Corporate Finance - Aubrey Yachts
Autor: delwyn • February 21, 2016 • Research Paper • 1,002 Words (5 Pages) • 937 Views
Corporate Finance - Aubrey Yachts
Jack Aubrey and his brother Charles are co-founders of Aubrey Yacht Manufacturers in Miami, Florida. The company specializes in the production of yachts in the $500,000 to $1,200,000 price range. The Aubrey brothers took the company public in 1998 and its shares are now traded on NASDAQ under the symbol AYM. Jack is the President and Charles is the chief executive officer (CEO) and chairman of the board.
Demand for yachts in AYM’s price range was strong during 2007, but a six-month strike that started in June of that year allowed the company to reduce its finished goods inventory substantially by year end. During the 2008 recession, demand fell. The company responded by reducing inventory and modifying its capital structure from its long run average of 25% long-term debt-to-equity until all of its outstanding long-term debt was finally repaid in 2009.
Earnings and dividends had been growing strongly until the strike occurred. The company paid its first dividend in 2003 but discontinued it soon after the strike began. Exhibit 1 shows the history of the company’s earnings per share (EPS) and dividends per share (DPS) since 2003.
Exhibit 1 | |||||||||||
Aubrey Yacht Manufacturers Earnings and Dividend History, 31 December 2003 to 31 December | |||||||||||
2013 | |||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | |
EPS ($) | 4.18 | 4.52 | 4.77 | 5.05 | 5.18 | 2.6 | 2.4 | 3.5 | 4.8 | 5.2 | 5.5 |
DPS ($) | 2.17 | 2.31 | 2.48 | 2.58 | 2.64 |
During 2012, sales of yachts in the company’s price range had recovered and Jack Aubrey is confident that the company will be able to reinstate its dividend in 2014. He also wants to ensure that future dividends are not cut as occurred in 2008 and has plans to determine dividends with a target payout adjustment model that uses a five-year period to adjust toward the target.
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