Scientific Glass Distribution Analysis Case

1. Scientific Glass (SG) has been growing rapidly i.e. 33% in 2009.2. SG operates 8 regional warehouses in the US with a target service level of 99%.3. Inventory balances have nearly doubled in the most recent year requiring significant additional working capital.4. SG is a private company and must fund expansion by debt and/or internal cash flow.5. The companys capital requirements for 2010 are: $1.74 million for inventory, $2.25 million for international distributor expansion, and possibly $10 million for manufacturing capacity.SG has a critical need to control and possibly reduce the finished goods inventory level. The objective of this case is to analyze quantitatively the merit of the following proposed changes which include the following.1. Consolidating from 8 warehouses to 2 warehouses.2. Consolidating to just a single warehouse located in WalthamAn Excel spreadsheet with all the case exhibits is available to facilitate analysis. Include summary tables of your analysis. Use discounted cash flow with a ten year time horizon and a 10% discount rate to evaluate the relative financial merits of the alternatives.

Exhibit 1: Select Income Statement and Balance Sheet Values ($MM)
Income Statement Accounts	2008	2009
Net sales	65.0	86.3
Expenses
Cost of goods sold	29.0	38.9
Sales, general and administrative	10.1	14.0
Research and development	13.5	17.0
Depreciation	2.9	3.1
Other expenses	0.6	1.0
Operating expenses	56.1	74.0
Interest expense	2.4	3.0
Taxes	2.0	2.9
Net earnings	4.5	6.5
Balance Sheet Accounts	2008	2009
Assets
Cash	3.2	3.4
Receivables	3.0	4.0
Inventory	4.9	8.7
Prepaid expenses	4.8	6.1
Current assets	15.9	22.2
Plant property and equipment	28.5	32.9
Other long term assets	2.7	4.3
Total long term assets	31.2	37.2
Total assets	47.1	59.4
Liabilities & Equity
Short term debt	2.7	3.2
Accounts payable	2.3	3.0
Accrued liabilities	0.4	0.5
Current liabilities	5.4	6.7
Long term debt	17.2	21.7
Owners equity	24.5	31.0
Total capitalization	41.7	52.7
Total liabilities & equity	47.1	59.4
Months of inventory	2.028	2.690
Cost of goods sold / sales	0.446	0.451
Long term debt / total capital	0.412	0.412