Worksheet + 500 words to answer the 5 questions

Scenario:

Apex Printing, Inc.

Apex Printing, Inc. is a private, domestic United States printer of periodicals, newspaper inserts, and advertising materials that accompany distributions of Sunday and weekday circulations of large metropolitan newspapers. The company, headed by CEO John Matthews, generates $450 million in revenues from three product lines (periodicals, inserts, and advertising) and has long-term contracts with several large U.S. retailers to produce weekly sales flyer inserts as well as metropolitan newspapers to produce Sunday magazine inserts and coupons. Its printing presses are characterized by offset print technology and capable of high-capacity output; in addition, the company recently migrated to water-soluble inks, which reduce manufacturing emissions considerably.

The company’s executive team, employees, and above all, its Vice President (VP) of Production, Luke Stewart, are committed to environmentally sustainable manufacturing practices. Presently, the only substrate Apex uses is paper, specifically newsprint of various weights. Trim and waste are recycled in accordance with the company’s sustainability commitment. Manufacturing divisions are geographically aligned with customers’ locations to minimize logistics cost and response time to customer requirements; however, a centralized corporate entity administers functions such as human resources, information technology, and financial reporting. The VP of Sales and Administration, James Simeon, oversees administration and quality compliance among the various divisions. There are presently five manufacturing divisions: Northwest, Southwest, Northeast, Southeast, and Midwest.

Currently, Apex is only marginally profitable, and as such, the Chief Financial Officer (CFO), Mary Francis, has indicated that external financing will be required to support a company expansion into a new segment of the printing sector: food packaging. This endeavor will require new investments in equipment as well as substrate inventory; promotional costs will also increase. In addition, Timothy Russell, the new Audit Committee Chair, has pointed out that the company’s compliance with the requirements of the Sarbanes-Oxley Act (SOX) will cause administrative costs to increase, as well. But following the requirements is paramount to successfully file a registration statement and issue equity to shareholders in an initial public offering (IPO).

As the newly hired VP of finance, you report to the CFO. In this capacity, your responsibilities include preparation of financial statements, comparative analysis and benchmarking to sector performance, and assessment of new business investment opportunities to grow Apex’s expansion endeavors in a challenging market.

Apex Printing

Balance Sheets

As of December 31, 2013 and 2012

000$

000$

Assets

2013

2012

Cash

6,000

5,700

Accounts Receivable

2,350

2,300

Inventory

12,100

6,500

Total Current Assets

20,450

14,500

Land

25,000

20,000

Building & Equipment

300,000

300,000

Less: Accumulated Depreciation – Building & Equipment

(187,850)

(160,000)

Total Long Term Assets

137,150

160,000

Total Assets

157,600

174,500

Liabilities and Stockholders’ Equity

Accounts Payable

4,600

3,500

Salaries Payable

0

2,100

Interest Payable

1,500

0

Short Term Notes Payable

12,000

0

Taxes Payable

0

5,600

Total Current Liabilities

18,100

11,200

Mortgate Payable

54,950

100,000

Total Long Term Liabilities

54,950

100,000

Common Stock

60,000

60,000

Retained Earnings

24,550

3,300

Total Stockholders’ Equity

84,550

63,300

Total Liabilities and Stockholders’ Equity

157,600

174,500

Apex Printing

Income Statements

For the Periods Ended December 31, 2013 and 2012

000$

000$

2013

2012

Revenue:

450,000

475,000

Less: Cost of Goods Sold

(324,300)

(374,500)

Less: Depreciation Expense

(27,850)

(26,000)

Gross Margin

97,850

74,500

Selling, General & Administrative Expenses

(29,100)

(32,000)

Income Before Interest & Taxes

68,750

42,500

Interest Expense

(7,500)

(6,000)

Income Before Taxes

61,250

36,500

Income Taxes

(35,000)

(30,000)

Net Income

26,250

6,500

Apex Printing

Statement of Cash Flows

For the Period Ended December 31, 2013

000$

Cash Flows from Operating Activities:

Net Income

26,250

Adjustments to reconcile net income to net cash provided by

operating activities

Depreciation Expense

27,850

Increase in accounts receivable

(50)

Increase in inventory

(5,600)

Decrease in salaries payable

(2,100)

Increase in interest payable

1,500

Decrease in taxes payable

(5,600)

Increase in Short Term notes Payable

12,000

Increase in accounts payable

1,100

Net Cash Flow from Operating Activities

55,350

Cash Flows from Investing Activities:

Cash paid to purchase land

(5,000)

Net Cash Flow from Investing Activities

(5,000)

Cash Flows From Financing Activities:

Cash paid for mortgage

(45,050)

Cash paid for dividends

(5,000)

Net Cash Flow from Financing Activities

(50,050)

Net Increase in Cash

300

Plus: Cash Balance at December 31, 2012

5,700

Cash Balance at December 31, 2013

6,000

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