nextera analyst report
TRANSCRIPT
market price $72.81
market capitalization $30,555,000,000.00
last year’s market return 23.6%
last year’s sales and earnings growth -0.03350%
operating margin 23.9%
price/earnings ratio vs. average of peers 16.1 vs. 16.1
price/book ratio vs. average of peers 1.9 vs. 1.8
consensus recommendation by analysts Hold stock due to diversification
Debt rating BBB+
Piotroski’s score 5.0
estimated stock beta 0.68
Washington University FIN 428/528, Group 2D Christine Banos [email protected] Aaron Belkin [email protected] Kenith D’Souza [email protected] Jared Friedman [email protected] Anna Han [email protected]
RECOMMENDATION
After analysis, we recommend a
HOLD on the stock. NextEra has
experienced negative cash flows
for the last several years due to
high capex and maturing long-
term debt. We want to maintain
a diversified portfolio in the
praxis, and NextEra will facilitate
that as it is split almost evenly
between being unregulated and
regulated. The company will
continue to reinvest in
renewable energy sources and
therefore is well-positioned for
the future as it follows the
industry trend.
February 6, 2013 Industry Report Utilities Industry
KEY FIRM STATISTICS
Based on our analysis, Nextera is a firm that is poised well within its industry. With the governmental regulations for the energy department to conserve fossil fuels and to place an emphasis on reducing CO2 emissions, utility companies that are coal-heavy will not be able to meet the standards and requirements set by the government. Nextera on the other hand will be able to promote and invest into alternative energy sources such as wind and solar energy. At the present time analysts also believe that the stock value is a little overvalued, but it is still a good investment since the stock is less volatile due to the company’s diversification into both regulated and unregulated energy markets.
EXECUTIVE SNAPSHOT
OVERVIEW OF NEXTERA ENERGY, INC.
For a brief introduction into what NextEra Energy, Inc. is, the New York Times explains that the company
“provides retail and wholesale electric services to approximately four million customers and owns
generation, transmission and distribution facilities to support its services. It also purchases electric
power for resale to its customers and provides risk management services related to power and gas
consumption for a limited number of customers.”1 As stated on their company website, “NextEra
Energy, Inc. is a leading clean-energy company with revenues of more than $15.3 billion, more than
41,000 megawatts (MW) of generating capacity, and approximately 15,000 employees in 24 states and
Canada as of year-end 2011.”2 It has garnered several awards over the years, including Forbes 2011-
2012 No.1 overall gas and utilities company, for its countless efforts towards environmental
sustainability and renewable energy procedures.
SUBSIDIARIES
NextEra is currently composed of three subsidiaries:
Florida Power & Light: As U.S.’s third largest utility company and NextEra’s largest subsidiary,
FPL distributes power at regulated rates over four million customers in Florida.
NextEra Energy Resources: NER composes the company’s clean energy portion and serves as
the country’s leader in the production of energy through wind and solar processes.
FPL FiberNet: Started by FPL in the 1980’s, FPL FiberNet provides fiber-optic solutions to
customers in both Florida and Texas.
MAIN PRODUCTS/SERVICES
NextEra provides several products and services for its customers. These include:
Wind energy: One of the world’s largest generators, with facilities throughout the United States and Canada.
Solar energy: Largest generator using both photovoltaic and solar thermal technologies.
Hydroelectric energy: All 22 facilities located in Maine
Fossil fueled facilities
Nuclear energy: Three nuclear-powered plants in Iowa, Wisconsin, and New Hampshire.
Energy marketing: Leading electricity and natural gas marketers in the country while additionally responsible for electricity and fuel management of the company’s generation.
Specialized wind: Under its WindLogics program, NextEra “researches historical wind resource data and wind patterns” by providing “engineering, technical analysis and consulting services in the field of studying, modeling, and forecasting meteorological air flow.”3
1 http://topics.nytimes.com/top/news/business/companies/fpl_group_inc/index.html
2 http://www.investor.nexteraenergy.com/phoenix.zhtml?c=88486&p=irol-homeProfile
3 http://www.nexteraenergyresources.com/what/specialized_wind.shtml
Retail market: Under Gexa Energy, this service provides electricity to both residential and commercial customers.
Exhibit 1 provides a more detailed breakdown of the products provided.
COMPETITORS
NextEra’s competition includes Progress Energy, Inc. (privately held), Southern Company, and TECO Energy, Inc with their respective market capitalizations listed below.
4
RECENT DEVELOPMENTS AND NEWS STORIES
FLORIDA POWER AND LIGHT COMPANY
FPL, a subsidiary of NextEra, announced on January 29th that they have launched a new website,
PoweringFlorida.com, which serves as a resource to help businesses in Florida to start, relocate, or
expand their companies. As CEO of Boyette Strategic Advisors, Del Boyette explains,
“PoweringFlorida.com has achieved a first: bringing the best planning and workforce data together
in one click. What that means for companies and their site selectors is unfiltered and unparalleled
insight – county by county and block by block. What that means for Florida is a competitive
advantage for the right types of jobs and investment.”5
SELLING RESOURCES
On December 21, 2012, NextEra Resources, a subsidiary of NextEra, took part in an agreement to sell its
hydro generating assets to Brookfield Energy Partners, L.P. As Armando Pimentel, the CEO of NextEra
Energy Resources, explains, “While this is an attractive portfolio in many respects, this transaction
enables us to further optimize our power generation portfolio and concentrate our resources on areas
with greater growth potential for our business."6 The transaction is still in its pending stages and is
4 http://finance.yahoo.com/q/co?s=NEE+Competitors
5 http://www.nexteraenergy.com/news/contents/2013/012913_1.shtml
6http://markets.on.nytimes.com/research/stocks/news/press_release.asp?docTag=201212211920PR_NEWS_USPR
X____FL34195&feedID=600&press_symbol=109578
Competition Market Capitalization
NextEra Energy, Inc. 30.77B
Progress Energy, Inc. N/A
Southern Company 39.11B
TECO Energy, Inc. 3.67B
Industry 6.97B
expected to be completed by the end of the first quarter of the 2013 fiscal year. While there is an
anticipated result of a gain upon completion, it is not expected to have a significant impact on the
current or future financial position of NextEra.
WHERE NEXTERA IS HEADED7
NextEra’s future within the utilities industry looks strong and profitable. Both of their main subsidiaries, FPL and NER, have proven successful over the last decade as they have continued to bring in profits and spark growth. Overall, the company’s shareholder return maintains an edge over the electric utility industry and has exceeded expectations. For example, at year-end 2011 NextEra informed the public that its total shareholder return over the past decade was 209%, a percentage nearly double that of the S&P 500 Electric Utilities Index. NextEra will continue to expend the $15 billion of capital it anticipated to use between 2010-2014. This includes more than $6 billion of major generation and advanced metering projects as well as an investment of an additional $6 billion in new wind and solar projects. This will not only continue but expand NextEra’s position as the renewable energy leader. Additionally, NextEra expects that its adjusted earnings per share for 2013 and 2014 will be from $4.70-$5.00 and $5.05-$5.65, respectively and its growth to be 5%-7% in the long-run. We were bullish on the renewable sector of the industry and therefore this increase in stock, however slight, between 2013 and 2014 makes sense as the industry sees an expansion and dominant presence of renewable energy sources in the utilities industry. With the recent climatic changes and disasters, new utility infrastructure is being researched and developed, a trend seen for much of the entire industry. As a result, NextEra will invest nearly $7.5 billion in this area and in turn garner higher returns and drive earnings growth until at least 2015. In regards to the company’s renewable energy program, NextEra continues to increase its capacity generation in natural gas-fired plants and wind energy. Specifically concerning its wind energy, NextEra already experiences great advantages over other companies, including access to wind turbines and operational excellence. As a result, the company increases its appeal to other utilities looking to have a greater mix of wind energy in their portfolio. Overall, with the industry’s and government’s increased focus on environmental regulations, NextEra appears well-positioned. The company will continue to see growth as Florida’s economy advances.
ANALYST OPINIONS8
Nextera is a company that is deals in both regulated and unregulated energy. Analysts believe that
Nextera is a safe and steady option with annual earnings growth rate of 6.5% and dividend growth rate
of 10%. In terms of regulated energy since the recession there has been a stagnation of growth, but
after the ruling on the rates for energy prices this growth should resume. Also due to its prime
7 http://www.investor.nexteraenergy.com/phoenix.zhtml?c=88486&p=earningsRelease12
8 NEE Morningstar Report
geographic location in Florida, Nextera is poised to plunge ahead into multiple alternative energy
markets such as wind energy and solar energy. This is beneficial to the company since it is so diversified.
If the regulated market takes a hit and the prices for energy go down then the company can invest more
in the unregulated market. Also with increased governmental regulation on preserving the environment
and fossil fuel regulation, Nextera’s decision to move ahead into alternative energy is a great idea.
Nextera’s current stock value is a little over-valued, but all in all it seems like a good stock to invest in
terms of steady growth and dividend yield.
SWOT ANALYSIS9
Strengths: o Established operations in Florida o Diverse customer base o Balanced fuel mix
Weaknesses: o Limited presence o Substantial debt o Dependence on subsidiaries
Opportunities: o Focus on renewable energy o Rising demand for electricity
Threats: o Risks associated with nuclear operations o Weather conditions o Compliance to environmental regulations
FINANCIAL STATEMENT ANALYSIS
Nextera’s 2012 10-K had not yet been released at the time of our analysis, we will focused our
evaluation on the company’s third quarter 10-Q SEC filing, as well as the unaudited earnings releases for
the fourth quarter of 2012 and the entire year of 2012.
After reviewing Nextera’s 2011 annual report and its quarterly report for the third quarter, we turned to
the most recent earnings release to examine trends in performance and growth. The amount of energy
being sold has noticeably decreased over the past four years, although the drop was not as significant
between 2011 and 2012. This past year, the majority of the decrease occurred in the Residential
segment, which is still the largest customer segment. Total energy sales (in Kilowatt-hours) have
decreased from 105,414 million kwh in 2009 to 81,002 million kwh in 2012. Similarly, the average price
of power is slowly decreasing, from 11.19 cents/kwh to 9.53 center/kwh four years later. Despite these
disappointing trends, we do see that the number of customer accounts is increasing, in both the
commercial and the residential sectors.
9 Market Line
To see how these trends fit into the big picture, we evaluated Nextera’s changes in net income over the
past 10 years. Graphing the net income from 2002 to 2012, we noticed a clear cyclical pattern; however,
the profitably was noticeably decreasing over time. Superimposing a linear line over the percentage
changes in net income, we roughly estimate a 4.94% annual decrease in net income (smoothing out the
cyclical patterns). These trends seem to fall in line with our industry analysis: energy consumption per
capita is decreasing, but an overall increase in population is making up for the lost demand marginally.
Change in net income by itself is far from conclusive. We also examined the consolidated balance sheets
from the past five years for trends in a number of items. First, the amount of cash and cash equivalents
has been volatile over the years, with seemingly no clear direction of whether it is increasing or
decreasing. With a high of $535 million in 2008 to a low of $238 million the next year, 2012 was in
between at $329 million. Next, net debt is calculated as the sum of short term and long term debt,
subtracted by the working capital. Over the past four years we see a trend of increasing net debt; from
$18.6 million in 2009 gradually rising to $27.0 million in 2012. This increase is also reflected in the
leverage ratio, which has climbed from 1.4 in 2009 to 1.7 today. In addition, working capital continues
to be below zero and has become more negative in 2012 than in the past five years at -$3,492,000.
This increase in debt could be related to a corresponding increase we see in the amount of fixed asset.
Electric utility plant in service and other property assets have increased by over two million dollars or
more each year. In addition, Nextera remains without any minority interest invested in the company.
To better understand what these financial statement numbers mean going into the future, we
calculated several profitability ratios. First, the gross margin ratio we found to be noticeably increasing
over the past four years, from 0.373 in 2009 to 0.544 in 2012. Similarly, the operating margin ratio has
also increased from 0.166 to 0.230 over the same four years. On the other hand, return on equity and
return on asset both appear to be slowly decreasing; ROE from 0.125 in 2009 down to 0.119 in 2012,
while ROA decreased from 0.0333 in 2009 to 0.0297 in 2012.
DCF VALUATION
In establishing projections for NextEra’s expected free cash flows for the next 5 years we first examined
historical data to uncover operating trends and margins. More specifically, we looked at the 5-year
historical revenue growth rate and how operating costs, depreciation, capital expenditures and net
working capital changed as a percentage of revenue over the same 5-year period. Our analysis showed
that over this 5-year historical period, operating costs trended downward, averaging approximately
71.37% of revenue, depreciation and amortization 10.17%, capital expenditures 34.37%, and net
working capital 7.06%.
Going forward, we projected that almost all of these historical margins will continue at approximately
the same percentages; however, we believe that operating costs and capital expenditures will change
slightly. We believe that operating costs as a percentage of revenue will trend downwards slightly as
higher utility rates are approved by Florida’s regulatory agencies to sustain approved ROE levels,
increasing revenues while maintaining level operating expenses. Additionally, while we believe capital
expenditures will drop to their long-term historical average, which is approximately 20%, in the short-
term we expect NextEra to take advantage of the low interest rate environment and maintain capital
expenditures on new solar and wind investments at levels commensurate with their 5-year historical
average of 34.37%.
With respect to revenue growth, we assumed an immediate annual growth of 6% driven primarily by
new wind and solar investment. Subsequently, we believe that revenue growth will trend downwards
and ultimately level off at a terminal growth rate comparable to that of GDP, or 2% (Exhibit 11).
APENDIX
EXHIBIT 1
Diversified Portfolio10
EXHIBIT 2
Recent Performance
10
http://www.nexteraenergyresources.com/who/index.shtml
EXHIBIT 3
Trends in Performance
-4
-3.5
-3
-2.5
-2
-1.5
-1
-0.5
0
0.5
1
2007 2009 2011
Trend in Cash and Working Capital ($ Billion)
Working Capital ($B)
Cash & Equivalents ($B)
0
0.1
0.2
0.3
0.4
0.5
0.6
2009 2010 2011 2012
Gross and Operating Margin Ratios
GM
OM
0
0.05
0.1
0.15
2009 2010 2011 2012
Recent Trends in ROE and ROA
ROE
ROA
EXHIBIT 4
Net Income by Segment
EXHIBIT 5
Year Total FPL
NextEra
Energy
Resources
Adjusted
Total
NextEra
Energy
Resources
Adjusted
2002 479$ 717$ (173)$ 838$ 122$
2003 903$ 733$ 192$ 884$ 173$
2004 896$ 749$ 148$ 899$ 151$
2005 901$ 748$ 146$ 1,013$ 258$
2006 1,281$ 802$ 540$ 1,204$ 449$
2007 1,312$ 836$ 461$ 1,404$ 553$
2008 1,639$ 789$ 831$ 1,545$ 737$
2009 1,615$ 831$ 759$ 1,648$ 792$
2010 1,957$ 945$ 980$ 1,778$ 800$
2011 1,923$ 1,068$ 774$ 1,837$ 679$
2012 1,911$ 1,240$ 687$ 1,914$ 693$
NET INCOME
DUK SO NEE Exelon PCG PPL XEL NU ETR CNP
Beta 0.13 0.1 0.68 0.5 0.26 0.11 0.19 0.45 0.31 0.4
P/E 22.15 16.350 15.9 17.26 19.61 13.95 15.170 21.48 12.91 21.78
P/B 0.0117 2.060 1.91 1.23 1.38 1.69 1.550 0.0139 1.19 0.0205
D/E 0.99 1.100 1.7 0.89 1.00 1.92 1.270 0.97 1.42 0.0232
PEG 0.044 3.290 2.31 -0.71 (2.97) 50.48 2.970 0.0303 5.06 0.0308
ROE 5.47% 12.25% 12.32% 7.62% 7.13% 14.24% 10.45% 7.03% 9.05% 9.45%
ROA 2.77% 4.42% 3.37% 3.34% 2.35% 4.50% 3.88% 3.21% 2.47% 3.62%
Profit Margin 9.01% 14.21% 13.41% 6.48% 6.07% 12.42% 8.94% 8.21% 8.22% 5.36%
Operating Margin 19.91% 26.87% 22.98% 16.51% 12.32% 25.31% 18.00% 19.30% 16.08% 16.84%
EBITDA $B 6.2 6.580 5.05 6.95 4.09 4.4 2.870 1.54 3.24 2.26
Working Cap $B 0.0155 0.127 -3.44 3.56 0.157 0.34 0.210 -1.66 -0.11652 -0.612
Market Cap $B 47.91 38.560 30.67 26.55 18.28 17.68 13.710 12.85 10.93 8.72
Dividend Yield (Avg
over past 5 Years 5.34% 4.76% 3.52% 4.38% 4.09% 4.62% 4.43% 3.39% 4.22% 4.95%
Total Debt - billion 40.52 21.760 27.36 19.74 13 20 11.270 9.07 13 9.87
FUNDAMENTALS OF UTILITIES COMPANIES (A)
EXHIBIT 5 (CONT.)
EXHIBIT 6
Net Income by Segment Adjusted NextEra and Total
CPN AEE NI AWK CMS PNW POM NVE TE
Beta 0.74 0.23 0.34 0.17 0.26 0.26 0.2 0.43 0.58
P/E 44.640 38.84 27.05 18.90 19.620 16.340 17.610 16.030 17.160
P/B 2.140 0.0102 0.0154 1.56 2.150 1.490 1.020 1.230 1.580
D/E 2.650 0.87 0.0145 1.24 2.280 0.820 1.220 1.400 1.300
PEG 2.700 -0.035 0.0277 2.15 2.830 2.110 3.770 2.790 5.830
ROE 4.73% 2.56% 5.80% 8.74% 11.10% 9.86% 6.02% 7.92% 10.79%
ROA 2.77% 3.75% 2.81% 4.01% 3.75% 3.90% 2.53% 4.02% 4.74%
Profit Margin 3.67% 3.09% 5.78% 12.96% 5.74% 11.34% 5.05% 9.35% 7.10%
Operating Margin 13.85% 20.96% 17.79% 32.96% 15.73% 25.31% 11.84% 25.61% 18.57%
EBITDA $B 1.360 2.22 1.44 1.3 1.530 1.310 1.060 1.140 0.894
Working Cap $B 1.340 0.86 -0.8884 -0.36335 0.875 0.150 (0.516) 0.115 0.005
Market Cap $B 8.570 8.04 8.3 6.92 6.840 6.030 4.630 4.410 3.630
Dividend Yield (Avg
over past 5 Years 0.00% 6.09% 5.51% 3.29% 3.51% 5.47% 5.98% 4.36% 5.17%
Total Debt - billion 10.750 6.99 7.87 6 7.380 3.430 5.430 5.020 2.970
FUNDAMENTALS OF UTILITIES COMPANIES (B)
-500
0
500
1000
1500
2000
2500
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
NextEra Net Income by Segment ($ M)
Total
AdjustedTotalFPL
NextEra
AdjustedNextera
EXHIBIT 7
From NextEra 2012 4th
quarter earnings summary and non-GAAP reconciliations
EXHIBIT 8
-4
-2
0
2
4
6
8
EBITDA and Working Capital of NEE and 18 Utilities in $Billion sorted by decreasing Market Capitalization
EBITDA $B Working Cap $B
EXHIBIT 9
Price-to-Earnings Ratio for NEE and 18 other Utilities Companies
0 5 10 15 20 25 30 35 40 45 50
DUKSO
NEEExelon
PCGPPLXELNU
ETRCNPCPNAEE
NIAWKCMSPNWPOMNVE
TE
EXHIBIT 11
NextEra Energy Inc (NYS: NEE)
Discounted Cash Flow Analysis
USD 1000's Avg. (07' - 11')
Report Date 2007 2008 2009 2010 2011 Margin CAGR 2012 2013 2014 2015
Operating revenues 15,263,000 16,410,000 15,643,000 15,317,000 15,341,000 0.13% 14,508,000 15,378,480 15,839,834 16,156,631
% Change N/A 7.51% -4.67% -2.08% 0.16% 0.23% 6.00% 3.00% 2.00%
Operating Costs 11,641,000 12,143,000 11,284,000 10,267,000 10,345,000 10,354,802 10,303,582 10,454,291 10,501,810
% of Rev 76.27% 74.00% 72.13% 67.03% 67.43% 71.37% 67.00% 66.00% 65.00%
EBITDA 3,622,000 4,267,000 4,359,000 5,050,000 4,996,000 8.37% 4,153,198 5,074,898 5,385,544 5,654,821
% of Rev 23.73% 26.00% 27.87% 32.97% 32.57% 28.63% 33.00% 34.00% 35.00%
Depreciation & Ammortization 1,335,000 1,442,000 1,765,000 1,807,000 1,567,000 1,474,848 1,563,339 1,610,239 1,642,444
% of Rev 8.75% 8.79% 11.28% 11.80% 10.21% 10.17% 10.17% 10.17% 10.17%
EBIT 2,287,000 2,825,000 2,594,000 3,243,000 3,429,000 10.66% 2,678,350 3,511,560 3,775,305 4,012,377
% of Rev 14.98% 17.22% 16.58% 21.17% 22.35% 22.83% 23.83% 24.83%
Income Taxes 368,000 450,000 327,000 532,000 529,000 560,760 594,406 612,238 624,483
% of Income before taxes 21.90% 21.54% 16.84% 21.37% 21.57% 20.65%
EBIAT 1,919,000 2,375,000 2,267,000 2,711,000 2,900,000 10.87% 2,117,590 2,917,154 3,163,067 3,387,894
Depreciation & Ammortization 1,335,000 1,442,000 1,765,000 1,807,000 1,567,000 1,474,848 1,563,339 1,610,239 1,642,444
% of Rev 8.75% 8.79% 11.28% 11.80% 10.21% 10.17% 10.17% 10.17% 10.17%
Capital Expenditures 4,319,000 5,211,000 5,991,000 5,846,000 5,424,000 4,987,081 5,382,468 5,385,544 5,331,688
% of Rev 28.30% 31.76% 38.30% 38.17% 35.36% 34.37% 35.00% 34.00% 33.00%
Networking Capital 868,000 1,445,000 1,781,000 28,000 1,416,000 1,023,998 1,085,438 1,118,001 1,140,361
% of Rev 5.69% 8.81% 11.39% 0.18% 9.23% 7.06% 7.06% 7.06% 7.06%
Change in Networking Capital 577,000 336,000 (1,753,000) 1,388,000 (392,002) 61,440 32,563 22,360
Unlevered Free Cash Flow (1,065,000) (1,971,000) (2,295,000) 425,000 (2,345,000) (1,002,641) (963,415) (644,801) (323,710)
Discount Rate 4.40%
Present Value of FCF (718,786) Enterprise Value 54,655,529
Less: Total Debt (21,618,000) 79.75 1.50% 1.75% 2.00%
Terminal Value Less: Preferred Securities - 3.8% 87.94 105.05 126.91
Terminal Year FCF (2017) 1,512,241 Less: Noncontrolling Interest - 4.0% 75.96 90.22 108.04
Discount Rate 4.40% Plus: Cash and Cash Equivalents 377,000 4.2% 65.75 77.81 92.61
Growth Rate 2% 4.4% 56.96 67.28 79.75
4.6% 49.31 58.23 68.87
Terminal Value 63,010,055 Implied Equity Value 33,414,529 4.8% 42.59 50.37 59.55
Present Value of Terminal Value 55,374,315 5.0% 36.63 43.49 51.48
% of Enterprise Value Fully Diluted Shares Outstanding 419,000 5.2% 31.33 37.40 44.42
5.4% 26.57 31.98 38.19
Enterprise Value 54,655,529 Implied Share Price 79.75 5.6% 22.28 27.13 32.665.8% 18.39 22.76 27.71
WA
CC
Sensitivit Analysis
Historical Period Projections
Enterprise Value Implied Equity Value and Share Price
Terminal Growth Rate
EXHIBIT 12
Financial Ratios
NextEra Energy Inc (NYS: NEE)
Exchange rate used is that of the Year End reported date
Profitability Ratios 12/31/2011 12/31/2010 12/31/2009 12/31/2008 12/31/2007
ROA % (Net) 3.49 3.86 3.46 3.85 3.45
ROE % (Net) 13.08 14.27 13.1 14.58 12.7
ROI % (Operating) 9.23 9.66 8.56 10.6 9.78
EBITDA Margin % 33.62 35.09 29.48 26.48 24.51
Calculated Tax Rate % 22.07 21.88 17.3 22.55 22.83
Revenue per Employee 1,036,554 1,021,133 1,489,810 1,529,455 1,453,619
Liquidity Ratios 12/31/2011 12/31/2010 12/31/2009 12/31/2008 12/31/2007
Quick Ratio 0.32 0.42 0.38 0.29 0.35
Current Ratio 0.73 0.76 0.67 0.7 0.66
Net Current Assets % TA (3.23) (3.11) (4.36) (5.12) (4.93)
Debt Management 12/31/2011 12/31/2010 12/31/2009 12/31/2008 12/31/2007
LT Debt to Equity 1.39 1.25 1.26 1.18 1.05
Total Debt to Equity 1.54 1.44 1.46 1.46 1.28
Interest Coverage 3.68 3.81 3.61 4 3.51
Asset Management 12/31/2011 12/31/2010 12/31/2009 12/31/2008 12/31/2007
Total Asset Turnover 0.28 0.3 0.34 0.39 0.4
Receivables Turnover 7 6.34 7.91 9.55 9.04
Inventory Turnover 9.59 10.52 10.9 11.99 12.8
Accounts Payable Turnover 13.25 14.48 15.23 14.44 13.48
Accrued Expenses Turnover 16.9 23.58 37.25 45.15 46.75
Property Plant & Equip Turnover 0.38 0.41 0.46 0.54 0.57
Cash & Equivalents Turnover 45.19 56.73 40.47 39.67 33.55
Per Share 12/31/2011 12/31/2010 12/31/2009 12/31/2008 12/31/2007
Cash Flow per Share 9.78 9.34 11.04 8.48 9.03
Book Value per Share 35.92 34.36 31.35 28.57 26.35
EXHIBIT 13
WACC Calculation
4.40%
Cost of Equity (CAPM) Weight of Equity
rf 1.97% Price/Share $72.75
E(rM - rf ) 5.00% Shares Out. 419,000,000
β 0.68 EMV $30,482,250,000
ke 5.38% DBV $20,810,000,000
D+E $51,292,250,000
E/(D+E) 0.59
Cost of Debt Weight of Debt Effective Tax Rate
rd 3.789% EMV $30,482,250,000 Income taxes $529,000,000
DBV $20,810,000,000 Income (loss) before income taxes $2,452,000,000
D+E $51,292,250,000 Effective Tax Rate 22%
D/(D+E) 0.41
Weighted Average Cost of Capital (WACC)
Equity
Debt
4.40% 1% 2% 3% 4% 5% 6% 7% 8% 9%
1.0% 0.9% 1.2% 1.5% 1.9% 2.2% 2.5% 2.8% 3.1% 3.5%
2.0% 1.5% 1.8% 2.1% 2.5% 2.8% 3.1% 3.4% 3.7% 4.1%
3.0% 2.1% 2.4% 2.7% 3.1% 3.4% 3.7% 4.0% 4.3% 4.6%
4.0% 2.7% 3.0% 3.3% 3.6% 4.0% 4.3% 4.6% 4.9% 5.2%
5.0% 3.3% 3.6% 3.9% 4.2% 4.6% 4.9% 5.2% 5.5% 5.8%
6.0% 3.9% 4.2% 4.5% 4.8% 5.2% 5.5% 5.8% 6.1% 6.4%
7.0% 4.5% 4.8% 5.1% 5.4% 5.8% 6.1% 6.4% 6.7% 7.0%
8.0% 5.1% 5.4% 5.7% 6.0% 6.3% 6.7% 7.0% 7.3% 7.6%
9.0% 5.7% 6.0% 6.3% 6.6% 6.9% 7.3% 7.6% 7.9% 8.2%
10.0% 6.3% 6.6% 6.9% 7.2% 7.5% 7.9% 8.2% 8.5% 8.8%
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WACC Sensitivity Analysis