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T AT&T

Filed: 23 Jul 20, 8:21am

 

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

 

 

 

 

 

 

Second Quarter

 

 

Six-Month Period

 

 

2020

 

2019

 

 

2020

 

2019

 

Net cash provided by operating activities

$

12,059

 $  

14,284

 

$

20,925

$

25,336

 

Less: Capital expenditures

 

(4,466)

 

(5,472)

 

 

(9,432)

 

(10,654)

 

Free Cash Flow

 

7,593

 

8,812

 

 

11,493

 

14,682

 

 

 

 

 

 

 

 

 

 

 

 

Less: Dividends paid

 

(3,737)

 

(3,722)

 

 

(7,474)

 

(7,436)

 

Free Cash Flow after Dividends

$

3,856

$

5,090

 

$

4,019

$

7,246

 

Free Cash Flow Dividend Payout Ratio

 

49.2%

 

42.2%

 

 

65.0%

 

50.6%

 


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

 

 

 

 

 

 

Second Quarter

 

 

Six-Month Period

 

 

2020

 

2019

 

 

2020

 

2019

 

Capital Expenditures

$

(4,466)

 $  

(5,472)

 

$

(9,432)

$

(10,654)

 

Cash paid for vendor financing

 

(563)

 

(1,017)

 

 

(1,354)

 

(1,836)

 

Cash paid for Capital Investment1

$

(5,029)

 $  

(6,489)

 

$

(10,786)

$

(12,490)

 

 1 Gross capital investment excludes FirstNet reimbursements of $72 in the second quarter and $79 for the first six months of 2020.          
 

EBITDA

Our calculation of EBITDA, as presented, may differ from similarly titled measures reported by other companies. For AT&T, EBITDA excludes other income (expense) – net, and equity in net income (loss) of affiliates, as these do not reflect the operating results of our subscriber base or operations that are not under our control. Equity in net income (loss) of affiliates represents the proportionate share of the net income (loss) of affiliates in which we exercise significant influence, but do not control. Because we do not control these entities, management excludes these results when evaluating the performance of our primary operations. EBITDA also excludes interest expense and the provision for income taxes. Excluding these items eliminates the expenses associated with our capital and tax structures. Finally, EBITDA excludes depreciation and amortization in order to eliminate the impact of capital investments. EBITDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with U.S. generally accepted accounting principles (GAAP).

1

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

 

 

 

 

 

Second Quarter

 

Six-Month Period

 

 

2020

 

2019

 

 

2020

 

2019

 

Net Income

$

1,563

 $  

3,974

 

 $  

6,526

 $  

8,322

 

Additions:

 

 

 

 

 

 

 

 

 

 

   Income Tax Expense

 

935

 

1,099

 

 

2,237

 

2,122

 

   Interest Expense

 

2,041

 

2,149

 

 

4,059

 

4,290

 

   Equity in Net (Income) Loss of Affiliates

 

10

 

(40)

 

 

16

 

(33)

 

   Other (Income) Expense - Net

 

(1,017)

 

318

 

 

(1,820)

 

32

 

   Depreciation and amortization

 

7,285

 

7,101

 

 

14,507

 

14,307

 

EBITDA

 

10,817

 

14,601

 

 

25,525

 

29,040

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

40,950

 

44,957

 

 

83,729

 

89,784

 

Service Revenues

 

37,051

 

41,023

 

 

75,934

 

81,707

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA Margin

 

26.4%

 

32.5%

 

 

30.5%

 

32.3%

 

EBITDA Service Margin

 

29.2%

 

35.6%

 

 

33.6%

 

35.5%

 

 

2

 

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

Dollars in millions

 

 

 

 

 

 

 

Second Quarter

 

 

Six-Month Period

 

 

 

2020

 

2019

 

 

2020

 

2019

 

Communications Segment

 

 

 

 

 

 

 

 

 

 

Operating Contribution

$

8,112

 $  

8,671

 

$

16,315

 $  

16,682

 

Additions:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

4,639

 

4,584

 

 

9,274

 

9,142

 

EBITDA

 

12,751

 

13,255

 

 

25,589

 

25,824

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

33,592

 

35,267

 

 

67,841

 

70,436

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

24.1%

 

24.6%

 

 

24.0%

 

23.7%

 

EBITDA Margin

 

38.0%

 

37.6%

 

 

37.7%

 

36.7%

 

 

 

 

 

 

 

 

 

 

 

 

Mobility

Operating Contribution

$

5,805

 $  

5,767

 

$

11,593

 $  

11,076

 

Additions:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

2,012

 

2,003

 

 

4,057

 

4,016

 

EBITDA

 

7,817

 

7,770

 

 

15,650

 

15,092

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

17,149

 

17,292

 

 

34,551

 

34,655

 

Service Revenues

 

13,669

 

13,824

 

 

27,637

 

27,453

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

33.9%

 

33.4%

 

 

33.6%

 

32.0%

 

EBITDA Margin

 

45.6%

 

44.9%

 

 

45.3%

 

43.5%

 

EBITDA Service Margin

 

57.2%

 

56.2%

 

 

56.6%

 

55.0%

 

 

 

 

 

 

 

 

 

 

 

 

Entertainment Group

Operating Contribution

$

1,030

 $  

1,514

 

$

2,365

 $  

2,992

 

Additions:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

1,309

 

1,339

 

 

2,598

 

2,662

 

EBITDA

 

2,339

 

2,853

 

 

4,963

 

5,654

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

10,069

 

11,368

 

 

20,584

 

22,696

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

10.2%

 

13.3%

 

 

11.5%

 

13.2%

 

EBITDA Margin

 

23.2%

 

25.1%

 

 

24.1%

 

24.9%

 

 

 

 

 

 

 

 

 

 

 

 

Business Wireline

Operating Contribution

$

1,277

 $  

1,390

 

$

2,357

 $  

2,614

 

Additions:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

1,318

 

1,242

 

 

2,619

 

2,464

 

EBITDA

 

2,595

 

2,632

 

 

4,976

 

5,078

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

6,374

 

6,607

 

 

12,706

 

13,085

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

20.0%

 

21.0%

 

 

18.6%

 

20.0%

 

EBITDA Margin

 

40.7%

 

39.8%

 

 

39.2%

 

38.8%

 


 

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

Dollars in millions

 

 

 

 

 

 

 

Second Quarter

 

 

Six-Month Period

 

 

 

2020

 

2019

 

 

2020

 

2019

 

WarnerMedia Segment

Operating Contribution

$

1,917

 $  

2,350

 

$

3,930

 $  

4,913

 

Additions:

 

 

 

 

 

 

 

 

 

 

Equity in Net (Income) of Affiliates

 

(4)

 

(55)

 

 

(19)

 

(122)

 

Depreciation and amortization

 

167

 

104

 

 

330

 

260

 

EBITDA

 

2,080

 

2,399

 

 

4,241

 

5,051

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

6,814

 

8,835

 

 

14,662

 

17,640

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

28.1%

 

26.0%

 

 

26.7%

 

27.2%

 

EBITDA Margin

 

30.5%

 

27.2%

 

 

28.9%

 

28.6%

 

 

3


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

Dollars in millions

 

 

 

 

 

 

 

Second Quarter

 

 

Six-Month Period

 

 

 

2020

 

2019

 

 

2020

 

2019

 

Latin America Segment

 

 

 

 

 

 

 

 

 

 

Operating Contribution

$

(201)

 $  

(209)

 

$

(385)

 $  

(382)

 

Additions:

 

 

 

 

 

 

 

 

 

 

Equity in Net (Income) of Affiliates

 

(8)

 

(12)

 

 

(12)

 

(12)

 

Depreciation and amortization

 

242

 

284

 

 

523

 

584

 

EBITDA

 

33

 

63

 

 

126

 

190

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

1,232

 

1,757

 

 

2,822

 

3,475

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

-17.0%

 

-12.6%

 

 

-14.1%

 

-11.3%

 

EBITDA Margin

 

2.7%

 

3.6%

 

 

4.5%

 

5.5%

 

 

 

 

 

 

 

 

 

 

 

 

Vrio

 

 

 

 

 

 

 

 

 

 

Operating Contribution

$

(28)

 $  

(2)

 

$

(67)

 $  

30

 

Additions:

 

 

 

 

 

 

 

 

 

 

Equity in Net (Income) of Affiliates

 

(8)

 

(12)

 

 

(12)

 

(12)

 

Depreciation and amortization

 

127

 

165

 

 

274

 

334

 

EBITDA

 

91

 

151

 

 

195

 

352

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

752

 

1,032

 

 

1,639

 

2,099

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

-4.8%

 

-1.4%

 

 

-4.8%

 

0.9%

 

EBITDA Margin

 

12.1%

 

14.6%

 

 

11.9%

 

16.8%

 

 

 

 

 

 

 

 

 

 

 

 

Mexico

 

 

 

 

 

 

 

 

 

 

Operating Contribution

$

(173)

 $  

(207)

 

$

(318)

 $  

(412)

 

Additions:

 

 

 

 

 

 

 

 

 

 

Equity in Net (Income) Loss of Affiliates

 

-

 

-

 

 

-

 

-

 

Depreciation and amortization

 

115

 

119

 

 

249

 

250

 

EBITDA

 

(58)

 

(88)

 

 

(69)

 

(162)

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

480

 

725

 

 

1,183

 

1,376

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

-36.0%

 

-28.6%

 

 

-26.9%

 

-29.9%

 

EBITDA Margin

 

-12.1%

 

-12.1%

 

 

-5.8%

 

-11.8%

 

 

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%.  

4

 

Adjusting Items

 

Dollars in millions

 

 

 

 

 

 

Second Quarter

 

Six-Month Period

 

 

 

2020

 

2019

 

 

2020

 

2019

 

Operating Revenues

 

 

 

 

 

 

 

 

 

 

   Time Warner merger adjustment

$

-

$

30

 

$

-

$

72

 

   Adjustments to Operating Revenues

 

-

 

30

 

 

-

 

72

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

   Time Warner and other merger costs

 

211

 

316

 

 

393

 

389

 

   Employee separation costs and benefit-related (gain) loss1

 

765

 

94

 

 

884

 

342 

 

   Impairments

 

2,319

 

-

 

 

2,442

 

-

 

   Gain on spectrum transaction

 

-

 

-

 

 

(900)

 

-

 

Adjustments to Operations and Support Expenses

 

3,295

 

410

 

 

2,819

 

731

 

   Amortization of intangible assets

 

2,145

 

1,959

 

 

4,201

 

3,948

 

Adjustments to Operating Expenses

 

5,440

 

2,369

 

 

7,020

 

4,679

 

Other

 

 

 

 

 

 

 

 

 

 

   Gain on sale of investments -net

 

-

 

(638)

 

 

-

 

(638)

 

   Debt redemptions, impairments and other adjustments

 

293

 

140

 

 

407

 

351

 

   Employee benefit related (gain) loss1,2

 

(161)

 

1,699

 

 

42

 

2,131

 

Adjustments to Income Before Income Taxes

 

5,572

 

3,600

 

 

7,469

 

6,595

 

   Tax impact of adjustments

 

749

 

779

 

 

1,143

 

1,428

 

   Tax-related items

 

-

 

-

 

 

-

 

141

 

   Impairment attributable to noncontrolling interest

 

105

 

-

 

 

105

 

-

 

Adjustments to Net Income

$

4,718

$

2,821

 

$

6,221

$

5,026

 

1 Total holding gains on benefit-related investments were approximately $300 million in the second quarter, and flat for the first six months of 2020.

 

2 Includes holding (gains) losses on benefit-related investments in 2020 and an actuarial loss on our pension plan in 2019.

 


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

 

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

5

 

Adjusted Operating Income, Adjusted Operating Income Margin,

Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EBITDA Service Margin

Dollars in millions

 

 

 

 

 

 

Second Quarter

 

Six-Month Period

 

 

 

2020

 

2019

 

 

2020

 

2019

 

Operating Income

$

3,532

 $  

7,500

 

$

11,018

 $  

14,733

 

Adjustments to Operating Revenues

 

-

 

30

 

 

-

 

72

 

Adjustments to Operating Expenses

 

5,440

 

2,369

 

 

7,020

 

4,679

 

Adjusted Operating Income

 

8,972

 

9,899

 

 

18,038

 

19,484

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

10,817

 

14,601

 

 

25,525

 

29,040

 

Adjustments to Operating Revenues

 

-

 

30

 

 

-

 

72

 

Adjustments to Operations and Support Expenses

 

3,295

 

410

 

 

2,819

 

731

 

Adjusted EBITDA

 

14,112

 

15,041

 

 

28,344

 

29,843

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

40,950

 

44,957

 

 

83,729

 

89,784

 

Adjustments to Operating Revenues

 

-

 

30

 

 

-

 

72

 

Total Adjusted Operating Revenue

 

40,950

 

44,987

 

 

83,729

 

89,856

 

Service Revenues

 

37,051

 

41,023

 

 

75,934

 

81,707

 

Adjustments to Service Revenues

 

-

 

30

 

 

-

 

72

 

Adjusted Service Revenue

 

37,051

 

41,053

 

 

75,934

 

81,779

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

8.6%

 

16.7%

 

 

13.2%

 

16.4%

 

Adjusted Operating Income Margin

 

21.9%

 

22.0%

 

 

21.5%

 

21.7%

 

Adjusted EBITDA Margin

 

34.5%

 

33.4%

 

 

33.9%

 

33.2%

 

Adjusted EBITDA Service Margin

 

38.1%

 

36.6%

 

 

37.3%

 

36.5%

 

 

Adjusted Diluted EPS

 

 

 

 

 

 

 

 

Second Quarter

 

 

Six-Month Period

 

 

 

2020

 

2019

 

 

2020

 

2019

 

Diluted Earnings Per Share (EPS)

$

0.17

 $  

0.51

 

 $  

0.81

 $  

1.06

 

   Amortization of intangible assets

 

0.24

 

0.21

 

 

0.46

 

0.42

 

   Merger integration items

 

0.02

 

0.05

 

 

0.04

 

0.07

 

   (Gain) loss on sale of assets, impairments

      and other adjustments

 

0.08

 

(0.06)

 

 

0.02

 

(0.01)

 

   Actuarial (gain) loss

 

-

 

0.18

 

 

-

 

0.23

 

   Impairments

 

0.32

 

-

 

 

0.34

 

-

 

   Tax-related items

 

-

 

-

 

 

-

 

(0.02)

 

Adjusted EPS

$

0.83

$

0.89

 

$

1.67

$

1.75

 

Year-over-year growth - Adjusted

 

-6.7%

 

 

 

 

-4.6%

 

 

 

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

 

7,170

 

7,353

 

 

7,192

 

7,347

 


Constant Currency

Constant Currency is a non-GAAP financial measure that management uses to evaluate the operating performance of certain international subsidiaries by excluding or otherwise adjusting for the impact of changes in foreign currency exchange rates between comparative periods. We believe constant currency enhances comparison and is useful to investors to evaluate the performance of our business without taking into account the impact of changes to the foreign exchange rates to which our business is subject. To compute our constant currency results, we multiply or divide, as appropriate, our current year U.S. dollar results by the current year average foreign exchange rates and then multiply or divide, as appropriate, those amounts by the prior year average foreign exchange rates. In calculating amounts on a constant currency basis, for our Vrio business unit, 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.

6

 

Constant Currency

Dollars in millions

 

 

 

 

 

Second Quarter

 

 

 

2020

 

2019

 

AT&T Inc.

Total Operating Revenues

$

40,950

 $  

44,957

 

Exclude Venezuela

 

(2)

 

(8)

 

Impact of foreign exchange translation

 

440

 

-

 

Operating Revenues on Constant Currency Basis

 

41,388

 

44,949

 

Year-over-year growth

 

-7.9%

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

14,112

 

15,041

 

Exclude Venezuela

 

(3)

 

2

 

Impact of foreign exchange translation

 

112

 

-

 

Adjusted EBITDA on Constant Currency Basis

 

14,221

 

15,043

 

Year-over-year growth

 

-5.5%

 

 

 

 

 

 

 

 

 

WarnerMedia Segment

Total Operating Revenues

$

6,814

 $  

8,835

 

Impact of foreign exchange translation

 

81

 

-

 

WarnerMedia Operating Revenues on Constant Currency Basis

 

6,895

 

8,835

 

Year-over-year growth

 

-22.0%

 

 

 

 

 

 

 

 

 

EBITDA

 

2,080

 

2,399

 

Impact of foreign exchange translation

 

39

 

-

 

WarnerMedia EBITDA on Constant Currency Basis

 

2,119

 

2,399

 

Year-over-year growth

 

-11.7%

 

 

 

 

 

 

 

 

 

Latin America Segment

 

 

 

 

 

Total Operating Revenues

$

1,232

 $  

1,757

 

Exclude Venezuela

 

(2)

 

(8)

 

Impact of foreign exchange translation

 

359

 

-

 

Latin America Operating Revenues on Constant Currency Basis

 

1,589

 

1,749

 

Year-over-year growth

 

-9.1%

 

 

 

 

 

 

 

 

 

EBITDA

 

33

 

63

 

Exclude Venezuela

 

(3)

 

2

 

Impact of foreign exchange translation

 

73

 

-

 

Latin America EBITDA on Constant Currency Basis

 

103

 

65

 

Year-over-year growth

 

58.5%

 

 

 

 


Net Debt to Adjusted EBITDA

Net Debt to EBITDA ratios are non-GAAP financial measures frequently used by investors and credit rating agencies and management believes these measures provide relevant and useful information to investors and other users of our financial data. Our Net Debt to Adjusted EBITDA ratio is calculated by dividing the Net Debt by the sum of the most recent four quarters Adjusted EBITDA. Net Debt is calculated by subtracting cash and cash equivalents and certificates of deposit and time deposits that are greater than 90 days, from the sum of debt maturing within one year and long-term debt.

 

 Net Debt to Adjusted EBITDA

Dollars in millions

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

Sept 30,

 

Dec. 31,

 

March 31,

 

June 30,

 

Four Quarters

 

 

 

20191

 

20191

 

20191

 

2020

 

 

Adjusted EBITDA2

 $  

15,079

 $  

14,365

 $  

14,232

$

14,112

 $  

57,788

 

   End-of-period current debt

 

 

 

 

 

 

 

 

 

15,576

 

   End-of-period long-term debt

 

 

 

 

 

 

 

 

 

153,388

 

Total End-of-Period Debt

 

 

 

 

 

 

 

 

 

168,964

 

   Less: Cash and Cash Equivalents

 

 

 

 

 

 

 

 

 

16,941

 

Net Debt Balance

 

 

 

 

 

 

 

 

 

152,023

 

Annualized Net Debt to Adjusted EBITDA Ratio

 

 

 

 

 

2.631

 

1 As reported in AT&T's Form 8-K filed  October 28, 2019,  January 29, 2020,  and April 22, 2020.

2 Includes the purchase accounting reclassification of released content amortization of $108 million, $102 million, $69 million and $75 million in the four quarters presented, respectively.

 

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

 

 

Second Quarter

 

 

June 30, 2020

 

 

June 30, 2019

 

 

Mobility

 

Business Wireline

 

Adjustments1

 

Business Solutions

 

 

Mobility

 

Business Wireline

 

Adjustments1

 

Business Solutions

Operating Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Wireless service

$

13,669

$

-

$

(11,785)

$

1,884

 

$

13,824

$

-

$

(11,943)

$

1,881

  Strategic and managed services

 

-

 

3,943

 

-

 

3,943

 

 

-

 

3,834

 

-

 

3,834

  Legacy voice and data services

 

-

 

2,067

 

-

 

2,067

 

 

-

 

2,324

 

-

 

2,324

  Other services and equipment

 

-

 

364

 

-

 

364

 

 

-

 

449

 

-

 

449

  Wireless equipment

 

3,480

 

-

 

(2,895)

 

585

 

 

3,468

 

-

 

(2,851)

 

617

Total Operating Revenues

 

17,149

 

6,374

 

(14,680)

 

8,843

 

 

17,292

 

6,607

 

(14,794)

 

9,105

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Operations and support

 

9,332

 

3,779

 

(7,687)

 

5,424

 

 

9,522

 

3,975

 

(7,985)

 

5,512

EBITDA

 

7,817

 

2,595

 

(6,993)

 

3,419

 

 

7,770

 

2,632

 

(6,809)

 

3,593

  Depreciation and amortization

 

2,012

 

1,318

 

(1,693)

 

1,637

 

 

2,003

 

1,242

 

(1,700)

 

1,545

Total Operating Expenses

 

11,344

 

5,097

 

(9,380)

 

7,061

 

 

11,525

 

5,217

 

(9,685)

 

7,057

Operating Income

 

5,805

 

1,277

 

(5,300)

 

1,782

 

 

5,767

 

1,390

 

(5,109)

 

2,048

Equity in Net Income (Loss) of Affiliates

 

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

Operating Contribution

$

5,805

$

1,277

$

(5,300)

$

1,782

 

$

5,767

$

1,390

$

(5,109)

$

2,048

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental Operational Measure

 

 

Six-Month Period

 

 

June 30, 2020

 

 

June 30, 2019

 

 

Mobility

 

Business Wireline

 

Adjustments1

 

Business Solutions

 

 

Mobility

 

Business Wireline

 

Adjustments1

 

Business Solutions

Operating Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Wireless service

$

27,637

$

-

$

(23,804)

$

3,833

 

$

27,453

$

-

$

(23,795)

$

3,658

  Strategic and managed services

 

-

 

7,822

 

-

 

7,822

 

 

-

 

7,613

 

-

 

7,613

  Legacy voice and data services

 

-

 

4,196

 

-

 

4,196

 

 

-

 

4,721

 

-

 

4,721

  Other services and equipment

 

-

 

688

 

-

 

688

 

 

-

 

751

 

-

 

751

  Wireless equipment

 

6,914

 

-

 

(5,619)

 

1,295

 

 

7,202

 

-

 

(5,995)

 

1,207

Total Operating Revenues

 

34,551

 

12,706

 

(29,423)

 

17,834

 

 

34,655

 

13,085

 

(29,790)

 

17,950

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Operations and support

 

18,901

 

7,730

 

(15,497)

 

11,134

 

 

19,563

 

8,007

 

(16,444)

 

11,126

EBITDA

 

15,650

 

4,976

 

(13,926)

 

6,700

 

 

15,092

 

5,078

 

(13,346)

 

6,824

  Depreciation and amortization

 

4,057

 

2,619

 

(3,414)

 

3,262

 

 

4,016

 

2,464

 

(3,410)

 

3,070

Total Operating Expenses

 

22,958

 

10,349

 

(18,911)

 

14,396

 

 

23,579

 

10,471

 

(19,854)

 

14,196

Operating Income

 

11,593

 

2,357

 

(10,512)

 

3,438

 

 

11,076

 

2,614

 

(9,936)

 

3,754

Equity in Net Income (Loss) of Affiliates

 

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

Operating Contribution

$

11,593

$

2,357

$

(10,512)

$

3,438

 

$

11,076

$

2,614

$

(9,936)

$

3,754

1 Non-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