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<table width="100%" border="0" cellspacing="0" cellpadding="6"> <tr> <td valign="top"> <h1 align="center">Ratio Analysis Report</h1> <h2 align="center">Publicly Traded
Company Ratios</h2> Steven Madden, Ltd. 3144 WOMENS FOOTWEAR, EXCEPT ATHLETIC <table width="100%" border="0" cellpadding="2" cellspacing="1" bgcol or="#ffffff"> <tbody> <tr> <td align="left" width="300">TERM </td > <td align="center">Qtr. End 31-Dec-10</ td> <td align="center">Qtr. End 31-Dec-09</ td> <td align="center">Year End 31-Dec-10</ td> <td align="center">Year End 31-Dec-09</ td> <td align="center">Year End 31-Dec-08</ td> <td align="center">Year End 31-Dec-07</ td> <td align="center">Year End 31-Dec-06</ td> </tr> <tr> <td>NET SALE S is gross sales less discounts, allowances, sales returns, freight out, etc.]' class="glossary_toolTip">Net Sales in $M</td> <td bgcolor="#CCCCCC" align="center">161.0</td> <td bgcolor="#CCCCCC" align="center">139.5</td> <td bgcolor="#CCCCCC" align="center">635.4</td> <td bgcolor="#CCCCCC" align="center">503.6</td> <td bgcolor="#CCCCCC" align="center">457.0</td> <td bgcolor="#CCCCCC" align="center">431.1</td> <td bgcolor="#CCCCCC" align="center">475.2</td> </tr> <tr bgcolor="#FFFFFF"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr> <td width="300">PREDICTOR RATIOS:</td> <td align="center">Qtr. End 31-Dec-10</ td> <td align="center">Qtr. End 31-Dec-09</ td> <td align="center">Year End 31-Dec-10</
td> <td align="center">Year End 31-Dec-09</ td> <td align="center">Year End 31-Dec-08</ td> <td align="center">Year End 31-Dec-07</ td> <td align="center">Year End 31-Dec-06</ td> </tr> <tr> <td>ALT MAN Z-SCORE reliably predicts whether or not a company is likely to enter into b ankruptcy within one or two years: If the Z-Score is 3.0 or above - bankruptcy i s not likely. If the Z-Score is 1.8 or less - bankruptcy is likely.A Z-Score bet ween 1.8 and 3.0 is the gray area, i.e., a high degree of caution should be used . Probabilities of bankruptcy within the above ranges are 95% for one year and 7 0% within two years. A Z-Score between the two is the gray area. Obviously a hig her Z-Score is desirable. It is best to assess each individual companys Z-Score against that of the industry. In low margin industries it is possible for Z-Scor es to fall below the above. In such cases a trend comparison to the industry ove r consecutive time periods may be a better indicator. It should be remembered th at a Z-Score is only as valid as the data from which it was derived i.e. if a co mpany has altered or falsified their financial records/books, a Z-Score derived from those "cooked books" is of lesser use.]' class="glossary_toolTip"><stro ng>Altman Z-Score</td> <td align="center" bgcolor="#CCCCCC">10.31</td> <td align="center" bgcolor="#CCCCCC">1.16</td> <td align="center" bgcolor="#CCCCCC">10.38</td> <td align="center" bgcolor="#CCCCCC">10.43</td> <td align="center" bgcolor="#CCCCCC">5.65</td> <td align="center" bgcolor="#CCCCCC">7.70</td> <td align="center" bgcolor="#CCCCCC">14.82</td> </tr> <tr> <td>SUSTAINABLE GROWTH RATE (SGR) shows how fast a company can grow using inte rnally generated assets without issuing additional debt or equity. SGR provides a useful benchmark for judging a companys appropriate rate of growth. A company with a low sustainable growth rate but lots of opportunities for expansion will have to fund that growth via outside sources, which could lower profits and perh aps strain the companys finances. Growth can be a major dilemma because with gro wth comes a spontaneously generated need for increased working capital. VentureL ine calculates a Sustainable Growth Rate from the data entered into the Income S tatement and Balance Sheet. The Sustainable Growth Rate is the rate at which the firm may grow the Stockholders Equity Account (Net Worth) using only increases in Retained Earnings (Net Profits contribution to retained earnings) to fund the growth. Growth beyond this amount will force the firm to obtain additional fina ncing from external sources to finance growth. Formula: SGR = (Asset Turnover) x (After Tax Revenue on Sales) x (Assets / Debt) x (Debt / Equity) x ( Fraction of Earnings Retained)]' class="glossary_toolTip">Sustainabl e Growth Rate</td> <td align="center" bgcolor="#CCCCCC">5%</td> <td align="center" bgcolor="#CCCCCC">5%</td> <td align="center" bgcolor="#CCCCCC">21%</td> <td align="center" bgcolor="#CCCCCC">19%</td> <td align="center" bgcolor="#CCCCCC">14%</td> <td align="center" bgcolor="#CCCCCC">17%</td>
<td align="center" bgcolor="#CCCCCC">12%</td> </tr> <tr> <td colspan="8"> </td> </tr> <tr> <td colspan="8">PROFITABILITY RATIOS:</ td> </tr> <tr> <td>P/E RATI O (PRICE/EARNINGS RATIO) is a stock analysis statistic in which the current pric e of a stock (todays last sale price) is divided by the reported actual (or some times projected, which would be forecast) earnings per share of the issuing firm ; it is also called the "multiple".]' class="glossary_toolTip">P/E R atio</td> <td align="center" bgcolor="#CCCCCC">80.2</td> <td align="center" bgcolor="#CCCCCC">N/A</td> <td align="center" bgcolor="#CCCCCC">15.2</td> <td align="center" bgcolor="#CCCCCC">14.9</td> <td align="center" bgcolor="#CCCCCC">14.0</td> <td align="center" bgcolor="#CCCCCC">11.6</td> <td align="center" bgcolor="#CCCCCC">15.8</td> </tr> <tr> <td>GROSS PROFIT MARGIN ON SALES (GPM) is one of the key performance indi cators. The gross profit margin gives an indication on whether the average marku p on goods and services is sufficient to cover expenses and make a profit. GPM s hows the relationship between sales and the direct cost of products/services sol d. It measures the ability of both to control costs and to pass along price incr eases through sales to customers. The gross profit margin should be stable over time. A persistent gradual decrease is likely to indicate that productivity need s to be increased to return profitability back to previous levels. Formula: Gros s Profit / Net Revenue]' class="glossary_toolTip">Gross Profit Margi n on Sales</td> <td align="center" bgcolor="#CCCCCC">43.2%</td> <td align="center" bgcolor="#CCCCCC">44.1%</td> <td align="center" bgcolor="#CCCCCC">43.4%</td> <td align="center" bgcolor="#CCCCCC">42.9%</td> <td align="center" bgcolor="#CCCCCC">40.9%</td> <td align="center" bgcolor="#CCCCCC">40.2%</td> <td align="center" bgcolor="#CCCCCC">41.8%</td> </tr> <tr> <td>NET PROFIT MARGIN (NPM Pre-Tax) incorporates all of the expenses a ssociated with ordinary business (excluding taxes) thus is a measure of the over all operating efficiency of the firm prior to any tax considerations which may m ask performance. For a business to be viable in the long term profits must be ge nerated; making the net profit margin ratio one of the key performance indicator s for any business. It is important to analyze the ratio over time. A variation in the ratio from year-to-year may be due to abnormal conditions or expenses whi ch need to be addressed. A decline in the ratio over time may indicate a margin squeeze suggesting that productivity improvements may need to be initiated. In s ome cases, the costs of such improvements may lead to a further drop in the rati
o or even losses before increased profitability is achieved. Formula: Net E arnings / Net Revenue]' class="glossary_toolTip">Net Profit Margin ( Pre-tax)</td> <td align="center" bgcolor="#CCCCCC">17.8%</td> <td align="center" bgcolor="#CCCCCC">15.4%</td> <td align="center" bgcolor="#CCCCCC">19.8%</td> <td align="center" bgcolor="#CCCCCC">16.0%</td> <td align="center" bgcolor="#CCCCCC">10.1%</td> <td align="center" bgcolor="#CCCCCC">13.0%</td> <td align="center" bgcolor="#CCCCCC">17.0%</td> </tr> <tr> <td>NET PROFIT MARGIN (NPM After Tax) measures profitability as a pe rcentage of revenues after consideration of all revenue and expense, including i nterest expenses, non-operating items, and income taxes. For a business to be vi able in the long term profits must be generated; making the net profit margin ra tio one of the key performance indicators for any business. It is important to a nalyze the ratio over time. A variation in the ratio from year-to-year may be du e to abnormal conditions or expenses which need to be addressed. A decline in th e ratio over time may indicate a margin squeeze suggesting that productivity imp rovements may need to be initiated. In some cases, the costs of such improvement s may lead to a further drop in the ratio or even losses before increased profit ability is achieved. Formula: Net Profit After Tax [EAT + DII + OI] / Net R evenue]' class="glossary_toolTip">Net Profit Margin (After-tax)</str ong></td> <td align="center" bgcolor="#CCCCCC">10.9%</td> <td align="center" bgcolor="#CCCCCC">9.7%</td> <td align="center" bgcolor="#CCCCCC">11.9%</td> <td align="center" bgcolor="#CCCCCC">9.9%</td> <td align="center" bgcolor="#CCCCCC">6.1%</td> <td align="center" bgcolor="#CCCCCC">8.3%</td> <td align="center" bgcolor="#CCCCCC">9.7%</td> </tr> <tr> <td>OPERATING EXPENSE TO SALES reports the operating expenses as a percent of Net Revenues. This then is a measure of the total overhead employed in the fi rm per Net Sales Revenue Dollar; thereby giving an indication of the efficiency of the cost structure of the company. It gives an indication of the ability of a business to convert income into profit. Generally, businesses with low ratios w ill generate more profit than others. In general business operations with larger and more stable cash flows can sustain higher ratios than smaller and less stab le operations. Scale and income stability are important considerations though it is up to the management of a business to monitor costs in an appropriate manner whatever its size. Formula: Total Overhead Cash Expense / Net Revenues ]' class="glossary_toolTip">Operating Expense to Sales</ td> <td align="center" bgcolor="#CCCCCC">83.0%</td> <td align="center" bgcolor="#CCCCCC">84.9%</td> <td align="center" bgcolor="#CCCCCC">80.9%</td> <td align="center" bgcolor="#CCCCCC">84.3%</td> <td align="center" bgcolor="#CCCCCC">90.2%</td> <td align="center" bgcolor="#CCCCCC">87.7%</td> <td align="center" bgcolor="#CCCCCC">83.5%</td> </tr> <tr> <td>OPERATING PROFIT TO SALES is a useful ratio when evaluating value of a f irm. It discounts the effect of varying tax rates and benefits to give a more ac curate indication of the return associated with the firm. Operating Profit [EBIT DA] / Net Revenues.]' class="glossary_toolTip">Operating Profit to S ales</td> <td align="center" bgcolor="#CCCCCC">17.0%</td> <td align="center" bgcolor="#CCCCCC">15.1%</td> <td align="center" bgcolor="#CCCCCC">19.1%</td> <td align="center" bgcolor="#CCCCCC">15.7%</td> <td align="center" bgcolor="#CCCCCC">9.8%</td> <td align="center" bgcolor="#CCCCCC">12.3%</td> <td align="center" bgcolor="#CCCCCC">16.5%</td> </tr> <tr> <td>BASIC EARNINGS POWER (BEP) is useful for comparing firms in different tax sit uations and with different degrees of financial leverage. This ratio is often us ed as a measure of the effectiveness of operations. Basic Earning Power measures the basic profitability of Assets because it excludes consideration of interest and tax. This ratio should be examined in conjunction with turnover ratios to h elp pinpoint potential problems regarding asset management. Formula: EBIT / Total Assets]' class="glossary_toolTip">Basic Earning Power</td> <td align="center" bgcolor="#CCCCCC">6.4%</td> <td align="center" bgcolor="#CCCCCC">6.6%</td> <td align="center" bgcolor="#CCCCCC">28.1%</td> <td align="center" bgcolor="#CCCCCC">24.7%</td> <td align="center" bgcolor="#CCCCCC">16.3%</td> <td align="center" bgcolor="#CCCCCC">21.1%</td> <td align="center" bgcolor="#CCCCCC">32.2%</td> </tr> <tr> <td>R ETURN ON ASSETS (ROA) shows the after tax earnings of assets. Return on assets i s an indicator of how profitable a company is. Use this ratio annually to compar e a business performance to the industry norms: The higher the ratio the greater the return on assets. However this has to be balanced against such factors as r isk, sustainability and reinvestment in the business through development costs.& nbsp;Formula: Earnings After Tax [EAITDA] / Total Assets]' class="glossary_t oolTip">Return on Assets (After-tax)</td> <td align="center" bgcolor="#CCCCCC">3.9%</td> <td align="center" bgcolor="#CCCCCC">4.2%</td> <td align="center" bgcolor="#CCCCCC">16.9%</td> <td align="center" bgcolor="#CCCCCC">15.3%</td> <td align="center" bgcolor="#CCCCCC">9.8%</td> <td align="center" bgcolor="#CCCCCC">13.4%</td> <td align="center" bgcolor="#CCCCCC">18.4%</td> </tr> <tr> <td>R ETURN ON EQUITY (ROE) measures the overall efficiency of the firm in managing it s total investments in assets and in generating a return to stockholders. It is the primary measure of how well management is running the company. ROE allows yo u to quickly gauge whether a company is a value creator or a cash consumer. By r elating the earnings generated to the shareholders equity, you can see how much cash is created from the existing assets. Clearly, all things being equal, the h
igher a companys ROE, the better the company. Formula: Net Income / Stockho lders Equity]' class="glossary_toolTip">Return on Equity</s pan></td> <td align="center" bgcolor="#CCCCCC">4.9%</td> <td align="center" bgcolor="#CCCCCC">5.1%</td> <td align="center" bgcolor="#CCCCCC">21.2%</td> <td align="center" bgcolor="#CCCCCC">18.7%</td> <td align="center" bgcolor="#CCCCCC">13.6%</td> <td align="center" bgcolor="#CCCCCC">16.6%</td> <td align="center" bgcolor="#CCCCCC">21.8%</td> </tr> <tr bgcolor="#FFFFFF"> <td> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> </tr> <tr> <td>ASSET MANAGEMENT RATIOS:</td> <td align="center">Qtr. End 31-Dec-10</ td> <td align="center">Qtr. End 31-Dec-09</ td> <td align="center">Year End 31-Dec-10</ td> <td align="center">Year End 31-Dec-09</ td> <td align="center">Year End 31-Dec-08</ td> <td align="center">Year End 31-Dec-07</ td> <td align="center">Year End 31-Dec-06</ td> </tr> <tr> <td> COLLECTION PERIOD (Period End) is used to appraise accounts receivable (AR). This ratio measures the length of time it takes to convert your average sales into cash. This measurement defines the relationship between accounts receivabl e and cash flow. A longer average collection period requires a higher investment in accounts receivable. A higher investment in accounts receivable means less c ash is available to cover cash outflows, such as paying bills. NOTE: Comparing t he two COLLECTION PERIOD ratios (Period Average and Period End) suggests the dir ection in which AR collections are moving, thereby giving an indication as to po tential impacts to cash flow.]' class="glossary_toolTip">Collection Period (Period Average)</td> <td align="center" bgcolor="#CCCCCC">36.7</td> <td align="center" bgcolor="#CCCCCC">169.4</td> <td align="center" bgcolor="#CCCCCC">37.2</td> <td align="center" bgcolor="#CCCCCC">36.9</td> <td align="center" bgcolor="#CCCCCC">33.7</td> <td align="center" bgcolor="#CCCCCC">37.5</td> <td align="center" bgcolor="#CCCCCC">31.7</td> </tr> <tr>
<td> COLLECTION PERIOD (Period End) is used to appraise accounts receivable (AR). This ratio measures the length of time it takes to convert your average sales into cash. This measurement defines the relationship between accounts receivabl e and cash flow. A longer average collection period requires a higher investment in accounts receivable. A higher investment in accounts receivable means less c ash is available to cover cash outflows, such as paying bills. NOTE: Comparing t he two COLLECTION PERIOD ratios (Period Average and Period End) suggests the dir ection in which AR collections are moving, thereby giving an indication as to po tential impacts to cash flow.]' class="glossary_toolTip">Collection Period (Period End)</td> <td align="center" bgcolor="#CCCCCC">40.2</td> <td align="center" bgcolor="#CCCCCC">153.3</td> <td align="center" bgcolor="#CCCCCC">40.7</td> <td align="center" bgcolor="#CCCCCC">42.5</td> <td align="center" bgcolor="#CCCCCC">34.5</td> <td align="center" bgcolor="#CCCCCC">34.9</td> <td align="center" bgcolor="#CCCCCC">36.5</td> </tr> <tr> <td>INVENTORY TURNS (Period Average) measures the average efficiency of the firm in managing and selling inventories during the last period, i.e., ho w many inventory turns the company has per period and whether that is getting be tter or worse. It is imperative to compare a companys inventory turns to the ind ustry average. A company turning their inventory much slower than the industry a verage might be an indication that there is excessive old inventory on hand whic h would tie up their cash. The faster the inventory turns, the more efficiently the company manages their assets. However, if the company is in financial troubl e, on the verge of bankruptcy, a sudden increase in inventory turns might indica te they are not able to get product from their suppliers, i.e., they are not car rying the correct level of inventory and may not have the product on hand to mak e their sales. If looking at a quarterly statement, there probably are more or l ess turns than an annual statement due to seasonality, i.e., their inventory lev els will be higher just before the busy season than just after the busy season. This does not mean they are managing their inventory any differently; the ratio is just skewed because of seasonality. NOTE: Comparing the two INVENTORY TURNS ( Period Average and Period End) suggests the direction in which inventories are m oving, thereby allowing an analysis of efficiency improvements and/or potential burgeoning inventory problems. Formula: COGS --------------------------------------------- (Inventory (current) + Inventory (last period) / 2)]' clas s="glossary_toolTip">Inventory Turns (Period Average)</t d> <td align="center" bgcolor="#CCCCCC">2.6</td> <td align="center" bgcolor="#CCCCCC">2.2</td> <td align="center" bgcolor="#CCCCCC">10.3</td> <td align="center" bgcolor="#CCCCCC">9.3</td> <td align="center" bgcolor="#CCCCCC">9.2</td> <td align="center" bgcolor="#CCCCCC">8.5</td> <td align="center" bgcolor="#CCCCCC">8.9</td> </tr> <tr> <td>INVENTORY TURNS (Period End) measures the ending efficiency of the fi rm in managing and selling inventories during the last period, i.e., how many in
ventory turns the company has per period and whether that is getting better or w orse. It is imperative to compare a companys inventory turns to the industry ave rage. A company turning their inventory much slower than the industry average mi ght be an indication that there is excessive old inventory on hand which would t ie up their cash. The faster the inventory turns, the more efficiently the compa ny manages their assets. However, if the company is in financial trouble, on the verge of bankruptcy, a sudden increase in inventory turns might indicate they a re not able to get product from their suppliers, i.e., they are not carrying the correct level of inventory and may not have the product on hand to make their s ales. If looking at a quarterly statement, there probably are more or less turns than an annual statement due to seasonality, i.e., their inventory levels will be higher just before the busy season than just after the busy season. This does not mean they are managing their inventory any differently; the ratio is just s kewed because of seasonality. NOTE: Comparing the two INVENTORY TURNS (Period Av erage and Period End) suggests the direction in which inventories are moving, th ereby allowing an analysis of efficiency improvements and/or potential burgeonin g inventory problems. Formula: COGS / Inventory (current)]' class="glos sary_toolTip">Inventory Turns (Period End)</td> <td align="center" bgcolor="#CCCCCC">2.3</td> <td align="center" bgcolor="#CCCCCC">2.6</td> <td align="center" bgcolor="#CCCCCC">9.1</td> <td align="center" bgcolor="#CCCCCC">9.4</td> <td align="center" bgcolor="#CCCCCC">8.6</td> <td align="center" bgcolor="#CCCCCC">9.5</td> <td align="center" bgcolor="#CCCCCC">8.2</td> </tr> <tr> <td>DAY S INVENTORY shows the average length of time items are in inventory, i.e., how m any days a business could continue selling using only its existing inventory. Th e goal, in most cases, is to demonstrate efficiency through having a high turnov er rate and therefore a low days inventory. However, realize that this ratio can be unfavorable if either too high or too low. A company must balance the cost o f carrying inventory with its unit and acquisition costs. The cost of carrying i nventory can be 25% to 35%. These costs include warehousing, material handling, taxes, insurance, depreciation, interest and obsolescence. Formula: Invento ry / (Net Revenue / 365).]' class="glossary_toolTip">Days Inventory</td> <td align="center" bgcolor="#CCCCCC">35.0</td> <td align="center" bgcolor="#CCCCCC">164.0</td> <td align="center" bgcolor="#CCCCCC">35.6</td> <td align="center" bgcolor="#CCCCCC">39.4</td> <td align="center" bgcolor="#CCCCCC">39.7</td> <td align="center" bgcolor="#CCCCCC">43.1</td> <td align="center" bgcolor="#CCCCCC">41.0</td> </tr> <tr> <td>WORKING CAPITAL TURNOVER (WCT) shows how efficiently Working Capital (WC) is employed, i.e., it measures how efficiently the business is using its availa ble assets. WCT measures the amount of Net Revenue generated per monetary unit o f Working Capital. It varies widely by industry; therefore it is best to compare WCT to industry averages. Formula: Net Revenue / (Current Assets - Current Liabilities).]' class="glossary_toolTip">Working Capital Turnover</td> <td align="center" bgcolor="#CCCCCC">1.2</td> <td align="center" bgcolor="#CCCCCC">1.0</td> <td align="center" bgcolor="#CCCCCC">4.6</td>
<td align="center" bgcolor="#CCCCCC">3.6</td> <td align="center" bgcolor="#CCCCCC">3.7</td> <td align="center" bgcolor="#CCCCCC">3.6</td> <td align="center" bgcolor="#CCCCCC">3.1</td> </tr> <tr> <td>FIXED ASSET TURNOVER measures managements ability to generate revenues from i nvestments in fixed assets. FAT considers only the firms investment in property, plant and equipment and is extremely important in high asset firms such as manu factures and telecommunications companies. Generally, the higher this ratio: <ul> <li>the smaller the investment required to generate sales, thus the more profita ble the firm.</li> <li>indicates the firm has less money tied up in fixed assets for each dollar of sales revenue. </li> </ul> A declining ratio may indicate that the firm has over-invested in plant, equi pment, or other fixed assets. Formula: Net Revenues / Fixed Assets]' cl ass="glossary_toolTip">Fixed Asset Turnover</td> <td align="center" bgcolor="#CCCCCC">7.7</td> <td align="center" bgcolor="#CCCCCC">5.9</td> <td align="center" bgcolor="#CCCCCC">30.5</td> <td align="center" bgcolor="#CCCCCC">21.2</td> <td align="center" bgcolor="#CCCCCC">16.2</td> <td align="center" bgcolor="#CCCCCC">15.0</td> <td align="center" bgcolor="#CCCCCC">20.8</td> </tr> <tr> <td>TOTAL ASSET TURNOVER measures managements efficiency in managing all of a fir ms assets - specifically the generation of revenues from the firms total investment s in assets. This ratio is extremely important in high asset firms such as manuf actures and telecommunications companies. Generally, the higher this ratio as co mpared to like companies or the industry (Formula: Net Revenue / Total Assets): <ul> <li> the smaller the investment required to generate sales, thus the more p rofitable the firm.</li> <li> indicates the firm has less money tied up in fixed assets for each dol lar of sales revenue.</li> </ul>]' class="glossary_toolTip">Total Asset Turnover</t d> <td align="center" bgcolor="#CCCCCC">0.4</td> <td align="center" bgcolor="#CCCCCC">0.4</td> <td align="center" bgcolor="#CCCCCC">1.4</td> <td align="center" bgcolor="#CCCCCC">1.5</td> <td align="center" bgcolor="#CCCCCC">1.6</td> <td align="center" bgcolor="#CCCCCC">1.6</td> <td align="center" bgcolor="#CCCCCC">1.9</td> </tr> <tr bgcolor="#FFFFFF"> <td> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td>
<td align="center"> </td> <td align="center"> </td> </tr> <tr> <td>LIQUIDITY RATIOS:</td> <td align="center">Qtr. End 31-Dec-10</ td> <td align="center">Qtr. End 31-Dec-09</ td> <td align="center">Year End 31-Dec-10</ td> <td align="center">Year End 31-Dec-09</ td> <td align="center">Year End 31-Dec-08</ td> <td align="center">Year End 31-Dec-07</ td> <td align="center">Year End 31-Dec-06</ td> </tr> <tr> <td>CURR ENT RATIO, a comparison of current assets to current liabilities, is a commonly used measure of short-run solvency, i.e., the immediate ability of a firm to pay its current debts as they come due. Current Ratio is particularly important to a company thinking of borrowing money or getting credit from their suppliers. Po tential creditors use this ratio to measure a companys liquidity or ability to p ay off short-term debts. Though acceptable ratios may vary from industry to indu stry below 1.00 is not atypical for high quality companies with easy access to c apital markets to finance unexpected cash requirements. Smaller companies, howev er, should have higher current ratios to meet unexpected cash requirements. The rule of thumb Current Ratio for small companies is 2:1, indicating the need for a level of safety in the ability to cover unforeseen cash needs from current ass ets. Current Ratio is best compared to the industry. Formula: Current Asset s / Current Liabilities]' class="glossary_toolTip">Current Rati o</td> <td align="center" bgcolor="#CCCCCC">2.9</td> <td align="center" bgcolor="#CCCCCC">3.7</td> <td align="center" bgcolor="#CCCCCC">2.9</td> <td align="center" bgcolor="#CCCCCC">3.7</td> <td align="center" bgcolor="#CCCCCC">2.7</td> <td align="center" bgcolor="#CCCCCC">3.5</td> <td align="center" bgcolor="#CCCCCC">5.2</td> </tr> <tr> <td>QUICK RATIO (or Acid Test Ratio) is a more rigorous test than the Current Ratio of sho rt-run solvency, the current ability of a firm to pay its current debts as they come due. This ratio considers only cash, marketable securities (cash equivalent s) and accounts receivable because they are considered to be the most liquid for ms of current assets. A Quick Ratio less than 1.0 implies "dependency" on invent ory and other current assets to liquidate short-term debt. Formula: (Cash + Cash Equivalents + Accounts Receivable) / Total Liabilities]' class="glossa ry_toolTip">Quick Ratio</td> <td align="center" bgcolor="#CCCCCC">2.4</td> <td align="center" bgcolor="#CCCCCC">3.1</td> <td align="center" bgcolor="#CCCCCC">2.4</td> <td align="center" bgcolor="#CCCCCC">3.1</td>
<td align="center" bgcolor="#CCCCCC">2.2</td> <td align="center" bgcolor="#CCCCCC">3.0</td> <td align="center" bgcolor="#CCCCCC">4.3</td> </tr> <tr> <td>SALES / RECEIVABLES (Receivables Turnover) is a ratio that measures the number of times trade Receivables turn over during the year. Generally, the higher the turnover of receivables, the shorter the time between sale and cash collection. It indicates how fast the company is getting paid for goods and services. Recei vables turnover is best compared to the industry in order to determine if the co mpany should improve their collection rate. The faster the receivables turnover, the better cash flow will look. Slow or below par turnover can be an indication of systemic problems within the company. It is best to compare receivables turn over with that of industry averages. Formula: Net Revenues / Accounts Recei vable (net)]' class="glossary_toolTip">Sales/Receivables</s pan></td> <td align="center" bgcolor="#CCCCCC">2.3</td> <td align="center" bgcolor="#CCCCCC">2.4</td> <td align="center" bgcolor="#CCCCCC">9.0</td> <td align="center" bgcolor="#CCCCCC">8.6</td> <td align="center" bgcolor="#CCCCCC">10.6</td> <td align="center" bgcolor="#CCCCCC">10.5</td> <td align="center" bgcolor="#CCCCCC">10.0</td> </tr> <tr> <td>GEAR ING RATIO measures the percentage of capital employed that is financed by debt a nd long term financing. The higher the gearing, the higher the dependence on bor rowing and long term financing. Whereas, the lower the gearing ratio, the higher the dependence on equity financing. Traditionally, the higher the level of gear ing, the higher the level of financial risk due to the increased volatility of p rofits. Financial manager face a difficult dilemma. Most businesses require long term debt in order to finance growth, as equity financing is rarely sufficient, on the other hand, the introduction of debt and gearing increases financial ris k. A high gearing ratio is positive; a large amount of debt will give higher ret urn on capital employed but the company dependent on equity financing alone is u nable to sustain growth. Gearing can be quite high for small businesses trying t o become established, but in general they should not be higher than 50%. Shareho lders benefit from gearing to the extent that return on the borrowed money excee ds the interest cost so that the market values of their shares rise. Formula: Long Term Debt / Shareholders Equity.]' class="glossary_toolTip"><s trong>Gearing Ratio</td> <td align="center" bgcolor="#CCCCCC">0.0%</td> <td align="center" bgcolor="#CCCCCC">0.0%</td> <td align="center" bgcolor="#CCCCCC">0.0%</td> <td align="center" bgcolor="#CCCCCC">0.0%</td> <td align="center" bgcolor="#CCCCCC">0.0%</td> <td align="center" bgcolor="#CCCCCC">0.0%</td> <td align="center" bgcolor="#CCCCCC">0.0%</td> </tr> <tr bgcolor="#FFFFFF"> <td> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td>
<td align="center"> </td> <td align="center"> </td> </tr> <tr> <td>DEBT MANAGEMENT RATIOS:</td> <td align="center">Qtr. End 31-Dec-10</ td> <td align="center">Qtr. End 31-Dec-09</ td> <td align="center">Year End 31-Dec-10</ td> <td align="center">Year End 31-Dec-09</ td> <td align="center">Year End 31-Dec-08</ td> <td align="center">Year End 31-Dec-07</ td> <td align="center">Year End 31-Dec-06</ td> </tr> <tr> <td>TIMES INTEREST EARNED (TIE) measures the extent to which operating income ca n decline before the firm is unable to meet its annual interest costs. The TIE r atio is used by bankers to assess a firms ability to pay their liabilities. TIE det ermines how many times during the year the company has earned the annual interes t costs associated with servicing its debt. Normally, a banker will be looking f or a TIE ratio to be 2.0 or greater, showing that a business is earning the inte rest charges two or more times each year. A value of 1.0 or less suggests that t he firm is not earning sufficient amounts to cover interest charges. Formula: Earnings Before Interest & Taxes [EBIT] / Interest Charges]' cl ass="glossary_toolTip">Times Interest Earned</td> <td align="center" bgcolor="#CCCCCC">Z</td> <td align="center" bgcolor="#CCCCCC">Z</td> <td align="center" bgcolor="#CCCCCC">Z</td> <td align="center" bgcolor="#CCCCCC">809.0</td> <td align="center" bgcolor="#CCCCCC">232.5</td> <td align="center" bgcolor="#CCCCCC">562.0</td> <td align="center" bgcolor="#CCCCCC">810.0</td> </tr> <tr> <td> EQUITY MULTIPLIER (EM) shows the amount of assets owned by the firm for each equ ivalent monetary unit owner claims held by stockholders, i.e., the equity multip lier measures how many dollars of assets an institution supports with each dolla r of capital. If a firm is totally financed by equity, the equity multiplier wil l equal 1.00, while the larger the number the more highly leveraged is the firm. EM compares assets with equity: large values indicate a large amount of debt fi nancing relative to equity. EM, thus, measures financial leverage and represents both profit and risk measurement. EM affects a firms profit because it has a mu ltiplier impact on Return on Assets (ROA) to determine the firms Return on Equit y (ROE). EM is also a risk measure because it reflects how many assets can go in to default before a company becomes insolvent. The EM ratio is best compared to industry averages. Formula: Total Assets / Net Worth]' class="glossary_ toolTip">Equity Multiplier</td> <td align="center" bgcolor="#CCCCCC">1.3</td> <td align="center" bgcolor="#CCCCCC">1.2</td> <td align="center" bgcolor="#CCCCCC">1.3</td>
<td align="center" bgcolor="#CCCCCC">1.2</td> <td align="center" bgcolor="#CCCCCC">1.4</td> <td align="center" bgcolor="#CCCCCC">1.2</td> <td align="center" bgcolor="#CCCCCC">1.2</td> </tr> <tr> <td>FIXED ASSETS (NET) / NET WORTH measures liquidity by comparing "fix ed" assets with "fixed" capital. A lower ratio indicates proportionately smaller investment and a better "cushion" for creditors in case of liquidation. This ma y be important if the fixed assets are not easily used in other businesses. The presence of substantial leased fixed assets (not shown on the balance sheet) may deceptively lower this ratio. Therefore smaller is better, i.e., greater than . 75 (75%) should merit caution.]' class="glossary_toolTip">Fixed Asse ts (net)/Net Worth</td> <td align="center" bgcolor="#CCCCCC">0.06</td> <td align="center" bgcolor="#CCCCCC">0.09</td> <td align="center" bgcolor="#CCCCCC">0.06</td> <td align="center" bgcolor="#CCCCCC">0.09</td> <td align="center" bgcolor="#CCCCCC">0.14</td> <td align="center" bgcolor="#CCCCCC">0.13</td> <td align="center" bgcolor="#CCCCCC">0.11</td> </tr> <tr> <td>DEBT RA TIO measures the percent of total funds provided by creditors. Debt includes bot h current liabilities and long-term debt. Creditors prefer low debt ratios becau se the lower the ratio, the greater the cushion against creditors losses in liqu idation. Owners may seek high debt ratios, either to magnify earnings or because selling new stock would mean giving up control. Owners want control while "usin g someone elses money." Debt Ratio is best compared to industry data to determin e if a company is possibly over or under leveraged. The right level of debt for a business depends on many factors. Some advantages of higher debt levels are: <ul> <li>The deductibility of interest from business expenses can provide tax advanta ges. </li> <li>Returns on equity can be higher.</li> <li>Debt can provide a suitable source of capital to start or expand a business. </li> </ul> Some disadvantages can be: <ul> <li>Sufficient cash flow is required to service a higher debt load. </li> <li>The need for this cash flow can place pressure on a business if income strea ms are erratic.</li> <li>Susceptibility to interest rate increases.</li> <li>Directing cash flow to service debt may starve expenditure in other areas su ch as development which can be detrimental to overall survival of the business.< /li> </ul> Formula: Total Liabilities / (Total Liabilities + Stockholders Equity)]' class="glossary_toolTip">Debt Ratio</td> <td align="center" bgcolor="#CCCCCC">0.2</td> <td align="center" bgcolor="#CCCCCC">0.2</td> <td align="center" bgcolor="#CCCCCC">0.2</td> <td align="center" bgcolor="#CCCCCC">0.2</td> <td align="center" bgcolor="#CCCCCC">0.3</td>
<td align="center" bgcolor="#CCCCCC">0.2</td> <td align="center" bgcolor="#CCCCCC">0.2</td> </tr> <tr> <td>DEB T TO EQUITY measures the risk of the firms capital structure in terms of amounts of capital contributed by creditors and that contributed by owners. It expresse s the protection provided by owners for the creditors. In addition, low Debt/Equ ity ratio implies ability to borrow. While using debt implies risk (required int erest payments must be paid), it also introduces the potential for increased ben efits to the firms owners. When debt is used successfully (operating earnings ex ceeding interest charges) the returns to shareholders are magnified through fina ncial leverage. Depending on the industry, different ratios are acceptable. The company should be compared to the industry, but, generally, a 3:1 ratio is a gen eral benchmark. Should a company have debt-to-equity ratio that exceeds this num ber; it will be a major impediment to obtaining additional financing. If the rat io is suspect and you find the companys working capital, and current / quick rat ios drastically low, this is a sign of serious financial weakness. Formula: Total Liabilities / Stockholders Equity]' class="glossary_toolTip"> Debt to Equity</td> <td align="center" bgcolor="#CCCCCC">0.3</td> <td align="center" bgcolor="#CCCCCC">0.2</td> <td align="center" bgcolor="#CCCCCC">0.3</td> <td align="center" bgcolor="#CCCCCC">0.2</td> <td align="center" bgcolor="#CCCCCC">0.4</td> <td align="center" bgcolor="#CCCCCC">0.2</td> <td align="center" bgcolor="#CCCCCC">0.2</td> </tr> <tr> <td>LONG-TERM DEBT TO EQUITY expresses the relationship between long-term cap ital contributions of creditors as related to that contributed by owners (invest ors). As opposed to DEBT TO EQUITY, Long-Term Debt to Equity expresses the degre e of protection provided by the owners for the long-term creditors. A company wi th a high long-term debt to equity is considered to be highly leveraged. But, ge nerally, companies are considered to carry comfortable amounts of debt at ratios of 0.35 to 0.50, or $0.35 to $0.50 of debt to every $1.00 of book value (shareh olders equity). These could be considered to be well-managed companies with a lo w debt exposure. It is best to compare the ratio with industry averages. Fo rmula: Total Long-Term Liabilities / Stockholders Equity]' class="glossary_t oolTip">Long-term-debt to Equity</td> <td align="center" bgcolor="#CCCCCC">0.0</td> <td align="center" bgcolor="#CCCCCC">0.0</td> <td align="center" bgcolor="#CCCCCC">0.0</td> <td align="center" bgcolor="#CCCCCC">0.0</td> <td align="center" bgcolor="#CCCCCC">0.0</td> <td align="center" bgcolor="#CCCCCC">0.0</td> <td align="center" bgcolor="#CCCCCC">0.0</td> </tr> <tr> <td>CURRENT DEBT TO TOTAL DEBT shows Current Liabilities as a percent of To tal Debt. Smaller firms carry proportionally higher level of current debt to tot al debt than larger firms. Formula: Total Current Liabilities / Total Liabi lities]' class="glossary_toolTip">Current-debt to Total Debt</td> <td align="center" bgcolor="#CCCCCC">79.0%</td>
<td align="center" bgcolor="#CCCCCC">88.7%</td> <td align="center" bgcolor="#CCCCCC">79.0%</td> <td align="center" bgcolor="#CCCCCC">88.7%</td> <td align="center" bgcolor="#CCCCCC">92.6%</td> <td align="center" bgcolor="#CCCCCC">93.2%</td> <td align="center" bgcolor="#CCCCCC">91.9%</td> </tr> </tbody> </table> </td> </tr> </table> <div align="left">N/A: Data unavailable in order to calculate ratio </div> <div align="left">Z: Data equals zero in ratio denominator</div>

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<table width="100%" border="0" cellspacing="0" cellpadding="6"> <tr> <td valign="top"> <h1 align="center">Ratio Analysis Report</h1> <h2 align="center">Publicly Traded

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