UNITED STATES
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
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Title of each class | Trading Symbol(s) | on which registered | ||||||
Common Shares (Par Value $1.00 Per Share) | T | New York Stock Exchange | ||||||
| T PRA | New York Stock Exchange | ||||||
| T PRC | New York Stock Exchange | ||||||
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AT&T Inc. 2.650% Global Notes due December 17, 2021 | T 21B | New York Stock Exchange | ||||||
AT&T Inc. 1.450% Global Notes due June 1, 2022 | T 22B | New York Stock Exchange | ||||||
AT&T Inc. 2.500% Global Notes due March 15, 2023 | T 23 | New York Stock Exchange | ||||||
AT&T Inc. 2.750% Global Notes due May 19, 2023 | T 23C | New York Stock Exchange | ||||||
AT&T Inc. Floating Rate Global Notes due September 5, 2023 | T 23D | New York Stock Exchange | ||||||
AT&T Inc. 1.050% Global Notes due September 5, 2023 | T 23E | New York Stock Exchange | ||||||
AT&T Inc. 1.300% Global Notes due September 5, 2023 | T 23A | New York Stock Exchange | ||||||
AT&T Inc. 1.950% Global Notes due September 15, 2023 | T 23F | New York Stock Exchange | ||||||
AT&T Inc. 2.400% Global Notes due March 15, 2024 | T 24A | New York Stock Exchange | ||||||
AT&T Inc. 3.500% Global Notes due December 17, 2025 | T 25 | New York Stock Exchange | ||||||
AT&T Inc. 0.250% Global Notes due March 4, 2026 | T 26E | New York Stock Exchange | ||||||
AT&T Inc. 1.800% Global Notes due September 5, 2026 | T 26D | New York Stock Exchange |
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Title of each class | Trading Symbol(s) | on which registered | ||||||
AT&T Inc. 2.900% Global Notes due December 4, 2026 | T 26A | New York Stock Exchange | ||||||
AT&T Inc. 1.600% Global Notes due May 19, 2028 | T 28C | New York Stock Exchange | ||||||
AT&T Inc. 2.350% Global Notes due September 5, 2029 | T 29D | New York Stock Exchange | ||||||
AT&T Inc. 4.375% Global Notes due September 14, 2029 | T 29B | New York Stock Exchange | ||||||
AT&T Inc. 2.600% Global Notes due December 17, 2029 | T 29A | New York Stock Exchange | ||||||
AT&T Inc. 0.800% Global Notes due March 4, 2030 | T 30B | New York Stock Exchange | ||||||
AT&T Inc. 2.050% Global Notes due May 19, 2032 | T 32A | New York Stock Exchange | ||||||
AT&T Inc. 3.550% Global Notes due December 17, 2032 | T 32 | New York Stock Exchange | ||||||
AT&T Inc. 5.200% Global Notes due November 18, 2033 | T 33 | New York Stock Exchange | ||||||
AT&T Inc. 3.375% Global Notes due March 15, 2034 | T 34 | New York Stock Exchange | ||||||
AT&T Inc. 2.450% Global Notes due March 15, 2035 | T 35 | New York Stock Exchange | ||||||
AT&T Inc. 3.150% Global Notes due September 4, 2036 | T 36A | New York Stock Exchange | ||||||
AT&T Inc. 2.600% Global Notes due May 19, 2038 | T 38C | New York Stock Exchange | ||||||
AT&T Inc. 1.800% Global Notes due September 14, 2039 | T 39B | New York Stock Exchange | ||||||
AT&T Inc. 7.000% Global Notes due April 30, 2040 | T 40 | New York Stock Exchange | ||||||
AT&T Inc. 4.250% Global Notes due June 1, 2043 | T 43 | New York Stock Exchange | ||||||
AT&T Inc. 4.875% Global Notes due June 1, 2044 | T 44 | New York Stock Exchange | ||||||
AT&T Inc. 4.000% Global Notes due June 1, 2049 | T 49A | New York Stock Exchange | ||||||
AT&T Inc. 4.250% Global Notes due March 1, 2050 | T 50 | New York Stock Exchange | ||||||
AT&T Inc. 3.750% Global Notes due September 1, 2050 | T 50A | New York Stock Exchange | ||||||
AT&T Inc. 5.350% Global Notes due November 1, 2066 | TBB | New York Stock Exchange | ||||||
AT&T Inc. 5.625% Global Notes due August 1, 2067 | TBC | New York Stock Exchange |
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No ☐
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Large Accelerated Filer | ☒ | Accelerated Filer | ☐ | |||||||||
Non-accelerated filer |
| Smaller reporting company |
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| Emerging growth company |
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PART I - FINANCIAL INFORMATION
AT&T INC. CONSOLIDATED STATEMENTS OF INCOME Dollars in millions except per share amounts (Unaudited) Three months ended March 31, 2020 2019 Operating Revenues Service $ 38,883 $ 40,684 Equipment 3,896 4,143 Total operating revenues 42,779 44,827 Operating Expenses Cost of revenues Equipment 4,092 4,502 Broadcast, programming and operations 6,847 7,652 Other cost of revenues (exclusive of depreciation and amortization shown separately below) 8,342 8,585 Selling, general and administrative 8,790 9,649 Depreciation and amortization 7,222 7,206 Total operating expenses 35,293 37,594 Operating Income 7,486 7,233 Other Income (Expense) Interest expense (2,018) (2,141) Equity in net income (loss) of affiliates (6) (7) Other income (expense) – net 803 286 Total other income (expense) (1,221) (1,862) Income Before Income Taxes 6,265 5,371 Income tax expense 1,302 1,023 Net Income 4,963 4,348 Less: Net Income Attributable to Noncontrolling Interest (353) (252) Net Income Attributable to AT&T $ 4,610 $ 4,096 Less: Preferred Stock Dividends (32) - Net Income Attributable to Common Stock $ 4,578 $ 4,096 Basic Earnings Per Share Attributable to Common Stock $ 0.63 $ 0.56 Diluted Earnings Per Share Attributable to Common Stock $ 0.63 $ 0.56 Weighted Average Number of Common Shares Outstanding – Basic (in millions) 7,187 7,313 Weighted Average Number of Common Shares Outstanding – with Dilution (in millions) 7,214 7,342 See Notes to Consolidated Financial Statements. AT&T INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Dollars in millions (Unaudited) Three months ended March 31, 2020 2019 Net income $ 4,963 $ 4,348 Other comprehensive income (loss), net of tax: Foreign currency: Translation adjustment (includes $(51) and $0 attributable to noncontrolling interest), net of taxes of $(62) and $49 (1,854) 288 Securities: Net unrealized gains, net of taxes of $22 and $5 66 16 Derivative instruments: Net unrealized gains (losses), net of taxes of $(971) and $34 (3,657) 127 Reclassification adjustment included in net income, net of taxes of $0 and $2 - 11 Defined benefit postretirement plans: Amortization of net prior service credit included in net income, net of taxes of $(151) and $(113) (461) (346) Other comprehensive income (loss) (5,906) 96 Total comprehensive income (loss) (943) 4,444 Less: Total comprehensive income attributable to noncontrolling interest (302) (252) Total Comprehensive Income (Loss) Attributable to AT&T $ (1,245) $ 4,192 See Notes to Consolidated Financial Statements. AT&T INC. CONSOLIDATED BALANCE SHEETS Dollars in millions except per share amounts March 31, December 31, 2020 2019 Assets (Unaudited) Current Assets Cash and cash equivalents $ 9,955 $ 12,130 Accounts receivable - net of allowances for doubtful accounts of $1,651 and $1,235 19,908 22,636 Prepaid expenses 1,600 1,631 Other current assets 21,241 18,364 Total current assets 52,704 54,761 Noncurrent inventories and theatrical film and television production costs 13,276 12,434 Property, Plant and Equipment 329,187 333,538 Less: accumulated depreciation and amortization (200,266) (203,410) Property, Plant and Equipment – Net 128,921 130,128 Goodwill 145,546 146,241 Licenses – Net 96,662 97,907 Trademarks and Trade Names – Net 23,293 23,567 Distribution Networks – Net 14,886 15,345 Other Intangible Assets – Net 19,623 20,798 Investments in and Advances to Equity Affiliates 3,606 3,695 Operating lease right-of-use assets 24,008 24,039 Other Assets 22,829 22,754 Total Assets $ 545,354 $ 551,669 Liabilities and Stockholders’ Equity Current Liabilities Debt maturing within one year $ 17,067 $ 11,838 Accounts payable and accrued liabilities 40,771 45,956 Advanced billings and customer deposits 5,960 6,124 Accrued taxes 2,169 1,212 Dividends payable 3,737 3,781 Total current liabilities 69,704 68,911 Long-Term Debt 147,202 151,309 Deferred Credits and Other Noncurrent Liabilities Deferred income taxes 58,491 59,502 Postemployment benefit obligation 18,324 18,788 Operating lease liabilities 21,584 21,804 Other noncurrent liabilities 34,600 29,421 Total deferred credits and other noncurrent liabilities 132,999 129,515 Stockholders’ Equity Preferred stock ($1 par value, 10,000,000 authorized): Series A (48,000 issued and outstanding at March 31, 2020 and December 31, 2019) - - Series B (20,000 issued and outstanding at March 31, 2020 and 0 issued and outstanding at December 31, 2019) - - Series C (70,000 issued and outstanding at March 31, 2020 and 0 issued and outstanding at December 31, 2019) - - Common stock ($1 par value, 14,000,000,000 authorized at March 31, 2020 and December 31, 2019: issued 7,620,748,598 at March 31, 2020 and at December 31, 2019) 7,621 7,621 Additional paid-in capital 129,966 126,279 Retained earnings 58,534 57,936 Treasury stock (495,533,462 at March 31, 2020 and 366,193,458 at December 31, 2019, at cost) (17,957) (13,085) Accumulated other comprehensive income (385) 5,470 Noncontrolling interest 17,670 17,713 Total stockholders’ equity 195,449 201,934 Total Liabilities and Stockholders’ Equity $ 545,354 $ 551,669 See Notes to Consolidated Financial Statements. AT&T INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Dollars in millions (Unaudited) Three months ended March 31, 2020 2019 Operating Activities Net income $ 4,963 $ 4,348 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,222 7,206 Amortization of television and film costs 2,269 2,497 Undistributed earnings from investments in equity affiliates 39 112 Provision for uncollectible accounts 780 592 Deferred income tax expense 259 753 Net (gain) loss on assets, net of impairments (646) (175) Pension and postretirement benefit expense (credit) (748) (369) Actuarial (gain) loss on pension and postretirement benefits - 432 Changes in operating assets and liabilities: Receivables 1,695 2,125 Other current assets, inventories and theatrical film and television production costs (3,267) (2,510) Accounts payable and other accrued liabilities (3,884) (3,686) Equipment installment receivables and related sales 535 652 Deferred customer contract acquisition and fulfillment costs 105 (375) Postretirement claims and contributions (111) (193) Other - net (345) (357) Total adjustments 3,903 6,704 Net Cash Provided by Operating Activities 8,866 11,052 Investing Activities Capital expenditures: Purchase of property and equipment (4,938) (5,121) Interest during construction (28) (61) Acquisitions, net of cash acquired (100) (117) Dispositions 118 10 (Purchases), sales and settlement of securities and investments, net (6) (1) Advances to and investments in equity affiliates, net (68) (111) Net Cash Used in Investing Activities (5,022) (5,401) Financing Activities Net change in short-term borrowings with original maturities of three months or less 1,742 (256) Issuance of other short-term borrowings 1,390 296 Repayment of other short-term borrowings - (176) Issuance of long-term debt 4,357 9,182 Repayment of long-term debt (4,422) (9,840) Payment of vendor financing (791) (819) Issuance of preferred stock 3,869 - Purchase of treasury stock (5,463) (189) Issuance of treasury stock 58 167 Dividends paid (3,737) (3,714) Other (3,102) 928 Net Cash Used in Financing Activities (6,099) (4,421) Net (decrease) increase in cash and cash equivalents and restricted cash (2,255) 1,230 Cash and cash equivalents and restricted cash beginning of year 12,295 5,400 Cash and Cash Equivalents and Restricted Cash End of Period $ 10,040 $ 6,630 See Notes to Consolidated Financial Statements. AT&T INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Dollars and shares in millions except per share amounts (Unaudited) March 31, 2020 March 31, 2019 Shares Amount Shares Amount Preferred Stock - Series A Balance at beginning of year - $ - - $ - Issuance of stock - - - - Balance at end of period - $ - - $ - Preferred Stock - Series B Balance at beginning of year - $ - - $ - Issuance of stock - - - - Balance at end of period - $ - - $ - Preferred Stock - Series C Balance at beginning of year - $ - - $ - Issuance of stock - - - - Balance at end of period - $ - - $ - Common Stock Balance at beginning of year 7,621 $ 7,621 7,621 $ 7,621 Issuance of stock - - - - Balance at end of period 7,621 $ 7,621 7,621 $ 7,621 Additional Paid-In Capital Balance at beginning of year $ 126,279 $ 125,525 Repurchase and acquisition of common stock 67 - Issuance of preferred stock 3,869 - Issuance of treasury stock (47) (77) Share-based payments (202) (274) Balance at end of period $ 129,966 $ 125,174 Retained Earnings Balance at beginning of year $ 57,936 $ 58,753 Net income attributable to AT&T ($0.63 and $0.56 per diluted share) 4,610 4,096 Preferred stock dividends (32) - Common stock dividends ($0.52 and $0.51 per share) (3,687) (3,741) Cumulative effect of accounting changes and other adjustments (293) 316 Balance at end of period $ 58,534 $ 59,424 See Notes to Consolidated Financial Statements. AT&T INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - continued Dollars and shares in millions except per share amounts (Unaudited) March 31, 2020 March 31, 2019 Shares Amount Shares Amount Treasury Stock Balance at beginning of year (366) $ (13,085) (339) $ (12,059) Repurchase and acquisition of common stock (148) (5,547) (7) (208) Issuance of treasury stock 18 675 22 815 Balance at end of period (496) $ (17,957) (324) $ (11,452) Accumulated Other Comprehensive Income (Loss) Attributable to AT&T, net of tax Balance at beginning of year $ 5,470 $ 4,249 Other comprehensive income (loss) attributable to AT&T (5,855) 96 Balance at end of period $ (385) $ 4,345 Noncontrolling Interest Balance at beginning of year $ 17,713 $ 9,795 Net income attributable to noncontrolling interest 353 252 Issuance and acquisition of noncontrolling interests 1 9 Distributions (339) (246) Translation adjustments attributable to noncontrolling interest, net of taxes (51) - Cumulative effect of accounting changes and other adjustments (7) 29 Balance at end of period $ 17,670 $ 9,839 Total Stockholders’ Equity at beginning of year $ 201,934 $ 193,884 Total Stockholders’ Equity at end of period $ 195,449 $ 194,951 See Notes to Consolidated Financial Statements. Three months ended March 31, 2020 2019 Numerators Numerator for basic earnings per share: Net income $ 4,963 $ 4,348 Less: Net income attributable to noncontrolling interest (353) (252) Net income attributable to AT&T 4,610 4,096 Less: Preferred stock dividends (32) - Net income attributable to common stock 4,578 4,096 Dilutive potential common shares: Share-based payment 6 6 Numerator for diluted earnings per share $ 4,584 $ 4,102 Denominators (000,000) Denominator for basic earnings per share: Weighted average number of common shares outstanding 7,187 7,313 Dilutive potential common shares: Share-based payment (in shares) 27 29 Denominator for diluted earnings per share 7,214 7,342 Basic earnings per share attributable to Common Stock $ 0.63 $ 0.56 Diluted earnings per share attributable to Common Stock $ 0.63 $ 0.56 (Gains) losses are included in “Other income (expense) - net” in the consolidated statements of income. Foreign Currency Translation Adjustment Net Unrealized Gains (Losses) on Securities Net Unrealized Gains (Losses) on Derivative Instruments Defined Benefit Postretirement Plans Accumulated Other Comprehensive Income Balance as of December 31, 2019 $ (3,056) $ 48 $ (37) $ 8,515 $ 5,470 Other comprehensive income (loss) before reclassifications (1,803) 66 (3,657) - (5,394) Amounts reclassified from accumulated OCI - 1 - 1 - 2 (461) 3 (461) Net other comprehensive income (loss) (1,803) 66 (3,657) (461) (5,855) Balance as of March 31, 2020 $ (4,859) $ 114 $ (3,694) $ 8,054 $ (385) Foreign Currency Translation Adjustment Net Unrealized Gains (Losses) on Securities Net Unrealized Gains (Losses) on Derivative Instruments Defined Benefit Postretirement Plans Accumulated Other Comprehensive Income Balance as of December 31, 2018 $ (3,084) $ (2) $ 818 $ 6,517 $ 4,249 Other comprehensive income (loss) before reclassifications 288 16 127 - 431 Amounts reclassified from accumulated OCI - 1 - 1 11 2 (346) 3 (335) Net other comprehensive income (loss) 288 16 138 (346) 96 Balance as of March 31, 2019 $ (2,796) $ 14 $ 956 $ 6,171 $ 4,345 1 (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 7). 3 The amortization of prior service credits associated with postretirement benefits are included in "Other income (expense) - net" in the consolidated statements of income (see Note 6). America. give effect to depreciation and amortization expenses incurred in operating contribution nor is it burdened by cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA margin is EBITDA divided by total revenues. new WarnerMedia reporting unit were tested for goodwill impairment on January 1, 2021, for which there was none. For the three months ended March 31, 2020 Equity in Net Operations Depreciation Operating Income and Support and Income (Loss) Segment Revenues Expenses EBITDA Amortization (Loss) Affiliates Contribution Communications Mobility $ 17,402 $ 9,569 $ 7,833 $ 2,045 $ 5,788 $ - $ 5,788 Entertainment Group 10,515 7,891 2,624 1,289 1,335 - 1,335 Business Wireline 6,332 3,951 2,381 1,301 1,080 - 1,080 Total Communications 34,249 21,411 12,838 4,635 8,203 - 8,203 WarnerMedia Turner 3,162 1,710 1,452 69 1,383 6 1,389 Home Box Office 1,497 1,053 444 21 423 20 443 Warner Bros. 3,240 2,950 290 41 249 (8) 241 Other (540) (196) (344) 12 (356) (3) (359) Total WarnerMedia 7,359 5,517 1,842 143 1,699 15 1,714 Latin America Vrio 887 783 104 147 (43) 4 (39) Mexico 703 714 (11) 134 (145) - (145) Total Latin America 1,590 1,497 93 281 (188) 4 (184) Xandr 489 170 319 20 299 - 299 Segment Total 43,687 28,595 15,092 5,079 10,013 $ 19 $ 10,032 Corporate and Other Corporate 388 874 (486) 87 (573) Acquisition-related items - 182 (182) 2,056 (2,238) Certain significant items - (658) 658 - 658 Eliminations and consolidations (1,296) (922) (374) - (374) AT&T Inc. $ 42,779 $ 28,071 $ 14,708 $ 7,222 $ 7,486 For the three months ended March 31, 2019 Equity in Net Operations Depreciation Operating Income and Support and Income (Loss) Segment Revenues Expenses EBITDA Amortization (Loss) Affiliates Contribution Communications Mobility $ 17,363 $ 10,041 $ 7,322 $ 2,013 $ 5,309 $ - $ 5,309 Entertainment Group 11,328 8,527 2,801 1,323 1,478 - 1,478 Business Wireline 6,478 4,032 2,446 1,222 1,224 - 1,224 Total Communications 35,169 22,600 12,569 4,558 8,011 - 8,011 WarnerMedia Turner 3,443 2,136 1,307 60 1,247 25 1,272 Home Box Office 1,510 921 589 22 567 15 582 Warner Bros. 3,518 2,919 599 52 547 6 553 Other (92) 17 (109) 9 (118) 21 (97) Total WarnerMedia 8,379 5,993 2,386 143 2,243 67 2,310 Latin America Vrio 1,067 866 201 169 32 - 32 Mexico 651 725 (74) 131 (205) - (205) Total Latin America 1,718 1,591 127 300 (173) - (173) Xandr 426 160 266 13 253 - 253 Segment Total 45,692 30,344 15,348 5,014 10,334 $ 67 $ 10,401 Corporate and Other Corporate 433 661 (228) 204 (432) Acquisition-related items (42) 73 (115) 1,988 (2,103) Certain significant items - 248 (248) - (248) Eliminations and consolidations (1,256) (938) (318) - (318) AT&T Inc. $ 44,827 $ 30,388 $ 14,439 $ 7,206 $ 7,233 Three months ended March 31, 2020 2019 Communications $ 8,203 $ 8,011 WarnerMedia 1,714 2,310 Latin America (184) (173) Xandr 299 253 Segment Contribution 10,032 10,401 Reconciling Items: Corporate and Other (573) (432) Merger and integration items (182) (115) Amortization of intangibles acquired (2,056) (1,988) Impairments (123) - Gain on spectrum transaction 1 900 - Employee separation costs and benefit-related losses (119) (248) Segment equity in net income (loss) of affiliates (19) (67) Eliminations and consolidations (374) (318) AT&T Operating Income 7,486 7,233 Interest Expense 2,018 2,141 Equity in net income (loss) of affiliates (6) (7) Other income (expense) - net 803 286 Income Before Income Taxes $ 6,265 $ 5,371 1 Included as a reduction of "Selling, general and administrative expenses" in the consolidated statement of income. Intersegment Reconciliation Three months ended March 31, 2020 2019 Intersegment revenues Communications $ 2 $ - WarnerMedia 816 858 Latin America - - Xandr 1 - Total Intersegment Revenues 819 858 Consolidations 477 398 Eliminations and consolidations $ 1,296 $ 1,256 segment: For the three months ended March 31, 2020 Service Revenues Wireless Advanced Data Legacy Voice & Data Subscription Content Advertising Other Equipment Total Communications Mobility $ 13,892 $ - $ - $ - $ - $ 76 $ - $ 3,434 $ 17,402 Entertainment Group - 2,109 581 6,982 - 413 419 11 10,515 Business Wireline - 3,275 2,129 - - - 753 175 6,332 WarnerMedia Turner - - - 2,049 86 957 70 - 3,162 Home Box Office - - - 1,338 157 - 2 - 1,497 Warner Bros. - - - 10 3,060 2 168 - 3,240 Eliminations and Other - - - 63 (646) 20 23 - (540) Latin America Vrio - - - 887 - - - - 887 Mexico 467 - - - - - - 236 703 Xandr - - - - - 489 - - 489 Corporate and Other 117 14 134 - - - 83 40 388 Eliminations and consolidations - - - - (794) (413) (89) - (1,296) Total Operating Revenues $ 14,476 $ 5,398 $ 2,844 $ 11,329 $ 1,863 $ 1,544 $ 1,429 $ 3,896 $ 42,779 unit, prior period amounts have been recast to conform to the current period presentation with our segment updates (see Note 4). For the three months ended March 31, 2019 Service Revenues Wireless Advanced Data Legacy Voice & Data Subscription Content Advertising Other Equipment Total Communications Mobility $ 13,562 $ - $ - $ - $ - $ 67 $ - $ 3,734 $ 17,363 Entertainment Group - 2,070 683 7,724 - 350 501 - 11,328 Business Wireline - 3,172 2,397 - - - 750 159 6,478 WarnerMedia Turner - - - 1,965 135 1,261 82 - 3,443 Home Box Office - - - 1,334 173 - 3 - 1,510 Warner Bros. - - - 21 3,332 10 155 - 3,518 Eliminations and Other - - - 49 (152) 8 3 - (92) Latin America Vrio - - - 1,067 - - - - 1,067 Mexico 442 - - - - - - 209 651 Xandr - - - - - 426 - - 426 Corporate and Other 163 13 7 - - - 167 41 391 Eliminations and consolidations - - - - (837) (350) (69) - (1,256) Total Operating Revenues $ 14,167 $ 5,255 $ 3,087 $ 12,160 $ 2,651 $ 1,772 $ 1,592 $ 4,143 $ 44,827 March 31, December 31, Consolidated Balance Sheets 2020 2019 Deferred Acquisition Costs Other current assets $ 2,592 $ 2,462 Other Assets 2,997 2,991 Total deferred customer contract acquisition costs 5,589 5,453 Deferred Fulfillment Costs Other current assets 4,438 4,519 Other Assets 6,279 6,439 Total deferred customer contract fulfillment costs $ 10,717 $ 10,958 March 31, March 31, Consolidated Statements of Income 2020 2019 Deferred acquisition cost amortization $ 636 $ 547 Deferred fulfillment cost amortization 1,305 1,098 March 31, December 31, 2020 2019 Contract asset $ 2,598 $ 2,472 Contract liability 6,757 6,999 Our consolidated balance sheets at March 31, 2021. We anticipate total distributions from the pension plan will exceed the threshold of service and interest costs for 2021, requiring us to follow settlement accounting and remeasure our pension benefit plan assets and obligations at each quarter-end in 2021, as we expect settlements to occur during each quarter. effect for determining pension service and interest costs after remeasurement is 3.60% and 2.50% respectively. The remeasurement reflects an actual return on pension plan assets of (1.33)% (three-month rate) relative to our expected long-term rate of 6.75% (annual rate). Three months ended March 31, 2020 2019 Pension cost: Service cost – benefits earned during the period $ 257 $ 240 Interest cost on projected benefit obligation 422 549 Expected return on assets (889) (851) Amortization of prior service credit (28) (33) Actuarial (gain) loss - 432 Net pension (credit) cost $ (238) $ 337 Postretirement cost: Service cost – benefits earned during the period $ 13 $ 18 Interest cost on accumulated postretirement benefit obligation 104 186 Expected return on assets (44) (56) Amortization of prior service credit (582) (426) Net postretirement (credit) cost $ (509) $ (278) Combined net pension and postretirement (credit) cost $ (747) $ 59 2020. Long-Term Debt and Other Financial Instruments March 31, 2020 December 31, 2019 Carrying Fair Carrying Fair Amount Value Amount Value Notes and debentures1 $ 159,386 $ 175,902 $ 161,109 $ 182,124 Commercial paper 3,144 3,144 - - Bank borrowings - - 4 4 Investment securities2 3,591 3,591 3,723 3,723 1 Includes credit agreement borrowings. 2 Excludes investments accounted for under the equity method. March 31, 2020 Level 1 Level 2 Level 3 Total Equity Securities Domestic equities $ 674 $ - $ - $ 674 International equities 143 - - 143 Fixed income equities 233 - - 233 Available-for-Sale Debt Securities - 1,514 - 1,514 Asset Derivatives Interest rate swaps - 14 - 14 Foreign exchange contracts - 77 - 77 Liability Derivatives Cross-currency swaps - (8,283) - (8,283) Interest rate locks - (720) - (720) Foreign exchange contracts - (11) - (11) 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) Investment Securities Three months ended March 31, 2020 2019 Total gains (losses) recognized on equity securities $ (203) $ 160 Gains (losses) recognized on equity securities sold (33) 18 Unrealized gains (losses) recognized on equity securities held at end of period (170) 142 $979. Fair Value Hedging hedges. Following are the notional amounts of our outstanding derivative positions: March 31, December 31, 2020 2019 Interest rate swaps $ 853 $ 853 Cross-currency swaps 42,325 42,325 Interest rate locks 3,500 3,500 Foreign exchange contracts 106 269 Total $ 46,784 $ 46,947 Effect of Derivatives on the Consolidated Statements of Income Three months ended March 31, Fair Value Hedging Relationships 2020 2019 Interest rate swaps (Interest expense): Gain (loss) on interest rate swaps $ 10 $ 24 Gain (loss) on long-term debt (10) (24) Three months ended March 31, Cash Flow Hedging Relationships 2020 2019 Cross-currency swaps: Gain (loss) recognized in accumulated OCI $ (3,979) $ 168 Foreign exchange contracts: Gain (loss) recognized in accumulated OCI (13) (7) Other income (expense) - net reclassified from accumulated OCI into income 16 3 Interest rate locks: Gain (loss) recognized in accumulated OCI (636) - Interest income (expense) reclassified from accumulated OCI into income (16) (16) consolidated statements of cash flows. Cash receipts on the deferred purchase price are classified as cash flows from investing activities. March 31, 2020 December 31, 2019 Equipment Equipment Installment Revolving Installment Revolving Gross receivables: $ 3,640 $ 4,057 $ 4,576 $ 3,324 Balance sheet classification Accounts receivable Notes receivable 1,979 - 2,467 - Trade receivables 466 3,733 477 2,809 Other Assets Noncurrent notes and trade receivables 1,195 324 1,632 515 Outstanding portfolio of receivables derecognized from our consolidated balance sheets 9,690 5,300 9,713 4,300 Cash proceeds received, net of remittances1 7,156 5,300 7,211 4,300 1 Represents amounts to which financial institutions remain entitled, excluding the deferred purchase price. Three months ended March 31, 2020 2019 Gross receivables sold $ 2,367 $ 2,701 Net receivables sold1 2,273 2,546 Cash proceeds received 1,950 2,275 Deferred purchase price recorded 353 309 Guarantee obligation recorded 44 101 1 Receivables net of allowance, imputed interest and equipment trade-in right guarantees. 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 7). Three months ended March 31, 2020 2019 Fair value of repurchased receivables $ 288 $ 423 Carrying value of deferred purchase price 277 407 Gain on repurchases1 $ 11 $ 16 1 These gains are included in “Selling, general and administrative” in the consolidated statements of income. Three months ended March 31, 2020 2019 Gross receivables sold/cash proceeds received1 $ 4,222 $ 1,400 Collections reinvested under revolving agreement 3,222 - Net cash proceeds received (remitted) $ 1,000 $ 1,400 Net receivables sold2 $ 4,138 $ 1,363 Obligations recorded 126 52 1 Includes initial sale of receivables of $1,000 and $1,400 for the three months ended March 31, 2020 and 2019, respectively. 2 Receivables net of allowance, return and incentive reserves and imputed interest. We have recognized a right-of-use asset for both operating and finance leases, and an operating lease liability that represents the present value of our obligation to make payments over the lease term. The present value of the lease payments is calculated using the incremental borrowing rate for operating and finance leases, which was 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 will be updated on a quarterly basis for measurement of new lease liabilities. Three months ended March 31, 2020 2019 Operating lease cost $ 1,377 $ 1,242 Finance lease cost: Amortization of right-of-use assets $ 67 $ 66 Interest on lease obligation 41 42 Total finance lease cost $ 108 $ 108 March 31, December 31, 2020 2019 Operating Leases Operating lease right-of-use assets $ 24,008 $ 24,039 Accounts payable and accrued liabilities $ 3,443 $ 3,451 Operating lease obligation 21,584 21,804 Total operating lease obligation $ 25,027 $ 25,255 Finance Leases Property, plant and equipment, at cost $ 3,298 $ 3,534 Accumulated depreciation and amortization (1,302) (1,296) Property, plant and equipment, net $ 1,996 $ 2,238 Current portion of long-term debt $ 158 $ 162 Long-term debt 1,581 1,872 Total finance lease obligation $ 1,739 $ 2,034 Weighted-Average Remaining Lease Term Operating leases 8.4 yrs Finance leases 10.7 yrs Weighted-Average Discount Rate Operating leases 4.2 % Finance leases 8.4 % At March 31, 2020 Operating Finance Leases Leases Remainder of 2020 $ 3,519 $ 275 2021 4,391 275 2022 4,068 258 2023 3,663 232 2024 3,140 214 Thereafter 11,788 1,509 Total lease payments 30,569 2,763 Less imputed interest (5,542) (1,024) Total $ 25,027 $ 1,739 March 31, December 31, Cash and Cash Equivalents and Restricted Cash 2020 2019 2019 2018 Cash and cash equivalents $ 9,955 $ 6,516 $ 12,130 $ 5,204 Restricted cash in Other current assets 8 20 69 61 Restricted cash in Other Assets 77 94 96 135 Cash and cash equivalents and restricted cash $ 10,040 $ 6,630 $ 12,295 $ 5,400 Three months ended March 31, Cash Paid (Received) During the Period for: 2020 2019 Interest $ 2,376 $ 2,507 Income taxes, net of refunds (354) (379) Three months ended March 31, Cash Paid for Amounts Included in Lease Obligations: 2020 2019 Operating cash flows from operating leases $ 1,217 $ 1,332 Supplemental Lease Cash Flow Disclosures: Operating lease right-of-use assets obtained in exchange for new operating lease obligations 1,013 201 First Quarter Percent 2020 2019 Change Operating Revenues Communications $ 34,249 $ 35,169 (2.6) % WarnerMedia 7,359 8,379 (12.2) Latin America 1,590 1,718 (7.5) Xandr 489 426 14.8 Corporate and other 388 391 (0.8) Eliminations and consolidation (1,296) (1,256) (3.2) AT&T Operating Revenues 42,779 44,827 (4.6) Operating Contribution Communications 8,203 8,011 2.4 WarnerMedia 1,714 2,310 (25.8) Latin America (184) (173) (6.4) Xandr 299 253 18.2 Segment Operating Contribution $ 10,032 $ 10,401 (3.5) % The Latin America segment provides entertainment and wireless services outside of the U.S. This segment contains the following business units: First Quarter Percent 2020 2019 Change Operating Revenues Service $ 38,883 $ 40,684 (4.4) % Equipment 3,896 4,143 (6.0) Total Operating Revenues 42,779 44,827 (4.6) Operating expenses Operations and support 28,071 30,388 (7.6) Depreciation and amortization 7,222 7,206 0.2 Total Operating Expenses 35,293 37,594 (6.1) Operating Income 7,486 7,233 3.5 Interest expense 2,018 2,141 (5.7) Equity in net income (loss) of affiliates (6) (7) 14.3 Other income (expense) – net 803 286 - Income Before Income Taxes 6,265 5,371 16.6 Net Income 4,963 4,348 14.1 Net Income Attributable to AT&T 4,610 4,096 12.5 Net Income Attributable to Common Stock $ 4,578 $ 4,096 11.8 % 2021 Operating income COMMUNICATIONS SEGMENT First Quarter Percent 2020 2019 Change Segment Operating Revenues Mobility $ 17,402 $ 17,363 0.2 % Entertainment Group 10,515 11,328 (7.2) Business Wireline 6,332 6,478 (2.3) Total Segment Operating Revenues 34,249 35,169 (2.6) Segment Operating Contribution Mobility 5,788 5,309 9.0 Entertainment Group 1,335 1,478 (9.7) Business Wireline 1,080 1,224 (11.8) Total Segment Operating Contribution $ 8,203 $ 8,011 2.4 % Selected Subscribers and Connections March 31, (000s) 2020 2019 Mobility Subscribers 169,198 154,670 Total domestic broadband connections 15,315 15,737 Network access lines in service 8,160 9,587 U-verse VoIP connections 4,213 4,935 2021 Communications Business Unit Discussion Mobility Results First Quarter Percent 2020 2019 Change Operating revenues Service $ 13,968 $ 13,629 2.5 % Equipment 3,434 3,734 (8.0) Total Operating Revenues 17,402 17,363 0.2 Operating expenses Operations and support 9,569 10,041 (4.7) Depreciation and amortization 2,045 2,013 1.6 Total Operating Expenses 11,614 12,054 (3.7) Operating Income 5,788 5,309 9.0 Equity in Net Income (Loss) of Affiliates - - - Operating Contribution $ 5,788 $ 5,309 9.0 % Subscribers March 31, Percent (in 000s) 2020 2019 Change Postpaid 75,148 75,737 (0.8) Prepaid 17,808 17,012 4.7 Reseller 6,736 7,495 (10.1) Connected devices1 69,506 54,426 27.7 Total Mobility Subscribers2 169,198 154,670 9.4 % 1 Includes data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems. Excludes postpaid tablets. 2 Excludes 55 customers who we have agreed not to terminate service under the FCC’s “Keep Americans Connected Pledge,” which was implemented March 13, 2020. 2021 Net Additions First Quarter Percent (in 000s) 2020 2019 Change Postpaid Phone Net Additions 163 79 - % Total Phone Net Additions 120 168 (28.6) Postpaid2, 5 27 (207) - Prepaid (45) 101 - Reseller (190) (242) 21.5 Connected devices3 3,518 3,088 13.9 Mobility Net Subscriber Additions1, 5 3,310 2,740 20.8 % Postpaid Churn4, 5 1.08 % 1.16 % (8) BP Postpaid Phone-Only Churn4, 5 0.86 % 0.92 % (6) BP 1 Excludes acquisition-related additions during the period. 2 In addition to postpaid phones, includes tablets and wearables and other. Tablet net (losses) were (267) and (410) for the three months ended March 31, 2020 and 2019, respectively. Wearables and other net adds were 24 and (17) for the three months ended March 31, 2020 and 2019, 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. 5 Excludes 55 customers who we have agreed not to terminate service under the FCC’s “Keep Americans Connected Pledge.” decline in international roaming revenues and waived fees. continued network improvements. 45.0% in Entertainment Group Results First Quarter Percent 2020 2019 Change Operating revenues Video entertainment $ 7,395 $ 8,074 (8.4) % High-speed internet 2,109 2,070 1.9 Legacy voice and data services 581 683 (14.9) Other service and equipment 430 501 (14.2) Total Operating Revenues 10,515 11,328 (7.2) Operating expenses Operations and support 7,891 8,527 (7.5) Depreciation and amortization 1,289 1,323 (2.6) Total Operating Expenses 9,180 9,850 (6.8) Operating Income 1,335 1,478 (9.7) Equity in Net Income (Loss) of Affiliates - - - Operating Contribution $ 1,335 $ 1,478 (9.7) % Connections March 31, Percent (in 000s) 2020 2019 Change Video Connections Premium TV1 18,576 22,359 (16.9) % AT&T TV Now 788 1,508 (47.7) Total Video Connections1 19,364 23,867 (18.9) Total Broadband Connections1 14,046 14,454 (2.8) Fiber Broadband Connections 4,096 3,060 33.9 % Retail Consumer Switched Access Lines 3,196 3,787 (15.6) U-verse Consumer VoIP Connections 3,630 4,393 (17.4) Total Retail Consumer Voice Connections 6,826 8,180 (16.6) Net Additions First Quarter Percent (in 000s) 2020 2019 Change Video Net Additions Premium TV1 (897) (544) (64.9) % AT&T TV Now (138) (83) (66.3) Net Video Additions1 (1,035) (627) (65.1) Net Broadband Additions1 (73) 45 - Fiber Broadband Net Additions 209 297 (29.6) % 1 Excludes 66 premium TV and 35 broadband connections who we have agreed not to terminate service under the FCC's "Keep Americans Connected Pledge." Business Wireline Results First Quarter Percent 2020 2019 Change Operating revenues Strategic and managed services $ 3,879 $ 3,779 2.6 % Legacy voice and data services 2,129 2,397 (11.2) Other service and equipment 324 302 7.3 Total Operating Revenues 6,332 6,478 (2.3) Operating expenses Operations and support 3,951 4,032 (2.0) Depreciation and amortization 1,301 1,222 6.5 Total Operating Expenses 5,252 5,254 - Operating Income 1,080 1,224 (11.8) Equity in Net Income (Loss) of Affiliates - - - Operating Contribution $ 1,080 $ 1,224 (11.8) % 2021 WARNERMEDIA SEGMENT First Quarter Percent 2020 2019 Change Segment Operating Revenues Turner $ 3,162 $ 3,443 (8.2) % Home Box Office 1,497 1,510 (0.9) Warner Bros. 3,240 3,518 (7.9) Eliminations & Other (540) (92) - Total Segment Operating Revenues 7,359 8,379 (12.2) Cost of revenues Turner 1,320 1,680 (21.4) Home Box Office 816 670 21.8 Warner Bros. 2,346 2,430 (3.5) Selling, general and administrative 1,354 1,284 5.5 Eliminations & Other (319) (71) - Depreciation and amortization 143 143 - Total Operating Expenses 5,660 6,136 (7.8) Operating Income 1,699 2,243 (24.3) Equity in Net Income (Loss) of Affiliates 15 67 (77.6) Total Segment Operating Contribution $ 1,714 $ 2,310 (25.8) % 2021 WarnerMedia Business Unit Discussion Turner Results First Quarter Percent 2020 2019 Change Operating revenues Subscription $ 2,049 $ 1,965 4.3 % Advertising 957 1,261 (24.1) Content and other 156 217 (28.1) Total Operating Revenues 3,162 3,443 (8.2) Operating expenses Cost of revenues 1,320 1,680 (21.4) Selling, general and administrative 390 456 (14.5) Depreciation and amortization 69 60 15.0 Total Operating Expenses 1,779 2,196 (19.0) Operating Income 1,383 1,247 10.9 Equity in Net Income (Loss) of Affiliates 6 25 (76.0) Operating Contribution $ 1,389 $ 1,272 9.2 % 2021 Home Box Office Results First Quarter Percent 2020 2019 Change Operating revenues Subscription $ 1,338 $ 1,334 0.3 % Content and other 159 176 (9.7) Total Operating Revenues 1,497 1,510 (0.9) Operating expenses Cost of revenues 816 670 21.8 Selling, general and administrative 237 251 (5.6) Depreciation and amortization 21 22 (4.5) Total Operating Expenses 1,074 943 13.9 Operating Income 423 567 (25.4) Equity in Net Income (Loss) of Affiliates 20 15 33.3 Operating Contribution $ 443 $ 582 (23.9) % Warner Bros. Results First Quarter Percent 2020 2019 Change Operating revenues Theatrical product $ 1,106 $ 1,506 (26.6) % Television product 1,769 1,613 9.7 Games and other 365 399 (8.5) Total Operating Revenues 3,240 3,518 (7.9) Operating expenses Cost of revenues 2,346 2,430 (3.5) Selling, general and administrative 604 489 23.5 Depreciation and amortization 41 52 (21.2) Total Operating Expenses 2,991 2,971 0.7 Operating Income 249 547 (54.5) Equity in Net Income (Loss) of Affiliates (8) 6 - Operating Contribution $ 241 $ 553 (56.4) % LATIN AMERICA SEGMENT First Quarter Percent 2020 2019 Change Segment Operating Revenues Vrio $ 887 $ 1,067 (16.9) % Mexico 703 651 8.0 Total Segment Operating Revenues 1,590 1,718 (7.5) Segment Operating Contribution Vrio (39) 32 - Mexico (145) (205) 29.3 Total Segment Operating Contribution $ (184) $ (173) (6.4) % 2021 Latin America Business Unit Discussion Vrio Results First Quarter Percent 2020 2019 Change Operating revenues $ 887 $ 1,067 (16.9) % Operating expenses Operations and support 783 866 (9.6) Depreciation and amortization 147 169 (13.0) Total Operating Expenses 930 1,035 (10.1) Operating Income (43) 32 - Equity in Net Income (Loss) of Affiliates 4 - - Operating Contribution $ (39) $ 32 - % The following tables highlight other key measures of performance for Vrio: March 31, Percent (in 000s) 2020 2019 Change Vrio Video Subscribers 13,217 13,584 (2.7) % First Quarter Percent (in 000s) 2020 2019 Change Vrio Video Net Subscriber Additions (114) (32) - % Mexico Results First Quarter Percent 2020 2019 Change Operating revenues Service $ 467 $ 442 5.7 % Equipment 236 209 12.9 Total Operating Revenues 703 651 8.0 Operating expenses Operations and support 714 725 (1.5) Depreciation and amortization 134 131 2.3 Total Operating Expenses 848 856 (0.9) Operating Income (Loss) (145) (205) 29.3 Equity in Net Income (Loss) of Affiliates - - - Operating Contribution $ (145) $ (205) 29.3 % March 31, Percent (in 000s) 2020 2019 Change Mexico Wireless Subscribers Postpaid 4,962 5,642 (12.1) % Prepaid 13,692 11,779 16.2 Reseller 504 301 67.4 Total Mexico Wireless Subscribers 19,158 17,722 8.1 % First Quarter Percent (in 000s) 2020 2019 Change Mexico Wireless Net Additions Postpaid (141) (69) - % Prepaid 108 114 (5.3) Reseller 32 48 (33.3) Mexico Wireless Net Subscriber Additions (1) 93 - % 2021 XANDR SEGMENT First Quarter Percent 2020 2019 Change Operating revenues $ 489 $ 426 14.8 % Operating expenses Operations and support 170 160 6.3 Depreciation and amortization 20 13 53.8 Total Operating Expenses 190 173 9.8 Operating Income 299 253 18.2 Equity in Net Income (Loss) of Affiliates - - - Operating Contribution $ 299 $ 253 18.2 % SUPPLEMENTAL Total Advertising Revenues First Quarter Percent 2020 2019 Change Operating Revenues WarnerMedia $ 979 $ 1,279 (23.5) % Communications 489 417 17.3 Xandr 489 426 14.8 Eliminations (413) (350) (18.0) Total Advertising Revenues $ 1,544 $ 1,772 (12.9) % Video: 2021 Business Solutions Results First Quarter 2020 2019 Percent Change Operating revenues Wireless service $ 1,949 $ 1,777 9.7 % Strategic and managed services 3,879 3,779 2.6 Legacy voice and data services 2,129 2,397 (11.2) Other service and equipment 324 302 7.3 Wireless equipment 710 590 20.3 Total Operating Revenues 8,991 8,845 1.7 Operating expenses Operations and support 5,710 5,614 1.7 Depreciation and amortization 1,625 1,525 6.6 Total Operating Expenses 7,335 7,139 2.7 Operating Income 1,656 1,706 (2.9) Equity in Net Income (Loss) of Affiliates - - - Operating Contribution $ 1,656 $ 1,706 (2.9) % OTHER BUSINESS MATTERS two states. 107. The amount of capital expenditures is influenced by demand for services and products, capacity needs and network enhancements. We paid dividends on common and preferred shares of millions except per share amounts transaction at closing. (See Note 8) 2021 First Quarter March 31, 2020 March 31, 2019 Mobility Business Wireline Adjustments1 Business Solutions Mobility Business Wireline Adjustments1 Business Solutions Operating Revenues Wireless service $ 13,968 $ - $ (12,019) $ 1,949 $ 13,629 $ - $ (11,852) $ 1,777 Strategic and managed services - 3,879 - 3,879 - 3,779 - 3,779 Legacy voice and data services - 2,129 - 2,129 - 2,397 - 2,397 Other service and equipment - 324 - 324 - 302 - 302 Wireless equipment 3,434 - (2,724) 710 3,734 - (3,144) 590 Total Operating Revenues 17,402 6,332 (14,743) 8,991 17,363 6,478 (14,996) 8,845 Operating Expenses Operations and support 9,569 3,951 (7,810) 5,710 10,041 4,032 (8,459) 5,614 EBITDA 7,833 2,381 (6,933) 3,281 7,322 2,446 (6,537) 3,231 Depreciation and amortization 2,045 1,301 (1,721) 1,625 2,013 1,222 (1,710) 1,525 Total Operating Expense 11,614 5,252 (9,531) 7,335 12,054 5,254 (10,169) 7,139 Operating Income 5,788 1,080 (5,212) 1,656 5,309 1,224 (4,827) 1,706 Equity in net income (loss) of affiliates - - - - - - - - Operating Contribution $ 5,788 $ 1,080 $ (5,212) $ 1,656 $ 5,309 $ 1,224 $ (4,827) $ 1,706 1Non-business wireless reported in the Communications segment under the Mobility business unit. swaps. 2021. 2021. 2021. Information set forth in this report contains forward-looking statements that are subject to risks and uncertainties, and actual results could differ materially. Many of these factors are discussed in more detail in the “Risk Factors” section. We claim the protection of the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. - continued 2021 material developments. In March Of the shares repurchased, restricted stock and performance shares or Of the shares repurchased, Voluntary Employee Benefit Association (VEBA) 345678AT&T INC. CONSOLIDATED STATEMENTS OF INCOME Dollars in millions except per share amounts (Unaudited) Three months ended March 31, 2021 2020 Operating Revenues Service $ 38,504 $ 38,883 Equipment 5,435 3,896 Total operating revenues 43,939 42,779 Operating Expenses Cost of revenues Equipment 5,556 4,092 Broadcast, programming and operations 7,538 6,754 7,993 8,342 Selling, general and administrative 9,382 8,760 Asset impairments and abandonments 0 123 Depreciation and amortization 5,809 7,222 Total operating expenses 36,278 35,293 Operating Income 7,661 7,486 Other Income (Expense) Interest expense (1,870) (2,018) Equity in net income (loss) of affiliates 52 (6) Other income (expense) — net 4,221 803 Total other income (expense) 2,403 (1,221) Income Before Income Taxes 10,064 6,265 Income tax expense 2,122 1,302 Net Income 7,942 4,963 Less: Net Income Attributable to Noncontrolling Interest (392) (353) Net Income Attributable to AT&T $ 7,550 $ 4,610 Less: Preferred Stock Dividends (50) (32) Net Income Attributable to Common Stock $ 7,500 $ 4,578 Basic Earnings Per Share Attributable to Common Stock $ 1.04 $ 0.63 Diluted Earnings Per Share Attributable to Common Stock $ 1.04 $ 0.63 Weighted Average Number of Common Shares Outstanding — Basic (in millions) 7,161 7,187 7,188 7,214 AT&T INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Dollars in millions (Unaudited) Three months ended March 31, 2021 2020 Net income $ 7,942 $ 4,963 Other comprehensive income (loss), net of tax: Foreign currency: (109) (1,854) Securities: Net unrealized gains (losses), net of taxes of $(18) and $22 (55) 66 Reclassification adjustment included in net income, net of taxes of $(1) and $0 (2) 0 Derivative instruments: Net unrealized gains (losses), net of taxes of $136 and $(971) 511 (3,657) Reclassification adjustment included in net income, net of taxes of $6 and $0 24 0 Defined benefit postretirement plans: (504) (461) Other comprehensive income (loss) (135) (5,906) Total comprehensive income (loss) 7,807 (943) Less: Total comprehensive income attributable to noncontrolling interest (388) (302) Total Comprehensive Income (Loss) Attributable to AT&T $ 7,419 $ (1,245) AT&T INC. CONSOLIDATED BALANCE SHEETS Dollars in millions except per share amounts March 31, 2021 December 31, 2020 Assets (Unaudited) Current Assets Cash and cash equivalents $ 11,342 $ 9,740 Accounts receivable – net of related allowances for credit loss of $954 and $1,221 16,971 20,215 Inventories 3,347 3,695 Prepaid and other current assets 31,094 18,358 Total current assets 62,754 52,008 Noncurrent Inventories and Theatrical Film and Television Production Costs 15,626 14,752 Property, plant and equipment 322,534 327,751 Less: accumulated depreciation and amortization (197,927) (200,436) Property, Plant and Equipment – Net 124,607 127,315 Goodwill 135,168 135,259 Licenses – Net 87,947 93,840 Trademarks and Trade Names – Net 23,043 23,297 Distribution Networks – Net 13,334 13,793 Other Intangible Assets – Net 13,384 15,386 Investments in and Advances to Equity Affiliates 1,805 1,780 Operating Lease Right-Of-Use Assets 24,415 24,714 Deposits on Wireless Licenses 23,406 0 Other Assets 21,496 23,617 Total Assets $ 546,985 $ 525,761 Liabilities and Stockholders’ Equity Current Liabilities Debt maturing within one year $ 19,505 $ 3,470 Accounts payable and accrued liabilities 48,245 50,051 Advanced billings and customer deposits 5,029 6,176 Dividends payable 3,829 3,741 Total current liabilities 76,608 63,438 Long-Term Debt 160,694 153,775 Deferred Credits and Other Noncurrent Liabilities Deferred income taxes 61,886 60,472 Postemployment benefit obligation 14,723 18,276 Operating lease liabilities 21,766 22,202 Other noncurrent liabilities 28,229 28,358 Total deferred credits and other noncurrent liabilities 126,604 129,308 Stockholders’ Equity Preferred stock ($1 par value, 10,000,000 authorized): Series A (48,000 issued and outstanding at March 31, 2021 and December 31, 2020) 0 0 Series B (20,000 issued and outstanding at March 31, 2021 and December 31, 2020) 0 0 Series C (70,000 issued and outstanding at March 31, 2021 and December 31, 2020) 0 0 7,621 7,621 Additional paid-in capital 129,856 130,175 Retained earnings 41,154 37,457 (17,342) (17,910) Accumulated other comprehensive income 4,199 4,330 Noncontrolling interest 17,591 17,567 Total stockholders’ equity 183,079 179,240 Total Liabilities and Stockholders’ Equity $ 546,985 $ 525,761 AT&T INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Dollars in millions (Unaudited) Three months ended March 31, 2021 2020 Operating Activities Net income $ 7,942 $ 4,963 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,809 7,222 Amortization of film and television costs 2,886 2,269 Undistributed earnings from investments in equity affiliates (47) 39 Provision for uncollectible accounts 321 780 Deferred income tax expense 1,848 259 Net (gain) loss on investments, net of impairments (119) (646) Pension and postretirement benefit expense (credit) (974) (748) Actuarial (gain) loss on pension and postretirement benefits (2,844) 0 Asset impairments and abandonments 0 123 Changes in operating assets and liabilities: Receivables 751 1,695 Other current assets, inventories and theatrical film and television production costs (3,518) (3,267) Accounts payable and other accrued liabilities (3,060) (3,884) Equipment installment receivables and related sales 1,190 535 Deferred customer contract acquisition and fulfillment costs 244 105 Postretirement claims and contributions (343) (111) Other - net (159) (468) Total adjustments 1,985 3,903 Net Cash Provided by Operating Activities 9,927 8,866 Investing Activities Capital expenditures, including $(61) and $(28) of interest during construction (4,033) (4,966) Acquisitions, net of cash acquired (22,884) (100) Dispositions 51 118 (Purchases), sales and settlements of securities and investments, net (4) (6) Advances to and investments in equity affiliates, net 18 (68) Net Cash Used in Investing Activities (26,852) (5,022) Financing Activities Net change in short-term borrowings with original maturities of three months or less 687 1,742 Issuance of other short-term borrowings 15,485 1,390 Issuance of long-term debt 9,097 4,357 Repayment of long-term debt (902) (4,422) Payment of vendor financing (1,690) (791) Issuance of preferred stock 0 3,869 Purchase of treasury stock (176) (5,463) Issuance of treasury stock 63 58 Dividends paid (3,741) (3,737) Other - net (340) (3,102) Net Cash Provided by (Used in) Financing Activities 18,483 (6,099) Net increase (decrease) in cash and cash equivalents and restricted cash 1,558 (2,255) Cash and cash equivalents and restricted cash beginning of year 9,870 12,295 Cash and Cash Equivalents and Restricted Cash End of Period $ 11,428 $ 10,040 AT&T INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Dollars and shares in millions except per share amounts (Unaudited) Three months ended March 31, 2021 March 31, 2020 Shares Amount Shares Amount Preferred Stock - Series A Balance at beginning of period 0 $ 0 0 $ 0 Issuance of stock 0 0 0 0 Balance at end of period 0 $ 0 0 $ 0 Preferred Stock - Series B Balance at beginning of period 0 $ 0 0 $ 0 Issuance of stock 0 0 0 0 Balance at end of period 0 $ 0 0 $ 0 Preferred Stock - Series C Balance at beginning of period 0 $ 0 0 $ 0 Issuance of stock 0 0 0 0 Balance at end of period 0 $ 0 0 $ 0 Common Stock Balance at beginning of period 7,621 $ 7,621 7,621 $ 7,621 Issuance of stock 0 0 0 0 Balance at end of period 7,621 $ 7,621 7,621 $ 7,621 Additional Paid-In Capital Balance at beginning of period $ 130,175 $ 126,279 Repurchase and acquisition of common stock 0 67 Issuance of preferred stock 0 3,869 Issuance of treasury stock (70) (47) Share-based payments (249) (202) Balance at end of period $ 129,856 $ 129,966 Retained Earnings Balance at beginning of period $ 37,457 $ 57,936 Cumulative effect of accounting change and other adjustments 0 (293) Adjusted beginning balance 37,457 57,643 Net income attributable to AT&T 7,550 4,610 Preferred stock dividends (117) (32) Common stock dividends ($0.52 and $0.52 per share) (3,736) (3,687) Balance at end of period $ 41,154 $ 58,534 AT&T INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - continued Dollars and shares in millions except per share amounts (Unaudited) Three months ended March 31, 2021 March 31, 2020 Shares Amount Shares Amount Treasury Stock Balance at beginning of period (495) $ (17,910) (366) $ (13,085) Repurchase and acquisition of common stock (6) (176) (148) (5,547) Reissuance of treasury stock 20 744 18 675 Balance at end of period (481) $ (17,342) (496) $ (17,957) Accumulated Other Comprehensive Income Attributable to AT&T, net of tax Balance at beginning of period $ 4,330 $ 5,470 Other comprehensive income attributable to AT&T (131) (5,855) Balance at end of period $ 4,199 $ (385) Noncontrolling Interest Balance at beginning of period $ 17,567 $ 17,713 Cumulative effect of accounting change and other adjustments 0 (7) Adjusted beginning balance 17,567 17,706 Net income attributable to noncontrolling interest 392 353 Issuance and acquisition by noncontrolling owners 0 1 Distributions (364) (339) Translation adjustments attributable to noncontrolling interest, net of taxes (4) (51) Balance at end of period $ 17,591 $ 17,670 Total Stockholders' Equity at beginning of period $ 179,240 $ 201,934 Total Stockholders' Equity at end of period $ 183,079 $ 195,449 202020212019.2020. The results for the interim periods are not necessarily indicative of those for the full year.These consolidated financial statements include all adjustments that are necessary to present fairly the results for the presented interim periods, consisting of normal recurring accruals and other items. including potential impacts arising from the COVID-19 pandemic, that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Certain prior period amounts have been conformed to the current period’s presentation.presentation (see Note 4 and Note 5).Adopted and Pending Accounting Standards and Other ChangesCredit 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” (ASU 2016-13, as amended), which replaces the incurred loss impairment methodology under prior GAAP with an expected credit loss model. ASU 2016-13 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, we recorded a $293 reduction to “Retained earnings,” $395 increase to “allowances for doubtful accounts” 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” as an opening adjustment. Our adoption of ASU 2016-13 did not have a material impact on our financial statements.Reference Rate ReformIn March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (ASU 2020-04), which provides optional expedients, and allows for certain exceptions to existing GAAP, for contract modifications triggered by the expected market transition of certain benchmark interest rates to alternative reference rates. ASU 2020-04 applies to contracts, hedging relationships and other arrangements that reference the London Interbank Offering Rate (LIBOR) or any other rates ending after December 31, 2022. We are evaluating the impact of our adoption of ASU 2020-04, including optional expedients, for impact to our financial statements.Intangible Assets During the first quarter of 2020, in conjunction with the nationwide launch of AT&T TV and our customers’ continued shift from linear to streaming video services, we reassessed the estimated economic lives and renewal assumptions for our orbital slot licenses. As a result, we have changed the estimated lives of these licenses from indefinite to finite-lived, effective January 1, 2020, and began amortizing our orbital slot licenses using the sum-of-months-digits method over their average remaining economic life of 15 years. This change in accounting increased amortization expense $386, or $0.04 per diluted share available to common stock during the first quarter of 2020.9AT&T INC.MARCH 31, 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ContinuedDollars in millions except per share amountsWe also reassessed and changed the estimated economic lives of certain trade names in our Latin America business from indefinite to finite-lived and began amortizing them using the straight-line method over their average remaining economic life of 15 years. This change had an insignificant impact on our financial statements.20202021 and 2019,2020, is shown in the table below:In the first quarter of 2020, we completed an accelerated share repurchase agreement with a third-party financial institution to repurchase AT&T common stock. Under the terms of the agreement, we paid the financial institution $4,000 and received 104.8 million shares. Three months ended March 31, 2021 2020 Numerators Numerator for basic earnings per share: Net Income Attributable to Common Stock $ 7,500 $ 4,578 Dilutive potential common shares: Share-based payment 6 6 Numerator for diluted earnings per share $ 7,506 $ 4,584 Denominators (000,000) Denominator for basic earnings per share: Weighted average number of common shares outstanding 7,161 7,187 Dilutive potential common shares: Share-based payment (in shares) 27 27 Denominator for diluted earnings per share 7,188 7,214 1020202021 Foreign Currency Translation Adjustment Net Unrealized Gains (Losses) on Securities Net Unrealized Gains (Losses) on Derivative Instruments Defined Benefit Postretirement Plans Accumulated Other Comprehensive Income (Loss) Balance as of December 31, 2020 $ (3,926) $ 111 $ (779) $ 8,924 $ 4,330 (105) (55) 511 0 351 0 1 (2) 1 24 2 (504) 3 (482) (105) (57) 535 (504) (131) Balance as of March 31, 2021 $ (4,031) $ 54 $ (244) $ 8,420 $ 4,199 Foreign Currency Translation Adjustment Net Unrealized Gains (Losses) on Securities Net Unrealized Gains (Losses) on Derivative Instruments Defined Benefit Postretirement Plans Accumulated Other Comprehensive Income (Loss) Balance as of December 31, 2019 $ (3,056) $ 48 $ (37) $ 8,515 $ 5,470 (1,803) 66 (3,657) 0 (5,394) 0 1 0 1 0 2 (461) 3 (461) (1,803) 66 (3,657) (461) (5,855) Balance as of March 31, 2020 $ (4,859) $ 114 $ (3,694) $ 8,054 $ (385) 43 reportable segments: (1) Communications, (2) WarnerMedia and (3) Latin America, and (4) Xandr.11AT&T INC.MARCH 31, 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ContinuedDollars in millions except per share amounts video and broadband services to 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. This segment contains the following business units:•Mobility provides nationwide wireless service and equipment.Entertainment Group provides video, including over-the-top (OTT) services, broadband and voice communications services primarily to residential customers. This segment also sells advertising on distribution platforms.•Business Wireline provides advanced IP-based services, as well as traditional voice and data services and related equipment to business customers.This segment containsWarnerMedia content is distributed through Basic Networks, Direct-to-Consumer (DTC) or Theatrical, TV Content and Games Licensing. Segment results also include Xandr advertising, Otter Media Holdings and eliminations of intercompany transactions within WarnerMedia.following business units:Turner primarily operates multichannel basic television networks and digital properties.reporting unit is deemed to be the operating segment. The previous reporting units, Turner, also sells advertising on its networks and digital properties.Home Box Office, consists of premium pay television Warner Bros. and OTT and streaming services domestically and premium pay, basic tier television and OTT services internationally, as well as 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 productsXandr, and the production and distribution of games.•Vrioprovides video services primarily to residential customers using satellite technology in Latin America and the Caribbean.•Mexicoprovides wireless service and equipment to customers in Mexico.The Xandr segment provides advertising services. These services utilize data insights to develop and deliver targeted advertising across video and digital platforms. Certain revenues in this segment are also reported by the Communications segment and are eliminated upon consolidation.•Video, whichconsists of our held-for-sale video operations, which provides video, including over-the-top (OTT) services and also sells multiplatform advertising services.•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,Video, and (2) includes adjustments for our reporting of the advertising business.122020202113For the three months ended March 31, 2021 Revenues Operations
and Support
ExpensesEBITDA Depreciation
and
AmortizationOperating
Income (Loss)Equity in Net
Income (Loss) of
AffiliatesSegment
ContributionCommunications Mobility $ 19,034 $ 11,018 $ 8,016 $ 2,014 $ 6,002 $ 0 $ 6,002 Business Wireline 6,046 3,710 2,336 1,278 1,058 0 1,058 Consumer Wireline 3,098 2,031 1,067 762 305 0 305 Total Communications 28,178 16,759 11,419 4,054 7,365 0 7,365 WarnerMedia 8,526 6,403 2,123 163 1,960 70 2,030 Latin America Vrio 743 661 82 117 (35) (4) (39) Mexico 631 620 11 145 (134) 0 (134) Total Latin America 1,374 1,281 93 262 (169) (4) (173) Segment Total 38,078 24,443 13,635 4,479 9,156 $ 66 $ 9,222 Corporate and Other 426 1,213 (787) 35 (822) Video 6,725 5,660 1,065 164 901 Acquisition-related items 0 37 (37) 1,131 (1,168) Certain significant items 0 57 (57) 0 (57) Eliminations and consolidations (1,290) (941) (349) 0 (349) AT&T Inc. $ 43,939 $ 30,469 $ 13,470 $ 5,809 $ 7,661 20202021For the three months ended March 31, 2020 Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Equity in Net
Income (Loss) of
AffiliatesSegment Contribution Communications Mobility $ 17,402 $ 9,569 $ 7,833 $ 2,045 $ 5,788 $ 0 $ 5,788 Business Wireline 6,266 3,887 2,379 1,286 1,093 0 1,093 Consumer Wireline 3,111 1,879 1,232 712 520 0 520 Total Communications 26,779 15,335 11,444 4,043 7,401 0 7,401 WarnerMedia 7,765 5,605 2,160 161 1,999 15 2,014 Latin America Vrio 887 783 104 147 (43) 4 (39) Mexico 703 714 (11) 134 (145) 0 (145) Total Latin America 1,590 1,497 93 281 (188) 4 (184) Segment Total 36,134 22,437 13,697 4,485 9,212 $ 19 $ 9,231 Corporate and Other 534 1,012 (478) 90 (568) Video 7,407 6,020 1,387 591 796 Acquisition-related items 0 182 (182) 2,056 (2,238) Certain significant items 0 (658) 658 0 658 Eliminations and consolidations (1,296) (922) (374) 0 (374) AT&T Inc. $ 42,779 $ 28,071 $ 14,708 $ 7,222 $ 7,486 1420202021onin our consolidated statements of income: Three months ended
March 31, 2021 2020 Communications $ 7,365 $ 7,401 WarnerMedia 2,030 2,014 Latin America (173) (184) Segment Contribution 9,222 9,231 Reconciling Items: Corporate and Other (822) (568) Video 901 796 Merger costs (37) (182) Amortization of intangibles acquired (1,131) (2,056) Asset impairments and abandonments 0 (123) 0 900 Employee separation costs and benefit-related losses (57) (119) Segment equity in net income of affiliates (66) (19) Eliminations and consolidations (349) (374) AT&T Operating Income 7,661 7,486 Interest Expense 1,870 2,018 Equity in net income (loss) of affiliates 52 (6) Other income (expense) - net 4,221 803 Income Before Income Taxes $ 10,064 $ 6,265 tabletables presents intersegment revenues and assets by segment.Intersegment Reconciliation Three months ended
March 31, 2021 2020 Intersegment Revenues Communications $ 3 $ 2 WarnerMedia 838 817 Latin America 0 0 Total Intersegment Revenues 841 819 Consolidations 449 477 Eliminations and consolidations $ 1,290 $ 1,296 1520202021March 31, 2021 December 31, 2020 Assets $ 506,168 $ 506,102 WarnerMedia 148,588 148,037 Latin America 15,522 15,811 (123,293) (144,189) Total $ 546,985 $ 525,761 unit:16For the three months ended March 31, 2021 Communications Mobility Business Wireline Consumer Wireline WarnerMedia Latin America Corporate & Other Total Wireless service $ 13,965 $ 0 $ 0 $ 0 $ 439 $ 10 $ 0 $ 14,414 Video service 0 0 0 0 743 6,295 0 7,038 Business service 0 5,872 0 0 0 70 0 5,942 IP Broadband 0 0 2,205 0 0 0 0 2,205 Subscription 0 0 0 3,830 0 0 0 3,010 0 0 0 0 0 0 (235) 0 0 0 0 0 0 (585) Content 0 0 0 3,420 0 0 0 2,777 0 0 0 (331) 0 0 0 0 0 0 (312) 0 0 0 Advertising 83 0 0 1,750 0 388 (388) 1,833 Legacy voice and data 0 0 519 0 0 123 0 642 Other 0 0 332 169 0 224 (82) 643 Total Service $ 14,048 $ 5,872 $ 3,056 $ 8,526 $ 1,182 $ 7,110 $ (1,290) $ 38,504 Equipment 4,986 174 42 0 192 41 0 5,435 Total $ 19,034 $ 6,046 $ 3,098 $ 8,526 $ 1,374 $ 7,151 $ (1,290) $ 43,939 20202021For the three months ended March 31, 2020 Communications Mobility Business Wireline Consumer Wireline WarnerMedia Latin America Corporate & Other Elim. Total Wireless service $ 13,892 $ 0 $ 0 $ 0 $ 467 $ 116 $ 0 $ 14,475 Video service 0 0 0 0 887 6,984 0 7,871 Business service 0 6,091 0 0 0 77 0 6,168 IP Broadband 0 0 2,109 0 0 0 0 2,109 Subscription 0 0 0 3,401 0 0 0 2,607 DTC (HBO Max) 0 0 0 0 0 0 0 0 0 0 0 0 0 (794) Content 0 0 0 3,303 0 0 0 2,633 0 0 0 (401) 0 0 0 0 0 0 (269) 0 0 0 Advertising 76 0 0 1,477 0 413 (413) 1,553 Legacy voice and data 0 0 581 0 0 134 0 715 Other 0 0 419 254 0 168 (89) 752 Total Service $ 13,968 $ 6,091 $ 3,109 $ 7,765 $ 1,354 $ 7,892 $ (1,296) $ 38,883 Equipment 3,434 175 2 0 236 49 0 3,896 Total $ 17,402 $ 6,266 $ 3,111 $ 7,765 $ 1,590 $ 7,941 $ (1,296) $ 42,779 17AT&T INC.MARCH 31, 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ContinuedDollars 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.costs and deferred customer contract fulfillment costs included on our consolidated balance sheets: March 31, December 31, Consolidated Balance Sheets 2021 2020 Deferred Acquisition Costs Prepaid and other current assets $ 3,788 $ 3,087 Other Assets 2,693 3,198 Total deferred customer contract acquisition costs $ 6,481 $ 6,285 Deferred Fulfillment Costs Prepaid and other current assets $ 4,945 $ 4,118 Other Assets 4,367 5,634 Total deferred customer contract fulfillment costs $ 9,312 $ 9,752 cost and deferred customer contract fulfillment cost amortization included in “Other cost of revenue” for the three months ended: March 31, March 31, Consolidated Statements of Income 2021 2020 Deferred acquisition cost amortization $ 764 $ 636 Deferred fulfillment cost amortization 1,290 1,305 Our beginning of period contract liability recorded as customer contract revenue during 2020 was $4,519. March 31, December 31, Consolidated Balance Sheets 2021 2020 Contract asset $ 3,554 $ 3,501 Contract liability 5,517 6,879 18AT&T INC.MARCH 31, 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ContinuedDollars in millions except per share amounts20202021 and December 31, 20192020 included approximately $1,700$2,208 and $1,611,$2,054, respectively, for the current portion of our contract asset in “Other“Prepaid and other current assets” and $5,769$4,839 and $5,939,$6,071, respectively, for the current portion of our contract liability in “Advanced billings and customer deposits.”2020,2021, the aggregate amount of the transaction price allocated to remaining performance obligations was $36,486,$41,259, of which we expect to recognize approximately 86%87% by the end of 2021,2022, with the balance recognized thereafter. Approximately $2,085 of the $41,259 remaining performance obligation relates to the Video business.2020.19AT&T INC.MARCH 31, 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ContinuedDollarsAs part of our first-quarter 2021 remeasurement, we increased the weighted-average discount rate used to measure our pension benefit obligation from 2.70% to 3.30%. The discount rate in millions except per share amounts (benefit) is recorded in operating expenses in the consolidated statements of income while the remaining components are recorded in “Other income (expense) – net.” Three months ended March 31, 2021 2020 Pension cost: Service cost - benefits earned during the period $ 254 $ 257 Interest cost on projected benefit obligation 291 422 Expected return on assets (877) (889) Amortization of prior service credit (36) (28) Actuarial (gain) loss (2,844) 0 Net pension (credit) cost $ (3,212) $ (238) Postretirement cost: Service cost – benefits earned during the period $ 11 $ 13 Interest cost on accumulated postretirement benefit obligation 53 104 Expected return on assets (38) (44) Amortization of prior service credit (634) (582) Net postretirement (credit) cost $ (608) $ (509) Combined net pension and postretirement (credit) cost $ (3,820) $ (747) ofended 2021 and 2020, and 2019, net supplemental pension benefits costs not included in the table above were $19$12 and $25.$19.2019.20AT&T INC.MARCH 31, 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ContinuedDollars in millions except per share amounts March 31, 2021 December 31, 2020 Carrying Fair Carrying Fair Amount Value Amount Value $ 171,194 $ 192,420 $ 155,209 $ 187,224 Commercial paper 7,078 7,078 0 0 3,208 3,208 3,249 3,249 20202021 and December 31, 2019.2020. Derivatives designated as hedging instruments are reflected as “Other assets,” “Other noncurrent liabilities”liabilities,” “Prepaid and for a portion of interest rate swaps, “Otherother current assets” and “Accounts payable and accrued liabilities” on our consolidated balance sheets. March 31, 2021 Level 1 Level 2 Level 3 Total Equity Securities Domestic equities $ 1,060 $ 0 $ 0 $ 1,060 International equities 198 0 0 198 Fixed income equities 227 0 0 227 Available-for-Sale Debt Securities 0 1,404 0 1,404 Asset Derivatives Cross-currency swaps 0 1,461 0 1,461 Foreign exchange contracts 0 8 0 8 Liability Derivatives Cross-currency swaps 0 (2,038) 0 (2,038) Foreign exchange contracts 0 (7) 0 (7) 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) 21AT&T INC.MARCH 31, 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ContinuedDollars in millions except per share amounts Three months ended March 31, 2021 2020 Total gains (losses) recognized on equity securities $ 55 $ (203) Gains (Losses) recognized on equity securities sold 0 (33) $ 55 $ (170) 2020,2021, available-for-sale debt securities totaling $1,514$1,404 have maturities as follows - less than one year: $78;$33; one to three years: $149;$186; three to five years: $160; for$206; five or more years: $1,127.“Other“Prepaid and other current assets” and our investment securities are recorded in “Other Assets” on the consolidated balance sheets.22AT&T INC.MARCH 31, 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ContinuedDollars in millions except per share amountsWe Periodically, 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.foreign exchange contractscross-currency swaps as fair value hedges. The purpose of these contracts is to hedge foreign currency risk associated with foreign-currency-denominated operating assets and liabilities.Accruedchanges in spot rates on foreign denominated debt. The changes in fair values of currency swaps attributable to the cross-currency basis spread are considered excluded components.ChangesExcept for excluded components, changes in the fair value of derivative instruments designated as fair value hedges are offset against the change in fair value of the hedged assets or liabilities through earnings. In the three months ended March 31, 20202021 and 2019,2020, no ineffectiveness was measured on fair value hedges. 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.$60$87 from accumulated OCI to “Interest expense” due to the amortization of net losses on historical interest rate locks.€1,364€1,433 million aggregate principal amount of debt as a hedge of the variability of some of the Euro-denominated net investments of our subsidiaries. The gain or loss on the debt that is designated as, and is effective as, an economic hedge of the net investment in a foreign operation is recorded as a currency translation adjustment within accumulated OCI, net on the consolidated balance sheet.sheets. Net gains on net investment hedges recognized in accumulated OCI for 2020in the first quarter were $25.$70.2020,2021, we had posted collateral of $2,809$47 (a deposit asset) and held 0 collateral.collateral of $781 (a receipt liability). Under the agreements, if AT&T’s credit rating had been downgraded one rating leveltwo ratings levels by Fitch Ratings, one level by S&P and one level by Moody’s before the end offinal collateral exchange in March, we would not have been required to post any additional collateral. of $48. If AT&T’s credit rating had been downgraded four ratingthree ratings 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 $6,149.$1,160. 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 $200.$36. At December 31, 2019,2020, we had posted collateral of $204$53 (a deposit asset) and held collateral of $44$694 (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.23AT&T INC.MARCH 31, 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ContinuedDollars in millions except per share amounts March 31, December 31, 2021 2020 Cross-currency swaps $ 42,186 $ 40,745 Foreign exchange contracts 228 90 Total $ 42,414 $ 40,835 Effect of Derivatives on the Consolidated Statements of Income Three months ended March 31, Fair Value Hedging Relationships 2021 2020 Interest rate swaps (Interest expense): Gain (Loss) on interest rate swaps $ (1) $ 10 Gain (Loss) on long-term debt 1 (10) Cross-currency swaps: Gain (Loss) on cross-currency swaps (48) 0 Gain (Loss) on long-term debt 48 0 Gain (Loss) recognized in accumulated OCI (1) 0 quarters ended March 31, 2020 and 2019periods above were offset against “Interest expense.” Three months ended March 31, Cash Flow Hedging Relationships 2021 2020 Cross-currency swaps: Gain (Loss) recognized in accumulated OCI $ 644 $ (3,979) Foreign exchange contracts: Gain (Loss) recognized in accumulated OCI 4 (13) (5) 16 Interest rate locks: Gain (Loss) recognized in accumulated OCI 0 (636) (25) (16) expense.in common units. We expect to receive $7,800 from New DTV at closing ($7,600 in cash and approximately $200 of transferred DIRECTV debt). 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 issued 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.Assets held-for-sale: Current assets $ 3,776 Property, plant and equipment - net 2,410 Licenses, net 5,798 Other intangible assets, net 1,633 Other assets 1,948 Total assets $ 15,565 Liabilities related to assets held-for-sale: Current liabilities $ 4,022 Long-term debt 205 Other noncurrent liabilities 351 Total liabilities $ 4,578 8.9. SALES OF RECEIVABLES24AT&T INC.MARCH 31, 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ContinuedDollars in millions except per share amounts March 31, 2021 December 31, 2020 Equipment Equipment Installment Revolving Installment Revolving Gross receivables: $ 3,857 $ 3,718 $ 5,565 $ 3,909 Balance sheet classification Accounts receivable Notes receivable 1,846 0 2,716 0 Trade receivables 452 3,543 554 3,715 Other Assets Noncurrent notes and trade receivables 1,559 175 2,295 194 9,448 5,755 7,827 5,300 7,176 5,755 5,646 5,300 20202021 and 2019:2020: Three months ended March 31, 2021 2020 Gross receivables sold $ 3,935 $ 2,367 3,826 2,273 Cash proceeds received 3,519 1,950 Deferred purchase price recorded 414 353 Guarantee obligation recorded 146 44 25AT&T INC.MARCH 31, 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ContinuedDollars in millions except per share amounts20202021 and 2019:2020: Three months ended March 31, 2021 2020 Fair value of repurchased receivables $ 273 $ 288 Carrying value of deferred purchase price 253 277 $ 20 $ 11 20202021 and December 31, 2019,2020, our deferred purchase price receivable was $2,378$2,283 and $2,336,$1,991, respectively, of which $1,583$1,515 and $1,569$1,476 are included in “Other“Prepaid and other current assets” on our consolidated balance sheets, with the remainder in “Other Assets.” The guarantee obligation at March 31, 20202021 and December 31, 20192020 was $351$285 and $384,$228, respectively, of which $189$129 and $148$161 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.In 2019, we entered into$4,300$6,000 of certain receivables through our bankruptcy-remote subsidiaries to various financial institutions on a recurring basis in exchange for cash equal to the gross receivables transferred. InThis agreement is subject to renewal on an annual basis and the first quarter of 2020, wetransfer limit may be expanded the program limitfrom time to $5,300.time. 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 subsidiaries, which hold additional receivables in the amount of $4,057$3,718 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.losses and interest rates. Our maximum exposure to loss related to these receivables transferred is limited to the amount outstanding. Three months ended March 31, 2021 2020 $ 5,204 $ 4,222 Collections reinvested under revolving agreement 4,504 3,222 Collections not reinvested 245 0 Net cash proceeds received (remitted) $ 455 $ 1,000 $ 5,125 $ 4,138 Obligations recorded (reversed) 142 126 9.10. LEASES26AT&T INC.MARCH 31, 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ContinuedDollars in millions except per share amounts Three months ended March 31, 2021 2020 Operating lease cost $ 1,458 $ 1,377 Finance lease cost: Amortization of right-of-use assets $ 69 $ 67 Interest on lease obligation 39 41 Total finance lease cost $ 108 $ 108 Three months ended March 31, 2021 2020 Cash Flows from Operating Activities Cash paid for amounts included in lease obligations: Operating cash flows for operating leases $ 1,254 $ 1,217 Supplemental Lease Cash Flow Disclosures Operating lease right-of-use assets obtained in exchange for new
operating lease obligations1,050 1,013 March 31,
2021December 31,
2020Operating Leases Operating lease right-of-use assets $ 24,415 $ 24,714 Accounts payable and accrued liabilities $ 3,564 $ 3,537 Operating lease obligation 21,766 22,202 Total operating lease obligation $ 25,330 $ 25,739 Finance Leases Property, plant and equipment, at cost $ 3,414 $ 3,586 Accumulated depreciation and amortization (1,308) (1,361) Property, plant and equipment, net $ 2,106 $ 2,225 Current portion of long-term debt $ 180 $ 189 Long-term debt 1,747 1,847 Total finance lease obligation $ 1,927 $ 2,036 March 31, 2021 2020 Weighted-Average Remaining Lease Term (years) Operating leases 8.4 8.4 Finance leases 9.8 10.7 Weighted-Average Discount Rate Operating leases 4.0 % 4.2 % Finance leases 8.0 % 8.4 % At March 31, 2021 Operating Finance Leases Leases Remainder of 2021 $ 3,631 $ 242 2022 4,647 314 2023 4,212 291 2024 3,671 272 2025 3,015 269 Thereafter 11,668 1,587 Total lease payments 30,844 2,975 Less: imputed interest (5,514) (1,048) Total $ 25,330 $ 1,927 2720202021Future minimum maturities of lease liabilities are as follows:NOTE 10. PREFERRED SHARESWe have authorized 10 million preferred shares of AT&T stock, each with a par value of $1.00 per share. Cumulative perpetual preferred shares consist of the following:Series A: 48 thousand shares outstanding at March 31, 2020 and December 31, 2019, with a $25,000 per share liquidation preference and a dividend rate of 5.00%.Series B: 20 thousand shares outstanding at March 31, 2020 and 0 issued and outstanding at December 31, 2019, with a €100,000 per share liquidation preference, and an initial dividend rate of 2.875%, subject to reset beginning on May 1, 2025.Series C: 70 thousand shares outstanding at March 31, 2020 and 0 issued and outstanding at December 31, 2019, with a $25,000 per share liquidation preference and a dividend rate of 4.75%.So long as the preferred dividends are declared and paid on a timely basis on each series of preferred shares, there are no limitations on our ability to declare a dividend on or repurchase AT&T common shares. The preferred shares are optionally redeemable by AT&T at the liquidation price generally on or after five years from the issuance date, or upon certain other contingent events. March 31, December 31, 2021 2020 2020 2019 Cash and cash equivalents $ 11,342 $ 9,955 $ 9,740 $ 12,130 Restricted cash in Prepaid and other current assets 2 8 9 69 Restricted cash in Other Assets 84 77 121 96 Cash and Cash Equivalents and Restricted Cash $ 11,428 $ 10,040 $ 9,870 $ 12,295 Consolidated Statements of Cash Flows Three months ended March 31, Cash paid (received) during the period for: 2021 2020 Interest $ 2,134 $ 2,376 Income taxes, net of refunds 5 (354) Spectrum acquisitions 22,876 97 2820202021Net commercial paper borrowings $ 7,072 U.S. dollar denominated global notes $ 6,000 Initial average rate of 1.27% Euro denominated global notes 1,461 Rate of 0.00% 2021 Syndicated Term Loan 7,350 BAML Bilateral Term Loan 2,000 Private financing 750 Other 636 Debt Issuances $ 18,197 Repayments: Private financing $ (649) Other (253) Repayments of long-term debt $ (902) Financing ActivitiesIncludes credit agreement borrowings.April 6, 2020,March 23, 2021, we borrowed $7,350 under the 2021 Syndicated Term Loan and the remaining $7,350 of lenders’ commitments were terminated. As of March 31, 2021, $7,350 was outstanding and is due on March 22, 2022.$5,500$2,000 term loan credit agreement (BAML Bilateral Term Loan Credit Agreement (Term Loan) consisting of (i) a 0.75 year $1,000 facility due December 31, 2021 (BAML Tranche A Facility), and (ii) a 1.75 year $1,000 facility due December 31, 2022 (BAML Tranche B Facility), with certain commercial banks and Bank of America, N.A., as lead agent. The Term Loan is not subject to amortization, and the entire principal amount will be due and payable on DecemberAt March 31, 2020.2021, $2,000 was outstanding under these facilities.2920202021 subscribers and connections in millions except per share and per subscriber amountsfourthree 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. Percentage increases and decreases that are not considered meaningful are denoted with a dash. First Quarter Percent 2021 2020 Change Operating Revenues Communications $ 28,178 $ 26,779 5.2 % WarnerMedia 8,526 7,765 9.8 Latin America 1,374 1,590 (13.6) Corporate 426 534 (20.2) Video 6,725 7,407 (9.2) Eliminations and consolidation (1,290) (1,296) 0.5 AT&T Operating Revenues 43,939 42,779 2.7 Operating Contribution Communications 7,365 7,401 (0.5) WarnerMedia 2,030 2,014 0.8 Latin America (173) (184) 6.0 Segment Operating Contribution $ 9,222 $ 9,231 (0.1) % •Mobility provides nationwide wireless service and equipment.Entertainment Group provides video, including over-the-top (OTT) services, broadband and voice communications services to residential customers. This segment also sells advertising on distribution platforms.•Business Wireline provides advanced IP-based services, as well as traditional voice and data services and related equipment to business customers.3020202021Operations -Operations- Continued subscribers and connections in millions except per share and per subscriber amountsThe WarnerMedia segment develops, produces and distributes feature films, television, gaming and other content over various physical and digital formats. This segment contains the following business units:Turner primarily 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 services domestically and premium pay, basic tier television and OTT services internationally, as well as 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.•Vrioprovides video services primarily to residential customers using satellite technology in Latin America and the Caribbean.•Mexico provides wireless service and equipment to customers in Mexico.The Xandrsegment provides advertising services. These services utilize data insights to develop and deliver targeted advertising across video and digital platforms.COVID-19 UPDATEIn March 2020, the World Health Organization designated the coronavirus (COVID-19) a pandemic and the President of the United States declared a national emergency. To date, COVID-19 has surfaced in nearly all regions around the world and resulted in travel restrictions and business slowdowns or shutdowns.Disruptions caused by COVID-19 and measures taken to prevent its spread or mitigate its effects both domestically and internationally have impacted our results of operations. In the first quarter of 2020, we recognized approximately $430, or $0.05 per share, of incremental costs associated with bad debt reserves, voluntary corporate actions taken primarily to protect and compensate front-line employees and contractors, and WarnerMedia production shutdown costs. We expect more than half of these incremental charges will be short-term in nature.In addition to these incremental costs, our operations and comparability were impacted by (1) the cancellation of the NCAA Division I Men’s Basketball Tournament (NCAA tournament), resulting in lower advertising revenues and associated expenses, (2) closures of retail stores, contributing to a decline in wireless equipment sales, with a corresponding reduction in equipment expense and (3) the imposition of travel restrictions, driving significantly lower wireless roaming services that do not have a directly correlated expense reduction. The net impact of these items on profitability was not significant.All subscriber counts at and for the period ended March 31, 2020, exclude customers who we have agreed not to terminate service under the Federal Communications Commission (FCC) “Keep Americans Connected Pledge.” For reporting purposes, we count these subscribers as if they had disconnected service.The economic effects of the pandemic and resulting societal changes are currently not predictable. We expect that COVID-19 could affect additional areas of our business in future quarters and that the financial impacts could vary from those seen in the first quarter. There are a number of uncertainties that could impact our future results of operations, including the effectiveness of COVID-19 mitigation measures; the duration of the pandemic; global economic conditions; changes to our operations; changes in consumer confidence, behaviors and spending; work from home trends; and the sustainability of supply chains.Due to the uncertainty of the COVID-19 pandemic and recovery, we have withdrawn our prior financial guidance.31AT&T INC.MARCH 31, 2020Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - ContinuedDollars, subscribers and connections in millions, except per share and per subscriber amountsfollowing discussions.discussions that follow. Additional analysis is discussed in our “Segment Results” section. Certain prior period amounts have been reclassified to conform to the current period’s presentation. First Quarter Percent 2021 2020 Change Operating Revenues Service $ 38,504 $ 38,883 (1.0) % Equipment 5,435 3,896 39.5 Total Operating Revenues 43,939 42,779 2.7 Operating expenses Operations and support 30,469 28,071 8.5 Depreciation and amortization 5,809 7,222 (19.6) Total Operating Expenses 36,278 35,293 2.8 Operating Income 7,661 7,486 2.3 Interest expense 1,870 2,018 (7.3) Equity in net income (loss) of affiliates 52 (6) — Other income (expense) - net 4,221 803 — Income Before Income Taxes 10,064 6,265 60.6 Net Income 7,942 4,963 60.0 Net Income Attributable to AT&T 7,550 4,610 63.8 Net Income Attributable to Common Stock $ 7,500 $ 4,578 63.8 % 2020. The decrease was driven by declines2021.our WarnerMedia, Communicationsthe first quarter primarily due to the lower cost basis of long-lived assets resulting from Video impairments taken in the fourth quarter of 2020 and Latin America segments. Lower WarnerMedia segment revenues reflect unfavorable programming comparisons, including strong carryover theatrical revenuesceasing amortization on held-for-sale Video assets in the first quarter of 2019, and lower advertising revenues from2021.cancellation of the NCAA tournament. Communications segment revenue declines were driven by continued declines in video and legacy services and lower wireless equipment sales resulting from store closures. Latin America segment revenue declines werefirst quarter primarily due to foreign exchange pressure. Partially offsetting these decreases were revenue increasesthe lower cost basis of property, plant and equipment resulting from Video impairments taken in wireless servicethe fourth quarter of 2020 and strategic and managed business service in our Communications segment.Operations and supportexpenses decreasedceasing depreciation on held-for-sale Video assets in the first quarter of 2020. The decrease was driven by a noncash gain of $900 on a spectrum transaction, lower broadcast and programming costs in our Communications and WarnerMedia segments, reduced wireless equipment costs resulting from lower device sales and lower sports licenses from the cancellation of televised sporting events. Expense declines also reflect our continued focus on cost management. Partially offsetting the decreases were incremental costs, including bad debt, associated with COVID-19. As part of our cost and efficiency initiatives, we expect operations and support expense improvements to continue as we size our operations to reflect the new economic activity level.2021.Depreciation and amortization expense increased in the first quarter of 2020.Depreciation expense increased $29, or 0.6%, primarily due to ongoing capital spend for network upgrades and expansion in our Communications segment.Amortization expense decreased $13, or 0.6%, primarily due to the decreased amortization of intangibles associated with WarnerMedia, largely offset by commencement of amortization for orbital slot licenses, beginning in the first quarter of 2020 (see Note 1).2020Operations -Operations- Continued subscribers and connections in millions except per share and per subscriber amountsincome increased in the first quarter of 2020.2021. Our operating income margin infor the first quarter increaseddecreased from 16.1% in 2019 to 17.5% in 2020.2020 to 17.4% in 2021.2020,2021, primarily due to lower debt balances.interest rates. For the remainder of 2021, we expect higher capitalized interest associated with putting spectrum into network service.(loss) of affiliates was essentially flat in the first quarter of 2020, reflecting changes in our investment portfolio, including the second-quarter 2019 sale of Hulu.Other income (expense) – net increased in the first quarter of 20202021, primarily due to improved performance from certain investments.in 2020 and an actuarial loss on pension benefits in 2019 (see Note 6). Partially offsetting the increase were losses on investments in equity securities resulting from market declines in the first quarter of 2020.2020. Our effective tax rate was 20.8% for the first quarter of 2020, versus 19.0% for the comparable year prior.2021. The increase in income tax expense was primarily due to higher income before income taxes and the impacts of tax settlements in the first quarter of 2019. The increase in our2021. Our effective tax rate was primarily due to21.1% for the impactsfirst quarter of 2021, versus 20.8% for the comparable period in the prior year, and includes the impact of tax settlements.COMMUNICATIONS SEGMENT First Quarter Percent 2021 2020 Change Segment Operating Revenues Mobility $ 19,034 $ 17,402 9.4 % Business Wireline 6,046 6,266 (3.5) Consumer Wireline 3,098 3,111 (0.4) Total Segment Operating Revenues 28,178 26,779 5.2 Segment Operating Contribution Mobility 6,002 5,788 3.7 Business Wireline 1,058 1,093 (3.2) Consumer Wireline 305 520 (41.3) Total Segment Operating Contribution $ 7,365 $ 7,401 (0.5) % Selected Subscribers and Connections March 31, (000s) 2021 2020 Mobility Subscribers 186,108 169,198 Total domestic broadband connections 15,435 15,315 Network access lines in service 6,988 8,160 U-verse VoIP connections 3,684 4,213 of 2020, driven by declines2021. The decline in the first quarter reflects lower contribution from our Entertainment GroupBusiness Wireline and BusinessConsumer Wireline business units, partiallylargely offset by increases in our Mobility business unit. The decrease reflectsOur Communications segment operating income margin in the continued shift awayfirst quarter decreased from linear video and legacy services and lower wireless equipment sales attributable27.6% in 2020 to store closures. Largely offsetting these declines were higher wireless service revenues from growth26.1% in our prepaid subscriber base and growth in our postpaid phone subscribers and average revenue per subscriber (ARPU).2021.332020Operations -Operations- Continued subscribers and connections in millions except per share and per subscriber amountsCommunications Business Unit Discussion Mobility Results First Quarter Percent 2021 2020 Change Operating revenues Service $ 14,048 $ 13,968 0.6 % Equipment 4,986 3,434 45.2 Total Operating Revenues 19,034 17,402 9.4 Operating expenses Operations and support 11,018 9,569 15.1 Depreciation and amortization 2,014 2,045 (1.5) Total Operating Expenses 13,032 11,614 12.2 Operating Income 6,002 5,788 3.7 Equity in Net Income (Loss) of Affiliates — — — Operating Contribution $ 6,002 $ 5,788 3.7 % Operating contribution increased in the first quarter of 2020, reflecting improvement in our Mobility business unit, partially offset by declines in our Entertainment Group and Business Wireline business units. Our Communications segment operating income margin in the first quarter increased from 22.8% in 2019 to 24.0% in 2020.Subscribers March 31, Percent (in 000s) 2021 2020 Change Postpaid 77,934 75,148 3.7 % Postpaid phone 64,752 63,105 2.6 18,387 17,808 3.3 Reseller 6,501 6,736 (3.5) 83,286 69,506 19.8 Total Mobility Subscribers 186,108 169,198 10.0 % 2020Operations -Operations- Continued subscribers and connections in millions except per share and per subscriber amountsNet Additions First Quarter Percent (in 000s) 2021 2020 Change Postpaid Phone Net Additions 595 163 — % Total Phone Net Additions 802 120 — 823 27 — Prepaid 279 (45) — Reseller (68) (190) 64.2 2,517 3,518 (28.5) 3,551 3,310 7.3 % 0.93 % 1.08 % (15) BP 0.76 % 0.86 % (10) BP Service revenue increased in the first quarter of 20202021. The first quarter increase is largely due to growth in subscribers, partially offset by declines in international roaming revenue due to reduced travel during the pandemic.higher averageand growth in Cricket subscribers.ARPUARPU increaseddecreased in the first quarter primarily due toquarter. ARPU during 2021 reflects the impact of higher promotional discount amortization and a continued shift by subscribers to our unlimited plans.quarterthree months due to pricing changes, competitiveretention offers, migrations to unlimited plans and industry-wide store closures from COVID-19.revenueexpenses increased in the first quarter of 2021 largely driven by growth in equipment sales and associated expenses and higher content costs associated with bundling HBO Max. The expense increase was offset by lower sales costs and bad debt expense. Commission deferral amortization was up slightly versus the prior year, including the impact of first-quarter 2021 updates to extend the estimated economic life for our subscribers.2020 driven by lower postpaid smartphone sales reflecting store closures from COVID-19.Operations and support expenses decreased in the first quarter of 20202021 primarily due to lower cost of equipment sales from lower volumes and advertising expense and continued improvements in cost efficiencies, partially offset by higher bad debt expense.Depreciation expense increased in the first quarter of 2020 primarily due to ongoing capital spending for network upgrades and expansion partially offset byassets becoming fully depreciated assets.depreciated.2020.2021. Our Mobility operating income margin in the first quarter increaseddecreased from 30.6% in 2019 to 33.3% in 2020.2020 to 31.5% in 2021. Our Mobility EBITDA margin in the first quarter increaseddecreased from 42.2% in 2019 to35AT&T INC.MARCH 31, 2020Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - ContinuedDollars, subscribers and connections in millions, except per share and per subscriber amounts2020.2020 to 42.1% in 2021. EBITDA is defined as operating contribution excluding equity in net income (loss) of affiliates and depreciation and amortization. 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.services. services. Virtually all of our postpaid smartphone subscribers are on plans that provide for service on multiple devices at reduced rates, and subscribers to such subscribersplans tend to have higher retention and lower churn rates. We offer unlimited data plans and subscribers to such subscribersplans 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 churn.Connected DevicesConnected devices include data-centric devices such as wholesale automobile systems, monitoring devices, fleet management and session-based tablets. The number of connected device subscriber relationships increased during the first quarter of 2020, driven by the addition of approximately 2.5 million wholesale connected cars through agreements with various carmakers and strong growth in other Internet of Things (IoT) connections. We believe that these connected car agreements give us the opportunity to create future retail relationships with the car owners.36AT&T INC.MARCH 31, 2020Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - ContinuedDollars, subscribers and connections in millions, except per share and per subscriber amountsBusiness Wireline Results First Quarter Percent 2021 2020 Change Operating revenues Service $ 5,872 $ 6,091 (3.6) % Equipment 174 175 (0.6) Total Operating Revenues 6,046 6,266 (3.5) Operating expenses Operations and support 3,710 3,887 (4.6) Depreciation and amortization 1,278 1,286 (0.6) Total Operating Expenses 4,988 5,173 (3.6) Operating Income 1,058 1,093 (3.2) Equity in Net Income (Loss) of Affiliates — — — Operating Contribution $ 1,058 $ 1,093 (3.2) % The following tables highlight other key measures of performance for the Entertainment Group business unit:Video entertainmentService revenues are comprised of subscription and advertising revenues. Revenues decreased in the first quarter of 2020, largely driven by a decline in premium TV subscribers, as we continue to focus on high-value customers, partially offset by subscription-based advertising growth. Consistent with the rest of the industry, our customers continue to shift from a premium linear service to our more economically priced OTT video services, which has pressured our video revenues.High-speed internet revenues increased in the first quarter of 2020, reflecting higher ARPU resulting from pricing actions and an increase in high-speed fiber connections. Our bundling strategy is helping to lower churn with subscribers who bundle broadband with another AT&T service.Legacy voice and data servicerevenues decreased in the first quarter of 2020, reflecting the continued migration of2021, driven by lower demand for legacy voice and data services as customers continue to ourshift to more advanced IP-based offerings or to competitors.offerings.2020, primarily due to lower content costs from fewer subscribers and ongoing cost initiatives, partially offset by higher amortization of fulfillment cost deferrals and higher annual content rate increases.37AT&T INC.MARCH 31, 2020Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - ContinuedDollars, subscribers and connections in millions, except per share and per subscriber amountsDepreciation expense decreased in the first quarter of 2020, due to network assets becoming fully depreciated. Partially offsetting the decreases was ongoing capital spending for network upgrades and expansion.Operating income decreased in the first quarter of 2020. Our Entertainment Group operating income margin in the first quarter decreased from 13.0% in 2019 to 12.7% in 2020. Our Entertainment Group EBITDA margin in the first quarter increased from 24.7% in 2019 to 25.0% in 2020.Strategic and managed servicesrevenues increased in the first quarter of 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 dedicated internet, business internet and security services.Legacy voice and dataservicerevenues decreased in the first quarter of 2020, primarily due to lower demand as customers continue to shift to our more advanced IP-based offerings and mobile services or our competitors.Other service and equipmentrevenues increased in the first quarter of 2020, driven by revenues from customer premises equipment. Revenues from the licensing of intellectual property assets vary from period-to-period and can impact revenue trends. Other service revenues include project-based revenue, which is nonrecurring in nature, as well as revenues from customer premises equipment.Operations and support expenses decreased in the first quarter of 2020,2021, primarily due to our continued efforts to drive efficiencies in our network operations through automation and reductions in customer support expenses through digitization.Depreciation expense increaseddecreased in the first quarter of 2021, primarily due to increases in capital spending for network upgrades and expansion.assets becoming fully depreciated.2020.2021. Our Business Wireline operating income margin in the first quarter decreasedincreased from 18.9%17.4% in 2019 to 17.1%2020 and 17.5% in 2020.2021. Our Business Wireline EBITDA margin in the first quarter decreasedincreased from 37.8%38.0% in 20192020 to 37.6%38.6% in 2020.2021.382020Operations -Operations- Continued subscribers and connections in millions except per share amountsConsumer Wireline Results First Quarter Percent 2021 2020 Change Operating revenues IP Broadband $ 2,205 $ 2,109 4.6 % Legacy voice and data services 519 581 (10.7) Other service and equipment 374 421 (11.2) Total Operating Revenues 3,098 3,111 (0.4) Operating expenses Operations and support 2,031 1,879 8.1 Depreciation and amortization 762 712 7.0 Total Operating Expenses 2,793 2,591 7.8 Operating Income 305 520 (41.3) Equity in Net Income (Loss) of Affiliates — — — Operating Contribution $ 305 $ 520 (41.3) % Connections March 31, Percent (in 000s) 2021 2020 Change Broadband Connections Total Broadband Connections 14,146 14,046 0.7 % Fiber Broadband Connections 5,186 4,096 26.6 Voice Connections Retail Consumer Switched Access Lines 2,740 3,196 (14.3) U-verse Consumer VoIP Connections 3,096 3,630 (14.7) Total Retail Consumer Voice Connections 5,836 6,826 (14.5) % Net Additions First Quarter Percent (in 000s) 2021 2020 Change Broadband Net Additions Total Broadband Net Additions 46 (73) — % Fiber Broadband Net Additions 235 209 12.4 % per subscriber amountspricing.Our WarnerMedia segment consists of 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.Operating revenues decreased in the first quarter of 2020, primarily due to lower advertising revenues from2021, reflecting the cancellation of televised sporting events at Turner; lower theatrical product revenues, reflecting unfavorable programming comparisons, including strong carryover revenuescontinued decline in the first quarternumber of 2019 at Warner Bros.;customers.lower content licensing revenue at HBO.Operating contributionequipment revenues decreased in 2021, reflecting the first quarter of 2020. Our WarnerMedia segment operating income margincontinued decline in the first quarter decreased from 26.8% in 2019 to 23.1% in 2020.number of VoIP customers.392020Operations -Operations- Continued subscribers and connections in millions except per share amountsper subscriber amountsOperating revenuessupport decreasedexpenses increased in the first quarter of 2020,2021, primarily driven by content costs associated with plans bundling HBO Max and higher customer support costs. Partially offsetting these increases was lower cost deferral amortization, including the impact of the first-quarter 2021 updates to extend the economic life for our subscribers.decreases in advertising revenue largely due to the cancellation of the NCAA Division I Men’s Basketball Tournament. Partially offsetting the decrease were higher subscription revenues that benefitted from higher domestic affiliate rates, partly offset by unfavorable exchange rates.ongoing capital spending for network upgrades and expansion.Cost of revenuesOperating income decreased in the first quarter of 2020, primarily due to lower programming costs, including NCAA sports licensing costs resulting from cancellation of the NCAA tournament.Selling, general and administrative decreased2021. Our Consumer Wireline operating income margin in the first quarter ofdecreased from 16.7% in 2020 primarily due to lower marketing costs.9.8% in 2021. Our Consumer Wireline EBITDA margin in the first quarter decreased from 39.6% in 2020 to 34.4% in 2021.WARNERMEDIA SEGMENT First Quarter Percent 2021 2020 Change Segment Operating Revenues Subscription $ 3,830 $ 3,401 12.6 % Content 3,420 3,303 3.5 Advertising 1,750 1,477 18.5 Other 169 254 (33.5) Eliminations (643) (670) 4.0 Total Segment Operating Revenues 8,526 7,765 9.8 Segment Operating Expenses Direct Costs Programming 4,383 3,513 24.8 Marketing 849 526 61.4 Other 722 669 7.9 General and administrative 967 1,222 (20.9) Eliminations and other (518) (325) (59.4) Depreciation and amortization 163 161 1.2 Total Operating Expenses 6,566 5,766 13.9 Operating Income 1,960 1,999 (2.0) Equity in Net Income (Loss) of Affiliates 70 15 — Total Segment Operating Contribution $ 2,030 $ 2,014 0.8 % incomerevenues increased in the first quarter of 2020. Our Turner operating income margin2021, primarily due to higher subscription, advertising and content revenues, reflecting the partial recovery from prior-year impacts of COVID-19. Subscription revenues increased reflecting growth of DTC domestic HBO Max and HBO subscribers, and, to a lesser extent, the May 2020 acquisition of the remaining interest in HBO Latin America Group. DTC subscription revenues were $1,810 versus $1,338 in the year-ago quarter and include growth from intercompany relationships with the Communications segment. Advertising revenues improved when compared to the prior year resulting from the return in 2021 of the NCAA Division I Men's Championship Basketball Tournament. Content revenues increased due to higher sales to HBO Max for theatrical product and increases in Basic Networks licensing, partly offset by lower television product licensing from prior-year licensing to HBO Max.increased from 36.2%of 2021, driven by higher programming and marketing costs for HBO Max and higher sports programming, including NCAA. Direct costs supporting DTC revenues were $1,685 in 2019 to 43.7%the first quarter of 2021, versus $911 in 2020.the year-ago quarter.402020Operations -Operations- Continued subscribers and connections in millions except per share amountsper subscriber amountsadministrativeOperating revenues expenses decreased in the first quarter of 2020,2021, primarily due to lower content licensing. Subscription revenue was flat, including digitalbad debt expense and international growth that was partially offset by lower domestic linear subscribers.Costintegration of revenuessupport functions.2020, primarily due to higher programming costs and expenses related to the launch of HBO Max, scheduled for second quarter.Selling, general and administrative decreased in the first quarter of 2020, primarily due to lower marketing expenses.Operating income decreased in the first quarter of 2020. Our HBO2021. The WarnerMedia segment operating income margin in the first quarter decreased from 37.5%25.7% in 20192020 to 28.3%23.0% in 2020.2021.41AT&T INC.MARCH 31, 2020Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - ContinuedDollars, subscribers and connections in millions, except per share and per subscriber amountsLATIN AMERICA SEGMENT First Quarter Percent 2021 2020 Change Segment Operating Revenues Vrio $ 743 $ 887 (16.2) % Mexico 631 703 (10.2) Total Segment Operating Revenues 1,374 1,590 (13.6) Segment Operating Contribution Vrio (39) (39) — Mexico (134) (145) 7.6 Total Segment Operating Contribution $ (173) $ (184) 6.0 % Operating revenues decreased in the first quarter of 2020, primarily due to lower theatrical product driven by unfavorable comparisons to the prior comparable period, which included, in 2019, carryover revenues from the theatrical release of Aquaman in addition to a more favorable mix of home entertainment releases. Partially offsetting the theatrical declines were higher television product revenues, driven by licensing, partly offset by lower initial telecast revenues driven by television production delays.Cost of revenues decreased in the first quarter of 2020, primarily due to lower marketing of theatrical product, partially offset by incremental costs incurred due to the production hiatus.Selling, general and administrative increased in the first quarter of 2020, primarily due to higher bad debt expense and other charges.Operating income decreased in the first quarter of 2020. Our Warner Bros. operating income margin in the first quarter decreased from 15.5% in 2019 to 7.7% in 2020.20202021, primarily driven by lower revenues for Vrio, primarily resulting from foreign exchange pressure, that more than offset growth in Mexico.and COVID-19 impacts.decreased improved in the first quarter of 2020,2021, reflecting foreign exchange pressure.rates and the impact of COVID-19. Our Latin America segment operating income margin in the first quarter wasdecreased from (11.8)% in 2020 and (10.1)to (12.3)% in 2019.2021.42Latin America Business Unit Discussion Vrio Results First Quarter Percent 2021 2020 Change Operating revenues $ 743 $ 887 (16.2) % Operating expenses Operations and support 661 783 (15.6) Depreciation and amortization 117 147 (20.4) Total Operating Expenses 778 930 (16.3) Operating Income (Loss) (35) (43) 18.6 Equity in Net Income (Loss) of Affiliates (4) 4 — Operating Contribution $ (39) $ (39) — % 2020Operations -Operations- Continued subscribers and connections in millions except per share and per subscriber amounts March 31, Percent (in 000s) 2021 2020 Change Vrio Video Subscribers 10,559 13,217 (20.1) % First Quarter Percent (in 000s) 2021 2020 Change Vrio Video Net Additions (383) (114) — % 2020,2021, primarily due todriven by foreign exchange pressures.impacts.2020,2021, primarily due to changesdriven by economic pressures, the restructuring of sales channels in foreign currency exchange rates.Brazil, and COVID-19 impacts. Approximately 20%23% of Vrio expenses are U.S. dollar based, with the remainder in the local currency.Depreciation expense decreased in the first quarter of 2020,2021, primarily due to changes inlower in-service assets and foreign currency exchange rates in most of the region.impacts.incomeloss decreasedimproved in the first quarter of 2020.2021. Our Vrio operating income margin infor the first quarter decreasedincreased from 3.0% in 2019 to (4.8)% in 2020.2020 to (4.7)% in 2021. Our Vrio EBITDA margin in the first quarter decreased from 18.8% in 2019 to 11.7% in 2020.2020 to 11.0% in 2021.43AT&T INC.MARCH 31, 2020Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - ContinuedDollars, subscribers and connections in millions, except per share and per subscriber amountsMexico Results First Quarter 2021 2020 Percent Change Operating revenues Service $ 439 $ 467 (6.0) % Equipment 192 236 (18.6) Total Operating Revenues 631 703 (10.2) Operating expenses Operations and support 620 714 (13.2) Depreciation and amortization 145 134 8.2 Total Operating Expenses 765 848 (9.8) Operating Income (Loss) (134) (145) 7.6 Equity in Net Income (Loss) of Affiliates — — — Operating Contribution $ (134) $ (145) 7.6 % March 31, Percent (in 000s) 2021 2020 Change Mexico Wireless Subscribers Postpaid 4,725 4,962 (4.8) % Prepaid 13,756 13,692 0.5 Reseller 500 504 (0.8) Total Mexico Wireless Subscribers 18,981 19,158 (0.9) % First Quarter Percent (in 000s) 2021 2020 Change Mexico Wireless Net Additions Postpaid 29 (141) — % Prepaid (2) 108 — Reseller 11 32 (65.6) Total Mexico Wireless Net Additions 38 (1) — % Service revenues increaseddecreased in the first quarter of 2020,2021, primarily due to growth in our prepaid subscriber base.lower ARPU and foreign exchange impacts.increaseddecreased in the first quarter of 2020,2021, primarily due to higher demand due to higher gross subscriber addslower equipment sales volumes and salesforeign exchange impacts..2020,2021, primarily driven bydue to a decline in customer growth, lower maintenance expenses, employee costssales volumes and changes in foreign currency rates. These decreases were partially offset by higher equipment sales.exchange impacts. Approximately 7% of Mexico expenses are U.S. dollar based, with the remainder in the local currency.2020,2021, primarily due to the amortization of spectrum licenses and higher in-service assets. These increases were partially offset by changes in foreign exchange rates.442020Operations -Operations- Continued subscribers and connections in millions except per share and per subscriber amountsOperating income increased in the first quarter of 2020. Our Mexico operating income margin in the first quarter increased from (31.5)% in 2019 to (20.6)% in 2020. Our Mexico EBITDA margin in the first quarter increased from (11.4)% in 2019 to (1.6)% in 2020.Operating revenues increased in the first quarter of 2020 due to strong demand for addressable advertising, including political advertising.Operations and support expenses increased in the first quarter of 2020 driven by ongoing development and growth in the business.Operating income increased in the first quarter of 2020. Our Xandr segment operating income margin in the first quarter increased from 59.4% in 2019 to 61.1% in 2020.TOTAL ADVERTISING REVENUEVIDEO INFORMATION to our Xandr segment operating results, we are providing a view of totalour Video business that is accounted for as held-for-sale and included in Corporate and Other. Our Video business provides video, including over-the-top (OTT) services and also sells advertising revenues generated by AT&T. This combined view presents the entire portfolioon video distribution platforms.Video Results First Quarter Percent 2021 2020 Change Operating revenues Service $ 6,684 $ 7,397 (9.6) % Equipment 41 10 — Total Operating Revenues 6,725 7,407 (9.2) Operating expenses Operations and support 5,660 6,020 (6.0) 164 591 (72.3) Total Operating Expenses 5,824 6,611 (11.9) Operating Income 901 796 13.2 Equity in Net Income (Loss) of Affiliates — — — Operating Contribution $ 901 $ 796 13.2 % advertising revenues reported across all operating segments and represents a significant strategic initiative and growth opportunityperformance for AT&T. See revenue categories tables in Note 5 for a reconciliation.Connections March 31, Percent (in 000s) 2021 2020 Change Premium TV Connections 15,885 18,599 (14.6) % 45Net Additions First Quarter Percent (in 000s) 2021 2020 Change Premium TV Net Additions (620) (897) 30.9 % 2020Operations -Operations- Continued subscribers and connections in millions except per share and per subscriber amountsSUPPLEMENTAL COMMUNICATIONS OPERATING INFORMATIONAs a supplemental presentation to our Communications segment operating results, we are providing a view of our AT&T Business Solutions results which includes both wireless and wireline operations. This combined view presents a complete profile of the entire business customer relationship, and underscores the importance of mobile solutions to serving our business customers. Results have been recast to conform to the current period's classification of consumer and business 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. We wereOn February 24, 2021, the Federal Communications Commission (FCC) announced that AT&T was the winning bidder for 1,621 C-Band licenses, comprised of high-frequency 37/39 GHz licenses in FCC Auction 103 covering an averagea total of 78680 MHz nationwide, including 40 MHz in Phase I. We provided to the FCC an upfront deposit of $550 in 2020 and cash payments totaling $22,856 in the first quarter of 2021, for a total of $23,406 to date. We estimate that we 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 approximately $2,400. Prior to$1,000 of compensable relocation costs over the auction, we exchangednext several years as the 39 GHz licenses previously acquired through FiberTower Corporation for vouchers to be applied against the winning bids. These vouchers yielded a value of $1,200 which was applied toward our $2,400 gross bids. We made our final payment of approximately $950 for the Auction 103 payment in April 2020. We expect the FCC will grant the licenses in mid-2020.Labor Contracts As of March 31, 2020, we employed approximately 244,000 persons. Approximately 40% of our employees are representedspectrum is being cleared 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.satellite operators. (See Note 8)A contract covering approximately 7,000 Mobility employees expired in February 2020. In March 2020, a new 4-year contract was ratified by employees and will expire in February 2024.A contract covering approximately 13,000 wireline employees in our West region expired in April 2020. In March 2020, a tentative agreement was reached on a new 4-year contract. The tentative agreement is subject to ratification by employees.46AT&T INC.MARCH 31, 2020Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - ContinuedDollars, subscribers and connections in millions, except per share and per subscriber amountsIn addition, we are pursuing,We continue to support regulatory and legislative measures and efforts, at both the state and federal levels, additional legislative and regulatory measures 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.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 numberFCC, 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 of the FCC order restoring broadband’s status as an information service. We will continue to support congressional action to codify a set of standard consumer rules for the internet.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 use47AT&T INC.MARCH 31, 2020Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - ContinuedDollars, subscribers and connections in millions, except per share and per subscriber amountsrestrictions 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.In December 2018, we introduced the nation’s first commercial mobile 5G service. We now expect nationwide 5G coverage this summer; we anticipate the introduction of 5G handsets and devices will contribute to a renewed interest in equipment upgrades.The Company's liquidity and capital resources were not materially impacted by COVID-19 and related economic conditions during the first quarter of 2020 despite lower business collections late in the quarter as customers extended their payment cycles, presumably in response to the economic challenges of the pandemic. We will continue to monitor impacts on the COVID-19 pandemic on our liquidity and capital resources. For further discussion regarding the potential future impacts of COVID-19 and related economic conditions on the Company's liquidity and capital resources, see "Part II-Item 1A-Risk Factors."$9,955$11,342 in “Cashcash and cash equivalents”equivalents available at March 31, 2020. “Cash2021. Cash and cash equivalents”equivalents included cash of $3,287$2,465 and money market funds and other cash equivalents of $6,668.$8,877. Approximately $2,485$2,433 of our “Cashcash and cash equivalents”equivalents were held by our foreign entities in accounts predominantly outside of the U.S. and may be subject to restrictions on repatriation.“equivalents” decreased $2,175equivalents increased $1,602 since December 31, 2019.2020. In the first three months of 2020,2021, cash inflows were primarily provided by the cash receipts from operations, including cash from our sale and transfer of our receivables to third parties, and issuance of long-term debt issuance ofand commercial paper and issuances of cumulative preferred stock.paper. 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,spectrum acquisitions, funding capital expenditures and vendor financing payments, collateral posted to banks and other participants in derivative arrangements, share repurchase, and dividends to stockholders.2020,2021, cash provided by operating activities was $8,866,$9,927, compared to $11,052$8,866 for the first three months of 2019. Lower2020. Higher operating cash flows in 20202021 were primarily driven by WarnerMedia profits, including increased HBO Max investments and higher production spend; lower incremental receivable securitization; andsales of receivables (see Note 9), working capital pressures, specificallyimprovements and lower business collections lateinterest partially offset by cash taxes. Total cash paid for WarnerMedia’s content investment was $4,508 in the quarter.first quarter of 2021 ($186 higher than the prior-year comparable period).non-capitaloperating items to optimize the use of our cash. Among other things, we seek to havemake payments made 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 decrease cash from operating activities was to decrease working capital$1,071 and $1,075 and $904 for the three months ended March 31, 20202021 and 2019,2020, respectively. All supplier financing payments are due within one year.2020,2021, cash used in investing activities totaled $5,022,$26,852, and consisted primarily of $4,966$4,033 (including interest during construction) for capital expenditures, ($216 lower than the prior-year comparable period), and $99 of wireless spectrum deposits. Subsequent to the first quarter of 2020, in April we made our final payment of approximately $950$22,876, primarily for wirelessC-Band spectrum licenses won in Auction 103, and on May 4, we acquired our remaining interest HBO Latin America Group (HBO LAG) for $230.2020,2021, vendor financing payments were $791,$1,690, compared to $819$791 for the first three months of 2019.48AT&T INC.MARCH 31, 2020Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - ContinuedDollars, subscribers and connections in millions, except per share and per subscriber amountsCapital2020. Capital expenditures in the first three months of 2020 2021 were $4,966,$4,033, and when including $791$1,690 cash paid for vendor financing, gross capital investment was $5,757$5,723 ($24441 lower than the prior-year comparable periodperiod).).monthmonths of 2020,2021, we placed $449$998 of equipment in service under vendor financing arrangements (compared to $733$449 in the prior-year comparable period) and $338approximately $240 of assets related to the FirstNet build (compared to $304$338 in the prior-year comparable period).2020,2021, cash used inprovided by financing activities totaled $6,099$18,483 and was comprised of debt issuances and repayments, issuances of preferred stock, share repurchase,debt, offset by payments of dividends, and required collateral deposits.vendor financing payments.During first three months of 2020, debt issuances included proceeds of $3,132 in net short-term borrowings and $4,357 of net proceeds from long-term debt, which consisted primarily of the following issuances:February issuance of $2,995 of 4.000% global notes due 2049.ended March draw of $750 on a private financing agreement.31, 2021 is as follows:Net commercial paper borrowings $ 7,072 U.S. dollar denominated global notes $ 6,000 Initial average rate of 1.27% Euro denominated global notes (converted to USD at issuance) 1,461 Rate of 0.00% 2021 Syndicated Term Loan 7,350 BAML Bilateral Term Loan 2,000 Private financing 750 Other 636 Debt Issuances $ 18,197 Repayments: Private financing $ (649) Other (253) Repayments of long-term debt $ (902) March borrowings of $665 from loan programs with export agencies of foreign governments to support network equipment purchases in those countries.During the first three months of 2020, repayment of long-term debt totaled $4,422. Repayments primarily consisted of the following:$800 of AT&T floating-rate notes redeemed at maturity.$2,619 of 4.600% AT&T global notes with original maturities in 2045.$750 of borrowings under a private financing agreement.Our4.3%3.8% as of March 31, 20202021 and 4.4%4.1% as of December 31, 2019.2020. We had $159,386$171,194 of total notes and debentures outstanding at March 31, 2020,2021, which included Euro, British pound sterling, Canadian dollar, Mexican peso, Australian dollar, Swiss franc Australian dollar,and Brazilian real and Mexican peso denominated debt that totaled approximately $40,712.$43,525.2020,2021, we had $17,067$19,505 of debt maturing within one year, including $3,144consisting of $7,078 of commercial paper borrowings, $9,100 of bank borrowings, and $13,923$3,327 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. These securities were redeemed on April 27, 2020.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 $592.2020,2021, we paid $791$1,690 of cash under our vendor financing program, compared to $819$791 in the first three months of 2019.2020. Total vendor financing payables included in our March 31, 20202021 consolidated balance sheet were approximately $1,361,$3,552, with $997$2,883 due within one year (in “Accounts payable and accrued liabilities”) and the remainder predominantly due within two to three years (in “Other noncurrent liabilities”).Financing activities in the first three months of 2020 also included $3,869 for the February issuance of Series B and Series C preferred stock. (See Note 10)During the first three months of 2020, we repurchased approximately 142 million shares of common stock and completed the share repurchase authorization approved by the Board of Directors in 2013. 2020,2021, we had approximately 178 million shares remaining from our share repurchase authorizations approved by the Board of Directors in 2014. On March 19,49AT&T INC.MARCH 31, 2020Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - ContinuedDollars, subscribers and connections in millions, except per share and per subscriber amounts2020, we announced the cancellation of an accelerated share repurchase agreement that was planned for the second quarter and all other repurchases to maintain flexibility and focus on continued investment in serving our customers, taking care of our employees and enhancing our network, including 5G.$3,737$3,741 during the first three months of 2020,2021, compared with $3,714$3,737 for the first three months of 2019. Dividends were higher in 2020, primarily due to dividend payments to preferred stockholders and the increase in our quarterly dividend on common stock approved by our Board of Directors in December 2019, partially offset by fewer shares outstanding. 2020.20202021 and $0.51$0.52 per share for the first three months of 2019.2020. 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 BoardDirectors to consider dividend growthFinancial Condition and to recommend an increaseResults of Operations- Continueddividends to be paid in future periods. All dividends remain subject to declaration by our Board of Directors.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 March 31, 2020.2021.September 2019,March 2021, we entered into and drew on a $1,300$2,000 term loan credit agreement containing(BAML Bilateral Term Loan) consisting of (i) a 1.250.75 year $400$1,000 facility due in 2020December 31 2021 (BAML Tranche A Facility), and (ii) a 2.251.75 year $400$1,000 facility due in 2021December 31, 2022 (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. No repayment had been madeAt March 31, 2021, $2,000 was outstanding under these facilities as of March 31, 2020.facilities.On April 6, 2020, we entered into and drew on a $5,500 Term Loan Credit Agreement (Term Loan), with 11 commercial banks and Bank of America, N.A., as lead agent. The Term Loan is not subject to amortization and the entire principal amount of the Term Loan will be due and payable on December 31, 2020.3.5-to-1.4.0-to-1 in the case of the BAML Bilateral Term Loan and not more than 3.5-to-1 for all other credit agreements. As of March 31, 2020,2021, we were in compliance with the covenants for our credit facilities.During 2019 and 2020, we amended 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 95% of our approximate $42,000 derivative portfolio, counterparties are still required to post collateral. During the first three months of 2020,2021, we depositedreceived approximately $2,650$90 of cash collateral, on a net basis as we exceeded the market value thresholds with some of the counterparties.basis. Cash postings under these arrangements vary with changes in credit ratings and netting agreements. (See Note 7)2020,2021, our debt ratio was 45.7%49.6%, compared to 47.4%45.7% at March 31, 20192020 and 44.7%46.7% at December 31, 2019.2020. Our net debt ratio was 46.5% at March 31, 2021, compared to 42.9% at March 31, 202050AT&T INC.MARCH 31, 2020Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - ContinuedDollars, subscribers and connections in millions, except per share and per subscriber amountscompared to 45.6% at March 31, 2019 and 41.4%43.8% at December 31, 2019.2020. 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.Duringfirst three monthssecond half of 2020, we received $1182021, pending customary closing conditions. We expect to receive $7,600 in cash from the disposition of assets, and when combined with working capital monetization initiatives, which include the sale of receivables, total cash received from monetization efforts, net of spectrum acquisitions, was approximately $1,000. We plan to continue to explore similar opportunities throughout 2020.512020Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - ContinuedDollars, subscribers and connections in millions, except per share and per subscriber amountsDISCUSSION AND RECONCILIATION OF NON-GAAP MEASUREWe believe the following measure is relevant and useful information to investors as it is used by management as a method of comparing performance with that of many of our competitors. This supplemental measure should be considered in addition to, but not as a substitute of, our consolidated and segment financial information.Business Solutions ReconciliationWe provide a supplemental discussion of our Business Solutions operations that is calculated by combining our Mobility and Business Wireline business units, and then adjusting to remove non-business operations. The following table presents a reconciliation of our supplemental Business Solutions results. Results have been recast to conform to the current period's classification of consumer and business wireless subscribers.52AT&T INC.MARCH 31, 20202020,2021, we had no interest rate swaps with a notional value of $853 and a fair value of $14.$42,325$42,186 to hedge our exposure to changes in foreign currency exchange rates. These derivatives have been designated at inception and qualify as cash flow or fair value hedges with a net fair value of $(8,283)$(577) at March 31, 2020.2021. We havehad no rate locks with a notional value of $3,500 and a fair value of $(720) at March 31, 2020.$106$228 to provide currency at a fixed rate to hedge a portion of the exchange risk involved in foreign currency-denominated transactions. These foreign exchange contracts include fair value hedges, cash flow hedges and economic (nonqualifying) hedges with a total net fair value of $66$1 at March 31, 2020.€1,364€1,433 million aggregate principal amount of debt as a hedge of the variability of certainsome of the Euro-denominated net investments of our subsidiaries. The gain or loss on the debt that is designated as, and is effective as, an economic hedge of the net investment in a foreign operation is recorded as a currency translation adjustment within accumulated other comprehensive income, net on the consolidated balance sheet.2020.2021. 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 March 31, 2020.5320202021•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.•Our inability to predict the extent to which the COVID-19 pandemic and related impacts will continue to impact our business operations, financial performance and results of operations.•Adverse economic, political and/or capital access changes in the markets served by us or in countries in which we have significant investments and/or operations, including the impact on customer demand and our ability and our suppliers’ ability to access financial markets at favorable rates and terms.•Increases in our benefit plans’ costs, including increases due to adverse changes in the United States and foreign securities markets, resulting in worse-than-assumed investment returns and discount rates; adverse changes in mortality assumptions; adverse medical cost trends; and unfavorable or delayed implementation or repeal of healthcare legislation, regulations or related court decisions.•The final outcome of FCC and other federal, state or foreign government agency proceedings (including judicial review, if any, of such proceedings) and legislative efforts involving issues that are important to our business, including, without limitation, pending Notices of Apparent Liability; the transition from legacy technologies to IP-based infrastructure, including the withdrawal of legacy TDM-based services; universal service; broadband deployment; wireless equipment siting regulations and, in particular, siting for 5G service; E911 services; competition policy; privacy; net neutrality; multichannel video programming distributor services and equipment; content licensing and copyright protection; availability of new spectrum on fair and balanced terms; and wireless and satellite license awards and renewals.•Enactment of additional state, local, federal and/or foreign regulatory and tax laws and regulations, or changes to existing standards and actions by tax agencies and judicial authorities including the resolution of disputes with any taxing jurisdictions, pertaining to our subsidiaries and foreign investments, including laws and regulations that reduce our incentive to invest in our networks, resulting in lower revenue growth and/or higher operating costs.•Potential changes to the electromagnetic spectrum currently used for broadcast television and satellite distribution being considered by the FCC could negatively impact WarnerMedia’s ability to deliver linear network feeds of its domestic cable networks to its affiliates, and in some cases, WarnerMedia’s ability to produce high-value news and entertainment programming on location.•U.S. and foreign laws and regulations regarding intellectual property rights protection and privacy, personal data protection and user consent are complex and rapidly evolving and could result in adverse impacts to our business plans, increased costs, or claims against us that may harm our reputation.•The ability of our competitors to offer product/service offerings at lower prices due to lower cost structures and regulatory and legislative actions adverse to us, including non-regulation of comparable alternative technologies and/or government-owned or subsidized networks.•Disruption in our supply chain for a number of reasons, including, difficulties in obtaining export licenses for certain technology, inability to secure component parts, general business disruption, natural disasters, safety issues, economic and political instability and public health emergencies.•Our ability to generate subscription and advertising revenue from attractive video content, especially from WarnerMedia, in the face of unpredictable and rapidly evolving public viewing habits and legal restrictions on the use ofusing personal data.data for advertising.•The availability and cost and our ability to adequately fund additional wireless spectrum and network upgrades; and regulations and conditions relating to spectrum use, licensing, obtaining additional spectrum, technical standards and deployment and usage, including network management rules.•Our ability to manage growth in wireless data services, including network quality and acquisition of adequate spectrum at reasonable costs and terms.•The outcome of pending, threatened or potential litigation (which includes arbitrations), including, without limitation, patent and product safety claims by or against third parties.parties or claims based on alleged misconduct by employees.5420202021•The impact from major equipment or software failures on our networks, including satellites operated by DIRECTV; the effect of security breaches related to the network or customer information; our inability to obtain handsets, equipment/software or have handsets, equipment/software serviced in a timely and cost-effective manner from suppliers; and in the case of satellites launched, timely provisioning of services from vendors; or severe weather conditions including flooding and hurricanes, natural disasters including earthquakes and forest fires, pandemics, energy shortages, wars or terrorist attacks.•The issuance by the Financial Accounting Standards Board or other accounting oversight bodies of new accounting standards or changes to existing standards.•Our ability to successfully integrate our WarnerMedia operations, including the ability to manage various businesses in widely dispersed business locations and with decentralized management.•Changes in our corporate strategies such as changing network-related requirements or acquisitions and dispositions, which may require significant amounts of cash or stock, to respond to competition and regulatory, legislative and technological developments.•The uncertainty surrounding further congressional actionOur ability to address spending reductions,realize or sustain the expected benefits of our business transformation initiatives, which may result in a significant decrease in government spendingare designed to reduce costs, streamline distribution, remove redundancies and reluctance of businessessimplify and consumers to spend in general.improve processes and support functions.552020We depend on various suppliers to provide equipment to operate our business and satisfy customer demand and interruption or delay in supply can adversely impact our operating results.We depend on suppliers to provide us, directly or through other suppliers, with items For the first quarter 2021, there were no such as network equipment, customer premises equipment, video equipment and wireless-related equipment such as mobile hotspots, handsets, wirelessly enabled computers, wireless data cards and other connected devices for our customers. These suppliers could fail to provide equipment on a timely basis, or fail to meet our performance expectations, for a number of reasons, including, difficulties in obtaining export licenses for certain technology, inability to secure component parts, general business disruption, natural disasters, safety issues, economic and political instability and public health emergencies such as the COVID-19 pandemic. The COVID-19 pandemic has caused, and may continue to cause, delays in the development, manufacturing (including the sourcing of key components) and shipment of products. In certain limited circumstances, suppliers have been unable to supply products in a timely fashion. In such limited circumstances, we have been unable to provide products and services precisely as and when requested by our customers. It is possible that, in some circumstances, we could be forced to switch to a different key supplier. Because of the cost and time lag that can be associated with transitioning from one supplier to another, our business could be substantially disrupted if we were required to, or chose to, replace the products of one or more key suppliers with products from another source, especially if the replacement became necessary on short notice. Any such disruption could increase our costs, decrease our operating efficiencies and have a negative effect on our operating results.Our business is subject to risks arising from the recent outbreak of the COVID-19 virus.The COVID-19 pandemic and resulting mitigation measures have caused, and may continue to cause, a negative effect on our operating results. To date, mitigation measures have caused sports leagues to suspend operations as well as the cancellation of many sporting events, including the NCAA tournament, which has adversely affected our advertising revenues, may result in contract disputes concerning carriage rights and will also cause us to incur expenses relating to these sporting events notwithstanding their cancellation. The closure, or the avoidance, of theaters, and the interruptions in movie production and other programming caused by COVID-19, are expected to impact the timing of revenues and may cause a loss of revenue to our Warner Media business over the long term. If the mitigating measures or the associated effects are prolonged, we expect business customers in industries most significantly impacted will reduce or terminate services, having a negative effect on the performance of our Business Wireline business unit. Further, concerns over the COVID-19 pandemic could result in the prolonged closure of many of our retail stores and deter customers from accessing our stores even as the mitigation measures subside. These pandemic concerns may also result in continued impact to our customers’ ability to pay for our products and services. We may also continue to see significant impact on roaming revenues due to a downturn in international travel. The COVID-19 pandemic has reduced staffing levels at our call centers and field operations resulting in delays in service. Further reductions in staffing levels could further limit our ability to provide services, adversely impacting our competitive position. We may also incur significantly higher expenses attributable to infrastructure investments required to meet higher network utilization from more customers consuming bandwidth from changes in work from home trends; extended cancellation periods; and increased labor costs if the COVID-19 pandemic continues for an extended period.The COVID-19 pandemic and mitigation measures have caused, and may continue to cause, adverse impacts on global economic conditions and consumer confidence and spending, which affect demand for our products and services. The extent to which the COVID-19 pandemic impacts our business results of operations, cash flows and financial condition will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact. Due to the speed with which the situation is developing, we are not able at this time to estimate the impact of COVID-19 on our financial or operational results, but the impact could be material.56AT&T INC.MARCH 31, 2020PART II – OTHER INFORMATION - CONTINUEDDollars in millions except per share amountsThe following table provides information about purchases by the Company during the quarter ended March 31, 2020of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act. Subject to applicablelaw, share purchases may be made from time to time in open market transactions, privately negotiated transactions, includingaccelerated share repurchase agreements, or pursuant to instruments and plans complying with Rule 10b5-1.20202021 is as follows: (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 January 1, 2021 - January 31, 2021 246,890 $ 29.62 13,563 177,916,645 February 1, 2021 - February 28, 2021 3,540,401 29.09 13,724 177,902,921 March 1, 2021 - March 31, 2021 2,219,810 29.60 — 177,902,921 Total 6,007,101 $ 29.30 27,287 (a)(b)(c)(d)PeriodTotal Number of Shares (or Units) Purchased 1, 2, 3Average Price Paid Per Share (or Unit)Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs1Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under The Plans or ProgramsJanuary 1, 2020 -January 31, 202085,491,992$39.0684,811,852234,687,593February 1, 2020 -February 29, 20202,485,42737.74-234,687,593March 1, 2020 -March 31, 202059,221,41535.3256,745,363177,942,230Total147,198,834$37.53141,557,21512013,2014, our Board of Directors authorized theapproved an authorization to repurchase of up to 300 million shares of our common stock. InDecember 2019, we entered into an accelerated share repurchase agreement with a third-party financial institution torepurchase $4.0 billion of the Company's common stock in the first quarter of 2020. Under this agreement, werepurchased approximately 104.8 million shares, which completed the March 2013 authorization. In March 2014, ourBoard of Directors authorized the repurchase of an additional 300 million shares of our common stock. The March2014 authorization has no expiration date.5,045,5255,979,814 shares were acquired through the withholding of taxes on the vesting ofonin respect of the exercise price of options.596,094no shares were acquired through reimbursements from AT&T maintainedtrusts.trusts during the period.57AT&T INC.MARCH 31, 2020Exhibit Number Exhibit Description 10.1 10.2 10.3 10.4 31 Rule 13a-14(a)/15d-14(a) Certifications 32 101 104 The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, (formatted as Inline XBRL and contained in Exhibit 101). ExhibitNumberExhibit Description3.13.23.33.44.1Form of 4.000% Global Notes due 2049 (Exhibit 4.1 to Form 8-K filed on February 27, 2020)31Rule 13a-14(a)/15d-14(a) Certifications32101The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, 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.104The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, (formatted as Inline XBRL and contained in Exhibit 101).58SIGNATUREPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.May 6, 2020AT&T Inc./s/ John J. StephensJohn J. StephensSenior Executive Vice Presidentand Chief Financial Officer59