At&T Inc 8-K, filed Apr 14, 2022
At&T Inc. (T)
8-K
2022-04-14
For: 2022-04-08
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Added on
April 12, 2026
About this 8-K
At&T Inc filed this 8-K on April 14, 2022, reporting on events of April 8, 2022.
Items reported
- Item 1.02: Ended a material agreement
- Item 8.01: Other events
- Item 9.01: Financial statements and exhibits
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) April 8, 2022
______________________________________________________
(Exact Name of Registrant as Specified in Charter)
______________________________________________________
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||
(Address of Principal Executive Offices) | (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 Symbol(s) | Name of each exchange on which registered | ||||||||||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
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 1.02 Termination of a Material Definitive Agreement.
The disclosure under Item 8.01 with respect to the termination of the Syndicated Term Loan (as defined in Item 8.01) is incorporated by reference into this Item 1.02.
Item 8.01 Other Events.
Throughout this document, AT&T Inc. is referred to as “AT&T.” As previously reported on the Form 8-K filed by AT&T on April 11, 2022, on April 11, AT&T provided irrevocable notice of prepayment of two existing term loan credit agreements with outstanding balances totaling $9.35 billion. AT&T recently completed the prepayment and termination of those two existing term loan credit agreements.
As previously reported, on March 2, 2022, AT&T entered into a $7.35 billion Amended and Restated Term Loan Credit Agreement (the “Syndicated Term Loan”), with Bank of America, N.A. (“Bank of America”), as agent. On April 13, 2022, AT&T repaid all of the $7,350,000,000 aggregate outstanding principal amount under the Syndicated Term Loan. Following the repayment, the Syndicated Term Loan terminated in its entirety.
On April 13, 2022, AT&T repaid all of (i) the $1,000,000,000 aggregate outstanding principal amount of a term loan facility and (ii) the $1,000,000,000 aggregate outstanding principal amount of a term loan facility, each outstanding pursuant to the $2 billion Term Loan Credit Agreement, dated as of March 19, 2021, by and among AT&T and Bank of America, as amended by Amendment No. 1 to the Term Loan Credit Agreement, dated as of December 15, 2021 (as amended, the “Bilateral Term Loan”). Following the repayment, the Bilateral Term Loan terminated in its entirety.
Item 9.01 Financial Statements and Exhibits.
On April 8, 2022, AT&T, a Delaware corporation (“AT&T”), completed the previously disclosed transactions contemplated by (i) that certain Agreement and Plan of Merger, dated as of May 17, 2021 (as amended, the “Merger Agreement”), by and among AT&T, Magallanes, Inc., a Delaware corporation and prior to the Merger (as defined below), a wholly owned subsidiary of AT&T (“Spinco”), Discovery, Inc., a Delaware corporation (“Discovery”), which has been renamed Warner Bros. Discovery, Inc. (“WBD”) in connection with the Merger, and Drake Subsidiary, Inc., a Delaware corporation and a wholly owned subsidiary of Discovery (“Merger Sub”), (ii) that certain Separation and Distribution Agreement, dated as of May 17, 2021 (as amended, the “Separation Agreement”), by and among AT&T, Spinco and Discovery, and (iii) certain other agreements in connection with the proposed transactions contemplated by the Merger Agreement and the Separation Agreement. Specifically, (1) AT&T transferred the business, operations and activities that constitute the WarnerMedia segment of AT&T, subject to certain exceptions as set forth in the Separation Agreement (the “WarnerMedia Business”), to Spinco (the “Separation”), (2) AT&T distributed to its stockholders all of the shares of common stock, par value $0.01 per share, of Spinco (the “Spinco Common Stock”) held by AT&T by way of a pro rata dividend such that each holder of shares of common stock, par value $1.00 per share, of AT&T (the “AT&T Common Stock”) was entitled to receive one share of Spinco Common Stock for each share of AT&T Common Stock held as of the record date, April 5, 2022 (the “Distribution”), and (3) Merger Sub was merged with and into Spinco, with Spinco as the surviving corporation (the “Merger” and together with the Separation and the Distribution, the “Transactions”). Upon completion of the Merger, Spinco became a wholly owned subsidiary of WBD and the holders of Spinco Common Stock were entitled to receive 0.241917 shares of WBD common stock (the “Exchange Ratio”) for each share of Spinco Common Stock held on the closing date.
As a result of the completion of the Transactions, holders of AT&T Common Stock (as holders of Spinco Common Stock immediately following the Distribution) owned approximately 71% of the outstanding capital stock of WBD, on a fully diluted basis (computed using the treasury method).
For additional information regarding the WarnerMedia Business, please refer to the Form 10 and the information statement included therein and the final information statement made available in connection with the Transactions, which was filed by Spinco as Exhibit 99.1 to its Current Report on Form 8-K dated March 28, 2022.
The unaudited pro forma condensed consolidated balance sheet of AT&T as of December 31, 2021 and the unaudited pro forma condensed consolidated statements of income of AT&T for the years ended December 31, 2021, 2020 and 2019 are filed as Exhibit 99.1 to this Current Report on Form 8-K.
(d) | Exhibits | ||||||||||
| Unaudited pro forma condensed consolidated balance sheet of AT&T Inc. as of December 31, 2021 and the unaudited pro forma condensed consolidated statements of income of AT&T Inc. for the years ended December 31, 2021, 2020 and 2019. | |||||||||||
| 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: April 14, 2022 | By: /s/ Debra L. Dial . Debra L. Dial Senior Vice President and Controller | ||||
AT&T INC.
Dollars in millions except per share amounts
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma consolidated financial statements presented below consist of an unaudited pro forma consolidated balance sheet as of December 31, 2021 and unaudited pro forma consolidated statements of income for the years ended December 31, 2021, 2020 and 2019.
On April 8, 2022, AT&T Inc. (AT&T or the Company) completed the previously announced separation of its WarnerMedia business in a Reverse Morris Trust transaction, under which Magallanes, Inc., which held the WarnerMedia business (Spinco), was distributed to AT&T stockholders via a pro rata dividend, followed by the combination of Spinco with a subsidiary of Discovery, Inc., which was renamed Warner Bros. Discovery, Inc. (WBD). Each AT&T shareholder received 0.241917shares of WBD common stock for each share of AT&T common stock held as of the record date. In connection with and in accordance with the terms of the transaction, prior to the distribution and merger, AT&T received approximately $40.4 billion in cash and WarnerMedia retention of debt, the cash portion of which is subject to potential post close adjustments for certain items.
The following unaudited pro forma consolidated financial statements were derived from AT&T’s historical consolidated financial statements and are being presented to give effect the separation, and the estimate special cash payment.
The following unaudited pro forma consolidated financial statements and accompanying notes give effect to the pro forma discontinued operations presentation of the separation and distribution of the WarnerMedia business in accordance with Financial Accounting Standards Board ASC 205, “Presentation of Financial Statements” (ASC 205) for the historical periods December 31, 2021, 2020 and 2019. The Company evaluated transactions completed during 2021 that were components of AT&T’s single plan of a strategic shift, including dispositions that may not have individually met the criteria due to materiality, and has determined discontinued operations to be comprised of the WarnerMedia, Vrio, Xandr and Playdemic Ltd. (Playdemic) transactions (collectively, the “Transactions”).
The unaudited pro forma consolidated statements of income for the years ended December 31, 2021, 2020 and 2019 reflect pro forma results of AT&T’s operations as if the Transactions had occurred on January 1, 2019. The unaudited pro forma consolidated balance sheet as of December 31, 2021 gives effect to the Transactions as if they had occurred on that date.
The unaudited pro forma financial information for the year ended December 31, 2021 and accompanying notes also include adjustments for transactions completed during 2021 that did not meet the criteria for discontinued operations, such as the separation of the U.S. video business, and the disposition of the Crunchyroll anime business and Government Solutions. The adjustments in the “Transaction Adjustments” column in the unaudited pro forma consolidated statement of income for the year ended December 31, 2021 give effect to the Transactions, as if they had occurred as of January 1, 2021.
The unaudited pro forma consolidated financial information presented below should be read in conjunction with AT&T’s historical consolidated financial statements and accompanying notes in its Annual Report on Form 10-K for the year ended December 31, 2021.
The unaudited pro forma financial information, prepared in accordance with Article 11 of Securities and Exchange Commission Regulation S-X (“Article 11 of Regulations S-X”), are for informational purposes only and do not purport to show the results that would have occurred had such transactions been completed as of the date and for the periods presented or which may occur in the future. The unaudited pro forma consolidated financial information constitutes forward-looking information and is subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. Accordingly, such information should not be relied upon as an indicator of future performance, financial condition or liquidity.
The pro forma financial information presented below may differ from other pro forma information presented by management in analyst presentations as those materials were not prepared in accordance with Article 11 of Regulation S-X. See accompanying notes (a)i, (a)ii, (f) and (g) below for items excluded from AT&T’s Analyst Day presentation and associated Form 8-K furnished with the Securities and Exchange Commission on March 11, 2022 (the “Form 8-K”). None of the information contained in the Form 8-K is incorporated herein.
Beginning with interim reporting for the second quarter of 2022, the Transactions will be reflected in the Company’s historical financial statements as discontinued operations.
1
AT&T INC.
Dollars in millions except per share amounts
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of December 31, 2021
| Discontinued | Continuing | Transaction | ||||||||||||||||||
| Historical | Operations (a) | Operations | Adjustments | Pro Forma1 | ||||||||||||||||
| Assets | ||||||||||||||||||||
| Current Assets | ||||||||||||||||||||
| Cash and cash equivalents | $ | 21,169 | $ | (1,946) | $ | 19,223 | $ | 39,000 | (b) | $ | 58,223 | |||||||||
| Accounts receivable - net | 17,571 | (5,239) | 12,332 | 12,332 | ||||||||||||||||
| Inventories | 3,464 | (139) | 3,325 | 3,325 | ||||||||||||||||
| Prepaid and other current assets | 17,793 | (885) | 16,908 | 16,908 | ||||||||||||||||
| Total current assets | 59,997 | (8,209) | 51,788 | 39,000 | 90,788 | |||||||||||||||
| Noncurrent inventories and theatrical film and television production costs | 18,983 | (18,983) | — | — | ||||||||||||||||
| Property, Plant and Equipment - Net | 125,904 | (4,459) | 121,445 | 121,445 | ||||||||||||||||
| Goodwill | 133,223 | (40,483) | 92,740 | 92,740 | ||||||||||||||||
| Licenses - Net | 113,830 | — | 113,830 | 113,830 | ||||||||||||||||
| Trademarks and Trade Names – Net | 21,938 | (16,688) | 5,250 | 5,250 | ||||||||||||||||
| Distribution Networks - Net | 11,942 | (11,942) | — | — | ||||||||||||||||
| Other Intangible Assets - Net | 11,783 | (11,783) | — | — | ||||||||||||||||
| Investments in Equity Affiliates | 7,274 | (1,107) | 6,167 | 6,167 | ||||||||||||||||
| Operating lease right-of-use assets | 24,180 | (2,396) | 21,784 | 21,784 | ||||||||||||||||
| Other Assets | 22,568 | (3,597) | 18,971 | 18,971 | ||||||||||||||||
| Total Assets | $ | 551,622 | $ | (119,647) | $ | 431,975 | $ | 39,000 | $ | 470,975 | ||||||||||
| Liabilities and Stockholders' Equity | ||||||||||||||||||||
| Current Liabilities | ||||||||||||||||||||
| Debt maturing within one year | 24,630 | (40) | 24,590 | 24,590 | ||||||||||||||||
| Note payable to DIRECTV | 1,245 | — | 1,245 | 1,245 | ||||||||||||||||
| Accounts payable and accrued liabilities | 50,661 | (11,453) | 39,208 | 39,208 | ||||||||||||||||
| Advanced billing and customer deposits | 5,303 | (1,338) | 3,965 | 3,965 | ||||||||||||||||
| Dividends payable | 3,749 | — | 3,749 | 3,749 | ||||||||||||||||
| Total current liabilities | 85,588 | (12,831) | 72,757 | — | 72,757 | |||||||||||||||
| Long-Term Debt | 152,724 | (1,749) | 150,975 | 150,975 | ||||||||||||||||
| Deferred Credits and Other Noncurrent Liabilities | ||||||||||||||||||||
| Deferred income taxes | 65,226 | (11,481) | 53,745 | 53,745 | ||||||||||||||||
| Postemployment benefit obligation | 12,649 | (89) | 12,560 | 12,560 | ||||||||||||||||
| Operating lease liabilities | 21,261 | (2,327) | 18,934 | 18,934 | ||||||||||||||||
| Other noncurrent liabilities | 30,223 | (5,077) | 25,146 | 25,146 | ||||||||||||||||
| Noncurrent portion of note payable to DIRECTV | 96 | — | 96 | 96 | ||||||||||||||||
| Total deferred credits and other noncurrent liabilities | 129,455 | (18,974) | 110,481 | — | 110,481 | |||||||||||||||
| Stockholders' Equity | ||||||||||||||||||||
| Preferred stock | — | — | — | |||||||||||||||||
| Common shares issued ($1 par value) | 7,621 | — | 7,621 | 7,621 | ||||||||||||||||
| Additional paid-in capital | 130,112 | (43,816) | 86,296 | 39,000 | (b) | 125,296 | ||||||||||||||
| Retained earnings | 42,350 | (42,350) | — | — | ||||||||||||||||
| Treasury stock (at cost) | (17,280) | — | (17,280) | (17,280) | ||||||||||||||||
| Accumulated other comprehensive income | 3,529 | 76 | 3,605 | 3,605 | ||||||||||||||||
| Noncontrolling interest | 17,523 | (3) | 17,520 | 17,520 | ||||||||||||||||
| Total stockholders' equity | 183,855 | (86,093) | 97,762 | 39,000 | 136,762 | |||||||||||||||
| Total Liabilities and Stockholders' Equity | 551,622 | (119,647) | 431,975 | 39,000 | 470,975 | |||||||||||||||
1 Represents AT&T’s current best estimate of its unaudited pro forma consolidated balance sheet, reflecting the discontinued operations. Actual results could differ from these estimates.
See accompanying notes to the unaudited pro forma consolidated financial statements.
2
AT&T INC.
Dollars in millions except per share amounts
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
For the Year Ended December 31, 2021
| Discontinued | Continuing | Other | Transaction | ||||||||||||||||||||
| Historical | Operations (a) | Operations | Dispositions (c) | Adjustments | Pro Forma1 | ||||||||||||||||||
| Total Operating Revenues | $ | 168,864 | $ | (34,826) | $ | 134,038 | $ | (15,966) | $ | 136 | (d) | $ | 118,208 | ||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Cost of revenues | |||||||||||||||||||||||
| Equipment | 23,778 | (93) | 23,685 | (100) | — | 23,585 | |||||||||||||||||
| Broadcast, programming and operations | 24,797 | (15,477) | 9,320 | (8,106) | — | 1,214 | |||||||||||||||||
| Other cost of revenues (exclusive of depreciation and amortization shown separately below) | 31,232 | (3,568) | 27,664 | (2,613) | 136 | (d) | 25,187 | ||||||||||||||||
| Selling, general and administrative | 37,944 | (8,536) | 29,408 | (2,190) | 817 | (e) | 28,035 | ||||||||||||||||
| Asset impairment and abandonments | 4,904 | (4,691) | 213 | 213 | |||||||||||||||||||
| Depreciation and amortization | 22,862 | (5,068) | 17,794 | (356) | 420 | (e) | 17,858 | ||||||||||||||||
| Total Operating Expenses | 145,517 | (37,433) | 108,084 | (13,365) | 1,373 | 96,092 | |||||||||||||||||
| Operating Income | 23,347 | 2,607 | 25,954 | (2,601) | (1,237) | 22,116 | |||||||||||||||||
| Interest expense | 6,884 | (162) | 6,722 | — | (1,482) | (g) | 5,240 | ||||||||||||||||
| Other income (expense) – net | 10,484 | (790) | 9,694 | 4 | 1,993 | (f) | 11,691 | ||||||||||||||||
| Income from continuing operations before income taxes | 26,947 | 1,979 | 28,926 | (2,597) | 2,238 | 28,567 | |||||||||||||||||
| Income tax expense | 5,468 | (152) | 5,316 | (566) | 470 | (h) | 5,220 | ||||||||||||||||
| Income from Continuing Operations | 21,479 | 2,131 | 23,610 | (2,031) | 1,768 | 23,347 | |||||||||||||||||
| Less: Income from Continuing Operations Attributable to Noncontrolling Interest | (1,398) | (81) | (1,479) | — | — | (1,479) | |||||||||||||||||
| Less: Preferred Stock Dividends | (207) | — | (207) | — | — | (207) | |||||||||||||||||
| Income from Continuing Operations Attributable to AT&T | $ | 19,874 | $ | 2,050 | $ | 21,924 | $ | (2,031) | $ | 1,768 | $ | 21,661 | |||||||||||
Earnings from continuing operations per share of common stock2: | |||||||||||||||||||||||
| Basic | $ | 2.77 | $ | 3.02 | |||||||||||||||||||
| Diluted | $ | 2.76 | $ | 3.01 | |||||||||||||||||||
| Weighted average common shares outstanding (000,000) | |||||||||||||||||||||||
| Basic | 7,168 | 7,168 | |||||||||||||||||||||
| Diluted | 7,199 | 7,199 | |||||||||||||||||||||
dispositions. Actual results could differ from these estimates.
2 Pro forma basic and diluted earnings per share is calculated by dividing pro forma net income available to AT&T common stockholders by the
weighted average number of AT&T shares outstanding.
See accompanying notes to the unaudited pro forma consolidated financial statements.
3
AT&T INC.
Dollars in millions except per share amounts
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
For the Year Ended December 31, 2020
| Discontinued | Continuing | Transaction | |||||||||||||||||||||
| Historical | Operations (a) | Operations | Adjustments | Pro Forma1 | |||||||||||||||||||
| Total Operating Revenues | $ | 171,760 | $ | (28,711) | $ | 143,049 | $ | — | $ | 143,049 | |||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Cost of revenues | |||||||||||||||||||||||
| Equipment | 19,706 | (113) | 19,593 | — | 19,593 | ||||||||||||||||||
| Broadcast, programming and operations | 27,305 | (10,364) | 16,941 | — | 16,941 | ||||||||||||||||||
| Other cost of revenues (exclusive of depreciation and amortization shown separately below) | 32,909 | (3,539) | 29,370 | — | 29,370 | ||||||||||||||||||
| Selling, general and administrative | 38,039 | (7,474) | 30,565 | — | 30,565 | ||||||||||||||||||
| Asset impairment and abandonments | 18,880 | (3,194) | 15,686 | 15,686 | |||||||||||||||||||
| Depreciation and amortization | 28,516 | (5,993) | 22,523 | — | 22,523 | ||||||||||||||||||
| Total Operating Expenses | 165,355 | (30,677) | 134,678 | — | 134,678 | ||||||||||||||||||
| Operating Income | 6,405 | 1,966 | 8,371 | — | 8,371 | ||||||||||||||||||
| Interest expense | 7,925 | (198) | 7,727 | — | 7,727 | ||||||||||||||||||
| Other income (expense) – net | (1,336) | 323 | (1,013) | — | (1,013) | ||||||||||||||||||
| Income from continuing operations before income taxes | (2,856) | 2,487 | (369) | — | (369) | ||||||||||||||||||
| Income tax expense | 965 | 182 | 1,147 | — | 1,147 | ||||||||||||||||||
| Income from Continuing Operations | (3,821) | 2,305 | (1,516) | — | (1,516) | ||||||||||||||||||
| Less: Income from Continuing Operations Attributable to Noncontrolling Interest | (1,355) | (105) | (1,460) | — | (1,460) | ||||||||||||||||||
| Less: Preferred Stock Dividends | (193) | — | (193) | — | (193) | ||||||||||||||||||
| Income from Continuing Operations Attributable to AT&T | $ | (5,369) | $ | 2,200 | $ | (3,169) | $ | — | $ | (3,169) | |||||||||||||
Earnings from continuing operations per share of common stock2: | |||||||||||||||||||||||
| Basic | $ | (0.75) | $ | (0.44) | |||||||||||||||||||
| Diluted | $ | (0.75) | $ | (0.44) | |||||||||||||||||||
| Weighted average common shares outstanding (000,000) | |||||||||||||||||||||||
| Basic | 7,157 | 7,157 | |||||||||||||||||||||
| Diluted | 7,183 | 7,183 | |||||||||||||||||||||
results could differ from these estimates.
2 Pro forma basic and diluted earnings per share is calculated by dividing pro forma net income available to AT&T common stockholders by the
weighted average number of AT&T shares outstanding.
See accompanying notes to the unaudited pro forma consolidated financial statements.
4
AT&T INC.
Dollars in millions except per share amounts
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
For the Year Ended December 31, 2019
| Discontinued | Continuing | Transaction | |||||||||||||||||||||
| Historical | Operations (a) | Operations | Adjustments | Pro Forma1 | |||||||||||||||||||
| Total Operating Revenues | $ | 181,193 | $ | (34,389) | $ | 146,804 | $ | — | $ | 146,804 | |||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Cost of revenues | |||||||||||||||||||||||
| Equipment | 18,653 | (6) | 18,647 | — | 18,647 | ||||||||||||||||||
| Broadcast, programming and operations | 31,132 | (12,372) | 18,760 | — | 18,760 | ||||||||||||||||||
| Other cost of revenues (exclusive of depreciation and amortization shown separately below) | 34,356 | (4,406) | 29,950 | — | 29,950 | ||||||||||||||||||
| Selling, general and administrative | 39,422 | (7,831) | 31,591 | — | 31,591 | ||||||||||||||||||
| Asset impairment and abandonments | 1,458 | (145) | 1,313 | — | 1,313 | ||||||||||||||||||
| Depreciation and amortization | 28,217 | (6,766) | 21,451 | — | 21,451 | ||||||||||||||||||
| Total Operating Expenses | 153,238 | (31,526) | 121,712 | — | 121,712 | ||||||||||||||||||
| Operating Income | 27,955 | (2,863) | 25,092 | — | 25,092 | ||||||||||||||||||
| Interest expense | 8,422 | (527) | 7,895 | — | 7,895 | ||||||||||||||||||
| Other income (expense) – net | (1,065) | (149) | (1,214) | — | (1,214) | ||||||||||||||||||
| Income from continuing operations before income taxes | 18,468 | (2,485) | 15,983 | — | 15,983 | ||||||||||||||||||
| Income tax expense | 3,493 | (263) | 3,230 | — | 3,230 | ||||||||||||||||||
| Income from Continuing Operations | 14,975 | (2,222) | 12,753 | — | 12,753 | ||||||||||||||||||
| Less: Income from Continuing Operations Attributable to Noncontrolling Interest | (1,072) | — | (1,072) | — | (1,072) | ||||||||||||||||||
| Less: Preferred Stock Dividends | (3) | — | (3) | — | (3) | ||||||||||||||||||
| Income from Continuing Operations Attributable to AT&T | $ | 13,900 | $ | (2,222) | $ | 11,678 | $ | — | $ | 11,678 | |||||||||||||
Earnings from continuing operations per share of common stock2: | |||||||||||||||||||||||
| Basic | $ | 1.90 | $ | 1.60 | |||||||||||||||||||
| Diluted | $ | 1.89 | $ | 1.59 | |||||||||||||||||||
| Weighted average common shares outstanding (000,000) | |||||||||||||||||||||||
| Basic | 7,319 | 7,319 | |||||||||||||||||||||
| Diluted | 7,348 | 7,348 | |||||||||||||||||||||
could differ from these estimates.
2 Pro forma basic and diluted earnings per share is calculated by dividing pro forma net income available to AT&T common stockholders by the
weighted average number of AT&T shares outstanding.
See accompanying notes to the unaudited pro forma consolidated financial statements.
5
AT&T INC.
Dollars in millions except per share amounts
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Discontinued Operations:
(a) Reflects the discontinued operations, including associated assets, liabilities and equity and results of operations attributable to the WarnerMedia business, Vrio, Xandr and Playdemic Ltd., which were included in the Company’s historical financial statements. Acquisition-related and other significant items associated with the WarnerMedia business, Vrio, Xandr and Playdemic businesses that have historically been reported in AT&T’s Corporate and Other presentation have been included in discontinued operations, and primarily relate to amortization of intangible assets and impairments. In accordance with ASC 205-20, Presentation of Financial Statements - Discontinued Operations, the amounts exclude the following:
i.Historically allocated general corporate overhead costs that do not meet the requirements for presentation in discontinued operations. Such allocations included real estate costs and corporate support functions.
ii.Invidi, the addressable TV advertising solution retained by AT&T.
iii.Intercompany transactions between WarnerMedia and/or Vrio and DIRECTV that were eliminated in consolidation. As of the date of these pro forma consolidated financial statements, there have been no transition service agreements or new commercial contracts signed to be included as transaction accounting adjustments.
Transaction Accounting Adjustments:
(b) Reflects the estimated cash AT&T received in connection with the Transactions, including the one-time cash payment, as well as cash received in connection with the exchange of $10.0 billion aggregate principal amount of Spinco debt securities issued to AT&T in connection with the separation, net of WarnerMedia debt, subject to adjustment.
(c) Reflects the removal of other AT&T businesses that were separated or sold in 2021, that did not meet the criteria for discontinued operations. Other dispositions include the operating results and associated acquisition-related and other significant items for the following dispositions:
i.In July 2021, AT&T closed its transaction with TPG to form a new company named DIRECTV Entertainment Holdings, LLC (DIRECTV). The transaction resulted in the deconsolidation of the U.S. video business (including the DIRECTV, AT&T TV and U-verse video services), with DIRECTV being accounted for under the equity method.
ii.The first-quarter 2021 sale of Government Solutions, which was reported in AT&T’s Corporate and Other presentation.
iii.The third-quarter 2021 sale of the Crunchyroll anime business, which was reported in AT&T’s Corporate and Other presentation.
(d) Reflects the recognition of intercompany transactions between DIRECTV and the AT&T Mobility business unit that were eliminated in consolidation prior to the separation of DIRECTV in July 2021 that are now reflected as third-party sales.
(e) After the DIRECTV transaction, AT&T expects to retain incurred operations and support costs in the range of approximately $500 million per quarter and depreciation of network infrastructure that provides both U-verse video and broadband services to customers of $150 million per quarter, of which approximately 60% will be received from DIRECTV through transition service agreements and commercial arrangements.
(f) Reflects the estimated equity in net income of affiliates from DIRECTV that would have been recorded by AT&T had the transaction closed on January 1, 2021. The estimate is calculated at 70% of the U.S. video business EBITDA, which excludes the noncash depreciation and amortization of fair value accretion expected to result from DIRECTV’s revaluation of assets and purchase price allocation.
(g) Reflects the use of proceeds to pay down approximately $39.0 billion of borrowings and the resulting reduction to interest expense. The estimated impact of interest expense reduction was determined using the weighted-average interest rate of AT&T’s long-term debt portfolio, including credit agreement borrowings and the impact of derivatives, of 3.8%. As of the date of the filing to which these unaudited pro forma financial statements are attached, the Company has committed to approximately $10.1 billion of term loan repayments with a weighted-average rate of 1.1% and make-whole or other redemptions totaling $9.3 billion with a weighted-average rate of 3.5%.
(h) Estimated tax impact of pro forma and other adjustments at AT&T's disclosed statutory tax rate of 21.0% for the year ended December 31, 2021, except for items that are not deductible for tax purposes or can drive a change in the tax rate.
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