An assessment of the Future Health of a Company

Anassessment of the Future Health of a Company

UniversityAffiliation

AT&ampTInc. 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&ampT

$11,764

$17,299

$9,608

$12,311

$17,654

Basic EPS for AT&ampT

$2.18

$3.2

$1.8

$2.3

$3.3

Diluted EPS Attributable to AT&ampT

$2.18

$3.2

$1.8

$2.3

$3.3

AT&ampTInc. 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&ampTInc. 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&ampTInc. has increased capital requirements. The increased revenue in thepro-forma financial statement is due to the large market share asAT&ampT 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 &amp 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 &amp Smith, 2013).These make it expensive for AT&ampTInc. 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&ampT, 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&ampT with the extremely highcustomer and spectrum base. This makes their revenues relatively lowwhich are discouraging after the high capital investments.

LIQUIDITYRATIOS

AT&ampTInc.

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&ampTInc.

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&ampT 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&ampTInc.

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&ampT 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&ampTInc.

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. &amp Wild, J. (2012).&nbspAnalysisof financial statements.New York: McGraw-Hill.

Gow,G. &amp Smith, R. (2013).&nbspMobileand wireless communications.Maidenhead: Open University Press.

Lorensen,L. (2013).&nbspIllustrationsof pro forma financial statements that reflect subsequent events.New York, N.Y.: American Institute of Certified Public Accountants.

Viscione,J. (2010).&nbspHowto construct pro forma statements.New York, N.Y.: National Association of Credit Management.