Ratio Analysis

Overview

Riordan Manufacturing has three operating entities…Georgia, Michigan and California…plus a joint venture in the People's Republic of China. Basically, the operating entities each have their own Finance & Accounting Systems and they provide input that is consolidated at Corporate…San Jose. The basic components of each system are as follows:

· General Ledger

· Accounts Payable

· Accounts Receivable

· Order Entry

· Procurement

· Sales and Purchasing History

· Invoicing and Shipping

· Payroll

· Financial Reporting

· EDI*

· Bar Code Reading*

· EDSS (Executive Decision Support System)*

*San Jose Only 

Background:

During the due diligence process in which Riordan acquired the operating entities in Michigan and Georgia the matter of F & A System's compatibility was not addressed.

Current Situation Regarding F & A Systems:

· San Jose has a license for a fully integrated Windows based ERP manufacturing, distribution and financial management software application specifically designed for plastics processors and process and assembly manufacturers. The license does not include application source code.

· Michigan had purchased a vendor developed software application and the attendant source code for their Fd & A and process application. The vendor is no longer in business. The application runs on a pair of DEC Alpha's, using the VMS operating system, VAX4000 work stations and programmed in C.

· Georgia had purchased a vendor (different from Michigan) developed software application and the attendant source code for their F & A and manufacturing process applications. The systems run on a pair of AS400's, using UNIX operating system, use PC's (Windows) as workstations, and is programmed in RPG400.

Challenge:

The F & A Department has been unable to achieve anything remotely resembling "seamless compatibility". Some F & A data is provided to corporate via data files; some data is provided via hardcopy reports and must be re-entered; some data is provided via data files but must be converted (redirected) to the proper account codes and the list goes on. Subsequently, Riordan has the following situation regarding F & A system outputs at the consolidated level:

· Consolidated close of the General Ledger and subsequently the Income Statement and Balance Sheet is labor intensive and normally not completed until 15-20 days after month end.

· Audit (to include external auditors) is required each month and is costly and labor intensive.

· Compliance with new government required reporting requirements at the consolidated level is difficult at best.

· Riordan Enterprises finds the situation unacceptable and has mandated a solutions(s)/alternatives be recommended soonest.

NOTE: This situation is transparent to customers and suppliers as each operating entity has maintained invoicing, payments, etc., as was prior to acquisition.

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Riordan Manufacturing, Inc. Consolidated Balance Sheet
	Fiscal Year Ending September 30th
	2011	2010
Assets
Current Assets
Cash	$3,725,406	$2,807,029
Accounts Receivable	3,192,094	2,695,342
Current Portion of Notes Receivable	84,255	102,976
Inventories	9,709,611	8,517,203
Prepaid Expenses and Other Items	666,591	402,240
Total Current Assets	$17,377,957	$14,524,790
Notes Receivable, less current portion	$842,551	$936,168
Investment in Joint Venture	1,734,004	1,609,004
Property, Plant and Equipment - net	26,366,949	16,658,218
Intangible Assets - net	904,473	904,473
Other Assets	183,203	192,845
Total Assets	$47,409,137	$34,825,498
Liabilities and Stockholders' Equity
Current Liabilities
Current Portion of Long-Term Debt	$1,560,959	$474,032
Accounts Payable	1,141,561	1,391,385
Accrued Liabilities	430,477	524,685
Income Taxes Payable	552,155	359,955
Total Current Liabilities	$3,685,152	$2,750,057
Bank Line of Credit	$114,759	$295,865
Long-Term Debt - less current portion	9,500,741	1,006,955
Deferred Income Taxes - net	660,503	825,629
Total Liabilities	$13,961,155	$4,878,506
Common Stock Stated par value is $.01. 20,000,000 shares authorized. Issued and Outstanding 15,801,332 net of treasury shares.	$29,055,488	$29,055,488
Retained Earnings / (Accumulated Deficit)	4,392,494	891,504
Total Stockholders' Equity	$33,447,982	$29,946,992
Total Liabilities and Stockholders' Equity	$47,409,137	$34,825,498

Download Historic Income Statement Data

Riordan Manufacturing, Inc. Income Statement For the 12 months ending September 30th
	2011	2010
Sales	$66,608,660	$56,534,254
Direct Cost of Goods Sold	51,592,470	43,970,250
Gross Margin	$15,016,190	$12,564,004
Operating Expenses
Sales, Marketing & Other	$1,328,615	$1,265,348
Depreciation	1,378,616	1,152,125
Quality Assurance	1,151,176	1,112,247
Research & Development	1,039,637	962,627
General & Administrative	4,954,751	4,674,293
Machining & Systems	143,808	125,050
Total Operating Expenses	$9,996,603	$9,291,690
Profit Before Interest & Taxes	$5,019,587	$3,272,314
Non-Operating Expenses
Interest Expense	$604,616	$121,533
Taxes	1,104,309	719,909
Total Non-Operating Expenses	$1,708,925	$841,442
Net Profit After Taxes	$3,310,662	$2,430,872