Walgreens-09-Analysis-MidTerm

Walgreens-09-Analysi - Walgreen 2009 Analysis 1 1 1 In Millions Except Per Share Data 100318 1 Cash flow from operating activities Net Earnings

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Unformatted text preview: Walgreen 2009 Analysis 1 1 1 In Millions, Except Per Share Data 100318 1 Cash flow from operating activities Net Earnings Depreciation and amortization Change in Accounts receivable, net Inventories Other current assets Trade accounts payable Accrued expenses and other liabilities Income taxes Deferred income taxes Other non-current liabilities Accumulated other comprehensive income Cash flow from operating activities Cash flow from investing activities Purchase of new Property and equipment Other non-current assets Goodwill Short-term investments Cash flow from investing activities Cash flow from financing activities Change in Short-term borrowings Long-term debt Cash dividends declared ($.4750 per share) Treasury stock at cost Paid-in capital Employee stock loan receivable Cash flow from financing activities Cash flow Cash Increase Å 3,831.0 + from balance sheet Å 2,006 975 31 460 37 19 134 40 115 (14) 28 3,831 (1,854) (214) (23) (500) (2,591) 1,027 827 148 66 (68) 999 (471) 18 30 (104) 404 (2,591) + 404 = 1,644 1,644 Depreciation and amortization expense Amortization Expense Depreciation Expense Property and equipment, at cost, less accumulated depreciation Beg Balance 9,775 | New P&E 1,854 | End Balance 10,802 | Other non-current assets 764 | 214 | 830 | 975 148 827 Å 827 Depreciation Expense Beg Balance New P&E End Balance 148 Amortization Expense Walgreen 2009 Analysis 2 2 a Ç É Ñ In Millions, Except Per Share Data 100318 Short-term borrowings Long-term debt Total Debt Total Shareholders' Equity Total Capital Total Assets Operating Liabilities Debt to Equity Ratio Earnings before Interest and Taxes Interest (expense) income, net Interest capitalized Interest Expense Times Interest Earned. Margin before interest and taxes MBIT Asset Turnover Tax rate NOPAT NOPAT ROTC Net Income + 2,006 + 08/31/09 15 2,336 2,351 14,376 16,727 25,142 8,415 0.1635 83 16 Ç+É Ñ-Ç-É Ç/É 3,247 99 Average 49 1,837 1,886 13,623 15,508 23,776 8,268 0.1384 b 3,247 ÷ 99 EBIT ÷ Net Sales 3,247 ÷ 63,335 Net Sales ÷ Total Assets 63,335 ÷ 23776 1,158 ÷ 3164 EBIT x (1-tax rate) 3,247 x 63.40% (1-tax rate) 0.6340 = 36.60% 32.80 5.13% 2.66 c d e = 2,059 x Interest Expense x 83 = 2,059 13.27% NOPAT ÷ Total Capital 2,059 ÷ 15,508 NOPAT ÷ Total Assets 2,059 ÷ 23,776 2.6638 x 5.13% x 63.40% = 8.66% = f ROA Check 8.66% h Return on Equity Net Income ÷ Av. equity 2006 ÷ 13,623 8,268.0 ÷ 15,508 = 0.5331 ROA x Operating liabilities ratio 8.66% x 0.5331 14.73% h Operating liabilities ratio = ROA ROTC = 8.66% Average Interest Rate. After tax interest cost ROE = = = ROTC 13.27% 13.27% + + 13.27% 2.79% j 83 ÷ 1,886 = 4.40% 4.40% x [ 100.00% - 36.60% ]= +[ +[ + ROTC 13.27% 1.45% After tax ] x Debt/Equity interest cost 2.79% ] x 0.138 = 14.72% Walgreen 2009 Analysis 3 3 a Increase in deferred tax liability due to Accelerated depreciation Tax Depreciation - Reported Depreciation Amortization expense for intangible assets Depreciation and amortization reported Depreciation reported Depreciation for tax purposes State income taxes, net of federal benefit State taxes on income, gross State tax rate State Current provision Deferred provision State taxes on income, gross State tax rate 91 17 108 108 ÷ 3,164 = 3.41% 913.0 117.0 975.0 - 148.0 827.0 + 319.7 - 796.0 ÷ 36.60% = 148.0 = 975.0 = 827.0 = = = 117.0 319.7 = = = = 1,146.7 70 107 3.38% b OR 2.20% x 3,164 70 ÷ 65.00% 107 ÷ 3,164 C Begin Balance Goodwill purchase Purchases [Plug] End Balance Goodwill and Other Intangible Assets Gross carrying amount 2,293.0 | 23.0 | 202.0 | 56.0 Wrote off 2,462.0 | Ö Ö Goodwill and Other Intangible Assets Total accumulated amortization Begin Balance | 212.0 Begin Balance Wrote off [Plug] 56.0 | 148.0 Amortization Expense End Balance | 304.0 End Balance Additional expense Change in net income Purchases [Plug] - Amortization Expense 202.0 - 148.0 = 54.0 x 63.40% = = x[ x[ 54.0 34.2 d Increase in LIFO reserve = 1,239.0 - 1,067.0 Net Income = Net Income (as + Increase in LIFO reserve = 2,006.0 + 172.0 Inventory turnover ratio (as reported) Cost of sales = Average inventory 172.0 1 - tax ] 63.40% ] 2,115.0 6.514 e f 45,722.0 7,019.0 Inventories LIFO Inventory LIFO Reserve FIFO inventory 08/31/08 7,249 + 1,067.0 = 8,316.0 08/31/09 6,789 + 1,239.0 = 8,028.0 Average inventory (FIFO) 8,172.0 Inventory turnover ratio Current cost Cost of sales (LIFO) ÷ Average inventory (FIFO) 45,722.0 ÷ 8,172.0 5.595 Walgreen 2009 Analysis 4 4 Discounted at rate = Operating Leases Rental commitments ÷ Factor Present Value 2,024.0 ÷ 1.0600 1,909 2010 2,101.0 ÷ 1.1236 1,870 2011 2,085.0 ÷ 1.1910 1,751 2012 2,044.0 ÷ 1.2625 1,619 2013 2,002.0 ÷ 1.3382 1,496 2014 8,645 Present value of lease payments for the first five years 24,696 ÷ 14 = 1,764 After 5 years: $ x 14 year annuity ÷ 5 year future value 1,764.0 x 9.295 ÷ 1.3382 = PV of lease payments 08/31/08 Lease payment in year ending 08/31/09 Future value 22,872 ÷ 1 08/31/09 PV of lease payments Fixed assets Capital lease obligations - Current Capital lease obligations - long term 21,578 ÷ 20 6.00% x 21,578 = = 6.00% 8,645 12,252 20,897 1,975 22,872 21,578 21,578 680 20,897 1,079 1,079 1,295 680 1,975 770 770 1,079 = 896 1,295 (399) 148 (250) 770 20,127 (250) 20,647 21,112 (125) 21,237 08/31/08 During year ending 08/31/09 Depreciation Expense Accumulated depreciation Interest Expense Capital lease obligations - Current Rental expense Capital lease obligations - long term 2,024.0 - [ Capital lease obligations - Current 20,897.3 x 6.00% 08/31/08 1,975 = Income Statement changes for year ending Earnings before Interest and Taxes Interest Expense Earnings before Taxes Deferred Tax Asset Net Income Balance Sheet Leased Assets Accumulated Depreciation Deferred Tax Asset Average Invested capital Increase Average Equity Increase Average Debt Increase Cash Flow Statement Cash flow from operating activities - (399) (399) x x 37.20% 62.80% end of fiscal 21,578 (1,079) 20,499 148 20,647 [ [ [ 2009 2009 Capital lease obligations - Current Capital lease obligations - long term Retained Earnings 21,578 21,578 + + + 20,647 ]/2= (250) ]/2= 20,897 ]/2= Net income (250.28) + Increase in Deferred tax asset + (148.26) + Depreciation Expense + 1,078.88 = 680.3 (680.3) Cash flow from Investing activities Reduction in Capital lease obligations Walgreen 2009 Analysis 5 4 Adjusted ratios Year ending 08/31/08 EBIT Interest Expense Times Interest Earned. As Reported 3,247 99 32.80 Adjustment 896 1,295 Adjusted 4,143 1,394 2.973 08/31/08 EBIT x (1 - tax rate) = NOPAT / Average Invested capital ROTC As Reported 3,247 63.40% 2,059 15,508 13.27% as reported 1,886 13,623 0.1384 Adjustment 896 63.40% 21,112 Adjusted 4,143.1 63.40% 2,627 36,620 7.17% Adjusted 23,123 13,497 1.7131 Year ending 08/31/08 Total debt Total Shareholders' Equity Average Debt to Equity Adjustment 21,237 (125) Walgreen 2009 Analysis 6 5 a b Conservative Implied rent expense as per WAG Implied rent expense Proper = = 6.00% x 8 0.4800 x Rent Expense x Rent Expense = Rent Expense - Depreciation expense Years assuming flat operating lease payments 34,952 Annuity (Rate: 0.06; periods:17) 10.4773 Life of assets 20 Depreciation expense = 10.4773 = 0.5239 = 0.5239 Prpoer adjustment CLOSE to as per WAG Depreciation expense as calculated in Q 4 =[ = ÷ 2,051 = 17 years 20 1,074 years x Rent Expense / x Rent Expense x 2,051 = 1.0000 - 0.5239 ]x Rent Expense 0.4761 x Rent Expense 1,079 Close 15 1,239 265 8.00 x 10.48 x Aggressive Conservative Conservative Rent Expense Less Rent Expense Aggressive c Walgreens Ignores Adds Adds Adds Short-term borrowings LIFO reserve Deferred income taxes Implied principal amount for leases Correct amount ...
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This note was uploaded on 03/09/2011 for the course ACT 516 taught by Professor Ramt.s.ramakrishnan during the Summer '10 term at Ill. Chicago.

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