Attached files
| file | filename |
|---|---|
| EX-99.2 - EX-99.2 AT&T INC. SELECTED FINANCIAL STATEMENTS AND OPERATING DATA - AT&T INC. | t-1q2021exhibit992.htm |
| 8-K - 8-K - AT&T INC. | t-20210422.htm |
| EX-99.1 - EX-99.1 PRESS RELEASE DATED APRIL 22, 2021 REPORTING FINANCIAL RESULTS - AT&T INC. | t-1q2021exhibit991.htm |
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 | ||||||||
| First Quarter | ||||||||
| 2021 | 2020 | |||||||
| Net cash provided by operating activities | $ | 9,927 | $ | 8,866 | ||||
| Less: Capital expenditures | (4,033) | (4,966) | ||||||
| Free Cash Flow | 5,894 | 3,900 | ||||||
| Less: Dividends paid | (3,741) | (3,737) | ||||||
| Free Cash Flow after Dividends | $ | 2,153 | $ | 163 | ||||
| Free Cash Flow Dividend Payout Ratio | 63.5 | % | 95.8 | % | ||||
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 | ||||||||
| First Quarter | ||||||||
| 2021 | 2020 | |||||||
| Capital Expenditures | $ | (4,033) | $ | (4,966) | ||||
| Cash paid for vendor financing | (1,690) | (791) | ||||||
| Cash paid for Capital Investment | $ | (5,723) | $ | (5,757) | ||||
| FirstNet reimbursement | — | (7) | ||||||
| Gross Capital Investment | $ | (5,723) | $ | (5,764) | ||||
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, EBITDA Margin and EBITDA Service Margin | ||||||||
| Dollars in millions | ||||||||
| First Quarter | ||||||||
| 2021 | 2020 | |||||||
| Net Income | $ | 7,942 | $ | 4,963 | ||||
| Additions: | ||||||||
| Income Tax Expense | 2,122 | 1,302 | ||||||
| Interest Expense | 1,870 | 2,018 | ||||||
| Equity in Net (Income) Loss of Affiliates | (52) | 6 | ||||||
| Other (Income) Expense - Net | (4,221) | (803) | ||||||
| Depreciation and amortization | 5,809 | 7,222 | ||||||
| EBITDA | 13,470 | 14,708 | ||||||
| Merger costs | 37 | 182 | ||||||
| Employee separation costs and benefit-related (gain) loss | 57 | 119 | ||||||
| Impairments | — | 123 | ||||||
| Gain on spectrum transaction | — | (900) | ||||||
Adjusted EBITDA 1 | $ | 13,564 | $ | 14,232 | ||||
1 See page 5 for additional discussion and reconciliation of adjusted items. | ||||||||
2
| Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin | ||||||||
| Dollars in millions | ||||||||
| First Quarter | ||||||||
| 2021 | 2020 | |||||||
| Communications Segment | ||||||||
| Operating Contribution | $ | 7,365 | $ | 7,401 | ||||
| Additions: | ||||||||
| Depreciation and amortization | 4,054 | 4,043 | ||||||
| EBITDA | 11,419 | 11,444 | ||||||
| Total Operating Revenues | 28,178 | 26,779 | ||||||
| Operating Income Margin | 26.1 | % | 27.6 | % | ||||
| EBITDA Margin | 40.5 | % | 42.7 | % | ||||
| Mobility | ||||||||
| Operating Contribution | $ | 6,002 | $ | 5,788 | ||||
| Additions: | ||||||||
| Depreciation and amortization | 2,014 | 2,045 | ||||||
| EBITDA | 8,016 | 7,833 | ||||||
| Total Operating Revenues | 19,034 | 17,402 | ||||||
| Service Revenues | 14,048 | 13,968 | ||||||
| Operating Income Margin | 31.5 | % | 33.3 | % | ||||
| EBITDA Margin | 42.1 | % | 45.0 | % | ||||
| EBITDA Service Margin | 57.1 | % | 56.1 | % | ||||
| Business Wireline | ||||||||
| Operating Contribution | $ | 1,058 | $ | 1,093 | ||||
| Additions: | ||||||||
| Depreciation and amortization | 1,278 | 1,286 | ||||||
| EBITDA | 2,336 | 2,379 | ||||||
| Total Operating Revenues | 6,046 | 6,266 | ||||||
| Operating Income Margin | 17.5 | % | 17.4 | % | ||||
| EBITDA Margin | 38.6 | % | 38.0 | % | ||||
| Consumer Wireline | ||||||||
| Operating Contribution | $ | 305 | $ | 520 | ||||
| Additions: | ||||||||
| Depreciation and amortization | 762 | 712 | ||||||
| EBITDA | 1,067 | 1,232 | ||||||
| Total Operating Revenues | 3,098 | 3,111 | ||||||
| Operating Income Margin | 9.8 | % | 16.7 | % | ||||
| EBITDA Margin | 34.4 | % | 39.6 | % | ||||
3
| Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin | ||||||||
| Dollars in millions | ||||||||
| First Quarter | ||||||||
| 2021 | 2020 | |||||||
| WarnerMedia Segment | ||||||||
| Operating Contribution | $ | 2,030 | $ | 2,014 | ||||
| Additions: | ||||||||
| Equity in Net (Income) of Affiliates | (70) | (15) | ||||||
| Depreciation and amortization | 163 | 161 | ||||||
| EBITDA | 2,123 | 2,160 | ||||||
| Total Operating Revenues | 8,526 | 7,765 | ||||||
| Operating Income Margin | 23.0 | % | 25.7 | % | ||||
| EBITDA Margin | 24.9 | % | 27.8 | % | ||||
| Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin | ||||||||
| Dollars in millions | ||||||||
| First Quarter | ||||||||
| 2021 | 2020 | |||||||
| Latin America Segment | ||||||||
| Operating Contribution | $ | (173) | $ | (184) | ||||
| Additions: | ||||||||
| Equity in Net (Income) of Affiliates | 4 | (4) | ||||||
| Depreciation and amortization | 262 | 281 | ||||||
| EBITDA | 93 | 93 | ||||||
| Total Operating Revenues | 1,374 | 1,590 | ||||||
| Operating Income Margin | -12.3 | % | -11.8 | % | ||||
| EBITDA Margin | 6.8 | % | 5.8 | % | ||||
| Vrio | ||||||||
| Operating Contribution | $ | (39) | $ | (39) | ||||
| Additions: | ||||||||
| Equity in Net (Income) of Affiliates | 4 | (4) | ||||||
| Depreciation and amortization | 117 | 147 | ||||||
| EBITDA | 82 | 104 | ||||||
| Total Operating Revenues | 743 | 887 | ||||||
| Operating Income Margin | -4.7 | % | -4.8 | % | ||||
| EBITDA Margin | 11.0 | % | 11.7 | % | ||||
| Mexico | ||||||||
| Operating Contribution | $ | (134) | $ | (145) | ||||
| Additions: | ||||||||
| Equity in Net (Income) Loss of Affiliates | — | — | ||||||
| Depreciation and amortization | 145 | 134 | ||||||
| EBITDA | 11 | (11) | ||||||
| Total Operating Revenues | 631 | 703 | ||||||
| Operating Income Margin | -21.2 | % | -20.6 | % | ||||
| EBITDA Margin | 1.7 | % | -1.6 | % | ||||
4
| Supplemental EBITDA and EBITDA Margin | ||||||||
| Dollars in millions | ||||||||
| First Quarter | ||||||||
| 2021 | 2020 | |||||||
| Video | ||||||||
| Operating Contribution | $ | 901 | $ | 796 | ||||
| Additions: | ||||||||
| Equity in Net (Income) of Affiliates | — | — | ||||||
| Depreciation and amortization | 164 | 591 | ||||||
| EBITDA | 1,065 | 1,387 | ||||||
| Total Operating Revenues | 6,725 | 7,407 | ||||||
| Operating Income Margin | 13.4 | % | 10.7 | % | ||||
| EBITDA Margin | 15.8 | % | 18.7 | % | ||||
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 | ||||||||
| First Quarter | ||||||||
| 2021 | 2020 | |||||||
| Operating Expenses | ||||||||
| Merger costs | $ | 37 | $ | 182 | ||||
| Employee separation costs and benefit-related (gain) loss | 57 | 119 | ||||||
| Assets impairments and abandonment | — | 123 | ||||||
| Gain on spectrum transaction | — | (900) | ||||||
| Adjustments to Operations and Support Expenses | 94 | (476) | ||||||
| Amortization of intangible assets | 1,131 | 2,056 | ||||||
| Adjustments to Operating Expenses | 1,225 | 1,580 | ||||||
| Other | ||||||||
| Debt redemption, (gain) loss on sale of assets, impairments and other | (59) | 114 | ||||||
| Actuarial (gain) loss | (2,844) | — | ||||||
| Employee benefit-related (gain) loss | — | 203 | ||||||
| Adjustments to Income Before Income Taxes | (1,678) | 1,897 | ||||||
| Tax impact of adjustments | (470) | 394 | ||||||
| Tax-related items | 118 | — | ||||||
| Adjustments to Net Income | $ | (1,326) | $ | 1,503 | ||||
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.
5
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, and Adjusted EBITDA Margin | ||||||||
| Dollars in millions | ||||||||
| First Quarter | ||||||||
| 2021 | 2020 | |||||||
| Operating Income | $ | 7,661 | $ | 7,486 | ||||
| Adjustments to Operating Expenses | 1,225 | 1,580 | ||||||
| Adjusted Operating Income | 8,886 | 9,066 | ||||||
| EBITDA | 13,470 | 14,708 | ||||||
| Adjustments to Operations and Support Expenses | 94 | (476) | ||||||
| Adjusted EBITDA | 13,564 | 14,232 | ||||||
| Total Operating Revenues | 43,939 | 42,779 | ||||||
| Operating Income Margin | 17.4 | % | 17.5 | % | ||||
| Adjusted Operating Income Margin | 20.2 | % | 21.2 | % | ||||
| Adjusted EBITDA Margin | 30.9 | % | 33.3 | % | ||||
| Adjusted Diluted EPS | ||||||||
| First Quarter | ||||||||
| 2021 | 2020 | |||||||
| Diluted Earnings Per Share (EPS) | $ | 1.04 | $ | 0.63 | ||||
| Amortization of intangible assets | 0.12 | 0.23 | ||||||
| Merger integration items | — | 0.02 | ||||||
| Employee separation, (gain) loss on sale of assets and other | 0.02 | (0.04) | ||||||
Actuarial (gain) loss 1 | (0.30) | — | ||||||
| Tax-related items | (0.02) | — | ||||||
| Adjusted EPS | $ | 0.86 | $ | 0.84 | ||||
| Year-over-year growth - Adjusted | 2.4 | % | ||||||
| Weighted Average Common Shares Outstanding with Dilution (000,000) | 7,188 | 7,214 | ||||||
1Includes adjustments for actuarial gains or losses associated with our pension benefit plan, 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 gain of $2.8 billion in the first quarter of 2021. As a result, adjusted EPS reflects an expected return on plan assets of $0.9 billion (based on an average expected return on plan assets of 6.75% for our pension trust), rather than the actual return on plan assets of $1.6 billion loss (actual pension return of -1.3%), included in the GAAP measure of income. | ||||||||
6
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 - 2021 | ||||||||||||||||||||||||||||||||
| Dollars in millions | ||||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||||
| June 30, | Sept. 30, | Dec. 31 | March 31, | Four Quarters | ||||||||||||||||||||||||||||
2020 1 | 2020 1 | 2020 1 | 2021 | |||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 14,112 | $ | 13,313 | $ | 12,889 | $ | 13,564 | $ | 53,878 | ||||||||||||||||||||||
| End-of-period current debt | 19,505 | |||||||||||||||||||||||||||||||
| End-of-period long-term debt | 160,694 | |||||||||||||||||||||||||||||||
| Total End-of-Period Debt | 180,199 | |||||||||||||||||||||||||||||||
| Less: Cash and Cash Equivalents | 11,342 | |||||||||||||||||||||||||||||||
| Net Debt Balance | 168,857 | |||||||||||||||||||||||||||||||
| Annualized Net Debt to Adjusted EBITDA Ratio | 3.13 | |||||||||||||||||||||||||||||||
1As reported in AT&T's Form 8-K filed July 23, 2020, October 22, 2020 and January 27, 2021. | ||||||||||||||||||||||||||||||||
| Net Debt to Adjusted EBITDA - 2020 | ||||||||||||||||||||||||||||||||
| Dollars in millions | ||||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||||
| June 30, | Sept. 30, | Dec. 31 | March 31, | Four Quarters | ||||||||||||||||||||||||||||
2019 1 | 2019 1 | 2019 1 | 2020 | |||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 15,041 | $ | 15,079 | $ | 14,365 | $ | 14,232 | $ | 58,717 | ||||||||||||||||||||||
| End-of-period current debt | 17,067 | |||||||||||||||||||||||||||||||
| End-of-period long-term debt | 147,202 | |||||||||||||||||||||||||||||||
| Total End-of-Period Debt | 164,269 | |||||||||||||||||||||||||||||||
| Less: Cash and Cash Equivalents | 9,955 | |||||||||||||||||||||||||||||||
| Net Debt Balance | 154,314 | |||||||||||||||||||||||||||||||
| Annualized Net Debt to Adjusted EBITDA Ratio | 2.63 | |||||||||||||||||||||||||||||||
1As reported in AT&T's Form 8-K filed July 24, 2019, October 28, 2019, January 29, 2020 and April 22, 2020. | ||||||||||||||||||||||||||||||||
7
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 table presents a reconciliation of our supplemental Business Solutions results.
| Supplemental Operational Measure | |||||||||||||||||||||||||||||
| First Quarter | |||||||||||||||||||||||||||||
| March 31, 2021 | March 31, 2020 | ||||||||||||||||||||||||||||
| Mobility | Business Wireline | Adjustments1 | Business Solutions | Mobility | Business Wireline | Adjustments1 | Business Solutions | ||||||||||||||||||||||
| Operating Revenues | |||||||||||||||||||||||||||||
| Wireless service | $ | 14,048 | $ | — | $ | (12,079) | $ | 1,969 | $ | 13,968 | $ | — | $ | (12,019) | $ | 1,949 | |||||||||||||
| Wireline service | — | 5,872 | — | 5,872 | — | 6,091 | — | 6,091 | |||||||||||||||||||||
| Wireless equipment | 4,986 | — | (4,196) | 790 | 3,434 | — | (2,724) | 710 | |||||||||||||||||||||
| Wireline equipment | — | 174 | — | 174 | — | 175 | — | 175 | |||||||||||||||||||||
| Total Operating Revenues | 19,034 | 6,046 | (16,275) | 8,805 | 17,402 | 6,266 | (14,743) | 8,925 | |||||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||||||||
| Operations and support | 11,018 | 3,710 | (9,179) | 5,549 | 9,569 | 3,887 | (7,810) | 5,646 | |||||||||||||||||||||
| EBITDA | 8,016 | 2,336 | (7,096) | 3,256 | 7,833 | 2,379 | (6,933) | 3,279 | |||||||||||||||||||||
| Depreciation and amortization | 2,014 | 1,278 | (1,678) | 1,614 | 2,045 | 1,286 | (1,722) | 1,609 | |||||||||||||||||||||
| Total Operating Expenses | 13,032 | 4,988 | (10,857) | 7,163 | 11,614 | 5,173 | (9,532) | 7,255 | |||||||||||||||||||||
| Operating Income | 6,002 | 1,058 | (5,418) | 1,642 | 5,788 | 1,093 | (5,211) | 1,670 | |||||||||||||||||||||
| Equity in Net Income (Loss) of Affiliates | — | — | — | — | — | — | — | — | |||||||||||||||||||||
| Operating Contribution | $ | 6,002 | $ | 1,058 | $ | (5,418) | $ | 1,642 | $ | 5,788 | $ | 1,093 | $ | (5,211) | $ | 1,670 | |||||||||||||
1Non-business wireless reported in the Communication segment under the Mobility business unit. | |||||||||||||||||||||||||||||
Results have been recast to conform to the current period's classification. | |||||||||||||||||||||||||||||
8