Skip to main content
Equibles

8-K

At&T Inc. (T)

8-K 2022-01-26 For: 2022-01-26
View Original
Added on April 12, 2026

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________________________________

FORM 8-K

______________________________________________________

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported) January 26, 2022

______________________________________________________

AT&T INC.

(Exact Name of Registrant as Specified in Charter)

______________________________________________________

Delaware 001-08610 43-1301883
(State or Other Jurisdiction<br>of Incorporation) (Commission<br>File Number) (IRS Employer<br>Identification No.)
208 S. Akard St., Dallas, Texas<br><br>(Address of Principal Executive Offices) 75202<br><br>(Zip Code)

Registrant’s telephone number, including area code (210) 821-4105

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240-14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities Registered Pursuant to Section 12(b) of the Act

Title of each class Trading<br>Symbol(s) Name of each exchange<br>on which registered
Common Shares (Par Value $1.00 Per Share) T New York Stock Exchange
Depositary Shares, each representing a 1/1000th interest in a share of 5.000% Perpetual Preferred Stock, Series A T PRA New York Stock Exchange
Depositary Shares, each representing a 1/1000th interest in a share of 4.750% Perpetual Preferred Stock, Series C T PRC New York Stock Exchange
AT&T Inc. 2.650% Global Notes due December 17, 2021 T 21B New York Stock Exchange
AT&T Inc. 1.450% Global Notes due June 1, 2022 T 22B New York Stock Exchange
AT&T Inc. 2.500% Global Notes due March 15, 2023 T 23 New York Stock Exchange
AT&T Inc. 2.750% Global Notes due May 19, 2023 T 23C New York Stock Exchange
AT&T Inc. Floating Rate Global Notes due September 5, 2023 T 23D New York Stock Exchange
AT&T Inc. 1.050% Global Notes due September 5, 2023 T 23E New York Stock Exchange
AT&T Inc. 1.300% Global Notes due September 5, 2023 T 23A New York Stock Exchange
Title of each class Trading<br><br>Symbol(s) Name of each exchange<br><br>on which registered
--- --- ---
AT&T Inc. 1.950% Global Notes due September 15, 2023 T 23F New York Stock Exchange
AT&T Inc. 2.400% Global Notes due March 15, 2024 T 24A New York Stock Exchange
AT&T Inc. 3.500% Global Notes due December 17, 2025 T 25 New York Stock Exchange
AT&T Inc. 0.250% Global Notes due March 4, 2026 T 26E New York Stock Exchange
AT&T Inc. 1.800% Global Notes due September 5, 2026 T 26D New York Stock Exchange
AT&T Inc. 2.900% Global Notes due December 4, 2026 T 26A New York Stock Exchange
AT&T Inc. 1.600% Global Notes due May 19, 2028 T 28C New York Stock Exchange
AT&T Inc. 2.350% Global Notes due September 5, 2029 T 29D New York Stock Exchange
AT&T Inc. 4.375% Global Notes due September 14, 2029 T 29B New York Stock Exchange
AT&T Inc. 2.600% Global Notes due December 17, 2029 T 29A New York Stock Exchange
AT&T Inc. 0.800% Global Notes due March 4, 2030 T 30B New York Stock Exchange
AT&T Inc. 2.050% Global Notes due May 19, 2032 T 32A New York Stock Exchange
AT&T Inc. 3.550% Global Notes due December 17, 2032 T 32 New York Stock Exchange
AT&T Inc. 5.200% Global Notes due November 18, 2033 T 33 New York Stock Exchange
AT&T Inc. 3.375% Global Notes due March 15, 2034 T 34 New York Stock Exchange
AT&T Inc. 2.450% Global Notes due March 15, 2035 T 35 New York Stock Exchange
AT&T Inc. 3.150% Global Notes due September 4, 2036 T 36A New York Stock Exchange
AT&T Inc. 2.600% Global Notes due May 19, 2038 T 38C New York Stock Exchange
AT&T Inc. 1.800% Global Notes due September 14, 2039 T 39B New York Stock Exchange
AT&T Inc. 7.000% Global Notes due April 30, 2040 T 40 New York Stock Exchange
AT&T Inc. 4.250% Global Notes due June 1, 2043 T 43 New York Stock Exchange
AT&T Inc. 4.875% Global Notes due June 1, 2044 T 44 New York Stock Exchange
AT&T Inc. 4.000% Global Notes due June 1, 2049 T 49A New York Stock Exchange
AT&T Inc. 4.250% Global Notes due March 1, 2050 T 50 New York Stock Exchange
AT&T Inc. 3.750% Global Notes due September 1, 2050 T 50A New York Stock Exchange
AT&T Inc. 5.350% Global Notes due November 1, 2066 TBB New York Stock Exchange
AT&T Inc. 5.625% Global Notes due August 1, 2067 TBC New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Item 2.02 Results of Operations and Financial Condition.

The registrant announced on January 26, 2022, its results of operations for the fourth quarter of 2021. The text of the press release and accompanying financial information are attached as exhibits and incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

The following exhibits are furnished as part of this report:

(d) Exhibits
99.1 Press release dated January 26, 2022reporting financial results for the fourth quarter ended December 31, 2021.
99.2 AT&T Inc. selected financial statements and operating data.
99.3 Discussion and reconciliation of non-GAAP measures.
99.4 Supplemental Quarterly Pro Forma Financial Information
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

AT&T INC.
Date: January 26, 2022 By: /s/ Debra L. Dial                                  .<br><br>Debra L. Dial<br><br>Senior Vice President and Controller

Document

attnewsreleasea01a.jpg

AT&T Reports Fourth-Quarter and Full-Year Results

Fourth-Quarter Consolidated Results

•Consolidated revenues of $41.0 billion

•Reported EPS of $0.69 compared to ($1.95) in the year-ago quarter, which included non-cash charges

•Adjusted EPS of $0.78 compared to $0.75 in the year-ago quarter

•Cash from operations of $11.3 billion

•Capital expenditures of $3.8 billion; gross capital investment1 of $4.9 billion and cash content spend of $4.6 billion

•Free cash flow2 of $8.7 billion

Full-Year Consolidated Results

•Consolidated revenues of $168.9 billion

•Reported EPS of $2.76 compared to ($0.75) in the prior year, which included non-cash charges

•Adjusted EPS of $3.40 compared to $3.18 in the prior year

•Cash from operations of $42.0 billion

•Capital expenditures of $16.5 billion; gross capital investment1 of $21.6 billion

•Free cash flow2 of $26.8 billion; total dividend payout ratio3 of 56%

Note: AT&T’s fourth-quarter earnings conference call will be webcast at 8:30 a.m. ET on Wednesday, January 26, 2022. The webcast and related materials will be available on AT&T’s Investor Relations website at https://investors.att.com.

DALLAS, January 26, 2022 — AT&T Inc. (NYSE:T) reported fourth-quarter results that showed continuing customer growth in wireless, fiber and HBO Max. For the full year, AT&T continued to lead the industry in postpaid phone net adds, gaining more subscribers than in the prior 10 years combined; added more than 1 million fiber subscribers — the fourth consecutive year in which it has added 1 million or more subscribers; and surpassed the high end of its guidance for global HBO Max and HBO subscribers with nearly 74 million subscribers at the end of 2021.

“A year and a half ago, we began simplifying our business to reposition AT&T for growth and we’re extremely pleased with how we’ve executed on that commitment,” said John Stankey, AT&T CEO. “We ended 2021 the way we started it – by growing our customer relationships, running our operations more effectively and efficiently, and sharpening our focus. Our momentum is strong and we’re confident there is more opportunity to continue to grow our customer base and drive costs from the business.

“We’re at the dawn of a new age of connectivity. Our focus now is to be America’s best connectivity provider and also ensure our media assets are positioned to grow and truly become a global media distribution leader. Once we do this, we’ll unlock the true value of these businesses and provide a great opportunity for shareholders.”

attglobea.jpg

Fourth-Quarter Highlights

Communications

•Mobility:

◦884,000 postpaid phone net adds; 3.2 million for full year

◦1.3 million postpaid net adds; 4.5 million for full year

◦Postpaid phone churn of 0.85%, 0.76% for full year

◦Revenues up 5.1%; service revenues up 4.6%; equipment revenues up 6.2%

◦Operating income of $5.4 billion, up 5.2% year over year; EBITDA4 up 4.3%

◦Operating income margin of 25.3%; EBITDA service margin5 50.5%

•Business Wireline:

◦Operating income margin of 15.2%; EBITDA margin4 37.5%, up 50 basis points due to cost efficiencies

•Consumer Wireline:

◦271,000 AT&T Fiber net adds; 1.0 million for full year

◦Revenues up 1.4%; broadband revenues up 5.4% with ARPU growth of 4.2%

WarnerMedia

•Total global HBO Max and HBO subscribers6 of 73.8 million, up 13.1 million year over year; domestic subscribers7 of 46.8 million, up 5.3 million for full year

•Domestic HBO Max and HBO subscriber ARPU8 of $11.15

•Total revenues up 15.4% in fourth quarter to $9.9 billion

•Direct-to-Consumer subscription revenues up 11.5% in fourth quarter

Consolidated Financial Results

Consolidated revenues for the fourth quarter totaled $41.0 billion versus $45.7 billion in the year-ago quarter, down 10.4% reflecting the impact of divested businesses, mainly U.S. Video in the third quarter and Vrio in the fourth quarter, and lower Business Wireline revenues. Decreases were partially offset by higher WarnerMedia revenues, including a partial recovery from prior-year pandemic impacts, and higher Mobility and Consumer Wireline revenues. Excluding impacts of the U.S. Video business and Vrio from both quarters, consolidated revenues totaled $40.6 billion9 compared to $39.0 billion in the year-ago quarter.

attglobea.jpg

Operating expenses were $35.7 billion versus $56.4 billion in the year-ago quarter. Expenses declined due to $16.4 billion of non-cash asset impairments in the prior year, the separation of the U.S. Video operations, and impacts of Vrio and other divested businesses. These declines were partially offset by higher WarnerMedia programming, marketing and selling costs, and higher domestic wireless equipment costs, including 3G network shutdown costs. Additionally, depreciation and amortization expense was $1.3 billion lower year over year, largely due to the impairments of long-lived assets taken in 2020 and ceasing depreciation and amortization of held-for-sale businesses.

Operating income (loss) was $5.3 billion versus ($10.7) billion in the year-ago quarter primarily due to non-cash asset impairments in the prior year. When adjusting for merger-amortization costs and other items, adjusted operating income was $6.6 billion10 versus $7.8 billion in the year-ago quarter. Adjusted operating income was comparable when excluding the U.S. Video business and Vrio from both quarters.

Fourth-quarter net income (loss) attributable to common stock was $5.0 billion, or $0.69 per diluted common share, versus ($13.9) billion, or ($1.95) per common share in the year-ago quarter. Adjusting for $0.09, which includes merger-amortization costs, a proportionate share of intangible amortization at the DIRECTV equity method investment, an actuarial gain on benefit plans, and other items, earnings per diluted common share was $0.78 compared to $0.75 in the year-ago quarter.

Cash from operating activities was $11.3 billion, up $1.2 billion year over year, including content spend of $4.6 billion. Capital expenditures were $3.8 billion in the quarter. Gross capital investment totaled $4.9 billion, which includes $0.6 billion of cash payments for vendor financing and excludes $0.5 billion of FirstNet reimbursements. Free cash flow, including $1.3 billion of distributions from DIRECTV classified as investing activities, was $8.7 billion for the quarter. Net debt decreased by $1.7 billion sequentially, and net debt-to-adjusted EBITDA at the end of the fourth quarter was 3.22x.11

Full-Year Results

For full-year 2021 when compared with 2020 results, AT&T's consolidated revenues totaled $168.9 billion versus $171.8 billion, reflecting the separation of the U.S. Video business in the third quarter of 2021, and the impacts from other divested businesses. These decreases were partially offset by higher revenues in WarnerMedia and Communications. Excluding impacts of U.S. Video and Vrio from both years, consolidated revenues totaled $153.2 billion9 compared to $144.6 billion in 2020.

Operating expenses were $145.5 billion in 2021 compared with $165.4 billion in 2020. Expenses declined due to $14.0 billion lower non-cash asset impairments year over year, a partial year of U.S. Video in 2021, and impacts of other divested businesses. These declines were partially offset by higher WarnerMedia programming, marketing and selling costs, and higher domestic wireless equipment costs. Additionally, depreciation and amortization expense was $5.7 billion lower year over year, largely due to the impairments of long-lived assets taken in 2020 and ceasing depreciation and amortization of held-for-sale businesses.

attglobea.jpg

Operating income was $23.3 billion compared to $6.4 billion in the prior year, and operating income margin was 13.8% versus 3.7%. With adjustments for both years, operating income was $32.8 billion10 versus $34.1 billion in 2020, and operating income margin was 19.4% versus 19.8%. Excluding impacts of U.S. Video and Vrio from both years, adjusted operating income totaled $30.5 billion12 compared to $32.4 billion in 2020.

Equity in net income (loss) of affiliates of $0.6 billion includes $0.6 billion from the DIRECTV investment for the five months after separation. With adjustment for a proportionate share of intangible amortization, adjusted equity in net income from the DIRECTV investment was $1.4 billion.13

2021 net income (loss) attributable to common stock was $19.9 billion, or $2.76 per diluted common share, versus ($5.4) billion, or ($0.75) per common share, in 2020. With adjustments for both years, earnings per diluted common share was $3.40 compared to $3.18 in 2020.

Cash from operating activities was $42.0 billion, down $1.2 billion year over year, including content spend of $19.2 billion, which was up $4.3 billion year over year. Capital expenditures were $16.5 billion for the year. Gross capital investment totaled $21.6 billion, which includes $4.6 billion of cash payments for vendor financing and excludes $0.5 billion of FirstNet reimbursements. Full-year free cash flow2, which includes $1.3 billion of distributions from DIRECTV classified as investing activities, was $26.8 billion for the year compared to $27.5 billion in 2020. The company’s free cash flow to total dividend payout ratio3 for the full year was 56%. Net debt increased by $8.7 billion in the year.

Communications Operational Highlights

Fourth-quarter revenues were $30.2 billion, up 2.4% year over year due to increases in Mobility and Consumer Wireline more than offsetting a decline in Business Wireline. Operating contribution was $6.5 billion, up 1.4% year over year, with operating income margin of 21.4%, compared to 21.6% in the year-ago quarter.

Mobility

•Revenues were up 5.1% year over year to $21.1 billion due to higher service and equipment revenues. Service revenues were $14.7 billion, up 4.6% year over year due to subscriber gains and the lapping of pandemic impacts on international roaming revenues. Equipment revenues were $6.5 billion, up 6.2% year over year, driven by increased sales of higher-priced smartphones.

•Operating expenses were $15.8 billion, up 5.1% year over year due to higher equipment costs, including 3G network shutdown costs of approximately $130 million, and higher HBO Max bundling costs, partially offset by lower marketing and support.

•Operating income was $5.4 billion, up 5.2% year over year. Operating income margin was 25.3%, flat with the year-ago quarter.

•EBITDA was $7.4 billion, up 4.3% year over year with EBITDA margin of 35.0%, down from 35.3% in the year-ago quarter. EBITDA service margin was 50.5%, compared to 50.6% in the year-ago quarter.

•Total net adds were 5.3 million including:

attglobea.jpg

▪1,285,000 postpaid net adds, with

•884,000 postpaid phone net adds

•31,000 postpaid tablet and other branded computing device net adds

•370,000 other net adds

▪24,000 prepaid phone net adds

•Postpaid churn was 1.02% versus 0.94% in the year-ago quarter. Postpaid phone churn was 0.85% versus 0.76% in the year-ago quarter. Prepaid phone churn was less than 3% with Cricket substantially lower.

•Postpaid phone-only ARPU was $54.06, down 0.7% versus the year-ago quarter, due to the impacts of promotional discount amortization.

Business Wireline

•Revenues were $5.9 billion, down 5.6% year over year, partially due to the prior-year increase for pandemic-related connectivity, lower demand for legacy voice and data services, and a strategic decision to deemphasize non-core services.

•Operating expenses were $5.0 billion, down 4.8% year over year due to the impact of ongoing operational cost efficiencies.

•Operating income was $0.9 billion, down 10.0% with operating income margin of 15.2%, compared to 15.9% in the year-ago quarter.

•EBITDA was $2.2 billion, down 4.3% year over year with EBITDA margin of 37.5%, compared to 37.0% in the year-ago quarter.

•More than 675,000 U.S. business buildings are lit with fiber from AT&T, enabling high-speed fiber connections to more than 2.75 million U.S. business customer locations. Nationwide, more than 9.5 million business customer locations are on or within 1,000 feet of AT&T fiber.14

Consumer Wireline

•Revenues were $3.2 billion, up 1.4% year over year due to gains in broadband more than offsetting declines in legacy voice and data services and other services. Broadband revenues increased 5.4%, which reflects fiber subscriber growth and higher ARPU resulting from increases in higher-revenue fiber customers.

•Operating expenses were $3.0 billion, up 4.1% year over year largely driven by higher advertising, network and technology, and higher depreciation costs, partially offset by lower amortization of deferred fulfillment costs.

•Operating income was $201 million, down 26.9% year over year, with operating income margin of 6.4%, compared to 8.8% in the year-ago quarter.

•EBITDA was $1.0 billion, down 2.3% year over year with EBITDA margin of 31.3%, compared to 32.5% in the year-ago quarter.

attglobea.jpg

•Total broadband and DSL subscriber net losses were 20,000, reflecting growth in fiber subscribers mostly offsetting losses in slower-speed services. Full-year 2021 fiber net adds totaled about 1.0 million, the fourth consecutive year in which the company added 1 million or more fiber subscribers. AT&T Fiber is marketed to about 16 million customer locations.

WarnerMedia Operational Highlights

Revenues were $9.9 billion, up 15.4% versus the year-ago quarter, driven by higher content and other revenues, including the partial recovery from prior-year impacts of the pandemic and higher subscription revenues, partially offset by lower advertising revenues. Subscription revenues were $3.8 billion, up 5.4%, primarily reflecting growth of HBO Max. Content and Other revenues were $4.4 billion, up 45.0%, driven by higher TV licensing and theatrical. Advertising revenues were $1.6 billion, down 12.9% when compared to the prior year due to lower audiences with tough comparisons to the prior year political environment.

•Operating expenses totaled $8.3 billion, up 38.0% when compared to the fourth quarter of 2020, driven by higher programming and marketing costs, and incremental selling costs associated with DIRECTV advertising revenue sharing arrangements.

•Operating contribution was $1.6 billion, down 37.8%. Operating income was $1.6 billion, down 37.9% year over year, as continued HBO Max investments and incremental advertising revenue sharing costs were partially offset by higher revenues and cost savings initiatives. Operating income margin was 16.0%, compared to 29.7% in the year-ago quarter.

•At the end of the quarter, there were 73.8 million global HBO Max and HBO subscribers, up 13.1 million year over year and up 4.3 million sequentially, driven by international as well as domestic retail subscriber gains. At the end of the quarter, there were 46.8 million domestic HBO Max and HBO subscribers versus 41.5 million in the year-ago quarter, up 5.3 million year over year. Domestic subscriber ARPU was $11.15.

Latin America Operational Highlights

Revenues were $1.1 billion, down 29.0% year over year due to the sale of Vrio on November 15, 2021. Operating contribution was ($80) million compared to ($167) million in the year-ago quarter reflecting ceasing depreciation on Vrio held-for-sale assets. Operating income margin was (7.4%), compared to (11.0%) in the prior-year quarter.

Mexico

•Revenues were $704 million, down 4.3% year over year primarily due to lower equipment revenues partially offset by increased growth in service revenues. Service revenues were $485 million, up 5.7% year over year, driven by a growing subscriber base and growth in other services. Equipment revenues were $219 million, down 20.9% year over year driven by lower volumes. Operating loss was ($117) million versus ($126) million in the year-ago quarter.

•Total wireless net adds were 889,000 including 858,000 prepaid net adds, 26,000 postpaid net adds, and 5,000 reseller net adds.

attglobea.jpg

2022 Outlook

The company is planning to host a virtual analyst event in the first half of March. At that event, the company expects to provide additional insight and expectations for financial and operational performance of the Communications Company following the close of the pending WarnerMedia transaction, which the company now expects to close in the second quarter.

For the full year, including WarnerMedia and Xandr, the company expects:

•Consolidated revenue growth in the low-single digits range compared to 2021 consolidated revenues of $153.2 billion9, which excludes U.S. Video and Vrio.

•Adjusted EPS15 from $3.10 to $3.15.

•Gross capital investment1 in the $24 billion range with capital expenditures in the $20 billion range.

•2022 free cash flow16 in the $23 billion range.

For the full year, the company expects the contribution for WarnerMedia and Xandr to be:

•Revenues in the $37 to $39 billion range.

•EBITDA in the $6 to $7 billion range.

•Free cash flow16 of approximately $3 billion.

1Gross capital investment includes capital expenditures and cash payments for vendor financing and excludes FirstNet reimbursements. In 4Q21, gross capital investment included $0.6 billion in vendor financing payments and excluded $0.5 billion in FirstNet reimbursements. In 2021, gross capital investment included $4.6 billion in vendor financing payments and excluded $0.5 billion in FirstNet reimbursements. In 2022, vendor financing payments are expected to be in the $4 billion range.

2 Free cash flow is a non-GAAP financial measure that is frequently used by investors and credit rating agencies to provide relevant and useful information. In 4Q21, free cash flow is cash from operating activities of $11.3 billion, plus cash distributions from DIRECTV classified as investing activities of $1.3 billion, minus capital expenditures of $3.8 billion. In 2021, free cash flow is cash from operating activities of $42.0 billion, plus cash distributions from DIRECTV classified as investing activities of $1.3 billion, minus capital expenditures of $16.5 billion.

3 Free cash flow total dividend payout ratio is total dividends paid divided by free cash flow. For full-year 2021, dividends paid totaled $15.1 billion.

4EBITDA is operating income before depreciation and amortization. EBITDA margin is operating income before depreciation and amortization, divided by total revenues.

5EBITDA service margin is operating income before depreciation and amortization, divided by total service revenues.

6Global HBO Max and HBO subscribers consist of domestic and international HBO Max and HBO subscribers, and exclude free trials, basic and Cinemax subscribers.

7Domestic HBO Max and HBO subscribers consist of U.S. accounts with access to HBO Max (including wholesale subscribers that may not have signed in) and HBO accounts, and exclude free trials and Cinemax subscribers.

8Domestic subscriber ARPU is defined as domestic HBO Max and HBO subscriber revenues during the period divided by average domestic HBO Max and HBO subscribers during the period, excluding HBO Commercial and other bulk-billed revenues and subscribers during the period.

attglobea.jpg

9 Operating Revenues, excluding impacts of the U.S. Video business and Vrio, of $40.6 billion for 4Q21 is calculated as Operating Revenues of $41.0 billion minus Vrio operating revenues of $0.4 billion. For full-year 2021, Operating Revenues, excluding impacts of the U.S. Video business and Vrio, of $153.2 billion is calculated as Operating Revenues of $168.9 billion minus Video operating revenues of $15.5 billion, minus Vrio operating revenues of $2.6 billion, plus WarnerMedia sales for content and advertising of $2.5 billion that are external after close of the transactions. Further information is included in our Form 8-K dated January 26, 2022.

10 Adjusted Operating Income is Operating Income adjusted for revenues and costs we consider non-operational in nature, including items arising from asset acquisitions or dispositions. Adjusted Operating Income for 4Q21 of $6.6 billion is calculated as Operating Income of $5.3 billion plus $1.3 billion of adjustments as detailed in the Discussion and Reconciliation of Non-GAAP Measures included in our Form 8-K dated January 26, 2022. Adjusted Operating Income for 2021 of $32.8 billion is calculated as Operating Income of $23.3 billion plus $9.5 billion of adjustments.

11Net Debt to adjusted EBITDA ratios are non-GAAP financial measures that are frequently used by investors and credit rating agencies to provide relevant and useful information. Our Net Debt to Adjusted EBITDA ratio is calculated by dividing the Net Debt of $156.2 billion (Total Debt of $177.4 billion at December 31, 2021 less Cash and Cash Equivalents of $21.2 billion) by the sum of the most recent four quarters of Pro Forma Adjusted EBITDA of $48.5 billion ($12.5 billion for March 31, 2021; $12.2 billion for June 30, 2021; $12.5 billion for September 30, 2021; and $11.3 billion for December 31, 2021).

12Adjusted Operating Income, excluding impacts of the U.S. Video business and Vrio, of $30.5 billion for 2021 is calculated as Adjusted Operating Income of $32.8 billion minus $2.4 billion of adjustments to reflect the impacts of the July 31, 2021 U.S. Video separation and the November 15, 2021 Vrio sale. Further detail of these adjustments and information is included in our Form 8-K dated January 26, 2022.

13Adjusted equity in net income from DIRECTV investment is calculated as equity income from DIRECTV reported in Equity in Net Income (Loss) of Affiliates and excludes AT&T’s proportionate share of the noncash depreciation and amortization of fair value accretion from DIRECTV’s revaluation of assets and purchase price allocation.

14The more than 2.75 million U.S. business customer locations are included within the 9.5+ million U.S. business customer locations on or within 1,000 feet of AT&T fiber.

15The company expects adjustments to 2022 reported diluted EPS (that excludes impact of adoption of new accounting standards) to include merger-related amortization in the range of $1 billion per quarter (prior to close of the WarnerMedia-Discovery transaction) and other adjustments, the proportionate share of intangible amortization at the DIRECTV equity method investment in the range of $1.5 billion, a non-cash mark-to-market benefit plan gain/loss, and other items. The company expects the mark-to-market adjustment, which is driven by interest rates and investment returns that are not reasonably estimable at this time, to be a significant item. Our 2022 EPS depends on future levels of revenues and expenses which are not reasonably estimable at this time. Accordingly, we cannot provide a reconciliation between these projected non-GAAP metrics and the reported GAAP metrics without unreasonable effort.

16Free cash flow is cash from operating activities plus cash distributions from DIRECTV classified as investing activities, minus capital expenditures. Due to high variability and difficulty in predicting items that impact cash from operating activities, cash distributions from DIRECTV, and capital expenditures, the company is not able to provide a reconciliation between projected free cash flow and the most comparable GAAP metric without unreasonable effort.

attglobea.jpg

*About AT&T

AT&T Inc. (NYSE:T) is a diversified, global leader in telecommunications, media and entertainment, and technology. AT&T Communications provides more than 100 million U.S. consumers with communications and entertainment experiences across mobile and broadband. Plus, it serves high-speed, highly secure connectivity and smart solutions to nearly 3 million business customers. WarnerMedia is a leading media and entertainment company that creates and distributes premium and popular content to global audiences through its consumer brands, including: HBO, HBO Max, Warner Bros., TNT, TBS, truTV, CNN, DC Entertainment, New Line, Cartoon Network, Adult Swim and Turner Classic Movies. AT&T Latin America provides wireless services to consumers and businesses in Mexico.

AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc. Additional information is available at about.att.com. © 2022 AT&T Intellectual Property. All rights reserved. AT&T, the Globe logo and other marks are trademarks and service marks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners.

Cautionary Language Concerning Forward-Looking Statements

Information set forth in this news release contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results might differ materially. A discussion of factors that may affect future results is contained in AT&T’s filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update and revise statements contained in this news release based on new information or otherwise.

This news release may contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available on the company’s website at https://investors.att.com.

For more information, contact:

Fletcher Cook

AT&T Inc.

Phone: 214-912-8541

Email: fletcher.cook@att.com

Daphne Avila

AT&T Inc.

Phone: (972) 266-3866

Email: daphne.avila@att.com

Document

AT&T Inc.
Financial Data
Consolidated Statements of Income
Dollars in millions except per share amounts
Unaudited Fourth Quarter Percent Year Ended Percent
2021 2020 Change 2021 2020 Change
Operating Revenues
Service $ 34,088 $ 39,051 (12.7) % $ 146,391 $ 152,767 (4.2) %
Equipment 6,870 6,640 3.5 % 22,473 18,993 18.3 %
Total Operating Revenues 40,958 45,691 (10.4) % 168,864 171,760 (1.7) %
Operating Expenses
Cost of revenues
Equipment 7,454 7,084 5.2 % 23,778 19,706 20.7 %
Broadcast, programming and operations 4,906 7,750 (36.7) % 24,797 27,305 (9.2) %
Other cost of revenues (exclusive of<br><br>depreciation and amortization shown<br><br>separately below) 7,435 8,076 (7.9) % 31,232 32,909 (5.1) %
Selling, general and administrative 9,994 10,182 (1.8) % 37,944 38,039 (0.2) %
Asset impairments and abandonments 188 16,365 (98.9) % 4,904 18,880 (74.0) %
Depreciation and amortization 5,673 6,979 (18.7) % 22,862 28,516 (19.8) %
Total Operating Expenses 35,650 56,436 (36.8) % 145,517 165,355 (12.0) %
Operating Income (Loss) 5,308 (10,745) — % 23,347 6,405 — %
Interest Expense 1,663 1,894 (12.2) % 6,884 7,925 (13.1) %
Equity in Net Income of Affiliates 447 106 — % 631 95 — %
Other Income (Expense) — Net 2,354 (3,020) — % 9,853 (1,431) — %
Income (Loss) Before Income Taxes 6,446 (15,553) — % 26,947 (2,856) — %
Income Tax (Benefit) Expense 1,056 (2,038) — % 5,468 965 — %
Net Income (Loss) 5,390 (13,515) — % 21,479 (3,821) — %
Less: Net Income Attributable to<br>    Noncontrolling Interest (347) (368) 5.7 % (1,398) (1,355) (3.2) %
Net Income (Loss) Attributable to AT&T $ 5,043 $ (13,883) — % $ 20,081 $ (5,176) — %
Less: Preferred Stock Dividends (51) (55) 7.3 % (207) (193) (7.3) %
Net Income (Loss) Attributable<br>   to Common Stock $ 4,992 $ (13,938) — % $ 19,874 $ (5,369) — %
Basic Earnings Per Share Attributable<br>   to Common Stock $ 0.69 $ (1.95) — % $ 2.77 $ (0.75) — %
Weighted Average Common<br>    Shares Outstanding (000,000) 7,172 7,150 0.3 % 7,168 7,157 0.2 %
Diluted Earnings Per Share Attributable<br>    to Common Stock $ 0.69 $ (1.95) — % $ 2.76 $ (0.75) — %
Weighted Average Common <br>    Shares Outstanding with Dilution (000,000) 7,204 7,176 0.4 % 7,199 7,183 0.2 %
AT&T Inc.
--- --- --- --- ---
Financial Data
Consolidated Balance Sheets
Dollars in millions
Unaudited Dec. 31, Dec. 31,
2021 2020
Assets
Current Assets
Cash and cash equivalents $ 21,169 $ 9,740
Accounts receivable – net of related allowance for credit loss of $771 and $1,221 17,571 20,215
Inventories 3,464 3,695
Prepaid and other current assets 17,793 18,358
Total current assets 59,997 52,008
Noncurrent Inventories and Theatrical Film and Television Production Costs 18,983 14,752
Property, Plant and Equipment – Net 125,904 127,315
Goodwill 133,223 135,259
Licenses – Net 113,830 93,840
Trademarks and Trade Names – Net 21,938 23,297
Distribution Networks – Net 11,942 13,793
Other Intangible Assets – Net 11,783 15,386
Investments in and Advances to Equity Affiliates 7,274 1,780
Operating Lease Right-Of-Use Assets 24,180 24,714
Other Assets 22,568 23,617
Total Assets $ 551,622 $ 525,761
Liabilities and Stockholders’ Equity
Current Liabilities
Debt maturing within one year $ 24,630 $ 3,470
Note payable to DIRECTV 1,245 —
Accounts payable and accrued liabilities 50,661 50,051
Advanced billings and customer deposits 5,303 6,176
Dividends payable 3,749 3,741
Total current liabilities 85,588 63,438
Long-Term Debt 152,724 153,775
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes 64,871 60,472
Postemployment benefit obligation 12,649 18,276
Operating lease liabilities 21,261 22,202
Other noncurrent liabilities 30,578 28,358
Noncurrent portion of note payable to DIRECTV 96 —
Total deferred credits and other noncurrent liabilities 129,455 129,308
Stockholders’ Equity
Preferred stock — —
Common stock 7,621 7,621
Additional paid-in capital 130,112 130,175
Retained earnings 42,350 37,457
Treasury stock (17,280) (17,910)
Accumulated other comprehensive income 3,529 4,330
Noncontrolling interest 17,523 17,567
Total stockholders’ equity 183,855 179,240
Total Liabilities and Stockholders’ Equity $ 551,622 $ 525,761
AT&T Inc.
--- --- --- --- ---
Financial Data
Consolidated Statements of Cash Flows
Dollars in millions
Unaudited Year Ended
2021 2020
Operating Activities
Net income (loss) $ 21,479 $ (3,821)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 22,862 28,516
Amortization of film and television costs 11,006 8,603
Distributed (undistributed) earnings from investments in equity affiliates 184 38
Provision for uncollectible accounts 1,240 1,972
Deferred income tax expense 5,246 1,675
Net (gain) loss on investments, net of impairments (927) (742)
Pension and postretirement benefit expense (credit) (3,848) (2,992)
Actuarial (gain) loss on pension and postretirement benefits (4,140) 4,169
Asset impairments and abandonments 4,904 18,880
Changes in operating assets and liabilities:
Receivables (634) 2,216
Other current assets, inventories and theatrical film and television production costs (16,472) (13,070)
Accounts payable and other accrued liabilities 1,636 (1,410)
Equipment installment receivables and related sales (265) (1,429)
Deferred customer contract acquisition and fulfillment costs 52 376
Postretirement claims and contributions (822) (985)
Other - net 456 1,134
Total adjustments 20,478 46,951
Net Cash Provided by Operating Activities 41,957 43,130
Investing Activities
Capital expenditures (16,527) (15,675)
Acquisitions, net of cash acquired (25,453) (1,851)
Dispositions 8,740 3,641
Distributions from DIRECTV in excess of cumulative equity in earnings 1,323 —
Other - net (172) 337
Net Cash Used in Investing Activities (32,089) (13,548)
Financing Activities
Net change in short-term borrowings with original maturities of three months or less 1,316 (17)
Issuance of other short-term borrowings 21,856 9,440
Repayment of other short-term borrowings (7,510) (9,467)
Issuance of long-term debt 9,931 31,988
Repayment of long-term debt (3,142) (39,964)
Note payable to DIRECTV, net of payments of $459 1,341 —
Payment of vendor financing (4,596) (2,966)
Issuance of preferred stock — 3,869
Purchase of treasury stock (202) (5,498)
Issuance of treasury stock 96 105
Issuance of preferred interests in subsidiaries — 1,979
Redemption of preferred interest in subsidiaries — (1,950)
Dividends paid (15,068) (14,956)
Other - net (2,444) (4,570)
Net Cash Provided by (Used in) Financing Activities 1,578 (32,007)
Net increase (decrease) in cash and cash equivalents and restricted cash 11,446 (2,425)
Cash and cash equivalents and restricted cash beginning of year 9,870 12,295
Cash and Cash Equivalents and Restricted Cash End of Year $ 21,316 $ 9,870
AT&T Inc.
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Consolidated Supplementary Data
Supplementary Financial Data
Dollars in millions except per share amounts
Unaudited Fourth Quarter Percent Year Ended Percent
2021 2020 Change 2021 2020 Change
Capital expenditures
Purchase of property and equipment $ 3,790 $ 2,361 60.5 % $ 16,354 $ 15,552 5.2 %
Interest during construction 41 31 32.3 % 173 123 40.7 %
Total Capital Expenditures $ 3,831 $ 2,392 60.2 % $ 16,527 $ 15,675 5.4 %
Acquisition, net of cash acquired
Business acquisitions $ — $ 85 — % $ — $ 238 — %
Spectrum acquisitions 1,655 551 — % 24,672 1,613 — %
Interest during construction - spectrum 265 — — % 781 — — %
Total Acquisitions $ 1,920 $ 636 — % $ 25,453 $ 1,851 — %
Cash Paid for Programming and Produced Film/TV Content $ 4,602 $ 4,617 (0.3) % $ 19,164 $ 14,898 28.6 %
Dividends Declared per Common Share $ 0.52 $ 0.52 — % $ 2.08 $ 2.08 — %
End of Period Common Shares Outstanding (000,000) 7,141 7,126 0.2 %
Debt Ratio 49.1 % 46.7 % 240 BP
Total Employees 202,600 230,760 (12.2) %

COMMUNICATIONS SEGMENT

The Communications segment provides wireless and wireline telecom and broadband services to consumers located in the U.S. and businesses globally. The Communications segment contains three reporting units: Mobility, Business Wireline, and Consumer Wireline.

Results have been recast to remove the Video business, instead reporting those results in Corporate and Other.

Segment Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
2021 2020 Change 2021 2020 Change
Segment Operating Revenues
Mobility $ 21,146 $ 20,119 5.1 % $ 78,254 $ 72,564 7.8 %
Business Wireline 5,901 6,251 (5.6) % 23,937 25,083 (4.6) %
Consumer Wireline 3,159 3,116 1.4 % 12,539 12,318 1.8 %
Total Segment Operating Revenues 30,206 29,486 2.4 % 114,730 109,965 4.3 %
Segment Operating Contribution
Mobility 5,353 5,088 5.2 % 23,312 22,372 4.2 %
Business Wireline 897 997 (10.0) % 3,990 4,564 (12.6) %
Consumer Wireline 201 275 (26.9) % 977 1,377 (29.0) %
Total Segment Operating Contribution $ 6,451 $ 6,360 1.4 % $ 28,279 $ 28,313 (0.1) %
Supplementary Operating Data
--- --- --- --- --- --- --- --- ---
Subscribers and connections in thousands
Unaudited December 31, Percent
2021 2020 Change
Broadband Connections
Broadband 15,074 14,818 1.7 %
DSL 430 566 (24.0) %
Total Broadband Connections 15,504 15,384 0.8 %
Voice Connections
Retail Consumer Switched Access Lines 6,177 7,263 (15.0) %
U-verse Consumer VoIP Connections 3,333 3,816 (12.7) %
Total Retail Consumer Voice Connections 9,510 11,079 (14.2) %
Fourth Quarter Percent Year Ended Percent
2021 2020 Change 2021 2020 Change
Broadband Net Additions
Broadband 24 57 (57.9) % 256 159 61.0 %
DSL (30) (48) 37.5 % (136) (164) 17.1 %
Total Broadband Net Additions (6) 9 — % 120 (5) — %

Mobility

Mobility provides nationwide wireless service and equipment.

Mobility Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
2021 2020 Change 2021 2020 Change
Operating Revenues
Service $ 14,669 $ 14,022 4.6 % $ 57,590 $ 55,542 3.7 %
Equipment 6,477 6,097 6.2 % 20,664 17,022 21.4 %
Total Operating Revenues 21,146 20,119 5.1 % 78,254 72,564 7.8 %
Operating Expenses
Operations and support 13,743 13,023 5.5 % 46,820 42,106 11.2 %
Depreciation and amortization 2,050 2,008 2.1 % 8,122 8,086 0.4 %
Total Operating Expenses 15,793 15,031 5.1 % 54,942 50,192 9.5 %
Operating Income 5,353 5,088 5.2 % 23,312 22,372 4.2 %
Equity in Net Income (Loss) of Affiliates — — — % — — — %
Operating Contribution $ 5,353 $ 5,088 5.2 % $ 23,312 $ 22,372 4.2 %
Operating Income Margin 25.3 % 25.3 % — BP 29.8 % 30.8 % (100) BP
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited December 31, Percent
2021 2020 Change
Mobility Subscribers
Postpaid 81,534 77,154 5.7 %
Postpaid phone 67,260 64,216 4.7 %
Prepaid 19,028 18,102 5.1 %
Reseller 6,113 6,535 (6.5) %
Connected Devices 95,116 80,767 17.8 %
Total Mobility Subscribers 201,791 182,558 10.5 %
Fourth Quarter Percent Year Ended Percent
2021 2020 Change 2021 2020 Change
Mobility Net Additions
Postpaid Phone Net Additions 884 800 10.5 % 3,196 1,457 — %
Total Phone Net Additions 908 760 19.5 % 3,850 1,640 — %
Postpaid 1,285 1,229 4.6 % 4,482 2,183 — %
Prepaid 29 14 — % 956 379 — %
Reseller (177) (197) 10.2 % (534) (449) (18.9) %
Connected Devices 4,134 4,809 (14.0) % 14,328 14,785 (3.1) %
Total Mobility Net Additions 5,271 5,855 (10.0) % 19,232 16,898 13.8 %
Postpaid Churn 1.02 % 0.94 % 8 BP 0.94 % 0.98 % (4) BP
Postpaid Phone-Only Churn 0.85 % 0.76 % 9 BP 0.76 % 0.79 % (3) BP

Business Wireline

Business Wireline provides advanced IP-based services, as well as traditional data services to business customers.

Results have been recast to characterize revenues as either service or equipment, consistent with the way we are managing the business unit.

Business Wireline Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
2021 2020 Change 2021 2020 Change
Operating Revenues
Service $ 5,727 $ 6,042 (5.2) % $ 23,224 $ 24,313 (4.5) %
Equipment 174 209 (16.7) % 713 770 (7.4) %
Total Operating Revenues 5,901 6,251 (5.6) % 23,937 25,083 (4.6) %
Operating Expenses
Operations and support 3,687 3,938 (6.4) % 14,755 15,303 (3.6) %
Depreciation and amortization 1,317 1,316 0.1 % 5,192 5,216 (0.5) %
Total Operating Expenses 5,004 5,254 (4.8) % 19,947 20,519 (2.8) %
Operating Income 897 997 (10.0) % 3,990 4,564 (12.6) %
Equity in Net Income (Loss) of Affiliates — — — % — — — %
Operating Contribution $ 897 $ 997 (10.0) % $ 3,990 $ 4,564 (12.6) %
Operating Income Margin 15.2 % 15.9 % (70) BP 16.7 % 18.2 % (150) BP

Consumer Wireline

Consumer Wireline provides internet, including broadband fiber, and voice communication services primarily to residential customers.

Results have been recast to refine the allocation of shared infrastructure and deferred customer acquisition costs between Consumer Wireline and Video.

Consumer Wireline Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
2021 2020 Change 2021 2020 Change
Operating Revenues
Broadband $ 2,324 $ 2,205 5.4 % $ 9,085 $ 8,534 6.5 %
Legacy voice and data services 470 534 (12.0) % 1,977 2,213 (10.7) %
Other service and equipment 365 377 (3.2) % 1,477 1,571 (6.0) %
Total Operating Revenues 3,159 3,116 1.4 % 12,539 12,318 1.8 %
Operating Expenses
Operations and support 2,169 2,103 3.1 % 8,467 8,027 5.5 %
Depreciation and amortization 789 738 6.9 % 3,095 2,914 6.2 %
Total Operating Expenses 2,958 2,841 4.1 % 11,562 10,941 5.7 %
Operating Income 201 275 (26.9) % 977 1,377 (29.0) %
Equity in Net Income (Loss) of Affiliates — — — % — — — %
Operating Contribution $ 201 $ 275 (26.9) % $ 977 $ 1,377 (29.0) %
Operating Income Margin 6.4 % 8.8 % (240) BP 7.8 % 11.2 % (340) BP
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited December 31, Percent
2021 2020 Change
Broadband Connections
Total Broadband and DSL Connections 14,160 14,100 0.4 %
Fiber Broadband Connections 5,992 4,951 21.0 %
Voice Connections
Retail Consumer Switched Access Lines 2,423 2,862 (15.3) %
U-verse Consumer VoIP Connections 2,736 3,231 (15.3) %
Total Retail Consumer Voice Connections 5,159 6,093 (15.3) %
Fourth Quarter Percent Year Ended Percent
2021 2020 Change 2021 2020 Change
Broadband Net Additions
Total Broadband and DSL Net Additions (20) (2) — % 60 (19) — %
Fiber Broadband Net Additions 271 273 (0.7) % 1,041 1,064 (2.2) %

Business Solutions

As a supplemental presentation to our Communications segment operating results, we are providing a view of our AT&T Business Solutions results which includes both wireless and fixed operations. This combined view presents a complete profile of the entire business customer relationship and underscores the importance of mobile solutions to serving our business customers.

Results have been recast to conform to the current period's classification of revenues.

Business Solutions Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
2021 2020 Change 2021 2020 Change
Operating Revenues
Wireless service $ 2,108 $ 1,948 8.2 % $ 8,161 $ 7,732 5.5 %
Wireline service 5,727 6,042 (5.2) % 23,224 24,313 (4.5) %
Wireless equipment 1,030 925 11.4 % 3,414 2,882 18.5 %
Wireline equipment 174 209 (16.7) % 713 770 (7.4) %
Total Operating Revenues 9,039 9,124 (0.9) % 35,512 35,697 (0.5) %
Operating Expenses
Operations and support 6,011 6,035 (0.4) % 22,826 22,482 1.5 %
Depreciation and amortization 1,667 1,638 1.8 % 6,570 6,500 1.1 %
Total Operating Expenses 7,678 7,673 0.1 % 29,396 28,982 1.4 %
Operating Income 1,361 1,451 (6.2) % 6,116 6,715 (8.9) %
Equity in Net Income (Loss) of Affiliates — — — % — — — %
Operating Contribution $ 1,361 $ 1,451 (6.2) % $ 6,116 $ 6,715 (8.9) %
Operating Income Margin 15.1 % 15.9 % (80) BP 17.2 % 18.8 % (160) BP

WARNERMEDIA SEGMENT

The WarnerMedia segment develops, produces and distributes feature films, television, gaming and other content in various physical and digital formats globally. WarnerMedia content is distributed through basic networks, Direct-to-Consumer (DTC) or theatrical, TV content and games licensing. Segment results also include Xandr advertising and Otter Media Holdings. We disposed of substantially all Otter Media assets in the third quarter of 2021. Additional information is provided as part of the earnings material on the company's Investor Relations website.

Segment Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
2021 2020 Change 2021 2020 Change
Segment Operating Revenues
Subscription $ 3,817 $ 3,623 5.4 % $ 15,596 $ 13,765 13.3 %
Content and other 4,411 3,042 45.0 % 13,514 10,552 28.1 %
Advertising 1,645 1,889 (12.9) % 6,522 6,125 6.5 %
Total Segment Operating Revenues 9,873 8,554 15.4 % 35,632 30,442 17.0 %
Direct Costs
Programming 4,290 3,040 41.1 % 15,286 11,678 30.9 %
Marketing 1,208 779 55.1 % 4,137 2,529 63.6 %
Other 1,059 882 20.1 % 3,658 3,211 13.9 %
Selling, general and administrative 1,572 1,134 38.6 % 4,656 4,161 11.9 %
Depreciation and amortization 165 177 (6.8) % 656 671 (2.2) %
Total Operating Expenses 8,294 6,012 38.0 % 28,393 22,250 27.6 %
Operating Income 1,579 2,542 (37.9) % 7,239 8,192 (11.6) %
Equity in Net Income (Loss) of Affiliates (6) (13) 53.8 % 38 18 — %
Total Segment Operating Contribution $ 1,573 $ 2,529 (37.8) % $ 7,277 $ 8,210 (11.4) %

LATIN AMERICA SEGMENT

The Latin America segment provides entertainment and wireless service outside of the U.S. Our international subsidiaries conduct business in their local currency and operating results are converted to U.S. dollars using official exchange rates. The Latin America segment contains two business units: Mexico and Vrio, which was sold in November 2021.

Segment Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
2021 2020 Change 2021 2020 Change
Segment Operating Revenues
Mexico $ 704 $ 736 (4.3) % $ 2,747 $ 2,562 7.2 %
Vrio 359 762 (52.9) % 2,607 3,154 (17.3) %
Total Segment Operating Revenues 1,063 1,498 (29.0) % 5,354 5,716 (6.3) %
Segment Operating Contribution
Mexico (117) (126) 7.1 % (510) (587) 13.1 %
Vrio 37 (41) — % 80 (142) — %
Total Segment Operating Contribution $ (80) $ (167) 52.1 % $ (430) $ (729) 41.0 %

Mexico

Mexico provides wireless services and equipment to customers in Mexico.

Mexico Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
2021 2020 Change 2021 2020 Change
Operating Revenues
Wireless service $ 485 $ 459 5.7 % $ 1,834 $ 1,656 10.7 %
Wireless equipment 219 277 (20.9) % 913 906 0.8 %
Total Operating Revenues 704 736 (4.3) % 2,747 2,562 7.2 %
Operating Expenses
Operations and support 668 722 (7.5) % 2,652 2,636 0.6 %
Depreciation and amortization 153 140 9.3 % 605 513 17.9 %
Total Operating Expenses 821 862 (4.8) % 3,257 3,149 3.4 %
Operating Income (Loss) (117) (126) 7.1 % (510) (587) 13.1 %
Equity in Net Income (Loss) of Affiliates — — — % — — — %
Operating Contribution $ (117) $ (126) 7.1 % $ (510) $ (587) 13.1 %
Operating Income Margin (16.6) % (17.1) % 50 BP (18.6) % (22.9) % 430 BP
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited December 31, Percent
2021 2020 Change
Mexico Wireless Subscribers
Postpaid 4,807 4,696 2.4 %
Prepaid 15,057 13,758 9.4 %
Reseller 498 489 1.8 %
Total Mexico Wireless Subscribers 20,362 18,943 7.5 %
Fourth Quarter Percent Year Ended Percent
2021 2020 Change 2021 2020 Change
Mexico Wireless Net Additions
Postpaid 26 (14) — % 111 (407) — %
Prepaid 858 509 68.6 % 1,299 174 — %
Reseller 5 34 (85.3) % 9 118 (92.4) %
Total Mexico Wireless Net Additions 889 529 68.1 % 1,419 (115) — %

Vrio

Vrio provides entertainment services to customers utilizing satellite technology in Latin America and the Caribbean. Vrio was sold to Grupo Werthein in November 2021.

Vrio Results
Dollars in millions
Unaudited Fourth Quarter Percent Year Ended Percent
2021 2020 Change 2021 2020 Change
Operating Revenues $ 359 $ 762 (52.9) % $ 2,607 $ 3,154 (17.3) %
Operating Expenses
Operations and support 321 681 (52.9) % 2,302 2,800 (17.8) %
Depreciation and amortization — 120 — % 231 520 (55.6) %
Total Operating Expenses 321 801 (59.9) % 2,533 3,320 (23.7) %
Operating Income (Loss) 38 (39) — % 74 (166) — %
Equity in Net Income (Loss) of Affiliates (1) (2) 50.0 % 6 24 (75.0) %
Operating Contribution $ 37 $ (41) — % $ 80 $ (142) — %
Operating Income Margin 10.6 % (5.1) % 1,570 BP 2.8 % (5.3) % 810 BP

SUPPLEMENTAL SEGMENT RECONCILIATION

Three Months Ended
Dollars in millions
Unaudited
December 31, 2021
Revenues Operations<br>and Support<br>Expenses EBITDA Depreciation<br>and<br>Amortization Operating<br>Income (Loss) Equity in Net<br>Income (Loss) of<br>Affiliates Segment<br>Contribution
Communications
Mobility $ 21,146 $ 13,743 $ 7,403 $ 2,050 $ 5,353 $ — $ 5,353
Business Wireline 5,901 3,687 2,214 1,317 897 — 897
Consumer Wireline 3,159 2,169 990 789 201 — 201
Total Communications 30,206 19,599 10,607 4,156 6,451 — 6,451
WarnerMedia 9,873 8,129 1,744 165 1,579 (6) 1,573
Latin America
Mexico 704 668 36 153 (117) — (117)
Vrio 359 321 38 — 38 (1) 37
Total Latin America 1,063 989 74 153 (79) (1) (80)
Segment Total 41,142 28,717 12,425 4,474 7,951 $ (7) $ 7,944
Corporate and Other
Corporate 199 1,323 (1,124) 178 (1,302)
Video — — — — —
Acquisition-related items — 132 (132) 1,021 (1,153)
Certain significant items — 188 (188) — (188)
Eliminations and<br><br>consolidations (383) (383) — — —
AT&T Inc. $ 40,958 $ 29,977 $ 10,981 $ 5,673 $ 5,308
Three Months Ended
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Dollars in millions
Unaudited
December 31, 2020
Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Equity in Net<br>Income (Loss) of<br>Affiliates Segment Contribution
Communications
Mobility $ 20,119 $ 13,023 $ 7,096 $ 2,008 $ 5,088 $ — $ 5,088
Business Wireline 6,251 3,938 2,313 1,316 997 — 997
Consumer Wireline 3,116 2,103 1,013 738 275 — 275
Total Communications 29,486 19,064 10,422 4,062 6,360 — 6,360
WarnerMedia 8,554 5,835 2,719 177 2,542 (13) 2,529
Latin America
Mexico 736 722 14 140 (126) — (126)
Vrio 762 681 81 120 (39) (2) (41)
Total Latin America 1,498 1,403 95 260 (165) (2) (167)
Segment Total 39,538 26,302 13,236 4,499 8,737 $ (15) $ 8,722
Corporate and Other
Corporate 456 949 (493) 56 (549)
Video 7,168 6,458 710 521 189
Acquisition-related items — 37 (37) 1,890 (1,927)
Certain significant items — 16,617 (16,617) 14 (16,631)
Eliminations and<br><br>consolidations (1,471) (906) (565) (1) (564)
AT&T Inc. $ 45,691 $ 49,457 $ (3,766) $ 6,979 $ (10,745)

SUPPLEMENTAL SEGMENT RECONCILIATION

Year Ended
Dollars in millions
Unaudited
December 31, 2021
Revenues Operations<br>and Support<br>Expenses EBITDA Depreciation<br>and<br>Amortization Operating<br>Income (Loss) Equity in Net<br>Income (Loss) of<br>Affiliates Segment<br>Contribution
Communications
Mobility $ 78,254 $ 46,820 $ 31,434 $ 8,122 $ 23,312 $ — $ 23,312
Business Wireline 23,937 14,755 9,182 5,192 3,990 — 3,990
Consumer Wireline 12,539 8,467 4,072 3,095 977 — 977
Total Communications 114,730 70,042 44,688 16,409 28,279 — 28,279
WarnerMedia 35,632 27,737 7,895 656 7,239 38 7,277
Latin America
Mexico 2,747 2,652 95 605 (510) — (510)
Vrio 2,607 2,302 305 231 74 6 80
Total Latin America 5,354 4,954 400 836 (436) 6 (430)
Segment Total 155,716 102,733 52,983 17,901 35,082 $ 44 $ 35,126
Corporate and Other
Corporate 1,264 4,805 (3,541) 372 (3,913)
Video 15,513 12,666 2,847 356 2,491
Acquisition-related items — 299 (299) 4,233 (4,532)
Certain significant items — 4,961 (4,961) — (4,961)
Eliminations and<br><br>consolidations (3,629) (2,809) (820) — (820)
AT&T Inc. $ 168,864 $ 122,655 $ 46,209 $ 22,862 $ 23,347
Year Ended
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Dollars in millions
Unaudited
December 31, 2020
Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Equity in Net<br>Income (Loss) of<br>Affiliates Segment Contribution
Communications
Mobility $ 72,564 $ 42,106 $ 30,458 $ 8,086 $ 22,372 $ — $ 22,372
Business Wireline 25,083 15,303 9,780 5,216 4,564 — 4,564
Consumer Wireline 12,318 8,027 4,291 2,914 1,377 — 1,377
Total Communications 109,965 65,436 44,529 16,216 28,313 — 28,313
WarnerMedia 30,442 21,579 8,863 671 8,192 18 8,210
Latin America
Mexico 2,562 2,636 (74) 513 (587) — (587)
Vrio 3,154 2,800 354 520 (166) 24 (142)
Total Latin America 5,716 5,436 280 1,033 (753) 24 (729)
Segment Total 146,123 92,451 53,672 17,920 35,752 $ 42 $ 35,794
Corporate and Other
Corporate 2,207 4,205 (1,998) 310 (2,308)
Video 28,610 24,174 4,436 2,262 2,174
Acquisition-related items — 468 (468) 8,012 (8,480)
Certain significant items — 19,156 (19,156) 14 (19,170)
Eliminations and<br><br>consolidations (5,180) (3,615) (1,565) (2) (1,563)
AT&T Inc. $ 171,760 $ 136,839 $ 34,921 $ 28,516 $ 6,405

16

Document

Discussion and Reconciliation of Non-GAAP Measures

We believe the following measures are relevant and useful information to investors as they are part of AT&T's internal management reporting and planning processes and are important metrics that management uses to evaluate the operating performance of AT&T and its segments. Management also uses these measures as a method of comparing performance with that of many of our competitors. These measures should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with U.S. generally accepted accounting principles (GAAP).

Free Cash Flow

Free cash flow is defined as cash from operations and cash distributions from DIRECTV (classified as investing activities) minus capital expenditures. Free cash flow after dividends is defined as cash from operations minus capital expenditures and dividends on common and preferred shares. Free cash flow dividend payout ratio is defined as the percentage of dividends paid on common and preferred shares to free cash flow. We believe these metrics provide useful information to our investors because management views free cash flow as an important indicator of how much cash is generated by routine business operations, including capital expenditures, and from our continued economic interest in the U.S. video operations as part of our DIRECTV equity method investment, and makes decisions based on it. Management also views free cash flow as a measure of cash available to pay debt and return cash to shareowners.

Free Cash Flow and Free Cash Flow Dividend Payout Ratio
Dollars in millions
Year Ended
2020 2021 2020
Net cash provided by operating activities1 11,254 $ 10,082 $ 41,957 $ 43,130
Add: Distributions from DIRECTV classified as investing         activities — 1,323 —
Less: Capital expenditures (2,392) (16,527) (15,675)
Free Cash Flow 7,690 26,753 27,455
Less: Dividends paid (3,741) (15,068) (14,956)
Free Cash Flow after Dividends 4,997 $ 3,949 $ 11,685 $ 12,499
Free Cash Flow Dividend Payout Ratio % 48.6 % 56.3 % 54.5 %
1Includes distributions from DIRECTV of 489 in the fourth quarter and 619 for the year ended December 31, 2021. Total distributions from DIRECTV were 1,812 in the fourth quarter and 1,942 for the year ended December 31, 2021.

All values are in US Dollars.

Cash Paid for Capital Investment

In connection with capital improvements, we negotiate with some of our vendors to obtain favorable payment terms of 120 days or more, referred to as vendor financing, which are excluded from capital expenditures and reported in accordance with GAAP as financing activities. We present an additional view of cash paid for capital investment to provide investors with a comprehensive view of cash used to invest in our networks, product developments and support systems.

Cash Paid for Capital Investment
Dollars in millions
Fourth Quarter Year Ended
2021 2020 2021 2020
Capital Expenditures $ (3,831) $ (2,392) $ (16,527) $ (15,675)
Cash paid for vendor financing (583) (1,001) (4,596) (2,966)
Cash paid for Capital Investment $ (4,414) $ (3,393) $ (21,123) $ (18,641)
FirstNet reimbursement (515) (920) (515) (1,063)
Gross Capital Investment $ (4,929) $ (4,313) $ (21,638) $ (19,704)

EBITDA

Our calculation of EBITDA, as presented, may differ from similarly titled measures reported by other companies. For AT&T, EBITDA excludes other income (expense) – net, and equity in net income (loss) of affiliates, as these do not reflect the operating results of our subscriber base or operations that are not under our control. Equity in net income (loss) of affiliates represents the proportionate share of the net income (loss) of affiliates in which we exercise significant influence, but do not control. Because we do not control these entities, management excludes these results when evaluating the performance of our primary operations. EBITDA also excludes interest expense and the provision for income taxes. Excluding these items eliminates the expenses associated with our capital and tax structures. Finally, EBITDA excludes depreciation and amortization in order to eliminate the impact of capital investments. 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 is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with GAAP.

EBITDA service margin is calculated as EBITDA divided by service revenues.

When discussing our segment, business unit and supplemental results, EBITDA excludes equity in net income (loss) of affiliates, and depreciation and amortization from operating contribution.

These measures are used by management as a gauge of our success in acquiring, retaining and servicing subscribers because we believe these measures reflect AT&T's ability to generate and grow subscriber revenues while providing a high level of customer service in a cost-effective manner. Management also uses these measures as a method of comparing operating performance with that of many of its competitors. The financial and operating metrics which affect EBITDA include the key revenue and expense drivers for which management is responsible and upon which we evaluate performance.

We believe EBITDA Service Margin (EBITDA as a percentage of service revenues) to be a more relevant measure than EBITDA Margin (EBITDA as a percentage of total revenue) for our Mobility business unit operating margin. We also use wireless service revenues to calculate margin to facilitate comparison, both internally and externally with our wireless competitors, as they calculate their margins using wireless service revenues as well.

There are material limitations to using these non-GAAP financial measures. EBITDA, EBITDA margin and EBITDA service margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies. Furthermore, these performance measures do not take into account certain significant items, including depreciation and amortization, interest expense, tax expense and equity in net income (loss) of affiliates. For market comparability, management analyzes performance measures that are similar in nature to EBITDA as we present it, and considering the economic effect of the excluded expense items independently as well as in connection with its analysis of net income as calculated in accordance with GAAP. EBITDA, EBITDA margin and EBITDA service margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP.

EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
Fourth Quarter Year Ended
2021 2020 2021 2020
Net Income (Loss) $ 5,390 $ (13,515) $ 21,479 $ (3,821)
Additions:
Income Tax Expense 1,056 (2,038) 5,468 965
Interest Expense 1,663 1,894 6,884 7,925
Equity in Net (Income) Loss of Affiliates (447) (106) (631) (95)
Other (Income) Expense - Net (2,354) 3,020 (9,853) 1,431
Depreciation and amortization 5,673 6,979 22,862 28,516
EBITDA 10,981 (3,766) 46,209 34,921
Merger costs and revenue adjustments 132 37 299 468
Employee separation costs and benefit-related (gain) loss — 253 57 1,177
Impairments 188 16,365 4,904 18,880
Gain on spectrum transactions — — — (900)
Adjusted EBITDA1 $ 11,301 $ 12,889 $ 51,469 $ 54,546
1 See page 5 for additional discussion and reconciliation of adjusted items.
Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
--- --- --- --- --- --- --- --- --- --- --- --- ---
Dollars in millions
Fourth Quarter Year Ended
2021 2020 2021 2020
Communications Segment
Operating Contribution $ 6,451 $ 6,360 $ 28,279 $ 28,313
Additions:
Depreciation and amortization 4,156 4,062 16,409 16,216
EBITDA 10,607 10,422 44,688 44,529
Total Operating Revenues 30,206 29,486 114,730 109,965
Operating Income Margin 21.4 % 21.6 % 24.6 % 25.7 %
EBITDA Margin 35.1 % 35.3 % 39.0 % 40.5 %
Mobility
Operating Contribution $ 5,353 $ 5,088 $ 23,312 $ 22,372
Additions:
Depreciation and amortization 2,050 2,008 8,122 8,086
EBITDA 7,403 7,096 31,434 30,458
Total Operating Revenues 21,146 20,119 78,254 72,564
Service Revenues 14,669 14,022 57,590 55,542
Operating Income Margin 25.3 % 25.3 % 29.8 % 30.8 %
EBITDA Margin 35.0 % 35.3 % 40.2 % 42.0 %
EBITDA Service Margin 50.5 % 50.6 % 54.6 % 54.8 %
Business Wireline
Operating Contribution $ 897 $ 997 $ 3,990 $ 4,564
Additions:
Depreciation and amortization 1,317 1,316 5,192 5,216
EBITDA 2,214 2,313 9,182 9,780
Total Operating Revenues 5,901 6,251 23,937 25,083
Operating Income Margin 15.2 % 15.9 % 16.7 % 18.2 %
EBITDA Margin 37.5 % 37.0 % 38.4 % 39.0 %
Consumer Wireline
Operating Contribution $ 201 $ 275 $ 977 $ 1,377
Additions:
Depreciation and amortization 789 738 3,095 2,914
EBITDA 990 1,013 4,072 4,291
Total Operating Revenues 3,159 3,116 12,539 12,318
Operating Income Margin 6.4 % 8.8 % 7.8 % 11.2 %
EBITDA Margin 31.3 % 32.5 % 32.5 % 34.8 %
Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
--- --- --- --- --- --- --- --- --- --- --- --- ---
Dollars in millions
Fourth Quarter Year Ended
2021 2020 2021 2020
WarnerMedia Segment
Operating Contribution $ 1,573 $ 2,529 $ 7,277 $ 8,210
Additions:
Equity in Net (Income) Loss of Affiliates 6 13 (38) (18)
Depreciation and amortization 165 177 656 671
EBITDA 1,744 2,719 7,895 8,863
Total Operating Revenues 9,873 8,554 35,632 30,442
Operating Income Margin 16.0 % 29.7 % 20.3 % 26.9 %
EBITDA Margin 17.7 % 31.8 % 22.2 % 29.1 %
Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
--- --- --- --- --- --- --- --- --- --- --- --- ---
Dollars in millions
Fourth Quarter Year Ended
2021 2020 2021 2020
Latin America Segment
Operating Contribution $ (80) $ (167) $ (430) $ (729)
Additions:
Equity in Net (Income) Loss of Affiliates 1 2 (6) (24)
Depreciation and amortization 153 260 836 1,033
EBITDA 74 95 400 280
Total Operating Revenues 1,063 1,498 5,354 5,716
Operating Income Margin -7.4 % -11.0 % -8.1 % -13.2 %
EBITDA Margin 7.0 % 6.3 % 7.5 % 4.9 %
Mexico
Operating Contribution $ (117) $ (126) $ (510) $ (587)
Additions:
Depreciation and amortization 153 140 605 513
EBITDA 36 14 95 (74)
Total Operating Revenues 704 736 2,747 2,562
Operating Income Margin -16.6 % -17.1 % -18.6 % -22.9 %
EBITDA Margin 5.1 % 1.9 % 3.5 % -2.9 %

Adjusting Items

Adjusting items include revenues and costs we consider non-operational in nature, including items arising from asset acquisitions or dispositions. We also adjust for net actuarial gains or losses associated with our pension and postemployment benefit plans due to the often-significant impact on our results (we immediately recognize this gain or loss in the income statement, pursuant to our accounting policy for the recognition of actuarial gains and losses). Consequently, our adjusted results reflect an expected return on plan assets rather than the actual return on plan assets, as included in the GAAP measure of income.

The tax impact of adjusting items is calculated using the effective tax rate during the quarter except for adjustments that, given their magnitude, can drive a change in the effective tax rate, in these cases we use the actual tax expense or combined marginal rate of approximately 25%.

Adjusting Items
Dollars in millions
Year Ended
2020 2021 2020
Operating Expenses
Merger costs 37 299 468
Employee separation costs and benefit-related (gain) loss1 253 57 1,177
Asset impairments and abandonment 16,365 4,904 18,880
Gain (loss) on spectrum transaction — — (900)
Adjustments to Operations and Support Expenses 16,655 5,260 19,625
Amortization of intangible assets 1,890 4,233 8,012
Impairments 14 — 14
Adjustments to Operating Expenses 18,559 9,493 27,651
Other
DIRECTV intangible amortization (proportionate share) — 826 —
(Gain) loss on sale of assets 43 (660) (50)
Debt redemption, impairments and other adjustments (29) 235 1,735
Actuarial (gain) loss 4,106 (4,140) 4,169
Employee benefit-related (gain) loss1 (149) — (172)
Adjustments to Income Before Income Taxes 22,530 5,754 33,333
Tax impact of adjustments 3,186 580 4,977
Tax-related items 41 505 41
Impairment attributable to noncontrolling interest — 81 105
Adjustments to Net Income 626 $ 19,303 $ 4,588 $ 28,210
1Mark-to-market gains and losses on benefit-related investments were adjusted in 2020 reflecting more significant market volatility and uncertainty experienced as a result of the onset of the COVID-19 pandemic. Benefit-related investment gains were approximately 160 and 430 in the fourth quarter and for the year ended December 31, 2021, and 205 and 330 in the fourth quarter and for the year ended December 31, 2020.

All values are in US Dollars.

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS are non-GAAP financial measures calculated by excluding from operating revenues, operating expenses and income tax expense certain significant items that are non-operational or non-recurring in nature, including dispositions and merger integration and transaction costs, actuarial gains and losses, significant abandonments and impairment, severance and other material gains and losses. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends.

Adjusted Operating Revenues, Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. AT&T's calculation of Adjusted items, as presented, may differ from similarly titled measures reported by other companies.

Adjusted Operating Income, Adjusted Operating Income Margin,<br>Adjusted EBITDA and Adjusted EBITDA Margin
Dollars in millions
Fourth Quarter Year Ended
2021 2020 2021 2020
Operating Income $ 5,308 $ (10,745) $ 23,347 $ 6,405
Adjustments to Operating Expenses 1,341 18,559 9,493 27,651
Adjusted Operating Income 6,649 7,814 32,840 34,056
EBITDA 10,981 (3,766) 46,209 34,921
Adjustments to Operations and Support Expenses 320 16,655 5,260 19,625
Adjusted EBITDA 11,301 12,889 51,469 54,546
Total Operating Revenues 40,958 45,691 168,864 171,760
Operating Income Margin 13.0 % (23.5) % 13.8 % 3.7 %
Adjusted Operating Income Margin 16.2 % 17.1 % 19.4 % 19.8 %
Adjusted EBITDA Margin 27.6 % 28.2 % 30.5 % 31.8 %
Adjusted Diluted EPS
--- --- --- --- --- --- --- --- --- ---
Year Ended
2020 2021 2020
Diluted Earnings Per Share (EPS) 0.69 $ (1.95) $ 2.76 $ (0.75)
Amortization of intangible assets 0.22 0.47 0.90
DIRECTV intangible amortization (proportionate share) — 0.09 —
Impairments 2.02 0.56 2.37
(Gain) loss on sale of assets 0.03 (0.05) 0.02
Actuarial (gain) loss 1 0.43 (0.43) 0.44
Debt redemption, merger and other adjustments 0.01 0.07 0.21
Tax-related items (0.01) (0.07) (0.01)
Adjusted EPS 0.78 $ 0.75 $ 3.40 $ 3.18
Year-over-year growth - Adjusted % 6.9 %
Weighted Average Common Shares Outstanding    with Dilution (000,000) 7,176 7,199 7,183
1Includes adjustments for actuarial gains or losses associated with our postemployment benefit plans, which we immediately recognize in the income statement, pursuant to our accounting policy for the recognition of actuarial gains/losses. We recorded total net actuarial gain of 4.1 billion in 2021. As a result, adjusted EPS reflects an expected return on plan assets of 3.7 billion (based on an average expected return on plan assets of 6.75% for our pension trust and 4.50% for our VEBA trusts), rather than the actual return on plan assets of 5.9 billion gain (actual pension return of 11.4% and VEBA return of 6.3%), included in the GAAP measure of income.

All values are in US Dollars.

Net Debt to Pro Forma Adjusted EBITDA

Net Debt to EBITDA ratios are non-GAAP financial measures frequently used by investors and credit rating agencies and management believes these measures provide relevant and useful information to investors and other users of our financial data. Our Net Debt to Pro Forma Adjusted EBITDA ratio is calculated by dividing the Net Debt by the sum of the most recent four quarters Pro Forma Adjusted EBITDA. Net Debt is calculated by subtracting cash and cash equivalents and certificates of deposit and time deposits that are greater than 90 days, from the sum of debt maturing within one year and long-term debt.

Net Debt to Pro Forma Adjusted EBITDA - 2021
Dollars in millions
Three Months Ended
March. 31 June 30, Sept. 30, Dec. 31, Four Quarters
2021 1 2021 1 2021 1 2021
Adjusted EBITDA $ 13,564 $ 13,585 $ 13,019 $ 11,301 $ 51,469
Less: Historical Video (1,065) (1,364) (418) — (2,847)
Add: WarnerMedia sale of DIRECTV advertising 349 372 99 — 820
Add: WarnerMedia/DIRECTV revenue share (271) (287) (78) — (636)
Less: Historical Vrio (82) (89) (96) (38) (305)
Pro Forma Adjusted EBITDA 12,495 12,217 12,526 11,263 48,501
End-of-period current debt 24,630
End-of-period long-term debt 152,724
Total End-of-Period Debt 177,354
Less: Cash and Cash Equivalents 21,169
Net Debt Balance 156,185
Annualized Net Debt to Pro Forma<br><br>Adjusted EBITDA Ratio 2 3.22
1Adjusted EBITDA as reported in AT&T's Form 8-K filed April 22, 2021, July 22, 2021 and October 21, 2021.
2Annualized Net Debt to Adjusted EBITDA Ratio of 3.03 (excluding pro forma). Net Debt to Adjusted EBITDA - 2020
--- --- --- --- --- --- --- --- --- --- ---
Dollars in millions
Three Months Ended
March 31, June 30, Sept. 30, Dec. 31, Four Quarters
2020 1 2020 1 2020 1 2020
Adjusted EBITDA $ 14,232 $ 14,112 $ 13,313 $ 12,889 $ 54,546
End-of-period current debt 3,470
End-of-period long-term debt 153,775
Total End-of-Period Debt 157,245
Less: Cash and Cash Equivalents 9,740
Net Debt Balance 147,505
Annualized Net Debt to Adjusted EBITDA Ratio 2.70
1As reported in AT&T's Form 8-K filed April 22, 2020, July 23, 2020, and October 22, 2020.

Supplemental Operational Measures

We provide a supplemental discussion of our business solutions operations that is calculated by combining our Mobility and Business Wireline operating units, and then adjusting to remove non-business operations. The following table presents a reconciliation of our supplemental Business Solutions results.

Supplemental Operational Measure
Fourth Quarter
December 31, 2021 December 31, 2020
Mobility Business<br>Wireline Adjustments1 Business<br>Solutions Mobility Business<br>Wireline Adjustments1 Business<br>Solutions
Operating Revenues
Wireless service $ 14,669 $ — $ (12,561) $ 2,108 $ 14,022 $ — $ (12,074) $ 1,948
Wireline services — 5,727 — 5,727 — 6,042 — 6,042
Wireless equipment 6,477 — (5,447) 1,030 6,097 — (5,172) 925
Wireline equipment — 174 — 174 — 209 — 209
Total Operating Revenues 21,146 5,901 (18,008) 9,039 20,119 6,251 (17,246) 9,124
Operating Expenses
Operations and support 13,743 3,687 (11,419) 6,011 13,023 3,938 (10,926) 6,035
EBITDA 7,403 2,214 (6,589) 3,028 7,096 2,313 (6,320) 3,089
Depreciation and amortization 2,050 1,317 (1,700) 1,667 2,008 1,316 (1,686) 1,638
Total Operating Expenses 15,793 5,004 (13,119) 7,678 15,031 5,254 (12,612) 7,673
Operating Income 5,353 897 (4,889) 1,361 5,088 997 (4,634) 1,451
Equity in Net Income (Loss) of Affiliates — — — — — — — —
Operating Contribution $ 5,353 $ 897 $ (4,889) $ 1,361 $ 5,088 $ 997 $ (4,634) $ 1,451
1Non-business wireless reported in the Communication segment under the Mobility business unit. Supplemental Operational Measure
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Year Ended
December 31, 2021 December 31, 2020
Mobility Business<br>Wireline Adjustments1 Business<br>Solutions Mobility Business<br>Wireline Adjustments1 Business<br>Solutions
Operating Revenues
Wireless service $ 57,590 $ — $ (49,429) $ 8,161 $ 55,542 $ — $ (47,810) $ 7,732
Wireline service — 23,224 — 23,224 — 24,313 — 24,313
Wireless equipment 20,664 — (17,250) 3,414 17,022 — (14,140) 2,882
Wireline equipment — 713 — 713 — 770 — 770
Total Operating Revenues 78,254 23,937 (66,679) 35,512 72,564 25,083 (61,950) 35,697
Operating Expenses
Operations and support 46,820 14,755 (38,749) 22,826 42,106 15,303 (34,927) 22,482
EBITDA 31,434 9,182 (27,930) 12,686 30,458 9,780 (27,023) 13,215
Depreciation and amortization 8,122 5,192 (6,744) 6,570 8,086 5,216 (6,802) 6,500
Total Operating Expenses 54,942 19,947 (45,493) 29,396 50,192 20,519 (41,729) 28,982
Operating Income 23,312 3,990 (21,186) 6,116 22,372 4,564 (20,221) 6,715
Equity in Net Income (Loss) of Affiliates — — — — — — — —
Operating Contribution $ 23,312 $ 3,990 $ (21,186) $ 6,116 $ 22,372 $ 4,564 $ (20,221) $ 6,715
1Non-business wireless reported in the Communication segment under the Mobility business unit.

8

Document

Quarterly Pro Forma Financial Information
Supplemental Unaudited Quarterly Pro Forma Financial Information1
Dollars in millions
Unaudited
Operating Revenues 3/31/20 6/30/20 9/30/20 12/31/20 2020 3/31/21 6/30/21 9/30/21 12/31/21 2021
Reported AT&T Operating Revenues $ 42,779 $ 40,950 $ 42,340 $ 45,691 $ 171,760 $ 43,939 $ 44,045 $ 39,922 $ 40,958 $ 168,864
Less: Video (A1) (7,407) (7,021) (7,014) (7,168) (28,610) (6,725) (6,639) (2,149) — (15,513)
Add: WarnerMedia sales to Video (A2) 755 666 551 487 2,459 524 508 167 — 1,199
Add: WarnerMedia sales of DIRECTV advertising inventory (A3) 413 294 408 603 1,718 388 410 111 — 909
Add: Other eliminations 64 55 65 84 268 61 58 17 — 136
Less: Vrio (A4) (887) (752) (753) (762) (3,154) (743) (749) (756) (359) (2,607)
Add: WarnerMedia sales to Vrio (A5) 41 39 53 60 193 64 65 63 30 222
Pro Forma Operating Revenues $ 35,758 $ 34,231 $ 35,650 $ 38,995 $ 144,634 $ 37,508 $ 37,698 $ 37,375 $ 40,629 $ 153,210
Reported Revenue Growth Rate Y/Y 2.7 % 7.6 % -5.7 % -10.4 % -1.7 %
Pro Forma Revenue Growth Rate Y/Y 4.9 % 10.1 % 4.8 % 4.2 % 5.9 %
Operations and Support Expenses 3/31/20 6/30/20 9/30/20 12/31/20 2020 3/31/21 6/30/21 9/30/21 12/31/21 2021
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Reported AT&T Operations and Support Expenses $ 28,071 $ 30,133 $ 29,178 $ 49,457 $ 136,839 $ 30,469 $ 35,015 $ 27,194 $ 29,977 $ 122,655
Adjustments (B1) 476 (3,295) (151) (16,655) (19,625) (94) (4,555) (291) (320) (5,260)
Adjusted Operations and Support Expenses 28,547 26,838 29,027 32,802 117,214 30,375 30,460 26,903 29,657 117,395
Less: Video (A1) (6,020) (5,809) (5,887) (6,458) (24,174) (5,660) (5,275) (1,731) — (12,666)
Add: WarnerMedia sales to Video (A2) 755 666 551 487 2,459 524 508 167 — 1,199
Add: WarnerMedia sales of DIRECTV advertising inventory (A3) 39 38 38 38 153 39 38 12 — 89
Add: WarnerMedia/DIRECTV 70% revenue share (A3) 289 206 286 422 1,203 271 287 78 — 636
Add: Other eliminations 64 55 65 84 268 61 58 17 — 136
Less: Vrio (A4) (783) (661) (675) (681) (2,800) (661) (660) (660) (321) (2,302)
Add: WarnerMedia sales to Vrio (A5) 41 39 53 60 193 64 65 63 30 222
Pro Forma Adjusted Operations and Support Expenses $ 22,932 $ 21,372 $ 23,458 $ 26,754 $ 94,516 $ 25,013 $ 25,481 $ 24,849 $ 29,366 $ 104,709
Reported Operations and Support Expense Growth Rate Y/Y 8.5 % 16.2 % -6.8 % -39.4 % -10.4 %
Adjusted Operations and Support Expense Growth Rate Y/Y 6.4 % 13.5 % -7.3 % -9.6 % 0.2 %
Pro Forma Adjusted Operations and Support Expense Growth Rate Y/Y 9.1 % 19.2 % 5.9 % 9.8 % 10.8 %
Depreciation and Amortization Expense 3/31/20 6/30/20 9/30/20 12/31/20 2020 3/31/21 6/30/21 9/30/21 12/31/21 2021
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Reported AT&T Depreciation and Amortization Expense $ 7,222 $ 7,285 $ 7,030 $ 6,979 $ 28,516 $ 5,809 $ 5,761 $ 5,619 $ 5,673 $ 22,862
Adjustments (B1) (2,056) (2,145) (1,921) (1,904) (8,026) (1,131) (1,069) (1,012) (1,021) (4,233)
Adjusted Depreciation and Amortization Expense 5,166 5,140 5,109 5,075 20,490 4,678 4,692 4,607 4,652 18,629
Less: Video Depreciation (A1) (591) (593) (557) (521) (2,262) (164) (148) (44) — (356)
Less: Vrio Depreciation (A4) (147) (127) (126) (120) (520) (117) (114) — — (231)
Add: Other consolidation — 1 — 1 2 — — — — —
Pro Forma Adjusted Depreciation and Amortization Expense $ 4,428 $ 4,421 $ 4,426 $ 4,435 $ 17,710 $ 4,397 $ 4,430 $ 4,563 $ 4,652 $ 18,042
Reported Depreciation and Amortization Expense Growth Rate Y/Y -19.6 % -20.9 % -20.1 % -18.7 % -19.8 %
Adjusted Depreciation and Amortization Expense Growth Rate Y/Y -9.4 % -8.7 % -9.8 % -8.3 % -9.1 %
Pro Forma Adjusted Depreciation and Amortization Expense Growth Rate Y/Y -0.7 % 0.2 % 3.1 % 4.9 % 1.9 %
Operating Income 3/31/20 6/30/20 9/30/20 12/31/20 2020 3/31/21 6/30/21 9/30/21 12/31/21 2021
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Reported AT&T Operating Income (Loss) $ 7,486 $ 3,532 $ 6,132 $ (10,745) $ 6,405 $ 7,661 $ 3,269 $ 7,109 $ 5,308 $ 23,347
Adjustments (B1) 1,580 5,440 2,072 18,559 27,651 1,225 5,624 1,303 1,341 9,493
Adjusted Operating Income 9,066 8,972 8,204 7,814 34,056 8,886 8,893 8,412 6,649 32,840
Less: Video (A1) (796) (619) (570) (189) (2,174) (901) (1,216) (374) — (2,491)
Add: WarnerMedia sales to Video (A2) — — — — — — — — — —
Add: WarnerMedia sales of DIRECTV advertising inventory (A3) 374 255 370 564 1,563 349 372 99 — 820
Add: WarnerMedia/DIRECTV 70% revenue share (A3) (289) (206) (286) (422) (1,203) (271) (287) (78) — (636)
Add: Other eliminations — — — — — — — — — —
Less: Vrio (A4) 43 36 48 39 166 35 25 (96) (38) (74)
Add: WarnerMedia sales to Vrio (A5) — — — — — — — — — —
Pro Forma Adjusted Operating Income $ 8,398 $ 8,438 $ 7,766 $ 7,806 $ 32,408 $ 8,098 $ 7,787 $ 7,963 $ 6,611 $ 30,459
Reported Operating Income Growth Rate Y/Y 2.3 % -7.4 % 15.9 % 149.4 % 264.5 %
Adjusted Operating Income Growth Rate Y/Y -2.0 % -0.9 % 2.5 % -14.9 % -3.6 %
Pro Forma Adjusted Operating Income Growth Rate Y/Y -3.6 % -7.7 % 2.5 % -15.3 % -6.0 %
Reported Operating Income Margin 17.5 % 8.6 % 14.5 % -23.5 % 3.7 % 17.4 % 7.4 % 17.8 % 13.0 % 13.8 %
Adjusted Operating Income Margin 21.2 % 21.9 % 19.4 % 17.1 % 19.8 % 20.2 % 20.2 % 21.1 % 16.2 % 19.4 %
Pro Forma Adjusted Operating Income Margin 23.5 % 24.7 % 21.8 % 20.0 % 22.4 % 21.6 % 20.7 % 21.3 % 16.3 % 19.9 %
EBITDA 6/30/20 9/30/20 12/31/20 2020 3/31/21 6/30/21 9/30/21 12/31/21 2021
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Reported AT&T Net Income (Loss) 4,963 $ 1,563 $ 3,168 $ (13,515) $ (3,821) $ 7,942 $ 1,874 $ 6,273 $ 5,390 $ 21,479
Additions:
Income Tax Expense (Benefit) 935 766 (2,038) 965 2,122 751 1,539 1,056 5,468
Interest Expense 2,041 1,972 1,894 7,925 1,870 1,684 1,667 1,663 6,884
Equity in Net Income (Loss) of Affiliates 10 (5) (106) (95) (52) (41) (91) (447) (631)
Other (Income) Expense - net (1,017) 231 3,020 1,431 (4,221) (999) (2,279) (2,354) (9,853)
Depreciation and amortization 7,285 7,030 6,979 28,516 5,809 5,761 5,619 5,673 22,862
EBITDA 10,817 13,162 (3,766) 34,921 13,470 9,030 12,728 10,981 46,209
Adjustments (B1) 3,295 151 16,655 19,625 94 4,555 291 320 5,260
Adjusted EBITDA 14,112 13,313 12,889 54,546 13,564 13,585 13,019 11,301 51,469
Less: Video (A1) (1,212) (1,127) (710) (4,436) (1,065) (1,364) (418) — (2,847)
Add: WarnerMedia sales to Video (A2) — — — — — — — — —
Add: WarnerMedia sales of DIRECTV advertising inventory (A3) 256 370 565 1,565 349 372 99 — 820
Add: WarnerMedia/DIRECTV 70% revenue share (A3) (206) (286) (422) (1,203) (271) (287) (78) — (636)
Add: Other eliminations — — — — — — — — —
Less: Vrio (A4) (91) (78) (81) (354) (82) (89) (96) (38) (305)
Add: WarnerMedia sales to Vrio (A5) — — — — — — — — —
Pro Forma Adjusted EBITDA 12,826 $ 12,859 $ 12,192 $ 12,241 $ 50,118 $ 12,495 $ 12,217 $ 12,526 $ 11,263 $ 48,501
Adjusted EBITDA Growth Rate Y/Y -4.7 % -3.7 % -2.2 % -12.3 % -5.6 %
Pro Forma Adjusted EBITDA Growth Rate Y/Y -2.6 % -5.0 % 2.7 % -8.0 % -3.2 %
Adjusted EBITDA Margin % 34.5 % 31.4 % 28.2 % 31.8 % 30.9 % 30.8 % 32.6 % 27.6 % 30.5 %
Pro Forma Adjusted EBITDA Margin % 37.6 % 34.2 % 31.4 % 34.7 % 33.3 % 32.4 % 33.5 % 27.7 % 31.7 %
1 After the transaction, AT&T expects to retain incurred operations and support costs in the range of ~500M per quarter and depreciation costs for network infrastructure that provides both U-verse video and broadband services of ~150M per quarter, of which approximately 50% will be received from DIRECTV through transition service agreements and commercial arrangements. These pro formas do not include the impacts of accounting for the NFL SUNDAY TICKET, per the Contribution Agreement.

All values are in US Dollars.

NOTES
(A) Notes to Pro Forma Adjustments
(A1) Video business results as reported in AT&T's consolidated financial results; quarters ended 2021 exclude retained depreciation on assets supporting U-verse products
(A2) Intercompany transactions between WarnerMedia and Video that are external following the close of the transaction
(A3) DIRECTV's advertising inventory sold by WarnerMedia (Xandr business) pursuant to commercial agreement, with WarnerMedia recording all the advertising revenues and an expense for DIRECTV's 70% revenue share
(A4) Vrio business results as reported in AT&T's consolidated financial results
(A5) Intercompany transactions between WarnerMedia and Vrio that are external following the close of the transaction
(B1) Non-GAAP Adjustments2: 3/31/20 6/30/20 9/30/20 12/31/20 2020 3/31/21 6/30/21 9/30/21 12/31/21 2021
Merger Costs $ 182 $ 211 $ 38 $ 37 $ 468 $ 37 $ — $ 130 $ 132 $ 299
Employee separation costs and benefit-related (gain) loss 119 765 40 253 1,177 57 — — — 57
Impairments 123 2,319 73 16,365 18,880 — 4,555 161 188 4,904
Gain (loss) on spectrum transaction (900) — — — (900) — — — — —
Adjustments to Operations and Support Expenses/ EBITDA (476) 3,295 151 16,655 19,625 94 4,555 291 320 5,260
Amortization of intangibles 2,056 2,145 1,921 1,890 8,012 1,131 1,069 1,012 1,021 4,233
Impairments — — — 14 14 — — — — —
Adjustments to Operating Income $ 1,580 $ 5,440 $ 2,072 $ 18,559 $ 27,651 $ 1,225 $ 5,624 $ 1,303 $ 1,341 $ 9,493
2 As reported in AT&T's Forms 8-K filed April 22, 2020, July 23, 2020, October 22, 2020, January 27, 2021, April 22, 2021, July 22, 2021, October 21, 2021 and January 26, 2022.

Report a Problem

Category
Description
Email (optional, for follow-up)