6. Reorganization plan

Your task is to analyze Puyol Corp.s reorganization plan.

Puyol Corp. has reported losses for the past three years and has finally decided to file for bankruptcy. You know that the company has preferred stock A that has a par value of $123.50, pays a dividend of $6 per share, and that there are 1,400,000 shares of this class outstanding. Preferred stock B is callable at $155, has 70,000 shares outstanding, and pays a dividend of $11.00 per share. The companys common stock has a par value of $2.00 and has 7,000,000 shares outstanding.

You have also collected the following data from the companys financial statements:

Puyol Corp. Data from Financial Statements (Millions of dollars)

	Balance Sheet			Income Statement
Current assets	$504.00	Current liabilities	$126.00	Net sales	$1,620.00
Net fixed assets	459.00	Advance payments	234.00	Operating expense	1,548.00
Goodwill	45.00	Reserves	18.00	Net operating income	$72.00
		Class A Preferred stock	172.90	Other income	9.00
		Class B Preferred stock	10.85	EBT	$81.00
		Common stock	14.00	Taxes (50%)	40.50
		Retained earnings	432.25	Net income	$40.50
				Dividends on Class A Preferred stock	21.60
				Dividends on Class B Preferred stock	1.80
Total assets	$1,008.00	Total claims	$1,008.00	Income available to common stockholders	$17.10

Puyols creditors have agreed to a voluntary reorganization plan with the following settlements:

	Each share of preferred stock A will be exchanged for one share of preferred stock C with a par value of $41.17 that pays a dividend of $2.40 per share, plus one 8% subordinated income debenture that carries a par value of $82.33.
	Preferred stock B that pays a dividend of $11.00 per share will be settled with cash at a call price of $155.

Based on the information you have, calculate and fill in the values in the pro-forma financial statements of Puyol Corp. for the reorganization plan. (Note: Round your answers to two decimal places.)

Puyol Corp. Pro-Forma Financial Statements Based on Reorganization Plan (Millions of dollars)
	Balance Sheet			Income Statement
Current assets		Current liabilities	$126.00	Net sales	$1,620.00
Net fixed assets	459.00	Advance payments	234.00	Operating expense	1,548.00
Goodwill	45.00	Reserves	18.00	Net operating income	$72.00
		Subordinated debenture		Other income	9.00
		$2.40 preferred stock C claims		EBIT	$81.00
		Common stock	14.00	Interest expense
		Retained earnings	432.25	EBT
				Taxes (50%)
				Net income
				Dividends on $2.40 preferred
Total assets		Total claims		Income available to common stockholders

Thus, income available for common stockholders will after the reorganization takes place.