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Excellent Model for Forecasting Balance Sheets
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Assumptions for Forecasting Model
AssumptionIncome StatementSales Will grow at 5%, based on input from managementCost of Sales 52% of sales, little better than historical average Selling, General & Admn. Expenses 29% of sales, based on expected worsening Depreciation 8% of Gross PP&E, based on analysis of depreciation schedulesOther Net (Income)/ Expenses -0.7% of sales, based on historical averageInterest Income Calculate based on average balance and interest rate specified laterInterest Expense For STD calculate based on average balance and interest rate specified later
For LTD interest expense will remain unchanged at $13.5 millionIncome Taxes 35% of pre-tax income
Balance SheetAssetsCash and Marketable Securities 2.1%, of sales based on historical averageAccounts Receivable 8.4% of sales, based on historical averageInventories 8.8% of sales, based on historical averageOther Current Assets 7.6% of sales, based on historical averageProperty, Plant and Equipment, Gross Will grow at 11% per year, based on discussion with managementAccumulated Depreciation Calculated from other itemsProperty, Plant and Equipment, Net Calculated from other itemsOther Non-Current Assets Will grow at 10% per year, based on discussion with management
Liabilities and Shareholders' EquityAccounts Payable 6.1% of sales, same as historical averageShort-Term Debt Hold level constant at year-end 2008 levelOther Current Liabilities 8.3% of sales, same as 2008Long-Term Debt Will remain unchanged at 2008 levelDeferred Income Taxes 1.4% of sales, based on historical averageOther Non-Current Liabilities 7.6% of sales, based on historical averagePaid-In Capital Will remain unchanged at 2008 levelRetained Earnings Calculated from other items
Other AssumptionsDividend payout ratio 40%, based on discussion with managementInterest on short-term debt 7%, based on economic forecastInterest on long-term debt Rates embedded in existing debt, annual expense $13.5 millionInterest on cash & marketable securities 6%, based on economic forecastNumber of shares outstanding Will remain unchangedP/E ratio Will decline to 16 in 2009 and then improve to 18, 20, and 22 in the following years
Scenario SummaryCurrent Values: Optimistic Pessimistic
Changing Cells:$J$6 5.0% 7.0% 3.0%$J$7 50.0% 49.0% 51.0%$J$10 29.0% 28.0% 30.0%$J$33 8.0% 7.0% 9.0%
Result Cells:2016 NI $150.53 $189.05 $114.84
EPS $3.26 $4.09 $2.49 D/S $1.30 $1.64 $0.99 ROE 16.9% 20.3% 13.6%
2017 NI $158.48 $206.03 $115.23 EPS $3.43 $4.46 $2.49 D/S 22.0 22.0 22.0ROE 16.1% 19.6% 12.6%
Notes: Current Values column represents values of changing cells attime Scenario Summary Report was created. Changing cells for eachscenario are highlighted in gray.
Income Statement and Balance Sheet for Vitex Corp.
Income Statement ($ Million)Historical period Forecast Period
2013 2014 2015Sales $1,334.4 $1,401.1 $1,471.2 Cost of Sales $667.0 $700.6 $735.6 Gross Operating Income $667.4 $700.56 $735.59
Selling, General & Admn. Expenses $373.3 $406.32 $426.64 Depreciation $75.2 $78.89 $85.20 Other Net (Income)/Expenses ($8.2) ($9.81) ($10.30) EBIT $227.1 $225.15 $234.04
Interest (Income) ($2.0) ($1.73) ($1.81)Interest Expense $23.7 $19.41 $16.23 Pre-Tax Income $205.4 $207.47 $219.62
Income Taxes $72.6 $72.62 $76.87 Net Income $132.8 $134.86 $142.75
Dividends $40.1 $53.94 $57.10 Addition to Retained Earnings $92.7 $80.91 $85.65
Balance Sheet ($ Million)AssetsCash and Marketable Securities $28.4 $29.42 $30.89 Accounts Receivable $120.1 $117.69 $123.58 Inventories $116.8 $123.30 $129.46 Other Current Assets $97.5 $106.49 $111.81 Total Current Assets $362.8 $376.90 $395.75
Property, Plant and Equipment, Gross $913.1 $986.15 $1,065.04 Accumulated Depreciation $427.9 $506.79 $592.00 Property, Plant and Equipment, Net $485.2 $479.36 $473.04
Other Non-Current Assets $456.3 $501.93 $552.12 Total Non-Current Assets $941.5 $981.3 $1,025.2
Total Assets $1,304.3 $1,358.2 $1,420.9
Liabilities and Shareholders' EquityAccounts Payable $80.5 $85.5 $89.7 Short-Term Debt $110.3 $58.6 $19.5 Other Current Liabilities $111.3 $112.1 $117.7 Total Current Liabilities $302.1 $256.2 $226.9
Long-Term Debt $218.1 $218.1 $218.1 Deferred Income Taxes $12.7 $19.6 $20.6 Other Non-Current Liabilities $94.5 $106.5 $111.8
Total Liabilities $627.4 $600.4 $577.4
Paid-In Capital $44.8 $44.8 $44.8 Retained Earnings $632.1 $713.0 $798.7 Total Shareholders' Equity $676.9 $757.8 $843.5
Total Liabilities and Shareholders' Equity $1,304.3 $1,358.2 $1,420.9
Discretionary Funding Need (DFN)
Other DataStock price (year-end) $51.40 $46.71 $55.63 Average number of shares outstanding (millions) 46.2 46.2 46.2
Financial IndicatorsValuation RatiosEPS $2.87 $2.92 $3.09 Dividend per Share $0.87 $1.17 $1.24 P/E Ratio 17.9 16.0 18.0P/B (price to book) Ratio 3.5 2.8 3.0Dividend Payout Ratio 30% 40% 40%
Profitability RatiosReturn on Equity (ROE) 21.2% 18.8% 17.8%Return on Sales (ROS) 17.0% 16.1% 15.9%
Growth RatesEPS Growth Rate 1.4% 1.5% 5.9%Dividend Growth Rate 2.1% 34.5% 5.9%Sales Growth Rate 2.6% 5.0% 5.0%EBIT Growth Rate 3.7% -0.9% 3.9%Net Income Growth Rate 0.1% 1.5% 5.9%
Liquidity RatiosCurrent Ratio 1.20 1.47 1.74Quick Ratio 0.49 0.57 0.68
Operating Efficiency RatiosInventory Turnover Ratio 5.7 5.8 5.8Receivable Turnover Ratio 11.1 11.8 11.9
Leverage RatiosTotal Debt to Total Capitalization 32.7% 26.7% 22.0%Long-Term Debt to Total Capitalization 21.7% 21.1% 21.1%Total Debt to Equity 48.5% 36.5% 28.2%
Coverage RatiosTimes Interest Earned (TIE) 9.6 11.6 14.4
Cash Coverage Ratio 12.8 15.7 19.7
EBIT$252.59
1% 201.94129448482% 214.05325437393% 226.52673591584% 239.36886240465% 252.58682662996% 266.18789087697% 280.17938692648% 294.56871605459% 309.3633490332
10% 324.570826129911% 340.1987571075
Forecast Period Forecasting2016 2017 Factor
$1,544.7 $1,622.0 5.0%$772.4 $811.0 50.0%
$772.37 $810.99
$447.97 $470.37 29.0%$92.02 $99.38 8.0%
($10.81) ($11.35) -0.7%$243.19 $252.59
($1.90) ($2.00) -6.0%$13.50 $10.77 7.0%
$231.59 $243.81
$81.06 $85.33 35.0%$150.53 $158.48
$60.21 $63.39 40.0%$90.32 $95.09
$32.44 $34.06 2.1%$129.76 $136.25 8.4%$135.94 $142.73 8.8%$117.40 $123.27 7.6%$415.53 $436.31
$1,150.24 $1,242.26 8.0%$684.01 $783.40 $466.23 $458.87
$607.34 $668.07 10.0%$1,073.6 $1,126.9
$1,489.1 $1,563.2
$94.2 $98.9 6.1%($19.6) ($58.4)$123.6 $129.8 8.0%$198.2 $170.3
$218.1 $218.1 $21.6 $22.7 1.4%
$117.4 $123.3 7.6%
$555.3 $534.4
$44.8 $44.8 $889.0 $984.1 $933.8 $1,028.9
$1,489.1 $1,563.2
$65.18 $75.48 46.2 46.2
$3.26 $3.43 $1.30 $1.37
20.0 22.03.2 3.4
40% 40%
16.9% 16.1%15.7% 15.6%
5.5% 5.3%5.5% 5.3%5.0% 5.0%3.9% 3.9%5.5% 5.3%
2.10 2.560.82 1.00
5.8 5.811.9 11.9
17.5% 13.4%20.2% 19.3%21.3% 15.5%
18.0 23.5
24.8 32.7
NI Div/Sh ROE$158.48 $1.37 16.15%
158.4782822 1.0733467181 0.1315843901158.4782822 1.144912145 0.1389445327158.4782822 1.2185680107 0.1463838701158.4782822 1.2943549638 0.1539007135158.4782822 1.3723141587 0.1614933545158.4782822 1.452487145 0.1691600556158.4782822 1.534915868 0.1768990516158.4782822 1.6196426678 0.1847085526158.4782822 1.7067102802 0.1925867461158.4782822 1.7961618359 0.2005317991158.4782822 1.8880408613 0.2085418607