CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Dollars and shares in millions except per share amounts
(Unaudited)
Three months ended
Nine months ended
September 30, 2024
September 30, 2023
September 30, 2024
September 30, 2023
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Preferred Stock - Series A
Balance at beginning of period
—
$
—
—
$
—
—
$
—
—
$
—
Balance at end of period
—
$
—
—
$
—
—
$
—
—
$
—
Preferred Stock - Series B
Balance at beginning of period
—
$
—
—
$
—
—
$
—
—
$
—
Balance at end of period
—
$
—
—
$
—
—
$
—
—
$
—
Preferred Stock - Series C
Balance at beginning of period
—
$
—
—
$
—
—
$
—
—
$
—
Balance at end of period
—
$
—
—
$
—
—
$
—
—
$
—
Common Stock
Balance at beginning of period
7,621
$
7,621
7,621
$
7,621
7,621
$
7,621
7,621
$
7,621
Balance at end of period
7,621
$
7,621
7,621
$
7,621
7,621
$
7,621
7,621
$
7,621
Additional Paid-In Capital
Balance at beginning of period
$
111,515
$
118,833
$
114,519
$
123,610
Preferred stock dividends
(36)
(36)
(134)
(170)
Common stock dividends
($0.2775, $0.2775, $0.8325 and $0.8325 per share)
(1,992)
(1,997)
(4,007)
(5,998)
Issuance of treasury stock
(84)
(3)
(500)
(371)
Share-based payments
(49)
93
(232)
(181)
Redemption or reclassification of
interest held by noncontrolling owners
—
—
(292)
—
Balance at end of period
$
109,354
$
116,890
$
109,354
$
116,890
Retained (Deficit) Earnings
Balance at beginning of period
$
2
$
(10,698)
$
(5,015)
$
(19,415)
Net income (loss) attributable to AT&T
(174)
3,495
6,868
12,212
Preferred stock dividends
—
—
(36)
—
Common stock dividends
($0.2775, $0.0000, $0.5550 and $0.0000 per share)
(13)
—
(2,002)
—
Balance at end of period
$
(185)
$
(7,203)
$
(185)
$
(7,203)
See Notes to Consolidated Financial Statements.
7
AT&T INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - continued
Dollars and shares in millions except per share amounts
(Unaudited)
Three months ended
Nine months ended
September 30, 2024
September 30, 2023
September 30, 2024
September 30, 2023
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Treasury Stock
Balance at beginning of period
(451)
$
(15,268)
(471)
$
(16,158)
(471)
$
(16,128)
(493)
$
(17,082)
Repurchase and acquisition of
common stock
(2)
(43)
—
(1)
(11)
(202)
(10)
(190)
Reissuance of treasury stock
7
224
—
9
36
1,243
32
1,122
Balance at end of period
(446)
$
(15,087)
(471)
$
(16,150)
(446)
$
(15,087)
(471)
$
(16,150)
Accumulated Other Comprehensive Income
Attributable to AT&T, net of tax
Balance at beginning of period
$
1,440
$
2,305
$
2,300
$
2,766
Other comprehensive income
(loss) attributable to AT&T
(792)
240
(1,652)
(221)
Balance at end of period
$
648
$
2,545
$
648
$
2,545
Noncontrolling Interest1
Balance at beginning of period
$
14,037
$
14,172
$
14,145
$
8,957
Net income attributable to
noncontrolling interest
283
295
870
787
Issuance and acquisition by
noncontrolling owners
—
(1)
—
5,180
Redemption of noncontrolling
interest
—
—
(58)
—
Distributions
(389)
(314)
(1,026)
(772)
Balance at end of period
$
13,931
$
14,152
$
13,931
$
14,152
Total Stockholders' Equity at
beginning of period
$
119,347
$
116,075
$
117,442
$
106,457
Total Stockholders' Equity at
end of period
$
116,282
$
117,855
$
116,282
$
117,855
1Excludes redeemable noncontrolling interest
See Notes to Consolidated Financial Statements.
8
AT&T INC.
SEPTEMBER 30, 2024
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Dollars in millions except per share amounts
NOTE 1. PREPARATION OF INTERIM FINANCIAL STATEMENTS
Basis of Presentation Throughout this document, AT&T Inc. is referred to as “we,” “AT&T” or the “Company.” The consolidated financial statements include the accounts of the Company and subsidiaries and affiliates which we control. AT&T is a holding company whose subsidiaries and affiliates operate worldwide in the telecommunications and technology industries. You should read this document in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2023. 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.
All significant intercompany transactions are eliminated in the consolidation process. Investments in subsidiaries and partnerships which we do not control but have significant influence are accounted for under the equity method. Earnings from certain investments accounted for using the equity method are included in our results on a one quarter lag. We also record our proportionate share of our equity method investees’ other comprehensive income (OCI) items, including translation adjustments.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions, including estimates of fair value, probable losses and expenses, that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Goodwill Impairment During the third quarter of 2024, we updated the long-term strategic plan of our Business Wireline reporting unit. The updated plans reflected lower long-term projected future cash flows associated with the industry-wide secular decline, including a faster-than-previously anticipated decline of legacy services. We identified this as an impairment indicator and performed an interim quantitative goodwill impairment test of our Business Wireline reporting unit. The interim impairment test methodology was consistent with our approach for annual impairment testing, using similar models updated with our current view of key inputs and assumptions. We concluded that the calculated fair value of the Business Wireline reporting unit was lower than the book value, resulting in a goodwill impairment. As a result, in the third quarter of 2024, we recorded a noncash goodwill impairment charge of $4,422 in our consolidated statements of income, which represented the entirety of Business Wireline reporting unit goodwill. “Goodwill – Net” included on our consolidated balance sheet at September 30, 2024 totaled $63,432, which is attributable to our Mobility and Consumer Wireline reporting units in the Communications segment. No indicators of impairment were identified for our Mobility and Consumer Wireline reporting units.
9
AT&T INC.
SEPTEMBER 30, 2024
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts
NOTE 2. EARNINGS PER SHARE
A reconciliation of the numerators and denominators of basic and diluted earnings per share is shown in the table below:
Three months ended
Nine months ended
September 30,
September 30,
2024
2023
2024
2023
Numerators
Numerator for basic earnings per share:
Net Income (Loss) Attributable to Common Stock
$
(226)
$
3,444
$
6,715
$
12,057
Dilutive potential common shares:
Mobility preferred interests
—
—
—
72
Share-based payment
—
—
—
10
Numerator for diluted earnings per share
$
(226)
$
3,444
$
6,715
$
12,139
Denominators (000,000)
Denominator for basic earnings per share:
Weighted average number of common shares outstanding
7,202
7,185
7,197
7,178
Dilutive potential common shares:
Mobility preferred interests (in shares)
—
—
—
95
Share-based payment (in shares)1
6
—
3
7
Denominator for diluted earnings per share
7,208
7,185
7,200
7,280
1For the three months ended September 30, 2024, dilutive potential common shares are not included in the computation of diluted earnings per share because their effect is antidilutive as a result of the net loss attributable to common stock.
On April 5, 2023, we repurchased all our Series A Cumulative Perpetual Preferred Membership Interests in AT&T Mobility II LLC (Mobility preferred interests). For periods prior to repurchase, under Accounting Standards Update (ASU) No. 2020-06, “Debt—Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (ASU 2020-06), the ability to settle the Mobility preferred interests in stock was reflected in our diluted earnings per share calculation.
10
AT&T INC.
SEPTEMBER 30, 2024
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts
NOTE 3. OTHER COMPREHENSIVE INCOME
Changes in the balances of each component included in accumulated OCI are presented below. All amounts are net of tax.
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, 2023
$
(1,337)
$
(57)
$
(1,029)
$
4,723
$
2,300
Other comprehensive income
(loss) before reclassifications
(329)
13
(364)
—
(680)
Amounts reclassified from
accumulated OCI
127
1
10
1
33
2
(1,142)
3
(972)
Net other comprehensive
income (loss)
(202)
23
(331)
(1,142)
(1,652)
Balance as of September 30, 2024
$
(1,539)
$
(34)
$
(1,360)
$
3,581
$
648
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, 2022
$
(1,800)
$
(90)
$
(1,998)
$
6,654
$
2,766
Other comprehensive income
(loss) before reclassifications
367
(25)
867
—
1,209
Amounts reclassified from
accumulated OCI
—
1
7
1
35
2
(1,472)
3
(1,430)
Net other comprehensive
income (loss)
367
(18)
902
(1,472)
(221)
Balance as of September 30, 2023
$
(1,433)
$
(108)
$
(1,096)
$
5,182
$
2,545
1(Gains) losses are included in “Other income (expense) - net” in the consolidated statements of income.
2(Gains) losses are primarily included in “Interest expense” in the consolidated statements of income (see Note 7).
3The 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).
NOTE 4. SEGMENT INFORMATION
Our segments are comprised of strategic business units or other operations that offer products and services to different customer segments over various technology platforms and/or in different geographies that are managed accordingly. We have two reportable segments: Communications and Latin America.
We also evaluate segment and business unit performance based on EBITDA and/or EBITDA margin, which is defined as operating income excluding depreciation and amortization. EBITDA is used as part of our management reporting and we believe EBITDA to be a relevant and useful measurement to our investors as it measures the cash generation potential of our business units. EBITDA does not give effect to depreciation and amortization expenses incurred in operating income 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 revenue.
The Communications segment provides wireless and wireline telecom and broadband services to consumers located in the U.S. and businesses globally. Our business strategies reflect integrated 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.
•Business Wireline provides advanced ethernet-based fiber services, IP Voice and managed professional services, as well as traditional voice and data services and related equipment to business customers. In the first quarter of 2024, we began
11
AT&T INC.
SEPTEMBER 30, 2024
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts
offering our fixed wireless access product that provides internet services delivered over our 5G wireless network where available.
•Consumer Wireline provides broadband services, including fiber connections that provide multi-gig services to residential customers in select locations and our fixed wireless access product that provides home internet services delivered over our 5G wireless network where available. Consumer Wireline also provides legacy telephony voice communication services.
The Latin America segment provides wireless services and equipment in Mexico.
Corporate and Other reconciles our segment results to consolidated operating income and income before income taxes.
Corporate includes:
•DTV-related retained costs, which are costs previously allocated to the Video business that were retained after the transaction, net of reimbursements from DIRECTV Entertainment Holdings, LLC (DIRECTV) under transition service agreements.
•Parent administration support, which includes costs borne by AT&T where the business units do not influence decision making.
•Securitization fees associated with our sales of receivables (see Note 8).
•Value portfolio, which are businesses no longer integral to our operations or which we no longer actively market.
Other items consist of:
•Certain significant items, which includes items associated with the merger and integration of acquired or divested businesses, including amortization of intangible assets, employee separation charges associated with voluntary and/or strategic offers, asset impairments and abandonments and restructuring, and other items for which the segments are not being evaluated.
“Interest expense,” “Other income (expense) – net” and “Equity in net income of affiliates” are managed only on a total company basis and are, accordingly, reflected only in consolidated results.
For the three months ended September 30, 2024
Revenues
Operations and Support Expenses
EBITDA
Depreciation and Amortization
Operating Income (Loss)
Communications
Mobility
$
21,052
$
11,559
$
9,493
$
2,490
$
7,003
Business Wireline
4,606
3,250
1,356
1,399
(43)
Consumer Wireline
3,416
2,296
1,120
924
196
Total Communications
29,074
17,105
11,969
4,813
7,156
Latin America - Mexico
1,022
854
168
158
10
Segment Total
30,096
17,959
12,137
4,971
7,166
Corporate and Other
Corporate:
DTV-related retained costs
—
107
(107)
95
(202)
Parent administration support
—
401
(401)
2
(403)
Securitization fees
31
134
(103)
—
(103)
Value portfolio
86
26
60
6
54
Total Corporate
117
668
(551)
103
(654)
Certain significant items
—
4,383
(4,383)
13
(4,396)
Total Corporate and Other
117
5,051
(4,934)
116
(5,050)
AT&T Inc.
$
30,213
$
23,010
$
7,203
$
5,087
$
2,116
12
AT&T INC.
SEPTEMBER 30, 2024
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts
For the three months ended September 30, 2023
Revenues
Operations and Support Expenses
EBITDA
Depreciation and Amortization
Operating Income (Loss)
Communications
Mobility
$
20,692
$
11,795
$
8,897
$
2,134
$
6,763
Business Wireline
5,221
3,526
1,695
1,345
350
Consumer Wireline
3,331
2,300
1,031
871
160
Total Communications
29,244
17,621
11,623
4,350
7,273
Latin America - Mexico
992
837
155
184
(29)
Segment Total
30,236
18,458
11,778
4,534
7,244
Corporate and Other
Corporate:
DTV-related retained costs
—
167
(167)
144
(311)
Parent administration support
(1)
333
(334)
1
(335)
Securitization fees
25
164
(139)
—
(139)
Value portfolio
90
25
65
5
60
Total Corporate
114
689
(575)
150
(725)
Certain significant items
—
716
(716)
21
(737)
Total Corporate and Other
114
1,405
(1,291)
171
(1,462)
AT&T Inc.
$
30,350
$
19,863
$
10,487
$
4,705
$
5,782
For the nine months ended September 30, 2024
Revenues
Operations and Support Expenses
EBITDA
Depreciation and Amortization
Operating Income (Loss)
Communications
Mobility
$
62,126
$
34,483
$
27,643
$
7,453
$
20,190
Business Wireline
14,274
10,004
4,270
4,147
123
Consumer Wireline
10,113
6,801
3,312
2,719
593
Total Communications
86,513
51,288
35,225
14,319
20,906
Latin America - Mexico
3,188
2,662
526
507
19
Segment Total
89,701
53,950
35,751
14,826
20,925
Corporate and Other
Corporate:
DTV-related retained costs
—
357
(357)
317
(674)
Parent administration support
—
1,236
(1,236)
5
(1,241)
Securitization fees
86
449
(363)
—
(363)
Value portfolio
251
77
174
15
159
Total Corporate
337
2,119
(1,782)
337
(2,119)
Certain significant items
—
5,040
(5,040)
43
(5,083)
Total Corporate and Other
337
7,159
(6,822)
380
(7,202)
AT&T Inc.
$
90,038
$
61,109
$
28,929
$
15,206
$
13,723
13
AT&T INC.
SEPTEMBER 30, 2024
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts
For the nine months ended September 30, 2023
Revenues
Operations and Support Expenses
EBITDA
Depreciation and Amortization
Operating Income (Loss)
Communications
Mobility
$
61,589
$
35,587
$
26,002
$
6,355
$
19,647
Business Wireline
15,831
10,699
5,132
4,008
1,124
Consumer Wireline
9,821
6,810
3,011
2,589
422
Total Communications
87,241
53,096
34,145
12,952
21,193
Latin America - Mexico
2,842
2,396
446
544
(98)
Segment Total
90,083
55,492
34,591
13,496
21,095
Corporate and Other
Corporate:
DTV-related retained costs
—
514
(514)
440
(954)
Parent administration support
(13)
1,039
(1,052)
4
(1,056)
Securitization fees
61
439
(378)
—
(378)
Value portfolio
275
77
198
16
182
Total Corporate
323
2,069
(1,746)
460
(2,206)
Certain significant items
—
644
(644)
55
(699)
Total Corporate and Other
323
2,713
(2,390)
515
(2,905)
AT&T Inc.
$
90,406
$
58,205
$
32,201
$
14,011
$
18,190
The following table is a reconciliation of Segment Operating Income to “Income Before Income Taxes” reported in our consolidated statements of income:
Three months ended September 30,
Nine months ended September 30,
2024
2023
2024
2023
Communications
$
7,156
$
7,273
$
20,906
$
21,193
Latin America
10
(29)
19
(98)
Segment Operating Income
7,166
7,244
20,925
21,095
Reconciling Items:
Corporate
(654)
(725)
(2,119)
(2,206)
Transaction and other costs
(34)
(72)
(101)
(72)
Amortization of intangibles acquired
(13)
(21)
(43)
(55)
Asset impairments and abandonments and restructuring
(4,422)
(604)
(5,061)
(604)
Benefit-related gains (losses)
73
(40)
122
32
AT&T Operating Income
2,116
5,782
13,723
18,190
Interest expense
1,675
1,662
5,098
4,978
Equity in net income of affiliates
272
420
915
1,338
Other income (expense) — net
717
440
1,850
2,362
Income Before Income Taxes
$
1,430
$
4,980
$
11,390
$
16,912
14
AT&T INC.
SEPTEMBER 30, 2024
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts
NOTE 5. REVENUE RECOGNITION
Revenue Categories
The following tables set forth reported revenue by category and by business unit:
For the three months ended September 30, 2024
Communications
Mobility
Business Wireline
Consumer Wireline
Latin America
Corporate & Other
Total
Wireless service
$
16,539
$
—
$
—
$
645
$
—
$
17,184
Business service
—
4,417
—
—
—
4,417
Broadband
—
—
2,838
—
—
2,838
Legacy voice and data
—
—
307
—
66
373
Other
—
—
271
—
51
322
Total Service
16,539
4,417
3,416
645
117
25,134
Equipment
4,513
189
—
377
—
5,079
Total
$
21,052
$
4,606
$
3,416
$
1,022
$
117
$
30,213
For the three months ended September 30, 2023
Communications
Mobility
Business Wireline
Consumer Wireline
Latin America
Corporate & Other
Total
Wireless service
$
15,908
$
—
$
—
$
672
$
—
$
16,580
Business service
—
5,087
—
—
—
5,087
Broadband
—
—
2,667
—
—
2,667
Legacy voice and data
—
—
368
—
69
437
Other
—
—
296
—
45
341
Total Service
15,908
5,087
3,331
672
114
25,112
Equipment
4,784
134
—
320
—
5,238
Total
$
20,692
$
5,221
$
3,331
$
992
$
114
$
30,350
For the nine months ended September 30, 2024
Communications
Mobility
Business Wireline
Consumer Wireline
Latin America
Corporate & Other
Total
Wireless service
$
48,810
$
—
$
—
$
2,034
$
—
$
50,844
Business service
—
13,688
—
—
—
13,688
Broadband
—
—
8,301
—
—
8,301
Legacy voice and data
—
—
972
—
190
1,162
Other
—
—
840
—
147
987
Total Service
48,810
13,688
10,113
2,034
337
74,982
Equipment
13,316
586
—
1,154
—
15,056
Total
$
62,126
$
14,274
$
10,113
$
3,188
$
337
$
90,038
15
AT&T INC.
SEPTEMBER 30, 2024
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts
For the nine months ended September 30, 2023
Communications
Mobility
Business Wireline
Consumer Wireline
Latin America
Corporate & Other
Total
Wireless service
$
47,136
$
—
$
—
$
1,898
$
—
$
49,034
Business service
—
15,401
—
—
—
15,401
Broadband
—
—
7,755
—
—
7,755
Legacy voice and data
—
—
1,147
—
232
1,379
Other
—
—
919
—
91
1,010
Total Service
47,136
15,401
9,821
1,898
323
74,579
Equipment
14,453
430
—
944
—
15,827
Total
$
61,589
$
15,831
$
9,821
$
2,842
$
323
$
90,406
Deferred Customer Contract Acquisition and Fulfillment Costs
Costs to acquire and fulfill customer contracts, including commissions on service activations for our Mobility, Business Wireline and Consumer Wireline services, are deferred and amortized over the contract period or expected customer relationship life, which typically ranges from three years to five years.
The following table presents the deferred customer contract acquisition and fulfillment costs included on our consolidated balance sheets:
September 30,
December 31,
Consolidated Balance Sheets
2024
2023
Deferred Acquisition Costs
Prepaid and other current assets
$
3,185
$
3,233
Other Assets
4,074
4,077
Total deferred customer contract acquisition costs
$
7,259
$
7,310
Deferred Fulfillment Costs
Prepaid and other current assets
$
2,155
$
2,340
Other Assets
3,399
3,843
Total deferred customer contract fulfillment costs
$
5,554
$
6,183
The following table presents deferred customer contract acquisition and fulfillment cost amortization, which are primarily included in “Selling, general and administrative” and “Other cost of revenues,” respectively, for the nine months ended:
September 30,
September 30,
Consolidated Statements of Income
2024
2023
Deferred acquisition cost amortization
$
2,733
$
2,568
Deferred fulfillment cost amortization
1,916
2,031
Contract Assets and Liabilities
A contract asset is recorded when revenue is recognized in advance of our right to bill and receive consideration. The contract asset will decrease as services are provided and billed. For example, when installment sales include promotional discounts (e.g., trade-in device credits) the difference between revenue recognized and consideration received is recorded as a contract asset to be amortized over the contract term.
Our contract assets primarily relate to our wireless businesses. Promotional equipment sales where we offer handset credits, which are allocated between equipment and service in proportion to their standalone selling prices, when customers commit to a
16
AT&T INC.
SEPTEMBER 30, 2024
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts
specified service period result in additional contract assets recognized. These contract assets will amortize over the service contract period, resulting in lower future service revenue.
When consideration is received in advance of the delivery of goods or services, a contract liability is recorded. Reductions in the contract liability will be recorded as we satisfy the performance obligations.
The following table presents contract assets and liabilities on our consolidated balance sheets:
September 30,
December 31,
Consolidated Balance Sheets
2024
2023
Contract asset
$
6,426
$
6,518
Current portion in “Prepaid and other current assets”
3,674
3,549
Contract liability
4,219
3,994
Current portion in “Advanced billings and customer deposits”
3,938
3,666
Our beginning of period contract liability recorded as customer contract revenue during 2024 was $3,512.
Remaining Performance Obligations
Remaining performance obligations represent services we are required to provide to customers under bundled or discounted arrangements, which are satisfied as services are provided over the contract term. In determining the transaction price allocated, we do not include non-recurring charges and estimates for usage, nor do we consider arrangements with an original expected duration of less than one year, which are primarily prepaid wireless and residential internet agreements.
Remaining performance obligations associated with business contracts reflect recurring charges billed, adjusted to reflect estimates for sales incentives and revenue adjustments. Performance obligations associated with wireless contracts are estimated using a portfolio approach in which we review all relevant promotional activities, calculating the remaining performance obligation using the average service component for the portfolio and the average device price. As of September 30, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $38,581, of which we expect to recognize approximately 63% by the end of 2025, with the balance recognized thereafter.
NOTE 6. PENSION AND POSTRETIREMENT BENEFITS
Many of our employees are covered by one of our noncontributory pension plans. We also provide certain medical, dental, life insurance and death benefits to certain retired employees under various plans and accrue actuarially determined postretirement benefit costs. Our objective in funding these plans, in combination with the standards of the Employee Retirement Income Security Act of 1974, as amended (ERISA), is to accumulate assets sufficient to provide benefits described in the plans to employees upon their retirement. We do not have significant funding requirements in 2024.
We recognize actuarial gains and losses on pension and postretirement plan assets in our consolidated results as a component of “Other income (expense) – net” at our annual measurement date of December 31, unless earlier remeasurements are required.
17
AT&T INC.
SEPTEMBER 30, 2024
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts
The following table details qualified pension and postretirement benefit costs included in the accompanying consolidated statements of income. The service cost component of net periodic pension (credit) cost 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
Nine months ended
September 30,
September 30,
2024
2023
2024
2023
Pension cost:
Service cost – benefits earned during the period
$
122
$
122
$
365
$
365
Interest cost on projected benefit obligation
396
416
1,189
1,448
Expected return on assets
(553)
(570)
(1,658)
(1,999)
Amortization of prior service credit
(21)
(33)
(65)
(100)
Net pension (credit) cost before remeasurement
(56)
(65)
(169)
(286)
Actuarial (gain) loss
—
(71)
—
218
Settlement (gain) loss
—
—
—
(363)
Net pension (credit) cost
$
(56)
$
(136)
$
(169)
$
(431)
Postretirement cost:
Service cost – benefits earned during the period
$
5
$
5
$
16
$
17
Interest cost on accumulated postretirement benefit
obligation
77
85
232
255
Expected return on assets
(15)
(32)
(45)
(98)
Amortization of prior service credit
(482)
(618)
(1,446)
(1,854)
Net postretirement (credit) cost
$
(415)
$
(560)
$
(1,243)
$
(1,680)
Combined net pension and postretirement (credit) cost
$
(471)
$
(696)
$
(1,412)
$
(2,111)
We also provide senior- and middle-management employees with nonqualified, unfunded supplemental retirement and savings plans. Net supplemental pension benefits costs not included in the table above were $17 and $19 in the third quarter and $50 and $56 for the first nine months of 2024 and 2023, respectively.
NOTE 7. FAIR VALUE MEASUREMENTS AND DISCLOSURE
The Fair Value Measurement and Disclosure framework in ASC 820, “Fair Value Measurement,” provides a three-tiered fair value hierarchy based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs and Level 3 includes fair values estimated using significant unobservable inputs.
The level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Our valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs.
The valuation methodologies described above may produce a fair value calculation that may not be indicative of future net realizable value or reflective of future fair values. We believe our valuation methods are appropriate and consistent with other market participants. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the methodologies used since December 31, 2023.
18
AT&T INC.
SEPTEMBER 30, 2024
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts
Long-Term Debt and Other Financial Instruments
The carrying amounts and estimated fair values of our long-term debt, including current maturities, and other financial instruments are summarized as follows:
September 30, 2024
December 31, 2023
Carrying
Fair
Carrying
Fair
Amount
Value
Amount
Value
Notes and debentures1
$
127,501
$
124,536
$
133,402
$
128,474
Commercial paper
—
—
2,091
2,091
Investment securities2
3,092
3,092
2,836
2,836
1Includes credit agreement borrowings.
2Excludes investments accounted for under the equity method.
The carrying amount of debt with an original maturity of less than one year approximates fair value. The fair value measurements used for notes and debentures are considered Level 2 and are determined using various methods, including quoted prices for identical or similar securities in both active and inactive markets.
Following is the fair value leveling for investment securities that are measured at fair value and derivatives as of September 30, 2024 and December 31, 2023. Derivatives designated as hedging instruments are reflected as “Prepaid and other current assets,” “Other Assets,” “Accounts payable and accrued liabilities,” and “Other noncurrent liabilities” on our consolidated balance sheets.
September 30, 2024
Level 1
Level 2
Level 3
Total
Equity Securities
Domestic equities
$
1,143
$
—
$
—
$
1,143
International equities
302
—
—
302
Fixed income equities
219
—
—
219
Available-for-Sale Debt Securities
—
1,198
—
1,198
Asset Derivatives
Cross-currency swaps
—
367
—
367
Liability Derivatives
Cross-currency swaps
—
(3,099)
—
(3,099)
December 31, 2023
Level 1
Level 2
Level 3
Total
Equity Securities
Domestic equities
$
1,002
$
—
$
—
$
1,002
International equities
215
—
—
215
Fixed income equities
209
—
—
209
Available-for-Sale Debt Securities
—
1,228
—
1,228
Asset Derivatives
Cross-currency swaps
—
424
—
424
Liability Derivatives
Interest rate swaps
—
(2)
—
(2)
Cross-currency swaps
—
(3,601)
—
(3,601)
19
AT&T INC.
SEPTEMBER 30, 2024
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts
Investment Securities
Our investment securities include both equity and debt securities that are measured at fair value, as well as equity securities without readily determinable fair values. A substantial portion of the fair values of our investment securities is estimated based on quoted market prices. Investments in equity securities not traded on a national securities exchange are valued at cost, less any impairment, and adjusted for changes resulting from observable, orderly transactions for identical or similar securities. Investments in debt securities not traded on a national securities exchange are valued using pricing models, quoted prices of securities with similar characteristics or discounted cash flows.
The components comprising total gains and losses in the period on equity securities are as follows:
Three months ended
Nine months ended
September 30,
September 30,
2024
2023
2024
2023
Total gains (losses) recognized on equity securities
$
80
$
(58)
$
206
$
107
Gains (losses) recognized on equity securities sold
—
(2)
(8)
(1)
Unrealized gains (losses) recognized on equity securities held at end of period
$
80
$
(56)
$
214
$
108
At September 30, 2024, available-for-sale debt securities totaling $1,198 have maturities as follows - less than one year: $61; one to three years: $173; three to five years: $106; five or more years: $858.
Our cash equivalents (money market securities) and short-term investments (certificate and time deposits) are recorded at amortized cost, and the respective carrying amounts approximate fair values. Short-term investments are recorded in “Prepaid and other current assets” and our investment securities are recorded in “Other Assets” on the consolidated balance sheets.
Derivative Financial Instruments
We enter into derivative transactions to manage certain market risks, primarily interest rate risk and foreign currency exchange risk. This includes the use of interest rate swaps, interest rate locks, foreign exchange forward contracts and combined interest rate foreign exchange contracts (cross-currency swaps). We do not use derivatives for trading or speculative purposes. We record derivatives on our consolidated balance sheets at fair value that is derived from observable market data, including yield curves and foreign exchange rates (all of our derivatives are Level 2). Cash flows associated with derivative instruments are presented in the same category on the consolidated statements of cash flows as the item being hedged.
Fair Value Hedging Periodically, we enter into and designate 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.
We also designate most of our cross-currency swaps and foreign exchange contracts as fair value hedges. The purpose of these contracts is to hedge foreign currency risk associated with changes in spot rates on foreign denominated debt. For cross-currency hedges, we have elected to exclude the change in fair value of the swap related to both time value and cross-currency basis spread from the assessment of hedge effectiveness. For foreign exchange contracts, we have elected to exclude the change in fair value of forward points from the assessment of hedge effectiveness.
Unrealized and realized gains or losses from fair value hedges impact the same category on the consolidated statements of income as the item being hedged, including the earnings impact of excluded components. In instances where we have elected to exclude components from the assessment of hedge effectiveness related to fair value hedges, unrealized gains or losses on such excluded components are recorded as a component of accumulated OCI and recognized into earnings over the life of the hedging instrument. Unrealized gains on derivatives designated as fair value hedges are recorded at fair value as assets, and unrealized losses are recorded at fair market value as liabilities. Except 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 nine months ended September 30, 2024 and 2023, no ineffectiveness was measured on fair value hedges.
20
AT&T INC.
SEPTEMBER 30, 2024
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts
Cash Flow Hedging We designate some of our cross-currency swaps as cash flow hedges to hedge our exposure to variability in expected future cash flows that are attributable to foreign currency risk and interest rate risk generated from our foreign-denominated debt. These agreements include initial and final exchanges of principal from fixed foreign 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 denominated interest rate to a fixed U.S. dollar denominated interest rate.
Unrealized gains on derivatives designated as cash flow hedges are recorded at fair value as assets and unrealized losses are recorded at fair value as liabilities. For derivative instruments designated as cash flow hedges, changes in fair value are reported as a component of accumulated OCI and are reclassified into the consolidated statements of income in the same period the hedged transaction affects earnings.
Periodically, we enter into and designate interest rate locks to partially hedge the risk of changes in interest payments attributable to increases in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt. We designate our interest rate locks as cash flow hedges. Gains and losses when we settle our interest rate locks are amortized into income over the life of the related debt. Over the next 12 months, we expect to reclassify $59 from accumulated OCI to “Interest expense” due to the amortization of net losses on historical interest rate locks.
Collateral and Credit-RiskContingency We have entered into agreements with our derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. At September 30, 2024, we had posted collateral of $670 (a deposit asset) and held collateral of $2 (a receipt liability). Under the agreements, if AT&T’s credit rating had been downgraded two ratings levels by Fitch Ratings, one level by S&P and one level by Moody’s before the final collateral exchange in September, we would have been required to post additional collateral of $52. If AT&T’s credit rating had been downgraded three 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 $2,661. At December 31, 2023, we had posted collateral of $670 (a deposit asset) and held collateral of $5 (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.
Following are the notional amounts of our outstanding derivative positions:
September 30,
December 31,
2024
2023
Interest rate swaps
$
—
$
1,750
Cross-currency swaps
35,351
38,006
Total
$
35,351
$
39,756
21
AT&T INC.
SEPTEMBER 30, 2024
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts
Following are the related hedged items affecting our financial position and performance:
Effect of Derivatives on the Consolidated Statements of Income
Three months ended
Nine months ended
September 30,
September 30,
Fair Value Hedging Relationships
2024
2023
2024
2023
Interest rate swaps (“Interest expense”):
Gain (loss) on interest rate swaps
$
1
$
(5)
$
—
$
(12)
Gain (loss) on long-term debt
(1)
5
—
12
Cross-currency swaps:
Gain (loss) on cross-currency swaps
1,308
(1,066)
884
(297)
Gain (loss) on long-term debt
(1,308)
1,066
(884)
297
Gain (loss) recognized in accumulated OCI
(412)
1,005
(482)
1,045
Foreign exchange contracts:
Gain (loss) on foreign exchange contracts
—
1
—
12
Gain (loss) on long-term debt
—
(1)
—
(12)
Gain (loss) recognized in accumulated OCI
—
18
—
12
In addition, the net swap settlements that accrued and settled in the periods above were offset against “Interest expense.”
The following table presents information for our cash flow hedging relationships:
Three months ended
Nine months ended
September 30,
September 30,
Cash Flow Hedging Relationships
2024
2023
2024
2023
Cross-currency swaps:
Gain (loss) recognized in accumulated OCI
$
(5)
$
31
$
—
$
23
Interest rate locks:
Interest income (expense) reclassified from accumulated
OCI into income
(15)
(15)
(44)
(44)
Nonrecurring Fair Value Measurements
In addition to assets and liabilities that are recorded at fair value on a recurring basis, impairment indicators may subject goodwill to nonrecurring fair value measurements. The implied fair value of the Business Wireline reporting unit was estimated using the discounted cash flow approach, which is considered Level 3. Goodwill related to the Business Wireline reporting unit was fully impaired at September 30, 2024 (see Note 1).
NOTE 8. SALES OF RECEIVABLES
We have agreements with various third-party financial institutions pertaining to the sales of certain types of our accounts receivable. The most significant of these programs are discussed in detail below and generally consist of (1) receivables arising from equipment installment plans, which are sold for cash and beneficial interests, such as deferred purchase price, when applicable, and (2) revolving trade receivables, which are sold for cash. Under the terms of our agreements for these programs, we continue to service the transferred receivables on behalf of the financial institutions.
22
AT&T INC.
SEPTEMBER 30, 2024
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts
The following table sets forth a summary of cash proceeds received, net of remittances paid, from sales of receivables:
Three months ended
Nine months ended
September 30,
September 30,
2024
2023
2024
2023
Net cash received (paid) from equipment installment
receivables program1
$
(568)
$
293
$
(1,121)
$
233
Net cash received (paid) from revolving receivables program
938
479
1,185
1,479
Net cash received (paid) from other programs
—
(376)
—
(632)
Total net cash impact to cash flows from operating activities2
$
370
$
396
$
64
$
1,080
1Cash from initial sales of $2,442 and $2,937 for the three months and $7,848 and $8,122 for the nine months ended September 30, 2024 and 2023, respectively.
2Net of facility fees.
The sales of receivables did not have a material impact on our consolidated statements of income or to “Total Assets” reported on our consolidated balance sheets. We reflect cash receipts on sold receivables as cash flows from operations in our consolidated statements of cash flows. In the event cash is received on the beneficial interests, those receipts are classified as cash flows from investing activities, when applicable.
Our equipment installment and revolving receivables programs are discussed in detail below. The following table sets forth a summary of the receivables and accounts being serviced:
September 30, 2024
December 31, 2023
Equipment
Equipment
Installment
Revolving
Installment
Revolving
Gross receivables:
$
2,940
$
195
$
3,714
$
924
Balance sheet classification
Accounts receivable
Notes receivable
1,665
—
1,695
—
Trade receivables
200
195
548
924
Other Assets
Noncurrent notes and trade receivables
1,075
—
1,471
—
Outstanding portfolio of receivables derecognized from
our consolidated balance sheets
$
11,872
$
2,770
$
12,027
$
1,500
Cash proceeds received, net of remittances1
8,470
2,770
9,361
1,500
1Represents amounts to which financial institutions remain entitled, excluding the beneficial interests.
Equipment Installment Receivables Program
We offer our customers the option to purchase certain wireless devices in installments over a specified period of time and, in many cases, once certain conditions are met, they may be eligible to trade in the original equipment for a new device and have the remaining unpaid balance paid or settled.
We maintain a program under which we transfer a portion of these receivables through our bankruptcy-remote subsidiary in exchange for cash and beneficial interests. In the event a customer trades in a device prior to the end of the installment contract period, we agree to make a payment to the financial institutions equal to any outstanding remaining installment receivable balance. Accordingly, we record a guarantee obligation for this estimated amount at the time the receivables are transferred.
23
AT&T INC.
SEPTEMBER 30, 2024
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts
The following table sets forth a summary of equipment installment receivables sold under this program:
Three months ended
Nine months ended
September 30,
September 30,
2024
2023
2024
2023
Gross receivables sold1
$
2,469
$
2,968
$
7,930
$
8,215
Net receivables sold2
2,340
2,842
7,535
7,834
Cash proceeds received
2,442
2,937
7,848
8,122
Guarantee obligation recorded
199
249
682
697
1Receivables net of promotion credits.
2Receivables net of allowance and other reserves.
Beneficial interests, when applicable, and guarantee obligations are initially recorded at estimated fair value and subsequently adjusted for changes in present value of expected cash flows. The estimation of their fair values is based on remaining installment payments expected to be collected and the expected timing and value of device trade-ins. The estimated value of the device trade-ins considers prices offered to us by independent third parties and contemplates changes in value after the launch of a device model. The fair value measurements used for the beneficial interests and the guarantee obligation are considered Level 3 under the Fair Value Measurement and Disclosure framework (see Note 7).
The following table presents the previously transferred equipment installment receivables, which we repurchased in exchange for the associated beneficial interests:
Three months ended
Nine months ended
September 30,
September 30,
2024
2023
2024
2023
Fair value of repurchased receivables
$
951
$
732
$
2,393
$
2,038
Carrying value of beneficial interests
956
740
2,420
2,051
Gain (loss) on repurchases1
$
(5)
$
(8)
$
(27)
$
(13)
1These gains (losses) are included in “Selling, general and administrative” expense in the consolidated statements of income.
At September 30, 2024 and December 31, 2023, our beneficial interests were $2,875 and $2,270, respectively, of which $1,681 and $1,296 are included in “Prepaid and other current assets” on our consolidated balance sheets, with the remainder in “Other Assets.” The guarantee obligation at September 30, 2024 and December 31, 2023 was $236 and $385, respectively, of which $121 and $111 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 beneficial interests and guarantee obligation.
Revolving Receivables Program
During 2024, we expanded our revolving agreement to transfer up to $2,770 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. This agreement is subject to renewal on an annual basis and the transfer limit may be expanded or reduced from time to 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 $195 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. Our maximum exposure to loss related to these receivables transferred is limited to the derecognized amount outstanding.
24
AT&T INC.
SEPTEMBER 30, 2024
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts
The following table sets forth a summary of the revolving receivables sold:
Three months ended
Nine months ended
September 30,
September 30,
2024
2023
2024
2023
Gross receivables sold/cash proceeds received1
$
5,620
$
4,053
$
14,466
$
5,053
Total collections under revolving agreement
4,650
3,553
13,196
3,553
Net cash proceeds received
$
970
$
500
$
1,270
$
1,500
Net receivables sold2
$
5,463
$
3,958
$
14,075
$
4,940
1Includes initial sales of receivables of $970 and $500 for the three months and $1,270 and $1,500 for the nine months ended September 30, 2024 and 2023, respectively.
2Receivables net of allowance and other reserves.
NOTE 9. TRANSACTIONS WITH DIRECTV
We account for our investment in DIRECTV under the equity method and record our share of DIRECTV earnings as equity in net income of affiliates, with DIRECTV considered a related party. On September 29, 2024, we agreed to sell our interest in DIRECTV to TPG Capital for approximately $7,600 in cash payments through 2029, inclusive of third-quarter 2024 distributions of $623. In addition to quarterly distributions through 2025, including payout of common catch-up units, this consideration includes notes payable to AT&T of approximately $2,550 and a dividend of $1,150. The transaction is expected to close in mid-2025, pending customary closing conditions. We expect a gain on sale, whose amount will be dependent on the timing of close.
At September 30, 2024, our investment in DIRECTV was reduced to zero on our consolidated balance sheet, resulting from aggregate cash receipts exceeding our initial investment balance plus our cumulative equity in DIRECTV earnings. As we are not committed, implicitly or explicitly, to provide financial or other support to DIRECTV, we will record future cash distributions received in excess of our share of DIRECTV’s earnings in “Equity in net income from affiliates” in the consolidated statements of income and as cash provided by operations in the consolidated statements of cash flows.
The following table sets forth our share of DIRECTV’s earnings included in “Equity in net income of affiliates” and cash distributions received from DIRECTV:
Three months ended
Nine months ended
September 30,
September 30,
2024
2023
2024
2023
DIRECTV’s earnings included in Equity in net income
of affiliates
$
281
$
423
$
955
$
1,334
Distributions classified as operating activities
$
281
$
423
$
955
$
1,334
Distributions classified as investing activities
342
473
928
1,447
Cash distributions received from DIRECTV
$
623
$
896
$
1,883
$
2,781
For the three and nine months ended September 30, 2024, we billed DIRECTV approximately $129 and $408 under commercial arrangements and transition service agreements, which were recorded as a reduction to the operations and support expenses incurred.
At September 30, 2024, we had accounts receivable from DIRECTV of $268 and accounts payable to DIRECTV of $52.
25
AT&T INC.
SEPTEMBER 30, 2024
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts
NOTE 10. SUPPLIER AND VENDOR FINANCING PROGRAMS
Supplier Financing Program
We actively manage the timing of our supplier payments for operating items to optimize the use of our cash and seek to make payments on 90-day or greater terms, while providing suppliers with access to bank facilities that permit earlier payment at their cost. Our supplier financing program does not result in changes to our normal, contracted payment cycles or cash from operations.
At the supplier’s election, they can receive payment of AT&T obligations prior to the scheduled due dates, at a discounted price from the third-party financial institution. The discounted price paid by participating suppliers is based on a variable rate that is indexed to the overnight borrowing rate. We agree to pay the financial institution the stated amount generally within 90 days of receipt of the invoice. We do not have pledged assets or other guarantees under our supplier financing program.
Suppliers had elected to sell to the third-party financial institutions $3,229 and $2,844 of our outstanding payment obligations as of September 30, 2024 and December 31, 2023, respectively. These amounts are included in “Accounts payable and accrued liabilities” on our consolidated balance sheets. Our supplier financing programs are reported as operating or investing (when capitalizable) activities in our statements of cash flows when paid.
Direct Supplier Financing
We also have arrangements with suppliers of handset inventory that allow us to extend the stated payment terms by up to 90 days at an additional cost to us (variable rate extension fee). We had $1,942 of direct supplier financing outstanding at September 30, 2024 and $5,442 as of December 31, 2023, which are included in “Accounts payable and accrued liabilities” on our consolidated balance sheets. Our direct supplier financing is reported as operating activities in our statements of cash flows when paid.
Vendor Financing
In connection with capital improvements and the acquisition of other productive assets, we negotiate favorable payment terms of 120 days or more (referred to as vendor financing), which are reported as financing activities in our statements of cash flows when paid. For the nine months ended September 30, 2024 and 2023, we recorded vendor financing commitments related to capital investments of $581 and $2,128, respectively. We had $1,660 of vendor financing payables at September 30, 2024, with $843 included in “Accounts payable and accrued liabilities” and $2,833 of vendor financing payables at December 31, 2023, with $1,975 included in “Accounts payable and accrued liabilities.”
NOTE 11. ADDITIONAL FINANCIAL INFORMATION
Cash and Cash Flows
We typically maintain our restricted cash balances for purchases and sales of certain investment securities and funding of certain deferred compensation benefit payments.
The following table summarizes cash and cash equivalents and restricted cash balances contained on our consolidated balance sheets:
September 30,
December 31,
2024
2023
2023
2022
Cash and cash equivalents
$
2,586
$
7,540
$
6,722
$
3,701
Restricted cash in Prepaid and other current assets
1
1
2
1
Restricted cash in Other Assets
139
118
109
91
Cash and Cash Equivalents and Restricted Cash
$
2,726
$
7,659
$
6,833
$
3,793
26
AT&T INC.
SEPTEMBER 30, 2024
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts
The following table summarizes cash paid during the periods for interest and income taxes:
Nine months ended
September 30,
Cash paid (received) during the period for:
2024
2023
Interest
$
5,615
$
5,703
Income taxes, net of refunds
882
758
The following table summarizes capital expenditures:
Nine months ended
September 30,
2024
2023
Purchase of property and equipment
$
13,301
$
13,116
Interest during construction - capital expenditures1
119
136
Total Capital Expenditures
$
13,420
$
13,252
The following table summarizes acquisitions, net of cash acquired:
Nine months ended
September 30,
2024
2023
Business acquisitions
$
—
$
—
Spectrum acquisitions
153
309
Interest during construction - spectrum1
169
614
Total Acquisitions
$
322
$
923
1 Total capitalized interest was $288 and $750 for the nine months ended September 30, 2024 and 2023, respectively.
Preferred Interests Issued by Subsidiaries
Tower Holdings Preferred Interests
In 2019, we issued $6,000 nonconvertible cumulative preferred interest in a wireless subsidiary (Tower Holdings) that holds interests in various tower assets and has the right to receive approximately $6,000 if the purchase options from the tower companies are exercised.
The membership interests in Tower Holdings consist of (1) common interests, which are held by a consolidated subsidiary of AT&T, and (2) two series of preferred interests (collectively the “2019 Tower preferred interests”). The September series (Tower Class A-1) of the preferred interests totals $1,500 and pays an initial preferred distribution of 5.0%, and the December series (Tower Class A-2) totals $4,500 and pays an initial preferred distribution of 4.75%. Distributions are paid quarterly, subject to declaration and reset every five years.
In August 2024, we amended the 2019 Tower preferred interests, effective November 2024, to reset the rate and restructure the membership interests whereby all of the 2019 Tower preferred interests shall be designated Fixed Rate Class A Limited Membership Interests (Tower Fixed Rate Interests). A portion of the Tower Fixed Rate Interests will move to Floating Rate Class A Limited Membership Interests (Tower Floating Rate Interests) each year over a five-year period. The Tower Fixed Rate Interests pay a preferred distribution of 5.90%, and the Tower Floating Rate Interests pay a preferred distribution equal to the Secured Overnight Financing Rate (SOFR) plus 250 basis points, as defined in the agreement. Any failure to declare or pay distributions on the Tower Fixed Rate Interests or Tower Floating Rate Interests (collectively, the “Tower preferred interests”) would not impose any limitation on cash movement between affiliates, or our ability to declare a dividend on or repurchase AT&T shares. We can call the Tower Fixed Rate Interests at the issue price beginning in November 2029, and we can call the Tower Floating Rate Interests at any time. The Tower preferred interests are included in “Noncontrolling interest” on the consolidated balance sheets.
27
AT&T INC.
SEPTEMBER 30, 2024
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts
The holders of the Tower preferred interests have the option to require redemption upon the occurrence of certain contingent events, such as the failure of AT&T to pay the preferred distribution for two or more periods or to meet certain other requirements, including a minimum credit rating. If notice is given upon such an event, all other holders of equal or more subordinate classes of membership interests in Tower Holdings are entitled to receive the same form of consideration payable to the holders of the Tower preferred interests, resulting in a deemed liquidation for accounting purposes.
2024年10月，我們達成協議，將在2025年第一季度額外發行$基金2,250 非轉換累積優先權利益，在Telco LLC（Telco Class A-4）中，Telco Class A-4權益將支付每年%的初始優先分配，需宣告，並且在2028年11月1日及其後的每年進行重設。 5.94Telco Class A-4權益可以在2028年11月1日開始按發行價贖回，且與Telco Class A-1、A-2和A-3權益享有相同的贖回和清算權利。 公司使用資產和負債的會計方法來計算所得稅。根據這種方法，根據資產和負債的金融報表及稅基之間的暫時區別，使用實施稅率來決定遞延稅資產和遞延稅負債，該稅率適用於預期差異將反轉的年份。稅法的任何修改對遞延稅資產和負債的影響將於生效日期在財務報告期內確認在彙總的綜合收益報表上。 預計2025年第一季度發行後，我們打算使用Telco Class A-4的款項來資助對優先股權證券的贖回。
Operating revenues decreased in the third quarter and for the first nine months of 2024, reflecting declines in Business Wireline service and Mobility equipment revenues, partially offset by Mobility service, Consumer Wireline and Mexico revenues.
Operations and support expenses increased in the third quarter and for the first nine months of 2024, primarily due to a $4,422 noncash goodwill impairment. We performed an interim goodwill impairment test of the Business Wireline reporting unit and concluded that the calculated fair value was lower than the book value, which was driven by a faster-than-previously anticipated industry-wide secular decline of legacy services (see Note 1). The increases were partially offset by lower Mobility equipment costs resulting from lower wireless sales volumes and expense declines from our continued transformation efforts.
Depreciation and amortization expense increased in the third quarter and for the first nine months of 2024, primarily due to the shortening of estimated economic lives of wireless network equipment that will be replaced earlier than originally anticipated with our Open RAN network modernization efforts. Also contributing to higher depreciation expense was the impact of ongoing capital spending for strategic initiatives such as fiber and network upgrades.
Operating income decreased in the third quarter and for the first nine months of 2024. Our operating income margin in the third quarter decreased from 19.1% in 2023 to 7.0% in 2024 and for the first nine months decreased from 20.1% in 2023 to 15.2% in 2024.
Interest expense increased in the third quarter and for the first nine months of 2024, primarily due to lower capitalized interest associated with spectrum acquisitions, mostly offset by lower debt balances. Interest expense for the first nine months of 2023 also included distributions on Mobility preferred interests, which were repurchased on April 5, 2023.
30
AT&T INC.
SEPTEMBER 30, 2024
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts
Equity in net income of affiliates decreased in the third quarter and for the first nine months of 2024, primarily due to the performance of our investment in DIRECTV, which included our share of a gain on a sale-leaseback transaction by DIRECTV of approximately $100 in the first quarter of 2023 (see Note 9).
Other income (expense) – net increased in the third quarter and decreased for the first nine months of 2024. The increase in the third quarter was primarily the result of a prior-year write-down of our SKY Mexico equity investment and higher returns on other benefit-related investments. These increases were partially offset by lower pension and postretirement benefit credits and an actuarial gain on our pension plan in 2023 with no corresponding remeasurement in 2024.
The decrease for the first nine months was primarily driven by lower pension and postretirement benefit credits in 2024 and net actuarial and settlement gains in 2023 with no corresponding remeasurement in 2024 (see Note 6) and an impairment recognized on a held-for-sale business, partially offset by the prior-year write-down of our SKY Mexico equity investment and higher returns on other benefit-related investments.
Income tax expense increased in the third quarter and decreased for the first nine months of 2024. The increase in the third quarter was primarily due to a higher effective tax rate driven by a goodwill impairment (see Note 1), which is not deductible for tax purposes. The decrease for the first nine months was primarily due to lower income before income tax.
Our effective tax rate was 89.9% in the third quarter of 2024 and 31.1% for the first nine months of 2024, versus 23.2% and 22.9% in the comparable periods in the prior year. The increase in our effective tax rates were primarily due to the goodwill impairment, which is not deductible for tax purposes.
COMMUNICATIONS SEGMENT
Third Quarter
Nine-Month Period
Percent
Percent
2024
2023
Change
2024
2023
Change
Segment Operating Revenues
Mobility
$
21,052
$
20,692
1.7
%
$
62,126
$
61,589
0.9
%
Business Wireline
4,606
5,221
(11.8)
14,274
15,831
(9.8)
Consumer Wireline
3,416
3,331
2.6
10,113
9,821
3.0
Total Segment Operating Revenues
$
29,074
$
29,244
(0.6)
%
$
86,513
$
87,241
(0.8)
%
Segment Operating Income (Loss)
Mobility
$
7,003
$
6,763
3.5
%
$
20,190
$
19,647
2.8
%
Business Wireline
(43)
350
—
123
1,124
(89.1)
Consumer Wireline
196
160
22.5
593
422
40.5
Total Segment Operating Income
$
7,156
$
7,273
(1.6)
%
$
20,906
$
21,193
(1.4)
%
Selected Subscribers and Connections
September 30,
(in 000s)
2024
2023
Mobility Subscribers1
116,066
112,857
Total domestic broadband connections2
15,344
15,296
Network access lines in service
3,486
4,421
VoIP connections
2,297
2,649
1Effective with our first-quarter 2024 reporting, we have removed connected devices from our total Mobility subscribers, consistent with industry standards and our key performance metrics. Connected devices include data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems.
2Excludes AT&T Internet Air for Business.
31
AT&T INC.
SEPTEMBER 30, 2024
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts
Operating revenues decreased in the third quarter and for the first nine months of 2024, primarily driven by declines in our Business Wireline business unit, which reflects lower demand for legacy services and product simplification, as well as the absence of revenues from our cybersecurity business that was contributed to a new cybersecurity joint venture, LevelBlue, in the second quarter of 2024. Revenue declines were also driven by lower Mobility equipment revenue. These decreases were partially offset by increases in our Mobility and Consumer Wireline business units, driven by gains in wireless and broadband services.
Operating income decreased in the third quarter and for the first nine months of 2024. Our Communications segment operating income margin in the third quarter decreased from 24.9% in 2023 to 24.6% in 2024 and for the first nine months decreased from 24.3% in 2023 to 24.2% in 2024.
Communications Business Unit Discussion
Mobility Results
Third Quarter
Nine-Month Period
Percent
Percent
2024
2023
Change
2024
2023
Change
Operating revenues
Service
$
16,539
$
15,908
4.0
%
$
48,810
$
47,136
3.6
%
Equipment
4,513
4,784
(5.7)
13,316
14,453
(7.9)
Total Operating Revenues
21,052
20,692
1.7
62,126
61,589
0.9
Operating expenses
Operations and support
11,559
11,795
(2.0)
34,483
35,587
(3.1)
Depreciation and amortization
2,490
2,134
16.7
7,453
6,355
17.3
Total Operating Expenses
14,049
13,929
0.9
41,936
41,942
—
Operating Income
$
7,003
$
6,763
3.5
%
$
20,190
$
19,647
2.8
%
The following tables highlight other key measures of performance for Mobility:
Subscribers
September 30,
Percent
(in 000s)
2024
2023
Change
Postpaid
88,384
86,365
2.3
%
Postpaid phone
72,285
70,757
2.2
Prepaid
19,200
19,391
(1.0)
Reseller
8,482
7,101
19.4
Total Mobility Subscribers1
116,066
112,857
2.8
%
1Effective with our first-quarter 2024 reporting, we have removed connected devices from our total Mobility subscribers, consistent with industry standards and our key performance metrics. Connected devices include data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems.
32
AT&T INC.
SEPTEMBER 30, 2024
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts
Mobility Net Additions
Third Quarter
Nine-Month Period
Percent
Percent
(in 000s)
2024
2023
Change
2024
2023
Change
Postpaid Phone Net Additions
403
468
(13.9)
%
1,171
1,218
(3.9)
%
Total Phone Net Additions
358
494
(27.5)
1,162
1,407
(17.4)
Postpaid2
429
550
(22.0)
1,411
1,556
(9.3)
Prepaid
(49)
56
—
34
263
(87.1)
Reseller
237
401
(40.9)
910
941
(3.3)
Mobility Net Subscriber Additions1
617
1,007
(38.7)
%
2,355
2,760
(14.7)
%
Postpaid Churn3
0.93
%
0.95
%
(2)
BP
0.89
%
0.97
%
(8)
BP
Postpaid Phone-Only Churn3
0.78
%
0.79
%
(1)
BP
0.73
%
0.80
%
(7)
BP
1Excludes migrations between wireless subscriber categories, including connected devices, and acquisition-related activity during the period.
2In addition to postpaid phones, includes tablets and wearables and other. Tablet net adds (losses) were (21) and (36) for the quarters ended September 30, 2024 and 2023 and 31 and (85) for the first nine months ended September 30, 2024 and 2023. Wearables and other net adds were 47 and 118 for the quarters ended September 30, 2024 and 2023 and 209 and 423 for the first nine months ended September 30, 2024 and 2023.
3Calculated by dividing the aggregate number of wireless subscribers who canceled service during a month 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.
Service revenue increased in the third quarter and for the first nine months of 2024. The increases are largely due to growth from subscriber gains and postpaid phone average revenue per subscriber (ARPU) growth. As part of our transformation activities and our focus on simplification, we aligned the timing of certain administrative fees and recorded approximately $90 of one-time revenues in the third quarter of 2024.
ARPU
ARPU increased in the third quarter and for the first nine months of 2024, reflecting pricing actions.
Churn
The effective management of subscriber churn is critical to our ability to maximize revenue growth and to maintain and improve margins. Postpaid churn and postpaid phone-only churn were lower in the third quarter and for the first nine months of 2024.
Equipment revenue decreased in the third quarter and for the first nine months of 2024, primarily driven by lower wireless device sales volumes.
Operations and support expenses decreased in the third quarter and for the first nine months of 2024, primarily due to lower equipment costs driven by lower wireless sales volumes.
Depreciation expense increased in the third quarter and for the first nine months of 2024, primarily due to shortening of estimated economic lives of wireless equipment that will be replaced earlier than originally anticipated with our Open RAN deployment and network transformation, and ongoing capital spending for network upgrades and expansion, which we expect to continue through the remainder of 2024.
Operating income increased in the third quarter and for the first nine months of 2024. Our Mobility operating income margin in the third quarter increased from 32.7% in 2023 to 33.3% in 2024 and for the first nine months increased from 31.9% in 2023 to 32.5% in 2024. Our Mobility EBITDA margin in the third quarter increased from 43.0% in 2023 to 45.1% in 2024 and for the first nine months increased from 42.2% in 2023 to 44.5% in 2024. EBITDA is defined as operating income excluding depreciation and amortization.
33
AT&T INC.
SEPTEMBER 30, 2024
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts
Business Wireline Results
Third Quarter
Nine-Month Period
Percent
Percent
2024
2023
Change
2024
2023
Change
Operating revenues
Service
$
4,417
$
5,087
(13.2)
%
$
13,688
$
15,401
(11.1)
%
Equipment
189
134
41.0
586
430
36.3
Total Operating Revenues
4,606
5,221
(11.8)
14,274
15,831
(9.8)
Operating expenses
Operations and support
3,250
3,526
(7.8)
10,004
10,699
(6.5)
Depreciation and amortization
1,399
1,345
4.0
4,147
4,008
3.5
Total Operating Expenses
4,649
4,871
(4.6)
14,151
14,707
(3.8)
Operating Income (Loss)
$
(43)
$
350
—
%
$
123
$
1,124
(89.1)
%
Service revenues decreased in the third quarter and for the first nine months of 2024, driven by lower demand for legacy voice, data and network services along with product simplification, partially offset by growth in connectivity services. We expect these trends to continue. Revenue declines also were impacted by prior-year intellectual property sales of approximately $100 and the absence of revenues from our cybersecurity business that was contributed to LevelBlue.
Equipment revenues increased in the third quarter and for the first nine months of 2024, driven by higher customer premises equipment sales, which are nonrecurring in nature.
Operations and support expenses decreased in the third quarter and for the first nine months of 2024, primarily driven by lower personnel costs associated with ongoing transformation initiatives, lower network access and customer support expenses and the contribution of our cybersecurity business. Partially offsetting the decreases for the first nine months were higher vendor credits in 2023 and higher equipment costs in 2024. As part of our transformation activities, we expect operations and support expense improvements through the remainder of 2024 as we further right size our operations in alignment with the strategic direction of the business.
Depreciation expense increased in the third quarter and for the first nine months of 2024, primarily due to ongoing capital investment for strategic initiatives such as fiber, which we expect to continue through the remainder of 2024.
Operating income decreased in the third quarter and for the first nine months of 2024. Our Business Wireline operating income margin in the third quarter decreased from 6.7% in 2023 to (0.9)% in 2024 and for the first nine months decreased from 7.1% in 2023 to 0.9% in 2024. Our Business Wireline EBITDA margin in the third quarter decreased from 32.5% in 2023 to 29.4% in 2024 and for the first nine months decreased from 32.4% in 2023 to 29.9% in 2024.
34
AT&T INC.
SEPTEMBER 30, 2024
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts
Consumer Wireline Results
Third Quarter
Nine-Month Period
Percent
Percent
2024
2023
Change
2024
2023
Change
Operating revenues
Broadband
$
2,838
$
2,667
6.4
%
$
8,301
$
7,755
7.0
%
Legacy voice and data services
307
368
(16.6)
972
1,147
(15.3)
Other service and equipment
271
296
(8.4)
840
919
(8.6)
Total Operating Revenues
3,416
3,331
2.6
10,113
9,821
3.0
Operating expenses
Operations and support
2,296
2,300
(0.2)
6,801
6,810
(0.1)
Depreciation and amortization
924
871
6.1
2,719
2,589
5.0
Total Operating Expenses
3,220
3,171
1.5
9,520
9,399
1.3
Operating Income
$
196
$
160
22.5
%
$
593
$
422
40.5
%
The following tables highlight other key measures of performance for Consumer Wireline:
Depreciation and amortization expense decreased in the third quarter and for the first nine months of 2024, primarily driven by lower in-service assets. Foreign exchange impacts were favorable in the third quarter and unfavorable for the first nine months.
Operating income improved in the third quarter and for the first nine months of 2024. Our Mexico operating income margin in the third quarter increased from (2.9)% in 2023 to 1.0% in 2024 and for the first nine months increased from (3.4)% in 2023 to 0.6% in 2024. Our Mexico EBITDA margin in the third quarter increased from 15.6% in 2023 to 16.4% in 2024 and for the first nine months increased from 15.7% in 2023 to 16.5% in 2024.
COMPETITIVE AND REGULATORY ENVIRONMENT
Overview AT&T subsidiaries operating within the United States are subject to federal and state regulatory authorities. AT&T subsidiaries operating outside the United States are subject to the jurisdiction of national and supranational regulatory authorities in the markets where service is provided.
In the Telecommunications Act of 1996 (Telecom Act), Congress established a national policy framework intended to bring the benefits of competition and investment in advanced telecommunications facilities and services to all Americans by opening all telecommunications markets to competition and reducing or eliminating regulatory burdens that harm consumer welfare. Nonetheless, since then, the FCC and some state regulatory commissions have maintained, re-imposed or expanded certain regulatory requirements that were imposed decades ago on our traditional wireline subsidiaries when they operated as legal monopolies. Recently, the FCC’s regulatory approach has depended on control of the executive branch, eliminating a variety of antiquated and unnecessary regulations in a number of areas, while imposing or re-imposing regulations in other areas. We continue to support regulatory and legislative measures and efforts, at both the state and federal levels, to reduce inappropriate regulatory burdens that inhibit our ability to compete effectively and offer needed services to 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.
Until 2015, the FCC classified fixed and mobile consumer broadband internet access services as information services subject to minimal regulation. In 2015, the FCC reclassified such services as telecommunications services subject to broader regulation by
37
AT&T INC.
SEPTEMBER 30, 2024
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts
the FCC and imposed “net neutrality rules.” Since then, the FCC has twice reversed course, most recently again reclassifying such services as telecommunications services subject to broader regulation by the FCC in an order adopted on April 25, 2024. Multiple trade associations and other parties have challenged the FCC’s reclassification decision in appeals consolidated in the U.S. Court of Appeals for the Sixth Circuit. The trade associations have petitioned the Sixth Circuit to stay the FCC’s order. On August 1, 2024, the Sixth Circuit issued a stay of the FCC order pending review of the appeals, holding that broadband providers are likely to succeed on the merits. The appeals are now being briefed, with oral argument scheduled for October 31, 2024.
Since 2018, some states have adopted legislation or issued executive orders that established state net neutrality rules, including California and Vermont. We expect additional states may seek to impose net neutrality and other requirements on broadband in the future.
We had $2,586 in cash and cash equivalents available at September 30, 2024, decreasing $4,136 since December 31, 2023. Cash and cash equivalents included cash of $1,062 and money market funds and other cash equivalents of $1,524. Approximately $965 of our cash and cash equivalents were held in accounts outside of the U.S. and may be subject to restrictions on repatriation.
For the first nine months of 2024, cash inflows were primarily provided by cash receipts from operations, including cash from our sale and transfer of our receivables to third parties and distributions from DIRECTV. These inflows were exceeded by cash used to meet the needs of the business, including, but not limited to, payment of operating expenses. The cash generatedfrom operating activities was used to repay short-term borrowings and long-term debt, funding capital expenditures and vendor financing payments, and dividend payments to stockholders. We maintain availability under our credit facilities and our commercial paper program to meet our short-term liquidity requirements.