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Mercury 2006
EBITADA $ 51,805 Metric
EBIT $ 42,299
Net Income $ 25,999 P/E
EV/EBIT
EV/EBITDA
Mercury Valuation ba
Mercury
P/E
EV/EBIT
EV/EBITDA
Selected Data on Public Footwear Companies- March 15th, 2007
Net
Revenue CAGR- Income EBIT EBITDA P/E
LTM Earnings 2000-06 EBITMargin EBITDA Margin Margin Multiple Multiple Multiple
$ 67,679 6.60% 4.40% 6.10% 2.70% 5.5 3.9 6.8
$ 41,923 17.80% 22.1% 23.10% 13.4% 18 16.9 31.6
$ 64,567 11.20% 8.8% 11.50% 4.9% 6.8 5.1 9.1
$ 27,568 4.60% 6.9% 8.90% 5.0% 7.3 5.5 6.6
$ 1,433,760 7.90% 14.1% 16.00% 9.3% 22.1 19.2 27.1
$ 73,124 10.10% 9.3% 10.80% 5.9% 7.4 6.3 8.6
$ 112,015 6.20% 10.4% 12.20% 6.9% 9 7.6 10.4
$ 86,156 8.50% 10.8% 12.60% 7.3% 12 10.1 18.6
$ 79,170 14.40% 19.9% 20.20% 15.3% 6.2 6 5.5
9.70% 11.9% 13.50% 7.9% 10.5 9 13.8
Comparable Metrics
mation
n Based on Case
ns
n based on
l Information
on Based on Case
ons
on based on
al Information
n Based on Case
ons
n based on
al Information
n
n Based on Case
ons
n based on
al Information
Mer
Assumtions Values
CGS 57.02%
SGA 31.42%
Synergy Assumptions
Current Day Sales Inventory 63.79
Target Day Sales Inventory 42.1
Mercury Case-Assumptions and Results Summary
DCF Valuation Summary
Model EV
Valuation as is
using Historical
Information $350,533
Valuation using DCF Valuation Summary
case projections $338,263
Valuation
including $390,000
Valuation as is u
synergies $381,674 $380,000 Historical Inform
$370,000 Valuation using
Premium based
on historical $31,141 $360,000 projections
Premium based $350,000 Valuation includ
on Case synergies
Projections $43,411 $340,000
$330,000
$320,000
Summary of Comparable Valuation
$310,000
P/E $ 441,116
EV/EBIT $ 537,197
EV/EBITDA $ 554,314 Valuation Comparison
Overall Average $ 510,876 $600,000
$100,000
$-
Premium Comparison
$50,000
$45,000
$40,000
Premium based o
$35,000 historical
$30,000 Premium based o
$25,000 Projections
$20,000
$15,000
$10,000
$5,000
$0
n Summary
Valuation as is using
Historical Information
Valuation using case
projections
Valuation including
synergies
mparison
Summary of Comparable
Valuation
Valuation as is using
Historical Information
Valuation using case
projections
mparison
Premium based on
historical
Premium based on Case
Projections
Mercury Historical Financial Statements
Operating Results
2004 2005 2006 2007
Net Revenue $ 340,578 $ 358,750 $ 431,121 $ 486,108
Less Cost of Goods Sold $ 198,115 $ 205,820 $ 239,383 $ 277,191
Gross Profit $ 142,463 $ 152,930 $ 191,738
Less Selling, General & Administrative $ 102,410 $ 113,892 $ 139,933 $ 152,758
EBITDA $ 40,053 $ 39,038 $ 51,805
Less Depreciation and Amortization $ 7,699 $ 8,001 $ 9,506 $ 8,891.20
EBIT $ 32,354 $ 31,037 $ 42,299 $ 47,268
Less Corporate Administrative Charge $ 275 $ 305 $ 366
EBT $ 32,079 $ 30,732 $ 41,933
Less Taxes $ 12,190 $ 11,689 $ 15,934
Net Income $ 19,889 $ 19,043 $ 25,999
Fiscal Year 2006 Men's Athletic Men's Casual Women's Athletic Women's Casual
Revenue $ 219,093 $ 51,663 $ 123,563 $ 36,802
Operating Income $ 31,421 $ 8,242 $ 12,703 $ (843)
Total Assets $ 148,576 $ 28,457 $ 27,978 $ 34,701
EBIT Margin 14.34% 15.95% 10.28% -2.29%
Fiscal Year 2005
Revenue $ 151,900 $ 55,402 $ 108,097 $ 43,381
Operating Income $ 18,398 $ 9,077 $ 11,631 $ (1,013)
Total Assets $ 173,482 $ 30,842 $ 24,267 $ 12,197
EBIT Margin 12.11% 16.38% 10.76% -2.34%
Fiscal Year 2004
Revenue $ 131,636 $ 58,787 $ 95,897 $ 54,258
Operating Income 17,720 $ 9,196 $ 9,109 $ 462
Total Assets 39543 $ 34,966 $ 22,526 $ 15,056
EBIT Margin 13.46% 15.64% 9.50% 0.85%
Data: 2004-2006 ($000)
$ - $ 358,780
$ (7,027) $ 31,066
$ 18,244 $ 259,032
-2.00% 8.66%
$ - $ 340,578
$ (4,134) $ 32,353
$ 30,919 $ 143,010
-1.20% 9.50%
Mercury Athletic Footwear: Base Case Projected Segment Performance ($000)
Men's Casual
Revenue $ 52,179 $ 53,223 $ 54,287 $ 55,916 $ 57,594
Less Operating Expenses $ 43,834 $ 44,711 $ 45,605 $ 46,973 $ 48,382
Operating Income $ 8,345 $ 8,512 $ 8,682 $ 8,943 $ 9,212
Women's Athetic
Revenue $ 138,390 $ 153,613 $ 167,438 $ 179,159 $ 188,117
Less Operating Expenses $ 124,302 $ 137,976 $ 150,393 $ 160,921 $ 168,967
Operating Income $ 14,088 $ 15,637 $ 17,045 $ 18,238 $ 19,150
Women's Casual
Revenue 36802 0 0 0 0
Less Operating Expense 37265 0 0 0 0
Operating Income -463 0 0 0 0
Liabilities
Accounts Payable $ 18,830 $ 18,985 $ 20,664 $ 22,149
Accrued Expenses $ 22,778 $ 22,966 $ 24,996 $ 26,792
$ 45,961
$ 43,853
$ 43,051
$ 11,162
$ 23,214
$ 28,081
$ 11,654
$ 9,080