REG - AT & T Inc. - 4Q16 Earnings Release <Origin Href="QuoteRef">T.N</Origin> - Part 4
07/03/2017 16:05
- Part 4: For the preceding part double click ID:nRSG7826Yc
113 (277) 52
Depreciation and amortization 6,129 6,477 25,847 22,016
EBITDA 10,377 14,009 50,194 46,801
Total Operating Revenues 41,841 42,119 163,786 146,801
Service Revenues 37,369 37,635 148,884 131,677
EBITDA Margin 24.8% 33.3% 30.6% 31.9%
EBITDA Service Margin 27.8% 37.2% 33.7% 35.5%
Segment EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions Three Months Ended Twelve Months Ended
December 31, December 31,
2016 2015 2016 2015
Business Solutions Segment
Segment Contribution $ 4,023 $ 3,721 $ 16,826 $ 16,392
Additions:
Depreciation and amortization 2,264 2,513 9,832 9,789
EBITDA 6,287 6,234 26,658 26,181
Total Segment Operating Revenues 18,033 18,214 70,988 71,127
Segment Operating Income Margin 22.3% 20.4% 23.7% 23.0%
EBITDA Margin 34.9% 34.2% 37.6% 36.8%
Entertainment Group Segment
Segment Contribution $ 1,370 $ 1,457 $ 6,104 $ 2,000
Additions:
Equity in Net (Income) of Affiliates (8) (12) (9) 4
Depreciation and amortization 1,381 1,426 5,862 4,945
EBITDA 2,743 2,871 11,957 6,949
Total Segment Operating Revenues 13,206 12,994 51,295 35,294
Segment Operating Income Margin 10.3% 11.1% 11.9% 5.7%
EBITDA Margin 20.8% 22.1% 23.3% 19.7%
Consumer Mobility Segment
Segment Contribution $ 2,185 $ 2,141 $ 9,825 $ 9,738
Additions:
Depreciation and amortization 918 939 3,716 3,851
EBITDA 3,103 3,080 13,541 13,589
Total Segment Operating Revenues 8,419 8,749 33,200 35,066
Service Revenues 6,731 7,131 27,536 29,150
Segment Operating Income Margin 26.0% 24.5% 29.6% 27.8%
EBITDA Margin 36.9% 35.2% 40.8% 38.8%
EBITDA Service Margin 46.1% 43.2% 49.2% 46.6%
International Segment
Segment Contribution $ (240) $ (260) $ (661) $ (488)
Additions:
Equity in Net (Income) of Affiliates (28) 1 (52) 5
Depreciation and amortization 298 309 1,166 655
EBITDA 30 50 453 172
Total Segment Operating Revenues 1,909 1,849 7,283 4,102
Segment Operating Income Margin -14.0% -14.0% -9.8% -11.8%
EBITDA Margin 1.6% 2.7% 6.2% 4.2%
Supplemental AT&T Mobility EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions Three Months Ended Twelve Months Ended
December 31, December 31,
2016 2015 2016 2015
AT&T Mobility
Operating Contribution $ 4,638 $ 4,376 $ 20,643 $ 19,803
Add: Depreciation and amortization 2,048 2,031 8,292 8,113
EBITDA 6,686 6,407 28,935 27,916
Total Segment Operating Revenues 18,750 18,886 72,821 73,705
Service Revenues 14,713 14,815 59,386 59,837
Segment Operating Income Margin 24.7% 23.2% 28.3% 26.9%
EBITDA Margin 35.7% 33.9% 39.7% 37.9%
EBITDA Service Margin 45.4% 43.2% 48.7% 46.7%
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 (1) adjustments
related to Mexico operations, which are taxed at the 30% marginal rate for Mexico and (2) 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%.
Adjusting Items
Dollars in millions Three Months Ended Twelve Months Ended
December 31, December 31,
2016 2015 2016 2015
Operating Revenues
Merger related deferred revenue $ - $ - $ - $ 85
Storm revenue credits 10 - 23 -
Adjustments to Operating Revenues 10 - 23 85
Operating Expenses
DIRECTV and other video merger integration costs 259 165 754 502
Mexico merger integration costs 78 84 309 167
Time Warner merger costs 47 - 47 -
Wireless merger integration costs 1 79 93 649
Leap network decommissioning - 55 - 669
Asset abandonments and impairments 361 - 361 35
Storm costs 27 - 44 -
Employee separation costs 30 36 344 375
Actuarial (gain) loss 1,024 (2,152) 1,024 (2,152)
(Gain) loss on transfer of wireless spectrum - - (714) -
Adjustments to Operations and Support Expenses 1,827 (1,733) 2,262 245
Amortization of intangible assets 1,228 1,272 5,177 2,556
Impairments 29 - 29 -
Adjustments to Operating Expenses 3,084 (461) 7,468 2,801
Other
DIRECTV-related interest expense and exchange fees 1 - - 16 142
(Gain) loss on sale of investments and impairments 28 132 32 132
Adjustments to Income Before Income Taxes 3,122 (329) 7,539 3,160
Tax impact of adjustments 1,097 (206) 2,618 996
Tax-related benefits2 359 - 359 228
Adjustments to Net Income $ 1,666 $ (123) $ 4,562 $ 1,936
1 Includes interest expense incurred on the debt issued prior to the close of the DIRECTV transaction and fees associated with the exchange of DIRECTV notes for AT&T notes.
22016 includes merger-related restructuring of investment in Mexico.
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 Twelve Months Ended
December 31, December 31,
2016 2015 2016 2015
Operating Income $ 4,248 $ 7,532 $ 24,347 $ 24,785
Adjustments to Operating Revenues 10 - 23 85
Adjustments to Operating Expenses 3,084 (461) 7,468 2,801
Adjusted Operating Income1 7,342 7,071 31,838 27,671
EBITDA 10,377 14,009 50,194 46,801
Adjustments to Operating Revenues 10 - 23 85
Adjustments to Operations and Support Expenses 1,827 (1,733) 2,262 245
Adjusted EBITDA1 12,214 12,276 52,479 47,131
Total Operating Revenues 41,841 42,119 163,786 146,801
Adjustments to Operating Revenues 10 - 23 85
Total Adjusted Operating Revenue 41,851 42,119 163,809 146,886
Service Revenues 37,369 37,635 148,884 131,677
Adjustments to Operating Revenues 10 - 23 85
Adjusted Service Revenues 37,379 37,635 148,907 131,762
Operating Income Margin 10.2% 17.9% 14.9% 16.9%
Adjusted Operating Income Margin1 17.5% 16.8% 19.4% 18.8%
Adjusted EBITDA Margin1 29.2% 29.1% 32.0% 32.1%
Adjusted EBITDA Service Margin1 32.7% 32.6% 35.2% 35.8%
1 Adjusted Operating Income, Adjusted EBITDA
and associated margins exclude all actuarial
gains or losses ($1.0 billion loss in 2016)
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 $3.5 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 $3.5 billion
(actual pension return of 7.8% and VEBA return
of 6.7%), as included in the GAAP measure of
income.
Adjusted Diluted EPS
Three Months Ended Twelve Months Ended
December 31, December 31,
2016 2015 2016 2015
Diluted Earnings Per Share (EPS) $ 0.39 $ 0.65 $ 2.10 $ 2.37
Amortization of intangible assets 0.13 0.14 0.55 0.30
Merger integration and other items1 0.04 0.06 0.13 0.28
Employee separation costs - - 0.04 0.04
Asset abandonments and impairments 0.05 - 0.04 -
Actuarial (gain) loss 0.10 (0.22) 0.10 (0.24)
Storm related and other items 0.01 - 0.01 -
Gain (loss) on transfer of wireless spectrum - - (0.07) -
Tax-related benefits (0.06) - (0.06) (0.04)
Adjusted EPS $ 0.66 $ 0.63 $ 2.84 $ 2.71
Year-over-year growth - Adjusted 4.8% 4.8%
Weighted Average Common Shares Outstanding with Dilution (000,000) 6,181 6,187 6,189 5,646
1Includes combined merger integration items, Leap network decommissioning, and DIRECTV-related interest expense and exchange fees.
Entertainment Group Segment Adjusted Operating Revenues includes the external operating revenues from DIRECTV U.S. as
reported in the DIRECTV Form 10-Q/A dated June 30, 2015 adjusted to (1) include operations reported in other DIRECTV
operating segments that AT&T has chosen to manage in our Entertainment Group segment, (2) conform DIRECTV's practice of
recognizing revenue to be received under contractual commitments on a straight line basis over the minimum contract period
to AT&T's method of limiting the revenue recognized to the monthly amounts billed and (3) eliminate intercompany
transactions from DIRECTV U.S. and the Entertainment Group segment. Adjusting Entertainment Group segment operating
revenues provides for comparability between periods.
Entertainment Group Adjusted Operating Revenues
Dollars in millions Three Months Ended Twelve Months Ended
December 31, December 31,
2016 2015 2016 2015
Segment Operating Revenues $ 13,206 $ 12,994 $ 51,295 $ 35,294
DIRECTV Operating Revenues1 - 14,864
Adjustments:
Other DIRECTV operations - 182
Revenue recognition - 229
Intercompany eliminations - (40)
Adjusted Segment Operating Revenues $ 13,206 $ 12,994 $ 51,295 $ 50,529
Year-over-year growth - Adjusted 1.6% 1.5%
1Includes results from July 1, 2015 through July 24, 2015 acquisition date.
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 Net Debt Adjusted EBITDA.
Annualized Net Debt Adjusted EBITDA excludes severance-related adjustments as described in our credit agreements. 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 Net Debt Adjusted EBITDA.
Net Debt to Adjusted EBITDA
Dollars in millions
Three Months Ended
Mar. 31, Jun. 30 Sep. 30 Dec. 31 YTD 2016
2016 2016 2016 2016
Adjusted EBITDA $ 13,279 $ 13,397 $ 13,589 $ 12,214 $ 52,479
Add back severance (25) (29) (260) (30) (344)
Net Debt Adjusted EBITDA 13,254 13,368 13,329 12,184 52,135
Annualized Net Debt Adjusted EBITDA 52,135
End-of-period current debt 9,832
End-of-period long-term debt 113,681
Total End-of-Period Debt 123,513
Less: Cash and Cash Equivalents 5,788
Net Debt Balance 117,725
Annualized Net Debt to Adjusted EBITDA Ratio 2.26
This information is provided by RNS
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