Eskimo Pie Case SOLUTION

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Question attached

  

 

       

       

   

 

         

   Year Ended December 31,   

  

19891990 

       

 

  

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

(88)

 

   

 

   

96

 

 

 

	Year Ended December 31,
	1989		1990
Exhibit 1     Historical Financial Information
$                  2,422	$                 2,526
1,006	1,352	1987	1988
175	118
250	(58)	Income Statement Data (in thousands):
(154)	(156)	Net salesa	$ 30,769	$ 36,695	$ 46,709	$ 47,198
1,212	(734)	Cost of goods sold	21,650	25,635	31,957	31,780
Gross profita	9,119	11,060	14,752	15,418
(524)	(51)	Advertising and sales promotions	4,742	4,241	5,030	5,130
2,054	(621)	General and administrative	6,068	5,403	6,394	7,063
Operating income (loss)	(1,691)	1,416	3,328	3,225
143	3,006	Interest income	308	550	801	1,004
6,595	5,382	Interest expense		(88)	(107)	(67)
Other income (expense)-netb	1,738	(77)	(108)	(20)
Income taxes	729	1,511	1,616
(2,358)	(1,311)	Net income	$     171	$   1,053	$   2,422	$   2,526

Sheet1

Year Ended December 31, Exhibit 1 Historical Financial Information

1989 1990

Year Ended December 31,

1987 1988 1989 1990 Year Ended December 31,

Income Statement Data (in thousands):

Net salesa $ 30,769 $ 36,695 $ 46,709 $ 47,198

1

Cost of goods sold 21,650 25,635 31,957 31,780

Gross profita 9,119 11,060 14,752 15,418

Advertising and sales promotions 4,742 4,241 5,030 5,130

Interest income

General and administrative 6,068 5,403 6,394 7,063

Interest expense

(88)

Operating income (loss) (1,691) 1,416 3,328 3,225

income (expense)

netb

Interest income 308 550 801 1,004

Income taxes 96

Interest expense (88) (107) (88) (67)

40.00% 40.00%

Net income

$ 2,422 $ 2,526 Other income (expense)-netb 1,738 (77) (108) (20)

Net income

Income taxes 96 729 1,511 1,616

Net income $ 171 $ 1,053 $ 2,422 $ 2,526

Other

.00

3,316.00

Balance Sheet Data (in thousands):

Cash $ 5,550 $ 8,109

$ 13,191

Working capital 9,342 11,107 10,830 11,735

(1,327) Total assets 20,857 23,006 26,159 29,518

(175) Long-term debt 1,269 1,094 919 744

(1,502) Stockholders’ equity 16,162 17,215 18,215 19,496

3,316 3,316 3,316 3,316

8,109 10,723 Per Share Data:

$ 10,723 $ 13,191 Weighted average number

– –

$ 0.40 of common shares outstanding 3,316 3,316 3,316 3,316

Net income per share $ 0.05 $ 0.32 $ 0.73 $ 0.76
Cash dividend per share – – $ 0.40 $ 0.40
Exhibit 6 Projected Income Statements for Eskimo Pie by Goldman Sachsa bIncludes the gain on sale of building of approximately $1,700,000 in 1987.

Year Ended December 31,

1991 1992 1993

Net Sales $56,655 $59,228

4.52

Operating expenses 52,610 54,755 55,337

Operating income (EBIT) 4,045 4,473 4,624

Interest income 828 890 1,058

3,316 3,316

Interest expense 52.5 38.5 24.5

Pretax income 4,821 5,324 5,657

Income taxes 1,928 2,130 2,263

$ 3,749

Tax rate 40.00% 40.00% 40.00%

Net income $2,893 $3,195 $3,394

Margin 5.10% 5.40% 5.70%

Earning per share $0.87 $0.96 $1.03

2,789

Average shares outstanding 3,316.00 3,316.00 3,316.00

14.00 16.00

Special dividend 4.52 4.52
Total per share 18.52 20.52

	Exhibit 1 Historical Financial Information
				Year Ended December 31,
		1989			1990
	1987		1988	Operating activities:		Exhibit 6 Projected Income Statements for Eskimo Pie by Goldman Sachsa
				Net income			$ 2,422			$ 2,526
	Income Statement Data (in thousands):	Depreciation	1,006	1,352
	Net salesa		$ 30,769		$ 36,695		$ 46,709		$ 47,198	Amortization	175	118		1991		1992		1993
	Cost of goods sold		21,650		25,635		31,957		31,780	Deferred income taxes	250	(58)
	Gross profita		9,119		11,060		14,752		15,418	Pension liability and other	(154)	(156)		Net Sales		$56,655		$59,228	$59,		96
	Advertising and sales promotions		4,742		4,241		5,030		5,130	Decrease (increase) in receivables	1,212	(734)		Operating expenses		52,610		54,755		55,337
	General and administrative		6,068		5,403		6,394		7,063	Decrease (increase) in inventories and
	Operating income (EBIT)		4,045		4,473		4,624
	Operating income (loss)		(1,691)		1,416		3,328		3,225	prepaid expenses	(524)	(51)				Interest income		828		890		1,058
	308		550		801		1,004	Increase (decrease) in payables to parent	2,054	(621)				Interest expense		52.5		38.5		24.5
			(88)		(107)		(67)	Increase (decrease) in accounts payable and
	Pretax income		4,821		5,324		5,657
		Other				–		1,738		(77)		(108)		(20)	accrued expenses	143	3,006				Income taxes		1,928		2,130		2,263
	729		1,511		1,616	Net cash provided by operating activities	6,595	5,382		Tax rate						40.00%
	$ 171		$ 1,053
	$2,893		$3,195		$3,394
Investing activities		Margin		5.10%		5.40%		5.70%
	Balance Sheet Data (in thousands):	Capital expendituresa	(2,358)	(1,311)		Earning per share		$0.87		$0.96		$1.03
	Cash		$ 5,550		$	8,109		$	10,723			$ 13,191	(121)	(101)		Average shares outstanding													3,316			3,3	16.00
	Working capital		9,342		11,107		10,830		11,735	Net cash used in investing activities	(2,479)	(1,412)
	Total assets		20,857		23,006		26,159		29,518	$ 10,723
	Long-term debt		1,269		1,094		919		744	Financing activities
	Stockholders’ equity		16,162		17,215		18,215		19,496	Cash dividends		(1,327)
Principal payments on long-term debt		(175)
	Per Share Data:	Net cash used in financing activities		(1,502)
	Weighted average number	Increase (decrease) in cash and cash equivalents	2,614	2,468
	of common shares outstanding	Cash and cash equivalents at beginning of year
	Net income per share		$ 0.05		$ 0.32		$ 0.73		$ 0.76	Cash and cash equivalents at end of year
	Cash dividend per share				$ 0.40
	bIncludes the gain on sale of building of approximately $1,700,000 in 1987.
Exhibit 7 Hypothetical Proceeds from an Initial Public Offering
Total for firm:
Offer Price	$	14.00	$ 16.00
$59,961		Special dividend				4.52
	Total per share	$	18.52	$	20.52
Shares outstandinga
Total Proceedsa	$ 61,412	$ 68,044
1991 Net Incomea		$ 3,749
Implied P/E Multiple	12.38	14.15
Reynolds’ proceeds:
Shares owneda		2,789
Per share proceeds:
Stock price
Total for holdingsa	51, 645	57,222

Sheet2

Sheet3