Four page, maximum, report on: What is your bid for Plastic Molding Company? Give your valuation of the company using the three valuation approaches: (1) restated book value, (2) current market value using earnings multiples, and (3) discounted future cash flow analysis). Give reasons for arriving at your bid. Also, list terms and conditions for your offer to purchase (such as: dollar amount down, amount to be paid on a promissory note over time, consulting payments to the previous owner, payments on a non-compete agreement, whether it is a purchase of stock or a purchase of assets, etc.) Jorge Rodriguez Jorge Rodriguez has been working for several large companies for his entire working career after emigrating from Cost Rica in 1986. He had been very successful rising to the position of vice president in charge of the international portion of two significant businesses in recent years. He had proven himself as a sound manager and someone who could grow sales and profits primarily through aggressive new product development, strong marketing and efficient overseas sourcing. Early in his career, he had obtained an MBA from the Kellogg School of Management at Northwestern University giving him polishing touches to his business career and creating a strong network of business executives to counsel and introduce him as needed to open the necessary doors for business development The positions that Jorge had held required much international travel and Jorge would often find himself gone from home from Sunday evening until Friday night or Saturday morning for many weeks at a time. Being a family-oriented person and having three children yet in elementary or high school, Jorge felt that he was missing out on the growing up years with his children and decided to leave the world of large corporations and buy his own small business. Jorge believed that the skills that he had obtained through his education and his professional career to this point in time would put him in a good position to take a small business that could use his management skills, strong sales and marketing orientation and international sourcing ability and grow it into a significant business with substantial value. (See his resume contained in Exhibit 1.) Jorge had lived well in Glendale, an upscale section of the greater Milwaukee area, and had just put a major addition on his home. As a result, his first mortgage and home equity loan used up almost all of the equity in his home. However, he had a few investments and retirement funds to somewhat offset his car loans and credit card balances. However, to invest in a new business, he would need to call upon his father, a well-to-do entrepreneur in Costa Rica with several investments. Jorge's father had agreed to provide $500,000 in financing to assist Jorge in his quest for a business to buy and own. (Jorge's and his wife's personal financial statement is shown in Exhibit 2.) Jorge had kept in touch with executives he had known when he had worked with prior employers and let them know of his interest in finding a business to buy and run. One of these executives, now a CEO of a small but growing business, became aware of a business for sale that seemed to have a need for someone with Jorge's skills. This executive notified the investment banking firm handling Page 6 Resume Jorge Rodriguez Glendale, Wisconsin Education: Bachelors in Engineering University of San Jose, Costa Rica MBA Kellogg School of Management Northwestern University Evanston, IL University of Paris Paris, France French Language Studies Japanese Language Studies Japanese Cultural Center San Jose, Costa Rica Professional Experience: Consumer Product Industries, Inc. Boston, MA Vice President - International Sales & Marketing 7/04 - Present Responsible for management of sales, marketing, engineering, customer service and product development functions for this $120 million sales corporation that produced and marketed unique lawn and garden products used by the homeowner. Achieved sales growth of 20% in 12 months in domestic and international business on 4 continents. Established and/or developed business relationships with "big box" retailers of the company's lawn and garden products both domestically and internationally Tools, Inc., Chicago, IL Vice President/General Manager - International Division 6/03-6/04 Responsible for running company divisions in the Asia Pacific, Latin American and European markets for this $250 million sales multinational supplier of hand tools sold into consumer markets. Responsible for merging 5 companies into a new company group structure. Increased sales and profits by over 50% in 12 months. Developed new sources of products in Asia and Latin America resulting in substantial savings in purchase prices Factory Shoe Company, Dallas, Texas Director of Marketing & Product Development 1/01 - 5/03 Responsible for all marketing and product development activities worldwide for this $350 million sales footwear company. Responsible for increasing profit margins by over 50% on sales increases of about 10% through new product development and marketing as well as development of Asian and Latin American sources for products. Home Products, Inc., Minneapolis, MN Group Director of Market Development - International 1/95 - 12/00 Held P&L responsibility for a $12 million international sales division of this $1 billion sales international consumer products company. Expanded sales and increased profits in his division and coordinated international sales with other division heads with combined volume of $42 million and increased profitability through development of markets and product sources in Asia, Europe and Latin America, Japanese Trading, Ltd., Chicago, IL Senior Product Manager 9/87 - 12/94 Directed the introduction and marketing of consumer electronics products of this $4 billion subsidiary of an $85 billion Japanese trading company. Established and serviced 2,000 key North American accounts importing products from this company's suppliers in Japan and other foreign countries. Page 7 Exhibit 2 Jorge & Maria Rodriguez Personal Financial Statement 12/31/04 Assets Liabilities & Net Worth Real Estate Mortgages Credit Card Balances Automobile Loans $925,000 $23,500 $21,450 Cash $2,900 Unlisted Securities $15,000 Listed Securities $20,000 Real Estate (Home) $950,000 Automobiles $47,000 Personal Property $88,000 IRA'S & 401k's $47,000 Total Liabilities $969,950 Net Worth $199,950 Total Assets $1,169,900 Tot. Liab & Equity $1,169,900 Exhibit 3 Page 8 Plastic Molding Company, Inc. Historical (Unadjusted) Income Statements Sin 000's 2000 Actual $6,074 2001 Actual $4,256 2002 Actual $4,614 2003 Actual $4,382 2004 Actual $4,255 1st 6 Mo. '05 Actual S2.089 $3,116 $1.091 $2,101 5837 S2.222 5819 S2,040 $651 $1,879 5580 5857 S301 583 $502 361 S620 S681 $4,888 $1,186 19.5% $75 $545 $620 $3,558 $698 16.4% $76 5554 S630 $3,671 $943 20.4% $585 $3,276 $1,106 25.2% $85 $506 $591 $3,050 $1.205 28.3% S39 S266 S305 51.463 $626 30.0% S18 57 5884 $909 15.0% $277 4.6% $14 $7 $840 $861 20.2% -S163 -3.8% 513 $7 $937 $957 20.7% -514 -0.3% $16 $7 $930 3953 21.7% $153 3.5% $13 $7 $901 S921 21.6% $284 6.7% Net Sales Cost of Goods Sold Material Direct Labor Overhead Depreciation Factory Eq & Tooling All Other Overhead Total Overhead Cost of Goods Sold - Total Gross Profit % of Net Sales Selling, General & Admin. Expenses Depreciation Office Related Amortization All Other S, G & A Expenses Total Selling, General & Admin Expenses % of Net Sales Income from Operations % of Net Sales Other Income (Expense) Bad Debt Expense Interest Expense All Other Other Income (Expense) Total Other Income (Expense) Net Income Before Income Taxes Provision for Income Taxes Net Income After Income Taxes % of Net Sales Retained Earnings Beginning of Period Retained Earnings End of Period JEBIT % of Net Sales Plus Depreciation & Amortization EBITDA Officer Salaries Estimated Normal General Management Salaries Adjustments to income for owner salaries S7 S4 S476 $487 23.3% $139 6.7% -$3 $32 $51 S16 S300 SO -S46 $24 -$22 S255 98 S157 2.6% $418 $575 SO -S42 $31 $11 -$174 -$79 -$95 -2.2% $575 $480 -$132 -3.1% $96 -$36 $350 $92 S258 $103 SO -S36 $10 -$26 -S40 S10 -$30 -0.7% S480 $450 -S4 -0.1% 597 $93 5347 $94 S253 $92 $30 $3 $119 $34 SO S34 0.8% $450 5484 $64 -S2 $14 S13 -S3 S136 $51 585 4.1% S681 5766 S150 8.2% $50 S200 S154 $50 5301 1.5% 197 4.6% $484 S681 $332 8.2% $105 $437 $309 $100 S209 5.0% $86 $387 S315 589 S226 S106 $170 $444 $97 S347 S104 Four page, maximum, report on: What is your bid for Plastic Molding Company? Give your valuation of the company using the three valuation approaches: (1) restated book value, (2) current market value using earnings multiples, and (3) discounted future cash flow analysis). Give reasons for arriving at your bid. Also, list terms and conditions for your offer to purchase (such as: dollar amount down, amount to be paid on a promissory note over time, consulting payments to the previous owner, payments on a non-compete agreement, whether it is a purchase of stock or a purchase of assets, etc.) Jorge Rodriguez Jorge Rodriguez has been working for several large companies for his entire working career after emigrating from Cost Rica in 1986. He had been very successful rising to the position of vice president in charge of the international portion of two significant businesses in recent years. He had proven himself as a sound manager and someone who could grow sales and profits primarily through aggressive new product development, strong marketing and efficient overseas sourcing. Early in his career, he had obtained an MBA from the Kellogg School of Management at Northwestern University giving him polishing touches to his business career and creating a strong network of business executives to counsel and introduce him as needed to open the necessary doors for business development The positions that Jorge had held required much international travel and Jorge would often find himself gone from home from Sunday evening until Friday night or Saturday morning for many weeks at a time. Being a family-oriented person and having three children yet in elementary or high school, Jorge felt that he was missing out on the growing up years with his children and decided to leave the world of large corporations and buy his own small business. Jorge believed that the skills that he had obtained through his education and his professional career to this point in time would put him in a good position to take a small business that could use his management skills, strong sales and marketing orientation and international sourcing ability and grow it into a significant business with substantial value. (See his resume contained in Exhibit 1.) Jorge had lived well in Glendale, an upscale section of the greater Milwaukee area, and had just put a major addition on his home. As a result, his first mortgage and home equity loan used up almost all of the equity in his home. However, he had a few investments and retirement funds to somewhat offset his car loans and credit card balances. However, to invest in a new business, he would need to call upon his father, a well-to-do entrepreneur in Costa Rica with several investments. Jorge's father had agreed to provide $500,000 in financing to assist Jorge in his quest for a business to buy and own. (Jorge's and his wife's personal financial statement is shown in Exhibit 2.) Jorge had kept in touch with executives he had known when he had worked with prior employers and let them know of his interest in finding a business to buy and run. One of these executives, now a CEO of a small but growing business, became aware of a business for sale that seemed to have a need for someone with Jorge's skills. This executive notified the investment banking firm handling Page 6 Resume Jorge Rodriguez Glendale, Wisconsin Education: Bachelors in Engineering University of San Jose, Costa Rica MBA Kellogg School of Management Northwestern University Evanston, IL University of Paris Paris, France French Language Studies Japanese Language Studies Japanese Cultural Center San Jose, Costa Rica Professional Experience: Consumer Product Industries, Inc. Boston, MA Vice President - International Sales & Marketing 7/04 - Present Responsible for management of sales, marketing, engineering, customer service and product development functions for this $120 million sales corporation that produced and marketed unique lawn and garden products used by the homeowner. Achieved sales growth of 20% in 12 months in domestic and international business on 4 continents. Established and/or developed business relationships with "big box" retailers of the company's lawn and garden products both domestically and internationally Tools, Inc., Chicago, IL Vice President/General Manager - International Division 6/03-6/04 Responsible for running company divisions in the Asia Pacific, Latin American and European markets for this $250 million sales multinational supplier of hand tools sold into consumer markets. Responsible for merging 5 companies into a new company group structure. Increased sales and profits by over 50% in 12 months. Developed new sources of products in Asia and Latin America resulting in substantial savings in purchase prices Factory Shoe Company, Dallas, Texas Director of Marketing & Product Development 1/01 - 5/03 Responsible for all marketing and product development activities worldwide for this $350 million sales footwear company. Responsible for increasing profit margins by over 50% on sales increases of about 10% through new product development and marketing as well as development of Asian and Latin American sources for products. Home Products, Inc., Minneapolis, MN Group Director of Market Development - International 1/95 - 12/00 Held P&L responsibility for a $12 million international sales division of this $1 billion sales international consumer products company. Expanded sales and increased profits in his division and coordinated international sales with other division heads with combined volume of $42 million and increased profitability through development of markets and product sources in Asia, Europe and Latin America, Japanese Trading, Ltd., Chicago, IL Senior Product Manager 9/87 - 12/94 Directed the introduction and marketing of consumer electronics products of this $4 billion subsidiary of an $85 billion Japanese trading company. Established and serviced 2,000 key North American accounts importing products from this company's suppliers in Japan and other foreign countries. Page 7 Exhibit 2 Jorge & Maria Rodriguez Personal Financial Statement 12/31/04 Assets Liabilities & Net Worth Real Estate Mortgages Credit Card Balances Automobile Loans $925,000 $23,500 $21,450 Cash $2,900 Unlisted Securities $15,000 Listed Securities $20,000 Real Estate (Home) $950,000 Automobiles $47,000 Personal Property $88,000 IRA'S & 401k's $47,000 Total Liabilities $969,950 Net Worth $199,950 Total Assets $1,169,900 Tot. Liab & Equity $1,169,900 Exhibit 3 Page 8 Plastic Molding Company, Inc. Historical (Unadjusted) Income Statements Sin 000's 2000 Actual $6,074 2001 Actual $4,256 2002 Actual $4,614 2003 Actual $4,382 2004 Actual $4,255 1st 6 Mo. '05 Actual S2.089 $3,116 $1.091 $2,101 5837 S2.222 5819 S2,040 $651 $1,879 5580 5857 S301 583 $502 361 S620 S681 $4,888 $1,186 19.5% $75 $545 $620 $3,558 $698 16.4% $76 5554 S630 $3,671 $943 20.4% $585 $3,276 $1,106 25.2% $85 $506 $591 $3,050 $1.205 28.3% S39 S266 S305 51.463 $626 30.0% S18 57 5884 $909 15.0% $277 4.6% $14 $7 $840 $861 20.2% -S163 -3.8% 513 $7 $937 $957 20.7% -514 -0.3% $16 $7 $930 3953 21.7% $153 3.5% $13 $7 $901 S921 21.6% $284 6.7% Net Sales Cost of Goods Sold Material Direct Labor Overhead Depreciation Factory Eq & Tooling All Other Overhead Total Overhead Cost of Goods Sold - Total Gross Profit % of Net Sales Selling, General & Admin. Expenses Depreciation Office Related Amortization All Other S, G & A Expenses Total Selling, General & Admin Expenses % of Net Sales Income from Operations % of Net Sales Other Income (Expense) Bad Debt Expense Interest Expense All Other Other Income (Expense) Total Other Income (Expense) Net Income Before Income Taxes Provision for Income Taxes Net Income After Income Taxes % of Net Sales Retained Earnings Beginning of Period Retained Earnings End of Period JEBIT % of Net Sales Plus Depreciation & Amortization EBITDA Officer Salaries Estimated Normal General Management Salaries Adjustments to income for owner salaries S7 S4 S476 $487 23.3% $139 6.7% -$3 $32 $51 S16 S300 SO -S46 $24 -$22 S255 98 S157 2.6% $418 $575 SO -S42 $31 $11 -$174 -$79 -$95 -2.2% $575 $480 -$132 -3.1% $96 -$36 $350 $92 S258 $103 SO -S36 $10 -$26 -S40 S10 -$30 -0.7% S480 $450 -S4 -0.1% 597 $93 5347 $94 S253 $92 $30 $3 $119 $34 SO S34 0.8% $450 5484 $64 -S2 $14 S13 -S3 S136 $51 585 4.1% S681 5766 S150 8.2% $50 S200 S154 $50 5301 1.5% 197 4.6% $484 S681 $332 8.2% $105 $437 $309 $100 S209 5.0% $86 $387 S315 589 S226 S106 $170 $444 $97 S347 S104