Anassessment of the Future Health of a Company
UniversityAffiliation
AT&TInc. Pro-form Statement of Income for the years ending 2017, 2018,2019, 2020, and 2021
Dollarsin millions
2017 | 2018 | 2019 | 2020 | 2021 | |
Operating revenues | |||||
Service | $146,397 | $162,501 | $180,376 | $200,217 | $230,250 |
Equipment | 19,964 | 26,352 | 34,785 | 45,916 | 60,600 |
Total operating revenues | 166,361 | 188,853 | 215,161 | 246,133 | 290,850 |
Operating Expenses | |||||
Sales and service costs | |||||
Equipment | 20,809 | 22,474 | 24,272 | 26,214 | 28,311 |
Broadcast | 17,994 | 26,991 | 28,900 | 31,212 | 33,709 |
Selling and administrative | 34,715 | 37,215 | 39,200 | 35,400 | 40,100 |
Abandonment of network assets | 22,200 | – | 25,300 | 20,000 | – |
Depreciation and Amortization | 22,966 | 22,800 | 24,500 | 25,600 | 25,900 |
Total operating expenses | 118,684 | 109,480 | 142,172 | 138,426 | 128,020 |
Operating income | 22,583 | 30,233 | 18,888 | 23,700 | 33,400 |
Other income (expense) | |||||
Interest expense | (4,573) | (4,676) | (5,190) | (5,761) | (6,395) |
Equity in net income of affiliates | 298 | 100 | 300 | 550 | 89 |
Other income (expense) Net | (120) | 1,088 | 857 | 544 | 200 |
Total other income (expense) | (4,395) | (3,488) | (4,033) | (4,667) | (6,106) |
Income Before Income Taxes | 18,188 | 26,745 | 14,855 | 19,033 | 27,294 |
Income tax expense | 6,184 | 9,093 | 5,051 | 6,471 | 9,280 |
Net Income | 12,004 | 17,652 | 9,804 | 12,562 | 18,014 |
Less: Net Income to Non-controlling Interest | (240) | (353) | (196) | (251) | (360) |
Net Income for AT&T | $11,764 | $17,299 | $9,608 | $12,311 | $17,654 |
Basic EPS for AT&T | $2.18 | $3.2 | $1.8 | $2.3 | $3.3 |
Diluted EPS Attributable to AT&T | $2.18 | $3.2 | $1.8 | $2.3 | $3.3 |
AT&TInc. Pro-form Statement of Financial Position for the years ending2017, 2018, 2019, 2020, and 2021
Dollarsin millions excluding the per share totals
2017 | 2018 | 2019 | 2020 | 2021 | |
Assets | |||||
Current Assets | |||||
Cash and its Equivalents | $6,862 | $7,136 | $7,523 | $7,226 | $6,935 |
Accounts receivable | 15,530 | 17,673 | 19,971 | 22,567 | 25,500 |
Prepaid expenses | 1,382 | 1,783 | 2,300 | 2,967 | 3,827 |
Other current assets | 18,249 | 25,001 | 34,251 | 46,924 | 64,286 |
Total current assets | 42,023 | 51,593 | 64,045 | 79,684 | 100,548 |
Property, Plant and Equipment – Net | 130,895 | 132,300 | 133,705 | 135,110 | 136,515 |
Goodwill | 129,546 | 131,946 | 134,346 | 136,746 | 139,146 |
Licenses | 139,640 | 140,430 | 141,220 | 142,010 | 142,800 |
Customer Lists and Relationships – Net | 20,600 | 50,700 | 65,800 | 45,679 | 34,890 |
Other intangible assets-net | 16,619 | 28,256 | 48,033 | 81,656 | 138,815 |
Investments in Equity Affiliates | 18,670 | 700 | 300 | 15,400 | 250 |
Other assets | 18,700 | 13,500 | 15,600 | 14,000 | 12,900 |
Total assets | $540,046 | $601,018 | $667,094 | $729,969 | $806,412 |
Liabilities and the Stockholders’ contribution | |||||
Current Liabilities | |||||
Debt maturing within a year | $9,216 | $10,796 | $12,376 | $13,956 | $15,536 |
Accounts payable and the accrued liabilities | 14,416 | 21,196 | 27,976 | 34,756 | 41,536 |
Advanced billings and customer deposits | 5,259 | 5,836 | 6,413 | 6,990 | 7,567 |
Accrued taxes | 3,261 | 4,346 | 5,431 | 6,516 | 7,601 |
Dividends payable | 3,462 | 3,974 | 4,486 | 4,998 | 5,510 |
Total current liabilities | 35,614 | 46,148 | 56,682 | 67,216 | 77,750 |
Long-Term debt | 161,252 | 203,989 | 246,726 | 289,463 | 332,200 |
Credits deferred and additional non-current liabilities | |||||
Income taxes deferred | 73,926 | 91,671 | 109,416 | 127,161 | 144,906 |
Postemployment benefit obligation | 31,445 | 28,628 | 25,811 | 22,994 | 20,177 |
Other noncurrent liabilities | 26,527 | 30,796 | 35,065 | 39,334 | 43,603 |
Total credits deferred and additional noncurrent liabilities | 131,898 | 151,095 | 170,292 | 189,489 | 208,686 |
Stockholders’ Equity | |||||
Ordinary shares | 6,495 | 6,495 | 6,495 | 6,495 | 6,495 |
Additional capital | 110,379 | 92,373 | 120,343 | 109,254 | 109,169 |
Retained earnings | 60,659 | 32,497 | 101,888 | 58,902 | 61,492 |
Treasury stock | – | – | – | – | – |
Accumulated other comprehensive income | 33,509 | 72,843 | 7,800 | 8,900 | 9,000 |
Non-controlling interest | 240 | 353 | 196 | 251 | 360 |
Total stockholders’ equity | 211,282 | 199,786 | 199,786 | 183,802 | 186,516 |
Total Liabilities and Stockholders’ Equity | $540,046 | $601,018 | $667,094 | $729,969 | $806,412 |
T-MobileUS, Inc. Pro-formaStatement of Comprehensive Income for the years ending 2017, 2018,2019, 2020, and 2021
InMillions
2017 | 2018 | 2019 | 2020 | 2021 | |
Revenues | |||||
Branded postpaid revenues | $15,687 | $17,099 | $18,638 | $20,315 | $22,143 |
Branded prepaid revenues | 9,622 | 12,258 | 14,894 | 17,530 | 20,166 |
Wholesale revenues | 825 | 919 | 1,013 | 1,107 | 1,201 |
Roaming and other service revenues | 347 | 397 | 447 | 497 | 547 |
Total service revenues | 25,508 | 29,079 | 33,150 | 37,791 | 43,081 |
Equipment sales | 9,580 | 12,371 | 15,162 | 17,953 | 20,744 |
Other revenues | 468 | 536 | 604 | 672 | 740 |
Total revenues | 62,037 | 72,659 | 83,908 | 95,865 | 108,622 |
Operating expenses | |||||
Operating expenses | 12,713 | 15,805 | 18,897 | 21,989 | 25,081 |
Selling, general and administrative | 9,897 | 10,931 | 11,965 | 12,999 | 14,033 |
Depreciation and amortization | 5,025 | 5,638 | 6,251 | 6,864 | 7,476 |
Cost of MetroPCS business combination | 445 | 744 | 1,043 | 1,342 | 1,641 |
Impairment charges | 0 | 0 | 9,677 | 0 | 0 |
Gains on disposal of spectrum licenses | -800 | -550 | 0 | -788 | -89 |
Total operating expenses | 27,280 | 32,568 | 47,833 | 42,406 | 48,142 |
Operating income (loss) | 34,757 | 40,091 | 36,075 | 53,459 | 60,480 |
Other income (expense) | |||||
Interest expense to affiliates | (468) | (658) | (848) | (1,038) | (1,228) |
Interest expense | (1,882) | (2,691) | (3,500) | 0 | 0 |
Interest income | 124 | 335 | 191 | 143 | 178 |
Other income (expense), net | 123 | 35 | -5 | -20 | 100 |
Income (loss) before income taxes | 32,654 | 37,112 | 33,609 | 52,544 | 59,530 |
Income tax expense | (11,429) | (12,989) | (11,763) | (18,390) | (20,836) |
Net income (loss) | 21,225 | 24,123 | 21,846 | 34,154 | 38,694 |
Basic EPS | $0.035 | $0.031 | $0.034 | $0.02 | 0.02 |
T-MobileUS, Inc. pro-forma statementof financial position (USD $) for the years ending 2017, 2018, 2019,2020, and 2021
InMillions
2017 | 2018 | 2019 | 2020 | 2021 | |
Current assets | |||||
Cash and its equivalents | $6,467 | $7,043 | $7,619 | $8,195 | $8,771 |
Accounts receivable, net of allowances | 2,431 | 2,714 | 2,997 | 3,280 | 3,563 |
Equipment installment plan receivables, net | 4,653 | 6,244 | 7,835 | 9,426 | 11,017 |
Accounts receivable from affiliates | 111 | 146 | 181 | 216 | 251 |
Inventories | 1,920 | 2,755 | 3,590 | 4,425 | 5,260 |
Deferred tax assets, net | 1,062 | 1,211 | 1,360 | 1,509 | 1,658 |
Other current assets | 1,422 | 1,763 | 2,104 | 2,445 | 2,786 |
Total current assets | 18,066 | 21,876 | 25,686 | 29,496 | 33,306 |
Property and equipment, net | 15,797 | 16,693 | 17,589 | 18,485 | 19,381 |
Goodwill | 1,683 | 1,683 | 1,683 | 1,683 | 1,683 |
Spectrum licenses | 20,039 | 23,872 | 27,705 | 31,538 | 35,371 |
Other intangible assets, net | 1,037 | 1,537 | 2,037 | 2,537 | 3037 |
Equipment installation plan receivables due in a year | 1,352 | 1,905 | 2,458 | 3,011 | 3,564 |
Other assets | 290 | 294 | 298 | 302 | 306 |
Total assets | 58,264 | 67,860 | 77,456 | 87,052 | 96,648 |
Current liabilities | |||||
Accounts payable and liabilities accrued | 5,966 | 8,666 | 11,366 | 14,066 | 16,766 |
Current payables to associates | 215 | 247 | 279 | 311 | 343 |
Short-term debt | 166 | 331 | 165 | 89 | 70 |
Deferred revenue | 452 | 466 | 480 | 494 | 508 |
Other current liabilities | 494 | 776 | 1,058 | 1,340 | 1,622 |
Total current liabilities | 7,293 | 10,486 | 13,348 | 16,300 | 19,309 |
Long-term debt | 15,309 | 17,237 | 19,165 | 21,093 | 23,021 |
Debt to associates | 5,600 | 5,600 | 5,600 | 5,600 | 5,600 |
Long-term financial obligation | 2,509 | 2,534 | 2,559 | 2,584 | 2,609 |
Deferred tax liabilities | 4,759 | 4,987 | 5,215 | 5,443 | 5,671 |
Deferred rents | 2,222 | 2,440 | 2,658 | 2,876 | 3,094 |
Other long-term liabilities | 659 | 744 | 829 | 914 | 999 |
Total long-term liabilities | 31,058 | 33,542 | 36,026 | 38,510 | 40,994 |
Stockholders` equity | |||||
Total stockholders` equity | 19,913 | 23,832 | 28,082 | 32,242 | 36,345 |
Total liabilities and stockholders` equity | 58,264 | 67,860 | 77,456 | 87,052 | 96,648 |
Thedigital and communications industry is faced with high competition.AT&TInc. hasoverthe years experienced the same leading to an increase in thebroadcast and advertisement costs. Technology is advancing andtherefore there is a need for high capital investments to acquiresome businesses, for example, the acquisition of two Mexican wirelessproducers and the DIRECTVin 2015. With this trend, the pro-forma statement of AT&TInc. has increased capital requirements. The increased revenue in thepro-forma financial statement is due to the large market share asAT&T Inc. is among the three providers of services in Mexico.
Currently,the company is incurring high expenses to provide an allowance forbad and doubtful debts, and failure to honor debts leads to losses tothe company. The receivables are analyzed and adjusted, and anychange of about ten percent on the uncollectible amounts could leadto a provision of nearly $142. Most of the cash and cash equivalentsare held in foreign countries hence subject to much restrictionsmaking their collection a hard task(Bernstein & Wild, 2012).The high competition also leads to increase in the cost of capitaland as seen in the pro-forma statements the interest charges keeprising as the years go by.
Governmentinvestigations could lead expensive procedures of operation, and thecompany is facing many lawsuits for example antitrust claims,infringement of patents, privacy violations, and advertising(Gow & Smith, 2013).These make it expensive for AT&TInc. to defend themselves leading to increased costs of operation asseen in the pro-forma statements.
T-MobileUS, Inc. makes high capital investments with large volumes ofpurchases. They are always on the lookout for opportunities to expandtheir network leading to many alliances. In 2014, it agreed withVerizonand acquired 700 MHz spectrum for $2.4 billion and handover of PCSspectrum and AWS spectrum(Viscione, 2010).Due to this, the pro-forma financial statements have had a steadyrise in the capital requirements to fund the expansions.
T-Mobileis among the four largest wireless communication providers in the USwith key competitors being Verizon, AT&T, and Sprint. To keep upwith the high competition product betterment is required leading tohigh costs of operations. As such, the pro-forma statements havecatered for the costs hence the rise in the expenses year by year(Lorensen, 2013).There are extremely high barriers to entry in this industry under theregulation of Federal Communications Commission. Obtaining thelicense and acquiring spectrum is expensive and yet the industry ishighly dominated by Verizon and AT&T with the extremely highcustomer and spectrum base. This makes their revenues relatively lowwhich are discouraging after the high capital investments.
LIQUIDITYRATIOS
AT&TInc.
2017
CurrentRatio= Current Assets /Current Liabilities
=42,023/35,614
=1.18
2018
=51,593/46,148
=1.12
2019
=64,045/56,682
=1.13
2020
=79,684/67,216
=1.19
2021
=100,548/77,750
=1.29
Thecompany has a current ratio of more than one and in the future, it isless likely to face financial constraints.
T-MobileUS, Inc.
2017
=18,066/7,293
=2.48
2018
=21,876/10,486
=2.09
2019
=25,686/13,348
=1.92
2020
=29,496/16,300
=1.81
2021
=33,306/19,309
=1.72
Thecompany is well placed in the future because its current ratio isgreater than 1.
QuickRatio= (Cash in hand+Receivables)/Current Liabilities
AT&TInc.
2017
=(6,862+15,530)/35,614
=0.63
2018
=(7,136+17,673)/46,148
=0.54
2019
=(7,523+19,971)/56,682
=0.49
2020
=(7,226+22,567)/67,216
=0.44
2021
=(6,935+25,500)/77,750
=0.42
Thequick ratio of AT&T Inc. will be relatively low implying thecompany’s solvency in the future will be guaranteed.
T-MobileUS, Inc.
2017
=(6,467+2,431)/7,293
=1.22
2018
=(7,043+2,714)/10,486
=0.93
2019
=(7,619+2,997)/13,348
=0.80
2020
=(8,195+3,280)/16,300
=0.70
2021
=(8,771+3,563)/19,309
=0.64
Thequick ratio of T-Mobile US, Inc. isrelatively higher implying the solvency of the company will be atrisk in the future.
PROFITABILITYRATIOS
Returnon Equity= Net Income after Tax/Average Shareholder’ Equity
AT&TInc.
2017
=12,004/211,282
=0.06
2018
=17,652/199,786
=0.09
2019
=9,804/199,786
=0.05
2020
=12,562/183,802
=0.07
2021
=18,014/186,516
=0.1
Returnon equity for AT&T Inc. will be low implying the management willbe required to implement better ways to increase returns on theshareholder’s money.
T-MobileUS, Inc.
2017
=21,225/19,913
=1.07
2018
=24,123/23,832
=1.01
2019
=21,846/28,082
=0.78
2020
=34,154/32,242
=1.06
2021
=38,694/36,345
=1.06
Thereturn on equity for T-Mobiles is high hence the management isimplementing and will also implement good strategies that ensure theinvestor’s money gives a good yield.
Returnon Assets=Net Income/Average Total Assets
AT&TInc.
2017
=12,004/540,046
=0.02
2018
=17,652/601,018
=0.03
2019
=9,804/667,094
=0.02
2020
=12,562/729,969
=0.02
2021
=18,014/806,412
=0.02
Thereturn on assets is positive indicating the company will beprofitable in the next five years.
T-MobileUS, Inc.
2017
=21,225/58,264
=0.36
2018
=24,123/67,860
=0.36
2019
=21,846/77,456
=0.28
2020
=34,154/87,052
=0.39
2021
=38,694/96,648
=0.4
Thecompany will be profitable in the next five years due to the positivereturn on assets employed.
References
(2016).Retrieved 12 May 2016, fromhttp://www.att.com/Investor/ATT_Annual/2015/downloads/att_ar2015_mda_consolidatedtables.pdf
Bernstein,L. & Wild, J. (2012). Analysisof financial statements.New York: McGraw-Hill.
Gow,G. & Smith, R. (2013). Mobileand wireless communications.Maidenhead: Open University Press.
Lorensen,L. (2013). Illustrationsof pro forma financial statements that reflect subsequent events.New York, N.Y.: American Institute of Certified Public Accountants.
Viscione,J. (2010). Howto construct pro forma statements.New York, N.Y.: National Association of Credit Management.