Financial Modeling Mid-Term Exam

Three statement modeling

Special features:

Ü Detailed revenue forecast

Ü Cash sweep with revolver (including mandated repayments)
Ü Positive presentation income statement
Ü Non-threaded assumptions
Ü OWC accounts forecast on days
Ü Cash and revolver
Ü Ratios

Model information:
Company name: Kraft
Date: 31-Dec-19
Currency: USD
Units: Millions
Analyst name: Analyst name
Circular switch: 1.0
Kraft Hist. Hist. Hist. Proj. Proj. Proj. Proj. Proj.
Assumptions 31-Dec-17 31-Dec-18 31-Dec-19 31-Dec-20 31-Dec-21 31-Dec-22 31-Dec-23 31-Dec-24
Income statement
Dirty COGS % of sales 66.2% 62.8% 63.4% 65.0% 65.0% 65.0% 62.0% 62.0%
Dirty SG&A % of sales 24.7% 25.7% 23.8% 25.0% 25.0% 25.0% 25.0% 25.0%
Amortization amount 225.0 217.0 217.0 200.0 217.0 217.0 217.0 217.0
Non-recurring income / (expense) amount (516.0) (239.0) (522.0) (485.0) 0.0 218.0 (21.0) 0.0
Effective tax rate 762.5% 20.9% 5.8% 19.0% 19.0% 19.0% 20.0% 20.0%
Marginal tax rate 35.2% 36.6% 35.5% 35.5% 35.5% 35.5% 35.5% 35.5%
Basic WASO 1,765.0 1,777.0 1,774.0 1,701.0 1,701.0 1,701.0 1,701.0 1,701.0
Diluted WASO 1,772.0 1,789.0 1,789.0 1,715.4 1,715.4 1,715.4 1,715.4 1,715.4
Dividend per share growth rate 0.1% (54.1%) 5.0% 5.0% 5.0% 5.0% 5.0%
Balance sheet
Receivables days 63.9 55.6 55.9 55.9 55.9 55.9 55.9
Inventory days 62.1 65.3 61.6 61.6 61.6 61.6 61.6
Deferred income taxes % of sales 1.7% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
Other current assets % of sales 2.1% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%
Goodwill amount 25,740.0 25,597.0 25,597.0 25,597.0 25,597.0 25,597.0 25,597.0
Other long-term assets $ amount 1,502.0 1,503.0 1,503.0 1,503.0 1,503.0 1,503.0 1,503.0
Payable days 77.0 84.5 87.9 87.9 87.9 87.9 87.9
Accrued marketing % of sales 7.1% 6.2% 6.6% 6.6% 6.6% 6.6% 6.6%
Accrued employment costs % of sales 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Other current liabilities % of sales 8.8% 9.1% 8.6% 8.6% 8.6% 8.6% 8.6%
Deferred taxes % of sales 17.8% 17.3% 17.8% 17.8% 17.8% 17.8% 17.8%
Non-pension post-retirement benefits amount 2,673.0 1,962.0 1,962.0 1,962.0 1,962.0 1,962.0 1,962.0
Other liabilities % of sales 10.0% 8.0% 8.2% 8.2% 8.2% 8.2% 8.2%
PP&E
Capital expenditure % of sales 3.8% 3.8% 4.6% 4.6% 4.6% 4.6% 4.6% 4.6%
Depreciation % of beginning PP&E 8.5% 8.6% 8.6% 8.6% 8.6% 8.6%
Equity
Share issuance / (repurchases) 0.0 0.0 0.0 0.0 0.0
Cash available for debt repayment
Minimum cash % of sales 0.5% 0.5% 0.5% 0.5% 0.5%
Interest rates
Short-term debt / revolver 5.5% 5.5% 5.5% 5.5% 5.5%
Debt 1 6.6% 6.6% 6.6% 6.6% 6.6%
Debt 2 6.0% 6.0% 6.0% 6.0% 6.0%
Debt 3 5.4% 5.4% 5.4% 5.4% 5.4%
Debt 4 6.5% 6.5% 6.5% 6.5% 6.5%
Interest income on cash 2.0% 2.0% 2.0% 2.0% 2.0%
Kraft Hist. Hist. Hist. Proj. Proj. Proj. Proj. Proj.
Revenues 31-Dec-17 31-Dec-18 31-Dec-19 31-Dec-20 31-Dec-21 31-Dec-22 31-Dec-23 31-Dec-24
North America
CPI increase / (decrease) % 1.5% 1.5% 1.5% 1.5% 1.5%
Price growth over / (under) CPI % 0.0% 0.0% 0.0% 0.0% 0.0%
Price growth % (additive) 1.5% 1.5% 1.5% 1.5% 1.5%
Population growth increase 0.8% 0.8% 0.8% 0.8% 0.8%
Market share growth / (decline) 0.0% 0.0% 0.0% 0.0% 0.0%
Volume growth 0.8% 0.8% 0.8% 0.8% 0.8%
Sales growth 1.0% 1.3% 2.3% 2.3% 2.3% 2.3% 2.3%
North America Sales 6,833.0 6,903.0 6,991.0 7,151.8 7,316.3 7,484.6 7,656.7 7,832.8
Europe
CPI increase / (decrease) % 1.0% 1.0% 1.0% 1.0% 1.0%
Price growth over / (under) CPI % 0.0% 0.0% 0.0% 0.0% 0.0%
Price growth % (additive) 1.0% 1.0% 1.0% 1.0% 1.0%
Population growth increase 0.8% 0.8% 0.8% 0.8% 0.8%
Market share growth / (decline) 0.0% 0.0% 0.0% 0.0% 0.0%
Volume growth 0.8% 0.8% 0.8% 0.8% 0.8%
Sales growth (7.1%) 1.8% 1.8% 1.8% 1.8% 1.8% 1.8%
Europe Sales 14,874.0 13,817.0 14,059.0 14,312.1 14,569.7 14,831.9 15,098.9 15,370.7
Latin America
CPI increase / (decrease) % 2.5% 2.5% 2.5% 2.5% 2.5%
Price growth over / (under) CPI % 0.0% 0.0% 0.0% 0.0% 0.0%
Price growth % (additive) 2.5% 2.5% 2.5% 2.5% 2.5%
Population growth increase 0.7% 0.7% 0.7% 0.7% 0.7%
Market share growth / (decline) 0.0% 0.0% 0.0% 0.0% 0.0%
Volume growth 0.7% 0.7% 0.7% 0.7% 0.7%
Sales growth (0.1%) (0.3%) 3.2% 3.2% 3.2% 3.2% 3.2%
Latin America Sales 5,403.0 5,396.0 5,382.0 5,554.2 5,732.0 5,915.4 6,104.7 6,300.0
Asia Pacific
CPI increase / (decrease) % 2.0% 2.0% 2.0% 2.0% 2.0%
Price growth over / (under) CPI % 0.0% 0.0% 0.0% 0.0% 0.0%
Price growth % (additive) 2.0% 2.0% 2.0% 2.0% 2.0%
Population growth increase 1.0% 1.0% 1.0% 1.0% 1.0%
 Market share growth / (decline) 0.5% 1.0% 1.0% 1.0% 1.0%
Volume growth 1.5% 2.0% 2.0% 2.0% 2.0%
Sales growth 6.2% (4.1%) 3.5% 4.0% 4.0% 4.0% 4.0%
Asia Pacific Sales 4,864.0 5,164.0 4,952.0 5,125.3 5,330.3 5,543.5 5,765.3 5,995.9
EEMEA
CPI increase / (decrease) % 3.0% 3.0% 3.0% 3.0% 3.0%
Price growth over / (under) CPI % 0.0% 0.0% 0.0% 0.0% 0.0%
Price growth % (additive) 3.0% 3.0% 3.0% 3.0% 3.0%
Population growth increase 0.5% 0.5% 0.5% 0.5% 0.5%
Market share growth / (decline) 0.0% 0.0% 0.0% 0.0% 0.0%
Volume growth 0.5% 0.5% 0.5% 0.5% 0.5%
Sales growth (2.6%) 4.8% 3.5% 3.5% 3.5% 3.5% 3.5%
EEMEA Sales 3,836.0 3,735.0 3,915.0 4,052.0 4,193.8 4,340.6 4,492.6 4,649.8

Sales summary
Total sales 35,810.0 35,015.0 35,299.0 36,195.4 37,142.1 38,116.1 39,118.1 40,149.2
Sales growth (2.2%) 0.8% 2.5% 2.6% 2.6% 2.6% 2.6%
Kraft Hist. Hist. Hist. Proj. Proj. Proj. Proj. Proj.
Calcs 31-Dec-17 31-Dec-18 31-Dec-19 31-Dec-20 31-Dec-21 31-Dec-22 31-Dec-23 31-Dec-24
PP&E
Beginning balance 10,247.0 11,030.7 11,790.6 12,530.0 13,251.8
Capital expenditure 1,370.0 1,328.0 1,622.0 1,665.0 1,708.5 1,753.3 1,799.4 1,846.9
Depreciation (881.2) (948.6) (1,014.0) (1,077.6) (1,139.7)
Ending balance 10,247.0 11,030.7 11,790.6 12,530.0 13,251.8 13,959.0

Equity
Beginning balance 32,532.0 32,450.7 32,759.2 33,220.2 34,416.9
Net income 868.1 1,305.4 1,507.6 2,295.7 2,422.5
Dividends 949.4 996.9 1,046.7 1,099.0 1,154.0
Share issuance / (repurchases) 0.0 0.0 0.0 0.0 0.0
Ending balance 32,532.0 32,450.7 32,759.2 33,220.2 34,416.9 35,685.4

OWC
Receivables 5,543.4 5,688.3 5,837.5 5,991.0 6,148.9
Inventories, net 3,970.6 4,074.4 4,181.3 4,093.1 4,201.0
Deferred income taxes 542.9 557.1 571.7 586.8 602.2
Other current assets 904.9 928.6 952.9 978.0 1,003.7
Total operating current assets 10,961.8 11,248.5 11,543.4 11,648.8 11,955.9
Accounts payable 5,665.8 5,814.0 5,966.5 5,840.7 5,994.7
Accrued marketing 2,388.9 2,451.4 2,515.7 2,581.8 2,649.8
Accrued employment costs 1,085.9 1,114.3 1,143.5 1,173.5 1,204.5
Other current liabilities 3,112.8 3,194.2 3,278.0 3,364.2 3,452.8
Total operating current liabilities 12,253.4 12,573.9 12,903.6 12,960.2 13,301.8
OWC (1,291.6) (1,325.4) (1,360.2) (1,311.4) (1,345.9)
Kraft Hist. Hist. Hist. Proj. Proj. Proj. Proj.
Debt 31-Dec-17 31-Dec-18 31-Dec-19 31-Dec-20 31-Dec-21 31-Dec-22 31-Dec-23
Cash available for debt repayment
Minimum cash % of sales 0.5% 0.5% 0.5% 0.5%

Beginning cash 2,000.0 181.0 185.7 190.6

Minimum cash 181.0 185.7 190.6 195.6
Cash flow available for debt repayment 311.4 45.5 226.6 903.6
Cash available for debt repayment 2,130.4 40.8 221.7 898.6
Cash available after mandated repayments 2,130.4 40.8 221.7 898.6

Short-term debt / revolver 0.0 0.0 0.0 0.0

Beginning balance 1,636.0 0.0 0.0 0.0
Issuance / (repayment) (1,636.0) 0.0 0.0 0.0
Ending balance 1,636.0 0.0 0.0 0.0 0.0
Interest rate 5.5% 5.5% 5.5% 5.5%
Interest expense 45.0 0.0 0.0 0.0

Cash available after servicing the revolver 494.4 40.8 221.7 898.6

Debt 1
Beginning balance 9,907.0 9,412.6 9,371.7 9,150.0
Accelerated repayment (494.4) (40.8) (221.7) (898.6)
Ending balance 9,907.0 9,412.6 9,371.7 9,150.0 8,251.5
Interest rate 6.6% 6.6% 6.6% 6.6%
Interest expense 640.0 622.2 613.5 576.4

Cash available for acceleration of debt 2 0.0 0.0 0.0 0.0

Debt 2
Beginning balance 4,448.0 4,448.0 4,448.0 4,448.0
Accelerated repayment 0.0 0.0 0.0 0.0
Ending balance 4,448.0 4,448.0 4,448.0 4,448.0 4,448.0
Interest rate 6.0% 6.0% 6.0% 6.0%
 Interest expense 266.9 266.9 266.9 266.9

Cash available for acceleration of debt 3 0.0 0.0 0.0 0.0

Debt 3
Beginning balance 1,116.0 1,116.0 1,116.0 1,116.0
Accelerated repayment 0.0 0.0 0.0 0.0
Ending balance 1,116.0 1,116.0 1,116.0 1,116.0 1,116.0
Interest rate 5.4% 5.4% 5.4% 5.4%
Interest expense 59.7 59.7 59.7 59.7

Cash available for acceleration of debt 4 0.0 0.0 0.0 0.0

Debt 4
Beginning balance 14.0 14.0 14.0 14.0
Accelerated repayment 0.0 0.0 0.0 0.0
Ending balance 14.0 14.0 14.0 14.0 14.0
Interest rate 6.5% 6.5% 6.5% 6.5%
Interest expense 0.9 0.9 0.9 0.9

Long-term debt summary

Debt 1 9,412.6 9,371.7 9,150.0 8,251.5
Debt 2 4,448.0 4,448.0 4,448.0 4,448.0
Debt 3 1,116.0 1,116.0 1,116.0 1,116.0
Debt 4 14.0 14.0 14.0 14.0
Total long-term debt 14,990.6 14,949.7 14,728.0 13,829.5

Interest expense summary

Short-term debt / revolver 45.0 0.0 0.0 0.0
Debt 1 640.0 622.2 613.5 576.4
Debt 2 266.9 266.9 266.9 266.9
Debt 3 59.7 59.7 59.7 59.7
Debt 4 0.9 0.9 0.9 0.9
Total interest expense 1,012.4 949.7 941.0 903.9
Interest income
Cash 2,000.0 1,090.5 183.3 188.1 193.1
Interest rate 2.0% 2.0% 2.0% 2.0%
Interest income 30.9 12.7 3.7 3.8
 Proj.
31-Dec-24

0.5%

195.6
200.7
1,081.0
1,075.8
1,075.8

0.0
0.0
0.0
0.0
5.5%
0.0

1,075.8

8,251.5
(1,075.8)
7,175.7
6.6%
511.0

0.0

4,448.0
0.0
4,448.0
6.0%
 266.9

0.0

1,116.0
0.0
1,116.0
5.4%
59.7

0.0

14.0
0.0
14.0
6.5%
0.9

7,175.7
4,448.0
1,116.0
14.0
12,753.7

0.0
511.0
266.9
59.7
0.9
838.5
198.2
2.0%
3.9
Kraft Hist. Hist. Hist. Proj. Proj. Proj. Proj. Proj.
IS 31-Dec-17 31-Dec-18 31-Dec-19 31-Dec-20 31-Dec-21 31-Dec-22 31-Dec-23 31-Dec-24
Sales 35,810.0 35,015.0 35,299.0 36,195.4 37,142.1 38,116.1 39,118.1 40,149.2
COGS 23,690.0 22,003.0 22,380.0 23,527.0 24,142.4 24,775.4 24,253.2 24,892.5
Gross profit 12,120.0 13,012.0 12,919.0 12,668.4 12,999.7 13,340.6 14,864.9 15,256.7

SG&A 8,861.0 8,983.0 8,400.0 9,048.9 9,285.5 9,529.0 9,779.5 10,037.3

EBITDA 3,259.0 4,029.0 4,519.0 3,619.5 3,714.2 3,811.6 5,085.4 5,219.4

Depreciation 884.0 860.0 850.0 881.2 948.6 1,014.0 1,077.6 1,139.7

Amortization 225.0 217.0 217.0 200.0 217.0 217.0 217.0 217.0
EBIT 2,150.0 2,952.0 3,452.0 2,538.3 2,548.6 2,580.6 3,790.8 3,862.7

Interest income 0.0 0.0 0.0 30.9 12.7 3.7 3.8 3.9
Interest expense 1,618.0 1,863.0 1,579.0 1,012.4 949.7 941.0 903.9 838.5
Non-recurring income / (expense) (516.0) (239.0) (522.0) (485.0) 0.0 218.0 (21.0) 0.0
Profit before tax 16.0 850.0 1,351.0 1,071.8 1,611.6 1,861.3 2,869.7 3,028.1

Tax 122.0 178.0 79.0 203.6 306.2 353.6 573.9 605.6

Net income (106.0) 672.0 1,272.0 868.1 1,305.4 1,507.6 2,295.7 2,422.5

Post tax non-recurring items (334.4) (151.5) (336.7) (312.8) 0.0 140.6 (13.5) 0.0
Recurring net income 228.4 823.5 1,608.7 1,180.9 1,305.4 1,367.0 2,309.3 2,422.5

Dividends 2,043.0 2,058.0 943.0 949.4 996.9 1,046.7 1,099.0 1,154.0

Shareholder information
Basic WASO 1,765.0 1,777.0 1,774.0 1,701.0 1,701.0 1,701.0 1,701.0 1,701.0
Diluted WASO 1,772.0 1,789.0 1,789.0 1,715.4 1,715.4 1,715.4 1,715.4 1,715.4
Basic EPS 0.13 0.46 0.91 0.69 0.77 0.80 1.36 1.42
Diluted EPS 0.13 0.46 0.90 0.69 0.76 0.80 1.35 1.41
Dividend per share 1.16 1.16 0.53 0.56 0.59 0.62 0.65 0.68
Kraft Hist. Hist. Hist. Proj. Proj. Proj. Proj. Proj.
BS 31-Dec-17 31-Dec-18 31-Dec-19 31-Dec-20 31-Dec-21 31-Dec-22 31-Dec-23 31-Dec-24
Cash and cash equivalents 4,475.0 2,000.0 181.0 185.7 190.6 195.6 200.7
Receivables 6,129.0 5,380.0 5,543.4 5,688.3 5,837.5 5,991.0 6,148.9
Inventories, net 3,741.0 4,001.0 3,970.6 4,074.4 4,181.3 4,093.1 4,201.0
Deferred income taxes 593.0 540.0 542.9 557.1 571.7 586.8 602.2
Other current assets 735.0 900.0 904.9 928.6 952.9 978.0 1,003.7
Total current assets 11,142.7 11,434.2 11,734.0 11,844.4 12,156.6

Property, plant and equipment, net 10,010.0 10,247.0 11,030.7 11,790.6 12,530.0 13,251.8 13,959.0
Goodwill 25,740.0 25,597.0 25,597.0 25,597.0 25,597.0 25,597.0 25,597.0
Intangible assets, net 22,552.0 21,994.0 21,794.0 21,577.0 21,360.0 21,143.0 20,926.0
Other long-term assets 1,502.0 1,503.0 1,503.0 1,503.0 1,503.0 1,503.0 1,503.0
Total other non-current assets 59,924.7 60,467.6 60,990.0 61,494.8 61,985.0

TOTAL ASSETS 71,067.5 71,901.8 72,724.0 73,339.3 74,141.7

Short-term debt / revolver 274.0 1,636.0 0.0 0.0 0.0 0.0 0.0
Accounts payable 4,642.0 5,179.0 5,665.8 5,814.0 5,966.5 5,840.7 5,994.7
Accrued marketing 2,484.0 2,179.0 2,388.9 2,451.4 2,515.7 2,581.8 2,649.8
Accrued employment costs 1,038.0 1,043.0 1,085.9 1,114.3 1,143.5 1,173.5 1,204.5
Other current liabilities 3,067.0 3,214.0 3,112.8 3,194.2 3,278.0 3,364.2 3,452.8
Total current liabilities 12,253.4 12,573.9 12,903.6 12,960.2 13,301.8

Long-term debt 19,151.0 15,485.0 14,990.6 14,949.7 14,728.0 13,829.5 12,753.7

Deferred income taxes 6,235.0 6,120.0 6,442.8 6,611.3 6,784.7 6,963.0 7,146.6
Non-pension post-retirement benefits 2,673.0 1,962.0 1,962.0 1,962.0 1,962.0 1,962.0 1,962.0
Other liabilities 3,497.0 2,812.0 2,968.0 3,045.7 3,125.5 3,207.7 3,292.2
Total non-current liabilities 26,363.4 26,568.7 26,600.2 25,962.2 25,154.5

Equity 32,416.0 32,532.0 32,450.7 32,759.2 33,220.2 34,416.9 35,685.4

TOTAL LIABILITIES & EQUITY 71,067.5 71,901.8 72,724.0 73,339.3 74,141.7

Balance check 0.0 0.0 0.0 0.0 0.0

Kraft Hist. Hist. Hist. Proj. Proj. Proj. Proj.
CFS 31-Dec-17 31-Dec-18 31-Dec-19 31-Dec-20 31-Dec-21 31-Dec-22 31-Dec-23

Net income 868.1 1,305.4 1,507.6 2,295.7

Depreciation 881.2 948.6 1,014.0 1,077.6
Amortization 200.0 217.0 217.0 217.0
increase in OWC 497.6 33.8 34.8 (48.8)
Goodwill impairment charge 0.0 0.0 0.0 0.0
increase in deffered income taxes 322.8 168.5 173.4 178.4
increse in non-pension post-retirement benefits 0.0 0.0 0.0 0.0
increase in other liabilities 156.0 77.6 79.9 82.2
Net cash from operating activities 2,925.8 2,750.9 3,026.6 3,802.1

Capex (1,665.0) (1,708.5) (1,753.3) (1,799.4)

Net cash from investing activities (1,665.0) (1,708.5) (1,753.3) (1,799.4)

Dividends (949.4) (996.9) (1,046.7) (1,099.0)

Share issuance / (repurchases) 0.0 0.0 0.0 0.0
Total long-term debt issuance (repurchase) (494.4) (40.8) (221.7) (898.6)
Short-term debt / revolver issuance (repurchase) (1,636.0) 0.0 0.0 0.0
Net cash from financing activities (3,079.8) (1,037.7) (1,268.4) (1,997.6)

Beginning cash 2,000.0 181.0 185.7 190.6

net cash flow (1,819.0) 4.7 4.9 5.0
Ending cash (revolver) 2,000.0 181.0 185.7 190.6 195.6

Cash flow available for debt repayment 311.4 45.5 226.6 903.6
 Proj.
31-Dec-24

2,422.5
1,139.7
217.0
34.6
0.0
183.5
0.0
84.5
4,081.8

(1,846.9)
(1,846.9)

(1,154.0)
0.0
(1,075.8)
0.0
(2,229.8)

195.6
5.2
200.7

1,081.0
Kraft Hist. Hist. Hist. Proj. Proj. Proj. Proj. Proj.
Ratios 31-Dec-17 31-Dec-18 31-Dec-19 31-Dec-20 31-Dec-21 31-Dec-22 31-Dec-23 31-Dec-24
Growth
Sales 2.5% 2.6% 2.6% 2.6% 2.6%
EBITDA (19.9%) 2.6% 2.6% 33.4% 2.6%
Net income (31.8%) 50.4% 15.5% 52.3% 5.5%
CFO (6.0%) 10.0% 25.6% 7.4%

Profitability
EBIT margin 7.0% 6.9% 6.8% 9.7% 9.6%
EBITDA margin 10.0% 10.0% 10.0% 13.0% 13.0%
Net income margin 3.3% 3.5% 3.6% 5.9% 6.0%

Returns
Net operating profit after tax (NOPAT) 1,637.2 1,643.8 1,664.5 2,445.1 2,491.5
Return on equity 3.6% 4.0% 4.1% 6.7% 6.8%
Return on invested capital 3.5% 3.4% 3.5% 5.1% 5.1%

Asset turnover
OWC to sales (3.6%) (3.6%) (3.6%) (3.4%) (3.4%)
Net PPE to sales 30.5% 31.7% 32.9% 33.9% 34.8%
Invested capital 47,441.3 47,709.0 47,948.2 48,246.3 48,439.1
Invested capital to sales 131.1% 128.4% 125.8% 123.3% 120.6%

Credit
Total debt 14,990.6 14,949.7 14,728.0 13,829.5 12,753.7
Net debt 14,809.6 14,764.0 14,537.4 13,633.9 12,552.9
Equity 32,450.7 32,759.2 33,220.2 34,416.9 35,685.4
Net debt / equity 45.6% 45.1% 43.8% 39.6% 35.2%
Net debt / EBITDA 4.1x 4.0x 3.8x 2.7x 2.4x
EBITDA / interest expense 3.6x 3.9x 4.1x 5.6x 6.2x
Dividend payout ratio 80.4% 76.4% 76.6% 47.6% 47.6%