REG - AT & T Inc. - 4Q15 Earnings Release <Origin Href="QuoteRef">T.N</Origin> - Part 1
RNS Number : 3497QAT & T Inc.26 February 2016UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported) January 26, 2016
AT&T INC.
(Exact Name of Registrant as Specified in Charter)
Delaware
1-8610
43-1301883
(State or Other Jurisdiction of Incorporation)
(Commission File Number)
(IRS Employer Identification No.)
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 January 26, 2016, its results of operations for the fourth quarter of 2015. The text of the press release and accompanying financial information are attached as exhibits and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
The following exhibits are furnished as part of this report:
(d)Exhibits
99.1
Press release dated January 26, 2016 reporting financial results for the fourth quarter ended December 31, 2015.
99.2
AT&T Inc. selected financial statements and operating data.
99.3
Discussion of EBITDA, Free Cash Flow, Free Cash Flow Yield, Free Cash Flow after Dividends and Adjusting Items
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
AT&T INC.
Date: January 26, 2016
By: /s/ Paul W. Stephens
Paul W. Stephens
Senior Vice President and Controller
For more information, contact:
Fletcher Cook Jaquelyn Scharnick
Phone: (214) 757-7629 Phone: (214) 254-3790
Email:fletcher.cook@att.com Email:jscharnick@brunswickgroup.com
AT&T caps strong year with
2.8 million wireless net adds and double-digit growth in REVENUES, adjusted Operating Margin, adjusted Eps and FREE CASH FLOW
in fourth quarterFull-Year 2015: 11% Consolidated Revenue Growth;
Nearly 6% Adjusted EPS Growth; $15.9 Billion in Free Cash FlowHighlights
Fourth-quarter consolidated revenues of $42.1 billion, up 22% versus the year-earlier period primarily due to DIRECTV acquisition
Fourth-quarter EPS of $0.65 as reported; $0.63 adjusted EPS, a 12.5% increase
Adjusted consolidated margin expansion and best-ever fourth-quarter and full-year wireless service EBITDA margins
Strong cash flows with $9.2 billion in reported cash from operations and $3.1 billion in free cash flow in fourth quarter; full-year reported cash from operations of $35.9 billion and free cash flow of $15.9 billion
Full-year capital investment1 of $20.7 billion
2.8 million wireless net adds; 1.6 million branded (postpaid and prepaid) net adds
o 4G LTE network coverage expands to 355 million POPs
o 2.2 million U.S. wireless net adds with gains in every category
Postpaid churn of 1.18% and total churn of 1.50%, both down year over year
o 638,000 Mexico wireless branded net adds
Business Solutions service revenues down slightly year over year
o Strategic business services revenues of $2.8 billion, up 10.3% and up 12.4% when adjusted for foreign exchange
214,000 U.S. DIRECTV net adds; total video subscribers down slightly
192,000 total IP broadband net adds
Note: AT&T's fourth-quarter earnings conference call will be webcast at 4:30 p.m. ET on Tuesday, January 26, 2016. The webcast and related materials will be available on AT&T's Investor Relations website at www.att.com/investor.relations.
dALLAS, January 26, 2016- AT&T Inc. (NYSE:T) today reported 2.8 million wireless net adds and double-digit revenue, adjusted operating margin, adjusted EPS and free cash flow growth for the fourth quarter.
"We now have a unique set of capabilities that positions us for growth and also gives us a strategic advantage in providing consumers and businesses the integrated mobile, video and data solutions they want," said Randall Stephenson, AT&T chairman and CEO. "Our DIRECTV integration is going well, and the customer response to our new integrated mobile and entertainment offers is strong. Throughout this year, we plan to launch a variety of new video entertainment packages that give customers even more choices.
"We're also seeing terrific results from our expansion into the Mexican mobile market. Our LTE network now covers 355 million people and businesses, and in the quarter we had 2.8 million wireless net additions," Stephenson said.
Consolidated Financial Results
AT&T's consolidated revenues for the fourth quarter totaled $42.1 billion, up more than 22% versus the year-earlier period largely due to the acquisition of DIRECTV. Compared with results for the fourth quarter of 2014, operating expenses were $34.6 billion versus $39.9 billion; operating income was
$7.5 billion versus $(5.5) billion; and operating income margin was 17.9% versus (15.9)% in the year-ago quarter. When adjusting for amortization, merger- and integration-related costs and other expenses, operating income was $7.1 billion versus $5.0 billion; and operating income margin was 16.8%, up 230 basis points from a year ago.Fourth-quarter 2015 net income attributable to AT&T totaled $4.0 billion, or $0.65 per share, compared to a net loss of $4.0 billion, or $(0.77) per share, in the year-ago quarter. Adjusting for the $0.22 non-cash actuarial gain on benefit plans from the annual remeasurement process and $0.20 of costs primarily for merger- and integration-related items, earnings per share was $0.63 compared to an adjusted $0.56 in the year-ago quarter, an increase of 12.5%.
Reported cash from operating activities was $9.2 billion in the fourth quarter, and capital expenditures totaled $6.1 billion, or $6.8 billion when including purchases in Mexico with favorable payment terms. Free cash flow - cash from operating activities minus capital expenditures - was $3.1 billion.
Full-Year Results
For full-year 2015, compared with 2014 results, AT&T's consolidated revenues totaled $146.8billion versus $132.4billion, up 10.8% for the year. Operating expenses reflect actuarial gains and losses on benefit plans and were $122.0billion compared with $120.2billion, up 1.5%; net income attributable to AT&T was $13.3billion versus $6.4billion; and earnings per diluted share was $2.37, compared with $1.24.
With adjustments for both years, operating income was $27.7 billion versus $23.1 billion; operating income margin was 18.8% versus 17.5%; and earnings per share totaled $2.71, compared with $2.56, an increase of 5.9%.
AT&T's full-year reported cash from operating activities was $35.9billion, up from $31.3 billion in 2014. Capital expenditures, including capitalized interest, totaled $20.0billion, or $20.7 billion when including purchases in Mexico with favorable payment terms, versus $21.4 billion in 2014. Full-year free cash flow was $15.9 billion compared to $9.9 billion in 2014, a 60% increase. The free cash flow dividend payout ratio for the full year was 64%.
Outlook
AT&T provided long-term guidance following its acquisition of DIRECTV, and there is no change to that guidance. Specifically, in 2016, the company expects:
Double-digit consolidated revenue growth
Adjusted EPS growth2 in the mid-single digit range or better
Stable consolidated margins with ramp in Mexico investment
Capital spending in the $22 billion range
Free cash flow growth with a dividend payout ratio3 in the 70s%
For detailed segment results, please go to the Investor Briefing and Financial and Operational Results on theAT&T Investor Relations website.
1Includes purchases in Mexico with favorable payment terms.
2Expected range excludes adjustments for non-cash mark-to-market benefit plan adjustments, merger integration costs and other adjustments that are not reasonably estimable at this time.
3Free cash flow dividend payout ratio is dividends divided by free cash flow.
AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc.
About AT&T
AT&T Inc. (NYSE:T) helps millions around the globe connect with leading entertainment, mobile, high speed Internet and voice services. We're the world's largest provider of pay TV. We have TV customers in the U.S. and 11 Latin American countries. We offer the best global coverage of any U.S. wireless provider*. And we help businesses worldwide serve their customers better with our mobility and highly secure cloud solutions.
Additional information about AT&T products and services is available at http://about.att.com. Follow our news on Twitter at @ATT, on Facebook at http://www.facebook.com/att and YouTube at http://www.youtube.com/att.
2016 AT&T Intellectual Property. All rights reserved. AT&T, the Globe logo and other marks are trademarks and service marks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners.
*Global coverage claim based on offering discounted voice and data roaming; LTE roaming; voice roaming; and world-capable smartphone and tablets in more countries than any other U.S. based carrier. International service required. Coverage not available in all areas. Coverage may vary per country and be limited/restricted in some countries.
Cautionary Language Concerning Forward-Looking Statements
Information set forth in this news release contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results may differ materially. A discussion of factors that may affect future results is contained in AT&T's filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update or revise statements contained in this news release based on new information or otherwise. This news release may contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available on the company's website at www.att.com/investor.relations. Accompanying financial statements follow.
NOTE: 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 segments. 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.
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 subscriber base and national footprint that we utilize to obtain and service our customers. Equity in net income (loss) of affiliates represents the proportionate share of the net income (loss) of affiliates in which we exercises significant influence, but do not control. Because we do 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 than EBITDA as a percentage of total revenue for our Consumer Mobility segment operating margin and our supplemental AT&T Mobility operating margin. We subsidize a portion of some 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 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.
NOTE: 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.
NOTE: 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 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 EBITDA is calculated by annualizing the year-to-date EBITDA.
For the three and nine month periods ended September 30, 2015, due to the timing of our acquisition of DIRECTV and the corresponding impact on annualized EBITDA, we are providing a Net Debt to Pro Forma EBITDA ratio calculated using the combined results of operations of the combined company based on the historical financial statements of AT&T and DIRECTV, after giving effect to the merger and certain adjustments, which is intended to reflect the impact of the DIRECTV acquisition on AT&T. Adjustments to derive Pro Forma Net Income are consistent with the adjustments described in the "Notes to Unaudited Pro Forma Condensed Combined Financial Statements" included in the Form 8-K/A dated July 24, 2015. Calculations include the historical results for AT&T for the nine months ended September 30, 2015 and the results from DIRECTV for the period from January 1, 2015 through July 24, 2015, the date of its acquisition by AT&T.
Adjusted EBITDA excludes costs which are non-recurring in nature. Adjusted EBITDA also 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.
NOTE: ADJUSTING ITEMS DISCUSSION
Adjusted Operating Revenues, Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, 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 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. Our calculations of Adjusted diluted EPS, as presented, may differ from similarly titled measures reported by other companies.
Financial Data
AT&T Inc.
Consolidated Statements of Income
Dollars in millions except per share amounts
Unaudited
Three Months Ended
Twelve Months Ended
12/31/2015
12/31/2014
% Chg
12/31/2015
12/31/2014
% Chg
Operating Revenues
Service
$
37,635
$
29,315
28.4
%
$
131,677
$
118,437
11.2
%
Equipment
4,484
5,124
-12.5
%
15,124
14,010
8.0
%
Total Operating Revenues
42,119
34,439
22.3
%
146,801
132,447
10.8
%
Operating Expenses
Cost of services and sales
Equipment
5,868
6,443
-8.9
%
19,268
18,946
1.7
%
Broadcast, programming and operations
5,645
1,056
-
11,996
4,075
-
Other cost of services (exclusive of depreciation
and amortization shown separately below)
8,178
10,957
-25.4
%
35,782
37,124
-3.6
%
Selling, general and administrative
8,419
14,765
-43.0
%
32,954
39,697
-17.0
%
Abandonment of network assets
-
2,120
-
-
2,120
-
Depreciation and amortization
6,477
4,567
41.8
%
22,016
18,273
20.5
%
Total Operating Expenses
34,587
39,908
-13.3
%
122,016
120,235
1.5
%
Operating Income (Loss)
7,532
(5,469
)
-
24,785
12,212
-
Interest Expense
1,143
856
33.5
%
4,120
3,613
14.0
%
Equity in Net Income (Loss) of Affiliates
31
(13
)
-
79
175
-54.9
%
Other Income (Expense) - Net
(113
)
125
-
(52
)
1,581
-
Income (Loss) Before Income Taxes
6,307
(6,213
)
-
20,692
10,355
99.8
%
Income Tax Expense (Benefit)
2,221
(2,295
)
-
7,005
3,619
93.6
%
Net Income (Loss)
4,086
(3,918
)
-
13,687
6,736
-
Less: Net Income Attributable to Noncontrolling Interest
(80
)
(81
)
1.2
%
(342
)
(294
)
-16.3
%
Net Income (Loss) Attributable to AT&T
$
4,006
$
(3,999
)
-
$
13,345
$
6,442
-
Basic Earnings Per Share Attributable to AT&T
$
0.65
$
(0.77
)
-
$
2.37
$
1.24
91.1
%
Weighted Average Common
Shares Outstanding (000,000)
6,165
5,198
18.6
%
5,628
5,205
8.1
%
Diluted Earnings Per Share Attributable to AT&T
$
0.65
$
(0.77
)
-
$
2.37
$
1.24
91.1
%
Weighted Average Common
Shares Outstanding with Dilution (000,000)
6,187
5,214
18.7
%
5,646
5,221
8.1
%
Financial Data
AT&T Inc.
Statements of Segment Income
Dollars in millions
Unaudited
Three Months Ended
Twelve Months Ended
12/31/2015
12/31/2014
% Chg
12/31/2015
12/31/2014
% Chg
Business Solutions
Segment Operating Revenues
Wireless service
$
7,684
$
7,589
1.3
%
$
30,687
$
30,182
1.7
%
Fixed strategic services
2,827
2,563
10.3
%
10,910
9,666
12.9
%
Legacy voice and data services
4,276
4,802
-11.0
%
18,019
19,857
-9.3
%
Other service and equipment
973
1,026
-5.2
%
3,558
3,860
-7.8
%
Wireless equipment
2,454
2,749
-10.7
%
7,953
7,041
13.0
%
Total Segment Operating Revenues
18,214
18,729
-2.7
%
71,127
70,606
0.7
%
Segment Operating Expenses
Operations and support expenses
11,980
12,990
-7.8
%
44,946
45,826
-1.9
%
Depreciation and amortization
2,513
2,346
7.1
%
9,789
9,355
4.6
%
Total Segment Operating Expenses
14,493
15,336
-5.5
%
54,735
55,181
-0.8
%
Segment Operating Income
3,721
3,393
9.7
%
16,392
15,425
6.3
%
Equity in Net Income of Affiliates
-
-
-
-
-
-
Segment Contribution
$
3,721
$
3,393
9.7
%
$
16,392
$
15,425
6.3
%
Segment Operating Income Margin
20.4
%
18.1
%
23.0
%
21.8
%
Entertainment Group
Segment Operating Revenues
Video entertainment
$
9,247
$
1,810
-
$
20,271
$
6,826
-
High-speed Internet
1,740
1,482
17.4
%
6,601
5,522
19.5
%
Legacy voice and data services
1,367
1,695
-19.4
%
5,914
7,592
-22.1
%
Other service and equipment
640
606
5.6
%
2,508
2,293
9.4
%
Total Segment Operating Revenues
12,994
5,593
-
35,294
22,233
58.7
%
Segment Operating Expenses
Operations and support expenses
10,123
4,810
-
28,345
18,992
49.2
%
Depreciation and amortization
1,426
1,077
32.4
%
4,945
4,473
10.6
%
Total Segment Operating Expenses
11,549
5,887
96.2
%
33,290
23,465
41.9
%
Segment Operating Income (Loss)
1,445
(294
)
-
2,004
(1,232
)
-
Equity in Net Income (Loss) of Affiliates
12
(2
)
-
(4
)
(2
)
-
Segment Contribution
$
1,457
$
(296
)
-
$
2,000
$
(1,234
)
-
Segment Operating Income Margin
11.1
%
-5.3
%
5.7
%
-5.5
%
Financial Data
AT&T Inc.
Statements of Segment Income
Dollars in millions
Unaudited
Three Months Ended
Twelve Months Ended
12/31/2015
12/31/2014
% Chg
12/31/2015
12/31/2014
% Chg
Consumer Mobility
Segment Operating Revenues
Postpaid wireless service
$
5,247
$
5,792
-9.4
%
$
22,030
$
24,282
-9.3
%
Prepaid wireless service
1,251
1,099
13.8
%
4,662
4,205
10.9
%
Other service revenue
633
595
6.4
%
2,458
2,363
4.0
%
Equipment
1,618
2,036
-20.5
%
5,916
5,919
-0.1
%
Total Segment Operating Revenues
8,749
9,522
-8.1
%
35,066
36,769
-4.6
%
Segment Operating Expenses
Operations and support expenses
5,669
6,718
-15.6
%
21,477
23,891
-10.1
%
Depreciation and amortization
939
981
-4.3
%
3,851
3,827
0.6
%
Total Segment Operating Expenses
6,608
7,699
-14.2
%
25,328
27,718
-8.6
%
Segment Operating Income
2,141
1,823
17.4
%
9,738
9,051
7.6
%
Equity in Net Income (Loss) of Affiliates
-
-
-
-
(1
)
-
Segment Contribution
$
2,141
$
1,823
17.4
%
$
9,738
$
9,050
7.6
%
Segment Operating Income Margin
24.5
%
19.1
%
27.8
%
24.6
%
International
Segment Operating Revenues
Video entertainment
$
1,206
$
-
-
$
2,151
$
-
-
Wireless service
494
-
-
1,647
-
-
Wireless equipment
149
-
-
304
-
-
Total Segment Operating Revenues
1,849
-
-
4,102
-
-
Segment Operating Expenses
Operations and support expenses
1,799
-
-
3,930
-
-
Depreciation and amortization
309
-
-
655
-
-
Total Segment Operating Expenses
2,108
-
-
4,585
-
-
Segment Operating Income (Loss)
(259
)
-
-
(483
)
-
-
Equity in Net Income (Loss) of Affiliates
(1
)
-
-
(5
)
153
-
Segment Contribution
$
(260
)
$
-
-
$
(488
)
$
153
-
Segment Operating Income Margin
-14.0
%
-11.8
%
Financial Data
AT&T Inc.
Consolidated Balance Sheets
Dollars in millions
Unaudited
December 31,
2015
2014
Assets
Current Assets
Cash and cash equivalents
$
5,121
$
8,603
Accounts receivable - net of allowances for doubtful accounts of $704 and $454
16,532
14,527
Prepaid expenses
1,072
831
Other current assets
13,267
9,645
Total current assets
35,992
33,606
Property, Plant and Equipment - Net
124,450
112,898
Goodwill
104,568
69,692
Licenses
93,093
60,824
Customer Lists and Relationships - Net
18,208
812
Other Intangible Assets - Net
9,409
5,327
Investments in Equity Affiliates
1,606
250
Other Assets
14,485
13,425
Total Assets
$
401,811
$
296,834
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year
$
7,636
$
6,056
Accounts payable and accrued liabilities
30,372
23,592
Advanced billing and customer deposits
4,682
4,105
Accrued taxes
2,176
1,091
Dividends payable
2,950
2,438
Total current liabilities
47,816
37,282
Long-Term Debt
118,515
75,778
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes
55,319
38,436
Postemployment benefit obligation
34,262
37,079
Other noncurrent liabilities
22,259
17,989
Total deferred credits and other noncurrent liabilities
111,840
93,504
Stockholders' Equity
Common stock
6,495
6,495
Additional paid-in capital
89,763
91,108
Retained earnings
33,671
31,081
Treasury stock
(12,592
)
(47,029
)
Accumulated other comprehensive income
5,334
8,061
Noncontrolling interest
969
554
Total stockholders' equity
123,640
90,270
Total Liabilities and Stockholders' Equity
$
401,811
$
296,834
Financial Data
AT&T Inc.
Consolidated Statements of Cash Flows
Dollars in millions
(Unaudited)
Twelve months ended December 31,
2015
2014
Operating Activities
Net income
$
13,687
$
6,736
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization
22,016
18,273
Undistributed earnings from investments in equity affiliates
(49
)
(27
)
Provision for uncollectible accounts
1,416
1,032
Deferred income tax expense
4,117
1,948
Net loss (gain) from sale of investments, net of impairments
91
(1,461
)
Actuarial (gain) loss on pension and postretirement benefits
(2,152
)
7,869
Abandonment of network assets
-
2,120
Changes in operating assets and liabilities:
Accounts receivable
(535
)
(2,651
)
Other current assets
(1,789
)
(974
)
Accounts payable and accrued liabilities
1,291
2,412
Retirement benefit funding
(735
)
(560
)
Other - net
(1,478
)
(3,379
)
Total adjustments
22,193
24,602
Net Cash Provided by Operating Activities
35,880
31,338
Investing Activities
Construction and capital expenditures:
Capital expenditures
(19,218
)
(21,199
)
Interest during construction
(797
)
(234
)
Acquisitions, net of cash acquired
(30,759
)
(3,141
)
Dispositions
83
8,123
Sales (purchases) of securities, net
1,545
(1,890
)
Return of advances to and investments in equity affiliates
1
4
Other
1
-
Net Cash Used in Investing Activities
(49,144
)
(18,337
)
Financing Activities
Net change in short-term borrowings with
original maturities of three months or less
(1
)
(16
)
Issuance of long-term debt
33,969
15,926
Repayment of long-term debt
(10,042
)
(10,400
)
Issuance of other long-term financing obligations
-
107
Purchase of treasury stock
(269
)
(1,617
)
Issuance of treasury stock
143
39
Dividends paid
(10,200
)
(9,552
)
Other
(3,818
)
(2,224
)
Net Cash Provided by (Used in) Financing Activities
9,782
(7,737
)
Net (decrease) increase in cash and cash equivalents
(3,482
)
5,264
Cash and cash equivalents beginning of year
8,603
3,339
Cash and Cash Equivalents End of Year
$
5,121
$
8,603
Financial Data
AT&T Inc.
Supplementary Operating and Financial Data
Dollars in millions except per share amounts, subscribers and connections in (000s)
Unaudited
Three Months Ended
Twelve Months Ended
12/31/2015
12/31/2014
% Chg
12/31/2015
12/31/2014
% Chg
Business Solutions Wireless Subscribers
73,659
65,114
13.1
%
Postpaid
48,290
45,160
6.9
%
Reseller
85
11
-
Connected Devices1
25,284
19,943
26.8
%
Business Solutions Wireless Net Adds
1,563
1,863
-16.1
%
6,531
5,509
18.6
%
Postpaid
353
566
-37.6
%
1,203
2,064
-41.7
%
Reseller
(1
)
2
-
13
6
-
Connected Devices1
1,211
1,295
-6.5
%
5,315
3,439
54.6
%
Business Wireless Postpaid Churn
1.10
%
1.08
%
2
BP
0.99
%
0.90
%
9
BP
Consumer Mobility Subscribers
54,981
55,440
-0.8
%
Postpaid
28,814
30,610
-5.9
%
Prepaid1
11,548
9,965
15.9
%
Reseller
13,690
13,844
-1.1
%
Connected Devices1
929
1,021
-9.0
%
Consumer Mobility Net Adds
671
42
-
1,528
99
-
Postpaid
174
288
-39.6
%
463
1,226
-62.2
%
Prepaid1
469
(67
)
-
1,364
(311
)
-
Reseller
50
(65
)
-
(168
)
(351
)
52.1
%
Connected Devices1
(22
)
(114
)
80.7
%
(131
)
(465
)
71.8
%
Consumer Mobility Postpaid Churn
1.31
%
1.43
%
-12
BP
1.25
%
1.22
%
3
BP
Total Consumer Mobility Churn
1.97
%
2.21
%
-24
BP
1.94
%
2.06
%
-12
BP
Entertainment Group
52,182
34,366
51.8
%
Video Connections
25,398
5,920
-
Satellite
19,784
-
-
U-verse
5,614
5,920
-5.2
%
Video Net Adds
(26
)
72
-
(66
)
663
-
Satellite
214
-
-
240
-
-
U-verse
(240
)
72
-
(306
)
663
-
Broadband Connections
14,286
14,444
-1.1
%
IP
12,356
11,383
8.5
%
DSL
1,930
3,061
-36.9
%
Broadband Net Adds
(37
)
(21
)
-76.2
%
(157
)
131
-
IP
171
372
-54.0
%
973
1,899
-48.8
%
DSL
(208
)
(393
)
47.1
%
(1,130
)
(1,768
)
36.1
%
Total Wireline Voice Connections
12,498
14,002
-10.7
%
AT&T International
Wireless Subscribers and Connections
Subscribers
8,684
-
-
Net Adds
593
-
-
(96
)
-
-
Total Churn
5.67
%
-
-
6.38
%
-
-
Video Subscribers and Connections
Latin America Video Subscribers
(34
)
-
-
12,510
-
-
Pan Americana
60
-
-
7,066
-
-
Brazil
(94
)
-
-
5,444
-
-
Financial Data
AT&T Inc.
Supplementary Operating and Financial Data
Dollars in millions except per share amounts, subscribers and connections in (000s)
Unaudited
Three Months Ended
Twelve Months Ended
12/31/2015
12/31/2014
% Chg
12/31/2015
12/31/2014
% Chg
AT&T Total Susbscribers and Connections
AT&T Mobility Subscribers
128,640
120,554
6.7
%
Postpaid1
77,105
75,770
1.8
%
Prepaid1
11,548
9,965
15.9
%
Reseller
13,774
13,855
-0.6
%
Connected Devices1
26,213
20,964
25.0
%
AT&T Mobility Net Adds
2,234
1,905
17.3
%
8,059
5,608
43.7
%
Postpaid1
526
854
-38.4
%
1,666
3,290
-49.4
%
Prepaid1
469
(67
)
-
1,364
(311
)
-
Reseller
50
(65
)
-
(155
)
(346
)
55.2
%
Connected Devices1
1,189
1,183
0.5
%
5,184
2,975
74.3
%
M&A Activity, Partitioned Customers and Other Adjs.
-
(1
)
-
27
4,570
-
AT&T Mobility Churn
Postpaid Churn
1.18
%
1.22
%
-4
BP
1.09
%
1.04
%
5
BP
Total Churn
1.50
%
1.59
%
-9
BP
1.39
%
1.45
%
-6
BP
Other
Domestic Licensed POPs (000,000)
321
321
-
Total Video Subscribers
37,934
5,943
-
Domestic
25,424
5,943
-
Pan Americana
7,066
-
-
Brazil
5,444
-
-
Total Video Net Adds
(60
)
(124
)
51.6
%
(210
)
483
-
Domestic
(26
)
(124
)
79.0
%
(63
)
483
-
Pan Americana
60
-
-
76
-
-
Brazil
(94
)
-
-
(223
)
-
-
Total Broadband Connections
15,778
16,028
-1.6
%
IP
13,268
12,205
8.7
%
DSL
2,510
3,823
-34.3
%
Broadband Net Adds
(54
)
(458
)
88.2
%
(250
)
(397
)
37.0
%
IP
192
107
79.4
%
1,063
1,830
-41.9
%
DSL
(246
)
(565
)
56.5
%
(1,313
)
(2,227
)
41.0
%
Total Wireline Voice Connections
22,123
24,778
-10.7
%
AT&T Inc.
Construction and capital expenditures:
Capital expenditures
$
5,862
$
4,370
34.1
%
$
19,218
$
21,199
-9.3
%
Interest during construction
$
231
$
56
-
$
797
$
234
-
Dividends Declared per Share
$
0.48
$
0.47
2.1
%
$
1.89
$
1.85
2.2
%
End of Period Common Shares Outstanding (000,000)
6,145
5,187
18.5
%
Debt Ratio1,2
50.5
%
47.5
%
300
BP
Total Employees
281,450
243,620
15.5
%
Financial Data
AT&T Inc.
Supplemental AT&T Mobility Results
Dollars in millions
Unaudited
Three Months Ended
Twelve Months Ended
12/31/2015
12/31/2014
% Chg
12/31/2015
12/31/2014
% Chg
AT&T Mobility
Operating Revenues
Service
$
14,815
$
15,074
-1.7
%
$
59,837
$
61,032
-2.0
%
Equipment
4,071
4,785
-14.9
%
13,868
12,960
7.0
%
Total Segment Operating Revenues
18,886
19,859
-4.9
%
73,705
73,992
-0.4
%
Operating Expenses
Operations and support expenses
12,479
14,327
-12.9
%
45,789
48,348
-5.3
%
Depreciation and amortization
2,031
1,959
3.7
%
8,113
7,744
4.8
%
Total Operating Expenses
14,510
16,286
-10.9
%
53,902
56,092
-3.9
%
Operating Income
4,376
3,573
22.5
%
19,803
17,900
10.6
%
Equity in Net Income (Loss) of Affiliates
-
-
-
-
(1
)
-
Income
$
4,376
$
3,573
22.5
%
$
19,803
$
17,899
10.6
%
Operating Income Margin
23.2
%
18.0
%
26.9
%
24.2
%
Financial Data
AT&T Inc.
Segment Supplemental - QTD
Dollars in millions
Unaudited
For the three months ended December 31, 2015
Revenues
Operations and Support Expenses
EBITDA
Depreciation and Amortization
Operating Income (Loss)
Equity in Net Income of Affiliates
Segment Contribution
Business Solutions
$
18,214
$
11,980
$
6,234
$
2,513
$
3,721
$
-
$
3,721
Entertainment Group
12,994
10,123
2,871
1,426
1,445
12
1,457
Consumer Mobility
8,749
5,669
3,080
939
2,141
-
2,141
International
1,849
1,799
50
309
(259
)
(1
)
(260
)
Segment Total
$
41,806
$
29,571
$
12,235
$
5,187
$
7,048
$
11
$
7,059
Corporate and Other
313
272
41
17
24
Acquisition-related items
-
383
(383
)
1,273
(1,656
)
Certain Significant items
-
(2,116
)
2,116
-
2,116
AT&T Inc.
$
42,119
$
28,110
$
14,009
$
6,477
$
7,532
For thethree months ended December 31, 2014
Revenues
Operations and Support Expenses
EBITDA
Depreciation and Amortization
Operating Income (Loss)
Equity in Net Income of Affiliates
Segment Contribution
Business Solutions
$
18,729
$
12,990
$
5,739
$
2,346
$
3,393
$
-
$
3,393
Entertainment Group
5,593
4,810
783
1,077
(294
)
(2
)
(296
)
Consumer Mobility
9,522
6,718
2,804
981
1,823
-
1,823
International
-
-
-
-
-
-
-
Segment Total
$
33,844
$
24,518
$
9,326
$
4,404
$
4,922
$
(2
)
$
4,920
Corporate and Other
595
444
151
28
123
Acquisition-related items
-
382
(382
)
109
(491
)
Certain Significant items
-
9,997
(9,997
)
26
(10,023
)
AT&T Inc.
$
34,439
$
35,341
$
(902
)
$
4,567
$
(5,469
)
Financial Data
AT&T Inc.
Segment Supplemental - YTD
Dollars in millions
Unaudited
For the year ended December 31, 2015
Revenues
Operations and Support Expenses
EBITDA
Depreciation and Amortization
Operating Income (Loss)
Equity in Net Income of Affiliates
Segment Contribution
Business Solutions
$
71,127
$
44,946
$
26,181
$
9,789
$
16,392
$
-
$
16,392
Entertainment Group
35,294
28,345
6,949
4,945
2,004
(4
)
2,000
Consumer Mobility
35,066
21,477
13,589
3,851
9,738
-
9,738
International
4,102
3,930
172
655
(483
)
(5
)
(488
)
Segment Total
$
145,589
$
98,698
$
46,891
$
19,240
$
27,651
$
(9
)
$
27,642
Corporate and Other
1,297
1,057
240
64
176
Acquisition-related items
(85
)
1,987
(2,072
)
2,712
(4,784
)
Certain Significant items
-
(1,742
)
1,742
-
1,742
AT&T Inc.
$
146,801
$
100,000
$
46,801
$
22,016
$
24,785
For the year ended December 31, 2014
Revenues
Operations and Support Expenses
EBITDA
Depreciation and Amortization
Operating Income (Loss)
Equity in Net Income of Affiliates
Segment Contribution
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
Financial Data
AT&T Inc.
Non-GAAP Consolidated Reconciliation
Adjusted Operating Revenues and Adjusted Consolidated EBITDA1
Dollars in millions
Unaudited
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2014
2015
2014
2015
Reported Operating Revenues
$
34,439
$
42,119
$
132,447
$
146,801
Adjustments:
DIRECTV deferred revenue5
-
-
-
85
Adjusted Operating Revenues
$
34,439
$
42,119
$
132,447
$
146,886
Reported Operating Income
$
(5,469
)
$
7,532
$
12,212
$
24,785
Plus: Depreciation and Amortization
4,567
6,477
18,273
22,016
EBITDA2
$
(902
)
$
14,009
$
30,485
$
46,801
Adjustments:
Actuarial (gain)/loss on benefit plans
7,869
(2,152
)
7,869
(2,152
)
Wireless merger integration costs3
299
79
648
645
Leap network decommissioning
-
55
-
669
DIRECTV/Mexico merger integration items4
89
249
131
757
Employee separation costs
-
36
-
375
Abandonment of network assets
2,120
-
2,120
-
Other
8
-
8
35
Adjusted EBITDA
$
9,483
$
12,276
$
41,261
$
47,130
Adjusted EBITDA Margin*
27.5
%
29.1
%
31.2
%
32.1
%
12014 Adjusted Consolidated EBITDA has been restated to reflect the change in accounting for customer set-up and installation costs.
2EBITDA is defined as operating income before depreciation and amortization.
3Adjustments include Operations and Support expenses for domestic wireless integration costs.
4Adjustments include DIRECTV merger integration items and Operations and Support expenses for international wireless integration costs.
5Adjustment includes DIRECTV deferred revenue not recognized due to purchase accounting fair value adjustment.
Adjusted Operating Revenues and Adjusted EBITDA 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 and merger integration and transaction costs. Adjusted EBITDA also excludes net actuarial gains or losses associated with our pension and postemployment benefit plans. Management believes that these measures provide relevant and u`seful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends.
Adjusted Operating Revenues and Adjusted EBITDA 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 EBITDA, as presented, may differ from similarly titled measures reported by other companies.
*Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by Adjusted Operating Revenues.
Financial Data
AT&T Inc.
Non-GAAP Consolidated Reconciliation
Adjusted Operating Revenues, Adjusted Operating Income and Margin1
Dollars in millions
Unaudited
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2014
2015
2014
2015
Reported Operating Revenues
$
34,439
$
42,119
$
132,447
$
146,801
Adjustments:
DIRECTV deferred revenue4
-
-
-
85
Adjusted Operating Revenues (Loss)
$
34,439
$
42,119
$
132,447
$
146,886
Reported Operating Income
$
(5,469
)
$
7,532
$
12,212
$
24,785
Adjustments:
Actuarial (gain)/loss on benefit plans
7,869
(2,152
)
7,869
(2,152
)
Amortization of intangible assets
38
1,273
135
2,557
Wireless merger integration costs2
299
79
648
645
Leap network decommissioning
-
55
-
669
DIRECTV/Mexico merger integration items3
89
249
131
757
Employee separation costs
-
36
-
375
Abandonment of network assets
2,120
-
2,120
-
Other
34
-
34
35
Adjusted Operating Income
$
4,980
$
7,072
$
23,149
$
27,671
Adjusted Operating Income Margin*
14.5
%
16.8
%
17.5
%
18.8
%
12014 Adjusted Operating Income and Margin have been restated to reflect the change in accounting for customer set-up and installation costs.
2Adjustments include Operations and Support expenses for domestic wireless integration costs.
3Adjustments include DIRECTV merger integration items and Operations and Support expenses for international wireless integration costs.
4Adjustments include DIRECTV deferred revenue not recognized due to purchase accounting fair value adjustment.
Adjusted Operating Revenue and Adjusted Operating Income and Margin are non-GAAP financial measures calculated by excluding from operating revenues and operating expenses 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 Income and Margin exclude all actuarial gains or losses ($2.2 billion gain in 2015) associated with our pension and postemployment benefit plans, which we immediately recognize in the income statement, pursuant to our accounting policy for the recognition of actuarial gains/losses. As a result, Adjusted Operating Income and Margin reflect an expected return on plan assets of $3.7 billion (based on an average expected return on plan assets of 7.75% for our pension trust and 5.75% for our VEBA trusts), rather than the actual return on plan assets of $3.1 billion (actual pension return of 1.1% and VEBA return of 0.9%), as included in the GAAP measure of income.
Adjusted Operating Revenue and Adjusted Operating Income and Margin 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 Operating Income and Margin, as presented, may differ from similarly titled measures reported by other companies.
*Adjusted Operating Income Margin is calculated by dividing Adjusted Operating Income by Adjusted Operating Revenues.
Financial Data
AT&T Inc.
Non-GAAP Consolidated Reconciliation
Capital Investment
Dollars in millions
Unaudited
Three Months
Twelve Months
Ended
Ended
December 31,
December 31,
2015
2015
Reported construction and capital expenditures
$
6,093
$
20,015
Add: Vendor financing for capital investments in Mexico
684
684
Capital Investment
$
6,777
$
20,699
Free Cash Flow
Dollars in millions
Unaudited
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2014
2015
2014
2015
Net cash provided by operating activities
$
5,745
$
9,185
$
31,338
$
35,880
Less: Construction and capital expenditures
(4,426
)
(6,093
)
(21,433
)
(20,015
)
Free Cash Flow
$
1,319
$
3,092
$
9,905
$
15,865
Free Cash Flow after Dividends
Dollars in millions
Unaudited
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2014
2015
2014
2015
Net cash provided by operating activities
$
5,745
$
9,185
$
31,338
$
35,880
Less: Construction and capital expenditures
(4,426
)
(6,093
)
(21,433
)
(20,015
)
Free Cash Flow
1,319
3,092
9,905
15,865
Less: Dividends paid
(2,382
)
(2,889
)
(9,552
)
(10,200
)
Free Cash Flow after Dividends
$
(1,063
)
$
203
$
353
$
5,665
Free Cash Flow Dividend Payout Ratio
96
%
64
%
Capital Investment is a non-GAAP financial measure calculated by including accrued long-term financing arrangements for capital improvements of the wireless network in Mexico. These favorable payment terms are considered vendor financing arrangements and are reported as repayments of debt instead of capital expenditures. Management believes that Capital Investment provides relevant and useful information to investors and other users of our financial data in evaluating the investment in our business.
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. 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 regularly reviews free cash flow as an important indicator of the cash 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
Pro Forma Annualized Net-Debt-to-Adjusted-EBITDA Ratio1
Dollars in millions
Unaudited
Three Months Ended
3/31/15
6/30/15
9/30/15
12/31/15
YTD 2015
Pro Forma Net Income
$
3,580
$
2,645
$
2,985
$
4,006
$
13,216
Add Back:
Taxes
1,577
2,193
1,653
2,221
7,644
Interest Expense, Equity In Net Income of Affiliates and Other Income (Expense) - net, and Noncontrolling Interest
1,231
1,252
1,325
1,305
5,113
Depreciation and amortization
6,245
5,762
6,678
6,477
25,162
Pro Forma Consolidated EBITDA
12,633
11,852
12,641
14,009
51,135
Add Back:
Actuarial gain on benefit plans
-
-
-
(2,152
)
(2,152
)
Wireless merger integration costs2
209
215
142
79
645
Leap network decommissioning
-
364
250
55
669
DIRECTV/Mexico merger integration items3
89
116
303
249
757
Pension termination charges
150
-
-
-
150
Other
-
-
35
-
35
Impairment of Venezuela subsidiary (Pro Forma)4
-
1,060
-
-
1,060
Integration expenses (Pro Forma)5
(72
)
(90
)
(20
)
-
(182
)
Pro Forma Adjusted Consolidated EBITDA
13,009
13,517
13,351
12,240
52,117
Pro Forma Annualized Adjusted Consolidated EBITDA
$
52,117
End-of-period current debt
7,636
End-of-period long-term debt
118,515
Total End-of-Period Debt
126,151
Less Cash and Cash Equivalents
5,121
Less Bank Securities - Certificates of Deposit & Time Deposits
401
Net Debt Balance
$
120,629
Pro Forma Annualized Net-Debt-to-Adjusted-EBITDA Ratio
2.31
1The pro forma financials reflect the combined results of operations of the combined company based on the historical financial statements of AT&T and DIRECTV, after giving effect to the merger and certain adjustments, and are intended to reflect the impact of the DIRECTV acquisition on AT&T. Adjustments to derive Pro Forma Net Income are consistent with the adjustments described in the "Notes to Unaudited Pro Forma Condensed Combined Financial Statements" included in the Form 8-K/A dated July 24, 2015. Calculations include the historical results for AT&T for the year ended December 31, 2015 and the results from DIRECTV for the period from January 1, 2015 through July 24, 2015, the date of its acquisition by AT&T.
2Adjustments include Operations and Support expenses for domestic wireless integration costs.
3Adjustments include DIRECTV merger and integration items and Operations and Support expenses for international wireless integration costs. Approximately $166 of DIRECTV merger costs were included in Pro Forma Net Income.
4Adjustment includes pre-tax charge related to the remeasurement of the net monetary assets at the SIMADI rate and the associated impairment of the fixed assets of DIRECTV's Venezuelan subsidiary.
5Adjustment to eliminate AT&T's merger costs in the pro forma net income as those costs are included in the line "DIRECTV/Mexico merger integration items" above.
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 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. 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.
Financial Data
AT&T Inc.
Non-GAAP Consolidated Reconciliation
Adjusted Diluted EPS1
Unaudited
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2014
2015
2014
2015
Reported Diluted EPS
$
(0.77
)
$
0.65
$
1.24
$
2.37
Adjustments:
Actuarial (gain)/loss on benefit plans
0.94
(0.22
)
0.94
(0.24
)
Amortization of intangible assets
0.01
0.14
0.02
0.30
Merger and integration items2
0.05
0.04
0.10
0.18
Leap network decommissioning
-
0.01
-
0.08
Employee separation costs
-
-
-
0.04
Abandonment of network assets
0.25
-
0.25
-
Early debt redemption costs
-
-
0.02
-
America Movil - Gain on AMX shares sale
-
-
(0.08
)
-
Other3
0.08
0.01
0.07
(0.02
)
Adjusted Diluted EPS
$
0.56
$
0.63
$
2.56
$
2.71
Year-over-year growth - Adjusted
12.5
%
5.9
%
Weighted Average Common Shares Outstanding
with Dilution (000,000)
5,214
6,187
5,221
5,646
12014 Adjusted Diluted EPS has been restated to reflect the change in accounting for customer set-up and installation costs.
2Adjustments include DIRECTV merger and integration items, domestic and international wireless merger and integration costs, and interest expense incurred on debt issued in May 2015 to fund the cash consideration of the DIRECTV merger.
3Includes the loss on divestiture of Connecticut Wireline Properties and other asset write-off costs.
Adjusted Diluted EPS is a non-GAAP financial measure calculated by excluding from operating revenues, operating expenses, interest expense and income taxes 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.
Sum of components may not tie due to rounding.
Financial Data
AT&T Inc.
Non-GAAP Segment Reconciliation
Business Solutions Segment EBITDA
Dollars in millions
Unaudited
Three Months Ended
12/31/14
3/31/15
6/30/15
9/30/15
12/31/15
Segment Operating Revenues
Total Segment Operating Revenues
$
18,729
$
17,557
$
17,664
$
17,692
$
18,214
Segment Operating Income
3,393
4,142
4,232
4,297
3,721
Segment Operating Income Margin
18.1
%
23.6
%
24.0
%
24.3
%
20.4
%
Plus: Depreciation and amortization
2,346
2,342
2,460
2,474
2,513
EBITDA1
$
5,739
$
6,484
$
6,692
$
6,771
$
6,234
EBITDA as a % of Revenues
30.6
%
36.9
%
37.9
%
38.3
%
34.2
%
Entertainment Group Segment EBITDA
Three Months Ended
12/31/14
3/31/15
6/30/15
9/30/15
12/31/15
Segment Operating Revenues
Total Segment Operating Revenues
$
5,593
$
5,660
$
5,782
$
10,858
$
12,994
Segment Operating Income (Loss)
(294
)
(264
)
(196
)
1,019
1,445
Segment Operating Income Margin
-5.3
%
-4.7
%
-3.4
%
9.4
%
11.1
%
Plus: Depreciation and amortization
1,077
1,065
1,065
1,389
1,426
EBITDA1
$
783
$
801
$
869
$
2,408
$
2,871
EBITDA as a % of Revenues
14.0
%
14.2
%
15.0
%
22.2
%
22.1
%
1For AT&T, EBITDA is defined as operating income before depreciation and amortization. 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.
Financial Data
AT&T Inc.
Non-GAAP Segment Reconciliation
Consumer Mobility Segment EBITDA
Dollars in millions
Unaudited
Three Months Ended
12/31/14
3/31/15
6/30/15
9/30/15
12/31/15
Segment Operating Revenues
Total Segment Operating Revenues
$
9,522
$
8,778
$
8,755
$
8,784
$
8,749
Segment Operating Income
1,823
2,235
2,618
2,743
2,141
Segment Operating Income Margin
19.1
%
25.5
%
29.9
%
31.2
%
24.5
%
Plus: Depreciation and amortization
981
1,002
934
976
939
EBITDA1
$
2,804
$
3,237
$
3,552
$
3,719
$
3,080
EBITDA as a % of Revenues
29.4
%
36.9
%
40.6
%
42.3
%
35.2
%
International Segment EBITDA
Three Months Ended
12/31/14
3/31/15
6/30/15
9/30/15
12/31/15
Segment Operating Revenues
Total Segment Operating Revenues
$
-
$
236
$
491
$
1,526
$
1,849
Segment Operating Income (Loss)
-
(10
)
(131
)
(83
)
(259
)
Segment Operating Income Margin
-
-4.2
%
-26.7
%
-5.4
%
-14.0
%
Plus: Depreciation and amortization
-
28
93
225
309
EBITDA1
$
-
$
18
$
(38
)
$
142
$
50
EBITDA as a % of Revenues
-
7.6
%
-7.7
%
9.3
%
2.7
%
1 For AT&T, EBITDA is defined as operating income before depreciation and amortization. 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.
Financial Data
AT&T Inc.
Non-GAAP Reconciliation - Supplemental
AT&T Mobility EBITDA
Dollars in millions
Unaudited
Three Months Ended
12/31/14
3/31/15
6/30/15
9/30/15
12/31/15
Operating Revenues
Service Revenues
$
15,074
$
14,812
$
15,115
$
15,095
$
14,815
Equipment Revenues
4,785
3,374
3,189
3,234
4,071
Total Operating Revenues
$
19,859
$
18,186
$
18,304
$
18,329
$
18,886
Operating Income
3,573
4,710
5,298
5,418
4,376
Operating Income Margin
18.0
%
25.9
%
28.9
%
29.6
%
23.2
%
Plus: Depreciation and amortization
1,959
2,005
2,031
2,046
2,031
EBITDA1
$
5,532
$
6,715
$
7,329
$
7,464
$
6,407
YoY Growth
15.8
%
EBITDA as a % of Revenues
27.9
%
36.9
%
40.0
%
40.7
%
33.9
%
EBITDA as a % of Service Revenues
36.7
%
45.3
%
48.5
%
49.4
%
43.2
%
Mexico EBITDA
Dollars in millions
Unaudited
Three Months Ended
12/31/14
3/31/15
6/30/15
9/30/15
12/31/15
Operating Revenues
Total Operating Revenues
$
-
$
236
$
491
$
581
$
643
Operating Income (Loss)
-
(10
)
(131
)
(134
)
(258
)
Operating Income Margin
-
-4.2
%
-26.7
%
-23.1
%
-40.1
%
Plus: Depreciation and amortization
-
28
93
67
89
EBITDA1
$
-
$
18
$
(38
)
$
(67
)
$
(169
)
EBITDA as a % of Revenues
-
7.6
%
-7.7
%
-11.5
%
-26.3
%
1For 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.
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 segments. 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.
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 subscriber base and national footprint that we utilize to obtain and service our customers. 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, 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 than EBITDA as a percentage of total revenue for our Consumer Mobility segment operating margin and our supplemental AT&T Mobility operating margin. For the periods covered by this report, we subsidized a portion of some of our wireless handset sales, 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 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 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 EBITDA is calculated by annualizing the year-to-date EBITDA.
For the year ended December 31, 2015, due to the timing of our acquisition of DIRECTV and the corresponding impact on annualized EBITDA, we are providing a Net Debt to Pro Forma EBITDA ratio calculated using the combined results of operations of the combined company based on the historical financial statements of AT&T and DIRECTV, after giving effect to the merger and certain adjustments, which is intended to reflect the impact of the DIRECTV acquisition on AT&T. Adjustments to derive Pro Forma Net Income are consistent with the adjustments described in the "Notes to Unaudited Pro Forma Condensed Combined Financial Statements" included in the Form 8-K/A dated July 24, 2015. Calculations include the historical results for AT&T for the year ended December 31, 2015 and the results from DIRECTV for the period from January 1, 2015 through July 24, 2015, the date of its acquisition by AT&T.
Adjusted EBITDA excludes costs which are non-recurring in nature. Adjusted EBITDA also 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, 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.
Capital Investment is a non-GAAP financial measure calculated by including long-term vendor financing arrangements for capital improvements of the wireless network in Mexico. These favorable payment terms are considered vendor financing arrangements and are reported as repayments of debt instead of capital expenditures. Management believes that Capital Investment provides relevant and useful information to investors and other users of our financial data in evaluating the investment in our business.
Adjusted Operating Revenues, Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA service margin, Adjusted diluted EPS and Capital Investment 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 RNSThe company news service from the London Stock ExchangeENDFR AKADQQBKDFBB
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