TBB, AT&T Inc. 5.350% Global Notes due 2066

Will it survive?

• Can it pay its interest? 3.6×
  Adequate
  Operating income $24.2B ÷ interest expense $6.8B
  What this means

  Comfortable in a normal year, but below the margin of safety Graham looked for. Worth checking how stable the coverage has been across a full cycle.

• How heavy is the debt, net of cash? $123.6B · 5.1× operating profit
  Heavy net debt
  Cash $18.2B + ST investments $1.9B − debt $143.7B
  What this means

  Netting $20.1B of cash and short-term investments against $143.7B of debt leaves $123.6B owed, about 5.1× a year's operating profit (5.9× on the gross debt, before the cash). Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.

• How long is cash tied up? -133d
  Negative, funded by others
  DSO 26 + DIO 22 − DPO 180 days
  What this means

  Days cash is tied up between paying suppliers and collecting from customers. A negative cycle is a quiet moat: suppliers and customers fund the operation (Buffett's “float”), the company grows on other people's money.

Is it a good business?

• Return on invested capital 6%
  Below average through the cycle
  9-yr median, range -1%–9%; 8% latest = NOPAT $20.7B ÷ invested capital $252.0B
  Industry peers: median 8%
  What this means

  The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 9 years (it ran 8% most recently), so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.

• Owner-earnings margin 15%
  High through the cycle
  10-yr median margin, range 10%–20%; latest $19.4B = operating cash $40.3B − maintenance capex $20.8B
  Industry peers: median 10%
  What this means

  What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's 15% of revenue this year, a 15% median across 10 years.

• Are earnings backed by cash? 1.84×
  Cash-backed
  Cash from ops $40.3B ÷ net income $22.0B
  What this means

  How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.

How is the cash used?

• Where do the earnings go? 65%
  Returns about half
  Dividends + buybacks $12.7B ÷ Owner Earnings $19.4B
  What this means

  Of $19.4B Owner Earnings, $12.7B (65%) went back to shareholders, $8.2B dividends, $4.5B buybacks. Returning most of it is the mark of a mature business with little left to reinvest at a high return; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.

• Investing or harvesting? 1.00×
  Maintaining
  Capex $20.8B ÷ depreciation $20.9B
  What this means

  Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Graham’s defensive tests · 2 of 6 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

• Adequate size Pass
  Revenue ≥ $2B · $125.6B
  What this means

  Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.

• Strong liquidity Miss
  Current ratio ≥ 2× · 0.91×
  What this means

  Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.

• Conservative debt Miss
  Debt ≤ working capital · $143.7B vs ($5.0B) WC
  What this means

  Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.

• Earnings stability Miss
  A profit every year (10-yr record) · 2 loss years
  What this means

  Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.

• Dividend record Pass
  Uninterrupted dividends · paid every year (10)
  What this means

  An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.

• Earnings growth Miss
  Earnings +33% over the record · −23%
  What this means

  At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.

• Moderate price —
  P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
  What this means

  Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $2.27/share (latest year $3.16), the averaged base the calculator's gate runs on, and book value is $18.20/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2016–2025

Whether the record’s returns held, and what the capital reinvested earned.

• Profitable years 8 of 10
  What this means

  Lost money in 2 year(s), look at what happened there before trusting the average.

• Return on capital ≥ 15% 0 of 10 yrs
  What this means

  A moat shows up as a high return on invested capital that holds year after year, not one good vintage.

• Operating margin 14% → 18% (3-yr avg ends)

  In the filing’s words The record and the words agree: the margin widened and the filing attributes the gain to its own pricing, not volume alone.

  What this means

  Through the cycle the operating margin widened — about 14% early to 18% lately, median 15% — pricing power intact or improving.

• Reinvestment, incremental ROIC returns capital
  What this means

  The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.

• Owner earnings growth +1%/yr
  What this means

  Owner earnings grew about 1% a year over the record.

• Worst year 2022 · −3.8% op. margin
  What this means

  Operations went underwater in 2022, understand why before trusting the good years.

• Share count +1.7%/yr
  What this means

  The share count is rising, dilution works against you on a per-share basis.

• Dividend record paid
  What this means

  Paid a dividend in 10 of the years on record.

• How management talks about it Owner’s terms
  What this means

  The filing reasons in an owner’s terms — per-share, return on capital, the long term — and the record has held; the words and the results are of a piece.