| AT&T Inc. | ||||||||
| Dollars in millions except per share amounts | ||||||||
15
|
|
We have international operations, particularly in Latin America, including Mexico, and worldwide through WarnerMedia’s content distribution as well as services to our large U.S.-based businesses.distribution. We need to comply with a wide variety of complex local laws, regulations and treaties. We are exposed to restrictions on cash repatriation, foreign exchange controls, fluctuations in currency values, changes in relationships between U.S. and foreign governments, trade restrictions including potential tariffs, differences in intellectual property protection laws, and other regulations that may affect materially our earnings. Our Mexico operations, in particular, rely on a continuation of a regulatory regime that fosters competition. While our foreign operations represent significant opportunities to sell our services, a number of foreign countries where we operate have experienced unstable growth patterns, highincreased inflation, currency devaluation, foreign exchange controls, instability in the banking sector and high unemployment. In addition, several Latin America countries have experienced significant political turmoil during 2019.has continued in several Latin American countries. Should these conditions persist, our ability to offer service in one or more countries could be adversely affected and customers in these countries may be unable to purchase the services we offer or pay for services already provided. For example, we found it necessary in May 2020 to close our DIRECTV operations in Venezuela due
to political instability in the country and in order to comply with sanctions of the U.S. government.
| AT&T Inc. | ||||||||
| Dollars in millions except per share amounts | ||||||||
| AT&T Inc. | ||||||||
| Dollars in millions except per share amounts | ||||||||
16
|
|
increases in network and handset component costs, regulatory permitting delays for tower sites or enhancements, or labor-related delays. Deployment of new technology also may adversely affect the performance of the network for existing services. If we cannot acquire needed spectrum or deploy the services customers desire on a timely basis with acceptable quality and at adequate cost,reasonable costs, then our ability to attract and retain customers, and, therefore, maintain and improve our operating margins, could be materially adversely affected.
| AT&T Inc. | ||||||||
| Dollars in millions except per share amounts | ||||||||
We strive to create a culture in which our colleagues act with integrity and respect and feel comfortable speaking up to report instances of misconduct or other concerns. Our ability to attract and retain employees is highly dependent upon our commitment to a diverse and inclusive workplace, ethical business practices and other qualities. Acts of misconduct by any employee, and particularly by senior management, could erode trust and confidence and damage our reputation. Negative public opinion could result from actual or alleged conduct by us or those currently or formerly associated with us, and from any number of activities or circumstances, including operations, employment-related offenses (such as sexual harassment and discrimination), regulatory compliance and actions taken by regulators or others in response to such conduct. We have in the past been, and may in the future be, named as a defendant in lawsuits, claims and other legal proceedings that arise in the ordinary course of our business based on alleged acts of misconduct by employees. These actions seek, among other things, compensation for alleged personal injury (including claims for loss of life), workers’ compensation, employment discrimination, sexual harassment, workplace misconduct, wage and hour claims and other employment-related damages, compensation for breach of contract, statutory or regulatory claims, negligence or gross negligence, punitive damages, consequential damages, and civil penalties or other losses or injunctive or declaratory relief. The outcome of any allegations, lawsuits, claims or legal proceedings is inherently uncertain and could result in significant costs, damage to our brands or reputation and diversion of management’s attention from our business. Additionally, our news organization makes editorial judgments around what is covered and how it is covered in the normal course of business. Although we have disciplined practices that are used to make such editorial judgments, it is possible that our news coverage alienates some consumers, adversely impacts our reputation and therefore impacts demand for our other products and services. Any damage to our reputation or payments of significant amounts, even if reserved, could materially and adversely affect our business, reputation, financial condition, results of operations and cash flows.
17
|
|
The communications and digital entertainment industry has experienced rapid changes in the past several years. An increasing number of our customers are using mobile devices as the primary means of viewing video and an increasing number of nontraditional video providers are developing content and technologies to satisfy the desire for video entertainment demand. In addition, businesses and government bodies are broadly shifting to wireless-based services for homes and infrastructure to improve services to their respective customers and constituencies. In order to meet this demand and remain competitive, we now offer a mobile TV service and continue to upgrade our sophisticated wired and wireless networks, including satellites, as well as research other technologies. We are spending significant capital to shift our wired network to software-based technology to manage this demand and are launchingexpanding 5G wireless technology to address these consumer demands. We are entering into a significant number of software licensing agreements and working with software developers to provide network functions in lieu of installing switches or other physical network equipment in order to respond to rapid developments in video and wireless demand. While software-based functionality can be changed much more quickly than, for example, physical switches, the rapid pace of development means that we may increasingly need to rely on single-source and software solutions that have not previously been deployed in production environments. Should this software not function as intended or our license agreements provide inadequate protection from intellectual property infringement claims, we could be forced to either substitute (if available), or else spend time to develop alternative technologies at a much higher cost and incur harm to our reputation for reliability, and, as a result, our ability to remain competitive could be materially adversely affected.
| AT&T Inc. | ||||||||
| Dollars in millions except per share amounts | ||||||||
| AT&T Inc. | ||||||||
| Dollars in millions except per share amounts | ||||||||
As with any new product launch,
18
|
|
because of technical issues with the platform, we may not be able to attract or retain subscribers, and as a result, our ability to maintain and/or grow our business will be adversely affected.
| AT&T Inc. | ||||||||
| Dollars in millions except per share amounts | ||||||||
19
| AT&T Inc. | ||||||||
Dollars in millions except per share amounts | ||||||||
CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS
The severity, magnitude and duration of the COVID-19 pandemic and containment, mitigation and other measures taken in response, including the potential impacts of these matters on our business and operations.
20
|
|
•The issuance by the Financial Accounting Standards Board or other accounting oversight bodies of new accounting standards or changes to existing standards.
| AT&T Inc. | ||||||||
| Dollars in millions except per share amounts | ||||||||
21
|
|
Dollars in millions except per share amounts Name Age Position Held Since Edward W. Gillespie Senior Executive Vice President and Chief Compliance Officer 12/2014 Jason Kilar Chief Executive Officer-AT&T Latin America and Global Marketing Officer 8/2017 David R. McAtee II Senior Executive Vice President and General Counsel 10/2015 Jeffery S. McElfresh Chief Executive Officer, AT&T Communications, LLC 10/2019 Angela R. Santone Senior Executive Vice President - Human Resources 12/2019 John J. Stephens Senior Executive Vice President and Chief Financial Officer 6/2011 Dollars in millions except per share amounts PART II STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES To implement these authorizations, we used open market ISSUER PURCHASES OF EQUITY SECURITIES (a) (b) (c) (d) Period Total Number of Shares (or Units) Purchased1,2,3 Average Price Paid Per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs1 Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under The Plans or Programs October 1, 2019 - October 31, 2019 671,252 $ 37.21 - 370,897,657 November 1, 2019 - November 30, 2019 24,049,128 38.40 24,000,000 346,897,657 December 1, 2019 - December 31, 2019 28,064,877 38.42 27,398,212 319,499,445 Total 52,785,257 $ 38.40 51,398,212 1 In December 2019, the Company entered into a $4,000 accelerated share repurchase agreement (ASR). Through purchases under the ASR, the Company plans to repurchase shares of our common stock during the first quarter of 2020. In March 2014, our Board of Directors approved an authorization to repurchase up to 300 million shares of our common stock. In March 2013, our Board of Directors approved an authorization to repurchase up to 300 million shares of our common stock. The authorizations have no expiration date. 2 Of the shares purchased, 886,515 shares were acquired through the withholding of taxes on the vesting of restricted stock or through the payment in stock of taxes on the exercise price of options. 3 Of the shares repurchased or transferred, 500,530 shares were transferred from AT&T maintained VEBA trusts. Dollars in millions except per share amounts Percent Change 2019 2018 2017 2019 vs. 2018 2018 vs. 2017 Operating Revenues Communications $ 142,359 $ 143,721 $ 149,457 (0.9) % (3.8) % WarnerMedia 33,499 18,941 430 76.9 - Latin America 6,963 7,652 8,269 (9.0) (7.5) Xandr 2,022 1,740 1,373 16.2 26.7 Corporate and other 1,603 2,101 2,200 (23.7) (4.5) Eliminations and consolidation (5,253) (3,399) (1,183) (54.5) - AT&T Operating Revenues 181,193 170,756 160,546 6.1 6.4 Operating Contribution Communications 32,230 32,108 31,488 0.4 2.0 WarnerMedia 9,326 5,695 62 63.8 - Latin America (635) (710) (266) 10.6 - Xandr 1,318 1,333 1,202 (1.1) 10.9 Segment Operating Contribution $ 42,239 $ 38,426 $ 32,486 9.9 % 18.3 % Percent Change 2019 vs. 2018 vs. 2019 2018 2017 2018 2017 Operating revenues Service $ 163,499 $ 152,345 $ 145,597 7.3 % 4.6 % Equipment 17,694 18,411 14,949 (3.9) 23.2 Total Operating Revenues 181,193 170,756 160,546 6.1 6.4 Operating expenses Operations and support 125,021 116,230 116,189 7.6 - Depreciation and amortization 28,217 28,430 24,387 (0.7) 16.6 Total Operating Expenses 153,238 144,660 140,576 5.9 2.9 Operating Income 27,955 26,096 19,970 7.1 30.7 Interest expense 8,422 7,957 6,300 5.8 26.3 Equity in net income (loss) of affiliates 6 (48) (128) - 62.5 Other income (expense) – net (1,071) 6,782 1,597 - - Income Before Income Taxes 18,468 24,873 15,139 (25.8) 64.3 Net Income 14,975 19,953 29,847 (24.9) (33.1) Net Income Attributable to AT&T 13,903 19,370 29,450 (28.2) (34.2) Net Income Attributable to Common Stock $ 13,900 $ 19,370 $ 29,450 (28.2) % (34.2) % Dollars in millions except per share amounts COMMUNICATIONS SEGMENT Percent Change 2019 vs. 2018 vs. 2019 2018 2017 2018 2017 Segment Operating Revenues Mobility $ 71,056 $ 70,521 $ 70,259 0.8 % 0.4 % Entertainment Group 45,126 46,460 49,995 (2.9) (7.1) Business Wireline 26,177 26,740 29,203 (2.1) (8.4) Total Segment Operating Revenues 142,359 143,721 149,457 (0.9) (3.8) Segment Operating Contribution Mobility 22,321 21,568 20,011 3.5 7.8 Entertainment Group 4,822 4,715 5,471 2.3 (13.8) Business Wireline 5,087 5,825 6,006 (12.7) (3.0) Total Segment Operating Contribution $ 32,230 $ 32,108 $ 31,488 0.4 % 2.0 % Selected Subscribers and Connections December 31, (000s) 2019 2018 2017 Mobility subscribers 165,889 151,921 139,986 Total domestic broadband connections 14,659 14,751 14,487 Network access lines in service 8,487 10,002 11,754 U-verse VoIP connections 4,370 5,114 5,682 Communications Business Unit Discussion Mobility Results Percent Change 2019 vs. 2018 vs. 2019 2018 2017 2018 2017 Operating revenues Service $ 55,331 $ 54,294 $ 57,023 1.9 % (4.8) % Equipment 15,725 16,227 13,236 (3.1) 22.6 Total Operating Revenues 71,056 70,521 70,259 0.8 0.4 Operating expenses Operations and support 40,681 40,690 42,317 - (3.8) Depreciation and amortization 8,054 8,263 7,931 (2.5) 4.2 Total Operating Expenses 48,735 48,953 50,248 (0.4) (2.6) Operating Income 22,321 21,568 20,011 3.5 7.8 Equity in Net Income (Loss) of Affiliates - - - - - Operating Contribution $ 22,321 $ 21,568 $ 20,011 3.5 % 7.8 % Dollars in millions except per share amounts The following tables highlight other key measures of performance for Mobility: Mobility Subscribers Percent Change 2019 vs. 2018 vs. (in 000s) 2019 2018 2017 2018 2017 Postpaid Phone Subscribers 63,018 62,882 63,197 0.2 % (0.5) % Total Phone Subscribers 79,700 78,767 77,657 1.2 1.4 Postpaid smartphones 60,664 60,131 59,298 0.9 1.4 Postpaid feature phones and other devices 14,543 15,937 17,376 (8.7) (8.3) Postpaid 75,207 76,068 76,674 (1.1) (0.8) Prepaid 17,803 16,828 15,154 5.8 11.0 Reseller 6,893 7,693 9,171 (10.4) (16.1) Connected devices1 65,986 51,332 38,987 28.5 31.7 Total Mobility Subscribers 165,889 151,921 139,986 9.2 % 8.5 % 1 Includes data-centric devices such as wholesale automobile systems, monitoring devices, fleet management and session-based tablets. Mobility Net Additions Percent Change 2019 vs. 2018 vs. (in 000s) 2019 2018 2017 2018 2017 Postpaid Phone Net Additions 483 194 (186) 149.0 % 204.3 % Total Phone Net Additions 989 1,248 659 (20.8) 89.4 Postpaid2 (435) (90) 853 - - Prepaid 677 1,301 996 (48.0) 30.6 Reseller (928) (1,599) (1,765) 42.0 9.4 Connected devices3 14,645 12,324 9,694 18.8 27.1 Mobility Net Subscriber Additions1 13,959 11,936 9,778 16.9 % 22.1 % Postpaid Churn4 1.18 % 1.12 % 1.07 % 6 BP 5 BP Postpaid Phone-Only Churn4 0.95 % 0.90 % 0.85 % 5 BP 5 BP 1 Excludes acquisition-related additions during the period. 2 In addition to postpaid phones, includes tablets and wearables and other. Tablet net adds (losses) were (1,487), (1,200) and 59 for the years ended December 31, 2019, 2018 and 2017, respectively. Wearables and other net adds were 569, 916 and 980 for the years ended December 31, 2019, 2018 and 2017, respectively. 3 Includes data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems. Excludes postpaid tablets. 4 Calculated by dividing the aggregate number of wireless subscribers who canceled service during a month divided by the total number of wireless subscribers at the beginning of that month. The churn rate for the period is equal to the average of the churn rate for each month of that period. Churn Dollars in millions except per share amounts Entertainment Group Results Percent Change 2019 vs. 2018 vs. 2019 2018 2017 2018 2017 Operating revenues Video entertainment $ 32,110 $ 33,357 $ 36,167 (3.7) % (7.8) % High-speed internet 8,403 7,956 7,674 5.6 3.7 Legacy voice and data services 2,573 3,041 3,767 (15.4) (19.3) Other service and equipment 2,040 2,106 2,387 (3.1) (11.8) Total Operating Revenues 45,126 46,460 49,995 (2.9) (7.1) Operating expenses Operations and support 35,028 36,430 38,903 (3.8) (6.4) Depreciation and amortization 5,276 5,315 5,621 (0.7) (5.4) Total Operating Expenses 40,304 41,745 44,524 (3.5) (6.2) Operating Income 4,822 4,715 5,471 2.3 (13.8) Equity in Net Income (Loss) of Affiliates - - - - - Operating Contribution $ 4,822 $ 4,715 $ 5,471 2.3 % (13.8) % The following tables highlight other key measures of performance for Entertainment Group: Connections Percent Change 2019 vs. 2018 vs. (in 000s) 2019 2018 2017 2018 2017 Video Connections Premium TV 19,473 22,903 24,089 (15.0) % (4.9) % AT&T TV NOW 926 1,591 1,155 (41.8) 37.7 Total Video Connections 20,399 24,494 25,244 (16.7) (3.0) Broadband Connections IP 13,598 13,729 13,462 (1.0) 2.0 DSL 521 680 888 (23.4) (23.4) Total Broadband Connections 14,119 14,409 14,350 (2.0) 0.4 Retail Consumer Switched Access Lines 3,329 3,967 4,774 (16.1) (16.9) U-verse Consumer VoIP Connections 3,794 4,582 5,222 (17.2) (12.3) Total Retail Consumer Voice Connections 7,123 8,549 9,996 (16.7) (14.5) Fiber Broadband Connections (included in IP) 3,887 2,763 1,767 40.7 % 56.4 % The following tables highlight other key measures of performance for Video: Dollars in millions except per share amounts Net Additions Percent Change 2019 vs. 2018 vs. (in 000s) 2019 2018 2017 2018 2017 Video Net Additions �� Premium TV (3,430) (1,186) (1,176) - % (0.9) % AT&T TV NOW (665) 436 888 - (50.9) Net Video Additions (4,095) (750) (288) - - Broadband Net Additions IP (131) 267 574 - (53.5) DSL (159) (208) (403) 23.6 48.4 Net Broadband Additions (290) 59 171 - (65.5) Fiber Broadband Net Additions 1,124 1,034 1,525 8.7 % (32.2) % Business Wireline Results Percent Change 2019 vs. 2018 vs. 2019 2018 2017 2018 2017 Operating revenues Strategic and managed services $ 15,440 $ 14,660 $ 13,880 5.3 % 5.6 % Legacy voice and data services 9,180 10,674 13,791 (14.0) (22.6) Other service and equipment 1,557 1,406 1,532 10.7 (8.2) Total Operating Revenues 26,177 26,740 29,203 (2.1) (8.4) Operating expenses Operations and support 16,091 16,201 18,441 (0.7) (12.1) Depreciation and amortization 4,999 4,714 4,756 6.0 (0.9) Total Operating Expenses 21,090 20,915 23,197 0.8 (9.8) Operating Income 5,087 5,825 6,006 (12.7) (3.0) Equity in Net Income (Loss) of Affiliates - - - - - Operating Contribution $ 5,087 $ 5,825 $ 6,006 (12.7) % (3.0) % Dollars in millions except per share amounts WARNERMEDIA SEGMENT 2019 2018 2017 Segment Operating Revenues Turner $ 13,122 $ 6,979 $ 430 Home Box Office 6,749 3,598 - Warner Bros. 14,358 8,703 - Eliminations & Other (730) (339) - Total Segment Operating Revenues 33,499 18,941 430 Segment Operating Contribution Turner 5,199 3,108 140 Home Box Office 2,365 1,384 - Warner Bros. 2,350 1,449 - Eliminations & Other (588) (246) (78) Total Segment Operating Contribution $ 9,326 $ 5,695 $ 62 WarnerMedia Business Unit Discussion Turner Results 2019 2018 2017 Operating revenues Subscription $ 7,736 $ 4,207 $ 365 Advertising 4,566 2,330 65 Content and other 820 442 - Total Operating Revenues 13,122 6,979 430 Operating expenses Operations and support 7,740 3,794 331 Depreciation and amortization 235 131 4 Total Operating Expenses 7,975 3,925 335 Operating Income 5,147 3,054 95 Equity in Net Income of Affiliates 52 54 45 Operating Contribution $ 5,199 $ 3,108 $ 140 Dollars in millions except per share amounts WarnerMedia Business Unit Discussion decreased in 2020 driven by cost-saving initiatives. Home Box Office Results 2019 2018 2017 Operating revenues Subscription $ 5,814 $ 3,201 $ - Content and other 935 397 - Total Operating Revenues 6,749 3,598 - Operating expenses Operations and support 4,312 2,187 - Depreciation and amortization 102 56 - Total Operating Expenses 4,414 2,243 - Operating Income 2,335 1,355 - Equity in Net Income of Affiliates 30 29 - Operating Contribution $ 2,365 $ 1,384 $ - Warner Bros. Results 2019 2018 2017 Operating revenues Theatrical product $ 5,978 $ 4,002 $ - Television product 6,367 3,621 - Games and other 2,013 1,080 - Total Operating Revenues 14,358 8,703 - Operating expenses Operations and support 11,816 7,130 - Depreciation and amortization 162 96 - Total Operating Expenses 11,978 7,226 - Operating Income 2,380 1,477 - Equity in Net Income (Loss) of Affiliates (30) (28) - Operating Contribution $ 2,350 $ 1,449 $ - Dollars in millions except per share amounts LATIN AMERICA SEGMENT Percent Change 2019 vs. 2018 vs. 2019 2018 2017 2018 2017 Segment Operating Revenues Vrio $ 4,094 $ 4,784 $ 5,456 (14.4) % (12.3) % Mexico 2,869 2,868 2,813 - 2.0 Total Segment Operating Revenues 6,963 7,652 8,269 (9.0) (7.5) Segment Operating Contribution Vrio 83 347 522 (76.1) (33.5) Mexico (718) (1,057) (788) 32.1 (34.1) Total Segment Operating Contribution $ (635) $ (710) $ (266) 10.6 % - % Latin America Business Unit Discussion Mexico Results Percent Change 2019 vs. 2018 vs. 2019 2018 2017 2018 2017 Operating revenues Service $ 1,863 $ 1,701 $ 2,047 9.5 % (16.9) % Equipment 1,006 1,167 766 (13.8) 52.3 Total Operating Revenues 2,869 2,868 2,813 - 2.0 Operating expenses Operations and support 3,085 3,415 3,232 (9.7) 5.7 Depreciation and amortization 502 510 369 (1.6) 38.2 Total Operating Expenses 3,587 3,925 3,601 (8.6) 9.0 Operating Income (Loss) (718) (1,057) (788) 32.1 (34.1) Equity in Net Income of Affiliates - - - - - Operating Contribution $ (718) $ (1,057) $ (788) 32.1 % (34.1) % Dollars in millions except per share amounts The following tables highlight other key measures of performance for Mexico: Percent Change 2019 vs. 2018 vs. (in 000s) 2019 2018 2017 2018 2017 Mexico Wireless Subscribers1 Postpaid 5,103 5,805 5,498 (12.1) % 5.6 % Prepaid 13,584 12,264 9,397 10.8 30.5 Reseller 472 252 204 87.3 23.5 Total Mexico Wireless Subscribers 19,159 18,321 15,099 4.6 % 21.3 % Percent Change 2019 vs. 2018 vs. (in 000s) 2019 2018 2017 2018 2017 Mexico Wireless Net Additions Postpaid (608) 307 533 - % (42.4) % Prepaid 1,919 2,867 2,670 (33.1) 7.4 Reseller 219 48 (77) - - Mexico Wireless Net Subscriber Additions 1,530 3,222 3,126 (52.5) % 3.1 % 1 2019 excludes the impact of 692 subscriber disconnections resulting from the churn of customers related to sales by certain third-party distributors and the sunset of 2G services in Mexico, which are reflected in beginning of period subscribers. Latin America Business Unit Discussion Vrio Results Percent Change 2019 vs. 2018 vs. 2019 2018 2017 2018 2017 Operating revenues $ 4,094 $ 4,784 $ 5,456 (14.4) % (12.3) % Operating expenses Operations and support 3,378 3,743 4,172 (9.8) (10.3) Depreciation and amortization 660 728 849 (9.3) (14.3) Total Operating Expenses 4,038 4,471 5,021 (9.7) (11.0) Operating Income 56 313 435 (82.1) (28.0) Equity in Net Income of Affiliates 27 34 87 (20.6) (60.9) Operating Contribution $ 83 $ 347 $ 522 (76.1) % (33.5) % Dollars in millions except per share amounts The following tables highlight other key measures of performance for Vrio: Percent Change 2019 vs. 2018 vs. (in 000s) 2019 2018 2017 2018 2017 Vrio Video Subscribers1,2 13,331 13,838 13,629 (3.7) % 1.5 % Percent Change 2019 vs. 2018 vs. (in 000s) 2019 2018 2017 2018 2017 Vrio Video Net Subscriber Additions3 (285) 250 42 - % - % 1 Excludes subscribers of our equity investment in SKY Mexico, in which we own a 41.3% stake. SKY Mexico had 7.4 million subscribers at September 30, 2019 and 7.6 million and 8.0 million at December 31, 2018 and 2017, respectively. 2 2019 excludes the impact of 222 subscriber disconnections resulting from conforming our video credit policy across the region, which is reflected in beginning of period subscribers. 3 Excludes SKY Mexico net subscriber losses of 225 in the nine months ended September 30, 2019 and losses of 366 and 23 for years ended December 31, 2018 and 2017, respectively. XANDR SEGMENT Percent Change 2019 vs. 2018 vs. 2019 2018 2017 2018 2017 Segment Operating Revenues $ 2,022 $ 1,740 $ 1,373 16.2 % 26.7 % Segment Operating Expenses Operations and support 646 398 169 62.3 - Depreciation and amortization 58 9 2 - - Total Segment Operating Expenses 704 407 171 73.0 - Segment Operating Income 1,318 1,333 1,202 (1.1) 10.9 Equity in Net Income of Affiliates - - - - - Segment Operating Contribution $ 1,318 $ 1,333 $ 1,202 (1.1) % 10.9 % SUPPLEMENTAL TOTAL ADVERTISING REVENUE INFORMATION Total Advertising Revenues Percent Change 2019 vs. 2018 vs. 2019 2018 2017 2018 2017 Advertising Revenues WarnerMedia $ 4,676 $ 2,461 $ 65 90.0 % - % Communications 1,963 1,827 1,513 7.4 20.8 Xandr 2,022 1,740 1,373 16.2 26.7 Eliminations (1,672) (1,595) (1,357) (4.8) (17.5) Total Advertising Revenues $ 6,989 $ 4,433 $ 1,594 57.7 % - % Business Solutions Results Percent Change 2019 vs. 2018 vs. 2019 2018 2017 2018 2017 Operating revenues Wireless service $ 7,925 $ 7,323 $ 7,928 8.2 % (7.6) % Strategic and managed services 15,440 14,660 13,880 5.3 5.6 Legacy voice and data services 9,180 10,674 13,791 (14.0) (22.6) Other service and equipment 1,557 1,406 1,532 10.7 (8.2) Wireless equipment 2,757 2,510 1,532 9.8 63.8 Total Operating Revenues 36,859 36,573 38,663 0.8 (5.4) Operating expenses Operations and support 22,735 22,608 24,376 0.6 (7.3) Depreciation and amortization 6,213 5,900 5,859 5.3 0.7 Total Operating Expenses 28,948 28,508 30,235 1.5 (5.7) Operating Income 7,911 8,065 8,428 (1.9) (4.3) Equity in Net Income (Loss) of Affiliates - - - - - Operating Contribution $ 7,911 $ 8,065 $ 8,428 (1.9) % (4.3) % Dollars in millions except per share amounts VideoWe provide domestic satellite video service through our subsidiary DIRECTV, whose satellites are licensed by the FCC. The Communications Act of 1934 and other related acts give the FCC broad authority to regulate the U.S. operations of DIRECTV, and some of WarnerMedia’s businesses are also subject to obligations under the Communications Act and related FCC regulations. business fixed services with their mobile service. During expected cash flows to be derived from the reporting unit or use of the asset. Long-lived assets are reviewed for impairment whenever events or circumstances indicated that the book value may not be recoverable over the remaining life. Inputs underlying the expected cash flows include, but are not limited to, subscriber counts, revenues from subscriptions, advertising and content, revenue per user, capital investment and acquisition costs per subscriber, production and content costs, and ongoing operating costs. We fair value of the Vrio reporting unit, estimated using discounted cash flow and market multiple approaches, is less than its carrying amount. We Beginning with a subsidiary. These inflows were offset by cash used to meet the needs of the business, including, but not limited to, payment of operating expenses, debt repayments, funding capital expenditures and vendor financing payments, 2020: 2020: During CAD$1,000 million of 3.825% AT&T global notes in the fourth quarter (approximately $954 at maturity). payable and accrued liabilities”) and the remainder predominantly due within two to three years (in “Other noncurrent liabilities”). Other Represents principal or payoff amounts of notes and debentures at maturity or, for putable debt, the next put opportunity (see Note 12). Foreign debt includes the impact from hedges, when applicable. Payments Due By Period Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Contractual Obligations Long-term debt obligations1 $ 168,065 $ 12,149 $ 22,225 $ 21,262 $ 112,429 Interest payments on long-term debt 108,976 7,204 13,259 11,847 76,666 Purchase obligations2 67,807 16,590 21,121 11,153 18,943 Operating lease obligations3 31,155 4,723 8,377 6,689 11,366 FirstNet sustainability payments4 17,640 120 315 390 16,815 Unrecognized tax benefits5 10,236 569 - - 9,667 Other finance obligations6 11,028 2,459 2,034 1,429 5,106 Authorized share repurchases7 4,000 4,000 - - - Total Contractual Obligations $ 418,907 $ 47,814 $ 67,331 $ 52,770 $ 250,992 1 Represents principal or payoff amounts of notes and debentures at maturity or, for putable debt, the next put opportunity (see Note 12). 2 The purchase obligations will be funded with cash provided by operations or through incremental borrowings. The minimum commitment for certain obligations is based on termination penalties that could be paid to exit the contracts. If we elect to exit these contracts, termination fees for all such contracts in the year of termination could be approximately $257 in 2020, $344 in the aggregate for 2021 and 2022, $129 in the aggregate for 2023 and 2024, and $22 in the aggregate thereafter. Certain termination fees are excluded from the above table, as the fees would not be paid every year and the timing of such payments, if any, is uncertain. (See Note 21) 3 Represents operating lease payments (see Note 8). 4 Represents contractual commitment to make sustainability payments over the 25-year contract. These sustainability payments represent our commitment to fund FirstNet’s operating expenses and future reinvestment in the network, which we will own and operate. FirstNet has a statutory requirement to reinvest funds that exceed the agency’s operating expenses, which we anticipate to be $15,000. (See Note 20) 5 The noncurrent portion of the UTBs is included in the “More than 5 Years” column, as we cannot reasonably estimate the timing or amounts of additional cash payments, if any, at this time (see Note 14). 6 Represents future minimum payments under the Crown Castle and other arrangements (see Note 19), payables subject to extended payment terms (see Note 22) and finance lease payments (see Note 8). 7 Represents commitments to repurchase shares of common stock under an accelerated share repurchase program (see Note 2). We expect to fund the purchase obligations with cash provided by operations or through incremental borrowings. The minimum commitment for certain obligations is based on termination penalties that could be paid to exit the contracts. If we elect to exit these contracts, termination fees for all such contracts in the year of termination could be approximately $259 in 2021, $257 in the aggregate for 2022 and 2023 and $64 in the aggregate for 2024 and 2025 and $1,987 in the aggregate thereafter. Certain termination fees are excluded from the above table, as the fees would not be paid every year and the timing of such payments, if any, is uncertain. (See Note 21) Dollars in millions except per share amounts DISCUSSION AND RECONCILIATION OF NON-GAAP MEASURE Year Ended December 31, 2019 Mobility Business Wireline Adjustments1 Business Solutions Operating revenues Wireless service $ 55,331 $ - $ (47,406) $ 7,925 Strategic and managed services - 15,440 - 15,440 Legacy voice and data services - 9,180 - 9,180 Other service and equipment - 1,557 - 1,557 Wireless equipment 15,725 - (12,968) 2,757 Total Operating Revenues 71,056 26,177 (60,374) 36,859 Operating expenses Operations and support 40,681 16,091 (34,037) 22,735 EBITDA 30,375 10,086 (26,337) 14,124 Depreciation and amortization 8,054 4,999 (6,840) 6,213 Total Operating Expenses 48,735 21,090 (40,877) 28,948 Operating Income $ 22,321 $ 5,087 $ (19,497) $ 7,911 1Non-business wireless reported in the Communications segment under the Mobility business unit. Year Ended December 31, 2018 Mobility Business Wireline Adjustments1 Business Solutions Operating revenues Wireless service $ 54,294 $ - $ (46,971) $ 7,323 Strategic managed services - 14,660 - 14,660 Legacy voice and data services - 10,674 - 10,674 Other service and equipment - 1,406 - 1,406 Wireless equipment 16,227 - (13,717) 2,510 Total Operating Revenues 70,521 26,740 (60,688) 36,573 Operating expenses Operations and support 40,690 16,201 (34,283) 22,608 EBITDA 29,831 10,539 (26,405) 13,965 Depreciation and amortization 8,263 4,714 (7,077) 5,900 Total Operating Expenses 48,953 20,915 (41,360) 28,508 Operating Income $ 21,568 $ 5,825 $ (19,328) $ 8,065 1Non-business wireless reported in the Communications segment under the Mobility business unit. Results have been recast to conform to the current period's classification. Dollars in millions except per share amounts Year Ended December 31, 2017 Mobility Business Wireline Adjustments1 Business Solutions Operating revenues Wireless service $ 57,023 $ - $ (49,095) $ 7,928 Strategic and managed services - 13,880 - 13,880 Legacy voice and data services - 13,791 - 13,791 Other service and equipment - 1,532 - 1,532 Wireless equipment 13,236 - (11,704) 1,532 Total Operating Revenues 70,259 29,203 (60,799) 38,663 Operating expenses Operations and support 42,317 18,441 (36,382) 24,376 EBITDA 27,942 10,762 (24,417) 14,287 Depreciation and amortization 7,931 4,756 (6,828) 5,859 Total Operating Expenses 50,248 23,197 (43,210) 30,235 Operating Income $ 20,011 $ 6,006 $ (17,589) $ 8,428 1Non-business wireless reported in the Communications segment under the Mobility business unit. 1Non-business wireless reported in the Communications segment under the Mobility business unit. Maturity Fair Value 2020 2021 2022 2023 2024 Thereafter Total 12/31/19 Interest Rate Derivatives Interest Rate Swaps: Receive Fixed/Pay Variable Notional Amount Maturing $ - $ 853 $ - $ - $ - $ - $ 853 $ 2 Weighted-Average Variable Rate Payable1 4.2% 4.1% 0.0% 0.0% 0.0% 0.0% Weighted-Average Fixed Rate Receivable 4.5% 4.5% 0.0% 0.0% 0.0% 0.0% 1 Interest payable based on current and implied forward rates for One Month LIBOR plus a spread ranging between approximately 254 and 274 basis points. Dollars in millions except per share amounts Consolidated Statements of Income 2019 2018 2017 Operating Revenues Service $ 163,499 $ 152,345 $ 145,597 Equipment 17,694 18,411 14,949 Total operating revenues 181,193 170,756 160,546 Operating Expenses Cost of revenues Equipment 18,653 19,786 18,709 Broadcast, programming and operations 31,132 26,727 21,159 Other cost of revenues (exclusive of depreciation and amortization shown separately below) 34,356 32,906 37,942 Selling, general and administrative 39,422 36,765 35,465 Asset abandonments and impairments 1,458 46 2,914 Depreciation and amortization 28,217 28,430 24,387 Total operating expenses 153,238 144,660 140,576 Operating Income 27,955 26,096 19,970 Other Income (Expense) Interest expense (8,422) (7,957) (6,300) Equity in net income (loss) of affiliates 6 (48) (128) Other income (expense) – net (1,071) 6,782 1,597 Total other income (expense) (9,487) (1,223) (4,831) Income Before Income Taxes 18,468 24,873 15,139 Income tax (benefit) expense 3,493 4,920 (14,708) Net Income 14,975 19,953 29,847 Less: Net Income Attributable to Noncontrolling Interest (1,072) (583) (397) Net Income Attributable to AT&T $ 13,903 $ 19,370 $ 29,450 Less: Preferred Stock Dividends (3) - - Net Income Attributable to Common Stock $ 13,900 $ 19,370 $ 29,450 Basic Earnings Per Share Attributable to Common Stock $ 1.90 $ 2.85 $ 4.77 Diluted Earnings Per Share Attributable to Common Stock $ 1.89 $ 2.85 $ 4.76 The accompanying notes are an integral part of the consolidated financial statements. Dollars in millions except per share amounts Consolidated Statements of Comprehensive Income 2019 2018 2017 Net income $ 14,975 $ 19,953 $ 29,847 Other comprehensive income, net of tax: Foreign Currency: Translation adjustment (includes $(9), $(32) and $(5) attributable to noncontrolling interest), net of taxes of $18, $(45) and $123 19 (1,062) 15 Securities: Net unrealized gains (losses), net of taxes of $17, $(1) and $109 50 (4) 187 Reclassification adjustment included in net income, net of taxes of $0, $0 and $(117) - - (185) Derivative Instruments: Net unrealized gains (losses), net of taxes of $(240), $(156) and $200 (900) (597) 371 Reclassification adjustment included in net income, net of taxes of $12, $6 and $21 45 13 39 Defined benefit postretirement plans: Net prior service credit arising during period, net of taxes of $1,134, $271 and $675 3,457 830 1,083 Amortization of net prior service credit included in net income, net of taxes of $(475), $(431) and $(604) (1,459) (1,322) (988) Other comprehensive income (loss) 1,212 (2,142) 522 Total comprehensive income 16,187 17,811 30,369 Less: Total comprehensive income attributable to noncontrolling interest (1,063) (551) (392) Total Comprehensive Income Attributable to AT&T $ 15,124 $ 17,260 $ 29,977 The accompanying notes are an integral part of the consolidated financial statements. Dollars in millions except per share amounts Consolidated Balance Sheets December 31, 2019 2018 Assets Current Assets Cash and cash equivalents $ 12,130 $ 5,204 Accounts receivable - net of allowances for doubtful accounts of $1,235 and $907 22,636 26,472 Prepaid expenses 1,631 2,047 Other current assets 18,364 17,704 Total current assets 54,761 51,427 Noncurrent inventories and theatrical film and television production costs 12,434 7,713 Property, Plant and Equipment – Net 130,128 131,473 Goodwill 146,241 146,370 Licenses – Net 97,907 96,144 Trademarks and Trade Names – Net 23,567 24,345 Distribution Networks – Net 15,345 17,069 Other Intangible Assets – Net 20,798 26,269 Investments in and Advances to Equity Affiliates 3,695 6,245 Operating lease right-of-use assets 24,039 - Other Assets 22,754 24,809 Total Assets $ 551,669 $ 531,864 Liabilities and Stockholders’ Equity Current Liabilities Debt maturing within one year $ 11,838 $ 10,255 Accounts payable and accrued liabilities 45,956 43,184 Advanced billings and customer deposits 6,124 5,948 Accrued taxes 1,212 1,179 Dividends payable 3,781 3,854 Total current liabilities 68,911 64,420 Long-Term Debt 151,309 166,250 Deferred Credits and Other Noncurrent Liabilities Deferred income taxes 59,502 57,859 Postemployment benefit obligation 18,788 19,218 Operating lease liabilities 21,804 - Other noncurrent liabilities 29,421 30,233 Total deferred credits and other noncurrent liabilities 129,515 107,310 Stockholders’ Equity Preferred stock ($1 par value, 5% cumulative, 10,000,000 authorized, 48,000 shares issued and outstanding at December 31, 2019 and 0 issued and outstanding at December 31, 2018) - - Common stock ($1 par value, 14,000,000,000 authorized at December 31, 2019 and December 31, 2018: issued 7,620,748,598 at December 31, 2019 and at December 31, 2018) 7,621 7,621 Additional paid-in capital 126,279 125,525 Retained earnings 57,936 58,753 Treasury stock (366,193,458 at December 31, 2019 and 339,120,073 at December 31, 2018, at cost) (13,085) (12,059) Accumulated other comprehensive income 5,470 4,249 Noncontrolling interest 17,713 9,795 Total stockholders’ equity 201,934 193,884 Total Liabilities and Stockholders’ Equity $ 551,669 $ 531,864 The accompanying notes are an integral part of the consolidated financial statements. Dollars and shares in millions except per share amounts Consolidated Statements of Cash Flows 2019 2018 2017 Operating Activities Net income $ 14,975 $ 19,953 $ 29,847 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 28,217 28,430 24,387 Amortization of film and television costs 9,587 3,772 - Undistributed earnings from investments in equity affiliates 295 292 174 Provision for uncollectible accounts 2,575 1,791 1,642 Deferred income tax expense (benefit) 1,806 4,931 (15,265) Net (gain) loss from sale of investments, net of impairments (1,218) (739) (282) Pension and postretirement benefit expense (credit) (2,002) (1,148) (1,031) Actuarial (gain) loss on pension and postretirement benefits 5,171 (3,412) 1,258 Asset abandonments and impairments 1,458 46 2,914 Changes in operating assets and liabilities: Receivables 2,812 (1,580) (986) Other current assets, inventories and theatrical film and television production costs (12,852) (6,442) (778) Accounts payable and other accrued liabilities (1,524) 1,602 816 Equipment installment receivables and related sales 548 (490) (1,239) Deferred customer contract acquisition and fulfillment costs (910) (3,458) (1,422) Postretirement claims and contributions (1,008) (936) (2,064) Other - net 738 990 39 Total adjustments 33,693 23,649 8,163 Net Cash Provided by Operating Activities 48,668 43,602 38,010 Investing Activities Capital expenditures: Purchase of property and equipment (19,435) (20,758) (20,647) Interest during construction (200) (493) (903) Acquisitions, net of cash acquired (1,809) (43,309) 1,123 Dispositions 4,684 2,148 59 (Purchases), sales and settlement of securities and investments, net 435 (183) 449 Advances to and investments in equity affiliates (365) (1,050) - Cash collections of deferred purchase price - 500 976 Net Cash Used in Investing Activities (16,690) (63,145) (18,943) Financing Activities Net change in short-term borrowings with original maturities of three months or less (276) (821) (2) Issuance of other short-term borrowings 4,012 4,898 - Repayment of other short-term borrowings (6,904) (2,098) - Issuance of long-term debt 17,039 41,875 48,793 Repayment of long-term debt (27,592) (52,643) (12,339) Payment of vendor financing (3,050) (560) (572) Issuance of preferred stock 1,164 - - Purchase of treasury stock (2,417) (609) (463) Issuance of treasury stock 631 745 33 Issuance of preferred interests in subsidiary 7,876 - - Dividends paid (14,888) (13,410) (12,038) Other (678) (3,366) 2,518 Net Cash (Used in) Provided by Financing Activities (25,083) (25,989) 25,930 Net increase (decrease) in cash and cash equivalents and restricted cash 6,895 (45,532) 44,997 Cash and cash equivalents and restricted cash beginning of year 5,400 50,932 5,935 Cash and Cash Equivalents and Restricted Cash End of Year $ 12,295 $ 5,400 $ 50,932 The accompanying notes are an integral part of the consolidated financial statements. Consolidated Statements of Changes in Stockholders’ Equity 2019 2018 2017 Shares Amount Shares Amount Shares Amount Preferred Stock Balance at beginning of year - $ - - $ - - $ - Issuance of stock - - - - - - Balance at end of year - $ - - $ - - $ - Common Stock Balance at beginning of year 7,621 $ 7,621 6,495 $ 6,495 6,495 $ 6,495 Issuance of stock - - 1,126 1,126 - - Balance at end of year 7,621 $ 7,621 7,621 $ 7,621 6,495 $ 6,495 Additional Paid-In Capital Balance at beginning of year $ 125,525 $ 89,563 $ 89,604 Issuance of preferred stock 1,164 - - Issuance of common stock - 35,473 - Issuance of treasury stock (125) (115) 2 Share-based payments (271) 604 (43) Changes related to acquisition of interests held by noncontrolling owners (14) - - Balance at end of year $ 126,279 $ 125,525 $ 89,563 Retained Earnings Balance at beginning of year $ 58,753 $ 50,500 $ 34,734 Net income attributable to AT&T ($1.89, $2.85 and $4.76 per diluted share) 13,903 19,370 29,450 Preferred stock dividends (8) - - Common stock dividends ($2.05, $2.01 and $1.97 per share) (15,028) (14,117) (12,157) Cumulative effect of accounting changes and other adjustments 316 3,000 (1,527) Balance at end of year $ 57,936 $ 58,753 $ 50,500 Treasury Stock Balance at beginning of year (339) $ (12,059) (356) $ (12,714) (356) $ (12,659) Repurchase and acquisition of common stock (67) (2,492) (20) (692) (14) (551) Issuance of treasury stock 40 1,466 37 1,347 14 496 Balance at end of year (366) $ (13,085) (339) $ (12,059) (356) $ (12,714) The accompanying notes are an integral part of the consolidated financial statements. Consolidated Statements of Changes in Stockholders’ Equity - continued 2019 2018 2017 Shares Amount Shares Amount Shares Amount Accumulated Other Comprehensive Income Attributable to AT&T, net of tax: Balance at beginning of year $ 4,249 $ 7,017 $ 4,961 Other comprehensive income (loss) attributable to AT&T 1,221 (2,110) 527 Cumulative effect of accounting changes and other adjustments - (658) 1,529 Balance at end of year $ 5,470 $ 4,249 $ 7,017 Noncontrolling Interest: Balance at beginning of year $ 9,795 $ 1,146 $ 975 Net income attributable to noncontrolling interest 1,072 583 397 Interest acquired by noncontrolling owners 7,876 8,803 - Acquisitions of noncontrolling interests 5 1 140 Distributions (1,055) (732) (361) Acquisition of interests held by noncontrolling owners - (9) - Translation adjustments attributable to noncontrolling interest, net of taxes (9) (32) (5) Cumulative effect of accounting changes and other adjustments 29 35 - Balance at end of year $ 17,713 $ 9,795 $ 1,146 Total Stockholders’ Equity at beginning of year $ 193,884 $ 142,007 $ 124,110 Total Stockholders’ Equity at end of year $ 201,934 $ 193,884 $ 142,007 The accompanying notes are an integral part of the consolidated financial statements. Notes to Consolidated Financial Statements programming inventory were eliminated. As of January 1, 2019, we reclassified Licensed Programming Inventory Cost Recognition and Impairment We enter into agreements to license programming exhibition rights from licensors. A programming inventory asset related to these rights and a corresponding liability payable to the licensor are recorded (on a discounted basis if the license agreements are long-term) when (i) the cost of the programming is reasonably determined, (ii) the programming material has been accepted in accordance with the terms of the agreement, (iii) the programming is available for its first showing or telecast, and (iv) the license period has commenced. There are variations in the amortization methods of these rights, depending on whether the network is advertising-supported (e.g., TNT and TBS) or not advertising-supported (e.g., HBO and Turner Classic Movies). (See Note 11) the utilization of that film or television program in that exhibition and expense such costs as the film or television program is exhibited. The period over which ultimate revenues are estimated the agreement, we paid the financial institution $4,000 and received 104.8 million shares. AT&T Inc. and exclude noncontrolling interest. to remove the Crunchyroll anime business that is classified as held-for-sale and removed from the WarnerMedia segment, instead including it in Corporate and Other. We also evaluate segment and business unit performance based on EBITDA and/or EBITDA margin. EBITDA is defined as operating contribution excluding equity in net income (loss) of affiliates and depreciation and amortization. We believe EBITDA to be a relevant and useful measurement to our investors as it is part of our internal management reporting and planning processes and it is an important metric that management uses to evaluate operating performance. EBITDA does not “Interest Dollars in millions except per share amounts For the year ended December 31, 2019 Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Equity in Net Income (Loss) of Affiliates Segment Contribution Communications Mobility $ 71,056 $ 40,681 $ 30,375 $ 8,054 $ 22,321 $ - $ 22,321 Entertainment Group 45,126 35,028 10,098 5,276 4,822 - 4,822 Business Wireline 26,177 16,091 10,086 4,999 5,087 - 5,087 Total Communications 142,359 91,800 50,559 18,329 32,230 - 32,230 WarnerMedia Turner 13,122 7,740 5,382 235 5,147 52 5,199 Home Box Office 6,749 4,312 2,437 102 2,335 30 2,365 Warner Bros. 14,358 11,816 2,542 162 2,380 (30) 2,350 Other (730) (71) (659) 39 (698) 110 (588) Total WarnerMedia 33,499 23,797 9,702 538 9,164 162 9,326 Latin America Vrio 4,094 3,378 716 660 56 27 83 Mexico 2,869 3,085 (216) 502 (718) - (718) Total Latin America 6,963 6,463 500 1,162 (662) 27 (635) Xandr 2,022 646 1,376 58 1,318 - 1,318 Segment Total 184,843 122,706 62,137 20,087 42,050 $ 189 $ 42,239 Corporate and Other Corporate 1,675 3,008 (1,333) 629 (1,962) Acquisition-related items (72) 960 (1,032) 7,460 (8,492) Certain significant items - 2,082 (2,082) 43 (2,125) Eliminations and consolidations (5,253) (3,735) (1,518) (2) (1,516) AT&T Inc. $ 181,193 $ 125,021 $ 56,172 $ 28,217 $ 27,955 Dollars in millions except per share amounts For the year ended December 31, 2018 Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Equity in Net Income (Loss) of Affiliates Segment Contribution Communications Mobility $ 70,521 $ 40,690 $ 29,831 $ 8,263 $ 21,568 $ - $ 21,568 Entertainment Group 46,460 36,430 10,030 5,315 4,715 - 4,715 Business Wireline 26,740 16,201 10,539 4,714 5,825 - 5,825 Total Communications 143,721 93,321 50,400 18,292 32,108 - 32,108 WarnerMedia Turner 6,979 3,794 3,185 131 3,054 54 3,108 Home Box Office 3,598 2,187 1,411 56 1,355 29 1,384 Warner Bros. 8,703 7,130 1,573 96 1,477 (28) 1,449 Other (339) (145) (194) 22 (216) (30) (246) Total WarnerMedia 18,941 12,966 5,975 305 5,670 25 5,695 Latin America Vrio 4,784 3,743 1,041 728 313 34 347 Mexico 2,868 3,415 (547) 510 (1,057) - (1,057) Total Latin America 7,652 7,158 494 1,238 (744) 34 (710) Xandr 1,740 398 1,342 9 1,333 - 1,333 Segment Total 172,054 113,843 58,211 19,844 38,367 $ 59 $ 38,426 Corporate and Other Corporate 2,150 2,250 (100) 1,630 (1,730) Acquisition-related items (49) 1,185 (1,234) 6,931 (8,165) Certain significant items - 899 (899) 26 (925) Eliminations and consolidations (3,399) (1,947) (1,452) (1) (1,451) AT&T Inc. $ 170,756 $ 116,230 $ 54,526 $ 28,430 $ 26,096 Dollars in millions except per share amounts For the year ended December 31, 2017 Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Equity in Net Income (Loss) of Affiliates Segment Contribution Communications Mobility $ 70,259 $ 42,317 $ 27,942 $ 7,931 $ 20,011 $ - $ 20,011 Entertainment Group 49,995 38,903 11,092 5,621 5,471 - 5,471 Business Wireline 29,203 18,441 10,762 4,756 6,006 - 6,006 Total Communications 149,457 99,661 49,796 18,308 31,488 - 31,488 WarnerMedia Turner 430 331 99 4 95 45 140 Home Box Office - - - - - - - Warner Bros. - - - - - - - Other - 4 (4) - (4) (74) (78) Total WarnerMedia 430 335 95 4 91 (29) 62 Latin America Vrio 5,456 4,172 1,284 849 435 87 522 Mexico 2,813 3,232 (419) 369 (788) - (788) Total Latin America 8,269 7,404 865 1,218 (353) 87 (266) Xandr 1,373 169 1,204 2 1,202 - 1,202 Segment Total 159,529 107,569 51,960 19,532 32,428 $ 58 $ 32,486 Corporate and Other Corporate 2,443 3,911 (1,468) 214 (1,682) Acquisition-related items - 798 (798) 4,608 (5,406) Certain significant items (243) 3,880 (4,123) 33 (4,156) Eliminations and consolidations (1,183) 31 (1,214) - (1,214) AT&T Inc. $ 160,546 $ 116,189 $ 44,357 $ 24,387 $ 19,970 Dollars in millions except per share amounts The following table is a reconciliation of operating income (loss) to Income Before Income Taxes reported in our consolidated statements of income: 2019 2018 2017 Communications $ 32,230 $ 32,108 $ 31,488 WarnerMedia 9,326 5,695 62 Latin America (635) (710) (266) Xandr 1,318 1,333 1,202 Segment Contribution 42,239 38,426 32,486 Reconciling Items: Corporate and Other (1,962) (1,730) (1,682) Merger and integration items (1,032) (1,234) (798) Amortization of intangibles acquired (7,460) (6,931) (4,608) Abandonments and impairments (1,458) (46) (2,914) Employee separation charges (624) (587) (445) Other noncash charges (credits), net (43) (111) 49 Natural disaster items - (181) (626) Tax reform special bonus - - (220) Segment equity in net income of affiliates (189) (59) (58) Eliminations and consolidations (1,516) (1,451) (1,214) AT&T Operating Income 27,955 26,096 19,970 Interest Expense 8,422 7,957 6,300 Equity in net income (loss) of affiliates 6 (48) (128) Other income (expense) - net (1,071) 6,782 1,597 Income Before Income Taxes $ 18,468 $ 24,873 $ 15,139 The following table is a reconciliation of operating income (loss) to “Income Before Income Taxes” reported in our consolidated statements of income: Dollars in millions except per share amounts The following table sets forth revenues earned from customers, and property, plant and equipment located in different geographic areas. 2019 2018 2017 Revenues Net Property, Plant & Equipment Revenues Net Property, Plant & Equipment Revenues Net Property, Plant & Equipment United States $ 162,344 $ 122,567 $ 154,795 $ 123,457 $ 149,841 $ 118,200 Europe 6,137 1,854 4,073 1,634 1,064 392 Mexico 3,198 3,648 3,100 3,467 2,913 3,619 Brazil 2,761 1,057 2,724 1,213 2,948 1,447 All other Latin America 3,219 544 3,055 1,217 2,743 1,294 Asia/Pacific Rim 2,651 390 2,214 408 829 194 Other 883 68 795 77 208 76 Total $ 181,193 $ 130,128 $ 170,756 $ 131,473 $ 160,546 $ 125,222 The following tables present intersegment revenues, assets, investments in equity affiliates and capital expenditures by segment: The following tables present intersegment revenues, assets, investments in equity affiliates and capital expenditures by segment. Intersegment Reconciliation 2019 2018 2017 Intersegment revenues Communications $ 26 $ 13 $ - WarnerMedia 3,308 1,875 134 Latin America - - - Xandr 10 - - Total Intersegment Revenues 3,344 1,888 134 Consolidations 1,909 1,511 1,049 Eliminations and consolidations $ 5,253 $ 3,399 $ 1,183 At or for the years ended December 31, 2019 2018 Investments in Equity Method Investees Capital Expenditures Investments in Equity Method Investees Capital Expenditures Assets Assets Communications $ 521,252 $ - $ 17,410 $ 485,357 $ - $ 19,509 WarnerMedia 137,264 3,011 1,013 132,453 5,547 581 Latin America 20,606 650 757 18,148 677 745 Xandr 3,116 - 192 2,718 - 106 Corporate and eliminations (130,569) 34 263 (106,812) 21 310 Total $ 551,669 $ 3,695 $ 19,635 $ 531,864 $ 6,245 $ 21,251 Dollars in millions except per share amounts Revenue recognized from fixed term contracts that bundle services and/or equipment is allocated based on the stand-alone selling price of all required performance obligations of the contract (i.e., each item included in the bundle). Promotional discounts are attributed to each required component of the arrangement, resulting in recognition over the contract term. Stand-alone selling prices are determined by assessing prices paid for service-only contracts (e.g., arrangements where customers bring their own devices) and stand-alone device pricing. Revenues from sales of feature films and television programming in physical format are recognized at the later of the delivery date or the date when made widely available for sale or rental by retailers based on gross sales less a provision for estimated returns, rebates and pricing allowances. Revenues from the licensing of television programs and series for electronic sell-through or video-on-demand are recognized when the product has been purchased by and made available to the consumer to either download or stream. Dollars in millions except per share amounts Revenue Categories The following tables set forth reported revenue by category and by business unit: For the year ended December 31, 2019 Service Revenues Wireless Advanced Data Legacy Voice & Data Subscription Content Advertising Other Equipment Total Communications Mobility $ 55,040 $ - $ - $ - $ - $ 291 $ - $ 15,725 $ 71,056 Entertainment Group - 8,403 2,573 30,438 - 1,672 2,032 8 45,126 Business Wireline - 12,926 9,180 - - - 3,286 785 26,177 WarnerMedia Turner - - - 7,736 481 4,566 339 - 13,122 Home Box Office - - - 5,814 925 - 10 - 6,749 Warner Bros. - - - 88 13,532 41 697 - 14,358 Eliminations and Other - - - 222 (1,058) 69 37 - (730) Latin America Vrio - - - 4,094 - - - - 4,094 Mexico 1,863 - - - - - - 1,006 2,869 Xandr - - - - - 2,022 - - 2,022 Corporate and Other 549 51 155 - - - 678 170 1,603 Eliminations and consolidations - - - - (3,249) (1,672) (332) - (5,253) Total Operating Revenues $ 57,452 $ 21,380 $ 11,908 $ 48,392 $ 10,631 $ 6,989 $ 6,747 $ 17,694 $ 181,193 Revenue Categories Dollars in millions except per share amounts For the year ended December 31, 2018 Service Revenues Wireless Advanced Data Legacy Voice & Data Subscription Content Advertising Other Equipment Total Communications Mobility $ 54,062 $ - $ - $ - $ - $ 232 $ - $ 16,227 $ 70,521 Entertainment Group - 7,956 3,041 31,762 - 1,595 2,097 9 46,460 Business Wireline - 12,245 10,674 - - - 2,998 823 26,740 WarnerMedia Turner - - - 4,207 295 2,330 147 - 6,979 Home Box Office - - - 3,201 391 - 6 - 3,598 Warner Bros. - - - 47 8,216 53 387 - 8,703 Eliminations and Other - - - 74 (518) 78 27 - (339) Latin America Vrio - - - 4,784 - - - - 4,784 Mexico 1,701 - - - - - - 1,167 2,868 Xandr - - - - - 1,740 - - 1,740 Corporate and Other 638 52 36 - - - 1,190 185 2,101 Eliminations and consolidations - - - - (1,843) (1,595) 39 - (3,399) Total Operating Revenues $ 56,401 $ 20,253 $ 13,751 $ 44,075 $ 6,541 $ 4,433 $ 6,891 $ 18,411 $ 170,756 Dollars in millions except per share amounts The following table presents the deferred customer contract acquisition and fulfillment costs included on our consolidated balance sheets at December 31: Consolidated Balance Sheets 2019 2018 Deferred Acquisition Costs Other current assets $ 2,462 $ 1,901 Other Assets 2,991 2,073 Total deferred customer contract acquisition costs $ 5,453 $ 3,974 Deferred Fulfillment Costs Other current assets $ 4,519 $ 4,090 Other Assets 6,439 7,450 Total deferred customer contract fulfillment costs $ 10,958 $ 11,540 The following table presents amortization of deferred customer contract acquisition and fulfillment cost, which are recorded in other cost of revenues in our consolidated statements of income, for the year ended December 31: Consolidated Statements of Income 2019 2018 Deferred acquisition cost amortization $ 2,174 $ 1,433 Deferred fulfillment cost amortization 4,947 4,039 The following table presents contract assets and liabilities on our consolidated balance sheets at December 31: Consolidated Balance Sheets 2019 2018 Contract assets $ 2,472 $ 1,896 Contract liabilities 6,999 6,856 Remaining Performance Obligations In May 2020, we acquired the remaining interest in HBO LAG for $141, net of cash acquired. At acquisition, we remeasured the fair value of the total business, which exceeded the carrying amount of our equity method investment and resulted in a pre-tax gain of $68. We consolidated that business upon close and recorded those assets at fair value, including $640 of trade names, $271 of distribution networks and $346 of goodwill that is reported in the WarnerMedia segment. These estimates are preliminary in nature and subject to adjustments, which will be finalized within one year from the date of acquisition. The following table summarizes the fair values of the Time Warner assets acquired and liabilities assumed and related deferred income taxes as of the acquisition date: Assets acquired Cash $ 1,889 Accounts receivable 9,020 All other current assets 2,913 Noncurrent inventory and theatrical film and television production costs 5,591 Property, plant and equipment 4,693 Intangible assets subject to amortization Distribution network 18,040 Released television and film content 10,806 Trademarks and trade names 18,081 Other 10,300 Investments and other assets 9,438 Goodwill 38,801 Total assets acquired 129,572 Liabilities assumed Current liabilities, excluding current portion of long-term debt 8,294 Debt maturing within one year 4,471 Long-term debt 18,394 Other noncurrent liabilities 19,054 Total liabilities assumed 50,213 Net assets acquired 79,359 Noncontrolling interest (1) Aggregate value of consideration paid $ 79,358 For the 200-day period ended December 31, 2018, our consolidated statement of income included $18,209 of revenues and $1,400 of operating income, which included $3,296 of intangible amortization, from Time Warner and its affiliates. The following unaudited pro forma consolidated results of operations assume that the acquisition of Time Warner was completed as of January 1, 2017. (Unaudited) Year Ended December 31, 2018 2017 Total operating revenues $ 183,651 $ 188,769 Net Income Attributable to AT&T 20,814 31,380 Basic Earnings Per Share Attributable to Common Stock $ 2.86 $ 4.30 Diluted Earnings Per Share Attributable to Common Stock $ 2.85 $ 4.26 AppNexusOn August 15, 2018, we purchased AppNexus for $1,432 and recorded $1,220 of goodwill that is reported in the Includes certain network software. AT&T Inc. The components of lease expense are as follows: 2019 Operating lease cost $ 5,684 Finance lease cost: Amortization of right-of-use assets $ 271 Interest on lease obligation 169 Total finance lease cost $ 440 AT&T Inc. The following tables set forth supplemental balance sheet information related to leases at December 31, 2019: Operating Leases Operating lease right-of-use assets $ 24,039 Accounts payable and accrued liabilities $ 3,451 Operating lease obligation 21,804 Total operating lease obligation $ 25,255 Finance Leases Property, plant and equipment, at cost $ 3,534 Accumulated depreciation and amortization (1,296) Property, plant and equipment, net $ 2,238 Current portion of long-term debt $ 162 Long-term debt 1,872 Total finance lease obligation $ 2,034 Weighted-Average Remaining Lease Term Operating leases 8.4 yrs Finance leases 10.3 yrs Weighted-Average Discount Rate Operating leases 4.2 % Finance leases 8.4 % The following table provides the expected future minimum maturities of lease obligations: Operating Finance Leases Leases 2020 $ 4,723 $ 340 2021 4,349 305 2022 4,028 289 2023 3,611 274 2024 3,078 258 Thereafter 11,366 1,649 Total lease payments 31,155 3,115 Less: imputed interest (5,900) (1,081) Total $ 25,255 $ 2,034 AT&T Inc. 2019 2018 Balance at Jan. 1 Acquisitions Dispositions, currency exchange and other Balance at Dec. 31 Balance at Jan. 1 Reallocation Acquisitions Dispositions, currency exchange and other Balance at Dec. 31 Communications $ 100,551 $ - $ (317) $ 100,234 $ 39,280 $ 61,075 $ 422 $ (226) $ 100,551 WarnerMedia 40,698 - 181 40,879 - 681 40,036 (19) 40,698 Latin America 3,718 - (56) 3,662 4,234 (32) - (484) 3,718 Xandr 1,403 66 (3) 1,466 - 211 1,220 (28) 1,403 Business Solutions - - - - 45,395 (45,395) - - - Consumer Mobility - - - - 16,540 (16,540) - - - Total $ 146,370 $ 66 $ (195) $ 146,241 $ 105,449 $ - $ 41,678 $ (757) $ 146,370 units: Vrio and Mexico. Dollars in millions except per share amounts Our other intangible assets at December 31 are summarized as follows: 2019 2018 Other Intangible Assets Weighted-Average Life Gross Carrying Amount Accumulated Amortization Currency Translation Adjustment Gross Carrying Amount Accumulated Amortization Currency Translation Adjustment Amortized intangible assets: Wireless licenses 24.5 years $ 2,981 $ 156 $ (243) $ - $ - $ - Trademarks and trade names 37.3 years 18,359 853 (6) 18,371 293 (7) Distribution network 10.0 years 18,138 2,793 - 18,040 971 - Released television and film content 16.4 years 10,941 4,974 - 10,814 2,988 - Customer lists and relationships 9.1 years 20,304 14,773 (281) 20,516 12,451 (314) Other 20.4 years 11,427 1,843 (3) 11,624 907 (25) Total 21.5 years $ 82,150 $ 25,392 $ (533) $ 79,365 $ 17,610 $ (346) Indefinite-lived intangible assets not subject to amortization, net of currency translation adjustment: Licenses: Wireless licenses $ 83,623 $ 84,442 Orbital slots 11,702 11,702 Trade names 6,067 6,274 Total $ 101,392 $ 102,418 2025. Dollars in millions except per share amounts The CW Network. The following table is a reconciliation of our investments in equity affiliates as presented on our consolidated balance sheets: 2019 2018 Beginning of year $ 6,245 $ 1,560 Additional investments 448 237 Disposition of Hudson Yards (1,681) - Disposition of Hulu (689) - Disposition of Game Show Network (288) - Time Warner investments acquired - 4,912 Acquisition of remaining interest in Otter Media - (166) Equity in net income (loss) of affiliates 6 (48) Dividends and distributions received (301) (243) Currency translation adjustments (10) (14) Other adjustments (35) 7 End of year $ 3,695 $ 6,245 The following table is a reconciliation of our investments in equity affiliates as presented on our consolidated balance sheets: The following table summarizes inventories and theatrical film and television production costs as of December 31: 2019 2018 Inventories: Programming costs, less amortization1 $ 4,599 $ 4,097 Other inventory, primarily DVD and Blu-ray Discs 96 146 Total inventories 4,695 4,243 Less: current portion of inventory (96) (2,420) Total noncurrent inventories 4,599 1,823 Theatrical film production costs:2 Released, less amortization 392 451 Completed and not released 437 435 In production 1,475 866 Development and pre-production 171 159 Television production costs:2 Released, less amortization 1,752 965 Completed and not released 1,344 1,087 In production 2,207 1,898 Development and pre-production 57 29 Total theatrical film and television production costs 7,835 5,890 Total noncurrent inventories and theatrical film and television production costs $ 12,434 $ 7,713 1 Includes the costs of certain programming rights, primarily sports, for which payments have been made prior to the related rights being received. 2 Does not include $5,967, and $7,826 of acquired film and television library intangible assets as of December 31, 2019, and 2018, respectively, which are included in “Other Intangible Assets – Net” on our consolidated balance sheet. Includes the costs of certain programming rights, primarily sports, for which payments have been made prior to the related rights being received. 2021. Dollars in millions except per share amounts NOTE 12. DEBT Long-term debt of AT&T and its subsidiaries, including interest rates and maturities, is summarized as follows at December 31: 2019 2018 Notes and debentures Interest Rates Maturities1 1.80% - 2.99% 2019 - 2039 $ 17,404 $ 14,404 3.00% - 4.99% 2019 - 2050 102,595 104,291 5.00% - 6.99% 2019 - 2095 34,513 37,175 7.00% - 9.15% 2019 - 2097 5,050 5,976 Credit agreement borrowings 4,969 12,618 Other - 89 Fair value of interest rate swaps recorded in debt 26 (32) 164,557 174,521 Unamortized (discount) premium - net (2,996) (2,526) Unamortized issuance costs (452) (466) Total notes and debentures 161,109 171,529 Finance lease obligations 2,034 1,911 Total long-term debt, including current maturities 163,143 173,440 Current maturities of long-term debt (11,834) (7,190) Total long-term debt $ 151,309 $ 166,250 1 Maturities assume putable debt is redeemed by the holders at the next opportunity. Debt maturing within one year consisted of the following at December 31: 2019 2018 Current maturities of long-term debt $ 11,834 $ 7,190 Commercial paper - 3,048 Bank borrowings1 4 4 Other - 13 Total $ 11,838 $ 10,255 1 Outstanding balance of short-term credit facility of a foreign subsidiary. Outstanding balance of short-term credit facility of a foreign subsidiary. Debt repayments represent maturity value and assume putable debt is redeemed at the next opportunity. Foreign debt includes the impact from hedges, when applicable. 2020 2021 2022 2023 2024 Thereafter Debt repayments1 $ 12,149 $ 11,036 $ 11,189 $ 10,037 $ 11,225 $ 112,429 Weighted-average interest rate 2.9 % 3.8 % 3.5 % 3.5 % 3.6 % 4.8 % 1 Debt repayments assume putable debt is redeemed by the holders at the next opportunity. Long-Term Debt and Other Financial Instruments The carrying amounts and estimated fair values of our long-term debt, including current maturities, and other financial instruments, are summarized as follows: December 31, 2019 December 31, 2018 Carrying Fair Carrying Fair Amount Value Amount Value Notes and debentures1 $ 161,109 $ 182,124 $ 171,529 $ 172,287 Commercial paper - - 3,048 3,048 Bank borrowings 4 4 4 4 Investment securities2 3,723 3,723 3,409 3,409 1 Includes credit agreement borrowings. 2 Excludes investments accounted for under the equity method. Includes credit agreement borrowings. Dollars in millions except per share amounts December 31, 2019 Level 1 Level 2 Level 3 Total Equity Securities Domestic equities $ 844 $ - $ - $ 844 International equities 183 - - 183 Fixed income equities 229 - - 229 Available-for-Sale Debt Securities - 1,444 - 1,444 Asset Derivatives Interest rate swaps - 2 - 2 Cross-currency swaps - 172 - 172 Interest rate locks - 11 - 11 Foreign exchange contracts - 89 - 89 Liability Derivatives Cross-currency swaps - (3,187) - (3,187) Interest rate locks - (95) - (95) December 31, 2018 Level 1 Level 2 Level 3 Total Equity Securities Domestic equities $ 1,061 $ - $ - $ 1,061 International equities 256 - - 256 Fixed income equities 172 - - 172 Available-for-Sale Debt Securities - 870 - 870 Asset Derivatives Cross-currency swaps - 472 - 472 Foreign exchange contracts - 87 - 87 Liability Derivatives Interest rate swaps - (39) - (39) Cross-currency swaps - (2,563) - (2,563) Foreign exchange contracts - (2) - (2) Investment Securities The components comprising total gains and losses in the period on equity securities are as follows: For the years ended December 31, 2019 2018 2017 Total gains (losses) recognized on equity securities $ 301 $ (130) $ 326 Gains (losses) recognized on equity securities sold 100 (10) 47 Unrealized gains (losses) recognized on equity securities held at end of period $ 201 $ (120) $ 279 Derivative Financial Instruments Collateral and Credit-Risk ContingencyWe have entered into agreements with our derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. At December 31, Following are the notional amounts of our outstanding derivative positions at December 31: 2019 2018 Interest rate swaps $ 853 $ 3,483 Cross-currency swaps 42,325 42,192 Interest rate locks 3,500 - Foreign exchange contracts 269 2,094 Total $ 46,947 $ 47,769 Following are the related hedged items affecting our financial position and performance: Effect of Derivatives on the Consolidated Statements of Income Fair Value Hedging Relationships For the years ended December 31, 2019 2018 2017 Interest rate swaps (Interest expense): Gain (Loss) on interest rate swaps $ 58 $ (12) $ (68) Gain (Loss) on long-term debt (58) 12 68 The net swap settlements that accrued and settled in the periods above were included in interest expense. Cash Flow Hedging Relationships For the years ended December 31, 2019 2018 2017 Cross-currency swaps: Gain (Loss) recognized in accumulated OCI $ (1,066) $ (825) $ 571 Foreign exchange contracts: Gain (Loss) recognized in accumulated OCI 10 51 - Other income (expense) - net reclassified from accumulated OCI into income 6 39 - Interest rate locks: Gain (Loss) recognized in accumulated OCI (84) - - Interest income (expense) reclassified from accumulated OCI into income (63) (58) (60) performance: Dollars in millions except per share amounts In Significant components of our deferred tax liabilities (assets) are as follows at December 31: 2019 2018 Depreciation and amortization $ 44,896 $ 43,105 Licenses and nonamortizable intangibles 17,355 17,561 Employee benefits (5,143) (5,366) Deferred fulfillment costs 3,050 2,679 Net operating loss and other carryforwards (7,301) (6,470) Other – net 1,536 1,651 Subtotal 54,393 53,160 Deferred tax assets valuation allowance 4,941 4,588 Net deferred tax liabilities $ 59,334 $ 57,748 Noncurrent deferred tax liabilities $ 59,502 $ 57,859 Less: Noncurrent deferred tax assets (168) (111) Net deferred tax liabilities $ 59,334 $ 57,748 Federal, State and Foreign Tax 2019 2018 Balance at beginning of year $ 10,358 $ 7,648 Increases for tax positions related to the current year 903 336 Increases for tax positions related to prior years 1,106 2,615 Decreases for tax positions related to prior years (1,283) (394) Lapse of statute of limitations (32) (52) Settlements (283) (664) Current year acquisitions 205 872 Foreign currency effects 5 (3) Balance at end of year 10,979 10,358 Accrued interest and penalties 2,708 2,588 Gross unrecognized income tax benefits 13,687 12,946 Less: Deferred federal and state income tax benefits (886) (811) Less: Tax attributable to timing items included above (4,320) (3,430) Less: UTBs included above that relate to acquired entities that would impact goodwill if recognized - (918) Total UTB that, if recognized, would impact the effective income tax rate as of the end of the year $ 8,481 $ 7,787 Periodically we make deposits to taxing jurisdictions which reduce our UTB balance but are not included in the reconciliation above. The amount of deposits that reduced our UTB balance was $702 at December 31, 2020 and $2,584 at December 31, The components of income tax (benefit) expense are as follows: 2019 2018 2017 Federal: Current $ 584 $ 3,258 $ 682 Deferred 1,656 277 (17,970) 2,240 3,535 (17,288) State and local: Current 603 513 79 Deferred 144 473 1,041 747 986 1,120 Foreign: Current 605 539 471 Deferred (99) (140) 989 506 399 1,460 Total $ 3,493 $ 4,920 $ (14,708) “Income Before Income Taxes” in the Consolidated Statements of Income included the following components for the years ended December 31: 2019 2018 2017 U.S. income before income taxes $ 18,301 $ 25,379 $ 16,438 Foreign income (loss) before income taxes 167 (506) (1,299) Total $ 18,468 $ 24,873 $ 15,139 The components of income tax (benefit) expense are as follows: 2019 2018 2017 Taxes computed at federal statutory rate $ 3,878 $ 5,223 $ 5,299 Increases (decreases) in income taxes resulting from: State and local income taxes – net of federal income tax benefit 611 738 509 Enactment date and measurement period adjustments from the Act - (718) (20,271) Tax on foreign investments (115) (466) 73 Noncontrolling interest (230) (121) (133) Other – net (651) 264 (185) Total $ 3,493 $ 4,920 $ (14,708) Effective Tax Rate 18.9 % 19.8 % (97.2) % Obligations and Funded Status The following table presents the change in the projected benefit obligation for the years ended December 31: Pension Benefits Postretirement Benefits 2019 2018 2019 2018 Benefit obligation at beginning of year $ 55,439 $ 59,294 $ 19,378 $ 24,059 Service cost - benefits earned during the period 1,019 1,116 71 109 Interest cost on projected benefit obligation 1,960 2,092 675 778 Amendments - 50 (4,590) (1,145) Actuarial (gain) loss 7,734 (5,046) 2,050 (2,815) Special termination benefits 81 1 - 1 Benefits paid (6,356) (4,632) (1,543) (1,680) Acquisitions - 2,559 - 71 Plan transfers (4) 5 - - Benefit obligation at end of year $ 59,873 $ 55,439 $ 16,041 $ 19,378 The following table presents the change in the fair value of plan assets for the years ended December 31 and the plans’ funded status at December 31: Pension Benefits Postretirement Benefits 2019 2018 2019 2018 Fair value of plan assets at beginning of year $ 51,681 $ 45,463 $ 4,277 $ 5,973 Actual return on plan assets 8,207 (1,044) 609 (218) Benefits paid1 (6,356) (4,632) (941) (1,503) Contributions 2 9,307 200 25 Acquisitions - 2,582 - - Plan transfers (4) 5 - - Fair value of plan assets at end of year 53,530 51,681 4,145 4,277 Unfunded status at end of year2 $ (6,343) $ (3,758) $ (11,896) $ (15,101) 1 At our discretion, certain postretirement benefits may be paid from AT&T cash accounts, which does not reduce Voluntary Employee Benefit Association (VEBA) assets. Future benefit payments may be made from VEBA trusts and thus reduce those asset balances. 2 Funded status is not indicative of our ability to pay ongoing pension benefits or of our obligation to fund retirement trusts. Required pension funding is determined in accordance with the Employee Retirement Income Security Act of 1974, as amended (ERISA) and applicable regulations. Dollars in millions except per share amounts The following table presents the change in the projected benefit obligation for the years ended December 31: Amounts recognized on our consolidated balance sheets at December 31 are listed below: Pension Benefits Postretirement Benefits 2019 2018 2019 2018 Current portion of employee benefit obligation1 $ - $ - $ (1,365) $ (1,464) Employee benefit obligation2 (6,343) (3,758) (10,531) (13,637) Net amount recognized $ (6,343) $ (3,758) $ (11,896) $ (15,101) 1 Included in “Accounts payable and accrued liabilities.” 2 Included in “Postemployment benefit obligation.” The following table presents the components of net periodic benefit cost (credit): Pension Benefits Postretirement Benefits 2019 2018 2017 2019 2018 2017 Service cost – benefits earned during the period $ 1,019 $ 1,116 $ 1,128 $ 71 $ 109 $ 138 Interest cost on projected benefit obligation 1,960 2,092 1,936 675 778 809 Expected return on assets (3,561) (3,190) (3,134) (227) (304) (319) Amortization of prior service credit (113) (115) (123) (1,820) (1,635) (1,466) Actuarial (gain) loss 3,088 (812) 844 1,670 (2,290) 342 Net pension and postretirement cost (credit) $ 2,393 $ (909) $ 651 $ 369 $ (3,342) $ (496) Other Changes in Benefit Obligations Recognized in Other Comprehensive Income The following table presents the after-tax changes in benefit obligations recognized in OCI and the after-tax prior service credits that were amortized from OCI into net periodic benefit costs: Pension Benefits Postretirement Benefits 2019 2018 2017 2019 2018 2017 Balance at beginning of year $ 447 $ 571 $ 575 $ 6,086 $ 6,456 $ 5,089 Prior service (cost) credit - (37) (30) 3,457 864 1,120 Amortization of prior service credit (86) (87) (76) (1,372) (1,234) (907) Total recognized in other comprehensive (income) loss (86) (124) (106) 2,085 (370) 213 Adoption of ASU 2018-02 - - 102 - - 1,154 Balance at end of year $ 361 $ 447 $ 571 $ 8,171 $ 6,086 $ 6,456 2018. Dollars in millions except per share amounts Assumptions In determining the projected benefit obligation and the net pension and postretirement benefit cost, we used the following significant weighted-average assumptions: Pension Benefits Postretirement Benefits 2019 2018 2017 2019 2018 2017 Weighted-average discount rate for determining benefit obligation at December 31 3.40 % 4.50 % 3.80 % 3.20 % 4.40 % 3.70 % Discount rate in effect for determining service cost1,2 4.10 % 4.20 % 4.60 % 4.40 % 4.30 % 4.60 % Discount rate in effect for determining interest cost1,2 3.50 % 3.80 % 3.60 % 3.70 % 3.60 % 3.40 % Weighted-average interest crediting rate for cash balance pension programs3 3.30 % 3.70 % 3.50 % - % - % - % Long-term rate of return on plan assets 7.00 % 7.00 % 7.75 % 5.75 % 5.75 % 5.75 % Composite rate of compensation increase for determining benefit obligation 3.00 % 3.00 % 3.00 % 3.00 % 3.00 % 3.00 % Composite rate of compensation increase for determining net cost (benefit) 3.00 % 3.00 % 3.00 % 3.00 % 3.00 % 3.00 % 1 Weighted-average discount rate for pension benefits in effect from January 1, 2019 through March 31, 2019 was 4.60% for service cost and 4.20% for interest cost, from April 1, 2019 through June 30, 2019 was 4.30% for service cost and 3.70% for interest cost, from July 1, 2019 through September 30, 2019 was 3.90% for service cost and 3.20% for interest cost, and, from October 1, 2019 through December 31, 2019 was 3.50% for service cost and 3.00% for interest cost. 2 Weighted-average discount rate for postretirement benefits in effect from January 1, 2019 through October 1, 2019 was 4.70% for service cost and 4.00% for interest cost, and, from October 2, 2019 through December 31, 2019 was 3.40% for service cost and 2.70% for interest cost. 3 Weighted-average interest crediting rates for cash balance pension programs relate only to the cash balance portion of total pension benefits. A 0.50% increase in the weighted-average interest crediting rate would increase the pension benefit obligation by $130. Assumptions cost component relates to the active participants in the plan, so the relevant cash flows on which to apply the yield curve are considerably longer in duration on average than the total projected benefit obligation cash flows, which also include benefit payments to retirees. Interest cost is computed by multiplying each spot rate by the corresponding discounted projected benefit obligation cash flows. The full yield curve approach reduces any actuarial gains and losses based upon interest rate expectations (e.g., built-in gains in interest cost in an upward sloping yield curve scenario), or gains and losses merely resulting from the timing and magnitude of cash outflows associated with our benefit obligations. Neither the annual measurement of our total benefit obligations nor annual net benefit cost is affected by the full yield curve approach. The plans’ weighted-average asset targets and actual allocations as a percentage of plan assets, including the notional exposure of future contracts by asset categories at December 31, are as follows: Pension Assets Postretirement (VEBA) Assets Target 2019 2018 Target 2019 2018 Equity securities: Domestic 15 % - 25 % 17 % 16 % 15 % - 25 % 20 % 25 % International 7 % - 17 % 12 12 8 % - 18 % 12 18 Fixed income securities 29 % - 39 % 35 37 47 % - 57 % 52 39 Real assets 4 % - 14 % 9 9 - % - 6 % 1 1 Private equity 2 % - 12 % 8 8 - % - 7 % 2 2 Preferred interest 13 % - 23 % 17 18 - % - - % - - Other - % - 5 % 2 - 9 % - 19 % 13 15 Total 100 % 100 % 100 % 100 % The plans’ weighted-average asset targets and actual allocations as a percentage of plan assets, including the notional exposure of future contracts by asset categories at December 31 are as follows: Dollars in millions except per share amounts Pension Assets and Liabilities at Fair Value as of December 31, 2019 Level 1 Level 2 Level 3 Total Non-interest bearing cash $ 85 $ - $ - $ 85 Interest bearing cash Interest bearing cash 529 - - 529 Foreign currency contracts - 5 - 5 Equity securities: Equity securities: Domestic equities Domestic equities 8,068 - 4 8,072 International equities International equities 3,929 11 6 3,946 Preferred interest - - 8,806 8,806 Fixed income securities: Fixed income securities: Corporate bonds and other investments Corporate bonds and other investments - 10,469 4 10,473 Government and municipal bonds Government and municipal bonds 49 6,123 - 6,172 Mortgage-backed securities Mortgage-backed securities - 522 2 524 Real estate and real assets - - 2,817 2,817 Securities lending collateral Securities lending collateral 103 1,658 - 1,761 Receivable for variation margin 5 - - 5 Assets at fair value Assets at fair value 12,768 18,788 11,639 43,195 Investments sold short and other liabilities at fair value (513) (2) - (515) Total plan net assets at fair value Total plan net assets at fair value $ 12,255 $ 18,786 $ 11,639 $ 42,680 Assets held at net asset value practical expedient Assets held at net asset value practical expedient Private equity funds Private equity funds 4,544 Real estate funds Real estate funds 2,062 Commingled funds Commingled funds 5,710 Total assets held at net asset value practical expedient Total assets held at net asset value practical expedient 12,316 Other assets (liabilities)1 Other assets (liabilities)1 (1,466) Total Plan Net Assets Total Plan Net Assets $ 53,530 1 Other assets (liabilities) include amounts receivable, accounts payable and net adjustment for securities lending payable. Dollars in millions except per share amounts Postretirement Assets and Liabilities at Fair Value as of December 31, 2019 Level 1 Level 2 Level 3 Total Interest bearing cash $ 248 $ 301 $ - $ 549 Equity securities: Domestic equities 438 - - 438 International equities 265 - - 265 Fixed income securities: Corporate bonds and other investments 7 492 31 530 Government and municipal bonds 6 182 1 189 Mortgage-backed securities - 294 - 294 Securities lending collateral - 36 - 36 Assets at fair value 964 1,305 32 2,301 Securities lending payable and other liabilities - (36) - (36) Total plan net assets at fair value $ 964 $ 1,269 $ 32 $ 2,265 Assets held at net asset value practical expedient Private equity funds 66 Real estate funds 27 Commingled funds 1,797 Total assets held at net asset value practical expedient 1,890 Other assets (liabilities)1 (10) Total Plan Net Assets $ 4,145 1 Other assets (liabilities) include amounts receivable and accounts payable. The tables below set forth a summary of changes in the fair value of the Level 3 pension and postretirement assets for the year ended December 31, 2019: Pension Assets Equities Fixed Income Funds Real Estate and Real Assets Total Balance at beginning of year $ 8,750 $ 4 $ 2,579 $ 11,333 Realized gains (losses) - - 64 64 Unrealized gains (losses) 58 - 45 103 Transfers in 8 5 134 147 Transfers out - (6) - (6) Purchases - 7 228 235 Sales - (4) (233) (237) Balance at end of year $ 8,816 $ 6 $ 2,817 $ 11,639 Postretirement Assets Equities Fixed Income Funds Real Estate and Real Assets Total Balance at beginning of year $ 1 $ 12 $ - $ 13 Transfers in - 28 - 28 Transfers out - (1) - (1) Sales (1) (7) - (8) Balance at end of year $ - $ 32 $ - $ 32 Pension Assets and Liabilities at Fair Value as of December 31, 2018 Level 1 Level 2 Level 3 Total Non-interest bearing cash $ 52 $ - $ - $ 52 Interest bearing cash 167 41 - 208 Foreign currency contracts - 5 - 5 Equity securities: Domestic equities 6,912 - 1 6,913 International equities 3,594 8 - 3,602 Preferred interest - - 8,749 8,749 Fixed income securities: Corporate bonds and other investments - 10,719 4 10,723 Government and municipal bonds 51 6,170 - 6,221 Mortgage-backed securities - 382 - 382 Real estate and real assets - - 2,579 2,579 Securities lending collateral 12 1,466 - 1,478 Purchased options, futures, and swaps - 3 - 3 Receivable for variation margin 19 - - 19 Assets at fair value 10,807 18,794 11,333 40,934 Investments sold short and other liabilities at fair value (657) (6) - (663) Total plan net assets at fair value $ 10,150 $ 18,788 $ 11,333 $ 40,271 Assets held at net asset value practical expedient Private equity funds 4,384 Real estate funds 2,162 Commingled funds 5,740 Total assets held at net asset value practical expedient 12,286 Other assets (liabilities)1 (876) Total Plan Net Assets $ 51,681 1 Other assets (liabilities) include amounts receivable, accounts payable and net adjustment for securities lending payable. Postretirement Assets and Liabilities at Fair Value as of December 31, 2018 Level 1 Level 2 Level 3 Total Interest bearing cash $ 45 $ 624 $ - $ 669 Equity securities: Domestic equities 745 8 - 753 International equities 541 - 1 542 Fixed income securities: Corporate bonds and other investments 7 602 11 620 Government and municipal bonds 2 377 1 380 Mortgage-backed securities - 283 - 283 Securities lending collateral - 63 - 63 Assets at fair value 1,340 1,957 13 3,310 Securities lending payable and other liabilities - (74) - (74) Total plan net assets at fair value $ 1,340 $ 1,883 $ 13 $ 3,236 Assets held at net asset value practical expedient Private equity funds 79 Real estate funds 36 Commingled funds 973 Total assets held at net asset value practical expedient 1,088 Other assets (liabilities)1 (47) Total Plan Net Assets $ 4,277 1 Other assets (liabilities) include amounts receivable and accounts payable. The tables below set forth a summary of changes in the fair value of the Level 3 pension and postretirement assets for the year ended December 31, 2018: Pension Assets Equities Fixed Income Funds Real Estate and Real Assets Total Balance at beginning of year $ 4 $ 2 $ 2,287 $ 2,293 Realized gains (losses) - - 120 120 Unrealized gains (losses) (408) (1) 170 (239) Transfers in 9,158 1 266 9,425 Transfers out (4) (1) - (5) Purchases - 8 85 93 Sales - (5) (349) (354) Balance at end of year $ 8,750 $ 4 $ 2,579 $ 11,333 Postretirement Assets Equities Fixed Income Funds Real Estate and Real Assets Total Balance at beginning of year $ - $ 5 $ - $ 5 Transfers in 1 8 - 9 Transfers out - (1) - (1) Purchases - 1 - 1 Sales - (1) - (1) Balance at end of year $ 1 $ 12 $ - $ 13 Estimated Future Benefit Payments affect these expected amounts. The following table provides expected benefit payments under our pension and postretirement plans: Pension Benefits Postretirement Benefits 2020 $ 5,540 $ 1,539 2021 4,471 1,441 2022 4,362 1,343 2023 4,272 1,258 2024 4,174 1,015 Years 2025 - 2029 19,965 4,307 options or upon vesting of performance stock units or other nonvested stock units) to officers, employees and directors pursuant to these various plans. Our consolidated statements of income include the compensation cost recognized for those plans as operating expenses, as well as the associated tax benefits, which are reflected in the table below: 2019 2018 2017 Performance stock units $ 544 $ 301 $ 395 Restricted stock and stock units 273 153 90 Other nonvested stock units 7 4 (5) Stock options (5) 5 - Total $ 819 $ 463 $ 480 Income tax benefit $ 202 $ 114 $ 184 A summary of the status of our nonvested stock units as of December 31, 2019, and changes during the year then ended is presented as follows (shares in millions): Nonvested Stock Units Shares Weighted-Average Grant-Date Fair Value Nonvested at January 1, 2019 39 $ 38.44 Granted 27 31.18 Vested (21) 39.03 Forfeited (3) 34.26 Nonvested at December 31, 2019 42 $ 33.80 Stock Repurchase ProgramFrom time to time, we repurchase shares of common stock for distribution through our employee benefit plans or in connection with certain acquisitions. Our Board of Directors has approved the following authorizations to repurchase common stock: (1) March 2013 authorization program of 300 million shares, Telco LLC Our equipment installment and WarnerMedia programs are discussed in detail below. The following table sets forth a summary of the receivables and accounts being serviced at December 31: 2019 2018 Equipment Equipment Installment WarnerMedia Installment WarnerMedia Gross receivables: $ 4,576 $ 3,324 $ 5,994 $ - Balance sheet classification Accounts receivable Notes receivable 2,467 - 3,457 - Trade receivables 477 2,809 438 - Other Assets Noncurrent notes and trade receivables 1,632 515 2,099 - Outstanding portfolio of receivables derecognized from our consolidated balance sheets 9,713 4,300 9,065 - Cash proceeds received, net of remittances1 7,211 4,300 6,508 - 1 Represents amounts to which financial institutions remain entitled, excluding the deferred purchase price. Represents amounts to which financial institutions remain entitled, excluding the deferred purchase price. We offer our customers the option to purchase certain wireless devices in installments over a specified period of time and, in many cases, once certain conditions are met, they may be eligible to trade in the original equipment for a new device and have the remaining unpaid balance paid or settled. The following table sets forth a summary of equipment installment receivables sold: 2019 2018 2017 Gross receivables sold $ 9,921 $ 9,391 $ 8,058 Net receivables sold1 9,483 8,871 7,388 Cash proceeds received 8,189 7,488 5,623 Deferred purchase price recorded 1,451 1,578 2,077 Guarantee obligation recorded 341 361 215 1 Receivables net of allowance, imputed interest and equipment trade-in right guarantees. Receivables net of allowance, imputed interest and equipment trade-in right guarantees. The following table presents the previously transferred equipment installment receivables, which we repurchased in exchange for the associated deferred purchase price: 2019 2018 2017 Fair value of repurchased receivables $ 1,418 $ 1,480 $ 1,699 Carrying value of deferred purchase price 1,350 1,393 1,524 Gain on repurchases1 $ 68 $ 87 $ 175 1 These gains are included in “Selling, general and administrative” in the consolidated statements of income. These gains are included in “Selling, general and administrative” in the consolidated statements of income. The following table sets forth a summary of WarnerMedia receivables sold: 2019 2018 2017 Gross receivables sold/cash proceeds received1 $ 11,989 $ - $ - Collections reinvested under revolving agreement 7,689 - - Net cash proceeds received (remitted) $ 4,300 $ - $ - Net receivables sold2 $ 11,604 $ - $ - Obligations recorded 530 - - 1 Includes initial sale of receivables of $4,300 for the year ended December 31, 2019. 2 Receivables net of allowance, return and incentive reserves and imputed interest. As of December 31, As of January 31, 2021, we employed approximately 230,000 persons. Approximately 37% of our employees are represented by the Communications Workers of America (CWA), the International Brotherhood of Electrical Workers (IBEW) or other unions. After expiration of the agreements, work stoppages or labor disruptions may occur in the absence of new contracts or other agreements being reached. There are no significant contracts expiring in 2021. A contract covering approximately 14,000 Mobility employees in 36 states and the District of Columbia that was set to expire in February 2021 was extended until February 2022. A contract covering approximately 10,000 Mobility employees in nine Southeast states that was set to expire in February 2022 was extended until February 2023. On February 25, 2021, we signed an agreement to form a new company named DIRECTV (New DTV) with TPG Capital, which will be jointly governed by a board with representation from both AT&T and TPG. Under the agreement, we will contribute our Video business unit to New DTV for $4,250 of junior preferred units, an additional distribution preference of $4,200 and a 70% economic interest in common units. We expect to receive $7,600 in cash from New DTV at closing. TPG will contribute approximately $1,800 in cash to New DTV for $1,800 of senior preferred units and a 30% economic interest in common units. The remaining $5,800 will be funded by debt taken on by New DTV. As part of this transaction, we agreed to pay net losses under the NFL SUNDAY TICKET contract up to a cap of $2,500 over the remaining period of the contract. Consolidated Statements of Income 2019 2018 2017 Advertising expense $ 6,121 $ 5,100 $ 3,772 Interest expense incurred $ 8,622 $ 8,450 $ 7,203 Capitalized interest (200) (493) (903) Total interest expense $ 8,422 $ 7,957 $ 6,300 AT&T Inc. December 31, Cash and Cash Equivalents and Restricted Cash 2019 2018 2017 2016 Cash and cash equivalents $ 12,130 $ 5,204 $ 50,498 $ 5,788 Restricted cash in Other current assets 69 61 6 7 Restricted cash in Other Assets 96 135 428 140 Cash and cash equivalents and restricted cash $ 12,295 $ 5,400 $ 50,932 $ 5,935 The following table summarizes cash paid during the periods for interest and income taxes: Consolidated Statements of Cash Flows 2019 2018 2017 Cash paid (received) during the year for: Interest $ 8,693 $ 8,818 $ 6,622 Income taxes, net of refunds 1,421 (354) 2,006 The following table provides supplemental disclosures for the statement of cash flows related to operating leases: 2019 Cash Flows from Operating Activities Cash paid for amounts included in lease obligations: Operating cash flows from operating leases $ 4,583 Supplemental Lease Cash Flow Disclosures Operating lease right-of-use assets obtained in exchange for new operating lease obligations 7,818 2019 Calendar Quarter First1 Second1 Third1 Fourth1,2 Annual Total Operating Revenues $ 44,827 $ 44,957 $ 44,588 $ 46,821 $ 181,193 Operating Income 7,233 7,500 7,901 5,321 27,955 Net Income 4,348 3,974 3,949 2,704 14,975 Net Income Attributable to AT&T 4,096 3,713 3,700 2,394 13,903 Basic Earnings Per Share Attributable to Common Stock3 $ 0.56 $ 0.51 $ 0.50 $ 0.33 $ 1.90 Diluted Earnings Per Share Attributable to Common Stock3 $ 0.56 $ 0.51 $ 0.50 $ 0.33 $ 1.89 Stock Price High $ 31.64 $ 33.55 $ 38.75 $ 39.70 Low 28.30 30.05 31.52 36.40 Close 31.36 33.51 37.84 39.08 1 Includes actuarial gains and losses on pension and postretirement benefit plans (Note 15). 2 Includes an asset abandonment charge (Note 7). 3 Quarterly earnings per share impacts may not add to full-year earnings per share impacts due to the difference in weighted-average common shares for the quarters versus the weighted-average common shares for the year. 2018 Calendar Quarter First1 Second1 Third Fourth1 Annual Total Operating Revenues $ 38,038 $ 38,986 $ 45,739 $ 47,993 $ 170,756 Operating Income 6,201 6,466 7,269 6,160 26,096 Net Income 4,759 5,248 4,816 5,130 19,953 Net Income Attributable to AT&T 4,662 5,132 4,718 4,858 19,370 Basic Earnings Per Share Attributable to Common Stock2 $ 0.75 $ 0.81 $ 0.65 $ 0.66 $ 2.85 Diluted Earnings Per Share Attributable to Common Stock2 $ 0.75 $ 0.81 $ 0.65 $ 0.66 $ 2.85 Stock Price High $ 39.29 $ 36.39 $ 34.28 $ 34.30 Low 34.44 31.17 30.13 26.80 Close 35.65 32.11 33.58 28.54 1 Includes actuarial gains and losses on pension and postretirement benefit plans (Note 15). 2 Quarterly earnings per share impacts may not add to full-year earnings per share impacts due to the difference in weighted-average common shares for the quarters versus the weighted-average common shares for the year. Dollars in millions except per share amounts ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Plan Category Number of securities to Weighted average reflected in column (a)) Equity compensation plans approved by security holders Equity compensation plans not approved by security holders — — Total AT&T Inc. Dollars in millions except per share amounts 3-a 3-b 3-c 3-d 3-e No instrument which defines the rights of holders of long-term debt of the registrant and all of its consolidated subsidiaries is filed herewith pursuant to Regulation S-K, Item 601(b)(4)(iii)(A), except for the instruments referred to in 4-b, 4-c, 4-d, 4-e, 4-f below. Pursuant to this regulation, the registrant hereby agrees to furnish a copy of any such instrument not filed herewith to the SEC upon request. 4-b AT&T Inc. Dollars in millions except per share amounts 4-d 4-e 4-f 4-g 4-h 10-a 10-b 10-b(i) 10-b(ii) 10-c 10-d 10-e 10-f 10-h 10-i 10-l 10-m 10-o 10-p 10-q 10-r 10-s 10-t AT&T Inc. Dollars in millions except per share amounts 10-v 10-w 10-x 10-y 10-z 10-aa 10-cc 10-dd 10-ee 10-ff 10-gg 10-ii 10-jj 31 Rule 13a-14(a)/15d-14(a) Certifications 99 Supplemental Interim Financial Information 101 The consolidated financial statements from the Company’s Form 10-K for the year ended December 31, 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Allowance for Doubtful Accounts COL. A COL. B COL. C COL. D COL. E Additions (1) (2) (3) Balance at Charged to Charged to Beginning of Costs and Other Balance at End Period Expenses (a) Accounts (b) Acquisitions (c) Deductions (d) of Period Year 2019 $ 907 2,575 - - 2,247 $ 1,235 Year 2018 $ 663 1,791 - 179 1,726 $ 907 Year 2017 $ 661 1,642 - - 1,640 $ 663 (a) Includes amounts previously written off which were credited directly to this account when recovered. Excludes direct charges and credits to expense for nontrade receivables in the consolidated statements of income. (b) Includes amounts related to long-distance carrier receivables which were billed by AT&T. (c) Acqusition of Time Warner in 2018. (d) Amounts written off as uncollectible, or related to divested entities. Dollars in millions except per share amounts SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Allowance for Deferred Tax Assets COL. A COL. B COL. C COL. D COL. E Additions (1) (2) (3) Balance at Charged to Charged to Beginning of Costs and Other Acquisitions Deductions Balance at End Period Expenses Accounts (a) (b) (c) of Period Year 2019 $ 4,588 (18) 371 - - $ 4,941 Year 2018 $ 4,640 (210) (53) 211 - $ 4,588 Year 2017 $ 2,283 2,376 (19) - - $ 4,640 (a) Includes current year reclassifications from other balance sheet accounts. (b) Acquisition of Time Warner in 2018. (c) Reductions to valuation allowances related to deferred tax assets. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Allowance for Credit Loss SIGNATURES 2021. John J. Stephens John J. Stephens, as attorney-in-fact Samuel A. Di Piazza, Jr.* Michael B. McCallister* Richard W. Fisher* Beth E. Mooney* Scott T. Ford* Matthew K. Rose* Glenn H. Hutchins* Cynthia B. Taylor* William E. Kennard* Debra L. Lee*2019,2020, of our total property, plant and equipment, central office equipment represented 29%; outside plant (including cable, wiring and other non-central office network equipment) represented approximately 22%; satellites represented 1%23%; other equipment, comprised principally of satellites, wireless network equipment attached to towers, furniture and office equipment and vehicles and other work equipment, represented 28%; land, building and wireless communications towers represented 12%13%; and other miscellaneous property represented 8%7%.leaseslease offices; studios; technical, production and warehouse spaces; communications facilities and other properties in numerous locations globally.22AT&T Inc. Information about our Executive Officers(As of February 1, 2020)Randall L. StephensonJohn T. Stankey5958Chairman of the Board and Chief Executive Officer and President6/20077/202059 Senior Executive Vice President - External and Legislative Affairs, AT&T Services, Inc. 4/2020 David S. Huntley 616249 Chief Executive Officer, Warner Media, LLC 5/2020 Lori M. Lee 5455515249504849John T. Stankey57President and Chief Operating Officer10/2019606123AT&T Inc. 2018 was 891,449 and 937,230.891,449. The number of stockholders of record as of February 12, 2020,2021, was 887,276.854,769. We declared dividends on common stock, on a quarterly basis, totaling $2.08 per share in 2020 and $2.05 per share in 2019 and $2.01 per share in 2018.2019.
2014,2015, in AT&T common stock and the following Standard & Poor’s (S&P) Indices: S&P 500 Index, S&P 500 Integrated Telecom Index and S&P 500 Communications Services Index. We have adopted the S&P 500 Communications Services Index, which permits us to use a more diversified set of companies in the communications and media sectors that are relevant to our businesses. Total return equals stock price appreciation plus reinvestment of dividends.AT&T Inc. Dollars in millions except per share amounts with 19(19 million outstanding at December 31, 2019, which we completed during the first quarter of 2020) and (2) March 2014 authorization program for an additional 300 million shares, with all 300178 million outstanding at December 31, 2019.2020. Excluding the impact of acquisitions, our 20202021 financing activities will focus on managing our debt level repurchasing common stock and paying dividends, subject to approval by our Board of Directors. We plan to fund our financing uses of cash through a combination of cash from operations, issuance of debt issuance of additional preferred stock and asset sales. The timing and mix of any debt issuance and/or refinancing will be guided by credit market conditions and interest rate trends.24AT&T Inc.Dollars in millions except per share amountsrepurchase programs,repurchases, relying on Rule 10b5-1 of the Securities Exchange Act of 1934, where feasible. We entered into an Accelerated Share Repurchase programagreement and repurchased $4,000 million of common stock during the first quarter of 2020.20192020 is as follows:25(a) (b) (c) (d) Period
Average Price Paid Per Share (or Unit)Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under The Plans or Programs October 1, 2020 - October 31, 2020 294,518 $ 28.52 6,374 177,935,856 November 1, 2020 - November 30, 2020 78,988 $ 28.69 5,062 177,930,794 December 1, 2020 - December 31, 2020 702,940 $ 28.58 586 177,930,208 Total 1,076,446 $ 28.57 12,022 AT&T Inc. At December 31 and for the year ended: 2020 2019 2018 2017 2016 Financial Data Operating revenues $ 171,760 $ 181,193 $ 170,756 $ 160,546 $ 163,786 Operating expenses $ 165,355 $ 153,238 $ 144,660 $ 140,576 $ 140,243 Operating income $ 6,405 $ 27,955 $ 26,096 $ 19,970 $ 23,543 Interest expense $ 7,925 $ 8,422 $ 7,957 $ 6,300 $ 4,910 Equity in net income (loss) of affiliates $ 95 $ 6 $ (48) $ (128) $ 98 Other income (expense) - net $ (1,431) $ (1,071) $ 6,782 $ 1,597 $ 1,081 Income tax (benefit) expense $ 965 $ 3,493 $ 4,920 $ (14,708) $ 6,479 Net Income (Loss) $ (3,821) $ 14,975 $ 19,953 $ 29,847 $ 13,333 $ (1,355) $ (1,072) $ (583) $ (397) $ (357) Net Income (Loss) Attributable to AT&T $ (5,176) $ 13,903 $ 19,370 $ 29,450 $ 12,976 Net Income (Loss) Attributable to Common Stock $ (5,369) $ 13,900 $ 19,370 $ 29,450 $ 12,976 $ (0.75) $ 1.90 $ 2.85 $ 4.77 $ 2.10 $ (0.75) $ 1.89 $ 2.85 $ 4.76 $ 2.10 7,157 7,319 6,778 6,164 6,168 7,183 7,348 6,806 6,183 6,189 End of period common shares outstanding (000,000) 7,126 7,255 7,282 6,139 6,139 Dividends declared per common share $ 2.08 $ 2.05 $ 2.01 $ 1.97 $ 1.93 Cash and cash equivalents $ 9,740 $ 12,130 $ 5,204 $ 50,498 $ 5,788 Total assets $ 525,761 $ 551,669 $ 531,864 $ 444,097 $ 403,821 Long-term debt $ 153,775 $ 151,309 $ 166,250 $ 125,972 $ 113,681 Total debt $ 157,245 $ 163,147 $ 176,505 $ 164,346 $ 123,513 Debt ratio 46.7 % 44.7 % 47.7 % 53.6 % 49.9 % Net debt ratio 43.8 % 41.4 % 46.2 % 37.2 % 47.5 % Book value per common share $ 25.15 $ 27.84 $ 26.63 $ 23.13 $ 20.22 Capital expenditures $ 15,675 $ 19,635 $ 21,251 $ 21,550 $ 22,408 Vendor financing payments $ 2,966 $ 3,050 $ 560 $ 572 $ — $ 19,704 $ 23,690 $ 23,240 $ 22,401 $ 22,408 $ 1,613 $ 1,316 $ 447 $ (1,380) $ 2,477 Number of employees 230,760 247,800 268,220 254,000 268,540 AT&T Inc. Dollars in millions except per share amounts At December 31 and for the year ended:20192018201720162015Financial DataOperating revenues$181,193$170,756$160,546$163,786$146,801Operating expenses$153,238$144,660$140,576$140,243$126,439Operating income$27,955$26,096$19,970$23,543$20,362Interest expense$8,422$7,957$6,300$4,910$4,120Equity in net income (loss) of affiliates$6$(48)$(128)$98$79Other income (expense) - net$(1,071)$6,782$1,597$1,081$4,371Income tax (benefit) expense$3,493$4,920$(14,708)$6,479$7,005Net Income$14,975$19,953$29,847$13,333$13,687Less: Net Income Attributable to Noncontrolling Interest$(1,072)$(583)$(397)$(357)$(342)Net Income Attributable to AT&T$13,903$19,370$29,450$12,976$13,345Net Income Attributable to Common Stock$13,900$19,370$29,450$12,976$13,345Basic Earnings Per Common Share:Net Income Attributable to Common Stock$1.90$2.85$4.77$2.10$2.37Diluted Earnings Per Common Share:Net Income Attributable to Common Stock$1.89$2.85$4.76$2.10$2.37Weighted-average common shares outstanding (000,000)7,3196,7786,1646,1685,628Weighted-average common shares outstandingwith dilution (000,000)7,3486,8066,1836,1895,646End of period common shares outstanding (000,000)7,2557,2826,1396,1396,145Dividends declared per common share$2.05$2.01$1.97$1.93$1.89Cash and cash equivalents$12,130$5,204$50,498$5,788$5,121Total assets$551,669$531,864$444,097$403,821$402,672Long-term debt$151,309$166,250$125,972$113,681$118,515Total debt$163,147$176,505$164,346$123,513$126,151Debt ratio44.7%47.7%53.6%49.9%50.5%Net debt ratio41.4%46.2%37.2%47.5%48.5%Book value per common share$27.84$26.63$23.13$20.22$20.12Capital expenditures$19,635$21,251$21,550$22,408$20,015Vendor financing payments$3,050$560$572$-$-Gross capital investment1$23,690$23,240$22,401$22,408$20,015Spectrum acquisitions2$1,316$447$(1,380)$2,477$17,740Number of employees247,800268,220254,000268,540281,4501Includes capital expenditures and vendor financing payments and excludes FirstNet reimbursements of $1,005 in 2019, $1,429 in 2018,$279 in 2017 and $0 in 2016-2015 (see Note 20).2Cash paid for FCC license and domestic spectrum acquired in business acquisitions and swaps, net of auction deposit returns.26AT&T Inc.Dollars in millions except per share amounts2018. Discussions of 2017 items and year-to-year comparisons between 2018 and 2017 that are not included in this document can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.2019.fourthree reportable segments: (1) Communications, (2) WarnerMedia and (3) Latin America and (4) Xandr.America. Our segment results presented in Note 4 and discussed below follow our internal management reporting. We analyze our segments based on segment operating contribution, which consists of operating income, excluding acquisition-related costs and other significant items and equity in net income (loss) of affiliates for investments managed within each segment. Each segment’s percentage calculation of total segment operating revenue and contribution is derived from our segment results table in Note 4 and may total more than 100% due to losses in one or more segments. Percentage increases and decreases that are not considered meaningful are denoted with a dash.exclude wirelessinclude our prior Xandr segment within our WarnerMedia segment and wireline operations in Puerto Ricoto remove the Crunchyroll anime business that is classified as held-for-sale and removed from the U.S. Virgin Islands from our Mobility and Business Wireline business units of the CommunicationsWarnerMedia segment, instead reporting them withincluding it in Corporate and Other (see Note 6).Other.Percent Change 2020 2019 2018 2020 vs. 2019 2019 vs. 2018 Operating Revenues Communications $ 138,850 $ 142,359 $ 143,721 (2.5) % (0.9) % WarnerMedia 30,442 35,259 20,585 (13.7) 71.3 Latin America 5,716 6,963 7,652 (17.9) (9.0) Corporate and other 1,932 1,865 2,197 3.6 (15.1) Eliminations and consolidation (5,180) (5,253) (3,399) 1.4 (54.5) AT&T Operating Revenues 171,760 181,193 170,756 (5.2) 6.1 Operating Contribution Communications 30,521 32,230 32,108 (5.3) 0.4 WarnerMedia 8,210 10,659 7,020 (23.0) 51.8 Latin America (729) (635) (710) (14.8) 10.6 Segment Operating Contribution $ 38,002 $ 42,254 $ 38,418 (10.1) % 10.0 % 77%79% of our 20192020 total segment operating revenues compared to 84%77% in 20182019 and 76%80% of our 20192020 total segment operating contribution as compared to 84%76% in 2018.2019. This segment provides services to businesses and consumers located in the U.S. and businesses globally. Our business strategies reflect bundled product offerings that cut across product lines and utilize shared assets. In December 2020, we changed our management strategy and reevaluated our domestic video business, allowing us to maximize value in our domestic video business and further accelerate our ability to innovate and execute in our fast-growing broadband and fiber business. In conjunction with the strategy change, we separated the former Entertainment Group into two business units, Video and Broadband, which includes legacy telephony operations. We have recast our results for all prior periods to split the Entertainment Group into two separate business units, Video and Broadband, and removed video operations from Business Wireline, combining all video operations in the Video business unit. This segment contains the following business units:•Mobilityprovides nationwide wireless service and equipment.AT&T Inc. Dollars in millions except per share amounts •Entertainment GroupVideo provides video, including over-the-top (OTT) services and also sells multiplatform advertising services as video revenues.communicationscommunication services to residential customers. This segment also sells advertising on DIRECTV and U-verse distribution platforms.27AT&T Inc.Dollars in millions except per share amounts•Business Wirelineprovides advanced IP-based services, as well as traditional voice and data services to business customers.18%17% of our 20192020 total segment operating revenues compared to 11%19% in 20182019 and 22% of our 20192020 total segment operating contribution compared to 15%25% in 2018.2019. This segment develops, produces and distributes feature films, television, gaming and other content over various physical and digital formats.formats globally. Historical financial results of Eliminations & Other included in the WarnerMedia segment have been recast to include Xandr, previously a separate reportable segment, and to remove the Crunchyroll anime business that was classified as held-for-sale. This segment contains the following business units:following:•Turnerprimarily operates multichannel basic television networks and digital properties. Turner also sells advertising on its networks and digital properties.•Home Box Office consists of premium pay television and OTT and streaming servicesHBO Max domestically and premium pay, basic tier television and OTT and streaming services internationally as well asand content licensing and home entertainment.•Warner Bros.primarily consists of the production, distribution and licensing of television programming and feature films, the distribution of home entertainment products and the production and distribution of games.4%3% of our 2019 and 20182020 total segment operating revenues.revenues compared to 4% in 2019. This segment provides entertainment and wireless services outside of the U.S. This segment contains the following business units:Mexico provides wireless service and equipment to customers in Mexico.•Vrio provides video services primarily to residential customers using satellite technology in Latin America and the Caribbean.The •XandrMexico provides wireless service and equipment to customers in Mexico.segmentLower revenues from the continued partial closure of movie theaters and higher costs based on our decision to distribute 2021 films on HBO Max in the U.S. simultaneous with theaters for 31 days and costs associated with the international launch of HBO Max; accounted for approximately 1% of our total segment operatingUncertainty in revenues from international wireless roaming services due to reduced travel, particularly in 2019the first quarter; and 20183% of our total segment operating contribution in 2019 and 2018. This segment provides advertising services. These services utilize data insights to develop and deliver targeted advertising across video and digital platforms.customers.AT&T Inc. Dollars in millions except per share amounts results for the past three years.results. Additional analysis is discussed in our “Segment Results” section. We also discuss our expected revenue and expense trends for 20202021 in the “Operating Environment and Trends of the Business” section. Certain prior periodprior-period amounts have been reclassified to conform to the current period’s presentation.OVERVIEWPercent Change 2020 2019 2018 Operating revenues Service $ 152,767 $ 163,499 $ 152,345 (6.6) % 7.3 % Equipment 18,993 17,694 18,411 7.3 (3.9) Total Operating Revenues 171,760 181,193 170,756 (5.2) 6.1 Operating expenses Operations and support 117,959 123,563 116,184 (4.5) 6.4 Asset impairments and abandonments 18,880 1,458 46 — — Depreciation and amortization 28,516 28,217 28,430 1.1 (0.7) Total Operating Expenses 165,355 153,238 144,660 7.9 5.9 Operating Income 6,405 27,955 26,096 (77.1) 7.1 Interest expense 7,925 8,422 7,957 (5.9) 5.8 Equity in net income (loss) of affiliates 95 6 (48) — — Other income (expense) – net (1,431) (1,071) 6,782 (33.6) — Income (Loss) Before Income Taxes (2,856) 18,468 24,873 — (25.8) Net Income (Loss) (3,821) 14,975 19,953 — (24.9) Net Income (Loss) Attributable to AT&T (5,176) 13,903 19,370 — (28.2) $ (5,369) $ 13,900 $ 19,370 — % (28.2) % 28AT&T Inc.Dollars in millions except per share amounts increaseddecreased in 2019,2020, with declines in all segments reflecting impacts of the COVID-19 pandemic. Lower WarnerMedia segment revenues reflect limited and postponed theatrical and home entertainment releases as well as lower television licensing, productions and advertising revenues. Communications segment revenue declines were driven by continued declines in video and legacy services, partially offset by higher wireless device sales and increases in strategic and managed business service revenues. Latin America segment revenue declines were primarily due to including a full year’s worth of Time Warner results, which was acquired in June 2018. Partially offsetting the increase were declines in the Communications segment driven by continued pressure in legacy and video services and lower wireless equipment upgrades that were offset by growth in advanced data and wireless services.foreign exchange rates.increasedincreased in 2020, primarily due to noncash impairment charges of $15,508 in the fourth quarter, resulting from our assessment of the recoverability of the long-lived assets and goodwill associated with our video business (see Notes 7 and 9). The increase also includes a goodwill impairment of $2,212 at our Vrio business unit in the second quarter (see Note 9) and $780 from the impairment of production and other content inventory at WarnerMedia, with approximately $524 resulting from the continued shutdown of theaters during the pandemic and the hybrid distribution model for our 2021 film slate (see Note 11). Charges in 2019 primarily duerelated to our 2018 acquisition of Time Warner and the abandonment of certain copper assets that willwere not be necessary to support future network activity (see Note 7). The increase was partially offset by lower costs in our Communications segment, specifically fewer subscribers contributing to lower content costs, lower upgrades driving a decline in wireless equipment costs and our continued focus on cost management.AT&T Inc. Dollars in millions except per share amounts decreasedincreased in 2019.2020.decreased $415,increased $307, or 5.0%3.9%, in 2019 primarily2020 due to the amortization of intangiblesorbital slot licenses, which began in the first quarter of 2020 (see Note 1). Amortization expense in 2021 will reflect approximately $1,200 of reductions from the 2020 impairment of orbital slots and customers lists associated with WarnerMedia. We expect continued declinesour domestic video business (see Note 9).amortization expense, reflecting the accelerated method of amortization applied to certain of the WarnerMedia intangibles.Depreciation expense increased $202, or 1.0%, in 20192020 primarily due to ongoing capital spend for network upgrades and expansion partially offset by fully depreciated assets in our Communications segment. Depreciation expense in 2021 will reflect approximately $480 of reductions from the Time Warner acquisition.2020 impairment of property, plant and equipment associated with our domestic video business (see Note 7).2019 and 2018.2019. Our operating margin was 3.7% in 2020, compared to 15.4% in 2019 compared toand 15.3% in 2018 and 12.4% in 2017.2018.increased in 2019,2020, primarily due to lower capitalized interest associated with putting spectrum into network service.rates and debt balances.2019, primarily due to the sale of Hulu, which had losses of $442020, reflecting changes in 2019 and $105our investment portfolio, including $130 equity in 2018. (See Note 6)earnings resulting from an investee transaction.20192020 primarily due to the recognition of $5,171 in actuarial losses, compared to gains$1,405 of $3,412 in 2018. Also contributing to the decline were higher debt redemption costs partially offset by increasedand lower income from Rabbi trusts and other investments and gains frominvestments. Offsetting the sales of nonstrategic assets.decrease were lower actuarial losses in 2020, $4,169 compared to $5,171 in 2019 (see Note 15).2019,2020, primarily driven by a decrease indecreased income before income taxes. taxes offset by impairments of goodwill (see Note 9), which are not deductible for tax purposes.2018, and (97.2)%2018. The effective tax rate in 2017. All years were2020 was impacted by The Tax Cuts and Jobs Act,the goodwill impairments, which was enacted in 2017.are not deductible for tax purposes.29AT&T Inc. COMMUNICATIONS SEGMENT Percent Change 2020 2019 2018 Segment Operating Revenues Mobility $ 72,564 $ 71,056 $ 70,521 2.1 % 0.8 % Video 28,610 32,124 33,363 (10.9) (3.7) Broadband 12,318 13,012 13,108 (5.3) (0.7) Business Wireline 25,358 26,167 26,729 (3.1) (2.1) Total Segment Operating Revenues 138,850 142,359 143,721 (2.5) (0.9) Segment Operating Contribution Mobility 22,372 22,321 21,568 0.2 3.5 Video 1,729 2,064 1,331 (16.2) 55.1 Broadband 1,822 2,681 3,369 (32.0) (20.4) Business Wireline 4,598 5,164 5,840 (11.0) (11.6) Total Segment Operating Contribution $ 30,521 $ 32,230 $ 32,108 (5.3) % 0.4 % Selected Subscribers and Connections December 31, (000s) 2020 2019 2018 Mobility subscribers 182,558 165,889 151,921 Total domestic broadband connections 15,384 15,389 15,701 Network access lines in service 7,263 8,487 10,002 U-verse VoIP connections 3,816 4,370 5,114 2019, driven2020 and were impacted by declinesthe COVID-19 pandemic. Declines in our Entertainment GroupVideo, Broadband and Business Wireline business units were partially offset by increases in our Mobility business unit. The decrease also reflects the continued shift away from legacy voice and data products and linear video largelyand legacy services, partially offset by higher wirelessequipment and service revenues from growth in postpaid phone subscribers and average revenue per subscriber (ARPU), and growth in our prepaid subscriber base.revenues.2019 and 2018.2019. The 20192020 operating contribution includes improvements in our Mobility and Entertainment Group business units, partially offset by declines in our Video, Broadband and Business Wireline business unit.units, and reflects stable operating contribution from our Mobility business. Our Communications segment operating income margin was 22.0% in 2020, 22.6% in 2019 and 22.3% in 2018 and 21.1% in 2017.2018.30Mobility Results Percent Change 2020 2019 2018 Operating revenues Service $ 55,542 $ 55,331 $ 54,295 0.4 % 1.9 % Equipment 17,022 15,725 16,226 8.2 (3.1) Total Operating Revenues 72,564 71,056 70,521 2.1 0.8 Operating expenses Operations and support 42,106 40,681 40,690 3.5 — Depreciation and amortization 8,086 8,054 8,263 0.4 (2.5) Total Operating Expenses 50,192 48,735 48,953 3.0 (0.4) Operating Income 22,372 22,321 21,568 0.2 3.5 Equity in Net Income (Loss) of Affiliates — — — — — Operating Contribution $ 22,372 $ 22,321 $ 21,568 0.2 % 3.5 % AT&T Inc. Subscribers Percent Change (in 000s) 2020 2019 2018 Postpaid 77,154 75,207 76,068 2.6 % (1.1) % Prepaid 18,102 17,803 16,828 1.7 5.8 Reseller 6,535 6,893 7,693 (5.2) (10.4) 80,767 65,986 51,332 22.4 28.5 Total Mobility Subscribers 182,558 165,889 151,921 10.0 % 9.2 % Mobility Net Additions Percent Change (in 000s) 2020 2019 2018 Postpaid Phone Net Additions 1,457 483 194 — % — % 1,640 989 1,248 65.8 (20.8) 2,183 (435) (90) — — 379 677 1,301 (44.0) (48.0) (449) (928) (1,599) 51.6 42.0 14,785 14,645 12,324 1.0 18.8 16,898 13,959 11,936 21.1 % 16.9 % 0.98 % 1.18 % 1.12 % (20) BP 6 BP 0.79 % 0.95 % 0.90 % (16) BP 5 BP 20192020 largely due to prepaidgrowth in phone subscribers and connected devices, offset by declines in international roaming revenue due to reduced travel during the pandemic. Successful offers aimed at customer retention contributed to subscriber gainsgrowth and lower churn.higher postpaid phone driven by the adoption of unlimited plans.ARPUARPU increasedpricing actions that were notthe decline in effect in the prior yearinternational roaming and a continued shift by subscribers to our unlimited plans.Churn31AT&T Inc.Dollars in millions except per share amountsCompetitive pricingPostpaid churn and postpaid phone-only churn were lower in the industry contributed2020 due to higher postpaid churn rates in 2019, and our movemigrations to unlimited plans, combined with an improved customer experiencecontinued network improvements, subscriber retention offers in 2018 contributedthe fourth quarter, and lower overall involuntary disconnects.AT&T Inc. Dollars in millions except per share amounts lower churn rates in that year.Equipmenthigher equipment revenue decreased in 2019. The 2019 decrease was driven by lowerfrom higher postpaid upgrade volumes, the mix of sales resulting from the continuing trend of customers choosing to upgradehigher-priced smartphones, and higher sales of data devices, less frequently or bring their own, which is generally offset by lower equipment expenseincluding wearables, wireless modems and hotspots..decreasedincreased in 2019,2020, largely driven by higher equipment costs, increased commission deferral amortization and intercompany content costs associated with plans offering HBO Max, partially offset by lower bad debt expense. The increase in commission deferral amortization is partly offset by the impacts of our second-quarter 2020 updates to extend the expected economic life of our Mobility customers. lower equipment expense driven by low upgrade rates and increased operational efficiencies, partially offset by higher bad debt expense and handset insurance costs.Depreciation expenses decreased in 2019, primarily due to fully depreciated assets, partially offset by ongoing capital spending for network upgrades and expansion.expansion partially offset by fully depreciated assets.20192020 and 2018.2019. Our Mobility operating income margin was 30.8% in 2020, 31.4% in 2019 and 30.6% in 2018 and 28.5% in 2017.2018. Our Mobility EBITDA margin was 42.0% in 2020, 42.7% in 2019 and 42.3% in 2018 and 39.8% in 2017.2018. we believe future wireless growth will depend on our ability to offer innovative services, plans and devices that take advantage of our premier 5G wireless network, which went nationwide in July 2020, and to provide these services in bundled product offerings. Subscribers that purchase two or more services from us have significantly lower churn than subscribers that purchase only one service. To support higher mobile data usage, our priority is to best utilize a wireless network that has sufficient spectrum and capacity to support these innovations on as broad a geographic basis as possible.subscribersplans tend to have higher retention and lower churn rates. SuchWe offer unlimited data plans and such subscribers also tend to have higher retention and lower churn rates. Our offerings are intended to encourage existing subscribers to upgrade their current services and/or add devices, attract subscribers from other providers and/or minimize subscriber churnchurn.. We also offer unlimited data plans and such subscribers also tend to have higher retention and lower churn rates.2019,2020, and we added approximately 8.49.9 million wholesale connected cars through agreements with various carmakers, and experienced strong growth in other Internet of Things (IoT) connections as well. We believe that theseconnections. These connected car agreements give us the opportunity to create future retail relationships with the car owners.32Video Results Percent Change 2020 2019 2018 Operating revenues Service $ 28,465 $ 32,123 $ 33,363 (11.4) % (3.7) % Equipment 145 1 — — — Total Operating Revenues 28,610 32,124 33,363 (10.9) (3.7) Operating expenses Operations and support 24,619 27,599 29,334 (10.8) (5.9) Depreciation and amortization 2,262 2,461 2,698 (8.1) (8.8) Total Operating Expenses 26,881 30,060 32,032 (10.6) (6.2) Operating Income 1,729 2,064 1,331 (16.2) 55.1 Equity in Net Income (Loss) of Affiliates — — — — — Operating Contribution $ 1,729 $ 2,064 $ 1,331 (16.2) % 55.1 % AT&T Inc. Connections Percent Change (in 000s) 2020 2019 2018 Video Connections Premium TV 16,505 19,496 22,926 (15.3) % (15.0) % 656 926 1,591 (29.2) (41.8) 17,161 20,422 24,517 (16.0) % (16.7) % Net Additions Percent Change (in 000s) 2020 2019 2018 Video Net Additions Premium TV (2,991) (3,430) (1,189) 12.8 % — % (270) (665) 436 59.4 — (3,261) (4,095) (753) 20.4 % — % 33AT&T Inc. Broadband Results Percent Change 2020 2019 2018 Operating revenues High-speed internet $ 8,534 $ 8,403 $ 7,956 1.6 % 5.6 % Legacy voice and data services 2,213 2,573 3,042 (14.0) (15.4) Other service and equipment 1,571 2,036 2,110 (22.8) (3.5) Total Operating Revenues 12,318 13,012 13,108 (5.3) (0.7) Operating expenses Operations and support 7,582 7,451 7,116 1.8 4.7 Depreciation and amortization 2,914 2,880 2,623 1.2 9.8 Total Operating Expenses 10,496 10,331 9,739 1.6 6.1 Operating Income 1,822 2,681 3,369 (32.0) (20.4) Equity in Net Income (Loss) of Affiliates — — — — — Operating Contribution $ 1,822 $ 2,681 $ 3,369 (32.0) % (20.4) % Video entertainment revenues are comprisedsubscription and advertising revenues. Revenues decreased in 2019, largely driven by a 15.0% decline in premium TV subscribers, as we continue to focus on high-value customers, partially offset by subscription-based advertising growth of 4.8%. Our customers continue to shift, consistent with the rest of the industry, from a premium linear service to our more economically priced OTT video service, or to competitors, which has pressured our video revenues.performance for Broadband:Connections Percent Change (in 000s) 2020 2019 2018 Broadband Connections Total Broadband Connections 14,100 14,119 14,409 (0.1) % (2.0) % Fiber Broadband Connections 4,951 3,887 2,763 27.4 40.7 Voice Connections Retail Consumer Switched Access Lines 2,862 3,329 3,967 (14.0) (16.1) U-verse Consumer VoIP Connections 3,231 3,794 4,582 (14.8) (17.2) Total Retail Consumer Voice Connections 6,093 7,123 8,549 (14.5) % (16.7) % Net Additions Percent Change (in 000s) 2020 2019 2018 Broadband Net Additions Total Broadband Net Additions (19) (290) 59 93.4 % — % Fiber Broadband Net Additions 1,064 1,124 1,034 (5.3) % 8.7 % Revenue declines in our premium TV products were partially offset by growth in revenues from our OTT service, AT&T TV NOW, which were primarily attributable to pricing actions. AT&T TV NOW subscriber net additions declined in 2019 due to price increases and fewer promotions.services. Our bundling strategy is helping to lower churn with subscribers who bundle broadband with another AT&T service.services and pricing actions.migrationdecline in the number of customers to our more advanced IP-based offerings or to competitors. The trend at which we are experiencing these revenue declines has slowed, with a decreasecustomers.$468 in 2019 compared to $726 in 2018.VoIP customers.AT&T Inc. Dollars in millions except per share amounts decreasedincreased in 2019,2020, largely driven by lower intercompany content costs from fewer subscribersassociated with plans offering HBO Max. Expense increases in 2020 and our ongoing focus on cost initiatives. Partially offsetting the decreases were 2019 also reflect higher amortization ofacquisition and fulfillment cost deferrals,deferral amortization, including the impact of second-quarter updates to decrease the estimated economic life forof our Entertainment Group customers,subscribers.costs associated with NFL SUNDAY TICKET. We expect the second-quarter 2019, update to estimated economic customer lives, and our launch of AT&T TV, our new streaming premium TV product, to contribute to expense pressure in the first half of 2020.Depreciation expenses decreased in 2019,primarily due to network assets becoming fully depreciated. Partially offsetting the decreases was ongoing capital spending for network upgrades and expansion, including the completion of the fiber commitment under the DIRECTV acquisition.expansion. increased in 2019 and decreased in 2018.2020 and 2019. Our Entertainment GroupBroadband operating income margin was 10.7%14.8% in 2020, 20.6% in 2019 10.1%and 25.7% in 2018 and 10.9% in 2017.2018. Our Entertainment GroupBroadband EBITDA margin was 22.4%38.4% in 2020, 42.7% in 2019 21.6%and 45.7% in 2018 and 22.2% in 2017.2018.34AT&T Inc.Dollars in millions except per share amountsBusiness Wireline Results Percent Change 2020 2019 2018 Operating revenues Strategic and managed services $ 15,788 $ 15,430 $ 14,649 2.3 % 5.3 % Legacy voice and data services 8,183 9,180 10,674 (10.9) (14.0) Other service and equipment 1,387 1,557 1,406 (10.9) 10.7 Total Operating Revenues 25,358 26,167 26,729 (3.1) (2.1) Operating expenses Operations and support 15,534 16,069 16,181 (3.3) (0.7) Depreciation and amortization 5,226 4,934 4,708 5.9 4.8 Total Operating Expenses 20,760 21,003 20,889 (1.2) 0.5 Operating Income 4,598 5,164 5,840 (11.0) (11.6) Equity in Net Income (Loss) of Affiliates — — — — — Operating Contribution $ 4,598 $ 5,164 $ 5,840 (11.0) % (11.6) % 2019.2020. Our strategic services are made up of (1) data services, including our VPN, dedicated internet ethernet and broadband, (2) voice service, including VoIP and cloud-based voice solutions, (3) security and cloud solutions, and (4) managed, professional and outsourcing services. Revenue increases were primarily attributable to growth in our data services and security and cloud solutions.solutions, dedicated internet and voice services and the impact of higher demand for connectivity due to the pandemic.2019,2020, primarily due to lower demand as customers continue to shift to our more advanced IP-based offerings or our competitors. The trend at which we are experiencing these revenue declines has slowed, with a decrease of $1,494 in 2019 compared to $3,117 in 2018.increaseddecreased in 2019, driven by2020, reflecting higher prior-year licensing of intellectual property licensing activity. Revenues fromassets. Revenue trends are impacted by the licensing of intellectual property assets, which vary from period-to-period and can impact revenue trends.period-to-period. Other service revenues include project-based revenue, which is nonrecurring in nature, as well as revenues from customer premises equipment.2019. The 2019 decrease was2020, primarily due to our continued efforts to shift to a software-baseddrive efficiencies in our network operations through automation and automate and digitize ourreductions in customer support activities, partially offset by higher fulfillment deferral amortization.expenses through digitization.2019, primarily due to2020, reflecting increases in capital spending for network upgrades and expansionexpansion..20192020 and 2018.2019. Our Business Wireline operating income margin was 19.4%18.1% in 2020, 19.7% in 2019 and 21.8% in 2018 and 20.6% in 2017.2018. Our Business Wireline EBITDA margin was 38.5%38.7% in 2020, 38.6% in 2019 39.4%and 39.5% in 2018 and 36.9% in 2017.2018.35AT&T Inc. WARNERMEDIA SEGMENT Percent Change 2020 2019 2018 2020 vs.
20192019 vs.
2018Segment Operating Revenues Turner $ 12,568 $ 13,122 $ 6,979 (4.2) % — % Home Box Office 6,808 6,749 3,598 0.9 — Warner Bros. 12,154 14,358 8,703 (15.4) — Eliminations & Other (1,088) 1,030 1,305 — — Total Segment Operating Revenues 30,442 35,259 20,585 (13.7) — Cost of revenues Cost of revenues Turner 5,330 5,970 2,815 (10.7) — Home Box Office 4,356 3,248 1,669 34.1 — Warner Bros. 8,236 10,006 6,130 (17.7) — Selling, general and administrative Selling, general and administrative 5,803 5,368 2,895 8.1 — Eliminations & Other (2,146) (420) (230) — — Depreciation and amortization Depreciation and amortization 671 589 311 13.9 — Total Operating Expenses Total Operating Expenses 22,250 24,761 13,590 (10.1) — Operating Income Operating Income 8,192 10,498 6,995 (22.0) — Equity in Net Income (Loss) of Affiliates Equity in Net Income (Loss) of Affiliates 18 161 25 (88.8) — Total Segment Operating Contribution $ 8,210 $ 10,659 $ 7,020 (23.0) % — % consists ofincludes our Turner, Home Box Office (HBO) and Warner Bros. business units. The order of presentation reflects the consistency of revenue streams, rather than overall magnitude as that is subject to timing and frequency of studio releases. WarnerMedia also includes ourHistorical financial results for regional sports networks (RSNs).of the WarnerMedia segment, (Eliminations & Other) have been recast to include Xandr, previously a separate reportable segment, and to remove the Crunchyroll anime business that is classified as held-for-sale.for the periods prior to our June 14, 2018 acquisition. For this reason, 2018 results are not comparable to the other two years presented for this segment and therefore percent changes comparing 2018 and 2019 are not shown in the tables. Otter Media isand HBO Latin America Group (HBO LAG) are included as an equity method investment for periodsinvestments prior to our August 7, 2018 acquisition ofacquiring the remaining interestinterests in each, which occurred in August 2018 and isMay 2020, respectively. Both are included in the segment operating results following the dates of acquisition. Consistent with our past practice, many of the impacts of the fair value adjustments from the application of purchase accounting required under GAAP have not been allocated to the segment, instead they are reported as acquisition-related items in the reconciliation to consolidated results.Duedecreased in 2020, primarily due to lower theatrical and television product revenues, reflecting the June 2018 acquisitionpandemic-related postponement of Timetheatrical releases and theatrical and television production delays at Warner Bros. Turner revenues also decreased due to lower advertising revenues resulting from cancellation and shifting of sporting events, and/or compressed seasons. HBO revenues partially offset these decreases, driven by growth in international revenues and domestic HBO Max retail subscribers, partially offset by lower licensing revenues.business unit results for 2019 are not comparable to prior periods, and, therefore, comparative results are not discussed.34.0% in 2018.Turner includes the WarnerMedia businesses managed by Turner as well as our financial results for RSNs.36AT&T Inc. Turner Results Percent Change 2020 2019 2018 2020 vs.
20192019 vs.
2018Operating revenues Subscription $ 7,613 $ 7,736 $ 4,207 (1.6) % — % Advertising 3,941 4,566 2,330 (13.7) — Content and other 1,014 820 442 23.7 — Total Operating Revenues 12,568 13,122 6,979 (4.2) — Operating expenses Cost of revenues 5,330 5,970 2,815 (10.7) — Selling, general and administrative 1,624 1,770 979 (8.2) — Depreciation and amortization 277 235 131 17.9 — Total Operating Expenses 7,231 7,975 3,925 (9.3) — Operating Income 5,337 5,147 3,054 3.7 — Equity in Net Income (Loss) of Affiliates (2) 52 54 — — Operating Contribution $ 5,335 $ 5,199 $ 3,108 2.6 % — % are generateddecreased in 2020 primarily due to lower advertising revenues resulting from licensing programmingthe cancellation of the NCAA Division I Men’s Basketball Tournament in the first quarter of 2020 and the impacts from shifting sporting event schedules and/or compressed seasons, such as the delay of the NBA season that historically has started earlier in the fourth quarter. These revenue declines were partially offset by increased advertising due to distribution affiliatesnews coverage of general elections and from selling advertising on itsCOVID-19 developments. Operating revenue declines were also caused by lower subscription revenues at regional sports networks and digital properties. We expect strong advertisingunfavorable exchange rates, partially offset by higher content and other revenue, growthincluding internal sales to HBO Max, which are eliminated in consolidation within the WarnerMedia segment.Turner advertising revenues are expecteda result of the previously mentioned cancellations and modifications to benefit from presidential election political spendthe timing and/or duration of various sporting events.from airing the NCAA Final Four and Championship games.administrativeforin 2019 and 43.8% forin 2018. Our Turner EBITDA margin was 41.0% for 2019 and 45.6% for 2018.Operating revenues are generated from the exploitation of original and licensed programming through distribution outlets.Operating income increased in 2019. Our Home Box Office operating income margin was 34.6% for 2019 and 37.7% for 2018. Our Home Box Office EBITDA margin was 36.1% for 2019 and 39.2% for 2018.Operating revenues primarily relate to theatrical product (which is content made available for initial exhibition in theaters) and television product (which is content made available for initial airing on television or OTT services). During 2019, fourth-quarter revenues were pressured from foregone content licensing revenues as we prepare for our launch of HBO Max in 2020 and lower theatrical product resulting from a more favorable mix of box office and home entertainment releases in the prior year. The timing of theatrical releases varies from year to year and is based on several factors. The variability of the release37AT&T Inc. Home Box Office Results Percent Change 2020 2019 2018 2020 vs.
20192019 vs.
2018Operating revenues Subscription $ 6,090 $ 5,814 $ 3,201 4.7 % — % Content and other 718 935 397 (23.2) — Total Operating Revenues 6,808 6,749 3,598 0.9 — Operating expenses Cost of revenues 4,356 3,248 1,669 34.1 — Selling, general and administrative 1,672 1,064 518 57.1 — Depreciation and amortization 98 102 56 (3.9) — Total Operating Expenses 6,126 4,414 2,243 38.8 — Operating Income 682 2,335 1,355 (70.8) — Equity in Net Income (Loss) of Affiliates 16 30 29 (46.7) — Operating Contribution $ 698 $ 2,365 $ 1,384 (70.5) % — % schedulethe difficultyadministrative increased in predicting the popularity of content can result in meaningful/material changes in quarterly revenue results as well as difficult year-over-year comparisons.2020, primarily due to higher marketing costs associated with HBO Max.Warner Bros. Results Percent Change 2020 2019 2018 2020 vs.
20192019 vs.
2018Operating revenues Theatrical product $ 4,389 $ 5,978 $ 4,002 (26.6) % — % Television product 6,171 6,367 3,621 (3.1) — Games and other 1,594 2,013 1,080 (20.8) — Total Operating Revenues 12,154 14,358 8,703 (15.4) — Operating expenses Cost of revenues 8,236 10,006 6,130 (17.7) — Selling, general and administrative 1,681 1,810 1,000 (7.1) — Depreciation and amortization 169 162 96 4.3 — Total Operating Expenses 10,086 11,978 7,226 (15.8) — Operating Income 2,068 2,380 1,477 (13.1) — Equity in Net Income (Loss) of Affiliates (70) (30) (28) — — Operating Contribution $ 1,998 $ 2,350 $ 1,449 (15.0) % — % AT&T Inc. Dollars in millions except per share amounts forin 2019 and 17.0% forin 2018. Our Warner Bros. EBITDA margin was 17.7% for 2019 and 18.1% for 2018.LATIN AMERICA SEGMENT Percent Change 2020 2019 2018 Segment Operating Revenues Vrio $ 3,154 $ 4,094 $ 4,784 (23.0) % (14.4) % Mexico 2,562 2,869 2,868 (10.7) — Total Segment Operating Revenues 5,716 6,963 7,652 (17.9) (9.0) Segment Operating Contribution Vrio (142) 83 347 — (76.1) Mexico (587) (718) (1,057) 18.2 32.1 Total Segment Operating Contribution $ (729) $ (635) $ (710) (14.8) % 10.6 % Operating Results2019,2020, primarily driven by lower revenues for Vrio, primarily resulting from foreign exchange pressure related to Argentina’s hyperinflationary economy. Mexico revenues were stable, with service revenue growth offset by lower equipment sales.rates and overall economic impacts.increasedin 2019 and decreased in 2018,2020, reflecting foreign exchange pressure, offset byrates and overall economic impacts, and increased in 2019, due to improvement in Mexico. Our Latin America segment operating income margin was (13.2)% in 2020, (9.5)% in 2019 and (9.7)% in 2018 and (4.3)% in 2017.2018.38AT&T Inc. Vrio Results Percent Change 2020 2019 2018 Operating revenues $ 3,154 $ 4,094 $ 4,784 (23.0) % (14.4) % Operating expenses Operations and support 2,800 3,378 3,743 (17.1) (9.8) Depreciation and amortization 520 660 728 (21.2) (9.3) Total Operating Expenses 3,320 4,038 4,471 (17.8) (9.7) Operating Income (Loss) (166) 56 313 — (82.1) Equity in Net Income of Affiliates 24 27 34 (11.1) (20.6) Operating Contribution $ (142) $ 83 $ 347 — % (76.1) % Percent Change (in 000s) 2020 2019 2018 2020 vs.
20192019 vs.
2018Vrio Video Subscribers 10,942 13,331 13,838 (17.9) % (3.7) % Percent Change (in 000s) 2020 2019 2018 (148) (285) 250 48.1 % — % Servicerevenues increaseddecreased in 2019,2020, primarily driven by foreign exchange and overall economic impacts.growthchanges in our subscriber base.foreign exchange rates.AT&T Inc. Dollars in millions except per share amounts Mexico Results Percent Change 2020 2019 2018 Operating revenues Service $ 1,656 $ 1,863 $ 1,701 (11.1) % 9.5 % Equipment 906 1,006 1,167 (9.9) (13.8) Total Operating Revenues 2,562 2,869 2,868 (10.7) — Operating expenses Operations and support 2,636 3,085 3,415 (14.6) (9.7) Depreciation and amortization 513 502 510 2.2 (1.6) Total Operating Expenses 3,149 3,587 3,925 (12.2) (8.6) Operating Income (Loss) (587) (718) (1,057) 18.2 32.1 Equity in Net Income (Loss) of Affiliates — — — — — Operating Contribution $ (587) $ (718) $ (1,057) 18.2 % 32.1 % Percent Change (in 000s) 2020 2019 2018 Postpaid 4,696 5,103 5,805 (8.0) % (12.1) % Prepaid 13,758 13,584 12,264 1.3 10.8 Reseller 489 472 252 3.6 87.3 Mexico Wireless Subscribers 18,943 19,159 18,321 (1.1) % 4.6 % Percent Change (in 000s) 2020 2019 2018 Postpaid (407) (608) 307 33.1 % — % Prepaid 174 1,919 2,867 (90.9) (33.1) Reseller 118 219 48 (46.1) — Mexico Wireless Net Additions (115) 1,530 3,222 — % (52.5) % 2019, reflecting higher demand2020, primarily due to lower equipment sales volumes related to COVID-19 and changes in the prior year for our initial offering of equipment installment programs.foreign exchange rates.2019, driven by2020, primarily due to lower equipment costs.sales and changes in foreign exchange rates. Approximately 6%7% of Mexico expenses are U.S. dollar-based, with the remainder in the local currency.Depreciation expense decreasedincreased in 2019,2020, primarily due to changes in the useful lives of certain assets, partially offset by the amortization of spectrum licenses and higher in-service assets. These increases were partially offset by changes in foreign exchange rates.20192020 and decreased in 2018.2019. Our Mexico operating income margin was (22.9)% in 2020, (25.0)% in 2019 and (36.9)% in 2018 and (28.0)% in 2017.2018. Our Mexico EBITDA margin was (2.9)% in 2020, (7.5)% in 2019 and (19.1)% in 2018 and (14.9)% in 2017.2018.39AT&T Inc. Operating revenues decreased in 2019, due to foreign exchange pressures.Operations and support expenses decreased in 2019, reflecting changes in foreign currency exchange rates. Approximately 19% of Vrio expenses are U.S. dollar-based, with the remainder in the local currency.Depreciation expense decreased in 2019, primarily due to changes in foreign currency exchange rates.Operating income decreased in 2019 and 2018. Our Vrio operating income margin was 1.4% in 2019, 6.5% in 2018 and 8.0% in 2017. Our Vrio EBITDA margin was 17.5% in 2019, 21.8% in 2018 and 23.5% in 2017.Operating revenues increased in 2019 due to growth in subscription-based advertising revenue and our acquisition of AppNexus in August 2018 (see Note 6).Operations and support expenses increased in 2019 reflecting our acquisition of AppNexus and our ongoing development of the platform supporting Xandr’s business.Operating income decreased in 2019 and increased 2018. Our Xandr segment operating income margin was 65.2% in 2019, 76.6% in 2018 and 87.5% in 2017.40AT&T Inc.Dollars in millions except per share amounts to our Xandr segment operating results, we are providing a view of total advertising revenues generated by AT&T. This combined view presents the entire portfolio of advertising revenues reported across all operating segments and represents a significant strategic initiative and growth opportunity for AT&T. See the revenue categories tabletables in Note 5 for a reconciliation.Total Advertising Revenues Percent Change 2020 2019 2018 Operating Revenues Turner $ 3,941 $ 4,566 $ 2,330 (13.7) % 96.0 % Video 1,718 1,672 1,595 2.8 4.8 Xandr 2,089 2,022 1,740 3.3 16.2 Other 386 382 352 1.0 8.5 Eliminations (1,718) (1,672) (1,595) (2.8) (4.8) Total Advertising Revenues $ 6,416 $ 6,970 $ 4,422 (7.9) % 57.6 % includingand underscores the importance of mobile solutions for our business customers. WirelessResults have been recast to conform to the current period’s classification of consumer and business relationships include FirstNet customers, IoT connections and other company paid-for devices.wireless subscribers. See “Discussion and Reconciliation of Non-GAAP Measure” for a reconciliation of these supplemental measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.Business Solutions Results Percent Change 2020 2019 2018 Operating revenues Wireless service $ 7,732 $ 7,444 $ 6,893 3.9 % 8.0 % Strategic and managed services 15,788 15,430 14,649 2.3 5.3 Legacy voice and data services 8,183 9,180 10,674 (10.9) (14.0) Other service and equipment 1,387 1,557 1,406 (10.9) 10.7 Wireless equipment 2,882 2,754 2,508 4.6 9.8 Total Operating Revenues 35,972 36,365 36,130 (1.1) 0.7 Operating expenses Operations and support 22,713 22,714 22,586 — 0.6 Depreciation and amortization 6,509 6,148 5,894 5.9 4.3 Total Operating Expenses 29,222 28,862 28,480 1.2 1.3 Operating Income 6,750 7,503 7,650 (10.0) (1.9) Equity in Net Income (Loss) of Affiliates — — — — — Operating Contribution $ 6,750 $ 7,503 $ 7,650 (10.0) % (1.9) % AT&T Inc. Dollars in millions except per share amounts 20202021 Revenue Trends We expect revenue growth in our wireless and broadband businesses as customers demand premium content, instant connectivity and higher speeds made possible by our fiber network expansion and wireless network enhancements through 5G deployment.and that 5G handset introductions during 2020handsets will continue to drive wireless equipment revenue growth. We anticipategrowth, and that applications like video streaming will also continue to drive greater demand for broadband. broadband services. The reluctance of consumers to travel at levels prior to the pandemic is expected to continue to contribute to uncertainty in international roaming wireless service revenues.premium content41AT&T Inc.Dollars in millions except per share amountsto drive revenue growth from both the current wholesale distribution through traditional pay-TV providers and our new video streaming platform, HBO Max, and premium content will continue to be launcheddrive revenue growth. The pandemic-related partial closure of movie theaters is expected to continue to pressure revenues and higher costs are anticipated based on our decision to distribute our 2021 films on HBO Max in May 2020. the U.S. simultaneous with theaters for 31 days.live-TV streaming packages, to traditional full-size linear video. We expect growth in our advertising businesses from combining the data insights from our 170 million direct-to-consumer relationships with our premium video and digital advertising inventory. Revenue from business customers willis expected to continue to grow for mobile and IP-based services but decline for legacy wireline services. Overall, we believe growth in wireless, broadband and WarnerMedia’s premium content should offset pressure from our linear video and legacy voice and data services.20202021 Expense Trends We expect the spending required to support growth initiatives, primarily our continued deployment of fiber, 5G, deployment and FirstNet build, as well as the launch ofcontinued investment into the HBO Max platform, to pressure expense trends in 2020.2021. To the extent 5G handset introductions continue in 2020 are2021, and as expected,anticipated, the expenses associated with those device sales will alsoare expected to contribute to higher costs. In addition, we expect the second-quarter 2019 update to estimated economic customer lives, and our launch of AT&T TV, our new streaming premium TV product, to contribute to expense pressure in the first half of the year. During 2020,2021, we will also continue to transition our hardware-based network technology to more efficient and less expensive software-based technology. These investments will help prepare us to meet increased customer demand for enhanced wireless and broadband services, including video streaming, augmented reality and “smart” technologies. The software benefits of our 5G wireless technology and new video delivery platforms should result in a more efficient use of capital and lower network-related expenses in the coming years.To offsetcosts of these initiatives, we anticipate savings from corporate initiatives to lower labor-related costs and corporate overhead, digital transformation ofbusiness. We are restructuring businesses, sunsetting legacy networks, improving customer service and ordering functions vendor discountsthrough digital transformation, sizing our support costs and staffing with current activity levels, and reassessing overall benefit costs. We expect continued savings from these initiatives and through our WarnerMedia merger synergies.synergy program. Cost savings and non-strategic asset sales should help to further reducealigns with our focus on debt level.reduction.a positive year althoughsignificant volatility in 2020 due to several factors, including the global pandemic, and thus general business investment remained modest, which affectedhad impact on our business services.Most The global pandemic has caused, and could again cause, delays in the development, manufacturing (including the sourcing of our productskey components) and services areshipment of products. As the labor market has not directly affected by the impositionreturned to pre-pandemic levels of tariffs on Chinese goods. To date, we have not experienced any disruptions from our wireless handset supply chain due to the coronavirus epidemic in China but we continue to monitor the situation. While unemployment, remains historically low, our residential customers continue to be price sensitive in selecting offerings, especially in the video area, and continue to focus on products that give them efficient access to video and broadcast services. WeMost of our products and services are not directly affected by the imposition of tariffs on Chinese goods. However, we expect ongoing pressure on pricing during 20202021 as we respond to the competitive marketplace, especially in wireless and video services.2020.2021. Investment returns on these assets depend largely on trends in the economy, and a weakness in the equity, fixed income and real asset markets could require us to make future contributions to the pension plans. In addition, our policy of recognizing actuarial gains and losses related to our pension and other postretirement plans in the period in which they arise subjects us to earnings volatility caused by changes in market conditions; however, these actuarial gains and losses do not impact segment performance as they are required to be recorded in other“Other income (expense) – net.” Changes in our discount rate, which are tied to changes in the bond market, and changes in the performance of equity markets, may have significant impacts on the valuation of our pension and other postretirement obligations at the end of 20202021 (see “Critical Accounting Policies and Estimates”).AT&T Inc. Dollars in millions except per share amounts In addition, we are pursuing,We continue to support regulatory and legislative measures and efforts, at both the state and federal levels, additional legislative and regulatory42AT&T Inc.Dollars in millions except per share amountsmeasures to reduce inappropriate regulatory burdens that are no longer appropriate in a competitive telecommunications market and that inhibit our ability to compete more effectively and offer needed services wanted and needed byto our customers, including initiatives to transition services from traditional networks to all IP-based networks. At the same time, we also seek to ensure that legacy regulations are not further extended to broadband or wireless services, which are subject to vigorous competition.We have organized the following discussion by reportable segment.Although theThe D.C. Circuit upheld the FCC’s current classification, challengesalthough it remanded three discrete issues to the FCC for further consideration. These issues related to the effect of the FCC’s decision to classify broadband services as information services on public safety, the regulation of pole attachments, and universal service support for low-income consumers through the Lifeline program. Because no party sought Supreme Court review of the D.C. Circuit’s decision to uphold the FCC’s classification of broadband as an information service, that decision remainis final. A more detailed discussion can be found under “Regulatory Developments”.A number ofFCC, and in some cases, established additional requirements.FCC. Suits have been filed concerning such laws in certain states, but have been stayed pursuant to agreements by those states not to enforce their laws pending final resolution of all appeals. We will continue to support congressional action to codify a set of standard consumer rules for the internet. A more detailed discussion can be found under “Regulatory Developments”.two states.In October 2016, the FCC adopted new rules governing the use of customer information by providers of broadband internet access service. Those rules were more restrictive in certain respects than those governing other participants in the internet economy, including so-called “edge” providers such as Google and Facebook. In April 2017, the president signed a resolution passed by Congress repealing the new rules under the Congressional Review Act.has beencontinues to be adopted or considered or adopted in a number of states.jurisdictions. Legislative, regulatory and regulatory actionlitigation actions could result in increased costs of compliance, further regulation or claims against broadband internet access service providers and others, and increased uncertainty in the value and availability of data. Effective as of January 1, 2020, a California state law gives consumers the right to know what personal information is being collected about them, and whether and to whom it is sold or disclosed, and to access and request deletion of this information. Subject to certain exceptions, it also gives California consumers the right to opt out of the sale of personal information.Federal regulations also canBetween 2018 and 2019, the FCC streamlined multiple federal wireless structure review processes with the potential to delay and impede the deployment of infrastructure used to provide telecommunications and broadband services, including small cell equipment. In March, AugustRecognizing that state and September 2018,local regulations have the same potential, in November 2020 the FCC adopted orders to streamline federalan order tightening the limits on state and local wireless infrastructure review processes in orderauthority to facilitate deployment of next-generationdeny requests to use existing structures for wireless facilities. Specifically, the FCC’s March 2018 Order streamlined historical, tribal, and environmental review requirements for wireless infrastructure, including by excluding most small cell facilities from such review. The Order was appealed and in August 2019, the D.C. Circuit Court of Appeals vacated the FCC’s finding that most small cell facilities are excluded from review, but otherwise upheld the FCC’s Order. The FCC’s August and September 2018 Orders simplified the regulations for attaching telecommunications equipment to utility poles and clarified when local government right-of-way access and use restrictions can be preempted because they unlawfully prohibit the provision of telecommunications services. ThoseThese orders were appealed to the 9th9th Circuit Court of Appeals, where theythe appeals remain pending. In addition to the FCC’s actions, to date, 28 states and Puerto Rico have adopted legislation to facilitate small cell deployment.service.service, and in July 2020, we announced nationwide 5G coverage. We expect to have mobile 5G service available nationwide to more than 200 million people by the second quarter of 2020; we anticipate the introduction of 5G handsets and devices will contribute to a renewed interest in equipment upgrades.devices and to provide these services in bundled product offerings to best utilizedevices. We will need a wireless network that haswith sufficient spectrum and capacity and sufficiently broad coverage to support the growth of these innovations on as broad a geographic basis as possible.services. We continue to invest significant capital in expanding our network capacity, as well as to secure and utilize spectrum that meets our long-term needs. We secured the FirstNet contract, which provides us with access to 20 MHz of nationwide low band spectrum, and invested in 5G and millimeter-wave technologies with our acquisition of Fiber-Tower Corporation, which holds significant amounts of spectrum in the millimeter wave bands (39 GHz) that the FCC reallocated for mobile broadband43AT&T Inc. services. We were also awarded 24 GHz licenses covering a nationwide footprint in a recent FCC auction. These bands will help to accelerate our entry into 5G services.thatwhich could impair Warner Bros.’ current country-by-country licensing approachimpact WarnerMedia’s activities in the European Union.EU. Piracy, particularly of digital content, continues to threaten WarnerMedia’s revenues from products and services, and we work to limit that threat through a combination of approaches, including technological and legislative solutions. Outside the U.S., various laws and regulations, as well as trade agreements with the U.S., also apply to the distribution or licensing of feature films for exhibition in movie theaters and on broadcast and cable networks. For example, in certain countries, including China, laws and regulations limit the number of foreign films exhibited in such countries in a calendar year.services and advertising and data insights (especially with WarnerMedia).services. We now provide integrated services to diverse groups of customers in the U.S. on an integrated telecommunications network utilizing different technological platforms, including wireless, satellite and wireline.platforms. In 2020,2021, our key initiatives include:•LaunchingContinuing expansion of 5G service nationwide on our premier wireless network.•Generating mobile subscriber growth from FirstNet and our premier network quality.•LaunchingIncreasing subscriber base for HBO Max, our new platform for premium content and video offered directly to consumers, as well as through our traditionalother distributors.•IncreasingImproving fiber penetration and growing broadband revenues.•Continuing to develop a competitive advantage through our industry-leading networkcorporate cost structure.•GrowingImproving profitability in our Mexico business unit. We secured the FirstNet contract, which provides us with access to 20 MHz of nationwide low band spectrum and the opportunity to grow subscribers through the first responder agencies served, and invested in 5G and millimeter-wave technologies with our acquisition of FiberTower Corporation, which holds significant amounts of spectrum in the millimeter wave bands (39 GHz) that the FCC reallocated for mobile broadband services. These bands will help to accelerate our entry into 5G services.2019,2020, we served 185202 million wireless subscribers in North America, with 166more than 182 million in the United States. Our LTE technology covers over 430440 million people in North America, and in the United States, we cover all major metropolitan areas and more thanover 330 million people. We also provide 4G coverage using another technology (HSPA+), and when combined with our upgraded backhaul network, we provide enhanced network capabilities and superior mobile broadband speeds for data and video services. In December 2018, we introduced the nation’s first commercial mobile 5G service and plan to expandexpanded that deployment nationwide by the second quarter of 2020 to cover approximately 200 million people.in July 2020.2019,2020, we provided LTE coverage to approximately 100over 110 million people in Mexico. satellite and wireless services, we plan to focus on expanding our wireless network capabilities and provide high-speed internet and video offerings that allow customers to integrate their home or44AT&T Inc.Dollars in millions except per share amounts2020,2021, we will continue to develop and provide unique integrated video, mobile and broadband solutions. The launch of the HBO Max platform will facilitatehas facilitated our customers’ desire to view video anywhere on demand and encouragehas encouraged customer retention.AT&T Inc. Dollars in millions except per share amounts 2019.2020. Industry-wide regulatory developments are discussed above in Operating Environment Overview. While these issues may apply only to certain subsidiaries, the words “we,” “AT&T” and “our” are used to simplify the discussion. The following discussions are intended as a condensed summary of the issues rather than as a comprehensive legal analysis and description of all of these specific issues.Internet In February 2015, the FCC released an order classifying both fixed and mobile consumer broadband internet access services as telecommunications services, subject to Title II of the Communications Act. The Order, which represented a departure from longstanding bipartisan precedent, significantly expanded the FCC’s authority to regulate broadband internet access services, as well as internet interconnection arrangements. In December 2017, the FCC reversed its 2015 decision by reclassifying fixed and mobile consumer broadband services as information services and repealing most of the rules that were adopted in 2015. In lieu of broad conduct prohibitions, the order requires internet service providers to disclose information about their network practices and terms of service, including whether they block or throttle internet traffic or offer paid prioritization. Several parties appealed the FCC’s December 2017 decision and the D.C. Circuit heard oral argument on the appeals on February 1, 2019. On October 1, 2019, the courtD.C. Circuit issued a unanimous opinion upholding the FCC’s reclassification of broadband as an information service, and its reliance on transparency requirements and competitive marketplace dynamics to safeguard net neutrality. While the court vacated the FCC’s express preemption of any state regulation of net neutrality, it nevertheless stressed that its ruling doesdid not prevent the FCC or ISPs from relying on conflict preemption to invalidate particular state laws that are inconsistent with the FCC’s regulatory objectives and framework. The court also concluded thatremanded the matter to the FCC failed to satisfy its obligation under the Administrative Procedure Act (APA) to considerfor further consideration of the impact of its 2017 order in three discrete areas:reclassifying broadband services as information services on public safety, the Lifeline program, and pole attachment regulation, and thus remanded it toregulation. In October 2020, the FCC for further proceedings onadopted an order concluding that those issues but without disturbing the operative effect of that order. Several petitions for rehearingdid not justify reversing its decision to reclassify broadband services as information services. An appeal of the D.C. Circuit’s October 1FCC’s remand decision have been filed. Those petitions remainis pending. A have adopted legislation to reimpose the very rules the FCC repealed. In some cases, state legislation imposes requirements that go beyond the FCC’s February 2015 order. Additionally, some state governors have issued executive orders that effectively reimpose the repealed requirements. Suits have been filed concerning laws in California and Vermont. Both lawsuits have beenwere stayed pursuant to agreements by those states not to enforce their laws pending final resolution of all appeals of the FCC’s December 2017 order. Because that order is now final, the California suit has returned to active status. Nonetheless, enforcement of both the California and Vermont laws remains stayed pending a ruling by a U.S. District Court in California on motions for a preliminary injunction against enforcement of the California law. Argument on those motions is now scheduled for February 2021. We expect that going forward additional states may seek to impose net neutrality requirements. We will continue to support congressional action to codify a set of standard consumer rules for the internet. SinceIn June and November 2017,2020, the FCC has adopted four significant rulings designedissued a Declaratory Ruling clarifying the limits on state and local authority to accelerate broadband infrastructure deployment. Indeny applications to modify existing structures to accommodate wireless facilities. Appeals of the November 2017,2020 order remain pending in the FCC updated and streamlined certain rules governing pole attachments, copper retirement, and service discontinuances. In March 2018, the FCC eliminated lengthy environmental, historical and tribal reviews for most small cell deployments and streamlined processes that must be followed when those reviews are required. The D.C.9th Circuit Court of Appeals vacated the FCC’s finding in this Order that small cell facilities do not require environmental, historical and tribal reviews, but left intact all other processes adopted to streamline review when required. In August 2018, theAppeals. If sustained on appeal, these FCC adopted more comprehensive pole attachment reform, including by simplifying the attaching process (i.e., one-touch make-ready) and clarified that the Communications Act precludes local governments from imposing moratoria on the deployment of communications facilities. And, in September 2018, the FCC restricted the ability45AT&T Inc.Dollars in millions except per share amountsofdecisions will remove state and local governments to impede small cell deployments in rights-of-way and on government-owned structures, through exorbitant fees, unreasonable aesthetic requirements and other actions. These decisions will remove regulatory barriers and reduce the costs of the infrastructure needed for 5G deployment,and FirstNet deployments, which will enhance our ability to place small cell facilities on utility poles, expand existing facilities to accommodate public safety services, and to replace legacy facilities and services with advanced broadband infrastructure and services. Appeals of the August and September 2018 Orders remain pending in the 9th Circuit Court of Appeals.AT&T Inc. Dollars in millions except per share amounts 2018,2020, the FCC took several actions to make spectrum available for 5G services. In late 2018,First, the FCC adoptedcompleted the auction rules forof the 39 GHz band that will allow the FCC to auction remaining unlicensed 39 GHz spectrum and realign the band to allowin large, contiguous blocks of spectrum that will support 5G. ThisAT&T obtained spectrum in this auction, which also includesincluded spectrum in the 37 GHz and 47 GHz bands is currently underway.(see “Other Business Matters”). The FCC has granted AT&T special temporary authority to launch its 5G service in 400also made 150 MHz of contiguousmid-band CBRS spectrum in the 37/39 GHz band in a total of 32 markets. In addition,available, to be shared with Federal incumbents, who enjoy priority. Furthermore, the FCC completedbegan the auction of 280 MHz of mid-band spectrum presently used for satellite service (the “C Band” auction). This auction is expected to conclude by June of 2021. Other mid-band spectrum auctions are planned for later in 2021.24the Pallone-Thune Telephone Robocall Abuse Criminal Enforcement and 28 GHz spectrum, twoDeterrence Act (TRACED Act) by Congress, the FCC adopted new rules requiring voice service providers to implement caller ID authentication protocols (known as STIR/SHAKEN) and adopt robocall mitigation measures. These measures apply to portions of their networks where STIR/SHAKEN is not enabled, in addition to other bands that will support 5G. AT&T was awarded 24 GHz licenses covering a nationwide footprint.anti-robocall measures. The new rules contemplate ongoing FCC oversight and review of efforts related to STIR/SHAKEN implementation. Among other goals, the FCC has stated its intention to promote the IP transition through its rules.3.40%2.70% and 3.20%2.40%, respectively, at December 31, 2019,2020, reflect the hypothetical rate at which the projected benefit obligations could be effectively settled or paid out to participants. We determined our discount rate based on a range of factors, including a yield curve composed of the rates of return on several hundred high-quality, fixed income corporate bonds available at the measurement date and corresponding to the related expected durations of future cash outflows for the obligations. These bonds were all rated at least Aa3 or AA- by one of the nationally recognized statistical rating organizations, denominated in U.S. dollars, and neither callable, convertible nor index linked. For the year ended December 31, 2019,2020, when compared to the year ended December 31, 2018,2019, we decreased our pension discount rate by 1.10%0.70%, resulting in an increase in our pension plan benefit obligation of $8,018$5,594 and decreased our postretirement discount rate by 1.20%0.80%, resulting in an increase in our postretirement benefit obligation of $2,399.$1,311.2020 and 2019.2020. Our expected long-term rate of return on postretirement plan assets is 4.50% for 2021 and 4.75% for 2020 and 5.75% for 2019.2020. Our expected return on plan assets is calculated using the actual fair value of plan assets. If all other factors were to remain unchanged, we expect that a 0.50% decrease in the expected long-term rate of return would cause 20202021 combined pension and postretirement cost to increase $273,$277, which under our accounting policy would be adjusted to actual returns in the current year as part of our fourth-quarter remeasurement of our retiree benefit plans.AT&T Inc. Dollars in millions except per share amounts $3,027$3,128 in our 20192020 depreciation expense and that a one-year decrease would have resulted in an increase of approximately $4,196$4,353 in our 20192020 depreciation expense. See Notes 7 and 8 for depreciation and amortization expense applicable to property, plant and equipment, including our finance lease right-of-use assets.46AT&T Inc.Dollars in millions except per share amountsrecorded an impairment in 2019 forbased our SKY Brasil trade name (see Note 9).assumptions on a combination of our historical results, trends, business plans and marketplace participant data.We test goodwillflow)flow model) and a market multiple approach. The income approach utilizes our 10-yearfuture cash flow projections with a perpetuity value discounted at an appropriate weighted average cost of capital. The market multiple approach uses the multiples of publicly traded companies whose services are comparable to those offered by the reporting units. In 2019,As of October 1, 2020, the calculated fair values of the reporting units exceeded their book values in all circumstances. Ifcircumstances; however, the Turner, HBO and Entertainment Group (prior to our December reporting unit change discussed below) fair values exceed their book values by less than 10% with COVID-19 impacts, industry trends and our content distribution strategy affecting fair value. For the reporting units with fair value in excess of 10% of book value, if either the projected rate of long-term growth of cash flows or revenues declined by 0.5%, or if the discount rateweighted average cost of capital increased by 0.5%, the fair values would still be higher than the book value of the goodwill. In the event of a 10% drop in the fair values of the reporting units, the fair values still would have exceeded the book values of the reporting units. For the Turner and HBO reporting units as of October 1, 2020, if the projected rate of longer-term growth of cash flows or revenues declined by 1% and more than 2%, respectively, or if the weighted average cost of capital increased by 0.5%, it would result in impairment of the goodwill. Carrying values of the reporting units in the WarnerMedia segment (Turner, HBO and Warner Bros.) decrease as intangibles identified in the acquisition are amortized.We assessThese changes required us to identify a separate Video reporting unit, which required evaluating assigned goodwill for impairment, while first assessing any impairment of goodwill at the historical Entertainment Group level.AT&T Inc. Dollars in millions except per share amounts Inputs to the model include subscriber growth, churn, revenue per user, capital investment and acquisition costs per subscriber, ongoing operating costs and resulting EBITDA margins. We based our assumptions on a combination of average marketplace participant data and our historical results, trends and business plans. These licenses are tested annually for impairment on an aggregated basis, consistent with their use on a national scope for the United States. For impairment testing, we assume subscriber and revenue growth will trend up to projected levels, with a long-term growth rate reflecting expected long-term inflation trends. We assume churn rates will initially exceed our current experience but decline to rates that are in line with industry-leading churn. We used a discount rate of 8.75%9.25%, based on the optimal long-term capital structure of a market participant and its associated cost of debt and equity for the licenses, to calculate the present value of the projected cash flows. If either the projected rate of long-term growth of cash flows or revenues declined by 0.5%, or if the discount rate increased by 0.5%, the fair values of these wireless licenses would still be higher than the book value of the licenses. The fair value of these wireless licenses exceeded their book values by more than 10%.Orbital slots are also valued using the Greenfield Approach. The projected cash flows are based on various factors, including satellite cost, other capital investment per subscriber, acquisition costs per subscriber and usage per subscriber, as well as revenue growth, subscriber growth and churn rates. For impairment testing purposes, we assumed sustainable long-term growth assumptions consistent with the business plan and industry counterparts in the United States. We used a discount rate of 8.5% to calculate the present value of the projected cash flows. In 2019, the fair value of orbital slots was slightly lower than the prior year, which exceeded the book value by approximately 10% in 2018. The decrease in fair value was driven by the transition of the video business to OTT and streaming technology.We review customerWe review operating lease right-of-use assets for When the asset’s book value exceeds undiscounted future cash flows, an impairment whenever events or circumstances indicated thatis recorded to reduce the book value mayof the asset to its estimated fair value (see Notes 7 and 9).be recoverable overthat the remaining life.periodically assess our network assets forrecorded a $2,212 goodwill impairment, the entire amount of goodwill allocated to the Vrio reporting unit, with $105 attributable to noncontrolling interest (see Note 9)..47AT&T Inc.Dollars in millions except per share amounts20192020 interim and annual reporting periods, we adopted the FASB’s new accounting guidance related to leasing. The most significant impactthe measurement of the new guidance was to our balance sheet, as we recorded a right-of-use assetcredit losses on trade receivables, loans, contract assets and corresponding liability for our operating leasescertain other assets not subject fair value measurement existing at January 1, 2019.2020. We adopted the new leasing standard using a modified retrospective transition methodapproach as of the beginning of the period of adoption, which did not require us to adjust the balance sheet for prior periods, therefore affecting the comparability of our financial statements. Upon adoption, we recorded an increase to our allowances for credit losses, primarily for trade and loan receivables. See Note 1 for discussion of the impact of the standard.AT&T Inc. Dollars in millions except per share amounts other new standards.Unlimited Data Plan ClaimsVideo Business In October 2014,On February 25, 2021, we signed an agreement to form a new company named DIRECTV (New DTV) with TPG Capital, which will be jointly governed by a board with representation from both AT&T and TPG. Under the FTC filedagreement, we will contribute our Video business unit to New DTV for $4,250 of junior preferred units, an additional distribution preference of $4,200 and a civil suit70% economic interest in common units. We expect to receive $7,600 in cash from New DTV at closing. TPG will contribute approximately $1,800 in cash to New DTV for $1,800 of senior preferred units and a 30% economic interest in common units. The remaining $5,800 will be funded by debt taken on by New DTV. As part of this transaction, we agreed to pay net losses under the NFL SUNDAY TICKET contract up to a cap of $2,500 over the remaining period of the contract.District Courtvideo business, and accordingly will include the assets in “Other current assets,” and the related liabilities in “Accounts payable and accrued liabilities,” on our consolidated balance sheet at March 31, 2021. The carrying amounts at December 31, 2020 of these assets and liabilities were approximately $16,150 and $4,900, respectively.Northern DistrictAuction 103 payment in April 2020. The FCC granted the licenses in June 2020.California against AT&T Mobility, LLC seeking injunctive relief and unspecified money damages under Section 5a total of 80 MHz nationwide, including 40 MHz in Phase I. We must provide to the FCC an initial down payment of $4,681 on March 10, 2021, of which $550 was paid as an upfront payment prior to the start of the Federal Trade Commission Act. The FTC’s allegations concern the applicationauction, and to pay a remaining $18,725 on or before March 24, 2021. We estimate that AT&T will be responsible for $955 of AT&T’s Maximum Bit Rate (MBR) program to customers who enrolled in our Unlimited Data Plan from 2007-2010. MBR temporarily reduces in certain instances the download speedsIncentive Payments upon clearing of Phase I spectrum and $2,112 upon clearing of Phase II spectrum. Additionally, we will be responsible for a small portion of our legacy Unlimited Data Plan customers each month aftercompensable relocation costs over the customer exceedsnext several years as the spectrum is being cleared. Satellite operators have provided the FCC with relocation cost estimates totaling $3,400. AT&T intends to fund the purchase price using a designated amountcombination of data during the customer’s billing cycle. MBR is an industry-standard practice that is designed to affect only the most data-intensive applications (such as video streaming). Texts, emails, tweets, social media posts, internet browsingcash and many other applications are typically unaffected. Contrary to the FTC’s allegations, our MBR program is permitted by our customer contracts, was fully disclosed in advance to our Unlimited Data Plan customers,short-term investments, funds from operations and was implemented to protect the network for the benefit of all customers. We either short-term or long-term debt, depending upon market conditions.reached a tentative agreement (Stipulated Order) with the FTC staff in August 2019, pending FTC approval. The FTC approved the Stipulated Order on November 4, 2019, and the Court approved and entered the Order on December 3, 2019. In the resolution of this matter, we did not admit the FTC’s allegations, and the settlement amount is not material to our financial results. In addition to the FTC case, several class actions were filed challenging our MBR program. We have secured dismissals in each of these cases except Roberts v. AT&T Mobility LLC, which is ongoing.JanuaryDecember 31, 2020, we employed approximately 246,000231,000 persons. Approximately 40%37% of our employees are represented by the Communications Workers of America (CWA), the International Brotherhood of Electrical Workers (IBEW) or other unions. After expiration of the collective bargaining agreements, work stoppages or labor disruptions may occur in the absence of new contracts or other agreements being reached. There are no significant contracts expiring in 2021. A contract covering approximately 7,000 traditional wireline14,000 Mobility employees in our Midwest region expired in April 2018. In August 2019, a new four-year contract36 states and the District of Columbia that was ratified by employees and willset to expire in AprilFebruary 2021 was extended until February 2022.A contract covering approximately 3,000 traditional wireline10,000 Mobility employees in our legacynine Southeast states that was set to expire in February 2022 was extended until February 2023.Corp.Mobility II LLC (Mobility preferred interests), the primary holding company for our wireless business, expiredto the trust used to pay pension benefits under certain of our qualified pension plans (see Note 17). Since their contribution, the Mobility preferred interests are plan assets under ERISA, and have been recognized as such in April 2018. In August 2019, a new four-year contractthe plan’s separate financial statements. On September 28, 2020, the trust, through the independent investment manager/fiduciary, sold 106.7 million of the Mobility preferred interests to unrelated third parties. The aggregate purchase price was ratified by employees and will expire in April 2022.$2,885, which includes accrued distributions through the date of sale (see Note 15).A contract covering approximately 18,000 traditional wireline employees in our Southeast region expired in August 2019. In October 2019, a new five-year contract was ratified by employees and will expire in August 2024.Contracts covering approximately 20,000 employees are scheduled to expire during 2020, including a contract expiring in February covering approximately 7,000 Mobility employees and a contract expiring in April covering approximately 13,000 traditional wireline employees in our West region.EnvironmentalWe are subject from time to time to judicial and administrative proceedings brought by various governmental authorities under federal, state or local environmental laws. We reference in our Forms 10-Q and 10-K certain environmental proceedings that could result in monetary sanctions (exclusive of interest and costs) of onethree hundred thousand dollars or more. However, we do not believe that any of those currently pending will have a material adverse effect on our results of operations.AT&T Inc. Dollars in millions except per share amounts $12,130$9,740 in cash and cash equivalents available at December 31, 2019.2020. Cash and cash equivalents included cash of $2,654$2,842 and money market funds and other cash equivalents of $9,476.$6,898. Approximately $2,681$2,205 of our cash and cash equivalents were held by our foreign entities in accounts predominantly outside of the U.S. and may be subject to restrictions on repatriation.increased $6,926decreased $2,390 since December 31, 2018.2019. In 2019,2020, cash inflows were primarily provided by cash receipts from operations, including cash from an increased amount of salesour sale and transferstransfer of our receivables to third parties sale of investments, issuanceand the issuances of long-term debt, collateral received from bankscumulative preferred stock and other participants in our derivative arrangements and issuances of nonconvertible perpetualcumulative preferred interests in subsidiaries and cumulative preferred stock.48AT&T Inc.Dollars in millions except per share amountsspectrum purchases and dividends to stockholders.stockholders, share repurchases and spectrum acquisitions.2019,2020, cash provided by operating activities was $48,668$43,130 compared to $43,602 in 2018. Higher operating cash flows$48,668 in 2019, were primarily due to contributions from full yearimpacted by the timing of WarnerMedia and higher cash flows from working capital initiatives, including sales of receivables (see Note 18), partly offset by higher spend on film and television production and net tax payments in 2019 compared to net tax refunds in 2018.payments.non-capitaloperating items to optimize the use of our cash. Among other things, we seek to make payments on 90-day or greater terms, while providing the suppliers with access to bank facilities that permit earlier payments at their cost. In addition, for payments to a key supplier, as part of our working capital initiatives, we have arrangements that allow us to extend payment terms up to 90 days at an additional cost to us (referred to as supplier financing). The net impact of supplier financing onwas to improve cash from operating activities was to improve working capital$432 in 2020 and $909 in 2019, and $1,869 in 2018.2019. All supplier financing payments are due within one year.2019,2020, cash used in investing activities totaled $16,690,$13,548, and consisted primarily of $19,635$15,675 (including interest during construction) for capital expenditures, ($1,616 lower than the prior-year), and $982final payment of approximately $950 for wireless spectrum offset by proceedslicenses won in Auction 103 and $141 of net cash paid to acquire the remaining interest in HBO LAG. Investing activities also included cash receipts of $1,928 from the salessale of our ownershipoperations in Puerto Rico, which were used to redeem the preferred interests secured by the sales proceeds (see Notes 6 and 17), $1,100 from the sale of our investment in Hulu and WarnerMedia’s headquarters (Hudson Yards) under a sale-leaseback arrangementCentral European Media Enterprises, Ltd. (see Note 6). and $400 from corporate owned life insurance investments.2019, compared to $560 in 2018. Capital2019. Capital expenditures in 20192020 were $19,635,$15,675, and when including $3,050$2,966 cash paid for vendor financing and excluding $1,005$1,063 of FirstNet reimbursements, gross capital investment was $23,690$19,704 ($450 higher3,986 lower than the prior-year)prior year).2019,2020, we placed $2,632$4,664 of equipment in service under vendor financing arrangements (compared to $2,162$2,632 in 2018)2019) and $1,116approximately $1,230 of assets related to the FirstNet build (compared to $1,500$1,116 in 2018)2019). Total reimbursements from the government for FirstNet were $1,626 for 2020 and $1,374 for 2019, and $1,670 for 2018, predominately for capital expenditures.2020,2021, we expect that our gross capital investment, which includes capital expenditures and cash paid for vendor financing and excludes expected FirstNet reimbursement of approximately $1,000, will be in the $20,000 range.$21,000 range (including capital expenditures in the $18,000 range). full year, cash used in financing activities totaled $25,083$32,007 and was comprised of issuances and repayments of debt, issuances of preferred stock, issuances and redemptions of preferred interests in subsidiaries, payments of dividends and share repurchases.AT&T Inc. Dollars in millions except per share amounts debt issuances of $17,039, which consisted primarily oflong-term debt. Borrowing activity included the following issuances:2019•January draw of $2,850 on an 11-month syndicated term loan agreement (repaid in the third quarter).JanuaryMarch draw of $750 on a private financing agreement (repaid in the firstsecond quarter).•August borrowingsApril draw of $400 under$5,500 on a private financingterm loan credit agreement with certain commercial banks and Bank of America, N.A., as lead agent (repaid in the thirdsecond quarter).2019•February issuance of $3,000$2,995 of 4.350%4.000% global notes due 2029.2049.•February issuanceMarch borrowings of $2,000$665 from loan programs with export agencies of 4.850% global notes due 2039.Borrowings of $725 in January and $525 in June that are supported by government agenciesforeign governments to support network equipment purchases.purchases in those countries.•June drawMay issuances totaling $12,500 in global notes, comprised of $300 on a private financing agreement.September issuance$2,500 of €1,000 of 0.25%2.300% global notes due 2026, €1,2502027, $3,000 of 0.80%2.750% global notes due 2030 and €7502031, $2,500 of 1.80%3.500% global notes due 2039 (when combined, $3,3082041, $3,000 of 3.650% global notes due 2051 and $1,500 of 3.850% global notes due 2060.., comprised of €1,750 million of 1.600% global notes due 2028, €750 million of 2.050% global notes due 2032 and €500 million of 2.600% global notes due 2038.•September draw of $1,300 on a Bank of America term loan credit agreement.November draw of $750 on a private financing agreement.DecemberJune issuance of $1,265$1,050 of 4.250%3.750% global notes due 2050.49•August issuances totaling $11,000 in global notes, comprised of $2,250 of 1.650% global notes due 2028, $2,500 of 2.250% global notes due 2032, $2,500 of 3.100% global notes due 2043, $2,250 of 3.300% global notes due 2052 and $1,500 of 3.500% global notes due 2061.AT&T Inc.Dollars in millions except per share amounts2019, repayment2020, repayments of debt included $9,467 of short-term borrowings (including $3,967 of commercial paper) and $39,964 of long-term debt totaled $27,592.debt. Repayments primarily consisted of the following:included:•$1,850 of 2.300% AT&T global notes in the first quarter.$400800 of AT&T floating-rate notes in the first quarter.•€1,500$687 of AT&T floating-rate notes in the second quarter.($1,882(approximately $2,637 at maturity).•$650€1,000 million of 2.100% Warner Media, LLC notes in the second quarter.CHF 450 0.500% senior fixed-rate1.875% AT&T global notes in the fourth quarter ($4671,290 at maturity).•$2,0102,619 of 4.600% AT&T global notes with original maturity in 2045, in the first quarter.AT&T Inc. Dollars in millions except per share amounts 5.000%3.500% to 5.200%3.650% and original maturities inranging from 2053 to 2059.2021, in the first quarter.$2,000 of Warner Media, LLCsubsidiary notes, with interest rates ranging from 4.700%2.950% to 4.750%7.125% and original maturities in 2021, in the first quarter.$1,295ranging from 2026 to 2048 for $8 of 4.700%cash and $9,678 of two new series of AT&T global notes, with an original maturity in 2044, in the fourth quarter.$590 of Warner Media, LLC and/or Historic TW Inc. notes that were tendered for cash in our second quarter obligor debt exchange. The notes had interest rates ranging between 6.500%of 2.550% and 9.150%3.800% and original maturities ranging from 2023 to 2036.$1,409 of subsidiary notes that were tendered for cash in December 2019. The notes had interest rates ranging between 2.950%2033 and 9.150% and original maturities ranging from 2022 to 2097.2057, respectively.$243 of open market repurchases of AT&T Corp, AT&T Mobility LLC, and New Cingular Wireless Services, Inc. notes, with interest rates ranging from 7.125% to 8.750% and original maturities in 2031, in the second quarter.$154 of open market repurchases of Warner Media, LLC, Historic TW Inc., BellSouth LLC and AT&T Mobility LLC notes, with interest rates ranging from 2.95% to 7.625% and original maturities ranging from 2022 to 2097, in the third quarter.Credit facilities repaid and other redemptions:$2,625 of final amounts outstanding under our Acquisition Term Loan (defined below) in the first quarter.$750 of January borrowings under a private financing agreement, in the first quarter.$1,500 of four-year and five-year borrowings under the Nova Scotia Credit Agreement (defined below) in the second quarter and $750 of three-year borrowings in the third quarter.$600 of borrowings under our credit agreement with Canadian Imperial Bank of Commerce in the second quarter.$500 of advances under our November 2018 Term Loan (defined below) in the second quarter, with payment of the remaining $3,050 of advances in the third quarter.$250 of borrowings under a U.S. Bank credit agreement in the second quarter.$750 of borrowings under a private credit agreement in the third quarter.$400 of borrowings under a private financing agreement in the third quarter.$2,850 of borrowings under an 11-month syndicated term loan agreement from January 2019 in the third quarter.4.4%4.1% as of December 31, 20192020 and 4.4% as of December 31, 2018.2019. We had $161,109$155,209 of total notes and debentures outstanding at December 31, 2019,2020, which included Euro, British pound sterling, Canadian dollar, Mexican peso, Australian dollar, Swiss franc and Brazilian real and Swiss francdenominated debt that totaled approximately $42,485.$43,399.2019,2020, we had $11,838$3,470 of debt maturing within one year, consisting of $4 of other short-term borrowings and $11,834entirely of long-term debt issuances. Debt maturing within one year includes the following notes that may be put back to us by the holders:$1,000 of annual put reset securities issued by BellSouth that may be put back to us each April until maturity in 2021.Anan accreting zero-coupon note that may be redeemed each May until maturity in 2022. If the remainder of the zero-coupon note (issued for principal of $500 in 2007 and partially exchanged in the 2017 debt exchange offers) is held to maturity, the redemption amount will be $592.2019,2020, we paid $3,050$2,966 of cash under our vendor financing program.program, compared to $3,050 in 2019. Total vendor financing payables included in our December 31, 20192020 consolidated balance sheet were approximately $2,067,$3,761, with $1,625$3,563 due within one year (in “Accounts50AT&T Inc.Dollars in millions except per share amounts20192020 also included $7,876 of capital$1,979 from the September issuance of nonconvertible preferred interests issued by subsidiariesin a subsidiary and $1,164$3,869 for the DecemberFebruary issuance of cumulative 5.00% preferred stock. In February 2020, we issued Series B and Series C preferred stock for approximately $3,900. (See(see Note 17).2019,2020, we had approximately 319178 million shares remaining from our share repurchase authorizations approved by the Board of Directors in 2013 and 2014 (see Note 17). For the year ended December 31, 2019, we repurchased approximately 56 million shares under these authorizations. In January 2020, we repurchased $4,000 of AT&T common stock under an accelerated share repurchase agreement (see Note 2).2014.20192019. Dividends were higher in 2020, primarily due to dividend payments to preferred stockholders and $13,410 in 2018, primarily reflecting the increase in the number of shares outstanding related to our acquisition of Time Warner as well as an increase in our quarterly dividend on common stock approved by our Board of Directors in December 2018. 2019, partially offset by fewer shares outstanding.2019 and $2.01 per share in 2018.2019. Our dividend policy considers the expectations and requirements of stockholders, capital funding requirements of AT&T and long-term growth opportunities. It is our intent to provide the financial flexibility to allow our Board of Directors to consider dividend growth and to recommend an increase in dividends to be paid in future periods. All dividends remain subject to declaration by our Board of Directors.20202021 financing activities will focus on managing our debt level repurchasing common stock and paying dividends, subject to approval by our Board of Directors. We plan to fund our financing uses of cash through a combination of cash from operations, issuance of debt, issuance of additional preferred stock and asset sales. The timing and mix of any debt issuance and/or refinancing will be guided by credit market conditions and interest rate trends.AT&T Inc. Dollars in millions except per share amounts December 2018,November 2020, we amended one of our five-year$7,500 revolving credit agreement (the “Amended and Restated Credit Agreement”) and concurrently entered into a new five-year agreement (the “Five Year Credit Agreement”) such thatagreements by extending the termination date. In total, we now have two $7,500 revolving credit agreements, totaling $15,000. The Amended and Restated Credit Agreement terminates$15,000, with one terminating on December 11, 20212023 and the Five Year Credit Agreement terminatesother terminating on December 11, 2023.November 17, 2025. No amounts were outstanding under either agreement as of December 31, 2019.2020.(BAML Tranche A Facility), (ii) a 2.25 year $400 facility due in 2021, (BAML Tranche B Facility), and (iii) a 3.25 year $500 facility due in 2022, (BAML Tranche C Facility)with Bank of America, N.A., as agent. These facilities were repaid and terminated in the second quarter of 2020.No repaymentThe Term Loan is available for a single draw at any time before May 29, 2021. The proceeds will be used for general corporate purposes, which may include among other things, financing acquisitions of additional spectrum. The entire principal amount of the Term Loan will be due and payable 364 days after the date on which the borrowing is made. At January 31, 2021, we had been made under these facilities asapproximately $6,100 of December 31, 2019.commercial paper outstanding.AT&Tus to maintain, as of the last day of each fiscal quarter, a ratio of not more than 3.5-to-1. As of December 31, 2019,2020, we were in compliance with the covenants for our credit facilities.the year,2019 and 2020, we amended collateral arrangements with certain counterparties to require cash collateral posting by AT&T only when derivative market values exceed certain thresholds. Under these arrangements, which cover over 90% of our approximate $41,000 derivative portfolio, counterparties are still required to post collateral. During 2019,2020, we received $1,413approximately $800 of cash collateral, on a net basis, primarily driven by the amended arrangements.basis. Cash postings under these arrangements vary with changes in credit ratings and netting agreements. (See Note 13)Other51AT&T Inc.Dollars in millions except per share amountsinvestees.investment. At December 31, 2019,2020, our debt ratio was 44.7%46.7%, compared to 44.7% at December 31, 2019 and 47.7% at December 31, 2018 and 53.6% at December 31, 2017.2018. Our net debt ratio was 43.8% at December 31, 2020, compared to 41.4% at December 31, 2019 compared toand 46.2% at December 31, 2018 and 37.2% at December 31, 2017.2018. The debt ratio is affected by the same factors that affect total capital, and reflects our recent debt issuances and repayments and debt acquired in business combinations.employees. employees:2018, were $24,170 and $22,172.$24,170. These taxes include income, franchise, property, sales, excise, payroll, gross receipts and various other taxes and fees.$4,059$3,656 in 2019,2020, with $941$1,029 paid from plan assets. Of those benefits, $3,707$3,293 related to medical and prescription drug benefits. In addition, in 20192020 we prefunded $500$745 for future benefit payments. During 2019,2020, we paid $6,356$5,124 of pension benefits out of plan assets.AT&T Inc. Dollars in millions except per share amounts 2019,2020, we have received $4,684$3,641 from the disposition of assets, and when combined with capital received from issuing preferred interests to external investors, an amendment of collateral arrangements, and working capital monetization initiatives, which include the sale of receivables, total cash received from monetization efforts, net of $1,613 of spectrum acquisitions, was approximately $18,000.$1,100. We plan to continue to explore similar opportunities.52AT&T Inc.Dollars in millions except per share amounts20192020 are in the following table:Payments Due By Period Contractual Obligations Total More than
5 Years$ 165,654 $ 3,418 $ 13,730 $ 14,238 $ 134,268 Interest payments on long-term debt 123,582 6,627 12,851 11,817 92,287 70,610 20,274 21,275 11,142 17,919 31,123 4,808 8,621 6,464 11,230 17,520 120 390 390 16,620 10,560 463 — — 10,097 12,437 4,236 2,232 1,602 4,367 Total Contractual Obligations $ 431,486 $ 39,946 $ 59,099 $ 45,653 $ 286,788 $59,502$60,472 (see Note 14); net postemployment benefit obligations of $20,316;$19,690; expected pension and postretirement payments (see Note 15); and other noncurrent liabilities of $13,412; third-party debt guarantees; and fair value of our interest rate swaps.$11,829.53AT&T Inc. Year Ended December 31, 2020 Mobility Business Wireline Business Solutions Operating revenues Wireless service $ 55,542 $ — $ (47,810) $ 7,732 Strategic and managed services — 15,788 — 15,788 Legacy voice and data services — 8,183 — 8,183 Other service and equipment — 1,387 — 1,387 Wireless equipment 17,022 — (14,140) 2,882 Total Operating Revenues 72,564 25,358 (61,950) 35,972 Operating expenses Operations and support 42,106 15,534 (34,927) 22,713 EBITDA 30,458 9,824 (27,023) 13,259 Depreciation and amortization 8,086 5,226 (6,803) 6,509 Total Operating Expenses 50,192 20,760 (41,730) 29,222 Operating Income $ 22,372 $ 4,598 $ (20,220) $ 6,750 54Year Ended December 31, 2019 Mobility Business Wireline Business Solutions Operating revenues Wireless service $ 55,331 $ — $ (47,887) $ 7,444 Strategic and managed services — 15,430 — 15,430 Legacy voice and data services — 9,180 — 9,180 Other service and equipment — 1,557 — 1,557 Wireless equipment 15,725 — (12,971) 2,754 Total Operating Revenues 71,056 26,167 (60,858) 36,365 Operating expenses Operations and support 40,681 16,069 (34,036) 22,714 EBITDA 30,375 10,098 (26,822) 13,651 Depreciation and amortization 8,054 4,934 (6,840) 6,148 Total Operating Expenses 48,735 21,003 (40,876) 28,862 Operating Income $ 22,321 $ 5,164 $ (19,982) $ 7,503 AT&T Inc. Year Ended December 31, 2018 Mobility Business Wireline Business Solutions Operating revenues Wireless service $ 54,295 $ — $ (47,402) $ 6,893 Strategic and managed services — 14,649 — 14,649 Legacy voice and data services — 10,674 — 10,674 Other service and equipment — 1,406 — 1,406 Wireless equipment 16,226 — (13,718) 2,508 Total Operating Revenues 70,521 26,729 (61,120) 36,130 Operating expenses Operations and support 40,690 16,181 (34,285) 22,586 EBITDA 29,831 10,548 (26,835) 13,544 Depreciation and amortization 8,263 4,708 (7,077) 5,894 Total Operating Expenses 48,953 20,889 (41,362) 28,480 Operating Income $ 21,568 $ 5,840 $ (19,758) $ 7,650 AT&T Inc. Dollars in millions except per share amounts 55AT&T Inc.Dollars in millions except per share amountsFollowing are ourWe had no interest rate derivatives subject to materialswaps and no interest rate risk as oflocks at December 31, 2019. The interest rates illustrated below refer to the average rates we expect to pay based on current and implied forward rates and the average rates we expect to receive based on derivative contracts. The notional amount is the principal amount of the debt subject to the interest rate swap contracts2020.. The fair value asset (liability) represents the amount we would receive (pay) if we terminated the contracts as of December 31, 2019.$269$90 and a fair value of $89$(3) outstanding at December 31, 2019.2020.56AT&T Inc. /s/John T. Stankey John T. Stankey John J. Stephens Chief Executive Officer
and PresidentSenior Executive Vice President
and Chief Financial OfficerAT&T Inc. Discount rates used in determining pension and postretirement benefit obligations Description of the Matter At December 31, 2020, the Company’s pension benefit obligation was $62,158 million and exceeded the fair value of defined benefit pension plan assets of $54,606 million, resulting in an unfunded benefit obligation of $7,552 million. Additionally, at December 31, 2020, the Company’s postretirement benefit obligation was $13,928 million and exceeded the fair value of postretirement plan assets of $3,843 million, resulting in an unfunded benefit obligation of $10,085 million. As explained in Note 15 to the consolidated financial statements, the Company updates the assumptions used to measure the defined benefit pension and postretirement benefit obligations, including discount rates, at December 31 or upon a remeasurement event. The Company determines the discount rates used to measure the obligations based on the development of a yield curve using high-quality corporate bonds selected to yield cash flows that correspond to the expected timing and amount of the expected future benefit payments. The selected discount rate has a significant effect on the measurement of the defined benefit pension and postretirement benefit obligations. AT&T Inc. Auditing the defined benefit pension and postretirement benefit obligations was complex due to the need to evaluate the highly judgmental nature of the actuarial assumptions made by management, primarily the discount rate, used in the Company’s measurement process. Auditing the discount rates associated with the measurement of the defined benefit pension and postretirement benefit obligations was complex because it required an evaluation of the credit quality of the corporate bonds used to develop the discount rate and the correlation of those bonds’ cash inflows to the timing and amount of future expected benefit payments. How We
Addressed the Matter in Our
AuditUncertain tax positions Description of the Matter How We Addressed the
Matter in Our
AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s accounting process for uncertain tax positions. This included controls over identification and measurement of the benefits of the uncertain tax positions, including management’s review of the inputs and calculations of unrecognized income tax benefits, both initially and on an ongoing basis.
We involved our tax professionals to assist us in assessing significant uncertain tax positions, including an evaluation of the technical merits of individual positions, the determination of whether a tax position was more-likely-than-not to be sustained, and the Company’s measurement of its uncertain tax positions, including the computation of interest and penalties, among other procedures. For significant new positions, we assessed the Company’s filing position, correspondence with the relevant tax authorities and third-party advice obtained by the Company, as appropriate. For existing positions, we assessed changes in facts and law, as well as settlements of similar positions for any impact to the recognized liability for the positions. We analyzed the Company’s assumptions and data used to determine the amount of tax benefit to recognize and tested the accuracy of the calculations. We also evaluated the adequacy of the Company’s financial statement disclosures related to uncertain tax positions included in Note 14.AT&T Inc. Impairment of goodwill and long-lived assets How We Addressed the
Matter in Our
AuditAT&T Inc. AT&T Inc. Dollars in millions except per share amounts ReportConsolidated Statements of Income 2020 2019 2018 Operating Revenues Service $ 152,767 $ 163,499 $ 152,345 Equipment 18,993 17,694 18,411 Total operating revenues 171,760 181,193 170,756 Operating Expenses Cost of revenues Equipment 19,706 18,653 19,786 Broadcast, programming and operations 27,305 31,132 26,727 32,909 34,356 32,906 Selling, general and administrative 38,039 39,422 36,765 Asset impairments and abandonments 18,880 1,458 46 Depreciation and amortization 28,516 28,217 28,430 Total operating expenses 165,355 153,238 144,660 Operating Income 6,405 27,955 26,096 Other Income (Expense) Interest expense (7,925) (8,422) (7,957) Equity in net income (loss) of affiliates 95 6 (48) Other income (expense) – net (1,431) (1,071) 6,782 Total other income (expense) (9,261) (9,487) (1,223) Income (Loss) Before Income Taxes (2,856) 18,468 24,873 Income tax expense 965 3,493 4,920 Net Income (Loss) (3,821) 14,975 19,953 Less: Net Income Attributable to Noncontrolling Interest (1,355) (1,072) (583) Net Income (Loss) Attributable to AT&T $ (5,176) $ 13,903 $ 19,370 Less: Preferred Stock Dividends (193) (3) 0 Net Income (Loss) Attributable to Common Stock $ (5,369) $ 13,900 $ 19,370 Basic Earnings Per Share Attributable to Common Stock $ (0.75) $ 1.90 $ 2.85 Diluted Earnings Per Share Attributable to Common Stock $ (0.75) $ 1.89 $ 2.85 ManagementThethe consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles. The integrity and objectivity of the data in these financial statements, including estimates and judgments relating to matters not concluded by year end, are the responsibility of management, as is all other information included in the Annual Report, unless otherwise indicated.The financial statements of AT&T Inc. (AT&T) have been audited by Ernst & Young LLP, Independent Registered Public Accounting Firm. Management has made available to Ernst & Young LLP all of AT&T’s financial records and related data, as well as the minutes of stockholders’ and directors’ meetings. Furthermore, management believes that all representations made to Ernst & Young LLP during its audit were valid and appropriate.Management maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by AT&T is recorded, processed, summarized, accumulated and communicated to its management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure, and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms.Management also seeks to ensure the objectivity and integrity of its financial data by the careful selection of its managers, by organizational arrangements that provide an appropriate division of responsibility and by communication programs aimed at ensuring that its policies, standards and managerial authorities are understood throughout the organization.The Audit Committee of the Board of Directors meets periodically with management, the internal auditors and the independent auditors to review the manner in which they are performing their respective responsibilities and to discuss auditing, internal accounting controls and financial reporting matters. Both the internal auditors and the independent auditors periodically meet alone with the Audit Committee and have access to the Audit Committee at any time.Assessment of Internal ControlThe management of AT&T is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) or 15d-15(f) under the Securities Exchange Act of 1934. AT&T’s internal control system was designed to provide reasonable assurance to the company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.AT&T management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2019. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013 framework). Based on its assessment, AT&T management believes that, as of December 31, 2019, the company’s internal control over financial reporting is effective based on those criteria.Ernst & Young LLP, the independent registered public accounting firm that audited the financial statements included in this Annual Report, has issued an attestation report on the company’s internal control over financial reporting./s/Randall Stephenson ./s/John J. Stephens .Randall Stephenson John J. StephensChairman of the BoardSenior Executive Vice President andand Chief Executive OfficerChief Financial Officer57AT&T Inc. Report of Independent Registered Public Accounting FirmTo the Stockholders and the Board of Directors of AT&T Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of AT&T Inc. (the Company) as of December 31, 2019 and 2018, the related consolidated statements of income, comprehensive income, cash flows and changes in stockholders’ equity for each of the three years in the period ended December 31, 2019, and the related notes and financial statement schedule listed in Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 19, 2020expressed an unqualified opinion thereon.Adoption of Accounting Standards UpdatesAs discussed in Note 1 to the consolidated financial statements, effective January 1, 2019, the Company changed its method for accounting for leases as a result of the modified retrospective adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), as amended. Effective January 1, 2018, the Company changed its method for recognizing revenue as a result of the modified retrospective adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), as amended, which is also discussed in Note 1.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidatedfinancial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.58AT&T Inc.Description of the MatterDiscount rates used in determining pension and postretirement benefit obligationsAt December 31, 2019, the Company’s pension benefit obligation was $59,873 million and exceeded the fair value of defined benefit pension plan assets of $53,530 million, resulting in an unfunded benefit obligation of $6,343 million. Additionally, at December 31, 2019, the Company’s postretirement benefit obligation was $16,041 million and exceeded the fair value of postretirement plan assets of $4,145 million, resulting in an unfunded benefit obligation of $11,896 million. As explained in Note 15 to the consolidated financial statements, the Company updates the assumptions used to measure the defined benefit pension and postretirement benefit obligations, including discount rates, at December 31 or upon a remeasurement event. The Company determines the discount rates used to measure the obligations based on the development of a yield curve using high-quality corporate bonds selected to yield cash flows that correspond to the expected timing and amount of the expected future benefit payments. The selected discount rate has a significant effect on the measurement of the defined benefit pension and postretirement benefit obligations.Auditing the defined benefit pension and postretirement benefit obligations was complex due to the need to evaluate the highly judgmental nature of the actuarial assumptions made by management, primarily the discount rate, used in the Company’s measurement process. Auditing the discount rates associated with the measurement of the defined benefit pension and postretirement benefit obligations was complex because it required an evaluation of the credit quality of the corporate bonds used to develop the discount rate and the correlation of those bonds’ cash inflows to the timing and amount of future expected benefit payments.How WeAddressed the Matter in OurAuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of certain controls over management’s review of the determination of the discount rates used in defined benefit pension obligation and postretirement benefit obligation calculations.To test the determination of the discount rate used in the calculation of the defined benefit pension and postretirement benefit obligations, we performed audit procedures that focused on evaluating, with the assistance of our actuarial specialists, the determination of the discount rates, among other procedures. For example, we evaluated the selected yield curve used to determine the discount rates applied in measuring the defined benefit pension and postretirement benefit obligations. As part of this assessment, we considered the credit quality of the corporate bonds that comprise the yield curve and compared the timing and amount of cash flows at maturity with the expected amounts and duration of the related benefit payments. As part of this assessment, we compared the Company’s current projections to historical projected defined benefit pension obligation cash flows, and compared the current-year benefits paid to the prior-year projected cash flows.Description of the MatterUncertain tax positionsAs discussed in Note 14 to the consolidated financial statements, at December 31, 2019 the Company had recorded unrecognized tax benefits of $13,687 million for uncertain tax positions. Uncertainty in a tax position may arise as tax laws are subject to interpretation. The Company uses judgment to (1) determine whether, based on the technical merits, a tax position is more likely than not to be sustained and (2) measure the amount of tax benefit that qualifies for recognition within the financial statements. Changes in facts and circumstances, such as changes in tax laws, new regulations issued by taxing authorities and communications with taxing authorities may affect the amount of uncertain tax positions and, in turn, income tax expense. Estimated tax benefits related to uncertain tax positions that are not more likely than not to be sustained are reported as unrecognized income tax benefits.Auditing the measurement of uncertain tax positions was challenging because the measurement is based on interpretations of tax laws and legal rulings. Each tax position involves unique facts and circumstances that must be evaluated, and there may be many uncertainties around initial recognition and de-recognition of tax positions, including regulatory changes, litigation and examination activity.How WeAddressed the Matter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s accounting process for uncertain tax positions. This included controls over identification and measurement of the benefits of the uncertain tax positions, including management’s review of the inputs and calculations of unrecognized income tax benefits, both initially and on an ongoing basis.We involved our tax professionals to assist us in assessing significant uncertain tax positions, including an evaluation of the technical merits of individual positions, the determination of whether a tax position was more-likely-than-not to be sustained, and the Company’s measurement of its uncertain tax positions, including the computation of interest and penalties, among other procedures. For significant new positions, we assessed the Company’s filing position, correspondence with the relevant tax authorities and third-party advice obtained by the Company, as appropriate. For existing positions, we assessed changes in facts and law, as well as settlements of similar positions for any impact to the recognized liability for the positions. We analyzed the Company’s assumptions and data used to determine the amount of tax benefit to recognize and tested the accuracy of the calculations. We also evaluated the adequacy of the Company’s financial statement disclosures related to uncertain tax positions included in Note 14.59AT&T Inc.Description of the MatterEvaluation of goodwill and indefinite-lived intangible assets for impairmentAt December 31, 2019, the Company’s goodwill balance was $146,241 million and its total indefinite-lived intangible assets were $101,392 million. The Company’s indefinite-lived intangible assets consist of wireless licenses, orbital slots and trade names. As discussed in Note 9 to the consolidated financial statements, reporting unit goodwill and indefinite-lived intangible assets are tested for impairment at least annually. This involves estimating the fair value of the reporting units and indefinite-lived intangible assets, which are determined using discounted cash flow models and a market multiples valuations approach. These fair value estimates are sensitive to significant assumptions, such as cash flow projections, operating margin, discount rates, terminal values, subscriber growth and churn, royalty rates and capital investment. The Company also considers market multiples for peer companies which offer comparable services to its reporting units. These assumptions are affected by expectations about future market and economic conditions.Auditing management’s annual impairment tests for goodwill and indefinite-lived intangible assets was complex because of the significant judgment required to evaluate the management assumptions described above used to determine the fair value of the reporting units and other assets.How WeAddressed the Matter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill and indefinite-lived intangible assets impairment review processes. This included controls over management’s review of the valuation models and the significant assumptions noted above, utilized in both the discounted cash flow and market valuation approaches.To test the estimated fair value of the Company’s reporting units and indefinite-lived intangible assets, we involved our valuation specialists to assist us in performing our audit procedures. Our procedures included, among others, testing the valuation methodology used and the significant assumptions within the valuation methodology. For example, we compared the significant assumptions to current industry, market and economic trends, and other guideline companies in the same industry and to other factors. Where appropriate, we evaluated whether changes to the company’s business model, customer base and other factors would affect the significant assumptions. We also assessed the historical accuracy of management’s estimates, tested the clerical accuracy of the valuation calculations, and performed independent sensitivity analyses. In addition, we tested management’s reconciliation of the fair value of the reporting units to the market capitalization of the Company./s/ Ernst & Young LLPWe have served as the Company’s auditor since 1999.Dallas, TexasFebruary 19, 202060AT&T Inc.Report of Independent Registered Public Accounting FirmTo the Stockholders and the Board of Directors of AT&T Inc.Opinion on Internal Control Over Financial ReportingWe have audited AT&T Inc.’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, AT&T Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2019 consolidated financial statements of the Company and our report dated February 19, 2020 expressed an unqualified opinion thereon.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate./s/ Ernst & Young LLPDallas, TexasFebruary 19, 202061AT&T Inc.Consolidated Statements of Comprehensive Income 2020 2019 2018 Net income (loss) $ (3,821) $ 14,975 $ 19,953 Other comprehensive income (loss), net of tax: Foreign Currency: (929) 19 (1,062) Securities: Net unrealized gains (losses), net of taxes of $27, $17 and $(1) 78 50 (4) (15) 0 0 Derivative Instruments: Net unrealized gains (losses), net of taxes of $(212), $(240) and $(156) (811) (900) (597) 69 45 13 Defined benefit postretirement plans: 2,250 3,457 830 (1,841) (1,459) (1,322) Other comprehensive income (loss) (1,199) 1,212 (2,142) Total comprehensive income (loss) (5,020) 16,187 17,811 Less: Total comprehensive income attributable to noncontrolling interest (1,296) (1,063) (551) Total Comprehensive Income (Loss) Attributable to AT&T $ (6,316) $ 15,124 $ 17,260 62AT&T Inc. Consolidated Balance Sheets December 31, 2020 2019 Assets Current Assets Cash and cash equivalents $ 9,740 $ 12,130 Accounts receivable - net of related allowance for credit loss of $1,221 and $1,235 20,215 22,636 Prepaid expenses 1,822 1,631 Other current assets 20,231 18,364 Total current assets 52,008 54,761 Noncurrent Inventories and Theatrical Film and Television Production Costs 14,752 12,434 Property, Plant and Equipment – Net 127,315 130,128 Goodwill 135,259 146,241 Licenses – Net 93,840 97,907 Trademarks and Trade Names – Net 23,297 23,567 Distribution Networks – Net 13,793 15,345 Other Intangible Assets – Net 15,386 20,798 Investments in and Advances to Equity Affiliates 1,780 3,695 Operating Lease Right-Of-Use Assets 24,714 24,039 Other Assets 23,617 22,754 Total Assets $ 525,761 $ 551,669 Liabilities and Stockholders’ Equity Current Liabilities Debt maturing within one year $ 3,470 $ 11,838 Accounts payable and accrued liabilities 49,032 45,956 Advanced billings and customer deposits 6,176 6,124 Accrued taxes 1,019 1,212 Dividends payable 3,741 3,781 Total current liabilities 63,438 68,911 Long-Term Debt 153,775 151,309 Deferred Credits and Other Noncurrent Liabilities Deferred income taxes 60,472 59,502 Postemployment benefit obligation 18,276 18,788 Operating lease liabilities 22,202 21,804 Other noncurrent liabilities 28,358 29,421 Total deferred credits and other noncurrent liabilities 129,308 129,515 Stockholders’ Equity Preferred stock ($1 par value, 10,000,000 authorized): Series A (48,000 issued and outstanding at December 31, 2020 and December 31, 2019) 0 0 0 0 0 0 7,621 7,621 Additional paid-in capital 130,175 126,279 Retained earnings 37,457 57,936 (17,910) (13,085) Accumulated other comprehensive income 4,330 5,470 Noncontrolling interest 17,567 17,713 Total stockholders’ equity 179,240 201,934 Total Liabilities and Stockholders’ Equity $ 525,761 $ 551,669 63AT&T Inc. Consolidated Statements of Cash Flows 2020 2019 2018 Operating Activities Net income (loss) $ (3,821) $ 14,975 $ 19,953 Depreciation and amortization 28,516 28,217 28,430 Amortization of film and television costs 8,603 9,587 3,772 Undistributed earnings from investments in equity affiliates 38 295 292 Provision for uncollectible accounts 1,972 2,575 1,791 Deferred income tax expense 1,675 1,806 4,931 Net (gain) loss on investments, net of impairments (742) (1,218) (739) Pension and postretirement benefit expense (credit) (2,992) (2,002) (1,148) Actuarial (gain) loss on pension and postretirement benefits 4,169 5,171 (3,412) Asset impairments and abandonments 18,880 1,458 46 Changes in operating assets and liabilities: Receivables 2,216 2,812 (1,580) (13,070) (12,852) (6,442) Accounts payable and other accrued liabilities (1,410) (1,524) 1,602 Equipment installment receivables and related sales (1,429) 548 (490) Deferred customer contract acquisition and fulfillment costs 376 (910) (3,458) Postretirement claims and contributions (985) (1,008) (936) Other - net 1,134 738 990 Total adjustments 46,951 33,693 23,649 Net Cash Provided by Operating Activities 43,130 48,668 43,602 Investing Activities (15,675) (19,635) (21,251) Acquisitions, net of cash acquired (1,851) (1,809) (43,309) Dispositions 3,641 4,684 2,148 (Purchases), sales and settlement of securities and investments, net 497 435 (183) Advances to and investments in equity affiliates, net (160) (365) (1,050) Cash collections of deferred purchase price 0 0 500 Net Cash Used in Investing Activities (13,548) (16,690) (63,145) Financing Activities (17) (276) (821) Issuance of other short-term borrowings 9,440 4,012 4,898 Repayment of other short-term borrowings (9,467) (6,904) (2,098) Issuance of long-term debt 31,988 17,039 41,875 Repayment of long-term debt (39,964) (27,592) (52,643) Payment of vendor financing (2,966) (3,050) (560) Issuance of preferred stock 3,869 1,164 0 Purchase of treasury stock (5,498) (2,417) (609) Issuance of treasury stock 105 631 745 Issuance of preferred interests in subsidiaries 1,979 7,876 0 Redemption of preferred interest in subsidiary (1,950) 0 0 Dividends paid (14,956) (14,888) (13,410) Other - net (4,570) (678) (3,366) Net Cash Used in Financing Activities (32,007) (25,083) (25,989) Net (decrease) increase in cash and cash equivalents and restricted cash (2,425) 6,895 (45,532) Cash and cash equivalents and restricted cash beginning of year 12,295 5,400 50,932 Cash and Cash Equivalents and Restricted Cash End of Year $ 9,870 $ 12,295 $ 5,400 64AT&T Inc. Consolidated Statements of Changes in Stockholders’ Equity 2020 2019 2018 Shares Amount Shares Amount Shares Amount Preferred Stock – Series A Balance at beginning of year 0 $ 0 0 $ 0 0 $ 0 Issuance of stock 0 0 0 0 0 0 Balance at end of year 0 $ 0 0 $ 0 0 $ 0 Preferred Stock – Series B Balance at beginning of year 0 $ 0 0 $ 0 0 $ 0 Issuance of stock 0 0 0 0 0 0 Balance at end of year 0 $ 0 0 $ 0 0 $ 0 Preferred Stock – Series C Balance at beginning of year 0 $ 0 0 $ 0 0 $ 0 Issuance of stock 0 0 0 0 0 0 Balance at end of year 0 $ 0 0 $ 0 0 $ 0 Common Stock Balance at beginning of year 7,621 $ 7,621 7,621 $ 7,621 6,495 $ 6,495 Issuance of stock 0 0 0 0 1,126 1,126 Balance at end of year 7,621 $ 7,621 7,621 $ 7,621 7,621 $ 7,621 Additional Paid-In Capital Balance at beginning of year $ 126,279 $ 125,525 $ 89,563 67 0 0 Issuance of preferred stock 3,869 1,164 0 Issuance of common stock 0 0 35,473 Issuance of treasury stock (62) (125) (115) Share-based payments 18 (271) 604 4 (14) 0 Balance at end of year $ 130,175 $ 126,279 $ 125,525 Retained Earnings Balance at beginning of year $ 57,936 $ 58,753 $ 50,500 (293) 316 3,000 Adjusted beginning balance 57,643 59,069 53,500 Net income (loss) attributable to AT&T (5,176) 13,903 19,370 Preferred stock dividends (139) (8) 0 (14,871) (15,028) (14,117) Balance at end of year $ 37,457 $ 57,936 $ 58,753 AT&T Inc. Dollars and shares in millions except per share amounts Consolidated Statements of Changes in Stockholders’ Equity - continued 2020 2019 2018 Shares Amount Shares Amount Shares Amount Treasury Stock Balance at beginning of year (366) $ (13,085) (339) $ (12,059) (356) $ (12,714) (150) (5,631) (67) (2,492) (20) (692) Issuance of treasury stock 21 806 40 1,466 37 1,347 Balance at end of year (495) $ (17,910) (366) $ (13,085) (339) $ (12,059) Balance at beginning of year $ 5,470 $ 4,249 $ 7,017 0 0 (658) Adjusted beginning balance 5,470 4,249 6,359 (1,140) 1,221 (2,110) Balance at end of year $ 4,330 $ 5,470 $ 4,249 Noncontrolling Interest: Balance at beginning of year $ 17,713 $ 9,795 $ 1,146 (7) 29 35 Adjusted beginning balance 17,706 9,824 1,181 1,355 1,072 583 1,979 7,881 8,804 Redemption of noncontrolling interest (1,950) 0 0 Distributions (1,464) (1,055) (732) 0 0 (9) (59) (9) (32) Balance at end of year $ 17,567 $ 17,713 $ 9,795 $ 201,934 $ 193,884 $ 142,007 $ 179,240 $ 201,934 $ 193,884 AT&T Inc. Dollars in millions except per share amounts 65AT&T Inc.Dollars in millions except per share amounts66AT&T Inc.Dollars in millions except per share amounts67AT&T Inc.Dollars in millions except per share amounts68AT&T Inc.Dollars in millions except per share amountsour majority-owned subsidiaries and affiliates which we control, including the results of Time Warner Inc. (referred to as “Time Warner” or “WarnerMedia”), which was acquired on June 14, 2018 (see Note 6). AT&T is a holding company whose subsidiaries and affiliates operate worldwide in the telecommunications, media and technology industries.less than majority-owned subsidiaries and partnerships wherewhich we do not control but have significant influence are accounted for under the equity method. Earnings from certain investments accounted for using the equity method are included for periods ended within up to one quarter of our period end. We also record our proportionate share of our equity method investees’ other comprehensive income (OCI) items, including translation adjustments. We treat distributions received from equity method investees as returns on investment and classify them as cash flows from operating activities until those distributions exceed our cumulative equity in the earnings of that investment. We treat the excess amount as a return of investment and classify it as cash flows from investing activities.notes, including estimates of probable losses and expenses.notes. Actual results could differ from those estimates. Certain prior periodprior-period amounts have been conformed to the current period’s presentation. See Note 4 for a discussion on the recast of our segment results.results and Note 9 for a discussion of the separation of our former Entertainment Group into two reporting units, Video and Broadband.LeasesCredit Losses As of January 1, 2020, we adopted, through modified retrospective application, the Financial Accounting Standards Board’s (FASB) Accounting Standards Update (ASU) No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” or Accounting Standards Codification (ASC) 326 (ASC 326), which replaces the incurred loss impairment methodology under prior GAAP with an expected credit loss model. ASC 326 affects trade receivables, loans, contract assets, certain beneficial interests, off-balance-sheet credit exposures not accounted for as insurance and other financial assets that are not subject to fair value through net income, as defined by the standard. Under the expected credit loss model, we are required to consider future economic trends to estimate expected credit losses over the lifetime of the asset. Upon adoption on January 1, 2020, we recorded a $293 reduction to “Retained earnings,” $395 increase to “Allowances for credit losses” applicable to our trade and loan receivables, $10 reduction of contract assets, $105 reduction of net deferred income tax liability and $7 reduction of “Noncontrolling interest.” Our adoption of ASC 326 did not have a material impact on our financial statements.Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU)the FASB's ASU No. 2016-02, “Leases (Topic 842)” (ASC 842), which replaces existing leasing rules with a comprehensive lease measurement and recognition standard and expanded disclosure requirements (see Note 8). ASC 842 requires lessees to recognize most leases on their balance sheets as liabilities, with corresponding “right-of-use” assets. For income statement recognition purposes, leases are classified as either a finance or an operating lease without relying upon bright-line tests.AT&T Inc. Dollars in millions except per share amounts $22,121$22,121 and an operating right-of-use asset of the same amount. Existing prepaid and deferred rent accruals were recorded as an offset to the right-of-use asset, resulting in a net asset of $20,960.$20,960. The cumulative effect of the adoption to retained earnings was an increase of $316 reflecting the reclassification of deferred gains related to sale/leaseback transactions. The standard did not materially impact our income statements or statements of cash flows,, and had no impact on our debt-covenant compliance under our current agreements.(ASU (ASU 2019-02), which we early adopted as of January 1, 2019, with prospective application. The standard eliminates certain revenue-related constraints on capitalization of inventory costs for episodic television that existed under prior guidance. In addition, the balance sheet classification requirements that existed in prior guidance for film production costs and69AT&T Inc.Dollars in millions except per share amounts$2,274$2,274 of our programming inventory costs from “Other current assets” to “Other Assets” in accordance with the guidance (see Note 11). This change in accounting doesdid not materially impact our income statementstatement..periods.periods. We applied the rules to all open contracts existing as of January 1, 2018, recording an increase of $2,342$2,342 to retained earnings for the cumulative effect of the change, with an offsetting contract asset of $1,737, deferred contract acquisition costs of $1,454, other asset reductions of $239, other liability reductions of $212, deferred income tax liability of $787 and increase to noncontrolling interest of $35. (See Note 5)$658$658 in retained earnings for the cumulative effect of the adoption of ASU 2016-01, with an offset to accumulated OCI.2017. The Act2017, reduced the U.S. federal corporate income tax rate from 35% to 21% and required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred. Recognizing the late enactment of the Act and complexity of accurately accounting for its impact, the Securities and Exchange Commission (SEC) in Staff Accounting Bulletin (SAB) 118 provided guidance that allowed registrants to provide a reasonable estimate of the impact to their financial statements and adjust the reported impact in a measurement period not to exceed one year. We included the estimated impact of the Act in our financial results at or for the period ended December 31, 2017, with additional adjustments recorded in 2018.2018, as allowed by the Securities and Exchange Commission (SEC) in Staff Accounting Bulletin (SAB) 118. (See Note 14)In February 2018, the FASB issued ASU No. 2018-02, “Income Statement– Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (ASU 2018-02), which allows entities the option to reclassify from accumulated OCI to retained earnings the stranded tax effects resulting from the application of the Act. We elected to adopt ASU 2018-02 in the period in which the estimated income tax effects of the Act were recognized, reflecting a $1,529 adjustment for 2017 in the consolidated statements of changes in stockholders’ equity. (See Note 3)2019,2020, we held $2,654$2,842 in cash and $9,476$6,898 in money market funds and other cash equivalents. Of our total cash and cash equivalents, $2,681$2,205 resided in foreign jurisdictions, some of which is subject to restrictions on repatriation.Doubtful AccountsCredit Losses We record expense to maintain an allowance for doubtful accountscredit losses for estimated losses that result from the failure or inability of our customers to make required payments deemed collectible from the customer when the service was provided or product was delivered. When determining the allowance,allowances for trade receivables and loans, we consider the probability of recoverability of accounts receivable based on past experience, taking into account current collection trends as well asand general economic factors, including bankruptcy rates. We also consider future economic trends to estimate expected credit losses over the lifetime of the asset. Credit risks are assessed based on historical write-offs, net of recoveries, as well as an analysis of the aged accounts receivable balances with allowances generally increasing as the receivable ages. Accounts receivable may be fully reserved for when specific collection issues are known to exist, such as catastrophes or pending bankruptcies.AT&T Inc. Dollars in millions except per share amounts 2019 and $2,771 at December 31, 2018.2019.70AT&T Inc.Dollars in millions except per share amountsimpairment. (Seeimpairment (see Note 11).wasare determined using the film forecast computation method. Under this method, the amortization of capitalized costs and the accrual of participations and residuals wasare based on the proportion of the film’s (or television program’s) revenues recognized for such period to the film’s (or television program’s) estimated remaining ultimate revenues (i.e., the total revenue to be received throughout a film’s (or television program’s) life cycle).AT&T Inc. Dollars in millions except per share amounts 71AT&T Inc.Dollars in millions except per share amountswas generally does not to exceed ten years from the initial release of a motion picture or from the date of delivery of the first episode of an episodic television series. Estimates were updated based on information available during the film’s production and, upon release, the actual results of each film.Equipment”Equipment - Net” on our consolidated balance sheets. In addition, there is certain network software that allows the equipment to provide the features and functions unique to the AT&T network, which we include in the cost of the equipment categories for financial reporting purposes.AT&T Inc. Dollars in millions except per share amounts the first quarter of 2019, in conjunction with the renewal process of certain wireless licenses in Mexico, we reassessed the estimated economic lives and renewal assumptions for these licenses. As a result, we have changed the life of these licenses from indefinite to finite-lived. On January 1, 2019, we began amortizing our wireless licenses in Mexico over their average remaining economic life of 25 years. This change in accounting does not materially impact our income statement.72AT&T Inc.Dollars in millions except per share amountsOrbital slots representDuring the spacefirst quarter of 2020, in whichconjunction with the nationwide launch of AT&T TV and our customers’ continued shift from linear to streaming video services, we operatereassessed the broadcast satellites that supportestimated economic lives and renewal assumptions for our digital video entertainment service offerings. Similar to our FCC wireless licenses, there are limited legal and regulatory factors that constrainorbital slot licenses. As a result, we have changed the usefulestimated lives of our orbital slots. slot licenses from indefinite to finite-lived, effective January 1, 2020, and began amortizing these licenses using the sum-of-months-digits method over their average remaining economic life of 15 years at January 1, 2020. This change in accounting increased amortization expense $1,504, or $0.16 per diluted share available to common stock for 2020.OrbitalPrior to 2020, orbital slots arewere similarly aggregated for purposes of impairment testing and valued using a discounted cash flow approach. Trade names are tested by comparing their book values to their fair values calculated using a discounted cash flow approach on a presumed royalty rate derived from the revenues related to each brand name.we incur themincurred (see Note 22).consideruse the U.S. dollar as the functional currency.benefit expense,benefits, including a discussion of the actuarial assumptions, our policy for recognizing the associated gains and losses and our method used to estimate service and interest cost components.AT&T Inc. Dollars in millions except per share amounts Credit Loss Standard In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (ASU 2016-13, as amended), which replaces the incurred loss impairment methodology under current GAAP. ASU 2016-13 affects trade receivables, loans and other financial assets that are not subject to fair value through net income, as defined by the standard. The amendments under ASU 2016-13 will be effective as of January 1, 2020, and interim periods within that year. We do not expect the standard to have a material impact on our financial statements.2019-12 for its impact2020-04, including optional expedients, to our financial statements.73AT&T Inc.Dollars in millions except per share amountsYear Ended December 31, 2020 2019 2018 Numerators Numerator for basic earnings per share: Net Income (Loss) $ (3,821) $ 14,975 $ 19,953 Less: Net Income Attributable to Noncontrolling Interest (1,355) (1,072) (583) Net Income (Loss) Attributable to AT&T (5,176) 13,903 19,370 Less: Preferred Stock Dividends (193) (3) 0 Net Income (Loss) Attributable to Common Stock (5,369) 13,900 19,370 Dilutive potential common shares: 23 21 19 Numerator for diluted earnings per share $ (5,346) $ 13,921 $ 19,389 Denominators (000,000) Denominator for basic earnings per share: Weighted average number of common shares outstanding 7,157 7,319 6,778 Dilutive potential common shares: 26 29 28 Denominator for diluted earnings per share 7,183 7,348 6,806 Basic Earnings Per Share Attributable to Common Stock $ (0.75) $ 1.90 $ 2.85 $ (0.75) $ 1.89 $ 2.85 Year Ended December 31,201920182017NumeratorsNumerator for basic earnings per share:Net income$14,975$19,953$29,847Less: Net income attributablenoncontrolling interest(1,072)(583)(397)Net income attributable torepurchase AT&T13,90319,37029,450Less: Preferred stock dividends(3)--Net income attributable to common stock13,90019,37029,450Dilutive potential common shares:Share-based payment211913Numerator for diluted earnings per share$13,921$19,389$29,463Denominators (000,000)Denominator for basic earnings per share:Weighted-average number (see Note 17). Under the terms of common shares outstanding7,3196,7786,164Dilutive potential common shares:Share-based payment (in shares)292819Denominator for diluted earnings per share7,3486,8066,183Basic earnings per share attributable to Common Stock$1.90$2.85$4.77Diluted earnings per share attributable to Common Stock$1.89$2.85$4.76We executed an accelerated share repurchase agreement with a third-party financial institution to repurchase AT&T common stock (see Note 17). Under the terms of the agreement, on January 3, 2020, we paid the financial institution $4,000 and received approximately 80% of the stock, or 82.3 million shares. The final number of shares to be repurchased under the agreement will be based on the average of the daily volume-weighted average prices of AT&T common stock during the repurchase period, which is expected to conclude late in the first quarter of 2020. Upon final settlement of the agreement, we may be entitled to receive additional shares of AT&T common stock, or, under certain circumstances, we may be required to deliver shares of AT&T common stock or make a cash payment, at our election.74Dollars in millions except per share amounts Dollars in millions except per share amountsForeign
Currency
Translation
AdjustmentNet Unrealized
Gains (Losses) on
Available-for-Sale
SecuritiesNet Unrealized
Gains (Losses) on
Cash Flow HedgesDefined Benefit
Postretirement
PlansAccumulated Other
Comprehensive
IncomeBalance as of December 31, 2017 $ (2,054) $ 660 $ 1,402 $ 7,009 $ 7,017 (1,030) (4) (597) 830 (801) 0 1 0 1 13 2 (1,322) 3 (1,309) (1,030) (4) (584) (492) (2,110) 0 (658) 0 0 (658) Balance as of December 31, 2018 (3,084) (2) 818 6,517 4,249 28 50 (900) 3,457 2,635 0 1 0 1 45 2 (1,459) 3 (1,414) 28 50 (855) 1,998 1,221 Balance as of December 31, 2019 (3,056) 48 (37) 8,515 5,470 (870) 78 (811) 2,250 647 0 1 (15) 1 69 2 (1,841) 3 (1,787) (870) 63 (742) 409 (1,140) Balance as of December 31, 2020 $ (3,926) $ 111 $ (779) $ 8,924 $ 4,330 Foreign Currency Translation AdjustmentNet Unrealized Gains (Losses) on Available-for-Sale SecuritiesNet Unrealized Gains (Losses) on Cash Flow HedgesDefined Benefit Postretirement PlansAccumulated Other Comprehensive IncomeBalance as of December 31, 2016$(1,995)$541$744$5,671$4,961Other comprehensive income(loss) before reclassifications201873711,0831,661Amounts reclassifiedfrom accumulated OCI-1(185)1392(988)3(1,134)Net other comprehensiveincome (loss)20241095527Amounts reclassified toretained earnings4(79)1172481,2431,529Balance as of December 31, 2017(2,054)6601,4027,0097,017Other comprehensive income(loss) before reclassifications(1,030)(4)(597)830(801)Amounts reclassifiedfrom accumulated OCI-1-1132(1,322)3(1,309)Net other comprehensiveincome (loss)(1,030)(4)(584)(492)(2,110)Amounts reclassified toretained earnings5-(658)--(658)Balance as of December 31, 2018(3,084)(2)8186,5174,249Other comprehensive income(loss) before reclassifications2850(900)3,4572,635Amounts reclassifiedfrom accumulated OCI-1-1452(1,459)3(1,414)Net other comprehensiveincome (loss)2850(855)1,9981,221Balance as of December 31, 2019$(3,056)$48$(37)$8,515$5,4701(Gains) losses are included in Other income (expense) - net in the consolidated statements of income.2(Gains) losses are included in Interest expense in the consolidated statements of income (see Note 13).3The amortization of prior service credits associated with postretirement benefits is included in Other income (expense) in theconsolidated statements of income (see Note 15).4With the adoption of ASU 2018-02, the stranded tax effects resulting from the application of the Tax Cuts and Jobs Act are reclassifiedto retained earnings (see Note 1).5With the adoption of ASU 2016-01, the unrealized (gains) losses on our equity investments are reclassified to retained earnings(see Note 1).43 reportable segments: (1) Communications, (2) WarnerMedia and (3) Latin America,America.(4) Xandr.75AT&T Inc.Dollars in millions except per share amountsAT&T Inc. Dollars in millions except per share amounts We have recast our segment results for all prior periods to exclude wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands from our Mobility and Business Wireline business units of the Communications segment, instead reporting them with Corporate and Other (see Note 6).•Mobilityprovides nationwide wireless service and equipment.•Entertainment GroupVideo provides video, including OTTover-the-top (OTT) services and also sells multiplatform advertising services as video revenues.communicationscommunication services primarily to residential customers. This segment also sells advertising on DIRECTV and U-verse distribution platforms.•Business Wirelineprovides advanced IP-based services, as well as traditional voice and data services to business customers.following business units:following:•Turnerprimarily operates multichannel basic television networks and digital properties. Turner also sells advertising on its networks and digital properties.•Home Box Officeconsists of premium pay television and OTT and streaming servicesHBO Max domestically and premium pay, basic tier television and OTT and streaming services internationally, as well asand content licensing and home entertainment.•Warner Bros.primarily consists of the production, distribution and licensing of television programming and feature films, the distribution of home entertainment products and the production and distribution of games.Mexico provides wireless service and equipment to customers in Mexico.•Vrio provides video services primarily to residential customers using satellite technology in Latin America and the Caribbean.The •Xandr segmentMexico provides advertising services. These services utilize data insightswireless service and equipment to develop higher-value targeted advertising across video and digital platforms. Certain revenuescustomers in this segment are also reported by the Communications segment and are eliminated upon consolidation.Mexico.•Corporate, which consists of: (1) businesses no longer integral to our operations or which we no longer actively market, (2) corporate support functions, (3) impacts of corporate-wide decisions for which the individual operating segments are not being evaluated, and (4) the reclassification of the amortization of prior service credits, which we continue to report with segment operating expenses, to consolidated other“Other income (expense) – net and (5) the recharacterization of programming intangible asset amortization, for released programming acquired in the Time Warner acquisition, which we continue to report within WarnerMedia segment operating expense, to consolidated amortization expense. The programming and intangible asset amortization reclass was $472 and $1,416 for the year ended December 31, 2019 and 2018, respectively.net.”•Acquisition-related items,which consists of items associated with the merger and integration of acquired businesses, including amortization of intangible assets.•Certain significant items,which includes (1) employee separation charges associated with voluntary and/or strategic offers, (2) losses resulting from abandonment or impairment of assetsasset impairments and abandonments, and (3) other items for which the segments are not being evaluated.•Eliminations and consolidations, which (1) removes transactions involving dealings between our segments, including content licensingchannel distribution between WarnerMedia and Communications, and (2) includes adjustments for our reporting of the advertising business.76AT&T Inc.Dollars in millions except per share amountsexpenseexpense” and other“Other income (expense) – net,net” are managed only on a total company basis and are, accordingly, reflected only in consolidated results.77AT&T Inc. For the year ended December 31, 2020 Revenues Operations
and Support
ExpensesEBITDA Operating
Income
(Loss)Equity in Net
Income (Loss) of
AffiliatesSegment
ContributionCommunications Mobility $ 72,564 $ 42,106 $ 30,458 $ 8,086 $ 22,372 $ 0 $ 22,372 Video 28,610 24,619 3,991 2,262 1,729 0 1,729 Broadband 12,318 7,582 4,736 2,914 1,822 0 1,822 Business Wireline 25,358 15,534 9,824 5,226 4,598 0 4,598 Total Communications 138,850 89,841 49,009 18,488 30,521 0 30,521 WarnerMedia Turner 12,568 6,954 5,614 277 5,337 (2) 5,335 Home Box Office 6,808 6,028 780 98 682 16 698 Warner Bros. 12,154 9,917 2,237 169 2,068 (70) 1,998 Eliminations and other (1,088) (1,320) 232 127 105 74 179 Total WarnerMedia 30,442 21,579 8,863 671 8,192 18 8,210 Latin America Vrio 3,154 2,800 354 520 (166) 24 (142) Mexico 2,562 2,636 (74) 513 (587) 0 (587) Total Latin America 5,716 5,436 280 1,033 (753) 24 (729) Segment Total 175,008 116,856 58,152 20,192 37,960 $ 42 $ 38,002 Corporate and Other 1,932 3,974 (2,042) 300 (2,342) Acquisition-related items 0 468 (468) 8,012 (8,480) Certain significant items 0 19,156 (19,156) 14 (19,170) Eliminations and consolidations (5,180) (3,615) (1,565) (2) (1,563) AT&T Inc. $ 171,760 $ 136,839 $ 34,921 $ 28,516 $ 6,405 78AT&T Inc. For the year ended December 31, 2019 Revenues Operations
and Support
ExpensesEBITDA Depreciation
and
AmortizationOperating
Income
(Loss)Equity in Net
Income
(Loss) of
AffiliatesSegment
ContributionCommunications Mobility $ 71,056 $ 40,681 $ 30,375 $ 8,054 $ 22,321 $ 0 $ 22,321 Video 32,124 27,599 4,525 2,461 2,064 0 2,064 Broadband 13,012 7,451 5,561 2,880 2,681 0 2,681 Business Wireline 26,167 16,069 10,098 4,934 5,164 0 5,164 Total Communications 142,359 91,800 50,559 18,329 32,230 0 32,230 WarnerMedia Turner 13,122 7,740 5,382 235 5,147 52 5,199 Home Box Office 6,749 4,312 2,437 102 2,335 30 2,365 Warner Bros. 14,358 11,816 2,542 162 2,380 (30) 2,350 Eliminations and other 1,030 304 726 90 636 109 745 Total WarnerMedia 35,259 24,172 11,087 589 10,498 161 10,659 Latin America Vrio 4,094 3,378 716 660 56 27 83 Mexico 2,869 3,085 (216) 502 (718) 0 (718) Total Latin America 6,963 6,463 500 1,162 (662) 27 (635) Segment Total 184,581 122,435 62,146 20,080 42,066 $ 188 $ 42,254 Corporate and Other 1,937 3,279 (1,342) 636 (1,978) Acquisition-related items (72) 960 (1,032) 7,460 (8,492) Certain significant items 0 2,082 (2,082) 43 (2,125) Eliminations and consolidations (5,253) (3,735) (1,518) (2) (1,516) AT&T Inc. $ 181,193 $ 125,021 $ 56,172 $ 28,217 $ 27,955 79AT&T Inc. For the year ended December 31, 2018 Revenues Operations
and Support
ExpensesEBITDA Depreciation
and
AmortizationOperating
Income
(Loss)Equity in Net
Income
(Loss) of
AffiliatesSegment
ContributionCommunications Mobility $ 70,521 $ 40,690 $ 29,831 $ 8,263 $ 21,568 $ 0 $ 21,568 Video 33,363 29,334 4,029 2,698 1,331 0 1,331 Broadband 13,108 7,116 5,992 2,623 3,369 0 3,369 Business Wireline 26,729 16,181 10,548 4,708 5,840 0 5,840 Total Communications 143,721 93,321 50,400 18,292 32,108 0 32,108 WarnerMedia Turner 6,979 3,794 3,185 131 3,054 54 3,108 Home Box Office 3,598 2,187 1,411 56 1,355 29 1,384 Warner Bros. 8,703 7,130 1,573 96 1,477 (28) 1,449 Eliminations and other 1,305 168 1,137 28 1,109 (30) 1,079 Total WarnerMedia 20,585 13,279 7,306 311 6,995 25 7,020 Latin America Vrio 4,784 3,743 1,041 728 313 34 347 Mexico 2,868 3,415 (547) 510 (1,057) 0 (1,057) Total Latin America 7,652 7,158 494 1,238 (744) 34 (710) Segment Total 171,958 113,758 58,200 19,841 38,359 $ 59 $ 38,418 Corporate and Other 2,246 2,335 (89) 1,633 (1,722) Acquisition-related items (49) 1,185 (1,234) 6,931 (8,165) Certain significant items 0 899 (899) 26 (925) Eliminations and consolidations (3,399) (1,947) (1,452) (1) (1,451) AT&T Inc. $ 170,756 $ 116,230 $ 54,526 $ 28,430 $ 26,096 80AT&T Inc. 2020 2019 2018 Communications $ 30,521 $ 32,230 $ 32,108 WarnerMedia 8,210 10,659 7,020 Latin America (729) (635) (710) Segment Contribution 38,002 42,254 38,418 Reconciling Items: Corporate and Other (2,342) (1,978) (1,722) Merger and integration items (468) (1,032) (1,234) Amortization of intangibles acquired (8,012) (7,460) (6,931) Impairments and abandonments (18,880) (1,458) (46) 900 0 0 Employee separation charges and benefit-related (gain) loss (1,177) (624) (587) Other noncash charges (credits), net (13) (43) (111) Natural disaster items 0 0 (181) Segment equity in net income of affiliates (42) (188) (59) Eliminations and consolidations (1,563) (1,516) (1,451) AT&T Operating Income 6,405 27,955 26,096 Interest Expense 7,925 8,422 7,957 Equity in net income (loss) of affiliates 95 6 (48) Other income (expense) - net (1,431) (1,071) 6,782 Income (Loss) Before Income Taxes $ (2,856) $ 18,468 $ 24,873 812020 2019 2018 Revenues Revenues Revenues Net Property,
Plant &
EquipmentUnited States $ 155,899 $ 121,208 $ 161,689 $ 122,567 $ 154,795 $ 123,457 Europe 5,387 1,152 6,536 1,854 4,073 1,634 Mexico 2,862 3,530 3,198 3,648 3,100 3,467 Brazil 1,807 694 2,797 1,057 2,724 1,213 All other Latin America 2,679 485 3,219 544 3,055 1,217 Asia/Pacific Rim 2,322 203 2,793 390 2,214 408 Other 804 43 961 68 795 77 Total $ 171,760 $ 127,315 $ 181,193 $ 130,128 $ 170,756 $ 131,473 AT&T Inc. 82AT&T Inc.Dollars in millions except per share amountsIntersegment Reconciliation 2020 2019 2018 Intersegment revenues Communications $ 11 $ 26 $ 13 WarnerMedia 3,183 3,318 1,875 Latin America 0 0 0 Total Intersegment Revenues 3,194 3,344 1,888 Consolidations 1,986 1,909 1,511 Eliminations and consolidations $ 5,180 $ 5,253 $ 3,399 At or for the years ended December 31, 2020 2019 Assets Investments in
Equity Method
InvesteesCapital
ExpendituresAssets Investments in
Equity Method
InvesteesCapital
ExpendituresCommunications $ 522,758 $ 0 $ 14,107 $ 521,252 $ 0 $ 17,410 WarnerMedia 150,947 1,123 699 143,492 3,011 1,205 Latin America 15,811 590 708 20,606 650 757 Corporate and eliminations (163,755) 67 161 (133,681) 34 263 Total $ 525,761 $ 1,780 $ 15,675 $ 551,669 $ 3,695 $ 19,635 facilitatefacilitates the delivery of service to the customer. In evaluating whether the equipment is a separate performance obligation, we consider the customer’s ability to benefit from the equipment on its own or together with other readily available resources and if so, whether the service and equipment are separately identifiable (i.e., is the service highly dependent on, or highly interrelated with the equipment). When the equipment does not meet the criteria to be a distinctseparate performance obligation (e.g., equipment associated with certain video services), we allocate the total transaction price to the related service. When equipment is a distinctseparate performance obligation, we record the sale of equipment when title has passed and the products are accepted by the customer. For devices sold through indirect channels (e.g., national dealers), revenue is recognized when the dealer accepts the device, not upon activation.83AT&T Inc. 84AT&T Inc.Dollars in millions except per share amountsAT&T Inc. Dollars in millions except per share amounts 85AT&T Inc. 86For the year ended December 31, 2020 Service Revenues Wireless Advanced
DataLegacy Voice & Data Subscription Content Advertising Other Equipment Total Communications Mobility $ 55,251 $ 0 $ 0 $ 0 $ 0 $ 291 $ 0 $ 17,022 $ 72,564 Video 0 0 0 26,747 0 1,718 0 145 28,610 Broadband 0 8,534 2,213 0 0 0 1,564 7 12,318 Business Wireline 0 13,330 8,183 0 0 0 3,075 770 25,358 WarnerMedia Turner 0 0 0 7,613 759 3,941 255 0 12,568 Home Box Office 0 0 0 6,090 692 0 26 0 6,808 Warner Bros. 0 0 0 50 11,632 6 466 0 12,154 0 0 0 12 (3,264) 2,178 (14) 0 (1,088) Latin America Vrio 0 0 0 3,154 0 0 0 0 3,154 Mexico 1,656 0 0 0 0 0 0 906 2,562 Corporate and Other 528 46 554 0 0 0 661 143 1,932 0 0 0 (3,110) 0 (1,718) (352) 0 (5,180) Total Operating Revenues $ 57,435 $ 21,910 $ 10,950 $ 40,556 $ 9,819 $ 6,416 $ 5,681 $ 18,993 $ 171,760 AT&T Inc. For the year ended December 31, 2019 Service Revenues Wireless Advanced
DataLegacy Voice & Data Subscription Content Advertising Other Equipment Total Communications Mobility $ 55,039 $ 0 $ 0 $ 0 $ 0 $ 292 $ 0 $ 15,725 $ 71,056 Video 0 0 0 30,451 0 1,672 0 1 32,124 Broadband 0 8,403 2,573 0 0 0 2,029 7 13,012 Business Wireline 0 12,916 9,180 0 0 0 3,286 785 26,167 WarnerMedia Turner 0 0 0 7,736 481 4,566 339 0 13,122 Home Box Office 0 0 0 5,814 925 0 10 0 6,749 Warner Bros. 0 0 0 88 13,532 41 697 0 14,358 0 0 0 13 (1,058) 2,071 4 0 1,030 Latin America Vrio 0 0 0 4,094 0 0 0 0 4,094 Mexico 1,863 0 0 0 0 0 0 1,006 2,869 Corporate and Other 628 59 565 0 0 0 443 170 1,865 0 0 0 (3,249) 0 (1,672) (332) 0 (5,253) Total Operating Revenues $ 57,530 $ 21,378 $ 12,318 $ 44,947 $ 13,880 $ 6,970 $ 6,476 $ 17,694 $ 181,193 87AT&T Inc. For the year ended December 31, 2018 Service Revenues Wireless Advanced
DataLegacy Voice & Data Subscription Content Advertising Other Equipment Total Communications Mobility $ 54,063 $ 0 $ 0 $ 0 $ 0 $ 232 $ 0 $ 16,226 $ 70,521 Video 0 0 0 31,768 0 1,595 0 0 33,363 Broadband 0 7,956 3,042 0 0 0 2,101 9 13,108 Business Wireline 0 12,234 10,674 0 0 0 2,998 823 26,729 WarnerMedia Turner 0 0 0 4,207 295 2,330 147 0 6,979 Home Box Office 0 0 0 3,201 391 0 6 0 3,598 Warner Bros. 0 0 0 47 8,216 53 387 0 8,703 0 0 0 6 (518) 1,807 10 0 1,305 Latin America Vrio 0 0 0 4,784 0 0 0 0 4,784 Mexico 1,701 0 0 0 0 0 0 1,167 2,868 Corporate and Other 718 160 288 0 0 0 845 186 2,197 0 0 0 (1,843) 0 (1,595) 39 0 (3,399) Total Operating Revenues $ 56,482 $ 20,350 $ 14,004 $ 42,170 $ 8,384 $ 4,422 $ 6,533 $ 18,411 $ 170,756 No customer accounted for more than 10% of consolidated revenues in 2019, 2018 or 2017.AT&T Inc. Dollars in millions except per share amounts entertainment services, are deferred and amortized over the contract period or expected customer relationship life, which typically ranges from three years to five years. For contracts with an estimated amortization period of less than one year, we expense incremental costs immediately.Consolidated Balance Sheets 2020 2019 Deferred Acquisition Costs Other current assets $ 3,087 $ 2,462 Other Assets 3,198 2,991 Total deferred customer contract acquisition costs $ 6,285 $ 5,453 Deferred Fulfillment Costs Other current assets $ 4,118 $ 4,519 Other Assets 5,634 6,439 Total deferred customer contract fulfillment costs $ 9,752 $ 10,958 Consolidated Statements of Income 2020 2019 Deferred acquisition cost amortization $ 2,755 $ 2,174 Deferred fulfillment cost amortization 5,110 4,947 Consolidated Balance Sheets 2020 2019 Contract assets $ 3,501 $ 2,472 Contract liabilities 6,879 6,999 20192020 was $5,394.$5,579.20192020 and 20182019 included approximately $1,611$2,054 and $1,244,$1,611, respectively, for the current portion of our contract assets in “Other current assets” and $5,939$6,071 and $5,752,$5,939, respectively, for the current portion of our contract liabilities in “Advanced billings and customer deposits.”88AT&T Inc.Dollars in millions except per share amountsAT&T Inc. Dollars in millions except per share amounts 2019,2020, the aggregate amount of the transaction price allocated to remaining performance obligations was $39,245,$42,072, of which we expect to recognize approximately 60% by the end of 2020,2021, with the remaining balance recognized thereafter.2017 ResultsPrior to the adoption of ASC 606 in 2018, revenue recognized from contracts that bundle services and equipment was limited to the lesser of the amount allocated based on the relative selling price of the equipment and service already delivered or the consideration received from the customer for the equipment and service already delivered. Our prior accounting also separately recognized regulatory fees as operating revenue when received and as an expense when incurred. Sales commissions were previously expensed as incurred.AcquisitionsHBO Latin America Group (HBO LAG) OnIn June 14, 2018, we completed our acquisition of Time Warner, a leader in media and entertainment whose major businesses encompass an array of some of the most respected media brands. We paidFor accounting purposes, the transaction was valued at $79,358. Our consolidated balance sheets include the assets and liabilities of Time Warner, shareholders $36,599 in AT&T stock and $42,100 in cash. Total consideration, including share-based payment arrangements and other adjustments, totaled $79,358, excluding Time Warner’s net debtwhich were measured at acquisition.The fair values of the assets acquired and liabilities assumed were determined using the income, cost and market approaches. The fair value measurements were primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement as defined in ASC 820, “Fair Value Measurement,” other than cash and long-term debt acquired in the acquisition. The income approach was primarily used to value the intangible assets, consisting primarily of distribution network, released TV and film content, in-place advertising network, trade names, and franchises. The income approach estimates fair value for an asset based on the present value of cash flow projected to be generated by the asset. Projected cash flow is discounted at a required rate of return that reflects the relative risk of achieving the cash flow and the time value of money. The cost approach, which estimates value by determining the current cost of replacing an asset with another of equivalent economic utility, was used, as appropriate, for plant, property and equipment. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the property, less an allowance for loss in value due to depreciation.value.Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the fair value of the net assets acquired, and represents the future economic benefits that we expect to achieve as a result of the acquisition.89AT&T Inc.Dollars in millions except per share amounts(Unaudited)
Year Ended
December 31,2018 2017 Total operating revenues $ 183,651 $ 188,769 Net Income Attributable to AT&T 20,814 31,380 Basic Earnings Per Share Attributable to Common Stock $ 2.86 $ 4.30 Diluted Earnings Per Share Attributable to Common Stock $ 2.85 $ 4.26 These unaudited pro forma consolidated results reflect the adoption of ASC 606 for 2018, which is not on a comparable basis with 2017 (see Note 5). 90AT&T Inc.Dollars in millions except per share amountsXandrWarnerMedia segment. Our investment will allowallows us to create a marketplace for TV and digital video advertising.AT&T Inc. Dollars in millions except per share amounts , we acquired $982$982 of 24 GHz spectrum in an FCC auction.InCentral European Media Enterprises Ltd. (CME) On October 13, 2020, we completed the sale of our 65.3% interest in CME, a European broadcasting company, for approximately $1,100 and recorded a pre-tax gain of $39. Upon close, we received relief from a debt guarantee originally covering approximately $1,100 that was reduced to $600 at the time of the sale.April 2017the FCC announced that we were the successful bidder for $910 of spectrum in 18 markets. We provided the FCC an initial deposit of $2,348 in July 2016allocated goodwill (approximately $250), net property, plant and received a refund of $1,438 in April 2017, which was recorded as cash from investing activities inequipment (approximately $850) and net tax liabilities (approximately $500), previously reported on our consolidated statementbalance sheets. The proceeds were used to redeem $1,950 of cash flows. In 2018, we sold these wireless licenses atcumulative preferred interests in a subsidiary that held notes secured by the auction price.proceeds of this sale.Dispositions, we sold our ownership in Hudson Yards North Tower Holdings LLC under a sale-leaseback arrangement for cash proceeds of $2,081$2,081 and recorded a loss of approximately $100 resulting from transaction costs (primarily real estate transfer taxes)., we sold our ownership in Hulu for cash proceeds of $1,430$1,430 and recorded a pre-tax gain of $740.Held-for-SaleIn October 2019, we entered into an agreement to sell wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands for approximately $1,950. We expect the transaction to close in the first half of 2020, subject to customary closing conditions.We applied held-for-sale treatment to the assets and liabilities of these operations, and, accordingly, included the assets in “Other current assets,” and the related liabilities in “Accounts payable and accrued liabilities,” on our consolidated balance sheet at December 31, 2019.The assets and liabilities primarily consist of approximately $700 of net property, plant and equipment; $1,100 of FCC licenses; $300 of goodwill; and $400 of net tax liabilities.Lives (years) 2020 2019 Land - $ 2,571 $ 2,651 Buildings and improvements 2-44 39,418 38,924 3-10 95,981 96,061 Cable, wiring and conduit 15-50 75,409 72,042 Satellites 14-17 908 2,489 Other equipment 3-20 90,883 94,951 Software 3-7 18,482 22,244 Under construction - 4,099 4,176 327,751 333,538 Accumulated depreciation and amortization 200,436 203,410 Property, plant and equipment - net $ 127,315 $ 130,128 Lives (years)20192018Land-$2,651$2,714Buildings and improvements2-4438,92438,013Central office equipment13-1096,06195,173Cable, wiring and conduit15-5072,04273,397Satellites14-172,4892,961Other equipment3-2094,95193,782Software3-722,24419,124Under construction-4,1765,526333,538330,690Accumulated depreciation and amortization203,410199,217Property, plant and equipment - net$130,128$131,4731Our depreciation expense was $20,285 in 2019, $20,083 in 2018 and $19,761 in 2017. Depreciation expense included amortization of software totaling $3,313 in 2019, $3,092 in 2018 and $2,810 in 2017.91Dollars in millions except per share amounts Dollarsmillions except per share amountsour operations. Our leases generally have remaining lease terms of up to 15 years. Some of our real estate operating leases contain renewal options that may be exercised, and some of our leases include options to terminate the leases within one year.2020 2019 Operating lease cost $ 5,896 $ 5,684 Finance lease cost: Amortization of right-of-use assets $ 287 $ 271 Interest on lease obligation 156 169 Total finance lease cost $ 443 $ 440 2020 2019 Cash Flows from Operating Activities Cash paid for amounts included in lease obligations: Operating cash flows from operating leases $ 4,852 $ 4,583 Supplemental Lease Cash Flow Disclosures Operating lease right-of-use assets obtained in exchange for new operating lease obligations $ 5,270 $ 7,818 In 2017, as a result of planned fiber deployment, we recorded a noncash pre-tax charge of $2,883 to abandon certain copper assets that we did not plan to utilize to support network activity. Largely due to the pace at which our customers have migrated to fiber, which exceeded previous forecasts, we identified additional copper assets that we no longer expect will be utilized to support future network activity. In the fourth quarter of 2019, we recorded a noncash pre-tax charge of $1,290 to abandon these copper assets. Each of these abandonments is considered outside the ordinary course of business.NOTE 8. LEASESWe have operating and finance leases for certain facilities and equipment used in our operations. As of December 31, 2019, our leases have remaining lease terms of up to 15 years. Some of our real estate operating leases contain renewal options that may be exercised, and some of our leases include options to terminate the leases within one year.Upon the adoption of ASC 842 on January 1, 2019, we recognized a right-of-use asset for operating leases, and an operating lease liability that represents the present value of our obligation to make payments over the lease terms. The present value of the lease payments is calculated using the incremental borrowing rate for operating and finance leases, which is determined using a portfolio approach based on the rate of interest that we would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. We use the unsecured borrowing rate and risk-adjust that rate to approximate a collateralized rate in the currency of the lease, which is updated on a quarterly basis for measurement of new lease obligations.92Dollars in millions except per share amounts 2020 2019 Operating Leases Operating lease right-of-use assets $ 24,714 $ 24,039 Accounts payable and accrued liabilities $ 3,537 3,451 Operating lease obligation 22,202 21,804 Total operating lease obligation $ 25,739 $ 25,255 Finance Leases Property, plant and equipment, at cost $ 3,586 $ 3,534 Accumulated depreciation and amortization (1,361) (1,296) Property, plant and equipment, net $ 2,225 $ 2,238 Current portion of long-term debt $ 189 $ 162 Long-term debt 1,847 1,872 Total finance lease obligation $ 2,036 $ 2,034 2020 2019 Weighted-Average Remaining Lease Term (years) Operating leases 8.5 8.4 Finance leases 9.9 10.3 Weighted-Average Discount Rate Operating leases 4.1 % 4.2 % Finance leases 8.1 % 8.4 % Dollars in millions except per share amountsOperating Leases Finance
Leases2021 $ 4,808 $ 350 2022 4,527 333 2023 4,094 300 2024 3,560 276 2025 2,904 272 Thereafter 11,230 1,609 Total lease payments 31,123 3,140 Less: imputed interest (5,384) (1,104) Total $ 25,739 $ 2,036 93Dollars in millions except per share amounts Dollars in millions except per share amountsThe following table sets forth the changes in the carrying amounts of goodwill by operating segment. Our Communications segment has threeWith our annual impairment testing as of October 1, 2020, the calculated fair values of the reporting units: Mobility,units exceeded their book values in all circumstances; however, the Turner, HBO and Entertainment Group (prior to the reporting unit change) fair values exceeded their book values by less than 10%, with COVID-19 impacts, industry trends and Business Wireline.our content distribution strategy affecting fair value.WarnerMedia segment has threerecoverability assessment resulted in $7,255 of long-lived asset impairment in the video business, including $4,373 for orbital slots and $1,201 for customer lists. The change in reporting units: Turner, Home Box Officeunit required the historical Entertainment Group goodwill to be assigned to the separate Video and Warner Bros. OurBroadband reporting units, for which we used the relative fair value allocation methodology. The affected reporting units were then tested for goodwill impairment. We recorded an impairment of the entire $8,253 of goodwill allocated to the Video reporting unit. NaN goodwill impairment was required in the Broadband reporting unit.has two reporting units: Mexico and Vrio.was combined with our WarnerMedia segment.The majority ofgoodwill acquired in 2018 is from our acquisitions of TimeCommunications segment has 4 reporting units: Mobility, Video, Broadband and Business Wireline. Our WarnerMedia segment has 4 reporting units: Turner, Home Box Office, Warner AppNexusBros. and Otter Media. Other changes to our goodwill in 2018 include the sale of our data colocation operations, as well as changes from foreign currency translation. With ourXandr. Our Latin America segment realignment in 2018, we reallocated goodwill within ourhas 2 reporting units.94AT&T Inc. 2020 2019 Balance at
Jan. 1Acquisitions Impairments Dispositions,
currency
exchange
and otherBalance at
Dec. 31Balance at
Jan. 1Acquisitions Dispositions,
currency
exchange
and otherBalance at
Dec. 31Communications $ 100,234 $ 0 $ (8,253) $ (5) $ 91,976 $ 100,551 $ 0 $ (317) $ 100,234 WarnerMedia 42,345 415 0 (313) 42,447 42,101 66 178 42,345 Latin America 3,662 0 (2,212) (614) 836 3,718 0 (56) 3,662 Total $ 146,241 $ 415 $ (10,465) $ (932) $ 135,259 $ 146,370 $ 66 $ (195) $ 146,241 AT&T Inc. Dollars in millions except per share amounts 2020 2019 Other Intangible Assets Weighted-Average Life Gross Carrying
AmountAccumulated
AmortizationCurrency
Translation
AdjustmentGross Carrying
AmountAccumulated
AmortizationCurrency
Translation
AdjustmentAmortized intangible assets: 24.6 years $ 2,979 $ 271 $ (421) $ 2,981 $ 156 $ (243) 15.0 years 5,825 0 0 0 0 0 Trademarks and trade names 37.1 years 20,016 1,518 (442) 18,359 853 (6) Distribution network 10.0 years 18,414 4,621 0 18,138 2,793 0 Released television and film content 17.5 years 10,940 6,240 0 10,941 4,974 0 Customer lists and relationships 9.3 years 4,100 1,645 (460) 20,304 14,773 (281) Other 21.3 years 11,311 2,615 (5) 11,427 1,843 (3) Total 22.3 years $ 73,585 $ 16,910 $ (1,328) $ 82,150 $ 25,392 $ (533) Licenses: Wireless licenses $ 85,728 $ 83,623 0 11,702 Trade names 5,241 6,067 Total $ 90,969 $ 101,392 2018 and $4,626 for the year ended December 31, 2017.2018. Amortization expense is estimated to be $6,614 in 2020, $5,683$5,987 in 2021, $4,961$5,363 in 2022, $4,299$4,846 in 2023, $4,302 in 2024 and $3,644$4,046 in 2024.We review amortized intangible assets for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable over the remaining life of the asset or asset group. In 2019, we recorded a $145 impairment on the SKY Brasil trade name. In 2018, we wrote off approximately $2,892 of fully amortized trade names and $2,890 of fully amortized customer lists.In 2019, we began amortizing wireless licenses in Mexico over their average remaining economic life (see Note 1). Renewal fees on these licenses are recorded as intangible assets and amortized over the renewal term on a straight-line basis, generally 20 years. In 2019, we recorded $1,561 of these intangible assets, with the majority to be amortized over 20 years.Changes to our indefinite-lived wireless licenses in 2019 were partially due to the held-for-sale treatment of wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands (see Note 6).95AT&T Inc. Duringsecond quarter of 2019,remaining interest in HBO LAG and fully consolidated that entity. In October 2020, we sold our ownership interest in CME. (See Note 6), we acquired Time Warner, (see Note 6), which included various equity method investments. The difference between the fair values and the proportional carrying amounts of thesethose investments’ net assets was $2,135 at December 31, 2019. Of this amount, $1,397 is attributedprimarily related to amortizing intangibles, which will be amortized into earningsinvestments in our “Equity net income (loss) of affiliates” over a weighted-average life of 19.4 years. The earnings from these investments, subsequent to the acquisition date, are includedCME (sold in the following table as well as our consolidated statements of income.2020) and HBO LAG (consolidated in 2020). (See Note 6)20192020 primarily include our interests in HBO Latin America Group, Central European Media Enterprises Ltd.SKY Mexico and SKY Mexico.HBO Latin America Group (HBO LAG) We hold an 88.2% interest in HBO LAG, which owns and operates various television channels in Latin America. We do not have the power to direct the activities that most significantly impact this entity’s economic performance, and therefore, account for this investment under the equity method of accounting.In October 2019, we entered into an agreement to acquire the remaining interest in HBO LAG for $230. That agreement also included a call option for HBO Brasil, which we have not exercised. We expect the transaction to close in the second half of 2020, pending regulatory approval. Upon closing, we will consolidate the HBO LAG operating results and record the assets at fair value.Central European Media Enterprises Ltd. (CME) We hold a 65.7% interest in CME, a broadcasting company that operates leading television networks in Bulgaria, the Czech Republic, Romania and the Slovak Republic, as well as develops and produces content for its television networks. We do not have the power to direct the activities that most significantly impact this entity’s economic performance, and therefore, account for this investment under the equity method of accounting.In October 2019, we entered into an agreement to sell our interest in CME for approximately $1,100. We expect the deal to close in the first half of 2020, pending regulatory approval.2020 2019 Beginning of year $ 3,695 $ 6,245 Additional investments 178 448 Acquisition of remaining interest in HBO LAG (1,141) 0 Disposition of CME (749) 0 Disposition of Hudson Yards 0 (1,681) Disposition of Hulu 0 (689) Disposition of Game Show Network 0 (288) Equity in net income (loss) of affiliates 95 6 Dividends and distributions received (133) (301) Currency translation adjustments (10) (10) Impairments (146) 0 Other adjustments (9) (35) End of year $ 1,780 $ 3,695 96AT&T Inc.Dollars in millions except per share amounts$2,274$2,274 of our programming inventory costs from “Other current assets” to “Other Assets” in connection with the adoption of ASU 2019-022019-2 (see Note 1).AT&T Inc. Dollars in millions except per share amounts 2020 2019 Inventories: $ 6,010 $ 4,151 Other inventory, primarily DVD and Blu-ray Discs 103 96 Total inventories 6,113 4,247 Less: current portion of inventory (103) (96) Total noncurrent inventories 6,010 4,151 Released, less amortization 487 392 Completed and not released 616 437 In production 1,130 1,475 Development and pre-production 190 171 Released, less amortization 2,495 2,199 Completed and not released 1,381 1,344 In production 2,353 2,208 Development and pre-production 90 57 Total theatrical film and television production costs 8,742 8,283 Total noncurrent inventories and theatrical film and television production costs $ 14,752 $ 12,434 95%90% of unamortized film costs for released theatrical and television content are expected to be amortized within three years from December 31, 2019.2020. In addition, approximately $2,195$3,111 of the total $5,171 film costs of released and completed and not released theatrical and television product are expected to be amortized during 2020.972020 2019 Notes and debentures Interest Rates 0.98% - 2.99% 2020 - 2039 $ 25,549 $ 17,404 3.00% - 4.99% 2020 - 2050 110,317 102,595 5.00% - 6.99% 2020 - 2095 24,259 34,513 7.00% - 9.15% 2020 - 2097 5,006 5,050 Credit agreement borrowings 300 4,969 Fair value of interest rate swaps recorded in debt 20 26 165,451 164,557 Unamortized (discount) premium - net (9,710) (2,996) Unamortized issuance costs (532) (452) Total notes and debentures 155,209 161,109 Finance lease obligations 2,036 2,034 Total long-term debt, including current maturities 157,245 163,143 Current maturities of long-term debt (3,470) (11,834) Total long-term debt $ 153,775 $ 151,309 AT&T Inc. and Swiss franc denominated debt of approximately $42,485$43,399 and $41,356$42,485 at December 31, 2020 and 2019, and 2018, respectively.remained unchanged at 4.4% atwas approximately 4.1% as of December 31, 20192020 and 2018.4.4% as of December 31, 2019. debt that may be put back to us by the holders in 2020. We have $1,000 of annual put reset securities that may be put each April until maturity in 2021. If the holders do not require us to repurchase the securities, the interest rate will be reset based on current market conditions. Likewise, we have an accreting zero-coupon note that may be redeemed each May, until maturity in 2022.2022. If the zero-coupon note (issued for principal of $500$500 in 2007 and partially exchanged in the 2017 debt exchange offers) is held to maturity, the redemption amount will be $592.2020 2019 Current maturities of long-term debt $ 3,470 $ 11,834 0 4 Total $ 3,470 $ 11,838 2019,2020, we received net proceeds of $17,039$31,988 on the issuance of $17,235$32,241 in long-term debt in various markets, with an average weighted maturity of approximately nine20 years and a weighted average couponinterest rate of 3.4%3.2%. We repaid $27,440$39,758 in borrowings of various notes with a weighted average coupon of 3.5%3.2%.FebruaryAugust 2020,, we redeemed $2,619repurchased $11,384 of 4.600%AT&T global notes with an original maturity in 2045and issued $2,995 of 4.000% globalsubsidiary notes due 2049.98AT&T Inc.Dollars in millions except per share amountsDebt Exchange and Tender OffersIn June 2019, we completed exchange2021 to 2025 through cash tender offers.the exchange offer, approximately $11,041September 2020, we exchanged $17,677 of AT&T and subsidiary notes, issued by WarnerMedia subsidiaries with interest rates between 1.950%ranging from 4.350% to 8.750% and 9.150%, were tenderedoriginal maturities ranging from 2031 to 2058 for $1,459 of cash and accepted in exchange for$21,500 of three new series of AT&T Inc. global notes, with interest rates ranging from 3.500% to 3.650% and maturities that were identicalranging from 2053 to the2059.the tendered notes, as well as identical interest payment dates2033 and substantially identical optional redemption provisions. Also, in 2057, respectively.June 2019, we purchased $590 notes issued by WarnerMedia subsidiaries.On December 19, 2019, we purchased $1,409 of notes issued by various subsidiaries.20192020 and 2018,2019, we were in compliance with all covenants and conditions of instruments governing our debt. Substantially all of our outstanding long-term debt is unsecured. Maturities of outstanding long-term notes and debentures, as of December 31, 2019,2020, and the corresponding weighted-average interest rate scheduled for repayment are as follows:2021 2022 2023 2024 2025 Thereafter $ 3,418 $ 5,951 $ 7,779 $ 7,849 $ 6,389 $ 134,268 Weighted-average interest rate 3.8 % 3.3 % 3.4 % 3.3 % 3.9 % 4.2 % December 2018, we amended our five-year revolving credit agreement (the “Amended and Restated Credit Agreement”) and concurrently entered into a new five-year agreement (the “Five Year Credit Agreement,” and, together with the Amended and Restated Credit Agreement, the “Credit Agreements”) such that we now have two $7,500 revolving credit agreements totaling $15,000. The Amended and Restated Credit Agreement terminates on December 11, 2021 and the Five Year Credit Agreement terminates on December 11, 2023. NaN amounts were outstanding under either agreement as of December 31, 2019.In September 2019,, we entered into and drew on a $1,300$1,300 term loan credit agreement containing (i) a 1.25 year $400 facility due in 2020, (BAML Tranche A Facility), (ii) a 2.25 year $400 facility due in 2021, (BAML Tranche B Facility), and (iii) a 3.25 year $500 facility due in 2022, with Bank of America, N.A., as agent. These facilities were repaid and terminated in the second quarter of 2020.2022 (BAML Tranche C Facility)AT&T Inc. Dollars in millions except per share amounts No repaymentThe Term Loan is available for a single draw at any time before May 29, 2021. The proceeds will be used for general corporate purposes, which may include among other things, financing acquisitions of additional spectrum. The entire principal amount of the Term Loan will be due and payable 364 days after the date on which the borrowing is made. At January 31, 2021, we had been madeapproximately $6,100 of commercial paper outstanding.these facilitieseither agreement as of December 31, 2019.2020.Agreementscredit agreements contains covenants that are customary for an issuer with an investment grade senior debt credit rating, as well as a net debt-to-EBITDA (earnings before interest, taxes, depreciation and amortization, and other modifications described in each agreement) financial ratio covenant requiring AT&T to maintain, as of the last day of each fiscal quarter, a ratio of not more than 3.5-to-1. The events of default are customary for agreements of this type and such events would result in the acceleration of, or would permit the lenders to accelerate, as applicable, required payments and would increase each agreement’s relevant Applicable Margin by 2.00% per annum.Revolving Credit Agreementsthe Amended and Restated Credit Agreementtwo revolving credit agreements to provide advances will terminate on December 11, 2021,2023, and under the Five Year Credit Agreement to provide advances will terminate on December 11, 2023,November 17, 2025, unless the commitments are terminated in whole prior to that date. All advances must be repaid no later than the date on which lenders are no longer obligated to make any advances under the applicable Credit Agreement.credit agreement.Credit Agreementscredit agreements provides that we and lenders representing more than 50% of the facility amount may agree to extend their commitments under such Credit Agreement for two2 one-year periods beyond the initial termination date. We have the right to terminate, in whole or in part, amounts committed by the lenders under each of the Credit Agreementscredit agreements in excess of any outstanding advances; however, any such terminated commitments may not be reinstated.AT&T’sour option, either:•at a variable annual rate equal to: (1) the highest of (but not less than zero) (a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank’s base rate, (b) 0.5% per annum above the federal funds rate, and (c) the London interbank offered rate (or the successor thereto) (“LIBOR”) applicable to dollars for a period of one month plus 1.00%, plus (2) an applicable margin, as set forth in the applicable Credit Agreement (the “Applicable Margin for Base Advances”); or99AT&T Inc.Dollars in millions except per share amounts•at a rate equal to: (i) LIBOR (adjusted upwards to reflect any bank reserve costs) for a period of one, two, three or six months, as applicable, plus (ii) an applicable margin, as set forth in the applicable Credit Agreement (the “Applicable Margin for Eurodollar Rate Advances”).0.070%0.070%, 0.080%0.080%, 0.100%0.100% or 0.125%0.125% per annum of the amount of the lender commitments, depending on AT&T’s credit rating.2018.2019.AT&T Inc. Dollars in millions except per share amounts December 31, 2020 December 31, 2019 Carrying
AmountFair
ValueCarrying
AmountFair
Value$ 155,209 $ 187,224 $ 161,109 $ 182,124 Bank borrowings 0 0 4 4 3,249 3,249 3,723 3,723 2019,2020, and December 31, 2018.2019. Derivatives designated as hedging instruments are reflected as “Other assets,” “Other noncurrent liabilities” and, for a portion of interest rate swaps,liabilities,” “Other current assets” and “Accounts payable and accrued liabilities” on our consolidated balance sheets.December 31, 2020 Level 1 Level 2 Level 3 Total Equity Securities Domestic equities $ 1,010 $ 0 $ 0 $ 1,010 International equities 180 0 0 180 Fixed income equities 236 0 0 236 Available-for-Sale Debt Securities 0 1,479 0 1,479 Asset Derivatives Cross-currency swaps 0 1,721 0 1,721 Foreign exchange contracts 0 6 0 6 Liability Derivatives Cross-currency swaps 0 (1,814) 0 (1,814) Foreign exchange contracts 0 (9) 0 (9) December 31, 2019 Level 1 Level 2 Level 3 Total Equity Securities Domestic equities $ 844 $ 0 $ 0 $ 844 International equities 183 0 0 183 Fixed income equities 229 0 0 229 Available-for-Sale Debt Securities 0 1,444 0 1,444 Asset Derivatives Interest rate swaps 0 2 0 2 Cross-currency swaps 0 172 0 172 Interest rate locks 0 11 0 11 Foreign exchange contracts 0 89 0 89 Liability Derivatives Cross-currency swaps 0 (3,187) 0 (3,187) Interest rate locks 0 (95) 0 (95) 100AT&T Inc. For the years ended December 31, 2020 2019 2018 Total gains (losses) recognized on equity securities $ 171 $ 301 $ (130) Gains (losses) recognized on equity securities sold (25) 100 (10) Unrealized gains (losses) recognized on equity securities held at end of period $ 196 $ 201 $ (120) 2019,2020, available-for-sale debt securities totaling $1,444$1,479 have maturities as follows - less than one year: $54;$29; one to three years: $172;$159; three to five years: $161; for$179; five or more years: $1,057.$1,112.101AT&T Inc.Dollars in millions except per share amountsWePeriodically, we enter into and designate our fixed-to-floating interest rate swaps as fair value hedges. The purpose of these swaps is to manage interest rate risk by managing our mix of fixed-rate and floating-rate debt. These swaps involve the receipt of fixed-rate amounts for floating interest rate payments over the life of the swaps without exchange of the underlying principal amount.Accrued20192020 and 2018,2019, no ineffectiveness was measured on fair value hedgeshedges.. the issuance of our foreign-denominated debt. These agreements include initial and final exchanges of principal from fixed foreign currency denominated amounts to fixed U.S. dollar denominated amounts, to be exchanged at a specified rate that is usually determined by the market spot rate upon issuance. They also include an interest rate swap of a fixed or floating foreign currency-denominated interest rate to a fixed U.S. dollar denominated interest rate.AT&T Inc. Dollars in millions except per share amounts the effective portion ischanges in fair value are reported as a component of accumulated OCI untiland are reclassified into the consolidated statements of income in the same period the hedged transaction affects earnings.$61$92 from accumulated OCI to interest expense“Interest expense” due to the amortization of net losses on historical interest rate locks.sheet.sheets. Net gainslosses on net investment hedges recognized in accumulated OCI for 20192020 were $4.$147.102AT&T Inc.Dollars in millions except per share amounts2019,2020, we had posted collateral of $204$53 (a deposit asset) and held collateral of $44$694 (a receipt liability). Under the agreements, if AT&T’s credit rating had been downgraded one rating level by Fitch Ratings, before the final collateral exchange in December, we would have been required to post additional collateral of $35.$33. If AT&T’s credit rating had been downgraded four ratingratings levels by Fitch Ratings, two levels by S&P, and two levels by Moody’s, we would have been required to post additional collateral of $2,678.$676. If DIRECTV Holdings LLC’s credit rating had been downgraded below BBB- (S&P),by S&P, we would have been required to post additional collateral of $232.$134. At December 31, 2018,2019, we had posted collateral of $1,675$204 (a deposit asset) and held collateral of $103$44 (a receipt liability). We do not offset the fair value of collateral, whether the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) exists, against the fair value of the derivative instruments.NOTE 14. INCOME TAXESThe Tax Cuts and Jobs Acts (the Act) was enacted on December 22, 2017. The Act reducesU.S. federal corporate income tax rate from 35% to 21% and required companies to pay a one-time transition tax on earningsnotional amounts of certain foreign subsidiaries that were previously tax deferred. ASC 740, “Income Taxes,” requires effects of changes in tax rates to be recognized in the period enacted. Recognizing the late enactment of the Act and complexity of accurately accounting for its impact, the Securities and Exchange Commission in SAB 118 provided guidance that allowed registrants to provide a reasonable estimate of the Act in their financial statementsour outstanding derivative positions at December 31, 201731:2020 2019 Interest rate swaps $ 0 $ 853 Cross-currency swaps 40,745 42,325 Interest rate locks 0 3,500 Foreign exchange contracts 90 269 Total $ 40,835 $ 46,947 adjust the reported impact in a measurement period not to exceed one year.Effect of Derivatives on the Consolidated Statements of Income Fair Value Hedging Relationships For the years ended December 31, 2020 2019 2018 Interest rate swaps (Interest expense): Gain (Loss) on interest rate swaps $ (6) $ 58 $ (12) Gain (Loss) on long-term debt 6 (58) 12 103AT&T Inc. 2018, we completed our accounting foraddition, the tax effectsnet swap settlements that accrued and settled in the periods above were offset against “Interest expense.”Cash Flow Hedging Relationships For the years ended December 31, 2020 2019 2018 Cross-currency swaps: Gain (Loss) recognized in accumulated OCI $ (378) $ (1,066) $ (825) Foreign exchange contracts: Gain (Loss) recognized in accumulated OCI 3 10 51 (3) 6 39 Interest rate locks: Gain (Loss) recognized in accumulated OCI (648) (84) 0 (84) (63) (58) enactmentvideo and Vrio businesses were estimated using both the discounted cash flow as well as market multiple approaches. The fair values of long-lived assets in the Actvideo business were determined using a present value approach of probability-weighted expected cash flows. The fair values of film productions were estimated using a discounted cash flow approach. The inputs to all of these approaches are considered Level 3.the measurementVrio reporting units were fully impaired. At December 31, 2020, nonrecurring fair value measurements in our Video business unit totaled $9,744 and were comprised of $5,873 for orbital slots, $1,613 for customer lists and $2,258 for property, plant and equipment (see Notes 7 and 9). Nonrecurring fair value measurements for film costs within our Warner Bros. business unit totaled $844 (see Note 11). There were 0 nonrecurring fair value measurements at December 31, 2019.assets and liabilities based on the rates(assets) are as follows at which they were expected to reverse in the future; the total benefit was $22,211, of which $20,271 was recorded in 2017 as a provisional amount. The total net benefit for the year ended December 31, 2018 was $718 for all enactment date and measurement period adjustments from the Act. The impact of the enactment of the Act is reflected in the following tables.31:2020 2019 Depreciation and amortization $ 46,952 $ 44,896 Licenses and nonamortizable intangibles 13,930 17,355 Employee benefits (5,279) (5,143) Deferred fulfillment costs 2,691 3,050 Net operating loss and other carryforwards (7,355) (7,301) Other – net 4,562 1,536 Subtotal 55,501 54,393 Deferred tax assets valuation allowance 4,773 4,941 Net deferred tax liabilities $ 60,274 $ 59,334 Noncurrent deferred tax liabilities $ 60,472 $ 59,502 Less: Noncurrent deferred tax assets (198) (168) Net deferred tax liabilities $ 60,274 $ 59,334 2019,2020, we had combined net operating and capital loss carryforwards (tax effected) for federal income tax purposes of $693,$585, state of $970$916 and foreign of $2,948,$2,763, expiring through 2039.2040. Additionally, we had federal credit carryforwards of $664$1,080 and state credit carryforwards of $2,025,$2,011, expiring primarily through 2039.2040.AT&T Inc. Dollars in millions except per share amounts 20192020 and 20182019 related primarily to state and foreign net operating losses and state credit carryforwards.20192020 and 20182019 is as follows:Federal, State and Foreign Tax 2020 2019 Balance at beginning of year $ 10,979 $ 10,358 Increases for tax positions related to the current year 1,580 903 Increases for tax positions related to prior years 112 1,106 Decreases for tax positions related to prior years (994) (1,283) Lapse of statute of limitations (24) (32) Settlements (1,646) (283) Current year acquisitions 0 205 Foreign currency effects (6) 5 Balance at end of year 10,001 10,979 Accrued interest and penalties 2,450 2,708 Gross unrecognized income tax benefits 12,451 13,687 Less: Deferred federal and state income tax benefits (878) (886) Less: Tax attributable to timing items included above (3,588) (4,320) $ 7,985 $ 8,481 104AT&T Inc.Dollars in millions except per share amounts2019 and $2,115 at December 31, 2018.2019.2019, and $2,588 as of December 31, 2018.2019. We record interest and penalties related to federal, state and foreign UTBs in income tax expense. The net interest and penalty expense included in income tax expense was $149 for 2020, $267 for 2019 and $1,290 for 2018 and $107 for 2017.2018.2010.2012. All audit periods prior to 20032005 are closed for federal examination purposes. Contestedpurposes and we have effectively resolved all outstanding audit issues from our 2003for years through 2010 returns are at various stages of resolution with the IRS Appeals Division. Those years will be closed as the final paperwork is processed in the coming months.AT&T Inc. Dollars in millions except per share amounts the close of the examination process;each year is closed; and it is possible that the amount of unrecognized benefit with respect to our uncertain tax positions could increase or decrease within the next 12 months.105AT&T Inc.Dollars in millions except per share amounts2020 2019 2018 Federal: Current $ (687) $ 584 $ 3,258 Deferred 1,039 1,656 277 352 2,240 3,535 State and local: Current (6) 603 513 Deferred 263 144 473 257 747 986 Foreign: Current 413 605 539 Deferred (57) (99) (140) 356 506 399 Total $ 965 $ 3,493 $ 4,920 2020 2019 2018 U.S. income (loss) before income taxes $ (452) $ 18,301 $ 25,379 Foreign income (loss) before income taxes (2,404) 167 (506) Total $ (2,856) $ 18,468 $ 24,873 (21% for 2019 and 2018 and 35% for 2017)of 21% to income from continuing operations before income taxes is as follows:2020 2019 2018 Taxes computed at federal statutory rate $ (600) $ 3,878 $ 5,223 Increases (decreases) in income taxes resulting from: State and local income taxes - net of federal income tax benefit 193 611 738 Enactment date and measurement period adjustments from the Act 0 0 (718) Tax on foreign investments (141) (115) (466) Noncontrolling interest (285) (230) (121) Permanent items and R&D credit (239) (285) (189) Audit resolutions (112) (156) 544 Divestitures 107 0 0 2,120 0 0 Other - net (78) (210) (91) Total $ 965 $ 3,493 $ 4,920 Effective Tax Rate (33.8) % 18.9 % 19.8 % AT&T Inc. Dollars in millions except per share amounts In 2018,recorded the fair value of the WarnerMediacommitted to, and reflected in our results, plan changes impacting retiree life and death coverage and health and medical subsidy benefits. Changes were also communicated that impact future pension accruals for certain management employees. These plan changes align our benefit plans using assumptions and accounting policies consistent with those disclosed by AT&T. Upon acquisition, the excess of projected benefit obligation over the plan assets was recognized as a liability and previously existing deferred actuarial gains and losses and unrecognized service coststo, or benefits were eliminated.above market level.committed to a plan to offeroffered certain terminated vested pension plan participants the opportunity to receive their benefit inas a lump-sum amount.lump sum.arewere reflected in our results. Future retirees will not receive health retirement subsidies toward post-Medicare coverage but will have access to a new cost-efficient comprehensive plan.106AT&T Inc.Dollars in millions except per share amountsDuring 2018, we communicated and reflected in results the plan changes involving the frequency of future health reimbursement account credit increases, and the ability of certain participants of the pension plan to receive their benefit in a lump-sum amount upon retirement.planplans to employee service.In 2013, we made a voluntary contribution of a preferred equity interest in AT&T Mobility II LLC (Mobility II), the primary holding company for our wireless business, to the trust used to pay pension benefits under certain of our qualified pension plans. In 2018, we simplified transferability and enhanced marketability of the preferred equity interest, which resulted in it107AT&T Inc. Pension Benefits Postretirement Benefits 2020 2019 2020 2019 Benefit obligation at beginning of year $ 59,873 $ 55,439 $ 16,041 $ 19,378 Service cost - benefits earned during the period 1,029 1,019 53 71 Interest cost on projected benefit obligation 1,687 1,960 416 675 Amendments (340) 0 (2,655) (4,590) Actuarial (gain) loss 5,054 7,734 1,423 2,050 Special termination benefits 0 81 0 0 Benefits paid (5,124) (6,356) (1,370) (1,543) Curtailment (1) 0 0 0 Plan transfers (20) (4) 20 0 Benefit obligation at end of year $ 62,158 $ 59,873 $ 13,928 $ 16,041 beingPension Benefits Postretirement Benefits 2020 2019 2020 2019 Fair value of plan assets at beginning of year $ 53,530 $ 51,681 $ 4,145 $ 4,277 Actual return on plan assets 6,199 8,207 302 609 (5,124) (6,356) (1,029) (941) Contributions 2 2 425 200 Plan transfers (1) (4) 0 0 Fair value of plan assets at end of year 54,606 53,530 3,843 4,145 $ (7,552) $ (6,343) $ (10,085) $ (11,896) as a plan asset inon our consolidated financial statements and reflected a noncash contribution of $8,803 included as “Contributions” in the above table. Since 2013, the preferred equity interest was a plan asset under ERISA and has been recognized as such in the plan’s separate financial statements. (See Note 17)balance sheets at December 31 are listed below:Pension Benefits Postretirement Benefits 2020 2019 2020 2019 $ 0 $ 0 $ (1,213) $ (1,365) (7,552) (6,343) (8,872) (10,531) Net amount recognized $ (7,552) $ (6,343) $ (10,085) $ (11,896) 2019, and $53,963 at December 31, 2018.2019.AT&T Inc. Dollars in millions except per share amounts $(4,251) and $155$(4,251) for the years ended December 31, 2020, 2019 2018 and 2017.108Postretirement Benefits 2020 2019 2018 2020 2019 2018 Service cost – benefits earned
during the period$ 1,029 $ 1,019 $ 1,116 $ 53 $ 71 $ 109 1,687 1,960 2,092 416 675 778 Expected return on assets (3,557) (3,561) (3,190) (178) (227) (304) Amortization of prior service credit (113) (113) (115) (2,329) (1,820) (1,635) Actuarial (gain) loss 2,404 3,088 (812) 1,299 1,670 (2,290) Net pension and postretirement
cost (credit)$ 1,450 $ 2,393 $ (909) $ (739) $ 369 $ (3,342) Pension Benefits Postretirement Benefits 2020 2019 2018 2020 2019 2018 Balance at beginning of year $ 361 $ 447 $ 571 $ 8,171 $ 6,086 $ 6,456 Prior service (cost) credit 250 0 (37) 2,001 3,457 864 Amortization of prior service credit (86) (86) (87) (1,756) (1,372) (1,234) 164 (86) (124) 245 2,085 (370) Balance at end of year $ 525 $ 361 $ 447 $ 8,416 $ 8,171 $ 6,086 AT&T Inc. Pension Benefits Postretirement Benefits 2020 2019 2018 2020 2019 2018 Weighted-average discount rate for
determining benefit obligation at
December 312.70 % 3.40 % 4.50 % 2.40 % 3.20 % 4.40 % 3.60 % 4.10 % 4.20 % 3.50 % 4.40 % 4.30 % 2.90 % 3.50 % 3.80 % 2.70 % 3.70 % 3.60 % 3.10 % 3.30 % 3.70 % 0 % 0 % 0 % Long-term rate of return on plan assets 7.00 % 7.00 % 7.00 % 4.75 % 5.75 % 5.75 % 3.00 % 3.00 % 3.00 % 3.00 % 3.00 % 3.00 % 3.00 % 3.00 % 3.00 % 3.00 % 3.00 % 3.00 % 3.40%2.70% and 3.20%2.40% respectively, at December 31, 2019,2020, reflects the hypothetical rate at which the projected benefit obligation could be effectively settled or paid out to participants. We determined our discount rate based on a range of factors, including a yield curve composed of the rates of return on several hundred high-quality, fixed income corporate bonds available at the measurement date and corresponding to the related expected durations of future cash outflows. These bonds were all rated at least Aa3 or AA- by one of the nationally recognized statistical rating organizations, denominated in U.S. dollars, and neither callable, convertible nor index linked. For the year ended December 31, 2019,2020, when compared to the year ended December 31, 2018,2019, we decreased our pension discount rate by 0.70%, resulting in an increase in our pension plan benefit obligation of $5,594 and decreased our postretirement discount rate by 0.80%, resulting in an increase in our postretirement benefit obligation of $1,311. For the year ended December 31, 2019, we decreased our pension discount rate by 1.10%, resulting in an increase in our pension plan benefit obligation of $8,018 and decreased our postretirement discount raterates by 1.20%, resulting in an increase in our postretirement benefit obligation of $2,399. For the year ended December 31, 2018, we increased our pension discount rate by 0.70%, resulting in a decrease in our pension plan benefit obligation of $4,394 and increased our postretirement discount rates by 0.70%, resulting in a decrease in our postretirement benefit obligation of $1,509.AT&T Inc. Dollars in millions except per share amounts 109AT&T Inc.Dollars in millions except per share amounts2020,2021, our expected long-term rate of return is 7.00%6.75% on pension plan assets and 4.75%4.50% on postretirement plan assets. Our expected long-term raterates of return on postretirement plan assets waswere adjusted downward by 0.25% for 2021, with pension reducing from 7.00% to 6.75% and postretirement from 4.75% for 2020 from 5.75% for 2019to 4.50%. This update to our asset return assumptions was due to economic forecasts, a change in the asset mix, and holding more VEBA assetsfixed income securities in the pension plan and more cash and short-term fixed income securities.securities in our VEBA trusts. Our long-term rates of return reflect the average rate of earnings expected on the funds invested, or to be invested, to provide for the benefits included in the projected benefit obligations. In setting the long-term assumed rate of return, management considers capital markets’ future expectations, the asset mix of the plans’ investment and average historical asset return. Actual long-term returns can, in relatively stable markets, also serve as a factor in determining future expectations. We consider many factors that include, but are not limited to, historical returns on plan assets, current market information on long-term returns (e.g., long-term bond rates) and current and target asset allocations between asset categories. The target asset allocation is determined based on consultations with external investment advisers. If all other factors were to remain unchanged, we expect that a 0.50% decrease in the expected long-term rate of return would cause 20202021 combined pension and postretirement cost to increase $273.$277. However, any differences in the rate and actual returns will be included with the actuarial gain or loss recorded in the fourth quarter when our plans are remeasured.20192020 and 20182019 reflects the long-term average rate of salary increases.Mortality Tables At December 31, 2019, we updated our assumed mortality rates to reflect our best estimate of future mortality, which decreased our pension obligation by $147 and our postretirement obligations by $4. At December 31, 2018, we updated our assumed mortality rates, which decreased our pension obligation by $488 and our postretirement obligations by $61. updated expectations of healthcare industry inflation andrecent prescription drug cost experience, our 20202021 assumed annual healthcare prescription drug cost trend and medical cost trend for eligible participants will decreaseremain at 4.00% annual and ultimate rate. For 2020, our assumed annual healthcare prescription drug cost trend and medical cost trend for eligible participants was decreased from an annual and ultimate trend rate of 4.50%4.50% to an annual and ultimate trend rate of 4.00%4.00%. This change in assumption decreased our obligation by $102.$102 at December 31, 2019. In addition to the healthcare cost trend, we assumed an annual 2.50%2.50% growth in administrative expenses and an annual 3.00%3.00% growth in dental claims.2020.2021.a discretionary contributioncontributions of $425 in December 2020 and $200 in December 2019 to our postretirement plan in plan.December 2019.AT&T Inc. Dollars in millions except per share amounts 110AT&T Inc.Dollars in millions except per share amountsPension Assets Postretirement (VEBA) Assets Target 2020 2019 Target 2020 2019 Equity securities: Domestic 16 % - 26 % 19 % 17 % 14 % - 24 % 19 % 20 % International 10 % - 20 % 15 12 9 % - 19 % 14 12 Fixed income securities 37 % - 47 % 35 35 40 % - 50 % 45 52 Real assets 8 % - 18 % 8 9 0 % - 6 % 1 1 Private equity 5 % - 15 % 9 8 0 % - 6 % 1 2 Preferred interest 6 % - 16 % 10 17 0 % - 0 % 0 0 Other 0 % - 5 % 4 2 15 % - 25 % 20 13 Total 100 % 100 % 100 % 100 % 2019,2020, AT&T securities represented 17%11% of assets held by our pension trust, including the preferred interest in Mobility II, and 3%1% of assets (primarily common stock) held by our VEBA trusts included in these financial statements.AT&T Inc. Dollars in millions except per share amounts Pension Assets and Liabilities at Fair Value as of December 31, 2020 Level 1 Level 2 Level 3 Total Non-interest bearing cash $ 173 $ 0 $ 0 $ 173 Interest bearing cash 7 0 0 7 Foreign currency contracts 0 3 0 3 Equity securities: Domestic equities 9,784 0 11 9,795 International equities 4,821 11 12 4,844 Preferred interest 0 0 5,771 5,771 Fixed income securities: Corporate bonds and other investments 0 11,043 52 11,095 Government and municipal bonds 0 6,039 0 6,039 Mortgage-backed securities 0 442 1 443 Real estate and real assets 0 0 2,544 2,544 Securities lending collateral 621 1,435 0 2,056 Receivable for variation margin 23 0 0 23 Assets at fair value 15,429 18,973 8,391 42,793 Investments sold short and other liabilities at fair value (450) (8) (1) (459) Total plan net assets at fair value $ 14,979 $ 18,965 $ 8,390 $ 42,334 Assets held at net asset value practical expedient Private equity funds 5,154 Real estate funds 1,694 Commingled funds 7,706 Total assets held at net asset value practical expedient 14,554 (2,282) Total Plan Net Assets $ 54,606 AT&T Inc. Dollars in millions except per share amounts Postretirement Assets and Liabilities at Fair Value as of December 31, 2020 Level 1 Level 2 Level 3 Total Interest bearing cash $ 497 $ 302 $ 0 $ 799 Equity securities: Domestic equities 363 0 0 363 International equities 282 0 0 282 Fixed income securities: Corporate bonds and other investments 5 307 3 315 Government and municipal bonds 6 132 1 139 Mortgage-backed securities 0 94 0 94 Securities lending collateral 0 28 0 28 Assets at fair value 1,153 863 4 2,020 Securities lending payable and other liabilities (1) (29) 0 (30) Total plan net assets at fair value $ 1,152 $ 834 $ 4 $ 1,990 Assets held at net asset value practical expedient Commingled funds 1,843 Private equity 24 Real estate funds 22 Total assets held at net asset value practical expedient 1,889 (36) Total Plan Net Assets $ 3,843 Pension Assets Equities Fixed Income Funds Real Estate and Real Assets Total Balance at beginning of year $ 8,816 $ 6 $ 2,817 $ 11,639 Realized gains (losses) (150) 0 255 105 Unrealized gains (losses) 3 0 (178) (175) Transfers in 4 51 36 91 Transfers out 0 (3) 0 (3) Purchases 9,114 1 223 9,338 Sales (11,994) (2) (609) (12,605) Balance at end of year $ 5,793 $ 53 $ 2,544 $ 8,390 Postretirement Assets Equities Fixed Income Funds Real Estate and Real Assets Total Balance at beginning of year $ 0 $ 32 $ 0 $ 32 Transfers in 0 3 0 3 Transfers out 0 (11) 0 (11) Sales 0 (20) 0 (20) Balance at end of year $ 0 $ 4 $ 0 $ 4 AT&T Inc. Dollars in millions except per share amounts 111Pension Assets and Liabilities at Fair Value as of December 31, 2019 Level 1 Level 2 Level 3 Total Non-interest bearing cash $ 85 $ 0 $ 0 $ 85 Interest bearing cash 529 0 0 529 Foreign currency contracts 0 5 0 5 Equity securities: Domestic equities 8,068 0 4 8,072 International equities 3,929 11 6 3,946 Preferred interest 0 0 8,806 8,806 Fixed income securities: Corporate bonds and other investments 0 10,469 4 10,473 Government and municipal bonds 49 6,123 0 6,172 Mortgage-backed securities 0 522 2 524 Real estate and real assets 0 0 2,817 2,817 Securities lending collateral 103 1,658 0 1,761 Receivable for variation margin 5 0 0 5 Assets at fair value 12,768 18,788 11,639 43,195 Investments sold short and other liabilities at fair value (513) (2) 0 (515) Total plan net assets at fair value $ 12,255 $ 18,786 $ 11,639 $ 42,680 Assets held at net asset value practical expedient Private equity funds 4,544 Real estate funds 2,062 Commingled funds 5,710 Total assets held at net asset value practical expedient 12,316 (1,466) Total Plan Net Assets $ 53,530 AT&T Inc. Postretirement Assets and Liabilities at Fair Value as of December 31, 2019 Postretirement Assets and Liabilities at Fair Value as of December 31, 2019 Level 1 Level 2 Level 3 Total Interest bearing cash $ 248 $ 301 $ 0 $ 549 Equity securities: Domestic equities 438 0 0 438 International equities 265 0 0 265 Fixed income securities: Corporate bonds and other investments 7 492 31 530 Government and municipal bonds 6 182 1 189 Mortgage-backed securities 0 294 0 294 Securities lending collateral 0 36 0 36 Assets at fair value 964 1,305 32 2,301 Securities lending payable and other liabilities Securities lending payable and other liabilities 0 (36) 0 (36) Total plan net assets at fair value $ 964 $ 1,269 $ 32 $ 2,265 Assets held at net asset value practical expedient Private equity funds 66 Real estate funds 27 Commingled funds 1,797 Total assets held at net asset value practical expedient 1,890 (10) Total Plan Net Assets $ 4,145 112Pension Assets Equities Fixed Income Funds Real Estate and Real Assets Total Balance at beginning of year $ 8,750 $ 4 $ 2,579 $ 11,333 Realized gains (losses) 0 0 64 64 Unrealized gains (losses) 58 0 45 103 Transfers in 8 5 134 147 Transfers out 0 (6) 0 (6) Purchases 0 7 228 235 Sales 0 (4) (233) (237) Balance at end of year $ 8,816 $ 6 $ 2,817 $ 11,639 Postretirement Assets Equities Fixed Income Funds Real Estate and Real Assets Total Balance at beginning of year $ 1 $ 12 $ 0 $ 13 Transfers in 0 28 0 28 Transfers out 0 (1) 0 (1) Sales (1) (7) 0 (8) Balance at end of year $ 0 $ 32 $ 0 $ 32 AT&T Inc. 113AT&T Inc.Dollars in millions except per share amountsThe following tables set forth by level, within the fair value hierarchy, the pension and postretirement assets and liabilities at fair value as of December 31, 2018:114AT&T Inc.Dollars in millions except per share amounts2019.2020. Because benefit payments will depend on future employment and compensation levels; average years employed; average life spans; and payment elections, among other factors, changes in any of these assumptions could significantly115AT&T Inc.Dollars in millions except per share amountsPension Benefits Postretirement Benefits 2021 $ 5,391 $ 1,392 2022 4,597 1,231 2023 4,428 1,159 2024 4,323 879 2025 4,234 832 Years 2026 - 2030 19,646 3,651 costcredit was $438 at and for the year ended December 31, 2019. The projected benefit obligation was $2,397 and the net supplemental retirement pension credit was $53 at and for the year ended December 31, 2018. and 4.40% at December 31, 2018 were calculated using the same methodologies used in calculating the discount rate for our qualified pension and postretirement benefit plans.2018 and $138 in 2017.2018.$724 and $703$724 for the years ended December 31, 2020, 2019 2018 and 2017.2018.AT&T Inc. Dollars in millions except per share amounts three-yearthree-year period, subject to the achievement of certain performance goals. We treat the cash settled portion of these awards as a liability. We grant forfeitable restricted stock and stock units, which are valued at the market price of our common stock at the date of grant and predominantly vest over a four- or five-yearfive-year period. We also grant other nonvested stock units and award them in cash at the end of a three-yearthree-year period, subject to the achievement of certain market based conditions. As of December 31, 2019,2020, we were authorized to issue up to approximately 293183 million shares of common stock (in addition to shares that may be issued upon exercise of outstanding116AT&T Inc.Dollars in millions except per share amounts2020 2019 2018 Performance stock units $ 348 $ 544 $ 301 Restricted stock and stock units 290 273 153 Other nonvested stock units 0 7 4 Stock options 0 (5) 5 Total $ 638 $ 819 $ 463 Income tax benefit $ 157 $ 202 $ 114
Nonvested Stock Units
SharesWeighted-Average Grant-
Date Fair ValueNonvested at January 1, 2020 42 $ 33.80 Granted 23 36.90 Vested (18) 35.87 Forfeited (4) 34.48 Nonvested at December 31, 2020 43 $ 34.50 2019,2020, there was $693$709 of total unrecognized compensation cost related to nonvested share-based payment arrangements granted. That cost is expected to be recognized over a weighted-average period of 2.212.09 years. The total fair value of shares vested during the year was $647 for 2020, compared to $798 for 2019 compared toand $766 for 2018 and $473 for 2017.2018.2018 and $33 for 2017.2018.AT&T Inc. Dollars in millions except per share amounts $1.00$1.00 per share. At December 31, 2019, there were Cumulative perpetual preferred shares consist of the following:of Series A perpetual preferred stock,outstanding at December 31, 2020 and December 31, 2019, with a $25,000 per share liquidation preference outstanding. There were 0 preferredand a dividend rate of 5.000%.2018. In February 2020 we issued 20 thousand shares of Series B cumulative perpetual preferred stock,and 0 outstanding at December 31, 2019, with a €100,000 per share liquidation preference, and an initial rate of 2.875%, subject to reset beginning after five years. We also issuedMay 1, 2025.of Series C, 4.75% cumulative perpetual preferred stockoutstanding at December 31, 2020 and 0 outstanding at December 31, 2019, with a $25,000 per share liquidation preference.preference, and a dividend rate of 4.75%.117AT&T Inc.Dollars in millions except per share amountswith 19 million outstanding at December 31, 2019which was completed in 2020 and (2) March 2014 authorization program for an additional 300 million shares, with all 300approximately 178 million outstanding at December 31, 2019.2020.repurchase programs,repurchases, relying on Rule 10b5-1 of the Securities Exchange Act of 1934, where feasible. We also useused accelerated share repurchase programsagreements with large financial institutions to repurchase our stock. During 2019,2020, we repurchased approximately 56142 million shares totaling $2,135$5,278 under the March 2013 authorization.and March 2014 authorizations. In December 2018, AT&T declared an increase in its quarterly common dividend to $0.51 per share of common stock.havepreviously issued 320 million Series A Cumulative Perpetual Preferred Membership Interests in Mobility II (Mobility preferred interests), representing all currently outstanding Mobility preferred equity interests, which pay cash distributions of $560 per annum, subject to declaration. So long as the distributions are declared and paid, the terms of the Mobility preferred equity interests will not impose any limitations on cash movements between affiliates, or our ability to declare a dividend on or repurchase AT&T shares.II on or after the earliest of certain events or September 9, 2020.II. Mobility II may redeem the interests upon a change in control of Mobility II or on or after September 9, 2022. When either options arise due to a passage of time, that option may be exercised only during certain periods.twenty-fiveNaN dollars ($8,000 in the aggregate) plus (b) any accrued and unpaid distributions. The redemption price may be paid with cash, AT&T common stock, or a combination of cash and AT&T common stock, at Mobility II’s sole election. In no event shall Mobility II be required to deliver more than 250 million shares of AT&T common stock to settle put and redemption options. We have the intent and ability to settle the Mobility preferred equity interests with cash. The preferred interests are included in “Noncontrolling interest” on the consolidated balance sheets.AT&T Inc. Dollars in millions except per share amounts two2 or more periods or to meet certain other requirements, including a minimum credit rating. If notice is given upon such an event, all other holders of equal or more subordinate classes of membership interests in Tower Holdings are entitled to receive the same form of consideration payable to the holders of the preferred interests, resulting in a deemed liquidation for accounting purposes. The preferred interests are included in “Noncontrolling interest” on the consolidated balance sheets.118AT&T Inc.Dollars in millions except per share amountsPR HoldingsDecember 2019,September 2020, we issued $1,950$2,000 nonconvertible cumulative preferred interests out of a newly created limited liability company (Telco LLC) that was formed to hold telecommunication-related assets.a subsidiary (PR Holdings) that holds notes secured by the proceeds from the agreement to sell wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands. (See Note 6)The membership interests in PR HoldingsTelco LLC consist of (1) commonmember’s interests, which are held by a consolidated subsidiariessubsidiary of AT&T, and (2) preferred interests (PR(Telco preferred interests). The PR preferred interests, which pay an initial preferred distribution at an annual rate of 4.75%. Distributions are paid quarterly,4.25% annually, subject to declaration, and subject to reset every fiveseven years. Any failureFailure to declare or pay distributions on the PRTelco preferred interests would not impose any limitation onlimit cash movements between affiliates, or our ability to declare a dividend on or repurchase AT&T shares. We can call the PRTelco preferred interests at the issue price beginning fiveseven years from the issuance date or upon the closing or termination of the sale of the underlying assets. date.PRTelco preferred interests have the option to require redemption upon the occurrence of certain contingent events, such as the failure of AT&TTelco LLC to pay the preferred distribution for two2 or more periods or to meet certain other requirements, including a minimum AT&T credit rating. If notice is given, upon such an event, all other holders of equal or more subordinate classes of membership interests in PR Holdingsmembers equity are entitled to receive the same form of consideration payable to the holders of the preferred interests, resulting in a deemed liquidation for accounting purposes. Theare included in “Noncontrolling interest”a subsidiary (PR Holdings) that held notes secured by the proceeds from our agreement to sell wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands. These preferred interests were redeemed on theNovember 6, 2020. (See Note 6)balance sheets.subsidiaries of AT&T, and (2) preferred interests (PR preferred interests). The PR preferred interests paid an initial preferred distribution at an annual rate of 4.75%. Distributions were paid quarterly, subject to declaration.receivables related to our WarnerMedia business.revolving service and trade receivables. Under these programs, we transfer receivables to purchasers in exchange for cash and additional consideration upon settlement of the receivables, where applicable. Under the terms of our agreements for these programs, we continue to bill and collect the payments from our customers on behalf of the financial institutions.AT&T Inc. Dollars in millions except per share amounts 2020 2019 Equipment Installment Revolving Equipment Installment Revolving Gross receivables: $ 5,565 $ 3,909 $ 4,576 $ 3,324 Balance sheet classification Accounts receivable Notes receivable 2,716 0 2,467 0 Trade receivables 554 3,715 477 2,809 Other Assets Noncurrent notes and trade receivables 2,295 194 1,632 515 7,827 5,300 9,713 4,300 5,646 5,300 7,211 4,300 119AT&T Inc.Dollars in millions except per share amounts2020 2019 2018 Gross receivables sold $ 7,270 $ 9,921 $ 9,391 7,026 9,483 8,871 Cash proceeds received 6,089 8,189 7,488 Deferred purchase price recorded 1,021 1,451 1,578 Guarantee obligation recorded 157 341 361 carried at the loweradjusted for changes in present value of cost or net realizable value.expected cash flows. The estimation of their fair values is based on remaining installment payments expected to be collected and the expected timing and value of device trade-ins. The estimated value of the device trade-ins considers prices offered to us by independent third parties that contemplate changes in value after the launch of a device model. The fair value measurements used for the deferred purchase price and the guarantee obligation are considered Level 3 under the Fair Value Measurement and Disclosure framework (see Note 13).AT&T Inc. Dollars in millions except per share amounts 2020 2019 2018 Fair value of repurchased receivables $ 1,271 $ 1,418 $ 1,480 Carrying value of deferred purchase price 1,235 1,350 1,393 $ 36 $ 68 $ 87 20192020 and December 31, 2018,2019, our deferred purchase price receivable was $2,336$1,991 and $2,370,$2,336, respectively, of which $1,569$1,476 and $1,448$1,569 are included in “Other current assets” on our consolidated balance sheets, with the remainder in “Other Assets.” The guarantee obligation at December 31, 20192020 and December 31, 20182019 was $384$228 and $439,$384, respectively, of which $148$161 and $196$148 are included in “Accounts payable and accrued liabilities” on our consolidated balance sheets, with the remainder in “Other noncurrent liabilities.” Our maximum exposure to loss as a result of selling these equipment installment receivables is limited to the total amount of our deferred purchase price and guarantee obligation.WarnerMedia Receivablesfromthrough our WarnerMedia businessbankruptcy-remote subsidiaries to various financial institutions on a recurring basis in exchange for cash equal to the gross receivables transferred. In 2020, we expanded the program limit to $5,300 and we extended the agreement by one year. As customers pay their balances, we transfer additional receivables into the program, resulting in our gross receivables sold exceeding net cash flow impacts (e.g., collect and reinvest). The transferred receivables are fully guaranteed by our bankruptcy-remote subsidiary,subsidiaries, which holdshold additional receivables in the amount of $3,324$3,909 that are pledged as collateral under this agreement. The transfers are recorded at fair value of the proceeds received and obligations assumed less derecognized receivables. The obligation is subsequently adjusted for changes in estimated expected credit losses and interest rates. Our maximum exposure to loss related to selling these receivables transferred is limited to the amount outstanding.120AT&T Inc.Dollars in millions except per share amounts2020 2019 2018 $ 15,888 $ 11,989 $ 0 Collections reinvested under revolving agreement 14,888 7,689 0 Net cash proceeds received (remitted) $ 1,000 $ 4,300 $ 0 $ 15,760 $ 11,604 $ 0 Obligations recorded (reversed) 271 530 0 AT&T Inc. Dollars in millions except per share amounts plantPlant and equipment”Equipment - Net” on our consolidated balance sheets and depreciate them accordingly. At December 31, 20192020 and 2018,2019, the tower assets had a balance of $804$764 and $843,$804, respectively. Our depreciation expense for these assets was $39 for each of 2020, 2019 2018 and 2017.2018.$244$248 for 2019.2020. At December 31, 2019,2020, the future minimum payments under the sublease arrangement are $248 for 2020, $253 for 2021, $258 for 2022, $264 for 2023, $269 for 2024, $274 for 2025 and $1,427$856 thereafter. March 2017, the First Responder Network Authority (FirstNet) announced its selection ofselected AT&T to build and manage the first nationwide broadband network dedicated to America’s first responders. All 56 jurisdictions, including 50 states, the District of Columbia and 5 U.S. territories, elected to participate in the network. Under the awarded 25-year agreement, FirstNet providedprovides 20 MHz of valuable telecommunications spectrum and will provide success-based payments of $6,500 over the first five years to support network buildout. The spectrum provides priority use to first responders, which are included as wireless subscribers and contribute to our wireless revenues. As allowed under the agreement, excess capacity on the spectrum is used for any of AT&T’s subscriber base.Under the agreement, weWe are required to construct a network that achieves coverage and nationwide interoperability requirements. Werequirements and have a contractual commitment to make sustainability payments of $18,000 over the 25-year contract. These sustainability payments represent our commitment to fund FirstNet’s operating expenses and future reinvestments in the network which we will own and operate. FirstNet has a statutory requirement to reinvest funds that exceed the agency’s operating expenses,operate, which are anticipated to be in the $75-$100 range annually, and when including increases for inflation, we expect to beestimate in the $3,000 or less range over the life of the 25-year contract. Being subject to federal acquisition rules, FirstNet is prohibited from contractually committing to a specific vendor for future network reinvestment. However, it is highly probable that AT&T will receive substantially all of the funds reinvested into the network since AT&T owns and operates the infrastructure and has exclusive rights to use the spectrum as all states have opted in. After FirstNet’s operating expenses are paid, we anticipate that the remaining amount, expected to be in the $15,000 range, will be reinvested into the network.121AT&T Inc.Dollars in millions except per share amountsAs of December 31, 2019,During 2020, we have submitted $360$120 in sustainability payments, with future payments under the agreement of $120 for 2020 and 2021; $195 for 2022, 2023, 2024 and 2024;2025; and $16,815$16,620 thereafter. Amounts paid to FirstNet, which are not expected to be returned to AT&T to be reinvested into our network, will be expensed in the period paid. In the event FirstNet does not reinvest any funds to construct, operate, improve and maintain this network, our maximum exposure to loss is the total amount of the sustainability payments, which would be reflected in higher expense.six6 operating capability milestones and certain first responder subscriber adoption targets. These milestones are based on coverage objectives of the first responder network during the construction period, which is expected to be over five years, and subscriber adoption targets. Funding payments to be received from FirstNet are reflected as a reduction from the costs capitalized in the construction of the network and, as appropriate, a reduction of associated operating expenses.2019,2020, we have completedcollected approximately $5,000 for the completion of certain task orders related to the construction of the networktasks and have collected $3,372 to date from FirstNet. We have reflected these amounts as a reduction to the costs incurred to complete the task orders. We anticipate collecting the remainder of the $6,500 from FirstNet as we achieve milestones set out by FirstNet over the next threetwo years. We also expect to receive approximately $200 over the next few years from FirstNet for reinvestment above the original success-based payments.$16,590$20,274 in 2020, $21,1212021, $21,275 in total for 20212022 and 2022, $11,1532023, $11,142 in total for 2023 and 2024 and $18,9432025 and $17,919 in total for years thereafter.AT&T Inc. Dollars in millions except per share amounts December 31, Consolidated Balance Sheets 2020 2019 Accounts payable and accrued liabilities: Accounts payable $ 31,836 $ 29,640 Accrued payroll and commissions 2,988 3,126 Current portion of employee benefit obligation 1,415 1,528 Accrued participations and residuals 2,708 2,852 Accrued interest 2,454 2,498 Other 7,631 6,312 Total accounts payable and accrued liabilities $ 49,032 $ 45,956 Consolidated Statements of Income 2020 2019 2018 Advertising expense $ 5,253 $ 6,121 $ 5,100 Interest expense incurred $ 8,048 $ 8,622 $ 8,450 Capitalized interest (123) (200) (493) Total interest expense $ 7,925 $ 8,422 $ 7,957 December 31, Cash and Cash Equivalents and Restricted Cash 2020 2019 2018 2017 Cash and cash equivalents $ 9,740 $ 12,130 $ 5,204 $ 50,498 Restricted cash in Other current assets 9 69 61 6 Restricted cash in Other Assets 121 96 135 428 Cash and cash equivalents and restricted cash $ 9,870 $ 12,295 $ 5,400 $ 50,932 Consolidated Statements of Cash Flows 2020 2019 2018 Cash paid (received) during the year for: Interest $ 8,237 $ 8,693 $ 8,818 Income taxes, net of refunds 993 1,421 (354) Spectrum acquisitions 1,613 1,576 521 AT&T Inc. Dollars in millions except per share amounts December 31,Consolidated Balance Sheets20192018Accountsliabilities:liabilities,” on our consolidated balance sheet at March 31, 2021. The carrying amounts at December 31, 2020 of these assets and liabilities were approximately $16,150 and $4,900, respectively.Accounts payable$29,640$27,018Accrued payrollOn February 24, 2021, the FCC announced that AT&T was the winning bidder for 1,621 C-Band licenses, comprised of a total of 80 MHz nationwide, including 40 MHz in Phase I. We must provide to the FCC an initial down payment of $4,681 on March 10, 2021, of which $550 was paid as an upfront payment prior to the start of the auction, and commissions3,1263,379Currentto pay a remaining $18,725 on or before March 24, 2021. We estimate that AT&T will be responsible for $955 of Incentive Payments upon clearing of Phase I spectrum and $2,112 upon clearing of Phase II spectrum. Additionally, we will be responsible for a portion of employee benefit obligation1,5281,464Accrued interest2,4982,557Other9,1648,766Total accounts payablecompensable relocation costs over the next several years as the spectrum is being cleared. Satellite operators have provided the FCC with relocation cost estimates totaling $3,400. AT&T intends to fund the purchase price using a combination of cash and accrued liabilitiesshort-term investments, funds from operations and either short-term or long-term debt, depending upon market conditions.$45,956$43,184Cash and Cash Flows We typically maintain our restricted cash balances for purchases and sales of certain investment securities and funding of certain deferred compensation benefit payments.The following table summarizes cash and cash equivalents and restricted cash balances contained on our consolidated balance sheets:122Dollars in millions except per share amounts Dollarsmillions except per share amountsNoncash Investing and Financing Activities In connection with capital improvements and the acquisition of other productive assets, we negotiate favorable payment terms (referred to as vendor financing), which are reported as financing activities when paid. We recorded $2,632 of vendor financing commitments related to capital investments in 2019, $2,162 in 2018 and $1,000 in 2017.Labor Contracts As of January 31, 2020, we employed approximately 246,000 persons. Approximately 40% of our employees are represented by the Communications Workers of America (CWA), the International Brotherhood of Electrical Workers (IBEW) or other unions. After expiration of the agreements, work stoppages or labor disruptions may occur in the absence of new contracts or other agreements being reached. A contract covering approximately 13,000 traditional wireline employees in our West region expires in April 2020. Other contracts covering approximately 7,000 employees are scheduled to expire during 2020.NOTE 23. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)The following tables represent our quarterly financial results:123AT&T Inc.Dollarsthe independent accountant engaged as the principal accountant to audit our financial statements, and the independent accountant has not expressed reliance on other independent accountants in millions except per share amountsits reports during such time period.124AT&T Inc.Dollars in millions except per share amountsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTINGAND FINANCIAL DISCLOSUREDuring our two most recent fiscal years, there has been no change in the independent accountant engaged as the principal accountant to audit our financial statements, and the independent accountant has not expressed reliance on other independent accountants in its reports during such time period.2019.2020. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the registrant’s disclosure controls and procedures were effective as of December 31, 2019.2020.(a) Management’s Annual Report on Internal Control over Financial Reporting2019.2020. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013 framework). Based on its assessment, AT&T management believes that, as of December 31, 2019,2020, the Company’s internal control over financial reporting is effective based on those criteria.(b) Attestation Report of the Independent Registered Public Accounting Firm The attestation report issued by Ernst & Young LLP is included in Item 8.125AT&T Inc.Dollars in millions except per share amountsOther Information20192020 but was not reported.AT&T Inc. Dollars in millions except per share amounts Officers”.Officers.” Information regarding directors required by Item 401 of Regulation S-K is incorporated herein by reference pursuant to General Instruction G(3) from the registrant’s 2021 definitive proxy statement dated on or about March 11, 2020 (Proxy Statement) under the heading “Management Proposal Item No. 1. Election of Directors.”Mses. Taylor and Tyson.Ms. Taylor. The additional information required by Item 407(d)(5) of Regulation S-K is incorporated herein by reference pursuant to General Instruction G(3) from the registrant’s Proxy Statement under the heading “Audit Committee.”Report”Report” and is incorporated herein by reference pursuant to General Instruction G(3) and shall be deemed furnished in this Annual Report on Form 10-K and will not be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.126AT&T Inc. "Common“Common Stock Ownership,"” which is incorporated herein by reference pursuant to General Instruction G(3).2019,2020, concerning shares of AT&T common stock authorized for issuance under AT&T’s existing equity compensation plans.Equity Compensation Plan Information
exercise of
outstanding options,
(a)
exercise price of
options, warrants
and rights
(b)
(excluding$ 29.14 40,052,616(2)(1)$ 27.08281,094,454(2)---— $ 29.14 40,052,616(2)(3)$ 27.08281,094,454(2)(1)Includes the issuance of stock in connection with the following stockholder approved plans: (a) 1,887,212 stock options under the Stock Purchase and Deferral Plan (SPDP), (b) 552,667 phantom stock units under the Stock Savings Plan (SSP), 13,166,723 phantom stock units under the SPDP, 1,670,691 restricted stock units under the 2011 Incentive Plan, 1,599,037 restricted stock units under the 2016 Incentive Plan and 1,251,399 restricted stock units under the 2018 Incentive Plan, (c) 0 target number of stock-settled performance shares under the 2011 Incentive Plan, 9,590,869 target number of stock-settled performance shares under the 2016 Incentive Plan, and 7,102,831 target number of stock-settled performance shares under the 2018 Incentive Plan. At payout, the target number of performance shares may be reduced to zero or increased by up to 150%. Each phantom stock unit and performance share is settleable in stock on a 1-to-1 basis. The weighted-average exercise price in the table does not include outstanding performance shares or phantom stock units.The SSP was approved by stockholders in 1994 and then was amended by the Board of Directors in 2000 to increase the number of shares available for purchase under the plan (including shares from the Company match and reinvested dividend equivalents). Stockholder approval was not required for the amendment. To the extent applicable, the amount shown for approved plans in column (a), in addition to the above amounts, includes 3,231,187 phantom stock units (computed on a first-in-first-out basis) that were approved by the Board in 2000. Under the SSP, shares could be purchased with payroll deductions and reinvested dividend equivalents by mid-level and above managers and limited Company partial matching contributions. No new contributions may be made to the plan.(2)Includes 36,806,311shares that may be issued under the SPDP, 241,491,917 shares that may be issued under the 2018 Incentive Plan, and up to 2,796,226 shares that may be purchased through reinvestment of dividends on phantom shares held in the SSP.(3)Does not include certain stock options issued by companies acquired by AT&T that were converted into options to acquire AT&T stock. As of December 31, 2019, there were 7,819,476 shares of AT&T common stock subject to the converted options, having a weighted-average exercise price of $15.69. Also, does not include 2,958,201 outstanding phantom stock units that were issued by companies acquired by AT&T that are convertible into stock on a 1-to-1 basis, along with an estimated 113,188 shares that may be purchased with reinvested dividend equivalents paid on the outstanding phantom stock units. No further phantom stock units, other than reinvested dividends, may be issued under the assumed plans. The weighted-average exercise price in the table does not include outstanding performance shares or phantom stock units.127Page(1) Report of Independent Registered Public Accounting Firm58Financial Statements covered by Report of Independent Registered Public Accounting Firm:Consolidated Statements of Income62Consolidated Statements of Comprehensive Income63Consolidated Balance Sheets64Consolidated Statements of Cash Flows65Consolidated Statements of Changes in Stockholders’ Equity67Notes to Consolidated Financial Statements69Page(2) Financial Statement Schedules:II - Valuation and Qualifying Accounts132Page (1) Report of Independent Registered Public Accounting Firm Financial Statements covered by Report of Independent Registered Public Accounting Firm: Consolidated Statements of Income Consolidated Statements of Comprehensive Income Consolidated Balance Sheets Consolidated Statements of Cash Flows Consolidated Statements of Changes in Stockholders’ Equity Notes to Consolidated Financial Statements (2) Financial Statement Schedules: II - Valuation and Qualifying Accounts (3) Exhibits:Exhibits identified in parentheses below, on file with the SEC, are incorporated herein by reference as exhibits hereto. Unless otherwise indicated, all exhibits so incorporated are from File No. 1-8610.128AT&T Inc.Dollars in millions except per share amounts(3) Exhibits: Exhibits identified in parentheses below, on file with the SEC, are incorporated herein by reference as exhibits hereto. Unless otherwise indicated, all exhibits so incorporated are from File No. 1-8610. Exhibit Number 20120199)4-a 4-c 4-h4-iResolution Regarding John Donovan (Exhibit 10-a to Form 10-Q for the period ending September 30, 2017)10-b(ii)10-b(iii)129AT&T Inc.Dollars in millions except per share amounts10-e10.1 to Form 10-Q for the period ending September 30, 20158-Kfiled on June 26, 2020)*Stock Purchase and Deferral Plan effective September 27, 2018Cash Deferral Plan effective September 27, 2018Administrative Plan10-u 130AT&T Inc.Dollars in millions except per share amounts10-xAgreement and Release and Waiver of Claims (Exhibit 10.1 to Form 8-K filed on September 6, 2019)December 11, 2018,November 17, 2020, among AT&T Inc., certain lenders named therein and Citibank, N.A., as agent. (Exhibit 10.1 to Form 8-K filed on December 13, 2018November 18, 2020)10-aa10-bb10-bbFourthFifth Amended and Restated Limited Liability Company Agreement of Mobility II LLC (Exhibit 10-ff10-1 to Form 10-K10-Q for the period ending December 31, 2018September 30, 2020)10-cc10-dd10-ee10-ff10-hh21 131AT&T Inc.Dollars in millions except per share amounts2019,2020, as filed with the SEC on February 19, 2020,25, 2021, formatted in Inline XBRL: (i) Consolidated Statements of Cash Flows, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Balance Sheets, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.AT&T Inc. Dollars in millions except per share amounts None.132AT&T Inc. 133COL. A COL. B COL. C COL. D COL. E Additions (1) (2) (3) Balance at Beginning of Period Charged to
Costs and Expenses (a)Charged to Other
Accounts (b)Acquisitions (c) Deductions (d) Balance at End
of Period (e)Year 2020 $ 1,235 1,972 405 0 2,023 $ 1,589 Year 2019 $ 907 2,575 0 0 2,247 $ 1,235 Year 2018 $ 663 1,791 0 179 1,726 $ 907 COL. A COL. B COL. C COL. D COL. E Additions (1) (2) (3) Balance at Beginning of Period Charged to
Costs and ExpensesCharged to Other
Accounts (a)Acquisitions
(b)Deductions
(c)Balance at End
of PeriodYear 2020 $ 4,941 (168) 0 0 0 $ 4,773 Year 2019 $ 4,588 (18) 371 0 0 $ 4,941 Year 2018 $ 4,640 (210) (53) 211 0 $ 4,588 SIGNATURES19th25th day of February, 2020.Senior Executive Vice President and Chief Financial Officer Randall Stephenson*Chairman of the Boardand and on his own behalf as Principal Financial Officer and Principal Accounting OfficerFebruary 19, 2020Directors:Randall L. Stephenson*Directors: John T. Stankey* Stephen J. Luczo* Laura D’Andrea Tyson*Geoffrey Y. Yang** by power of attorney * by power of attorney134