Published: 2022-11-03 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 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, 2021. 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.

On April 8, 2022, we completed the separation of our WarnerMedia business, which represented substantially all of our WarnerMedia segment, in a Reverse Morris Trust transaction, under which Magallanes, Inc. (Spinco), a formerly wholly-owned subsidiary of AT&T that held the WarnerMedia business, was distributed to AT&T stockholders via a pro rata dividend, followed by the combination of Spinco with a subsidiary of Discovery, Inc. (Discovery), which was renamed Warner Bros. Discovery, Inc. (WBD). (See Notes 8 and 13)

Upon the separation and distribution, the WarnerMedia business met the criteria for discontinued operations. For discontinued operations, we also evaluated transactions that were components of AT&T’s single plan of a strategic shift, including dispositions that previously did not individually meet the criteria due to materiality, and have determined discontinued operations to be comprised of WarnerMedia, Vrio, Xandr and Playdemic Ltd. (Playdemic). These businesses are reflected in our historical financial statements as discontinued operations, including for periods prior to the consummation of the WarnerMedia/Discovery transaction.

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. Moreover, unfavorable changes in market conditions, including interest rates, could adversely impact those estimates and result in asset impairments. Certain prior period amounts have been conformed to the current period’s presentation. Unless otherwise noted, the information in Notes 1 through 12 refer only to our continuing operations and do not include discussion of balances or activity of WarnerMedia, Vrio, Xandr and Playdemic, which are part of discontinued operations.

Accounting Policies, Adopted and Pending Accounting Standards and Other Changes

Customer Acquisition and Fulfillment Costs During the first quarter of 2022, we updated our analysis of expected economic lives of customer relationships. As of January 1, 2022, we extended the amortization period for deferred acquisition and fulfillment contract costs within Mobility and broadband/fiber in Consumer Wireline and Business Wireline to better reflect the estimated economic lives of the relationships. These changes in accounting estimate decreased other cost of revenues approximately $80, or $0.01 per diluted share from continuing operations in the third quarter and $335, or $0.03 per diluted share from continuing operations for the first nine months of 2022.

Fiber Network Assets During the first quarter of 2022, we updated our analysis of economic lives of AT&T owned fiber network assets. As of January 1, 2022, we extended the estimated economic life and depreciation period of such costs to better reflect the physical life of the assets that we had been experiencing and absence of technological changes that would replace fiber as the best broadband technology in the industry. The change in accounting estimate decreased depreciation expense $70, or $0.01 per diluted share from continuing operations in the third quarter and $210, or $0.02 per diluted share from continuing operations for the first nine months of 2022.

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Convertible Instruments As of January 1, 2022, we adopted, through retrospective application, 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). ASU 2020-06 requires that instruments which may be settled in cash or stock are presumed settled in stock in calculating diluted earnings per share. While our intent is to settle the Series A Cumulative Perpetual Membership Interests in AT&T Mobility II LLC (Mobility preferred interests) in cash, the ability to settle this instrument in AT&T shares will result in additional dilutive impact, the magnitude of which is influenced by the fair value of the Mobility II preferred interests and the average AT&T common stock price during the reporting period, which could vary from period-to-period.

The following table presents the impact of the adoption of ASU 2020-06 on our diluted earnings per share from continuing operations:

									Historical Accounting Method						Effect of Adoption of ASU 2020-061						Under ASU 2020-06
Diluted earnings per share from continuing operations:
Three months ended September 30, 2022															$	0.82					$	(0.03)					$	0.79
Three months ended September 30, 2021															$	0.64					$	(0.01)					$	0.63
Nine months ended September 30, 2022															$	2.08					$	(0.05)					$	2.03
Nine months ended September 30, 2021															$	2.40					$	(0.03)					$	2.37
1See Note 2 for a discussion of the numerator and denominator adjustments.

Government Assistance The Financial Accounting Standards Board (FASB) issued ASU No, 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance” (ASU 2021-10), which requires annual disclosures, beginning with the 2022 Annual Report on Form 10-K, in the notes to the financial statements, about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy to other guidance. The annual disclosures include terms and conditions, accounting treatment and impacted financial statement lines reflecting the impact of the transactions. ASU 2021-10 will be effective for annual reporting periods beginning after December 15, 2021, which we plan to adopt under prospective application for all in scope government transactions in the financial statements as of our adoption date or thereafter.

Supplier Finance Obligations In September 2022, the FASB issued ASU No. 2022-04, “Liabilities – Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations” (ASU 2022-04), which establishes interim and annual reporting disclosure requirements about a company’s supplier finance programs for its purchase of goods and services. Interim and annual requirements include disclosure of outstanding amounts under the obligations as of the end of the reporting period, and annual requirements include a rollforward of those obligations for the annual reporting period, as well as a description of payment and other key terms of the programs. ASU 2022-04 will be effective for interim and annual periods beginning after December 15, 2022, with retrospective application, except for the annual rollforward requirement, which becomes effective for annual periods beginning after December 15, 2023, with prospective application. The standard allows early adoption of all requirements. In the year of adoption, the disclosure of payment and other key terms under the programs and outstanding balances under the obligations will also apply to interim reporting dates. We are in the process of evaluating the impact of our adoption of ASU 2022-04.

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NOTE 2. EARNINGS PER SHARE

 

A reconciliation of the numerators and denominators of basic and diluted earnings per share for the three months and nine months ended September 30, 2022 and 2021, is shown in the table below:

			Three months ended												Nine months ended
			September 30,												September 30,
			2022						2021						2022						2021
Numerators
Numerator for basic earnings per share:
Income from continuing operations, net of tax			$	6,346					$	5,019					$	16,246					$	18,574
Net income from continuing operations attributable to noncontrolling interests			(373)						(356)						(1,107)						(1,137)
Preferred Stock Dividends			(49)						(50)						(149)						(156)
Income from continuing operations attributable to common stock			5,924						4,613						14,990						17,281
Income (loss) from discontinued operations, net of tax			53						1,254						(146)						(2,485)
Net (income) loss from discontinued operations attributable to noncontrolling interests			—						1						—						86
Income (loss) from discontinued operations attributable to common stock			53						1,255						(146)						(2,399)
Net Income Attributable to Common Stock			$	5,977					$	5,868					$	14,844					$	14,882
Dilutive potential common shares:
Mobility II preferred interests			139						140						419						420
Share-based payment			4						6						13						17
Numerator for diluted earnings per share			$	6,120					$	6,014					$	15,276					$	15,319
Denominators (000,000)
Denominator for basic earnings per share:
Weighted average number of common shares outstanding			7,153						7,171						7,169						7,167
Dilutive potential common shares:
Mobility II preferred interests (in shares)			446						304						394						294
Share-based payment (in shares)			48						31						42						30
Denominator for diluted earnings per share			7,647						7,506						7,605						7,491

Upon the adoption of ASU 2020-06 in the first quarter of 2022, the ability to settle our Mobility II preferred interests in stock is reflected in our diluted earnings per share calculation. While our intent is to settle the Mobility II preferred interests in cash, the ability to settle this instrument in AT&T shares will result in additional dilutive impact, the magnitude of which is influenced by the fair value of the Mobility II preferred interests and the average AT&T common stock price during the reporting period, which could vary from period-to-period. The numerator includes an adjustment to add back to income the earned distributions on the Mobility II preferred interests, included in net income attributable to noncontrolling interest, and the denominator includes the potential issuance of AT&T common stock to settle the Mobility II preferred interests outstanding. (See Note 1)

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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, 2021			$	(1,964)					$	45					$	(1,422)					$	6,870					$	3,529
Other comprehensive income (loss) before reclassifications			160						(152)						(885)						1,787						910
Amounts reclassified from accumulated OCI			—			1			7			1			85			2			(1,477)			3			(1,385)
Distribution of WarnerMedia			(182)						—						(24)						25						(181)
Net other comprehensive income (loss)			(22)						(145)						(824)						335						(656)
Balance as of September 30, 2022			$	(1,986)					$	(100)					$	(2,246)					$	7,205					$	2,873
			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			108						(39)						(593)						—						(524)
Amounts reclassified from accumulated OCI			—			1			(4)			1			57			2			(1,516)			3			(1,463)
Net other comprehensive income (loss)			108						(43)						(536)						(1,516)						(1,987)
Balance as of September 30, 2021			$	(3,818)					$	68					$	(1,315)					$	7,408					$	2,343
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 revenues.

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In the first quarter of 2022, we reclassified into “Corporate” certain administrative costs borne by AT&T where the business units do not influence decision making to conform with the current period presentation. This recast increased Corporate operations and support expenses by approximately $270 for full-year 2021. Correspondingly, this recast lowered administrative expenses at AT&T’s Communications operations and Video (our former U.S. video operations contributed to DIRECTV Entertainment Holdings, LLC (DIRECTV) in July 2021), with no change on a consolidated basis.

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 ethernet-based fiber services, IP Voice and managed professional services, as well as traditional voice and data services and related equipment to business customers.

•Consumer Wireline provides broadband services, including fiber connections that now provide our multi-gig services to residential customers. 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 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 9).

•Value portfolio, which are businesses no longer integral to our operations or which we no longer actively market.

Other items consist of:

•Video, which includes our former U.S. video operations that were contributed to DIRECTV on July 31, 2021, and our share of DIRECTV’s earnings as equity in net income of affiliates (see Note 11).

•Held-for-sale and other reclassifications, which includes our former Crunchyroll and Government Solutions operations.

•Reclassification of prior service credits, which includes the reclassification of prior service credit amortization, where we present the impact of benefit plan amendments in our business unit results. Prior service credit amortization is presented in “Other Income (Expense) - Net” in the consolidated statements of income and therefore has no impact on consolidated operating income or EBITDA.

•Merger & 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 other items for which the segments are not being evaluated.

•Eliminations and consolidations, removed transactions involving dealings between Mobility and our Video business, prior to the July 31, 2021 separation of Video.

 

“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 Operating Income to “Income from Continuing Operations Before Income Taxes” reported in our consolidated statements of income:

			Three months ended September 30,												Nine months ended September 30,
			2022						2021						2022						2021
Communications			$	7,631					$	7,168					$	21,886					$	21,983
Latin America			(63)						(130)						(247)						(393)
Segment Operating Income			7,568						7,038						21,639						21,590
Reconciling Items:
Corporate			(621)						(402)						(1,810)						(1,033)
Video			—						374						—						2,491
Held-for-sale and other reclassifications			—						33						—						147
Transaction and other costs			(58)						(8)						(341)						(43)
Amortization of intangibles acquired			(16)						(28)						(60)						(142)
Asset impairments and abandonments and restructuring			(114)						(105)						(745)						(105)
Benefit-related gains (losses), and other    employee-related costs			(16)						5						(217)						109
Reclassification of prior service credits			(731)						(670)						(1,961)						(2,011)
AT&T Operating Income			6,012						6,237						16,505						21,003
Interest Expense			1,420						1,627						4,548						5,090
Equity in net income (loss) of affiliates			392						183						1,417						159
Other income (expense) — net			2,270						1,522						6,729						6,958
Income from Continuing Operations Before Income Taxes			$	7,254					$	6,315					$	20,103					$	23,030

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, 2022
			Communications
			Mobility						Business Wireline						Consumer Wireline						Latin America						Corporate & Other						Elim.						Total
Wireless service			$	15,256					$	—					$	—					$	559					$	4					$	—					$	15,819
Video service			—						—						—						—						—						—						—
Business service			—						5,524						—						—						—						—						5,524
Broadband			—						—						2,429						—						—						—						2,429
Advertising			81						—						—						—						—						—						81
Legacy voice and data			—						—						427						—						87						—						514
Other			—						—						329						—						35						—						364
Total Service			15,337						5,524						3,185						559						126						—						24,731
Equipment			4,941						144						—						226						1						—						5,312
Total			$	20,278					$	5,668					$	3,185					$	785					$	127					$	—					$	30,043

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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, 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			2022						2021
Deferred Acquisition Costs
Prepaid and other current assets			$	2,772					$	2,551
Other Assets			3,790						3,247
Total deferred customer contract acquisition costs			$	6,562					$	5,798
Deferred Fulfillment Costs
Prepaid and other current assets			$	2,489					$	2,600
Other Assets			4,252						4,148
Total deferred customer contract fulfillment costs			$	6,741					$	6,748

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

			September 30,						September 30,
Consolidated Statements of Income			2022						20211
Deferred acquisition cost amortization			$	2,138					$	2,266
Deferred fulfillment cost amortization			2,000						3,285
1Includes deferred acquisition amortization of $409 and deferred fulfillment cost amortization of $1,162 from our separated Video business for the nine months ended September 30, 2021.

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.

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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 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			2022						2021
Contract asset			$	5,047					$	4,389
Current portion in “Prepaid and other current assets”			2,827						2,582
Contract liability			3,938						4,133
Current portion in “Advanced billings and customer deposits”			3,597						3,766

Our contract asset balances for the quarter ended September 30, 2022 and December 31, 2021 reflect increased promotional equipment sales in our wireless business. We expect the amortization of these promotional costs to increase throughout 2022 and the contract asset to flatten in 2023.

Our beginning of period contract liability recorded as customer contract revenue during 2022 was $3,527.

 

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 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, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $34,309, of which we expect to recognize approximately 70% by the end of 2023, 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 2022.

 

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. Total distributions from the pension plan exceeded the threshold of service and interest costs for 2022, requiring us to follow settlement accounting and remeasure our pension benefit plan assets and obligations at each quarter-end in 2022. These remeasurements resulted in the recognition of an actuarial gain of $216 in the third quarter and $2,573 for the first nine months of 2022. Similar to 2022, in 2021, we were required to follow settlement accounting and remeasure our pension benefit plan assets and obligations at each quarter end.

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During the third quarter of 2022, we committed to, and reflected in our results, plan changes impacting postretirement health and welfare benefits. This plan change reduced our postretirement benefit obligation approximately $2,400 and aligns our benefit plans to market level. In conjunction with this plan change, we also remeasured the postretirement plan assets and liabilities as of July 1, 2022, and recognized an actuarial gain of $1,084.

As part of our 2022 remeasurements, we updated the weighted-average discount rates used to measure our pension and postretirement benefit obligations as summarized in the table below.

			Pension Benefits															Postretirement Benefits
			Dec. 31, 2021			Mar. 31, 2022			Jun. 30, 2022			Sep. 30, 2022						Dec. 31, 2021			Jul. 1, 2022
Weighted-average discount rate for determining benefit obligation			3.00		%	3.70		%	4.80		%	5.50		%				2.80		%	4.70		%
Discount rate in effect for determining service cost, for period beginning			3.20		%	3.80		%	4.90		%	5.50		%				3.10		%	4.90		%
Discount rate in effect for determining interest cost, for period beginning			2.30		%	3.40		%	4.40		%	5.30		%				2.10		%	4.20		%
Expected long-term rate of return on plan assets (annual rate)			6.75		%													4.50		%
Actual return on plan assets (YTD rate)						(5.20		%)	(11.30		%)	(15.40		%)							(12.20		%)

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,
			2022						2021			2022						2021
Pension cost:
Service cost – benefits earned during the period			$	141					$	241		$	488					$	723
Interest cost on projected benefit obligation			481						321			1,216						951
Expected return on assets			(740)						(890)			(2,410)						(2,617)
Amortization of prior service credit			(33)						(36)			(100)						(108)
Net pension (credit) cost before remeasurement			(151)						(364)			(806)						(1,051)
Actuarial (gain) loss			(216)						(374)			(2,573)						(3,021)
Net pension (credit) cost			$	(367)					$	(738)		$	(3,379)					$	(4,072)
Postretirement cost:
Service cost – benefits earned during the period			$	7					$	11		$	25					$	34
Interest cost on accumulated postretirement benefit obligation			75						53			201						158
Expected return on assets			(23)						(38)			(88)						(114)
Amortization of prior service credit			(697)						(634)			(1,861)						(1,903)
Net postretirement (credit) cost before remeasurement			(638)						(608)			(1,723)						(1,825)
Actuarial (gain) loss			(1,084)						—			(1,084)						—
Net postretirement (credit) cost			$	(1,722)					$	(608)		$	(2,807)					$	(1,825)
Combined net pension and postretirement (credit) cost			$	(2,089)					$	(1,346)		$	(6,186)					$	(5,897)

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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, 2021.

 

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, 2022												December 31, 2021
			Carrying						Fair						Carrying						Fair
			Amount						Value						Amount						Value
Notes and debentures1			$	129,688					$	116,586					$	167,475					$	193,068
Commercial paper			2,161						2,161						6,586						6,586
Investment securities2			2,595						2,595						3,214						3,214
1Includes credit agreement borrowings. Excludes note payable to DIRECTV.
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 September 30, 2022 and December 31, 2021. 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.

			September 30, 2022
			Level 1						Level 2						Level 3						Total
Equity Securities
Domestic equities			$	912					$	—					$	—					$	912
International equities			178						—						—						178
Fixed income equities			185						—						—						185
Available-for-Sale Debt Securities			—						1,142						—						1,142
Liability Derivatives
Cross-currency swaps			—						(8,882)						—						(8,882)
Foreign exchange contracts			—						(69)						—						(69)

			December 31, 2021
			Level 1						Level 2						Level 3						Total
Equity Securities
Domestic equities			$	1,213					$	—					$	—					$	1,213
International equities			221						—						—						221
Fixed income equities			219						—						—						219
Available-for-Sale Debt Securities			—						1,380						—						1,380
Asset Derivatives
Cross-currency swaps			—						211						—						211
Liability Derivatives
Cross-currency swaps			—						(3,170)						—						(3,170)

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,
			2022						2021						2022						2021
Total gains (losses) recognized on equity securities			$	(79)					$	9					$	(411)					$	151
Gains (Losses) recognized on equity securities sold			(8)						(2)						(56)						(2)
Unrealized gains (losses) recognized on equity securities held at end of period			$	(71)					$	11					$	(355)					$	153

At September 30, 2022, available-for-sale debt securities totaling $1,142 have maturities as follows - less than one year: $71; one to three years: $140; three to five years: $187; five or more years: $744.

 

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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 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 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 nine months ended September 30, 2022 and 2021, no ineffectiveness was measured on fair value hedges.

 

Cash Flow Hedging We designated most of our cross-currency swaps as cash flow hedges through September 30, 2022. 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.

On September 30, 2022, we de-designated most of our cross-currency swaps from cash flow hedges and re-designated these swaps as fair value hedges. The amount remaining in accumulated other comprehensive loss amounting to $1,857 related to cash flow hedges on the de-designation date will be reclassified to earnings when the hedged item is recognized in earnings or when it becomes probable that the forecasted transactions will not occur. Existing cross-currency swaps with a maturity of less than 12 months will retain their cash flow hedge designation. The election of fair value hedge designation for cross-currency swaps does not have an impact on our financial results.

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.

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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-Risk Contingency We have entered into agreements with our derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. At September 30, 2022, we had posted collateral of $1,767 (a deposit asset) and held collateral of $0 (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 $23. 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 $7,811. At December 31, 2021, we had posted collateral of $135 (a deposit asset) and held collateral of $7 (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,
			2022						2021
Cross-currency swaps			$	38,213					$	40,737
Foreign exchange contracts			617						—
Total			$	38,830					$	40,737

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			2022						2021						2022						2021
Interest rate swaps (Interest expense):
Gain (Loss) on interest rate swaps			$	(1)					$	(1)					$	(3)					$	(3)
Gain (Loss) on long-term debt			1						1						3						3
Cross-currency swaps:
Gain (Loss) on cross-currency swaps			(52)						(34)						7						(66)
Gain (Loss) on long-term debt			52						34						(7)						66
Gain (Loss) recognized in accumulated OCI			12						2						(48)						3
Foreign exchange contracts:
Gain (Loss) on foreign exchange contracts			(37)						—						(60)						—
Gain (Loss) on long-term debt			37						—						60						—
Gain (Loss) recognized in accumulated OCI			(5)						—						(9)						—

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												Nine months ended
			September 30,												September 30,
Cash Flow Hedging Relationships			2022						2021						2022						2021
Cross-currency swaps:
Gain (Loss) recognized in accumulated OCI			$	(690)					$	(237)					$	(1,077)					$	(742)
Foreign exchange contracts:
Gain (Loss) recognized in accumulated OCI			—						(14)						3						(14)
Other income (expense) - net reclassified from accumulated OCI into income			—						7						1						(3)
Interest rate locks:
Interest income (expense) reclassified from accumulated OCI into income			(15)						(22)						(51)						(70)
Other income (expense) reclassified from accumulated OCI into income			—						—						(45)						—
Distribution of WarnerMedia			—						—						(12)						—

NOTE 8. ACQUISITIONS, DISPOSITIONS AND OTHER ADJUSTMENTS

 

Acquisitions

 

Spectrum Auction On January 14, 2022, the Federal Communications Commission (FCC) announced that we were the winning bidder for 1,624 3.45 GHz licenses in Auction 110. We provided the FCC with an upfront deposit of $123 in the third quarter of 2021 and paid the remaining $8,956 in the first quarter of 2022, for a total of $9,079. We funded the purchase price using cash and short-term investments. We received the licenses in May 2022 and classified the auction deposits and related capitalized interest as “Licenses - Net” on our September 30, 2022 consolidated balance sheet.

In February 2021, the FCC announced that we were the winning bidder for 1,621 C-Band licenses. We provided 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. The licenses were received in July 2021. In the third quarter of 2022, we paid $98 of compensable relocation costs for a total of $1,703 Incentive Payments and compensable relocation costs paid to date for the C-Band licenses, with $1,605 paid in 2021.

Cash paid, including spectrum deposits (net of refunds), capitalized interest, and any payments for incentive and relocation costs are included in “Acquisitions, net of cash acquired” on our consolidated statements of cash flows. Interest is capitalized until the spectrum is ready for its intended use.

Dispositions

WarnerMedia On April 8, 2022, we completed the separation and distribution of our WarnerMedia business, and merger of Spinco, an AT&T subsidiary formed to hold the WarnerMedia business, with a subsidiary of Discovery, Inc., which was renamed Warner Bros. Discovery, Inc (WBD). Each AT&T shareholder was entitled to receive 0.241917 shares of WBD common stock for each share of AT&T common stock held as of the record date, which represented approximately 71% of WBD. In connection with and in accordance with the terms of the Separation and Distribution Agreement (SDA), prior to the distribution and merger, AT&T received approximately $40,400, which includes $38,800 of Spinco cash and $1,600 of debt retained by WarnerMedia. During the second quarter, assets of approximately $121,100 and liabilities of $70,600 were removed from our balance sheet as well as $45,041 of retained earnings and $5,632 of additional paid-in capital associated with the transaction. Additionally, in August 2022, we and WBD finalized the post-closing adjustment, pursuant to section 1.3 of the SDA, which resulted in a $1,200 payment to WBD in the third quarter of 2022. The $1,200 post-closing adjustment was included in the change in additional paid-in capital for the three months ended June 30, 2022, and for balance sheets ended June 30, 2022 and September 30, 2022. (See Note 13)

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AT&T, Spinco and Discovery entered into a Tax Matters Agreement, which governs the parties’ rights, responsibilities and obligations with respect to tax liabilities and benefits, the preservation of the expected tax-free status of the transactions contemplated by the SDA, and other matters regarding taxes.

Xandr On June 6, 2022, we completed the sale of the marketplace component of Xandr to Microsoft Corporation. Xandr was reflected in our historical financial statements as discontinued operations. (See Note 13)

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 consists of receivables arising from equipment installment plans, which are sold for cash and a deferred purchase price. Under this program, we transfer receivables to purchasers in exchange for cash and additional consideration upon settlement of the receivables. Under the terms of our agreement for this program, we continue to service the transferred receivables on behalf of the financial institutions.

For the nine months ended September 30, 2022, cash flows from operating activities included net cash proceeds received from the sales of receivables of approximately $2,180, comprised of equipment installment receivable sales of $8,598, or approximately $1,540 cash received net of remittances paid, and approximately $640 from other programs. For the nine months ended September 30, 2021, net cash proceeds received from the sales of receivables were approximately $940, comprised of equipment installment receivable sales of $7,231, or approximately $940 cash received net of remittances paid.

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.

 

The following table sets forth a summary of the equipment installment receivables and accounts being serviced:

			September 30, 2022						December 31, 2021
Gross receivables:			$	4,309											$	4,361
Balance sheet classification
Accounts receivable
Notes receivable			1,894												1,846
Trade receivables			693												606
Other Assets
Noncurrent notes and trade receivables			1,722												1,909
Outstanding portfolio of receivables derecognized from our consolidated balance sheets			10,049												9,767
Cash proceeds received, net of remittances1			8,180												6,644
1Represents amounts to which financial institutions remain entitled, excluding the deferred purchase price.

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 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.

 

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The following table sets forth a summary of equipment installment receivables sold under this program during the three and nine months ended September 30, 2022 and 2021:

			Three months ended												Nine months ended
			September 30,												September 30,
			2022						2021						2022						2021
Gross receivables sold			$	2,698					$	2,123					$	8,950					$	8,067
Net receivables sold1			2,590						2,069						8,623						7,858
Cash proceeds received			2,664						1,981						8,598						7,231
Deferred purchase price recorded			—						158						245						864
Guarantee obligation recorded			173						94						469						321
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 nine months ended September 30, 2022 and 2021:

			Three months ended												Nine months ended
			September 30,												September 30,
			2022						2021						2022						2021
Fair value of repurchased receivables			$	1,386					$	471					$	3,314					$	1,094
Carrying value of deferred purchase price			1,395						440						3,335						1,019
Gain (loss) on repurchases1			$	(9)					$	31					$	(21)					$	75
1These gains (losses) are included in “Selling, general and administrative” in the consolidated statements of income.

At September 30, 2022 and December 31, 2021, our deferred purchase price receivable was $1,740 and $3,177, respectively, of which $821 and $2,123 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, 2022 and December 31, 2021 was $345 and $371, respectively, of which $64 and $101 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.

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.

 

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The components of lease expense were as follows:

			Three months ended												Nine months ended
			September 30,												September 30,
			2022						2021						2022						2021
Operating lease cost			$	1,368					$	1,343					$	4,072					$	4,021
Finance lease cost:
Amortization of right-of-use assets			$	55					$	47					$	149					$	134
Interest on lease obligation			39						38						120						108
Total finance lease cost			$	94					$	85					$	269					$	242

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

						Nine months ended
						September 30,
						2022						2021
Cash Flows from Operating Activities
Cash paid for amounts included in lease obligations:
Operating cash flows for operating leases						$	3,507					$	3,442
Supplemental Lease Cash Flow Disclosures
Operating lease right-of-use assets obtained in exchange for new       operating lease obligations						2,775						2,667

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

			September 30, 2022						December 31, 2021
Operating Leases
Operating lease right-of-use assets			$	21,782					$	21,824
Accounts payable and accrued liabilities			$	3,468					$	3,393
Operating lease obligation			18,741						18,956
Total operating lease obligation			$	22,209					$	22,349
Finance Leases
Property, plant and equipment, at cost			$	2,612					$	2,494
Accumulated depreciation and amortization			(1,141)						(1,053)
Property, plant and equipment, net			$	1,471					$	1,441
Current portion of long-term debt			$	155					$	127
Long-term debt			1,476						1,442
Total finance lease obligation			$	1,631					$	1,569
			September 30,
			2022						2021
Weighted-Average Remaining Lease Term (years)
Operating leases			8.1						8.2
Finance leases			7.9						9.0
Weighted-Average Discount Rate
Operating leases			3.6		%				3.7		%
Finance leases			7.9		%				8.3		%

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

At September 30, 2022			Operating						Finance
			Leases						Leases
Remainder of 2022			$	1,162					$	70
2023			4,486						279
2024			4,062						270
2025			3,413						274
2026			2,703						253
Thereafter			10,539						1,136
Total lease payments			26,365						2,282
Less: imputed interest			(4,156)						(651)
Total			$	22,209					$	1,631

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NOTE 11. TRANSACTIONS WITH DIRECTV

On July 31, 2021, we closed our transaction with TPG to form a new company named DIRECTV. The transaction resulted in our deconsolidation of the Video business. As DIRECTV is jointly governed by a board with representation from both AT&T and TPG, with TPG having tie-breaking authority on certain key decisions, most significantly the appointment and removal of the CEO, we have concluded that we are not the primary beneficiary of DIRECTV. Effective August 1, 2021, we began accounting for our investment in DIRECTV under the equity method and recorded our share of DIRECTV earnings as equity in net income of affiliates, with DIRECTV considered a related party.

For the nine months ended September 30, 2022, our share of DIRECTV’s earnings included in equity in net income of affiliates was $1,429. Cash distributions from DIRECTV for the first nine months totaled $3,634, with $1,429 classified as operating activities and $2,205 classified as investing activities in our consolidated statement of cash flows. Our investment in DIRECTV at September 30, 2022 was $3,352.

In addition to the assets and liabilities contributed to DIRECTV, at close we recorded total obligations of $2,100 to cover certain net losses under the NFL SUNDAY TICKET contract, of which $1,800 is in the form of a note payable to DIRECTV. During the first nine months of 2022, cash payments to DIRECTV on the note totaled $1,070 and were classified as financing activities in our consolidated statement of cash flows. Amounts due under the DIRECTV note were $271 at September 30, 2022.

We also provide DIRECTV with network transport for U-verse products and sales services under commercial arrangements for up to five years. Under separate transition services agreements, we provide DIRECTV certain operational support, including servicing of certain of their customer receivables for up to three years. For the nine months ended September 30, 2022, we billed DIRECTV approximately $920 for these costs, which were recorded as a reduction to the operations and support expenses incurred and resulted in net retained costs to AT&T of $197 in the third quarter and $532 for the first nine months of 2022.

At September 30, 2022, we had accounts receivable from DIRECTV of $571 and accounts payable to DIRECTV of $210.

We are not committed, implicitly or explicitly to provide financial or other support, other than noted above, as our involvement with DIRECTV is limited to the carrying amount of the assets and liabilities recognized on our balance sheet.

NOTE 12. 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,
			2022						2021						2021						2020
Cash and cash equivalents from continuing operations			$	2,423					$	18,485					$	19,223					$	7,924
Cash and cash equivalents from discontinued operations			—						2,785						1,946						1,816
Restricted cash in Prepaid and other current assets			1						2						3						9
Restricted cash in Other Assets			70						133						144						121
Cash and Cash Equivalents and Restricted Cash			$	2,494					$	21,405					$	21,316					$	9,870

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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:			2022						2021
Interest			$	5,981					$	5,931
Income taxes, net of refunds			400						215
The following table summarizes capital expenditures:
			Nine months ended
			September 30,
			2022						2021
Purchase of property and equipment			$	15,273					$	11,919
Interest during construction - capital expenditures1			124						132
Total Capital Expenditures			$	15,397					$	12,051
The following table summarizes acquisitions, net of cash acquired:
			Nine months ended
			September 30,
			2022						2021
Business acquisitions			$	—					$	—
Spectrum acquisitions			9,076						23,017
Interest during construction - spectrum1			883						516
Total Acquisitions			$	9,959					$	23,533
1 Total capitalized interest was $1,007 and $648 for the nine months ended September 30, 2022 and 2021, respectively.

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 nine months ended September 30, 2022 and 2021, we recorded vendor financing commitments related to capital investments of approximately $3,916 and $3,624, respectively.

Total vendor financing payables included in our September 30, 2022 consolidated balance sheet were approximately $4,635, with $3,105 due within one year (in “Accounts payable and accrued liabilities”) and the remainder predominantly due within two to five years (in “Other noncurrent liabilities”).

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Debt Transactions At September 30, 2022, our debt obligations totaled $133,480. Our debt activity primarily consisted of the following:

			First Quarter			Second Quarter			Third Quarter			Nine months ended September 30, 2022
Net commercial paper borrowings			$	1,471		$	(5,219)		$	(724)		$	(4,472)
Issuance of Notes and Debentures:
Private financing			$	—		$	—		$	750		$	750
Other			479			—			—			479
Debt Issuances			$	479		$	—		$	750		$	1,229
Repayments:
2021 Syndicated Term Loan			$	—		$	(7,350)		$	—		$	(7,350)
BAML Bilateral Term Loan – Tranche A			—			(1,000)			—			(1,000)
Private financing			—			(750)			—			(750)
Repayment of other short-term borrowings			$	—		$	(9,100)		$	—		$	(9,100)
USD notes1,2,3			$	(123)		$	(18,957)		$	—		$	(19,080)
Euro notes			—			(3,343)			—			(3,343)
BAML Bilateral Term Loan – Tranche B			—			(1,000)			—			(1,000)
Other			(667)			(123)			(199)			(989)
Repayments of long-term debt			$	(790)		$	(23,423)		$	(199)		$	(24,412)
1On March 31, 2022, we issued a notice for the redemption in full of all of the outstanding $1,962 aggregate principal amount of 3.000% Global Notes due June 30, 2022. We redeemed the notes on April 30, 2022 at 100% of the principal amount.
2On April 11, 2022, we issued notices for the redemption in full of all of the outstanding approximately $9,042 aggregate principal amount of various global notes due 2022 to 2026 with coupon rates ranging from 2.625% to 4.450% (Make-Whole Notes). The Make-Whole Notes were redeemed on the redemption dates set forth in the notices of redemption, at “make whole” redemption prices calculated as set forth in the respective redemption notices in the second quarter.
3Includes $7,954 of cash paid toward the $8,822 aggregate principal amount of various notes that were tendered for cash in May 2022. The notes had interest rates ranging between 3.100% and 8.750% and original maturities ranging from 2026 to 2061.

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The following is a summary of operating results included in income (loss) from discontinued operations for the third quarter and nine months ended September 30:

			Three months ended												Nine months ended
			September 30,												September 30,
			20221						2021						2022						2021
Revenues			$	4					$	8,596					$	9,454					$	24,963
Operating Expenses
Cost of revenues			1						4,392						5,481						13,830
Selling, general and administrative			10						2,113						2,789						5,649
Asset abandonments and impairments			—						57						—						4,612
Depreciation and amortization			1						1,163						1,173						3,837
Total operating expenses			12						7,725						9,443						27,928
Interest expense			—						40						131						131
Equity in net income (loss) of affiliates			—						(93)						(27)						25
Other income (expense) – net2			71						757						(68)						541
Total other income (expense)			71						624						(226)						435
Income (Loss) before income taxes			63						1,495						(215)						(2,530)
Income tax expense (benefit)			10						241						(69)						(45)
Net income (loss) from discontinued operations			$	53					$	1,254					$	(146)					$	(2,485)
1Includes results from WarnerMedia operations in Mexico that were subject to regulatory approval that transferred in September 2022.
2“Other income (expense) - net” includes a gain from post-closing adjustment related to the sale of the marketplace component of Xandr in the three and nine months ended September 30, 2022, and a gain of $766 from the sale of Playdemic for the three months and nine months ended September 30, 2021.

The following is a summary of assets and liabilities attributable to discontinued operations, which were included in our Consolidated Balance Sheet at December 31, 2021:

						December 31,
						2021
Assets:
Current assets						$	9,005
Noncurrent Inventories and Theatrical Film and Television Production Costs						18,983
Property, plant and equipment, net						4,255
Goodwill						40,484
Other Intangibles – Net						40,273
Other assets						6,776
Total assets, discontinued operations						$	119,776
Liabilities:
Current liabilities						$	12,912
Other liabilities						20,643
Total liabilities, discontinued operations						$	33,555

In preparation for close, on April 7, 2022, Spinco drew $10,000 on its $10,000 term loan credit agreement (Spinco Term Loan), which conveyed to WBD. Total debt conveyed was approximately $41,600, which includes $1,600 of existing WarnerMedia debt, $30,000 of Spinco senior notes issued in March 2022 and the $10,000 Spinco Term Loan. WarnerMedia cash transfer to Discovery was approximately $2,660.

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