1st. Case Assignment - Materiality Mini Case A Saved Help Save & Exit Submit ! This question will be sent to your instructor for grading. Check my work 1 In this mini-case you will determine overall materiality as well as tolerable misstatement amounts for balance sheet accounts of EarthWear Clothiers, Inc. Most auditing firms use a simple approach for establishing planning materiality and tolerable misstatement similar to the one illustrated in your textbook. This case illustrates such an approach, with some additional guidance from Willis & Adams relating to the amount of tolerable misstatement to allocate to various balance sheet accounts based on difficulty to audit and expected misstatement, and limiting the total amount of tolerable misstatement to about ten times materiality. 40 points Skipped INSTRUCTIONS: Please download the files below to complete the audit tasks associated with this mini-case. The Excel workbook contains the instructions and workpapers you are to complete. eBook 11e Ch3 Mini case Materiality Materiality Guidelines Using your completed Excel file, answer the questions presented below. Print The fields below will be populated automatically as you complete the assigned workpapers. You may need to resize the rows to display your complete answer. Input your responses below into Connect. References Measurement Base Factors that you considered to determine the appropriate measurement base Percentage Applied % (Round your answer to 1 decimal place.) Factors that you considered to determine the appropriate percentage applied Planning Materiality ta Total Amount of Tolerable Misstatement Allocated To Balance Sheet Accounts $ Ratio of Total Tolerable Misstatement to Planning Materiality (Round your answer to 1 decimal place.) A B D E EARTHWEAR CLOTHIERS Planning Materiality December 31, 2019 (In thousands) 3-7 Initial Here 9/6/21 1. Benchmark Data Sales / Revenue Pre-tax income Total assets Materiality Unaudited 2019 $1,019,890 $70,154 $389,428 2018 $950,484 $35,757 $329,959 $1,800 2. Establish Planning Materiality Level Measurement Base Select Measurement Basle Using The Yellow Cell on the Left Percentage Applied* Input a Percentage Here Based on the Guidelines Below Planning Materiality Please Complete Cells Above Please use this template in conjunction with Wiis & Adams Materiality Guidelines. The materiality factors provided are guidelines only and should be used only as an aid as you use professional judgment to determine planning materiaity. Bases and Percentage Ranges: Profit Oriented Entities Pre-tax income 3 - 7%* Total Revenue 0.5 - 3% Total Assets 0.25 -2% * For pubic companies, 5% is typicaly the maximum. Not-for-Profit Entities Total Revenue 0.5 -3% Total Assets 0.25-2% Mutual Fund Entities Net Asset Value 3-5% 3. Justify/Support Your Level of Planning Materiality State the factors that you considered to determine the appropriate measurement base and percentage to determine planning materiality Measurement Base: Enter your response here Percentage: Enter your response here EARTHWEAR CLOTHIERS Allocation of Materiality: Tolerable Misstatements December 31, 2019 I thousands) 3-8 Lilial Here 9/6/21 Explanation Large and complex account with misstatements expected, costly to audit Relatively complex, estimation involved, related to Deferred Income Taxes Relatively Nite change from prior year, not difficult to audit 2019 Unaudited Trial Balance $79,359 $8,643 $147,693 $15,647 $10,338 $223,736 $97.722 $1,734 $ $10,510 $60,286 $33,600 $24.567 $261 $5,460 $25,719 ($36) $2,173 $361402 ($134,512) Account Name 2018 Cash and cash equivalents $48,978 Receivables, net S12,875 Inventory $122,337 Prepaid expenses $17,772 Deferred income tax benefits $7,132 Property, Plant & Equipment $206,426 Accumulated depreciaton and amortization S85,986 Intangibles, net $423 $ Lines of credit $11,011 Accounts payable & Reserve for returns S68,399 Accrued liabilities & Accrued proft sharing S28,270 Income taxes payable & Deferred income taxes $18,057 Common slock 26,121 shares issued $261 Donated capital $5,460 Additional paid-in capital S20,740 Deferred compensation ($79) Accumulated other comprehensive income $ $3,883 Retained earnings $317.907 Treasury stock. 6,546 and 6,706 shares at cost respocively ($143,950) Total Amount of Tolerable Misstatement Allocated To Balance Sheet Accounts Planning Materiality (from work paper 3-71 Ratio of Total Tolerable Misstatement to Planning Materiality ** Relatively we volume, not dificult to audit wa 3rd party into Tolerable Misstatement as of Tolerable Planning Account Misstatement Materiality Balance 0% 0% 0% OS $0 08 0% 0% 0% $0 0% 0% $0 0% OS ox 0% 0% 0% $0 0% 0% 0% 0% 0% OS 0% 0% $65 0% 25% $1.365 0% 25% $0 0% OS $0 0% 09 $543 0% 25% Not Applicable Not Applicable Not Applicable $0 0% $1,974 Complete Work Paper 3-7 0.0 No change from prior year, easily verified No change from prior year, easily verified Lite change from prior year, not difficult to audit Not difficult to avail examine current year wesling adivity Involves some complex applications of GAAD Not Applicable Live change from prior year, nor dificult to avait Willis & Adams Tolerable Misstatement Guidelines Tolerable misstatement should be between 50% and 75% of planning maleriality * Tolerable misstatement should not exceed 25% of the account balance *** The total amount of tolerable misstatement allocated to balance sheet accounts should be below ten imes materially in order to limit aggregaton risk. The M.Graw Hil Companies, Inc., 2019 C E F EARTHWEAR CLOTHIERS Consolidated Balance Sheets (In thousands) 1-1 PBC 12/31/2019 PBC: Prepa December 31 2018 2017 2019 (unaudited) $79,359 $8,643 $147,693 $10,212 $5,435 $10,338 $261,680 $48,978 $12,875 $122,337 $11,458 $6,315 $7,132 $209,095 $49,668 $11,539 $105,425 $10,772 $3,780 $6,930 $188,115 Assets Current Assets: Cash and cash equivalents Receivables, net Inventory Prepaid advertising Other prepaid expenses Deferred income tax benefits 5 Total current assets Property, plant and equipment, at cost Land and buildings Fixtures and equipment 3 Computer hardware and software Leasehold improvements Total property, plant and equipment Less - accumulated depreciation and amortization Property, plant and equipment, net Intangibles, net 5 Total assets $76,560 $68,632 $75,400 $3,144 $223,737 $97,722 $126,014 $1,734 $389,428 $70,918 $67,513 $64,986 $3,010 $206,426 $85,986 $120,440 $423 $329,959 $66,804 $66,876 $47,466 $2,894 $184,040 $76,256 $107,784 $628 $296,527 $10,510 $54,186 $6,100 $30,492 $3,108 $16,222 $120,617 $8,345 $11,011 $62,509 $5,890 $26,738 $1,532 $8,588 $116,268 $9,469 $7,621 $48,432 $5,115 $28,440 $1,794 $6,666 $98,067 $5,926 Liabilities and shareholder's investment Current liabilities: Lines of credit Accounts payable 1 Reserve for returns 2 Accrued liabilities 3 Accrued profit sharing Income taxes payable 5 Total current liabilities s Deferred income taxes 7 Shareholders' investment: Common stock, 26,144 shares issued Donated capital Additional paid-in capital 1 Deferred compensation 2 Accumulated other comprehensive income 3 Retained earnings Treasury stock, 6,654,7,114, and 6,546 shares at cost, respectively 5 Total shareholders' investment Total liabilities and shareholders' investment 7 3 $261 $5,460 $25,719 ($36) $2,173 $361,402 ($134,512) $260,467 $389,428 $261 $5,460 $20,740 ($79) $3,883 $317,907 ($143,950) $204,222 $329,959 $261 $5,460 $19,311 ($153) $1,739 $295,380 ($129,462) $192,535 $296,527 E2 fx 1-2 A B D E F G H 1 2 3 4 5 6 EARTHWEAR CLOTHIERS Consolidated Statements of Operations (In thousands, except per share data) 1-2 PBC 12/31/2019 PBC: Prepared by Client 2017 For the period ended December 31 2019 2018 (unaudited) $1,019,890 $950,484 $572,153 $546,393 $447,737 $404,091 $374,180 $364,012 $857,885 $472,739 $385,146 $334,994 ($1,153) $51,305 $73,557 $40,729 ($878) $989 ($983) $1,459 ($1,229) $573 7 Net Sales Cost of sales 10 Gross Profit 11 Selling, general and administrative expenses 12 Non-recurring charge (credit) 13 Income from operations 14 Other income (expense): 15 Interest expense 16 Interest income 17 Gain on sale of subsidiary 18 Other 19 Total other income (expense), net 20 Income before income taxes 21 Income tax provision 22 Net income 23 Basic earnings per share 24 Diluted earnings per share 25 Basic weighted average shares outstanding 26 Diluted weighted average shares outstanding 27 28 29 The McGraw-Hill Companies, Inc., 2019 30 31 32 33 34 ($3,514) ($3,403) $70,154 $26,658 $43,495 1.48 1.45 19,159 19,485 ($4,798) ($4,322) $35,757 $13,230 $22,527 1.15 1.14 19,531 19,774 ($1,091) ($1,747) $49,559 $18,337 $31,222 1.60 1.56 19,555 20,055 Format E2 fx 1-3 B D E F G 1 3 EARTHWEAR CLOTHIERS Consolidated Statements of Cash Flows (In thousands) 1-3 PBC 12/31/2019 PBC: Prepared by Client 5 6 2018 2017 For the period ended December 31 2019 (unaudited) $43,495 $22,527 $31,222 $17,515 $42 ($4,330) $15,231 $75 $3,340 ($1,153) $13,465 $103 $5,376 $1,578 $284 $602 7 Cash flows from (used for operating activities: 8 Net income 9 Adjustments to reconcile net income to 10 net cash flows from operating activities: 11 Non-recurring charge (credit) 12 Depreciation and amortization 13 Deferred compensation expense 14 Deferred income taxes 15 Pretax gain on sale of subsidiary 16 Loss on disposal of fixed assets 17 Changes in assets and liabilities excluding 18 the effects of divestitures: 19 Receivables, net 20 Inventory 21 Prepaid advertising 22 Other prepaid expenses 23 Accounts payable 24 Reserve for returns 25 Accrued liabilities 26 Accrued profit sharing 27 Income taxes payable 28 Tax benefit of stock options 29 Other 30 Net cash from (used for operating activities 31 Cash flows from (used for) investing activities: 32 Cash paid for capital additions 33 Proceeds from sale of subsidiary 34 Net cash flows used for investing activities 35 Cash flows from (used for) financing activities: 36 Proceeds from (payment of) short-term debt 37 Purchases of treasury stock 38 Issuance of treasury stock 39 Net cash flows used for financing activities 40 Net increase (decrease in cash and cash equivalents 41 Beginning cash and cash equivalents 42 Ending cash and cash equivalents 43 Supplemental cash flow disclosures: 44 Interest paid 45 Income taxes paid 46 $4,232 ($25,356) $1,246 ($818) ($8,323) $210 $5,502 $1,576 $7,634 $4,979 ($1,404) $47,778 ($1,336) ($16,912) ($686) ($2,534) $14,078 $775 ($709) ($262) $1,923 $1,429 $2,144 $39,367 $2,165 $37,370 $3,110 $1,152 ($8,718) $439 ($4,982) $328 ($2,810) $1,765 $437 $79.871 ($26,334) ($28,959) ($18,208) ($26,334) ($28,959) ($18,208) ($501) ($8,052) $17,490 $8,937 $30,381 $48,978 $79,359 $3,390 ($18,192) $3,704 ($11,097) ($690) $49,668 $48,978 ($17,692) ($2,935) $4,317 ($16,310) $45,352 $4,317 $49,668 $878 $21,431 $987 $6,278 $1,229 $13,701 A B D E F H I J K M N PRC: EARTHWEAR CLOTHIERS Consolidated Statements of Stockholders' Investment in dousands 1-4 PAC 1281.2019 Prepared by Cient Comprehensive Income Common Suck $261 Donated Capital $5.460 Additional Pad-in Capital $17,546 Deferred Compensadan 1$2571 fecumulated Other Comprehensive Income $1,302 Retained Earnings $254,158 Treasury Sock ($130,844) 1$2.935) $4.317 Talal $157,626 (52,935) $4,317 51,765 S103 $1,765 $103 53122 531,222 531,222 560 $377 $31,659 $60 $377 531,222 560 S377 $261 $5.460 $19,311 $1541 $1,739 S295,380 ($129462) ($18.192) $3,704 $192,584 (S18,192) $3,704 51,429 S75 $1429 $75 Balance December 31, 2016 Purchase of Toasury stock Issuance of treasury stock Tax beneitoralock options exercised Deferred compensation Bapense Comprehensive income: Netincome Foreign currency translaton adjustments Unrealized gain on forward contads Comprehensive income Balance December 31, 2017 Purchase of reasury slock Issuance of treasury stock Tax benettof stock options exercised Deferred compensation expense Comprehensive income: Netincome Other comprehensweincome: Foreign currency translation adjustments Unrealized gain on forward contrada Comprehensive income Balance December 31, 2018 Purchase of Teasury sock Issuance of treasury stock Tax bene il of stock options exercised Deferred compensation expense Comprehensive income: Netincome Other comprehensive income Fore gn currency translation adjustments Unrealized gain on forward contracts Comprehensive income Balance December 31, 2019 $22,527 522527 522,527 $22,527 (51,151) 53,295 $24,671 $1.151) 3.295 ($1,151) $3,295 $261 $5,460 $20,740 $79) $3,883 S317,907 ($143.950) 1$8,052) $17.490 S204,222 (58,052) $17490 $4,979 SAZ S43,495 $4,979 $42 S43,495 $43,495 (8221) ($1,489) S41,785 ( ($221) $1.489) (S221) ($1,499 $261 $5.460 $25,719 1$361 $2,173 $361,402 ($134,512) $250.467 Thaler 119 G3 x fx PBC A B D E F G H J 1 2 3 4 5 6 EARTHWEAR CLOTHIERS Five-Year Consolidated Financial Summary (unaudited) (In thousands, except per share data) 1-5 PBC 12/31/2019 1PBC: Prepared by Client For the period ended December 31 2018 2017 2016 2015 2019 (unaudited) 1.019,890 70,154 6.9% 43,495 950484 35,757 3.8% 22,527 857,885 49,559 5.8% 31,222 891,394 32,175 3.6% 20.270 821,359 66,186 8.1% 41,698 1.48 1.45 19,159 1.15 1.14 19,531 1.60 1.56 19,555 1.02 1.01 19,806 2.01 2.00 20,703 7 8 Income statement data: 9 Net Sales 10 Pretax Income 11 Percent of net sales 12 Net income 13 14 Per share of common stock: 15 Basic earnings per share 16 Diluted earnings per share 17 Common shares outstanding 18 19 Balance sheet data: 20 Current assets 1 21 Current liabilities 22 PPE and intangibles 23 Total assets 24 Noncurrent liabilities 25 Shareholders' investment 26 27 Other data: 28 Networking capital 29 Capital expenditures 30 Depreciation and amortization expense 31 Return on average shareholders' investment 32 Return on average assets 33 34 35 The McGraw-Hill Companies, Inc, 2019 36 37 38 261,680 120,617 127,748 389,428 8,345 260,467 209,095 116,268 120,864 329,959 9,469 204,222 188,115 98,067 108,412 296,527 5,926 192,535 191,297 133,434 105,051 296,347 5,286 157,627 194,445 118,308 87,312 281,757 5,686 157,763 76,136 141,063 26,334 17,515 19% 12% 92,827 28,959 15,231 11% 7% 90,048 18,208 13,465 18% 11% 57,863 30,388 12,175 13% 7% 31,348 9,833 28% 16% an 1st. Case Assignment - Materiality Mini Case A Saved Help Save & Exit Submit ! This question will be sent to your instructor for grading. Check my work 1 In this mini-case you will determine overall materiality as well as tolerable misstatement amounts for balance sheet accounts of EarthWear Clothiers, Inc. Most auditing firms use a simple approach for establishing planning materiality and tolerable misstatement similar to the one illustrated in your textbook. This case illustrates such an approach, with some additional guidance from Willis & Adams relating to the amount of tolerable misstatement to allocate to various balance sheet accounts based on difficulty to audit and expected misstatement, and limiting the total amount of tolerable misstatement to about ten times materiality. 40 points Skipped INSTRUCTIONS: Please download the files below to complete the audit tasks associated with this mini-case. The Excel workbook contains the instructions and workpapers you are to complete. eBook 11e Ch3 Mini case Materiality Materiality Guidelines Using your completed Excel file, answer the questions presented below. Print The fields below will be populated automatically as you complete the assigned workpapers. You may need to resize the rows to display your complete answer. Input your responses below into Connect. References Measurement Base Factors that you considered to determine the appropriate measurement base Percentage Applied % (Round your answer to 1 decimal place.) Factors that you considered to determine the appropriate percentage applied Planning Materiality ta Total Amount of Tolerable Misstatement Allocated To Balance Sheet Accounts $ Ratio of Total Tolerable Misstatement to Planning Materiality (Round your answer to 1 decimal place.) A B D E EARTHWEAR CLOTHIERS Planning Materiality December 31, 2019 (In thousands) 3-7 Initial Here 9/6/21 1. Benchmark Data Sales / Revenue Pre-tax income Total assets Materiality Unaudited 2019 $1,019,890 $70,154 $389,428 2018 $950,484 $35,757 $329,959 $1,800 2. Establish Planning Materiality Level Measurement Base Select Measurement Basle Using The Yellow Cell on the Left Percentage Applied* Input a Percentage Here Based on the Guidelines Below Planning Materiality Please Complete Cells Above Please use this template in conjunction with Wiis & Adams Materiality Guidelines. The materiality factors provided are guidelines only and should be used only as an aid as you use professional judgment to determine planning materiaity. Bases and Percentage Ranges: Profit Oriented Entities Pre-tax income 3 - 7%* Total Revenue 0.5 - 3% Total Assets 0.25 -2% * For pubic companies, 5% is typicaly the maximum. Not-for-Profit Entities Total Revenue 0.5 -3% Total Assets 0.25-2% Mutual Fund Entities Net Asset Value 3-5% 3. Justify/Support Your Level of Planning Materiality State the factors that you considered to determine the appropriate measurement base and percentage to determine planning materiality Measurement Base: Enter your response here Percentage: Enter your response here EARTHWEAR CLOTHIERS Allocation of Materiality: Tolerable Misstatements December 31, 2019 I thousands) 3-8 Lilial Here 9/6/21 Explanation Large and complex account with misstatements expected, costly to audit Relatively complex, estimation involved, related to Deferred Income Taxes Relatively Nite change from prior year, not difficult to audit 2019 Unaudited Trial Balance $79,359 $8,643 $147,693 $15,647 $10,338 $223,736 $97.722 $1,734 $ $10,510 $60,286 $33,600 $24.567 $261 $5,460 $25,719 ($36) $2,173 $361402 ($134,512) Account Name 2018 Cash and cash equivalents $48,978 Receivables, net S12,875 Inventory $122,337 Prepaid expenses $17,772 Deferred income tax benefits $7,132 Property, Plant & Equipment $206,426 Accumulated depreciaton and amortization S85,986 Intangibles, net $423 $ Lines of credit $11,011 Accounts payable & Reserve for returns S68,399 Accrued liabilities & Accrued proft sharing S28,270 Income taxes payable & Deferred income taxes $18,057 Common slock 26,121 shares issued $261 Donated capital $5,460 Additional paid-in capital S20,740 Deferred compensation ($79) Accumulated other comprehensive income $ $3,883 Retained earnings $317.907 Treasury stock. 6,546 and 6,706 shares at cost respocively ($143,950) Total Amount of Tolerable Misstatement Allocated To Balance Sheet Accounts Planning Materiality (from work paper 3-71 Ratio of Total Tolerable Misstatement to Planning Materiality ** Relatively we volume, not dificult to audit wa 3rd party into Tolerable Misstatement as of Tolerable Planning Account Misstatement Materiality Balance 0% 0% 0% OS $0 08 0% 0% 0% $0 0% 0% $0 0% OS ox 0% 0% 0% $0 0% 0% 0% 0% 0% OS 0% 0% $65 0% 25% $1.365 0% 25% $0 0% OS $0 0% 09 $543 0% 25% Not Applicable Not Applicable Not Applicable $0 0% $1,974 Complete Work Paper 3-7 0.0 No change from prior year, easily verified No change from prior year, easily verified Lite change from prior year, not difficult to audit Not difficult to avail examine current year wesling adivity Involves some complex applications of GAAD Not Applicable Live change from prior year, nor dificult to avait Willis & Adams Tolerable Misstatement Guidelines Tolerable misstatement should be between 50% and 75% of planning maleriality * Tolerable misstatement should not exceed 25% of the account balance *** The total amount of tolerable misstatement allocated to balance sheet accounts should be below ten imes materially in order to limit aggregaton risk. The M.Graw Hil Companies, Inc., 2019 C E F EARTHWEAR CLOTHIERS Consolidated Balance Sheets (In thousands) 1-1 PBC 12/31/2019 PBC: Prepa December 31 2018 2017 2019 (unaudited) $79,359 $8,643 $147,693 $10,212 $5,435 $10,338 $261,680 $48,978 $12,875 $122,337 $11,458 $6,315 $7,132 $209,095 $49,668 $11,539 $105,425 $10,772 $3,780 $6,930 $188,115 Assets Current Assets: Cash and cash equivalents Receivables, net Inventory Prepaid advertising Other prepaid expenses Deferred income tax benefits 5 Total current assets Property, plant and equipment, at cost Land and buildings Fixtures and equipment 3 Computer hardware and software Leasehold improvements Total property, plant and equipment Less - accumulated depreciation and amortization Property, plant and equipment, net Intangibles, net 5 Total assets $76,560 $68,632 $75,400 $3,144 $223,737 $97,722 $126,014 $1,734 $389,428 $70,918 $67,513 $64,986 $3,010 $206,426 $85,986 $120,440 $423 $329,959 $66,804 $66,876 $47,466 $2,894 $184,040 $76,256 $107,784 $628 $296,527 $10,510 $54,186 $6,100 $30,492 $3,108 $16,222 $120,617 $8,345 $11,011 $62,509 $5,890 $26,738 $1,532 $8,588 $116,268 $9,469 $7,621 $48,432 $5,115 $28,440 $1,794 $6,666 $98,067 $5,926 Liabilities and shareholder's investment Current liabilities: Lines of credit Accounts payable 1 Reserve for returns 2 Accrued liabilities 3 Accrued profit sharing Income taxes payable 5 Total current liabilities s Deferred income taxes 7 Shareholders' investment: Common stock, 26,144 shares issued Donated capital Additional paid-in capital 1 Deferred compensation 2 Accumulated other comprehensive income 3 Retained earnings Treasury stock, 6,654,7,114, and 6,546 shares at cost, respectively 5 Total shareholders' investment Total liabilities and shareholders' investment 7 3 $261 $5,460 $25,719 ($36) $2,173 $361,402 ($134,512) $260,467 $389,428 $261 $5,460 $20,740 ($79) $3,883 $317,907 ($143,950) $204,222 $329,959 $261 $5,460 $19,311 ($153) $1,739 $295,380 ($129,462) $192,535 $296,527 E2 fx 1-2 A B D E F G H 1 2 3 4 5 6 EARTHWEAR CLOTHIERS Consolidated Statements of Operations (In thousands, except per share data) 1-2 PBC 12/31/2019 PBC: Prepared by Client 2017 For the period ended December 31 2019 2018 (unaudited) $1,019,890 $950,484 $572,153 $546,393 $447,737 $404,091 $374,180 $364,012 $857,885 $472,739 $385,146 $334,994 ($1,153) $51,305 $73,557 $40,729 ($878) $989 ($983) $1,459 ($1,229) $573 7 Net Sales Cost of sales 10 Gross Profit 11 Selling, general and administrative expenses 12 Non-recurring charge (credit) 13 Income from operations 14 Other income (expense): 15 Interest expense 16 Interest income 17 Gain on sale of subsidiary 18 Other 19 Total other income (expense), net 20 Income before income taxes 21 Income tax provision 22 Net income 23 Basic earnings per share 24 Diluted earnings per share 25 Basic weighted average shares outstanding 26 Diluted weighted average shares outstanding 27 28 29 The McGraw-Hill Companies, Inc., 2019 30 31 32 33 34 ($3,514) ($3,403) $70,154 $26,658 $43,495 1.48 1.45 19,159 19,485 ($4,798) ($4,322) $35,757 $13,230 $22,527 1.15 1.14 19,531 19,774 ($1,091) ($1,747) $49,559 $18,337 $31,222 1.60 1.56 19,555 20,055 Format E2 fx 1-3 B D E F G 1 3 EARTHWEAR CLOTHIERS Consolidated Statements of Cash Flows (In thousands) 1-3 PBC 12/31/2019 PBC: Prepared by Client 5 6 2018 2017 For the period ended December 31 2019 (unaudited) $43,495 $22,527 $31,222 $17,515 $42 ($4,330) $15,231 $75 $3,340 ($1,153) $13,465 $103 $5,376 $1,578 $284 $602 7 Cash flows from (used for operating activities: 8 Net income 9 Adjustments to reconcile net income to 10 net cash flows from operating activities: 11 Non-recurring charge (credit) 12 Depreciation and amortization 13 Deferred compensation expense 14 Deferred income taxes 15 Pretax gain on sale of subsidiary 16 Loss on disposal of fixed assets 17 Changes in assets and liabilities excluding 18 the effects of divestitures: 19 Receivables, net 20 Inventory 21 Prepaid advertising 22 Other prepaid expenses 23 Accounts payable 24 Reserve for returns 25 Accrued liabilities 26 Accrued profit sharing 27 Income taxes payable 28 Tax benefit of stock options 29 Other 30 Net cash from (used for operating activities 31 Cash flows from (used for) investing activities: 32 Cash paid for capital additions 33 Proceeds from sale of subsidiary 34 Net cash flows used for investing activities 35 Cash flows from (used for) financing activities: 36 Proceeds from (payment of) short-term debt 37 Purchases of treasury stock 38 Issuance of treasury stock 39 Net cash flows used for financing activities 40 Net increase (decrease in cash and cash equivalents 41 Beginning cash and cash equivalents 42 Ending cash and cash equivalents 43 Supplemental cash flow disclosures: 44 Interest paid 45 Income taxes paid 46 $4,232 ($25,356) $1,246 ($818) ($8,323) $210 $5,502 $1,576 $7,634 $4,979 ($1,404) $47,778 ($1,336) ($16,912) ($686) ($2,534) $14,078 $775 ($709) ($262) $1,923 $1,429 $2,144 $39,367 $2,165 $37,370 $3,110 $1,152 ($8,718) $439 ($4,982) $328 ($2,810) $1,765 $437 $79.871 ($26,334) ($28,959) ($18,208) ($26,334) ($28,959) ($18,208) ($501) ($8,052) $17,490 $8,937 $30,381 $48,978 $79,359 $3,390 ($18,192) $3,704 ($11,097) ($690) $49,668 $48,978 ($17,692) ($2,935) $4,317 ($16,310) $45,352 $4,317 $49,668 $878 $21,431 $987 $6,278 $1,229 $13,701 A B D E F H I J K M N PRC: EARTHWEAR CLOTHIERS Consolidated Statements of Stockholders' Investment in dousands 1-4 PAC 1281.2019 Prepared by Cient Comprehensive Income Common Suck $261 Donated Capital $5.460 Additional Pad-in Capital $17,546 Deferred Compensadan 1$2571 fecumulated Other Comprehensive Income $1,302 Retained Earnings $254,158 Treasury Sock ($130,844) 1$2.935) $4.317 Talal $157,626 (52,935) $4,317 51,765 S103 $1,765 $103 53122 531,222 531,222 560 $377 $31,659 $60 $377 531,222 560 S377 $261 $5.460 $19,311 $1541 $1,739 S295,380 ($129462) ($18.192) $3,704 $192,584 (S18,192) $3,704 51,429 S75 $1429 $75 Balance December 31, 2016 Purchase of Toasury stock Issuance of treasury stock Tax beneitoralock options exercised Deferred compensation Bapense Comprehensive income: Netincome Foreign currency translaton adjustments Unrealized gain on forward contads Comprehensive income Balance December 31, 2017 Purchase of reasury slock Issuance of treasury stock Tax benettof stock options exercised Deferred compensation expense Comprehensive income: Netincome Other comprehensweincome: Foreign currency translation adjustments Unrealized gain on forward contrada Comprehensive income Balance December 31, 2018 Purchase of Teasury sock Issuance of treasury stock Tax bene il of stock options exercised Deferred compensation expense Comprehensive income: Netincome Other comprehensive income Fore gn currency translation adjustments Unrealized gain on forward contracts Comprehensive income Balance December 31, 2019 $22,527 522527 522,527 $22,527 (51,151) 53,295 $24,671 $1.151) 3.295 ($1,151) $3,295 $261 $5,460 $20,740 $79) $3,883 S317,907 ($143.950) 1$8,052) $17.490 S204,222 (58,052) $17490 $4,979 SAZ S43,495 $4,979 $42 S43,495 $43,495 (8221) ($1,489) S41,785 ( ($221) $1.489) (S221) ($1,499 $261 $5.460 $25,719 1$361 $2,173 $361,402 ($134,512) $250.467 Thaler 119 G3 x fx PBC A B D E F G H J 1 2 3 4 5 6 EARTHWEAR CLOTHIERS Five-Year Consolidated Financial Summary (unaudited) (In thousands, except per share data) 1-5 PBC 12/31/2019 1PBC: Prepared by Client For the period ended December 31 2018 2017 2016 2015 2019 (unaudited) 1.019,890 70,154 6.9% 43,495 950484 35,757 3.8% 22,527 857,885 49,559 5.8% 31,222 891,394 32,175 3.6% 20.270 821,359 66,186 8.1% 41,698 1.48 1.45 19,159 1.15 1.14 19,531 1.60 1.56 19,555 1.02 1.01 19,806 2.01 2.00 20,703 7 8 Income statement data: 9 Net Sales 10 Pretax Income 11 Percent of net sales 12 Net income 13 14 Per share of common stock: 15 Basic earnings per share 16 Diluted earnings per share 17 Common shares outstanding 18 19 Balance sheet data: 20 Current assets 1 21 Current liabilities 22 PPE and intangibles 23 Total assets 24 Noncurrent liabilities 25 Shareholders' investment 26 27 Other data: 28 Networking capital 29 Capital expenditures 30 Depreciation and amortization expense 31 Return on average shareholders' investment 32 Return on average assets 33 34 35 The McGraw-Hill Companies, Inc, 2019 36 37 38 261,680 120,617 127,748 389,428 8,345 260,467 209,095 116,268 120,864 329,959 9,469 204,222 188,115 98,067 108,412 296,527 5,926 192,535 191,297 133,434 105,051 296,347 5,286 157,627 194,445 118,308 87,312 281,757 5,686 157,763 76,136 141,063 26,334 17,515 19% 12% 92,827 28,959 15,231 11% 7% 90,048 18,208 13,465 18% 11% 57,863 30,388 12,175 13% 7% 31,348 9,833 28% 16% an