5.0.-14.0. EDSR 09-13-1993 - Laserfiche WebLink

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The projected cash flows of Water Laboratories for FYs 1993 and 1994 are as follows: S WATER LABORATORIES, INC. FY 1993 FY 1994 Net Income $33,790 $45,425 Depr./Am. 5,500 4,400 Interest Exp. 950 850 * TOTAL CASH FLOW $40,240 $50,675 EXISTING DEBT SERVICE $ 9,491 $ 8,868 PROPOSED DEBT SERVICE 877 10,524 EXCESS CASH FLOW $29,872 $31,283 COVERAGE 3.88 times 2.61 times • The interest expense figure allowed in the projection is inadequate. The annual interest expense would be approximately $9,892 in FY 1993 and $8,892 in FY 1994. While this adjustment would reduce profitability, the cash flow analysis above is not affected by this error because the real interest expense is included in the debt service. The projection is based on the following assumptions: • • Revenues are expected to grow 21.5% from FY 1992 to FY 1993, and 10.4% from FY 1993 to FY 1994. The growth in 1993 is based on YTD performance through May 1993. The actual sales could be higher than that as the last six months of the year are typically peak season. Interim profitability, however, is somewhat depressed because the company incurs extraordinary amounts of marketing expense in the winter months when their clients' and their business is seasonally slow. • Wages and salaries were kept constant with previous years. • Depreciation is modest because it does not include any depreciation on the new building. It simply is a continuation of past depreciation and amortization. • The projection did not include an allowance for property taxes. The estimate for this expense is $3,300, and does not materially impact the projected profit or cash flow coverage. • Most other expenses are self-explanatory and based on historical performance with an • allowance for growth. The display above supports the fact that adequate sources of repayment exist for the debt repayment of Water Laboratories' proposed loans. The operating income of ECO-Systems • Engineering represents an additional source of cash flow.