T
$37.90
AT&T
$.43
1.15%
Earnings Details
2nd Quarter June 2019
Wednesday, July 24, 2019 6:21:00 AM
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Summary

AT&T Misses

AT&T (T) reported 2nd Quarter June 2019 earnings of $0.89 per share on revenue of $45.0 billion. The consensus earnings estimate was $0.89 per share on revenue of $45.0 billion. The Earnings Whisper number was $0.90 per share. Revenue grew 15.3% on a year-over-year basis.

The company said it continues to expect low single-digit earnings growth in 2019, or earnings of approximately $3.60 per share. The current consensus earnings estimate is $3.58 per share for the year ending December 31, 2019

AT&T Inc, through its subsidiaries and affiliates, provides wireless and wireline telecommunications services in the United States and internationally. The Company has three reportable segments: Wireless, Wireline, and Other.

Results
Reported Earnings
$0.89
Earnings Whisper
$0.90
Consensus Estimate
$0.89
Reported Revenue
$44.96 Bil
Revenue Estimate
$45.02 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

AT&T Reports Second-Quarter Results

Second-Quarter Consolidated Results

  • Diluted EPS of $0.51 as reported compared to $0.81 in the year-ago quarter
  • Adjusted EPS of $0.89 compared to $0.91 in the year-ago quarter
  • Consolidated revenues of $45.0 billion, up 15.3%
  • Cash from operations of $14.3 billion, up 40%
  • Capital expenditures of $5.5 billion
  • Free cash flow of $8.8 billion

  • Company Raises Free Cash Flow Guidance to $28 Billion Range1;
    Reaffirms Remainder of 2019 Guidance:
    • Low single-digit adjusted EPS growth2;
    • Dividend payout ratio in the 50s% range1;
    • End-of-year net debt to adjusted EBITDA in the 2.5x range;
    • Gross capital investment in the $23 billion range3

Note: AT&T's second-quarter earnings conference call will be webcast at 8:30 a.m. ET on Wednesday, July 24, 2019. The webcast and related materials will be available on AT&T’s Investor Relations website at https://investors.att.com.

DALLAS--(BUSINESS WIRE)--AT&T Inc. (NYSE:T) reported solid operating results in the second quarter, including consolidated revenue growth, expanding operating income margin and record operating and free cash flow.

“We’re halfway through the year and on track to deliver on all our 2019 priorities,” said Randall Stephenson, AT&T chairman and CEO. “We continue to pay down debt and are more confident than ever that we’ll meet our yearend deleveraging goal, and we’ll take a look at buying back stock. Our FirstNet build is not only running ahead of schedule – it’s become a driver of our wireless network leadership in speed, reliability and network performance. It also sets us up to have nationwide commercially available 5G coverage in the first half of 2020.

“On top of all this, our operating teams continue to deliver solid results. Our wireless business grew revenues, profitability and phone customers, both postpaid and prepaid. WarnerMedia delivered another strong quarter with both revenue and operating income growth. And our Entertainment Group profitability continued to stabilize, and even grow. Across the board, it was a solid quarter that puts us in position to have a really strong year.”

Second-Quarter Results

Communications Highlights

  • Mobility:
    • Recognized as the nation’s fastest4, best5 and most reliable6 network
    • Service revenues up 2.4%, operating income and EBITDA growth with 355,000 phone net adds
    • 144,000 postpaid smartphone net adds
      • 72,000 postpaid phone net adds
    • 341,000 prepaid net adds of which 283,000 were phones
  • Entertainment Group:
    • 2.6% operating income growth with solid video and broadband ARPU gains
    • 1.1% EBITDA growth as company targets stability
    • Focus on long-term value customer base
      • 21.6 million premium TV subscribers – 778,000 net loss
      • 1.3 million DIRECTV NOW subscribers – 168,000 net loss
    • AT&T TV, company’s new thin client video service, expected to begin trials in the third quarter
    • IP broadband revenue growth of 6.5%; 318,000 AT&T Fiber gains
    • Nearly 14 million customer locations passed with fiber

WarnerMedia Highlights

  • Solid revenue growth and strong operating income growth with gains in all business units
    • Original content drives strong HBO digital subscriber growth
    • HBO Max slated to launch Spring 2020
    • Strong Warner Bros. operating income growth
    • Continued Turner subscription revenue growth

Consolidated Financial Results

AT&T's consolidated revenues for the second quarter totaled $45.0 billion versus $39.0 billion in the year-ago quarter, up 15.3%, primarily due to the Time Warner acquisition (Deal closed on June 14, 2018). Declines in revenues from legacy wireline services, Vrio, domestic video and wireless equipment were more than offset by the addition of WarnerMedia and growth in domestic wireless services, strategic and managed business services, IP broadband and Xandr. Operating expenses were $37.5 billion versus $32.5 billion in the year-ago quarter, an increase of about $4.9 billion due in part to the Time Warner acquisition, partially offset by cost efficiencies and lower Entertainment Group and wireless equipment costs.

Operating income was $7.5 billion versus $6.5 billion in the year-ago quarter, primarily due to the Time Warner acquisition, with operating income margin of 16.7% versus 16.6%. When adjusting for amortization, merger- and integration-related expenses and other items, operating income was $9.9 billion versus $8.2 billion in the year-ago quarter, and operating income margin was 22.0% versus 21.1% in the year-ago quarter primarily due to the acquisition of Time Warner.

Second-quarter net income attributable to AT&T was $3.7 billion, or $0.51 per diluted share, versus $5.1 billion, or $0.81 per diluted share, in the year-ago quarter. Adjusting for $0.38, which includes merger-amortization costs, a non-cash actuarial loss on benefit plans, merger- and integration-related expenses and other items, earnings per diluted share was $0.89 compared to an adjusted $0.91 in the year-ago quarter.

Cash from operating activities was $14.3 billion, and capital expenditures were $5.5 billion. Capital investment – which consists of capital expenditures plus cash payments for vendor financing – totaled $6.5 billion, which includes about $1.0 billion of cash payments for vendor financing. Free cash flow — cash from operating activities minus capital expenditures — was a record $8.8 billion for the quarter.

The Company now expects:

Free cash flow guidance in the $28 billion range1

Dividend payout ratio in the 50s% range1

  • 1 Free cash flow is cash from operating activities minus capital expenditures. The increase in guidance reflects higher cash from operations driven by incremental working capital efforts. Free cash flow dividend payout ratio is dividends divided by free cash flow.

Low single-digit adjusted EPS growth2

  • 2 Adjustments include merger-related adjusted amortization costs in the range of $7.5 billion, a non-cash mark-to-market benefit plan gain/loss, merger integration and other adjustments. The mark-to-market adjustment is driven by interest rates and investment returns that are not reasonably estimable and can be a significant item. Accordingly, we cannot provide a reconciliation between forecasted adjusted diluted EPS and reported diluted EPS without unreasonable effort.

Gross capital investment in the $23 billion range3

  • 3Excludes expected FirstNet reimbursement in the $1 billion range; includes vendor financing

4Based on GWS OneScore Sept. 2018
5Based on analysis by Ookla® of Speedtest Intelligence® data average download speeds for Q2 2019
6Based on PC Mag June 2019

*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 is a leading media and entertainment company that creates and distributes premium and popular content to global audiences through its consumer brands including: HBO, Warner Bros., TNT, TBS, truTV, CNN, DC Entertainment, New Line, Cartoon Network, Adult Swim, Turner Classic Movies and others. 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 nearly 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. © 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.

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 U.S. 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

 

 

 

 

 

 

Second Quarter

 

 

Six-Month Period

 

 

 

2019

 

 

2018

 

 

 

2019

 

 

2018

 

 

Net cash provided by operating activities

$

14,284

 

$

10,229

 

 

$

25,336

 

$

19,176

 

 

Less: Capital expenditures

 

(5,472

)

 

(5,108

)

 

 

(10,654

)

 

(11,226

)

 

Free Cash Flow

 

8,812

 

 

5,121

 

 

 

14,682

 

 

7,950

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Dividends paid

 

(3,722

)

 

(3,074

)

 

 

(7,436

)

 

(6,144

)

 

Free Cash Flow after Dividends

$

5,090

 

$

2,047

 

 

$

7,246

 

$

1,806

 

 

Free Cash Flow Dividend Payout Ratio

 

42.2

%

 

60.0

%

 

 

50.6

%

 

77.3

%

 

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

 

 

 

 

 

 

Second Quarter

 

 

Six-Month Period

 

 

2019

 

 

2018

 

 

 

2019

 

 

2018

 

 

Capital Expenditures

$

(5,472

)

$

(5,108

)

 

$

(10,654

)

$

(11,226

)

 

Cash paid for vendor financing

 

(1,016

)

 

(85

)

 

 

(1,836

)

 

(257

)

 

Cash paid for Capital Investment

$

(6,488

)

$

(5,193

)

 

$

(12,490

)

$

(11,483

)

 

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. For market comparability, management analyzes 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

 

 

 

 

 

Second Quarter

 

Six-Month Period

 

 

2019

 

2018

 

 

2019

 

2018

 

Net Income

$

3,974

 

$

5,248

 

 

$

8,322

 

$

10,007

 

 

Additions:

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

1,099

 

 

1,532

 

 

 

2,122

 

 

2,914

 

 

Interest Expense

 

2,149

 

 

2,023

 

 

 

4,290

 

 

3,794

 

 

Equity in Net (Income) Loss of Affiliates

 

(40

)

 

16

 

 

 

(33

)

 

7

 

 

Other (Income) Expense - Net

 

318

 

 

(2,353

)

 

 

32

 

 

(4,055

)

 

Depreciation and amortization

 

7,101

 

 

6,378

 

 

 

14,307

 

 

12,372

 

 

EBITDA

 

14,601

 

 

12,844

 

 

 

29,040

 

 

25,039

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

44,957

 

 

38,986

 

 

 

89,784

 

 

77,024

 

 

Service Revenues

 

41,023

 

 

34,906

 

 

 

81,707

 

 

68,552

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA Margin

 

32.5

%

 

32.9

%

 

 

32.3

%

 

32.5

%

 

EBITDA Service Margin

35.6

%

36.8

%

35.5

%

36.5

%

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin

Dollars in millions

 

 

 

 

 

 

 

Second Quarter

 

 

Six-Month Period

 

 

 

2019

 

2018

 

 

2019

 

2018

 

Communications Segment

 

 

 

 

 

 

 

 

 

 

Operating Contribution

$

8,737

 

$

8,414

 

 

$

16,789

 

$

16,441

 

 

Additions:

 

 

 

 

 

 

 

 

 

 

Equity in Net (Income) Loss of Affiliates

 

-

 

 

-

 

 

 

-

 

 

2

 

 

Depreciation and amortization

 

4,620

 

 

4,638

 

 

 

9,213

 

 

9,213

 

 

EBITDA

 

13,357

 

 

13,052

 

 

 

26,002

 

 

25,656

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

35,508

 

 

35,410

 

 

 

70,901

 

 

70,943

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

24.6

%

 

23.8

%

 

 

23.7

%

 

23.2

%

 

EBITDA Margin

 

37.6

%

 

36.9

%

 

 

36.7

%

 

36.2

%

 

 

 

 

 

 

 

 

 

 

 

 

Mobility

Operating Contribution

$

5,833

 

$

5,506

 

 

$

11,184

 

$

10,664

 

 

Additions:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

2,025

 

 

2,113

 

 

 

4,060

 

 

4,208

 

 

EBITDA

 

7,858

 

 

7,619

 

 

 

15,244

 

 

14,872

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

17,512

 

 

17,282

 

 

 

35,079

 

 

34,637

 

 

Service Revenues

 

14,006

 

 

13,682

 

 

 

27,798

 

 

27,085

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

33.3

%

 

31.9

%

 

 

31.9

%

 

30.8

%

 

EBITDA Margin

 

44.9

%

 

44.1

%

 

 

43.5

%

 

42.9

%

 

EBITDA Service Margin

 

56.1

%

 

55.7

%

 

 

54.8

%

 

54.9

%

 

 

 

 

 

 

 

 

 

 

 

 

Entertainment Group

Operating Contribution

$

1,514

 

$

1,475

 

 

$

2,992

 

$

2,784

 

 

Additions:

 

 

 

 

 

 

 

 

 

 

Equity in Net (Income) Loss of Affiliates

 

-

 

 

1

 

 

 

-

 

 

2

 

 

Depreciation and amortization

 

1,339

 

 

1,345

 

 

 

2,662

 

 

2,655

 

 

EBITDA

 

2,853

 

 

2,821

 

 

 

5,654

 

 

5,441

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

11,368

 

 

11,478

 

 

 

22,696

 

 

22,909

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

13.3

%

 

12.9

%

 

 

13.2

%

 

12.2

%

 

EBITDA Margin

 

25.1

%

 

24.6

%

 

 

24.9

%

 

23.8

%

 

 

 

 

 

 

 

 

 

 

 

 

Business Wireline

Operating Contribution

$

1,390

 

$

1,433

 

 

$

2,613

 

$

2,993

 

 

Additions:

 

 

 

 

 

 

 

 

 

 

Equity in Net (Income) Loss of Affiliates

 

-

 

 

(1

)

 

 

-

 

 

-

 

 

Depreciation and amortization

 

1,256

 

 

1,180

 

 

 

2,491

 

 

2,350

 

 

EBITDA

 

2,646

 

 

2,612

 

 

 

5,104

 

 

5,343

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

6,628

 

 

6,650

 

 

 

13,126

 

 

13,397

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

21.0

%

 

21.5

%

 

 

19.9

%

 

22.3

%

 

EBITDA Margin

39.9

%

39.3

%

38.9

%

39.9

%

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin

Dollars in millions

 

 

 

 

 

 

 

Second Quarter

 

 

Six-Month Period

 

 

 

2019

 

2018

 

 

2019

 

2018

 

WarnerMedia Segment

Operating Contribution

$

2,025

 

$

425

 

 

$

4,335

 

$

464

 

 

Additions:

 

 

 

 

 

 

 

 

 

 

Equity in Net (Income) of Affiliates

 

(55

)

 

26

 

 

 

(122

)

 

16

 

 

Depreciation and amortization

 

91

 

 

31

 

 

 

234

 

 

32

 

 

EBITDA

 

2,061

 

 

482

 

 

 

4,447

 

 

512

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

8,350

 

 

1,393

 

 

 

16,729

 

 

1,505

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

23.6

%

 

32.4

%

 

 

25.2

%

 

31.9

%

 

EBITDA Margin

 

24.7

%

 

34.6

%

 

 

26.6

%

 

34.0

%

 

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin

Dollars in millions

 

 

 

 

 

 

 

Second Quarter

 

 

Six-Month Period

 

 

 

2019

 

2018

 

 

2019

 

2018

 

Latin America Segment

 

 

 

 

 

 

 

 

 

 

Operating Contribution

$

(209

)

$

(150

)

 

$

(382

)

$

(261

)

 

Additions:

 

 

 

 

 

 

 

 

 

 

Equity in Net (Income) of Affiliates

 

(12

)

 

(15

)

 

 

(12

)

 

(15

)

 

Depreciation and amortization

 

284

 

 

313

 

 

 

584

 

 

645

 

 

EBITDA

 

63

 

 

148

 

 

 

190

 

 

369

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

1,757

 

 

1,951

 

 

 

3,475

 

 

3,976

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

-12.6

%

 

-8.5

%

 

 

-11.3

%

 

-6.9

%

 

EBITDA Margin

 

3.6

%

 

7.6

%

 

 

5.5

%

 

9.3

%

 

 

 

 

 

 

 

 

 

 

 

 

Vrio

 

 

 

 

 

 

 

 

 

 

Operating Contribution

$

(2

)

$

67

 

 

$

30

 

$

215

 

 

Additions:

 

 

 

 

 

 

 

 

 

 

Equity in Net (Income) of Affiliates

 

(12

)

 

(15

)

 

 

(12

)

 

(15

)

 

Depreciation and amortization

 

165

 

 

186

 

 

 

334

 

 

391

 

 

EBITDA

 

151

 

 

238

 

 

 

352

 

 

591

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

1,032

 

 

1,254

 

 

 

2,099

 

 

2,608

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

-1.4

%

 

4.1

%

 

 

0.9

%

 

7.7

%

 

EBITDA Margin

 

14.6

%

 

19.0

%

 

 

16.8

%

 

22.7

%

 

 

 

 

 

 

 

 

 

 

 

 

Mexico

 

 

 

 

 

 

 

 

 

 

Operating Contribution

$

(207

)

$

(217

)

 

$

(412

)

$

(476

)

 

Additions:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

119

 

 

127

 

 

 

250

 

 

254

 

 

EBITDA

 

(88

)

 

(90

)

 

 

(162

)

 

(222

)

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

725

 

 

697

 

 

 

1,376

 

 

1,368

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

-28.6

%

 

-31.1

%

 

 

-29.9

%

 

-34.8

%

 

EBITDA Margin

-12.1

%

-12.9

%

-11.8

%

-16.2

%

Segment EBITDA, EBITDA Margin and EBITDA Service Margin

Dollars in millions

 

 

 

 

 

 

 

Second Quarter

 

 

Six-Month Period

 

 

 

2019

 

2018

 

 

2019

 

2018

 

Xandr

 

 

 

 

 

 

 

 

 

 

Operating Contribution

$

325

 

$

333

 

 

$

578

 

$

619

 

 

Additions:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

13

 

 

-

 

 

 

26

 

 

1

 

 

EBITDA

 

338

 

 

333

 

 

 

604

 

 

620

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

485

 

 

392

 

 

 

911

 

 

729

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

67.0

%

 

84.9

%

 

 

63.4

%

 

84.9

%

 

EBITDA Margin

 

69.7

%

 

84.9

%

 

 

66.3

%

 

85.0

%

 

 

 

 

 

 

 

 

 

 

 

 

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 results (we immediately recognize this gain or loss in the income statement, pursuant to our accounting policy for the recognition of actuarial gains and losses). Consequently, our adjusted results reflect an expected return on plan assets rather than the actual return on plan assets, as included in the GAAP measure of income.

The tax impact of adjusting items is calculated using the effective tax rate during the quarter except for adjustments that, given their magnitude, can drive a change in the effective tax rate, in these cases we use the actual tax expense or combined marginal rate of approximately 25%.

Adjusting Items

Dollars in millions

 

 

 

 

 

Second Quarter

 

Six-Month Period

 

 

2019

 

2018

 

 

2019

 

2018

Operating Revenues

 

 

 

 

 

 

 

 

 

Time Warner merger adjustment

$

30

 

$

-

 

 

$

72

 

$

-

 

Adjustments to Operating Revenues

 

30

 

 

-

 

 

 

72

 

 

-

 

Operating Expenses

 

 

 

 

 

 

 

 

 

Time Warner and other merger costs

 

316

 

 

339

 

 

 

389

 

 

431

 

Employee separation costs

 

94

 

 

133

 

 

 

342

 

 

184

 

Natural disaster costs

 

-

 

 

-

 

 

 

-

 

 

104

 

Adjustments to Operations and Support Expenses

 

410

 

 

472

 

 

 

731

 

 

719

 

Amortization of intangible assets

 

1,959

 

 

1,278

 

 

 

3,948

 

 

2,340

 

Adjustments to Operating Expenses

 

2,369

 

 

1,750

 

 

 

4,679

 

 

3,059

 

Other

 

 

 

 

 

 

 

 

 

Merger-related interest and fees1

 

-

 

 

636

 

 

 

-

 

 

1,029

 

(Gains) losses on sale of investments

 

(638

)

 

-

 

 

 

(638

)

 

-

 

Special termination charges, debt redemption costs and other adjustments

 

140

 

 

48

 

 

 

351

 

 

48

 

Actuarial (gain) loss

 

1,699

 

 

(1,796

)

 

 

2,131

 

 

(2,726

)

Adjustments to Income Before Income Taxes

 

3,600

 

 

638

 

 

 

6,595

 

 

1,410

 

Tax impact of adjustments

 

779

 

 

44

 

 

 

1,428

 

 

217

 

Tax-related items

 

-

 

 

(96

)

 

 

141

 

 

(96

)

Adjustments to Net Income

$

2,821

 

$

690

 

 

$

5,026

 

$

1,289

 

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

 

 

 

 

 

 

Second Quarter

 

Six-Month Period

 

 

 

2019

 

2018

 

 

2019

 

2018

 

Operating Income

$

7,500

 

$

6,466

 

 

$

14,733

 

$

12,667

 

 

Adjustments to Operating Revenues

 

30

 

 

-

 

 

 

72

 

 

-

 

 

Adjustments to Operating Expenses

 

2,369

 

 

1,750

 

 

 

4,679

 

 

3,059

 

 

Adjusted Operating Income

 

9,899

 

 

8,216

 

 

 

19,484

 

 

15,726

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

14,601

 

 

12,844

 

 

 

29,040

 

 

25,039

 

 

Adjustments to Operating Revenues

 

30

 

 

-

 

 

 

72

 

 

-

 

 

Adjustments to Operations and Support Expenses

 

410

 

 

472

 

 

 

731

 

 

719

 

 

Adjusted EBITDA

 

15,041

 

 

13,316

 

 

 

29,843

 

 

25,758

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

44,957

 

 

38,986

 

 

 

89,784

 

 

77,024

 

 

Adjustments to Operating Revenues

 

30

 

 

-

 

 

 

72

 

 

-

 

 

Total Adjusted Operating Revenue

 

44,987

 

 

38,986

 

 

 

89,856

 

 

77,024

 

 

Service Revenues

 

41,023

 

 

34,906

 

 

 

81,707

 

 

68,552

 

 

Adjustments to Service Revenues

 

30

 

 

-

 

 

 

72

 

 

-

 

 

Adjusted Service Revenue

 

41,053

 

 

34,906

 

 

 

81,779

 

 

68,552

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

16.7

%

 

16.6

%

 

 

16.4

%

 

16.4

%

 

Adjusted Operating Income Margin

 

22.0

%

 

21.1

%

 

 

21.7

%

 

20.4

%

 

Adjusted EBITDA Margin

 

33.4

%

 

34.2

%

 

 

33.2

%

 

33.4

%

 

Adjusted EBITDA Service Margin

 

36.6

%

 

38.1

%

 

 

36.5

%

 

37.6

%

 

Adjusted Diluted EPS

 

 

 

 

 

 

 

 

Second Quarter

 

 

Six-Month Period

 

 

 

2019

 

2018

 

 

2019

 

2018

 

Diluted Earnings Per Share (EPS)

$

0.51

 

$

0.81

 

 

$

1.06

 

$

1.56

 

 

Amortization of intangible assets

 

0.21

 

 

0.16

 

 

 

0.42

 

 

0.29

 

 

Merger integration items1

 

0.05

 

 

0.14

 

 

 

0.07

 

 

0.20

 

 

(Gain) loss on sale of assets, impairments and other adjustments2

 

(0.06

)

 

0.01

 

 

 

(0.01

)

 

0.05

 

 

Actuarial (gain) loss3

 

0.18

 

 

(0.21

)

 

 

0.23

 

 

(0.33

)

 

Tax-related items

 

-

 

 

-

 

 

 

(0.02

)

 

-

 

 

Adjusted EPS

$

0.89

 

$

0.91

 

 

$

1.75

 

$

1.77

 

 

Year-over-year growth - Adjusted

 

-2.2

%

 

 

 

 

-1.1

%

 

 

 

Weighted Average Common Shares Outstanding with Dilution (000,000)

 

7,353

 

 

6,374

 

 

 

7,347

 

 

6,277

 

 

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 (losses of $1.7 billion in the second quarter and $2.1 billion for the first six months of 2019) associated with our pension benefit plan. As a result, adjusted EPS reflects an expected return on plan assets of $880 million in the second quarter and $1,731 million for the first six months (based on an expected return on plan assets of 7.00%), rather than the actual return of $1.4 billion in the quarter and $3.4 billion for the first six months (actual return of 4.2% for the quarter and 10.0% for the first six months), included in the GAAP measure of income.

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 Adjusted EBITDA ratio is calculated by dividing the Net Debt by the sum of the most recent four quarters 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 Adjusted EBITDA

Dollars in millions

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

Sep. 30,
20181

 

Dec. 31,
20181

 

Mar. 31,
20191

 

June 30,
2019

 

Four
Quarters

 

Adjusted EBITDA1,2

$

15,872

 

$

15,029

 

$

14,802

$

15,041

$

60,744

 

 

Add back severance

 

(76

)

 

(327

)

 

-

 

-

 

(403

)

 

Net Debt Adjusted EBITDA

 

15,796

 

 

14,702

 

 

14,802

 

15,041

 

60,341

 

 

End-of-period current debt

 

 

 

 

 

 

 

 

 

12,625

 

 

End-of-period long-term debt

 

 

 

 

 

 

 

 

 

157,937

 

 

Total End-of-Period Debt

 

 

 

 

 

 

 

 

 

170,562

 

 

Less: Cash and Cash Equivalents

 

 

 

 

 

 

 

 

 

8,423

 

 

Net Debt Balance

 

 

 

 

 

 

 

 

 

162,139

 

 

Annualized Net Debt to Adjusted EBITDA Ratio

 

 

 

 

 

2.69

 

 

1 As reported in AT&T's Form 8-K filed October 24, 2018, January 30, 2019 and April 24, 2019.

2 Includes the purchase accounting reclassification of released content amortization of $772 million in the third quarter of 2018, $545 million in the fourth quarter of 2018, $150 million and $112 million reported by AT&T in the first and second quarters of 2019, 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

 

 

Second Quarter

 

 

June 30, 2019

 

 

June 30, 2018

 

 

Mobility

 

Business
Wireline

 

Adjustments1

 

Business
Solutions

 

 

Mobility

 

Business
Wireline

 

Adjustments1

 

Business
Solutions

Operating Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wireless service

$

14,006

$

-

$

(11,984

)

$

2,022

 

$

13,682

$

-

$

(11,853

)

$

1,829

Strategic and managed services

 

-

 

3,848

 

-

 

 

3,848

 

 

-

 

3,603

 

-

 

 

3,603

Legacy voice and data services

 

-

 

2,331

 

-

 

 

2,331

 

 

-

 

2,730

 

-

 

 

2,730

Other services and equipment

 

-

 

449

 

-

 

 

449

 

 

-

 

317

 

-

 

 

317

Wireless equipment

 

3,506

 

-

 

(2,884

)

 

622

 

 

3,600

 

-

 

(3,016

)

 

584

Total Operating Revenues

 

17,512

 

6,628

 

(14,868

)

 

9,272

 

 

17,282

 

6,650

 

(14,869

)

 

9,063

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operations and support

 

9,654

 

3,982

 

(8,097

)

 

5,539

 

 

9,663

 

4,038

 

(8,085

)

 

5,616

EBITDA

 

7,858

 

2,646

 

(6,771

)

 

3,733

 

 

7,619

 

2,612

 

(6,784

)

 

3,447

Depreciation and amortization

 

2,025

 

1,256

 

(1,720

)

 

1,561

 

 

2,113

 

1,180

 

(1,806

)

 

1,487

Total Operating Expenses

 

11,679

 

5,238

 

(9,817

)

 

7,100

 

 

11,776

 

5,218

 

(9,891

)

 

7,103

Operating Income

 

5,833

 

1,390

 

(5,051

)

 

2,172

 

 

5,506

 

1,432

 

(4,978

)

 

1,960

Equity in net Income of Affiliates

 

-

 

-

 

-

 

 

-

 

 

-

 

1

 

-

 

 

1

Operating Contribution

$

5,833

$

1,390

$

(5,051

)

$

2,172

 

$

5,506

$

1,433

$

(4,978

)

$

1,961

1 Non-business wireless reported in the Communication segment under the Mobility business unit.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental Operational Measure

 

 

Six-Month Period

 

 

June 30, 2019

 

 

June 30, 2018

 

 

Mobility

 

Business
Wireline

 

Adjustments1

 

Business
Solutions

 

 

Mobility

 

Business
Wireline

 

Adjustments1

 

Business
Solutions

Operating Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wireless service

$

27,798

$

-

$

(23,863

)

$

3,935

 

$

27,085

$

-

$

(23,465

)

$

3,620

Strategic and managed services

 

-

 

7,640

 

-

 

 

7,640

 

 

-

 

7,198

 

-

 

 

7,198

Legacy voice and data services

 

-

 

4,735

 

-

 

 

4,735

 

 

-

 

5,595

 

-

 

 

5,595

Other services and equipment

 

-

 

751

 

-

 

 

751

 

 

-

 

604

 

-

 

 

604

Wireless equipment

 

7,281

 

-

 

(6,063

)

 

1,218

 

 

7,552

 

-

 

(6,390

)

 

1,162

Total Operating Revenues

 

35,079

 

13,126

 

(29,926

)

 

18,279

 

 

34,637

 

13,397

 

(29,855

)

 

18,179

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operations and support

 

19,835

 

8,022

 

(16,678

)

 

11,179

 

 

19,765

 

8,054

 

(16,609

)

 

11,210

EBITDA

 

15,244

 

5,104

 

(13,248

)

 

7,100

 

 

14,872

 

5,343

 

(13,246

)

 

6,969

Depreciation and amortization

 

4,060

 

2,491

 

(3,449

)

 

3,102

 

 

4,208

 

2,350

 

(3,613

)

 

2,945

Total Operating Expenses

 

23,895

 

10,513

 

(20,127

)

 

14,281

 

 

23,973

 

10,404

 

(20,222

)

 

14,155

Operating Income

 

11,184

 

2,613

 

(9,799

)

 

3,998

 

 

10,664

 

2,993

 

(9,633

)

 

4,024

Equity in net Income of Affiliates

 

-

 

-

 

-

 

 

-

 

 

-

 

-

 

-

 

 

-

Operating Contribution

$

11,184

$

2,613

$

(9,799

)

$

3,998

 

$

10,664

$

2,993

$

(9,633

)

$

4,024

1 Non-business wireless reported in the Communication segment under the Mobility business unit.

 

Erin McGrath
AT&T Inc.
Phone: (214) 862-0651
Email: erin.mcgrath@att.com

Source: AT&T Inc.