Memorandum Objective of the Analysis

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Memorandum Objective of the Analysis
The following analysis utilized historical data for the five period of 2011-2015 with projections through 2020. The objectives for the analysis were to determine whether the current price of the stock reflects firm performance and to identify strengths and challenges/weaknesses in performance.
Operating Results
Summary: The trend for net income for 2011-2015 has been mixed, with the company earnings of $6.4 billion for 2011 and $5.5 billion for 2015. The high point for earnings was $6.7 billion for 2013. The compound annual growth rate (CAGR) for the period was -4.1%. Net income for 2015 was 16.3% lower than 2014. Current period earnings were impacted by a one-time, $1.3 billion impairment charge for the Venezuela operations.
 
Revenues: The trend for revenues has been mixed, with revenues totaling $66.5 billion for 2011 and $63.1 billion for 2015. The high point was $66.7 billion for 2014. The CAGR for the period was -1.3%. Revenues for 2015 was 5.4% lower than the prior year.
 
Gross Profit and Cost of Goods Sold (COGS): The trend for gross profits has been mixed, with gross profit totaling $34.9 billion for 2011 and $34.7 billion for 2015. The high point was $35.8 billion for 2014. The CAGR for the period was -0.2%. The trend for COGS has also been mixed, ranging from $31.6 billion for 2011 to $28.4 billion for 2015. The CAGR for the period was -2.6%. While the trend for COGS as a percent of revenue was mixed, the expenses during the period only ranged from the current low of 45.0% to a high of 47.8% for 2012. COGS is currently at 45.0%, down from 46.3% for 2014.
 
Operating Expenses: Operating expenses, which primarily include research and development (R&D) and selling, general and administrative (SGA) expenses, have increased from $25.3 billion during 2011 to $26.3 billion for 2015, a CAGR of 1.0%.  Like COGS, the firm reported mixed results for operating expenses, with results being relatively stable, with the exception of 2015. Operating expenses are currently at 41.7% of revenues, up from 39.3% for the prior year, due to a $1.3 billion impairment charge for the Venezuela operations. Had this one-time charge not occurred, operating expenses would have remained relatively stable.
 
Operating Income:Operating income which represents the core earnings of the company, has decreased from $9.6 billion in 2011 to $8.4 billion for 2015 a CAGR of -3.5%. The decrease overtime was due to the impairment charge for the Venezuela operations. Removing this one-time charge from the analysis would have resulted in an operating income of $9.7 billion for 2015, with a CAGR for the period of 0.2%. The adjusted improvement overtime is attributable to managing the increases in COGS and operating expenses.
 
Non-Operating Income / (Expense): Non-operating items have remained stable at 1.2% of revenues for 2011-2014. The increase to 1.4% for 2015 was due to an increase in interest expense.
 
Taxes:Taxes decreased from $2.4 billion during 2011 to $1.9 billion for 2015, representing a CAGR for the period of -4.9%. During the period, the trend for taxes remained relatively stable as tax expense ranged from 3.1% to 3.6% of revenue. Taxes for 2015 were 3.1% of revenue slightly down from 3.3% for 2014.

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Memorandum Objective of the Analysis

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Memorandum Objective of the Analysis
The following analysis utilized historical data for the five period of 2011-2015 with projections through 2020. The objectives for the analysis were to determine whether the current price of the stock reflects firm performance and to identify strengths and challenges/weaknesses in performance.
Operating Results
Summary: The trend for net income for 2011-2015 has been mixed, with the company earnings of $6.4 billion for 2011 and $5.5 billion for 2015. The high point for earnings was $6.7 billion for 2013. The compound annual growth rate (CAGR) for the period was -4.1%. Net income for 2015 was 16.3% lower than 2014. Current period earnings were impacted by a one-time, $1.3 billion impairment charge for the Venezuela operations.
 
Revenues: The trend for revenues has been mixed, with revenues totaling $66.5 billion for 2011 and $63.1 billion for 2015. The high point was $66.7 billion for 2014. The CAGR for the period was -1.3%. Revenues for 2015 was 5.4% lower than the prior year.
 
Gross Profit and Cost of Goods Sold (COGS): The trend for gross profits has been mixed, with gross profit totaling $34.9 billion for 2011 and $34.7 billion for 2015. The high point was $35.8 billion for 2014. The CAGR for the period was -0.2%. The trend for COGS has also been mixed, ranging from $31.6 billion for 2011 to $28.4 billion for 2015. The CAGR for the period was -2.6%. While the trend for COGS as a percent of revenue was mixed, the expenses during the period only ranged from the current low of 45.0% to a high of 47.8% for 2012. COGS is currently at 45.0%, down from 46.3% for 2014.
 
Operating Expenses: Operating expenses, which primarily include research and development (R&D) and selling, general and administrative (SGA) expenses, have increased from $25.3 billion during 2011 to $26.3 billion for 2015, a CAGR of 1.0%.  Like COGS, the firm reported mixed results for operating expenses, with results being relatively stable, with the exception of 2015. Operating expenses are currently at 41.7% of revenues, up from 39.3% for the prior year, due to a $1.3 billion impairment charge for the Venezuela operations. Had this one-time charge not occurred, operating expenses would have remained relatively stable.
 
Operating Income:Operating income which represents the core earnings of the company, has decreased from $9.6 billion in 2011 to $8.4 billion for 2015 a CAGR of -3.5%. The decrease overtime was due to the impairment charge for the Venezuela operations. Removing this one-time charge from the analysis would have resulted in an operating income of $9.7 billion for 2015, with a CAGR for the period of 0.2%. The adjusted improvement overtime is attributable to managing the increases in COGS and operating expenses.
 
Non-Operating Income / (Expense): Non-operating items have remained stable at 1.2% of revenues for 2011-2014. The increase to 1.4% for 2015 was due to an increase in interest expense.
 
Taxes:Taxes decreased from $2.4 billion during 2011 to $1.9 billion for 2015, representing a CAGR for the period of -4.9%. During the period, the trend for taxes remained relatively stable as tax expense ranged from 3.1% to 3.6% of revenue. Taxes for 2015 were 3.1% of revenue slightly down from 3.3% for 2014.

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