Hola Kola Case Study

1. What are the relevant cash flows? In the capital budgeting analysis of this low-price, low-calorie soda project, how shall we treat:
   1. The consultants market study cost?
   2. The potential rental value of the unoccupied annex?
   3. The interest charges?
   4. Working capital?
2. Should we consider the erosion of the existing productthe regular sodasin the analysis? Why or why not?
3. Calculate the projects NPV, IRR, payback period, discounted payback, and profitability index.
4. Perform sensitivity analyses on sales volume, price, direct labor, materials, and energy cost. What do you observe?
5. What are the benefits and risks of undertaking this project?
6. Should Bebida Sol undertake this project?

I copied above the wrong questions this is the ones we have to do

• Scenario 1: Perform a capital budgeting analysis with the information provided in the case.
• Scenario 2: You have been advised by the consultants that the energy costs, the labor costs, and the material costs are likely to rise by 5% a year, starting in Year 2. The consultants do not think that you can pass the extra cost through. What do you observe?
• Scenario 3: You have been advised by the consultants that the energy costs, the labor costs, and the material costs are likely to rise by 5% a year, starting in Year 2. The consultants think that you can pass part of the extra cost through. You should be able to increase the price per unit by 5%, but the volume would decrease by 2%. What do you observe?

THUNDERBIRD SCHOOL OF GLOBAL MANAGEMENT T10343 LEN HOLA-KOLATHE CAPITAL BUDGETING DECISION The consumption of sugar sweetened beverages has been linked to risks for obesity, diabetes, and heart disease, therefore compelling cate come made for the need for reduced consumption or these beverages Health Policy Report, The New England Journal of Medicine, October 15, 2009 Mexico leads world in soda consumption, World Health Organization planning to fight it Carolyn Crist, Obesity Initiative, October 25, 2012. In December 2012. Antonio Ortega, the owner of Bebida Sal, had just finished reading a report done by his general manager, Pedro Cortez, about the possible investment in a new product line. Hola-Kola. The idea of Hola-Kola came about three months earlier when Antonio attended a seminar on youth obesity organized by a local high school that his two children attended. Even though he had often heard of the rising obesity problem in Mexico, Antonio was still very disturbed by the statistics indicating how the obesity rate in Mexico had tripled since 1980, and that 69.5% of the people 15 years and older were either obese or overweight. Even more shocking to Antonio, based on this statistic, Mexico now had the highest swerweight rate in the world, surpassing the United States. After the seminar, Antonio discussed the idea of Hola-Kola a low-price, zero-calorie carbonated soft drink, with Pedro Cortez. Pedro was excited about the idea, and liked the opportunity to launch something new, espe cially given that the company had not introduced a new product in the last five years. However, Pedro thought a market study should be done to gauge the potential demand before the firm undertook the investment. Company Background Bebida Sol is a small privately owned carbonated soft drink company based in Puebla, Mexico. A retired ex- ecutive from a popular fast-food restaurant chain, Roberto Ortega, founded it in 1998. During his career as a restaurant executive, Roberto learned that Mexicans, regardless of social status, loved their soda pop. Many would drink soda to quench their thirst on a regular basis, due to the lack of hygienic, drinkable water . With the influx of international brands of soda pop, Mexico now had the highest consumption of carbonated soft drinks per capita in the world. The average per capita consumption was 40% higher than the United States, at 163 liters (43 gallons) per year, while the United States consumed 118 liters (31 gallons), according to statistics presented by the international organization Oxfam and the Mexican NGO Consumer's Powet. Due to the high obesity problem, health and consumer groups in Mexico had demanded that the government impose a 20% tax on soft drinks, claiming that it would not only reduce consumption, but the tax revenue could also be used to fight health problems that soft drinks generated.? "The World is Farby Gatherine Rampell, 9/23/2010. http://economia.blog.nytimes.com/2010/09/23./the-world-is-fat! http://ginfasusda.gov/Resene 20GAIN%20Publications The 20Mexican%20Market for 20Sofd 20Drinks Mexico 20ATO Mexico_8-20-2009.pdf Global Agriculture Information Network (GAIN) report MX9336 3 Mexico, Leader in Soft Drink Consumption", July 10, 2012 http://www.mexicanbusinessweb.mx eng 2012 mexico-leader-in-soft-drink-consumption. Copyrighe 2013 Thunderbird School of Global Manegement. All rights reserved. This case cas prepared by Professor Lena Crna Bones for the purpose of clestow elismerion only, and not to dedicate the effective ar infection management. This document is authorized for use only by Euge Pere in W-Week Finance taught by Ricardo Armente. Tecnologia de Monterrey from Jul 2021 202 Exhibit 1. Rates of Overweight and Obesity Persons by Country (2010) Overweight Obesity Swand NA Free Dunas.com wards 2001 Am Po 2000 2001 Tuta Porta OECD 2007 Sow) Sova Cow Papel Spa De 200 2007 De den C200 hington 2000 2007 Me 2001 ed 200 . de 9920 Perg 70 he Fade ERO 30 60 20 Nof adult population of adult population Source: World Obesity Stats 2016 and Beyond." Douglas Robbs Sept.27.2010. Mental News The market leaders for carbonated soft drinks in Mexico were Coca-Cola, Pepsi-Cola, Dr. Pepper Snapple, and Grupo Penafiel. Together, they accounted for a combined market share of more than 90%, with Coca Cola being the major player. The Mexican soft drink market (products include bottled water, carbonates, RTD real coffee, functional drinks, fruit/vegetable juices, and other soft drinks) had total revenues of $39.2bn in 2011, representing a compound annual growth rate (CAGR) of 6.3% between 2007 and 2011. Market consumption volumes increased with a CAGR of 4.5% between 2007 and 2011, reaching a total of 49.3 billion liters in 2011.' Roberto thought these popular international brands commanded prices that might be out of reach for the poorer segment of the population. To capture this market. he started the company to offer private-labeled carbonated soft drinks with similar tastes, but at about half the price. His products consisted of regular cola carbonates and non-cola carbonates, such as lemon/lime or orange carbonates. Bebida Sol's products were sold only in small, independent grocery stores and convenience stores in Mexico. The firm avoided the supermarkets and hypermarkets because it could not sustain the desired margin in these large stores. Moreover, most of the consumers, especially the middle-to-low income ones, shopped at small independent grocery stores. To create awareness, the owners of these independent stores were given incentives to personally promote the products. Sales increased dramatically, from 80 million pesos in 1998 to about 900 million pesos in 2011 "Soft Drinks in Mexico," Market Research Report, March 29, 2013. http://www.marketresearch.com/Market.anev3883/ Soft Drinks-Mexico-7679076/ There were about half a million small, independent grocery stores, and more than 8,000 convenience stores throughout Mexico 2 TB0343 In 2007. Antonio Ortega, Roberto's only son, took over the business when Roberto unexpectedly passed away. Antonio started working on the sales side of the business two years before his father's death. He had gath- cred a few valuable tips on how to run the business from his father, which had made him a rather conservative businessman. A year after Antonio took over the business, the global financial crisis hit. The economic downturn in Mexico actually benefitted the low price soda business. Demand increased dramatically as many consumers became price conscious and switched from international brands to private labels. Bebida Sol's sales increased by 60% from 2008 to 2009 and continued to increase without the firm changing any of its business strategy or practices. The company's retum on sales (net profit margin) also had been incteasing in the last few years, Exhibit 2. Bebida Sol's Sales and Return on Sales $1,000,000 5.34% 5.57% 6.00% $900,000 $800,000 $900,101 5.00% 4.21% $832, 341 $700,000 4.00% $600,000 5642.400 $500,000 3.00% $400,000 $300,000 2.00% $200,000 1.00% $100,000 SO 0.00% Sales (thounds of pesos Return of slaes ("%) 2009 2010 2011 Sales Return on Sales The Proposal Reading once again the executive summary of the report, Antonio recalled what his father told him several times during the two years he was working with him: "Don't grow the company for the sake of growing. Invest only when you are confident there is sufficient demand for a new product, and also when you have the financial resources." As far as financial resources, Antonio felt the timing could not be better. Due to strong sales and profitability in the last few years, Bebida Sol had accumulated a sizable amount of cash. With solid financial performance and steady cash flows, his banker had agreed to extend him a five-year, 16% annual interest term loan to launch Hola-Kola. In the proposal, Pedro Corter estimated that with 20% of the needed capital borrowed, the 20/80 debe-equity structure would result in an 18.2% weighted average cost of capital for this project. The bigger question lingering in Antonio's mind was whether there would be sufficient demand for this new, zero-calorie product line. Even though the demand for low-calorie sodas had increased in Mexico, they seemed to be consumed mainly by the middle-to-upper income segment of the population. The majority of the lower-income people still consumed only the regular, high-sugared carbonated soft drinks. It wasn't clear whether this was because the low-income group lacked the awareness of the obesity problem, or because there were not too many low-priced. low-calorie soda options available. If it were the former, the outlook for low- price, low-calorie carbonated soft drinks might not be too promising at this time. If it were the latter, it might be the perfect timing for Bebida Sol to introduce Hola-Kola. Pedro hired a consultant to do a market study right after Antonio discussed the idea of Hola-Kola with him. The consultant estimated that the company could sell a total of 600.000 liters of these zero-calorie carbonates a month, at a projected price of five pesos a liter. This volume of sales was expected for a period of five years at In an effort to fight the obesity problem, the Mexican government had been launching media campaigns to encourage the public to participate in weight loss programs in recent years. Drastic measures were also taken to ban high-fat, high-sugar food and drinks in schools, and to add more physical education in the school curriculum. TB0343 the same price. The market study took about two months to complete and cost the company five million pesos, which Pedro had paid shortly after its completion. Since the existing bottling plant was running at 100% capacity producing regular sodas, the proposal called for a fleet of new, semi-automated bottling and kegging machines designed for long, high-quality runs. The total cost of these machines, including installation, was estimated to be 50 million pesos. This amount could be fully depreciated on a straight-line basis over a period of five years. Pedro believed that the purchase of these machines would enable Bebida Sol to reduce its cost of labor and therefore the price to the customers, putting the firm in a more competitive position. With proper maintenance, these machines could produce at least 600,000 liters of carbonated drinks per month. Pedro also estimated that these machines would have a resale value of four million pesos in five years time, if the company were to either shut down the production of Hola-Kola, or replace these machines with fully automated ones at that time. The new machines would be housed in an unoccupied annex by the main production facility of Bebida Sol. The annex was also large enough to store the finished products before they were shipped out to grocery stores. Antonio's father built the annex years ago when he planned to venture into the mineral water business. He died before he could execute his plan. The annex had been vacant ever since, even though Antonio recently received an offer to lease out the space for 60,000 pesos a year. Pedro determined that additional working capital was needed to ensure smooth production and sales of this new product line. He proposed keeping raw materials inventory at a level equal to one month of produc- tion. To encourage the independent grocery stores to carry the new product line, he proposed offering a longer collection period, letting the grocers pay in 45 days, instead of the normal 30 days. As far as accounts payable, he would follow the company's normal policy, and settle the accounts in 36 days The proposal also outlined the various estimates of production and overhead costs, and selling expenses. Raw materials needed to produce the sodas were estimated to be 1.8 pesos per liter, while labor costs and energy costs per month were estimated to be 180,000 pesos and 50,000 pesos, respectively. The incremental general administrative and selling expenses were quite modest, estimated to be 300,000 a year, as the new product could be sold by Bebida Sol's current sales force and via existing distribution channels. The accounting department typically charged 1% of sales as overhead costs for any new projects. Glancing back at his notes, Antonio started pondering. The market study seemed to indicate sufficient demand for the new product line. What he really feared was that the new zero-calorie carbonates might etode the sales of his existing products-the regular sodas. The market study suggested that potential erosion could cost the firm as much as 800,000 pesos of after-tax cash flows per year. At the new tax rate of 30% for both income and capital gains, could he add value to the firm by taking on this project? Appendix 1. Bebida Sol-Income Statements for the Year Ending December 31 (thousands of pesos) Income Item 2009 2010 2011 Sales 642.400 100.0% 832.341 100.0% 900,101 100.0% COGS 349.884 54.5% 456,409 54.8% 487.020 54.1% Gross margin 292.516 45.5% 375.932 45.2% 413,081 45.9% Marketing & Selling Expenses 120.359 18.7% 150,322 18.1% 168.330 18.7% General Administrative Expenses 65.30 10.2% 88.622 10.64 97,791 10.99 EBITDA 106,817 16.6% 136.988 16.5% 146.460 16.3% Depreciation 15.016 70% 59.441 Z. 65.985 7239 EBIT 61.771 77.544 9.3% 80.975 9.096 Interest EBT 23.120 38.651 3.6% 6.0% 14.088 63,456 1.79 7.6% 9.340 71.635 10% 8,0% 1.894 11.595 27056 19.037 44.419 2.39 5,39 21.49 2.4% 50.25 5.696 Taxes @ 30% Net Income Dividends Retained Earnings 20.000 7.056 20.000 24.419 20.000 30.145 11.19 Appendix 2. Bebida SolBalance Sheet as of December 31 (thousands of pesos) Assets 2009 2010 2011 Cash 12,023 3.1% 36,090 8.99 53,020 14.0% Accounts Receivable 61,600 15.7% 75.253 18.6% 78,913 20.8% Inventory 32.592 8,3% 45,016 60,044 15.8% Prepaid Expenses 11.792 3.0% 20.660 5.19 15.UZ 4.0% Current Assets 118,007 30.1% 177,019 207.093 54.594 Gross fixed assets 439.230 112.0% 452,020 111.796 463.122 122.09 Accum depreciation 165.046 42.1% 224.490 55.59 290.475 26.59 Net fixed assets 274.184 69.9% 227.530 56.296 172.647 45.5% Total Assets 392.191 100.0% 404.519 100.0% 329,740 100.0% Liabilities & Net Worth 2009 2010 2011 Accounts Payable 34,509 8.8% 43.765 10.8% 48,035 12.6% Accrued expenses 15,083 3.8% 19.087 4.7% 20.493 5494 Short-term der 70,520 18.0% 63429 15.79 22.900 6.09 Current Liabilities 120.112 30.6% 126.281 31.296 91.428 24.1% Long-term debt 45,023 11.5% 26,793 6.6% 6,693 1.8% Equity 227.056 57.9% 251.475 281.619 74.2% Lisabilities - Net Worth 3924191 100.0% 404.519 100.0% 379.740 100.0% TB0343 THUNDERBIRD SCHOOL OF GLOBAL MANAGEMENT T10343 LEN HOLA-KOLATHE CAPITAL BUDGETING DECISION The consumption of sugar sweetened beverages has been linked to risks for obesity, diabetes, and heart disease, therefore compelling cate come made for the need for reduced consumption or these beverages Health Policy Report, The New England Journal of Medicine, October 15, 2009 Mexico leads world in soda consumption, World Health Organization planning to fight it Carolyn Crist, Obesity Initiative, October 25, 2012. In December 2012. Antonio Ortega, the owner of Bebida Sal, had just finished reading a report done by his general manager, Pedro Cortez, about the possible investment in a new product line. Hola-Kola. The idea of Hola-Kola came about three months earlier when Antonio attended a seminar on youth obesity organized by a local high school that his two children attended. Even though he had often heard of the rising obesity problem in Mexico, Antonio was still very disturbed by the statistics indicating how the obesity rate in Mexico had tripled since 1980, and that 69.5% of the people 15 years and older were either obese or overweight. Even more shocking to Antonio, based on this statistic, Mexico now had the highest swerweight rate in the world, surpassing the United States. After the seminar, Antonio discussed the idea of Hola-Kola a low-price, zero-calorie carbonated soft drink, with Pedro Cortez. Pedro was excited about the idea, and liked the opportunity to launch something new, espe cially given that the company had not introduced a new product in the last five years. However, Pedro thought a market study should be done to gauge the potential demand before the firm undertook the investment. Company Background Bebida Sol is a small privately owned carbonated soft drink company based in Puebla, Mexico. A retired ex- ecutive from a popular fast-food restaurant chain, Roberto Ortega, founded it in 1998. During his career as a restaurant executive, Roberto learned that Mexicans, regardless of social status, loved their soda pop. Many would drink soda to quench their thirst on a regular basis, due to the lack of hygienic, drinkable water . With the influx of international brands of soda pop, Mexico now had the highest consumption of carbonated soft drinks per capita in the world. The average per capita consumption was 40% higher than the United States, at 163 liters (43 gallons) per year, while the United States consumed 118 liters (31 gallons), according to statistics presented by the international organization Oxfam and the Mexican NGO Consumer's Powet. Due to the high obesity problem, health and consumer groups in Mexico had demanded that the government impose a 20% tax on soft drinks, claiming that it would not only reduce consumption, but the tax revenue could also be used to fight health problems that soft drinks generated.? "The World is Farby Gatherine Rampell, 9/23/2010. http://economia.blog.nytimes.com/2010/09/23./the-world-is-fat! http://ginfasusda.gov/Resene 20GAIN%20Publications The 20Mexican%20Market for 20Sofd 20Drinks Mexico 20ATO Mexico_8-20-2009.pdf Global Agriculture Information Network (GAIN) report MX9336 3 Mexico, Leader in Soft Drink Consumption", July 10, 2012 http://www.mexicanbusinessweb.mx eng 2012 mexico-leader-in-soft-drink-consumption. Copyrighe 2013 Thunderbird School of Global Manegement. All rights reserved. This case cas prepared by Professor Lena Crna Bones for the purpose of clestow elismerion only, and not to dedicate the effective ar infection management. This document is authorized for use only by Euge Pere in W-Week Finance taught by Ricardo Armente. Tecnologia de Monterrey from Jul 2021 202 Exhibit 1. Rates of Overweight and Obesity Persons by Country (2010) Overweight Obesity Swand NA Free Dunas.com wards 2001 Am Po 2000 2001 Tuta Porta OECD 2007 Sow) Sova Cow Papel Spa De 200 2007 De den C200 hington 2000 2007 Me 2001 ed 200 . de 9920 Perg 70 he Fade ERO 30 60 20 Nof adult population of adult population Source: World Obesity Stats 2016 and Beyond." Douglas Robbs Sept.27.2010. Mental News The market leaders for carbonated soft drinks in Mexico were Coca-Cola, Pepsi-Cola, Dr. Pepper Snapple, and Grupo Penafiel. Together, they accounted for a combined market share of more than 90%, with Coca Cola being the major player. The Mexican soft drink market (products include bottled water, carbonates, RTD real coffee, functional drinks, fruit/vegetable juices, and other soft drinks) had total revenues of $39.2bn in 2011, representing a compound annual growth rate (CAGR) of 6.3% between 2007 and 2011. Market consumption volumes increased with a CAGR of 4.5% between 2007 and 2011, reaching a total of 49.3 billion liters in 2011.' Roberto thought these popular international brands commanded prices that might be out of reach for the poorer segment of the population. To capture this market. he started the company to offer private-labeled carbonated soft drinks with similar tastes, but at about half the price. His products consisted of regular cola carbonates and non-cola carbonates, such as lemon/lime or orange carbonates. Bebida Sol's products were sold only in small, independent grocery stores and convenience stores in Mexico. The firm avoided the supermarkets and hypermarkets because it could not sustain the desired margin in these large stores. Moreover, most of the consumers, especially the middle-to-low income ones, shopped at small independent grocery stores. To create awareness, the owners of these independent stores were given incentives to personally promote the products. Sales increased dramatically, from 80 million pesos in 1998 to about 900 million pesos in 2011 "Soft Drinks in Mexico," Market Research Report, March 29, 2013. http://www.marketresearch.com/Market.anev3883/ Soft Drinks-Mexico-7679076/ There were about half a million small, independent grocery stores, and more than 8,000 convenience stores throughout Mexico 2 TB0343 In 2007. Antonio Ortega, Roberto's only son, took over the business when Roberto unexpectedly passed away. Antonio started working on the sales side of the business two years before his father's death. He had gath- cred a few valuable tips on how to run the business from his father, which had made him a rather conservative businessman. A year after Antonio took over the business, the global financial crisis hit. The economic downturn in Mexico actually benefitted the low price soda business. Demand increased dramatically as many consumers became price conscious and switched from international brands to private labels. Bebida Sol's sales increased by 60% from 2008 to 2009 and continued to increase without the firm changing any of its business strategy or practices. The company's retum on sales (net profit margin) also had been incteasing in the last few years, Exhibit 2. Bebida Sol's Sales and Return on Sales $1,000,000 5.34% 5.57% 6.00% $900,000 $800,000 $900,101 5.00% 4.21% $832, 341 $700,000 4.00% $600,000 5642.400 $500,000 3.00% $400,000 $300,000 2.00% $200,000 1.00% $100,000 SO 0.00% Sales (thounds of pesos Return of slaes ("%) 2009 2010 2011 Sales Return on Sales The Proposal Reading once again the executive summary of the report, Antonio recalled what his father told him several times during the two years he was working with him: "Don't grow the company for the sake of growing. Invest only when you are confident there is sufficient demand for a new product, and also when you have the financial resources." As far as financial resources, Antonio felt the timing could not be better. Due to strong sales and profitability in the last few years, Bebida Sol had accumulated a sizable amount of cash. With solid financial performance and steady cash flows, his banker had agreed to extend him a five-year, 16% annual interest term loan to launch Hola-Kola. In the proposal, Pedro Corter estimated that with 20% of the needed capital borrowed, the 20/80 debe-equity structure would result in an 18.2% weighted average cost of capital for this project. The bigger question lingering in Antonio's mind was whether there would be sufficient demand for this new, zero-calorie product line. Even though the demand for low-calorie sodas had increased in Mexico, they seemed to be consumed mainly by the middle-to-upper income segment of the population. The majority of the lower-income people still consumed only the regular, high-sugared carbonated soft drinks. It wasn't clear whether this was because the low-income group lacked the awareness of the obesity problem, or because there were not too many low-priced. low-calorie soda options available. If it were the former, the outlook for low- price, low-calorie carbonated soft drinks might not be too promising at this time. If it were the latter, it might be the perfect timing for Bebida Sol to introduce Hola-Kola. Pedro hired a consultant to do a market study right after Antonio discussed the idea of Hola-Kola with him. The consultant estimated that the company could sell a total of 600.000 liters of these zero-calorie carbonates a month, at a projected price of five pesos a liter. This volume of sales was expected for a period of five years at In an effort to fight the obesity problem, the Mexican government had been launching media campaigns to encourage the public to participate in weight loss programs in recent years. Drastic measures were also taken to ban high-fat, high-sugar food and drinks in schools, and to add more physical education in the school curriculum. TB0343 the same price. The market study took about two months to complete and cost the company five million pesos, which Pedro had paid shortly after its completion. Since the existing bottling plant was running at 100% capacity producing regular sodas, the proposal called for a fleet of new, semi-automated bottling and kegging machines designed for long, high-quality runs. The total cost of these machines, including installation, was estimated to be 50 million pesos. This amount could be fully depreciated on a straight-line basis over a period of five years. Pedro believed that the purchase of these machines would enable Bebida Sol to reduce its cost of labor and therefore the price to the customers, putting the firm in a more competitive position. With proper maintenance, these machines could produce at least 600,000 liters of carbonated drinks per month. Pedro also estimated that these machines would have a resale value of four million pesos in five years time, if the company were to either shut down the production of Hola-Kola, or replace these machines with fully automated ones at that time. The new machines would be housed in an unoccupied annex by the main production facility of Bebida Sol. The annex was also large enough to store the finished products before they were shipped out to grocery stores. Antonio's father built the annex years ago when he planned to venture into the mineral water business. He died before he could execute his plan. The annex had been vacant ever since, even though Antonio recently received an offer to lease out the space for 60,000 pesos a year. Pedro determined that additional working capital was needed to ensure smooth production and sales of this new product line. He proposed keeping raw materials inventory at a level equal to one month of produc- tion. To encourage the independent grocery stores to carry the new product line, he proposed offering a longer collection period, letting the grocers pay in 45 days, instead of the normal 30 days. As far as accounts payable, he would follow the company's normal policy, and settle the accounts in 36 days The proposal also outlined the various estimates of production and overhead costs, and selling expenses. Raw materials needed to produce the sodas were estimated to be 1.8 pesos per liter, while labor costs and energy costs per month were estimated to be 180,000 pesos and 50,000 pesos, respectively. The incremental general administrative and selling expenses were quite modest, estimated to be 300,000 a year, as the new product could be sold by Bebida Sol's current sales force and via existing distribution channels. The accounting department typically charged 1% of sales as overhead costs for any new projects. Glancing back at his notes, Antonio started pondering. The market study seemed to indicate sufficient demand for the new product line. What he really feared was that the new zero-calorie carbonates might etode the sales of his existing products-the regular sodas. The market study suggested that potential erosion could cost the firm as much as 800,000 pesos of after-tax cash flows per year. At the new tax rate of 30% for both income and capital gains, could he add value to the firm by taking on this project? Appendix 1. Bebida Sol-Income Statements for the Year Ending December 31 (thousands of pesos) Income Item 2009 2010 2011 Sales 642.400 100.0% 832.341 100.0% 900,101 100.0% COGS 349.884 54.5% 456,409 54.8% 487.020 54.1% Gross margin 292.516 45.5% 375.932 45.2% 413,081 45.9% Marketing & Selling Expenses 120.359 18.7% 150,322 18.1% 168.330 18.7% General Administrative Expenses 65.30 10.2% 88.622 10.64 97,791 10.99 EBITDA 106,817 16.6% 136.988 16.5% 146.460 16.3% Depreciation 15.016 70% 59.441 Z. 65.985 7239 EBIT 61.771 77.544 9.3% 80.975 9.096 Interest EBT 23.120 38.651 3.6% 6.0% 14.088 63,456 1.79 7.6% 9.340 71.635 10% 8,0% 1.894 11.595 27056 19.037 44.419 2.39 5,39 21.49 2.4% 50.25 5.696 Taxes @ 30% Net Income Dividends Retained Earnings 20.000 7.056 20.000 24.419 20.000 30.145 11.19 Appendix 2. Bebida SolBalance Sheet as of December 31 (thousands of pesos) Assets 2009 2010 2011 Cash 12,023 3.1% 36,090 8.99 53,020 14.0% Accounts Receivable 61,600 15.7% 75.253 18.6% 78,913 20.8% Inventory 32.592 8,3% 45,016 60,044 15.8% Prepaid Expenses 11.792 3.0% 20.660 5.19 15.UZ 4.0% Current Assets 118,007 30.1% 177,019 207.093 54.594 Gross fixed assets 439.230 112.0% 452,020 111.796 463.122 122.09 Accum depreciation 165.046 42.1% 224.490 55.59 290.475 26.59 Net fixed assets 274.184 69.9% 227.530 56.296 172.647 45.5% Total Assets 392.191 100.0% 404.519 100.0% 329,740 100.0% Liabilities & Net Worth 2009 2010 2011 Accounts Payable 34,509 8.8% 43.765 10.8% 48,035 12.6% Accrued expenses 15,083 3.8% 19.087 4.7% 20.493 5494 Short-term der 70,520 18.0% 63429 15.79 22.900 6.09 Current Liabilities 120.112 30.6% 126.281 31.296 91.428 24.1% Long-term debt 45,023 11.5% 26,793 6.6% 6,693 1.8% Equity 227.056 57.9% 251.475 281.619 74.2% Lisabilities - Net Worth 3924191 100.0% 404.519 100.0% 379.740 100.0% TB0343