New Look, Inc.

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Clothing Manufacturer Business Plan

Financial Plan

The company is seeking a substantial long-term business loan for the purpose of developing the clothing line. This funding will cover operating expenses and product development leading to the launch in July 2000.

8.1 Important Assumptions

The table below contains important assumptions which the company will use to ensure its success, the primary assumption is that the economy will remain in its present upturn.

General Assumptions
2000 2001 2002
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 25.42% 25.00% 25.42%
Other 0 0 0

8.2 Break-even Analysis

With a high gross margin and estimated fixed monthly expenses, the required monthly break-even sales volume is shown below.

Break-even Analysis
Monthly Revenue Break-even $222,738
Assumptions:
Average Percent Variable Cost 28%
Estimated Monthly Fixed Cost $160,371

8.3 Projected Profit and Loss

New Look is in the early stage of development, thus initial projections have only been made on accounts that are believed to most drive the income statement.

Pro Forma Profit and Loss
2000 2001 2002
Sales $5,000,000 $50,000,000 $150,000,000
Direct Cost of Sales $1,400,000 $14,000,000 $42,000,000
Other $50,000 $50,000 $50,000
Total Cost of Sales $1,450,000 $14,050,000 $42,050,000
Gross Margin $3,550,000 $35,950,000 $107,950,000
Gross Margin % 71.00% 71.90% 71.97%
Expenses
Payroll $565,217 $800,000 $1,000,000
Sales and Marketing and Other Expenses $1,188,058 $9,260,000 $11,830,000
Depreciation $26,400 $26,400 $26,400
Communications $26,400 $90,000 $150,000
Client Relations $24,000 $120,000 $200,000
Rent $9,600 $30,000 $30,000
Payroll Taxes $84,783 $120,000 $150,000
Other $0 $0 $0
Total Operating Expenses $1,924,458 $10,446,400 $13,386,400
Profit Before Interest and Taxes $1,625,542 $25,503,600 $94,563,600
EBITDA $1,651,942 $25,530,000 $94,590,000
Interest Expense $364,435 $387,597 $331,004
Taxes Incurred $322,231 $6,279,001 $23,950,785
Net Profit $938,876 $18,837,002 $70,281,811
Net Profit/Sales 18.78% 37.67% 46.85%

8.4 Projected Cash Flow

The projected cash flow assumes the company receives the required loan in two credit installments--in January, and in May 2000.

Pro Forma Cash Flow
2000 2001 2002
Cash Received
Cash from Operations
Cash Sales $250,000 $2,500,000 $7,500,000
Cash from Receivables $4,338,433 $40,015,900 $125,868,667
Subtotal Cash from Operations $4,588,433 $42,515,900 $133,368,667
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $3,000,000 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $7,588,433 $42,515,900 $133,368,667
Expenditures 2000 2001 2002
Expenditures from Operations
Cash Spending $565,217 $800,000 $1,000,000
Bill Payments $2,894,534 $29,215,892 $77,486,294
Subtotal Spent on Operations $3,459,751 $30,015,892 $78,486,294
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $300,137 $537,779 $594,092
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $3,759,888 $30,553,671 $79,080,386
Net Cash Flow $3,828,546 $11,962,229 $54,288,281
Cash Balance $4,273,546 $16,235,775 $70,524,056

8.5 Projected Balance Sheet

New Look's projected balance sheets for 2000-2002 are provided below.

Pro Forma Balance Sheet
2000 2001 2002
Assets
Current Assets
Cash $4,273,546 $16,235,775 $70,524,056
Accounts Receivable $831,567 $8,315,667 $24,947,000
Inventory $145,000 $1,450,000 $4,350,000
Other Current Assets $105,000 $105,000 $105,000
Total Current Assets $5,355,112 $26,106,441 $99,926,056
Long-term Assets
Long-term Assets $525,000 $525,000 $525,000
Accumulated Depreciation $106,400 $132,800 $159,200
Total Long-term Assets $418,600 $392,200 $365,800
Total Assets $5,773,712 $26,498,641 $100,291,856
Liabilities and Capital 2000 2001 2002
Current Liabilities
Accounts Payable $174,973 $2,600,679 $6,706,174
Current Borrowing $1,090,000 $1,090,000 $1,090,000
Other Current Liabilities $410,000 $410,000 $410,000
Subtotal Current Liabilities $1,674,973 $4,100,679 $8,206,174
Long-term Liabilities $3,054,863 $2,517,084 $1,922,992
Total Liabilities $4,729,836 $6,617,763 $10,129,166
Paid-in Capital $70,000 $70,000 $70,000
Retained Earnings $35,000 $973,876 $19,810,878
Earnings $938,876 $18,837,002 $70,281,811
Total Capital $1,043,876 $19,880,878 $90,162,689
Total Liabilities and Capital $5,773,712 $26,498,641 $100,291,856
Net Worth $1,043,876 $19,880,878 $90,162,689

8.6 Business Ratios

The following table contains important business ratios from the men's clothing industry, as determined by the Standard Industry Classification (SIC) Index, code 2329.

Ratio Analysis
2000 2001 2002 Industry Profile
Sales Growth 66.67% 900.00% 200.00% -5.70%
Percent of Total Assets
Accounts Receivable 14.40% 31.38% 24.87% 22.70%
Inventory 2.51% 5.47% 4.34% 34.90%
Other Current Assets 1.82% 0.40% 0.10% 20.60%
Total Current Assets 92.75% 98.52% 99.64% 78.20%
Long-term Assets 7.25% 1.48% 0.36% 21.80%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 29.01% 15.48% 8.18% 28.60%
Long-term Liabilities 52.91% 9.50% 1.92% 19.30%
Total Liabilities 81.92% 24.97% 10.10% 47.90%
Net Worth 18.08% 75.03% 89.90% 52.10%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 71.00% 71.90% 71.97% 29.30%
Selling, General & Administrative Expenses 52.08% 34.23% 24.85% 16.00%
Advertising Expenses 12.00% 14.00% 6.00% 0.80%
Profit Before Interest and Taxes 32.51% 51.01% 63.04% 3.50%
Main Ratios
Current 3.20 6.37 12.18 2.67
Quick 3.11 6.01 11.65 1.14
Total Debt to Total Assets 81.92% 24.97% 10.10% 47.90%
Pre-tax Return on Net Worth 120.81% 126.33% 104.51% 5.60%
Pre-tax Return on Assets 21.84% 94.78% 93.96% 10.80%
Additional Ratios 2000 2001 2002
Net Profit Margin 18.78% 37.67% 46.85% n.a
Return on Equity 89.94% 94.75% 77.95% n.a
Activity Ratios
Accounts Receivable Turnover 5.71 5.71 5.71 n.a
Collection Days 59 35 43 n.a
Inventory Turnover 1.75 17.55 14.48 n.a
Accounts Payable Turnover 11.83 12.17 12.17 n.a
Payment Days 41 16 21 n.a
Total Asset Turnover 0.87 1.89 1.50 n.a
Debt Ratios
Debt to Net Worth 4.53 0.33 0.11 n.a
Current Liab. to Liab. 0.35 0.62 0.81 n.a
Liquidity Ratios
Net Working Capital $3,680,139 $22,005,762 $91,719,881 n.a
Interest Coverage 4.46 65.80 285.69 n.a
Additional Ratios
Assets to Sales 1.15 0.53 0.67 n.a
Current Debt/Total Assets 29% 15% 8% n.a
Acid Test 2.61 3.98 8.61 n.a
Sales/Net Worth 4.79 2.51 1.66 n.a
Dividend Payout 0.00 0.00 0.00 n.a

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