Eskimo Pie Corp.

Harvard Business School Case #293-084

Case Software #XLS079

Copyright 2010 President and Fellows of Harvard College. No part of this product may be reproduced, stored in a retrieval syste
transmitted in any form or by any meanselectronic, mechanical, photocopying, recording or otherwisewithout the permissio
Harvard Business School.

duct may be reproduced, stored in a retrieval system or

ng, recording or otherwisewithout the permission of

Table A

Sales by Business Line

Business
Licensing
Welchs and Heatha
Flavors, packaging and other
a

Heath products included only in 1991.

Year Ended December 31,

1989
1990
1991
58%
14
28

59%
14
27

56%
24
20

Table B

1991 Leading Frozen Novelty Brands

Brand

Company

Popsicle
Klondike
Eskimo Pie
Snickers
Weight Watchers

Unilever
Empire of Carolina
Eskimo Pie
Mars
H.J. Heinz

Unit Share
7.6%
5.4
5.3
4.8
4.3

Exhibit 1

Historical Financial Information

Year Ended December 31,
1987
1988
1989

Income Statement Data (in thousands):

Net salesa
Cost of goods sold
Gross profita
Advertising and sales promotions
General and administrative
Operating income (loss)
Interest income
Interest expense
Other income (expense)-netb
Income taxes
Net income
Balance Sheet Data (in thousands):
Cash
Working capital
Total assets
Long-term debt
Stockholders equity
Per Share Data:
Weighted average number of common shares
outstanding
Net income per share
Cash dividend per share

1990

$30,769
21,650
9,119
4,742
6,068
(1,691)
308
(88)
1,738
96
$171

$36,695
25,635
11,060
4,241
5,403
1,416
550
(107)
(77)
729
$1,053

$46,709
31,957
14,752
5,030
6,394
3,328
801
(88)
(108)
1,511
$2,422

$47,198
31,780
15,418
5,130
7,063
3,225
1,004
(67)
(20)
1,616
$2,526

$5,550
9,342
20,857
1,269
16,162

$8,109
11,107
23,006
1,094
17,215

$10,723
10,830
26,159
919
18,215

$13,191
$11,735
29,518
744
19,496

3,316
$0.05
-

3,316
$0.32
-

3,316
$0.73
$0.40

3,316
$0.76
$0.40

Source: Eskimo Pie Prospectus, p. 10.

a

Beginning in 1991 the Company increased prices for products and assumed responsibility for advertising and
sales promotion costs previously shared with licensees. This change in business practice accounts for
approximately one-half of the increase in net sales for 1991 with a similar impact on 1991 gross profit.
b

Includes the gain on sale of building of approximately $1,700,000 in 1987.

Exhibit 2

Cash Flow Summary

Year Ended December 31,
1989
1990

Operating activities:
Net income
Depreciation
Amortization
Deferred income taxes
Pension liability and other
Decrease (increase) in receivables
Decrease (increase) in inventories and prepaid expenses
Increase (decrease) in payables to parent
Increase (decrease) in accounts payable and accrued expenses
Net cash provided by operating activities

$2,422
1,006
175
250
(154)
1,212
(524)
2,054
143
6,595

$2,526
1,352
118
(58)
(156)
(734)
(51)
(621)
3,006
5,382

Investing activities
Capital expendituresa
Other
Net cash used in investing activities

(2,358)
(121)
(2,479)

(1,311)
(101
(1,412)

(1,327)
(175)
(1,502)
2,614
8,109
$10,723

(1,327)
(175)
(1,502)
2,468
10,723
$13,191

Financing activities
Cash dividends
Principal payments on long-term debt
Net cash used in financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Source: Eskimo Pie Prospectus, p. F-4.
a

Capital expenditures in 1989 are principally related to equipment acquired for use by licensees and, in 1990, an expansion of an
ingredients manufacturing facility.

Exhibit 3

Distribution and Market Share of Eskimo Pie, Heath, and Welchs Frozen Novelties

Distribution of at least one Eskimo product at

U.S. Grocery Stores
Unit Market Share of Eskimo products
Source: Eskimo Pie Prospectus

1987

1988

1989

1990

1991

76.3%
3.3

78.1%
3.9

91.2%
5.7

95.6%
6.8

97.9%
7.5

Exhibit 4

Year
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990

Industry Information for Frozen Novelties

Industry
Revenues
(millions)

Units Sold
(millions)

$590
680
770
940
1,100
1,300
1,400
1,500
1,355
1,332
1,321

Source: 1980-87 Nieldsen; 1988-90 IRI

N/A
N/A
457
525
577
643
681
717
637
623
590

% Change
in Sales
N/A
15.3%
13.2
22.1
17.0
18.2
7.7
7.1
-9.7
-1.7
-0.8

Average
Price
N/A
N/A
$1.69
1.79
1.90
2.02
2.06
2.09
2.13
2.19
2.24

Advertising
Spending
(millions)
$2
4
17
23
32
44
77
38
26
40
21

Exhibit 6

Goldman Sachs Projected Income Statementsa

Year Ended December 31,
1991
1992
1993

Net Sales
Operating expenses
Operating income
Interest income
Interest expense
Pretax income
Income taxes
Tax rate
Net income
Margin
Earning per share
Average shares outstanding

$56,655
52,610
4,045
828
52.5
4,821
1,928
40.00%
$2,893
5.10%
$0.87
3316

Source: Goldman Sachs

a

Adjusted for 2.5 to 1.0 stock split in March 1992.

$59,228
54,755
4,473
890
38.5
5,324
2,130
40.00%
$3,195
5.40%
$0.96
3316

$59,961
55,337
4,624
1,058
24.5
5,657
2,263
40.00%
$3,394
5.70%
$1.02
3316

92.5%

PE=
Market Value

22.80
$0

Exhibit 7 Hypothetical Proceeds from an Initial

Public Offering
Total for firm:
Offer Price
Special dividend
Total per share

14.00
4.52
18.52

16.00
4.52
20.52

Shares outstanding
Total

3,316
61,421

3,316
68,054

1991 Net Income

Implied P/E Multiple

3,749
12.38

3,749
14.15

2,789

2,789

14.00
4.52
18.52
51,645

16.00
4.52
20.52
57,222

Reynolds Proceeds:
Shares owned
Per share proceeds:
Stock price
Special dividend
Total per share
Total for holdings
Source: Casewriter estimates

Exhibit 8

Company

Information about Comparable Companies

Sales

Cash
Flow

Ben & Jerry's

97.0
6.7
Dreyer's Grand Ice354.9
Cream
24.1
Empire of Carolina,
243.1
Inc.
16.8
Steve's Homemade35.1
Ice Cream 2.7
Hershey Foods Corp.
2899.2
292.3
Tootsie Roll Inds. 207.9
32.5

Operating
Incomea

Net
Income

10.2
37.0
37.4
3.9
463.0
47.2

Source: Standard & Poor's, Compustat, and casewriter estimates.

a

Before extraordinary items.

3.7
15.9
8.8
1.8
219.5
25.5

Book Value of Market Value

Equity
of Equity
26.3
113.1
45.1
11.1
1335.3
152.8

110.1
534.0
51.4
37.4
4002.5
728.8

Total
Debt
2.8
44.3
89.8
3.1
282.9
0.0

Beta
1.2
1.4
0.3
2.5
1.0
1.0
AVG PE

PE
29.8
33.6
5.8
20.8
18.2
28.6
22.8

Exhibit 9

Selected Financial Market Data, November 1991

I. Treasury Yields
90 day
Six months
One year
Five years
Ten years
Thirty years
II. Corporate Borrowing Rates
Long-term Bond Yields
AA
A
BBB
BB
B
Floating Rates
Prime rate
Prime commercial paper (6 months)
Source: Federal Reserve Bulletin, S&P Bond Guide.

4.56%
4.61
4.64
6.62
7.42
7.92

8.74%
9.27
9.56
11.44
14.68
7.50%
4.76

Exhibit 8

Company
Ben & Jerry's
Dreyer's Grand Ice Cream
Empire of Carolina, Inc.
Steve's Homemade Ice Cream
Hershey Foods Corp.
Tootsie Roll Inds.

Information about Comparable Companies

Shareholders'
Equity Total Debt
110.1
534.0
51.4
37.4
4002.5
728.8

Sales

2.8
44.3
89.8
3.1
282.9
0.0

Cash Flow
97.0
354.9
243.1
35.1
2899.2
207.9

6.7
24.1
16.8
2.7
292.3
32.5

Company
Ben & Jerry's
Dreyer's Grand Ice Cream
Empire of Carolina, Inc.
Steve's Homemade Ice Cream
Hershey Foods Corp.
Tootsie Roll Inds.
Average

MV/BV
4.19
4.72
1.14
3.37
3.00
4.77
3.53

Source: Standard & Poor's, Compustat, and casewriter estimates.

Before extraordinary items.

Estimate for Eskimo Pie 1991

Valuation Using Comparables
Eskimo Pie 1991 Cash
Total Estimated Value

Exhibit 1

23.50
$
$
$

83.0
13.0
96.0

Historical Financial Information

1987
Income Statement Data (in thousands):
Net salesa
Cost of goods sold
Gross profita

Advertising and sales promotions

General and administrative
Operating income (loss)
Interest income
Interest expense
Other income (expense) - netb
Income taxes
Net income

30,769
21,650
9,119
4,742
6,068
(1,691)
308
(88)
1,738

96
171

Balance Sheet Data (in thousands):

Cash
Working capital
Total assets
Total debt
Stockholders' equity

5,550
9,342
20,857
1,269
16,162

Per Share Data:

Weighted average number
of common shares outstanding
Net income per share
Cash dividend per share

3,316
0.05
-

Source: Eskimo Pie Prospectus, p. 10.

Beginning in 1991 the Company increased prices for products and ass
advertising and sales promotion costs previously shared with licensees
business practice accounts for approximately one-half of the increase in
with a similar impact on 1991 gross profit.
b
Includes the gain on sale of building of approximately $1,700,000 in 19
a

Operating
Incomea

$
$
$

Net Income Book Value

10.2
37.0
37.4
3.9
463.0
47.2

3.7
15.9
8.8
1.8
219.5
25.5

26.3
113.1
45.1
11.1
1335.3
152.8

PE
29.76
33.58
5.84
20.78
18.23
28.58
22.80

MV/S
1.16
1.63
0.58
1.15
1.48
3.51
1.59

TV/CF
16.85
24.00
8.40
15.00
14.66
22.42
16.89

61

3.6

91.2
13.0
104.2

$
$
$

96.7
13.0
109.7

$
$
$

4,241
5,403
1,416

729
1,053

46,709
31,957
14,752
5,030
6,394
3,328

550
(107)
(77)

Company
Ben & Jerry's
Dreyer's Grand Ice Cream
Empire of Carolina, Inc.
Steve's Homemade Ice Cream
Hershey Foods Corp.
Tootsie Roll Inds.

Exhibit 6

Year Ended December 31,

1988
1989

36,695
25,635
11,060

1.2
1.4
0.3
2.5
1.0
1.0

Equity
Total Debt
110.1
2.8
534.0
44.3
51.4
89.8
37.4
3.1
4002.5
282.9
728.8
0.0
Average

E/TMV
0.98
0.92
0.36
0.92
0.93
1.00
0.85

60.8
13.0
73.8

storical Financial Information

Beta

Goldman Sachs Projected Income Statements

Year Ended December 31,
1991
1992
1993

1990

$ 47,198 Net Sales

31,780
Operating expenses
15,418 JKD Est Op Exp using ave.

5,130
7,063 JKD Operating Income
3,225 Operating income
Margin
801
1,004 Interest income
(88)
(67) Interest expense
(108)
(20)
Pretax income
1,511
2,362 Income taxes
2,422 $ 1,780 Net income
Earning per share

56,655
52,610
38,978

14636
3,041
4,045
828
53

$
$

4,821
1,928
2,892
2.18

59,228
54,755

$ 59,961
55,337

4,473

4,624

890
39

$
$

5,325
2,130
3,195
2.41

1058
25

$
$

5,658
2,263
3,395
2.58

8,109
11,107
23,006
1,094
17,215

10,723
10,830
26,159
919
18,215

$ 13,191
Tax rate
11,735
Margin
29,518
744
19,496 Average shares outstanding

40.00%
5.1%

40.00%
5.4%

40.00%
5.7%

1326.6

1326.6

1326.6

12%

14%

Source: Goldman Sachs

3,316
$

0.32
-

3,316
$

0.73

0.40

3,316 DCF Value Using Perpetuity Formula

Initial Cash Free Cash Flow
$2.7
$
0.76 Growth Rate
29.2%
WACC
15.5%
$
0.40 Valuation
$
(25.4)

ncreased prices for products and assumed responsability for

osts previously shared with licensees. This change in
proximately one-half of the increase in net sales for 1991

ng of approximately $1,700,000 in 1987.

Valuation Matrix
Growth =
Discount Rate
14%
15%
16%
17%

10%
$
$
$
$

101.8
81.4
67.8
58.1

$
$
$
$

207.2
138.1
103.6
82.9

-421.8
210.9
140.6

Equity Beta
1.2
1.4
0.3
2.5
1.0
1.0
1.23

Asset Beta
1.17
1.29
0.11
2.31
0.93
1.00
1.14

d Income Statements

Eskimo Pie Profit/Cashflow '91

Sales
$61.0
Operating Expenses
41.4
SG&A
15.8
Op. Profit
$3.8

92
$
63.8
43.9
16.5
$3.4

93
$
64.6
44.4
16.7
$3.5

Free Cash Flow

Net Income
Growth '90-91
FCF + TV
PV @ 15.5%
Cash
Total Value

$2.7
$2.3
29.2%
$2.7
$36.5
$13.0
$49.5

$2.5
$2.5
$2.1 $
2.1
4.5%
1.2%
$2.5
$49.87

Exhibit 8

Information about Comparable Companies

Company

Sales

Ben & Jerry's

Dreyer's Grand Ice Cream
Empire of Carolina, Inc.
Steve's Homemade Ice Cream
Hershey Foods Corp.
Tootsie Roll Inds.

97.0
354.9
243.1
35.1
2899.2
207.9

Cash Flow

Operating
Incomea

6.7
24.1
16.8
2.7
292.3
32.5

10.2
37.0
37.4
3.9
463.0
47.2

Net Income
3.7
15.9
8.8
1.8
219.5
25.5

Source: Standard & Poor's, Compustat, and casewriter estimates.

a

Before extraordinary items.

Company
Ben & Jerry's
Dreyer's Grand Ice Cream
Empire of Carolina, Inc.
Steve's Homemade Ice Cream
Hershey Foods Corp.
Tootsie Roll Inds.
Average
Median

P/B
4.19
4.72
1.14
3.37
3.00
4.77
3.53
3.78

Estimate for Eskimo Pie 1991

21.80

Valuation Using Comparables

Eskimo Pie 1991 Cash
Total Estimated Value

P/E
29.76
33.58
5.84
20.78
18.23
28.58
22.80
24.68

P/S
1.16
1.63
0.58
1.15
1.48
3.51
1.59
1.32

2.30

$ 77.0
$ 13.0
$ 90.0

$
$
$

52.5
13.0
65.5

$76.97
$ 13.00
Applying average $89.97
Applying Median $95.40

$
$
$
$

52.51
13.00
65.51
69.85

61
$
$
$

96.7
13.0
109.7

$ 96.70
$ 13.00
$ 109.70
$ 93.52

Company
Ben & Jerry's
Dreyer's Grand Ice Cream
Empire of Carolina, Inc.
Steve's Homemade Ice Cream
Hershey Foods Corp.
Tootsie Roll Inds.

Book Value of Equity

Market
Value of
Equity

26.3
113.1
45.1
11.1
1335.3
152.8

110.1
534.0
51.4
37.4
4002.5
728.8

110.1
534.0
51.4
37.4
4002.5
728.8

Total Debt
2.8
44.3
89.8
3.1
282.9
0.0
Average

Equity

Total Debt
2.8
44.3
89.8
3.1
282.9
0.0

Beta
1.2
1.4
0.3
2.5
1.0
1.0

E/TMV
Equity Beta
Asset Beta
0.98
1.2
1.17
0.92
1.4
1.29
0.36
0.3
0.11
0.92
2.5
2.31
0.93
1.0
0.93
1.00
1.0
1.00
1.14

Market Return
Beta
Risk free rate
Required rate of return

13.76%
1.14
7.42%
14.62%

Growth rate

29.24%

Market Value

1986
1987

18.50%
5.20%

1988
1989
1990

16.80%
31.50%
-3.20%
13.76%

Net salesa
Cost of goods sold
Gross profita
Advertising and sales promotions
General and administrative
Operating income (loss)
Interest income
Interest expense
Other income (expense)-netb
Income taxes
Net income
Balance Sheet Data (in thousands):
Cash
Working capital
Total assets
Long-term debt
Stockholders equity
Per Share Data:

Net income per share

Cash dividend per share

Year Ended December 31,

1987
1988
1989
Income Statement Data (in thousands):
Net salesa
Cost of goods sold
Gross profita
Advertising and sales promotions
General and administrative
Operating income (loss)
Interest income
Interest expense
Other income (expense)-netb
Income taxes
Net income
Balance Sheet Data (in thousands):
Cash
Working capital
Total assets
Long-term debt
Stockholders equity
Per Share Data:
Weighted average number of common
shares outstanding
Net income per share
Cash dividend per share

$30,769
21,650
9,119
4,742
6,068
(1,691)
308
(88)
1,738
96
$171

$36,695
25,635
11,060
4,241
5,403
1,416
550
(107)
(77)
729
$1,053

$46,709
31,957
14,752
5,030
6,394
3,328
801
(88)
(108)
1,511
$2,422

$5,550
9,342
20,857
1,269
16,162

$8,109
11,107
23,006
1,094
17,215

$10,723
10,830
26,159
919
18,215

3,316
$0.05
-

3,316
$0.32
-

3,316
$0.73
$0.40

Estimate
1990

$47,198
31,780
15,418
5,130
7,063
3,225
1,004
(67)
(20)
1,616
$2,526

1991E

$61,000
$42,086
$18,914
7,413
9,623
$1,879

$1,127
-55.37%
NPV $22,249.68
$13,191
$11,735
29,518
744
19,496

3,316
$0.76
$0.40

Net income
Margin

Estimate
1992E

1993E

1994E

1995E

1996E

1997E

1998E

1999E

2000E

$63,770
$43,779
$19,991
7,229
9,430
$3,332

$64,560
$44,126
$20,434
7,283
9,557
$3,593

$65,359
$44,661
$20,698
7,457
9,858
$3,383

$66,167
$45,378
$20,789
7,639
10,000
$3,151

$66,986
$45,871
$21,115
7,632
10,012
$3,471

$67,815
$46,409
$21,406
7,736
10,163
$3,507

$68,655
$46,998
$21,656
7,853
10,320
$3,483

$69,504
$47,602
$21,902
7,956
10,439
$3,508

$70,364
$48,174
$22,190
8,037
10,552
$3,601

$1,999
77.31%
$35,249.68

$2,156
7.85%

$2,030
-5.85%

$1,890
-6.87%

$2,083
10.17%

$2,104
1.03%

$2,090
-0.69%

Year Ended December 31,

1991
1992
1993
Net Sales
$56,655 $59,228
Operating expenses
52,610
54,755
Operating income 4,045
4,473
Interest income
828
890
Interest expense 52.5
38.5
Pretax income
4,821
5,324
Income taxes
1,928
2,130
Tax rate
40.00%
40.00%
Net income
$2,893
$3,195
Margin
5.10%
5.40%
Earning per share $0.87
$0.96
Average shares outstanding
3316
3316

$59,961
55,337
4,624
1,058
24.5
5,657
2,263
40.00%
$3,394
5.70%
$1.02
3316

$2,105 $51,417
0.72% 2343.08%

Exhibit 8

Company
Ben & Jerry's
Dreyer's Grand Ice Cream
Empire of Carolina, Inc.
Steve's Homemade Ice Cream
Hershey Foods Corp.
Tootsie Roll Inds.

Information about Comparable Companies

Shareholders'
Equity Total Debt
110.1
534.0
51.4
37.4
4002.5
728.8

Sales

2.8
44.3
89.8
3.1
282.9
0.0

Cash Flow
97.0
354.9
243.1
35.1
2899.2
207.9

6.7
24.1
16.8
2.7
292.3
32.5

Company
Ben & Jerry's
Dreyer's Grand Ice Cream
Empire of Carolina, Inc.
Steve's Homemade Ice Cream
Hershey Foods Corp.
Tootsie Roll Inds.
Average

MV/BV
4.19
4.72
1.14
3.37
3.00
4.77
3.53

Source: Standard & Poor's, Compustat, and casewriter estimates.

Before extraordinary items.

Estimate for Eskimo Pie 1991

Valuation Using Comparables
Eskimo Pie 1991 Cash
Total Estimated Value

Exhibit 1

23.50
$
$
$

83.0
13.0
96.0

Historical Financial Information

1987
Income Statement Data (in thousands):
Net salesa
Cost of goods sold
Gross profita

Advertising and sales promotions

General and administrative
Operating income (loss)
Interest income
Interest expense
Other income (expense) - netb
Income taxes
Net income

30,769
21,650
9,119
4,742
6,068
(1,691)
308
(88)
1,738

96
171

Balance Sheet Data (in thousands):

Cash
Working capital
Total assets
Total debt
Stockholders' equity

5,550
9,342
20,857
1,269
16,162

Per Share Data:

Weighted average number
of common shares outstanding
Net income per share
Cash dividend per share

3,316
0.05
-

Source: Eskimo Pie Prospectus, p. 10.

Beginning in 1991 the Company increased prices for products and ass
advertising and sales promotion costs previously shared with licensees
business practice accounts for approximately one-half of the increase in
with a similar impact on 1991 gross profit.
b
Includes the gain on sale of building of approximately $1,700,000 in 19
a

Operating
Incomea

$
$
$

Net Income Book Value

10.2
37.0
37.4
3.9
463.0
47.2

3.7
15.9
8.8
1.8
219.5
25.5

26.3
113.1
45.1
11.1
1335.3
152.8

PE
29.76
33.58
5.84
20.78
18.23
28.58
22.80

MV/S
1.16
1.63
0.58
1.15
1.48
3.51
1.59

TV/CF
16.85
24.00
8.40
15.00
14.66
22.42
16.89

61

3.6

91.2
13.0
104.2

$
$
$

96.7
13.0
109.7

$
$
$

4,241
5,403
1,416

729
1,053

46,709
31,957
14,752
5,030
6,394
3,328

550
(107)
(77)

Company
Ben & Jerry's
Dreyer's Grand Ice Cream
Empire of Carolina, Inc.
Steve's Homemade Ice Cream
Hershey Foods Corp.
Tootsie Roll Inds.

Exhibit 6

Year Ended December 31,

1988
1989

36,695
25,635
11,060

1.2
1.4
0.3
2.5
1.0
1.0

Equity
Total Debt
110.1
2.8
534.0
44.3
51.4
89.8
37.4
3.1
4002.5
282.9
728.8
0.0
Average

E/TMV
0.98
0.92
0.36
0.92
0.93
1.00
0.85

60.8
13.0
73.8

storical Financial Information

Beta

Goldman Sachs Projected Income Statements

Year Ended December 31,
1991
1992
1993

1990

$ 47,198 Net Sales

31,780
Operating expenses
15,418 JKD Est Op Exp using ave.

5,130
7,063 JKD Operating Income
3,225 Operating income
Margin
801
1,004 Interest income
(88)
(67) Interest expense
(108)
(20)
Pretax income
1,511
2,362 Income taxes
2,422 $ 1,780 Net income
Earning per share

55,655
52,610
38,290

14378
2,987
3,045
828
53

$
$

3,821
1,528
2,292
2.18

59,228
54,755

$ 59,961
55,337

4,473

4,624

890
39

$
$

5,325
2,130
3,195
2.41

1058
25

$
$

5,658
2,263
3,395
2.58

8,109
11,107
23,006
1,094
17,215

10,723
10,830
26,159
919
18,215

$ 13,191
Tax rate
11,735
Margin
29,518
744
19,496 Average shares outstanding

40.00%
5.1%

40.00%
5.4%

40.00%
5.7%

1326.6

1326.6

1326.6

12%

14%

Source: Goldman Sachs

3,316
$

0.32
-

3,316
$

0.73

0.40

3,316 DCF Value Using Perpetuity Formula

Initial Cash Free Cash Flow
$2.7
$
0.76 Growth Rate
29.2%
WACC
15.5%
$
0.40 Valuation
$
(25.4)

ncreased prices for products and assumed responsability for

osts previously shared with licensees. This change in
proximately one-half of the increase in net sales for 1991

ng of approximately $1,700,000 in 1987.

Valuation Matrix
Growth =
Discount Rate
14%
15%
16%
17%

10%
$
$
$
$

101.8
81.4
67.8
58.1

$
$
$
$

207.2
138.1
103.6
82.9

-421.8
210.9
140.6

Equity Beta
1.2
1.4
0.3
2.5
1.0
1.0
1.23

Asset Beta
1.17
1.29
0.11
2.31
0.93
1.00
1.14

d Income Statements

Eskimo Pie Profit/Cashflow '91

Sales
$61.0
Operating Expenses
41.4
SG&A
15.8
Op. Profit
$3.8

92
$
64.9
44.7
16.8
$3.5

93
$
65.7
45.2
17.0
$3.5

Free Cash Flow

Net Income
Growth '90-91
FCF + TV
PV @ 15.5%
Cash
Total Value

$2.7
$2.3
29.2%
$2.7
$37.2
$13.0
$50.2

$2.5
$2.5
$2.1 $
2.1
6.4%
1.2%
$2.5
$50.76

Eskimo Pie Profit/Cashflow '91

92
93
Sales
$61.0 $
64.9 $
65.7
Operating Expenses
34.3
36.4
36.9
SG&A
19.0
20.2
20.5
Op. Profit
$7.8
$8.2
$8.3
Free Cash Flow
$5.1
$5.3
$5.4
Net Income
$4.7
$4.9 $
5.0
Growth '90-91
29.2%
6.4%
1.2%
FCF + TV
$5.1
$5.3 $119.61
PV @ 15.5%
$86.0
Cash
$13.0
Total Value
$99.0