Reebok

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Presented by
Investment Club Officers
Overview
 News
Important Events:
1996: The push into performance sneakers also translated into large
increases in expenses, resulting in decreasing net income, from $254.5
million in 1994 to $164.8 million in 1995 to $139 million in 1996.

1998: Reebok took a restructuring charge of $23.7 million in the first

quarter of 1998 for costs related to eliminating management layers,
combining business units, and cutting its workforce by 500, or 10
percent.

1999: Declining sales prompt Reebok to lay off 10% of its global
workforce.

Recent News:

2001: Clearly Canadian Beverage Corp. and Reebok jointly launch

Reebok Fitness Water
2001 Aug.: NBA grants Reebok a ten-year license to design,
manufacture, and market NBA licensed merchandise.
2002: Reebok secures a 10-year exclusive license from the National
Football League.
 Du Pont
Analysis

Return on equity = Asset turnover * Net profit

margin * leverage
(ROE) (NPM) (TATR) 1/
(1-DR)

(Net profit/Equity) =

(Net profit/Sales) * (Sales/Total assets) * (Total

assets/Equity)
Key Ratios
 Key Index
Trends
Income Statement:
 Key Index
Trends
Balance Sheet:
 EV/EBITDA

Reebok: 1.71
Nike: 13.24
ADIDAS: 41.01

The EV/EBITDA ratio shows that firms selling for a low

EV/EBITDA multiple compared to competitors are assumed
to be undervalued.

This ratio relates the total market value of the firm to the
EBITDA
We remove cash holdings because the interest income from
cash is not counted as a part of EBITDA. If we did not
Notes: In thesubtract
cases ofthe cash, and
Reebok the end result
Nike, would resultwas
the denominator in an
substituted for
(income before income taxes, of
overstatement minority interest
the EBITDA and cumulative effect
multiple.
of the change in the accounting principle + interest expense interest
income.)
Book Value of debt was substituted for market value in the case of debt and
preferred stock. (if preferred stock was applicable.)
 EV / EBITDA
Market Value of equity- Cash + Market Value of Debt +
Market Value of Preferred Stock / (Sales-COGS-SGA)

ADIDAS: (1,081,359 x 82.3 ) 75,956

+ 3,179,452/ 2,245,383
(Sales-COGS-SGA) are from the income statement
MV of equity= Number of shares outstanding* the share price
Cash= found on balance sheet
MV (BV) of Debt= Balance sheet: Total Liabilities & equity-
Total Value of Equity
MV of preferred stock= preferred stock price* shares out
preferred stock outstanding (if applicable)
Conclusion

Buy More!
 Any
Questions?
 Analytical
Tools
Du Pont Analysis

Index Analysis

Common Size Analysis

EV / EBITDA
 Du Pont
Analysis

Return on equity = Asset turnover * Net profit

margin * leverage
(ROE) (NPM) (TATR) 1/
(1-DR)

(Net profit/Equity) =

(Net profit/Sales) * (Sales/Total assets) * (Total

assets/Equity)
 EV / EBITDA
Market Value of equity- Cash + Market Value of Debt +
Market Value of Preferred Stock / (Sales-COGS-SGA)
Outcome