TIDM58KN
RNS Number : 0617Z
AT & T Inc.
28 August 2018
UNITED 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) July 24,
2018
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))
Indicate by check mark whether the registrant is an emerging
growth company as defined in Rule 405 of the Securities Act of 1933
(--230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (--240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
Item 2.02 Results of Operations and Financial Condition.
The registrant announced on July 24, 2018, its results of
operations for the second quarter of 2018. 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 July 24, 2018 reporting financial results for the second quarter ended
June 30, 2018.
99.2 AT&T Inc. selected financial statements and operating data.
99.3 Discussion and reconciliation of non-GAAP measures.
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: July 24, 2018 By: /s/ Debra L. Dial .
Debra L. Dial
Senior Vice President and Controller
AT&T Completes Time Warner Acquisition;
Agrees to Acquire AppNexus;
Reports Second-Quarter Results
Consolidated results include 16 days
of Time Warner results for the second quarter
-- Diluted EPS of $0.81 as reported compared to $0.63 in the year-ago quarter
-- Adjusted EPS of $0.91 compared to $0.79 in the year-ago quarter
-- Consolidated revenues of $39.0 billion
-- Cash from operations of $10.2 billion, up 17.5%
-- Capital expenditures of $5.1 billion
-- Free cash flow of $5.1 billion, up 46.4%
Company Updates 2018 Guidance[1]
-- Raising adjusted EPS to high end of $3.50 range
-- Raising free cash flow to high end of $21 billion range
(inclusive of all deal and integration costs)
-- Capital Investment of approximately $25 billion; $22 billion
net of expected FirstNet reimbursements and vendor financing
Note: AT&T's second-quarter earnings conference call will be
webcast at 4:30 p.m. ET on Tuesday, July 24, 2018. The webcast and
related materials will be available on AT&T's Investor
Relations website at https://investors.att.com.
dALLAS, July 24, 2018 - "It was an exciting quarter for AT&T
as we completed the acquisition of Time Warner on June 14 and
created a modern media company built around premium content, 170
million direct-to-customer relationships, advertising technology
and high-speed networks," said Randall Stephenson, AT&T
chairman and CEO.[2]
"Time Warner joins us coming off an impressive second-quarter.
Turner turned in solid subscription and advertising revenue growth,
Warner Bros. is in high gear with a record number of series in
production, and HBO delivered strong subscriber revenue growth.
"Since we closed the Time Warner deal, we've also announced an
agreement to acquire ad-tech leader AppNexus, which will be an
important step to strengthen our leadership in advanced TV
advertising.
"Our goal is to reshape the way media and entertainment work for
consumers, and you will see us continue to do exactly that."
AT&T Inc. (NYSE:T) reported solid wireless results in the
second quarter, including postpaid phone gains, continued strong
prepaid phone growth and stable postpaid churn. On a GAAP basis,
service revenue declined; however, on a comparable basis service
revenue grew. Including the acquisition of Time Warner in mid-June,
AT&T reported consolidated revenue growth on a comparable
basis, which offset pressure from its entertainment and business
segments, and strong earnings and free cash flow growth.
-- Strong subscriber gains:
o 3.8 million total wireless net adds
-- 3.1 million in U.S., driven by connected devices and
prepaid
-- 756,000 in Mexico
o 219,000 total video net adds (U.S. and Latin America)
-- U.S. wireless results:
o Service revenue growth on a comparable basis
o 46,000 postpaid phone net adds with continued strong
year-over-year improvement
o Continued prepaid growth with 356,000 phone net adds
o Nearly 400,000 branded smartphones added to base
o Second-quarter postpaid phone churn of 0.82%
-- Entertainment Group results:
o 342,000 DIRECTV NOW net adds to reach more than 1.8 million
subscribers
o 80,000 total video net adds; total video customer base stable
with DIRECTV NOW; AT&T WatchTV launched
o 76,000 IP broadband net adds; 23,000 total broadband net adds;
more than
9 million customer locations passed with fiber
o AdWorks continues double-digit revenue growth
-- Time Warner acquisition closed on June 14; full second-quarter results include:
o HBO and Turner year-over-year subscription revenue growth
o Turner ad revenues up 3%
o Record number of series in production at Warner Bros.
o 166 Primetime Emmy Awards nominations
Consolidated Financial Results
AT&T adopted new U.S. accounting standards as required that
deal with revenue recognition (ASC 606), post-employment benefit
costs and certain cash receipts on installment receivables. These
changes impact the company's income statements and cash flows. With
the adoption of ASC 606, the company made a policy decision to
record Universal Service Fees (USF) and other regulatory fees on a
net basis. The company is providing comparable results in addition
to GAAP to help investors better understand the impact on
financials from ASC 606 and the policy decision. Historical income
statements and cash flows have been recast to show only the impact
of the adoption of the other two accounting standards.
The company's consolidated results include 16 days of Time
Warner results for the second quarter. Time Warner's total
second-quarter results on a historical basis are located on
AT&T's Investor Relations website. Pro forma schedules are
expected to be filed in August.
AT&T's consolidated revenues for the second quarter totaled
$39.0 billion versus $39.8 billion in the year-ago quarter,
primarily due to the impact of ASC 606 which included netting of
approximately $900 million of USF with operating expenses. On a
comparative basis, declines in domestic video and legacy wireline
services were offset by adding approximately $1.1 billion from Time
Warner net of eliminations and growth in wireless, strategic
business services and advertising. On a comparative basis, revenues
were $39.9 billion, an increase of 0.2% primarily due to the
second-quarter close of the Time Warner acquisition.
Operating expenses were $32.5 billion versus $33.3 billion,
primarily due to the netting of USF and other regulatory fee
revenues and the deferral of commissions under ASC 606. Excluding
those impacts, operating expenses were $34.0 billion, an increase
of about $700 million due to inclusion of Time Warner results,
content cost pressure and higher wireless equipment costs partially
offset by cost efficiencies.
Versus results from the second quarter of 2017, operating income
was $6.5 billion, stable versus the year-ago quarter; and operating
income margin was 16.6% versus 16.4%. On a comparative basis,
operating income was $5.9 billion and operating income margin was
14.8%. When adjusting for a non-cash actuarial gain on benefit
plans, amortization, merger- and integration-related expenses and
other items, operating income was $8.2 billion, or $7.7 billion on
a comparative basis, versus $8.1 billion in the year-ago quarter
and operating income margin was 21.1%, or 19.2% on a comparative
basis, versus 20.3% in the year-ago quarter.
Second-quarter net income attributable to AT&T was $5.1
billion, or $0.81 per diluted share, versus $3.9 billion, or $0.63
per diluted share, in the year-ago quarter. Adjusting for a $0.21
non-cash actuarial gain on benefit plans and $0.31 of costs for
amortization, merger- and integration-related expenses and other
items, earnings per diluted share was $0.91 compared to an adjusted
$0.79 in the year-ago quarter, a 15.2% increase.
Cash from operating activities was $10.2 billion, and capital
expenditures were $5.1 billion. Capital investment included about
$275 million in FirstNet capital costs and reflects about $300
million in FirstNet reimbursements. Free cash flow - cash from
operating activities minus capital expenditures - was $5.1 billion
for the quarter.
2018 Outlook(1)
AT&T expects in 2018:
-- Raising adjusted EPS to high end of the $3.50 range
-- Raising free cash flow to high end of the $21 billion range;
inclusive of all deal and integration costs
-- Capital Investment of approximately $25 billion; $22 billion
net of expected FirstNet reimbursements and vendor financing
*About AT&T
AT&T Inc. (NYSE:T) is a diversified, global leader in
telecommunications, media and entertainment, and technology. It
executes in the market under four operating units. WarnerMedia's
HBO, Turner and Warner Bros. divisions are world leaders in
creating premium content, operate the world's largest TV and film
studio, and own a world-class library of entertainment. AT&T
Communications provides more than 100 million U.S. consumers with
entertainment and communications experiences across TV, mobile and
broadband services. Plus, it serves more than 3 million business
customers with high-speed, highly secure connectivity and smart
solutions. AT&T International provides pay-TV services across
11 countries and territories in Latin America and the Caribbean,
and is the fastest growing wireless provider in Mexico, serving
consumers and businesses. AT&T ad and analytics provides
marketers with innovative, targeted, data-driven advertising
solutions around premium video content.
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. Additional information is available
at about.att.com. (c) 2018 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.
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 might 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 and 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 https://investors.att.com.
For more information, contact:
Name: Erin McGrath
AT&T Corporate Communications
Phone: 214-862-0651
Email: Erin.McGrath@att.com
AT&T Inc.
Financial Data
Dollars in millions except per
share amounts Three Months Ended Six Months Ended
Unaudited June 30, June 30,
----------------------- -----------------------
2018 2017 Percent 2018 2017 Percent
As Adjusted Change As Adjusted Change
----------------------------- ------- ------------ --------- ------- ------------ ---------
Operating Revenues
Service $ 33,773 $ 36,538 -7.6% $ 67,419 $ 72,994 -7.6%
Equipment 4,080 3,299 23.7% 8,472 6,208 36.5%
Media 1,133 - -% 1,133 - -%
------------------------------ ------- ------------ ------- ------------
Total Operating Revenues 38,986 39,837 -2.1% 77,024 79,202 -2.7%
------------------------------ ------- ------------ ------- ------------
Operating Expenses
Cost of revenues
Equipment 4,377 4,138 5.8% 9,225 7,986 15.5%
Broadcast, programming and
operations 5,449 4,898 11.2% 10,615 9,872 7.5%
Other cost of revenues
(exclusive of depreciation
and amortization shown
separately below) 7,632 9,569 -20.2% 15,564 18,857 -17.5%
Selling, general and
administrative 8,684 8,559 1.5% 16,581 17,331 -4.3%
Depreciation and
amortization 6,378 6,147 3.8% 12,372 12,274 0.8%
------------------------------ ------- ------------ ------- ------------
Total Operating Expenses 32,520 33,311 -2.4% 64,357 66,320 -3.0%
------------------------------ ------- ------------ ------- ------------
Operating Income 6,466 6,526 -0.9% 12,667 12,882 -1.7%
------------------------------ ------- ------------ ------- ------------
Interest Expense (2,023) (1,395) 45.0% (3,794) (2,688) 41.1%
Equity in Net Income (Loss) of
Affiliates (16) 14 -% (7) (159) 95.6%
Other Income (Expense) - Net 2,353 925 -% 4,055 1,413 -%
------------------------------ ------- ------------ ------- ------------
Income Before Income Taxes 6,780 6,070 11.7% 12,921 11,448 12.9%
Income Tax Expense 1,532 2,056 -25.5% 2,914 3,860 -24.5%
------------------------------ ------- ------------ ------- ------------
Net Income 5,248 4,014 30.7% 10,007 7,588 31.9%
------------------------------ ------- ------------ ------- ------------
Less: Net Income Attributable
to
Noncontrolling Interest (116) (99) -17.2% (213) (204) -4.4%
------------------------------ ------- ------------ ------- ------------
Net Income Attributable to
AT&T $ 5,132 3,915 31.1% 9,794 7,384 32.6%
============================== ======= ============ ======= ============
Basic Earnings Per Share
Attributable to AT&T $ 0.81 0.63 28.6% 1.56 1.19 31.1%
Weighted Average Common
Shares Outstanding
(000,000) 6,351 6,165 3.0% 6,257 6,166 1.5%
Diluted Earnings Per Share
Attributable to AT&T $ 0.81 0.63 28.6% 1.56 1.19 31.1%
Weighted Average Common
Shares Outstanding with
Dilution (000,000) 6,374 6,184 3.1% 6,277 6,185 1.5%
------------------------------ ------- ------------ ----- ------- ------------ -----
AT&T Inc.
Financial Data
Dollars in millions
Unaudited Jun. 30, Dec. 31,
2018 2017
------------------------------------------------------------------------------- -------- --------
Assets
Current Assets
Cash and cash equivalents $ 13,523 $ 50,498
Accounts receivable - net of allowances for doubtful accounts of $804 and $663 25,492 16,522
Prepaid expenses 1,966 1,369
Other current assets 14,305 10,757
-------------------------------------------------------------------------------- -------- --------
Total current assets 55,286 79,146
-------------------------------------------------------------------------------- -------- --------
Noncurrent Inventories and Theatrical Film and Television Production Costs 5,849 -
Property, Plant and Equipment - Net 129,556 125,222
Goodwill 143,499 105,449
Licenses 96,802 96,136
Trademarks and Trade Names - Net 24,440 7,021
Distribution Networks 17,403 -
Other Intangible Assets - Net 30,800 11,119
Investments in and Advances to Equity Affiliates 8,007 1,560
Other Assets 23,734 18,444
-------------------------------------------------------------------------------- -------- --------
Total Assets $ 535,376 $ 444,097
================================================================================ ======== ========
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year $ 21,672 $ 38,374
Accounts payable and accrued liabilities 35,488 34,470
Advanced billing and customer deposits 5,914 4,213
Accrued taxes 1,889 1,262
Dividends payable 3,630 3,070
-------------------------------------------------------------------------------- -------- --------
Total current liabilities 68,593 81,389
-------------------------------------------------------------------------------- -------- --------
Long-Term Debt 168,495 125,972
-------------------------------------------------------------------------------- -------- --------
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes 59,665 43,207
Postemployment benefit obligation 29,476 31,775
Other noncurrent liabilities 25,017 19,747
-------------------------------------------------------------------------------- -------- --------
Total deferred credits and other noncurrent liabilities 114,158 94,729
-------------------------------------------------------------------------------- -------- --------
Stockholders' Equity
Common stock 7,621 6,495
Additional paid-in capital 125,960 89,563
Retained earnings 56,555 50,500
Treasury stock (12,872) (12,714)
Accumulated other comprehensive income 5,716 7,017
Noncontrolling interest 1,150 1,146
-------------------------------------------------------------------------------- -------- --------
Total stockholders' equity 184,130 142,007
-------------------------------------------------------------------------------- -------- --------
Total Liabilities and Stockholders' Equity $ 535,376 $ 444,097
================================================================================ ======== ========
AT&T Inc.
Financial Data
Dollars in millions Six Months Ended
Unaudited June 30,
------------------------
2018 2017
As Adjusted
----------------------------------------------------------------------------------- --------
Operating Activities
Net income $ 10,007 $ 7,588
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 12,372 12,274
Amortization of film and television costs 168 -
Undistributed earnings from investments in equity affiliates 235 167
Provision for uncollectible accounts 808 795
Deferred income tax expense 2,032 964
Net (gain) loss from sale of investments, net of impairments (29) 12
Actuarial (gain) loss on pension and postretirement benefits (2,726) (259)
Changes in operating assets and liabilities:
Accounts receivable 233 119
Other current assets, inventories and theatrical film and television production
costs 1,039 470
Accounts payable and other accrued liabilities (3,890) (2,761)
Equipment installment receivables and related sales 490 525
Deferred customer contract acquisition and fulfillment costs (1,725) (796)
Retirement benefit funding (280) (280)
Other - net 442 (1,148)
------------------------------------------------------------------------------------ -------- ------------
Total adjustments 9,169 10,082
------------------------------------------------------------------------------------ -------- ------------
Net Cash Provided by Operating Activities 19,176 17,670
------------------------------------------------------------------------------------ -------- ------------
Investing Activities
Capital expenditures:
Purchase of property and equipment (10,959) (10,750)
Interest during construction (267) (473)
Acquisitions, net of cash acquired (40,715) 1,224
Dispositions 59 51
(Purchases) sales of securities, net (218) 169
Advances to and investments in equity affiliates, net (1,035) -
Cash collections of deferred purchase price 500 382
Net Cash Used in Investing Activities (52,635) (9,397)
--------
Financing Activities
Net change in short-term borrowings with original maturities of three months or less 2,992 (2)
Issuance of other short-term borrowings 4,839 -
Issuance of long-term debt 26,478 24,115
Repayment of long-term debt (30,212) (6,118)
Purchase of treasury stock (564) (458)
Issuance of treasury stock 12 24
Dividends paid (6,144) (6,021)
Other (1,121) 77
------------------------------------------------------------------------------------ -------- ------------
Net Cash (Used in) Provided by Financing Activities (3,720) 11,617
------------------------------------------------------------------------------------ -------- ------------
Net (decrease) increase in cash and cash equivalents and restricted cash (37,179) 19,890
Cash and cash equivalents and restricted cash beginning of year 50,932 5,935
------------------------------------------------------------------------------------ -------- ------------
Cash and Cash Equivalents and Restricted Cash End of Period $ 13,753 $ 25,825
==================================================================================== ======== ============
AT&T Inc.
Consolidated Supplementary Data
Dollars in millions except per
share amounts Three Months Ended Six Months Ended
Unaudited June 30, Percent June 30, Percent
---------------------- -------------------------
2018 2017 Change 2018 2017 Change
---------------------------------- -------- ------- --------- ------- ------- ---------
Capital expenditures
Purchase of property and equipment $ 5,002 $ 4,966 0.7% $ 10,959$ 10,750 1.9%
Interest during construction 106 242 -56.2% 267 473 -43.6%
---------------------------------- -------- ------- ------- -------
Total Capital Expenditures $ 5,108 $ 5,208 -1.9% $ 11,226$ 11,223 -%
----------------------------------- -------- ------- ------- -------
Dividends Declared per Share $ 0.50 $ 0.49 2.0% $ 1.00$ 0.98 2.0%
End of Period Common Shares
Outstanding (000,000) 7,261 6,140 18.3%
Debt Ratio 50.8% 53.3% -250 BP
Total Employees 273,210 260,480 4.9%
----------------------------------- -------- ------- ----- ------- ------- -----
Subscribers and connections in
thousands
Unaudited June 30, Percent
-------------------------
2018 2017 Change
---------------------------------- -------- ------- ----- ------- ------- ---------
Wireless Subscribers
Domestic 146,889 136,102 7.9%
Mexico 16,398 13,082 25.3%
---------------------------------- -------- ------- ----- ------- -------
Total Wireless Subscribers 163,287 149,184 9.5%
----------------------------------- -------- ------- ----- ------- -------
Total Branded Wireless Subscribers 109,806 104,022 5.6%
Video Connections
Domestic 25,473 25,200 1.1%
Latin America 13,713 13,622 0.7%
---------------------------------- -------- ------- ----- ------- -------
Total Video Connections 39,186 38,822 0.9%
----------------------------------- -------- ------- ----- ------- -------
Broadband Connections
IP 14,709 14,234 3.3%
DSL 1,063 1,452 -26.8%
---------------------------------- -------- ------- ----- ------- -------
Total Broadband Connections 15,772 15,686 0.5%
----------------------------------- -------- ------- ----- ------- -------
Voice Connections
Network Access Lines 10,832 12,791 -15.3%
U-verse VoIP Connections 5,449 5,853 -6.9%
Total Retail Voice Connections 16,281 18,644 -12.7%
=================================== ======== ======= ===== ======= ======= =====
Three Months Ended Six Months Ended
June 30, Percent June 30, Percent
------------------------------------ --------------------- ------------------
2018 2017 Change 2018 2017 Change
------------------------------------ --------- --------- --------- -------- -------- ---------
Wireless Net Additions
Domestic 3,064 2,298 33.3% 5,694 4,376 30.1%
Mexico 756 476 58.8% 1,299 1,109 17.1%
------------------------------------- --------- --------- -------- --------
Total Wireless Net Additions 3,820 2,774 37.7% 6,993 5,485 27.5%
------------------------------------- --------- --------- -------- --------
Total Branded Wireless Net Additions 1,280 904 41.6% 2,138 1,639 30.4%
Video Net Additions
Domestic 79 (199) -% 203 (360) -%
Latin America 140 (56) -% 125 35 -%
------------------------------------- --------- --------- -------- --------
Total Video Net Additions 219 (255) -% 328 (325) -%
------------------------------------- --------- --------- -------- --------
Broadband Net Additions
IP 72 124 -41.9% 222 370 -40.0%
DSL (75) (133) 43.6% (169) (289) 41.5%
------------------------------------- --------- --------- -------- --------
Total Broadband Net Additions (3) (9) 66.7% 53 81 -34.6%
------------------------------------- --------- --------- ----- -------- -------- -----
CONSUMER MOBILITY
The Consumer Mobility segment provides nationwide wireless service to consumers and wholesale
and resale wireless subscribers located in the U.S. or in U.S. territories. We provide voice
and data services, including high-speed internet, and video services.
Dollars in millions Three Months Ended Six Months Ended
Unaudited June 30, Percent June 30, Percent
---------------------------- -----------------------
2018 2017 Change 2018 2017 Change
------------------------------- ------- --- ------ ---------- ------ ------ ---------
Segment Operating Revenues
Service $ 11,853$ 12,467 -4.9% $23,465$ 24,932 -5.9%
Equipment 3,016 2,624 14.9% 6,390 4,965 28.7%
------------------------------- ------- --- ------ ------ ------
Total Segment Operating
Revenues 14,869 15,091 -1.5% 29,855 29,897 -0.1%
-------------------------------- ------- --- ------ ------ ------
Segment Operating Expenses
Operations and support 8,085 8,636 -6.4% 16,609 17,196 -3.4%
Depreciation and amortization 1,806 1,716 5.2% 3,613 3,432 5.3%
-------------------------------- ------- --- ------ ------ ------
Total Segment Operating
Expenses 9,891 10,352 -4.5% 20,222 20,628 -2.0%
-------------------------------- ------- --- ------ ------ ------
Segment Operating Income 4,978 4,739 5.0% 9,633 9,269 3.9%
Equity in Net Income of
Affiliates - - -% - - -%
-------------------------------- ------- --- ------ ------ ------
Segment Contribution $ 4,978$ 4,739 5.0% $ 9,633$ 9,269 3.9%
================================ ======= ====== ====== ======
Segment Operating Income Margin 33.5% 31.4% 210 BP 32.3% 31.0% 130 BP
-------------------------------- ------- ------ ----- --- ------ ------ -----
Subscribers and connections in thousands
Unaudited June 30, Percent
-----------------------
2018 2017 Change
------------------------------- ------- --- ------ ----- --- ------ ------ ---------
Consumer Mobility Subscribers
Postpaid 65,326 65,570 -0.4%
Prepaid 15,376 14,187 8.4%
------------------------------- ------- --- ------ ----- --- ------ ------
Branded 80,702 79,757 1.2%
Reseller 8,484 10,182 -16.7%
Total Consumer Mobility
Subscribers 89,186 89,939 -0.8%
================================ ======= === ====== ===== === ====== ====== =====
Three Months Ended Six Months Ended
June 30, Percent June 30, Percent
---------------------------- -----------------------
2018 2017 Change 2018 2017 Change
------------------------------- ------- --- ------ ---------- ------ ------ ---------
Consumer Mobility Net Additions
Postpaid (49) (28) -75.0% (113) (310) 63.5%
Prepaid 356 267 33.3% 548 549 -0.2%
------------------------------- ------- --- ------ ------ ------
Branded 307 239 28.5% 435 239 82.0%
Reseller (451) (364) -23.9% (841) (951) 11.6%
Total Consumer Mobility Net
Additions (144) (125) -15.2% (406) (712) 43.0%
------- --- ------ ----- ------ ------ -----
BUSINESS SOLUTIONS
The Business Solutions segment provides services to business customers, including multinational
companies; governmental and wholesale customers. We provide advanced IP-based services including
Virtual Private Networks (VPN); Ethernet-related products and broadband, collectively referred
to as strategic business services; as well as traditional data and voice products. We provide
a complete communications solution to our business customers.
--------------------------------------------------------------------------------------------------------------
Dollars in millions Three Months Ended Six Months Ended
Unaudited June 30, Percent June 30, Percent
--------------------------- -----------------------
2018 2017 Change 2018 2017 Change
-------------------------------- ------ --- ------ ---------- ------ ------ ---------
Segment Operating Revenues
Wireless service $ 1,829$ 2,004 -8.7% $ 3,620$ 4,007 -9.7%
Strategic services 3,039 2,958 2.7% 6,109 5,862 4.2%
Legacy voice and data services 2,723 3,423 -20.4% 5,561 6,971 -20.2%
Other service and equipment 888 922 -3.7% 1,727 1,800 -4.1%
Wireless equipment 584 360 62.2% 1,162 648 79.3%
------ --- ------ ------ ------
Total Segment Operating
Revenues 9,063 9,667 -6.2% 18,179 19,288 -5.7%
------ --- ------ ------ ------
Segment Operating Expenses
Operations and support 5,616 6,053 -7.2% 11,210 12,051 -7.0%
Depreciation and amortization 1,487 1,483 0.3% 2,945 2,943 0.1%
------ --- ------ ------ ------
Total Segment Operating
Expenses 7,103 7,536 -5.7% 14,155 14,994 -5.6%
------ --- ------ ------ ------
Segment Operating Income 1,960 2,131 -8.0% 4,024 4,294 -6.3%
Equity in Net Income (Loss) of
Affiliates 1 - -% - - -%
------ --- ------ ------ ------
Segment Contribution $ 1,961$ 2,131 -8.0% $ 4,024$ 4,294 -6.3%
====== ====== ====== ======
Segment Operating Income Margin 21.6% 22.0% -40 BP 22.1% 22.3% -20 BP
--------------------------------- ------ ------ ----- --- ------ ------ -----
Subscribers and connections in thousands
Unaudited June 30, Percent
-----------------------
2018 2017 Change
-------------------------------- ------ --- ------ ----- --- ------ ------ ---------
Business Solutions Wireless
Subscribers
Postpaid 12,046 11,432 5.4%
Prepaid 841 - -%
-------------------------------- ------ --- ------ ----- --- ------ ------
Branded 12,887 11,432 12.7%
Reseller 98 73 34.2%
Connected Devices 44,718 34,658 29.0%
--------------------------------- ------ --- ------ ----- --- ------ ------
Total Business Mobility
Subscribers 57,703 46,163 25.0%
--------------------------------- ------ --- ------ ----- --- ------ ------
Business Solutions IP Broadband Connections 1,017 992 2.5%
========================================================== ===== === ====== ====== =====
Three Months Ended Six Months Ended
June 30, Percent June 30, Percent
--------------------- ------------------
2018 2017 Change 2018 2017 Change
---------------------------------- --------- --------- --------- -------- -------- ---------
Business Solutions Wireless Net
Additions
Postpaid 122 171 -28.7% 235 259 -9.3%
Prepaid 97 - -% 146 - -%
----------------------------------- --------- --------- -------- --------
Branded 219 171 28.1% 381 259 47.1%
Reseller 7 (4) -% 9 1 -%
Connected Devices 2,982 2,256 32.2% 5,710 4,828 18.3%
----------------------------------- --------- --------- -------- --------
Total Business Solutions Wireless
Net Additions 3,208 2,423 32.4% 6,100 5,088 19.9%
----------------------------------- --------- --------- -------- --------
Business Solutions IP Broadband Net
Additions (4) 12 -% (8) 16 -%
----------------------------------- --------- --------- ----- -------- -------- -----
ENTERTAINMENT GROUP
The Entertainment Group segment provides video, internet, voice communication, and interactive
and targeted advertising services to customers located in the U.S. or in U.S. territories.
Dollars in millions Three Months Ended Six Months Ended
Unaudited June 30, Percent June 30, Percent
--------------------------- -----------------------
2018 2017 Change 2018 2017 Change
--------------------------------- ------- ------ --------- ------ ------ ---------
Segment Operating Revenues
Video entertainment $ 8,331$ 9,153 -9.0% $16,690$ 18,173 -8.2%
High-speed internet 1,981 1,927 2.8% 3,859 3,868 -0.2%
Legacy voice and data services 785 981 -20.0% 1,604 2,012 -20.3%
Other service and equipment 553 600 -7.8% 1,074 1,209 -11.2%
--------------------------------- ------- ------ ------ ------
Total Segment Operating
Revenues 11,650 12,661 -8.0% 23,227 25,262 -8.1%
---------------------------------- ------- ------ ------ ------
Segment Operating Expenses
Operations and support 8,852 9,561 -7.4% 17,791 19,166 -7.2%
Depreciation and amortization 1,346 1,458 -7.7% 2,658 2,878 -7.6%
---------------------------------- ------- ------ ------ ------
Total Segment Operating
Expenses 10,198 11,019 -7.5% 20,449 22,044 -7.2%
---------------------------------- ------- ------ ------ ------
Segment Operating Income 1,452 1,642 -11.6% 2,778 3,218 -13.7%
Equity in Net Income (Loss) of
Affiliates (20) (12) -66.7% (11) (18) 38.9%
---------------------------------- ------- ------ ------ ------
Segment Contribution $ 1,432$ 1,630 -12.1% $ 2,767$ 3,200 -13.5%
================================== ======= ====== ====== ======
Segment Operating Income Margin 12.5% 13.0% -50 BP 12.0% 12.7% -70 BP
---------------------------------- ------- ------ ----- ------ ------ -----
Subscribers and connections in
thousands
Unaudited June 30, Percent
-----------------------
2018 2017 Change
--------------------------------- ------- ------ --------- ------ ------ ---------
Video Connections
Satellite 19,984 20,856 -4.2%
U-verse 3,656 3,825 -4.4%
DIRECTV NOW 1,809 491 -%
--------------------------------- ------- ------ ----- ------ ------
Total Video Connections 25,449 25,172 1.1%
---------------------------------- ------- ------ ----- ------ ------
Broadband Connections
IP 13,692 13,242 3.4%
DSL 763 1,060 -28.0%
--------------------------------- ------- ------ ----- ------ ------
Total Broadband Connections 14,455 14,302 1.1%
---------------------------------- ------- ------ ----- ------ ------
Voice Connections
Retail Consumer Switched Access
Lines 4,333 5,257 -17.6%
U-verse Consumer VoIP Connections 4,950 5,439 -9.0%
--------------------------------- ------- ------ ----- ------ ------
Total Retail Consumer Voice
Connections 9,283 10,696 -13.2%
================================== ======= ====== ===== ====== ====== =====
Three Months Ended Six Months Ended
June 30, Percent June 30, Percent
--------------------- ------------------
2018 2017 Change 2018 2017 Change
---------------------------------- --------- --------- --------- -------- -------- ---------
Video Net Additions(1)
Satellite (286) (156) -83.3% (474) (156) -%
U-verse 24 (195) -% 25 (428) -%
DIRECTV NOW 342 152 -% 654 224 -%
----------------------------------- --------- --------- -------- --------
Total Video Net Additions 80 (199) -% 205 (360) -%
----------------------------------- --------- --------- -------- --------
Broadband Net Additions
IP 76 112 -32.1% 230 354 -35.0%
DSL (53) (104) 49.0% (125) (231) 45.9%
----------------------------------- --------- --------- -------- --------
Total Broadband Net Additions 23 8 -% 105 123 -14.6%
----------------------------------- --------- --------- -------- --------
(1) Includes the impact of customers that migrated to
DIRECTV NOW.
--------------------------------------------------------- ----- -------- -------- -----
INTERNATIONAL
The International segment provides entertainment services in Latin America and wireless services
in Mexico. Video entertainment services are provided to primarily residential customers using
satellite technology. We utilize our regional and national wireless networks in Mexico to
provide consumer and business customers with wireless data and voice communication services.
Our international subsidiaries conduct business in their local currency and operating results
are converted to U.S. dollars using official exchange rates.
Dollars in millions Three Months Ended Six Months Ended
Unaudited June 30, Percent June 30, Percent
2018 2017 Change 2018 2017 Change
--------------------------------- ------ --- ------ --------- ---------
Segment Operating Revenues
Video entertainment $ 1,254$ 1,361 -7.9% $ 2,608$ 2,702 -3.5%
Wireless service 417 535 -22.1% 821 1,010 -18.7%
Wireless equipment 280 130 115.4% 547 243 125.1%
--------------------------------- ------ --- ------ ------ ------
Total Segment Operating
Revenues 1,951 2,026 -3.7% 3,976 3,955 0.5%
---------------------------------- ------ --- ------ ------ ------
Segment Operating Expenses
Operations and support 1,803 1,772 1.7% 3,607 3,531 2.2%
Depreciation and amortization 313 311 0.6% 645 601 7.3%
---------------------------------- ------ --- ------ ------ ------
Total Segment Operating
Expenses 2,116 2,083 1.6% 4,252 4,132 2.9%
---------------------------------- ------ --- ------ ------ ------
Segment Operating Income (Loss) (165) (57) -% (276) (177) -55.9%
Equity in Net Income of Affiliates 15 25 -40.0% 15 45 -66.7%
---------------------------------- ------ --- ------ ------ ------
Segment Contribution $ (150)$ (32) -% $ (261)$ (132) -97.7%
================================== ====== ====== ====== ======
Segment Operating Income Margin (8.5)% (2.8)% -570 BP (6.9)% (4.5)% -240 BP
---------------------------------- ------ ------ ----- ------ ------ -----
Subscribers and connections in
thousands
Unaudited June 30, Percent
2018 2017 Change
--------------------------------- ------ --- ------ ----- ------ ------ ---------
Mexican Wireless Subscribers
Postpaid 5,749 5,187 10.8%
Prepaid 10,468 7,646 36.9%
--------------------------------- ------ --- ------ ----- ------ ------
Branded 16,217 12,833 26.4%
Reseller 181 249 -27.3%
---------------------------------- ------ --- ------ ----- ------ ------
Total Mexican Wireless Subscribers 16,398 13,082 25.3%
---------------------------------- ------ --- ------ ----- ------ ------
Latin America Satellite
Subscribers
---------------------------------- ------ --- ------ ----- ------ ------
Total Latin America Satellite
Subscribers 13,713 13,622 0.7%
================================== ====== === ====== ===== ====== ====== =====
Three Months Ended Six Months Ended
June 30, Percent June 30, Percent
2018 2017 Change 2018 2017 Change
--------- --------- --------- -------- -------- ---------
Mexican Wireless Net Additions
Postpaid 142 92 54.3% 251 222 13.1%
Prepaid 611 402 52.0% 1,070 919 16.4%
----------------------------------- --------- --------- -------- --------
Branded 753 494 52.4% 1,321 1,141 15.8%
Reseller 3 (18) -% (22) (32) 31.3%
----------------------------------- --------- --------- -------- --------
Total Mexican Wireless Net
Additions 756 476 58.8% 1,299 1,109 17.1%
----------------------------------- --------- --------- -------- --------
Latin America Satellite Net
Additions
----------------------------------- --------- --------- -------- --------
Total Latin America Satellite Net
Additions 140 (56) -% 125 35 -%
----------------------------------- --------- --------- ----- -------- -------- -----
WarnerMedia
The WarnerMedia segment consists of the results of Time Warner Inc. after we completed our
acquisition June 14, 2018. Our Warner Media segment operating income margin was 35.4% for
the 16-day period ended June 30, 2018. Consistent with our past practice, many of the adjustment
from the application of purchase accounting rules required under GAAP have not been allocated
to the business unit, instead they are reported as acquisition-related items. The Warner Media
segment consists of the following businesses: Turner, consisting principally of cable networks
and digital media properties; Home Box Office (HBO), consisting principally of premium pay
television and OTT services; and Warner Bros., consisting principally of television, feature
film, home video and game production and distribution.
Dollars in millions Three Months Ended Six Months Ended
Unaudited June 30, Percent June 30, Percent
------------------------------ -----------------------
2018 2017 Change 2018 2017 Change
------------------------------ -------- --- ------ --- --------- ------- ----- ---------
Segment Operating Revenues
Content $ 487$ - -% $ 487$ - -%
Subscription 591 - -% 591 - -%
Advertising 208 208
Other 51 - -% 51 - -%
Intrasegment eliminations (62) (62)
------------------------------ -------- --- ------ --- ------- -----
Total Segment Operating
Revenues 1,275 - -% 1,275 - -%
------------------------------- -------- --- ------ --- ------- -----
Segment Operating Expenses
Operations and support 794 - -% 794 - -%
Depreciation and amortization 30 - -% 30 - -%
------------------------------- -------- --- ------ --- ------- -----
Total Segment Operating
Expenses 824 - -% 824 - -%
------------------------------- -------- --- ------ --- ------- -----
Segment Operating Income (Loss) 451 - -% 451 - -%
Equity in Net Income of
Affiliates (6) - -% (6) - -%
------------------------------- -------- --- ------ --- ------- -----
Segment Contribution $ 445$ - -% $ 445$ - -%
=============================== ======== ====== === ======= =====
Segment Operating Income Margin 35.4% -% - BP 35.4% -% - BP
------------------------------- -------- ------ --- ---- ------- ----- ---
SUPPLEMENTAL OPERATING INFORMATION - AT&T MOBILITY
As a supplemental discussion of our operating results, for comparison purposes, we are providing
a view of our combined domestic wireless operations (AT&T Mobility).
Dollars in millions Three Months Ended Six Months Ended
Unaudited June 30, Percent June 30, Percent
---------------------------- -------------------------
2018 2017 Change 2018 2017 Change
------------------------------- ------- --- ------ --------- ------- ------- ---------
Operating Revenues
Service $ 13,682$ 14,471 -5.5% $ 27,085$ 28,939 -6.4%
Equipment 3,600 2,984 20.6% 7,552 5,613 34.5%
------------------------------ --- ------ -------
Total Operating Revenues 17,282 17,455 -1.0% 34,637 34,552 0.2%
------------------------------- --- ------ -------
Operating Expenses
Operations and support 9,663 10,091 -4.2% 19,765 19,976 -1.1%
Depreciation and amortization 2,113 1,988 6.3% 4,208 3,980 5.7%
------------------------------- --- ------ -------
Total Operating Expenses 11,776 12,079 -2.5% 23,973 23,956 0.1%
------------------------------- --- ------ -------
Operating Income $ 5,506$ 5,376 2.4% $ 10,664$ 10,596 0.6%
===============================
Operating Income Margin 31.9% 30.8% 110 BP 30.8% 30.7% 10 BP
------------------------------- ------ ----- ------- -----
Subscribers and connections in
thousands
Unaudited June 30, Percent
-------------------------
2018 2017 Change
------------------------------ ------- --- ------ ----- ------- ------- ---------
AT&T Mobility Subscribers
Postpaid 77,372 77,002 0.5%
Prepaid 16,217 14,187 14.3%
------------------------------ ------- --- ------ ----- -------
Branded 93,589 91,189 2.6%
Reseller 8,582 10,255 -16.3%
Connected Devices 44,718 34,658 29.0%
------------------------------- ------- --- ------ ----- -------
Total AT&T Mobility Subscribers 146,889 136,102 7.9%
------------------------------- -------
Domestic Licensed POPs
(000,000) 329 326 0.9%
===============================
Three Months Ended Six Months Ended
June 30, Percent June 30, Percent
----------------------
2018 2017 Change 2018 2017 Change
---------------------------------- ------- --- ------ --------- ----- ------- ---------
AT&T Mobility Net Additions
Postpaid 73 143 -49.0% 122 (51) -%
Prepaid 453 267 69.7% 694 549 26.4%
----------------------------------- --- ------ -------
Branded 526 410 28.3% 816 498 63.9%
Reseller (444) (368) -20.7% (832) (950) 12.4%
Connected Devices 2,982 2,256 32.2% 5,710 4,828 18.3%
----------------------------------- --- ------ -------
Total AT&T Mobility Net Additions 3,064 2,298 33.3% 5,694 4,376 30.1%
----------------------------------- --- ------ -------
M&A Activity, Partitioned Customers
and
Other Adjustments (7) - -% (6) (2,723) 99.8%
Branded Churn 1.50% 1.57% -7 BP 1.57% 1.64% -7 BP
Postpaid Churn 1.02% 1.01% 1 BP 1.04% 1.06% -2 BP
Postpaid Phone Only Churn 0.82% 0.79% 3 BP 0.83% 0.84% -1 BP
----------------------------------- ------ ----- ------- -----
SUPPLEMENTAL SEGMENT RECONCILIATION
Dollars in millions
Unaudited
June 30, 2018
Operations Equity in
and Depreciation Operating Net Income
Support and Income (Loss) of Segment
Revenues Expenses EBITDA Amortization (Loss) Affiliates Contribution
Consumer Mobility $ 14,869 $ 8,085 $ 6,784 $ 1,806 $ 4,978 $ - $ 4,978
Business Solutions 9,063 5,616 3,447 1,487 1,960 1 1,961
Entertainment Group 11,650 8,852 2,798 1,346 1,452 (20) 1,432
International 1,951 1,803 148 313 (165) 15 (150)
Warner Media 1,275 794 481 30 451 (6) 445
Segment Total 38,808 25,150 13,658 4,982 8,676 $ (10) $ 8,666
Corporate and Other 319 660 (341) 118 (459)
Acquisition-related
items - 321 (321) 1,278 (1,599)
Certain Significant
items - 152 (152) - (152)
Eliminations (141) (141) - - -
--------
AT&T Inc. $ 38,986 $ 26,142 $12,844 $ 6,378 $ 6,466
June 30, 2017
Operations Equity in
and Depreciation Operating Net Income
Support and Income (Loss) of Segment
Revenues Expenses EBITDA Amortization (Loss) Affiliates Contribution
Consumer Mobility $ 15,091 $ 8,636 $ 6,455 $ 1,716 $ 4,739 $ - $ 4,739
Business Solutions 9,667 6,053 3,614 1,483 2,131 - 2,131
Entertainment Group 12,661 9,561 3,100 1,458 1,642 (12) 1,630
International 2,026 1,772 254 311 (57) 25 (32)
-------- ------
Segment Total 39,445 26,022 13,423 4,968 8,455 $ 13 $ 8,468
Corporate and Other 392 766 (374) 9 (383)
Acquisition-related
items - 281 (281) 1,170 (1,451)
Certain Significant
items - 95 (95) - (95)
-------- ------
AT&T Inc. $ 39,837 $ 27,164 $12,673 $ 6,147 $ 6,526
Dollars in millions
Unaudited
June 30, 2018
Operations Equity in
and Depreciation Operating Net Income
Support and Income (Loss) of Segment
Revenues Expenses EBITDA Amortization (Loss) Affiliates Contribution
Consumer Mobility $ 29,855 $ 16,609 $13,246 $ 3,613 $ 9,633 $ - $ 9,633
Business Solutions 18,179 11,210 6,969 2,945 4,024 - 4,024
Entertainment Group 23,227 17,791 5,436 2,658 2,778 (11) 2,767
International 3,976 3,607 369 645 (276) 15 (261)
Warner Media 1,275 794 481 30 451 (6) 445
Segment Total 76,512 50,011 26,501 9,891 16,610 $ (2) $ 16,608
Corporate and Other 653 1,395 (742) 141 (883)
Acquisition-related
items - 388 (388) 2,340 (2,728)
Certain Significant
items - 332 (332) - (332)
Eliminations (141) (141) - - -
--------
AT&T Inc. $ 77,024 $ 51,985 $25,039 $ 12,372 $ 12,667
June 30, 2017
Operations Equity in
and Depreciation Operating Net Income
Support and Income (Loss) of Segment
Revenues Expenses EBITDA Amortization (Loss) Affiliates Contribution
Consumer Mobility $ 29,897 $ 17,196 $12,701 $ 3,432 $ 9,269 $ - $ 9,269
Business Solutions 19,288 12,051 7,237 2,943 4,294 - 4,294
Entertainment Group 25,262 19,166 6,096 2,878 3,218 (18) 3,200
International 3,955 3,531 424 601 (177) 45 (132)
-------- ------
Segment Total 78,402 51,944 26,458 9,854 16,604 $ 27 $ 16,631
Corporate and Other 800 1,637 (837) 48 (885)
Acquisition-related
items - 488 (488) 2,372 (2,860)
Certain Significant
items - (23) 23 - 23
-------- ------
AT&T Inc. $ 79,202 $ 54,046 $25,156 $ 12,274 $ 12,882
As a supplemental discussion of our operating results, we are providing results under the
comparative historical accounting method prior to our adoption of ASC 606 and other accounting
changes.
SUPPLEMENTAL INCOME STATEMENT
Dollars in millions except per share Three Months Ended
amounts
Unaudited June 30,
Historical Percent
2018 Accounting Impact 2018 2017 Change
Operating Revenues
Service $ 33,773 $ (1,390) $ 35,163 $ 36,538 -3.8%
Equipment 4,080 469 3,611 3,299 9.5%
Media 1,133 (2) 1,135 - -%
Total Operating Revenues 38,986 (923) 39,909 39,837 0.2%
Operating Expenses
Cost of revenues
Equipment 4,377 - 4,377 4,138 5.8%
Broadcast, programming and
operations 5,449 - 5,449 4,898 11.2%
Other cost of revenues (exclusive
of depreciation
and amortization shown separately
below) 7,632 (903) 8,535 9,569 -10.8%
Selling, general and administrative 8,684 (583) 9,267 8,559 8.3%
Depreciation and amortization 6,378 - 6,378 6,147 3.8%
Total Operating Expenses 32,520 (1,486) 34,006 33,311 2.1%
Operating Income 6,466 563 5,903 6,526 -9.5%
Interest Expense (2,023) - (2,023) (1,395) 45.0%
Equity in Net Income (Loss) of
Affiliates (16) - (16) 14 -%
Other Income (Expense) - Net 2,353 - 2,353 925 -%
Income Before Income Taxes 6,780 563 6,217 6,070 2.4%
Income Tax Expense 1,532 138 1,394 2,056 -32.2%
Net Income 5,248 425 4,823 4,014 20.2%
Less: Net Income Attributable to
Noncontrolling Interest (116) (6) (110) (99) -11.1%
Net Income Attributable to AT&T $ 5,132 $ 419 $ 4,713 $ 3,915 20.4%
Basic Earnings Per Share Attributable
to AT&T $ 0.81 $ 0.07 $ 0.74 $ 0.63 17.5%
Weighted Average Common
Shares Outstanding (000,000) 6,351 - 6,351 6,165 3.0%
Diluted Earnings Per Share
Attributable to AT&T $ 0.81 $ 0.07 $ 0.74 $ 0.63 17.5%
Weighted Average Common
Shares Outstanding with Dilution
(000,000) 6,374 - 6,374 6,184 3.1%
SUPPLEMENTAL CONSUMER MOBILITY
Dollars in millions Three Months Ended
Unaudited June 30,
Historical Percent
2018 Accounting Impact 2018 2017 Change
Segment Operating Revenues
Service $11,853 $ (603) $ 12,456 $12,467 -0.1%
Equipment 3,016 291 2,725 2,624 3.8%
Total Segment Operating Revenues 14,869 (312) 15,181 15,091 0.6%
Segment Operating Expenses
Operations and support 8,085 (571) 8,656 8,636 0.2%
EBITDA 6,784 259 6,525 6,455 1.1%
Depreciation and amortization 1,806 - 1,806 1,716 5.2%
Total Segment Operating Expenses 9,891 (571) 10,462 10,352 1.1%
Segment Operating Income 4,978 259 4,719 4,739 -0.4%
Equity in Net Income of Affiliates - - - - -%
Segment Contribution $ 4,978 $ 259 $ 4,719 $ 4,739 -0.4%
Operating Income Margin 33.5% 31.1% 31.4% -30 BP
EBITDA Margin 45.6% 43.0% 42.8% 20 BP
EBITDA Service Margin 57.2% 52.4% 51.8% 60 BP
SUPPLEMENTAL BUSINESS SOLUTIONS
Dollars in millions Three Months Ended
Unaudited June 30,
Historical Percent Change
2018 Accounting Impact 2018 2017
Segment Operating Revenues
Wireless service $1,829 $ (209) $ 2,038 $2,004 1.7%
Strategic services 3,039 (2) 3,041 2,958 2.8%
Legacy voice and data services 2,723 (251) 2,974 3,423 -13.1%
Other service and equipment 888 (70) 958 922 3.9%
Wireless equipment 584 160 424 360 17.8%
Total Segment Operating Revenues 9,063 (372) 9,435 9,667 -2.4%
Segment Operating Expenses
Operations and support 5,616 (443) 6,059 6,053 0.1%
EBITDA 3,447 71 3,376 3,614 -6.6%
Depreciation and amortization 1,487 - 1,487 1,483 0.3%
Total Segment Operating Expenses 7,103 (443) 7,546 7,536 0.1%
Segment Operating Income 1,960 71 1,889 2,131 -11.4%
Equity in Net Income of Affiliates 1 - 1 - -%
Segment Contribution $1,961 $ 71 $ 1,890 $2,131 -11.3%
Operating Income Margin 21.6% 20.0% 22.0% -200 BP
EBITDA Margin 38.0% 35.8% 37.4% -160 BP
SUPPLEMENTAL ENTERTAINMENT GROUP
Dollars in millions Three Months Ended
Unaudited June 30,
Historical Percent
2018 Accounting Impact 2018 2017 Change
Segment Operating Revenues
Video entertainment $ 8,331 $ (107) $ 8,438 $ 9,153 -7.8%
High-speed internet 1,981 - 1,981 1,927 2.8%
Legacy voice and data services 785 (33) 818 981 -16.6%
Other service and equipment 553 (66) 619 600 3.2%
Total Segment Operating Revenues 11,650 (206) 11,856 12,661 -6.4%
Segment Operating Expenses
Operations and support 8,852 (425) 9,277 9,561 -3.0%
EBITDA 2,798 219 2,579 3,100 -16.8%
Depreciation and amortization 1,346 - 1,346 1,458 -7.7%
Total Segment Operating Expenses 10,198 (425) 10,623 11,019 -3.6%
Segment Operating Income 1,452 219 1,233 1,642 -24.9%
Equity in Net Income (Loss) of Affiliates (20) - (20) (12) -66.7%
Segment Contribution $ 1,432 $ 219 $ 1,213 $ 1,630 -25.6%
Operating Income Margin 12.5% 10.4% 13.0% -260 BP
EBITDA Margin 24.0% 21.8% 24.5% -270 BP
SUPPLEMENTAL INTERNATIONAL
Dollars in millions Three Months Ended
Unaudited June 30,
Historical Percent
2018 Accounting Impact 2018 2017 Change
Segment Operating Revenues
Video entertainment $1,254 $ - $ 1,254 $1,361 -7.9%
Wireless service 417 (40) 457 535 -14.6%
Wireless equipment 280 18 262 130 -%
Total Segment Operating Revenues 1,951 (22) 1,973 2,026 -2.6%
Segment Operating Expenses
Operations and support 1,803 (41) 1,844 1,772 4.1%
EBITDA 148 19 129 254 -49.2%
Depreciation and amortization 313 - 313 311 0.6%
Total Segment Operating Expenses 2,116 (41) 2,157 2,083 3.6%
Segment Operating Income (Loss) (165) 19 (184) (57) -%
Equity in Net Income of Affiliates 15 - 15 25 -40.0%
Segment Contribution $(150) $ 19 $ (169) $ (32) -%
Operating Income Margin -8.5% -9.3% -2.8% -650 BP
EBITDA Margin 7.6% 6.5% 12.5% -600 BP
SUPPLEMENTAL AT&T MOBILITY
Dollars in millions Three Months Ended
Unaudited June 30,
Historical Percent
2018 Accounting Impact 2018 2017 Change
Operating Revenues
Service $13,682 $ (813) $ 14,495 $14,471 0.2%
Equipment 3,600 451 3,149 2,984 5.5%
Total Operating Revenues 17,282 (362) 17,644 17,455 1.1%
Operating Expenses
Operations and support 9,663 (670) 10,333 10,091 2.4%
EBITDA 7,619 308 7,311 7,364 -0.7%
Depreciation and amortization 2,113 - 2,113 1,988 6.3%
Total Operating Expenses 11,776 (670) 12,446 12,079 3.0%
Operating Income $ 5,506 $ 308 $ 5,198 $ 5,376 -3.3%
Operating Income Margin 31.9% 29.5% 30.8% -130 BP
EBITDA Margin 44.1% 41.4% 42.2% -80 BP
EBITDA Service Margin 55.7% 50.4% 50.9% -50 BP
SUPPLEMENTAL LATIN AMERICA
Dollars in millions Three Months Ended
Unaudited June 30,
Historical Percent
2018 Accounting Impact 2018 2017 Change
Operating Revenues
Video entertainment $1,254 $ - $ 1,254 $1,361 -7.9%
Total Operating Revenues 1,254 - 1,254 1,361 -7.9%
Operating Expenses
Operations and support 1,016 (40) 1,056 998 5.8%
EBITDA 238 40 198 363 -45.5%
Depreciation and amortization 186 - 186 222 -16.2%
Total Operating Expenses 1,202 (40) 1,242 1,220 1.8%
Operating Income (Loss) 52 40 12 141 -91.5%
Equity in Net Income (Loss) of Affiliates 15 - 15 25 -40.0%
Operating Contribution $ 67 $ 40 $ 27 $ 166 -83.7%
Operating Income Margin 4.1% 1.0% 10.4% -940 BP
EBITDA Margin 19.0% 15.8% 26.7% -1,090 BP
SUPPLEMENTAL MEXICO
Dollars in millions Three Months Ended
Unaudited June 30,
Historical Percent
2018 Accounting Impact 2018 2017 Change
Operating Revenues
Wireless service $ 417 $ (40) $ 457 $ 535 -14.6%
Wireless equipment 280 18 262 130 -%
Total Operating Revenues 697 (22) 719 665 8.1%
Operating Expenses
Operations and support 787 (1) 788 774 1.8%
EBITDA (90) (21) (69) (109) 36.7%
Depreciation and amortization 127 - 127 89 42.7%
Total Operating Expenses 914 (1) 915 863 6.0%
Operating Income (Loss) (217) (21) (196) (198) 1.0%
Operating Contribution $ (217) $ (21) $ (196) $ (198) 1.0%
Operating Income Margin -31.1% -27.3% -29.8% 250 BP
EBITDA Margin -12.9% -9.6% -16.4% 680 BP
Discussion and Reconciliation of Non-GAAP Measures
We believe the following measures are relevant and useful
information to 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 AT&T and its segments. Management also uses these measures
as a method of comparing performance with that of many of our
competitors.
Certain amounts have been conformed to the current period's
presentation, including our adoption of new accounting standards;
ASU No. 2017-07, "Compensation - Retirement Benefits (Topic 715):
Improving the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost," ASU No. 2016-15, "Statement
of Cash Flows (Topic 230): Classification of Certain Cash Receipts
and Cash Payments," and ASU No. 2016-18, Statement of Cash Flows
(Topic 230): Restricted Cash; and our realignment of certain
responsibilities and operations within our segments, the most
significant of which is to report wireless accounts with employer
discounts in our Consumer Mobility segment.
Free Cash Flow
Free cash flow is defined as cash from operations minus Capital
expenditures. Free cash flow after dividends is defined as cash
from operations minus 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 views free
cash flow as an important indicator of how much cash is generated
by routine 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.
Dollars in millions Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Net cash provided by operating activities $ 10,229 $ 8,705 $ 19,176 $ 17,670
Less: Capital expenditures (5,108) (5,208) (11,226) (11,223)
Free Cash Flow 5,121 3,497 7,950 6,447
Less: Dividends paid (3,074) (3,012) (6,144) (6,021)
Free Cash Flow after Dividends $ 2,047 $ 485 $ 1,806 $ 426
Free Cash Flow Dividend Payout Ratio 60.0% 86.1% 77.3% 93.4%
EBITDA
Our calculation of EBITDA, as presented, may differ from
similarly titled measures reported by other companies. For
AT&T, EBITDA excludes other income (expense) - net, and equity
in net income (loss) of affiliates, as these do not reflect the
operating results of our subscriber base or operations that are not
under our control. 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, management
excludes these results when evaluating the performance of our
primary operations. EBITDA also excludes interest expense and the
provision for income taxes. Excluding these items eliminates the
expenses associated with our capital and tax structures. Finally,
EBITDA excludes depreciation and amortization in order to eliminate
the impact of capital investments. 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 U.S. generally accepted accounting
principles (GAAP).
EBITDA service margin is calculated as EBITDA divided by service
revenues.
1
When discussing our segment results, EBITDA excludes equity in
net income (loss) of affiliates, and depreciation and amortization
from segment contribution. For our supplemental presentation of our
combined domestic wireless operations (AT&T Mobility) and our
supplemental presentation of the Mexico Wireless and Latin America
operations of our International segment, EBITDA excludes
depreciation and amortization from operating income.
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. Management uses Mexico Wireless EBITDA in evaluating
profitability trends after our two Mexico wireless acquisitions in
2015, and our investments in building a nationwide LTE network by
end of 2018. Management uses Latin America EBITDA in evaluating the
ability of our Latin America operations to generate cash to finance
its own operations.
We believe EBITDA Service Margin (EBITDA as a percentage of
service revenues) to be a more relevant measure than EBITDA Margin
(EBITDA as a percentage of total revenue) for our Consumer Mobility
segment operating margin and our supplemental AT&T Mobility
operating margin. 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, EBITDA margin 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.
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, EBITDA margin 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.
2
Dollars in millions Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Net Income $ 5,248 $ 4,014 $ 10,007 $ 7,588
Additions:
Income Tax (Benefit) Expense 1,532 2,056 2,914 3,860
Interest Expense 2,023 1,395 3,794 2,688
Equity in Net (Income) Loss of Affiliates 16 (14) 7 159
Other (Income) Expense - Net (2,353) (925) (4,055) (1,413)
Depreciation and amortization 6,378 6,147 12,372 12,274
EBITDA 12,844 12,673 25,039 25,156
Total Operating Revenues 38,986 39,837 77,024 79,202
Service Revenues 33,773 36,538 67,419 72,994
EBITDA Margin 32.9% 31.8% 32.5% 31.8%
EBITDA Service Margin 38.0% 34.7% 37.1% 34.5%
Dollars in millions Three Months Ended
June 30, 2018
Net Income $ 4,823
Additions:
Income Tax (Benefit) Expense 1,394
Interest Expense 2,023
Equity in Net (Income) Loss of Affiliates 16
Other (Income) Expense - Net (2,353)
Depreciation and amortization 6,378
EBITDA 12,281
Total Operating Revenues 39,909
Service Revenues 35,163
EBITDA Margin 30.8%
EBITDA Service Margin 34.9%
3
Dollars in millions Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Consumer Mobility Segment
Segment Contribution $ 4,978 $ 4,739 $ 9,633 $ 9,269
Additions:
Depreciation and amortization 1,806 1,716 3,613 3,432
EBITDA 6,784 6,455 13,246 12,701
Total Segment Operating Revenues 14,869 15,091 29,855 29,897
Service Revenues 11,853 12,467 23,465 24,932
Segment Operating Income Margin 33.5% 31.4% 32.3% 31.0%
EBITDA Margin 45.6% 42.8% 44.4% 42.5%
EBITDA Service Margin 57.2% 51.8% 56.5% 50.9%
Business Solutions Segment
Segment Contribution $ 1,961 $ 2,131 $ 4,024 $ 4,294
Additions:
Equity in Net (Income) Loss of Affiliates (1) - - -
Depreciation and amortization 1,487 1,483 2,945 2,943
EBITDA 3,447 3,614 6,969 7,237
Total Segment Operating Revenues 9,063 9,667 18,179 19,288
Segment Operating Income Margin 21.6% 22.0% 22.1% 22.3%
EBITDA Margin 38.0% 37.4% 38.3% 37.5%
Entertainment Group Segment
Segment Contribution $ 1,432 $ 1,630 $ 2,767 $ 3,200
Additions:
Equity in Net (Income) Loss of Affiliates 20 12 11 18
Depreciation and amortization 1,346 1,458 2,658 2,878
EBITDA 2,798 3,100 5,436 6,096
Total Segment Operating Revenues 11,650 12,661 23,227 25,262
Segment Operating Income Margin 12.5% 13.0% 12.0% 12.7%
EBITDA Margin 24.0% 24.5% 23.4% 24.1%
International Segment
Segment Contribution $ (150) $ (32) $ (261) $ (132)
Additions:
Equity in Net (Income) of Affiliates (15) (25) (15) (45)
Depreciation and amortization 313 311 645 601
EBITDA 148 254 369 424
Total Segment Operating Revenues 1,951 2,026 3,976 3,955
Segment Operating Income Margin -8.5% -2.8% -6.9% -4.5%
EBITDA Margin 7.6% 12.5% 9.3% 10.7%
4
Dollars in millions Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
AT&T Mobility
Operating Income $ 5,506 $ 5,376 $ 10,664 $10,596
Add: Depreciation and amortization 2,113 1,988 4,208 3,980
EBITDA 7,619 7,364 14,872 14,576
Total Operating Revenues 17,282 17,455 34,637 34,552
Service Revenues 13,682 14,471 27,085 28,939
Operating Income Margin 31.9% 30.8% 30.8% 30.7%
EBITDA Margin 44.1% 42.2% 42.9% 42.2%
EBITDA Service Margin 55.7% 50.9% 54.9% 50.4%
Dollars in millions Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
International - Latin America
Operating Income $ 52 $ 141 $ 200 $ 218
Add: Depreciation and amortization 186 222 391 436
EBITDA 238 363 591 654
Total Operating Revenues 1,254 1,361 2,608 2,702
Operating Income Margin 4.1% 10.4% 7.7% 8.1%
EBITDA Margin 19.0% 26.7% 22.7% 24.2%
Dollars in millions Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
International - Mexico
Operating Income (Loss) $ (217) $ (198) $ (476) $ (395)
Add: Depreciation and amortization 127 89 254 165
EBITDA (90) (109) (222) (230)
Total Operating Revenues 697 665 1,368 1,253
Operating Income Margin -31.1% -29.8% -34.8% -31.5%
EBITDA Margin -12.9% -16.4% -16.2% -18.4%
5
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, unless earlier remeasurement is required
(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% for transactions prior to tax reform and 25% for
transactions after tax reform.
Dollars in millions Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Operating Expenses
Time Warner and other merger costs 321 78 388 119
Employee separation costs 133 60 184 60
Natural disaster costs - - 104 -
DIRECTV merger integration costs - 123 - 250
Mexico merger integration costs - 80 - 119
(Gain) loss on transfer of wireless spectrum - (63) - (181)
Foreign currency devaluation 18 98 43 98
Adjustments to Operations and Support Expenses 472 376 719 465
Amortization of intangible assets 1,278 1,170 2,340 2,372
Adjustments to Operating Expenses 1,750 1,546 3,059 2,837
Other
Merger-related interest and fees(1) 636 158 1,029 267
Actuarial (gain) loss (1,796) (259) (2,726) (259)
(Gain) loss on sale of assets,
impairments and other adjustments 48 (36) 48 221
Adjustments to Income Before Income Taxes 638 1,409 1,410 3,066
Tax impact of adjustments 44 445 217 1,001
Tax related items (96) - (96) -
Adjustments to Net Income $ 690 $ 964 $ 1,289 $ 2,065
(1) Includes interest expense incurred on debt issued, redemption premiums and interest income
earned on cash held 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.
6
Dollars in millions Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Operating Income $ 6,466 $ 6,526 $ 12,667 $12,882
Adjustments to Operating Expenses 1,750 1,546 3,059 2,837
Adjusted Operating Income 8,216 8,072 15,726 15,719
EBITDA 12,844 12,673 25,039 25,156
Adjustments to Operations and Support Expenses 472 376 719 465
Adjusted EBITDA 13,316 13,049 25,758 25,621
WarnerMedia Operating Income 1,236 3,047
Pro Forma
Additions:
Depreciation and amortization 168 339
Merger costs 548 694
WarnerMedia Adjusted EBITDA 1,952 4,080
WarnerMedia segment income (post acquisition) (451) (451)
WarnerMedia segment depreciation and
amortization (post acquisition) (30) (30)
WarnerMedia merger costs (post acquisition) (159) (159)
Film and television cost amortization (release prior to
June 14) 1,324 2,693
Pro Forma Adjusted EBITDA (1) 15,952 31,891
Total Operating Revenues 38,986 39,837 77,024 79,202
Service Revenues 33,773 36,538 67,419 72,994
Operating Income Margin 16.6% 16.4% 16.4% 16.3%
Adjusted Operating Income Margin 21.1% 20.3% 20.4% 19.8%
Adjusted EBITDA Margin 34.2% 32.8% 33.4% 32.3%
Adjusted EBITDA Service Margin 39.4% 35.7% 38.2% 35.1%
Supplemental Results under Historical Accounting Method
Operating Income 5,903
Adjustments to Operating Expenses 1,750
Adjusted Supplemental Operating Income 7,653
EBITDA 12,281
Adjustments to Operations and Support Expenses 472
Adjusted Supplemental EBITDA 12,753
Supplemental Operating Revenues 39,909
Adjusted Supplemental Operating Income Margin 19.2%
Adjusted Supplemental EBITDA margin 32.0%
(1) Pro Forma Adjusted EBITDA reflects the combined results operations of the combined company
based on the historical financial statements of AT&T and Time Warner, after giving effect
to the merger and certain adjustments, and is intended to reflect the impact of the Time Warner
acquisition on AT&T. WarnerMedia operating income, depreciation and amortization expense and
merger costs are provided on Item 7.01 Form 8-K filed by AT&T on July 24, 2018. Pro Forma
adjustments are to (1) remove the duplication of operating results for the 16-period in which
AT&T also reported Time Warner results and (2) to recognize the purchase accounting classification
of released content as intangible assets and accordingly reclassify associated content amortization
from operating expense to amortization expense. Intercompany revenue and expense eliminations
net and do not impact EBITDA.
7
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Diluted Earnings Per Share (EPS) $ 0.81 $ 0.63 $ 1.56 $ 1.19
Amortization of intangible assets 0.16 0.13 0.29 0.26
Merger items(1) 0.14 0.05 0.20 0.08
(Gain) loss on sale of assets, impairments and other
adjustments(2) 0.01 0.01 0.05 0.03
Actuarial (gain) loss(3) (0.21) (0.03) (0.33) (0.03)
Adjusted EPS $ 0.91 $ 0.79 $ 1.77 $ 1.53
Year-over-year growth - Adjusted 15.2% 15.7%
Weighted Average Common Shares Outstanding
with Dilution (000,000) 6,374 6,184 6,277 6,185
(1) Includes combined merger integration items and merger-related interest income and expense,
and redemption premiums.
(2) Includes natural disaster, employee-related, and other costs.
(3) Includes adjustments for actuarial gains or losses associated with our postemployment
benefit plans, which we immediately recognize in the income statement, pursuant to our accounting
policy for the recognition of actuarial gains/losses. We recorded an actuarial gain of $930
million in the first quarter of 2018 associated with our postretirement plan and a gain of
$1,796 million in the second quarter associated with our pension plan. As a result, adjusted
EPS reflects (1) in the first quarter and for the first six months, an expected return on
plan assets of $77 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 $31 million loss (VEBA return
of -3.08%) and (2) in the second quarter and for the first six months, an expected return
on plan assets of $754 million (based on an average expected return on plan assets of 7.00%
for our Pension trusts), rather than the actual return on plan assets of $186 million loss
(Pension return of -0.56%), both of which are included in the GAAP measure of income.
Net Debt to Pro Forma 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. Our
Net Debt to Pro Forma Adjusted EBITDA ratio is calculated by
dividing the Net Debt by Annualized Pro Forma 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 Pro Forma Adjusted EBITDA is calculated by
annualizing the year-to-date Pro Forma Adjusted EBITDA.
Dollars in millions
Three Months Ended
Mar. 31, Jun. 30,
2018 2018 YTD 2018
Pro Forma Adjusted EBITDA $ 15,939 $ 15,952 $ 31,891
Add back severance (51) (133) (184)
Net Debt Pro Forma Adjusted EBITDA 15,888 15,819 31,707
Annualized Pro Forma Adjusted EBITDA 63,414
End-of-period current debt 21,672
End-of-period long-term debt 168,495
Total End-of-Period Debt 190,167
Less: Cash and Cash Equivalents 13,523
Net Debt Balance 176,644
Annualized Net Debt to Pro Forma Adjusted EBITDA Ratio 2.79
8
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.
Three Months Ended
June 30, 2018 June 30, 2017
Consumer Business AT&T Consumer Business AT&T
Mobility Solutions Adjustments(1) Mobility Mobility Solutions Adjustments(1) Mobility
Operating
Revenues
Wireless
service $ 11,853 $ 1,829 $ - $ 13,682 $ 12,467 $ 2,004 $ - $ 14,471
Strategic
services - 3,039 (3,039) - - 2,958 (2,958) -
Legacy voice
and data
services - 2,723 (2,723) - - 3,423 (3,423) -
Other
services and
equipment - 888 (888) - - 922 (922) -
Wireless
equipment 3,016 584 - 3,600 2,624 360 - 2,984
Total Operating
Revenues 14,869 9,063 (6,650) 17,282 15,091 9,667 (7,303) 17,455
Operating
Expenses
Operations
and support 8,085 5,616 (4,038) 9,663 8,636 6,053 (4,598) 10,091
EBITDA 6,784 3,447 (2,612) 7,619 6,455 3,614 (2,705) 7,364
Depreciation
and
amortization 1,806 1,487 (1,180) 2,113 1,716 1,483 (1,211) 1,988
Total Operating
Expenses 9,891 7,103 (5,218) 11,776 10,352 7,536 (5,809) 12,079
Operating
Income $ 4,978 $ 1,960 $ (1,432) $ 5,506 $ 4,739 $ 2,131 $ (1,494) $ 5,376
(1) Business wireline operations reported in Business Solutions segment.
Six Months Ended
June 30, 2018 June 30, 2017
Consumer Business AT&T Consumer Business AT&T
Mobility Solutions Adjustments(1) Mobility Mobility Solutions Adjustments(1) Mobility
Operating
Revenues
Wireless
service $ 23,465 $ 3,620 $ - $ 27,085 $ 24,932 $ 4,007 $ - $ 28,939
Strategic
services - 6,109 (6,109) - - 5,862 (5,862) -
Legacy voice
and data
services - 5,561 (5,561) - - 6,971 (6,971) -
Other
services and
equipment - 1,727 (1,727) - - 1,800 (1,800) -
Wireless
equipment 6,390 1,162 - 7,552 4,965 648 - 5,613
Total Operating
Revenues 29,855 18,179 (13,397) 34,637 29,897 19,288 (14,633) 34,552
Operating
Expenses
Operations
and support 16,609 11,210 (8,054) 19,765 17,196 12,051 (9,271) 19,976
EBITDA 13,246 6,969 (5,343) 14,872 12,701 7,237 (5,362) 14,576
Depreciation
and
amortization 3,613 2,945 (2,350) 4,208 3,432 2,943 (2,395) 3,980
Total Operating
Expenses 20,222 14,155 (10,404) 23,973 20,628 14,994 (11,666) 23,956
Operating
Income $ 9,633 $ 4,024 $ (2,993) $ 10,664 $ 9,269 $ 4,294 $ (2,967) $ 10,596
(1) Business wireline operations reported in Business Solutions segment.
9
Supplemental International
We provide a supplemental presentation of the Mexico Wireless
and Latin America operations within our International segment. The
following table presents a reconciliation of our International
segment.
Three Months Ended
June 30, 2018 June 30, 2017
Latin America Mexico International Latin America Mexico International
Operating Revenues
Video service $ 1,254 $ - $ 1,254 $ 1,361 $ - $ 1,361
Wireless service - 417 417 - 535 535
Wireless
equipment - 280 280 - 130 130
Total Operating
Revenues 1,254 697 1,951 1,361 665 2,026
Operating Expenses
Operations and
support 1,016 787 1,803 998 774 1,772
Depreciation and
amortization 186 127 313 222 89 311
Total Operating
Expenses 1,202 914 2,116 1,220 863 2,083
Operating Income
(Loss) 52 (217) (165) 141 (198) (57)
Equity in Net Income
of Affiliates 15 - 15 25 - 25
Segment Contribution $ 67 $ (217) $ (150) $ 166 $ (198) $ (32)
Six Months Ended
June 30, 2018 June 30, 2017
Latin America Mexico International Latin America Mexico International
Operating Revenues
Video service $ 2,608 $ - $ 2,608 $ 2,702 $ - $ 2,702
Wireless service - 821 821 - 1,010 1,010
Wireless
equipment - 547 547 - 243 243
Total Operating
Revenues 2,608 1,368 3,976 2,702 1,253 3,955
Operating Expenses
Operations and
support 2,017 1,590 3,607 2,048 1,483 3,531
Depreciation and
amortization 391 254 645 436 165 601
Total Operating
Expenses 2,408 1,844 4,252 2,484 1,648 4,132
Operating Income
(Loss) 200 (476) (276) 218 (395) (177)
Equity in Net Income
of Affiliates 15 - 15 45 - 45
Segment Contribution $ 215 $ (476) $ (261) $ 263 $ (395) $ (132)
10
([1]) Adjustments include a non-cash mark-to-market benefit plan
gain/loss, merger-related interest expense, merger integration and
amortization costs and other adjustments. We expect the
mark-to-market adjustment which is driven by interest rates and
investment returns that are not reasonably estimable at this time,
to be the largest of these items. Accordingly, we cannot provide a
reconciliation between forecasted adjusted diluted EPS and reported
diluted EPS without unreasonable effort.
([2]) Represents cumulative video-capable D2C relationships
across the following services: Postpaid, prepaid and reseller
wireless; US and LatAm pay-TV, including DIRECTV NOW; Mexico
wireless; and US consumer broadband
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR FKFDKBBKBDFB
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