This case study aims: (1) to evaluate the past

performance of; (2) to evaluate the

investments to be made by; (3) to prepare
discount rate for; (4) to evaluate the financing
to1-store and 3-store Portland expansion of
Green Zebra

Case 2: Green
Zebra
Finace Case Study

Case 2
 TABLE OF CONTENTS

I. THE COMPANY AND INDUSTRY 2

ii. EXECUTIVE SUMMARY 4
III. POINT OF VIEW 5
IV. CASE CONTEXT AND PROBLEM 6
V. METHODOLOGY 7
VI. CASE ANALYSIS 9
A. PAST PERFORMANCE AND FORECAST 9
B. 1-STORE PORTLAND EXPANSION 11

FORECAST
C. DISCOUNT RATE 12
D. GREEN ZEBRA EXPANSION 12
E. 3-STORE PORTLAND EXPANSION 13
F. GREEN ZEBRA VARIOUS OPTIONS 14
VII. CONCLUSIONS AND DECISIONS 15
VIII. MAIN JUSTIFICATIIONS 16
ix. IMPLEMENTATION 17
x. APPENDICES 18

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 I. THE COMPANY AND INDUDTRY

A. THE COMPANY

Green Zebra was leading both healthy food and convenience trends. It is influenced by an

organic grocer in the European style, locally owned and run, with a local community connection.

The ‘Zeeb’, as it was affectionately referred to by the community, had supported over 100

different, local non-profits. Of these, 30 community organizations addressed food scarcity across

the Portland metro area. Sedlar described it, “we are a cross between Whole Foods, Starbucks,

and 7-Eleven”.

Green Zebra stores are linked with locally sourced produce and grocery items with a premium

deli operation. While their largest supplier for healthy and organic food was a national chain that

operated in all states, Green Zebra sourced in the local community whenever possible.

Supporting local business results to positive outcomes. For instance, independent retailers return

more than three times as much money per dollar of sales to the community in which they operate

than chain competitors. Local businesses are more accountable to their local communities and

donate more money to non-profits. [ CITATION mas13 \l 1033 ]

Store products included organic produce, ready-to-drink beverages, locally sourced wine, and

craft beer. Each location included a premium coffee bar as well as an on-premise kitchen used to

prepare fresh, gourmet soups, salads, sandwiches and packaged grab-and-go meals that could be

heated up at home. The organic salad bar was the number one seller in the stores.

The salad bar, a top seller, is all organic, and many prepared foods are made in-house. The

stores, which at 5,000 square feet are roughly double the size of the average convenience store,

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are bright and easy to navigate. In all, they carry about 6,000 SKUs, including plenty of produce

and a limited assortment of conventional groceries, as well as dog food. [ CITATION Kra18 \l

1033 ]

In her nearly 20 years of experience in the grocery sector, CEO Lisa Sedlar had come to realize

that launching a c-store startup was an entirely different endeavor. Sept 16, 2019: Lisa Sedlar,

named by INC Magazine as one of the top 100 most innovative female founders in America.

Securing needed investing and financing to meet operations and growth, managing everyday

operations and functions had to be balanced. To fix this, Sedlar assembled a management team

for Green Zebra. This included Ana Andueza, Green Zebra’s CFO, an immigrant from the

Basque Country. Her professional work experience included an accounting career that began

with Deloitte, a subsequent move to a major Portland specialty finance firm, and eventually

working as a CFO with start-ups. The CFO in an entrepreneurial firm plays an indispensable role

in enabling the CEOs vision.

In 2019, the c-store market was highly competitive and was marked by a decentralized but

integrated structure of the industry. Smaller niche grocers that continued to draw consumers have

lost the market share of larger, existing grocery brands. The trend was expected to continue as

the food service side of their company with healthier alternatives was gradually expanded by the

c-store market. Since 2017 Amazon started its c-stores start-up in Seattle and San Francisco

markets and other larger players announced plans to enter the market with their own evolved c-

store concepts. This included, for example, Target’s Fresh Express, Kroger’s Express, Dollar

General’s ‘Grab & Go’ and Walmart’s move into a smaller footprint convenience store offering.

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 II. EXECUTIVE SUMMARY

It was the fall of 2019, and the CFO of Green Zebra told onwer that there was just enough cash

for the next 120 days to fund operations. Interest payments on current debt have been in arrears

for several months and suppliers have been calling for more prompt payments. Whether or not

Green Zebra expanded, additional funding was soon needed to ensure its continuity. The original

plan of simultaneous local and regional expansion had been reduced to two alternative growth

options: a debt-financed single-store expansion in Portland, or a minimum three-store expansion

to Seattle, funded by venture capital. A Portland expansion would slow growth in the near-term,

but the addition of a store would allow operations to achieve profitability more quickly and allay

concerns expressed by potential funders.

Compare to its competitors in the market Green Zebra has lower EBITDA. EBITDA, with

interest, taxes, depreciation and amortization applied back, is simply net income (or earnings).

EBITDA, as it removes the effects of financing and capital expenditures can be used to evaluate

and compare profitability among companies and industries. For instance, Chipotle Mexican Grill,

Inc., also referred to simply as Chipotle, is an American chain of fast casual restaurants that

specialize in tacos and Mission burritos that are made to order in front of the consumer had 2019

EBITDA Margin of 12.4% while Green Zebra had a negative Pre-tax Return on Revenue.

III. POINT OF VIEW

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The case study is in the perspective of finance, particular with regard to expansion and growth of

Green Zebra. Finance is defined as the management of money and includes activities such as

investing, borrowing, lending, budgeting, saving, and forecasting. It is the management of large

amounts of money, especially by governments or large companies.

Forecasting is as well a pivotal part of this case study. Forecasting is the process of estimating

the relevant events of future, based on the analysis of their past and present behavior. It is, thus,

the basis of planning, when a business enterprise makes an attempt to look into the future in a

systematic and concentrated way, it may discover certain aspects of its operations requiring

special attention. However, it must be recognized that the process of forecasting involves an

element of guesswork and the managers cannot stay satisfied and relaxed after having prepared a

forecast. The forecast will have to be constantly monitored and revised—particularly when it

relates to a long- term period. The managers should try to reduce the element of guesswork in

preparing forecasts by collecting the relevant data using the scientific techniques of analysis and

inference [ CITATION Pri19 \l 1033 ].

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 IV. CASE CONTEXT AND PROBLEM

It was the fall of 2019, and the CFO of Green Zebra told Sedlar that there was just enough cash

for the next 120 days to fund operations. Interest payments on current debt have been in arrears

for several months and suppliers have been calling for more prompt payments. Whether or not

Green Zebra expanded, additional funding was soon needed to ensure its continuity.

Sedlar and other board of directors are choosing between two alternative options for expansion.

They were hesitant to select among a debt-financed single-store expansion in Portland, or a

minimum three-store expansion to Seattle, funded by venture capital.

In the near-term, a Portland expansion would delay growth, but Sedlar was persuaded that adding

a store would allow operations to achieve profitability faster and mitigate the concerns expressed

by potential funders. Sedlar was concerned, however, that as similar rivals expanded into West

Coast markets, this slower growth strategy could permanently restrict later rapid expansion. The

expansion of Seattle, she claimed, would lead to a stronger bargaining place for potential VC

funding, but came with substantial dilution of ownership.

As she weighed these possibilities, she considered whether growth was worth it at any cost or

whether “perhaps being a strong, local company with fewer stores was an attractive alternative to

fast growth.”

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 V. METHODOLOGY

Linear Regression was used to forecast the Income Statement and Balance Sheet of Green Zebra.

It projects a future value along a line of best fit. There were two sets of forecasted financial

statements to better compare the historical data to predicted numbers. A linear regression

analysis of the historical data of Profit-and-Loss Statement and Financial Position from 2017 to

2019 was initially made. Then, a forecast based on the percentages foreseen by Green Zebra. The

second projection is based on 2019 numbers as constant values.

Item Basis Forecast 

Income Statement % of: 2020 After 2020: 

Sales growth rate 35.00% 7.0%, 5.0%, 4.0%, then steady state at 1.0%

Cost of goods sold of sales 59.5% leveling off at 58% by 2022

Payroll & Benefits of sales 25.3% falling to 24.0% by 2022 

Occupancy & other of sales 14.0% falling to 12.3% by 2024 

Advertising & Marketing of sales 1.0% constant 

Balance Sheet 

Cash & Equivalents % of sales 2.0% constant 

Inventories % COGS 6.3% constant 

Accounts payable % COGS 7.0% constant 

Other current liabilities of sales 1.9% constant 

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The discount rate we are primarily interested in concerns the calculation of the business’ future

cash flows based on company’s net present value, or NPV. Discount rate expresses the change in

the value of money as it is invested in your business over time.

Green Zebra need to know the NPV when performing discounted cash flow (DCF) analysis, one

of the most common valuation methods used by investors to gauge the value of investing in a

business.

The discount rate element of the NPV formula is used to account for the difference between the

value-return on an investment in the future and the money to be invested in the present. Your

company’s weighted average cost of capital (WACC, a discount rate formula we’ll show you

how to calculate shortly) is often used as the discount rate when calculating NPV, although it is

sometimes thought to be more appropriate to use a higher discount rate to adjust for risk or

opportunity cost.

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 VI. CASE ANALYSIS

A. PAST PERFORMANCE AND FORECASTS

Green Zebra is a convenience store with healthy and organic product mix which was founded in

2013 by Lisa Sedlar. The first branch was located in the community of Portland, Oregon. Despite

favorable attention since its launch, Sedlar's recent pitches for expansion funding to the venture

capital (VC) group have not yielded promising results. They were hesitant to fund a company

that did not have positive cash flows and there was uncertainty about the food industry's

competitive trends. Green Zebra was funded initially with contributions made by Sedlar, her

colleagues, and family. Green Zebra tapped into angel and crowd sourced capital as planning

progressed. In 2013, funding of $885,000 was obtained after Green Zebra was successfully

pitched to the Oregon Investment Fund.

In 2018 she walked away from a venture capital offer of $10 million, in part because the terms

required that new shares receive 10 votes per share. If the deal had been completed, Sedlar’s

voting rights would have been reduced significantly from the roughly 30% controlling position

she held at that time. The 30% control is enough for her to have significant influence to the

company. If someone holds, directly or indirectly more than or equal to 20% power, it is

presumed that he has significant influence. [CITATION Con19 \n \l 1033 ]. It was a better

alternative for her to choose not to accept the offer because she would have had less voting rights

that will result to less power over her own founded company.

The investors also have major holdings in e-cigarettes which were different to the healthy

lifestyle branding of Green Zebra. This would result to a backlash to the company since its main

vision is to provide organic and healthy food to its market. The connection would have resulted

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to a short-term positive result because of the investment but a negative long-term consequence to

its identity.

Compare to its competitors in the market Green Zebra has lower EBITDA. EBITDA, with

interest, taxes, depreciation and amortization applied back, is simply net income (or earnings).

EBITDA, as it removes the effects of financing and capital expenditures can be used to evaluate

and compare profitability among companies and industries. For instance, Chipotle Mexican Grill,

Inc., also referred to simply as Chipotle, is an American chain of fast casual restaurants that

specialize in tacos and Mission burritos that are made to order in front of the consumer had 2019

EBITDA Margin of 12.4% while Green Zebra had a negative Pre-tax Return on Revenue

(Exhibit 1 & Exhibit 9).

Using the Linear Regression Forecasting that was used by the researcher, from 2020 to 2025

Green Zebra would continue to earn major losses. On the other hand the forecasted Income

Statement of the company itself had a positive outlook in the future. For example, the

depreciation and amortization balances would continue to decrease according to the forecast of

the company but using the linear regression analysis these would continue to grow resulting to

high expenses and low income.

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B. 1-STORE PORTLAND EXPANSION FORECAST

The forecast was constant in 2019 levels. Accordingly, sales would continue to bring promising

results for the future of the company. But, 35% growth rate from 2019 to 2020 was ambitious;

looking on its historical performances Green Zebra would only yield an average of 8% growth

rate. After 2020 the sales growth rate would drastically decline at continuous level of 7.0%,

5.0%, 4.0% then eventually at steady rate of 1.0% The forecast of Cost of Sales is also lower

than of its past numbers, 59.5% on 2020 then leveling off at 58% by 2022 (Table 3).

Payroll and Benefits had a forecast at 25.3% of sales then falling to 24.0% by 2022. Occupancy

and other expenses is at 14.0% on 2020 then falling by 1.7% by 2024. Advertising and

Marketing would be constant at 1.0% (Table 3).

The balance sheet forecasting data is as follows. Cash and Equivalents is at 2.0% of sales.

Inventories is at 6.3% of the cost of goods sold. Accounts payable is at 7.0% of the cost of goods

sold. Other current liabilities is at 1.9% of sales. All these forecast would be constant after 2020

(Table 4).

The rest of the Income Statement and Balance Sheet accounts without forecast were predicted

using the Linear Regression Analysis. The numbers at constant were also predicted using the

same method.

The external financing needed by the company is $141,208.00, $530,060.00, $698,835.00,

$1,012,276.00, $1,229,454.00, $1,510,817.00 from 2020 to 2025 respectively.

C. DISCOUNT RATE

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Measuring your discount rate as a business, however, can be a complex proposition. For both

companies and investors, discount rate is a key metric when positioning for the future. An

accurate discount rate is crucial to investing and reporting, as well as assessing the financial

viability of new projects within your company.

Cash flow is the net amount of cash and cash-equivalents being transferred into and out of a

business. At the most fundamental level, a company's ability to create value for shareholders is

determined by its ability to generate positive cash flows, or more specifically, maximize long-

term free cash flow.

In finance, return is a profit on an investment. It comprises any change in value of the

investment, and/or cash flows which the investor receives from the investment, such as interest

payments or dividends. It may be measured either in absolute terms or as a percentage of the

amount invested.

The cash flow used in the computation is the sales projected by the company if there will be a 3-

store expansion. The rate of return is based on the prevalent rate of return in the market.

D. GREEN ZEBRA EXPANSION

The expansion is attractive but risky. Green Zebra's experience in the Portland region validated

the efficiencies of a 3-store company, especially in terms of store size, inventory procurement

and cross-site shared labor. While the timeframe associated with the build-out and authorization

of the store will vary location-by-location, the Portland experience offered approximate

expectations to function with the expansion phase and operating ramp to predict.

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The 3-store launch, funded by a venture capital boost, was envisaged. The availability of funds

will decide additional Seattle shop openings. This is too risky for the company. The cash flows

of the company were not in good terms. The profitability of the company is also low. The ability

to meet the venture capital obligation is only based on the assumption if the company would earn

profit however the historical and projected values were not positive.

E. 3-STORE PORTLAND EXPANSION FORECAST

Per store revenues in the first year of operation were forecast at $4.5 million, with growth rates

of ten percent in the subsequent two years before falling to five percent in the fourth year. In the

fifth and sixth years, revenue growth was forecast at two years, operating costs for the new stores

were estimated to be higher in the early years.

Cost of goods sold of 60.0 percent, estimated for the first year of operation, were forecast to fall

to approximately 58.0 percent by the sixth year. First year store level expenses, as a percent of

sales were also expected to follow this pattern, is estimated at 18.9% for payroll while occupancy

& other expenses, were estimated at 11.5 percent of sales. By the last year, 2025, payroll costs

were estimated to fall to 18.0%. Due to high real estate costs in Seattle, occupancy costs, as a

percent of sales, were expected to remain flat. Advertising and marketing were essential to

building a community image. Due to the new market region, these store-level costs were forecast

at 1.0% of sales.

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 F. GREEN ZEBRA’S VARIOUS OPTIONS

How much the company should invest in equity and how much it should put in with a debt

instrument is one of the immediate items. The shareholders wanted to be in a situation where the

terms of the term sheet are in charge of them. The valuation was not terrible for one of the new

term sheets they were reviewing, but the words that went along with it were too restrictive. Few

funding options were available due to Green Zebra's lack of profitability and accumulated debt.

A bridge loan of $2.2 million with an upfront fee of $180,000 was the first choice, targeted to

fund the 1-store expansion. A 12.5 percent coupon interest was borne by the loan, half of which

would be paid in cash, and the other half deferred before maturity (often referred to as debt paid-

in-kind interest (PIK). The loan, due in 12-18 months, had no principal amortization and was

immediately available. If the 4-store Portland operations were nearing profitability by the end of

the loan period, a one-time 18 month term extension was negotiable.

A second alternative was being pursued from sources of venture capital. Nevertheless, buyers

tried to pitch to increase interest in this lower volume of equity investment. The option of

expansion and its funding will have to be adequate to cover both expansion and capital burn

before a cash breakeven has been reached from current activities. The Board of Directors shared

a preference for Green Zebra, irrespective of the preferred policy, to decrease debt funding to

thirty percent of capital over the next three years and to retain it at that pace thereafter.

VII. CONCLUSIONS AND DECISIONS

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The 3-store Portland Expansion is too risky for Green Zebra. Based on past performances of the

company, profitability is low; there are more expenses than revenue. One of the simplest factors

that can lead to declining margin is higher costs of goods sold. Over time, the local suppliers

naturally want to increase their own revenue and margins. These factors may lead to them

negotiating or simply charging you higher rates on goods. If higher COGS negatively affect

gross profit margin, Green Zebra have to negotiate harder or look for alternative providers. The

forecasts do not show promising results as well. The numbers predicted by the company is too

sublime to happen.

Gross profit margin is therefore influenced by emerging rivals or intensified competition from

competitors. The more consumer deals are appealing to the market, the tougher it is to get

consumers to pay the desired rates for their solutions. An indirect effect is decreased orders from

vendors as your sales transactions drop. Moreover, competitors of the company are shown to

have higher gross profit margin and EBITDA.

A bridge loan of $2.2 million with an upfront fee of $180,000 was the first choice, targeted to

fund the 1-store expansion.

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 VIII. MAIN JUSTIFICATIONS

Compare to its competitors in the market Green Zebra has lower EBITDA. EBITDA, with

interest, taxes, depreciation and amortization applied back, is simply net income (or earnings).

EBITDA, as it removes the effects of financing and capital expenditures can be used to evaluate

and compare profitability among companies and industries. For instance, Chipotle Mexican Grill,

Inc., also referred to simply as Chipotle, is an American chain of fast casual restaurants that

specialize in tacos and Mission burritos that are made to order in front of the consumer had 2019

EBITDA Margin of 12.4% while Green Zebra had a negative Pre-tax Return on Revenue.

Portland 1-store Expansion: Accordingly, sales would continue to bring promising results for the

future of the company. But, 35% growth rate from 2019 to 2020 was ambitious; looking on its

historical performances Green Zebra would only yield an average of 8% growth rate. After 2020

the sales growth rate would drastically decline at continuous level of 7.0%, 5.0%, 4.0% then

eventually at steady rate of 1.0% The forecast of Cost of Sales is also lower than of its past

numbers, 59.5% on 2020 then leveling off at 58% by 2022 (Table 3).

3-store Expansion: Cost of goods sold of 60.0 percent, estimated for the first year of operation,

were forecast to fall to approximately 58.0 percent by the sixth year. First year store level

expenses, as a percent of sales were also expected to follow this pattern, is estimated at 18.9%

for payroll while occupancy & other expenses, were estimated at 11.5 percent of sales. By the

last year, 2025, payroll costs were estimated to fall to 18.0%. Due to high real estate costs in

Seattle, occupancy costs, as a percent of sales, were expected to remain flat. Due to the new

market region, these store-level costs were forecast at 1.0% of sales (Table 5).

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 IX. IMPLEMENTATION

Slower Growth is fit than a faster growth for Green Zebra. The bridge loan is sufficient to

finance both the current operations and 1-store Portland expansion. Green Zebra is also in need

of funds to capitalize the current operations of the company. Whether Green Zebra expanded or

not, additional financing was needed soon to secure their survival. The Portland expansion will

slow growth however it is more realistic and less risky. It will also allow operations to achieve

profitability more quickly and allay concerns expressed by potential funders. Green Zebra would

need to show positive ratios of its profitability in order to attract more investors. It should focus

more on strengthening its sales and a firm Gross Margin Rate.

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 X. APPENDICES
Table 1
Forecasted Income Statement using Linear Regression

Green Zebra Income Statement Historical Result Forecasted Result

2017 2018 2019 2020 2021 2022 2023 2024 2025
Sales 10,006,049 10,782,087 12,683,289 13,834,382 15,173,002 16,511,622 17,850,242 19,188,862 20,527,482
Cost of Sales 6,329,714 6,697,427 7,765,068 8,366,090 9,083,767 9,801,444 10,519,121 11,236,798 11,954,475
Gross Margin 3,676,335 4,084,660 4,918,221 5,468,291 6,089,234 6,710,177 7,331,120 7,952,063 8,573,006

Payroll and Benefits 3,009,276 3,109,118 3,576,002 3,798,191 4,081,554 4,364,917 4,648,280 4,931,643 5,215,006
Advertising and Marketing 139,333 183,958 192,000 224,431 250,764 277,098 303,431 329,765 356,098
Occupancy and Other 1,905,230 1,868,793 2,072,950 2,116,711 2,200,571 2,284,431 2,368,291 2,452,151 2,536,011
Total Other Operatng Expenses 5,053,839 5,161,868 5,841,619 6,140,222 6,692,924 7,076,226 7,572,462 7,993,408 8,464,547

EBITDA (1,377,504) (1,077,208) (923,398) (671,931) (485,568) (255,803) (54,972) 165,148 372,409

Depreciation / Amortization 301,100 312,080 355,322 377,056 413,129 439,642 472,529 501,166 532,636
Interest Expense ( Income) 555,022 452,291 433,114 358,234 320,490 257,988 211,992 154,992 105,327

Income before Fed. Income Tax (2,233,625) (1,841,579) (1,711,834) (1,407,222) (1,219,188) (953,435) (739,494) (491,012) (265,558)

Income Tax 11,252 15,421 16,129 19,144 20,621 23,124 24,943 27,218 29,189

Net Income / (Loss) (2,244,877) (1,857,000) (1,727,962) (1,426,365) (1,239,807) (976,556) (764,434) (518,226) (294,742)

Table 2
Forecasted Balance Sheet using Linear Regression
Historical Data Forecasted Data
Green Zebra Balance Sheet

ASSETS 2017 2018 2019 2,020 2,021 2,022 2,023 2,024 2,025
Cash and Equivalents 271,249 376,420 991,610 1,266,787 1,768,640 2,119,375 2,570,856 2,955,173 3,384,265
Receivables 19,377 75,496 65,000 98,914 103,221 127,266 138,153 157,812 171,623
Inventory 441,123 489,220 558,779 614,030 678,820 737,250 799,920 859,764 921,492
Other Current Assets 205,339 23,717 25,000 (95,654) (135,016) (228,573) (286,000) (367,514) (432,970)
Total Current Assets 937,085 964,854 1,640,389 1,884,080 2,415,667 2,755,323 3,222,933 3,605,241 4,044,417
Total LT Assets 3,213,085 3,097,801 3,751,686 3,892,792 4,375,750 4,630,807 5,037,798 5,343,500 5,716,728
Total Assets 4,150,171 4,062,655 5,392,075 5,776,871 6,791,416 7,386,129 8,260,730 8,948,738 9,761,142

Liabilities
Accounts Payable 428,128 627,075 596,550 719,006 739,475 827,936 871,068 944,419 997,625
Other Current Liabilities 521,476 684,363 892,828 1,070,908 1,269,244 1,454,076 1,647,911 1,835,744 2,027,579
Line of Credit 100,000 74,959 34,256 3,994 (33,228) (65,810) (101,486) (135,099) (170,087)
Total Current Liabilities 1,049,604 1,386,397 1,523,634 1,793,908 1,975,491 2,216,202 2,417,494 2,645,065 2,855,116

Long Term Debt & LT Liabilities 4,660,101 6,095,693 7,019,863 8,284,981 9,322,800 10,512,152 11,600,482 12,756,160 13,866,940
Total Liabilities 5,709,705 7,482,089 8,543,497 10,078,889 11,298,292 12,728,354 14,017,976 15,401,225 16,722,057

NET WORTH
Stockholder's Equity 7,180,157 7,177,255 9,173,230 9,836,620 11,388,400 12,347,921 13,702,281 14,793,414 16,060,032
Retained Earnings (6,494,813) (8,739,690) (10,596,690) (12,712,275) (14,655,470) (16,713,591) (18,695,095) (20,727,677) (22,726,207)
Current Year Earnings (2,244,877) (1,857,000) (1,727,962) (1,426,365) (1,239,807) (976,556) (764,434) (518,226) (294,742)

Total Net Worth (1,559,532) (3,419,435) (3,151,422) (4,302,020) (4,506,877) (5,342,228) (5,757,250) (6,452,491) (6,960,919)

Total Liabilities and Net Worth 4,150,173 4,062,654 5,392,075 5,776,869 6,791,415 7,386,126 8,260,727 8,948,735 9,761,138

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Table 3
Forecasted Income Statement (1-store Expansion)

Green Zebra Income Statement Forecasted Result

2019 2020 2021 2022 2023 2024 2025
Sales 12,683,289 17,122,440 18,321,011 19,053,851 19,244,390 19,436,834 19,631,202
Cost of Sales 7,765,068 10,187,852 10,901,002 11,051,234 11,161,746 11,273,364 11,386,097
Gross Margin 4,918,221 6,934,588 7,420,009 8,002,618 8,082,644 8,163,470 8,245,105

Payroll and Benefits 3,576,002 4,331,977 4,635,216 4,572,924 4,618,654 4,664,840 4,711,489
Advertising and Marketing 192,000 171,224 183,210 190,539 192,444 194,368 196,312
Occupancy and Other 2,072,950 2,397,142 2,564,942 2,667,539 2,694,215 2,390,731 2,414,638
Total Other Operatng Expenses 5,841,619 6,900,343 7,383,367 7,431,002 7,505,312 7,249,939 7,322,438

EBITDA (923,398) 34,245 36,642 571,616 577,332 913,531 922,667

Depreciation / Amortization 355,322 420,072 402,711 326,661 311,583 263,919 125,551

Interest Expense ( Income) 433,114 358,234 358,234 358,234 358,234 358,234 358,234

Income before Fed. Income Tax (1,711,834) (744,061) (724,303) (113,280) (92,486) 291,378 438,881

Income Tax 16,129 22,745 24,338 26,249 26,511 26,776 27,044

Net Income / (Loss) (1,727,962) (766,807) (748,641) (139,528) (118,997) 264,602 411,837

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Table 4
Forecasted Balance Sheet (1-store Expansion)

Green Zebra Balance Sheet

Forecasted Result
ASSETS 2019 2020 2021 2022 2023 2024 2025
Cash and Equivalents 991,610 342,449 366,420 381,077 384,888 388,737 392,624
Receivables 65,000 98,914 103,221 127,266 138,153 157,812 171,623
Inventory 558,779 641,835 686,763 696,228 703,190 710,222 717,324
Other Current Assets 25,000 (95,654) (135,016) (228,573) (286,000) (367,514) (432,970)
Total Current Assets 1,640,389 987,544 1,021,388 975,998 940,231 889,257 848,601
Total LT Assets 3,751,686 3,892,792 4,375,750 4,630,807 5,037,798 5,343,500 5,716,728
Total Assets 5,392,075 4,880,335 5,397,139 5,606,805 5,978,029 6,232,757 6,565,329

Liabilities
Accounts Payable 596,550 713,150 763,070 773,586 781,322 789,135 797,027
Other Current Liabilities 892,828 325,326 348,099 362,023 365,643 369,300 372,993
Line of Credit 34,256 3,994 (33,228) (65,810) (101,486) (135,099) (170,087)
Total Current Liabilities 1,523,634 1,038,582 1,111,275 1,135,716 1,147,072 1,158,541 1,170,126

Long Term Debt & LT Liabilities 7,019,863 8,284,981 9,322,800 10,512,152 11,600,482 12,756,160 13,866,940
Total Liabilities 8,543,497 9,323,563 10,434,076 11,647,868 12,747,554 13,914,701 15,037,065

NET WORTH
Stockholder's Equity 9,173,230 9,836,620 11,388,400 12,347,921 13,702,281 14,793,414 16,060,032
Retained Earnings (10,596,690) (12,712,275) (14,655,470) (16,713,591) (18,695,095) (20,727,677) (22,726,207)
Current Year Earnings (1,727,962) (1,426,365) (1,239,807) (976,556) (764,434) (518,226) (294,742)

Total Net Worth (3,151,422) (4,302,020) (4,506,877) (5,342,228) (5,757,250) (6,452,491) (6,960,919)

Total Liabilities and Net Worth 5,392,075 5,021,543 5,927,199 6,305,640 6,990,304 7,462,211 8,076,146

Exhibit 1
Green Zebra
Convenience Store Financial Metrics, 2015 - 2019-Q2

2014 2015 2016 2017 2018 2019-Q2

Avg Revenue, per store 3,270,854 4,084,965 3,867,284 3,284,232 2,216,948 2,102,850
Sales Per Employee 238,752 236,052 244,595 249,413 252,950 255,709

Percent of Sales:
Cost of Sales 75.10% 74.90% 74.90% 74.80% 74.90% 75.20%
Gross Margin 24.90% 25.10% 25.10% 25.20% 25.10% 24.90%
Wages 9.20% 9.10% 9.60% 10.70% 10.30% 10.00%

Financial Ratios:
Cash Flow-Solvency 2014 2015 2016 2017 2018 2019-Q2
Accounts Payable/Revenue 2.7 3.6 3.5 4 3.2 3.2
Current Ratio 1.7 1.6 1.5 1.5 1.8 1.9
Net Working Capital/Revenue 0 0 0 0 0 0.1
Cost of Sales/Accounts Payable 27.6 20.6 21.3 18.9 23.7 23.6
Cost of Sales/Inventory 18.3 14.4 15.5 14.3 14.4 13.5

Profi tability 2014 2015 2016 2017 2018 2019-Q2

EBITDA/Business Revenue (%) 2.2 2.4 1.5 n/a n/a n/a
Pre-Tax Return on Revenue (%) 1.6 1.7 0.8 -2.2 -3.6 -2.3

Effi ciency 2014 2015 2016 2017 2018 2019-Q2

Days Inventory 20 25.4 23.6 25.5 25.4 27.1
Days Receivables 3.6 5.2 4.7 5.1 4.4 4.7
Gross Margin/Revenue 24.9 25.1 25.1 25.2 25.1 24.9
Inventory Turnover 24.3 19.2 20.6 19.1 19.2 17.9
Receivables Turnover 100.4 69.9 77 71.4 83 77.9

Debt-Risk 2014 2015 2016 2017 2018 2019-Q2

Long-Term Liabilities/Net Worth 0.5 0.4 0.5 0.5 0.6 0.6

Case 2

20
Exhibit 9
Green Zebra Grocery
Selected Market and Fi nanci al Data for Sel ected Green Ze bra Competitors, 2019

AHOLD
(7-11) Wal-Mart
Chi potl e (CMG)
Sprouts Farmers
Vi llageMarket
Super
Kroger
Market
(SFM)
(KR)Casey's
(V LGEA)General
Ali mentation
Stores
(ADRNY)
(CASY)
Couche(WMT)
Tard (A NCUF)
Positi oni ng 1 Fast CasualN atural & Organic
Conventional
Conventional
Groce rs
C-Store
Groce rs
C-Store C-Store Supercenters and Whol esal ers

TTM Revenues
($ Bil ) 5.2 5.4 1.6 120.9 9.4 58.5 64.5 518
EBITDA ($ Mi l) 644.4 369.5 67.3 5.7 B 586.9 3.7 B 4.3 B 31.7
3 yr Revenue growth rate % 2.60% 13.20% 0.60% 3.30% 9.50% 20.10% 18.00% 2.20%
ROE % 17.00% 25.10% 7.90% 23.40% 15.70% 22.20% 12.40% 18.20%
ROIC % 6.00% 9.40% 6.70% 9.00% 8.00% 12.30% 10.80% 10.80%
EBITDA Margin % 12.40% 6.80% 4.10% 4.70% 6.30% 6.30% 6.70% 6.10%
Net Margin 4.80% 2.60% 1.50% 1.50% 2.30% 3.30% 2.70% 2.50%

Market Capitali zation ($ Bil ) 23.4 2.3 372.7 M 20.6 6.2 35.2 27.2 334.5
Ente rpri se Val ue ($ Bil) 14.5 3.9 316.9M 40.5 7.3 43.5 28.4 398.2

Book Value 2
D/E 1.8 3.2 0.2 2.4 0.9 1 0.3 1.1
Interest Bearing Debt ($ Bil ) 2.7 1.7 0.1 20.6 1.4 9.4 3.9 74.7
Share hol ders Equity ($ Bil ) 1.5 0.5 0.3 8.5 1.5 9.7 13.6 77.1

Bond Rating na na na Baa na na na AA

Curre nt YTM, Comparabl e Maturity*
na na na 0 na na na 0

AHOLD
(7-11) Wal-Mart
Chi potl e (CMG)
Sprouts Farmers
Vi llageMarket
Super
Kroger
Market
(SFM)
(KR)Casey's
(V LGEA)General
Ali mentation
Stores
(ADRNY)
(CASY)
Couche(WMT)
Tard (A NCUF)
Positi oni ng 1 Fast CasualN atural & Organic
Conventional
Conventional
Groce rs
C-Store
Groce rs
C-Store C-Store Supercenters and Whol esal ers

Beta coeffi ci ent 1.1 0.3 0.6 0.8 0.8 0.5 0.2 0.7

Ent. Val ue to EBITDA 39 10.5 4.7 7.3 12.5 11.7 5.9 12.6
Pri ce/Sal es 4.5 0.4 0.2 0.2 0.7 0.6 0.4 0.7

WACC 3, % (2019) 8.60% 3.70% 5.30% 5.40% 6.20% 4.30% 1.60% 5.30%

Industry Beta, Grocery & Food 4 0.59

Prevaili ng valuation discounts and premi ums3:Control Premium
20.70% Di scounts:Mi nori ty 17.10% Liquidi ty4:20% - 30%

Industry Valuati on Metri cs, by Segment 5

Mul tiple Fast CasualBeverage/Snack Retai
Quick
l Se rvice Restaurants
Food Retai l
EV/EBITDA 16.1 20.6 17.2 7.3
% EBITDA Margin 12.40% 22.80% 35.60% 5.20%
EV/Revenues 4 3.9 6.2 0.4
% Revenue Growth 11.30% 2.70% 2.30% 5.20%

* 25 yr average maturity

Table 5
Forecasted Income Statement (3-store expansion)

Green Zebra Income Statement FORECASTED RESULT

2019 2020 2021 2022 2023 2024 2025
Sales 12,683,289 13,500,000 14850000 16335000 17151750 17837820 18194576.4
Cost of Sales 7,765,068 8100000 8910000 9801000 10291050 10702692 10552854.31
Gross Margin 4,918,221 5,400,000 5,940,000 6,534,000 6,860,700 7,135,128 7,641,722

Payroll and Benefits 3,576,002 2551500 2806650 3087315 3241680.75 3371347.98 3275023.752
Advertising and Marketing 192,000 23100
Occupancy and Other 2,072,950 1552500 1707750 1878525 1972451.25 2051349.3 2092376.286
Total Other Operatng Expenses 5,841,619 4127100 4514400 4965840 5214132 5422697.28 5367400.038

EBITDA (923,398) 1,272,900 1,425,600 1,568,160 1,646,568 1,712,431 2,274,322

Depreciation / Amortization 355,322 420,072 402,711 326,661 311,583 263,919 125,551

Interest Expense ( Income) 433,114 358,234 358,234 358,234 358,234 358,234 358,234

Income before Fed. Income Tax (1,711,834) 494,594 664,655 883,265 976,751 1,090,277 1,790,537

Income Tax 16,129 16200 17820 19602 20582.1 21405.384 22925.16626

Net Income / (Loss) (1,727,962) 478,394 646,835 863,663 956,169 1,068,872 1,767,612

Case 2

21
Table 6
Period Cash Flow Rate of Return
1 13,500,000 60%
2 14,850,000
3 16,335,000 Net Present Value
4 17,151,750 $23,629,096.06
5 17,837,820
6 18,194,576

Case 2

22