Does Forzani have any off-balance-sheet liabilities? Describe these liabilities. What impact do the off-balance-sheet liabilities have on your ability to evaluate Forzani’s capital structure and risk? Calculate Forzani’s debt-to-equity ratio on February 1, 2009, using only the amounts reflected in the balance sheet, and compare that amount with the ratio taking into consideration the off-balance-sheet amounts. Don’t forget to discount the amounts where appropriate. Assume a discount rate of 15 percent.

The Forzani Group Ltd. is Canada’s largest sporting goods retailer, offering brand-name and private-brand products. It operates stores across the country, under the following corporate and franchise banners: Sport Chek, Coast Mountain Sports, Sport Mart, National Sports, Athletes World, Sports Experts, Tech Shop, Nevada Bob’s Golf, Hockey Experts, and The Fitness Source.
The company also retails online at www.sportmart.ca and offers a sporting goods information site, www.sportchek.ca. At the end of fiscal 2009, Forzani Group operated 337 corporate stores and was franchisor/licensor of 227 stores.’
Forzani’s consolidated balance sheets, statements of operations, comprehensive earnings, and cash flows, and extracts from the notes to the financial statements are provided in Exhibit 12.3.

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EXHIBIT 12.3 The Forzani Group Ltd.: Extracts from the Financial Statements The Forzani Group Ltd. Consolidated Balance Sheets (in thousands) As at ASSETS Current Cash Accounts receivable Febuary 1, 2009 February 3, 2008 January 28, 2007 3,474 84,455 47,484 $ 22,758 75,506 65,543 Inventory (Note 3) 291,497 319,445 302,207 Prepaid expenses (Note 4) 2,827 14,501 2,688 382,253 456,936 393,196 Capital assets (Note 5) 196,765 188,621 191,146 Goodwill and other intangibles (Note 6) 91,481 89,335 90,238 Other assets (Note 7) 9,280 3,863 8,011 Future income tax assets (Note 12) 9,681 16,209 689,460 $ 754,964 $ 682,591 LIABILITIES Current Indebtedness under revolving credit facilities Accounts payable and accrued liabilities 17,130 277,820 279,910 230,977 Current portion of long-term debt (Note 8) 7,501 51,863 1,163 302,451 331,773 232,140 Long-term debt (Note 8) 126 6,586 58,303 Deferred lease inducements 47,811 55,089 58,543 Deferred rent liability 5,893 6,033 5,737 Future income tax liability 55