AT-VZ FINAL

PROFOTABILITY

VERIZON2014 2013 NOTE

OPERATING INCOME 19,599

TAX 4915.73 Tax on op profit = Tax exp + (pretax non op exp x tax rate) 3314 + (4329 x .37) 4,916

NOPAT 14,683 NOPAT= Op Income - Tax on op profit 19,599 - 4915.73 14,683

NOA 114,992 131,446 2014 NOA= Op Asset - Op Liability 220,753 - 105,761 114,992

2013 NOA= Op Asset - Op Liability 216,537 - 85,091

RNOA 11.92% RNOA= NOPAT 14,683 11.92%

Avg NOA Avg(114,992,131,446)

ROE 37.65% ROE= Net Income (CI) 9,625 37.65%

Avg equity(CI) 25,567

NOAT 1.031 NOAT= Sales 127,079 1.031

Avg NOA= Avg(114,992,131,446)

NOPM 11.55% NOPM= NOPAT 14683 11.6%

SALES 127079

OP RETURN 11.92% RNOA= 11.92%

NON-OP RETURN 25.73% NON-OP RETURN= Flev X spread 3.82 x 6.74% 25.74%

NNO 102,694 92,610 (2014)NNO= NOA - E 114992 -12298 102694

(2013)NNO= NOA - E 131,446 - 38,836 92,610

FLEV 3.82 Flev= Avg NNO 97,652 3.82


NNE 5,058 NNE= NOPAT - NI 14,683 - 9625 5085

NNEP 5.18% NNEP= NNE 5,058.27 5.18%

Avg NNO 97,652

SPREAD 6.74% Spread= RNOA - NNEP 11.92%-5.18% 6.74%

ROE 37.65% ROE= RNOA + FLEV x Spread 11.92% + 3.8 x 6.74% 37.5%

PM 7.57% PM= Net Income 9625 7.57%

Sales 127079

AT 0.5015 AT= Sales 127079 0.501

Avg T Asset Avg(232,708,274,098)

FL 9.91 FL= Avg T Asset 253,403 9.91

Avg T Equity 25,567

ROE (DU POINT) 37.65% ROE= PM x AT x FL= 7.57% x 0.5 x 9.9 37.6%

Liquidity VERIZON 2014 VERIZON 2013

Current ratio = Current asset 29,623 1.06 70,994 2.62

Current liabilities 28,064 27,054

Quick ratio = Cash + Marketable securities + A/R 10,598 + 0 + 13,993 0.88 53,528 + 12,439 2.44

Current liability 28,064 27,054

Solvency

Liabilities-to-equity = Total liabilities 219,032 16.02 178,682 1.87

Equity 13,676 95,416

Total Debt-to-Equity= LT debt + St debt 110,536 + 2,735 8.28 89,658 + 3,933 0.98

Equity 13,676.00 95,416

Coverage

Times Interest Earned = EBT + Interest Exp 15,270 + 4,915 4.11 29,277 + 2,667 11.98

Interest Exp 4,915.00 2,667

EBITDA Coverage= EBITDA 15,270 + 4,915 + 16,533 7.47 29,277 + 2,667 + 16,606 18.20

Interest Exp 4,915 2,667

Free Op cash flow Cash from operations - CAPEX 30,631 - 17,191 12% 38,818 - 16,604 24%

-to-total debt= ST-debt + LT-debt 110,536 + 2,735 89,658 + 3,933

Verizon 2014

Z-score=

1.2 x working capital (+) 1.4x Ret. Earnings (+) 3.3x EBIT (+) 0.6x MV Equitytotal assets Total Assets Total Assets Total LIA

(+) 0.99x SalesTotal Assets

= 1.2x (29623-28064) (+) 1.4x 2447 (+) 3.3x 20185 (+) 0.6x (4242.374240-87.410000)*$46.78232708 232708 232708 219032

(+) 0.99x 127079232708

= 0.0080393 (+) 0.0147215 (+) 0.2862 (+) 0.53244 (+) 0.54063

Z-score= 1.382069

Verizon 2013

Z-score=

1.2 x working capital (+) 1.4x Ret. Earnings (+) 3.3x EBIT (+) 0.6x MV Equitytotal assets Total Assets Total Assets Total LIA

(+) 0.99x SalesTotal Assets

= 1.2x (70994-27050) (+) 1.4x 1782 (+) 3.3x 31944 (+) 0.6x (2967.610119-105.610)*$49.14274098 274098 274098 178682

(+) 0.99x 120550274098

= 0.1923867 (+) 0.0091019 (+) 0.3846 (+) 0.47225 (+) 0.43541

Z-score= 1.4937397

VERIZON 2014Rating: A

EBITA TO AVERAGE ASSETS [Earnings from

countinuing

operations

+

Net interest

expense + Tax expense +Amortization

expense ]Average

Assets

[ 19,599 + 4,915 + 3,314 + 1,567 ] = 12% A

Avg(232,708,274,098)

NOTE: Earnings from countinuing operations: Verizon's operating income in 2014.

Net interst expense: Verizon's interest expense in 2014

Tax expense: Verizon's income tax expense in 2014

Amortization expense include: $1,567 from intangible asset amortization

Average assets: Average total assets of Verizon from 2013 to 2014

OPERATING MARGIN [Earnings from

countinuing

operations

+ Tax expense ]Sales

[ 19,599 + 3,314 ] = 18% Aa

127,079



Sales: Operating Revenue of Verizon in 2014

EBITA MARGIN [Earnings from

countinuing

operations

+Net interest

expense+ Tax expense +

Amortization

expense ]

Sales

[ 19,599 + 4,915 + 3,314 + 1,567 ] = 23% Aa

127,079






EBITA INTEREST COVERAGE [Earnings from

countinuing

operations

+ Net interest


Amortization

expense ]

Gross interest expense

[ 19,599 + 4,915 + 3,314 + 1,567 ] = 5.56 A

5,290





Gross interst expense: is included in interest expense ( http://www.marketwatch.com/investing/stock/vz/financials)

DEBT TO EBITDA [ Long term debt +Current

maturities+

Commercial

paper+

Short term

borrowings ]

[Earnings from

countinuing

operations

+ Net interest


Amortization

expense+

Depreciation

expenses ]

[ 110,536 + 2,397 + 19 + 319 + ]= 2.55 Baa

19,599 + 4,915 + 3,314 + 1,567 + 14,966

NOTE: Long term debt: Verizon's long term debt in 2014

Current maturities: Long-term debt maturing within one year of $2,397 million in 2014 (Note 8 - Verizon consolidated financial statement)

Commercial paper: Verizon's commercial paper of $19 million in 2014 (Note 8 - Verizon consolidated financial statement)

Short term borrowings: Verizon's short term notepayable of $319 million in 2014(Note 8 - Verizon consolidated financial statement)

Earnings from countinuing operations: Verizon's operating income in 2014.




Depreciation expense: is calculated by 2014 Depreciation and amortization expense in income statement of $16,533 subtracts $1,567 of amortization expense

DEBT TO BOOK CAP [ Long term debt +Current

maturities+

Commercial

paper+

Short term

borrowings ]Long term debt +

Current

maturities+

Commercial

paper+

Short term

borrowingsDeferred taxes +

Minority

interest+ Equity

[ 110536 + 2397 + 19 + 319 + ] 67.21%

110536 + 2397 + 19 + 319 + 41578 + 1378 + 12298 B





Deferred taxes: Verizon's deferred income taxes in 2014

Minority interest: Verizon's noncontrolling interest in 2014

Equity: Verizon's equity before noncontrolling interest in 2014

RETAINED CF TO DEBT [ Operating cash

flows- Dividends ]

Long term debt +Current

maturities+

Commercial

paper+

Short term

borrowings

[ 30,631 - 7,803 ] = 20.2% Ba

110536 + 2397

NOTE: Operating cash flows: Verizon's cash flow from operating activities in 2014

Dividend: Verizon's dividend paid from financing activities in 2014

Long term debt: Verizon's long term debt in 2014




VERIZON 2013

Rating: Aa


countinuing

operations

+

Net interest


expense ]Average

Assets

[ 31,968 + 2,667 + 5,730 + 1,587 ] = 16.56% Aa

Avg(232,708,274,098)







countinuing

operations


[ 31,968 + 5,730 ] = 31% Aaa

120,550





countinuing

operations

+Net interest


Amortization

expense ]Sales

[ 31,968 + 2,667 + 5,730 + 1,587 ] = 35% Aaa

120,550







countinuing

operations

+ Net interest


Amortization

expense ]Gross interest expense

[ 31,968 + 2,667 + 5,730 + 1,587 ] = 12.27 Aa

3,420

NOTE: Net interst expense: Verizon's interest expense in 2013






maturities+

Commercial

paper+

Short term

borrowings ]

[Earnings from

countinuing

operations

+ Net interest


Amortization

expense+

Depreciation

expenses ]

[ 89,658 + 3,486 + 447 + 0 + ]= 1.64 Aa

31,968 + 2,667 + 5,730 + 1,587 + 15,019










maturities+

Commercial

paper+

Short term


Current

maturities+

Commercial

paper+

Short term


Minority

interest+ Equity

[ 89,658 + 3,486 + 447 + - + ] 43.00%

89,658 + 3,486 + 447 + - + 28,639 + 56,580 + 38,836 Baa




Deferred taxes: Verizon's deferred income taxes in 2013

3Minority interest: Verizon's noncontrolling interest in 2013

Equity: Verizon's equity before noncontrolling interest in 2013


flows- Dividends ]


maturities+

Commercial

paper+

Short term

borrowings

[ 38,818 - 5,936 ] = 35.1% Aa

89,658 + 3,486 + 447 + 0

NOTE: Operating cash flows: Verizon's cash flow from operating activities in 2013

Dividend: Verizon's dividend paid from financing activities in 2013

Long term debt: Verizon's long term debt in 2013



VERIZON Income Statement Average revenue growth rate = 4.85%

(2014 Total Revenue - 2012 Total Revenue)/2012 Total Rev/ 2

31-Dec-14 31-Dec-13 31-Dec-12 31-Dec-15 %

127,079 120,550 115,846 2015 Est. Net Sale = 2014 Net Sale x (1 + Growth rate) 127,079 x (1 + 4.85%) 133,240.10

49,931 44,887 46,275 2015 Est. Cost of sales = 2015 Est. Net Sale x 2015 Est. Cost of sales/Net sales Ratio* 133,240.10 x 39.64%* 52,816.38 39.29%

77,148 75,663 69,571 2015 Est. Gross Profit = 2015 Est. Net Sale - 2015 Est. Cost of sale 133,240.10 - 52,816.38 80,424

-

Research Development - - -

Selling General and Administrative 41,016 27,089 39,951 2015 Est. SG&A = 2015 Est. Net sales x 2015 Est. SG&A/Net Sales Ratio* 133,240.10 x 31.68%* 42,210.46 32.28%

Non Recurring - - -

Depreciation and Amortization 16,533 16,606 16,460 2015 Est. Dep & Amr = 2014 Net PPE x 2014 Dep/2013 PPE Ratio* 89,947 x 18.59%* 16,717.18

Total Operating Expenses 107,480 88,582 102,686

2015 Est. Total Op Exp = 2015 Est. Cost of sales + 2015 Est. SG&A + 2015 Est. Dep &

Amr 52,816.38 + 42,210.46 + 16,717.18 111,744

19,599 31,968 13,160

2015 Est. Op Income or loss = 2015 Est. Gross Profit - 2015 Est. T. Op. Exp(w/o

cost of sales) 80,424 - (42,210.46 + 16,717.18) 21,496

Total Other Income/Expenses Net (1,194) (166) (1,016)

2015 Est. Other Income/Exp = 2014 Other income/Exp + 2014 gain/loss in

divestitures -1,194 + 884* (310)

Earnings Before Interest And Taxes 20,185 31,944 12,468

2015 Est. Earning before interst & tax = 2015 Est. Operating income - 2015 Est.

Other Expenses 21,496 - 310 21,186

Interest Expense 4,915 2,667 2,571 2015 Est. interest expense is considered NO CHANGE 4,915

Income Before Tax 15,270 29,277 9,897

2015 Est. Income before tax = 2015 Est. Earning before Interest&Tax - 2015 Esr.

Interest Exp 21,186 - 4,915 16,271

Income Tax Expense 3,314 5,730 (660)

2015 Est. Income tax expense= 2015 Est. Income before tax x 2014 income tax exp/

2014 Income before tax 16,271 x 3,314/15,270 3,531.26 22%

Net Income attributable to

Noncontrolling Interest (2,331) (12,050) (9,682)

2015 Est. NI attributable to noncontrolling interest = 2015 Est. Income from Con. Op

x 2014 Minority Interest Ratio(2014 NI-NonCI/2014 NI before NonCI) 12,740 x 19.5% (2,483.82) 19.5%

Net Income From Continuing Ops 11,956 23,547 10,557

2015 Est. Income from continuing operation= 2015 Est. Income before tax - tax

expense 16,271 - 3,531.26 12,740

Discontinued Operations - - -

Extraordinary Items - - -

Effect Of Accounting Changes - - -

Other Items - - -

9,625 11,497 875

2015 Est. Net Income = 2015 Est. Income from continuing op - 2015 Est. Minority

Interest 12,740 - 2,483.82 10,256

- - -

9,625 11,497 875 10,256

VERIZON Balance Sheet

31-Dec-14 31-Dec-13 31-Dec-12 31-Dec-15

Cost of Revenue

Gross Profit

Operating Income or Loss

Preferred Stock And Other Adjustments

Net Income Applicable To Common Shares

PERIOD ENDING

Total Revenue

Net Income

PERIOD ENDING

Cash And Cash Equivalents 10,598 53,528 3,093 2015 Est. Cash = 2015 Est. Net sales x 2014 Cash/Net sale ratio 133,240.10 x 8.34% 11,111.82 8.34%

Short Term Investments 555 601 470 2015 Est. Short term investment is considered No Change 555

Net Receivables 13,993 12,439 12,576 2015 Est. net Receivables = 2015 est. Net sale x 2014 Net Receivable/Net sales ratio 133,240.10 x 11.01% 14,671.42 11.01%

Inventory 1,153 1,020 1,075 2015 Est. Inventories = 2015 est. Net sale x 2014 Inventories/Net sales ratio 133,240.10 x 0.91% 1,208.90 0.91%

Prepaid Expenses and Other Current

Assets 3,324 3,406 4,021

2015 Est. Prepaid Exp and other CA = 2015 est. Net sale x 2014 Prepaid Exp and

other CA/Net sales ratio 133,240.10 x 2.62% 3,324.00 2.62%

29,623 70,994 21,235

2015 Est. Total Current Assets = 2015 Est. Cash + ST Investment + Net Rec + Inv +

PreExp and Other CA

11,111.82 + 555 + 14,671.42 + 1,208.90 +

3,324 30,871.13

802 3,432 3,401 2015 Est. Long term Investment is considered unchanged 802.00

89,947 88,956 88,642 2015 Est. PPE = 2014 Net PPE + 2015 CAPEX* - 2015 Dep&Amr 89,947 + 133,240 x 14% - 16,717.18 91,254.28 70.78%

24,639 24,634 24,139 2015 Est. Goodwill is considered unchanged 24,639 19.39%

81,069 81,547 83,677 2015 Est. Intangible asset is considered unchanged 81,069 63.79%

- - - - 0.00%

6,628 4,535 4,128 2015 Est. Other asset = 2015 Est. Net Sales x 2014 Other aseet/netsales ratio 133,240.10 x 5.22% 6,949 5.22%

- - -

232,708 274,098 225,222 2015 Est. total assets = 2015 Est. Total CA + LT inv + PPE +GW + IA + Other assets

30,871.13 + 802 + 91,254 + 24,639 + 81,

069 + 6,949 235,584.75

Accounts Payable 16,680 16,453 16,182 2015 Est. Account Payable = 2015 Est. Net Sales x 2014 AP/Net sales ratio 133,240.10 x 13.13% 17,488.69 13.13%

Short/Current Long Term Debt 2,735 3,933 4,369

2015 Est. Short term debt = 2014 Short term debt - 2015 Maturity of LT debt + 2016

Maturity LT debt* + Newly short term debt issued* 2,735 - 2,397 + 6,114* + 2,293.93* 8,745.93

Other Current Liabilities 8,649 6,664 6,405

2015 Est. Other current liabilities = 2015 Est. Net sales x 2014 other CL/Net sales

ratio 133,240.10 x 6.81% 9,068.32 6.81%

28,064 27,050 26,956 2015 Est. Total current liabilities = 2015 Est. AP + ST debt + other CL 17,488.69 + 6,452 + 9,068.32 35,302.94

110,536 89,658 47,618 2015 Est. Long term debt = 2014 LT debt - 2016 Maturity LT debt 110,536 - 6,114 104,422

38,854 33,335 40,438 2015 Est Other Liabilities = 2015 Est. Net sales x 2014 Other Liabilities / net sale ratio 133,240.10 x 30.57% 40,737.74 30.57%

41,578 28,639 24,677 2015 Est De. LT Tax = 2015 Est. Net sales x 2014 De. LT tax / net sale ratio 133,240.10 x 32.72% 43,593.80 32.72%

- - -

219,032 178,682 139,689

2015 Est. Total liabilities = 2015 Est. total CL + 2015 Est. LT debt + other liabilities +

De. LT. Taxes 33,009 + 104,422 + 40,737.74 + 43,593.80 224,056.48

- - -

- - -

- - -

424 297 297 2015 Est. Common stock is unchanged 424

2,447 1,782 (3,734) 2015 Est. Retained earnings = 2015 Beg RE + 2015 Est. NI - 2015 Est. Dividend 2,447 + 10,256 - 10,256 x 81%* 4,388.45

(3,263) (3,961) (4,071) 2015 Est. Treasury Stock = 2015 Beg TS - 2015 Share repurchase* -3,263 - 5,000* (8,263)

11,155 37,939 37,990 2015 Est. Capital surplus is unchanged 11,155

1,535 2,779 2,675 2015 Est. Other Stockholders equity is unchanged 1,535

1,378 56,580 52,376

2015 Est Noncontrolling interest = 2014 Ending balance of Noncontrolling interest +

2015 Est. NI attribute to Noncntrolling int - 2014 other comprehensive loss - 2014

distribution & other* 1,378 + 2,483.82 - 23 - 1,550 2288.82

13,676 95,416 85,533

2015 Est. Total Stockholder Equity = 2015 Est. CS + RE + Capital Surplus - TS + Other

SE + NonCI + Noncontrolling Int

424 + 4,388.45 - 8,263 + 11,155 + 1,535 +

2,288.82 11,528

232,708 274,098 225,222 2015 Est. Total liabilities & Stock equitu = 2015 Est. TL + T.SE 224,056.78 + 11,528 235,584.75

0.00

2014 Capital Expenditure/Net Sales Ratio 14%

2014 Depreciation/Prior Net PPE(2013) 19%

2014 Dividend/Net Income 81%

Total Assets

Negative Goodwill

Total Liabilities

Other Stockholder Equity

Total Stockholder Equity

Deferred Long Term Liability Charges

Non Controlling Interest

Total Liabilities & Stock Equity

Retained Earnings

Treasury Stock

Capital Surplus

Misc Stocks Options Warrants

Redeemable Preferred Stock

Preferred Stock

Common Stock

Total Current Liabilities

Long Term Debt

Other Liabilities

Deferred Long Term Asset Charges

Total Current Assets

Long Term Investments

Property Plant and Equipment

Goodwill

Intangible Assets

Accumulated Amortization

Other Assets

VERIZON FOOTNOTES

*Cost of sales and SG&A ratios:

Period Ending 31-Mar-15 31-Dec-14 30-Sep-14 30-Jun-14 2015

Total Revenue 31,984 33,192 31,586 31,483 128,245

Cost of Revenue 12,096 14,403 12,252 12,087 50,838

% of Sales 39.64%

Gross Profit 19,888 18,789 19,334 19,396

Operating Expenses

Selling General and Administrative 7,939 16,857 8,277 7,550 40,623

% of Sales 31.68%

*2014 Dep& Amr Ratio:

2014 Depreciation/Prior Net

PPE(2013) 18.59%

16,533/88,956

*2014 Gain/loss in Divestitures

NOTE 15: Comprehensive Income

Since we don’t forcast divestitures, we substract gain/loss reclassified to net income (884) from 2015 Other Income/Expense

The remain will be "no changed" interest income and other early cost redemption (Note 8, 9)

*2015 CAPEX

>>2014 PPE x CAPEX to Sales ratio

2014 Capital Expenditure/Net

Sales Ratio 14%

(2014 Cash Flow Statement -

Investing - CAPEX 17,194) 17,194 / 127,079

Maturities of Long-Term Debt

Maturities of long-term debt

outstanding at December 31, 2014

are as follows:

Years

2015 $ 2,397

2016 6,114

2017 3,911

2018 6,529

2019 6,088

Thereafter 87,894

*2015 Est. Dividend

2015 Net Income x 2014 Div to

NI 10,256 x 81%


(2014 Cash Flow Statement -

Financing - 7,803 Dividend) 7,803/9,625

*2015 Stock Repurchase (Note 16)

In addition to the previously authorized three-year share buyback program, in February 2015,

the Verizon Board of Directors authorized Verizon to enter into an accelerated share repurchase (ASR)

agreement to repurchase $5.0 billion of the Company’s common stock.

*2014 Noncontrolling Interests

Balance at beginning of year 56,580

Acquisition of noncontrolling interest (Note 2) (55,960) – –

Net income attributable to noncontrolling interests 2,331

Other comprehensive income (loss) (23)

Total comprehensive income (loss) 2,308

Distributions and other (1,550)

Balance at end of year 1,378

*2015 Newly Short term debt issued

(dollars in millions)

Before adjusted

2015 Total Asset 2015 Total Liabilities and Stockholders Equity

235,584.75 233,290.82

Difference 2,293.93

After adjusted (Plug in to newly short term debt)


235,584.75 235,584.75

VERIZON

Income Statement

Years Ended December 31, 2014 2013 2012

Operating Revenues 127,079 120,550 115,846

Operating Expenses

Cost of services and sales (exclusive of items shown below) 49,931 44,887 46,275

Selling, general and administrative expense 41,016 27,089 39,951

Depreciation and amortization expense 16,533 16,606 16,460


Operating Income 19,599 31,968 13,160

Equity in earnings of unconsolidated businesses 1,780 142 324

Other income and (expense), net (1,194) 166 (1,016)

Interest expense (4,915) (2,667) (2,571)

(4,329)

Income Before (Provision) Benefit For Income Taxes 15,270 29,277 9,897

(Provision) Benefit for income taxes (3,314) (5,730) 660

Net Income 11,956 23,547 10,557

Net income attributable to noncontrolling interests 2,331 12,050 9,682

Net income attributable to Verizon 9,625 11,497 875

Net Income 11,956 23,547 10,557

Basic Earnings Per Common Share

Net income attributable to Verizon 2.42 4 0

Weighted-average shares outstanding (in millions) 3,974 2,866 2,853

VERIZON

Balance Sheet

At December 31, 2,014 2013

Assets

Current assets

Cash and cash equivalents 10,598 53,528

Short-term investments 555 601

Accounts receivable, net of allowances of $739 and $645 13,993 12,439

Inventories 1,153 1,020

Prepaid expenses and other 3,324 3,406

Total current assets 29,623 70,994

Plant, property and equipment 230,508 220,865

Less accumulated depreciation 140,561 131,909


Long term assets

Investments in unconsolidated businesses 802 3,432

Wireless licenses 75,341 75,747

Goodwill 24,639 24,634

Other intangible assets, net 5,728 5,800

Other assets 6,628 4,535

Operating assets 220,753 216,537

Total assets 232,708 274,098

Non-operating assets 11,955 57,561

Liabilities

Current liabilities

Debt maturing within one year 2,735 3,933

Accounts payable and accrued liabilities 16,680 16,453

Other 8,649 6,664

Total current liabilities 28,064 27,050

Long term liability

Long-term debt 110,536 89,658

Employee benefit obligations 33,280 27,682

Deferred income taxes 41,578 28,639

Other liabilities 5,574 5,653

Operating liability 105,761 85,091

Non operating liability 113,271 93,591

Total liabilities 219,032 178,682

Equity

Series preferred stock ($.10 par value; none issued) – –

Common stock ($.10 par value; 4,242,374,240 and 2,967,610,119 shares issued in each period, respectively) 424 297

Contributed capital 11,155 37,939

Reinvested earnings 2,447 1,782

Accumulated other comprehensive income 1,111 2,358

Common stock in treasury, at cost (3,263) (3,961)

Deferred compensation – employee stock ownership plans and other 424 421

Noncontrolling interests 1,378 56,580

Total equity before noncontrolling interests 12,298 38,836

Total equity 13,676 95,416

Total liabilities and equity 232,708 274,098

PROFITABILITY

ATT 2014 2013 NOTE NOTE2

OPERATING INCOME 11,746 11,746

TAX 4,103 Tax on op profit = Tax exp + (pretax non op exp x tax rate) 3,442 +1,786 x 0.37 4,103

NOPAT 7,643 NOPAT= Op Income - Tax on op profit 11,746 - 4,103 7,643

NOA 162,576 161,475 2014 NOA= Op Asset - Op Liability 283,976 - 121,420 162,576

2013 NOA= Op Asset - Op Liability 216,537 - 85,091

RNOA 4.72% RNOA= NOPAT 7,643 4.72%

Avg NOA Avg(162,576,161,475)

ROE 7.0% ROE= Net Income (CI) 6,224 7.0%


NOAT 0.817 NOAT= Sales 132,447 0.817

Avg NOA= Avg(162,576,161,475)

NOPM 5.77% NOPM= NOPAT 7,643 5.77%

SALES 132,447

OP RETURN 4.72% RNOA= 4.72%

NON-OP RETURN 2.3% NON-OP RETURN= Flev X spread 0.82 x 2.77% 2.3%

NNO 75,652 69,993 (2014)NNO= NOA - E 162,576 - 86,924 75,652

(2013)NNO= NOA - E 161,475 - 91,482 69,993

FLEV 0.82 Flev= Avg NNO 72,823 0.82


NNE 1,419 NNE= NOPAT - NI 7,643 - 6,224 1,419

NNEP 1.95% NNEP= NNE 1,419.18 1.95%

Avg NNO 72,823

SPREAD 2.77% Spread= RNOA - NNEP 4.72% - 1.95% 2.77%

ROE 7.0% ROE= RNOA + FLEV x Spread 4.72% + 0.82 x 2.77% 7.0%

PM 4.70% PM= Net Income 6,224 4.70%

Sales 132,447

AT 0.46 AT= Sales 132,447 0.46

Avg T Asset Avg(292,829,277,787)

FL 3.20 FL= Avg T Asset Avg(292,829,277,787) 3.20

Avg T Equity Avg(86,370,90,988)

ROE (DU POINT) 7.0% ROE= PM x AT x FL= 4.7% x 0.46 x 3.2 7.0%

Liquidity ATT 2014 ATT 2013

Current ratio = Current asset 32,028 0.86 23,196 0.66

Current liabilities 37,282 34,995

Quick ratio = Cash + Marketable securities + A/R 8,603 + 14,527 0.62 3,339 + 12,918 0.46

Current liability 37,282 34,995

Solvency

Liabilities-to-equity = Total liabilities 205,905 2.37 186,305 2.04

Equity 86,924 91,482

Total Debt-to-Equity= LT debt + St debt 76,011 + 6,056 0.94 69,290 + 5,498 0.82

Equity 86,924 91,482

Coverage

Times Interest Earned = EBT + Interest Exp 9,960 + 3,613 3.76 27,777 + 3,940 8.05


EBITDA Coverage= EBITDA 9,960 + 3,613 + 18,273 8.81 27,777 + 3,940 + 18,395 12.72


Free Op cash flow Cash from operations - CAPEX 31,338 - 21,199 0.12 34,796 - 20,944 0.19

-to-total debt= ST-debt + LT-debt 76,011 + 6,056 69,290 + 5,498

ATT 2014

Z-score=

1.2 x working capital (+) 1.4x Ret. Earnings (+) 3.3x EBIT (+) 0.6x MV Equity

total assets Total Assets Total Assets Total LIA

(+) 0.99x Sales

Total Assets

= 1.2x (32028-37282) (+) 1.4x 27736 (+) 3.3x 13573 (+) 0.6x (6495.231088-1308.318131)*$33.59

292829 292829 292829 205905

(+) 0.99x 132447

292829

= -0.02153 (+) 0.1326044 (+) 0.153 (+) 0.5077 (+) 0.44778

Z-score= 1.2195069

ATT 2013

1.2 x working capital (+) 1.4x Ret. Earnings (+) 3.3x EBIT (+) 0.6x MV Equity

total assets Total Assets Total Assets Total LIA

(+) 0.99x Sales

Total Assets

= 1.2x (23196-34995) (+) 1.4x 31141 (+) 3.3x 31717 (+) 0.6x (6495.231088-1268.914913)*$35.16

277787 277787 277787 186305

(+) 0.99x 128752

277787

= -0.05097 (+) 0.1569454 (+) 0.377 (+) 0.5918 (+) 0.45886

Z-score= 1.5334128

AT&T 2014

Rating: Ba


countinuing

operations

+

Net interest


expense ]Average

Assets

[ 11,746 + 3,613 + 3,442 + 2,004 ] = 7.29% Ba

Avg(292,829,277,787)

NOTE: Earnings from countinuing operations: AT&T's operating income in 2014.

Net interst expense: AT&T's interest expense in 2014

Tax expense: AT&T's income tax expense in 2014

Amortization expense include: $1,504 from software amortization and $500 from intangible asset amortization

Average assets: Average total assets of AT&T from 2013 to 2014


countinuing

operations


[ 11,746 + 3,442 ] = 11.47% Ba

132,447



Sales: Operating Revenue of AT&T in 2014


countinuing

operations

+Net interest


Amortization

expense ]

Sales

[ 11,746 + 3,613 + 3,442 + 2,004 ] = 15.71% A

132,447







countinuing

operations

+ Net interest


Amortization

expense ]

Gross interest expense

[ 11,746 + 3,613 + 3,442 + 2,004 ] = 5.48 Baa

3800







maturities+

Commercial

paper+

Short term

borrowings ]

[Earnings from

countinuing

operations

+ Net interest


Amortization

expense+

Depreciation

expenses ]

[ 110,536 6,051 0 5 ]= 3.14 Ba

11,746 + 3,613 + 3,442 + 2,004 + 16,269

NOTE: Long term debt: AT&T's long term debt in 2014

Current maturities: Current maturities of long-term debt of $6,051 million in 2014 (Note 9 - AT&T consolidated financial statement)

Short term borrowings: AT&T's short term notepayable of $5 million in 2014 (Note 9 - AT&T consolidated financial statement)

Earnings from countinuing operations: AT&T's operating income in 2014.






maturities+

Commercial

paper+

Short term


Current

maturities+

Commercial

paper+

Short term


Minority

interest+ Equity

[ 110,536 + 6,051 + 0 + 5 + ] 48.37%

110,536 + 6,051 + 0 + 5 + 37,544 + 554 + 86,370 Ba



Short term borrowings: AT&T's short term notepayable of $5 million in 2014 (Note 9 - AT&T consolidated financial statement)

Deferred taxes: AT&T's deferred income taxes in 2014

Minority interest: AT&T's noncontrolling interest in 2014

Equity: AT&T's equity before noncontrolling interest in 2014


flows- Dividends ]


maturities+

Commercial

paper+

Short term

borrowings

[ 31,338 - 9,552 ] = 18.7% Ba

110536 + 6051 + 0 + 5

AT&T 2013Rating: Aa


countinuing

operations

+

Net interest


expense ]Average

Assets

[ 30,479 + 3,940 + 9,224 + 2,814 ] = 16.28% Aaa

Avg(292,829,277,787)







countinuing

operations


[ 30,479 + 9,224 ] = 30.84% Aaa

128,752





countinuing

operations

+Net interest


Amortization

expense ]Sales

[ 30,479 + 3,940 + 9,224 + 2,814 ] = 36.08% Aaa

128,752







countinuing

operations

+ Net interest


Amortization

expense ]Gross interest expense

[ 30,479 + 3,940 + 9,224 + 2,814 ] = 11.11 Aa

4,180

NOTE: Tax expense: AT&T's income tax expense in 2013





maturities+

Commercial

paper+

Short term

borrowings ]

[Earnings from

countinuing

operations

+ Net interest


Amortization

expense+

Depreciation

expenses ]

[ 69,290 + 5,477 + 20 + 1 + ]= 1.21 Aa

30,479 + 3,940 + 9,224 + 2,814 + 15,459



Commercial paper: AT&T's commercial paper of $20 million in 2013 (Note 9 - AT&T consolidated financial statement)





maturities+

Commercial

paper+

Short term


Current

maturities+

Commercial

paper+

Short term


Minority

interest+ Equity

[ 69,290 + 5,477 + 20 + 1 + ] 36.92%

69,290 + 5,477 + 20 + 1 + 36,308 + 494 + 90,988 Aa




Deferred taxes: AT&T's deferred income taxes in 2013

Minority interest: AT&T's noncontrolling interest in 2013

Equity: AT&T's equity before noncontrolling interest in 2013


flows- Dividends ]


maturities+

Commercial

paper+

Short term

borrowings

[ 34,796 - 9,696 ] = 33.6% A

69,290 + 5,477 + 20 + 1

NOTE: Operating cash flows: AT&T's cash flow from operating activities in 2013

Dividend: AT&T's dividend paid from financing activities in 2013


Long term debt: AT&T's long term debt in 2013


AT&T Income Statement Average revenue

growth rate = 1.97%

D-14 D-13 D-12 2015 %

132,447 128,752 127,434 2015 Est. Net Sale = 2014 Net Sale x (1 + Growth rate) 132,447 x (1 + 1.97%) 135,052

60,611 51,464 55,228

2015 Est. Cost of sales = 2015 Est. Net Sale x 2015 Est. Cost of

sales/Net sales Ratio* 135,052.10 x 46.68%* 63,040 45.76%

71,836 77,288 72,206

2015 Est. Gross Profit = 2015 Est. Net Sale - 2015 Est. Cost of

sale 135,052.10 - 63,040 72,012

- Research Development - - -

Selling General and Administrative 39,697 28,414 41,066

2015 Est. SG&A = 2015 Est. Net Sales x 2015 Est. SG&A/Net

Sales Ratio* 135,052.10 x 31.32%* 42,303 29.97%Abandonment of network asset 2,120 - -

Depreciation and Amortization 18,273 18,395 18,143

2015 Est. Dep & Amr = 2014 Net PPE x 2014 Dep/2013 PPE

Ratio* 112,989 x 16.47% 18,606


2015 Est. Total Op Exp = 2015 Est. Cost of sales + 2015 Est.

SG&A + 2015 Est. Dep & Amr 63,040 + 42,303 + 18,606 123,949

11,746 30,479 12,997

2015 Est. Op Income or loss = 2015 Est. Gross Profit - 2015 Est.

T. Op. Exp (w/o cost of sales) 72,012 - (18,606 + 42,303) 11,103

Total Other Income/Expenses Net 1,652 596 134

2015 Est. Other Income/Exp = 2014 Other income/Exp+ 2014

gain/loss in divestitures 1,652 + 497* 2,149

Earnings Before Interest And Taxes 13,573 31,717 13,883

2015 Est. Earning before interst & tax = 2015 Est. Operating

income + 2015 Est. Other Income 11,103 + 2,149 13,252 Interest Expense 3,613 3,940 3,444 2015 Est. interest expense is considered NO CHANGE 3,613

Income Before Tax 9,960 27,777 10,439

2015 Est. Income before tax = 2015 Est. Earning before

Interest&Tax - 2015 Esr. Interest Exp 13,252 - 3,613 9,639

Income Tax Expense 3,442 9,224 2,900

2015 Est. Income tax expense= 2015 Est. Income before tax x

2014 income tax exp/ 2014 Income before tax 9,639 x 3,442/9,960 3,331.17 35%

Net Income attribute to Noncontrolling

Interest (294) (304) (275)

2015 Est. NI attributable to noncontrolling interest = 2015 Est.

Income from Con. Op x 2014 Minority Interest Ratio(2014 NI-

NonCI/2014 NI before NonCI) 6,308 x 294/6,518 (284.53) 5%

Net Income From Continuing Ops 6,518 18,553 7,539

2015 Est. Income from continuing operation= 2015 Est. Income

before tax - tax expense 9,639 - 3,331.17 6,308

Discontinued Operations - - -

Extraordinary Items - - -

Effect Of Accounting Changes - - -

Other Items - - -

6,224 18,249 7,264

2015 Est. Net Income = 2015 Est. Income from continuing op -

2015 Est. Minority Interest 6,308 - 284.53 6,024

- - -

6,224 18,249 7,264 6,024

Preferred Stock And Other Adjustments

Net Income Applicable To Common Shares

Net Income

PERIOD ENDINGTotal Revenue

Cost of Revenue

Gross Profit

Operating Income or Loss

AT&T Balance Sheet

D-14 D-13 D-12

Cash And Cash Equivalents 8,603 3,339 4,868 2015 Est. Cash = 2015 Est. Net sales x 2014 Cash/Net sale ratio 135,052.10 x 6.5% 8,772.21 6.50%Short Term Investments - - -

Net Receivables 15,669 14,117 13,693

2015 Est. net Receivables = 2015 est. Net sale x 2014 Net

Receivable/Net sales ratio 135,052.10 x 11.83% 15,977.19 11.83%Inventory - - -

Other Current Assets 7,756 5,740 4,145

2015 Est. other CA = 2015 est. Net sale x 2014 other CA/Net

sales ratio 135,052.10 x 5.86% 7,908.55 5.86%

32,028 23,196 22,706

2015 Est. Total Current Assets = 2015 Est. Cash + ST Investment

+ Net Rec + Inv + PreExp and Other CA 8,772.21 + 15,977.19 + 7,908.55 32,657.96

250 3,860 4,581 2015 Est. Long term Investment is considered unchanged 250

112,989 110,968 109,767 2015 Est. PPE = 2014 Net PPE + 2015 CAPEX* - 2015 Dep&Amr

112,989 + 135,052.10 x 16.01% -

18,606 115,999.17 85.31% 69,692 69,273 69,773 2015 Est. Goodwill is considered unchanged 69,692 52.62% 66,963 62,212 58,775 2015 Est. Intangible asset is considered unchanged 66,963 50.56% - - - 0.00%

10,998 8,278 6,713

2015 Est. Other asset = 2015 Est. Net Sales x 2014 Other

asset/net sales ratio 135,052.10 x 8.3% 11,214.32 8.30% - - -

292,920 277,787 272,315

2015 Est. total assets = 2015 Est. Total CA + LT inv + PPE +GW +

IA + Other assets

32,657.96 +250 + 115,999.17 +

69,692 + 66,963 + 11,214.32 296,776.45

Accounts Payable 31,226 29,497 28,301

2015 Est. Account Payable = 2015 Est. Net Sales x 2014 AP/Net

sales ratio 135,052.10 x 23.58% 31,840.18 23.58%

Short/Current Long Term Debt 6,056 5,498 3,486

2015 Est. Short term debt = 2014 Short term debt - 2015

Maturity of LT debt + 2016 Maturity LT debt* + Newly short

term debt issued* 6,056 - 6,482 + 5,523 +10,937.98 16,035 Other Current Liabilities - - -

37,282 34,995 31,787

2015 Est. Total current liabilities = 2015 Est. AP + ST debt + other

CL 31,840.18 + 5,097 47,875.16

76,011 69,290 66,358

2015 Est. Long term debt = 2014 LT debt - 2016 Maturity LT

debt 76,011 - 5,523 70,488

55,068 45,712 52,984

2015 Est Other Liabilities = 2015 Est. Net sales x 2014 Other

Liabilities / net sale ratio 135,052.10 x 41.58% 56,151.13 41.58%

37,544 36,308 28,491

2015 Est De. LT Tax = 2015 Est. Net sales x 2014 De. LT tax / net

sale ratio 135,052.10 x 28.35% 38,282.45 28.35% - - -

205,905 186,305 179,620

2015 Est. Total liabilities = 2015 Est. total CL + 2015 Est. LT debt

+ other liabilities + De. LT. Taxes

36,937.18 + 70,488 + 56151.13 +

38,282.45 212,796.75

- - -

- - -

- - -

6,495 6,495 6,495 2015 Est. Common stock is unchanged 6,495

27,736 31,141 22,481

2015 Est. Retained earnings = 2015 Beg RE + 2015 Est. NI - 2015

Est. Dividend 27,736 + 6,024 - 6,024 x 153% 24,515.16 Retained Earnings

Deferred Long Term Liability Charges

Negative Goodwill

Total Liabilities

Stockholders' Equity

Misc Stocks Options Warrants

Redeemable Preferred Stock

Preferred Stock

Common Stock

Other Liabilities

Accumulated Amortization

Other Assets

Deferred Long Term Asset Charges

Total Assets

Liabilities

Current Liabilities

Total Current Liabilities

Long Term Debt

Intangible Assets

PERIOD ENDING

Assets

Current Assets

Total Current Assets

Long Term Investments

Property Plant and Equipment

Goodwill

(47,029) (45,619) (32,888) 2015 Est. Treasury Stock = 2015 Beg TS + 2015 Share issuance* -47,029 + 225 (46,804) 91,108 91,091 91,038 2015 Est. Capital surplus is unchanged 91,108 8,060 7,880 5,236 2015 Est. Other Stockholders equity is unchanged 8,060

554 494 333

2015 Est Noncontrolling interest = 2014 Ending balance of

Noncontrolling interest + 2015 Est. NI attribute to Noncntrolling

int - 2014 other comprehensive loss - 2014 distribution & other* 554 + 284.53 - 233 605.53

86,924 91,482 92,695

2015 Est. Total Stockholder Equity = 2015 Est. CS + RE + Capital

Surplus - TS + Other SE + NonCI + Minority Int

6,495 + 24,515.16 - 46,804 +91,108

+ 8,060 +605.53 83,979.70

(50,285) (40,497) (36,186) 2015 Est. Total liabilities & Stock equitu = 2015 Est. TL + T.SE 212,796.75 + 83,979.70 296,776.45

(0.00)

2014 Capital Expenditure/Net Sales Ratio 16.01%

2014 Depreciation/Prior Net PPE(2013) 16.47%


Net Tangible Assets

Treasury Stock

Capital Surplus

Other Stockholder Equity

Total Stockholder Equity

Minority Interest

AT&T FOOTNOTES

*Cost of sales and SG&A ratios: 31-Mar-15 31-Dec-14 30-Sep-14 30-Jun-14 2015

Total Revenue 32,576$ 34,439$ 32,957$ 32,575$ 132,547$

Cost of Revenue 14,581$ 18,537$ 14,541$ 14,212$ 61,871$

% of Sales 46.68%

Gross Profit 17,995$ 15,902$ 18,416$ 18,363$ 70,676$

Operating Expenses

Selling General and Administrative 7,961$ 16,885$ 8,475$ 8,197$ 41,518$

% of Sales 31.32%

*2014 Dep& Amr Ratio:

2014 Depreciation/Prior Net PPE(2013) 16.47%

18,273/110,968

*2014 Gain/loss in Divestitures

NOTE 3: Comprehensive Income

Since we don’t forcast divestitures, we substract gain/loss reclassified to net income (497) from 2015 Other Income/Expense

*2015 CAPEX

>>2014 PPE x CAPEX to Sales ratio

2014 Capital Expenditure/Net Sales Ratio 16.01%

(2014 Cash Flow Statement - Investing -

CAPEX 21,199) 21,199/132,447

Maturities of Long-Term Debt

Notes to Consolidated Financial

Statements (continued)

Dollars in millions except per share amounts

As of December 31, 2014 and 2013, we were in

compliance with all covenants and conditions of

instruments governing our debt. Substantially all

of our outstanding long-term debt is unsecured.

Maturities of outstanding long-term notes and

debentures, as of December 31, 2014, and the

corresponding weighted-average interest rate

scheduled for repayment are as follows:

Debt repayments1 $ 6,482 5,523

Weighted-average interest rate 4 2.1

*2015 Est. Dividend

2015 Net Income x 2014 Div to NI 6,024 x 153%


(2014 Cash Flow Statement - Financing -

7,803 Dividend) 9,552/6,224

*2015 Issuance Treasury Stock

AT&T CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

Balance at beginning of year -47,029

Issuance of treasury stock 225

Balance at end of period -46,804

*2014 Noncontrolling Interests

Noncontrolling Interest:

Balance at beginning of year 494

Net income attributable to noncontrolling

interest

Distributions -233

294

2015 2016

Contributions -

Acquisitions of noncontrolling interests 69

Acquisition of interests held by

noncontrolling owners

Translation adjustments attributable to

noncontrolling interest, net of taxes

Balance at end of year $ 554

*2015 Newly Short term debt issued

Before adjusted


296,776.45 285,838.47

Difference 10,937.98

After adjusted (Plug in to newly short term debt)


296,776.45 296,776.45

-

-70

AT&T Inc.Consolidated Statements of Income

Dollars in millions except per share amounts2014 2013 2012

Operating Revenues

Service 118,437 119,252 118,506

Equipment 14,010 9,500 8,928

Total operating revenues 132,447 128,752 127,434

Operating Expenses

Cost of services and sales (exclusive of depreciation 60,611 51,464 55,228

and amortization shown separately below)

Selling, general and administrative 39,697 28,414 41,066

Abandonment of network assets 2,120 - -

Depreciation and amortization 18,273 18,395 18,143

Total operating expenses 120,701 98,273 114,437

Operating Income 11,746 30,479 12,997

Other Income (Expense)

Interest expense -3,613 -3,940 -3,444

Equity in net income of affiliates 175 642 752

Other income (expense) – net 1,652 596 134

Total other income (expense) -1,786 -2,702 -2,558

Income Before Income Taxes 9,960 27,777 10,439

Income tax expense 3,442 9,224 2,900

Net Income 6,518 18,553 7,539

Less: Net Income Attributable to Noncontrolling Interest -294 -304 -275

Net Income Attributable to AT&T 6,224 18,249 7,264

Basic Earnings Per Share Attributable to AT&T 1.19 3.39 1.25

Diluted Earnings Per Share Attributable to AT&T 1.19 3.39 1.25

AT&T Inc.Consolidated Balance Sheets

Dollars in millions except per share amounts

2014 2013

Assets

Current Assets

Cash and cash equivalents 8,603 3,339

Accounts receivable - net of allowances for doubtful accounts of $454 and $48314,527 12,918

Prepaid expenses 831 960

Deferred income taxes 1,142 1,199

Other current assets 6,925 4,780


Long term assets

Property, Plant and Equipment – Net 112,898 110,968

Goodwill 69,692 69,273

Licenses 60,824 56,433

Other Intangible Assets – Net 6,139 5,779

Investments in Equity Affiliates 250 3,860

Other Assets 10,998 8,278

Total Assets 292,829 277,787

Operating assets 283,976 270,588

283,976

Nonoperating assets 8,853 7,199

Liabilities

Current Liabilities

Debt maturing within one year 6,056 5,498

Accounts payable and accrued liabilities 23,592 21,107

Advanced billings and customer deposits 4,105 4,212

Accrued taxes 1,091 1,774

Dividends payable 2,438 2,404

Total current liabilities 37,282 34,995

Long-Term Debt 76,011 69,290

Deferred Credits and

Other Noncurrent Liabilities Deferred income taxes 37,544 36,308

Postemployment benefit obligation 37,079 29,946

Other noncurrent liabilities 17,989 15,766

Total deferred credits and other noncurrent liabilities 92,612 82,020

Total liabilities 205,905 186,305

Operating liabilities 121,400 109,113

Nonoperating liabilities 84,505 77,192

Stockholders' Equity

Common stock ($1 par value, 14,000,000,000 authorized at December 31, 2014

and 2013: issued 6,495,231,088 at December 31, 2014 and 2013) 6,495 6,495

Additional paid-in capital 91,108 91,091

Retained earnings 27,736 31,141

Treasury stock (1,308,318,131 at December 31, 2014 and 1,268,914,913

at December 31, 2013, at cost) -47,029 -45,619

Accumulated other comprehensive income 8,060 7,880

Noncontrolling interest 554 494

Total stockholders' equity 86,924 91,482

Equity before noncontrolling interest 86,370 90,988

Total Liabilities and Stockholders' Equity 292,829 277,787

Documents

AT-VZ FINAL