Table A Consolidated Income Statement, 2009-2011 (in thousands of dollars)

2009
2010
Net sales
14,079
15,065
COGS
9,011
10,244
Gross profit
5,068
4,821
Operating expense
3,520
3,615
Interest expense
105
125
Interest income
17
19
Pretax profit
1,461
1,099
Income tax
497
374
Net income
964
725

2011
16,360
10,798
5,562
4,090
128
15
1,359
462
897

Table B Balance Sheet at December 31, 2011 (in thousands of dollars)

Cash
Accounts receivable
Inventory
Current assets
PP&E
Total assets

500
5,245
1,227
6,972
2,988
9,960

Accounts payable
Notes payable, bank
Accrued taxes
Long-term debt, current portion
Current liabilities
Long-term debt
Total liabilities
Shareholders equity
Total liabilities and shareholders equity

966
826
139
100
2,031
1,000
3,031
6,929
9,960

Table C Monthly Sales (in thousands of dollars)

Sales
Projected Sales
2011
2012
January
671
702
February
393
486
March
360
414
April
311
378
May
180
162
June
196
180
July
474
378
August
769
540
September
2,896
2,970
October
2,618
2,520
November
4,564
5,724
December
2,928
3,546
16,360
18,000
Total

Exhibit 1 2012 Pro Forma Balance Sheets and Accured Taxes Under Seasonal Production (in thousands of dollars)

Cash
Accounts receivableb
Inventoryc
Current assets
Net PP&Ed
Total assets
a

Accounts payablee
Notes payable, bank
Accrued taxesf
Long-term debt, current portion
Current Liabilities
Long-term debtg
Total liabilities
Shareholders' equity
Total liabilities and equity
Accrued Taxes
Beg. accrued taxes
Accrual of monthly taxes
Tax payments
End. accrued taxes

Actual Dec
31, 2011
500
5,245
1,227
6,972
2,988
9,960

Jan

Feb
1,511
2,541
1,227
5,280
2,988
8,268

2,950
832
1,227
5,009
2,988
7,997

Mar
2,768
630
1,227
4,625
2,988
7,613

Apr
2,477
554
1,227
4,259
2,988
7,247

May
2,274
378
1,227
3,879
2,988
6,867

966
826
139
100
2,031
1,000
3,031
6,929
9,960

232
0
94
100
425
1,000
1,425
6,842
8,268

160
0
26
100
286
1,000
1,286
6,710
7,997

137
0
-188
100
49
1,000
1,049
6,564
7,613

125
0
-388
100
-163
1,000
837
6,409
7,247

53
0
-492
100
-339
1,000
661
6,206
6,867

139

139
-45
0
94

94
-68
0
26

26
-75
-139
-188

-188
-80
-120
-388

-388
-105
0
-492

Assumed maintenance of minimum $500,000 balance.

Assumed 60-day collection period for wholesale sales and instant collection for retail sales.
c
Assumed inventories maintained at December 31, 2011 level for all of 2012.
d
Assumed equipment purchases equal to depreciation.
a

Assumed equal to 50% of the current month's COGS for seasonal production; and was related to material purchases that accounts for 50% of COGS for 20
seasonal production and sales pattern.
e

Taxes payble on 2011 income are due March 15, 2012. On April 15, June 15, September 15, and December 15, 2012, payments of 25% of each of the estim
of $480,000. This implies a payment of $120,000 in April, June, September and December.
g
To be repaid at the at rate of $50,000 each June and December
f

Jun
1,946
239
1,227
3,413
2,988
6,401

Jul
1,625
391
1,227
3,243
2,988
6,231

Aug
1,246
643
1,227
3,116
2,988
6,104

59
0
-715
100
-556
950
394
6,007
6,401

125
0
-795
100
-571
950
379
5,851
6,231

-492
-103
-120
-715

-715
-80
0
-795

Sep

Oct

Nov

Dec

758
2,457
1,227
4,442
2,988
7,430

500
3,843
1,227
5,570
2,988
8,558

500
5,771
1,227
7,498
2,988
10,486

500
6,489
1,227
8,216
2,988
11,204

178
0
-857
100
-578
950
372
5,732
6,104

980
0
-757
100
323
950
1,273
6,158
7,430

832
785
-590
100
1,126
950
2,076
6,482
8,558

1,889
80
-55
100
2,014
950
2,964
7,522
10,486

1,170
847
111
100
2,228
900
3,128
8,076
11,204

-795
-61
0
-857

-857
219
-120
-757

-757
167
0
-590

-590
536
0
-55

-55
285
-120
111

ounts for 50% of COGS for 2012. This represents a 30-day payment period. Since inventories are level, purchases will follow

nts of 25% of each of the estimated tax for 2012 are due. In estimating its tax liability for 2012, the company uses a tax liability

Exhibit 2 2012 Pro Forma Income Statement Under Seasonal Production (in thousands of dollars)
Jan
Feb
Mar
Apr
Net sales
702
486
414
378
a
COGS
463
321
273
249
Gross profit
239
165
141
129
Operating expensesb
Interest expense
Interest incomec
Profit (loss) before tax
Income taxesd
Net income

360
11
1
-132
-45
-87

360
7
3
-200
-68
-132

360
7
5
-222
-75
-146

360
7
5
-234
-80
-155

May
162
107
55
360
7
4
-308
-105
-203

Assumed cost of goods sold equal to 66% sales.

Assumed to be same for each month throughout the year.
c
2% annualized rate of return on monthly cash balances.
d
Negative figures are tax credits from operating losses, and reduced accured taxes shown on balance sheets. The federal tax rate on all earnings was 34%
a

Jun

Jul

Aug

Sep

Oct

Nov

Dec

180
119
61

378
249
129

540
356
184

2,970
1,960
1,010

2,520
1,663
857

5,724
3,778
1,946

3,546
2,340
1,206

360
7
4
-302
-103
-200

360
7
3
-235
-80
-155

360
7
3
-181
-61
-119

360
7
2
645
219
426

360
7
1
491
167
324

360
11
1
1,576
536
1,040

360
7
1
839
285
554

The federal tax rate on all earnings was 34%.

Total
18,000
11,880
6,120
4,320
94
32
1,737
591
1,147

Exhibit 3 2012 Pro Forma Cash Flow Statement Under Seasonal Production (in thousands of dollars)
Jan
Feb
Mar
Operating Activities
Net income
-87
-132
-146
Depreciation
25
25
25
Less: Increase (Decrease) in A/R
-2,704
-1,710
-202
Less: Increase (Decrease) in Inventory
0
0
0
Add: Increase (Decrease) in A/P
-735
-71
-24
Add: Increase (Decrease) in Accrued Taxes
-45
-68
-214
Cash flow from operations
1,862
1,464
-157
Investing Activities
Less: capital expenditures
Cash flow from operating and investing
Cash available before financing activities
Financing Activities
Less: bank note repayment
Less: debt repayment
Add: bank note issuance
Cash flow from financing
Total Cash Flow

Apr
-155
25
-76
0
-12
-200
-265

-25
1,837
1,837

-25
1,439
2,450

-25
-182
2,268

-25
-290
1,977

826
0
0
-826

0
0
0
0

0
0
0
0

0
0
0
0

1,011

1,439

-182

-290

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

-203
25
-176
0
-71
-105
-178

-200
25
-139
0
6
-223
-253

-155
25
151
0
65
-80
-296

-119
25
252
0
53
-61
-354

426
25
1,814
0
802
99
-463

324
25
1,386
0
-149
167
-1,018

1,040
25
1,928
0
1,057
536
731

554
25
718
0
-719
165
-693

-25
-203
1,774

-25
-278
1,496

-25
-321
1,125

-25
-379
746

-25
-488
258

-25
-1,043
-785

-25
706
706

-25
-718
-718

0
0
0
0

0
50
0
-50

0
0
0
0

0
0
0
0

0
0
0
0

0
0
785
785

706
0
0
-706

0
50
768
718

-203

-328

-321

-379

-488

-258

Exhibit 4 2012 Pro Forma Balance Sheets and Accured Taxes Under Level Production (in thousands of dollars)
Actual Dec 31,
2011
Cash

Jan

Feb

Mar

1,511

5,245

2,541

832

630

554

1,227

1,227

1,227

1,227

1,227

Current assets

6,972

5,280

5,009

4,625

4,259

Net PP&E

2,988

2,988

2,988

2,988

2,988

9,960

8,268

7,997

7,613

7,247

Accounts payablee

966

232

160

137

125

Notes payable, bank

826

Accrued taxes

139

94

26

-188

-388

100

100

100

100

100

2,031

425

286

49

-163

1,000

1,000

1,000

1,000

1,000

Total liabilities

3,031

1,425

1,286

1,049

837

Shareholders' equity

6,929

6,842

6,710

6,564

6,409

Total liabilities and equity

9,960

8,268

7,997

7,613

7,247

Beg. accrued taxes

139

94

26

-188

Accrual of monthly taxes

-45

-68

-75

-80

-139

-120

94

26

-188

-388

Accounts receivable

Inventoryc
d

Total assets

Long-term debt, current portion

Current Liabilities
Long-term debt

2,950

Apr

500

2,768

2,477

Accrued Taxes

Tax payments
End. accrued taxes

139

May

Jun

2,274

Jul
1,946

Aug
1,625

Sep

Oct

Nov

Dec

1,246

758

500

500

500

378

239

391

643

2,457

3,843

5,771

6,489

1,227

1,227

1,227

1,227

1,227

1,227

1,227

1,227

3,879

3,413

3,243

3,116

4,442

5,570

7,498

8,216

2,988

2,988

2,988

2,988

2,988

2,988

2,988

2,988

6,867

6,401

6,231

6,104

7,430

8,558

10,486

11,204

53

59

125

178

980

832

1,889

1,170

785

80

847

-492

-715

-795

-857

-757

-590

-55

111

100

100

100

100

100

100

100

100

-339

-556

-571

-578

323

1,126

2,014

2,228

1,000

950

950

950

950

950

950

900

661

394

379

372

1,273

2,076

2,964

3,128

6,206

6,007

5,851

5,732

6,158

6,482

7,522

8,076

6,867

6,401

6,231

6,104

7,430

8,558

10,486

11,204

-388

-492

-715

-795

-857

-757

-590

-55

-105

-103

-80

-61

219

167

536

285

-120

-120

-120

-492

-715

-795

-857

-757

-590

-55

111

Exhibit 2 2012 Pro Forma Income Statement Under Level Production (in thousands of dollars)
Jan

Feb

Mar

Apr

May

Jun

Net sales

702

486

414

378

162

180

COGSa

421

292

273

227

97

108

Gross profit

281

194

141

151

65

72

Operating expensesb

360

360

360

360

360

360

Interest expense

11

Interest income

Profit (loss) before tax

-86

-169

-223

-213

-299

-293

Income taxesd

-29

-57

-76

-72

-102

-100

Net income

-57

-111

-147

-140

-198

-193

Assumed cost of goods sold equal to 60% sales.

Assumed to be same for each month throughout the year.

2% annualized rate of return on monthly cash balances.

Negative figures are tax credits from operating losses, and reduced accured taxes shown on balance sheets. The federal tax rate on all earnings was 34%.
Jan

Feb

Mar

Apr

May

Jun

Net sales

702

486

414

378

162

180

COGSa

421

292

248

227

97

108

Gross profit

281

194

166

151

65

72

92

50

50

50

50

50

Operating expensesb
Interest expense
Interest incomec
Profit (loss) before tax
Income taxesd
Net income

Jul

Aug

Sep

Oct

Nov

Dec

Total

378

540

2,970

2,520

5,724

3,546

18,000

227

324

1,782

1,512

3,434

2,128

10,825

151

216

1,188

1,008

2,290

1,418

7,175

360

360

360

360

360

360

4,320

11

11

83

24

-215

-154

821

638

1,930

1,058

2,796

-73

-52

279

217

656

360

951

-142

-102

542

421

1,274

699

1,845

ate on all earnings was 34%.

Jul

Aug

Sep

Oct

Nov

Dec

Total

378

540

2,970

2,520

5,724

3,546

18,000

227

324

1,782

1,512

3,434

2,128

10,800

151

216

1,188

1,008

2,290

1,418

7,200

50

50

50

50

50

50

Exhibit 3 2012 Pro Forma Cash Flow Statement Under Level Production (in thousands of dollars)
Jan

Feb

Mar

Apr

Operating Activities
Net income

-87

-132

-146

-155

Depreciation

25

25

25

25

-2,704

-1,710

-202

-76

Less: Increase (Decrease) in A/R

Less: Increase (Decrease) in Inventory

-735

-71

-24

-12

-45

-68

-214

-200

1,862

1,464

-157

-265

-25

-25

-25

-25

Cash flow from operating and investing

1,837

1,439

-182

-290

Cash available before financing activities

1,837

2,450

2,268

1,977

Add: Increase (Decrease) in A/P

Add: Increase (Decrease) in Accrued Taxes
Cash flow from operations
Investing Activities
Less: capital expenditures

Financing Activities
Less: bank note repayment

826

Less: debt repayment

Add: bank note issuance

-826

1,011

1,439

-182

-290

Cash flow from financing

Total Cash Flow

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

-203

-200

-155

-119

426

324

1,040

554

25

25

25

25

25

25

25

25

-176

-139

151

252

1,814

1,386

1,928

718

-71

65

53

802

-149

1,057

-719

-105

-223

-80

-61

99

167

536

165

-178

-253

-296

-354

-463

-1,018

731

-693

-25

-25

-25

-25

-25

-25

-25

-25

-203

-278

-321

-379

-488

-1,043

706

-718

1,774

1,496

1,125

746

258

-785

706

-718

706

50

50

785

768

-50

785

-706

718

-203

-328

-321

-379

-488

-258

sales growth
projection sales
net income in 2011
projection income
COGS 2012 under seasonal
Op expenses 2012 seasonal or level
corporate tax
wholesale channel
after exhibition
under seasonal production in 2012
ac payable
total purchase
2011 end cash balance
end of 2011
av interest paid in 2011
withdrawal > 2000
oustanding long term bond
cap ex
net block in 2012
in 2012
storage and handling cost in 2012

4650 in 2001
18000 in 2012
897
1147 in 2012
66% of sales
24%
34%
70% of sales
15% of annual sales
same inv held from 31 dec
2011
50% of COGS of that month
based on 30 day payment
500
outstanding loan
6%
11% interest
1000
300
won't change
cogs 60%
300

Overtime wage premiums

480,000
Other direct labor savings
600,000
Net savings before financial charges, carrying costs, inventory losses, and taxes
1,080,000
Increase in interest expenses
147,923
Reduction in interest income
16,140
Increase in storage cost
300,000
Net pretax savings
615,937
Less tax at 34%
209,418
Net savings
406,518

16360 in 2011

evenly throughout each month

shipped in sep

total purchase in 2012

2012 forcast
minimum for operations req.

60 days payment time

5940
826 should not exceed 2/3 of ac receivable+inventory

in balance sheet as on 2011 dec

equal to dep
as capex=dep
won't change monthly under
level production

osses, and taxes

coupon 8%
amortized
evenly divided throughout the yr

saving 480 and 600

eceivable+inventory

50 in june and dec each year

level prodn.