I am in need of help with the Business Strategy Game. My team is nowhere to be found and I am struggling and am in last place and my grade is determined on how well I do. can anyone of you experts PLEASE help me?! I am posting what decisions I need to make for Year 13. Anything and everything will be greatly appreciated to help me with my endeavors.
Projected Y13 Performance Scoring Measures EPS (eamings per share) ROE (return on equity) Credit Rating Image Rating Other Measures Net Revenues ($000s) Net Profit ($000s) Ending Cash ($000s) Investor Year 13 Expectation $1.80 $3.50 12.7% 23.0% B+ B+ 64 72 Change Year 13 from Y12 431,587 +19.4% 44,931 100.0% 101,175 +54,008 FINANCE AND CASH Flow Sources of Additional Cash ($000s) 1-Year Bank Loan (9.30% interest) $ 5-Year Bank Loan (9.80% interest) $ 10-Year Bank Loan (10.30% interest) $ Stock Issue (000s of shares at $8.96) Maximum share issue in Y13 = 5000k 0 0 0 Uses for Excess Cash (5000) Early Repayment of L-T None - Loans (Balance Sheet Note 8) N/A Dividend ($/share) Year 12 dividend was $0.00 $0.00 Stock Repurchase (000s of shares at $8.96) 0 Maximum share repurchase in Y13 = Ok 0 Shares of stock outstanding at the beginning of Year 13 25,000 K Shares of stock outstanding at the end of Year 13 25,000 K $ $000s 47,167 429,596 Projected Cash Available in Year 13 Beginning Cash Balance (carried over from Year 12) Cash Receipts from Footwear Sales Inflows Bank Loans 1-Year Loan 5-Year Loan 10-Year Loan Stock Issue (0 shares @ $8.96) Sale of Used Production Equipment Interest Income on Y12 Cash Balance Loan to Cover Overdraft (1-year loan 11.3%) Cash Refund (awarded by instructor) Total Cash Available from All Sources 0 0 0 849 0 0 $ 477,612 Projected Cash Outlays in Year 13 Cash Payments to Materials Suppliers Outlays Production Expenses (excluding depreciation) Distribution and Warehouse Expenses Marketing and Administrative Expenses Capital Facility Expansion (new space) Outlays Equipment Purchases Equipment Upgrade Options Energy Efficiency Initiatives Bank Loan 1-Year Loan Repayment 5-Year Loans 10-Year Loans Interest Bank Loans Payments Y12 Overdraft Loan Stock Repurchases (0 shares @ $8.96) Income Tax Payments Dividend Payments to Shareholders Charitable Contributions Cash Fine (assessed by instructor) Total Cash Outlays $000s $ 60,054 88,252 85,570 91,885 0 0 0 400 0 0 20,900 10,120 0 0 19,256 0 0 0 $ 376,437 This positive cash balance could generate interest income of $1.8M in Year 14. Projected Cash Balance at the End of Year 13 (5000s) $ +101,175 Other Important Financial Statistics Interest Rate Paid on Overdraft Loans Interest Rate Received on Cash Balances Shareholder Equity (mandated minimum = $150 mil.) Last Year 8.3% 1.8% $333 mil. Year 13 (projected) 11.3% 1.8% $377 mil. Performance on Credit Rating Measures Interest Coverage Ratio (operating profit + interest exp.) Debt to Assets Ratio (total debt + total assets) Risk of Default (based on Y13 default risk ratio of 3.29) Last Year 1.89 0.31 High Year 13 (projected) 7.92 0.25 Medium Corporate Social Responsibility and Citizenship Below are seven CSRC initiatives that can be used to develop a Which (if any) of the seven initiatives to pursue and how much to "social responsibility strategy" for your company. The drop-down spend is entirely voluntary. There is no pressure to spend anything selection boxes below offer several optional actions. on these initiatives the company can perform successfully without While undertaking CSRC initiatives is often considered "the right undertaking any social responsibility initiatives. In Year 10, prior thing to do", one reason to operate in a socially responsible manner company management spent no money on any of the seven optional is to enhance the company's image. Aggressive and astute pursuit social responsibility initiatives. of a social responsibility strategy over 5 years can increase the The Help button at the top-right offers further information and guid- company's Image Rating by 15 to 20 points. ance regarding the seven CSRC initiatives. CSRC INITIATIVES Use of Recycled Boxing / Packaging No - Involves the use of recycled packaging materials to box each pair of athletic footwear at company distribution centers. Increases shoe packaging costs by $0.15 per pair Energy Efficiency Initiatives $( 50- Involves investments at each production facility for each million pairs of production capability to improve energy efficiency and use renewable energy sources. Treated as capital investment depreciated at 10% per year. 0- of pretax Charitable Contributions Involves making tax-deductible donations to charities and charitable causes. Reported on the Income Statement under 0 profit "Other Expense" (reduces pre-tax profits). Ethics Training / Enforcement No - Involves training for and development / enforcement of a code of ethics for company managers at all levels. Increases corporate administrative expenses by $400k annually. Improved Cafeteria and On-Site Child Care Facilities Continue Involves one-time capital investment of $2.5 million and increased administrative costs of $600k annualy per facility. Results in a one-time productivity increase of 100 pairs per year at each facility. Working Conditions Improved Ventilation, Lighting, and Safety Continue Involves one-time capital investment of $3.0 million and increased administrative costs of $500k annualy per facility. Results in a one-time productivity increase of 100 pairs per year at each facility. Involves compliance monitoring of supplier employment practices and working conditions to prevent 50+ hour work Institution of a Supplier Code of Conduct No - weeks, substandard wages, use of underage labor, exposure to toxic materials, and lax safety practices. Entails added annual administrative costs of $750k per facility. Cash Outlays for Corporate Social Responsibility and Citizenship in Y13 Total Cash Outlays ($000s) $1,750 Per Pair Sold ($ per pair) $0.23 Company's Historical CSRC Efforts Year 8 Year 9 Year 10 Year 11 Year 12 The information below indicates the range of CSRC effort being exerted by the companies in your Recycled Boxing / Packaging No No No Yes No industry. These statistics should be helpful in craft- Energy Efficiency Initiatives (5000s) 0 0 0 ing your own company's CSRC strategy. 0 50 Charitable Contributions ($000s) 0 0 0 0 0 Industry 33 CSRC Cash Outlays Year 11 Year 12 Ethics Training / Enforcement No No No Yes No Thousands of $ High 15,837 28,462 Improved Working Facilities No No No Yes Yes Average 7,051 Conditions 12,181 Safety/Lighting No No No Yes Yes Low 0 1,245 Supplier Code of Conduct No No No Yes No $ Per Pair Sold High 1.90 2.53 0 Total Cash Outlays Thousands of $ 0 0 15,424 12,700 Average 0.82 1.42 0.00 0.00 $ Per Unit Sold 0.00 1.90 1.83 Low 0.00 0.15 PROPOSED PRIVATE-LABEL PRODUCTION North America Europe-Africa Facility Facility Asia-Pacific Facility Latin America Facility Private Label Specifications 0 % 0 80% 20 % Materials Standard Materials % Superior materials % Number of Models / Styles (global requirement) Enhanced Styling / Features ($000s per model) 80 % 20- 100 models $| 20 k/model 0 % 0 % O models $0 k/model O models $ 0 Jk/model 100 models $ 26 k/model S/Q Rating of Private-Label Pairs to be Produced Global Minimum = 3.1* 3.8* 0.0* 3.4* 0.0% 1,200 pairs O pairs O pairs 0 300 330 125 225 Capacity Available for Private Label Production (000s of pairs) Private-Label Pairs - North America Warehouse to be Produced Europe-Africa Warehouse and Shipped to Asia-Pacific Warehouse (before rejects) Latin America Warehouse Proposed Total Production Regular Time of Private-Label Pairs Overtime (000s of pairs) Pairs Rejected Net Private-Label Production Projected Cost of Private-Label Pairs to be Produced ($ per pair) 2,400 pairs 200 250 125 225 800 pairs 0 80 (10.0%) 0 0 0 0 400 pairs 580 38 (3.9%) 942 pairs $26.19 per pair O pairs 0 0 (0.0%) O pairs O pairs 0 0 (0.0%) O pairs 720 pairs $0.00 per pair $23.94 per pair $0.00 per pair North America Market Europe-Africa Market Asia-Pacific Market Latin America Market 2,730 pairs 2,730 pairs 2,880 pairs 2,880 pairs PRIVATE-LABEL CONTRACT OFFERS Private Label Demand projected total regional demand assuming nor- page 4 of FIR) Pairs Offered for Sale (to be produced and shipped if offer is accepted) Price Offer (must be at least $10.00 below the Y13 regional average whsle.price) Projected Private Label Market Share (if offer is accepted) 233 pairs 468 pairs $38.00 542 pairs $140.00 19.9% 419 pairs $140.00 $(38.00 8.1% 17.1% 14.5% Revenue, Cost, and Margin Projections for Year 13 $000s 8,854 71 8,925 Gross Private-Label Revenues + Exchange Rate Adjustments Net Private-Label Revenues Production Cost + Exchange Rate Adjustments Freight / Packaging / Tariffs Margin Over Direct Costs $000s 17,784 0 17,784 11,852 34 1,836 4,062 $/pair 38.00 0.00 38.00 25.32 0.07 $000s 21,680 100 21,780 13,689 -23 4,878 3,236 $/pair 40.00 0.18 40.18 25.26 -0.04 9.00 5.97 $/pair 38.00 0.30 38.30 25.10 -0.11 6.64 6.68 $000s 16,760 1,138 17,898 10,517 -667 5,447 2,601 $/pair 40.00 2.72 42.72 25.10 -1.59 5,848 3.92 -25 1,546 1,556 13.00 8.68 6.21 The projected outcome of winning a Private-Label contract may be included in the overall performance projections for the cur- rent year. Select "Yes" for a region only if there is a reasonable probability of winning a Private Label contract in the region. Incorporate the pro-Incorporate the pro- jected olutcomes for jected olutcomes for this region into Y13 this region into Y13 projections? Yes projections? Yes Incorporate the pro-Incorporate the pro- jected olutcomes for jected olutcomes for this region into Y13 this region into 913 projections? Yes projections? Yes WHOLESALE MARKETING North America Market Year 12 Year 13 3.3* 3.1 232 335 Europe-Africa Market Year 12 Year 13 3.3* 2.9* 228 290 erated by production and S/Q Rating (weighted average) marketing decisions in Y13. Models Available (weighted average) Wholesale Wholesale Price to Retailers ($/pair) Marketing Brand Advertising ($000s) Decisions Mail-In Rebate ($3 to $15 per pair) Delivery Time (1 to 4 week delivery) Retailer Support ($0 to $10000 per outlet) Retail Outlets (willing to carry your brand) Marketing variables de- termined by prior-year Celebrity Appeal (sum of appeal indices for all celebrities under contract) decisions / outcomes. Brand Reputation (prior-year Image rating) 50.00 10,000 5.00 3 5,000 876 75 62 50.00 10000 4.00 - 3 - 5000 1,037 275 62 55.00 9,000 5.00 3 4,500 840 80 62 54.00 9000 4.00 3 - 4500 700 260 62 Asia-Pacific Market Year 12 Year 13 3.2* 2.9* 228 291 50.00 50.00 8,000 8000 5.00 4.00 3 3 - 3,750 3750 628 712 95 300 62 62 Latin America Market Year 12 Year 13 3.2* 2.9* 228 299 55.00 54.00 7,500 7500 5.00 4.00 3 3- 3,250 3250 589 507 60 265 62 62 Wholesale Market Share (% of total regional sales volume) Pairs Available for Sale (after filling internet orders) (000s) Wholesale Demand for Branded Pairs Required Inventory (needed to achieve delivery time) Surplus (Shortfall) of Branded Pairs Year 12 Actual 8.1% 2,012 1,741 68 +143 Year 13 Projected 10.6% 2,481 2,374 145 -38 Year 12 Year 13 Actual Projected 8.2% 9.3% 536 347 1,515 1,812 27 31 -1,006 -1,496 Year 12 Actual 8.2% 1,575 1,252 49 +273 Year 13 Projected 9.6% 1,066 1,597 57 -588 Year 12 Year 13 Actual Projected 8.2% 9.8% 634 523 1,238 1,610 30 38 -634 -1,125 Revenue, Cost, and Profit Projections for Year 13 Gross Wholesale Revenues + Exchange Rate Adjustments Net Wholesale Revenues Cost of Pairs Sold Warehouse Expenses Marketing Expenses Administrative Expenses Operating Profit (Loss) Operating Profit Margin $000s $/pair 116,800 50.00 0 0.00 116,800 50.00 60,653 25.96 8,967 3.84 18,246 7.81 8,140 3.48 20,794 8.90 17.8% $000s $/pair 17,064 54.00 78 0.25 17,142 54.25 9,810 31.04 1,689 5.34 7,586 24.01 1,101 3.48 -3,044 -9.63 -17.8% $000s $/pair 50,450 50.00 404 0.40 50,854 50.40 29,326 29.06 4,986 4.94 10,705 10.61 3,515 3.48 2,322 2.30 4.6% $000s $/pair 26,190 54.00 1,778 3.67 27,968 57.67 16,371 33.75 2,484 5.12 6,687 13.79 1,690 3.48 736 1.52 2.6% Competitive Assumptions S/Q Rating Model Availability Wholesale Price ($ per pair Brand Advertising (5000s) Rebate Offer ($ per pair) Delivery Time (weeks) Retailer Support ($ per outlet) Retail Outlets Celebrity Appeal Brand Reputation 4.1. * 261 - models $50.40 $( 9900 $ 4.20 2.7 weeks $( 4000 1,638 outlets 111 69 4.1 * 261_models $ 53.75 $( 7950 $( 4.40 2.8 weeks $( 4000 1,523 outlets 109 69 4.2* 264 models $ 49.90 $( 7850 $ 5.00 2.8 weeks $ 3225 1,262 outlets 110 69 4.2 * 262 models $ 53.90 $ 6450 $[ 4.40 3.0 weeks $( 2900 1,122 outlets Industry averages for these vari- ables determined by prior-year decision entries and outcomes. 111 69 INTERNET MARKETING Marketing variables gen- S/Q Rating (weighted average) erated by production and Models Available (weighted average) marketing decisions in Y13. Brand Advertising ($000s) Internet Retail Price ($ per pair sold online) Marketing Retail Price Exceeds Wholesale Price by Decisions Search Engine Advertising (5000s) Free Shipping (from warehouse to buyer) Marketing variables de Celebrity Appeal (sum of appeal Indices for all termined by prior-year celebrities under contract) decisions / outcomes. Brand Reputation (prior-year image rating) North America Market Year 12 Year 13 3.3* 3.1* 232 335 10,000 10,000 70.00 70.00 40% 40% 2,000 2000 No No 75 275 62 62 Europe-Africa Market Year 12 Year 13 3.3* 2.9* 228 290 9,000 9,000 80.00 ( 77.00 45% 43% 2,000 2000 No No - 80 260 62 62 Asia-Pacific Market Year 12 Year 13 3.2* 2.9% 228 291 8,000 8,000 70.00 70.00 40% 40% 2,000 2000 No No 95 300 62 62 Latin America Market Year 12 Year 13 3.2* 2.9% 228 299 7,500 7,500 78.00 77.00 42% 43% 4,000 4000 Na No - 60 265 62 62 Internet Market Share (% of total regional sales volume) Internet Sales Volume (000s of pairs sold to online customers) Year 12 Actual 6.9% 307 Year 13 Projected 10.5% 530 Year 12 Actual 7.3% 273 Year 13 Projected 10.3% 438 Year 12 Actual 7.2% 222 Year 13 Projected 9.8% 356 Year 12 Actual 8.8% 267 Year 13 Projected 11.9% 420 Revenue, Cost, and Profit Projections for Year 13 Gross Internet Revenues + Exchange Rate Adjustments Adjusted Gross Revenues + Shipping Fees (paid by customer) Net Internet Revenues Cost of Pairs Sold Warehouse Expenses Marketing Expenses Administrative Expenses Operating Profit (Loss) Operating Profit Margin $000s $/pair 37,100 70.00 0 0.00 37,100 70.00 6,625 12.50 43,725 82.50 13,761 6,843 12.91 5,831 11.00 1,846 3.48 15,444 29.14 35.3% $000s $/pair 33,726 77.00 155 0.35 33,881 77.35 5,475 12.50 39,356 89.85 13,598 31.05 6,064 13.84 8,980 20.50 1,526 3.48 9,188 20.98 23.3% $000s $/pair 24,920 70.00 199 0.56 25,119 70.56 4,450 12.50 29,569 83.06 10,347 29.06 4,789 13.45 5,795 16.28 1,240 3.48 7,398 20.78 25.0% $000s $/pair 32,340 77.00 2,196 5.23 34,536 82.23 5,250 12.50 39,786 94.73 14,177 33.75 5,721 13.62 9,259 22.05 1,464 3.49 9,165 21.82 23.0% 25.96 Estimated industry averages S/Q Rating for these marketing variables Models Available are entered on the Wholesale Marketing decision entry page. Brand Advertising ($000s) Competitive Retail Price ($ per pair) Assumptions Search Engine Advertising ($000s) Free Shipping Industry averages for these vari- Celebrity Appeal ables determined by prior-year decision entries/outcomes. Brand Reputation 4.1* 261 $ 9,900 $( 69.60 $( 5400 4.1* 261 $ 7,950 $( 76.50 $( 4250 None 109 69 4.2* 264 $ 7,850 $ 68.80 4150 4.2* 262 $ 6,450 $ 75.30 $( 3300 None 111 69 111 69 110 69 BRANDED DISTRIBUTION Europe-Africa Facility Asia-Pacific Facility Latin America Facility 0 pairs 2,158 pairs 0 pairs North America Facility 3,413 pairs 2000 350 600 463 Pairs Available for Shipment (000s of pairs produced at each facility after rejects) Pairs to be shipped North America Warehouse from Facility to Europe-Africa Warehouse (000s of pairs) Asia-Pacific Warehouse Latin America Warehouse Remaining Pairs to be shipped (if left unshipped, will be shipped automatically) 0 0 800 408 500 450 0 0 0 0 0 pairs 0 pairs 0 pairs 0 pairs WAREHOUSE OPERATIONS North America Warehouse Pairs Models S/Q 211 232 3.0* 0 - O pairs $000s $/pair 0 0.00 0 0.00 0 0.00 Inventory Left Over at the End of Year 12 (000s) Inventory Clearance (prior to Year 13 operations) Europe-Africa Warehouse Pairs Models S/Q 27 228 3.0* 0 % O pairs $000s $/pair 0 0.00 0 0.00 0 0.00 Asia-Pacific Warehouse Pairs Models S/Q 322 228 2.9* 0- % O pairs $000s $/pair 0 0.00 0 0.00 0 0.00 Latin America Warehouse Pairs Models S/Q 30 228 2.9* 0 % O pairs $000s Clearance Statistics Discounted Clearance Revenues Direct Cost of Pairs Cleared Margin Over Direct Cost 0 0 0 $/pair 0.00 0.00 0.00 Beginning Inventory (000s of pairs carried over from Year 12) Incoming Shipments from North America Facility (see Note 1 below) Europe-Africa Facility Asia-Pacific Facility Latin America Facility Pairs Available for Sale in Year 13 (see Note 2 below) Projected Demand (glven branded marketing decision entries) Required Inventory (needed to achieve delivery time) Projected Inventory Surplus (Shortfall) Pairs Models S/Q 211 232 3.0 2,000 400 3.3 0 0 0.0 800 200 2.5 0 0 0.0 3,011 335 3.1* 2,904 145 (3-week delivery) -38 (minimal) Pairs Models S/Q 27 228 3.0* 350 400 3.3 a 0 0.0 408 200 2.5 0 0.0 785 290 2.9* 2,250 31 (3-week delivery) -1,496 (minimal) Pairs Models S/Q 322 228 2.9 600 400 3.3 0 0 0.0 500 200 2.5 0 0 0.0 1,422 291 2.9* 1,953 57 (3-week delivery) Pairs Models S/Q 30 228 2.9* 463 400 3.3 0 0 0.0 450 200 2.5 0 0 0.0 943 299 2.9* 2,030 38 (3-week delivery) -1,125 (minimal) -588 (minimal) $000s $/pair -0.08 1.20 Projected Distribution and Warehouse Costs Exchange Rate Cost Adjustment (on Incoming shipments) Distribution and Freight on Footwear Shipments Warehouse Tariffs on Pairs Imported Costs Inventory Storage (on Y12 inventory) Packaging / Shipping (Net + wholesale) Warehouse Lease / Maintenance Total Dist. and Whse. Costs $000s 142 3,600 3,200 177 14,633 1,000 22,610 $/pair 0.05 1.20 1.06 0.06 4.86 0.33 7.51 $000s -11 1,516 4,548 14 6,739 1,000 13,817 $/pair -0.01 1.93 5.79 0.02 8.58 1.27 17.60 $000s -114 1,700 4,800 298 8,477 1,000 16,275 3.38 0.21 5.96 0.70 11.45 -1,337 1,826 9,130 15 7,190 1,000 19,161 $/pair -1.42 1.94 9.68 0.02 7.62 1.06 20.32 EQUIPMENT FOR FOOTWEAR PRODUCTION Europe-Africa Facility Asia-Pacific Facility 8,000 pairs Latin America Facility 1,000 pairs 2,000 pairs North America Facility 7,000 pairs 4,000 pairs 0 pairs 0- pairs O pairs 4,000 pairs pairs Space Available for Footwear Production Equipment in Y13 Production Equipment in Place at Beginning of Y13 (000s of pairs) Purchase of Production New (000s of pairs) Equipment Refurbished (000s of pairs) Sale of Existing Equipment (oldest equipment will be sold first) Total Footwear Production Capability in Y13 (000s of pairs without OT) Percentage of New / Refurbished Production Equipment pairs 0 0- 0- 0 O pairs 0 pairs 0- pairs pairs pairs 0- pairs 0- pairs 0 pairs 4,000 pairs 100% 0% O pairs 0% 0% 0 - pairs 4,000 pairs 0% 100% O pairs 0% 0% North America Facility $10,000 Done $1,614 $6,400 Done $2,173 Europe-Africa Facility $0 No - $0 Asia-Pacific Facility $10,000 No $2,277 Latin America Facility $0 No - $0 $0 $0 No PRODUCTION IMPROVEMENT OPTIONS Option Purchase of special equipment Capital outlay (5000s) to reduce reject rate by 50% Projected annual cost savings at current reject rate ($000s/ Option Layout revisions to reduce pro- Capital outlay ($000s) B duction run setup costs by 50% Projected annual cost savings ( Option Purchase of special equipment Capital outlay (S000s) to increase S/Q rating by 1 star Projected annual cost at current S/Q effort ($000s) Option Robot-assisted production to in- Capital outlay (S000s) D crease worker productivity by 50% Projected annual cost savings at current production / comp. $6,400 $1,860 No No - $0 $0 $0 $0 $19,200 $1,859 savings No No $19,200 $1,206 No No $0 $0 $0 $0 $57,600 $6,947 No No - $57,600 $-1,417 No No $0 $0 Europe-Africa Facility Asia-Pacific Facility Latin America Facility 1,000 pairs North America Facility 6,000 pairs 1,000 7,000 pairs 0- pairs 7,000 pairs SPACE FOR PRODUCTION EQUIPMENT Space in 000s Equipment Space at the End of Year 12 of Pairs Construction of Additional Space (initiated in Y12) (without OT) Space Available for Equipment in Year 13 Construction of New / Additional Space (to be available in Year 14) Space Available for Production Equipment in Year 14 2,000 pairs 1,000 1,000 pairs 8,000 pairs 0 2,000 pairs 0- pairs 0 pairs 0- pairs 7,000 pairs 1,000 pairs 8,000 pairs 2,000 pairs $ $ $ $ 0 Capital Outlays in Year 13 ($000s) Purchase of New Equipment Purchase of Refurbished Equipment -Book Value of Equipment Sold Equipment Upgrade Options Energy Efficiency Initiatives New / Additional Facility Space Net Capital Outlays in Year 13 0 0 0 0 200 0 200 Oooo 0 0 0 0 200 0 200 0 oooooo 0 BRANDED FOOTWEAR PRODUCTION Europe-Africa Facility 100 % Latin America Facility 100% 0- % Branded Production Specs North America Facility 82% 18% 400 $ 6- k/model $ 1.10 per pair 0- Materials Standard Materials % (see anticipated materials prices at bottom of page Superior Materials % Number of Models / Styles (50 to 500 models) Enhanced Styling / Features ($000 per model) TQM / 6-Sigma Quality Program ($/pr. produced) % Asia-Pacific Facility 82% 18 ) % 200 $ 6- k/model $( 1.10 per pair k/model $ 0 $ 0.00 0 $ 0.00 k/model per pair per pair Projected S/Q Rating (the style/quality rating ranges from 0.5 to 10.0 stars) Projected Reject Rate (percentage of pairs that will fail inspection) 3.3* 5.2% 0.0* 0.0% 2.5* 10.1% 0.0* 0.0% pairs 2400 pairs Maximum Y13 Production Capability Without Overtime 7,000 pairs 1,000 pairs 8,000 pairs 2,000 pairs Maximum Overtime 8,400 pairs 1,200 pairs 9,600 pairs (assuming all ynused facility space is filled at the 2,400 pairs beginning of the year with production equipment Total Branded Production Needed in Year 13 9,500 pairs This figure is an approximation given beginning inventories, projected reject rates, and entries that currently reside on the Internet and Wholesale Marketing decision pages. The company must schedule production of (to satisfy projected demand in all four regions) (before rejects) about this many pairs to satisfy projected demand and inventory requirements. Note: To install production equipment at the beginning of the current year in a facility that currently has unused space, go to the Production Facilities decision entry page (the next item in the decision entries menu). Year 13 Production Regular-Time 4,000 pairs O pairs 4,000 pairs O pairs 800 Overtime (20% maximum) 0 800 0 Capability (000s of Total Production Capability 4,800 pairs O pairs 4,800 pairs O pairs before rejects) 3600 pairs 0 pairs 0 pairs Branded Pairs to be Manufactured in Y13 (000s) Total = 6,000 3,600 pairs O pairs 2,400 pairs O pairs Branded Footwear Regular-Time Production 0 0 0 0 Production (000s of pairs) Overtime Production 187 (5.2%) 0 (0.0%) 242 (10.1%) 0 (0.0%) Rejected Pairs (and reject rate) 3,413 pairs O pairs 2,158 pairs 0 pairs Net Branded Production 1,200 pairs O pairs 2,400 pairs O pairs Production Capability Remaining for Private-tabet Operations Cost of Rejected Pairs (in $000s and $ per pair produced) $4,266 $1.25 $0 $0.00 $4,834 $2.24 $0 $0.00 $000s $/pair $000s $/pair $000s $/pair $000s $/pair Costs Associated with Materials Cost 27,432 8.04 0 0.00 18,288 8.47 0 0.00 the Production of Labor Cost (including supervisory costs) 29,558 8.66 0.00 10,451 4.84 0 0.00 Branded Footwear Enhanced Styling/Features 2,400 0.70 0 0.00 1,200 0.56 0 0.00 TQM / 6-Sigma Quality Program 3,960 1.16 0.00 2,640 1.22 0 0.00 Production Run Set-Up 5,375 1.57 0 0.00 4,500 2.09 0 0.00 Maintenance (of facilities and equipment) 3,297 0.97 77 0.00 3,780 1.75 155 0.00 Depreciation (of facilities and equipment) 10,059 2.95 638 0.00 7,026 3.26 1,088 0.00 Total Branded Production Cost 82,081 24.05 715 0.00 47,885 22.19 1,243 0.00 Anticipated Y13 Materials Prices Standard Materials $ 6.74 per pair Superior Materials $11.63 per pair Beginning figures represent actual materials prices from the prior year. WORKFORCE COMPENSATION & TRAINING Prior-Year Compensation and Productivity Data Workforce Base Wages Compensation Incentive Pay (total $ per year) Fringe Benefits Total Regular Compensation Overtime Pay (included incentives) Total Compensation Incentive Pay as a % of Regular Compensation Workforce Productivity (pairs per worker per year) North America Facility Industry Company Average H 34,855 34,340 4,350 2,337 2,179 250 41,384 36,927 3,850 8,754 45,234 45,681 10.5% 6.3% 5,890 4,877 Europe-Africa Facility Industry Company Average H 20,810 0 4,650 0 1,000 0 26,460 0 6,621 0 33,081 0 17.6% 0.0% 4,057 0 Asia-Pacific Facility Industry Company Average H 12,278 12,120 2,055 1,573 1,064 250 15,397 13,943 1,706 0 17,103 13,943 13.3% 11.3% 3,630 3,498 Latin America Facility Industry Company Average H 12,181 0 4,650 0 375 0 17,206 0 3,838 0 21,044 0 27.0% 0.0% 3,853 0 Compensation Base Wage (% change from prior year) and Training Incentive Pay (s per non-rejected pair) of Production Fringe Benefits ($ per year) Workers Total Regular Compensation ($ per year) Overtime Pay (includes incentives) Total Compensation ($ per year) Incentive Pay as % of Regular Comp. Best Practices Training ($ per worker) Materials Cost Impact pre cumulative expenditures) Supervisory Staff (ratio of production workers to supervisors) Minimum Wage = 34,683 +2% 35,027 0.50 2,266 250 - 250 37,543 7,946 45,489 6.0% $ 400 per worker Std 0.00 Sup 0.00 Minimum Wage = 20,810 0% 0 $ 0.00 0 $ 0 - 0 0 0 0 0.0% 0- per worker Std 0.00 Sup 0.00 Minimum Wage = 12,241 +2% 12,362 0.50 - 1,566 250- 250 14,178 0 14,178 11.0% $( 400 per worker Std 0.00 Sup 0.00 Minimum Wage = 12,241 0% 0 $ 0.00 0 $ 0 - 0 0 0 0 0.0% 0- per worker Std 0.00 Sup 0.00 Ind. Avg. Prior-Year Supervisory Compensation ($/year/supervisor) 45to1 Staff = 19 Ind. Avg. Co. H 68,140 63,630 Minimum Salary = 61,206 +3% 65,539 0 to 1 Staff = 0 Co. H 36,724 0 Minimum Salary = 36,724 0% 0 45to1 Staff = 20 Ind. Avg. Co. H 25,477 26,008 Minimum Salary = 25,503 +3% 26,788 50 to1 Staff=0 Ind. Avg. Co. 25,377 0 Minimum Salary = 25,503 0% 0 Supervisory Compensation (% change in salary, benefits, and bonus) Projected Workforce Productivity (pairs per worker in Y13) Number of Workers Employed (given branded production entries) 4,776 838 0 0 3,482 919 0 0 $000s $000s 0 Cost of Labor Associated with Footwear Production Production Base Wages Workers Incentive Pay Fringe Benefits Overtime Pay Total Best Practices Training Expenditures Supervisory Compensation (salary + benefits) Total Cost of Production Labor $000s 29,353 1,899 210 6,659 38,121 335 1,245 39,701 $/pair 6.41 0.41 0.05 1.45 8.32 0.07 0.27 8.67 olo ooooo $/pair 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 $000s 11,361 1,439 230 0 13,030 368 536 13,934 $/pair 3.55 0.45 0.07 0.00 4.07 0.12 0.17 olo oolooool $/pair 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Per-pair figures not adjusted for rejected pairs. 4.35 0.00 Projected Y13 Performance Scoring Measures EPS (eamings per share) ROE (return on equity) Credit Rating Image Rating Other Measures Net Revenues ($000s) Net Profit ($000s) Ending Cash ($000s) Investor Year 13 Expectation $1.80 $3.50 12.7% 23.0% B+ B+ 64 72 Change Year 13 from Y12 431,587 +19.4% 44,931 100.0% 101,175 +54,008 FINANCE AND CASH Flow Sources of Additional Cash ($000s) 1-Year Bank Loan (9.30% interest) $ 5-Year Bank Loan (9.80% interest) $ 10-Year Bank Loan (10.30% interest) $ Stock Issue (000s of shares at $8.96) Maximum share issue in Y13 = 5000k 0 0 0 Uses for Excess Cash (5000) Early Repayment of L-T None - Loans (Balance Sheet Note 8) N/A Dividend ($/share) Year 12 dividend was $0.00 $0.00 Stock Repurchase (000s of shares at $8.96) 0 Maximum share repurchase in Y13 = Ok 0 Shares of stock outstanding at the beginning of Year 13 25,000 K Shares of stock outstanding at the end of Year 13 25,000 K $ $000s 47,167 429,596 Projected Cash Available in Year 13 Beginning Cash Balance (carried over from Year 12) Cash Receipts from Footwear Sales Inflows Bank Loans 1-Year Loan 5-Year Loan 10-Year Loan Stock Issue (0 shares @ $8.96) Sale of Used Production Equipment Interest Income on Y12 Cash Balance Loan to Cover Overdraft (1-year loan 11.3%) Cash Refund (awarded by instructor) Total Cash Available from All Sources 0 0 0 849 0 0 $ 477,612 Projected Cash Outlays in Year 13 Cash Payments to Materials Suppliers Outlays Production Expenses (excluding depreciation) Distribution and Warehouse Expenses Marketing and Administrative Expenses Capital Facility Expansion (new space) Outlays Equipment Purchases Equipment Upgrade Options Energy Efficiency Initiatives Bank Loan 1-Year Loan Repayment 5-Year Loans 10-Year Loans Interest Bank Loans Payments Y12 Overdraft Loan Stock Repurchases (0 shares @ $8.96) Income Tax Payments Dividend Payments to Shareholders Charitable Contributions Cash Fine (assessed by instructor) Total Cash Outlays $000s $ 60,054 88,252 85,570 91,885 0 0 0 400 0 0 20,900 10,120 0 0 19,256 0 0 0 $ 376,437 This positive cash balance could generate interest income of $1.8M in Year 14. Projected Cash Balance at the End of Year 13 (5000s) $ +101,175 Other Important Financial Statistics Interest Rate Paid on Overdraft Loans Interest Rate Received on Cash Balances Shareholder Equity (mandated minimum = $150 mil.) Last Year 8.3% 1.8% $333 mil. Year 13 (projected) 11.3% 1.8% $377 mil. Performance on Credit Rating Measures Interest Coverage Ratio (operating profit + interest exp.) Debt to Assets Ratio (total debt + total assets) Risk of Default (based on Y13 default risk ratio of 3.29) Last Year 1.89 0.31 High Year 13 (projected) 7.92 0.25 Medium Corporate Social Responsibility and Citizenship Below are seven CSRC initiatives that can be used to develop a Which (if any) of the seven initiatives to pursue and how much to "social responsibility strategy" for your company. The drop-down spend is entirely voluntary. There is no pressure to spend anything selection boxes below offer several optional actions. on these initiatives the company can perform successfully without While undertaking CSRC initiatives is often considered "the right undertaking any social responsibility initiatives. In Year 10, prior thing to do", one reason to operate in a socially responsible manner company management spent no money on any of the seven optional is to enhance the company's image. Aggressive and astute pursuit social responsibility initiatives. of a social responsibility strategy over 5 years can increase the The Help button at the top-right offers further information and guid- company's Image Rating by 15 to 20 points. ance regarding the seven CSRC initiatives. CSRC INITIATIVES Use of Recycled Boxing / Packaging No - Involves the use of recycled packaging materials to box each pair of athletic footwear at company distribution centers. Increases shoe packaging costs by $0.15 per pair Energy Efficiency Initiatives $( 50- Involves investments at each production facility for each million pairs of production capability to improve energy efficiency and use renewable energy sources. Treated as capital investment depreciated at 10% per year. 0- of pretax Charitable Contributions Involves making tax-deductible donations to charities and charitable causes. Reported on the Income Statement under 0 profit "Other Expense" (reduces pre-tax profits). Ethics Training / Enforcement No - Involves training for and development / enforcement of a code of ethics for company managers at all levels. Increases corporate administrative expenses by $400k annually. Improved Cafeteria and On-Site Child Care Facilities Continue Involves one-time capital investment of $2.5 million and increased administrative costs of $600k annualy per facility. Results in a one-time productivity increase of 100 pairs per year at each facility. Working Conditions Improved Ventilation, Lighting, and Safety Continue Involves one-time capital investment of $3.0 million and increased administrative costs of $500k annualy per facility. Results in a one-time productivity increase of 100 pairs per year at each facility. Involves compliance monitoring of supplier employment practices and working conditions to prevent 50+ hour work Institution of a Supplier Code of Conduct No - weeks, substandard wages, use of underage labor, exposure to toxic materials, and lax safety practices. Entails added annual administrative costs of $750k per facility. Cash Outlays for Corporate Social Responsibility and Citizenship in Y13 Total Cash Outlays ($000s) $1,750 Per Pair Sold ($ per pair) $0.23 Company's Historical CSRC Efforts Year 8 Year 9 Year 10 Year 11 Year 12 The information below indicates the range of CSRC effort being exerted by the companies in your Recycled Boxing / Packaging No No No Yes No industry. These statistics should be helpful in craft- Energy Efficiency Initiatives (5000s) 0 0 0 ing your own company's CSRC strategy. 0 50 Charitable Contributions ($000s) 0 0 0 0 0 Industry 33 CSRC Cash Outlays Year 11 Year 12 Ethics Training / Enforcement No No No Yes No Thousands of $ High 15,837 28,462 Improved Working Facilities No No No Yes Yes Average 7,051 Conditions 12,181 Safety/Lighting No No No Yes Yes Low 0 1,245 Supplier Code of Conduct No No No Yes No $ Per Pair Sold High 1.90 2.53 0 Total Cash Outlays Thousands of $ 0 0 15,424 12,700 Average 0.82 1.42 0.00 0.00 $ Per Unit Sold 0.00 1.90 1.83 Low 0.00 0.15 PROPOSED PRIVATE-LABEL PRODUCTION North America Europe-Africa Facility Facility Asia-Pacific Facility Latin America Facility Private Label Specifications 0 % 0 80% 20 % Materials Standard Materials % Superior materials % Number of Models / Styles (global requirement) Enhanced Styling / Features ($000s per model) 80 % 20- 100 models $| 20 k/model 0 % 0 % O models $0 k/model O models $ 0 Jk/model 100 models $ 26 k/model S/Q Rating of Private-Label Pairs to be Produced Global Minimum = 3.1* 3.8* 0.0* 3.4* 0.0% 1,200 pairs O pairs O pairs 0 300 330 125 225 Capacity Available for Private Label Production (000s of pairs) Private-Label Pairs - North America Warehouse to be Produced Europe-Africa Warehouse and Shipped to Asia-Pacific Warehouse (before rejects) Latin America Warehouse Proposed Total Production Regular Time of Private-Label Pairs Overtime (000s of pairs) Pairs Rejected Net Private-Label Production Projected Cost of Private-Label Pairs to be Produced ($ per pair) 2,400 pairs 200 250 125 225 800 pairs 0 80 (10.0%) 0 0 0 0 400 pairs 580 38 (3.9%) 942 pairs $26.19 per pair O pairs 0 0 (0.0%) O pairs O pairs 0 0 (0.0%) O pairs 720 pairs $0.00 per pair $23.94 per pair $0.00 per pair North America Market Europe-Africa Market Asia-Pacific Market Latin America Market 2,730 pairs 2,730 pairs 2,880 pairs 2,880 pairs PRIVATE-LABEL CONTRACT OFFERS Private Label Demand projected total regional demand assuming nor- page 4 of FIR) Pairs Offered for Sale (to be produced and shipped if offer is accepted) Price Offer (must be at least $10.00 below the Y13 regional average whsle.price) Projected Private Label Market Share (if offer is accepted) 233 pairs 468 pairs $38.00 542 pairs $140.00 19.9% 419 pairs $140.00 $(38.00 8.1% 17.1% 14.5% Revenue, Cost, and Margin Projections for Year 13 $000s 8,854 71 8,925 Gross Private-Label Revenues + Exchange Rate Adjustments Net Private-Label Revenues Production Cost + Exchange Rate Adjustments Freight / Packaging / Tariffs Margin Over Direct Costs $000s 17,784 0 17,784 11,852 34 1,836 4,062 $/pair 38.00 0.00 38.00 25.32 0.07 $000s 21,680 100 21,780 13,689 -23 4,878 3,236 $/pair 40.00 0.18 40.18 25.26 -0.04 9.00 5.97 $/pair 38.00 0.30 38.30 25.10 -0.11 6.64 6.68 $000s 16,760 1,138 17,898 10,517 -667 5,447 2,601 $/pair 40.00 2.72 42.72 25.10 -1.59 5,848 3.92 -25 1,546 1,556 13.00 8.68 6.21 The projected outcome of winning a Private-Label contract may be included in the overall performance projections for the cur- rent year. Select "Yes" for a region only if there is a reasonable probability of winning a Private Label contract in the region. Incorporate the pro-Incorporate the pro- jected olutcomes for jected olutcomes for this region into Y13 this region into Y13 projections? Yes projections? Yes Incorporate the pro-Incorporate the pro- jected olutcomes for jected olutcomes for this region into Y13 this region into 913 projections? Yes projections? Yes WHOLESALE MARKETING North America Market Year 12 Year 13 3.3* 3.1 232 335 Europe-Africa Market Year 12 Year 13 3.3* 2.9* 228 290 erated by production and S/Q Rating (weighted average) marketing decisions in Y13. Models Available (weighted average) Wholesale Wholesale Price to Retailers ($/pair) Marketing Brand Advertising ($000s) Decisions Mail-In Rebate ($3 to $15 per pair) Delivery Time (1 to 4 week delivery) Retailer Support ($0 to $10000 per outlet) Retail Outlets (willing to carry your brand) Marketing variables de- termined by prior-year Celebrity Appeal (sum of appeal indices for all celebrities under contract) decisions / outcomes. Brand Reputation (prior-year Image rating) 50.00 10,000 5.00 3 5,000 876 75 62 50.00 10000 4.00 - 3 - 5000 1,037 275 62 55.00 9,000 5.00 3 4,500 840 80 62 54.00 9000 4.00 3 - 4500 700 260 62 Asia-Pacific Market Year 12 Year 13 3.2* 2.9* 228 291 50.00 50.00 8,000 8000 5.00 4.00 3 3 - 3,750 3750 628 712 95 300 62 62 Latin America Market Year 12 Year 13 3.2* 2.9* 228 299 55.00 54.00 7,500 7500 5.00 4.00 3 3- 3,250 3250 589 507 60 265 62 62 Wholesale Market Share (% of total regional sales volume) Pairs Available for Sale (after filling internet orders) (000s) Wholesale Demand for Branded Pairs Required Inventory (needed to achieve delivery time) Surplus (Shortfall) of Branded Pairs Year 12 Actual 8.1% 2,012 1,741 68 +143 Year 13 Projected 10.6% 2,481 2,374 145 -38 Year 12 Year 13 Actual Projected 8.2% 9.3% 536 347 1,515 1,812 27 31 -1,006 -1,496 Year 12 Actual 8.2% 1,575 1,252 49 +273 Year 13 Projected 9.6% 1,066 1,597 57 -588 Year 12 Year 13 Actual Projected 8.2% 9.8% 634 523 1,238 1,610 30 38 -634 -1,125 Revenue, Cost, and Profit Projections for Year 13 Gross Wholesale Revenues + Exchange Rate Adjustments Net Wholesale Revenues Cost of Pairs Sold Warehouse Expenses Marketing Expenses Administrative Expenses Operating Profit (Loss) Operating Profit Margin $000s $/pair 116,800 50.00 0 0.00 116,800 50.00 60,653 25.96 8,967 3.84 18,246 7.81 8,140 3.48 20,794 8.90 17.8% $000s $/pair 17,064 54.00 78 0.25 17,142 54.25 9,810 31.04 1,689 5.34 7,586 24.01 1,101 3.48 -3,044 -9.63 -17.8% $000s $/pair 50,450 50.00 404 0.40 50,854 50.40 29,326 29.06 4,986 4.94 10,705 10.61 3,515 3.48 2,322 2.30 4.6% $000s $/pair 26,190 54.00 1,778 3.67 27,968 57.67 16,371 33.75 2,484 5.12 6,687 13.79 1,690 3.48 736 1.52 2.6% Competitive Assumptions S/Q Rating Model Availability Wholesale Price ($ per pair Brand Advertising (5000s) Rebate Offer ($ per pair) Delivery Time (weeks) Retailer Support ($ per outlet) Retail Outlets Celebrity Appeal Brand Reputation 4.1. * 261 - models $50.40 $( 9900 $ 4.20 2.7 weeks $( 4000 1,638 outlets 111 69 4.1 * 261_models $ 53.75 $( 7950 $( 4.40 2.8 weeks $( 4000 1,523 outlets 109 69 4.2* 264 models $ 49.90 $( 7850 $ 5.00 2.8 weeks $ 3225 1,262 outlets 110 69 4.2 * 262 models $ 53.90 $ 6450 $[ 4.40 3.0 weeks $( 2900 1,122 outlets Industry averages for these vari- ables determined by prior-year decision entries and outcomes. 111 69 INTERNET MARKETING Marketing variables gen- S/Q Rating (weighted average) erated by production and Models Available (weighted average) marketing decisions in Y13. Brand Advertising ($000s) Internet Retail Price ($ per pair sold online) Marketing Retail Price Exceeds Wholesale Price by Decisions Search Engine Advertising (5000s) Free Shipping (from warehouse to buyer) Marketing variables de Celebrity Appeal (sum of appeal Indices for all termined by prior-year celebrities under contract) decisions / outcomes. Brand Reputation (prior-year image rating) North America Market Year 12 Year 13 3.3* 3.1* 232 335 10,000 10,000 70.00 70.00 40% 40% 2,000 2000 No No 75 275 62 62 Europe-Africa Market Year 12 Year 13 3.3* 2.9* 228 290 9,000 9,000 80.00 ( 77.00 45% 43% 2,000 2000 No No - 80 260 62 62 Asia-Pacific Market Year 12 Year 13 3.2* 2.9% 228 291 8,000 8,000 70.00 70.00 40% 40% 2,000 2000 No No 95 300 62 62 Latin America Market Year 12 Year 13 3.2* 2.9% 228 299 7,500 7,500 78.00 77.00 42% 43% 4,000 4000 Na No - 60 265 62 62 Internet Market Share (% of total regional sales volume) Internet Sales Volume (000s of pairs sold to online customers) Year 12 Actual 6.9% 307 Year 13 Projected 10.5% 530 Year 12 Actual 7.3% 273 Year 13 Projected 10.3% 438 Year 12 Actual 7.2% 222 Year 13 Projected 9.8% 356 Year 12 Actual 8.8% 267 Year 13 Projected 11.9% 420 Revenue, Cost, and Profit Projections for Year 13 Gross Internet Revenues + Exchange Rate Adjustments Adjusted Gross Revenues + Shipping Fees (paid by customer) Net Internet Revenues Cost of Pairs Sold Warehouse Expenses Marketing Expenses Administrative Expenses Operating Profit (Loss) Operating Profit Margin $000s $/pair 37,100 70.00 0 0.00 37,100 70.00 6,625 12.50 43,725 82.50 13,761 6,843 12.91 5,831 11.00 1,846 3.48 15,444 29.14 35.3% $000s $/pair 33,726 77.00 155 0.35 33,881 77.35 5,475 12.50 39,356 89.85 13,598 31.05 6,064 13.84 8,980 20.50 1,526 3.48 9,188 20.98 23.3% $000s $/pair 24,920 70.00 199 0.56 25,119 70.56 4,450 12.50 29,569 83.06 10,347 29.06 4,789 13.45 5,795 16.28 1,240 3.48 7,398 20.78 25.0% $000s $/pair 32,340 77.00 2,196 5.23 34,536 82.23 5,250 12.50 39,786 94.73 14,177 33.75 5,721 13.62 9,259 22.05 1,464 3.49 9,165 21.82 23.0% 25.96 Estimated industry averages S/Q Rating for these marketing variables Models Available are entered on the Wholesale Marketing decision entry page. Brand Advertising ($000s) Competitive Retail Price ($ per pair) Assumptions Search Engine Advertising ($000s) Free Shipping Industry averages for these vari- Celebrity Appeal ables determined by prior-year decision entries/outcomes. Brand Reputation 4.1* 261 $ 9,900 $( 69.60 $( 5400 4.1* 261 $ 7,950 $( 76.50 $( 4250 None 109 69 4.2* 264 $ 7,850 $ 68.80 4150 4.2* 262 $ 6,450 $ 75.30 $( 3300 None 111 69 111 69 110 69 BRANDED DISTRIBUTION Europe-Africa Facility Asia-Pacific Facility Latin America Facility 0 pairs 2,158 pairs 0 pairs North America Facility 3,413 pairs 2000 350 600 463 Pairs Available for Shipment (000s of pairs produced at each facility after rejects) Pairs to be shipped North America Warehouse from Facility to Europe-Africa Warehouse (000s of pairs) Asia-Pacific Warehouse Latin America Warehouse Remaining Pairs to be shipped (if left unshipped, will be shipped automatically) 0 0 800 408 500 450 0 0 0 0 0 pairs 0 pairs 0 pairs 0 pairs WAREHOUSE OPERATIONS North America Warehouse Pairs Models S/Q 211 232 3.0* 0 - O pairs $000s $/pair 0 0.00 0 0.00 0 0.00 Inventory Left Over at the End of Year 12 (000s) Inventory Clearance (prior to Year 13 operations) Europe-Africa Warehouse Pairs Models S/Q 27 228 3.0* 0 % O pairs $000s $/pair 0 0.00 0 0.00 0 0.00 Asia-Pacific Warehouse Pairs Models S/Q 322 228 2.9* 0- % O pairs $000s $/pair 0 0.00 0 0.00 0 0.00 Latin America Warehouse Pairs Models S/Q 30 228 2.9* 0 % O pairs $000s Clearance Statistics Discounted Clearance Revenues Direct Cost of Pairs Cleared Margin Over Direct Cost 0 0 0 $/pair 0.00 0.00 0.00 Beginning Inventory (000s of pairs carried over from Year 12) Incoming Shipments from North America Facility (see Note 1 below) Europe-Africa Facility Asia-Pacific Facility Latin America Facility Pairs Available for Sale in Year 13 (see Note 2 below) Projected Demand (glven branded marketing decision entries) Required Inventory (needed to achieve delivery time) Projected Inventory Surplus (Shortfall) Pairs Models S/Q 211 232 3.0 2,000 400 3.3 0 0 0.0 800 200 2.5 0 0 0.0 3,011 335 3.1* 2,904 145 (3-week delivery) -38 (minimal) Pairs Models S/Q 27 228 3.0* 350 400 3.3 a 0 0.0 408 200 2.5 0 0.0 785 290 2.9* 2,250 31 (3-week delivery) -1,496 (minimal) Pairs Models S/Q 322 228 2.9 600 400 3.3 0 0 0.0 500 200 2.5 0 0 0.0 1,422 291 2.9* 1,953 57 (3-week delivery) Pairs Models S/Q 30 228 2.9* 463 400 3.3 0 0 0.0 450 200 2.5 0 0 0.0 943 299 2.9* 2,030 38 (3-week delivery) -1,125 (minimal) -588 (minimal) $000s $/pair -0.08 1.20 Projected Distribution and Warehouse Costs Exchange Rate Cost Adjustment (on Incoming shipments) Distribution and Freight on Footwear Shipments Warehouse Tariffs on Pairs Imported Costs Inventory Storage (on Y12 inventory) Packaging / Shipping (Net + wholesale) Warehouse Lease / Maintenance Total Dist. and Whse. Costs $000s 142 3,600 3,200 177 14,633 1,000 22,610 $/pair 0.05 1.20 1.06 0.06 4.86 0.33 7.51 $000s -11 1,516 4,548 14 6,739 1,000 13,817 $/pair -0.01 1.93 5.79 0.02 8.58 1.27 17.60 $000s -114 1,700 4,800 298 8,477 1,000 16,275 3.38 0.21 5.96 0.70 11.45 -1,337 1,826 9,130 15 7,190 1,000 19,161 $/pair -1.42 1.94 9.68 0.02 7.62 1.06 20.32 EQUIPMENT FOR FOOTWEAR PRODUCTION Europe-Africa Facility Asia-Pacific Facility 8,000 pairs Latin America Facility 1,000 pairs 2,000 pairs North America Facility 7,000 pairs 4,000 pairs 0 pairs 0- pairs O pairs 4,000 pairs pairs Space Available for Footwear Production Equipment in Y13 Production Equipment in Place at Beginning of Y13 (000s of pairs) Purchase of Production New (000s of pairs) Equipment Refurbished (000s of pairs) Sale of Existing Equipment (oldest equipment will be sold first) Total Footwear Production Capability in Y13 (000s of pairs without OT) Percentage of New / Refurbished Production Equipment pairs 0 0- 0- 0 O pairs 0 pairs 0- pairs pairs pairs 0- pairs 0- pairs 0 pairs 4,000 pairs 100% 0% O pairs 0% 0% 0 - pairs 4,000 pairs 0% 100% O pairs 0% 0% North America Facility $10,000 Done $1,614 $6,400 Done $2,173 Europe-Africa Facility $0 No - $0 Asia-Pacific Facility $10,000 No $2,277 Latin America Facility $0 No - $0 $0 $0 No PRODUCTION IMPROVEMENT OPTIONS Option Purchase of special equipment Capital outlay (5000s) to reduce reject rate by 50% Projected annual cost savings at current reject rate ($000s/ Option Layout revisions to reduce pro- Capital outlay ($000s) B duction run setup costs by 50% Projected annual cost savings ( Option Purchase of special equipment Capital outlay (S000s) to increase S/Q rating by 1 star Projected annual cost at current S/Q effort ($000s) Option Robot-assisted production to in- Capital outlay (S000s) D crease worker productivity by 50% Projected annual cost savings at current production / comp. $6,400 $1,860 No No - $0 $0 $0 $0 $19,200 $1,859 savings No No $19,200 $1,206 No No $0 $0 $0 $0 $57,600 $6,947 No No - $57,600 $-1,417 No No $0 $0 Europe-Africa Facility Asia-Pacific Facility Latin America Facility 1,000 pairs North America Facility 6,000 pairs 1,000 7,000 pairs 0- pairs 7,000 pairs SPACE FOR PRODUCTION EQUIPMENT Space in 000s Equipment Space at the End of Year 12 of Pairs Construction of Additional Space (initiated in Y12) (without OT) Space Available for Equipment in Year 13 Construction of New / Additional Space (to be available in Year 14) Space Available for Production Equipment in Year 14 2,000 pairs 1,000 1,000 pairs 8,000 pairs 0 2,000 pairs 0- pairs 0 pairs 0- pairs 7,000 pairs 1,000 pairs 8,000 pairs 2,000 pairs $ $ $ $ 0 Capital Outlays in Year 13 ($000s) Purchase of New Equipment Purchase of Refurbished Equipment -Book Value of Equipment Sold Equipment Upgrade Options Energy Efficiency Initiatives New / Additional Facility Space Net Capital Outlays in Year 13 0 0 0 0 200 0 200 Oooo 0 0 0 0 200 0 200 0 oooooo 0 BRANDED FOOTWEAR PRODUCTION Europe-Africa Facility 100 % Latin America Facility 100% 0- % Branded Production Specs North America Facility 82% 18% 400 $ 6- k/model $ 1.10 per pair 0- Materials Standard Materials % (see anticipated materials prices at bottom of page Superior Materials % Number of Models / Styles (50 to 500 models) Enhanced Styling / Features ($000 per model) TQM / 6-Sigma Quality Program ($/pr. produced) % Asia-Pacific Facility 82% 18 ) % 200 $ 6- k/model $( 1.10 per pair k/model $ 0 $ 0.00 0 $ 0.00 k/model per pair per pair Projected S/Q Rating (the style/quality rating ranges from 0.5 to 10.0 stars) Projected Reject Rate (percentage of pairs that will fail inspection) 3.3* 5.2% 0.0* 0.0% 2.5* 10.1% 0.0* 0.0% pairs 2400 pairs Maximum Y13 Production Capability Without Overtime 7,000 pairs 1,000 pairs 8,000 pairs 2,000 pairs Maximum Overtime 8,400 pairs 1,200 pairs 9,600 pairs (assuming all ynused facility space is filled at the 2,400 pairs beginning of the year with production equipment Total Branded Production Needed in Year 13 9,500 pairs This figure is an approximation given beginning inventories, projected reject rates, and entries that currently reside on the Internet and Wholesale Marketing decision pages. The company must schedule production of (to satisfy projected demand in all four regions) (before rejects) about this many pairs to satisfy projected demand and inventory requirements. Note: To install production equipment at the beginning of the current year in a facility that currently has unused space, go to the Production Facilities decision entry page (the next item in the decision entries menu). Year 13 Production Regular-Time 4,000 pairs O pairs 4,000 pairs O pairs 800 Overtime (20% maximum) 0 800 0 Capability (000s of Total Production Capability 4,800 pairs O pairs 4,800 pairs O pairs before rejects) 3600 pairs 0 pairs 0 pairs Branded Pairs to be Manufactured in Y13 (000s) Total = 6,000 3,600 pairs O pairs 2,400 pairs O pairs Branded Footwear Regular-Time Production 0 0 0 0 Production (000s of pairs) Overtime Production 187 (5.2%) 0 (0.0%) 242 (10.1%) 0 (0.0%) Rejected Pairs (and reject rate) 3,413 pairs O pairs 2,158 pairs 0 pairs Net Branded Production 1,200 pairs O pairs 2,400 pairs O pairs Production Capability Remaining for Private-tabet Operations Cost of Rejected Pairs (in $000s and $ per pair produced) $4,266 $1.25 $0 $0.00 $4,834 $2.24 $0 $0.00 $000s $/pair $000s $/pair $000s $/pair $000s $/pair Costs Associated with Materials Cost 27,432 8.04 0 0.00 18,288 8.47 0 0.00 the Production of Labor Cost (including supervisory costs) 29,558 8.66 0.00 10,451 4.84 0 0.00 Branded Footwear Enhanced Styling/Features 2,400 0.70 0 0.00 1,200 0.56 0 0.00 TQM / 6-Sigma Quality Program 3,960 1.16 0.00 2,640 1.22 0 0.00 Production Run Set-Up 5,375 1.57 0 0.00 4,500 2.09 0 0.00 Maintenance (of facilities and equipment) 3,297 0.97 77 0.00 3,780 1.75 155 0.00 Depreciation (of facilities and equipment) 10,059 2.95 638 0.00 7,026 3.26 1,088 0.00 Total Branded Production Cost 82,081 24.05 715 0.00 47,885 22.19 1,243 0.00 Anticipated Y13 Materials Prices Standard Materials $ 6.74 per pair Superior Materials $11.63 per pair Beginning figures represent actual materials prices from the prior year. WORKFORCE COMPENSATION & TRAINING Prior-Year Compensation and Productivity Data Workforce Base Wages Compensation Incentive Pay (total $ per year) Fringe Benefits Total Regular Compensation Overtime Pay (included incentives) Total Compensation Incentive Pay as a % of Regular Compensation Workforce Productivity (pairs per worker per year) North America Facility Industry Company Average H 34,855 34,340 4,350 2,337 2,179 250 41,384 36,927 3,850 8,754 45,234 45,681 10.5% 6.3% 5,890 4,877 Europe-Africa Facility Industry Company Average H 20,810 0 4,650 0 1,000 0 26,460 0 6,621 0 33,081 0 17.6% 0.0% 4,057 0 Asia-Pacific Facility Industry Company Average H 12,278 12,120 2,055 1,573 1,064 250 15,397 13,943 1,706 0 17,103 13,943 13.3% 11.3% 3,630 3,498 Latin America Facility Industry Company Average H 12,181 0 4,650 0 375 0 17,206 0 3,838 0 21,044 0 27.0% 0.0% 3,853 0 Compensation Base Wage (% change from prior year) and Training Incentive Pay (s per non-rejected pair) of Production Fringe Benefits ($ per year) Workers Total Regular Compensation ($ per year) Overtime Pay (includes incentives) Total Compensation ($ per year) Incentive Pay as % of Regular Comp. Best Practices Training ($ per worker) Materials Cost Impact pre cumulative expenditures) Supervisory Staff (ratio of production workers to supervisors) Minimum Wage = 34,683 +2% 35,027 0.50 2,266 250 - 250 37,543 7,946 45,489 6.0% $ 400 per worker Std 0.00 Sup 0.00 Minimum Wage = 20,810 0% 0 $ 0.00 0 $ 0 - 0 0 0 0 0.0% 0- per worker Std 0.00 Sup 0.00 Minimum Wage = 12,241 +2% 12,362 0.50 - 1,566 250- 250 14,178 0 14,178 11.0% $( 400 per worker Std 0.00 Sup 0.00 Minimum Wage = 12,241 0% 0 $ 0.00 0 $ 0 - 0 0 0 0 0.0% 0- per worker Std 0.00 Sup 0.00 Ind. Avg. Prior-Year Supervisory Compensation ($/year/supervisor) 45to1 Staff = 19 Ind. Avg. Co. H 68,140 63,630 Minimum Salary = 61,206 +3% 65,539 0 to 1 Staff = 0 Co. H 36,724 0 Minimum Salary = 36,724 0% 0 45to1 Staff = 20 Ind. Avg. Co. H 25,477 26,008 Minimum Salary = 25,503 +3% 26,788 50 to1 Staff=0 Ind. Avg. Co. 25,377 0 Minimum Salary = 25,503 0% 0 Supervisory Compensation (% change in salary, benefits, and bonus) Projected Workforce Productivity (pairs per worker in Y13) Number of Workers Employed (given branded production entries) 4,776 838 0 0 3,482 919 0 0 $000s $000s 0 Cost of Labor Associated with Footwear Production Production Base Wages Workers Incentive Pay Fringe Benefits Overtime Pay Total Best Practices Training Expenditures Supervisory Compensation (salary + benefits) Total Cost of Production Labor $000s 29,353 1,899 210 6,659 38,121 335 1,245 39,701 $/pair 6.41 0.41 0.05 1.45 8.32 0.07 0.27 8.67 olo ooooo $/pair 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 $000s 11,361 1,439 230 0 13,030 368 536 13,934 $/pair 3.55 0.45 0.07 0.00 4.07 0.12 0.17 olo oolooool $/pair 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Per-pair figures not adjusted for rejected pairs. 4.35 0.00
