The purpose of this mini-case is to familiarize you with the EarthWear Company by reviewing key...

 

 

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The purpose of this mini-case is to familiarize you with the EarthWear Company by reviewing key pieces of information included in the annual report in the textbook. You can locate the EarthWear Clothiers 2018 Annual Report following Chapter 1 in the textbook. In the ebook format, the the EarthWear Clothiers 2018 Annual Report appears as a separate section following Chapter 1. Please refer to the Table of Contents in your respective text should you have issues locating the EarthWear Clothiers 2018 Annual Report. INSTRUCTIONS 1 Find the information requested in the 'WORKSHEET tab of this spreadsheet and record your answers in the space provided as evidence that you've visited the sites. Remember that the purpose of this exercise is to become familiar with these annual report, so please take a few minutes to review all content. This activity is not meant to be difficult but the more familiar you Fields you are to complete on the WORKSHEET are colored yellow. The color will disappear as the field is completed. Please input your answers into Connect or print a copy of the WORKSHEET to submit unless 2 your instructor requests an electronic submission. The WORKSHEET is formatted to print on a single sheet of paper. EarthWear Clothiers 2018 Annual Report 1. Who is the current CEO of EarthWear? 2. How much did Accounts Payable change in dollars and percent from 2017 to 2018? 3. In which of the last 5 years was EarthWear's Net Income highest, and what was Net Income in that year? 4. Does EarthWear use the FIFO or LIFO inventory valuation method? Hint: See the Notes to the Consolidated Financial Statements 5 What is the date of Willis & Adams' Audit Report included in the Annual Report? EarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Comprehensive Income (In thousands, except share data) For the period ended December 31 2018 2017 2016 $ 950,484 546,393 $ 857,885 $ 891,394 490,530 Net Sales Cost of sales 472,739 Gross Profit 404,091 364,012 385,146 400,864 353,890 Selling, general, and administrative expenses Nonrecurring charge (credit) 334,994 (1,153) 8,190 Income from operations Other income (expense): Interest expense 40,079 51,305 38,784 (983) (1,229) (5,027) Interest income 1,459 573 10 Other (4,798) (1,091) (1,593) Total other income (expense), net (4,322) (1,747) 6,610 Income before income taxes 32,174 35,757 13,230 49,558 Income tax provision 18,337 11,905 Net income $ 22,527 $ 31,221 $ 20,269 Other Comprehensive Income: Foreign currency translation adjustments Unrealized gain on forward contracts Other comprehensive income (loss), net of tax (1,151) 3,295 2,144 437 733 437 733 Comprehensive Income $ 24,671 $ 31,658 $ 21,002 Net Income per Common Share: Basic earnings per share 1.15 1.60 1.02 Diluted earnings per share 1.14 1.56 1.01 Basic weighted average shares outstanding Diluted weighted average shares outstanding 19,531 19,774 19,555 20,055 19,806 19,996 Consolidated Balance Sheets (In thousands) December 31 Assets 2018 2017 Current assets: $ 49,668 11,539 $ 48,978 12,875 122,337 11,458 6,315 Cash and cash equivalents Receivables, net Inventory Prepaid advertising Other prepaid expenses Deferred income tax benefits 105,425 10,772 3,781 7,132 6,930 Total current assets 209,095 188,115 Property, plant, and equipment, at cost: Land and buildings Fixtures and equipment Computer hardware and software 70,918 62,003 64,986 66,804 61,800 47,466 Right-to-Own Leased Space and Equipment Leasehold improvements 6,510 6,076 1,894 2,010 Total property, plant, and equipment Less accumulated depreciation and amortization 206,427 85,986 184,040 76,256 Property, plant, and equipment, net Intangibles, net 120,441 107,784 423 628 $ 329,959 $ 296,527 Total assets Liabilities and Stockholders' Equity Current liabilities: Lines of credit $4 7,621 45,430 11,011 59,009 5,890 23,728 Accounts payable Reserve for returns 5,115 25,364 1,794 Accrued liabilities Accrued profit sharing Income taxes payable 1,532 8,588 6,666 Total current liabilities 109,758 91,990 Operating Lease Liability 6,510 6,076 Deferred income taxes 9,469 5,926 Stockholders' Equity: Common stock, 26,121 shares issued Donated capital Additional paid-in capital Deferred compensation Accumulated other comprehensive income Retained earnings Treasury stock, 6,546 and 6,706 shares at cost 261 261 5,460 20,740 (79) 3,883 317,907 (143,950) 5,460 19,311 (154) 1,739 295,380 (129,462) Total Stockholders' Equity 204,222 192,535 Total liabilities and Stockholders' Equity $ 329,959 $ 296,527 EARTHWEAR CLOTHIERS Consolidated Statements of Cash Flows (In thousands) For the period ended December 31 Cash flows from (used for) operating activities: 2018 2017 2016 $ 22,527 $ 31,221 $ 20,270 Net income Adjustments to reconcile net income to net cash flows from operating activities: Nonrecurring charge (credit) Depreciation and amortization Deferred compensation expense (1,150) 13,465 103 8,190 15,231 12,175 424 75 Deferred income taxes 3,340 5,376 (3,866) Loss on disposal of fixed assets Changes in assets and liabilities excluding the effects of divestitures: 284 602 381 (3,666) 13,954 (1,849) (1,628) 2,716 Receivables, net 2,165 Inventory Prepaid advertising Other prepaid expenses Accounts payable (1,336) (16,912) (686) (2,534) 14,078 37,370 3,110 1,152 (8,718) 439 Reserve for returns 775 692 4,545 (1,320) (3,834) Accrued liabilities Accrued profit sharing Income taxes payable Tax benefit of stock options (709) (262) 1,923 1,429 2,144 (4,982) 328 (2,810) 1,765 349 Other 437 733 Net cash from (used for) operating activities 39,367 79,873 48,266 Cash flows from (used for) investing activities: Cash paid for capital additions (28,959) (18,208) (30,388) Net cash flows used for investing activities (28,959) (18,208) (30,388) Cash flows from (used for) financing activities: Proceeds from (payment of) short-term debt Purchases of treasury stock Issuance of treasury stock 3,390 (18,192) 3,704 (17,692) (2,935) 4,317 4,228 (23,112) 1,199 Net cash flows used for financing activities (11,098) (16,310) (17,685) Net increase (decrease) in cash and cash equivalents (689) 45,355 193 Beginning cash and cash equivalents 49,668 4,313 4,120 Ending cash and cash equivalents $ 48,978 $ 49,668 $ 4,313 Supplemental cash flow disclosures: Interest paid Income taxes paid 983 $ 5,027 1,229 13,701 6,278 18,107 %24 TarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Stockholders' Equity (In thousands) Accumulated Additional Paid-in Other Common Donated Deferred Comprehensive Retained Treasury Štock Stock Capital Capital Compensation Income Eamings Total Balance, December 31, 2015 Purchase of treasury stock Issuance of treasury stock $569 $243,888 $(108,931) $157,763 (23,112) 1,199 $261 $5,460 $17.197 $(681) (23,112) 1,199 Tax benefit of stock options exercised Deferred compensation expense 349 349 424 424 Net income 20,270 20,270 Other Comprehensive Income 733 733 Balance, December 31, 2016 Purchase of treasury stock Issuance of treasury stock Tax benefit of stock options exercised Deferred compensation expense Net income $261 $5,460 $17,546 $(257) $1,302 $264,158 ($130,844) $157,626 (2,935) 4,317 (2.935) 4,317 1,765 1,765 103 103 31,222 31,222 Other Comprehensive Income 437 437 Balance, December 31, 2017 Purchase of treasury stock Issuance of treasury stock $261 $5,460 $19,311 $(153) $1,739 $295,380 $(129,462) $192,535 (18,192) 3,704 (18,192) 3,704 Tax benefit of stock options exercised Deferred compensation expense 1,429 1,429 75 75 Net income 22,527 22.527 Other Comprehensive Income 2,144 2,144 Balance, December 31, 2018 $261 $5,460 $20,740 $(79) $3,883 $317,907 $(143,950) $204,222 Five-Year Consolidated Financial Summary (unaudited) (In thousands, except per share data) For the period ended December 31 2018 2017 2016 2015 2014 Income statement data: 891,394 32,175 3.6% 20,270 503,434 38,212 950,484 857,885 49,559 Net Sales 821,359 Pretax Income 35,757 66,186 8.1% 41,698 Percent of net sales 3.8% 5.8% 7.6% Net income 22,527 31,222 22,929 Per share of common stock: 1.60 1.56 1.15 1.02 2.01 1.54 Basic earnings per share Diluted earnings per share Common shares outstanding 1.14 1.01 2.00 1.53 19,531 19,555 19,806 20,703 14,599 Balance sheet data: 191,297 209,095 109,758 120,864 329,959 15,979 204,222 188,115 194,445 122,418 65,505 46,658 Current assets Current liabilities 91,990 108,412 296,527 133,434 118,308 87,312 281,757 105,051 PPE and intangibles Total assets 296,347 5,286 157,627 170,121 Noncurrent liabilities 12,002 192,535 5,686 157,763 4,211 100,405 Shareholders' equity Other data: 56,913 8,316 57,863 Net working capital Capital expenditures Depreciation and amortization expense 99,337 96,125 18,208 76,137 28,959 30,388 31,348 15,231 13,465 12,175 9,833 6,101 Return on average shareholders' investment 28% 16% 11% 18% 13% 24% Return on average assets 7% 11% 7% 15% NET INCOME NET SALES NET INCOME PER SHARE $900,000 $50,000 sa00,000 $40,000 $2.00 $700,000 $30,000 $1.50 $600,000 $20,000 $1.00 $500,000 $10,000 $0.50 $400,000 2016 2017 2018 2016 2017 2018 2014 2015 2016 2017 2018 The purpose of this mini-case is to familiarize you with the EarthWear Company by reviewing key pieces of information included in the annual report in the textbook. You can locate the EarthWear Clothiers 2018 Annual Report following Chapter 1 in the textbook. In the ebook format, the the EarthWear Clothiers 2018 Annual Report appears as a separate section following Chapter 1. Please refer to the Table of Contents in your respective text should you have issues locating the EarthWear Clothiers 2018 Annual Report. INSTRUCTIONS 1 Find the information requested in the 'WORKSHEET tab of this spreadsheet and record your answers in the space provided as evidence that you've visited the sites. Remember that the purpose of this exercise is to become familiar with these annual report, so please take a few minutes to review all content. This activity is not meant to be difficult but the more familiar you Fields you are to complete on the WORKSHEET are colored yellow. The color will disappear as the field is completed. Please input your answers into Connect or print a copy of the WORKSHEET to submit unless 2 your instructor requests an electronic submission. The WORKSHEET is formatted to print on a single sheet of paper. EarthWear Clothiers 2018 Annual Report 1. Who is the current CEO of EarthWear? 2. How much did Accounts Payable change in dollars and percent from 2017 to 2018? 3. In which of the last 5 years was EarthWear's Net Income highest, and what was Net Income in that year? 4. Does EarthWear use the FIFO or LIFO inventory valuation method? Hint: See the Notes to the Consolidated Financial Statements 5 What is the date of Willis & Adams' Audit Report included in the Annual Report? EarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Comprehensive Income (In thousands, except share data) For the period ended December 31 2018 2017 2016 $ 950,484 546,393 $ 857,885 $ 891,394 490,530 Net Sales Cost of sales 472,739 Gross Profit 404,091 364,012 385,146 400,864 353,890 Selling, general, and administrative expenses Nonrecurring charge (credit) 334,994 (1,153) 8,190 Income from operations Other income (expense): Interest expense 40,079 51,305 38,784 (983) (1,229) (5,027) Interest income 1,459 573 10 Other (4,798) (1,091) (1,593) Total other income (expense), net (4,322) (1,747) 6,610 Income before income taxes 32,174 35,757 13,230 49,558 Income tax provision 18,337 11,905 Net income $ 22,527 $ 31,221 $ 20,269 Other Comprehensive Income: Foreign currency translation adjustments Unrealized gain on forward contracts Other comprehensive income (loss), net of tax (1,151) 3,295 2,144 437 733 437 733 Comprehensive Income $ 24,671 $ 31,658 $ 21,002 Net Income per Common Share: Basic earnings per share 1.15 1.60 1.02 Diluted earnings per share 1.14 1.56 1.01 Basic weighted average shares outstanding Diluted weighted average shares outstanding 19,531 19,774 19,555 20,055 19,806 19,996 Consolidated Balance Sheets (In thousands) December 31 Assets 2018 2017 Current assets: $ 49,668 11,539 $ 48,978 12,875 122,337 11,458 6,315 Cash and cash equivalents Receivables, net Inventory Prepaid advertising Other prepaid expenses Deferred income tax benefits 105,425 10,772 3,781 7,132 6,930 Total current assets 209,095 188,115 Property, plant, and equipment, at cost: Land and buildings Fixtures and equipment Computer hardware and software 70,918 62,003 64,986 66,804 61,800 47,466 Right-to-Own Leased Space and Equipment Leasehold improvements 6,510 6,076 1,894 2,010 Total property, plant, and equipment Less accumulated depreciation and amortization 206,427 85,986 184,040 76,256 Property, plant, and equipment, net Intangibles, net 120,441 107,784 423 628 $ 329,959 $ 296,527 Total assets Liabilities and Stockholders' Equity Current liabilities: Lines of credit $4 7,621 45,430 11,011 59,009 5,890 23,728 Accounts payable Reserve for returns 5,115 25,364 1,794 Accrued liabilities Accrued profit sharing Income taxes payable 1,532 8,588 6,666 Total current liabilities 109,758 91,990 Operating Lease Liability 6,510 6,076 Deferred income taxes 9,469 5,926 Stockholders' Equity: Common stock, 26,121 shares issued Donated capital Additional paid-in capital Deferred compensation Accumulated other comprehensive income Retained earnings Treasury stock, 6,546 and 6,706 shares at cost 261 261 5,460 20,740 (79) 3,883 317,907 (143,950) 5,460 19,311 (154) 1,739 295,380 (129,462) Total Stockholders' Equity 204,222 192,535 Total liabilities and Stockholders' Equity $ 329,959 $ 296,527 EARTHWEAR CLOTHIERS Consolidated Statements of Cash Flows (In thousands) For the period ended December 31 Cash flows from (used for) operating activities: 2018 2017 2016 $ 22,527 $ 31,221 $ 20,270 Net income Adjustments to reconcile net income to net cash flows from operating activities: Nonrecurring charge (credit) Depreciation and amortization Deferred compensation expense (1,150) 13,465 103 8,190 15,231 12,175 424 75 Deferred income taxes 3,340 5,376 (3,866) Loss on disposal of fixed assets Changes in assets and liabilities excluding the effects of divestitures: 284 602 381 (3,666) 13,954 (1,849) (1,628) 2,716 Receivables, net 2,165 Inventory Prepaid advertising Other prepaid expenses Accounts payable (1,336) (16,912) (686) (2,534) 14,078 37,370 3,110 1,152 (8,718) 439 Reserve for returns 775 692 4,545 (1,320) (3,834) Accrued liabilities Accrued profit sharing Income taxes payable Tax benefit of stock options (709) (262) 1,923 1,429 2,144 (4,982) 328 (2,810) 1,765 349 Other 437 733 Net cash from (used for) operating activities 39,367 79,873 48,266 Cash flows from (used for) investing activities: Cash paid for capital additions (28,959) (18,208) (30,388) Net cash flows used for investing activities (28,959) (18,208) (30,388) Cash flows from (used for) financing activities: Proceeds from (payment of) short-term debt Purchases of treasury stock Issuance of treasury stock 3,390 (18,192) 3,704 (17,692) (2,935) 4,317 4,228 (23,112) 1,199 Net cash flows used for financing activities (11,098) (16,310) (17,685) Net increase (decrease) in cash and cash equivalents (689) 45,355 193 Beginning cash and cash equivalents 49,668 4,313 4,120 Ending cash and cash equivalents $ 48,978 $ 49,668 $ 4,313 Supplemental cash flow disclosures: Interest paid Income taxes paid 983 $ 5,027 1,229 13,701 6,278 18,107 %24 TarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Stockholders' Equity (In thousands) Accumulated Additional Paid-in Other Common Donated Deferred Comprehensive Retained Treasury Štock Stock Capital Capital Compensation Income Eamings Total Balance, December 31, 2015 Purchase of treasury stock Issuance of treasury stock $569 $243,888 $(108,931) $157,763 (23,112) 1,199 $261 $5,460 $17.197 $(681) (23,112) 1,199 Tax benefit of stock options exercised Deferred compensation expense 349 349 424 424 Net income 20,270 20,270 Other Comprehensive Income 733 733 Balance, December 31, 2016 Purchase of treasury stock Issuance of treasury stock Tax benefit of stock options exercised Deferred compensation expense Net income $261 $5,460 $17,546 $(257) $1,302 $264,158 ($130,844) $157,626 (2,935) 4,317 (2.935) 4,317 1,765 1,765 103 103 31,222 31,222 Other Comprehensive Income 437 437 Balance, December 31, 2017 Purchase of treasury stock Issuance of treasury stock $261 $5,460 $19,311 $(153) $1,739 $295,380 $(129,462) $192,535 (18,192) 3,704 (18,192) 3,704 Tax benefit of stock options exercised Deferred compensation expense 1,429 1,429 75 75 Net income 22,527 22.527 Other Comprehensive Income 2,144 2,144 Balance, December 31, 2018 $261 $5,460 $20,740 $(79) $3,883 $317,907 $(143,950) $204,222 Five-Year Consolidated Financial Summary (unaudited) (In thousands, except per share data) For the period ended December 31 2018 2017 2016 2015 2014 Income statement data: 891,394 32,175 3.6% 20,270 503,434 38,212 950,484 857,885 49,559 Net Sales 821,359 Pretax Income 35,757 66,186 8.1% 41,698 Percent of net sales 3.8% 5.8% 7.6% Net income 22,527 31,222 22,929 Per share of common stock: 1.60 1.56 1.15 1.02 2.01 1.54 Basic earnings per share Diluted earnings per share Common shares outstanding 1.14 1.01 2.00 1.53 19,531 19,555 19,806 20,703 14,599 Balance sheet data: 191,297 209,095 109,758 120,864 329,959 15,979 204,222 188,115 194,445 122,418 65,505 46,658 Current assets Current liabilities 91,990 108,412 296,527 133,434 118,308 87,312 281,757 105,051 PPE and intangibles Total assets 296,347 5,286 157,627 170,121 Noncurrent liabilities 12,002 192,535 5,686 157,763 4,211 100,405 Shareholders' equity Other data: 56,913 8,316 57,863 Net working capital Capital expenditures Depreciation and amortization expense 99,337 96,125 18,208 76,137 28,959 30,388 31,348 15,231 13,465 12,175 9,833 6,101 Return on average shareholders' investment 28% 16% 11% 18% 13% 24% Return on average assets 7% 11% 7% 15% NET INCOME NET SALES NET INCOME PER SHARE $900,000 $50,000 sa00,000 $40,000 $2.00 $700,000 $30,000 $1.50 $600,000 $20,000 $1.00 $500,000 $10,000 $0.50 $400,000 2016 2017 2018 2016 2017 2018 2014 2015 2016 2017 2018 The purpose of this mini-case is to familiarize you with the EarthWear Company by reviewing key pieces of information included in the annual report in the textbook. You can locate the EarthWear Clothiers 2018 Annual Report following Chapter 1 in the textbook. In the ebook format, the the EarthWear Clothiers 2018 Annual Report appears as a separate section following Chapter 1. Please refer to the Table of Contents in your respective text should you have issues locating the EarthWear Clothiers 2018 Annual Report. INSTRUCTIONS 1 Find the information requested in the 'WORKSHEET tab of this spreadsheet and record your answers in the space provided as evidence that you've visited the sites. Remember that the purpose of this exercise is to become familiar with these annual report, so please take a few minutes to review all content. This activity is not meant to be difficult but the more familiar you Fields you are to complete on the WORKSHEET are colored yellow. The color will disappear as the field is completed. Please input your answers into Connect or print a copy of the WORKSHEET to submit unless 2 your instructor requests an electronic submission. The WORKSHEET is formatted to print on a single sheet of paper. EarthWear Clothiers 2018 Annual Report 1. Who is the current CEO of EarthWear? 2. How much did Accounts Payable change in dollars and percent from 2017 to 2018? 3. In which of the last 5 years was EarthWear's Net Income highest, and what was Net Income in that year? 4. Does EarthWear use the FIFO or LIFO inventory valuation method? Hint: See the Notes to the Consolidated Financial Statements 5 What is the date of Willis & Adams' Audit Report included in the Annual Report? EarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Comprehensive Income (In thousands, except share data) For the period ended December 31 2018 2017 2016 $ 950,484 546,393 $ 857,885 $ 891,394 490,530 Net Sales Cost of sales 472,739 Gross Profit 404,091 364,012 385,146 400,864 353,890 Selling, general, and administrative expenses Nonrecurring charge (credit) 334,994 (1,153) 8,190 Income from operations Other income (expense): Interest expense 40,079 51,305 38,784 (983) (1,229) (5,027) Interest income 1,459 573 10 Other (4,798) (1,091) (1,593) Total other income (expense), net (4,322) (1,747) 6,610 Income before income taxes 32,174 35,757 13,230 49,558 Income tax provision 18,337 11,905 Net income $ 22,527 $ 31,221 $ 20,269 Other Comprehensive Income: Foreign currency translation adjustments Unrealized gain on forward contracts Other comprehensive income (loss), net of tax (1,151) 3,295 2,144 437 733 437 733 Comprehensive Income $ 24,671 $ 31,658 $ 21,002 Net Income per Common Share: Basic earnings per share 1.15 1.60 1.02 Diluted earnings per share 1.14 1.56 1.01 Basic weighted average shares outstanding Diluted weighted average shares outstanding 19,531 19,774 19,555 20,055 19,806 19,996 Consolidated Balance Sheets (In thousands) December 31 Assets 2018 2017 Current assets: $ 49,668 11,539 $ 48,978 12,875 122,337 11,458 6,315 Cash and cash equivalents Receivables, net Inventory Prepaid advertising Other prepaid expenses Deferred income tax benefits 105,425 10,772 3,781 7,132 6,930 Total current assets 209,095 188,115 Property, plant, and equipment, at cost: Land and buildings Fixtures and equipment Computer hardware and software 70,918 62,003 64,986 66,804 61,800 47,466 Right-to-Own Leased Space and Equipment Leasehold improvements 6,510 6,076 1,894 2,010 Total property, plant, and equipment Less accumulated depreciation and amortization 206,427 85,986 184,040 76,256 Property, plant, and equipment, net Intangibles, net 120,441 107,784 423 628 $ 329,959 $ 296,527 Total assets Liabilities and Stockholders' Equity Current liabilities: Lines of credit $4 7,621 45,430 11,011 59,009 5,890 23,728 Accounts payable Reserve for returns 5,115 25,364 1,794 Accrued liabilities Accrued profit sharing Income taxes payable 1,532 8,588 6,666 Total current liabilities 109,758 91,990 Operating Lease Liability 6,510 6,076 Deferred income taxes 9,469 5,926 Stockholders' Equity: Common stock, 26,121 shares issued Donated capital Additional paid-in capital Deferred compensation Accumulated other comprehensive income Retained earnings Treasury stock, 6,546 and 6,706 shares at cost 261 261 5,460 20,740 (79) 3,883 317,907 (143,950) 5,460 19,311 (154) 1,739 295,380 (129,462) Total Stockholders' Equity 204,222 192,535 Total liabilities and Stockholders' Equity $ 329,959 $ 296,527 EARTHWEAR CLOTHIERS Consolidated Statements of Cash Flows (In thousands) For the period ended December 31 Cash flows from (used for) operating activities: 2018 2017 2016 $ 22,527 $ 31,221 $ 20,270 Net income Adjustments to reconcile net income to net cash flows from operating activities: Nonrecurring charge (credit) Depreciation and amortization Deferred compensation expense (1,150) 13,465 103 8,190 15,231 12,175 424 75 Deferred income taxes 3,340 5,376 (3,866) Loss on disposal of fixed assets Changes in assets and liabilities excluding the effects of divestitures: 284 602 381 (3,666) 13,954 (1,849) (1,628) 2,716 Receivables, net 2,165 Inventory Prepaid advertising Other prepaid expenses Accounts payable (1,336) (16,912) (686) (2,534) 14,078 37,370 3,110 1,152 (8,718) 439 Reserve for returns 775 692 4,545 (1,320) (3,834) Accrued liabilities Accrued profit sharing Income taxes payable Tax benefit of stock options (709) (262) 1,923 1,429 2,144 (4,982) 328 (2,810) 1,765 349 Other 437 733 Net cash from (used for) operating activities 39,367 79,873 48,266 Cash flows from (used for) investing activities: Cash paid for capital additions (28,959) (18,208) (30,388) Net cash flows used for investing activities (28,959) (18,208) (30,388) Cash flows from (used for) financing activities: Proceeds from (payment of) short-term debt Purchases of treasury stock Issuance of treasury stock 3,390 (18,192) 3,704 (17,692) (2,935) 4,317 4,228 (23,112) 1,199 Net cash flows used for financing activities (11,098) (16,310) (17,685) Net increase (decrease) in cash and cash equivalents (689) 45,355 193 Beginning cash and cash equivalents 49,668 4,313 4,120 Ending cash and cash equivalents $ 48,978 $ 49,668 $ 4,313 Supplemental cash flow disclosures: Interest paid Income taxes paid 983 $ 5,027 1,229 13,701 6,278 18,107 %24 TarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Stockholders' Equity (In thousands) Accumulated Additional Paid-in Other Common Donated Deferred Comprehensive Retained Treasury Štock Stock Capital Capital Compensation Income Eamings Total Balance, December 31, 2015 Purchase of treasury stock Issuance of treasury stock $569 $243,888 $(108,931) $157,763 (23,112) 1,199 $261 $5,460 $17.197 $(681) (23,112) 1,199 Tax benefit of stock options exercised Deferred compensation expense 349 349 424 424 Net income 20,270 20,270 Other Comprehensive Income 733 733 Balance, December 31, 2016 Purchase of treasury stock Issuance of treasury stock Tax benefit of stock options exercised Deferred compensation expense Net income $261 $5,460 $17,546 $(257) $1,302 $264,158 ($130,844) $157,626 (2,935) 4,317 (2.935) 4,317 1,765 1,765 103 103 31,222 31,222 Other Comprehensive Income 437 437 Balance, December 31, 2017 Purchase of treasury stock Issuance of treasury stock $261 $5,460 $19,311 $(153) $1,739 $295,380 $(129,462) $192,535 (18,192) 3,704 (18,192) 3,704 Tax benefit of stock options exercised Deferred compensation expense 1,429 1,429 75 75 Net income 22,527 22.527 Other Comprehensive Income 2,144 2,144 Balance, December 31, 2018 $261 $5,460 $20,740 $(79) $3,883 $317,907 $(143,950) $204,222 Five-Year Consolidated Financial Summary (unaudited) (In thousands, except per share data) For the period ended December 31 2018 2017 2016 2015 2014 Income statement data: 891,394 32,175 3.6% 20,270 503,434 38,212 950,484 857,885 49,559 Net Sales 821,359 Pretax Income 35,757 66,186 8.1% 41,698 Percent of net sales 3.8% 5.8% 7.6% Net income 22,527 31,222 22,929 Per share of common stock: 1.60 1.56 1.15 1.02 2.01 1.54 Basic earnings per share Diluted earnings per share Common shares outstanding 1.14 1.01 2.00 1.53 19,531 19,555 19,806 20,703 14,599 Balance sheet data: 191,297 209,095 109,758 120,864 329,959 15,979 204,222 188,115 194,445 122,418 65,505 46,658 Current assets Current liabilities 91,990 108,412 296,527 133,434 118,308 87,312 281,757 105,051 PPE and intangibles Total assets 296,347 5,286 157,627 170,121 Noncurrent liabilities 12,002 192,535 5,686 157,763 4,211 100,405 Shareholders' equity Other data: 56,913 8,316 57,863 Net working capital Capital expenditures Depreciation and amortization expense 99,337 96,125 18,208 76,137 28,959 30,388 31,348 15,231 13,465 12,175 9,833 6,101 Return on average shareholders' investment 28% 16% 11% 18% 13% 24% Return on average assets 7% 11% 7% 15% NET INCOME NET SALES NET INCOME PER SHARE $900,000 $50,000 sa00,000 $40,000 $2.00 $700,000 $30,000 $1.50 $600,000 $20,000 $1.00 $500,000 $10,000 $0.50 $400,000 2016 2017 2018 2016 2017 2018 2014 2015 2016 2017 2018 The purpose of this mini-case is to familiarize you with the EarthWear Company by reviewing key pieces of information included in the annual report in the textbook. You can locate the EarthWear Clothiers 2018 Annual Report following Chapter 1 in the textbook. In the ebook format, the the EarthWear Clothiers 2018 Annual Report appears as a separate section following Chapter 1. Please refer to the Table of Contents in your respective text should you have issues locating the EarthWear Clothiers 2018 Annual Report. INSTRUCTIONS 1 Find the information requested in the 'WORKSHEET tab of this spreadsheet and record your answers in the space provided as evidence that you've visited the sites. Remember that the purpose of this exercise is to become familiar with these annual report, so please take a few minutes to review all content. This activity is not meant to be difficult but the more familiar you Fields you are to complete on the WORKSHEET are colored yellow. The color will disappear as the field is completed. Please input your answers into Connect or print a copy of the WORKSHEET to submit unless 2 your instructor requests an electronic submission. The WORKSHEET is formatted to print on a single sheet of paper. EarthWear Clothiers 2018 Annual Report 1. Who is the current CEO of EarthWear? 2. How much did Accounts Payable change in dollars and percent from 2017 to 2018? 3. In which of the last 5 years was EarthWear's Net Income highest, and what was Net Income in that year? 4. Does EarthWear use the FIFO or LIFO inventory valuation method? Hint: See the Notes to the Consolidated Financial Statements 5 What is the date of Willis & Adams' Audit Report included in the Annual Report? EarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Comprehensive Income (In thousands, except share data) For the period ended December 31 2018 2017 2016 $ 950,484 546,393 $ 857,885 $ 891,394 490,530 Net Sales Cost of sales 472,739 Gross Profit 404,091 364,012 385,146 400,864 353,890 Selling, general, and administrative expenses Nonrecurring charge (credit) 334,994 (1,153) 8,190 Income from operations Other income (expense): Interest expense 40,079 51,305 38,784 (983) (1,229) (5,027) Interest income 1,459 573 10 Other (4,798) (1,091) (1,593) Total other income (expense), net (4,322) (1,747) 6,610 Income before income taxes 32,174 35,757 13,230 49,558 Income tax provision 18,337 11,905 Net income $ 22,527 $ 31,221 $ 20,269 Other Comprehensive Income: Foreign currency translation adjustments Unrealized gain on forward contracts Other comprehensive income (loss), net of tax (1,151) 3,295 2,144 437 733 437 733 Comprehensive Income $ 24,671 $ 31,658 $ 21,002 Net Income per Common Share: Basic earnings per share 1.15 1.60 1.02 Diluted earnings per share 1.14 1.56 1.01 Basic weighted average shares outstanding Diluted weighted average shares outstanding 19,531 19,774 19,555 20,055 19,806 19,996 Consolidated Balance Sheets (In thousands) December 31 Assets 2018 2017 Current assets: $ 49,668 11,539 $ 48,978 12,875 122,337 11,458 6,315 Cash and cash equivalents Receivables, net Inventory Prepaid advertising Other prepaid expenses Deferred income tax benefits 105,425 10,772 3,781 7,132 6,930 Total current assets 209,095 188,115 Property, plant, and equipment, at cost: Land and buildings Fixtures and equipment Computer hardware and software 70,918 62,003 64,986 66,804 61,800 47,466 Right-to-Own Leased Space and Equipment Leasehold improvements 6,510 6,076 1,894 2,010 Total property, plant, and equipment Less accumulated depreciation and amortization 206,427 85,986 184,040 76,256 Property, plant, and equipment, net Intangibles, net 120,441 107,784 423 628 $ 329,959 $ 296,527 Total assets Liabilities and Stockholders' Equity Current liabilities: Lines of credit $4 7,621 45,430 11,011 59,009 5,890 23,728 Accounts payable Reserve for returns 5,115 25,364 1,794 Accrued liabilities Accrued profit sharing Income taxes payable 1,532 8,588 6,666 Total current liabilities 109,758 91,990 Operating Lease Liability 6,510 6,076 Deferred income taxes 9,469 5,926 Stockholders' Equity: Common stock, 26,121 shares issued Donated capital Additional paid-in capital Deferred compensation Accumulated other comprehensive income Retained earnings Treasury stock, 6,546 and 6,706 shares at cost 261 261 5,460 20,740 (79) 3,883 317,907 (143,950) 5,460 19,311 (154) 1,739 295,380 (129,462) Total Stockholders' Equity 204,222 192,535 Total liabilities and Stockholders' Equity $ 329,959 $ 296,527 EARTHWEAR CLOTHIERS Consolidated Statements of Cash Flows (In thousands) For the period ended December 31 Cash flows from (used for) operating activities: 2018 2017 2016 $ 22,527 $ 31,221 $ 20,270 Net income Adjustments to reconcile net income to net cash flows from operating activities: Nonrecurring charge (credit) Depreciation and amortization Deferred compensation expense (1,150) 13,465 103 8,190 15,231 12,175 424 75 Deferred income taxes 3,340 5,376 (3,866) Loss on disposal of fixed assets Changes in assets and liabilities excluding the effects of divestitures: 284 602 381 (3,666) 13,954 (1,849) (1,628) 2,716 Receivables, net 2,165 Inventory Prepaid advertising Other prepaid expenses Accounts payable (1,336) (16,912) (686) (2,534) 14,078 37,370 3,110 1,152 (8,718) 439 Reserve for returns 775 692 4,545 (1,320) (3,834) Accrued liabilities Accrued profit sharing Income taxes payable Tax benefit of stock options (709) (262) 1,923 1,429 2,144 (4,982) 328 (2,810) 1,765 349 Other 437 733 Net cash from (used for) operating activities 39,367 79,873 48,266 Cash flows from (used for) investing activities: Cash paid for capital additions (28,959) (18,208) (30,388) Net cash flows used for investing activities (28,959) (18,208) (30,388) Cash flows from (used for) financing activities: Proceeds from (payment of) short-term debt Purchases of treasury stock Issuance of treasury stock 3,390 (18,192) 3,704 (17,692) (2,935) 4,317 4,228 (23,112) 1,199 Net cash flows used for financing activities (11,098) (16,310) (17,685) Net increase (decrease) in cash and cash equivalents (689) 45,355 193 Beginning cash and cash equivalents 49,668 4,313 4,120 Ending cash and cash equivalents $ 48,978 $ 49,668 $ 4,313 Supplemental cash flow disclosures: Interest paid Income taxes paid 983 $ 5,027 1,229 13,701 6,278 18,107 %24 TarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Stockholders' Equity (In thousands) Accumulated Additional Paid-in Other Common Donated Deferred Comprehensive Retained Treasury Štock Stock Capital Capital Compensation Income Eamings Total Balance, December 31, 2015 Purchase of treasury stock Issuance of treasury stock $569 $243,888 $(108,931) $157,763 (23,112) 1,199 $261 $5,460 $17.197 $(681) (23,112) 1,199 Tax benefit of stock options exercised Deferred compensation expense 349 349 424 424 Net income 20,270 20,270 Other Comprehensive Income 733 733 Balance, December 31, 2016 Purchase of treasury stock Issuance of treasury stock Tax benefit of stock options exercised Deferred compensation expense Net income $261 $5,460 $17,546 $(257) $1,302 $264,158 ($130,844) $157,626 (2,935) 4,317 (2.935) 4,317 1,765 1,765 103 103 31,222 31,222 Other Comprehensive Income 437 437 Balance, December 31, 2017 Purchase of treasury stock Issuance of treasury stock $261 $5,460 $19,311 $(153) $1,739 $295,380 $(129,462) $192,535 (18,192) 3,704 (18,192) 3,704 Tax benefit of stock options exercised Deferred compensation expense 1,429 1,429 75 75 Net income 22,527 22.527 Other Comprehensive Income 2,144 2,144 Balance, December 31, 2018 $261 $5,460 $20,740 $(79) $3,883 $317,907 $(143,950) $204,222 Five-Year Consolidated Financial Summary (unaudited) (In thousands, except per share data) For the period ended December 31 2018 2017 2016 2015 2014 Income statement data: 891,394 32,175 3.6% 20,270 503,434 38,212 950,484 857,885 49,559 Net Sales 821,359 Pretax Income 35,757 66,186 8.1% 41,698 Percent of net sales 3.8% 5.8% 7.6% Net income 22,527 31,222 22,929 Per share of common stock: 1.60 1.56 1.15 1.02 2.01 1.54 Basic earnings per share Diluted earnings per share Common shares outstanding 1.14 1.01 2.00 1.53 19,531 19,555 19,806 20,703 14,599 Balance sheet data: 191,297 209,095 109,758 120,864 329,959 15,979 204,222 188,115 194,445 122,418 65,505 46,658 Current assets Current liabilities 91,990 108,412 296,527 133,434 118,308 87,312 281,757 105,051 PPE and intangibles Total assets 296,347 5,286 157,627 170,121 Noncurrent liabilities 12,002 192,535 5,686 157,763 4,211 100,405 Shareholders' equity Other data: 56,913 8,316 57,863 Net working capital Capital expenditures Depreciation and amortization expense 99,337 96,125 18,208 76,137 28,959 30,388 31,348 15,231 13,465 12,175 9,833 6,101 Return on average shareholders' investment 28% 16% 11% 18% 13% 24% Return on average assets 7% 11% 7% 15% NET INCOME NET SALES NET INCOME PER SHARE $900,000 $50,000 sa00,000 $40,000 $2.00 $700,000 $30,000 $1.50 $600,000 $20,000 $1.00 $500,000 $10,000 $0.50 $400,000 2016 2017 2018 2016 2017 2018 2014 2015 2016 2017 2018 The purpose of this mini-case is to familiarize you with the EarthWear Company by reviewing key pieces of information included in the annual report in the textbook. You can locate the EarthWear Clothiers 2018 Annual Report following Chapter 1 in the textbook. In the ebook format, the the EarthWear Clothiers 2018 Annual Report appears as a separate section following Chapter 1. Please refer to the Table of Contents in your respective text should you have issues locating the EarthWear Clothiers 2018 Annual Report. INSTRUCTIONS 1 Find the information requested in the 'WORKSHEET tab of this spreadsheet and record your answers in the space provided as evidence that you've visited the sites. Remember that the purpose of this exercise is to become familiar with these annual report, so please take a few minutes to review all content. This activity is not meant to be difficult but the more familiar you Fields you are to complete on the WORKSHEET are colored yellow. The color will disappear as the field is completed. Please input your answers into Connect or print a copy of the WORKSHEET to submit unless 2 your instructor requests an electronic submission. The WORKSHEET is formatted to print on a single sheet of paper. EarthWear Clothiers 2018 Annual Report 1. Who is the current CEO of EarthWear? 2. How much did Accounts Payable change in dollars and percent from 2017 to 2018? 3. In which of the last 5 years was EarthWear's Net Income highest, and what was Net Income in that year? 4. Does EarthWear use the FIFO or LIFO inventory valuation method? Hint: See the Notes to the Consolidated Financial Statements 5 What is the date of Willis & Adams' Audit Report included in the Annual Report? EarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Comprehensive Income (In thousands, except share data) For the period ended December 31 2018 2017 2016 $ 950,484 546,393 $ 857,885 $ 891,394 490,530 Net Sales Cost of sales 472,739 Gross Profit 404,091 364,012 385,146 400,864 353,890 Selling, general, and administrative expenses Nonrecurring charge (credit) 334,994 (1,153) 8,190 Income from operations Other income (expense): Interest expense 40,079 51,305 38,784 (983) (1,229) (5,027) Interest income 1,459 573 10 Other (4,798) (1,091) (1,593) Total other income (expense), net (4,322) (1,747) 6,610 Income before income taxes 32,174 35,757 13,230 49,558 Income tax provision 18,337 11,905 Net income $ 22,527 $ 31,221 $ 20,269 Other Comprehensive Income: Foreign currency translation adjustments Unrealized gain on forward contracts Other comprehensive income (loss), net of tax (1,151) 3,295 2,144 437 733 437 733 Comprehensive Income $ 24,671 $ 31,658 $ 21,002 Net Income per Common Share: Basic earnings per share 1.15 1.60 1.02 Diluted earnings per share 1.14 1.56 1.01 Basic weighted average shares outstanding Diluted weighted average shares outstanding 19,531 19,774 19,555 20,055 19,806 19,996 Consolidated Balance Sheets (In thousands) December 31 Assets 2018 2017 Current assets: $ 49,668 11,539 $ 48,978 12,875 122,337 11,458 6,315 Cash and cash equivalents Receivables, net Inventory Prepaid advertising Other prepaid expenses Deferred income tax benefits 105,425 10,772 3,781 7,132 6,930 Total current assets 209,095 188,115 Property, plant, and equipment, at cost: Land and buildings Fixtures and equipment Computer hardware and software 70,918 62,003 64,986 66,804 61,800 47,466 Right-to-Own Leased Space and Equipment Leasehold improvements 6,510 6,076 1,894 2,010 Total property, plant, and equipment Less accumulated depreciation and amortization 206,427 85,986 184,040 76,256 Property, plant, and equipment, net Intangibles, net 120,441 107,784 423 628 $ 329,959 $ 296,527 Total assets Liabilities and Stockholders' Equity Current liabilities: Lines of credit $4 7,621 45,430 11,011 59,009 5,890 23,728 Accounts payable Reserve for returns 5,115 25,364 1,794 Accrued liabilities Accrued profit sharing Income taxes payable 1,532 8,588 6,666 Total current liabilities 109,758 91,990 Operating Lease Liability 6,510 6,076 Deferred income taxes 9,469 5,926 Stockholders' Equity: Common stock, 26,121 shares issued Donated capital Additional paid-in capital Deferred compensation Accumulated other comprehensive income Retained earnings Treasury stock, 6,546 and 6,706 shares at cost 261 261 5,460 20,740 (79) 3,883 317,907 (143,950) 5,460 19,311 (154) 1,739 295,380 (129,462) Total Stockholders' Equity 204,222 192,535 Total liabilities and Stockholders' Equity $ 329,959 $ 296,527 EARTHWEAR CLOTHIERS Consolidated Statements of Cash Flows (In thousands) For the period ended December 31 Cash flows from (used for) operating activities: 2018 2017 2016 $ 22,527 $ 31,221 $ 20,270 Net income Adjustments to reconcile net income to net cash flows from operating activities: Nonrecurring charge (credit) Depreciation and amortization Deferred compensation expense (1,150) 13,465 103 8,190 15,231 12,175 424 75 Deferred income taxes 3,340 5,376 (3,866) Loss on disposal of fixed assets Changes in assets and liabilities excluding the effects of divestitures: 284 602 381 (3,666) 13,954 (1,849) (1,628) 2,716 Receivables, net 2,165 Inventory Prepaid advertising Other prepaid expenses Accounts payable (1,336) (16,912) (686) (2,534) 14,078 37,370 3,110 1,152 (8,718) 439 Reserve for returns 775 692 4,545 (1,320) (3,834) Accrued liabilities Accrued profit sharing Income taxes payable Tax benefit of stock options (709) (262) 1,923 1,429 2,144 (4,982) 328 (2,810) 1,765 349 Other 437 733 Net cash from (used for) operating activities 39,367 79,873 48,266 Cash flows from (used for) investing activities: Cash paid for capital additions (28,959) (18,208) (30,388) Net cash flows used for investing activities (28,959) (18,208) (30,388) Cash flows from (used for) financing activities: Proceeds from (payment of) short-term debt Purchases of treasury stock Issuance of treasury stock 3,390 (18,192) 3,704 (17,692) (2,935) 4,317 4,228 (23,112) 1,199 Net cash flows used for financing activities (11,098) (16,310) (17,685) Net increase (decrease) in cash and cash equivalents (689) 45,355 193 Beginning cash and cash equivalents 49,668 4,313 4,120 Ending cash and cash equivalents $ 48,978 $ 49,668 $ 4,313 Supplemental cash flow disclosures: Interest paid Income taxes paid 983 $ 5,027 1,229 13,701 6,278 18,107 %24 TarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Stockholders' Equity (In thousands) Accumulated Additional Paid-in Other Common Donated Deferred Comprehensive Retained Treasury Štock Stock Capital Capital Compensation Income Eamings Total Balance, December 31, 2015 Purchase of treasury stock Issuance of treasury stock $569 $243,888 $(108,931) $157,763 (23,112) 1,199 $261 $5,460 $17.197 $(681) (23,112) 1,199 Tax benefit of stock options exercised Deferred compensation expense 349 349 424 424 Net income 20,270 20,270 Other Comprehensive Income 733 733 Balance, December 31, 2016 Purchase of treasury stock Issuance of treasury stock Tax benefit of stock options exercised Deferred compensation expense Net income $261 $5,460 $17,546 $(257) $1,302 $264,158 ($130,844) $157,626 (2,935) 4,317 (2.935) 4,317 1,765 1,765 103 103 31,222 31,222 Other Comprehensive Income 437 437 Balance, December 31, 2017 Purchase of treasury stock Issuance of treasury stock $261 $5,460 $19,311 $(153) $1,739 $295,380 $(129,462) $192,535 (18,192) 3,704 (18,192) 3,704 Tax benefit of stock options exercised Deferred compensation expense 1,429 1,429 75 75 Net income 22,527 22.527 Other Comprehensive Income 2,144 2,144 Balance, December 31, 2018 $261 $5,460 $20,740 $(79) $3,883 $317,907 $(143,950) $204,222 Five-Year Consolidated Financial Summary (unaudited) (In thousands, except per share data) For the period ended December 31 2018 2017 2016 2015 2014 Income statement data: 891,394 32,175 3.6% 20,270 503,434 38,212 950,484 857,885 49,559 Net Sales 821,359 Pretax Income 35,757 66,186 8.1% 41,698 Percent of net sales 3.8% 5.8% 7.6% Net income 22,527 31,222 22,929 Per share of common stock: 1.60 1.56 1.15 1.02 2.01 1.54 Basic earnings per share Diluted earnings per share Common shares outstanding 1.14 1.01 2.00 1.53 19,531 19,555 19,806 20,703 14,599 Balance sheet data: 191,297 209,095 109,758 120,864 329,959 15,979 204,222 188,115 194,445 122,418 65,505 46,658 Current assets Current liabilities 91,990 108,412 296,527 133,434 118,308 87,312 281,757 105,051 PPE and intangibles Total assets 296,347 5,286 157,627 170,121 Noncurrent liabilities 12,002 192,535 5,686 157,763 4,211 100,405 Shareholders' equity Other data: 56,913 8,316 57,863 Net working capital Capital expenditures Depreciation and amortization expense 99,337 96,125 18,208 76,137 28,959 30,388 31,348 15,231 13,465 12,175 9,833 6,101 Return on average shareholders' investment 28% 16% 11% 18% 13% 24% Return on average assets 7% 11% 7% 15% NET INCOME NET SALES NET INCOME PER SHARE $900,000 $50,000 sa00,000 $40,000 $2.00 $700,000 $30,000 $1.50 $600,000 $20,000 $1.00 $500,000 $10,000 $0.50 $400,000 2016 2017 2018 2016 2017 2018 2014 2015 2016 2017 2018 The purpose of this mini-case is to familiarize you with the EarthWear Company by reviewing key pieces of information included in the annual report in the textbook. You can locate the EarthWear Clothiers 2018 Annual Report following Chapter 1 in the textbook. In the ebook format, the the EarthWear Clothiers 2018 Annual Report appears as a separate section following Chapter 1. Please refer to the Table of Contents in your respective text should you have issues locating the EarthWear Clothiers 2018 Annual Report. INSTRUCTIONS 1 Find the information requested in the 'WORKSHEET tab of this spreadsheet and record your answers in the space provided as evidence that you've visited the sites. Remember that the purpose of this exercise is to become familiar with these annual report, so please take a few minutes to review all content. This activity is not meant to be difficult but the more familiar you Fields you are to complete on the WORKSHEET are colored yellow. The color will disappear as the field is completed. Please input your answers into Connect or print a copy of the WORKSHEET to submit unless 2 your instructor requests an electronic submission. The WORKSHEET is formatted to print on a single sheet of paper. EarthWear Clothiers 2018 Annual Report 1. Who is the current CEO of EarthWear? 2. How much did Accounts Payable change in dollars and percent from 2017 to 2018? 3. In which of the last 5 years was EarthWear's Net Income highest, and what was Net Income in that year? 4. Does EarthWear use the FIFO or LIFO inventory valuation method? Hint: See the Notes to the Consolidated Financial Statements 5 What is the date of Willis & Adams' Audit Report included in the Annual Report? EarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Comprehensive Income (In thousands, except share data) For the period ended December 31 2018 2017 2016 $ 950,484 546,393 $ 857,885 $ 891,394 490,530 Net Sales Cost of sales 472,739 Gross Profit 404,091 364,012 385,146 400,864 353,890 Selling, general, and administrative expenses Nonrecurring charge (credit) 334,994 (1,153) 8,190 Income from operations Other income (expense): Interest expense 40,079 51,305 38,784 (983) (1,229) (5,027) Interest income 1,459 573 10 Other (4,798) (1,091) (1,593) Total other income (expense), net (4,322) (1,747) 6,610 Income before income taxes 32,174 35,757 13,230 49,558 Income tax provision 18,337 11,905 Net income $ 22,527 $ 31,221 $ 20,269 Other Comprehensive Income: Foreign currency translation adjustments Unrealized gain on forward contracts Other comprehensive income (loss), net of tax (1,151) 3,295 2,144 437 733 437 733 Comprehensive Income $ 24,671 $ 31,658 $ 21,002 Net Income per Common Share: Basic earnings per share 1.15 1.60 1.02 Diluted earnings per share 1.14 1.56 1.01 Basic weighted average shares outstanding Diluted weighted average shares outstanding 19,531 19,774 19,555 20,055 19,806 19,996 Consolidated Balance Sheets (In thousands) December 31 Assets 2018 2017 Current assets: $ 49,668 11,539 $ 48,978 12,875 122,337 11,458 6,315 Cash and cash equivalents Receivables, net Inventory Prepaid advertising Other prepaid expenses Deferred income tax benefits 105,425 10,772 3,781 7,132 6,930 Total current assets 209,095 188,115 Property, plant, and equipment, at cost: Land and buildings Fixtures and equipment Computer hardware and software 70,918 62,003 64,986 66,804 61,800 47,466 Right-to-Own Leased Space and Equipment Leasehold improvements 6,510 6,076 1,894 2,010 Total property, plant, and equipment Less accumulated depreciation and amortization 206,427 85,986 184,040 76,256 Property, plant, and equipment, net Intangibles, net 120,441 107,784 423 628 $ 329,959 $ 296,527 Total assets Liabilities and Stockholders' Equity Current liabilities: Lines of credit $4 7,621 45,430 11,011 59,009 5,890 23,728 Accounts payable Reserve for returns 5,115 25,364 1,794 Accrued liabilities Accrued profit sharing Income taxes payable 1,532 8,588 6,666 Total current liabilities 109,758 91,990 Operating Lease Liability 6,510 6,076 Deferred income taxes 9,469 5,926 Stockholders' Equity: Common stock, 26,121 shares issued Donated capital Additional paid-in capital Deferred compensation Accumulated other comprehensive income Retained earnings Treasury stock, 6,546 and 6,706 shares at cost 261 261 5,460 20,740 (79) 3,883 317,907 (143,950) 5,460 19,311 (154) 1,739 295,380 (129,462) Total Stockholders' Equity 204,222 192,535 Total liabilities and Stockholders' Equity $ 329,959 $ 296,527 EARTHWEAR CLOTHIERS Consolidated Statements of Cash Flows (In thousands) For the period ended December 31 Cash flows from (used for) operating activities: 2018 2017 2016 $ 22,527 $ 31,221 $ 20,270 Net income Adjustments to reconcile net income to net cash flows from operating activities: Nonrecurring charge (credit) Depreciation and amortization Deferred compensation expense (1,150) 13,465 103 8,190 15,231 12,175 424 75 Deferred income taxes 3,340 5,376 (3,866) Loss on disposal of fixed assets Changes in assets and liabilities excluding the effects of divestitures: 284 602 381 (3,666) 13,954 (1,849) (1,628) 2,716 Receivables, net 2,165 Inventory Prepaid advertising Other prepaid expenses Accounts payable (1,336) (16,912) (686) (2,534) 14,078 37,370 3,110 1,152 (8,718) 439 Reserve for returns 775 692 4,545 (1,320) (3,834) Accrued liabilities Accrued profit sharing Income taxes payable Tax benefit of stock options (709) (262) 1,923 1,429 2,144 (4,982) 328 (2,810) 1,765 349 Other 437 733 Net cash from (used for) operating activities 39,367 79,873 48,266 Cash flows from (used for) investing activities: Cash paid for capital additions (28,959) (18,208) (30,388) Net cash flows used for investing activities (28,959) (18,208) (30,388) Cash flows from (used for) financing activities: Proceeds from (payment of) short-term debt Purchases of treasury stock Issuance of treasury stock 3,390 (18,192) 3,704 (17,692) (2,935) 4,317 4,228 (23,112) 1,199 Net cash flows used for financing activities (11,098) (16,310) (17,685) Net increase (decrease) in cash and cash equivalents (689) 45,355 193 Beginning cash and cash equivalents 49,668 4,313 4,120 Ending cash and cash equivalents $ 48,978 $ 49,668 $ 4,313 Supplemental cash flow disclosures: Interest paid Income taxes paid 983 $ 5,027 1,229 13,701 6,278 18,107 %24 TarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Stockholders' Equity (In thousands) Accumulated Additional Paid-in Other Common Donated Deferred Comprehensive Retained Treasury Štock Stock Capital Capital Compensation Income Eamings Total Balance, December 31, 2015 Purchase of treasury stock Issuance of treasury stock $569 $243,888 $(108,931) $157,763 (23,112) 1,199 $261 $5,460 $17.197 $(681) (23,112) 1,199 Tax benefit of stock options exercised Deferred compensation expense 349 349 424 424 Net income 20,270 20,270 Other Comprehensive Income 733 733 Balance, December 31, 2016 Purchase of treasury stock Issuance of treasury stock Tax benefit of stock options exercised Deferred compensation expense Net income $261 $5,460 $17,546 $(257) $1,302 $264,158 ($130,844) $157,626 (2,935) 4,317 (2.935) 4,317 1,765 1,765 103 103 31,222 31,222 Other Comprehensive Income 437 437 Balance, December 31, 2017 Purchase of treasury stock Issuance of treasury stock $261 $5,460 $19,311 $(153) $1,739 $295,380 $(129,462) $192,535 (18,192) 3,704 (18,192) 3,704 Tax benefit of stock options exercised Deferred compensation expense 1,429 1,429 75 75 Net income 22,527 22.527 Other Comprehensive Income 2,144 2,144 Balance, December 31, 2018 $261 $5,460 $20,740 $(79) $3,883 $317,907 $(143,950) $204,222 Five-Year Consolidated Financial Summary (unaudited) (In thousands, except per share data) For the period ended December 31 2018 2017 2016 2015 2014 Income statement data: 891,394 32,175 3.6% 20,270 503,434 38,212 950,484 857,885 49,559 Net Sales 821,359 Pretax Income 35,757 66,186 8.1% 41,698 Percent of net sales 3.8% 5.8% 7.6% Net income 22,527 31,222 22,929 Per share of common stock: 1.60 1.56 1.15 1.02 2.01 1.54 Basic earnings per share Diluted earnings per share Common shares outstanding 1.14 1.01 2.00 1.53 19,531 19,555 19,806 20,703 14,599 Balance sheet data: 191,297 209,095 109,758 120,864 329,959 15,979 204,222 188,115 194,445 122,418 65,505 46,658 Current assets Current liabilities 91,990 108,412 296,527 133,434 118,308 87,312 281,757 105,051 PPE and intangibles Total assets 296,347 5,286 157,627 170,121 Noncurrent liabilities 12,002 192,535 5,686 157,763 4,211 100,405 Shareholders' equity Other data: 56,913 8,316 57,863 Net working capital Capital expenditures Depreciation and amortization expense 99,337 96,125 18,208 76,137 28,959 30,388 31,348 15,231 13,465 12,175 9,833 6,101 Return on average shareholders' investment 28% 16% 11% 18% 13% 24% Return on average assets 7% 11% 7% 15% NET INCOME NET SALES NET INCOME PER SHARE $900,000 $50,000 sa00,000 $40,000 $2.00 $700,000 $30,000 $1.50 $600,000 $20,000 $1.00 $500,000 $10,000 $0.50 $400,000 2016 2017 2018 2016 2017 2018 2014 2015 2016 2017 2018 The purpose of this mini-case is to familiarize you with the EarthWear Company by reviewing key pieces of information included in the annual report in the textbook. You can locate the EarthWear Clothiers 2018 Annual Report following Chapter 1 in the textbook. In the ebook format, the the EarthWear Clothiers 2018 Annual Report appears as a separate section following Chapter 1. Please refer to the Table of Contents in your respective text should you have issues locating the EarthWear Clothiers 2018 Annual Report. INSTRUCTIONS 1 Find the information requested in the 'WORKSHEET tab of this spreadsheet and record your answers in the space provided as evidence that you've visited the sites. Remember that the purpose of this exercise is to become familiar with these annual report, so please take a few minutes to review all content. This activity is not meant to be difficult but the more familiar you Fields you are to complete on the WORKSHEET are colored yellow. The color will disappear as the field is completed. Please input your answers into Connect or print a copy of the WORKSHEET to submit unless 2 your instructor requests an electronic submission. The WORKSHEET is formatted to print on a single sheet of paper. EarthWear Clothiers 2018 Annual Report 1. Who is the current CEO of EarthWear? 2. How much did Accounts Payable change in dollars and percent from 2017 to 2018? 3. In which of the last 5 years was EarthWear's Net Income highest, and what was Net Income in that year? 4. Does EarthWear use the FIFO or LIFO inventory valuation method? Hint: See the Notes to the Consolidated Financial Statements 5 What is the date of Willis & Adams' Audit Report included in the Annual Report? EarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Comprehensive Income (In thousands, except share data) For the period ended December 31 2018 2017 2016 $ 950,484 546,393 $ 857,885 $ 891,394 490,530 Net Sales Cost of sales 472,739 Gross Profit 404,091 364,012 385,146 400,864 353,890 Selling, general, and administrative expenses Nonrecurring charge (credit) 334,994 (1,153) 8,190 Income from operations Other income (expense): Interest expense 40,079 51,305 38,784 (983) (1,229) (5,027) Interest income 1,459 573 10 Other (4,798) (1,091) (1,593) Total other income (expense), net (4,322) (1,747) 6,610 Income before income taxes 32,174 35,757 13,230 49,558 Income tax provision 18,337 11,905 Net income $ 22,527 $ 31,221 $ 20,269 Other Comprehensive Income: Foreign currency translation adjustments Unrealized gain on forward contracts Other comprehensive income (loss), net of tax (1,151) 3,295 2,144 437 733 437 733 Comprehensive Income $ 24,671 $ 31,658 $ 21,002 Net Income per Common Share: Basic earnings per share 1.15 1.60 1.02 Diluted earnings per share 1.14 1.56 1.01 Basic weighted average shares outstanding Diluted weighted average shares outstanding 19,531 19,774 19,555 20,055 19,806 19,996 Consolidated Balance Sheets (In thousands) December 31 Assets 2018 2017 Current assets: $ 49,668 11,539 $ 48,978 12,875 122,337 11,458 6,315 Cash and cash equivalents Receivables, net Inventory Prepaid advertising Other prepaid expenses Deferred income tax benefits 105,425 10,772 3,781 7,132 6,930 Total current assets 209,095 188,115 Property, plant, and equipment, at cost: Land and buildings Fixtures and equipment Computer hardware and software 70,918 62,003 64,986 66,804 61,800 47,466 Right-to-Own Leased Space and Equipment Leasehold improvements 6,510 6,076 1,894 2,010 Total property, plant, and equipment Less accumulated depreciation and amortization 206,427 85,986 184,040 76,256 Property, plant, and equipment, net Intangibles, net 120,441 107,784 423 628 $ 329,959 $ 296,527 Total assets Liabilities and Stockholders' Equity Current liabilities: Lines of credit $4 7,621 45,430 11,011 59,009 5,890 23,728 Accounts payable Reserve for returns 5,115 25,364 1,794 Accrued liabilities Accrued profit sharing Income taxes payable 1,532 8,588 6,666 Total current liabilities 109,758 91,990 Operating Lease Liability 6,510 6,076 Deferred income taxes 9,469 5,926 Stockholders' Equity: Common stock, 26,121 shares issued Donated capital Additional paid-in capital Deferred compensation Accumulated other comprehensive income Retained earnings Treasury stock, 6,546 and 6,706 shares at cost 261 261 5,460 20,740 (79) 3,883 317,907 (143,950) 5,460 19,311 (154) 1,739 295,380 (129,462) Total Stockholders' Equity 204,222 192,535 Total liabilities and Stockholders' Equity $ 329,959 $ 296,527 EARTHWEAR CLOTHIERS Consolidated Statements of Cash Flows (In thousands) For the period ended December 31 Cash flows from (used for) operating activities: 2018 2017 2016 $ 22,527 $ 31,221 $ 20,270 Net income Adjustments to reconcile net income to net cash flows from operating activities: Nonrecurring charge (credit) Depreciation and amortization Deferred compensation expense (1,150) 13,465 103 8,190 15,231 12,175 424 75 Deferred income taxes 3,340 5,376 (3,866) Loss on disposal of fixed assets Changes in assets and liabilities excluding the effects of divestitures: 284 602 381 (3,666) 13,954 (1,849) (1,628) 2,716 Receivables, net 2,165 Inventory Prepaid advertising Other prepaid expenses Accounts payable (1,336) (16,912) (686) (2,534) 14,078 37,370 3,110 1,152 (8,718) 439 Reserve for returns 775 692 4,545 (1,320) (3,834) Accrued liabilities Accrued profit sharing Income taxes payable Tax benefit of stock options (709) (262) 1,923 1,429 2,144 (4,982) 328 (2,810) 1,765 349 Other 437 733 Net cash from (used for) operating activities 39,367 79,873 48,266 Cash flows from (used for) investing activities: Cash paid for capital additions (28,959) (18,208) (30,388) Net cash flows used for investing activities (28,959) (18,208) (30,388) Cash flows from (used for) financing activities: Proceeds from (payment of) short-term debt Purchases of treasury stock Issuance of treasury stock 3,390 (18,192) 3,704 (17,692) (2,935) 4,317 4,228 (23,112) 1,199 Net cash flows used for financing activities (11,098) (16,310) (17,685) Net increase (decrease) in cash and cash equivalents (689) 45,355 193 Beginning cash and cash equivalents 49,668 4,313 4,120 Ending cash and cash equivalents $ 48,978 $ 49,668 $ 4,313 Supplemental cash flow disclosures: Interest paid Income taxes paid 983 $ 5,027 1,229 13,701 6,278 18,107 %24 TarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Stockholders' Equity (In thousands) Accumulated Additional Paid-in Other Common Donated Deferred Comprehensive Retained Treasury Štock Stock Capital Capital Compensation Income Eamings Total Balance, December 31, 2015 Purchase of treasury stock Issuance of treasury stock $569 $243,888 $(108,931) $157,763 (23,112) 1,199 $261 $5,460 $17.197 $(681) (23,112) 1,199 Tax benefit of stock options exercised Deferred compensation expense 349 349 424 424 Net income 20,270 20,270 Other Comprehensive Income 733 733 Balance, December 31, 2016 Purchase of treasury stock Issuance of treasury stock Tax benefit of stock options exercised Deferred compensation expense Net income $261 $5,460 $17,546 $(257) $1,302 $264,158 ($130,844) $157,626 (2,935) 4,317 (2.935) 4,317 1,765 1,765 103 103 31,222 31,222 Other Comprehensive Income 437 437 Balance, December 31, 2017 Purchase of treasury stock Issuance of treasury stock $261 $5,460 $19,311 $(153) $1,739 $295,380 $(129,462) $192,535 (18,192) 3,704 (18,192) 3,704 Tax benefit of stock options exercised Deferred compensation expense 1,429 1,429 75 75 Net income 22,527 22.527 Other Comprehensive Income 2,144 2,144 Balance, December 31, 2018 $261 $5,460 $20,740 $(79) $3,883 $317,907 $(143,950) $204,222 Five-Year Consolidated Financial Summary (unaudited) (In thousands, except per share data) For the period ended December 31 2018 2017 2016 2015 2014 Income statement data: 891,394 32,175 3.6% 20,270 503,434 38,212 950,484 857,885 49,559 Net Sales 821,359 Pretax Income 35,757 66,186 8.1% 41,698 Percent of net sales 3.8% 5.8% 7.6% Net income 22,527 31,222 22,929 Per share of common stock: 1.60 1.56 1.15 1.02 2.01 1.54 Basic earnings per share Diluted earnings per share Common shares outstanding 1.14 1.01 2.00 1.53 19,531 19,555 19,806 20,703 14,599 Balance sheet data: 191,297 209,095 109,758 120,864 329,959 15,979 204,222 188,115 194,445 122,418 65,505 46,658 Current assets Current liabilities 91,990 108,412 296,527 133,434 118,308 87,312 281,757 105,051 PPE and intangibles Total assets 296,347 5,286 157,627 170,121 Noncurrent liabilities 12,002 192,535 5,686 157,763 4,211 100,405 Shareholders' equity Other data: 56,913 8,316 57,863 Net working capital Capital expenditures Depreciation and amortization expense 99,337 96,125 18,208 76,137 28,959 30,388 31,348 15,231 13,465 12,175 9,833 6,101 Return on average shareholders' investment 28% 16% 11% 18% 13% 24% Return on average assets 7% 11% 7% 15% NET INCOME NET SALES NET INCOME PER SHARE $900,000 $50,000 sa00,000 $40,000 $2.00 $700,000 $30,000 $1.50 $600,000 $20,000 $1.00 $500,000 $10,000 $0.50 $400,000 2016 2017 2018 2016 2017 2018 2014 2015 2016 2017 2018 The purpose of this mini-case is to familiarize you with the EarthWear Company by reviewing key pieces of information included in the annual report in the textbook. You can locate the EarthWear Clothiers 2018 Annual Report following Chapter 1 in the textbook. In the ebook format, the the EarthWear Clothiers 2018 Annual Report appears as a separate section following Chapter 1. Please refer to the Table of Contents in your respective text should you have issues locating the EarthWear Clothiers 2018 Annual Report. INSTRUCTIONS 1 Find the information requested in the 'WORKSHEET tab of this spreadsheet and record your answers in the space provided as evidence that you've visited the sites. Remember that the purpose of this exercise is to become familiar with these annual report, so please take a few minutes to review all content. This activity is not meant to be difficult but the more familiar you Fields you are to complete on the WORKSHEET are colored yellow. The color will disappear as the field is completed. Please input your answers into Connect or print a copy of the WORKSHEET to submit unless 2 your instructor requests an electronic submission. The WORKSHEET is formatted to print on a single sheet of paper. EarthWear Clothiers 2018 Annual Report 1. Who is the current CEO of EarthWear? 2. How much did Accounts Payable change in dollars and percent from 2017 to 2018? 3. In which of the last 5 years was EarthWear's Net Income highest, and what was Net Income in that year? 4. Does EarthWear use the FIFO or LIFO inventory valuation method? Hint: See the Notes to the Consolidated Financial Statements 5 What is the date of Willis & Adams' Audit Report included in the Annual Report? EarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Comprehensive Income (In thousands, except share data) For the period ended December 31 2018 2017 2016 $ 950,484 546,393 $ 857,885 $ 891,394 490,530 Net Sales Cost of sales 472,739 Gross Profit 404,091 364,012 385,146 400,864 353,890 Selling, general, and administrative expenses Nonrecurring charge (credit) 334,994 (1,153) 8,190 Income from operations Other income (expense): Interest expense 40,079 51,305 38,784 (983) (1,229) (5,027) Interest income 1,459 573 10 Other (4,798) (1,091) (1,593) Total other income (expense), net (4,322) (1,747) 6,610 Income before income taxes 32,174 35,757 13,230 49,558 Income tax provision 18,337 11,905 Net income $ 22,527 $ 31,221 $ 20,269 Other Comprehensive Income: Foreign currency translation adjustments Unrealized gain on forward contracts Other comprehensive income (loss), net of tax (1,151) 3,295 2,144 437 733 437 733 Comprehensive Income $ 24,671 $ 31,658 $ 21,002 Net Income per Common Share: Basic earnings per share 1.15 1.60 1.02 Diluted earnings per share 1.14 1.56 1.01 Basic weighted average shares outstanding Diluted weighted average shares outstanding 19,531 19,774 19,555 20,055 19,806 19,996 Consolidated Balance Sheets (In thousands) December 31 Assets 2018 2017 Current assets: $ 49,668 11,539 $ 48,978 12,875 122,337 11,458 6,315 Cash and cash equivalents Receivables, net Inventory Prepaid advertising Other prepaid expenses Deferred income tax benefits 105,425 10,772 3,781 7,132 6,930 Total current assets 209,095 188,115 Property, plant, and equipment, at cost: Land and buildings Fixtures and equipment Computer hardware and software 70,918 62,003 64,986 66,804 61,800 47,466 Right-to-Own Leased Space and Equipment Leasehold improvements 6,510 6,076 1,894 2,010 Total property, plant, and equipment Less accumulated depreciation and amortization 206,427 85,986 184,040 76,256 Property, plant, and equipment, net Intangibles, net 120,441 107,784 423 628 $ 329,959 $ 296,527 Total assets Liabilities and Stockholders' Equity Current liabilities: Lines of credit $4 7,621 45,430 11,011 59,009 5,890 23,728 Accounts payable Reserve for returns 5,115 25,364 1,794 Accrued liabilities Accrued profit sharing Income taxes payable 1,532 8,588 6,666 Total current liabilities 109,758 91,990 Operating Lease Liability 6,510 6,076 Deferred income taxes 9,469 5,926 Stockholders' Equity: Common stock, 26,121 shares issued Donated capital Additional paid-in capital Deferred compensation Accumulated other comprehensive income Retained earnings Treasury stock, 6,546 and 6,706 shares at cost 261 261 5,460 20,740 (79) 3,883 317,907 (143,950) 5,460 19,311 (154) 1,739 295,380 (129,462) Total Stockholders' Equity 204,222 192,535 Total liabilities and Stockholders' Equity $ 329,959 $ 296,527 EARTHWEAR CLOTHIERS Consolidated Statements of Cash Flows (In thousands) For the period ended December 31 Cash flows from (used for) operating activities: 2018 2017 2016 $ 22,527 $ 31,221 $ 20,270 Net income Adjustments to reconcile net income to net cash flows from operating activities: Nonrecurring charge (credit) Depreciation and amortization Deferred compensation expense (1,150) 13,465 103 8,190 15,231 12,175 424 75 Deferred income taxes 3,340 5,376 (3,866) Loss on disposal of fixed assets Changes in assets and liabilities excluding the effects of divestitures: 284 602 381 (3,666) 13,954 (1,849) (1,628) 2,716 Receivables, net 2,165 Inventory Prepaid advertising Other prepaid expenses Accounts payable (1,336) (16,912) (686) (2,534) 14,078 37,370 3,110 1,152 (8,718) 439 Reserve for returns 775 692 4,545 (1,320) (3,834) Accrued liabilities Accrued profit sharing Income taxes payable Tax benefit of stock options (709) (262) 1,923 1,429 2,144 (4,982) 328 (2,810) 1,765 349 Other 437 733 Net cash from (used for) operating activities 39,367 79,873 48,266 Cash flows from (used for) investing activities: Cash paid for capital additions (28,959) (18,208) (30,388) Net cash flows used for investing activities (28,959) (18,208) (30,388) Cash flows from (used for) financing activities: Proceeds from (payment of) short-term debt Purchases of treasury stock Issuance of treasury stock 3,390 (18,192) 3,704 (17,692) (2,935) 4,317 4,228 (23,112) 1,199 Net cash flows used for financing activities (11,098) (16,310) (17,685) Net increase (decrease) in cash and cash equivalents (689) 45,355 193 Beginning cash and cash equivalents 49,668 4,313 4,120 Ending cash and cash equivalents $ 48,978 $ 49,668 $ 4,313 Supplemental cash flow disclosures: Interest paid Income taxes paid 983 $ 5,027 1,229 13,701 6,278 18,107 %24 TarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Stockholders' Equity (In thousands) Accumulated Additional Paid-in Other Common Donated Deferred Comprehensive Retained Treasury Štock Stock Capital Capital Compensation Income Eamings Total Balance, December 31, 2015 Purchase of treasury stock Issuance of treasury stock $569 $243,888 $(108,931) $157,763 (23,112) 1,199 $261 $5,460 $17.197 $(681) (23,112) 1,199 Tax benefit of stock options exercised Deferred compensation expense 349 349 424 424 Net income 20,270 20,270 Other Comprehensive Income 733 733 Balance, December 31, 2016 Purchase of treasury stock Issuance of treasury stock Tax benefit of stock options exercised Deferred compensation expense Net income $261 $5,460 $17,546 $(257) $1,302 $264,158 ($130,844) $157,626 (2,935) 4,317 (2.935) 4,317 1,765 1,765 103 103 31,222 31,222 Other Comprehensive Income 437 437 Balance, December 31, 2017 Purchase of treasury stock Issuance of treasury stock $261 $5,460 $19,311 $(153) $1,739 $295,380 $(129,462) $192,535 (18,192) 3,704 (18,192) 3,704 Tax benefit of stock options exercised Deferred compensation expense 1,429 1,429 75 75 Net income 22,527 22.527 Other Comprehensive Income 2,144 2,144 Balance, December 31, 2018 $261 $5,460 $20,740 $(79) $3,883 $317,907 $(143,950) $204,222 Five-Year Consolidated Financial Summary (unaudited) (In thousands, except per share data) For the period ended December 31 2018 2017 2016 2015 2014 Income statement data: 891,394 32,175 3.6% 20,270 503,434 38,212 950,484 857,885 49,559 Net Sales 821,359 Pretax Income 35,757 66,186 8.1% 41,698 Percent of net sales 3.8% 5.8% 7.6% Net income 22,527 31,222 22,929 Per share of common stock: 1.60 1.56 1.15 1.02 2.01 1.54 Basic earnings per share Diluted earnings per share Common shares outstanding 1.14 1.01 2.00 1.53 19,531 19,555 19,806 20,703 14,599 Balance sheet data: 191,297 209,095 109,758 120,864 329,959 15,979 204,222 188,115 194,445 122,418 65,505 46,658 Current assets Current liabilities 91,990 108,412 296,527 133,434 118,308 87,312 281,757 105,051 PPE and intangibles Total assets 296,347 5,286 157,627 170,121 Noncurrent liabilities 12,002 192,535 5,686 157,763 4,211 100,405 Shareholders' equity Other data: 56,913 8,316 57,863 Net working capital Capital expenditures Depreciation and amortization expense 99,337 96,125 18,208 76,137 28,959 30,388 31,348 15,231 13,465 12,175 9,833 6,101 Return on average shareholders' investment 28% 16% 11% 18% 13% 24% Return on average assets 7% 11% 7% 15% NET INCOME NET SALES NET INCOME PER SHARE $900,000 $50,000 sa00,000 $40,000 $2.00 $700,000 $30,000 $1.50 $600,000 $20,000 $1.00 $500,000 $10,000 $0.50 $400,000 2016 2017 2018 2016 2017 2018 2014 2015 2016 2017 2018 The purpose of this mini-case is to familiarize you with the EarthWear Company by reviewing key pieces of information included in the annual report in the textbook. You can locate the EarthWear Clothiers 2018 Annual Report following Chapter 1 in the textbook. In the ebook format, the the EarthWear Clothiers 2018 Annual Report appears as a separate section following Chapter 1. Please refer to the Table of Contents in your respective text should you have issues locating the EarthWear Clothiers 2018 Annual Report. INSTRUCTIONS 1 Find the information requested in the 'WORKSHEET tab of this spreadsheet and record your answers in the space provided as evidence that you've visited the sites. Remember that the purpose of this exercise is to become familiar with these annual report, so please take a few minutes to review all content. This activity is not meant to be difficult but the more familiar you Fields you are to complete on the WORKSHEET are colored yellow. The color will disappear as the field is completed. Please input your answers into Connect or print a copy of the WORKSHEET to submit unless 2 your instructor requests an electronic submission. The WORKSHEET is formatted to print on a single sheet of paper. EarthWear Clothiers 2018 Annual Report 1. Who is the current CEO of EarthWear? 2. How much did Accounts Payable change in dollars and percent from 2017 to 2018? 3. In which of the last 5 years was EarthWear's Net Income highest, and what was Net Income in that year? 4. Does EarthWear use the FIFO or LIFO inventory valuation method? Hint: See the Notes to the Consolidated Financial Statements 5 What is the date of Willis & Adams' Audit Report included in the Annual Report? EarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Comprehensive Income (In thousands, except share data) For the period ended December 31 2018 2017 2016 $ 950,484 546,393 $ 857,885 $ 891,394 490,530 Net Sales Cost of sales 472,739 Gross Profit 404,091 364,012 385,146 400,864 353,890 Selling, general, and administrative expenses Nonrecurring charge (credit) 334,994 (1,153) 8,190 Income from operations Other income (expense): Interest expense 40,079 51,305 38,784 (983) (1,229) (5,027) Interest income 1,459 573 10 Other (4,798) (1,091) (1,593) Total other income (expense), net (4,322) (1,747) 6,610 Income before income taxes 32,174 35,757 13,230 49,558 Income tax provision 18,337 11,905 Net income $ 22,527 $ 31,221 $ 20,269 Other Comprehensive Income: Foreign currency translation adjustments Unrealized gain on forward contracts Other comprehensive income (loss), net of tax (1,151) 3,295 2,144 437 733 437 733 Comprehensive Income $ 24,671 $ 31,658 $ 21,002 Net Income per Common Share: Basic earnings per share 1.15 1.60 1.02 Diluted earnings per share 1.14 1.56 1.01 Basic weighted average shares outstanding Diluted weighted average shares outstanding 19,531 19,774 19,555 20,055 19,806 19,996 Consolidated Balance Sheets (In thousands) December 31 Assets 2018 2017 Current assets: $ 49,668 11,539 $ 48,978 12,875 122,337 11,458 6,315 Cash and cash equivalents Receivables, net Inventory Prepaid advertising Other prepaid expenses Deferred income tax benefits 105,425 10,772 3,781 7,132 6,930 Total current assets 209,095 188,115 Property, plant, and equipment, at cost: Land and buildings Fixtures and equipment Computer hardware and software 70,918 62,003 64,986 66,804 61,800 47,466 Right-to-Own Leased Space and Equipment Leasehold improvements 6,510 6,076 1,894 2,010 Total property, plant, and equipment Less accumulated depreciation and amortization 206,427 85,986 184,040 76,256 Property, plant, and equipment, net Intangibles, net 120,441 107,784 423 628 $ 329,959 $ 296,527 Total assets Liabilities and Stockholders' Equity Current liabilities: Lines of credit $4 7,621 45,430 11,011 59,009 5,890 23,728 Accounts payable Reserve for returns 5,115 25,364 1,794 Accrued liabilities Accrued profit sharing Income taxes payable 1,532 8,588 6,666 Total current liabilities 109,758 91,990 Operating Lease Liability 6,510 6,076 Deferred income taxes 9,469 5,926 Stockholders' Equity: Common stock, 26,121 shares issued Donated capital Additional paid-in capital Deferred compensation Accumulated other comprehensive income Retained earnings Treasury stock, 6,546 and 6,706 shares at cost 261 261 5,460 20,740 (79) 3,883 317,907 (143,950) 5,460 19,311 (154) 1,739 295,380 (129,462) Total Stockholders' Equity 204,222 192,535 Total liabilities and Stockholders' Equity $ 329,959 $ 296,527 EARTHWEAR CLOTHIERS Consolidated Statements of Cash Flows (In thousands) For the period ended December 31 Cash flows from (used for) operating activities: 2018 2017 2016 $ 22,527 $ 31,221 $ 20,270 Net income Adjustments to reconcile net income to net cash flows from operating activities: Nonrecurring charge (credit) Depreciation and amortization Deferred compensation expense (1,150) 13,465 103 8,190 15,231 12,175 424 75 Deferred income taxes 3,340 5,376 (3,866) Loss on disposal of fixed assets Changes in assets and liabilities excluding the effects of divestitures: 284 602 381 (3,666) 13,954 (1,849) (1,628) 2,716 Receivables, net 2,165 Inventory Prepaid advertising Other prepaid expenses Accounts payable (1,336) (16,912) (686) (2,534) 14,078 37,370 3,110 1,152 (8,718) 439 Reserve for returns 775 692 4,545 (1,320) (3,834) Accrued liabilities Accrued profit sharing Income taxes payable Tax benefit of stock options (709) (262) 1,923 1,429 2,144 (4,982) 328 (2,810) 1,765 349 Other 437 733 Net cash from (used for) operating activities 39,367 79,873 48,266 Cash flows from (used for) investing activities: Cash paid for capital additions (28,959) (18,208) (30,388) Net cash flows used for investing activities (28,959) (18,208) (30,388) Cash flows from (used for) financing activities: Proceeds from (payment of) short-term debt Purchases of treasury stock Issuance of treasury stock 3,390 (18,192) 3,704 (17,692) (2,935) 4,317 4,228 (23,112) 1,199 Net cash flows used for financing activities (11,098) (16,310) (17,685) Net increase (decrease) in cash and cash equivalents (689) 45,355 193 Beginning cash and cash equivalents 49,668 4,313 4,120 Ending cash and cash equivalents $ 48,978 $ 49,668 $ 4,313 Supplemental cash flow disclosures: Interest paid Income taxes paid 983 $ 5,027 1,229 13,701 6,278 18,107 %24 TarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Stockholders' Equity (In thousands) Accumulated Additional Paid-in Other Common Donated Deferred Comprehensive Retained Treasury Štock Stock Capital Capital Compensation Income Eamings Total Balance, December 31, 2015 Purchase of treasury stock Issuance of treasury stock $569 $243,888 $(108,931) $157,763 (23,112) 1,199 $261 $5,460 $17.197 $(681) (23,112) 1,199 Tax benefit of stock options exercised Deferred compensation expense 349 349 424 424 Net income 20,270 20,270 Other Comprehensive Income 733 733 Balance, December 31, 2016 Purchase of treasury stock Issuance of treasury stock Tax benefit of stock options exercised Deferred compensation expense Net income $261 $5,460 $17,546 $(257) $1,302 $264,158 ($130,844) $157,626 (2,935) 4,317 (2.935) 4,317 1,765 1,765 103 103 31,222 31,222 Other Comprehensive Income 437 437 Balance, December 31, 2017 Purchase of treasury stock Issuance of treasury stock $261 $5,460 $19,311 $(153) $1,739 $295,380 $(129,462) $192,535 (18,192) 3,704 (18,192) 3,704 Tax benefit of stock options exercised Deferred compensation expense 1,429 1,429 75 75 Net income 22,527 22.527 Other Comprehensive Income 2,144 2,144 Balance, December 31, 2018 $261 $5,460 $20,740 $(79) $3,883 $317,907 $(143,950) $204,222 Five-Year Consolidated Financial Summary (unaudited) (In thousands, except per share data) For the period ended December 31 2018 2017 2016 2015 2014 Income statement data: 891,394 32,175 3.6% 20,270 503,434 38,212 950,484 857,885 49,559 Net Sales 821,359 Pretax Income 35,757 66,186 8.1% 41,698 Percent of net sales 3.8% 5.8% 7.6% Net income 22,527 31,222 22,929 Per share of common stock: 1.60 1.56 1.15 1.02 2.01 1.54 Basic earnings per share Diluted earnings per share Common shares outstanding 1.14 1.01 2.00 1.53 19,531 19,555 19,806 20,703 14,599 Balance sheet data: 191,297 209,095 109,758 120,864 329,959 15,979 204,222 188,115 194,445 122,418 65,505 46,658 Current assets Current liabilities 91,990 108,412 296,527 133,434 118,308 87,312 281,757 105,051 PPE and intangibles Total assets 296,347 5,286 157,627 170,121 Noncurrent liabilities 12,002 192,535 5,686 157,763 4,211 100,405 Shareholders' equity Other data: 56,913 8,316 57,863 Net working capital Capital expenditures Depreciation and amortization expense 99,337 96,125 18,208 76,137 28,959 30,388 31,348 15,231 13,465 12,175 9,833 6,101 Return on average shareholders' investment 28% 16% 11% 18% 13% 24% Return on average assets 7% 11% 7% 15% NET INCOME NET SALES NET INCOME PER SHARE $900,000 $50,000 sa00,000 $40,000 $2.00 $700,000 $30,000 $1.50 $600,000 $20,000 $1.00 $500,000 $10,000 $0.50 $400,000 2016 2017 2018 2016 2017 2018 2014 2015 2016 2017 2018 The purpose of this mini-case is to familiarize you with the EarthWear Company by reviewing key pieces of information included in the annual report in the textbook. You can locate the EarthWear Clothiers 2018 Annual Report following Chapter 1 in the textbook. In the ebook format, the the EarthWear Clothiers 2018 Annual Report appears as a separate section following Chapter 1. Please refer to the Table of Contents in your respective text should you have issues locating the EarthWear Clothiers 2018 Annual Report. INSTRUCTIONS 1 Find the information requested in the 'WORKSHEET tab of this spreadsheet and record your answers in the space provided as evidence that you've visited the sites. Remember that the purpose of this exercise is to become familiar with these annual report, so please take a few minutes to review all content. This activity is not meant to be difficult but the more familiar you Fields you are to complete on the WORKSHEET are colored yellow. The color will disappear as the field is completed. Please input your answers into Connect or print a copy of the WORKSHEET to submit unless 2 your instructor requests an electronic submission. The WORKSHEET is formatted to print on a single sheet of paper. EarthWear Clothiers 2018 Annual Report 1. Who is the current CEO of EarthWear? 2. How much did Accounts Payable change in dollars and percent from 2017 to 2018? 3. In which of the last 5 years was EarthWear's Net Income highest, and what was Net Income in that year? 4. Does EarthWear use the FIFO or LIFO inventory valuation method? Hint: See the Notes to the Consolidated Financial Statements 5 What is the date of Willis & Adams' Audit Report included in the Annual Report? EarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Comprehensive Income (In thousands, except share data) For the period ended December 31 2018 2017 2016 $ 950,484 546,393 $ 857,885 $ 891,394 490,530 Net Sales Cost of sales 472,739 Gross Profit 404,091 364,012 385,146 400,864 353,890 Selling, general, and administrative expenses Nonrecurring charge (credit) 334,994 (1,153) 8,190 Income from operations Other income (expense): Interest expense 40,079 51,305 38,784 (983) (1,229) (5,027) Interest income 1,459 573 10 Other (4,798) (1,091) (1,593) Total other income (expense), net (4,322) (1,747) 6,610 Income before income taxes 32,174 35,757 13,230 49,558 Income tax provision 18,337 11,905 Net income $ 22,527 $ 31,221 $ 20,269 Other Comprehensive Income: Foreign currency translation adjustments Unrealized gain on forward contracts Other comprehensive income (loss), net of tax (1,151) 3,295 2,144 437 733 437 733 Comprehensive Income $ 24,671 $ 31,658 $ 21,002 Net Income per Common Share: Basic earnings per share 1.15 1.60 1.02 Diluted earnings per share 1.14 1.56 1.01 Basic weighted average shares outstanding Diluted weighted average shares outstanding 19,531 19,774 19,555 20,055 19,806 19,996 Consolidated Balance Sheets (In thousands) December 31 Assets 2018 2017 Current assets: $ 49,668 11,539 $ 48,978 12,875 122,337 11,458 6,315 Cash and cash equivalents Receivables, net Inventory Prepaid advertising Other prepaid expenses Deferred income tax benefits 105,425 10,772 3,781 7,132 6,930 Total current assets 209,095 188,115 Property, plant, and equipment, at cost: Land and buildings Fixtures and equipment Computer hardware and software 70,918 62,003 64,986 66,804 61,800 47,466 Right-to-Own Leased Space and Equipment Leasehold improvements 6,510 6,076 1,894 2,010 Total property, plant, and equipment Less accumulated depreciation and amortization 206,427 85,986 184,040 76,256 Property, plant, and equipment, net Intangibles, net 120,441 107,784 423 628 $ 329,959 $ 296,527 Total assets Liabilities and Stockholders' Equity Current liabilities: Lines of credit $4 7,621 45,430 11,011 59,009 5,890 23,728 Accounts payable Reserve for returns 5,115 25,364 1,794 Accrued liabilities Accrued profit sharing Income taxes payable 1,532 8,588 6,666 Total current liabilities 109,758 91,990 Operating Lease Liability 6,510 6,076 Deferred income taxes 9,469 5,926 Stockholders' Equity: Common stock, 26,121 shares issued Donated capital Additional paid-in capital Deferred compensation Accumulated other comprehensive income Retained earnings Treasury stock, 6,546 and 6,706 shares at cost 261 261 5,460 20,740 (79) 3,883 317,907 (143,950) 5,460 19,311 (154) 1,739 295,380 (129,462) Total Stockholders' Equity 204,222 192,535 Total liabilities and Stockholders' Equity $ 329,959 $ 296,527 EARTHWEAR CLOTHIERS Consolidated Statements of Cash Flows (In thousands) For the period ended December 31 Cash flows from (used for) operating activities: 2018 2017 2016 $ 22,527 $ 31,221 $ 20,270 Net income Adjustments to reconcile net income to net cash flows from operating activities: Nonrecurring charge (credit) Depreciation and amortization Deferred compensation expense (1,150) 13,465 103 8,190 15,231 12,175 424 75 Deferred income taxes 3,340 5,376 (3,866) Loss on disposal of fixed assets Changes in assets and liabilities excluding the effects of divestitures: 284 602 381 (3,666) 13,954 (1,849) (1,628) 2,716 Receivables, net 2,165 Inventory Prepaid advertising Other prepaid expenses Accounts payable (1,336) (16,912) (686) (2,534) 14,078 37,370 3,110 1,152 (8,718) 439 Reserve for returns 775 692 4,545 (1,320) (3,834) Accrued liabilities Accrued profit sharing Income taxes payable Tax benefit of stock options (709) (262) 1,923 1,429 2,144 (4,982) 328 (2,810) 1,765 349 Other 437 733 Net cash from (used for) operating activities 39,367 79,873 48,266 Cash flows from (used for) investing activities: Cash paid for capital additions (28,959) (18,208) (30,388) Net cash flows used for investing activities (28,959) (18,208) (30,388) Cash flows from (used for) financing activities: Proceeds from (payment of) short-term debt Purchases of treasury stock Issuance of treasury stock 3,390 (18,192) 3,704 (17,692) (2,935) 4,317 4,228 (23,112) 1,199 Net cash flows used for financing activities (11,098) (16,310) (17,685) Net increase (decrease) in cash and cash equivalents (689) 45,355 193 Beginning cash and cash equivalents 49,668 4,313 4,120 Ending cash and cash equivalents $ 48,978 $ 49,668 $ 4,313 Supplemental cash flow disclosures: Interest paid Income taxes paid 983 $ 5,027 1,229 13,701 6,278 18,107 %24 TarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Stockholders' Equity (In thousands) Accumulated Additional Paid-in Other Common Donated Deferred Comprehensive Retained Treasury Štock Stock Capital Capital Compensation Income Eamings Total Balance, December 31, 2015 Purchase of treasury stock Issuance of treasury stock $569 $243,888 $(108,931) $157,763 (23,112) 1,199 $261 $5,460 $17.197 $(681) (23,112) 1,199 Tax benefit of stock options exercised Deferred compensation expense 349 349 424 424 Net income 20,270 20,270 Other Comprehensive Income 733 733 Balance, December 31, 2016 Purchase of treasury stock Issuance of treasury stock Tax benefit of stock options exercised Deferred compensation expense Net income $261 $5,460 $17,546 $(257) $1,302 $264,158 ($130,844) $157,626 (2,935) 4,317 (2.935) 4,317 1,765 1,765 103 103 31,222 31,222 Other Comprehensive Income 437 437 Balance, December 31, 2017 Purchase of treasury stock Issuance of treasury stock $261 $5,460 $19,311 $(153) $1,739 $295,380 $(129,462) $192,535 (18,192) 3,704 (18,192) 3,704 Tax benefit of stock options exercised Deferred compensation expense 1,429 1,429 75 75 Net income 22,527 22.527 Other Comprehensive Income 2,144 2,144 Balance, December 31, 2018 $261 $5,460 $20,740 $(79) $3,883 $317,907 $(143,950) $204,222 Five-Year Consolidated Financial Summary (unaudited) (In thousands, except per share data) For the period ended December 31 2018 2017 2016 2015 2014 Income statement data: 891,394 32,175 3.6% 20,270 503,434 38,212 950,484 857,885 49,559 Net Sales 821,359 Pretax Income 35,757 66,186 8.1% 41,698 Percent of net sales 3.8% 5.8% 7.6% Net income 22,527 31,222 22,929 Per share of common stock: 1.60 1.56 1.15 1.02 2.01 1.54 Basic earnings per share Diluted earnings per share Common shares outstanding 1.14 1.01 2.00 1.53 19,531 19,555 19,806 20,703 14,599 Balance sheet data: 191,297 209,095 109,758 120,864 329,959 15,979 204,222 188,115 194,445 122,418 65,505 46,658 Current assets Current liabilities 91,990 108,412 296,527 133,434 118,308 87,312 281,757 105,051 PPE and intangibles Total assets 296,347 5,286 157,627 170,121 Noncurrent liabilities 12,002 192,535 5,686 157,763 4,211 100,405 Shareholders' equity Other data: 56,913 8,316 57,863 Net working capital Capital expenditures Depreciation and amortization expense 99,337 96,125 18,208 76,137 28,959 30,388 31,348 15,231 13,465 12,175 9,833 6,101 Return on average shareholders' investment 28% 16% 11% 18% 13% 24% Return on average assets 7% 11% 7% 15% NET INCOME NET SALES NET INCOME PER SHARE $900,000 $50,000 sa00,000 $40,000 $2.00 $700,000 $30,000 $1.50 $600,000 $20,000 $1.00 $500,000 $10,000 $0.50 $400,000 2016 2017 2018 2016 2017 2018 2014 2015 2016 2017 2018 The purpose of this mini-case is to familiarize you with the EarthWear Company by reviewing key pieces of information included in the annual report in the textbook. You can locate the EarthWear Clothiers 2018 Annual Report following Chapter 1 in the textbook. In the ebook format, the the EarthWear Clothiers 2018 Annual Report appears as a separate section following Chapter 1. Please refer to the Table of Contents in your respective text should you have issues locating the EarthWear Clothiers 2018 Annual Report. INSTRUCTIONS 1 Find the information requested in the 'WORKSHEET tab of this spreadsheet and record your answers in the space provided as evidence that you've visited the sites. Remember that the purpose of this exercise is to become familiar with these annual report, so please take a few minutes to review all content. This activity is not meant to be difficult but the more familiar you Fields you are to complete on the WORKSHEET are colored yellow. The color will disappear as the field is completed. Please input your answers into Connect or print a copy of the WORKSHEET to submit unless 2 your instructor requests an electronic submission. The WORKSHEET is formatted to print on a single sheet of paper. EarthWear Clothiers 2018 Annual Report 1. Who is the current CEO of EarthWear? 2. How much did Accounts Payable change in dollars and percent from 2017 to 2018? 3. In which of the last 5 years was EarthWear's Net Income highest, and what was Net Income in that year? 4. Does EarthWear use the FIFO or LIFO inventory valuation method? Hint: See the Notes to the Consolidated Financial Statements 5 What is the date of Willis & Adams' Audit Report included in the Annual Report? EarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Comprehensive Income (In thousands, except share data) For the period ended December 31 2018 2017 2016 $ 950,484 546,393 $ 857,885 $ 891,394 490,530 Net Sales Cost of sales 472,739 Gross Profit 404,091 364,012 385,146 400,864 353,890 Selling, general, and administrative expenses Nonrecurring charge (credit) 334,994 (1,153) 8,190 Income from operations Other income (expense): Interest expense 40,079 51,305 38,784 (983) (1,229) (5,027) Interest income 1,459 573 10 Other (4,798) (1,091) (1,593) Total other income (expense), net (4,322) (1,747) 6,610 Income before income taxes 32,174 35,757 13,230 49,558 Income tax provision 18,337 11,905 Net income $ 22,527 $ 31,221 $ 20,269 Other Comprehensive Income: Foreign currency translation adjustments Unrealized gain on forward contracts Other comprehensive income (loss), net of tax (1,151) 3,295 2,144 437 733 437 733 Comprehensive Income $ 24,671 $ 31,658 $ 21,002 Net Income per Common Share: Basic earnings per share 1.15 1.60 1.02 Diluted earnings per share 1.14 1.56 1.01 Basic weighted average shares outstanding Diluted weighted average shares outstanding 19,531 19,774 19,555 20,055 19,806 19,996 Consolidated Balance Sheets (In thousands) December 31 Assets 2018 2017 Current assets: $ 49,668 11,539 $ 48,978 12,875 122,337 11,458 6,315 Cash and cash equivalents Receivables, net Inventory Prepaid advertising Other prepaid expenses Deferred income tax benefits 105,425 10,772 3,781 7,132 6,930 Total current assets 209,095 188,115 Property, plant, and equipment, at cost: Land and buildings Fixtures and equipment Computer hardware and software 70,918 62,003 64,986 66,804 61,800 47,466 Right-to-Own Leased Space and Equipment Leasehold improvements 6,510 6,076 1,894 2,010 Total property, plant, and equipment Less accumulated depreciation and amortization 206,427 85,986 184,040 76,256 Property, plant, and equipment, net Intangibles, net 120,441 107,784 423 628 $ 329,959 $ 296,527 Total assets Liabilities and Stockholders' Equity Current liabilities: Lines of credit $4 7,621 45,430 11,011 59,009 5,890 23,728 Accounts payable Reserve for returns 5,115 25,364 1,794 Accrued liabilities Accrued profit sharing Income taxes payable 1,532 8,588 6,666 Total current liabilities 109,758 91,990 Operating Lease Liability 6,510 6,076 Deferred income taxes 9,469 5,926 Stockholders' Equity: Common stock, 26,121 shares issued Donated capital Additional paid-in capital Deferred compensation Accumulated other comprehensive income Retained earnings Treasury stock, 6,546 and 6,706 shares at cost 261 261 5,460 20,740 (79) 3,883 317,907 (143,950) 5,460 19,311 (154) 1,739 295,380 (129,462) Total Stockholders' Equity 204,222 192,535 Total liabilities and Stockholders' Equity $ 329,959 $ 296,527 EARTHWEAR CLOTHIERS Consolidated Statements of Cash Flows (In thousands) For the period ended December 31 Cash flows from (used for) operating activities: 2018 2017 2016 $ 22,527 $ 31,221 $ 20,270 Net income Adjustments to reconcile net income to net cash flows from operating activities: Nonrecurring charge (credit) Depreciation and amortization Deferred compensation expense (1,150) 13,465 103 8,190 15,231 12,175 424 75 Deferred income taxes 3,340 5,376 (3,866) Loss on disposal of fixed assets Changes in assets and liabilities excluding the effects of divestitures: 284 602 381 (3,666) 13,954 (1,849) (1,628) 2,716 Receivables, net 2,165 Inventory Prepaid advertising Other prepaid expenses Accounts payable (1,336) (16,912) (686) (2,534) 14,078 37,370 3,110 1,152 (8,718) 439 Reserve for returns 775 692 4,545 (1,320) (3,834) Accrued liabilities Accrued profit sharing Income taxes payable Tax benefit of stock options (709) (262) 1,923 1,429 2,144 (4,982) 328 (2,810) 1,765 349 Other 437 733 Net cash from (used for) operating activities 39,367 79,873 48,266 Cash flows from (used for) investing activities: Cash paid for capital additions (28,959) (18,208) (30,388) Net cash flows used for investing activities (28,959) (18,208) (30,388) Cash flows from (used for) financing activities: Proceeds from (payment of) short-term debt Purchases of treasury stock Issuance of treasury stock 3,390 (18,192) 3,704 (17,692) (2,935) 4,317 4,228 (23,112) 1,199 Net cash flows used for financing activities (11,098) (16,310) (17,685) Net increase (decrease) in cash and cash equivalents (689) 45,355 193 Beginning cash and cash equivalents 49,668 4,313 4,120 Ending cash and cash equivalents $ 48,978 $ 49,668 $ 4,313 Supplemental cash flow disclosures: Interest paid Income taxes paid 983 $ 5,027 1,229 13,701 6,278 18,107 %24 TarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Stockholders' Equity (In thousands) Accumulated Additional Paid-in Other Common Donated Deferred Comprehensive Retained Treasury Štock Stock Capital Capital Compensation Income Eamings Total Balance, December 31, 2015 Purchase of treasury stock Issuance of treasury stock $569 $243,888 $(108,931) $157,763 (23,112) 1,199 $261 $5,460 $17.197 $(681) (23,112) 1,199 Tax benefit of stock options exercised Deferred compensation expense 349 349 424 424 Net income 20,270 20,270 Other Comprehensive Income 733 733 Balance, December 31, 2016 Purchase of treasury stock Issuance of treasury stock Tax benefit of stock options exercised Deferred compensation expense Net income $261 $5,460 $17,546 $(257) $1,302 $264,158 ($130,844) $157,626 (2,935) 4,317 (2.935) 4,317 1,765 1,765 103 103 31,222 31,222 Other Comprehensive Income 437 437 Balance, December 31, 2017 Purchase of treasury stock Issuance of treasury stock $261 $5,460 $19,311 $(153) $1,739 $295,380 $(129,462) $192,535 (18,192) 3,704 (18,192) 3,704 Tax benefit of stock options exercised Deferred compensation expense 1,429 1,429 75 75 Net income 22,527 22.527 Other Comprehensive Income 2,144 2,144 Balance, December 31, 2018 $261 $5,460 $20,740 $(79) $3,883 $317,907 $(143,950) $204,222 Five-Year Consolidated Financial Summary (unaudited) (In thousands, except per share data) For the period ended December 31 2018 2017 2016 2015 2014 Income statement data: 891,394 32,175 3.6% 20,270 503,434 38,212 950,484 857,885 49,559 Net Sales 821,359 Pretax Income 35,757 66,186 8.1% 41,698 Percent of net sales 3.8% 5.8% 7.6% Net income 22,527 31,222 22,929 Per share of common stock: 1.60 1.56 1.15 1.02 2.01 1.54 Basic earnings per share Diluted earnings per share Common shares outstanding 1.14 1.01 2.00 1.53 19,531 19,555 19,806 20,703 14,599 Balance sheet data: 191,297 209,095 109,758 120,864 329,959 15,979 204,222 188,115 194,445 122,418 65,505 46,658 Current assets Current liabilities 91,990 108,412 296,527 133,434 118,308 87,312 281,757 105,051 PPE and intangibles Total assets 296,347 5,286 157,627 170,121 Noncurrent liabilities 12,002 192,535 5,686 157,763 4,211 100,405 Shareholders' equity Other data: 56,913 8,316 57,863 Net working capital Capital expenditures Depreciation and amortization expense 99,337 96,125 18,208 76,137 28,959 30,388 31,348 15,231 13,465 12,175 9,833 6,101 Return on average shareholders' investment 28% 16% 11% 18% 13% 24% Return on average assets 7% 11% 7% 15% NET INCOME NET SALES NET INCOME PER SHARE $900,000 $50,000 sa00,000 $40,000 $2.00 $700,000 $30,000 $1.50 $600,000 $20,000 $1.00 $500,000 $10,000 $0.50 $400,000 2016 2017 2018 2016 2017 2018 2014 2015 2016 2017 2018 The purpose of this mini-case is to familiarize you with the EarthWear Company by reviewing key pieces of information included in the annual report in the textbook. You can locate the EarthWear Clothiers 2018 Annual Report following Chapter 1 in the textbook. In the ebook format, the the EarthWear Clothiers 2018 Annual Report appears as a separate section following Chapter 1. Please refer to the Table of Contents in your respective text should you have issues locating the EarthWear Clothiers 2018 Annual Report. INSTRUCTIONS 1 Find the information requested in the 'WORKSHEET tab of this spreadsheet and record your answers in the space provided as evidence that you've visited the sites. Remember that the purpose of this exercise is to become familiar with these annual report, so please take a few minutes to review all content. This activity is not meant to be difficult but the more familiar you Fields you are to complete on the WORKSHEET are colored yellow. The color will disappear as the field is completed. Please input your answers into Connect or print a copy of the WORKSHEET to submit unless 2 your instructor requests an electronic submission. The WORKSHEET is formatted to print on a single sheet of paper. EarthWear Clothiers 2018 Annual Report 1. Who is the current CEO of EarthWear? 2. How much did Accounts Payable change in dollars and percent from 2017 to 2018? 3. In which of the last 5 years was EarthWear's Net Income highest, and what was Net Income in that year? 4. Does EarthWear use the FIFO or LIFO inventory valuation method? Hint: See the Notes to the Consolidated Financial Statements 5 What is the date of Willis & Adams' Audit Report included in the Annual Report? EarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Comprehensive Income (In thousands, except share data) For the period ended December 31 2018 2017 2016 $ 950,484 546,393 $ 857,885 $ 891,394 490,530 Net Sales Cost of sales 472,739 Gross Profit 404,091 364,012 385,146 400,864 353,890 Selling, general, and administrative expenses Nonrecurring charge (credit) 334,994 (1,153) 8,190 Income from operations Other income (expense): Interest expense 40,079 51,305 38,784 (983) (1,229) (5,027) Interest income 1,459 573 10 Other (4,798) (1,091) (1,593) Total other income (expense), net (4,322) (1,747) 6,610 Income before income taxes 32,174 35,757 13,230 49,558 Income tax provision 18,337 11,905 Net income $ 22,527 $ 31,221 $ 20,269 Other Comprehensive Income: Foreign currency translation adjustments Unrealized gain on forward contracts Other comprehensive income (loss), net of tax (1,151) 3,295 2,144 437 733 437 733 Comprehensive Income $ 24,671 $ 31,658 $ 21,002 Net Income per Common Share: Basic earnings per share 1.15 1.60 1.02 Diluted earnings per share 1.14 1.56 1.01 Basic weighted average shares outstanding Diluted weighted average shares outstanding 19,531 19,774 19,555 20,055 19,806 19,996 Consolidated Balance Sheets (In thousands) December 31 Assets 2018 2017 Current assets: $ 49,668 11,539 $ 48,978 12,875 122,337 11,458 6,315 Cash and cash equivalents Receivables, net Inventory Prepaid advertising Other prepaid expenses Deferred income tax benefits 105,425 10,772 3,781 7,132 6,930 Total current assets 209,095 188,115 Property, plant, and equipment, at cost: Land and buildings Fixtures and equipment Computer hardware and software 70,918 62,003 64,986 66,804 61,800 47,466 Right-to-Own Leased Space and Equipment Leasehold improvements 6,510 6,076 1,894 2,010 Total property, plant, and equipment Less accumulated depreciation and amortization 206,427 85,986 184,040 76,256 Property, plant, and equipment, net Intangibles, net 120,441 107,784 423 628 $ 329,959 $ 296,527 Total assets Liabilities and Stockholders' Equity Current liabilities: Lines of credit $4 7,621 45,430 11,011 59,009 5,890 23,728 Accounts payable Reserve for returns 5,115 25,364 1,794 Accrued liabilities Accrued profit sharing Income taxes payable 1,532 8,588 6,666 Total current liabilities 109,758 91,990 Operating Lease Liability 6,510 6,076 Deferred income taxes 9,469 5,926 Stockholders' Equity: Common stock, 26,121 shares issued Donated capital Additional paid-in capital Deferred compensation Accumulated other comprehensive income Retained earnings Treasury stock, 6,546 and 6,706 shares at cost 261 261 5,460 20,740 (79) 3,883 317,907 (143,950) 5,460 19,311 (154) 1,739 295,380 (129,462) Total Stockholders' Equity 204,222 192,535 Total liabilities and Stockholders' Equity $ 329,959 $ 296,527 EARTHWEAR CLOTHIERS Consolidated Statements of Cash Flows (In thousands) For the period ended December 31 Cash flows from (used for) operating activities: 2018 2017 2016 $ 22,527 $ 31,221 $ 20,270 Net income Adjustments to reconcile net income to net cash flows from operating activities: Nonrecurring charge (credit) Depreciation and amortization Deferred compensation expense (1,150) 13,465 103 8,190 15,231 12,175 424 75 Deferred income taxes 3,340 5,376 (3,866) Loss on disposal of fixed assets Changes in assets and liabilities excluding the effects of divestitures: 284 602 381 (3,666) 13,954 (1,849) (1,628) 2,716 Receivables, net 2,165 Inventory Prepaid advertising Other prepaid expenses Accounts payable (1,336) (16,912) (686) (2,534) 14,078 37,370 3,110 1,152 (8,718) 439 Reserve for returns 775 692 4,545 (1,320) (3,834) Accrued liabilities Accrued profit sharing Income taxes payable Tax benefit of stock options (709) (262) 1,923 1,429 2,144 (4,982) 328 (2,810) 1,765 349 Other 437 733 Net cash from (used for) operating activities 39,367 79,873 48,266 Cash flows from (used for) investing activities: Cash paid for capital additions (28,959) (18,208) (30,388) Net cash flows used for investing activities (28,959) (18,208) (30,388) Cash flows from (used for) financing activities: Proceeds from (payment of) short-term debt Purchases of treasury stock Issuance of treasury stock 3,390 (18,192) 3,704 (17,692) (2,935) 4,317 4,228 (23,112) 1,199 Net cash flows used for financing activities (11,098) (16,310) (17,685) Net increase (decrease) in cash and cash equivalents (689) 45,355 193 Beginning cash and cash equivalents 49,668 4,313 4,120 Ending cash and cash equivalents $ 48,978 $ 49,668 $ 4,313 Supplemental cash flow disclosures: Interest paid Income taxes paid 983 $ 5,027 1,229 13,701 6,278 18,107 %24 TarthWear EARTHWEAR CLOTHIERS Consolidated Statements of Stockholders' Equity (In thousands) Accumulated Additional Paid-in Other Common Donated Deferred Comprehensive Retained Treasury Štock Stock Capital Capital Compensation Income Eamings Total Balance, December 31, 2015 Purchase of treasury stock Issuance of treasury stock $569 $243,888 $(108,931) $157,763 (23,112) 1,199 $261 $5,460 $17.197 $(681) (23,112) 1,199 Tax benefit of stock options exercised Deferred compensation expense 349 349 424 424 Net income 20,270 20,270 Other Comprehensive Income 733 733 Balance, December 31, 2016 Purchase of treasury stock Issuance of treasury stock Tax benefit of stock options exercised Deferred compensation expense Net income $261 $5,460 $17,546 $(257) $1,302 $264,158 ($130,844) $157,626 (2,935) 4,317 (2.935) 4,317 1,765 1,765 103 103 31,222 31,222 Other Comprehensive Income 437 437 Balance, December 31, 2017 Purchase of treasury stock Issuance of treasury stock $261 $5,460 $19,311 $(153) $1,739 $295,380 $(129,462) $192,535 (18,192) 3,704 (18,192) 3,704 Tax benefit of stock options exercised Deferred compensation expense 1,429 1,429 75 75 Net income 22,527 22.527 Other Comprehensive Income 2,144 2,144 Balance, December 31, 2018 $261 $5,460 $20,740 $(79) $3,883 $317,907 $(143,950) $204,222 Five-Year Consolidated Financial Summary (unaudited) (In thousands, except per share data) For the period ended December 31 2018 2017 2016 2015 2014 Income statement data: 891,394 32,175 3.6% 20,270 503,434 38,212 950,484 857,885 49,559 Net Sales 821,359 Pretax Income 35,757 66,186 8.1% 41,698 Percent of net sales 3.8% 5.8% 7.6% Net income 22,527 31,222 22,929 Per share of common stock: 1.60 1.56 1.15 1.02 2.01 1.54 Basic earnings per share Diluted earnings per share Common shares outstanding 1.14 1.01 2.00 1.53 19,531 19,555 19,806 20,703 14,599 Balance sheet data: 191,297 209,095 109,758 120,864 329,959 15,979 204,222 188,115 194,445 122,418 65,505 46,658 Current assets Current liabilities 91,990 108,412 296,527 133,434 118,308 87,312 281,757 105,051 PPE and intangibles Total assets 296,347 5,286 157,627 170,121 Noncurrent liabilities 12,002 192,535 5,686 157,763 4,211 100,405 Shareholders' equity Other data: 56,913 8,316 57,863 Net working capital Capital expenditures Depreciation and amortization expense 99,337 96,125 18,208 76,137 28,959 30,388 31,348 15,231 13,465 12,175 9,833 6,101 Return on average shareholders' investment 28% 16% 11% 18% 13% 24% Return on average assets 7% 11% 7% 15% NET INCOME NET SALES NET INCOME PER SHARE $900,000 $50,000 sa00,000 $40,000 $2.00 $700,000 $30,000 $1.50 $600,000 $20,000 $1.00 $500,000 $10,000 $0.50 $400,000 2016 2017 2018 2016 2017 2018 2014 2015 2016 2017 2018

Answer rating: 100% (QA)

Solution 1 CEO Calvin J Rodgers 2 Change in Accounts Payable ... View the full answer