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Hampton Machine Works

Cash
Acct. Receivable
Inventories
Current Assets
Gross Fixed Assets
Acc. Depreciation
Net Fixed Assets
Prepaid Expenses

CHG from nov. to Aug


961
561 Source
(2,163) USE

Nov-78
2,520
1,245
2,601
6,366
4,010
(2,998)
1,012
62

92
92 Source
20 Source

Total Assets
Notes Payable, Banks
Accounts Payable
Accruals
Taxes Payable
Customer Advance Payments
Current Liabilities
Common Stock
Surplus
Total Equity

7,440
(1,000)
(600)
9
(329)
(726)

Source
Source
Use
Source
Source

348
561
150
840
1,899
1,178
4,363
5,541

750
1,367 Use

Total Liabilities and Equity

7,440
12/31/1978
Dec-78
Jan-79
Feb-79
Mar-79
12 mos
1 mos
1 mos
1 mos
1 mos

Net Sales
COGS
Gross Profit
SG&A
EBIT
Interest Exp
Net Income before taxes
Taxes
Net Income
Dividends

7,854
5,052
2,802
1,296
1,506
1,506
723

1,551
1,122
429
248
181
181
87

861
474
387
103
284
15
269
129

672
369
303
61
242
15
227
109

1,866
1,362
504
205
299
15
284
136

783

94

140

118

148

50

25

First Step: Cash receipts and cash disbursements


What are Revenues - cash

Aug-79

Sep-79

Oct-79

Nov-79

Dec-79

Shipments
SALES

CASH

less: gen. aircraft


New Monthly Sales billed
pp A/R
plus billings/new sales
less collections
Equals: Ending A/R

684

Aug-79

2,163
(840)
1,323
1,323

1,505
(726)
779
779

1,604

2,265

1,604
1,604

2,265
2,265

684
1,323

1,323
779

779
1,604

1,604
2,265

Sep-79

Oct-79

Nov-79

Dec-79

Purchases
PP Accts. Payable

600
948

600
600

600
600

600
600

CASH payments on A/P


Ending A/P balance

948
600

600
600

600
600

600
600

948

Dec-78
491
1,863
28
2,382
4,010
(3,010)
1,000
40

Mar-79
505
1,971
3,474
5,950
4,010
(3,040)
970
39

Jun-79
1,152
1,893
3,276
6,321
4,010
(3,070)
940
24

Jul-79
1,678
1,269
3,624
6,571
4,010
(3,080)
930
24

Aug-79
1,559
684
4,764
7,007
4,010
(3,090)
920
42

3,422

6,959

7,285

7,525

7,969

TA

1,000
371
777
74
1,040

1,000
681
849
373
1,040

1,000
399
678
354
1,566

1,000
621
585
407
1,566

1,000
948
552
479
1,566

N/P
A/P
Accruals
Tax paybl
Cust. Adv

600
552
888
-

3,262
428
2,182
2,610

3,943
428
2,588
3,016

3,997
428
2,860
3,288

4,179
428
2,918
3,346

4,545
428
2,996
3,424

CL
Com. Stk
Surplus
Tot. Eq

2,040
428
3,754
4,182

5,872

6,959

7,285

7,525

7,969

TL & E

6,223

Cash
A/R
Inv.
CA
Gross PPE
Acc. Dep.
Net PPE
Ppd Exp.

6,223

Apr-79
May-79
Jun-79
Jul-79
Aug-79
Aug-79
1 mos
1 mos
1 mos
1 mos
1 mos
8 mos
1,566
1,137
429
172
257
15
242
116

873
567
306
96
210
15
195
94

1,620
1,197
423
130
293
15
278
133

723
510
213
87
126
15
111
53

507
276
231
66
165
15
150
72

126

101

145

58

78

100

12/31/1979
(331)
2,265
3,024
4,958
4,360
(3,137)
1,223
42

12/31/1979
4 Mos

8,688 Net Sales


5,892
2,796
920
1,876 EBIT
120
1,756
842
914 Net Income

908

100

150
758

*** NOT APPLES to APPLES


COGS Calculation not included in SGA above
Jan-80

WIP inv. Used

7,537
4,187
3,350
1,600
1,750
70
1,680
771

1,320

Plus Raw Mat used


Plus 4 mos Purchases

420
2400 4*600

(1,566)
Est. of Inv. Used/COGs

2,265
-

Jan-80

600

4,140

INTEREST EXPENSE
Depr. Expense = old equip depr. + new
Old is $10 per month
New is $350,000 @ 8 yr SL deprecation
43.8 annual depr.
3.6 monthly
7.3 two months depr.
Total depr. For 4 months
This should be added to COGS/or SGA

47.3

600
Beginning Inv.
Less: WIP used
Less: RM used
Ending Inventory

4,764
(1,320)
(420)
3,024

What Can we Do to improve cash position?


PLUG FIGURE
Dec. shipments

350k in capex
8/79 plus 4 mos depr below

defer proposed $100k dividend


restructure loan request to pay one-half
of balance in Dec. and rest in Jan. '1980
Negotiate terms on capex

Unchanged per chase


Negotiate 60 day deferral of sales
commissions to stockholder sales
people like you did before
Loan paid off
Unchanged per case
479-181-181+771
paid off as prod. Shipped

PY = NI - div

Shipments 4 mos
see below
400*4

pgs 64 parag. 2

48% tax rate with $35k ITC

CHG to Retained Earnings

Stretch payables slightly or encourage


customers to pay faster possibly with
discount of less than 0.75% 10 days,
net 30

Sep-79

Oct-79

Dec-79

Jan-80

779

1,604

2,265

1,673

779

1,604

2,265

600
400
350

600
400

600
400

600
400

Receipts
Collections of Accounts Receivable
Bank Loan Proceeds

684

1,323
350

Total Cash Inflows/Sources

684

948
400

Nov-79

Expenditures/uses
Accounts Payable payments
Other Operating Outlays
Capital Expenditures
Tax Payments
Interest Payments
original 1.0mm loan
new 350k loan
Principal Payments on Loans
Dividends

181

181

15
-

15
-

15
5
-

15
5
1,350
150

Total Cash Outflow

1,544

1,365

1,020

2,701

1,000

NET CASH Inflow/(Outflow)


Beginning Cash Balance

(860)
1,559

(241)
1,007

(1,097)
766

1,265
(331)

Ending Cash Balance

699

308
699
1,007

766

(331)

934

Assumes 30 day collection pg 60

Assumes 30 day Collection pg 60


all exp. Other than interest & raw materials
pg 59
pg 64 paragraph 4

Loan repayment at end of month


pg 64 last paragraph

Hampton Machine Works


question 7

$1,178,000
10
117,800
$3,000,000
$

40.00
63.7%

$ 4,712,000

$ 1,712,000

Year end 1978 Common Stock ($10 Par Value)


Divided by Par Value
Equals
Number of Shares before repurchase
Purchase Price for 75,000 shares
75000
Value Per Share
% Ownership of 75,000 shares
Implied Value of the Equity (100%)
for the Entire Company before purchase
aka "Pre-Money" Value
Another Way to Calculate is
Based on Share Price
Remaining Shares Outstanding
42800 x share price
Implied Value of the Equity
"After" the transaction aka "Post Money"
EBIT
EBITDA

1978
1978

1506
1598

ENTERPRISE VALUE = VALUE OF EQUITY + DEBT (NET)

DEBT
Value of
Equity
Enteprise
Value

ACTUAL
Dec-78
1,000

1,712

3,149

2,712

3,149

Multiple
of EBIT

1.80 x

Multiple of
EBITDA

1.70 x

Implied Value
Dec-79
0

1.8 x

1.7x

*** Valuation impacted due to all of the strange things


going on at year end 1978 wrt customer advances and the
1979 comparison with a balance sheet that has neg. cash