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