Financial Statements for Willmott Winery

Since Ms. Willmotts family has been in the wine business for many years, the existing marketing network helped to sell substantial amounts of wine for the following varieties of wine.

In addition, the Income Statements and Balance Sheets for 2014 and 2015 is provided below by Ms. Willmotts accountant.

Table 3: Income Statement and Balance Sheet for 2014 and 2015

INCOME STATEMENT	2015	2014
Revenues	?	?
Cost of Revenues	2,137,500	1,343,115
Depreciation	79,000	51,000
Selling & Administrative Expenses	123,900	32,945
Earnings Before Interest and Taxes	769,531	251,835
Interest Paid	155,000	44,000
Taxable Income	614,531	207,835
Taxes, 40%	245,812	83,134
Net Income	368,719	124,701
Qualified Dividends (30%)	110,616	37,410
Addition to Retained Earnings	258,103	87,291
BALANCE SHEET	2015	2014
ASSETS
Cash	145,000	40,000
Accounts Receivable	600,000	200,000
Inventories	1,300,450	650,000
Total Current Assets	2,045,450	890,000
Gross Fixed Assets	?	2,510,000
Accumulated Depreciation	232,000	153,000
Net Fixed Assets	3,068,000	2,357,000
Total Assets	5,113,450	3,247,000
LIABILITIES & EQUITY
Accounts Payable	145,000	55,000
Notes Payable	750,000	300,000
Total Current Liabilities	895,000	355,000
Long-term Debt	1,868,347	800,000
Unlisted Shares*	2,000,000	2,000,000
Retained Earnings	350,103	92,000
TOTAL EQUITY	2,350,103	2,092,000
Total Equity and Liabilities	5,113,450	3,247,000
*100,000 shares owned by Ms. Willmott

Ms. Willmott feels uneasy about her understanding of the financial information and looks forward to meet an MBA student who would advise her about what to do next.

CASE QUESTIONS:

1. Find total sales for 2014 and 2015.

2. Find total investments for 2014 and 2015. 3. After filling the missing information in the ordinary income statement and balance sheet, find common-size income and balance sheet statements. Also, find $ Change from 2014 to 2015 next to the common-size statements.

Willmott Winery is a privately owned firm and was founded by an agricultural engineer, Ms. Margaret Willmott, in Northern California 5 years ago. As the CEO and the majority owner of the company, Ms. Willmott spent several years to prepare the land feasibility report identifying and evaluating potential environmental consequences of the winery to its surroundings. She implemented mitigation measures to eliminate adverse impacts of the winery operations to its vicinity and for met the county zoning requirements of the winery site. After the approval of the winery location, she invested her own family savings to cultivate different varieties of wine ranging from Cabernet Sauvignon, Merlot, Chardonnay, Riesling, Pinot Gris, and Pinot Noir. Luckily, she was born to a family of wine makers and her familiarity with wine making gave Ms. Willmott an edge to turn her winery profitable in a very short time. Having the family members on her side, especially her father Ralph, was instrumental for her to focus on producing quality wine and start selling right away to the large quantities of wine to the regional retailers and whole-sale distributors. In addition to producing grapes on the winery fields, Ms. Willmott purchased grapes from other growers in the region and processed them at the site to increase the selling volume. The father Ralph tapped easily into his old marketing connections and started to supply to the largest retail and wholesale distribution channels. Currently, Ms. Willmott is the majority owner with 60,000 unlisted company shares and the rest of the 40,000 shares belong to her father. One day, Ms. Willmott wants to grow her business by buying more land in the region and go public by issuing publicly traded shares. Therefore, she decided to run her company similar to a publicly traded firm and distributed first annual dividends to the shareholders (Ralph and herself) with a target annual dividend payout ratio of 30%. In addition to her family's money to support Willmott's long term financing needs, she recently obtained an Asset Based Loan (ABL) from a local bank to supplement the firm's operating expenses and new investment for further expansion. Unfortunately, the ABL loan was rather expensive and collateralized the winery's real estate assets (land and buildings). The following table shows the details of investments made in Willmott Winery in the last 2 years. 2015 Table 1: Willmott Winery Investments (2014-2015) Willmott Winery Investments Stainless Steel Tanks $51,119 Fermentation/Storage $5,184 Cooperage Cellar Equipment Laboratory Equipment Refrigeration/Tank Cooling Bottling Line, Packaging Equipment $158,847 Winery Office and Vehicles $200,000 Tasting Room $374,850 2014 $97,558 $35,625 $16,971 $38,880 $11,606 $13,142 $0 $296,218 $0 $18 $22 Table 2: Wine Revenues from Types of Wine for 2014 and 2015 and Wine Distribution Channels Willmott Winery Sales Number of Bottles Wines Average Revenues (2014) Sold Price Cabernet Sauvignon 15,443 $16 $247,088 Merlot 5,150 $92,700 Chardonnay 27,642 $608,127 Riesling 7,445 $14 $104,230 Pinot Gris 9,202 $17 $156,434 Pinot Noir. 11,198 $42 $470,316 Number of Bottles Average Wines Revenues (2015) Sold Price Cabernet Sauvignon 27,606 $24 $662,544 Merlot 9,343 $13 $121,459 Chardonnay 61,200 $15 $918,000 Riesling 12,857 $26 $334,282 Pinot Gris 19,254 $346,572 Pinot Noir. 23,454 $727,074 $18 $31 Wine Sales Channels On-Premise Sales Retail Sales (Direct-to-Consumer) Wholesale Sales (Sales to Distributors) Revenues (2015) 187,542 460,948 2,461,441 Revenues (2014) 91,643 120,968 1,466,284