Company Announcements

2Q16 Earnings Release

Source: RNS
RNS Number : 7285H
AT & T Inc.
19 August 2016
 

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

WASHINGTON, DC 20549


 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

 

 

Date of report (Date of earliest event reported) July 21, 2016

 

AT&T INC.

(Exact Name of Registrant as Specified in Charter)

 

Delaware

1-8610

43-1301883

(State or Other Jurisdiction of Incorporation)

(Commission File Number)

(IRS Employer Identification No.)

 

                      208 S. Akard St., Dallas, Texas

75202

                        (Address of Principal Executive Offices)

(Zip Code)

 

Registrant's telephone number, including area code (210) 821-4105

 

 

__________________________________

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240-14d-2(b))

  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 2.02 Results of Operations and Financial Condition.

 

The registrant announced on July 21, 2016, its results of operations for the second quarter of 2016. The text of the press release and accompanying financial information are attached as exhibits and incorporated herein by reference.

 

Item 9.01 Financial Statements and Exhibits.

The following exhibits are furnished as part of this report:

(d)          Exhibits


99.1

Press release dated July 21, 2016 reporting financial results for the second quarter ended June 30, 2016.

 


99.2

AT&T Inc. selected financial statements and operating data.





 99.3

Discussion and reconciliation of non-GAAP measures.

 

 

 

 

 

 

 



Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


AT&T INC.







Date: July 21, 2016

By: /s/ Debra L. Dial_________________

       Debra L. Dial

 Senior Vice President and Controller

 

 

 



 

 

AT&T Reports Second-Quarter Results

Including DIRECTV Acquisition

 

 

Consolidated revenues of $40.5 billion, up more than 22%

 

Operating income up 13.6%

 

Net income up 10.6%

 

Cash from operations of $10.3 billion, up 12.5%

 

Free cash flow of $4.8 billion, up 8.4%

 

Diluted EPS of $0.55 as reported and $0.72 diluted adjusted EPS compared to $0.59 and $0.70 in the year-ago quarter

 

2.1 million wireless net adds driven by connected devices, Mexico and Cricket

 

U.S. wireless postpaid churn of 0.97%, second-lowest ever

 

U.S. wireless operating margins expand; best-ever U.S. wireless EBITDA margins

 

342,000 U.S. DIRECTV net adds; 38,000 global TV net adds

 

o

Nearly 1 million U.S. satellite net adds since acquisition of DIRECTV

 

74,000 IP broadband net adds

 

Nearly 800,000 U.S.-branded smartphones added to subscriber base, more than offsetting a nearly 600,000 decline in U.S.-branded feature phone base

 

185,000 U.S.-branded (postpaid and prepaid) phone net adds

 

380 million North American 4G LTE POPs

 

Year-to-date cash from operations up 14.5%; year-to-date free cash flow up 11.6%

 

Full-year guidance on track to meet or exceed expectations

 

Note: AT&T's second-quarter earnings conference call will be webcast at 4:30 p.m. ET on Thursday, July 21, 2016. The webcast and related materials will be available on AT&T's Investor Relations website at www.att.com/investor.relations

 

DALLAS, July 21, 2016 - AT&T Inc. (NYSE:T) today reported revenue, net income, adjusted EPS and free cash flow growth for the second quarter.

 

July 21, 2016

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"One year after our acquisition of DIRECTV, the success of the integration has exceeded our expectations," said Randall Stephenson, AT&T chairman and CEO. "Cost synergies are ahead of target, we've added nearly 1 million DIRECTV subscribers since the acquisition, and our new video streaming services are scheduled to roll out later this year. We plan to serve every segment of the video industry and offer customers their favorite content virtually wherever and whenever they want it.

"Second-quarter results continued our strong track record of delivering revenue, adjusted earnings and free cash flow growth. This steady execution done at scale gives us the financial strength to grow our business while returning substantial value to our shareholders."

Consolidated Financial Results

AT&T's consolidated revenues for the second quarter totaled $40.5 billion, up more than 22% versus the year-earlier period largely due to the July 24, 2015 acquisition of DIRECTV. Compared with results for the second quarter of 2015, operating expenses were $34.0 billion versus $27.2 billion; operating income was $6.6 billion versus $5.8 billion; and operating income margin was 16.2% versus 17.5%. When adjusting for amortization, merger- and integration-related costs and other expenses, operating income was $8.1 billion versus $6.5 billion; and operating income margin was 20.1%, up 30 basis points from a year ago.

 

Second-quarter net income attributable to AT&T totaled $3.4 billion, or $0.55 per diluted share, compared to $3.1 billion, or $0.59 per diluted share, in the year-ago quarter. Adjusting for $0.17 of amortization, merger-and integration-related costs and other expenses, earnings per diluted share was $0.72 compared to an adjusted $0.70 in the year-ago quarter.

 

Cash from operating activities was $10.3 billion in the second quarter, and capital investment1 totaled $5.6 billion. Free cash flow - cash from operating activities minus capital expenditures - was $4.8 billion, up 8.4% year over year.

 

For detailed segment results, please go to the Investor Briefing and Financial and Operational Results on the AT&T Investor Relations website.

12Q16 includes $95 million in capital purchases in Mexico with favorable vendor payment terms.

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.

 

 

 

 

 

 

July 21, 2016

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About AT&T

AT&T Inc. (NYSE:T) helps millions around the globe connect with leading entertainment, mobile, high-speed Internet and voice services. We're the world's largest provider of pay TV. We have TV customers in the U.S. and 11 Latin American countries. We offer the best global coverage of any U.S. wireless provider*. And we help businesses worldwide serve their customers better with our mobility and highly secure cloud solutions.

Additional information about AT&T products and services is available at http://about.att.com. Follow our news on Twitter at @ATT, on Facebook at http://www.facebook.com/att and YouTube at http://www.youtube.com/att.

© 2016 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.

*Global coverage claim based on offering discounted voice and data roaming; LTE roaming; voice roaming; and world-capable smartphone and tablets in more countries than any other U.S. based carrier. International service required.  Coverage not available in all areas. Coverage may vary per country and be limited/restricted in some countries.

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 www.att.com/investor.relations.

 

The "quiet period" for FCC Spectrum Auction 1000 (also known as the 600 MHz incentive auction) is now in effect. During the quiet period, auction applicants are required to avoid discussions of bids, bidding strategy and post-auction market structure with other auction applicants.

 

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.

 

 

 

 

 

 

July 21, 2016

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Capital Investment

Capital Investment is a non-GAAP financial measure that adds to Capital expenditures the amount of vendor financing arrangements for capital improvements to our wireless network in Mexico. These favorable payment terms are considered vendor financing arrangements and are reported as repayments of debt instead of Capital expenditures. Management believes that Capital Investment provides relevant and useful information to investors and other users of our financial data in evaluating long-term investment in our business.

 

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), 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.

 

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. For the periods covered by this report, we subsidized a portion of some of our wireless handset sales, which are recognized in the period in which we sell the handset. Management views this equipment subsidy as a cost to acquire or retain a subscriber, which is recovered through the ongoing service revenue that is generated by the subscriber. 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.

 

 

 

 

 

 

 

July 21, 2016

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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.

 

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 (we immediately recognize this gain or loss in the income statement, pursuant to our accounting policy for the recognition of actuarial gains and losses.) As a result, 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 (1) adjustments related to Mexico operations, which are taxed at the 30% marginal rate for Mexico and (2) 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%.

 

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.

 

 

 

 

 

July 21, 2016

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Entertainment Group Segment Adjusted Operating Revenues includes the external operating revenues from DIRECTV U.S. as reported in the DIRECTV Form 10-Q/A dated June 30, 2015 adjusted to (1) include operations reported in other DIRECTV operating segments that AT&T has chosen to manage in our Entertainment Group segment, (2) conform DIRECTV's practice of recognizing revenue to be received under contractual commitments on a straight line basis over the minimum contract period to AT&T's method of limiting the revenue recognized to the monthly amounts billed and (3) eliminate intercompany transactions from DIRECTV U.S. and the Entertainment Group segment. Adjusting Entertainment Group segment operating revenues provides for comparability between periods.

 

 

Net Debt to Adjusted EBITDA Discussion

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 Net Debt Adjusted EBITDA. Annualized Net Debt Adjusted EBITDA excludes severance-related adjustments as described in our credit agreements. 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 Net Debt Adjusted EBITDA.

 

 

For more information, contact:

Name: Fletcher Cook

AT&T Corporate Communications

Phone: (214) 757-7629

Email: fletcher.cook@att.com

 

Name: McCall Butler

AT&T Corporate Communications

Phone: (917) 209-5792

Email: butlerm@att.com

 

 

 

 

 

 

 

 

 

July 21, 2016

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Financial Data



















 




















 

AT&T Inc.



















 

Consolidated Statements of Income



















 

Dollars in millions except per share amounts



















 

Unaudited


Three Months Ended


Six Months Ended



6/30/2016


6/30/2015


% Chg


6/30/2016


6/30/2015


% Chg




















 

Operating Revenues



















 

  Service


$

37,142



$

29,541




25.7

%


$

74,243



$

58,503




26.9

%

 

  Equipment



3,378




3,474




-2.8

%



6,812




7,088




-3.9

%

 

    Total Operating Revenues



40,520




33,015




22.7

%



81,055




65,591




23.6

%

 


























 

Operating Expenses

























 

  Cost of services and sales

























 

       Equipment



4,260




4,353




-2.1

%



8,635




8,899




-3.0

%

 

       Broadcast, programming and operations



4,701




1,148




-




9,330




2,270




-


 

       Other cost of services (exclusive of depreciation

           and amortization shown separately below)



9,514




9,578




-0.7

%



18,910




18,390




2.8

%

 

  Selling, general and administrative



8,909




7,467




19.3

%



17,350




15,428




12.5

%

 

  Depreciation and amortization



6,576




4,696




40.0

%



13,139




9,274




41.7

%

 

    Total Operating Expenses



33,960




27,242




24.7

%



67,364




54,261




24.1

%

 

Operating Income



6,560




5,773




13.6

%



13,691




11,330




20.8

%

 

Interest Expense



1,258




932




35.0

%



2,465




1,831




34.6

%

 

Equity in Net Income of Affiliates



28




33




-15.2

%



41




33




24.2

%

 

Other Income (Expense) - Net



91




48




89.6

%



161




118




36.4

%

 

Income Before Income Taxes



5,421




4,922




10.1

%



11,428




9,650




18.4

%

 

Income Tax Expense



1,906




1,738




9.7

%



4,028




3,127




28.8

%

 

Net Income



3,515




3,184




10.4

%



7,400




6,523




13.4

%

 

  Less: Net Income Attributable to Noncontrolling Interest



(107

)



(102

)



-4.9

%



(189

)



(178

)



-6.2

%

 

Net Income Attributable to AT&T


$

3,408



$

3,082




10.6

%


$

7,211



$

6,345




13.6

%

 


























 


























 

Basic Earnings Per Share Attributable to AT&T


$

0.55



$

0.59




-6.8

%


$

1.17



$

1.22




-4.1

%

 

Weighted Average Common

     Shares Outstanding (000,000)



6,174




5,204




18.6

%



6,173




5,204




18.6

%

 


























 

Diluted Earnings Per Share Attributable to AT&T


$

0.55



$

0.59




-6.8

%


$

1.17



$

1.22




-4.1

%

 

Weighted Average Common

     Shares Outstanding with Dilution (000,000)



6,195




5,220




18.7

%



6,193




5,220




18.6

%

 


























 

 

 

 

 



 

Financial Data





















 

AT&T Inc.

Statements of Segment Income

Dollars in millions




















 

Unaudited




















 



Three Months Ended


Six Months Ended



6/30/2016



6/30/2015


% Chg


6/30/2016


6/30/2015


% Chg

 

Business Solutions




















 

Segment Operating Revenues




















 

Wireless service


$

7,963




$

7,756




2.7

%


$

15,818



$

15,271




3.6

%

 

Fixed strategic services



2,797





2,580




8.4

%



5,559




5,099




9.0

%

 

Legacy voice and data services



4,158





4,681




-11.2

%



8,521




9,465




-10.0

%

 

Other service and equipment



886





854




3.7

%



1,744




1,700




2.6

%

 

Wireless equipment



1,775





1,793




-1.0

%



3,546




3,686




-3.8

%

 

    Total Segment Operating Revenues



17,579





17,664




-0.5

%



35,188




35,221




-0.1

%

 



























 

Segment Operating Expenses


























 

Operations and support expenses



10,857





10,972




-1.0

%



21,659




22,045




-1.8

%

 

Depreciation and amortization



2,521





2,460




2.5

%



5,029




4,802




4.7

%

 

    Total Segment Operating Expenses



13,378





13,432




-0.4

%



26,688




26,847




-0.6

%

 

Segment Operating Income



4,201





4,232




-0.7

%



8,500




8,374




1.5

%

 

Equity in Net Income of Affiliates



-





-




-




-




-




-


 

Segment Contribution


$

4,201




$

4,232




-0.7

%


$

8,500



$

8,374




1.5

%

 



























 

Segment Operating Income Margin



23.9

%




24.0

%







24.2

%



23.8

%





 



























 

Entertainment Group


























 

Segment Operating Revenues


























 

Video entertainment


$

8,963




$

1,991




-



$

17,867



$

3,862




-


 

High-speed internet



1,867





1,623




15.0

%



3,670




3,176




15.6

%

 

Legacy voice and data services



1,244





1,516




-17.9

%



2,557




3,128




-18.3

%

 

Other service and equipment



637





652




-2.3

%



1,275




1,276




-0.1

%

 

    Total Segment Operating Revenues



12,711





5,782




-




25,369




11,442




-


 



























 

Segment Operating Expenses


























 

Operations and support expenses



9,569





4,913




94.8

%



19,147




9,772




95.9

%

 

Depreciation and amortization



1,489





1,065




39.8

%



2,977




2,130




39.8

%

 

    Total Segment Operating Expenses



11,058





5,978




85.0

%



22,124




11,902




85.9

%

 

Segment Operating Income (Loss)



1,653





(196

)



-




3,245




(460

)



-


 

Equity in Net Income (Loss) of Affiliates



(2

)




(12

)



83.3

%



1




(18

)



-


 

Segment Contribution


$

1,651




$

(208

)



-



$

3,246



$

(478

)



-


 



























 

Segment Operating Income Margin



13.0

%




-3.4

%







12.8

%



-4.0

%





 



























 

 

 

 

 

 



 

Financial Data























 

AT&T Inc.


Statements of Segment Income


Dollars in millions


Unaudited





















 



Three Months Ended


Six Months Ended



6/30/2016




6/30/2015



% Chg



6/30/2016




6/30/2015



% Chg


 

Consumer Mobility





















 

Segment Operating Revenues





















 

Service


$

6,948




$

7,359




-5.6

%


$

13,891




$

14,656




-5.2

%

 

Equipment



1,238





1,396




-11.3

%



2,623





2,877




-8.8

%

 

    Total Segment Operating Revenues



8,186





8,755




-6.5

%



16,514





17,533




-5.8

%

 




























 

Segment Operating Expenses



























 

Operations and support expenses



4,680





5,202




-10.0

%



9,592





10,743




-10.7

%

 

Depreciation and amortization



932





934




-0.2

%



1,854





1,936




-4.2

%

 

    Total Segment Operating Expenses



5,612





6,136




-8.5

%



11,446





12,679




-9.7

%

 

Segment Operating Income



2,574





2,619




-1.7

%



5,068





4,854




4.4

%

 

Equity in Net Income of Affiliates



-





-




-




-





-




-


 

Segment Contribution


$

2,574




$

2,619




-1.7

%


$

5,068




$

4,854




4.4

%

 




























 

Segment Operating Income Margin



31.4

%




29.9

%







30.7

%




27.7

%





 




























 

International



























 

Segment Operating Revenues



























 

Video entertainment


$

1,222




$

-




-



$

2,352




$

-




-


 

Wireless service



489





444




10.1

%



944





659




43.2

%

 

Wireless equipment



117





47




-




199





68




-


 

    Total Segment Operating Revenues



1,828





491




-




3,495





727




-


 




























 

Segment Operating Expenses



























 

Operations and support expenses



1,723





529




-




3,311





747




-


 

Depreciation and amortization



298





93




-




575





121




-


 

    Total Segment Operating Expenses



2,021





622




-




3,886





868




-


 

Segment Operating Income (Loss)



(193

)




(131

)



-47.3

%



(391 )




(141

)



-


 

Equity in Net Income of Affiliates



9





-




-




23





-




-


 

Segment Contribution


$

(184

)



$

(131

)



-40.5

%


$

(368 )



$

(141

)



-


 




























 

Segment Operating Income Margin



-10.6

%




-26.7

%







-11.2

%




-19.4

%





 




























 

 

 

 

 

 



 

Financial Data








AT&T Inc.

Consolidated Balance Sheets







Dollars in millions



6/30/16


12/31/15



Unaudited











Assets







Current Assets







Cash and cash equivalents


$

7,208



$

5,121


Accounts receivable - net of allowances for doubtful accounts of $642 and $704



15,830




16,532


Prepaid expenses



1,197




1,072


Other current assets



11,770




13,267


Total current assets



36,005




35,992


Property, Plant and Equipment - Net



123,537




124,450


Goodwill



105,252




104,568


Licenses



94,098




93,093


Customer Lists and Relationships - Net



16,259




18,208


Other Intangible Assets - Net



9,107




9,409


Investments in Equity Affiliates



1,677




1,606


Other Assets



15,873




15,346


Total Assets


$

401,808



$

402,672











Liabilities and Stockholders' Equity









Current Liabilities









Debt maturing within one year


$

9,528



$

7,636


Accounts payable and accrued liabilities



26,746




30,372


Advanced billing and customer deposits



4,465




4,682


Accrued taxes



2,773




2,176


Dividends payable



2,953




2,950


Total current liabilities



46,465




47,816


Long-Term Debt



117,308




118,515


Deferred Credits and Other Noncurrent Liabilities









Deferred income taxes



57,983




56,181


Postemployment benefit obligation



34,023




34,262


Other noncurrent liabilities



21,425




22,258


Total deferred credits and other noncurrent liabilities



113,431




112,701


Stockholders' Equity









Common stock



6,495




6,495


Additional paid-in capital



89,486




89,763


Retained earnings



34,950




33,671


Treasury stock



(12,343

)



(12,592

)

Accumulated other comprehensive income



5,047




5,334


Noncontrolling interest



969




969


Total stockholders' equity



124,604




123,640


Total Liabilities and Stockholders' Equity


$

401,808



$

402,672


 

 

 

 

 



 

Financial Data








AT&T Inc.

Consolidated Statements of Cash Flows

Dollars in millions

(Unaudited)



Six months ended June 30,



2016


2015








Operating Activities







Net income


$

7,400



$

6,523


Adjustments to reconcile net income to net cash provided by operating activities:









    Depreciation and amortization



13,139




9,274


    Undistributed earnings from investments in equity affiliates



(22

)



(23

)

    Provision for uncollectible accounts



705




535


    Deferred income tax expense



1,767




1,244


    Net gain from sale of investments, net of impairments



(85

)



(50

)

Changes in operating assets and liabilities:









    Accounts receivable



543




434


    Other current assets



1,069




732


    Accounts payable and accrued liabilities



(3,059

)



(1,125

)

Retirement benefit funding



(280

)



(455

)

Other - net



(2,970

)



(1,191

)

Total adjustments



10,807




9,375


Net Cash Provided by Operating Activities



18,207




15,898











Investing Activities









Capital expenditures:









    Purchase of property and equipment



(9,702

)



(8,328

)

    Interest during construction



(437

)



(339

)

Acquisitions, net of cash acquired



(485

)



(20,954

)

Dispositions



107




72


Sales of securities, net



500




1,890


Other



-




(1

)

Net Cash Used in Investing Activities



(10,017

)



(27,660

)










Financing Activities









Issuance of long-term debt



10,140




33,958


Repayment of long-term debt



(9,129

)



(2,919

)

Purchase of treasury stock



(197

)



-


Issuance of treasury stock



119




20


Dividends paid



(5,899

)



(4,873

)

Other



(1,137

)



(2,071

)

Net Cash (Used in) Provided by Financing Activities



(6,103

)



24,115


Net increase in cash and cash equivalents



2,087




12,353


Cash and cash equivalents beginning of year



5,121




8,603


Cash and Cash Equivalents End of Period


$

7,208



$

20,956


 

 

 

 

 



 

Financial Data



















 

AT&T Inc.

Supplementary Operating and Financial Data

Dollars in millions except per share amounts, subscribers and connections in (000s)    

Unaudited


Three Months Ended


Six Months Ended




6/30/2016


6/30/2015

% Chg


6/30/2016


6/30/2015

% Chg

Business Solutions Wireless Subscribers











77,545




69,178




12.1

%

 


 Postpaid











49,432




46,697




5.9

%

 


Branded Subscribers











49,432




46,697




5.9

%

 


 Reseller











52




19




-


 


 Connected Devices











28,061




22,462




24.9

%

 























 

Business Solutions Wireless Net Adds



1,371




1,769




-22.5

%



3,060




3,093




-1.1

%

 


 Postpaid



185




288




-35.8

%



318




585




-45.6

%

 


Branded Net Adds



185




288




-35.8

%



318




585




-45.6

%

 


 Reseller



(13

)



3




-




(35

)



6




-


 


 Connected Devices



1,199




1,478




-18.9

%



2,777




2,502




11.0

%

 



























 

Business Wireless Postpaid Churn



0.91

%



0.91

%



-




0.97

%



0.90

%

7

BP 

 



























 

Consumer Mobility Subscribers















54,260




54,724




-0.8

%

 


Postpaid















27,862




29,844




-6.6

%

 


Prepaid















12,633




10,438




21.0

%

 


   Branded Subscribers















40,495




40,282




0.5

%

 


Reseller















12,869




13,487




-4.6

%

 


Connected Devices















896




955




-6.2

%

 



























 

Consumer Mobility Net Adds



(10

)



325




-




82




219




-62.6

%

 


Postpaid



72




122




-41.0

%



68




266




-74.4

%

 


Prepaid



365




331




10.3

%



865




429




-


 


   Branded Net Adds



437




453




-3.5

%



933




695




34.2

%

 


Reseller



(446

)



(98

)



-




(824

)



(367

)



-


 


Connected Devices



(1

)



(30

)



96.7

%



(27

)



(109

)



75.2

%

 



























 

Consumer Mobility Postpaid Churn



1.09

%



1.16

%

-7

BP



1.16

%



1.18

%

-2

BP

 

Total Consumer Mobility Churn



1.96

%



1.86

%

10

BP



2.04

%



1.95

%

9

BP

 



























 

Entertainment Group















51,291




33,686




52.3

%

 

Video Connections















25,295




5,946




-


 


Satellite















20,454




-




-


 


U-verse















4,841




5,946




-18.6

%

 



























 

Video Net Adds



(49

)



(23

)



-




(103

)



26




-


 


Satellite



342




-




-




670




-




-


 


U-verse



(391

)



(23

)



-




(773

)



26




-


 



























 

Broadband Connections















14,181




14,428




-1.7

%

 


IP















12,596




12,013




4.9

%

 


DSL















1,585




2,415




-34.4

%

 



























 

Broadband Net Adds



(110

)



(107

)



-2.8

%



(105

)



(14

)



-


 


IP



54




217




-75.1

%



240




630




-61.9

%

 


DSL



(164

)



(324

)



49.4

%



(345

)



(644

)



46.4

%

 



























 

Total Wireline Voice Connections















11,815




13,312




-11.2

%

 



























 

AT&T International

























 

Mexican Wireless Subscribers and Connections

























 


Subscribers















9,955




8,550




16.4

%

 


Net Adds



742




(170

)



-




1,271




(458

)



-


 


Total Churn



5.83

%



6.81

%

-98

BP



5.65

%



7.36

%

-171

BP 

 



























 

Video Subscribers and Connections

























 


Latin America Video Subscribers















12,523




-




-


 


Pan Americana















7,175




-




-


 


Brazil















5,348




-




-


 



























 

Video Subscribers and Connections Net Adds

























 


Latin America Video Subscribers



87




-




-




14




-




-


 


Pan Americana



81




-




-




109




-




-


 


Brazil



6




-




-




(95

)



-




-


 

 

 

 

 

 



 

Financial Data




















 

AT&T Inc.


Supplementary Operating and Financial Data


Dollars in millions except per share amounts, subscribers and connections in (000s)


Unaudited


Three Months Ended


Six Months Ended




6/30/2016


6/30/2015

% Chg


6/30/2016


6/30/2015

% Chg

AT&T Total Subscribers and Connections

















 

AT&T Mobility Subscribers











131,805




123,902




6.4

%

 


Postpaid











77,295




76,541




1.0

%

 


Prepaid











12,633




10,438




21.0

%

 


Branded Subscribers











89,928




86,979




3.4

%

 


Reseller











12,920




13,506




-4.3

%

 


Connected Devices











28,957




23,417




23.7

%

 

  





















 

AT&T Mobility Net Adds



1,361




2,094




-35.0

%



3,142




3,312




-5.1

%

 


Postpaid



257




410




-37.3

%



386




851




-54.6

%

 


Prepaid



365




331




10.3

%



865




429




-


 


   Branded Net Adds



622




741




-16.1

%



1,251




1,280




-2.3

%

 


Reseller



(459

)



(95

)



-




(859

)



(361

)



-


 


Connected Devices



1,198




1,448




-17.3

%



2,750




2,393




14.9

%

 

M&A Activity, Partitioned Customers and Other Adjs.



(1

)



36




-




23




36




-36.1

%

 



























 

AT&T Mobility Churn

























 

Postpaid Churn



0.97

%



1.01

%

-4

BP



1.04

%



1.01

%

3

BP 

 

Total Churn



1.35

%



1.31

%

4

BP



1.38

%



1.36

%

2

BP 

 



























 

Other

























 

Domestic Licensed POPs (000,000)














322




321




0.3

%

 



























 

Total Video Subscribers















37,846




5,971




-


 


Domestic















25,323




5,971




-


 


Pan Americana















7,175




-




-


 


Brazil















5,348




-




-


 



























 

Total Video Net Adds



38




(22

)



-




(87

)



28




-


 


Domestic



(49

)



(22

)



-




(101

)



28




-


 


Pan Americana



81




-




-




109




-




-


 


Brazil



6




-




-




(95

)



-




-


 



























 

Total Broadband Connections















15,641




15,961




-2.0

%

 


IP















13,544




12,885




5.1

%

 


DSL















2,097




3,076




-31.8

%

 



























 

Broadband Net Adds



(123

)



(136

)



9.6

%



(137

)



(67

)



-


 


IP



74




241




-69.3

%



276




680




-59.4

%

 


DSL



(197

)



(377

)



47.7

%



(413

)



(747

)



44.7

%

 



























 

Total Wireline Voice Connections















20,877




23,497




-11.2

%

 



























 

Total Wireless Subscribers















141,760




132,452




7.0

%

 

Domestic Wireless Subscribers















131,805




123,902




6.4

%

 

Mexican Wireless Subscribers















9,955




8,550




16.4

%

 



























 

Branded Subscribers















99,557




95,049




4.7

%

 

Branded Net Adds



1,401




741




89.1

%



2,596




1,280




-


 



























 

AT&T Inc.

























 

Capital expenditures:

























 


Purchase of property and equipment


$

5,251



$

4,480




17.2

%


$

9,702



$

8,328




16.5

%

 


Interest during construction


$

219



$

216



1.4

%


$

437



$

339




28.9

%

 

Dividends Declared per Share


$

0.48



$

0.47




2.1

%


$

0.96



$

0.94




2.1

%

 

End of Period Common Shares Outstanding (000,000)














6,152




5,193




18.5

%

 

Debt Ratio1,2















50.4

%



55.5

%

-510

BP

 

Total Employees















277,200




250,730




10.6

%

 



























 

1

Prior year amounts restated to conform to current period reporting methodology.







 

2

Total long-term debt plus debt maturing within one year divided by total debt plus total stockholders' equity.



 


Note: For the end of 2Q16, total switched access lines were 15,285.








 



Business Solutions and Consumer Mobility may not total to AT&T Mobility due to rounding.





 

 

 

 

 

 



 

Financial Data























 

AT&T Inc.

Segment Supplemental - QTD

Dollars in millions

Unaudited






















 























 

For the three months ended June 30, 2016



Revenues



Operations and Support Expenses



EBITDA


Depreciation and Amortization



Operating Income (Loss)


Equity in Net Income (Loss) of Affiliates


Segment

Contribution

 

Business Solutions


$

17,579



$

10,857



$

6,722



$

2,521



$

4,201



$

-



$

4,201


 

Entertainment Group



12,711




9,569




3,142




1,489




1,653




(2

)



1,651


 

Consumer Mobility



8,186




4,680




3,506




932




2,574




-




2,574


 

International



1,828




1,723




105




298




(193

)



9




(184

)

 

Segment Total



40,304




26,829




13,475




5,240




8,235



$

7



$

8,242


 

Corporate and Other



216




293




(77

)



20




(97

)









 

Acquisition-related items



-




233




(233

)



1,316




(1,549

)









 

Certain Significant items



-




29




(29

)



-




(29

)









 

AT&T Inc.


$

40,520



$

27,384



$

13,136



$

6,576



$

6,560










 






























 

For the three months ended June 30, 2015      



Revenues



Operations and Support Expenses



EBITDA


Depreciation and Amortization



Operating Income (Loss)


Equity in Net Income (Loss) of Affiliates


Segment

Contribution

 

Business Solutions


$

17,664



$

10,972



$

6,692



$

2,460



$

4,232



$

-



$

4,232


 

Entertainment Group



5,782




4,913




869




1,065




(196

)



(12

)



(208

)

 

Consumer Mobility



8,755




5,202




3,553




934




2,619




-




2,619


 

International



491




529




(38

)



93




(131

)



-




(131

)

 

Segment Total



32,692




21,616




11,076




4,552




6,524



$

(12

)


$

6,512


 

Corporate and Other



323




236




87




24




63










 

Acquisition-related items



-




694




(694

)



120




(814

)









 

Certain Significant items



-




-




-




-




-










 

AT&T Inc.


$

33,015



$

22,546



$

10,469



$

4,696



$

5,773










 






























 

 

 

 

 

 



 

Financial Data























 

AT&T Inc.

Segment Supplemental - YTD

Dollars in millions 

Unaudited






















 























 

For the six months ended June 30, 2016



Revenues



Operations and Support Expenses



EBITDA


Depreciation and Amortization



Operating Income (Loss)


Equity in Net Income of Affiliates


Segment

Contribution

 

Business Solutions


$

35,188



$

21,659



$

13,529



$

5,029



$

8,500



$

-



$

8,500


 

Entertainment Group



25,369




19,147




6,222




2,977




3,245




1




3,246


 

Consumer Mobility



16,514




9,592




6,922




1,854




5,068




-




5,068


 

International



3,495




3,311




184




575




(391

)



23




(368

)

 

Segment Total



80,566




53,709




26,857




10,435




16,422



$

24



$

16,446


 

Corporate and Other



489




670




(181

)



37




(218

)









 

Acquisition-related items



-




528




(528

)



2,667




(3,195

)









 

Certain Significant items



-




(682

)



682




-




682










 

AT&T Inc.


$

81,055



$

54,225



$

26,830



$

13,139



$

13,691










 






























 

For the six months ended June 30, 2015



Revenues



Operations and Support Expenses



EBITDA


Depreciation and Amortization



Operating Income (Loss)


Equity in Net Income (Loss) of Affiliates


Segment

Contribution

 

Business Solutions


$

35,221



$

22,045



$

13,176



$

4,802



$

8,374



$

-



$

8,374


 

Entertainment Group



11,442




9,772




1,670




2,130




(460

)



(18

)



(478

)

 

Consumer Mobility



17,533




10,743




6,790




1,936




4,854




-




4,854


 

International



727




747




(20

)



121




(141

)



-




(141

)

 

Segment Total



64,923




43,307




21,616




8,989




12,627



$

(18

)


$

12,609


 

Corporate and Other



668




470




198




44




154










 

Acquisition-related items



-




993




(993

)



241




(1,234

)









 

Certain Significant items



-




217




(217

)



-




(217

)









 

AT&T Inc.


$

65,591



$

44,987



$

20,604



$

9,274



$

11,330










 






























 

 

 

 

 

 



 

Financial Data














 

AT&T Inc.

Supplemental AT&T Mobility Results

Dollars in millions

Unaudited













 


Three Months Ended

Six Months Ended


6/30/2016

6/30/2015

% Chg

6/30/2016

6/30/2015

% Chg

AT&T Mobility

Operating Revenues













 

Service


$

14,912



$

15,115




-1.3

%


$

29,710



$

29,927




-0.7

%

 

Equipment



3,013




3,189




-5.5

%



6,169




6,563




-6.0

%

 

    Total Operating Revenues



17,925




18,304




-2.1

%



35,879




36,490




-1.7

%

 


























 

Operating Expenses

























 



10,502




10,973




-4.3

%



21,126




22,445




-5.9

%

 

Depreciation and amortization



2,081




2,031




2.5

%



4,137




4,036




2.5

%

 

    Total Operating Expenses



12,583




13,004




-3.2

%



25,263




26,481




-4.6

%

 

Operating Income


$

5,342



$

5,300




0.8

%


$

10,616



$

10,009




6.1

%

 


























 

 Operating Income Margin



29.8

%



29.0

%







29.6

%



27.4

%





 


























 



Exhibit 99.3

 

Discussion and Reconciliation of Non-GAAP Measures

We believe the following measures are relevant and useful information to investors as they are part of AT&T's internal management reporting and planning processes and are important metrics that management uses to evaluate the operating performance of AT&T and its segments. Management also uses these measures as a method of comparing performance with that of many of our competitors.

 

Certain amounts have been conformed to the current period's presentation, including our change in accounting to capitalize customer set-up and installation costs and amortize them over the expected economic life of the customer relationship.

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

June 30,


Six Months Ended

June 30,



2016



2015



2016



2015


 

Net cash provided by operating activities


$

10,307



$

9,160



$

18,207



$

15,898


 

Less: Capital expenditures



(5,470

)



(4,696

)



(10,139

)



(8,667

)

 

Free Cash Flow



4,837




4,464




8,068




7,231


 


















 

Less: Dividends paid



(2,952

)



(2,439

)



(5,899

)



(4,873

)

 

Free Cash Flow after Dividends


$

1,885



$

2,025



$

2,169



$

2,358


 

Free Cash Flow Dividend Payout Ratio



61.0

%



54.6

%



73.1

%



67.4

%

 

Capital Investment

Capital Investment is a non-GAAP financial measure that adds to Capital expenditures the amount of vendor financing arrangements for capital improvements to our wireless network in Mexico. These favorable payment terms are considered vendor financing arrangements and are reported as repayments of debt instead of Capital expenditures. Management believes that Capital Investment provides relevant and useful information to investors and other users of our financial data in evaluating long-term investment in our business.

Capital Investment

Dollars in millions


Three Months Ended

June 30,



Six Months Ended

June 30,




2016



2015



2016



2015


 

Capital expenditures


$

5,470



$

4,696



$

10,139



$

8,667


 

Vendor financing



95




-




138




-


 

Capital Investment


$

5,565



$

4,696



$

10,277



$

8,667


 

 

 

 

 



 

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), 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.

 

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. For the periods covered by this report, we subsidized a portion of some of our wireless handset sales, which are recognized in the period in which we sell the handset. Management views this equipment subsidy as a cost to acquire or retain a subscriber, which is recovered through the ongoing service revenue that is generated by the subscriber. 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

June 30,


Six Months Ended

June 30,



2016



2015



2016



2015


 

Net Income


$

3,515



$

3,184



$

7,400



$

6,523


 

Additions:

















 

   Income Tax Expense



1,906




1,738




4,028




3,127


 

   Interest Expense



1,258




932




2,465




1,831


 

   Equity in Net (Income) of Affiliates



(28

)



(33

)



(41

)



(33

)

 

   Other (Income) Expense - Net



(91

)



(48

)



(161

)



(118

)

 

   Depreciation and amortization



6,576




4,696




13,139




9,274


 

EBITDA



13,136




10,469




26,830




20,604


 


















 

Total Operating Revenues



40,520




33,015




81,055




65,591


 

Service Revenues



37,142




29,541




74,243




58,503


 


















 

EBITDA Margin



32.4

%



31.7

%



33.1

%



31.4

%

 

EBITDA Service Margin



35.4

%



35.4

%



36.1

%



35.2

%

 

 

 

 

 

 



 

Segment EBITDA, EBITDA Margin and EBITDA Service Margin

Dollars in millions


Three Months Ended

June 30,


Six Months Ended

June 30,



2016



2015



2016



2015


 

Business Solutions Segment













 

Segment Contribution


$

4,201



$

4,232



$

8,500



$

8,374


 

Additions:

















 

   Equity in Net (Income) Loss of Affiliates



-




-




-




-


 

   Depreciation and amortization



2,521




2,460




5,029




4,802


 

EBITDA



6,722




6,692




13,529




13,176


 


















 

Total Segment Operating Revenues



17,579




17,664




35,188




35,221


 


















 

Segment Operating Income Margin



23.9

%



24.0

%



24.2

%



23.8

%

 

EBITDA Margin



38.2

%



37.9

%



38.4

%



37.4

%

 


















 

Entertainment Group Segment

















 

Segment Contribution


$

1,651



$

(208

)


$

3,246



$

(478

)

 

Additions:

















 

   Equity in Net (Income) Loss of Affiliates



2




12




(1

)



18


 

   Depreciation and amortization



1,489




1,065




2,977




2,130


 

EBITDA



3,142




869




6,222




1,670


 


















 

Total Segment Operating Revenues



12,711




5,782




25,369




11,442


 


















 

Segment Operating Income Margin



13.0

%



-3.4

%



12.8

%



-4.0

%

 

EBITDA Margin



24.7

%



15.0

%



24.5

%



14.6

%

 


















 

Consumer Mobility Segment

















 

Segment Contribution


$

2,574



$

2,619



$

5,068



$

4,854


 

Additions:

















 

   Equity in Net (Income) Loss of Affiliates



-




-




-




-


 

   Depreciation and amortization



932




934




1,854




1,936


 

EBITDA



3,506




3,553




6,922




6,790


 


















 

Total Segment Operating Revenues



8,186




8,755




16,514




17,533


 

Service Revenues



6,948




7,359




13,891




14,656


 


















 

Segment Operating Income Margin



31.4

%



29.9

%



30.7

%



27.7

%

 

EBITDA Margin



42.8

%



40.6

%



41.9

%



38.7

%

 

EBITDA Service Margin



50.5

%



48.3

%



49.8

%



46.3

%

 


















 

International Segment

















 

Segment Contribution


$

(184

)


$

(131

)


$

(368

)


$

(141

)

 

Additions:

















 

   Equity in Net (Income) Loss of Affiliates



(9

)



-




(23

)



-


 

   Depreciation and amortization



298




93




575




121


 

EBITDA



105




(38

)



184




(20

)

 


















 

Total Segment Operating Revenues



1,828




491




3,495




727


 


















 

Segment Operating Income Margin



-10.6

%



-26.7

%



-11.2

%



-19.4

%

 

EBITDA Margin



5.7

%



-7.7

%



5.3

%



-2.8

%

 

 

 

Supplemental AT&T Mobility EBITDA, EBITDA Margin and EBITDA Service Margin

Dollars in millions


Three Months Ended

June 30,


Six Months Ended

June 30,



2016



2015



2016



2015


 

AT&T Mobility













 

Operating Income


$

5,342



$

5,300



$

10,616



$

10,009


 

 Add: Depreciation and amortization



2,081




2,031




4,137




4,036


 

EBITDA



7,423




7,331




14,753




14,045


 


















 

Total Operating Revenues



17,925




18,304




35,879




36,490


 

Service Revenues



14,912




15,115




29,710




29,927


 


















 

Operating Income Margin



29.8

%



29.0

%



29.6

%



27.4

%

 

EBITDA Margin



41.4

%



40.1

%



41.1

%



38.5

%

 

EBITDA Service Margin



49.8

%



48.5

%



49.7

%



46.9

%

 

 

 

 

 



 

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 (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 (1) adjustments related to Mexico operations, which are taxed at the 30% marginal rate for Mexico and (2) 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%.

Adjusting Items

Dollars in millions


Three Months Ended

June 30,



Six Months Ended

June 30,


 



2016



2015



2016



2015


 

Operating Expenses













 

   DIRECTV and other video merger integration costs


$

133



$

92



$

306



$

164


 

   Mexico merger integration costs



66




24




147




41


 

   Wireless merger integration costs



33




215




75




424


 

   Leap network decommissioning



-




364




-




364


 

   Employee separation costs



29




-




54




217