Blue Sky Satellite Communications
Financial Plan
The most important element of the financial plan is to have enough cash to be able to implement all the concepts of Blue Sky. This is not like any other conventional business, where stock turnover is the key factor. Here we look at selling as much hardware as possible to be able to increase the amount of airtime sold. The main revenue comes from the margins on the airtime.
7.1 Important Assumptions
The assumptions in the following table are thought to be key to the success of Blue Sky.
| General Assumptions | |||
| 2001 | 2002 | 2003 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 5.00% | 5.00% | 5.00% |
| Long-term Interest Rate | 5.00% | 5.00% | 5.00% |
| Tax Rate | 32.75% | 33.00% | 32.75% |
| Other | 0 | 0 | 0 |
7.2 Key Financial Indicators
The chart below shows the benchmarks for the company.
7.3 Projected Profit and Loss
Blue Sky’s projected profit and loss statement is found in the table below. For a monthly projection, please see appendix.
| Pro Forma Profit and Loss | |||
| 2001 | 2002 | 2003 | |
| Sales | $22,349,400 | $36,643,340 | $62,212,882 |
| Direct Cost of Sales | $16,234,151 | $24,939,040 | $42,507,546 |
| Other | $0 | $0 | $0 |
| Total Cost of Sales | $16,234,151 | $24,939,040 | $42,507,546 |
| Gross Margin | $6,115,249 | $11,704,300 | $19,705,336 |
| Gross Margin % | 27.36% | 31.94% | 31.67% |
| Expenses | |||
| Payroll | $110,040 | $110,040 | $110,040 |
| Sales and Marketing and Other Expenses | $74,000 | $574,000 | $831,000 |
| Depreciation | $4,350 | $4,350 | $4,350 |
| Leased Equipment | $8,500 | $20,000 | $40,000 |
| Utilities | $3,600 | $4,000 | $4,200 |
| Insurance | $8,400 | $9,000 | $9,600 |
| Rent | $16,200 | $16,800 | $17,200 |
| Payroll Taxes | $2,201 | $2,201 | $2,201 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $227,291 | $740,391 | $1,018,591 |
| Profit Before Interest and Taxes | $5,887,958 | $10,963,909 | $18,686,746 |
| EBITDA | $5,892,308 | $10,968,259 | $18,691,096 |
| Interest Expense | $446,688 | $261,250 | $143,750 |
| Taxes Incurred | $1,795,983 | $3,531,878 | $6,072,831 |
| Net Profit | $3,645,287 | $7,170,782 | $12,470,165 |
| Net Profit/Sales | 16.31% | 19.57% | 20.04% |
7.4 Projected Cash Flow
The cash flow projections for Blue Sky are found in the chart and table below. We will use a $3,000,000 line of credit to finance inventory purchases.
| Pro Forma Cash Flow | |||
| 2001 | 2002 | 2003 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $2,234,940 | $3,664,334 | $6,221,288 |
| Cash from Receivables | $19,206,566 | $32,328,895 | $54,828,651 |
| Subtotal Cash from Operations | $21,441,506 | $35,993,229 | $61,049,939 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $3,700,000 | $0 | $0 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 |
| New Long-term Liabilities | $0 | $0 | $0 |
| Sales of Other Current Assets | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $0 |
| New Investment Received | $3,500,000 | $0 | $0 |
| Subtotal Cash Received | $28,641,506 | $35,993,229 | $61,049,939 |
| Expenditures | 2001 | 2002 | 2003 |
| Expenditures from Operations | |||
| Cash Spending | $110,040 | $110,040 | $110,040 |
| Bill Payments | $18,468,456 | $28,321,992 | $48,877,891 |
| Subtotal Spent on Operations | $18,578,496 | $28,432,032 | $48,987,931 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $3,005,000 | $350,000 | $350,000 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $300,000 | $2,000,000 | $2,000,000 |
| Purchase Other Current Assets | $500,000 | $0 | $0 |
| Purchase Long-term Assets | $6,000,000 | $200,000 | $0 |
| Dividends | $0 | $0 | $9,000,000 |
| Subtotal Cash Spent | $28,383,496 | $30,982,032 | $60,337,931 |
| Net Cash Flow | $258,010 | $5,011,197 | $712,009 |
| Cash Balance | $288,786 | $5,299,984 | $6,011,992 |
7.5 Projected Balance Sheet
The table below shows Blue Sky’s balance sheet.
| Pro Forma Balance Sheet | |||
| 2001 | 2002 | 2003 | |
| Assets | |||
| Current Assets | |||
| Cash | $288,786 | $5,299,984 | $6,011,992 |
| Accounts Receivable | $1,016,486 | $1,666,596 | $2,829,539 |
| Inventory | $882,664 | $1,355,956 | $2,311,170 |
| Other Current Assets | $532,800 | $532,800 | $532,800 |
| Total Current Assets | $2,720,736 | $8,855,336 | $11,685,501 |
| Long-term Assets | |||
| Long-term Assets | $6,043,586 | $6,243,586 | $6,243,586 |
| Accumulated Depreciation | $11,600 | $15,950 | $20,300 |
| Total Long-term Assets | $6,031,986 | $6,227,636 | $6,223,286 |
| Total Assets | $8,752,722 | $15,082,972 | $17,908,787 |
| Liabilities and Capital | 2001 | 2002 | 2003 |
| Current Liabilities | |||
| Accounts Payable | $942,433 | $2,451,901 | $4,157,551 |
| Current Borrowing | $700,000 | $350,000 | $0 |
| Other Current Liabilities | $10,000 | $10,000 | $10,000 |
| Subtotal Current Liabilities | $1,652,433 | $2,811,901 | $4,167,551 |
| Long-term Liabilities | $5,700,000 | $3,700,000 | $1,700,000 |
| Total Liabilities | $7,352,433 | $6,511,901 | $5,867,551 |
| Paid-in Capital | $3,640,000 | $3,640,000 | $3,640,000 |
| Retained Earnings | ($5,884,998) | ($2,239,711) | ($4,068,929) |
| Earnings | $3,645,287 | $7,170,782 | $12,470,165 |
| Total Capital | $1,400,289 | $8,571,071 | $12,041,235 |
| Total Liabilities and Capital | $8,752,722 | $15,082,972 | $17,908,787 |
| Net Worth | $1,400,289 | $8,571,071 | $12,041,235 |
7.6 Business Ratios
The following table contains ratios from the communication services (4899) industry, as determined by the Standard Industry Classification (SIC) Index.
| Ratio Analysis | ||||
| 2001 | 2002 | 2003 | Industry Profile | |
| Sales Growth | 1178.09% | 63.96% | 69.78% | 4.80% |
| Percent of Total Assets | ||||
| Accounts Receivable | 11.61% | 11.05% | 15.80% | 14.30% |
| Inventory | 10.08% | 8.99% | 12.91% | 2.50% |
| Other Current Assets | 6.09% | 3.53% | 2.98% | 46.50% |
| Total Current Assets | 31.08% | 58.71% | 65.25% | 63.30% |
| Long-term Assets | 68.92% | 41.29% | 34.75% | 36.70% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 18.88% | 18.64% | 23.27% | 43.60% |
| Long-term Liabilities | 65.12% | 24.53% | 9.49% | 26.30% |
| Total Liabilities | 84.00% | 43.17% | 32.76% | 69.90% |
| Net Worth | 16.00% | 56.83% | 67.24% | 30.10% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 27.36% | 31.94% | 31.67% | 57.80% |
| Selling, General & Administrative Expenses | 10.68% | 12.46% | 11.85% | 35.50% |
| Advertising Expenses | 0.04% | 1.36% | 1.21% | 1.00% |
| Profit Before Interest and Taxes | 26.35% | 29.92% | 30.04% | 1.90% |
| Main Ratios | ||||
| Current | 1.65 | 3.15 | 2.80 | 1.17 |
| Quick | 1.11 | 2.67 | 2.25 | 0.95 |
| Total Debt to Total Assets | 84.00% | 43.17% | 32.76% | 69.90% |
| Pre-tax Return on Net Worth | 388.58% | 124.87% | 154.00% | 4.20% |
| Pre-tax Return on Assets | 62.17% | 70.96% | 103.54% | 14.00% |
| Additional Ratios | 2001 | 2002 | 2003 | |
| Net Profit Margin | 16.31% | 19.57% | 20.04% | n.a |
| Return on Equity | 260.32% | 83.66% | 103.56% | n.a |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 19.79 | 19.79 | 19.79 | n.a |
| Collection Days | 59 | 15 | 15 | n.a |
| Inventory Turnover | 7.57 | 22.28 | 23.18 | n.a |
| Accounts Payable Turnover | 20.56 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 21 | 24 | n.a |
| Total Asset Turnover | 2.55 | 2.43 | 3.47 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 5.25 | 0.76 | 0.49 | n.a |
| Current Liab. to Liab. | 0.22 | 0.43 | 0.71 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $1,068,303 | $6,043,435 | $7,517,949 | n.a |
| Interest Coverage | 13.18 | 41.97 | 129.99 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.39 | 0.41 | 0.29 | n.a |
| Current Debt/Total Assets | 19% | 19% | 23% | n.a |
| Acid Test | 0.50 | 2.07 | 1.57 | n.a |
| Sales/Net Worth | 15.96 | 4.28 | 5.17 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.72 | n.a |
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