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 AT&T Reports Fourth-Quarter and Full-Year Results
   Wednesday, January 29, 2020 6:50:00 AM ET

Full-Year Consolidated Results:

  • Diluted EPS of $1.89 as reported compared to $2.85 in the prior year
  • Adjusted EPS of $3.57 compared to $3.52 in the prior year, up 1.4%
  • Record cash from operations of $48.7 billion, up nearly 12%
  • Capital expenditures of $19.6 billion
  • Consolidated revenues of $181.2 billion

Achieved or Overachieved All 2019 Goals

  • Debt: Reduced net debt by $20.3 billion and achieved ~2.5x net-debt-to-adjusted EBITDA range1
  • Portfolio Review: ~$18 billion of net asset monetization vs. goal of $6-8 billion
  • Adjusted EPS growth: Grew 1.4%, achieved goal of low single-digit growth
  • Record free cash flow: $29.0 billion vs. original goal of $26 billion range, up 30% for year
  • Wireless network leadership: Nation’s best and fastest network2
  • Wireless service revenue growth: Achieved ~2% growth
  • Entertainment Group EBITDA: Achieved stable EBITDA versus prior year
  • Merger synergies: Achieved goal of $700 million in run-rate synergies, HBO Max launch set
  • Dividend payout ratio3: 51% vs. goal in high 50’s% range
  • Gross capital investment4: $23.7 billion, achieved goal of $23 billion range


Fourth-Quarter Consolidated Results

  • Diluted EPS of $0.33 as reported compared to $0.66 in the year-ago quarter
  • Adjusted EPS of $0.89 compared to $0.86 in the year-ago quarter, up 3.5%
  • Cash from operations of $11.9 billion
  • Capital expenditures of $3.8 billion
  • Free cash flow of $8.2 billion; dividend payout ratio 46%
  • Consolidated revenues of $46.8 billion; $48.0 billion excluding HBO Max investment

Note: AT&T's fourth-quarter earnings conference call will be webcast at 8:30 a.m. ET on Wednesday, January 29, 2020. The webcast and related materials will be available on AT&T's Investor Relations website at https://investors.att.com .

DALLAS--(BUSINESS WIRE)--AT&T Inc. (NYSE:T ) reported that for the full-year, the company met or exceeded its 2019 guidance and delivered record operating and free cash flow.

Solid operating results in the fourth quarter included strong operating and free cash flow and adjusted earnings growth.

“We delivered what we promised in 2019 and we begin this year with strong momentum in wireless, with HBO Max set to launch in May and our share retirement plan well underway,” said Randall Stephenson, AT&T chairman and CEO. “Our 2020 outlook positions us to deliver meaningful progress on our 3-year financial and capital allocation plans as we continue to invest in growth opportunities and create value for our owners, as we did last year.”

Fourth-Quarter Highlights

Communications

  • Mobility:
    • Service revenues up 1.8% in 4Q and 1.9% for full year; total wireless revenues (including equipment) up 0.8% in 4Q and for full year
    • Operating income up 1.5% with EBITDA up 0.8%
    • 229,000 postpaid phone net adds; nearly 1 million total phone net adds for full year (483,000 postpaid, 506,000 prepaid)
    • FirstNet coverage more than 75% completed
  • Entertainment Group:
    • Full-year EBITDA stable versus prior year
    • Solid video and broadband ARPU gains
    • Video subs impacted by focus on long-term value customer base:
      • 19.5 million premium TV subscribers – 945,000 net loss
      • AT&T TV NOW subscribers – 219,000 net loss
    • 191,000 AT&T Fiber net adds; IP broadband revenue growth of 2.7%
  • Business Wireline:
    • Sequential revenue growth of $86 million; down 1.7% in 4Q

 WarnerMedia

  • Foregone content licensing revenue in preparation for HBO Max launch impacted revenues and operating income
  • Turner revenues up 1.6% with subscription revenue gains
  • Home Box Office revenues up 1.9% with gains in digital subscribers
  • 6 Golden Globe® awards, the most of any media company; 12 Academy Award® nominations

Latin America

  • Mexico operating loss improves by nearly $200 million; EBITDA positive for the first time since acquisitions

Consolidated Financial Results

AT&T's consolidated revenues for the fourth quarter totaled $46.8 billion (~$48.0 billion excluding HBO Max investment) versus $48.0 billion in the year-ago quarter. Growth in domestic wireless services and strategic and managed business services revenues partially offset declines in revenues from domestic video, legacy wireline services and WarnerMedia. Without the impact of foreign exchange pressures and HBO Max investments in the form of foregone WarnerMedia content licensing revenues, consolidated revenues would have increased in both the fourth quarter and the full year.

Operating expenses were $41.5 billion versus $41.8 billion in the year-ago quarter, down 0.8% due to lower Entertainment Group costs, lower intangible asset amortization and cost efficiencies, partially offset by the write-off of certain copper facilities.

Operating income was $5.3 billion versus $6.2 billion in the year-ago quarter, due to a $1.3 billion write-off of certain copper facilities, with operating income margin of 11.4% versus 12.8%. When adjusting for amortization, merger- and integration-related expenses, write-off of certain copper facilities and other items, operating income was $9.2 billion versus $9.4 billion in the year-ago quarter, and operating income margin was 19.6%, the same as the year-ago quarter.

Fourth-quarter net income attributable to common stock was $2.4 billion, or $0.33 per diluted common share, versus $4.9 billion, or $0.66 per diluted common share, in the year-ago quarter. Adjusting for $0.56, which includes merger-amortization costs, the write-off of certain copper facilities, a non-cash actuarial loss on benefit plans, merger- and integration-related expenses and other items, earnings per diluted common share was $0.89 compared to an adjusted $0.86 in the year-ago quarter.

Cash from operating activities was $11.9 billion, and capital expenditures were $3.8 billion. Capital investment – which consists of capital expenditures plus cash payments for vendor financing – totaled $4.2 billion, which includes about $450 million of cash payments for vendor financing and $900 million of FirstNet reimbursements. Free cash flow – cash from operating activities minus capital expenditures – was $8.2 billion for the quarter.

The company completed or announced about $9 billion in non-core asset monetizations in the fourth quarter. For the full year, the company closed about $18 billion of net asset monetizations, including working capital initiatives. Net debt was reduced by $7.6 billion in the quarter and reduced by $20.3 billion for the full year. Net-debt-to-adjusted EBITDA at the end of the fourth quarter was about 2.5x.

In addition to its investments to further improve and expand operations, AT&T continues to use its cash to return substantial value to shareholders through dividends and share retirements. In the fourth quarter, dividends paid totaled $3.7 billion. During the fourth quarter, AT&T began retiring shares under its outstanding share repurchase authorization. In the quarter, the company repurchased 51 million of its common shares for $2.0 billion.

Full-Year Results

For full-year 2019 when compared with 2018 results, AT&T's consolidated revenues totaled $181.2 billion versus $170.8 billion. The increase in revenues from a full year of Time Warner (which includes lower Warner Bros. theatrical revenues in second half of 2019) and growth in domestic wireless services, strategic and managed services and IP broadband revenues, were partially offset by declines in revenues from legacy wireline services and video. Operating expenses were $153.2 billion compared with $144.7 billion, primarily due to a full year of Time Warner (which includes lower Warner Bros. second-half 2019 costs) and the write-off of certain copper facilities, partially offset by lower Entertainment Group costs, lower domestic wireless equipment costs, lower intangible asset amortization, and cost efficiencies.

Versus results from 2018, operating income was $28.0 billion, up 7.1% primarily due to a full year of Time Warner in 2019, partially offset by the write-off of certain copper facilities; and operating income margin was 15.4% versus 15.3%. With adjustments for both years, operating income was $38.6 billion versus $35.2 billion in 2018, and operating income margin was 21.3% versus 20.6%.

2019 net income attributable to common stock was $13.9 billion, or $1.89 per diluted common share, versus $19.4 billion, or $2.85 per diluted common share in 2018. With adjustments for both years, earnings per diluted common share was $3.57 compared to $3.52 in 2018.

AT&T's full-year cash from operating activities was $48.7 billion versus $43.6 billion in 2018. Gross capital investment – which includes capital expenditures, cash payments for vendor financing and FirstNet spending – was $23.7 billion. Capital investment – which consists of capital expenditures plus cash payments for vendor financing – totaled $22.7 billion, which includes $3 billion of cash payments for vendor financing. Full-year free cash flow was $29.0 billion compared to $22.4 billion in 2018, up 30%. The company’s free cash flow dividend payout ratio for the full year was 51%.3

2020 Outlook5

AT&T reaffirms 2020 guidance:

  • Revenue growth: of 1% to 2%;
  • Adjusted EPS growth: $3.60 to $3.70, including HBO Max investment;
  • Adjusted EBITDA margin7: Stable with 2019;
  • Free cash flow in $28 billion range;
  • Dividend payout ratio: In low ‘50s% range3;
  • Gross capital investment: In $20 billion range4;
  • Monetization of assets: net $5 billion to $10 billion

3-Year Financial Guidance and Capital Allocation Plan

  • Adjusted EPS growth5: $4.50 to $4.80 by 2022; includes HBO Max investment
  • Revenue growth every year: 1% to 2% three-year CAGR6
  • Adjusted EBITDA7 margin expansion: By 2022, 200 bps higher than 2019 levels; targeting 35% margins in 2022
  • Free cash flow: $30 billion - $32 billion in 2022
  • Dividend growth: Continued modest annual increases; dividends as % of free cash flow – less than 50% range3 in 2022
  • Capital allocation: 50% - 70% of free cash flow post-dividends for retiring ~70% of shares issued for Time Warner deal
  • Debt: Pay off 100% of acquisition debt from Time Warner deal; net-debt-to-adjusted EBITDA1 ratio of 2.0x to 2.25x in 2022
  • No major acquisitions

5Adjustments to 2020 and 2022 EPS include merger-related amortization for the three-year period in the range of $17.0 billion ($6.5 billion range for 2020), a non-cash mark-to-market benefit plan gain/loss, merger integration and other adjustments. We 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 2022 EPS estimate assumes share retirements of approximately 40 cents, new cost-reduction initiatives and EBITDA growth in our Mexico operations of a combined 25 cents, WarnerMedia synergies of approximately 20 cents and organic growth opportunities, that we expect to be partially offset by dilution from HBO Max. Our EPS, adjusted EBITDA and free cash flow estimates depend 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.

1Net Debt to adjusted EBITDA ratios are non-GAAP financial measures that are frequently 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 Adjusted EBITDA.
2 America’s Best Network based on GWS OneScore Sept. 2019; Nation’s fastest network based on analysis by Ookla® of Speedtest Intelligence® data average download speeds for Q4 2019. Ookla trademarks used under license and reprinted with permission.
3Free cash flow dividend payout ratio is common share dividends divided by free cash flow
4Gross capital investment includes capital expenditures and cash payments for vendor financing and excludes expected FirstNet reimbursements; in 2019, gross capital investment included $1.0 billion of FirstNet reimbursements; in 2020, vendor financing is expected to be about $3 billion range and FirstNet reimbursements are expected to be about $1 billion
6Compound annual growth rate
7EBITDA margin is operating income before depreciation and amortization, divided by total revenues

*About AT&T

AT&T Inc. (NYSE:T ) is a diversified, global leader in telecommunications, media and entertainment, and technology. It executes in the market under four operating units. 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, Warner Bros., TNT, TBS, truTV, CNN, DC Entertainment, New Line, Cartoon Network, Adult Swim, Turner Classic Movies and others. AT&T Communications provides more than 100 million U.S. consumers with entertainment and communications experiences across TV, mobile and broadband services. Plus, it serves nearly 3 million business customers with high-speed, highly secure connectivity and smart solutions. AT&T Latin America provides pay-TV services across 11 countries and territories in Latin America and the Caribbean, and is the fastest growing wireless provider in Mexico, serving consumers and businesses. Xandr provides marketers with innovative and relevant advertising solutions for consumers around premium video content and digital advertising through its AppNexus platform.

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 . © 2020 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 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 shares. Free cash flow dividend payout ratio is defined as the percentage of dividends paid on common 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

 

 

2019

 

2018

 

2019

 

2018

Net cash provided by operating activities

$

11,943

 

$

12,080

 

$

48,668

 

$

43,602

 

Less: Capital expenditures

 

(3,792

)

 

(4,152

)

 

(19,635

)

 

(21,251

)

Free Cash Flow

 

8,151

 

 

7,928

 

 

29,033

 

 

22,351

 

 

 

 

 

 

 

 

 

 

Less: Dividends paid on common shares

 

(3,726

)

 

(3,635

)

 

(14,888

)

 

(13,410

)

Free Cash Flow after Dividends

$

4,425

 

$

4,293

 

$

14,145

 

$

8,941

 

Free Cash Flow Dividend Payout Ratio

 

45.7

%

 

45.9

%

 

51.3

%

 

60.0

%

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

 

 

2019

 

2018

 

 

2019

 

2018

 

Capital Expenditures

$

(3,792

)

$

(4,152

)

 

$

(19,635

)

$

(21,251

)

 

Cash paid for vendor financing

 

(449

)

 

(213

)

 

 

(3,050

)

 

(560

)

 

Cash paid for Capital Investment1

$

(4,241

)

$

(4,365

)

 

$

(22,685

)

$

(21,811

)

 

1 Gross capital investment excludes FirstNet reimbursements of $900 million in the fourth quarter and $1.0 billion for the year ended December 31, 2019.

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, 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, EBITDA Margin and EBITDA Service Margin

Dollars in millions

 

 

 

 

 

Fourth Quarter

 

Year Ended

 

 

2019

 

2018

 

 

2019

 

2018

 

Net Income

$

2,704

 

$

5,130

 

 

$

14,975

 

$

19,953

 

 

Additions:

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

434

 

 

615

 

 

 

3,493

 

 

4,920

 

 

Interest Expense

 

2,049

 

 

2,112

 

 

 

8,422

 

 

7,957

 

 

Equity in Net (Income) Loss of Affiliates

 

30

 

 

(23

)

 

 

(6

)

 

48

 

 

Other (Income) Expense - Net

 

104

 

 

(1,674

)

 

 

1,071

 

 

(6,782

)

 

Depreciation and amortization

 

6,961

 

 

7,892

 

 

 

28,217

 

 

28,430

 

 

EBITDA

 

12,282

 

 

14,052

 

 

 

56,172

 

 

54,526

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

46,821

 

 

47,993

 

 

 

181,193

 

 

170,756

 

 

Service Revenues

 

41,475

 

 

42,496

 

 

 

163,499

 

 

152,345

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA Margin

 

26.2

%

 

29.3

%

 

 

31.0

%

 

31.9

%

 

EBITDA Service Margin

 

29.6

%

 

33.1

%

 

 

34.4

%

 

35.8

%

 

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin

Dollars in millions

 

 

 

 

 

 

 

Fourth Quarter

 

 

Year Ended

 

 

 

2019

 

2018

 

 

2019

 

2018

 

Communications Segment

 

 

 

 

 

 

 

 

 

 

Operating Contribution

$

7,511

 

$

7,607

 

 

$

32,229

 

$

32,105

 

 

Additions:

 

 

 

 

 

 

 

 

 

 

Equity in Net (Income) Loss of Affiliates

 

1

 

 

-

 

 

 

1

 

 

3

 

 

Depreciation and amortization

 

4,589

 

 

4,568

 

 

 

18,329

 

 

18,292

 

 

EBITDA

 

12,101

 

 

12,175

 

 

 

50,559

 

 

50,400

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

36,522

 

 

37,223

 

 

 

142,359

 

 

143,721

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

20.6

%

 

20.4

%

 

 

22.6

%

 

22.3

%

 

EBITDA Margin

 

33.1

%

 

32.7

%

 

 

35.5

%

 

35.1

%

 

 

 

 

 

 

 

 

 

 

 

 

Mobility

Operating Contribution

$

5,503

 

$

5,424

 

 

$

22,320

 

$

21,568

 

 

Additions:

 

 

 

 

 

 

 

 

 

 

Equity in Net (Income) of Affiliates

 

-

 

 

-

 

 

 

1

 

 

-

 

 

Depreciation and amortization

 

2,027

 

 

2,045

 

 

 

8,054

 

 

8,263

 

 

EBITDA

 

7,530

 

 

7,469

 

 

 

30,375

 

 

29,831

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

18,700

 

 

18,556

 

 

 

71,056

 

 

70,521

 

 

Service Revenues

 

13,948

 

 

13,700

 

 

 

55,331

 

 

54,294

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

29.4

%

 

29.2

%

 

 

31.4

%

 

30.6

%

 

EBITDA Margin

 

40.3

%

 

40.3

%

 

 

42.7

%

 

42.3

%

 

EBITDA Service Margin

 

54.0

%

 

54.5

%

 

 

54.9

%

 

54.9

%

 

 

 

 

 

 

 

 

 

 

 

 

Entertainment Group

Operating Contribution

$

745

 

$

825

 

 

$

4,822

 

$

4,713

 

 

Additions:

 

 

 

 

 

 

 

 

 

 

Equity in Net (Income) Loss of Affiliates

 

1

 

 

1

 

 

 

-

 

 

2

 

 

Depreciation and amortization

 

1,298

 

 

1,329

 

 

 

5,276

 

 

5,315

 

 

EBITDA

 

2,044

 

 

2,155

 

 

 

10,098

 

 

10,030

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

11,233

 

 

11,962

 

 

 

45,126

 

 

46,460

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

6.6

%

 

6.9

%

 

 

10.7

%

 

10.1

%

 

EBITDA Margin

 

18.2

%

 

18.0

%

 

 

22.4

%

 

21.6

%

 

 

 

 

 

 

 

 

 

 

 

 

Business Wireline

Operating Contribution

$

1,263

 

$

1,358

 

 

$

5,087

 

$

5,824

 

 

Additions:

 

 

 

 

 

 

 

 

 

 

Equity in Net (Income) Loss of Affiliates

 

-

 

 

(1

)

 

 

-

 

 

1

 

 

Depreciation and amortization

 

1,264

 

 

1,194

 

 

 

4,999

 

 

4,714

 

 

EBITDA

 

2,527

 

 

2,551

 

 

 

10,086

 

 

10,539

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

6,589

 

 

6,705

 

 

 

26,177

 

 

26,740

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

19.2

%

 

20.2

%

 

 

19.4

%

 

21.8

%

 

EBITDA Margin

 

38.4

%

 

38.0

%

 

 

38.5

%

 

39.4

%

 

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin

Dollars in millions

 

 

 

 

 

 

 

Fourth Quarter

 

 

Year Ended

 

 

 

2019

 

2018

 

 

2019

 

2018

 

WarnerMedia Segment

Operating Contribution

$

2,447

 

$

2,703

 

 

$

9,326

 

$

5,695

 

 

Additions:

 

 

 

 

 

 

 

 

 

 

Equity in Net (Income) of Affiliates

 

(25

)

 

(80

)

 

 

(162

)

 

(25

)

 

Depreciation and amortization

 

154

 

 

139

 

 

 

538

 

 

305

 

 

EBITDA

 

2,576

 

 

2,762

 

 

 

9,702

 

 

5,975

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

8,924

 

 

9,232

 

 

 

33,499

 

 

18,941

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

27.1

%

 

28.4

%

 

 

27.4

%

 

29.9

%

 

EBITDA Margin

 

28.9

%

 

29.9

%

 

 

29.0

%

 

31.5

%

 

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin

Dollars in millions

 

 

 

 

 

 

 

Fourth Quarter

 

 

Year Ended

 

 

 

2019

 

2018

 

 

2019

 

2018

 

Latin America Segment

 

 

 

 

 

 

 

 

 

 

Operating Contribution

$

(87

)

$

(248

)

 

$

(635

)

$

(710

)

 

Additions:

 

 

 

 

 

 

 

 

 

 

Equity in Net (Income) of Affiliates

 

(2

)

 

(10

)

 

 

(27

)

 

(34

)

 

Depreciation and amortization

 

294

 

 

296

 

 

 

1,162

 

 

1,238

 

 

EBITDA

 

205

 

 

38

 

 

 

500

 

 

494

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

1,758

 

 

1,843

 

 

 

6,963

 

 

7,652

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

-5.1

%

 

-14.0

%

 

 

-9.5

%

 

-9.7

%

 

EBITDA Margin

 

11.7

%

 

2.1

%

 

 

7.2

%

 

6.5

%

 

 

 

 

 

 

 

 

 

 

 

 

Vrio

 

 

 

 

 

 

 

 

 

 

Operating Contribution

$

40

 

$

66

 

 

$

83

 

$

347

 

 

Additions:

 

 

 

 

 

 

 

 

 

 

Equity in Net (Income) of Affiliates

 

(2

)

 

(10

)

 

 

(27

)

 

(34

)

 

Depreciation and amortization

 

164

 

 

169

 

 

 

660

 

 

728

 

 

EBITDA

 

202

 

 

225

 

 

 

716

 

 

1,041

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

982

 

 

1,074

 

 

 

4,094

 

 

4,784

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

3.9

%

 

5.2

%

 

 

1.4

%

 

6.5

%

 

EBITDA Margin

 

20.6

%

 

20.9

%

 

 

17.5

%

 

21.8

%

 

 

 

 

 

 

 

 

 

 

 

 

Mexico

 

 

 

 

 

 

 

 

 

 

Operating Contribution

$

(127

)

$

(314

)

 

$

(718

)

$

(1,057

)

 

Additions:

 

 

 

 

 

 

 

 

 

 

Equity in Net (Income) Loss of Affiliates

 

-

 

 

-

 

 

 

-

 

 

-

 

 

Depreciation and amortization

 

130

 

 

127

 

 

 

502

 

 

510

 

 

EBITDA

 

3

 

 

(187

)

 

 

(216

)

 

(547

)

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

776

 

 

769

 

 

 

2,869

 

 

2,868

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

-16.4

%

 

-40.8

%

 

 

-25.0

%

 

-36.9

%

 

EBITDA Margin

 

0.4

%

 

-24.3

%

 

 

-7.5

%

 

-19.1

%

 

Segment EBITDA, EBITDA Margin and EBITDA Service Margin

Dollars in millions

 

 

 

 

 

 

 

Fourth Quarter

 

 

Year Ended

 

 

 

2019

 

2018

 

 

2019

 

2018

 

Xandr

 

 

 

 

 

 

 

 

 

 

Operating Contribution

$

413

 

$

381

 

 

$

1,318

 

$

1,333

 

 

Additions:

 

 

 

 

 

 

 

 

 

 

Equity in Net (Income) of Affiliates

 

-

 

 

-

 

 

 

-

 

 

-

 

 

Depreciation and amortization

 

17

 

 

5

 

 

 

58

 

 

9

 

 

EBITDA

 

430

 

 

386

 

 

 

1,376

 

 

1,342

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

607

 

 

566

 

 

 

2,022

 

 

1,740

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

68.0

%

 

67.3

%

 

 

65.2

%

 

76.6

%

 

EBITDA Margin

 

70.8

%

 

68.2

%

 

 

68.1

%

 

77.1

%

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

2019

 

2018

 

 

2019

 

2018

Operating Revenues

 

 

 

 

 

 

 

 

 

Time Warner merger adjustment

$

-

 

$

49

 

 

$

72

 

$

49

 

Adjustments to Operating Revenues

 

-

 

 

49

 

 

 

72

 

 

49

 

Operating Expenses

 

 

 

 

 

 

 

 

 

Time Warner and other merger costs

 

382

 

 

436

 

 

 

961

 

 

1,228

 

Employee separation costs

 

243

 

 

327

 

 

 

624

 

 

587

 

Asset abandonments and impairments

 

1,458

 

 

46

 

 

 

1,458

 

 

46

 

Natural disaster costs

 

-

 

 

77

 

 

 

-

 

 

181

 

Holding losses on benefit-related investments

 

-

 

 

42

 

 

 

-

 

 

42

 

Adjustments to Operations and Support Expenses

 

2,083

 

 

928

 

 

 

3,043

 

 

2,084

 

Amortization of intangible assets

 

1,741

 

 

2,261

 

 

 

7,460

 

 

6,930

 

Impairments

 

43

 

 

26

 

 

 

43

 

 

26

 

Adjustments to Operating Expenses

 

3,867

 

 

3,215

 

 

 

10,546

 

 

9,040

 

Other

 

 

 

 

 

 

 

 

 

Merger-related interest and fees1

 

-

 

 

-

 

 

 

-

 

 

1,029

 

(Gains) losses on sale of investments

 

(69

)

 

(451

)

 

 

(707

)

 

(808

)

Special termination charges, debt redemption costs and other adjustments

 

331

 

 

307

 

 

 

693

 

 

385

 

Actuarial (gain) loss

 

1,123

 

 

(686

)

 

 

5,171

 

 

(3,412

)

Adjustments to Income Before Income Taxes

 

5,252

 

 

2,434

 

 

 

15,775

 

 

6,283

 

Tax impact of adjustments

 

1,119

 

 

412

 

 

 

3,302

 

 

1,177

 

Tax-related items

 

-

 

 

601

 

 

 

141

 

 

505

 

Adjustments to Net Income

$

4,133

 

$

1,421

 

 

$

12,332

 

$

4,601

 

1 Includes interest expense incurred on debt issued, redemption premiums and interest income earned on cash held prior to the close of merger transactions.

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS are non-GAAP financial measures calculated by excluding from operating revenues, operating expenses and income tax expense certain significant items that are non-operational or non-recurring in nature, including dispositions and merger integration and transaction costs. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends.

Adjusted Operating Revenues, Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. AT&T's calculation of Adjusted items, as presented, may differ from similarly titled measures reported by other companies.

Adjusted Operating Income, Adjusted Operating Income Margin,

Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EBITDA Service Margin

Dollars in millions

 

 

 

 

 

 

Fourth Quarter

 

Year Ended

 

 

 

2019

 

2018

 

 

2019

 

2018

 

Operating Income

$

5,321

 

$

6,160

 

 

$

27,955

 

$

26,096

 

 

Adjustments to Operating Revenues

 

-

 

 

49

 

 

 

72

 

 

49

 

 

Adjustments to Operating Expenses

 

3,867

 

 

3,215

 

 

 

10,546

 

 

9,040

 

 

Adjusted Operating Income

 

9,188

 

 

9,424

 

 

 

38,573

 

 

35,185

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

12,282

 

 

14,052

 

 

 

56,172

 

 

54,526

 

 

Adjustments to Operating Revenues

 

-

 

 

49

 

 

 

72

 

 

49

 

 

Adjustments to Operations and Support Expenses

 

2,083

 

 

928

 

 

 

3,043

 

 

2,084

 

 

Adjusted EBITDA

 

14,365

 

 

15,029

 

 

 

59,287

 

 

56,659

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

46,821

 

 

47,993

 

 

 

181,193

 

 

170,756

 

 

Adjustments to Operating Revenues

 

-

 

 

49

 

 

 

72

 

 

49

 

 

Total Adjusted Operating Revenue

 

46,821

 

 

48,042

 

 

 

181,265

 

 

170,805

 

 

Service Revenues

 

41,475

 

 

42,496

 

 

 

163,499

 

 

152,345

 

 

Adjustments to Service Revenues

 

-

 

 

49

 

 

 

72

 

 

49

 

 

Adjusted Service Revenue

 

41,475

 

 

42,545

 

 

 

163,571

 

 

152,394

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

11.4

%

 

12.8

%

 

 

15.4

%

 

15.3

%

 

Adjusted Operating Income Margin

 

19.6

%

 

19.6

%

 

 

21.3

%

 

20.6

%

 

Adjusted EBITDA Margin

 

30.7

%

 

31.3

%

 

 

32.7

%

 

33.2

%

 

Adjusted EBITDA Service Margin

 

34.6

%

 

35.3

%

 

 

36.2

%

 

37.2

%

 

Adjusted Diluted EPS

 

 

 

 

 

 

 

 

Fourth Quarter

 

 

Year Ended

 

 

 

2019

 

2018

 

 

2019

 

2018

 

Diluted Earnings Per Share (EPS)

$

0.33

 

$

0.66

 

 

$

1.89

 

$

2.85

 

 

Amortization of intangible assets

 

0.19

 

 

0.25

 

 

 

0.81

 

 

0.81

 

 

Merger integration items1

 

0.04

 

 

0.06

 

 

 

0.13

 

 

0.26

 

 

(Gain) loss on sale of assets, impairments and other adjustments2

 

0.21

 

 

0.04

 

 

 

0.20

 

 

0.05

 

 

Actuarial (gain) loss3

 

0.12

 

 

(0.07

)

 

 

0.56

 

 

(0.38

)

 

Tax-related items

 

-

 

 

(0.08

)

 

 

(0.02

)

 

(0.07

)

 

Adjusted EPS

$

0.89

 

$

0.86

 

 

$

3.57

 

$

3.52

 

 

Year-over-year growth - Adjusted

 

3.5

%

 

 

 

 

1.4

%

 

 

 

Weighted Average Common Shares Outstanding with Dilution (000,000)

 

7,341

 

 

7,328

 

 

 

7,348

 

 

6,806

 

 

1Includes combined merger integration items and merger-related interest income and expense, and redemption premiums.

2Includes abandonment and impairments, gains on transactions, and employee-related and other costs.

3Includes 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 $5.1 billion in 2019. As a result, adjusted EPS reflects an expected return on plan assets of $3.8 billion (based on an average expected return on plan assets of 7.00% for our pension trust and 5.75% for our VEBA trusts), rather than the actual return on plan assets of $8.8 billion gain (actual pension return of 16.9% and VEBA return of 15.6%), included in the GAAP measure of income.

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, 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

 

 

 

2019

 

2018

 

AT&T Inc.

Total Operating Revenues

$

46,821

 

$

47,993

 

 

Exclude Venezuela

 

(6

)

 

(8

)

 

Impact of foreign exchange translation

 

220

 

 

-

 

 

Operating Revenues on Constant Currency Basis

 

47,035

 

 

47,985

 

 

Year-over-year growth

 

-2.0

%

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

14,365

 

 

15,029

 

 

Exclude Venezuela

 

(38

)

 

(38

)

 

Impact of foreign exchange translation

 

109

 

 

-

 

 

Adjusted EBITDA on Constant Currency Basis

 

14,436

 

 

14,991

 

 

Year-over-year growth

 

-3.7

%

 

 

 

 

 

 

 

 

 

WarnerMedia Segment

Total Operating Revenues

$

8,924

 

$

9,232

 

 

Impact of foreign exchange translation

 

58

 

 

-

 

 

WarnerMedia Operating Revenues on Constant Currency Basis

 

8,982

 

 

9,232

 

 

Year-over-year growth

 

-2.7

%

 

 

 

 

 

 

 

 

 

EBITDA

 

2,576

 

 

2,762

 

 

Impact of foreign exchange translation

 

31

 

 

-

 

 

WarnerMedia EBITDA on Constant Currency Basis

 

2,607

 

 

2,762

 

 

Year-over-year growth

 

-5.6

%

 

 

 

 

 

 

 

 

 

Latin America Segment

 

 

 

 

 

Total Operating Revenues

$

1,758

 

$

1,843

 

 

Exclude Venezuela

 

(6

)

 

(8

)

 

Impact of foreign exchange translation

 

162

 

 

-

 

 

Latin America Operating Revenues on Constant Currency Basis

 

1,914

 

 

1,835

 

 

Year-over-year growth

 

4.3

%

 

 

 

 

 

 

 

 

 

EBITDA

 

205

 

 

38

 

 

Exclude Venezuela

 

(38

)

 

(38

)

 

Impact of foreign exchange translation

 

78

 

 

-

 

 

Latin America EBITDA on Constant Currency Basis

 

245

 

 

-

 

 

Year-over-year growth

 

-

 

 

 

 

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

 

 

 

 

 

Mar. 31

 

June 30,

 

Sept. 30,

 

Dec. 31,

 

Four Quarters

 

 

 

20191

 

20191

 

20191

 

2019

 

 

Adjusted EBITDA2

$

14,802

$

15,041

$

15,079

$

14,365

$

59,287

 

End-of-period current debt

 

 

 

 

 

 

 

 

 

11,438

 

End-of-period long-term debt

 

 

 

 

 

 

 

 

 

151,709

 

Total End-of-Period Debt

 

 

 

 

 

 

 

 

 

163,147

 

Less: Cash and Cash Equivalents

 

 

 

 

 

 

 

 

 

12,130

 

Net Debt Balance

 

 

 

 

 

 

 

 

 

151,017

 

Annualized Net Debt to Adjusted EBITDA Ratio

 

 

 

 

 

2.547

 

1 As reported in AT&T's Form 8-K filed April 24, 2019, July 24, 2019 and October 28, 2019.

2 Includes the purchase accounting reclassification of released content amortization of $150 million, $112 million, $108 million and $102 million in the four quarters of 2019, respectively. 

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 table presents a reconciliation of our supplemental Business Solutions results.

Supplemental Operational Measure

 

 

Fourth Quarter

 

 

December 31, 2019

 

 

December 31, 2018

 

 

Mobility

 

Business
Wireline

 

Adjustments1

 

Business
Solutions

 

 

Mobility

 

Business
Wireline

 

Adjustments1

 

Business
Solutions

Operating Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wireless service

$

13,948

$

-

$

(11,924)

$

2,024

 

$

13,700

$

-

$

(11,817)

$

1,883

Strategic and managed services

 

-

 

3,927

 

-

 

3,927

 

 

-

 

3,811

 

-

 

3,811

Legacy voice and data services

 

-

 

2,207

 

-

 

2,207

 

 

-

 

2,498

 

-

 

2,498

Other services and equipment

 

-

 

455

 

-

 

455

 

 

-

 

396

 

-

 

396

Wireless equipment

 

4,752

 

-

 

(3,897)

 

855

 

 

4,856

 

-

 

(4,083)

 

773

Total Operating Revenues

 

18,700

 

6,589

 

(15,821)

 

9,468

 

 

18,556

 

6,705

 

(15,900)

 

9,361

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operations and support

 

11,170

 

4,062

 

(9,267)

 

5,965

 

 

11,087

 

4,154

 

(9,357)

 

5,884

EBITDA

 

7,530

 

2,527

 

(6,554)

 

3,503

 

 

7,469

 

2,551

 

(6,543)

 

3,477

Depreciation and amortization

 

2,027

 

1,264

 

(1,721)

 

1,570

 

 

2,045

 

1,194

 

(1,747)

 

1,492

Total Operating Expenses

 

13,197

 

5,326

 

(10,988)

 

7,535

 

 

13,132

 

5,348

 

(11,104)

 

7,376

Operating Income

 

5,503

 

1,263

 

(4,833)

 

1,933

 

 

5,424

 

1,357

 

(4,796)

 

1,985

Equity in Net Income (Loss) of Affiliates

 

-

 

-

 

-

 

-

 

 

-

 

1

 

-

 

1

Operating Contribution

$

5,503

$

1,263

$

(4,833)

$

1,933

 

$

5,424

$

1,358

$

(4,796)

$

1,986

1 Non-business wireless reported in the Communication segment under the Mobility business unit.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental Operational Measure

 

 

Year Ended

 

 

December 31, 2019

 

 

December 31, 2018

 

 

Mobility

 

Business
Wireline

 

Adjustments1

 

Business
Solutions

 

 

Mobility

 

Business
Wireline

 

Adjustments1

 

Business
Solutions

Operating Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wireless service

$

55,331

$

-

$

(47,406)

$

7,925

 

$

54,294

$

-

$

(46,971)

$

7,323

Strategic and managed services

 

-

 

15,440

 

-

 

15,440

 

 

-

 

14,660

 

-

 

14,660

Legacy voice and data services

 

-

 

9,180

 

-

 

9,180

 

 

-

 

10,674

 

-

 

10,674

Other services and equipment

 

-

 

1,557

 

-

 

1,557

 

 

-

 

1,406

 

-

 

1,406

Wireless equipment

 

15,725

 

-

 

(12,968)

 

2,757

 

 

16,227

 

-

 

(13,717)

 

2,510

Total Operating Revenues

 

71,056

 

26,177

 

(60,374)

 

36,859

 

 

70,521

 

26,740

 

(60,688)

 

36,573

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operations and support

 

40,681

 

16,091

 

(34,037)

 

22,735

 

 

40,690

 

16,201

 

(34,283)

 

22,608

EBITDA

 

30,375

 

10,086

 

(26,337)

 

14,124

 

 

29,831

 

10,539

 

(26,405)

 

13,965

Depreciation and amortization

 

8,054

 

4,999

 

(6,840)

 

6,213

 

 

8,263

 

4,714

 

(7,077)

 

5,900

Total Operating Expenses

 

48,735

 

21,090

 

(40,877)

 

28,948

 

 

48,953

 

20,915

 

(41,360)

 

28,508

Operating Income

 

22,321

 

5,087

 

(19,497)

 

7,911

 

 

21,568

 

5,825

 

(19,328)

 

8,065

Equity in Net Income (Loss) of Affiliates

 

(1)

 

-

 

1

 

-

 

 

-

 

(1)

 

-

 

(1)

Operating Contribution

$

22,320

$

5,087

$

(19,496)

$

7,911

 

$

21,568

$

5,824

$

(19,328)

$

8,064

1 Non-business wireless reported in the Communication segment under the Mobility business unit.

 

Erin McGrath
AT&T Inc.
Phone: (214) 862-0651
Email: erin.mcgrath@att.com

Source: AT&T Inc.



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