Anheuser-Busch Balance Sheet

case study (finance)

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Excell-HW2.xlsx

Balance Sheet

Exhibit1. Anheuser-Busch Balance Sheet (in Million $, except per share)
Dec.31 2006 Dec.31 2007
Assets
Current Assets 219.20 283.20
Accounts receivable 720.20 805.20
Inventories 694.90 723.50
Other Current assets 195.20 212.60
Investments in affiliated companies 1,829.50 2,024.50
Total Current Assets 3,680.30 4,019.50
Plant & equipment, net 8,916.10 8,833.50
Intangible assets, including goodwill 1,367.20 1,547.90
Other assets 584.10 729.60
Total Assets 16,377.20 17,155.00
Liabilities and shareholders’ equity
Current liability 1,426.30 1,464.50
Accounts payable 342.80 374.30
Accrued salaries, wages and benefits 133.90 106.20
Arrued taxes 124.20 136.40
Accrued interest 218.90 222.40
Total Current liability 2,246.10 2,303.80
Retirement benefits 1,191.50 1,002.50
Debt 7,653.50 9,140.30
Deferred income taxes 1,194.50 1,314.60
Other long term liabilities 152.90 242.20
Shareholders’ Equity
Common stock, $1 par value, authorized 1.6 billion shares 1,473.70 1,482.50
Capital in excess of par value 2,962.50 3,382.10
Retained earnings 16,741.00 17,923.90
Treasury stock, at cost -16,007.70 -18714.70
Accumulated non-owner changes in shareholder equity -1230.80 -922.20
Total shareholders’ equity 3938.70 3151.6
Commitments and contingencies
Total liabilities and shareholders’ equity 16377.2 17155
Source: Andrew Inkpen, InBev and Anheuser-Busch, Thunderbird School of Global Management, 2010.

income statement & assumptions

Exhibit2: Income Statement and Assumptions
(Millions of dollars) 10-yr
Years Ended December 31, 2003 2004 2005 2006 2007 5 yrs 1 yr Revenue
Net sales 14,147 100.0% 14,934 100.0% 15,036 100.0% 15,717 100.0% 16,686 100.0% 3.4% 6.2% 100.0%
OPERATING EXPENSES:
Cost of goods Sold 7,572 53.5% 8,050 53.9% 8,601 57.2% 9,176 58.4% 9,840 59.0% 5.4% 7.2% 56.4%
S, G & A expenses 2,498 17.7% 2,591 17.3% 2,730 18.2% 2,833 18.0% 2,982 17.9% 3.6% 5.3% 17.8%
Depreciation, Depletion, and Amortization 877 6.2% 933 6.2% 979 6.5% 989 6.3% 996 6.0% 2.6% 0.8% 6.2%
OPERATING INCOME (EBIT) 3,199 22.6% 3,361 22.5% 2,726 18.1% 2,720 17.3% 2,894 17.3% -2.0% 6.4% 19.6%
OTHER EXPENSES (INCOME):
Interest expense 402 2.8% 454.5 3.0% 455 3.0% 451 2.9% 484 2.9% 3.8% 7.3% 2.9%
Non-operating income/expense 365 2.6% 437 2.9% 508 3.4% 597 3.8% 685 4.1% 13.4% 14.7% 3.4%
PRETAX INCOME 3,169 22.4% 3,404 22.8% 2,690 17.9% 2,866 18.2% 3,095 18.5% -0.5% 8.0% 20.0%
INCOME TAXES 1,093 7.7% 1,163 7.8% 850 5.7% 901 5.7% 970 5.8% -2.4% 7.7% 6.5%
NET INCOME 2,076 14.7% 2,240 15.0% 1,939 12.9% 1,965 12.5% 2,125 12.7% 0.5% 8.1% 13.6%
NET INCOME PER SHARE,BASIC 4.95 4.56 5.72 6.05 6.40 0.04% 5.3% 5.8%
0.0%
NET INCOME PER SHARE,DILUTED 4.89 4.52 5.63 5.96 6.32 0.04% 5.3% 6.0% 5 year
Effective tax rate 0.34 0.34 0.32 0.31 0.31 0.33
Capital expenditures (millions of $) 812.50 5.2% 870.00 5.2% 7.1% 5.2%
Working Capital 5,640 35.9% 6,136 36.8% 8.8% 51.2%
Source: Anheuser-Busch Annual Reports except the last three columns.

Other Info

Exhibit 1 (in Million $, except where noted)
31-Dec-06 31-Dec-07 % change
Net Sales 15,717.10 16,685.70 6.20%
Gross Profit 5,552.10 5,849.60 5.40%
As a % of sales 35.33% 35.06% (0.2) pts
Operating Income 2,719.60 2,894.00 6.40%
As a % of sales 17.30% 17.30% (0.0) pts
Net Income 1,965.20 2,115.30 7.60%
Diluted EPS 2.53 2.79 10.30%
# of shares outstanding 715.00
Operating cash flow before the change in working capital 2,502.60 2,963.10 18.40%
Common dividend paid per share (in $) 1.13 1.25 10.60%
Return on shareholders’ equity 51.60% 59.70% (8.1) pts
Total assets 6,377.00 17,155.00 169.00%
Capital expenditures 812.50 870.00 7.10%
Closing stock price (in $) 49.20 52.34 6.40%
Source: Andrew Inkpen, InBev and Anheuser-Busch, Thunderbird School of Global Management, 2010.

WACC

Exhibit
$ millions Weight Notes
Equity market cap as of 12/31/2007 37,423 0.804 (a)
Book value of debt as of 12/31/2007 9,140.30 0.196
Credit rating A (b)
Beta 0.6 (c)
10-year U.S. treasury YTM as of 12/31/2007 4.10% (d)
A 10-yr corporate bond yield as of 12/31/2007 5.50% (e)
expected annual market risk premium 4.79% (f)
tax rate 32.61% (g)
dividend growth rate 4.75% (g)
last dividend $ 1.250 (a)
closing share price 12/31/2007 $ 52.34 (a)
Cost of Equity Ke:
CAPM 6.974
Constant dividend growth (or “Dividend Discount Model”) 7.25%
WACC: 0.0370645
with Ke based on CAPM 6.33%
with Ke based on Constant dividend growth model 6.56%
Sources:
(a) Find relevant information from the “Other Info” tab.
(b) Source: http://www.netadvantage.standardandpoors.com
(c)Souce: Center for Research on Security Price
(d) http://www.federalreserve.gov/releases/h15/data.htm
(e) http://ycharts.com
(f)http://people.stern.nyu.edu/adamodar/pdfiles/papers/ERP2012.pdf
(g) Estimated based on historical dividend payments.

cash flow projection

Assumption Base Year
2007 2008 2009 2010 2011 2012 Notes for assumptions made
Period 0 1 2 3 4 5
Sales 6.00% annual growth rate $ 16,685.70 $ 17,686.84 $ 18,748.05 $ 19,872.94 $ 21,065.31 $ 22,329.23 1. Historical pattern (including one-year growth rate of 6.1%); (2) Expectation of recession and (3) strategy to expand globally
OPERATING EXPENSES:
Cost of sales 59.0% of total revenue 9,840 10,430 11,056 11,719 12,423 13,168 Expectation of rising commodity prices
S G & A 17.8% of total revenue 2,982 3,150 3,339 3,540 3,752 3,977
Dep. and am. 6.2% of total revenue 996 1,104 1,171 1,241 1,315 1,394
Total operating expenses 13,818 14,685 15,566 16,500 17,490 18,539
OPERATING INCOME (EBIT) 2,894 3,002 3,182 3,373 3,575 3,790
PROVISION FOR INCOME TAXES 32.61% of operating income 970 979 1038 1100 1166 1236
Operating Cash Flows
EBIT 3,002 3,182 3,373 3,575 3,790
Taxes 979 1038 1100 1166 1236
Depreciation and amortization 1,104 1,171 1,241 1,315 1,394
Operating Cash Flows 3,127 3,315 3,514 3,725 3,948
Net Capital Spending 5.19% of revenue or depr (whichever is greater) $ 870 $ 1,104 $ 1,171 $ 1,241 $ 1,315 $ 1,394
Change in NWC 51.21% of incremental sales $ 496 $ 513 $ 543 $ 576 $ 611 $ 647
FREE CASH FLOW (=OCF-NCS-Change in NWC) 1,510 1,601 1,697 1,799 1,907

Valuation

Discounted Cash Flow Valuation Based on Constant Growth Assumption
Your Growth Rate Assumption for TV 4%
WACC 6.33%
No. of common shares O/S (millions) 715.00
Debt 9140.3
Year 2007 2008 2009 2010 2011 2012
Period 0 1 2 3 4 5
Cash flows (millions) $ 1,510.28 $ 1,600.90 $ 1,696.95 $ 1,798.77 $ 1,906.69
Terminal value (millions) $ 85,105.55
Free Cash Flows (with Terminal Value) $ 1,510.28 $ 1,600.90 $ 1,696.95 $ 1,798.77 $ 87,012.24
Value of Firm Vfirm $69,672.96
Less: Value of Long-term Debt Vd $9,140.30
Value of Equity Ve $60,532.66
Share Value

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