SECURITIES AND EXCHANGE COMMISSION
	Washington, D.C. 20549
(Mark One)
	FORM 11-K
☒	ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2017
	OR
☐	TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from              to
	Commission File Number:1-8610
	A. Full title of the plan and the address of the plan, if different from that of the issuer named below:
	AT&T SAVINGS AND SECURITY PLAN
	B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
	AT&T INC.
	208 S. Akard, Dallas, Texas 75202

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Plan Administrator and Plan Participants

AT&T Savings and Security Plan

Dallas, Texas

Opinion on the Financial Statements

We have audited the accompanying statement of net assets available for benefits of AT&T Savings and Security Plan (Plan) as of December 31, 2017, the related statement of changes in net assets available for benefits for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of AT&T Savings and Security Plan as of December 31, 2017, and the changes in net assets available for benefits for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Basis of Opinion

These financial statements are the responsibility of the Plan's management.  Our responsibility is to express an opinion on these financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Plan's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Report on Supplemental Information

The supplemental information in the accompanying schedule of assets held (at end of year) as of December 31, 2017 has been subjected to audit procedures performed in conjunction with the audit of the Plan's financial statements. The supplemental schedule is the responsibility of the Plan's management. Our audit procedures included determining whether the supplemental schedule reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental schedule. In forming our opinion on the supplemental schedule, we evaluated whether the supplemental schedule, including its form and content, is presented in conformity with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental information is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

/s/ BKD, LLP

We have served as the Plan's auditor since 2018

San Antonio, Texas

June 22, 2018

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

 

AT&T SAVINGS AND SECURITY PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
(Dollars in Thousands)
		December 31,
	2017			2016
ASSETS
Investments at fair value (See Notes 3 and 4)	$	4,621,952		$	4,893,896
Fully benefit-responsive investment contracts at contract value (See Note 4)		720,943			814,265
Notes receivable from participants		199,179			233,312
Receivable for investments sold		1,466			2,383
Participant contributions receivable		3,509			3,349
Employer contributions receivable		1,580			1,589
Dividends and interest receivable		25			16
Total Receivables		205,759			240,649
Total Assets		5,548,654			5,948,810
LIABILITIES
Administrative expenses payable		749			1,508
Due to broker for securities purchased		680			2,725
Total Liabilities		1,429			4,233
Net Assets Available for Benefits	$	5,547,225		$	5,944,577
See Notes to Financial Statements.

 

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AT&T SAVINGS AND SECURITY PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2017
(Dollars in Thousands)
Net Assets Available for Benefits, December 31, 2016	$	5,944,577
Additions to Net Assets:
Contributions:
Participant contributions		160,155
Employer contributions		75,944
Rollover contributions		23,673
		259,772
Investment Income:
Net appreciation in fair value of investments		270,795
Dividends on AT&T common shares		96,433
Interest		17,398
		384,626
Interest income on notes receivable from participants		9,012
Total Additions		653,410
Deductions from Net Assets:
Distributions		462,816
Administrative expenses		5,737
Total Deductions		468,553
Net increase before transfers		184,857
Transfer to other qualified savings plan		(582,209)
Net Assets Available for Benefits, December 31, 2017	$	5,547,225
See Notes to Financial Statements.

 

 

 

 

NOTE 1. PLAN DESCRIPTION

The Bank of New York Mellon Corporation (BNY Mellon) serves as the trustee for the Plan. Fidelity Investments Institutional Operations Company, Inc. (Fidelity) serves as record keeper for the Plan.

During 2017, participants could invest their contributions in one or more of seven funds in 1% increments:

· AT&T Shares Fund	· Global Equity Fund
· Bond Fund	· Mid and Small Cap Stock Fund
· Large Cap Stock Fund	· International Stock Fund
· Interest Income Fund

Participants contribute to the Plan through payroll allotments. Participants may also contribute amounts representing distributions from other qualified defined benefit and defined contribution plans (rollovers). The Company contributes to the Plan by matching the participants' contributions based on the provisions of the Plan. Company matching contributions are made solely in the form of shares of AT&T's common stock held in an Employee Stock Ownership Plan (ESOP), which is part of the AT&T Shares Fund, within this Plan. Matching contributions made to the Plan can be immediately diversified into any of the fund options above.

Dividends on shares in the AT&T Shares Fund can either be reinvested in the AT&T Shares Fund on a quarterly basis, or paid into a short-term interest bearing fund for distribution before the end of the year. Interest earned on dividends held in the short-term interest bearing fund are used to purchase additional units of the AT&T Shares Fund in the participant's account. During 2017, Plan participants elected to receive $21,361 in dividend distributions. This amount is included in distributions on the Plan's Statement of Changes in Net Assets Available for Benefits.

Each participant is entitled to exercise voting rights attributable to the AT&T shares allocated to their account and is notified by the Company prior to the time that such rights may be exercised. Subject to the fiduciary provisions of ERISA, the trustee will not vote any allocated shares for which instructions have not been given by a participant. The trustee votes any unallocated shares in the same proportion as it votes those shares that were allocated to the extent the proportionate vote is consistent with the trustee's fiduciary obligations under ERISA. Participants have the same voting rights in the event of a tender or exchange offer.

Although it has not expressed any intent to do so, AT&T has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA and collective bargaining obligations. In the event that the Plan is terminated, subject to the conditions set forth by ERISA, the account balances of all participants shall be 100% vested.

During 2017, AT&T initiated a review with Fidelity to identify where participants maintained balances within the Plan. When participant balances were identified as "inactive" in the Plan, those balances were merged into the participant account identified as "active" in the AT&T Retirement Savings Plan (AT&T RSP). As a result, $582,209 was transferred from the Plan into the AT&T RSP during 2017.

 

 

Administrative Expenses The reasonable expenses of plan administration may be charged to the Plan in accordance with procedures adopted by the plan administrator (as defined by the Plan). Brokerage fees, transfer taxes and other expenses incident to the purchase or sale of securities by the Trustee shall be deemed to be part of the cost of such securities, or deducted in computing the proceeds, as the case may be. Taxes, if any, on any assets held or income received by the Trustee will be charged appropriately against the accounts of Plan participants as determined by the plan administrator. To the extent that expenses incident to the administration of the Plan are paid from the Plan, the plan administrator will determine which expenses are to be charged to and paid from participant's individual accounts, which expenses are to be charged to and paid from the accounts of all participants (and how they are to be allocated among such accounts), and which expenses are to be charged to and paid from the accounts of one or more identified groups of participants (and how they are to be allocated among such accounts). All expenses of administering the Plan that are not charged to the Plan will be borne by the respective participating companies in the Plan as determined by the plan administrator.

 

 

NOTE 3. FAIR VALUE MEASUREMENTS

Accounting Standards Codification 820, Fair Value Measurement, establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1

Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.

Level 2

Inputs to the valuation methodology include:

·	Quoted prices for similar assets and liabilities in active markets;

·	Quoted prices for identical or similar assets or liabilities in inactive markets;

·	Inputs other than quoted market prices that are observable for the asset or liability;

·	Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3

Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset's or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The valuation methodologies described in Note 2 may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while Plan management believes its 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 at December 31, 2017 and 2016.

The following table sets forth by level, within the fair value hierarchy, the Plan's investments at fair value as of December:
	Plan Assets at Fair Value as of December 31, 2017
	Level 1			Level 2			Level 3			Total
AT&T common stock	$	1,755,249		$	-		$	-		$	1,755,249
Mutual funds or exchange-traded funds		29,074			-			-			29,074
Total assets in fair value hierarchy	$	1,784,323		$	-		$	-		$	1,784,323
Common/collective trusts measured at net asset value:
Large cap U.S. stock index fund1											1,080,599
Mid and small cap U.S. stock index fund2											645,041
Bond index fund3											381,041
International stock index fund4											405,018
Global equity fund5											325,930
Total investments at fair value										$	4,621,952

The following table sets forth by level, within the fair value hierarchy, the Plan's investments at fair value as of December:
	Plan Assets at Fair Value as of December 31, 2016
	Level 1			Level 2			Level 3			Total
AT&T common stock	$	2,222,706		$	-		$	-		$	2,222,706
Mutual funds or exchange-traded funds		53,659			-			-			53,659
Total assets in fair value hierarchy	$	2,276,365		$	-		$	-		$	2,276,365
Common/collective trusts measured at net asset value:
Large cap U.S. stock index fund1											998,042
Mid and small cap U.S. stock index fund2											612,182
Bond index fund3											399,017
International stock index fund4											321,719
Global equity fund5											286,571
Total investments at fair value										$	4,893,896

 

 

NOTE 4. INVESTMENTS

Investments held by the Plan are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investments, it is at least reasonably possible that changes in the values of investments could occur in the near term and that such changes could materially affect participants' account balances and the amounts reported in the statements of net assets available for benefit. Plan participants' accounts that are invested in the Company stock fund option are exposed to market risk in the event of a significant decline in the value of AT&T stock.

 

 

NOTE 5. PARTIES-IN-INTEREST TRANSACTIONS

The Plan may, at the discretion of the Plan's participants or via the Company match, invest its assets in the Company's common stock. The Plan's AT&T Shares Fund held 45,145,290 and 52,247,398 shares of the Company's common stock as of December 31, 2017 and 2016, respectively. Dividends earned by the Plan's AT&T Shares Fund on the Company's common stock were $73,657 for the year ended December 31, 2017.

Accounting principles generally accepted in the United States require Plan management to evaluate uncertain tax positions taken by the Plan. The financial statement effects of a tax position are recognized when the position is more likely than not, based on the technical merits, to be sustained upon examination by the IRS. The Plan administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2017, there were no uncertain positions taken or expected to be taken. The Plan has recognized no interest or penalties related to uncertain tax positions. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.

 

 

NOTE 7. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500

		2017				2016
Net Assets Available for Benefits per the financial statements		$	5,547,225			$	5,944,577
Distributions payable to participants			(1,430	)			(564	)
Net Assets Available for Benefits per the Form 5500		$	5,545,795			$	5,944,013

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