Company Announcements

4Q16 Earnings Release

Source: RNS
RNS Number : 7826Y
AT & T Inc.
07 March 2017
 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

WASHINGTON, DC 20549


 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

 

 

Date of report (Date of earliest event reported) January 25, 2017

 

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):

 

(X) 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 January 25, 2017, its results of operations for the fourth 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 January 25, 2017 reporting financial results for the fourth quarter ended December 31, 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: January 25, 2017

By: /s/ Debra L. Dial                                 

       Debra L. Dial 

Senior Vice President and Controller  
 


AT&T Reports Fourth-Quarter and Full-Year Results; AT&T Meets Full-Year Guidance

With Strong Customer Growth

 

Full Year

·    Consolidated revenues of $163.8 billion

·    Operating income of $24.3 billion

·    Net income attributable to AT&T of $13.0 billion

·     Diluted EPS of $2.10 as reported and $2.84 as adjusted, compared to $2.37 and $2.71 in the prior year

·    Cash from operations of $39.3 billion

·    Free cash flow of $16.9 billion, up 6.8%

 

Fourth Quarter

·    Consolidated revenues of $41.8 billion

·    Operating income of $4.2 billion

·    Net income attributable to AT&T of $2.4 billion

·     Diluted EPS of $0.39 as reported and $0.66 as adjusted, compared to $0.65 and $0.63 in the year-ago quarter

·    Cash from operations of $10.1 billion

·    Free cash flow of $3.7 billion, up 19.2%

 

 

·      Fourth-quarter:  2.8 million wireless net adds

1.5 million U.S.

1.3 million Mexico

·      Full-year:  9.5 million wireless net adds

6.2 million U.S.

3.3 million Mexico

·      U.S. wireless fourth-quarter results:

1.1 million branded smartphones added to subscriber base

Best-ever postpaid phone churn of 0.98%

Wireless postpaid churn of 1.16%

Strong operating margin of 24.7%; best-ever fourth-quarter service EBITDA margin of 45.4%

·      Strong DIRECTV NOW launch with more than 200,000 paid net adds

·      235,000 U.S. DIRECTV satellite net adds with stable linear TV subscriber base

·      149,000 IP broadband net adds with stable total broadband base

·      Nearly 400 million North American 4G LTE POPs

 

Note: AT&T's fourth-quarter earnings conference call will be webcast at 4:30 p.m. ET on Wednesday, January 25, 2017. The webcast and related materials will be available on AT&T's Investor Relations website at www.att.com/investor.relations.

 

dALLAS, January 25, 2017 - AT&T Inc. (NYSE:T) today reported 2.8 million North American wireless net adds, strong DIRECTV NOW growth and solid adjusted operating margin and earnings gains, with continued free cash flow growth for the fourth quarter.

 

"2016 was a transformational year for AT&T, one in which we made tremendous progress toward our goal of becoming the global leader in telecom, media and technology," said Randall Stephenson, AT&T Chairman and CEO. "We launched DIRECTV NOW, our innovative over-the-top streaming service. Our 5G evolution plans and improved spectrum position are paving the way for the next-generation of super-fast mobile and fixed networks. And we shook-up the industry with our landscape-changing deal to acquire Time Warner, the logical next step in our strategy to bring together world-class content with best-in-class distribution which will drive innovation and more choice for consumers.

"At the same time, we performed at a high level in 2016 with growing revenues, expanding adjusted consolidated operating margins and solid adjusted earnings growth, and we hit our $1.5 billion DIRECTV cost-synergy target. We also delivered record cash from operations, which allowed us to return substantial value to investors and invest more in the U.S. economy."

Consolidated Financial Results

AT&T's consolidated revenues for the fourth quarter totaled $41.8 billion versus $42.1 billion in the year-ago quarter. Compared with results for the fourth quarter of 2015, operating expenses were $37.6 billion versus $34.6 billion; operating income was $4.2 billion versus $7.5 billion; and operating income margin was 10.2% versus 17.9%. When adjusting for amortization, merger- and integration-related and other items, operating income was $7.3 billion versus $7.1 billion; and operating income margin was 17.5%, up 70 basis points versus the year-ago quarter.

 

Fourth-quarter net income attributable to AT&T totaled $2.4 billion, or $0.39 per diluted share, compared to $4.0 billion, or $0.65 per diluted share, in the year-ago quarter. Adjusting for the $0.10 non-cash actuarial loss on benefit plans from the annual remeasurement process and $0.17 of costs for amortization, merger-and integration-related and other items, earnings per diluted share was $0.66 compared to an adjusted $0.63 in the year-ago quarter.

 

Cash from operating activities was $10.1 billion in the fourth quarter, and capital expenditures were $6.5 billion. Capital investment1 for the quarter totaled $6.7 billion. Free cash flow - cash from operating activities minus capital expenditures - was $3.7 billion for the quarter, up 19.2% versus the year-ago quarter even with higher capital spending.

 

Full-Year Results

For full-year 2016, compared with 2015 results, AT&T's consolidated revenues totaled $163.8 billion versus $146.8 billion, up 11.6% for the year, driven by a full year of results from DIRECTV and gains in IP services and video. Operating expenses reflect actuarial gains and losses on benefit plans and were $139.4 billion compared with $122.0 billion, up 14.3%; net income attributable to AT&T was $13.0 billion versus $13.3 billion, down 2.8%; and earnings per diluted share was $2.10, compared with $2.37. With adjustments for both years, operating income was $31.8 billion versus $27.7 billion; operating income margin was 19.4% versus 18.8%; and earnings per share totaled $2.84, compared with $2.71, an increase of 4.8%.

 

AT&T's full-year cash from operating activities was a record $39.3 billion, up from $35.9 billion in 2015. Capital expenditures, including capitalized interest, totaled $22.4 billion, versus $20.0 billion in 2015. Capital investment for the full year was $22.9 billion versus $20.7 billion in 2015. Full-year free cash flow was $16.9 billion compared to $15.9 billion in 2015. The company's free cash flow dividend payout ratio for the full year was 70%.2

 

2017 Outlook

On a business-as-usual basis without the impact of Time Warner, AT&T expects in 2017:

·      Consolidated revenue growth in the low-single digits

·      Adjusted EPS growth in the mid-single digit range

·      Adjusted operating margin expansion

·      Capital expenditures in the $22 billion range 

·      Free cash flow in the $18 billion range

 

Adjustments include non-cash mark-to-market benefit plan gain/loss, merger integration and amortization costs and other adjustments. Traditionally, the mark-to-market adjustment is the largest item, which is driven by interest rates and investment returns that are not reasonably estimable at this time.  We expect amortization to be lower in 2017 compared to 2016.

 

14Q16 includes $267 million in capital purchases with favorable vendor payment terms.

2Free cash flow dividend payout ratio is dividends divided by free cash flow

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.

 

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 one of the world's largest providers 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.

© 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.

*Global coverage claim based on offering discounted voice and data roaming; LTE roaming; and voice roaming 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.

 

Information set forth in this communication, including financial estimates and statements as to the expected timing, completion and effects of the proposed merger between AT&T and Time Warner, constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and the rules, regulations and releases of the Securities and Exchange Commission.  These forward-looking statements are subject to risks and uncertainties, and actual results might differ materially from those discussed in, or implied by, the forward-looking statements. Such forward-looking statements include, but are not limited to, statements about the benefits of the merger, including future financial and operating results, the combined company's plans, objectives, expectations and intentions, and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the management of AT&T and Time Warner and are subject to significant risks and uncertainties outside of our control.

 

Among the risks and uncertainties that could cause actual results to differ from those described in the forward-looking statements are the following: (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, (2) the risk that Time Warner stockholders may not adopt the merger agreement, (3) the risk that the necessary regulatory approvals may not be obtained or may be obtained subject to conditions that are not anticipated, (4) risks that any of the closing conditions to the proposed merger may not be satisfied in a timely manner, (5) risks related to disruption of management time from ongoing business operations due to the proposed merger, (6) failure to realize the benefits expected from the proposed merger and (7) the effect of the announcement of the proposed merger on the ability of Time Warner and AT&T to retain customers and retain and hire key personnel and maintain relationships with their suppliers, and on their operating results and businesses generally. Discussions of additional risks and uncertainties are and will be contained in AT&T's and Time Warner's filings with the Securities and Exchange Commission. Neither AT&T nor Time Warner is under any obligation, and each expressly disclaim any obligation, to update, alter, or otherwise revise any forward-looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events, or otherwise.  Persons reading this communication are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof.

 

No Offer or Solicitation

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.  No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended. 

 

Additional Information and Where to Find It

In connection with the proposed merger, AT&T has filed a registration statement on Form S-4, containing a proxy statement/prospectus with the Securities and Exchange Commission ("SEC").  AT&T and Time Warner have made the proxy statement/prospectus available to their respective stockholders and AT&T and Time Warner will file other documents regarding the proposed merger with the SEC.  This communication is not intended to be, and is not, a substitute for such filings or for any other document that AT&T or Time Warner may file with the SEC in connection with the proposed merger.  STOCKHOLDERS OF TIME WARNER ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE REGISTRATION STATEMENT AND THE PROXY STATEMENT/PROSPECTUS, CAREFULLY BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT AT&T, TIME WARNER AND THE PROPOSED MERGER.  Investors and security holders are able to obtain copies of the proxy statement/prospectus as well as other filings containing information about AT&T and Time Warner, without charge, at the SEC's website, http://www.sec.gov.  Copies of documents filed with the SEC by AT&T will be made available free of charge on AT&T's investor relations website at http://phx.corporate-ir.net/phoenix.zhtml?c=113088&p=irol-sec. Copies of documents filed with the SEC by Time Warner will be made available free of charge on Time Warner's investor relations website at http://ir.timewarner.com/phoenix.zhtml?c=70972&p=irol-sec.

 

Participants in Solicitation

AT&T, Time Warner and certain of their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from the holders of Time Warner common stock in respect to the proposed merger. Information about the directors and executive officers of AT&T is set forth in the proxy statement for AT&T's 2016 Annual Meeting of Stockholders, which was filed with the SEC on March 11, 2016. Information about the directors and executive officers of Time Warner is set forth in the proxy statement for Time Warner's 2016 Annual Meeting of Stockholders, which was filed with the SEC on May 19, 2016. Investors may obtain additional information regarding the interest of such participants by reading the proxy statement/prospectus regarding the proposed merger and other relevant materials filed with the SEC.  These documents will be available free of charge from the sources indicated above.

 

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.

 

Capital Investment

Capital Investment is a non-GAAP financial measure that adds to Capital expenditures the amount of vendor financing arrangements for capital improvements. These favorable payment terms are considered vendor financing arrangements and are reported as financing activities 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.

 

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.) 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%.

 

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.

 

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

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 Media Relations

Phone: (214) 757-7629

Email: fletcher.cook@att.com 

 

 


 

AT&T Inc.

Financial Data









































Consolidated Statements of Income

Dollars in millions except per share amounts


Three Months Ended







Twelve Months Ended





Unaudited


December 31,


Percent



December 31,


Percent



2016



2015



Change



2016



2015



Change

Operating Revenues




















  Service


$

37,369



$

37,635




-0.7

%



$

148,884



$

131,677




13.1

%

  Equipment



4,472




4,484




-0.3

%




14,902




15,124




-1.5

%

    Total Operating Revenues



41,841




42,119




-0.7

%




163,786




146,801




11.6

%



























Operating Expenses


























   Cost of services and sales


























    Equipment



5,667




5,868




-3.4

%




18,757




19,268




-2.7

%

    Broadcast, programming and operations



5,612




5,645




-0.6

%




19,851




11,996




65.5

%

    Other cost of services (exclusive of depreciation

          and amortization shown separately below)



9,840




8,178




20.3

%




38,276




35,782




7.0

%

   Selling, general and administrative



9,984




8,419




18.6

%




36,347




32,919




10.4

%

   Asset abandonments and impairments



361




-




-

%




361




35




-

%

   Depreciation and amortization



6,129




6,477




-5.4

%




25,847




22,016




17.4

%

    Total Operating Expenses



37,593




34,587




8.7

%




139,439




122,016




14.3

%

Operating Income



4,248




7,532




-43.6

%




24,347




24,785




-1.8

%

Interest Expense



1,221




1,143




6.8

%




4,910




4,120




19.2

%

Equity in Net Income of Affiliates



41




31




32.3

%




98




79




24.1

%

Other Income (Expense) - Net



123




(113

)



-

%




277




(52

)



-

%

Income Before Income Taxes



3,191




6,307




-49.4

%




19,812




20,692




-4.3

%

Income Tax Expense



676




2,221




-69.6

%




6,479




7,005




-7.5

%

Net Income



2,515




4,086




-38.4

%




13,333




13,687




-2.6

%

 Less: Net Income Attributable to

    Noncontrolling Interest



(78

)



(80

)



2.5

%




(357

)



(342

)



-4.4

%

Net Income Attributable to AT&T


$

2,437



$

4,006




-39.2

%



$

12,976



$

13,345




-2.8

%





















































Basic Earnings Per Share Attributable to AT&T


$

0.39



$

0.65




-40.0

%



$

2.10



$

2.37




-11.4

%

   Weighted Average Common

       Shares Outstanding (000,000)



6,161




6,165




-0.1

%




6,168




5,628




9.6

%



























Diluted Earnings Per Share Attributable to AT&T


$

0.39



$

0.65




-40.0

%



$

2.10



$

2.37




-11.4

%

   Weighted Average Common

       Shares Outstanding with Dilution (000,000)



6,181




6,187




-0.1

%




6,189




5,646




9.6

%

 



 

AT&T Inc.







Financial Data





















Consolidated Balance Sheets

Dollars in millions







Unaudited


Dec. 31,



Dec. 31,




2016



2015


Assets







Current Assets







Cash and cash equivalents


$

5,788



$

5,121


Accounts receivable - net of allowances for doubtful accounts of $661 and $704



16,794




16,532


Prepaid expenses



1,555




1,072


Other current assets



14,232




13,267


Total current assets



38,369




35,992


Property, Plant and Equipment - Net



124,899




124,450


Goodwill



105,207




104,568


Licenses



94,176




93,093


Customer Lists and Relationships - Net



14,243




18,208


Other Intangible Assets - Net



8,441




9,409


Investments in Equity Affiliates



1,674




1,606


Other Assets



16,812




15,346


Total Assets


$

403,821



$

402,672











Liabilities and Stockholders' Equity









Current Liabilities









Debt maturing within one year


$

9,832



$

7,636


Accounts payable and accrued liabilities



31,138




30,372


Advanced billing and customer deposits



4,519




4,682


Accrued taxes



2,079




2,176


Dividends payable



3,008




2,950


Total current liabilities



50,576




47,816


Long-Term Debt



113,681




118,515


Deferred Credits and Other Noncurrent Liabilities









Deferred income taxes



60,128




56,181


Postemployment benefit obligation



33,578




34,262


Other noncurrent liabilities



21,748




22,258


Total deferred credits and other noncurrent liabilities



115,454




112,701


Stockholders' Equity









Common stock



6,495




6,495


Additional paid-in capital



89,604




89,763


Retained earnings



34,734




33,671


Treasury stock



(12,659

)



(12,592

)

Accumulated other comprehensive income



4,961




5,334


Noncontrolling interest



975




969


Total stockholders' equity



124,110




123,640


Total Liabilities and Stockholders' Equity


$

403,821



$

402,672











 



 

AT&T Inc.







Financial Data





















Consolidated Statements of Cash Flows

Dollars in millions


Twelve Months Ended

Unaudited


December 31,



2016


2015

Operating Activities







Net income


$

13,333



$

13,687


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









Depreciation and amortization



25,847




22,016


Undistributed earnings from investments in equity affiliates



(37

)



(49

)

Provision for uncollectible accounts



1,474




1,416


Deferred income tax expense



2,947




4,117


Net (gain) loss from sale of investments, net of impairments



(169

)



91


Actuarial loss (gain) on pension and postretirement benefits



1,024




(2,152

)

Asset abandonments and impairments



361




35


Changes in operating assets and liabilities:









Accounts receivable



(1,003

)



30


Other current assets



1,708




(1,182

)

Accounts payable and accrued liabilities



118




1,354


Equipment installment receivables and related sales



(576

)



(3,023

)

Deferred fulfillment costs



(2,359

)



(1,437

)

Retirement benefit funding



(910

)



(735

)

Other - net



(2,414

)



1,712


Total adjustments



26,011




22,193


Net Cash Provided by Operating Activities



39,344




35,880











Investing Activities









Capital expenditures:









Purchase of property and equipment



(21,516

)



(19,218

)

Interest during construction



(892

)



(797

)

Acquisitions, net of cash acquired



(2,959

)



(30,759

)

Dispositions



646




83


Sales of securities, net



506




1,545


Other



-




2


Net Cash Used in Investing Activities



(24,215

)



(49,144

)










Financing Activities









Net change in short-term borrowings with original maturities of three months or less



-




(1

)

Issuance of long-term debt



10,140




33,969


Repayment of long-term debt



(10,823

)



(10,042

)

Purchase of treasury stock



(512

)



(269

)

Issuance of treasury stock



146




143


Dividends paid



(11,797

)



(10,200

)

Other



(1,616

)



(3,818

)

Net Cash (Used in) Provided by Financing Activities



(14,462

)



9,782


Net increase (decrease) in cash and cash equivalents



667




(3,482

)

Cash and cash equivalents beginning of year



5,121




8,603


Cash and Cash Equivalents End of Year


$

5,788



$

5,121











 



 

AT&T Inc.

Consolidated Supplementary Data







































Supplementary Financial Data

Dollars in millions except per share amounts


Three Months Ended





Twelve Months Ended




Unaudited


December 31,


Percent


December 31,


Percent



2016


2015


Change


2016



2015



Change

Capital expenditures



















Purchase of property and equipment


$

6,233



$

5,862




6.3

%


$

21,516



$

19,218




12.0

%

Interest during construction



223




231




-3.5

%



892




797




11.9

%

Total Capital Expenditures


$

6,456



$

6,093




6.0

%


$

22,408



$

20,015




12.0

%


























Dividends Declared per Share


$

0.49



$

0.48




2.1

%


$

1.93



$

1.89




2.1

%


























End of Period Common Shares Outstanding (000,000)















6,139




6,145




-0.1

%

Debt Ratio















49.9

%



50.5

%



-60

BP

Total Employees















268,540




281,450




-4.6

%












































































Supplementary Operating Data

Subscribers and connections in thousands

























Unaudited















December 31, 


Percent
















2016




2015



Change

Wireless Subscribers

























Domestic















134,859




128,640




4.8

%

Mexico















11,973




8,684




37.9

Total Wireless Subscribers















146,832




137,324




6.9


























Total Branded Wireless Subscribers















103,011




96,937




6.3


























Video Connections

























Domestic















25,293




25,424




-0.5

PanAmericana















7,206




7,066




2.0

Brazil















5,249




5,444




-3.6

Total Video Connections















37,748




37,934




-0.5

%


























Broadband Connections

























 IP















13,864




13,268




4.5

 DSL















1,741




2,510




-30.6

Total Broadband Connections















15,605




15,778




-1.1


























Voice Connections

























Network Access Lines















13,986




16,670




-16.1

U-verse  VoIP Connections















5,787




5,453




6.1

Total Retail Consumer Voice Connections















19,773




22,123




-10.6

 



 





























Three Months Ended







Twelve Months Ended








December 31,



Percent 



December 31, 



Percent 




2016




2015




Change 



2016




2015




Change 

Wireless Net Additions

























Domestic



1,522




2,234




-31.9

%



6,196




8,059




-23.1

Mexico



1,275




593




-

%



3,289




(96

)



-

%

Total Wireless Net Additions



2,797




2,827




-1.1

%



9,485




7,963




19.1


























Total Branded Wireless Net Additions



2,221




1,633




36.0

%



6,102




3,038




-


























Video Net Additions

























Domestic



(28

)



(26

)



-7.7

%



(131

)



(63

)



-

PanAmericana



67




60




11.7

%



140




76




84.2

Brazil



(88

)



(94

)



6.4

%



(195

)



(223

)



12.6

Total Video Net Additions



(49

)



(60

)



18.3

%



(186

)



(210

)



11.4


























Broadband Net Additions

























 IP



149




192




-22.4

%



596




1,063




-43.9

 DSL



(162

)



(246

)



34.1

%



(769

)



(1,313

)



41.4

%

Total Broadband Net Additions



(13

)



(54

)



75.9

%



(173

)



(250

)



30.8

%

 



 

BUSINESS SOLUTIONS























The Business Solutions segment provides services to business customers, including multinational companies; governmental and wholesale customers; and individual subscribers who purchase wireless services through employer-sponsored plans. We provide advanced IP-based services including Virtual Private Networks (VPN); Ethernet-related products and broadband, collectively referred to as strategic business services; as well as traditional data and voice products. We utilize our wireless and wired networks (referred to as "wired" or "wireline") to provide a complete communications solution to our business customers.                                



































































Segment Results

Dollars in millions


Three Months Ended




    


Twelve Months Ended




Unaudited


December 31,


Percent

  

December 31,


Percent



2016




2015



Change


2016




2015



Change

Segment Operating Revenues






















Wireless service


$

7,983




$

7,684



3.9

%



$

31,850




$

30,687



3.8

%

Fixed strategic services



2,942





2,716



8.3

%




11,389





10,461



8.9

%

Legacy voice and data services



3,797





4,387



-13.4

%




16,364





18,468



-11.4

%

Other service and equipment



963





973



-1.0

%




3,615





3,558



1.6

%

Wireless equipment



2,348





2,454



-4.3

%




7,770





7,953



-2.3

%

  Total Segment Operating Revenues



18,033





18,214



-1.0

%




70,988





71,127



-0.2

%



























Segment Operating Expenses


























Operations and support expenses



11,746





11,980



-2.0

%




44,330





44,946



-1.4

%

Depreciation and amortization



2,264





2,513



-9.9

%




9,832





9,789



0.4

%

    Total Segment Operating Expenses



14,010





14,493



-3.3

%




54,162





54,735



-1.0

%

Segment Operating Income



4,023





3,721



8.1

%




16,826





16,392



2.6

%

Equity in Net Income of Affiliates



-





-



-

%




-





-



-

%

Segment Contribution


$

4,023




$

3,721



8.1

%



$

16,826




$

16,392



2.6

%



























Segment Operating Income Margin



22.3

%




20.4

%


190

BP




23.7

%




23.0

%


70

BP















































































Supplementary Operating Data

Subscribers and connections in thousands


























Unaudited














        

December 31,


Percent

















2016





2015



Change

Business Solutions Wireless Subscribers


























Postpaid/Branded
















50,688





48,290



5.0

%

Reseller
















65





85



-23.5

%

Connected Devices
















30,649





25,284



21.2

%

Total Business Solutions Wireless Subscribers
















81,402





73,659



10.5

%



























Business Solutions IP Broadband Connections
















977





911



7.2

%

 



 





























Three Months Ended





     

Twelve Months Ended






December 31,


Percent


  

December 31,


Percent





2016





2015



Change




2016





2015



Change


Business Solutions Wireless Net Additions


























Postpaid/Branded



250





353



-29.2




759





1,203



-36.9

%

Reseller



1





(1

)


-

%




(33

)




13



-

%

Connected Devices



1,263





1,211



4.3

%




5,330





5,315



0.3

%

Total Business Solutions Wireless Net Additions



1,514





1,563



-3.1

%




6,056





6,531



-7.3

%



























Business Solutions Wireless Postpaid Churn



1.11

%




1.10

%


1

BP




1.00

%




0.99

%


1

BP



























Business Solutions IP Broadband

  Net Additions



14





19



-26.3

%




66





89



-25.8

%

 



 

ENTERTAINMENT GROUP





















The Entertainment Group segment provides video, internet, voice communication, and interactive and targeted advertising services to customers located in the U.S. or in U.S. territories. We utilize our copper and IP-based wired network and/or our satellite technology.                               









































Segment Results

Dollars in millions


Three Months Ended




    


Twelve Months Ended




Unaudited


December 31,


Percent



December 31,


Percent



2016


2015


Change



2016



2015



Change

Segment Operating Revenues





















Video entertainment


$

9,567



$

9,247




3.5



$

36,460



$

20,271




79.9

%

High-speed internet



1,910




1,740




9.8




7,472




6,601




13.2

%

Legacy voice and data services



1,104




1,367




-19.2




4,829




5,914




-18.3

%

Other service and equipment



625




640




-2.3




2,534




2,508




1.0

%

    Total Segment Operating Revenues



13,206




12,994




1.6




51,295




35,294




45.3

%



























Segment Operating Expenses


























Operations and support expenses



10,463




10,123




3.4




39,338




28,345




38.8

%

Depreciation and amortization



1,381




1,426




-3.2




5,862




4,945




18.5

%

    Total Segment Operating Expenses



11,844




11,549




2.6




45,200




33,290




35.8

%

Segment Operating Income



1,362




1,445




-5.7




6,095




2,004




-

%

Equity in Net Income (Loss) of Affiliates



8




12




-33.3

%




9




(4

)



-

%

Segment Contribution


$

1,370



$

1,457




-6.0



$

6,104



$

2,000




-

%



























Segment Operating Income Margin



10.3

%



11.1

%



-80

BP




11.9

%



5.7

%



620

BP















































































Supplementary Operating Data

Subscribers and connections in thousands


























Unaudited















December 31,


Percent

















2016




2015



Change

Video Connections


























Satellite
















21,012




19,784




6.2

%

U-verse
















4,253




5,614




-24.2

%

Total Video Connections
















25,265




25,398




-0.5

%



























Broadband Connections


























 IP
















12,888




12,356




4.3

%

 DSL
















1,291




1,930




-33.1

%

Total Broadband Connections
















14,179




14,286




-0.7

%



























Voice Connections


























Retail Consumer Switched Access Lines
















5,853




7,286




-19.7

%

U-verse Consumer VoIP Connections
















5,425




5,212




4.1

%

Total Retail Consumer Voice Connections
















11,278




12,498




-9.8

%

 



 





























Three Months Ended







Twelve Months Ended







December 31,


Percent



December 31,


Percent




2016 



2015 


Change




2016 



2015


Change

Video Net Additions1


























Satellite



235




214




9.8

%




1,228




240




-

U-verse



(262

)



(240

)



-9.2

%




(1,361

)



(306

)



-

Total Video Net Additions



(27

)



(26

)



-3.8

%




(133

)



(66

)



-

1

Includes customers that migrated to DIRECTV NOW


















































Broadband Net Additions


























 IP



136




171




-20.5

%




532




973




-45.3

 DSL



(133

)



(208

)



36.1

%




(639

)



(1,130

)



43.5

Total Broadband Net Additions



3




(37

)



-

%




(107

)



(157

)



31.8

 



 

CONSUMER MOBILITY




















   

The Consumer Mobility segment provides nationwide wireless service to consumers and wholesale and resale wireless subscribers located in the U.S. or in U.S. territories. We utilize our U.S. wireless network to provide voice and data services, including high-speed internet, video, and home monitoring services.              




















       




















   

Segment Results

Dollars in millions


Three Months Ended



    

Twelve Months Ended




Unaudited


December 31,


Percent



December 31,


Percent



2016



2015



Change



2016



2015



Change

Segment Operating Revenues



















  

Service


$

6,731



$

7,131




-5.6

%



$

27,536



$

29,150




-5.5

%

Equipment



1,688




1,618




4.3

%




5,664




5,916




-4.3

%

    Total Segment Operating Revenues



8,419




8,749




-3.8

%




33,200




35,066




-5.3

%



























Segment Operating Expenses


























Operations and support expenses



5,316




5,669




-6.2

%




19,659




21,477




-8.5

%

Depreciation and amortization



918




939




-2.2

%




3,716




3,851




-3.5

%

    Total Segment Operating Expenses



6,234




6,608




-5.7

%




23,375




25,328




-7.7

%

Segment Operating Income



2,185




2,141




2.1

%




9,825




9,738




0.9

%

Equity in Net Income of Affiliates



-




-




-

%




-




-




-

%

Segment Contribution


$

2,185



$

2,141




2.1

%



$

9,825



$

9,738




0.9

%



























Segment Operating Income Margin



26.0

%



24.5

%



150

BP




29.6

%



27.8

%



180

BP


























  


























    


























  

Supplementary Operating Data

Subscribers and connections in thousands

























  

Unaudited













   


December 31,


Percent

















2016 



2015 


Change

Consumer Mobility Subscribers

























  

Postpaid
















27,095




28,814




-6.0

%

Prepaid
















13,536




11,548




17.2

%

Branded
















40,631




40,362




0.7

%

Reseller
















11,884




13,690




-13.2

%

Connected Devices
















942




929




1.4

%

Total Consumer Mobility Subscribers
















53,457




54,981




-2.8

%

 



 



Three Months Ended





     


Twelve Months Ended







December 31,


Percent

  


December 31,


Percent




2016 



2015 


Change




2016 



2015 


Change

Consumer Mobility Net Additions











  















Postpaid



270




174




55.2

%




359




463




-22.5

%

Prepaid



406




469




-13.4

%




1,575




1,364




15.5

%

Branded



676




643




5.1

%




1,934




1,827




5.9

%

Reseller



(673

)



50




-

%




(1,813

)



(168

)



-

%

Connected Devices



5




(22

)



-

%




19




(131

)



-

%

Total Consumer Mobility Net Additions



8




671




-98.8

%




140




1,528




-90.8

%












  















Total Churn



2.43

%



1.97

%



46

BP




2.15

%



1.94

%



21

BP

Postpaid Churn



1.25

%



1.31

%



-6

BP




1.19

%



1.25

%



-6

BP

 



 

INTERNATIONAL





















The International segment provides entertainment services in Latin America and wireless services in Mexico. Video entertainment services are provided to primarily residential customers using satellite technology. We utilize our regional and national wireless networks in Mexico to provide consumer and business customers with wireless data and voice communication services. Our international subsidiaries conduct business in their local currency and operating results are converted to U.S. dollars using official exchange rates.                                  









































Segment Results

Dollars in millions


Three Months Ended




    


Twelve Months Ended




Unaudited


December 31,


Percent



December 31,


Percent



2016


2015


Change



2016


2015


Change

Segment Operating Revenues




















Video entertainment


$

1,261



$

1,206




4.6

%



$

4,910



$

2,151




-

%

Wireless service



477




494




-3.4




1,905




1,647




15.7

Wireless equipment



171




149




14.8




468




304




53.9

    Total Segment Operating Revenues



1,909




1,849




3.2




7,283




4,102




77.5



























Segment Operating Expenses


























Operations and support expenses



1,879




1,799




4.4




6,830




3,930




73.8

Depreciation and amortization



298




309




-3.6




1,166




655




78.0

    Total Segment Operating Expenses



2,177




2,108




3.3




7,996




4,585




74.4

Segment Operating Income (Loss)



(268

)



(259

)



-3.5




(713

)



(483

)



-47.6

Equity in Net Income (Loss) of Affiliates



28




(1

)



-




52




(5

)



-

Segment Contribution


$

(240

)


$

(260

)



7.7



$

(661

)


$

(488

)



-35.5



























Segment Operating Income Margin



(14.0

)%



(14.0

)%



-

BP 




(9.8

)%



(11.8

)%



200

BP















































































Supplementary Operating Data

Subscribers and connections in thousands


























Unaudited















December 31,


Percent
















2016 



2015 


Change

Mexican Wireless Subscribers


























Postpaid
















4,965




4,289




15.8

Prepaid
















6,727




3,995




68.4

Branded
















11,692




8,284




41.1

Reseller
















281




400




-29.8

Total Mexican Wireless Subscribers
















11,973




8,684




37.9



























Latin America Satellite Subscribers


























PanAmericana
















7,206




7,066




2.0

SKY Brazil
















5,249




5,444




-3.6

Total Latin America Satellite Subscribers
















12,455




12,510




-0.4

%

 



 



Three Months Ended







Twelve Months Ended







December 31,


Percent



December 31,


Percent




2016 



2015 


Change




2016 



2015


Change

Mexican Wireless Net Additions


























Postpaid



233




130




79.2




677




177




-

Prepaid



1,062




508




-




2,732




(169

)



-

Branded



1,295




638




-




3,409




8




-

Reseller



(20

)



(45

)



55.6




(120

)



(104

)



-15.4

Total Mexican Wireless Net Additions



1,275




593




-




3,289




(96

)



-



























Latin America Satellite Net Additions


























PanAmericana



67




60




11.7




140




76




84.2

SKY Brazil



(88

)



(94

)



6.4




(195

)



(223

)



12.6

Total Latin America Satellite Net Additions



(21

)



(34

)



38.2




(55

)



(147

)



62.6

%

 



 

SUPPLEMENTAL OPERATING INFORMATION - AT&T MOBILITY
















As a supplemental discussion of our operating results, for comparison purposes, we are providing a view of our combined domestic wireless operations (AT&T Mobility).































Operating Results

Dollars in millions

Three Months Ended



  

Twelve Months Ended




Unaudited

December 31,


Percent

December 31,


Percent


2016


2015

Change

2016


2015

Change

Operating Revenues















Service


$

14,713



$

14,815




-0.7


$

59,386



$

59,837




-0.8

%

Equipment



4,037




4,071




-0.8



13,435




13,868




-3.1

%

    Total Operating Revenues



18,750




18,886




-0.7



72,821




73,705




-1.2

%


























Operating Expenses

























Operations and support expenses



12,064




12,479




-3.3

%



43,886




45,789




-4.2

%

Depreciation and amortization



2,048




2,031




0.8

%



8,292




8,113




2.2

%

    Total Operating Expenses



14,112




14,510




-2.7

%



52,178




53,902




-3.2

%

Operating Income



4,638




4,376




6.0



20,643




19,803




4.2

%

Equity in Net Income of Affiliates



-




-




-



-




-




-

%

Operating Contribution


$

4,638



$

4,376




6.0


$

20,643



$

19,803




4.2

%


























Operating Income Margin



24.7

%



23.2

%



150

BP



28.3

%



26.9

%



140

BP












































































Supplementary Operating Data

Subscribers and connections in thousands

























Unaudited












       

December 31,


Percent
















2016 



2015 

Change

AT&T Mobility Subscribers

























Postpaid















77,783




77,105




0.9

%

Prepaid















13,536




11,548




17.2

%

Branded















91,319




88,653




3.0

%

Reseller















11,949




13,774




-13.2

%

Connected Devices















31,591




26,213




20.5

%

Total AT&T Mobility Subscribers















134,859




128,640




4.8

%


























Domestic Licensed POPs (000,000)















322




321




0.3

%




























 


















































   


Three Months Ended




   

Twelve Months Ended






December 31,

Percent

December 31,

Percent




2016 



2015 

Change



2016 



2015 

Change

AT&T Mobility Net Additions

























Postpaid