25 January 2017
Note: AT&T's fourth-quarter earnings conference call will be webcast at 4:30 p.m. ET on Wednesday, January 25, 2017. The webcast and related materials will be available on AT&T’s Investor Relations website at www.att.com/investor.relations.
DALLAS, January 25, 2017 — AT&T Inc. (NYSE:T) today reported 2.8 million North American wireless net adds, strong DIRECTV NOW growth and solid adjusted operating margin and earnings gains, with continued free cash flow growth for the fourth quarter.
“2016 was a transformational year for AT&T, one in which we made tremendous progress toward our goal of becoming the global leader in telecom, media and technology,” said Randall Stephenson, AT&T Chairman and CEO. “We launched DIRECTV NOW, our innovative over-the-top streaming service. Our 5G evolution plans and improved spectrum position are paving the way for the next-generation of super-fast mobile and fixed networks. And we shook-up the industry with our landscape-changing deal to acquire Time Warner, the logical next step in our strategy to bring together world-class content with best-in-class distribution which will drive innovation and more choice for consumers.
“At the same time, we performed at a high level in 2016 with growing revenues, expanding adjusted consolidated operating margins and solid adjusted earnings growth, and we hit our $1.5 billion DIRECTV cost-synergy target. We also delivered record cash from operations, which allowed us to return substantial value to investors and invest more in the U.S. economy.”
Consolidated Financial Results
AT&T's consolidated revenues for the fourth quarter totaled $41.8 billion versus $42.1 billion in the year-ago quarter. Compared with results for the fourth quarter of 2015, operating expenses were $37.6 billion versus $34.6 billion; operating income was $4.2 billion versus $7.5 billion; and operating income margin was 10.2% versus 17.9%. When adjusting for amortization, merger- and integration-related and other items, operating income was $7.3 billion versus $7.1 billion; and operating income margin was 17.5%, up 70 basis points versus the year-ago quarter.
Fourth-quarter net income attributable to AT&T totaled $2.4 billion, or $0.39 per diluted share, compared to $4.0 billion, or $0.65 per diluted share, in the year-ago quarter. Adjusting for the $0.10 non-cash actuarial loss on benefit plans from the annual remeasurement process and $0.17 of costs for amortization, merger-and integration-related and other items, earnings per diluted share was $0.66 compared to an adjusted $0.63 in the year-ago quarter
Cash from operating activities was $10.1 billion in the fourth quarter, and capital expenditures were $6.5 billion. Capital investment1 for the quarter totaled $6.7 billion. Free cash flow — cash from operating activities minus capital expenditures — was $3.7 billion for the quarter, up 19.2% versus the year-ago quarter even with higher capital spending.
For full-year 2016, compared with 2015 results, AT&T's consolidated revenues totaled $163.8 billion versus $146.8 billion, up 11.6% for the year, driven by a full year of results from DIRECTV and gains in IP services and video. Operating expenses reflect actuarial gains and losses on benefit plans and were $139.4 billion compared with $122.0 billion, up 14.3%; net income attributable to AT&T was $13.0 billion versus $13.3 billion, down 2.8%; and earnings per diluted share was $2.10, compared with $2.37. With adjustments for both years, operating income was $31.8 billion versus $27.7 billion; operating income margin was 19.4% versus 18.8%; and earnings per share totaled $2.84, compared with $2.71, an increase of 4.8%.
AT&T's full-year cash from operating activities was a record $39.3 billion, up from $35.9 billion in 2015. Capital expenditures, including capitalized interest, totaled $22.4 billion, versus $20.0 billion in 2015. Capital investment for the full year was $22.9 billion versus $20.7 billion in 2015. Full-year free cash flow was $16.9 billion compared to $15.9 billion in 2015. The company’s free cash flow dividend payout ratio for the full year was 70%.2
On a business-as-usual basis without the impact of Time Warner, AT&T expects in 2017:
Adjustments include non-cash mark-to-market benefit plan gain/loss, merger integration and amortization costs and other adjustments. Traditionally, the mark-to-market adjustment is the largest item, which is driven by interest rates and investment returns that are not reasonably estimable at this time. We expect amortization to be lower in 2017 compared to 2016.
14Q16 includes $267 million in capital purchases with favorable vendor payment terms.
2Free cash flow dividend payout ratio is dividends divided by free cash flow
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