Bergner Construction Case

Topics: Construction, 1988, Earnings before interest and taxes Pages: 3 (764 words) Published: December 9, 2010
Discuss the Company:
* Located in Cleveland, Ohio
* Mechanical contracting business, specializing in specialty construction projects in food and beverage manufacturing facilities. * “Custom-built” contractor, using primary stainless steel to build the vessels and piping necessary for assembly lines in food & beverage processing. * They work on a project-by-project basis, for which it provides engineering design and construction expertise to its clients. * Required relatively little, complex specialized production equipment , and most inventory was associated with specific job in progress * Thinly capitalized (equity less than debt)

* The company was incorporates in 1982 by president John Bergner * He did business with FirstOhio Bank of Cleveland, where his account was handled by Peter Davis and a good relationship was kept between them for five years from 1982 till 1987 * In December 1987, Mr. Davis accepted a new position at Westside National Bank. Located in Cleveland * Therefore, a new loan officer was appointed for the company in January 1988

Present Position:
* Bergner Construction Company had recorded a small net operating profit of $13,088 (net income of 16502) in 1987 * During the first four months of 1988, the company’s completed jobs slumped, leading to a loss of $53,556 (net loss of 47682) due to problems encountered on one project, for which a former estimator had underestimate a construction cost. (If no single project is excessively dominant, then a loss on one does not imply that the firm’s profit potential would be significantly affected). * The company enjoyed a sales growth rate of 23 percent over the past 2 years, and projected sales by the end of 1988 were $1.3million

Management of the company:
* The company’s president: John Bergner was 40 years of age. * He had a degree in mechanical engineering from Ohio State University. * Bergner began his career as a...
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