Accounting Document: AT&T Company - Case Study Example

Executive Summary Paper Executive Summary Paper AT&T is offering high-quality, innovative and reliable products and services and first-rate services to its customers. AT&T strength is to offer innovative solutions for customers and business by developing innovative products in the field of entertainment and communication industry in U.S.A and other parts of the globe. AT&T is the leading holding company in the communication industry in the globe by revenue wise. AT&T has many laurels to its feat sheet. It provides one of the globe’s most powerful and superior worldwide backbone networks and it is the U.S.A’s best ever 3G network offering services to more than 79 millions clients. Further, it revolutionalized the U.S communication industry by launching iPhone 3Gs in June 2007. Further, AT&T is the single monopoly supplier of U-verse TV in U.S market to offer a 100% IP-oriented television service. It is the U.S largest service provider of broadband, Wi-Fi services and directory publisher. AT&T is the global leader in IP-oriented communication services both in VPN and VoIP services to business which is footed on innovative security technologies. (www.AT&T.com) Company History In 1876 Alexander Graham Bell invented the telephone which he had two patents with two financial backers that found the company that becomes AT&T. In 1877, The Bell Company issues its first stock to seven shareholders. By 1885, the first line was put up between New York and Philadelphia and first call was made. In 1892, AT&T opened up the first long distance lines connecting New York and Chicago and the circuit could only handle one call at a time and the cost was $9.00 per five minutes of talk time. In 1894, Alexander Graham Bell’s patent expired which opened the market for thousands of companies to go into the telephone business. In 1899, Michael Pupin & George Campbell of AT&T developed the theory of loading coils which would make the telephone lines longer. In 1907, Theodore Vail begins his second term (as president of AT&T from 1885-1887) developed the philosophy, strategy, and structure that AT&T and the Bell System followed for the next seventy years. In 1908 Vail begins the slogan “One System, One Policy, Universal Service.” (AT&T website) In 1913, AT&T settles its first anti-trust suit that is known as the Kingsbury Commitment. In 1915, AT&T opened its first transcontinental telephone line with the first call on January 25 going to four locations New York, San Francisco, Washington D.C., and Jekyll Island, GA. In 1919 AT&T installed the first dial telephone in Virginia. In 1922 AT&T established WEAF, the first commercial radio station in New York and it lasted until 1926. In 1927 AT&T developed the transatlantic telephone service between the US and London. 1927 was the year that AT&T demonstrated the first television in the United States. In 1934, AT&T established transpacific service between US and Japan. In 1937, Clinton Davisson was the first of seven Nobel Prize winners produced by AT&T. In 1941, AT&T develops the first coaxial cable for broadband transmissions. In 1946 AT&T commenced the first mobile telephone service. In 1948 AT&T begins to offer networking services for television. In the 1950’s all long distance calls required the help of operators. In 1956 AT&T developed telephone cable which provided high signal quality, greater capacity and security. In 1958 the first modem was introduced for commercial use. In 1962, AT&T launched the first active communications by satellite. In 1963, AT&T introduced the first touchtone service with a keyboard as opposed the dial telephone. In 1968 AT&T introduced 911 emergency number. In 1971, it established the UNIX computer operating system that eventually became the underlying language of the Internet. In 1977, AT&T developed its first fiber optic cable within its commercial communication system. AT&T established the first commercial cellular telephone system in the US in 1983. In 1993, AT&T wirelesses became reality. In 1999, AT&T announced that local residential service will be offered in New York. In 2004, AT&T introduced voice over internet protocol services for consumers. In 2005, AT&T was acquired by SBC for $16 billion. In 2007, AT&T introduced the Apple iPhone that is the most anticipated electronic equipment and the implementation of AT&T U-verse service that bundles your telephone, satellite, internet, and wireless services into one at an affordable cost. Independent Auditor Ernst & Young LLP 1900 Frost Bank Tower 100 W. Houston St. San Antonio, TX 78205 AT&T has hired Ernst and Young for the company’s auditing and reporting. Ernst and Young LLC is a financial service company with a global presence, having member firms in the UK, Uruguay and Venezuela just to name a few with many locations in the United States. The organization’s philosophy is to help company’s achieve their best while maintaining confidence in the changing global environment. They provide many business services for the business organization such services include but may not be limited to advisory services, consulting, tax services, operation effectiveness, transactions and business growth. Ernst and Young also help companies to find financial solutions for their business in economical trying times, they help with growth, risk management, company’s investments, acquiring assets, record their transactions, identification and selection of economic activities. AT&T Inc. common stock is listed on the New York Stock Exchange. A Fortune 500 company, ticker symbol NYSE: T. AT&T is one of the 30 stocks that make up the Dow Jone’s Industrial Average. Assets INSERT D&E a. How much cash and cash equivalents did the company have at the end of its two (2) most recent annual reporting periods? $ in Millions Details As of 31st December 2008 As of 31st December 2007 Cash and equivalents 1792 1970 As on 31st December, 2008, AT&T’s cash and cash equivalents included cash worth of $958 millions and investments in money market funds and cash equivalents amounted to $ 834 millions. This figure is decreased by $178 millions in the year 2008 as compared to the last year figures of 2007. It is to be noted that cash balance as of 31st December 2008 was chiefly comprise of cash flows from operations , proceeds from the issue of long-term debt and cash realisation from the disposal of non-strategic real estates of the company and the cash realisation from the disposal of marketable securities and other assets. (p52). b. What were the company’s total current assets at the end of its two (2) most recent annual reporting periods? In what order should current assets be presented? $ in Millions Details As of 31st December 2008 As of 31st December 2007 Total Current Assets 22,556 24,686 (p 52) The two largest current assets for AT&T at year end December 2008 are Other Assets with the total of $2165 million and Accounts Receivables with the total of $16047 million. For 2007 other assets increased by $798 million to the amount of $2963 million and accounts receivables increased by $138 million to $16,185 million. (P50) The current assets can be depicted in the balance sheet in two formats. In one format, current assets are shown by classifying the same as current and non-current assets as a separate classification on the face of the balance sheet. In another format, where the distinction between both the current and non-current assets is not depicted on the face of the balance sheet. In this format, current assets are shown in rank of their liquidity. This format is being used by the AT&T in their balance sheet. For 2007, AT&T’s assets totaled $275,644 million. At the end of 2008, these assets totaled $265,245 million. In 2007, the current assets totaled $24,686 million with tangible assets totaling $250,958 million. In 2008, the current assets totaled $22,556 million with tangible assets totaling $242,689 million. From 2007 to 2008 there was a decrease in total assets by $10,399 million. Almost every asset decreased from 2007 to 2008. Although each section’s decrease was small, it did add to the overall decrease in assets. A few sections, mainly intangible assets, did increase the value of their assets. These consisted of the property, plant and equipment, which have increased by $3198 million. Other sections included goodwill, licenses, and investments in equity affiliates. The steady growth of the wireless sector has contributed to gaining assets in some sections. Although these gains did offset decreases in other sectors, there was still a net decrease in total assets from 2007 to 2008. (pg. 30) Liabilities The liabilities and stockholders’ equity also contains information about AT&T’s accounts payable and accrued liabilities. In 2007, AT&T had $21,399 million in accounts payable and liabilities. In 2008 the company had $20,032 million in accounts payable and liabilities. Accounts payable decreased by $1367 million from 2007 to 2008. Although AT&T’s total long term debt did increase, it did manage to decrease the amount of money owed to creditors. Assuming the liabilities and future debt will be managed in the same way, this figure should continue to decrease as AT&T works to reduce its debt. (pg. 30) Total current liabilities for AT&T for yearend December 2007 was $39,274 with an increase for December 2008 the amount was $42,290. AT&T is an example of how some products or services are not affected by economic conditions as much as they are affected by consumer’s demand. Ultimately, consumers make the final decision on whether or not to buy the product or pay for the service and as we moved to the new millennium consumers high demand for technology continues to rise, they want the latest, most advanced technological equipments in the market, and they have no problem paying to have voice and tele-communication at all times. The increase of cell phone used is astonishing; in our society even kids owned a cell phone. AT& T has done a great job on continuing to have a powerful presence in the market of communication. As the business of communication grows and the company continues to expand their products and services to the public, expenses on the business also rises. For the past few years AT& T has reported positive financial statements that demonstrate the company is in good financial health. As the AT&T Inc. Financial Review 2008 shows the company’s two largest current liabilities at the end of December 31, 2007 and 2008 were Accounts payable and accrued Liabilities. AT&T reported a significant increase in short term debts from 2007 to 2008. Debt maturing within one year increased by at least fifty percent from 2007 to 2008. The debt maturing account reported current liabilities from $6,860 in 2007 to $14,119 in 2008; and total liabilities of $275,644 for year 2007 and $265,245 for 2008. AT&T’s total liabilities at the end of its two most recent annual reporting periods represent the company as a stable business that continues to grow including their responsibilities and business liabilities. Revenues The company saw a steady increase in revenue over the last three years this is in relation to an increase in wireless subscribers, an increase in I-phone users and any phone service that uses internet or access the internet helped the increase in the company’s revenue. AT&T saw a loss in regular phone usage but the increase in wireless and I-phone users have offset the loss and so in 2006 Revenues was $63,055 million, 2007 $118,928 and in 2008 an increase of $5,100 or 4.3% to $124,028. (pg. 22 & p23) INSERT M, N and CONCLUSION c. What was the company’s net income for the last three annual reporting periods? $ in millions As of 31st December 2008 As of 31st December 2008 As of 31st December 2008 AT&T Net Income 12,867 11,951 7,536 (p51) d. What was the change in dollars in the company’s net income from its most recent annual reporting period to the previous annual reporting period? What was the change in dollars in the company’s net income from its previous year to the year before annual reporting period? As of 31st December 2008 As of 31st December 2008 As of 31st December 2008 % of Change 2008 v 2007 % of Change 2007 v 2006 AT&T Net Income 12,867 11,951 7,536 7.7 62.5 (p25). Conclusion Despite of economic downturn, AT&T is able to maintain its growth pace in the year 2008 also. AT&T witnessed growth both in earnings per share and in revenues and also fortified their position in key customer provinces. AT&T is successful in returning value to its shareholders through continuous strong dividend and share buybacks. In the year 2008 , AT&T’s consolidated revenues were increased by four percent and per share reported earnings swelled by 11.4 % AT&T has constructed its business around the strong foundations of data , mobility and Internet Protocol to offer wholly integrated , ubiquitous connectivity which AT&T’s clients expand and demand. As and when U.S economy rebounds, AT&T will be in position to exploit on its financial acumen, their leadership in market and their regulated investment tactics to kindle revenue growth beyond their present budgets. Read More