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3c Case Study IDEKO Workbook - CASE STUDY

The document contains 10 tables that provide estimated 2005 financial data and projections for Ideko Corporation, including income statements, balance sheets, ratios compared to competitors, assumptions for sales, costs, capital expenditures, debt, working capital, and free cash flow. Key details include Ideko's 2005 net income of $6.9 million, projected sales growth, capital investments of $5 million annually, $100 million in outstanding debt, and forecasts for working capital and free cash flow through 2010.

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Tiffany Sandjong
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115 views8 pages

3c Case Study IDEKO Workbook - CASE STUDY

The document contains 10 tables that provide estimated 2005 financial data and projections for Ideko Corporation, including income statements, balance sheets, ratios compared to competitors, assumptions for sales, costs, capital expenditures, debt, working capital, and free cash flow. Key details include Ideko's 2005 net income of $6.9 million, projected sales growth, capital investments of $5 million annually, $100 million in outstanding debt, and forecasts for working capital and free cash flow through 2010.

Uploaded by

Tiffany Sandjong
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Table 1.

Estimated 2005 Income Statement and Balance Sheet


Data for Ideko Corporation

Income Statement ($ 000) Year 2005 Balance Sheet ($ 000)

1 Sales 75,000 Assets


2 Cost of Goods Sold 1 Cash and Equivalents
3 Raw Materials - 16,000 2 Accounts Receivable
4 Direct Labor Costs - 18,000 3 Inventories
5 Gross Profit 41,000 4 Total Current Assets
6 Sales and Marketing - 11,250 5 Property, Plant, and Equipment
7 Administrative - 13,500 6 Goodwill
8 EBITDA 16,250 7 Total Assets
9 Depreciation - 5,500 Liabilities and Stockholders' Equity
10 EBIT 10,750 8 Accounts Payable
11 Interest Expense (net) - 75 9 Debt
12 Pretax Income 10,675 10 Total Liabilities
13 Income Tax - 3,736 11 Stockholders' Equity
14 Net Income 6,939 12 Total Liabilities and Equity

Table 2. Ideko financial ratios comparison


Mid 2005 - solution

Ideko Luxottica
Ratio (Proposed) Oakley, Inc. Group Nike, Inc.
P/E 21.6x 24.8× 28.0× 18.2x
EV/Sales 2.0x 2.0X 2.7× 1.5x
EV/EBITDA 9,1x 11.6x 14.4× 9.3x
EBITDA/Sales 21.7% 17.0% 18.5% 15.9%

Range Price (in $ million)


Multiple Low High Low High
P/E 18.2x 28.0x 126.3 194.3
EV/sales 1.4x 2.7x 107.0 204.5
EV/EBITDA 9.3x 14.4x 153.1 236.0
ce Sheet

Year 2005

12,664
18,493
6,165
37,322
49,500
-
86,822

4,654
4,500
9,154
77,668
86,822

Sporting
Goods
Industry
20.3x
1.4x
11.4x
12.1%
Table 3. Ideko Sales and Operating costs assumptions

Year 2005 2006 2007


Growth/year
Sales data
1 Market size (000 units)
2 Market Share
3 Average Sales Price (S/unit)
Cost of goods data
1 Raw Materials (S/unit)
2 Direct Labor Costs (S/unit)
Operating expenses and sales data
1 Sales and Marketing (% sales) 15.0% 16.50% 18.00%
2 Administrative (% sales) 18.0% 15.00% 15.00%
3 Tax Rate 35% 35% 35%

Table 4. Ideko Capital Expenditures assumptions

2005 2006 2007

Fixed Assets and Capital Investment ($ 000)


1 Opening Book Value 50,000 49,500 49,050
2 Capital Investment 5,000 5,000 5,000
3 Depreciation - 5,500 - 5,450 - 5,405
4 Closing Book Value 49,500 49,050 48,645

Table 5. Ideko planned Debt and Interest payment

2005 2006 2007

Debt and Interest Table (S 000)


1 Outstanding Debt 100,000 100,000 100,000
2 Interest on Term Loan 6.8% 6,800 6,800 6,800

Table 7. Ideko proforma income statement, 2005 - 2010

Year 2005 2006 2007


Income Statement ($ 000)
1 Sales - - -
2 Cost of Goods Sold
3 Raw Materials
4 Direct Labor Costs
5 Gross Profit
6 Sales and Marketing
7 Administrative
8 EBITDA
9 Depreciation
10 EBIT
11 Interest Expense (net)
12 Pretax Income
13 Income Tax
14 Net Income

Table 9. Ideko's Net Working Capital Forecast

Year 2005 2006 2007

Working Capital (S 000)


Assets
1 Accounts Receivable
2 Raw Materials
3 Finished Goods
4 Minimum Cash Balance
5 Total Current Assets
Liabilities
6 Wages Payable
7 Other Accounts Payable
8 Total Current Liabilities
Net Working Capital
9 Net Working Capital (5-8)
10 Increase in Net Working Capital

Table 10. Ideko's Free Cash Flow Forecast

Year 2005 2006 2007

Free Cash Flow ($ 000)


1 Net Income
2 Plus: After-Tax Interest Expense
3 Unlevered Net Income
4 Plus: Depreciation
5 Less: Increases in NWC
6 Less: Capital Expenditures
7 Free Cash Flow of Firm
8 Plus: Net Borrowing
9 Less: After-Tax Interest Expense
10 Free Cash Flow to Equity
assumptions

2008 2009 2010

19.50% 20.00% 20.00%


14.00% 13.00% 13.00%
35% 35% 35%

umptions

2008 2009 2010

48,645 61,780 69,102


20,000 15,000 8,000
- 6,865 - 7,678 - 7,710
61,780 69,102 69,392

t payment Table 6. Sources and uses of fund

2008 2009 2010 Acquistion financing ($ 000)


Sources
1 New Term Loan 100,000
115,000 120,000 120,000 2 Excess Ideko Cash 6,500
7,820 8,160 8,160 3 KKP Equity Investment 53,000
4 Total Sources of Funds 159,500

t, 2005 - 2010

2008 2009 2010 Table 8. Ideko's Working Cap


Working Capital Days
- - - Assets
1 Accounts Receivable
2 Raw Materials
3 Finished Goods
4 Minimum Cash Balance
Liabilities
5 Wages Payable
6 Other Accounts Payable

Forecast

2008 2009 2010

recast

2008 2009 2010


ources and uses of funds for Ideko acquisition

Uses
Purchase Ideko Equity 150000
Repay Existing Ideko Debt 4500
Advisory and Other Fees 5000
Total Uses of Funds 159,500

8. Ideko's Working Capital Requirements


2005 >2005
Based on: Days Days
Sales Revenue 90 60
Raw Materials Costs 45 30
Raw Materials + Labor Costs 45 45
Sales Revenue 30 30

Direct Labor + Admin Costs 15 15


Raw Materials + Sales and Marketing 45 45

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