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Jackson Automotive

Jackson Automotive System is an automotive parts supplier located in Michigan that emerged from the recession looking to ramp up production but faced a $5 million short-term loan coming due and shipment delays that hindered their ability to pay back the loan. The company is requesting an extension on the $5 million loan for 4 months and an additional $2.4 million short-term loan to maintain production capacity, with the loans payable over 1 year with $200,000 monthly principal payments and $91,000 in annual interest payments. The balance sheet scenarios compare the company's financial position with and without securing the additional loans.

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Erika Theng
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5K views3 pages

Jackson Automotive

Jackson Automotive System is an automotive parts supplier located in Michigan that emerged from the recession looking to ramp up production but faced a $5 million short-term loan coming due and shipment delays that hindered their ability to pay back the loan. The company is requesting an extension on the $5 million loan for 4 months and an additional $2.4 million short-term loan to maintain production capacity, with the loans payable over 1 year with $200,000 monthly principal payments and $91,000 in annual interest payments. The balance sheet scenarios compare the company's financial position with and without securing the additional loans.

Uploaded by

Erika Theng
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Background 1. 2. 3. 4. 5. Jackson Automotive System was founded in 1961.

Larry Edwards took over the business in the mid 1990s. Successfully led the company through 2008-2009 global recessions. Jackson was on pace for its first year of capacity sales since 2007. In 2013, there were over 5,000 supplies in US with less than 200 companies had annual sales of more than $100 million. 6. Located in the Michigan area with the Big Three. 7. In 2008, sales dropping more than 30%; The Industry was running at about 55% capacity during the financial crisis. 8. The industry has rebounded since 2010 and returned profitability 2010 and returned profitability in 2011. Issues 1. Group of dissident shareholders moved Edwards to repurchase 40%of outstanding common shares for $10 million. 2. & 5 million came from cash and the other $5 million came from a 10 month short term loan. 3. Emerging from the financial crisis looking to ramp up production. 4. $2.4 Million worth of capital equipment needed to maintain production capacity 5. $5 Million Short Term Loan Now due 6. Shipment Delays due to material shortages caused shortfall in April-May Actual Sales 7. Shortfalls hindered the companys ability to pay back 5 Million loan in June 8. These components have arrived and items are to be shipped in June

Scenario Comparison for Jackson Automotive Balance Sheet September 30 2013 Scenario 1 Cash 870 Accounts Receivable 5,954 Inventory 7,300 Current Assets 14,124 Gross PP&E Accumulated Depreciation Net PP&E Prepaid Expenses Total Assets Accounts Payable Notes Payable, Bank Accrued Taxes Other Accrued Expenses Costumer Advance Payments Current Liabilities Shareholders' Equity Total Liabilities and Equity 47,900 32,408 15,492 54 29,670 5,200 748 1,142 1,479 8,569 21,101 29,670

Scenario 2 4,470 5,954 7,300 17,724 47,900 32,408 15,492 54 33,270 5,200 748 1,142 1,479 8,569 24,701 33,270

Scenario 3 2,860 5,954 7,300 16,114 47,900 32,408 15,492 54 31,660 5,200 2,000 745 1,142 1,479 10,566 21,094 31,660

Ratio Analysis 2012 Sept 3,267 2.37 0.64 569 23% 42% 14.62 2013 Sept 9,155 3.88 0.79 463 2% 15.71 26%

Aug Net Working Capital Current Ratio Inventory Turnover Average Age of Inventory (Days) Debt Ratio Times Interest Earned 12,917 4.38 0.70 523

Aug 6,107 2.36 0.77 475

5Cs : Credit Character, Credit Capacity, Credit Conditions, Credit Collateral, Credit Capital Conclusion 1. 2. 3. 4. 5. 6. Requesting Extension for 5M dollar short-term loan for 4 months Additional 2.4 M dollar short-term loan Payable over one year Monthly principle payments $200,000 Annual Interest Rate of 7% Interest Payments of $91,000

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