REG - AT & T Inc. - 2Q17 Earnings Release <Origin Href="QuoteRef">T.N</Origin> - Part 4
23/08/2017 16:40
- Part 4: For the preceding part double click ID:nRSW8227Oc
Depreciation and amortization 871 932 1,744 1,854
EBITDA 3,271 3,506 6,483 6,922
Total Segment Operating Revenues 7,791 8,186 15,531 16,514
Service Revenues 6,528 6,948 13,137 13,891
Segment Operating Income Margin 30.8 % 31.4 % 30.5 % 30.7 %
EBITDA Margin 42.0 % 42.8 % 41.7 % 41.9 %
EBITDA Service Margin 50.1 % 50.5 % 49.3 % 49.8 %
International Segment
Segment Contribution $ (32 ) $ (184 ) $ (132 ) $ (368 )
Additions:
Equity in Net (Income) of Affiliates (25 ) (9 ) (45 ) (23 )
Depreciation and amortization 311 298 601 575
EBITDA 254 105 424 184
Total Segment Operating Revenues 2,026 1,828 3,955 3,495
Segment Operating Income Margin -2.8 % -10.6 % -4.5 % -11.2 %
EBITDA Margin 12.5 % 5.7 % 10.7 % 5.3 %
Supplemental AT&T Mobility EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
AT&T Mobility
Operating Income $ 5,329 $ 5,342 $ 10,501 $ 10,616
Add: Depreciation and amortization 1,992 2,081 3,989 4,137
EBITDA 7,321 7,423 14,490 14,753
Total Operating Revenues 17,518 17,924 34,685 35,878
Service Revenues 14,534 14,911 29,072 29,709
Operating Income Margin 30.4 % 29.8 % 30.3 % 29.6 %
EBITDA Margin 41.8 % 41.4 % 41.8 % 41.1 %
EBITDA Service Margin 50.4 % 49.8 % 49.8 % 49.7 %
Supplemental Latin America EBITDA and EBITDA Margin
Dollars in millions Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
International - Latin America
Operating Income $ 141 $ 32 $ 218 $ 85
Add: Depreciation and amortization 222 212 436 408
EBITDA 363 244 654 493
Total Operating Revenues 1,361 1,222 2,702 2,352
Operating Income Margin 10.4 % 2.6 % 8.1 % 3.6 %
EBITDA Margin 26.7 % 20.0 % 24.2 % 21.0 %
Supplemental Mexico EBITDA and EBITDA Margin
Dollars in millions Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
International - Mexico
Operating Income $ (198 ) $ (225 ) $ (395 ) $ (476 )
Add: Depreciation and amortization 89 86 165 167
EBITDA (109 ) (139 ) (230 ) (309 )
Total Operating Revenues 665 606 1,253 1,143
Operating Income Margin -29.8 % -37.1 % -31.5 % -41.6 %
EBITDA Margin -16.4 % -22.9 % -18.4 % -27.0 %
Adjusting Items
Adjusting items include revenues and costs we consider nonoperational in nature, such as items arising from asset
acquisitions or dispositions. We also adjust for net actuarial gains or losses associated with our pension and
postemployment benefit plans due to the often significant impact on our fourth-quarter results (we immediately recognize
this gain or loss in the income statement, pursuant to our accounting policy for the recognition of actuarial gains and
losses.) Consequently, our adjusted results reflect an expected return on plan assets rather than the actual return on plan
assets, as included in the GAAP measure of income.
The tax impact of adjusting items is calculated using the effective tax rate during the quarter except for 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%. Certain foreign operations with losses, where such losses are not realizable for tax
purposes, are not tax effected, resulting in no tax impact for Venezuela devaluation. 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 Six Months Ended
June 30, June 30,
2017 2016 2017 2016
Operating Expenses
DIRECTV and other video merger integration costs $ 123 $ 133 $ 250 $ 306
Mexico merger integration costs 80 66 119 147
Time Warner merger costs 78 - 119 -
Wireless merger integration costs - 33 - 75
Actuarial (gain) loss (259 ) - (259 ) -
Employee separation costs 60 29 60 54
(Gain) loss on transfer of wireless spectrum (63 ) - (181 ) (736 )
Venezuela devaluation 98 - 98 -
Adjustments to Operations and Support Expenses 117 261 206 (154 )
Amortization of intangible assets 1,170 1,316 2,372 2,667
Adjustments to Operating Expenses 1,287 1,577 2,578 2,513
Other
Merger related interest expense and exchange fees 1 158 - 267 16
(Gain) loss on sale of assets, impairments and other adjustments (36 ) - 221 4
Adjustments to Income Before Income Taxes 1,409 1,577 3,066 2,533
Tax impact of adjustments 445 550 1,001 881
Adjustments to Net Income $ 964 $ 1,027 $ 2,065 $ 1,652
1 Includes interest expense incurred on the debt issued prior to the close of merger transactions.
Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA
service margin and Adjusted diluted EPS are non-GAAP financial measures calculated by excluding from operating revenues,
operating expenses and income tax expense certain significant items that are non-operational or non-recurring in nature,
including dispositions and merger integration and transaction costs. Management believes that these measures provide
relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our
operations and underlying business trends.
Adjusted Operating Revenues, Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA
margin, Adjusted EBITDA service margin and Adjusted diluted EPS should be considered in addition to, but not as a
substitute for, other measures of financial performance reported in accordance with GAAP. AT&T's calculation of Adjusted
items, as presented, may differ from similarly titled measures reported by other companies.
Adjusted Operating Income,
Adjusted Operating Income
Margin,Adjusted EBITDA,
Adjusted EBITDA Margin and
Adjusted EBITDA Service Margin
Dollars in millions Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
Operating Income $ 7,323 $ 6,560 $ 14,187 $ 13,691
Adjustments to Operating 1,287 1,577 2,578 2,513
Expenses
Adjusted Operating Income 1 8,610 8,137 16,765 16,204
EBITDA 13,470 13,136 26,461 26,830
Adjustments to Operations and 117 261 206 (154 )
Support Expenses
Adjusted EBITDA 1 13,587 13,397 26,667 26,676
Total Operating Revenues 39,837 40,520 79,202 81,055
Service Revenues 36,538 37,142 72,994 74,243
Operating Income Margin 18.4 % 16.2 % 17.9 % 16.9 %
Adjusted Operating Income 21.6 % 20.1 % 21.2 % 20.0 %
Margin 1
Adjusted EBITDA Margin 1 34.1 % 33.1 % 33.7 % 32.9 %
Adjusted EBITDA Service Margin 37.2 % 36.1 % 36.5 % 35.9 %
1
1 Adjusted Operating Income,
Adjusted EBITDA and associated
margins exclude all actuarial
gains or losses ($259 million
gain in the second quarter of
2017) associated with our
postemployment benefit plan,
which we immediately recognize
in the income statement,
pursuant to our accounting
policy for the recognition of
actuarial gains/losses. As a
result, Adjusted Operating
Income and Margin reflect an
expected return on plan assets
of $106 million (based on an
average expected return on
plan assets of 5.75% for our
VEBA trusts), rather than the
actual return on plan assets
of $234 million (actual
annualized VEBA return of
12.2%), as included in the
GAAP measure of income.
Adjusted Diluted EPS
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
Diluted Earnings Per Share (EPS) $ 0.63 $ 0.55 $ 1.19 $ 1.17
Amortization of intangible assets 0.13 0.14 0.26 0.28
Merger integration and other items 1 0.05 0.03 0.08 0.06
Asset abandonments, impairments and other adjustments - - 0.03 -
Actuarial (gain) loss (0.03 ) - (0.03 ) -
(Gain) loss on transfer of wireless spectrum (0.01 ) - (0.02 ) (0.08 )
Venezuela devaluation 0.02 - 0.02 -
Adjusted EPS $ 0.79 $ 0.72 $ 1.53 $ 1.43
Year-over-year growth - Adjusted 9.7 % 7.0 %
Weighted Average Common Shares Outstanding with Dilution (000,000) 6,184 6,195 6,185 6,193
1 Includes combined merger integration items, merger-related interest expense.
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, Jun. 30 YTD 2017
2017 2017
Adjusted EBITDA $ 13,080 $ 13,587 $ 26,667
Add back severance - (60 ) (60 )
Net Debt Adjusted EBITDA 13,080 13,527 26,607
Annualized Adjusted EBITDA 53,214
End-of-period current debt 10,831
End-of-period long-term debt 132,824
Total End-of-Period Debt 143,655
Less: Cash and Cash Equivalents 25,617
Net Debt Balance 118,038
Annualized Net Debt to Adjusted EBITDA Ratio 2.22
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
June 30, 2017 June 30, 2016
Consumer Mobility Business Solutions Adjustments 1 AT&T Mobility Consumer Mobility Business Solutions Adjustments 1 AT&T Mobility
Operating Revenues
Wireless service $ 6,528 $ 8,006 $ - $ 14,534 $ 6,948 $ 7,963 $ - $ 14,911
Fixed strategic services - 3,028 (3,028 ) - - 2,805 (2,805 ) -
Legacy voice and data services - 3,508 (3,508 ) - - 4,162 (4,162 ) -
Other services and equipment - 844 (844 ) - - 874 (874 ) -
Wireless equipment 1,263 1,721 - 2,984 1,238 1,775 - 3,013
Total Operating Revenues 7,791 17,107 (7,380 ) 17,518 8,186 17,579 (7,841 ) 17,924
Operating Expenses
Operations and support 4,520 10,313 (4,636 ) 10,197 4,680 10,857 (5,036 ) 10,501
EBITDA 3,271 6,794 (2,744 ) 7,321 3,506 6,722 (2,805 ) 7,423
Depreciation and amortization 871 2,335 (1,214 ) 1,992 932 2,521 (1,372 ) 2,081
Total Operating Expense 5,391 12,648 (5,850 ) 12,189 5,612 13,378 (6,408 ) 12,582
Operating Income $ 2,400 $ 4,459 $ (1,530 ) $ 5,329 $ 2,574 $ 4,201 $ (1,433 ) $ 5,342
1 Non-wireless (fixed) operations reported in Business Solutions segment.
Supplemental Operational Measure
Six Months Ended
June 30, 2017 June 30, 2016
Consumer Mobility Business Solutions Adjustments 1 AT&T Mobility Consumer Mobility Business Solutions Adjustments 1 AT&T Mobility
Operating Revenues
Wireless service $ 13,137 $ 15,935 $ - $ 29,072 $ 13,891 $ 15,818 $ - $ 29,709
Fixed strategic services - 6,002 (6,002 ) - - 5,556 (5,556 ) -
Legacy voice and data services - 7,138 (7,138 ) - - 8,535 (8,535 ) -
Other services and equipment - 1,661 (1,661 ) - - 1,733 (1,733 ) -
Wireless equipment 2,394 3,219 - 5,613 2,623 3,546 - 6,169
Total Operating Revenues 15,531 33,955 (14,801 ) 34,685 16,514 35,188 (15,824 ) 35,878
Operating Expenses
Operations and support 9,048 20,489 (9,342 ) 20,195 9,592 21,659 (10,126 ) 21,125
EBITDA 6,483 13,466 (5,459 ) 14,490 6,922 13,529 (5,698 ) 14,753
Depreciation and amortization 1,744 4,647 (2,402 ) 3,989 1,854 5,029 (2,746 ) 4,137
Total Operating Expense 10,792 25,136 (11,744 ) 24,184 11,446 26,688 (12,872 ) 25,262
Operating Income $ 4,739 $ 8,819 $ (3,057 ) $ 10,501 $ 5,068 $ 8,500 $ (2,952 ) $ 10,616
1 Non-wireless (fixed) operations reported in Business Solutions segment.
Supplemental International
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
June 30, 2017 June 30, 2016
Latin America Mexico International Latin America Mexico International
Operating Revenues
Video service $ 1,361 $ - $ 1,361 $ 1,222 $ - $ 1,222
Wireless service - 535 535 - 489 489
Wireless equipment - 130 130 - 117 117
Total Operating Revenues 1,361 665 2,026 1,222 606 1,828
Operating Expenses
Operations and support 998 774 1,772 978 745 1,723
Depreciation and amortization 222 89 311 212 86 298
Total Operating Expense 1,220 863 2,083 1,190 831 2,021
Operating Income 141 (198 ) (57 ) 32 (225 ) (193 )
Equity in Net Income of Affiliates 25 - 25 9 - 9
Segment Contribution $ 166 $ (198 ) $ (32 ) $ 41 $ (225 ) $ (184 )
Supplemental International
Six Months Ended
June 30, 2017 June 30, 2016
Latin America Mexico International Latin America Mexico International
Operating Revenues
Video service $ 2,702 $ - $ 2,702 $ 2,352 $ - $ 2,352
Wireless service - 1,010 1,010 - 944 944
Wireless equipment - 243 243 - 199 199
Total Operating Revenues 2,702 1,253 3,955 2,352 1,143 3,495
Operating Expenses
Operations and support 2,048 1,483 3,531 1,859 1,452 3,311
Depreciation and amortization 436 165 601 408 167 575
Total Operating Expense 2,484 1,648 4,132 2,267 1,619 3,886
Operating Income 218 (395 ) (177 ) 85 (476 ) (391 )
Equity in Net Income of Affiliates 45 - 45 23 - 23
Segment Contribution $ 263 $ (395 ) $ (132 ) $ 108 $ (476 ) $ (368 )
This information is provided by RNS
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