Butler Lumber - ButlerLumber CaseAnalysis...

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Click to edit Master subtitle style  10/21/10 Butler Lumber Case Analysis Jon Sadow & Mike Samuels
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 10/21/10 Company Background Founded in 1981 as a partnership between Mark Butler  & Henry Stark Butler used debt financing to buyout Stark’s share in 1989 Located in a growing suburb of a large city in the  Pacific Northwest, Operations are limited to retail distribution of lumber  products Products include plywood, moldings, and sash and door 
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 10/21/10 Major Challenges 55% of sales come from April-September Seasonal cash needs Offer quantity discounts and credit terms of net 30 days  on open accounts Not currently taking advantage of 2/10 discounts Effective interest rate of not taking advantage of these  discounts is significantly more than than the 10-12% of  available debt
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 10/21/10 Historical Financial Performance 1988 1989 1990 Q1 1991 Sales $1,697 $2,013 $2,694 $718 Growth Rate 18.62% 33.83% Cost of Goods Sold (as % of Sales) 72.01% 71.39% 72.38% 72.70% Gross Profit $475 $576 $744 $196 Net Income $31 $34 $44 $9
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 10/21/10 Historic Balance Sheet 1988 1989 1990 Q1 1991 Cash $58 $49 $41 $31 Accounts receivable, net $171 $222 $317 $345 Inventory $239 $325 $418 $556 Total Current assets $468 $596 $776 $932 Property, net $126 $140 $157 $162 Total assets $594 $736 $933 $1,094 Notes payable, bank $0 $146 $233 $247 Notes payable, Mr. Stark $105 $0 $0 $0 Notes payable, trade $0 $0 $0 $157 Accounts payable $124 $192 $256 $243 Accrued expenses $24 $30 $39 $36 Long-term debt, current portion $7 $7 $7 $7 Total Current liabilities $260 $375 $535 $690 Long-term debt $64 $57 $50 $47 Total liabilities $324 $432 $585 $737 Net worth $270 $304 $348 $357 Total liabilities and Net Worth $594 $736 $933 $1,094
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 10/21/10 Current Debt Long term loan taken on to purchase Mr. Stark’s share  of the business $70K over 10 years, $7K each year at a rate of 11%
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