Analyzing, Forecasting, and Interpreting Income Statement and Balance Sheet Following are the income statement and balance sheet of Whole Foods Market, Inc. Income Statement, For Years Ended (in $ 000s) 2010 2009 Sales $ 9,005,794 $ 8,031,620 Cost of goods sold and occupancy costs 5,870,393 5.277 310 Gross profit 3,135,401 2,754,310 Direct store expenses 2.375,716 2,145,809 General administrative expenses 272.449 243,749 Pre-opening expenses 38,044 49,218 Relocation, store closures and lease termination costs 11,217 31,185 Operating income 437,975 284,349 Interest expense (33,048) (36,856) Investment and other income 6,854 3.449 Income before income taxes 411,781250,942 Provision for income taxes 165.948 104,138 Net income $ 245,833 $ 146,804 Balance Sheet($ 000s) 2010 2009 Assets Cash and cash equivalents $ 131,996 $430,130 Short-term investments available-for-sale securities 329,738 Restricted cash 86,802 71,023 Accounts receivable 133,346 104,731 Merchandise inventories 323,487 310,602 Prepaid expenses and other current assets 54,686 51,137 Deferred income taxes 101,464 87,757 Total current assets 1,161,519 1,055,380 Property and equipment, net of accum depr and amortization 1,886,130 1,897,853 Long-term investments--available-for-sale securities 96,146 Goodwill 665,224 658,254 Intangible assets, net of accumulated amortization 69,064 73,035 Deferred income taxes 99,156 91,000 Other assets 9.301 7,866 Total assets 53,986,540 $ 3.783,388 Liabilities and shareholders' equity Current installments of long-term debt and capital lease obligations $410 $ 389 Accounts payable 213,212 189,597 Accrued payroll, bonus and other benefits due team members 244,427 207.983 Dividends payable 8,217 Other current liabilities 289.823 277,838 Total current liabilities 747,872 684,024 Long-term debt and capital lease obligations, less current installments 508,288 738,848 Deferred lease liabilities 294,291 250,326 Other long-term liabilities 62.831 69,262 Total liabilities 1,613,282 1,742,460 Series A redeemable preferred stock; $0.01 par value 413,052 Shareholders' equity: Common stock, no par value 1,773,897 1,283,028 Accumulated other comprehensive income 791 (13,367) Retained earnings 598,570 358,215 Total shareholders' equity 2373,258 1.627.876 Total liabilities and shareholders' equity $ 3,986,540 $ 3.783,388 Analyzing, Forecasting, and Interpreting Both Income Statement and Balance Sheet Following are the income statements and balance sheets of Best Buy Co., Inc. 52 Income Statement, Fiscal Years Ended ($ millions) Feb. 26, 2011 Feb. 27, 2010 Revenue $ 50,272 $ 49,694 Cost of goods sold 37,611 37,534 Restructuring charges - cost of goods sold 24 Gross profit 12,637 12,160 Selling, general and administrative expenses 10,325 9,873 Restructuring charges 198 Goodwill and tradename impairment Operating income 2,114 2,235 Other income (expenses) Investment income and other 51 54 Interest expense (87) (94) Earnings before income tax expense and equity in income of affiliates 2,078 2,195 Income tax expense 714 802 Equity in income of affiliates Net earnings including noncontrolling interests 1.366 1,394 Net earnings attributable to noncontrolling interests (89) (77) Net earnings attributable to Best Buy Co., Inc. $ 1,277 $ 1,317 95 Balance Sheet (5 millions) Feb. 26, 2011 Feb. 27, 2010 Assets Cash and cash equivalents $ 1,103 $ 1,826 Short-term investments 22 Receivables 2.348 2020 Merchandise inventories 5,897 5,486 Other current assets 1,103 1,144 Total current assets 10,473 10,566 Property and equipment Land and buildings 766 757 Leasehold improvements 2,318 2,154 Fixtures and equipment 4,701 4,447 Property under capital lease 120 Gross property and equipment 7.905 7,453 Less accumulated depreciation 4,082 3,383 Net property and equipment 3,823 4,070 Goodwill 2,454 2,452 Tradenames, Net 133 159 Customer Relationships, Net 203 279 Equity and Other Investments 328 324 Other assets 435 Total assets $ 17849 $ 18,302 Liabilities and Equity Accounts payable $ 4,894 $ 5.276 Unredeemed giftcard liabilities 474 463 Accrued compensation and related expenses 570 544 Accrued liabilities 1,471 1,681 Accrued income taxes 256 316 Short-term debt 557 663 Current portion of long-term debt 35 Total current liabilities 8,663 8,978 Long-term liabilities 1.183 1.256 Long-term debt 711 1,104 Best Buy Co., Inc. Shareholders' Equity Preferred stock, $ 1.00 par value: Authorized-400,000 shares; Issued and outstanding-none Common stock $0.10 par value: Authorized-1.0 billion shares; Issued and outstanding-392,590,000 and 418,815,000 shares, respectively 39 42 Additional paid in capital 441 Retained earnings 6,372 5,797 Accumulated other comprehensive income 40 Total Best Buy Co., Inc. shareholders' equity 6,602 6.320 Noncontrolling interests 644 Total equity 7,292 6,964 Total liabilities and shareholders' equity $ 17,849 $ 18,302 441 173 690 596 Forecast Best Buy's fiscal 2012 income statement using the following relations (assume "no change for accounts not listed). Revenue growth Cost of good sold/Revenue 74.8% Restructuring charges - cost of good sold Selling, general and administrative expenses/Revenue 20.5% Restructuring charges Goodwill and trademark impairment Investment income and other $51 Investment impairment Interest expense $87 Income tax expense/Pretax income 34.4% Equity in income of affiliates Net earnings attributable to noncontrolling interests/Net earnings including noncontrolling interests 6.5% $2 Round all answers to nearest whole number. Do not use negative signs with your answers in the income statement. 2012 Estimated $ 52,786 39,484 0 13,302 10,821 0 2,481 Income Statement, Fiscal Years Ended (5 millions) Revenue Cost of goods sold Restructuring charges - cost of goods sold Gross profit Selling, general and administrative expenses Restructuring charges Goodwill and tradename impairment Operating income Other income/expenses Investment income and other Interest expense Earnings before income tax expense and equity in income of affiliates Income tax expense Equity in income of affiliates Net earnings including noncontrolling interests Net earnings attributable to noncontrolling interests Net earnings attributable to Best Buy Co., Inc. 51 87 2,445 841 2 1,606 104 1,502 Forecast Best Buy's fiscal 2012 balance sheet using the following relations (assume no change for accounts not listed). Assume that all capital expenditures are purchases of property and equipment. Short-term investments No change Receivables/Revenue Merchandise inventories/Revenue Other current assets/Revenue CAPEX (increase in gross Property and equipment Revenue Goodwill No change Amortization expense for Tradenames Amortization expense for Customer relationships Equity and Other Investments No change Other Assets/Revenue Accounts payable/Revenue Unredeemed gift card liabilities/Revenue Accrued compensation and related expenses/Revenue Accrued liabilities/Revenue Accrued income taxes/Revenue 0.5% Long-term liabilities No change Noncontrolling interests Depreciation/Prior year gross PPE 12.0% Amortization/Prior year intangible asset balance 18.7 Dividends/Net income 18.6% Long-term debt payments required in fiscal 2013 increase by net income attributable to noncontrolling interests and assume no dividends - Round all answers to the nearest whole number - Do not use negative signs with your answers in the balance sheet. 2012 Estimated 792 x 22 2,481 6,176 1,161 11,001 x 8,697 5,031 3,666 2.454 108 165 328 475 18,918 x Balance Sheet ($ millions) Assets Cash and cash equivalents Short-term investments Receivables Merchandise inventories Other current assets Total current assets Property and equipment Gross property and equipment Less accumulated depreciation Net property and equipment Goodwill Tradenames, Net Customer Relationships, Net Equity and Other Investments Other assets Total assets Liabilities and equity Accounts payable Unredeemed gift card liabilities Accrued compensation and related expenses Accrued liabilities Accrued income taxes Short-term debt Current portion of long-term debt Total current liabilities Long-term liabilities Long-term debt Best Buy Co. Inc. Shareholders' Equity Preferred stock, $1.00 par value: Authorized - 400,000 shares; Issued and outstanding - none Common stock, $0.10 par value: Authorized - 1.0 billion shares; Issued and outstanding. 392.590,000 and 418,815,000 shares, respectively Additional paid-in capital Retained earnings Accumulated other comprehensive income Total Best Buy Co., Inc. shareholders' equity Noncontrolling interests Total equity Total liabilities and Equity 5,120 475 581 1.531 264 557 37 8,565 1.183 674 0 39 18 7,558 x 173 7,789 X 808 8.596 x 18.198 X $