Weebly



AC499: Bachelors Capstone in AccountingProfessor: Laura PrevratilUnit 9 AssignmentFinal ProjectRainbow Paint Company Annual Report DocumentsBy: Frank J. Ball Sr.Rainbow Paint Company1234 Main Street Suite B, Any Town, California 91108 Tel: 626-555-1234, Fax: 626-555-1235January 2013 President’sLetter to ShareholdersDear fellow shareholders:In our 2012 outlook we have performed with a stronger appearance than in 2011 with an increase in sales and new colors to our product lines. We have presented strong figures against our competition like Benjamin Moore, Behr, Valspar, Sherwin-Williams and Olympic, by establishing ourselves through more retail vendors this year and letting consumers know that we are a high-quality paint company.Our logistics team has improved the efficiency of our shipping to ensure fast reliable on-time delivery of all orders to our customers. Our engineers have improved the proficiency of the production lines so that our products maintain the same quality in every can purchased no matter if it is bought in New Jersey or in New Mexico. Our scientists are perfecting new blends so that our colors are unique, stand out from our competitors, and are more appealing to the consumers.Our earnings per share this year are $4.10, and our dividend yield is 3.6%. Overall, 2012 showed healthy growth in sales, gross profit, operating income and net income. With the construction and housing market still not showing significant growth for a company such as ours who relies on those trades as part of their consuming market to show continued growth means that we are doing something right. Our customers appreciate a high quality product at an affordable cost, which is exactly what we are providing to them.In other news, we continue to look at ways to move ahead and with that in mind we will expand our current sales from the United States to include all of North America encompassing Canada and Mexico. To ensure that we meet the demands of the added sales volume we will be expanding production at our facilities from the current two shifts, five day a week schedule to three shifts, seven day a week schedule. We will be incorporating sales and logistics software with production scheduling so that we can ensure that all orders will be met and shipped to the proper customers.Looking ahead, the first quarter of 2013, in terms of advanced sales, is especially good, and we are expecting a stellar year as we grow into our new markets in Canada and Mexico and as we expand our markets in the US. We hope to be offering new colors blends for our customers, and with our expanded production we will be able to meet any and all supply demands.Finally, we are on target to have our 2012 Annual Report and Consolidated Financial Statements filed on the company website by the last week of March or early April.As always, thank you for your ongoing support.Frank J. Ball Sr.PresidentRainbow Paint CompanyManagement’s Discussion and Analysis of Financial Condition and Results of OperationsThis Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Any statements contained herein regarding our future financial performance or operations (including, without limitation, statements to the effect that we ‘believe’, ‘expect’, ‘plan’, ‘may’, ‘will’, ‘project, ‘continue, or ‘estimate’ or other variations thereof) should be considered forward-looking statements. Actual results could differ from those projected as a result of a number of important factors, including those under ‘Risk Factors’. Readers are also encouraged to refer to the documents regularly filed by us with the SEC, including our full annual report and financial documents.Overview:Rainbow Paint Company designs, manufactures and sells custom high-quality paint of various colors for both interior and exterior use of the home and business. Our engineers and scientists are accelerating productivity, innovation and discovery to ensure that we have the best products for our customer base. Our logistics team is working with graphical design system integrated software to ensure that our products arrive on time as ordered by the customers. We believe our long term and focus on technology and customer support will lead to the success of our customers, employees, suppliers and stockholders. We sell our paint products to a large number of retail customers in a variety of markets in the US and are looking to expand our market to the entire North American continent to include Canada and Mexico. The key strategies that we focus on in running our business are the following:Expanding our customer base:We strive to increase our already broad customer base by increasing our production facilities from two shifts, five days; to three shifts, seven days. In this manner we will be able to increase production to meet demand for our products in new markets including Canada and Mexico.Maintaining a high level of customer satisfaction.To maintain a high level of customer satisfaction we strive to offer various blends of paint colors unique and different from our competition. Our scientists are working on bases that will last longer on our exterior colors, which will give us the edge over our competition. Our engineers use innovation and technology to accelerate production, which will provide cost-effective solutions for our customers while also maintaining the highest quality standards that we are known for and still maximize profits. We believe that it is crucial that we continue to offer products with the highest quality and reliability, and that we provide these products in a cost efficient way.Current business outlook.Since the 2008 housing market downturn, many of the retail industries we serve have been cynical and have experienced periodic downturns. In assessing our business, we consider the trends in the industry reports of specific vertical industries that we target. Although we remain concerned by the continued weakness, we have seen significant sales increases. We believe this trend could be coupled with the fact that customers are fixing up and/or repairing/remodeling their current homes or businesses. If the economy continues to improve and the housing market picks up we could see significant increases in our current sales growth. Our key strategies are to maintain a stable gross margin and to optimize our operating cost structure while maintaining strong employee productivity.Results of Operations.The following table sets forth for the periods indicated, the percentage of net sales as reflected in our Income Statement:2011 2012 Percentage of GrowthSales $ 3,257,600.00 $ 5,125,000.00 63.56%We are pleased to report continued revenue growth in 2012. We believe that the stability of our business despite the weakened economy is a validation of the value we deliver to our customers and our approach to measurement and control. We believe that our strong growth in large orders illustrate the mainstream acceptance that our products continue to Sales: Our net sales were $5,125,000 with a healthy 63% increase over the same sales periods the previous year. Our gross profit in 2012 was $1,600,000, which showed a 70% increase over the same period the previous year.Operating Expenses: Our total operating expenses rose to $975,000, which increased equally to our gross profit by 70%. The increase in our operating expenses was due to higher personnel expenses which related in variable compensation and benefits to ensure that product demand was met and orders were filled. Operating Income: Our operating income before interest and tax expenses rose to $625,000 which increased from 2011 by 69%.Provision for Income Taxes: Our income before tax was $545,000, which left us with a tax liability of $300,000. This tax liability is a 58% increase over our 2011 tax liability.Liquidity and Capital Resources:Working Capital 750,000.00 Current Ratio2.0Quick Ratio1.0A/R Turnover13.3Days in Receivable27.4Inventory Turnover5.7Fixed Assets /Long-term Liabilities1.7Liabilities/Stock-holders Equity1.0We believe that with a current ratio of 2.0 and a quick ratio of 1.0 Rainbow Paint is a company in a strong financial position given the economic setting that our country is in. Our A/R turnover with our receivables being paid in less than thirty days shows that we have good internal control in our credit department. Our inventory turnover number is not as good as we would like it to be with product in the facility up as long as 65 days. Some of this is due to our WIP (Work in Process), but we are implementing new software with our logistics team to help streamline the efficiency of shipping product out to our customers.Quantitative and Qualitative disclosures about market risks:Our sales are subject to inherent risks, including fluctuations in the economy which could lead to difficulty in account receivable collection, sales, costs and production. The vast majority of our retail vendors rely on consumers who will purchase our products for us in the construction, remodeling industries and home and business owners wishing to improve the appearance of their existing structures. If there is a downturn in the economy our sales could suffer.Although the housing market has been in a downturn since 2008, we have seen increase sales growth. The marketplace for our products dictates that our products be shipped very quickly after an order is received. As a result we are implementing new software with our logistics team to ensure that we have sufficient product on hand and that the product is shipped quickly and correctly to the customer as ordered.2012 Financial Highlights20112012Net Income $ 211,200.00 $ 245,000.00 Retained Earnings $ 793,000.00 $ 968,000.00 2011 2012 Sales $ 3,257,600.00 $ 5,125,000.00 *Reconciliation to GAAP net income and rest of financial documents may be found at the end of this report.762000762009525References:SEC Checklist for Annual Report (Item 6 – Selected Financial Data, Item 7 – Management’s Discussion and Analysis): ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download