Download - Volcom Financial Analysis (1) (1)

VOLCOM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

2009

(In thousands,

share data)

AssetsCurrent assets:Cash and cash equivalents $ 76,180 30.11%

Short-term investments 35,000 13.83%

53,792 21.26%

Inventories 33,250 13.14%

Prepaid expenses and other current assets 4,353 1.72%

Income taxes receivable 725 0.29%

Deferred income taxes 7,700 3.04%

Total current assets 211,000 83.39%

26,348 10.41%

Investment in unconsolidated investee 330 0.13%

Deferred income taxes 3,545 1.40%

9,784 3.87%

Goodwill 1,291 0.51%

Other assets 735 0.29%

Total assets $ 253,033 100.00%

Liabilities and Stockholders’ EquityCurrent liabilities:Accounts payable $ 22,788 9.01%

Accrued expenses and other current liabilities 9,957 3.94%

Current portion of capital lease obligations 50 0.02%

Total current liabilities 32,795 12.96%

Long-term capital lease obligationsOther long-term liabilities 1,203 0.48%

68 0.03%

0.00%

Stockholders’ equity:

24 0.01%

Additional paid-in capital 92,192 36.43%

Retained earnings 123,679 48.88%

Accumulated other comprehensive income 3,072 1.21%

Total stockholders’ equity 218,967 86.54%

Total liabilities and stockholders’ equity $ 253,033 100.00%

As of December 31,

except share and per

Accounts receivable — net of allowances of $8,626 (2009) and $6,998 (2008)

Property and equipment — net

Intangible assets — net

—

Income taxes payable — non-current

Commitments and contingencies (Note 10)

Common stock, $0.001 par value — 60,000,000 shares authorized; 24,374,362 (2009 and 2008) shares issued and outstanding

2008 2007

(In thousands,

share data)

$ 79,613 35.92% 92,962 45.91%

—

60,914 27.49% 58,270 28.78%

27,086 12.22% 20,440 10.09%

2,596 1.17% 1,720 0.85%

3,309 1.49% 326 0.16%

4,947 2.23% 2,956 1.46%

0.00%

178,465 80.53% 176,674 87.25%

0.00%

26,716 12.05% 24,427 12.06%

330 0.15% 298 0.15%

4,028 1.82% 268 0.13%

10,578 4.77% 363 0.18%

665 0.30% —841 0.38% 464 0.23%

0.00%

$ 221,623 100.00% 202,494 100.00%

$ 15,291 6.90% 18,694 9.23%

11,393 5.14% 10,561 5.22%

71 0.03% 72 0.04%

26,755 12.07% 29,327 14.48%

23 0.01% 33 0.02%

1,048 0.47% 190 0.09%

94 0.04% 89 0.04%

24 0.01% 24 0.01%

90,456 40.82% 89,185 44.04%

101,935 45.99% 80,226 39.62%

1,288 0.58% 3,420 1.69%

193,703 87.40% 172,855 85.36%

$ 221,623 100.00% 202,494 100.00%

As of December 31,

except share and per

—

VOLCOM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS

2009 % Revenue % of Change

(In thousands, except share and per share data)

Revenues:Product revenues $ 278,598 99.27%

Licensing revenues 2,041 0.73%

Total revenues 280,639 100.00%

Cost of goods sold 139,844 49.83%

Gross profit 140,795 50.17%

Operating expenses:Selling, general and administrative expenses 110,847 39.50%

Asset impairments

Total operating expenses 110,847 39.50%

Operating income 29,948 10.67%

Other income (loss):Interest income, net 358Foreign currency gain (loss) 1,534 0.55%

Total other income (loss) 1,892 0.67%

Income before provision for income taxes 31,840 11.35%

Provision for income taxes 10,096 3.60%

Net income $ 21,744 7.75%

Net income per share:Basic $ 0.89Diluted $ 0.89Weighted-average shares outstanding:Basic 24,352,146Diluted 24,363,544

Year Ended December 31,

—

2008 % Revenue % of Change 2007 % of Revenue

(In thousands, except share and per share data)

$ 332,110 99.34% $ 265,193 98.73%2,194 0.66% 3,420 1.27%

334,304 100.00% 268,613 100.00%171,208 51.21% 138,570 51.59%

0.00%163,096 48.79% 130,043 48.41%

0.00%112,464 33.64% 79,411 29.56%

16,230 4.85%

128,694 38.50% 79,411 29.56%0.00%

34,402 10.29% 50,632 18.85%

901 0.27% 3,973 1.48%-1,807 -0.54% 401 0.15%

-906 -0.27% 4,374 1.63%

33,496 10.02% 55,006 20.48%11,787 3.53% 21,671 8.07%

$ 21,709 6.49% $ 33,335 12.41%

$ 0.89 $ 1.37$ 0.89 $ 1.37

24,337,923 24,302,89324,357,652 24,419,802


—

VOLCOM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

2009 2008

(In thousands)

Cash flows from operating activities:Net income $ 21,744 $ 21,709

Depreciation and amortization 6,360 7,315Provision for doubtful accounts 2,490 2,332Loss on disposal of property and equipment 77 1Asset impairments 134 16,230Excess tax benefits related to exercise of stock options (34Stock-based compensation 1,795 985Deferred income taxes (2,277 (6,349Changes in operating assets and liabilities:Accounts receivable 5,241 (3,114Inventories (5,838 (1,844Prepaid expenses and other current assets (1,759 (499Income taxes receivable/payable 2,485 (3,021Other assets 103 (306Accounts payable 7,126 (8,096Accrued expenses (1,623 (1,059Other long-term liabilities 151 422

Net cash provided by operating activities 36,209 24,672

Cash flows from investing activities:Purchase of property and equipment (4,798 (5,915Business acquisitions, net of cash acquired (890 (32,138Purchase of intangible assets (589Purchase of short-term investments (74,932 (278Sale of short-term investments 39,932 278Purchase of additional shares in cost method investee (32Proceeds from sale of property and equipment 18 15

Net cash used in investing activities (40,670 (38,659

Cash flows from financing activities:Principal payments on capital lease obligations (83 (127Proceeds from government grants 455Proceeds from the exercise of stock options 273Excess tax benefits related to exercise of stock options 34

Net cash (used in) provided by financing activities (83 635Effect of exchange rate changes on cash 1,111 3

Net (decrease) increase in cash and cash equivalents (3,433 (13,34979,613 92,962


Adjustments to reconcile net income to net cash provided by operating activities:

— )

) ) )

) ) — ) —

)

) — — —

)

) Cash and cash equivalents — Beginning of period

$ 76,180 $ 79,613

Supplemental disclosures of cash flow information:Cash paid during the period for:Interest $ 4 $ 110Income taxes 10,380 20,804

Cash and cash equivalents — End of period

2007

(In thousands)

$ 33,335

2,895831

24161

(444934

(191

(23,736(6,789

(311(339(242

9,3963,791

(36

19,279

(14,989

16

(14,973

(78229

1,028444

1,6231,619

7,54885,414


) ) ) )

) ) ) ) ) ) ) ) ) ) ) ) )

) ) ) — ) — ) — — ) —

) )

) )

)

$ 92,962

$ 3522,799

January 31,In thousands, except share amounts 2010ASSETS Current assets:Cash and cash equivalents $ 149,561 Restricted cash 49,352

322,959 Other receivables 28,832 Inventories 301,216 Deferred income taxes short-term 63,220 Prepaid expenses and other current assets 40,698 Current assets held for sale 86 Total current assets 955,924

225,320 Intangible assets, net 141,995 Goodwill 324,431 Other assets 76,017 Deferred income taxes long-term 58,586 Total assets $ 1,782,273 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Lines of credit $ 24,927 Accounts payable 203,232 Accrued liabilities 91,222 Current portion of long-term debt 93,314 Income taxes payable 14,202 Liabilities related to assets held for sale 324 Total current liabilities 427,221 Long-term debt, net of current portion 858,324

Trade accounts receivable, less allowances of $48,156 (2010) and $47,211 (2009)

Fixed assets, less accumulated depreciation and amortization of $246,655 (2010) and $248,557 (2009)

Other long-term liabilities 40,573 Total liabilities 1,326,118 Stockholders’ equity:

—

1,318 Additional paid-in capital 370,878 Treasury stock, 2,885,200 shares (6,778 Accumulated deficit (6,977 Accumulated other comprehensive income 89,424 Total Quiksilver, Inc. stockholders’ equity 447,865 Non-controlling interest 8,290 Total stockholders’ equity 456,155 Total liabilities and stockholders’ equity $ 1,782,273

Preferred stock, $.01 par value, authorized shares - 5,000,000; issued and outstanding shares - none

Common stock, $.01 par value, authorized shares - 185,000,000; issued shares - 131,761,930 (2010) and 131,484,363 (2009)

12 Mos 3 Mos addIn thousands, except per share amounts 2009 1/31/2010 1/31/2010

Revenues, net $ 1,977,526 432,737 2,410,263

Cost of goods sold 1,046,495 210,588 1,257,083 Gross profit 931,031 222,149 1,153,180 Selling, general and administrative expense 851,746 203,160 1,054,906 Asset impairments 10,737 0 10,737 Operating income 68,548 18,989 87,537 Interest expense, net 63,924 21,873 85,797 Foreign currency loss (gain) 8,633 (1,979) 6,654

Minority interest and other expense(gain) 2,539 851 3,390

(Loss) income before provision for income taxes (6,548) (1,756) (8,304) Provision for income taxes 66,667 3,674 70,341

(Loss) income from continuing operations (73,215) (5,430) (78,645) Loss(Gain) from discontinued operations (118,827) 76 (118,751) Net loss $ (192,042) (5,354) (197,396)

(Loss) income per share from continuing operations (0.58) (0.04) (0.62) $Loss per share from discontinued operations (0.94) 0.00 (0.94) Net loss per share (1.51) (0.04) (1.55)

Weighted average common shares outstanding 127,042 127,648

3 Mos Subtract New 12 Mos1/31/2009 1/31/2009 1/31/2010

443,278 1,966,985 1,966,985

236,115 1,020,968 1,020,968

207,163 946,017 946,017

206,818 848,088 848,088

10,737 10,737

345 87,192 87,192

14,154 71,643 71,643

1,430 5,224 5,224

42 3,348 3,348

(15,281) 6,977 6,977

50,581 19,760 19,760

(65,862) (12,783) (12,783)

(128,564) 9,813 9,813

(194,426) (2,970) (2,970)

(0.52) (0.10) (0.10)

(1.01) 0.07 0.07

(1.53) (0.02) (0.02)

127,039 127,039 127,039

CONSOLIDATED BALANCE SHEETS

2010 2009

(In thousands, except

par amounts)

ASSETSCurrent Assets:

Cash and cash equivalents $ 8,288 $Receivables, net 74,398Inventories, net 77,029Prepaid expenses 10,713Deferred tax assets 13,875

184,303

Property, plant and equipment, net 79,540Intangible assets, net 137,490

Other non-current assets, net 23,841

Total Assets $ 425,174 $

LIABILITIES AND SHAREHOLDERS' EQUITYCurrent Liabilities:

Trade accounts payable and other accrued expenses $ 81,831 $

Accrued compensation 11,514Income taxes payable 2,517

—

95,862

Long-term debt, less current maturities 146,408

Other non-current liabilities 50,066

Non-current deferred income taxes 28,421

Commitments and contingenciesShareholders' Equity:

OXFORD INDUSTRIES, INC.

January 30, January 31,

Total current assets

Short-term debt and current maturities of long-term debt

Total current liabilities

Common stock, $1.00 par value per common share 16,461

Additional paid-in capital 91,840Retained earnings 19,356

Accumulated other comprehensive loss (23,240 )

104,417

Total Liabilities and Shareholders' Equity $ 425,174 $

Total shareholders' equity

2009

(In thousands, except

par amounts)

3,29078,567

119,61610,84510,159

222,477

89,026135,999

20,180

467,682

87,723

14,027—

5,083

106,833

194,187

47,244

32,111

January 31,

15,866

88,42510,621

(27,605 )

87,307

467,682

CONSOLIDATED STATEMENTS OF OPERATIONS

Fiscal 2009

(In thousands, except per share amounts)

Net sales $ 800,658Cost of goods sold 466,975

Gross profit 333,683SG&A 304,330

Amortization of intangible assets 1,256

—

305,586

Royalties and other operating income 13,057

Operating income (loss) 41,154

—Interest expense, net 21,361

Earnings (loss) before income taxes 19,793Income taxes (benefit) 5,169

Net earnings (loss) from continuing operations 14,624

Earnings (loss) from discontinued operations, net of taxes —

Net earnings (loss) $ 14,624

Net earnings (loss) from continuing operations per common share:Basic $ 0.9Diluted $ 0.9

OXFORD INDUSTRIES, INC.

Impairment of goodwill, intangible assets and investment in an unconsolidated entity

Gain on repurchase of 87/8% Senior Unsecured Notes

Earnings (loss) from discontinued operations per common share:Basic $ —Diluted $ —

Net earnings (loss) per common share:Basic $ 0.9Diluted $ 0.9

Weighted average common shares outstanding:Basic 16,297Dilution 7

Diluted 16,304

Dividends declared per common share $ 0.36

Fiscal 2008

Eight-month

Fiscal 2007

Transition

Period Ended

2008

(In thousands, except per share amounts)

$ 947,516 $ 695,798 $ 1,128,907560,314 418,459 682,080

387,202 277,339 446,827358,071 244,033 356,970

2,903 3,184 6,405

314,813 — —

675,787 247,217 363,375

17,294 12,451 16,462

(271,291 ) 42,573 99,914

7,767 — —23,702 15,302 22,214

(287,226 ) 27,271 77,700(15,769 ) 7,094 25,948

(271,457 ) 20,177 51,752

— — (183 )

$ (271,457 ) $ 20,177 $ 51,569

$ (17.00 ) $ 1.17 $ 2.91$ (17.00 ) $ 1.16 $ 2.89

February 2,

$ — $ — $ (0.01 )$ — $ — $ (0.01 )

$ (17.00 ) $ 1.17 $ 2.9$ (17.00 ) $ 1.16 $ 2.88

15,968 17,306 17,770— 71 157

15,968 17,377 17,927

$ 0.72 $ 0.54 $ 0.66

Liquidity Ratios Formulas Units CalculationsCurrent ratio CA/CL Times 211,000/32,795Quick Ratio ((C.A.-Inv)/CL) Times ((211,000-33,250)/32,795)

Leverage RatiosTotal Debt Ratio Debt/Total Assets Times (22,788+9,957+1,203+50)/253,033Debt-Equity Ratio Debt/Total Equity Times (22,788+9,957+1,203+50)/218,967

Activity RatiosInventory Turnover Sales/Inventory Times 280,639/33,250Total Asset Turnover Sales/Total Assets Times 280,639/253,033

Profitability RatiosGross Profit Margin (Sales-COGS)/Sales % (280,639-139,844)/280,639Profit Margin NI/Sales % 21,744/280,639ROA NI/Total Assets % 21,744/253,033ROE NI/Total Equity % 21,744/218,967EPS NI/Shares Outstanding $ 21,744/24,374PE Ratio Price Per Share/EPS Times 16.74/0.89

Liquidity Ratios Formulas Units CalculationsCurrent ratio CA/CL Times 955,924/427,221Quick Ratio ((C.A.-Inv)/CL) Times (955,924-301,216)/427,221

Leverage Ratios

Total Debt Ratio Debt/Total Assets Times

Debt-Equity Ratio Debt/Total Equity Times

Activity RatiosInventory Turnover Sales/Inventory Times 1,966,985/301,216Total Asset Turnover Sales/Total Assets Times 1,966,985/1,782,273

Profitability RatiosGross Profit Margin (Sales-COGS)/Sales $ (1,966,985-1,046,495)/1,966,985Profit Margin NI/Sales % (-2970)/1966985ROA NI/Total Assets % (-2,970)/1,782,273ROE NI/Total Equity % (-2,970)/456,155EPS NI/Shares Outstanding $ (-2,970)/131,484

(24,927+203,232+93,314+858,324+40,573)/1,782,273(24,927+203,232+93,314+858,324+40,573)/456,155

PE Ratio Price Per Share/EPS Times 2.02/(-0.02)

Liquidity Ratios Formulas Units CalculationsCurrent ratio CA/CL Times 184,303/95,862Quick Ratio ((C.A.-Inv)/CL) Times (184,303-77,029)/95,862

Leverage RatiosTotal Debt Ratio Debt/Total Assets Times (81,831+146,408+50,066)/425,174Debt-Equity Ratio Debt/Total Equity Times (81,831+146,408+50,066)/104,417

Activity RatiosInventory Turnover Sales/Inventory Times 800,658/77,029Total Asset Turnover Sales/Total Assets Times 800,658/425,174

Profitability RatiosGross Profit Margin (Sales-COGS)/Sales $ (800,658-466,975)/800,658Profit Margin NI/Sales % 14,624/800,658ROA NI/Total Assets % 14,624/425,174ROE NI/Total Equity % 14,624/104,417EPS NI/Shares Outstanding $ 14,624/16,297PE Ratio Price Per Share/EPS Times 20.49/0.9

Liquidity Ratios Formulas Units Industry AverageCurrent ratio CA/CL Times 3.53Quick Ratio ((C.A.-Inv)/CL) Times 2.69

Leverage RatiosTotal Debt Ratio Debt/Total Assets Times 0.49Debt-Equity Ratio Debt/Total Equity Times 1.83

Activity RatiosInventory Turnover Sales/Inventory Times 8.45Total Asset Turnover Sales/Total Assets Times 1.37

Profitability Ratios

Gross Profit Margin (Sales-COGS)/Sales $ 46.31%Profit Margin NI/Sales % 3.14%ROA NI/Total Assets % 3.96%ROE NI/Total Equity % 7.76%EPS NI/Shares Outstanding $ 0.59PE Ratio Price Per Share/EPS Times -19.82

Volcom 2009 Volcom 20082009 Calculations 2008 Calculations6.43 178,465/26,755 6.67 176,674/29,3275.42 ((178,465-27,086)/27,086 5.66 (176,674-20,440)/29,327

0.13 (15,291+71+23+1,048)/221,623 0.13 (18,694+72+33+190)/202,4940.16 (15,291+71+23+1,048)/193,703 0.14 (18,694+72+33+190)/172,855

8.44 334,304/27,086 12.34 268,613/20,4401.11 334,304/221,623 1.51 268,613/202,494

50.17% (334,394-171,208)/334,394 48.79% (268,613-138,570)/268,6137.75% 21,709/334,304 6.49% 33,335/268,6138.59% 21,709/221,623 9.80% 33,335/202,4949.93% 21,709/193,703 11.21% 33,335/172,855

0.89 21,709/24,374 0.89 33,335/24,30218.76 10.90/.089 12.24 22.03/1.37

Quiksilver 200920092.241.53

0.68

2.68

6.531.10

0.4708059-0.0015-0.0017

-0.01-0.02

-101.00

Oxford Industries20091.921.12

0.652.67

10.391.88

0.4167612%3%

14%0.90

22.77

Volcom 200720076.025.33

0.150.17

13.141.33

48.41%12.41%16.46%19.28%

1.37

16.08

Volcom Liquidity Ratios 2007 2008 2009Current ratio 6.02 6.67 6.43Quick Ratio 5.33 5.66 5.42

Leverage RatiosTotal Debt Ratio 0.15 0.13 0.13Debt-Equity Ratio 0.17 0.14 0.16

Activity RatiosInventory Turnover 13.14 12.34 8.44Total Asset Turnover 1.33 1.51 2.29

Profitability RatiosGross Profit Margin 48.41% 48.79% 50.17%Profit Margin 12.41% 6.49% 7.75%Return on Assets 16.46% 9.80% 8.59%Return on Equity 19.28% 11.21% 9.93%Earnings Per Share 1.37 0.89 0.89Price Earnings Ratio 16.08 12.24 18.76

IndustryLiquidity Ratios AverageCurrent ratio 3.53Quick Ratio 2.69

Leverage RatiosTotal Debt Ratio 0.49Debt-Equity Ratio 1.83

Activity RatiosInventory Turnover 8.45Total Asset Turnover 1.76

Profitability RatiosGross Profit Margin 46.31%Profit Margin 3.14%Return on Assets 3.96%Return on Equity 7.76%Earnings Per Share 0.59Price Earnings Ratio -19.82

2007 2008 20090.00

2.00

4.00

6.00

8.00

10.00

12.00

14.0020072008

20092009

Volcom vs. Industry Avg: Inv Turns

Volcom

Industry Average

Tim

es

2007 2008 20090

0.1

0.2

0.3

0.4

0.5

0.6

0.145767281993541 0.12545178072673 0.134361921172337

0.491218659449844

Volcom vs. Industry Average Leverage Ratios: Total Debt

Volcom Industry Average

2007 2008 20090

0.02

0.04

0.06

0.08

0.1

0.12

0.140.124100471682309

0.0649379008327750.0774803216944188

0.0314117912207977

Volcom vs. Industry Ave: Profit Margin

VolcomIndsutry Average

2007 2008 2009

-25.00

-20.00

-15.00

-10.00

-5.00

0.00

5.00

10.00

15.00

20.00

25.00

20072008

2009

2009

Volcom vs. Industry Avg: P/E Ratio

Volcom

Industry Averag

Tim

es

2007 2008 20090

0.02

0.04

0.06

0.08

0.1

0.12

0.140.124100471682309

0.0649379008327750.0774803216944188

0.0314117912207977



2007 2008 20090

0.05

0.1

0.15

0.2

0.25

0.192849498134274

0.1120736385084380.09930263464357640.0776151708507722

Volcom vs. Industry Ave: ROE

VolcomIndustry Average

0

2

4

6

8

10

12

Volcom vs. Industry Avg: Quick Ratio

Tim

es

2007 2008 20090.00

2.00

4.00

6.00

8.00

10.00

12.00

14.0020072008

20092009

Volcom vs. Industry Avg: Inv Turns

Volcom

Industry Average

Tim

es

2007 2008 20090

0.1

0.2

0.3

0.4

0.5

0.6

0.145767281993541 0.12545178072673 0.134361921172337

0.491218659449844

Volcom vs. Industry Average Leverage Ratios: Total Debt

Volcom Industry Average

2007 2008 20090

0.20.40.60.8

11.21.41.61.8

2

0.170761621011831 0.143534173451108 0.155265405289382

1.83197624021792

Volcom vs. Indsutry Avg: D/E


2007 2008 20090

0.02

0.04

0.06

0.08

0.1

0.12

0.140.124100471682309

0.0649379008327750.0774803216944188

0.0314117912207977



2007 2008 20090.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%16.46%

9.80%8.59%

3.96%

Volcom vs. Industry Ave: ROA


2007 2008 20090.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.602007

2008 2009

2009

Volcom vs. Industry Avg: EPS

Volcom

Industry Average

$

2007 2008 2009

-25.00

-20.00

-15.00

-10.00

-5.00

0.00

5.00

10.00

15.00

20.00

25.00

20072008

2009

2009

Volcom vs. Industry Avg: P/E Ratio

Volcom

Industry Averag

Tim

es

2007 2008 20090

0.02

0.04

0.06

0.08

0.1

0.12

0.140.124100471682309

0.0649379008327750.0774803216944188

0.0314117912207977



2007 2008 20090.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%16.46%

9.80%8.59%

3.96%



2007 2008 20090

0.05

0.1

0.15

0.2

0.25

0.192849498134274

0.1120736385084380.09930263464357640.0776151708507722

Volcom vs. Industry Ave: ROE


2007 2008 20090.44

0.45

0.46

0.47

0.48

0.49

0.5

0.51

0.4841277227833350.487867330334067

0.501694347542573

0.463087086023172

Volcom vs. Industry Avg: Gross Profit Margin


0

2

4

6

8

10

12

Volcom vs. Industry Avg: Quick Ratio

Tim

es

2007 2008 20090

0.20.40.60.8

11.21.41.61.8

2

0.170761621011831 0.143534173451108 0.155265405289382

1.83197624021792

Volcom vs. Indsutry Avg: D/E


2007 2008 20090.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%16.46%

9.80%8.59%

3.96%



2007 2008 20090.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.602007

2008 2009

2009

Volcom vs. Industry Avg: EPS

Volcom

Industry Average

$

2007 2008 20090.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%16.46%

9.80%8.59%

3.96%



2007 2008 20090.44

0.45

0.46

0.47

0.48

0.49

0.5

0.51

0.4841277227833350.487867330334067

0.501694347542573

0.463087086023172

Volcom vs. Industry Avg: Gross Profit Margin


•Increase Retail Presence: Five West Coast retail stores–Volcom will need to invest $15,000,000 of its liquid assets to fund this project. –This project will last for five years and has salvage value of $10,000,000. –Initial revenues are based on average price per unit of $27.00 and sales volume of 666,667.–The initial working capital will amount in $6547,200 in year 1, increasing by 80% in year 2 and then in year 3 it will increase 98%, Year 4 and 5 will also have an increase in capital of 96% and 89% respectively. –Sales will increase 25% over the next from fives from year 2009. – As seen in the previously analyzed financial statements the cost of goods sold are half of the annual sales amounts year in and year out, which is emulated in this analysis. –Expenses, such as administrative, employee costs, and other expenses, amount for 30% of sales each year. –Depreciation is based on MACRS Depreciation 5 yrs–Based on management's experience, the effective tax rate will be 31.7%.

VolcomIncrease Retail Presence

Base Case One Exempt Employee making $30,000 per yearCapital investment 15,000,000 22 Hourly Employees working 20 hours making minimum wage of 8 per hourResale 10,000,000

0.1429 0.2449 0.1749 0.1249 0.0893 440.0000 hours per weekMACRS Depreciation 5 yrs 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500 8 minimum wageNet Book Value 12,856,500 9,183,000 6,559,500 4,686,000 3,346,500 51 weeks in a year

Inventory 2,139,301 2,852,401 3,803,202 5,070,936 6,363,025 .2237 based on yr-end 2009 Inventory/COGS.1629 based on yr-end 2009 A/P / COGS

AP 1,466,101 1,954,801 2,606,401 3,475,202 4,633,602Working Capital 0 673,200 897,600 1,196,801 1,595,734 1,729,423

Sales Volume 666,667 666,667Average Cost Per Unit 27

Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5Sales 75% 18,000,009 24,000,012 32,000,016 42,666,688 56,888,917Cost of Goods Sold 9,000,005 12,000,006 16,000,008 21,333,344 28,444,459Labor CostExempt Employee 30,000 30,000 30,000 30,000 30,000Hourly Employees 179,520 179,520 179,520 179,520 179,520Utilities 125,000 125,000 125,000 125,000 125,000Administrative and Other Expenses 3,100,000 4,100,000 3,500,000 4,300,000 5,000,000Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500EBIT 3,421,985 3,891,986 9,541,988 14,825,324 21,770,439Tax 0.317 1,084,769 1,233,760 3,024,810 4,699,628 6,901,229NI 2,337,215 2,658,226 6,517,178 10,125,696 14,869,210Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500OCF 4,480,715 6,331,726 9,140,678 11,999,196 16,208,710

Change in WC -673,200 -224,400 -299,200 -398,934 -133,689 -1,729,423Recovery of NWC 1,729,423Net Change in WC -673,200 -224,400 -299,200 -398,934 1,595,734

Capital spending -15,000,000Resale value 10,000,000Tax savings -2109159.5 (Bk-resale)*TNet Capital Spending -15,000,000 0 0 0 0 7,890,841

OCF 0 4,480,715 6,331,726 9,140,678 11,999,196 16,208,710NWC 0 -673,200 -224,400 -299,200 -398,934 1,595,734Net Cap spend -15,000,000 0 0 0 0 7,890,841Net Cash Flows -15,000,000 3,807,515 6,107,326 8,841,478 11,600,263 25,695,284PVIF 14% CoC 1.0000 0.8772 0.7695 0.6750 0.5921 0.5194 DCF -15,000,000 3,339,952 4,699,588 5,967,997 6,868,516 13,346,131

NPV = $19,222,183

IRR = 45.19%

Paybackcumulative NCFs -15,000,000 -11,192,485 -5,085,159 3,756,319 15,356,582 41,051,866

0.425Payback = 2.4 yrs

VolcomIncrease Retail PresenceBase Case with WACC One Exempt Employee making $30,000 per year

Capital investment 15,000,000 22 Hourly Employees working 20 hours making minimum wage of 8 per hourResale 10,000,000



AP 1,466,101 1,954,801 2,606,401 3,475,202 4,633,602Working Capital 0 547,200 729,600 972,800 1,595,734 2,127,646

Sales Volume 666,667 666,667Average Cost Per Unit 27

Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5Sales 75% 18,000,009 24,000,012 32,000,016 42,666,688 56,888,917 Increased sales by 50%Cost of Goods Sold 9,000,005 12,000,006 16,000,008 21,333,344 28,444,459 Changed COGS accordinglyLabor CostExempt Employee 30,000 30,000 30,000 30,000 30,000Hourly Employees 179,520 179,520 179,520 179,520 179,520Utilities 125,000 125,000 125,000 125,000 125,000Administrative and Other Expenses 3,100,000 4,100,000 3,500,000 4,300,000 5,000,000Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500EBIT 3,421,985 3,891,986 9,541,988 14,825,324 21,770,439Tax 0.3127 1,070,055 1,217,024 2,983,780 4,635,879 6,807,616NI 2,351,930 2,674,962 6,558,208 10,189,445 14,962,822Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500OCF 4,495,430 6,348,462 9,181,708 12,062,945 16,302,322


Capital spending -15,000,000Resale value 10,000,000Tax savings -2080549.45 (Bk-resale)*TNet Capital Spending -15,000,000 0 0 0 0 7,919,451


NPV = $12,861,374

IRR = 45.62%


0.453Payback = 2.5 yrs


Best Case Increase Sales 10% and Decrease COGS 10%One Exempt Employee making $30,000 per year

Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 22 Hourly Employees working 20 hours making minimum wage of 8 per hour0

Capital investment 15,000,000 440.0000 hours per weekResale 10,000,000 8 minimum wage

0.143 0.245 0.175 0.125 0.089 51 weeks in a yearMACRS Depreciation 5 yrs 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500Net Book Value 12,856,500 9,183,000 6,559,500 4,686,000 3,346,500

Inventory 1,925,371 2,406,714 3,008,392 3,760,490 4,700,613

AP 1,319,491 1,649,363 2,061,704 2,577,130 3,221,413Working Capital 605,880 757,350 946,688 1,183,360 1,479,200

Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5Sales 10% 19,800,010 24,750,012 30,937,515 38,671,894 48,339,868Cost 8,100,004 10,125,005 12,656,256 15,820,320 19,775,401Labor CostExempt Employee 30,000 30,000 30,000 30,000 30,000Hourly Employees 179,520 179,520 179,520 179,520 179,520Utilities 125,000 125,000 125,000 125,000 125,000Adminstrative and Other Expenses 4,000,000 5,290,480 4,500,000 5,600,000 6,400,000Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500EBIT 5,221,986 5,326,507 10,823,239 15,043,554 20,490,447Tax 0.317 1,655,370 1,688,503 3,430,967 4,768,807 6,495,472NI 3,566,616 3,638,004 7,392,272 10,274,747 13,994,976Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500OCF 5,710,116 7,311,504 10,015,772 12,148,247 15,334,476


Capital spending -15,000,000Resale value 10,000,000Tax savings -2109159.5Net Capital Spending -15,000,000 0 0 0 0 7,890,841


NPV = $14,673,726

IRR = 50.22%


0.721594899724634Payback = 2.7 yrs


Worst Case Decrease Sales 10% and Increase COGS 10%0

One Exempt Employee making $30,000 per year0 22 Hourly Employees working 20 hours making minimum wage of 8 per hour

Capital investment 15,000,000Resale 10,000,000 440.0000 hours per week

0.143 0.245 0.175 0.125 0.089 8 minimum wageMACRS Depreciation 5 yrs 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500 51 weeks in a yearNet Book Value 12,856,500 9,183,000 6,559,500 4,686,000 3,346,500

Inventory 2,353,231 2,941,539 3,676,924 4,596,155 5,745,193


Average Cost Per Unit 25

Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5Sales 0.1 16,200,008 20,250,010 25,312,513 31,640,641 39,550,801Cost of Goods Sold 9,900,005 12,375,006 15,468,758 19,335,947 24,169,934Labor CostExempt Employee 30,000 30,000 30,000 30,000 30,000Hourly Employee 179,520 179,520 179,520 179,520 179,520Administrative and Other Expenses 2,300,000 3,000,000 2,500,000 3,200,000 3,700,000Utilities 125,000 125,000 125,000 125,000 125,000Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500EBIT 1,521,983 866,984 4,385,735 6,896,674 10,006,847Tax 0.317 482,469 274,834 1,390,278 2,186,246 3,172,171NI 1,039,514 592,150 2,995,457 4,710,428 6,834,677Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500OCF 3,183,014 4,265,650 5,618,957 6,583,928 8,174,177




NPV = $2,567,025

IRR = 26.52%

Paybackcumulative NCFs -15,000,000 -12,557,506 -8,476,986 -3,089,442 3,205,221 20,716,567

0.509196611Payback = 3.5 yrs

0 VolcomIncrease Retail Presence

0 NPV=0 (Revenues)

Capital investment 15,000,000Resale 10,000,000

0.143 0.245 0.175 0.125 0.089MACRS Depreciation 5 yrs 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500Net Book Value 12,856,500 9,183,000 6,559,500 4,686,000 3,346,500

Inventory 1,422,915 1,778,644 2,223,305 2,779,131 3,473,914

AP 975,149 1,218,936 1,523,670 1,904,587 2,380,734Working Capital 0 447,766 559,708 699,635 874,543 1,093,179

Sales Volume 443,420.75Average Price Per Unit $27.00

Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5Sales 11,972,360 14,965,450 18,706,813 23,383,516 29,229,395Cost of Goods Sold 5,986,180 7,482,725 9,353,406 11,691,758 14,614,697Labor CostExempt Employee 30,000 30,000 30,000 30,000 30,000Hourly Employees 179,250 179,520 179,520 179,520 179,520Administrative and Other Expenses 3,100,000 4,100,000 3,500,000 4,300,000 5,000,000Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500EBIT 533,430 -500,295 3,020,386 5,308,738 8,065,677Tax 0.317 169,097 -158,593 957,462 1,682,870 2,556,820NI 364,333 -341,701 2,062,924 3,625,868 5,508,858Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500OCF 2,507,833 3,331,799 4,686,424 5,499,368 6,848,358

Change in WC -447,766 -111,942 -139,927 -174,909 -218,636 -1,093,179Recovery of NWC 1,093,179Net Change in WC -447,766 -111,942 -139,927 -174,909 874,543


OCF 0 2,507,833 3,331,799 4,686,424 5,499,368 6,848,358NWC 0 -447,766 -111,942 -139,927 -174,909 874,543Net Cap spend -15,000,000 0 0 0 0 7,890,841Net Cash Flows -15,000,000 2,060,066 3,219,857 4,546,497 5,324,459 15,613,742PVIF 21% CoC 1.0000 0.8266 0.6834 0.5652 0.4675 0.3867 DCF -15,000,000 1,702,851 2,200,450 2,569,680 2,489,185 6,037,834

NPV = $0

IRR = 20.94%

Paybackcumulative NCFs -15,000,000 -12,939,934 -9,720,076 -5,173,580 150,880 15,764,622

0.028337115Payback = 3.0 yrs


NPV=0 (COGS)0

Capital investment 15,000,000Resale 10,000,000

0.143 0.245 0.175 0.125 0.089MACRS Depreciation 5 yrs 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500Net Book Value 12,856,500 9,183,000 6,559,500 4,686,000 3,346,500

Inventory 1,884,899 2,827,349 4,241,023 6,361,534 9,542,301


Sales Volume 666,667Average Price Per Unit 27

Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5Sales 75% 18,000,009 22,500,011 28,125,014 35,156,268 43,945,334Cost of Goods Sold 7,929,739 11,894,609 17,841,913 26,762,870 40,144,305Labor CostExempt Employee 30,000 30,000 30,000 30,000 30,000Hourly Employees 179,250 179,520 179,520 179,520 179,520Administrative and Other Expenses 3,100,000 4,100,000 3,500,000 4,300,000 5,000,000Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500EBIT 4,617,520 2,622,382 3,950,081 2,010,378 -2,747,990Tax 0.317 1,463,754 831,295 1,252,176 637,290 -871,113NI 3,153,766 1,791,087 2,697,905 1,373,088 -1,876,877Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500OCF 5,297,266 5,464,587 5,321,405 3,246,588 -537,377

Change in WC -593,144 -296,572 -444,858 -667,288 -1,000,931 -3,002,794Recovery of NWC 3,002,794Net Change in WC -593,144 -296,572 -444,858 -667,288 2,001,863


OCF 0 5,297,266 5,464,587 5,321,405 3,246,588 -537,377NWC 0 -593,144 -296,572 -444,858 -667,288 2,001,863Net Cap spend -15,000,000 0 0 0 0 7,890,841Net Cash Flows -15,000,000 4,704,122 5,168,015 4,876,547 2,579,300 9,355,326PVIF 21% CoC 1.0000 0.8266 0.6834 0.5652 0.4675 0.3867 DCF -15,000,000 3,888,427 3,531,821 2,756,224 1,205,823 3,617,704

NPV = $0

IRR = 20.94%

Paybackcumulative NCFs -15,000,000 -10,295,878 -5,127,864 -251,317 2,327,984 11,683,310

0.9025640179Payback = 3.9 yrs


Tax Rate = 38% One Exempt Employee making $30,000 per yearCapital investment 15,000,000 22 Hourly Employees working 20 hours making minimum wage of 8 per hourResale 10,000,000



AP 1,466,100 1,832,625 1,873,350 1,954,800 2,199,150Working Capital 0 673,200 841,500 860,200 897,600 1,009,800

Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5Sales 18,000,000 22,500,000 23,000,000 24,000,000 27,000,000 Increased sales by 50%Cost of Goods Sold 9,000,000 11,250,000 11,500,000 12,000,000 13,500,000 Changed COGS accordinglyLabor CostExempt Employee 30,000 30,000 30,000 30,000 30,000Hourly Employees 179,520 179,520 179,520 179,520 179,520Utilities 125,000 125,000 125,000 125,000 125,000Administrative and Other Expenses 3,100,000 4,100,000 3,500,000 4,300,000 5,000,000Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500EBIT 3,421,980 3,141,980 5,041,980 5,491,980 6,825,980Tax 0.38 1,300,352 1,193,952 1,915,952 2,086,952 2,593,872NI 2,121,628 1,948,028 3,126,028 3,405,028 4,232,108Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500OCF 4,265,128 5,621,528 5,749,528 5,278,528 5,571,608

Change in WC -673,200 -168,300 -18,700 -37,400 -112,200 -1,009,800Recovery of NWC 1,009,800Net Change in WC -673,200 -168,300 -18,700 -37,400 897,600

Capital spending -15,000,000Resale value 10,000,000Tax savings -2528330 (Bk-resale)*TNet Capital Spending -15,000,000 0 0 0 0 7,471,670

OCF 0 4,265,128 5,621,528 5,749,528 5,278,528 5,571,608NWC 0 -673,200 -168,300 -18,700 -37,400 897,600Net Cap spend -15,000,000 0 0 0 0 7,471,670Net Cash Flows -15,000,000 3,591,928 5,453,228 5,730,828 5,241,128 13,940,878PVIF 21% CoC 1.0000 0.8266 0.6834 0.5652 0.4675 0.3867 DCF -15,000,000 2,969,087 3,726,736 3,239,064 2,450,227 5,390,937

NPV = $2,776,051

IRR = 27.66%

Paybackcumulative NCFs -15,000,000 -11,408,072 -5,954,845 -224,017 5,017,110 18,957,988

0.957257824Payback = 4.0 yrs

Volcom, Inv.Project Summary

Best Case Base Case Base Case Worst Case NPV = 0 NPV = 0 Tax RateSales +10% WACC Sales - 10%, Revenue COGS 38%COGS - 10% COGS + 10%

NPV = $14,673,726 $19,222,183 $12,861,374 $2,567,025 $0 $0 $2,776,051

IRR = 50.22% 45.19% 45.62% 26.52% 20.94% 20.94% 27.66%

Payback = yrs 2.7 2.4 2.5 3.5 3.0 3.9 4.0

Volcom, Inc.Forecast, Annual Plan and Strategic Long Range Plan

AssumptionsIncome Statement

Category2010

Relationship Annual ForecastRevenues:All Product revenues A/R 1.10Cost of goods sold-% of Sales Inventory & A/P 0.50Operating Expenses:SGA Expenses 1.09Depreciation ExpenseTotal Other Income (Loss) 1.00Tax Rate 32% 0.32 Shares Outstanding 24,374,362 24,374,362

Balance Sheet

Category2010

Relationship Annual ForecastAssets:Current assets:Cash and cash equivalentsShort-term investmentsAccounts receivable-% of sales= 0.1931Inventories-% of COGS= 0.2237Other Current Assets

15000000Other Long-Term AssetsLiabilitiesCurrent liabilities:Accounts payable-% of COGS= 0.1629Accrued expenses and OtherOther long-term liabilitiesAccrued expenses and OtherCurrent portion of capital lease obligationsLong-term capital lease obligationsOther long-term liabilities

Property and equipment — net

Income taxes payable — non-current



2010 2011 2012Project Impact Annual Forecast Project Impact Annual Forecast

$18,000,009 1.10 $24,000,012 1.10 $9,000,005 0.50 $12,000,006 0.50

$3,100,000 1.09 $4,100,000 1.09 $2,143,500 $3,673,500

1.00 1.00 0.32 0.32

Balance Sheet2010 2011 2012

Project Impact Annual Forecast Project Impact Annual Forecast

$3,475,802 $4,634,402 $2,013,301 $2,684,401

$1,466,101 $1,954,801



2012Project Impact

$32,000,016 $16,000,008

$3,500,000 $2,623,500

Balance Sheet2012

Project Impact

$6,179,203 $3,579,202

$2,606,401

2009 Annual ACTUALS2009 2009

Income Statement Year End Q1 Q2Revenues:Total Product Revenues $ 280,639,000 $68,319,000 $54,216,000 Cost of goods sold $ 139,844,000 $33,937,000 $27,862,000 Gross profit $ 140,795,000 $ 34,382,000 $ 26,354,000 Operating expenses:Selling, general and administrative expenses $ 104,487,000 $28,034,000 $25,850,000 Depreciation Expense $ 6,360,000 $2,125,875 $2,125,875 Net S,G&A $ 110,847,000 $ 30,159,875 $ 27,975,875 Operating income $ 29,948,000 $ 4,222,125 $ (1,621,875)

Total other income (loss) $ 1,892,000 $473,473 $473,473 Income before provision for income taxes $ 31,840,000 $ 4,695,598 $ (1,148,402)Provision for income taxes $ 11,144,000 $ 2,279,000 $ 352,000

Net income $ 20,696,000 $ 2,416,598 $ (1,500,402)

Net income per share:Basic 84.91% 9.91% -6.16%Diluted 84.91% 9.91% -6.16%Weighted-average shares outstanding:Basic 24,374,362 24,374,362 24,374,362Diluted 24,374,362 24,374,362 24,374,362

2009 2009

Balance Sheet Year End Q1 Q2AssetsCurrent assets:Cash and cash equivalents $ 76,180,000 $ 59,947,000 $ 51,244,000 Short-term investments $ 35,000,000 $ 24,944,000 $ 44,933,000 Accounts receivable $ 53,792,000 $ 56,990,000 $ 48,487,000 Inventories $ 33,250,000 $ 22,290,000 $ 30,160,000 Other Current Assets $ 12,778,000 $ 8,240,000 $ 12,821,000 Total current assets $ 211,000,000 $ 172,411,000 $ 187,645,000

Gross Property & equipment $ 42,029,000 $ 25,612,000 $ 25,852,000 Accumulated depreciation $ 15,681,000 Net Property & equipment $ 26,348,000 $ 25,612,000 $ 25,852,000 Other Long-Term Assets $ 15,685,000 $ 16,789,000 $ 14,580,000 Total Long-term Assets $ 42,033,000 $ 42,401,000 $ 40,432,000 Total assets $ 253,033,000 $ 214,812,000 $ 228,077,000

Liabilities and Stockholders’ EquityCurrent liabilities:

Accounts payable $ 22,788,000 $ 9,955,000 $ 17,875,000 Accrued expenses and other current liabilities $ 10,007,000 $ 8,869,000 $ 12,213,000 Total current liabilities $ 32,795,000 $ 18,824,000 $ 30,088,000

Other long-term liabilities $ 1,271,000 $ 357,000 $ 450,000 Total Long-term Liabilities $ 1,271,000 $ 357,000 $ 450,000 Total Liabilities $ 34,066,000 $ 19,181,000 $ 30,538,000

Stockholders’ equity: $ 24,000 $ 24,000 $ 24,000

Additional paid-in capital $ 92,192,000 $ 90,685,000 $ 91,103,000 Retained earnings $ 123,679,000 $ 106,595,000 $ 105,340,000 Accumulated other comprehensive income $ 3,072,000 $ (1,673,000) $ 1,072,000 Total stockholders’ equity $ 218,967,000 $ 195,631,000 $ 197,539,000

Total liabilities and stockholders’ equity $ 253,033,000 $ 214,812,000 $ 228,077,000

Common stock, $0.001 par value

2009 Annual ACTUALS2009Q3 Q4 Total

$93,916,000 $ 64,188,000 $280,639,000 $45,433,000 $ 32,612,000 $139,844,000

$ 48,483,000 $ 31,576,000 $ 140,795,000

$28,825,000 $ 21,778,000 $104,487,000 $2,125,875 $2,125,875 $8,503,500

$ 30,950,875 $ 23,903,875 $ 112,990,500 $ 17,532,125 $ 7,672,125 $ 27,804,500

$473,473 $473,473 $1,893,892 $ 18,005,598 $ 8,145,598 $ 29,698,392 $ 6,750,000 $ 1,763,000 $ 11,144,000

$ 11,255,598 $ 6,382,598 $ 18,554,392

46.18% 26.19% 76.12%46.18% 26.19% 76.12%

24,374,362 24,374,362 24,374,36224,374,362 24,374,362 24,374,3622009

Q3 Q4 Total

$ 59,329,000 $ 76,180,000 $ 76,180,000 $ 39,989,000 $ 35,000,000 $ 35,000,000 $ 69,752,000 $ 53,792,000 $ 53,792,000 $ 22,425,000 $ 33,250,000 $ 33,250,000 $ 8,929,000 $ 12,778,000 $ 12,778,000 $ 200,424,000 $ 211,000,000 $ 211,000,000

$ 26,525,000 $ 42,029,000 $ 42,029,000

$ 26,525,000 $ 42,029,000 $ 42,029,000 $ 14,544,000 $ 15,685,000 $ 15,685,000 $ 41,069,000 $ 42,033,000 $ 42,033,000 $ 241,493,000 $ 253,033,000 $ 253,033,000

$ 9,835,000 $ 22,788,000 $ 22,788,000 $ 13,436,000 $ 10,007,000 $ 10,007,000 $ 23,271,000 $ 32,795,000 $ 32,795,000

$ 397,000 $ 1,271,000 $ 1,271,000 $ 397,000 $ 1,271,000 $ 1,271,000 $ 23,668,000 $ 34,066,000 $ 34,066,000

$ 24,000 $ 24,000 $ 24,000 $ 91,641,000 $ 92,192,000 $ 92,192,000 $ 121,979,000 $ 123,679,000 $ 123,679,000 $ 4,181,000 $ 3,072,000 $ 3,072,000 $ 217,825,000 $ 218,967,000 $ 218,967,000

$ 241,493,000 $ 253,033,000 $ 253,033,000

Annual Plan2009 2010

1 2 3 4 5 6Income Statement Year End Q1 Q2 Q3 Q4 TotalRevenues:Total Product Revenues $ 280,639,000 $ 79,650,902 $ 64,137,602 $ 107,807,602 $ 75,106,802 $ 326,702,909 Cost of goods sold $ 139,844,000 $ 39,825,451 $ 32,068,801 $ 53,903,801 $ 37,553,401 $ 163,351,455 Gross profit $ 140,795,000 $ 39,825,451 $ 32,068,801 $ 53,903,801 $ 37,553,401 $ 163,351,455 Operating expenses:Selling, general and administrative expenses $ 104,487,000 $31,332,060 $28,951,500 $32,194,250 $24,513,020 $ 116,990,830 Depreciation Expense $ 6,360,000 $ 2,125,875 $ 2,125,875 $ 2,125,875 $ 2,125,875 $ 8,503,500 Net S,G&A $ 110,847,000 $ 33,457,935 $ 31,077,375 $ 34,320,125 $ 26,638,895 $ 125,494,330 Operating income $ 29,948,000 $ 6,367,516 $ 991,426 $ 19,583,676 $ 10,914,506 $ 37,857,124

Total other income (loss) $ 1,892,000 $ 473,000 $ 473,000 $ 473,000 $ 473,000 $ 1,892,000 Income before provision for income taxes $ 31,840,000 $ 6,840,516 $ 1,464,426 $ 20,056,676 $ 11,387,506 $ 39,749,124 Provision for income taxes $ 11,144,000 $ 2,168,444 $ 464,223 $ 6,357,966 $ 3,609,839 $ 12,600,472

Net income $ 20,696,000 $ 4,672,073 $ 1,000,203 $ 13,698,710 $ 7,777,667 $ 27,148,652

Net income per share:Basic 0.85 0.19 0.04 0.56 0.32 1.11Diluted 0.85 0.19 0.04 0.56 0.32 1.11Weighted-average shares outstanding:Basic 24,374,362 24,374,362 24,374,362 24,374,362 24,374,362 24,374,362Diluted 24,374,362 24,374,362 24,374,362 24,374,362 24,374,362 24,374,362

2009 2010

Balance Sheet Year End Q1 Q2 Q3 Q4 TotalAssetsCurrent assets:Cash and cash equivalents $ 76,180,000 $ 70,467,635 $ 67,946,276 $ 80,573,368 $ 88,068,052 $ 88,068,052 Short-term investments $ 35,000,000 $ 35,000,000 $ 35,000,000 $ 35,000,000 $ 35,000,000 $ 35,000,000 Accounts receivable $ 53,792,000 $ 56,379,581 $ 58,295,443 $ 60,977,911 $63,086,332 $ 63,086,332 Inventories $ 33,250,000 $ 32,600,349 $ 33,541,411 $ 35,436,329 $ 36,541,720 $ 36,541,720 Other Current Assets $ 12,778,000 $ 12,778,000 $ 12,778,000 $ 12,778,000 $ 12,778,000 $ 12,778,000 Total current assets $ 211,000,000 $ 207,225,566 $ 207,561,130 $ 224,765,608 $ 235,474,104 $ 235,474,104

Gross Property & equipment $ 42,029,000 $ 57,029,000 $ 57,029,000 $ 57,029,000 $ 57,029,000 $ 57,029,000 Accumulated depreciation $ 15,681,000 $ 17,806,875 $ 19,932,750 $ 22,058,625 $ 24,184,500 $ 24,184,500 Net Property & equipment $ 26,348,000 $ 39,222,125 $ 37,096,250 $ 34,970,375 $ 32,844,500 $ 32,844,500 Other Long-Term Assets $ 15,685,000 $ 15,685,000 $ 15,685,000 $ 15,685,000 $ 15,685,000 $ 15,685,000 Total Long-term Assets $ 42,033,000 $ 54,907,125 $ 52,781,250 $ 50,655,375 $ 48,529,500 $ 48,529,500 Total assets $ 253,033,000 $ 262,132,691 $ 260,342,380 $ 275,420,983 $ 284,003,604 $ 284,003,604

Liabilities and Stockholders’ EquityCurrent liabilities:Accounts payable $ 22,788,000 $ 27,215,618 $ 24,425,104 $ 25,804,998 $ 26,609,952 $ 26,609,952 Accrued expenses and other current liabilities $ 10,007,000 $ 10,007,000 $ 10,007,000 $ 10,007,000 $ 10,007,000 $ 10,007,000 Total current liabilities $ 32,795,000 $ 37,222,618 $ 34,432,104 $ 35,811,998 $ 36,616,952 $ 36,616,952

Other long-term liabilities $ 1,271,000 $ 1,271,000 $ 1,271,000 $ 1,271,000 $ 1,271,000 $ 1,271,000 Total Long-term Liabilities $ 1,271,000 $ 1,271,000 $ 1,271,000 $ 1,271,000 $ 1,271,000 $ 1,271,000 Total Liabilities $ 34,066,000 $ 38,493,618 $ 35,703,104 $ 37,082,998 $ 37,887,952 $ 37,887,952

Stockholders’ equity: $ 24,000 $ 24,000 $ 24,000 $ 24,000 $ 24,000 $ 24,000

Additional paid-in capital $ 92,192,000 $ 92,192,000 $ 92,192,000 $ 92,192,000 $ 92,192,000 $ 92,192,000 Retained earnings $ 123,679,000 $ 128,351,073 $ 129,351,276 $ 143,049,985 $ 150,827,652 $ 150,827,652 Accumulated other comprehensive income $ 3,072,000 $ 3,072,000 $ 3,072,000 $ 3,072,000 $ 3,072,000 $ 3,072,000 Total stockholders’ equity $ 218,967,000 $ 223,639,073 $ 224,639,276 $ 238,337,985 $ 246,115,652 $ 246,115,652

Total liabilities and stockholders’ equity $ 253,033,000 $ 262,132,691 $ 260,342,380 $ 275,420,983 $ 284,003,604 $ 284,003,604


Adjusted Annual Plan2009 2010

Income Statement Year End Growth Project Total Q1 Q2 Q3 Q4 TotalRevenues:Total Product Revenues $ 280,639,000 $308,702,900 $18,000,009 $326,702,909 $ 79,650,902 $ 64,137,602 $ 107,807,602 $ 75,106,802 $ 326,702,909 Cost of goods sold $ 139,844,000 $154,351,450 $9,000,005 $163,351,455 $ 39,825,451 $ 32,068,801 $ 53,903,801 $ 37,553,401 $ 163,351,455 Gross profit $ 140,795,000 $154,351,450 $9,000,005 $163,351,455 $ 39,825,451 $ 32,068,801 $ 53,903,801 $ 37,553,401 $ 163,351,455 Operating expenses:Selling, general and administrative expenses $ 104,487,000 $113,890,830 $3,100,000 $116,990,830 $31,332,060 $28,951,500 $32,194,250 $24,513,020 $116,990,830 Depreciation Expense $ 6,360,000 $6,360,000 $2,143,500 $8,503,500 $ 2,125,875 $ 2,125,875 $ 2,125,875 $ 2,125,875 $8,503,500 Net S,G&A $ 110,847,000 $120,250,830 $5,243,500 $125,494,330 $ 33,457,935 $ 31,077,375 $ 34,320,125 $ 26,638,895 $125,494,330 Operating income $ 29,948,000 $34,100,620 $3,756,505 $37,857,124 $ 6,367,516 $ 991,426 $ 19,583,676 $ 10,914,506 $ 37,857,125

Total other income (loss) $ 1,892,000 $1,892,000 $0 $1,892,000 $ 473,000 $ 473,000 $ 473,000 $ 473,000 $ 1,892,000 Income before provision for income taxes $ 31,840,000 $35,992,620 $3,756,505 $39,749,124 $ 6,840,516 $ 1,464,426 $ 20,056,676 $ 11,387,506 $ 39,749,125 Provision for income taxes $ 11,144,000 $11,409,661 $1,190,812 $12,600,472 $ 2,168,444 $ 464,223 $ 6,357,966 $ 3,609,839 $ 12,600,472

Net income $ 20,696,000 $24,582,959 $2,565,693 $27,148,652 $ 4,672,073 $ 1,000,203 $ 13,698,710 $ 7,777,667 $ 27,148,652

Net income per share:Basic 0.85 1.11 0.19 0.04 0.56 0.32 1.11Diluted 0.85 1.11 0.19 0.04 0.56 0.32 1.11Weighted-average shares outstanding:Basic 24,374,362 24,374,362 24,374,362 24,374,362 24,374,362 24,374,362 24,374,362Diluted 24,374,362 24,374,362 24,374,362 24,374,362 24,374,362 24,374,362 24,374,362

2009 2010

Balance Sheet Year End Growth Project Total Q1 Q2 Q3 Q4 TotalAssetsCurrent assets:Cash and cash equivalents $ 76,180,000 $ 102,381,861 $ (14,313,809) $ 88,068,052 $ 70,467,635 $ 67,946,276 $ 80,573,368 $ 88,068,052 $ 88,068,052 Short-term investments $ 35,000,000 $ 35,000,000 $ 35,000,000 $ 35,000,000 $ 35,000,000 $ 35,000,000 $ 35,000,000 $ 35,000,000 Accounts receivable $ 53,792,000 $ 59,610,530 $ 3,475,802 $ 63,086,332 $ 56,379,581 $ 58,295,443 $ 60,977,911 $63,086,332 $ 63,086,332 Inventories $ 33,250,000 $ 34,528,419 $ 2,013,301 $ 36,541,720 $ 32,600,349 $ 33,541,411 $ 35,436,329 $ 36,541,720 $ 36,541,720 Other Current Assets $ 12,778,000 $ 12,778,000 $ 12,778,000 $ 12,778,000 $ 12,778,000 $ 12,778,000 $ 12,778,000 $ 12,778,000 Total current assets $ 211,000,000 $ 244,298,811 $ (8,824,707) $ 235,474,104 $ 207,225,566 $ 207,561,130 $ 224,765,608 $ 235,474,104 $ 235,474,104

Gross Property & equipment $ 42,029,000 $ 42,029,000 $ 15,000,000 $ 57,029,000 $ 57,029,000 $ 57,029,000 $ 57,029,000 $ 57,029,000 $ 57,029,000 Accumulated depreciation $ 15,681,000 $ 22,041,000 $ 2,143,500 $ 24,184,500 $ 17,806,875 $ 19,932,750 $ 22,058,625 $ 24,184,500 $ 24,184,500 Net Property & equipment $ 26,348,000 $ 19,988,000 $ 12,856,500 $ 32,844,500 $ 39,222,125 $ 37,096,250 $ 34,970,375 $ 32,844,500 $ 32,844,500 Other Long-Term Assets $ 15,685,000 $ 15,685,000 $ 15,685,000 $ 15,685,000 $ 15,685,000 $ 15,685,000 $ 15,685,000 $ 15,685,000 Total Long-term Assets $ 42,033,000 $ 35,673,000 $ 12,856,500 $ 48,529,500 $ 54,907,125 $ 52,781,250 $ 50,655,375 $ 48,529,500 $ 48,529,500 Total assets $ 253,033,000 $ 279,971,811 $ 4,031,793 $ 284,003,604 $ 262,132,691 $ 260,342,380 $ 275,420,983 $ 284,003,604 $ 284,003,604

Liabilities and Stockholders’ EquityCurrent liabilities:Accounts payable $ 22,788,000 $ 25,143,851 $ 1,466,101 $ 26,609,952 $ 27,215,618 $ 24,425,104 $ 25,804,998 $ 26,609,952 $ 26,609,952 Accrued expenses and other current liabilities $ 10,007,000 $ 10,007,000 $ 10,007,000 $ 10,007,000 $ 10,007,000 $ 10,007,000 $ 10,007,000 $ 10,007,000 Total current liabilities $ 32,795,000 $ 35,150,851 $ 1,466,101 $ 36,616,952 $ 37,222,618 $ 34,432,104 $ 35,811,998 $ 36,616,952 $ 36,616,952

Other long-term liabilities $ 1,271,000 $ 1,271,000 $ 1,271,000 $ 1,271,000 $ 1,271,000 $ 1,271,000 $ 1,271,000 $ 1,271,000 Total Long-term Liabilities $ 1,271,000 $ 1,271,000 $ 1,271,000 $ 1,271,000 $ 1,271,000 $ 1,271,000 $ 1,271,000 $ 1,271,000 Total Liabilities $ 34,066,000 $ 36,421,851 $ 1,466,101 $ 37,887,952 $ 38,493,618 $ 35,703,104 $ 37,082,998 $ 37,887,952 $ 37,887,952

Stockholders’ equity: $ 24,000 $ 24,000 $ 24,000 $ 24,000 $ 24,000 $ 24,000 $ 24,000 $ 24,000

Additional paid-in capital $ 92,192,000 $ 92,192,000 $ 92,192,000 $ 92,192,000 $ 92,192,000 $ 92,192,000 $ 92,192,000 $ 92,192,000 Retained earnings $ 123,679,000 $ 148,261,959 $ 2,565,693 $ 150,827,652 $ 128,351,073 $ 129,351,276 $ 143,049,985 $ 150,827,652 $ 150,827,652 Accumulated other comprehensive income $ 3,072,000 $ 3,072,000 $ 3,072,000 $ 3,072,000 $ 3,072,000 $ 3,072,000 $ 3,072,000 $ 3,072,000 Total stockholders’ equity $ 218,967,000 $ 243,549,959 $ 2,565,693 $ 246,115,652 $ 223,639,073 $ 224,639,276 $ 238,337,985 $ 246,115,652 $ 246,115,652

Total liabilities and stockholders’ equity $ 253,033,000 $ 279,971,811 $ 4,031,793 $ 284,003,604 $ 262,132,691 $ 260,342,380 $ 275,420,983 $ 284,003,604 $ 284,003,604


Strategic Long-Range PlanIncome Statement 2009 2010 2011Revenues:Total Product Revenues $280,639,000 $326,702,909 $363,573,202 Cost of goods sold $139,844,000 $163,351,455 $181,786,601 Gross profit $140,795,000 $163,351,455 $181,786,601 Operating expenses:Selling, general and administrative expenses $104,487,000 $116,990,830 $131,620,005 Depreciation Expense $6,360,000 $8,503,500 $10,033,500 Net S,G&A $110,847,000 $125,494,330 $141,653,505 Operating income $29,948,000 $37,857,124 $40,133,096

Total other income (loss) $1,892,000 $1,892,000 $1,892,000 Income before provision for income taxes $31,840,000 $39,749,124 $42,025,096 Provision for income taxes $11,144,000 $12,600,472 $13,321,956

Net income $20,696,000 $27,148,652 $28,703,141

Net income per share:Basic 0.85 1.11 1.18Diluted 0.85 1.11 1.18Weighted-average shares outstanding:Basic 24,374,362 24,374,362 24,374,362Diluted 24,374,362 24,374,362 24,374,362

Balance Sheet 2009 2010 2011AssetsCurrent assets:Cash and cash equivalents $ 76,180,000 $ 88,068,052 $ 118,564,182 Short-term investments $ 35,000,000 $ 35,000,000 $ 35,000,000 Accounts receivable $ 53,792,000 $ 63,086,332 $ 70,205,985 Inventories $ 33,250,000 $ 36,541,720 $ 40,665,663 Other Current Assets $ 12,778,000 $ 12,778,000 $ 12,778,000 Total current assets $ 211,000,000 $ 235,474,104 $277,213,830

Gross Property & equipment $ 42,029,000 $ 57,029,000 $ 57,029,000 Accumulated depreciation $ 15,681,000 $ 24,184,500 $ 34,218,000 Net Property & equipment $ 26,348,000 $ 32,844,500 $22,811,000 Other Long-Term Assets $ 15,685,000 $ 15,685,000 $ 15,685,000 Total Long-term Assets $ 42,033,000 $ 48,529,500 $38,496,000 Total assets $ 253,033,000 $ 284,003,604 $315,709,830

Liabilities and Stockholders’ EquityCurrent liabilities:Accounts payable $ 22,788,000 $ 26,609,952 $ 29,613,037 Accrued expenses and other current liabilities $ 10,007,000 $ 10,007,000 $ 10,007,000 Total current liabilities $ 32,795,000 $ 36,616,952 $39,620,037

Other long-term liabilities $ 1,271,000 $ 1,271,000 $ 1,271,000 Total Long-term Liabilities $ 1,271,000 $ 1,271,000 $1,271,000 Total Liabilities $ 34,066,000 $ 37,887,952 $40,891,037

Stockholders’ equity: $ 24,000 $ 24,000 $ 24,000

Additional paid-in capital $ 92,192,000 $ 92,192,000 $ 92,192,000 Retained earnings $ 123,679,000 $ 150,827,652 $ 179,530,793 Accumulated other comprehensive income $ 3,072,000 $ 3,072,000 $ 3,072,000 Total stockholders’ equity $ 218,967,000 $ 246,115,652 $274,818,793



Strategic Long-Range Plan2012

$405,530,525 $202,765,263 $202,765,263

$146,965,805 $8,983,500

$155,949,305 $46,815,957

$1,892,000 $48,707,957 $15,440,422

$33,267,535

1.361.36

24,374,36224,374,362

2012

$ 151,437,755 $ 35,000,000 $ 78,307,944 $ 45,358,589 $ 12,778,000

$322,882,289

$ 57,029,000 $ 43,201,500

$13,827,500 $ 15,685,000

$29,512,500 $352,394,789

$ 33,030,461 $ 10,007,000

$43,037,461

$ 1,271,000 $1,271,000

$44,308,461

$ 24,000 $ 92,192,000 $ 212,798,328 $ 3,072,000

$308,086,328

$ 352,394,789

Strategic Long-Range PlanIncome Statement 2009 2010 2010

OrganicGrowth ProjectTotal Product Revenues $280,639,000 $308,702,900 $18,000,009 Cost of goods sold $139,844,000 $154,351,450 $9,000,005 Gross profit $140,795,000 $154,351,450 $9,000,005 Operating expenses:Selling, general and administrative expenses $104,487,000 $113,890,830 $3,100,000 Depreciation Expense $6,360,000 $6,360,000 $2,143,500 Net S,G&A $110,847,000 $120,250,830 $5,243,500 Operating income $29,948,000 $34,100,620 $3,756,505

Total other income (loss) $1,892,000 $1,892,000 $0 Income before provision for income taxes $31,840,000 $35,992,620 $3,756,505 Provision for income taxes $11,144,000 $11,409,661 $1,190,812

Net income $20,696,000 $24,582,959 $2,565,693

Net income per share:Basic 0.85Diluted 0.85Weighted-average shares outstanding:Basic 24,374,362Diluted 24,374,362

Balance Sheet 2009 2010 2010

Assets OrganicGrowth Project

Current assets:Cash and cash equivalents $ 76,180,000 $ 102,381,861 -$14,313,809Short-term investments $ 35,000,000 $ 35,000,000 Accounts receivable $ 53,792,000 $59,610,530 $3,475,802Inventories $ 33,250,000 $ 34,528,419 $2,013,301Other Current Assets $ 12,778,000 $ 12,778,000 Total current assets $ 211,000,000 $ 244,298,811 -$8,824,707

Gross Property & equipment $ 42,029,000 $ 42,029,000 $ 15,000,000 Accumulated depreciation $ 15,681,000 $ 22,041,000 $2,143,500 Net Property & equipment $ 26,348,000 $ 19,988,000 $ 12,856,500 Other Long-Term Assets $ 15,685,000 $ 15,685,000 Total Long-term Assets $ 42,033,000 $ 35,673,000 $ 12,856,500 Total assets $ 253,033,000 $ 279,971,811 $ 4,031,793

Liabilities and Stockholders’ EquityCurrent liabilities:Accounts payable $ 22,788,000 $25,143,851 $ 1,466,101 Accrued expenses and other current liabilities $ 10,007,000 $ 10,007,000 Total current liabilities $ 32,795,000 $ 35,150,851 $ 1,466,101

Other long-term liabilities $ 1,271,000 $ 1,271,000 Total Long-term Liabilities $ 1,271,000 $ 1,271,000 Total Liabilities $ 34,066,000 $ 36,421,851 $ 1,466,101

Stockholders’ equity: $ 24,000 $ 24,000

Additional paid-in capital $ 92,192,000 $ 92,192,000 Retained earnings $ 123,679,000 $ 148,261,959 $2,565,693 Accumulated other comprehensive income $ 3,072,000 $ 3,072,000 Total stockholders’ equity $ 218,967,000 $ 243,549,959 $ 2,565,693



Strategic Long-Range Plan2010 Yr 2 Yr 2 2011 Yr 3

Combined OrganicGrowth Project Combined OrganicGrowth$326,702,909 $339,573,190 $24,000,012 $363,573,202 $373,530,509 $163,351,455 $169,786,595 $12,000,006 $181,786,601 $186,765,255 $163,351,455 $169,786,595 $12,000,006 $181,786,601 $186,765,255

$116,990,830 $127,520,005 $4,100,000 $131,620,005 $143,465,805 $8,503,500 $6,360,000 $3,673,500 $10,033,500 $6,360,000

$125,494,330 $133,880,005 $7,773,500 $141,653,505 $149,825,805 $37,857,124 $35,906,590 $4,226,506 $40,133,096 $36,939,449

$1,892,000 $1,892,000 $0 $1,892,000 $1,892,000 $39,749,124 $37,798,590 $4,226,506 $42,025,096 $38,831,449 $12,600,472 $11,982,153 $1,339,802 $13,321,956 $12,309,569

$27,148,652 $25,816,437 $2,886,704 $28,703,141 $26,521,880

1.11 1.181.11 1.18

24,374,362 24,374,36224,374,362 24,374,362

2010 2011 2011 2011 2012OrganicGrowth Project OrganicGrowth

$88,068,052 $127,658,789 -$9,094,607 $118,564,182 $152,951,208$35,000,000 $35,000,000 $35,000,000 $35,000,000$63,086,332 $65,571,583 $4,634,402 $70,205,985 $72,128,741$36,541,720 $37,981,261 $2,684,401 $40,665,663 $41,779,387$12,778,000 $12,778,000 $12,778,000 $12,778,000

$235,474,104 $278,989,633 -$1,775,803 $277,213,830 $314,637,337

$57,029,000 $ 42,029,000 $ 15,000,000 $57,029,000 $ 42,029,000 $24,184,500 $ 28,401,000 $5,817,000 $34,218,000 $ 34,761,000 $32,844,500 $ 13,628,000 $ 9,183,000 $22,811,000 $ 7,268,000 $15,685,000 $ 15,685,000 $15,685,000 $ 15,685,000 $48,529,500 $ 29,313,000 $ 9,183,000 $38,496,000 $ 22,953,000

$ 284,003,604 $ 308,302,633 $ 7,407,197 $315,709,830 $ 337,590,337

$26,609,952 $27,658,236 $ 1,954,801 $29,613,037 $ 30,424,060 $10,007,000 $ 10,007,000 $10,007,000 $ 10,007,000 $36,616,952 $ 37,665,236 $ 1,954,801 $39,620,037 $ 40,431,060

$1,271,000 $ 1,271,000 $1,271,000 $ 1,271,000 $1,271,000 $ 1,271,000 $1,271,000 $ 1,271,000

$37,887,952 $ 38,936,236 $ 1,954,801 $40,891,037 $ 41,702,060

$24,000 $ 24,000 $ 24,000 $ 24,000 $92,192,000 $ 92,192,000 $ 92,192,000 $ 92,192,000

$150,827,652 $ 174,078,397 $5,452,396 $ 179,530,793 $ 200,600,277 $3,072,000 $ 3,072,000 $ 3,072,000 $ 3,072,000

$246,115,652 $ 269,366,397 $ 5,452,396 $274,818,793 $295,888,277

$284,003,604 $ 308,302,633 $ 7,407,197 $ 315,709,830 $ 337,590,337

Strategic Long-Range PlanYr 3 2012

Project Combined$32,000,016 $405,530,525 $16,000,008 $202,765,263 $16,000,008 $202,765,263

$3,500,000 $146,965,805 $2,623,500 $8,983,500 $6,123,500 $155,949,305 $9,876,508 $46,815,957

$0 $1,892,000 $9,876,508 $48,707,957 $3,130,853 $15,440,422

$6,745,655 $33,267,535

1.361.36

24,374,36224,374,362

2012 2012Project

-$1,513,452 $151,437,755$35,000,000

$6,179,203 $78,307,944$3,579,202 $45,358,589

$12,778,000$8,244,952 $322,882,289

$ 15,000,000 $57,029,000 $8,440,500 $43,201,500

$ 6,559,500 $13,827,500 $15,685,000

$ 6,559,500 $29,512,500 $ 14,804,452 $352,394,789

$ 2,606,401 $33,030,461 $ 10,007,000

$ 2,606,401 $43,037,461

$ 1,271,000 $1,271,000

$ 2,606,401 $44,308,461

$ 24,000 $ 92,192,000

$12,198,051 $ 212,798,328 $ 3,072,000

$ 12,198,051 $308,086,328

$ 14,804,452 $ 352,394,789

Weighted Average Cost of CapitalWACC= E/V * R(e) + D/V * R(D) * (1-Tc)

Cost of Equity:Er=Rf + (Rm-Rf) x βRisk-free Rate R(f)Avg. Market Return R(m): (Avg. S&P 500)Market Risk Premium (Rm-Rf)Beta Coefficient: (yahoo finance)R(e)= Market Value of Equity # of Outstanding SharesStock Price:MVE (E):

Cost Of Debt (D):Current Bonds

Total WACCV: Market value of debt + Market value of equityE/V:D/V:Tax Rate (31.7%)WACC

Weighted Average Cost of CapitalWACC= E/V * R(e) + D/V * R(D) * (1-Tc)

Cost of Equity:

3.3%14.00%10.70%

1.6721.17%

24,300,000$20.50

$498,150,000.00 Cost Of Debt (D):

0Total WACC

$498,150,000.00 1.00

0 0.32

21.17%

Capital StructureCurrent Capital Structure:

Values Current Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Scenario 6R(e): 21.17% 21.17% 21.17% 21.17% 21.17% 21.17% 21.17%

E/V: 1 0.75 0.50 0.3333 0.25 0.10 0.00

D: 0 0 0 0 0 0 0

D/V: 0 0.25 0.50 0.6667 0.75 0.90 1.00

1-Tc: 0.66 0.66 0.66 0.66 0.66 0.66 0.66

WACC: 21.17% 15.88% 10.58% 7.06% 5.29% 2.12% 0.00%Option 2 use of debt:

Values Current Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Scenario 6R(e): 21.17% 21.17% 21.17% 21.17% 21.17% 21.17% 21.17%

E/V: 0.998 0.75 0.50 0.3333 0.25 0.10 0.00

D: 2.88% 2.88% 2.88% 2.88% 2.88% 2.88% 2.88%

D/V: 0.20 0.25 0.50 0.6667 0.75 0.90 1.00

1-Tc: 0.66 0.66 0.66 0.66 0.66 0.66 0.66

WACC: 21.51% 16.35% 11.54% 8.32% 6.72% 3.83% 1.90%

V: Total market value= $500,000,000 + $15,000,000 = $515,000,000E: $485,000,000D: 4.37% per bond 10 yr AA

If corporate bonds are 8%, after cost of debt = .08 X (1-T), approximately 5.3% if Tax rate is 34%Need to determine term of bond, 10, 20, 30 years and that it is higher risk (notAAA)

Corporate Bonds 10Yr AA 4.37% 3%

Equity Debt TotalNew WACC 21% 0.09% 20.62%

485000000

To fund $15m project, total market cap becomes $515M. If using debt, 15/515=3%. Equity becomes 97%

If corporate bonds are 8%, after cost of debt = .08 X (1-T), approximately 5.3% if Tax rate is 34%, total market cap becomes $515M. If using debt, 15/515=3%. Equity becomes 97%

Raising Capital Funds

Cost of Investment for project: $15,000,000

Ideal capital structure: If Volcom were to float an offering it would be best to use 100% debt aslisted in our option #2

Equity 0Amount $0 Stock Price: $20.50#of Shares Issued 0

Debt 1.00Amount $15,000,000 #Bonds Issued: 15,000

Indenture Explaination# of Bonds Issued: 15,000 Bonds Issued 15,000Amount of Issue: $15,000,000 The company has issued $15,000,00 worth of bonds.Date of issue: 7/1/2010 The bonds will be sold on 7/1/2010 and will mature onMaturity: 7/1/2030 7/1/2030. Interest is payable annually on June 1 of each Face value: $1,000 year to the person in whose name the bond is registered Coupon rate: 8.30% at close of business on January 1st.Annual coupon: $83.00 Each bondholder will receive $83.00 per bond per year. (8.3% of face value)Offer price: $995.43 Coupon payment dates: 1-Jul Bonds not secured by specific assets.Security: NoneSinking fund: None At any time/ do not have a "deferred call"Call provision: The bonds have a "make-whole" call feature.Call price: Treasury rate Plus 0.15%Rating: Fitch BBB The bonds are in the top grade of investment.

Moody's A2 Negative Covenants include:* The firm cannot pledge any assets to other lenders* The firm cannot sell or lease any major assets without approval of lenderPositive Covenants include:*The company must periodically furnish audited financial statements to lender.

Each bondholder will receive $83.00 per bond per year. (8.3% of face value) 1245 annual int exp

NY Times June 25, 2010 article

Initial Pricing Mark-Up

Base Price Discounted PriceSale Price $27 Initial Markup 23.00%List Price $33.21

Pieces ordered 250,000 250,000

Cash Discount 15%

Savings per Piece $4.98

Total Price $28.23

Sum Total $8,302,500.00 $7,057,125.00

Tax 32%

Shipping and Handling $3,375 $3,375

Total $10,937,767.50 $9,297,608.63

Total Savings: $1,640,158.88

Shipping and Handling per Piece ordered 100 $45.00 Order Minimum1000 $112.50

10,000 $337.50100,000 $1,350.00500,000 $6,750.00 Order Maximum

Termination Costs Assuming Hawiian distributer breaches contract

Cost Items: Percent from Operating ExpensesSalary (Overhead and Office) $310,000.00 7.04%Payroll (taxes included) $31,000.00 0.70%Outside Services $300.00 0.01%Supplies (Office Operation) $75.00 0.00%Repairs / Maintence $210.00 0.00%Advertising $2,000.00 0.05%Vehicle, Deliver and Travel $4,000.00 0.09%Accounting and Legal $12,000.00 0.27%Mortgage $850,000.00 19.31%Telephone/Internet/IT Service $1,500.00 0.03%Utilities $3,000.00 0.07%Insurance $90,000.00 2.04%Taxes $43,000.00 0.98%Depreciation $100,000.00 2.27%Parts:Depreciation $100,000.00 2.27%Assets:Unearned Discount $1,668,802.50 37.91%Equipment Lease $19,000.00 0.43%One Time Costs:Transaction Fees $2,400.00 0.05%Professional Services $5,000.00 0.11%Third Party Contracts:Vehicle Lease $2,000.00 0.05%Litigation $18,000.00 0.41%Consulting Services $30,000.00 0.68%Wind Down Services:Service Continuation $10,000.00 0.23%Professional Services $150,000.00 3.41%

Risk @ 20% $880,401.40

Grand Total of Cost $4,332,688.90

Download - Volcom Financial Analysis (1) (1)

Top Related