Jackson Automotive

Background

1. Jackson Automotive System was founded in 1961. 2. Larry Edwards took over the business in the mid 1990s. 3. Successfully led the company through 2008-2009 global recessions. 4. Jackson was on pace for its first year of capacity sales since 2007. 5. In 2013, there were over 5,000 supplies in US with less than 200 companies had annual sales of more than $100 million. 6. Located in the Michigan area with the “Big Three”. 7. In 2008, sales dropping more than 30%; The Industry was running at about 55% capacity during the financial crisis. 8. The industry has rebounded since 2010 and returned profitability 2010 and returned profitability in 2011. Issues

1. Group of dissident shareholders moved Edwards to repurchase 40%of outstanding common shares for $10 million. 2. & 5 million came from cash and the other $5 million came from a 10 month short term loan. 3. Emerging from the financial crisis looking to ramp up production. 4. $2.4 Million worth of capital equipment needed to maintain production capacity 5. $5 Million Short Term Loan Now due 6. Shipment Delays due to material shortages caused shortfall in April-May Actual Sales 7. Shortfalls hindered the company’s ability to pay back 5 Million loan in June 8. These components have arrived and items are to be shipped in June

Scenario Comparison for Jackson Automotive Balance Sheet September 30 2013

Scenario 1

Scenario 2

Scenario 3

Cash Accounts Receivable Inventory Current Assets

870 5,954 7,300 14,124

4,470 5,954 7,300 17,724

2,860 5,954 7,300 16,114

Gross PP&E

47,900

47,900

47,900

Accumulated Depreciation Net PP&E Prepaid Expenses Total Assets

32,408 15,492 54 29,670

32,408 15,492 54 33,270

32,408 15,492 54 31,660

5,200 748 1,142 1,479 8,569

5,200 748 1,142 1,479 8,569

5,200 2,000 745 1,142 1,479 10,566

21,101 29,670

24,701 33,270

21,094 31,660

Accounts Payable Notes Payable, Bank Accrued Taxes Other Accrued Expenses Costumer Advance Payments Current Liabilities Shareholders' Equity Total Liabilities and Equity

Ratio Analysis 2012

2013

Aug

Sept

Aug

Sept

Net Working Capital

12,917

3,267

6,107

9,155

Current Ratio

4.38

2.37

2.36

3.88

Inventory Turnover Average Age of Inventory (Days) Debt Ratio

0.70

0.64

0.77

0.79

523

569

475

463

Times Interest Earned

23%

42%

-

-

2% 14.62

26% 15.71

5C’s : Credit

Character, Credit Capacity, Credit Conditions, Credit Collateral, Credit Capital

Conclusion

1. Requesting Extension for 5M dollar short-term loan for 4 months 2. Additional 2.4 M dollar short-term loan 3. Payable over one year 4. Monthly principle payments $200,000 5. Annual Interest Rate of 7% 6. Interest Payments of $91,000