Clarkson Lumber Harvard Business Case

1
Income Statement
1993 1994 1995 1996 change
Net Sales 2,921 3,477 4,519 4,519 0%

COGS Beginning Inventory 330 337 432 587

Purchases 2209 2729 3579 2849
2,539 3,066 4,011 3,436
Ending Inventory 337 432 587 574
Total COGS 2,202 2,634 3,424 3,424 0%

Gross Profit 719 843 1,095 1,095

Operating Expense 622 717 940 936 0%
Operating profit EBIT 97 126 155 159
Interest Expense 23 42 56 67 20%
NOPAT 74 84 99 92
Income tax 14 16 22 22
Net Income 60 68 77 70 -9%

*assumumption interest expense 1996: calculated using interest paying liability*avg interest rate 1996 (11%)

Balance Sheet
1993 1994 1995 1996
Cash 43 52 56 56 0
Account Receivable (net) 306 411 606 570 -0.059266
Inventory 337 432 587 574 -0.021752
Current Assets 686 895 1249 1200 -0.038978
PPE 233 262 388 364 -0.061189
Total Asset 919 1157 1637 1565 -0.044242

prime +2 Note payable bank @P+2 0 60 390 399

@11% Note Payable to Holtz, current 0 100 100 0
Note Payable Trade 0 0 127 127
Account Payable 213 340 376 376
Accrued Expenses 42 45 75 75
10% balance 10,000 Term Loan @10% semi annual 20 20 20 20
current liability 275 565 1088 988
10% balance 10,000 Term Loan @10% semi annual 140 120 100 100
Note payable to Holtz, long 0 100 0 0
Total Liability 415 785 1188 1088
Clarkson Equity 504 372 449 449

EFN 28
Case Assignment 1
Industry Average
Percent of Sales 1993 1994 1995 avg 2 year Avg Low P High P
Cost of Goods 75.4% 75.8% 75.8% 75.6% 75.8% 76.9 75.1
Operating Expense 21.3% 20.6% 20.8% 20.9% 20.7% 22.0 20.6
Cash 1.5% 1.5% 1.2% 1.4% 1.4% 1.3 1.1
Account Receivable 10.5% 11.8% 13.4% 11.9% 12.6% 13.7 12.4
Inventory 11.5% 12.4% 13.0% 12.3% 12.7% 12.0 11.6
Fixed Asset 8.0% 7.5% 8.6% 8.0% 8.1% 12.1 9.2
Total Asset 31.5% 33.3% 36.2% 33.7% 34.8% 39.1 34.3

Percent of Total Asset

Current Liabilities 29.9% 48.8% 66.5% 48.4% 57.6% 52.7 29.2
Long term Liabilities 15.2% 19.0% 6.1% 13.5% 12.6% 34.8 16.0
Equity 54.8% 32.2% 27.4% 38.1% 29.8% 12.5 54.8

Current Ratio 249.5% 158.4% 114.8% 174.2% 136.6% 1.3 2.5

Return on Sales 2.1% 2.0% 1.7% 1.9% 1.8% 0.0 0.0
Return on Assets 6.5% 5.9% 4.7% 5.7% 5.3% 0.0 0.1
Return on Equity 11.9% 18.3% 17.1% 15.8% 17.7% -0.1 0.2

Balance Sheet
1993 1994 1995 1996
Cash 43 52 56 56
Account Receivable (net) 306 411 606 694
Inventory 337 432 587 699
Current Assets 686 895 1249 1449
PPE 233 262 388 443
Total Asset 919 1157 1637 1892
current liability 275 565 1088 1338
Long Term Liability 140 120 100 100
0 100 0 -
Total Liability 415 785 1188 1438
Clarkson Equity 504 372 449 449

EFN 5
Statement of Cash Flow
1993 1994 1995 1996
Operating
Net Income 68 77 70

Account Receivable -105 -195 36

Note Payable Trade 0 127 0
Account Payable 127 36 0
Accrued Expenses 3 30 0
Inventory -95 -155 13

Net Cash From Operating -2 -80 119

Investing

PPE -29 -126 24

Net Cash from Investing -29 -126 23.74144

Financing

Notes Payable Bank 60 330 9

Notes Pyable Holtz Current 0 -100
Notes Payable Holtz Long -100 0
Term Loan 0 0 0
Long term Loan -20 -20 0
Net Cash From Financing 40 210 -91

Increase/Decrease in Cash 9 4 52
Beginning of the year 43 52 56
End of Year 43 52 56 108

change in net working capital

1993 1994 1995 Q1
current asset excluding cash 643 843 1193 1144.317
current liability 275 565 1088 988
Net working capital 368 278 105 156.3167
change -90 -173 51.31665

Average
COGS 3,424 Inv. turn 6.720314 54.31294 Days in Inv.
Inventory 509.5 AR turn 7.86234 46.42384 Days in AR
Net Sales 3998 AP turn 10 38.16297 Days in AP
AR 508.5
AP 358
0.171492
Clarkson Lumber Harvard Business Case

Income Statement Statement of Cash Flow

1993 1994 1995 Q1
Net Sales 2,921 3,477 4,519 1,062 Operating
Net Income
COGS Beginning Inventory 330 337 432 587
Purchases 2209 2729 3579 819 Account Receivable
2,539 3,066 4,011 1,406 Note Payable Trade
Ending Inventory 337 432 587 607 Account Payable
Total COGS 2,202 2,634 3,424 799 Accrued Expenses
Inventory
Gross Profit 719 843 1,095 263
Operating Expense 622 717 940 244 Net Cash From Operating
Operating pEBIT 97 126 155 19
Interest Expense 23 42 56 13 Investing
NOPAT 74 84 99 6
Income tax 14 16 22 1 PPE
Net Income 60 68 77 5 Net Cash from Investing

Financing

Balance Sheet Notes Payable Bank

1993 1994 1995 Q1 Notes Pyable Holtz Current
Cash 43 52 56 53 Notes Payable Holtz Long
Account Receivable (net) 306 411 606 583 Term Loan
Inventory 337 432 587 607 Long term Loan
Current Assets 686 895 1249 1243 Net Cash From Financing
PPE 233 262 388 384
Total Asset 919 1157 1637 1627 Increase/Decrease in Cash
Beginning of the year
prime +2 Note payable bank @P+2 0 60 390 399 End of Year
@11% Note Payable to Holtz, current 0 100 100 100
Note Payable Trade 0 0 127 123 change in net working capita
Account Payable 213 340 376 364
Accrued Expenses 42 45 75 67 current asset excluding cash
10% balancTerm Loan @10% semi annual 20 20 20 20 current liability
current liability 275 565 1088 1073 Net working capital
10% balancTerm Loan @10% semi annual 140 120 100 100 change
Note payable to Holtz, long 0 100 0 0
Total Liability 415 785 1188 1173
Clarkson Equity 504 372 449 454

Case Assignment 1
Industry Average
Percent of 1993 1994 1995 avg 2 year Avg Low P High P
Cost of Go 75.4% 75.8% 75.8% 75.6% 75.8% 76.9 75.1
Operating 21.3% 20.6% 20.8% 20.9% 20.7% 22.0 20.6
Cash 1.5% 1.5% 1.2% 1.4% 1.4% 1.3 1.1
Account Re10.5% 11.8% 13.4% 11.9% 12.6% 13.7 12.4
Inventory 11.5% 12.4% 13.0% 12.3% 12.7% 12.0 11.6
Fixed Asset8.0% 7.5% 8.6% 8.0% 8.1% 12.1 9.2
Total Asset31.5% 33.3% 36.2% 33.7% 34.8% 39.1 34.3

Percent of Total Asset

Current Liab
29.9% 48.8% 66.5% 48.4% 57.6% 52.7 29.2
Long term L15.2% 19.0% 6.1% 13.5% 12.6% 34.8 16.0
Equity 54.8% 32.2% 27.4% 38.1% 29.8% 12.5 54.8

Current Rat249.5% 158.4% 114.8% 174.2% 136.6% 1.3 2.5

Return on 2.1% 2.0% 1.7% 1.9% 1.8% 0.0 0.0
Return on 6.5% 5.9% 4.7% 5.7% 5.3% 0.0 0.1
Return on 11.9% 18.3% 17.1% 15.8% 17.7% -0.1 0.2

Balance Sheet
1993 1994 1995 change
Cash 43 52 56
Account Receivable (net) 306 411 606
Inventory 337 432 587 COGS
Current Assets 686 895 1249
PPE 233 262 388
Total Asset 919 1157 1637

Note payable bank @P+2 0 60 390

Note Payable to Holtz, current 0 100 100
Note Payable Trade 0 0 127
Account Payable 213 340 98 -278 Operating p
Accrued Expenses 42 45 75
Term Loan @10% semi annual 20 20 20
current liability 275 565 810
Term Loan @10% semi annual 140 120 100
Note payable to Holtz, long 0 100 0
Total Liability 415 785 910
Clarkson Equity 504 372 449

EFN 278
Statement of Cash Flow
1993 1994 1995 Q1

Net Income 68 77 5

Account Receivable -105 -195 23

Note Payable Trade 0 127 -4
Account Payable 127 36 -12
Accrued Expenses 3 30 -8
-95 -155 -20

Net Cash From Operating -2 -80 -16

-29 -126 4
Net Cash from Investing -29 -126 4

Notes Payable Bank 60 330 9

Notes Pyable Holtz Current 0 0
Notes Payable Holtz Long -100 0
Term Loan 0 0 0
Long term Loan -20 -20 0
Net Cash From Financing 40 210 9

Increase/Decrease in Cash 9 4 -3
Beginning of the year 43 52 56
End of Year 43 52 56

change in net working capital

1993 1994 1995 Q1
current asset excluding cash 643 843 1193 1190
current liability 275 565 1088 1073
Net working capital 368 278 105 117
-90 -173 12

Average
Purchases 3154 Inv. turn 6.190383 58.96243 Days in Inv.
Inventory 509.5 AR turn 7.86234 46.42384 Days in AR
Net Sales 3998 AP turn 9 41.42993 Days in AP
AR 508.5 want AP turnover to be 36.5
AP 358
Income Statement
1993 1994 1995 Change
Net Sales 2,921 3,477 4,519

Beginning Inventory 330 337 432

Purchases 2209 2729 3579
2,539 3,066 4,011
Ending Inventory 337 432 587
Total COGS 2,202 2,634 3,356 -68

Gross Profit 719 843 1,163

Operating Expense 622 717 940
EBIT 97 126 223
Interest Expense 23 42 56
NOPAT 74 84 167
Income tax 14 16 22
Net Income 60 68 145 68