Volcom Financial Analysis

VOLCOM, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31,
2009
(In thousands,
except share and per
share data)
Assets
Current assets:
Cash and cash equivalents $ 76,180 30.11%
Short-term investments 35,000 13.83%
Accounts receivable — net of allowances of $8,626 (2009) and
$6,998 (2008) 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%

Property and equipment — net 26,348 10.41%

Investment in unconsolidated investee 330 0.13%
Deferred income taxes 3,545 1.40%
Intangible assets — net 9,784 3.87%
Goodwill 1,291 0.51%
Other assets 735 0.29%

Total assets $ 253,033 100.00%

Liabilities and Stockholders’ Equity

Current 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 obligations —

Other long-term liabilities 1,203 0.48%
Income taxes payable — non-current 68 0.03%
Commitments and contingencies (Note 10) 0.00%
Stockholders’ equity:
Common stock, $0.001 par value — 60,000,000 shares
authorized; 24,374,362 (2009 and 2008) shares issued and
outstanding 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%
s of December 31,
2008 2007
(In thousands,
cept share and per
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%
VOLCOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,

2009 % Revenue % of Change 2008
(In thousands, except share and per share d
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 358
Foreign 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 $ 0.89 $
Diluted $ 0.89 $
Weighted-average shares outstanding:
Basic 24,352,146
Diluted 24,363,544
2008 % Revenue % of Change 2007 % of Revenue
usands, 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 24,302,893
24,357,652 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
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 6,360 7,315
Provision for doubtful accounts 2,490 2,332
Loss on disposal of property and equipment 77 1
Asset impairments 134 16,230
Excess tax benefits related to exercise of stock options — (34
Stock-based compensation 1,795 985
Deferred income taxes (2,277 ) (6,349
Changes in operating assets and liabilities:
Accounts receivable 5,241 (3,114
Inventories (5,838 ) (1,844
Prepaid expenses and other current assets (1,759 ) (499
Income taxes receivable/payable 2,485 (3,021
Other assets 103 (306
Accounts payable 7,126 (8,096
Accrued expenses (1,623 ) (1,059
Other 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 ) (5,915
Business acquisitions, net of cash acquired (890 ) (32,138
Purchase of intangible assets — (589
Purchase of short-term investments (74,932 ) (278
Sale of short-term investments 39,932 278
Purchase of additional shares in cost method investee — (32
Proceeds 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 ) (127
Proceeds from government grants — 455
Proceeds from the exercise of stock options — 273
Excess tax benefits related to exercise of stock options — 34

Net cash (used in) provided by financing activities (83 ) 635

Effect of exchange rate changes on cash 1,111 3

Net (decrease) increase in cash and cash equivalents (3,433 ) (13,349

Cash and cash equivalents — Beginning of period 79,613 92,962

Cash and cash equivalents — End of period $ 76,180 $ 79,613

Supplemental disclosures of cash flow information:

Cash paid during the period for:
Interest $ 4 $ 110
Income taxes 10,380 20,804
nded December 31,
2007
n thousands)
$ 33,335
2,895
831
24
161
) (444 )
934
) (191 )
) (23,736 )
) (6,789 )
) (311 )
) (339 )
) (242 )
) 9,396
) 3,791
(36 )
19,279
) (14,989 )
) —
) —
) —
—
) —
16
) (14,973 )
) (78 )
229
1,028
444
1,623
1,619
) 7,548
85,414
$ 92,962
$ 35
22,799
January 31,
In thousands, except share amounts 2010
ASSETS
Current assets:
Cash and cash equivalents $ 149,561
Restricted cash 49,352
Trade accounts receivable, less allowances of $48,156

(2010) and $47,211 (2009) 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
Fixed assets, less accumulated depreciation and

amortization of $246,655 (2010) and $248,557 (2009) 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
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
Other long-term liabilities 40,573
Total liabilities 1,326,118
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) 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

12 Mos 3 Mos add 3 Mos
In thousands, except per share amounts 2009 1/31/2010 1/31/2010 1/31/2009
Revenues, net $ 1,977,526 432,737 2,410,263 443,278
Cost of goods sold 1,046,495 210,588 1,257,083 236,115
Gross profit 931,031 222,149 1,153,180 207,163
Selling, general and administrative expense 851,746 203,160 1,054,906 206,818
Asset impairments 10,737 0 10,737
Operating income 68,548 18,989 87,537 345
Interest expense, net 63,924 21,873 85,797 14,154
Foreign currency loss (gain) 8,633 (1,979) 6,654 1,430
Minority interest and other expense(gain) 2,539 851 3,390 42
(Loss) income before provision for income taxes (6,548) (1,756) (8,304) (15,281)
Provision for income taxes 66,667 3,674 70,341 50,581
(Loss) income from continuing operations (73,215) (5,430) (78,645) (65,862)
Loss(Gain) from discontinued operations (118,827) 76 (118,751) (128,564)
Net loss $ (192,042) (5,354) (197,396) (194,426)
(Loss) income per share from continuing operations (0.58) (0.04) (0.62) (0.52)
$
Loss per share from discontinued operations (0.94) 0.00 (0.94) (1.01)
Net loss per share (1.51) (0.04) (1.55) (1.53)
Weighted average common shares outstanding 127,042 127,648 127,039

Subtract New 12 Mos
1/31/2009 1/31/2010
1,966,985 1,966,985
1,020,968 1,020,968
946,017 946,017
848,088 848,088
10,737 10,737
87,192 87,192
71,643 71,643
5,224 5,224
3,348 3,348
6,977 6,977
19,760 19,760
(12,783) (12,783)
9,813 9,813
(2,970) (2,970)
(0.10) (0.10)
0.07 0.07
(0.02) (0.02)
127,039 127,039
OXFORD INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
January 30, January 31,
2010 2009
(In thousands, except
par amounts)
ASSETS
Current Assets:
Cash and cash equivalents $ 8,288 $

Receivables, net 74,398
Inventories, net 77,029
Prepaid expenses 10,713
Deferred tax assets 13,875
Total
current
assets 184,303
Property, plant and equipment, net 79,540

Intangible assets, net 137,490
Other non-current assets, net 23,841
Total Assets $ 425,174 $
LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
Trade accounts payable and other accrued expenses $ 81,831 $
Accrued compensation 11,514

Income taxes payable 2,517
Short-term debt and current maturities of long-term

debt —
Total
current
liabilitie
s 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 contingencies

Shareholders' Equity:
Common stock, $1.00 par value per common share 16,461
Additional paid-in capital 91,840

Retained earnings 19,356
Accumulated other comprehensive loss (23,240 )
Total
shareho
lders'
equity 104,417
Total Liabilities and Shareholders' Equity $ 425,174 $

January 31,
2009
ept
3,290
78,567
119,616
10,845
10,159
222,477
89,026
135,999
20,180
467,682
87,723
14,027
—
5,083
106,833
194,187
47,244
32,111
15,866
88,425
10,621
(27,605 )
87,307
467,682
OXFORD INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal 2009
(In
Net sales $ 800,658
Cost of goods sold 466,975
Gross profit 333,683

SG&A 304,330
Amortization of intangible assets 1,256
Impairment of goodwill, intangible assets and investment in an

unconsolidated entity —
305,586
Royalties and other operating income 13,057
Operating income (loss) 41,154
Gain on repurchase of 87/8% Senior Unsecured Notes —

Interest expense, net 21,361
Earnings (loss) before income taxes 19,793

Income 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 $ 0.9
Diluted $ 0.9
Earnings (loss) from discontinued operations per common share:

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

Basic $ 0.9
Diluted $ 0.9
Weighted average common shares outstanding:

Basic 16,297
Dilution 7
Diluted 16,304
Dividends declared per common share $ 0.36

Eight-month
Transition
Fiscal 2008 Period Ended Fiscal 2007
February 2,
2008
(In thousands, except per share amounts)
$ 947,516 $ 695,798 $ 1,128,907
560,314 418,459 682,080
387,202 277,339 446,827

358,071 244,033 356,970
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
$ — $ — $ (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

Volcom 2009
Liquidity Ratios Formulas Units Calculations 2009
Current ratio CA/CL Times 211,000/32,795 6.43
Quick Ratio ((C.A.-Inv)/CL) Times ((211,000-33,250)/32,795) 5.42
Leverage Ratios
Total Debt Ratio Debt/Total Assets Times (22,788+9,957+1,203+50)/253,033 0.13
Debt-Equity Ratio Debt/Total Equity Times (22,788+9,957+1,203+50)/218,967 0.16
Activity Ratios
Inventory Turnover Sales/Inventory Times 280,639/33,250 8.44
Total Asset Turnover Sales/Total Assets Times 280,639/253,033 1.11
Profitability Ratios
Gross Profit Margin (Sales-COGS)/Sales % (280,639-139,844)/280,639 50.17%
Profit Margin NI/Sales % 21,744/280,639 7.75%
ROA NI/Total Assets % 21,744/253,033 8.59%
ROE NI/Total Equity % 21,744/218,967 9.93%
EPS NI/Shares Outstanding $ 21,744/24,374 0.89
PE Ratio Price Per Share/EPS Times 16.74/0.89 18.76
Quiksilver 2009
Quick Ratio ((C.A.-Inv)/CL) Times (955,924-301,216)/427,221 1.53
Leverage Ratios
(24,927+203,232+93,314+858,324+4
Total Debt Ratio Debt/Total Assets Times 0,573)/1,782,273 0.68
(24,927+203,232+93,314+858,324+4
Debt-Equity Ratio Debt/Total Equity Times 0,573)/456,155 2.68
Activity Ratios
Inventory Turnover Sales/Inventory Times 1,966,985/301,216 6.53
Total Asset Turnover Sales/Total Assets Times 1,966,985/1,782,273 1.10
Gross Profit Margin (Sales-COGS)/Sales $ (1,966,985-1,046,495)/1,966,985 0.4708059
Profit Margin NI/Sales % (-2970)/1966985 -0.0015
ROA NI/Total Assets % (-2,970)/1,782,273 -0.0017
ROE NI/Total Equity % (-2,970)/456,155 -0.01
EPS NI/Shares Outstanding $ (-2,970)/131,484 -0.02
PE Ratio Price Per Share/EPS Times 2.02/(-0.02) -101.00
Oxford Industries
Quick Ratio ((C.A.-Inv)/CL) Times (184,303-77,029)/95,862 1.12
Leverage Ratios
Total Debt Ratio Debt/Total Assets Times (81,831+146,408+50,066)/425,174 0.65
Debt-Equity Ratio Debt/Total Equity Times (81,831+146,408+50,066)/104,417 2.67
Activity Ratios
Inventory Turnover Sales/Inventory Times 800,658/77,029 10.39
Total Asset Turnover Sales/Total Assets Times 800,658/425,174 1.88
Gross Profit Margin (Sales-COGS)/Sales $ (800,658-466,975)/800,658 0.416761
Profit Margin NI/Sales % 14,624/800,658 2%
ROA NI/Total Assets % 14,624/425,174 3%
ROE NI/Total Equity % 14,624/104,417 14%
EPS NI/Shares Outstanding $ 14,624/16,297 0.90
PE Ratio Price Per Share/EPS Times 20.49/0.9 22.77
Liquidity Ratios Formulas Units Industry Average

Current ratio CA/CL Times 3.53
Quick Ratio ((C.A.-Inv)/CL) Times 2.69
Leverage Ratios
Total Debt Ratio Debt/Total Assets Times 0.49
Debt-Equity Ratio Debt/Total Equity Times 1.83
Activity Ratios
Inventory Turnover Sales/Inventory Times 8.45
Total Asset Turnover Sales/Total Assets Times 1.37
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 $ 0.59
PE Ratio Price Per Share/EPS Times -19.82
Volcom 2009 Volcom 2008 Volcom 2007
Calculations 2008 Calculations 2007
178,465/26,755 6.67 176,674/29,327 6.02
((178,465-27,086)/27,086 5.66 (176,674-20,440)/29,327 5.33
(15,291+71+23+1,048)/221,623 0.13 (18,694+72+33+190)/202,494 0.15

(15,291+71+23+1,048)/193,703 0.14 (18,694+72+33+190)/172,855 0.17
334,304/27,086 12.34 268,613/20,440 13.14

334,304/221,623 1.51 268,613/202,494 1.33
(334,394-171,208)/334,394 48.79% (268,613-138,570)/268,613 48.41%

21,709/334,304 6.49% 33,335/268,613 12.41%
21,709/221,623 9.80% 33,335/202,494 16.46%
21,709/193,703 11.21% 33,335/172,855 19.28%
21,709/24,374 0.89 33,335/24,302 1.37
10.90/.089 12.24 22.03/1.37 16.08
Quiksilver 2009
Oxford Industries
Volcom
Liquidity Ratios 2007 2008 2009
Current ratio 6.02 6.67 6.43
Quick Ratio 5.33 5.66 5.42
Leverage Ratios
Total Debt Ratio 0.15 0.13 0.13
Debt-Equity Ratio 0.17 0.14 0.16
Activity Ratios
Inventory Turnover 13.14 12.34 8.44
Total Asset Turnover 1.33 1.51 2.29
Gross Profit Margin 48.41% 48.79% 50.17% Volcom vs. Industry Average
Profit Margin 12.41% 6.49% 7.75% Total Debt
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 0.89 0.6
0.49121865944984
Price Earnings Ratio 16.08 12.24 18.76 0.5
0.4
Industry
0.3
Liquidity Ratios Average
0.145767281993541
0.2 0.13436192117233
Current ratio 3.53 0.12545178072673
Quick Ratio 2.69 0.1
0
2007 2008 2009
Leverage Ratios
Total Debt Ratio 0.49
Debt-Equity Ratio 1.83
Volcom vs. Industry Avg: Inv
Activity Ratios 2007
14.00 2008
Inventory Turnover 8.45 12.00
Times
Total Asset Turnover 1.76

10.00 2009
8.00
6.00
Gross Profit Margin 46.31%
Profit Margin 3.14% 4.00
Return on Assets 3.96% 2.00

Return on Equity 7.76% 0.00
2007 2008 2009
Earnings Per Share 0.59
Price Earnings Ratio -19.82
Volcom vs. Industry Ave: P
0.14
0.124100471682309
0.12
Volcom vs. Industry Ave: P
0.14
0.124100471682309
0.12
0.1
0.07748032
0.08 0.064937900832775
0.06
0.04 0.03141179
0.02
0
2007 2008 2009
Volcom vs. Industry Ave: RO

0.25
0.192849498134274
0.2
0.15
0.112073638508438
0.09930263464
0.1 0.07761517085
0.05
0
2007 2008 2009
Volcom vs. Industry Avg: P/

25.00
20
20.00
2007
15.00 2008
Times
10.00
5.00
0.00
2007 2008 20
-5.00
-10.00
-15.00
20
-20.00
-25.00
Volcom vs. Industry Avg: Quick Ratio
12
Times
10
8
Volcom
6 Industry Average
4
21
0
. Industry Average Leverage Ratios: Volcom vs. Indsutry Avg: D/E

2 1.83197624021792
1.8
1.6
1.4
0.491218659449844
1.2
Volcom
1 Industry
Volcom 0.8 Average
Industry
Average 0.6
72673 0.134361921172337
0.4
0.170761621011831 0.143534173451108 0.155265405289382
0.2
0
2009 2007 2008 2009
ndustry Avg: Inv Turns

2008
2009
Volcom
Industry Average
2008 2009
. Industry Ave: Profit Margin Volcom vs. Industry Ave: ROA

18.00%
16.46%
16.00%
14.00%
. Industry Ave: Profit Margin Volcom vs. Industry Ave: ROA
18.00%
16.46%
16.00%
14.00%
12.00%
0.077480321694419 9.80%
00832775 Volcom 10.00% 8.59% Volcom
Indsutry Industry
8.00% Average
Average
0.031411791220798 6.00%
3.96%
4.00%
2.00%
08 2009 0.00%
2007 2008 2009
Industry Ave: ROE Volcom vs. Industry Avg: EPS

1.60
2007
1.40
1.20
1.00 2008 2009
$
08438 Volcom
0.099302634643577 Industry 0.80 Volcom
Average 2009 Industry Average
0.077615170850772
0.60
0.40
0.20
2009 0.00
2007 2008 2009
Industry Avg: P/E Ratio

2009 Volcom vs. Industry Avg: Gross Profit Ma
2008
0.51 0.501694347542572
0.5
Volcom 0.487867330334067
0.49
0.484127722783335
Industry Averag
2008 2009
0.48 Volcom
Indsutry
0.47 0.463087086023172 Average
2009 0.46
0.45
0.44
2007 2008 2009
0.46
0.45
0.44
2007 2008 2009
uick Ratio
Volcom
Industry Average
vg: D/E
7624021792
Volcom
Industry
Average
5405289382
2009
ROA
ROA
% Volcom
Industry
Average
g: EPS
2009
Volcom
2009 Industry Average
2009
Gross Profit Margin
1694347542572
Volcom
Indsutry
3087086023172 Average
2009
2009
•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%.
Volcom
Increase Retail Presence
Base Case 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 hour
Resale 10,000,000
0.1429 0.2449 0.1749 0.1249 0.0893 440.0000 hours per week
MACRS Depreciation 5 yrs 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500 8 minimum wage
Net 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 4,633,602
Working Capital 0 673,200 897,600 1,196,801 1,595,734 1,729,423
Sales Volume 666,667 666,667

Average Cost Per Unit 27
Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
Sales 75% 18,000,009 24,000,012 32,000,016 42,666,688 56,888,917
Cost of Goods Sold 9,000,005 12,000,006 16,000,008 21,333,344 28,444,459
Labor Cost
Exempt Employee 30,000 30,000 30,000 30,000 30,000
Hourly Employees 179,520 179,520 179,520 179,520 179,520
Utilities 125,000 125,000 125,000 125,000 125,000
Administrative and Other Expenses 3,100,000 4,100,000 3,500,000 4,300,000 5,000,000
Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500
EBIT 3,421,985 3,891,986 9,541,988 14,825,324 21,770,439
Tax 0.317 1,084,769 1,233,760 3,024,810 4,699,628 6,901,229
NI 2,337,215 2,658,226 6,517,178 10,125,696 14,869,210
Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500
OCF 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 -1,729,423

Recovery of NWC 1,729,423
Net Change in WC -673,200 -224,400 -299,200 -398,934 1,595,734
Capital spending -15,000,000

Resale value 10,000,000
Tax savings -2109159.5 (Bk-resale)*T
Net 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 16,208,710

NWC 0 -673,200 -224,400 -299,200 -398,934 1,595,734
Net Cap spend -15,000,000 0 0 0 0 7,890,841
Net Cash Flows -15,000,000 3,807,515 6,107,326 8,841,478 11,600,263 25,695,284
PVIF 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%
Payback
cumulative NCFs -15,000,000 -11,192,485 -5,085,159 3,756,319 15,356,582 41,051,866
0.425
Payback = 2.4 yrs
Volcom
Base Case with WACC One Exempt Employee making $30,000 per year
Resale 10,000,000
0.1429 0.2449 0.1749 0.1249 0.0893 440.0000 hours per week
AP 1,466,101 1,954,801 2,606,401 3,475,202 4,633,602
Working Capital 0 547,200 729,600 972,800 1,595,734 2,127,646
Sales Volume 666,667 666,667

Sales 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 accordingly
Labor Cost
Exempt Employee 30,000 30,000 30,000 30,000 30,000
Utilities 125,000 125,000 125,000 125,000 125,000
Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500
EBIT 3,421,985 3,891,986 9,541,988 14,825,324 21,770,439
Tax 0.3127 1,070,055 1,217,024 2,983,780 4,635,879 6,807,616
NI 2,351,930 2,674,962 6,558,208 10,189,445 14,962,822
Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500
OCF 4,495,430 6,348,462 9,181,708 12,062,945 16,302,322
Change in WC -547,200 -182,400 -243,200 -622,934 -531,911 -2,127,646

Net Change in WC -547,200 -182,400 -243,200 -622,934 1,595,734

Tax savings -2080549.45 (Bk-resale)*T
OCF 0 4,495,430 6,348,462 9,181,708 12,062,945 16,302,322

NWC 0 -547,200 -182,400 -243,200 -622,934 1,595,734
Net Cap spend -15,000,000 0 0 0 0 7,919,451
Net Cash Flows -15,000,000 3,948,230 6,166,062 8,938,508 11,440,012 25,817,507
PVIF 21% CoC 1.0000 0.8266 0.6834 0.5652 0.4675 0.3867
DCF -15,000,000 3,263,607 4,213,887 5,052,045 5,348,205 9,983,630
NPV = $12,861,374
IRR = 45.62%
Payback
cumulative NCFs -15,000,000 -11,051,770 -4,885,708 4,052,800 15,492,811 41,310,319
0.453
Payback = 2.5 yrs
Volcom
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 hour
0
Capital investment 15,000,000 440.0000 hours per week
Resale 10,000,000 8 minimum wage
0.143 0.245 0.175 0.125 0.089 51 weeks in a year
MACRS Depreciation 5 yrs 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500
Net 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 3,221,413

Working Capital 605,880 757,350 946,688 1,183,360 1,479,200
Sales 10% 19,800,010 24,750,012 30,937,515 38,671,894 48,339,868
Cost 8,100,004 10,125,005 12,656,256 15,820,320 19,775,401
Labor Cost
Exempt Employee 30,000 30,000 30,000 30,000 30,000
Utilities 125,000 125,000 125,000 125,000 125,000
Adminstrative and Other Expenses 4,000,000 5,290,480 4,500,000 5,600,000 6,400,000
Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500
EBIT 5,221,986 5,326,507 10,823,239 15,043,554 20,490,447
Tax 0.317 1,655,370 1,688,503 3,430,967 4,768,807 6,495,472
NI 3,566,616 3,638,004 7,392,272 10,274,747 13,994,976
Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500
OCF 5,710,116 7,311,504 10,015,772 12,148,247 15,334,476
Change in WC -605,880 -151,470 -189,338 -236,672 -295,840 -1,479,200

Net Change in WC -605,880 -151,470 -189,338 -236,672 1,183,360

Tax savings -2109159.5
OCF 0 5,710,116 7,311,504 10,015,772 12,148,247 15,334,476

NWC 0 -605,880 -151,470 -189,338 -236,672 1,183,360
Net Cap spend -15,000,000 0 0 0 0 7,890,841
Net Cash Flows -15,000,000 5,104,236 7,160,034 9,826,435 11,911,575 24,408,676
PVIF 21% CoC 1.0000 0.8266 0.6834 0.5652 0.4675 0.3867
DCF -15,000,000 4,219,162 4,893,168 5,553,901 5,568,661 9,438,835
NPV = $14,673,726
IRR = 50.22%
Payback
cumulative NCFs -15,000,000 -9,895,764 -2,735,730 7,090,705 19,002,281 43,410,957
0.721594899724634
Payback = 2.7 yrs
Volcom
Worst Case Decrease Sales 10% and Increase COGS 10%
0
One Exempt Employee making $30,000 per year
0 22 Hourly Employees working 20 hours making minimum wage of 8 per hour
Capital investment 15,000,000
Resale 10,000,000 440.0000 hours per week
0.143 0.245 0.175 0.125 0.089 8 minimum wage
MACRS Depreciation 5 yrs 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500 51 weeks in a year
Net 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
AP 1,612,711 2,015,889 2,519,861 3,149,826 3,937,282

Working Capital 0 740,520 925,650 1,157,063 1,446,329 1,807,911
Sales 0.1 16,200,008 20,250,010 25,312,513 31,640,641 39,550,801
Labor Cost
Exempt Employee 30,000 30,000 30,000 30,000 30,000
Hourly Employee 179,520 179,520 179,520 179,520 179,520
Utilities 125,000 125,000 125,000 125,000 125,000
Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500
EBIT 1,521,983 866,984 4,385,735 6,896,674 10,006,847
Tax 0.317 482,469 274,834 1,390,278 2,186,246 3,172,171
NI 1,039,514 592,150 2,995,457 4,710,428 6,834,677
Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500
OCF 3,183,014 4,265,650 5,618,957 6,583,928 8,174,177
Change in WC -740,520 -185,130 -231,413 -289,266 -361,582 -1,807,911

Net Change in WC -740,520 -185,130 -231,413 -289,266 1,446,329

OCF 0 3,183,014 4,265,650 5,618,957 6,583,928 8,174,177

NWC 0 -740,520 -185,130 -231,413 -289,266 1,446,329
Net Cap spend -15,000,000 0 0 0 0 7,890,841
Net Cash Flows -15,000,000 2,442,494 4,080,520 5,387,544 6,294,662 17,511,346
PVIF 21% CoC 1.0000 0.8266 0.6834 0.5652 0.4675 0.3867
DCF -15,000,000 2,018,966 2,788,627 3,045,040 2,942,755 6,771,637
NPV = $2,567,025
IRR = 26.52%
Payback
cumulative NCFs -15,000,000 -12,557,506 -8,476,986 -3,089,442 3,205,221 20,716,567
0.509196611
Payback = 3.5 yrs
0 Volcom
0 NPV=0 (Revenues)

Resale 10,000,000
0.143 0.245 0.175 0.125 0.089
Net 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 2,380,734

Working Capital 0 447,766 559,708 699,635 874,543 1,093,179
Sales Volume 443,420.75

Average Price Per Unit $27.00
Sales 11,972,360 14,965,450 18,706,813 23,383,516 29,229,395
Labor Cost
Exempt Employee 30,000 30,000 30,000 30,000 30,000
Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500
EBIT 533,430 -500,295 3,020,386 5,308,738 8,065,677
Tax 0.317 169,097 -158,593 957,462 1,682,870 2,556,820
NI 364,333 -341,701 2,062,924 3,625,868 5,508,858
Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500
OCF 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 -1,093,179

Net 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 6,848,358

NWC 0 -447,766 -111,942 -139,927 -174,909 874,543
Net Cap spend -15,000,000 0 0 0 0 7,890,841
Net Cash Flows -15,000,000 2,060,066 3,219,857 4,546,497 5,324,459 15,613,742
PVIF 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%
Payback
cumulative NCFs -15,000,000 -12,939,934 -9,720,076 -5,173,580 150,880 15,764,622
0.028337115
Payback = 3.0 yrs
Volcom
NPV=0 (COGS)
0
Resale 10,000,000
0.143 0.245 0.175 0.125 0.089
Net 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
AP 1,291,755 1,937,632 2,906,448 4,359,671 6,539,507

Working Capital 0 593,144 889,717 1,334,575 2,001,863 3,002,794
Sales Volume 666,667

Average Price Per Unit 27
Sales 75% 18,000,009 22,500,011 28,125,014 35,156,268 43,945,334
Labor Cost
Exempt Employee 30,000 30,000 30,000 30,000 30,000
Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500
EBIT 4,617,520 2,622,382 3,950,081 2,010,378 -2,747,990
Tax 0.317 1,463,754 831,295 1,252,176 637,290 -871,113
NI 3,153,766 1,791,087 2,697,905 1,373,088 -1,876,877
Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500
OCF 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 -3,002,794

Net 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 -537,377

NWC 0 -593,144 -296,572 -444,858 -667,288 2,001,863
Net Cap spend -15,000,000 0 0 0 0 7,890,841
Net Cash Flows -15,000,000 4,704,122 5,168,015 4,876,547 2,579,300 9,355,326
PVIF 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%
Payback
cumulative NCFs -15,000,000 -10,295,878 -5,127,864 -251,317 2,327,984 11,683,310
0.9025640179
Payback = 3.9 yrs
Volcom
Tax Rate = 38% One Exempt Employee making $30,000 per year
Resale 10,000,000
0.1429 0.2449 0.1749 0.1249 0.0893 440.0000 hours per week
AP 1,466,100 1,832,625 1,873,350 1,954,800 2,199,150
Working Capital 0 673,200 841,500 860,200 897,600 1,009,800
Sales 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 accordingly
Labor Cost
Exempt Employee 30,000 30,000 30,000 30,000 30,000
Utilities 125,000 125,000 125,000 125,000 125,000
Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500
EBIT 3,421,980 3,141,980 5,041,980 5,491,980 6,825,980
Tax 0.38 1,300,352 1,193,952 1,915,952 2,086,952 2,593,872
NI 2,121,628 1,948,028 3,126,028 3,405,028 4,232,108
Depreciation 2,143,500 3,673,500 2,623,500 1,873,500 1,339,500
OCF 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 -1,009,800

Net Change in WC -673,200 -168,300 -18,700 -37,400 897,600

Tax savings -2528330 (Bk-resale)*T
OCF 0 4,265,128 5,621,528 5,749,528 5,278,528 5,571,608

NWC 0 -673,200 -168,300 -18,700 -37,400 897,600
Net Cap spend -15,000,000 0 0 0 0 7,471,670
Net Cash Flows -15,000,000 3,591,928 5,453,228 5,730,828 5,241,128 13,940,878
PVIF 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%
Payback
cumulative NCFs -15,000,000 -11,408,072 -5,954,845 -224,017 5,017,110 18,957,988
0.957257824
Payback = 4.0 yrs
Volcom, Inv.
Project Summary
Best Case Base Case Base Case Worst Case NPV = 0 NPV = 0 Tax Rate
Sales +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 R
Assumptions
Income Statement
2010
Category Relationship Annual Forecast
Revenues:
All Product revenues A/R 1.10
Cost of goods sold-% of Sales Inventory & A/P 0.50
Operating Expenses:
SGA Expenses 1.09
Depreciation Expense
Total Other Income (Loss) 1.00
Tax Rate 32% 0.32
Shares Outstanding 24,374,362 24,374,362
Balance Sheet
2010
Category Relationship Annual Forecast
Assets:
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable-% of sales= 0.1931
Inventories-% of COGS= 0.2237
Other Current Assets
Property and equipment — net 15000000
Other Long-Term Assets
Liabilities
Accounts payable-% of COGS= 0.1629
Accrued expenses and Other
Other long-term liabilities
Accrued expenses and Other
Current portion of capital lease obligations
Long-term capital lease obligations
Other long-term liabilities
Income taxes payable — non-current
Volcom, Inc.
ast, Annual Plan and Strategic Long Range Plan
Assumptions
10 2011 2012
Project 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
10 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
2012
Project Impact
$32,000,016
$16,000,008
$3,500,000
$2,623,500
2012
Project Impact
$6,179,203
$3,579,202
$2,606,401
2009 Annual ACTUALS
2009 2009
Income Statement Year End Q1 Q2
Revenues:
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)

Basic 84.91% 9.91% -6.16%
Diluted 84.91% 9.91% -6.16%
Basic 24,374,362 24,374,362 24,374,362
Diluted 24,374,362 24,374,362 24,374,362
2009 2009
Balance Sheet Year End Q1 Q2
Assets
Current 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
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
Common stock, $0.001 par value $ 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

ALS
2009
Q3 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 24,374,362

24,374,362 24,374,362 24,374,362
2009
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 Plan
2009 2010
1 2 3 4 5 6
Income Statement Year End Q1 Q2 Q3 Q4 Total
Revenues:
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 $ 37,857,125
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 $ 39,749,125
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

Basic 0.85 0.19 0.04 0.56 0.32 1.11
Diluted 0.85 0.19 0.04 0.56 0.32 1.11
Basic 24,374,362 24,374,362 24,374,362 24,374,362 24,374,362 24,374,362
Diluted 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 Total
Assets
Current 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

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
Common stock, $0.001 par value $ 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 Plan
2009 2010
Income Statement Year End Growth Project Total Q1 Q2 Q3 Q4 Total
Revenues:
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 $37,857,125 $ 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 $39,749,125 $ 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

Basic 0.85 1.11 0.19 0.04 0.56 0.32 1.11
Diluted 0.85 1.11 0.19 0.04 0.56 0.32 1.11
Basic 24,374,362 24,374,362 24,374,362 24,374,362 24,374,362 24,374,362 24,374,362
Diluted 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 Total
Assets
Current 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

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
Common stock, $0.001 par value $ 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 Plan
Income Statement 2009 2010 2011
Revenues:
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 $37,857,125 $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 $39,749,125 $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

Basic 0.85 1.11 1.18
Diluted 0.85 1.11 1.18
Basic 24,374,362 24,374,362 24,374,362
Diluted 24,374,362 24,374,362 24,374,362
Balance Sheet 2009 2010 2011

Assets
Current 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

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
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
Common stock, $0.001 par value $ 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

2012
$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
1.36
1.36
24,374,362
24,374,362
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 L
Income Statement 2009 2010 2010
OrganicGrowth Project
Total 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

Basic 0.85
Diluted 0.85
Basic 24,374,362
Diluted 24,374,362
Balance Sheet 2009 2010 2010

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

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
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
Common stock, $0.001 par value $ 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 Plan
2010 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
$37,857,125 $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

$39,749,125 $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 1.18
1.11 1.18
24,374,362 24,374,362
24,374,362 24,374,362
2010 2011 2011 2011 2012

OrganicGrowth 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

Yr 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
1.36
1.36
24,374,362
24,374,362
2012 2012
Project
-$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 Capital
WACC= E/V * R(e) + D/V * R(D) * (1-Tc)
Cost of Equity:
Er=Rf + (Rm-Rf) x β
Risk-free Rate R(f) 3.3%
Avg. Market Return R(m): (Avg. S&P 500) 14.00%
Market Risk Premium (Rm-Rf) 10.70%
Beta Coefficient: (yahoo finance) 1.67
R(e)= 21.17%
Market Value of Equity # of Outstanding Shares 24,300,000
Stock Price: $20.50
MVE (E): $498,150,000.00
Cost Of Debt (D):
Current Bonds 0
Total WACC
V: Market value of debt + Market value of equity $498,150,000.00
E/V: 1.00
D/V: 0
Tax Rate (31.7%) 0.32
WACC 21.17%
Capital Structure
Current Capital Structure:
Values Current Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Scenario 6
R(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 6
R(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 = $515,000,000

E: $485,000,000
D: 4.37% per bond 10 yr AA
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%
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 Total

New WACC 21% 0.09% 20.62%
485000000
ecomes 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 as
listed in our option #2
Equity 0
Amount $0
Stock Price: $20.50
#of Shares Issued 0
Debt 1.00
Amount $15,000,000
#Bonds Issued: 15,000
Indenture Explaination
# of Bonds Issued: 15,000 Bonds Issued 15,000
Amount 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 on
Maturity: 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: None
Sinking 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 lender
Positive Covenants include:
*The company must periodically furnish audited
financial statements to lender.
er year. (8.3% of face value) 1245 annual int exp
NY Times June 25, 2010 article

Initial Pricing Mark-Up
Base Price Discounted Price

Sale 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 Minimum
1000 $112.50
10,000 $337.50
100,000 $1,350.00
500,000 $6,750.00 Order Maximum
Termination Costs Assuming Hawiian distributer breaches contract
Cost Items: Percent from Operating Expenses

Salary (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

Volcom Financial Analysis

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Volcom Financial Analysis

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VOLCOM, INC.

Total current assets 211,000 83.39%

Property and equipment — net 26,348 10.41%

Total assets $ 253,033 100.00%

Liabilities and Stockholders’ Equity

Total current liabilities 32,795 12.96%

Long-term capital lease obligations —

Total stockholders’ equity 218,967 86.54%

$ 79,613 35.92% 92,962 45.91%

60,914 27.49% 58,270 28.78%

$ 15,291 6.90% 18,694 9.23%

26,755 12.07% 29,327 14.48%

193,703 87.40% 172,855 85.36%

Year Ended December 31,

Total revenues 280,639 100.00%

Gross profit 140,795 50.17%

Total operating expenses 110,847 39.50%

Operating income 29,948 10.67%

Total other income (loss) 1,892 0.67%

Income before provision for income taxes 31,840 11.35%

Net income $ 21,744 7.75% $

Net income per share:

332,110 99.34% $ 265,193 98.73%

334,304 100.00% 268,613 100.00%

128,694 38.50% 79,411 29.56%

901 0.27% 3,973 1.48%

-906 -0.27% 4,374 1.63%

33,496 10.02% 55,006 20.48%

21,709 6.49% $ 33,335 12.41%

Year Ended December 31,

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

Cash flows from investing activities:

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

Cash flows from financing activities:

Net cash (used in) provided by financing activities (83 ) 635

Net (decrease) increase in cash and cash equivalents (3,433 ) (13,349

Supplemental disclosures of cash flow information:

Restricted cash 49,352

Trade accounts receivable, less allowances of $48,156

Other receivables 28,832

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

Fixed assets, less accumulated depreciation and

Intangible assets, net 141,995

Other assets 76,017

Deferred income taxes long-term 58,586

Total assets $ 1,782,273

LIABILITIES AND STOCKHOLDERS’ EQUITY

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

Long-term debt, net of current portion 858,324

Other long-term liabilities 40,573

Total liabilities 1,326,118

Preferred stock, $.01 par value, authorized shares -

Common stock, $.01 par value, authorized shares -

Additional paid-in capital 370,878

Treasury stock, 2,885,200 shares (6,778

Accumulated deficit (6,977