Fluent Essays

Prompt Write an executive summary describing the newly discovered concerns and your analysis of the situation at Company B. Specifically, you must address the following rubric criteria: Summarize the safety issues and their direct impact on the company over the past month. Describe how this news affects factors other than revenue, which will then affect the company's value. How does this affect your initial performance evaluation and analysis of the company? Do you see any additional risks? Explain. Will it impact your recommendation about acquisition? Why or why not? What additional information about this situation will you need to make your final decision? Submit a 1 page Word document using double spacing, 12-point Times New Roman font, and one-inch margins. Sources should be cited according to APA style. COMPANY B Three Year Data B_CO_FINANCE Learner Copy Rev 3/14/21 COMPANY B Illlustrative Data for Educational Purposes All values shown are in thousands. 2017 2018 2019 Income Statement Revenue 27,981 26,302 27,091 Cost of Goods Sold (COGS) 15,389 18,411 18,151 Gross Profit 12,591 7,891 8,940 Expenses Salaries and Benefits 2,910 2,600 2,910 Rent and Overhead 1,354 1,354 1,354 Depreciation and Amortization 2,814 2,806 2,776 Interest 2,700 1,800 1,800 Total Expenses 9,778 8,560 8,840 Earnings Before Tax 2,813 (669) 100 Taxes 788 (141) 21 Net Earnings 2,025 (529) 79 2017 2018 2019 Balance Sheet Assets Cash 82,445 82,914 72,944 Accounts Receivable 1,380 1,297 1,336 Inventory 3,078 2,018 1,989 Property and Equipment 37,413 37,007 37,032 Total Assets 124,316 123,236 113,301 Liabilities Accounts Payable 1,560 1,009 995 Debt 90,000 90,000 80,000 Total Liabilities 91,560 91,009 80,995 Shareholders' Equity Equity Capital 33,685 33,685 33,685 Retained Earnings (928) (1,457) (1,378) Shareholders' Equity 32,757 32,228 32,307 Total Liabilities and Shareholders' Equity 124,317 123,236 113,301 2017 2018 2019 Cash Flow Statement Operating Cash Flow Net Earnings 2,025 (529) 79 Plus: Depreciation and Amortization 2,814 2,806 2,776 Less: Changes in Working Capital (10,312) (592) 25 Cash from Operations 15,151 2,869 2,830 Investing Cash Flow Investments in Property and Equipment 2,706 2,400 2,800 Cash from Investing 2,706 2,400 2,800 Financing Cash Flow Issuance (repayment) of Debt - - (10,000) Issuance (repayment) of Equity - - - Cash from Financing - - (10,000) Net Increase (decrease) in Cash 12,445 469 (9,970) Opening Cash Balance 70,000 82,445 82,914 Closing Cash Balance 82,445 82,914 72,944 Supporting Schedules Working Capital Schedule Accounts Receivable 1,380 1,297 1,336 Inventory 3,078 2,018 1,989 Accounts Payable 1,560 1,009 995 Net Working Capital (NWC) 2,898 2,306 2,331 Change in NWC (10,312) (592) 25 Depreciation Schedule PPE Opening 37,521 37,413 37,007 Plus Capex 2,706 2,400 2,800 Less Depreciation 2,814 2,806 2,776 PPE Closing 37,413 37,007 37,032 Debt and Interest Schedule Debt Opening 90,000 90,000 90,000 Issuance (repayment) - - (10,000) Debt Closing 90,000 90,000 80,000 Interest Expense 2,700 1,800 1,800 Company B Information Location, size, and age of the firm:  Name:  Location: Orlando, FL  Size: 98 employees  Age: began operations in 1988 Customer segment and target market:  Market: Florida and nearby destinations  Destinations: eight (the Bahama Islands; Savannah, Georgia; Atlanta, Georgia; Tampa, Florida; Fort Myers, Florida; Miami, Florida; Tallahassee, Florida; and New Orleans, Louisiana)  Market segment: tourists and business  Aircraft capacities: 12–50 seats  Customer segment: vacationers, tourists, business travelers  Retention: 40% repeat customers  Seat occupancy average: 62% (middle of industry benchmark data)  Average customer fare: $249 US Major competitors:  Delta Connection  American Eagle  Sun Country  Frontier Company leadership: Privately held, with a board, president, VP admin, CFO, COO, VP sales Company strategy and direction: As a smaller player, the company is more of a follower than a leader; however, the new president has a desire to shake things up. The image of the company as cheap transportation is no longer sufficient, and the leadership team seeks to demonstrate that even a small company can be an innovation leader. They hope to do this by emphasizing the potential benefits of agile problem solving and a lean and clean working environment. These 10-year goals were adopted in 2015; they were reaffirmed in 2019 shortly before the arrival of the new president:  Demonstrate adaptability, flexibility, and speed in decision making and innovation  Build the best workforce; be a winning team  Do the right thing; provide excellence in customer service  Enjoy the short run; invest in the long run Current financial highlights:  Annual revenues: $11–13 million  Annual growth YoY: 4%  Gross profit margin: 49%  Net profit margin: 2–6%  Aircraft in fleet: 40  Average age of aircraft: 18 years (25 years of useful life is typical)  See financial statements for more information Background:  The company is known as a value leader.  In 2016, the company sold its ownership in a regional hotel chain, resulting in substantial cash holdings.  The company has strong business relationships with area employers in the theme park industry.  The company president is new this year; prior experience has been heavily influenced by organizational transformation initiatives.  Turnover among employees is higher than many airline companies, but average for the central Florida economy; maintenance employees are increasingly more difficult to find and retain; overtime is common in the maintenance department.  Wage levels in the Orlando area are growing, resulting in upward pressure in compensation.  Customer feedback received that is at or above industry benchmarks (at industry benchmarks 60th percentile or higher; positive feedback): o Short wait times at counter o Ease of modifying reservations o Cost o Overall value  Customer feedback received below industry midpoint (negative feedback): o Airplane cleanliness o Amenities o Food and beverages o In-flight noise Internal process highlights:  Within the last 30 days, an investment and joint venture was established with SITA Horizon software system, including an industry-standard customer portal and a hospitality industry interface functionality.  Bookkeeping is integrated with the new SITA system; an external accounting firm will still be used for audits.  HR function is provided by a consortium partner in the local area (outsourced).  On-ground operations teams rated fair against industry-wide efficiency standards. Human resource highlights:  Employees with a high school diploma or higher: 95%  Employees with a post-secondary degree or diploma: 60%  Average turnover rate: 18% annually  Internal training offered: o Regulatory refresher courses (as needed, with supervisor approval) o Quality and Customer Service Principles (self-study)