AT&T Wireless 2015 Annual Report Download - page 35

AT&T INC. | 33
In September 2013, we made a voluntary contribution
of a preferred equity interest in AT&TMobilityIILLC
(Mobility), the holding company for our wireless business,
to the trust used to pay pension benefits under our qualified
pension plans. In September 2013, the U.S. Department
of Labor (DOL) published a proposed exemption that
authorized retroactive approval of this voluntary contribution.
In July 2014, the DOL published in the Federal Register
their final retroactive approval of our voluntary contribution.
The preferred equity interest had a fair value of $8,714
at December31,2015 and $9,104 on the contribution date
and has a liquidation value of $8,000. The trust is entitled
to receive cumulative cash distributions of $560 per annum,
which are distributed quarterly in equal amounts and
accounted for as contributions. We distributed $560
to the trust during 2015. So long as we make the
distributions, we will have no limitations on our ability
to declare a dividend or repurchase shares. This preferred
equity interest is a plan asset under ERISA and is recognized
as such in the plan’s separate financial statements. However,
because the preferred equity interest is not unconditionally
transferable to an unrelated party, it is not reflected in plan
assets in our consolidated financial statements and instead
has been eliminated in consolidation. We also agreed
to make a cash contribution to the trust of $175 no later
than the due date of our federal income tax return for 2014,
2015 and 2016. The 2014 contribution of $175 was made
to the trust during the second quarter of 2015. We are
required to contribute another $175 in 2016 and $175
in 2017.
The preferred equity interest is not transferable by the
trust except through its put and call features. After a
period of five years from the contribution or, if earlier,
the date upon which the pension plan trust is fully funded
as determined under GAAP, AT&T has a right to purchase
from the pension plan trust some or all the preferred equity
interest at the greater of their fair market value or minimum
liquidation value plus any unpaid cumulative dividends.
In addition, AT&T will have the right to purchase the
preferred equity interest in the event AT&T’s ownership
of Mobility is less than 50% or there is a transaction
that results in the transfer of 50% or more of the pension
plan trust’s assets to an entity not under common control
with AT&T (collectively, a change of control). The pension
plan trust has the right to require AT&T to purchase the
preferred equity interest at the greater of their fair market
value or minimum liquidation value plus any unpaid
cumulative dividends, and in installments, as specified in the
contribution agreement upon the occurrence of any of the
following: (1) at any time if the ratio of debt to total
capitalization of Mobility exceeds that of AT&T, (2)the date
on which AT&T is rated below investment grade for two
on AT&T’s credit rating. In the event that AT&T’s unsecured
senior long-term debt ratings are split by S&P, Moody’s
and Fitch, then the Applicable Margin will be determined
by the highest rating, unless the lowest of such ratings
is more than one level below the highest of such ratings,
in which case the pricing will be the rating that is one level
above the lowest of such ratings.
The 18-Month Credit Agreement contains affirmative and
negative covenants and events of default equivalent to
those contained in the Syndicated Credit Agreement.
Collateral Arrangements
During 2015, we posted $2,288 of additional cash
collateral, on a net basis, to banks and other participants
in our derivative arrangements. Cash postings under these
arrangements vary with changes in credit ratings and netting
agreements. (See Note 10)
Other
Our total capital consists of debt (long-term debt and
debt maturing within one year) and stockholders’ equity.
Our capital structure does not include debt issued by our
equity method investments. At December31,2015, our debt
ratio was 50.5%, compared to 47.5% at December31,2014,
and 44.1% at December31,2013. The debt ratio is affected
by the same factors that affect total capital, and reflects
the debt issued and acquired in 2015 and our issuance
of treasury shares of AT&T common stock, and debt
redemptions during 2015. Total capital increased $77,687
in 2015 compared to an increase of $2,905 in 2014.
The 2015 capital increase was primarily due to use of
treasury stock to acquire DIRECTV and an increase in
debt balances, partially offset by a decrease in accumulated
other comprehensive income due to foreign currency
translation adjustments.
A significant amount of our cash outflows are related
to tax items and benefits paid for current and former
employees. Total taxes incurred, collected and remitted by
AT&T during 2015, 2014, and 2013 were $21,501, $20,870
and $21,004. These taxes include income, franchise, property,
sales, excise, payroll, gross receipts and various other taxes
and fees. Total health and welfare benefits provided to
certain active and retired employees and their dependents
totaled $4,625 in 2015, with $1,239 paid from plan assets.
Of those benefits, $3,749 related to medical and prescription
drug benefits. During 2015, we paid $4,681 of pension
benefits out of plan assets.
During 2015, we also received approximately $4,534 from
monetization of various assets, primarily from our sales
of certain equipment installment receivables and real estate
holdings. We plan to continue to explore monetization
opportunities in 2016.