Professional Documents
Culture Documents
Exhibit 1
Income Statement for the year ending Decemeber 31, 2000
(thousands of Italian liras)
Revenues
Private brand
Premium brand
56,112,408
9,934,848
46,177,560
33,233,867
22,878,541
Marketing expenses
R&D expenses
Selling expenses
Administrative expenses
Interest expense
4,155,980
3,328,130
3,574,710
4,752,000
3,825,000
Research_1997
Selling_1997
Admin_1997
Interest_1997
Profits
Taxes (40%)
Net profit
3,242,721
1,297,088
1,945,632
Depreciation
2,593,700 ROE
ROA
23.75%
15.83%
Cash
Raw material inventory
Finished goods (174,000 kg.)
Accounts Receivable
1,121,450
2,907,963
1,148,400
9,368,467
42,374,000
(12,267,080)
Total assets
44,653,200
Page 1
Accounts payable
Credit line
Long term debt
Equity
Total liabilities
0.13
ROS
1.2566268
Asset turnover
d Shareholders' Equity
487,331
25,000,000
10,000,000
9,165,869
44,653,200
Page 2
Exhibit 2
Quality
Prices per kilogram
VOLUME (kg.)
Advertising /Sales
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
D
Price_private_brand
8,800
6,000,000
BB
AA
AAA
19,500
26,600
30,000
35,500
39,000
42,600
2,395,000
2,455,000
2,545,000
2,665,000
2,800,000
2,950,000
3,130,000
3,196,000
3,268,000
3,310,000
3,340,000
1,645,000
1,696,000
1,720,700
1,896,000
2,024,000
2,166,000
2,367,000
2,417,000
2,446,000
2,465,000
2,494,000
1,529,000
1,566,000
1,649,000
1,760,000
1,884,000
2,022,000
2,157,000
2,195,000
2,231,000
2,258,000
2,286,000
1,103,000
1,145,000
1,226,000
1,334,000
1,456,000
1,591,000
1,723,000
1,792,000
1,823,000
1,837,000
1,843,000
667,000
717,000
799,000
910,000
1,034,000
1,172,000
1,307,000
1,345,000
1,366,000
1,495,000
1,523,000
127,000
157,000
229,000
325,000
433,000
553,000
667,000
694,000
752,000
875,000
935,000
Page 3
Exhibit 3
Quality
Prices per kilogram
D
8,800
C
19,500
B
26,600
BB
30,000
A
35,500
AA
39,000
AAA
42,600
Variable_private_brand
Unit cost (liras)
6,600
12,485
Fixed costs (th. of liras)*
3,319,500
4,100,500
Fixed_private_brand
14,275
4,100,500
16,288
4,100,500
17,791
4,100,500
19,166
4,100,500
20,441
4,100,500
24,526
21,109
19,401
18,376
17,692
17,204
16,838
16,553
16,325
16,139
15,984
15,852
26,539
23,122
21,414
20,389
19,705
19,217
18,851
18,566
18,338
18,152
17,997
28,042
24,625
22,917
21,892
21,208
20,720
20,354
20,069
19,841
29,417
26,000
24,292
23,267
22,583
22,095
21,729
30,692
27,275
25,567
24,542
Volume (kg.)
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
2,200,000
2,400,000
2,600,000
2,800,000
3,000,000
3,200,000
3,400,000
6,000,000
14,899
12,133
10,749
9,920
9,366
8,971
8,675
8,444
8,260
8,109
7,983
7,877
7,786
7,707
7,637
7,576
7,153
22,736
19,319
17,611
16,586
15,902
15,414
15,048
14,763
14,535
14,349
14,194
14,062
13,949
13,852
13,766
13,691
* Fixed costs for premium coffees include private brand fixed costs.
Page 4
Exhibit 4
Year 2000
January
February
March
April
May
June
July
August
September
October
November
December
average price
1,196,000
8.62
38.61
100.0%
Page 5
ASSUMPTION = the ending FG inventory in the 2000 BS is all private brand coffee
Beginning inventory Production
January
February
March
April
May
June
July
August
September
October
November
December
174,000
248,000
208,000
90,000
338,000
640,000
732,000
446,000
220,000
500,000
500,000
500,000
450,000
486,000
390,000
500,000
500,000
500,000
500,000
500,000
500,000
2000 Actual
Sales Percent
Sales
Ending inventory
426,000
540,000
708,000
450,000
486,000
300,000
252,000
198,000
408,000
786,000
726,000
720,000
7.1%
9.0%
11.8%
7.5%
8.1%
5.0%
4.2%
3.3%
6.8%
13.1%
12.1%
12.0%
6,000,000
100.0%
248,000
208,000
90,000
338,000
640,000
732,000
446,000
220,000
-
674,000
748,000
708,000
450,000
486,000
390,000
590,000
838,000
1,140,000
1,232,000
946,000
8,800
ASSUMPTIONS
52,800,000 = 6 million kgs X 8,800 L (from ex. 2). Expected level of sales = 6 million kg
Revenues
Private brand
Premium brand
Costs of goods sold
52,800,000
42,919,500 = COGS var =
+COGS fix =
9,880,500
= assumption in ex. 2
832,033 = 25% of actual R&D spending (saving assumption pg. 3)
1,251,149 = 35% of actual selling costs (saving assumption pg. 3)
2,376,000 = 50% of actual administrative costs (saving assumption pg. 3)
Gross margin
Marketing expenses
R&D expenses
Selling expenses
Administrative expenses
Ebit
Interest expense
39,600,000 = 6 million kgs X 6,600 L (from ex. 3). Expected level of sales = 6 million kg
3,319,500 = assumption in ex. 3
5,421,319
3,903,897 = see calculation of monthly cash flows. ASSUMPTION: excess cash (relative to the initial cash= 1,121,450) is used to repay debt as soon as it is available each month
same interest rate as in 2000
1,517,422
606,969
910,453
Ebt
Taxes (40%)
Net profit
Cash In
A/R
Private
January
February
March
April
May
June
July
August
September
October
November
December
Cash Out
COGS
Variable
A/R
Premium
1,328,026
1,226,650
1,216,512
3,748,800
4,752,000
6,230,400
3,960,000
4,276,800
2,640,000
2,217,600
1,742,400
3,590,400
36,929,587
5,597,280
3,300,000
3,300,000
3,300,000
2,970,000
3,207,600
2,574,000
3,300,000
3,300,000
3,300,000
3,300,000
3,300,000
3,300,000
38,451,600
5,597,280
Add back
depreciation
COGS
Fixed
276,625
276,625
276,625
276,625
276,625
276,625
276,625
276,625
276,625
276,625
276,625
276,625
3,319,500
Selling
249,475
249,475
249,475
249,475
249,475
249,475
249,475
249,475
249,475
249,475
249,475
249,475
2,993,700
R&D
104,262
104,262
104,262
104,262
104,262
104,262
104,262
104,262
104,262
104,262
104,262
104,262
1,251,149
Admin
69,336
69,336
69,336
69,336
69,336
69,336
69,336
69,336
69,336
69,336
69,336
69,336
832,033
198,000
198,000
198,000
198,000
198,000
198,000
198,000
198,000
198,000
198,000
198,000
198,000
2,376,000
Interest(*)
Taxes
318,750
292,268
317,444
342,941
342,603
337,500
310,906
311,358
308,930
321,385
337,801
362,011
3,903,897
2,907,807
(2,764,367)
(2,799,680)
37,111
560,261
2,920,151
(49,655)
266,693
(1,367,678)
(1,802,534)
(2,658,331)
(470,359)
(5,220,580) Yearly cash deficit
1,121,450 Initial cash
(5,220,580) Cash needed
242,787
364,181
606,969
ASSUMPTION
Taxes in Italy paid in May (40%) and Nov. (60%)
ASSUMPTION
90-day policy for brand retailers (private)
30-day policy for premium clients
Same monthly sales % as previous year
ASSUMPTION
Based on production plan with 0 ending inventory
Costs are paid monthly
ASSUMPTION
Costs are paid monthly
ASSUMPTION
2,593,700.00
400,000.00
2,993,700.00
249,475.00
9,368,467
ASSUMPTION
Costs are paid monthly
19,641,600
ASSUMPTION
+
ARE FOR THE ADDITIONAL CAPACITY (EXPANSION FINISHED IN DECEMBER. 6 BILLION LIRAS ON 15 YEARS)
YEARLY DEPRECIATION
MONTHLY DEPRECIATION
910,453
2,993,700
1,148,400 ASSUMPTION
(10,273,133)
(5,220,580)
5,220,580
(0)
1,121,450
1,121,450 ASSUMPTION
1,121,450
2,907,963
0
19,641,600
42,374,000
-12,267,080
-2,993,700
50,784,233
AP
Credit line
487,331
30,220,579.71 ASSUMPTION
10,000,000
9,165,869
910,453
50,784,233
We can increase our credit line to fund the cash deficit (negative operating cash flow)
Other alternatives: increase the long term debt or the equity (in this case, beware of the decrease in the ROE)
Monthly Debt
(*) Interest
(calculated on average debt)
35,000,000
32,092,193
34,856,560
37,656,240
37,619,129
37,058,868
34,138,717
34,188,371
33,921,678
35,289,356
37,091,890
39,750,220
40,220,580
########
ASSUMPTION
Each month we want to maintain the initial cash amount
10.9%
305,509
304,856
330,192
342,772
340,052
324,203
311,132
310,144
315,157
329,593
349,906
364,153
3,927,669
8,800
52,800,000
52,800,000
44,503,500
Gross margin
Marketing expenses
R&D expenses
Selling expenses
Administrative expenses
8,296,500
832,033
1,251,149
2,376,000
Ebit
Interest expense
3,837,319
3,974,941
Ebt
Taxes (40%)
Net profit
ROE
ROA
(137,622)
(137,622)
n.a.
8.04%
recalculated
NEW ASSUMPTION
recalculated
THE NEW STRATEGY BECOMES "NOT VIABLE"
We can not meet the unitary variable production cost target (we assume an increase by 4% vs. original estimate)
8,800
52,800,000
52,800,000
42,919,500
Gross margin
Marketing expenses
R&D expenses
Selling expenses
Administrative expenses
9,880,500
1,664,065
1,787,355
2,851,200
Ebit
Interest expense
3,577,880
3,974,842
Ebt
Taxes (40%)
Net profit
ROE
ROA
(396,962)
(396,962)
na
7.50%
Cash In
A/R
A/R
Private
January
February
March
April
May
June
July
August
September
October
November
December
Premium
1,328,026
1,226,650
1,216,512
3,748,800
4,752,000
6,230,400
3,960,000
4,276,800
2,640,000
2,217,600
1,742,400
3,590,400
36,929,587
5,597,280
5,597,280
9,368,467
19,641,600
(396,962)
2,993,700
1,148,400
(10,273,133)
(6,527,995)
5,814,250
(713,746) ASSUMPTION
1,121,450
407,704
BS 2001
cash
raw materials inv
fin good inv
AR
ppe
depr
depr year
Total assets
407,704
2,907,963
0
19,641,600
42,374,000
-12,267,080
-2,993,700
50,070,487
AP
credit line
l-t debt
SE
retained earnings of the year
Total liabilities + equity
NEW ASSUMPTIONS
= 50% of actual R&D spending (saving assumption pg. 3)
= 50% of actual selling costs (saving assumption pg. 3)
= 60% of actual administrative costs (saving assumption pg. 3)
vs.
recalculated
THE NEW STRATEGY BECOMES "NOT VIABLE"
Cash Out
COGS
COGS
Variable
Fixed
3,300,000
3,300,000
3,300,000
3,300,000
3,300,000
3,300,000
3,300,000
3,300,000
3,300,000
3,300,000
3,300,000
3,300,000
39,600,000
no variation in A/P
inventory = 0 at the end of the year
487,331
30,814,250
10,713,746
9,165,869
-396,962
50,784,233
276,625
276,625
276,625
276,625
276,625
276,625
276,625
276,625
276,625
276,625
276,625
276,625
3,319,500
Add back
depreciation
Selling
R&D
249,475
249,475
249,475
249,475
249,475
249,475
249,475
249,475
249,475
249,475
249,475
249,475
2,993,700
104,262
104,262
104,262
104,262
104,262
104,262
104,262
104,262
104,262
104,262
104,262
104,262
1,251,149
69,336
69,336
69,336
69,336
69,336
69,336
69,336
69,336
69,336
69,336
69,336
69,336
832,033
Admin
Interest
Taxes
Monthly Debt
198,000
198,000
198,000
198,000
198,000
198,000
198,000
198,000
198,000
198,000
198,000
198,000
2,376,000
318,750
292,268
317,444
342,941
345,608
339,164
319,196
319,724
317,371
329,904
346,397
367,369
3,956,136
35,000,000
2,907,807
32,092,193
(2,764,367)
34,856,560
(2,799,680)
37,656,240
(292,889)
37,949,129
707,643
37,241,486
2,192,488
35,048,998
(57,945)
35,106,942
258,328
34,848,615
(1,376,120)
36,224,734
(1,811,052)
38,035,787
(2,302,746)
40,338,532
(475,717)
40,814,250
(5,814,250) Yearly cash deficit
1,121,450 Initial cash
(4,692,800) Net cash needed
10.9%
(5,814,250)
8,800
52,800,000
52,800,000
42,919,500
Gross margin
Marketing expenses
R&D expenses
Selling expenses
Administrative expenses
9,880,500
832,033
1,251,149
2,376,000
Ebit
Interest expense
5,421,319
3,977,682
Ebt
Taxes (40%)
Net profit
1,443,637
577,455
866,182
Cash In
A/R
Private
January
February
March
April
May
June
July
August
September
October
November
December
Cash Out
COGS
Variable
A/R
Premium
1,328,026
1,226,650
1,216,512
3,748,800
4,752,000
6,230,400
3,960,000
4,276,800
2,640,000
2,217,600
1,742,400
3,590,400
36,929,587
5,597,280
5,597,280
COGS
Fixed
3,300,000
3,300,000
3,300,000
3,300,000
3,300,000
3,300,000
3,300,000
3,300,000
3,300,000
3,300,000
3,300,000
3,300,000
39,600,000
NEW ASSUMPTION
276,625
276,625
276,625
276,625
276,625
276,625
276,625
276,625
276,625
276,625
276,625
276,625
3,319,500
Add back
depreciation
249,475
249,475
249,475
249,475
249,475
249,475
249,475
249,475
249,475
249,475
249,475
249,475
2,993,700
19,641,600
866,182
2,993,700
NEW ASSUMPTION
(10,273,133)
(6,413,251)
6,413,251
(0)
1,121,450
1,121,450
BS 2001
cash
raw materials inv
fin good inv
AR
ppe
depr
depr year
Total assets
1,121,450
2,907,963
1,148,400
19,641,600
42,374,000
-12,267,080
-2,993,700
51,932,633
AP
credit line
487,331
25,000,000
l-t debt
SE
retained earnings of the year
Total liabilities + equity
10,000,000
15,579,120
866,182
51,932,633
104,262
104,262
104,262
104,262
104,262
104,262
104,262
104,262
104,262
104,262
104,262
104,262
1,251,149
R&D
69,336
69,336
69,336
69,336
69,336
69,336
69,336
69,336
69,336
69,336
69,336
69,336
832,033
9,368,467
Selling
Admin
198,000
198,000
198,000
198,000
198,000
198,000
198,000
198,000
198,000
198,000
198,000
198,000
2,376,000
Interest
318,750
292,268
317,444
342,941
345,608
341,793
321,850
322,402
320,073
332,630
349,149
372,775
3,977,682
Taxes
288,727
288,727
577,455
Monthly Debt
35,000,000
2,907,807
32,092,193
(2,764,367)
34,856,560
(2,799,680)
37,656,240
(292,889)
37,949,129
418,916
37,530,213
2,189,859
35,340,354
(60,598)
35,400,953
255,650
35,145,302
(1,378,822)
36,524,124
(1,813,779)
38,337,903
(2,594,225)
40,932,128
(481,123)
41,413,251
(6,413,251) Yearly cash deficit
1,121,450 Initial cash
(6,413,251) Cash needed
(6,413,251)
Select strategy
12,485
4,100,500
14,275
4,100,500
16,288
4,100,500
17,791
4,100,500
D
8,800
C
19,500
B
26,600
BB
30,000
A
35,500
0% 9,880,500
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
12,700,425
12,642,600
12,760,125
13,035,450
13,357,500
13,717,500
14,194,350
13,956,900
13,726,440
13,310,100
12,816,600
16,174,125
16,351,564
16,191,715
17,754,692
18,691,764
19,714,670
21,295,043
21,188,571
20,841,362
20,379,415
20,004,010
16,865,148
16,902,692
17,521,188
18,448,620
19,472,108
20,592,164
21,593,684
21,387,840
21,136,572
20,764,596
20,387,132
15,432,527
15,769,830
16,740,274
18,102,596
19,616,284
21,250,494
22,742,117
23,180,908
23,005,687
22,561,718
21,994,537
(*) This is the contribution margin (volume from exhibit 2 times unit margin) minus the fixed costs minus the advertising expense
The alternative in the yellow cell/bolded margin is chosen in this example for a mixed strategy. It is chosen
=1792000 KG X (35,500-17,791) - 4100500000 - 1792000 KG X 35,500 X 7%
You can start from this alternative if you want to build a business plan for a mixed strategy
Page 25
Select strategy
19,166
4,100,500
20,441
4,100,500
AA
39,000
AAA
42,600
9,128,778
9,840,848
11,123,646
12,883,740
14,794,816
16,859,548
18,764,158
18,904,380
18,730,824
20,303,880
20,166,982
(1,286,307)
(688,419)
778,803
2,685,825
4,756,515
6,975,537
8,974,701
9,208,338
10,000,252
11,933,875
12,635,065
this example for a mixed strategy. It is chosen because it gives the highest contribution, calculated as
Page 26
Select strategy
ution, calculated as
Page 27