Idle Chatter: Financial Spreadsheets

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A Note for the Granddaughters

Just idle chatter. Don't ask why I'm even posting this. I just find it interesting. Perhaps I find it interesting because I'm reading Sylvia Nasar's Grand Pursuit: The Story of Economic Genius.

Yesterday I received a copy of ATT's 2013 annual report. [I don't personally invest in ATT but a family member, not my wife, does.] Annual reports are generally composed of two parts. The first ten pages are glossy, marketing, summaries of the actual report. The actual report is 200 pages of thin paper, black and white, dry, boring writing. But generally one of the first graphics in the 200 pages of thin paper is the "selected financial and operating data" which summarizes the past three to five years.

This was the 2013 ATT summary:

Two things jumped out at me in the graphic above:

• operating expenses
• number of employees

Sylvia Nasar discusses the early economists who realized that productivity could increase even with if the number of employees decreased. Prior to the 1800's, that was not generally accepted. So, even as ATT grows bigger, the number of employees has decreased over the past five years. [This, of course, is part of the unemployment problem. One can argue that in conditions like this, the government needs to do more to ensure the government is NOT contributing to the problem. The national poll that the US will hold November 4, 2014, will provide insight into whether most Americans feel the government is a help or a hindrance when it comes to unemployment.]

But I digress. Getting back to the graphic.

It was the operating expenses, however, that really jumped out at me. It really shows how much a company can cut expenses if they want to. Operating expenses, which had risen by as much as $16 million between 2009 and 2011, took a remarkable drop over the past year (2013), decreasing about the same amount, $16 million.

I'm sure everyone but me will be able to explain the $16 million savings in expenses by reading the rest of the annual report, but what little I read did not shed much light. It looks like $13 million of that $16 million was saved in "selling, general, and administrative expenses." I did not understand the verbiage that followed but some of it seemed a bit like "smoke and mirrors." Be that as it may, it's still a significant decrease. I did note that part of SGA included pension-related costs. One of the problems I have with SGA (among companies I follow in the Bakken): it is easy to hide things there. At least companies can hide reasons for expenses under SGA from naive investors like me.

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or think you may have read here. 

Later: after the original post, I also noted the huge jump in operating income. Again, it's probably explained in the fine print on the thin pages of the annual report. Time to do some more reading.

[Later this same day: Communications Works of America ratify AT&T Southeast Mobility contract (T) 34.08 +1.12 : Co announced that employees represented by the Communications Workers of America have voted to ratify a four-year contract with AT&T Mobility. The contract covers more than 11,500 AT&T Mobility employees in CWA District 3 -- the Southeast Region, which includes Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, and St. Croix, USVI. The contract covers wages, pension, work rules and disability benefits. CWA members in October 2012 ratified a separate four-year benefit agreement for all CWA-bargained Mobility employees nationwide covering health care and certain other benefits.]

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For my granddaughters, who happen to be young and beautiful --

Young and Beautiful, Lana Del Rey