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financial results and provide a margin analysis
– this should include EBITDA, EBIT, and net income
margins.
4. From question 3, what themes are being played out for either
or both companies?
5. For AT&T and Verizon, consider the consolidated financial
results and provide an understating of
how the leverage has changed over time (e.g., D/E ratio)
6. From question 5, what themes are being played out for either
or both companies?
7. For AT&T and Verizon, consider the consolidated financial
results and provide an understanding
of how well the company is utilizing its assets (e.g., total
asset turnover)
8. From question 7, what themes are being played out for either
or both companies?
9. For AT&T and Verizon, consider the consolidated financial
results and provide the ROE of each
firm from 2009 to 2014.
10. From question 9, which firm has historically had a higher
ROE and explain what may be driving
the higher ROE (e.g., profit margin, leverage, operating
efficiency).
B с D E F G 2010 2011 2012 2013 2014 124,280 126,723 127,434 128,752 132,447 52,379 57,374 55,228 51,464 60,611 32,864 38,844 41,066 28,414 39,697 85 2,910 0 0 2,120 38,952 27,595 31,140 48,874 30,019 19,379 18,377 18,143 18,395 18,273 19,573 9,218 12,997 30,479 11,746 2,994 3,535 3,444 3,940 3,613 762 784 752 642 175 1,676 249 134 596 1,652 19,017 6,716 10,439 27,777 9,960 (1,162) 2,532 2,900 9,224 3,442 20,179 4,184 7,539 18,553 6,518 315 240 275 304 294 19,864 3,944 7,264 18,249 6,224 A 2 TN Exhibit 1A AT&T Income Statements 3 4 Operating Results ($ millions): 5 Total Operating Revenue 6 Less: Cost of Services (Excluding Depreciation) 7 Less: Selling, General & Administrative 8 Less: Impairment & Other Charges 9 EBITDA 10 Less: Depreciation & Amortization 11 EBIT 12 Less: Interest Expense 13 Plus: Equity in Net Income of Affiliates 14 Plus: Other Income (a) 15 EBT 16 Less: Taxes 17 Net Income 18 Less: Income Attributable to Minority Interest 19 Net Income Attributable to AT&T Shareholders 20 21 Unlevered Free Cash Flow ($ millions): 22 EBIAT 23 Less: Change in Net Operating Assets 24 Unlevered FCF 25 26 Unlevered Free Cash Flow Reconciliation ($ millions): 27 EBIAT 28 Plus: Depreciation 29 Less: Change in Working Capital 30 Less: Investment in Long-Term Assets 31 Less: Change in Investments in Affiliates 32 Less: Change in Deferred Taxes 33 Less: Change in Goodwill 34 Plus: Increase in Post-Retirement Benefits 35 Plus: Increase in Other Long-Term Liabilities 36 Unlevered Free Cash Flow 37 38 Margins: 39 Revenue Growth 40 EBIT Margin 41 EBITDA Margin 42 Tax Rate 43 Net Income Margin 44 Unlevered FCF Margin 11,744 6,414 5,330 5,531 (9,109 14,640 7,798 (9,886) 17,684 18,287 5,108 13,179 7,048 (2,509 9,557 11,744 19,379 (1,566) 22,432 1,594 (1,609) 765 956 (483) 53,212 5,531 18,377 1,439 21,081 (797) 931 (2,987) 5,208 (49) 48,734 7,798 18,143 (2,559) 20,681 863 23 (1,249) 7,381 (1,102) 49,979 18,287 18,395 1,256 23,851 (721) 748 247 (11,446) 4,174 54,791 7,048 18,273 1,247 27,314 (3,610) (683) 779 7,133 2,223 59,724 2.9% 1.4% 15.7% 31.3% 40.0% 16.2% 4.3% 2.0% 7.3% 21.8% 40.0% 3.3% 11.6% 0.6% 10.2% 24.4% 40.0% 5.9% 13.9% 1.0% 23.7% 38.0% 40.0% 14.4% 10.2% 8.9% 22.7% 40.0% 4.9% 7.2%
2009 3,741 14,845 1,562 1,247 3,792 25,187 2010 1,437 13,610 1,45S 1,170 2,276 19,951 2011 3,045 13,231 1,102 1,470 4,137 22,985 2012 4,868 12,657 1,035 1,036 3,110 22,706 2013 3,339 12,918 960 1,199 4,780 23,196 2014 8,603 14,527 831 1,142 6,925 32,028 99,519 103,196 107,087 109,767 110,968 112,898 48,741 50,372 51,374 52,352 56,433 60,824 78,276 79,041 76,054 74,805 75,052 75,831 7,393 4,708 2,757 1,391 0 0 2,921 4,515 3,718 4,581 3,860 250 6,275 6,705 6,467 6,713 8,278 10,998 268,312 268,488 270,442 272,315 277,787 292,829 50 51 TN Exhibit 1B AT&T Balance Sheets 52 53 Assets ($ millions): 54 Cash & Cash Equivalents 55 Accounts Receivable 56 Prepaid Expenses 57 Deferred Taxes 58 Other Current Assets 59 Total Current Assets 60 61 Property, Plant & Equipment 62 Licenses 63 Goodwill & Other Intangibles 64 Customer Lists 65 Investments in Affiliates 66 Other Assets 67 Total Assets 68 69 Liabilities & Owners' Equity ($ millions): 70 Accounts Payable & Accrued Liabilities 71 Prepaid Revenue & Customer Deposits 72 Deferred Taxes 73 Dividends Payable 74 Current Portion of Long-Term Debt 75 Total Current Liabilities 76 77 Long-Term Debt 78 Post-Retirement Obligations 79 Deferred Taxes 80 Other Long-Term Liabilities 81 82 Total Owners' Equity 83 Total Liabilities & Owners' Equity 84 85 Source: AT&T 2009 to 2014 10Ks and Casewriter 86 87 21,260 4,170 1,681 2,479 7,361 36,951 20,055 4,086 72 2,542 7,196 33,951 19,956 3,872 1,003 2,608 3,453 30,892 20,911 3,808 1,026 2,556 3,486 31,787 21,107 4,212 1,774 2,404 5,498 34,995 23,592 4,105 1,091 2,438 6,056 37,282 64,720 27,847 23,579 13,226 58,971 28,803 22,070 12,743 61,300 34,011 25,745 12,694 66,355 41,392 28,491 11,592 69,290 29,946 36,308 15,766 76,011 37,079 37,544 17,989 101,989 111,950 105,797 92,695 91,482 86,924 268,312 268,488 270,442 272,315 277,787 292,829
2009 2010 2011 2012 2013 2014 14,845 13,610 13,231 12,657 12,918 14,527 1,562 1,458 1,102 1,035 960 831 1,247 1,170 1,470 1,036 1,199 1,142 3,792 2,276 4,137 3,110 4,780 6,925 99,519 103,196 107,087 109,767 110,968 112,898 48,741 50,372 51,374 52,352 56,433 60,824 78,276 79,041 76,054 74,805 75,052 75,831 7,393 4,708 2,757 1,391 0 0 2,921 4,515 3,718 4,581 3,860 250 6,275 6,705 6,467 6,713 8,278 10,998 264,571 267,051 267,397 267,447 274,448 284,226 87 88 TN Exhibit 1C AT&T Reorganized Balance Sheets 89 90 Operating Assets ($ millions): 91 Accounts Receivable 92 Prepaid Expenses 93 Deferred Taxes 94 Other Current Assets 95 Property, Plant & Equipment 96 Licenses 97 Goodwill & Other Intangibles 98 Customer Lists 99 Investments in Affiliates 00 Other Assets 01 Total Operating Assets 02 03 Operating Liabilities ($ millions): 04 Accounts Payable & Accrued Liabilities 05 Prepaid Revenue & Customer Deposits 06 Deferred Taxes 07 Post-Retirement Obligations 08 Deferred Taxes 09 Other Long-Term Liabilities 10 Total Operating Liabilities 11 12 Net Operating Assets 13 Change 14 15 AT&T Net Financial Obligations ($ millions): 16 Dividends Payable 17 Current Portion of Long-Term Debt 118 Long-Term Debt 19 Total Financial Obligations 20 Less: Cash & Cash Equivalents 21 Net Financial Obligations 22 23 Total Owners' Equity 24 D/E 21,260 4,170 1,681 27,847 23,579 13,226 91,763 20,055 4,086 72 28,803 22,070 12,743 87,829 19,956 20,911 21,107 23,592 3,872 3,808 4,212 4,105 1,003 1,026 1,774 1,091 34,011 41,392 29,946 37,079 25,748 28,491 36,308 37,544 12,694 11,592 15,766 17,989 97,284 107,220 109,113 121,400 172,808 179,222 170,113 160,227 165,335 162,826 NA 6,414 (9,109) (9,886) 5,105 (2,509) 2,479 7,361 64,720 74,560 3,741 70,819 2,542 7,196 58,971 68,709 1,437 67,272 2,60S 3,453 61,300 67,361 3,045 64,316 2,556 3,486 66,358 72,400 4,868 67,532 2,404 5,498 69,290 77,192 3,339 73,853 2,438 6,056 76,011 84,505 8,603 75,902 101,989 69.4% 111,950 105,797 60.1% 60.8% 92,695 72.9% 91,482 80.7% 86,924 87.3%
127 128 TN Exhibit 1D AT&T Wireless Segment Data 129 130 Wireless Operating Results ($ millions) (a): 131 Service Revenue 132 Equipment Revenue 133 Total Operating Revenue 134 Less: Operations & Support Expense 135 Less: Depreciation & Amortization 136 Wireless Operating Income 137 Plus: Net Income (Loss) in Affiliates 138 Segment Income 139 740 EBIT Margin 141 EBITDA Margin 142 Equipment Revenue/Total Revenue 143 Operations & Support/Total Operating Revenue 2009 48,563 4,941 53,504 33,631 6,043 13,830 2 13,839 2010 53,510 4,990 58,500 36,746 6,497 15,257 9 15,266 2011 56,726 6,486 63,212 41,581 6,324 15,307 (29) 15,278 2012 59,186 7,577 66,763 43,296 6,873 16,594 (62) 16,532 2013 61,552 8,347 69,899 44,508 7,468 17,923 (75) 17,848 2014 61,032 12,960 73,992 48,924 7,941 17,127 (112) 17,015 25.8% 37.1% 9.2% 62.9% 26.1% 37.2% 8.5% 62.8% 24.2% 34.2% 10.3% 65.8% 24.9% 35.1% 11.3% 64.9% 25.6% 36.3% 11.9% 63.7% 23.1% 33.9% 17.5% 66.1% 144 2009 64,627 5,350 10,439 4,704 85,120 2010 2011 2012 2013 2014 68,041 69,309 70,497 72,638 75,931 6,524 7,225 7,328 7,384 10,986 11,645 13,644 14,875 14,028 13,855 9,326 13,069 14,257 16,326 19,782 95,536 103,247 106,957 110,376 120,554 145 746 Wireless Subscribers (000s): 747 Postpaid 748 Prepaid 149 Resellers 150 Connected Devices 151 Total Wireless Subscribers 152 153 Net Wireless Additions (000s): 154 Postpaid 155 Prepaid 156 Reseller 157 Connected Devices 158 Total Net Wireless Additions 159 160 Total Churn Rate 161 Postpaid Churn Rate 162 163 Average Total Customers (000s) 164 Average Postpaid Customers (000s) 165 ARPU Total Customers ($) 4,199 (801) 1,803 2,077 7,278 2,153 952 1,140 4,60S 8,853 1,429 674 1,874 3,722 7,699 1,438 128 1,027 1,171 3,764 1,776 (13) (1,074) 2,032 2,721 3,290 (775) (346) 3,439 5,608 1.47% 1.13% 1.31% 1.09% 1.37% 1.18% 1.35% 1.09% 1.37% 1.06% 1.45% 1.04% 90,328 94,634 97,715 100,247 103,632 N/A N/A N/A 12.77 13.44 13.03 13.74 14.35
2010 2011 2012 2013 2014 106,565 110,875 115,846 120,550 127,079 44,149 45,875 46,275 44,887 49,931 31,366 35,624 39,951 27,089 41,016 31,050 29,376 29,620 48,574 36,132 16,405 16,496 16,460 16,606 16,533 14,645 12,880 13,160 31,968 19,599 2,523 2,827 2,571 2,667 4,915 508 444 324 142 1,780 54 (14) (1,016) (166) (1,194) 12,684 10,483 9,897 29,277 15,270 2,467 285 (660 5,730 3,314 10,217 10,198 10,557 23,547 11,956 7,668 7,794 9,682 12,050 2,331 2,549 2,404 875 11,497 9,625 1 TN Exhibit 2A Verizon Income Statements 2 3 Operating Results ($ millions): 4 Total Operating Revenue 5 Less: Cost of Services (Excluding Depreciation) 6 Less: Selling, General & Administrative 7 EBITDA 8 Less: Depreciation & Amortization 9 EBIT 10 Less: Interest Expense 11 Plus: Equity in Net Income of Affiliates 12 Plus: Other Income (Expense) 13 EBT 14 Less: Taxes 15 Net Income 16 Less: Income Attributable to Non-Controlling Interest 17 Net Income Attributable to Verizon Shareholders 18 19 Unlevered Free Cash Flow ($ millions): 20 EBIAT 21 Less: Change in Net Operating Assets 22 Unlevered Free Cash Flow 23 24 Unlevered Free Cash Flow Reconciliation ($ millions): 25 EBIAT 26 Plus: Depreciation 27 Less: Change in Working Capital 28 Less: Investment in Long-Term Assets 29 Less: Change in Investments in Affiliates 30 Less: Change in Goodwill 31 Plus: Change in Deferred Tax Liabilities 32 Plus: Increase in Post-Retirement Benefits 33 Plus: Increase in Other Long-Term Liabilities 34 Unlevered Free Cash Flow 35 36 Margins: 87 Revenue Growth 38 EBIT Margin 39 EBITDA Margin 40 Tax Rate 41 Net Income Margin 42 Unlevered FCF Margin 8,787 (11,407) 20,194 7,728 (5,387) 13,115 7,896 6,861 1,035 19,181 911 18,270 11,759 (19,084 30,843 7,896 16,460 4,012 20,135 8,787 7,728 16,405 16,496 (5,235) (1,007) 9,939 16,993 379 (49) (1,418) 1,417 3,628 2,242 (4,458) 4,793 (503 (790) 20,194 13,115 19,181 16,606 (1,337) 15,330 31 362 3,962 (6,664) (439) 18,260 11,759 16,533 (607) 19,211 (2,630) (67) 12,939 5,598 (79 30,843 837 (383) 1,389 620 1,045 NA 13.7% 29.1% 40.0% 9.6% 18.9% 4.0% 11.6% 26.5% 40.0% 9.2% 11.8% 4.5% 11.4% 25.6% 40.0% 9.1% 0.9% 4.1% 26.5% 40.3% 40.0% 19.5% 15.2% 5.4% 15.4% 28.4% 40.0% 9.4% 24.3%
2009 2,009 2011 13,362 490 592 12,573 1,426 5,247 21,745 2010 6,668 545 11,781 1,131 2,223 22,348 11,776 940 4,269 30,939 2012 3,093 470 12,576 1,075 4,021 21,235 2013 53,528 601 12,439 1,020 3,406 70,994 2014 10,595 555 13,993 1,153 3,324 29,623 91,985 87,711 88,434 88,642 88,956 89,947 72,067 72,996 73,250 77,744 75,747 75,341 29,236 27,818 29,235 30,072 30,434 30,367 3,118 3,497 3,448 3,401 3,432 802 8,756 5,635 5,155 4,128 4,535 6,628 226,907 220,005 230,461 225,222 274,098 232,708 48 TN Exhibit 2B Verizon Balance Sheets 49 50 Assets ($ millions): 51 Cash & Cash Equivalents 52 Short-Term Investments 53 Accounts Receivable 54 Inventory 55 Prepaid Expenses & Other Current Assets 56 Total Current Assets 57 58 Property, Plant & Equipment 59 Wireless Licenses 60 Goodwill & Other Intangibles 61 Investments in Unconsolidated Businesses 62 Other Assets 63 Total Assets 64 65 Liabilities & Owners' Equity ($ millions): 66 Accounts Payable & Accrued Liabilities 67 Other Current Liabilities 68 Current Portion of Long-Term Debt 69 Total Curent Liabilities 70 71 Long-Term Debt 72 Post-Retirement Obligations 73 Deferred Taxes 74 Other Long-Term Liabilities 75 76 Total Equity Attributable to Shareholders 77 Plus: Non-Controlling Interest 78 Total Owners' Equity 79 80 Total Liabilities & Owners' Equity 81 Source: Verizon 2009 to 2014 10-Ks. 15,223 6,708 7,205 29,136 15,702 7,353 7,542 30,597 14,689 11,223 4,849 30,761 16,182 6,405 4,369 26,956 16,453 6,664 3,933 27,050 16,680 8,649 2,735 28,064 55,051 32,622 19,190 6,765 45,252 28,164 22,818 6,262 50,303 32,957 25,060 5,472 47,618 34,346 24,677 6,092 89,658 110,536 27,682 33,280 28,639 41,578 5,653 5,574 41,382 42,761 84,143 38,569 48,343 86,912 35,970 49,935 85,908 33,157 52,376 85,533 38,836 56,580 95,416 12,298 1,378 13,676 226,907 220,005 230,461 225,222 274,098 232,708
2009 2010 2011 2012 2013 2014 12,573 11,781 11,776 12,576 12,439 13,993 1,426 1,131 940 1,075 1,020 1,153 5,247 2,223 4,269 4,021 3,406 3,324 91,985 87,711 88,434 88,642 88,956 89,947 72,067 72,996 73,250 77,744 75,747 75,341 29,236 27,818 29,235 30,072 30,434 30,367 3,118 3,497 3,445 3,401 3,432 802 8,756 5,635 5,155 4,128 4,535 6,628 224,408 212,792 216,507 221,659 219,969 221,555 3 IN Exhibit 2C Verizon Reorganized Balance Sheets 4 5 Operating Assets ($ millions): 6 Accounts Receivable -7 Inventory 8 Prepaid Expenses & Other Current Assets 9 Property, Plant & Equipment 0 Wireless Licenses -1 Goodwill & Other Intangibles 2 Investments in Unconsolidated Businesses 3 Other Assets 4 Total Operating Assets -5 6 Operating Liabilities ($ millions): 7 Accounts Payable & Accrued Liabilities 8 Other Current Liabilities 9 Post-Retirement Obligations 00 Deferred Taxes 01 Other Long-Term Liabilities 02 Total Operating Liabilities 3 04 Net Operating Assets 5 Change 06 07 Verizon Net Financial Obligations ($ millions): 08 Current Portion of Long-Term Debt 09 Long-Term Debt 10 Total Financial Obligations 11 Less: Cash & Cash Equivalents 12 Less: Short-Term Investments 13 Net Financial Obligations 14 15 Total Equity Attibutable to Shareholders 16 Plus: Non-Controlling Interest 17 Total Owners' Equity 18 15,223 6,70S 32,622 19,190 6,765 80,508 15,702 7,353 28,164 22,818 6,262 80,299 14,689 11,223 32,957 25,060 5,472 89,401 16,182 6,405 34,346 24,667 6,092 87,692 16,453 16,680 6,664 8,649 27,682 33,280 28,639 41,578 5,653 5,574 85,091 105,761 143,900 132,493 127,106 133,967 134,878 115,794 NA (11,407) (5,387) 6,861 911 (19,084) 7,205 55,051 62,256 2,009 490 59,757 7,542 45,252 52,794 6,668 545 45,581 4,849 50,303 55,152 13,362 592 41,198 4,369 47,618 51,987 3,093 470 48,424 3,933 2,735 89,658 110,536 93,591 113,271 53,528 10,598 601 555 39,462 102,118 41,382 42,761 84,143 38,569 48,343 86,912 35,970 49,938 85,908 33,157 52,376 85,533 38,836 56,580 95,416 12,298 1,378 13,676 19 D/E 71.0% 52.4% 48.0% 56.6% 41.4% 746.7%
2009 52,046 8,279 60,325 19,348 17,309 7,030 16,638 2010 55,629 7,778 63,407 19,245 18,082 7,356 18,724 2011 59,157 10,997 70,154 24,086 19,579 7,962 18,527 2012 63,733 12,135 75,868 24,490 21,650 7,960 21,768 2013 69,033 11,990 81,023 23,648 23,176 8,202 25,997 2014 72,630 15,016 87,646 28,825 23,602 8,459 26,760 27.6% 39.2% 42.8% 29.5% 41.1% 12.3% 26.4% 37.8% 15.7% 28.7% 39.2% 16.0% 32.1% 42.2% 14.8% 30.5% 40.2% 17.1% 124 TN Exhibit 2D Verizon Wireless Segment Data 125 126 Wireless Operating Results ($ millions) (a): 127 Service Revenue 128 Equipment & Other Revenue 729 Total Segment Revenue 130 Less: Cost of Service Revenue 731 Less: Selling, General & Administrative 732 Less: Depreciation & Amortization 133 Segment Operating Income 134 135 EBIT 136 EBITDA 737 Equipment Revenue/Total Revenue 138 139 Wireless Subscribers (000s) (b): 740 Postpaid 741 Prepaid 142 Total Wireless Subscribers 743 144 Net Wireless Additions (000s) (c): 745 Postpaid 746 Prepaid 147 Total Net Wireless Additions 148 149 Total Churn Rate 750 Postpaid Churn Rate 151 152 Average Monthly Revenue per Postpaid Account (S) 153 Postpaid Accounts (000s) 154 Postpaid Connections per Account 155 756 Postpaid Proportion 157 Average Total Subscribers (000s) 158 Total ARPU ($) 2009 2010 2011 80,495 83,125 87,382 16,000 19,121 20,416 96,495 102,246 107,798 2012 2013 2014 92,530 96,752 102,079 5,700 6,047 6,132 98,230 102,799 108,211 3,987 948 4,935 2,529 2,988 5,517 4,252 1,167 5,419 5,024 893 5,917 4,115 354 4,472 5,482 86 5,568 1.41% 1.07% 1.38% 1.02% 1.26% 0.95% 1.19% 0.91% 1.27% 0.97% 1.33% 1.04% NA NA NA 125.75 34,268 2.43 134.51 34,561 2.53 144.04 35,057 2.64 153.93 35,083 2.76 159.86 35,616 2.87 83.4% NA NA 81.3% 81.1% 94.2% 94.1% 94.3% 99,371 105,022 103,014 100,515 105,505 53.17 55.67 61.37 67.17 69.23