8-KOther Events

AT&T INC. 8-K Report, Corporate Update (Jun 7, 2012)

Filed June 7, 2012For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. has announced the completion of the sale of its AT&T Advertising Solutions business segment to an affiliate of Cerberus Capital Management, L.P. This transaction, which closed on May 8, 2012, resulted in AT&T receiving approximately $750 million in cash, a $200 million note, and a 47 percent equity interest in the newly formed entity, YP Holdings LLC. As a consequence of this divestiture, AT&T will no longer report the results of its Advertising Solutions segment as a separate operating segment. The company will account for its significant 47 percent stake in YP Holdings LLC using the equity method of accounting. While this move signals a strategic shift away from the advertising business, investors should note that the company does not anticipate a material gain or loss from this transaction and expects a minimal impact on its 2012 earnings. To aid investors in analyzing performance post-divestiture, AT&T has provided historical operating data for the preceding eight quarters, excluding the Advertising Solutions segment's results.

Key Highlights

  • 1AT&T completed the sale of its AT&T Advertising Solutions business on May 8, 2012.
  • 2The company received $750 million in cash and a $200 million note as part of the sale proceeds.
  • 3AT&T retains a 47 percent equity interest in the new entity, YP Holdings LLC.
  • 4Advertising Solutions results will no longer be reported as a separate operating segment.
  • 5AT&T will account for its stake in YP Holdings LLC using the equity method.
  • 6The transaction is not expected to result in a material gain or loss.
  • 7A minimal impact on 2012 earnings is anticipated.
  • 8AT&T is providing supplemental selected operating data excluding the Advertising Solutions segment for the past eight quarters.

Frequently Asked Questions

While not explicitly stated as a 'reason' in this 8-K, AT&T's divestiture of its Advertising Solutions business and subsequent retention of a significant equity stake in YP Holdings LLC suggests a strategic shift. This move likely allows AT&T to focus its resources on its core communications services (wireless and wireline) while still participating in the growth of the advertising market through its investment in YP Holdings LLC.

AT&T will no longer report the financial results of the Advertising Solutions segment in its consolidated operating results. The company's 47 percent equity interest in YP Holdings LLC will be accounted for under the equity method, meaning its share of YP Holdings' net income will be reported in AT&T's 'Other' segment. Additionally, AT&T has provided historical operating data that excludes the Advertising Solutions segment to help investors track performance on a comparable basis.

AT&T received approximately $750 million in cash and a $200 million note. The company does not expect to record a material gain or loss from this transaction and anticipates a minimal effect on its 2012 earnings. Investors should also note that some annual shared services expenses previously allocated to the Advertising Solutions segment will continue to be incurred by AT&T.

YP Holdings LLC is the new entity formed following the sale of AT&T's Advertising Solutions business to an affiliate of Cerberus Capital Management, L.P. AT&T retains a 47 percent equity interest in this new company.