Form 8-K AT&T INC. For: Apr 24
Delaware
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1-8610
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43-1301883
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(State or Other Jurisdiction of Incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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208 S. Akard St., Dallas, Texas
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75202
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(Address of Principal Executive Offices)
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(Zip Code)
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99.1 | Press release dated April 24, 2019 reporting financial results for the first quarter ended March 31, 2019. | |
99.3 |
AT&T INC.
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Date: April 24, 2019
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By: /s/
Debra L. Dial
Debra L. Dial
Senior Vice President and Controller
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Diluted EPS of $0.56 as reported compared to $0.75 in the year-ago quarter
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Adjusted EPS of $0.86 compared to $0.85 in the year-ago quarter
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Consolidated revenues of $44.8 billion
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Cash from operations of $11.1 billion, up 24%
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Capital expenditures of $5.2 billion
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Free cash flow of $5.9 billion
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●
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Mobility:
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o
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Service revenues up 2.9%; operating income and EBITDA growth with
postpaid phone and prepaid net adds
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o
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179,000 postpaid smartphone net adds in the U.S.
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●
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80,000 postpaid phone net adds
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o
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96,000 prepaid net adds of which 85,000 are phones
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●
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Entertainment Group:
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o
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13% operating income growth with solid ARPU gains
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o
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6.9% EBITDA growth as company targets stability
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o
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Focus on long-term value customer base
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●
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22.4 million premium TV subscribers – 544,000 net loss
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●
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1.5 million DIRECTV NOW subscribers – 83,000 net loss
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o
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Nearly 300,000 AT&T Fiber gains; 45,000 broadband net adds with broadband revenue growth of more than 8%
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o
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12.4 million customer locations passed with fiber
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●
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Solid revenue growth with strong operating income growth with gains in all business units
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o
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Turner subscription revenue growth
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o
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HBO digital subscriber growth continued as last season of Game of Thrones begins
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o
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Strong Warner Bros. revenue and operating income growth
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●
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93,000 Mexico wireless net adds
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●
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Advertising revenues grew by 26.4% largely due to the AppNexus acquisition
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AT&T Inc. |
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Financial Data |
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Consolidated Statements of Income |
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Dollars in millions except per share amounts |
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Unaudited |
First Quarter |
Percent |
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2019 |
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2018 |
|
Change |
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Operating Revenues |
|
|
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Service |
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$ |
40,684 |
$ |
33,646 |
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20.9 |
% |
Equipment |
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|
4,143 |
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4,392 |
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(5.7) |
% |
Total Operating Revenues |
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44,827 |
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38,038 |
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17.8 |
% |
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Operating Expenses |
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Cost of revenues |
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Equipment |
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4,502 |
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4,848 |
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(7.1) |
% |
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Broadcast, programming and operations |
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7,652 |
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5,166 |
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48.1 |
% |
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Other cost of revenues (exclusive of depreciation and amortization shown separately below) |
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8,585 |
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7,932 |
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8.2 |
% |
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Selling, general and administrative |
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9,649 |
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7,897 |
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22.2 |
% |
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Depreciation and amortization |
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7,206 |
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5,994 |
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20.2 |
% |
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Total Operating Expenses |
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37,594 |
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31,837 |
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18.1 |
% |
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Operating Income |
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7,233 |
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6,201 |
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16.6 |
% |
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Interest Expense |
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2,141 |
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1,771 |
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20.9 |
% |
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Equity in Net Income (Loss) of Affiliates |
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(7) |
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9 |
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- |
% |
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Other Income (Expense) - Net |
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286 |
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1,702 |
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(83.2) |
% |
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Income Before Income Taxes |
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5,371 |
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6,141 |
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(12.5) |
% |
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Income Tax Expense |
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1,023 |
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1,382 |
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(26.0) |
% |
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Net Income |
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4,348 |
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4,759 |
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(8.6) |
% |
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Less: Net Income Attributable to Noncontrolling Interest |
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(252) |
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(97) |
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- |
% |
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Net Income Attributable to AT&T |
$ |
4,096 |
$ |
4,662 |
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(12.1) |
% |
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Basic Earnings Per Share Attributable to AT&T |
$ |
0.56 |
$ |
0.75 |
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(25.3) |
% |
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Weighted Average Common Shares Outstanding (000,000) |
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7,313 |
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6,161 |
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18.7 |
% |
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Diluted Earnings Per Share Attributable to AT&T |
$ |
0.56 |
$ |
0.75 |
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(25.3) |
% |
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Weighted Average Common Shares Outstanding with Dilution (000,000) |
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7,342 |
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6,180 |
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18.8 |
% |
AT&T Inc. |
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Financial Data |
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Consolidated Balance Sheets |
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Dollars in millions |
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Unaudited |
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Mar. 31, |
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Dec. 31, |
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2019 |
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2018 |
Assets |
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Current Assets |
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Cash and cash equivalents |
$ |
6,516 |
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$ |
5,204 |
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Accounts receivable - net of allowances for doubtful accounts of $905 and $907 |
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23,863 |
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26,472 |
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Prepaid expenses |
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1,518 |
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2,047 |
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Other current assets |
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14,575 |
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17,704 |
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Total current assets |
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46,472 |
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51,427 |
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Noncurrent Inventories and Theatrical Film and Television Production Costs |
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10,270 |
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7,713 |
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Property, Plant and Equipment – Net |
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132,051 |
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131,473 |
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Goodwill |
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146,434 |
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146,370 |
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Licenses – Net |
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97,001 |
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96,144 |
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Trademarks and Trade Names – Net |
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24,218 |
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24,345 |
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Distribution Networks – Net |
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16,623 |
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17,069 |
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Other Intangible Assets – Net |
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24,732 |
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26,269 |
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Investments in and Advances to Equity Affiliates |
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6,230 |
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6,245 |
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Operating Lease Right-of-Use Assets |
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20,235 |
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- |
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Other Assets |
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24,118 |
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24,809 |
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Total Assets |
$ |
548,384 |
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$ |
531,864 |
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Liabilities and Stockholders’ Equity |
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Current Liabilities |
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Debt maturing within one year |
$ |
11,538 |
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$ |
10,255 |
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Accounts payable and accrued liabilities |
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42,306 |
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43,184 |
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Advanced billings and customer deposits |
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5,956 |
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5,948 |
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Accrued taxes |
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1,130 |
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1,179 |
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Dividends payable |
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3,722 |
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3,854 |
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Total current liabilities |
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64,652 |
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64,420 |
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Long-Term Debt |
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163,942 |
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166,250 |
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Deferred Credits and Other Noncurrent Liabilities |
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Deferred income taxes |
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59,207 |
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57,859 |
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Postemployment benefit obligation |
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19,664 |
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19,218 |
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Operating lease liabilities |
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18,253 |
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- |
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Other noncurrent liabilities |
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27,715 |
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30,233 |
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Total deferred credits and other noncurrent liabilities |
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124,839 |
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107,310 |
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Stockholders’ Equity |
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Common stock |
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7,621 |
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7,621 |
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Additional paid-in capital |
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125,174 |
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125,525 |
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Retained earnings |
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59,424 |
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58,753 |
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Treasury stock |
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(11,452) |
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(12,059) |
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Accumulated other comprehensive income |
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4,345 |
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4,249 |
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Noncontrolling interest |
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9,839 |
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9,795 |
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Total stockholders’ equity |
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194,951 |
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193,884 |
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Total Liabilities and Stockholders' Equity |
$ |
548,384 |
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$ |
531,864 |
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AT&T Inc. |
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Financial Data |
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Consolidated Statements of Cash Flows |
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Dollars in millions |
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Unaudited |
First Quarter |
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2019 |
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2018 |
Operating Activities |
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Net income |
$ |
4,348 |
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$ |
4,759 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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7,206 |
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5,994 |
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Amortization of film and television costs |
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2,497 |
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- |
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Undistributed earnings from investments in equity affiliates |
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112 |
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(2) |
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Provision for uncollectible accounts |
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592 |
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438 |
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Deferred income tax expense (benefit) |
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1,069 |
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1,222 |
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Net (gain) loss from investments, net of impairments |
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(175) |
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2 |
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Actuarial (gain) loss on pension and postretirement benefits |
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432 |
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(930) |
Changes in operating assets and liabilities: |
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Accounts receivable |
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1,894 |
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(439) |
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Other current assets, inventories and theatrical film and television production costs |
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(2,510) |
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|
614 |
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Accounts payable and other accrued liabilities |
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(3,686) |
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(1,962) |
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Equipment installment receivables and related sales |
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652 |
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|
505 |
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Deferred customer contract acquisition and fulfillment costs |
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(375) |
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(826) |
Retirement benefit funding |
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- |
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(140) |
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Other - net |
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(1,004) |
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(288) |
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Total adjustments |
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6,704 |
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4,188 |
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Net Cash Provided by Operating Activities |
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11,052 |
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8,947 |
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Investing Activities |
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Capital expenditures: |
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Purchase of property and equipment |
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(5,121) |
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(5,957) |
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Interest during construction |
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(61) |
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(161) |
Acquisitions, net of cash acquired |
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(213) |
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(234) |
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Dispositions |
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10 |
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56 |
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(Purchases) sales of securities, net |
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(1) |
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(116) |
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Advances to and investments in equity affiliates, net |
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(15) |
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(1,007) |
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Cash collections of deferred purchase price |
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- |
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|
267 |
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Net Cash Used in Investing Activities |
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(5,401) |
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(7,152) |
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Financing Activities |
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Net change in short-term borrowings with original maturities of three months or less |
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(256) |
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- |
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Issuance of other short-term borrowings |
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296 |
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- |
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Repayment of other short-term borrowings |
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(176) |
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- |
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Issuance of long-term debt |
|
9,182 |
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|
2,565 |
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Repayment of long-term debt |
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(9,840) |
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(4,911) |
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Purchase of treasury stock |
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(189) |
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(145) |
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Issuance of treasury stock |
|
167 |
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|
11 |
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Dividends paid |
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(3,714) |
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|
(3,070) |
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Other |
|
109 |
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|
2,048 |
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Net Cash Used in Financing Activities |
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(4,421) |
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(3,502) |
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Net increase (decrease) in cash and cash equivalents and restricted cash |
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1,230 |
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(1,707) |
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Cash and cash equivalents and restricted cash beginning of year |
|
5,400 |
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|
50,932 |
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Cash and Cash Equivalents and Restricted Cash End of Period |
$ |
6,630 |
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$ |
49,225 |
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AT&T Inc. |
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Consolidated Supplementary Data |
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Supplementary Financial Data |
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Dollars in millions except per share amounts |
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Unaudited |
First Quarter |
Percent |
||||||
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|
|
2019 |
|
2018 |
|
Change |
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Capital expenditures |
|
|
|
|
|
|
|
|
|
Purchase of property and equipment |
$ |
5,121 |
$ |
5,957 |
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(14.0) |
% |
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Interest during construction |
|
61 |
|
161 |
|
(62.1) |
% |
Total Capital Expenditures |
$ |
5,182 |
$ |
6,118 |
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(15.3) |
% |
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Dividends Declared per Share |
$ |
0.51 |
$ |
0.50 |
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2.0 |
% |
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End of Period Common Shares Outstanding (000,000) |
|
7,297 |
|
6,148 |
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18.7 |
% |
|
Debt Ratio |
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47.4 |
% |
52.6 |
% |
(520) |
BP |
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Total Employees |
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262,290 |
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249,240 |
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5.2 |
% |
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Supplementary Operating Data |
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Subscribers and connections in thousands |
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Unaudited |
First Quarter |
Percent |
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2019 |
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2018 |
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Change |
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Wireless Subscribers |
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Domestic |
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155,732 |
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143,832 |
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8.3 |
% |
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Mexico |
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17,722 |
|
15,642 |
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13.3 |
% |
Total Wireless Subscribers |
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173,454 |
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159,474 |
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8.8 |
% |
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Video Connections |
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Domestic |
|
23,891 |
|
25,394 |
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(5.9) |
% |
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Latin America |
|
13,584 |
|
13,573 |
|
0.1 |
% |
Total Video Connections |
|
37,475 |
|
38,967 |
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(3.8) |
% |
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Broadband Connections |
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|
IP |
|
14,852 |
|
14,637 |
|
1.5 |
% |
|
DSL |
|
885 |
|
1,138 |
|
(22.2) |
% |
Total Broadband Connections |
|
15,737 |
|
15,775 |
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(0.2) |
% |
|
|
|
|
|
|
|
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Voice Connections |
|
|
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|
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Network Access Lines |
|
9,576 |
|
11,288 |
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(15.2) |
% |
|
U-verse VoIP Connections |
|
4,935 |
|
5,585 |
|
(11.6) |
% |
Total Retail Voice Connections |
|
14,511 |
|
16,873 |
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(14.0) |
% |
|
|
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|
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|
First Quarter |
Percent |
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|
|
2019 |
|
2018 |
|
Change |
|
Wireless Net Additions |
|
|
|
|
|
|
|
|
|
Domestic |
|
2,727 |
|
2,630 |
|
3.7 |
% |
|
Mexico |
|
93 |
|
543 |
|
(82.9) |
% |
Total Wireless Net Additions |
|
2,820 |
|
3,173 |
|
(11.1) |
% |
|
|
|
|
|
|
|
|
|
|
Video Net Additions |
|
|
|
|
|
|
|
|
|
Domestic |
|
(626) |
|
124 |
|
- |
% |
|
Latin America |
|
(32) |
|
(15) |
|
- |
% |
Total Video Net Additions |
|
(658) |
|
109 |
|
- |
% |
|
|
|
|
|
|
|
|
|
|
Broadband Net Additions |
|
|
|
|
|
|
|
|
|
IP |
|
100 |
|
150 |
|
(33.3) |
% |
|
DSL |
|
(64) |
|
(94) |
|
31.9 |
% |
Total Broadband Net Additions |
|
36 |
|
56 |
|
(35.7) |
% |
COMMUNICATIONS SEGMENT |
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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. |
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Segment Results |
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Dollars in millions |
|
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|
|||||
Unaudited |
First Quarter |
Percent |
||||||
|
|
|
2019 |
|
2018 |
|
Change |
|
Segment Operating Revenues |
|
|
|
|
|
|
|
|
|
Mobility |
$ |
17,567 |
$ |
17,355 |
|
1.2 |
% |
|
Entertainment Group |
|
11,328 |
|
11,431 |
|
(0.9) |
% |
|
Business Wireline |
|
6,498 |
|
6,747 |
|
(3.7) |
% |
Total Segment Operating Revenues |
|
35,393 |
|
35,533 |
|
(0.4) |
% |
|
|
|
|
|
|
|
|
|
|
Segment Operating Contribution |
|
|
|
|
|
|
|
|
|
Mobility |
|
5,351 |
|
5,158 |
|
3.7 |
% |
|
Entertainment Group |
|
1,478 |
|
1,309 |
|
12.9 |
% |
|
Business Wireline |
|
1,223 |
|
1,560 |
|
(21.6) |
% |
Total Segment Operating Contribution |
$ |
8,052 |
$ |
8,027 |
|
0.3 |
% |
|
|
|
|
|
|
|
|
|
|
Mobility |
||||||||
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|
|
|
|
|
|
|
|
Mobility provides nationwide wireless service and equipment. |
||||||||
|
|
|
|
|
|
|
|
|
Mobility Results |
||||||||
Dollars in millions |
|
|
|
|||||
Unaudited |
First Quarter |
Percent |
||||||
|
|
|
2019 |
|
2018 |
|
Change |
|
Operating Revenues |
|
|
|
|
|
|
|
|
Service |
$ |
13,792 |
$ |
13,403 |
|
2.9 |
% |
|
Equipment |
|
3,775 |
|
3,952 |
|
(4.5) |
% |
|
Total Operating Revenues |
|
17,567 |
|
17,355 |
|
1.2 |
% |
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
Operations and support |
|
10,181 |
|
10,102 |
|
0.8 |
% |
|
Depreciation and amortization |
|
2,035 |
|
2,095 |
|
(2.9) |
% |
|
Total Operating Expenses |
|
12,216 |
|
12,197 |
|
0.2 |
% |
|
Operating Income |
|
5,351 |
|
5,158 |
|
3.7 |
% |
|
Equity in Net Income (Loss) of Affiliates |
|
- |
|
- |
|
- |
% |
|
Operating Contribution |
$ |
5,351 |
$ |
5,158 |
|
3.7 |
% |
|
|
|
|
|
|
|
|
|
|
Operating Income Margin |
|
30.5 |
% |
29.7 |
% |
80 |
BP |
|
|
|
|
|
|
|
|
|
|
Supplementary Operating Data |
||||||||
Subscribers and connections in thousands |
|
|
|
|
||||
Unaudited |
First Quarter |
Percent |
||||||
|
|
|
2019 |
|
2018 |
|
Change |
|
Mobility Subscribers |
|
|
|
|
|
|
|
|
Postpaid |
|
76,550 |
|
77,431 |
|
(1.1) |
% |
|
Prepaid |
|
17,180 |
|
15,671 |
|
9.6 |
% |
|
Reseller |
|
7,574 |
|
9,002 |
|
(15.9) |
% |
|
Connected Devices |
|
54,428 |
|
41,728 |
|
30.4 |
% |
|
Total Mobility Subscribers |
|
155,732 |
|
143,832 |
|
8.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
Percent |
||||||
|
|
|
2019 |
|
2018 |
|
Change |
|
Mobility Net Additions |
|
|
|
|
|
|
|
|
Postpaid |
|
(204) |
|
49 |
|
- |
% |
|
Prepaid |
|
96 |
|
241 |
|
(60.2) |
% |
|
Reseller |
|
(253) |
|
(388) |
|
34.8 |
% |
|
Connected Devices |
|
3,088 |
|
2,728 |
|
13.2 |
% |
|
Total Mobility Net Additions |
|
2,727 |
|
2,630 |
|
3.7 |
% |
|
|
|
|
|
|
|
|
|
|
Postpaid Churn |
|
1.17 |
% |
1.06 |
% |
11 |
BP |
|
Postpaid Phone-Only Churn |
|
0.93 |
% |
0.84 |
% |
9 |
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 video distribution platforms. |
|||||||||
|
|
|
|
|
|
|
|
|
|
Entertainment Group Results |
|||||||||
Dollars in millions |
|
|
|
||||||
Unaudited |
First Quarter |
Percent |
|||||||
|
|
|
2019 |
|
2018 |
|
Change |
||
Operating Revenues |
|
|
|
|
|
|
|
||
Video entertainment |
$ |
8,074 |
$ |
8,225 |
|
(1.8) |
% |
||
High-speed internet |
|
2,070 |
|
1,878 |
|
10.2 |
% |
||
Legacy voice and data services |
|
683 |
|
806 |
|
(15.3) |
% |
||
Other service and equipment |
|
501 |
|
522 |
|
(4.0) |
% |
||
Total Operating Revenues |
|
11,328 |
|
11,431 |
|
(0.9) |
% |
||
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
||
Operations and support |
|
8,527 |
|
8,811 |
|
(3.2) |
% |
||
Depreciation and amortization |
|
1,323 |
|
1,310 |
|
1.0 |
% |
||
Total Operating Expenses |
|
9,850 |
|
10,121 |
|
(2.7) |
% |
||
Operating Income |
|
1,478 |
|
1,310 |
|
12.8 |
% |
||
Equity in Net Income (Loss) of Affiliates |
|
- |
|
(1) |
|
- |
% |
||
Operating Contribution |
$ |
1,478 |
$ |
1,309 |
|
12.9 |
% |
||
|
|
|
|
|
|
|
|
|
|
Operating Income Margin |
|
13.0 |
% |
11.5 |
% |
150 |
BP |
||
|
|
|
|
|
|
|
|
|
|
Supplementary Operating Data |
|||||||||
Subscribers and connections in thousands |
|
|
|
||||||
Unaudited |
First Quarter |
Percent |
|||||||
|
|
|
2019 |
|
2018 |
|
Change |
||
Video Connections1 |
|
|
|
|
|
|
|
||
Premium TV |
|
22,359 |
|
23,902 |
|
(6.5) |
% |
||
DIRECTV NOW |
|
1,508 |
|
1,467 |
|
2.8 |
% |
||
Total Video Connections |
|
23,867 |
|
25,369 |
|
(5.9) |
% |
||
|
|
|
|
|
|
|
|
|
|
Broadband Connections1 |
|
|
|
|
|
|
|
||
IP |
|
13,822 |
|
13,616 |
|
1.5 |
% |
||
DSL |
|
632 |
|
816 |
|
(22.5) |
% |
||
Total Broadband Connections |
|
14,454 |
|
14,432 |
|
0.2 |
% |
||
|
|
|
|
|
|
|
|
|
|
Voice Connections |
|
|
|
|
|
|
|
||
Retail Consumer Switched Access Lines |
|
3,787 |
|
4,535 |
|
(16.5) |
% |
||
U-verse Consumer VoIP Connections |
|
4,393 |
|
5,105 |
|
(13.9) |
% |
||
Total Retail Consumer Voice Connections |
|
8,180 |
|
9,640 |
|
(15.1) |
% |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
Percent |
|||||||
|
|
|
2019 |
|
2018 |
|
Change |
||
Video Net Additions1,2 |
|
|
|
|
|
|
|
||
Premium TV |
|
(544) |
|
(187) |
|
- |
% |
||
DIRECTV NOW |
|
(83) |
|
312 |
|
- |
% |
||
Total Video Net Additions |
|
(627) |
|
125 |
|
- |
% |
||
|
|
|
|
|
|
|
|
|
|
Broadband Net Additions1 |
|
|
|
|
|
|
|
||
IP |
|
93 |
|
154 |
|
(39.6) |
% |
||
DSL |
|
(48) |
|
(72) |
|
33.3 |
% |
||
Total Broadband Net Additions |
|
45 |
|
82 |
|
(45.1) |
% |
||
|
|
|
|
|
|
|
|
|
1 |
2019 includes the impact of conforming our subscriber disconnection policy with that of our wireless business and industry |
||||||||
|
practice (to billing cycle basis), resulting in 117 additional video and 38 additional broadband subscribers at March 31, 2019. |
||||||||
2 |
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. Revenues have been recast to conform to the current period's presentation. |
||||||||
|
|
|
|
|
|
|
|
|
Business Wireline Results |
||||||||
Dollars in millions |
|
|
|
|||||
Unaudited |
First Quarter |
Percent |
||||||
|
|
2019 |
|
2018 |
|
Change |
||
Operating Revenues |
|
|
|
|
|
|
|
|
|
Strategic and managed services |
$ |
3,792 |
$ |
3,595 |
|
5.5 |
% |
|
Legacy voice and data services |
|
2,404 |
|
2,865 |
|
(16.1) |
% |
|
Other service and equipment |
|
302 |
|
287 |
|
5.2 |
% |
Total Operating Revenues |
|
6,498 |
|
6,747 |
|
(3.7) |
% |
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
Operations and support |
|
4,040 |
|
4,016 |
|
0.6 |
% |
|
Depreciation and amortization |
|
1,235 |
|
1,170 |
|
5.6 |
% |
|
Total Operating Expenses |
|
5,275 |
|
5,186 |
|
1.7 |
% |
|
Operating Income |
|
1,223 |
|
1,561 |
|
(21.7) |
% |
|
Equity in Net Income (Loss) of Affiliates |
|
- |
|
(1) |
|
- |
% |
|
Operating Contribution |
$ |
1,223 |
$ |
1,560 |
|
(21.6) |
% |
|
|
|
|
|
|
|
|
|
|
Operating Income Margin |
|
18.8 |
% |
23.1 |
% |
(430) |
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. Revenues have been recast to conform to the current period's presentation. |
|||||||||
|
|
|
|
|
|
|
|
|
|
Business Solutions Results |
|||||||||
Dollars in millions |
|
|
|
||||||
Unaudited |
First Quarter |
Percent |
|||||||
|
|
2019 |
|
2018 |
|
Change |
|||
Operating Revenues |
|
|
|
|
|
|
|
||
|
Wireless service |
$ |
1,913 |
$ |
1,791 |
|
6.8 |
% |
|
|
Strategic and managed services |
|
3,792 |
|
3,595 |
|
5.5 |
% |
|
|
Legacy voice and data services |
|
2,404 |
|
2,865 |
|
(16.1) |
% |
|
|
Other service and equipment |
|
302 |
|
287 |
|
5.2 |
% |
|
|
Wireless equipment |
|
596 |
|
578 |
|
3.1 |
% |
|
Total Operating Revenues |
|
9,007 |
|
9,116 |
|
(1.2) |
% |
||
|
|
|
|
|
|
|
|
||
Operating Expenses |
|
|
|
|
|
|
|
||
Operations and support |
|
5,640 |
|
5,594 |
|
0.8 |
% |
||
Depreciation and amortization |
|
1,541 |
|
1,458 |
|
5.7 |
% |
||
Total Operating Expenses |
|
7,181 |
|
7,052 |
|
1.8 |
% |
||
Operating Income |
|
1,826 |
|
2,064 |
|
(11.5) |
% |
||
Equity in Net Income (Loss) of Affiliates |
|
- |
|
(1) |
|
- |
% |
||
Operating Contribution |
$ |
1,826 |
$ |
2,063 |
|
(11.5) |
% |
||
|
|
|
|
|
|
|
|
||
Operating Income Margin |
|
20.3 |
% |
22.6 |
% |
(230) |
BP |
WARNERMEDIA SEGMENT |
||||||||
|
|
|
|
|
|
|
|
|
The WarnerMedia segment develops, produces and distributes feature films, television, gaming and other content in various physical and digital formats globally. Results from Turner, Home Box Office and Warner Bros. businesses are combined with AT&T's Regional Sports Network (RSN) and Otter Media Holdings in the WarnerMedia segment. |
||||||||
|
|
|
|
|
|
|
|
|
Segment Results |
||||||||
Dollars in millions |
|
|
|
|||||
Unaudited |
First Quarter |
Percent |
||||||
|
|
2019 |
|
2018 |
|
Change |
||
Operating Revenues |
|
|
|
|
|
|
|
|
|
Subscription |
$ |
3,369 |
$ |
98 |
|
- |
% |
|
Advertising |
|
1,279 |
|
14 |
|
- |
% |
|
Content and other |
|
3,731 |
|
- |
|
- |
% |
Total Operating Revenues |
|
8,379 |
|
112 |
|
- |
% |
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
Operations and support |
|
5,993 |
|
82 |
|
- |
% |
|
Depreciation and amortization |
|
143 |
|
1 |
|
- |
% |
|
Total Operating Expenses |
|
6,136 |
|
83 |
|
- |
% |
|
Operating Income |
|
2,243 |
|
29 |
|
- |
% |
|
Equity in Net Income (Loss) of Affiliates |
|
67 |
|
10 |
|
- |
% |
|
Operating Contribution |
$ |
2,310 |
$ |
39 |
|
- |
% |
|
|
|
|
|
|
|
|
|
|
Operating Income Margin |
|
26.8 |
% |
25.9 |
% |
90 |
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 |
First Quarter |
Percent |
||||||
|
|
|
2019 |
|
2018 |
|
Change |
|
Segment Operating Revenues |
|
|
|
|
|
|
|
|
|
Vrio |
$ |
1,067 |
$ |
1,354 |
|
(21.2) |
% |
|
Mexico |
|
651 |
|
671 |
|
(3.0) |
% |
Total Segment Operating Revenues |
|
1,718 |
|
2,025 |
|
(15.2) |
% |
|
|
|
|
|
|
|
|
|
|
Segment Operating Contribution |
|
|
|
|
|
|
|
|
|
Vrio |
|
32 |
|
148 |
|
(78.4) |
% |
|
Mexico |
|
(205) |
|
(259) |
|
20.8 |
% |
Total Segment Operating Contribution |
$ |
(173) |
$ |
(111) |
|
(55.9) |
% |
|
|
|
|
|
|
|
|
|
Vrio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vrio provides entertainment services to customers utilizing satellite technology in Latin America and the Caribbean. |
||||||||
|
|
|
|
|
|
|
|
|
Vrio Results |
||||||||
Dollars in millions |
|
|
|
|||||
Unaudited |
First Quarter |
Percent |
||||||
|
|
|
2019 |
|
2018 |
|
Change |
|
Operating Revenues |
$ |
1,067 |
$ |
1,354 |
|
(21.2) |
% |
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
Operations and support |
|
866 |
|
1,001 |
|
(13.5) |
% |
|
Depreciation and amortization |
|
169 |
|
205 |
|
(17.6) |
% |
|
Total Operating Expenses |
|
1,035 |
|
1,206 |
|
(14.2) |
% |
|
Operating Income |
|
32 |
|
148 |
|
(78.4) |
% |
|
Equity in Net Income of Affiliates |
|
- |
|
- |
|
- |
% |
|
Operating Contribution |
$ |
32 |
$ |
148 |
|
(78.4) |
% |
|
|
|
|
|
|
|
|
|
|
Operating Income Margin |
|
3.0 |
% |
10.9 |
% |
(790) |
BP |
|
|
|
|
|
|
|
|
|
|
Supplementary Operating Data |
||||||||
Subscribers and connections in thousands |
|
|
|
|
||||
Unaudited |
First Quarter |
Percent |
||||||
|
|
|
2019 |
|
2018 |
|
Change |
|
Vrio Video Subscribers1 |
|
13,584 |
|
13,573 |
|
0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
Percent |
||||||
|
|
|
2019 |
|
2018 |
|
Change |
|
Vrio Video Net Subscriber Additions |
|
(32) |
|
(15) |
|
- |
% |
|
|
|
|
|
|
|
|
|
|
1 |
2019 excludes the impact of 222 subscriber disconnections resulting from conforming our video credit policy across the region, which is |
|||||||
|
reflected in beginning of period subscribers. |
Mexico |
||||||||
|
|
|
|
|
|
|
|
|
Mexico provides wireless services and equipment to customers in Mexico. |
||||||||
|
||||||||
Mexico Results |
||||||||
Dollars in millions |
|
|
|
|||||
Unaudited |
First Quarter |
Percent |
||||||
|
|
2019 |
|
2018 |
|
Change |
||
Operating Revenues |
|
|
|
|
|
|
|
|
Wireless service |
$ |
442 |
$ |
404 |
|
9.4 |
% |
|
Wireless equipment |
|
209 |
|
267 |
|
(21.7) |
% |
|
Total Operating Revenues |
|
651 |
|
671 |
|
(3.0) |
% |
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
Operations and support |
|
725 |
|
803 |
|
(9.7) |
% |
|
Depreciation and amortization |
|
131 |
|
127 |
|
3.1 |
% |
|
Total Operating Expenses |
|
856 |
|
930 |
|
(8.0) |
% |
|
Operating Income (Loss) |
|
(205) |
|
(259) |
|
20.8 |
% |
|
Equity in Net Income of Affiliates |
|
- |
|
- |
|
- |
% |
|
Operating Contribution |
$ |
(205) |
$ |
(259) |
|
20.8 |
% |
|
|
|
|
|
|
|
|
|
|
Operating Income Margin |
|
(31.5) |
% |
(38.6) |
% |
710 |
BP |
|
|
|
|
|
|
|
|
|
|
Supplementary Operating Data |
||||||||
Subscribers and connections in thousands |
|
|
|
|
||||
Unaudited |
First Quarter |
Percent |
||||||
|
|
2019 |
|
2018 |
|
Change |
||
Mexico Wireless Subscribers1 |
|
|
|
|
|
|
|
|
Postpaid |
|
5,642 |
|
5,607 |
|
0.6 |
% |
|
Prepaid |
|
11,779 |
|
9,857 |
|
19.5 |
% |
|
Reseller |
|
301 |
|
178 |
|
69.1 |
% |
|
Total Mexico Wireless Subscribers |
|
17,722 |
|
15,642 |
|
13.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
Percent |
||||||
|
|
2019 |
|
2018 |
|
Change |
||
Mexico Wireless Net Additions |
|
|
|
|
|
|
|
|
Postpaid |
|
(69) |
|
109 |
|
- |
% |
|
Prepaid |
|
114 |
|
459 |
|
(75.2) |
% |
|
Reseller |
|
48 |
|
(25) |
|
- |
% |
|
Total Mexico Wireless Net Subscriber Additions |
|
93 |
|
543 |
|
(82.9) |
% |
|
|
|
|
|
|
|
|
|
|
1 |
2019 excludes the impact of 692 subscriber disconnections resulting from the churn of customers related to sales by certain third-party | |||||||
|
distributors and the sunset of 2G services in Mexico, which are reflected in beginning of period subscribers. |
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 |
First Quarter |
Percent |
||||||
|
|
2019 |
|
2018 |
|
Change |
||
Segment Operating Revenues |
$ |
426 |
$ |
337 |
|
26.4 |
% |
|
|
|
|
|
|
|
|
|
|
Segment Operating Expenses |
|
|
|
|
|
|
|
|
Operations and support |
|
160 |
|
50 |
|
- |
% |
|
Depreciation and amortization |
|
13 |
|
1 |
|
- |
% |
|
Total Segment Operating Expenses |
|
173 |
|
51 |
|
- |
% |
|
Operating Income |
|
253 |
|
286 |
|
(11.5) |
% |
|
Equity in Net Income of Affiliates |
|
- |
|
- |
|
- |
% |
|
Segment Operating Contribution |
$ |
253 |
$ |
286 |
|
(11.5) |
% |
|
|
|
|
|
|
|
|
|
|
Segment Operating Income Margin |
|
59.4 |
% |
84.9 |
% |
(2,550) |
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 |
First Quarter |
Percent |
|||||||
|
|
|
2019 |
|
2018 |
|
Change |
||
Operating Revenues |
|
|
|
|
|
|
|
||
|
WarnerMedia |
$ |
1,279 |
$ |
14 |
|
- |
% |
|
|
Communications |
|
417 |
|
375 |
|
11.2 |
% |
|
|
Xandr |
|
426 |
|
337 |
|
26.4 |
% |
|
|
Eliminations |
|
(350) |
|
(334) |
|
(4.8) |
% |
|
Total Advertising Revenues |
$ |
1,772 |
$ |
392 |
|
- |
% |
||
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL SEGMENT RECONCILIATION |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
||||||||||||||||||||
Dollars in millions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
Operations and Support Expenses |
|
|
EBITDA |
|
|
Depreciation and Amortization |
|
|
Operating Income (Loss) |
|
|
Equity in Net Income (Loss) of Affiliates |
|
|
Segment Contribution |
Communications |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobility |
$ |
17,567 |
|
$ |
10,181 |
|
$ |
7,386 |
|
$ |
2,035 |
|
$ |
5,351 |
|
$ |
- |
|
$ |
5,351 |
Entertainment Group |
|
11,328 |
|
|
8,527 |
|
|
2,801 |
|
|
1,323 |
|
|
1,478 |
|
|
- |
|
|
1,478 |
Business Wireline |
|
6,498 |
|
|
4,040 |
|
|
2,458 |
|
|
1,235 |
|
|
1,223 |
|
|
- |
|
|
1,223 |
Total Communications |
|
35,393 |
|
|
22,748 |
|
|
12,645 |
|
|
4,593 |
|
|
8,052 |
|
|
- |
|
|
8,052 |
WarnerMedia |
|
8,379 |
|
|
5,993 |
|
|
2,386 |
|
|
143 |
|
|
2,243 |
|
|
67 |
|
|
2,310 |
Latin America |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vrio |
|
1,067 |
|
|
866 |
|
|
201 |
|
|
169 |
|
|
32 |
|
|
- |
|
|
32 |
Mexico |
|
651 |
|
|
725 |
|
|
(74) |
|
|
131 |
|
|
(205) |
|
|
- |
|
|
(205) |
Total Latin America |
|
1,718 |
|
|
1,591 |
|
|
127 |
|
|
300 |
|
|
(173) |
|
|
- |
|
|
(173) |
Xandr |
|
426 |
|
|
160 |
|
|
266 |
|
|
13 |
|
|
253 |
|
|
- |
|
|
253 |
Segment Total |
|
45,916 |
|
|
30,492 |
|
|
15,424 |
|
|
5,049 |
|
|
10,375 |
|
$ |
67 |
|
$ |
10,442 |
Corporate and Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
209 |
|
|
513 |
|
|
(304) |
|
|
169 |
|
|
(473) |
|
|
|
|
|
|
Acquisition-related items |
|
(42) |
|
|
73 |
|
|
(115) |
|
|
1,988 |
|
|
(2,103) |
|
|
|
|
|
|
Certain significant items |
|
- |
|
|
248 |
|
|
(248) |
|
|
- |
|
|
(248) |
|
|
|
|
|
|
Eliminations and consolidations |
|
(1,256) |
|
|
(938) |
|
|
(318) |
|
|
- |
|
|
(318) |
|
|
|
|
|
|
AT&T Inc. |
$ |
44,827 |
|
$ |
30,388 |
|
$ |
14,439 |
|
$ |
7,206 |
|
$ |
7,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
Operations and Support Expenses |
|
|
EBITDA |
|
|
Depreciation and Amortization |
|
|
Operating Income (Loss) |
|
|
Equity in Net Income (Loss) of Affiliates |
|
|
Segment Contribution |
Communications |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobility |
$ |
17,355 |
|
$ |
10,102 |
|
$ |
7,253 |
|
$ |
2,095 |
|
$ |
5,158 |
|
$ |
- |
|
$ |
5,158 |
Entertainment Group |
|
11,431 |
|
|
8,811 |
|
|
2,620 |
|
|
1,310 |
|
|
1,310 |
|
|
(1) |
|
|
1,309 |
Business Wireline |
|
6,747 |
|
|
4,016 |
|
|
2,731 |
|
|
1,170 |
|
|
1,561 |
|
|
(1) |
|
|
1,560 |
Total Communications |
|
35,533 |
|
|
22,929 |
|
|
12,604 |
|
|
4,575 |
|
|
8,029 |
|
|
(2) |
|
|
8,027 |
WarnerMedia |
|
112 |
|
|
82 |
|
|
30 |
|
|
1 |
|
|
29 |
|
|
10 |
|
|
39 |
Latin America |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vrio |
|
1,354 |
|
|
1,001 |
|
|
353 |
|
|
205 |
|
|
148 |
|
|
- |
|
|
148 |
Mexico |
|
671 |
|
|
803 |
|
|
(132) |
|
|
127 |
|
|
(259) |
|
|
- |
|
|
(259) |
Total Latin America |
|
2,025 |
|
|
1,804 |
|
|
221 |
|
|
332 |
|
|
(111) |
|
|
- |
|
|
(111) |
Xandr |
|
337 |
|
|
50 |
|
|
287 |
|
|
1 |
|
|
286 |
|
|
- |
|
|
286 |
Segment Total |
|
38,007 |
|
|
24,865 |
|
|
13,142 |
|
|
4,909 |
|
|
8,233 |
|
$ |
8 |
|
$ |
8,241 |
Corporate and Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
333 |
|
|
735 |
|
|
(402) |
|
|
23 |
|
|
(425) |
|
|
|
|
|
|
Acquisition-related items |
|
- |
|
|
67 |
|
|
(67) |
|
|
1,062 |
|
|
(1,129) |
|
|
|
|
|
|
Certain significant items |
|
- |
|
|
180 |
|
|
(180) |
|
|
- |
|
|
(180) |
|
|
|
|
|
|
Eliminations and consolidations |
|
(302) |
|
|
(4) |
|
|
(298) |
|
|
- |
|
|
(298) |
|
|
|
|
|
|
AT&T Inc. |
$ |
38,038 |
|
$ |
25,843 |
|
$ |
12,195 |
|
$ |
5,994 |
|
$ |
6,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. These measures should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with US generally accepted accounting principles (GAAP).
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 |
|
||||
|
|
First Quarter |
|
||
|
|
2019 |
|
2018 |
|
Net cash provided by operating activities |
$ |
11,052 |
$ |
8,947 |
|
Less: Capital expenditures |
|
(5,182) |
|
(6,118) |
|
Free Cash Flow |
|
5,870 |
|
2,829 |
|
|
|
|
|
|
|
Less: Dividends paid |
|
(3,714) |
|
(3,070) |
|
Free Cash Flow after Dividends |
$ |
2,156 |
$ |
(241) |
|
Free Cash Flow Dividend Payout Ratio |
|
63.3% |
|
108.5% |
|
Cash Paid for Capital Investment
In connection with capital improvements, we negotiate with some of our vendors to obtain favorable payment terms of 120 days or more, referred to as vendor financing, which are excluded from capital expenditures and reported in accordance with GAAP as financing activities. We present an additional view of cash paid for capital investment to provide investors with a comprehensive view of cash used to invest in our networks, product developments and support systems.
Cash Paid for Capital Investment |
||||
Dollars in millions |
|
|
||
|
|
First Quarter |
||
|
|
2019 |
|
2018 |
Capital Expenditures |
$ |
(5,182) |
$ |
(6,118) |
Cash paid for vendor financing |
|
(820) |
|
(172) |
Cash paid for Capital Investment |
$ |
(6,002) |
$ |
(6,290) |
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 |
|
|
|
||
|
|
First Quarter |
|
||
|
|
2019 |
|
2018 |
|
Net Income |
$ |
4,348 |
$ |
4,759 |
|
Additions: |
|
|
|
|
|
Income Tax (Benefit) Expense |
|
1,023 |
|
1,382 |
|
Interest Expense |
|
2,141 |
|
1,771 |
|
Equity in Net (Income) Loss of Affiliates |
|
7 |
|
(9) |
|
Other (Income) Expense - Net |
|
(286) |
|
(1,702) |
|
Depreciation and amortization |
|
7,206 |
|
5,994 |
|
EBITDA |
|
14,439 |
|
12,195 |
|
|
|
|
|
|
|
Total Operating Revenues |
|
44,827 |
|
38,038 |
|
Service Revenues |
|
40,684 |
|
33,646 |
|
|
|
|
|
|
|
EBITDA Margin |
|
32.2% |
|
32.1% |
|
EBITDA Service Margin |
|
35.5% |
|
36.2% |
|
Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin |
|||||
Dollars in millions |
|
|
|
||
|
|
First Quarter |
|
||
|
|
2019 |
|
2018 |
|
Communications Segment |
|
|
|
|
|
Operating Contribution |
$ |
8,052 |
$ |
8,027 |
|
Additions: |
|
|
|
|
|
Equity in Net (Income) Loss of Affiliates |
|
- |
|
2 |
|
Depreciation and amortization |
|
4,593 |
|
4,575 |
|
EBITDA |
|
12,645 |
|
12,604 |
|
|
|
|
|
|
|
Total Operating Revenues |
|
35,393 |
|
35,533 |
|
|
|
|
|
|
|
Operating Income Margin |
|
22.8% |
|
22.6% |
|
EBITDA Margin |
|
35.7% |
|
35.5% |
|
|
|
|
|
|
|
Mobility |
|||||
Operating Contribution |
$ |
5,351 |
$ |
5,158 |
|
Additions: |
|
|
|
|
|
Depreciation and amortization |
|
2,035 |
|
2,095 |
|
EBITDA |
|
7,386 |
|
7,253 |
|
|
|
|
|
|
|
Total Operating Revenues |
|
17,567 |
|
17,355 |
|
Service Revenues |
|
13,792 |
|
13,403 |
|
|
|
|
|
|
|
Operating Income Margin |
|
30.5% |
|
29.7% |
|
EBITDA Margin |
|
42.0% |
|
41.8% |
|
EBITDA Service Margin |
|
53.6% |
|
54.1% |
|
|
|
|
|
|
|
Entertainment Group |
|||||
Operating Contribution |
$ |
1,478 |
$ |
1,309 |
|
Additions: |
|
|
|
|
|
Equity in Net (Income) Loss of Affiliates |
|
- |
|
1 |
|
Depreciation and amortization |
|
1,323 |
|
1,310 |
|
EBITDA |
|
2,801 |
|
2,620 |
|
|
|
|
|
|
|
Total Operating Revenues |
|
11,328 |
|
11,431 |
|
|
|
|
|
|
|
Operating Income Margin |
|
13.0% |
|
11.5% |
|
EBITDA Margin |
|
24.7% |
|
22.9% |
|
|
|
|
|
|
|
Business Wireline |
|||||
Operating Contribution |
$ |
1,223 |
$ |
1,560 |
|
Additions: |
|
|
|
|
|
Equity in Net (Income) Loss of Affiliates |
|
- |
|
1 |
|
Depreciation and amortization |
|
1,235 |
|
1,170 |
|
EBITDA |
|
2,458 |
|
2,731 |
|
|
|
|
|
|
|
Total Operating Revenues |
|
6,498 |
|
6,747 |
|
|
|
|
|
|
|
Operating Income Margin |
|
18.8% |
|
23.1% |
|
EBITDA Margin |
|
37.8% |
|
40.5% |
|
Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin |
|||||
Dollars in millions |
|
|
|
||
|
|
First Quarter |
|
||
|
|
2019 |
|
2018 |
|
WarnerMedia Segment |
|||||
Operating Contribution |
$ |
2,310 |
$ |
39 |
|
Additions: |
|
|
|
|
|
Equity in Net (Income) of Affiliates |
|
(67) |
|
(10) |
|
Depreciation and amortization |
|
143 |
|
1 |
|
EBITDA |
|
2,386 |
|
30 |
|
|
|
|
|
|
|
Total Operating Revenues |
|
8,379 |
|
112 |
|
|
|
|
|
|
|
Operating Income Margin |
|
26.8% |
|
25.9% |
|
EBITDA Margin |
|
28.5% |
|
26.8% |
|
|
|
|
|
|
|
Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin |
|||||
Dollars in millions |
|
|
|
||
|
|
First Quarter |
|
||
|
|
2019 |
|
2018 |
|
Latin America Segment |
|
|
|
|
|
Operating Contribution |
$ |
(173) |
$ |
(111) |
|
Additions: |
|
|
|
|
|
Depreciation and amortization |
|
300 |
|
332 |
|
EBITDA |
|
127 |
|
221 |
|
|
|
|
|
|
|
Total Operating Revenues |
|
1,718 |
|
2,025 |
|
|
|
|
|
|
|
Operating Income Margin |
|
-10.1% |
|
-5.5% |
|
EBITDA Margin |
|
7.4% |
|
10.9% |
|
|
|
|
|
|
|
Vrio |
|
|
|
|
|
Operating Contribution |
$ |
32 |
$ |
148 |
|
Additions: |
|
|
|
|
|
Depreciation and amortization |
|
169 |
|
205 |
|
EBITDA |
|
201 |
|
353 |
|
|
|
|
|
|
|
Total Operating Revenues |
|
1,067 |
|
1,354 |
|
|
|
|
|
|
|
Operating Income Margin |
|
3.0% |
|
10.9% |
|
EBITDA Margin |
|
18.8% |
|
26.1% |
|
|
|
|
|
|
|
Mexico |
|
|
|
|
|
Operating Contribution |
$ |
(205) |
$ |
(259) |
|
Additions: |
|
|
|
|
|
Depreciation and amortization |
|
131 |
|
127 |
|
EBITDA |
|
(74) |
|
(132) |
|
|
|
|
|
|
|
Total Operating Revenues |
|
651 |
|
671 |
|
|
|
|
|
|
|
Operating Income Margin |
|
-31.5% |
|
-38.6% |
|
EBITDA Margin |
|
-11.4% |
|
-19.7% |
|
Segment EBITDA, EBITDA Margin and EBITDA Service Margin |
|||||
Dollars in millions |
|
|
|
||
|
|
First Quarter |
|
||
|
|
2019 |
|
2018 |
|
Xandr |
|
|
|
|
|
Operating Contribution |
$ |
253 |
$ |
286 |
|
Additions: |
|
|
|
|
|
Depreciation and amortization |
|
13 |
|
1 |
|
EBITDA |
|
266 |
|
287 |
|
|
|
|
|
|
|
Total Operating Revenues |
|
426 |
|
337 |
|
|
|
|
|
|
|
Operating Income Margin |
|
59.4% |
|
84.9% |
|
EBITDA Margin |
|
62.4% |
|
85.2% |
|
|
|
|
|
|
|
Adjusting Items
Adjusting items include revenues and costs we consider non-operational 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 25% for transactions after tax reform.
Adjusting Items |
|||||
Dollars in millions |
|
|
|||
|
|
First Quarter |
|||
|
|
2019 |
|
2018 |
|
Operating Revenues |
|
|
|
|
|
Time Warner merger adjustment |
$ |
42 |
$ |
- |
|
Adjustments to Operating Revenues |
|
42 |
|
- |
|
Operating Expenses |
|
|
|
|
|
Time Warner and other merger costs |
|
73 |
|
67 |
|
Employee separation costs |
|
248 |
|
51 |
|
Natural disaster costs |
|
- |
|
104 |
|
Foreign currency exchange |
|
- |
|
25 |
|
Adjustments to Operations and Support Expenses |
|
321 |
|
247 |
|
Amortization of intangible assets |
|
1,989 |
|
1,062 |
|
Adjustments to Operating Expenses |
|
2,310 |
|
1,309 |
|
Other |
|
|
|
|
|
Merger-related interest and fees1 |
|
- |
|
393 |
|
Special termination charges, debt redemption costs and other adjustments |
|
211 |
|
- |
|
Actuarial (gain) loss |
|
432 |
|
(930) |
|
Adjustments to Income Before Income Taxes |
|
2,995 |
|
772 |
|
Tax impact of adjustments |
|
649 |
|
173 |
|
Tax-related items |
|
141 |
|
- |
|
Adjustments to Net Income |
$ |
2,205 |
$ |
599 |
|
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 |
|
|
|
||
|
|
First Quarter |
|
||
|
|
2019 |
|
2018 |
|
Operating Income |
$ |
7,233 |
$ |
6,201 |
|
Adjustments to Operating Revenues |
|
42 |
|
- |
|
Adjustments to Operating Expenses |
|
2,310 |
|
1,309 |
|
Adjusted Operating Income |
|
9,585 |
|
7,510 |
|
|
|
|
|
|
|
EBITDA |
|
14,439 |
|
12,195 |
|
Adjustments to Operating Revenues |
|
42 |
|
- |
|
Adjustments to Operations and Support Expenses |
|
321 |
|
247 |
|
Adjusted EBITDA |
|
14,802 |
|
12,442 |
|
|
|
|
|
|
|
Total Operating Revenues |
|
44,827 |
|
38,038 |
|
Adjustments to Operating Revenues |
|
42 |
|
- |
|
Total Adusted Operating Revenue |
|
44,869 |
|
38,038 |
|
Service Revenues |
|
40,684 |
|
33,646 |
|
Adjustments to Service Revenues |
|
42 |
|
- |
|
Adusted Service Revenue |
|
40,726 |
|
33,646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income Margin |
|
16.1% |
|
16.3% |
|
Adjusted Operating Income Margin |
|
21.4% |
|
19.7% |
|
Adjusted EBITDA Margin |
|
33.0% |
|
32.7% |
|
Adjusted EBITDA Service Margin |
|
36.3% |
|
37.0% |
|
Adjusted Diluted EPS |
|||||
|
|
|
|
||
|
|
First Quarter |
|
||
|
|
2019 |
|
2018 |
|
Diluted Earnings Per Share (EPS) |
$ |
0.56 |
$ |
0.75 |
|
Amortization of intangible assets |
|
0.21 |
|
0.13 |
|
Merger integration items1 |
|
0.01 |
|
0.06 |
|
(Gain) loss on sale of assets, impairments and other adjustments2 |
|
0.05 |
|
0.03 |
|
Actuarial (gain) loss3 |
|
0.05 |
|
(0.12) |
|
Tax-related items |
|
(0.02) |
|
- |
|
Adjusted EPS |
$ |
0.86 |
$ |
0.85 |
|
Year-over-year growth - Adjusted |
|
1.2% |
|
|
|
Weighted Average Common Shares Outstanding with Dilution (000,000) |
|
7,342 |
|
6,180 |
|
1Includes combined merger integration items and merger-related interest income and expense, and redemption premiums. |
|||||
2Includes gains on transactions, natural disaster adjustments and charges, and employee-related and other costs. |
|||||
3Includes adjustments for actuarial gains or losses ($432 million loss in the first quarter of 2019) associated with our pension benefit plan, which we immediately recognize in the income statement, pursuant to our accounting policy for the recognition of actuarial gains/losses. As a result, adjusted EPS reflects an expected return on plan assets of $816 million (based on an average expected return on plan assets of 7.00% for our pension trust), rather than the actual return on plan assets of $2.8 billion (actual return of 5.8% for the quarter), 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 the sum of the most recent four quarters 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.
Net Debt to Pro Forma Adjusted EBITDA |
|||||||||||
Dollars in millions |
|
|
|
|
|
|
|
||||
|
|
Three Months Ended |
|
|
|
||||||
|
|
Jun. 30, |
|
Sep. 30, |
|
Dec. 31, |
|
Mar. 31, |
|
Four Quarters |
|
|
|
20181 |
|
20181 |
|
20181 |
|
2019 |
|
|
|
Pro Forma Adjusted EBITDA1,2 |
$ |
15,119 |
$ |
15,872 |
$ |
15,029 |
$ |
14,802 |
$ |
60,822 |
|
Add back severance |
|
(133) |
|
(76) |
|
(327) |
|
- |
|
(536) |
|
Net Debt Pro Forma Adjusted EBITDA |
|
14,986 |
|
15,796 |
|
14,702 |
|
14,802 |
|
60,286 |
|
End-of-period current debt |
|
|
|
|
|
|
|
|
|
11,538 |
|
End-of-period long-term debt |
|
|
|
|
|
|
|
|
|
163,942 |
|
Total End-of-Period Debt |
|
|
|
|
|
|
|
|
|
175,480 |
|
Less: Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
|
6,516 |
|
Net Debt Balance |
|
|
|
|
|
|
|
|
|
168,964 |
|
Annualized Net Debt to Pro Forma Adjusted EBITDA Ratio |
|
|
|
|
|
2.80 |
|
||||
1 As reported in AT&T's Form 8-K filed July 24, 2018, October 24, 2018 and January 30, 2019. |
|||||||||||
2 Includes the purchase accounting reclassification of released content amortization of $491 million pro forma and $98 million reported by AT&T in the second quarter of 2018, $772 million reported in the third quarter of 2018, $545 million reported by AT&T in the fourth quarter of 2018 and $150 million reported by AT&T in the first quarter of 2019. |
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 |
|||||||||||||||||
|
|
First Quarter |
|||||||||||||||
|
|
March 31, 2019 |
|
|
March 31, 2018 |
||||||||||||
|
|
Mobility |
|
Business Wireline |
|
Adjustments1 |
|
Business Solutions |
|
|
Mobility |
|
Business Wireline |
|
Adjustments1 |
|
Business Solutions |
Operating Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless service |
$ |
13,792 |
$ |
- |
$ |
(11,879) |
$ |
1,913 |
|
$ |
13,403 |
$ |
- |
$ |
(11,612) |
$ |
1,791 |
Strategic and managed services |
|
- |
|
3,792 |
|
- |
|
3,792 |
|
|
- |
|
3,595 |
|
- |
|
3,595 |
Legacy voice and data services |
|
- |
|
2,404 |
|
- |
|
2,404 |
|
|
- |
|
2,865 |
|
- |
|
2,865 |
Other services and equipment |
|
- |
|
302 |
|
- |
|
302 |
|
|
- |
|
287 |
|
- |
|
287 |
Wireless equipment |
|
3,775 |
|
- |
|
(3,179) |
|
596 |
|
|
3,952 |
|
- |
|
(3,374) |
|
578 |
Total Operating Revenues |
|
17,567 |
|
6,498 |
|
(15,058) |
|
9,007 |
|
|
17,355 |
|
6,747 |
|
(14,986) |
|
9,116 |
Operations and support |
|
10,181 |
|
4,040 |
|
(8,581) |
|
5,640 |
|
|
10,102 |
|
4,016 |
|
(8,524) |
|
5,594 |
EBITDA |
|
7,386 |
|
2,458 |
|
(6,477) |
|
3,367 |
|
|
7,253 |
|
2,731 |
|
(6,462) |
|
3,522 |
Depreciation and amortization |
|
2,035 |
|
1,235 |
|
(1,729) |
|
1,541 |
|
|
2,095 |
|
1,170 |
|
(1,807) |
|
1,458 |
Total Operating Expenses |
|
12,216 |
|
5,275 |
|
(10,310) |
|
7,181 |
|
|
12,197 |
|
5,186 |
|
(10,331) |
|
7,052 |
Operating Income |
|
5,351 |
|
1,223 |
|
(4,748) |
|
1,826 |
|
|
5,158 |
|
1,561 |
|
(4,655) |
|
2,064 |
Equity in net Income of Affiliates |
|
- |
|
- |
|
- |
|
- |
|
|
- |
|
(1) |
|
- |
|
(1) |
Contribution |
$ |
5,351 |
$ |
1,223 |
$ |
(4,748) |
$ |
1,826 |
|
$ |
5,158 |
$ |
1,560 |
$ |
(4,655) |
$ |
2,063 |
1 Non-business wireless reported in the Communication segment under the Mobility business unit. |
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