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 Cos
t of goods sold: Beginning inventory Purchases $1,697 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
$183 $1,278 $1,461 Ending inventory $239 Total cost of goods sold $1,222 Gross P
rofit $475 Operating expenses $425 Interest expense $13 Net income before income
taxes $37 Provision for income taxes $6 Net income $31
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, $8
5,000 in 1989, $95,000 in 1990, and $22,000 in the first quarter of 1991. Mr. Bu
tler 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 Ma
rch 31, 1991 (thousands of dollars) 1st Qrtr 1988 1989 1990 1991 Cash Accounts r
eceivable, net Inventory Current assets Property, net Total assets Notes payable
, bank Notes payable, Mr. Stark Notes payable, trade Accounts payable Accrued ex
penses 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 $14
6 $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% 1
1.0% 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 g
oods sold Operating expenses Cash Accounts receivable Inventory Fixed assets (ne
t) Total assets Percent of total assets Current liabilities Long-term liabilitie
s Equity Current ratio Return on sales (margin) Return on assets Return on equit
y Sustainable Growth: Margin Asset Turnover Leverage (using bop equity) Retentio
n 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 doll
ars) 1988 to 1989 1989 to 1990 Sources of Funds: Retained Earnings $34 $44 Decre
ase 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: I
ncrease in Accounts Receivable Increase in Inventory Increase in Fixed Asset Acc
ount 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 doll
ars) 1988 to 1989 1989 to 1990 1988 to 1990 Cash From Operations: Retained Earni
ngs (=WC from Operations) $34 $44 $78 Less: Change in Nonfinancial working capit
al $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 Cha
nge 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 Average Daily Sales $4,649 Average
Collection Period: (AR Days) 37 Inventory Turnover 5.11 Average Daily Purchases
$3,501 Days of Inventory 68 Days of Payables (Trade Notes and Accounts)35 Days
Cash to Cash: 70 Increase in AR due to Increased Average Collection Period: Incr
eased 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 Activ
ity: 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
$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 o
f goods sold: Beginning inventory Purchases Ending inventory Total cost of goods
sold Gross Profit Operating expenses Operating Profit Purchase Discounts* Inter
est expense** Net income before income taxes Provision for income taxes Net inco
me $ 3,600 $418 $2,736 $3,154 $562 $2,592 $1,008 $900 $108 $42 $53 $97 $21 $76 $
Assumptions Value 3,600
76%
72% 25% 2% 10.50% 34%
*Assume purchase discounts of 2% taken on all purchases after April 1, 1991. **1
0.5% 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 A
ssets $1,048 Property, net $216 Total Assets $1,264 Liabilities: Accounts payabl
e Accrued expenses Long-term debt, current portion Bank note payable (plug) Curr
ent Liabilities Long-term debt Total Liabilities Net worth Total Liabilities plu
s net worth
1.50% 12%
6%
$
$75 $54 7 $661 $797 $43 $840 $424 $1,264
$
10 1.50% 7
Asset - (TL+NW except for Bank note)
$661
LER LUMBER COMPANY
Assumptions Explanation given in case from Ex 1 historical % of sales computed v
alue (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 computed plug valu
e computed value computed value
ROA ROE ROBE
5.99% 17.87% 21.76%
computed value
BUTLER LUMBER COMPANY
Projected income statement for 1991 (thousands of dollars) 1991 Net sales Cost o
f goods sold: Beginning inventory Purchases Ending inventory Total cost of goods
sold Gross Profit Operating expenses Operating Profit Purchase Discounts* Inter
est expense** Net income before income taxes Provision for income taxes Net inco
me $
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 pu
rch 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. **1
0.5% 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 Ass
ets Liabilities: Accounts payable Accrued expenses Long-term debt, current porti
on 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% recen
t % of sales
$
10 days of purchases 1.50% historical % of sales 7 constant amortization compute
d plug value computed value computed value
ROA ROE ROBE
#DIV/0! #DIV/0! #DIV/0!
Asset - (TL+NW except for Bank note)
$
-
computed value