Table ATable A Consolidated Income Statement, 2009-2011 (in thousands of dollars)200920102011Net sales14,07915,06516,360COGS9,01110,24410,798Gross profit5,0684,8215,562Operating expense3,5203,6154,090Interest expense105125128Interest income171915Pretax profit1,4611,0991,359Income tax497374462Net income964725897

Table BTable B Balance Sheet at December 31, 2011 (in thousands of dollars)Cash500Accounts receivable5,245Inventory1,227Current assets6,972PP&E2,988Total assets9,960

Accounts payable966Notes payable, bank826Accrued taxes139Long-term debt, current portion100Current liabilities2,031Long-term debt1,000Total liabilities3,031Shareholders equity6,929Total liabilities and shareholders equity9,960

Table CTable C Monthly Sales (in thousands of dollars)SalesProjected Sales20112012January671702February393486March360414April311378May180162June196180July474378August769540September2,8962,970October2,6182,520November4,5645,724December2,9283,546Total16,36018,000

Seasonal1Exhibit 1 2012 Pro Forma Balance Sheets and Accured Taxes Under Seasonal Production (in thousands of dollars)Actual Dec 31, 2011JanFebMarAprMayJunJulAugSepOctNovDecCasha5001,5112,9502,7682,4772,2741,9461,6251,246758500500500Accounts receivableb5,2452,5418326305543782393916432,4573,8435,7716,489Inventoryc1,2271,2271,2271,2271,2271,2271,2271,2271,2271,2271,2271,2271,227Current assets6,9725,2805,0094,6254,2593,8793,4133,2433,1164,4425,5707,4988,216Net PP&Ed2,9882,9882,9882,9882,9882,9882,9882,9882,9882,9882,9882,9882,988Total assets9,9608,2687,9977,6137,2476,8676,4016,2316,1047,4308,55810,48611,204

Accounts payablee96623216013712553591251789808321,8891,170Notes payable, bank82600000000078580847Accrued taxesf1399426-188-388-492-715-795-857-757-590-55111Long-term debt, current portion100100100100100100100100100100100100100Current Liabilities2,03142528649-163-339-556-571-5783231,1262,0142,228Long-term debtg1,0001,0001,0001,0001,0001,000950950950950950950900Total liabilities3,0311,4251,2861,0498376613943793721,2732,0762,9643,128Shareholders' equity6,9296,8426,7106,5646,4096,2066,0075,8515,7326,1586,4827,5228,076Total liabilities and equity9,9608,2687,9977,6137,2476,8676,4016,2316,1047,4308,55810,48611,204

Accrued TaxesBeg. accrued taxes1399426-188-388-492-715-795-857-757-590-55Accrual of monthly taxes-45-68-75-80-105-103-80-61219167536285Tax payments00-139-1200-12000-12000-120End. accrued taxes1399426-188-388-492-715-795-857-757-590-55111a Assumed maintenance of minimum $500,000 balance.b 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.e 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 2012. This represents a 30-day payment period. Since inventories are level, purchases will follow seasonal production and sales pattern.f 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 estimated tax for 2012 are due. In estimating its tax liability for 2012, the company uses a tax liability 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

Seasonal2Exhibit 2 2012 Pro Forma Income Statement Under Seasonal Production (in thousands of dollars)JanFebMarAprMayJunJulAugSepOctNovDecTotalNet sales7024864143781621803785402,9702,5205,7243,54618,000COGSa4633212732491071192493561,9601,6633,7782,34011,880Gross profit23916514112955611291841,0108571,9461,2066,120

Operating expensesb3603603603603603603603603603603603604,320Interest expense1177777777711794Interest incomec13554433211132Profit (loss) before tax-132-200-222-234-308-302-235-1816454911,5768391,737Income taxesd-45-68-75-80-105-103-80-61219167536285591Net income-87-132-146-155-203-200-155-1194263241,0405541,147a Assumed cost of goods sold equal to 66% sales.b 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%.

Seasonal3Exhibit 3 2012 Pro Forma Cash Flow Statement Under Seasonal Production (in thousands of dollars)JanFebMarAprMayJunJulAugSepOctNovDecOperating ActivitiesNet income-87-132-146-155-203-200-155-1194263241,040554Depreciation252525252525252525252525Less: Increase (Decrease) in A/R-2,704-1,710-202-76-176-1391512521,8141,3861,928718Less: Increase (Decrease) in Inventory000000000000Add: Increase (Decrease) in A/P-735-71-24-12-7166553802-1491,057-719Add: Increase (Decrease) in Accrued Taxes-45-68-214-200-105-223-80-6199167536165Cash flow from operations1,8621,464-157-265-178-253-296-354-463-1,018731-693

Investing ActivitiesLess: capital expenditures-25-25-25-25-25-25-25-25-25-25-25-25Cash flow from operating and investing1,8371,439-182-290-203-278-321-379-488-1,043706-718Cash available before financing activities1,8372,4502,2681,9771,7741,4961,125746258-785706-718

Financing ActivitiesLess: bank note repayment8260000000007060Less: debt repayment00000500000050Add: bank note issuance 0000000007850768Cash flow from financing-8260000-50000785-706718

Total Cash Flow1,0111,439-182-290-203-328-321-379-488-25800

Level1Exhibit 4 2012 Pro Forma Balance Sheets and Accured Taxes Under Level Production (in thousands of dollars)Actual Dec 31, 2011JanFebMarAprMayJunJulAugSepOctNovDecCasha5001,5112,9502,7682,4772,2741,9461,6251,246758500500500Accounts receivableb5,2452,5418326305543782393916432,4573,8435,7716,489Inventoryc1,2271,2271,2271,2271,2271,2271,2271,2271,2271,2271,2271,2271,227Current assets6,9725,2805,0094,6254,2593,8793,4133,2433,1164,4425,5707,4988,216Net PP&Ed2,9882,9882,9882,9882,9882,9882,9882,9882,9882,9882,9882,9882,988Total assets9,9608,2687,9977,6137,2476,8676,4016,2316,1047,4308,55810,48611,204

Accounts payablee96623216013712553591251789808321,8891,170Notes payable, bank82600000000078580847Accrued taxesf1399426-188-388-492-715-795-857-757-590-55111Long-term debt, current portion100100100100100100100100100100100100100Current Liabilities2,03142528649-163-339-556-571-5783231,1262,0142,228Long-term debtg1,0001,0001,0001,0001,0001,000950950950950950950900Total liabilities3,0311,4251,2861,0498376613943793721,2732,0762,9643,128Shareholders' equity6,9296,8426,7106,5646,4096,2066,0075,8515,7326,1586,4827,5228,076Total liabilities and equity9,9608,2687,9977,6137,2476,8676,4016,2316,1047,4308,55810,48611,204

Accrued TaxesBeg. accrued taxes1399426-188-388-492-715-795-857-757-590-55Accrual of monthly taxes-45-68-75-80-105-103-80-61219167536285Tax payments00-139-1200-12000-12000-120End. accrued taxes1399426-188-388-492-715-795-857-757-590-55111

Level2Exhibit 2 2012 Pro Forma Income Statement Under Level Production (in thousands of dollars)JanFebMarAprMayJunJulAugSepOctNovDecTotalNet sales7024864143781621803785402,9702,5205,7243,54618,000COGSa421292273227971082273241,7821,5123,4342,12810,825Gross profit28119414115165721512161,1881,0082,2901,4187,175

Operating expensesb3603603603603603603603603603603603604,320Interest expense11777777117110083Interest incomec54433211110024Profit (loss) before tax-86-169-223-213-299-293-215-1548216381,9301,0582,796Income taxesd-29-57-76-72-102-100-73-52279217656360951Net income-57-111-147-140-198-193-142-1025424211,2746991,845

a Assumed cost of goods sold equal to 60% sales.b 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%.JanFebMarAprMayJunJulAugSepOctNovDecTotalNet sales7024864143781621803785402,9702,5205,7243,54618,000COGSa421292248227971082273241,7821,5123,4342,12810,800Gross profit28119416615165721512161,1881,0082,2901,4187,200

Operating expensesb925050505050505050505050Interest expenseInterest incomecProfit (loss) before taxIncome taxesdNet income

Level3Exhibit 3 2012 Pro Forma Cash Flow Statement Under Level Production (in thousands of dollars)JanFebMarAprMayJunJulAugSepOctNovDecOperating ActivitiesNet income-87-132-146-155-203-200-155-1194263241,040554Depreciation252525252525252525252525Less: Increase (Decrease) in A/R-2,704-1,710-202-76-176-1391512521,8141,3861,928718Less: Increase (Decrease) in Inventory000000000000Add: Increase (Decrease) in A/P-735-71-24-12-7166553802-1491,057-719Add: Increase (Decrease) in Accrued Taxes-45-68-214-200-105-223-80-6199167536165Cash flow from operations1,8621,464-157-265-178-253-296-354-463-1,018731-693

Investing ActivitiesLess: capital expenditures-25-25-25-25-25-25-25-25-25-25-25-25Cash flow from operating and investing1,8371,439-182-290-203-278-321-379-488-1,043706-718Cash available before financing activities1,8372,4502,2681,9771,7741,4961,125746258-785706-718

Financing ActivitiesLess: bank note repayment8260000000007060Less: debt repayment00000500000050Add: bank note issuance 0000000007850768Cash flow from financing-8260000-50000785-706718

Total Cash Flow1,0111,439-182-290-203-328-321-379-488-25800

Notessales growth4650 in 2001 16360 in 2011saving 480 and 600level prodn.projection sales18000 in 2012net income in 2011897projection income1147 in 2012COGS 2012 under seasonal66% of salesOp expenses 2012 seasonal or level24%evenly throughout each monthcorporate tax 34%wholesale channel70% of salesafter exhibition15% of annual salesshipped in sep60 days payment timeunder seasonal production in 2012same inv held from 31 dec 2011ac payable50% of COGS of that monthtotal purchase in 2012total purchasebased on 30 day payment2012 forcast59402011 end cash balance500minimum for operations req.end of 2011outstanding loan826should not exceed 2/3 of ac receivable+inventoryav interest paid in 20116%withdrawal > 200011% interestoustanding long term bond1000in balance sheet as on 2011 deccoupon 8%amortized50 in june and dec each yearcap ex300equal to depevenly divided throughout the yrnet block in 2012won't change as capex=depin 2012cogs 60%won't change monthly under level productionstorage and handling cost in 2012300Overtime wage premiums480,000Other direct labor savings600,000Net savings before financial charges, carrying costs, inventory losses, and taxes1,080,000Increase in interest expenses147,923Reduction in interest income16,140Increase in storage cost300,000Net pretax savings615,937Less tax at 34%209,418Net savings406,518