Introduction

UVA-S-F-1360 v. 1.1

This spreadsheet supports student analysis of Eastboro Machine Tools

Corporation case (UVA -F- 1360 version 1.1)

Please note:

1) This is a working model. Assumptions / Inputs presented can be

changed to vary the results.

2) As long as default spreadsheet calculation is set as "automatic"

impact of changing assumptions will be computed in real time.
Alternatively F9 function key may need to be invoked to recalculate
results. To set numerical calculation settings to automatic look under
tools, options, calculations menu.

Copyright (C) 2001 by the Trustees of the University of Virginia Darden School Foundation.

Page 1
 Exhibit 1

EXHIBIT 1
EASTBORO MACHINE TOOLS CORPORATION
Consolidated Income Statements ( in thousand dollars, except per share data)

For the Years Ended December 31,

1998 1999 2000

Net sales $ 858,263 $ 815,979 $ 756,638

Cost of sales 540,747 501,458 498,879
Gross profit 317,516 314,522 257,759

Research & development 77,678 70,545 75,417

Selling, general, & administrative 229,971 223,634 231,008
Restructuring costs 65,448 0 89,411
Operating profit (loss) (55,581) 20,343 (138,077)

Other income (expense) (4,500) 1,065 (3,458)

Income (loss) before taxes (60,081) 21,408 (141,534)
Income taxes (benefit) 1,241 8,415 (750)

Net income (loss) ($61,322) $12,993 ($140,784)

Earnings (loss) per share ($3.25) $0.69 ($7.57)

Dividends per share $0.77 $0.25 $0.25

Page 2
 Exhibit 1

December 31,
Projected
2001

$ 870,000
549,750
320,250

77,250
211,500
0
31,500

(4,200)
27,300
9,282

$18,018

$0.98
$0.39

Page 3
 Exhibit 2

EXHIBIT 2
EASTBORO MACHINE TOOLS CORPORATION
Consolidated Balance Sheets ( in thousand dollars)

December 31st
Projected
1999 2000 2001

Cash & equivalents $ 13,917 $ 22,230 $ 25,665

Accounts receivable 208,541 187,235 217,510
Inventories 230,342 203,888 217,221
Prepaid expenses 14,259 13,016 15,011
Other 22,184 20,714 21,000
Total Current Assets 489,242 447,082 496,407

Property, plant, & equipment 327,603 358,841 410,988

Less depreciation 167,414 183,486 205,530
Net property, plant, & equipment 160,190 175,355 205,458
Intangible assets 9,429 2,099 1,515
Other assets 15,723 17,688 17,969

Total assets $674,583 $642,223 $721,350

Bank loans $ 34,196 71,345 74,981

Accounts payable 36,449 34,239 37,527
Current portion of long-term debt 300 150 1,515
Accruals and other 129,374 161,633 183,014
Total Current Liabilities 200,318 267,367 297,037

Deferred taxes 16,986 13,769 16,526

Long-term debt 9,000 8,775 30,021
Deferred pension costs 44,790 64,329 70,134
Other liabilities 2,318 5,444 7,505
Total Liabilities 273,411 359,683 421,224

Common stock, $1 par value 18,855 18,855 18,835

Capital in excess of par 107,874 107,907 107,889
Cumulative translation adjustment (6,566) 20,208 26,990
Retained earnings 291,498 146,065 156,875
Less treasury stock at cost:

Page 4
 Exhibit 2

1986--256,151, 1987--255,506 (10,490) (10,494) (10,464)

Total shareholders' equity 401,172 282,541 300,126

Total Liabilities & Equity $674,583 $642,223 $721,350

Page 5
Exhibit 2

Page 6
 Exhibit 5

EXHIBIT 5
EASTBORO MACHINE TOOLS CORPORATION
Per Share Financial & Stock Data*

Sales / -----Stock Price-----

Year Share EPS~ DPS~ CPS~ High Low

1985 $14.52 $ 0.45 $0.18 $0.97 $20.37 $9.69

1986 16.00 0.74 0.22 1.29 21.11 10.18
1987 22.25 0.89 0.27 1.43 21.23 8.20
1988 25.64 1.59 0.31 2.05 18.50 10.18
1989 27.19 2.29 0.40 2.83 22.48 12.17
1990 30.06 2.59 0.57 3.25 23.84 18.01
1991 31.66 2.61 0.72 3.34 26.70 18.25
1992 37.71 2.69 0.81 3.60 29.43 19.50
1993 40.69 2.56 0.86 3.62 39.74 20.12
1994 48.23 3.58 0.92 4.81 40.98 27.32
1995 43.59 2.79 1.03 4.25 38.74 21.36
1996 42.87 0.65 1.03 2.23 47.19 29.55
1997 41.48 0.35 1.03 2.00 40.23 26.82
1998 46.01 (3.29) 0.77 2.86 30.75 22.13
1999 43.88 0.70 0.25 1.99 71.88 50.74
2000 40.68 (7.57) 0.25 -0.97 39.88 18.38

*Adjusted for 3-for-2 stock split in January 1991 and 50 percent stock dividend in June 1993.
~ EPS: Earnings Per Share;CPS: Cash earnings per Share; DPS: Dividend per Share

Page 7
 Exhibit 5

Shares
Stock Price----- Avg. Payout Avg. Outstanding
Avg. P/E Ratio Yield (Millions)

$14.48 32.4 40% 1.2% 15.49

14.85 20.2 30% 1.5 15.58
13.50 15.1 30% 2.0 16.04
13.35 8.4 19% 2.3 17.87
18.36 8.0 17% 2.2 18.08
21.00 8.1 22% 2.7 18.39
22.73 8.7 27% 3.1 18.76
24.23 9.0 30% 3.4 18.76
29.48 11.5 34% 2.9 18.78
33.98 9.5 26% 2.7 18.88
31.82 11.4 37% 3.2 18.66
36.81 57.0 160% 2.8 18.66
31.26 89.9 297% 3.3 18.66
26.45 NMF NMF 2.9 18.85
61.33 88.2 35% 0.4 18.85
29.15 NMF NMF 0.9 18.60

Page 8
 Exhibit 8

EXHIBIT 8
EASTBORO MACHINE TOOLS CORPORATION
Projected Sources and Uses Statement ( in million dollars)

Assumptions: 2001 2002 2003 2004 2005

1. Sales Growth Rate: 15% 15% 15% 15% 15%

2. Net Income as % of Sales 2.1% 4.0% 5.0% 5.5% 6.0%
3. Dividend Payout Ratio 40.0% 40.0% 40.0% 40.0% 40.0%

Projections
2001 2002 2003 2004 2005

Sales $ 870 $ 1,001 $ 1,151 $ 1,323 $ 1,522

Sources:
Net income 18 40 58 73 91
Depreciation 23 26 30 35 41
41 66 88 107 132
Uses:
Capital expend. 44 50 58 66 68
Change in Working capital 20 22 26 30 34
63 73 83 96 102

Excess cash/(Borrowing needs) (23) (7) 4 12 29

Dividend 7 16 23 29 37

After dividend
Excess cash/(Borrowing needs) (30) (23) (19) (18) (7)

*Ignoring the effects of borrowings on interest and amortization.

Page 9
 Exhibit 8

2006 2007

15% 15%
5.6% 8.0%
40.0% 40.0%

Total
2006 2007 2001-07

$ 1,750 $ 2,013 9,630

98 160 538
47 53 252
145 213 790

79 91 456
39 44 214
117 135 670

27 78 120
39 64 215

(12) 14 (95)

Page 10
 2000 2001 2002 2003 2004
Sales Growth 15% 15% 15% 15%
Sales Growth 756.6 870.1 1000.7 1150.8 1323.4
Net income margin 2.1% 4.0% 5.0% 5.5%
Net income 18.10 40.03 57.54 72.79

Source
Net Income 18.1 40.0 57.5 72.8
Depreciation 22.5 25.5 30 34.5
Net Source 40.6 65.5 87.5 107.3

Uses
Capex 43.80 50.37 57.54 66.17
Inc. in NWC 19.50 22.43 25.79 29.59
Net uses 63.30 72.79 83.33 95.75

Dividend Payout 40% 40% 40% 40%

Dividend Paid 7.24 16.01 23.02 29.11

Net Funding Gap 29.94 23.28 18.80 17.58

Equity
Opening 282.54 293.40 317.42 351.94
Add : NI 18.10 40.03 57.54 72.79
Less : Div 7.24 16.01 23.02 29.11
Closing 282.54 293.40 317.42 351.94 395.61

Debt
Opening 80 110 133 152
Add : New borrowings(repayment) 29.94 23.28 18.80 17.58
Closing 80.27 110.21 133.49 152.29 169.87

Leverage
D/E (book) 28.41% 37.56% 42.05% 43.27% 42.94%
Max D/E (book) 40% 40% 40% 40% 40%
Max. Debt Capacity 113.02 117.36 126.97 140.78 158.24
Unutilised Debt Capacity 32.75 7.15 -6.52 -11.52 -11.63
 2005 2006 2007
15% 15% 15%
1521.9 1750.1 2012.7
6.0% 5.6% 8.0%
91.31 98.01 160.01

91.3 98.0 160.0

40.5 46.5 52.5
131.8 144.5 212.5

68.48 78.76 90.57

33.95 38.52 44.29
102.44 117.28 134.86

40% 40% 40%

36.52 39.20 64.00

7.15 11.97 -13.64

395.61 450.40 509.20

91.31 98.01 160.01
36.52 39.20 64.00
450.40 509.20 605.21

170 177 189

7.15 11.97 -13.64
177.02 189.00 175.36

39.30% 37.12% 28.97%

40% 40% 40%
180.16 203.68 242.08
3.13 14.69 66.73