accounting help

lawsem2017

20171117014621under_armour_project4.xlsx

Home >Business & Finance homework help >accounting help

Introduction

Financial Statement Analysis & Security Valuation (Fifth Edition)

Stephen Penman (2012)

Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product

Introduction

This roadmap leads you through the steps to create a valuation tool. With this tool you will be able to reformulate financial statements in a spreadsheet program, analyze the financial statements using the techniques in the book, forecast pro forma financial statements, and value firms from those pro forma financial statements. In the end you will have a valuable tool to carry with you into your professional life and to use for your own personal investing.

Use the tool for:

Reformulating financial statements (as in Chapters 8-11)

Analyzing financial statements (as in Chapters 12-13)

Forecasting and valuation (as in Chapters 14-16)

Reverse Engineering (Chapter 7, 19)

You will find that building your own analysis product is very satisfying. It will help you grasp the concepts behind the analysis, for the concepts come to life as you make them work for you in practice. And you will discover the points where your understanding is weak. Off-the-shelf spreadsheet programs that you can use at the press of a button are available but pressing buttons is dangerous if you are not sure about what is going on inside the program. Better to develop your own model, following sound principles, and so be assured of the integrity of the product.

Once you have followed the roadmap here, think of adding your own bells and whistles. You can customize the tool for particular industries. You can add a quality of earnings analysis (as in Chapter 17). You can utilize spreadsheets features for scenario planning and risk analysis (as in Chapter 18). And you can add a credit analysis (as in Chapter 19).

Please note that the numbers presented in this spreadshhet might not be exactly same as those on the textbook mainly because of rounding difference.

The Roadmap

Financial Statement Analysis & Security Valuation Fifth Edition)

Stephen Penman 2012

Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product

The roadmap: steps for building the product

Chapter 8 gives the form of the financial statements you should work with and the accounting relations that tie the various parts of the statements together. So read this chapter before beginning.

Start with reformulation of the financial statements within a spreadsheet, following the design in the book. Then carry out the financial statement analysis to identify the relevant drivers for forecasting. Next forecast future financial statements and develop a valuation from the forecasts.

Work with the textbook beside you. The most relevant part of the text is Chapter 7 to Chapter 16, where financial statement analysis and valuation are covered in detail. Nike Inc. serves as an example of the application techniques described in the chapters. This case utilizes Nike's financials for 2000-2010.

The steps:

1. Download financial statements

2. Reformulate financial statements

Statements of shareholders' equity

Income statements

Balance sheets

Statements of cash flows

3. Financial statement analysis

Ratios based on reformulated financial statements

Analysis of profitability

Analysis of growth

Common size and trend analysis

1. Downloading Statements

Financial Statement Analysis & Security Valuation (Fifth Edition)

Stephen Penman 2012

Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product

Step 1: Download Financial Statements

The US Securities and Exchange Commission's Electronic Data Gathering, Analysis and Retrieval (SEC EDGAR) system provides electronic access to companies' financial reports. Access a company through EDGAR at http://www.sec.gov/edgar/searchedgar/companysearch.html Several more intelligent interfaces to the EDGAR database have been developed, which enable the downloading of the individual financial statements directly to a spreadsheet program like Microsoft Excel. Three of these are:

1. EDGARscan developed by PricewaterhouseCoopers at http://edgarscan.pwcglobal.com;

2. 10k Wizard at http://www.10kwizard.com;

3. Edgar Online at http://www.sec.gov/edgar/searchedgar/companysearch.html

These sites require subscriptions, however.

All these websites allow searches for companies using either company name or its ticker. You can then select the reports you need. Most of the time, you need the annual 10K reports that contain annual financial statements. You can find the financial statements within the annual 10K reports and will see instructions on how to extract them into Excel files. As each annual report contains financial statements for the year and one or two years before, you will need to go back to another annual reports of the company to get financial statements for a longer period. Individual spreadsheet files can then be merged into the format you like.

2. Reformulation

Financial Statement Analysis & Security Valuation (Fifth Edition)

Stephen Penman 2012

Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product

Step 2: Reformulation

Analysis begins with the reformulation of financial statements. Reformulation readies the statements for analysis within a spreadsheet. The aim is to:

Separate operating and financing items in the statements

Bring additional information into the statements from footnotes and elsewhere. The financial statements aggregate a lot of information (particularly the income statements). Break down the aggregation to give more detail.

Allocate taxes in the income statement to operating and financing activities

Distinguish different components of income such as core operating income from sales, other core operating income, and unusual items

Before beginning, make sure you understand the reformulation template in Chapter 8 of the book. Chapters 8-11 cover the rules and principles for reformulation.

Spreadsheet programs like Excel allows you to use either the simple copy-and-paste method or the formula method to manipulate the financial statements when doing the reformulation.

In the next section, the reformulated statements of shareholders' equity, balance sheets, income statements, and cash flow statements for Nike Inc. for 2000-2010 are given next to the original statements. Note the following points on the reformulation:

(a) Unearned stock compensation that arose from issuing shares to employees in fiscal year 2004 is an operating asset, so is moved from the statement of shareholders' equity to the balance sheet. This is like prepaid wages and is amortized to the income statement over a service period.

(b) Cash and cash equivalents in the balance sheets are split between a portion for operating needs and investment of excess cash in financial assets

(d) Core and unusual operating items have been distinguished in the income statements.

(e) The tax allocation in the income statements involves not only allocating taxes between operating and financing activities but also between core operating income and the restructuring charges. Note that foreign currency translation gains and losses are already after tax.

3. Summary of steps

Financial Statement Analysis & Security Valuation (Fifth Edition)

Stephen Penman 2012

Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product

Summary of reformulation steps

1. Statement of Shareholders' Equity

1) Restate beginning and ending balances for items incorrectly included in or excluded from common equity

-Preferred stock (take out from SE and include in "financial liabilities" in B/S).

+Dividends payable (take out from "accrued liabilities" in B/S and include in SE)

- Noncontrolling interest

2) Calculate net transactions with shareholders

= Cash dividends +share repurchases - share issues

(Cash dividends = dividends declared - change in dividends payable)

3) Calculate comprehensive income

= Net income +"other comprehensive income"

-Earnings from accounting changes

-Preferred dividends

-Hidden dirty-surplus losses

2. Balance Sheet

1) Classify GAAP assets and liabilities accounts into 4 categories: OA, FA, OL, FL

2) Regroup accounts under NOA (OA, OL) and NFA (FA, FL)

3) Refer to comments in the NIKE example to make adjustments for specific accounts

Statement of SE (Ch.9)

Financial Statement Analysis and Security Valuation (Fifth Edition)
Stephen Penman 2012
Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product
Step 2: Reformulation
2.1. Reformulation of the Statement of Shareholders' Equity
Under Armour (UAA). STATEMENT OF SHAREHOLDERS' EQUITY
(in thousands)
	COMMON STOCK	CAPITAL IN EXCESS OF STATED VALUE	UNEARNED STOCK COMPENSATION Author: Contra-equity account, which should be instead accounted for as an asset, as a kind of prepaid compensation expense.	ACCUMULATED OTHER COMPREHENSIVE INCOME	RETAINED EARNINGS	TOTAL
	CLASS A	CLASS B	CLASS C	Adjustments to equity: A check Author: Three adjustments to beginning and ending balance of shareholders' equity. 1) Dividends payable - take out from other liabilities, and add to the shareholders' equity 2) Stock compensation (before 2006, "unearned compensation"; after 2006, "stock compensation expense", but adjust this only to the end of 2008 balance due to complications from accounting rule change) - take out (or make opposite adjustment) from shareholders' equity. In pre-2006, include it in "prepaid expense" (opposite sign from the original amount). For post-2006, include in other liabilities (same sign as the original amount) 3) Preferred stock - take out from shareholders' equity and add to financial liabilities
in millions	SHARES	AMOUNT	SHARES	AMOUNT	SHARES	AMOUNT		Dividends payable Author: Take out from Accrued Liabilities, because it is not truly a liability in the stockholders' perspective. Instead, add this amount to the balances of shareholders' equity. This amount should come from Accrued Liabilities notes. This information is not always available, in which case, safe to assume that the amount is immaterial	Stock compensation Author: Deduct from shareholders' equity because this is an asset (prepaid expense) for shareholders.	Adjusted equity balance
BALANCE AT DECEMBER 31, 2009	156,487.0	52.0	47,500.0	15.0	-0	-0	197,291.0	(14.0)	464.0	202,188.0	399,996.0	Balance at December 31, 2009	399,996.0	0	14.0	400,010.0
Stock options exercised	1,598.0	1.0	6,104.0	6,105.0	Transactions with Shareholders
Conversion to Class B Common Stock	-0	Stock issues for stock options	6,105.0
Repurchase of Class B Common	-0	Stock issued to employee	20,811.0
Dividends on Common Stock	-0	Stock repurchases	-0
Issuance of shares to employees	(38.0)	19,653.0	14.0	(644.0)	19,023.0	Common dividends	-0	26,916.0
Amortization of unearned compensation	-0	Comprehensive income
Forfeiture of shares from employees	265.0	1,788.0	1,788.0	Net income reported	68,477.0
-0	Net translation gain (loss)	1,577.0
Comprehensive Income:	-0	Net hedging gain (loss)	-0
Net income	68,477.0	68,477.0	Loss on option exercise	-0
Foreign currency translation	1,577.0	1,577.0	Tax benefit	-0	-0	70,054.0
Adjustment for fair value of hedge derivatives	-0
Comprehensive Income	-0	-0	-0	-0	-0	-0	-0	-0	1,577.0	68,477.0	70,054.0
BALANCE AT DECEMBER 31, 2010	158,312.0	53.0	47,500.0	15.0	-0	-0	224,836.0	-0	2,041.0	270,021.0	496,966.0	Balance at December 31, 2010	496,966.0	0	-0	496,966.0
Stock options exercised	1,126.0	12,853.0	12,853.0	Transactions with Shareholders
Conversion to Class B Common Stock	2,500.0	1.0	(2,500.0)	(1.0)	-0	Stock issues for stock options	12,853.0
Repurchase of Class B Common	-0	Stock issued to employee	29,707.0
Dividends on Common Stock	-0	Stock repurchases	-0
Issuance of shares to employees	(23.0)	28,442.0	(776.0)	27,666.0	Common dividends	-0	42,560.0
Amortization of unearned compensation	-0	Comprehensive income
Forfeiture of shares from employees	69.0	2,041.0	2,041.0	Net income reported	96,919.0
-0	Net translation gain (loss)	(13.0)
Comprehensive Income:	-0	Net hedging gain (loss)	-0
Net income	96,919.0	96,919.0	Loss on option exercise	-0
Foreign currency translation	(13.0)	(13.0)	Tax benefit	-0	-0	96,906.0
Adjustment for fair value of hedge derivatives	-0
Comprehensive Income	-0	-0	-0	-0	-0	-0	(13.0)	96,919.0	96,906.0
BALANCE AT DECEMBER 31, 2011	161,984.0	54.0	45,000.0	14.0	268,172.0	-0	2,028.0	366,164.0	636,432.0	Balance at December 31, 2011	636,432.0	0	-0	636,432.0
Stock options exercised	2,436.0	2.0	12,370.0	12,372.0	Transactions with Shareholders
Conversion to Class B Common Stock	2,400.0	(2,400.0)	-0	Stock issues for stock options	12,372.0
Repurchase of Class B Common	-0	Stock issued to employee	39,000.0
Dividends on Common Stock	-0	Stock repurchases	-0
Issuance of shares to employees	(76.0)	(1,761.0)	(1,761.0)	Common dividends	-0	51,372.0
Stock-based compensation	37,515.0	37,515.0	Comprehensive income
Forfeiture of shares from employees	178.0	3,246.0	3,246.0	Net income reported	128,778.0
-0	Net translation gain (loss)	423.0
Comprehensive Income:	-0	Net hedging gain (loss)	(83.0)
Net income	128,778.0	128,778.0	Loss on option exercise	-0
Foreign currency translation	423.0	423.0	Tax benefit	-0	-0	129,118.0
Adjustment for fair value of hedge derivatives	-0
Reclassification to net income of previously deferred gains related to hedge derivatives	(83.0)	(83.0)
Comprehensive Income	-0	-0	-0	-0	-0	-0	340.0	128,778.0	129,118.0
BALANCE AT DECEMBER 31, 2012	166,922.0	56.0	42,600.0	14.0	321,303.0	-0	2,368.0	493,181.0	816,922.0	Balance at December 31, 2012	816,922.0	0	-0	816,922.0
Stock options exercised	1,822.0	12,159.0	12,159.0	Transactions with Shareholders
Conversion to Class B Common Stock	2,600.0	1.0	(2,600.0)	(1.0)	-0	Stock issues for stock options	40,886.4
Repurchase of Class B Common	-0	Stock issued to employee	1,770.0
Dividends on Common Stock	-0	Stock repurchases	-0
Issuance of shares to employees	(47.0)	(1,669.0)	(1,669.0)	Common dividends	-0	42,656.4
Stock-based compensation	60,347.0	60,347.0	Comprehensive income
Forfeiture of shares from employees	332.0	3,439.0	3,439.0	Net income reported	162,330.0
-0	Net translation gain (loss)	(897.0)
Comprehensive Income:	-0	Net hedging gain (loss)	723.0
Net income	162,330.0	162,330.0	Adjustment for Accounting Changes	-0
Foreign currency translation	(897.0)	(897.0)	Loss on option exercise	(45,890.4)
Adjustment for fair value of hedge derivatives	-0	Tax benefit	17,163.0
Reclassification to net income of previously deferred gains related to hedge derivatives	723.0	723.0	Loss on option exercise (after-tax)	(28,727.4)
Comprehensive Income	-0	-0	-0	-0	-0	-0	(174.0)	162,330.0	162,156.0	stock-based compensation	60,347.0	31,619.6	193,775.6
Adoption of FAS 158	-0
BALANCE AT DECEMBER 31, 2013	171,629.0	57.0	40,000.0	13.0	211,629.0	70.0	397,248.0	-0	2,194.0	653,842.0	1,053,354.0	Balance at December 31, 2013	1,053,354.0	0	-0	1,053,354.0
Stock options exercised	1,454.0	1.0	1,454.0	1.0	11,257.0	11,259.0	Transactions with Shareholders
Conversion to Class B Common Stock	3,400.0	1.0	(3,400.0)	(1.0)	-0	Stock issues for stock options	69,564.6
Repurchase of Class B Common	-0	Stock issued to employee	6,870.0
Dividends on Common Stock	-0	Stock repurchases	-0
Issuance of shares to employees	(95.0)	(95.0)	(5,197.0)	(5,197.0)	Common dividends	-0	76,434.6
Stock-based compensation	87,777.0	87,777.0	Comprehensive income
Forfeiture of shares from employees	908.0	908.0	12,067.0	12,067.0	Net income reported	208,042.0
-0	Net translation gain (loss)	(17,002.0)
Comprehensive Income:	-0	Net hedging gain (loss)	-0
Net income	208,042.0	208,042.0	Adjustment for Accounting Changes	-0
Foreign currency translation	(16,743.0)	(16,743.0)	Loss on option exercise	(95,270.6)
Realized foreign currency translation gain due to divestiture	(259.0)	(259.0)	Tax benefit	36,965.0
Net loss on cash flow hedges	-0	Loss on option exercise (after-tax)	(58,305.6)
Net loss on net investment hedges	-0	stock-based compensation	87,777.0	29,471.4	220,511.4
Reclassification to net income of previously deferred gains related to hedge derivatives	-0
Comprehensive Income	-0	-0	-0	-0	-0	-0	-0	-0	(17,002.0)	208,042.0	191,040.0
Adoption of FIN 48
Adoption of EITF 06-2 Sabbaticals
BALANCE AT DECEMBER 31, 2014	177,296.0	59.0	36,600.0	12.0	213,896.0	71.0	508,349.0	-0	(14,808.0)	856,687.0	1,350,300.0	Balance at December 31, 2014	1,350,300.0	0	-0	1,350,300.0
Stock options exercised	360.0	360.0	2,852.0	2,852.0	Transactions with Shareholders
Conversion to Class B Common Stock	2,150.0	1.0	(2,150.0)	(1.0)	-0	Stock issues for stock options	77,136.6
Repurchase of Class B Common	-0	Stock issued to employee	6,409.0
Dividends on Common Stock	-0	Stock repurchases	-0
Issuance of shares to employees	(172.0)	(172.0)	(12,727.0)	(12,727.0)	Common dividends	-0	83,545.6
Stock-based compensation	106,293.0	106,293.0	Comprehensive income
Forfeiture of shares from employees	1,996.0	1.0	1,996.0	1.0	19,134.0	19,136.0	Net income reported	232,573.0
-0	Net translation gain (loss)	(31,816.0)
Comprehensive Income:	-0	Net hedging gain (loss)	1,611.0
Net income	232,573.0	232,573.0	Loss on option exercise	(120,201.6)
Foreign currency translation	(31,816.0)	(31,816.0)	Tax benefit	45,917.0
Net loss on cash flow hedges	1,611.0	1,611.0	Loss on option exercise (after-tax)	(74,284.6)
Net loss on net investment hedges	-0	stock-based compensation	106,293.0	32,008.4	234,376.4
Reclassification to net income of previously deferred gains related to hedge derivatives	-0
Comprehensive Income	-0	-0	-0	-0	-0	-0	-0	-0	(30,205.0)	232,573.0	202,368.0
BALANCE AT DECEMBER 31, 2015	181,630.0	61.0	34,450.0	11.0	216,080.0	72.0	636,628.0	-0	(45,013.0)	1,076,533.0	1,668,222.0	Balance at December 31, 2015	1,668,222.0	0	-0	1,668,222.0
Stock options exercised	792.0	971.0	6,203.0	6,203.0	Transactions with Shareholders
Conversion to Class B & Common Stock	-0	Stock issues for stock options	81,160.6
Repurchase of Class B & Common	-0	Stock issued to employee	18,621.0
Dividends on Common Stock	1,547.0	56,073.0	(59,000.0)	(2,927.0)	Stock repurchases	-0
Issuance of shares to employees	(199.0)	(276.0)	(15,098.0)	(15,098.0)	Common dividends	(2,927.0)	96,854.6
Stock-based compensation	90,932.0	90,932.0	Comprehensive income
Forfeiture of shares from employees	1,592.0	1,852.0	1.0	33,718.0	33,719.0	Net income reported	256,979.0
-0	Net translation gain (loss)	(16,214.0)
Comprehensive Income:	-0	Net hedging gain (loss)	9,084.0
Net income	256,979.0	256,979.0	Loss on option exercise	(119,740.6)
Foreign currency translation	(16,214.0)	(16,214.0)	Tax benefit	44,783.0
Net loss on cash flow hedges	9,084.0	9,084.0	Loss on option exercise (after-tax)	(74,957.6)
Net loss on net investment hedges	-0	stock-based compensation	90,932.0	15,974.4	265,823.4
Reclassification to net income of previously deferred gains related to hedge derivatives	-0
Reclassification of ineffective hedge gains to net income	-0
Comprehensive Income	(7,130.0)	256,979.0	249,849.0
BALANCE AT DECEMBER 31, 2016	183,815.0	61.0	34,450.0	11.0	220,174.0	73.0	823,554.0	-0	(52,143.0)	1,259,414.0	2,030,900.0	Balance at December 31, 2016	2,030,900.0	0	-0	2,030,900.0
Note:
Marginal tax rates derived based on the income tax footnotes to the income statements are:
Fiscal year	2016	2015	2014	2013	2012	2011	2010
Marginal tax rate (from 10k footnote)	37.40%	38.20%	38.8%	37.4%	37.1%	39.1%	36.2%

&8Financial Statement Analysis and Security Valuation: Roadmap &8Stephen H. Penman 2003

Balance Sheet (Ch. 10)

Financial Statement Analysis and Security Valuation (Fifth Edition)
Stephen Penman 2012
Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product
Step 2: Reformulation
2.2. Reformulation of Balance Sheets
Under Armour (UAA). BALANCE SHEET	Under Armour (UAA). REFORMULATED BALANCE SHEETS
(in thousands)	(in thousands)
CLASSIFICATION	2016/12/31	2015/12/31	2014/12/31	2013/12/31	2012/12/31	2011/12/31	2010/12/31	2016/12/31	2015/12/31	2014/12/31	2013/12/31	2012/12/31	2011/12/31	2010/12/31
ASSETS	Net operating assets (NOA):
Current Assets:	Operating assets
Cash and equivalents	OA & FA	$250,470	$129,852	$593,175	$347,489	$341,841	$175,384	$203,870	Cash and equivalents Author: Operating cash is estimated at 0.5% of sales.	$24,127	$19,817	$15,422	$11,660	$9,175	$7,363	$5,320
Short-term investments	FA	-0	-0	-0	-0	-0	-0	-0	Accounts receivable, less allowance for doubtful accounts	$622,685	$433,638	$332,333	$248,329	$198,575	$150,227	$117,299
Accounts receivable, net	OA	622,685	433,638	332,333	248,329	198,575	150,227	117,299	Inventories	$917,491	$783,031	$536,714	$469,006	$319,286	$324,409	$215,355
Inventories	OA	917,491	783,031	536,714	469,006	319,286	324,409	215,355	Prepaid expenses and other current assets Author: Unearned compensation was deducted from shareholders' equity, and was included in prepaid expenses, because this is actually an asset for shareholders	$174,507	$152,242	$87,177	$63,987	$43,896	$39,643	$19,326
Deferred income taxes	OA	-0	-0	-0	-0	-0	-0	-0	Property, plant and equipment, net	$804,211	$538,531	$305,564	$223,952	$180,850	$159,135	$76,127
Income taxes receivable	OA	-0	-0	-0	-0	-0	-0	-0	Goodwill	$563,591	$585,181	$123,256	$122,244	$0	$0	$0
Prepaid expenses and other current assets	OA	174,507	152,242	87,177	63,987	43,896	39,643	19,326	Identifiable intangible assets	$64,310	$75,686	$26,230	$24,097	$4,483	$5,535	$3,914
Total current assets	1,965,153	1,498,763	1,549,399	1,128,811	903,598	6,351	5,529	Deferred income taxes and other assets	$247,066	$167,809	$90,634	$78,637	$68,152	$64,877	$39,487
Property, plant and equipment, net	OA	804,211	538,531	305,564	223,952	180,850	159,135	76,127	Total operating assets	$3,417,988	$2,755,935	$1,517,330	$1,241,912	$824,417	$751,189	$476,828
Goodwill	OA	563,591	585,181	123,256	122,244	0	0	0	Operating liabilities
Identifiable intangible assets	OA	64,310	75,686	26,230	24,097	4,483	5,535	3,914	Accounts payable - non-interest bearing Author: Interest-bearing accounts payable are classified as financing obligations.	$408,839	$199,712	$209,650	$164,640	$142,839	$100,020	$83,836
Deferred income taxes and other assets	OA	247,066	167,809	90,634	78,637	68,152	64,877	39,487	Accrued liabilities Author: Exclude dividends payable.	$249,137	$236,350	$182,244	$156,202	$99,407	$76,198	$57,603
Total assets	3,644,331	2,865,970	2,095,083	1,577,741	1,157,083	235,898	125,057	Income taxes payable	$0	$0	$0	$0	$0	$0	$0
LIABILITIES AND SHAREHOLDERS' EQUITY	Deferred income taxes and other liabilities	$137,227	$94,868	$67,906	$49,806	$35,176	$28,329	$20,188
Current Liabilities:	Total operating liabilities	$795,203	$530,930	$459,800	$370,648	$277,422	$204,547	$161,627
Current portion of long-term debt	FL	27,000	42,000	28,951	104,972	9,132	6,882	6,865	Net operating assets (NOA):	$2,622,785	$2,225,005	$1,057,530	$871,264	$546,995	$546,643	$315,200
Notes payable	FL	-0	-0	-0	-0	-0	-0	-0
Accounts payable	OL	409,679	200,460	210,432	165,456	143,689	100,527	84,679	Net financial assets (obligations) (NFA/NFO):
Accrued liabilities & Other Liabilities	OL	249,137	236,350	182,244	156,202	99,407	76,198	57,603	Financial assets
Income taxes payable	OL	-0	-0	-0	-0	-0	-0	-0	Cash equivalent	$226,343	$110,035	$577,753	$335,829	$332,666	$168,021	$198,550
Total current liabilities	685,816	478,810	421,627	426,630	252,228	183,607	149,147	Short-term investments	$0	$0	$0	$0	$0	$0	$0
Long-term debt	FL	790,388	624,070	255,250	47,951	52,757	70,842	9,077	Total financial assets	$226,343	$110,035	$577,753	$335,829	$332,666	$168,021	$198,550
Deferred income taxes and other liabilities	OL	137,227	94,868	67,906	49,806	35,176	28,329	20,188	Financial liabilities
Redeemable Preferred Stock	FL	-0	-0	-0	-0	-0	-0	-0	Current portion of long-term debt	$27,000	$42,000	$28,951	$104,972	$9,132	$6,882	$6,865
Shareholders' Equity:	Notes payable	$0	$0	$0	$0	$0	$0	$0
Common Stock at stated value:	Accounts payable - interest bearing Author: Interest-bearing accounts payable are classified as financing obligations.	$840	$748	$782	$816	$850	$508	$843
Class A convertible	61	61	59	57	28	27	13	Long-term debt	$790,388	$624,070	$255,250	$47,951	$52,757	$70,842	$9,077
Class B	11	11	12	13	7	7	4	Redeemable Preferred Stock	$0	$0	$0	$0	$0	$0	$0
Class C common stock	73	72	0	0	0	0	0	Total financial liabilities	$818,228	$666,818	$284,983	$153,739	$62,739	$78,232	$16,785
Capital in excess of stated value	823,484	636,558	508,350	397,248	321,338	268,206	224,887	Net financial assets (obligations) (NFA/NFO)	($591,885)	($556,783)	$292,770	$182,090	$269,927	$89,789	$181,766
Unearned stock compensation	OA
Accumulated other comprehensive income	(52,143)	(45,013)	(14,808)	2,194	2,368	2,028	2,041	Common Shareholders' Equity (CSE)	$2,030,900	$1,668,222	$1,350,300	$1,053,354	$816,922	$636,432	$496,966
Retained earnings	1,259,414	1,076,533	856,687	653,842	493,181	366,164	270,021
Total shareholders' equity	CSE	2,030,900.0	1,668,222	1,350,300	1,053,354	816,922	636,432	496,966
Total liabilities and shareholders' equity	3,644,331	2,865,970	2,095,083	1,577,741	1,157,083	919,210	675,378

Financial Statement Analysis and Valuation: Roadmap Stephen H. Penman 2001

Income Statement (Ch. 10)

Financial Statement Analysis and Security Valuation (Fifth Edition)
Stephen Penman 2012
Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product
Step 2: Reformulation
2.3. Reformulation of Income Statements
Under Armour (UAA). INCOME STATEMENTS	Under Armour (UAA). REFORMULATED INCOME STATEMENTS
(in thousands, except per share data)	(in thousands)
for the year ended	2016/12/31	2015/12/31	2014/12/31	2013/12/31	2012/12/31	2011/12/31	2010/12/31	for the year ended	2016/12/31	2015/12/31	2014/12/31	2013/12/31	2012/12/31	2011/12/31	2010/12/31
Revenues	$4,825,335	$3,963,313	$3,084,370	$2,332,051	$1,834,921	$1,472,684	$1,063,927	Operating revenue	4,825,335	3,963,313	3,084,370	2,332,051	1,834,921	1,472,684	1,063,927
Costs and expenses:	Cost of sales	2,584,724	2,057,766	1,572,164	1,195,381	955,624	759,848	533,420
Cost of sales	$2,584,724	$2,057,766	$1,572,164	1,195,381	955,624	759,848	533,420	Gross margin	2,240,611	1,905,547	1,512,206	1,136,670	879,297	712,836	530,507
Selling and administrative	1,823,140	1,497,000	1,158,252	871,572	670,602	550,069	418,152	Operating expenses
Interest expense, net	26,434	14,628	5,334	2,933	5,183	3,841	2,258	Administrative expenses Author: Derived through adjusting "selling and administrative expenses" and "other income/expense" in published income statements.	1,820,770	1,494,637	1,155,935	869,650	668,852	548,459	416,762
Other income/expense, net	2,755	7,234	6,410	1,172	73	2,064	1,178	Advertising Author: Broken out from selling and administrative expenses in published income statements.	2,356	2,351	2,308	1,912	1,740	1,601	1,378
Amortization of identifiable intangibles Author: 1. Broken out from selling and administrative expenses in published income statements. 2. For years before 2001, the amount represents amortization expense of all intangible assets and goodwill.	14	12	9	10	10	9	12
Intangable and other asset impairment	Other expense, net	2,755	7,234	6,471	1,172	73	2,064	1,178
Goodwill Impairment	Total operating expenses	1,825,895	1,504,234	1,164,723	872,744	670,675	552,133	419,330
Restructuring charge, net	Core operating income (before tax)	414,716	401,313	347,483	263,926	208,622	160,703	111,177
Total costs and expenses	4,437,053.0	3,576,628	2,742,160	2,071,058	1,631,482	1,315,822	955,008	Tax on operating income
Income before income taxes and cumulative effect accounting change	388,282	386,685	342,210	260,993	203,439	156,862	108,919	Tax as reported	131,303.0	154,112.0	134,168.0	98,663.0	74,661.0	59,943.0	40,442.0
Income taxes	131,303	154,112	134,168	98,663	74,661	59,943	40,442	Tax on other operating income	-0	-0	(23.8)	-0	-0	-0	-0
Income before cumulative effect of accounting change	256,979	232,573	208,042	162,330	128,778	96,919	68,477	Tax benefit from net interest expenses	8,934.7	5,836.6	2,090.9	1,108.7	1,902.2	1,467.3	837.7
Cumulative effect of accounting change, net of income taxes	Total tax on operating income	140,237.7	159,948.6	136,235.2	99,771.7	76,563.2	61,410.3	41,279.7
Net income	256,979	232,573	208,042	162,330	128,778	96,919	68,477	Core operating income (after tax)	274,478.3	241,364.4	211,248.2	164,154.3	132,058.8	99,292.7	69,897.3
Basic earnings per common share	1.17	1.08	1.0	1.54	1.23	1.88	1.35	Other operating income (expense) (before tax)
Diluted earnings per common share	1.16	1.06	0.9	1.50	1.21	1.85	1.34	Gains on divestitures	60.6
Impairment	-0
Restructuring charge, net	-0
-0	Tax on other operating income	-0	(23.8)
-0	36.8
Other operating income (expense) (after tax)
Currency translation gains (loss)	(16,214.0)	(31,816.0)	(17,002.0)	(897.0)	423.0	(13.0)	1,577.0
Net hedging gain (loss)	9,084.0	1,611.0	-0	723.0	(83.0)	-0	-0
Adjustment for Accounting Changes	-0	-0
Effect of stock option exercise	15,974.4	32,008.4	29,471.4	31,619.6	-0	-0	-0
Total other operating income (expense)	8,844.4	1,803.4	12,506.2	31,445.6	340.0	(13.0)	1,577.0
Operating income after tax	283,322.7	243,167.9	223,754.5	195,600.0	132,398.8	99,279.7	71,474.3
Financial income (NFE)
Interest expense	(26692)	(14792)	(5526)	(2957)	(5208)	(3871)	(2307)
Interest income Author: Interest income is netted against interest expense in the GAAP statements.	258	164	192	24	25	30	49
Net interest Income (expense) before tax	(26434)	(14628)	(5334)	(2933)	(5183)	(3841)	(2258)
Tax benefit of debt	8,935	5,837	2,091	1,109	1,902	1,467	838
Net financial income (expense)	(17,499)	(8,791)	(3,243)	(1,824)	(3,281)	(2,374)	(1,420)
Comprehensive income (available to common)	265,823.4	234,376.4	220,511.4	193,775.6	129,118.0	96,906.0	70,054.0
Note:
Marginal tax rates derived based on the income tax footnotes to the income statements are:
Fiscal year	2016	2015	2014	2013	2012	2011	2010
Marginal tax rate (from 10k footnote)	33.80%	39.90%	39.2%	37.8%	36.7%	38.2%	37.1%

&8Financial Statement Analysis and Security Valuation: Roadmap &8Stephen H. Penman 2003

Cash Flows Statement (Ch. 11)

Financial Statement Analysis and Security Valuation (Fifth Edition)
Stephen Penman 2012
Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product
Step 2: Reformulation
2.4. Reformulation of the Statement of Cash Flows
Under Armour (UAA). STATEMENT OF CASH FLOWS	Under Armour (UAA): Calculation of Free Cash Flow Using Reformulated Statements
in thousands
Year ended December 31, 2016
year ended	2016/12/31	2015/12/31	2014/12/31	2013/12/31	2012/12/31	2011/12/31	2010/12/31
Cash provided (used) by operations:	Method 1:
Net income	$256,979	$232,573	$208,042	$162,330	$128,778	96,919	$68,477	C - I = OI - change in NOA
Income charges (credits) not affecting cash:
Cumulative effect of accounting change	-0	-0	-0	$0	Operating income, 2010	283,322.7
Depreciation & amortization	144,770	100,940	72,093	50,549	43,082	36,301	$31,321	NOA, 2010	2,622,784.7
Stock-based compensation	46,149	60,376	50,812	43,184	19,845	18,063	$16,227
Unrealized foreign currency exchange rate losses	12,627	33,359	11,739	1,905	(2,464)	4,027	$1,280	NOA, 2009	2,225,004.6	397,780.1
Loss on disposal of property and equipmentt	1,580	549	261	332	524	36	$44
Deferred income taxes	(43,004)	(4,426)	(17,584)	(18,832)	(12,973)	3,620	($10,337)
Change in reserves and allowances	70,188	40,391	31,350	13,945	13,916	5,536	$2,322	Free cash flow	(114,457.4)
Income tax benefit from exercise of stock options	-0	-0	-0	-0	-0	-0	-0
Changes in certain working capital components:
Increase in inventories	(148,055)	(278,524)	(84,658)	(156,900)	4,699	(117,946)	($65,239)
Decrease (increase) in accounts receivable	(249,853)	(191,876)	(101,057)	(35,960)	(53,433)	(33,923)	($32,320)	Method 2:
Decrease (increase) in other current assets and income taxes receivable	(25,284)	(76,476)	(33,345)	(19,049)	(4,060)	(42,633)	($4,099)	C - I = NFE + Change in NFA + d
(Decrease) increase in accounts payable, accrued liabilities and income taxes payable	238,390	39,010	81,380	78,566	61,847	45,218	$42,438
Cash provided by operations	304,487	(44,104)	219,033	120,070.0	199,761.0	15,218	50,114	NFE, 2016	17,499.3
Cash provided (used) by investing activities:	NFA, 2016	(591,884.7)
Purchases of short-term investments	6,482	(6,534)	-0	(1,700.0)	-0	-0	-0	NFA, 2015	(556,782.6)	(35,102.1)
Maturities of short-term investments	Net dividend, 2016	(96,854.6)
Additions to property, plant and equipment	(386,746)	(298,928)	(140,528)	(87,830)	(50,650)	(60,090)	(41,307)
Disposals of property, plant and equipment	Free cash flow	(114,457.4)
Increase in other assets	(875)	(2,553)	(860)	(475)	(1,310)	(1,153)	(478)
Increase (decrease) in other liabilities
Settlement of net investment hedges
Acquisition of subsidiary, net of cash acquired	-0	(539,460)	(10,924)	(148,097)	5,029	(28,193)	-0
Proceeds from divesture
Cash used by investing activities	(381,139)	(847,475)	(152,312)	(238,102)	(46,931)	(89,436)	(41,785)
Cash provided (used) by financing activities:
Additions to long-term debt	1,327,601	650,000	250,000	100,000	-0	30,000
Reductions in long-term debt including current portion	(1,170,750)	(265,202)	(118,722)	(5,471)	(19,330)	(6,774)	(4,184.0)
(Decrease) increase in notes payable	(6,692)	(947)	(1,713)	-0	(1,017)	(2,324)	(97.0)
Proceeds from exercise of options and other stock issuances	15,485	10,310	15,776	15,103	14,776	14,645	7,335.0
Excess tax benefits from share-based payment arrangements	44,783	45,917	36,965	17,163	17,868	10,260	4,189.0
Repurchase of stock	(1,505)	-0	-0	-0	-0
Dividends--common and preferred	(2,927)	-0	-0
Cash (used) provided by financing activities	205,995	440,078	182,306	126,795	12,297	45,807	7,243
Effect of exchange rate changes on cash	(8,725)	(11,822)	(3,341)	(3,115)	1,330	(75)	1,001
Net (decrease) increase in cash and equivalents	120,618	(463,323)	245,686	5,648	166,457	(28,486)	16,573
Cash and equivalents, beginning of year	129,852	593,175	347,489	341,841	175,384	203,870	187,297
Cash and equivalents, end of year	250,470	129,852	593,175	347,489	341,841	175,384	203,870
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest (net of amount capitalized)	$21,412	$11,176	$4,146	$1,505	$3,306	$2,305	$992.0
Income taxes	$135,969	$99,708	$103,284	$85,570	$57,739	$56,940	38,773.0
Non-cash investing and financing activity:
Assumption of long-term debt to acquire property, plant, and equipment	($39,100)	$23,389	$16,155	$3,786	$12,137	$38,713	$2,992.0

Financial Statement Analysis and Valuation: Roadmap Stephen H. Penman 2001

Reformulation Checks

Financial Statement Analysis and Security Valuation (Fifth Edition)
Stephen Penman 2012
Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product
Step 2: Reformulation
2.5. Reformulation Check
FYE	2016/12/31	2015/12/31	2014/12/31	2013/12/31	2012/12/31	2011/12/31	2010/12/31
Comprehensive income
Ref stmt of shareholders equity	265,823.4	234,376.4	220,511.4	193,775.6	129,118.0	96,906.0	70,054.0
Income statement	265,823.4	234,376.4	220,511.4	193,775.6	129,118.0	96,906.0	70,054.0
Difference	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Comprehensive income
GAAP net income	256,979.0	232,573.0	208,042.0	162,330.0	128,778.0	96,919.0	68,477.0
Dirty-surplus items	8,844.4	1,803.4	12,469.4	31,445.6	340.0	(13.0)	1,577.0
Adjusted GAAP Net Income	265,823.4	234,376.4	220,511.4	193,775.6	129,118.0	96,906.0	70,054.0
Income Statement	265,823.4	234,376.4	220,511.4	193,775.6	129,118.0	96,906.0	70,054.0
Difference	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Ending CSE
Ref stmt of shareholders equity	2,030,900.0	1,668,222.0	1,350,300.0	1,053,354.0	816,922.0	636,432.0	496,966.0
Balance sheet	2,030,900.0	1,668,222.0	1,350,300.0	1,053,354.0	816,922.0	636,432.0	496,966.0
Difference	0.0	0.0	0.0	0.0	0.0	0.0	0.0

Profitability and Growth

Financial Statement Analysis and Security Valuation (Fifth Edition)
Stephen Penman 2012
Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product
Step 3: Financial Statement Analysis
3.1 Analysis of Profitability and Growth
Under Armour, year ended December 31, 2016
A systematic analysis of profitability
Summary measure	ROCE	RNOA
14.37%	11.69%
First level breakdown	RNOA+[FLEV*(RNOA-NBC)]
14.37%
Second level breakdown	RNOA = PM*ATO
11.69%
PM = OI / Sales	ATO = Sales / NOA
5.87%	1.99
Third level breakdown
individual revenue and expense ratios - seen from common size analysis
A systematic analysis of growth
Under Armour. Summary information from balance sheets and income statements
2016	2015	2014	2013	2012	2011	2010
Average NOA	2,423,894.6	1,641,267.2	964,397.1	709,129.4	546,818.8	430,921.6
Average NFA	(574,333.6)	(132,006.2)	237,429.9	226,008.6	179,858.2	135,777.4
Average CSE	1,849,561.0	1,509,261.0	1,201,827.0	935,138.0	726,677.0	566,699.0
Sales	4,825,335.0	3,963,313.0	3,084,370.0	2,332,051.0	1,834,921.0	1,472,684.0	1,063,927.0
Core operating income	274,478.3	241,364.4	211,248.2	164,154.3	132,058.8	99,292.7	69,897.3
Unusual items	8,844.4	1,803.4	12,506.2	31,445.6	340.0	(13.0)	1,577.0
Operating income	283,322.7	243,167.9	223,754.5	195,600.0	132,398.8	99,279.7	71,474.3
Comprehensive income	265,823.4	234,376.4	220,511.4	193,775.6	129,118.0	96,906.0	70,054.0
Net financial income (expense)	(17,499.3)	(8,791.4)	(3,243.1)	(1,824.3)	(3,280.8)	(2,373.7)	(1,420.3)
ROCE	14.37%	15.53%	18.35%	20.72%	17.77%	17.10%
RNOA	11.69%	14.82%	23.20%	27.58%	24.21%	23.04%
NBC	3.05%	6.66%	-1.37%	-0.81%	-1.82%	-1.75%
PM	5.87%	6.14%	7.25%	8.39%	7.22%	6.74%	6.72%
Core sales PM	5.69%	6.09%	6.85%	7.04%	7.20%	6.74%	6.57%
ATO	1.99	2.41	3.20	3.29	3.36	3.42
FLEV	31.05%	8.75%	-19.76%	-24.17%	-24.75%	-23.96%
SPREAD	8.64%	8.16%	24.57%	28.39%	26.04%	24.79%
* Balance sheet numbers are averages for the year.
Under Armour(UAA) - Residual Earnings Growth: 2010-2016
Residual earnings	[ROCEt - Cost of Equity Capitalt]*CSEt
2016	2015	2014	2013	2012	2011	2010
Revenue growth rate	21.75%	28.50%	32.26%	27.09%	24.60%	38.42%
Growth in CSE	22.55%	25.58%	28.52%	28.69%	28.23%
Growth in comprehensive income	13.42%	6.29%	13.80%	50.08%	33.24%	38.33%
Residual earnings (at cost of equity of 8.50%)	108610.67	106089.24	118356.09	114288.90	67350.46	48736.59	70054.00
A systematic analysis of the change in ROCE
Analysis of change in RNOA
Level 1: Distinguish core and unusual components of RNOA
RNOA =	Core OI / NOA +	UI / NOA	check
11.69%	11.32%	0.36%	11.69%
Level 2:	Change in RNOA =	Change in core sales PM at previous asset turnover level +	Change due to change in asset turnover +	Change due to change in other core income +
-3.13%	-0.97%	-2.41%	0
Analysis of changes in ROCE
Change in ROCE =	Change in RNOA +	Change due to change in spread at previous level of financial leverage +	Change due to change in financial leverage
-1.16%	-3.13%	0.04%	1.93%
A systematic analysis of the change in investment (CSE)
Change in CSE =	Change in NOA +	Change in NFA
362678.0	397780.1	-35102.1
NOA =	Sales / ATO
2,423,894.6	2,423,894.6
Change in CSE =	Change due to change in sales at previous level of asset turnover +	Change due to change in asset turnover +	Change in financial assets
340,300.0	356,976.2	425651.2	-442327.4

&8Financial Statement Analysis and Security Valuation: Roadmap &8Stephen H. Penman 2003

Common Size and Trend Analysis

Financial Statement Analysis and Security Valuation (Fifth Edition)
Stephen Penman 2012
Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product
Step 3: Financial Statement Analysis
3.2 Common size and trend analysis
Common size and trend analysis helps understand the business and how it changes over time. It is a useful step in financial statement analysis in preparation for full-information forecasting and valuation.
Under Armour (UAA)	Under Armour (UAA)
Common size analysis of income statements	Trend analysis of income statements
for the year ended	2016/12/31	2015/12/31	2014/12/31	2013/12/31	2012/12/31	2011/12/31	2010/12/31	for the year ended	2016/12/31	2015/12/31	2014/12/31	2013/12/31	2012/12/31	2011/12/31	2010/12/31
Operating revenue	100%	100%	100%	100%	100%	100%	100%	Operating revenue	454%	373%	290%	219%	172%	138%	100%
Cost of sales	54%	52%	51%	51%	52%	52%	50%	Cost of sales	485%	386%	295%	224%	179%	142%	100%
Gross margin	46%	48%	49%	49%	48%	48%	50%	Gross margin	422%	359%	285%	214%	166%	134%	100%
Operating expenses	Operating expenses
Administrative expenses Author: Derived through adjusting "selling and administrative expenses" and "other income/expense" in published income statements.	38%	38%	37%	37%	36%	37%	39%	Administrative expenses Author: Derived through adjusting "selling and administrative expenses" and "other income/expense" in published income statements.	437%	359%	277%	209%	160%	132%	100%
Advertising Author: Broken out from selling and administrative expenses in published income statements.	0%	0%	0%	0%	0%	0%	0%	Advertising Author: Broken out from selling and administrative expenses in published income statements.	171%	171%	168%	139%	126%	116%	100%
Amortization of identifiable intangibles Author: 1. Broken out from selling and administrative expenses in published income statements. 2. For years before 2001, the amount represents amortization expense of all intangible assets and goodwill.	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	Amortization of identifiable intangibles Author: 1. Broken out from selling and administrative expenses in published income statements. 2. For years before 2001, the amount represents amortization expense of all intangible assets and goodwill.	113%	99%	77%	83%	82%	78%	100%
Other expense, net	0.1%	0.2%	0.2%	0.1%	0.0%	0.1%	0.1%	Other expense, net	234%	614%	549%	99%	6%	175%	100%
Total operating expenses	38%	38%	38%	37%	37%	37%	39%	Total operating expenses	435%	359%	278%	208%	160%	132%	100%
Core operating income (before tax)	9%	10%	11%	11%	11%	11%	10%	Core operating income (before tax)	373%	361%	313%	237%	188%	145%	100%
Tax on operating income	Tax on operating income
Tax as reported	2.7%	3.9%	4.3%	4.2%	4.1%	4.1%	3.8%	Tax as reported
Tax on other operating income	0.0%	0.0%	-0.0%	0.0%	0.0%	0.0%	0.0%	Tax on other operating income
Tax benefit from net interest expenses	0.2%	0.1%	0.1%	0.0%	0.1%	0.1%	0.1%	Tax benefit from net interest expenses
Total tax on operating income	2.9%	4.0%	4.4%	4.3%	4.2%	4.2%	3.9%	Total tax on operating income	340%	387%	330%	242%	185%	149%	100%
Core operating income (after tax)	6%	6%	7%	7%	7%	7%	7%	Core operating income (after tax)	393%	345%	302%	235%	189%	142%	100%
Other operating income (expense) (before tax)	Other operating income (expense) (before tax)
Gains on divestitures	0.0%	Gains on divestitures
Impairment	0.0%	Impairment
Restructuring charge, net	0.0%	Restructuring charge, net
Tax on other operating income	0.0%	-0.0%	Tax on other operating income
0.0%	0.0%
Other operating income (expense) (after tax)	Other operating income (expense) (after tax)
Currency translation gains (loss)	-0.3%	-0.8%	-0.6%	-0.0%	0.0%	-0.0%	0.1%	Currency translation gains (loss)
Net hedging gain (loss)	0.2%	0.0%	0.0%	0.0%	-0.0%	0.0%	0.0%	Net hedging gain (loss)
Adjustment for Accounting Changes	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	Adjustment for Accounting Changes
Effect of stock option exercise	0.3%	0.8%	1.0%	1.4%	0.0%	0.0%	0.0%	Effect of stock option exercise
Total other operating income (expense)	0.2%	0.0%	0.4%	1.3%	0.0%	-0.0%	0.1%	Total other operating income (expense)	561%	114%	793%	1994%	22%	-1%	100%
Operating income after tax	5.9%	6.1%	7.3%	8.4%	7.2%	6.7%	6.7%	Operating income after tax	396%	340%	313%	274%	185%	139%	100%
Financial income (NFE)	Financial income (NFE)
Interest expense	-0.6%	-0.3%	-0.1%	-0.1%	-0.1%	-0.1%	-0.0%	Interest expense
Interest income Author: Interest income is netted against interest expense in the GAAP statements.	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	Interest income Author: Interest income is netted against interest expense in the GAAP statements.
Net interest Income (expense) before tax	-0.5%	-0.3%	-0.1%	-0.1%	-0.1%	-0.1%	-0.0%	Net interest Income (expense) before tax
Tax benefit of debt	0.2%	0.1%	0.0%	0.0%	0.0%	0.0%	0.0%	Tax benefit of debt
Net financial income (expense)	-0.4%	-0.2%	-0.1%	-0.0%	-0.1%	-0.0%	-0.0%	Net financial income (expense)	1232%	619%	228%	128%	231%	167%	100%
Comprehensive income (available to common)	5.5%	4.9%	4.6%	4.0%	2.7%	2.0%	1.5%	Comprehensive income (available to common)	379%	335%	315%	277%	184%	138%	100%
Under Armour (UAA)	Under Armour (UAA)
Common size analysis of balance sheets	Trend analysis of balance sheets
2016/12/31	2015/12/31	2014/12/31	2013/12/31	2012/12/31	2011/12/31	2010/12/31	2016/12/31	2015/12/31	2014/12/31	2013/12/31	2012/12/31	2011/12/31	2010/12/31
Net operating assets (NOA):	Net operating assets (NOA):
Operating assets	Operating assets
Cash and equivalents Author: Operating cash is estimated at 0.5% of sales.	1%	1%	1%	1%	1%	1%	1%	Cash and equivalents Author: Operating cash is estimated at 0.5% of sales.	454%	373%	290%	219%	172%	138%	100%
Accounts receivable, less allowance for doubtful accounts	18%	16%	22%	20%	24%	20%	25%	Accounts receivable, less allowance for doubtful accounts	531%	370%	283%	212%	169%	128%	100%
Inventories	27%	28%	35%	38%	39%	43%	45%	Inventories	426%	364%	249%	218%	148%	151%	100%
Prepaid expenses and other current assets Author: Unearned compensation was deducted from shareholders' equity, and was included in prepaid expenses, because this is actually an asset for shareholders	5%	6%	6%	5%	5%	5%	4%	Prepaid expenses and other current assets Author: Unearned compensation was deducted from shareholders' equity, and was included in prepaid expenses, because this is actually an asset for shareholders	903%	788%	451%	331%	227%	205%	100%
Property, plant and equipment, net	24%	20%	20%	18%	22%	21%	16%	Property, plant and equipment, net	1056%	707%	401%	294%	238%	209%	100%
Goodwill	16%	21%	8%	10%	0%	0%	0%	Goodwill	0%	0%	0%	0%	0%	0%	0%
Identifiable intangible assets	2%	3%	2%	2%	1%	1%	1%	Identifiable intangible assets	1643%	1934%	670%	616%	115%	141%	100%
Deferred income taxes and other assets	7%	6%	6%	6%	8%	9%	8%	Deferred income taxes and other assets	626%	425%	230%	199%	173%	164%	100%
Total operating assets	100%	100%	100%	100%	100%	100%	100%	Total operating assets	717%	578%	318%	260%	173%	158%	100%
Operating liabilities	Operating liabilities
Accounts payable - non-interest bearing Author: Interest-bearing accounts payable are classified as financing obligations.	51%	38%	46%	44%	51%	49%	52%	Accounts payable - non-interest bearing Author: Interest-bearing accounts payable are classified as financing obligations.	488%	238%	250%	196%	170%	119%	100%
Accrued liabilities Author: Exclude dividends payable.	31%	45%	40%	42%	36%	37%	36%	Accrued liabilities Author: Exclude dividends payable.	433%	410%	316%	271%	173%	132%	100%
Income taxes payable	0%	0%	0%	0%	0%	0%	0%	Income taxes payable
Deferred income taxes and other liabilities	17%	18%	15%	13%	13%	14%	12%	Deferred income taxes and other liabilities	680%	470%	336%	247%	174%	140%	100%
Total operating liabilities	100%	100%	100%	100%	100%	100%	100%	Total operating liabilities	492%	328%	284%	229%	172%	127%	100%
Net operating assets (NOA):	832%	706%	336%	276%	174%	173%	100%
Net financial assets (obligations) (NFA/NFO):
Financial assets	Net financial assets (obligations) (NFA/NFO):
Cash equivalent	100%	100%	100%	100%	100%	100%	100%	Financial assets
Short-term investments	0%	0%	0%	0%	0%	0%	0%	Cash equivalent	114%	55%	291%	169%	168%	85%	100%
Total financial assets	100%	100%	100%	100%	100%	100%	100%	Short-term investments
Financial liabilities	Total financial assets	114%	55%	291%	169%	168%	85%	100%
Current portion of long-term debt	3%	6%	10%	68%	15%	9%	41%	Financial liabilities
Notes payable	0%	0%	0%	0%	0%	0%	0%	Current portion of long-term debt	393%	612%	422%	1529%	133%	100%	100%
Accounts payable - interest bearing Author: Interest-bearing accounts payable are classified as financing obligations.	0%	0%	0%	1%	1%	1%	5%	Notes payable	0%	0%	0%	0%	0%	0%	0%
Long-term debt	97%	94%	90%	31%	84%	91%	54%	Accounts payable - interest bearing Author: Interest-bearing accounts payable are classified as financing obligations.	100%	89%	93%	97%	101%	60%	100%
Redeemable Preferred Stock	0%	0%	0%	0%	0%	0%	0%	Long-term debt	8708%	6875%	2812%	528%	581%	780%	100%
Total financial liabilities	100%	100%	100%	100%	100%	100%	100%	Redeemable Preferred Stock	0%	0%	0%	0%	0%	0%	0%
Total financial liabilities	4875%	3973%	1698%	916%	374%	466%	100%
As percentage of CSE:	Net financial assets (obligations) (NFA/NFO)	-326%	-306%	161%	100%	149%	49%	100%
Net operating assets (NOA):	129.1%	133.4%	78.3%	82.7%	67.0%	85.9%	63.4%
Net financial assets (obligations)	-29.1%	-33.4%	21.7%	17.3%	33.0%	14.1%	36.6%	Common Shareholders' Equity (CSE)	409%	336%	272%	212%	164%	128%	100%
Common Shareholders' Equity (CSE)	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%

&8Financial Statement Analysis and Security Valuation: Roadmap &8Stephen H. Penman 2003

Charts

Financial Statement Analysis and Security Valuation (Fifth Edition)
Stephen Penman 2012
Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product
Step 3: Financial Statement Analysis
3.3 Charts
2016	2015	2014	2013	2012	2011	2010
RNOA	14.4%	15.5%	18.3%	20.7%	17.8%	17.1%	0.0%
PM	5.9%	6.1%	7.3%	8.4%	7.2%	6.7%	6.7%
ATO	2.0	2.4	3.2	3.3	3.4	3.4	- 0

Common-Size Income Statement

Cost of sales 42735 42369 42004 41639 41274 40908 40543 0.53565690257774845 0.51920350474464172 0.50971965101463179 0.5125878464922079 0.52079844309373535 0.5159613331848516 0.50136898490215964 Core operating income (before tax) 8.5945535387698502E-2 0.10125695346292346 0.11265944098794889 0.11317333969111315 0.11369535800178865 0.10912252730388866 0.10449683107957597 Total operating expenses 0.37839756203455305 0.37953954179243482 0.37762090799741932 0.37423881381667895 0.365506198904476 0.37491613951125974 0.39413418401826439 Total other operating income (expense) 5.8715646952754622E-2 6.1354694246800921E-2 7.2532675600948948E-2 8.3874645823976107E-2 7.2155062261536076E-2 6.7414148588563441E-2 6.7179686200275035E-2 Net financial income (expense) -3.6265477940909795E-3 -1.821931119808262E-3 -6.7209261118658084E-4 -3.7807240326319315E-4 -6.7991942528342595E-4 -4.9193226998747242E-4 -2.9433852779133473E-4 Operating income after tax 5.8715646952754622E-2 6.1354694246800921E-2 7.2532675600948948E-2 8.3874645823976107E-2 7.2155062261536076E-2 6.7414148588563441E-2 6.7179686200275035E-2 Comprehensive income (available to common) 5.5089099158663599E-2 4.8572053405488272E-2 4.569866785276025E-2 4.0157963264405315E-2 2.6758349420299317E-2 2.0082750731296378E-2 1.4517955748150128E-2

Percent of Revenue

Common-Size Balance Sheet

Net operating assets (NOA): 42735 42369 42004 41639 41274 40908 40543 1.2914395957457285 1.3337580759635108 0.7831814041324151 0.82713338061088659 0.66957996601878755 0.85891803052014992 0.63424929472036318 Net financial assets (obligations) -0.29143959574572853 -0.33375807596351081 0.21681859586758501 0.17286661938911324 0.33042003398121245 0.14108196947985013 0.36575070527963677

Percent of Total CSE

Trend Analysis of Income Statement Items

Operating revenue 42735 42369 42004 41639 41274 40908 40543 4.5354004551064122 3.7251738136169115 2.8990428854611268 2.1919276416521059 1.7246681398253827 1.3841964721263771 1 Gross margin 4.2235276820098511 3.5919356389265364 2.8504920764476247 2.1426107478317911 1.6574654057345144 1.3436882076956571 1 Core operating income (before tax) 3.7302319724403428 3.6096764618581183 3.1254971801721569 2.3739262617267962 1.8764852442501596 1.4454698363870224 1 Core operating income (after tax) 3.9268809908803024 3.4531303806634424 3.022266691285648 2.3485080006401393 1.8893272416515423 1.4205522040184622 1 Operating income after tax 3.9639805865943503 3.4021727887993576 3.1305589532651599 2.7366480109369857 1.8523983074079708 1.3890274266763531 1 Comprehensive income (available to common) 3.7945493232188028 3.3456537716528931 3.1477343398421058 2.7660893834534677 1.8431210209267137 1.3833043081051759 1

Percent of 2000 Value

Trend Analysis of Balance Sheet Items

Net operating assets (NOA): 42735 42369 42004 41639 41274 40908 40543 8.321008526212383 7.0590171327070443 3.3551038262697279 2.7641603077610939 1.7353871308544133 1.7342713801366993 1 Net financial assets (obligations) (NFA/NFO) -3.2563062721444127 -3.063188886635988 1.6107010639220563 1.0017829549931776 1.4850296121657522 0.49398262317583463 1 Common Shareholders' Equity (CSE) 4.0865974734690091 3.356813142146545 2.71708728564932 2.1195695480173695 1.6438186918219757 1.280634892527859 1

Percent of 2000 Values

RNOA 2016 2015 2014 2013 2012 2011 2010 0.18348013602897828 0.20721607470603184 0.17768279441897844 0.17100083112904735 0 PM 2016 2015 2014 2013 2012 2011 2010 7.2544621249493055E-2 8.3874645823976066E-2 7.2155062261536063E-2 6.7414148588563469E-2 6.7179686200275021E-2 ATO 2014 2013 2012 2011 2010 3.1982366515994718 3.2886112200984243 3.3556291880163864 3.417521669877198 0

Common-Size Income Statement

Percent of Revenue

Common-Size Balance Sheet

Percent of Total CSE

Trend Analysis of Income Statement Items

Percent of 2000 Value

Trend Analysis of Balance Sheet Items

Percent of 2000 Values

Common-Size Income Statement

Percent of Revenue

Common-Size Balance Sheet

Percent of Total CSE

Trend Analysis of Income Statement Items

Percent of 2000 Value

Trend Analysis of Balance Sheet Items

Percent of 2000 Values

Common-Size Income Statement

Percent of Revenue

Common-Size Balance Sheet

Percent of Total CSE

Trend Analysis of Income Statement Items

Percent of 2000 Value

Trend Analysis of Balance Sheet Items

Percent of 2000 Values

Common-Size Income Statement

Percent of Revenue

Common-Size Balance Sheet

Percent of Total CSE

Trend Analysis of Income Statement Items

Percent of 2000 Value

Trend Analysis of Balance Sheet Items

Percent of 2000 Values

Valuation - Essentials

Financial Statement Analysis and Security Valuation (Fifth Edition)
Stephen Penman 2012
Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product
Step 4: Projection and Valuation
4.1. Valuation essentials
Net income component	Book value component	Residual earnings components
Operating income (OI)	Net operating assets (NOA)	Residual operating income: OIt - (kF-1)*NOAt-1
Net financial expense (NFE)	Net financial obligations (NFO)	Residual net financial expense: NFEt - (kD-1)NFOt-1
Earnings	Common stockholders' equity (CSE)	Residual earnings: Earnt-(kE-1)*CSEt-1
Value of operations =	Net operating assets +	Present value of expected residual operating income
Value of common equity =	Book value of common equity +	Present value of expected residual operating income
Value of operations =	Value of common equity +	Value of net financial obligations
Discount rates
Denoted as	Formula
Cost of capital for equity	kE	rf + beta*(rm-rf)
Cost of capital for debt	kD	NBC
Cost of operations	kF	kEVE/VF + kDVD/VF
For Nike in 2000
riskfree rate (T-bill rate)	5.50%
Beta	0.95
Market risk premium (rm-rf)	6.00%
kE	11.20%
kD	5.21%
Market value of equity*	ERROR:#REF!
Market value of debt	1,295.48
Market value of the firm	ERROR:#REF!
kF	ERROR:#REF!
* using Nike market close on Sept. 1, 2000 of $40.875 per share.
For Under Armour (UAA) in 2016
rish-free rate (10-year Treasury rate)	1.4%
Beta	0.03
Market risk premium (rm-rf)	5.0%
kE	1.6%
kD	0.0%	(Get borrowing rate from debt footnote (0%) and convert to after-tax basis (0%))
Number of shares	434.5
Under Armour's close price on December 31, 2016	$ 25.17
Market value of equity	10,936
Net Financial Obligation	591,885
Market value of the firm	602,821
kF	0.0%

&8Financial Statement Analysis and Security Valuation: Roadmap &8Stephen H. Penman 2003

No-Growth and Growth Valuation

Financial Statement Analysis and Security Valuation (Fifth Edition)
Stephen Penman 2012
Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product
Step 4: Projection and Valuation
4.2. Simple forecasts and simple valuations
No-Growth Valuation: Forecasts from earnings and book values	Page 485
Forecasting earnings and its components by forecasting that earnings will be the same as in the current year, adjusted for changes in the balance sheet earning at the required return.
No-Growth Forecast is assuming all future residual earnings are the same as in the current year.
No-Growth Forecast Valuations of Under Armour
Under Armour (UAA)
in thousands except for per share data
Required return for operations	0.0%
Common shareholders' equity, 2016	2,030,900.0
Core operating income, 2016	274,478.3
Net operating assets, 2016	2,622,784.7
Net operating assets, 2015	2,225,004.6
Core residual operating income, 2016	273,852.6
No-Growth Forecast of ReOI, 2017	273,852.6
No-Growth Forecast of operating income, 2017	274,590.2
Value of common equity
vE = CSE2016 + ReOI2016/kF	975,900,102.4
# of shares	434.5
Value per share	2,246,030.16
Value of operations
vNOA = vE + NFO	976,491,987.1
vNOA = NOA + ReOI/kF	976,491,987.1
vNOA = OI2017/kF	976,491,987.1
Growth Valution: Forecasting from accounting rates of return	Page 487
Forecast of earnings component: Forecast earnings and its components by forecasting that the relevant balance sheet component will earn at the current profitability
Operating	OI1 = RNOA0*NOA0
Financing	NFE1 = NBC0*NFO0
Earnings	Earn1 = ROCE0*CSE0
Growth Valuations of Under Armour (UAA)
Cost of capital for operations	0.03%
RNOA, 2016 (on average NOA)	11.69%
Growth rate for net operating assets (2010-2016)	7.3%	2016	2015	2014	2013	2012	2011	2010
Net operating assets, 2016	2,622,784.7	NOA =	$2,622,033	$2,224,335	$1,056,814	$870,493	$546,214	$546,189	$314,402
Growth Rate for NOA=	0.18	1.10	0.21	0.59	0.000047	0.74
Growth forecast of operating income, 2017	306,570.4
Growth forecast of ReOI, 2017	305,832.9	Growth Rate for NOA=	NOA Present - NOA Past
NOA Past
Value of common equity
vE = CSE+ ReOI1/(kF-g)	(2,151,922.7)	Growth Rate for NOA 2010-2016=	7.34%
Value per share	(4,952.64)
Value of operations
vNOA = vE + NFO	(1,560,038.0)
vNOA = NOA + ReOI1/(kF-g)	(1,560,038.0)
vNOA = NOA*(RNOA-g)/(kF-g)	(1,560,038.0)

&8Financial Statement Analysis and Security Valuation: Roadmap &8Stephen H. Penman 2003

Full Forecasting and Valuation

Financial Statement Analysis and Security Valuation (Fifth Edition)
Stephen Penman 2012
Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product
Step 4: Projection and Valuation
4.3. Full-information forecasting: Under Armour (UAA)
Forecasts of key income statement ratios	Page 441
2016A	2015E	2014E	2013E	2012E	2011E	2010E and after
Gross margin	46.4%	45.0%	45.0%	45.0%	45.0%	45.0%	45.0%
SG&A expense ratio	37.8%	30.0%	30.0%	30.0%	30.0%	30.0%	30.0%
Tax rate	33.8%	35.0%	35.0%	35.0%	35.0%	35.0%	35.0%
Sales growth	21.8%	4.0%	4.0%	4.0%	4.0%	4.0%	4.0%
Forecasts of turnover
2016A	2015E	2014E	2013E	2012E	2011E	2010E and after
Accounts receivable turnover	9.14	6.8	6.8	6.8	6.8	6.8	6.8
Inventory turnover	5.68	8.6	8.6	8.6	8.6	8.6	8.6
PPE turnover	7.19	9.7	9.7	9.7	9.7	9.7	9.7
Other NOA/Sales	5.8%	-6%	-6%	-6%	-6%	-6%	-6%
Pro forma financial statements
2016A	2015E	2014E	2013E	2012E	2011E	2010E and after
Income statement
Sales	4,825,335.0	5,018,348.4	5,219,082.3	5,427,845.6	5,644,959.5	5,870,757.8
Cost of sales	2,584,724.0	2,760,091.6	2,870,495.3	2,985,315.1	3,104,727.7	3,228,916.8
Gross margin	2,240,611.0	2,258,256.8	2,348,587.1	2,442,530.5	2,540,231.8	2,641,841.0
Total operating expenses	1,825,895.0	1,505,504.5	1,565,724.7	1,628,353.7	1,693,487.8	1,761,227.3
Core operating income before tax	414,716.0	752,752.3	782,862.4	814,176.8	846,743.9	880,613.7
Taxes	140,237.7	263,463.3	274,001.8	284,961.9	296,360.4	308,214.8
Core operating income after tax	274,478.3	489,289.0	508,860.5	529,214.9	550,383.5	572,398.9
Other income (expense)	8,844.4
Operating income	283,322.7	489,289.0	508,860.5	529,214.9	550,383.5	572,398.9
Balance sheet
Account receivable	622,685.0	737,992.4	767,512.1	798,212.6	830,141.1	863,346.7
Inventory	917,491.0	583,528.9	606,870.0	631,144.8	656,390.6	682,646.3
Property, plant and equipment	804,211.0	517,355.5	538,049.7	559,571.7	581,954.6	605,232.8
Other NOA	278,397.7	(301,100.9)	(313,144.9)	(325,670.7)	(338,697.6)	(352,245.5)
Net operating assets (NOA)	2,622,784.7	1,537,775.9	1,599,286.9	1,663,258.4	1,729,788.7	1,798,980.3
Operating income	283,322.7	489,289.0	508,860.5	529,214.9	550,383.5	572,398.9
Change in NOA	397,780.1	(1,085,008.8)	61,511.0	63,971.5	66,530.3	69,191.5
Free cash flow	(114,457.4)	1,574,297.7	447,349.5	465,243.5	483,853.2	503,207.3
RNOA	11.7%	23.5%	32.4%	32.4%	32.4%	32.4%	32.4%
ReOI	282,641.1	616,150.3	498,450.4	518,388.5	539,124.0	560,689.0	583,116.5
Growth in ReOI	118.0%	-19.1%	4.0%	4.0%	4.0%	4.0%
Cost of operations	0.03%
Total PV of ReOI to 2010	2,730,518.0
Continuing value Author: Assume growth in ReOI remains constant at 4% into the future.	(14,681,121.6)
PV of CV	(14,660,497.3)
NOA as of 2010	2,622,784.7
Value of operations	(9,307,194.5)
NFA (NFO)	(591,884.7)
Value of common equity	(9,899,079.2)
Number of shares outstanding	434.5
Value per share	$ (22,782.69)

&8Financial Statement Analysis and Security Valuation: Roadmap &8Stephen H. Penman 2003

Reverse engineering

Financial Statement Analysis and Security Valuation (Fifth Edition)
Stephen Penman 2012
Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product
Step 4: Projection and Valuation
4.4. Reverse engineering: Implied Expected Return and Implied Growth Rate
Reverse engineering to get implied expected return	(Page 665)
ER = [NOA0/PNOA0 x RNOA1] + [(1- NOA0/PNOA0) x (g-1)]
NOA0	2622784.675
P0	602821.0
RNOA1	11.69%
g-1	ER
-3%	60.9%
-2%	57.6%
-1%	54.2%
0	50.9%
1%	47.5%
2%	44.2%
3%	40.8%
4%	37.5%
5%	34.1%
6%	30.8%
7%	27.4%
4.48%	35.85%
Reverse engineering to get implied growth rate	(Page 492)
Cost of capital for operations	0.03%
RNOA, 2016 (on average NOA)	11.69%
Growth rate for net operating assets (2010-2016)	7.34%
Net operating assets, 2016	2,622,784.68
Forwared Operating Income Forecast	306,570.4
ReOI2017	305,832.9
Market Value of the Firm	602,821.0
VNOA = NOA + ReOI1/(kF-g)	(4,247,531.7)
Market price implied growth rate	4.48%	<- This number was calculated by goal seek to make E54=E55

&8Financial Statement Analysis and Security Valuation: Roadmap &8Stephen H. Penman 2003

Bells and Whistles

Financial Statement Analysis and Security Valuation (Fifth Edition)

Stephen Penman 2012

Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product

Step 5: Bells and Whistles

Steps 1-4 set up a basic valuation tool. You can add additional features:

Sensitivity analysis (Chapters 15)

Business Strategy Analysis (Chapter 16)

Economics Value Analysis (Chapter 17) (Please see web page for this chapter with additional tools)

Quality of earnings analysis (Chapters 18)

Risk analysis (Chapters 19 and 20)

&8Financial Statement Analysis and Security Valuation: Roadmap &8Stephen H. Penman 2003