[@@

9-281-0t4

Harvard Business School

Harris Seafoods, lnc.

g

years ol4 was chairman and drief excutive officer of tlarlis safoods, Inc'
founded
by his fathr in 1935. Mr. Harris, S!., had been in the lhber
The company had beer
rusinessln Sivannah, Georgia. A shrimP boat builder to whom he had sold some lumber had gon

Charlie Hards,

into banlruptcy. As a result, he ended uP owning two newly constmcted shrimP boats

From that modest bginnin& Harris Safoods had evolved into one of tll larSest Producd
of frozer shrimp in ttu Unitd States. Charlie tlarris II,Ilad talen over resPonsibility Ior oPnting
the company in 1958 after a serious heart attack disabld his father.
By 1979, the company had sales of slightly under $33 milliolv while Prodts afte! taxs were
$7.8 million. The latter figure represented ats9% atier-tar. lctlim olr stEtdtoldels e$dty The hiSh
rcturn on equity was achieved in spite of th fact that th comPany tPically had a low Percntate of
debt in ib aapital structute. The comPany llad issued shares Publicly in 1967. Managendt srill
controned 50% of tlle shaes, but there was an active over-thecounter market for the stoclc As ofthe
end of 1979, thele were two milion shars outstanding The total market value of the filllr was $g
milion. Data flom the ompany's historical incom stathents ajld balance sheets are shown in

Exhibit 1.
The company had a flt o{ over 100 boats which Plied the waters betwn Texas and Mexico.
Fach boat had abuilt-in fleezer. Every nrght, as soon as the shliErP wer takn out of the nets, the
shrimp wer deheadd and flash frozer On a tyPical kiP, a boat stayd out 45 to 60 days before

returning to po!t.

Haris Sealoods' h-shole facilities included a dock and Packing Plant whle the shri-lrrP were
urloaded, gaded by size and quality, and Put into 5 lb. corltamels. In turl! the 5 lb. containers were
placed in 50 lb. carions Ior shipment to a local cold storat Plant kom which th 6rm leased sPace.
The shimp were distributd ttEough a caPtiv sales organization. RougNy aO% of sales
were made to whoiesalers along the east coast of th United States. The wholesalers sold th sldmP
to letail establishments (e., supermarket chains and letail lish stors) atd institutioral oudets (e.9,
lestau.rants, hospiials and industsial caftrias). Another 35% of sales were made to laPanes tading
compmies. Tht renraining sales wele to Processors Processors converH the law sllrimP into an
intermdiat product such as pre<:ookd or breaded stEimP. In tuln, the Processors sold thir

products to

his

ew

_ttre

preporcn

same

rrix oI outlets a5 itlat dessibed

6 ttu btsislot

class discassion

larhd

Is

above (i.e., rtail and institutional

to iJtsttule eithd

atlnin isba t ;o e sit ua t iM.

'fectioe

ot infintioe handting

tan

reiri:die

Ptesider$ dd Felo&5 of tlaaard CoUeSe. To oldq .oPi? or tquest-Permissim to

materiats, eU ra0G5i5-7681 write Haeld B$in.s s.h@l Publishin& Bostoa MA 02163, d to to

rftddi!&

or

Coplritht O 1981 by the

hiip://w1wJrbspllarvdd.edu. No Part of tltjs pubucation Elay be rePtod@d, stoPd in a reEi4al stsierr

used in a s"rerdsheet, or transhitted in dy ror or by any me$+l(koruc mectaic'j, PhotrcPyin&

othefliFwjthout

the PerErisim of ttaRald Busin6s Sch@l

241451

Hanis Safoods sold its prcduct under the SHRMP KING brand nam. Hanis Sa{oods was

know! for its high-quality ploduct and superb customer service. The SHRIMP KINC brand
a ptice premium of $0.10 to 60.15 per pormd over compeiitive brands. In the pasL it was
ftquendy the cas that demand excded supplt md sals had to be rarioned amonS cusromets.

commanded

The Shdmp lndustry

Hards Seafoods had ben phenohenaly successful whn judged in terms of average
profitability. However, the business was not without its !isk5. Thrc wre two principal sources oI
risk fi$t, the supply of shdmp both for Haris Safoods and Ior the entift indusEy was uncertairy
and, scond, the demand Ior shriftp was u.ncertain.
The shrimp consumed in each yar came from thre sources: domestk ploductioq net
imports, and be$nning inventories. With retard to domestic productior! tIrc shrimp bds in the
waters off Texas and Mexico were ovdished. As a rsdt, it w'3 becoming increaringly dilficult to
Iind shrimp. Also, in any given yea!, the siz and valu oI the caldr were affected by events beyond
the control of management When there was too much rai& fo! example, the level of Foduction was
adversely aJlected. Wathr could also affect the size composition of the catch: since the price
receivd lor shimp dpnded on tlle siz class, but cosr did not, the prcent of large shrimp in the
catd was a critical detersinant of profirabili9.
Another corftibutor to uncedainty about th supply of shrimp was Olat th dlarlatic increas
in offshore clrilling activity in the 197Os had brought a comnensurate inceas in the lisk of oil spils.
Some shrimping Srounds wre

danger ofbeint destroyed.

Further, Mexico, and indd mo6t of the countdes of the worl4 had established 2oGmitre
telritorial boundaris. The number of foreign reFstered boats alowed to fish in Mexican waters had
ben sharply timid. This was most unfortunate sinc a high proportion of the shrimp catch came
from watrs within Mexiccn territorial limits. Hanis Safoods had ben successful in parr because it
had established and maintained good relations with the Mencan governnent. ManagGrent believd
thy wele less !.ulnemble than some of then comFtito$ to a tiShtening of th Mexican fishing
regulations. Nevenheless, the threai existed.
Finauy, the lvel of inporis into the Unid States fluctuated lrom year to yea!- Foreign
cornpetito$ tended to have lower costs than U.S. Iisherme& and chas of dumping were frcqusrtly
Ireard.l
With regard to coruullrption, the demand for shdmp was strongly affected by cyclical swings
in the eonomy. One of th leasons Hards Seafoods had decided to export to tapan was that doing so
dampened the cydical swings in its business.
The pdc of slEimp thus dpended on D.ny factors, few of which were under th control of
ma.na8mnt First, there werc pric swings broutht about by chang6 in th state of the economy.
Since shrimp were a luxury good, the denand for shrimp was panicularly snsitive to swings in tlle
economy. 'Iher! therc wr price changes blought about by changs in supply. Rarely were supply
and demand for shrimp Blnchonized. Shrimp could be put into cold storag for up to one year with
no damage, but holdi$ shrimp ofi lhe aErket did not elimirlat dramatic price swints. And cold

lHanis Seafooas wa rct particula y wtnenble to inpdt.@petitim bcaus d|e brdk of idlPolls wEte in the
shall siFlow vdue part of th Eurkei Hads Seafods 6shd in areas where the average size of the shrimp
ught was la4, and l{here accss ws lihiied. these large stEidrp wle sold in @kets which w@ quite
alifferent

ftoh

the

d.ket

fo!

sEll

slEimp.

261454

slorage was fatuly expDsive. Daia on the demand, suPPI, and averge Price of shrimP are shown
Exhibit 2.

in

On th cost side, the largest and most uncertain elment of cost was tuel exPense for
operating the boats. Sirce 1973, the cost of tuel had increasd from 15% of cost of goods sold to 27ol0.
Btter mgine tuel fficiency had helpd, but still the prcbleF prsisred.
Att in all, then, th stuimp business was dsky. Remrkably, however, Hanis Safoods had
never reported a loss in its 45 years of opration. Considring how many of its comPetito$ had been
forced into bankruptcy, that was an enviable rci:ord.

The Processing Plarrt Proposal

Over th ya$, Hanis Sealoods had considered a nuE$er of prcpoaats to exPand into
businesses othe! than shrimp production and sales. In 1975, for example, th comPany had entered
The lishing Srouds
the labsier business. Apprcximately 15 boats were Puchased and
wer in the Caribbean Sea south oI the Cayman Islands. The return on invstment did not live uP to
expectations, and the boats were rfittd to catch shrimP one year alter the exPerimnt betan.

ou(itd.

h late 1979, Mr. Hanjs had unsuccesstully attemptd to acqule a local, Privately-held
shrimp processing opemtion. The company had sales of $23 million, and net Profits of $r.9 miluorl
The owner of the company tuned down an offe! of $10 million in cash, witn all additionar $10
milion to b paid basd on tutu.re perfomance.
When the acquisition attempt feU ttuough, Mr. Hanis decided that Haris Seafoods should
consider building its own processing Iacility. The businest Emed quit attractive both in tefms of
growth and in terEls of retum on investmnt And, thete were some obvious oPPortunities/
espcialy in the sals 3rea, for th comPany to utjlize iis resources more effectively.

The Shrimp Processing lndustry

Shrimp plocessors purchasd law shimP and convertd thm into some ritermediate or
IiMl product For example, Iaw shrimp gneraly werc puchasd with thet hads off but the shls
intact A typical processinS operation would be to dean (dahlIand devein) the shlihP. The
output would either be repackaged lor sale (e.t., frozen individually and Put into 2 lb. bags) or
{urther processed. Th mo6t ftequnt processing operation e aied addinS a batter
(ca d brcading). The breaded slllidrP were then frozrL packaged, ajld distributed.

1o each

shdmP

Sales of procssd shrimp products had grown at telatively high rats over the past 10 years.

a[ (fresh, ftozen and processd) shrimp products wer $3.5 bilion.2 This
represnted almost 50% of total safood sales in the Unitd Stats. kdeed, both the share of total
putchases reFesnted by seafood and the share of iotal seafood exPenditures
consumer
lepresntd by sllrimP had inaeased dramaticaly during the decade of the 1970s. ShrimP had
become a luxury good, and dmand had hetd up in spite of plice d!s wU in excess of general
inflation. (See Exhibit 3 for yearly fiSures on sales of shrimP.)
By 1979, total sales oI

fd

Thrc were no dominant competitors in Are shrimP Prccessint industry. The la4est
company (Siryleton Shridrp ComPany) had 1979 sates of under $80 mfion. There wer about five
other processors whose sales xceded $30 million. It was somew]rat difficult to get accurate dara on
sales ard profitab ity of the various comPtitors becaus most werc Privatly owned. However,
2of ttr totat sales of $3.6 bitliorr $471 milion

repMted

breaded sniis'p sals.

llZ

2a145r'l

there were two publicly traded companies-Treasure Iste, lnc. ed Ocean Foods, Inc. SuEmary data
fiom the incom statments and balance shets Ior these two companies are shown in Erhibits 4 ,nd
5. According to Dtm and Bladskeet reports, the other large companies in the industry were
rasonably profitable.

OpeEting and Financial lnfomaiion Regarding the Shrimp Processing Plant

Mr. Haris's staff had determind that it would do6t dbout $7.0 milllur to bund an efficientplani If construction wer btun in the first quader of 1980, the plant could be
finishd by the beFnning of 1981. The plant would b located on land which was owned by th City
of Brownsville, Texas, and which wourd be leasd to Harris Sealoods for 99 yeals ar a nominal cost.
However, tlrc company would have to pay p.opelty tr(es at th normal commercial rate. th
company could aiso lease cold stoEge space at GuIf Coast Cold Storate. The latter would have to
xpud its facfitis at a cost of approximaiely 5131,000, but had agred to do so at its own expense iI
size processinS

the plant were

buili

The raw shrixnp to be proceised at the plant were to be puchased on th open rnarket There
i
was
posribiljty
a
that some Hmis Seafoods product would b sold to the plrnt, but givn the fact
I
' that dmand exceeded supply for the shdt:lP company,Iew inrelcompany sales were contemplated.
t--

The principal product to be produced was breaded shrimp. There were quite favorabl
prcjections lor this part of the total shrimp markel particularly dven the fact that breadd shrimp
were significandy less expensive than 6ozen sllrimp when measud on a per?omd basis, The
entire process was automated: machins sortd, peeld, deveined, bradd and pa&ged the shrimp
in a continuous procluction line. Genelaly the breading materials (eggs, milk and $ound crackers)
werc equal in weight to the raw shrimp. However, it the ost of raw shrimp puchased on the open
narket by Harris SeaJoods i{ere $4.31 pr polrn4 the cost to purchas the bleading materials worid
only averag $O.$ pr pound of mterials puclusd.
Marketing would be done by the existing Hanis Sealoods sales organization. There werc

trce kinds

1.

of dstomers:

Food servic brckels-ths caued on institutional food sewice companiei,

national fast food chains and lalge s.hools and hospitals.

2.

Retail blokers-these sold

to retail outlets such as

grocery stors and

supemarket chains.

3.

Direct sales-tlE company felt it could bpass other distriburors and s[ dirtly
to national rsraurant food chaiis sudr as Anhur Treacher, Long john Silver and
Morrison's Cafeteria. The combined usage of processed shrimp by thes tfuee
organizations alone had ben 8.5 hillion pouds in 1979-

In the eady years. it woutd be necessary to invsr heavily in advertising and marketing. The
brand imaSe of the product was an essential contributor to succes.

tuI capacity, th plant would b capable of pioducing 15 milion pounds

yea!.
At
firI
capacity, the labor forc lequircd would total400. The initial production
Fr
and sales plan caled foi first-year ma]mint of 300 v/orkers, viltualy a of whom wodd rcceive
minimum wag. Sals in the lilst year were projecrd to b 5.5 minion pounds (37'16 of capacity).
Wfthin ffve years, it was expectd that sales and th labor force would mov toward the upp! limits.
Whn oprating at

of produci

M!. Hanis had talked to two extremely capable people who rcn processing operatiolrs for
competitors- Boih had expressd a shong intiest in working for Haris Seafoods if ihe Plant wer
built.
Pro fonna data for the processing plant are shown in Exhibits 6 and 7. Th data in Exhibit 6
is Dad in Exhibit 7 tllat the amual inflation Ete wi]l be 11%. The
tust sais for th processing plant were not expected io begin untit 1981. The tax mt on income ftom
the project was expected to be 48'l" (the combined U.S. federal and Texas state tax rate). Any Prodts
or losses from the prcject would be consolidated for tax Pugoses with th Parent comPany's income
statement. Atso, in 1981, Hads Seafoods expected io receive a $650,000 rax credit for the investment
in plant and quipment at the processhg plant.
are

noi innated. The assumpfion

'Ih frmds f,ecessary to finance drc project wte expected to come &om two soulcs: (1)
curent liabiiitis which were gnelaied in tlle normat coulse of busirese--..8., accounts Payable, ajlld
(2) inv6Elertt of Junds by rhe parent coElPa.Ily. Cutrent liabilitis of ihe Processing Plant, comPlised

of accourts payable, tarGs payable, and miscIaneous cunent liabilides, wre exPected io b 9% of
total sales. This figule was low principally bcaus processo.s had to Pay cash for shrimP at most
times during the year.

Mr. Han'is had ben i.Jorrned by the cornpany's investrnent banlcrs that the comPany's
effe.tive interest cost on newly issued long-term dbt would be 13-5%.3 The debt would b retircd in
equal installmmts over a l2-year period from the time of issue.
Over the long run, Mr. Hanis believed total debt (notes Payable Plus cunenr maturities of
long-term debt plus long-teEn debt) slEuld not exceed 307. oI total invsd caPii:] (total debt Plus
shareholders' equity) of $ fim.
There was a possibility that Hanis Seafoods would be abte to issue $70 milion of l2-year
maturity Indushial Revenue Bonds4 to fund lhe invesErcnt in ProPrty, Plant, and equiPment in th
processing plant. These bonds would b dortized h qual installments over th l2-year life of the
bond. Th intrst rate was expected to b 9.5%. Income on this kind of bond was not taxabl to the
buyer of the bond, bur was tax deductible by the jssuer. Thouth the bond would technicalty be
issued by tll hunicipality of Brownsville, Texas, the payment of intercst and ttle rePayment of

principal wodd b made and guaranteed by Harris Safoods.

The lssues
Mr. Harb thought the proiect looked attractiv, but was oncemd that accePting it miSht
reduce the company's high rate of retum on invested caPital. H also wondeed how imPortant the
ability to issue the Indusirial Revenue Bonds was to ihe value of tlte Project

3As of laie February 1980, the plirc Ete wB 15.5%. lf Hdis Seafooab bon@ed from the ba*s, tte effective
cost of fr:nds would be 15%. (See Exhibil 8 for some data on reent trends in the etuohy dd GPiial tukets )
4tn ode to aomge conpdies to inv6t in a local commity, the muiciPality soFelmes alowed filfu to

taxaxdpt muicipal bonds in d d(Mt equal !o the value of the inv6tnat in Property, Plant ad
equipment. Ihe firns wodd pay interes! at the rate aPPrcPriate for tax<xempt bonals rathd than at the higher
rate ;ppropriale for bonds paying interest that rePregted taxable incotu to the buyd. The tax+xemPt mture
of the interest paymots otr Indlstrial Revaue Bonds produced a sitnifi@t lo6s of revdue for the US
Treasu.y. Fo! this reasn the Treasury ws attemPting to lisit the use of this film.ing vehicle. Ptes.ure from
the U.S. Treasury rnade it unlikely that lhG financing altemtive wodd continue to be available in tuhre yed
issue

Exhibit

-}larlis Seafoods, Lrc.-Slectd hcome Statemnt, Balance

Sheer and Share

Perfomae

D^ta, 197 4-'t979 (W00s)

1974

1975

1976

$ 10,245

$ 14,653

19Tl

1978

1979

$20,136

$ 32,619

llncornc StaL.n.Irt
Sales
Cost of goods sold

Grcss profit

$9,232

_EN31 _!,C41
$ 4,045 $ 3,404

$ 6,355

__!60

__-0@

__09

$3,585

$2,754

$ 5,747

373

314

__-353

_-415

Selling, general and adminislralive

Opraling jncome

,!299

409

__&

Otier income

3,464 $2,734
_1,92 _1119
$ 1,767 S r,558
$

Dividends

-1!J91

_p50

11534

6,657 $ 5,975 I 15,085

_111! __-9@ _$S1

$
$

5,4{J3 S 5,069

$ 13,584

s5,908

124
401
649
__599 __!00 _l3A
$ 5,658 $5,134 $ 13,455

$ 3,486

2&

00

$ 15,613

2319 ?J!0

697

_5S55

3,282 $ 2,978

a20

953

$7,810
2,733

Bahl|ca Shaat

240
123
563
799
1,985 3,242
___c5 11!

Cash ard ma*etable secudlies

Other curent assets

Nel propedy, plant and equipmenl

Odrer loneterm assels

Cunent matuitiesjong-tem debt

olhr c.unenl liabilities

Tolal cunenl liaulilies

Oher loog{erm liabilitjss

Long-term debl
Total liabiliths and equity

z,arc

_-0J19

2,612

l@

4,322

7,407 6,106
___4!9 _!!1
$j@ $a390!
I2,662 S 3,007
a7
145
311
4r8
42
35
_=13 __te
$ 3,285 S 3,867
29
34
1,345 1,438

4,008

11,019

_1&
$l.'1!-!9
$ 2,743

2U

440
59

__42
$ 3,788

56

1,fi7

_z-za

sl@ $j@

468
604
952 1,297
5,386 4,213

308
908

lsl1o

623
1,W7

6,332

__14

___302 , 9SA
$ 6.950 $ 6.421 $ 9.24A
12,115 12,566 15,6&l

_--cca

!.a1

$19,945 $20-088

292
$A.g

2,0t3 $ r,007 $ 3,084

1,414 1,364 1,246
543
416
A29
55
59
42
-_& __l9 __g
94.318 $ 3.034 $5.788
71
27
2A
2,636 2,082 1,567
_12l4o -14316 Ap7
$

$19,945 S 20.088

$ 27-404

Shar Data
Hish
Cl06
Shars (000s)

Eamings per share

Pdce to eamings ralio
Beta

13.3a $ 12-13
s7.25 $ 6.75
$ 12.13 $ 10.75
1,831 1,931
$ 0.96
$0.81
$ 0.00
$ 0.00
12.6 13 3
$

$ 18.8E

$26.75

s 12.00

$'t5.50

$ 18.75

$ 18.38

1,940

1,963

$ 1.80
$ 0.36

$ 1.67
$ 0.42

104

11.0

124.63
$15.88
$22.sO

\942
1.50
$ 0.48
15.0
$

$ 32.38
S

21.88

$27.00
2,005
$ 3.90
$ 1.36

6.9
1.25

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241454

Exhibit4

totha

Selcted Income Statement, Balance Sheet and Share Performance Data

ftlsle,

Inc.-197+19n $IXns,

Sales
Gross profit
Selling, generaland administElive

1971

1975

1976

$ 38,587

I32,212

$ 41,588

!4,Ce1

4,@

I3,783

2,697
421
___994

$ (229)

$ 08)
0

Dividends

34,lE

5,384

$ 6,909
3,379

2,Ut
383
__4
899

$ 3,035
_t 4q1

1,01'1

$ 1,571

9,794

1978

58,704

-q-$!
$11,090

4,356 5,352
372
345
__-1@ 44
I4,919 $ 5,092

__Lg

1,909

50.132

!0t3c
s

34

_11t1)

1977

$2,514

80

057

1979

$ 71.457

cs.E?s
$10,587

6,702
866
___9.1-0

2,203.

$2,734

$1264

72

70

Balaica Shaet
62

Cash and markelable securities

2,m7
2,572
__!5C
Nel property, phnt and eqlipnient
Oher lonsFterm assels

$ 5,299
2,851

4t6
____0

$9-@
Noles payable

Clrent maturitiee--longterm

s 2,827

214

debt

863
0

-!@

Olher cunent liabililies

Tolal curent liabilities
Olher long-term liabilities
Long-term debt
Toral liabilities and equity

4,368
206
385

293
2,2U
2,104

___q
$4,738

2,559
100

s 5,609
2,744
444

2,n7
403
_!
-9
92q19 $iJ9?
$ 1,m3 $ 570
30
62
'|,061 457
845 703

-_lc5

$3,514

64
175

429
457
3,772 3,707
4,124 4,251
,_-1?3 -,112
$ 8,476 $ 8,499
2,990 4,197
883 1,581

198

2,752

___0@

$ 2,801
91

266

____s

----0

$12-W V4Af
1475 $ 209
144
164
1,676 1,396
972
100
__l@ -1lg
$ 4,029 $2,973
124
196
705
367

1,@

_-3i02

_4J-05

_5639

@!aq

94919

$ 8,2sf,

$ 7-25
$ 3.25
$ 6.38
640
$ (0.11)

$23.25
$ 12.13
$ 15.53

136.75

$ 27.63

$
$

l-s103

$i2@ $)az

620
3,636
5,058
___929

$10,292

8,7nb
1,660

1E1b
$2 134
g

2,787
695
2,338
0

1@

s 7,023
275

3,302

lll30

$??J.30

Share Data
High

shares (000s)
Eamings per share
Dividends per shre
Price to eahings ralio
Beta

0.00

662
't.53
$ 0.00
10.2

134.25
556
2.83

o.1o
12.1

tPrcfts h 1979 re depEssd by ext'aordnBry hgal dpens6 of $500,000 betoB taresbRefe.ts acquisilid made in 1979.

45.88
28.88
39.12
532
4-73
$ 0.40
8.3

$ 37.88
$ 26.75
S

33.75

512

'U
$ 0.40

6.3

$ 22sa

$ 8.75
$ 10.88
507
2.49
S 0.40
4.4
1.62

Exhibit

Slected Incom Statement, Balance Shet and Share Performance Data fot OceonFoo&,

Inc.-197 4-1979 l$0oos)

1971
lncome Stat

1975

't976

19n

1974

rs79

m.nt

Sales

$12,045

Cost of goods sold

Gross profl
Selling, general and administrative
Deprecialion

lgJs5
2,020

-959
$ 2,602

'1,272

1,n2

300
299

336
368

_t4
s 163

_11

$17,U7

$18,463 $22,549

___e _(33)

56

16

28

148

123
1,247
1,457

182
349
277
1,449 2,073 1,7a1
1,616 2,267 2.321

986

614

__-902

312

527,451

t4,!g 14J50 lls6! 4p11

$ 3,354 $ 4.407 $ 4.884 $ 5.540
1,762 2,053 2,205 2,394
320
419
324
388
360
274
362
337
$ 974 $ 1,624 $2,050
,-4S __lgl __-962
$ 514
$ 842 $ 1,082
51
211
271

_z!
Dividends

$12,461

____0

I2,421
_1,J14
$ 1,307
405

2,361
3,019

B.l.nc. Sh.ct
Cash and martetable securiltes

1,189
1,427

__!a

_p

s 2,912

$ 3,020

Net poperly, plant and equipment

Other long{erm assts

2,57

3.245

_&

_14

2\1 __91

3,542 $ 4,937 $ 4,727

3,455 3,129 3,459
___352 __255 __@

___305

$ 6,020

3,856

__!91

$-1Zl

E-0.?4

$2.!q 9i.9?1 t=q,!!

q4zq

1,28

s1,271

$ 2,OO2
100
1,315

$
Cunenl maludties--long-tem debr

100
1:r8

100
677
177

Olher curent liabilities

___19

_,14

Tolal cunenl liabililies

$ 2.2A3

s2,239

788

u3

375
1,500

2p13
Tolal liabilities and quily

__&

275

1,400

2g

$=L1tJ

$ 6.?29

$ 4.25
$ 3.25

$ 5.00
$ 2.50
$ 4.88

$
$

$
$

1,692 S 1,991 $ 1,395

1o()
100
100
865 1,016 1,081
220
247
230

___l-8 l3

29

327

2t

12,895 $3.367 $2.826 $3.r/1

400
362
359
400
1,300 1,200 1,100 1,000

2f@ !392 _4& _5J.05

$a54 9_8=q21 qa-448 9l!,?20

Share Data
Hish

$
Shares {000s)
Eamings per share
Price to earnings
Bela

10

lato

1.88

0.10
o.o2
31 I

834
0.37
0.03
13.0

$ 6.25
$
$
845
$ 0.61
$ 0.06
8.4

13.25 $ 11.13
6.88 $ 6.75
s 9.38 I 7.38
474
881
$ 0.96 $ 1.23
$ 0.24 $ 0.31
9.7
6.0

$ 12.75
$ 9.25
$ 11.

$ 1.47
$ 0.46
7.6
0.86

?,1451

Exhibit5

Processing Plant

Prcposal-Pro Fortrla Income Statement dd Asst Requiremnts

Projections-198G1986-{% Innation

t!)ao

($000s)

1981 19A2

198/t

lS83

1986

1985

Sales
Pounds (00os)
Price per po0nd (S)

Cost of soods sold

0 5,500
4.75 $ 4.75
$0 $25,125

G.oss profit
Selling. gneral and

0
o

$ 3,297

2,474

____s -,@

Depreciation
Prelax oprating proft

$ (410)

450
o
2,485

Cash

*_a

2,935

7,000
__l-00

Net plant ald equipmnt

Other lonelem assF

10.035

2,176
4,561

15.000

57,119

67,759

l03zc
$ 12,398

6,283 6,437
__213 __1!
i3,220 $ 5,029

,_-099

1355

_rlz8

$ 17,123

317,405

22,080

$ 24,E96

$ 12,825

5,294

6,769

,,!34
S

5,42.

701 $ 713
5,836 5,935
9,767 9,932
_lJq! 1&
$

6,765

1 033
25,203

12,611

6,656

5,737
9,601

I71.25O

_-1

$ 5,162

$ 689

4.75

51rc7 -@M
$

6,5{'

$ 678
5,644
9.446

6,789 6,757
__@ _1,!110

--392

68.875 $ 70.063

12,197

814,4U

6,857

4.75 14.75

t9.562

10,281 t

lle

__8

$ 14,780

14.500 14.750

$ 4.75

4.75

$ 571
4,7*
7,52

s 261

$ 7,521

14,265

!637

___..s -2,@

(exclrdins deprccl{ion}

12,025

17,705

$ 18,005

6,8&
_L051

-l-009

25,560

25,944

6,870

aDouHeclhnE balaic nrihod.

11

Edribit

Plocessing Plant Pioposal-Pro Forma Income Statemnt and Asser Reguiiements

Proiections-1980-1986-11% Infl ation (gtx)os)

1981)

196t

1982

1983

1984

1985

1946

0
4.75

5,500
$ 5.27

12,e5

14,265
$ 6.50

14,500

14,7..fi
$ 8.00

15,000

Sales
Pounds (000s)
Price per pound ($)

$0
Cost of goods sold
(exduding deprccaalion)
Gmss proft
Selling, general and

'Ddbl{dining bdaE rEthod.

12

92,669

19,557

$ 118.059 $133,267

lzJoc

1589

_5J32

_!03@

'1o9.279

$ 3,660

s 12,668

$ 16,680

$ 18,E20

s21,251

$ 23,988

3,190

7,741

8,804

9,933

11,216

12,660

__J4

744

__J@

$8,141

$ s,2a7

$ 10,564

1,046
8,710

1,181

1,333

9,834

11,10.1

16,457

18,577

,lg

t*"

$4,139

2W

7U

2,416

5,862

$;
7,719

2,445

5,063

9,810

12,914

14,575

__a

,-!@

_!pc

_tp!3

_2J91

$ 2,935

$ 8,348

$ 17,784

$ 23,417

7,000

6,9:14

t9

7,21A

$ 26,422
7,535

L050

-1399

-1as
$

70.376

25339

450
0

Nat plant and equiprnent

Ofier longFlerm assets

$8.8a

$0

$0

Cash

28,999

$7.21

____a

____s

Retax opel'iing plbfit

$ 5.85

7,0

435

10,035 $ 15,727

5.859 $ 32,025 $ 35,535

29
$

29,834

2.655
$

33,67/

8.5i1

7,S66

-IJT1
g 39,570

44n87

t
9-6aici6

9qq'1

9!.n@E ci-

q\:6lcll

9!

6"?e'q

d\9n

-!

5
9-tJ6-d

e1\1.!9

!66djrJ6

.9q9.C:q

-\c?.?

99AeA9

!q13 I

9 -+6ci.i
..-

c?1q-':C

@ c'i9Yq
-hio

96ri6cj=

\eA\!'):

dinc2-

e=<riri.i
a

qC.A9e
Foo@ots

6ini;C
96o

;-

6
a

::Eag

616

E
x ,'iEEE C3'i
g
:"

-"E tl
EE

iF:;eE EEj

sbiE

E?gs

ee ?3iFe.ii5i

E+*?$$,s5'gf i i;+F I
;g';$$$ lif iri ts$I PE
otaiti

E E -oE z

9!P!!E
z Eninin

5$cF$$ FCCtC
-.i.tirj@

F.doj o-..i

E:n5.
:9-ez
EE$E
cj!99

3^<