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Advanced Medical Technology Corporation (amt)

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Advanced Medical Technology Corporation (AMT)

Case Write-up Guidelines/Suggestions

Background Analysis

  1. What has created the need for additional financing by AMT over the past few years?  What are some of AMT’s most important financial characteristics over this period?

  1. How much will AMT need to borrow by yearend 1988?  Management has given you its financial forecast, as follows.   You may also want to do your own assessment of what you expect their results to be by forecasting their income statement and balance sheet, based on an analysis of their recent trends.

                Management Forecasts (millions)                 1986                 1987                 1988

                Sales (+35% per year)                                $41.6                $56.2                $75.9

                Profits after tax                                      .4                    2.8                    4.6

                After tax profits % of sales                          .96%                 5.0%                 6.1%

In addition, due to the new computer inventory management system, they expect the inventory turnover ratio to improve to 2 times in 1986 - 1988, vs. its current level.

  1. How effective has Mr. Haskins been in managing his banking relationships?

  1. Do you believe Biological Labs will support AMT if AMT has financial difficulties?  (See their financials attached.)

Writeup

As credit analysts, write a memo to Tom Winter with your recommendation as to whether or not Western      National should extend credit to AMT. Support your recommendation by incorporating your answers to the above questions in your memo and appendices. If you do recommend a loan to AMT, provide details on how you would structure the financing.


Financial Summary, Biological Labs, 1981-1985

1981

1982

1983

1984

1985

Sales ($MM)

2,343

2,602

2,928

3,104

3,360

Net income:

    ($MM)

247

289

348

403

465

    % sales

10.5

11.1

11.9

13.0

13.8

    % equity

21.5

22.1

24.5

25.1

24.9

Per share

EPS

$1.01

$1.19

$1.43

$1.67

$1.94

Dividend

$.35

$.41

$.58

$.58

$.68

Market price

$12-16

$13-21

$18-27

$18-24

$20-36

P/E ratio

14

14

16

13

14

Balance Sheet Capitalization at 12/31/1985

Book Values ($MM)

Market Values ($MM)

Long-term debt

443

Long-term debt

397

Deferred taxes

252

Deferred taxes

252

Equity

1,871

Equity

7,246

2,566

7,895

(Note – 240 million total common shares outstanding)

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