P12-32. Forecast the Income Statement, Balance Sheet, and Statement of Cash Flows
Following are fiscal year financial statements of
Costco.
Consolidated Statements of Income For Year Ended ($ millions) Sep. 1, 2019 Sep. 2, 2018 Net sales. . $149,351 $138,434 Membership fees 3,352 3,142 Total revenue 152,703 141,576 Merchandise costs 132,886 123,152 Selling, general and administrative. 14,994 13,876 Preopening expenses. 86 68 Operating income. 4,737 4,480 Interest expense. (150) (159) Interest income and other, net 178 121 Income before income taxes 4,765 4,442 Provision for income taxes . 1,061 1,263 Net income including noncontrolling interests 3,704 3,179 Net income attributable to noncontrolling interests. (45) (45) Net income attributable to Costco .. $ 3,659 $ 3,134 Sep. 1, 2019 Sep. 2, 2018 $ 8,384 1,060 1,535 11,395 1,111 23,485 $ 6,055 1,204 1,669 11,040 321 20,289 In millions, except par value Current Assets Cash and cash equivalents... Short-term investments.. Receivables, net. Merchandise inventories. Other current assets. Total current assets. Property and Equipment Land ... Buildings and improvements Equipment and fixtures. Construction in progress. Gross property and equipment. . Less accumulated depreciation and amortization Net property and equipment. . Other assets .. 6,417 17,136 7,801 1,272 32,626 (11,736) 20,890 1,025 $45,400 6,193 16,107 7,274 1,140 30,714 (11,033) 19,681 860 $40,830 Total assets Sep. 1, 2019 Sep. 2, 2018 In millions, except par value Current Liabilities Accounts payable Accrued salaries and benefits. Accrued member rewards.. Deferred membership fees. Current portion of long-term debt Other current liabilities Total current liabilities .. Long-term debt, excluding current portion . Other liabilities Total liabilities Equity Preferred stock $.01 par value; 100,000,000 shares authorized; no shares issued and outstanding Common stock $0.01 par value; 900,000,000 shares authorized; 439,625,000 and 438,189,000 shares issued and outstanding Additional paid-in capital. . Accumulated other comprehensive loss. Retained earnings . Total Costco stockholders' equity. Noncontrolling interests Total equity ...... Total liabilities and equity $11,679 3,176 1,180 1,711 1,699 3,792 23,237 5,124 1,455 29,816 $11,237 2,994 1,057 1,624 90 2,924 19,926 6,487 1,314 27,727 4 6,417 (1,436) 10,258 15,243 341 15,584 $45,400 4 6,107 (1,199) 7,887 12,799 304 13,103 $40,830 . Required Forecast Costco's income statement, balance sheet, and statement of cash flows for the year ended September 1, 2020. Combine all property and equipment accounts into Net property and equipment. What do the forecasts imply about Costco's financing needs in 2020? Forecasts assumptions Forecast Net sales and Membership fees using their respective historical growth rates (2018 to 2019). Forecast the following as a percentage of Net sales: Merchandise costs Merchandise inventories Accrued member rewards Receivables, net Accounts payable Forecast income tax as 23% of pretax income Forecast Deferred membership fees as a percentage of Membership fees. Assume no change in the balance of the following: Preopening expenses Short-term investments Interest expense Preferred stock Interest income Common stock Net income attributable to noncontrolling Accumulated other comprehensive loss interest Debt maturing in fiscal 2020 and 2021 is $1,699 million and $1,094 million, respectively. The company anticipates repurchasing $250 million in common stock in fiscal 2020. The 2019 statement of cash flows reports the following: Depreciation expense of $1,492 million Dividends of $1,038 million (to forecast 2020 dividends, use the 2019 dividend payout ratio as a percentage of net income attributable to Costco shareholders) Stock-based compensation (a noncash expense that is included in SG&A expense and is added to Additional paid-in capital) of $595 million CAPEX of $2,998 million Forecast all other items as a percentage of total revenues. Note: Round historical rates to three decimal places. For example, round 0.04556 to 4.6%. . . Consolidated Statements of Income For Year Ended ($ millions) Sep. 1, 2019 Sep. 2, 2018 Net sales. . $149,351 $138,434 Membership fees 3,352 3,142 Total revenue 152,703 141,576 Merchandise costs 132,886 123,152 Selling, general and administrative. 14,994 13,876 Preopening expenses. 86 68 Operating income. 4,737 4,480 Interest expense. (150) (159) Interest income and other, net 178 121 Income before income taxes 4,765 4,442 Provision for income taxes . 1,061 1,263 Net income including noncontrolling interests 3,704 3,179 Net income attributable to noncontrolling interests. (45) (45) Net income attributable to Costco .. $ 3,659 $ 3,134 Sep. 1, 2019 Sep. 2, 2018 $ 8,384 1,060 1,535 11,395 1,111 23,485 $ 6,055 1,204 1,669 11,040 321 20,289 In millions, except par value Current Assets Cash and cash equivalents... Short-term investments.. Receivables, net. Merchandise inventories. Other current assets. Total current assets. Property and Equipment Land ... Buildings and improvements Equipment and fixtures. Construction in progress. Gross property and equipment. . Less accumulated depreciation and amortization Net property and equipment. . Other assets .. 6,417 17,136 7,801 1,272 32,626 (11,736) 20,890 1,025 $45,400 6,193 16,107 7,274 1,140 30,714 (11,033) 19,681 860 $40,830 Total assets Sep. 1, 2019 Sep. 2, 2018 In millions, except par value Current Liabilities Accounts payable Accrued salaries and benefits. Accrued member rewards.. Deferred membership fees. Current portion of long-term debt Other current liabilities Total current liabilities .. Long-term debt, excluding current portion . Other liabilities Total liabilities Equity Preferred stock $.01 par value; 100,000,000 shares authorized; no shares issued and outstanding Common stock $0.01 par value; 900,000,000 shares authorized; 439,625,000 and 438,189,000 shares issued and outstanding Additional paid-in capital. . Accumulated other comprehensive loss. Retained earnings . Total Costco stockholders' equity. Noncontrolling interests Total equity ...... Total liabilities and equity $11,679 3,176 1,180 1,711 1,699 3,792 23,237 5,124 1,455 29,816 $11,237 2,994 1,057 1,624 90 2,924 19,926 6,487 1,314 27,727 4 6,417 (1,436) 10,258 15,243 341 15,584 $45,400 4 6,107 (1,199) 7,887 12,799 304 13,103 $40,830 . Required Forecast Costco's income statement, balance sheet, and statement of cash flows for the year ended September 1, 2020. Combine all property and equipment accounts into Net property and equipment. What do the forecasts imply about Costco's financing needs in 2020? Forecasts assumptions Forecast Net sales and Membership fees using their respective historical growth rates (2018 to 2019). Forecast the following as a percentage of Net sales: Merchandise costs Merchandise inventories Accrued member rewards Receivables, net Accounts payable Forecast income tax as 23% of pretax income Forecast Deferred membership fees as a percentage of Membership fees. Assume no change in the balance of the following: Preopening expenses Short-term investments Interest expense Preferred stock Interest income Common stock Net income attributable to noncontrolling Accumulated other comprehensive loss interest Debt maturing in fiscal 2020 and 2021 is $1,699 million and $1,094 million, respectively. The company anticipates repurchasing $250 million in common stock in fiscal 2020. The 2019 statement of cash flows reports the following: Depreciation expense of $1,492 million Dividends of $1,038 million (to forecast 2020 dividends, use the 2019 dividend payout ratio as a percentage of net income attributable to Costco shareholders) Stock-based compensation (a noncash expense that is included in SG&A expense and is added to Additional paid-in capital) of $595 million CAPEX of $2,998 million Forecast all other items as a percentage of total revenues. Note: Round historical rates to three decimal places. For example, round 0.04556 to 4.6%
