REG - AT & T Inc. - 4Q15 Earnings Release <Origin Href="QuoteRef">T.N</Origin> - Part 3
01/04/2016 16:03
- Part 3: For the preceding part double click ID:nRSZ3497Qb
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
Consolidat
ed
Reconcilia
tion
Capital
Investment
Dollars in
millions
Unaudited
Three Months Twelve Months
Ended Ended
December 31, December 31,
2015 2015
Reported $ 6,093 $ 20,015
constructi
on and
capital
expenditur
es
Add: 684 684
Vendor
financing
for
capital
investment
s in
Mexico
Capital $ 6,777 $ 20,699
Investment
Free Cash
Flow
Dollars in
millions
Unaudited
Three Months Ended Twelve Months Ended
December 31, December 31,
2014 2015 2014 2015
Net cash $ 5,745 $ 9,185 $ 31,338 $ 35,880
provided
by
operating
activities
Less: (4,426 ) (6,093 ) (21,433 ) (20,015 )
Constructi
on and
capital
expenditur
es
Free Cash $ 1,319 $ 3,092 $ 9,905 $ 15,865
Flow
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 $ 5,745 $ 9,185 $ 31,338 $ 35,880
provided
by
operating
activities
Less: (4,426 ) (6,093 ) (21,433 ) (20,015 )
Constructi
on and
capital
expenditur
es
Free Cash 1,319 3,092 9,905 15,865
Flow
Less: (2,382 ) (2,889 ) (9,552 ) (10,200 )
Dividends
paid
Free Cash $ (1,063 ) $ 203 $ 353 $ 5,665
Flow after
Dividends
Free Cash 96 % 64 %
Flow
Dividend
Payout
Ratio
Capital
Investment
is a non
-GAAP
financial
measure
calculated
by
including
accrued
long-term
financing
arrangemen
ts for
capital
improvemen
ts of the
wireless
network in
Mexico.
These
favorable
payment
terms are
considered
vendor
financing
arrangemen
ts and are
reported
as
repayments
of debt
instead of
capital
expenditur
es.
Management
believes
that
Capital
Investment
provides
relevant
and useful
informatio
n to
investors
and other
users of
our
financial
data in
evaluating
the
investment
in our
business.
Free cash
flow
includes
reimbursem
ents of
certain
postretire
ment
benefits
paid. Free
cash flow
is defined
as cash
from
operations
minus
constructi
on and
capital
expenditur
es. Free
cash flow
after
dividends
is defined
as cash
from
operations
minus
constructi
on,
capital
expenditur
es 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
informatio
n to our
investors
because
management
regularly
reviews
free cash
flow as an
important
indicator
of the
cash
generated
by normal
business
operations
,
including
capital
expenditur
es, 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
shareowner
s.
Financial
Data
AT&T Inc.
Non-GAAP
Consolidat
ed
Reconcilia
tion
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 $ 3,580 $ 2,645 $ 2,985 $ 4,006 $ 13,216
Net Income
Add Back:
Taxes 1,577 2,193 1,653 2,221 7,644
Interest 1,231 1,252 1,325 1,305 5,113
Expense,
Equity In
Net Income
of
Affiliates
and Other
Income
(Expense)
- net, and
Noncontrol
ling
Interest
Depreciati 6,245 5,762 6,678 6,477 25,162
on and
amortizati
on
Pro Forma 12,633 11,852 12,641 14,009 51,135
Consolidat
ed EBITDA
Add Back:
Actuarial - - - (2,152 ) (2,152 )
gain on
benefit
plans
Wireless 209 215 142 79 645
merger
integratio
n costs2
Leap - 364 250 55 669
network
decommissi
oning
DIRECTV/Me 89 116 303 249 757
xico
merger
integratio
n items3
Pension 150 - - - 150
terminatio
n charges
Other - - 35 - 35
Impairment - 1,060 - - 1,060
of
Venezuela
subsidiary
(Pro
Forma)4
Integratio (72 ) (90 ) (20 ) - (182 )
n expenses
(Pro
Forma)5
Pro Forma 13,009 13,517 13,351 12,240 52,117
Adjusted
Consolidat
ed EBITDA
Pro Forma $ 52,117
Annualized
Adjusted
Consolidat
ed EBITDA
End-of 7,636
-period
current
debt
End-of 118,515
-period
long-term
debt
Total End 126,151
-of-Period
Debt
Less Cash 5,121
and Cash
Equivalent
s
Less Bank 401
Securities
-
Certificat
es of
Deposit &
Time
Deposits
Net Debt $ 120,629
Balance
Pro Forma 2.31
Annualized
Net-Debt
-to
-Adjusted
-EBITDA
Ratio
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
adjustment
s, and are
intended
to reflect
the impact
of the
DIRECTV
acquisitio
n on AT&T.
Adjustment
s to
derive Pro
Forma Net
Income are
consistent
with the
adjustment
s
described
in the
"Notes to
Unaudited
Pro Forma
Condensed
Combined
Financial
Statements
" included
in the
Form 8-K/A
dated July
24, 2015.
Calculatio
ns 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
acquisitio
n by AT&T.
2Adjustmen
ts include
Operations
and
Support
expenses
for
domestic
wireless
integratio
n costs.
3Adjustmen
ts include
DIRECTV
merger and
integratio
n items
and
Operations
and
Support
expenses
for
internatio
nal
wireless
integratio
n costs.
Approximat
ely $166
of DIRECTV
merger
costs were
included
in Pro
Forma Net
Income.
4Adjustmen
t includes
pre-tax
charge
related to
the
remeasurem
ent of the
net
monetary
assets at
the SIMADI
rate and
the
associated
impairment
of the
fixed
assets of
DIRECTV's
Venezuelan
subsidiary
.
5Adjustmen
t to
eliminate
AT&T's
merger
costs in
the pro
forma net
income as
those
costs are
included
in the
line
"DIRECTV/M
exico
merger
integratio
n 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
informatio
n to
investors
and other
users of
our
financial
data. Net
debt is
calculated
by
subtractin
g cash and
cash
equivalent
s and
certificat
es 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
annualizin
g the year
-to-date
EBITDA.
Our
calculatio
n 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 0.94 (0.22 ) 0.94 (0.24 )
on benefit plans
Amortization of 0.01 0.14 0.02 0.30
intangible assets
Merger and integration 0.05 0.04 0.10 0.18
items2
Leap network - 0.01 - 0.08
decommissioning
Employee separation - - - 0.04
costs
Abandonment of network 0.25 - 0.25 -
assets
Early debt redemption - - 0.02 -
costs
America Movil - Gain - - (0.08 ) -
on AMX shares sale
Other3 0.08 0.01 0.07 (0.02 )
Adjusted Diluted EPS $ 0.56 $ 0.63 $ 2.56 $ 2.71
Year-over-year growth 12.5 % 5.9 %
- Adjusted
Weighted Average
Common Shares
Outstanding
with Dilution 5,214 6,187 5,221 5,646
(000,000)
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 $ 18,729 $ 17,557 $ 17,664 $ 17,692 $ 18,214
Operating Revenues
Segment Operating 3,393 4,142 4,232 4,297 3,721
Income
Segment Operating 18.1 % 23.6 % 24.0 % 24.3 % 20.4 %
Income Margin
Plus: Depreciation 2,346 2,342 2,460 2,474 2,513
and amortization
EBITDA1 $ 5,739 $ 6,484 $ 6,692 $ 6,771 $ 6,234
EBITDA as a % of 30.6 % 36.9 % 37.9 % 38.3 % 34.2 %
Revenues
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 $ 5,593 $ 5,660 $ 5,782 $ 10,858 $ 12,994
Operating Revenues
Segment Operating (294 ) (264 ) (196 ) 1,019 1,445
Income (Loss)
Segment Operating -5.3 % -4.7 % -3.4 % 9.4 % 11.1 %
Income Margin
Plus: Depreciation 1,077 1,065 1,065 1,389 1,426
and amortization
EBITDA1 $ 783 $ 801 $ 869 $ 2,408 $ 2,871
EBITDA as a % of 14.0 % 14.2 % 15.0 % 22.2 % 22.1 %
Revenues
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 $ 9,522 $ 8,778 $ 8,755 $ 8,784 $ 8,749
Operating Revenues
Segment Operating 1,823 2,235 2,618 2,743 2,141
Income
Segment Operating 19.1 % 25.5 % 29.9 % 31.2 % 24.5 %
Income Margin
Plus: Depreciation 981 1,002 934 976 939
and amortization
EBITDA1 $ 2,804 $ 3,237 $ 3,552 $ 3,719 $ 3,080
EBITDA as a % of 29.4 % 36.9 % 40.6 % 42.3 % 35.2 %
Revenues
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 $ - $ 236 $ 491 $ 1,526
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