Hampton Machine Tool Case Solution

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• Hampton Machine Tool Case Essay

  ... Hampton Machine Tool Case Group 5: Laura Lafitte, Joe Loden, Chris Ingham, Keenen Leake, and Humberto Maldonado Hampton Machine Tool Company was founded in 1915 and began supplying parts to military and automobile companies. Beginning in the 1960’s, heavy increases in defense spending prompted by the Vietnam War in conjunction with a blossoming automobile industry allowed Hampton Machine Tool Company to experience a period of high growth and increased profitability. By the mid-1970’s, defense spending was slashed at the conclusion of the conflict and there was a severe downturn in the automobile market resulting in a significant decline in sales for Hampton Machine Tool. In December of 1978, Hampton Machine Tool was approved for a $1 million loan to repurchase stock. The loan was to be repaid by September of 1979 with monthly interest payments at 1.5% of principle. Due to a backlog of unfilled orders summing to $16.5 million, Hampton Machine Tool was unable to repay the loan. In order for the company to get back on track they must take out an additional loan of $350,000 in order to purchase new equipment. Mr. Cowin of Hampton Machine Tool Company has incorporated...

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• Essay on hampton machine tool case

  ...Mr. Jerry Eckwood, V.P of Louis national bank requested loan from customer named Hampton Machine Tool Hampton-requested renewal of the existing 1 million dollar loan, repaid time of Sep.30 Additional-asking for a 350,000 loan for planned equipment purchases in Oct. Under terms of company’s request, both were to be paid back end of 1979 Background of Hampton Established in 1915, machine tool manufacturing business. Recent months, record production/profitability mid-late 1960. -Customers include aircraft & automobile manufacturers in St. Louis Area. Hampton along with entire capital good industry, experience decline in sales/profitability in mid 1970’s. Decline in gasoline and recession of 1974. Reduction in defense spending had impact on hamptons customer segments, military aircraft manufacturers. Sales boomed out in mid-1970 3 factors in recovery of sales in 1978: military aircraft sales increased (both export and domestic market) automobile manufacturer stabilized, economical conditions take toll in regional capital goods industry. Hamptons shares increased as small capitalized competitors died out. Entered 1979 expecting 1st year capacity sales. Conservative Financial policies, contributed to its success and survival. Maintained strong working capital, having no debt on balance sheets, 10 years prior to...

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• Hampton Machine Tool Essay

  ...Business and strategy Hampton Machine Tool Company (HMTC) is established in 1915, specialized in manufacturing tools for the automobile and the aircraft manufacturer. HMTC business has been extremely successful in the mid and late 60s. But in the mid-1970s, HTMC’s business had been considerably affected by the Arab oil embargo and ending of Vietnam War, which had turn down the automobile and aircraft industry. However, HMTC has survived through this hard time and its market share increased due to many thinly capitalized competitors had been forced out of the business. The company had been rebuilding of sales and they expecting 1979 will be the first year of capacity sales since 1972. HTMC main weakness is its lack of customer diversification. In fact, HMTC is highly exposure to the risk of automobile and aircraft industry. Management Mr.Cowins, the president of the HMTC was widely respected in the business community as an energetic and successful executive. The company traditionally maintained a strong working capital position, which contributed to its survival and success in the poor economic condition. Low operating leverage may be useful when sale market is fluctuating, but conservative financial policy also should contributed to the poor performance on ROE, which is the main reason for redemption of the stock from several dissident shareholders; HMTC has rebuild its sales but is, unfortunately,...

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• Hampton Machine Tool Essay

  ...Hampton Machine Tool Company -Case Write-up Summary: On September 12, 1979, Hampton Machine Tool Company requested from St. Louis National Bank a renewal to their loan of $1,000,000 due to be repaid on September 30, 1979 and also to be given an additional loan of $350,000 for new equipment purchases in October 1979. Both loans were to be repaid on December 31, 1979. Hampton M.T. Company wrote a letter to the St. Louis National Bank stating the reasons for the extension of the loan and the need of the additional loan, and giving the current and the predicted future financial position of the company. In order to decide whether to approve the loan extension and the additional new loan, the bank examine the financial position of the company for the following months to come and calculate the forecasted Income Statement and Cash Flow Analysis to find out if the company will have the required cash flows to repay their loan and interest on time. Since the bank found that the company will not be able to pay its loan on time, so the bank made some adjustments to determine the terms that would be more achievable. The bank then decided to grant the company the additional $350,000 loan due on January 1980 with the condition that it must pay the principal of its first loan on a monthly installment until December. In addition to this, the company should also delay its...

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• Hampton Machine Tool Company Essay

  ...Hampton Machine Tool Company On September 14, 1979, Mr. Jerry Eckwood, vice president of the St. Louis National Bank was considering a loan request from a customer located in a nearby city. The company, Hampton Machine Too] Company, had requested renewal of an existing $1 million loan originally due to be repaid on September 30. In addition to the renewal of the existin- loan, Hampton was asking for an additional loan of $350,000 for planned equipment purchases in October. Under the terms of the company's request, both loans, totaling $1.35 million, would be repayable at the end of 1979. Since its establishment in 1915, Hampton Machine Tool Company had successfully weathered the severe cyclical fluctuations characteristic of the macl-tine tool manufacturing business. In the most recent cvcle, Hampton had experienced record production and profitability during the niid- and late 1960s. Because Hampton's major customers included the aircraft manufacturers and automobile manufacturers in the St. Louis area, the company's success in the 1960s reflected a strong automobile market and the heavy defense spending associated with the Vietnam War. Hampton rode the 1960s boom into the early 1970s. Hampton, along with the rest of the capital goods industry, experienced a severe decline in...

  2299  Words | 7  Pages

• Hampton Machine Tool Company Essay

  ...Hampton Machine Tool Company 1. Why can't a profitable firm like Hampton repay its loan on time and why does it need more bank financing? What major developments between November 1978 and August 1979 contributed to this situation? A/ Hampton Machine Tool Company was unable to repay its loan on time due to several factors. One of such factors is the fact that the stock repurchase, for which the loan was initially requested, was a major cash disbursement of $3 million. In the period between November 1978 and August 1979, stock repurchase represented 58% of total expenditures for that period, while inventory purchases represented 42% of total expenditures. There were some developments that also contributed to this situation. For instance: The shipment has been upset by the suppliers’ delay of sending the electronic control mechanisms to Hampton. This has influenced the decrease of cash from past months as for example the accumulated orders have not been filled. Raw materials were acquired before immediate need. The company has spent $420,000 for the purchase of this type of inventory. Since December 1978, Hampton has spent $3 million on repurchasing stocks of several dissident shareholders. The $181,000.00 tax payment in December. The $150,000.00 dividend payment in December. We consider that this dividend payment must not be...

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• Hampton Tool Machine Essay

  ...I. Summary Hampton Machine Tool Company was established in 1915, whose customers were aircraft and automobile manufacturers located in the St. Louis area. The company had a large success rate throughout the 1960’s, with an unfortunate decline throughout the mid 1970’s in sales. The company was able to recover in the years following due to a large increase in military aircraft sales, especially the company’s conservative financial policies. Mr. Benjamin G. Cowins, president of Hampton Machine Tool Company requested an initial loan of $1 million from the St. Louis National Bank in order to purchase the stocks of several dissident shareholders, with a current interest rate of 1.5% monthly. Even though the company had excess money for normal operations, they did not have enough for their stock redemption that the company was currently interested in. However, Mr. Cowins sent Mr. Jerry Eckwood an additional letter requesting for an additional $350,000 to their loan in order to improve the overall performance of the company. The issue that Mr. Eckwood is concerned with is whether or not he should give HMTC the additional $35,000 loan and if he does extend this loan, will they be able to repay the loan within the duration of time that they are given. HMTC is very conservative financially which has allowed them to survive and continue to succeed. Knowing this allows HMTC to be a reliable and...

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• Cases Hampton Machine Tool Company Essay

  ...Zachary Duffy Hampton Machine Tool Company From the point of view as the bank creditor, Jerry Eckwood, a determination must be made of whether Hampton Machine Tool Company should receive an extension of their original loan of $1 million, as well as an additional loan of $350,000. After research and careful consideration and extraneous research and forecasting, we, St. Louis National Bank, as well as myself, Jerry Eckwood, have determined to reject Hampton Machine Tool Company’s loan request, as well as the loan extension request. Based off of conducting a financial analysis, primarily on the cash budget, our forecasting has shown that Hampton Machine Tool Company would not be able to fully repay their loan of $1.35 million by the end of the year (1979). However, we have determined that Hampton Machine Tool Company would be able to fully repay their loan in January. Therefore, we are offering a proposal to extend the loan for another month, but with an increased interest rate. Not only will this allow you to repay your loans in full, but it will also provide you with the necessary funding that you are requesting. The re-negotiation of the terms of the loans would include the following: the deadline of the payment would increase to January, while the interest rate...

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