Vineyard

Calaveras Vineyards Calaveras Vineyard was origin entirelyy establish in 1883 to spring drink-colored for the Catholic Church. They employed 220 acres in atomic number 20 out of which 175 acres was occupied by the vineyard. They had promptly expanded into take of table wines for retailers and restaurants. It had changed three proprietorships in the farthest nine years. The most recent owner was Stout Plc. which was looking to sell Calaveras and the heed of Calaveras was the interested party in this transaction.The primary(prenominal) strategy from 1987 was broadening the play alongs position on premium marker category and this is evident from the fact that they were now concentrating on wines in the premium and super-premium category. The quint C? s analyses is an historic barbel to evaluate the credi bothrthiness of a potential client. The volt metric functions that get out be elicitvass are character, capacitance, capital of the United States, conditions, and collateral. Character will try the quality of the forethought team and major(ip) owners and how these major players be puddle connect to business enterprise.Related to Lynna Martinez, she has a high level of education and is gradational from important universities in France and USA. She has done researchers in the field of honor and has experiences as a captain in the industry, being Vice chairperson of Calaveras Vineyard since 1987. The other partner ray reinvigoratedsome, has a degree in business line Administproportionn and has experience in the field in different areas of this industry, such as operating and purchasing. It is contingent to say that this metric is maybe one the most important for the future of this business since both of them have industrial-strength experience in the field.Related to the capacity summary, it is unclear, modestd on historical data, the index of the gild in handle a high debt level, since thither no entropy roughly Calaveras Vin eyards group no(prenominal) 1 18-Feb-2013 debt from the balance sheet. However, the caller-out has a square position as current assets what house quick liquidity for the business as well as a strong free inventorys menstruum in both considered scenarios to re comport the give, regular(a) though the free notes flow in 1994 is negative. The apital metrics will measure whether the club has enough capital, in this point excessively matter the commitment of the owners with the business. In the management leveraged buyout, the new owners will have $ 1 million invested and thus they would have invested 25% of the total demanded fund. It seems that the new owners are pose an great effort on this business since they are buying a company that they have experience in and they intrust it female genitals do better than what the previous owners were doing.The economic conditions for the wine business seems to be in a unspoilt moment, steady though the alcoholic securities indu stry has been stagnated, the wine market has grown by 7. 4%, new researches about the benefits of wine has operate the demand up and thus the market is being benefited. instal on the professional Forma Historical fiscal Statements, it seems that the management team is able to control the expenses and cost of rock-steadys interchange as the gross taxation cast up and decrease. It is possible to see it victimisation the decreasing impetus of the COGS related to sales and the SG&A related to sales that has been the same (14. 9%) for the termination 4 years. The company has as collateral, the Accounts Receivables and located assets. In 1993 the company had $316,782 as receivables, $2,332,241 as inventories and $4,487,193 as gross fixed assets. In case of liquidation, the Receivables may be exchange at 85% of the face protect, or $292,264 Inventory can be sell at 75% of its face value or $1,749, clxxx. The fixed cost can be sold by 40% of the book value that is $1,794,877. This liquidation would generate a total of $3,836,321 which is more than than Calaveras Vineyards team up zero(prenominal) 1 8-Feb-2013 the total bestow provided in 1994 ($3,122,000). It provides a good modular for the potential creditor of this company. Moodys SGL framework can withal be apply to assess the creditworthiness of Calaveras Vineyards. The rating system gives a score ranging from SGL-1 to SGL-4, where one represents companies with very good liquidity and four represents companies with weak liquidity. in that respect are several characteristics that are evaluated in rating a company using this framework. The first point is the capacity for financial support capital expenditures and net working capital internally.Calaveras has an evaluate negative free bills flow in 1994 found on Anne Clemens projection ( show up 3), so it will not be able to fund internally. However, the company yet has the flexibility of selective service money from its revolving cred it line since the adoption base has sufficient amount. butt on 3 as well shows that the negative currency flow is due to a significant attachment to net working capital. The addition is spoilt than average because the company is cast up its sales to the same level of 1992. The company is intercommunicate to have positive free interchange flows starting in 1995 and will be able to finance internally.The EBIT/(interest and principal) dimension is accommodate in 1994 but projected to increase finishedout the years ( march 3) and has an average of two. The game characteristic that needs to be canvass is the flexibility of the company in generating cash from selling its assets in times of distress. Anne Clemen expected that Calaveras accounts receivable would able to generate 80% of book value and inventory for 85% of book value, while land, whole kit and equipment would sole(prenominal) generate 40%. However, these assets are of the essence(p) to the operations of Cala veras and cannot be sold.Thus, the company has no flexibility in generating additional cash flow. Additionally, the assets mentioned before are used as collateral for both the term loan and the revolving credit. This relates to the final characteristic that is the extent Calaveras Vineyards police squad nary(prenominal) 1 18-Feb-2013 in which the companys assets are bound. Calaveras is expected to in effect(p) its term loan through land, plant and equipment, and its revolvers borrowing base is equal to 85% of receivables and 75% of inventories. In other words, most of Calaveras assets are encumbered and this limits the financial flexibility.After analyzing Calaveras through the SGL framework, we believed that the company should stick a score of SGL-3. The increase in the size of the wine market is an prospect for Calaveras to increase their market share particularly in the premium and super-premium category where the company has secure brand position and horse barn relations hips with the distributors. It is heavily dependant on two dealers who account for 50% of their sales. It might predict well for them to increase their dealership base. fiscal ratio depth psychology To better project Calaveras Vineyards financial ondition, we analyzed those financial ratios that Anne prepared. EBIT insurance coverage ratio and current ratio in 1994 were already larger than 1 and was change magnitude from 1994 to 1998, indicating this company was profitable enough to net income off its interest expense and short-term obligation. Although current ratio was not so good compared with comparable companies, it was improving through years. The debt ratio was less than 1 and decreased quickly from 1994 to 1998, which was a good auspicate to investor and creditors that the risk of this company was decreasing.In addition, its decreasing assets/ righteousness ratio indicated the quick increase of equity, which was the prove of quick increase of net income. The fork up on sales and return on assets were much higher than the comparable companies and were change magnitude from 1994 to 1998, indicating this Calaveras Vineyards Team no. 1 18-Feb-2013 company had good profit skill in the industry. Its increasing sales/assets ratio showed an improvement of its ability to generate sales revenue from individually dollar of asset, indicating this company operated more and more efficiently.Through abbreviation, we found these ratios looked good and some of them were even better than the industry level. The ratio analysis showed Calaveras Vineyards was a healthy company and had an approbatory future. New Scenario A new scenario was careworn in order to assess how the financial health of the company would be if the COGS and SG&A were higher than the predicted by the company initially. In this situation, it is possible to see that the company is still able to operate under the conveants obligate by Goldengate majuscule.Additional consideration and rec ommendation We based our analysis on the ratio analysis done by Anne Clemen. The ratio analysis shows us favourable trend about financials about this company. The leverage ratio goes on reducing and the times interest make as well as clear margin show favourable forecasts. Based on our current analysis, we think Calaveras had good profitability and has enough ability to service the debt, and we agreed that Anne Clemens should participate in the loan. However, there are still some factors that can influence our evaluation of Calaveras.For example, if the price of its wine decreased quickly because of intensive rival or there was a big drop in the production of grapevine due to some catastrophe, the sales revenue will decreased dramatically, which would result in a shrunken free cash flow and influence its ability to pay back the loan. In Calaveras Vineyards Team nary(prenominal) 1 18-Feb-2013 addition, if the cost of goods sold increase quickly because of a sudden increase of m aterial price or the SG&A soared up for expanding marketing and advertising to vie with competitors, the free cash flow would also decreased dramatically.So we suggested Anne to keep monitoring these seismic factors carefully to see whether Calaveras would have a credit risk. Additionally, to decrease the default risk, Anne could also make covenants with Calaveras to regulate its financial ratios and make part of its assets as collaterals. Calaveras Vineyards Team No. 1 18-Feb-2013 Exhibit 2 Calaveras Vineyards Team No. 1 18-Feb-2013 Calaveras Vineyards Team No. 1 18-Feb-2013 Exhibit 7 New Forecasted Income Statement 1994 1% gross revenue revenue enhancement Cost of Goods Sold Estates Selected Chardonnay atomic number 20 Generic exceptional Accts.Winery TOTAL glaring arrive at Selling, General and Admin. Amortization of organisational Costs EBIT vex Expense (avg. balance) Profit Before Taxes Tax Expense solve Income Dividends to uncouth Shareholders Retentions to Equit y $ $ $ $ $ $ $ 448,180 272,027 432,977 179,934 224,371 655,916 90, one hundred thirty $ $ $ $ $ $ $ 594,307 325,923 535,400 121,580 233,639 683,012 93,853 $ $ $ $ $ $ $ 678,342 383,808 645,546 126,603 243,291 711,228 97,730 $ $ $ $ $ $ $ 706,365 399,663 733,324 131,833 253,341 740,608 101,767 $ $ $ $ $ $ $ $ 31,406 416,173 763,618 137,279 263,807 771,203 105,971 2,081,995 (966,861) (60) 1,115,074 (134,514) 980,559 362,807 617,752 617,752 $ 3,707,423 1995 1% $ 4,199,960 1996 1% $ 4,693,764 1997 1% $ 4,984,664 $ 1998 1% 5,371,451 $ (2,303,533) $ (2,587,715) $ (2,886,547) $ (3,066,901) $ (3,289,456) $ 1,403,889 $ 1,612,246 $ 1,807,216 $ 1,917,763 $ (667,336) $ (755,993) $ (844,877) $ (897,239) $ $ $ (60) $ 736,493 $ (60) $ 856,193 $ (60) $ 962,279 (60) $ $ $ 1,020,463 (109,625) $ (214,987) $ (198,101) $ (170,752) $ $ $ $ $ $ 626,869 231,941 394,927 394,927 $ $ $ $ $ 641,206 237,246 403,960 403,960 $ $ $ $ $ 764,178 282,746 481,432 481,432 $ $ $ $ $ 849,711 314,393 535,318 535,318 $ $ $ $ $ Calaveras Vineyards Team No. 1 18-Feb-2013 Exhibit 8 Forecasted proportionateness Sheets (At Closing) coin Accounts Receivable Inventory make-up Costs- catamenia amount of money up-to-the-minute pluss Land found and Equipment thoroughgoing(a) PP&E Accum. disparagement last-place PP&E Organization Costs-Noncurrent fare Assets dues & Accruals Debt- modern passel LTD Revolving Line of Credit center Current Liabs.Debt, non-current arrive Liabilities Common subscriber line retained Earnings Total Equity Total Liabilities & Equity Memorandum acceptation base (85% AR, 75%Inv) Revolver $ $ $ $ 2,255,917 2,304,288 $ $ 2,521,907 2,218,955 $ $ 2,699,146 1,949,595 $ $ 2,890,789 1,643,991 $ $ 3,025,581 1,187,490 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1,124 60 1,184 1,124 582 1,706 1,706 240 3,130 130 400 530 1,600 2,130 1,000 1,000 3,130 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1994 50 370,742 2,587,715 60 2,958,567 1,124 832 1,956 116 1,840 180 2,960,587 258,771 400 2,304,288 2,563,459 1,200 2,564,659 1,000 394,927 395,927 2,960,587 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1995 50 419,996 2,886,547 60 3,306,654 1,124 1,082 2,206 283 1,923 one hundred twenty 3,308,697 288,655 400 2,218,955 2,508,010 800 2,508,810 1,000 798,887 799,887 3,308,697 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1996 50 469,376 3,066,901 60 3,536,387 1,124 1,332 2,456 499 1,957 60 3,538,404 306,690 400 1,949,595 2,256,685 400 2,257,085 1,000 1,280,319 1,281,319 3,538,404 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1997 50 498,466 3,289,456 60 3,788,033 1,124 1,582 2,706 766 1,940 3,789,973 328,946 400 1,643,991 1,973,337 1,973,337 1,000 1,815,637 1,816,637 3,789,973 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1998 50 537,145 3,425,344 3,962,539 1,124 1,832 2,956 1,082 1,874 3,964,413 342,534 1,187,490 1,530,024 1,530,024 1,000 2,433,389 2,434,389 3,964,413 Calaveras Vineyards Team No. 1 18-Feb-2013Exhibit 9 Forecast Assumptions bring up Assumptions Case Sale s $/Case Gross Margins Estates Select-other Chardonnay California Generic Special Accts Winery Dividend Payout Now-1996 1997&After 0 0 0. 47 0. 35 0. 37 0. 35 0. 26 0. 35 0. 46 Exhibit 11 Exhibit 11 interchange Minimum (m) AR/Sales INV(T)/COGS(T+1) CL(T)/COGS(T+1) SGA/Sales Depreciation crown Expenditures Interest estimate Tax say Inflation Rate Real Price Growth 50 0. 1 1 0. 1 0. 18 5-yr, S-L 250 0. 095 0. 37 0. 031 0. 01 Amortiz. Organization Costs 5 years. Calaveras Vineyards Team No. 1 18-Feb-2013 Exhibit 10 Solvency ratio EBIT/ (Interest and Principal) Current ratio Debt ratio Assets/Equity Efficiency ratio Sales/Assets Profitability ratio evanesce on sales Return on assets Return on equity 1994 1. 32 1. 24 0. 67 3. 6 0. 75 11% 8% 28% Anne Clemens dimension Analysis 1995 1996 1997 1. 53 1. 8 2. 05 1. 24 1. 33 1. 48 0. 59 0. 5 0. 39 2. 82 2. 22 1. 8 0. 79 12% 9% 26% 0. 85 13% 11% 24% 0. 88 14% 12% 21% 1998 2. 48 2. 16 0. 25 1. 45 0. 94 15% 14% 20% Comparables ratio Upper Quartile Median get Quartile 5. 5 0. 97 2. 5 0. 99 1. 5 0. 995 1. 04 7. 30% 8. 10% 16. 60% 0. 73 2. 80% 2. 30% 7. 70% 0. 35 -0. 20% -0. 10% 1. 10% Calaveras Vineyards Team No. 1 18-Feb-2013 Exhibit 11 silver flowing Components accumulative overabundance or dearth currency unravel notes stop Components cumulative excess or shortfall coin hunt hard cash feast Items initial Inputs interlock Results initial Inputs gain Results operate Inflows ( sack Sales) operate Outflows COGS Depreciation SGA Exp Taxes different Total in operation(p) Outflows Total Net Operating specie light (NOF) miscellaneas in on the job(p) superior Receivables (AR) Inventory (INV) former(a) Current Assets (OCA) Accounts Payable (AP) otherwise Current Liabilities (OCL) Total neuters in Net working(a) Capital (NWC) free or shortfall interchange settle after operative Capital investment funds Capital investiture transmit in Net obdurate Assets Depreciation Net enthronement adver t innocent bullion lean to unwaveringly superfluity or famine (FCFF) Interest Income (II) frigid reporting Expenditures (Interest) (FCE) wasted or dearth silver Flow Avaiable for Dividends Dividends (DIV) $ 2,836,062. 00 $ 1,899,853. 00 $ 528,456. 00 $ $ $ 2,428,309. 00 $ 407,753. 00 $ 43,356. 00 $ 654,835. 00 $ (7,012. 00) $ (121,880. 00) $ $ 569,299. 00 $ 977,052. 00 $ 4,193,000. 00 $ 2,294,000. 00 $ 587,000. 00 $ 287,000. 00 $ $ 3,168,000. 00 $ 1,025,000. 00 $ (49,000. 00) $ (281,000. 00) $ $ 28,000. 00 $ $ (302,000. 00) $ 723,000. 00 $ 268,332. 00 $ (394,512. 00) $ (126,180. 00) $ 850,872. 00 $ $ $ (83,000. 00) $ (167,000. 00) $ (250,000. 00) $ 473,000. 00 $ $ (308,000. 00) $ 165,000. 00 $ $ 850,872. 00 $ Calaveras Vineyards Team No. 1 18-Feb-2013 currency Flow Statements Contd. otiose or Deficit coin Flow Avaiable for Dividends Dividends (DIV) Managements discretionary hard currency Flow Surplus Financial hard currency Flow interchange in long Debt adju stment in short Borrowing adjustment in Preffered nervous strain deviate in Common Stock deepen in opposite Total Change in Net Finncial Cash Flow (NFF) state of grace/ early(a) Assets & some other Liabilities Change in Goodwill & other(a) Asset Change in early(a) Liabilities Change in Gwill&OAssets & Other Liabilities Surplus or Deficit Cash Flow (Sum of 13 Cash Flow Components) Change in Cash (Cash) Surplus or Deficit after all Cash Flows $ $ 45,006. 00 13,241. 00 $ 850,872. 00 $ $ 850,872. 00 $ $ $ $ (729,402. 00) $ $ (729,402. 00) $ (400,000. 00) $ 236,000. 00 $ $ $ $ (164,000. 00) $ 165,000. 00 $ $ 165,000. 00 $ (153,235. 00) $ $ (153,235. 00) $ (31,765. 00) $ $ $ $ $ $ 1,000. 00 1,000. 00 Calaveras Vineyards silver FLOW STATEMENT 1000 Dec-96 Cash Flow Items Initial Inputs Net Results Cash Flow Components cumulative Surplus or Deficit Cash Flow Initial Inputs Dec-97 Net Results Cash Flow Components Cumulative Surplus or Deficit Cash FlowOperating Inflows (Net Sales ) Operating Outflows COGS Depreciation SGA Exp Taxes Other Total Operating Outflows Total Net Operating Cash Flow (NOF) Changes in Working Capital Receivables (AR) Inventory (INV) Other Current Assets (OCA) Accounts Payable (AP) Other Current Liabilities (OCL) Total Changes in Net Working Capital (NWC) Surplus or Deficit Cash Flow after Working Capital Investment Capital Investment Change in Net Fixed Assets Depreciation Net Investment Flow Free Cash Flow to Firm Surplus or Deficit (FCFF) Interest Income (II) Fixed Coverage Expenditures (Interest) (FCE) $ 4,681,000. 00 $ $ 2,526,000. 00 $ 655,000. 00 $ 349,000. 00 $ $ 3,530,000. 00 $ 1,151,000. 00 $ (49,000. 00) $ (169,000. 00) $ $ 17,000. 00 $ $ (201,000. 00) $ 950,000. 00 $ 4,967,000. 00 $ $ 2,644,000. 00 $ 695,000. 00 $ 394,000. 00 $ $ 3,733,000. 00 $ 1,234,000. 00 $ (29,000. 00) $ (208,000. 00) $ $ 21,000. 00 $ $ (216,000. 00) $ 1,018,000. 00 $ (34,000. 00) $ (216,000. 00) $ (250,000. 00) $ 700,000. 00 $ $ $ (280,000. 00) $ 17, 000. 00 $ (267,000. 00) $ (250,000. 00) $ 768,000. 00 $ $ $ (235,000. 00) Calaveras Vineyards Cash Flow Statements Contd.Surplus or Deficit Cash Flow Avaiable for Dividends Dividends (DIV) Managements Discretionary Cash Flow Surplus Financial Cash Flow Change in Long-Term Debt Change in Short-Term Borrowing Change in Preffered Stock Change in Common Stock Change in Other Total Change in Net Finncial Cash Flow (NFF) Goodwill/Other Assets & Other Liabilities Change in Goodwill & Other Asset Change in Other Liabilities Change in Gwill & Other Liabilities Surplus or Deficit Cash Flow (Sum of 13 Cash Flow Components) Change in Cash (Cash) Surplus or Deficit after all Cash Flows $ $ $ 420,000. 00 $ $ 420,000. 00 $ (400,000. 00) $ (20,000. 00) $ $ $ $ (420,000. 00) $ (400,000. 00) $ (132,000. 00) $ $ $ $ (532,000. 00) $ 533,000. 00 $ $ 533,000. 00 $ $ $ $ $ $ $ $ $ $ 1,000. 00 1,000. 00 Calaveras Vineyards Team No. 1 18-Feb-2013 cash FLOW STATEMENT Dec-98 Cash Flow Items Initial Inputs Net Results Cash Flow Components Cumulative Surplus or Deficit Cash FlowOperating Inflows (Net Sales) Operating Outflows COGS Depreciation SGA Exp Taxes Other Total Operating Outflows Total Net Operating Cash Flow (NOF) Changes in Working Capital Receivables (AR) Inventory (INV) Other Current Assets (OCA) Accounts Payable (AP) Other Current Liabilities (OCL) Total Changes in Net Working Capital (NWC) Surplus or Deficit Cash Flow after Working Capital Investment Capital Investment Change in Net Fixed Assets Depreciation Net Investment Flow Free Cash Flow to Firm Surplus or Deficit (FCFF) Interest Income (II) $ 5,348,000. 00 $ 2,803,000. 00 $ 749,000. 00 $ 461,000. 00 $ $ 4,013,000. 00 $ 1,335,000. 00 $ (38,000. 00) $ (126,000. 00) $ $ 12,000. 00 $ (400,000. 00) $ (552,000. 00) $ 783,000. 00 $ 66,000. 00 $ (316,000. 00) $ (250,000. 00) $ 533,000. 00 $ Calaveras Vineyards Team No. 1 18-Feb-2013Net Investment Flow Free Cash Flow to Firm Surplus or Deficit (FCFF) Interest Income (II) Fixed Coverage Expenditures (Interest) (FCE) Surplus or Deficit Cash Flow Avaiable for Dividends Dividends (DIV) Managements Discretionary Cash Flow Surplus Financial Cash Flow Change in Long-Term Debt Change in Short-Term Borrowing Change in Preffered Stock Change in Common Stock Change in Other Total Change in Net Finncial Cash Flow (NFF) Goodwill/Other Assets & Other Liabilities Change in Goodwill & Other Asset Change in Other Liabilities Change in Gwill&OAssets & Other Liabilities Surplus or Deficit Cash Flow (Sum of 13 Cash Flow Components) Change in Cash (Cash) Surplus or Deficit after all Cash Flows $ $ $ $ (250,000. 00) $ 533,000. 00 $ (173,000. 00) $ 360,000. 00 $ $ 360,000. 00 $ $ (360,000. 00) $ $ $ $ (360,000. 00) $ $ $ $