Butler Lumber Company
BUTLER LUMBER COMPANY EXHIBIT 1 Operating Expenses for Years Ending December 31, 1988-1990, and for First Quarter 1991 (thousands of dollars) 1988 Net sales Cost of goods sold: Beginning inventory Purchases Ending inventory Total cost of goods sold Gross Profit Operating expenses Interest expense Net income before income tax Provision for income taxes Net income $1,697 $183 $1,278 $1,461 $239 $1,222 $475 $425 $13 $37 $6 $31 1989 $2,013 $239 $1,524 $1,763 $326 $1,437 $576 $515 $20 $41 $7 $34 1990 $2,694 $326 $2,042 $2,368 $418 $1,950 $744 $658 $33 $53 $9 $44 1st Qtr 1991 $718 $418 $660 $1,078 $556 $522 $196 $175 $10 $11 $2 $9
a. In the first quarter of 1990 sales were $698,000 and net income was $7,000.
b. Operating expenses include a cash salary for Mr. Butler of $75,000 in 1988, $85,000 in 1989, $95,000 in 1990, and $22,000 in the first quarter of 1991. Mr. Butler also received some of the perquisites commonly taken by owners of privately held businesses.
Memo items Purchases to sales Cogs to sales Operating expenses/sales 75.3% 72.0% 25.0% 75.7% 71.4% 25.6% 75.8% 72.4% 24.4%
Butler Lumber Company
BUTLER LUMBER COMPANY EXHIBIT 2 Balance Sheets at December 31, 1988-1990, and March 31, 1991 (thousands of dollars) 1st Qrtr 1988 1989 1990 1991 Cash Accounts receivable, net Inventory Current assets Property, net Total assets Notes payable, bank Notes payable, Mr. Stark Notes payable, trade Accounts payable Accrued expenses Long-term debt, current portion Current liabilities Long-term debt Total liabilities Net worth Total liabilities & net worth $58 $171 $239 $468 $126 $594 $0 $105 $0 $124 $24 $7 $260 $64 $324 $270 $594 $49 $222 $325 $596 $140 $736 $146 $0 $0 $192 $30 $7 $375 $57 $432 $304 $736 $41 $317 $418 $776 $157 $933 $233 $0 $0 $256 $39 $7 $535 $50 $585 $348 $933 $31 $345 $556 $932 $162 $1,094 $247 $0 $157 $243 $36 $7 $690 $47 $737 $357 $1,094
Memo items Working capital Nonfinancial working capital Cash/sales AR/sales Net property/sales Accrued exp/sales $208 $262 3.4% 10.1% 7.4% 1.4% $221 $325 2.4% 11.0% 7.0% 1.5% $241 $440 1.5% 11.8% 5.8% 1.4% $242 $465
BUTLER LUMBER COMPANY
Selected statistics: 1988 through 1990 1988 Percent of sales Purchases Cost of goods sold Operating expenses Cash Accounts receivable Inventory Fixed assets (net) Total assets Percent of total assets Current liabilities Long-term liabilities Equity Current ratio Return on sales (margin) Return on assets Return on equity Sustainable Growth: Margin Asset Turnover Leverage (using bop equity) Retention ratio G-star Actual Growth (Sales) Actual Growth (Assets) 1989 1990 Average
75.3% 72.0% 25.0% 3.4% 10.1% 14.1% 7.4% 35.0%
75.7% 71.4% 25.6% 2.4% 11.0% 16.1% 7.0% 36.6%
75.8% 72.4% 24.4% 1.5% 11.8% 15.5% 5.8% 34.6%
75.6% 71.9% 25.0% 2.5% 11.0% 15.2% 6.7% 35.4%
43.8% 10.8% 45.5% 1.80 1.8% 5.2% 11.5%
51.0% 7.7% 41.3% 1.59 1.7% 4.6% 11.2%
57.3% 5.4% 37.3% 1.45 1.6% 4.7% 12.6%
50.7% 8.0% 41.4% 1.61 1.7% 4.9% 11.8%
1.83% 2.86
1.69% 2.74 2.73 1.00 12.59% 18.62% 23.91%
1.63% 2.89 3.07 1.00 14.47% 33.83% 26.77%
Butler Lumber Company
BUTLER LUMBER COMPANY Sources and Uses of Funds, 1988 - 1990, (thousands of dollars) 1988 to 1989 1989 to 1990 Sources of Funds: Retained Earnings $34 $44 Decrease in Cash Account $9 $8 Increase in Trade Payables $68 $64 Increase in Accrued Expenses $6 $9 Bank Borrowing $146 $87 Total Sources $263 $212 Uses of Funds: Increase in Accounts Receivable Increase in Inventory Increase in Fixed Asset Account Buyout of Mr. Stark Decrease in Long Term Debt Total Uses
1988 to 1990 $78 $17 $132 $15 $233 $475 16.4% 3.6% 27.8% 3.2% 49.1% 100.0%
$51 $86 $14 $105 $7 $263
$95 $93 $17 $0 $7 $212
$146 $179 $31 $105 $14 $475
30.7% 37.7% 6.5% 22.1% 2.9% 100.0%
Butler Lumber Company
BUTLER LUMBER COMPANY Sources and Uses of Funds, 1988 - 1990, (thousands of dollars) 1988 to 1989 1989 to 1990 1988 to 1990 Cash From Operations: Retained Earnings (=WC from Operation $34 $44 $78 Less: Change in Nonfinancial working capital $63 $115 $178 Equals: Cash from Operations ($29) ($71) ($100) Sources of Cash: From Operations From Short term Bank Loans Total Sources of Cash Uses of Cash: For Buyout of Mr. Stark For Fixed Assets For LTD Paydown Total Uses of Cash Change in Cash Holding: Change in cash (check)
($29) $146 $117 $105 $14 $7 $126 ($9) ($9)
($71) $87 $16 $0 $17 $7 $24 ($8) ($8)
($100) $233 $133 $105 $31 $14 $150 ($17)
Butler Lumber Company
BUTLER LUMBER COMPANY Cash to Cash Cycle 1988 $4,649 37 5.11 $3,501 68 35 70 1990 $7,381 43 4.67 $5,595 75 46 72 Change from 1988 to 1990 $2,732 6 -0.45 $2,093 6 10 2
Average Daily Sales Average Collection Period: (AR Days) Inventory Turnover Average Daily Purchases Days of Inventory Days of Payables (Trade Notes and Acc Days Cash to Cash: Increase in AR due to Increased Average Collection Period: Increased Sales: Increase in Inventory due to Reduced Inventory Turnover: Increased Sales: Increase in Payables due to Slower Payment: Increased Purchases: Increase in Net Working Assets due to Reduced Activity Ratios: Increased Operating Activity:
$28,684 $117,316 $22,608 $156,392 $36,219 $95,781 $15,073 $177,927
BUTLER LUMBER COMPANY
Projected income statement for 1991 (thousands of dollars) 1991 Net sales Cost of goods sold: Beginning inventory Purchases Ending inventory Total cost of goods sold Gross Profit Operating expenses Operating Profit Purchase Discounts* Interest expense** Net income before income taxes Provision for income taxes Net income $ 3,600 $418 $2,736 $3,154 $562 $2,592 $1,008 $900 $108 $42 $53 $97 $21 $76 $
Value
Assumptions Explanation
3,600 given in case from Ex 1 76% historical % of sales computed value (beg inv + purch - end inv) 72% historical % of sales 25% historical % of sales 2% (of purch after Q1) assumption 10.50% (of average outstanding balance) assumption 34% schedule given in footnote 1
*Assume purchase discounts of 2% taken on all purchases after April 1, 1991. **10.5% on the average outstanding balance.
Projected balance sheet for December 31, 1991 (thousands of dollars) 1991 Assets: Cash $54 Accounts recievable, net (12% of sales) $432 Inventory $562 Current Assets $1,048 Property, net $216 $1,264 Total Assets Liabilities: Accounts payable Accrued expenses Long-term debt, current portion Bank note payable (plug) Current Liabilities Long-term debt Total Liabilities Net worth Total Liabilities plus net worth
1.50% recent % of sales 12% recent % of sales computed value from above 6% recent % of sales
$75 $54 7 $661 $797 $43 $840 $424 $1,264
10 days of purchases 1.50% historical % of sales 7 constant amortization computed plug value computed value computed value
ROA ROE ROBE
5.99% 17.87% 21.76%
Asset - (TL+NW except for Bank note)
$661
computed value
BUTLER LUMBER COMPANY
Projected income statement for 1991 (thousands of dollars) 1991 Net sales Cost of goods sold: Beginning inventory Purchases Ending inventory Total cost of goods sold Gross Profit Operating expenses Operating Profit Purchase Discounts* Interest expense** Net income before income taxes Provision for income taxes Net income $
Value
Assumptions Explanation
3,600 given in case from Ex 1 76% historical % of sales computed value (beg inv + purch - end inv) 72% historical % of sales 25% historical % of sales 2% (of purch after Q1) assumption 10.50% (of average outstanding balance) assumption
34% schedule given in footnote 1
*Assume purchase discounts of 2% taken on all purchases after April 1, 1991. **10.5% on the average outstanding balance.
Projected balance sheet for December 31, 1991 (thousands of dollars) 1991 Assets: Cash Accounts recievable, net Inventory Current Assets Property, net Total Assets Liabilities: Accounts payable Accrued expenses Long-term debt, current portion Bank note payable (plug) Current Liabilities Long-term debt Total Liabilities Net worth Total Liabilities plus net worth
1.50% recent % of sales 12% recent % of sales computed value from above 6% recent % of sales
10 days of purchases 1.50% historical % of sales 7 constant amortization computed plug value computed value computed value
ROA ROE ROBE
#DIV/0! #DIV/0! #DIV/0!
Asset - (TL+NW except for Bank note)
computed value
