Spyder Active Sports2004

Harvard Business School Case 206-027

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Selected Financial Data about Comparable Companies (in $ millions, as year end 2004)

Company Name

Industry

Beta

Market Value
of Equity

Adidas-Salomon AG
Columbia Sportswear Co.
K2 Inc.
Nike Inc.
Quiksilver Inc.
Skis Rossignol SA
VF Corp

Sports Apparel, Footwear, & Equipment

Sports Apparel
Sports Equipment
Sports Apparel & Footwear
Sports Apparel
Sports Equipment & Apparel
Apparel, incl. Sports Apparel

0.81
1.48
1.36
0.70
1.01
0.55
0.59

4,302
2,239
559
20,558
1,217
174
5,113

Average
Median

Current Risk Free Rate (April 2004, 20 Year Treasury)

Market Risk Premium
CAPM Cost of Capital (Unlevered)
Small Stock Premium
Total Cost of Capital

0.93
0.81

5.16%
6.50%
9.76%
6%
15.76%

Total InterestBearing Debt

1,459
20
209
866
138
118
994

Five-Year
Average Debt-toTotal Value Five Average D/E

Unlvered
Beta

0.39
0.06
0.41
0.08
0.17
0.44
0.20

0.64
0.06
0.70
0.09
0.20
0.79
0.25

0.49
1.40
0.80
0.64
0.84
0.31
0.47

0.25
0.20

0.39
0.25

0.71
0.64

Consolidated Income Statement and Cash Flow AdjustmentsHistorical and Forecasted (in $ thousands)
FY2004 Current

FY2005E

FY2006E

FY2007E

FY2008E

85,281
43,279

105,630
55,075

133,223
70,419

165,732
88,253

42,002

50,554

62,804

77,479

Total Operating Expenses

Op. Income Before Depreciation

28,014
13,988

33,571
16,983

41,028
21,777

49,584
27,895

EBIT

12,910
3,228

14,887
3,722

18,517
4,629

24,798
6,199

9,683
1,078
2,558

11,165
2,097
3,169

13,888
3,260
3,997

18,598
3,098
4,972

Net Sales

61,366

Cost of Sales
Gross Profit

Taxes
Unlevered Net Income
Add Back Depreciation
Less Capital Expenditures
Less Net Working Capital Investment
Total Free Cash Flow
Discount Rate
Terminal Value Growth Rate
PV Cash Flows
PV Terminal Value
Enterprise Value
Implied 2005 EBITDA Multiple
Implied 2005 Sales Multiple

383

326

7,819

9,767

441
12,709
TV

520
16,204

166,660

15.76%
6%
$31,262
$92,819
$124,081
9.6
1.5

3.00%
2558.43
1.60%
1364.50
382.64

3.00%
3168.89
1.60%
1690.08
325.58

3.00%
3996.69
1.60%
2131.57
441.49

3.00%
4971.95
1.60%
2651.71
520.14

Net Sales growth

Cost of Sales
Gross Profit

50.75%
49.25%

23.86%
52.14%
47.86%

26.12%
52.86%
47.14%

24.40%
53.25%
46.75%

Total Operating Expenses

Op. Income Before Depreciation

32.85%
16.40%

31.78%
16.08%

30.80%
16.35%

29.92%
16.83%

EBITDA

15.14%

14.09%

13.90%

14.96%

Depreciation & Amortization

Tax Rate

1.26%
25.00%

1.98%
25.00%

2.45%
25.00%

1.87%
25.00%

Capital Expenditures %
Capital Expenditures $
Net Working Capital Investment
WC
Change in NWC

FY2009E

1.60%
981.86

Percent of Sales

25.00%

Selected Financial Data about Comparable Companies (in $ millions 2004)

Company Name

Industry

Beta

Adidas-Salomon AG
Columbia Sportswear Co.
K2 Inc.
Nike Inc.
Quiksilver Inc.
Skis Rossignol SA
VF Corp

Sports Apparel, Footwear, & Equipment

Sports Apparel
Sports Equipment
Sports Apparel & Footwear
Sports Apparel
Sports Equipment & Apparel
Apparel, incl. Sports Apparel

0.81
1.48
1.36
0.70
1.01
0.55
0.59

Average
Median

Market Value Interest-Bearing

of Equity
Debt
4,302
2,239
559
20,558
1,217
174
5,113

0.93
0.81

Implied Enterprise Value (Average)

Implied Enterprise Value (Median)

Sales

0.39
0.06
0.41
0.08
0.17
0.44
0.20

6,221
990
839
11,751
1,039
479
5,390

0.25
0.20

Sales
Creative Sports Values (2005)

1,459
20
209
866
138
118
994

Five-Year
Average Debt-toTotal Value

EBIT
$85,281

$13,988

$109,586
$96,631

$150,643
$146,000

EBITDA EV/Sales
586
220
63
1,736
130
25
725

EV/EBITDA

0.93
2.28
0.92
1.82
1.30
0.61
1.13
1.28
1.13

9.84
10.29
12.11
12.34
10.44
11.94
8.42
10.77
10.44