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
AT&T Inc. (NYSE:T):
- 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
- 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
AT&T Inc. (NYSE:T) today reported revenue, net income,
adjusted EPS and free cash flow growth for the second quarter.
“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.
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.
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.
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 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160721006335/en/
AT&T Corporate CommunicationsFletcher Cook,
214-757-7629fletcher.cook@att.comorMcCall Butler,
917-209-5792butlerm@att.com
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