Excel Corporation

Income Statements
For Years Ended December 31, Year 8 and Year 9

($ thousands) Year 8 Year 9

Sales 1,636,298 1,782,254

Cost of goods sold and operating expenses 1,473,293 1,598,679
EBIT 163,005 183,575
Interest expense 21,825 20,843
EBT 141,180 162,732
Tax expense 52,237 58,584
NI 88,943 104,148

NOPAT EBIT ( 1 - t )

Year 8 Year 9
Tax rate Tax EXP/EBT 37% 36%
Nopat 102,693 117,487
 chapter 8:RETURN ON INVESTED CAPITAL A

Risk and Return

ROIC

Income/Invested capital

Income
Revenue
Growth Rate of Assets
Net income

1 RNOA 3 ways
2 ROCE 3 ways

RNOA Return on NET OPERATING ASSETS

RNOA = NOPAT/ Average NOA
Average NOA = (Opening NOA + Closing NOA)/2
NOA = Operating Assets - Operating Liabilities
NOPAT = EBIT (1 - Tax rate)
1
2
3

ROCE Return on COMMON EQUITY

1
2
4

REASONS RO CALC ROIC

1 Measuring managerial effectivness
2 Measuring profitability
3 Plan for future
ON INVESTED CAPITAL AND PROFITABILITY ANALYSIS

Invested Capital
Total assets
Total liabilities + OE
OE
LTL + OE
 TA
CA LTA

INV PPE
A/R LT MKT INV
ADVANCES GOOD WILL

CASH AND EQUIVALENTS COPY RIGHTS

MKT SEC SHORT TERM PATENTS
NOTE RECEIVBLE ST DEF TAXED (LT)
PREPAID EXP LONG TERM INVESTMENT
DEF TAXES ASSET ST LEASE HOLD EQUIPMENTS
LONG TERM PREPAYMENTS
INV IN STRATEGIC ACQUISITION
INV IN NON STRATEGIC ACQUISITION

Operating Assets Non operating assets

Cash Invement in debt secutiries LT
Cash EQB Invement in debt secutiries ST
AR Invesment in equity security ST
Prepaid Exp Invesment in equity security LT
Property Notes recievable ST and LT
Plant Long term invesments
Eqvipment Capital Lease
Goodwill
Coptrights
Defered Tax
Trade Recievables
Strategic acquisitions (equity method)
Subsidiries

OA FA
CA - CL
NOA
 NOA = NFO + SE
RNOA
EQUALS TL
CL LTL

A/P REMAINING PORTION OF LTL

ST DEBTS BONDS
NOTE PAYABLE CONTINGENCY LIABILITIES

PENSIONS OR OTHER BENEFIT TO

INTEREST PAYABLE EMPLOYEES
TAX PAYABLE/DEF TAX ST INSTALLMENT NOTES
SALARY PAYABLE DEF TAX ES
CURRENT PORTION OF LTL LTL
UNEARNED REV
ACCRUED EXP
TRADE PAYABLE

equals Operating liabilities Non operating liabilities

AP
Accrued Expense Notes payable ST LT
Trade Payables Bonds ST LT
Current portion of LTL
Def tax liabilities LT ST Remaining portion of LTL
Operating liabilities Long term financing
Warranties Installment notes
Guaranties PREF stock
Pensions Mortgage payment
Employee funds

EQUALS OL FL
FL - FA
Equals NFO
 PLUS OE
PAID UP CAPITAL ENDING RE

COMMON EQUITY ENDING RE

PREFFERED STOCKS
TREASURY STOCKS

Plus SE
Common stock
Treasury
Paid up Capita;

Plus SE
Plus SE
Plus SE
 Excel Corporation
Balance Sheets
At December 31, Year 8 and Year 9

($ thousands) Year 8 Year 9

Assets
Cash 115,397 71,546
Marketable Securities 38,008 43,854
Accounts Receivable, net 177,538 182,859
Inventories 204,362 256,838
Total current assets 535,305 555,097

Investments in unconsolidated subsidiaries 33,728 62,390

Marketable securities 5,931 56,997
PPE, net 1,539,221 1,633,458
Goodwill 6,550 6,550
Total long-term assets 1,585,430 1,759,395
Total Assets 2,120,735 2,314,492

Liabilities
Notes payable 7,850 13,734
Accounts payable 138,662 155,482
Taxes payable 24,370 13,256
Current maturities of long-term debt 30,440 33,822
Total current liabilities 201,322 216,294

Long-term debt 507,329 473,507

Pension and OPEB liabilities 743,779 852,237
Total long-term liabilities 1,251,108 1,325,744

Equity
Common stock 413,783 413,783
Additional paid-in capital 19,208 19,208
Retained earnings 436,752 540,901
Treasury stock - 201,438 - 201,438
Total stockholders' equity 668,305 772,454
Total liabilities and equity 2,120,735 2,314,492
NOPAT YEAR 9 117,487
SALES 9 1,782,254
 OA YR 8
Cash 115,397

Goodwill 6,550

AR 177,538
Inventories 204,362
PPE, net 1,539,221
Investments in unconsolidated subsidiaries 33,728

TOTAL 2,076,796

AVG 2,145,219

YEAR 8
NOA
NOA
YEAR 8 1,169,985
YEAR 9 1,192,666

1 RNOA

NOPAT/AVG NOA

NOPAT YEAR 9 117487.4585

AVG NOA 1181325.5

RNOA 9.95%

Segregated formulas to calculate moa

2 NOPAT/AVG NOA

RNOA NOPAT/SALES *
NOPAT MARGIN *
 NET PROFIT AFTER TAXES MARGIN *

6.59% *

OPERATING PROFITABILITY

3 NOPAT/AVG NOA *

RNOA NOPAT/SALES *

NOPAT MARGIN *
OA YR9
71,546 Marketable Securities

6,550 Marketable securities

182,859
256,838
1,633,458
62,390

2,213,641 -

1,106,821 21,970

YEAR 9

NOA EQUALS

SALES/AVG NOA
AVG NOA TURNOVER
AVG NET OPERATING ASSETS TURNOVER

1.50869002658454

UR MANAGEMENT OF ASSET UTILITIZATION

SALES/AVG OA *

AVG OA TURNOVER *
FA YR 8 FA YR9
38,008 43,854 Accounts payable

5,931 56,997 Taxes payable

Pension and OPEB liabilities

43,939 100,851 -

72,395 50,426 453,406

YEAR 8 YEAR 9

NFO
501,680
420,212

CAPITAL INTENSIVE FIRMS

NOA
HIGHER NOA
LOWER TO
 REASONS FOR CHANGES IN NOPAT MARGIN

EXPENSES
TAX RATE
SALES DUE TO DEMAND OF PRODUCT
TYPE OF PRODUCT
VOLUME SOLD
PRICE OF PRODUCT
CGS

(1+OL LEV) 0.83

(1+AVG OL/AVG NOA) 2.82

OL YR 8 OL YR 9
138,662 155,482 Notes payable
Current maturities of long-term
24,370 13,256 debt

743,779 852,237 Long-term debt

906,811 1,020,975 -

963,893 510,488 272,810

YEAR 8

PLUS SE
668305
720379.5

OA-OL
SUPPLIER SALARIES

RENT SUPPLIES EXP, INSURANCE EXP.

DEPRECIATION EXPENSE
FL YR 8 FL YR9 SE YR8
7,850 13,734 Common stock 413,783

30,440 33,822 Additional paid-in capital 19,208

507,329 473,507 Retained earnings 436,752

Treasury stock - 201,438

545,619 521,063 668,305

533,341 521,063 668,305 720,380

YEAR 9
SE YR 9
413,783

19,208

540,901
- 201,438

772,454

772,454