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Financial Management Report
Demo Company
Private Equity Scenario #1a-1
(Dollars and Shares in Thousands, Except Per Share Amounts)

  Actual   Forecast   Forecast
 12 Months
12/31/96		  12 Months
12/31/97		  12 Months
12/31/98		  12 Months
12/31/99		  3 Months
03/31/00		  12 Months
12/31/00		  12 Months
12/31/01		  12 Months
12/31/02		  12 Months
12/31/03		  12 Months
12/31/04		  
 
1.    Working Capital Management:                   
                   
Net Working Capital:                   
                   
Current Assets$12,284  $10,421  $10,527  $12,717  $13,099  $13,670  $14,658  $15,687  $16,997  $18,603 
Current Liabilities(5,269)  (9,696)  (5,231)  (6,715)  (6,595)  (10,195)  (7,738)  (9,383)  (10,720)  (15,851) 
 
Net Working Capital$7,015  $725  $5,296  $6,002  $6,504  $3,475  $6,920  $6,304  $6,277  $2,752 
 
                   
                   
Current Ratio:                   
                   
Current Assets, divided by Current Liabilities2.33  1.07  2.01  1.89  1.99  1.34  1.89  1.67  1.59  1.17 
                   
                   
Quick Ratio:                   
                   
Cash plus Accounts Receivable divided by Current Liabilities1.47  0.65  1.23  1.10  1.03  0.77  1.09  0.97  0.92  0.68 
                   
                   
Net Working Capital Turnover:                   
                   
Net Sales, divided by Net Working Capital4.46  46.70  6.17  6.50  5.23  12.02  6.52  7.73  8.46  21.23 
                   
                   
2.    Asset Management:                   
                   
Number of Days Sales in Accounts Receivable                   
                   
Accounts Receivable, divided by Net Sales/36554.2  62.2  63.5  63.0  65.5  63.0  63.0  63.0  63.0  63.0 
                   
                   
Number of Days Cost of Goods Sold in Inventory                   
                   
Inventory, divided by Cost of Goods Sold / 36563.8  53.5  57.9  65.0  88.7  65.0  65.0  65.0  65.0  65.0 
                   
                   
Capital Expenditures (Net):                   
                   
Ending Property, Plant and Equipment, minus Beginning Property, Plant and Equipment$987  $2,128  $1,818  $3,210  $532  $3,210  $3,210  $3,210  $3,210  $3,210 
                   
                   
Depreciation (Net):                   
                   
Ending Accumulated Depreciation, minus Beginning Accumulated Depreciation$1,395  $1,176  $1,224  $1,592  $531  $1,592  $1,592  $1,592  $1,592  $1,592 
                   
                   
Net Property, Plant and Equipment:                   
                   
Property, Plant and Equipment, minus Accumulated Depreciation$10,205  $11,157  $11,751  $13,369  $13,370  $14,987  $16,605  $18,223  $19,841  $21,459 
                   
                   
Fixed Asset Turnover:                   
                   
Net Sales, divided by Net Property, Plant and Equipment3.07  3.04  2.78  2.92  2.54  2.79  2.72  2.67  2.68  2.72 
                   
                   
Total Asset Turnover:                   
                   
Net Sales, divided Total Assets1.38  1.54  1.44  1.46  1.26  1.37  1.36  1.36  1.38  1.41 
                   
                   
3.    Liabilities Management:                   
                   
Number of Days Cost of Goods Sold in Accounts Payable                   
                   
Accounts Payable, divided by Cost of Goods Sold / 36528.4  31.1  24.0  30.0  31.0  30.0  30.0  30.0  30.0  30.0 
                   
                   
Number of Days Operating Expenses in Accrued Expenses:                   
                   
Accrued Expenses, divided by Operating Expenses / 365221.4  213.4  163.2  165.0  170.0  165.0  165.0  165.0  165.0  165.0 
                   
                   
Current Maturities:                   
                   
Current Maturities of Long Term Debt$653  $5,049  $1,744  $2,327  $2,327  $2,327  $2,327  $2,327  $2,327  $2,327 
                   
                   
Long Term Liabilities, as % of Total Assets:                   
                   
Total Long Term Liabilities, divided by Total Assets21.3%  68.5%  77.5%  64.8%  64.3%  49.6%  50.4%  40.3%  31.4%  13.9% 
                   
                   
Total Liabilities, as % of Total Assets:                   
                   
Total Liabilities, divided by Total Assets44.5%  112.7%  100.6%  89.8%  88.6%  83.1%  73.7%  66.5%  59.3%  52.0% 
                   
                   
Debt-to-Worth Ratio:                   
                   
Total Liabilities, divided by Owners' Equity0.80  (8.90)  (170.04)  8.85  7.79  4.91  2.80  1.98  1.46  1.09 
                   
                   
4.    Profitability Management:                   
                   
Gross Margin on Sales:                   
                   
Net Sales, minus Cost of Goods Sold$8,872  $8,639  $8,923  $11,250  $2,380  $11,279  $12,316  $13,643  $14,924  $16,358 
                   
                   
Gross Margin %:                   
                   
Gross Margin on Sales, divided by Net Sales28.4%  25.5%  27.3%  28.8%  28.0%  27.0%  27.3%  28.0%  28.1%  28.0% 
                   
                   
Operating Earnings:                   
                   
Gross Margin on sales, minus Operating Expenses$4,820  $4,361  $4,619  $6,595  $1,205  $5,514  $6,135  $6,968  $7,701  $8,471 
                   
                   
Operating Earnings %:                   
                   
Operating Earnings, divided by Net Sales15.4%  12.9%  14.1%  16.9%  14.2%  13.2%  13.6%  14.3%  14.5%  14.5% 
                   
                   
Earnings Before Interest, Taxes, Depreciation and Amortization of Intangible Assets (Referred to as "EBITDA")                   
                   
Net Earnings, plus Interest Expense, plus Income Tax Expense, plus Depreciation, plus Amortization of Intangible Assets ("EBITDA")$5,493  $5,450  $6,120  $8,697  $1,936  $7,416  $8,037  $8,870  $9,603  $10,373 
                   
                   
EBITDA as % of Net Sales:                   
                   
EBITDA, divided by Net Sales17.6%  16.1%  18.7%  22.3%  22.8%  17.8%  17.8%  18.2%  18.1%  17.8% 
                   
                   
Earnings Before Income Taxes:                   
                   
Net Earnings, plus Income Taxes$3,635  $2,718  $3,007  $4,763  $964  $4,030  $4,334  $5,424  $6,072  $7,116 
                   
                   
Net Earnings Per Share:                   
                   
Net Earnings, divided by Common Shares Outstanding$21.51  $25.17  $30.07  $47.63  $9.64  $24.18  $26.00  $32.54  $36.43  $42.70 
                   
                   
Earnings Before Income Taxes as % of Net Sales:                   
                   
Earnings Before Income Taxes, divided by Net Sales11.6%  8.0%  9.2%  12.2%  11.3%  9.7%  9.6%  11.1%  11.4%  12.2% 
                   
                   
Net Earnings as % of Net Sales:                   
                   
Net Earnings, divided by Net Sales6.9%  7.4%  9.2%  12.2%  11.3%  5.8%  5.8%  6.7%  6.9%  7.3% 
                   
                   
5.    Debt Management:                   
                   
Senior Interest Expense:                   
                   
Interest on Line of Credit, plus Interest on Term Loan$363  $1,456  $1,789  $2,142  $391  $1,794  $1,581  $1,299  $1,184  $1,035 
                   
                   
Non-Senior Interest Expense:                   
                   
Interest on Subordinated Debt$0  $0  $0  $0  $0  $0  $480  $480  $480  $480 
                   
                   
Total Interest Expense:                   
                   
Senior Interest Expense, plus Non-Senior Interest Expense$363  $1,456  $1,789  $2,142  $391  $1,794  $2,061  $1,779  $1,664  $1,515 
                   
                   
EBITDA Coverage of Senior Interest Expense:                   
                   
EBITDA, divided by Senior Interest Expense15.13  3.74  3.42  4.06  4.95  4.13  5.08  6.83  8.11  10.02 
                   
                   
EBITDA Coverage of Total Interest Expense:                   
                   
EBITDA, divided by Total Interest Expense15.13  3.74  3.42  4.06  4.95  4.13  3.90  4.99  5.77  6.85 
                   
                   
Required Debt Service:                   
                   
Total Interest Expense, plus Current Maturities$1,016  $6,505  $3,533  $4,469  $2,718  $4,121  $4,388  $4,106  $3,991  $3,842 
                   
                   
EBITDA Coverage of Required Debt Service:                   
                   
EBITDA, divided by Required Debt Service5.41  0.84  1.73  1.95  0.71  1.80  1.83  2.16  2.41  2.70 
                   
                   
EBITDA minus Capex, divided By Required Debt Service:                   
                   
EBITDA minus Capital Expenditures, divided by Required Debt Service4.44  0.51  1.22  1.23  0.52  1.02  1.10  1.38  1.60  1.86 
                   
                   
Free Cash Flow:                   
                   
Net Earnings, plus Depreciation minus Capital Expenditures, minus Dividends$2,559  $(11,091)  $2,051  $1,240  $353  $800  $982  $1,636  $2,025  $2,652 
                   
                   
Cash Available for Debt Service:                   
                   
Free Cash Flow, plus Total Interest Expense$2,922  $(9,635)  $3,840  $3,382  $744  $2,594  $3,043  $3,415  $3,689  $4,167 
                   
                   
Debt Service Coverage:                   
                   
Cash Available for Debt Service, divided by Required Debt Service2.88  (1.48)  1.09  0.76  0.27  0.63  0.69  0.83  0.92  1.08 
                   
                   
6.    Estimated Bank Credit Availability:                   
                   
Borrowing Base Assets:                   
                   
Accounts Receivable$4,647  $5,766  $5,685  $6,738  $6,100  $7,210  $7,787  $8,410  $9,167  $10,083 
Inventory3,916  3,693  3,769  4,949  5,950  5,430  5,841  6,247  6,800  7,490 
Property, Plant and Equipment (Net)10,205  11,157  11,751  13,369  13,370  14,987  16,605  18,223  19,841  21,459 
                   
                   
Estimated Borrowing Base %:                   
                   
Accounts Receivable80.0%  80.0%  80.0%  80.0%  80.0%  80.0%  80.0%  80.0%  80.0%  80.0% 
Inventory35.0%  35.0%  35.0%  35.0%  35.0%  35.0%  35.0%  35.0%  35.0%  35.0% 
Property, Plant and Equipment50.0%  50.0%  50.0%  50.0%  50.0%  50.0%  50.0%  50.0%  50.0%  50.0% 
                   
                   
Estimated Amount Available to Borrow:                   
                   
Accounts Receivable$3,718  $4,613  $4,548  $5,390  $4,880  $5,768  $6,230  $6,728  $7,334  $8,066 
Inventory1,371  1,293  1,319  1,732  2,082  1,900  2,044  2,186  2,380  2,622 
Property, Plant and Equipment5,102  5,578  5,876  6,684  6,685  7,494  8,302  9,112  9,920  10,730 
 
 $10,191  $11,484  $11,743  $13,806  $13,647  $15,162  $16,576  $18,026  $19,634  $21,418 
                   
                   
Loans Outstanding:                   
                   
Line of Credit$0  $0  $0  $0  $0  $2,756  $(79)  $1,156  $1,990  $6,502 
Current Maturities653  5,049  1,744  2,327  2,327  2,327  2,327  2,327  2,327  2,327 
Term Loan2,986  14,742  17,476  17,396  17,396  15,069  12,742  10,415  8,088  5,761 
 
 $3,639  $19,791  $19,220  $19,723  $19,723  $20,152  $14,990  $13,898  $12,405  $14,590 
                   
                   
Estimated Net Bank Borrowing Availability:                   
                   
Estimated Amount Available to Borrow, minus Loans Outstanding$6,552  $(8,307)  $(7,477)  $(5,917)  $(6,076)  $(4,990)  $1,586  $4,128  $7,229  $6,828