REG - AT & T Inc. - 2Q14 Earnings Release <Origin Href="QuoteRef">T.N</Origin> - Part 2
29/10/2014 10:46
- Part 2: For the preceding part double click ID:nRSF4324Oa
17,203 15,192 13.2 %
Wireless Net Adds
Total 634 632 0.3 % 1,696 923 83.7 %
Postpaid 1,026 551 86.2 % 1,651 847 94.9 %
Prepaid (405 ) 11 - (455 ) (173 ) -
Reseller (162 ) (414 ) 60.9 % (368 ) (666 ) 44.7 %
Connected Devices 175 484 -63.8 % 868 915 -5.1 %
M&A Activity, Partitioned Customers and Other Adjs. (14 ) 1 - 4,562 4 -
Wireless Churn
Postpaid Churn 0.86 % 1.02 % -16 BP 0.96 % 1.03 % -7 BP
Total Churn 1.47 % 1.36 % 11 BP 1.43 % 1.37 % 6 BP
Other
Licensed POPs (000,000) 321 317 1.3 %
Wireline
Voice
Total Wireline Voice Connections 26,958 30,228 -10.8 %
Net Change (758 ) (935 ) 18.9 % (1,531 ) (1,956 ) 21.7 %
Broadband
Total Wireline Broadband Connections 16,448 16,453 -
Net Change (55 ) (61 ) 9.8 % 23 63 -63.5 %
Video
Total U-verse Video Connections 5,851 5,001 17.0 %
Net Change 190 233 -18.5 % 391 465 -15.9 %
Consumer Revenue Connections
Broadband1 14,780 14,660 0.8 %
U-verse Video Connections 5,831 4,986 16.9 %
Voice2 15,314 17,362 -11.8 %
Total Consumer Revenue Connections1 35,925 37,008 -2.9 %
Net Change (299 ) (393 ) 23.9 % (465 ) (659 ) 29.4 %
AT&T Inc.
Construction and capital expenditures:
Capital expenditures $ 5,933 $ 5,413 9.6 % $ 11,649 $ 9,665 20.5 %
Interest during construction $ 63 $ 74 -14.9 % $ 118 $ 140 -15.7 %
Dividends Declared per Share $ 0.46 $ 0.45 2.2 % $ 0.92 $ 0.90 2.2 %
End of Period Common Shares Outstanding (000,000) 5,191 5,335 -2.7 %
Debt Ratio3 47.6 % 46.6 % 100 BP
Total Employees 248,170 245,350 1.1 %
1 Consumer wireline broadband connections include DSL lines, U-verse high speed Internet access and satellite broadband.
2 Includes consumer U-verse Voice over Internet Protocol connections of 4,379 as of June 30, 2014.
3 Total long-term debt plus debt maturing within one year divided by total debt plus total stockholders' equity.
Note: For the end of 2Q14, total switched access lines were 22,547; retail business switched access lines totaled 9,808; and wholesale,
national mass markets and coin switched access lines totaled 1,804. Restated switched access lines do not include ISDN lines.
Financial Data
AT&T Inc.
Non-GAAP Wireless Reconciliation
Wireless Segment EBITDA
Dollars in millions
Unaudited
Three Months Ended
6/30/13 9/30/13 12/31/13 3/31/14 6/30/14
Segment Operating Revenues
Service $ 15,370 $ 15,460 $ 15,660 $ 15,387 $ 15,148
Equipment 1,921 2,020 2,777 2,479 2,782
Total Segment Operating Revenues $ 17,291 $ 17,480 $ 18,437 $ 17,866 $ 17,930
Segment Operating Expenses
Operations and support 10,770 10,982 12,576 10,882 11,568
Depreciation and amortization 1,843 1,875 1,915 1,931 2,035
Total Segment Operating Expenses 12,613 12,857 14,491 12,813 13,603
Segment Operating Income 4,678 4,623 3,946 5,053 4,327
Segment Operating Income Margin 27.1 % 26.4 % 21.4 % 28.3 % 24.1 %
Plus: Depreciation and amortization 1,843 1,875 1,915 1,931 2,035
EBITDA1 $ 6,521 $ 6,498 $ 5,861 $ 6,984 $ 6,362
EBITDA as a % of Service Revenues2 42.4 % 42.0 % 37.4 % 45.4 % 42.0 %
1EBITDA is defined as Operating Income Before Depreciation and Amortization.2Service revenues include Wireless data, voice, text and other service revenues.
Financial Data
AT&T Inc.
Non-GAAP Wireless Reconciliation
Wireless Segment Adjusted EBITDA
Dollars in millions
Unaudited
Three Months Ended
6/30/13 6/30/14
Segment Operating Revenues
Service $ 15,370 $ 15,148
Equipment 1,921 2,782
Total Segment Operating Revenues $ 17,291 $ 17,930
Segment Operating Income 4,678 4,327
Segment Operating Income Margin 27.1 % 24.1 %
Plus: Depreciation and amortization 1,843 2,035
EBITDA1 $ 6,521 $ 6,362
Total EBITDA Margin 37.7 % 35.5 %
EBITDA as a % of Service Revenues2 42.4 % 42.0 %
Adjustments:
Leap integration expense - 96
Adjusted EBITDA1 $ 6,521 $ 6,458
Total Adjusted EBITDA Margin 37.7 % 36.0 %
Adjusted EBITDA as a % of Service Revenues2 42.4 % 42.6 %
1EBITDA is defined as Operating Income Before Depreciation and Amortization.2Service revenues include Wireless data, voice, text and other service revenues.
Financial Data
AT&T Inc.
Non-GAAP Consolidated Reconciliation
Adjusted Diluted EPS
Unaudited
Three Months Ended
June 30,
2013 2014
Reported Diluted EPS $ 0.71 $ 0.68
Adjustments:
Gain on sale of Amйrica Mуvil shares (0.04 ) (0.08 )
Leap Integration Costs - 0.02
Adjusted Diluted EPS $ 0.67 $ 0.62
Year-over-year growth - Adjusted -7.5 %
Weighted Average Common Shares Outstanding
with Dilution (000,000) 5,397 5,220
Adjusted Diluted EPS is a non-GAAP financial measure calculated
by excluding from operating revenues, operating expenses and
equity in net income of affiliates certain significant items
that are non-operational or non-recurring in nature, including
dispositions. Management believes that this measure provides
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 Diluted EPS
should be considered in addition to, but not as a substitute
for, other measures of financial performance reported in
accordance with GAAP. Our calculation of Adjusted Diluted EPS,
as presented, may differ from similarly titled measures reported
by other companies.
Financial Data
AT&T Inc.
Non-GAAP Consolidated
Reconciliation
Free Cash Flow
Dollars in millions
Unaudited
Three Months Ended Six Months Ended
June 30, June 30,
2013 2014 2013 2014
Net cash provided by operating $ 9,512 $ 8,070 $ 17,711 $ 16,869
activities
Less: Construction and capital (5,487 ) (5,996 ) (9,805 ) (11,767 )
expenditures
Free Cash Flow $ 4,025 $ 2,074 $ 7,906 $ 5,102
Free Cash Flow after Dividends
Dollars in millions
Unaudited
Three Months Ended Six Months Ended
June 30, June 30,
2013 2014 2013 2014
Net cash provided by operating $ 9,512 $ 8,070 $ 17,711 $ 16,869
activities
Less: Construction and capital (5,487 ) (5,996 ) (9,805 ) (11,767 )
expenditures
Free Cash Flow 4,025 2,074 7,906 5,102
Less: Dividends paid (2,428 ) (2,386 ) (4,930 ) (4,784 )
Free Cash Flow after Dividends $ 1,597 $ (312 ) $ 2,976 $ 318
Free cash flow includes
reimbursements of certain
postretirement benefits paid.
Free cash flow is defined as
cash from operations minus
construction and capital
expenditures. Free cash flow
after dividends is defined as
cash from operations minus
construction, capital
expenditures and dividends. We
believe these metrics provide
useful information to our
investors because management
regularly reviews free cash
flow as an important indicator
of how much cash is generated
by normal 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.
Financial Data
AT&T Inc.
Non-GAAP Consolidated Reconciliation
Adjusted Operating Income Margin
Dollars in millions
Unaudited
Three Months Ended
June 30,
2013 2014
Reported Operating Income $ 6,113 $ 5,616
Reported Operating Income Margin 19.1 % 17.2 %
Adjustments:
Leap integration costs - (141 )
Adjusted Operating Income $ 6,113 $ 5,757
Adjusted Operating Income Margin 19.1 % 17.7 %
Adjusted Operating Income and Adjusted Operating Income
Margin are non-GAAP financial measures calculated by
excluding from operating revenues and operating expenses
certain significant items that are non-operational or
non-recurring in nature, including dispositions.
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 Income and Adjusted Operating Income Margin
should be considered in addition to, but not as a
substitute for, other measures of financial performance
reported in accordance with GAAP. Our calculations of
Adjusted Operating Revenues may differ from similarly
titled measures reported by other companies.
Financial Data
AT&T Inc.
Non-GAAP Consolidated Reconciliation
Annualized Net-Debt-to-Adjusted-EBITDA
Ratio
Dollars in millions
Unaudited
Three Months Ended
3/31/14 6/30/14 2014 YTD
Operating Revenues $ 32,476 $ 32,575 $ 65,051
Operating Expenses 26,198 26,959 53,157
Total Operating Income 6,278 5,616 11,894
Add back Depreciation and Amortization 4,617 4,550 9,167
Consolidated Reported EBITDA 10,895 10,166 21,061
Add Back:
Leap integration costs1 81 97 178
Total Consolidated Adjusted EBITDA 10,976 10,263 21,239
Annualized Consolidated Adjusted EBITDA $ 42,478
End-of-period current debt 10,482
End-of-period long-term debt 73,570
Total End-of-Period Debt 84,052
Less Cash and Cash Equivalents 11,305
Net Debt Balance $ 72,747
Annualized Net-Debt-to-Adjusted-EBITDA 1.71
Ratio
1 Adjustments include Operations and
Support expenses included in Leap
integration costs. Net-Debt-to-EBITDA
ratios are non-GAAP financial measures
frequently used by investors and credit
rating agencies. Management believes these
measures provide relevant and useful
information to investors and other users
of our financial data. Net debt is
calculated by subtracting cash and cash
equivalents from the sum of debt maturing
within one year and long-term debt. The
Net-Debt-to-EBITDA ratio is calculated by
dividing the Net Debt by annualized
EBITDA. Annualized EBITDA is calculated by
annualizing the year-to-date EBITDA. Our
calculation of EBITDA, as presented, may
differ from similarly titled measures
reported by other companies.
Exhibit 99.3
EBITDA DISCUSSION
For AT&T, EBITDA is defined as operating income before depreciation and amortization. EBITDA service margin is calculated
as EBITDA divided by service revenues. EBITDA differs from Segment Operating Income (Loss), as calculated in accordance
with U.S. generally accepted accounting principles (GAAP), in that it excludes depreciation and amortization. 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 GAAP. Our calculation of EBITDA, as presented, may differ from
similarly titled measures reported by other companies.
We believe these measures are relevant and useful information to our 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 its wireless operations. These measures are used by management as a gauge of our success in acquiring,
retaining and servicing wireless 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 our Wireless segment's 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 AT&T Mobility's operating
managers are responsible and upon which we evaluate their 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. EBITDA excludes other income (expense) - net, net income
attributable to noncontrolling interest and equity in net income (loss) of affiliates, as these do not reflect the
operating results of our wireless subscriber base and national footprint that we utilize to obtain and service our
customers. Equity in net income (loss) of affiliates represents AT&T Mobility's proportionate share of the net income
(loss) of affiliates in which it exercises significant influence, but does not control. As AT&T Mobility does not control
these entities, our management excludes these results when evaluating the performance of our primary operations. EBITDA
excludes interest expense and the provision for income taxes. Excluding these items eliminates the expenses associated with
its capitalization and tax structures. Finally, EBITDA excludes depreciation and amortization, in order to eliminate the
impact of capital investments.
We believe EBITDA as a percentage of service revenues to be a more relevant measure of our Wireless segment operating
margin than EBITDA as a percentage of total revenue. We generally subsidize a portion of our wireless handset sales, all of
which are recognized in the period in which we sell the handset. Management views this equipment subsidy as a cost to
acquire or retain a subscriber, which is recovered through the ongoing service revenue that is generated by the subscriber.
We also use wireless service revenues to calculate margin to facilitate comparison, both internally and externally with our
wireless competitors, as they calculate their margins using wireless service revenues as well.
There are material limitations to using these non-GAAP financial measures. EBITDA 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, which directly affect our Wireless segment income.
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 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.
FREE CASH FLOW DISCUSSION
Free cash flow is defined as cash from operations minus construction and capital expenditures. Free cash flow after
dividends is defined as cash from operations minus construction, capital expenditures and dividends. Free cash flow yield
is defined as cash from continuing operations less construction and capital expenditures as a percentage of market
capitalization computed on the last trading day of the quarter. Market capitalization is computed by multiplying the end of
period stock price by the end of period shares outstanding. We believe these metrics provide useful information to our
investors because management reviews free cash flow as an important indicator of how much cash is generated by normal
business operations, including capital expenditures, and makes decisions based on it. Management also views it as a measure
of cash available to pay debt and return cash to shareowners.
NET DEBT TO EBITDA DISCUSSION
Net Debt to EBITDA ratios are non-GAAP financial measures frequently used by investors and credit rating agencies and
management believes these measures provide relevant and useful information to investors and other users of our financial
data. The Net Debt to EBITDA ratio is calculated by dividing the Net Debt by annualized EBITDA. Net Debt is calculated by
subtracting cash and cash equivalents from the sum of debt maturing within one year and long-term debt. Annualized EBITDA
is calculated by annualizing the year-to-date EBITDA.
Adjusted EBITDA excludes net actuarial gains or losses associated with our pension and postemployment benefit plans, which
we immediately recognize in the income statement, pursuant to our accounting policy for the recognition of actuarial
gains/losses. As a result, the Adjusted EBITDA reflects an expected return on plan assets rather than the actual return on
plan assets, as included in the GAAP measure of income. This measure is consistent with metrics under our existing credit
agreements.
ADJUSTING ITEMS DISCUSSION
Adjusted Operating Revenues, Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA 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.
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 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. Our calculations of Adjusted diluted EPS, as presented, may differ from similarly titled
measures reported by other companies.
This information is provided by RNS
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