Segment Information

6 Months Ended

Jun. 30, 2016

Segment Information

Segment Information

NOTE 4. SEGMENT INFORMATION

Our segments are strategic business units that offer products and services to different customer segments over various technology platforms and/or in different geographies that are managed accordingly. Due to organizational changes and our July 24, 2015 acquisition of DIRECTV, effective for the quarter ended September 30, 2015, we revised our operating segments to align with our new management structure and organizational responsibilities. We analyze our operating segments based on Segment Contribution, which consists of operating income, excluding acquisition-related costs and other significant items (as discussed below), and equity in net income (loss) of affiliates for investments managed within each operating segment. We have four reportable segments: (1) Business Solutions, (2) Entertainment Group, (3) Consumer Mobility and (4) International.

We also evaluate segment performance based on Segment Contribution, excluding equity in net income (loss) of affiliates and depreciation and amortization, which we refer to as EBITDA and/or EBITDA margin. We believe EBITDA to be a relevant and useful measurement to our investors as it is part of our internal management reporting and planning processes and it is an important metric that management uses to evaluate segment operating performance. 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 margin is EBITDA divided by total revenues.

The Business Solutions segment provides services to business customers, including multinational companies;governmental and wholesale customers; and individual subscribers who purchase wireless services through employer-sponsored plans. We provide advanced IP-based services including Virtual Private Networks (VPN); Ethernet-related products and broadband, collectively referred to as strategic business services; as well as traditional data and voice products. We utilize our wireless and wired networks (referred to as “wired” or “wireline”) to provide a complete communications solution to our business customers.

The Entertainment Group segment provides video, internet, voice communication, and interactive and targeted advertising services to customers located in the U.S. or in U.S. territories. We utilize our copper and IP-based wired network and/or our satellite technology.

The Consumer Mobility segment provides nationwide wireless service to consumers and wholesale and resale wireless subscribers located in the U.S. or in U.S. territories. We utilize our U.S. wireless network to provide voice and data services, including high-speed internet, video, and home monitoring services.

The International segment provides entertainment services in Latin America and wireless services in Mexico. Video entertainment services are provided to primarily residential customers using satellite technology. We utilize our regional and national wireless networks in Mexico to provide consumer and business customers with wireless data and voice communication services. Our international subsidiaries conduct business in their local currency, and operating results are converted to U.S. dollars using official exchange rates.

In reconciling items to consolidated operating income and income before income taxes, Corporate and Other includes: (1) operations that are not considered reportable segments and that are no longer integral to our operations or which we no longer actively market, and (2) impacts of corporate-wide decisions for which the individual operating segments are not being evaluated, including interest costs and expected return on plan assets for our pension and postretirement benefit plans.

Certain operating items are not allocated to our business segments, and those include:

• Acquisition-related items which consist of (1) operations and support items associated with the merger and integration of newly acquired businesses and (2) the noncash amortization of intangible assets acquired in acquisitions.
• Certain significant items which consist of (1) noncash actuarial gains and losses from pension and other postretirement benefits, (2) employee separation charges associated with voluntary and/or strategic offers, (3) losses resulting from abandonment or impairment of assets and (4) other items for which the segments are not being evaluated.

Interest expense and other income (expense) – net, are managed only on a total company basis and are, accordingly, reflected only in consolidated results.

Our operating assets are utilized by multiple segments and consist of our wireless and wired networks as well as an international satellite fleet. We manage our assets to provide for the most efficient, effective and integrated service to our customers, not by operating segment, and, therefore, asset information and capital expenditures by segment are not presented. Depreciation is allocated based on network usage or asset utilization by segment.

For the three months ended June 30, 2016
		Revenue		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Business Solutions	$	17,579	$	10,857	$	6,722	$	2,521	$	4,201	$	-	$	4,201
Entertainment Group		12,711		9,569		3,142		1,489		1,653		(2)		1,651
Consumer Mobility		8,186		4,680		3,506		932		2,574		-		2,574
International		1,828		1,723		105		298		(193)		9		(184)
Segment Total		40,304		26,829		13,475		5,240		8,235	$	7	$	8,242
Corporate and Other		216		293		(77)		20		(97)
Acquisition-related items		-		233		(233)		1,316		(1,549)
Certain significant items		-		29		(29)		-		(29)
AT&T Inc.	$	40,520	$	27,384	$	13,136	$	6,576	$	6,560
For the six months ended June 30, 2016
		Revenue		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Business Solutions	$	35,188	$	21,659	$	13,529	$	5,029	$	8,500	$	-	$	8,500
Entertainment Group		25,369		19,147		6,222		2,977		3,245		1		3,246
Consumer Mobility		16,514		9,592		6,922		1,854		5,068		-		5,068
International		3,495		3,311		184		575		(391)		23		(368)
Segment Total		80,566		53,709		26,857		10,435		16,422	$	24	$	16,446
Corporate and Other		489		670		(181)		37		(218)
Acquisition-related items		-		528		(528)		2,667		(3,195)
Certain significant items		-		(682)		682		-		682
AT&T Inc.	$	81,055	$	54,225	$	26,830	$	13,139	$	13,691
For the three months ended June 30, 2015
		Revenue		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Business Solutions	$	17,664	$	10,972	$	6,692	$	2,460	$	4,232	$	-	$	4,232
Entertainment Group		5,782		4,913		869		1,065		(196)		(12)		(208)
Consumer Mobility		8,755		5,202		3,553		934		2,619		-		2,619
International		491		529		(38)		93		(131)		-		(131)
Segment Total		32,692		21,616		11,076		4,552		6,524	$	(12)	$	6,512
Corporate and Other		323		236		87		24		63
Acquisition-related items		-		694		(694)		120		(814)
Certain significant items		-		-		-		-		-
AT&T Inc.	$	33,015	$	22,546	$	10,469	$	4,696	$	5,773
For the six months ended June 30, 2015
		Revenue		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Business Solutions	$	35,221	$	22,045	$	13,176	$	4,802	$	8,374	$	-	$	8,374
Entertainment Group		11,442		9,772		1,670		2,130		(460)		(18)		(478)
Consumer Mobility		17,533		10,743		6,790		1,936		4,854		-		4,854
International		727		747		(20)		121		(141)		-		(141)
Segment Total		64,923		43,307		21,616		8,989		12,627	$	(18)	$	12,609
Corporate and Other		668		470		198		44		154
Acquisition-related items		-		993		(993)		241		(1,234)
Certain significant items		-		217		(217)		-		(217)
AT&T Inc.	$	65,591	$	44,987	$	20,604	$	9,274	$	11,330

The following table is a reconciliation of Segment Contribution to “Income Before Income Taxes” reported on our consolidated statements of income.
	Second Quarter					Six-Month Period
		2016		2015		2016		2015
Business Solutions	$	4,201	$	4,232	$	8,500	$	8,374
Entertainment Group		1,651		(208)		3,246		(478)
Consumer Mobility		2,574		2,619		5,068		4,854
International		(184)		(131)		(368)		(141)
Segment Contribution		8,242		6,512		16,446		12,609
Reconciling Items:
Corporate and Other		(97)		63		(218)		154
Merger and integration charges		(233)		(694)		(528)		(993)
Amortization of intangibles acquired		(1,316)		(120)		(2,667)		(241)
Employee separation charges		(29)		-		(54)		(217)
Gain on wireless spectrum transactions		-		-		736		-
Segment equity in net (income) loss of affiliates		(7)		12		(24)		18
AT&T Operating Income		6,560		5,773		13,691		11,330
Interest expense		1,258		932		2,465		1,831
Equity in net income of affiliates		28		33		41		33
Other income (expense) - net		91		48		161		118
Income Before Income Taxes	$	5,421	$	4,922	$	11,428	$	9,650