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Ellen Petrillo ACG2021 - 004

Ellen Petrillo ACG2021 - 004. International Limited. Please note that all references to money is made in AUD (Australian Dollars). Executive Summary.

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Ellen Petrillo ACG2021 - 004

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  1. Ellen PetrilloACG2021 - 004 InternationalLimited Please note that all references to money is made in AUD (Australian Dollars).

  2. Executive Summary Billabong International Limited has just completed a big financial year with a sequence of noteworthy highlights. This is huge for a growing company like Billabong. Billabong’s athletes dominate in their sport, but the Company is still working on global domination. During the past year, the Company has added two new businesses, saw developing brands grow 35-40%, hit growth in net profit after tax, earnings per share and shareholders dividend. Along with these amazing triumphs, Billabong International Limited finally hit the $1 billion mark in global sales! It is clear from the annual report that they are well on their way to becoming a top producer. With a strong competitive drive, smart investments and a dedicated team, Billabong International Limited will continue to see further growth impact throughout the years. http://www.billabongcorporate.com/investors-reports.php

  3. Introduction • Derek O’Neill – Chief Executive Officer • Location: 1 Billabong Place Burleigh Heads QLD 4220 Australia • Fiscal Year Ending on June 30, 2006 • Marketing, distribution, wholesaling and retailing apparel, accessories, eyewear, wetsuits and hard goods (surfboards, skateboards, surf camps, footwear, etc) under the Billabong, Element, Von Zipper, Honolua Surf Company, Custom, Palmers Surf and Nixon brands • Billabong is a Global Company with businesses in Africa, Australia, Europe, North America and South America. Their products are distributed in over 100 countries with the majority of its revenue generating from wholly-owned operations in Australia, Brazil, Europe, Japan, New Zealand and North America.

  4. Audit Report • Pricewaterhouse Coopers Waterfront Place 1 Eagle St. Brisbane QLD 4000 • Pricewaterhouse Coopers stated that Billabong International Limited was well-positioned to maintain its growth profile. Over the past year, Billabong International Limited has experienced exceptional growth in Australia and strong growth everywhere else. They expect to see a robust revenue growth in Europe and the Americas for 2007. Billabong International Limited is seen as beneficial to its stockholders due to the attraction of high-caliber executives and sustained growth.

  5. Stock Market Information • 14.23/share • 12-Month Range: 15.3 – 12.9 • Dividend per share: 44.0 cents • Information found on October 10, 2006 • Personally, I would buy and hold onto Billabong International Limited. In the past two years, their shareholders have benefited in its solid growth and will continue to do so. Billabong International Limited appears to be a great investment.

  6. Industry Situation & Company Plans Billabong International Limited is a versatile company in the competitive world of extreme sports. By sponsoring a variety of athletes all over the world who compete in skateboarding, snowboarding, surfing and wakeboarding, they are able to draw in people from all different backgrounds. The 2005-2006 financial year was the first time Billabong International Limited “surpassed more than $1 billion in reported global sales, more than $500 million in reported sales in the Americas and more than $200 million in reported sales in Europe.” Billabong International Limited is proud of their “strong and stable sales base in Australia” and their improving stats in Europe along with its strong progression in the Americas (http://www.billabongcorporate.com/investors-reports.php). In the late 70’s, two surfers designed and made Billabong board shorts and sold them to a local surf shop in Australia. Once local surfers realized the “superior functionality” of these board short, they were sold. To this day, Billabong International Limited strives to stay true to its roots and provide “design-relevant and functional products” (http://www.billabongcorporate.com/about-billabong.php). This company plans on remaining consistent in all areas of marketing, manufacturing and distributing. Billabong International Limited will continue to commit to the “global boardsports sector through athlete sponsorship, event staging and support of industry bodies” (http://www.billabongcorporate.com/company-history.php). According to Derek O’Neill, Chief Executive Officer, the Company is excited to “build some of the strongest youth brands in the world” (http://www.billabongcorporate.com/investors-reports.php).

  7. Income Statement Billabong International Limited uses a Single Step Format. There was an expansion in Gross Profit and Net Income from 2005 to 2006, but there was a decline in the Income of Operations.

  8. Balance Sheet 2005: 937,938 = 300,604 + 637,334 2006: 1,257,732 = 545,609 + 712,123 ___________________________________________________________ There were increases in all categories. For Assets, it was mostly due to “Non-Current Assets”. Overall, Liabilities had a huge increase.

  9. Statement of Cash Flows The cash flows from operations was larger than the net income by 115,750 in 2005 and 96,829 in 2006. There was a decrease in this change between 2005 and 2006 due to the increase in the net income. Billabong International Limited is growing through investing in other brands that share their interests and activities such as marketing in the core boardsport channels, athletes and much more. Billabong International Limited’s primary source of financing is the stock sales. However, with the large increase in stock sales between 2005 and 2006, there was also a small increase in borrowings. Overall, the cash has increased over the past two years.

  10. Accounting Policies Cash and Cash Equivalents: These include cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value and bank overdrafts (shown within borrowings in current liabilities on balance sheet). It is done this way for cash flow statement presentation purposes. Inventories: Raw materials, work in progress and finished goods are stated at the lower cost and net realizable value. For raw materials, cost is determined using the first-in, first-out method and standard costs approximating actual costs. As for work in progress and finished goods, cost is standard costs approximating actual costs including direct materials, direct labor and an allocation of variable and fixed overhead expenditure.The latter being allocated on the basis of normal operating capacity. Costs of purchased inventory are determined after deducting rebates and discounts. Property, Plant and Equipment: Land and buildings are shown at cost. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives as follows: buildings 20 years, owned and leased plant and equipment 3-20 years and furniture, fittings and equipment 3-20 years. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. Revenue Recognition: Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and amounts collected on behalf of third parties. Revenue is recognized for Sale of Goods, Interest Income, Royalty Income and Agent Commissions.

  11. 1. Summary of Significant Accounting Policies 2. Financial Risk Management 3. Critical Accounting Estimates and Judgements 4. Segment Information 5. Revenue 6. Other Income 7. Expenses 8. Income Tax Expense 9. Current Assets – Cash and Cash Equivalents 10. Current Assets – Trade and other Receivables 11. Current Assets - Inventories 12. Current Assets – Other 13. Non-Current Assets – Receivables 14. Non-Current Assets – Other Financial Assets 15. Non-Current Assets – Property, Plant and Equipment 16. Non-Current Assets – Intangible Assets 17. Non-Current Assets – Deferred Tax Assets 18. Non-Current Assets - Other 19. Current Liabilities – Trade and other Payables 20. Current Liabilities – Borrowings 21. Current Liabilities – Current Tax Liabilities 22. Current Liabilities - Provisions 23. Non-Current Liabilities - Borrowings 24. Non-Current Liabilities – Deferred Tax Liabilities 25. Non-Current Liabilities - Provisions 26. Contributed Equity 27. Treasury Shares, Reserves and Retained Profits 28. Dividends 29. Derivative Financial Instruments 30. Key Management Personnel Disclosures 31. Remuneration of Auditors 32. Contingencies 33. Commitments 34. Related Party Transactions 35. Business Combinations 36. Subsidiaries 37. Deed of Cross Guarantee 38. Events Occurring after the Balance Sheet Date 39. Reconciliation of Profit after Income Tax to Net Cash Flow from Operating Activities 40. Non-Cash Investing and Financing Activities 41. Earnings Per Share 42. Share-Based Payments 43. Explanation of Transition to Australian Equvalents to IFRS Notes to the Financial Statement:

  12. Financial Analysis Liquidity Ratios The 2006 year ending Liquidity Ratios show encouraging results. Overall, 2006 finished up better than 2005. The working capital shows that at the end of 2006, Billabong International Limited had more assets than liabilities. As for the drop off in receivable turnover, this shows a 2.27 decrease in the average amount of days that sales are uncollected. On the flip side, there was a slight increase in inventory turnover which proves that the cost of goods sold in 2006 had improved from 2005.

  13. Financial Analysis Profitability Ratios Billabong International Limited’s Profitability Ratios are increasing in every category except for Asset Turnover. This is not extremely important since it does not change anything. For the most part, it is a minimal decrease. As for Billabong International Limited’s profit margin, this chart shows that they enhanced their earnings by 10.65% in 2006. Along with this, the net income for every dollar of average total assets increased from 7% in 2005 to 8% in 2006. This chart indicates a positive sign for shareholders since it shows that the amount of net income for every dollar of shareholders equity improved from 20.6% in 2005 to 21.6% in 2006.

  14. Financial Analysis Solvency Ratio • Debt to Equity 2005: .97 2006: 1.7 The Debt to Equity ratio helps determine if the shareholders own Billabong International Limited or if the creditors do. In 2005, the shareholders just barely owned the majority of the company. In 2006, ownership shifted to the creditors. This can be positive and negative.

  15. Financial AnalysisMarket Strength Ratios • In 2005, the earnings per share was 61.0 cents. In 2006, it rose 16.1% and became 70.8 cents. This is good because the shareholders benefit by receiving more back from Billabong. • Dividend Yield 2005: 1.54 2006: 1.65 The rise in dividend yield shows that in 2006 investor returns were more than in 2005.

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