TIDM58KN
RNS Number : 6504S
AT & T Inc.
12 March 2019
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) January 30,
2019
AT&T INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 1-8610 43-1301883
(State or Other Jurisdiction (Commission File Number) (IRS Employer Identification
of Incorporation) 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 January 30, 2019, its results of
operations for the fourth 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 January 30, 2019 reporting financial results for
the fourth quarter ended December 31, 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: January 30, 2019 By: / s/ Debra L. Dial
Debra L. Dial
Senior Vice President and Controller
AT&T Reports Fourth-Quarter Results
Full-Year Consolidated Results
-- Diluted EPS of $2.85 as reported compared to $4.76 in the
prior year (2017 impacted by tax reform)
-- Adjusted EPS of $3.52 compared to $3.05 in the prior year
-- Cash from operations of $43.6 billion, up 15%
-- Capital expenditures of $21.3 billion
-- Free cash flow of $22.4 billion, up 36%
-- Dividend payout ratio of 60% 1
-- Consolidated revenues of $170.8 billion
Fourth-Quarter Consolidated Results
-- Diluted EPS of $0.66 as reported compared to $3.08 in the
year-ago quarter (2017 impacted by tax reform)
-- Net income of $4.9 billion compared to $19.0 billion in
the year-ago quarter (2017 impacted by tax reform)
-- Adjusted EPS of $0.86 compared to $0.78 in the year-ago
quarter
-- Cash from operations of $12.1 billion, up 27%
-- Capital expenditures of $4.2 billion
-- Dividend payout ratio 46% 1
-- Free cash flow of $7.9 billion, up 78%
-- Consolidated revenues of $48.0 billion
As Part of Fourth-Quarter Results, AT&T Reports:
-- Strong Cash from Operations and Record Free Cash
Flow
-- Consolidated Pro Forma Adjusted EBITDA Growth
-- Deleveraging Plan on Track
-- 2019 Guidance Reaffirmed
Note: AT&T's fourth-quarter earnings conference call will be
webcast at 8:30 a.m. ET on Wednesday, January 30, 2019. The webcast
and related materials will be available on AT&T's Investor
Relations website at https://investors.att.com .
DALLAS, January 30, 2019 - AT&T Inc . ( NYSE:T ) r eported
strong Mobility and WarnerMedia results in the fourth quarter,
including solid domestic wireless service revenue growth with
record fourth-quarter wireless service margins. (On a GAAP basis,
domestic service revenues declined 3.0%; however, on a comparable
basis, service revenues grew 2.9%.)
"Our top priority for 2018 and 2019 is reducing our debt and I
couldn't be more pleased with how we closed the year. In 2018, we
generated record free cash flow while investing at near-record
levels. Our dividend payout as a percent of free cash flow was 46%
for the quarter and 60% for the year, allowing us to increase the
dividend for the 35th consecutive year," said Randall Stephenson,
AT&T chairman and CEO. "This momentum will carry us into 2019
allowing us to continue reducing our debt while investing in the
business and continuing our strong record for paying
dividends."
Fourth-Quarter Results
North America Wireless Highlights:
-- 3.8 million total wireless net adds:
o 2.8 million in U.S., driven by connected devices and smartphones
o 1.0 million in Mexico
Communications Highlights
-- Operating income up 3.1% on a comparable basis; EBITDA up 1.9%
-- Mobility:
o Service revenues up 2.9% on a comparable basis; operating income
up 18.7% with EBITDA up 13.3% on a comparable basis
o 147,000 phone net adds in the U.S.
-- 134,000 postpaid phone net adds
-- 13,000 prepaid phone net adds
o 467,000 branded smartphones added to base
-- Entertainment Group:
o Focus on profitability and reduced promotions leads to losses
in video subscribers
o More than 11 million customer locations passed with fiber
WarnerMedia Highlights
-- Revenues up with operating income gains in all business units
o Strong Warner Bros. theatrical and television licensing revenue
growth
o Turner subscription revenue growth
o HBO digital subscriber growth continued
o 11 Academy Award(R) nominations
Latin America Highlights
-- 3.2 million Mexico wireless full-year net adds
-- 250,000 full-year Vrio net adds
Xandr Highlights
-- Advertising revenues grew BY 48.6%; up 26.0% excluding the AppNexus
acquisition
-- Continued progress in strategic initiatives
Consolidated Financial Results 2
AT&T's consolidated revenues for the fourth quarter totaled
$48.0 billion versus $41.7 billion in the year-ago quarter, up
15.2%, primarily due to the Time Warner acquisition partially
offset by the impact of ASC 606 which includes the policy election
of netting of approximately $980 million of USF revenues with
operating expenses. Without the accounting change, revenues were
$48.9 billion, an increase of 17.2% primarily due to the Time
Warner acquisition. Declines in legacy wireline services, wireless
equipment, domestic video and Vrio were more than offset by
WarnerMedia and growth in domestic wireless services and Xandr.
Operating expenses were $41.8 billion versus $40.4 billion in
the year-ago quarter, primarily due to the Time Warner acquisition,
partially offset by the netting of USF and other regulatory fees
and the deferral of commissions under ASC 606. Excluding those
impacts, operating expenses were $43.3 billion, an increase of
about $2.9 billion due to the Time Warner acquisition and
Entertainment Group content cost pressure, partially offset by the
write-off of certain network assets in the prior year, lower
wireless equipment costs and cost efficiencies.
Versus results from the fourth quarter of 2017, operating income
was $6.2 billion versus $1.3 billion, primarily due to the Time
Warner acquisition and the write-off of certain network assets in
the prior year; and operating income margin was 12.8% versus 3.1%.
On a comparative basis, operating income was $5.6 billion and
operating income margin was 11.4%. When adjusting for amortization,
merger- and integration-related expenses and other items, operating
income was $9.4 billion, or $8.8 billion on a comparative basis,
versus $6.3 billion in the year-ago quarter, and operating income
margin was 19.6%, or 18.1% on a comparative basis, versus 15.1% in
the year-ago quarter due to the acquisition of Time Warner and
impact of ASC 606.
Fourth-quarter net income attributable to AT&T was $4.9
billion, or $0.66 per diluted share, versus $19.0 billion, or $3.08
per diluted share, in the year-ago quarter which reflected the
impact of the December 2017 federal Tax Cuts and Jobs Act.
Adjusting for $0.20, which includes amortization costs, merger- and
integration-related expenses and other items, a true-up of deferred
tax liability remeasurement and other tax items and a non-cash
actuarial gain on benefit plans from the annual remeasurement
process, earnings per diluted share was $0.86 compared to an
adjusted $0.78 in the year-ago quarter, a 10% increase.
Cash from operating activities was $12.1 billion, and capital
expenditures were $4.2 billion. Capital investment included about
$270 million in FirstNet capital costs and $1.1 billion in FirstNet
capital reimbursements. Free cash flow - cash from operating
activities minus capital expenditures - was $7.9 billion for the
quarter.
Full-Year Results
For full-year 2018 when compared with 2017 results, AT&T's
consolidated revenues totaled $170.8 billion versus $160.5 billion,
up 6.4%, primarily due to the Time Warner acquisition partially
offset by the impact of ASC 606 which includes the policy election
of netting approximately $3.7 billion of USF revenues with
operating expenses. Without the accounting change, revenues were
$174.3 billion, an increase of 8.6% primarily due to the Time
Warner acquisition.
Operating expenses were $144.7 billion compared with $140.6
billion, primarily due to the Time Warner acquisition partially
offset by the netting of USF and other regulatory fees and the
deferral of commissions under ASC 606. Excluding those impacts,
operating expenses were $150.6 billion, an increase of about $10.0
billion due to the Time Warner acquisition, Entertainment Group
content cost pressure and higher wireless equipment costs,
partially offset by the write-off of certain network assets in the
prior year and cost efficiencies.
Versus results from 2017, operating income was $26.1 billion, up
30.7% primarily due to the Time Warner acquisition and the
write-off of certain network assets in the prior year; and
operating income margin was 15.3% versus 12.4%. On a comparative
basis, operating income was $23.7 billion and operating income
margin was 13.6%. With adjustments for both years, operating income
was $35.2 billion, or $32.8 billion on a comparable basis, versus
$29.5 billion in 2017, and operating income margin was 20.6%, or
18.8% on a comparative basis, versus 18.4% in 2017.
2018 net income attributable to AT&T was $19.4 billion, or
$2.85 per diluted share, versus $29.5 billion, or $4.76 per diluted
share in 2017. With adjustments for both years, earnings per
diluted share was $3.52 compared to an adjusted $3.05 in 2017, up
15% primarily due to lower rates associated with tax reform, the
impact of ASC 606 and the acquisition of Time Warner.
AT&T's full-year cash from operating activities was $43.6
billion versus $38.0 billion in 2017. Capital expenditures,
including capitalized interest, totaled $21.3 billion versus $21.6
billion in 2017. Capital investment included about $1.2 billion in
FirstNet capital costs and $1.4 billion in FirstNet capital
reimbursements. Full-year free cash flow was $22.4 billion compared
to $16.5 billion in 2017, up 36%. The company's free cash flow
dividend payout ratio for the full year was 60%. 1
2019 Outlook 3
AT&T expects in 2019:
-- Free cash flow in the $26 billion range;
-- Low single-digit adjusted EPS growth;
-- Dividend payout ratio in the high 50s% range;
-- End-of-year net debt to adjusted EBITDA in the 2.5x range;
-- Gross capital investment in the $23 billion range 4
3 Adjustments to EPS include merger-related amortization in the
range of $7.5 billion, a non-cash mark-to-market benefit plan
gain/loss, merger integration 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 a significant item. Our EPS, free cash flow and EBITDA
estimates depend on future levels of revenues and expenses which
are not reasonably estimable at this time. Accordingly, we cannot
provide a reconciliation between our non-GAAP metrics and the
reported GAAP metrics without unreasonable effort. (Our 2019
outlook for Net Debt to Adjusted EBITDA ratio excludes the impact
of a new accounting standard for leases (ASC 842) that is effective
beginning January 1, 2019 to be consistent with our existing
multi-year guidance on this debt ratio . )
1 Free cash flow dividend payout ratio is dividends divided by
free cash flow .
2 AT&T adopted new U.S. accounting standards 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.
4 Excludes expected FirstNet reimbursements in the $1 billion
range; includes potential 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 one of the world's largest TV and
film studios, 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 Latin America 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. Xandr
provides marketers with innovative and relevant advertising
solutions for consumers around premium video content and digital
advertising through its AppNexus platform.
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) 2019 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 Inc.
Phone: 214-862-0651
Email: Erin.McGrath@att.com
EXHIBIT 99.2
AT&T Inc.
Financial Data
Consolidated Statements of Income
Dollars in millions except per
share amounts
Unaudited Fourth Quarter Percent Year Ended Percent
------------------- -------------------
2018 2017 Change 2018 2017 Change
----------------------------------- ------- -------- ---------- ------- -------- ----------
Operating Revenues
Service $ 42,496 $ 36,225 17.3% $152,345 $ 145,597 4.6%
Equipment 5,497 5,451 0.8% 18,411 14,949 23.2%
Total Operating Revenues 47,993 41,676 15.2% 170,756 160,546 6.4%
------- -------- ------- --------
Operating Expenses
Cost of revenues
Equipment 5,733 6,532 (12.2)% 19,786 18,709 5.8%
Broadcast, programming and
operations 8,885 6,003 48.0% 26,727 21,159 26.3%
Other cost of revenues (exclusive
of depreciation
and amortization shown
separately
below) 8,691 9,391 (7.5)% 32,906 37,942 (13.3)%
Selling, general and
administrative 10,586 9,484 11.6% 36,765 35,465 3.7%
Asset abandonment and impairments 46 2,914 (98.4)% 46 2,914 (98.4)%
Depreciation and amortization 7,892 6,071 30.0% 28,430 24,387 16.6%
------------------------------------ ------- -------- ------- --------
Total Operating Expenses 41,833 40,395 3.6% 144,660 140,576 2.9%
------------------------------------ ------- -------- ------- --------
Operating Income 6,160 1,281 -% 26,096 19,970 30.7%
------------------------------------ ------- -------- ------- --------
Interest Expense (2,112) (1,926) 9.7% (7,957) (6,300) 26.3%
Equity in Net Income (Loss) of
Affiliates 23 20 15.0% (48) (128) 62.5%
Other Income (Expense) - Net 1,674 (658) -% 6,782 1,597 -%
------------------------------------ ------- -------- ------- --------
Income (Loss) Before Income Taxes 5,745 (1,283) -% 24,873 15,139 64.3%
Income Tax (Benefit) Expense 615 (20,419) -% 4,920 (14,708) -%
------------------------------------ ------- -------- ------- --------
Net Income 5,130 19,136 (73.2)% 19,953 29,847 (33.1)%
------------------------------------ ------- -------- ------- --------
Less: Net Income Attributable
to
Noncontrolling Interest (272) (99) -% (583) (397) (46.9)%
------------------------------------ ------- -------- ------- --------
Net Income Attributable to AT&T $ 4,858 $ 19,037 (74.5)% $ 19,370 $ 29,450 (34.2)%
==================================== ======= ======== ======= ========
Basic Earnings Per Share
Attributable
to AT&T $ 0.66 $ 3.08 (78.6)% $ 2.85 $ 4.77 (40.3)%
Weighted Average Common
Shares Outstanding (000,000) 7,296 6,163 18.4% 6,778 6,164 10.0%
Diluted Earnings Per Share
Attributable
to AT&T $ 0.66 $ 3.08 (78.6)% $ 2.85 $ 4.76 (40.1)%
Weighted Average Common
Shares Outstanding with Dilution
(000,000) 7,328 6,182 18.5% 6,806 6,183 10.1%
------------------------------------ ------- -------- ------ ------- -------- ------
AT&T Inc.
Financial Data
Consolidated Balance Sheets
Dollars in millions
Unaudited Dec. 31, Dec. 31,
2018 2017
-------------------------------------------------------------- -------- --------
Assets
Current Assets
Cash and cash equivalents $ 5,204 $ 50,498
Accounts receivable - net of allowances for doubtful accounts
of $907 and $663 26,472 16,522
Prepaid expenses 2,047 1,369
Other current assets 17,704 10,757
--------------------------------------------------------------- -------- --------
Total current assets 51,427 79,146
--------------------------------------------------------------- -------- --------
Noncurrent Inventories and Theatrical Film and Television
Production Costs 7,713 -
Property, Plant and Equipment - Net 131,473 125,222
Goodwill 146,370 105,449
Licenses 96,144 96,136
Trademarks and Trade Names - Net 24,345 7,021
Distribution Networks - Net 17,069 -
Other Intangible Assets - Net 26,269 11,119
Investments in and Advances to Equity Affiliates 6,245 1,560
Other Assets 24,809 18,444
--------------------------------------------------------------- -------- --------
Total Assets $ 531,864 $ 444,097
=============================================================== ======== ========
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year $ 10,255 $ 38,374
Accounts payable and accrued liabilities 43,184 34,470
Advanced billings and customer deposits 5,948 4,213
Accrued taxes 1,179 1,262
Dividends payable 3,854 3,070
--------------------------------------------------------------- -------- --------
Total current liabilities 64,420 81,389
--------------------------------------------------------------- -------- --------
Long-Term Debt 166,250 125,972
--------------------------------------------------------------- -------- --------
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes 57,859 43,207
Postemployment benefit obligation 19,218 31,775
Other noncurrent liabilities 30,233 19,747
--------------------------------------------------------------- -------- --------
Total deferred credits and other noncurrent liabilities 107,310 94,729
--------------------------------------------------------------- -------- --------
Stockholders' Equity
Common stock 7,621 6,495
Additional paid-in capital 125,525 89,563
Retained earnings 58,753 50,500
Treasury stock (12,059) (12,714)
Accumulated other comprehensive income 4,249 7,017
Noncontrolling interest 9,795 1,146
--------------------------------------------------------------- -------- --------
Total stockholders' equity 193,884 142,007
--------------------------------------------------------------- -------- --------
Total Liabilities and Stockholders' Equity $ 531,864 $ 444,097
=============================================================== ======== ========
AT&T Inc.
Financial Data
Consolidated Statements of Cash Flows
Dollars in millions
Unaudited Year Ended
--------------------
2018 2017
-------------------------------------------------------------------- --------
Operating Activities
Net income $ 19,953 $ 29,847
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 28,430 24,387
Amortization of film and television costs 3,772 -
Undistributed earnings from investments in equity affiliates 292 174
Provision for uncollectible accounts 1,791 1,642
Deferred income tax expense (benefit) 610 (15,940)
Net (gain) loss from sale of investments, net of impairments (739) (282)
Actuarial (gain) loss on pension and postretirement benefits (3,412) 1,258
Asset abandonments and impairments 46 2,914
Changes in operating assets and liabilities:
Accounts receivable (1,244) (986)
Other current assets, inventories and theatrical film and
television production costs (6,442) (778)
Accounts payable and other accrued liabilities 1,602 816
Equipment installment receivables and related sales (490) (1,239)
Deferred customer contract acquisition and fulfillment costs (3,458) (1,422)
Retirement benefit funding (500) (1,066)
Other - net 3,391 (1,315)
--------------------------------------------------------------------- -------- --------
Total adjustments 23,649 8,163
--------------------------------------------------------------------- -------- --------
Net Cash Provided by Operating Activities 43,602 38,010
--------------------------------------------------------------------- -------- --------
Investing Activities
Capital expenditures:
Purchase of property and equipment (20,758) (20,647)
Interest during construction (493) (903)
Acquisitions, net of cash acquired (43,309) 1,123
Dispositions 2,148 59
(Purchases) sales of securities, net (185) 449
Advances to and investments in equity affiliates, net (1,050) -
Cash collections of deferred purchase price 500 976
Other 2 -
--------------------------------------------------------------------- -------- --------
Net Cash Used in Investing Activities (63,145) (18,943)
--------------------------------------------------------------------- -------- --------
Financing Activities
Net change in short-term borrowings with original maturities
of three months or less (821) (2)
Issuance of other short-term borrowings 4,898 -
Repayment of other short-term borrowings (2,098) -
Issuance of long-term debt 41,875 48,793
Repayment of long-term debt (52,643) (12,339)
Purchase of treasury stock (609) (463)
Issuance of treasury stock 745 33
Dividends paid (13,410) (12,038)
Other (3,926) 1,946
--------------------------------------------------------------------- -------- --------
Net Cash (Used in) Provided by Financing Activities (25,989) 25,930
--------------------------------------------------------------------- -------- --------
Net (decrease) increase in cash and cash equivalents and restricted
cash (45,532) 44,997
Cash and cash equivalents and restricted cash beginning of
year 50,932 5,935
--------------------------------------------------------------------- -------- --------
Cash and Cash Equivalents and Restricted Cash End of Year $ 5,400 $ 50,932
===================================================================== ======== ========
AT&T Inc.
Consolidated Supplementary Data
Supplementary Financial Data
Dollars in millions except per
share amounts
Unaudited Fourth Quarter Percent Year Ended Percent
------------------ -------------------------
2018 2017 Change 2018 2017 Change
------------------------------------ ------ ----- ---------- ------- ------- ----------
Capital expenditures
Purchase of property and equipment $ 4,063 $4,891 (16.9)% $ 20,758$ 20,647 0.5%
Interest during construction 89 185 (51.9)% 493 903 (45.4)%
------------------------------------ ------ ----- ------- -------
Total Capital Expenditures $ 4,152 $5,076 (18.2)% $ 21,251$ 21,550 (1.4)%
------------------------------------- ------ ----- ------- -------
Dividends Declared per Share $ 0.51 $ 0.50 2.0% $ 2.01$ 1.97 2.0%
End of Period Common Shares
Outstanding
(000,000) 7,282 6,139 18.6%
Debt Ratio 47.7% 53.6% (590) BP
Total Employees 268,220 254,000 5.6%
------------------------------------- ------ ----- ------ ------- ------- ------
Supplementary Operating Data
Subscribers and connections in
thousands
Unaudited Year Ended Percent
-------------------------
2018 2017 Change
------------------------------------ ------ ----- ------ ------- ------- ----------
Wireless Subscribers
Domestic 153,006 141,202 8.4%
Mexico 18,321 15,099 21.3%
------------------------------------ ------ ----- ------ ------- -------
Total Wireless Subscribers 171,327 156,301 9.6%
------------------------------------- ------ ----- ------ ------- -------
Total Branded Wireless Subscribers 111,958 107,740 3.9%
Video Connections
Domestic 24,517 25,270 (3.0)%
Latin America 13,838 13,629 1.5%
------------------------------------ ------ ----- ------ ------- -------
Total Video Connections 38,355 38,899 (1.4)%
------------------------------------- ------ ----- ------ ------- -------
Broadband Connections
IP 14,751 14,487 1.8%
DSL 950 1,232 (22.9)%
------------------------------------ ------ ----- ------ ------- -------
Total Broadband Connections 15,701 15,719 (0.1)%
------------------------------------- ------ ----- ------ ------- -------
Voice Connections
Network Access Lines 10,002 11,753 (14.9)%
U-verse VoIP Connections 5,114 5,682 (10.0)%
------------------------------------ ------ ----- ------ ------- -------
Total Retail Voice Connections 15,116 17,435 (13.3)%
===================================== ====== ===== ====== ======= ======= ======
Fourth Quarter Percent Year Ended Percent
------------------ -------------------------
2018 2017 Change 2018 2017 Change
------------------------------------ ------ ----- ---------- ------- ------- ----------
Wireless Net Additions
Domestic 2,753 2,757 (0.1)% 11,810 9,474 24.7%
Mexico 1,016 1,320 (23.0)% 3,222 3,126 3.1%
------------------------------------ ------ ----- ------- -------
Total Wireless Net Additions 3,769 4,077 (7.6)% 15,032 12,600 19.3%
------------------------------------- ------ ----- ------- -------
Total Branded Wireless Net Additions 1,016 2,046 (50.3)% 4,367 4,858 (10.1)%
Video Net Additions
Domestic (660) 159 -% (753) (291) -%
Latin America 198 139 42.4% 250 42 -%
------------------------------------ ------ ----- ------- -------
Total Video Net Additions (462) 298 -% (503) (249) -%
------------------------------------- ------ ----- ------- -------
Broadband Net Additions
IP 7 103 (93.2)% 264 623 (57.6)%
DSL (53) (99) 46.5% (282) (509) 44.6%
------------------------------------ ------ ----- ------- -------
Total Broadband Net Additions (46) 4 -% (18) 114 -%
------------------------------------- ------ ----- ------ ------- ------- ------
COMMUNICATIONS SEGMENT
The Communications segment provides wireless and wireline telecom, video and
broadband services to consumers located in the U.S. or in U.S. territories and
businesses globally. The Communications segment contains three reporting units:
Mobility, Entertainment Group, and Business Wireline.
Segment Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
---------------- ------------------
2018 2017 Change 2018 2017 Change
--------------------------------------- ------ ------ ---------- ------- ------- ----------
Segment Operating Revenues
Mobility $18,769 $19,168 (2.1)% $ 71,344 $ 71,090 0.4%
Entertainment Group 11,962 12,560 (4.8)% 46,460 49,995 (7.1)%
Business Wireline 6,727 7,382 (8.9)% 26,827 29,293 (8.4)%
--------------------------------------- ------ ------ ------- -------
Total Segment Operating Revenues 37,458 39,110 (4.2)% 144,631 150,378 (3.8)%
======================================== ====== ====== ======= =======
Segment Operating Contribution
Mobility 5,455 4,275 27.6% 21,722 20,204 7.5%
Entertainment Group 825 1,001 (17.6)% 4,713 5,471 (13.9)%
Business Wireline 1,359 1,588 (14.4)% 5,827 6,010 (3.0)%
--------------------------------------- ------ ------ ------- -------
Total Segment Operating Contribution $ 7,639 $ 6,864 11.3% $ 32,262 $ 31,685 1.8%
======================================== ====== ====== ======= =======
Mobility
Mobility provides nationwide wireless service and equipment.
Mobility Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
----------------------- -------------------------
2018 2017 Change 2018 2017 Change
------------------------------ ------ ------ ---------- ------- ------- ----------
Operating Revenues
Service $13,859$ 14,282 (3.0)% $ 54,933$ 57,696 (4.8)%
Equipment 4,910 4,886 0.5% 16,411 13,394 22.5%
------------------------------ ------ ------ ------- -------
Total Operating Revenues 18,769 19,168 (2.1)% 71,344 71,090 0.4%
------------------------------- ------ ------ ------- -------
Operating Expenses
Operations and support 11,246 12,866 (12.6)% 41,266 42,871 (3.7)%
Depreciation and amortization 2,068 2,027 2.0% 8,355 8,015 4.2%
------------------------------- ------ ------ ------- -------
Total Operating Expenses 13,314 14,893 (10.6)% 49,621 50,886 (2.5)%
------------------------------- ------ ------ ------- -------
Operating Income 5,455 4,275 27.6% 21,723 20,204 7.5%
Equity in Net Income
(Loss) of Affiliates - - -% (1) - -%
------------------------------- ------ ------ ------- -------
Operating Contribution $ 5,455$ 4,275 27.6% $ 21,722$ 20,204 7.5%
=============================== ====== ====== ======= =======
Operating Income Margin 29.1% 22.3% 680 BP 30.4% 28.4% 200 BP
------------------------------- ------ ------ ------ ------- ------- ------
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited Year Ended Percent
-------------------------
2018 2017 Change
------------------------------ ------ ------ ------ ------- ------- ----------
Mobility Subscribers
Postpaid 76,889 77,510 (0.8)%
Prepaid 17,000 15,335 10.9%
------------------------------ ------ ------ ------ ------- -------
Branded 93,889 92,845 1.1%
Reseller 7,782 9,366 (16.9)%
Connected Devices 51,335 38,991 31.7%
------------------------------- ------ ------ ------ ------- -------
Total Mobility Subscribers 153,006 141,202 8.4%
=============================== ====== ====== ====== ======= ======= ======
Fourth Quarter Percent Year Ended Percent
----------------------- -------------------------
2018 2017 Change 2018 2017 Change
------------------------------ ------ ------ ---------- ------- ------- ----------
Mobility Net Additions
Postpaid 13 558 (97.7)% (97) 641 -%
Prepaid 26 140 (81.4)% 1,290 1,013 27.3%
------------------------------ ------ ------ ------- -------
Branded 39 698 (94.4)% 1,193 1,654 (27.9)%
Reseller (438) (530) 17.4% (1,704) (1,871) 8.9%
Connected Devices 3,152 2,589 21.7% 12,321 9,691 27.1%
------------------------------- ------ ------ ------- -------
Total Mobility Net Additions 2,753 2,757 (0.1)% 11,810 9,474 24.7%
------------------------------- ------ ------ ------- -------
Branded Churn 1.82% 1.75% 7 BP 1.67% 1.68% (1) BP
Postpaid Churn 1.24% 1.11% 13 BP 1.12% 1.07% 5 BP
Postpaid Phone-Only
Churn 1.00% 0.89% 11 BP 0.90% 0.85% 5 BP
------------------------------- ------ ------ ------ ------- ------- ------
Entertainment Group
Entertainment Group provides video, including over-the-top (OTT) services,
broadband and voice communication services primarily to residential customers.
This business unit also sells advertising on DIRECTV and U-verse distribution
platforms.
Entertainment Group Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
--------------------------- ------------------------
2018 2017 Change 2018 2017 Change
--------------------------- ------- ------ ---------- ------- ------ ----------
Operating Revenues
Video entertainment $ 8,676$ 9,200 (5.7)% $ 33,357$ 36,167 (7.8)%
High-speed internet 2,052 1,890 8.6% 7,956 7,674 3.7%
Legacy voice and
data services 724 878 (17.5)% 3,041 3,767 (19.3)%
Other service
and equipment 510 592 (13.9)% 2,106 2,387 (11.8)%
--------------------------- ------- ------ ------- ------
Total Operating
Revenues 11,962 12,560 (4.8)% 46,460 49,995 (7.1)%
---------------------------- ------- ------ ------- ------
Operating Expenses
Operations and support 9,807 10,192 (3.8)% 36,430 38,903 (6.4)%
Depreciation and
amortization 1,329 1,367 (2.8)% 5,315 5,621 (5.4)%
---------------------------- ------- ------ ------- ------
Total Operating
Expenses 11,136 11,559 (3.7)% 41,745 44,524 (6.2)%
---------------------------- ------- ------ ------- ------
Operating Income 826 1,001 (17.5)% 4,715 5,471 (13.8)%
Equity in Net Income
(Loss) of Affiliates (1) - -% (2) - -%
---------------------------- ------- ------ ------- ------
Operating Contribution $ 825$ 1,001 (17.6)% $ 4,713$ 5,471 (13.9)%
============================ ======= ====== ======= ======
Operating Income
Margin 6.9% 8.0% (110) BP 10.1% 10.9% (80) BP
---------------------------- ------- ------ ------ ------- ------ ------
Supplementary Operating Data
Subscribers and
connections in thousands
Unaudited Year Ended Percent
------------------------
2018 2017 Change
--------------------------- ------- ------ ---------- ------- ------ ----------
Video Connections
Satellite 19,222 20,458 (6.0)%
U-verse 3,681 3,631 1.4%
DIRECTV NOW 1,591 1,155 37.7%
--------------------------- ------- ------ ------ ------- ------
Total Video Connections 24,494 25,244 (3.0)%
---------------------------- ------- ------ ------ ------- ------
Broadband Connections
IP 13,729 13,462 2.0%
DSL 680 888 (23.4)%
--------------------------- ------- ------ ------ ------- ------
Total Broadband
Connections 14,409 14,350 0.4%
---------------------------- ------- ------ ------ ------- ------
Voice Connections
Retail Consumer
Switched Access
Lines 3,967 4,774 (16.9)%
U-verse Consumer
VoIP Connections 4,582 5,222 (12.3)%
--------------------------- ------- ------ ------ ------- ------
Total Retail Consumer
Voice Connections 8,549 9,996 (14.5)%
============================ ======= ====== ====== ======= ====== ======
Fourth Quarter Percent Year Ended Percent
--------------------------- ------------------------
2018 2017 Change 2018 2017 Change
--------------------------- ------- ------ ---------- ------- ------ ----------
Video Net Additions
1
Satellite (403) (147) -% (1,236) (554) -%
U-verse 12 (60) -% 50 (622) -%
DIRECTV NOW (267) 368 -% 436 888 (50.9)%
--------------------------- ------- ------ ------- ------
Total Video Net
Additions (658) 161 -% (750) (288) -%
---------------------------- ------- ------ ------- ------
Broadband Net Additions
IP 6 95 (93.7)% 267 574 (53.5)%
DSL (38) (76) 50.0% (208) (403) 48.4%
--------------------------- ------- ------ ------- ------
Total Broadband
Net Additions (32) 19 -% 59 171 (65.5)%
---------------------------- ------- ------ ------- ------
1 Includes the impact of customers
that migrated to DIRECTV NOW.
---------------------------------------------------- ------ ------- ------ ------
Business Wireline
Business Wireline unit provides advanced IP-based services, as well as traditional
data services to business customers.
Business Wireline Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
------------------------- -----------------------
2018 2017 Change 2018 2017 Change
---------------------------------- ------ ----- ---------- ------ ------ ----------
Operating Revenues
Strategic services $ 3,142$ 3,070 2.3% $12,310$ 11,950 3.0%
Legacy voice and data services 2,521 3,251 (22.5)% 10,697 13,565 (21.1)%
Other service and equipment 1,064 1,061 0.3% 3,820 3,778 1.1%
--------------------------------- ------ ----- ------ ------
Total Operating Revenues 6,727 7,382 (8.9)% 26,827 29,293 (8.4)%
---------------------------------- ------ ----- ------ ------
Operating Expenses
Operations and support 4,161 4,586 (9.3)% 16,245 18,492 (12.2)%
Depreciation and amortization 1,207 1,206 0.1% 4,754 4,789 (0.7)%
---------------------------------- ------ ----- ------ ------
Total Operating Expenses 5,368 5,792 (7.3)% 20,999 23,281 (9.8)%
---------------------------------- ------ ----- ------ ------
Operating Income 1,359 1,590 (14.5)% 5,828 6,012 (3.1)%
Equity in Net Income (Loss)
of Affiliates - (2) -% (1) (2) 50.0%
---------------------------------- ------ ----- ------ ------
Operating Contribution $ 1,359$ 1,588 (14.4)% $ 5,827$ 6,010 (3.0)%
================================== ====== ===== ====== ======
Operating Income Margin 20.2% 21.5% (130) BP 21.7% 20.5% 120 BP
---------------------------------- ------ ----- ------ ------ ------ ------
Business Solutions
As a supplemental presentation to our Communications segment operating results,
we are providing a view of our AT&T Business Solutions results which includes
both wireless and fixed operations. This combined view presents a complete
profile of the entire business customer relationship and underscores the importance
of mobile solutions to serving our business customers.
Business Solutions Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
---------------------------- -------------------------
2018 2017 Change 2018 2017 Change
--------------------------- ------- --- ------ ----------- ------- ------- -----------
Operating Revenues
Wireless service $ 1,900$ 1,979 (4.0)% $ 7,397$ 8,009 (7.6)%
Strategic services 3,142 3,070 2.3% 12,310 11,950 3.0%
Legacy voice
and data services 2,521 3,251 (22.5)% 10,697 13,565 (21.1)%
Other service
and equipment 1,064 1,061 0.3% 3,820 3,778 1.1%
Wireless equipment 780 564 38.3% 2,532 1,552 63.1%
-------------------------- ------- --- ------ ------- -------
Total Operating
Revenues 9,407 9,925 (5.2)% 36,756 38,854 (5.4)%
--------------------------- ------- --- ------ ------- -------
Operating Expenses
Operations and
support 5,911 6,349 (6.9)% 22,719 24,496 (7.3)%
Depreciation and
amortization 1,507 1,492 1.0% 5,951 5,901 0.8%
--------------------------- ------- --- ------ ------- -------
Total Operating
Expenses 7,418 7,841 (5.4)% 28,670 30,397 (5.7)%
--------------------------- ------- --- ------ ------- -------
Operating Income 1,989 2,084 (4.6)% 8,086 8,457 (4.4)%
Equity in Net
Income (Loss)
of Affiliates - (1) -% (1) (1) -%
--------------------------- ------- --- ------ ------- -------
Operating Contribution $ 1,989$ 2,083 (4.5)% $ 8,085$ 8,456 (4.4)%
=========================== ======= ====== ======= =======
Operating Income
Margin 21.1% 21.0% 10 BP 22.0% 21.8% 20 BP
--------------------------- ------- ------ ------- ------- ------- -------
W ARNER M EDIA SEGMENT
The WarnerMedia segment develops, produces and distributes feature films, television,
gaming and other content in various physical and digital formats globally. Results
from AT&T's Regional Sports Network (RSN) and Otter Media Holdings are also
included in the WarnerMedia segment. The WarnerMedia segment contains three
business units: Turner, Home Box Office and Warner Bros.
Segment Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
------------------------ -----------------
2018 2017 Change 2018 2017 Change
--------------------------------------- -------- ------ --------- -------- ----- ---------
Segment Operating Revenues
Turner $ 3,212 $ 107 -% $ 6,979 $ 430 -%
Home Box Office 1,673 - -% 3,598 - -%
Warner Bros. 4,476 - -% 8,703 - -%
Eliminations and other (129) - -% (339) - -%
-------------------------------------- -------- ------ -------- -----
Total Segment Operating
Revenues 9,232 107 -% 18,941 430 -%
======================================= ======== ====== ======== =====
Segment Operating Contribution
Turner 1,306 61 -% 3,108 140 -%
Home Box Office 650 - -% 1,384 - -%
Warner Bros. 807 - -% 1,449 - -%
Eliminations and other (60) (20) -% (246) (78) -%
-------------------------------------- -------- ------ -------- -----
Total Segment Operating
Contribution $ 2,703 $ 41 -% $ 5,695 $ 62 -%
======================================= ======== ====== ======== =====
Turner
Turner is comprised of the WarnerMedia businesses managed by Turner as well
as our RSN. This business unit creates and programs branded news, entertainment,
sports and kids multi-platform content that is sold to various distribution
affiliates. Turner also sells advertising on its networks and digital properties.
Turner Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
----------------------------- ----------------------
2018 2017 Change 2018 2017 Change
------------------------------- ------- --- ------ --- ---------- ------ ----- ----------
Operating Revenues
Subscription $ 1,844$ 94 -% $ 4,207$ 365 -%
Advertising 1,149 13 -% 2,330 65 -%
Content and
other 219 - -% 442 - -%
------------------------------ ------- --- ------ --- ------ -----
Total Operating
Revenues 3,212 107 -% 6,979 430 -%
------------------------------- ------- --- ------ --- ------ -----
Operating Expenses
Operations and
support 1,861 58 -% 3,794 331 -%
Depreciation and
amortization 60 1 -% 131 4 -%
------------------------------- ------- --- ------ --- ------ -----
Total Operating
Expenses 1,921 59 -% 3,925 335 -%
------------------------------- ------- --- ------ --- ------ -----
Operating Income 1,291 48 -% 3,054 95 -%
Equity in Net Income
of Affiliates 15 13 15.4% 54 45 20.0%
------------------------------- ------- --- ------ --- ------ -----
Operating Contribution $ 1,306$ 61 -% $ 3,108$ 140 -%
=============================== ======= ====== === ====== =====
Operating Income
Margin 40.2% 44.9% (470) BP 43.8% 22.1% 2,170 BP
------------------------------- ------- ------ ------ ------ ----- ------
Home Box Office
Home Box Office consists of premium pay television and OTT services domestically
and premium pay, basic tier television and OTT services internationally, as
well as content licensing and home entertainment
Home Box Office Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
------------------------------ --------------------------
2018 2017 Change 2018 2017 Change
------------------------------ -------- --- ------ --- --------- ------- ----- ---------
Operating Revenues
Subscription $ 1,414$ - -% $ 3,201$ - -%
Content and other 259 - -% 397 - -%
----------------------------- -------- --- ------ --- ------- -----
Total Operating
Revenues 1,673 - -% 3,598 - -%
------------------------------ -------- --- ------ --- ------- -----
Operating Expenses
Operations and support 1,025 - -% 2,187 - -%
Depreciation and
amortization 26 - -% 56 - -%
------------------------------ -------- --- ------ --- ------- -----
Total Operating
Expenses 1,051 - -% 2,243 - -%
------------------------------ -------- --- ------ --- ------- -----
Operating Income 622 - -% 1,355 - -%
Equity in Net Income
of Affiliates 28 - -% 29 - -%
------------------------------ -------- --- ------ --- ------- -----
Operating Contribution $ 650$ - -% $ 1,384$ - -%
============================== ======== ====== === ======= =====
Operating Income
Margin 37.2% -% - BP 37.7% -% - BP
------------------------------ -------- ------ --- ---- ------- ----- --- ----
Warner Bros.
Warner Bros. consists of the production, distribution and licensing of television
programming and feature films, the distribution of home entertainment products
and the production and distribution of games.
Warner Bros. Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
------------------------------ ---------------------------
2018 2017 Change 2018 2017 Change
---------------------------- -------- --- ------ --- --------- -------- ----- ---------
Operating Revenues
Theactrical product $ 2,085$ - -% $ 4,002$ - -%
Television product 1,827 - -% 3,621 - -%
Video games and
other 564 - -% 1,080 - -%
---------------------------- -------- --- ------ --- -------- -----
Total Operating
Revenues 4,476 - -% 8,703 - -%
----------------------------- -------- --- ------ --- -------- -----
Operating Expenses
Operations and support 3,623 - -% 7,130 - -%
Depreciation and
amortization 42 - -% 96 - -%
----------------------------- -------- --- ------ --- -------- -----
Total Operating
Expenses 3,665 - -% 7,226 - -%
----------------------------- -------- --- ------ --- -------- -----
Operating Income 811 - -% 1,477 - -%
Equity in Net Income
(Loss) of Affiliates (4) - -% (28) - -%
----------------------------- -------- --- ------ --- -------- -----
Operating Contribution $ 807$ - -% $ 1,449$ - -%
============================= ======== ====== === ======== =====
Operating Income
Margin 18.1% -% - BP 17.0% -% - BP
----------------------------- -------- ------ --- ---- -------- ----- --- ----
LATIN AMERICA SEGMENT
The Latin America segment provides entertainment and wireless service outside
of the U.S. Our international subsidiaries conduct business in their local currency
and operating results are converted to U.S. dollars using official exchange
rates. The Latin America segment contains two business units: Vrio and Mexico.
Segment Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
--------------------- -----------------
2018 2017 Change 2018 2017 Change
------------------------------------- ------ ----- ----------- -------- ----- -----------
Segment Operating Revenues
Vrio $ 1,074 $ 1,391 (22.8)% $ 4,784 $5,456 (12.3)%
Mexico 769 824 (6.7)% 2,868 2,813 2.0%
--------
Total Segment Operating
Revenues 1,843 2,215 (16.8)% 7,652 8,269 (7.5)%
========
Segment Operating Contribution
Vrio 66 160 (58.8)% 347 522 (33.5)%
Mexico (314) (169) (85.8)% (1,057) (788) (34.1)%
--------
Total Segment Operating
Contribution $ (248) $ (9) -% $ (710) $(266) -%
========
Vrio
Vrio provides entertainment services to customers utilizing satellite technology
in Latin America and the Caribbean.
Vrio Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
---------------------
2018 2017 Change 2018 2017 Change
Operating Revenues $1,074$ 1,391 (22.8)% $ 4,784$ 5,456 (12.3)%
Operating Expenses
Operations and support 849 1,049 (19.1)% 3,743 4,172 (10.3)%
Depreciation and amortization 169 207 (18.4)% 728 849 (14.3)%
Total Operating Expenses 1,018 1,256 (18.9)% 4,471 5,021 (11.0)%
Operating Income 56 135 (58.5)% 313 435 (28.0)%
Equity in Net Income of Affiliates 10 25 (60.0)% 34 87 (60.9)%
Operating Contribution $ 66$ 160 (58.8)% $ 347$ 522 (33.5)%
Operating Income Margin 5.2% 9.7% (450) BP 6.5% 8.0% (150) BP
Supplementary Operating Data
Subscribers and connections in
thousands
Unaudited Year Ended Percent
2018 2017 Change
Vrio Satellite Subscribers 13,838 13,629 1.5%
Fourth Quarter Year Ended
2018 2017 2,018 2,017
Vrio Satellite Net Subscriber
Additions 198 139 42.4% 250 42 -%
Mexico
Mexico provides wireless services and equipment to customers in Mexico.
Mexico Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
2018 2017 Change 2018 2017 Change
------ ------- ------
Operating Revenues
Wireless service $ 440$ 501 (12.2)% $ 1,701$ 2,047 (16.9)%
Wireless equipment 329 323 1.9% 1,167 766 52.3%
------ ------- ------
Total Operating Revenues 769 824 (6.7)% 2,868 2,813 2.0%
------ ------- ------
Operating Expenses
Operations and support 956 887 7.8% 3,415 3,232 5.7%
Depreciation and amortization 127 106 19.8% 510 369 38.2%
------ ------- ------
Total Operating Expenses 1,083 993 9.1% 3,925 3,601 9.0%
------ ------- ------
Operating Income (Loss) (314) (169) (85.8)% (1,057) (788) (34.1)%
Operating Contribution $ (314)$ (169) (85.8)% $(1,057)$ (788) (34.1)%
Operating Income Margin (40.8)% (20.5)% (2,030) BP (36.9)% (28.0)% (890) BP
------ ------- ------
Supplementary Operating Data
Subscribers and connections
in thousands
Unaudited Year Ended Percent
2018 2017 Change
------ ------- ------
Mexico Wireless Subscribers
Postpaid 5,805 5,498 5.6%
Prepaid 12,264 9,397 30.5%
------ ------- ------
Branded 18,069 14,895 21.3%
Reseller 252 204 23.5%
------ ------- ------
Total Mexico Wireless Subscribers 18,321 15,099 21.3%
------ ------- ------
Fourth Quarter Percent Year Ended Percent
2018 2017 Change 2018 2017 Change
------ ------- ------
Mexico Wireless Net Additions
Postpaid (17) 182 -% 307 533 (42.4)%
Prepaid 994 1,165 (14.7)% 2,867 2,670 7.4%
------ ------- ------
Branded 977 1,347 (27.5)% 3,174 3,203 (0.9)%
Reseller 39 (27) -% 48 (77) -%
------ ------- ------
Total Mexico Wireless Net
Subscriber Additions 1,016 1,320 (23.0)% 3,222 3,126 3.1%
------ ------- ------
XANDR SEGMENT
The Xandr segment provides advertising services. These services utilize data
insights to develop higher value targeted advertising. Certain revenues in
this segment are also reported by the Communications segment and are eliminated
upon consolidation.
Segment Operating Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
2018 2017 Change 2018 2017 Change
Segment Operating
Revenues $ 566$ 381 48.6% $1,740$ 1,373 26.7%
Segment Operating
Expenses
Operations and
support 180 51 -% 398 169 -%
Depreciation and
amortization 5 1 -% 9 2 -%
Total Segment
Operating Expenses 185 52 -% 407 171 -%
Operating Income 381 329 15.8% 1,333 1,202 10.9%
Segment Operating
Contribution $ 381$ 329 15.8% $1,333$ 1,202 10.9%
Segment Operating
Income Margin 67.3% 86.4% (1,910) BP 76.6% 87.5% (1,090) BP
Supplemental AT&T Advertising Revenues
As a supplemental presentation to our Xandr segment operating results, we are
providing a view of total advertising revenues generated by AT&T, which combines
the advertising revenues recorded across all operating segments. This combined
view presents the entire portfolio of revenues generated from AT&T assets and
represents a significant strategic initiative and growth opportunity for AT&T.
Advertising Revenues
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
2018 2017 Change 2018 2017 Change
Operating Revenues
WarnerMedia $ 1,239 $ 13 -% $ 2,461 $ 65 -%
Communications 543 420 29.3% 1,827 1,513 20.8%
Xandr 566 381 48.6% 1,740 1,373 26.7%
Eliminations (473) (377) (25.5)% (1,595) (1,357) (17.5)%
Total Advertising
Revenues $ 1,875 $ 437 -% $ 4,433 $ 1,594 -%
SUPPLEMENTAL SEGMENT RECONCILIATION
Three Months Ended
Dollars in millions
Unaudited
December 31,
2018
Equity
in Net
Operations Income
and Depreciation Operating (Loss)
Support and Income of Segment
Revenues Expenses EBITDA Amortization (Loss) Affiliates Contribution
Communications
Mobility $ 18,769 $ 11,246 $ 7,523 $ 2,068 $ 5,455 $ - $ 5,455
Entertainment
Group 11,962 9,807 2,155 1,329 826 (1) 825
Business Wireline 6,727 4,161 2,566 1,207 1,359 - 1,359
-------
Total Communications 37,458 25,214 12,244 4,604 7,640 (1) 7,639
-------
WarnerMedia
Turner 3,212 1,861 1,351 60 1,291 15 1,306
Home Box Office 1,673 1,025 648 26 622 28 650
Warner Bros. 4,476 3,623 853 42 811 (4) 807
Other (129) (39) (90) 11 (101) 41 (60)
-------
Total WarnerMedia 9,232 6,470 2,762 139 2,623 80 2,703
-------
Latin America
Vrio 1,074 849 225 169 56 10 66
Mexico 769 956 (187) 127 (314) - (314)
-------
Total Latin America 1,843 1,805 38 296 (258) 10 (248)
-------
Xandr 566 180 386 5 381 - 381
-------
Segment Total 49,099 33,669 15,430 5,044 10,386 89 10,475
Corporate and
Other
Corporate 279 252 27 560 (533)
Acquisition-related
items (49) 435 (484) 2,262 (2,746)
Certain significant
items - 492 (492) 26 (518)
Eliminations
and consolidations (1,336) (907) (429) - (429)
-------
AT&T Inc. $ 47,993 $ 33,941 $ 14,052 $ 7,892 $ 6,160
December 31,
2017
Equity
in Net
Operations Income
and Depreciation Operating (Loss)
Support and Income of Segment
Revenues Expenses EBITDA Amortization (Loss) Affiliates Contribution
Communications
Mobility $ 19,168 $ 12,866 $ 6,302 $ 2,027 $ 4,275 $ - $ 4,275
Entertainment
Group 12,560 10,192 2,368 1,367 1,001 - 1,001
Business Wireline 7,382 4,586 2,796 1,206 1,590 (2) 1,588
-------
Total Communications 39,110 27,644 11,466 4,600 6,866 (2) 6,864
-------
WarnerMedia
Turner 107 58 49 1 48 13 61
Home Box Office - - - - - - -
Warner Bros. - - - - - - -
Other - 1 (1) - (1) (19) (20)
-------
Total WarnerMedia 107 59 48 1 47 (6) 41
-------
Latin America
Vrio 1,391 1,049 342 207 135 25 160
Mexico 824 887 (63) 106 (169) - (169)
-------
Total Latin America 2,215 1,936 279 313 (34) 25 (9)
-------
Xandr 381 51 330 1 329 - 329
-------
Segment Total 41,813 29,690 12,123 4,915 7,208 17 7,225
Corporate and
Other
Corporate 340 866 (526) 24 (550)
Acquisition-related
items - 176 (176) 1,100 (1,276)
Certain significant
items (154) 3,578 (3,732) 32 (3,764)
Eliminations
and consolidations (323) 14 (337) - (337)
-------
AT&T Inc. $ 41,676 $ 34,324 $ 7,352 $ 6,071 $ 1,281
SUPPLEMENTAL SEGMENT RECONCILIATION
Twelve Months Ended
Dollars in millions
Unaudited
December 31,
2018
Equity
in Net
Operations Income
and Depreciation Operating (Loss)
Support and Income of Segment
Revenues Expenses EBITDA Amortization (Loss) Affiliates Contribution
Communications
Mobility $ 71,344 $ 41,266 $ 30,078 $ 8,355 $ 21,723 $ (1) $ 21,722
Entertainment
Group 46,460 36,430 10,030 5,315 4,715 (2) 4,713
Business Wireline 26,827 16,245 10,582 4,754 5,828 (1) 5,827
-------
Total Communications 144,631 93,941 50,690 18,424 32,266 (4) 32,262
-------
WarnerMedia
Turner 6,979 3,794 3,185 131 3,054 54 3,108
Home Box Office 3,598 2,187 1,411 56 1,355 29 1,384
Warner Bros. 8,703 7,130 1,573 96 1,477 (28) 1,449
Other (339) (145) (194) 22 (216) (30) (246)
-------
Total WarnerMedia 18,941 12,966 5,975 305 5,670 25 5,695
-------
Latin America
Vrio 4,784 3,743 1,041 728 313 34 347
Mexico 2,868 3,415 (547) 510 (1,057) - (1,057)
-------
Total Latin America 7,652 7,158 494 1,238 (744) 34 (710)
-------
Xandr 1,740 398 1,342 9 1,333 - 1,333
-------
Segment Total 172,964 114,463 58,501 19,976 38,525 55 38,580
Corporate and
Other
Corporate 1,240 1,630 (390) 1,498 (1,888)
Acquisition-related
items (49) 1,185 (1,234) 6,931 (8,165)
Certain significant
items - 899 (899) 26 (925)
Eliminations
and consolidations (3,399) (1,947) (1,452) (1) (1,451)
-------
AT&T Inc. $ 170,756 $ 116,230 $ 54,526 $ 28,430 $ 26,096
December 31,
2017
Equity
in Net
Operations Income
and Depreciation Operating (Loss)
Support and Income of Segment
Revenues Expenses EBITDA Amortization (Loss) Affiliates Contribution
Communications
Mobility $ 71,090 $ 42,871 $ 28,219 $ 8,015 $ 20,204 $ - $ 20,204
Entertainment
Group 49,995 38,903 11,092 5,621 5,471 - 5,471
Business Wireline 29,293 18,492 10,801 4,789 6,012 (2) 6,010
-------
Total Communications 150,378 100,266 50,112 18,425 31,687 (2) 31,685
-------
WarnerMedia
Turner 430 331 99 4 95 45 140
Home Box Office - - - - - - -
Warner Bros. - - - - - - -
Other - 4 (4) - (4) (74) (78)
-------
Total WarnerMedia 430 335 95 4 91 (29) 62
-------
Latin America
Vrio 5,456 4,172 1,284 849 435 87 522
Mexico 2,813 3,232 (419) 369 (788) - (788)
-------
Total Latin America 8,269 7,404 865 1,218 (353) 87 (266)
-------
Xandr 1,373 169 1,204 2 1,202 - 1,202
-------
Segment Total 160,450 108,174 52,276 19,649 32,627 56 32,683
Corporate and
Other
Corporate 1,522 3,306 (1,784) 97 (1,881)
Acquisition-related
items - 798 (798) 4,608 (5,406)
Certain significant
items (243) 3,880 (4,123) 33 (4,156)
Eliminations
and consolidations (1,183) 31 (1,214) - (1,214)
-------
AT&T Inc. $ 160,546 $ 116,189 $ 44,357 $ 24,387 $ 19,970
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
Supplemental Consolidated Statements of Income
Dollars in millions except per share
amounts
Unaudited Fourth Quarter
Accounting Historical Percent
2018 Impact 2018 2017 Change
Operating Revenues
Service $ 42,496 $ (1,435) $ 43,931 $ 36,225 21.3%
Equipment 5,497 571 4,926 5,451 (9.6)%
Total Operating Revenues 47,993 (864) 48,857 41,676 17.2%
Operating Expenses
Cost of revenues
Equipment 5,733 - 5,733 6,532 (12.2)%
Broadcast, programming and operations 8,885 - 8,885 6,003 48.0%
Other cost of revenues (exclusive
of depreciation
and amortization shown separately
below) 8,691 (981) 9,672 9,391 3.0%
Selling, general and administrative 10,586 (466) 11,052 9,484 16.5%
Asset abandonments and impairments 46 - 46 2,914 (98.4)%
Depreciation and amortization 7,892 - 7,892 6,071 30.0%
Total Operating Expenses 41,833 (1,447) 43,280 40,395 7.1%
Operating Income 6,160 583 5,577 1,281 -%
Interest Expense (2,112) - (2,112) (1,926) 9.7%
Equity in Net Income (Loss) of Affiliates 23 - 23 20 15.0%
Other Income (Expense) - Net 1,674 - 1,674 (658) -%
Income Before Income Taxes 5,745 583 5,162 (1,283) -%
Income Tax Expense (Benefit) 615 143 472 (20,419) -%
Net Income 5,130 440 4,690 19,136 (75.5)%
Less: Net Income Attributable to
Noncontrolling Interest (272) (6) (266) (99) -%
Net Income Attributable to AT&T $ 4,858 $ 434 $ 4,424 $ 19,037 (76.8)%
Basic Earnings Per Share Attributable
to AT&T $ 0.66 $ 0.05 $ 0.61 $ 3.08 (80.2)%
Weighted Average Common
Shares Outstanding (000,000) 7,296 - 7,296 6,163 18.4%
Diluted Earnings Per Share Attributable
to AT&T $ 0.66 $ 0.05 $ 0.61 $ 3.08 (80.2)%
Weighted Average Common
Shares Outstanding with Dilution
(000,000) 7,328 - 7,328 6,182 18.5%
Supplemental Mobility
Supplemental Results
Dollars in millions
Unaudited Fourth Quarter
Accounting Historical Percent
2018 Impact 2018 2017 Change
Operating Revenues
Service $13,859$ (840) $ 14,699$ 14,282 2.9%
Equipment 4,910 555 4,355 4,886 (10.9)%
Total Operating Revenues 18,769 (285) 19,054 19,168 (0.6)%
Operating Expenses
Operations and support 11,246 (667) 11,913 12,866 (7.4)%
EBITDA 7,523 382 7,141 6,302 13.3%
Depreciation and amortization 2,068 - 2,068 2,027 2.0%
Total Operating Expenses 13,314 (667) 13,981 14,893 (6.1)%
Operating Income 5,455 382 5,073 4,275 18.7%
Equity in Net Income (Loss) of Affiliates - - - - -%
Operating Contribution $ 5,455$ 382 $ 5,073$ 4,275 18.7%
Operating Income Margin 29.1% 26.6% 22.3% 430 BP
EBITDA Margin 40.1% 37.5% 32.9% 460 BP
EBITDA Service Margin 54.3% 48.6% 44.1% 450 BP
Supplemental Entertainment Group
Supplemental Entertainment Group Results
Dollars in millions
Unaudited Fourth Quarter
Accounting Historical Percent
2018 Impact 2018 2017 Change
Operating Revenues
Video entertainment $ 8,676$ (117) $ 8,793$ 9,200 (4.4)%
High-speed internet 2,052 - 2,052 1,890 8.6%
Legacy voice and data services 724 (34) 758 878 (13.7)%
Other service and equipment 510 (66) 576 592 (2.7)%
Total Operating Revenues 11,962 (217) 12,179 12,560 (3.0)%
Operating Expenses
Operations and support 9,807 (374) 10,181 10,192 (0.1)%
EBITDA 2,155 157 1,998 2,368 (15.6)%
Depreciation and amortization 1,329 - 1,329 1,367 (2.8)%
Total Operating Expenses 11,136 (374) 11,510 11,559 (0.4)%
Operating Income 826 157 669 1,001 (33.2)%
Equity in Net Income (Loss) of Affiliates (1) - (1) - -%
Contribution $ 825$ 157 $ 668$ 1,001 (33.3)%
Operating Income Margin 6.9% 5.5% 8.0% (250) BP
EBITDA Margin 18.0% 16.4% 18.9% (250) BP
Supplemental Business Wireline
Supplemental Business Wireline Results
Dollars in millions
Unaudited Fourth Quarter
Accounting Historical Percent
2018 Impact 2018 2017 Change
Operating Revenues
Strategic services $3,142$ (3) $ 3,145$ 3,070 2.4%
Legacy voice and data services 2,521 (267) 2,788 3,251 (14.2)%
Other service and equipment 1,064 (76) 1,140 1,061 7.4%
Total Operating Revenues 6,727 (346) 7,073 7,382 (4.2)%
Operating Expenses
Operations and support 4,161 (368) 4,529 4,586 (1.2)%
EBITDA 2,566 22 2,544 2,796 (9.0)%
Depreciation and amortization 1,207 - 1,207 1,206 0.1%
Total Operating Expenses 5,368 (368) 5,736 5,792 (1.0)%
Operating Income 1,359 22 1,337 1,590 (15.9)%
Equity in Net Income of Affiliates - - - (2) -%
Operating Contribution $1,359$ 22 $ 1,337$ 1,588 (15.8)%
Operating Income Margin 20.2% 18.9% 21.5% (260) BP
EBITDA Margin 38.1% 36.0% 37.9% (190) BP
Supplemental Latin America
Supplemental Segment Results
Dollars in millions
Unaudited Fourth Quarter
Accounting Historical Percent
2018 Impact 2018 2017 Change
------
Segment Operating Revenues
Vrio $ 1,074$ - $ 1,074$ 1,391 (22.8)%
Mexico 769 (9) 778 824 (5.6)%
Total Segment Operating Revenues 1,843 (9) 1,852 2,215 (16.4)%
Segment Operating Expenses
Operations and support 1,805 (30) 1,835 1,936 (5.2)%
EBITDA 38 21 17 279 (93.9)%
Depreciation and amortization 296 - 296 313 (5.4)%
Total Segment Operating Expenses 2,101 (30) 2,131 2,249 (5.2)%
Segment Operating Income (Loss) (258) 21 (279) (34) -%
Equity in Net Income of Affiliates 10 - 10 25 (60.0)%
Segment Contribution $ (248)$ 21 $ (269)$ (9) -%
Operating Income Margin (14.0)% (15.1)% (1.5)% (1,360) BP
EBITDA Margin 2.1% 0.9% 12.6% (1,170) BP
Supplemental Business Solutions
As a supplemental presentation to our Communications segment operating results,
we are providing a view of our AT&T Business Solutions results which includes
both wireless and fixed operations. This combined view presents a complete profile
of the entire business customer relationship, and underscores the importance
of mobile solutions to serving our business customers.
Supplemental Operating Results
Dollars in millions
Unaudited Fourth Quarter
Accounting Historical Percent
2018 Impact 2018 2017 Change
Operating Revenues
Wireless service $ 1,900$ (209) $ 2,109$ 1,979 6.6%
Strategic services 3,142 (3) 3,145 3,070 2.4%
Legacy voice and data services 2,521 (267) 2,788 3,251 (14.2)%
Other service and equipment 1,064 (76) 1,140 1,061 7.4%
Wireless equipment 780 210 570 564 1.1%
Total Operating Revenues 9,407 (345) 9,752 9,925 (1.7)%
Operating Expenses
Operations and support 5,911 (470) 6,381 6,349 0.5%
EBITDA 3,496 125 3,371 3,576 (5.7)%
Depreciation and amortization 1,507 - 1,507 1,492 1.0%
Total Operating Expenses 7,418 (470) 7,888 7,841 0.6%
Operating Income 1,989 125 1,864 2,084 (10.6)%
Equity in Net Income (Loss) of
Affiliates - - - (1) -%
Operating Contribution $ 1,989$ 125 $ 1,864$ 2,083 (10.5)%
Operating Income Margin 21.1% 19.1% 21.0% (190) BP
EBITDA Margin 37.2% 34.6% 36.0% (140) BP
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
Supplemental Consolidated Statements of Income
Dollars in millions except per share
amounts
Unaudited Year Ended
Accounting Historical Percent
2018 Impact 2018 2017 Change
Operating Revenues
Service $152,345 $ (5,634) $ 157,979 $ 145,597 8.5%
Equipment 18,411 2,087 16,324 14,949 9.2%
Total Operating Revenues 170,756 (3,547) 174,303 160,546 8.6%
Operating Expenses
Cost of revenues
Equipment 19,786 - 19,786 18,709 5.8%
Broadcast, programming and operations 26,727 - 26,727 21,159 26.3%
Other cost of revenues (exclusive
of depreciation
and amortization shown separately
below) 32,906 (3,730) 36,636 37,942 (3.4)%
Selling, general and administrative 36,765 (2,196) 38,961 35,465 9.9%
Asset abandonments and impairments 46 - 46 2,914 (98.4)%
Depreciation and amortization 28,430 - 28,430 24,387 16.6%
Total Operating Expenses 144,660 (5,926) 150,586 140,576 7.1%
Operating Income 26,096 2,379 23,717 19,970 18.8%
Interest Expense (7,957) - (7,957) (6,300) 26.3%
Equity in Net Income (Loss) of Affiliates (48) - (48) (128) 62.5%
Other Income (Expense) - Net 6,782 - 6,782 1,597 -%
Income Before Income Taxes 24,873 2,379 22,494 15,139 48.6%
Income Tax Expense (Benefit) 4,920 583 4,337 (14,708) -%
Net Income 19,953 1,796 18,157 29,847 (39.2)%
Less: Net Income Attributable to
Noncontrolling Interest (583) (23) (560) (397) (41.1)%
Net Income Attributable to AT&T $ 19,370 $ 1,773 $ 17,597 $ 29,450 (40.2)%
Basic Earnings Per Share Attributable
to AT&T $ 2.85 $ 0.26 $ 2.59 $ 4.77 (45.7)%
Weighted Average Common
Shares Outstanding (000,000) 6,778 - 6,778 6,164 10.0%
Diluted Earnings Per Share Attributable
to AT&T $ 2.85 $ 0.26 $ 2.59 $ 4.76 (45.6)%
Weighted Average Common
Shares Outstanding with Dilution
(000,000) 6,806 - 6,806 6,183 10.1%
EXHIBIT 99.3
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 revised operating
segments.
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.
Free Cash Flow and Free Cash Flow Dividend Payout Ratio
Dollars in millions
Fourth Quarter Year Ended
2018 2017 2018 2017
Net cash provided by operating activities $ 12,080 $ 9,537 $ 43,602 $ 38,010
Less: Capital expenditures (4,152) (5,076) (21,251) (21,550)
Free Cash Flow 7,928 4,461 22,351 16,460
Less: Dividends paid (3,635) (3,008) (13,410) (12,038)
Free Cash Flow after Dividends $ 4,293 $ 1,453 $ 8,941 $ 4,422
Free Cash Flow Dividend Payout Ratio 45.9% 67.4% 60.0% 73.1%
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.
When discussing our segment, business unit and supplemental
results, EBITDA excludes equity in net income (loss) of affiliates,
and depreciation and amortization from operating contribution.
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 operating 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 management is responsible and upon which we evaluate
performance.
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 Mobility business
unit 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.
EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
Fourth Quarter Year Ended
2018 2017 2018 2017
Net Income $ 5,130 $ 19,136 $ 19,953 $ 29,847
Additions:
Income Tax (Benefit) Expense 615 (20,419) 4,920 (14,708)
Interest Expense 2,112 1,926 7,957 6,300
Equity in Net (Income) Loss of Affiliates (23) (20) 48 128
Other (Income) Expense - Net (1,674) 658 (6,782) (1,597)
Depreciation and amortization 7,892 6,071 28,430 24,387
EBITDA 14,052 7,352 54,526 44,357
Total Operating Revenues 47,993 41,676 170,756 160,546
Service Revenues 42,496 36,225 152,345 145,597
EBITDA Margin 29.3% 17.6% 31.9% 27.6%
EBITDA Service Margin 33.1% 20.3% 35.8% 30.5%
Supplemental Historical EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
Fourth Quarter Year Ended
2018 2018
Net Income $ 4,690 $ 18,157
Additions:
Income Tax (Benefit) Expense 472 4,337
Interest Expense 2,112 7,957
Equity in Net (Income) Loss of Affiliates (23) 48
Other (Income) Expense - Net (1,674) (6,782)
Depreciation and amortization 7,892 28,430
EBITDA 13,469 52,147
Total Operating Revenues 48,857 174,303
Service Revenues 43,931 157,979
EBITDA Margin 27.6% 29.9%
EBITDA Service Margin 30.7% 33.0%
Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
Fourth Quarter Year Ended
2018 2017 2018 2017
Communications Segment
Operating Contribution $ 7,639 $ 6,864 $ 32,262 $ 31,685
Additions:
Equity in Net (Income) Loss of Affiliates 1 2 4 2
Depreciation and amortization 4,604 4,600 18,424 18,425
EBITDA 12,244 11,466 50,690 50,112
Total Operating Revenues 37,458 39,110 144,631 150,378
Operating Income Margin 20.4% 17.6% 22.3% 21.1%
EBITDA Margin 32.7% 29.3% 35.0% 33.3%
Mobility
Operating Contribution $ 5,455 $ 4,275 $ 21,722 $ 20,204
Additions:
Equity in Net (Income) of Affiliates - - 1 -
Depreciation and amortization 2,068 2,027 8,355 8,015
EBITDA 7,523 6,302 30,078 28,219
Total Operating Revenues 18,769 19,168 71,344 71,090
Service Revenues 13,859 14,282 54,933 57,696
Operating Income Margin 29.1% 22.3% 30.4% 28.4%
EBITDA Margin 40.1% 32.9% 42.2% 39.7%
EBITDA Service Margin 54.3% 44.1% 54.8% 48.9%
Entertainment Group
Operating Contribution $ 825 $ 1,001 $ 4,713 $ 5,471
Additions:
Equity in Net (Income) Loss of Affiliates 1 - 2 -
Depreciation and amortization 1,329 1,367 5,315 5,621
EBITDA 2,155 2,368 10,030 11,092
Total Operating Revenues 11,962 12,560 46,460 49,995
Operating Income Margin 6.9% 8.0% 10.1% 10.9%
EBITDA Margin 18.0% 18.9% 21.6% 22.2%
Business Wireline
Operating Contribution $ 1,359 $ 1,588 $ 5,827 $ 6,010
Additions:
Equity in Net (Income) Loss of Affiliates - 2 1 2
Depreciation and amortization 1,207 1,206 4,754 4,789
EBITDA 2,566 2,796 10,582 10,801
Total Operating Revenues 6,727 7,382 26,827 29,293
Operating Income Margin 20.2% 21.5% 21.7% 20.5%
EBITDA Margin 38.1% 37.9% 39.4% 36.9%
Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
Fourth Quarter Year Ended
2018 2017 2018 2017
WarnerMedia Segment
Operating Contribution $ 2,703 $ 41 $ 5,695 $ 62
Additions:
Equity in Net (Income) of Affiliates (80) 6 (25) 29
Depreciation and amortization 139 1 305 4
EBITDA 2,762 48 5,975 95
Total Operating Revenues 9,232 107 18,941 430
Operating Income Margin 28.4% 43.9% 29.9% 21.2%
EBITDA Margin 29.9% 44.9% 31.5% 22.1%
Turner
Operating Contribution $ 1,306 $ 61 $ 3,108 $ 140
Additions:
Equity in Net (Income) of Affiliates (15) (13) (54) (45)
Depreciation and amortization 60 1 131 4
EBITDA 1,351 49 3,185 99
Total Operating Revenues 3,212 107 6,979 430
Operating Income Margin 40.2% 44.9% 43.8% 22.1%
EBITDA Margin 42.1% 45.8% 45.6% 23.0%
Home Box Office
Operating Contribution $ 650 $ - $ 1,384 $ -
Additions:
Equity in Net (Income) Loss of Affiliates (28) - (29) -
Depreciation and amortization 26 - 56 -
EBITDA 648 - 1,411 -
Total Operating Revenues 1,673 - 3,598 -
Operating Income Margin 37.2% - 37.7% -
EBITDA Margin 38.7% - 39.2% -
Warner Bros.
Operating Contribution $ 807 $ - $ 1,449 $ -
Additions:
Equity in Net (Income) Loss of Affiliates 4 - 28 -
Depreciation and amortization 42 - 96 -
EBITDA 853 - 1,573 -
Total Operating Revenues 4,476 - 8,703 -
Operating Income Margin 18.1% - 17.0% -
EBITDA Margin 19.1% - 18.1% -
Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
Fourth Quarter Year Ended
2018 2017 2018 2017
Latin America Segment
Operating Contribution $ (248) $ (9) $ (710) $ (266)
Additions:
Equity in Net (Income) of Affiliates (10) (25) (34) (87)
Depreciation and amortization 296 313 1,238 1,218
EBITDA 38 279 494 865
Total Operating Revenues 1,843 2,215 7,652 8,269
Operating Income Margin -14.0% -1.5% -9.7% -4.3%
EBITDA Margin 2.1% 12.6% 6.5% 10.5%
Vrio
Operating Contribution $ 66 $ 160 $ 347 $ 522
Additions:
Equity in Net (Income) of Affiliates (10) (25) (34) (87)
Depreciation and amortization 169 207 728 849
EBITDA 225 342 1,041 1,284
Total Operating Revenues 1,074 1,391 4,784 5,456
Operating Income Margin 5.2% 9.7% 6.5% 8.0%
EBITDA Margin 20.9% 24.6% 21.8% 23.5%
Mexico
Operating Contribution $ (314) $ (169) $(1,057) $ (788)
Additions:
Depreciation and amortization 127 106 510 369
EBITDA (187) (63) (547) (419)
Total Operating Revenues 769 824 2,868 2,813
Operating Income Margin -40.8% -20.5% -36.9% -28.0%
EBITDA Margin -24.3% -7.6% -19.1% -14.9%
Segment EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
Fourth Quarter Year Ended
2018 2017 2018 2017
------ ----- -----
Xandr
------ ----- -----
Operating Contribution $ 381 $ 329 $1,333 $1,202
Additions:
Depreciation and amortization 5 1 9 2
------ ----- -----
EBITDA 386 330 1,342 1,204
------ ----- -----
Total Operating Revenues 566 381 1,740 1,373
Operating Income Margin 67.3% 86.4% 76.6% 87.5%
EBITDA Margin 68.2% 86.6% 77.1% 87.7%
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, 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.
Adjusting Items
Dollars in millions
Fourth Quarter Year Ended
2018 2017 2018 2017
Operating Revenues
Time Warner deferred revenue $ 49 $ - $ 49 $ -
Natural disaster revenue credits - 154 - 243
Adjustments to Operating Revenues 49 154 49 243
Operating Expenses
Time Warner and other merger costs 436 63 1,185 214
Employee separation costs 327 177 587 445
Natural disaster costs 77 265 181 384
Asset abandonments and impairments 46 2,914 46 2,914
Holding losses on benefit-related investments 42 - 42 -
DIRECTV merger integration costs - 95 - 412
Mexico merger integration costs - 19 - 172
Tax reform special bonus - 220 - 220
(Gain) loss on transfer of wireless spectrum - - - (181)
Foreign currency exchange - - 43 98
Adjustments to Operations and Support Expenses 928 3,753 2,084 4,678
Amortization of intangible assets 2,261 1,100 6,930 4,608
Impairments 26 33 26 33
Adjustments to Operating Expenses 3,215 4,886 9,040 9,319
Other
Merger-related interest and fees 1 - 432 1,029 1,104
Actuarial (gain) loss (686) 1,517 (3,412) 1,258
Holding losses on benefit-related investments 208 - 208 -
(Gain) loss on sale of assets,
impairments and other adjustments (352) 161 (631) 382
Adjustments to Income Before Income Taxes 2,434 7,150 6,283 12,306
Tax impact of adjustments 412 1,908 1,177 3,625
Tax-related items 601 19,455 505 19,309
Adjustments to Net Income $1,421 $(14,213) $ 4,601 $(10,628)
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.
Adjusted Operating Income, Adjusted Operating Income Margin,
Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EBITDA Service Margin
Dollars in millions
Fourth Quarter Year Ended
2018 2017 2018 2017
Operating Income $ 6,160 $ 1,281 $ 26,096 $ 19,970
Adjustments to Operating Revenues 49 154 49 243
Adjustments to Operating Expenses 3,215 4,886 9,040 9,319
Adjusted Operating Income 9,424 6,321 35,185 29,532
EBITDA 14,052 7,352 54,526 44,357
Adjustments to Operating Revenues 49 154 49 243
Adjustments to Operations and Support Expenses 928 3,753 2,084 4,678
Adjusted EBITDA 15,029 11,259 56,659 49,278
Pro forma as of June 30, 2018
WarnerMedia Operating Income - 3,047
Additions:
Depreciation and amortization - 339
Merger costs - 694
WarnerMedia Adjusted EBITDA - 4,080
WarnerMedia segment income (post acquisition) - (451)
WarnerMedia segment depreciation and
amortization (post acquisition) - (30)
WarnerMedia merger costs (post acquisition) - (159)
Film and television cost amortization
(release prior to June 14) - 1,103
Pro Forma Adjusted EBITDA 1 15,029 61,202
Total Operating Revenues 47,993 41,676 170,756 160,546
Adjustments to Operating Revenues 49 154 49 243
Total Adjusted Operating Revenue 48,042 41,830 170,805 160,789
Service Revenues 42,496 36,225 152,345 145,597
Adjustments to Service Revenues 49 154 49 243
Adjusted Service Revenue 42,545 36,379 152,394 145,840
Operating Income Margin 12.8% 3.1% 15.3% 12.4%
Adjusted Operating Income Margin 19.6% 15.1% 20.6% 18.4%
Adjusted EBITDA Margin 31.3% 26.9% 33.2% 30.6%
Adjusted EBITDA Service Margin 35.3% 30.9% 37.2% 33.8%
Supplemental Results under Historical Accounting
Method
Operating Income 5,577 23,717
Adjustments to Operating Revenues 49 49
Adjustments to Operating Expenses 3,215 9,040
Adjusted Supplemental Operating Income 8,841 32,806
EBITDA 13,469 52,147
Adjustments to Operating Revenues 49 49
Adjustments to Operations and Support Expenses 928 2,084
Adjusted Supplemental EBITDA 14,446 54,280
Supplemental Operating Revenues 48,857 174,303
Adjusted Supplemental Operating Income
Margin 18.1% 18.8%
Adjusted Supplemental EBITDA margin 29.6% 31.1%
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.
Adjusted Diluted EPS
Fourth Quarter Year Ended
2018 2017 2018 2017
Diluted Earnings Per Share (EPS) $ 0.66 $ 3.08 $ 2.85 $ 4.76
Amortization of intangible assets 0.25 0.12 0.81 0.50
Merger integration items 1 0.06 0.07 0.26 0.21
(Gain) loss on sale of assets, impairments
and other adjustments 2 0.04 0.48 0.05 0.58
Actuarial (gain) loss 3 (0.07) 0.19 (0.38) 0.16
Tax-related items (0.08) (3.16) (0.07) (3.16)
Adjusted EPS $ 0.86 $ 0.78 $ 3.52 $ 3.05
Year-over-year growth - Adjusted 10.3% 15.4%
Weighted Average Common Shares Outstanding
with Dilution (000,000) 7,328 6,182 6,806 6,183
1 Includes combined merger integration items and merger-related interest income
and expense, and redemption premiums.
2 Includes gains on transactions, natural disaster adjustments and charges,
and 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 total net actuarial gains of $3.4 billion in 2018. As a result, adjusted
EPS reflects an expected return on plan assets of $3.5 billion (based on an
average expected return on plan assets of 7.00% for our pension trust and 5.75%
for our VEBA trusts), rather than the actual return on plan assets of $1.2
billion loss (actual pension return of -1.4% and VEBA return of -4.2%), included
in the GAAP measure of income.
Pro Forma 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. 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.
Our Annualized Net Debt to Pro Forma Adjusted EBITDA ratio for
the year ended December 31, 2018 reflects the benefit of
amortization of prior service credits of $1,754 in Other Income
(Expense) - net rather than EBITDA, consistent with treatment for
consolidated reported results. Segment results continue to show
this benefit as a reduction in their operating expenses, consistent
with treatment prior to adoption of accounting rules in
first-quarter 2018. If we had used the historical method of
accounting for prior service credits, our 2018 Annualized Net Debt
to Pro Forma Adjusted EBITDA Ratio would be 2.75 .
Net Debt to Pro Forma Adjusted EBITDA
Dollars in millions
Three Months Ended
Mar. 31, Jun. 30, Sep. 30, Dec. 31, YTD 2018
2018 2018 2018 2018
Pro Forma Adjusted EBITDA 1 $ 15,182 $ 15,119 $ 15,872 $ 15,029 $ 61,202
Add back severance (51) (133) (76) (327) (587)
Net Debt Pro Forma Adjusted EBITDA 15,131 14,986 15,796 14,702 60,615
Annualized Pro Forma Adjusted EBITDA 60,615
End-of-period current debt 10,255
End-of-period long-term debt 166,250
Total End-of-Period Debt 176,505
Less: Cash and Cash Equivalents 5,204
Net Debt Balance 171,301
Annualized Net Debt to Pro Forma
Adjusted EBITDA Ratio 2.83
1 Includes the purchase accounting reclassification of released content amortization
of $612 million pro forma in the first quarter, $491 million pro forma and $98
million reported by AT&T in the second quarter and $772 million reported and
$545 million reported by AT&T in the third and fourth quarters of 2018, respectively.
Supplemental Operational Measures
We provide a supplemental discussion of our business solutions
operations that is calculated by combining our Mobility and
Business Wireline operating units, and then adjusting to remove
non-business operations. The following table presents a
reconciliation of our supplemental Business Solutions results.
Supplemental Operational Measure
Three Months Ended
December 31, 2018 December 31, 2017
Business Adjustments Business Business Adjustments Business
Mobility Wireline 1 Solutions Mobility Wireline 1 Solutions
Operating
Revenues
Wireless
service $ 13,859 $ - $ (11,959) $ 1,900 $ 14,282 $ - $ (12,303) $ 1,979
Strategic
services - 3,142 - 3,142 - 3,070 - 3,070
Legacy voice
and
data
services - 2,521 - 2,521 - 3,251 - 3,251
Other
services and
equipment - 1,064 - 1,064 - 1,061 - 1,061
Wireless
equipment 4,910 - (4,130) 780 4,886 - (4,322) 564
Total Operating
Revenues 18,769 6,727 (16,089) 9,407 19,168 7,382 (16,625) 9,925
Operations
and support 11,246 4,161 (9,496) 5,911 12,866 4,586 (11,103) 6,349
EBITDA 7,523 2,566 (6,593) 3,496 6,302 2,796 (5,522) 3,576
Depreciation
and
amortization 2,068 1,207 (1,768) 1,507 2,027 1,206 (1,741) 1,492
Total Operating
Expenses 13,314 5,368 (11,264) 7,418 14,893 5,792 (12,844) 7,841
Operating
Income 5,455 1,359 (4,825) 1,989 4,275 1,590 (3,781) 2,084
Equity in net
Income
of Affiliates - - - - - (2) 1 (1)
Contribution $ 5,455 $ 1,359 $ (4,825) $ 1,989 $ 4,275 $ 1,588 $ (3,780) $ 2,083
1 Non-business wireless reported in the Communication segment under the Mobility
business unit.
Supplemental Operational Measure
Year Ended
December 31, 2018 December 31, 2017
Business Adjustments Business Business Adjustments Business
Mobility Wireline 1 Solutions Mobility Wireline 1 Solutions
Operating
Revenues
Wireless
service $ 54,933 $ - $ (47,536) $ 7,397 $ 57,696 $ - $ (49,687) $ 8,009
Strategic
services - 12,310 - 12,310 - 11,950 - 11,950
Legacy voice
and
data
services - 10,697 - 10,697 - 13,565 - 13,565
Other
services and
equipment - 3,820 - 3,820 - 3,778 - 3,778
Wireless
equipment 16,411 - (13,879) 2,532 13,394 - (11,842) 1,552
Total Operating
Revenues 71,344 26,827 (61,415) 36,756 71,090 29,293 (61,529) 38,854
Operating
Expenses
Operations
and support 41,266 16,245 (34,792) 22,719 42,871 18,492 (36,867) 24,496
EBITDA 30,078 10,582 (26,623) 14,037 28,219 10,801 (24,662) 14,358
Depreciation
and
amortization 8,355 4,754 (7,158) 5,951 8,015 4,789 (6,903) 5,901
Total Operating
Expenses 49,621 20,999 (41,950) 28,670 50,886 23,281 (43,770) 30,397
Operating
Income 21,723 5,828 (19,465) 8,086 20,204 6,012 (17,759) 8,457
Equity in net
Income
of Affiliates (1) (1) 1 (1) - (2) 1 (1)
Contribution $ 21,722 $ 5,827 $ (19,464) $ 8,085 $ 20,204 $ 6,010 $ (17,758) $ 8,456
1 Non-business wireless reported in the Communication segment under the Mobility
business unit.
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
FR SFSFMEFUSEED
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