 and operating profit before depreciation and amortization of approximately
$180. Pro forma data may not be indicative of the results that would have been obtained had these events occurred at the
beginning of the periods presented, nor is it intended to be a projection of future results.
Nextel Mexico On April 30, 2015, we completed our acquisition of the subsidiaries of NII Holdings Inc., operating its
wireless business in Mexico, for $1,875, including approximately $427 of net debt and other adjustments. The subsidiaries
offered service under the name Nextel Mexico.
The preliminary values of assets acquired were: $383 in licenses, $1,293 in property, plant and equipment, $111 in customer
lists and $112 of goodwill. The goodwill was allocated to our International segment.
GSF Telecom On January 16, 2015, we acquired Mexican wireless company GSF Telecom Holdings, S.A.P.I. de C.V. (GSF Telecom)
for $2,500, including net debt of approximately $700. GSF Telecom offered service under both the Iusacell and Unefon brand
names in Mexico.
The preliminary values of assets acquired were: $673 in licenses, $715 in property, plant and equipment, $374 in customer
lists, $26 in trade names and $972 of goodwill. The goodwill was allocated to our International segment.
AWS-3 Auction In January 2015, we submitted winning bids for 251 Advanced Wireless Service (AWS) spectrum licenses in the
AWS-3 Auction (FCC Auction 97) for $18,189. We provided the Federal Communications Commission (FCC) an initial down payment
of $921 in October 2014 and paid the remaining $17,268 in the first quarter of 2015.
Spectrum Acquisitions During 2015, we acquired $489 of wireless spectrum, not including the AWS auction. During 2014, we
acquired $1,263 of wireless spectrum, not including Leap Wireless International, Inc. (Leap) discussed below.
Leap In March 2014, we acquired Leap, a provider of prepaid wireless service, for $15.00 per outstanding share of Leap's
common stock, or $1,248 (excluding Leap's cash on hand), plus one nontransferable contingent value right (CVR) per share.
The CVR will entitle each Leap stockholder to a pro rata share of the net proceeds of the future sale of the Chicago 700
MHz A-band FCC license held by Leap.
The values of assets acquired under the terms of the agreement were: $3,000 in licenses, $510 in property, plant and
equipment, $520 of customer lists, $340 for trade names and $248 of goodwill. The goodwill was allocated to our Consumer
Mobility segment. The estimated fair value of debt associated with the acquisition of Leap was $3,889, all of which was
redeemed or matured by July 31, 2014.
Dispositions
Connecticut Wireline On October 24, 2014, we sold our incumbent local exchange operations in Connecticut for $2,018 and
recorded a pre-tax gain of $76, which is included in "Other income (expense) - net," on our consolidated statements of
income. In conjunction with the sale, we allocated $743 of goodwill from our former Wireline reporting unit. Because the
book value of the goodwill did not have a corresponding tax basis, the resulting net income impact of the sale was a loss
of $360.
América Móvil In 2014, we sold our remaining stake in América Móvil for approximately $5,885 and recorded a pre-tax gain
of $1,330, which is included in "Other income (expense) - net," on our consolidated statements of income. In 2013, we sold
a portion of our shares in América Móvil for approximately $1,179. América Móvil was accounted for as an equity method
investment.
NOTE 6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized as follows at December 31:
Lives (years) 2015 2014
Land - $ 1,638 $ 1,567
Buildings and improvements 2-44 33,784 32,204
Central office equipment1 3-10 93,643 89,857
Cable, wiring and conduit 15-50 75,784 72,766
Satellites 12-15 2,088 -
Other equipment 2-23 81,972 74,244
Software 3-5 11,347 8,604
Under construction - 5,971 3,053
306,227 282,295
Accumulated depreciation and amortization 181,777 169,397
Property, plant and equipment - net $ 124,450 $ 112,898
1 Includes certain network software.
Our depreciation expense was $19,289 in 2015, $17,773 in 2014 and $17,722 in 2013. Depreciation expense included
amortization of software totaling $1,660 in 2015, $1,504 in 2014 and $2,142 in 2013.
We periodically assess our network assets for impairment, and our analyses have indicated no impairment. During 2014, due
to declining customer demand for our legacy voice and data products and the migration of our networks to next generation
technologies, we decided to abandon in place specific copper network assets classified as cable, wiring and conduit. These
abandoned assets had a gross book value of approximately $7,141, with accumulated depreciation of $5,021. In 2014, we
recorded a $2,120 noncash charge for this abandonment, which is included in "Abandonment of network assets" on our
consolidated statements of income.
Certain facilities and equipment used in operations are leased under operating or capital leases. Rental expenses under
operating leases were $5,025 for 2015, $4,345 for 2014 and $3,683 for 2013. At December 31, 2015, the future minimum rental
payments under noncancelable operating leases for the years 2016 through 2020 were $3,775, $3,551, $3,257, $3,003 and
$2,771, with $12,488 due thereafter. Certain real estate operating leases contain renewal options that may be exercised.
Capital leases are not significant.
NOTE 7. GOODWILL AND OTHER INTANGIBLE ASSETS
As part of our organizational realignment discussed in Note 4, the goodwill from the previous Wireless segment was
allocated to the Business Solutions and Consumer Mobility segments and the goodwill from the previous Wireline segment was
allocated to the Business Solutions and Entertainment Group segments. The allocations were based on the relative fair value
of the portions of the previous Wireless and Wireline segments which were moved into the new Business Solutions,
Entertainment Group and Consumer Mobility segments.
The following table sets forth the changes in the carrying amounts of goodwill by segment, which is the same as reporting
unit for Business Solutions, Entertainment Group and Consumer Mobility. The International segment has three reporting
units: Mexico Wireless, Brazil and PanAmericana.
Wireless Wireline Business Solutions Entertainment Group Consumer Mobility International Total
Balance as of December 31, 2013 $ 36,106 $ 33,167 $ - $ - $ - $ - $ 69,273
Goodwill acquired 367 - - - - - 367
Other (4) 56 - - - - 52
Balance as of December 31, 2014 36,469 33,223 - - - - 69,692
Goodwill acquired 6 - - 30,839 - 4,672 35,517
Foreign currency translation adjustments - - - - - (638) (638)
Allocation of goodwill (36,471) (33,226) 45,351 7,834 16,512 - -
Other (4) 3 - - - (2) (3)
Balance as of December 31, 2015 $ - $ - $ 45,351 $ 38,673 $ 16,512 $ 4,032 $ 104,568
The majority of our goodwill acquired during 2015 related to our acquisitions of DIRECTV, Nextel Mexico and GSF Telecom.
The allocation of goodwill represents goodwill previously assigned to our Wireless and Wireline segments. Other changes to
our goodwill in 2015 include foreign currency translation adjustments and the final valuation of Leap. The majority of our
goodwill acquired during 2014 related to our acquisition of Leap. Other changes to our goodwill during 2014 include
adjustments to the amount of goodwill moved to held for sale in 2013 related to the sale of our Connecticut wireline
operations. (See Note 5)
Our other intangible assets are summarized as follows:
December 31, 2015 December 31, 2014
Other Intangible Assets Gross Carrying Amount Currency Translation Adjustment Accumulated Amortization Gross Carrying Amount Currency Translation Adjustment Accumulated Amortization
Amortized intangible assets:
Customer lists and relationships:
Wireless acquisitions $ 1,055 $ - $ 679 $ 1,082 $ - $ 550
BellSouth Corporation 4,450 - 4,347 5,825 - 5,559
DIRECTV 19,505 (294) 1,807 - - -
AT&T Corp. 33 - 23 56 - 42
Mexican wireless 485 (60) 110 - - -
Subtotal 25,528 (354) 6,966 6,963 - 6,151
Trade name 2,905 - 424 - - -
Other 686 - 195 275 - 189
Total $ 29,119 $ (354) $ 7,585 $ 7,238 $ - $ 6,340
Indefinite-lived intangible assets not subject to amortization:
Licenses
Wireless licenses $ 81,147 $ 60,824
Orbital slots 11,946 -
Trade names 6,437 5,241
Total $ 99,530 $ 66,065
Wireless license additions in 2015 were primarily related to FCC Auction 97, with the remainder originating from our Mexico
business acquisitions and various spectrum license purchases. The increase in orbital slots and trade names was primarily
due to the DIRECTV acquisition. (See Note 5)
We review indefinite-lived intangible assets for impairment annually (see Note 1). Licenses include wireless licenses that
provide us with the exclusive right to utilize certain radio frequency spectrum to provide wireless communications
services, similar licenses in Mexico and orbital slots representing the space in which we operate the broadcast satellites
that support our digital video entertainment service offerings.
Amortized intangible assets are definite-life assets, and as such, we record amortization expense based on a method that
most appropriately reflects our expected cash flows from these assets, over a weighted-average of 8.6 years (9.2 years for
customer lists and relationships and 4.2 years for amortizing trade names and other). Amortization expense for
definite-life intangible assets was $2,728 for the year ended December 31, 2015, $500 for the year ended December 31, 2014
and $672 for the year ended December 31, 2013. Amortization expense is estimated to be $5,207 in 2016, $4,623 in 2017,
$3,580 in 2018, $2,521 in 2019, and $2,041 in 2020.
In 2015, we wrote off approximately $1,483 of fully amortized intangible assets (primarily customer lists). In 2014, we
wrote off approximately $2,850 of fully amortized intangible assets (primarily customer lists). We review other amortizing
intangible assets for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable
over the remaining life of the asset or asset group.
NOTE 8. EQUITY METHOD INVESTMENTS
Investments in partnerships, joint ventures and less than majority-owned subsidiaries in which we have significant
influence are accounted for under the equity method.
In the third quarter of 2015, we acquired DIRECTV (see Note 5), which included various equity method investments. The
earnings from these investments, subsequent to the acquisition date, are included in the 2015 activity in the table below,
as well as our consolidated statement of income for 2015.
Our investments in equity affiliates at December 31, 2015 primarily include our interests in SKY Mexico, Game Show Network,
Otter Media Holdings, YP Holdings LLC (YP Holdings), MLB Network and NW Sports Net.
SKY Mexico We hold a 41.0% interest in SKY Mexico, which was acquired as part of DIRECTV. SKY Mexico is a leading pay-TV
provider in Mexico.
Game Show Network (GSN) We hold a 42.0% interest in GSN, which was also a part of the acquisition of DIRECTV. GSN is a
television network dedicated to game-related programming and Internet interactive game playing.
Otter Media Holdings We hold a 43.4% interest in Otter Media Holdings, a venture between The Chernin Group and AT&T that
is focused on acquiring, investing in and launching over-the-top subscription video services.
YP Holdings We hold a 47.0% interest in YP Holdings, an online advertising company and directory publisher.
MLB Network We hold a 16.7% interest in MLB Network, which offers broadcasts dedicated to Major League Baseball and was
acquired with DIRECTV.
NW Sports Net We hold a 29.0% interest in NW Sports Net, a regional sports network acquired as part of DIRECTV.
The following table is a reconciliation of our investments in equity affiliates as presented on our consolidated balance
sheets:
2015 2014
Beginning of year $ 250 $ 3,860
Additional investments 77 226
DIRECTV investments acquired 1,232 -
Equity in net income of affiliates 79 175
Dividends and distributions received (30) (148)
Sale of América Móvil shares - (3,817)
Other adjustments (2) (46)
End of year $ 1,606 $ 250
Undistributed earnings from equity affiliates were $162 and $88 at December 31, 2015 and 2014.
NOTE 9. DEBT
Long-term debt of AT&T and its subsidiaries, including interest rates and maturities, is summarized as follows at December
31:
2015 2014
Notes and debentures1
Interest Rates Maturities2
0.49% - 2.99% 2015 - 2022 $ 34,265 $ 22,127
3.00% - 4.99% 2015 - 2046 54,678 31,516
5.00% - 6.99% 2015 - 2095 31,140 23,260
7.00% - 9.50% 2015 - 2097 5,805 6,153
Other 15 -
Fair value of interest rate swaps recorded in debt 109 125
126,012 83,181
Unamortized (discount) premium - net (842) (1,549)
Unamortized issuance costs (323) (233)
Total notes and debentures 124,847 81,399
Capitalized leases 884 430
Other 416 -
Total long-term debt, including current maturities 126,147 81,829
Current maturities of long-term debt (7,632) (6,051)
Total long-term debt $ 118,515 $ 75,778
1 Includes credit agreement borrowings.
2 Maturities assume putable debt is redeemed by the holders at the
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