Costco

STANDARDIZED BALANCE SHEET AND INCOME STATEMENT (millions)

9/2/2012

BALANCE SHEET
ASSETS

+ Cash and Marketable Securities

4,009,000.00

Short term investments

1,326,000.00

+ Accounts Receivable
+ Inventory
= Other Current Assets
Total Current Assets

3,528,000.00
1,576,000.00
7,096,000.00
0.00

13,706,000.00

+ Long-Term Tangible Assets

+ Long-Term Intangible Assets

13,526,000.00

12,961,000.00

+ Other Long-Term Assets

653,000.00

_ Acum. Depr. & Amort.

= Total Long-Term Assets

13,614,000.00

Total Assets

27,140,000.00

LIABILITIES

+ Accounts Payable
+ Short-Term Debt
= Other Current Liabilities

10,193,000.00
0.00
2,067,000.00

Total Current Liabilities

12,050,000.00

12,260,000.00

Working Capital

-2,353,000.00

-2,262,000.00

Var WC

+ Long Term Debt

+ Deferred Taxes
= Other Long-Term Liabilities
Total Long-Term Liabilities

91,000.00
1,381,000.00
981,000.00
0.00
2,362,000.00

Total Liabilities

14,622,000.00

Comp

14,779,000.00

Minority Interest (NOTE A)

157,000.00

SHAREHOLDERS' EQUITY

+ Preferred Stock
= Common Shareholder's Equity
Capital Surplus

0.00
2,000.00
4,369,000.00

Retained Earnings
Other Equity

7,834,000.00
156,000.00

Total Shareholder's Equity

12,361,000.00

TOTAL LIABILITIES & EQUITY

27,140,000.00

Common Shares Outstanding at Fiscal Year End

INCOME STATEMENT
Sales

- Cost of Goods Sold

= Gross Profit
- SG&A
Non Recurring Items

- Depr. & Amortization, total

- Other Operating Expenses
= Operating Income

9/2/2012
99,137,000.00
86,823,000.00
12,314,000.00
9,518,000.00
37,000.00
0.00
2,759,000.00

Investment Income
Other Income, net of Other Expense
Other Income
Other Expense

Net Interest Expense (Income)

Interest Income
EBIT
Interest Expense

=
+
=
=

2,862,000.00
95,000.00

Minority Interest (NOTE A)

-58,000.00

Total Other Income Expenses Net

103,000.00

EBT

2,767,000.00

Tax Expense

1,000,000.00

Net Income for cont

1,709,000.00

Net Income

1,709,000.00

Preferred Dividends
Net Income to Common

0.00
1,709,000.00

9/1/2013

8/31/2014

4,644,000.00

5,738,000.00

1,480,000.00

1,577,000.00

1,822,000.00

1,817,000.00

7,894,000.00

8,456,000.00

0.00

0.00

15,840,000.00

17,588,000.00

13,881,000.00

14,830,000.00

562,000.00

606,000.00

14,443,000.00

15,436,000.00

30,283,000.00

33,024,000.00

11,001,000.00

11,937,000.00

0.00

0.00

2,256,000.00

2,475,000.00

13,257,000.00

14,412,000.00

-2,061,000.00

-2,562,000.00

201,000.00

-501,000.00

4,998,000.00

5,093,000.00

1,016,000.00

1,004,000.00

0.00

0.00

6,014,000.00

6,097,000.00

19,271,000.00

20,509,000.00

19,450,000.00

20,721,000.00

179,000.00

212,000.00

0.00

0.00

2,000.00

2,000.00

4,670,000.00

4,919,000.00

6,283,000.00

7,458,000.00

-122,000.00

-76,000.00

10,833,000.00

12,303,000.00

30,283,000.00

33,024,000.00

9/1/2013

8/31/2014

105,156,000.00

112,640,000.00

91,948,000.00

98,458,000.00

13,208,000.00

14,182,000.00

10,104,000.00

10,899,000.00

51,000.00

63,000.00

0.00

0.00

3,053,000.00

3,220,000.00

3,150,000.00

3,310,000.00

99,000.00

113,000.00

-22,000.00

-30,000.00

97,000.00

90,000.00

3,051,000.00

3,197,000.00

999,000.00

1,109,000.00

2,039,000.00

2,058,000.00

2,030,000.00

2,058,000.00

0.00

0.00

2,030,000.00

2,058,000.00

DISCOUNTED CASH FLOW VALUATION

HISTORICA
2011
Sales

88,915,000.00

% growth
Total Costs

0.00

Costs % Sales

0.00
#DIV/0!

EBIT

0%

EBIT % sales

88,915,000.00

#DIV/0!

100%

Tax rate

35%

35%

After-tax EBIT

Depreciation & Amortization

Depr. % sales

57,794,750.00

0.00

2,667,450.00

3.0%

3.0%

Capx

0.00

Increase in Net Working Capital

0.00

FCF
Terminal Value
Discount Factor
Discounted Cash Flows
Firm Value

Working Capital
End of Year - Net Working Capital

0.00

WK % Sales

0.00
#DIV/0!

Increase in Net Working Capital

0%
-

Capital Expenditures
End of Year - Fixed Assets (gross)
Acum. Depreciation
End of Year - Fixed Assets (net)
Turnover = Sales / Net FA

0.00

0.00
2,330.00

3,195.71

-2,330.00

-3,195.71

0.00

-27,823.24

Capex

0.00

Capex % Sales

0%

Capital structure
Total liabilities
Total equity
Total Assets
D/E

#DIV/0!

#DIV/0!

D/V

#DIV/0!

#DIV/0!

HISTORICAL

FORECAST

9/2/2012

9/1/2013

8/31/2014

99,137,000.00

105,156,000.00

112,640,000.00

11%
96,341,000.00

6%
102,052,000.00

97.180%
2,862,000.00

2015
121,651,200.00

7%

8%

109,357,000.00
97.048%

3,150,000.00

118,001,664.00
97.085%

97%

3,310,000.00

3,649,536.00

3%

3%

3%

3%

40%

40%

40%

40%

1,717,200.00

1,890,000.00

1,986,000.00

2,189,721.60

2,974,110.00

3,154,680.00

3,379,200.00

3,649,536.00

3.0%

3.0%

3.0%

3.0%

-1,480,000.00

-2,083,000.00

-1,993,000.00

4,838,843.69

91,000.00

201,000.00

-501,000.00

128,976.00
871,437.91
0.99
862,723.53

-203,853,546.91

-2,262,000.00

-2,061,000.00
-2%

-2,562,000.00

-2,433,024.00

-2%

-2%

-2%

91,000.00

201,000.00

-501,000.00

128,976.00

13,614,000.00

14,443,000.00

15,436,000.00

20,274,843.69

908,000.00

946,000.00

1,029,000.00

4,678,536.00

12,706,000.00

13,497,000.00

14,407,000.00

15,596,307.69

7.80

7.79

7.82

7.80

-1,480,000.00

-2,083,000.00

-1,993,000.00

4,838,843.69

-1%

-2%

-2%

4%

14,779.00

19,450.00

20,721.00

12,361.00

10,833.00

12,303.00

27,140.00

30,283.00

33,024.00

1.20

1.80

1.68

1.56

54%

64%

63%

61%

Cost of Capital Parameters

Market Risk Premium

-1.65%

Risk Free Rate

1.99%

Tax Rate

40.00%

Cost of Debt

2.89%

Common Equity Beta (levered)

rE
WACC
Terminal growth rate
g

0.510
1.15%
1.51%

3%

NOTES:

All assumptions made are in red numbers

Sales growth slows down during the growth period, and assumed 3% in the long run
Cost of sales maintained as historically based on % sales
Historical depreciation taken from income statement, forecasted depreciation assumed to remain at 3
Capx based on historical turnover ratio
Net Working Capital based on historical average of % Sales
D/V target assumed at 45% (industry average)
Capex = Depreciation at terminal year

TERMINAL

FORECAST
2016

2017

130,166,784.00

2018

143,183,462.40

2019

157,501,808.64

2020

166,951,917.16

176,969,032.19

7%

10%

10%

6%

6%

126,261,780.48

138,887,958.53

152,776,754.38

161,943,359.64

171,659,961.22

97%

97%

97%

97%

97%

3,905,003.52

4,295,503.87

4,725,054.26

5,008,557.51

5,309,070.97

3%

3%

3%

3%

3%

40%

40%

40%

40%

40%

2,343,002.11

2,577,302.32

2,835,032.56

3,005,134.51

3,185,442.58

3,905,003.52

4,295,503.87

4,725,054.26

5,008,557.51

5,309,070.97

3.0%

3.0%

3.0%

3.0%

3.0%

4,996,745.06

5,964,308.80

6,560,739.67

-170,311.68

-260,333.57

-286,366.92

-189,002.17

-200,342.30

1,421,572.25

1,168,830.97

1,285,714.06

1,982,584.31

3,385,784.88

6,220,109.89 5,309,070.97

-233,370,368.05
0.97

0.96

0.94

0.93

0.91

1,378,925.09

1,122,077.73

1,208,571.22

1,843,803.40

-209,285,970.69

-2,603,335.68

-2,863,669.25

-3,150,036.17

-3,339,038.34

-3,539,380.64

-2%

-2%

-2%

-2%

-2.0%

170,311.68

260,333.57

286,366.92

189,002.17

200,342.30

25,271,588.75

31,235,897.55

37,796,637.22

44,016,747.11

8,583,539.52

12,879,043.39

17,604,097.65

22,612,655.17

16,688,049.23

18,356,854.15

20,192,539.57

21,404,091.94

7.80

7.80

7.80

7.80

4,996,745.06

5,964,308.80

6,560,739.67

6,220,109.89

4%

4%

4%

4%

0%

1.56

1.56

1.56

1.56

1.56

61%

61%

61%

61%

61%

27,921,726.13
7.80

Firm Value

-203,853,546.91

Debt

20,721.00

Equity Value

-203,874,267.91

N. shares (millions)
Price

439,970,000.00
-0.46

% in the long run

preciation assumed to remain at 3% as historical

Compare with 144,57

Sensitivity Analysis
Beta
0.6
0.75
0.8
0.9
0.95

Terminal growth rate g

1%
2%

3%

4%