You are on page 1of 17

Aurora.

xls
This spreadsheet supports STUDENT analysis of the
case, "Aurora Textile Company"
(Case 21)

Copyright (C) 2007, by the University of Virginia Darden School Foundation.

Consolidated Statement of Operations for the Fiscal Years


Ending December, 31 1999-2002
($ thousands)

Pounds shipped (000's)


Average selling price / lb
Conversion Cost / lb
Average Raw Material Cost / lb
Net Sales
Raw Material Cost
Cost of Conversion
Total costs
Gross Margin
SG&A Expenses
Depreciation & Amortization
Operating Profit
Interest Expense
Other Income (Expense)
Asset Impairments*
Earnings Before Income Tax Provision
Income Tax Provision (Benefit) @ 36% tax rate
Net Earnings

* Costs associated with the shut down of plants

1999

2000

2001

2002

187,673
1.3103
0.4447
0.7077

190,473
1.2064
0.4421
0.6429

151,893
1.2045
0.4465
0.6487

144,116
1.0235
0.4296
0.4509

$245,908
132,812
83,454
216,267
29,641
14,603
15,241
(203)
6,777

(6,980)
(2,513)
($4,467)

$229,787 $182,955 $147,503


122,461
98,536
64,982
84,212
67,822
61,912
206,673 166,358 126,894
23,114
16,597
20,609
14,218
11,635
10,305
13,005
11,196
9,859
(4,109) (6,234)
445
6,773
5,130
3,440
1,143
(1,232)
(409)
4,758
7,564
(9,739) (17,354) (10,968)
(3,506) (6,247) (3,949)
($6,233)

($11,106)

($7,020)

Consolidated Balance Sheets for the Fiscal Years


Ending December, 31 1999-2002
($ thousands)
1999

2000

2001

2002

$1,144
17,322
34,778
2,774
$56,018

$5,508
11,663
33,155
1,922
$52,247

$2,192
20,390
31,313
712
$54,608

$1,973
26,068
33,278
2,378
$63,697

Property and Equipment


Land
Buildings
Machinery and equipment
Gross PP&E
Less accumulated depreciation
Net PP&E
Goodwill
Other non-current assets
Total Assets

2,654
32,729
230,759
266,142
(147,891)
118,250
1,180
3,516
$178,965

2,594
31,859
220,615
255,068
(147,104)
107,964
1,180
3,499
$164,890

2,516
30,308
197,889
230,713
(146,302)
84,411
1,180
2,824
$143,023

2,505
30,427
190,410
223,342
(154,658)
68,684
1,180
2,430
$135,991

Liabilities
Accounts payable
Accrued compensation and benefits
Accrued interest
Other accrued expenses
Current portion of long-term debt
Total Current Liabilities
Long-term debt
Other long-term liabilities
Total Liabilities

12,236
4,148
1,830
4,083
1,009
$23,306
66,991
16,566
$106,863

7,693
3,712
1,090
3,914
1,730
$18,139
66,991
14,081
$99,211

9,667
4,176
961
3,881
0
$18,685
58,000
11,776
$88,461

10,835
4,730
929
3,657
0
$20,151
58,000
10,297
$88,448

50
15,868
56,184

50
15,678

50
15,668

50
15,668

49,951
$65,679
$164,890

38,845
$54,563
$143,023

31,825
$47,543
$135,991

Assets
Cash and cash equivalents
Accounts receivable, net
Inventories
Other current assets
Total Current Assets

Shareholder's equity
Common stock, par $0.01
Capital surplus
Retained earnings
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity

$72,102
$178,965

(595,955)

Plant Production Capability


Plant
Hunter
Rome
Barton
Butler

Technology
Ring
Rotor
Rotor
Rotor

Product Mix
100% Cotton
100% Cotton
Heather and Poly/Cotton Blends
100% Cotton

Count Range Capacity


600,000
5/1 to 22/1
1,200,000
5/1 to 22/1
800,000
8/1 to 30/1
1,000,000
5/1 to 30/1

Cost of Customer Returns

Price of Yarn Sold


Reimbursement cost
Liability multiplier
Returns as % of Volume
Returns as % of Revenue
Returns as cost/lb

Existing
machine
$5.0
$25.0
5.0
1.50%
7.50%
$0.077

Zinser
Price of Yarn Sold $10.0
Reimbursement cost $75.0
Liability multiplier
7.5
Returns as % of Volume 1.00%
Returns as % of Revenue 7.50%
Returns as cost/lb $0.084

Calculation
(25/5)
(5 x 1.5%)
(7.5% x $1.0235/lb)
Calculation
(75/10)
(7.5 x 1.0%)
(7.5% x $1.0235/lb x 110%)

Monthly Spot Price $ (contract size 50,000lbs)


2 / 97
74.05
90
3 / 97
73.27
5 / 97
70.01
80
6 / 97
73.58
7 / 97
71.81
70
9 / 97
72.05
10 / 97
68.75
Spot Price (Dollars)
60
12 / 97
67.41
2 / 98
63.90
50
3 / 98
65.64
4 / 98
63.67
40
5 / 98
63.00
6 / 98
81.60
30
7 / 98
81.93
9 / 98
71.52
20
10 / 98
72.32
11 / 98
61.00
10
12 / 98
60.74
2 / 99
63.39
0
3 / 99
64.79
4 / 99
59.42
2 / 97 8 / 97
5 / 99
58.72
6 / 99
49.90
7 / 99
48.20
9 / 99
51.18
10 / 99
49.44
11 / 99
49.80
12 / 99
48.53
2 / 00
57.19
3 / 00
59.31
4 / 00
56.30
5 / 00
56.64
6 / 00
51.60
7 / 00
50.45
9 / 00
62.45
10 / 00
63.60
11 / 00
64.72
12 / 00
64.32
1 / 01
59.30
2 / 01
52.38
3 / 01
53.54
4 / 01
43.83
5 / 01
44.33
6 / 01
42.65
7 / 01
40.61
9 / 01
34.00
10 / 01
32.19
11 / 01
36.23
12 / 01
34.94
2 / 02
34.65
3 / 02
34.53
4 / 02
33.80

2 / 98 8 / 98 2 / 99 8 / 99 2 / 00 8 / 00 2 / 01
Month

5 / 02
6 / 02
7 / 02
8 / 02
9 / 02
10 / 02
11 / 02
12 / 02

32.04
43.77
45.23
45.10
42.30
41.79
47.50
45.98

9 2 / 00 8 / 00 2 / 01 8 / 01 2 / 02 8 / 02
Month

Interest Rate Yields: January 2003


U.S. Government (% yield)
Treasury bill (1-year)
Treasury note (10-year)
Treasury bond (30-year)

1.24%
3.98%
4.83%

Industrials (% yield)
Prime rate1
AAA (10-year)
AA (10-year)
A (10-year)
BB (10-year)
BBB (10-year)

4.25%
4.60%
4.66%
4.87%
5.60%
6.90%

The prime rate was the short-term interest rate charged by large U.S. banks
for corporate clients with strong credit ratings.

1
Days' sale in inventory

Days sales in receivables or collection period


Asset turnover
Profit Margin
EBIT Margin
ROA
ROE

existing machine book value


if sold, price

1999
2000
58.6965386234 58.5539373242
25.7109640635 18.5255428128
1.3740544637
1.393571895
($0.018)
($0.027)
-0.0008252128
-0.017882248
($0.025)
($0.038)
($0.062)
($0.095)

$2,000,000
$500,000

3 Status quo

2002
0
1.02
0.45
0.43
500,000.00

2003
1
1.03
0.46
0.43
510,000.00

Annual sales volume


Annual Revenues

26,000,000.00
26,611,000.00

26,520,000.00
27,414,652.20

Material cost (Cost of good sold)


Conversion cost

11,723,400.00
11,180,000.00
3,707,600.00
1,862,770.00

12,077,446.68
11,517,636.00
3,819,569.52
1,919,025.65
500,000.00
1,400,543.87
504,195.79
500,000.00
1,396,348.07

Average selling price / lb


Average Raw Material Cost / lb
Conversion Cost / lb
Weekly capacity

Gross Margin
SG&A cost
Depreciation and amortization
EBIT
Tax (36%)
Add Depreciation
OCF
Working capital
Change in net working capital
Opportunity cost of old equipment
Cash flow
NPV
Discount rate

1,844,830.00
664,138.80
1,180,691.20
963,567.12
(963,567.12)
-1,040,000
(2,003,567.12)
6,746,011.60
10%

992,666.85
(29,099.73)
1,367,248.35

Zinser

2002
0
1.13
0.41
0.4509
475,000.00

2003
1
1.14
0.41
0.46
484,500.00

Annual sales volume


Annual Revenues

24,700,000.00
27,808,495.00

25,194,000.00
28,648,311.55

Material cost (Cost of good sold)


Conversion cost

11,137,230.00
10,052,900.00
6,618,365.00
1,946,594.65

11,473,574.35
10,356,497.58
6,818,239.62
2,005,381.81
500,000.00
4,312,857.81
1,552,628.81
500,000.00
3,260,229.00

Average selling price / lb


Conversion Cost / lb
Average Raw Material Cost / lb
Weekly capacity

Gross Margin
SG&A cost
Depreciation and amortization
EBIT
Tax (36%)
Add Depreciation
OCF
Working capital
Change in net working capital
Opportunity cost of old equipment
Cash flow
NPV
Discount rate

4,671,770.35
1,681,837.33
2,989,933.02
915,388.77
(915,388.77)
-500,000
(1,415,388.77)
20,184,566.19
10%

943,033.51
(27,644.74)
3,232,584.26

2001
2002
68.7023634256 95.7201348418
40.6785558175 64.5060620778
1.2792024663 1.0846522412
($0.061)
($0.048)
-0.0340720278 0.0030141002
($0.078)
($0.052)
($0.204)
($0.148)

2004
2
1.04
0.46
0.44
520,200.00

2005
3
1.05
0.46
0.44
530,604.00

2006
4
1.07
0.47
0.45
541,216.08

2007
5
1.08
0.47
0.45
552,040.40

2008
6
1.09
0.48
0.46
563,081.21

2009
7
1.10
0.48
0.46
574,342.83

27,050,400.00
28,242,574.70

27,591,408.00
29,095,500.45

28,143,236.16
29,974,184.57

28,706,100.88
30,879,404.94

29,280,222.90
31,811,962.97

29,865,827.36
32,772,684.25

12,442,185.57
11,865,468.61
3,934,920.52
1,976,980.23
500,000.00
1,457,940.29
524,858.50
500,000.00
1,433,081.79

12,817,939.57
12,223,805.76
4,053,755.12
2,036,685.03
500,000.00
1,517,070.09
546,145.23
500,000.00
1,470,924.86

13,205,041.35
12,592,964.69
4,176,178.52
2,098,192.92
500,000.00
1,577,985.60
568,074.82
500,000.00
1,509,910.79

13,603,833.60
12,973,272.23
4,302,299.12
2,161,558.35

14,014,669.37
13,365,065.05
4,432,228.55
2,226,837.41

14,437,912.39
13,768,690.01
4,566,081.85
2,294,087.90

2,140,740.77
770,666.68

2,205,391.14
793,940.81

2,271,993.95
817,917.82

1,370,074.09

1,411,450.33

1,454,076.13

1,022,645.39
(29,978.54)

1,053,529.28
(30,883.89)

1,085,345.86
(31,816.58)

1,118,123.31
(32,777.45)

1,151,890.63
(33,767.32)

1,186,677.73
(34,787.10)

1,403,103.25

1,440,040.97

1,478,094.20

1,337,296.65

1,377,683.01

1,419,289.03

2004
2
1.15
0.42
0.46
494,190.00

2005
3
1.16
0.42
0.46
504,073.80

2006
4
1.17
0.42
0.47
514,155.28

2007
5
1.18
0.43
0.47
524,438.38

2008
6
1.20
0.43
0.48
534,927.15

2009
7
1.21
0.44
0.48
545,625.69

25,697,880.00
29,513,490.56

26,211,837.60
30,404,797.97

26,736,074.35
31,323,022.87

27,270,795.84
32,268,978.16

27,816,211.76
33,243,501.30

28,372,535.99
34,247,455.04

11,820,076.29
10,669,263.81
7,024,150.46
2,065,944.34
500,000.00
4,458,206.12
1,604,954.20
500,000.00
3,353,251.92

12,177,042.60
10,991,475.57
7,236,279.80
2,128,335.86
500,000.00
4,607,943.95
1,658,859.82
500,000.00
3,449,084.13

12,544,789.28
11,323,418.14
7,454,815.45
2,192,611.60
500,000.00
4,762,203.85
1,714,393.39
500,000.00
3,547,810.47

12,923,641.92
11,665,385.36
7,679,950.88
2,258,828.47

13,313,935.90
12,017,680.00
7,911,885.40
2,327,045.09

13,716,016.77
12,380,613.94
8,150,824.34
2,397,321.85

5,421,122.41
1,951,604.07

5,584,840.31
2,010,542.51

5,753,502.48
2,071,260.89

3,469,518.34

3,574,297.80

3,682,241.59

971,513.12
(28,479.61)

1,000,852.82
(29,339.70)

1,031,078.57
(30,225.76)

1,062,217.14
(31,138.57)

1,094,296.10
(32,078.96)

1,127,343.84
(33,047.74)

3,324,772.31

3,419,744.43

3,517,584.71

3,438,379.77

3,542,218.84

3,649,193.85

2010
8
1.11
0.49
0.47
585,829.69

2011
9
1.12
0.49
0.47
597,546.28

2012
10
1.13
0.50
0.47
609,497.21

30,463,143.91
33,762,419.32

31,072,406.78
34,782,044.38

31,693,854.92
35,832,462.12

14,873,937.34
14,184,504.45
4,703,977.52
2,363,369.35

15,323,130.25
14,612,876.49
4,846,037.64
2,434,743.11

15,785,888.78
15,054,185.36
4,992,387.98
2,508,272.35

2,340,608.17
842,618.94

2,411,294.54
868,066.03

2,484,115.63
894,281.63

1,497,989.23

1,543,228.50

1,589,834.00

1,222,515.40
(35,837.67)

1,259,435.36
(36,919.97)

1,297,470.31
(38,034.95)

1,462,151.56

1,506,308.54

1,551,799.06

Inflation
1%

2010
8
1.22
0.44
0.49
556,538.21

2011
9
1.23
0.45
0.49
567,668.97

2012
10
1.24
0.45
0.50
579,022.35

28,939,986.71
35,281,728.18

29,518,786.44
36,347,236.38

30,109,162.17
37,444,922.91

14,130,240.47
12,754,508.48
8,396,979.23
2,469,720.97

14,556,973.74
13,139,694.63
8,650,568.00
2,544,306.55

14,996,594.34
13,536,513.41
8,911,815.16
2,621,144.60

5,927,258.26
2,133,812.97

6,106,261.46
2,198,254.12

6,290,670.55
2,264,641.40

3,793,445.29

3,908,007.33

4,026,029.15

1,161,389.63
(34,045.78)

1,196,463.59
(35,073.97)

1,232,596.80
(36,133.20)

3,759,399.50

3,872,933.37

3,989,895.95

Inflation
1%