AT&T (T) 8-K AT&T Reports Third-Quarter Results

Quarterly Pro Forma Financial Information
Supplemental Unaudited Quarterly Pro Forma Financial Information1
Dollars in millions
Unaudited
Operating Revenues	3/31/20		6/30/20		9/30/20		12/31/20		2020		3/31/21			6/30/21			9/30/21
Reported AT&T Operating Revenues	$	42,779	$	40,950	$	42,340	$	45,691	$	171,760	$	43,939		$	44,045		$	39,922
Less: Video (A1)	(7,407)		(7,021)		(7,014)		(7,168)		(28,610)		(6,725)			(6,639)			(2,149)
Add: WarnerMedia sales to Video (A2)	755		666		551		487		2,459		524			508			167
Add: WarnerMedia sales of DIRECTV advertising inventory (A3)	413		294		408		603		1,718		388			410			111
Add: Other eliminations	64		55		65		84		268		61			58			17
Pro Forma Operating Revenues	$	36,604	$	34,944	$	36,350	$	39,697	$	147,595	$	38,187		$	38,382		$	38,068
Reported Revenue Growth Rate Y/Y											2.7		%	7.6		%	-5.7		%
Pro Forma Revenue Growth Rate Y/Y											4.3		%	9.8		%	4.7		%

Operations and Support Expenses	3/31/20		6/30/20		9/30/20		12/31/20		2020		3/31/21			6/30/21			9/30/21
Reported AT&T Operations and Support Expenses	$	28,071	$	30,133	$	29,178	$	49,457	$	136,839	$	30,469		$	35,015		$	27,194
Adjustments (B1)	476		(3,295)		(151)		(16,655)		(19,625)		(94)			(4,555)			(291)
Adjusted Operations and Support Expenses	28,547		26,838		29,027		32,802		117,214		30,375			30,460			26,903
Less: Video (A1)	(6,020)		(5,809)		(5,887)		(6,458)		(24,174)		(5,660)			(5,275)			(1,731)
Add: WarnerMedia sales to Video (A2)	755		666		551		487		2,459		524			508			167
Add: WarnerMedia sales of DIRECTV advertising inventory (A3)	39		38		38		38		153		39			38			12
Add: WarnerMedia/DIRECTV 70% revenue share (A3)	289		206		286		422		1,203		271			287			78
Add: Other eliminations	64		55		65		84		268		61			58			17
Pro Forma Adjusted Operations and Support Expenses	$	23,674	$	21,994	$	24,080	$	27,375	$	97,123	$	25,610		$	26,076		$	25,446
Reported Operations and Support Expense Growth Rate Y/Y											8.5		%	16.2		%	-6.8		%
Adjusted Operations and Support Expense Growth Rate Y/Y											6.4		%	13.5		%	-7.3		%
Pro Forma Adjusted Operations and Support Expense Growth Rate Y/Y											8.2		%	18.6		%	5.7		%
Depreciation and Amortization Expense	3/31/20		6/30/20		9/30/20		12/31/20		2020		3/31/21			6/30/21			9/30/21
Reported AT&T Depreciation and Amortization Expense	$	7,222	$	7,285	$	7,030	$	6,979	$	28,516	$	5,809		$	5,761		$	5,619
Adjustments (B1)	(2,056)		(2,145)		(1,921)		(1,904)		(8,026)		(1,131)			(1,069)			(1,012)
Adjusted Depreciation and Amortization Expense	5,166		5,140		5,109		5,075		20,490		4,678			4,692			4,607
Less: Video Depreciation (A1)	(591)		(593)		(557)		(521)		(2,262)		(164)			(148)			(44)
Add: Other consolidation	—		1		—		1		2		—			—			—
Pro Forma Adjusted Depreciation and Amortization Expense	$	4,575	$	4,548	$	4,552	$	4,555	$	18,230	$	4,514		$	4,544		$	4,563
Reported Depreciation and Amortization Expense Growth Rate Y/Y											-19.6		%	-20.9		%	-20.1		%
Adjusted Depreciation and Amortization Expense Growth Rate Y/Y											-9.4		%	-8.7		%	-9.8		%
Pro Forma Adjusted Depreciation and Amortization Expense Growth Rate Y/Y											-1.3		%	-0.1		%	0.2		%

Operating Income	3/31/20			6/30/20			9/30/20			12/31/20			2020			3/31/21			6/30/21			9/30/21
Reported AT&T Operating Income (Loss)	$	7,486		$	3,532		$	6,132		$	(10,745)		$	6,405		$	7,661		$	3,269		$	7,109
Adjustments (B1)	1,580			5,440			2,072			18,559			27,651			1,225			5,624			1,303
Adjusted Operating Income	9,066			8,972			8,204			7,814			34,056			8,886			8,893			8,412
Less: Video (A1)	(796)			(619)			(570)			(189)			(2,174)			(901)			(1,216)			(374)
Add: WarnerMedia sales to Video (A2)	—			—			—			—			—			—			—			—
Add: WarnerMedia sales of DIRECTV advertising inventory (A3)	374			255			370			564			1,563			349			372			99
Add: WarnerMedia/DIRECTV 70% revenue share (A3)	(289)			(206)			(286)			(422)			(1,203)			(271)			(287)			(78)
Add: Other eliminations	—			—			—			—			—			—			—			—
Pro Forma Adjusted Operating Income	$	8,355		$	8,402		$	7,718		$	7,767		$	32,242		$	8,063		$	7,762		$	8,059
Reported Operating Income Growth Rate Y/Y																2.3		%	-7.4		%	15.9		%
Adjusted Operating Income Growth Rate Y/Y																-2.0		%	-0.9		%	2.5		%
Pro Forma Adjusted Operating Income Growth Rate Y/Y																-3.5		%	-7.6		%	4.4		%
Reported Operating Income Margin	17.5		%	8.6		%	14.5		%	-23.5		%	3.7		%	17.4		%	7.4		%	17.8		%
Adjusted Operating Income Margin	21.2		%	21.9		%	19.4		%	17.1		%	19.8		%	20.2		%	20.2		%	21.1		%
Pro Forma Adjusted Operating Income Margin	22.8		%	24.0		%	21.2		%	19.6		%	21.8		%	21.1		%	20.2		%	21.2		%

EBITDA	3/31/20			6/30/20			9/30/20			12/31/20			2020			3/31/21			6/30/21			9/30/21
Reported AT&T Net Income (Loss)	$	4,963		$	1,563		$	3,168		$	(13,515)		$	(3,821)		$	7,942		$	1,874		$	6,273
Additions:
Income Tax Expense (Benefit)	1,302			935			766			(2,038)			965			2,122			751			1,539
Interest Expense	2,018			2,041			1,972			1,894			7,925			1,870			1,684			1,667
Equity in Net Income (Loss) of Affiliates	6			10			(5)			(106)			(95)			(52)			(41)			(91)
Other (Income) Expense - net	(803)			(1,017)			231			3,020			1,431			(4,221)			(999)			(2,279)
Depreciation and amortization	7,222			7,285			7,030			6,979			28,516			5,809			5,761			5,619
EBITDA	14,708			10,817			13,162			(3,766)			34,921			13,470			9,030			12,728
Adjustments (B1)	(476)			3,295			151			16,655			19,625			94			4,555			291
Adjusted EBITDA	14,232			14,112			13,313			12,889			54,546			13,564			13,585			13,019
Less: Video (A1)	(1,387)			(1,212)			(1,127)			(710)			(4,436)			(1,065)			(1,364)			(418)
Add: WarnerMedia sales to Video (A2)	—			—			—			—			—			—			—			—
Add: WarnerMedia sales of DIRECTV advertising inventory (A3)	374			256			370			565			1,565			349			372			99
Add: WarnerMedia/DIRECTV 70% revenue share (A3)	(289)			(206)			(286)			(422)			(1,203)			(271)			(287)			(78)
Add: Other eliminations	—			—			—			—			—			—			—			—
Pro Forma Adjusted EBITDA	$	12,930		$	12,950		$	12,270		$	12,322		$	50,472		$	12,577		$	12,306		$	12,622
Adjusted EBITDA Growth Rate Y/Y																-4.7		%	-3.7		%	-2.2		%
Pro Forma Adjusted EBITDA Growth Rate Y/Y																-2.7		%	-5.0		%	2.9		%
Adjusted EBITDA Margin	33.3		%	34.5		%	31.4		%	28.2		%	31.8		%	30.9		%	30.8		%	32.6		%
Pro Forma Adjusted EBITDA Margin	35.3		%	37.1		%	33.8		%	31.0		%	34.2		%	32.9		%	32.1		%	33.2		%
1 After the transaction, AT&T expects to retain incurred operations and support costs in the range of ~$500M per quarter and depreciation costs for network infrastructure that provides both U-verse video and broadband services of ~$150M per quarter, of which approximately 50% will be received from DIRECTV through transition service agreements and commercial arrangements. These pro formas do not include the impacts of accounting for the NFL SUNDAY TICKET, per the Contribution Agreement.

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