Assumptions for Forecasting Model
Income Statement Sales Cost of Sales Selling, General & Admn. Expenses Depreciation Other Net (Income)/Expenses Interest Income Interest Expense Income Taxes Balance Sheet Assets Cash and Marketable Securities Accounts receivable Inventories Other Current Assets Property, Plant, and Equipment, Gross Accumulated Depreciation Property, Plant and equipment, Net Other Non-Current Assets Liabilities and Shareholders' Equity Accounts Payable Short-Term Debt Other Current Liabilities Long-Term Debt Deferred Income Taxes Other Non-Current Liabilities Paid-In Capital Retained Earnings Other Assumptions Dividend policy Interest on short-term debt Interest on long-term debt Interest on cash & marketable securities Number of shares outstanding P/E ratio
Stock price Capital structure
Assumption Will grow at 5%, based on input from management 50% of sales, specified by management 29% of sales, based on expected worsening 8% of Gross PP&E, based on analysis of depreciation schedules -0.7% of sales, based on historical average Calculate based on average balance and interest rate specified later For STD calculate based on average balance and interest rate For LTD $13.5 million on year-end 2002 balance. Add/ repay at marginal rate below 35% of pre-tax income
2.1% sales based on historical average 8.4% of sales, based on historical average 8.8% of sales, based on historical average 7.6% of sales, based on historical average Will grow at 8% per year, specified by management Calculated from other items Calculated from other items Will grow at 8% per year, specified by management
6.1% of sales, same as historical average 40% of debt, debt to total capitalization 30% 8.3% of sales, sme as 2002 60% of debt, debt to total capitalization 30% 1.4% of sales, based on historical average 7.6% of sales, based on historical average Will remain unchanged Adjusted to maintain debt to total capitalization of 30%
Payout target is 40%, but div./share cannot grow more than 10% in any year 7%, based on economic forecast Marginal rate for repayments or issuances will be 9% 6%, based on economic forecast Shares will be issued and bought back at average price for the eyar Will decline to 16 in 2003 and then improve to 18, 20, and 22 in the following years
Year-end price based on P/E ratio and EPS for past year Maintain 30% debt to total capitalization. Within debt 40% short-term.
Income Statement and Balance Sheet for Vitex Corp. Income Statement ($ Million) Forecast Period 2004 $1,471.2 $735.6 $735.6
2002 $1,334.4 $667.0 $667.4
2003 $1,401.1 $700.6 $700.6
Selling, General & Admn. Expenses Depreciation Other Net (Income)/Expenses EBIT
$373.3 $75.2 ($8.2) $227.1
$406.3 $78.9 ($9.8) $225.2
$426.6 $85.2 ($10.3) $234.0
Interest (Income) Interest Expense Pre-tax Income
($2.0) $23.7 $205.4
($1.7) $20.1 $206.8
($1.8) $19.4 $216.4
Income Taxes Net Income
$72.6 $132.8
$72.4 $134.4
$75.7 $140.7
$40.1 $92.7
$43.1 $91.3
$46.0 $94.7
Assets Cash and Marketable Securities Accounts receivable Inventories Other Current Assets Total Current Assets
$28.4 $120.1 $116.8 $97.5 $362.8
$29.4 $117.7 $123.3 $106.5 $376.9
$30.9 $123.6 $129.5 $111.8 $395.7
Property, Plant, and Equipment, Gross Accumulated Depreciation Property, Plant and equipment, Net
$913.1 $427.9 $485.2
$986.1 $506.8 $479.4
$1,065.0 $592.0 $473.0
Other Non-Curent Assets Total Non-Current Assets
$456.3 $941.5
$492.8 $972.2
$532.2 $1,005.3
$1,304.3
$1,349.1
$1,401.0
Liabilities and Shareholders' Equity Accounts Payable Short-Term Debt Other Current Liabilities Total Current Liabilities
$80.5 $110.3 $111.3 $302.1
$85.5 $122.5 $116.3 $324.3
$89.7 $126.8 $122.1 $338.7
Long-Term Debt Deferred Income Taxes Other Non-Current Liabilities Total Liabilities
$218.1 $12.7 $94.5 $627.4
$183.8 $19.6 $106.5 $634.2
$190.2 $20.6 $111.8 $661.3
Sales Cost of Sales Gross Operating Income
Dividends Addition to Retained Earnings
Balance Sheet ($ Million)
Total Assets
Paid-In Capital Retained Earnings Total Shareholder's Equity Total Liability and Shareholders' Equity
$44.8 $632.1 $676.9
$44.8 $670.0 $714.8
$44.8 $694.9 $739.7
$1,304.3
$1,349.1
$1,401.0
Stock Issuance/ (Buyback) (in dollars) Stock Issuance/(Buyback) (in millions of shares)
Other Data Stock Price (year-end) Average Number of Shares Outstanding (millions)
$51.40 46.2
($53.4) (1.1)
($69.8) (1.3)
$47.67 45.1
$57.82 43.8
Financial Indicators Valuation EPS Dividend per Share P/E Ratio P/B (price to book) Ratio Dividend payout ratio
$2.87 $0.87 17.9 3.5 30%
$2.98 $0.95 16.0 3.0 32%
$3.21 $1.05 18.0 3.4 33%
Profitability ratios Return on Equity (ROE) Return on Sales (ROS)
21.2% 17.0%
19.3% 16.1%
19.3% 15.9%
Growth Rates EPS Growth Rate Dividend Growth Rate Sales Growth Rate EBIT Growth Rate Net Income Growth Rate
1.4% 2.1% 2.6% 3.7% 0.1%
3.6% 10.0% 5.0% -0.9% 1.2%
7.8% 10.0% 5.0% 3.9% 4.7%
Liquidity Ratios Current Quick
1.20 0.49
1.16 0.45
1.17 0.46
Operating Efficiency Ratios Inventory Turnover Receivable Turnover
5.7 11.1
5.7 11.9
5.7 11.9
32.7% 21.7% 48.5%
30.0% 18.0% 42.9%
30.0% 18.0% 42.9%
9.6 12.8
11.2 15.1
12.0 16.4
Leverage Ratios Total Debt to Total Capitalization Long-Term Debt to Total Capitalization Total Debt to Equity Coverage Ratios Times Interest Earned (TIE) Cash Coverage Ratio
Forecast Period
Forecasting Factor 5.0% 50.0%
2005 $1,544.7 $772.4 $772.4
2006 $1,622.0 $811.0 $811.0
$448.0 $92.0 ($10.8) $243.2
$470.4 $99.4 ($11.4) $252.6
29.0% 8.0% -0.7%
($1.9) $20.3 $224.7
($2.0) $21.3 $233.3
6.0% 7.0% 9.0%
$78.7 $146.1
$81.6 $151.6
35.0%
$49.3 $96.8
$53.1 $98.6
$32.4 $129.8 $135.9 $117.4 $415.5
$34.1 $136.2 $142.7 $123.3 $436.3
2.1% 8.4% 8.8% 7.6%
$1,150.2 $684.0 $466.2
$1,242.3 $783.4 $458.9
8.0%
$574.8 $1,041.0
$620.8 $1,079.7
8.0%
$1,456.6
$1,516.0
$94.2 $131.4 $128.2 $353.9
$98.9 $136.4 $134.6 $369.9
6.1% 12.0% 8.3%
$197.1 $21.6 $117.4 $690.0
$204.6 $22.7 $123.3 $720.5
18.0% 1.4% 7.6%
10% 40.0%
$44.8 $721.8 $766.6
$44.8 $750.7 $795.5
$1,456.6
$1,516.0
($69.9) (1.1)
($69.6) (0.9)
$68.45 42.7
$79.90 41.7
$3.42 $1.16 20.0 3.8 34%
$3.63 $1.27 22.0 4.2 35%
19.4% 15.7%
19.4% 15.6%
6.5% 10.0% 5.0% 3.9% 3.8%
6.1% 10.0% 5.0% 3.9% 3.8%
1.17 0.46
1.18 0.46
5.7 11.9
5.7 11.9
30.0% 18.0% 42.9%
30.0% 18.0% 42.9%
12.0 16.5
11.8 16.5
Statement of Cash Flows for Vitex Corp. Millions of Dollars
Cash Flows from Operations Net Income Depreciation Expense Decrease/(Increase) in Accounts Receivable Decrease/(Increase) in Inventories Decrease/(Increase) in Other Current Assets Increase/(Decrease) in Accounts Payable Increase/(Decrease) in Other Current Liabilities Increase/(Decrease) in Deferred Income Taxes Increase/(Decrease) in Other Non-Current Liabilities Total Cash Flows from Operations Cash Flows from Investing (Additions to) Property, Plant & Equipment (Investment) in Other Non-Current Assets Total Cash Flows from Investing Cash Flows from Financing From Issuance/(Repayment)of Short-Term Debt From Issuance/(Repayment)of Long-Term Debt From Sale/(Repurchase) of Equity Cash Dividends Paid to Shareholders Total Cash Flows from Financing Net Change in Cash & Marketable Securities
Beginning Cash & Marketable Securities Ending Cash & Marketable Securities Net Change in Cash balance
Forecast Period 2004
2002
2003
$132.8 $75.2 ($12.8) ($1.9) $6.2 $8.7 ($60.8) ($2.3) ($20.5) $124.6
$134.4 $78.9 $2.4 ($6.5) ($9.0) $5.0 $5.0 $6.9 $12.0 $229.1
$140.7 $85.2 ($5.9) ($6.2) ($5.3) $4.3 $5.8 $1.0 $5.3 $224.9
($92.3) ($49.3) ($141.6)
($73.0) ($36.5) ($109.6)
($78.9) ($39.4) ($118.3)
$30.5 $16.3 $6.6 ($40.1) $13.3
$12.2 ($34.3) ($53.4) ($43.1) ($118.5)
$4.3 $6.4 ($69.8) ($46.0) ($105.1)
($3.7)
$1.0
$1.5
$32.1 $28.4 ($3.7)
$28.4 $29.4 $1.0
$29.4 $30.9 $1.5
Forecast Period 2005
2006
$146.1 $92.0 ($6.2) ($6.5) ($5.6) $4.5 $6.1 $1.0 $5.6 $237.1
$151.6 $99.4 ($6.5) ($6.8) ($5.9) $4.7 $6.4 $1.1 $5.9 $249.9
($85.2) ($42.6) ($127.8)
($92.0) ($46.0) ($138.0)
$4.6 $6.9 ($69.9) ($49.3) ($107.8)
$5.0 $7.4 ($69.6) See note ($53.1) ($110.3)
$1.5
$1.6
$30.9 $32.4 $1.5
$32.4 $34.1 $1.6
Scenario Summary Current Values:
Optimistic 2006 Created by Chandan Sengupta on 7/26/2003
Changing Cells Sales growth rate 5.0% Cost of sales to sales ratio 50.0% SG&A to sales ratio 29.0% Gross PP&E growth rate 8.0% Result Cells: 2003 Net income $134.4 EPS $2.98 Dividend per share $0.95 Return on equity 19.3% Times interest earned 11.2 2006 Net income $151.6 EPS $3.63 Dividend per share $1.27 Return on equity 19.4% Time interest earned 11.8 Notes: Current Values column represents values of changing cells at time Scenario Summary Report was created. Changing cells for each scenario are highlighted in gray.
7.0% 49.0% 28.0% 7.0%
$157.3 $3.52 $0.95 22.7% 13.0 $195.2 $4.84 $1.27 25.6% 15.5
Pessimistic 2006 Created by Chandan Sengupta on 7/26/2003
3.0% 51.0% 30.0% 9.0%
$112.2 $2.46 $0.95 16.1% 9.5 $112.2 $2.58 $1.03 14.0% 8.7
