Investment Analysis - Polar Sports (A)

Investment Analysis Polar Sports
Investment Analysis
Polar Sports, Inc.
Appendix
Exhibit 1 (Balance Sheet Under Level Production)
2012 Pro Forma Balance Sheets and Accrued Taxes Under Level Production (in
thousands of dollars)
Actual
Dec
31,
Ma
2011
Jan Feb Mar Apr
y
Jun
Jul
1,32 2,24 1,43
Casha
500
7
3
7 500 500 500 500
2,54
Accounts receivableb
5,245
1 832 630 554 378 239 391
1,70 2,31 2,96 3,63 4,44 5,23 5,90
Inventoryc
1,227
6
4
6
9
2
4
7
5,57 5,38 5,03 4,69 5,32 5,97 6,79
Current assets
6,972
4
9
3
3
0
3
8
2,98 2,98 2,98 2,98 2,98 2,98 2,98
Net PP&Ed
2,988
8
8
8
8
8
8
8
8,56 8,37 8,02 7,68 8,30 8,96 9,78
Total assets
9,960
2
7
1
1
8
1
6
Accounts payablee
966
495
495
495
495
Notes payable, bank
826
96
Accrued taxesf
Long-term debt, current portion
139
100
104
100
41
100
-171
100
-451
100
Current Liabilities
2,031
Long-term debtg
1,000
Total liabilities
3,031
Shareholders' equity
6,929
Total liabilities and equity
9,960
699
1,00
0
1,69
9
6,86
3
8,56
2
636
1,00
0
1,63
6
6,74
0
8,37
7
424
1,00
0
1,42
4
6,59
7
8,02
1
241
1,00
0
1,24
1
6,44
1
7,68
1
Aug
Sep
500
500
643
6,48
3
7,62
6
2,98
8
10,6
14
2,457
495
495
1,05
3
495
2,28
9
495
3,37
9
-563
100
1,08
5
1,00
0
2,08
5
6,22
2
8,30
8
-875
100
2,00
9
-966
100
3,00
8
495
4,42
1
1,03
8
100
3,97
8
950
2,95
9
6,00
3
8,96
1
950
3,95
8
5,82
7
9,78
6
950
4,92
8
5,68
6
10,6
14
5,601
8,558
2,988
11,54
6
4,798
-981
100
4,412
950
5,362
6,184
11,54
6
Oct
500
3,84
3
4,98
9
9,33
2
2,98
8
12,3
20
495
4,99
8
-786
100
4,80
7
950
5,75
7
6,56
3
12,3
20
Nov
Dec
500
500
5,771
6,489
2,455
1,227
8,725
8,216
2,988
11,71
3
2,988
11,20
4
495
495
2,521
1,229
-150
100
2
100
2,966
1,826
950
900
3,916
2,726
7,797
11,71
3
8,478
11,20
4
Accrued Taxes
Beg. accrued taxes
Accrual of monthly taxes
Tax payments
End. accrued taxes
139
139
-34
0
104
-63
0
41
-74
-139
-171
-81
-199
-451
-112
0
-563
-113
-199
-875
-90
0
104
41
-171
-451
-563
-875
-966
-966
-73
0
1,03
8
1,038
256
-199
-981
195
0
-786
636
0
-150
351
-199
-981
-786
-150
Exhibit 2 (Income Statement Under Level Production)

2012 Pro Forma Income Statement Under Level Production (in
Ma
Ma
Jan Feb
r
Apr
y
Jun
Net sales
702 486 414 378 162 180
COGSa
421 292 248 227
97 108
Gross profit
281 194 166 151
65
72
Operating expensesb
Storage & Handling Costs
Interest expensee
Interest incomec
Profit (loss) before tax
360
11
11
1
101
360
15
7
2
186
360
19
7
4
217
360
23
7
2
237
Income taxesd
-34
Net income
-66
-63
122
-74
143
-81
156
360
28
8
1
331
112
218
360
33
13
1
333
113
220
Jul
378
227
151
Au
g
540
324
216
360
38
20
1
265
-90
175
Sep
2,970
1,782
1,188
Oct
2,520
1,512
1,008
Nov
5,724
3,434
2,290
Dec
3,546
2,128
1,418
Total
18,000
10,800
7,200
360
41
30
1
214
360
36
39
1
360
32
43
1
360
16
44
1
360
8
20
1
4,320
0
249
16
754
574
1,870
1,032
2,647
-73
141
256
195
636
351
798
498
379
1,234
681
1,849
Assumed cost of goods sold equal to 60% sales due to the savings regarding the maintenance ($480,000) and training
($600,000) costs.
b
Assumed to be same for each month throughout the year.
2% annualized rate of return on monthly cash

balances.
d
Negative figures are tax credits from operating losses, and reduced accured taxes shown on balance sheets. The federal
tax rate on all earnings was 34%.
e Interest expense includes the coupon rate (8%) on the long-term date, interest rate of 6% and 11% (exceeding 2m
loans) on the line of credit.
Exhibit 3 (Cash Flow Statement under Level Production)
2012 Pro Forma Cash Flow Statement Under Level Production (in
M
Ma
Jan Feb ar Apr
y
Jun
Operating Activities
- 14
- 21
Net income
-66 122
3 156
8 220
Depreciation
25
25 25
25 25
25
2,7
1,7 20
17
Less: Increase (Decrease) in A/R
04
10
2
-76
6 139
Less: Increase (Decrease) in
Inventory
608
Add: Increase (Decrease) in A/P
479
471
Add: Increase (Decrease) in Accrued

Taxes
Cash flow from operations
-34
1,6
-63
941
65
2
0
21
2
-
673
0
280
-
80
3
0
11
2
-
Jul
Aug
Sep
Oct
Nov
Dec
-175
25
141
25
498
25
379
25
1,23
4
25
681
25
151
252
1,8
14
1,3
86
792
673
576
882
612
312
-
-90
-
-73
-
57
-
195
-
1,92
8 718
2,53 1,22
4
8
0
636 152
2,50 1,36
78
78
1
1,0
09
93
2
1,1
61
1,06
5
1,0
17
-25
1,0
34
-25
95
7
95
7
-25
1,1
86
1,1
86
-25
1,09
0
1,09
0
-25
1,0
42
1,0
42
0
50
1,2
36
0
0
1,09
0
0
0
1,0
42
353
175
-25
-25
-25
-25
378
200
2,47 1,34
7
2
378
200
2,47 1,34
7
2
0
0
0
0
2,47 1,29
7
2
0
50
378
200
Investing Activities
Less: capital expenditures
-25
-25
Cash flow from operating and

investing
1,6
53
916
-25
80
6
Cash available before financing

activities
1,6
53
1,7
43
93
7
-96
826
0
0
0
0
0
0
0
Add: bank note issuance
96
0
0
95
7
Cash flow from financing
826
1,1
86
1,09
0
1,0
42
378
200
June
July
Financing Activities
Less: bank note repayment
Less: debt repayment
Total Cash Flow
827
96
95
7
916
80
6
937
0
0
2,47 1,34
7
2
Exhibit 4 (Inventory Plan)
2012 Inventory Plan Under Level Production (in thousands of

dollars)
Dec,20
11
Januar
y
Februar
y
Marc
h
April
May
Augus
t
Septem
ber
Octob
er
Novemb
er
Decemb
er
Sales
Labour Costs
Less:COGS-Material
Cost
Purchases
Ending Inventory
1227
702
405
486
405
414
405
378
405
162
405
180
405
378
405
540
405
2,970
405
2,520
405
5,724
405
3546
405
421
292
248
227
97
108
227
324
1782
1512
3434
2128
495
495
495
495
495
495
495
495
495
495
495
1706
2314
2966
495
363
9
4442
5234
5907
6483
5601
4989
2455
1227
Exhibit 5 (Ratios)
Ratios Under level of Production
Januar
y
Debt Ratio
Debt-Equity ratio
Times interest earned
0.25
0.15
-21.19
Februa
ry
0.24
0.15
-25.68
March
0.22
0.15
-28.23
April
0.19
0.17
-38.20
May
June
Leverage
0.34
0.49
0.33
0.54
-23.53
-11.27
Liquidity
July
0.68
0.74
-5.41
Augus
t
Septem
ber
Octob
er
Novemb
er
Decembe
r
0.87
0.94
20.85
0.87
0.93
15.03
0.88
0.91
43.59
0.50
0.45
54.86
0.32
0.25
11.66
Working Capital-to Total

Assets
Current ratio
0.57
0.57
0.57
0.58
7.97
8.47
11.87
19.49
0.083
0.075
0.059
0.054
0.053
0.048
-30.92%
38.23
%
64.29%
-1.73%
-1.83%
-2.02%
Sales-to-Assets
Sales-to-Working Capital
Net Profit Margin
20.82%
ROA
0.51
0.44
0.39
0.34
0.36
0.37
0.49
0.57
4.90
2.97
Efficiency
0.047
0.019
0.041
0.017
Profitability
129.04
74.03
%
%
2.26
1.92
1.94
1.94
2.94
4.50
0.019
0.017
0.037
0.034
0.049
0.046
0.249
0.234
0.210
0.212
0.500
0.466
160.20
%
12.12%
68.20
%
7.24%
71.33%
-0.93%
7.81%
3.02%
14.30%
3.62%
0.06
0.16
-21.63
0.06
0.17
96.40
0.21
0.15
74.54
0.32
0.27
147.47
0.39
0.14
117.69
0.39
0.22
19.32
0.62
0.61
0.61
0.55
0.52
0.52
0.53
-11.44
-6.14
Efficiency
-5.68
-5.39
13.77
4.95
3.72
3.69
0.054
0.024
0.049
0.023
Profitability
119.78
71.49
59.60%
%
%
0.061
0.057
0.080
0.071
0.372
0.331
0.265
0.236
0.528
0.469
131.71
%
9.34%
56.32
%
5.41%
42.72%
-1.56%
10.51%
3.47%
14.90%
2.86%
-3.04%
-2.42%
25.18
%
1.42%
Ratios Under Seasonal Production*
Debt Ratio
Debt-Equity ratio
Times interest earned
Working Capital-to Total
Assets
Current ratio
0.19
0.15
-26.49
0.16
0.15
-28.16
0.13
0.16
-38.17
0.59
0.59
0.60
0.61
12.41
17.49
95.28
-26.13
0.086
0.078
0.062
0.057
0.056
0.051
0.029
0.026
-31.15%
37.71
%
-1.84%
-1.94%
-2.10%
25.51
%
2.04%
Sales-to-Assets
Sales-to-Working Capital
Net Profit Margin

ROA
Leverage
0.11
0.07
0.16
0.16
-37.34
-29.50
Liquidity
0.21
0.15
-23.15
21.35%
0.61
-3.19%
-2.92%

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