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REFORMULATED FINANCIAL STATEMENT

REFORMULATED FINANCIAL STATEMENT. Discount, Variety Store - Costco Aileen Huang. Costco. Established in 1983 71,200 members 451 Warehouses/stores in U.S. Sales: $103m; Net income: $2m Competitors: Sam’s Club, BJ Wholesale

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REFORMULATED FINANCIAL STATEMENT

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  1. REFORMULATED FINANCIAL STATEMENT Discount, Variety Store - Costco Aileen Huang

  2. Costco • Established in 1983 • 71,200 members • 451 Warehouses/stores in U.S. • Sales: $103m; Net income: $2m • Competitors: Sam’s Club, BJ Wholesale • Started same time, only three big wholesale clubs still in operation • Market share: 67% Sam’s Club; 17% Costco

  3. Inventory LIFO/FIFO Comparison • Balance Sheet effect • Increase in inventory $81.0 • Tax saving -30.1 • NEA increased by 50.9 • Income statement effect • LIFO reserve decrease 27.0 • Tax saving -10.0 • EPAT lower by 17.0

  4. Operating leases vs. capital leases • Balance Sheet effect • NEA increase $1,564 • NFL current 13.96 • NFL noncurrent 1,549.64 • Income Statement effect • Operating expense $225 • Interest expense 105.39 • Depreciation expense 95.0 • EPAT increase 81.8 • FEAT increase 66.3

  5. Share-Based Compensation • Increased NFL: $123.7 • Decrease CSE: $123.7 • Increase EPAT: $10.2 • Decrease FEAT: $21.9 • (2)-(1)-(3)-(4)

  6. Reformulated Balance Sheet

  7. Reformulated Balance Sheet

  8. Reformulated Balance Sheet

  9. Reformulated Income Statement

  10. Net Enterprise Assets

  11. Net Financial Liabilities

  12. Enterprise Profitability After Tax

  13. Financial Expenses After Tax

  14. Sales Growth Forecast

  15. EPM

  16. EPM Forecast

  17. EATO

  18. EATO Forecast

  19. Forecasts

  20. DCF, REI, AEIG

  21. Recommendation • Enterprise Value$38,807 • Adjusting date 40,649 • Adjusting mid-year 42,173 • NFL 2,720.12 • Equity value 36,087 • Shares outstanding439.88 • Equity per share 82.04 • Share price113.56 • Recommendation SELL! • 2012, 2011 very good performance • Adjustment: • 10% increase in NEA because of operating leases • WACC from 8% to 7.4%

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