(Mark One) ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 or | |||
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Large accelerated filer | [X] | Accelerated filer | [ ] | |
Non-accelerated filer | [ ] | Smaller reporting company | [ ] | |
Emerging growth company | [ ] |
Name of each exchange | ||
Title of each class | Trading Symbol(s) | on which registered |
Common Shares (Par Value $1.00 Per Share) | T | New York Stock Exchange |
Floating Rate AT&T Inc. | T 19B | New York Stock Exchange |
Global Notes due June 4, 2019 | ||
Floating Rate AT&T Inc. | T 20C | New York Stock Exchange |
Global Notes due August 3, 2020 | ||
1.875% AT&T Inc. | T 20 | New York Stock Exchange |
Global Notes due December 4, 2020 |
2.65% AT&T Inc. | T 21B | New York Stock Exchange |
Global Notes due December 17, 2021 | ||
1.45% AT&T Inc. | T 22B | New York Stock Exchange |
Global Notes due June 1, 2022 | ||
2.50% AT&T Inc. | T 23 | New York Stock Exchange |
Global Notes due March 15, 2023 | ||
Floating Rate AT&T Inc. | T23 D | New York Stock Exchange |
Global Notes due September 5, 2023 | ||
1.05% AT&T Inc. | T 23E | New York Stock Exchange |
Global Notes due September 5, 2023 | ||
1.30% AT&T Inc. | T 23A | New York Stock Exchange |
Global Notes due September 5, 2023 | ||
2.75% AT&T Inc. | T 23C | New York Stock Exchange |
Global Notes due May 19, 2023 | ||
2.40% AT&T Inc. | T 24A | New York Stock Exchange |
Global Notes due March 15, 2024 | ||
3.50% AT&T Inc. | T 25 | New York Stock Exchange |
Global Notes due December 17, 2025 | ||
1.80% AT&T Inc. | T 26D | New York Stock Exchange |
Global Notes due September 5, 2026 |
Name of each exchange | ||
Title of each class | Trading Symbol(s) | on which registered |
2.90% AT&T Inc. | T 26A | New York Stock Exchange |
Global Notes due December 4, 2026 | ||
2.35% AT&T Inc. | T 29D | New York Stock Exchange |
Global Notes due September 5, 2029 | ||
4.375% AT&T Inc. | T 29B | New York Stock Exchange |
Global Notes due September 14, 2029 | ||
2.60% AT&T Inc. | T 29A | New York Stock Exchange |
Global Notes due December 17, 2029 | ||
3.55% AT&T Inc. | T 32 | New York Stock Exchange |
Global Notes due December 17, 2032 | ||
5.20% AT&T Inc. | T 33 | New York Stock Exchange |
Global Notes due November 18, 2033 | ||
3.375% AT&T Inc. | T 34 | New York Stock Exchange |
Global Notes due March 15, 2034 | ||
2.45% AT&T Inc. | T 35 | New York Stock Exchange |
Global Notes due March 15, 2035 | ||
3.15% AT&T Inc. | T 36A | New York Stock Exchange |
Global Notes due September 4, 2036 | ||
7.00% AT&T Inc. | T 40 | New York Stock Exchange |
Global Notes due April 30, 2040 | ||
4.25% AT&T Inc. | T 43 | New York Stock Exchange |
Global Notes due June 1, 2043 | ||
4.875% AT&T Inc. | T 44 | New York Stock Exchange |
Global Notes due June 1, 2044 |
5.35% AT&T Inc. | TBB | New York Stock Exchange |
Global Notes due November 1, 2066 | ||
5.625% AT&T Inc. | TBC | New York Stock Exchange |
Global Notes due August 1, 2067 |
Explanatory Note
AT&T Inc. (AT&T) is filing this Amendment No. 1 to its Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 6, 2019 (the Original Filing) to correct the signature dates and hyperlinks related to Exhibits 31.1, 31.2 and 32 of the Original Filing.
This Amendment is limited in scope to the items identified above. This Amendment does not reflect events occurring after the filing of the Original Filing and no revisions are being made to the Company’s financial statements or disclosures pursuant to this Amendment.
AT&T INC. | |||||
CONSOLIDATED STATEMENTS OF INCOME | |||||
Dollars in millions except per share amounts | |||||
(Unaudited) | |||||
Three months ended | |||||
March 31, | |||||
2019 | 2018 | ||||
Operating Revenues | |||||
Service | $ | 40,684 | $ | 33,646 | |
Equipment | 4,143 | 4,392 | |||
Total operating revenues | 44,827 | 38,038 | |||
Operating Expenses | |||||
Cost of revenues | |||||
Equipment | 4,502 | 4,848 | |||
Broadcast, programming and operations | 7,652 | 5,166 | |||
Other cost of revenues (exclusive of depreciation and amortization shown separately below) | 8,585 | 7,932 | |||
Selling, general and administrative | 9,649 | 7,897 | |||
Depreciation and amortization | 7,206 | 5,994 | |||
Total operating expenses | 37,594 | 31,837 | |||
Operating Income | 7,233 | 6,201 | |||
Other Income (Expense) | |||||
Interest expense | (2,141) | (1,771) | |||
Equity in net income (loss) of affiliates | (7) | 9 | |||
Other income (expense) – net | 286 | 1,702 | |||
Total other income (expense) | (1,862) | (60) | |||
Income Before Income Taxes | 5,371 | 6,141 | |||
Income tax expense | 1,023 | 1,382 | |||
Net Income | 4,348 | 4,759 | |||
Less: Net Income Attributable to Noncontrolling Interest | (252) | (97) | |||
Net Income Attributable to AT&T | $ | 4,096 | $ | 4,662 | |
Basic Earnings Per Share Attributable to AT&T | $ | 0.56 | $ | 0.75 | |
Diluted Earnings Per Share Attributable to AT&T | $ | 0.56 | $ | 0.75 | |
Weighted Average Number of Common Shares Outstanding – Basic (in millions) | 7,313 | 6,161 | |||
Weighted Average Number of Common Shares Outstanding – with Dilution (in millions) | 7,342 | 6,180 | |||
See Notes to Consolidated Financial Statements. |
AT&T INC. | |||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||
Dollars in millions | |||||
(Unaudited) | |||||
Three months ended | |||||
March 31, | |||||
2019 | 2018 | ||||
Net income | $ | 4,348 | $ | 4,759 | |
Other comprehensive income (loss), net of tax: | |||||
Foreign currency: | |||||
Translation adjustment (includes $0 and $2 attributable to noncontrolling interest), net of taxes of $49 and $175 | 288 | 108 | |||
Securities: | |||||
Net unrealized gains (losses), net of taxes of $5 and $(4) | 16 | (12) | |||
Derivative instruments: | |||||
Net unrealized gains, net of taxes of $34 and $180 | 127 | 674 | |||
Reclassification adjustment included in net income, net of taxes of $2 and $3 | 11 | 12 | |||
Defined benefit postretirement plans: | |||||
Net prior service (cost) credit arising during period, net of taxes of $0 and $185 | - | 567 | |||
Amortization of net prior service credit included in net income, net of taxes of $(113) and $(105) | (346) | (323) | |||
Other comprehensive income (loss) | 96 | 1,026 | |||
Total comprehensive income | 4,444 | 5,785 | |||
Less: Total comprehensive income attributable to noncontrolling interest | (252) | (99) | |||
Total Comprehensive Income Attributable to AT&T | $ | 4,192 | $ | 5,686 | |
See Notes to Consolidated Financial Statements. |
AT&T INC. | |||||
CONSOLIDATED BALANCE SHEETS | |||||
Dollars in millions except per share amounts | |||||
March 31, | December 31, | ||||
2019 | 2018 | ||||
Assets | (Unaudited) | ||||
Current Assets | |||||
Cash and cash equivalents | $ | 6,516 | $ | 5,204 | |
Accounts receivable - net of allowances for doubtful accounts of $905 and $907 | 23,863 | 26,472 | |||
Prepaid expenses | 1,518 | 2,047 | |||
Other current assets | 14,575 | 17,704 | |||
Total current assets | 46,472 | 51,427 | |||
Noncurrent Inventories and Theatrical Film and Television Production Costs | 10,270 | 7,713 | |||
Property, plant and equipment | 332,517 | 330,690 | |||
Less: accumulated depreciation and amortization | (200,466) | (199,217) | |||
Property, Plant and Equipment – Net | 132,051 | 131,473 | |||
Goodwill | 146,434 | 146,370 | |||
Licenses – Net | 97,001 | 96,144 | |||
Trademarks and Trade Names – Net | 24,218 | 24,345 | |||
Distribution Networks – Net | 16,623 | 17,069 | |||
Other Intangible Assets – Net | 24,732 | 26,269 | |||
Investments in and Advances to Equity Affiliates | 6,230 | 6,245 | |||
Operating Lease Right-of-Use Assets | 20,235 | - | |||
Other Assets | 24,118 | 24,809 | |||
Total Assets | $ | 548,384 | $ | 531,864 | |
Liabilities and Stockholders’ Equity | |||||
Current Liabilities | |||||
Debt maturing within one year | $ | 11,538 | $ | 10,255 | |
Accounts payable and accrued liabilities | 42,306 | 43,184 | |||
Advanced billings and customer deposits | 5,956 | 5,948 | |||
Accrued taxes | 1,130 | 1,179 | |||
Dividends payable | 3,722 | 3,854 | |||
Total current liabilities | 64,652 | 64,420 | |||
Long-Term Debt | 163,942 | 166,250 | |||
Deferred Credits and Other Noncurrent Liabilities | |||||
Deferred income taxes | 59,207 | 57,859 | |||
Postemployment benefit obligation | 19,664 | 19,218 | |||
Operating lease liabilities | 18,253 | - | |||
Other noncurrent liabilities | 27,715 | 30,233 | |||
Total deferred credits and other noncurrent liabilities | 124,839 | 107,310 | |||
Stockholders’ Equity | |||||
Common stock ($1 par value, 14,000,000,000 authorized at March 31, 2019 and December 31, 2018: issued 7,620,748,598 at March 31, 2019 and December 31, 2018) | 7,621 | 7,621 | |||
Additional paid-in capital | 125,174 | 125,525 | |||
Retained earnings | 59,424 | 58,753 | |||
Treasury stock (323,523,763 at March 31, 2019 and 339,120,073 | |||||
at December 31, 2018, at cost) | (11,452) | (12,059) | |||
Accumulated other comprehensive income | 4,345 | 4,249 | |||
Noncontrolling interest | 9,839 | 9,795 | |||
Total stockholders’ equity | 194,951 | 193,884 | |||
Total Liabilities and Stockholders’ Equity | $ | 548,384 | $ | 531,864 | |
See Notes to Consolidated Financial Statements. |
AT&T INC. | |||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||
Dollars in millions | |||||
(Unaudited) | |||||
Three months ended | |||||
March 31, | |||||
2019 | 2018 | ||||
Operating Activities | |||||
Net income | $ | 4,348 | $ | 4,759 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||||
Depreciation and amortization | 7,206 | 5,994 | |||
Amortization of television and film costs | 2,497 | - | |||
Undistributed earnings from investments in equity affiliates | 112 | (2) | |||
Provision for uncollectible accounts | 592 | 438 | |||
Deferred income tax expense | 1,069 | 1,222 | |||
Net (gain) loss from investments, net of impairments | (175) | 2 | |||
Actuarial (gain) loss on pension and postretirement benefits | 432 | (930) | |||
Changes in operating assets and liabilities: | |||||
Accounts receivable | 1,894 | (439) | |||
Other current assets, inventories and theatrical film and television production costs | (2,510) | 614 | |||
Accounts payable and other accrued liabilities | (3,686) | (1,962) | |||
Equipment installment receivables and related sales | 652 | 505 | |||
Deferred customer contract acquisition and fulfillment costs | (375) | (826) | |||
Retirement benefit funding | - | (140) | |||
Other - net | (1,004) | (288) | |||
Total adjustments | 6,704 | 4,188 | |||
Net Cash Provided by Operating Activities | 11,052 | 8,947 | |||
Investing Activities | |||||
Capital expenditures: | |||||
Purchase of property and equipment | (5,121) | (5,957) | |||
Interest during construction | (61) | (161) | |||
Acquisitions, net of cash acquired | (117) | (234) | |||
Dispositions | 10 | 56 | |||
(Purchases) sales of securities, net | (1) | (116) | |||
Advances to and investments in equity affiliates, net | (111) | (1,007) | |||
Cash collections of deferred purchase price | - | 267 | |||
Net Cash Used in Investing Activities | (5,401) | (7,152) | |||
Financing Activities | |||||
Net change in short-term borrowings with original maturities of three months or less | (256) | - | |||
Issuance of other short-term borrowings | 296 | - | |||
Repayment of other short-term borrowings | (176) | - | |||
Issuance of long-term debt | 9,182 | 2,565 | |||
Repayment of long-term debt | (9,840) | (4,911) | |||
Purchase of treasury stock | (189) | (145) | |||
Issuance of treasury stock | 167 | 11 | |||
Dividends paid | (3,714) | (3,070) | |||
Other | 109 | 2,048 | |||
Net Cash Used in Financing Activities | (4,421) | (3,502) | |||
Net increase (decrease) in cash and cash equivalents and restricted cash | 1,230 | (1,707) | |||
Cash and cash equivalents and restricted cash beginning of year | 5,400 | 50,932 | |||
Cash and Cash Equivalents and Restricted Cash End of Period | $ | 6,630 | $ | 49,225 | |
See Notes to Consolidated Financial Statements. |
AT&T INC. | |||||||||
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY | |||||||||
Dollars and shares in millions except per share amounts | |||||||||
(Unaudited) | |||||||||
March 31, 2019 | March 31, 2018 | ||||||||
Shares | Amount | Shares | Amount | ||||||
Common Stock | |||||||||
Balance at beginning of year | 7,621 | $ | 7,621 | 6,495 | $ | 6,495 | |||
Issuance of stock | - | - | - | - | |||||
Balance at end of period | 7,621 | $ | 7,621 | 6,495 | $ | 6,495 | |||
Additional Paid-In Capital | |||||||||
Balance at beginning of year | $ | 125,525 | $ | 89,563 | |||||
Issuance of treasury stock | (77) | (4) | |||||||
Share-based payments | (274) | (155) | |||||||
Balance at end of period | $ | 125,174 | $ | 89,404 | |||||
Retained Earnings | |||||||||
Balance at beginning of year | $ | 58,753 | $ | 50,500 | |||||
Net income attributable to AT&T ($0.56 and $0.75 per diluted share) | 4,096 | 4,662 | |||||||
Dividends to stockholders ($0.51 and $0.50 per share) | (3,741) | (3,092) | |||||||
Cumulative effect of accounting changes | 316 | 2,997 | |||||||
Balance at end of period | $ | 59,424 | $ | 55,067 | |||||
Treasury Stock | |||||||||
Balance at beginning of year | (339) | $ | (12,059) | (356) | $ | (12,714) | |||
Repurchase and acquisition of common stock | (7) | (208) | (4) | (164) | |||||
Issuance of treasury stock | 22 | 815 | 12 | 446 | |||||
Balance at end of period | (324) | $ | (11,452) | (348) | $ | (12,432) | |||
Accumulated Other Comprehensive Income Attributable to AT&T, net of tax | |||||||||
Balance at beginning of year | $ | 4,249 | $ | 7,017 | |||||
Other comprehensive income attributable to AT&T | 96 | 1,024 | |||||||
Amounts reclassified to retained earnings | - | (655) | |||||||
Balance at end of period | $ | 4,345 | $ | 7,386 | |||||
Noncontrolling Interest | |||||||||
Balance at beginning of year | $ | 9,795 | $ | 1,146 | |||||
Net income attributable to noncontrolling interest | 252 | 97 | |||||||
Interest acquired by noncontrolling owners | 9 | - | |||||||
Distributions | (246) | (124) | |||||||
Translation adjustments attributable to noncontrolling interest, net of taxes | - | 2 | |||||||
Cumulative effect of accounting changes | 29 | 35 | |||||||
Balance at end of period | $ | 9,839 | $ | 1,156 | |||||
Total Stockholders’ Equity at beginning of year | $ | 193,884 | $ | 142,007 | |||||
Total Stockholders’ Equity at end of period | $ | 194,951 | $ | 147,076 | |||||
See Notes to Consolidated Financial Statements. |
Three months ended | |||||
March 31, | |||||
2019 | 2018 | ||||
Numerators | |||||
Numerator for basic earnings per share: | |||||
Net Income | $ | 4,348 | $ | 4,759 | |
Less: Net income attributable to noncontrolling interest | (252) | (97) | |||
Net Income attributable to AT&T | 4,096 | 4,662 | |||
Dilutive potential common shares: | |||||
Share-based payment | 6 | 5 | |||
Numerator for diluted earnings per share | $ | 4,102 | $ | 4,667 | |
Denominators (000,000) | |||||
Denominator for basic earnings per share: | |||||
Weighted average number of common shares outstanding | 7,313 | 6,161 | |||
Dilutive potential common shares: | |||||
Share-based payment (in shares) | 29 | 19 | |||
Denominator for diluted earnings per share | 7,342 | 6,180 | |||
Basic earnings per share attributable to AT&T | $ | 0.56 | $ | 0.75 | |
Diluted earnings per share attributable to AT&T | $ | 0.56 | $ | 0.75 |
Foreign Currency Translation Adjustment | Net Unrealized Gains (Losses) on Securities | Net Unrealized Gains (Losses) on Derivative Instruments | Defined Benefit Postretirement Plans | Accumulated Other Comprehensive Income | |||||||||||
Balance as of December 31, 2018 | $ | (3,084) | $ | (2) | $ | 818 | $ | 6,517 | $ | 4,249 | |||||
Other comprehensive income (loss) before reclassifications | 288 | 16 | 127 | - | 431 | ||||||||||
Amounts reclassified from accumulated OCI | - | - | 11 | 1 | (346) | 2 | (335) | ||||||||
Net other comprehensive income (loss) | 288 | 16 | 138 | (346) | 96 | ||||||||||
Balance as of March 31, 2019 | $ | (2,796) | $ | 14 | $ | 956 | $ | 6,171 | $ | 4,345 | |||||
Foreign Currency Translation Adjustment | Net Unrealized Gains (Losses) on Securities | Net Unrealized Gains (Losses) on Derivative Instruments | Defined Benefit Postretirement Plans | Accumulated Other Comprehensive Income | |||||||||||
Balance as of December 31, 2017 | $ | (2,054) | $ | 660 | $ | 1,402 | $ | 7,009 | $ | 7,017 | |||||
Other comprehensive income (loss) before reclassifications | 106 | (12) | 674 | 567 | 1,335 | ||||||||||
Amounts reclassified from accumulated OCI | - | - | 12 | 1 | (323) | 2 | (311) | ||||||||
Net other comprehensive income (loss) | 106 | (12) | 686 | 244 | 1,024 | ||||||||||
Amounts reclassified to retained earnings | - | (655) | 3 | - | - | (655) | |||||||||
Balance as of March 31, 2018 | $ | (1,948) | $ | (7) | $ | 2,088 | $ | 7,253 | $ | 7,386 | |||||
1 | (Gains) losses are included in Interest expense in the consolidated statements of income (see Note 7). | ||||||||||||||
2 | The amortization of prior service credits associated with postretirement benefits are included in Other income (expense) in the | ||||||||||||||
consolidated statements of income (see Note 6). | |||||||||||||||
3 | With the adoption of ASU 2016-01, the unrealized (gains) losses on our equity investments are reclassified to retained earnings. |
● | Mobility provides nationwide wireless service and equipment. |
● | Entertainment Group provides video, including over-the-top (OTT) services, broadband and voice communications services primarily to residential customers. This segment also sells advertising on DIRECTV and U-verse distribution platforms. |
● | Business Wireline provides advanced IP-based services, as well as traditional voice and data services to business customers. |
● | Turner is comprised of the historic Turner division as well as the financial results of our RSNs. This business unit primarily operates multichannel basic television networks and digital properties. Turner also sells advertising on its networks and digital properties. |
● | Home Box Office consists of premium pay television and OTT services domestically and premium pay, basic tier television and OTT services internationally, as well as content licensing and home entertainment. |
● | Warner Bros. consists of the production, distribution and licensing of television programming and feature films, the distribution of home entertainment products and the production and distribution of games. |
● | Vrio provides video services primarily to residential customers using satellite technology in Latin America and the Caribbean. |
● | Mexico provides wireless service and equipment to customers in Mexico. |
● | Corporate, which consists of: (1) businesses no longer integral to our operations or which we no longer actively market, (2) corporate support functions, (3) impacts of corporate-wide decisions for which the individual operating segments are not being evaluated, (4) the reclassification of the amortization of prior service credits, which we continue to report with segment operating expenses, to consolidated other income (expense)-net and (5) the recharacterization of $150 of programming intangible asset amortization, for released programming acquired in the Time Warner acquisition, which we continue to report within WarnerMedia segment operating expense, to consolidated amortization expense. |
● | Acquisition-related items which consists of items associated with the merger and integration of acquired businesses, including amortization of intangible assets. |
● | Certain significant items includes (1) employee separation charges associated with voluntary and/or strategic offers, (2) losses resulting from abandonment or impairment of assets and (3) other items for which the segments are not being evaluated. |
● | Eliminations and consolidations, which (1) removes transactions involving dealings between our segments, including content licensing between WarnerMedia and Communications, and (2) includes adjustments for our reporting of the advertising business. |
For the three months ended March 31, 2019 | ||||||||||||||||||||
Revenues | Operations and Support Expenses | EBITDA | Depreciation and Amortization | Operating Income (Loss) | Equity in Net Income (Loss) of Affiliates | Segment Contribution | ||||||||||||||
Communications | ||||||||||||||||||||
Mobility | $ | 17,567 | $ | 10,181 | $ | 7,386 | $ | 2,035 | $ | 5,351 | $ | - | $ | 5,351 | ||||||
Entertainment Group | 11,328 | 8,527 | 2,801 | 1,323 | 1,478 | - | 1,478 | |||||||||||||
Business Wireline | 6,498 | 4,040 | 2,458 | 1,235 | 1,223 | - | 1,223 | |||||||||||||
Total Communications | 35,393 | 22,748 | 12,645 | 4,593 | 8,052 | - | 8,052 | |||||||||||||
WarnerMedia | ||||||||||||||||||||
Turner | 3,443 | 2,136 | 1,307 | 60 | 1,247 | 25 | 1,272 | |||||||||||||
Home Box Office | 1,510 | 921 | 589 | 22 | 567 | 15 | 582 | |||||||||||||
Warner Bros. | 3,518 | 2,919 | 599 | 52 | 547 | 6 | 553 | |||||||||||||
Other | (92) | 17 | (109) | 9 | (118) | 21 | (97) | |||||||||||||
Total WarnerMedia | 8,379 | 5,993 | 2,386 | 143 | 2,243 | 67 | 2,310 | |||||||||||||
Latin America | ||||||||||||||||||||
Vrio | 1,067 | 866 | 201 | 169 | 32 | - | 32 | |||||||||||||
Mexico | 651 | 725 | (74) | 131 | (205) | - | (205) | |||||||||||||
Total Latin America | 1,718 | 1,591 | 127 | 300 | (173) | - | (173) | |||||||||||||
Xandr | 426 | 160 | 266 | 13 | 253 | - | 253 | |||||||||||||
Segment Total | 45,916 | 30,492 | 15,424 | 5,049 | 10,375 | $ | 67 | $ | 10,442 | |||||||||||
Corporate and Other | ||||||||||||||||||||
Corporate | 209 | 513 | (304) | 169 | (473) | |||||||||||||||
Acquisition-related items | (42) | 73 | (115) | 1,988 | (2,103) | |||||||||||||||
Certain significant items | - | 248 | (248) | - | (248) | |||||||||||||||
Eliminations and consolidations | (1,256) | (938) | (318) | - | (318) | |||||||||||||||
AT&T Inc. | $ | 44,827 | $ | 30,388 | $ | 14,439 | $ | 7,206 | $ | 7,233 |
AT&T INC. MARCH 31, 2019 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Dollars in millions except per share amounts For the three months ended March 31, 2018 | ||||||||||||||||||||
Revenues | Operations and Support Expenses | EBITDA | Depreciation and Amortization | Operating Income (Loss) | Equity in Net Income (Loss) of Affiliates | Segment Contribution | ||||||||||||||
Communications | ||||||||||||||||||||
Mobility | $ | 17,355 | $ | 10,102 | $ | 7,253 | $ | 2,095 | $ | 5,158 | $ | - | $ | 5,158 | ||||||
Entertainment Group | 11,431 | 8,811 | 2,620 | 1,310 | 1,310 | (1) | 1,309 | |||||||||||||
Business Wireline | 6,747 | 4,016 | 2,731 | 1,170 | 1,561 | (1) | 1,560 | |||||||||||||
Total Communications | 35,533 | 22,929 | 12,604 | 4,575 | 8,029 | (2) | 8,027 | |||||||||||||
WarnerMedia | ||||||||||||||||||||
Turner | 112 | 74 | 38 | 1 | 37 | 27 | 64 | |||||||||||||
Home Box Office | - | - | - | - | - | - | - | |||||||||||||
Warner Bros. | - | - | - | - | - | - | - | |||||||||||||
Other | - | 8 | (8) | - | (8) | (17) | (25) | |||||||||||||
Total WarnerMedia | 112 | 82 | 30 | 1 | 29 | 10 | 39 | |||||||||||||
Latin America | ||||||||||||||||||||
Vrio | 1,354 | 1,001 | 353 | 205 | 148 | - | 148 | |||||||||||||
Mexico | 671 | 803 | (132) | 127 | (259) | - | (259) | |||||||||||||
Total Latin America | 2,025 | 1,804 | 221 | 332 | (111) | - | (111) | |||||||||||||
Xandr | 337 | 50 | 287 | 1 | 286 | - | 286 | |||||||||||||
Segment Total | 38,007 | 24,865 | 13,142 | 4,909 | 8,233 | $ | 8 | $ | 8,241 | |||||||||||
Corporate and Other | ||||||||||||||||||||
Corporate | 333 | 735 | (402) | 23 | (425) | |||||||||||||||
Acquisition-related items | - | 67 | (67) | 1,062 | (1,129) | |||||||||||||||
Certain significant items | - | 180 | (180) | - | (180) | |||||||||||||||
Eliminations and consolidations | (302) | (4) | (298) | - | (298) | |||||||||||||||
AT&T Inc. | $ | 38,038 | $ | 25,843 | $ | 12,195 | $ | 5,994 | $ | 6,201 |
Three months ended March 31, | |||||
2019 | 2018 | ||||
Communications | $ | 8,052 | $ | 8,027 | |
WarnerMedia | 2,310 | 39 | |||
Latin America | (173) | (111) | |||
Xandr | 253 | 286 | |||
Segment Contribution | 10,442 | 8,241 | |||
Reconciling Items: | |||||
Corporate and Other | (473) | (425) | |||
Merger and integration items | (115) | (67) | |||
Amortization of intangibles acquired | (1,988) | (1,062) | |||
Employee separation charges | (248) | (51) | |||
Natural disaster items | - | (104) | |||
Foreign currency devaluation | - | (25) | |||
Segment equity in net income of affiliates | (67) | (8) | |||
Eliminations and consolidations | (318) | (298) | |||
AT&T Operating Income | 7,233 | 6,201 | |||
Interest Expense | 2,141 | 1,771 | |||
Equity in net income (loss) of affiliates | (7) | 9 | |||
Other income (expense) - net | 286 | 1,702 | |||
Income Before Income Taxes | $ | 5,371 | $ | 6,141 |
Intersegment Reconciliation | |||||
Three months ended March 31, | |||||
2019 | 2018 | ||||
Intersegment revenues | |||||
Communications | $ | - | $ | - | |
WarnerMedia | 858 | 31 | |||
Latin America | - | - | |||
Xandr | - | - | |||
Total Intersegment Revenues | 858 | 31 | |||
Consolidations | 398 | 271 | |||
Eliminations and consolidations | $ | 1,256 | $ | 302 |
NOTE 5. REVENUE RECOGNITION
Revenue Categories | ||||||||||||||||||||||||||
The following tables set forth reported revenue by category: | ||||||||||||||||||||||||||
For the three months ended March 31, 2019 | ||||||||||||||||||||||||||
Service Revenues | ||||||||||||||||||||||||||
Wireless | Advanced Data | Legacy Voice & Data | Subscription | Content | Advertising | Other | Equipment | Total | ||||||||||||||||||
Communications | ||||||||||||||||||||||||||
Mobility | $ | 13,725 | $ | - | $ | - | $ | - | $ | - | $ | 67 | $ | - | $ | 3,775 | $ | 17,567 | ||||||||
Entertainment Group | - | 2,070 | 683 | 7,724 | - | 350 | 501 | - | 11,328 | |||||||||||||||||
Business Wireline | - | 3,186 | 2,404 | - | - | - | 749 | 159 | 6,498 | |||||||||||||||||
WarnerMedia | ||||||||||||||||||||||||||
Turner | - | - | - | 1,965 | 135 | 1,261 | 82 | - | 3,443 | |||||||||||||||||
Home Box Office | - | - | - | 1,334 | 173 | - | 3 | - | 1,510 | |||||||||||||||||
Warner Bros. | - | - | - | 21 | 3,332 | 10 | 155 | - | 3,518 | |||||||||||||||||
Eliminations and Other | - | - | - | 49 | (152) | 8 | 3 | - | (92) | |||||||||||||||||
Latin America | ||||||||||||||||||||||||||
Vrio | - | - | - | 1,067 | - | - | - | - | 1,067 | |||||||||||||||||
Mexico | 442 | - | - | - | - | - | - | 209 | 651 | |||||||||||||||||
Xandr | - | - | - | - | - | 426 | - | - | 426 | |||||||||||||||||
Corporate and Other | - | - | - | - | - | - | 167 | - | 167 | |||||||||||||||||
Eliminations and consolidations | - | - | - | - | (837) | (350) | (69) | - | (1,256) | |||||||||||||||||
Total Operating Revenues | $ | 14,167 | $ | 5,256 | $ | 3,087 | $ | 12,160 | $ | 2,651 | $ | 1,772 | $ | 1,591 | $ | 4,143 | $ | 44,827 |
For the three months ended March 31, 2018 | ||||||||||||||||||||||||||
Service Revenues | ||||||||||||||||||||||||||
Wireless | Advanced Data | Legacy Voice & Data | Subscription | Content | Advertising | Other | Equipment | Total | ||||||||||||||||||
Communications | ||||||||||||||||||||||||||
Mobility | $ | 13,362 | $ | - | $ | - | $ | - | $ | - | $ | 41 | $ | - | $ | 3,952 | $ | 17,355 | ||||||||
Entertainment Group | - | 1,878 | 806 | 7,891 | - | 334 | 519 | 3 | 11,431 | |||||||||||||||||
Business Wireline | - | 3,043 | 2,865 | - | - | - | 669 | 170 | 6,747 | |||||||||||||||||
WarnerMedia | ||||||||||||||||||||||||||
Turner | - | - | - | 98 | - | 14 | - | - | 112 | |||||||||||||||||
Home Box Office | - | - | - | - | - | - | - | - | - | |||||||||||||||||
Warner Bros. | - | - | - | - | - | - | - | - | - | |||||||||||||||||
Eliminations and Other | - | - | - | - | - | - | - | - | - | |||||||||||||||||
Latin America | ||||||||||||||||||||||||||
Vrio | - | - | - | 1,354 | - | - | - | - | 1,354 | |||||||||||||||||
Mexico | 404 | - | - | - | - | - | - | 267 | 671 | |||||||||||||||||
Xandr | - | - | - | - | - | 337 | - | - | 337 | |||||||||||||||||
Corporate and Other | - | - | - | - | - | - | 333 | - | 333 | |||||||||||||||||
Eliminations and consolidations | - | - | - | - | - | (334) | 32 | - | (302) | |||||||||||||||||
Total Operating Revenues | $ | 13,766 | $ | 4,921 | $ | 3,671 | $ | 9,343 | $ | - | $ | 392 | $ | 1,553 | $ | 4,392 | $ | 38,038 |
March 31, | December 31, | |||||
2019 | 2018 | |||||
Contract asset | $ | 2,198 | $ | 1,896 | ||
Contract liability | 6,899 | 6,856 |
Three months ended | |||||
March 31, | |||||
2019 | 2018 | ||||
Pension cost: | |||||
Service cost – benefits earned during the period | $ | 240 | $ | 291 | |
Interest cost on projected benefit obligation | 549 | 487 | |||
Expected return on assets | (851) | (760) | |||
Amortization of prior service credit | (33) | (30) | |||
Actuarial (gain) loss | 432 | - | |||
Net pension (credit) cost | $ | 337 | $ | (12) | |
Postretirement cost: | |||||
Service cost – benefits earned during the period | $ | 18 | $ | 29 | |
Interest cost on accumulated postretirement benefit obligation | 186 | 191 | |||
Expected return on assets | (56) | (77) | |||
Amortization of prior service credit | (426) | (397) | |||
Actuarial (gain) loss | - | (930) | |||
Net postretirement (credit) cost | $ | (278) | $ | (1,184) | |
Combined net pension and postretirement (credit) cost | $ | 59 | $ | (1,196) |
March 31, 2019 | December 31, 2018 | |||||||||||
Carrying | Fair | Carrying | Fair | |||||||||
Amount | Value | Amount | Value | |||||||||
Notes and debentures1 | $ | 170,532 | $ | 179,576 | $ | 171,529 | $ | 172,287 | ||||
Commercial paper | 2,957 | 2,957 | 3,048 | 3,048 | ||||||||
Bank borrowings | 4 | 4 | 4 | 4 | ||||||||
Investment securities2 | 3,606 | 3,606 | 3,409 | 3,409 | ||||||||
1 | Includes credit agreement borrowings. | |||||||||||
2 | Excludes investments accounted for under the equity method. |
March 31, 2019 | ||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||
Equity Securities | ||||||||||||
Domestic equities | $ | 1,092 | $ | - | $ | - | $ | 1,092 | ||||
International equities | 263 | - | - | 263 | ||||||||
Fixed income equities | 208 | - | - | 208 | ||||||||
Available-for-Sale Debt Securities | - | 989 | - | 989 | ||||||||
Asset Derivatives | ||||||||||||
Interest rate swaps | - | 2 | - | 2 | ||||||||
Cross-currency swaps | - | 427 | - | 427 | ||||||||
Foreign exchange contracts | - | 87 | - | 87 | ||||||||
Liability Derivatives | ||||||||||||
Interest rate swaps | - | (13) | - | (13) | ||||||||
Cross-currency swaps | - | (2,697) | - | (2,697) | ||||||||
Foreign exchange contracts | - | (6) | - | (6) |
December 31, 2018 | ||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||
Equity Securities | ||||||||||||
Domestic equities | $ | 1,061 | $ | - | $ | - | $ | 1,061 | ||||
International equities | 256 | - | - | 256 | ||||||||
Fixed income equities | 172 | - | - | 172 | ||||||||
Available-for-Sale Debt Securities | - | 870 | - | 870 | ||||||||
Asset Derivatives | ||||||||||||
Cross-currency swaps | - | 472 | - | 472 | ||||||||
Foreign exchange contracts | - | 87 | - | 87 | ||||||||
Liability Derivatives | ||||||||||||
Interest rate swaps | - | (39) | - | (39) | ||||||||
Cross-currency swaps | - | (2,563) | - | (2,563) | ||||||||
Foreign exchange contracts | - | (2) | - | (2) |
Three months ended | |||||
March 31, | |||||
2019 | 2018 | ||||
Total gains (losses) recognized on equity securities | $ | 160 | $ | (13) | |
Gains (Losses) recognized on equity securities sold | 86 | 52 | |||
Unrealized gains (losses) recognized on equity securities held at end of period | 74 | (65) |
March 31, | December 31, | ||||
2019 | 2018 | ||||
Interest rate swaps | $ | 1,633 | $ | 3,483 | |
Cross-currency swaps | 42,192 | 42,192 | |||
Foreign exchange contracts | 1,238 | 2,094 | |||
Total | $ | 45,063 | $ | 47,769 |
Effect of Derivatives on the Consolidated Statements of Income | |||||
Three months ended | |||||
March 31, | |||||
Fair Value Hedging Relationships | 2019 | 2018 | |||
Interest rate swaps (Interest expense): | |||||
Gain (Loss) on interest rate swaps | $ | 24 | $ | (53) | |
Gain (Loss) on long-term debt | (24) | 53 |
Three months ended | |||||
March 31, | |||||
Cash Flow Hedging Relationships | 2019 | 2018 | |||
Cross-currency swaps: | |||||
Gain (Loss) recognized in accumulated OCI | $ | 168 | $ | 854 | |
Foreign exchange contracts: | |||||
Gain (Loss) recognized in accumulated OCI | (7) | - | |||
Other income (expense) - net reclassified from accumulated OCI into income | 3 | - | |||
Interest rate locks: | |||||
Interest income (expense) reclassified from accumulated OCI into income | (16) | (15) |
Assets acquired | |||
Cash | $ | 1,889 | |
Accounts receivable | 9,052 | ||
All other current assets | 2,913 | ||
Noncurrent inventory and theatrical film and television production costs | 5,591 | ||
Property, plant and equipment | 4,785 | ||
Intangible assets subject to amortization | |||
Distribution network | 18,040 | ||
Released television and film content | 10,806 | ||
Trademarks and trade names | 18,081 | ||
Other | 10,300 | ||
Investments and other assets | 9,449 | ||
Goodwill | 38,569 | ||
Total assets acquired | 129,475 | ||
Liabilities assumed | |||
Current liabilities, excluding current portion of long-term debt | 8,303 | ||
Debt maturing within one year | 4,471 | ||
Long-term debt | 18,394 | ||
Other noncurrent liabilities | 18,948 | ||
Total liabilities assumed | 50,116 | ||
Net assets acquired | 79,359 | ||
Noncontrolling interest | (1) | ||
Aggregate value of consideration paid | $ | 79,358 |
Three months ended | ||||||
March 31, | ||||||
2019 | 2018 | |||||
Gross receivables sold | $ | 4,101 | $ | 3,010 | ||
Net receivables sold1 | 3,909 | 2,795 | ||||
Cash proceeds received | 3,675 | 2,395 | ||||
Deferred purchase price recorded | 309 | 519 | ||||
Guarantee obligation recorded | 138 | 123 | ||||
1 | Receivables net of allowance, imputed interest and trade-in right guarantees. |
Three months ended | ||||||
March 31, | ||||||
2019 | 2018 | |||||
Fair value of repurchased receivables | $ | 423 | $ | - | ||
Carrying value of deferred purchase price | 407 | - | ||||
Gain (loss) on repurchases1 | $ | 16 | $ | - | ||
1 | These gains (losses) are included in “Selling, general and administrative” in the consolidated statements of income. |
Three months ended | ||
March 31, 2019 | ||
Operating lease cost | $ | 1,242 |
Finance lease cost: | ||
Amortization of right-of-use assets | $ | 66 |
Interest on lease obligation | 42 | |
Total finance lease cost | $ | 108 |
At March 31, 2019 | |||
Operating Leases | |||
Operating lease right-of-use assets | $ | 20,235 | |
Accounts payable and accrued liabilities | $ | 3,072 | |
Operating lease obligation | 18,253 | ||
Total operating lease obligation | $ | 21,325 | |
Finance Leases | |||
Property, plant and equipment, at cost | $ | 3,377 | |
Accumulated depreciation and amortization | (1,173) | ||
Property, plant and equipment, net | $ | 2,204 | |
Current portion of long-term debt | $ | 135 | |
Long-term debt | 1,852 | ||
Total finance lease obligation | $ | 1,987 | |
Weighted-Average Remaining Lease Term | |||
Operating leases | 7.9 | yrs | |
Finance leases | 10.9 | yrs | |
Weighted-Average Discount Rate | |||
Operating leases | 4.7 | % | |
Finance leases | 8.6 | % |
At March 31, 2019 | Operating | Finance | |||
Leases | Leases | ||||
Remainder of 2019 | $ | 3,201 | $ | 246 | |
2020 | 3,981 | 290 | |||
2021 | 3,533 | 279 | |||
2022 | 3,231 | 263 | |||
2023 | 2,893 | 254 | |||
Thereafter | 9,633 | 1,828 | |||
Total lease payments | 26,472 | 3,160 | |||
Less imputed interest | (5,147) | (1,173) | |||
Total | $ | 21,325 | $ | 1,987 |
March 31, | December 31, | |||||||||||
Cash and Cash Equivalents and Restricted Cash | 2019 | 2018 | 2018 | 2017 | ||||||||
Cash and cash equivalents | $ | 6,516 | $ | 48,872 | $ | 5,204 | $ | 50,498 | ||||
Restricted cash in Other current assets | 20 | 8 | 61 | 6 | ||||||||
Restricted cash in Other Assets | 94 | 345 | 135 | 428 | ||||||||
Cash and cash equivalents and restricted cash | $ | 6,630 | $ | 49,225 | $ | 5,400 | $ | 50,932 |
Three months ended | |||||
March 31, | |||||
Cash Paid for Amounts Included in the Measurement of Lease Liabilities: | 2019 | 2018 | |||
Operating cash flows from operating leases | $ | 1,332 | $ | 1,207 |
Three months ended | ||||||
March 31, | ||||||
Cash Paid (Received) During the Period for: | 2019 | 2018 | ||||
Interest | $ | 2,507 | $ | 2,408 | ||
Income taxes, net of refunds | (379) | (1,089) |
First Quarter | |||||||
Percent | |||||||
2019 | 2018 | Change | |||||
Operating Revenues | |||||||
Communications | $ | 35,393 | $ | 35,533 | (0.4) | % | |
WarnerMedia | 8,379 | 112 | - | ||||
Latin America | 1,718 | 2,025 | (15.2) | ||||
Xandr | 426 | 337 | 26.4 | ||||
Corporate and other | 167 | 333 | (49.8) | ||||
Eliminations and consolidation | (1,256) | (302) | - | ||||
AT&T Operating Revenues | 44,827 | 38,038 | 17.8 | ||||
Operating Contribution | |||||||
Communications | 8,052 | 8,027 | 0.3 | ||||
WarnerMedia | 2,310 | 39 | - | ||||
Latin America | (173) | (111) | (55.9) | ||||
Xandr | 253 | 286 | (11.5) | ||||
Segment Operating Contribution | $ | 10,442 | $ | 8,241 | 26.7 | % |
Mobility provides nationwide wireless service and equipment. |
Entertainment Group provides video, including over-the-top (OTT) services, broadband and voice communications services primarily to residential customers. This segment also sells advertising on DIRECTV and U-verse distribution platforms. |
Business Wireline provides advanced IP-based services, as well as traditional voice and data services to business customers. |
Turner is comprised of the historic Turner division as well as the financial results of our AT&T's Regional Sports Networks (RSNs). This business unit primarily operates multichannel basic television networks and digital properties. Turner also sells advertising on its networks and digital properties. |
Home Box Office consists of premium pay television and OTT services domestically and premium pay, basic tier television and OTT services internationally, as well as content licensing and home entertainment. |
Warner Bros. consists of the production, distribution and licensing of television programming and feature films, the distribution of home entertainment products and the production and distribution of games. |
Vrio provides video services primarily to residential customers using satellite technology in Latin America and the Caribbean. |
Mexico provides wireless service and equipment to customers in Mexico. |
First Quarter | |||||||
Percent | |||||||
2019 | 2018 | Change | |||||
Operating Revenues | |||||||
Service | $ | 40,684 | $ | 33,646 | 20.9 | % | |
Equipment | 4,143 | 4,392 | (5.7) | ||||
Total Operating Revenues | 44,827 | 38,038 | 17.8 | ||||
Operating expenses | |||||||
Operations and support | 30,388 | 25,843 | 17.6 | ||||
Depreciation and amortization | 7,206 | 5,994 | 20.2 | ||||
Total Operating Expenses | 37,594 | 31,837 | 18.1 | ||||
Operating Income | 7,233 | 6,201 | 16.6 | ||||
Interest expense | 2,141 | 1,771 | 20.9 | ||||
Equity in net income (loss) of affiliates | (7) | 9 | - | ||||
Other income (expense) – net | 286 | 1,702 | (83.2) | ||||
Income Before Income Taxes | 5,371 | 6,141 | (12.5) | ||||
Net Income | 4,348 | 4,759 | (8.6) | ||||
Net Income Attributable to AT&T | $ | 4,096 | $ | 4,662 | (12.1) | % |
COMMUNICATIONS SEGMENT | First Quarter | ||||||
Percent | |||||||
2019 | 2018 | Change | |||||
Segment Operating Revenues | |||||||
Mobility | $ | 17,567 | $ | 17,355 | 1.2 | % | |
Entertainment Group | 11,328 | 11,431 | (0.9) | ||||
Business Wireline | 6,498 | 6,747 | (3.7) | ||||
Total Segment Operating Revenues | 35,393 | 35,533 | (0.4) | ||||
Segment Operating Contribution | |||||||
Mobility | 5,351 | 5,158 | 3.7 | ||||
Entertainment Group | 1,478 | 1,309 | 12.9 | ||||
Business Wireline | 1,223 | 1,560 | (21.6) | ||||
Total Segment Operating Contribution | $ | 8,052 | $ | 8,027 | 0.3 | % |
AT&T INC.
Selected Subscribers and Connections | |||
First Quarter | |||
(000s) | 2019 | 2018 | |
Total domestic broadband connections | 15,737 | 15,775 | |
Network access lines in service | 9,576 | 11,288 | |
U-verse VoIP connections | 4,935 | 5,585 |
Communications Business Unit Discussion | |||||||
Mobility Results | |||||||
First Quarter | |||||||
Percent | |||||||
2019 | 2018 | Change | |||||
Operating revenues | |||||||
Service | $ | 13,792 | $ | 13,403 | 2.9 | % | |
Equipment | 3,775 | 3,952 | (4.5) | ||||
Total Operating Revenues | 17,567 | 17,355 | 1.2 | ||||
Operating expenses | |||||||
Operations and support | 10,181 | 10,102 | 0.8 | ||||
Depreciation and amortization | 2,035 | 2,095 | (2.9) | ||||
Total Operating Expenses | 12,216 | 12,197 | 0.2 | ||||
Operating Income | 5,351 | 5,158 | 3.7 | ||||
Equity in Net Income (Loss) of Affiliates | - | - | - | ||||
Operating Contribution | $ | 5,351 | $ | 5,158 | 3.7 | % |
First Quarter | Percent | |||||||
(in 000s) | 2019 | 2018 | Change | |||||
Wireless Subscribers | ||||||||
Postpaid smartphones | 60,597 | 60,002 | 1.0 | % | ||||
Postpaid feature phones and data-centric devices | 15,953 | 17,429 | (8.5) | |||||
Postpaid | 76,550 | 77,431 | (1.1) | |||||
Prepaid | 17,180 | 15,671 | 9.6 | |||||
Reseller | 7,574 | 9,002 | (15.9) | |||||
Connected devices1 | 54,428 | 41,728 | 30.4 | |||||
Total Wireless Subscribers | 155,732 | 143,832 | 8.3 | |||||
Wireless Net Additions2 | ||||||||
Postpaid | (204) | 49 | - | |||||
Prepaid | 96 | 241 | (60.2) | |||||
Reseller | (253) | (388) | 34.8 | |||||
Connected devices1 | 3,088 | 2,728 | 13.2 | |||||
Wireless Net Subscriber Additions | 2,727 | 2,630 | 3.7 | |||||
Postpaid Phone Subscribers | 63,438 | 63,657 | (0.3) | |||||
Postpaid Phone Net Additions | 80 | (60) | - | % | ||||
Postpaid Churn3 | 1.17 | 1.06 | 11 | BP | ||||
Postpaid Phone-Only Churn 3 | 0.93 | 0.84 | 9 | BP | ||||
1 | Includes data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems. Excludes | |||||||
postpaid tablets. | ||||||||
2 | Excludes acquisition-related additions during the period. | |||||||
3 | Calculated by dividing the aggregate number of wireless subscribers who canceled service during a month divided by the total number | |||||||
of wireless subscribers at the beginning of that month. The churn rate for the period is equal to the average of the churn rate for | ||||||||
each month of that period. |
Entertainment Group Results | |||||||
First Quarter | |||||||
Percent | |||||||
2019 | 2018 | Change | |||||
Operating revenues | |||||||
Video entertainment | $ | 8,074 | $ | 8,225 | (1.8) | % | |
High-speed internet | 2,070 | 1,878 | 10.2 | ||||
Legacy voice and data services | 683 | 806 | (15.3) | ||||
Other service and equipment | 501 | 522 | (4.0) | ||||
Total Operating Revenues | 11,328 | 11,431 | (0.9) | ||||
Operating expenses | |||||||
Operations and support | 8,527 | 8,811 | (3.2) | ||||
Depreciation and amortization | 1,323 | 1,310 | 1.0 | ||||
Total Operating Expenses | 9,850 | 10,121 | (2.7) | ||||
Operating Income | 1,478 | 1,310 | 12.8 | ||||
Equity in Net Income (Loss) of Affiliates | - | (1) | - | ||||
Operating Contribution | $ | 1,478 | $ | 1,309 | 12.9 | % |
First Quarter | Percent Change | ||||||
(in 000s) | 2019 | 2018 | |||||
Video Connections | |||||||
Premium TV1 | 22,359 | 23,902 | (6.5) | % | |||
DIRECTV NOW2 | 1,508 | 1,467 | 2.8 | ||||
Total Video Connections | 23,867 | 25,369 | (5.9) | ||||
Broadband Connections | |||||||
IP1 | 13,822 | 13,616 | 1.5 | ||||
DSL | 632 | 816 | (22.5) | ||||
Total Broadband Connections | 14,454 | 14,432 | 0.2 | ||||
Retail Consumer Switched Access Lines | 3,787 | 4,535 | (16.5) | ||||
U-verse Consumer VoIP Connections | 4,393 | 5,105 | (13.9) | ||||
Total Retail Consumer Voice Connections | 8,180 | 9,640 | (15.1) | ||||
Video Net Additions | |||||||
Premium TV1, 3 | (544) | (187) | - | ||||
DIRECTV NOW2 | (83) | 312 | - | ||||
Net Video Additions | (627) | 125 | - | ||||
Broadband Net Additions | |||||||
IP1 | 93 | 154 | (39.6) | ||||
DSL | (48) | (72) | 33.3 | ||||
Net Broadband Additions | 45 | 82 | (45.1) | ||||
Fiber Broadband Connections (included in IP) | 3,060 | 1,955 | 56.5 | ||||
Fiber Broadband Net Additions (included in IP) | 297 | 226 | 31.4 | % | |||
1 | 2019 includes the impact of aligning our subscriber billing practice with the industry and AT&T Mobility to extend customer business | ||||||
disconnection period to the end of the billing cycle, resulting in an increase of 117 net video and 38 net broadband subscribers at March | |||||||
31, 2019. | |||||||
2 | Consistent with industry practice, DIRECTV NOW includes connections that are on a free-trial. | ||||||
3 | Includes disconnections for customers that migrated to DIRECTV NOW. |
Business Wireline Results | |||||||
First Quarter | |||||||
Percent | |||||||
2019 | 2018 | Change | |||||
Operating revenues | |||||||
Strategic and managed services | $ | 3,792 | $ | 3,595 | 5.5 | % | |
Legacy voice and data services | 2,404 | 2,865 | (16.1) | ||||
Other service and equipment | 302 | 287 | 5.2 | ||||
Total Operating Revenues | 6,498 | 6,747 | (3.7) | ||||
Operating expenses | |||||||
Operations and support | 4,040 | 4,016 | 0.6 | ||||
Depreciation and amortization | 1,235 | 1,170 | 5.6 | ||||
Total Operating Expenses | 5,275 | 5,186 | 1.7 | ||||
Operating Income | 1,223 | 1,561 | (21.7) | ||||
Equity in Net Income (Loss) of Affiliates | - | (1) | - | ||||
Operating Contribution | $ | 1,223 | $ | 1,560 | (21.6) | % |
WARNERMEDIA SEGMENT | First Quarter | ||||||
Percent | |||||||
2019 | 2018 | Change | |||||
Segment Operating Revenues | |||||||
Turner | $ | 3,443 | $ | 112 | - | % | |
Home Box Office | 1,510 | - | - | ||||
Warner Bros. | 3,518 | - | - | ||||
Eliminations & Other | (92) | - | - | ||||
Total Segment Operating Revenues | 8,379 | 112 | - | ||||
Segment Operating Contribution | |||||||
Turner | 1,272 | 64 | - | ||||
Home Box Office | 582 | - | - | ||||
Warner Bros. | 553 | - | - | ||||
Eliminations & Other | (97) | (25) | - | ||||
Total Segment Operating Contribution | $ | 2,310 | $ | 39 | - | % |
WarnerMedia Business Unit Discussion | |||||||
Turner Results | |||||||
First Quarter | |||||||
Percent | |||||||
2019 | 2018 | Change | |||||
Operating revenues | |||||||
Subscription | $ | 1,965 | $ | 98 | - | % | |
Advertising | 1,261 | 14 | - | ||||
Content and other | 217 | - | - | ||||
Total Operating Revenues | 3,443 | 112 | - | ||||
Operating expenses | |||||||
Operations and support | 2,136 | 74 | - | ||||
Depreciation and amortization | 60 | 1 | - | ||||
Total Operating Expenses | 2,196 | 75 | - | ||||
Operating Income | 1,247 | 37 | - | ||||
Equity in Net Income of Affiliates | 25 | 27 | (7.4) | ||||
Operating Contribution | $ | 1,272 | $ | 64 | - | % |
Home Box Office Results | |||||||
First Quarter | |||||||
Percent | |||||||
2019 | 2018 | Change | |||||
Operating revenues | |||||||
Subscription | $ | 1,334 | $ | - | - | % | |
Content and other | 176 | - | - | ||||
Total Operating Revenues | 1,510 | - | - | ||||
Operating expenses | |||||||
Operations and support | 921 | - | - | ||||
Depreciation and amortization | 22 | - | - | ||||
Total Operating Expenses | 943 | - | - | ||||
Operating Income | 567 | - | - | ||||
Equity in Net Income of Affiliates | 15 | - | - | ||||
Operating Contribution | $ | 582 | $ | - | - | % |
Warner Bros. Results | |||||||
First Quarter | |||||||
Percent | |||||||
2019 | 2018 | Change | |||||
Operating revenues | |||||||
Theatrical product | $ | 1,506 | $ | - | - | % | |
Television product | 1,613 | - | - | ||||
Games and other | 399 | - | - | ||||
Total Operating Revenues | 3,518 | - | - | ||||
Operating expenses | |||||||
Operations and support | 2,919 | - | - | ||||
Depreciation and amortization | 52 | - | - | ||||
Total Operating Expenses | 2,971 | - | - | ||||
Operating Income | 547 | - | - | ||||
Equity in Net Income of Affiliates | 6 | - | - | ||||
Operating Contribution | $ | 553 | $ | - | - | % |
LATIN AMERICA SEGMENT | First Quarter | ||||||
Percent | |||||||
2019 | 2018 | Change | |||||
Segment Operating Revenues | |||||||
Vrio | $ | 1,067 | $ | 1,354 | (21.2) | % | |
Mexico | 651 | 671 | (3.0) | ||||
Total Segment Operating Revenues | 1,718 | 2,025 | (15.2) | ||||
Segment Operating Contribution | |||||||
Vrio | 32 | 148 | (78.4) | ||||
Mexico | (205) | (259) | 20.8 | ||||
Total Segment Operating Contribution | $ | (173) | $ | (111) | (55.9) | % |
Latin America Business Unit Discussion | |||||||
Vrio Results | |||||||
First Quarter | |||||||
Percent | |||||||
2019 | 2018 | Change | |||||
Operating revenues | $ | 1,067 | $ | 1,354 | (21.2) | % | |
Operating expenses | |||||||
Operations and support | 866 | 1,001 | (13.5) | ||||
Depreciation and amortization | 169 | 205 | (17.6) | ||||
Total Operating Expenses | 1,035 | 1,206 | (14.2) | ||||
Operating Income | 32 | 148 | (78.4) | ||||
Operating Contribution | $ | 32 | $ | 148 | (78.4) | % |
First Quarter | ||||||||
Percent | ||||||||
(in 000s) | 2019 | 2018 | Change | |||||
Vrio Video Subscribers1,2 | 13,584 | 13,573 | 0.1 | % | ||||
Vrio Video Net Subscriber Additions3 | (32) | (15) | - | % | ||||
1 | Excludes subscribers of our equity investment in SKY Mexico, in which we own a 41.3% stake. SKY Mexico had 7.6 million | |||||||
subscribers at December 31, 2018 and 7.9 million subscribers at March 31, 2018. | ||||||||
2 | 2019 excludes the impact of 222 subscriber disconnections resulting from conforming our video credit policy across the region, which is | |||||||
reflected in beginning of period subscribers. | ||||||||
3 | Excludes SKY Mexico net subscriber losses of 199 and 92 for the quarter ended December 31, 2018 and March 31, 2018, respectively. |
AT&T INC. MARCH 31, 2019 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued Dollars, subscribers and connections in millions, except per share and per subscriber amounts | |||||||
First Quarter | |||||||
2019 | 2018 | Percent Change | |||||
Operating revenues | |||||||
Service | $ | 442 | $ | 404 | 9.4 | % | |
Equipment | 209 | 267 | (21.7) | ||||
Total Operating Revenues | 651 | 671 | (3.0) | ||||
Operating expenses | |||||||
Operations and support | 725 | 803 | (9.7) | ||||
Depreciation and amortization | 131 | 127 | 3.1 | ||||
Total Operating Expenses | 856 | 930 | (8.0) | ||||
Operating Income (Loss) | (205) | (259) | 20.8 | ||||
Operating Contribution | $ | (205) | $ | (259) | 20.8 | % |
First Quarter | ||||||||
Percent | ||||||||
(in 000s) | 2019 | 2018 | Change | |||||
Mexico Wireless Subscribers1 | ||||||||
Postpaid | 5,642 | 5,607 | 0.6 | % | ||||
Prepaid | 11,779 | 9,857 | 19.5 | |||||
Reseller | 301 | 178 | 69.1 | |||||
Total Mexico Wireless Subscribers | 17,722 | 15,642 | 13.3 | % | ||||
Mexico Wireless Net Additions | ||||||||
Postpaid | (69) | 109 | - | % | ||||
Prepaid | 114 | 459 | (75.2) | |||||
Reseller | 48 | (25) | - | |||||
Mexico Wireless Net Subscriber Additions | 93 | 543 | (82.9) | % | ||||
1 | 2019 excludes the impact of 692 subscriber disconnections resulting from the churn of customers related to sales by certain third-party | |||||||
distributors and the sunset of 2G services in Mexico, which are reflected in beginning of period subscribers. |
XANDR SEGMENT | |||||||
First Quarter | |||||||
Percent | |||||||
2019 | 2018 | Change | |||||
Operating revenues | $ | 426 | $ | 337 | 26.4 | % | |
Operating expenses | |||||||
Operations and support | 160 | 50 | - | ||||
Depreciation and amortization | 13 | 1 | - | ||||
Total Operating Expenses | 173 | 51 | - | ||||
Operating Income | 253 | 286 | (11.5) | ||||
Equity in Net Income of Affiliates | - | - | - | ||||
Operating Contribution | $ | 253 | $ | 286 | (11.5) | % |
Total Advertising Revenues | |||||||
First Quarter | |||||||
Percent | |||||||
2019 | 2018 | Change | |||||
Operating Revenues | |||||||
WarnerMedia | $ | 1,279 | $ | 14 | - | % | |
Communications | 417 | 375 | 11.2 | ||||
Xandr | 426 | 337 | 26.4 | ||||
Eliminations | (350) | (334) | (4.8) | ||||
Total Advertising Revenues | $ | 1,772 | $ | 392 | - | % |
Business Solutions Results | |||||||
First Quarter | |||||||
2019 | 2018 | Percent Change | |||||
Operating revenues | |||||||
Wireless service | $ | 1,913 | $ | 1,791 | 6.8 | % | |
Strategic and managed services | 3,792 | 3,595 | 5.5 | ||||
Legacy voice and data services | 2,404 | 2,865 | (16.1) | ||||
Other service and equipment | 302 | 287 | 5.2 | ||||
Wireless equipment | 596 | 578 | 3.1 | ||||
Total Operating Revenues | 9,007 | 9,116 | (1.2) | ||||
Operating expenses | |||||||
Operations and support | 5,640 | 5,594 | 0.8 | ||||
Depreciation and amortization | 1,541 | 1,458 | 5.7 | ||||
Total Operating Expenses | 7,181 | 7,052 | 1.8 | ||||
Operating Income | 1,826 | 2,064 | (11.5) | ||||
Equity in Net Income of Affiliates | - | (1) | - | ||||
Operating Contribution | $ | 1,826 | $ | 2,063 | (11.5) | % |
● | January draw of $2,850 on an 11-month syndicated term loan agreement. |
● | January borrowings of $725 supported by government agencies to support network equipment purchases. |
● | January draw of $750 on a private financing agreement. |
● | February issuance of $3,000 of 4.350% global notes due 2029. |
● | February issuance of $2,000 of 4.850% global notes due 2039. |
● | The final $2,625 of amounts outstanding under our Acquisition Term Loan (defined below). |
● | $750 of January borrowings under a private financing agreement. |
● | $1,850 of 2.300% notes due 2019. |
● | $400 of floating rate notes due 2019. |
● | $890 of 5.200% notes due 2020. |
● | $1,120 of 5.000% notes due 2021. |
● | $1,000 of 4.700% Warner Media, LLC notes due 2021. |
● | $1,000 of 4.750% Warner Media, LLC notes due 2021. |
● | $38 of 4.600% DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. notes due 2021. |
● | $40 of 5.000% DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. notes due 2021. |
● | $1,000 of annual put reset securities issued by BellSouth that may be put back to us each April until maturity in 2021. |
● | An accreting zero-coupon note that may be redeemed each May until maturity in 2022. If the remainder of the zero-coupon note (issued for principal of $500 in 2007 and partially exchanged in the 2017 debt exchange offers) is held to maturity, the redemption amount will be $592. |
First Quarter | |||||||||||||||||
March 31, 2019 | March 31, 2018 | ||||||||||||||||
Mobility | Business Wireline | Adjustments1 | Business Solutions | Mobility | Business Wireline | Adjustments1 | Business Solutions | ||||||||||
Operating Revenues | |||||||||||||||||
Wireless service | $ | 13,792 | $ | - | $ | (11,879) | $ | 1,913 | $ | 13,403 | $ | - | $ | (11,612) | $ | 1,791 | |
Strategic and managed services | - | 3,792 | - | 3,792 | - | 3,595 | - | 3,595 | |||||||||
Legacy voice and data services | - | 2,404 | - | 2,404 | - | 2,865 | - | 2,865 | |||||||||
Other service and equipment | - | 302 | - | 302 | - | 287 | - | 287 | |||||||||
Wireless equipment | 3,775 | - | (3,179) | 596 | 3,952 | - | (3,374) | 578 | |||||||||
Total Operating Revenues | 17,567 | 6,498 | (15,058) | 9,007 | 17,355 | 6,747 | (14,986) | 9,116 | |||||||||
Operating Expenses | |||||||||||||||||
Operations and support | 10,181 | 4,040 | (8,581) | 5,640 | 10,102 | 4,016 | (8,524) | 5,594 | |||||||||
EBITDA | 7,386 | 2,458 | (6,477) | 3,367 | 7,253 | 2,731 | (6,462) | 3,522 | |||||||||
Depreciation and amortization | 2,035 | 1,235 | (1,729) | 1,541 | 2,095 | 1,170 | (1,807) | 1,458 | |||||||||
Total Operating Expense | 12,216 | 5,275 | (10,310) | 7,181 | 12,197 | 5,186 | (10,331) | 7,052 | |||||||||
Operating Income | 5,351 | 1,223 | (4,748) | 1,826 | 5,158 | 1,561 | (4,655) | 2,064 | |||||||||
Equity in net income (loss) of affiliates | - | - | - | - | - | (1) | - | (1) | |||||||||
Operating Contribution | $ | 5,351 | $ | 1,223 | $ | (4,748) | $ | 1,826 | $ | 5,158 | $ | 1,560 | $ | (4,655) | $ | 2,063 | |
1Non-business wireless reported in the Communications segment under the Mobility business unit. |
● | Adverse economic and/or capital access changes in the markets served by us or in countries in which we have significant investments, including the impact on customer demand and our ability and our suppliers’ ability to access financial markets at favorable rates and terms. |
● | Changes in available technology and the effects of such changes, including product substitutions and deployment costs. |
● | Increases in our benefit plans’ costs, including increases due to adverse changes in the United States and foreign securities markets, resulting in worse-than-assumed investment returns and discount rates; adverse changes in mortality assumptions; adverse medical cost trends; and unfavorable or delayed implementation or repeal of healthcare legislation, regulations or related court decisions. |
● | The final outcome of FCC and other federal, state or foreign government agency proceedings (including judicial review, if any, of such proceedings) and legislative efforts involving issues that are important to our business, including, without limitation, special access and business data services; pending Notices of Apparent Liability; the transition from legacy technologies to IP-based infrastructure, including the withdrawal of legacy TDM-based services; universal service; broadband deployment; wireless equipment siting regulations; E911 services; competition policy; privacy; net neutrality; multichannel video programming distributor services and equipment; content licensing and copyright protection; availability of new spectrum, on fair and balanced terms; and wireless and satellite license awards and renewals. |
● | Enactment of additional state, local, federal and/or foreign regulatory and tax laws and regulations, or changes to existing standards and actions by tax agencies and judicial authorities including the resolution of disputes with any taxing jurisdictions, pertaining to our subsidiaries and foreign investments, including laws and regulations that reduce our incentive to invest in our networks, resulting in lower revenue growth and/or higher operating costs. |
● | Potential changes to the electromagnetic spectrum currently used for broadcast television and satellite distribution being considered by the FCC could negatively impact WarnerMedia’s ability to deliver linear network feeds of its domestic cable networks to its affiliates, and in some cases, WarnerMedia’s ability to produce high-value news and entertainment programming on location. |
● | U.S. and foreign laws and regulations regarding intellectual property rights protection and privacy, personal data protection and user consent are complex and rapidly evolving and could result in impact to our business plans, increased costs, or claims against us that may harm our reputation. |
● | Our ability to respond to revenue and margin pressures from increasing competition, including services that use alternative technologies and/or government-owned or subsidized networks. |
● | The ability of our competitors to offer product/service offerings at lower prices due to lower cost structures and regulatory and legislative actions adverse to us, including non-regulation of comparable alternative technologies (e.g., VoIP and data usage). |
● | The continued development and delivery of attractive and profitable wireless, video and broadband offerings and devices; the extent to which regulatory and build-out requirements apply to our offerings; our ability to match speeds offered by our competitors and the availability, cost and/or reliability of the various technologies and/or content required to provide such offerings. |
● | Our ability to generate advertising revenue from attractive video content, especially from WarnerMedia, in the face of unpredictable and rapidly evolving public viewing habits. |
● | The availability and cost and our ability to adequately fund additional wireless spectrum and network upgrades; and regulations and conditions relating to spectrum use, licensing, obtaining additional spectrum, technical standards and deployment and usage, including network management rules. |
● | Our ability to manage growth in wireless data services, including network quality and acquisition of adequate spectrum at reasonable costs and terms. |
● | The outcome of pending, threatened or potential litigation (which includes arbitrations), including, without limitation, patent and product safety claims by or against third parties. |
● | The impact from major equipment or software failures on our networks, including satellites operated by DIRECTV; the effect of security breaches related to the network or customer information; our inability to obtain handsets, equipment/software or have handsets, equipment/software serviced in a timely and cost-effective manner from suppliers; and in the case of satellites launched, timely provisioning of services from vendors; or severe weather conditions including flooding and hurricanes, natural disasters including earthquakes and forest fires, pandemics, energy shortages, wars or terrorist attacks. |
● | The issuance by the Financial Accounting Standards Board or other accounting oversight bodies of new accounting standards or changes to existing standards. |
● | Our ability to successfully integrate our WarnerMedia operations, including the ability to manage various businesses in widely dispersed business locations and with decentralized management. |
● | Our ability to take advantage of the desire of advertisers to change traditional video advertising models. |
● | Our increased exposure to foreign economies, including foreign exchange fluctuations as well as regulatory and political uncertainty. |
● | Changes in our corporate strategies, such as changing network-related requirements or acquisitions and dispositions, which may require significant amounts of cash or stock, to respond to competition and regulatory, legislative and technological developments. |
● | The uncertainty surrounding further congressional action to address spending reductions, which may result in a significant decrease in government spending and reluctance of businesses and consumers to spend in general. |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | |||||||||
(c) A summary of our repurchases of common stock during the first quarter of 2019 is as follows: | |||||||||
(a) | (b) | (c) | (d) | ||||||
Period | Total Number of Shares (or Units) Purchased 1, 2, 3 | Average Price Paid Per Share (or Unit) | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs1 | Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under The Plans or Programs | |||||
January 1, 2019 - January 31, 2019 | 710,607 | $ | 30.46 | - | 375,662,000 | ||||
February 1, 2019 - February 28, 2019 | 3,021,234 | 30.29 | - | 375,662,000 | |||||
March 1, 2019 - March 31, 2019 | 3,113,701 | 30.52 | - | 375,662,000 | |||||
Total | 6,845,542 | $ | 30.41 | - | |||||
1 | In March 2014, our Board of Directors approved an additional authorization to repurchase up to 300 million shares of our common | ||||||||
stock. In March 2013, our Board of Directors authorized the repurchase of up to an additional 300 million shares of our common stock. | |||||||||
The authorizations have no expiration date. | |||||||||
2 | Of the shares repurchased, 6,237,118 shares were acquired through the withholding of taxes on the vesting of restricted stock | ||||||||
and performance shares or on the exercise price of options. | |||||||||
3 | Of the shares repurchased, 608,424 shares were acquired through reimbursements from AT&T maintained Voluntary Employee Benefit | ||||||||
Association (VEBA) trusts. |
Item 6. Exhibits | ||
The following exhibits are filed or incorporated by reference as a part of this report: | ||
Exhibit | ||
Number | Exhibit Description | |
31 | Rule 13a-14(a)/15d-14(a) Certifications | |
32 | ||
101 | XBRL Instance Document |
May 6, 2019 | AT&T Inc. /s/ John J. Stephens John J. Stephens Senior Executive Vice President and Chief Financial Officer |