Student Name: Instructor
Class: McGraw-Hill/Irwin
Problem 10-08
ELECTROLUX CORPORATION
Requirement 1:
Bond Issue Price
Principal: $453,920
Interest: 230,707
Bond issue price $684,627
Correct!
Why are both stated and effective-interest rates used?
Requirement 2:
Straight-line Amortization
2011 2012 2013 2014 2015
Cash interest payment 64,000$ 64,000$ 64,000$ 64,000$ 64,000$
Requirement 3:
Bond Payment Schedule
Cash Interest Amortization Net
Date Payment Expense of Discount Liability
1/1/2011 684,627$
Explanation of constant interest rate:
Requirement 4:
Which amortization method should be used? Which method is preferred? Why?
The stated rate of interest is used only to compute the periodic cash interest payments of $64,000. This amount is
A constant interest rate can be demonstrated each year by dividing interest expense by the net liability – the answer on
all lines will be the effective rate (12%).
Maturity (par) value 800,000$
ELECTROLUX CORPORATION
Given Data P10-08:
Problem 10-09
McGraw-Hill/Irwin
Instructor
VIGELAND CORPORATION
Maturity (par) value 2,000,000$
VIGELAND CORPORATION
Given Data P10-09:
Student Name:
Class:
Problem 10-12
Requirement 1:
Date Cash Interest Amortization Balance
January 1, 2011 48,808$
Note: Add $6 to 2012 interest for rounding error
Requirement 2:
Maturity amount of bonds 48,000 Correct!
Requirement 3:
Cash received at date of bond issuance 48,808$ Correct!
Requirement 4:
Was there a premium or discount? Premium Correct!
How much? 808$ Correct!
Requirement 5:
Cash disbursed for interest each period: 3,600$ Correct!
Cash disbursed for interest during full life: 14,400$ Correct!
Requirement 6:
Method of amortization and explanation:
Requirement 7:
Stated rate of interest: 7.5% Correct!
Requirement 8:
Effective rate of interest: 7% Correct!
Requirement 9:
Annual interest expense:
2011 3,417$ Correct!
2012 3,404 Correct!
2013 3,390 Correct!
2014 3,381 Correct!
Requirement 10:
Balance sheet:
Bonds payable, 7.5% Maturity amount
$48,000, plus unamortized premium 48,625 48,429 48,219 48,000
McGraw-Hill/Irwin
Instructor
(amounts in thousands)
Bond Amortization Schedule
MBTA CORPORATION
End of year 2011 3,600$ 3,417$ 183$ 48,625
End of year 2012 3,600 3,404 196 48,429
End of year 2013 3,600 3,390 210 48,219
End of year 2014 3,600 3,381 219 48,000
Date Cash Interest Amortization Balance
January 1, 2011 48,808$
MBTA CORPORATION
(amounts in thousands)
Bond Amortization Schedule
Given P10-12:
Required:
1.
This workbook is organized as follows:
Sheet Name Contents
CP10-3 (this worksheet) CP10-3 Problem Requirements and Workbook Layout
Industry Ratio Report Industry Ratio Report
AEO Balance Sheets American Eagle Outfitters, Inc. Consolidated Balance Sheets
AEO Income Statements American Eagle Outfitters, Inc. Consolidated Statements of Operations
CP10-3 Comparing Companies within an Industry
Examine the statements of cash flow for both companies. What is the primary source for cash flow for both companies?
Liquidity
Current Ratio 2.55
Company
Name
Ticker
Symbol
Quick Ratio 1.38 ANF
ARO
Activity AEO
Inventory
5.92 ANN
Payable
GES
Profitability JCG
Gross Profit
Margin
38.99% LTD
Profit Margin
Net Profit
Margin
Return on
Equity
Return on
Assets
Quality of
0.07 MW
The Men’s Warehouse Inc
The Buckle Inc
Ross Stores Inc
Pacific Sunwear of California Inc
Operating
6.24% JWN
Income
0.72 URBN
Leverage WTSLA
Earned
Interest
16.39
Total
1.08
Total
1.92
Times Interest
16.33
Assets/Total
Dividends
Dividend
Payout
19.61%
Dividend Yield 2.22%
Other
Sales
Sales Growth 2.39%
Capital
Acquisitions
1.93
Advertising-to-
2.39%
Abercrombie & Fitch
J. Crew Group Inc
Ann Taylor Stores
Guess? Inc
COMPANIES USED IN INDUSTRY ANALYSIS
American Eagle Outfitters
Aeropostale Inc
INDUSTRY RATIO REPORT
Retail Family Clothing Stores
Wet Seal Inc.
Urban Outfitters Inc
Nordstrom, Inc.
Limited Brands Inc
Turnover
Days to Sell
Inventory
70.897 days BEBE
Receivables
Turnover
54.24 CHS
Average
Collection
15.07 days PSS
Fixed Asset
Turnover
5.76 DBRN
Total Asset
Turnover
1.90 FL
Accounts
6.43 GPS
Collective Brands Inc
Chico’s FAS Inc
bebe stores Inc
Gap Inc
Foot Locker, Inc
Dress Barn Inc.
January 31, February 2,
(in thousands, except per share amounts) 2009 2008
$ 473,342 $ 116,061
740,240 625,568
10,706 11,479
251,007 165,810
15,001 24,238
21,363 19,751
Non-current deferred income taxes
Other assets, net
Total assets
Long-term investments
Goodwill
Property and equipment, at cost, net of accumulated depreciation and amortization
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
Short-term investments
Cash and cash equivalents
Current assets:
10,511 503,878
294,928 286,485
41,471 31,920
59,660 35,486
45,447 47,004
925,359 1,020,834
Total current assets
Deferred income taxes
Prepaid expenses and other
Accounts and note receivable
Merchandise inventory
$ 152,068 $ 157,928
$ 75,000 $ –
29,417 49,494
64,695 62,161
88,314 70,355
39,898 44,837
24,670 35,846
152,882 151,038
– –
Commitments and contingencies
share issued; 205,281 and 204,480 shares outstanding , respectively
Common stock, $0.01 par value; 600,000 shared authorized; 249,328 and 248,763 shares
Preferred stock, $0.01 par value; 5,000 shares authorized; none issued and outstanding
Total stockholders’ equity
Treasury stock, 43,248 and 43,596 shares, repectively, at cost
513,574 493,395
(14,389) 35,485
1,694,161 1,601,784
LIABILITIES AND STOCKHOLDERS’ EQUITY
Notes payable
Non-current accrued income taxes
Accrued rent
Deferred lease credits
Retained earnings
Accumulated other comprehensive (loss) income
Accrued compensation and payroll taxes
Accounts payable
Current liabilities:
Contributed capital
Total non-current liabilities
Other non-current liabilities
Non-current liabilities:
6,259 22,803
42,299 54,554
13,726 12,953
18,299 16,285
401,763 376,178
Current portion of deferred lease credits
Unredeemed stored value cards and gift certificates
Other liabilities and accrued expenses
Accrued income and other taxes
Total current liabilities
January 1, February 2, February 3,
(In thousands, except per share amounts) 2009 2008 2007
Net sales $ 2,988,866 $ 3,055,419 $ 2,794,409
Cost of sales, including certain buying, occupancy and
warehousi
ng
1,814,765 1,632,281 1,453,980
temporary
Income
before
297,041 636,381 629,067
Provision for
income
117,980 236,362 241,708
Net income $ 179,061 $ 400,019 $ 387,359
Basic
income per
Diluted
$ 0.87 $ 1.85 $ 1.74
income per
$ 0.86 $ 1.82 $ 1.70
Weighted average common shares outstanding – basic
205,169 216,119 222,662
Weighted average common shares outstanding – diluted
207,582 220,280 228,384
For the Years Ended
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Gross profit 1,174,101 1,423,138 1,340,429
740,742 715,180 665,606
Depreciation
131,219 109,203 88,033
Other
income, net
17,790 37,626 42,277
22,889 – –
CP10-3
Home
January 1, February 2, February 3,
(In thousands) 2009 2008 2007
197 242 356
(378) 947 (191)
– – (177)
– – 878
(49,874) 13,771 (314)
transfer of investment securities from available-for-sale classification
Comprehensive income
Other comprehensive (loss) income
Reclassification adjustment for foreign currenty loss reasinzed in net
income realted to the disposition of National Logistics Services
to trading classification, net of tax
the sale of available-for-sale securities, net of tax
Reclassification adjustment for losses realized in net income due to
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended
Net income
Reclassification adjustment for gain realized in net income realted to the
Unrealized (loss) gain on investments, net of tax
$ 179,061 $ 400,019 $ 387,359
related to ARS
Reclassification adjustment for OTTI charges realized in net income
Other comprehensive (loss) income:
Accumulated
Shares Deferred Other
Outstanding Common Contributed Retained Treasury Compensation Comprehensive Stockholders’
(1) Stock Capital Earnings Stock (2) Expense Income (loss) Equity
221,897 $ 2,416 $ 369,807 $ 978,855 $ (216,513) $ (1,041) $ 22,028 $ 1,155,552
– – – – – (314) (314)
– – – (61,521) – – – (61,521)
221,284 2,461 453,418 1,302,345 (362,626) – 21,714 1,417,312
– – – (13,304) – (13,304)
221,284 2,461 453,418 1,289,041 (362,626) – 21,714 1,404,008
1,092 20 39,977 – – – – 39,997
(18,750) – – – (438,291) – – (438,291)
(415) – – – (12,310) – – (12,310)
1,269 – – (6,480) 20,546 – – 14,066
204,480 2,481 493,395 1,601,784 (792,681) – 35,485 1,340,464
453 4 20,179 420 – – – 20,603
Stock awards
Net income
Repurchase of common stock from employees
of publicly announced programs
Balance at February 2, 2008
Cash dividends ($0.98 per share)
Other comprehensive income, net of tax
Repurchase of common stock as part
Stock awards
(164) – – – (3,432) – – (3,432)
512 – – (4,710) 9,313 – – 4,603
– – – 179,061 – – – 179,061
– – – – – – (49,874) (49,874)
Cash dividends ($0.40 per share)
Repurchase of common stock from employees
Reissuance of treasury stock
Other comprehensive loss, net of tax
Net income
Other comprehensive loss, net of tax
Adoption of FIN 48
Balance at February 3, 2007
Balance at February 4, 2007
AMERICAN EAGLE OUTFITTERS, INC.
Cash dividends ($0.28 per share)
Balance at January 31, 2006
(in thousands, except per share amounts)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
4,556 45 83,615 – – 1,041 – 84,701
(5,250) – – (146,485) – – (146,485)
(4) – (113) – – – – (113)
528 – 109 (2,348) 8,007 – – 5,768
announced programs
Repurchase of common stock as part of publicly
Stock awards
Net income
stock split
Cash paid for fractional shares in three-for-two
Reissuance of treasury stock
January 31, February 2, February 3,
(In thousands) 2009 2008 2007
Operating activities:
Net income
$ 179,061 $ 400,019 $ 387,359
Adjustments to reconcile income to net cash provided by operating activities:
Depreciation and amortization
133,141 110,753 89,698
Stock-based compensation
20,296 33,670 36,556
Prepaid expenses and other
(24,781) (1,334) (4,204)
Other assets, net
390 (3,242) (5,357)
Accounts payable
(3,053) (15,559) 32,345
Unredeemed gift cards and gift certificates
(11,392) (699) 11,623
Deferred lease credits
18,887 4,640 7,791
(20,697) (31,416) 43,482
(19,188) (2,598) 33,047
123,132 64,251 361,909
302,193 464,270 749,268
(265,335) (250,407) (225,939)
– – 12,345
(48,655) (1,772,653) (1,353,339)
393,559 2,126,891 915,952
(1,180) (1,170) (140)
Net cash provided by (used for) investing activities
78,389 102,661 (651,121)
Financing activities:
Payments on note payable and capital leases
(2,177) (1,912) (3,020)
Proceeds from issuance of note payable
75,000 – 2,025
Repurchase of common stock as part of publicly announced programs
– (438,291) (146,485)
(3,432) (12,310) (7,635)
– – (113)
3,799 13,183 28,447
693 6,156 19,541
(82,394) (80,796) (61,521)
(8,511) (513,970) (168,761)
(14,790) 3,363 (178)
357,281 56,324 (70,792)
116,061 59,737 130,529
Cash and cash equivalents – end of period
AMERICAN EAGLE OUTFITTERS, INC.
For the Years Ended
CONSOLIDATED STATEMENTS OF CASH FLOWS
24,469 (8,147) (27,572)
1,121 7,260 25,465
(693) (6,156) (19,541)
(1,141) 1,221 687
6,713 592 –
22,889 – –
(13,735) (19,074) (53,527)
(10,094) (5,660) 7,448
2009 2008
$ 316,035 $ 49,912
5,919 4,694
Total current assets 624,402 385,183
Accrued compensation
Accrued expenses and other current liabilities
Accounts payable
Retained earnings
505,407 299,291
155,226 64,748
43,974 19,983
1,329,009$ 769,205$
none issued – –
167,712,088 and 166,104,615 issued and outstanding respectively 17 16
170,166 134,146
Total Assets
Additional paid-in capital
Preferred shares; $.0001 par value, 10,000,000 shares authorized,
Common shares; $.0001 par value, 200,000,000 shares authorized,
Deferred taxes
Property and equipment, net
Marketable securities
Deferred income taxes and other assets
(in thousands, except share and per share data)
Consolidated Balance Sheets
URBAN OUTFITTERS, INC.
Current Assets:
Cash and cash equivalents
January 31,
ASSETS
Marketable securities
Accounts receivable, net of allowance for doubtful accounts of $1,229
Prepaid expenses and other current assets
2009 2008 2007
Net sales 1,834,618$ 1,507,724$ 1,224,717$
Cost of sales, including certain buying, distribution
and occupancy costs 1,121,140 930,952 772,796
Gross profit 713,478 576,772 451,921
Selling, general and administrative expenses 414,043 351,827 287,932
Income from operations 299,435 224,945 163,989
Consolidated Statements of Income
URBAN OUTFITTERS, INC.
Fiscal Year Ended January 31,
(in thousands, except share and per share data)
Interest income 11,504 9,390 6,531
Other income 694 575 353
Other expenses (2,143) (515) (715)
Income before income tax expense 309,490 234,395 170,158
Income tax expense 110,126 74,164 53,952
Net income per common share:
Weighted average common shares outstanding:
Accumulated
Additional Other
Comprehensive Number of Par Paid-in Unearned Retained Comprehensive
Income Shares Value Capital Compensation Earnings Income (loss) Total
Balances as of February 1, 2006 164,831,477 16$ 138,050$ (3,905)$ 426,190$ 528$ 560,880$
Net Income 116,206$ – – – – 116,206 – 116,206
Foreign currency translation 3,614 – – – – – 3,614 3,614
Unrealized losses on marketable securities,
net of tax 142 – – – – – 142 142
Comprehensive income 119,962$
Share-based compensation – – 3,497 – – 3,497
Unearned compensation reclass – – (3,905) 3,905 – – –
Share-based compensation – – 3,277 – – – 3,277
Exercise of stock options 1,117,152 – 5,000 – – – 5,000
Tax effect of share exercises – – 7,341 – – – 7,341
Balances as of January 31, 2008 166,104,615 17 144,204 – 701,975 7,235 853,431
Net income 199,364 – – – – 199,364 – 199,364
Foreign currency translation (19,866) – – – – – (19,866) (19,866)
Unrealized losses on marketable securities,
net of tax (5,116) – – – – – (5,116) (5,116)
Comprehensive income 174,382$
Share-based compensation – – 3,637 – – – 3,637
Exercise of stock options 1,607,473 – 8,891 – – – 8,891
Tax effect of share exercises – – 13,434 – – – 13,434
Balances as of January 31, 2009 167,712,088 17$ 170,166$ –$ 901,339$ (17,747)$ 1,053,775$
Consolidated Statements of Shareholders’ Equity
URBAN OUTFITTERS, INC.
(in thousands, except share data)
Common Shares
Exercise of stock options 1,375,986 1 6,350 – – – 6,351
Tax effect of share exercises – 5,394 5,394
Share Repurchase (1,220,000) – (20,801) – – – (20,801)
Balances as of January 31, 2007 164,987,463 17 128,586 – 542,396 4,284 675,283
Net income 160,231 – – – – 160,231 – 160,231
Foreign currency translation 703 – – – – – 703 703
FIN48 adjustment – (652) (652)
Unrealized gains on marketable securities,
net of tax 2,248 – – – – – 2,248 2,248
Comprehensive income 163,182$
2009 2008 2007
Cash flows from operating activities:
Net income 199,364$ 160,231$ 116,206$
Accounts payable, accrued expenses and other liabilities (8,868) 75,967 33,600
Net cash provided by operating activities 251,570 254,353 187,117
Cash flows from investing activities:
Cash flows from financing activities:
Exercise of stock options 8,891 5,000 6,351
Excess tax benefit of stock options exercises 13,434 7,341 5,394
Share repurchases – – (20,801)
Net cash provided by (used in) financing activities 22,325 12,341 (9,056)
Effect of exchange rate changes on cash and cash equivalents (6,224) 212 702
Increase (decrease) in cash and cash equivalents 210,764 78,004 (22,645)
Cash and cash equivalents at beginning of period 105,271 27,267 49,912
Cash and cash equivalents at end of period 316,035$ 105,271$ 27,267$
Supplemental cash flow information:
Cash paid during the year for:
Income taxes 115,040$ 70,765$ 52,535$
Non-cash investing activities – Accrued capital expenditures 6,561$ 6,645$ 14,618$
Cash paid for property and equipment (112,553) (115,370) (212,029)
Cash paid for marketable securities (809,039) (293,633) (182,653)
(in thousands)
Consolidated Statements of Cash Flows
URBAN OUTFITTERS, INC.
Fiscal Year Ended January 31,
Adjustments to reconcile net income to net cash provided by operating activities: