Question

2012-2016 Financial Statement Data and Stock Price Data for Mydeco Corp. (All data as of fiscal year end; in $ millions) Income Statement 2012 2013 2014 2015 Revenue 403.8 368.6 428.1 512.2 Cost of Goods Sold (188.5) (173.4) (205.4) (246.7) Gross Profit 215.3 195.2 222.7 265.5 Sales and Marketing (67.5) (65.7) (83.9) (101.9) Administration (61.1) (59.3) (59.1) (66.2) Depreciation & Amortization (27.3) (26.6) (35.1) (37.8) EBIT 59.4 43.6 44.6 59.6 Interest Income (Expense) (32.5) (32.9) (31.4) (36.1) Pretax Income 26.9 10.7 13.2 23.5 Income Tax (9.4) (3.7) (4.6) (8.2) Net Income 17.5 7.0 8.6 15.3 Shares Outstanding (millions) 54.8 54.8 54.8 54.8 Earnings per Share $0.32 $0.13 $0.16 $0.28 Balance Sheet 2012 2013 2014 2015 Assets Cash 49.5 71.1 92.1 85.4 Accounts Receivable 88.3 68.9 68.9 76.4 Inventory 33.8 30.5 27.9 30.9 Total Current Assets 171.6 170.5 188.9 192.7 Net Property, Plant & Equipment 241.6 243.7 347.1 Goodwill & Intangibles 362.4 362.4 362.4 362.4 Total Assets 775.6 776.6 8571 902.2 Liabilities & Stockholders' Equity Accounts Payable 19.6 17.4 21.5 25.9 Accrued Compensation 7.1 6.4 8.1 Total Current Liabilities 26.7 23.3 27.9 34.0 Long-Term Debt 498.6 498.6 573.8 598.7 Total Liabilities 525.3 521.9 601.7 632.7 Stockholders' Equity 250.3 254.7 255.4 269.5 Total Liabilities & Stockholders' 775.6 776.6 857.1 9022 Equity Statement of Cash Flows 2012 2013 2014 2015 Net Income 17.5 7.0 8.6 15.3 Depreciation & Amortization 27.3 26.6 35.1 37.8 Change in Accounts Receivable 4.1 19.4 0.0 (7.5) Change in Inventory (2.9) 3.3 2.6 (3.0) Change in Pay. & Accrued Comp. 2.7 (3.4) 4.6 6.1 Cash from Operations 48.7 52.9 50.9 48.7 Capital Expenditures (25.8) (25.7) (99.5) (74.7) Cash from Investing Activ. (25.8) (25.7) (99.5) (74.7) Dividends Paid (5.6) (5.6) Sale lor Purchase of Stork 2016 604.8 (293.2) 311.6 (116.3) - 78.9 (38.5) 77.9 (38.2) 39.7 (13.9) 25.8 54.8 $0.47 2016 20130833333333333333 *** 94.4 86.3 35.1 215.8 350.3 362.4 928.5 305.8 5.9 30.8 8.7 39.5 598.7 638.2 290.3 928.5 ****** Elsa' 2016 25.8 38.5 (9.9) (4.2) 5.5 55.7 (40.2) (40.2) (6.5) (5.6) (5.6)

Requirements:

a. In what year was​ Mydeco's net income the​ lowest and what was the amount?

b. In what year did Mydeco need to reduce its cash​ reserves and what was the amount?

c. Why did Mydeco need to reduce its cash reserves in a year when net income was reasonably​ high? (please include the numerical amounts)

Answer 1

Solution a) Mydeco's net income was the​ lowest in 2013 and the amount was $7.0 million.

Solution b) Mydeco needed to reduce its cash​ reserves in the Year 2015 (from $92.1 million in the Year 2014 to $85.4 million in the Year 2015).

Solution c) Mydeco needed to reduce cash to pay for large capital expenditures in 2014 and 2015. It incurred high capital expenditures of $99.5 million in 2014 and $74.7 million in 2015. In addition, even though net income was reasonably high, cash from operations declined in 2014 to $50.9 million and further to $48.7 million in 2015 due to a reduction in accounts receivable (-$7.5 million) and inventories (-$3.0 million) in 2015.