1. Using the data in the student spreadsheet file Ethan Allen Financials.xlsx forecast the 2019 income statement and balance sheet for Ethan Allen. Use the percent of sales method and the following assumptions: (1) sales in FY 2019 will be $797.3359; (2) the tax rate will be 35%; (3) each item that changes with sales will be the five-year average percentage of sales; (4) net fixed assets will increase to $300; and (5) the common dividend will be $0.75 per share. Use your judgment on all other items. a. What is the discretionary financing needed in 2019? Is this a surplus or deficit? b. Assume that the DFN will be absorbed by long-term debt and that the interest rate is 4% of LTD. Set up an iterative worksheet to eliminate it. A B D E Ethan Allen Interiors Inc. 2 Income Statement (Industrial) 3 All figures in millions of U.S. Dollar, except per share items 4 Jun '18 Jun '17 Jun '16 Jun '15 Jun '14 5 Sales 794.202 754.600 746.659 729.083 729.373 6 Cost of Goods Sold (COGS) incl. D&A 351.966 343.437 340.163 330.734 339.085 7 Gross Income 442.236 411.163 406.496 398.349 390.288 8 SG&A Expense 353.057 345.229 336.860 337.912 340.676 9 EBIT (Operating Income) 89.179 65.934 69.636 60.437 49.612 10 Interest Expense 1.618 5.957 7.540 8.778 9.020 11 Other Income - Net 0.395 1.206 0.306 -1.485 0.562 12 Unusual Expense - Net 0.000 4.500 0.000 0.000 -0.085 13 Pretax Income 87.956 56.683 62.402 50.174 41.239 14 Income Taxes 31.319 19.541 19.471 17.696 -8.455 15 Net Income 56.637 37.142 42.931 32.478 49.694 16 17 18 EPS (recurring) 2.00 1.38 1.47 1.11 1.71 19 EPS (diluted) 2.00 1.27 1.47 1.11 1.71 20 Diluted Shares Outstanding 28.32 29.18 29.28 29.24 29.11 21 Total Shares Outstanding 27.75 28.41 28.93 28.91 28.84 22 Dividends per Share 0.62 0.50 0.40 0.36 0.30 23 Payout Ratio 31.00 39.37 27.21 32.43 17.54 24 25 EBITDA 108.53 85.08 87.57 78.45 68.19 26 EBIT 89.18 65.93 69.64 60.44 49.61 27 Depreciation & Amortization Expense 19.35 19.14 17.93 18.01 18.58 28 29 30 Source : FactSet Fundamentals 31 32 23 E F G Jun '15 Jun '14 72.601 15.529 12.277 137.256 22.907 260.570 594.385 302.713 291.672 65.043 617.285 79.721 9.005 14.919 155.739 23.408 282.792 587.368 291.673 295.695 66.301 644.788 B D 1 Ethan Allen Interiors Inc. 2 Balance Sheet (Industrial) 3 All figures in millions of U.S. Dollar, except per share items 4 Jun '18 Jun '17 Jun '16 5 Assets 6 Cash Only 52.659 76.182 109.176 7 Total Short Term Investments 0.000 2.198 18.153 8 Short-Term Receivables 9.467 12.547 12.426 9 Inventories 162.323 151.916 146.275 10 Other Current Assets 23.755 27.831 19.599 11 Total Current Assets 248.204 270.674 305.629 12 | Property, Plant & Equipment - Gross 598.264 594.912 601.709 13 Accumulated Depreciation 324,649 317.877 313.553 14 Net Property, Plant & Equipment 273.615 277.035 288.156 15 Other Long-Term Assets 55.590 59.599 60.649 16 Total Assets 577.409 607.308 654.434 17 18 Liabilities & Shareholders' Equity 19 ST Debt & Curr. Portion LT Debt 3,001 3.341 0.501 20 Accounts Payable 15.437 18.946 24.320 21 Other Current Liabilities 104.909 118.682 111.226 22 Total Current Liabilities 123.347 140.969 136.047 23 Long-Term Debt 38.837 74.227 130,411 24 Other Liabilities 23.023 21.577 20.509 25 Total Liabilities 185.207 236.773 286.967 26 Common Stock Par/Carry Value 0.489 0.489 0.486 27 Additional Paid-In Capital/Capital Surplus 374.972 370.914 365.733 28 Retained Earnings 646.315 607.079 584.395 29 Treasury Stock and Other Deductions from Equity 629.574 607.947 583,147 30 Total Shareholders' Equity 392.202 370.535 367.467 31 Total Liabilities & Shareholders' Equity 577.409 607.308 654.434 32 33 Source : FactSet Fundamentals 34 35 0.480 22.995 109.464 132.939 130.809 19.180 282.928 0.486 363.938 553.083 583.150 334.357 617.285 0.250 27.315 123.512 151.077 154.250 17.593 322.920 0.485 361.165 542.918 582.700 321.868 644.788 1. Using the data in the student spreadsheet file Ethan Allen Financials.xlsx forecast the 2019 income statement and balance sheet for Ethan Allen. Use the percent of sales method and the following assumptions: (1) sales in FY 2019 will be $797.3359; (2) the tax rate will be 35%; (3) each item that changes with sales will be the five-year average percentage of sales; (4) net fixed assets will increase to $300; and (5) the common dividend will be $0.75 per share. Use your judgment on all other items. a. What is the discretionary financing needed in 2019? Is this a surplus or deficit? b. Assume that the DFN will be absorbed by long-term debt and that the interest rate is 4% of LTD. Set up an iterative worksheet to eliminate it. A B D E Ethan Allen Interiors Inc. 2 Income Statement (Industrial) 3 All figures in millions of U.S. Dollar, except per share items 4 Jun '18 Jun '17 Jun '16 Jun '15 Jun '14 5 Sales 794.202 754.600 746.659 729.083 729.373 6 Cost of Goods Sold (COGS) incl. D&A 351.966 343.437 340.163 330.734 339.085 7 Gross Income 442.236 411.163 406.496 398.349 390.288 8 SG&A Expense 353.057 345.229 336.860 337.912 340.676 9 EBIT (Operating Income) 89.179 65.934 69.636 60.437 49.612 10 Interest Expense 1.618 5.957 7.540 8.778 9.020 11 Other Income - Net 0.395 1.206 0.306 -1.485 0.562 12 Unusual Expense - Net 0.000 4.500 0.000 0.000 -0.085 13 Pretax Income 87.956 56.683 62.402 50.174 41.239 14 Income Taxes 31.319 19.541 19.471 17.696 -8.455 15 Net Income 56.637 37.142 42.931 32.478 49.694 16 17 18 EPS (recurring) 2.00 1.38 1.47 1.11 1.71 19 EPS (diluted) 2.00 1.27 1.47 1.11 1.71 20 Diluted Shares Outstanding 28.32 29.18 29.28 29.24 29.11 21 Total Shares Outstanding 27.75 28.41 28.93 28.91 28.84 22 Dividends per Share 0.62 0.50 0.40 0.36 0.30 23 Payout Ratio 31.00 39.37 27.21 32.43 17.54 24 25 EBITDA 108.53 85.08 87.57 78.45 68.19 26 EBIT 89.18 65.93 69.64 60.44 49.61 27 Depreciation & Amortization Expense 19.35 19.14 17.93 18.01 18.58 28 29 30 Source : FactSet Fundamentals 31 32 23 E F G Jun '15 Jun '14 72.601 15.529 12.277 137.256 22.907 260.570 594.385 302.713 291.672 65.043 617.285 79.721 9.005 14.919 155.739 23.408 282.792 587.368 291.673 295.695 66.301 644.788 B D 1 Ethan Allen Interiors Inc. 2 Balance Sheet (Industrial) 3 All figures in millions of U.S. Dollar, except per share items 4 Jun '18 Jun '17 Jun '16 5 Assets 6 Cash Only 52.659 76.182 109.176 7 Total Short Term Investments 0.000 2.198 18.153 8 Short-Term Receivables 9.467 12.547 12.426 9 Inventories 162.323 151.916 146.275 10 Other Current Assets 23.755 27.831 19.599 11 Total Current Assets 248.204 270.674 305.629 12 | Property, Plant & Equipment - Gross 598.264 594.912 601.709 13 Accumulated Depreciation 324,649 317.877 313.553 14 Net Property, Plant & Equipment 273.615 277.035 288.156 15 Other Long-Term Assets 55.590 59.599 60.649 16 Total Assets 577.409 607.308 654.434 17 18 Liabilities & Shareholders' Equity 19 ST Debt & Curr. Portion LT Debt 3,001 3.341 0.501 20 Accounts Payable 15.437 18.946 24.320 21 Other Current Liabilities 104.909 118.682 111.226 22 Total Current Liabilities 123.347 140.969 136.047 23 Long-Term Debt 38.837 74.227 130,411 24 Other Liabilities 23.023 21.577 20.509 25 Total Liabilities 185.207 236.773 286.967 26 Common Stock Par/Carry Value 0.489 0.489 0.486 27 Additional Paid-In Capital/Capital Surplus 374.972 370.914 365.733 28 Retained Earnings 646.315 607.079 584.395 29 Treasury Stock and Other Deductions from Equity 629.574 607.947 583,147 30 Total Shareholders' Equity 392.202 370.535 367.467 31 Total Liabilities & Shareholders' Equity 577.409 607.308 654.434 32 33 Source : FactSet Fundamentals 34 35 0.480 22.995 109.464 132.939 130.809 19.180 282.928 0.486 363.938 553.083 583.150 334.357 617.285 0.250 27.315 123.512 151.077 154.250 17.593 322.920 0.485 361.165 542.918 582.700 321.868 644.788