Tire City

Harvard Business School Case #297-091

Case Software #XLS092

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Exhibit 1 Financial Statements for Tire City, Inc.

For years ending 12/31 1993 1994 1995 1996 1997

INCOME STATEMENT

Net sales 16,230 20,355 23,505 28,206 33,847

Cost of sales 9,430 11,898 13,612 16,416 19,699
Gross profit 6,800 8,457 9,893 11,790 14,148
Selling, general, and administrative expenses
5,195 6,352 7,471 8,941 10,729
Depreciation 160 180 213 213 333
Net interest expense 119 106 94 100 139
Pre-tax income 1,326 1,819 2,115 2,536 2,946
Income taxes 546 822 925 1,101 1,279
Net income 780 997 1,190 1,435 1,668

Dividends 155 200 240 287 334

BALANCE SHEET

Assets
Cash 508 609 706 846 1,015
Accounts receivable 2,545 3,095 3,652 4,372 5,246
Inventories 1,630 1,838 2,190 1,625 3,148
Total current assets 4,683 5,542 6,548 6,843 9,409

Gross plant & equipment 3,232 3,795 4,163 6,163 6,563

Accumulated depreciation 1,335 1,515 1,728 1,941 2,274
Net plant & equipment 1,897 2,280 2,435 4,222 4,289

Total assets 6,580 7,822 8,983 11,065 13,698

LIABILITIES

Current maturities of
long-term debt 125 125 125 125 125
Bank Debt - - - 372 1,041
Accounts payable 1,042 1,325 1,440 1,805 2,166
Accrued expenses 1,145 1,432 1,653 1,974 2,369
Total current liabilities 2,312 2,882 3,218 4,277 5,701

Long-term debt 1,000 875 750 625 500

Common stock 1,135 1,135 1,135 1,135 1,135

Retained earnings 2,133 2,930 3,880 5,028 6,362
Total shareholders’ equity 3,268 4,065 5,015 6,163 7,497

Total liabilities 6,580 7,822 8,983 11,065 13,699

Difference b/w to tal assets and total liabilities 0 0 0 0 0

RATIOS:

Short-term Solvency/ Liqudidty Ratios

Current Ratio 2.03 1.92 2.03 1.60 1.65
Quick Ratio 1.32 1.29 1.35 1.22 1.10
Cash Ratio 0.22 0.21 0.22 0.20 0.18
Net Working Capital to Total Assets 0.36 0.34 0.37 0.23 0.27

Long-term Solvency Ratios

Total Debt Ratio 0.15 0.11 0.08 0.06 0.04
Debt-Equity Ratio 0.31 0.22 0.15 0.10 0.07
Times Interest Earned 12.14 18.16 23.50 26.40 22.13
Cash Coverage 13.49 19.86 25.77 28.53 24.52

Asset Management or Turnover measures

Inventory Turnover 5.79 6.86 6.76 8.61 8.25
Receivables Turnover 6.38 7.22 6.97 7.03 7.04
Asset Turnover 2.47 2.60 2.62 2.55 2.47

Profitability Measures
Gross Profit Ratio 41.90% 41.55% 42.09% 41.80% 41.80%
Operating Profit Ratio 8.90% 9.46% 9.40% 9.34% 9.12%
Net Profit Ratio 4.81% 4.90% 5.06% 5.09% 4.93%
Dividend Payout Ratio 19.87% 20.06% 20.17% 20.00% 20.00%

Return on Assets 11.85% 12.75% 13.25% 12.97% 12.17%

Return on Equity 23.87% 24.53% 23.73% 23.29% 22.24%
Return on Capital employed 33.86% 38.97% 38.32% 38.83% 38.58%
 Comments

Take average of the 3 years to get the percentage increase - 58.2%

31.7% of sales
2400 is the warehouse total cost
Take an average of (875+750) to get your current principal for 1995 and (750+625) for 1996

Take average of the 3 years to get the percentage - 43.4%

Take average of the 3 years to get the percentage - 20%

3% of sales
Take average of the 3 years to get the percentage - 15.5% of sales
9.3% of sales
Take average of the 3 years to get the percentage - 6.4% of sales
7% of sales