add question (b) Comment on what the reformulated financial statements tell you about Yorks strategy
York Inc is a consumer products firm listed in the US stock markets. Its Balance Sheet and Income Statements for the years ending 2019 and 2018 are given below. The Reformulated Statement of Stockholders Equity for the years ending 2019 and 2018 are given below. YORK INC. INCOME STATEMENTS Consolidated Income Statement 12 Months Ended Dec. 31, Dec. 31, in USD millions, except per share data 2019 2018 Net Sales 23.815 22,938) Cost of goods sold 15,835 15,234 Gross Profit 7,980 7,704 Sales and general expenses 4,528 4,198 Other (income) and expense, net 185 116 Operating Profit 3,267 3,390 Interest income 24 311 Interest expense (292) (330) Income before tax and other operating income 2,999 3,091 Provision for income taxes (946) (895) Income before other operating income 2,053 2,196) Share of net income of equity companies 277 197 Net Income 2,330 2,393 Net income attributable to NCI (120) (132) Net Income Attributable to Common 2,210 2,261 Earnings Per Share Basic Net Income Attributable to Common 3.12 3.191 Diluted Net Income Attributable to Common 3.09 3.16 Dec. 31, 2019 Dec. 31, 2018 1,091 2,966 2621 2.848 958 3,079 242 2.440 224 163 203 7,594 10.027 4491 2.884 3861 430 868 22.638 155 7,037 9.640 4261 2.730 372 728 9181 21.851 YORK INC. BALANCE SHEETS Consolidated Balance Sheet in USD millions Current Assets Cash and cash equivalents Accounts receivable, net Notes receivable Inventories Deferred income taxes Other current assets Total Current Assets Property. Plant and Equipment, net Investments in Equity Companies Goodwill Other Intangible Assets Long-Term Notes Receivable Other Assets Total Assets Current Liabilities Debt payable within one year Trade accounts payable Accrued expenses Accrued income taxes Dividends payable Total Current Liabilities Long-Term Debt Noncurrent Employee Benefits Deferred Income Taxes Other Liabilities Stockholders' Equity Preferred stock. 10 million shares outstanding Common stock - 708 million shares outstanding Additional paid-in capital Common stock held in treasury -70 million shares Accumulated other comprehensive income (loss) Retained earnings Total Stockholders' Equity available to CSE Noncontrolling interests Total Stockholders' Equity Liabilities and Stockholders' Equity, Total 2931 3,903 1.331 1251 3231 5,975 5,784 2,412 7551 2691 732 3,565 1.277 95 3001 5.969 5.750 2.387 654 262 10 10 708 S10 (5,671) 708 479 (4,904) (1.759) 13,303 7,101 342 7,443 22,638 (2.200) 12.395 6,488 341 6.829 21,851 Liabilities and Stockholders' Equity, Total 22,638 20.251 Reformulated Statement of Stockholders Equity (in USD millions) Balance at December 31, 2017 5.795 Transactions with Shareholders Stock issues for stock options 490 Stock repurchases (1.107 Cash Dividend (1,458) Total Transactions with Shareholders (2,075) Comprehensive income Net income reported 2.261 Net translation pain (loss) 743 Pension adjustment (38) Other Total Comprehensive income for 2018 3OSK Balance at December 31, 2018 6,778 2 Balance at December 31, 2018 6,778 Transactions with Shareholders Stock issues for stock options 178 Stock ropurchases 1971) Cash Dividend k1.279) Total Transactions with Shareholders | 12.072) Comprehensive income Net income reported 2.210 Net translation gain (los) 391 Pension adjustment Other 39 Total Comprehensive income for 2018 | 2.708 Balance at December 31, 2019 Notes: The firm bears a 35% statutory tax rate. Working cash is estimated to be S120 million and $115 million for 2019 and 2018 respectively. Notes receivable bear interest of 8% per calendar year. Required: a) Prepare the Reformulated Balance Sheet and Income Statements for the years 2019 and 2018 in preparation for valuation York Inc is a consumer products firm listed in the US stock markets. Its Balance Sheet and Income Statements for the years ending 2019 and 2018 are given below. The Reformulated Statement of Stockholders Equity for the years ending 2019 and 2018 are given below. YORK INC. INCOME STATEMENTS Consolidated Income Statement 12 Months Ended Dec. 31, Dec. 31, in USD millions, except per share data 2019 2018 Net Sales 23.815 22,938) Cost of goods sold 15,835 15,234 Gross Profit 7,980 7,704 Sales and general expenses 4,528 4,198 Other (income) and expense, net 185 116 Operating Profit 3,267 3,390 Interest income 24 311 Interest expense (292) (330) Income before tax and other operating income 2,999 3,091 Provision for income taxes (946) (895) Income before other operating income 2,053 2,196) Share of net income of equity companies 277 197 Net Income 2,330 2,393 Net income attributable to NCI (120) (132) Net Income Attributable to Common 2,210 2,261 Earnings Per Share Basic Net Income Attributable to Common 3.12 3.191 Diluted Net Income Attributable to Common 3.09 3.16 Dec. 31, 2019 Dec. 31, 2018 1,091 2,966 2621 2.848 958 3,079 242 2.440 224 163 203 7,594 10.027 4491 2.884 3861 430 868 22.638 155 7,037 9.640 4261 2.730 372 728 9181 21.851 YORK INC. BALANCE SHEETS Consolidated Balance Sheet in USD millions Current Assets Cash and cash equivalents Accounts receivable, net Notes receivable Inventories Deferred income taxes Other current assets Total Current Assets Property. Plant and Equipment, net Investments in Equity Companies Goodwill Other Intangible Assets Long-Term Notes Receivable Other Assets Total Assets Current Liabilities Debt payable within one year Trade accounts payable Accrued expenses Accrued income taxes Dividends payable Total Current Liabilities Long-Term Debt Noncurrent Employee Benefits Deferred Income Taxes Other Liabilities Stockholders' Equity Preferred stock. 10 million shares outstanding Common stock - 708 million shares outstanding Additional paid-in capital Common stock held in treasury -70 million shares Accumulated other comprehensive income (loss) Retained earnings Total Stockholders' Equity available to CSE Noncontrolling interests Total Stockholders' Equity Liabilities and Stockholders' Equity, Total 2931 3,903 1.331 1251 3231 5,975 5,784 2,412 7551 2691 732 3,565 1.277 95 3001 5.969 5.750 2.387 654 262 10 10 708 S10 (5,671) 708 479 (4,904) (1.759) 13,303 7,101 342 7,443 22,638 (2.200) 12.395 6,488 341 6.829 21,851 Liabilities and Stockholders' Equity, Total 22,638 20.251 Reformulated Statement of Stockholders Equity (in USD millions) Balance at December 31, 2017 5.795 Transactions with Shareholders Stock issues for stock options 490 Stock repurchases (1.107 Cash Dividend (1,458) Total Transactions with Shareholders (2,075) Comprehensive income Net income reported 2.261 Net translation pain (loss) 743 Pension adjustment (38) Other Total Comprehensive income for 2018 3OSK Balance at December 31, 2018 6,778 2 Balance at December 31, 2018 6,778 Transactions with Shareholders Stock issues for stock options 178 Stock ropurchases 1971) Cash Dividend k1.279) Total Transactions with Shareholders | 12.072) Comprehensive income Net income reported 2.210 Net translation gain (los) 391 Pension adjustment Other 39 Total Comprehensive income for 2018 | 2.708 Balance at December 31, 2019 Notes: The firm bears a 35% statutory tax rate. Working cash is estimated to be S120 million and $115 million for 2019 and 2018 respectively. Notes receivable bear interest of 8% per calendar year. Required: a) Prepare the Reformulated Balance Sheet and Income Statements for the years 2019 and 2018 in preparation for valuation
