In: Accounting
Refine Assumptions for PPE Forecast
Provided below is FY2016 information for Medtronic PLC.
Medtronic plc | ||
---|---|---|
Consolidated Statement of Income | ||
($ millions) | Apr. 29, 2016 | |
Net sales | $29,499 | |
Costs and expenses | ||
Cost of products sold | 9,142 | |
Research and development expenses | 2,224 | |
Selling, general, and administrative expense | 9,469 | |
Special charges (gains), net | 70 | |
Restructuring charge, net | 290 | |
Certain litigation charges, net | 26 | |
Acquisition-related items | 283 | |
Amortization of intangiable assets | 1,931 | |
Other expense, net | 107 | |
Operating profit | 5,957 | |
Interest expense, net | 955 | |
Income from operations before income taxes | 5,002 | |
Provision for income taxes | 950 | |
Net income | $4,052 |
Medtronic plc | |||
---|---|---|---|
Consolidated Balance Sheets | |||
($ millions) | Apr. 29, 2016 | Apr. 24, 2015 | |
Current assets | |||
Cash and cash equivalents | $3,042 | $5,009 | |
Investments | 9,758 | 14,637 | |
Accounts receivable | 5,562 | 5,112 | |
Inventories | 3,473 | 3,463 | |
Tax assets | 697 | 1,335 | |
Prepaid expenses and other current assets | 1,234 | 1,454 | |
Total current assets | 23,766 | 31,010 | |
Property, plant, and equipment, net | 5,007 | 4,865 | |
Goodwill | 41,500 | 40,530 | |
Other intangible assets, net | 26,899 | 28,101 | |
Long-term tax assets | 1,383 | 774 | |
Other assets | 1,559 | 1,737 | |
Total assets | $100,114 | $107,017 | |
Current liabilities | |||
Short-term borrowings | $1,159 | $2,600 | |
Accounts payable | 1,709 | 1,610 | |
Accrued compensation | 1,712 | 1,611 | |
Accrued income taxes | 566 | 935 | |
Deferred tax liabilities | - | 119 | |
Other accrued expenses | 2,185 | 2,464 | |
Total current liabilities | 7,331 | 9,339 | |
Long-term debt | 30,247 | 33,752 | |
Long-term accrued compensation | 1,759 | 1,535 | |
Long-term accrued income taxes | 2,903 | 2,476 | |
Long-term deferred tax liabilities | 3,729 | 4,700 | |
Other long-term liabilities | 1,916 | 1,819 | |
Total liabilities | 47,885 | 53,621 | |
Shareholders' equity | |||
Ordinary shares | - | - | |
Retained earnings | 54,097 | 54,580 | |
Accumulated other comprehensive (loss) | (1,868) | (1,184) | |
Total shareholders' equity | 52,229 | 53,396 | |
Total liabilities and shareholders' equity | $100,114 | $107,017 |
a. Use the financial statements along with the additional
information below to forecast property, plant and equipment, net
for FY2017.
CAPEX in FY2016 | $1,101 million |
Depreciation expense in FY2016 | 945 million |
Forecasted FY2017 net sales | 35,842 million |
Round to the nearest million.
Forecasted PPE, net for FY2017 $Answer
million
b. Suppose the company discloses in a press release that
accompanies its year-end SEC filing that anticipated CAPEX for
FY2017 is $1.5 billion. Use the guidance to refine your forecast of
property, plant and equipment, net for FY2017.
$Answer
million
Answer :
(a) Sales for 2016 = $29,499 million
CAPEX in 2016 = $1,101 million
Percentage of CAPEX of net sales = (1,101 / 29,499) x 100 = 3.7323%
Depreciation expense in 2016 = 945 million
Net PPE as on Apr. 24, 2015 = $4,865 million
Percentage of Depreciation expense of Net PPE = (945 / 4,865) x 100 = 19.425%
Forecasted net sales for 2017 = 35,842 million
Forecasted CAPEX for 2017 = 35,842 x 3.7323% = 1,338 million
Net PPE as on Apr. 29 2016 = $5,007 million
Forecasted Depreciation expense for 2017 = PPE net 2016 x 19.425%
= $5,007 x 19.425% = $973 million
Forecasted property, plant and equipment, net for FY2017 =
= Property, plant, and equipment, net as on Apr. 29, 2016 + Forecasted CAPEX for 2017 - Forecasted Depreciation expense for 2017
= 5,007 + 1,338 - 973 = $5,372 million
So, Forecasted property, plant and equipment, net for FY2017 = $5,372 million
(b)
Anticipated CAPEX for FY2017 = 1,500 million
Forecasted property, plant and equipment, net for FY2017 =
= Property, plant, and equipment, net as on Apr. 29, 2016 + Anticipated CAPEX for FY2017 - Forecasted Depreciation expense for 2017
= 5,007 + 1,500 - 973 = $5,534 million
So, Forecasted property, plant and equipment, net for FY2017 = $5,534 million