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Consolidated Income Statement Year Ended May 31 In Millions 1995 1996 1997 1998 1999 Revenues 4,760.8 6,470.6 9,186.5 9,553.1 8,776.9 Cost of goods sold 2,865.3 3,906.7 5,503.0 6,065.5 5,493.5 Gross profit 1,895.5 2,563.9 3,683.5 3,487.6 3,283.4 Selling and administrative 1,209.8 1,588.6 2,303.7 2,623.8 2,426.6 Operating income 685.7 975.3 1,379.8 863.8 856.8 Interest Expense 24.2 39.5 52.3 60.0 44.1 Other Expense, net 11.7 36.7 32.3 20.9 21.5 Restructuring charge, net 0.0 0.0 0.0 129.9 45.1 Income before taxes 649.8 899.1 1,295.2 653.0 746.1 Income taxes 250.2 346.2 499.9 253.4 294.7 Net income 399.6 552.9 795.3 399.6 451.4 1.4 1.9 2.7 1.4 1.6 294.0 293.6 297.0 296.0 287.5 Growth(%) Revenue 35.9% 42.0% 4.0% -8.1% Operating income 42.2% 41.5% -37.4% -0.8% Net income 38.4% 43.8% -49.7% 13.0% Margins(%) Gross margin 39.6% 40.1% 36.5% 37.4% Operating margin 15.1% 15.0% 9.0% 9.8% Net margin 8.5% 8.7% 4.2% 5.1% Effective tax rate 38.5% 38.6% 38.8% 39.5% Diluted earnings per common share Average shares outstanding (diluted)
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Income StatementConsolidated Income StatementYear Ended May 31In Millions1995199619971998199920002001Revenues4,760.86,470.69,186.59,553.18,776.98,995.19,488.8Cost of goods sold2,865.33,906.75,503.06,065.55,493.55,403.85,784.9Gross profit1,895.52,563.93,683.53,487.63,283.43,591.33,703.9Selling and administrative1,209.81,588.62,303.72,623.82,426.62,606.42,689.7Operating income685.7975.31,379.8863.8856.8984.91,014.2Interest Expense24.239.552.360.044.145.058.7Other Expense, net11.736.732.320.921.523.234.1Restructuring charge, net0.00.00.0129.945.1(2.5)0.0Income before taxes649.8899.11,295.2653.0746.1919.2921.4Income taxes250.2346.2499.9253.4294.7340.1331.7Net income399.6552.9795.3399.6451.4579.1589.7Diluted earnings per common share1.41.92.71.41.62.12.2Average shares outstanding (diluted)294.0293.6297.0296.0287.5279.8273.3Growth(%)Revenue35.9%42.0%4.0%-8.1%2.5%5.5%Operating income42.2%41.5%-37.4%-0.8%15.0%3.0%Net income38.4%43.8%-49.7%13.0%28.3%1.8%Margins(%)Gross margin39.6%40.1%36.5%37.4%39.9%39.0%Operating margin15.1%15.0%9.0%9.8%10.9%10.7%Net margin8.5%8.7%4.2%5.1%6.4%6.2%
Effective tax rate38.5%38.6%38.8%39.5%37.0%36.0%
DCFDiscounted Cash Flow Analysis
2002200320042005200620072008200920102011Assumpstions:Revenue growth7.0%6.5%6.5%6.5%6.5%6.0%6.0%6.0%6.0%6.0%COGS/Sales60.0%60.0%59.5%59.5%59.0%59.0%58.5%58.5%58.0%58.0%S&A/sales28.0%27.5%27.0%26.5%26.0%25.5%25.0%25.0%25.0%25.0%Tax rate38.0%38.0%38.0%38.0%38.0%38.0%38.0%38.0%38.0%38.0%Current assets/sales38.0%38.0%38.0%38.0%38.0%38.0%38.0%38.0%38.0%38.0%Current liabilities/sales11.5%11.5%11.5%11.5%11.5%11.5%11.5%11.5%11.5%11.5%Yearly depreciation and capex equal each otherCost of capital12.0%Terminal value growth3.0%
Discounted cash flowOperating Income1,218.41,351.61,554.61,717.01,950.02,135.92,410.22,554.82,790.12,957.5Taxes463.0513.6590.8652.5741.0811.7915.9970.81,060.21,123.9NOPAT755.4838.0963.81,064.51,209.01,324.21,494.31,584.01,729.91,833.6Capex, net of depreciation0.00.00.00.00.00.00.00.00.00.0Change in NWC8.8(174.9)(186.3)(198.4)(195.0)(206.7)(219.1)(232.3)(246.2)(261.0)Free cash flow764.2663.1777.5866.11,014.01,117.51,275.21,351.71,483.71,572.6Terminal Value17,997.5Total flows764.2663.1777.5866.11,014.01,117.51,275.21,351.71,483.719,570.1Present value of flowsEnterprise valueLess: current outstanding debt1,296.6Equity valueCurrent shares outstanding271.5Equity per share @12%Current share price
Sensitivity of equity value to discount rateDiscount rateEquity value8.0%8.5%9.0%9.5%10.5%11.0%11.5%12.0%
Balance SheetConsolidated Balance SheetAs of May 31(in millions)20002001Assets:Current Assets: Cash and cash equivalents254.3304.0 Accounts receivable1,569.41,621.4 Inventories1,446.01,424.1 Deferred income taxes111.5113.3 Prepaid expenses215.2162.5 Total current asstes3,596.43,625.3
Property, plant adn equipment, net1,583.41,618.8Identifiable intangible asstes and goodwill, net410.9397.3Deferred income taxes and other assets266.2178.2Total assets5,856.95,819.6
Liabilities and shareholders equityCurrent liabilities: Current portion of long-term debt50.15.4 Notes payable924.2855.3 Accounts payable543.8432.0 Accrued liabilities621.9472.1 Income taxes payable0.021.9 Total current liablities2,140.01,786.7
Long term debt470.3435.9Deferred income taxes and other liabilities110.3102.2Redeemable preferred stocks0.30.3Shareholders' equity: Common stock, par 2.82.8 Capital in excess of stated value369.0459.4 Unearned stock compensation(11.7)(9.9) Accumulated other comprehensive income(111.1)(152.1) Retained earnings2,887.03,194.3Total shareholder's equity3,136.03,494.5Total liabilities and shareholder's equity5,856.95,819.6
