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Fiberglass World, Inc.
Financial Plan
Funding Requirements and Uses:
The company is seeking first round financing for the purpose of acquiring starting inventory of raw materials, purchasing land, building construction, utility hook-up and site improvement, machinery and equipment, working capital, legal and accounting, and miscellaneous start-up expenses. The company will require additional investment or loans for Phase II, set to begin during the fourth year of operation.
7.1 Important Assumptions
The following table outlines important assumptions for Fiberglass World.
| General Assumptions | |||
| Year 1 | Year 2 | Year 3 | |
| 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 | 39.17% | 40.00% | 39.17% |
| Other | 0 | 0 | 0 |
7.2 Break-even Analysis
| Break-even Analysis | |
| Monthly Revenue Break-even | $275,977 |
| Assumptions: | |
| Average Percent Variable Cost | 56% |
| Estimated Monthly Fixed Cost | $121,670 |
7.3 Projected Profit and Loss
The following table presents year-end profit and loss projections for Fiberglass World. For a monthly analysis, please see the appendix at the end of the plan.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $5,952,000 | $13,633,000 | $13,633,000 |
| Direct Cost of Sales | $3,327,942 | $7,802,670 | $7,617,112 |
| Royalties | $0 | $0 | $2,044,800 |
| Total Cost of Sales | $3,327,942 | $7,802,670 | $9,661,912 |
| Gross Margin | $2,624,058 | $5,830,330 | $3,971,088 |
| Gross Margin % | 44.09% | 42.77% | 29.13% |
| Expenses | |||
| Payroll | $300,000 | $380,000 | $545,000 |
| Sales and Marketing and Other Expenses | $857,541 | $1,371,697 | $1,605,710 |
| Depreciation | $55,000 | $55,000 | $55,000 |
| Leased Equipment | $15,000 | $16,500 | $18,150 |
| Utilities | $50,000 | $157,000 | $180,550 |
| Insurance | $109,500 | $257,200 | $422,920 |
| Rent | $28,000 | $35,000 | $36,750 |
| Payroll Taxes | $45,000 | $57,000 | $81,750 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $1,460,041 | $2,329,397 | $2,945,830 |
| Profit Before Interest and Taxes | $1,164,017 | $3,500,933 | $1,025,258 |
| EBITDA | $1,219,017 | $3,555,933 | $1,080,258 |
| Interest Expense | $53,413 | $68,990 | $82,250 |
| Taxes Incurred | $431,700 | $1,372,777 | $369,345 |
| Net Profit | $678,904 | $2,059,166 | $573,663 |
| Net Profit/Sales | 11.41% | 15.10% | 4.21% |
7.4 Projected Cash Flow
The cash flow projections for Fiberglass World are outlined in the following table and chart.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $5,952,000 | $13,633,000 | $13,633,000 |
| Cash from Receivables | $0 | $0 | $0 |
| Subtotal Cash from Operations | $5,952,000 | $13,633,000 | $13,633,000 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $50,000 | $85,000 | $85,000 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 |
| New Long-term Liabilities | $47,600 | $47,600 | $47,600 |
| 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 | $6,049,600 | $13,765,600 | $13,765,600 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $300,000 | $380,000 | $545,000 |
| Bill Payments | $4,728,411 | $11,048,606 | $12,369,809 |
| Subtotal Spent on Operations | $5,028,411 | $11,428,606 | $12,914,809 |
| 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 | $0 | $0 | $0 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $17,000 | $17,000 | $17,000 |
| Subtotal Cash Spent | $5,045,411 | $11,445,606 | $12,931,809 |
| Net Cash Flow | $1,004,189 | $2,319,994 | $833,791 |
| Cash Balance | $1,039,189 | $3,359,183 | $4,192,973 |
7.5 Projected Balance Sheet
The table below shows our projected balance sheet for three years. Monthly figures for the first year are included in the appendices.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $1,039,189 | $3,359,183 | $4,192,973 |
| Accounts Receivable | $0 | $0 | $0 |
| Inventory | $320,314 | $751,007 | $733,147 |
| Other Current Assets | $0 | $0 | $0 |
| Total Current Assets | $1,359,503 | $4,110,190 | $4,926,120 |
| Long-term Assets | |||
| Long-term Assets | $300,000 | $300,000 | $300,000 |
| Accumulated Depreciation | $55,000 | $110,000 | $165,000 |
| Total Long-term Assets | $245,000 | $190,000 | $135,000 |
| Total Assets | $1,604,503 | $4,300,190 | $5,061,120 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $429,999 | $950,920 | $1,022,587 |
| Current Borrowing | $100,000 | $185,000 | $270,000 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $529,999 | $1,135,920 | $1,292,587 |
| Long-term Liabilities | $523,600 | $571,200 | $618,800 |
| Total Liabilities | $1,053,599 | $1,707,120 | $1,911,387 |
| Paid-in Capital | $321,000 | $321,000 | $321,000 |
| Retained Earnings | ($449,000) | $212,904 | $2,255,070 |
| Earnings | $678,904 | $2,059,166 | $573,663 |
| Total Capital | $550,904 | $2,593,070 | $3,149,733 |
| Total Liabilities and Capital | $1,604,503 | $4,300,190 | $5,061,120 |
| Net Worth | $550,904 | $2,593,070 | $3,149,733 |
7.6 Business Ratios
The following table outlines important ratios from the roofing, siding and insulation industry, as determined by the Standard Industry Classification (SIC) Index #5033, Roofing, Siding, and Insulation.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 129.05% | 0.00% | 14.50% |
| Percent of Total Assets | ||||
| Accounts Receivable | 0.00% | 0.00% | 0.00% | 29.10% |
| Inventory | 19.96% | 17.46% | 14.49% | 26.30% |
| Other Current Assets | 0.00% | 0.00% | 0.00% | 25.10% |
| Total Current Assets | 84.73% | 95.58% | 97.33% | 80.50% |
| Long-term Assets | 15.27% | 4.42% | 2.67% | 19.50% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 33.03% | 26.42% | 25.54% | 46.10% |
| Long-term Liabilities | 32.63% | 13.28% | 12.23% | 11.10% |
| Total Liabilities | 65.67% | 39.70% | 37.77% | 57.20% |
| Net Worth | 34.33% | 60.30% | 62.23% | 42.80% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 44.09% | 42.77% | 29.13% | 17.60% |
| Selling, General & Administrative Expenses | 32.89% | 27.66% | 24.98% | 9.60% |
| Advertising Expenses | 4.26% | 2.28% | 2.75% | 0.20% |
| Profit Before Interest and Taxes | 19.56% | 25.68% | 7.52% | 2.00% |
| Main Ratios | ||||
| Current | 2.57 | 3.62 | 3.81 | 1.58 |
| Quick | 1.96 | 2.96 | 3.24 | 0.86 |
| Total Debt to Total Assets | 65.67% | 39.70% | 37.77% | 57.20% |
| Pre-tax Return on Net Worth | 201.60% | 132.35% | 29.94% | 5.50% |
| Pre-tax Return on Assets | 69.22% | 79.81% | 18.63% | 12.80% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 11.41% | 15.10% | 4.21% | n.a |
| Return on Equity | 123.23% | 79.41% | 18.21% | n.a |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 0.00 | 0.00 | 0.00 | n.a |
| Collection Days | 0 | 0 | 0 | n.a |
| Inventory Turnover | 10.91 | 14.57 | 10.26 | n.a |
| Accounts Payable Turnover | 12.00 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 22 | 29 | n.a |
| Total Asset Turnover | 3.71 | 3.17 | 2.69 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 1.91 | 0.66 | 0.61 | n.a |
| Current Liab. to Liab. | 0.50 | 0.67 | 0.68 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $829,504 | $2,974,270 | $3,633,533 | n.a |
| Interest Coverage | 21.79 | 50.75 | 12.47 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.27 | 0.32 | 0.37 | n.a |
| Current Debt/Total Assets | 33% | 26% | 26% | n.a |
| Acid Test | 1.96 | 2.96 | 3.24 | n.a |
| Sales/Net Worth | 10.80 | 5.26 | 4.33 | n.a |
| Dividend Payout | 0.03 | 0.01 | 0.03 | n.a |