wallic ivicula competes with ulus allu television pio uvi groups and independents w plou networks and online platforms have affiliated production companies from which they are increasingly obtaining their programming, which has reduced their demand for programming from non-affiliated production companies. WarnerMedia also faces competition from other television networks, online platforms, and premium pay television services for distribution and marketing of its television networks and premium pay and basic tier television services by affiliates. Our WarnerMedia businesses compete with other production companies and studios for the services of producers, directors, writers, actors and others and for the acquisition of literary properties. In recent years, technology companies also have begun to produce programming and compete with WarnerMedia for talent and property rights. Advertising The increased amount of consumer time spent online and on mobile activities has resulted in the shift of advertising budgets away from traditional television to digital advertising. WarnerMedia's advertising-supported television networks and digital properties compete with streaming services, other networks and digital properties, print, radio and other media. Our programmatic advertising business faces competition from a variety of technology companies. Similar to all participants in the advertising technology sector, we contend with the dominance of Google, as well as the influence of Facebook, whose practices may result in the decreased ability and willingness of advertisers and programmers to adopt programmatic solutions offered by alternative suppliers. RESEARCH AND DEVELOPMENT AT&T scientists and engineers conduct research in a variety of areas, including IP networking, advanced network design and architecture, network and cyber security, network operations support systems, satellite technology, video platform development and data analytics. The majority of the development activities are performed to create new services and to invent tools and systems to manage secure and reliable networks for us and our customers. Research and development expenses were $1,276 in 2019, $1, 194 in 2018, and $1,503 in 2017. EMPLOYEES As of January 31, 2020, we employed approximately 246,000 persons. Approximately 40% of our employees are represented by the Communications Workers of America (CWA), the International Brotherhood of Electrical Workers (IBEW) or other unions. After expiration of the agreements, work stoppages or labor disruptions may occur in the absence of new contracts or other agreements being reached. A contract covering approximately 7,000 traditional wireline employees in our Midwest region expired in April 2018. In August 2019, a new four-year contract was ratified by employees and will expire in April 2022. A contract covering approximately 3,000 traditional wireline employees in our legacy AT&T Corp. business expired in April 2018. In August 2019, a new four-year contract was ratified by employees and will expire in April 2022. A contract covering approximately 18,000 traditional wireline employees in our Southeast region expired in August 2019. In October 2019, a new five-year contract was ratified by employees and will expire in August 2024. Other contracts covering approximately 20,000 employees are scheduled to expire during 2020, including a contract expiring in February covering approximately 7,000 Mobility employees and a contract expiring in April covering approximately 13,000 traditional wireline employees in our West region. At December 31, 2019, we had approximately 540,000 retirees and dependents that were eligible to receive retiree benefits.ITEM 6. SELECTED FINANCIAL DATA At December 31 and for the year ended: 2019 2018 2017 2016 2015 Financial Data Operating revenues S 181,193 S 170,756 S 160,546 S 163,786 S 146,801 Operating expenses S 153,238 S 144,660 S 140,576 S 140,243 S 126,439 Operating income S 27,955 S 26,096 S 19,970 S 23,543 S 20,362 Interest expense S 8,422 S 7,957 S 6,300 S 4,910 S 4,120 Equity in net income (loss) of ailiates S 6 S (48) S (128) S 98 S 79 Other income (expense) - net S (1,071) S 6,782 S 1,597 S 1,081 S 4,371 Income tax (benet) expense S 3,493 S 4,920 S (14,708) S 6,479 S 7,005 Net Income S 14,975 S 19,953 S 29,847 S 13,333 S 13,687 Less: Net Income Attributable to Noncontrolling Interest S (1,072) S (583) S (397) S (357) S (342) Net Income Attributable to AT&T S 13,903 S 19,370 S 29,450 S 12,976 S 13,345 Net Income Attributable to Common Stock S 13,900 S 19,370 S 29,450 S 12,976 S 13,345 Basic Earnings Per Common Share: Net Income Attributable to Common Stock S 1.90 S 2.85 S 477 S 210 S 2.37 Diluted Earnings Per Common Share: Net Income Attributable to Common Stock S 1.89 S 2.85 S 4.76 S 2.10 S 2.37 Weighted-average common shares outstanding (000,000) 7,319 6,778 6,164 6,168 5,628 Weightedaverage conunon shares outstanding with dilution (000,000) 7,348 6,806 6,183 6,189 5,646 End of period common shares outstanding (000,000) 7,255 7,282 6,139 6,139 6,145 Dividends declared per common share S 2.05 S 2.01 S 1.97 S 1.93 S 1.89 Cash and cash equivalents S 12,130 S 5,204 S 50,498 S 5,788 S 5,121 Total assets S 551,669 S 531,864 S 444,097 S 403,821 S 402,672 Long-term debt S 151,309 S 166,250 S 125,972 S 113,681 S 118,515 Total debt S 163,147 S 176,505 S 164,346 S 123,513 S 126,151 Debt ratio 44.7% 47.7% 53.6% 49.9% 50.5% Net debt ratio 41.4% 46.2% 37.2% 47.5% 48.5% Book value per common share S 27.84 S 2663 S 2313 S 2022 S 20.12 Capital expenditures S 19,635 S 21,251 S 21,550 S 22,408 S 20,015 Vendor nancing payments S 3,050 S 560 S 572 S - S - Gross capital investment1 S 23,690 S 23,240 S 22,401 S 22,408 S 20,015 Spectrum acquisitions2 S 1,316 S 447 S (1,380) S 2,477 S 17,740 Number of employees 247,800 268,220 254,000 268,540 281,450 1 $279 in 2017 and S0 in 2016-2015 (see Note 20). Cash paid for FCC license and domestic spectrum acquired in business acquisitions and swaps, net of auction deposit retums. Includes capital expenditures and vendor nancing payments and excludes FirstNet reimbursements of S1 ,005 in 2019, S 1,429 in 2018, ITEM 7. MANAGER/[ENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW AT&T Inc. is referred to as \"we,\" \"AT&T\" or the \"Company" throughout this document, and the names of the particular subsidiaries and afliates providing the services generally have been omitted. AT&T is a holding company whose subsidiaries and affiliates operate worldwide in the telecommunications, media and technology industries. You should read this discussion in conjunction with the consolidated nancial statements and accompanying notes (Notes). We completed the acquisition of Time Warner Inc. (Time Warner) on June 14, 2018, and have included its results after that date. In accordance with U.S. generally accepted accounting principles (GAAP), operating results from Time Warner prior to the acquisition are excluded. Our Management's Discussion and Analysis of Financial Condition and Results of Operations included in this document generally discusses 2019 and 2018 items and year-to-year comparisons between 2019 and 2018. Discussions of 2017 items and year-to-year comparisons between 2018 and 2017 that are not included in this document can be found in \"Management's Discussion and Analysis of Financial Condition and Results of Operations\" in Part II, Item 7 of our Annual Report on Form 10-K for the scal year ended December 31, 2018. We have four reportable segments: (1) Communications, (2) WarnerMedia, (3) Latin America and (4) Xandr. Our segment results presented in Note 4 and discussed below follow our internal management reporting. We analyze our segments based on segment operating contribution, which consists of operating income, excluding acquisition-related costs and other signicant items and equity in net income (loss) of afliates for investments managed within each segment. Each segment's percentage calculation of total segment operating revenue and contribution is derived from our segment results table in Note 4 and may total more than 100% due to losses in one or more segments. Percentage increases and decreases that are not considered meaningful are denoted with a dash. We have recast our segment results for all prior periods presented to exclude wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands from our Mobility and Business Wireiine business units of the Communications segment, instead reporting them with Corporate and Other (see Note 6). Percent Change 2019 2018 2017 2019 vs. 2018 2018 vs. 2017 Operating Revenues Communications $ 142,359 $ 143,721 $ 149,457 (0.9) 'Vn (3 .8)% WarnerMedia 33,499 18,941 430 76.9 - Latin America 6,963 7,552 8,269 (9.0) (7.5) Xandr 2,022 1,740 1,373 16.2 26.7 Corporate and other 1,603 2,101 2,200 (23.7) (4.5) Eliminations and consolidation (5,253) (3,399) (l, 183) (54.5) - AT&T Operating Revenues 181,193 170,756 160,546 6.1 6_4 Operating Contribution Communications 32,230 32,108 31,488 0.4 2.0 WarnerMedia 9,326 5,695 62 63.8 - Latin America (635) (710) (266) 10.6 - Xandr 1,318 1,333 1,202 (1.1) 10.9 Segn_1ent Operating Contribution $ 42,239 $ 38,426 $ 32,486 9.9 % 18.3 % The Communications segment accounted for approximately 77% of our 2019 total segment operating revenues compared to 84% in 2018 and 76% of our 2019 total segment operating contribution as compared to 84% in 2018. This segment provides services to businesses and consumers located in the U.S. and businesses globally. Our business strategies reect bundled product offerings that cut across product lines and utilize shared assets. This segment contains the following business units: - Mobility provides nationwide wireless service and equipment. I Entertainment Group provides video, including over-the-top (OTT) services, broadband and voice communications services to residential customers. This segment also sells advertising on DIRECTV and Uverse distribution platforms. 27 0 Business Wireline provides advanced IP-based services, as well as traditional voice and data services to business customers. The WarnerMedia segment accounted for approximately 18% of our 2019 total segment operating revenues compared to 11% in 2018 and 22% of our 2019 total segment operating contribution compared to 15% in 2018. This segment develops, produces and distributes feature lms, television, gaming and other content over various physical and digital formats. This segment contains the following business units: 0 Turner primarily operates multichannel basic television networks and digital properties. Turner also sells advertising on its networks and digital properties. 0 Home Box Ofce consists of premium pay television and OTT and streaming services domestically and premium pay, basic tier television and OTT and streaming services internationally, as well as content licensing and home entertainment. 0 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. The Latin America segment accounted for approximately 4% of our 2019 and 2018 total segment operating revenues. This segment provides entertainment and wireless services outside of the U.S. This segment contains the following business units: 0 Mexico provides wireless service and equipment to customers in Mexico. 0 Vrio provides video services primarily to residential customers using satellite technology in Latin America and the Caribbean. The Xandr segment accounted for approximately 1% of our total segment operating revenues in 2019 and 2018 and 3% of our total segment operating contribution in 2019 and 2018. This segment provides advertising services. These services utilize data insights to develop and deliver targeted advertising across video and digital platforms. RESULTS OF OPERATIONS Consolidated Results Our financial results are summarized in the following table. We then discuss factors affecting our overall results for the past three years. Additional analysis is discussed in our \"Segment Results" section. We also discuss our expected revenue and expense trends for 2020 in the \"Operating Environment and Trends of the Business\" section. Certain prior period amounts have been reclassied to conform to the current period's presentation. Percent Change 2019 vs. 2018 vs. 2019 2018 2017 2018 2017 Operating revenues Service $ 163,499 $ 152,345 $ 145,597 7.3 % 4.6 % Equipment 17,694 18,411 14,949 (3.9) 23.2 Total Operating Revenues 181,193 170,756 160,546 6.1 6.4 Operating expenses Operations and support 125,021 116,2 30 116,189 7.6 - Depreciation and amortization 28,217 28,43 0 24,3 87 (0.7) 16.6 Total Operating Expenses 153,238 144,660 140,576 5.9 2.9 Operating Income 27,955 26,096 19,970 7.1 30.7 Interest expense 8,422 7,957 6,300 5.8 26.3 Equity in net income (loss) of ailiates 6 (48) (128) 62.5 Other income (expense) net (1,071) 6,782 1,597 - Income Before Income Taxes 18,468 24,873 15,13 9 (25.8) 64.3 Net Income 14,975 19,953 29,847 (24.9) (33.1) Net Income Attributable to AT&T 13,903 19,370 29,450 (28.2) [34.2) Net Income Attributable to Common Stock $ 13,900 $ 19,370 $ 29,450 28.2 % 34.2 % OVERVIEW 28
