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John M.

Case
Income Statement
1985 1986 1987 1988 1989 1990 1991
Sales 16,024 16,844 17,686 18,570 19,498 20,472 21,496
Expansion 0 1,000 1,400 1,960 2,744 3,114 3,535
Net Sales 16,024 17,844 19,086 20,530 22,242 23,586 25,030
COGS 9454 10,528 11,261 12,113 13,123 13,916 14,768
Intial Investment 200 - - - - - -
Merchandising 450 450 - - - - -
S&A Expense 3429 3,819 4,084 4,393 4,760 5,047 5,357
EBIT 2491 3,047 3,741 4,024 4,359 4,623 4,906
Financing Expense 249 175 0 0 0 0
Interest Expense 1675 1538 1369 908 800 800 800
Profit Before Tax 567 1334 2372 3116 3559 3823 4,106
Fed Tax 1 88 208 370 486 555 596 944
Profit after Tax 478 1126 2002 2630 3004 3227 3,162
EPS 0.96 2.25 4.00 5.26 6.01 6.29 6.17
2.99% 6.31% 10.49% 12.81% 13.51% 13.68% 12.63%
1 - Starting in 1991 we used a tax rate of 23% and grew the tax rate by 1 percent each year

Balance Sheet
(000's) 1985 1986 1987 1988 1989 1990
1
Assets
Cash 9486 10564 11299 12154 13167 13963
Acct Rec 4182 4657 4981 5358 5805 6156
Inv 1026 1142 1222 1314 1423 1510
total Current Asset14694 16363 17502 18826 20396 21629
Net, P,P,&E2 2310 2270 2230 2190 2150 2110
Misc. Asset. 122 136 145 156 169 179
Total Assets 17126 18769 19877 21172 22715 23918
Liab.
Acct. Payable3 6023 6461 5490 4087 2565 489
Accrued Expenses 383 427 457 491 532 564
Accrued Inc. Tax 26 61 108 142 162 174
Current liab. 6432 6949 6055 4720 3259 1228
Common Stock6 500 500 500 500 500 508
Retained Earnings 10194 11320 13322 15952 18956 22183
Total Liab. & S/E 17126 18769 19877 21172 22715 23918

1- All assets were calculated using persentage of net sales


2-Assumed a 5 year straight line depreciation with $0 salvage value on the $200,000 intia
3-Plug figure
4- Calculated as a percentage of Selling and Admin. Expenses
5-Calculated as a percentage of Fed. Income Taxes
6-500,000 shares from Management group plus warrants issued in 1990 to Venture Capita
1992 1993 1994 1995 1996
22,570 23,699 24,884 26,128 27,434
4,012 4,554 5,168 5,866 6,658
26,582 28,253 30,052 31,994 34,093
15,684 16,669 17,731 18,877 20,115
- - - - -
- - - - -
5,689 6,046 6,431 6,847 7,296
5,210 5,538 5,890 6,271 6,682

800 - - - -
4,410 5,538 5,890 6,271 6,682
1,058 1,384 1,531 1,693 1,871
3,352 4,153 4,359 4,578 4,811
6.54 8.10 8.50 8.93 9.38
12.61% 14.70% 14.50% 14.31% 14.11%
nt each year

Net Working Capital


(000's) 1985 1986 1987 1988 1989 1990
Cash 9486 10564 11299 12154 13167 13963
Acct Rec. 4182 4657 4981 5358 5805 6156
Inv. 1026 1142 1222 1314 1423 1510
C/L (6432) (6949) (6055) (4720) (3259) (1228)
NWC 8262 9414 11447 14106 17137 20401

the $200,000 intial investment for the expansion project

0 to Venture Capitalists
John M Case
Free Cash Flow Valuation
1985 1986 1987 1988 1989 1990
EBIT*(1-T) 1 2107 2520 3053 3195 3400 3583
Add Non-Cash 240 260 284 300 310 340
Less:Increase in NWC 156 162 170 180 190 200
Less:Cap expense 770 584 142 150 466 600
Free Cash Flow 1421 2034 3025 3165 3054 3123

Debt Retirement Schedule


Bank Loan 2 1421 2034 2545 2355
Sellers' Debt 480 5520
3
Subordinated Loan 0 699 2801

Price-Earnings Multiple
DeLuther Wakefield Co.
Officomp
P/E Ratio 8.7 7.2 10.5
Avg. P/E Ratios 8.8

Case Co. 1985 1986 1987 1988 1989 1990


Projected Net Income 478 1126 2002 2630 3004 3227
Avgerage net Income 2078

Multiple EV 19765 28397.6


Selling Price 20000
Bank Loan 6000
Company Cash 4000
Seller's Debt 6000
Equity 500
Subordinate Loan 3500

1 - Starting in 1991 we used a tax rate of 23% and grew the tax rate by 1 percent each year
2 -Loan paid off by cash flow and new bank term loan of 2.355 million to be paid off the following yea
3 - In 1992 the loan to the VC is completely paid off plus a payment of 1.17 million in order to guarant
WACC
Bank Loan
1991 1992 1993 1994 1995 1996 Sellers' Debt
3778 3960 4154 4359 4578 4811 Subordinate Loan
340 340 340 340 340 340 WACC
210 220 230 240 250 260
600 600 600 600 600 600 Bank Weight
3308 3480 3664 3859 4068 4291 Seller's Debt
VC Loan

Used the Weighted Averag


Dividend Payo

Bank Loan is repaid first beca


Case's Debt is repaid second
Venture Capital debt is repa
to the Bank's and C
###
Assumed tax rate as compu

each year
ff the following year
in order to guarantee the VC's 22% IRR
Coupon Rate Weight
Bank Loan 12% 30.8%
Sellers' Debt 4% 30.8%
Subordinate Loan 9% 38.5%
8.40%

Bank Weight 6000/19500=.308


Seller's Debt 6000/19500=.308
7500/19500=.385

Used the Weighted Average Cost of Debt for the WACC due to no anticipated
Dividend Payouts until all debts have been repayed

Bank Loan is repaid first because it is the Senior debt


Case's Debt is repaid second because of its 5-year term
Venture Capital debt is repaid last because it is subordinate
to the Bank's and Case's debt 5-year term

Assumed tax rate as computed in case exhibit


Venture Capitalist Valuation
1985 1986 1987 1988
Initial Outlay -3500
Interest Revenue 315 315 315
Principal Repayment
8,160 Warrants @ $55.88 per share

Venture Capitalist Contribution 3500


Interest Payments at 9%
Warrant Value 13% of 3500 455

3500
1989 1990

315 252
699 2801
456

1990
Equity 28398
Selling Price20000
Bank Loan 6000
Company Cash 4000
Seller's Debt 6000
Equity 500
Subordinate Loan
3500
1991 1992 1993 1994 1995 1996
0 0 0 0 0 0
340 340 340 340 340 340
210 220 230 240 250 260
600 600 600 600 600 600
-470 -480 -490 -500 -510 -520

1991 1992 1993 1994 1995 1996


21,496 22,570 23,699 24,884 26,128 27,434
3,535 4,012 4,554 5,168 5,866 6,658
25,030 26,582 28,253 30,052 31,994 34,093
14,768 15,684 16,669 17,731 18,877 20,115
- - - - - -
- - - - - -
5,357 5,689 6,046 6,431 6,847 7,296
7,834 8,526 9,294 10,145 11,092 12,145
Price-Earnings Multiple
DeLutherWakefieldOfficomp
Co.
P/E Ratio 8.7 7.2 10.5
Avg. P/E Ratios8.8

Case Co. 1985 1986 1987 1988 1989 1990


Projected Net Income
478 1126 2002 2630 3004 3227
Avgerage net 2078
Income