Nuts n' Seeds has a required financial reporting deadline of 90 days after their fiscal year end. True or false, these financials were produced ahead of the client's submission deadline?

True

False

 

 

Nuts n' Seeds Incorporated (NSI) is a producer of organic, packaged snack products. Their products include granola bars, nut and seed butters, and other legume-based packaged snacks, like nut and seed mixes. The company was founded by owner Jason Lee, who still runs the business at its original facility in Anytown, USA. Jason's background was in marketing; he worked as a brand manager at a much larger competitor for 5 years before leaving to create NSI approximately 8 years ago when he identified what he believed to be a great market opportunity. NSI is a relatively new client to your commercial bank, moving over about 18 months ago from a competitor after a referral from your wealth management division, with whom jason has a relationship. Jason is a marketing guru, but even he is the first to admit that his financial acumen is weak - though improving. Jason's outside net worth is approximately $1,600,000 - with some of it in home equity but most in non-registered marketable securities, held with your wealth management group. Jason has been considering hiring a part time CFO to help support growth and to optimize their capital structure. He's only 40 and expects to work in the business for at least another 20 years; he has big growth expectations over that time. In a recent meeting it was made clear that he has not done any succession planning. The snack food production industry in North America is dominated by several large players, with Pepsi-co chief among them. Smaller operators like NSI generally achieve success by carving out unique niches (like locally-sourced and/or organic). Jason has been successful in this, particularly around brand messaging given his background in marketing. NSI has a well-diversified customer- base, although Jason is presently in negotiations with Costco's procurement team; a large new customer like that would be a game-changer. The present transaction is an annual review with increase. NSI is looking to borrow an additional $500,000 that will support the acquisition of new packaging equipment. They have a $500,000 operating line already, plus a $200,000 reducing term facility that you advanced right before their fiscal year end. Industry The snack food production industry is in the mature stage of its lifecycle, with heavy levels of regulation. CAPX requirements are considered relatively high. Industry revenues are growing at an annualized rate of 1.4%; this is expected to continue over the next 5 years. Technological change is considered medium, with investment in innovation required to keep up with the changing industry landscape. Some key industry ratios are as follows: Net margin: 3.8% Gross margin: 33.1% Debt service coverage: 1.5x Total liabilities to equity: 1.9x Current ratio: 1.5x Funded debt to EBITDA: 3.7xFunded debt to EBITDA: 3.7x