Summary
AT&T Inc. (T) has filed an 8-K report to provide supplemental operating information following the separation of its U.S. video business (DIRECTV) on July 31, 2021. This filing offers pro forma financial information as if the separation occurred on January 1, 2020, allowing investors to better understand the historical performance of AT&T excluding the divested video operations. Key adjustments include the removal of video business results, intercompany eliminations related to content licensing, and the recognition of a new advertising revenue share agreement with DIRECTV. The company also detailed its accounting treatment for the DIRECTV transaction, including how retained costs and transition service agreements (TSAs) will be handled. AT&T expects to retain approximately $650 million per quarter in costs related to the video business, with about 50% expected to be reimbursed by DIRECTV through TSAs and commercial agreements. Additionally, AT&T has agreed to cover net losses under the NFL SUNDAY TICKET contract up to a $2.1 billion cap, which will be reported as a financing activity. Investors should note that AT&T will begin reporting its share of DIRECTV's earnings as equity in net income of affiliates from Q3 2021, with a clear intention to exclude merger-related amortization and purchase accounting impacts from its adjusted diluted EPS.
Key Highlights
- 1AT&T provided supplemental pro forma operating information excluding the DIRECTV business, as if the separation occurred on January 1, 2020.
- 2The filing details adjustments for the removal of video business results, intercompany eliminations, and a new revenue share agreement for advertising with DIRECTV.
- 3AT&T expects to retain approximately $650 million per quarter in video-related costs, with about 50% anticipated to be reimbursed by DIRECTV via transition service agreements.
- 4The company will cover net losses for the NFL SUNDAY TICKET contract up to a $2.1 billion cap, to be treated as a financing activity.
- 5Starting Q3 2021, AT&T will report its share of DIRECTV's earnings as equity in net income of affiliates.
- 6AT&T intends to exclude DIRECTV's merger-related amortization and purchase accounting impacts from its adjusted diluted EPS.
- 7Proceeds from the DIRECTV transaction will be classified, with approximately $1.8 billion reported as cash from financing activities and the remainder from investing activities.