Question
Financial Statement Analysis Guidance The required tasks are detailed below: (1) Prepare common-size balance sheets and income statements for both companies. Note: Compute for the
Financial Statement Analysis
Guidance
The required tasks are detailed below:
(1) Prepare common-size balance sheets and income statements for both companies. Note: Compute for the Fiscal year 2015, 2014 and 2013.
(2) Prepare comparative analysis (i.e., change of percentage analysis) on income statement and balance sheet for both companies. You should compute for the Fiscal year 2015, 2014 and 2013.
(3) Prepare ratio analyses (for the Fiscal year 2015, 2014 and 2013 time period) for both companies. At least, you should include the following ratios in your computations: (1) current ratio, (2) acid-test ratio, (3) receivables turnover, (4) inventory turnover, (5) asset turnover, (6) profit margin on sales, (7) rate of return on assets, (8) rate of return on common stock equity, (9) debt to total assets ratio.
You will be analyzing the following firms:
Williams-Sonoma, Inc.
Pier 1 Imports, Inc.
For these firms, download the most recent annual report (10-K report) to begin your work. In 10-K reports, you can find companies basic information, financial statements, footnotes to the financials, and the management discussions and analyses. Please download the 10-K reports from the following web links:
10-K reports (fiscal year 2015) for Williams-Sonoma, Inc.
https://www.sec.gov/Archives/edgar/data/719955/000119312516525847/d120289d10k.htm
10-K reports (fiscal year 2014) for Williams-Sonoma, Inc.
https://www.sec.gov/Archives/edgar/data/719955/000119312515118009/d851953d10k.htm#tx851953_13
10-K reports (fiscal year 2013) for Williams-Sonoma, Inc.
https://www.sec.gov/Archives/edgar/data/719955/000119312514129974/d659151d10k.htm
10-K reports (fiscal year 2015) for Pier 1 Imports, Inc.
https://www.sec.gov/Archives/edgar/data/278130/000119312516556025/d133529d10k.htm
10-K reports (fiscal year 2014) for Pier 1 Imports, Inc.
https://www.sec.gov/Archives/edgar/data/278130/000119312515153179/d881010d10k.htm#toc881010_13
10-K reports (fiscal year 2013) for Pier 1 Imports, Inc.
https://www.sec.gov/Archives/edgar/data/278130/000119312514165673/d678776d10k.htm
For your convenience, I also provided the balance sheet and income statement of each company for fiscal year 2015, 2014, 2013 and 2012 at the end (page 5-8; Table 1-4). Please use them to prepare common-size financial statements and comparative financial statements.
Table 1. Williams-Sonoma, Inc ---- Pro Forma Balance Sheet
Williams-Sonoma, Inc. | ||||
Pro Forma BALANCE SHEET | ||||
Fiscal Years 2015, 2014, 2013 | ||||
(In thousands) | FY 2015 | FY 2014 | FY 2013 | FY 2012 |
ASSETS | ||||
Current assets | ||||
Cash and cash equivalents | 193,647 | 222,927 | 330,121 | 424,555 |
Restricted cash | 0 | 0 | 14,289 | 16,055 |
Accounts receivable, net | 79,304 | 67,465 | 60,330 | 62,985 |
Merchandise inventories, net | 978,138 | 887,701 | 813,160 | 640,024 |
Prepaid catalog expenses | 28,919 | 33,942 | 33,556 | 37,231 |
Prepaid expenses | 44,654 | 36,265 | 35,309 | 26,339 |
Deferred income taxes, net | 0 | 130,618 | 121,486 | 99,764 |
Other assets | 11,438 | 13,005 | 10,852 | 9,819 |
Total current assets | 1,336,100 | 1,391,923 | 1,419,103 | 1,316,772 |
Property and equipment, net | 886,813 | 883,012 | 849,293 | 812,037 |
Deferred income taxes, net | 141,784 | 4,265 | 13,824 | 12,398 |
Other assets, net | 52,730 | 51,077 | 54,514 | 46,472 |
Total assets | 2,417,427 | 2,330,277 | 2,336,734 | 2,187,679 |
LIABILITIES AND STOCKHOLDERS EQUITY | ||||
Current liabilities | ||||
Accounts payable | 447,412 | 397,037 | 404,791 | 259,162 |
Accrued salaries, benefits and other liabilities | 127,122 | 136,012 | 138,181 | 120,632 |
Customer deposits | 296,827 | 261,679 | 228,193 | 207,415 |
Income taxes payable | 67,052 | 32,488 | 49,365 | 41,849 |
Current portion of long-term debt | 0 | 1,968 | 1,785 | 1,724 |
Other liabilities | 58,014 | 46,764 | 38,781 | 26,345 |
Total current liabilities | 996,427 | 875,948 | 861,096 | 657,127 |
Deferred rent and lease incentives | 173,061 | 166,925 | 157,856 | 171,198 |
Long-term debt | 0 | 0 | 1,968 | 3,753 |
Other long-term obligations | 49,713 | 62,698 | 59,812 | 46,463 |
Total liabilities | 1,219,201 | 1,105,571 | 1,080,732 | 878,541 |
Stockholders equity | ||||
Preferred stock: $.01 par value; 7,500 shares authorized; none issued | 0 | 0 | 0 | 0 |
Common stock: $.01 par value; 253,125 shares authorized; | 896 | 919 | 941 | 977 |
Additional paid-in capital | 541,307 | 527,261 | 522,595 | 503,616 |
Retained earnings | 668,545 | 701,214 | 729,043 | 790,912 |
Accumulated other comprehensive loss | (10,616) | (2,548) | 6,524 | 13,633 |
Treasury stock | (1,906) | (2,140) | (3,101) | 0 |
Total stockholders equity | 1,198,226 | 1,224,706 | 1,256,002 | 1,309,138 |
Total liabilities and stockholders equity | 2,417,427 | $ 2,330,277 | 2,336,734 | 2,187,679 |
Table 2. Williams-Sonoma, Inc --- Pro Forma Statement of Income
Williams-Sonoma, Inc. | ||||
Pro Forma STATEMENT OF INCOME | ||||
Fiscal Years 2015, 2014,2013,2012 | ||||
(In thousands) | FY 2015 | FY 2014 | FY 2013 | FY 2012 |
Net revenues | 4,976,090 | 4,698,719 | 4,387,889 | 4,042,870 |
Cost of goods sold | 3,131,876 | 2,898,215 | 2,683,673 | 2,450,394 |
Gross profit | 1,844,214 | 1,800,504 | 1,704,216 | 1,592,476 |
Selling, general and administrative expenses | 1,355,580 | 1,298,239 | 1,252,118 | 1,183,313 |
Operating income | 488,634 | 502,265 | 452,098 | 409,163 |
Interest (income) expense, net | 627 | 62 | (584) | (793) |
Earnings before income taxes | 488,007 | 502,203 | 452,682 | 409,956 |
Income taxes | 177,939 | 193,349 | 173,780 | 153,226 |
Net earnings | 310,068 | 308,854 | 278,902 | 256,730 |
Table 3. Pier 1 Imports, Inc ---- Pro Forma Balance Sheet
Pier 1 Imports, Inc. | ||||
Pro Forma BALANCE SHEET | ||||
Fiscal Years 2015, 2014, 2013, 2012 | ||||
(in thousands) | FY 2015 | FY 2014 | FY 2013 | FY 2012 |
ASSETS | ||||
Current assets: | ||||
Cash and cash equivalents | 115,221 | 100,064 | 126,695 | 231,556 |
Accounts receivable, net | 22,639 | 29,405 | 24,614 | 22,309 |
Inventories | 405,859 | 478,843 | 377,650 | 356,053 |
Prepaid expenses and other current assets | 31,175 | 45,273 | 47,547 | 49,016 |
Total current assets | 574,894 | 653,585 | 576,506 | 658,934 |
Properties and equipment, net | 207,633 | 214,048 | 183,352 | 150,615 |
Other noncurrent assets | 36,664 | 39,251 | 43,765 | 47,666 |
Total assets | 819,191 | 906,884 | 803,623 | 857,215 |
LIABILITIES AND SHAREHOLDERS EQUITY | ||||
Current liabilities: | ||||
Accounts payable | 72,570 | 102,762 | 84,238 | 58,701 |
Gift cards and other deferred revenue | 64,081 | 63,002 | 57,428 | 51,740 |
Accrued income taxes payable | 6,324 | 13,505 | 14,025 | 25,249 |
Current portion of long-term debt | 2,000 | 2,000 | 0 | 0 |
Other accrued liabilities | 101,712 | 106,781 | 110,278 | 112,437 |
Total current liabilities | 246,687 | 288,050 | 265,969 | 248,127 |
Long-term debt | 200,255 | 201,426 | 9,500 | 9,500 |
Other noncurrent liabilities | 87,492 | 80,141 | 78,722 | 62,457 |
Total liabilities | 534,434 | 569,617 | 354,191 | 320,084 |
Shareholders equity: | ||||
Common stock, $0.001 par, 500,000,000 shares authorized | 125 | 125 | 125 | 125 |
Paid-in capital | 211,019 | 222,438 | 235,637 | 233,518 |
Retained earnings | 729,537 | 713,575 | 660,040 | 574,206 |
Cumulative other comprehensive loss | (10,637) | (9,985) | (6,114) | (4,828) |
Treasury stock | (645,287) | (588,886) | (440,256) | (265,890) |
Total shareholders equity | 284,757 | 337,267 | 449,432 | 537,131 |
Total liabilities and stockholders equity | 819,191 | 906,884 | 803,623 | 857,215 |
Table 4. Pier 1 Imports, Inc ---- Pro Forma Statement of Income
Pier 1 Imports, Inc. | ||||
Pro Forma STATEMENT OF INCOME | ||||
Fiscal Years 2015, 2014,2013, 2012 | ||||
(in thousands) | FY 2015 | FY 2014 | FY 2013 | FY 2012 |
Net sales | 1,892,230 | 1,884,557 | 1,791,443 | 1,704,885 |
Cost of sales | 1,187,250 | 1,116,076 | 1,026,180 | 961,826 |
Gross profit | 704,980 | 768,481 | 765,263 | 743,059 |
Selling, general and administrative expenses | 578,828 | 594,906 | 550,890 | 513,085 |
Depreciation | 50,944 | 46,304 | 38,873 | 30,988 |
Operating income | 75,208 | 127,271 | 175,500 | 198,986 |
Nonoperating (income) and expenses: | ||||
Interest, investment income and other | (237) | (3,391) | (1,721) | (2,757) |
Interest expense | 12,280 | 10,260 | 2,572 | 743 |
12,043 | 6,869 | 851 | (2,014) | |
Income before income taxes | 63,165 | 120,402 | 174,649 | 201,000 |
Income tax provision | 23,531 | 45,240 | 67,118 | 71,556 |
Net income | 39,634 | 75,162 | 107,531 | 129,444 |
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