How to Read Financial Statements 2015

Transcription

1 CORPORATE LAW AND PRACTICE Course Handbook Series Number B-2157 How to Read Financial Statements 2015 Chair Chad Rucker To order this book, call (800) 260-4PLI or fax us at (800) Ask our Customer Service Department for PLI Order Number 58927, Dept. BAV5. Practising Law Institute 1177 Avenue of the Americas New York, New York 10036

2 2 How to Read Financial Statements (PowerPoint slides) Chad Rucker Valuation Research Corporation If you find this article helpful, you can learn more about the subject by going to to view the on demand program or segment for which it was written. 47

3 48 Practising Law Institute

4 Chair Chad Rucker Managing Director Valuation Research Corporation 500 Fifth Avenue 39 th Floor New York, NY Office: Cell: How to Read Financial Statements 1 49

5 Balance Sheet 2 50

6 Assets = Liabilities & Equity Assets = Liabilities + Book Equity 3 51

7 Balance Sheet Balance sheet --The financial statement that shows the amounts of the company s assets, liabilities, and owners equity at the end of the period. Three sections of a balance sheet: Assets -- A resource with economic value that a company owns or controls with the expectation that it will provide future benefit. Liabilities -- A company's legal debts or obligations that arise during the course of business operations. Liabilities are settled over time through the transfer of economic benefits including money, goods or services. Book Equity -- On a company's balance sheet, the amount of the funds contributed by the owners (the stockholders) plus the retained earnings (or losses). Also referred to as shareholders' equity. 4 52

8 Sample Balance Sheet (Dollars in Thousands) CONSOLIDATED BALANCE SHEET - ABC Inc. December 31, December 31, 20X9 20X8 20X9 20X8 Assets Liabilities and Shareholders' Equity Line ID # Line ID # Assets Liabilities Current Assets Current Liabilities A1 Cash and cash equivalents $25,000 $15,000 B1 Accounts payable $60,000 $57,000 A2 Accounts receivable - net of allowance for 160, ,000 B2 Notes payable 51,000 61,000 doubtful accounts of $6,000 in 20X9 and $3,000 in 20X8 A3 Inventories, at the lower of cost or market 180, ,000 B3 Accrued expenses 30,000 36,000 A4 Prepaid expenses and other current assets 4,000 3,000 B4 Income taxes payable 17,000 15,000 B5 Other liabilities 12,000 12,000 B6 Current portion of long-term debt 6,000 6,000 A5 Total Current Assets $369,000 $348,000 B7 Total Current Liabilities $176,000 $187,000 Long-Term Assets Long-Term Liabilities A6 Land $30,000 $30,000 B8 Deferred income taxes $16,000 $9,000 A7 Buildings 125, ,000 B9 Long-term debt 130, ,000 A8 Machinery 200, ,000 B10 Total Liabilities $322,000 $326,000 A9 Leasehold improvements 15,000 15,000 A10 Furniture, fixtures, etc. 15,000 12,000 A11 Total Property, Plant and Equipment $385,000 $350,000 Shareholders' Equity B11 Common stock $75,000 $72,500 A12 Less: accumulated depreciation 125,000 97,000 B12 Additional paid-in capital 20,000 13,500 A13 Net Property, Plant & Equipment $260,000 $253,000 B13 Retained earnings 214, ,000 B14 Total Shareholders' Equity $309,000 $278,000 Other Assets A14 Intangibles (goodwill, patents) net of accumulated amortization of $2,000 in 20X9 and $1,000 in 20X8 $2,000 $3,000 A15 Total Other Assets $2,000 $3,000 A16 Total Assets $631,000 $604,000 B15 Total Liabilities and Shareholders' Equity $631,000 $604,

9 Sample Balance Sheet (Dollars in Thousands) Assets Line ID # December 31, 20X9 20X8 Current Assets A1 Cash and cash equivalents $25,000 $15,000 The value of a company's assets that are cash or can be converted into cash immediately. A2 Accounts receivable - net of allowance for doubtful accounts of $6,000 in 20X9 and $3,000 in 20X8 160, ,000 Money owed by customers (individuals or corporations) to another entity in exchange for goods or services that have been delivered or used, but not yet paid for. Receivables are usually due within a relatively short time period, ranging from a few days to a year A3 Inventories, at the lower of cost or market 180, ,000 The raw materials, work-in-process goods and completely finished goods that are considered to be the portion of a business's assets that are ready or will be ready for sale. Inventory represents one of the most important assets that most businesses possess, because the turnover of inventory represents one of the primary sources of revenue generation and subsequent earnings for the company's shareholders/owners. A4 Prepaid expenses and other current assets 4,000 3,000 A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received in the near future. While prepaid expenses are initially recorded as assets, their value is expensed over time as the benefit is received onto the income statement, because unlike conventional expenses, the business will receive something of value in the near future. A5 Total Current Assets $369,000 $348,

10 Sample Balance Sheet (Dollars in Thousands) Assets Line ID # December 31, 20X9 20X8 Long-Term Assets A6 Land $30,000 $30,000 A7 Buildings 125, ,000 A8 Machinery 200, ,000 A9 Leasehold improvements 15,000 15,000 A10 Furniture, fixtures, etc. 15,000 12,000 A11 Total Property, Plant and Equipment $385,000 $350,000 A company asset that is vital to business operations but cannot be easily liquidated. The value of property, plant and equipment is typically depreciated over the estimated life of the asset, because even the longest-term assets become obsolete or useless after a period of time. A12 Less: accumulated depreciation 125,000 97,000 The cumulative depreciation of an asset up to a single point in its life. Regardless of the method used to calculate it, the depreciation of an asset during a single period is added to the previous period s accumulated depreciation to get the current accumulated depreciation. A13 Net Property, Plant & Equipment $260,000 $253,

11 Sample Balance Sheet (Dollars in Thousands) Assets Line ID # Other Assets A14 Intangibles (goodwill, patents) net of accumulated amortization of $2,000 in 20X9 and $1,000 in 20X8 December 31, 20X9 20X8 $2,000 $3,000 An asset that is not physical in nature. Corporate intellectual property (items such as patents, trademarks, copyrights, business methodologies), goodwill and brand recognition are all common intangible assets in today's marketplace. An intangible asset can be classified as either indefinite or definite depending on the specifics of that asset. A company brand name is considered to be an indefinite asset, as it stays with the company as long as the company continues operations. However, if a company enters a legal agreement to operate under another company's patent, with no plans of extending the agreement, it would have a limited life and would be classified as a definite asset. A15 Total Other Assets $2,000 $3,000 A16 Total Assets $631,000 $604,

12 Sample Balance Sheet Dollars in Thousands) December 31, 20X9 20X8 Liabilities and Shareholders' Equity Line ID # Liabilities Current Liabilities B1 Accounts payable $60,000 $57,000 Accounts payable are debts that must be paid off within a given period of time in order to avoid default. For example, at the corporate level, AP refers to short-term debt payments to suppliers and banks. B2 Notes payable 51,000 61,000 Written promises to pay stated sums of money at future dates, classified as current (if due within 12 months) or non-current (if due after 12 months) of the balance sheet date. B3 Accrued expenses 30,000 36,000 An accounting expense recognized in the books before it is paid for. It is a liability and is usually current. These expenses are typically periodic and documented on a company's balance sheet due to the high probability that they will be paid. B4 Income taxes payable 17,000 15,000 A type of account in the current liabilities section of a company's balance sheet. This account is comprised of taxes that must be paid to the government within one year. Income tax payable is calculated according to the prevailing tax law in the company's home country B5 Other liabilities 12,000 12,000 Any other short-term liabilities (i.e. amounts that will be paid within a year) B6 Current portion of long-term debt 6,000 6,000 A portion of the balance sheet that represents the total amount of longterm debt that must be paid within the next year. The balance sheet has a liability section, which is broken down into long-term and current debt. When a debt payment is set to be made in longer than a year's time, it is recorded in the long-term debt section, and when that payment becomes due within a year, it moves to the "current portion of long-term debt" section. B7 Total Current Liabilities $176,000 $187,

13 Sample Balance Sheet Dollars in Thousands) Liabilities and Shareholders' Equity Line ID # December 31, 20X9 20X8 Long-term liabilities B8 Deferred income taxes $16,000 $9,000 A liability recorded on the balance sheet that results from income already earned and recognized for accounting, but not tax, purposes. Also, differences between tax laws and accounting methods can result in a temporary difference in the amount of income tax payable by a company. This difference is recorded as deferred income tax. B9 Long-term debt 130, ,000 Loans and financial obligations lasting over one year. B10 Total Liabilities $322,000 $326,

14 Sample Balance Sheet Dollars in Thousands) December 31, 20X9 20X8 Liabilities and Shareholders' Equity Line ID # Shareholders' Equity B11 Common stock $75,000 $72,500 A security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure. In the event of liquidation, common shareholders have rights to a company's assets only after bondholders, preferred shareholders and other debt holders have been paid in full. B12 Additional paid-in capital 20,000 13,500 A value that is often included in the contributed surplus account in the shareholders' equity section of a company's balance sheet. The account represent the excess paid by an investor over the par-value price of a stock issue. Additional paid-in-capital can arise from issuing either preferred or common stock. B13 Retained earnings 214, ,000 The percentage of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders' equity on the balance sheet. B14 Total Shareholders' Equity $309,000 $278,000 B15 Total Liabilities and Shareholders' Equity $631,000 $604,

15 Sample Statement of Shareholders Equity (Dollars in Thousands) Line ID # Common Stock CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY - ABC Inc. Additional paid-in capital Retained earnings Total C11 Balance Jan. 1, 20X9 $72,500 $13,500 $192,000 $278,000 C12 Net income 50,000 50,000 A company's total earnings (or profit). Net income is calculated by taking revenues and adjusting for the cost of doing business, depreciation, interest, taxes and other expenses. This number is found on a company's income statement and is an important measure of how profitable the company is over a period of time. The measure is also used to calculate earnings per share. Dividends paid on: C13 Common stock (28,000) (28,000) A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. The dividend is most often quoted in terms of the dollar amount each share receives (dividends per share). It can also be quoted in terms of a percent of the current market price, referred to as dividend yield. C14 Common stock issued 2,500 6,500 9,000 The proceeds received by the company from the sale of common stock to investors. The par value amount is determined by multiplying the par value per share times the number of shares issued. The additional paid-in capital is the amount received in excess of the par value C15 Balance Dec. 31, 20X9 $75,000 $20,000 $214,000 $309,

16 Key Ratios Balance Sheet Working Capital Management Line ID # Value Ratio Non cash, non debt working capital = Total Current Assets A5 $369,000 - Total Current Liabilities B7 176,000 - Cash and Cash Equivalents A1 25,000 + Current Portion of Long-term Debt B6 6,000 Non cash, non debt working capital = Cur. Assets - Cur. Liabilities - Cash + Cur. Debt 174, ,000 Accounts receivable turnover = Net Sales C1 765, x Average Accounts Receivable A2 152,500 Accounts receivable days outstanding = 365 Accounts Receivable Turnover 365 (see above) Days Inventory turnover = Cost of Goods Sold Average Inventory C2 535,000 A3 182, x Days inventory = 365 Inventory Turnover 365 (see above) Days Accounts payable turnover = Cost of Goods Sold Average Accounts Payable C2 535,000 B1 58, x Days payable outstanding = 40 Days Accounts Payable Turnover (see above) 9.1 Average cash conversion cycle = Days Inventory (see above) Accounts Receivable Days Outstanding (see above) 73 - Days Payable Outstanding (see above) 40 Average cash conversion cycle = Days Inventory Outstanding plus Days Sales Outstanding minus Average Days Payable Outstanding Days 13 61

17 Key Ratios Balance Sheet Balance Sheet Solvency Ratios ID Value Ratio Current ratio = Current Assets Current Liabilities A5 369,000 B7 176, x Total Debt = Notes Payable B2 51,000 + Current Portion of Long-term Debt B6 6,000 + Long-term Debt B9 130,000 = Total Debt 187, ,000 Total Debt/Equity = Total Debt Equity (see above) 187,000 B14 309, Total Debt/Capital = Total Debt Total Debt plus Total Equity (see above) 187,000 (see above) 496, Long-term Debt/Capital = Long-term Debt Total Debt plus Total Equity B9 130,000 (see above) 496,

18 Key Ratios Balance Sheet Non Cash working capital = Current assets - current liabilities - cash - current debt Accounts receivables turnover = Net sales Average accounts receivables Accounts receivable days outstanding = 365 Accounts receivables turnover Inventory turnover = Cost of goods sold Average inventory Days inventory 365 Inventory turnover Accounts payable turnover = Cost of goods sold Average accounts payable Days payable outstanding = 365 Accounts payable turnover Current ratio = Current assets Current liabilities Average cash conversion cycle = Days inventory outstanding plus days sales outstanding minus average days payable outstanding 15 63

19 Key Ratios Balance Sheet Total Debt/Equity = Total Debt/Capital = Total Debt Equity Total Debt Total debt plus total equity 16 64

20 Income Statement 17 65

21 Income Statement Income Statement--The financial statement that shows the net income of a company for a period of time. Three sections of an income statement: Revenues -- Amounts earned from rendering services or selling goods to customers. Expenses -- The economic costs that a company incurs through its operations to earn revenue. Net Income -- A company s total revenues less its total expenses for a period of time

22 Sample Income Statement (Dollars in Thousands) CONSOLIDATED INCOME STATEMENTS - ABC Inc. 20X9 20X8 Line ID # C1 Net sales (or revenues) $765,000 $725,000 C2 Cost of goods sold 535, ,000 C3 Gross margin $230,000 $208,000 Operating expenses: C4 Depreciation and amortization $29,000 $25,000 C5 Selling, general and administrative expenses 100, ,000 C6 Operating income $101,000 $74,000 Other income (expense): C7 Interest expense ($17,000) ($17,000) C8 Income before income taxes $84,000 $57,000 C9 Income taxes $34,000 $23,000 C10 Net income $50,000 $34,

23 EBITDA Net Income + Taxes + Interest Expense (net of interest income) = Earnings Before Interest and Taxes ( EBIT ) + Depreciation and Amortization = Earnings Before Interest, Taxes and Depreciation and Amortization ( EBITDA ) +/- EBITDA Adjustments (e.g., one-time items) = Adjusted EBITDA 20 68

24 Key Ratios Income Statement Profitability Line ID # Value Ratio 20X9 20X9 Gross margin = Net Sales C1 765,000 - Cost of Goods Sold C2 535,000 = Gross Margin C3 230, ,000 Gross margin (%) = Gross Margin Net Sales (see above) $230,000 C1 765,000 30% EBIT = Net Income C10 50,000 + Income Taxes C9 34,000 + Interest Expense C7 17,000 EBIT = Earnings (i.e, Net Income) before Interest and Taxes 101,000 EBIT Margin = EBIT Net Sales (see above) 101,000 C1 765,000 13% EBITDA = Net Income C10 50,000 + Income Taxes C9 34,000 + Interest Expense C7 17,000 + Depreciation and Amortization C4 29,000 EBITDA = Earnings (i.e., Net Income) before Interest, Taxes, Depreciation, and Amortization 130, ,000 EBITDA Margin = EBITDA Net Sales (see above) 130,000 C1 765,000 17% Return on sales = Net Income Net Sales C10 50,000 C1 765,000 7% Return on equity = Net Income Average Total Equity C10 50,000 B14 293,500 17% Return on assets = Net Income Average Total Assets C10 50,000 A16 617,500 8% Asset turnover = Net Sales Average Total Assets C1 765,000 A16 617, x 21 69

25 Sample Income Statement (Dollars in Thousands) CONSOLIDATED INCOME STATEMENTS - ABC Inc. 20X9 20X8 Line ID # C1 Net sales (or revenues) $765,000 $725,000 The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any discounts allowed. The sales number reported on a company's financial statements is a net sales number, reflecting these deductions. C2 Cost of goods sold 535, ,000 Cost of sales is the amount of money its costs to produce the goods or products of a company. It is also called cost of goods sold. These costs include the materials and labor needed to produce the goods. C3 Gross margin $230,000 $208,000 A company's total sales revenue minus its cost of goods sold. Operating expenses: C4 Depreciation and amortization $29,000 $25,000 A reduction in a capital account of the value of an asset over time. C5 Selling, general and administrative expenses 100, ,000 The sum or all direct and indirect selling expenses and all general and administrative expenses of a company. Direct selling expenses are expenses that can be directly linked to the sale of a specific unit such as credit, warranty and advertising expenses. Indirect selling expenses are expenses which cannot be directly linked to the sale of a specific unit, but which are proportionally allocated to all units sold during a certain period, such as telephone and postal charges. General and administrative expenses include salaries of non-sales personnel, rent, heat and lights. C6 Operating income $101,000 $74,000 Other income (expense): C7 Interest expense ($17,000) ($17,000) Read more: C8 Income before income taxes $84,000 $57,000 C9 Income taxes $34,000 $23,000 A tax that governments impose on financial income generated by all entities within their jurisdiction. By law, businesses and individuals must file an income tax return every year to determine whether they owe any taxes or are eligible for a tax refund. Income tax is a key source of funds that the government uses to fund its activities and serve the public. C10 Net income $50,000 $34,000 A company's total earnings (or profit). Net income is calculated by taking revenues and adjusting for the cost of doing business, depreciation, interest, taxes and other expenses. This number is found on a company's income statement and is an important measure of how profitable the company is over a period of time. This measure is also used to calculate earnings per share

26 Key Ratios Income Statement Income Statement Solvency Ratios Line ID # Value Ratio EBIT/Interest = EBIT Interest C6 101,000 C7 17, EBITDA/Interest = EBITDA Interest (see above) 130,000 C7 17, (EBITDA - CAPEX)/Interest Expense = EBITDA - CAPEX Interest Expense (see above) 95,000 C7 17, Total Debt/EBITDA = Total Debt EBITDA (see above) 187,000 (see above) 130, Net Debt = Total Debt (see above) 187,000 - Cash and Cash Equivalents A1 25,000 = Net Debt 162, ,000 Net Debt/EBITDA = Net Debt EBITDA (see above) 162,000 (see above) 130,

27 Key Ratios Income Statement Gross margin = Revenues minus cost of goods sold Net sales Return on sales = Net income Net sales Return on assets* = Net income Average total assets Asset turnover = Net sales Average total assets Return on equity = Net income Average total equity EBITDA = Earnings before interest, taxes, depreciation, and amortization EBIT = Earnings before interest and taxes EBITDA margin = EBITDA Net sales EBIT Margin = EBIT Net sales *Can also use earnings before interest and taxes to calculate return (EBIT/Average total assets) 24 72

28 Key Ratios Income Statement EBIT/Interest = EBITDA/Interest = (EBITDA - CAPEX)/Interest Expense = Total Debt/EBITDA = Net Debt/EBITDA = EBIT Interest EBITDA Interest EBITDA - CAPEX Interest Expense Total debt EBITDA Total debt minus cash EBITDA 25 73

29 Cash Flow Statement 26 74

30 Cash Flow Statement Cash flow Statement --The financial statement that shows the cash inflows and cash outflows for the period of time covered by the income statement. Three sections of a cash flow statement: Operating -- reconciles the net income to the actual cash the company received from or used in its operating activities. Adjusts net income for any non-cash items (such as adding back depreciation expenses) and adjusts for any cash that was used or provided by other operating assets and liabilities. Investing -- The second part of a cash flow statement shows the cash flow from all investing activities, which generally include purchases or sales of long-term assets, such as property, plant and equipment, as well as investment securities. Financing -- The third part of a cash flow statement shows the cash flow from all financing activities. Typical sources of cash flow include cash raised by selling stocks and bonds or borrowing from banks. Likewise, paying back a bank loan would show up as a use of cash flow

31 Sample Cash Flow Statement CONSOLIDATED STATEMENTS OF CASH FLOW - ABC Inc. Line ID # (Dollars in Thousands) Year Ended December 31, 20X9 Cash flows from operating activities: D1 Net income $50,000 Adjustments to reconcile net income to net cash from operating activities: D2 Depreciation and amortization $29,000 D3 Increase in accounts receivable (15,000) D4 Decrease in inventory 5,000 D5 Increase in prepaid expenses and other current asset (1,000) D6 Increase in deferred taxes 7,000 D7 Increase in accounts payable 3,000 D8 Decrease in accrued expenses (6,000) D9 Increase in income taxes payable 2,000 D10 Total adjustments $24,000 D11 Net cash provided by operating activities $74,000 Cash flows from investing activities: D12 Purchase of fixed assets ($35,000) D13 Net cash used in investing activities ($35,000) Cash flows from financing activities: D14 Payment of notes payable ($10,000) D15 Proceeds from issuance of common stock 9,000 D16 Payment of dividends (28,000) D17 Net cash used in financing activities ($29,000) D18 Increase in cash $10,000 D19 Cash and cash equivalents at beginning of year 15,000 D20 Cash and cash equivalents at the end of year $25,

32 Sample Cash Flow Statement CONSOLIDATED STATEMENTS OF CASH FLOW - ABC Inc. Line ID # (Dollars in Thousands) Year Ended December 31, 20X9 Cash flows from operating activities: D1 Net income $50,000 Adjustments to reconcile net income to net cash from operating activities: D2 Depreciation and amortization $29,000 Added back as a non-cash charge that was previously deducted to arrive at net income. D3 Increase in accounts receivable (15,000) An increase (decrease) in receivables represents a use (source) of funds. A use of funds is a cash outflow. D4 Decrease in inventory 5,000 An decrease (increase) in inventory represents a source (use) of funds. A source of funds is a cash inflow. D5 Increase in prepaid expenses and other current asset (1,000) An increase (decrease) in prepaid expenses or other current assets represents a use (source) of funds. A use of funds is a cash outflow. D6 Increase in deferred taxes 7,000 An increase in a liability is source of funds and represents a cash inflow. By deferring taxes, ABC will have additional funds available for use in operations. D7 Increase in accounts payable 3,000 An increase (decrease) in payables represents a source (use) of funds. Increases in payables may result from more flexible payment terms from vendors and is a cash inflow (more funds available for use in operations). D8 Decrease in accrued expenses (6,000) An decrease (increase) in expenses accrued is a use (source) of funds. Paying off expenses is a cash outflow. D9 Increase in income taxes payable 2,000 Similar to accounts payable (above), and increase in a payable is a source of funds and a cash inflow. D10 Total adjustments $24,000 D11 Net cash provided by operating activities $74,000 Operating cash flow is the cash generated by running the business. Many analyst consider cash flow from operations a good profitability measure as it is independent of investing and financing decisions

33 Sample Cash Flow Statement CONSOLIDATED STATEMENTS OF CASH FLOW - ABC Inc. Line ID # (Dollars in Thousands) Year Ended December 31, 20X9 Cash flows from investing activities: D12 Purchase of fixed assets ($35,000) Also called capital expenditures, this represents the cash paid for fixed assets over the period. Increased fixed assets represents a cash outflow (use of funds). It is possible that a company sells fixed assets, which would be a cash inflow (source of funds). D13 Net cash used in investing activities ($35,000) Cash flow from investing activities represents the net change in cash position that results from investments made in capital markets or purchases (or sales) of property, plant, or equipment. Paying down debt represents a cash outflow (use) and will decrease cash levels. Cash flows from financing activities: D14 Payment of notes payable ($10,000) Issuance of new debt would provide a cash inflow (source of funds). D15 Proceeds from issuance of common stock 9,000 Stock sales are another way a company can generate funds. Issuing stock increases cash and share repurchases decrease cash (use of funds). D16 Payment of dividends (28,000) Dividend payments are a use of funds and will decrease cash levels. D17 Net cash used in financing activities ($29,000) Cash flow from financing activities measures the changes in cash due to interactions with both equity and debt investors. Net cash provided by operating activities $74,000 Net cash used in investing activities ($35,000) Net cash used in financing activities ($29,000) D18 Increase in cash $10,000 Net change in cash position is the sum of cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. D19 Cash and cash equivalents at beginning of year 15,000 D20 Cash and cash equivalents at the end of year $25,

34 Key Ratios Cash Flow Statement Cash Flow Ratios Line ID # Value Ratio Total Debt Coverage = Net Cash provided by Operating Activities Total Debt D11 74,000 (see above) 187, Cash Flow from Operations - CAPEX = Net Cash provided by Operating Activities D11 74,000 (Free Cash Flows) - Purchase of Fixed Assets D12 35,000 = Free Cash Flows 39,000 39,000 EBITDA - CAPEX = EBITDA (see above) 130,000 - Purchase of Fixed Assets D12 35,000 = EBITDA - CAPEX 95,000 95,000 CAPEX Coverage = Net Cash provided by Operating Activities Purchase of Fixed Assets D11 74,000 D12 35, CAPEX/EBITDA = Purchase of Fixed Assets EBITDA D12 35,000 (see above) 130, CAPEX/Gross PPE = Purchase of Fixed Assets D12 35,000 Average Total of Property, Total Property, Plant and Plant Equipment and Equipment A11 385, ,

35 Key Ratios Cash Flow Statement Total Debt Coverage = Net Cash from Operating Activities Total Debt EBITDA Minus Cap Expenditures = EBITDA - Capital Expenditures Capital Expenditures/EBITDA = Capital Expenditures EBITDA Capital Expenditures/Gross PPE = Capital Expenditures Gross Property Plant and Equipment Cash Flow from Operations = Net Cash from Operating Activities CAPEX - Purchases of Fixed Assets (Free Cash Flows) = Free Cash Flows 32 80

36 NOTES 81

37 NOTES 82