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Citrix Systems, Inc.
Professor Dr. Mikhail Pevzner
11/22/2019
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1
Executive Summary
Based on the instructions provided, I conducted a full business,
accounting,
financial and prospective analysis of Citrix systems Inc. Citrix
is drastically changing the
IT software Industry by delivering unified digital workspace,
networking, and analytics

solutions that improve employee experience and productivity,
while also simplifying its
ability to adopt and manage complex cloud environments.
Technology is drastically changing every day. With that in
mind, Citrix is adjusting
its business strategy to meet the demands of future generations
that are more tech
savvy. It is focusing and leaning more towards cloud
technology, unifying its portfolio
and expanding its business into new areas to address the
challenges inherent in
complex hybrid multi-cloud environments. In addition, it is
playing a crucial role in the
ongoing effort of digital transformation by empowering end-
users and organizations to
seize on opportunities that were once unthinkable.
Based on the detailed analysis below, Citrix has maintained a
strong financial
position amongst other industry giants. It has a strong business
strategy which
translates into a solid Balance sheet, Income and Cash flow
statements. Its stock price
and future EPS fall well within the industry average and are
projected to be $113.29 and

$5.49 (respectively) at the end of 2019. Furthermore, Citrix
systems Inc has an overall
beta of 0.98 which means that it is less volatile than the market
and has less systematic
risk than the overall market. Hence, its stocks are less risker
with a low potential for
return. Also, it is worth mentioning that it is investing more on
Research and
Development (R&D) every year to remain competitive and is
outperforming its
competitors by owning patents which translate into higher
revenue.
2
Introduction
Business Analysis
I selected Citrix Systems, Inc. from the provided list. Citrix
Systems, Inc. is an
American multinational software company that provides server,
application and desktop

virtualization, networking, software as a service (SaaS), and
cloud computing
technologies. Citrix solutions are claimed to be in use by over
100 million users across
400,000 organizations worldwide, including 99% of the Fortune
100, and 98% of the
Fortune 500 companies. Citrix came to prominence as an
industry leader in thin client
technology, enabling purpose built devices to access remote
servers and resources.
The company first went public in 1995 with a few competitors
in the market as a result
of which it experienced tremendous increase in revenue from
1995 to 1999. In FY’18,
Citrix systems massive growth grew even more massively as the
tech giant reported
$2.974 billion in revenue and its net income continued to
accelerate (“About Us”).
According to their FY’18 Annual report, 2018 was a great year
for Citrix which
was directly attributed to a number of initiatives executed in
2017, all of which align with
the long term strategy of:

innovation to
sales, marketing, and backend supporting functions and
infrastructure,
Citrix as an organization is making the transition to the cloud a
priority.
and simplified
messaging.
moving
from organizing work to guiding and automating work. In
Networking, it is
3
expanding its analytics capabilities to address the challenges
inherent in
complex hybrid multi-cloud environments.
Furthermore, Citrix executed a few technology acquisitions—
one for intelligent,
consolidated access to workspace activities and integrations
with business-critical

applications, and another for real-time intelligent internet
traffic management. These
acquisitions have accelerated its product roadmap and
demonstrate commitment to
make thoughtful and strategic investments in innovation.
Its solid business performance in 2018 can also be attributed to
the fact that it
accelerated its subscription model transition and ended the full
year of 2018 with
subscriptions accounting for more than 43% of total product
bookings, up from 28% in
the same period for the prior year. Deferred and unbilled
revenue, or future committed
revenue, grew 12% year over year to $2.2 billion. For the full
year, subscription grew
45% over the years. SaaS, the most important component of
subscription transition,
accounted for 60% of subscription revenue and 9% of total
revenue. Cash flow from
operations increased 7% year over year to $1.04 billion (“2018
Citrix Annual Report”).
Competitors

The company operates in a highly competitive environment
which may
significantly affect its market share and revenues. Some of the
company's competitors
include A10 Networks, AT&T, BlackBerry, BoxInc, BT Group,
Cisco Systems, Dropbox,
F5 Networks, LogMeIn, Premiere Global Services, Radware,
RingCentral, Verizon
Wireless, VMware, and Vonage Holdings. Moreover, many of
the company’s
competitors have significantly greater financial, technical,
sales, marketing and other
resources than it does. The company also faces competition
from new entrants into the
4
market. These new entrants have better flexibility to develop
more agile platforms and
have greater ability to adapt their strategy and cost structures
which may give them a
competitive advantage with the company's current or
prospective customers.
Additionally, as IT companies attempt to strengthen or maintain

their market positions in
the evolving workspace services, delivery networking and
mobility apps markets, these
companies continue to seek to deliver comprehensive IT
solutions to end users and
combine enterprise-level hardware and software solutions that
may compete with the
company’s workspace services, delivery networking and
mobility apps solutions.
Further, as the industry evolves, companies with which Citrix
has strategic alliances
may become competitors in other product areas or the current
competitors may enter
into new strategic relationships with new or existing
competitors, all of which may further
increase the competitive pressures. Due to this, price
competition could become a more
significant competitive factor in the future. As a result, Citrix
may not be able to maintain
its historic prices and margins, which could adversely affect its
business, results of
operations and financial condition (“10-K report SEC, 2019”).
In addition, Citrix systems states that its application
virtualization and VDI

solutions are based on a proprietary technology platform, the
success of which will
depend on organizations and customers perceiving
technological, operational and
security benefits and cost savings associated with adopting
desktop and application
virtualization solutions. In order to mitigate the threats from its
competition, Citrix
differentiates its platform from basic virtualization solutions
with robust security, higher
flexibility and better end user experience to enable IT to deliver
Windows and Linux
apps and desktops for better business outcomes. Furthermore,
Citrix has been awarded
5
with numerous domestic and foreign patents across the globe
and has a number of
pending patent applications in the U.S. and foreign countries.
Their technology is also
protected under copyright laws. Additionally, it relies on trade
secret protection and

confidentiality and proprietary information agreements to
protect proprietary technology
(“10-K report SEC, 2019”).
Growth Opportunities and Innovation
With the fast paced advancement in technology, Citrix needs to
consistently
strive and innovate its products and services in order to keep
ahead of its competitors.
Hence, it needs to invest in its research and development.
According to their Annual
report, its innovation engine continues to advance, and growth
in Citrix Cloud Services
has also accelerated innovation and shortened the time to value
for end-users. Citrix
focuses research and development efforts on developing new
cross-portfolio solutions
across Digital Workspaces, Networking and Analytics solutions,
while continuing to
invest in functional improvements related to its core market
technologies to expand
Citrix differentiation and opportunity within each category. To
better refine its products it
solicits extensive feedback concerning product development

from customers, both
directly and indirectly, through channel distributors and
partners. Citrix also believes that
its software development teams and core technologies represent
a significant
competitive advantage. Subsequently, the tech conglomerate
incurred research and
development expenses of $440 million in 2018, 415 million in
2017 and $395.4 million in
2016. This shows that Citrix is spending more and more on
Research and Development
every year in order to remain competitive in the tech industry.
Citrix also states that it
continues to search for suitable acquisition candidates and could
acquire or make
6
investments in companies that they believe are related to
strategic objectives. From
time to time it seeks to raise additional funds through issuance
of debt or equity
securities for larger acquisitions, potential redemption of
convertible notes for general

corporate purpose (“2018 Citrix Annual Report”).
Porter’s 5 Forces
Citrix systems primary and support activities are not carried out
in isolation but are,
instead influenced by five important forces that confront the
company and determine its
competitive intensity. Hence, we will analyze Citrix’ business
environment with the help
of this strategic tool which sheds light on industry competition,
buying power, supplier
power, product substitutes and threat of new entrants.
Competition and rivalry raise the cost of doing business as
companies must hire
and train competitive workers, advertise products, research and
develop products, and
engage in other related activities. Citrix states in its FY’18
Annual report that it operates
in a very competitive environment and due to competitive
pressures it may be not be
able to maintain its historic prices and profitability, which
could have a negative impact

on its financials and results of operations. In order to mitigate
the risk of losing revenue
7
to competition, it should innovate its products by building
sustainable differentiation so
that it can compete in a better manner. Differentiation is
typically achieved from
technological innovation that produces products and services
with attributes valued by
customers and not easily replicated by competitors. Such
differentiation has costs such
as research and development, advertising, and other marketing
expenses. In addition,
Citrix should also collaborate with its competitors and build
synergies to increase the
market size rather than just compete for a small market
(“Easton, 2018”).
In terms of bargaining power of buyers, strong bargaining
power can extract price
concessions and demand a higher level of service and delayed
payment terms; this

force reduces both profits from sales and operating cash flows
to sellers. Hence, Citrix
should focus on becoming a cost leader. Cost leadership can
result from a number of
factors such as, including access to low cost raw materials or
labor (while maintaining
quality), manufacturing or service efficiency in the form of cost
efficient processes and
manufacturing scale efficiencies, greater bargaining power with
suppliers, sophisticated
IT systems that permit timely collection of key information, and
other avenues. Citrix
can tackle the bargaining power of buyers by building a large
base of customers which
will help reduce the bargaining power of buyers plus it will
provide an opportunity to the
firm to streamline its sales and production process. By rapidly
innovating products,
customers won’t have the opportunity to seek discounts on
established products. Lastly,
new products will prevent defection of existing customers to its
competitors (“Easton,
2018”).
Bargaining power of suppliers is also one of the factors which

contributes
towards remaining competitive in the market. Suppliers with
strong bargaining power
8
can demand higher prices and earlier payments, adversely
affecting profits and cash
flows to buyers such as Citrix systems. Citrix can mitigate the
bargaining power of its
suppliers by building an efficient supply chain with multiple
vendors and by
experimenting with product designs using various materials so
that if the price of raw
materials tends to increase, then Citrix could move to another
vendor. Also, it should
follow the example of Nike and Walmart by developing vendors
whose business solely
depends on the firm. This would give Citrix greater flexibility
and bargaining power as
opposed to its competitors which would result in greater profits
(“Easton, 2018”).
Similarly, as the number of product substitutes increase, sellers
have less power

to raise prices and pass on costs to buyers; accordingly, threat
of substitution places
downward pressure on profits of sellers. For instance, Google
Drive and Dropbox are
substitutes to storage. The threat of substitution is high as its
competitors are equally
and better equipped to fulfill the increasing needs and demands
of its customers. Citrix
should shift its approach from being service oriented rather than
just product oriented. It
should understand the needs and requirements of its customers
to outperform its
competitors (“Easton, 2018”).
Technology is getting better and more complex every day. New
market entrants
increase competition. To mitigate that threat, companies spend a
huge chunk of their
budget on activities such as research and development, new
technologies, promotion
and human development to erect barriers to entry and to create
economies of scale.
Other barriers to entry include patents that allow a company to
achieve competitive

advantage and charge higher prices for their products or
services and thereby earn
excess returns. These legal barriers typically have a finite life
but a firm must always
9
maintain a pipeline of innovations to replace intellectual
property that loses protection.
As of December 31, 2018, Citrix held a worldwide portfolio of
2,725 patents and had an
additional 1,126 applications pending. This shows that Citrix is
on the cutting edge of
technology and is outpacing its rivals by owning patents and
thereby increasing its
revenue (“Easton, 2018”).
Marketing
Citrix systems most recent 10-K report sheds light on the fact
that it markets and
licenses solutions through multiple channels worldwide,
including selling through
resellers, direct and over the Web. Its partner community
comprises thousands of value-

added resellers known as Citrix
Solution
Advisors, VADs, Sis, ISVs, OEMs and CSPs.
In addition, its distribution channels are managed by its
worldwide sales and services
organization. Partners receive training and certification
opportunities to support its
portfolio of solutions and services. It states that it rewards its
partners that identify new
business, provide sales expertise, services delivery, customer
education, technical
implementation and support of portfolio solutions through
incentive programs. It further
focuses on increasing the productivity of existing partners,
while also adding new

transacting partners, building capacity through targeted
recruitment and introducing
programs to increase partner mindshare (“10-K report SEC,
2019”).
Technology relationships
Citrix system has a number of technology relationships in place
to accelerate the
development of its existing and future solutions to include go-
to-market initiatives.
These relationships include cross-licensing, OEM, resell, joint
reference architectures,
and other arrangements that result in better solutions for its
customers. For almost thirty
10

years, Citrix and Microsoft have maintained a strategic
partnership spanning product
development, go-to-market initiatives and partner development,
enabling high
performance delivery of application, desktops, and data to
customers anywhere,
anytime on any device. Together, Citrix and Microsoft offer
solutions and services that
aid and accelerate the transition from on premise IT
infrastructure and practices to
emerging hybrid-cloud and multi-cloud delivery models for the
full breadth of legacy and
modern applications. Similarly, Citrix continues to build five
partnerships with Google
through which it brings digital workspace solutions to
enterprise customers who are

increasingly looking to public and hybrid clouds to address
competitive demands and
solve business challenges. Lastly, Citrix has developed
additional relationships to
enable infrastructure choice for its cloud customers. For public
cloud choice, it has
relations with Microsoft, Azure, Google Cloud, Amazon AWS,
Oracle, Hewlett Packard,
Cisco and Lenovo (“2018 Citrix Annual Report”).
Accounting Analysis
Citrix systems has laid out its accounting policies in its most
recent 10-K with the
Securities and Exchange Commission. Revenues are recognized
when control of the
promised products or services are transferred to customers, in
an amount that reflects

the consideration that the company expects to receive in
exchange for those products
or services. In other words revenue is recognized with the
satisfaction of performance
obligations. Citrix generates all of its revenues from contracts
with customers. The
company’s typical performance obligations include the
following:
Performance Obligation When Performance Obligation is
typically satisfied
Subscription:
fferings
Over the contract, beginning on the date that service
is made available to the customers (over time).

11
-premise subscription software licenses When software
activation keys have been made
available for download (point in time).
Product and License:
When software activation keys have been made
available for download (point in time).
customer;
typically upon shipment (point in time)
Support and services:
Ratably over the course of the service term (over
time).

In its FY’18 annual filling, Citrix states that Inventories are
stated at the lower of
cost or net realizable value on a standard cost basis, which
approximates actual cost.
The Company’s inventories primarily consist of finished goods
as of December 31, 2018
and 2017. It is to note that this inventory is evaluated using this
method due to the
principle of conservatism. Conservatism implies that
management should avoid
overstatement of assets and income. On the other hand,
liabilities tend to be presented
at higher amounts in the face of uncertainty. In more simplified
words, inventory is

carried on the accounting records greater than its net realizable
value (NRV), a write
down from the recorded cost to the lower NRV would be made.
Hence, inventory would
be credited, and a loss for the decline in NRV would be the
offsetting debit. This debit
would then be reported in the income statement as a charge
against (reduction in)
income (“Lower Of Cost Or Net Realizable Value”).
Citrix systems accounts for goodwill in compliance with
authoritative guidance,
which requires that goodwill and certain intangible assets be
tested for impairment on
an annual basis. During 2018, the company initiated an effort to
streamline and simplify
its product branding and packaging, which included naming
updates to the portfolio to

provide clarity on the Company’s offerings and unify its sales
motions. The change
resulted in the Company consolidating its Content Collaboration
product group with
Workspace Services and renaming the new product group
Digital Workspace. As a
12
result, the company’s two reporting units were combined into
one, consistent with how
management reviews the operating results of the business.
Citrix systems performed a
qualitative goodwill assessment of the reporting units and
determined there were no
indicators of impairment during the 3rd Quarter of 2018.

Citrix states that its property and equipment is stated at cost.
Depreciation is
computed using the straight line method over the estimated
useful lives of the assets,
which is generally three years for computer equipment and
software; the lesser of the
lease term or ten years for leasehold improvements, which is the
estimated useful life;
seven years for office equipment and furniture and Company’s
enterprise resource
planning systems; and 40 years for buildings.
Citrix states that it invests excess cash in short and long-term
investments. Short-
term and long-term available for sale (AFS) investments as of
December 31, 2018 and
2017 consist of agency securities, corporate securities,

municipal securities and
government securities. Investments classified as available for
sale are stated at fair
value with unrealized gains and losses, net of taxes, reported in
Accumulated other
comprehensive loss. Citrix further classifies its AFS
investments as current and non-
current based on their actual remaining time to maturity. The
Company does not
recognize changes in the fair value of its available-for-sale
investments in income
unless a decline in value is considered other-than-temporary in
accordance with the
authoritative guidance (“2018 Citrix Annual Report”).
Ratio Analysis

Based on data extracted from Macro trends, Citrix had a robust
return on assets
in the last five years except in FY’2017. In 2017 its ROA fell to
0.4% due to a net loss
13
14%
12%
10%
8%
6%
4%
2%

0%
1 2 3 4 5
CTXS ORCL VMW Industry
of $21 million on the income statement. This indicates that it is
not making enough
income from the use of its assets. In other words, Citrix is not
managing its investments
effectively. While on the other hand, VMware has been more
efficient and effective in
utilizing its assets than Citrix, Oracle and the rest of the
Industry with an average ROA
of 16%.
Return on Assets 2018 2017 2016 2015 2014
CTXS 11% 0.40% 7% 4% 5%

ORCL 10% 3% 7% 8% 8%
VMW 16% 3% 6% 7% 6%
Industry 12% 2% 7% 6% 6%
Based on data extracted from Macro trends, Citrix had a solid
ROE in the last
five years except in FY’2017. It outperformed its competitors
except VMware which was
on par with the industry average. The decrease in 2017 can be
attributed to the steep
decline in Net Income. But in 2018 Citrix returned to its glory
with a 104% ROE thus
making it more efficient. The rise in ROE means that Citrix is
increasing its ability to
generate profit without needing as much capital. It is also an
indication that the

14
500%
400%
300%
200%
100%
0%
company’s management is making good use of capital. Hence,
higher ROE translates

into better performance.
Return on Equity 2018 2017 2016 2015 2014
CTXS 104% 2.00% 18% 10% 12%
ORCL 50% 8% 17% 18% 20%
VMW 440% 8% 15% 13% 12%
Industry 198% 6% 17% 14% 15%
2018 2017 2016 2015 2014
Net Profit Margin can be defined as the Net Income as portion
of total sales

revenue. PM increased from a negative in FY’17 to a positive
19.35%. This can be
attributed to the fact that the company’s Net Income increased
to an all-time high in
FY’18 and it also had steady increase in revenue. Citrix states
that Net Income
increased because 42% of total product bookings were
subscription based in 2018, up
from 28% in 2017 which translates into a 45% hike in reported
subscription based
revenue (Citrix Systems Financial Ratios for Analysis 2005-
2019, 2019).
Citrix systems Asset turnover at the end of FY’18 was 0.579. It
is the amount of
sales or revenues generated per dollar of assets. It is an
indicator of the efficiency with

15
which a company deploys its assets. Citrix systems had an all-
time high asset turnover
in FY’18 as subscription based revenue increased 44.7% to
$455.3 million. The spike
was primarily a result of increased customer adoption of cloud
based solutions from
Digital Workspace and Networking offerings delivered via the
cloud (Citrix Systems
Financial Ratios for Analysis 2005-2019, 2019).
The multinational software conglomerate reported a current
ratio of 0.7169
(below 1). Current ratio measures the short-term liquidity of the
company, and the ability
to cover its current liabilities using its current assets. An

increase in current liabilities
and a decrease in current assets in FY’18 can be a cause for
concern as this would
mean that the company is unable to pay off its short term
liabilities with cash. But it
should also be noted that the decline in current ratio does not
necessarily mean that the
company will be unable to succeed (Citrix Systems Financial
Ratios for Analysis 2005-
2019, 2019).
Receivable Turnover for the company was 4.31 in FY’18 with
Days in receivable
at 84.49. Based on the information extracted, Days in
Receivable is at par and in line
with the industry average. The reason for a lower receivable
turnover ratio could be due

to the fact that Citrix has transitioned more towards a
subscription based model where
customers generally purchase cloud offerings on a subscription
basis and revenues
from offerings are generally recognized ratably over the terms
of the subscription.
Days in Receivable 2018 2017 2016 2015 2014
CTXS 84.49 92.07 90.87 92.31 78.32
ORCL 47.43 47.60 51.18 53.05 53.64
VMW 102.21 89.41 102.59 94.81 95.20
Industry 78.04 76.36 81.55 80.06 75.72
16

40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
2018 2017 2016 2015 2014
Receivable Turnover 2018 2017 2016 2015 2014

CTXS 4.31 3.96 4.01 3.95 4.66
ORCL 7.69 7.66 7.13 6.87 6.80
VMW 3.57 4.08 3.55 3.84 3.90
Industry 5.19 5.23 4.90 4.89 5.12
Citrix has a high inventory turnover ratio than its competitors
and rest of the
industry. Inventory Turnover ratio could not be compared to
VMware due to lack of
availability of information. Based on the table below, Citrix
generally shows a higher
turnover ratio from 2014-2017 with a sudden decline in 2018. A
higher inventory
turnover ratio means that Citrix has a better integrated and
efficient inventory

100.00
90.00
80.00
70.00
60.00
50.00
40.00
2018 2017 2016 2015 2014
17
10.00

8.00
6.00
4.00
2.00
0.00
2018 2017 2016 2015 2014
management system. It is selling its inventory very quickly and
demand for its products
is on the rise (“Financials”).
Inventory Turnover 2018 2017 2016 2015 2014
CTXS 19.80 31.60 32.33 45.05 49.15
ORCL 35.27 23.98 38.28 23.98 24.19

VMW N/A N/A N/A N/A N/A
Industry 27.54 27.79 35.31 34.52 36.67
Citrix systems Debt to Equity ratio was 3.44 which means that
it was higher than
Oracle and lower than VMware but well within the average
industry range. A higher debt
to equity ratio is often associated with high risk which means
that a company has been
aggressive in financing its growth with debt. If a lot of debt is
used to finance growth, a
company could potentially generate more earnings than it would
have without financing
(Earnings & Estimates Citrix Systems Inc., 2019).

Debt to Equity ratio 2018 2017 2016 2015 2014
CTXS 3.44 2.14 0.51 0.66 0.59
ORCL 2.51 1.29 1.06 0.91 0.85
VMW 7.69 0.49 0.18 0.19 0.20
Industry 4.55 1.31 0.58 0.59 0.55
18
250.00
200.00
150.00

100.00
50.00
0.00
2018 2017 2016 2015 2014
EBITDA margin is a measurement of a company’s earnings
before interest,
taxes, depreciation, and amortization as a percentage of its total
revenue. Citrix has a
healthy EBITDA which is on par with the industry average and
higher than some of its
competitors. EBITDA gives investors an idea of how the
company is doing financially

and portrays how much cash a company generates before paying
its debts. EBITDA
can also be used to analyze and compare profitability among its
peers as it eliminates
the effects of accounting and financial decisions. Hence, higher
EBITDA means that the
company is profitable and has a strong and positive cash flow
(Earnings & Estimates
Citrix Systems Inc., 2019).
EBITDA 2018 2017 2016 2015 2014
CTXS 30.16 27.58 28.35 21.38 20.86
ORCL 40.75 40.65 40.79 43.77 46.15
VMW 29.86 28.83 28.43 23.31 22.73
Industry 33.59 32.35 32.52 29.49 29.21

Forecasting and Valuation
Forecasting financial performance is integral to a variety of
business decisions.
With the help of forecasting, an analyst can predict the next five
years future value of a
19
Forecasted Revenues (in thousands)
$3,996,000.00
$3,513,000.00
$3,496,000.00
$2,996,000.00

$2,496,000.00
$1,996,000.00
$1,496,000.00
$996,000.00
$496,000.00
$(4,000.00)
$2,974,000.00
$3,144,000.00
$3,323,000.00
Revenues
2019 2020 2021 2022
firm which can be instrumental in deciding whether it’s worth
investing in a firm.
According to information obtained from CNN Business, Citrix

systems revenue growth
last year was 5.28%. Citrix systems revenue is forecasted to
increase from $2.94 million
in 2019 to $3.14 million in 2020, $3.32 million in 2021 and
$3.51 million in 2022. Its Net
Income is forecasted to increase and remain positive in the next
five years. Others
investments include technical, financial, legal, sales, IT and
operation systems.
According to information extracted from Bar Chart, Citrix
systems reported
Capital expenditure of 72.56 million and free cash flow of $966
million in 2018 which
was a significant increase of 16.75% or $827 million from 2017.
It reported a decrease
in FCF in 2017 mainly due to negative financing cash flow sales
and growth. Citrix

systems projected stock at the end of 2019 should be $113.29.
The future EPS for 2019
is projected to be $5.48 and the book value per share is $3.55 as
shown below.
20
Forecasted Earnings per share
$6.000
$5.000
$4.000
$3.000
$2.000
$1.000

$0.000
$5.484
$1.266
$1.760
$1.377
9/30/2019 9/30/2020
Estimate
Net Income (in thousands)
$1,100,000.00 $1,042,696.81
$1,000,000.00
$984,255.08
$929,190.10
$900,000.00
$876,892.10

$800,000.00
Net Income
$700,000.00
$600,000.00
$500,000.00
2019 2020 2021 2022
21
22

23
Based on my analysis, I believe that Citrix systems is a solid
and an innovative
company. It provides virtual experiences on remote devices
permitting more individuals
across the World to use corporate networks and applications. An
employee working
thousands of miles from their work location has the ability to
virtually connect to
corporate headquarters in a seamless way. The company
continues to grow steadily. It
has a positive cash flow, an all-time high asset turnover as
subscription based revenue

increased 44.7% to $455.3 million in 2018. Its Profit Margin
increased from a negative in
24
2017 to a positive 19.35% in 2018. It is also worthy to note that
ROE was at 104% the
same year which is above some of its competitors and falls
within the industry average.
The company is also reinvesting its excess cash more efficiently
and effectively.
However, it should continue to expend more on Research and
Development in order to
gain competitive and strategic advantage over its competitors.

25
References
About Us. (n.d.). Retrieved from https://www.citrix.com/about/.
2018 Citrix Annual report. (n.d.). 2018 Citrix Annual report.
(2019). 10-K report Securities and Exchange Commision.
Easton, P. D., McAnally, M. L., Somers, G. A., & Zhang, X. J.
(2018). Financial Statement Analysis
& Valuation (5th ed.). Cambridge.

Citrix Systems Financial Ratios for Analysis 2005-2019. (2019).
Retrieved 11/ 04/2019, from
Macrotrends:
https://www.macrotrends.net/stocks/charts/CTXS/citrix-
systems/financial-ratios.
Earnings & Estimates Citrix Systems Inc. (2019). The Wall
Street Journal.
Lower of Cost or Net Realizable Value. (n.d.). Retrieved
11/01/2019, from Principles of
Accounting: https://www.principlesofaccounting.com/chapter-
8/lcnrv-adjustments/
Financials. (n.d.). Retrieved 10/30/2019, from Investing.com:
https://www.investing.com/equities/citrix-sys-inc-ratios
CNN Business. (n.d.). Retrieved 1//05/2019, from
https://money.cnn.com/quote/quote.html?symb=CTXS

Citrix systems Inc. Cash Flow. (n.d.). Retrieved 11/05/2019,
from Bar Chart:
https://www.barchart.com/stocks/quotes/CTXS/cash-
flow/annual
https://www.citrix.com/about/
https://www.macrotrends.net/stocks/charts/CTXS/citrix-
systems/financial-ratios
https://www.principlesofaccounting.com/chapter-8/lcnrv-
adjustments/
https://www.investing.com/equities/citrix-sys-inc-ratios
https://money.cnn.com/quote/quote.html?symb=CTXS
https://www.barchart.com/stocks/quotes/CTXS/cash-
flow/annual

Molson Coors Brewing Corporation
Business Analysis and Valuation
FIN700 – Fall 2019
Dr Mikhail Pevzner
University of Baltimore
Merrick School of Business

Table of Contents
1
Executive
Summary………………………………………………………………
……………….1
Business
Analysis………………………………………………………………
…………………2
Background…………………………………………………………
……………………………..2
Competitors…………………………………………………………
……………………..3

Opportunities and
Challenges…………………………………………………………….
.4
Accounting
Analysis………………………………………………………………
………………6
Ratio
Analysis………………………………………………………………
……………………..8
Forecasting and
Valuation……………………………………………………………
………….12
Conclusion……………………………………………………………
………………………….14
References……………………………………………………………
…………………………..16
Appendix……….……………………………………………………
…………………………...18

Executive Summary
Molson Coors Brewing Company (MCBC) is a publicly traded
international brewing
organization which specializes in domestic lagers and light
beers. The present analysis begins
with a background on MCBC, then looks at future potential for
profitability and growth. An
accounting analysis, ratio analysis, and forecast is conducted to
determine a present-day

valuation based on the business analysis. The analysis
concludes that MCBC is making
corrective moves to position itself for success in a changing
marketplace, however these moves
may only be realizable in the medium to long run and in the
short run MCBC is likely to
continue to face slower than average growth compared to US
economy as a whole.
Introduction
2
Molson Coors Brewing Company (NYSE: TAP; MCBC
hereafter) is a multinational
brewing company which operates primarily in the United States
and Canada selling beers, lagers,

spirits, and energy drinks. While the company was incorporated
in the United States, it is traded
on exchanges in both the United States and Canada. MCBC is
the fifth largest brewer in the
world by volume (Technavio, 2018).
Background
MCBC is the product of a 2005 merger with two brewing giants,
Molson of Canada and
Coors of the US. Molson Brewery was formed in 1786 in
Montreal by the Molson family –
Molson is the oldest brewery in North America. During the 20th
century, Molson expanded
considerably after becoming a publicly traded company and
moving into dispersed areas of
Canada subsequently growing to be the largest brewer in
Canada. Molson’s flagship product is

its Molson Canadian lager which contains 5% alcohol by
volume and was released in 1959. In
2011 Molson entered into a $375 million partnership with the
National Hockey League for
guaranteed advertisement rights and special promotions. Today
Molson continues to brew from
its first brewery located on the Saint Lawrence River in
Montreal.
Coors Brewing Company was established in Golden Colorado in
1873 by a pair or
German immigrants, Adolph Coors and Jacob Schueler. For
much Coors’ early years, they
marketed and sold their product solely in the American West
giving them a mystique in states
which did not have established distribution networks. Later in
the 1970s Coors sold their product
nationally. Coors is responsible for many notable innovations in

the production of beer such as in
1959 when they became the first American brewer to use an all-
aluminum design on their cans,
and to this today Coors operates the largest aluminum can
producing plant in the world known as
the Rocky Mountain Metal Container in Golden, CO.
3
MCBC currently has sales in four primary segments: the US,
Europe, Canada, and
International in respective order of sales volume. Sales in 2018
for MCBC were $10.77 billion,
down 2.12% from the previous year (more on this in the
financial statement analysis): most of
the revenue being derived from the sale of alcoholic beverages.

In addition to alcoholic
beverages, MCBC also sells a variety of non-alcoholic
beverages and energy drinks. Recently, as
cannabis has become legalized in Canada and in many states in
the US, THC/CBD (the active
alkaloids found in cannabis) infused beverages have become a
hot topic for many beverage
producers (MarketWatch, 2019). In the fall of 2019, MCBC
announced that it is working through
a joint venture with Truss Beverage Co. to produce and market a
CBD infused beverage product
for sale in Canada. The portfolio of products is expected to
contain various flavors and dosages,
some containing only CBD (non-psychoactive) and some
containing both CBD and THC (the
psychoactive compound in cannabis).

Competitors
As a multinational corporation, MCBC has unique competitors
in each of its markets
across North America, Europe, and the rest of the world. In
North America where most of their
revenue is derived, their primary competitors are alternative
domestic lager producers Anheuser-
Busch Inc (NYSE: BUD), Constellation Brands, Inc. (NYSE:
STZB), and Boston Beer Co Inc
(NYSE: SAM). Anheuser-Busch, with a market cap of over $150
billion, is the largest of these
competitors (MCBC has a market cap of just over $10 billion).
Because of the commoditization of domestic beer, product
differentiation is difficult for
the flagship brands such as MCBC’s Coors Light, Miller Lite, or
Anheuser-Busch’s Budweiser

or Bud Light. To differentiate, MCBC has many brands that
appeal to a smaller, more niche
market such as their popular Belgium-style wheat ale called
Blue Moon. This strategy is not
4
unique to MCBC in any way however, as Anheuser-Busch owns
dozens of similar niche beers
such as Michelob Ultra, Stella Artois, and Landshark, to name
but a few.
In recently years, MCBC has seen decreased sales in the US
driven down primarily by
lower demand for their Premium Light segment (Doering,
2018). Much of this demand reduction
was attributed from American consumers favoring Mexican
imports, higher quality craft beers,

and wine/spirits over the Premium Light. This lower demand for
premium light beers was not
isolated in its impact to MCBC – rather this was an industry-
wide phenomenon that impacted
many of MCBC’s competitors who also sold in this segment.
Opportunities and Challenges
As a major participant in a mostly mature market, growth for
MCBC is limited. In
addition, according to some sources many Americans are
making efforts to curb their alcohol
consumption. According to survey conducted by Nielsen, 66%
of millennials say they are
making efforts to reduce their alcohol consumption for health,
for weight loss, and for the cost
(Nielsen, 2019). To replace alcohol consumption, many
consumers are moving to non-alcoholic

alternatives such as Kombucha, energy drinks, sparkling water,
and value-added water. The
market for Kombucha for example has increased by
approximately 20% year/year according to
Nielsen Retail Measurement (Nielsen, 2019).
These shifts in consumer behavior patterns have been showing
up in MCBC’s financial
statements over the past couple years with total revenue
dropping by 2.12% from 2017-2018.
The impact of this consumer shift is not isolated to MCBC –
Anheuser-Busch Inc’s revenue also
dropped by 3.23% over the same period. If consumers are
moving away from alcoholic
beverages in favor of non-alcoholic beverages and shifting to
craft beers for the remaining

5
alcohol demand, producers of domestic lager beers such as
MCBC and Anheuser-Busch may
find difficulty in realizing revenue growth for these products.
The challenges faced by MCBC also produce their share of
opportunities. To address this
shifting landscape, MCBC announced in October 2019 a
“revitalization plan” that will mobilize
the company to take advantage of the growing market in non-
alcoholic beverages (Furnari,
2019). Among these mobilization efforts, the company included
a name change from ‘brewing’
to ‘beverage’ underscoring their interest in pursuing the non-
alcoholic market. Shortly
afterwards, MCBC announced that it will be acquiring a

minority interest in L.A. Libations, a
California based incubator that produces emerging non-
alcoholic beverages. This equity
investment creates many opportunities for MCBC since this
gives them an immediate stake in
the growing non-alcoholic market as well as access to new
distribution, marketing, and branding
networks. By partnering with L.A. Libations, MCBC also has
access to some of the innovative
minds in the non-alcoholic space, such as their CEO, Danny
Stepper. Stepper previously worked
with Coca-Cola and has a strong track record of success in the
non-alcoholic market. According
to the president of emerging growth of MCBC Pete Marino, this
partnership with Stepper was
one of the driving factors behind the acquisition. By building
strategic partnerships with

established success stories in the non-alcoholic space, MCBC
positions itself to potentially
mitigate the impacts to the falling demand of the domestic
lagers and to potentially outperform
its peers in the mid to long-term if continued growth is realized
in the non-alcoholic segment.
In addition to opportunities in the non-alcoholic segment,
opportunities also exist for
MCBC as federal cannabis legalization becomes more likely in
the US (Furnari, 2019). To
address this growing opportunity, in 2018 MCBC announced
that it would be partnering with
The Hydropothecary Corporation (NYSE: HEXO) in a joint
venture to develop cannabis infused
6

beverages. This type of partnership is not unique to MCBC
however – in 2017 Constellation
Brands (NYSE: STZ) announced a partnership with Canopy
Growth Corp, another large
cannabis player. By partnering with HEXO, MCBC helps to
position itself to benefit from the
growing demand for cannabis infused beverages in Canada and
in certain states such as
California where recreational cannabis use has been legalized.
By shifting its focus to other non-alcoholic segments and
through strategic partnerships
such as those with L.A. Libations and HEXO, MCBC can help
to offset some of the lost revenue
from lower domestic beer sales. The shift undertaken by MCBC
may take time to be realized

however, and in the short-run revenue may continue to decline
if lower demand for alcoholic
beverages continues. As Americans become more health-
conscious, volumes previously seen by
beer sales may not realizable in the future – particularly when
combined with the growing
preference for craft and microbrews. As the culture of
microbreweries grows in many major
cities (Wood, 2019), this may continue to put downward
pressure on the sales of domestic
brewers.
Accounting Analysis
When considering a company’s financial performance, it is
important to consider the
accounting practices surrounding the reports since this provides
the context for the numbers.

MCBC’s reporting is based on the key geographic regions in
which they operate – these
segments are, in order of sales: United States, Canada, Europe,
and International. Figure 2
illustrates sales by operating unit. The Corporate operating unit
is not like the others and
primarily includes interest and SG&A expenses.
7
In 2018, MCBC notes in their annual filing that they adopted a
new way of accounting
for pensions and other postretirement benefit plans pursuant
unto FASB’s August 2018
guidance. The new guidance is to take effect after Dec 2020,
however early adoption is

permitted. MCBC decided to adopt this new guidance in the
fourth quarter of 2018. This new
guidance requires the service cost component to be split out
from the other compensation costs.
The service cost only can then be capitalized where applicable.
This guidance adoption was a
classification adjustment for MCBC and did not impact the
consolidated net income.
In addition, MCBC adopted the May 2014 FASB revenue
recognition guidance in
January 1 of 2018. This new revenue recognition guidance
pertained to how to recognize
revenue for customer contracts. This change resulted in
reclassification of certain cash payments
to customers from SG&A leading to a small reduction in
revenue: the impacts of this
reclassification can be viewed in Figure 3.

Inventories for MCBC are recorded at the lower of cost or net
realizable value. To
determine the cost MCBC uses first-in first-out (FIFO). This
method of valuing inventory is
standard in the brewing industry: for example, both Anheuser-
Busch Inc and Constellation
Brands also use this method for valuing inventories. MCBC
regularly assesses the shelf-life of
their inventory to reserve product when it becomes clear the
product will not be sold in
compliance with MCBC’s freshness specifications.
MCBC tests goodwill for impairment at least annually, on an
operating unit basis. For
example, impairment tests are made separately for operations in
the US, Canada, and Europe.
This method of testing is similar to other industry participants;

however, differences do exist. For
example, Anheuser-Busch Inc also tests goodwill for
impairment annually, however they
8
conduct this test on the cash-generating unit level rather than at
the operating segment – the cash-
generating unit is one level below the operating segment.
Considering the accounting methods used, it seems unlikely that
a greater than average
risk exists for accounting fraud. The accounting methods,
including recognition of revenue and
inventory valuation, are similar if not the same to those same
methods used by similar
companies. In addition, from the outside looking in the

environment does not seem to include
greater than normal incentives to commit accounting fraud since
managerial growth expectations
appear tempered considering the shifting landscape and the need
for adaptation, namely the
adaptation of a larger non-alcoholic product portfolio.
Ratio Analysis
The comparables (comps) used for the analysis of financial
ratios were selected based on
product similarity, geographic operations, and availability of
financial data. To compare, three
alcoholic beverage producers, all active traded on the NYSE,
were selected: Anheuser-Busch Inc
(BUD), Constellation Brands, Inc. (STZ), and Diageo plc
(DEO). Among these comps, BUD is
most similar to MCBC with on their portfolio of domestic and

craft beers. STZ is second most
alike with a mixed portfolio of domestic brands like Corona and
Modelo along with a broad
offering of spirits and liquors. Lastly, DEO is the least similar
to MCBC since their product
portfolio consists of mostly spirits and liquors with only one
notable beer brand: Guinness.
Operating profit margin for the group of companies varied
greatly for each of the
observed years. Table 1 shows the spread between the MCBC
(ticker: TAP) and the three comps
for years 2018-2015. In Year Ending 2016 MCBC had an
abnormal operating profit margin as a
result of their large debt-financed acquisition of MillerCoors –
this larger than normal operating

9
profit margin did not continue in the following years and is not
expected moving forward.
MCBC’s operating profit margin faired well against close
competitor BUD, however both
companies’ margins were much lower than the liquor-based
sales of STZ and DEO. This trend
would imply that while consumers may be moving away from
particular beers, they may still be
maintaining full demand for mixed drinks. Another explanation
for this is geography – most of
the business done by MCBC and BUD are in the US, whereas
DEO is based in the UK and does
business all throughout the world. This explanation is also
limited however as STZ is a US based
company and had very high operating profit margins.

Table 1 – Operating Profit Margin
Return on Assets (ROA) is discussed herein rather than Return
on Equity (ROE) since a
company’s capital structure can greatly impact the
interpretation of any ROE computation. ROA
was computed by dividing Net Income by total assets. Once
again MCBC and BUD had much
lower ROAs when compared to the more liquor-heavy portfolios
of STZ and DEO. Comparing
MCBC to BUD however we see that they both have similar
ROAs with MCBC being slightly
higher overall. MCBC had a good year for ROA in 2016, and
this once again can be largely
attributed to the performance from the MillerCoors acquisition.
Moving forward, it is unlikely

any major deviations from historical ROAs will be realized in
the short-term.
Table 2 – ROA
Ticker YE 2018 YE 2017 YE 2016 YE 2015
TAP 10.37% 12.85% 40.45% 10.08%
BUD 8.00% 14.16% 2.72% 18.97%
STZ 42.33% 30.57% 20.94% 16.11%
DEO 24.56% 24.85% 22.09% 21.40%
10
An Asset Turnover ratio was computed by taking total revenue
divided by average assets
during the year. Because an average of beginning and ending

assets was used, there are three
computations for each company rather than two – Table 3
illustrates these computations.
Compared to BUD, MCBC had significantly higher asset
turnover for the years in consideration.
Considering MCBC is a fraction of the size of BUD, this could
explain some of this differential.
Additionally, MCBC had a lower ratio of PP&E to total assets
(15% for MCBC compared to
20% for BUD). Asset turnover for STZ was similar to MCBC,
and the asset turnover for DEO
was consistently higher: these results suggest that asset turnover
for MCBC is steady and is
showing no evidence for a slowdown or concern.
Table 3 – Asset Turnover Ratio

To examine liquidity and short-term solvency, a current ratio
was computed for MCBC
and each of the comps (Table 4). Both MCBC and BUD had
current ratios of below 1 in the two
most recent years highlighting the difficulties seen by both
these companies. A ratio of less than
1 indicates the company has more debt becoming collectable in
the next 12 months than it has
short term reserves to pay those debts. Often this indicates
financial and solvency troubles in the
YE 2018 YE 2017 YE 2016 YE 2015
TAP 3.71% 4.68% 6.73% 2.93%
BUD 1.88% 3.25% 0.48% 6.14%
STZ 11.75% 11.29% 8.25% 6.22%
DEO 10.10% 10.17% 9.23% 7.88%

YE 2018 YE 2017 YE 2016
TAP 0.36 0.37 0.23
BUD 0.23 0.22 0.23
STZ 0.33 0.39 0.41
DEO 0.42 0.42 0.42
11
future. On the other hand, if MCBC can demonstrate
opportunities for increased profitability in
the future they may be able to use these projected cash flows to
borrow additional funds to be
prevent default.
Table 4 – Current Ratio

To look at the leverage utilized by each company, a debt-to-
equity ratio was computed
(Figure 5). Despite MCBC and BUD’s similarities, it appears
by looking at the D/E ratios that
the two companies differ greatly in their use of debt. In the
most recent filing year, MCBC had
about half the outstanding debt compared to the same year for
BUD – and this observation is
made after 2016 where MCBC more than doubled their use of
leverage in the acquisition of
MillerCoors. MCBC also had lower debt levels relative to
equity than both STZ and DEO. This
difference implies that MCBC may be positioned more
defensively than the other comps and
may be more capable of withstanding the shaping landscape in
the alcoholic beverage industry

than its competitors.
Table 5 – Debt-to-Equity Ratio
YE 2018 YE 2017 YE 2016 YE 2015
TAP 0.64 0.64 0.69 1.03
BUD 0.53 0.66 1.07 0.64
STZ 1.16 1.79 1.20 1.31
DEO 1.34 1.37 1.30 1.43
YE 2018 YE 2017 YE 2016 YE 2015
TAP 1.21 1.27 1.55 0.74
BUD 2.48 2.29 2.48 2.11
STZ 1.31 1.55 1.70 1.57
DEO 2.53 1.81 1.63 2.15

12
Financial Forecast and Valuation
In forecasting MCBC’s revenues, the clear slowdown in the beer
brewing industry needs
to be taken into consideration. After the 2016 acquisition of
MillerCoors, MCBC’s total assets
jumped by 139% in the same year, however in 2017 and 2018
total assets grew at only 3.09%
and -.45% respectively, indicative of slowed growth. This trend
is not unique to MCBC – BUD’s
total assets also shrank by -5% and -6% in 2017 and 2018
respectively. Additionally, revenue for
MCBC shrank by -2.12% in 2018 following the explosive
growth of 125% in 2017 because of

the MillerCoors acquisition. With this backdrop in mind, a
modest growth rate will be assumed
for the forecasting of revenues.
To determine the growth in revenues, historical revenue growth
for MCBC was
considered together with historical growth rates in the
Alcoholic Beverage Industry. Using
MCBC’s historical revenues is tricky, since in 2017 they grew
by 125% due to a one-time
acquisition. The most recent year, revenues shrunk by 2.12%.
Considering MCBC’s moves to
enter the non-alcoholic markets in addition to its entry into the
cannabis infused beverage
markets, MCBC’s revenue will be assumed to grow at or above
the annual growth rate for the
alcoholic beverage industry at large. According to Allied

Market Research, the expected
compound annual growth rate for 2018-2025 for the alcoholic
beverage industry is 2.0% (Allied
Market Research, 2019). To remain on the conservative side,
this 2.0% growth rate will be used
to forecast revenues for MCBC.
To arrive at forecasts for expenses and balance sheet data, an
average of historical ratios
was computed for MCBC. For example, the average
SG&A/Revenues from 2015-2018 was .29,
so this number was held consistent and used to forecast SG&A
expenses. Additionally, the
average ratio of AR/Sales was used to predict collections and
year-end AR balances for the
13

forecast. This process was repeated to estimate the following:
inventory, AR balance, AP
balance, capital expenditures, interest expense, and dividends.
The product of this forecast is
shown in Table 6.
Table 6 – Forecasted Income Statement
Based on the assumed revenue growth rate of 2%, the Year 1
net income decreased from
$1,116,500 to $753,949 thousand, a drop of 32% from 2018 Net
Income. This drop comes from
increased costs in COGS, SG&A, and interest expense.
Considering the challenging environment
in the alcoholic beverage industry, this forecast is in line with
the business analysis.

To determine a valuation for MCBC, a price-to-earnings
multiple was used. Historically,
MCBC’s P/E ratio has been volatile with a minimum of 7.29 a
maximum of 83.76, and a mean
of 19.74 in the past ten years (Wolfram Alpha, 2019). To
determine the correct PE to use for
MCBC, an average was taken between the 10 year average PE of
MCBC and the current industry
average PE ratio for the Beverages & Brewers industry as a
whole in the US – according to
GuruFocus, the industry average PE for Beverages & Brewers is
17.44 (GuruFocus, 2019).
Combining these two numbers yields a composite estimate PE
of 18.59. To estimate the
valuation, this PE estimate is multiplied against the Year 1 Net
Income: this yields an estimated
valuation for Molson Coors of $14,015,916 thousand, or $14

billion dollars. This valuation is
higher than Molson Coors current market capitalization of
$10.93 billion.
Molson Coors Brewing Company *$ in thousands
Income Statement (forecasted) Year 1 Year 2 Year 3 Year 4
Revenues 10,984,992.00$ 11,204,691.84$ 11,428,785.68$
11,657,361.39$
Cost of Goods Sold 6,580,010.21$ 6,711,610.41$
6,845,842.62$ 6,982,759.47$
Other Operating Expenses 3,185,647.68$ 3,249,360.63$
3,314,347.85$ 3,380,634.80$
EBIT 1,219,334.11$ 1,243,720.79$ 1,268,595.21$
1,293,967.11$
Net Interest Expense (Income) 264,967.99$ 271,372.41$
277,967.63$ 284,759.35$
Income Before Taxes 954,366.12$ 972,348.38$

990,627.58$ 1,009,207.77$
Tax Expense 200,416.89$ 204,193.16$ 208,031.79$
211,933.63$
Net Income 753,949.24$ 768,155.22$ 782,595.78$
797,274.14$
14
Table 7 – Forecasted Balance Sheet
Conclusion
Based on the business analysis conducted herein, MCBC has
many strengths to leverage
for increased profitability in the future but also has
environmental challenges it must overcome
pertaining to the demand for domestic beers. In the past 3 years,

the domestic beer industry has
seen a challenging climate where many Americans are choosing
healthier alternatives to beer
such as flavored waters, kombucha, and sparkling waters. To
turn these challenges into an
opportunity, MCBC has made moves to partner with firms that
can help to give them a
competitive edge in this new environment. Working with
companies such as L.A. Libations to
meet the demand of flavored waters, and companies such as The
Hydropothecary Corporation to
pioneer the budding cannabis infused beverage industry in
Canada, MCBC is on track to profit
from these changing consumer demands. These changes will
take time however, and it is
difficult to accurately forecast the potential value of these new
ventures, particularly when

politics and legislation play an essential role, such as the case
for cannabis infused beverage
products. Overall, MCBC has demonstrated its commitment to
driving innovation and its ability
to mobilize and have the flexibility to tackle a changing
marketplace. These skills together will
undoubtedly lead to a bright future for MCBC, even if it takes
several years to be realized.
Molson Coors Brewing Company
Balance Sheet (Forecasted) Year 0 (actuals) Year 1 Year 2 Year
3 Year 4
Cash 1,438,500.00$ 1,369,629.90$ 1,236,784.75$
1,102,527.92$ 966,844.75$
Accounts Receivables 736,000.00$ 549,249.60$
560,234.59$ 571,439.28$ 582,868.07$
Inventories 591,800.00$ 556,713.87$ 567,848.15$

579,205.11$ 590,789.21$
Long-term assets 27,343,500.00$ 28,077,407.32$
28,825,992.78$ 29,589,549.95$ 30,368,378.26$
Total Assets 30,109,800.00$ 30,553,000.69$ 31,190,860.26$
31,842,722.26$ 32,508,880.30$
Accounts Payable 1,616,800.00$ 1,464,573.19$
1,493,864.65$ 1,523,741.95$ 1,554,216.79$
Long-term debt 8,893,800.00$ 9,108,767.99$ 9,330,140.40$
9,558,108.04$ 9,792,867.38$
Common Stock 11,906,300.00$ 11,906,300.00$ 11,906,300.00$
11,906,300.00$ 11,906,300.00$
Retained Earnings 7,692,900.00$ 8,073,359.51$
8,460,555.21$ 8,854,572.28$ 9,255,496.13$
Total liabilities and equity 30,109,800.00$ 30,553,000.69$
31,190,860.26$ 31,842,722.26$ 32,508,880.30$

15
References
Allied Market Research, 2019. Alcoholic Beverages Market by
Type and Distribution Channel:
Global Opportunity Analysis and Industry Forecast, 2018 –
2025. Accessed in 2019 at
https://www.alliedmarketresearch.com/alcoholic-beverages-

market
CSIMarket, 2019. Alcoholic Beverages Industry Revenue
Growth Rates. Accessed in 2019 from
https://csimarket.com/Industry/industry_growth_rates.php?ind=
501&hist=8.
16
Doering, 2018. Molson Coors plans to 'aggressively address' flat
North American sales.
Accessed in 2019 at https://www.fooddive.com/news/molson-
coors-plans-to-
aggressively-address-flat-north-american-sales/529103/.
Furnari, 2019. Molson Coors Sees Future Growth Opportunities
In Non-Alcoholic Beverages.
Accessed in 2019 at

https://www.forbes.com/sites/chrisfurnari/2019/11/27/molson-
coors-
sees-future-growth-opportunities-in-non-alcoholic-
beverages/#6986befb64ac.
Furnari, 2019. Cannabis Decriminalization Bill Passes Historic
House Judiciary Committee
Vote. Accessed in 2019 at https://thcnet.com/news/house-
judiciary-committee-cannabis-
decriminalization-bill-more-act.
GuruFocus, 2019. Overview of Market Industries: Valuation and
Profitability Accessed in 2019
at
https://www.gurufocus.com/industry_overview.php?industry=Be
verages-_-Alcoholic
MarketWatch, 2019. CBD-Infused Beverages Market Insights,
Forecast to 2019 Analysis by
Application, Size, Production, Market Share, Consumption,

Trends and Forecast 2025.
Accessed in 2019 at https://www.marketwatch.com/press-
release/cbd-infused-beverages-
market-insights-forecast-to-2019-analysis-by-application-size-
production-market-share-
consumption-trends-and-forecast-2025-2019-11-
21?mod=mw_quote_news.
Milburn, T., & Guertin-Martín, F. A. (2019). Tapping into
Environmental Harm in Brewing: An
Exploration of Pollution and Waste in Beer Production. Critical
Criminology, 1-17.
Nielsen, 2019. Many Americans Are Looking For A Bar
Experience Without The Buzz.
Accessed in 2019 at
https://www.nielsen.com/us/en/insights/article/2019/many-
americans-are-looking-for-a-bar-experience-without-the-buzz/.

https://thcnet.com/news/house-judiciary-committee-cannabis-
decriminalization-bill-more-act
https://thcnet.com/news/house-judiciary-committee-cannabis-
decriminalization-bill-more-act
17
Technavio, 2018. Top 10 Largest Beer Companies and Their
Beer Brands in the Global Beer
Market 2019. Accessed in 2019 at
https://blog.technavio.com/blog/top-companies-global-
beer-market.
Wikipedia, 2019. Coors Brewing Company. Accessed in 2019 at
https://en.wikipedia.org/wiki/Coors_Brewing_Company.
Wolfram Alpha, 2019. Molson Coors PE Ratio. Accessed in
2019 at
https://www.wolframalpha.com/input/?i=TAP+p%2Fe

Wood, 2019. Global Craft Beer Market Analysis and Forecasts,
2017-2019 & 2025 - Growing
Consumer Preference for Low Alcohol by Volume (ABV) Beer -
ResearchAndMarkets.com Accessed in 2019 at
https://www.businesswire.com/news/home/20190815005550/en/
Global-Craft-Beer-
Market-Analysis-Forecasts-2017-2019
Appendix
Figure 1 – 5-Year Stock Return Comparison with S&P 500 and
Peer Group

https://en.wikipedia.org/wiki/Coors_Brewing_Company
18
*Peer Group consists of a market-cap-weighted index of the
following companies: MCBC, ABI,
Carlsberg, Heineken, and Asahi.
Figure 2 – Sales by Operating Unit

19
Figure 3 – Impacts from Revenue Recognition Modifications.
Figure 4 – Consolidated Balance Sheet info for MCBC and
Comparables

20
Figure 5 – Consolidated Income Statement for MCBC and
Comparables
Balance Sheet
TAP 12/31/2018 12/31/2017 12/31/2016 12/31/2015
Cash And Cash Equivalents 1,057,900 418,600 560,900 430,900
Net Receivables 736,000 728,300 654,400 407,900
Total Current Assets 2,766,300 2,189,700 2,169,600 1,258,800

Total Assets 30,109,800 30,246,900 29,341,500 12,276,300
Accounts Payable 1,616,800 1,568,600 1,297,600 1,184,400
Total Current Liabilities 4,300,900 3,399,300 3,157,500
1,217,200
Total Liabilities 16,374,000 16,811,900 17,719,800 5,213,200
Total stockholders' equity 13,507,400 13,226,100 11,418,700
7,043,000
Total liabilities and stockholders' equity 30,109,800 30,246,900
29,341,500 12,276,300
BUD 12/31/2018 12/31/2017 12/31/2016 12/31/2015
Cash 7,074,000 10,472,000 8,579,000 6,923,000
Net Receivables 4,412,000 4,752,000 4,562,000 3,241,000
Total Current Assets 18,281,000 23,960,000 43,061,000
18,294,000
Total Assets 232,103,000 246,126,000 258,381,000 134,635,000

Accounts Payable 15,512,000 15,240,000 14,071,000
11,616,000
28,456,000
Total Liabilities 160,199,000 165,906,000 176,956,000
88,916,000
Total Equity 64,486,000 72,585,000 71,339,000 42,137,000
Total liabilities and equity 232,103,000 246,126,000
258,381,000 134,635,000
STZ 12/31/2018 12/31/2017 12/31/2016 12/31/2015
Total Cash 93,600 90,300 177,400 83,100
Net Receivables 846,900 776,200 737,000 732,500
Current Assets 3,684,000 3,474,000 3,230,000 2,977,600
Total Assets 29,231,500 20,538,700 18,602,400 16,965,000

Accounts Payable 616,700 592,200 559,800 429,300
2,272,300
Total Equity 12,551,000 8,046,100 6,891,200 6,559,600
Total liabilities and equity 29,231,500 20,538,700 18,602,400
16,965,000
DEO 12/31/2018 12/31/2017 12/31/2016 12/31/2015
Total Cash 1,056,000 899,000 1,272,000 1,237,000
Net Receivables 2,173,000 2,152,000 2,130,000 2,154,000
Current Assets 9,373,000 8,691,000 8,652,000 8,852,000
Total Assets 31,296,000 29,715,000 28,848,000 28,491,000
Accounts Payable 1,694,000 1,514,000 1,365,000 916,000

6,187,000
Total Equity 8,361,000 9,948,000 10,313,000 8,530,000
Total liabilities and equity 31,296,000 29,715,000 28,848,000
28,491,000
21
Income Statement
TAP 12/31/2018 12/31/2017 12/31/2016 12/31/2015
Total Revenue 10,769,600 11,002,800 4,885,000 3,567,500
Cost of Revenue 6,584,800 6,217,200 3,003,100 2,163,500
Gross Profit 4,184,800 4,785,600 1,881,900 1,404,000

Selling General and Administrative 2,802,700 3,032,400
1,597,300 1,051,800
EBIT 1,382,100 1,753,200 284,600 352,200
Interest Expense 306,200 349,300 271,600 120,300
Total Other Income/Expenses Net 275,900 -28,200 3,058,500
170,500
Income Before Tax 1,359,800 1,381,700 3,035,300 410,700
Income Tax Expense 225,200 -53,200 1,050,700 51,800
Income from Continuing Operations 1,134,600 1,434,900
1,984,600 358,900
Net Income 1,116,500 1,414,200 1,975,900 359,500
BUD 12/31/2018 12/31/2017 12/31/2016 12/31/2015
Total Revenue 54,619,000 56,444,000 45,517,000 43,604,000
Cost of Revenue 20,359,000 21,386,000 17,803,000 17,137,000

Gross Profit 34,260,000 35,058,000 27,714,000 26,467,000
15,171,000 13,732,000
EBIT 17,402,000 17,591,000 13,168,000 13,686,000
Interest Expense 4,393,000 4,193,000 1,923,000
Total Other Income/Expenses Net -2,828,000 -1,670,000 -
1,807,000 617,000
Income Before Tax 8,532,000 11,074,000 4,333,000 12,460,000
Income Tax Expense 2,839,000 1,920,000 1,613,000 2,594,000
2,720,000 9,866,000
Net Income 4,370,000 7,995,000 1,240,000 8,272,000
STZ 2/28/2019 2/28/2018 2/28/2017 2/29/2016
Total Revenue 8,116,000 7,585,000 7,331,500 6,548,400

Cost of Revenue 4,035,700 3,767,800 3,802,100 3,606,100
Gross Profit 4,080,300 3,817,200 3,529,400 2,942,300
1,392,400 1,177,200
EBIT 2,412,200 2,284,500 2,137,000 1,765,100
Total Other Income/Expenses Net 2,099,900 390,200 289,700
50,000
Income Tax Expense 685,900 11,900 554,200 440,600
1,539,200 1,060,600
Net Income 3,435,900 2,318,900 1,535,100 1,054,900
DEO 6/29/2019 6/29/2018 6/29/2017 6/29/2016

Total Revenue 12,867,000 12,163,000 12,050,000 10,485,000
Cost of Revenue 4,866,000 4,634,000 4,680,000 4,251,000
Gross Profit 8,001,000 7,529,000 7,370,000 6,234,000
1,798,000 1,562,000
Total Operating Expenses 3,959,000 3,838,000 3,811,000
3,485,000
EBIT 4,042,000 3,691,000 3,559,000 2,749,000
Total Other Income/Expenses Net - - 294,000 326,000
Income Tax Expense 898,000 596,000 732,000 496,000
2,827,000 2,362,000

Net Income 3,160,000 3,022,000 2,662,000 2,244,000
Acct 635/FIN 700 Final Project Grading Rubric (total 200
points possible)
Item Points Possible Instructor notes
1. Business analysis contains a thorough
discussion of a firm’s competitive
challenges and evaluation of its
business plans/goals. In particular,
please perform:
a. Porter’s Five Forces Analysis of
Competitive environment of the
company.
b. SWOT analysis and analysis of risks
facing the company. Please refer
directly to the risk disclosures the

company provides in its most recent
10-Ks.
/20
2. Project contains analysis of most
recent news surrounding the company
from multiple news sources and
provides consideration of how this
news analysis impacts business
analysis. In particular, you must
provide a summary of:
a. News articles for the most recent
two years for the company.
b. Discussion of the last four
quarterly earnings releases and
earnings releases conference calls
and strategic company issues
raised in those earnings releases
and conference calls.
/15

3. Project contains a discussion of critical
accounting issues facing the company
/15
as well as discussion of risk of possible
mis-application of accounting rules
that could hurt investors, including
consideration of incentives to commit
accounting fraud (e.g. due to
excessive growth expectations).
In particular, please discuss whether
the company’s revenue recognition
policy is consistent with that of its
competitors. Discuss if there are any
obvious red flags suggesting
management may want to manage
earnings or misstate earnings outright.
Discuss levels of a company’s accruals
and how they compare to the
competitors (whether they are in
particular excessively high). Discuss

any unusual changes in ratios which
may suggest earnings management
risks (for example excessive declines
in AR or inventory turnovers or overall
declines in turnover ratios).
Discuss if a company has material
accounts which require significant
management judgments, and thus
could be vulnerable to manipulation
(e.g. significant estimates such as
goodwill).
4. Project contains a thorough discussion
of applicable ratio analysis with
respect to implications for future
profitability and future cash flows.
/30
5. Project contains a clear discussion of
how business analysis, accounting
analysis as well as ratio analysis

impact assumptions surrounding
forecasts of future financial
statements.
Please be very clear on how ratio patterns
affected your forecast judgments and
predictions. Please be very specific in your
discussions of the assume sales and expenses
growth rates. Please do not assume constant,
persistent growth rates without clear
justification. Please make sure to EXPLICITLY
tie these growth rates assumptions to your
earlier discussion of competition.
/30
6. Project contains well-presented
forecasted financial statements
(income statement and balance sheet)
Please include your assumption worksheet
and make sure that your forecasted balance
sheet is in balance.
/30

7. Project is organized and presented in
professional manner (i.e. contains an
executive summary, appropriately
organizes the text and has clear and
neat presentation of exhibits)
/20
8. Writing is clear and is free of
mechanical errors.
/20
9. Project presentation was well
organized, within appropriate time
limits and followed professional
requirements as stipulated in the
Professor’s Writing and Presentations
Video.
/20
https://www.youtube.com/watch?v=68uSxu2nylg&feature=yout
u.be

https://www.youtube.com/watch?v=68uSxu2nylg&feature=yout
u.be
Points Earned
/200

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