Agenda Financial Year 10 Year 11 Year 12 1. Operations Strategy EPS (earnings per share) $2.00 $3.63 $4.51 ROE (return on equity) 20.0%% 29.6%% 29.0%% Human Resources and Culture Stock Price $30.00 $82.04 $90.53 Credit Rating B A- 3. Marketing and Advertising Image Rating 70 87 4. Financial Net Internet 90.315 138,351 153,097 Revenues Wholesale 314,731 417,801 517,573 5 . ($000) Key Initiatives for the Following Year Private-Label 27,600 Total 432,646 556,152 670,670 INTERNET SEGMENT - NORTH AMERICA WHOLESALE SEGMENT - NORTH AMERICA High End IIIIIIIIIIII Price and SQ Rating Price and SQ Rating Low of Wadden 500 M 500 Models Operations Strategy: Utilizing a focused differentiation strategy and reaching the best value for money. We are in the middle in terms of the number of models and SQ rating was pegged as mid-high end (currently second highest at 7.5 stars vs top 7.7) vs. the saturated low cost market the competitors are fighting over. Use of above average styling investment for designs, TOM, and Six Sigma training, and manufacturing systems along with lean teams and incentivized only for acceptable pairs Maximising only the plant domestic market to eliminate currency risk (did not work for Latin America) as well as Invested in Option B for North America and Asia Pacific plant as well as purchasing added facilities and equipment in Asia Pacific Human Resources and Culture - We have established a core emphasis on CSR and investing heavily on almost all options excluding charitable contributions for now. Worker productivity has slightly decreased compared to previous years due to more employees being employed in the company, but improved working conditions are still being maintained. Supervisors have also increased so as our reject rates count as among the lowest in the industry (2.7% total) and our workers will have enough supervisory exposure. WORKFORCE STATISTICS North America Europe-Africa Asia-Pacific Latin America Total Annua Annual Total Annua Total $ per Cost $ per Cost $ per Cost $ per Cost Cost Worker 3000s Worker 3000s Worker (5090s Worker ($000) (30005) Workforce - Base Wages 34.683 34.752 20,810 5.806 12.241 20.712 12.241 3.452 64.722 Compensation Incentive Pay 9.800 9.820 6.968 1.94 6.858 11.604 6.894 1.944 25.312 (in Year 12) Fringe Benefits 0 0 0 Total Regular Comp. 44.483 44.572 27.778 7.750 19.099 32.316 19.135 5.396 90.034 Overtime Pay 12,367 12,392 7,627 2,128 5,043 8,533 5,053 1,425 24.478 Total Compensation 56.850 56.964 35.405 9.878 24.142 40.849 24.188 6.821 114,512 Best Practices Training Expenditures (n Y12) 600 601 600 167 400 677 400 113 1.558 Supervisory Compensation (salary . b 60.600 1.515 36,360 255 25,250 1.061 25,250 177 3,008 Incentive Pay as % of Regular Compensation 22.0% 25.1%% 35.9% 36.0% Cumulative Best Practices (total $ per worker) 1.800 600 1.200 400 Year 11 Year 12 Year 11 Year 12 Year 11 Year 12 Year 11 Year 12 Year 11 Year 12 Workforce Productivity (p 5,03 4.98 0 3.590 3,527 3,547 0 3,545 Number of Workers Employed 795 1.002 279 1.134 1.697 282 1,929 3,255 Number of Supervisors Employed 20 25 28 48 81Marketing MARKETING EXPENSES North America Europe-Africa Asia-Pacific Latin America Total $000s S/Pair SO00s SPair SOOOs S/Pair SOODs S/Pair SODOS S/Pair Search Engine Advertising 12,000 1.24 6,000 17.54 10,000 27.25 4.500 23.32 32,500 22.15 Internet- Segments Website Maintenance 1.550 2.74 1.505 4.40 1.550 4.22 1,350 6.99 5,955 4.06 Brand Advertising (Note 1) 3,202 5.67 2.136 6.25 2.639 7.19 1,046 5.42 9.023 6.15 Celebrity Endorsements (Note 2) 0.00 0.00 0.00 0.00 0.00 Total Internet Marketing 16,752 29.65 9,641 28.19 14,189 38.66 6,896 35.73 47,478 32.36 SO00s s/Pair $000s S/Pai $000s SPair $000s S/Pair $000s S/Pair Wholesale - Brand Advertising (Note 1) 16.798 5.67 13,864 6.25 12,361 7.19 4.95 5.42 47,977 6.14 Segments Rebate Redemption 3,706 1.25 2.774 1.25 2,149 1.25 731 0.80 9,360 1.20 On-Time Delivery 4.448 1.50 3.329 1.50 2.579 1.50 1,371 1.50 11,727 1.50 Retailer Support 18.336 6.18 16,737 7.54 3.316 4.84 1.129 1.24 44,518 5.70 Celebrity Endorsements (Note 2) 0 0.00 0.00 0 0.00 0 0.00 0 0.00 Total Wholesale Marketing 43,288 14.60 36.704 16.54 25,405 14.78 8,185 8.96 113,582 14.53 Currently, we sit at having the most retailers carry our brand (retail superiority) as well as the strongest investor (double vs. competitor efforts) in terms of advertising expenditure, which is reflected in our best-in-industry image rating (currently at 87 and projected at 90 in Year 13). Our two celebrity endorsements have provided us with a solid consumer appeal with not much cost. To boost demand and maximise capacity for production, we will explore private label or reinvest in other demand driving activities while maintaining our market share. Financial Risk of Default and Debts to Asset Ratio continues to be at SELECTED FINANCIAL STATISTICS a good low level in spite of the intentional overstock on Credit Interest Coverage Ratio (oper, profit + inter 15.0 Rating Debt to Assets Ratio gotal liabilities + 0.52 Year 12 and a 2-year 0 cash on hand due to overspend and Default Risk Ratio (cash flow from ops . principal paymes) 5.80 Risk of Default (see Note 1) Low underfinance. While we currently have the highest net Credit Rating (at the end of Year 12) A- revenue in the industry (we are only second for net profit Current Ratio ( 2.69 Operating Profit Margin (operating profit + net sales 19.3%% behind company L). ROE decreased from 29.6% to 29.0% Net Profit Margin (net profit . net sales revenues) 12.6% Dividend Payout (dividends per share + earnings per share) 0.0% due to increase in Fixed Assets and Liabilities which we Cash Flow from Operations (after-tax profit + depreciation) 15,456 Total Principal Payments (3000s to be paid in Year 13) 19,900 plan to recoup on Year 13 following the readjustment of facility upgrades in lieu of Latin America. Opportunities arise in improving the operating profit margin and dividend payout is scheduled once we have been cleared of the existing overdrafts and reviewed the marketing expenses to see where else we can either cut costs or invest further into maintaining our retail superiority; payment is expected around Year 14-15. Key Initiatives for the Following Year 1. Price Change for both internet and retail segment following exchange rate impact per region and comparative to industry standards 2. Purchase of additional production machines for Asia Pacific 3. Shutting down of Latin America factory due to foreign exchange loss year-on-year to lower overall operational expenses overall 4. Re-open the Private Label as an optional revenue segment (Year 13) following capability to produceAsia-Pacific Total PRODUCTION STATISTICS North America Europe-Africa Latin America (all facilities) Branded P-Label Branded P-Label Branded P-Label Branded P-Label Branded P-Label Footwear Regular-Time Pairs 4,250 0 4,250 0 0 0 8,500 0 Production Overtime Pairs 850 850 0 0 1,700 0 (000s of pairs) Rejected Pairs -107 -0 -168 -0 -0 -0 -275 -0 Net Footwear Production 4,993 0 0 4,932 9,925 S/Q Rating of Pairs Produced 10.0* 8.8* 0.0* 0.0* 10.0* 8.4* 0.0* 0.0* Number of Models Produced 300 100 200 100 Branded P-Label Branded P-Label Branded P-Label Branded P-Label Branded P-Label Reject Rate (% of regular + overtime pairs) 2.1% 1.5% 0.0% 0.0% 3.3% 3.2% 0.0% 0.0% 2.7% 0.0% Cost of Rejected Pairs - $ Thousands 4.044 0 5,573 9,617 $ Per Pair 0.81 0.00 0.00 0.00 1.13 0.00 0,00 0.00 0.98 0.00 Production Capability (000s of pairs without OT) 4,250 pairs 0 pairs 4,250 pairs 0 pairs 8,500 pairs Total Production (including rejected pairs) 5,100 pairs 0 pairs 5,100 pairs 0 pairs 10,200 pairs Utilization of Production Capability (max = 120%%) 120%% 0% 120% 0% 120% Total WORKFORCE STATISTICS North America Europe-Africa Asia-Pacific Latin America (all facilities) Annua Total Annual Total Annual Total Annua Total Total $ per Cost $ per Cost $ per Cost $ per Cost Cost Worker ($000s) Worker ($0005) Worker ($0005) Worker ($0003) ($DOOS) Workforce - Base Wages 34,340 29,052 0 0 12,120 13,938 0 42,990 Compensation Incentive Pay 6,148 5,201 3,574 4,110 0 9,311 in Year 11) Fringe Benefits 750 635 750 863 0 1,498 Total Regular Comp. 41,238 34,888 0 16,444 18,911 0 53,799 o olo olooo Overtime Pay 11,528 9,753 o oo oo 4,351 5,004 lo 14,757 Total Compensation 52,766 44,641 20,795 23,915 68,556 Best Practices Training Expenditures (in Y11) 1,000 846 0 800 920 O 1,766 Supervisory Compensation (salary + benefits) 60,600 1,273 25,250 732 2,005 Incentive Pay as % of Regular Compensation 14.9% 0.0% 21.7% 0.0% Cumulative Best Practices (total $ per worker) 1,600 0 1,200 0 Year 10 Year 11 Year 10 Year 11 Year 10 Year 11 Year 10 Year 11 Year 10 Year 11 Workforce Productivity (pairs per worker per year) 5,000 5,025 0 3,500 3,695 0 Number of Workers Employed 800 846 1,143 1,150 1,943 1,996 O O Number of Supervisors Employed 20 21 29 29 49 50 BRANDED PRODUCTION COSTS North America Europe-Africa Asia-Pacific Latin America Total (all facilities) $000s $/Pair $000s $/Pair $000s $/Pair $000s $/Pair $000s $/Pair Materials Costs 73,506 14.72 0.00 86,144 17.47 0.00 159,650 16.09 Production Labor 44.641 8.94 0.00 23,915 4.85 0.00 8,556 6.91 This section lists Best Practices Training 846 0.17 0.00 920 0.19 0.0 1,766 0.18 costs for branded 1,273 0.25 ).00 732 0.15 0.0 2,005 0.20 production only. Supervisory Costs Private-Label pro- Enhanced Styling/Features 30,000 6.01 0.00 20,000 4.06 0.00 50,000 5.04 duction costs are ooooooooo oooooooo TQM/6-Sigma Program 19,890 3.98 0.00 19,890 4.03 0.00 39,780 4.01 listed separately in the Private-Label Production Run Setup 7,500 1.50 0.00 4,500 0.91 0.00 12,000 1.21 Operations report. Facilities Maintenance 3,342 0.67 0.00 4,223 0.86 0.00 7,565 0.76 Depreciation Expense 10,919 2.19 0.00 9,269 1.88 0.00 20,188 2.03 Total Production Costs 191,917 38.44 0.00 169,593 34.39 0.00 361,510 36.42MARKETING EXPENSES North America Europe-Africa Asia-Pacific Latin America Total $000s $/Pair $000s $/Pair $000s $/Pair $000s $/Pair $000s $/Pair Internet -Search Engine Advertising 5,000 25.77 4,500 23.32 4,000 31.50 4,000 21.51 17,500 25.00 Segments Website Maintenance 1,353 6.97 1,357 7.03 1,338 10.54 1,341 7.21 5,389 7.70 Brand Advertising (Note 1) 32 0.16 62 0.32 68 0.54 90 0.48 252 0.36 Celebrity Endorsements (Note 2) 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 Total Internet Marketing 6,385 32.91 5,919 30.67 5,406 42.57 5,431 29.20 23,141 33.06 $000s $/Pair $000s $/Pair $000s $/Pair $000s $/Pair $000s $/Pair Wholesale - Brand Advertising (Note 1) 468 0.17 438 0.32 432 0.53 410 0.48 1,748 0.30 Segments Rebate Redemption 3,523 1.25 1,098 0.80 2,555 3.15 381 0.45 7,557 1.29 On-Time Delivery 1,409 0.50 687 0.50 1,217 1.50 423 0.50 3,736 0.64 Retailer Support 4,250 1.51 4,250 3.10 2,100 2.59 2,100 2.48 12,700 2.17 Celebrity Endorsements (Note 2) 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 Total Wholesale Marketing 9,650 3.42 6,473 4.71 6,304 7.77 3,314 3.92 25,741 4.40 Note 1: Brand advertising expenditures in each region are allocated to the internet and wholesale segments based on each segment's percentage of total branded pairs sold in the region. Note 2: Expenditures for celebrity endorsements are allocated to the internet and wholesale segments based on each segment's percentage of total branded pairs sold in the region. ADMINISTRATIVE EXPENSES North America Europe-Africa Asia-Pacific Latin America Total $000s $/Pair $000s $/Pair $000s $/Pair $000s $/Pair $000s $/Pair Executive Salaries (Note 1) 2,369 0.79 1,232 0.79 737 0.79 812 0.79 5,150 0.79 Corporate Overhead (Note 2) 4,830 1.60 2,512 1.60 1,504 1.60 1,655 1.60 10,500 1.60 CSRC Ethics Training / Enforcement 184 0.06 96 0.06 57 0.06 63 0.06 400 0.06 Initiatives Cafeteria / On-Site Child Care 276 0.09 144 0.09 86 0.09 95 0.09 600 0.09 Ventilation / Lighting / Safety 230 0.08 120 0.08 72 0.08 79 0.08 500 0.08 Supplier Code of Conduct 690 0.23 359 0.23 215 0.23 236 0.23 1,500 0.23 Fixed Costs of Idled Prodcution Facility (Note 3) 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 Total Administrative Expenses (Note 4) 8,579 2.85 4,463 2.85 2,671 2.85 2,940 2.85 18,650 2.85 Note 1: Executive salaries totaled $5 million in Year 10 and increase at a rate of 3% annually. Note 2: Corporate overhead expenses include $1.00 for each pair of production capability (without overtime) company-wide and $1 million for each production facility. Corporate overhead will increase or decrease as company-wide footwear production capability increases or decreases. Also, if the company holds celebrity endorsement contract(s) but sells no branded pairs (private-label sales only), then the total annual cost of celebrity contracts is assigned to corporate overhead. Note 3: If no pairs are produced at a production facility in a given year, the annual maintenance and depreciation expenses (fixed costs) for the facility are treated as administrative expenses rather than allocated to the production costs at other active facilities. Note 4: Administrative expenses are calculated for the company in total and then allocated to the branded segments based on each segment's percentage of total branded pairs sold. For accounting purposes and for purpose of profit/loss calculations, no administrative expenses are allocated to private label sales.North Europe- Asia- Latin Company CONSOLIDATED INCOME STATEMENT America Africa Pacific America Total Segment -Internet 21,825 21,713 14,288 9,065 76,891 Revenues Wholesale (see Note 1) 178,111 87,052 57,104 56,271 378,538 Private-Label 0 0 0 0 Gross Revenues from Footwear Sales 199,936 108,765 71,392 75,336 455,429 + Exchange Rate Adjustments 0 Net Revenues from Footwear Sales 199,936 108,765 71,392 75,336 455,429 Operating Cost of Pairs Sold (see Note 1) 119,847 69,807 38,977 50,040 278,671 Costs Warehouse Expenses 13,451 8,866 6,048 6,939 35,304 Marketing Expenses 16,035 12,392 11,710 8,745 48,882 Administrative Expenses 8,579 4,463 2,671 2,940 18,653 Operating Profit (Loss) 42,024 13,237 11,986 6,672 73,919 Interest Income (Expense) 3,708 Profitability and Payout Year 10 Year 11 Other Income or (Expense) (see Note 2) -652 Earnings Per Share $2.00 $2.28 Pre-Tax Profit (Loss) 64,559 Dividends Per Share $1.00 $3.00 Income Taxes (see Note 3) 19,368 Net Profit (Loss) 45,191 Note 1: These items also include revenues collected from and costs associated with inventory clearance at the beginning of the year. For more details on inventory clearance, see the last section of the Distribution and Warehouse report. Note 2: This item includes charitable contributions and/or instructor-awarded refunds and/or instructor-imposed fines (appearing as negative) Note 3: The income tax rate is 30%. If a net loss was recorded in the prior year, the loss is carried forward and may offset some or all taxable income in the current year and reduce current-year income taxes. BRANDED MARKET PERFORMANCE INTERNET MARKET PERFORMANCE North America Europe-Africa Asia-Pacific Latin America Total $000s $/Pair $000s $/Pair $000s $/Pair $000s $/Pair $000s $/Pair Gross Revenues from Internet Sales 19,400 100.00 19,300 100.00 12,700 100.00 16,740 90.00 68,140 97.34 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 Exchange Rate Adjustments Gross Internet Revenues 19,400 100.00 19,300 100.00 12,700 100.00 6,740 90.00 68,140 97.34 Customer-Paid Shipping Fees 2,425 12.50 2,413 12.50 1,588 12.50 2,325 12.50 8,751 12.50 Net Internet Revenues 21,825 112.50 21,713 112.50 14,288 112.50 19,065 102.50 76,891 109.84 Operating - Cost of Pairs Sold 7,691 39.64 8,546 44.28 5,244 41.29 8,952 48.13 30,433 43.48 Costs Warehouse Expenses 2,521 12.99 2.568 13.31 1,746 13.75 2,537 13.64 9,372 13.39 Marketing Expenses 6,385 32.91 5.919 30.67 5.406 42.57 5.431 29.20 23,141 33.06 Administrative Expenses 552 2.85 550 2.85 362 2.85 530 2.85 1,994 2.85 Operating Profit (Loss) 4,676 24.10 4,130 21.40 1,530 12.05 1,615 8.68 11,951 17.07 Year 10 Year 11 Year 10 Year 11 Year 10 Year 11 Year 10 Year 11 Year 10 Year 11 Segment - Pairs Sold (000s) 353 194 300 193 225 127 225 186 1,103 700 Statistics Market Share 8.3% 4.0% 8.3% 4.6% 8.3% 3.9% 8.3% 5.7% 8.3% 4.6% Operating Profit Margin 22.5% 21.4% 17.9% 19.09 17.5% 10.7% 9.8% 8.5% 17.5% 15.5% WHOLESALE MARKET PERFORMANCE North America Europe-Africa Asia-Pacific Latin America Total $000s $/Pair $000s $/Pair $000s $/Pair $000s $/Pair $000s $/Pair Gross WHolesale Revenues 177,534 63.00 86,499 63.00 56,770 70.00 55,836 66.00 376,639 64.40 Exchange Rate Adjustments 0 0.00 0 0.00 0 0.00 0 0.00 0.00 Net Wholesale Revenues 177,534 63.00 86,499 63.00 56,770 70.00 55,836 66.00 376,639 64.40 Cost of Pairs Sold 111,713 39.64 60,796 44.28 33,484 41.29 40,715 48.13 246,708 42.19 Operating Costs Warehouse Expenses 10,846 3.85 6,228 4.54 4,250 5.24 4,350 5.14 25,674 4.39 Marketing Expenses 9,650 3.42 6.473 4.71 6,304 7.77 3,314 3.92 25,741 4.40 Administrative Expenses 8,027 2.85 3,913 2.85 2,309 2.85 2,410 2.85 16,659 2.85 Operating Profit (Loss) 37,298 13.24 9.089 6,62 10,423 12.85 5,047 5.97 61,857 10.58 Year 10 Year 11 Year 10 Year 11 Year 10 Year 11 Year 10 Year 11 Year 10 Year 11 Pairs Sold (000s) 1,997 2,818 1,700 1,373 1,275 811 1,275 846 6,247 5,848 Segment Statistics Market Share 8.3% 10.8% 8.3% 6.1% 8.3% 4.7% 8.3% 4.9% 8.3% 8.0% Operating Profit Margin 18.3% 21.0% 13.3% 10.5% 21.9% 18.4% 9.1% 9.0% 15.6% 16.4%BALANCE SHEET CASH FLOW STATEMENT ASSETS $000s CASH AVAILABLE IN YEAR 11 $000s Cash On Hand 0 Beginning Cash Balance (carried over from prior year) 6,074 Accounts Receivable (see Note 1) 94,160 157,621 Cash - Receipts from Footwear Sales (see Note 1) 446,852 Footwear Inventories Inflows Bank Loans - 1-Year Loan 10,000 Total Current Assets 251,781 5-Year Loan 10,000 Net Investment in Facilities and Equipment 248,988 10-Year Loan 10,000 Construction Work In Progress (for new space) 24,000 Stock Issue (0 shares issued) 0 Production Improvement Options On Order 21,250 Sale of Production Equipment ,160 Interest Income on Y10 Cash Balance 121 Total Fixed Assets (see Note 2) 294,238 Loan to Cover Overdraft (1-year loan @ 9.4%) 189,172 Total Assets 546,019 Cash Refund (awarded by instructor) 0 LIABILITIES $000s Total Cash Available from All Sources 676,379 Accounts Payable (see Note 3) 39,913 CASH OUTLAYS IN YEAR 11 $000s 1-Year Bank Loan Payable (see Note 4) 10,000 Current Portion of Long-Term Bank Loans (see Note 5) 18,900 Cash Payments to Materials Suppliers (see Note 2) 139,126 189,172 Outlays Production Expenses (excluding depreciation - see Note 3) 181,672 Overdraft Loan Payable (see Note 6) Distribution and Warehouse Expenses 103,964 Total Current Liabilities 257,985 Marketing and Administrative Expenses 67,532 Long Term Bank Loans Outstanding (see Note 7) 98,300 Capital Facility Expension (new space) 24,000 Total Liabilities 356,285 Outlay Equipment Purchases 17,200 Production Imp. Options 21,250 SHAREHOLDER EQUITY Beginning Change Balance in Y11 $000s Energy Efficiency Initiatives 11,426 Bank Loan 1-Year Loan 0 Common Stock (see Note 8) 20,000 -200 19,800 Repayment Additional Capital (see Note 9) 1 10,000 5,86 104,140 5-Year Loans 0 see Note 4) 10-Year Loans 15,900 Retained Earnings (see Note 10) 80,003 -14,209 65,794 Interest Bank Loans 8,829 Total Shareholder Equity 210,003 -20,269 189,734 Payments Y10 Overdraft Loan 0 Return On Average Shareholder Equity (see Note 11 22.6% Stock Repurchase (200 shares repurchased @ $30.30) 6,060 Income Tax Payments 19,368 Note 1: Of the $376.639 of wholesale and private label net revenues reported on the Y11 income Dividend Payments to Shareholders 59,400 statement, 75% was collected in Y11 and 25% will be collected in Y12. Charitable Contributions 652 Note 2: For more details on fixed asset investment, see the Facilities and Equipment report (page Cash Fine (assessed by instructor) 0 1 of these Company Operating Reports). Note 3: Of the $159,650 of materials used for footwear production in Year 11, 75% was paid for in Total Cash Outlays 676,379 Year 11 and 25% will be p d for in Year 12. Note 4: The company's Year 11 interest rate for a 1-year bank loan was 5.4%. Net Cash Balance (at the end of Year 11) Note 5: This item represents the principal portion of all outstanding 5-year and 10-year bank loans due to be repaid in the upcoming year (Year 12). Note 1: This item consists of all internet revenues recorded in Y11, 75% of wholesale and private- label revenues recorded in Y11, and accounts receivable from Y10 sales. Note 6: Loans for overdrafts are incurred automatically to prevent a negative year-end cast balance at an interest rate that is 2.0% higher than the company's 1-year loan rate. Note 2: This item consists of 75% of the cost of V11 production materials and 25% of V10 production materials costs due to a 3-month lag in payments to materials suppliers. Note 7: Long-term bank loans outstanding: Year 12 Note 3: This item includes all V11 production-related expenses (adjusted for exchange rate cost Loan Initial Original Interest standing Principal Interes impacts) except for depreciation (which is a non-cash accounting charge). Number Year Principal Rate Term Principal Payment Payable Note 4: All 1-year loans (including overdraft loans) received in Year 10 were repaid in full in Year Y4 60.000 8.2% 10-yr 6.000 1.476 11. Interest on all 1-year loans received in Year 10 was also paid in Year 11. Y9 79,200 9'900 7.5% 10 000 10.00 80% 2,000 10-yr 10 000 800 SELECTED FINANCIAL STATISTICS Credit Interest Coverage Ratio (oper. profit + interest exp. 8.49 Rating Debt to Assets Ratio (total liabilities + total assets) 0.65 Measures Default Risk Ratio (cash flow from ops + principal paymts) 4.11 Risk of Default (see Note 1) Low Credit Rating (at the end of Year 11) B+ Current Ratio (current assets + current liabilities) 0.98 Note 8: There are 19,800k shares of stock issued and outstanding at a par value of $1.00 per Operating Profit Margin (operating profit + net sales revenues) 16.2% share. The authorized maximum number of shares outstanding is 50,000k. Net Profit Margin (net profit + net sales revenues) 9.9% Note 9: Additional Capital represents the dollar amount over and above par value that share- Dividend Payout (dividends per share + earnings per share) 131.4% holders have paid to purchase new shares of common stock. Note 10: Retained Earnings is a summation of all after-tax profits the company has earned that Cash Flow from Operations (after-tax profit + depreciation) 65,379 have not been distributed to shareholders in the form of dividends. Total Principal Payments ($000s to be paid in Year 11) 15,900 Note 11: The formula for Return On Average Shareholder Equity is After-Tax Profit Note 1: A default risk ratio of 4.00 or higher results in a Low default risk, 2.00 to 4.00 results in a (Beginning Equity + Ending Equity) + 2 Meduim default risk, and below 2.00 results in a High default risk." Note: Because demand and sales figures are rounded to the nearest 1000 pairs, minor anomalies in the company's financial statements may occasionally occur. Any rounding inconsistencies that do appear will be smaller than +50 and will likely average-out over time. Such rounding anomalies have no significant impact on company performance.WAREHOUSE OPERATIONS (branded) North America Europe-Africa Asia-Pacific Latin America Total All pair figures in thousands. Pairs Models S/Q Pairs Models S/Q Pairs Models S/Q Pairs Models S/Q Pairs Ending Inventory from Year 10 1 200 3.7# 200 3.7# 200 3.7* 45 200 3.7A 221 Inventory Clearance (at the beginning of Y11) 18 15 11 11 55 Beginning Year 11 Inventory 53 200 3.7 45 200 3.7 34 200 3.7 34 200 3.7 166 Incoming Year 11 - North America Facility 1,600 300 1,283 300 10.0 1,000 300 10.0 1,110 300 10.0 4,993 Shipments from Europe-Africa Facility 0 0 0.0 0 0.0 0 0 0.0 0 0.0 0 Asia-Pacific Facility 1,500 200 10.0 1,152 200 10.0 1,100 200 10.0 1,180 200 10.0 4,932 Latin America Facility 0 0 0.0 0 0.0 0 0 0.0 0 0 0.0 0 Pairs Available for Sale in Year 11 3,153 251 9.9* 2,480 252 9.9* 2,134 247 9.9* 2,324 248 9.9* 10,091 Pairs Sold Internet Segment 194 194 Actual 193 193 Actual 127 127 Actual 186 186 Actual 700 Wholesale Segment 2,818 1,242 Branded 1,373 1,272 Branded 811 811 Branded 846 832 Branded 5,848 Total Branded Sales 3,012 1,436 Demand 1,566 1,465 Demand 938 939 Demand 1,032 1,018 Demand 6,548 Required Inventory (needed to achieve delivery time) 43 44 43 28 158 Inventory Surplus (Shortfall) 98 870 1,153 1,264 3,385 Ending Year 11 Inventory (unsold pairs) 141 251 9.9* 914 252 9.9* 1,196 247 9.9* 1,292 248 9.9# 3,543 COST OF BRANDED PAIRS SOLD North America Europe-Africa Asia-Pacific Latin America Total $000s $/Pair $000s $/Pair $000s $/Pair $000s $/Pair $000s $/Pair Cost of Beginning Year 11 Inventory 1,330 0.44 1,394 0.89 748 0.80 1,119 1.08 4,591 0.70 + Production Cost of Incoming Pairs 113,063 37.54 88,940 56.79 76,260 81.30 83,247 80.67 361,510 55.21 Exchange Rate Cost Adjustments 0.00 0 0.00 0 0.0 0.00 0 0.00 + Freight on Incoming Pairs 4,600 1.53 4,870 3.11 3,100 3.30 4,580 4.44 17,150 2.62 + Import Tariffs on Incoming Pairs 6,000 1.99 14,610 9.33 8,000 8.5 22,900 22.19 51,510 7.87 - Cost of Ending Year 11 Inventory 5,590 1.86 40,472 25.84 49,380 52.64 62,179 60.25 157,621 24.07 Cost of Branded Pairs Sold in Year 11 119,403 39.64 69,342 44.28 38,728 41.29 49,667 48.13 277,140 42.32 WAREHOUSE EXPENSES North America Europe-Africa Asia-Pacific Latin America Total $000s $/Pair $000s $/Pair $000s $/Pair $000s $/Pair $000s $/Pair Inventory Storage Costs (on Y10 carried over) 36 0.01 30 0.02 23 0.02 23 0.02 112 0.02 Packaging/Shipping Costs - Internet 2,454 0.81 2,441 1.56 1,607 1.71 2,353 2.28 8,855 1.35 Wholesale 9,877 3.28 5,325 3.40 3,366 3.59 3,511 3.40 22,079 3.37 Warehouse Lease and Maintenance 1,000 0.33 1,000 0.64 1,000 1.07 1,000 0.97 4,000 0.61 Total Warehouse Operating Expenses 13,367 4.44 8,796 5.62 5,996 6.39 6,887 6.67 35,046 5.35 INVENTORY CLEARANCE North America Europe-Africa Asia-Pacific Latin America Total $000s $/Pair $000s $/Pair $000s $/Pair $000s $/Pair $000s $/Pair Gross Revenues from Pairs Cleared 577 32.06 553 36.87 334 30.36 435 39.55 1,899 34.53 + Exchange Rate Cost Adjustments 0.00 0.00 0 0.00 0.00 0.00 Net Revenues from Pairs Cleared 577 32.06 553 36.87 334 30.36 435 39.55 1,899 34.53 Direct Costs - Production / Freight / Tariffs 443 24.61 465 31.00 249 22.64 373 33.91 1,530 27.82 Inventory Storage 0.50 0.53 0.55 6 0.55 29 0.53 Packaging / Shipping 75 4.17 62 4.13 46 4.18 46 4.18 229 4.16 Margin Over Direct Costs 50 2.78 18 1.20 33 3,00 10 0.91 111 2.02