Hampton Machine Works Solutions

7/29/2019 Hampton Machine Works Solutions

1/9

Hampton Machine Works

CHG from nov. to Aug Nov-78

Cash 961 2,520

Acct. Receivable 561 Source 1,245

Inventories (2,163) USE 2,601

Current Assets 6,366Gross Fixed Assets - 4,010

Acc. Depreciation 92 (2,998)

Net Fixed Assets 92 Source 1,012

Prepaid Expenses 20 Source 62

Total Assets 7,440

Notes Payable, Banks (1,000) Source -

Accounts Payable (600) Source 348

Accruals 9 Use 561

Taxes Payable (329) Source 150

Customer Advance Payments (726) Source 840

Current Liabilities 1,899

Common Stock 750 1,178

Surplus 1,367 Use 4,363

Total Equity 5,541

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 7,854 1,551 861 672 1,866

COGS 5,052 1,122 474 369 1,362

Gross Profit 2,802 429 387 303 504

SG&A 1,296 248 103 61 205

EBIT 1,506 181 284 242 299

Interest Exp - - 15 15 15

Net Income before taxes 1,506 181 269 227 284

Taxes 723 87 129 109 136

Net Income 783 94 140 118 148

Dividends 50 25

First Step: Cash receipts and cash disbursements

What are Revenues - cash Aug-79 Sep-79 Oct-79 Nov-79 Dec-79


2/9

Shipments 2,163 1,505 1,604 2,265

less: gen. aircraft (840) (726)

SALES New Monthly Sales billed 1,323 779 1,604 2,265

pp A/R 684 1,323 779 1,604 2,265

plus billings/new sales

CASH less collections 684 1,323 779 1,604Equals: Ending A/R 1,323 779 1,604 2,265

Aug-79 Sep-79 Oct-79 Nov-79 Dec-79

Purchases 600 600 600 600

PP Accts. Payable 948 600 600 600

CASH payments on A/P 948 600 600 600

Ending A/P balance 948 600 600 600 600


3/9

Dec-78 Mar-79 Jun-79 Jul-79 Aug-79 12/31/1979

491 505 1,152 1,678 1,559 Cash (331)

1,863 1,971 1,893 1,269 684 A/R 2,265

28 3,474 3,276 3,624 4,764 Inv. 3,024

2,382 5,950 6,321 6,571 7,007 CA 4,9584,010 4,010 4,010 4,010 4,010 Gross PPE 4,360

(3,010) (3,040) (3,070) (3,080) (3,090) Acc. Dep. (3,137)

1,000 970 940 930 920 Net PPE 1,223

40 39 24 24 42 Ppd Exp. 42

3,422 6,959 7,285 7,525 7,969 TA 6,223

1,000 1,000 1,000 1,000 1,000 N/P -

371 681 399 621 948 A/P 600

777 849 678 585 552 Accruals 552

74 373 354 407 479 Tax paybl 888

1,040 1,040 1,566 1,566 1,566 Cust. Adv -

3,262 3,943 3,997 4,179 4,545 CL 2,040

428 428 428 428 428 Com. Stk 428

2,182 2,588 2,860 2,918 2,996 Surplus 3,754

2,610 3,016 3,288 3,346 3,424 Tot. Eq 4,182

5,872 6,959 7,285 7,525 7,969 TL & E 6,223

Apr-79 May-79 Jun-79 Jul-79 Aug-79 Aug-79 12/31/1979

1 mos 1 mos 1 mos 1 mos 1 mos 8 mos 4 Mos

1,566 873 1,620 723 507 8,688 Net Sales 7,537

1,137 567 1,197 510 276 5,892 4,187

429 306 423 213 231 2,796 3,350

172 96 130 87 66 920 1,600

257 210 293 126 165 1,876 EBIT 1,750

15 15 15 15 15 120 70

242 195 278 111 150 1,756 1,680

116 94 133 53 72 842 771

126 101 145 58 78 914 Net Incom 908

100 100 150

758

*** NOT APPLES to APPLES

COGS Calculation not included in SGA above

Jan-80 WIP inv. Used 1,320


4/9

Plus Raw Mat used 420

Plus 4 mos Purchases 2400 4*600

(1,566)

Est. of Inv. Used/COGs 4,140

2,265 INTEREST EXPENSE- Depr. Expense = old equip depr. + new

Old is $10 per month

New is $350,000 @ 8 yr SL deprecation

Jan-80 43.8 annual depr.

3.6 monthly

7.3 two months depr.

600 Total depr. For 4 months 47.3

This should be added to COGS/or SGA

600

-

Beginning Inv. 4,764

Less: WIP used (1,320)

Less: RM used (420)

Ending Inventory 3,024


5/9

What Can we Do to improve cash position?

PLUG FIGURE

Dec. shipments defer proposed $100k dividend

restructure loan request to pay one-half350k in capex of balance in Dec. and rest in Jan. '1980

8/79 plus 4 mos depr below

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

Stretch payables slightly or encourage

Unchanged per case customers to pay faster possibly with

479-181-181+771 discount of less than 0.75% 10 days,

paid off as prod. Shipped net 30

PY = NI - div

Shipments 4 mos

see below

400*4 pgs 64 parag. 2

48% tax rate with $35k ITC

CHG to Retained Earnings


6/9

Sep-79 Oct-79 Nov-79 Dec-79 Jan-80

Receipts

Collections of Accounts Receivable 684 1,323 779 1,604 2,265

Bank Loan Proceeds 350

Total Cash Inflows/Sources 684 1,673 779 1,604 2,265

Expenditures/uses

Accounts Payable payments 948 600 600 600 600

Other Operating Outlays 400 400 400 400 400

Capital Expenditures 350

Tax Payments 181 181

Interest Payments

original 1.0mm loan 15 15 15 15 -

new 350k loan - - 5 5 -

Principal Payments on Loans - - - 1,350

Dividends 150

Total Cash Outflow 1,544 1,365 1,020 2,701 1,000

NET CASH Inflow/(Outflow) (860) 308 (241) (1,097) 1,265

Beginning Cash Balance 1,559 699 1,007 766 (331)

Ending Cash Balance 699 1,007 766 (331) 934


7/9

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


8/9

Hampton Machine Works

question 7

$1,178,000 Year end 1978 Common Stock ($10 Par Value)

10 Divided by Par Value

Equals117,800 Number of Shares before repurchase

$3,000,000 Purchase Price for 75,000 shares

75000

40.00$ Value Per Share

63.7% % Ownership of 75,000 shares

Implied Value of the Equity (100%)

4,712,000$ 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

1,712,000$ Implied Value of the Equity

"After" the transaction aka "Post Money"

EBIT 1978 1506

EBITDA 1978 1598


9/9

ENTERPRISE VALUE = VALUE OF EQUITY + DEBT (NET)

ACTUAL Implied ValueDec-78 Dec-79

DEBT 1,000$ 0

Value of

Equity 1,712$ 3,149$

Enteprise

Value 2,712$ 3,149$

Multiple

of EBIT 1.80 x 1.8 x

Multiple of

EBITDA 1.70 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

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Hampton Machine Works Solutions