Question

Cash Is King Inc a calendar year-end SEC registrant is a leading automotive retail as well as service chain. The company operates completely in the automotive aftermarket industry and is engaged principally in the retail sale of automotive parts, tires and accessories, automotive repairs and maintenance and the installation of parts. The Company's liquidity as well as capital requirements are primarily a function of its working capital needs, capital expenditures and debt service requirements. The Company has the subsequent transactions for the current year-

1) Acquisition of Property, Plant and Equipment on Account

On December 15th, the Company incurred $20 million of capital expenditures related to the acquisition of manufacturing equipment and machinery. The terms of the invoice are 2%/15, net 30. The amounts were unpaid as of year-end (i.e., included in the accounts payable balance). The Company intends to pay the invoice in early January, in accordance with the terms of the invoice.

2) Insurance Settlement Proceeds

Cash Is King Inc. has a warehouse as well as sales office in the Gulf Coast Region. The damage affected by Hurricane William (Hurricane) a Category 5 hurricane has rendered the warehouse inoperable as well as has likewise forced the company to rent temporary office space in Houston to accommodate its sales force. The Company reached a payment with its insurance carrier related to the damage from the hurricane and received proceeds of $15 million from its insurance carrier in connection with its claim for reimbursement. The Company plans to utilize the insurance proceeds to fund its defined-benefit pension plan rather than to rebuild the destroyed facility

3) Sale of Accounts Receivable

The Company sells undivided interests in designated pools of capable accounts receivable to a securitization vehicle. The Company uses securitization as a financing technique (example- to reduce more expensive bank debt - the interest rates the company obtains on notes issued by the qualifying special purpose entity are lower than the company could get on its own bank debt). The Company services, administers besides collects the receivables on behalf of the purchaser. The agreement includes certain covenants as well as provides for various events of termination. The agreement likewise requires that proceeds from securitization be used to pay down Company debt. During the current year, $11 million of receivables produced from sales of the Company's inventory were sold under the agreement and thus are not reflected in the accounts receivable balance in the Company's balance sheet.