Pacific Grove Spice Company Exhibit 1 - Income Statement ($ in millions except for price per share) Income Statement Net Sales Cost of Goods Sold Gross Profit Margin
06/30/07
06/30/08
06/30/09
06/30/10
06/30/11
06/30/12
06/30/13
06/30/14
06/30/15
$46.180 26.784 19.396
$53.107 30.802 22.305
$57.887 33.575 24.312
$68.017 39.790 28.227
$80.940 47.512 33.428
$93.08 54.452 38.629
$105.182 61.531 43.650
$116.751 68.300 48.452
$127.26 74.447 52.813
0.739 14.916 3.741
0.850 17.260 4.195
0.926 18.871 4.515
1.088 21.902 5.237
1.295 26.063 6.070
1.489 29.321 7.819
1.683 33.132 8.835
1.868 36.777 9.807
2.036 40.087 10.690
Interest Expense Earnings Before Income Taxes
2.906 0.835
2.940 1.255
2.668 1.847
2.423 2.814
2.817 3.253
3.237 4.581
3.582 5.254
3.894 5.913
4.124 6.566
Income Taxes Net Income
0.225 0.610
0.339 0.916
0.499 1.348
0.760 2.054
0.879 2.374
1.237 3.344
1.418 3.835
1.597 4.316
1.773 4.793
R&D Expense SG&A Expense Earnings Before Interest & Taxes
Growth rate of sale Income tax rate assumed Price/Earnings Ratio Market Value of Equity
15.00%
9.00%
17.50%
19.00%
15.00% 27.00%
13.00% 27.00%
11.00% 27.00%
9.00% 27.00%
0.084
0.084
0.084
16.0 $37.990
Common Shares Outstanding Price per share
1,165,327 $32.60
Note: 2012-2015 are projected data COGS/Sales
58.70%
R&D Expense/Sales
1.60%
SG&A Expense/Sales
32.20%
Interest Expense EBIT/Sales
0.081
0.079
0.078
0.077
Prime + 5%
0.0825
0.075
0.084
Pacific Grove Spice Company Exhibit 2 - Balance Sheet ($ in millions) Assets
06/30/07
06/30/08
06/30/09
06/30/10
06/30/11
06/30/12
06/30/13
06/30/14
06/30/15
Cash Accounts Receivable Inventories Prepaid Expenses Total Current Assets
$2.325 9.489 6.697 0.770 19.281
$2.680 10.912 7.701 0.840 22.133
$2.924 11.895 8.394 0.910 24.123
$3.440 13.976 9.947 0.828 28.191
$4.102 16.632 11.878 0.969 33.581
$4.672 19.126 13.613 1.117 38.528
$5.279 21.613 15.383 1.262 43.537
$5.860 23.990 17.075 1.401 48.326
$6.387 26.149 18.612 1.527 52.675
Net Property & Equipment * Other Long-Term Assets Total Assets
15.200 2.241 36.722
16.000 2.479 40.612
17.300 2.671 44.094
19.100 3.074 50.365
22.400 3.639 59.620
25.157 4.189 67.874
28.427 4.733 76.697
31.554 5.254 85.134
34.395 5.727 92.797
10.6%
8.6%
14.2%
18.4%
13.8%
13.0%
11.0%
9.0%
06/30/07
06/30/08
06/30/09
06/30/10
06/30/11
06/30/12
06/30/13
06/30/14
06/30/15
Bank Notes Payable Accounts Payable Current Portion of Long-Term Debt Accrued Expenses Total Current Liabilities
$7.669 2.203 0.973 0.771 11.616
$8.820 2.532 1.060 0.884 13.296
$9.613 2.760 1.124 0.965 14.462
$11.295 3.271 1.240 1.129 16.935
$13.442 3.905 1.483 1.345 20.175
$15.492 4.476 1.614 1.545 23.127
$17.506 5.057 1.751 1.746 26.061
$19.432 5.614 1.842 1.938 28.826
$21.181 6.119 1.869 2.113 31.282
Long-Term Debt Total Liabilities
14.600 26.216
15.894 29.190
16.862 31.324
18.606 35.541
22.247 42.422
24.204 47.331
26.258 52.319
27.614 56.440
28.028 59.310
Common Stock Retained Earnings Total Shareholder Equity
6.881 3.625 10.506
6.881 4.541 11.422
6.881 5.889 12.770
6.881 7.943 14.824
6.881 10.317 17.198
6.881 13.661 20.543
6.881 17.497 24.378
6.881 21.813 28.694
6.881 26.606 33.488
Total Liabilities & Net Worth
36.722
40.612
44.094
50.365
59.620
67.874
76.697
85.134
92.797
Growth rate of assets Liabilities & Owners' Equity
* Net property & equipment for all years is calculated as net property & equipment from the prior year, plus capital expenditures in the same year, minus depreciation expense in the same year. Depreciation expense is included in reported operating expenses; it is not broken out separately. Note: 2012-2015 are projected data Total Debt
$23.242
$25.774
$27.599
$31.141
$37.172
$41.311
$45.516
$48.888
$51.078
Interest Bearing Debt
$23.242
$25.774
$27.599
$31.141
$37.172
$41.311
$45.516
$48.888
$51.078
Interest Bearing Debt/Total Assets
63%
63%
63%
62%
62%
61%
59%
57%
55%
Equity Multiplier
3.50
3.56
3.45
3.40
3.47
3.30
3.15
2.97
2.77
Debt/Equity
221%
226%
216%
210%
216%
201%
187%
170%
153%
1.29
1.43
1.69
2.16
2.15
2.42
2.47
2.52
2.59
Times Interest Earned
Pacific Grove Spice Company Exhibit 3 - Capital Budgeting Analysis of Television Program Opportunity Initial Investment Cash Flows Equipment
Year 0 -$1,440,000
Growth Rate of Sales Operating Cash Flows
Year 1
5.0% Year 2
5.0% Year 3
5.0% Year 4
5.0% Year 5
Sales Cost of Goods Sold at 58.5% of sales Gross Profit Margin
$8,100,000 4,738,500 3,361,500
$8,505,000 4,975,425 3,529,575
$8,930,250 5,224,196 3,706,054
$9,376,763 5,485,406 3,891,356
$9,845,601 5,759,676 4,085,924
Promotion Expense at 11% of sales General & Administrative Expense Depreciation Expense Incremental Operating Profit
891,000 760,000 288,000 1,422,500
935,550 798,000 288,000 1,508,025
982,328 837,900 288,000 1,597,826
1,031,444 879,795 288,000 1,692,118
1,083,016 923,785 288,000 1,791,123
Income Taxes at 27% Incremental Net Income
384,075 1,038,425
407,167 1,100,858
431,413 1,166,413
456,872 1,235,246
483,603 1,307,520
+ Depreciation Expense Incremental Operating Cash Flow
288,000 1,326,425
288,000 1,388,858
288,000 1,454,413
288,000 1,523,246
288,000 1,595,520
Yearly Net Working Capital Investment Additional A/R at 75 Days Sales Outstanding Additional Inventory at 4 Inventory Turns Additional A/P at 30 Days COGS Total NWC Investment
Year 1 $1,664,384 1,184,625 389,466 -2,459,543
Year 2 $83,219 59,231 19,473 -122,977
Year 3 $87,380 62,193 20,447 -129,126
Year 4 $91,749 65,302 21,469 -135,582
Year 5 $96,337 68,568 22,543 -142,361
Year 1
Year 2
Year 3
Year 4
Year 5 $2,989,590
-$1,133,118
$1,265,881
$1,325,287
$1,387,664
$4,442,748
Terminal Cash Flows Recovery of NWC Total Project Cash Flows Internal Rate of Return Net Present Value at 20% Net Present Value at 15% Net Present Value at 10%
-$1,440,000 41.28% $1,716,414 $2,405,498 $3,278,174
Pacific Grove Spice Company Exhibit 4 - High Country Seasonings Income Statement ($ in millions) Income Statement Net Sales Cost of Goods Sold Gross Profit Margin
06/30/08
06/30/09
06/30/10
06/30/11
$15.401 9.887 5.514
$15.919 10.284 5.635
$16.664 10.732 5.932
$17.564 11.329 6.235
R&D Expense SG&A Expense Earnings Before Interest & Taxes
0.000 4.359 1.155
0.000 4.553 1.082
0.000 4.816 1.116
0.000 5.041 1.194
Interest Expense Earnings Before Income Taxes
0.057 1.098
0.072 1.010
0.060 1.056
0.063 1.131
Income Taxes Net Income
0.297 0.801
0.273 0.737
0.285 0.771
0.306 0.825
Dividends Paid
0.288
0.254
0.422
0.401
Pacific Grove Spice Company Exhibit 5 - High Country Seasonings Balance Sheet ($ in millions) Assets
06/30/08
06/30/09
06/30/10
06/30/11
Cash Accounts Receivable Inventories Prepaid Expenses Total Current Assets
$0.585 3.165 2.060 0.231 6.041
$0.610 3.271 2.142 0.239 6.262
$0.639 3.424 2.236 0.250 6.549
$0.673 3.609 2.360 0.263 6.905
Net Property & Equipment * Other Long-Term Assets Total Assets
3.831 0.462 10.334
4.146 0.477 10.885
4.273 0.500 11.322
4.424 0.527 11.856
06/30/08
06/30/09
06/30/10
06/30/11
Bank Notes Payable Accounts Payable Current Portion of Long-Term Debt Accrued Expenses Total Current Liabilities
$0.791 0.813 0.000 0.262 1.866
$0.818 0.845 0.000 0.271 1.934
$0.856 0.882 0.000 0.283 2.021
$0.902 0.931 0.000 0.299 2.132
Long-Term Debt Total Liabilities
0.000 1.866
0.000 1.934
0.000 2.021
0.000 2.132
Common Stock Retained Earnings Total Shareholder Equity
4.584 3.884 8.468
4.584 4.367 8.951
4.584 4.716 9.300
4.584 5.140 9.724
Total Liabilities & Net Worth
10.334
10.885
11.322
11.856
Liabilities + Owners' Equity
* Net property & equipment for all years is calculated as net property & equipment from the prior year, plus capital expenditures in the same year, minus depreciation expense in the same year. Depreciation expense is included in reported operating expenses; it is not broken out separetely.
Pacific Grove Spice Company Exhibit 6 - Industry Information McCormick & Company* 2010 2011
ConAgra Foods** 2010 2011
Pacific Grove Spice Co. 2010 2011
Sales revenue (in millions) Net income (in millions) Earnings per share Closing stock price Price/earnings ratio
$3,336.8 $370.2 $2.79 $44.01 15.8
$3,440.5 $386.5 $2.92 $49.60 17.0
$12,014.9 $725.8 $1.63 $24.02 14.7
$12,303.1 $817.0 $1.90 $25.76 13.6
$68.0 $2.1 $1.76 $25.87 14.7
$80.9 $2.4 $2.04 $32.60 16.0
Total liabilities (in millions) Interest-bearing debt (in millions)
$1,957.0 $880.3
$1,947.3 $989.7
$6,809.1 $3,487.2
$6,700.2 $3,233.8
$35.5 $31.1
$42.4 $37.2
Book value of equity (in millions)
$1,462.7
$1,642.1
$4,928.9
$4,708.5
$14.8
$17.2
Shares outstanding (in millions) Market value of equity (in millions)
133.1 $5,857.7
132.4 $6,567.0
443.6 $10,655.3
429.7 $11,069.1
1.2 $30.1
1.2 $38.0
Equity beta coefficient
0.50
0.60
* McCormick's fiscal year-end is November 30. The 2011 data presents the most recent four quarters of income statement information and the May 31, 2011, balance sheet information. ** ConAgra's fiscal year-end is May 31. The 2011 data presents the full 2011 fiscal year.
Current market interest rates in July of 2011: Long-term U.S. Treasury Bonds
4.25%
Long-term AA Corporate Bonds
5.20%
Long-Term BBB Corporate Bonds
5.65%
Market Risk Premium, S&P 500 vs. Long-term Treasuries
7.00%
0.85
Prime Interest Rate
3.25%
