HW20

No. 4Finance 305, FALL 2012

HW 20

An Integrated SystemCutting Edge B2B Inc. 2003 2004 2005 2006 2007 2008 2009 Ave Hist.

Financial Plan Actual Actual Actual Actual Forecast Forecast Forecast % of Sales

CORPORATE FINANCIAL PLANNING

Key AssumptionsSales Growth Rate 26.3% 24.3% 19.8% 16.0% 13.0% 11.0%Tax Rate 42.1% 43.5% 42.1% 37.9% 40.0% 40.0% 40.0%Int Rate on Short-Term Debt 6.5% 6.7% 6.9% 7.1% 7.0% 6.9% 6.8%Int Rate on Long-Term Debt 7.7% 7.9% 8.1% 8.3% 8.2% 8.1% 8.0%Dividend Payout Rate 33.9% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%Price / Earnings 28.8 29.3 29.0 29.0 29.4 29.4 29.4

Income Statement (Mil.$)Sales $73.84 $93.28 $115.93 $138.84 $161.05 $181.99 $202.01 Cost of Goods Sold $41.83 $58.39 $75.49 $89.83 $100.28 $113.32 $125.78 Gross Margin $32.01 $34.89 $40.44 $49.01 $60.77 $68.67 $76.23

Selling, Gen & Adm Expenses $6.58 $7.28 $8.56 $10.21 $12.66 $14.31 $15.88 Depreciation $5.91 $6.37 $7.31 $9.86 $11.37 $12.85 $14.26 EBIT $19.52 $21.24 $24.57 $28.94 $36.74 $41.51 $46.08


HW 20




Interest Expense $4.76 $5.23 $6.69 $8.88 $11.37 $12.34 $13.62 Taxes $6.21 $6.96 $7.52 $7.60 $10.15 $11.67 $12.98 Net Income $8.55 $9.05 $10.36 $12.46 $15.22 $17.51 $19.48 Shares Outstanding (Millions) 39.60 40.36 44.93 53.91 59.87 65.22 69.02 Earnings Per Share $0.22 $0.22 $0.23 $0.23 $0.25 $0.27 $0.28

Allocation of Net Income:Dividends $2.90 $3.17 $3.63 $4.36 $5.33 $6.13 $6.82 Change in Equity $5.65 $5.88 $6.73 $8.10 $9.89 $11.38 $12.66

Balance Sheet (Mil.$)AssetsCurrent Assets Cash & Equivalents $4.27 $6.38 $7.62 $8.83 $10.29 $11.63 $12.91 Receivables $20.58 $24.39 $28.77 $34.11 $41.63 $47.05 $52.22 Inventories $26.73 $30.45 $36.75 $43.27 $53.03 $59.92 $66.52 Total Current Assets $51.58 $61.22 $73.14 $86.21 $104.95 $118.60 $131.65

Property, Plant & Equip. (PPE) $331.64 $423.92 $503.87 $613.28 $676.62 $760.05 $841.81 Accumulated Depreciation $98.72 $105.09 $112.40 $122.26 $133.63 $146.48 $160.74


HW 20




Net PPE $232.92 $318.83 $391.47 $491.02 $542.98 $613.57 $681.07

Total Assets $284.50 $380.05 $464.61 $577.23 $647.93 $732.17 $812.72

Liabilities and Shareholders' EquityCurrent Liabilities Accounts Payable $31.83 $63.43 $83.84 $94.41 $101.23 $114.39 $126.98 Short-term Debt $30.86 $43.03 $64.85 $79.49 $80.98 $91.50 $101.57 Total Current Liabilities $62.69 $106.46 $148.69 $173.90 $182.21 $205.90 $228.54

Long-term Debt $40.00 $45.90 $51.50 $70.81 $83.32 $92.48 $107.71 Total Liabilities $102.69 $152.36 $200.19 $244.71 $266.53 $298.38 $336.26

Shareholders' Equity Paid-in Capital $90.00 $130.00 $160.00 $220.00 $260.00 $300.00 $330.00 Retained Earnings $91.81 $97.69 $104.42 $112.52 $112.41 $133.79 $146.45 Total Shareholders' Equity $181.81 $227.69 $264.42 $332.52 $362.14 $433.79 $476.45

Total Liab. & Share. Equity $284.50 $380.05 $464.61 $577.23 $647.94 $732.17 $812.71

Debt / (Debt + Equity) 28.0% 28.1% 30.6% 31.1% 30.1% 29.8% 30.5%Market Price / Share $6.21 $6.57 $6.68 $6.71 $7.47 $7.89 $8.30 External Funds Needed $58.07 $57.42 $93.95 $53.99 $59.69 $55.30


HW 20




Income Statement (% of Sales)Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%Cost of Goods Sold 56.6% 62.6% 65.1% 64.7% 62.3% 62.3% 62.3% 62.3%Gross Margin 43.4% 37.4% 34.9% 35.3% 37.7% 37.7% 37.7% 37.7%

Selling, Gen & Adm Expenses 8.9% 7.8% 7.4% 7.4% 7.9% 7.9% 7.9% 7.9%Depreciation 8.0% 6.8% 6.3% 7.1% 7.1% 7.1% 7.1% 7.1%EBIT 26.4% 22.8% 21.2% 20.8% 22.8% 22.8% 22.8% 22.8%

Interest Expense 6.4% 5.6% 5.8% 6.4% 7.1% 6.8% 6.7% 6.1%Taxes 8.4% 7.5% 6.5% 5.5% 6.3% 6.4% 6.4% 7.0%Net Income 11.6% 9.7% 8.9% 9.0% 9.5% 9.6% 9.6% 9.8%Shares Outstanding (Millions) 53.6% 43.3% 38.8% 38.8% 37.2% 35.8% 34.2% 43.6%Earnings Per Share 0.3% 0.2% 0.2% 0.2% 0.2% 0.1% 0.1% 0.2%

Allocation of Net Income:Dividends 3.9% 3.4% 3.1% 3.1% 3.3% 3.4% 3.4% 3.4%Change in Equity 7.7% 6.3% 5.8% 5.8% 6.1% 6.3% 6.3% 6.4%

Balance Sheet (% of Sales)AssetsCurrent Assets Cash & Equivalents 5.8% 6.8% 6.6% 6.4% 6.4% 6.4% 6.4% 6.4% Receivables 27.9% 26.1% 24.8% 24.6% 25.9% 25.9% 25.9% 25.9% Inventories 36.2% 32.6% 31.7% 31.2% 32.9% 32.9% 32.9% 32.9%Total Current Assets 69.9% 65.6% 63.1% 62.1% 65.2% 65.2% 65.2% 65.2%

Property, Plant & Equip. (PPE) 449.1% 454.5% 434.6% 441.7% 420.1% 417.6% 416.6% 445.0% Accum Depreciation 133.7% 112.7% 97.0% 88.1% 83.0% 80.5% 79.6% 107.8%Net PPE 315.4% 341.8% 337.7% 353.7% 337.1% 337.1% 337.1% 337.1%

Total Assets 385.3% 407.4% 400.8% 415.8% 402.3% 402.3% 402.3% 402.3%


HW 20




Liabilities and Shareholders' EquityCurrent Liabilities Accounts Payable 43.1% 68.0% 72.3% 68.0% 62.9% 62.9% 62.9% 62.9% Short-term Debt 41.8% 46.1% 55.9% 57.3% 50.3% 50.3% 50.3% 50.3%Total Current Liabilities 84.9% 114.1% 128.3% 125.3% 113.1% 113.1% 113.1% 113.1%

Long-term Debt 54.2% 49.2% 44.4% 51.0% 51.7% 50.8% 53.3% 49.7%Total Liabilities 139.1% 163.3% 172.7% 176.3% 164.9% 164.0% 166.5% 162.8%

Shareholders' Equity Paid-in Capital 121.9% 139.4% 138.0% 158.5% 161.4% 164.8% 163.4% 139.4% Retained Earnings 124.3% 104.7% 90.1% 81.0% 76.0% 73.5% 72.5% 100.0%Total Shareholders' Equity 246.2% 244.1% 228.1% 239.5% 237.4% 238.4% 235.9% 239.5%

Total Liabilities and Equity 385.3% 407.4% 400.8% 415.8% 402.3% 402.3% 402.3% 402.3%

Cash Flow Statement (Mil.$)Cash Flow From Operating Activities Net Income $9.05 $10.36 $12.46 $15.22 $17.51 $19.48 + Depreciation $6.37 $7.31 $9.86 $11.37 $12.85 $14.26 - Inc in Accts Receivable ($3.81) ($4.38) ($5.34) ($7.52) ($5.42) ($5.17) - Inc in Inventories ($3.72) ($6.30) ($6.52) ($9.76) ($6.89) ($6.60) + Inc in Accounts Payable $31.60 $20.41 $10.57 $6.82 $13.16 $12.59 Cash Flow From Operat Act $39.49 $27.40 $21.03 $16.13 $31.21 $34.56


HW 20




Cash Flow From Investing Activities - Invest in Plant and Equip ($92.28) ($79.95) ($109.41) ($63.34) ($83.43) ($81.76)Cash Flow From Invest Act ($92.28) ($79.95) ($109.41) ($63.34) ($83.43) ($81.76)

Cash Flow From Financing Activities + Inc in Long-term Debt $5.90 $5.60 $19.31 $12.51 $9.16 $15.23 + Inc in Short-term Debt $12.17 $21.82 $14.64 $1.49 $10.52 $10.07 + Inc in Paid in Capital $40.00 $30.00 $60.00 $40.00 $40.00 $30.00 - Dividends Paid ($3.17) ($3.63) ($4.36) ($5.33) ($6.13) ($6.82)Cash Flow From Financ Act $54.90 $53.79 $89.59 $48.67 $53.55 $48.48

Change in Cash and Equiv $2.11 $1.24 $1.21 $1.46 $1.33 $1.28 Cash and Equiv, Begin of Yr $4.27 $6.38 $7.62 $8.83 $10.29 $11.63 Cash and Equiv, End of Yr $6.38 $7.62 $8.83 $10.29 $11.62 $12.91


HW 20




Financial RatiosProfitabilityReturn On Sales (ROS) 26.4% 22.8% 21.2% 20.8% 22.8% 22.8% 22.8%Return On Assets (ROA) 6.4% 5.8% 5.6% 6.0% 6.0% 6.0%Return On Equity (ROE) 4.4% 4.2% 4.2% 4.4% 4.4% 4.3%

Asset TurnoverReceivables Turnover 414.9% 436.2% 441.6% 425.3% 410.4% 407.0%Inventory Turnover 204.2% 224.7% 224.5% 208.3% 200.7% 199.0%Asset Turnover 28.1% 27.5% 26.7% 26.3% 26.4% 26.2%

Financial LeverageDebt 24.9% 23.4% 25.0% 26.0% 25.4% 25.1% 25.8%Times Interest Earned 410.1% 406.1% 367.3% 325.9% 323.1% 336.5% 338.3%

LiquidityCurrent 82.3% 57.5% 49.2% 49.6% 57.6% 57.6% 57.6%Quick 39.6% 28.9% 24.5% 24.7% 28.5% 28.5% 28.5%

Market ValuePrice to Earnings 28.76 29.30 28.97 29.03 29.38 29.22 29.64Market to Book 135.3% 116.5% 113.5% 108.8% 123.5% 118.6% 120.2%


HW 20




Data Table: Sensitivity of the External Funds Needed to the 2007 Sales Growth Rate

Input Values for 2007 Sales Growth RateOutput Formula: 0.0% 4.0% 8.0% 12.0% 16.0% 20.0% 24.0%External Funds Needed $53.99 ($19.44) ($1.08) $17.28 $35.63 $53.99 $72.35 $90.71

0.0% 4.0% 8.0% 12.0% 16.0% 20.0% 24.0%($40)

($20)

$0

$20

$40

$60

$80

$100 External Funds Needed by the Sales Growth Rate

Sales Growth Rate

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No. 12Finance 305; FALL 2012

HW 24

Full-Scale EstimationNike, Inc. 5/31/2003 5/31/2004 5/31/2005 5/31/2006 5/31/2007 5/31/2008 5/31/2009 Ave. %

Financial Plan Actual Actual Actual Actual Forecast Forecast Forecast of Sales


Key AssumptionsSales Growth Rate 14.5% 12.1% 8.8% 7.0% 6.0% 5.0%Tax Rate 44.7% 34.8% 34.9% 35.0% 35.0% 35.0% 35.0%Int Rate on Short-Term Debt 1.0% 2.1% 3.4% 5.1% 4.5% 4.5% 4.5%Int Rate on Long-Term Debt 2.3% 3.9% 3.8% 5.1% 5.5% 5.5% 5.5%Dividend Payout Rate 29.1% 19.0% 19.5% 20.9% 21.0% 22.0% 23.0%Price / Earnings 62.3 39.6 35.4 29.5 30.0 31.0 32.0

Income Statement (Mil.$)Sales $10,697.0 $12,253.1 $13,739.7 $14,954.9 $16,001.7 $16,961.8 $17,809.9 Cost of Goods Sold $6,072.8 $6,824.0 $7,596.3 $8,190.7 $8,901.8 $9,435.9 $9,907.7 Gross Margin $4,624.2 $5,429.1 $6,143.4 $6,764.2 $7,100.0 $7,526.0 $7,902.3

Selling, Gen & Adm Expenses $3,137.6 $3,702.0 $4,221.7 $4,477.8 $4,809.0 $5,097.6 $5,352.5 Other Expense $79.9 $74.7 $29.1 $4.4 $63.9 $67.8 $71.1 Accounting Change, Net $266.1 $0.0 $0.0 $0.0 $99.5 $105.5 $110.8 Depreciation $240.8 $177.4 $28.0 $177.2 $203.5 $215.7 $226.5 EBIT $899.8 $1,475.0 $1,864.6 $2,104.8 $1,924.0 $2,039.4 $2,141.4

Interest Expense, Net $42.9 $25.0 $4.8 ($36.8) $24.5 $48.3 $55.8 Taxes $382.9 $504.4 $648.2 $749.6 $664.8 $696.9 $730.0 Net Income $474.0 $945.6 $1,211.6 $1,392.0 $1,234.6 $1,294.3 $1,355.6 Shares Outstanding (Millions) 527.2 526.2 522.2 512.0 512.0 512.0 512.0Earnings Per Share $0.90 $1.80 $2.32 $2.72 $2.41 $2.53 $2.65

Allocation of Net Income:Dividends $137.8 $179.2 $236.7 $290.9 $259.3 $284.7 $311.8 Change in Equity $336.2 $766.4 $974.9 $1,101.1 $975.4 $1,009.5 $1,043.8

Balance Sheet (Mil.$)AssetsCurrent Assets Cash & Equivalents $634.0 $828.0 $1,388.1 $954.2 $1,110.0 $1,260.6 $1,415.4 Short-term Investments $0.0 $400.8 $436.6 $1,348.8 $618.8 $655.9 $688.7 Receivables $2,101.1 $2,120.2 $2,262.1 $2,395.9 $2,777.5 $2,944.2 $3,091.4


HW 24




Inventories $1,514.9 $1,633.6 $1,811.1 $2,076.7 $2,182.7 $2,313.7 $2,429.4 Deferred Income Taxes $163.7 $165.0 $110.2 $203.3 $201.6 $213.7 $224.3 Prepaid Expenses $266.2 $364.4 $343.0 $380.1 $420.1 $445.3 $467.5 Total Current Assets $4,679.9 $5,512.0 $6,351.1 $7,359.0 $7,310.6 $7,833.3 $8,316.7

Property, Plant & Equip., Net $1,620.8 $1,586.9 $1,605.8 $1,657.7 $2,035.2 $2,157.3 $2,265.2 Intangible Assets, Net $118.2 $366.3 $406.1 $405.5 $390.5 $413.9 $434.6 Goodwill $65.6 $135.4 $135.4 $130.8 $143.2 $151.7 $159.3 Deferred Inc. Taxes & Other $229.4 $291.0 $295.2 $316.6 $351.4 $372.5 $391.2 Total Assets $6,713.9 $7,891.6 $8,793.6 $9,869.6 $10,230.9 $10,928.8 $11,567.0

Liabilities and Shareholders' EquityCurrent Liabilities Current Portion of L.T. Debt $205.7 $6.6 $6.2 $255.3 $149.2 $158.1 $166.0 Notes Payable $75.4 $146.0 $69.8 $43.4 $107.8 $114.3 $120.0 Accounts Payable $572.7 $763.8 $843.9 $952.2 $964.0 $1,021.8 $1,072.9 Accrued Liabilities $1,054.2 $974.4 $984.3 $1,286.9 $1,343.2 $1,423.8 $1,495.0 Income Taxes Payable $107.2 $118.2 $95.0 $85.5 $129.2 $137.0 $143.8 Total Current Liabilities $2,015.2 $2,009.0 $1,999.2 $2,623.3 $2,693.4 $2,855.0 $2,997.7

Long-term Debt $551.6 $682.4 $687.3 $410.7 $789.2 $921.5 $371.6 Deferred Inc. Taxes & Other $156.1 $418.2 $462.6 $550.1 $476.8 $505.4 $530.6 Redeemable Preferred Stock $0.3 $0.3 $0.3 $0.3 $0.4 $0.4 $0.4 Total Liabilities $2,723.2 $3,109.9 $3,149.4 $3,584.4 $3,959.7 $4,282.2 $3,900.4

Shareholders' Equity Common Stock Class A $0.2 $0.1 $0.1 $0.1 $0.2 $0.2 $0.2 Common Stock Class B $2.6 $2.7 $2.7 $2.7 $2.6 $2.6 $2.6 Capital in Excess of Stated $589.0 $887.8 $1,182.9 $1,451.4 $650.0 $20.0 $0.0 Unearned Stock Compen. ($0.6) ($5.5) ($11.4) ($4.1) ($6.4) ($6.8) ($7.2) Accum. Other Comp. Loss ($239.7) ($86.3) $73.4 $121.7 ($63.9) ($67.7) ($71.1) Retained Earnings $3,639.2 $3,982.9 $4,396.5 $4,713.4 $5,688.8 $6,698.3 $7,742.1 Total Shareholders' Equity $3,990.7 $4,781.7 $5,644.2 $6,285.2 $6,271.2 $6,646.6 $7,666.7

Total Liab. & Share. Equity $6,713.9 $7,891.6 $8,793.6 $9,869.6 $10,230.9 $10,928.8 $11,567.0


HW 24




Debt / (Debt + Equity) 17.3% 14.9% 11.9% 10.1% 14.3% 15.2% 7.9% Market Price / Share $55.99 $71.15 $82.20 $80.31 $72.34 $78.36 $84.73 External Funds Needed $642.9 $408.3 $650.8 ($626) ($369.5) ($456.7)

Income Statement (% of Sales)Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%Cost of Goods Sold 56.8% 55.7% 55.3% 54.8% 55.6% 55.6% 55.6% 55.6%Gross Margin 43.2% 44.3% 44.7% 45.2% 44.4% 44.4% 44.4% 44.4%

Selling, Gen & Adm Expenses 29.3% 30.2% 30.7% 29.9% 30.1% 30.1% 30.1% 30.1%Other Expense 0.7% 0.6% 0.2% 0.0% 0.4% 0.4% 0.4% 0.4%Accounting Change, Net 2.5% 0.0% 0.0% 0.0% 0.6% 0.6% 0.6% 0.6%Depreciation 2.3% 1.4% 0.2% 1.2% 1.3% 1.3% 1.3% 1.3%EBIT 8.4% 12.0% 13.6% 14.1% 12.0% 12.0% 12.0% 12.0%

Interest Expense, Net 0.4% 0.2% 0.0% -0.2% 0.2% 0.3% 0.3% 0.1%Taxes 3.6% 4.1% 4.7% 5.0% 4.2% 4.1% 4.1% 4.4%Net Income 4.4% 7.7% 8.8% 9.3% 7.7% 7.6% 7.6% 7.6%Shares Outstanding (Millions) 4.9% 4.3% 3.8% 3.4% 3.2% 3.0% 2.9% 4.1%Earnings Per Share 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Allocation of Net Income: 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Dividends 1.3% 1.5% 1.7% 1.9% 1.6% 1.7% 1.8% 1.6%Change in Equity 3.1% 6.3% 7.1% 7.4% 6.1% 6.0% 5.9% 6.0%

Balance Sheet (% of Sales)AssetsCurrent Assets Cash & Equivalents 5.9% 6.8% 10.1% 6.4% 6.9% 7.4% 7.9% 7.3% Short-term Investments 0.0% 3.3% 3.2% 9.0% 3.9% 3.9% 3.9% 3.9% Receivables 19.6% 17.3% 16.5% 16.0% 17.4% 17.4% 17.4% 17.4% Inventories 14.2% 13.3% 13.2% 13.9% 13.6% 13.6% 13.6% 13.6%


HW 24




Deferred Income Taxes 1.5% 1.3% 0.8% 1.4% 1.3% 1.3% 1.3% 1.3% Prepaid Expenses 2.5% 3.0% 2.5% 2.5% 2.6% 2.6% 2.6% 2.6%Total Current Assets 43.7% 45.0% 46.2% 49.2% 45.7% 46.2% 46.7% 46.0%

Property, Plant & Equip., Net 15.2% 13.0% 11.7% 11.1% 12.7% 12.7% 12.7% 12.7%Intangible Assets, Net 1.1% 3.0% 3.0% 2.7% 2.4% 2.4% 2.4% 2.4%Goodwill 0.6% 1.1% 1.0% 0.9% 0.9% 0.9% 0.9% 0.9%Deferred Inc. Taxes & Other 2.1% 2.4% 2.1% 2.1% 2.2% 2.2% 2.2% 2.2%Total Assets 62.8% 64.4% 64.0% 66.0% 63.9% 64.4% 64.9% 64.3%

Liabilities and Shareholders' EquityCurrent Liabilities Current Portion of L.T. Debt 1.9% 0.1% 0.0% 1.7% 0.9% 0.9% 0.9% 0.9% Notes Payable 0.7% 1.2% 0.5% 0.3% 0.7% 0.7% 0.7% 0.7% Accounts Payable 5.4% 6.2% 6.1% 6.4% 6.0% 6.0% 6.0% 6.0% Accrued Liabilities 9.9% 8.0% 7.2% 8.6% 8.4% 8.4% 8.4% 8.4% Income Taxes Payable 1.0% 1.0% 0.7% 0.6% 0.8% 0.8% 0.8% 0.8%Total Current Liabilities 18.8% 16.4% 14.6% 17.5% 16.8% 16.8% 16.8% 16.8%

Long-term Debt 5.2% 5.6% 5.0% 2.7% 4.9% 5.4% 2.1% 4.6%Deferred Inc. Taxes & Other 1.5% 3.4% 3.4% 3.7% 3.0% 3.0% 3.0% 3.0%Redeemable Preferred Stock 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Total Liabilities 25.5% 25.4% 22.9% 24.0% 24.7% 25.2% 21.9% 24.4%

Shareholders' Equity Common Stock Class A 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Common Stock Class B 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Capital in Excess of Stated 5.5% 7.2% 8.6% 9.7% 4.1% 0.1% 0.0% 7.8% Unearned Stock Compen. 0.0% 0.0% -0.1% 0.0% 0.0% 0.0% 0.0% 0.0% Accum. Other Comp. Loss -2.2% -0.7% 0.5% 0.8% -0.4% -0.4% -0.4% -0.4% Retained Earnings 34.0% 32.5% 32.0% 31.5% 35.6% 39.5% 43.5% 32.5%Total Shareholders' Equity 37.3% 39.0% 41.1% 42.0% 39.2% 39.2% 43.0% 39.9%

Total Liab. & Share. Equity 62.8% 64.4% 64.0% 66.0% 63.9% 64.4% 64.9% 64.3%

Cash Flow Statement (Mil.$)Cash Provided (Used) By Operating Activities


HW 24




Net Income $474.0 $945.6 $1,211.6 $1,392.0 $1,234.6 $1,294.3 $1,355.6 Income Charges (Credits) Not Affecting Cash: Depreciation $239.3 $252.1 $257.2 $282.0 $322.1 $341.4 $358.5 Cum Effect of Acct Change $266.1 $0.0 $0.0 $0.0 $99.5 $105.5 $110.8 Deferred Income Taxes $50.4 $19.0 $21.3 ($26.0) $24.3 $25.8 $27.0 Amortization and other $23.2 $58.3 $30.5 $8.9 $39.0 $41.3 $43.4 Inc Tax Ben Exer Options $12.5 $47.2 $63.1 $54.2 $53.0 $56.1 $58.9 Changes in Certain Working Capital Components: (Inc) dec in Inventories ($102.8) ($55.9) ($103.3) ($200.3) ($140.4) ($148.8) ($156.2) (Inc) dec in Accounts Rec. ($136.3) $82.5 ($93.5) ($85.1) ($74.0) ($78.5) ($82.4) Dec (inc) in Prepd & Ot CA $60.9 ($103.5) $71.4 ($37.2) ($0.2) ($0.2) ($0.2) Inc (dec.) in Account Pay, Accr Liab., & Inc Tax Pay. $30.1 $269.1 $112.4 $279.4 $206.6 $219.0 $229.9 Cash Provided By Operations $917.4 $1,514.4 $1,570.7 $1,667.9 $1,764.5 $1,855.9 $1,945.4

Cash Provided (Used) By Investing Activities Purch of short-term invest $0.0 ($400.8) ($1,527.2) ($2,619.7) ($1,276.3) ($1,352.9) ($1,420.5) Matur of short-term invest $0.0 $0.0 $1,491.9 $1,709.8 $891.8 $945.3 $992.5 Additions to PP & E ($185.9) ($213.9) ($257.1) ($333.7) ($303.5) ($321.7) ($337.8) Disposals of PP & E $14.8 $11.6 $7.2 $1.6 $11.8 $12.6 $13.2 Increase in Other Assets ($46.3) ($53.4) ($39.1) ($30.3) ($54.2) ($57.5) ($60.4) Inc (dec.) in Other Liab $1.8 ($0.9) $11.1 ($4.3) $2.5 $2.6 $2.7 Acq of subs-net assets acq $0.0 ($289.1) ($47.2) $0.0 ($108.1) ($114.6) ($120.3)Cash Used By Investing Act ($215.6) ($946.5) ($360.4) ($1,276.6) ($836.1) ($886.2) ($930.5)

Cash Provided (Used) By Financing Activities Proc from Long-term Debt $90.4 $153.8 $0.0 $0.0 $84.0 $89.1 $93.5 Reduct in Long-term Debt ($55.9) ($206.6) ($9.2) ($6.0) ($92.6) ($98.2) ($103.1) Inc (dec.) in Notes Payable ($349.8) ($0.3) ($81.7) ($18.2) ($159.6) ($169.1) ($177.6) Proc from Exer of Options $44.2 $253.6 $226.8 $225.3 $225.6 $239.2 $251.1 Repurchase of stock ($196.3) ($419.8) ($556.2) ($761.1) ($576.0) ($610.6) ($641.1) Dividends - common & pref ($137.8) ($179.2) ($236.7) ($290.9) ($256.8) ($272.2) ($285.8)Cash Used By Financing Act ($605.2) ($398.5) ($657.0) ($850.9) ($775.3) ($821.9) ($863.0)

Effect of Exch. Rate Chgs ($38.1) $24.6 $6.8 $25.7 $2.6 $2.8 $2.9


HW 24




Net Inc (Dec.) Cash & Equiv. $58.5 $194.0 $560.1 ($433.9) $155.8 $150.6 $154.8

Cash and Equiv. Beg of Year $575.5 $634.0 $828.0 $1,388.1 $954.2 $1,110.0 $1,260.6 Cash and Equiv. End of Year $634.0 $828.0 $1,388.1 $954.2 $1,110.0 $1,260.6 $1,415.4

Cash Flow Statement (% of Sales)Cash Provided (Used) By Operating ActivitiesNet Income 4.4% 7.7% 8.8% 9.3% 7.7% 7.6% 7.6% 7.6%Income Charges (Credits) Not Affecting Cash: Depreciation 2.2% 2.1% 1.9% 1.9% 2.0% 2.0% 2.0% 2.0% Cum Effect of Acct Change 2.5% 0.0% 0.0% 0.0% 0.6% 0.6% 0.6% 0.6% Deferred Income Taxes 0.5% 0.2% 0.2% -0.2% 0.2% 0.2% 0.2% 0.2% Amortization and other 0.2% 0.5% 0.2% 0.1% 0.2% 0.2% 0.2% 0.2% Inc Tax Ben Exer Options 0.1% 0.4% 0.5% 0.4% 0.3% 0.3% 0.3% 0.3%Changes in Certain Working Capital Components: (Inc) dec in Inventories -1.0% -0.5% -0.8% -1.3% -0.9% -0.9% -0.9% -0.9% (Inc) dec in Accounts Rec. -1.3% 0.7% -0.7% -0.6% -0.5% -0.5% -0.5% -0.5% Dec (inc) in Prepd & Ot CA 0.6% -0.8% 0.5% -0.2% 0.0% 0.0% 0.0% 0.0% Inc (dec.) in Account Pay, 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Accr Liab., & Inc Tax Pay. 0.3% 2.2% 0.8% 1.9% 1.3% 1.3% 1.3% 1.3%Cash Provided By Operations 8.6% 12.4% 11.4% 11.2% 11.0% 10.9% 10.9% 10.9%

Cash Provided (Used) By Investing Activities Purch of short-term invest 0.0% -3.3% -11.1% -17.5% -8.0% -8.0% -8.0% -8.0% Matur of short-term invest 0.0% 0.0% 10.9% 11.4% 5.6% 5.6% 5.6% 5.6% Additions to PP & E -1.7% -1.7% -1.9% -2.2% -1.9% -1.9% -1.9% -1.9% Disposals of PP & E 0.1% 0.1% 0.1% 0.0% 0.1% 0.1% 0.1% 0.1% Increase in Other Assets -0.4% -0.4% -0.3% -0.2% -0.3% -0.3% -0.3% -0.3% Inc (dec.) in Other Liab 0.0% 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% Acq of subs-net assets acq 0.0% -2.4% -0.3% 0.0% -0.7% -0.7% -0.7% -0.7%Cash Used By Investing Act -2.0% -7.7% -2.6% -8.5% -5.2% -5.2% -5.2% -5.2%


HW 24




Cash Provided (Used) By Financing Activities Proc from Long-term Debt 0.8% 1.3% 0.0% 0.0% 0.5% 0.5% 0.5% 0.5% Reduct in Long-term Debt -0.5% -1.7% -0.1% 0.0% -0.6% -0.6% -0.6% -0.6% Inc (dec.) in Notes Payable -3.3% 0.0% -0.6% -0.1% -1.0% -1.0% -1.0% -1.0% Proc from Exer of Options 0.4% 2.1% 1.7% 1.5% 1.4% 1.4% 1.4% 1.4% Repurchase of stock -1.8% -3.4% -4.0% -5.1% -3.6% -3.6% -3.6% -3.6% Dividends - common & pref -1.3% -1.5% -1.7% -1.9% -1.6% -1.6% -1.6% -1.6%Cash Used By Financing Act -5.7% -3.3% -4.8% -5.7% -4.8% -4.8% -4.8% -4.8%

Effect of Exch. Rate Chgs -0.4% 0.2% 0.0% 0.2% 0.0% 0.0% 0.0% 0.0%Net Inc (Dec.) Cash & Equiv. 0.5% 1.6% 4.1% -2.9% 1.0% 0.9% 0.9% 0.8%

Cash and Equiv. Beg of Year 5.4% 5.2% 6.0% 9.3% 6.0% 6.5% 7.1% 6.5%Cash and Equiv. End of Year 5.9% 6.8% 10.1% 6.4% 6.9% 7.4% 7.9% 7.3%

Financial RatiosProfitabilityReturn On Sales (ROS) 8.4% 12.0% 13.6% 14.1% 12.0% 12.0% 12.0%Return On Assets (ROA) 20.2% 22.4% 22.6% 19.1% 19.3% 19.0%Return On Equity (ROE) 21.6% 23.2% 23.3% 19.7% 20.0% 18.9%

Asset TurnoverReceivables Turnover 5.8 6.3 6.4 6.2 5.9 5.9Inventory Turnover 4.3 4.4 4.2 4.2 4.2 4.2Asset Turnover 1.7 1.6 1.6 1.6 1.6 1.6

Financial LeverageDebt 12.4% 10.6% 8.7% 7.2% 10.2% 10.9% 5.7%Times Interest Earned 21.0 59.0 388.5 -57.2 78.4 42.3 38.4

LiquidityCurrent 232.2% 274.4% 317.7% 280.5% 271.4% 274.4% 277.4%Quick 135.7% 146.7% 182.6% 127.7% 144.3% 147.3% 150.3%

Market ValuePrice to Earnings 62.3 39.6 35.4 29.5 30.00 31.00 32.00


HW 24




Market to Book 739.7% 783.0% 760.5% 654.2% 590.6% 603.7% 565.8%

ProblemsGlobal Impact P2P 2003 2004 2005 2006

Financial Plan Actual Actual Actual Actual


Key AssumptionsSales Growth Rate 21.4% 19.3%Tax Rate 40.5% 38.8% 38.2% 36.0%Int Rate on Short-Term Debt 6.3% 6.3% 6.4% 6.5%Int Rate on Long-Term Debt 7.4% 7.4% 7.5% 7.6%Dividend Payout Rate 26.1% 25.9% 26.8% 24.4%Price / Earnings 8.6 8.4 8.7 9.3

Income Statement (Mil.$)Sales $185.76 $194.29 $235.84 $281.38 Cost of Goods Sold $109.81 $112.25 $138.97 $171.57 Gross Margin $75.95 $82.04 $96.87 $109.81

Selling, Gen & Adm Expenses $12.73 $13.54 $16.87 $19.94 Depreciation $11.66 $12.39 $14.58 $18.37 EBIT $51.56 $56.11 $65.42 $71.50

Interest Expense $14.23 $15.69 $23.88 $24.55 Taxes $15.12 $15.68 $15.87 $16.92




Net Income $22.21 $24.74 $25.67 $30.03 Shares Outstanding (Millions) 2.03 2.10 2.15 2.44 Earnings Per Share $10.94 $11.78 $11.94 $12.31

Allocation of Net Income:Dividends $5.80 $6.41 $6.87 $7.33 Change in Equity $16.41 $18.33 $18.80 $22.70

Balance Sheet (Mil.$)AssetsCurrent Assets Cash & Equivalents $8.56 $13.97 $15.34 $17.75 Receivables $41.63 $49.52 $57.37 $68.91 Inventories $52.11 $60.94 $73.49 $86.32 Total Current Assets $102.30 $124.43 $146.20 $172.98

Property, Plant & Equip. (PPE) $663.29 $846.39 $910.34 $958.31 Accumulated Depreciation $189.20 $201.59 $216.17 $234.54 Net PPE $474.09 $644.80 $694.17 $723.77

Total Assets $576.39 $769.23 $840.37 $896.75

Liabilities and Shareholders' EquityCurrent Liabilities




Accounts Payable $62.46 $90.48 $134.32 $174.57 Short-term Debt $202.12 $307.87 $304.96 $312.85 Total Current Liabilities $264.58 $398.35 $439.28 $487.42

Long-term Debt $40.00 $55.74 $62.15 $17.69 Total Liabilities $304.58 $454.09 $501.43 $505.11

Shareholders' Equity Paid-in Capital $180.00 $205.00 $210.00 $240.00 Retained Earnings $91.81 $110.14 $128.94 $151.64 Total Shareholders' Equity $271.81 $315.14 $338.94 $391.64

Total Liab. & Share. Equity $576.39 $769.23 $840.37 $896.75

Debt / (Debt + Equity) 47.1% 53.6% 52.0% 45.8% Market Price / Share $94.58 $99.12 $103.47 $114.95 External Funds Needed $146.49 $8.50 ($6.57)

HW20

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Transcript of HW20