This assignment for American Eagle Outfitter for Fed 2,2013 -Jan,28 2012               Tool Kit for Analysis of Financial Statements             Financial statements are analyzed...

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 This assignment for American Eagle Outfitter for Fed 2,2013 -Jan,28 2012      
         
Tool Kit for Analysis of Financial Statements    
         
Financial statements are analyzed by calculating certain key ratios and then comparing them with the ratios of other firms and by examining the trends in ratios over time.  We can also combine ratios to make the analysis more revealing, those indicated below are exceptionally useful for this type of analysis.    
   
   
   
         
RATIO ANALYSIS (Section 3.1)       
American Eagle outtfitters Years starts and ends on Feb 2 2013,  Jan 28,2012   
Input Data:        
   20132012    
Year-end common stock price $12.26$13.86    
Year-end shares outstanding (in thousands)616,756612,191    
Tax rate  15%12%    
After-tax cost of capital       
Lease payments (in thousands) $18,998$21,439    
Required sinking fund payments $0$0    
         
Balance Sheets        
(in thousands of dollars)       
         
Assets  20132012    
Cash and equivalents $906,223$767,218* Added to cash and quivalents prepaid expense and deferred income taxes
Short-term investments $2,995,097$2,461,700 20132012 
Accounts receivable $454,252$336,143 69,70149,411prepaid expenses and other
Inventories  $419,686$340,297 103,73649,931deferred income taxes
   Total current assets $4,775,258$3,905,358    
Net plant and equipment $1,636,987$1,647,570* In addition to equpment also includes goodwill, intangible assets, and other assets
Total assets  $6,412,245$5,552,928 20132012 
      641,030641,030goodwill
Liabilities and equity    312,332326,136intangible assets
Accounts payable  $356,428$335,072 107,481120,332other assets
Notes payable  $0$0    
Accruals  $619,795$594,886    
   Total current liabilities $976,223$929,958    
Long-term bonds  $608,319$477,246 20132012 
   Total liabilities  $1,584,542$1,407,204 3,193,6232,900,896additional paid-in capital
Preferred stock (2,00,000 shares: none issued)$0$0 -1,622,709-1,496,904treasury stock
Common stock (616,756,134 shares oustanding 2013 and 612,191,412 outstanding in 2012$720$700 998110,614accumulated other comprehensive income
Retained earnings  $3,246,088$2,730,418    
Total common equity $4,827,703$4,145,724* Added to Total Common equity additional paid-in capital, treasuary stock, and accumulated other comprehensive income
Total liabilities and equity $6,412,245$5,552,928    
         
Income Statements       
(in thousands of dollars)       
   20132012    
Net sales  $4,280,159.0$3,997,930.0    
   Operating costs  $3,631,920.0$3,349,631.0    
Earnings before interest, taxes, depr. & amort. (EBITDA)$648,239.0$648,299.0    
   Depreciation  $0.0$0.0    
   Amortization  $0.0$0.0    
   Depreciation and amortization $0.0$0.0    
Earnings before interest and taxes (EBIT)$648,239.0$648,299.0    
   Less interest   -$13,800.0-$15,097.0    
Earnings before taxes (EBT) $662,039.0$663,396.0    
   Taxes (15.0%, 12.4%) $99,503.0$82,306.0    
Net income before preferred dividends $562,536.0$581,090.0    
   Preferred dividends $0.0$0.0    
Net income available to common stockholders$562,536.0$581,090.0    
Common dividends $0.0$0.0    
Addition to retained earnings $562,536.0$581,090.0    
         
Calculated Data:  Operating Performance and Cash Flows     
   20132012    
Net operating working capital (NOWC) $803,938.0 $513,700.0     
Total operating capital $2,440,925.0 $2,161,270.0     
Net Operating Profit After Taxes (NOPAT)$551,003.2 $567,909.9     
Net Cash Flow (Net income + Depreciation)$562,536.0 $581,090.0     
Operating Cash Flow (OCF) $551,003.2 $567,909.9     
Free Cash Flow (FCF) $271,348.2 N/A    
         
Calculated Data:  Per-share Information       
   20132012    
Earnings per share (EPS) $0.91$0.95    
Dividends per share (DPS) $0.00$0.00    
Book value per share (BVPS) $7.83$6.77    
Cash flow per share (CFPS) $0.91 $0.95     
Free cash flow per share (FCFPS) $0.44 N/A    
         
LIQUIDITY RATIOS (Section 3.2)  Industry    
  20132012Average    
Liquidity ratios        
  Current Ratio 4.894.202.22    
  Quick Ratio 4.463.831.3    
         
ASSET MANAGEMENT RATIOS (Section 3.3) Industry    
  20132012Average    
Asset Management ratios       
  Inventory Turnover10.2011.754.78
 
  
 
   
  Days Sales Outstanding38.730.6925.6*Industry leader  
  Fixed Asset Turnover2.612.431.89*Industry leader  
  Total Asset Turnover0.670.720.63    
         
DEBT MANAGEMENT RATIOS (Section 3.4) Industry    
  20132012Average    
Debt Management ratios       
  Debt Ratio 24.71%25.34%39.30%*Industry leader  
  Debt-to-Equity Ratio0.330.340.65*Industry leader  
  Market Debt Ratio17.33%14.23%24.40*Industry leader  
  Times Interest Earned46.9742.94196.79*Incorrect for 2013 and 2012 as interest combined is income not expense 
  EBITDA Coverage Ratio128.36105.60N/A    
         
PROFITABILITY RATIOS (Section 3.5)  Industry    
  20132012Average    
Profitability ratios        
  Profit Margin 13.14%14.53%19.96%    
  Basic Earning Power10.11%11.67%17.63%*Industry leader  
  Return on Assets 8.77%10.46%12.56%    
  Return on Equity 11.65%14.02%19.43%    
         
MARKET VALUE RATIOS (Section 3.6)  Industry    
  20132012Average    
Market Value ratios       
  Price-to Earnings Ratio13.4414.6025.77*NVIDIA doesn't account for depreciation in their 10-K statements Same P/E P/CF Ratio because there is no depreciation
  Price-to-Cash Flow Ratio13.4414.609.66    
  Price-to-EBITDA 11.6613.095.13*Industry Leader  
  Market-to-Book Ratio1.572.053.59    
         
TREND ANALYSIS, COMMON SIZE ANALYSIS, AND PERCENT CHANGE ANALYSIS (Section 3.7)   
         
TREND ANALYSIS        
Trend analysis allows you to see how a firm's results are changing over time.  For instance, a firm's ROE may be slightly below the benchmark, but if it has been steadily rising over the past four years, that should be seen as a good sign. 
         
A trend analysis and graph have been constructed on this data regarding Nvidia's ROE over the past 5 years.  (Nvidia and indusry average data for earlier years has been provided.) 
         
  ROE    
  american eagle??    
 2009-1.2%-213.1%12.93%    
 2010-2.7%107.4%10.82%    
 20118.7%56.7%25.16%    
 201215.9%37.7%27.15%    
 201311.7%-111.2%22.66%    
         
Figure 3-1  Rate of Return on Common Equity      
 
        
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
COMMON SIZE ANALYSIS       
In common size income statements, all items for a year are divided by the sales for that year.   
         
Figure 3-2  Common Size Income Statements      
   Industry CompositeNvidia   
   201320132012   
Net sales  100.0%100.0%100.0%   
   Operating costs  72.1%84.9%83.8%   
Earnings before interest, taxes, depr. & amort. (EBITDA)27.9%15.1%16.2%   
   Depreciation and amortization 0.0%0.0%0.0%   
Earnings before interest and taxes (EBIT)27.9%15.1%16.2%   
   Less interest   0.0%-0.3%-0.4%   
Earnings before taxes (EBT) 27.9%15.5%16.6%   
   Taxes (15.0%, 12.4%) 7.3%2.3%2.1%   
Net income before preferred dividends 20.6%13.1%14.5%   
   Preferred dividends 0.0%0.0%0.0%   
Net income available to common stockholders (profit margin)20.6%13.1%14.5%   
         
         
In common sheets, all items for a year are divided by the total assets for that year.    
         
Figure 3-3  Common Size Balance Sheets      
  Industry CompositeNvidia    
  201320132012    
Assets        
Cash and equivalents13.0%14.1%13.8%    
Short-term investments11.5%46.7%44.3%    
Accounts receivable7.1%7.1%6.1%    
Inventories 5.6%6.5%6.1%    
   Total current assets37.2%74.5%70.3%    
Net plant and equipment62.8%25.5%29.7%    
Total assets 100.0%100.0%100.0%    
         
Liabilities and equity       
Accounts payable 12.6%5.6%6.0%    
Notes payable 0.4%0.0%0.0%    
Accruals 2.3%9.7%10.7%    
   Total current liabilities15.3%15.2%16.7%    
Long-term bonds 61.1%9.5%8.6%    
   Total liabilities 76.4%24.7%25.3%    
Preferred stock 0.0%0.0%0.0%    
Total common equity23.6%75.3%74.7%    
Total liabilities and equity100.0%100.0%100.0%    
         
         
PERCENT CHANGE ANALYSIS       
         
In percent change analysis, all items are divided by the that item's value in the beginning, or base, year.  
         
Figure 3-4  Income Statement Percent Change Analysis     
Base year =2012 Percent Change in     
   2013     
Net sales  7.1%      
   Operating costs  8.4%      
Earnings before interest, taxes, depr. & amort. (EBITDA)(0.0%)     
   Depreciation and amortization 0.0%      
Earnings before interest and taxes (EBIT)(0.0%)     
   Less interest   (8.6%)     
Earnings before taxes (EBT) (0.2%)     
   Taxes (15.0%, 12.4%) 20.9%      
Net income before preferred dividends (3.2%)     
   Preferred dividends 0.0%      
Net income available to common stockholders(3.2%)     
         
         
Balance Sheet Percent Change Analysis (not in textbook)     
Base year =2012 Percent Change in     
   2013     
Assets        
Cash and equivalents 18.1%     
Short-term investments 21.7%     
Accounts receivable 35.1%     
Inventories  23.3%     
   Total current assets 22.3%     
Net plant and equipment -0.6%     
Total assets  15.5%     
         
Liabilities and equity       
Accounts payable  6.4%     
Notes payable  0.0%     
Accruals  4.2%     
   Total current liabilities 5.0%     
Long-term bonds  27.5%     
   Total liabilities  12.6%     
Preferred stock (2,00,000 shares: none issued)0.0%     
Common stock (616,756,134 shares oustanding 2013 and 612,191,412 outstanding in 20122.9%     
Retained earnings  18.9%     
Total common equity 16.5%     
Total liabilities and equity 15.5%     
         
         
ANALYSIS (Section 3.8)       
             ROE    =(Profit margin)(TA turnover)(Equity Multiplier)   
american eagle201311.65%13.14%0.671.33   
Nvidia 201214.02%14.53%0.721.34   
Industry Average 20.72%19.96%0.631.65   
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         

 

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