Blaine Kitchenware - 1766 Words

BLAINE KITCHENWARE INC. Blaine Kitchenware was a mid-sized producer of small appliances primarily used in residential kitchens. By 2006, the company’s products consisted of a wide range of small kitchen appliances including deep fryers, griddles, toasters, ovens etc. Blaine had just under 10% of the $2.3 billion U.S. market for small kitchen appliances. For the period 2003 to 2006, the industry posted modest annual unit sales growth of 2%. In 2006, 65% of its revenue was generated from shipments to U.S. wholesalers and retailers. The company shipped approximately 14 million units a year. There were three major segments in the small kitchen appliance industry: food preparation appliances, cooking and beverage making appliances but†¦show more content†¦Thus, the returns to shareholders are lower from the industry average. Blaine is an over-liquid and under-levered company and its shareholders are paying a price for it. It would not be rational for a public company to be funded only by equity. It s too inefficient. In 2006, the company Return on Equity (ROE) was 11%, which is below the industry average of 19.5%. Also the increasing trend in BKI’s payout ratio was unsustainable Debt is a lower cost source of funds and allows a higher return to the equity investors by leveraging their money. In addition, the company can deduct the interest paid on the debt from their income and thus reduce the tax burden. With an increase of future corporate tax from 30.8% to 40%, it would be beneficial for the firm to deduct interest payments to pay fewer taxes. Debt greatly reduces the role of integrated enterprise cost of capital. Therefore, it can increase earnings per share and its stock value by improving the proportion of corporate debt appropriately, which assumes a crucial role of financial leverage. Enterprises financial leverage of funds has a magnifying affect, when the business uses the liabilities, the effects of financial leverage will show. However, debt is not always excellent, and we should firstly analyze whether the profitability of raising the funds for capital is greater than the interest rate. If it is so the use of debt will substantially increase th eirShow MoreRelatedBlaine Kitchenware3691 Words   |  15 PagesTIMOTHY LUEHRMAN JOEL HEILPRIN op yo Blaine Kitchenware, Inc.: Capital Structure On April 27, 2007, Victor Dubinski, CEO of Blaine Kitchenware, Inc. (BKI), sat in his office reflecting on a meeting he had had with an investment banker earlier in the week. The banker, whom Dubinski had known for years, asked for the meeting after a group of private equity investors made discreet inquiries about a possible acquisition of Blaine. Although Blaine was a public company, a majority of its sharesRead MoreBlaine Kitchenware674 Words   |  3 PagesAhmad Mohammad Analysis of Blaine Kitchenware Inc. case Brief Background Blaine Kitchenware Inc., a mid-sized producer of branded small appliances primarily used in residential kitchens, has a very conservative practices regarding taking debt. It only took debt twice in its entire history. An investment banker prompted the idea of repurchasing some of the company’s stocks to the CEO Mr. Dubinki. The CEO is not sure whether the repurchase will benefit the company or not. Problems with BlainRead MoreBlaine Kitchenware763 Words   |  4 PagesRATE  F FINANC CE   C CASE  II   Blaine  Kitche enwar re,  Inc. .:  Capital  Str ucture   r e                   Grou up  Mem mbers   Shivam m  Pitaria  (3 336/50)   Tanuj j  Madan  (37 76/50)   Vinit  Ã‚  Bansal  (395/50)   Yuvraj  S Singh  Bist  (402/50)      Q1  Ã¢â‚¬ Ã‚  Is  Blaine’s  capital  structure  appropriate?  Give  reasons.   Blaine’s  capital  structure  is  not  appropriate  because  of  several  reasons.  The  biggest  of  them   being  not  using  debt  financing.  Without  debt,  Blaine  is  not  realizing  its  true  potentialRead MoreCase Study Solutions Blaine Kitchenware1356 Words   |  6 Pagesï » ¿Blaine Kitchenware Case Study Answers 1. ABOUT THE COMPANY Blain Kitchenware, Inc. (BKI), founded in 1927, is a mid-sized producer of small appliances for residential kitchens. BKI has an approximate 10% market share of the $2.3 billion U.S. market for small kitchen appliances, with 65% of sales originating from the US market. The company is public since 1994, and the majority of the shares is controlled by the founders family (62% of outstanding shares), who also have a strong representationRead MoreBlaine Kitchenware Case Essay3133 Words   |  13 Pages.tsoc noitargetni dna nwod- etirw yrotnevni ,elpmaxe rof ,tol a IKB tsoc evah sn oi tisiuqca esehT .htworg gniyortsed-eulav ni tsevni lliw yeht dna ,eerf si latipac taht kniht dluow tnemeganam ehT .noitacollasim latipac f o sksir gib eb lliw ereht ,hsac sulprus fo tol a sah ynapm oc eht fI – ksiR tnem tsevnieR .sreyub laitnetop cinagro fo daetsni seinapm oc llams f o sn oi tisiuqca m orf semoc htworg tnecer lla ,IKB roF .stcejorp ot laed retteb a noi tisiuqca eht gnikam ,n oillim 927 $ ot n oillimRead MoreBlaine Kitchenware Inc. Essay examples942 Words   |  4 PagesMemorandum To: Blaine Kitchenware Inc. Board of Directors CC: Mr. Victor Dubinski From: Date: 1/13/2013 Re: BKI stocks repurchase To review Blaine Kitchenware Inc.’s (BKI) current debt, equity and leverage levels with respect to the highly advisable repurchase of 14 million shares of stock at $18.50 per share and the related, necessary financing. BKI is currently highly over-liquid and under-levered. The firm can anticipate elevated tax rates due to the lack of debt held. BKI has alsoRead MoreEvaluation on Share Repurchase Proposal of Blaine Kitchenware Inc.1972 Words   |  8 Pagesï » ¿Evaluation on Share Repurchase Proposal of Blaine Kitchenware Inc. Group 7 Contents Executive Summary 3 Overview of problems 3 Analysis on Capital Structure Payout Policies of Blaine 3 1. Inappropriate current capital structure and payout policies 3 2. Advantages and disadvantages of large share repurchase proposal 4 a. Effects of share repurchase on assets, liabilities and equity on balance sheet 5 b. Effects of share repurchase on debt ratios and interest coverage ratio 5 c. EffectsRead MoreRespuesta 3 Caso Blane1747 Words   |  7 PagesBlaine Kitchenware is issuing stock to raise money for their business. BKI plans repurchase its own shares. This means BKI plans to invest into its own company. The company’s main issue is the fact that it is over liquid and under-levered and whether to distribute cash to shareholders by buying back shares or paying dividends. The answer is easy as this; BKI has to spend money to make money. Lucky for them they have the money and have more than enough to invest into their company. When BKI repurchaseRead MoreThe Impact Of A Share Repurchase Program For A Fictional Company1239 Words   |  5 PagesSummary We considered the impact of a share repurchase program for a fictional company – Blaine Kitchenware, Inc. It was determined that the liquidation of $209 million in cash and marketable securities and the addition of $50 million in long-term would result in a capital structure which was reasonable and sustainable. Overall, tax expense would be lower, the value of the firm would increase and the riskiness of the company’s equity would edge just a touch higher. From the perspective of bothRead MoreBlain Kitchenware Case1875 Words   |  8 PagesBlaine Kitchenware Inc. | Take-Home Case Assignment BSAD 342 Prof. Vishwakarma | Grady McQuillanJoe MackayMitch ChownAlessandro Galeone | Discussion questions * Do you believe Blaine’s current capital structure and payout policies are appropriate? Why or why not? * The current capital structure and payout policies for Blaine’s Kitchenware Inc in our opinion is not the most appropriate. The firm’s structure is invested primarily in equity, for the