Professional Documents
Culture Documents
- Operating Model
($ in Millions Except Per Share and Per Unit Data)
INSTRUCTIONS:
Use the following template and assumptions to build a 3-statement projection model over 5 years for Illinois To
Please clearly note any additional assumptions or modifications you make. Assume that the company's perform
the past 3 years, except where otherwise noted in the assumptions.
If you have additional time remaining at the end, please write 1-2 sentence answers for the following case stu
1) What is the MAIN reason why the company's Cash balance changes the way it does over these 5 years?
Its Cash balance declines substantially because the company keeps repurchasing shares without raising any ad
it also keeps issuing Dividends at the same time, further reducing cash flow.
2) What would you recommend to company management as the best financing decision over the next sever
We would recommend additional Debt as the best way to boost its Cash balance - the company's borrowing co
sense than Equity. Another option is to cut its stock repurchases; cutting Dividends would make less sense bec
3) Would it benefit this company more to focus on sales growth or margin improvement? What would you r
Focusing on margin improvement would make the most sense because most of ITW's costs are variable, so red
a bigger difference than improving revenue growth by 1%; also, the company doesn't seem to be growing quic
General Assumptions:
Amortization of Debt: %
Interest Expense: $M
Interest Income: $M
Operating Expenses:
(+) Selling, General & Administrative: $M 2,815.0 2,678.0
(+) Amortization of Intangible Assets: $M 250.0 242.0
(+) Impairment of Goodwill: $M 2.0 3.0
Total Operating Expenses: $M 3,067.0 2,923.0
Non-Current Assets:
Net PP&E: $M 1,709.0 1,686.0
Goodwill: $M 4,886.0 4,667.0
Other Intangible Assets: $M 1,999.0 1,799.0
Other Long-Term Assets: $M 1,556.0 1,449.0
Total Non-Current Assets: $M 10,150.0 9,601.0
Non-Current Liabilities:
Long-Term Debt: $M 6,344.0 7,419.0
Deferred Tax Liability: $M 507.0 171.0
Other Long-Term Liabilities: $M 923.0 1,002.0
Total Non-Current Liabilities: $M 7,774.0 8,592.0
ssume that the company's performance will be similar to its performance over
sing shares without raising any additional Debt to fund those repurchases;
ance - the company's borrowing costs are already very low, so Debt makes more
dends would make less sense because of investors' expectations.
of ITW's costs are variable, so reducing COGS or SG&A by 1% of revenue will make
y doesn't seem to be growing quickly, so there may not be much room for growth.
Historical Projected
FY15 FY16 FY17 FY18 FY19 FY20
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