AT&T Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; filed February 16, 2022. Amounts are in millions of dollars except per-share data. AT&T reported three segments: Communications, WarnerMedia and Latin America.
Financial performance
| Metric | 2021 | 2020 | Change / context |
|---|---|---|---|
| Operating revenue | $168,864 | $171,760 | Down 1.7% |
| Operating income | $23,347 | $6,405 | Operating margin 13.8%, versus 3.7% |
| Net income attributable to AT&T | $20,081 | $(5,176) | 2021 included substantial non-operating and other items |
| Diluted EPS attributable to common stock | $2.76 | $(0.75) | 2021 versus a loss in 2020 |
| Cash from operating activities | $41,957 | $43,130 | Down $1,173 |
| Capital expenditures | $16,527 | $15,675 | Gross capital investment, including vendor-financing payments and excluding FirstNet reimbursements, was $21,638 |
| Cash and cash equivalents at year-end | $21,169 | $9,740 | Increase of $11,429 |
| Total debt at year-end | $177,354 | $157,245 | Debt ratio 49.1%, versus 46.7% |
| Common dividend declared per share | $2.08 | $2.08 | Paid dividends of $15,068 across common and preferred shares |
Segment trends
- Communications: Revenue rose 4.3% to $114,730; operating contribution was nearly flat at $28,279. Mobility revenue grew 7.8%, while Business Wireline revenue fell 4.6% and Consumer Wireline contribution fell 29.0%. Fiber broadband connections reached about 6.0 million, up 21.0%.
- WarnerMedia: Revenue increased 17.0% to $35,632, but operating contribution declined 11.4% to $7,277 as programming and marketing costs rose. HBO Max and HBO subscribers totaled nearly 74 million worldwide at year-end.
- Latin America: Revenue declined 6.3% to $5,354, reflecting the Vrio sale; operating contribution remained a loss of $430.
Material changes and unusual items
- Revenue fell despite growth in Mobility, broadband and WarnerMedia subscriptions. The decline reflected the July 2021 separation of U.S. video operations, the November sale of Vrio and continuing weakness in legacy Business Wireline.
- 2021 operating expenses included a $4,555 noncash Vrio impairment. In 2020, impairment and abandonment charges totaled $18,880, including charges related to U.S. video and Vrio. These large charges materially affect year-over-year comparisons.
- Other income, net, was $9,853 in 2021, compared with an expense of $1,431 in 2020. AT&T cited $4,140 of actuarial gains in 2021 versus $4,169 of actuarial losses in 2020; 2021 also included a $706 pretax gain on the Playdemic sale. The improved reported net income therefore reflects significant items beyond ongoing operating performance.
- Cash from operations decreased, with higher WarnerMedia content investment and the U.S. video separation partly offset by greater receivables securitization activity. WarnerMedia content cash investment was $19,164, up $4,266 from 2020.
- AT&T paid $23,406 for C-band licenses in 2021 and reported $25,453 of acquisitions, net of cash acquired, in investing activities. It also won 3.45 GHz spectrum licenses for $9,079, with the remaining payment due in the first quarter of 2022.
Liquidity, debt and obligations
- Year-end debt included $24,630 maturing within one year, including $10,100 of credit-agreement borrowings, $6,586 of commercial paper and $7,944 of long-term debt maturities. Weighted-average interest on the long-term debt portfolio was approximately 3.8%.
- AT&T had $15,000 of revolving credit facilities with no amounts drawn at year-end and stated it was in compliance with debt covenants. Its net-debt-to-EBITDA covenant limit was 4.0-to-1 through June 30, 2023, and 3.5-to-1 thereafter.
- Contractual obligations totaled $447,949, including $181,449 of long-term debt principal and $117,454 of associated interest payments. These totals include substantial long-dated obligations and commitments.
- Supplier financing supported operating cash flow by $25 in 2021, versus $432 in 2020. Vendor-financing payables were approximately $5,000 at year-end, with $3,950 due within one year.
Outlook, transactions and risks
- Management expected 2022 revenue growth in wireless and broadband, supported by 5G deployment, fiber expansion and HBO Max. It also anticipated continued declines in legacy wireline and basic cable viewing, and ongoing pandemic-related pressure on theatrical revenue.
- Management expected 2022 gross capital investment of about $24,000, including capital expenditures of about $20,000. Fiber and 5G deployment, 3G shutdown costs and HBO Max investment were expected to pressure expenses.
- The WarnerMedia–Discovery transaction was expected to close in the second quarter of 2022, subject to Discovery shareholder approval and customary regulatory and other conditions. AT&T expected approximately $43,000 in cash, debt securities and debt assumed or retained by WarnerMedia. AT&T shareholders were expected to receive approximately 71% of the combined company; the announced distribution estimate was about 0.24 shares per AT&T share. The filing states that AT&T’s board approved an expected annual dividend of $1.11 per share following closing.
- AT&T completed the separation of U.S. video operations into DIRECTV, retaining an equity-method investment. It agreed to cover certain NFL SUNDAY TICKET net losses up to a $2,100 cap; $1,341 remained payable to DIRECTV at year-end.
- Key risks include high debt and refinancing needs, competition and pricing pressure, execution and regulatory risks for spectrum and network deployment, supply-chain and inflation pressures, COVID-19 effects, privacy and cybersecurity exposure, and uncertainty around the WarnerMedia transaction and expected benefits. The FAA’s review of possible C-band effects on aircraft radio altimeters led to temporary voluntary deployment measures.
- The filing describes numerous ordinary-course legal matters and says they were not expected to have a material adverse effect overall. Separately, the U.S. Attorney’s Office was considering a charge against an AT&T subsidiary related to a 2017 consulting contract; AT&T disputed the merits and said the outcome could not be predicted.
Most important facts for investors to verify
- Whether the WarnerMedia–Discovery transaction closed on the expected terms and timing, and how its proceeds affected debt, cash and the post-transaction dividend.
- Whether cash generation and debt reduction can support near-term maturities, spectrum payments and planned network investment.
- Whether Communications growth—particularly in Mobility and fiber—can offset ongoing Business Wireline and legacy-service declines without further margin deterioration.
- Whether WarnerMedia subscriber and revenue growth can offset higher content and marketing costs ahead of its separation.
- Whether C-band rollout constraints, the 3.45 GHz purchase and other network investment deliver the expected coverage, capacity and returns.
- The realized cost and cash effects of significant impairments, actuarial gains and losses, receivables sales, vendor financing and transaction-related obligations.