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PLANT OPERATIONS REPORT Year 11

PLANT CAPACITY (000s of pairs w/o OT) North AmericaPlantEurope-Africa

PlantAsia-Pacific

PlantLatin America

PlantAll PlantsCombined

Plant Capacity at the End of Year 10+ New Construction (initiated in Year 10)+ Capacity Purchased (at beginning of Y11)

– Capaci ty Sold-Off (at beginning of Y11)Capacity Available for Year 11 Production

New Construction Initiated in Year 11Total Capacity Available for Year 12

2,000 pairs

2,000 pairs

000

2,0000

0 pairs

0 pairs

00000

4,000 pairs

4,000 pairs

000

4,0000

0 pairs

0 pairs

00000

6,000 pairs

6,000 pairs

000

6,0000

Plan t Upgrade ——–Options Online (initiated prior to Y11)Pending (initiated in Y11) nonenone nonenone nonenone nonenone

PLANT INVESTMENT ($000s) North AmericaPlantEurope-Africa

PlantAsia-Pacific

PlantLatin America

PlantAll PlantsCombined

Gross Investment at the End of Year 10+ Upgrade Options (initiated in Year 10)+ New Construction (initiated in Year 10)+ Capacity Purchased (at beginning of Y11)

– Capaci ty Sold-Off (at beginning of Y11)+ Energy Efficiency Initiatives (in Y11)

Gross Investment in Year 11 Capacity – Accumulated Depreciation (through Y10) – Current Depreciation (incurred in Y11)

Net Investment in Year 11 CapacityUpgrade and Construction Work in Progress

75,00000000

75,00027,500

3,75043,750

0

00000000000

180,00000000

180,00031,500

9,000139,500

0

00000000000

255,00000000

255,00059,00012,750

183,2500

LABOR STATISTICS Year 10 Year 11

North America

Year 10 Year 11

Europe-Africa

Year 10 Year 11

Asia-Pacific

Year 10 Year 11

Latin America

Compensat ion ——–($000s per worker)

Annual Base Wage Incentive Pay

Total Compensation

Worker Productivity (pairs per worker per year)Number of Workers Employed

Incentive Pay Per Pair ($ per non-rejected pair)

4,000 4,021501 475

15.0 15.25.1 4.8

20.1 19.91.25 1.25

0 00 0

0.0 0.00.0 0.00.0 0.0

0.00 0.00

2,500 2,5001,412 1,600

2.8 2.80.9 0.93.7 3.8

0.40 0.40

0 00 0

0.0 0.00.0 0.00.0 0.0

0.00 0.00

Cumulat ive Best ——–Practices

$ Per Worker $ Per Branded Pair

1,0000.25

00.00

5000.20

00.00

PRODUCTION STATISTICS Branded P-LabelNorth America

Branded P-LabelEurope-Africa

Branded P-LabelAsia-Pacific

Branded P-LabelLatin America

Branded P-LabelOverall

Footwear ———–Production(000s of pairs)

Regular Pairs ProducedOvertime Pairs Produced

Rejected PairsNet Footwear Production

Reject Rate (% of regular + OT production)Number of Models ProducedS/Q Rating of Pairs Produced

1,800 1050 0

90 51,710 100

5 .0% 4 .0%200 1004☆ 4☆

0 00 00 00 0

0.0% 0.0%0 00☆ 0☆

3,500 5000 0

249 313,251 469

7 .1% 6.1%200 1004☆ 4☆

0 00 00 00 0

0.0% 0.0%0 00☆ 0☆

5,300 6050 0

339 364,961 569

6.4% 6.0%

Capacity Utilization (max utilization at full OT = 120%) 95.3% 0.0% 100.0% 0.0% 98.4%

BRANDED PRODUCTION COSTS $000s $ / pair North America

$000s $ / pair Europe-Africa

$000s $ / pair Asia-Pacific

$000s $ / pair Latin America

$000s $ / pair Overall

This section listscosts for brandedproduction only.Private-Labelproduction costsare listed on thePrivate-LabelOperations report.

Materials Costs —– StandardSuperior

Labor Costs —– Regular PayOvertime Pay

Best Practices TrainingPlant SupervisionEnhanced Styling/FeaturesTQM/6-Sigma Quality ProgramProduction Run Set-UpPlant MaintenanceDepreciation

Total Production CostsCost of Rejected Pairs

4 ,951 2 .9011,829 6.928,938 5 .23

0 0.00423 0.25

2,693 1 .572,000 1 .17

945 0.556,000 3 .514,607 2 .693,544 2 .07

45,930 26.862,296 1 .34

0 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.00

9,628 2 .9623,001 7 .08

5,251 1 .620 0.00

613 0.192,800 0 .862,000 0 .621,750 0 .546,000 1 .857,481 2 .307,875 2 .42

66,399 20.424,723 1 .45

0 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.00

14,579 2 .9434,830 7 .0214,189 2 .86

0 0.001,036 0 .215,493 1 .114,000 0 .812,695 0 .54

12,000 2 .4212,088 2 .4411,419 2.30

112,329 22.647,020 1 .42

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MARKETING & ADMINISTRATIVE REPORT Year 11

MARKETING EXPENSES $000s $ / pair North America

$000s $ / pair Europe-Africa

$000s $ / pair Asia-Pacific

$000s $ / pair Latin America

$000s $ / pair Overall

Internet ————–Segments

AdvertisingWeb Site MaintenanceCelebrity Endorsements

Total Internet Marketing

400 4.881,177 14.35

0 0.001,577 19.23

410 4.821,221 14.36

0 0.001,631 19.19

191 3.35818 14.35

0 0.001,009 17.70

199 3.49818 14.35

0 0.001,017 17.84

1,200 4 .274,034 14.36

0 0.005,234 18.63

Wholesale ———Segments

AdvertisingRebate RedemptionRetailer SupportOn-Time DeliveryCelebrity Endorsements

Total Wholesale Marketing

6,600 4 .871,016 0 .751,200 0 .891,016 0 .75

0 0.009,832 7 .26

6,590 4 .811,027 0 .751,200 0 .881,027 0 .75

0 0.009,844 7 .19

3,309 3 .36740 0.75600 0.61740 0.75

0 0.005,389 5 .47

3,301 3 .49378 0.40600 0.63709 0.75

0 0.004,988 5 .28

19,800 4 .253,161 0 .683,600 0 .773,492 0 .75

0 0.0030,053 6 .46

1. Total regional advertis ing expenditures are allocated to internet and wholesale seg-ments based on each segment's percentage of total branded pairs sold in the region.

2. Total expenditures for c elebrity endorsements are allocated to internet and whole-sale segments based on each segment's percentage of total branded pairs sold.

ADMINISTRATIVE EXPENSES $000s $ / pair North America

$000s $ / pair Europe-Africa

$000s $ / pair Asia-Pacific

$000s $ / pair Latin America

$000s $ / pair Overall

General AdministrationOther Corporate Overhead

Total Administrative Expenses

540 0.381,746 1 .222,286 1 .59

546 0.381,768 1 .222,314 1 .59

392 0.381,268 1 .221,660 1 .59

376 0.381,218 1 .221,594 1 .59

1,854 0 .386,000 1 .227,854 1 .59

CEOIndustry 8

PRIVATE-LABEL REPORT Year 11

OFFERS SUBMITTED North AmericaMarketEurope-Africa

MarketAsia-Pacific

MarketLatin America

MarketCompany

TotalOffers to Private ————

Label BuyersPairs Offered (000s)S/Q RatingBid Price ($ per pair)

4☆100 pairs

40.000☆

0 pairs

35.004☆

469 pairs

37.000☆

0 pairs

35.00

569 pairs

Pairs Offered (000s) 100 pairs 0 pairs 469 pairs 0 pairs 569 pairs

PRODUCTION SHIPPING $000s $ / pair North America

$000s $ / pair Europe-Africa

$000s $ / pair Asia-Pacific

$000s $ / pair Latin America

$000s $ / pair Overall

Production ———–Costs

Materials ————–

Labor ——————–

Standard Superior Regular Overtime

Styling / FeaturesProduction Run Set-UpOther Allocated Costs

Total Production Costs

389 3.89486 4.86521 5.21

0 0.00

400 4.00625 6.25711 7 .11

3,132 31.32

0 0.000 0.000 0.000 0.00

0 0.000 0.000 0.000 0.00

1,854 3 .952,312 4 .93

752 1.600 0.00

600 1.28625 1.332,931 6 .259,074 19.35

0 0.000 0.000 0.000 0.00

0 0.000 0.000 0.000 0.00

2,243 3 .942,798 4 .921,273 2 .24

0 0.00

1,000 1 .761,250 2 .203,642 6 .40

12,206 21.45

Pairs Produced (000s of pairs after rejects) 100 pairs 0 pairs 469 pairs 0 pairs 569 pairs

Shipments To ———————–(000s of pairs)

N.A. WarehouseE-A WarehouseA-P WarehouseL.A. Warehouse

100 pairs000 pairs

0 pairs000 pairs

0 pairs0

4690 pairs

0 pairs000 pairs

100 pairs0

4690 pairs

1. Best practices, plant supervision, TQ M/6-Sigma, plant maintenance, and deprecia-tion cost allocations based on percentage of total pairs produced before rejects.

2. For more pr ivate-label production info (rejected pairs, reject rate, number of models,and S/Q rating) see the Production Statistics section of the Plant Operations Report.

REVENUES / COSTS / MARGINS $000s $ / pair North America

$000s $ / pair Europe-Africa

$000s $ / pair Asia-Pacific

$000s $ / pair Latin America

$000s $ / pair Overall

Direct ————–Costs

Production Costs ± Exchange Rate Adjustments Freight Import Tariffs Packaging / Shipping

Gross Private-Label Revenues± Exchange Rate Adjustments

Net Private-Label Revenues

Margin Over Direct Costs

4,000 40.000 0.00

4,000 40.003,132 31.320 0.00

100 1.000 0.00

100 1.00668 6.68

0 0.000 0.00

0 0.000 0.000 0.000 0.000 0.000 0.000 0.00

17,353 37.000 0.00

17,353 37.009,074 19.350 0.00

469 1.000 0.00

469 1.007,341 15.65

0 0.000 0.00

0 0.000 0.000 0.000 0.000 0.000 0.000 0.00

21,353 37.530 0.00

21,353 37.5312,206 21.450 0.00

569 1.000 0.00

569 1.008,009 14.08

Company Operating Reports Copyright © GLO-BUS Software, Inc. Page 3

Total company administrative expenses are allocated to each region based on the region's percentage of total branded pairs sold.

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INCOME STATEMENT Year 11

CONSOLIDATED INCOME STATEMENT $000s $ / pair North America

$000s $ / pair Europe-Africa

$000s $ / pair Asia-Pacific

$000s $ / pair Latin America

$000s $ / pair Overall

Segment Revenues ——— InternetWholesalePrivate-Label

Operating —–—Costs

Cost of Pairs SoldWarehouse ExpensesMarketing ExpensesAdministrative Expenses

Gross Revenues from Footwear Sales± Exchange Rate Adjustments

Net Revenues from Footwear Sales

Operating Profit (Loss)

6,806 83.0064,992 48.00

4,000 40.0075,798 49.35

0 0.0075,798 49.3543,208 28.13

4,471 2 .9111,409 7.432,286 1 .49

14,424 9 .39

7,055 83.0065,712 48.00

0 0.0072,767 50.05

0 0.0072,767 50.0538,450 26.44

4,424 3 .0411,475 7.892,314 1 .59

16,104 11.08

4,731 83.0040,426 41.0017,353 37.0062,510 41.34

0 0.0062,510 41.3431,908 21.10

4,024 2 .666,398 4 .231,660 1 .10

18,520 12.25

4,731 83.0039,690 42.00

0 0.0044,421 44.33

0 0.0044,421 44.3328,603 28.55

3,473 3 .476,005 5 .991,594 1 .594,746 4 .74

23,323 83.00210,820 45.30

21,353 37.53255,496 46.42

0 0.00255,496 46.42142,169 25.83

16,392 2 .9835,287 6 .41

7,854 1 .4353,794 9 .77

PROFITABILITY & PAYOUT Year 10 Year 11Earnings Per Share $2.50 $3.19Dividend Per Share $1.00 $0.00

Interest Income (Expenses)Other Income (Expenses)Pre-Tax Profit (Loss)Income Taxes

Net Profit (Loss)

-8,183 -1.490 0.00

45,611 8.2913,683 2 .4931,928 5 .80

1. These items include revenues collected from and costs associated with inventory liquidated at the beginning of Y11. See the last s ection of the Distribution & Warehouse Report.2. This item includes any charitable contributions and/or instructor-imposed fines (appearing as negative) and/or instructor-awarded refunds ( appearing as positive).3. The income tax rate is 30%. If a net loss was recorded in Y10, the loss is carried forward and may offset some or all taxable Y11 profit and reduce Y11 income taxes.

CEOIndustry 8

REVENUE-COST-PROFIT PERFORMANCEIN THE BRANDED SEGMENTS

Year 11

INTERNET MARKET PERFORMANCE $000s $ / pair North America

$000s $ / pair Europe-Africa

$000s $ / pair Asia-Pacific

$000s $ / pair Latin America

$000s $ / pair Overall

Operating ——Costs

Cost of Pairs SoldWarehouse ExpensesMarketing ExpensesAdministrative Expenses

Revenues from Internet SalesCustomer-Paid Shipping FeesGross Internet Revenues

± Exchange Rate AdjustmentsNet Internet Revenues

Operating Profit (Loss)

5,986 73.00820 10.00

6,806 83.000 0.00

6,806 83.002,283 27.84

878 10.711,577 19.23

131 1.601,937 23.62

6,205 73.00850 10.00

7,055 83.000 0.00

7,055 83.002,248 26.45

910 10.711,631 19.19

135 1.592,131 25.07

4,161 73.00570 10.00

4,731 83.000 0.00

4,731 83.001,222 21.44

625 10.961,009 17.70

91 1.601,784 31.30

4,161 73.00570 10.00

4,731 83.000 0.00

4,731 83.001,627 28.54

628 11.021,017 17.84

91 1.601,368 24.00

20,513 73.002,810 10.00

23,323 83.000 0.00

23,323 83.007,380 26.263,041 10.825,234 18.63

448 1.597,220 25.69

MARKET STATISTICS Year 10 Year 11 Year 10 Year 11 Year 10 Year 11 Year 10 Year 11 Year 10 Year 11Pairs Sold (000s)Market ShareOperating Profit Margin

68 828.3% 9.3%

26.8% 28.5%

68 858.3% 9.7%

26.6% 30.2%

45 578.3% 9.2%

33.6% 37.7%

45 578.3% 9.2%

25.8% 28.9%

226 2818.3% 9.4%

27.9% 31.0%

WHOLESALE MARKET PERFORMANCE $000s $ / pair North America

$000s $ / pair Europe-Africa

$000s $ / pair Asia-Pacific

$000s $ / pair Latin America

$000s $ / pair Overall

Operating —––Costs

Cost of Pairs SoldWarehouse ExpensesMarketing ExpensesAdministrative Expenses

Gross Wholesale Revenues± Exchange Rate Adjustments

Net Wholesale Revenues

Operating Profit (Loss)

64,992 48.000 0.00

64,992 48.0037,693 27.84

3,493 2 .589,832 7 .262,155 1 .59

11,819 8.73

65,712 48.000 0.00

65,712 48.0036,202 26.44

3,514 2 .579,844 7 .192,179 1 .59

13,973 10.21

40,426 41.000 0.00

40,426 41.0021,143 21.44

2,930 2 .975,389 5 .471,569 1 .599,395 9 .53

39,690 42.000 0.00

39,690 42.0026,976 28.55

2,845 3 .014,988 5 .281,503 1 .593,378 3 .57

210,820 45.300 0.00

210,820 45.30122,014 26.22

12,782 2 .7530,053 6 .46

7,406 1 .5938,565 8 .29

MARKET STATISTICS Year 10 Year 11 Year 10 Year 11 Year 10 Year 11 Year 10 Year 11 Year 10 Year 11Pairs Sold (000s)Market ShareOperating Profit Margin

1,282 1 ,3548.3% 10.7%

18.7% 18.2%

1,282 1 ,3698.3% 11.0%

18.4% 21.3%

855 9868.3% 11.8%

20.0% 23.2%

855 9458.3% 11.3%6.2% 8.5%

4,274 4 ,6548.3% 11.1%

16.4% 18.3%

Company Operating Reports Copyright © GLO-BUS Software, Inc. Page 4

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BALANCE SHEET & CASH FLOW REPORT Year 11

Cash On Hand 29,475Accounts Receivable (see Note 1) 63,874Footwear Inventories 4,090

Total Current Assets 97,439Net Plant Investment (see Note 2) 183,250Construction Work in Progress 0

Total Fixed Assets 183,250

Total Assets 280,689

Accounts Payable (see Note 3) 13,613Overdraft Loan Payable (see Note 4) 01-Year Bank Loan Payable (see Note 5) 0Current Portion of Long-Term Loans (see Note 6) 16,300

Total Current Liabilities 29,913Long-Term Bank Loans Outstanding (see Note 7) 67,100

Total Liabilities 97,013

BeginningBalance

Changein Y11

Common Stock (see Note 8) 10,000 0 10,000Additional Capital (see Note 9) 100,000 0 100,000Retained Earnings (see Note 10) 41,750 +31,926 73,676

Total Shareholder Equity 151,750 +31,926 183,676

Return on Average Equity for Year 11 (see Note 11) 19.0%

Note 1: Of the $255,496 net revenues reported in the Y11 income statement, 25% havenot been collected from customers (and will be collected in Y12).

Note 2: For more details on net plant investment, see the Plant Investment section of the Plant Operations Report.

Note 3: Of the $54,452 in materials used for footwear production in Y11, 25% have notbeen paid for (and will be paid for in Y12).

Note 4: Loans for overdrafts are incurred automatically to prevent a negative year-endcash balance and carry an interest rate 2% above the rate for 1-year loans.

Note 5: The company's interest rate for a 1-year loan in Y11 was 7.0%.Note 6: This item represents the principal portion of all outstanding 5-year and 10-year

bank loans due to be repaid in Year 12.Note 7: Long-term bank loans outstanding:

LoanNumber

InitialYear

OriginalPrincipal

InterestRate Term

Out-standingPrincipal

AnnualPrincipalPayment

Year 12InterestPayable

1 Y7 115,000 8.5% 10- Yr 69,000 11,500 5,8652 Y9 24,000 7.5% 5-Yr 14,400 4,800 1,0803 - - - - - - -4 - - - - - - -5 - - - - - - -6 - - - - - - -7 - - - - - - -8 - - - - - - -9 - - - - - - -

10 - - - - - - -11 - - - - - - -12 - - - - - - -13 - - - - - - -14 - - - - - - -15 - - - - - - -16 - - - - - - -

Note 8: There are 10,000 shares issued and outstanding at a par value of $1.00 per share. The authorized maximum number of shares outstanding is 40,000.

Note 9: Additional Capital represents the amount over and above par value that share-holders have paid to purchase new shares of stock.

Note 10: Retained Earnings is a summation of all after-tax profits the company hasearned that have not been distributed to shareholders in the form of dividends.

Note 11: The formula for Returnon Average Equity is:

After-Tax profit(Beginning Equity + Ending Equity) ÷ 2

ASSETS $000s

LIABILITIES $000s

SHAREHOLDER EQUITY $000s

Balance Sheet Notes (all dollar and share figures in thousands)

BALANCE SHEET

Beginning Cash Balance 5,000Cash —————–

InflowsReceipts from Sales (see Note 1) 251,409Bank Loans ———————— 1-Year

5-Year 10-Year

000

Stock Issues (0 shares issued) 0Sale of Existing Plant Capacity 0Loan to Cover Overdrafts 0Interest on Y10 Cash Balance 100

Total Cash Available from All Sources 256,509

Payments to Materials Suppliers (see Note 2) 53,617Production Expenses (see Note 3) 57,335Distribution and Warehouse Expenses 34,675Marketing and Administrative Expenses 43,141Capita l ———–

Outlays Plant Upgrade Options Initiated 0 Purchase of Used Plant Capacity 0 Construction of New Capacity 0 Energy Efficiency Initiatives 0

Repayment of Principal ———–on Bank Loans (see Note 4) Overdraft Loan 01-Year Loan 05-Year Loans 4,80010-Year Loans 11,500

Interest Payments on ————— Overdraft Loan 0Bank Loans 8,283

Stock Repurchases (0 shares repurchased) 0Income Tax Payments 13,683Dividend Payments to Shareholders 0Charitable Contributions 0

Total Cash Outlays 227,034

Net Cash Balance (at the end of Year 11) 29,475

Note 1: Receipts from Sales represents 75% of Year 11 revenues and 25% of Year 10revenues due to a 3-month lag in receivables collections.

Note 2: Payments to Materials Suppliers represents 75% of the cost of materials usedfor Y11 production and 25% of teh cost of materials used for Y10 production due

to a 3-month lag in payments made to materials suppliers.Note 3: Production Expenses include all Y11 production-related expenses (adjusted for

the exchange rate effects of shipping to regional warehouses) except for depreciation (which is a non-cash accounting charge).

Note 4: Overdraft and 1-year loans received in Year 10 were repaid in full in Year 11.Interest on an overdraft loan received in Y10 would also be repaid in Y11.

CASH AVAILABLE IN YEAR 11 $000s

CASH OUTLAYS IN YEAR 11 $000s

Cash Flow Notes

Credit ————RatingMeasures

Interest Coverage Ratio (oper. profit ÷ interest exp.) 6.57 Debt-To-Assets Ratio (total debt ÷ total assets) 0.30 Default Risk Ratio (free cash flow ÷ principal payments) 2.74 Default Risk Rating (see Note 1) Medium Credit Rating (at the end of Year 11) A–

Current Ratio (current assets ÷ current liabilities) 3.26Operating Profit Margin (operating profit ÷ net sales revenues) 21.1%Net Profit Margin (after-tax profit ÷ net sales revenues) 12.5%Dividend Payout (dividend per share ÷ earnings per share) 0.0%Free Cash Flow (after-tax profit + [depreciation – dividends] ) 44,678Total Principal Payments ($000s to be paid in Year 12) 16,300

Note 1: A default r isk ratio of 3.00 or higher results in a Low default risk rating, 1.00 to3.00 results in a Medium rating, and below 1.00 results in a High rating.

CASH FLOW STATEMENT

SELECTED FINANCIAL STATISTICS

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