Published: 2021-08-05 00:00:00 ET

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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, media 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, 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.

 

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.

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions 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 (see Note 4 and Note 5).

In the tables throughout this document, percentage increases and decreases that are not considered meaningful are denoted with a dash.

NOTE 2. EARNINGS PER SHARE

 

A reconciliation of the numerators and denominators of basic and diluted earnings per share for the three months and six months ended June 30, 2021 and 2020, is shown in the table below:

			Three months ended												Six months ended
			June 30,												June 30,
			2021						2020						2021						2020
Numerators
Numerator for basic earnings per share:
Net Income Attributable to Common Stock			$	1,514					$	1,229					$	9,014					$	5,807
Dilutive potential common shares:
Share-based payment			5						5						11						11
Numerator for diluted earnings per share			$	1,519					$	1,234					$	9,025					$	5,818
Denominators (000,000)
Denominator for basic earnings per share:
Weighted average number of common shares outstanding			7,168						7,145						7,165						7,166
Dilutive potential common shares:
Share-based payment (in shares)			32						25						29						26
Denominator for diluted earnings per share			7,200						7,170						7,194						7,192

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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 and exclude noncontrolling interest.

			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
Other comprehensive income (loss) before reclassifications			190						(35)						(398)						—						(243)
Amounts reclassified from accumulated OCI			—			1			(3)			1			46			2			(1,011)			3			(968)
Net other comprehensive income (loss)			190						(38)						(352)						(1,011)						(1,211)
Balance as of June 30, 2021			$	(3,736)					$	73					$	(1,131)					$	7,913					$	3,119
			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
Other comprehensive income (loss) before reclassifications			(1,490)						80						(3,026)						—						(4,436)
Amounts reclassified from accumulated OCI			—			1			—			1			17			2			(922)			3			(905)
Net other comprehensive income (loss)			(1,490)						80						(3,009)						(922)						(5,341)
Balance as of June 30, 2020			$	(4,546)					$	128					$	(3,046)					$	7,593					$	129

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 analyze our segments based on segment operating contribution, which consists of operating income, excluding acquisition-related costs and other significant items (as discussed below), and equity in net income (loss) of affiliates for investments managed within each segment. We have three reportable segments: (1) Communications, (2) WarnerMedia and (3) Latin America.

 

We also evaluate segment and business unit performance based on EBITDA and/or EBITDA margin, which is defined as operating contribution excluding equity in net income (loss) of affiliates and depreciation and amortization. We believe EBITDA to be a relevant and useful measurement to our investors as it is part of our internal management reporting and planning processes and it is an important metric that management uses to evaluate operating performance. EBITDA does not 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.

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In the first quarter of 2021, we recast our segment results for all prior periods to reflect the following:

•Communications segment results were recast to remove the held-for-sale businesses, principally Video, instead reporting those results in Corporate and Other. Additionally, we refined the allocation of shared infrastructure and deferred customer acquisition costs between Consumer Wireline and Video.

•WarnerMedia segment results reflect our operation of WarnerMedia as one integrated organization.

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 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.

•Business Wireline provides advanced IP-based services, as well as traditional voice and data services and related equipment to business customers.

•Consumer Wireline provides internet, including broadband fiber, and legacy telephony voice communication services to residential customers.

 

The WarnerMedia segment develops, produces and distributes feature films, television, gaming and other content in various physical and digital formats globally. WarnerMedia content is distributed through basic networks, Direct-to-Consumer (DTC) or theatrical, TV content and games licensing. Segment results also include Xandr advertising and Otter Media Holdings.

On May 17, 2021, we entered into an agreement to combine our WarnerMedia segment, subject to certain exceptions, with a subsidiary of Discovery Inc. (See Note 8)

Effective January 1, 2021, we updated our reporting units to reflect recent changes in how WarnerMedia, an integrated content organization that distributes across various platforms, is managed and evaluated. With this operational change, the reporting unit is deemed to be the operating segment. The previous reporting units, Turner, Home Box Office, Warner Bros., and Xandr, and the new WarnerMedia reporting unit were tested for goodwill impairment on January 1, 2021, for which there was none.

 

The Latin America segment provides entertainment and wireless services outside of the U.S. This segment contains the following business units:

•Vrio provides 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.

On July 21, 2021, we entered into an agreement to sell our Vrio business to Grupo Werthein (see Note 8). The transaction is expected to close within one year. We applied held-for-sale accounting to Vrio as of June 30, 2021, and continue to present the Vrio results within the Latin America segment consistent with how performance was assessed and resource allocation decisions were made through June 30, 2021.

 

Corporate and Other reconciles our segment results to consolidated operating income and income before income taxes, and includes:

•Corporate, which consists of: (1) businesses no longer integral to our operations or which we no longer actively market, (2) corporate support functions, (3) impacts of corporate-wide decisions for which the individual operating segments are not being evaluated, and (4) the reclassification of the amortization of prior service credits, which we continue to report with segment operating expenses, to consolidated “Other income (expense) – net.”

•Video, which consists of our held-for-sale U.S. video operations, which provides video, including over-the-top (OTT) services and also sells multiplatform advertising services.

•Acquisition-related items, which consists of items associated with the merger and integration of acquired or divested businesses, including amortization of intangible assets.

•Certain significant items, which includes (1) employee separation charges associated with voluntary and/or strategic offers, (2) asset 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 channel distribution between WarnerMedia and Video, and (2) includes adjustments for our reporting of the advertising business.

 

“Interest expense” and “Other income (expense) – net,” are managed only on a total company basis and are, accordingly, reflected only in consolidated results.

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The following table is a reconciliation of Segment Contributions to “Income Before Income Taxes” reported in our consolidated statements of income:

			Three months ended June 30,												Six months ended June 30,
			2021						2020						2021						2020
Communications			$	7,340					$	7,488					$	14,705					$	14,889
WarnerMedia			1,739						1,912						3,769						3,926
Latin America			(152)						(201)						(325)						(385)
Segment Contribution			8,927						9,199						18,149						18,430
Reconciling Items:
Corporate and Other			(829)						(579)						(1,651)						(1,147)
Video			1,216						619						2,117						1,415
Merger costs			—						(211)						(37)						(393)
Amortization of intangibles acquired			(1,069)						(2,145)						(2,200)						(4,201)
Asset impairments and abandonments			(4,555)						(2,319)						(4,555)						(2,442)
Gain on spectrum transaction1			—						—						—						900
Employee separation costs and benefit-related losses			—						(765)						(57)						(884)
Segment equity in net income of affiliates			(49)						(12)						(115)						(31)
Eliminations and consolidations			(372)						(255)						(721)						(629)
AT&T Operating Income			3,269						3,532						10,930						11,018
Interest Expense			1,684						2,041						3,554						4,059
Equity in net income (loss) of affiliates			41						(10)						93						(16)
Other income (expense) - net			999						1,017						5,220						1,820
Income Before Income Taxes			$	2,625					$	2,498					$	12,689					$	8,763

1Included as a reduction of "Selling, general and administrative expenses" in the consolidated statement of income.

The following tables presents intersegment revenues and assets by segment:

Intersegment Reconciliation
			Three months ended June 30,												Six months ended June 30,
			2021						2020						2021						2020
Intersegment Revenues
Communications			$	3					$	2					$	6					$	4
WarnerMedia			840						774						1,678						1,591
Latin America			—						—						—						—
Total Intersegment Revenues			843						776						1,684						1,595
Consolidations			468						349						917						826
Eliminations and consolidations			$	1,311					$	1,125					$	2,601					$	2,421

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NOTE 5. REVENUE RECOGNITION

Revenue Categories

The following tables set forth reported revenue by category and by business unit, prior period amounts have been recast to conform to the current period presentation with our first quarter 2021 segment updates (see Note 4).

For the three months ended June 30, 2021
			Communications
			Mobility						Business Wireline						Consumer Wireline						WarnerMedia						Latin America						Corporate & Other						Elim.						Total
Wireless service			$	14,252					$	—					$	—					$	—					$	447					$	27					$	—					$	14,726
Video service			—						—						—						—						749						6,197						—						6,946
Business service			—						5,860						—						—						—						—						—						5,860
Broadband			—						—						2,266						—						—						—						—						2,266
Subscription			—						—						—						3,961						—						—						—						3,138
DTC (HBO Max)1			—						—						—						—						—						—						(253)
Other2			—						—						—						—						—						—						(570)
Content			—						—						—						3,492						—						—						—						2,876
DTC (HBO Max)3			—						—						—						(392)						—						—						—
Other3			—						—						—						(224)						—						—						—
Advertising			94						—						—						1,739						—						410						(410)						1,833
Legacy voice and data			—						—						504						—						—						113						—						617
Other			—						—						336						215						—						221						(78)						694
Total Service			14,346						5,860						3,106						8,791						1,196						6,968						(1,311)						38,956
Equipment			4,590						192						34						—						241						32						—						5,089
Total			$	18,936					$	6,052					$	3,140					$	8,791					$	1,437					$	7,000					$	(1,311)					$	44,045
1Represents DTC (HBO Max) intercompany sales to the Communications segment ($162 with Mobility and $91 with Consumer Wireline).
2Represents intercompany video distribution arrangements primarily to DIRECTV/U-verse from WarnerMedia.
3Represents intercompany transactions in the WarnerMedia segment.

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Deferred Customer Contract Acquisition and Fulfillment Costs

Costs to acquire and fulfill customer contracts, including commissions on service activations, for our wireless, business wireline, consumer wireline and video 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.

 

The following table presents the deferred customer contract acquisition and fulfillment costs included on our consolidated balance sheets:

			June 30,						December 31,
Consolidated Balance Sheets			2021						2020
Deferred Acquisition Costs
Prepaid and other current assets			$	3,750					$	3,087
Other Assets			2,901						3,198
Total deferred customer contract acquisition costs			$	6,651					$	6,285
Deferred Fulfillment Costs
Prepaid and other current assets			$	4,720					$	4,118
Other Assets			4,256						5,634
Total deferred customer contract fulfillment costs			$	8,976					$	9,752

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Deferred customer contract acquisition and fulfillment costs included in “Prepaid and other current assets” at June 30, 2021, include $1,465 of deferred acquisition costs ($414 of which were reclassified from “Other Assets”) and $2,116 of deferred fulfillment costs ($916 of which were reclassified from “Other Assets”) principally for our Video business, reflecting the held-for-sale treatment (see Note 8).

The following table presents deferred customer contract acquisition and fulfillment cost amortization included in “Other cost of revenue” for the six months ended:

			June 30,						June 30,
Consolidated Statements of Income			2021						2020
Deferred acquisition cost amortization			$	1,623					$	1,278
Deferred fulfillment cost amortization			2,422						2,636

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., “buy one get one free”) the difference between revenue recognized and consideration received is recorded as a contract asset to be amortized over the contract term.

When consideration is received in advance of the delivery of goods or services, a contract liability is recorded for deferred revenue. 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:

			June 30,						December 31,
Consolidated Balance Sheets			2021						2020
Contract asset			$	4,072					$	3,501
Current portion in “Prepaid and other current assets”			2,642						2,054
Contract liability			6,431						6,879
Current portion in “Advanced billings and customer deposits”			4,735						6,071
Current portion in “Accounts payable and accrued liabilities”			1,100						—

Our beginning of period contract liability recorded as customer contract revenue during 2021 was $5,023.

 

Remaining Performance Obligations

Remaining performance obligations primarily relate to our Communications segment and 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 our WarnerMedia segment, the most significant remaining performance obligations relate to the licensing of theatrical and television content which will be made available to customers at some point in the future. 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, video 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 June 30, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was $42,528, of which we expect to recognize approximately 82% by the end of 2022, with the balance recognized thereafter. Approximately $2,027 of the $42,528 remaining performance obligation relates to the Video business.

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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 2021.

 

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. 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. These remeasurements resulted in the recognition of an actuarial gain of $2,844 for the first quarter and an actuarial loss of $197 for the second quarter, totaling $2,647 gain for the six months ended June 30, 2021.

As part of our 2021 remeasurements, we updated the weighted-average discount rate used to measure our pension benefit obligation from 2.70% at December 31, 2020 to 3.30% at March 31, 2021, and to 3.00% at June 30, 2021. The discount rate in effect for determining pension service and interest costs after our June 30 remeasurement is 3.30% and 2.30% respectively. The remeasurements also reflect actual returns on pension plan assets of 4.29% (six-month rate) relative to our expected long-term rate of 6.75% (annual rate).

 

The following table details 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												Six months ended
			June 30,												June 30,
			2021						2020						2021						2020
Pension cost:
Service cost – benefits earned during the period			$	228					$	258					$	482					$	515
Interest cost on projected benefit obligation			339						422						630						844
Expected return on assets			(850)						(890)						(1,727)						(1,779)
Amortization of prior service credit			(36)						(29)						(72)						(57)
Actuarial (gain) loss			197						—						(2,647)						—
Net pension (credit) cost			$	(122)					$	(239)					$	(3,334)					$	(477)
Postretirement cost:
Service cost – benefits earned during the period			$	12					$	13					$	23					$	26
Interest cost on accumulated postretirement benefit obligation			52						104						105						208
Expected return on assets			(38)						(45)						(76)						(89)
Amortization of prior service credit			(635)						(582)						(1,269)						(1,164)
Net postretirement (credit) cost			$	(609)					$	(510)					$	(1,217)					$	(1,019)
Combined net pension and postretirement (credit) cost			$	(731)					$	(749)					$	(4,551)					$	(1,496)

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 $11 and $19 in the second quarter and $23 and $38 for the first six months of 2021 and 2020, respectively.

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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, 2020.

 

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:

			June 30, 2021												December 31, 2020
			Carrying						Fair						Carrying						Fair
			Amount						Value						Amount						Value
Notes and debentures1			$	171,445					$	199,544					$	155,209					$	187,224
Commercial paper			6,571						6,571						—						—
Investment securities2			3,300						3,300						3,249						3,249
1Includes credit agreement borrowings. Amounts at June 30, 2021 exclude $200 associated with Video business and $35 associated with Vrio, which were classified as held-for-sale (see Note 8).
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.

 

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Following is the fair value leveling for investment securities that are measured at fair value and derivatives as of June 30, 2021 and December 31, 2020. Derivatives designated as hedging instruments are reflected as “Other assets,” “Other noncurrent liabilities,” “Prepaid and other current assets” and “Accounts payable and accrued liabilities” on our consolidated balance sheets.

			June 30, 2021
			Level 1						Level 2						Level 3						Total
Equity Securities
Domestic equities			$	1,142					$	—					$	—					$	1,142
International equities			213						—						—						213
Fixed income equities			231						—						—						231
Available-for-Sale Debt Securities			—						1,420						—						1,420
Asset Derivatives
Cross-currency swaps			—						856						—						856
Foreign exchange contracts			—						7						—						7
Liability Derivatives
Cross-currency swaps			—						(2,207)						—						(2,207)
Foreign exchange contracts			—						(17)						—						(17)

			December 31, 2020
			Level 1						Level 2						Level 3						Total
Equity Securities
Domestic equities			$	1,010					$	—					$	—					$	1,010
International equities			180						—						—						180
Fixed income equities			236						—						—						236
Available-for-Sale Debt Securities			—						1,479						—						1,479
Asset Derivatives
Cross-currency swaps			—						1,721						—						1,721
Foreign exchange contracts			—						6						—						6
Liability Derivatives
Cross-currency swaps			—						(1,814)						—						(1,814)
Foreign exchange contracts			—						(9)						—						(9)

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.

 

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The components comprising total gains and losses in the period on equity securities are as follows:

			Three months ended												Six months ended
			June 30,												June 30,
			2021						2020						2021						2020
Total gains (losses) recognized on equity securities			$	87					$	161					$	142					$	(42)
Gains (Losses) recognized on equity securities sold			—						9						—						(24)
Unrealized gains (losses) recognized on equity securities held at end of period			$	87					$	152					$	142					$	(18)

At June 30, 2021, available-for-sale debt securities totaling $1,420 have maturities as follows - less than one year: $51; one to three years: $195; three to five years: $186; five or more years: $988.

 

Our cash equivalents (money market securities), short-term investments (certificate and time deposits) and nonrefundable customer deposits are recorded at amortized cost, and the respective carrying amounts approximate fair values. Short-term investments and nonrefundable customer deposits 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 some of our cross-currency swaps 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. The changes in fair values of cross-currency swaps attributable to the cross-currency basis spread are considered excluded components.

 

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. In instances where we have designated excluded components 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 through the swap accrual. Unrealized gains on derivatives designated as fair value hedges are recorded at fair market 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 six months ended June 30, 2021 and 2020, no ineffectiveness was measured on fair value hedges.

 

Cash Flow Hedging We designate most of our cross-currency swaps as cash flow hedges. We have entered into multiple cross-currency swaps to hedge our exposure to variability in expected future cash flows that are attributable to foreign currency risk generated from 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.

 

We also designate some of our foreign exchange contracts as cash flow hedges. The purpose of these contracts is to hedge certain forecasted film production costs and film tax incentives denominated in foreign currencies.

 

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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 $81 from accumulated OCI to “Interest expense” due to the amortization of net losses on historical interest rate locks.

  

Net Investment Hedging We have designated €1,450 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 sheets. Net losses on net investment hedges recognized in accumulated OCI in the second quarter were $19 and net gains for the first six months of 2021 were $51.

 

Collateral and Credit-Risk Contingency We have entered into agreements with our derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. At June 30, 2021, we had posted collateral of $68 (a deposit asset) and held collateral of $398 (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 June, we would have been required to post additional collateral of $57. 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 $1,550. If DIRECTV Holdings LLC’s credit rating had been downgraded below BBB- by S&P, we would have been required to post additional collateral of $3. At December 31, 2020, we had posted collateral of $53 (a deposit asset) and held collateral of $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.

 

Following are the notional amounts of our outstanding derivative positions:

			June 30,						December 31,
			2021						2020
Cross-currency swaps			$	42,186					$	40,745
Foreign exchange contracts			516						90
Total			$	42,702					$	40,835

Following are the related hedged items affecting our financial position and performance:

Effect of Derivatives on the Consolidated Statements of Income
			Three months ended												Six months ended
			June 30,												June 30,
Fair Value Hedging Relationships			2021						2020						2021						2020
Interest rate swaps (Interest expense):
Gain (Loss) on interest rate swaps			$	(1)					$	(14)					$	(2)					$	(4)
Gain (Loss) on long-term debt			1						14						2						4
Cross-currency swaps:
Gain (Loss) on cross-currency swaps			16						—						(32)						—
Gain (Loss) on long-term debt			(16)						—						32						—
Gain (Loss) recognized in accumulated OCI			2						—						1						—

In addition, the net swap settlements that accrued and settled in the periods above were offset against “Interest expense.” 

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The following table presents information for our cash flow hedging relationships:

			Three months ended												Six months ended
			June 30,												June 30,
Cash Flow Hedging Relationships			2021						2020						2021						2020
Cross-currency swaps:
Gain (Loss) recognized in accumulated OCI			$	(1,149)					$	809					$	(505)					$	(3,170)
Foreign exchange contracts:
Gain (Loss) recognized in accumulated OCI			(4)						2						—						(11)
Other income (expense) - net reclassified from accumulated OCI into income			(5)						(3)						(10)						13
Interest rate locks:
Gain (Loss) recognized in accumulated OCI			—						(12)						—						(648)
Interest income (expense) reclassified from accumulated OCI into income			(23)						(18)						(48)						(34)

NOTE 8. ACQUISITIONS, DISPOSITIONS AND OTHER ADJUSTMENTS

 

Acquisitions

 

Spectrum Auction On February 24, 2021, the Federal Communications Commission (FCC) announced that AT&T was the winning bidder for 1,621 C-Band licenses, comprised of a total of 80 MHz nationwide, including 40 MHz in Phase I. We 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. The licenses were granted by the FCC in July 2021 and remain subject to clearing. We estimate that we will be responsible for $955 of Incentive Payments upon clearing of Phase I spectrum, expected by the end of 2021, and $2,112 upon clearing of Phase II spectrum, expected by the end of 2023. Additionally, we will be responsible for approximately $1,000 of compensable relocation costs over the next several years as the spectrum is being cleared by satellite operators. Cash paid, including deposits and refunds, for spectrum and capitalized interest is included in “Acquisitions, net of cash acquired” on our consolidated statements of cash flows. Funding for the purchase price of the spectrum included a combination of cash on hand and short-term investments, as well as short- and long-term debt.

The amounts deposited toward the acquisition of the licenses and capitalized interest were reported as “Deposits on Wireless Licenses” on our consolidated balance sheet as of June 30, 2021, and were reclassified to “Licenses - Net” upon receipt in July 2021. Interest is capitalized until the spectrum is ready for its intended use.

Dispositions

Video Business On July 31, 2021, we closed our transaction with TPG Capital (TPG) to form a new company named DIRECTV (New DTV), which is jointly governed by a board with representation from both AT&T and TPG, with TPG having tie-breaking authority on certain key decisions. We began accounting for our investment in New DTV under the equity method, effective August 1, 2021. After the close of the transaction, New DTV issued $6,200 of long-term debt on August 2, 2021.

In connection with the transaction, we contributed our U.S. Video business unit to New DTV for $4,250 of junior preferred units, an additional distribution preference of $4,200 and a 70% economic interest in common units (collectively “equity considerations”). Upon close, we received approximately $7,130 in cash from New DTV ($7,600, net of $470 cash on hand) and transferred $195 of DIRECTV debt. TPG contributed approximately $1,800 in cash to New DTV for $1,800 of senior preferred units and a 30% economic interest in common units. As part of this transaction, we agreed to pay net losses under the NFL SUNDAY TICKET contract up to a cap of $2,100 over the remaining period of the contract.

Due to the timing of the transaction, the separation of shared operations, and finalization of commercial and transition service arrangements, our assessment of the third-quarter 2021 financial impacts of the sale is ongoing.

Under separate transition services agreements, we will provide New DTV certain operational support for up to three years. We also have entered into commercial arrangements, for up to five years, to provide network transport for U-verse products and sales services.

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In the first quarter of 2021, we applied held-for-sale accounting treatment to the assets and liabilities of the U.S. video business, and, accordingly, include the assets in “Prepaid and other current assets,” and the related liabilities in “Accounts payable and accrued liabilities,” on our consolidated balance sheet. The held-for-sale classification also resulted in ceasing depreciation and amortization on the designated assets.

The historical characteristics of the assets and liabilities of the Video operations, using June 30, 2021 balances, is as follows:

Assets held-for-sale:
Current assets												$	3,616
Property, plant and equipment - net												2,572
Licenses, net												5,798
Other intangible assets, net												1,634
Other assets												1,846
Total Video assets (included in “Prepaid and other current     assets” beginning first quarter 2021)												$	15,466
Liabilities related to assets held-for-sale:
Current liabilities												$	3,592
Long-term debt												206
Other noncurrent liabilities												351
Total Video liabilities (included in “Accounts payable and    accrued liabilities” beginning first quarter 2021)												$	4,149

Pending Dispositions

WarnerMedia On May 17, 2021, we entered into an agreement to combine our WarnerMedia segment, subject to certain exceptions, with a subsidiary of Discovery, Inc. (Discovery). The agreement is structured as a Reverse Morris Trust transaction, under which WarnerMedia will be distributed to AT&T’s shareholders via a pro rata dividend, an exchange offer, or a combination of both, followed by its combination with Discovery. The transaction is expected to be tax-free to AT&T and AT&T’s shareholders. AT&T will receive approximately $43,000 (subject to adjustment) in a combination of cash, debt securities, and WarnerMedia’s retention of certain debt; and AT&T’s shareholders will receive stock representing approximately 71% of the new company; Discovery shareholders will own approximately 29% of the new company. The transaction is expected to close in mid-2022, subject to approval by Discovery shareholders and customary closing conditions, including receipt of regulatory approvals. No vote is required by AT&T shareholders.

The merger agreement contains certain customary termination rights for AT&T and Discovery, including, without limitation, a right for either party to terminate if the transaction is not completed on or before July 15, 2023. Termination under specified circumstances will require Discovery to pay AT&T a termination fee of $720 or AT&T to pay Discovery a termination fee of $1,770.

Magallanes, Inc. (Spinco), a subsidiary of AT&T, entered into a $41,500 commitment letter (Bridge Loan) on May 17, 2021. On June 4, 2021, Spinco entered into a $10,000 term loan credit agreement (Spinco Term Loan) and reduced the aggregate commitment amount under the Bridge Loan to $31,500. There have been no draws on the Bridge Loan or the Spinco Term Loan. In the event advances are made under the Bridge Loan or Spinco Term Loan, those advances will be used by Spinco to finance a portion of the cash distribution to AT&T in connection with the transaction.

Also, on June 23, 2021, we entered into an agreement to sell WarnerMedia’s mobile games app studio, Playdemic Ltd. (Playdemic), to Electronic Arts (EA) for approximately $1,400 in cash. Playdemic was excluded from the pending WarnerMedia/Discovery transaction. In the second quarter of 2021, we classified Playdemic as held-for-sale and included $564 of goodwill in “Prepaid and other current assets,” on our consolidated balance sheet at June 30, 2021. This transaction is subject to customary regulatory approvals and is expected to close by the end of 2021.

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Vrio On July 21, 2021, we entered into an agreement to sell our Latin America video operations, Vrio, to Grupo Werthein. In the second quarter of 2021, we classified the Vrio disposal group as held-for-sale and reported the disposal group at fair value less cost to sell, which resulted in a noncash, pre-tax impairment charge of $4,555, including approximately $2,100 related to accumulated foreign currency translation adjustments and $2,500 related to property, plant and equipment and intangible assets. Approximately $80 of the impairment was attributable to noncontrolling interest. At June 30, 2021, our consolidated balance sheet included $883 of Vrio held-for-sale assets reported in “Prepaid and other current assets,” primarily related to deferred customer contract acquisition and fulfillment costs, prepaids and other deferred charges, and $2,849 of related liabilities reported in “Accounts payable and accrued liabilities,” primarily for reserves associated with accumulated foreign currency translation adjustments, which will reverse against accumulated other comprehensive income upon close of the transaction.

The transaction is expected to close in early 2022, pending customary closing conditions. We will retain our 41.3% interest in SKY Mexico, a leading pay-TV provider in Mexico.

NOTE 9. 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 a deferred purchase price, and (2) revolving service and trade receivables. Under these programs, we transfer receivables to purchasers in exchange for cash and additional consideration upon settlement of the receivables, where applicable. Under the terms of our agreements for these programs, we continue to bill and collect the payments from our customers on behalf of the financial institutions.

 

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. Cash receipts on the deferred purchase price are classified as cash flows from investing activities.

 

Our equipment installment and revolving receivable programs are discussed in detail below. The following table sets forth a summary of the receivables and accounts being serviced:

			June 30, 2021												December 31, 2020
			Equipment												Equipment
			Installment						Revolving						Installment						Revolving
Gross receivables:			$	3,775					$	3,714					$	5,565					$	3,909
Balance sheet classification
Accounts receivable
Notes receivable			1,933						—						2,716						—
Trade receivables			435						3,518						554						3,715
Other Assets
Noncurrent notes and trade receivables			1,407						196						2,295						194
Outstanding portfolio of receivables derecognized from our consolidated balance sheets			9,454						5,891						7,827						5,300
Cash proceeds received, net of remittances1			6,735						5,891						5,646						5,300
1Represents amounts to which financial institutions remain entitled, excluding the deferred purchase price.

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.

 

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We maintain a program under which we transfer a portion of these receivables through our bankruptcy-remote subsidiary in exchange for cash and additional consideration upon settlement of the receivables, referred to as the deferred purchase price. 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.

 

The following table sets forth a summary of equipment installment receivables sold under this program during the three and six months ended June 30, 2021 and 2020:

			Three months ended												Six months ended
			June 30,												June 30,
			2021						2020						2021						2020
Gross receivables sold			$	2,009					$	1,506					$	5,944					$	3,873
Net receivables sold1			1,963						1,449						5,789						3,722
Cash proceeds received			1,731						1,225						5,250						3,175
Deferred purchase price recorded			292						232						706						585
Guarantee obligation recorded			81						27						227						71
1Receivables net of allowance, imputed interest and equipment trade-in right guarantees.

The deferred purchase price and guarantee obligation 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 contemplate changes in value after the launch of a device model. The fair value measurements used for the deferred purchase price and the guarantee obligation are considered Level 3 under the Fair Value Measurement and Disclosure framework (see Note 7).

The following table presents the previously transferred equipment installment receivables, which we repurchased in exchange for the associated deferred purchase price during the three and six months ended June 30, 2021 and 2020:

			Three months ended												Six months ended
			June 30,												June 30,
			2021						2020						2021						2020
Fair value of repurchased receivables			$	350					$	285					$	623					$	573
Carrying value of deferred purchase price			326						281						579						558
Gain on repurchases1			$	24					$	4					$	44					$	15
1These gains are included in "Selling, general and administrative" in the consolidated statements of income.

At June 30, 2021 and December 31, 2020, our deferred purchase price receivable was $2,631 and $1,991, respectively, of which $1,639 and $1,476 are included in “Prepaid and other current assets” on our consolidated balance sheets, with the remainder in “Other Assets.” The guarantee obligation at June 30, 2021 and December 31, 2020 was $289 and $228, respectively, of which $92 and $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.

 

Revolving Receivables Program

We have a revolving agreement to transfer up to $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. This agreement is subject to renewal on an annual basis and the transfer limit may be expanded 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 $3,714 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

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subsequently adjusted for changes in estimated expected credit losses and interest rates. Our maximum exposure to loss related to these receivables transferred is limited to the amount outstanding.

 

The fair value measurement used for the obligation is considered Level 3 under the Fair Value Measurement and Disclosure framework (see Note 7).

 

The following table sets forth a summary of receivables sold:

			Three months ended												Six months ended
			June 30,												June 30,
			2021						2020						2021						2020
Gross receivables sold/cash proceeds received1			$	5,137					$	3,805					$	10,341					$	8,027
Total collections under revolving agreement2			5,001						3,805						9,750						7,027
Net cash proceeds received			$	136					$	—					$	591					$	1,000
Net receivables sold3			$	5,132					$	3,819					$	10,257					$	7,957
Obligations recorded (reversed)			(131)						(12)						11						114
1Includes initial sales of receivables of $0 for each of the three months and $700 and $1,000 for the six months ended June 30, 2021 and 2020, respectively.
2Includes collections of $0 for each of the three months and $109 and $0 for the six months ended June 30, 2021 and 2020, respectively, that were not reinvested under the revolving agreement.
3Receivables net of allowance, return and incentive reserves and imputed interest.

NOTE 10. LEASES

 

We have operating and finance leases for certain facilities and equipment used in operations. Our leases generally have remaining lease terms of up to 15 years. Some of our real estate operating leases contain renewal options that may be exercised, and some of our leases include options to terminate the leases within one year.

 

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.

 

The components of lease expense were as follows:

			Three months ended												Six months ended
			June 30,												June 30,
			2021						2020						2021						2020
Operating lease cost			$	1,431					$	1,449					$	2,889					$	2,826
Finance lease cost:
Amortization of right-of-use assets			$	70					$	73					$	139					$	140
Interest on lease obligation			41						36						80						77
Total finance lease cost			$	111					$	109					$	219					$	217

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The following table provides supplemental cash flows information related to leases:

						Six months ended
						June 30,
						2021						2020
Cash Flows from Operating Activities
Cash paid for amounts included in lease obligations:
Operating cash flows for operating leases						$	2,509					$	2,424
Supplemental Lease Cash Flow Disclosures
Operating lease right-of-use assets obtained in exchange for new       operating lease obligations						2,349						2,895

The following tables set forth supplemental balance sheet information related to leases:

			June 30, 2021						December 31, 2020
Operating Leases
Operating lease right-of-use assets			$	24,390					$	24,714
Accounts payable and accrued liabilities			$	3,651					$	3,537
Operating lease obligation			21,637						22,202
Total operating lease obligation			$	25,288					$	25,739
Finance Leases
Property, plant and equipment, at cost			$	2,755					$	3,586
Accumulated depreciation and amortization			(1,106)						(1,361)
Property, plant and equipment, net			$	1,649					$	2,225
Current portion of long-term debt			$	161					$	189
Long-term debt			1,606						1,847
Total finance lease obligation			$	1,767					$	2,036
			June 30,
			2021						2020
Weighted-Average Remaining Lease Term (years)
Operating leases			8.3						8.5
Finance leases			8.8						10.2
Weighted-Average Discount Rate
Operating leases			3.9		%				4.2		%
Finance leases			8.0		%				8.2		%

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The following table provides the expected future minimum maturities of lease obligations:

At June 30, 2021			Operating						Finance
			Leases						Leases
Remainder of 2021			$	2,484					$	143
2022			4,829						290
2023			4,400						277
2024			3,864						257
2025			3,127						251
Thereafter			12,203						1,344
Total lease payments			30,907						2,562
Less: imputed interest			(5,619)						(795)
Total			$	25,288					$	1,767

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:

			June 30,												December 31,
			2021						2020						2020						2019
Cash and cash equivalents			$	11,869					$	16,941					$	9,740					$	12,130
Restricted cash in Prepaid and other current assets			6						3						9						69
Restricted cash in Other Assets			101						87						121						96
Cash and Cash Equivalents and Restricted Cash			$	11,976					$	17,031					$	9,870					$	12,295

The following table summarizes cash paid during the periods for interest, income taxes and spectrum:

Consolidated Statements of Cash Flows			Six months ended
			June 30,
Cash paid (received) during the period for:			2021						2020
Interest			$	3,861					$	4,202
Income taxes, net of refunds			418						(214)
Spectrum acquisitions1			22,886						1,046
1 Included as cash paid for “Acquisitions, net of cash acquired” on our consolidated statement of cash flows. Excludes interest     during construction.
The following table summarizes interest capitalized during construction:
			Six months ended
			June 30,
Interest during construction:			2021						2020
Capital expenditures			$	(94)					$	(60)
Spectrum1			(257)						—
Interest During Construction			$	(351)					$	(60)
1 Included in “Acquisitions, net of cash acquired” on our consolidated statement of cash flows.

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Noncash Investing and Financing Activities In connection with capital improvements and the acquisition of other productive assets, we negotiate favorable payment terms (referred to as vendor financing), which are reported as financing activities in our statements of cash flows when paid. For the six months ended June 30, 2021 and 2020, we recorded vendor financing commitments related to capital investments of approximately $1,778 and $1,680.

Total vendor financing payables included in our June 30, 2021 consolidated balance sheet were approximately $2,948, with $2,149 due within one year (in “Accounts payable and accrued liabilities”) and the remainder predominantly due within two to three years (in “Other noncurrent liabilities”).

Debt Transactions At June 30, 2021, our debt obligations totaled $179,783. Our debt activity during the six months ended June 30, 2021 primarily consisted of the following:

						First Quarter			Second Quarter			Six months ended June 30, 2021
Net commercial paper borrowings						$	7,072		$	(513)		$	6,559
Issuance of Notes and Debentures1:
U.S. dollar denominated global notes						$	6,000		$	—		$	6,000
Initial average rate of 1.27%
Euro denominated global notes						1,461			—			1,461
Rate of 0.00%
2021 Syndicated Term Loan						7,350			—			7,350
BAML Bilateral Term Loan						2,000			—			2,000
Private financing						750			—			750
Other						636			—			636
Debt Issuances						$	18,197		$	—		$	18,197
Repayments:
Private financing						$	(649)		$	—		$	(649)
Other						(253)			(253)			(506)
Repayments of long-term debt						$	(902)		$	(253)		$	(1,155)

1 Includes credit agreement borrowings.

Credit Facilities

On January 29, 2021, we entered into a $14,700 Term Loan Credit Agreement (2021 Syndicated Term Loan), with Bank of America, N.A., as agent. On 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 June 30, 2021, $7,350 was outstanding and is due on March 22, 2022.

In March 2021, we entered into and drew on a $2,000 term loan credit agreement (BAML Bilateral 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 Bank of America, N.A., as agent. At June 30, 2021, $2,000 was outstanding under these facilities.

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