Week 2: Financial Forecast Using Excel Financial Forecasting For Target Corporation
Introduction
Target Corporation has had weak sales forecasts this year as compared to prior year. Despite this, Target Corporation is expected to outperform in next year. The purpose of this paper is to describe the financial projections of Target Corporation next year over the current balances. The paper shall specifically discuss the growth rates projected using Prof. Steven’s Model as well, explain all other assumptions, provide explanations and interpretation of the projected financial statements, as well as discuss the overall forecast and financial ratios under this model. The methodology in this analysis was basically the use of Excel financial forecasting techniques with the aid of Prof. Steven’s model of financial forecasting. Data was obtained through secondary data sources, specifically online resources. The data analysis shall be presented in table format.
Explanation of Growth Rates
Target’s growth rates for sales revenue for the current quarter had declined by 5.6% over the last quarter’s sales. Target Corporation’s revenues for the 12 month trailing period ending 30 Jul, 2016 are reported to have increased by 1.6% over the prior year’s revenues. The decline in the quarterly sales revenues since the first quarter which ended in 30 April, 2016 is a clear indication that the revenues for next year will increase slightly over the current year’s sales. It’s therefore not likely that the sales revenue for Target Corp. can increase greatly by more than 2% next year, 2017. Some analysts are even stipulating a decline of revenues but Target’s consensus panel of analysts are estimating a slight increase. It was reported that Target Corp. itself had cut its own sales forecasts after the last quarter’s results fell below the expectations. The growth rate of other revenues is expected to increase by about 1.46% similar to the current year’s estimated increase of 1.4% compared to prior year. The overall average sustained earnings growth rate for the company is however projected to increase by about 6.8% in 2017.
Explanation of All Other Assumptions
Inputs (First Page)
% of Current Balance OR Forecast If Different
Explanation of Assumptions
Cost of Sales %
70.00%
Target's current cost of sales are $50321 while the sales are $71603 for the past trailing 12 months ending July 30.
Selling/General/Administrative Expenses %
66.00%
If the SGA is less than 30% of the gross profit, the company is in less competitive industry. If SGA is close to 100%, it's operating in a very competitive industry.
Other Expenses %
11.00%
Other expenses in the 12 month trailing period ending 30 Jul, 2016 was 11% of the total gross profit.
Other Expenses%
6.80%
Income tax expense was 6.8% of the total gross profit in the 12 month trailing period ending 30 Jul, 2016
Cash %
7.00%
The cash & cash equivalents for Target Corp in the last 4 quarters ending July 30 is 7% of the total assets.
Week 2 Financial Forecast Using Excel Financial Forecasting For T.docx
1. Week 2: Financial Forecast Using Excel Financial Forecasting
For Target Corporation
Introduction
Target Corporation has had weak sales forecasts this year as
compared to prior year. Despite this, Target Corporation is
expected to outperform in next year. The purpose of this paper
is to describe the financial projections of Target Corporation
next year over the current balances. The paper shall specifically
discuss the growth rates projected using Prof. Steven’s Model
as well, explain all other assumptions, provide explanations and
interpretation of the projected financial statements, as well as
discuss the overall forecast and financial ratios under this
model. The methodology in this analysis was basically the use
of Excel financial forecasting techniques with the aid of Prof.
Steven’s model of financial forecasting. Data was obtained
through secondary data sources, specifically online resources.
The data analysis shall be presented in table format.
Explanation of Growth Rates
Target’s growth rates for sales revenue for the current quarter
had declined by 5.6% over the last quarter’s sales. Target
Corporation’s revenues for the 12 month trailing period ending
30 Jul, 2016 are reported to have increased by 1.6% over the
prior year’s revenues. The decline in the quarterly sales
revenues since the first quarter which ended in 30 April, 2016 is
a clear indication that the revenues for next year will increase
slightly over the current year’s sales. It’s therefore not likely
that the sales revenue for Target Corp. can increase greatly by
more than 2% next year, 2017. Some analysts are even
stipulating a decline of revenues but Target’s consensus panel
of analysts are estimating a slight increase. It was reported that
Target Corp. itself had cut its own sales forecasts after the last
quarter’s results fell below the expectations. The growth rate of
other revenues is expected to increase by about 1.46% similar to
the current year’s estimated increase of 1.4% compared to prior
2. year. The overall average sustained earnings growth rate for the
company is however projected to increase by about 6.8% in
2017.
Explanation of All Other Assumptions
Inputs (First Page)
% of Current Balance OR Forecast If Different
Explanation of Assumptions
Cost of Sales %
70.00%
Target's current cost of sales are $50321 while the sales are
$71603 for the past trailing 12 months ending July 30.
Selling/General/Administrative Expenses %
66.00%
If the SGA is less than 30% of the gross profit, the company is
in less competitive industry. If SGA is close to 100%, it's
operating in a very competitive industry.
Other Expenses %
11.00%
Other expenses in the 12 month trailing period ending 30 Jul,
2016 was 11% of the total gross profit.
Other Expenses%
6.80%
Income tax expense was 6.8% of the total gross profit in the 12
month trailing period ending 30 Jul, 2016
Cash %
7.00%
The cash & cash equivalents for Target Corp in the last 4
quarters ending July 30 is 7% of the total assets.
Accounts Receivable %
-
There is no issue of accounts receivables in the last 4 Quarters
ended July 30, 2016. This is basically because this is a retail
business. Manufacturing companies however can’t have zero
accounts receivables throughout the year.
Inventories %
23.000%
3. Target's Inventory are only 23% of the total assets but 66% of
the total current liabilities. The inventories have increasing
trend and are therefore likely to increase next year by around
6%.
Other Current Assets %
4.500%
Other current assets were 4.55% of the total assets for the 12
year period ended July 30.
Other Assets %
63.25%
Property, Plant & Equipment was 63.25% of the total assets for
the 4 Quarters ended July 30.
Other Assets %
2.32%
Other assets were 2.32% of the total assets in the last four
quarters.
Accounts Payable %
33.00%
The company has accounts payables amounting to 33% of the
total liabilities in the 12 month period ending July 30, 2016.
Notes Payable %
4.00%
The short-term/current long term debt was 4% as of July 20,
2016.
Other Current Liabilities %
0.50%
Other current liabilities were only 0.5% of the total liabilities in
the last 12 month period ending Jul 30.
Other Long-Term Liabilities %
45.00%
Commercial paper represented the highest percentage of the
company’s debt of 45% in the 12 month period ended July 30,
2016.
Other Long-Term Liabilities %
6.00%
Other long-term debt were 6% of the total liabilities.
4. Other Equity %
-5.00%
The company has been repurchasing stock which has led to the
negative 5% decrease of the total stockholders' equity.
Next Year Forecast
Growth Rate for Sales Revenues (%)
2.0%
The sales are estimated to increase by 2% in next year even
though the current quarter has experienced a decline of 5.7%
from last Quarter's. The current sales revenues for the 12 month
trailing period ended 30 Jul had increased by 1.6% over the
prior year’s sales revenues.
Growth Rate for Other Revenues (%)
1.46%
The growth of other revenues is estimated to be by a slight
increase of 1.46% from the current year's estimated growth rate.
New Long-Term Debt $ (+)
$1,962.0
The company is forecasting a possible increase of $1,962m over
the current long-term debt in 2017. In order for Target to
operate effectively, it basically obtains money for financing
operations through long-term debt.
Common Stock Dividends $ (+)
$2.36
The Company had a 10.55% increase over previous year.
Analysts expect an increase of 7.09% for next year to an
estimated $2.36. The current dividend rate is at $2.2.
(90% to Paid-in Cap. & 10% to Com. Stk.) New Common Stock
Issued $ (+)
$600.0
Target is expected to issue approximately 600 million shares of
common stock in 2017. The company has issued approximately
over 600 million shares of common stock over the last two
fiscal years, currently and it’s expected to be around that next
year.
(90% from Paid-in Cap. & 10% from Com. Stk.) Common Stock
5. Repurchased $ (-)
$106.0
Target would be expected to repurchase approximately 106
million shares of stock by the end of the second or third Quarter
of 2017. The price of the common stock repurchases next year is
likely to be around $70 per share.
Preferred Stock Issued $ (+)
$0.0
The company has 5 m preferred shares outstanding but none has
been issued so far.
Tax Rate % (+)
-0.9%
The tax rate is expected to drop further next year by
approximately 0.94% to around 30.66% due to increased tax
saving incentives. Target Corp. has been performing strategic
planning which would lead to further decrease in the effective
tax rate 2017.
Depreciation Rate as Percent of Gross Fixed Assets % (+)
3.7%
The depreciation rate is likely to increase by approximately
3.68 % as percent of Gross Fixed Assets. The depreciation rate
increases annually by approximately 3.7% using the straight-
line method.
Capital Investments / New Fixed Assets $ (+)
$0.0
It's not likely that the Company would acquire new fixed assets
while it's discontinuing some activities and selling some
invested assets in some regions.
Interest Expense for Short-Term & Long-Term Debt % (+)
0.56%
Target Corp doesn't have a specific trend of changes of interest
but the current interest rate is likely to increase slightly by
0.56% next year. Target Corp. has a good credit rating and a
good financial historical record which enables it to obtain lower
interest debts.
Interest Income % (+)
6. 0.0%
The company has not received any interest income and is thus
not likely to receive it next.
Explanation and Interpretation of Projected Financial
Statements
The cost of sales is currently at 70% of the total sales, this
leaves the company with a Gross profit of only 30%. The high
costs of sales for the trailing 12 months ended 30 Jul, 2016 was
$50,321 while the sales were $71, 603. The SG&A expenses
were 66% which is very high. According to Guru Focus, (2016)
high SG&A expenses above 30% mean the firm operates in a
very competitive environment as is the case with Target. The
inventories represent 23% of the total assets and 66% of the
current assets. Cash is only 7% of the total assets and 21% of
total current assets which shows that the company is not
efficient enough. The accounts payables of the company are
33% of the total liabilities. The notes payables are only 4% of
the total liabilities with a greater portion being other being
long-term debt of 45%.
Explanation an Interpretation of Overall Forecast Results &
Financial Ratios
The gross margin is only 30% which shows that the profitability
is not very high due to high costs of sales. The inventories
turnover ratio is currently at 1.3 which means the company is
overstocking to meet the unexpected demand and for high
seasons. Target and its competitors usually experience changes
in demand as the seasons change. The quick ratio for the
company is currently at 0.26 which is means Target is currently
unable to meet its short-term debts as and when they are due.
ROA is currently 7% which means the assets are utilized well
while the ROE is 22.6% which is also desirable. The ratio of
debt/equity for the company is currently 2.16 which shows that
there’s high leverage. The company majorly relies on the
financing from debt which is the main reason for this high ratio.
8. version 4.00
Russell Lundholm
Richard Sloan
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Financial StatementsFinancial Statements($000s)Data can be
entered manually in financial statements or as a block cut-and-
paste from the Case Data Sheet to the Raw Data Input section
below.Jump to Raw Data InputCompany Name and
TickerStarbucks CorporationSBUXLink to Form 10-KsCommon
Shares Outstanding1,485,100(in 000s at most recent fiscal year
end)Estimated
Price/Share=$47.53ActualActualActualActualActualForecastFor
ecastForecastForecastForecastForecastForecastForecastForecast
ForecastForecastForecastFiscal Year End (YYYY-MM-
DD)2007/10/012008/09/292009/09/282010/09/272011/09/26201
2/09/262013/09/262014/09/262015/09/262016/09/262017/09/26
2018/09/262019/09/262020/09/262021/09/262022/09/262023/09
/26Income StatementSales
(Net)11,700,40013,276,80014,866,80016,447,80019,162,70022,
090,44025,194,25628,424,83031,720,64035,009,11738,208,658
41,231,47143,987,17546,386,96848,348,13249,798,57651,292,5
33Cost of Goods
Sold(8,483,700)(9,701,100)(10,634,200)(11,458,200)(13,158,70
0)(15,169,129)(17,300,467)(19,518,847)(21,782,024)(24,040,16
5)(26,237,235)(28,312,949)(30,205,245)(31,853,142)(33,199,83
9)(34,195,834)(35,221,709)Gross
Profit3,216,7003,575,7004,232,6004,989,6006,004,0006,921,31
17,893,7898,905,9839,938,61610,968,95211,971,42312,918,521
13,781,93114,533,82715,148,29215,602,74116,070,823R&D
14. (Net)2,355,0002,658,9003,200,5003,519,0004,088,300Investme
nts479,300575,900554,800833,300664,500Intangibles433,50054
2,8001,137,7001,129,7002,095,800Other
Assets297,700242,0001,152,3001,102,2001,244,800Current
Debt00000Accounts
Payable540,000398,100491,700533,700684,200Income Taxes
Payable109,200138,300125,000272,000259,000Other Current
Liabilities1,426,6001,673,4004,760,6002,233,0002,710,300Lon
g-Term Debt549,500549,6001,299,4002,048,3002,347,500Other
Liabilities347,800334,700347,600385,300557,500Deferred
Taxes010,60010,1006,90067,800Minority
Interest2,4005,5002,1001,7001,800Preferred Stock00000Paid in
Common Capital
(Net)41,20040,100282,90040,10042,600Retained
Earnings4,343,7005,068,9004,197,3005,231,9005,775,400Comm
on Dividends0543,700668,600827,0001,016,200
Jump to Raw Data Input
Ratio AnalysisRatio AnalysisCompany NameStarbucks
CorporationActualActualActualActualActualForecastForecastFo
recastForecastForecastForecastForecastForecastForecastForecas
tForecastForecastFiscal Year End
Date2007/10/012008/09/292009/09/282010/09/272011/09/26201
2/09/262013/09/262014/09/262015/09/262016/09/262017/09/26
2018/09/262019/09/262020/09/262021/09/262022/09/262023/09
/26Annual Growth
RatesSales13.5%12.0%10.6%16.5%15.3%14.1%12.8%11.6%10.
4%9.1%7.9%6.7%5.5%4.2%3.0%3.0%Assets11.7%40.1%-
6.6%15.7%15.3%14.1%12.8%11.6%10.4%9.1%7.9%6.7%5.5%4
.2%3.0%3.0%Common Equity16.5%-
12.3%17.7%10.4%15.3%14.1%12.8%11.6%10.4%9.1%7.9%6.7
%5.5%4.2%3.0%3.0%Earnings11.1%-
99.4%24816.9%33.3%13.5%13.9%12.7%11.4%10.2%9.0%7.7%
6.5%5.3%4.1%2.8%3.0%Free Cash Flow to Investors-
156.8%0.0%111.1%153.2%19.0%17.6%16.2%14.9%13.5%12.2
%10.8%9.5%8.2%6.8%3.0%Sustainable Growth Rate-
13.8%25.5%31.4%31.5%31.3%31.1%30.9%30.7%30.5%30.3%3
15. 0.1%29.9%29.7%29.4%29.4%ProfitabilityReturn on
Equity0.2920.0020.4240.4970.5000.4960.4930.4900.4870.4830.
4800.4770.4730.4700.4660.466Return on Equity (b4 non-
recurring)0.248(0.018)0.3660.4190.4200.4170.4150.4120.4090.
4060.4030.4000.3970.3940.3910.391Return on Net Operating
Assets0.2650.0010.3220.3630.3630.3600.3580.3560.3530.3510.
3490.3460.3440.3410.3390.339Basic Dupont ModelNet Profit
Margin0.1060.1040.0010.1260.1440.1420.1410.1410.1410.1410.
1410.1400.1400.1400.1400.1390.139x Total Asset
Turnover1.7041.5071.4771.6521.6491.6411.6321.6241.6161.60
71.5981.5891.5811.5721.5621.562x Total
Leverage1.6412.0582.2842.0922.1392.1392.1392.1392.1392.139
2.1392.1392.1392.1392.1392.139= Return on
Equity0.2920.0020.4240.4970.5000.4960.4930.4900.4870.4830.
4800.4770.4730.4700.4660.466Advanced Dupont ModelNet
Operating
Margin0.1080.1060.0010.1280.1470.1440.1440.1440.1440.1440.
1430.1430.1430.1430.1430.1420.142x Net Operating Asset
Turnover2.5052.5982.5102.4742.5132.5002.4882.4752.4622.44
92.4362.4222.4092.3952.3812.381= Return on Net Operating
Assets0.2650.0010.3220.3630.3630.3600.3580.3560.3530.3510.
3490.3460.3440.3410.3390.339Net Borrowing Cost
(NBC)0.041(0.000)0.0250.0240.0240.0240.0240.0230.0230.023
0.0230.0230.0230.0230.0230.023Spread (RNOA -
NBC)0.2240.0020.2970.3390.3390.3370.3350.3320.3300.3280.3
250.3230.3200.3180.3150.315Financial Leverage
(LEV)0.1170.1940.3440.3970.4040.4040.4040.4040.4040.4040.
4040.4040.4040.4040.4040.404ROE = RNOA +
LEV*Spread0.2920.0020.4240.4970.5000.4960.4930.4900.4870.
4830.4800.4770.4730.4700.4660.466Margin AnalysisGross
Margin0.2750.2690.2850.3030.3130.3130.3130.3130.3130.3130.
3130.3130.3130.3130.3130.3130.313EBITDA
Margin0.1770.1780.1930.2150.2240.2240.2240.2240.2240.2240.
2240.2240.2240.2240.2240.2240.224EBIT
Margin0.1300.1350.1480.1700.1750.1720.1720.1720.1710.1710.
1710.1710.1700.1700.1700.1690.169Net Operating Margin (b4
16. non-
rec.)0.0900.090(0.006)0.1110.1240.1220.1220.1210.1210.1210.
1210.1210.1200.1200.1200.1200.120Net Operating
Margin0.1080.1060.0010.1280.1470.1440.1440.1440.1440.1440.
1430.1430.1430.1430.1430.1420.142Turnover AnalysisNet
Operating Asset
Turnover2.5052.5982.5102.4742.5132.5002.4882.4752.4622.44
92.4362.4222.4092.3952.3812.381Net Working Capital
Turnover7.15914.26826.87320.95229.35229.20629.05828.90828
.75728.60428.44928.29328.13427.97427.81227.812Avge Days
to Collect
Receivables11.99212.85613.23112.85712.78812.85212.91712.9
8413.05213.12213.19313.26613.34113.41713.49613.496Avge
Inventory Holding
Period41.52440.37635.07433.24933.83634.00534.17834.35534.
53534.72034.90935.10235.30035.50235.71035.710Avge Days to
Pay
Payables17.16015.46016.36116.61917.49117.59417.70017.8091
7.92018.03418.15118.27018.39318.51918.64818.648PP&E
Turnover5.2965.0754.8965.0385.0204.9954.9704.9444.9184.89
24.8664.8394.8124.7844.7564.756Analysis of Leverage- Long-
Term Capital StructureDebt to Equity
Ratio0.1250.1080.2900.3890.4030.4030.4030.4030.4030.4030.4
030.4030.4030.4030.4030.4030.403FFO to Total
Debt3.5720.7321.7031.7861.7311.7201.7091.6981.6871.6761.66
51.6531.6421.6301.6181.618CFO to Total
Debt3.0544.0770.2541.8771.7861.7711.7561.7411.7261.7101.69
41.6781.6621.6461.6291.629Analysis of Leverage- Short-Term
LiquidityCurrent
Ratio1.8281.9001.0171.3721.1911.1911.1911.1911.1911.1911.1
911.1911.1911.1911.1911.1911.191Quick
Ratio1.1741.1420.7060.8140.6380.6380.6380.6380.6380.6380.6
380.6380.6380.6380.6380.6380.638EBIT Interest
Coverage78.18554.639125.41543.56647.70246.95446.65046.34
346.03145.71745.39845.07644.75044.42044.08643.74843.748E
BITDA Interest
17. Coverage106.39072.394162.66555.24260.94861.11360.80960.5
0260.19059.87659.55759.23558.90958.57958.24557.90757.907
Fiscal
Year2011201220132014201520162017201820192020202120222
0232024202520262027
Cash Flow AnalysisCash Flow Analysis($000)Company
NameStarbucks
CorporationActualActualActualActualForecastForecastForecast
ForecastForecastForecastForecastForecastForecastForecastForec
astForecastFiscal Year End
Date2008/09/292009/09/282010/09/272011/09/262012/09/26201
3/09/262014/09/262015/09/262016/09/262017/09/262018/09/26
2019/09/262020/09/262021/09/262022/09/262023/09/26Pro
Forma Statement of Cash FlowsOperating:Net
Income1,383,8008,3002,068,1002,757,4003,128,5893,563,2204,
014,4134,473,3684,929,7785,372,1235,788,0856,165,0616,490,
7536,753,8076,944,4387,152,771+Depreciation &
Amortization580,600655,600748,400933,8001,147,5981,315,38
71,491,6001,673,1541,856,3182,036,8052,209,9012,370,6512,5
14,0692,635,3842,730,2892,812,198+Increase in Deferred
Taxes10,600(500)(3,200)60,90010,35910,98211,43011,66111,63
511,32010,6959,7508,4916,9395,1325,286+Increase in Other
Liabilities(13,100)12,90037,700172,20085,17790,29993,98795,
88595,67293,08487,94380,17269,81757,05642,19843,464+Mino
rity Interest in
Earnings900500(400)1,9002,1562,4552,7663,0823,3973,7023,9
884,2484,4724,6544,7854,929+Preferred
Dividends0000000000000000=Funds From
Operations1,962,800676,8002,850,6003,926,2004,373,8784,982,
3435,614,1966,257,1506,896,8007,517,0358,100,6138,629,8819
,087,6029,457,8409,726,84210,018,647-Increase in
Receivables(99,400)(75,500)(69,600)(88,000)(109,851)(116,458
)(121,214)(123,661)(123,386)(120,049)(113,418)(103,396)(90,0
42)(73,584)(54,422)(56,054)-Increase in
Inventory(275,700)130,30020,300(215,500)(199,596)(211,600)(
220,242)(224,689)(224,189)(218,126)(206,078)(187,868)(163,6
18. 04)(133,701)(98,883)(101,849)-Increase in Other Current
Assets(43,300)(129,800)(38,000)(112,900)(109,378)(115,956)(1
20,691)(123,128)(122,854)(119,532)(112,929)(102,950)(89,654)
(73,267)(54,187)(55,813)+Increase in Accounts
Payable(141,900)93,60042,000150,500104,534110,821115,3471
17,676117,414114,239107,92998,39285,68470,02351,78853,341
+Increase in Taxes
Payable29,100(13,300)147,000(13,000)39,57141,95143,66444,5
4644,44743,24440,85637,24632,43526,50719,60420,192+Increa
se in Other Curr.
Liabilities246,8003,087,200(2,527,600)477,300414,088438,992
456,920466,147465,110452,531427,535389,756339,418277,380
205,145211,300=Cash From
Operations1,678,4003,769,300424,7004,124,6004,513,2475,130,
0945,767,9816,414,0407,053,3417,669,3428,244,5078,761,0619
,201,8409,551,1979,795,88710,089,764Investing:-Capital
Expenditures(884,500)(1,197,200)(1,066,900)(1,503,100)(1,772
,222)(1,977,576)(2,180,832)(2,376,304)(2,557,904)(2,719,417)(
2,854,809)(2,958,571)(3,026,057)(3,053,792)(3,039,737)(3,130,
929)-Increase in
Investments(96,600)21,100(278,500)168,800(101,524)(107,630)
(112,026)(114,288)(114,034)(110,950)(104,821)(95,559)(83,217
)(68,007)(50,297)(51,806)-Purchases of
Intangibles(109,300)(594,900)8,000(966,100)(320,203)(339,460
)(353,324)(360,459)(359,657)(349,930)(330,601)(301,388)(262,
462)(214,490)(158,633)(163,392)-Increase in Other
Assets55,700(910,300)50,100(142,600)(190,185)(201,622)(209,
857)(214,094)(213,618)(207,841)(196,361)(179,009)(155,889)(
127,396)(94,220)(97,047)=Cash From
Investing(1,034,700)(2,681,300)(1,287,300)(2,443,000)(2,384,1
35)(2,626,289)(2,856,039)(3,065,145)(3,245,213)(3,388,137)(3,
486,592)(3,534,527)(3,527,626)(3,463,685)(3,342,887)(3,443,1
74)Financing:+Increase in
Debt100749,800748,900299,200358,659380,229395,757403,749
402,850391,955370,306337,584293,983240,250177,685183,015
-Dividends Paid to Minority
19. Interest2,200(3,900)0(1,800)(1,881)(2,164)(2,463)(2,773)(3,088
)(3,401)(3,704)(3,989)(4,247)(4,470)(4,649)(4,788)-Dividends
Paid on Preferred0000000000000000+Increase in Pref.
Stock0000000000000000-Dividends Paid on
Common(543,700)(668,600)(827,000)(1,016,200)(1,152,996)(1,
313,173)(1,479,454)(1,648,595)(1,816,799)(1,979,819)(2,133,1
15)(2,272,044)(2,392,074)(2,489,018)(2,559,272)(2,636,050)+/-
Net Issuance of Common
Stock(1,100)242,800(242,800)2,500(1,086,699)(1,307,695)(1,55
4,122)(1,824,130)(2,114,563)(2,420,890)(2,737,212)(3,056,355)
(3,370,077)(3,669,359)(3,944,795)(4,063,139)+/-Clean Surplus
Plug
(Ignore)(114,900)(211,300)(206,500)(1,197,700)000000000000
=Cash From
Financing(657,400)108,800(527,400)(1,914,000)(1,882,918)(2,2
42,804)(2,640,282)(3,071,749)(3,531,599)(4,012,155)(4,503,72
6)(4,994,805)(5,472,414)(5,922,597)(6,331,031)(6,520,962)Net
Change in
Cash(13,700)1,196,800(1,390,000)(232,400)246,195261,001271
,660277,146276,530269,051254,190231,728201,800164,915121,
968125,628+ Beginning Cash
Balance2,050,7002,037,0003,233,8001,843,8001,611,4001,857,
5952,118,5962,390,2572,667,4032,943,9323,212,9833,467,1733
,698,9013,900,7014,065,6164,187,584= Ending Cash
Balance2,037,0003,233,8001,843,8001,611,4001,857,5952,118,
5962,390,2572,667,4032,943,9323,212,9833,467,1733,698,9013
,900,7014,065,6164,187,5844,313,212Free Cash Flow to
Common EquityNet
Income1,383,8008,3002,068,1002,757,4003,128,5893,563,2204,
014,4134,473,3684,929,7785,372,1235,788,0856,165,0616,490,
7536,753,8076,944,4387,152,771- Increase in Common
Equity(724,100)628,800(791,800)(546,000)(888,893)(942,352)(
980,837)(1,000,643)(998,417)(971,415)(917,758)(836,661)(728,
603)(595,430)(440,370)(453,581)+/-Clean Surplus Plug
(Ignore)(114,900)(211,300)(206,500)(1,197,700)000000000000
=Free Cash Flow to Common
20. Equity544,800425,8001,069,8001,013,7002,239,6962,620,8683,
033,5763,472,7253,931,3614,400,7094,870,3275,328,3995,762,
1516,158,3776,504,0676,699,189Computation based on
SCF:+Cash From
Operations1,678,4003,769,300424,7004,124,6004,513,2475,130,
0945,767,9816,414,0407,053,3417,669,3428,244,5078,761,0619
,201,8409,551,1979,795,88710,089,764-Increase in
Cash13,700(1,196,800)1,390,000232,400(246,195)(261,001)(27
1,660)(277,146)(276,530)(269,051)(254,190)(231,728)(201,800)
(164,915)(121,968)(125,628)+Cash From
Investing(1,034,700)(2,681,300)(1,287,300)(2,443,000)(2,384,1
35)(2,626,289)(2,856,039)(3,065,145)(3,245,213)(3,388,137)(3,
486,592)(3,534,527)(3,527,626)(3,463,685)(3,342,887)(3,443,1
74)+Increase in
Debt100749,800748,900299,200358,659380,229395,757403,749
402,850391,955370,306337,584293,983240,250177,685183,015
-Dividends Paid to Minority
Interest2,200(3,900)0(1,800)(1,881)(2,164)(2,463)(2,773)(3,088
)(3,401)(3,704)(3,989)(4,247)(4,470)(4,649)(4,788)-Dividends
Paid on Preferred0000000000000000+Increase in Preferred
Stock0000000000000000+/-Clean Surplus Plug
(Ignore)(114,900)(211,300)(206,500)(1,197,700)000000000000
=Free Cash Flow to Common
Equity544,800425,8001,069,8001,013,7002,239,6962,620,8683,
033,5763,472,7253,931,3614,400,7094,870,3275,328,3995,762,
1516,158,3776,504,0676,699,189Financing Flows:+Dividends
Paid543,700668,600827,0001,016,2001,152,9961,313,1731,479,
4541,648,5951,816,7991,979,8192,133,1152,272,0442,392,0742
,489,0182,559,2722,636,050-Net Issuance of Common
Stock1,100(242,800)242,800(2,500)1,086,6991,307,6951,554,12
21,824,1302,114,5632,420,8902,737,2123,056,3553,370,0773,6
69,3593,944,7954,063,139= Free Cash Flow to Common
Equity544,800425,8001,069,8001,013,7002,239,6962,620,8683,
033,5763,472,7253,931,3614,400,7094,870,3275,328,3995,762,
1516,158,3776,504,0676,699,189Free Cash Flow to all
InvestorsNet Operating
21. Income1,406,6908,1262,109,6472,809,1413,188,0453,631,3534,
091,6554,559,9925,025,8625,477,5245,902,4156,287,6776,620,
7556,890,0487,085,5487,298,114- Increase in Net Operating
Assets(727,300)(117,600)(1,540,300)(845,300)(1,247,827)(1,32
2,872)(1,376,897)(1,404,701)(1,401,576)(1,363,670)(1,288,348)
(1,174,504)(1,022,811)(835,864)(618,191)(636,737)+/-Clean
Surplus Plug
(Ignore)(114,900)(211,300)(206,500)(1,197,700)000000000000
=Free Cash Flow to
Investors564,490(320,774)362,847766,1411,940,2182,308,4822,
714,7583,155,2913,624,2864,113,8544,614,0685,113,1735,597,
9446,054,1846,467,3576,661,377Computation based on
SCF:Cash From
Operations1,678,4003,769,300424,7004,124,6004,513,2475,130,
0945,767,9816,414,0407,053,3417,669,3428,244,5078,761,0619
,201,8409,551,1979,795,88710,089,764-Increase in Operating
Cash13,700(1,196,800)1,390,000232,400(246,195)(261,001)(27
1,660)(277,146)(276,530)(269,051)(254,190)(231,728)(201,800)
(164,915)(121,968)(125,628)+Cash from
Investing(1,034,700)(2,681,300)(1,287,300)(2,443,000)(2,384,1
35)(2,626,289)(2,856,039)(3,065,145)(3,245,213)(3,388,137)(3,
486,592)(3,534,527)(3,527,626)(3,463,685)(3,342,887)(3,443,1
74)+Interest
Expense32,70017,60064,10070,50081,05192,901105,346118,16
9131,105143,852156,077167,431177,560186,128192,831198,61
5-Tax Shield on
Interest(10,710)(18,274)(22,153)(20,659)(23,750)(27,223)(30,8
70)(34,627)(38,418)(42,153)(45,736)(49,062)(52,030)(54,541)(
56,505)(58,200)+/-Clean Surplus Plug
(Ignore)(114,900)(211,300)(206,500)(1,197,700)000000000000
=Free Cash Flow to
Investors564,490(320,774)362,847766,1411,940,2182,308,4822,
714,7583,155,2913,624,2864,113,8544,614,0685,113,1735,597,
9446,054,1846,467,3576,661,377Financing Flows:+Dividends
on Common
Stock543,700668,600827,0001,016,2001,152,9961,313,1731,47
22. 9,4541,648,5951,816,7991,979,8192,133,1152,272,0442,392,07
42,489,0182,559,2722,636,050+Interest
Expense32,70017,60064,10070,50081,05192,901105,346118,16
9131,105143,852156,077167,431177,560186,128192,831198,61
5-Tax Shield on
Interest(10,710)(18,274)(22,153)(20,659)(23,750)(27,223)(30,8
70)(34,627)(38,418)(42,153)(45,736)(49,062)(52,030)(54,541)(
56,505)(58,200)+Dividends on Preferred
Stock0000000000000000+Dividends Paid to Minority
Interest(2,200)3,90001,8001,8812,1642,4632,7733,0883,4013,7
043,9894,2474,4704,6494,788-Net Issuance of Common
Stock1,100(242,800)242,800(2,500)1,086,6991,307,6951,554,12
21,824,1302,114,5632,420,8902,737,2123,056,3553,370,0773,6
69,3593,944,7954,063,139-Net Issuance of
Debt(100)(749,800)(748,900)(299,200)(358,659)(380,229)(395,
757)(403,749)(402,850)(391,955)(370,306)(337,584)(293,983)(
240,250)(177,685)(183,015)-Net Issuance of Preferred
Stock0000000000000000=Free Cash Flow to
Investors564,490(320,774)362,847766,1411,940,2182,308,4822,
714,7583,155,2913,624,2864,113,8544,614,0685,113,1735,597,
9446,054,1846,467,3576,661,377Traditional Computation of
FCF:EBIT1,786,7002,207,3002,792,6003,363,0003,805,6814,33
3,8524,882,0225,439,4795,993,6806,530,6187,035,3197,492,47
47,887,1558,205,5868,435,9108,688,987-Taxes on
EBIT(685,110)220,426(1,114,153)(1,164,359)(1,321,410)(1,505
,157)(1,695,947)(1,890,067)(2,083,166)(2,270,375)(2,446,487)(
2,606,174)(2,744,231)(2,855,850)(2,936,883)(3,024,989)+Incre
ase in Deferred
Taxes10,600(500)(3,200)60,90010,35910,98211,43011,66111,63
511,32010,6959,7508,4916,9395,1325,286=
NOPLAT1,112,1902,427,2261,675,2472,259,5412,494,6292,839
,6773,197,5053,561,0723,922,1504,271,5644,599,5274,896,050
5,151,4145,356,6755,504,1585,669,283+Depreciation &
Amortization580,600655,600748,400933,8001,147,5981,315,38
71,491,6001,673,1541,856,3182,036,8052,209,9012,370,6512,5
14,0692,635,3842,730,2892,812,198+Non-Operating Income
23. (Loss)305,100(2,419,600)431,200610,500703,774802,658905,5
801,010,5801,115,3471,217,2811,313,5841,401,3771,477,8321,
540,3121,586,5211,634,117+Other Income
(Loss)0000000000000000+Ext. Items & Disc.
Ops.0000000000000000=Gross Cash
Flow1,997,890663,2262,854,8473,803,8414,346,0024,957,7225,
594,6856,244,8076,893,8167,525,6508,123,0128,668,0789,143,
3159,532,3709,820,96910,115,598-Increase in Working
Capital(270,700)1,895,700(1,035,900)430,800(106,826)(113,25
1)(117,876)(120,256)(119,988)(116,743)(110,295)(100,549)(87,
563)(71,558)(52,923)(54,511)-Capital
Expenditures(884,500)(1,197,200)(1,066,900)(1,503,100)(1,772
,222)(1,977,576)(2,180,832)(2,376,304)(2,557,904)(2,719,417)(
2,854,809)(2,958,571)(3,026,057)(3,053,792)(3,039,737)(3,130,
929)-Increase in
Investments(96,600)21,100(278,500)168,800(101,524)(107,630)
(112,026)(114,288)(114,034)(110,950)(104,821)(95,559)(83,217
)(68,007)(50,297)(51,806)-Purchases of
Intangibles(109,300)(594,900)8,000(966,100)(320,203)(339,460
)(353,324)(360,459)(359,657)(349,930)(330,601)(301,388)(262,
462)(214,490)(158,633)(163,392)-Increase in Other
Assets55,700(910,300)50,100(142,600)(190,185)(201,622)(209,
857)(214,094)(213,618)(207,841)(196,361)(179,009)(155,889)(
127,396)(94,220)(97,047)+Increase in Other
Liabilities(13,100)12,90037,700172,20085,17790,29993,98795,
88595,67293,08487,94380,17269,81757,05642,19843,464+/-
Clean Surplus Plug
(Ignore)(114,900)(211,300)(206,500)(1,197,700)000000000000
=Free Cash Flow to
Investors564,490(320,774)362,847766,1411,940,2182,308,4822,
714,7583,155,2913,624,2864,113,8544,614,0685,113,1735,597,
9446,054,1846,467,3576,661,377Analysis of Earnings
Quality(Red Shading = Quality Flag)Current Op.
Accruals/NOA0.099(0.853)0.952(0.036)(0.021)(0.020)(0.018)(0
.016)(0.014)(0.013)(0.011)(0.009)(0.008)(0.006)(0.004)(0.004)
+ Non-Current Op.
24. Accruals/NOA0.1590.5540.1980.2330.1740.1600.1460.1320.118
0.1040.0900.0760.0620.0480.0340.034= Operating
Accruals/NOA0.257(0.298)1.1500.1970.1530.1410.1280.1160.1
040.0910.0790.0670.0550.0420.0300.030Sales
Growth0.1350.1200.1060.1650.1530.1410.1280.1160.1040.0910
.0790.0670.0550.0420.0300.030- NOA Turnover
Growth0.108(0.373)0.9430.0270.0000.000(0.000)(0.000)0.0000.
000(0.000)0.000(0.000)0.000(0.000)0.000-
Interaction0.014(0.045)0.1000.0040.0000.000(0.000)(0.000)0.0
000.000(0.000)0.000(0.000)0.000(0.000)0.000= Operating
Accruals/NOA0.257(0.298)1.1500.1970.1530.1410.1280.1160.1
040.0910.0790.0670.0550.0420.0300.030Fiscal
Year2012201320142015201620172018201920202021202220232
024202520262027
Credit AnalysisCredit AnalysisCompany NameStarbucks
CorporationActualActualActualActualActualForecastForecastFo
recastForecastForecastForecastForecastForecastForecastForecas
tForecastForecastFiscal Year End
Date2007/10/012008/09/292009/09/282010/09/272011/09/26201
2/09/262013/09/262014/09/262015/09/262016/09/262017/09/26
2018/09/262019/09/262020/09/262021/09/262022/09/262023/09
/26Analysis of Leverage- Long-Term Capital StructureDebt to
Equity
Ratio0.1250.1080.2900.3890.4030.4030.4030.4030.4030.4030.4
030.4030.4030.4030.4030.4030.403FFO to Total
Debt3.5720.7321.7031.7861.7311.7201.7091.6981.6871.6761.66
51.6531.6421.6301.6181.618CFO to Total
Debt3.0544.0770.2541.8771.7861.7711.7561.7411.7261.7101.69
41.6781.6621.6461.6291.629Analysis of Leverage- Short-Term
LiquidityCurrent
Ratio1.8281.9001.0171.3721.1911.1911.1911.1911.1911.1911.1
911.1911.1911.1911.1911.1911.191Quick
Ratio1.1741.1420.7060.8140.6380.6380.6380.6380.6380.6380.6
380.6380.6380.6380.6380.6380.638EBIT Interest
Coverage78.18554.639125.41543.56647.70246.95446.65046.34
346.03145.71745.39845.07644.75044.42044.08643.74843.748E
25. BITDA Interest
Coverage106.39072.394162.66555.24260.94861.11360.80960.5
0260.19059.87659.55759.23558.90958.57958.24557.90757.907
Analysis of Credit RiskNet Income to Total
Assets0.1700.1680.0010.1920.2220.2180.2180.2180.2170.2170.
2170.2160.2160.2160.2150.2150.215implied default
probability2.0%2.0%5.5%2.0%2.0%2.0%2.0%2.0%2.0%2.0%2.0
%2.0%2.0%2.0%2.0%2.0%2.0%Total Liabilities to Total
Assets0.4040.3780.6110.5100.5320.5320.5320.5320.5320.5320.
5320.5320.5320.5320.5320.5320.532implied default
probability3.0%2.5%4.5%3.5%3.5%3.5%3.5%3.5%3.5%3.5%3.5
%3.5%3.5%3.5%3.5%3.5%3.5%Quick
Ratio1.1741.1420.7060.8140.6380.6380.6380.6380.6380.6380.6
380.6380.6380.6380.6380.6380.638implied default
probability4.0%4.0%5.0%4.2%5.0%5.0%5.0%5.0%5.0%5.0%5.0
%5.0%5.0%5.0%5.0%5.0%5.0%EBIT to Interest
Expense78.1854.64125.4143.5747.7046.9546.6546.3446.0345.7
245.4045.0844.7544.4244.0943.7543.75implied default
probability1.0%1.0%1.0%1.0%1.0%1.0%1.0%1.0%1.0%1.0%1.0
%1.0%1.0%1.0%1.0%1.0%1.0%Inventory Holding
Period41.5546.7138.1434.7536.2436.2436.2436.2436.2436.2436
.2436.2436.2436.2436.2436.2436.24implied default
probability4.2%4.2%4.2%4.2%4.2%4.2%4.2%4.2%4.2%4.2%4.2
%4.2%4.2%4.2%4.2%4.2%4.2%Annual Sales
Growth0.0%13.5%12.0%10.6%16.5%15.3%14.1%12.8%11.6%1
0.4%9.1%7.9%6.7%5.5%4.2%3.0%3.0%implied default
probability4.2%3.0%3.0%3.0%3.2%3.0%3.0%3.0%3.0%3.0%3.0
%3.0%3.0%3.0%3.2%3.2%3.2%Average Implied Default
Probability3.1%2.8%3.9%3.0%3.2%3.1%3.1%3.1%3.1%3.1%3.
1%3.1%3.1%3.1%3.2%3.2%3.2%Fiscal
Year2011201220132014201520162017201820192020202120222
0232024202520262027Lookup Table of default
probabilitydecile 1min decile 2min decile 3min decile 4min
decile 5min decile 6min decile 7min decile 8min decile 9min
decile 10NI to TA thresholds-0.448-0.161-
0.0490.0010.0220.0380.0560.0790.118NI to TA default
26. rates0.0830.080.0720.0550.0450.0300.0250.0200.0200.020TL to
TA
thresholds0.1750.2830.3850.4760.5580.6330.7090.8161.030TL
to TA default
rates0.020.0220.0250.0300.0350.0450.0550.0700.0900.100Quic
k Ratio
thresholds0.3820.5220.8090.9941.2001.4701.8902.5304.550Qui
ck Ratio default
rates0.090.0650.050.0420.0400.0350.0250.0200.0150.010EBIT
to Int thresholds-17.4-3.6-
0.1391.252.2103.3805.2109.16023.800EBIT to Int default
rates0.0750.090.0850.0700.0500.0300.0210.0180.0150.010Inv
Holding
thresholds0.3652.5614.2431.395070.08091.980121.540174.470I
nv Holding default
rates0.030.0350.0390.0400.0420.0450.0490.0550.0600.070Sales
Growth thresholds-0.203-
0.0630.0030.050.0980.1580.2440.3980.797Sales Growth default
rates0.0690.0550.0420.0320.0300.0300.0320.0420.0500.065
Forecasting AssumptionsForecasting AssumptionsCompany
NameStarbucks CorporationTERMINALEstimated
Price/Share=$47.53YEARActualActualActualActualActualForec
astForecastForecastForecastForecastForecastForecastForecastFo
recastForecastForecastForecastFiscal Year End
Date2007/10/012008/09/292009/09/282010/09/272011/09/26201
2/09/262013/09/262014/09/262015/09/262016/09/262017/09/26
2018/09/262019/09/262020/09/262021/09/262022/09/262023/09
/26Implied Return on
Equity0.2920.0020.4240.4970.5000.4960.4930.4900.4870.4830.
4800.4770.4730.4700.4660.466Income Statement
AssumptionsSales
Growth13.5%12.0%10.6%16.5%15.3%14.1%12.8%11.6%10.4%
9.1%7.9%6.7%5.5%4.2%3.0%3.0%Cost of Goods
Sold/Sales72.5%73.1%71.5%69.7%68.7%68.7%68.7%68.7%68.
7%68.7%68.7%68.7%68.7%68.7%68.7%68.7%68.7%R&D/Sales
0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0
27. %0.0%0.0%0.0%0.0%SG&A/Sales9.8%9.1%9.2%8.8%8.9%8.9
%8.9%8.9%8.9%8.9%8.9%8.9%8.9%8.9%8.9%8.9%8.9%Dep&
Amort/Avge PP&E and
Intang.19.4%17.4%16.7%17.2%17.2%17.2%17.2%17.2%17.2%1
7.2%17.2%17.2%17.2%17.2%17.2%17.2%Net Interest
Expense/Avge Net
Debt6.0%1.9%3.8%3.2%3.2%3.2%3.2%3.2%3.2%3.2%3.2%3.2
%3.2%3.2%3.2%3.2%Non-Operating Income/Sales2.6%2.3%-
16.3%2.6%3.2%3.2%3.2%3.2%3.2%3.2%3.2%3.2%3.2%3.2%3.
2%3.2%3.2%Effective Tax
Rate31.1%32.8%103.8%34.6%29.3%29.3%29.3%29.3%29.3%29
.3%29.3%29.3%29.3%29.3%29.3%29.3%29.3%Minority
Interest/After Tax Income0.2%0.1%5.7%-
0.0%0.1%0.1%0.1%0.1%0.1%0.1%0.1%0.1%0.1%0.1%0.1%0.1
%0.1%Other
Income/Sales0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%
0.0%0.0%0.0%0.0%0.0%0.0%0.0%Ext. Items & Disc.
Ops./Sales0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0
%0.0%0.0%0.0%0.0%0.0%0.0%Pref. Dividends/Avge Pref.
Stock0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0
%0.0%0.0%0.0%0.0%Balance Sheet AssumptionsWorking
Capital AssumptionsEnding Operating
Cash/Sales17.5%15.3%21.8%11.2%8.4%8.4%8.4%8.4%8.4%8.4
%8.4%8.4%8.4%8.4%8.4%8.4%8.4%Ending
Receivables/Sales3.3%3.7%3.8%3.8%3.8%3.8%3.8%3.8%3.8%3
.8%3.8%3.8%3.8%3.8%3.8%3.8%3.8%Ending
Inventories/COGS11.4%12.8%10.4%9.5%9.9%9.9%9.9%9.9%9.
9%9.9%9.9%9.9%9.9%9.9%9.9%9.9%9.9%Ending Other
Current
Assets/Sales3.3%3.3%3.8%3.7%3.7%3.7%3.7%3.7%3.7%3.7%3
.7%3.7%3.7%3.7%3.7%3.7%3.7%Ending Accounts
Payable/COGS6.4%4.1%4.6%4.7%5.2%5.2%5.2%5.2%5.2%5.2
%5.2%5.2%5.2%5.2%5.2%5.2%5.2%Ending Taxes
Payable/Sales0.9%1.0%0.8%1.7%1.4%1.4%1.4%1.4%1.4%1.4%
1.4%1.4%1.4%1.4%1.4%1.4%1.4%Ending Other Current
Liabs/Sales12.2%12.6%32.0%13.6%14.1%14.1%14.1%14.1%14
28. .1%14.1%14.1%14.1%14.1%14.1%14.1%14.1%14.1%Other
Operating Asset AssumptionsEnding Net
PP&E/Sales20.1%20.0%21.5%21.4%21.3%21.3%21.3%21.3%21
.3%21.3%21.3%21.3%21.3%21.3%21.3%21.3%21.3%Ending
Investments/Sales4.1%4.3%3.7%5.1%3.5%3.5%3.5%3.5%3.5%3
.5%3.5%3.5%3.5%3.5%3.5%3.5%3.5%Ending
Intangibles/Sales3.7%4.1%7.7%6.9%10.9%10.9%10.9%10.9%1
0.9%10.9%10.9%10.9%10.9%10.9%10.9%10.9%10.9%Ending
Other
Assets/Sales2.5%1.8%7.8%6.7%6.5%6.5%6.5%6.5%6.5%6.5%6
.5%6.5%6.5%6.5%6.5%6.5%6.5%Other Operating Liability
AssumptionsOther
Liabilities/Sales3.0%2.5%2.3%2.3%2.9%2.9%2.9%2.9%2.9%2.
9%2.9%2.9%2.9%2.9%2.9%2.9%2.9%Deferred
Taxes/Sales0.0%0.1%0.1%0.0%0.4%0.4%0.4%0.4%0.4%0.4%0.
4%0.4%0.4%0.4%0.4%0.4%0.4%Financing AssumptionsCurrent
Debt/Total
Assets0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.
0%0.0%0.0%0.0%0.0%0.0%Long-Term Debt/Total
Assets7.5%6.7%11.3%19.0%18.9%18.9%18.9%18.9%18.9%18.
9%18.9%18.9%18.9%18.9%18.9%18.9%18.9%Minority
Interest/Total
Assets0.0%0.1%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.
0%0.0%0.0%0.0%0.0%0.0%Preferred Stock/Total
Assets0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.
0%0.0%0.0%0.0%0.0%0.0%Dividend Payout
Ratio0.0%39.3%8055.4%40.0%36.9%36.9%36.9%36.9%36.9%3
6.9%36.9%36.9%36.9%36.9%36.9%36.9%36.9%
Valuation ParametersValuation ParametersEstimated
Price/Share=$47.53Company Name:Starbucks
CorporationRequired Valuation Parameters (to compute value of
common equity):Enter Cost of Equity Capital:10.00%Enter
Value of Contingent Claims on Common Equity ($000):0Enter
Date of Valuation:2013/01/20Enter Dilution Factor for Splits
Occurring Since Latest Fiscal Year End:1.00Optional Valuation
Parameters (to compute value to all investors):Enter Cost of Net
29. Debt:8.00%Enter Cost of Preferred Stock:9.00%Enter Cost of
Minority Interest:10.00%Adjust the Weighted Average Cost of
Capital Input9.3720%upsuch that the two equity values below
are approximately equal:Equity Value computed directlyEquity
Value computed indirectlyapproximate weighted averagefrom
flows to equityholders:as the Entity Value less non-equity
claims:cost of capital to use as starting point:47.5352.3910.11%
Residual Income ValuationsResidual Income
Valuation($000)Company NameStarbucks CorporationMost
Recent Fiscal Year End9/26/11Date of Valuation1/20/13Cost of
Common Equity10.00%Teriminal Growth Rate3.00%Fiscal Year
of
Forecast2012/09/262013/09/262014/09/262015/09/262016/09/26
2017/09/262018/09/262019/09/262020/09/262021/09/262022/09
/262023/09/26(6,113,812)Valuation to Common EquityNet
Income3,128,5893,563,2204,014,4134,473,3684,929,7785,372,1
235,788,0856,165,0616,490,7536,753,8076,944,4387,152,771Co
mmon Equity at Beginning of
Year5,818,0006,706,8937,649,2458,630,0819,630,72410,629,14
111,600,55612,518,31413,354,97514,083,57814,679,00815,119,
378Residual
Income2,546,7892,892,5313,249,4883,610,3603,966,7064,309,2
094,628,0304,913,2295,155,2565,345,4505,476,5375,640,833Pr
esent Value of Residual
Income2,315,2622,390,5212,441,3892,465,9242,463,0122,432,4
362,374,9112,292,0582,186,3322,060,9021,919,4931,797,343Pr
esent Value Beyond 10 Years30,163,457Present Value of First
10 Years23,422,748Common Equity as
of9/26/115,818,000Forecast Equity Value Before Time
Adj.59,404,204Forecasted Value as of Valuation
Date70,587,046Less Value of Contingent Equity Claims0Value
Attributable to Common Equity70,587,046Common Shares
Outstanding at BS Date1,485,100Equivalent Shares at Valuation
Date1,485,100Forecast Price/Share$47.53Valuation to All
InvestorsCost of Debt8.00%Cost of Preferred Stock9.00%Cost
of Minority Interest10.00%After Tax Weighted Average Cost of
30. Capital9.37%Net Interest Expense to Net
Debtholders81,05192,901105,346118,169131,105143,852156,07
7167,431177,560186,128192,831198,615Beginning Book Value
of
Debt2,347,5002,706,1593,086,3873,482,1443,885,8934,288,743
4,680,6995,051,0045,388,5885,682,5715,922,8216,100,505Resi
dual Interest
Expense(106,749)(123,592)(141,565)(160,403)(179,766)(199,24
7)(218,378)(236,650)(253,527)(268,478)(280,995)(289,425)Pres
ent Value of Residual Interest
Income(98,842)(105,960)(112,379)(117,901)(122,346)(125,560)
(127,422)(127,855)(126,827)(124,357)(120,514)(114,935)Value
of Debt(1,445,049)Dividends to Preferred
Stockholders000000000000Beginning Book Value of Preferred
Stock000000000000Residual Income to Preferred
Stock000000000000Present Value of Preferred Residual
Income000000000000Value of Preferred Stock0Minority
Interest in
Earnings2,1562,4552,7663,0823,3973,7023,9884,2484,4724,654
4,7854,929Beginning Book Value of Minority
Interest1,8002,0752,3672,6702,9803,2883,5893,8734,1324,3574
,5414,678Residual Income to Minority
Interest1,9762,2482,5292,8153,0993,3733,6293,8614,0594,2184
,3314,461Present Value of MI Residual
Income1,7961,8581,9001,9231,9241,9041,8621,8011,7221,6261
,5181,421Value of Minority Interest43,970Net Operating
Income3,188,0453,631,3534,091,6554,559,9925,025,8625,477,5
245,902,4156,287,6776,620,7556,890,0487,085,5487,298,114Be
ginning Net Operating
Assets8,167,3009,415,12710,737,99912,114,89613,519,59714,9
21,17316,284,84317,573,19118,747,69519,770,50720,606,3702
1,224,562Residual Income to all
Investors2,422,6052,748,9683,085,2903,424,5843,758,8064,079
,1124,376,2004,640,7174,863,7215,037,1565,154,3195,308,948
Present Value of Residual Investor
Income2,215,0142,298,0392,358,1832,393,2232,401,7022,383,0
31. 262,337,5132,266,3962,171,7672,056,4771,923,9931,811,902En
tity Value64,072,967Less Value of Debt1,445,049Less Value of
Preferred Stock0Less Value of Minority
Interest(43,970)Forecast Equity Value Before Time
Adj.65,474,046Forecasted Value as of Valuation
Date77,799,535Less Value of Contingent Equity Claims0Value
Attributable to Common Equity77,799,535Common Shares
Outstanding at BS Date1,485,100Equivalent Shares at Valuation
Date1,485,100Forecast Price/Share$52.39
DCF ValuationsDCF Valuations($000)Company NameStarbucks
CorporationMost Recent Fiscal Year End9/26/11Date of
Valuation1/20/13Cost of Common Equity10.00%Terminal
Growth Rate3.00%Fiscal Year of
Forecast2012/09/262013/09/262014/09/262015/09/262016/09/26
2017/09/262018/09/262019/09/262020/09/262021/09/262022/09
/262023/09/26-6113812.2149Valuation to Common EquityFree
Cash Flow to Common
Equity2,239,6962,620,8683,033,5763,472,7253,931,3614,400,7
094,870,3275,328,3995,762,1516,158,3776,504,0676,699,189Pr
esent Value of
FCF2,036,0872,166,0072,279,1702,371,9182,441,0662,484,085
2,499,2482,485,7382,443,7142,374,3212,279,6362,134,568Pres
ent Value Beyond 10 Years35,822,850Present Value of First 10
Years23,581,354Forecast Equity Value Before Time
Adj.59,404,204Forecasted Value as of Valuation
Date70,587,046Less Value of Contingent Equity Claims0Value
Attributable to Common Equity70,587,046Common Shares
Outstanding at BS Date1,485,100Equivalent Shares at Valuation
Date1,485,100Forecast Price/Share$47.53Valuation to All
InvestorsCost of Net Debt8.00%Cost of Preferred
Stock9.00%Cost of Minority Interest10.00%After Tax Weighted
Average Cost of Capital9.37%Free Cash Flow to
Debt(277,608)(287,328)(290,411)(285,580)(271,745)(248,103)(
214,228)(170,153)(116,424)(54,122)15,14615,600Present Value
of FCF to
Debt(257,044)(246,337)(230,537)(209,910)(184,945)(156,347)(
32. 125,000)(91,928)(58,241)(25,069)6,4966,195Value of
Debt(1,445,049)Free Cash Flow to Preferred
Stock000000000000Present Value of FCF to Preferred
Stock000000000000Value of Preferred Stock0Free Cash Flow to
Minority
Interest1,8812,1642,4632,7733,0883,4013,7043,9894,2474,4704
,6494,788Present Value of FCF to Minority
Interest1,7101,7881,8501,8941,9171,9201,9011,8611,8011,7231
,6291,526Value of Minority Interest43,970Free Cash Flows to
Investors1,940,2182,308,4822,714,7583,155,2913,624,2864,113
,8544,614,0685,113,1735,597,9446,054,1846,467,3576,661,377
Present Value of FCF to
Investors1,773,9621,929,8082,074,9742,205,0312,315,7502,403
,3222,464,5682,497,1312,499,6152,471,6902,414,1212,273,475
Entity Value64,072,967Less Value of Net Debt1,445,049Less
Value of Preferred Stock0Less Value of Minority
Interest(43,970)Forecast Equity Value Before Time
Adj.65,474,046Forecasted Value as of Valuation
Date77,799,535Less Value of Contingent Equity Claims0Value
Attributable to Common Equity77,799,535Common Shares
Outstanding at BS Date1,485,100Equivalent Shares at Valuation
Date1,485,100Forecast Price/Share$52.39
EPS ForecasterEPS Forecaster($000, except per share
amounts)Company NameStarbucks CorporationCommon Shares
Outstanding at BS Date1,485,100Equivalent Shares at Valuation
Date1,485,100Forecasted Price at Valuation
Date$47.53ForecastForecastForecastForecastForecastForecastFo
recastForecastForecastForecastForecastForecastFiscal Year of
Forecast2012/09/262013/09/262014/09/262015/09/262016/09/26
2017/09/262018/09/262019/09/262020/09/262021/09/262022/09
/262023/09/26Net
Income3,128,5893,563,2204,014,4134,473,3684,929,7785,372,1
235,788,0856,165,0616,490,7536,753,8076,944,4387,152,771Co
mmon Equity Issued
(Repurchased)(1,086,699)(1,307,695)(1,554,122)(1,824,130)(2,
114,563)(2,420,890)(2,737,212)(3,056,355)(3,370,077)(3,669,3
33. 59)(3,944,795)(4,063,139)Forecasted Price at Year
End$46.27$50.00$53.97$58.19$62.69$67.49$72.60$78.07$83.9
3$90.23$97.02$104.34New Shares Issued
(Repurchased)(23,486)(26,154)(28,797)(31,346)(33,729)(35,873
)(37,702)(39,150)(40,154)(40,668)(40,659)(38,940)Shares
Outstanding at End of
Year1,461,6141,435,4601,406,6641,375,3181,341,5881,305,716
1,268,0131,228,8641,188,7101,148,0421,107,3831,068,443Fore
cast
EPS$2.12$2.46$2.82$3.22$3.63$4.06$4.50$4.94$5.37$5.78$6.1
6$6.57Consensus Analyst Forecast of EPSForecast Five Year
Growth Rate in EPS14%Consensus Analyst Forecast of Growth
RateTo obtain analyst forecasts, click here
Although not a necessary input for eVal, we recommend that
you find the analyst forecasts for your company and store them
in the yellow-shaded cells for comparison purposes.
Model SummaryModel SummaryHistorical Data For:Starbucks
CorporationMost Recent Fiscal Year End:2011/09/26Average
ROE (last five years)30.37%Sales Growth (last five
years)13.13%Forecast Data:Forecast Horizon10 yearsThis
Year's ROE49.96%Terminal Year's ROE46.61%This Year's
Sales Growth15.28%Terminal Year's Sales Growth3.00%This
Year's Forecast EPS$2.12Forecast 5 Year EPS
Growth13.83%Valuation Data:Cost of Equity
Capital10.00%Valuation Date2013/01/20Estimated
Price/Share$47.53Estimated Price/Earnings
Ratio22.38Estimated Market/Book Ratio12.13
Case DataCut-and-Paste the yellow block of case data into the
Raw Data Input section on the lower part of the eVal financial
statementsAmerica OnlineAmazon.comFour
ModelsIntelCabelasNetflixOverstockRoyal
CaribbeanCarnivalSporting Goods IndustrySaltonCity
ScreensCountry CinemaSiriusVerizonNordstromRoss
StoresKohlsAppleIBMCompany Name and TickerAMERICA
ONLINE INCAOLCommon Shares Outstanding
(000)2,255,000Fiscal Year End (YYYY-MM-
34. DD)1991/06/291992/06/291993/06/291994/06/291995/06/29Sale
s (Net)394,2901,094,0002,197,0003,091,0004,777,000Cost of
Goods
Sold(229,724)(654,000)(1,770,000)(2,434,000)(3,465,000)R&D
Expense(64,598)(75,000)(204,000)(333,000)(286,000)SG&A
Expense(119,764)(293,000)(605,000)(328,000)(408,000)Depreci
ation &
Amortization(1,653)(7,000)(6,000)(24,000)(65,000)Interest
Expense00000Non-Operating Income
(Loss)867(3,000)(87,000)(62,000)543,000Income
Taxes(15,169)(32,000)(10,000)16,000(334,000)Minority
Interest in Earnings00000Other Income (Loss)00000Ext. Items
& Disc. Ops.00000Preferred Dividends00000Operating Cash
and Market.
Sec.64,549129,133124,000823,0001,424,000Receivables32,176
42,93965,000192,000323,000Inventories00000Other Current
Assets36,90898,506134,000248,000232,000PP&E
(Net)70,919101,277233,000503,000657,000Investments0081,00
0531,0002,151,000Intangibles59,93556,63859,000472,000454,0
00Other Assets140,926530,261137,000105,000107,000Current
Debt2,3292,435000Accounts
Payable84,640105,90468,000120,00074,000Income Taxes
Payable00000Other Current
Liabilities46,393181,567485,0001,035,0001,651,000Long-Term
Debt17,36919,30650,000372,000348,000Other
Liabilities2,2431,1684,0007,00015,000Deferred
Taxes35,627135,87286,000344,000227,000Minority
Interest00000Preferred Stock01000Paid in Common Capital
(Net)253,435520,268647,0001,586,0002,882,000Retained
Earnings(36,623)(7,767)(507,000)(590,000)151,000-Common
Dividends0000Company Name and TickerAMAZON.COM
INCAMZNback to topCommon Shares Outstanding
(000)357,140Fiscal Year End (YYYY-MM-
DD)1992/12/301993/12/301994/12/301995/12/301996/12/30Sale
s (Net)15,746147,787609,8191,639,8392,761,983Cost of Goods
Sold(12,287)(118,969)(476,155)(1,349,194)(2,106,206)R&D
35. Expense(2,401)0000SG&A
Expense(7,501)(60,202)(194,696)(643,016)(972,777)Depreciati
on & Amortization00(42,599)(214,694)(321,772)Interest
Expense(5)(326)(26,639)(84,566)(130,921)Non-Operating
Income (Loss)2026908,6298,432(336,984)Income
Taxes00000Minority Interest in Earnings00000Other Income
(Loss)00(2,905)(76,769)(304,596)Ext. Items & Disc.
Ops.00000Preferred Dividends00000Operating Cash and
Market.
Sec.6,248125,375373,445706,1881,100,522Receivables00000In
ventories5718,97129,501220,646174,563Other Current
Assets3213,36321,30879,64386,044PP&E
(Net)9859,72629,791317,613366,416Investments007,740371,46
292,250Intangibles00178,638730,144255,325Other
Assets1462,4098,03740,15460,049Current
Debt01,50080814,32216,577Accounts
Payable2,85233,027113,273463,026485,383Income Taxes
Payable00000Other Current
Liabilities2,01810,02447,494255,886472,996Long-Term
Debt076,521348,1401,466,3382,127,464Other
Liabilities0181000Deferred Taxes00000Minority
Interest00000Preferred Stock60000Paid in Common Capital
(Net)9,42066,105300,8051,148,3061,326,050Retained
Earnings(6,025)(37,514)(162,060)(882,028)(2,293,301)-
Common Dividends0000Company Name and TickerFOUR
MODELSFOURback to topCommon Shares Outstanding
(000)1,000Fiscal Year End (YYYY-MM-
DD)1992/12/301993/12/301994/12/301995/12/301996/12/30Sale
s (Net)20,00020,00020,00020,00020,000Cost of Goods
Sold(12,000)(12,000)(12,000)(12,000)(12,000)R&D
Expense00000SG&A Expense00000Depreciation &
Amortization(2,000)(2,000)(2,000)(2,000)(2,000)Interest
Expense(1,000)(1,000)(1,000)(1,000)(1,000)Non-Operating
Income (Loss)00000Income
Taxes(2,000)(2,000)(2,000)(2,000)(2,000)Minority Interest in
Earnings00000Other Income (Loss)00000Ext. Items & Disc.
36. Ops.00000Preferred Dividends00000Operating Cash and
Market.
Sec.1,0001,0001,0001,0001,000Receivables00000Inventories00
000Other Current Assets00000PP&E
(Net)20,00020,00020,00020,00020,000Investments00000Intangi
bles00000Other Assets00000Current Debt00000Accounts
Payable00000Income Taxes Payable00000Other Current
Liabilities00000Long-Term
Debt10,00010,00010,00010,00010,000Other
Liabilities00000Deferred Taxes00000Minority
Interest00000Preferred Stock00000Paid in Common Capital
(Net)10,00010,00010,00010,00010,000Retained
Earnings1,0001,0001,0001,0001,000-Common
Dividends0000Company Name and TickerINTEL
CORPINTCback to topCommon Shares Outstanding
(000)6,668,000Fiscal Year End (YYYY-MM-
DD)1991/12/301992/12/301993/12/301994/12/301995/12/30Sale
s
(Net)16,202,00020,847,00025,070,00026,273,00029,389,000Cos
t of Goods
Sold(7,811,000)(9,164,000)(9,945,000)(12,144,000)(11,836,000
)R&D
Expense(1,296,000)(1,808,000)(2,347,000)(2,674,000)(3,503,00
0)SG&A
Expense(1,843,000)(2,322,000)(2,891,000)(3,076,000)(3,872,00
0)Depreciation & Amortization0000(411,000)Interest
Expense(29,000)(25,000)(27,000)(34,000)(36,000)Non-
Operating Income
(Loss)415,000406,000799,000792,0001,497,000Income
Taxes(2,072,000)(2,777,000)(3,714,000)(3,069,000)(3,914,000)
Minority Interest in Earnings00000Other Income
(Loss)00000Ext. Items & Disc. Ops.00000Preferred
Dividends00000Operating Cash and Market.
Sec.2,458,0007,907,0009,732,0007,310,00011,400,000Receivab
les3,116,0003,723,0003,438,0003,527,0003,700,000Inventories
2,004,0001,293,0001,697,0001,582,0001,478,000Other Current
38. Payable013,71520,35032,65449,775Income Taxes
Payable00000Other Current
Liabilities09,48118,84529,94945,067Long-Term
Debt03,856460440Other Liabilities0240288241600Deferred
Taxes00000Minority Interest0101,830000Preferred
Stock06000Paid in Common Capital
(Net)046,756248,569266,001287,981Retained
Earnings0(137,266)(159,213)(153,293)(131,698)-Common
Dividends0000Company Name and TickerOVERSTOCK.COM
INCOSTKback to topCommon Shares Outstanding
(000)16,025Fiscal Year End (YYYY-MM-
DD)1997/12/301998/12/301999/12/30Sales
(Net)40,00391,784238,945Cost of Goods
Sold(32,536)(70,953)(211,077)R&D Expense000SG&A
Expense(15,225)(19,494)(37,084)Depreciation &
Amortization(5,809)(5,391)(3,171)Interest
Expense(729)(465)(76)Non-Operating Income
(Loss)490(41)576Income Taxes000Minority Interest in
Earnings000Other Income (Loss)000Ext. Items & Disc.
Ops.000Preferred Dividends0(7,013)(262)Operating Cash and
Market.
Sec.3,72932,66240,346Receivables1,5656,99410,183Inventories
7,58613,95429,926Other Current Assets4762,3334,583PP&E
(Net)5,0184,9459,483Investments000Intangibles02,7842,784Oth
er Assets3,340284427Current Debt4,51212475Accounts
Payable3,68013,73130,363Income Taxes Payable000Other
Current Liabilities2,0936,4099,316Long-Term
Debt1655886Other Liabilities000Deferred Taxes000Minority
Interest5,28400Preferred Stock04,3632,978Paid in Common
Capital (Net)50,07394,937122,729Retained
Earnings(44,093)(55,666)(67,815)-Common
Dividends0(7,013)(262)Company Name and TickerROYAL
CARIBBEAN CRUISES LTDRCLback to topCommon Shares
Outstanding168,591Fiscal Year End (YYYY-MM-
DD)1990/12/301991/12/301992/12/301993/12/301994/12/30Sale
s (Net)1,171,4231,183,9521,357,3251,939,0072,636,291Cost of
39. Goods
Sold(728,760)(742,467)(854,478)(1,219,268)(1,593,728)R&D
Expense00000SG&A
Expense(179,051)(177,481)(194,629)(272,368)(359,214)Depreci
ation &
Amortization(77,892)(80,071)(91,185)(143,816)(194,614)Intere
st Expense(43,349)(54,844)(76,540)(128,531)(167,869)Non-
Operating Income (Loss)(46)19,86910,3737,6619,904Income
Taxes00000Minority Interest in Earnings00000Other Income
(Loss)00000Ext. Items & Disc. Ops.(6)00(7,558)0Preferred
Dividends00000Operating Cash and Market.
Sec.23,92031,25640,419110,793172,921Receivables9,42412,17
115,53522,62836,532Inventories13,55516,83022,66537,27431,8
34Other Current Assets71,23327,56333,74540,45045,044PP&E
(Net)1,384,8141,758,4462,378,9344,785,2915,073,008Investme
nts00000Intangibles351,456341,041330,628320,214309,801Oth
er Assets10,60215,93620,37323,09816,936Current
Debt06,23413,061141,013127,919Accounts
Payable63,18171,52869,091108,474115,833Income Taxes
Payable00000Other Current
Liabilities209,094230,935321,307639,857646,403Long-Term
Debt747,107929,4581,353,9062,431,6832,341,163Other
Liabilities00000Deferred Taxes00000Minority
Interest00000Preferred Stock000172,500172,500Paid in
Common Capital
(Net)545,061546,058549,4221,185,5661,358,567Retained
Earnings300,561419,030535,512660,655923,691-Common
Dividends(30,489)(34,384)(49,984)(67,734)Company Name and
TickerCARNIVAL CORPCCLback to topCommon Shares
Outstanding (000)595,448Fiscal Year End (YYYY-MM-
DD)1990/11/291991/11/291992/11/291993/11/291994/11/29Sale
s (Net)1,806,0161,998,1502,212,5722,447,4683,009,306Cost of
Goods
Sold(1,028,475)(1,131,113)(1,241,269)(1,322,669)(1,619,377)R
&D Expense00000SG&A
Expense(223,272)(248,566)(274,855)(296,533)(369,469)Depreci
40. ation &
Amortization(110,595)(128,433)(144,987)(167,287)(200,668)Int
erest Expense(51,378)(63,080)(64,092)(55,898)(57,772)Non-
Operating Income (Loss)(478)33,50787,97867,20288,782Income
Taxes10,053(9,374)(9,045)(6,233)(3,815)Minority Interest in
Earnings0000(11,102)Other Income (Loss)00000Ext. Items &
Disc. Ops.00000Preferred Dividends00000Operating Cash and
Market.
Sec.124,220103,760124,115149,727143,229Receivables20,7893
3,08038,10957,09060,837Inventories45,12248,82053,28154,970
75,449Other Current
Assets50,31870,71875,42874,23890,764PP&E
(Net)3,071,4313,414,8234,099,0384,327,4135,768,114Investme
nts47,51451,794430,330479,329546,693Intangibles233,553226,
571219,589212,607437,464Other
Assets76,876155,92161,99871,40156,773Current
Debt84,64472,75266,36959,62067,626Accounts
Payable86,75090,23784,748106,783168,546Income Taxes
Payable00000Other Current
Liabilities393,563431,721511,625619,739898,941Long-Term
Debt1,046,9041,035,0311,277,5291,015,2941,563,014Other
Liabilities129,028130,87339,10300Deferred
Taxes0091,63020,24163,036Minority
Interest0000132,684Preferred Stock00000Paid in Common
Capital (Net)538,345592,733823,103873,885905,848Retained
Earnings1,390,5891,752,1402,207,7812,731,2133,379,628-
Common
Dividends(85,098)(103,877)(130,456)(178,458)Company Name
and TickerSALTON INCSFPback to topCommon Shares
Outstanding (000)11,352Fiscal Year End (YYYY-MM-
DD)1992/06/281993/06/281994/06/271995/06/251996/06/30Sale
s (Net)99,202182,806305,599506,116837,302Cost of Goods
Sold(72,780)(129,399)(191,703)(307,147)(504,889)R&D
Expense00000SG&A
Expense(21,343)(42,944)(84,216)(129,588)(156,749)Depreciati
on & Amortization00000Interest
41. Expense(3,934)(4,063)(5,333)(15,518)(28,761)Non-Operating
Income (Loss)007,83900Income
Taxes3,450(2,001)(12,205)(19,320)(55,087)Minority Interest in
Earnings00000Other Income (Loss)00000Ext. Items & Disc.
Ops.00000Preferred Dividends00000Operating Cash and
Market.
Sec.42,61366111,2407,606Receivables15,87125,64743,22596,1
79129,850Inventories28,28841,96876,506144,124219,230Other
Current Assets3,8836,5567,5459,48413,859PP&E
(Net)6,2328,3168,31524,65134,643Investments012,157000Intan
gibles3,6714,8805,14542,638159,088Other
Assets1,532206000Current
Debt24,51238,47750,47532,229112,155Accounts
Payable10,05717,36118,96040,99735,113Income Taxes
Payable006,49904,578Other Current
Liabilities1,2332,9507,23521,86521,028Long-Term
Debt3,7544,9330182,329215,065Other Liabilities00000Deferred
Taxes005171572,529Minority Interest00000Preferred
Stock00000Paid in Common Capital
(Net)29,35843,65642,7641,24932,502Retained
Earnings(9,433)(5,034)14,94749,490141,306-Common
Dividends0000Company Name and TickerCITY
SCREENSCSCRback to topCommon Shares Outstanding
(000)23,469Fiscal Year End (YYYY-MM-
DD)1991/03/301992/03/271993/04/021994/04/011995/03/31Sale
s (Net)564,664657,872752,904852,7551,026,721Cost of Goods
Sold(209,122)(247,740)(295,557)(341,988)(407,124)R&D
Expense00000SG&A
Expense(266,600)(297,577)(344,399)(403,866)(517,066)Depreci
ation &
Amortization(37,913)(43,886)(52,572)(70,117)(89,221)Interest
Expense(35,908)(28,828)(22,022)(35,679)(38,628)Non-
Operating Income
(Loss)9,8576,830(6,459)(42,204)(1,198)Income
Taxes9,000(19,300)(12,900)16,60010,500Minority Interest in
Earnings00000Other Income (Loss)00000Ext. Items & Disc.
42. Ops.0(19,350)000Preferred Dividends00000Operating Cash and
Market.
Sec.140,37710,79524,7159,88113,239Receivables8,57220,5039,
83713,01818,325Inventories00000Other Current
Assets12,06915,17949,96284,22471,024PP&E
(Net)279,904355,485543,058562,158726,025Investments00000I
ntangibles42,92636,48328,67922,06618,723Other
Assets38,30645,01362,804104,433128,394Current
Debt2,5162,9043,4414,01718,017Accounts
Payable29,04764,35361,87672,63369,381Income Taxes
Payable00000Other Current
Liabilities33,79438,31969,79297,186101,658Long-Term
Debt264,988185,268370,283399,595591,603Other
Liabilities34,42133,69643,65182,89479,606Deferred
Taxes00000Minority Interest00000Preferred
Stock2,6672,6672,2021,2000Paid in Common Capital
(Net)118,139118,648117,205117,213110,439Retained
Earnings36,58237,60350,60521,0425,026-Common
Dividends(7,000)(5,993)(5,064)0Company Name and
TickerCOUNTY CINEMACCINback to topCommon Shares
Outstanding (000)11,363Fiscal Year End (YYYY-MM-
DD)1990/12/301991/12/301992/12/301993/12/301994/12/30Sale
s (Net)327,619364,749426,726458,598481,568Cost of Goods
Sold(126,930)(150,613)(174,220)(188,006)(197,665)R&D
Expense00000SG&A
Expense(132,918)(149,164)(170,108)(181,455)(194,985)Depreci
ation &
Amortization(22,544)(27,216)(28,408)(33,443)(37,502)Interest
Expense(17,028)(16,031)(20,289)(23,142)(27,230)Non-
Operating Income (Loss)00(45,447)0(72,999)Income
Taxes(11,246)(8,638)4,469(12,366)18,166Minority Interest in
Earnings00000Other Income (Loss)00000Ext. Items & Disc.
Ops.00000Preferred Dividends00000Operating Cash and
Market.
Sec.22,68718,84713,29519,58718,572Receivables3,81412,2114,
822758522Inventories1,9392,9362,6313,0823,851Other Current
43. Assets5,0255,6325,3637,5485,886PP&E
(Net)293,971371,851387,915497,056573,612Investments4,6314,
97310,32414,14820,334Intangibles43,15659,23162,60868,14956
,954Other Assets2,3752,3312,4259,66917,812Current
Debt9,35212,20515,02619,0771,290Accounts
Payable23,47824,87321,43226,12245,533Income Taxes
Payable00000Other Current
Liabilities11,32719,10217,24017,83337,842Long-Term
Debt143,973218,305253,233341,662350,470Other
Liabilities000036,099Deferred
Taxes17,51218,4334,52212,4310Minority
Interest00000Preferred Stock0000550Paid in Common Capital
(Net)100,098100,149100,262105,018158,884Retained
Earnings71,85884,94577,66897,85466,875-Common
Dividends0000Company Name and TickerKOHL'S
CORPKSSback to topCommon Shares Outstanding
(000)307,000Fiscal Year End (YYYY-MM-
DD)2002/01/302003/01/302004/01/302005/01/302006/01/30Sale
s
(Net)13,402,21715,544,18416,473,73416,389,00017,178,000Cos
t of Goods
Sold(8,670,484)(9,890,513)(10,459,549)(10,334,000)(10,680,00
0)R&D Expense00000SG&A
Expense(3,007,842)(3,451,196)(3,757,563)(3,978,000)(4,196,00
0)Depreciation &
Amortization(307,710)(387,674)(452,145)(541,000)(590,000)Int
erest Expense(79,383)(74,427)(98,712)(140,000)(134,000)Non-
Operating Income
(Loss)8,99234,07136,29629,00010,000Income
Taxes(503,830)(665,764)(658,210)(540,000)(597,000)Minority
Interest in Earnings00000Other Income (Loss)00000Ext. Items
& Disc. Ops.00000Preferred Dividends00000Operating Cash
and Market.
Sec.286,916620,400663,671676,0002,267,000Receivables1,652,
0650000Inventories2,237,5682,588,0992,855,7332,799,0002,92
3,000Other Current
45. 289956,000900,000898,000Other Current
Assets200,829229,794259,000303,000326,000PP&E
(Net)1,773,8711,757,2151,983,0002,221,0002,242,000Investme
nts00000Intangibles140,912135,71453,00053,00053,000Other
Assets132,409186,456203,000170,000230,000Current
Debt306,6186,800261,000299,000356,000Accounts
Payable540,019576,796556,000563,000726,000Income Taxes
Payable81,61776,09558,00000Other Current
Liabilities695,058773,452760,000739,000932,000Long-Term
Debt627,776623,6522,236,0002,214,0002,257,000Other
Liabilities577,580596,262614,000636,000736,000Deferred
Taxes00000Minority Interest00000Preferred Stock00000Paid in
Common Capital
(Net)685,607826,421936,000997,0001,066,000Retained
Earnings1,407,0741,342,100179,000213,000506,000-Common
Dividends(134,000)110,158134,000138,000139,000Company
Name and TickerROSS STORES INCROSTback to topCommon
Shares Outstanding (000)122,929Fiscal Year End (YYYY-MM-
DD)2002/01/272003/02/022004/02/012005/01/302006/01/29Sale
s (Net)4,944,1795,570,2105,975,2126,486,1397,184,213Cost of
Goods
Sold(3,832,296)(4,317,527)(4,618,220)(4,956,576)(5,327,278)R
&D Expense00000SG&A
Expense(786,439)(863,033)(935,901)(1,034,357)(1,130,813)Dep
reciation & Amortization00000Interest
Expense(4,102)(2,873)(9,771)(8,343)(9,393)Non-Operating
Income (Loss)7,00011,50013,8008,5001,800Income
Taxes(128,710)(156,643)(164,069)(189,922)(275,772)Minority
Interest in Earnings00000Other Income (Loss)00000Ext. Items
& Disc. Ops.00000Preferred Dividends00000Operating Cash
and Market.
Sec.204,530372,635263,678322,153770,097Receivables29,1223
0,10537,46896,411102,852Inventories938,0911,051,7291,025,2
95881,058872,498Other Current
Assets57,10460,48771,56014,0930PP&E
(Net)639,852748,233868,315951,656942,999Investments11,202
46. 31,13640,76638,01416,848Intangibles12,08613,91612,79610,97
12,889Other Assets46,75150,35051,44441,15560,450Current
Debt50,0000000Accounts
Payable474,614698,063637,158536,745658,299Income Taxes
Payable25,58633,57721,8189,12054,399Other Current
Liabilities328,783351,617351,629409,394477,816Long-Term
Debt0150,000150,000150,000150,000Other
Liabilities122,92632,51057,34061,99464,883Deferred
Taxes100,657182,994182,728191,889205,943Minority
Interest00000Preferred Stock00000Paid in Common Capital
(Net)476,415524,910554,558595,397646,443Retained
Earnings359,757384,920416,091400,972510,850-Common
Dividends0(33,634)(40,638)(49,838)(55,202)Company Name
and TickerCABELA'S INCCABback to topCommon Shares
Outstanding (000)66,923Fiscal Year End (YYYY-MM-
DD)2000/12/302001/12/302002/12/302003/12/302004/12/30Sale
s (Net)1,555,9741,799,6612,063,5242,349,5992,552,721Cost of
Goods
Sold(895,822)(1,029,410)(1,158,840)(1,318,523)(1,475,541)R&
D Expense00000SG&A
Expense(533,094)(620,376)(715,380)(820,121)(871,468)Depreci
ation &
Amortization(29,843)(34,912)(45,559)(59,863)(64,673)Interest
Expense(8,178)(10,928)(17,947)(20,243)(29,708)Non-Operating
Income (Loss)11,04411,33511,4588,3786,904Income
Taxes(35,085)(42,801)(51,471)(51,348)(41,831)Minority
Interest in Earnings00000Other Income (Loss)00000Ext. Items
& Disc. Ops.00000Preferred Dividends00000Operating Cash
and Market.
Sec.248,18486,923172,903131,182410,104Receivables38,73312
5,000196,359244,270213,014Inventories313,002396,635484,41
4608,159517,657Other Current
Assets128,56885,469100,545110,777133,439PP&E
(Net)294,141459,622600,065904,052920,398Investments00000I
ntangibles4,5553,61708,1235,902Other
Assets201,048209,014196,944206,267195,552Current
47. Debt28,32721,65233,294126,785179,512Accounts
Payable100,826162,305239,285281,391189,766Income Taxes
Payable00000Other Current
Liabilities324,588364,511346,255422,928331,526Long-Term
Debt119,82590,777284,579376,600379,336Other
Liabilities71,68666,99283,519145,454363,514Deferred
Taxes16,62520,19030,44031,11338,707Minority
Interest00000Preferred Stock00000Paid in Common Capital
(Net)239,560240,490248,710257,287266,029Retained
Earnings326,794399,363485,148571,272647,676-Common
Dividends00000Company Name and TickerSporting Goods
StoresMG740back to topCommon Shares Outstanding
(000)36,184Fiscal Year End (YYYY-MM-
DD)2000/12/302001/12/302002/12/302003/12/302004/12/30Sale
s (Net)651,734872,581821,884952,7571,005,890Cost of Goods
Sold(421,579)(563,859)(528,199)(608,868)(654,521)R&D
Expense(16)0000SG&A
Expense(174,364)(233,253)(223,527)(262,510)(277,137)Depreci
ation &
Amortization(12,576)(17,408)(16,495)(20,814)(23,708)Interest
Expense(4,537)(6,317)(5,004)(5,199)(5,933)Non-Operating
Income (Loss)172(2,556)178(3,610)(23,980)Income
Taxes(15,398)(18,753)(19,677)(21,873)(13,577)Minority
Interest in Earnings00000Other Income (Loss)00000Ext. Items
& Disc. Ops.00000Preferred Dividends00000Operating Cash
and Market.
Sec.42,63225,17738,84623,55358,037Receivables11,65625,127
30,56938,12333,992Inventories144,192194,027185,408235,144
220,261Other Current
Assets22,47618,52520,65125,67326,659PP&E
(Net)99,332144,468143,097191,863195,647Investments00000In
tangibles31,89836,12428,49750,14333,253Other
Assets30,88837,68729,62128,50235,707Current
Debt4,8384,4049,04721,65923,772Accounts
Payable62,19185,74482,17999,91479,343Income Taxes
Payable00000Other Current
48. Liabilities75,92797,76683,285105,45385,203Long-Term
Debt70,60466,98462,41375,81281,123Other
Liabilities24,75031,11633,82747,81878,891Deferred
Taxes2,4092,8843,5183,6766,264Minority
Interest00500Preferred Stock3760000Paid in Common Capital
(Net)83,74996,11994,620102,424106,572Retained
Earnings58,23096,118107,797136,246142,389-Common
Dividends198907857898865Company NameSIRIUS
SATELLITE RADIO INCSIRIback to topCommon Shares
Outstanding1,346,227Fiscal Year End (YYYY-MM-
DD)1997/12/301998/12/301999/12/302000/12/302001/12/30Sale
s (Net)080512,87266,854242,245Cost of Goods
Sold(47,464)(69,898)(86,774)(120,914)(184,943)R&D
Expense(47,794)(30,087)(24,534)(30,520)(44,745)SG&A
Expense(64,146)(131,200)(243,741)(498,354)(743,142)Deprecia
tion &
Amortization(9,052)(82,747)(95,353)(95,370)(98,555)Interest
Expense(89,686)(106,163)(50,510)(41,386)(45,361)Non-
Operating Income
(Loss)22,379(3,191)261,82511,72913,815Income
Taxes000(4,201)(2,311)Minority Interest in
Earnings00000Other Income (Loss)00000Ext. Items & Disc.
Ops.00000Preferred Dividends00000Operating Cash and
Market.
Sec.323,742173,702551,880763,874904,422Receivables000031,
688Inventories000014,256Other Current
Assets12,30325,90727,78447,16661,082PP&E
(Net)1,082,9151,032,874941,052881,280828,357Investments7,2
007,2006,75092,61582,450Intangibles83,65483,65483,65483,65
483,654Other Assets17,79117,6036,19789,02479,453Current
Debt00000Accounts
Payable39,83643,33665,9195,5256,829Income Taxes
Payable00000Other Current
Liabilities20,4774,98416,084263,989600,138Long-Term
Debt639,990670,357194,803656,2741,084,437Other
Liabilities19,48554,26411,59315,50112,511Deferred
49. Taxes003,72415,69156,479Minority Interest00000Preferred
Stock485,168531,153000Paid in Common Capital
(Net)827,647964,3252,478,8882,866,4893,053,821Retained
Earnings(504,998)(927,479)(1,153,694)(1,865,856)(2,728,853)C
ommon Dividends00000Company NameVERIZON
COMMUNICATIONSVZback to topCommon Shares
Outstanding1,979,509Fiscal Year End (YYYY-MM-
DD)2000/12/302001/12/302002/12/302003/12/302004/12/30Sale
s
(Net)71,283,00075,112,00088,144,00093,469,00097,354,000Cos
t of Goods
Sold(23,168,000)(25,469,000)(34,994,000)(37,547,000)(39,007,
000)R&D Expense00000SG&A
Expense(21,088,000)(21,312,000)(25,232,000)(25,967,000)(26,
898,000)Depreciation &
Amortization(13,910,000)(14,047,000)(14,545,000)(14,377,000)
(14,565,000)Interest
Expense(2,384,000)(2,180,000)(2,349,000)(1,829,000)(1,819,00
0)Non-Operating Income
(Loss)1,788,0001,548,0001,168,000796,000849,000Income
Taxes(2,851,000)(3,210,000)(2,674,000)(3,982,000)(3,331,000)
Minority Interest in
Earnings(2,409,000)(3,045,000)(4,038,000)(5,053,000)(6,155,0
00)Other Income (Loss)00(42,000)00Ext. Items & Disc.
Ops.570,0000759,00011,0000Preferred
Dividends00000Operating Cash and Market.
Sec.4,547,0003,274,0005,653,0003,397,00010,291,000Receivab
les9,801,0009,171,00010,891,00011,736,00011,703,000Inventor
ies1,535,0001,780,0001,514,0001,729,0002,092,000Other
Current
Assets3,596,0002,223,0004,480,0001,836,0001,989,000PP&E
(Net)74,124,00075,305,00082,356,00085,294,00086,546,000Inv
estments00000Intangibles47,448,00052,933,00061,754,00061,0
29,00073,208,000Other
Assets24,907,00023,444,00022,156,00021,938,00016,523,000C
urrent
50. Debt3,593,0007,141,0007,715,0002,954,0004,993,000Accounts
Payable13,177,00012,351,00014,320,0004,491,0003,856,000Inc
ome Taxes Payable00000Other Current
Liabilities6,359,0005,571,00010,245,00017,296,00017,057,000
Long-Term
Debt35,674,00031,869,00028,646,00028,203,00046,959,000Oth
er
Liabilities22,010,00022,353,00034,736,00036,362,00038,813,00
0Deferred
Taxes22,532,00022,411,00016,270,00014,784,00011,769,000Mi
nority
Interest25,053,00026,754,00028,337,00032,288,00037,199,000P
referred Stock00000Paid in Common Capital
(Net)24,576,00023,775,00031,211,00032,697,00022,456,000Ret
ained
Earnings12,984,00015,905,00017,324,00017,884,00019,250,000
Common
Dividends4,262,0004,427,0004,719,0004,773,0004,994,000Com
pany NameAPPLE INCAAPLback to topCommon Shares
Outstanding899,806Fiscal Year End (YYYY-MM-
DD)2001/09/232002/09/292003/09/282004/09/262005/09/25Sale
s
(Net)13,931,00019,315,00024,006,00032,479,00036,537,000Cos
t of Goods
Sold(9,889,000)(13,717,000)(15,852,000)(21,334,000)(23,397,0
00)R&D
Expense(535,000)(712,000)(782,000)(1,109,000)(1,333,000)SG
&A
Expense(1,864,000)(2,433,000)(2,963,000)(3,761,000)(4,149,00
0)Depreciation & Amortization00000Interest
Expense00000Non-Operating Income
(Loss)165,000365,000599,000620,000326,000Income
Taxes(480,000)(829,000)(1,512,000)(2,061,000)(2,280,000)Min
ority Interest in Earnings00000Other Income (Loss)00000Ext.
Items & Disc. Ops.00000Preferred Dividends00000Operating
Cash and Market.
52. (Loss)00000Ext. Items & Disc. Ops.(60,000)76,000000Preferred
Dividends00000Operating Cash and Market.
Sec.13,686,00010,656,00016,146,00012,907,00014,247,000Rece
ivables24,428,00026,848,00028,789,00031,854,00030,464,000I
nventories2,841,0002,810,0002,664,0002,701,0002,494,000Othe
r Current
Assets4,706,0004,346,0005,578,0001,542,0001,730,000PP&E
(Net)13,756,00014,440,00015,081,00014,305,00014,165,000Inv
estments1,174,0001,618,0001,940,00001,157,000Intangibles11,
104,00015,056,00016,392,00021,104,00023,015,000Other
Assets34,053,00027,460,00033,841,00025,111,00021,750,000C
urrent
Debt7,216,0008,902,00012,235,00011,236,0004,168,000Accoun
ts
Payable7,349,0007,964,0008,054,0007,014,0007,436,000Income
Taxes
Payable4,710,0004,670,0003,673,0002,743,0003,826,000Other
Current
Liabilities15,877,00018,555,00020,348,00021,442,00020,572,00
0Long-Term
Debt15,425,00013,780,00023,039,00022,689,00021,932,000Oth
er
Liabilities18,020,00017,690,00020,489,00030,815,00024,301,00
0Deferred
Taxes4,053,0003,167,0004,124,00004,032,000Minority
Interest00000Preferred Stock00000Paid in Common Capital
(Net)(11,636,000)(23,926,000)(32,171,000)(56,768,000)(58,144
,000)Retained
Earnings44,734,00052,432,00060,640,00070,353,00080,899,000
Common Dividends00000
America Online
Amazon.com
Four Models
Intel
Netflix
Overstock
53. Royal Caribbean
Carnival
Salton
City Screens
Country Cinema
Kohls
Nordstrom
Ross Stores
Cabelas
Sporting Goods Industry
Sirius
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54. Starbucks Corporation
Forecast & Analysis Assignment 1
FINC 430 6380 Financial Management
University of Maryland University College
Jeffrey Peyton
January 17, 2017
Introduction
Starbucks Corporation, who trades its common stock as
“SBUX” on the NASDAQ, is “the premier roaster, marketer and
retailer of specialty coffee in the world” (Starbucks, 2016). The
company is comprised of seven brands, which include:
Starbucks Coffee, Teavana, Tazo, Seattle’s Best Coffee,
Evolution Fresh, La Boulange and Ethos (Starbucks, 2016).
Starbucks operates both company-owned, and licensed stores,
and also operates a sizeable business by selling its products
through third-party accounts. The company has five segments of
business in which it operates 23,043 stores in 68 different
countries, and in fiscal year 2015 those segments represented
the following, as a percentage of total revenues: Americas
(69%), China/Asia Pacific (13%), Europe, Middle East and
55. Africa (6%), Channel Development (9%), and all other segments
(3%) (Starbucks, 2016).
McDonalds and Dunkin Donuts, two of Starbucks’ main
competitors, have not seen the same positive growth across their
key performance indicators in recent years. “Not surprisingly,
investors have caught onto the fact that McDonald’s and
Dunkin’ may be hurting one another – and not Starbucks – as
evidenced by recent moves in Starbucks, Dunkin’, and
McDonald’s shares” (Lim, 2014). However, some challenges
that Starbucks faces in the near future are the rising price of
coffee beans, higher wage payments and the continuing increase
in the price of its products (Team, 2016). With these challenges,
it will be necessary for Starbucks to be strategic in its future
business decisions to protect the historical positive trending
sales growth. The following paper will analyze the outcome of
an eVal financial forecast completed on Starbucks, and will
detail future growth rates, projected financial statements,
financial ratios and other assumptions.
Explanation of Growth Rates
Starbucks has seen positive year-over-year sales growth of
12 %, 10.6%, 16.5% in 2013, 2014, and 2015 respectively, and
eVal forecasts that the company will continue to see positive
growth into 2026. The terminal growth rate forecasted for
Starbucks by eVal is 3%, which is a solid financial outlook for
the company. In the short-term, the company should continue
the process of “leveraging its consumer loyalty and lack of
elasticity among its consumers by continuously passing on
increases in costs…to its customers” (Team, 2016). By
continuously raising the price of its products, the company can
protect its operating margins, and not sacrifice the quality of its
product and/or locations. When the price of products becomes
too high for the consumer, Starbucks can move to maximize the
atmosphere, and offer an experience even better than previously
offered, to offset the price of the product with an experience.
The eVal forecasts sales growth in 2016 to have an
56. increase of 15.3% compared to a forecasted increase of only
4.2% in 2025. The next 10 years are forecasted to be positive,
but not as positive as the previous, leading to a plateau in
business. According to a recent financial press release,
Starbucks plans to “add 12,000 stores globally –to a total of
37,000 – by 2021” (Starbucks, 2016). The expansion of stores
internationally is the biggest opportunity to for the company.
With the planned expansion, Starbucks will gain forecasted net
sales of more than $29 billion from 2015 to 2025 according to
the eVal.
Explanation of All Other Assumptions
Table 1: eVal Assumptions for Financial Forecast Using eVal
As mentioned previously, sales growth is forecasted by
eVal to continue to remain positive into 2025, but slowly
decrease in its velocity from 16.5% to 3% in 2015 and 2025
respectively. The eVal assumes all other indicators above,
referenced in table 1, to remain constant into the future. Cost of
goods sold are forecasted at 68.7% constantly over the next 10
years, showing investors that Starbucks will be able to maintain
healthy relationships with its suppliers, and that buyers and
negotiators will be able to maintain stability as it relates to
costs. In addition, the ending operating cash/sales ratio remains
forecasted at a constant 8.4%, informing investors that
Starbucks will continue to turn the sales it earns into cash to use
for business. Shareholders should also notate the constant
36.9% dividend payout ratio forecasted, as this informs them to
expect a continuous growth of their investment. This high pay-
out ratio will most likely hold true based on the recent
announcement of its intent to open 12,000 stores globally
(Starbucks, 2016). It should also be noted that the eVal forecast
57. did not take into account this announcement, and the financing
assumptions will most likely change. With the planned
expansion of stores, Starbucks will most likely incur increases
in its long-term debt as a result of additional leases. According
to Starbucks’ Form 10k, the company currently has about
“12,235 company-operated stores, almost all of which are
leased” (Starbucks, 2016).
Explanation and Interpretation of Projected Financial
Statements
Net sales of Starbucks were $19 billion in 2015, and are
forecasted by eVal to reach $48 billion by 2025, more than
double its current sales. This large increase in sales will most
likely occur as a result of the company’s expanded footprint
globally, and over the past 5 years, the company has seen
similar growth, increasing net sales from $11 billion in 2011 to
$19 billion in 2015. Net income aligns with net sales, forecasted
at a continuous positive increase. The company also is
forecasted to continue with a healthy 20% EBITDA. The non-
operating income forecasted may be offset by a large litigation
charge of $2,784 million to Kraft that posted to the company’s
income statement in 2013 (Starbucks, 2016). In developing a
strategy for the future, Starbucks should limit its partnerships
with third-party companies on large scale agreements to
diversify its financial risk.
On the historical balance sheet of Starbucks, the company
maintained operating cash of $2 billion in 2011, yet is only
forecasted for $1.8 billion in 2016. The company is forecasted
to eventually reach its 2011 operating cash flow in 2017, with
$2.1 billion, and continue on its positive trend. Other current
liabilities also were also affected by the Kraft litigation
payment, and may have skewed the forecast. When the 2013
other current liabilities were adjusted to reflect no litigation
payment, the eVal forecast was not affected.
Explanation and Interpretation of Overall Forecast Results &
Financial Ratio
Starbucks’ positive sales performance has a trickle effect
58. on the financial ratios forecasted using eVal. As it relates to
annual growth rates, sales, assets and common equity continue
into 2025 positively trending, although slightly decrease year-
over-year. In 2016, a 15.3% sales, asset and common equity
growth is forecasted compared with a 4.2% growth in 2025.
Earnings are about (0.1)% off of sales every year. Free cash
flow to investors is forecasted as a huge spike in 2016, to
153.2% and then decreases to 19% the following year in 2017.
This is most likely a skewed forecast due to the $2.8 billion
arbitration payment made to Kraft Foods in 2014, as a result of
breach of contract (Starbucks, 2016). Starbucks should invest
heavily in its legal and risk departments to avoid future legal
proceedings that may result in similar negative financial
consequences.
As it relates to profitability, the eVal forecasts that
Starbucks will remain consistent with its return on equity at
0.497 in 2015, and forecasted at 0.470 in 2025. The company is
doing well with generating profits from shareholder’s equity,
and in order to continue this trend, the executive leadership
team should continue their growth strategy of expanding the
company’s footprint of stores internationally. From 2015 to
2025, the gross margin, EBITDA margin and net operating
margin are all forecasted at a constant. This forecast will likely
be true for Starbucks if coffee bean prices align with top line
sales. One of the challenges faced by Starbucks is the rising
price of coffee beans, which can be attributed to weather
conditions in the countries where it does business. “The primary
contributor towards the rise in prices of coffee beans is the
drought in Brazil and Vietnam, the largest producers of coffee
beans” (Team, 2016). In order to maintain the constant healthy
margins, Starbucks should seek out alternate, back-up locations
for similar quality beans.
Short-term liquidity is an important aspect of any
organization, as one needs to be able to pay its debts quickly in
order to continue doing business. The current ratio of Starbucks
increased from 2013 to 2015 from 1.017 to 1.191 respectively.
59. The eVal forecasts that the current ratio will continue to remain
at 1.91 until 2025. The quick ratio seen a slight decrease from
2013 to 2015 from 0.706 to 0.638 respectively. According to the
eVal forecast, the quick ratio is also to remain constant through
2025. The consistency in the positive leverage that Starbucks is
forecasted at, allows the company to continue its current daily
operation while being able to protect itself from any financial
need that should arise without notice, such as the Kraft
arbitration.
From a profitability standpoint, Starbucks hits all the marks,
showing effective maximization of assets, equity and
investments. Management should take notice of the company’s
liquidity, as the company has become less liquid over the past
five years. Starbucks has increased its long-term debt but
reduced its overall debt, and indicates to investors that it can
pay its interest payments on time. Starbucks may have found its
most effective asset management strategies as asset management
ratios have maintained relatively neutral over the past five
years. Historically Starbucks has had stellar financial
performance, and is forecasted to continue the trend. With the
expansion of its stores globally, the company is likely to see
record sales and growth over the next 10 years.
60. Appendix
Appendix A – Income Statement Assumptions eVal
Appendix B – Balance Sheet Assumptions eVal
Appendix C – Financing Assumptions eVal
Appendix D – Short-Term Liquidity eVal
Appendix E – Financial Ratios eVal
References