Investment Analysis – Polar Sports (a)

Investment Analysis – Polar Sports

Investment Analysis Polar Sports, Inc.

Appendix

Investment Analysis – Polar Sports

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

0

0

0

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

Investment Analysis – Polar Sports

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

2

Investment Analysis – Polar Sports

Exhibit 2 (Income Statement Under Level Production) 2012 Pro Forma Income Statement Under Level Production (in thousands of dollars) 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

a

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.

Investment Analysis – Polar Sports

c

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 thousands of dollars) 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

0

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

0

0

0

0

0

312 -

-90 -

-73 -

57 -

195 -

1,92 8 718 2,53 1,22 4 8 0

0

636 152 2,50 1,36

Investment Analysis – Polar Sports

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

2

7

-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

0

0

0

96

0 0 95 7

Cash flow from financing

826

1,1 86

1,09 0

1,0 42

378

200

0

0

0

0

0

June

July

Financing Activities Less: bank note repayment Less: debt repayment

Total Cash Flow

827

0

0

96

95 7

916

80 6

937

0

0 0 2,47 1,34 7 2

0

0

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

Investment Analysis – Polar Sports

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

Investment Analysis – Polar Sports

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%

Investment Analysis – Polar Sports