Rainbow Paint Company
Financial Highlights 2006 2005
Net Sales $5,000,000 $3,200,000
Gross Profit $1,600,000 $1,120,000
Income from Operations $625,000 $432,000
Net Income $245,000 $211,200
Ratio of Net Sales to Assets 1.5% 2.2%
Rate Earned on Total Assets 10% 17.3%
Common Shares Outstanding 50,000 50,000
Earnings Per Share - Common Stock $4.10 $3.42
Dividends Per Share – Common Stock $0.90 $0.60
Rate Earned on Shareholders’ Equity 13.6% 24.5%

Letter to Shareholders
Dear Stockholders,
As we close the books on our second year in operation we are committed to the growth and innovation of our products. As a growing company we will continue to focus on expansion while controlling costs and increasing value to our stockholders. This year we enjoyed a growth in earnings per share of common stock, the value grew to $4.10, a 16.6% increase from 2005.
As our economy continues to rebound we are confident that Rainbow Paint Company will continue to provide quality products that will be attractive to consumers in both times of recession and in times of economic prosperity.
Total net sales reached $5 million in 2006, this is a 36% increase over 2005 and we are pleased to announce that net sales have exceeded our projections for the year. Even with the cost of goods sold up 38.9% this year we are able to announce a gross profit of $1.6 million, a 30% increase over 2005.
During the year we were able to raise working capital from $350,000 to $750,000. This increase will allow Rainbow Paint Company to work toward expanding our product line, and securing a position in the paint market.
This year we