Spyder Active Sports—2004

Harvard Business School Case 206-027

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

Five-Year
Market Value Total Interest- Average Debt-to- Unlvered
Company Name Industry Beta of Equity Bearing Debt Total Value Five Average D/E Beta

Adidas-Salomon AG Sports Apparel, Footwear, & Equipm 0.81 4,302 1,459 0.39 0.64 0.49
Columbia Sportswear Co. Sports Apparel 1.48 2,239 20 0.06 0.06 1.40
K2 Inc. Sports Equipment 1.36 559 209 0.41 0.70 0.80
Nike Inc. Sports Apparel & Footwear 0.70 20,558 866 0.08 0.09 0.64
Quiksilver Inc. Sports Apparel 1.01 1,217 138 0.17 0.20 0.84
Skis Rossignol SA Sports Equipment & Apparel 0.55 174 118 0.44 0.79 0.31
VF Corp Apparel, incl. Sports Apparel 0.59 5,113 994 0.20 0.25 0.47

Average 0.93 0.25 0.39 0.71

Median 0.81 0.20 0.25 0.64

Current Risk Free Rate (April 2004, 20 Year Treasury) 5.16%

Market Risk Premium 6.50%

CAPM Cost of Capital (Unlevered) 9.76%

Small Stock Premium 6%
Total Cost of Capital 15.76%
Consolidated Income Statement and Cash Flow Adjustments—Historical and Forecasted (in $ thousands)

FY2004 Current FY2005E FY2006E FY2007E FY2008E FY2009E

Net Sales 61,366 85,281 105,630 133,223 165,732

Cost of Sales 43,279 55,075 70,419 88,253
Gross Profit 42,002 50,554 62,804 77,479

Total Operating Expenses 28,014 33,571 41,028 49,584

Depreciation 13,988 16,983 21,777 27,895

EBIT 12,910 14,887 18,517 24,798

Taxes 3,228 3,722 4,629 6,199

Unlevered Net Income 9,683 11,165 13,888 18,598

Add Back Depreciation 1,078 2,097 3,260 3,098
Less Capital Expenditures 2,558 3,169 3,997 4,972
Less Net Working Capital
Investment 383 326 441 520

Total Free Cash Flow 7,819 9,767 12,709 16,204

TV 166,660
Discount Rate 15.76%
Terminal Value Growth Rate 6%

PV Cash Flows $31,262

PV Terminal Value $92,819
Enterprise Value $124,081

Implied 2005 EBITDA Multiple 9.6

Implied 2005 Sales Multiple 1.5

Capital Expenditures % 3.00% 3.00% 3.00% 3.00%

Capital Expenditures $ 2558.43 3168.89 3996.69 4971.95
Investment 1.60% 1.60% 1.60% 1.60% 1.60%
WC 981.86 1364.50 1690.08 2131.57 2651.71
Change in NWC 382.64 325.58 441.49 520.14

Percent of Sales
Net Sales growth 23.86% 26.12% 24.40%
Cost of Sales 50.75% 52.14% 52.86% 53.25%
Gross Profit 49.25% 47.86% 47.14% 46.75%

Total Operating Expenses 32.85% 31.78% 30.80% 29.92%

Depreciation 16.40% 16.08% 16.35% 16.83%

EBITDA 15.14% 14.09% 13.90% 14.96%

Depreciation & Amortization 1.26% 1.98% 2.45% 1.87%

Tax Rate 25.00% 25.00% 25.00% 25.00% 25.00%
Selected Financial Data about Comparable Companies (in $ millions 2004)

Five-Year
Market Value Interest- Average Debt-to-
Company Name Industry Beta of Equity Bearing Debt Total Value Sales EBITDA EV/Sales EV/EBITDA

Adidas-Salomon AG Sports Apparel, Footwear, & Equipme 0.81 4,302 1,459 0.39 6,221 586 0.93 9.84
Columbia Sportswear Co. Sports Apparel 1.48 2,239 20 0.06 990 220 2.28 10.29
K2 Inc. Sports Equipment 1.36 559 209 0.41 839 63 0.92 12.11
Nike Inc. Sports Apparel & Footwear 0.70 20,558 866 0.08 11,751 1,736 1.82 12.34
Quiksilver Inc. Sports Apparel 1.01 1,217 138 0.17 1,039 130 1.30 10.44
Skis Rossignol SA Sports Equipment & Apparel 0.55 174 118 0.44 479 25 0.61 11.94
VF Corp Apparel, incl. Sports Apparel 0.59 5,113 994 0.20 5,390 725 1.13 8.42

Average 0.93 0.25 1.28 10.77

Median 0.81 0.20 1.13 10.44

Sales EBIT
Creative Sports Values (2005) $85,281 $13,988

Implied Enterprise Value (Average) $109,586 $150,643

Implied Enterprise Value (Median) $96,631 $146,000