Calculate the WACC, estimate the future cash flows and use multiples to value wood-tech. Accept the $1.5 million offer from Chinook?...
Jps2
wood-tech_tables-2.xlsxExhibit 2
| Exhibit 2 | |||
| Selected Financial Ratios | |||
| Garden Furniture Industry | |||
| % of Sales Averages | |||
| Income Statement | 12/31/03 | ||
| Sales Growth, 1 yr | (4.7) | ||
| Cost of Goods Sold | 64% | ||
| Operating Expense | 31.2% | ||
| Operating Income | 4.8% | ||
| Beta: | |||
| Wood Products Firms | 1.6 | ||
| Small Firm Subjective Adjustment to Beta | +.4 | ||
| Estimate of Beta for Wood-Tech | 2.0 | ||
| Selected Industry Ratios | 12/31/03 | ||
| Liquidity | |||
| Quick Ratio | 0.94 | ||
| Current Ratio | 1.72 | ||
| Leverage | |||
| Debt/Equity | 3.81 | ||
| Total Liabilities/Total Assets | 0.79 | ||
| Profitability | |||
| Return on Assets | 7.79% | ||
| Return on Equity | 37.45% | ||
| Profit Margin | 4.10% | ||
| Activity | |||
| COGS/Inventory | 3.9 | ||
| Sales/Total Assets | 1.9 | ||
| Source: Internal Company Documents |
Exhibit 3
| Exhibit 3 | |||
| Net Revenues by Channel, 2003 and 2004 forecast December 2007 | |||
| 2003 Actual | 2004E | ||
| Chain Stores | $ 1,638,271 | $ 1,150,437 | |
| Distributors | 54,479 | 27,141 | |
| Mail Order | 189,878 | 121,365 | |
| Internet | 57,434 | 35,397 | |
| Dealer/Retailer | 327,500 | 118,387 | |
| Miscellaneous | 335,377 | 49,756 | |
| Total Sales | $ 2,602,939 | $ 1,502,483 |
Exhibit 4
| Exhibit 4 | ||||
| Top 5 Customers, 2003 and 2004 Forecast December 2004 | ||||
| Channel | 2003, Actual | 2004E | ||
| Cashes | Chain Store | $ 287,561 | $ 242,738 | |
| AC Cooper | Chain Store | 381,556 | 226,029 | |
| Garden Works | Chain Store | 622,243 | 438,037 | |
| ACER Hardware | Chain Store | 177,647 | 128,589 | |
| Poppybox | Mail-Order | 91,423 | 83,618 | |
| Total - Top 5 Customers | $ 1,560,430 | $ 1,119,011 | ||
| Total - Top 5 Customers as a | 60% | 74% | ||
| % of Total Sales in Exhibit 3 |
Exhibit 5
| Exhibit 5 | |||||||
| Historical Financial Statements | |||||||
| Actual | Estimated | ||||||
| Income Statement | 12/31/00 | 12/31/01 | 12/31/02 | 12/31/03 | 12/31/04 | ||
| Net Sales | $ 2,036,081 | $ 2,317,440 | $ 2,941,911 | $ 2,602,939 | $ 1,502,483 | ||
| Cost of Goods Sold | 2,272,597 | 2,136,363 | 2,051,645 | 2,486,499 | 1,056,902 | ||
| Gross Profit | $ (236,516) | $ 181,077 | $ 890,266 | $ 116,440 | $ 445,581 | ||
| GS&A | 544,342 | 605,030 | 587,796 | 740,694 | 638,119 | ||
| Operating Income | $ (780,858) | $ (423,953) | $ 302,470 | $ (624,254) | $ (192,538) | ||
| Other Income | - 0 | 107,883 | 6,379 | - 0 | - 0 | ||
| Interest | - 0 | - 0 | 89 | 112,423 | 132,643 | ||
| Income Before Tax | $ (780,858) | $ (316,070) | $ 308,760 | $ (736,677) | $ (325,181) | ||
| Income Tax | - 0 | - 0 | - 0 | - 0 | - 0 | ||
| After Tax Profit | $ (780,858) | $ (316,070) | $ 308,760 | $ (736,677) | $ (325,181) | ||
| Actual | Estimated | ||||||
| Balance Sheet | 12/31/00 | 12/31/01 | 12/31/02 | 12/31/03 | 12/31/04 | ||
| Assets | |||||||
| Cash & Cash Equivalents | $ 140,570 | $ 209,474 | $ 50,846 | $ 89,591 | $ 45,880 | ||
| Accts Receivable | (347,787) | 472,204 | 1,639,594 | 287,203 | 86,334 | ||
| Inventory | 983,810 | 744,796 | 910,424 | 1,286,062 | 935,503 | ||
| Prepaid Expenses | - 0 | - 0 | - 0 | - 0 | 2,237 | ||
| Deferred Income Taxes | - 0 | - 0 | 189,400 | 189,750 | 222,373 | ||
| Other Current Assets | - 0 | - 0 | - 0 | 252 | - 0 | ||
| Current Assets | $ 776,593 | $ 1,426,474 | $ 2,790,264 | $ 1,852,858 | $ 1,292,327 | ||
| PP&E - Net Book Value | 74,120 | 77,585 | 2,254 | 21,831 | 36,587 | ||
| Other Assets | 68,169 | - 0 | - 0 | - 0 | - 0 | ||
| Total Assets | $ 918,882 | $ 1,504,059 | $ 2,792,518 | $ 1,874,689 | $ 1,328,914 | ||
| Liabilities | |||||||
| Accts Payable | (534,641) | 102,437 | 665,079 | 480,678 | 107,729 | ||
| N/P Bank | 739,980 | 1,022,000 | 815,000 | 347,354 | - 0 | ||
| Accrued/Other | 68,669 | 41,666 | - 0 | - 0 | 44,064 | ||
| Income Taxes Payable | - 0 | - 0 | - 0 | 1,010 | - 0 | ||
| Current Portion LTD | - 0 | - 0 | - 0 | - 0 | 89,615 | ||
| Current Liabilities | $ 274,008 | $ 1,166,103 | $ 1,480,079 | $ 829,042 | $ 241,408 | ||
| Long Term Debt | - 0 | - 0 | 502,000 | 469,376 | 293,395 | ||
| Other Liabilities | - 0 | - 0 | 2,317 | - 0 | 550,000 | ||
| Total Liabilities | $ 274,008 | $ 1,166,103 | $ 1,984,396 | $ 1,298,418 | $ 1,084,803 | ||
| Book Net Worth | 644,874 | 337,956 | 808,122 | 576,271 | 244,111 | ||
| Total Liabilities & NW | $ 918,882 | $ 1,504,059 | $ 2,792,518 | $ 1,874,689 | $ 1,328,914 | ||
| Check | $ - 0 | $ - 0 | $ - 0 | $ - 0 | $ - 0 |
Exhibit 6
| Exhibit 6 | ||||||
| Historical Cost of Goods as a Percentage of Sales | ||||||
| Dec-04 | ||||||
| 2001 | 2002 | 2003 | 2004E | |||
| Sales, net | $ 2,317,438 | $ 2,941,911 | $ 2,602,939 | $ 1,502,483 | ||
| Cost of Goods Sold | ||||||
| (as a % of sales) | ||||||
| Product | 27.7% | 20.9% | 28.7% | 25.3% | ||
| Wages | 23.0% | 17.4% | 23.9% | 24.0% | ||
| Other | 41.5% | 31.4% | 43.0% | 21.0% | ||
| Total COGS | 92.2% | 69.7% | 95.6% | 70.3% |
Exhibit 7
| Exhibit 7 | |||
| Financial Market Rates | |||
| December 2004 | |||
| % | |||
| Treasury Bill, 30 Day | 1.92% | ||
| Treasury Bond, 10 Year | 4.23% | ||
| Prime Rate | 5.14% | ||
| Corporate Bonds: | |||
| AAA | 5.47% | ||
| BBB | 6.15% | ||
| High Yield | 8.47% | ||
| Market Risk Premium, 1928-2003 | 6.54% |
Exhibit 8
| Exhibit 8 | |||||
| Comparable Sale Information | |||||
| Privately Held Firms, Revenue Range $1.5m - $6.6m | |||||
| 2001-2004 | |||||
| Selling | |||||
| Selling | Price/Operating | ||||
| Revenue | Price/Sales | Cash Flow | |||
| Average (n=180 firms) | $ 2,561,000 | 2.4 | 3.7 | ||
Exhibit 9
| Exhibit 9 | ||||||
| Pro Forma Estimates of Selected Financial Data | ||||||
| 2005-2009 | ||||||
| 2005 | 2006 | 2007 | 2008 | 2009 | ||
| Additions to Net Working Capital | ||||||
| as a % of change in sales | 8% | 15% | 18% | 11% | 11% | |
| Income Tax Rate | 0% | 0% | 0% | 0% | 30% | |
| Depreciation | $ 7,250 | $ 9,769 | $ 14,036 | $ 24,750 | $ 24,750 | |
| Capital Expenditures | $ 14,750 | $ 17,000 | $ 30,500 | $ 75,000 | $ - 0 | |
| Total Long Term Debt | $ 295,395 | $ 272,008 | $ 251,000 | $ 251,000 | $ 251,000 | |
| Total Other Long Term Debt | $ 400,000 | $ 200,000 | $ 100,000 | $ - 0 | $ - 0 |
