Solid wireless, fiber and HBO Max subscriber
gains with continuing strong cash flows
AT&T Inc. (NYSE:T):
Fourth-Quarter Consolidated Results
- Consolidated revenues of $45.7 billion
- Cash from operations of $10.1 billion
- Capital expenditures of $2.4 billion; gross capital
investment of $4.3 billion1
- Free cash flow of $7.7 billion2; total dividend payout
ratio of 49%3
- Reported EPS of ($1.95) due to non-cash charges compared
to $0.33 diluted EPS in the year-ago quarter
- Adjusted EPS of $0.75 compared to $0.89 in the year-ago
quarter
- Includes COVID-19 impacts of ($0.08): $0.01 incremental cost
reductions and ($0.09) of estimated revenues
Full-Year Consolidated Results
- Consolidated revenues of $171.8 billion
- Cash from operations of $43.1 billion
- Capital expenditures of $15.7 billion; gross capital
investment of $19.7 billion1
- Free cash flow of $27.5 billion2; total dividend payout
ratio 55%3
- Reported EPS of ($0.75) due to non-cash charges compared
to $1.89 diluted EPS in the prior year
- Adjusted EPS of $3.18 compared to $3.57 in the prior
year
- Includes COVID-19 impacts of ($0.43): ($0.10) of incremental
costs and ($0.33) of estimated revenues
Note: AT&T’s fourth-quarter earnings conference call will be
webcast at 8:30 a.m. ET on Wednesday, January 27, 2021. The webcast
and related materials will be available on AT&T’s Investor
Relations website at https://investors.att.com.
AT&T Inc. (NYSE:T) reported fourth-quarter results that
showed continuing subscriber growth in wireless, fiber and HBO Max
while continuing to reflect strong cash flows and financial
strength.
“We ended the year with strong momentum in our market focus
areas of broadband connectivity and software-based entertainment,”
said John Stankey, AT&T CEO. “By investing in our high-quality
wireless customer base, we had our best full-year of postpaid phone
net adds in a decade and our second lowest postpaid phone churn
ever. Our fiber broadband net adds passed the 1 million mark for
the year. And the release of Wonder Woman 1984 helped drive our
domestic HBO Max and HBO subscribers to more than 41 million, a
full two years faster than our initial forecast.”
Fourth-Quarter Highlights
Communications
- Mobility:
- 800,000 postpaid phone net adds; 1.5 million for full year
- 1.2 million postpaid net adds; 2.2 million for full year
- Nearly 6 million total domestic wireless net adds
- Postpaid phone churn of 0.76%, second-lowest quarter ever;
full-year churn of 0.79%
- Revenues up 7.6%; service revenues up 0.5%; equipment revenues
up 28.3%
- Nation’s fastest 5G wireless network and, for the 8th
consecutive quarter in a row, the fastest network in the
nation4
- Broadband:
- 273,000 AT&T Fiber net adds; more than 1 million for full
year
- Solid IP broadband ARPU growth of 4.6% growth
- AT&T TV gains helped offset premium TV loss
- 617,000 net loss, the result of lower churn and higher quality
base
WarnerMedia
- Total domestic HBO Max and HBO subscribers5 top 41 million and
nearly 61 million6 worldwide
- HBO Max activations double since end of third-quarter 2020;
17.2 million as of end of 4Q
Consolidated Financial Results
AT&T’s consolidated revenues for the fourth quarter totaled
$45.7 billion versus $46.8 billion in the year-ago quarter. The
COVID-19 pandemic impacted revenues across most businesses,
particularly WarnerMedia and domestic wireless service revenues,
which were pressured from lower international roaming. For the
quarter, revenue declines included domestic video, Warner Bros.
television and theatrical products, legacy wireline services, and
Latin America, which includes foreign exchange pressure. These
declines were partly offset by higher domestic wireless revenues,
primarily from equipment sales.
Operating expenses were $56.4 billion versus $41.5 billion in
the year-ago quarter. Expenses increased due to higher non-cash
asset impairments and abandonments (including $15.5 billion for the
Video business), higher domestic wireless equipment costs and
higher HBO Max investments. These increases were partially offset
by lower Video and Warner Bros. costs associated with lower
revenues and foreign exchange impacts on Latin America
expenses.
Operating income/(loss) was ($10.7) billion versus $5.3 billion
in the year-ago quarter due to the non-cash asset impairments in
the quarter and the impact of lower revenues. Operating income
margin was (23.5%) versus 11.4% in the year-ago quarter. When
adjusted for non-cash asset impairments, merger-amortization costs
and other items, operating income was $7.8 billion versus $9.2
billion in the year-ago quarter, and operating income margin was
17.1% versus 19.6% in the year-ago quarter.
Fourth-quarter net loss attributable to common stock was ($13.9)
billion, or ($1.95) per common share, versus net income
attributable to common stock of $2.4 billion, or $0.33 per diluted
common share, in the year-ago quarter. Adjusting for $2.70, which
includes asset impairments, an actuarial loss on benefit plans,
merger-amortization costs and other items, earnings per diluted
common share was $0.75 compared to an adjusted $0.89 in the
year-ago quarter. The company did not adjust for COVID-19 impacts
of ($0.08): $0.01 incremental cost reductions and ($0.09) of
estimated revenues.
Cash from operating activities was $10.1 billion, and capital
expenditures were $2.4 billion. Gross capital investment – which
consists of capital expenditures, cash payments for vendor payments
and excludes FirstNet reimbursements – totaled $4.3 billion.
Capital investment – which consists of capital expenditures plus
cash payments for vendor financing – totaled $3.4 billion, which
includes $1.0 billion of cash payments for vendor financing and
$920 million of FirstNet reimbursements. Free cash flow – cash from
operating activities minus capital expenditures – was $7.7 billion
for the quarter. Net debt declined by $1.6 billion sequentially in
the quarter, and net debt to adjusted EBITDA at the end of the
fourth quarter was 2.70x.7
Full-Year Results
For full-year 2020 when compared with 2019 results, AT&T's
consolidated revenues totaled $171.8 billion versus $181.2 billion.
The COVID-19 pandemic impacted revenues across all businesses,
particularly WarnerMedia and domestic wireless service revenues,
which were pressured from lower international roaming. Declines at
WarnerMedia included lower content and advertising revenues, in
part due to COVID-19. Revenues also declined in domestic video,
legacy wireline services and Latin America, which was impacted by
foreign exchange pressures. Growth from domestic wireless equipment
and strategic and managed services partly offset these
declines.
Operating expenses were $165.4 billion in 2020 compared with
$153.2 billion in 2019, primarily due to non-cash asset impairments
and abandonments that were $17.4 billion higher than in 2019, costs
relating to launching and operating HBO Max, higher domestic
wireless equipment costs, incremental COVID-19 costs, higher
severance charges, and higher subscriber acquisition and
fulfillment costs. These increases were partially offset by lower
Video and WarnerMedia costs from lower revenues, foreign exchange
impacts on Latin America expenses, a one-time spectrum gain and
cost efficiencies.
Compared with results from 2019, operating income was $6.4
billion, down 77.1% primarily due to higher asset impairments and
abandonments and COVID-19 impacts; and operating income margin was
3.7% versus 15.4%. With adjustments for both years, operating
income was $34.1 billion versus $38.6 billion in 2019, and
operating income margin was 19.8% versus 21.3%.
2020 net loss attributable to common stock was ($5.4) billion,
or ($0.75) per common share, versus net income attributable to
common stock of $13.9 billion, or $1.89 per diluted common share,
in 2019. With adjustments for both years, earnings per diluted
common share was $3.18 compared to $3.57 in 2019.
Cash from operating activities was $43.1 billion, and capital
expenditures were $15.7 billion. Gross capital investment – which
includes capital expenditures, cash payments for vendor financing
and excludes FirstNet reimbursements – was $19.7 billion. Capital
investment – which consists of capital expenditures plus cash
payments for vendor financing – totaled $18.6 billion, including
$3.0 billion of cash payments for vendor financing and $1.1 billion
of FirstNet reimbursements. Full-year free cash flow2 was $27.5
billion compared to $29.0 billion in 2019. The company’s free cash
flow total dividend payout ratio for the full year was 55%.3 Net
debt declined by $3.5 billion in the year.
2021 Outlook
In 2021, the company expects:
- Consolidated revenue growth in the 1% range
- Adjusted EPS to be stable with 20209
- Gross capital investment1 in the $21 billion range with capital
expenditures in the $18 billion range
- 2021 free cash flow8 in the $26 billion range, with a full-year
total dividend payout ratio in the high 50’s% range.3
1Gross capital investment includes capital expenditures and cash
payments for vendor financing and excludes FirstNet reimbursements.
In 4Q20, gross capital investment included $1 billion in vendor
financing payments and excluded $920 million of FirstNet
reimbursements. In 2020, gross capital investment included $3.0
billion in vendor financing payments and excluded $1.1 billion of
FirstNet reimbursements. In 2021, vendor financing payments are
expected to be in the $2 billion range and FirstNet reimbursements
are expected to be about $1 billion.
2 Free cash flow is a non-GAAP financial measure that is used by
investors and credit rating agencies to provide relevant and useful
information. Free cash flow is cash from operating activities minus
capital expenditures. For 2020, Cash from operating activities was
$43.1 billion and 2020 capital expenditures were $15.7 billion.
3 Free cash flow total dividend payout ratio is total dividends
paid divided by free cash flow. In 4Q20, total dividends paid were
$3.7 billion. For full-year 2020, dividends paid totaled $15.0
billion.
4 Fastest 5G network based on AT&T analysis of Ookla® of
Speedtest Intelligence® data median 5G download speeds for Q4 2020.
Fastest network based on analysis by Ookla® of Speedtest
Intelligence® data of average download speeds for Q1, Q2, Q3 and Q4
2019, and median download speeds for Q1, Q2, Q3 and Q4 2020. Ookla
trademarks used under license and reprinted with permission.
5 Domestic HBO Max and HBO subscribers exclude customers that
are part of a free trial.
6 Worldwide HBO Max and HBO subscribers consist of domestic and
international HBO subscribers and domestic HBO Max subscribers and
excludes basic subscribers and Cinemax subscribers.
7Net Debt to adjusted EBITDA ratios are non-GAAP financial
measures that are used by investors and credit rating agencies to
provide relevant and useful information. Our Net Debt to Adjusted
EBITDA ratio is calculated by dividing the Net Debt by the sum of
the most recent four quarters of Adjusted EBITDA.
8 Free cash flow is cash from operating activities minus capital
expenditures. Due to high variability and difficulty in predicting
items that impact cash from operating activities and capital
expenditures, the company is not able to provide a reconciliation
between projected free cash flow and the most comparable GAAP
metric without unreasonable effort.
9 The company expects adjustments to 2021 reported diluted EPS
to include merger-related amortization in the range of $5.9 billion
and other adjustments, a non-cash mark-to-market benefit plan
gain/loss, and other items. Expect the mark-to-market adjustment,
which is driven by interest rates and investment returns that are
not reasonably estimable at this time, to be a significant item.
Our 2021 EPS depends on future levels of revenues and expenses
which are not reasonably estimable at this time. Accordingly, we
cannot provide a reconciliation between our non-GAAP metrics and
the reported GAAP metrics without unreasonable effort.
*About AT&T
AT&T Inc. (NYSE:T) is a diversified, global leader in
telecommunications, media and entertainment, and technology.
AT&T Communications provides more than 100 million U.S.
consumers with entertainment and communications experiences across
TV, mobile and broadband. Plus, it serves high-speed, highly secure
connectivity and smart solutions to nearly 3 million business
customers. WarnerMedia is a leading media and entertainment company
that creates and distributes premium and popular content to global
audiences through its consumer brands, including: HBO, HBO Max,
Warner Bros., TNT, TBS, truTV, CNN, DC Entertainment, New Line,
Cartoon Network, Adult Swim and Turner Classic Movies. Xandr, now
part of WarnerMedia, provides marketers with innovative and
relevant advertising solutions for consumers around premium video
content and digital advertising through its platform. AT&T
Latin America provides pay-TV services across 10 countries and
territories in Latin America and the Caribbean and wireless
services to consumers and businesses in Mexico.
AT&T products and services are provided or offered by
subsidiaries and affiliates of AT&T Inc. under the AT&T
brand and not by AT&T Inc. Additional information is available
at about.att.com. © 2021 AT&T Intellectual Property. All rights
reserved. AT&T, the Globe logo and other marks are trademarks
and service marks of AT&T Intellectual Property and/or AT&T
affiliated companies. All other marks contained herein are the
property of their respective owners.
Cautionary Language Concerning Forward-Looking
Statements
Information set forth in this news release contains financial
estimates and other forward-looking statements that are subject to
risks and uncertainties, and actual results might differ
materially. A discussion of factors that may affect future results
is contained in AT&T’s filings with the Securities and Exchange
Commission. AT&T disclaims any obligation to update and revise
statements contained in this news release based on new information
or otherwise.
This news release may contain certain non-GAAP financial
measures. Reconciliations between the non-GAAP financial measures
and the GAAP financial measures are available on the company’s
website at https://investors.att.com.
Discussion and Reconciliation of Non-GAAP Measures
We believe the following measures are relevant and useful
information to investors as they are part of AT&T's internal
management reporting and planning processes and are important
metrics that management uses to evaluate the operating performance
of AT&T and its segments. Management also uses these measures
as a method of comparing performance with that of many of our
competitors. These measures should be considered in addition to,
but not as a substitute for, other measures of financial
performance reported in accordance with U.S. generally accepted
accounting principles (GAAP).
Free Cash Flow
Free cash flow is defined as cash from operations minus capital
expenditures. Free cash flow after dividends is defined as cash
from operations minus capital expenditures and dividends on common
and preferred shares. Free cash flow dividend payout ratio is
defined as the percentage of dividends paid on common and preferred
shares 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
Fourth Quarter
Year Ended
2020
2019
2020
2019
Net cash provided by operating
activities
$
10,082
$
11,943
$
43,130
$
48,668
Less: Capital expenditures
(2,392
)
(3,792
)
(15,675
)
(19,635
)
Free Cash Flow
7,690
8,151
27,455
29,033
Less: Dividends paid
(3,741
)
(3,726
)
(14,956
)
(14,888
)
Free Cash Flow after Dividends
$
3,949
$
4,425
$
12,499
$
14,145
Free Cash Flow Dividend Payout
Ratio
48.6
%
45.7
%
54.5
%
51.3
%
Cash Paid for Capital
Investment
In connection with capital improvements, we negotiate with some
of our vendors to obtain favorable payment terms of 120 days or
more, referred to as vendor financing, which are excluded from
capital expenditures and reported in accordance with GAAP as
financing activities. We present an additional view of cash paid
for capital investment to provide investors with a comprehensive
view of cash used to invest in our networks, product developments
and support systems.
Cash Paid for Capital
Investment
Dollars in millions
Fourth Quarter
Year Ended
2020
2019
2020
2019
Capital Expenditures
$
(2,392
)
$
(3,792
)
$
(15,675
)
$
(19,635
)
Cash paid for vendor financing
(1,001
)
(449
)
(2,966
)
(3,050
)
Cash paid for Capital
Investment
$
(3,393
)
$
(4,241
)
$
(18,641
)
$
(22,685
)
FirstNet reimbursement
(920
)
(902
)
(1,063
)
(1,005
)
Gross Capital Investment
$
(4,313
)
$
(5,143
)
$
(19,704
)
$
(23,690
)
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 GAAP.
EBITDA service margin is calculated as EBITDA divided by service
revenues.
When discussing our segment, business unit and supplemental
results, EBITDA excludes equity in net income (loss) of affiliates,
and depreciation and amortization from operating contribution.
These measures are used by management as a gauge of our success
in acquiring, retaining and servicing subscribers because we
believe these measures reflect AT&T's ability to generate and
grow subscriber revenues while providing a high level of customer
service in a cost-effective manner. Management also uses these
measures as a method of comparing operating performance with that
of many of its competitors. The financial and operating metrics
which affect EBITDA include the key revenue and expense drivers for
which management is responsible and upon which we evaluate
performance.
We believe EBITDA Service Margin (EBITDA as a percentage of
service revenues) to be a more relevant measure than EBITDA Margin
(EBITDA as a percentage of total revenue) for our Mobility business
unit operating margin. We also use wireless service revenues to
calculate margin to facilitate comparison, both internally and
externally with our wireless competitors, as they calculate their
margins using wireless service revenues as well.
There are material limitations to using these non-GAAP financial
measures. EBITDA, EBITDA margin and EBITDA service margin, as we
have defined them, may not be comparable to similarly titled
measures reported by other companies. Furthermore, these
performance measures do not take into account certain significant
items, including depreciation and amortization, interest expense,
tax expense and equity in net income (loss) of affiliates. For
market comparability, management analyzes performance measures that
are similar in nature to EBITDA as we present it, and considering
the economic effect of the excluded expense items independently as
well as in connection with its analysis of net income as calculated
in accordance with GAAP. EBITDA, EBITDA margin and EBITDA service
margin should be considered in addition to, but not as a substitute
for, other measures of financial performance reported in accordance
with GAAP.
EBITDA
Dollars in millions
Fourth Quarter
Year to Date
2020
2019
2020
2019
Net Income (Loss)
$
(13,515
)
$
2,704
$
(3,821
)
$
14,975
Additions:
Income Tax Expense
(2,038
)
434
965
3,493
Interest Expense
1,894
2,049
7,925
8,422
Equity in Net (Income) Loss of
Affiliates
(106
)
30
(95
)
(6
)
Other (Income) Expense - Net
3,020
104
1,431
1,071
Depreciation and amortization
6,979
6,961
28,516
28,217
EBITDA
(3,766
)
12,282
34,921
56,172
Impairments1
16,365
1,458
18,880
1,458
Employee separation costs and
benefit-related (gain) loss
253
243
1,177
624
Gain on spectrum transactions
—
—
(900
)
—
Merger costs and revenue adjustments
37
382
468
1,033
Adjusted EBITDA2
$
12,889
$
14,365
$
54,546
$
59,287
1 Includes $15.5 billion for the
impairment of goodwill and other long-lived assets in our video
business.
2 See page 5 for additional discussion and
reconciliation of adjusted items.
Segment and Business Unit
EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
Fourth Quarter
Year Ended
2020
2019
2020
2019
Communications Segment
Operating Contribution
$
6,558
$
7,511
$
30,521
$
32,230
Additions:
Depreciation and amortization
4,587
4,589
18,488
18,329
EBITDA
11,145
12,100
49,009
50,559
Total Operating Revenues
36,722
36,522
138,850
142,359
Operating Income Margin
17.9
%
20.6
%
22.0
%
22.6
%
EBITDA Margin
30.3
%
33.1
%
35.3
%
35.5
%
Mobility
Operating Contribution
$
5,088
$
5,503
$
22,372
$
22,321
Additions:
Depreciation and amortization
2,008
2,027
8,086
8,054
EBITDA
7,096
7,530
30,458
30,375
Total Operating Revenues
20,119
18,700
72,564
71,056
Service Revenues
14,022
13,948
55,542
55,331
Operating Income Margin
25.3
%
29.4
%
30.8
%
31.4
%
EBITDA Margin
35.3
%
40.3
%
42.0
%
42.7
%
EBITDA Service Margin
50.6
%
54.0
%
54.8
%
54.9
%
Video
Operating Contribution
$
98
$
39
$
1,729
$
2,064
Additions:
Depreciation and amortization
521
589
2,262
2,461
EBITDA
619
628
3,991
4,525
Total Operating Revenues
7,168
8,075
28,610
32,124
Operating Income Margin
1.4
%
0.5
%
6.0
%
6.4
%
EBITDA Margin
8.6
%
7.8
%
13.9
%
14.1
%
Broadband
Operating Contribution
$
366
$
686
$
1,822
$
2,681
Additions:
Depreciation and amortization
738
726
2,914
2,880
EBITDA
1,104
1,412
4,736
5,561
Total Operating Revenues
3,116
3,161
12,318
13,012
Operating Income Margin
11.7
%
21.7
%
14.8
%
20.6
%
EBITDA Margin
35.4
%
44.7
%
38.4
%
42.7
%
Business Wireline
Operating Contribution
$
1,006
$
1,283
$
4,598
$
5,164
Additions:
Depreciation and amortization
1,320
1,247
5,226
4,934
EBITDA
2,326
2,530
9,824
10,098
Total Operating Revenues
6,319
6,586
25,358
26,167
Operating Income Margin
15.9
%
19.5
%
18.1
%
19.7
%
EBITDA Margin
36.8
%
38.4
%
38.7
%
38.6
%
Segment and Business Unit
EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
Fourth Quarter
Year Ended
2020
2019
2020
2019
WARNERMEDIA Segment
Operating Contribution
$
2,529
$
2,859
$
8,210
$
10,659
Additions:
Equity in Net (Income) of Affiliates
13
(23)
(18)
(161)
Depreciation and amortization
177
169
671
589
EBITDA
2,719
3,005
8,863
11,087
Total Operating Revenues
8,554
9,453
30,442
35,259
Operating Income Margin
29.7
%
30.0
%
26.9
%
29.8
%
EBITDA Margin
31.8
%
31.8
%
29.1
%
31.4
%
Segment and Business Unit
EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
Fourth Quarter
Year Ended
2020
2019
2020
2019
Latin America Segment
Operating Contribution
$
(167
)
$
(87
)
$
(729
)
$
(635
)
Additions:
Equity in Net (Income) of Affiliates
2
(2
)
(24
)
(27
)
Depreciation and amortization
260
294
1,033
1,162
EBITDA
95
205
280
500
Total Operating Revenues
1,498
1,758
5,716
6,963
Operating Income Margin
-11.0
%
-5.1
%
-13.2
%
-9.5
%
EBITDA Margin
6.3
%
11.7
%
4.9
%
7.2
%
Vrio
Operating Contribution
$
(41
)
$
40
$
(142
)
$
83
Additions:
Equity in Net (Income) of Affiliates
2
(2
)
(24
)
(27
)
Depreciation and amortization
120
164
520
660
EBITDA
81
202
354
716
Total Operating Revenues
762
982
3,154
4,094
Operating Income Margin
-5.1
%
3.9
%
-5.3
%
1.4
%
EBITDA Margin
10.6
%
20.6
%
11.2
%
17.5
%
Mexico
Operating Contribution
$
(126
)
$
(127
)
$
(587
)
$
(718
)
Additions:
Equity in Net (Income) Loss of
Affiliates
—
—
—
—
Depreciation and amortization
140
130
513
502
EBITDA
14
3
(74
)
(216
)
Total Operating Revenues
736
776
2,562
2,869
Operating Income Margin
-17.1
%
-16.4
%
-22.9
%
-25.0
%
EBITDA Margin
1.9
%
0.4
%
-2.9
%
-7.5
%
Adjusting Items
Adjusting items include revenues and costs we consider
non-operational in nature, such as items arising from asset
acquisitions or dispositions. We also adjust for net actuarial
gains or losses associated with our pension and postemployment
benefit plans due to the often-significant impact on our results
(we immediately recognize this gain or loss in the income
statement, pursuant to our accounting policy for the recognition of
actuarial gains and losses). Consequently, our adjusted results
reflect an expected return on plan assets rather than the actual
return on plan assets, as included in the GAAP measure of
income.
The tax impact of adjusting items is calculated using the
effective tax rate during the quarter except for adjustments that,
given their magnitude, can drive a change in the effective tax
rate, in these cases we use the actual tax expense or combined
marginal rate of approximately 25%.
Adjusting Items
Dollars in millions
Fourth Quarter
Year Ended
2020
2019
2020
2019
Operating Revenues
Time Warner merger adjustment
$
—
$
—
$
—
$
72
Adjustments to Operating
Revenues
—
—
—
72
Operating Expenses
Merger costs
37
382
468
961
Employee separation costs and
benefit-related (gain) loss1
253
243
1,177
624
Impairments2
16,365
1,458
18,880
1,458
Gain on spectrum transaction
—
—
(900)
—
Adjustments to Operations and Support
Expenses
16,655
2,083
19,625
3,043
Amortization of intangible assets
1,890
1,741
8,012
7,460
Impairments
14
43
14
43
Adjustments to Operating
Expenses
18,559
3,867
27,651
10,546
Other
Gain on sale of investments - net
—
(69)
—
(707)
Debt redemption, impairments and other
adjustments
14
331
1,685
693
Actuarial (gain) loss
4,106
1,123
4,169
5,171
Employee benefit-related (gain) loss1
(149)
—
(172)
—
Adjustments to Income Before Income
Taxes
22,530
5,252
33,333
15,775
Tax impact of adjustments
3,186
1,119
4,977
3,302
Tax-related items
41
—
41
141
Impairment attributable to noncontrolling
interest
—
—
105
—
Adjustments to Net Income
$
19,303
$
4,133
$
28,210
$
12,332
1 Total holding gains on benefit-related investments were
approximately $205 million in the fourth quarter and $330 million
for the year ended December 31,2020.
2 Includes $15.5 billion for the impairment of goodwill and
other long-lived assets in our video business.
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, actuarial gains and
losses, significant abandonments and impairment, severance and
other material gains and losses. Management believes that these
measures provide relevant and useful information to investors and
other users of our financial data in evaluating the effectiveness
of our operations and underlying business trends.
Adjusted Operating Revenues, Adjusted Operating Income, Adjusted
Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin,
Adjusted EBITDA service margin and Adjusted diluted EPS should be
considered in addition to, but not as a substitute for, other
measures of financial performance reported in accordance with GAAP.
AT&T's calculation of Adjusted items, as presented, may differ
from similarly titled measures reported by other companies.
Adjusted Operating Income,
Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted
EBITDA Margin and Adjusted EBITDA Service Margin
Dollars in millions
Fourth Quarter
Year Ended
2020
2019
2020
2019
Operating Income
$
(10,745
)
$
5,321
$
6,405
$
27,955
Adjustments to Operating Revenues
—
—
—
72
Adjustments to Operating Expenses
18,559
3,867
27,651
10,546
Adjusted Operating Income
7,814
9,188
34,056
38,573
EBITDA
(3,766
)
12,282
34,921
56,172
Adjustments to Operating Revenues
—
—
—
72
Adjustments to Operations and Support
Expenses
16,655
2,083
19,625
3,043
Adjusted EBITDA
12,889
14,365
54,546
59,287
Total Operating Revenues
45,691
46,821
171,760
181,193
Adjustments to Operating Revenues
—
—
—
72
Total Adjusted Operating
Revenue
45,691
46,821
171,760
181,265
Service Revenues
39,051
41,475
152,767
163,499
Adjustments to Service Revenues
—
—
—
72
Adjusted Service Revenue
39,051
41,475
152,767
163,571
Operating Income Margin
(23.5
)
%
11.4
%
3.7
%
15.4
%
Adjusted Operating Income Margin
17.1
%
19.6
%
19.8
%
21.3
%
Adjusted EBITDA Margin
28.2
%
30.7
%
31.8
%
32.7
%
Adjusted EBITDA Service Margin
33.0
%
34.6
%
35.7
%
36.2
%
Adjusted Diluted EPS
Fourth Quarter
Year Ended
2020
2019
2020
2019
Diluted Earnings Per Share
(EPS)
$
(1.95
)
$
0.33
$
(0.75
)
$
1.89
Amortization of intangible assets
0.22
0.19
0.90
0.81
Merger integration items
—
0.04
0.05
0.13
Impairments 2
2.02
0.16
2.37
0.16
Debt redemption costs, (gain) loss on sale
of assets and other
0.04
0.05
0.18
0.04
Actuarial (gain) loss 1
0.43
0.12
0.44
0.56
Tax-related items
(0.01
)
—
(0.01
)
(0.02
)
Adjusted EPS
$
0.75
$
0.89
$
3.18
$
3.57
Year-over-year growth - Adjusted
-15.7
%
-10.9
%
Weighted Average Common Shares
Outstanding with Dilution (000,000)
7,176
7,341
7,183
7,348
1 Includes adjustments for actuarial gains or losses associated
with our postemployment benefit plans, which we immediately
recognize in the income statement, pursuant to our accounting
policy for the recognition of actuarial gains/losses. We recorded
total net actuarial losses of $4.2 billion in 2020. As a result,
adjusted EPS reflects an expected return on plan assets of $3.7
billion (based on an average expected return on plan assets of 7.0%
for our pension trust and 4.75% for our VEBA trusts), rather than
the actual return on plan assets of $6.5 billion gain (actual
pension return of 12.2% and VEBA return of 8.4%), included in the
GAAP measure of income.
2 Includes $1.91 for the impairment of
goodwill and other long-lived assets in our video
business.
Constant Currency
Constant Currency is a non-GAAP financial measure that
management uses to evaluate the operating performance of certain
international subsidiaries by excluding or otherwise adjusting for
the impact of changes in foreign currency exchange rates between
comparative periods. We believe constant currency enhances
comparison and is useful to investors to evaluate the performance
of our business without taking into account the impact of changes
to the foreign exchange rates to which our business is subject. To
compute our constant currency results, we multiply or divide, as
appropriate, our current year U.S. dollar results by the current
year average foreign exchange rates and then multiply or divide, as
appropriate, those amounts by the prior year average foreign
exchange rates. In calculating amounts on a constant currency
basis, for our Vrio business unit (sale of this business unit
closed in second quarter 2020), we exclude our Venezuela subsidiary
in light of the hyperinflationary conditions in Venezuela, which we
do not believe are representative of the macroeconomics of the rest
of the region in which we operate.
Constant Currency
Dollars in millions
Fourth Quarter
2020
2019
AT&T Inc.
Total Operating Revenues
$
45,691
$
46,821
Exclude Venezuela
—
(6)
Impact of foreign exchange
translation
219
—
Operating Revenues on Constant Currency
Basis
45,910
46,815
Year-over-year growth
-1.9
%
Adjusted EBITDA
12,889
14,365
Exclude Venezuela
—
(38)
Impact of foreign exchange
translation
52
—
Adjusted EBITDA on Constant Currency
Basis
12,941
14,327
Year-over-year growth
-9.7
%
WarnerMedia Segment
Total Operating Revenues
$
8,554
$
9,453
Impact of foreign exchange
translation
(6)
—
WarnerMedia Operating Revenues on
Constant Currency Basis
8,548
9,453
Year-over-year growth
-9.6
%
EBITDA
2,719
3,005
Impact of foreign exchange
translation
4
—
WarnerMedia EBITDA on Constant Currency
Basis
2,723
3,005
Year-over-year growth
-9.4
%
Latin America Segment
Total Operating Revenues
$
1,498
$
1,758
Exclude Venezuela
—
(6)
Impact of foreign exchange
translation
225
—
Latin America Operating Revenues on
Constant Currency Basis
1,723
1,752
Year-over-year growth
-1.7
%
EBITDA
95
205
Exclude Venezuela
—
(38)
Impact of foreign exchange
translation
48
—
Latin America EBITDA on Constant
Currency Basis
143
167
Year-over-year growth
-14.4
%
Net Debt to Adjusted
EBITDA
Net Debt to EBITDA ratios are non-GAAP financial measures
frequently used by investors and credit rating agencies and
management believes these measures provide relevant and useful
information to investors and other users of our financial data. Our
Net Debt to Adjusted EBITDA ratio is calculated by dividing the Net
Debt by the sum of the most recent four quarters Adjusted EBITDA.
Net Debt is calculated by subtracting cash and cash equivalents and
certificates of deposit and time deposits that are greater than 90
days, from the sum of debt maturing within one year and long-term
debt.
Net Debt to Adjusted
EBITDA
Dollars in millions
Three Months Ended
March 31,
June 30,
Sept. 30,
Dec. 31,
Four Quarters
2020 1
2020 1
2020 1
2020
Adjusted EBITDA2
$
14,232
$
14,112
$
13,313
$
12,889
$
54,546
End-of-period current debt
3,470
End-of-period long-term debt
153,775
Total End-of-Period Debt
157,245
Less: Cash and Cash Equivalents
9,740
Net Debt Balance
147,505
Annualized Net Debt to Adjusted EBITDA
Ratio
2.70
1 As reported in AT&T's Form 8-K filed April 22, 2020, July
23, 2020, and October 22, 2020.
2 Includes the purchase accounting reclassification of released
content amortization of $69 million, $75 million, $45 million, and
$38 million in the four quarters presented, respectively.
Supplemental Operational
Measures
We provide a supplemental discussion of our business solutions
operations that is calculated by combining our Mobility and
Business Wireline operating units, and then adjusting to remove
non-business operations. The following tables present a
reconciliation of our supplemental Business Solutions results.
Results have been recast to conform to the current period's
classification.
Supplemental Operational
Measure
Fourth Quarter
December 31, 2020
December 31, 2019
Mobility
Business
Wireline
Adjustments1
Business
Solutions
Mobility
Business Wireline
Adjustments1
Business Solutions
Operating Revenues
Wireless service
$
14,022
$
—
$
(12,074)
$
1,948
$
13,948
$
—
$
(12,049)
$
1,899
Strategic and managed services
—
4,006
—
4,006
—
3,925
—
3,925
Legacy voice and data services
—
1,956
—
1,956
—
2,207
—
2,207
Other services and equipment
—
357
—
357
—
454
—
454
Wireless equipment
6,097
—
(5,172)
925
4,752
—
(3,897)
855
Total Operating Revenues
20,119
6,319
(17,246)
9,192
18,700
6,586
(15,946)
9,340
Operating Expenses
Operations and support
13,023
3,993
(10,925)
6,091
11,170
4,056
(9,266)
5,960
EBITDA
7,096
2,326
(6,321)
3,101
7,530
2,530
(6,680)
3,380
Depreciation and amortization
2,008
1,320
(1,688)
1,640
2,027
1,247
(1,720)
1,554
Total Operating Expenses
15,031
5,313
(12,613)
7,731
13,197
5,303
(10,986)
7,514
Operating Income
5,088
1,006
(4,633)
1,461
5,503
1,283
(4,960)
1,826
Equity in Net Income (Loss) of
Affiliates
—
—
—
—
—
—
—
—
Operating Contribution
$
5,088
$
1,006
$
(4,633)
$
1,461
$
5,503
$
1,283
$
(4,960)
$
1,826
1 Non-business wireless reported in the Communication segment
under the Mobility business unit.
Supplemental Operational
Measure
Year Ended
December 31, 2020
December 31, 2019
Mobility
Business
Wireline
Adjustments1
Business
Solutions
Mobility
Business Wireline
Adjustments1
Business Solutions
Operating Revenues
Wireless service
$
55,542
$
—
$
(47,810)
$
7,732
$
55,331
$
—
$
(47,887)
$
7,444
Strategic and managed services
—
15,788
—
15,788
—
15,430
—
15,430
Legacy voice and data services
—
8,183
—
8,183
—
9,180
—
9,180
Other services and equipment
—
1,387
—
1,387
—
1,557
—
1,557
Wireless equipment
17,022
—
(14,140)
2,882
15,725
—
(12,971)
2,754
Total Operating Revenues
72,564
25,358
(61,950)
35,972
71,056
26,167
(60,858)
36,365
Operating Expenses
Operations and support
42,106
15,534
(34,927)
22,713
40,681
16,069
(34,036)
22,714
EBITDA
30,458
9,824
(27,023)
13,259
30,375
10,098
(26,822)
13,651
Depreciation and amortization
8,086
5,226
(6,803)
6,509
8,054
4,934
(6,840)
6,148
Total Operating Expenses
50,192
20,760
(41,730)
29,222
48,735
21,003
(40,876)
28,862
Operating Income
22,372
4,598
(20,220)
6,750
22,321
5,164
(19,982)
7,503
Equity in Net Income (Loss) of
Affiliates
—
—
—
—
—
—
—
—
Operating Contribution
$
22,372
$
4,598
$
(20,220)
$
6,750
$
22,321
$
5,164
$
(19,982)
$
7,503
1 Non-business wireless reported in the Communication segment
under the Mobility business unit.
For comparative purposes and to assist in the transition to our
current financial presentation, we provided on a one-time basis, a
supplemental presentation of the Historical Entertainment Group
business unit (Historical EG) that is calculated by combining our
Video and Broadband business units, adjusted to remove the business
video operations previously reported in the Business Wireline
business unit. The following tables present a reconciliation of the
supplemental Historical EG results.
Supplemental Operational
Measure
Fourth Quarter
December 31, 2020
December 31, 2019
Video
Broadband
Adj.1
Historical EG
Video
Broadband
Adj.1
Historical EG
Operating Revenues
Video
$
7,124
$
—
$
(2)
$
7,122
$
8,074
$
—
$
(6)
$
8,068
High-speed internet
—
2,205
—
2,205
—
2,107
—
2,107
Legacy voice and data services
—
534
—
534
—
604
—
604
Other services and equipment
44
377
—
421
1
450
3
454
Total Operating Revenues
7,168
3,116
(2)
10,282
8,075
3,161
(3)
11,233
Operating Expenses
Operations and support
6,549
2,012
(8)
8,553
7,447
1,749
(7)
9,189
EBITDA
619
1,104
6
1,729
628
1,412
4
2,044
Depreciation and amortization
521
738
(15)
1,244
589
726
(17)
1,298
Total Operating Expenses
7,070
2,750
(23)
9,797
8,036
2,475
(24)
10,487
Operating Income
98
366
21
485
39
686
21
746
Equity in Net Income (Loss) of
Affiliates
—
—
—
—
—
—
—
—
Operating Contribution
$
98
$
366
$
21
$
485
$
39
$
686
$
21
$
746
Operating Income Margin
1.4
%
11.7
%
4.7
%
0.5
%
21.7
%
6.6
%
EBITDA Margin
8.6
%
35.4
%
16.8
%
7.8
%
44.7
%
18.2
%
1 Predominantly the video business
previously reported in the Communications segment under the
Business Wireline business unit.
Supplemental Operational
Measure
Year Ended
December 31, 2020
December 31, 2019
Video
Broadband
Adj.1
Historical EG
Video
Broadband
Adj.1
Historical EG
Operating Revenues
Video
$
28,465
$
—
$
(8)
$
28,457
$
32,123
$
—
$
(13)
$
32,110
High-speed internet
—
8,534
—
8,534
—
8,403
—
8,403
Legacy voice and data services
—
2,213
—
2,213
—
2,573
—
2,573
Other services and equipment
145
1,571
(1)
1,715
1
2,036
3
2,040
Total Operating Revenues
28,610
12,318
(9)
40,919
32,124
13,012
(10)
45,126
Operating Expenses
Operations and support
24,619
7,582
(30)
32,171
27,599
7,451
(22)
35,028
EBITDA
3,991
4,736
21
8,748
4,525
5,561
12
10,098
Depreciation and amortization
2,262
2,914
(57)
5,119
2,461
2,880
(65)
5,276
Total Operating Expenses
26,881
10,496
(87)
37,290
30,060
10,331
(87)
40,304
Operating Income
1,729
1,822
78
3,629
2,064
2,681
77
4,822
Equity in Net Income (Loss) of
Affiliates
—
—
—
—
—
—
—
—
Operating Contribution
$
1,729
$
1,822
$
78
$
3,629
$
2,064
$
2,681
$
77
$
4,822
Operating Income Margin
6.0
%
14.8
%
8.9
%
6.4
%
20.6
%
10.7
%
EBITDA Margin
13.9
%
38.4
%
21.4
%
14.1
%
42.7
%
22.4
%
1 Predominantly the video business
previously reported in the Communications segment under the
Business Wireline business unit.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210127005463/en/
Fletcher Cook AT&T Inc. Phone: (214) 912-8541 Email:
fletcher.cook@att.com Daphne Avila AT&T Inc. Phone: (972)
266-3866 Email: daphne.avila@att.com
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