AFS1-2 Kraft Acquires Cadbury PLC
The following information from the financial statements of Kraft Foods and Cadbury PLC is available for the three years prior to their merger. Evaluate the performance of each company leading up to the year of the acquisition (2010). Note that Cadbury”s financial statements are in millions of pounds, while Kraft”s statements are in millions of dollars.
|
Kraft Foods ($ millions) |
2007 |
2008 |
2009 |
|
Balance Sheet |
|||
|
Assets |
67,993 |
63,173 |
66,714 |
|
Total Liabilities |
40,698 |
40,817 |
40,742 |
|
Stockholders” Equity |
27,295 |
22,356 |
25,972 |
|
Selected Balance Sheet items |
|||
|
Market value of equity |
50,480 |
48,110 |
40,111 |
|
Current Assets |
10,737 |
9,917 |
12,454 |
|
Current Liabilities |
17,086 |
11,044 |
11,491 |
|
Accounts Receivable |
5,197 |
4,704 |
5,197 |
|
Inventory |
4,096 |
3,881 |
3,775 |
|
Long-term Debt |
13,624 |
19,354 |
18,537 |
|
Retained Earnings |
12,209 |
13,440 |
14,636 |
|
Income Statement |
|||
|
Total Revenues |
37,241 |
40,492 |
38,754 |
|
Cost of Goods Sold |
24,651 |
27,164 |
24,819 |
|
Gross Margin |
12,590 |
13,328 |
13,935 |
|
Income continuing operations |
2,590 |
1,678 |
2,810 |
|
Net income |
2,590 |
2,884 |
3,021 |
|
Selected Income Statement items |
|||
|
Interest Expense |
604 |
1,240 |
1,237 |
|
Tax Expense |
1,137 |
658 |
1,136 |
|
Statement of Cash Flows |
|||
|
Cash from Operations (CFO) |
3,571 |
4,141 |
5,084 |
|
Cash interest paid |
628 |
968 |
1,308 |
|
Cash taxes paid |
1,366 |
964 |
1,025 |
|
Cadbury (£ millions) |
2007 |
2008 |
2009 |
|
Balance Sheet |
|||
|
Assets |
11,338 |
8,895 |
8,129 |
|
Total Liabilities |
7,165 |
5,361 |
4,607 |
|
Stockholders” Equity |
4,173 |
3,534 |
3,522 |
|
Selected Balance Sheet items |
|||
|
Market value of equity |
9,581 |
8,241 |
12,266 |
|
Current Assets |
2,600 |
2,635 |
2,125 |
|
Current Liabilities |
4,614 |
3,388 |
2,434 |
|
Accounts Receivable |
1,197 |
1,067 |
978 |
|
Inventory |
821 |
767 |
748 |
|
Long-term Debt |
1,120 |
1,194 |
1,349 |
|
Retained Earnings |
2,677 |
2,498 |
3,502 |
|
Income Statement |
|||
|
Total Revenues |
4,699 |
5,384 |
5,975 |
|
Cost of Goods Sold |
5,504 |
2,870 |
3,210 |
|
Gross Margin |
2,195 |
2,514 |
2,765 |
|
Income continuing operations |
149 |
370 |
275 |
|
Net income |
405 |
364 |
509 |
|
Selected Income Statement items |
|||
|
Interest Expense |
88 |
50 |
172 |
|
Tax Expense |
105 |
30 |
103 |
|
Statement of Cash Flows |
|||
|
Cash from Operations (CFO) |
812 |
469 |
523 |
|
Cash interest paid |
193 |
165 |
122 |
|
Cash taxes paid |
235 |
153 |
163 |
Required:
- Use the method described in Appendix A to evaluate the health of the target company, and point out any trends that might have been worrisome to Kraft. Also indicate any strengths in the firm”s performance.
- Use the method described in Appendix A to evaluate the health of Kraft Foods, and point out any positive or negative trends.