What is your valuation of Shaker Circuits?>
Shaker Circuits 147 EXHIBIT 8.1 Shaker Circuits income statement. 1989 1988 1987 1986 1985 Revenue (annual) $125 320 175 230 $ 160 450 340 290 $1,240 $150 330 170 225 $145 210 150 175 $160 185 140 145 $850 $875 $680 $630 Computer manufacturers Power supply manufacturers Electronic instrument manufacturers Automotive industry Total revenue Variable costs Materials COGS, manufactured Design Outside services Total variable costs Contribution (gross margin) 298 47 13 $357 440 62 12 $ 515 306 48 13 245 34 14 $292 227 32 6 $368 $265 $493 58% $ 725 59% $508 58% $388 57% 8365 58% $ 75 5 $170 6 4 60 13 21 11 $ 186 7 6 55 12 25 12 12 12 12 $ 341 $131 6 4 52 9 18 9 9 13 10 50 7 14 7 $ 57 4 3 50 6 13 6 6 9 9 9 13 13 Fixed costs Salaries Phone Utilities Rent Office equipment leases Warehouse equipment leases Travel Postage/shipping Legal/accounting fees Insurance Total fixed costs Total costs (fixed & variable) Income before interest, taxes, & depreciation Depreciation Interest Income before taxes State income taxes Federal income taxes 10 10 $319 $260 $187 $165 $676 $ 856 $628 $480 $429 200 12 201 10 9 10 174 19 13 $142 7 50 $ 85 10.0% 384 247 19 16 10 9 $222 18 11 124 78 $ 213 $133 17.2% 15.2% $178 9 62 $182 9 64 Net income $107 15.7% $109 17.3% 148 Shaker Circuits (A) 1988 1987 1986 EXHIBIT 8.2 Shaker Circuits balance sheet. 1989 $106 $185 153 89 79 66 Assets Cash & marketable securities Accounts receivable Inventory Total current assets Property plant & equipment Accumulated depreciation Property plant & equipment (net) Other assets $132 196 129 $457 278 (80) 198 $83 134 92 $308 241 (61) 180 $104 94 73 $272 179 (45) 134 $427 286 (99) 188 $25 125 133 $656 $488 $406 $615 $343 Total assets Liabilities 107 11 112 11 55 6 Accounts payable Short term debt Total current liabilities Long term debt Total liabilities 72 7 $ 79 90 $169 $124 100 $118 130 $ 61 100 50 5 $ 54 90 $144 $294 $248 $161 150 293 150 169 150 96 Owners equity Common stock Retained earnings Total equity Total liabilities & equity 150 218 $368 150 49 $199 $433 $319 $246 $616 $656 $488 $407 $344 remove the resist. This produces an alkaline polymer sludge, which must be chemi- cally neutralized and dried prior to being hauled away by a certified hazardous waste hauler. The boards are then run through a conveyor etcher. The etching process re- moves the exposed copper areas by chemically degrading the copper coating down to the fiberglass substrate of the board. The ammonia-based etching solution does not attack the tin/lead plating. This leaves the copper traces under the tin/lead plating in- tact and the rest of the board exposed fiberglass. The ammonia-based solution of dis- solved copper must be removed by an authorized hazardous waste hauler. The tin/lead is then chemically stripped from the pathways exposing the copper traces. A photosensitive epoxy ink, called solder mask, is applied to the boards to cover the traces but leave the holes and surface mount pads exposed. The boards are then run through hot air solder leveling to coat the exposed holes and surface mount pads. This is accomplished by running the boards through a curtain of liquid tin/lead and then blowing off the excess solder with extremely hot air knives. After hot air leveling, an epoxy-based nomenclature ink is applied to the Shaker Circuits 149 EXHIBIT 8.3 Shaker Circuits cash flow. 1989 1988 1987 1986 1985 Operations Net income Depreciation $ 85 19 43 39 (5) $213 19 (63) (37) 40 $173 $133 16 (39) (19) 17 $108 $107 12 (16) (7) 6 $102 $109 10 2 (5) 4 $120 $ 181 (9) $ (9) (37) $(37) (61) $(61) (54) $(54) (15) $(15) Accounts receivable decrease/(increase) Inventory decrease/(increase) Accounts payable (decrease increase Net cash from operations Investing PP & E decrease/(increase) Net cash from investing Financing Increase/(decrease) in short-term debt Increase/(decrease) in long-term debt Issues of common stock Common dividends Net cash from financing activities Beginning cash balance Net cash flow Ending cash balance Operating cash flows + common dividends Discount rate NPV of operating cash flows (1) 30 4 10 2 (10) 1 10 5 5 (150) $(121) (100) $(86) (60) $(68) (60) $(49) (60) $(60) 132 52 $ 185 83 50 $132 104 (22) $ 83 106 (2) $104 61 45 $106 $273 $165 $162 $180 $ 331 15.0% $ 787 boards to aid in component placement. The final step in the process is to rout the boards to their final dimensions using a CNC router. PCBs were a member of the electronic components industry. In 1988, the value of shipments in the parent industry were approximately $57 billion dollars. This rep- resented a 25 percent increase over the value of shipments in 1987. United States PCB production was over $4.5 billion in 1989. Most industry analysts felt that the growth would be modest for a few years then pick up significantly in the early to mid- 1990s. Demand in the consumer electronics and defense industry would weaken, but would be offset by strength in the computer and telecommunications sectors. By most accounts, electronic components shipments were estimated to increase by over 10 percent in 1989 and 1990. For the PCB market, 1988 was a good year. Demand from computer, telecom- munications, instrumentation, and automotive markets was strong, Unit shipments of PCBs were growing and the market was demanding improvements in technology PCB sales to computer manufacturers made up over 40 percent of the revenue of independent PCB manufacturers. Over 15 percent of revenues came from Shaker Circuits 147 EXHIBIT 8.1 Shaker Circuits income statement. 1989 1988 1987 1986 1985 Revenue (annual) $125 320 175 230 $ 160 450 340 290 $1,240 $150 330 170 225 $145 210 150 175 $160 185 140 145 $850 $875 $680 $630 Computer manufacturers Power supply manufacturers Electronic instrument manufacturers Automotive industry Total revenue Variable costs Materials COGS, manufactured Design Outside services Total variable costs Contribution (gross margin) 298 47 13 $357 440 62 12 $ 515 306 48 13 245 34 14 $292 227 32 6 $368 $265 $493 58% $ 725 59% $508 58% $388 57% 8365 58% $ 75 5 $170 6 4 60 13 21 11 $ 186 7 6 55 12 25 12 12 12 12 $ 341 $131 6 4 52 9 18 9 9 13 10 50 7 14 7 $ 57 4 3 50 6 13 6 6 9 9 9 13 13 Fixed costs Salaries Phone Utilities Rent Office equipment leases Warehouse equipment leases Travel Postage/shipping Legal/accounting fees Insurance Total fixed costs Total costs (fixed & variable) Income before interest, taxes, & depreciation Depreciation Interest Income before taxes State income taxes Federal income taxes 10 10 $319 $260 $187 $165 $676 $ 856 $628 $480 $429 200 12 201 10 9 10 174 19 13 $142 7 50 $ 85 10.0% 384 247 19 16 10 9 $222 18 11 124 78 $ 213 $133 17.2% 15.2% $178 9 62 $182 9 64 Net income $107 15.7% $109 17.3% 148 Shaker Circuits (A) 1988 1987 1986 EXHIBIT 8.2 Shaker Circuits balance sheet. 1989 $106 $185 153 89 79 66 Assets Cash & marketable securities Accounts receivable Inventory Total current assets Property plant & equipment Accumulated depreciation Property plant & equipment (net) Other assets $132 196 129 $457 278 (80) 198 $83 134 92 $308 241 (61) 180 $104 94 73 $272 179 (45) 134 $427 286 (99) 188 $25 125 133 $656 $488 $406 $615 $343 Total assets Liabilities 107 11 112 11 55 6 Accounts payable Short term debt Total current liabilities Long term debt Total liabilities 72 7 $ 79 90 $169 $124 100 $118 130 $ 61 100 50 5 $ 54 90 $144 $294 $248 $161 150 293 150 169 150 96 Owners equity Common stock Retained earnings Total equity Total liabilities & equity 150 218 $368 150 49 $199 $433 $319 $246 $616 $656 $488 $407 $344 remove the resist. This produces an alkaline polymer sludge, which must be chemi- cally neutralized and dried prior to being hauled away by a certified hazardous waste hauler. The boards are then run through a conveyor etcher. The etching process re- moves the exposed copper areas by chemically degrading the copper coating down to the fiberglass substrate of the board. The ammonia-based etching solution does not attack the tin/lead plating. This leaves the copper traces under the tin/lead plating in- tact and the rest of the board exposed fiberglass. The ammonia-based solution of dis- solved copper must be removed by an authorized hazardous waste hauler. The tin/lead is then chemically stripped from the pathways exposing the copper traces. A photosensitive epoxy ink, called solder mask, is applied to the boards to cover the traces but leave the holes and surface mount pads exposed. The boards are then run through hot air solder leveling to coat the exposed holes and surface mount pads. This is accomplished by running the boards through a curtain of liquid tin/lead and then blowing off the excess solder with extremely hot air knives. After hot air leveling, an epoxy-based nomenclature ink is applied to the Shaker Circuits 149 EXHIBIT 8.3 Shaker Circuits cash flow. 1989 1988 1987 1986 1985 Operations Net income Depreciation $ 85 19 43 39 (5) $213 19 (63) (37) 40 $173 $133 16 (39) (19) 17 $108 $107 12 (16) (7) 6 $102 $109 10 2 (5) 4 $120 $ 181 (9) $ (9) (37) $(37) (61) $(61) (54) $(54) (15) $(15) Accounts receivable decrease/(increase) Inventory decrease/(increase) Accounts payable (decrease increase Net cash from operations Investing PP & E decrease/(increase) Net cash from investing Financing Increase/(decrease) in short-term debt Increase/(decrease) in long-term debt Issues of common stock Common dividends Net cash from financing activities Beginning cash balance Net cash flow Ending cash balance Operating cash flows + common dividends Discount rate NPV of operating cash flows (1) 30 4 10 2 (10) 1 10 5 5 (150) $(121) (100) $(86) (60) $(68) (60) $(49) (60) $(60) 132 52 $ 185 83 50 $132 104 (22) $ 83 106 (2) $104 61 45 $106 $273 $165 $162 $180 $ 331 15.0% $ 787 boards to aid in component placement. The final step in the process is to rout the boards to their final dimensions using a CNC router. PCBs were a member of the electronic components industry. In 1988, the value of shipments in the parent industry were approximately $57 billion dollars. This rep- resented a 25 percent increase over the value of shipments in 1987. United States PCB production was over $4.5 billion in 1989. Most industry analysts felt that the growth would be modest for a few years then pick up significantly in the early to mid- 1990s. Demand in the consumer electronics and defense industry would weaken, but would be offset by strength in the computer and telecommunications sectors. By most accounts, electronic components shipments were estimated to increase by over 10 percent in 1989 and 1990. For the PCB market, 1988 was a good year. Demand from computer, telecom- munications, instrumentation, and automotive markets was strong, Unit shipments of PCBs were growing and the market was demanding improvements in technology PCB sales to computer manufacturers made up over 40 percent of the revenue of independent PCB manufacturers. Over 15 percent of revenues came from
