DALLAS--(BUSINESS WIRE)--AT&T Inc.* (NYSE:T) reported record wireless EBITDA margins and phone churn and strong wireless and DIRECTV NOW subscriber gains in the third quarter.
“We look forward to closing our acquisition of Time Warner and bringing together premium content with world-class distribution to deliver a better entertainment experience for consumers and more effective targeted advertising,” said Randall Stephenson, AT&T Inc. chairman and CEO. “We’re also on track to have one of the largest high-speed internet networks in the U.S., reaching more than 50 million customer locations with competitive high speeds. This expansion will make our bundled video, mobile and broadband services even more compelling.
“We continued to operate our business efficiently in the quarter. At a time of transformation in our wireless and video businesses, as well as investment in growth opportunities, we’re able to maintain our full-year guidance. Wireless margins and phone churn continue to run at record levels, our fiber deployment is helping drive broadband growth and DIRECTV NOW had another strong quarter. We’re also pleased with our FirstNet progress. Already 27 states and territories have opted in, and we’re working closely with them as we prepare to deploy the FirstNet network.”
Consolidated Financial Results
AT&T's consolidated revenues for the third quarter totaled $39.7 billion versus $40.9 billion in the year-ago quarter, primarily due to declines in legacy wireline services and consumer mobility. Excluding the impact of hurricanes and earthquakes in the third quarter, revenues would have been $39.8 billion. Compared with results for the third quarter of 2016, operating expenses were $33.3 billion versus $34.5 billion; operating income was flat versus the year-ago quarter at $6.4 billion; and operating income margin was 16.1% versus 15.7%. When adjusting for amortization, merger- and integration-related expenses and other items, operating income was $8.1 billion versus $8.3 billion in the year-ago quarter and operating income margin was 20.3%, the same as in the year-ago quarter.
Third-quarter net income attributable to AT&T totaled $3.0 billion, or $0.49 per diluted share, compared with $3.3 billion, or $0.54 per diluted share, in the year-ago quarter. Adjusting for $0.25 of costs for amortization, merger- and integration-related expenses and other items including hurricane and earthquake impacts, earnings per diluted share was $0.74, the same as in the year-ago quarter.
Cash from operating activities was $11.1 billion in the third quarter and $29.3 billion year to date. Capital expenditures were $5.3 billion in the quarter and $16.5 billion year to date. Free cash flow — cash from operating activities minus capital expenditures — was $5.9 billion for the quarter and $12.8 billion year to date.
*About AT&T
AT&T Inc. (NYSE:T) is a holding company. 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 about AT&T Inc. is available at about.att.com.
© 2017 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.
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 | Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Net cash provided by operating activities | $ | 11,114 | $ | 10,995 | $ | 29,274 | $ | 29,202 | |||||||||||||
Less: Capital expenditures | (5,251 | ) | (5,813 | ) | (16,474 | ) | (15,952 | ) | |||||||||||||
Free Cash Flow | 5,863 | 5,182 | 12,800 | 13,250 | |||||||||||||||||
Less: Dividends paid | (3,009 | ) | (2,951 | ) | (9,030 | ) | (8,850 | ) | |||||||||||||
Free Cash Flow after Dividends | $ | 2,854 | $ | 2,231 | $ | 3,770 | $ | 4,400 | |||||||||||||
Free Cash Flow Dividend Payout Ratio | 51.3 | % | 56.9 | % | 70.5 | % | 66.8 | % | |||||||||||||
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 results, EBITDA excludes equity in net income (loss) of affiliates, and depreciation and amortization from segment contribution. For our supplemental presentation of our combined domestic wireless operations (AT&T Mobility) and our supplemental presentation of the Mexico Wireless and Latin America operations of our International segment, EBITDA excludes depreciation and amortization from operating income.
These measures are used by management as a gauge of our success in acquiring, retaining and servicing subscribers because we believe these measures reflect AT&T's ability to generate and grow subscriber revenues while providing a high level of customer service in a cost-effective manner. Management also uses these measures as a method of comparing segment performance with that of many of its competitors. The financial and operating metrics which affect EBITDA include the key revenue and expense drivers for which segment managers are responsible and upon which we evaluate their performance. Management uses Mexico Wireless EBITDA in evaluating profitability trends after our two Mexico wireless acquisitions in 2015, and our investments in building a nationwide LTE network by end of 2018. Management uses Latin America EBITDA in evaluating the ability of our Latin America operations to generate cash to finance its own operations.
We believe EBITDA Service Margin (EBITDA as a percentage of service revenues) to be a more relevant measure than EBITDA Margin (EBITDA as a percentage of total revenue) for our Consumer Mobility segment operating margin and our supplemental AT&T Mobility operating margin. We also use wireless service revenues to calculate margin to facilitate comparison, both internally and externally with our wireless competitors, as they calculate their margins using wireless service revenues as well.
There are material limitations to using these non-GAAP financial measures. EBITDA, EBITDA margin and EBITDA service margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies. Furthermore, these performance measures do not take into account certain significant items, including depreciation and amortization, interest expense, tax expense and equity in net income (loss) of affiliates. Management compensates for these limitations by carefully analyzing how its competitors present performance measures that are similar in nature to EBITDA as we present it, and considering the economic effect of the excluded expense items independently as well as in connection with its analysis of net income as calculated in accordance with GAAP. EBITDA, EBITDA margin and EBITDA service margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP.
EBITDA, EBITDA Margin and EBITDA Service Margin | |||||||||||||||||||||
Dollars in millions | Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Net Income | $ | 3,123 | $ | 3,418 | $ | 10,711 | $ | 10,818 | |||||||||||||
Additions: | |||||||||||||||||||||
Income Tax Expense | 1,851 | 1,775 | 5,711 | 5,803 | |||||||||||||||||
Interest Expense | 1,686 | 1,224 | 4,374 | 3,689 | |||||||||||||||||
Equity in Net (Income) Loss of Affiliates | (11 | ) | (16 | ) | 148 | (57 | ) | ||||||||||||||
Other (Income) Expense - Net | (246 | ) | 7 | (354 | ) | (154 | ) | ||||||||||||||
Depreciation and amortization | 6,042 | 6,579 | 18,316 | 19,718 | |||||||||||||||||
EBITDA | 12,445 | 12,987 | 38,906 | 39,817 | |||||||||||||||||
Total Operating Revenues | 39,668 | 40,890 | 118,870 | 121,945 | |||||||||||||||||
Service Revenues | 36,378 | 37,272 | 109,372 | 111,515 | |||||||||||||||||
EBITDA Margin | 31.4 | % | 31.8 | % | 32.7 | % | 32.7 | % | |||||||||||||
EBITDA Service Margin | 34.2 | % | 34.8 | % | 35.6 | % | 35.7 | % | |||||||||||||
Segment EBITDA, EBITDA Margin and EBITDA Service Margin | |||||||||||||||||||||
Dollars in millions | Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Business Solutions Segment | |||||||||||||||||||||
Segment Contribution | $ | 4,503 | $ | 4,303 | $ | 13,322 | $ | 12,803 | |||||||||||||
Additions: | |||||||||||||||||||||
Depreciation and amortization | 2,325 | 2,539 | 6,972 | 7,568 | |||||||||||||||||
EBITDA | 6,828 | 6,842 | 20,294 | 20,371 | |||||||||||||||||
Total Segment Operating Revenues | 17,061 | 17,767 | 51,016 | 52,955 | |||||||||||||||||
Segment Operating Income Margin | 26.4 | % | 24.2 | % | 26.1 | % | 24.2 | % | |||||||||||||
EBITDA Margin | 40.0 | % | 38.5 | % | 39.8 | % | 38.5 | % | |||||||||||||
Entertainment Group Segment | |||||||||||||||||||||
Segment Contribution | $ | 1,310 | $ | 1,488 | $ | 4,562 | $ | 4,734 | |||||||||||||
Additions: | |||||||||||||||||||||
Equity in Net (Income) Loss of Affiliates | 6 | - | 23 | (1 | ) | ||||||||||||||||
Depreciation and amortization | 1,379 | 1,504 | 4,256 | 4,481 | |||||||||||||||||
EBITDA | 2,695 | 2,992 | 8,841 | 9,214 | |||||||||||||||||
Total Segment Operating Revenues | 12,648 | 12,720 | 37,953 | 38,089 | |||||||||||||||||
Segment Operating Income Margin | 10.4 | % | 11.7 | % | 12.1 | % | 12.4 | % | |||||||||||||
EBITDA Margin | 21.3 | % | 23.5 | % | 23.3 | % | 24.2 | % | |||||||||||||
Consumer Mobility Segment | |||||||||||||||||||||
Segment Contribution | $ | 2,320 | $ | 2,572 | $ | 7,059 | $ | 7,640 | |||||||||||||
Additions: | |||||||||||||||||||||
Depreciation and amortization | 877 | 944 | 2,621 | 2,798 | |||||||||||||||||
EBITDA | 3,197 | 3,516 | 9,680 | 10,438 | |||||||||||||||||
Total Segment Operating Revenues | 7,748 | 8,267 | 23,279 | 24,781 | |||||||||||||||||
Service Revenues | 6,507 | 6,914 | 19,644 | 20,805 | |||||||||||||||||
Segment Operating Income Margin | 29.9 | % | 31.1 | % | 30.3 | % | 30.8 | % | |||||||||||||
EBITDA Margin | 41.3 | % | 42.5 | % | 41.6 | % | 42.1 | % | |||||||||||||
EBITDA Service Margin | 49.1 | % | 50.9 | % | 49.3 | % | 50.2 | % | |||||||||||||
International Segment | |||||||||||||||||||||
Segment Contribution | $ | (125 | ) | $ | (53 | ) | $ | (257 | ) | $ | (421 | ) | |||||||||
Additions: | |||||||||||||||||||||
Equity in Net (Income) of Affiliates | (17 | ) | (1 | ) | (62 | ) | (24 | ) | |||||||||||||
Depreciation and amortization | 304 | 293 | 905 | 868 | |||||||||||||||||
EBITDA | 162 | 239 | 586 | 423 | |||||||||||||||||
Total Segment Operating Revenues | 2,099 | 1,879 | 6,054 | 5,374 | |||||||||||||||||
Segment Operating Income Margin | -6.8 | % | -2.9 | % | -5.3 | % | -8.3 | % | |||||||||||||
EBITDA Margin | 7.7 | % | 12.7 | % | 9.7 | % | 7.9 | % | |||||||||||||
Supplemental AT&T Mobility EBITDA, EBITDA Margin and EBITDA Service Margin | |||||||||||||||||||||
Dollars in millions | Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
AT&T Mobility | |||||||||||||||||||||
Operating Income | $ | 5,313 | $ | 5,389 | $ | 15,814 | $ | 16,005 | |||||||||||||
Add: Depreciation and amortization | 2,010 | 2,107 | 5,999 | 6,244 | |||||||||||||||||
EBITDA | 7,323 | 7,496 | 21,813 | 22,249 | |||||||||||||||||
Total Operating Revenues | 17,436 | 18,193 | 52,121 | 54,071 | |||||||||||||||||
Service Revenues | 14,541 | 14,964 | 43,613 | 44,673 | |||||||||||||||||
Operating Income Margin | 30.5 | % | 29.6 | % | 30.3 | % | 29.6 | % | |||||||||||||
EBITDA Margin | 42.0 | % | 41.2 | % | 41.9 | % | 41.1 | % | |||||||||||||
EBITDA Service Margin | 50.4 | % | 50.1 | % | 50.0 | % | 49.8 | % | |||||||||||||
Supplemental Latin America EBITDA and EBITDA Margin | |||||||||||||||||||||
Dollars in millions | Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
International - Latin America | |||||||||||||||||||||
Operating Income | $ | 82 | $ | 94 | $ | 300 | $ | 179 | |||||||||||||
Add: Depreciation and amortization | 206 | 212 | 642 | 620 | |||||||||||||||||
EBITDA | 288 | 306 | 942 | 799 | |||||||||||||||||
Total Operating Revenues | 1,363 | 1,297 | 4,065 | 3,649 | |||||||||||||||||
Operating Income Margin | 6.0 | % | 7.2 | % | 7.4 | % | 4.9 | % | |||||||||||||
EBITDA Margin | 21.1 | % | 23.6 | % | 23.2 | % | 21.9 | % | |||||||||||||
Supplemental Mexico EBITDA and EBITDA Margin | |||||||||||||||||||||
Dollars in millions | Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
International - Mexico | |||||||||||||||||||||
Operating Income | $ | (224 | ) | $ | (148 | ) | $ | (619 | ) | $ | (624 | ) | |||||||||
Add: Depreciation and amortization | 98 | 81 | 263 | 248 | |||||||||||||||||
EBITDA | (126 | ) | (67 | ) | (356 | ) | (376 | ) | |||||||||||||
Total Operating Revenues | 736 | 582 | 1,989 | 1,725 | |||||||||||||||||
Operating Income Margin | -30.4 | % | -25.4 | % | -31.1 | % | -36.2 | % | |||||||||||||
EBITDA Margin | -17.1 | % | -11.5 | % | -17.9 | % | -21.8 | % | |||||||||||||
Adjusting Items
Adjusting items include revenues and costs we consider nonoperational in nature, such as items arising from asset acquisitions or dispositions. We also adjust for net actuarial gains or losses associated with our pension and postemployment benefit plans due to the often significant impact on our fourth-quarter results, unless earlier remeasurement is required (we immediately recognize this gain or loss in the income statement, pursuant to our accounting policy for the recognition of actuarial gains and losses.) Consequently, our adjusted results reflect an expected return on plan assets rather than the actual return on plan assets, as included in the GAAP measure of income.
The tax impact of adjusting items is calculated using the effective tax rate during the quarter except for adjustments that, given their magnitude can drive a change in the effective tax rate, reflect the actual tax expense or combined marginal rate of approximately 38%. Certain foreign operations with losses, where such losses are not realizable for tax purposes, are not tax effected, resulting in no tax impact for Venezuelan devaluation. For years prior to 2017, adjustments related to Mexico operations were taxed at the 30% marginal rate for Mexico.
Adjusting Items | ||||||||||||||||||||
Dollars in millions | Three Months Ended | Nine Months Ended | ||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
Operating Revenues | ||||||||||||||||||||
Natural disaster revenue credits | $ | 89 | $ | 13 | $ | 89 | $ | 13 | ||||||||||||
Adjustments to Operating Revenues | 89 | 13 | 89 | 13 | ||||||||||||||||
Operating Expenses | ||||||||||||||||||||
DIRECTV and other video merger integration costs | 67 | 189 | 317 | 495 | ||||||||||||||||
Mexico merger integration costs | 34 | 84 | 153 | 231 | ||||||||||||||||
Time Warner merger costs | 33 | - | 152 | - | ||||||||||||||||
Wireless merger integration costs | - | 17 | - | 92 | ||||||||||||||||
Actuarial (gain) loss | - | - | (259 | ) | - | |||||||||||||||
Employee separation costs | 208 | 260 | 268 | 314 | ||||||||||||||||
Natural disaster costs | 118 | 17 | 118 | 17 | ||||||||||||||||
(Gain) loss on transfer of wireless spectrum | - | 22 | (181 | ) | (714 | ) | ||||||||||||||
Venezuela devaluation | - | - | 98 | - | ||||||||||||||||
Adjustments to Operations and Support Expenses | 460 | 589 | 666 | 435 | ||||||||||||||||
Amortization of intangible assets | 1,136 | 1,282 | 3,508 | 3,949 | ||||||||||||||||
Adjustments to Operating Expenses | 1,596 | 1,871 | 4,174 | 4,384 | ||||||||||||||||
Other | ||||||||||||||||||||
Merger related interest expense and exchange fees1 | 485 | - | 752 | 16 | ||||||||||||||||
(Gain) loss on sale of assets, impairments and other adjustments2 |
(81 | ) | - | 140 | 4 | |||||||||||||||
Adjustments to Income Before Income Taxes | 2,089 | 1,884 | 5,155 | 4,417 | ||||||||||||||||
Tax impact of adjustments | 716 | 640 | 1,717 | 1,521 | ||||||||||||||||
Tax-related items | (146 | ) | - | (146 | ) | - | ||||||||||||||
Adjustments to Net Income | $ | 1,519 | $ | 1,244 | $ | 3,584 | $ | 2,896 | ||||||||||||
1 Includes interest expense incurred on the debt issued prior to the close of merger transactions. | ||||||||||||||||||||
2 Includes 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 | Three Months Ended | Nine Months Ended | ||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
Operating Income | $ | 6,403 | $ | 6,408 | $ | 20,590 | $ | 20,099 | ||||||||||||
Adjustments to Operating Revenues | 89 | 13 | 89 | 13 | ||||||||||||||||
Adjustments to Operating Expenses | 1,596 | 1,871 | 4,174 | 4,384 | ||||||||||||||||
Adjusted Operating Income1 | 8,088 | 8,292 | 24,853 | 24,496 | ||||||||||||||||
EBITDA | 12,445 | 12,987 | 38,906 | 39,817 | ||||||||||||||||
Adjustments to Operating Revenues | 89 | 13 | 89 | 13 | ||||||||||||||||
Adjustments to Operations and Support Expenses | 460 | 589 | 666 | 435 | ||||||||||||||||
Adjusted EBITDA1 | 12,994 | 13,589 | 39,661 | 40,265 | ||||||||||||||||
Total Operating Revenues | 39,668 | 40,890 | 118,870 | 121,945 | ||||||||||||||||
Adjustments to Operating Revenues | 89 | 13 | 89 | 13 | ||||||||||||||||
Total Adjusted Operating Revenues | 39,757 | 40,903 | 118,959 | 121,958 | ||||||||||||||||
Service Revenues | 36,378 | 37,272 | 109,372 | 111,515 | ||||||||||||||||
Adjustments to Service Revenues | 89 | 13 | 89 | 13 | ||||||||||||||||
Adjusted Service Revenues | 36,467 | 37,285 | 109,461 | 111,528 | ||||||||||||||||
Operating Income Margin | 16.1 | % | 15.7 | % | 17.3 | % | 16.5 | % | ||||||||||||
Adjusted Operating Income Margin1 | 20.3 | % | 20.3 | % | 20.9 | % | 20.1 | % | ||||||||||||
Adjusted EBITDA Margin1 | 32.7 | % | 33.2 | % | 33.3 | % | 33.0 | % | ||||||||||||
Adjusted EBITDA Service Margin1 | 35.6 | % | 36.4 | % | 36.2 | % | 36.1 | % | ||||||||||||
1 Adjusted Operating Income, Adjusted EBITDA and associated margins exclude all actuarial gains or losses ($259 million gain for the first nine months of 2017) associated with our postemployment benefit plan, which we immediately recognize in the income statement, pursuant to our accounting policy for the recognition of actuarial gains/losses. | ||||||||||||||||||||
Adjusted Diluted EPS | ||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
Diluted Earnings Per Share (EPS) | $ | 0.49 | $ | 0.54 | $ | 1.69 | $ | 1.70 | ||||||||||||
Amortization of intangible assets | 0.12 | 0.14 | 0.38 | 0.42 | ||||||||||||||||
Merger integration and other items1 | 0.06 | 0.03 | 0.14 | 0.09 | ||||||||||||||||
Asset abandonments, impairments and other adjustments | 0.05 | 0.03 | 0.06 | 0.03 | ||||||||||||||||
Actuarial (gain) loss | - | - | (0.03 | ) | - | |||||||||||||||
(Gain) loss on transfer of wireless spectrum | - | - | (0.02 | ) | (0.07 | ) | ||||||||||||||
Venezuela devaluation | - | - | 0.02 | - | ||||||||||||||||
Tax-related items | 0.02 | - | 0.02 | - | ||||||||||||||||
Adjusted EPS | $ | 0.74 | $ | 0.74 | $ | 2.26 | $ | 2.17 | ||||||||||||
Year-over-year growth - Adjusted | 0.0 | % | 4.1 | % | ||||||||||||||||
Weighted Average Common Shares Outstanding with Dilution (000,000) |
6,182 | 6,189 | 6,184 | 6,191 | ||||||||||||||||
1Includes combined merger integration items, merger-related interest income and expense. | ||||||||||||||||||||
Net Debt to Adjusted EBITDA
Net Debt to EBITDA ratios are non-GAAP financial measures frequently used by investors and credit rating agencies and management believes these measures provide relevant and useful information to investors and other users of our financial data. The Net Debt to Adjusted EBITDA ratio is calculated by dividing the Net Debt by Annualized Adjusted EBITDA. Net Debt is calculated by subtracting cash and cash equivalents and certificates of deposit and time deposits that are greater than 90 days, from the sum of debt maturing within one year and long-term debt. Annualized Adjusted EBITDA is calculated by annualizing the year-to-date Adjusted EBITDA.
Net Debt to Adjusted EBITDA | |||||||||||||||||||
Dollars in millions | |||||||||||||||||||
Three Months Ended | |||||||||||||||||||
Mar. 31, | Jun. 30, | Sep. 30, | YTD 2017 | ||||||||||||||||
2017 | 2017 | 2017 | |||||||||||||||||
Adjusted EBITDA | $ | 13,080 | $ | 13,587 | $ | 12,994 | $ | 39,661 | |||||||||||
Add back severance | - | (60 | ) | (208 | ) | (268 | ) | ||||||||||||
Net Debt Adjusted EBITDA | 13,080 | 13,527 | 12,786 | 39,393 | |||||||||||||||
Annualized Adjusted EBITDA | 52,524 | ||||||||||||||||||
End-of-period current debt | 8,551 | ||||||||||||||||||
End-of-period long-term debt | 154,728 | ||||||||||||||||||
Total End-of-Period Debt | 163,279 | ||||||||||||||||||
Less: Cash and Cash Equivalents | 48,499 | ||||||||||||||||||
Net Debt Balance | 114,780 | ||||||||||||||||||
Annualized Net Debt to Adjusted EBITDA Ratio | 2.19 | ||||||||||||||||||
Supplemental Operational Measures
We provide a supplemental discussion of our domestic wireless operations that is calculated by combining our Consumer Mobility and Business Solutions segments, and then adjusting to remove non-wireless operations. The following table presents a reconciliation of our supplemental AT&T Mobility results.
Supplemental Operational Measure | |||||||||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||||||
September 30, 2017 | September 30, 2016 | ||||||||||||||||||||||||||
Consumer |
Business |
Adjustments1 |
AT&T Mobility |
Consumer |
Business |
Adjustments1 |
AT&T Mobility |
||||||||||||||||||||
Operating Revenues | |||||||||||||||||||||||||||
Wireless service | $ | 6,507 | $ | 8,034 | $ | - | $ | 14,541 | $ | 6,914 | $ | 8,050 | $ | - | $ | 14,964 | |||||||||||
Fixed strategic services | - | 3,087 | (3,087 | ) | - | - | 2,913 | (2,913 | ) | - | |||||||||||||||||
Legacy voice and data services | - | 3,434 | (3,434 | ) | - | - | 4,042 | (4,042 | ) | - | |||||||||||||||||
Other services and equipment | - | 852 | (852 | ) | - | - | 886 | (886 | ) | - | |||||||||||||||||
Wireless equipment | 1,241 | 1,654 | - | 2,895 | 1,353 | 1,876 | - | 3,229 | |||||||||||||||||||
Total Operating Revenues | 7,748 | 17,061 | (7,373 | ) | 17,436 | 8,267 | 17,767 | (7,841 | ) | 18,193 | |||||||||||||||||
Operating Expenses | |||||||||||||||||||||||||||
Operations and support | 4,551 | 10,233 | (4,671 | ) | 10,113 | 4,751 | 10,925 | (4,979 | ) | 10,697 | |||||||||||||||||
EBITDA | 3,197 | 6,828 | (2,702 | ) | 7,323 | 3,516 | 6,842 | (2,862 | ) | 7,496 | |||||||||||||||||
Depreciation and amortization | 877 | 2,325 | (1,192 | ) | 2,010 | 944 | 2,539 | (1,376 | ) | 2,107 | |||||||||||||||||
Total Operating Expense | 5,428 | 12,558 | (5,863 | ) | 12,123 | 5,695 | 13,464 | (6,355 | ) | 12,804 | |||||||||||||||||
Operating Income | $ | 2,320 | $ | 4,503 | $ | (1,510 | ) | $ | 5,313 | $ | 2,572 | $ | 4,303 | $ | (1,486 | ) | $ | 5,389 | |||||||||
1 Non-wireless (fixed) operations reported in Business Solutions segment. | |||||||||||||||||||||||||||
Supplemental Operational Measure | |||||||||||||||||||||||||||
Nine Months Ended | |||||||||||||||||||||||||||
September 30, 2017 | September 30, 2016 | ||||||||||||||||||||||||||
Consumer |
Business |
Adjustments1 | AT&T Mobility |
Consumer |
Business |
Adjustments1 | AT&T Mobility | ||||||||||||||||||||
Operating Revenues | |||||||||||||||||||||||||||
Wireless service | $ | 19,644 | $ | 23,969 | $ | - | $ | 43,613 | $ | 20,805 | $ | 23,868 | $ | - | $ | 44,673 | |||||||||||
Fixed strategic services | - | 9,089 | (9,089 | ) | - | - | 8,469 | (8,469 | ) | - | |||||||||||||||||
Legacy voice and data services | - | 10,572 | (10,572 | ) | - | - | 12,577 | (12,577 | ) | - | |||||||||||||||||
Other services and equipment | - | 2,513 | (2,513 | ) | - | - | 2,619 | (2,619 | ) | - | |||||||||||||||||
Wireless equipment | 3,635 | 4,873 | - | 8,508 | 3,976 | 5,422 | - | 9,398 | |||||||||||||||||||
Total Operating Revenues | 23,279 | 51,016 | (22,174 | ) | 52,121 | 24,781 | 52,955 | (23,665 | ) | 54,071 | |||||||||||||||||
Operating Expenses | |||||||||||||||||||||||||||
Operations and support | 13,599 | 30,722 | (14,013 | ) | 30,308 | 14,343 | 32,584 | (15,105 | ) | 31,822 | |||||||||||||||||
EBITDA | 9,680 | 20,294 | (8,161 | ) | 21,813 | 10,438 | 20,371 | (8,560 | ) | 22,249 | |||||||||||||||||
Depreciation and amortization | 2,621 | 6,972 | (3,594 | ) | 5,999 | 2,798 | 7,568 | (4,122 | ) | 6,244 | |||||||||||||||||
Total Operating Expense | 16,220 | 37,694 | (17,607 | ) | 36,307 | 17,141 | 40,152 | (19,227 | ) | 38,066 | |||||||||||||||||
Operating Income | $ | 7,059 | $ | 13,322 | $ | (4,567 | ) | $ | 15,814 | $ | 7,640 | $ | 12,803 | $ | (4,438 | ) | $ | 16,005 | |||||||||
1 Non-wireless (fixed) operations reported in Business Solutions segment. | |||||||||||||||||||||||||||
Supplemental International
We provide a supplemental presentation of the Latin America and Mexico Wireless operations within our International segment. The following table presents a reconciliation of our International segment.
Supplemental International | |||||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||
September 30, 2017 | September 30, 2016 | ||||||||||||||||||||||
Latin America | Mexico | International | Latin America | Mexico | International | ||||||||||||||||||
Operating Revenues | |||||||||||||||||||||||
Video service | $ | 1,363 | $ | - | $ | 1,363 | $ | 1,297 | $ | - | $ | 1,297 | |||||||||||
Wireless service | - | 536 | 536 | - | 484 | 484 | |||||||||||||||||
Wireless equipment | - | 200 | 200 | - | 98 | 98 | |||||||||||||||||
Total Operating Revenues | 1,363 | 736 | 2,099 | 1,297 | 582 | 1,879 | |||||||||||||||||
Operating Expenses | |||||||||||||||||||||||
Operations and support | 1,075 | 862 | 1,937 | 991 | 649 | 1,640 | |||||||||||||||||
Depreciation and amortization | 206 | 98 | 304 | 212 | 81 | 293 | |||||||||||||||||
Total Operating Expenses | 1,281 | 960 | 2,241 | 1,203 | 730 | 1,933 | |||||||||||||||||
Operating Income (Loss) | 82 | (224 | ) | (142 | ) | 94 | (148 | ) | (54 | ) | |||||||||||||
Equity in Net Income of Affiliates | 17 | - | 17 | 1 | - | 1 | |||||||||||||||||
Segment Contribution | $ | 99 | $ | (224 | ) | $ | (125 | ) | $ | 95 | $ | (148 | ) | $ | (53 | ) | |||||||
Supplemental International | |||||||||||||||||||||||
Nine Months Ended | |||||||||||||||||||||||
September 30, 2017 | September 30, 2016 | ||||||||||||||||||||||
Latin America | Mexico | International | Latin America | Mexico | International | ||||||||||||||||||
Operating Revenues | |||||||||||||||||||||||
Video service | $ | 4,065 | $ | - | $ | 4,065 | $ | 3,649 | $ | - | $ | 3,649 | |||||||||||
Wireless service | - | 1,546 | 1,546 | - | 1,428 | 1,428 | |||||||||||||||||
Wireless equipment | - | 443 | 443 | - | 297 | 297 | |||||||||||||||||
Total Operating Revenues | 4,065 | 1,989 | 6,054 | 3,649 | 1,725 | 5,374 | |||||||||||||||||
Operating Expenses | |||||||||||||||||||||||
Operations and support | 3,123 | 2,345 | 5,468 | 2,850 | 2,101 | 4,951 | |||||||||||||||||
Depreciation and amortization | 642 | 263 | 905 | 620 | 248 | 868 | |||||||||||||||||
Total Operating Expenses | 3,765 | 2,608 | 6,373 | 3,470 | 2,349 | 5,819 | |||||||||||||||||
Operating Income (Loss) | 300 | (619 | ) | (319 | ) | 179 | (624 | ) | (445 | ) | |||||||||||||
Equity in Net Income of Affiliates | 62 | - | 62 | 24 | - | 24 | |||||||||||||||||
Segment Contribution | $ | 362 | $ | (619 | ) | $ | (257 | ) | $ | 203 | $ | (624 | ) | $ | (421 | ) |