Assumptions for Forecasting Model

Assumption
Income Statement
Sales

Will grow at 5%, based on input from management

Cost of Sales

52% of sales, little better than historical average

Selling, General & Admn. Expenses

29% of sales, based on expected worsening

Depreciation

8% of Gross PP&E, based on analysis of depreciation schedules

Other Net (Income)/ Expenses

-0.7% of sales, based on historical average

Interest Income

Calculate based on average balance and interest rate specified later

Interest Expense

For STD calculate based on average balance and interest rate specified later
For LTD interest expense will remain unchanged at $13.5 million

Income Taxes

35% of pre-tax income

Balance Sheet
Assets
Cash and Marketable Securities

2.1%, of sales based on historical average

Accounts Receivable

8.4% of sales, based on historical average

Inventories

8.8% of sales, based on historical average

Other Current Assets

7.6% of sales, based on historical average

Property, Plant and Equipment, Gross

Will grow at 11% per year, based on discussion with management

Accumulated Depreciation

Calculated from other items

Property, Plant and Equipment, Net

Calculated from other items

Other Non-Current Assets

Will grow at 10% per year, based on discussion with management

Liabilities and Shareholders' Equity

Accounts Payable

6.1% of sales, same as historical average

Short-Term Debt

Hold level constant at year-end 2008 level

Other Current Liabilities

8.3% of sales, same as 2008

Long-Term Debt

Will remain unchanged at 2008 level

Deferred Income Taxes

1.4% of sales, based on historical average

Other Non-Current Liabilities

7.6% of sales, based on historical average

Paid-In Capital

Will remain unchanged at 2008 level

Retained Earnings

Calculated from other items

Other Assumptions
Dividend payout ratio

40%, based on discussion with management

Interest on short-term debt

7%, based on economic forecast

Interest on long-term debt

Rates embedded in existing debt, annual expense $13.5 million

Interest on cash & marketable securities

6%, based on economic forecast

Number of shares outstanding

Will remain unchanged

P/E ratio

Will decline to 16 in 2009 and then improve to 18, 20, and 22 in the following years

Scenario Summary
Current Values:

Optimistic

Pessimistic

Changing Cells:
$J$6
5.0%
7.0%
3.0%
$J$7
50.0%
49.0%
51.0%
$J$10
29.0%
28.0%
30.0%
$J$33
8.0%
7.0%
9.0%
Result Cells:
2016
NI
$150.53
$189.05
$114.84
EPS
$3.26
$4.09
$2.49
D/S
$1.30
$1.64
$0.99
ROE
16.9%
20.3%
13.6%
2017
NI
$158.48
$206.03
$115.23
EPS
$3.43
$4.46
$2.49
D/S
22.0
22.0
22.0
ROE
16.1%
19.6%
12.6%
Notes: Current Values column represents values of changing cells at
time Scenario Summary Report was created. Changing cells for each
scenario are highlighted in gray.

Income Statement and Balance Sheet for Vitex Corp.

Income Statement ($ Million)
Sales
Cost of Sales
Gross Operating Income

Historical period
2013
$1,334.4
$667.0
$667.4

2014
$1,481.2
$699.6
$728.18

Forecast Period
2015
$1,644.1
$748.6
$779.15

Selling, General & Admn. Expenses

Depreciation
Other Net (Income)/Expenses
EBIT

$373.3
$75.2
($8.2)
$227.1

$399.79
$78.16
($9.99)
$260.23

$427.77
$83.63
($10.69)
$278.45

Interest (Income)
Interest Expense
Pre-Tax Income

($2.0)
$23.7
$205.4

($1.79)
$18.66
$243.32

($1.97)
$13.83
$266.48

Income Taxes
Net Income

$72.6
$132.8

$85.16
$158.16

$93.27
$173.21

$40.1
$92.7

$63.26
$94.89

$69.29
$103.93

Assets
Cash and Marketable Securities
Accounts Receivable
Inventories
Other Current Assets
Total Current Assets

$28.4
$120.1
$116.8
$97.5
$362.8

$31.10
$119.94
$125.65
$108.51
$384.08

$34.53
$128.33
$134.44
$116.11
$410.97

Property, Plant and Equipment, Gross

Accumulated Depreciation
Property, Plant and Equipment, Net

$913.1
$427.9
$485.2

$977.02
$506.06
$470.96

$1,045.41
$589.69
$455.71

Other Non-Current Assets

Total Non-Current Assets

$456.3
$941.5

$501.93
$972.9

$552.12
$1,007.8

$1,304.3

$1,357.0

$1,418.8

Liabilities and Shareholders' Equity

Accounts Payable
Short-Term Debt
Other Current Liabilities
Total Current Liabilities

$80.5
$110.3
$111.3
$302.1

$90.4
$37.2
$118.5
$238.6

$100.3
($27.9)
$131.5
$187.5

Long-Term Debt
Deferred Income Taxes
Other Non-Current Liabilities

$218.1
$12.7
$94.5

$218.1
$20.7
$112.6

$218.1
$23.0
$125.0

Dividends
Addition to Retained Earnings

Balance Sheet ($ Million)

Total Assets

Total Liabilities

$627.4

$585.2

$543.1

$44.8
$632.1
$676.9

$44.8
$727.0
$771.8

$44.8
$830.9
$875.7

$1,304.3

$1,357.0

$1,418.8

$51.40
46.2

$54.78
46.2

$67.50
46.2

Valuation Ratios
EPS
Dividend per Share
P/E Ratio
P/B (price to book) Ratio
Dividend Payout Ratio

$2.87
$0.87
17.9
3.5
30%

$3.42
$1.37
16.0
3.3
40%

$3.75
$1.50
18.0
3.6
40%

Profitability Ratios
Return on Equity (ROE)
Return on Sales (ROS)

21.2%
17.0%

21.8%
18.2%

21.0%
18.2%

Growth Rates
EPS Growth Rate
Dividend Growth Rate
Sales Growth Rate
EBIT Growth Rate
Net Income Growth Rate

1.4%
2.1%
2.6%
3.7%
0.1%

19.1%
57.8%
7.0%
14.6%
19.1%

9.5%
9.5%
7.0%
7.0%
9.5%

Liquidity Ratios
Current Ratio
Quick Ratio

1.20
0.49

1.61
0.63

2.19
0.86

Operating Efficiency Ratios

Inventory Turnover Ratio
Receivable Turnover Ratio

5.7
11.1

5.8
11.9

5.8
11.9

32.7%
21.7%
48.5%

24.9%
21.2%
33.1%

17.8%
21.2%
21.7%

9.6

13.9

20.1

Paid-In Capital
Retained Earnings
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity
Discretionary Funding Need (DFN)

Other Data
Stock price (year-end)
Average number of shares outstanding (millions)

Financial Indicators

Leverage Ratios
Total Debt to Total Capitalization
Long-Term Debt to Total Capitalization
Total Debt to Equity
Coverage Ratios
Times Interest Earned (TIE)

Cash Coverage Ratio

12.8

18.1

26.2
EBIT

1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%

$318.79
233.3429049152
246.5711744716
260.1942856487
274.2200182655
288.6562280415
303.510846597
318.7918814528
334.5074160306
350.6656096525
367.2746975415
384.3429908212

Forecast Period

Forecasting
Factor
7.0%
49.0%

2016
$1,825.0
$801.0
$833.70

2017
$2,025.7
$857.1
$892.05

$457.72
$89.49
($11.44)
$297.94

$489.76
$95.75
($12.24)
$318.79

28.0%
8.0%
-0.7%

($2.19)
$9.08
$290.85

($2.43)
$3.95
$316.97

-6.0%
7.0%

$101.80
$189.05

$110.94
$206.03

35.0%

$75.62
$113.43

$82.41
$123.62

40.0%

$38.32
$137.31
$143.85
$124.24
$439.73

$42.54
$146.93
$153.92
$132.93
$470.51

2.1%
8.4%
8.8%
7.6%

$1,118.59
$679.18
$439.41

$1,196.89
$774.93
$421.96

7.0%

$607.34
$1,046.7

$668.07
$1,090.0

10.0%

$1,486.5

$1,560.5

$111.3
($98.4)
$146.0
$132.1

$106.7
($174.4)
$139.9
$72.2

$218.1
$25.5
$138.7

$218.1
$24.5
$132.9

6.1%
8.0%

1.4%
7.6%

$497.3

$447.8

$44.8
$944.4
$989.2

$44.8
$1,068.0
$1,112.8

$1,486.5

$1,560.5

$81.85
46.2

$98.12
46.2

$4.09
$1.64
20.0
3.8
40%

$4.46
$1.78
22.0
4.1
40%

20.3%
18.2%

19.6%
18.2%

9.1%
9.1%
7.0%
7.0%
9.1%

9.0%
9.0%
7.0%
7.0%
9.0%

3.33
1.30

6.51
2.54

5.8
11.9

5.8
11.9

10.8%
20.5%
12.1%

3.8%
19.7%
3.9%

32.8

80.6

42.7
NI
$206.03
206.03097207
206.03097207
206.03097207
206.03097207
206.03097207
206.03097207
206.03097207
206.03097207
206.03097207
206.03097207
206.03097207

104.9
Div/Sh
$1.78
1.0733467181
1.144912145
1.2185680107
1.2943549638
1.3723141587
1.452487145
1.534915868
1.6196426678
1.7067102802
1.7961618359
1.8880408613

ROE
19.60%
0.1315843901
0.1389445327
0.1463838701
0.1539007135
0.1614933545
0.1691600556
0.1768990516
0.1847085526
0.1925867461
0.2005317991
0.2085418607