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Valuation Measuring and managing the value ofpanies - Koller T.

Koller T., Murrin J. Valuation Measuring and managing the value ofpanies - Wiley & sons , 2000. - 508 p.
ISBN 0-471-36190-9
Download (direct link): valuationmeasuringandmanaging2000.pdf
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Exhibits 9.13 through 9.20 detail the historical financial analysis of Heineken. Exhibits 9.13 and 9.14 present Heineken's income statement and balance sheet for the years 1994 through 1998. Exhibits 9.15 through 9.17 detail the calculations of Heineken's NOPLAT, invested capital, and free cash flow for each year. Exhibit 9.18 shows the calculations of Heineken's economic profit. The remainder of the exhibits offer the backup calculations and ratios to be used for forecasting.
In analyzing Heineken's financial statements, several accounting issues merit special attention.
3 The authors would like to thank our colleague, David Krieger, who prepared this analysis of Heineken.
4 During 1998 and 1999, the Dutch guilder most often traded within a range of 2.0 to 2.1 times the U.S. dollar. The Dutch guilder is also now fixed at 2.20 euros.
Page 186
Exhibit 9.13 Heineken—Historical Income Statement
/*----------------------------------------------------------------------------------------------------------\
NLG million 1993 1994 1995 1996 1997 1998
Revenues 9,049 9,974 10,443 12,189 13,512 13,822
Duties, levies, and trade taxes (1.198) (1,359) (1,387) (1,621) (1,849) (1,806)
COGS - Marketing (1.219) (1,418) (1,580) (1,436) (1,642) (1,741)
COGS • Merchandising (756) (989) (1,028) (1,466) (1,637) (1,597)
COGS - Packaging (1,014) (1,070) (1,151) (1,393) (1,409) (1,448)
COGS - Raw materials (663) (567) (616) (858) (876) (738)
COGS - Other (1,257) (1,407) (1,386) (1,603) (1,878) (1,923)
Personnel costs (1,643) (1,684) (1,734) (2,174) (2,274) (2,295)
Amortization of goodwill 0 (J 0 0 0 0
Depreciation expense (501) (586) (556) (626) (744) (822)
Operating income 798 895 1,006 1,012 1,203 1,453
Interest and dividend income 168 158 173 178 159 189
Interest expense (152) (103) (99) (136) (123) (117)
Earnings before taxes 814 950 1,079 1,053 1,239 1,525
Income taxes (320) (318) (384) (369) (456) (518)
Minority interest 24 (28) (31) (29) (21) (26)
Income before extraordinary items 519 603 664 655 761 981
Extraordinary items (after tax) 0 59 0 0 0 0
Net income 519 662 664 655 761 981
Statement of changes in equity
Beginning equity 3,973 4,354 4,734 4,514 5,103
Net income 662 664 655 761 981
Common dividends (140) (203) (176) (176) (254)
Revaluations (13) (9) 139 134 (151)
Goodwill written off (127) (72) (839) (131) (612)
Ending equity 4,354 4,734 4,514 5,103 5,066
V_________________________________________________________________________________^
Acquisitions and Treatment of Goodwill
Heineken has made several acquisitions and has increased stakes in companies in the years to 1998. Most notable are the investments in Birra Moretti in Italy and the French brewers Fischer and Saint-Arnould, all in 1996. Given these large purchases, the pre-1996 data may not be entirely comparable to more recent data. In forecasting, we will give more weight to the latter years' data than to the earlier figures.
Through its various acquisitions, Heineken has taken on more than NLG 2.3 billion in goodwill. In the United States, goodwill must be recorded as an asset and then amortized over a 40-year life. In the Netherlands, goodwill may be written off immediately to equity, which is Heineken's policy. Using this accounting method would distort comparison of Heineken's ROIC with companies such as Anheuser-Busch that
Page 187
Exhibit 9.14 Heineken—Historical Balance Sheets
/" N
NLG million 1993 1994 1995 1996 1997 1998
Operating cash 173 204 210 246 276 283
Excess marketable securities 1,393 1,536 1,945 1,382 1,595 1,806
Accounts receivable 658 792 879 1,220 1,275 1,218
Inventories 690 687 793 985 1,026 996
Other current assets 314 359 361 479 486 490
Total current assets 3,228 3,578 4,189 4,313 4,658 4,793
Gross prop, plant, and equipment 9,946 10,882 11,383 11,672 14,022 14,283
Accum. depreciation (5.583) (6,187) (6,669) (6,169) (8,368) (8,459)
Net property, plant, and equipment 4,363 4,695 4,715 5,503 5,654 5,824
Goodwill 0 0 0 0 0 0
Investments and advances 541 646 738 838 945 1,080
Total assets 8.132 8,919 9,641 10,654 11,257 11,697
Short-term debt 479 433 586 774 476 474
Accounts payable 530 584 701 885 903 907
Dividends payable 86 86 105 106 106 129
Other current liabilities 951 1,123 1,223 1,454 1,564 1,708
Total current liabilities 2,046 2,226 2,615 3,219 3,050 3,218
Long-term debt 462 503 424 792 909 1,151
Deferred income taxes 584 582 624 635 629 601
Investment facilities equalization 130 119 119 100 100 83
Retirement-related provisions 168 164 167 162 157 103
Ongoing provisions 528 616 612 821 909 912
Minority interest 239 354 346 410 401 564
Total common equity 3,973 4,354 4,734 4,514 5,103 5,066
Total liabilities and equity 8,132 8,919 9,641 10,654 11,257 11,697
follow U.S.-style practices. For comparison purposes, then, it is best to look at performance both with and without goodwill.
Revaluation Reserves
Each year, Heineken makes an adjustment to its balance sheet and equity called a ''revaluation reserve." The details of this adjustment are not disclosed though they are most likely due to foreign currency translation adjustments and fixed asset revaluations. We have treated these adjustments as non-operating cash flows.
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