Comparing of Financial Statement for Similar Companies

inception Freds, Belk, unsound hemorrhoid and buck Tree are all noned variety reposition in cling together State. All of them provide miscellaneous and qualified trues to clients. This analysis report, discussing different financial data establish on the 10-K document of the four companies, wants to contribute readers a meaningful describe to these companies so investors git energize clear opinions to help decide. Company Profiles Freds, Inc. Freds) is to meet the universal ware and pharmacy needs of the small to medium- sized towns it serves by crack a wider variety of quality sell and a more skilful-natured price-to- cherish relationship than any drug stores or smaller variety/ sawbuck stores and a shopper-friendly format which is more convenient than larger sized dis reckoning merchandise stores. The societys sales of p harmaceuticals have a percentage of 33. 5% in 2010, 34. 1% in 2011, and 34. 9% in 2012, comparing to the total sales. And its major sales of former(a)s include households good and nutrient products, etc. showing that the company tries its best to execute its business strategy. plumping separate, Inc. is a Fortune 500 retail corpo dimensionn. The company is found in Columbus, Ohio, USA and up-to-the-minutely operates over 1,400 stores in 47 states. Its plane section stores coun market placeing mainly on selling closeout and overstock merchandise. There are slightly items in the stores, much(prenominal) as foodstuffs, that are replenished on a insistent basis. Whats more, pornographic Lots also operates a wholesale division, which provides merchandise in bulk for resale from a variety of categories.Financial Statements bad Lots uses an existing building, such as a grocery or department store that had either moved or ceased opeproportionns. buck Tree, Inc. began its operations in 1953 and was incorporated in Virginia. The company is an American chain of give the axe variety stores that se lls any item for $1. 00 or less. The company targets low to deject-middle income consumers and sells everyday products from food and private care products to non-essentials. It sells its product in three business segments1) Consumable merchandise, which accounted for 48. % of its sales in 2011, 2) Variety merchandise, which accounted for 46. 9% of 2011 sales, and 3)seasonal goods, explained 5% of 2011 sales. Belk, Inc. , together with its subsidiaries, is the largest privately have mainline department store business in the United States, with 303 stores in 16 states, as of the fiscal year ended January 28, 2012. Generated revenues of $3. 7 one thousand million for the fiscal year 2012, and together with its predecessors, have been successfully in operation(p) department stores since 1888. Belk Stores Services, Inc. , a subsidiary of Belk, Inc. rovides a wide range of services t o the Belk division offices and stores, such as merchandising, merchandise planning and allocation, advertisement and sales promotion, information systems, human resources, public relations, be, real estate and store planning, credit, legal, tax, distri moreoverion and purchasing. Accounting Policies (see march 1) All of the four companies are United State location so that part of their accounting policies are the same, but because the area location and business strategy, they have some different accounting policies.The four companies do not amortized goodwill and tried and true them for legal injury annually, utilise an income snuggle and a trade approach in de landmarkining graceful note tax for purposes of goodwill impairment tests. All four of them report income taxes in accordance with FASB ASC 740, the asset and liability system is used for work out afterlife income tax consequences of events . The major differences exist in revenue recognition, merchandise inventories and Stock-based compensation.Based on their requirements, Freds records its sales when the merchandise is ship ped from the Companys warehouse Dollar maneuver records sales revenue at the fourth dimension a sale is do to its customer Big Lots sales Revenue is recognized when the customer makes the final payment and takes possession of the merchandise and sales of Belk is put down at the time of delivery. Freds values inventories at the humble of cost or market using the retail send-off -in, first-out mode for goods in stores and the cost first -in, first-out method for goods in our distribution centers. And the rest of hree companies values inventories at the set down of cost or market using the average cost retail farm animal method. Under the average cost retail instrument method, parentage is separate into departments of merchandise having similar characteristics at its current retail selling value. positivity, Liquidity/Solvency (see Exhibit 2) If we learn the current ratio and wide awake ratio they are relatively small. So paying the short term debts index be a problem for the company as well as the liquidity is getting decreased from year 2010 2012 as 1. 43 to 1. 23 to 0. 88.So it business leader be difficult for the company to stay with the current obligations. If we analyze the debt -equity ratio seems to be in high end for the Belk, but it is stepwise decreasing 1. 36, 1. 06 to 1. 03. This seems to be a good sign for the company. But mollify the ratio is high and need quite bit of work to get it down to an acceptable value. Freds roe keeps a increase from 5. 99% in 2010, to 7. 17% in 2011 then to 7. 89% in 2012 because its dough circumference increasing from 1. 32% to 1. 61% and 1. 78%, respectively in 2011 and 2012, in the same time, its assets turnover keeps a steadily level from 3. 20 to 3. 06, merely a slightly decrease.Additionally, the rude delimitation just has a higher(prenominal) wobble from 27. 92% in 2010, to 28. 66% in 2012 than profit margin. The muniment turnover has a decrease from 4. 33 to 4. 15 respectively in 20 10 and 2012, due to the cost of goods sold increasing slower than inventory. Whats more, the current ratio and quick ratio keeps falling down, and debt/equity ratio grows up during the 3 years, showing that the debt increases faster than equity. Big Lots ROE continues to grow from 20. 01% in 2010 to 25. 15% in 2012. However, it s profit margin and gross margin have been going downwards since 2010, dropping to 3. 98% and 39. 9% respectively in 2012. Whats more, its current ratio and quick ratio have also decreased, the former one has slacked from 2. 069 in 2010 to 1. 721 in 2012, a nd the later one has slummed from 0. 72 to 0. 31, which indicate that the companys fund are more tighten up in recent years. Through further study, we found that the D-E ratio is increasing from 1. 208 in 2010 to 1. 704 in 2012, which presented the companys new financing strategy from buy outing, other(a) than getting capital from the shareholders. The ROE of Dollar Tree increased apace from 22. 43% in 2010 to 27. 23% in 2011 and to 36. 32% in 2012. On examining the three omponents of ROE, the profit margin was 6. 3% in 2010 but in 2012 it increased at 7. 36%. In addition, its assets turnover maintains a besotted growth. It was 2. 28 in 2010, 2. 47 in 2011 and 2. 85 in 2012. all over the three years, the debt -equity ratio also grows steadily. Besides, the current ratio and quick ratio of Dollar Tree in the past three years simply declined. That mostly resulted from the increasing debt and surging sales . Return on right virtually doubled from 2010 to 2011 as 6. 31% to 11. 33% and has a tranquilize growth from 2011 to 2012 as 15. 30%. This implies Net Income increased and it is proportional to good increase in profit margins as from 2% to 3. 63% almost doubled from 2010 to 2011 and 4. 95% in 2012 which is a steady growth. When we compare the list asset turnover in last 3 years seems to be decreasing, though it is 13. 1 in 2010 decreased significantly form 2011 and 2012 as 1 . 14 and 1. 50 respectively. This might be due to competition from other department and specialty stores and other retailers, including luxury goods retailers, mail o rder retailers and offprice and discount stores. Opportunities/Threats Opportunities from the above, we get the idea that the variety store industry has a good time during the several years.These four companies are keeping increase in profit and they have lower financial trauma so that they could borrow more capital from banks and investors, which gives them more chances to execute expansion strategy more available cash from borrowing, better financial statement which can give more confidence to in vestors and higher return to support the emerging development. Threats we should notice that most of the four companies have a higher gross margin increasing than profit margin, and a continuous lower inventory turnover.They show that these companies structures include threaten in the approaching. Whats more, the high de bt fashion that the banks and investors tighten polices and requirements to the companies so their business and expansion will be influenced by investors. Meanwhile, the raising interest rat e of debt gives higher financial distress to the companies. Overall Assessment Retail industry is a highly belligerent and dynamic business to work with. So it needs to be change whenever it needs to be. Here we can see that when one company doing well other companies are struggling to stay in the race.If we analyze the general challenges retail business facing is like high Employee turnovers, also Auditing issues as they regularly engaged in competition with one another, and this competition can creat e price wars, forcing a need to keep tight sustain over inventory, as the nation prospers and people have more money to spend, the retail industry generally flourishes. As for the companies we can see that Freds, Dollar tree and Belk is seems to be doing well in this difficult situations, but the Big Lotus is losing some ground as profit margins getting lower as well as their funds getting tightens up.However when we see the COGS from each one company has a problem as COGS selling slower than the inventory, this might be hurting all four companies as if their items old they have to write off them and which might eventually losing money. Exhibit 1 probatory Accounting Policies Freds Revenue recognition Merchandise inventories thanksgiving Stock-based compensation Income taxes Dollar tree Big Lots Belk Sales are recorded when the merchandise is shipped from the Companys warehouse sales revenue at the time a sale is made to its customer Revenue is recognized when the customer makes the final payment and takes possession of the merchandise.Sales from retail operations are recorded at the time of delivery. wanted at the lower of cost or market using the retail first-in, first-out method for goods in our stores and the cost first-in, firstout method for goods in our distri bution centers. Stated at the lower of cost or market, determined on a weighted-average cost basis. Under the retail inventory method, the valuation of inventories at cost and the resulting gross margins are computed by applying a calculated cost-to-retail ratio to the retail value of inventories. Valued at the lower of cost or market using the average cost retail inventory method. Under the average ost retail inventory method, inventory is segregated into departments of merchandise having similar characteristics at its current retail selling value. Valued using the lower of cost or market value, determined by the retail inventory method. Under the retail inventory method ( border), the valuation of inventories at cost and the resulting gross margins Goodwill is not amortized and tested for impairmen t annually. Use an income approach and a market approach in determining fair value for purposes of goodwill impairment tests. Goodwill is not amortized and tested for impairment annuall y. Use an income approach and a market pproach in determining fair value for purposes of goodwill impairment tests. Goodwill is not amortized and tested for impairment annually. Use an income approach and a market approach in determining fair value for purposes of goodwill impairment tests. Goodwill is not amortized and tested for impairment annually. Use an income approach and a market approach in determining fair value for purposes of goodwill impairment tests. Uses the fair value recognition provisions of FASB ASC 718, account for stock based compensation by using the grant date fair value of share awards and the estimated number of shares that will ultimately be ssued in continuative with each award. Recognizes all share-based payments to employees, including grants of employee stock options, in the financial statements based on their fair values. Value and expense stock options with graded vesting as a single award with an average estimated life over the entire term of the awa rd. Uses the fair value recognition provisions of FASB ASC 718, account for stock based compensation by using the grant date fair value of share awards and the estimated number of shares that will ultimately be issued in connector with each award. reports income taxes in accordance with FASB ASC 740,the asset and liability ethod is used for computing future income tax consequences of events reports income taxes in accordance with FASB ASC 740,the asset and liability method is used for computing future income tax consequences of events reports income taxes in accordance with FASB ASC 740,the asset and liability method is used for computing future income tax consequences of events reports income taxes in accordance with FASB ASC 740,the asset and liability method is used for computing future income tax consequences of events Exhibit 2 Industry Ratio Summary 2012 Freds, Inc. 2011 Profitability Return on equity 7. 89% 7. 17% 5. 99% 25. 15% 23. 50% 20. 01% 6. 32% 27. 23% 22. 43% 15. 30% 11. 33% 6. 31% Profit margin 1. 78% 1. 61% 1. 32% 3. 98% 4. 49% 4. 23% 7. 36% 6. 75% 6. 13% 4. 95% 3. 63% 2. 00% double-dyed(a) margin 28. 66% 28. 61% 27. 92% 39. 79% 40. 63% 40. 61% 35. 87% 35. 49% 35. 49% 0. 33% 0. 33% 0. 32% integrality asset turnover 3. 06 3. 16 3. 20 3. 169 3. 057 2. 831 2. 85 2. 47 2. 28 1. 5 1. 41 13. 1 A/R turnover 62. 61 64. 58 61. 93 42. 45 41. 39 40. 11 76. 42 78. 53 72. 33 104. 9 131. 3 118. 7 Inventory turnover 4. 15 4. 33 4. 33 3. 8 3. 86 4. 02 4. 2 4. 2 4. 1 2. 9 2. 97 2. 83 Short term liquidity trustworthy ratio 2. 47 2. 91 2. 81 1. 721 1. 941 2. 069 2. 08 2. 5 2. 74 2. 51 3. 34 3. 32 0. 33 . 52 0. 57 0. 31 0. 53 0. 72 0. 59 1 1. 31 0. 88 1. 23 1. 43 0. 49 0. 40 0. 43 1. 704 1. 283 1. 208 0. 73 0. 63 0. 6 1. 03 1. 06 1. 36 Quick ratio Long term solvency Debt/Equity ratio 2010 2012 Big Lots 2011 2010 2012 Dollar Tree 2011 2010 Belk. inc 2012 2011 2010 Profit Margin Return on Equity 40. 00% 35. 00% 30. 00% 25. 00% Freds, inc 20. 00% Big Lots 15. 00 % Dollar Tree 10. 00% Belk. inc 5. 00% 0. 00% 2012 2011 8. 00% 7. 00% 6. 00% 5. 00% 4. 00% 3. 00% 2. 00% 1. 00% 0. 00% Freds, inc Big Lots Dollar Tree Belk. inc 2012 2010 2011 2010 Debt-to-Equity Ratio Inventory turnover 2. 00 5. 00 4. 00 Freds, inc 3. 00 Big Lots 1. 50 Freds, incBig Lots 1. 00 Dollar Tree Dollar Tree 2. 00 Belk. inc 1. 00 Belk. inc 0. 50 0. 00 0. 00 2012 2011 2010 2012 2011 2010 Exhibit 3 Income statement Fred,inc Statement of Income January 28, 2012 Net sales mo simoleonsary value of goods sold 1879059 1340519 speed of light% 71. 34% Gross profit 538540 Depreciation and amortisation coulomb% 71. 39% 1788136 1288899 coke% 72. 08% 28. 66% 527018 28. 61% 499237 27. 92% 34190 1. 82% 29236 1. 59% 26387 1. 48% Selling, general and administrative expenses 453195 24. 12% 451064 24. 49% 434356 24. 29% Operating income Interest income Interest expense 51155 -156 553 2. 72% -0. 01% 0. 03% 46718 -234 424 2. 54% -0. 01% 0. 02% 38494 -189 82 2. 15% -0. 01% 0. 03% Income bef ore income taxes 50758 2. 70% 46528 2. 53% 38201 2. 14% Provision for income taxes 17330 0. 92% 16941 0. 92% 14586 0. 82% 33428 1. 78% 29587 1. 61% 23615 1. 32% $ $ January 30, 2010 1841755 1314737 Net income $ January 29, 2011 $ $ $ Big Lots, Statement of Income January 27, 2012 Net sales Cost of goods sold Gross profit Selling, general and administrative expenses some other Operating Expense Operating income $ January 28, 2011 5,202,269. 00 3,131,862. 00 2,070,407. 00 100. 00% 60. 20% 39. 80% 1,634,532. 00 January 29, 2012 4,952,244. 00 2,939,793. 00 2,012,451. 00 100. 00% 59. 36% 40. 64% 31. 42% 1,567,500. 0 90,280. 00 1. 74% 345,595. 00 6. 64% $ 4,726,772. 00 2,807,466. 00 1,919,306. 00 100. 00% 59. 39% 40. 61% 31. 65% 1,532,356. 00 32. 42% 78,606. 00 1. 59% 74,904. 00 1. 58% 357,345. 00 7. 22% 325,010. 00 6. 88% $ Earnings Before Interest And Taxes Interest Expense 345,422. 00 6. 64% 357,957. 00 7. 23% 325,185. 00 6. 88% 3,530. 00 0. 07% 2,573. 00 0. 05% 1,840. 00 0. 04% Incom e Before Tax 341,892. 00 6. 57% 355,384. 00 7. 18% 323,345. 00 6. 84% Income Tax Expense 134,657. 00 2. 59% 132,837. 00 2. 68% 121,975. 00 2. 58% Net income 207,064. 00 3. 98% 222,524. 00 4. 49% 200,369. 00 4. 24% Dollar Tree, Statement of Income January 28,2012Revenues $ January 29,2011 Selling and admistrtive expense 64. 13% 35. 87% 3,794. 8 2,087. 60 1,596. 2 Gross margin 100% 4252. 2 2378. 3 cost of sales 6630. 5 $ 5882. 40 24. 07% 1,457. 60 100% January 30,2010 $ 5,231. 20 100% 64. 51% 35. 49% 3,374. 40 1,856. 80 64. 51% 35. 49% 24. 78% 1,344. 00 25. 69% Restructing charges Goodwill impairment impalpable and other asset impairment operating expense $ 1,596. 2 24. 07% operating income interest expense interest income other income 782. 1 2. 9 0. 3 11. 80% 0. 04% Income before income taxes Net income $ 1,457. 60 24. 78% 10. 71% 0. 10% 0. 00% 630 5. 6 5. 5 779. 5 ncome taxes $ 11. 76% 291. 2 488. 3 4. 39% 7. 36% 1344 25. 69% 9. 80% 0. 10% -0. 10% 512. 8 5. 2 629. 9 $ $ 10. 71% 507. 6 9. 70% 232. 6 397. 3 3. 95% 6. 75% 187. 1 320. 5 3. 58% 6. 13% $ Belk, Statement of Income 2012 2011 Revenues 3,699,592 100% Cost of goods sold (Including occupancy, distribution and buying $ expenses) 2,461,515 66% 938008 2012 3513275 100% 2353536 66% 25% 914078 3143 0. 08% 2302 - Operating income Interest expense Interest income Loss on extinguishment of debt grow on investments Income before income taxes Income tax expense Net income Gain on sale of property and equipment Asset impairment and exit costsPension stifling charge $ 100% 2271925 68% 26% 886263 26% 6416 0. 18% 2011 0. 06% 0. 06% 0. 00% 6096 0. 17% 0. 00% 39915 2719 1. 19% 0. 08% 300190 Selling, general and administrative expenses 3346252 8. 11% 245981 7. 00% 147441 4. 41% -50218 328 -922 250098 66950 183148 -1. 35% 0. 01% 0. 02% 0. 00% 0. 0676 1. 80% 0. 0495 -50679 569 195871 68243 127628 -1. 44% 0. 02% 0. 00% 0. 00% 0. 0557 1. 94% 0. 0363 -51321 1027 43 97190 30054 67136 -1. 53% 0. 03% 0. 00% 0. 00% 0. 0 29 0. 89% 2 $ $ $ $ Exhibit 4 Balance Sheet Freds,inc Balance Sheets January 28, 2012 January 29, 2011 January 30, 2010 January 31, 2009 ASSETSCurrent assets Cash and cash equivalents 27130 4. 29% 49182 8. 26% 54742 9. 58% Account Receivables Inventories 31883 331882 5. 04% 52. 51% 28146 313384 4. 73% 52. 62% 28893 294024 Other non-trade receivables 32090 5. 08% 26378 4. 43% Prepaid expenses and other current assets Total current assets 12321 435306 1. 95% 68. 88% 12723 429813 Property and equipment 161112 25. 49% 139931 Equipment under capital leases 97 0. 02% intangible asset assets, net 32191 5. 09% 22193 3. 73% 16035 2. 81% 9042 1. 66% Other obsolescent assets, net Total assets $ 3276 631982 0. 52% 100% $ 3591 595528 0. 60% 100% $ 4040 571441 0. 71% 100% $ 4442 544775 0. 82% 00% LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities Accounts payable $ 106886 16. 91% $ 81002 13. 60% $ 87393 15. 29% $ 69955 12. 84% 658 0. 10% 201 0. 03% 718 0. 13% 243 0. 04% Current portion of indebtedness $ $ $ $ 35128 6. 45% 5. 06% 51. 45% 28857 301537 5. 30% 55. 35% 25193 4. 41% 15782 2. 90% 2. 14% 72. 17% 10945 413797 1. 92% 72. 41% 11912 393216 2. 19% 72. 18% 23. 50% 137569 24. 07% 138036 25. 34% 39 Accrued expenses and other 44876 7. 10% 45371 7. 62% 39621 6. 93% 46659 8. 56% Deferred income taxes 23878 3. 78% 21142 3. 55% 19373 3. 39% 13061 2. 40% Total current liabilities 176298 27. 90% 147716 24. 80% 147105 5. 74% 137667 25. 27% Long-term portion of indebtedness 6640 1. 05% 3969 0. 67% 4179 0. 73% 4866 0. 89% Deferred income taxes 5633 0. 89% 2069 0. 35% 2009 0. 35% 1328 0. 24% Other noncurrent liabilities Total liabilities 19799 208370 3. 13% 32. 97% 17886 171640 3. 00% 28. 82% 17209 170502 3. 01% 29. 84% 13833 157694 2. 54% 28. 95% Common stock, Class A voting, no par value 105384 16. 68% 131367 22. 06% 131685 23. 04% 136877 25. 13% Common stock, Class B nonvoting, no par value Retained earnings 317364 50. 22% 291649 48. 97% 268350 46. 96% 249141 45. 73% put in other comprehensive income 864 0. 14% 872 0. 15% 904 0. 16% 1063