Practice Case Study A Strictly Confidential

Table of Contents Model Checks

Outputs Model Exceeding Operational Capacity? No

Inputs Unused Tax Losses Remaining? Yes
Model Balanced Sheet Unbalanced? No

Model Circularity

Model Circularity 2

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Internal
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Dashboard: Charts & Graphs

All figures in USD thousands unless stated 2020A 2021A 2022A 2023F 2024F 2025F 2026F 2027F

Driver Switch

INCOME STATEMENT

Revenue 30,628 34,847 47,365 49,734 52,220 53,787 54,863 55,960

EBITDA (2,863) (124) 9,600 10,080 10,584 10,901 11,119 11,342

EBITDA Margin (9.3%) (0.4%) 20.3% 20.3% 20.3% 20.3% 20.3% 20.3%

Net Income (28,651) (24,224) (5,103) (5,358) (5,626) (5,795) (5,910) (6,029)
Net Income Margin (93.5%) (69.5%) (10.8%) (10.8%) (10.8%) (10.8%) (10.8%) (10.8%)

CASH FLOW STATEMENT

Operating (20,677) (14,838) 5,382 5,399 5,669 5,839 5,956 6,075

Investing (7,125) (7,265) (7,482) – – – – –
Financing (4,000) 9,000 (2,000) – – – – –
Change in Cash (31,802) (13,103) (4,100) 5,399 5,669 5,839 5,956 6,075

INCOME STATEMENT CASH FLOW STATEMENT

Revenue EBITDA Margin Net Income Margin 15,000 Investing Financing Operating Change in Cash
60,000 40.0%
10,000
20.0%
50,000 5,000

– –
40,000
(5,000)
(20.0%)
30,000 (10,000)
(40.0%) (15,000)
20,000 (20,000)
(60.0%)
(25,000)
10,000
(80.0%)
(30,000)

– (100.0%) (35,000)
2020A 2021A 2022A 2023A 2024A 2025A 2026A 2027A 2020A 2021A 2022A 2023A 2024A 2025A 2026A 2027A
Drivers

All figures in USD thousands unless stated 2023F 2024F 2025F 2026F 2027F

Driver Switch 2

Sales Volume Growth 7.0% 6.0% 5.0% 4.0% 3.0%

Best Case 9.0% 8.0% 7.0% 6.0% 4.0%

Base Case 7.0% 6.0% 5.0% 4.0% 3.0%
Worst Case 5.0% 4.0% 3.0% 2.0% 1.0%

Pricing Increases 12.0% 9.0% 8.0% 4.0% 2.0%

Best Case 13.0% 10.0% 9.0% 6.0% 4.0%

Base Case 12.0% 9.0% 8.0% 4.0% 2.0%
Worst Case 8.0% 7.0% 5.5% 2.5% –

Capital Expenditure 8,500 8,000 7,500 7,500 7,000

Best Case 6,500 6,000 5,500 5,500 4,000

Base Case 8,500 8,000 7,500 7,500 7,000
Worst Case 9,500 9,000 8,000 8,000 7,500
Other Inputs

All figures in USD thousands unless stated 2023F 2024F 2025F 2026F 2027F

Working Capital
Accounts Receivable (Days) 40 40 40 40 40
Inventory (Days) 25 25 25 25 25
Accounts Payable (Days) 34 34 34 34 34

Other Annual Inputs

Inflation Rate 5.0% 5.0% 3.0% 2.0% 2.0%
Term Debt Increase / (Decrease) (4,000) (4,000) (4,000) (4,000) (4,000)
Common Equity Increase / (Decrease) – (5,000) (5,000) – –

Dates Taxes
First Year of Forecast (YYYY) 2023 Tax Rate 31%
Days in Period 365 First Year Tax Depreciation 50%
Blended Tax Depreciation Rate 15.0%
Tax Basis for Assets (End of 2022) 92,164
Other Single Inputs Tax Losses (End of 2022) 69,512
Plant Capacity (Units/Day) 2,000
Dividend Payout Ratio 35%

Interest Rates Depreciation

Cash Balances 1.5% First Year Accounting Depreciation 50%
Revolving Credit Line 4.0% Useful Life: Existing Assets (Years) 10.00
Long Term Debt 6.0% Useful Life: New Assets (Years) 15.00
Income Statement

All figures in USD thousands unless stated 2020A 2021A 2022A 2023F 2024F 2025F 2026F 2027F
Model Running: Base Case Drivers

Inflation 2.5% 3.5% 4.5% 5.0% 5.0% 3.0% 2.0% 2.0%

Revenue 30,628 34,847 47,365 49,734 52,220 53,787 54,863 55,960

COGS (31,457) (32,866) (35,566) (37,344) (39,211) (40,388) (41,195) (42,019)
Gross Profit (829) 1,981 11,800 12,390 13,009 13,399 13,667 13,941

SG&A (1,284) (1,329) (1,389) (1,458) (1,531) (1,577) (1,609) (1,641)

Other (750) (776) (811) (852) (894) (921) (940) (958)
EBITDA (2,863) (124) 9,600 10,080 10,584 10,901 11,119 11,342

Depreciation (9,234) (9,861) (10,245) (10,757) (11,295) (11,634) (11,867) (12,104)

EBIT (12,097) (9,985) (645) (677) (711) (733) (747) (762)

Interest Expense (2,400) (2,160) (1,920) (2,016) (2,117) (2,180) (2,224) (2,268)
Interest Income 171 33 14 15 15 16 16 16
EBT (14,325) (12,112) (2,551) (2,679) (2,813) (2,897) (2,955) (3,014)

Current Tax – – – – – – – –
Deferred Tax – – – – – – – –
Total Tax (14,325) (12,112) (2,551) (2,679) (2,813) (2,897) (2,955) (3,014)

Net Income (28,651) (24,224) (5,103) (5,358) (5,626) (5,795) (5,910) (6,029)
Cash Flow Statement

All figures in USD thousands unless stated 2020A 2021A 2022A 2023F 2024F 2025F 2026F 2027F
Model Running: Base Case Drivers

CASH FROM OPERATIONS

Net Income (28,651) (24,224) (5,103) (5,358) (5,626) (5,795) (5,910) (6,029)
Deferred Taxes - - - - - - - -
Depreciation 9,234 9,861 10,245 10,757 11,295 11,634 11,867 12,104
Cash From Accounts Receivable (600) (525) 212
Cash From Inventory (400) (131) (86)
Cash From Accounts Payable (260) 181 114
Subtotal (20,677) (14,838) 5,382 5,399 5,669 5,839 5,956 6,075

CASH FROM INVESTING

Capital Expenditure (7,125) (7,265) (7,482)
Subtotal (7,125) (7,265) (7,482) - - - - -

CASH FROM FINANCING

Change in Long-Term Debt (4,000) (4,000) (4,000)
Change in Revolving Credit Line - - 2,000
Change in Common Equity - 13,000 -
Dividends - - -
Subtotal (4,000) 9,000 (2,000) - - - - -

CASH BALANCE
Beginning of the Year 20,165
Increase / (Decrease) (31,802) (13,103) (4,100) 5,399 5,669 5,839 5,956 6,075
End of the Year (11,637) (13,103) (4,100) 5,399 5,669 5,839 5,956 6,075
Balance Sheet

All figures in USD thousands unless stated 2020A 2021A 2022A 2023F 2024F 2025F 2026F 2027F
Model Running: Base Case Drivers

ASSETS

Cash
Accounts Receivable 5,008 5,533 5,321
Inventories 1,892 2,023 2,109
Total Current Assets

Property Plant & Equipment 118,411 115,815 113,052

Total Assets

LIABILITIES

Accounts Payable 3,024 3,205 3,319

Revolving Credit Line – – 2,000
Total Current Liabilities

Deferred Taxes 6,290 6,290 6,290

Long-Term Debt 40,000 36,000 32,000
Total Liabilities

EQUITY

Common Equity 55,138 68,138 68,138

Retained Earnings 23,548 11,436 8,885
Total Shareholders' Equity

Total Liabilities & Equity

Check – – – – – – – –
Revenue Schedule

All figures in USD thousands unless stated 2020A 2021A 2022A 2023F 2024F 2025F 2026F 2027F
Model Running: Base Case Drivers

OPERATIONS

Sales Volume Growth 5.3% 19.2% 7.0% 6.0% 5.0% 4.0% 3.0%

Sales Volume (Units/Day) 1,234 1,300 1,550 1,659 1,758 1,846 1,920 1,977
Plant Capacity (Units/Day) 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000
Operational Efficiency 61.7% 65.0% 77.5% 82.9% 87.9% 92.3% 96.0% 98.9%

VOLUME

Days in Period 365 365 365 365 365 365 365 365
Sales Volume (Units/Day) 1,234 1,300 1,550 1,659 1,758 1,846 1,920 1,977
Sales Volume (Units) 450,410 474,500 565,750 605,353 641,674 673,757 700,708 721,729

PRICING

Pricing Increases 8.0% 14.0% 12.0% 9.0% 8.0% 4.0% 2.0%

Unit Price (USD/Unit) 68.00 73.44 83.72 93.77 102.21 110.38 114.80 117.10

REVENUE

Sales Volume (Units) 450,410 474,500 565,750 605,353 641,674 673,757 700,708 721,729
Sales Price (USD/Unit) 68.00 73.44 83.72 93.77 102.21 110.38 114.80 117.10
Revenue 30,628 34,847 47,365 56,763 65,584 74,372 80,441 84,511

Operational Capacity Exceeded? No No No No No No No No

Cost Schedule

All figures in USD thousands unless stated 2020A 2021A 2022A 2023F 2024F 2025F 2026F 2027F
Model Running: Base Case Drivers

Sales Volume 450,410 474,500 565,750 605,353 641,674 673,757 700,708 721,729
Inflation 2.5% 3.5% 4.5% 5.0% 5.0% 3.0% 2.0% 2.0%

VARIABLE COSTS

Materials (USD/Unit) 11.12 11.51 12.03 12.63 13.26 13.66 13.93 14.21
Packaging (USD/Unit) 1.25 1.29 1.35 1.42 1.49 1.54 1.57 1.60
Subtotal 12.37 12.80 13.38 14.05 14.75 15.19 15.50 15.81

Materials 5,009 5,461 6,804 7,645 8,509 9,202 9,761 10,255

Packaging 563 614 765 859 956 1,034 1,097 1,153
Subtotal 5,572 6,075 7,569 8,504 9,465 10,236 10,859 11,408

FIXED COSTS

Labor (USD/Unit) 38.15 37.48 32.85 32.24 31.93 31.32 30.72 30.42
Utilities (USD/Unit) 19.32 18.98 16.64 16.33 16.17 15.86 15.56 15.41
Subtotal 57.47 56.46 49.49 48.56 48.10 47.19 46.28 45.83

Labor 17,183 17,784 18,585 19,514 20,490 21,104 21,526 21,957

Utilities 8,702 9,007 9,412 9,882 10,377 10,688 10,902 11,120
Subtotal 25,885 26,791 27,997 29,396 30,866 31,792 32,428 33,077

SUMMARY

Variable Costs (USD/Unit) 12.37 12.80 13.38 14.05 14.75 15.19 15.50 15.81
Fixed Costs (USD/Unit) 57.47 56.46 49.49 48.56 48.10 47.19 46.28 45.83
Total Costs (USD/Unit) 69.84 69.26 62.86 62.61 62.85 62.38 61.78 61.64

Variable Costs 5,572 6,075 7,569 8,504 9,465 10,236 10,859 11,408
Fixed Costs 25,885 26,791 27,997 29,396 30,866 31,792 32,428 33,077
Total Costs 31,457 32,866 35,566 37,900 40,331 42,029 43,287 44,485
Working Capital Schedule

All figures in USD thousands unless stated 2020A 2021A 2022A 2023F 2024F 2025F 2026F 2027F
Model Running: Base Case Drivers

Days in Period 365 365 365 365 365 365 365 365
Revenue 30,628 34,847 47,365 49,734 52,220 53,787 54,863 55,960
COGS 31,457 32,866 35,566 37,344 39,211 40,388 41,195 42,019

AMOUNTS PER DAY

Accounts Receivable (Days) 60 58 41 40 40 40 40 40
Inventory (Days) 22 22 22 25 25 25 25 25
Accounts Payable (Days) 35 36 34 34 34 34 34 34

TOTAL AMOUNTS
Accounts Receivable 5,008 5,533 5,321 5,450 5,723 5,894 6,012 6,133
Inventory 1,892 2,023 2,109 2,558 2,686 2,766 2,822 2,878
Accounts Payable 3,024 3,205 3,319 3,479 3,653 3,762 3,837 3,914

CASH CHANGES
Accounts Receivable (525) 212 (129) (273) (172) (118) (120)
Inventory (131) (86) (449) (128) (81) (55) (56)
Accounts Payable 181 114 160 174 110 75 77
Cash from Working Capital Items (475) 240 (418) (226) (143) (98) (100)
Depreciation Schedule

All figures in USD thousands unless stated 2022A 2023F 2024F 2025F 2026F 2027F
Model Running: Base Case Drivers

Capital Expenditure 8,500 8,000 7,500 7,500 7,000

EXISTING ASSETS 1 Percent of Full Year

Useful Life (Years) 10.00 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
PP&E (End of 2022) 113,052 100% 100% 100% 100% 100%

Percent of Full Year

NEW ASSETS 1
Year Life 2023F 2024F 2025F 2026F 2027F
Useful Life (Years) 15.00 2023F 15.00 50% 100% 100% 100% 100%
First Year Amount 50% 2024F 15.00 – 50% 100% 100% 100%
2025F 15.00 – – 50% 100% 100%
2026F 15.00 – – – 50% 100%
2027F 15.00 – – – – 50%

Amounts for Depreciation

Year Capex Per Yr 2023F 2024F 2025F 2026F 2027F
2023F 8,500 567 283 567 567 567 567
2024F 8,000 533 – 267 533 533 533
2025F 7,500 500 – – 250 500 500
2026F 7,500 500 – – – 250 500
2027F 7,000 467 – – – – 233

TOTAL ASSET DEPRECIATION 2

Existing Assets 11,305 11,305 11,305 11,305 11,305
New Assets 283 833 1,350 1,850 2,333
Total Depreciation 11,589 12,139 12,655 13,155 13,639

All PP&E and capital expenditure is assumed depreciable (i.e. no land balance). ⁽¹⁾
This schedule calculates depreciation on a straight-line basis. ⁽²⁾
Asset Schedule

All figures in USD thousands unless stated 2022A 2023F 2024F 2025F 2026F 2027F
Model Running: Base Case Drivers

Capital Expenditure 8,500 8,000 7,500 7,500 7,000

First Year Tax Depreciation 50%

Blended Tax Depreciation Rate 15.0%

PROPERTY PLANT & EQUIPMENT 1

Beginning 113,052 109,964 105,825 100,670 95,015
Capital Expenditure 8,500 8,000 7,500 7,500 7,000
Accounting Depreciation (11,589) (12,139) (12,655) (13,155) (13,639)
Ending 113,052 109,964 105,825 100,670 95,015 88,376

TAX BASIS 1
Beginning 92,164 86,202 80,672 75,508 71,120
Capital Expenditure 8,500 8,000 7,500 7,500 7,000
Tax Depreciation (14,462) (13,530) (12,663) (11,889) (11,193)
Ending 92,164 86,202 80,672 75,508 71,120 66,927

Model assumes no dispositions that would impact the PP&E or the Tax Basis. ⁽¹⁾
Income Tax Schedule

All figures in USD thousands unless stated 2022A 2023F 2024F 2025F 2026F 2027F
Model Running: Base Case Drivers

Earnings Before Tax (EBT) (2,679) (2,813) (2,897) (2,955) (3,014)

Profitable Before Taxes? No No No No No

Tax Rate 31%

Unused Tax Losses Remaining? Yes

ADJUSTMENT FOR DEPRECIATION

EBT (2,679) (2,813) (2,897) (2,955) (3,014)
Add: Accounting Depreciation 11,589 12,139 12,655 13,155 13,639
Less: Tax Depreciation (14,462) (13,530) (12,663) (11,889) (11,193)
EBT After Adjustment (5,552) (4,205) (2,905) (1,689) (569)

ADJUSTMENT FOR TAX LOSSES 1

EBT After Adjustment (5,552) (4,205) (2,905) (1,689) (569)
Less: Use of Tax Losses 2 – – – – –
Taxable Income – – – – –

TAX LOSSES
Beginning 69,512 72,191 75,004 77,901 80,856
Add: New Losses 2,679 2,813 2,897 2,955 3,014
Less: Use of Tax Losses – – – – –
Ending 69,512 72,191 75,004 77,901 80,856 83,871

TAXES
Current Taxes – – – – –
Deferred Taxes – – – – –
Total Taxes – – – – –

This schedule assumes that tax losses can be carried forward indefinitely into the future. ⁽¹⁾
This schedule assumes losses do not carry back to previous periods to reduce taxable income. ⁽²⁾
Debt Schedule: Part 1

All figures in USD thousands unless stated 2022A 2023F 2024F 2025F 2026F 2027F
Model Running: Base Case Drivers

CASH

Beginning Balance
Increase / (Decrease)
Ending Balance

Interest Rate Circularity 1.5% 1.5% 1.5% 1.5% 1.5%

Interest Income Off

LONG TERM DEBT

Beginning Balance 32,000 28,000 24,000 20,000 16,000

Increase / (Decrease) (4,000) (4,000) (4,000) (4,000) (4,000)
Ending Balance 32,000 28,000 24,000 20,000 16,000 12,000

Interest Rate 6.0% 6.0% 6.0% 6.0% 6.0%

Interest Expense 1,800 1,560 1,320 1,080 840
Debt Schedule: Part 2

All figures in USD thousands unless stated 2022A 2023F 2024F 2025F 2026F 2027F
Model Running: Base Case Drivers

AVAILABLE CASH

Beginning Cash Balance

Cash from Operations
Cash from Investing
Change in Long-Term Debt
Change in Common Equity
Dividends
Cash Available for Revolving Credit Line

REVOLVING CREDIT LINE

Beginning Balance
Increase / (Decrease)
Ending Balance

Interest Rate Circularity 4.0% 4.0% 4.0% 4.0% 4.0%

Interest Expense Off

Interest Expense
Less: Interest Income
Net Interest Expense
Equity Schedule

All figures in USD thousands unless stated 2022A 2023F 2024F 2025F 2026F 2027F
Model Running: Base Case Drivers

COMMON EQUITY

Beginning Balance 68,138 68,138 63,138 58,138 58,138

Increase / (Decrease) – (5,000) (5,000) – –
Ending Balance 68,138 68,138 63,138 58,138 58,138 58,138

Net Income
Payout Ratio 35.0% 35.0% 35.0% 35.0% 35.0%
Dividend

RETAINED EARNINGS

Beginning Balance 8,885 3,527 (2,099) (7,893) (13,804)

Net Income (5,358) (5,626) (5,795) (5,910) (6,029)
Dividends – – – – –
Ending Balance 8,885 3,527 (2,099) (7,893) (13,804) (19,833)