lbo dcf model

Leveraged Buyout (LBO) Model

Input Values*Enter values in yellow cells.

Estimated Cost of Deal: Debt Assumptions:Curent Stock Price $6.00 $ amt Assumed DebtOffer Premium 10.00% % Maturity YearOffer Price Per Share 6.60 $ amt Annual RepaymentNo. of Shares outstanding 100,000 nos. Coupon RateEquity Purchase Price $660,000 $ amt Average Interest

Optional PrepaymentExisting Debt Retired $185,000 $ amtAssumed Debt $65,000 $ amt Bank RevolverExpensed Transaction Costs $2,500 $ amt Coupon RateCapitalized Financing Costs $10,888 $ amt Revolver limitCash Infusion $27,500 $ amt Undrawn Commitment Fee

Total Funds Requirement $950,888 $ amt Term Loan "A"Term YearsAnnual Repayment

Sources of Funds: Coupon RateExcess Cash $5,000 $ amt Average InterestDebt: Fees Optional PrepaymentAssumed Debt $65,000 $ amtBank Revolver $200,888 $ amt 0.75% Term Loan "B"Term Loan "A" $80,000 $ amt 1.50% Term YearsTerm Loan "B" $55,000 $ amt 1.75% Annual RepaymentSenior Notes $65,000 $ amt 2.00% Bullet Year RepaymentSubordinated Notes $40,000 $ amt 2.50% Coupon RateMezzanine Debt $70,000 $ amt 2.75% Average InterestSeller Notes $25,000 $ amt 0.00% Optional PrepaymentPreferred:Preferred Stock $60,000 $ amt 2.00% Senior NotesEquity: Maturity YearCommon - Sponsor Equity $220,000 $ amt Coupon RateManagement Equity $40,000 $ amt Average InterestNew Equity $25,000 $ amt Optional PrepaymentTotal $950,888 $ amt

Subordinated NotesMaturity Year

Goodwill / Bargain Purchase: Coupon RateEquity Purchase Price $660,000 $ amt Average InterestAdd: Years PIK

Existing Goodwill $20,000 $ amt Optional PrepaymentLess:

Net Assets (Book Value) $464,749 $ amt Mezzanine DebtFixed Assets (PP&E) Write-up $2,450 $ amt Maturity YearIdentifiable Tangibles Write-up $1,200 $ amt Coupon RateDeferred Tax Liability - existing $1,400 $ amt Average InterestDTL Created on Assets Write-up ($1,278) $ amt Years PIK

Goodwill/(Gain from Bargain Purchase) $211,479 $ amt Optional Prepayment

Seller NotesTerm Years

A2

Amit Tandon: A leveraged buyout (LBO) is an acquisition of a company or a segment of a company funded mostly with debt. A financial buyer (e.g. private equity fund) invests a small amount of equity (relative to the total purchase price) and uses leverage (debt or other non-equity sources of financing) to fund the remainder of the consideration paid to the seller.

H13

Amit Tandon: Optional repayment option, subject to excess cash.

H15

Amit Tandon: Balance adjustable every year subject to Cash Balance and Cash Minimum.

B16

Amit Tandon: Expensed as incurred (in current period) in accordance with FAS 141r.

C16

Amit Tandon: Includes investment banking, legal, accounting & other expenses related to the transaction/ acquisition, with the exception of debt and equity issuance costs.

B17

Amit Tandon: Costs to issue debt and equity securities are excluded from Expensed Transaction Costs (per FAS 141r) and are to be accounted for under other applicable GAAP.

C17

Amit Tandon: Costs to issue debt and equity securities are excluded from Expensed Transaction Costs (per FAS 141r) and are to be accounted for under other applicable GAAP. Debt issuance fees, is to be capitalized (and amortized over the term of the debt) and Equity issuance fees to be netted against proceeds from the offering.

B20

Amit Tandon: To reconcile with "Sources of Funds".

B23

Amit Tandon: In a leveraged buyout (LBO), the target company's existing debt is usually refinanced (although it can be rolled over) and replaced with new debt to finance the transaction. Multiple tranches of debt are commonly used to finance LBOs.

E25

Amit Tandon: Issue Costs.

H25


B26

Amit Tandon: Amortized evenly over specified no. of years.

B27

Amit Tandon: A revolver is a form of senior bank debt that acts like a credit card for companies and is generally used to help fund a company's working capital needs.

C27

Amit Tandon: Balance of Total Funds Requirement less Sources of Funds (exc.l revolver).

B28

Amit Tandon: Bank debt, typically amortized evenly over specified no. of years.

B29

Amit Tandon: Bank debt (Term Loan B), usually involves nominal amortization (repayment) overspecified no. of years, with a large bullet payment in the last year.

B30

Amit Tandon: Carries a bullet repayment with no amortization. Categorized as Senior Debt.

H30

Amit Tandon: Bank debt (Term Loan B), usually involves nominal amortization (repayment) overspecified no. of years, with a large bullet payment in the last year.

B31

Amit Tandon: Carries a bullet repayment with no amortization. This is high-yield debt and the interest may be either cash-pay, payment-in-kind ("PIK"), or a combination of both. It may be structured so that the PIK option is available for the first few years of the debt's life, after which cash-pay becomes mandatory.

B32

Amit Tandon: Carries bullet repayments with no amortization. This is high-yield debt and the interest may be either cash-pay, payment-in-kind ("PIK"), or a combination of both. It may be structured so that the PIK option is available for the first few years of the debt's life, after which cash-pay becomes mandatory.

B33

Amit Tandon: Amortize over fixed period of time.

H33


E35

Amit Tandon: Equity issuance fees to be netted against proceeds from the offering. Issue Costs of Preferred Stock need to be adjusted against APIC (Additional Paid In Capital), which also includes any premium charged over par value. Preferred Dividend will be payable on par value of stock. NOT being accounted for in this model presently.

H39


B43

Amit Tandon: Purchase price - Fair value of net assets acquired = Goodwill

B46

Amit Tandon: Any goodwill or deferred tax items existing on the target's balance sheet at the time of acquisition are written off.

H46


B49

Amit Tandon: Both Fixed Assets and Intangibles. Exceptions: the following are not measured at fair value: 1. Assets and liabilities arising from contingencies 2. Income taxes 3. Employee benefits 4. Indemnification assets 5. Reacquired rights 6. Share-based payment awards 7. Assets held for sale Each of the above are to measured in accordance with the guidance of the Statements that they currently fall under. (I.e. Share-based payment awards follow the guidance in FAS123R)

B50

Amit Tandon: Acquired intangible assets may represent indefinite-lived assets (e.g., certain trademarks or brands), determinable-lived intangibles (e.g., certain trademarks or brands, customer relationships, patents and technologies) or residual goodwill. Of these, only the costs of determinable-lived intangibles are amortized to expense over their estimated life. The value of indefinite-lived intangible assets and residual goodwill is not amortized, but is tested at least annually for impairment.

B51

Amit Tandon: Any goodwill or deferred tax items existing on the target's balance sheet at the time of acquisition are written off.

B53

Amit Tandon: Excess paid on acquisition is "Goodwill" which is amortized over a specific no. of years and immediately recognize "Gain from Bargain Purchase" in earnings (included in Retained Earnings) as a gain in accordance with FAS 141r. FAS 141(R) amended FAS 109 to require a deferred tax asset to be recorded for the excess of tax deductible goodwill over book goodwill as of the acquisition date.

H53


Annual RepaymentCoupon RateAverage InterestYears PIKOptional Prepayment

Preferred StockPreferred Stock DividendYears PIK

Pref Stock Retired Year

H61


H66

Amit Tandon: Leave Blank in case not repaid.

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Income/BS Assumptions:Income Statement:

9 select no. Sales Year 1 $1,100,000 $ amt11.11% % of FV Sales - Annual Increase 10.00% %4.25% % annual Cost of goods sold 45.00% % of revenue

1 1=Yes 0=No Cost of goods sold - Annual Increase 0.25% % 1 1=Yes 0=No SG&A expenses 14.00% % of revenue

SG&A expenses - Annual Increase 0.50% % Other expenses 12.00% % of revenue

4.75% % annual Other expenses - Annual Increase 0.15% % $600,000 $ amt

1.00% % annual Balance Sheet:Accounts receivable 18.00% % of revenueAccounts receivable - Annual Increase 5.00% %

8 select no. Inventories 20.00% % of COGS12.50% % of FV Inventories - Annual Increase 4.00% % 5.50% % annual Prepaids 4.50% % of revenue

1 1=Yes 0=No Prepaids - Annual Increase 2.00% % 1 1=Yes 0=No Other current assets 12.00% % of revenue

Other current assets - Annual Increase 2.50% % Other long-term assets 4.00% % of revenue

11 select no. Other long-term assets - Annual Increase 0.50% % 4.00% % of FV

60.00% % of FV Accounts payable 15.00% % of COGS plus inventory in5.25% % annual Accounts payable - Annual Increase 2.00% %

1 1=Yes 0=No Accrued expenses 6.00% % of revenue1 1=Yes 0=No Accrued expenses - Annual Increase 1.50% %

Other current liabilities 8.00% % of revenueOther current liabilities - Annual Increase 1.00% %

9 select no. Capex 10.00% % of revenue4.25% % annual Capex Start Year 1 in years

1 1=Yes 0=No Capex Interval 1 in years1 1=Yes 0=No

Other Assumptions:12 select no. Cash Minimum $50,000 $ amt

4.50% % annual On / Off 1 1=On. 0=Off.0 1=Yes 0=No5 enter no. Tax Rate 35.00% %1 1=Yes 0=No Year 1 2010 year

14 select no. DCF Assumptions:4.50% % annual Discount Rate (WACC) 7.00% %

0 1=Yes 0=No Discount Rate Range 1.0% %5 enter no. EBITDA Terminal Value Multiple 6.0x x1 1=Yes 0=No EBITDA Multiple Range 2.0x x

Perpetuity Growth Rate 3.00% %Perpetuity Growth Range 0.5% %

7 select no. Net Debt $583,388 $ amt

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I13

Amit Tandon: Leaving this field Blank will mean "No".

I25


I33


M36

Amit Tandon: %age of revenue.

M38

Amit Tandon: Select 1 for Annual Exp, 2 for Bi-Annual Exp, and so on.

I39


M43

Amit Tandon: To maintain Cash Minimum, select 1. This will adjust excess cash with Revolver Loan. To not use this feature, select 0.

I46


I53


N56

Amit Tandon: Debt + Preferred Stock - Cash. Total Enterprise Value is equal to: company's market capitalization + preferred stock + debt - cash and cash equivalents. "Preferred Stock Redeemable" is treated as above. In case of "Preferred Stock Convertible", the portion/option which is converted to (ie. upon conversion to) Common Stock will be treated as Common Stock and the balance amount as Debt, as above.

14.29% % of FV5.25% % annual

1 1=Yes 0=No5 enter no.1 1=Yes 0=No

7.00% % annual5 enter no.

select no.

I61


Financing Annual

Costs Amortization

Period (Yrs)4,500 450 10 1,200 150

963 88 1,300 144 1,000 83 1,925 138

0 0 10,888 1,053 1,200

12,088

R25

Amit Tandon: Amortized over the term of the debt, as per FAS 141r.

R27

Amit Tandon: Bank Revolver not having a maturity date, this can be spread over the revolver validity period ... presently we have taken the projected no. of years ie. 10.

Q34

Amit Tandon: Debt issuance fees, to be capitalized and amortized over the term of the debt.

Q35

Amit Tandon: Equity issuance fees to be netted against proceeds from the offering. Issue Costs of Preferred Stock need to be adjusted against APIC (Additional Paid In Capital), which also includes any premium charged over par value. Preferred Dividend will be payable on par value of stock. Not being accounted for in this model presently.

Income Statements

Year 2010 2011 2012 2013 2014Year No. 1 2 3 4 5

Net Sales 1,100,000 1,210,000 1,331,000 1,464,100 1,610,510

Cost of goods sold 495,000 545,861 601,948 663,799 732,004

Gross Margin 605,000 664,139 729,052 800,301 878,506

Operating Expenses 286,000 315,665 348,408 384,548 424,438 SG&A expenses 154,000 170,247 188,208 208,064 230,015 Other expenses 132,000 145,418 160,200 176,484 194,423

EBITDA 319,000 348,474 380,644 415,753 454,068

D&A 72,924 85,024 93,898 104,355 117,776

EBIT 246,076 263,450 286,746 311,398 336,292

Interest Expense 32,061 30,509 26,835 22,778 20,741 Existing Debt 2,609 1,228 0 0 0 Bank Revolver 13,533 14,005 14,005 14,005 14,005 Term Loan "A" 4,125 3,500 1,575 0 0 Term Loan "B" 2,830 2,714 2,092 764 0 Senior Notes 2,763 2,763 2,763 1,505 124 Subordinated Notes 1,800 1,881 1,966 2,054 2,147 Mezzanine Debt 3,150 3,292 3,440 3,595 3,756 Seller Notes 1,252 1,127 995 856 709

Other Expenses (Income) (197) (297) 353 (35) (257)Amortization of Capitalized

Financing Costs 1,053 1,053 1,803 1,515 1,393 (Gain) Loss on Asset Sales (1,250) (1,350) (1,450) (1,550) (1,650)

Net Income before Taxes 214,212 233,238 259,559 288,655 315,807

Income Tax Expense (Benefit) 74,974 81,633 90,846 101,029 110,533

Net Income 139,238 151,605 168,713 187,625 205,275

Dividend 6,700 7,194 7,659 8,245 8,955 Preferred Stock Dividend 4,200 4,494 4,809 5,145 5,505 Common Stock Dividend 2,500 2,700 2,850 3,100 3,450

Net Income to Common Shareholders 132,538 144,411 161,055 179,380 196,319

A20

Amit Tandon: Includes Depreciation on PP&E, Impairment of Goodwill and Amortization of Intangible Assets. Excludes Amortization of Capitalized Financing Costs. With the introduction of impairment testing of goodwill, there is no regular charge to the income statement for goodwill. This might result in irregular income statement charges as and when impairments materialize and as a result of which EBIT volatility would increase. Free Cash Flows need to be normalized for any volatility on account of goodwill impairment charges, which might need to be excluded for EBIT.

A46

Amit Tandon: Preferred Dividend is payable on par value of stock.

2015 2016 2017 2018 20196 7 8 9 10

1,771,561 1,948,717 2,143,589 2,357,948 2,593,742

807,217 890,159 981,623 1,082,485 1,193,710

964,344 1,058,558 1,161,966 1,275,463 1,400,033

468,468 517,067 570,709 629,918 695,271

254,281 281,108 310,765 343,551 379,795

214,187 235,959 259,944 286,367 315,476

495,876 541,492 591,257 645,545 704,761

128,849 101,532 115,822 128,047 149,661

367,027 439,960 475,435 517,499 555,100

16,059 12,049 8,161 6,000 6,000

0 0 0 0 0

14,005 12,049 8,161 6,000 6,000

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

97 0 0 0 0

1,640 0 0 0 0

317 0 0 0 0

521 (1,400) (1,500) (1,600) (1,700)

2,271 450 450 450 450

(1,750) (1,850) (1,950) (2,050) (2,150)

350,447 429,310 468,774 513,099 550,800

122,656 150,259 164,071 179,585 192,780

227,791 279,052 304,703 333,514 358,020

9,391 9,591 9,891 9,991 10,291

5,891 5,891 5,891 5,891 5,891

3,500 3,700 4,000 4,100 4,400

218,400 269,461 294,813 323,523 347,729

Balance Sheets

Year Pre-Acq Adj Post-Acq 2010 2011 2012Year No. 0 1 2 3

ASSETS

Current Assets:Cash in bank 55,000 22,500 77,500 50,000 50,000 50,000 Accounts receivable 85,000 85,000 198,000 228,690 264,137 Inventories 95,999 95,999 99,000 113,539 130,213 Prepaids 22,000 22,000 49,500 55,539 62,315 Other current assets 45,000 45,000 132,000 148,830 167,806

Total Current Assets 302,999 325,499 528,500 596,598 674,471

Non-Current Assets:Goodwill 20,000 191,479 211,479 211,479 211,479 211,479 Intangible Assets 950 1,200 2,150 1,971 1,792 1,612 Capitalized Financing Costs 0 10,888 10,888 9,835 8,782 6,979 Other Long-Term Assets 15,000 15,000 44,000 48,642 53,774 PP&E:

Gross PP&E 500,000 2,450 502,450 502,450 612,450 733,450 Capex 0 0 110,000 121,000 133,100 Depreciation (Current) 0 0 72,745 84,845 93,718 Accumulated Depreciation 25,000 25,000 97,745 182,590 276,308 Net PP&E 475,000 477,450 514,705 550,860 590,242

Total Non-Current Assets 510,950 716,966 781,989 821,554 864,086

Total Assets 813,949 228,516 1,042,465 1,310,489 1,418,152 1,538,557

LIABILITIES & EQUITY

Current Liabilities:Accounts payable 51,800 51,800 74,700 85,741 96,542 Accrued expenses 24,000 24,000 66,000 73,689 82,274 Other current liabilities 22,000 22,000 88,000 97,768 108,620

Total Current Liabilities 97,800 97,800 228,700 257,198 287,436

Deferred Tax Liability 1,400 (123) 1,278 5,873 6,119 6,366 Long-Term Debt:

Existing Debt 250,000 (185,000) 65,000 57,778 0 0 Bank Revolver 0 200,888 200,888 213,470 213,470 213,470 Term Loan "A" 0 80,000 80,000 70,000 57,264 0 Term Loan "B" 0 55,000 55,000 52,800 50,600 29,091 Senior Notes 0 65,000 65,000 65,000 65,000 65,000 Subordinated Notes 0 40,000 40,000 41,800 43,681 45,647 Mezzanine Debt 0 70,000 70,000 73,150 76,442 79,882 Seller Notes 0 25,000 25,000 22,680 20,235 17,659

E5

Amit Tandon: Post Acquisition Balance Sheet, Year 0, Opening Balances.

A27

Amit Tandon: Includes current depreciation.

Total Long Term Debt 250,000 600,888 596,678 526,692 450,748

Total Long-Term Liabilities 251,400 602,165 602,551 532,811 457,114

Total Liabilities 349,200 699,965 831,251 790,010 744,551

Shareholder's Equity:Preferred Stock 0 60,000 60,000 64,200 68,694 73,503 Common Equity 440,000 (155,000) 285,000 285,000 285,000 285,000 Retained Earnings 24,749 (27,249) (2,500) 130,038 274,449 435,503

Total Shareholder's Equity 464,749 342,500 479,238 628,143 794,006

Total Liabilities & Equity 813,949 228,516 1,042,465 1,310,489 1,418,152 1,538,557

Balance Sheet Check 0 0 0 0 0 0

2013 2014 2015 2016 2017 2018 20194 5 6 7 8 9 10

50,000 50,000 50,000 50,000 134,329 263,486 352,890

305,078 352,365 406,982 470,064 542,924 627,077 724,274

149,337 171,268 196,421 225,267 258,350 296,291 339,804

69,917 78,447 88,018 98,756 110,804 124,322 139,489

189,201 213,324 240,523 271,190 305,766 344,752 388,707

763,533 865,405 981,943 1,115,277 1,352,173 1,655,928 1,945,165

211,479 211,479 211,479 211,479 211,479 211,479 211,479

1,433 1,254 1,075 896 717 537 358

5,464 4,071 1,800 1,350 900 450 0

59,447 65,719 72,652 80,317 88,790 98,157 108,513

866,550 1,012,960 1,174,011 1,351,167 1,546,039 1,760,398 1,996,192

146,410 161,051 177,156 194,872 214,359 235,795 259,374

104,176 117,597 128,669 101,352 115,643 127,868 149,482

380,485 498,082 626,751 728,103 843,747 971,614 1,121,096

632,475 675,929 724,416 817,935 916,651 1,024,578 1,134,470

910,298 958,451 1,011,421 1,111,976 1,218,536 1,335,202 1,454,820

1,673,831 1,823,856 1,993,365 2,227,253 2,570,709 2,991,130 3,399,985

108,708 122,413 137,851 155,242 174,837 196,914 221,789

91,859 102,560 114,508 127,849 142,743 159,373 177,940

120,677 134,072 148,954 165,488 183,857 204,266 226,939

321,244 359,045 401,313 448,579 501,437 560,552 626,668

8,646 20,303 31,978 52,837 106,242 144,024 139,035

0 0 0 0 0 0 0

213,470 213,470 161,317 57,619 0 0 0

0 0 0 0 0 0 0

0 0 0 0 0 0 0

5,819 0 0 0 0 0 0

47,701 2,147 0 0 0 0 0

83,476 36,454 0 0 0 0 0

14,943 12,081 0 0 0 0 0

365,410 264,152 161,317 57,619 0 0 0

374,055 284,455 193,295 110,456 106,242 144,024 139,035

695,300 643,500 594,608 559,036 607,679 704,576 765,703

78,648 84,153 84,153 84,153 84,153 84,153 84,153

285,000 285,000 285,000 285,000 285,000 285,000 285,000

614,884 811,203 1,029,603 1,299,064 1,593,877 1,917,400 2,265,129

978,532 1,180,356 1,398,756 1,668,217 1,963,030 2,286,553 2,634,282

1,673,831 1,823,856 1,993,365 2,227,253 2,570,709 2,991,130 3,399,985

0 0 0 0 0 0 0

Cash Flows

Year 2010 2011 2012 2013Year No. 1 2 3 4

Cash flows from operating activities

Net Income to Common Shareholders 132,538 144,411 161,055 179,380

Non-cash adjustments:

Depreciation and amortization 72,924 85,024 93,898 104,355

Amortization of Capitalized Financing Costs 1,053 1,053 1,803 1,515

Increase (Decrease) in Deferred Tax Liability 4,595 247 247 2,280

Accrued Interest Subordinated Notes 1,800 1,881 1,966 2,054

Accrued Interest Mezzanine Debt 3,150 3,292 3,440 3,595

Accrued Interest Seller Notes 1,252 1,127 995 856

Accrued Interest Preferred Stock 4,200 4,494 4,809 5,145

Changes in operating assets and liabilities:

(Increase) decrease in accounts receivable (113,000) (30,690) (35,447) (40,941)

(Increase) decrease in inventories (3,001) (14,539) (16,674) (19,123)

(Increase) decrease in prepaids & other assets (114,500) (22,869) (25,752) (28,998)

Increase (decrease) in accounts payable 22,900 11,041 10,801 12,166

Increase (decrease) in accrued exp & other liabilities 108,000 17,457 19,437 21,642

Net cash provided by (used in) operating activities 121,911 201,928 220,576 243,926

Cash flows from investing activities

Purchase of property & equipment (110,000) (121,000) (133,100) (146,410)

(Increase) decrease in other long-term assets (29,000) (4,642) (5,132) (5,673)

Net cash provided by (used in) investing activities (139,000) (125,642) (138,232) (152,083)

Cash flows from financing activities

Increase (decrease) in Existing Debt (7,222) (57,778) 0 0

Increase (decrease) in Term Loan "A" (10,000) (12,736) (57,264) 0

Increase (decrease) in Term Loan "B" (2,200) (2,200) (21,509) (29,091)

Increase (decrease) in Senior Notes 0 0 0 (59,181)

Increase (decrease) in Subordinated Notes 0 0 0 0

Increase (decrease) in Mezzanine Debt 0 0 0 0

Increase (decrease) in Seller Notes (3,571) (3,571) (3,571) (3,571)

Increase (decrease) in Preferred Stock 0 0 0 0

Net cash provided by (used in) financing activities (22,994) (76,286) (82,344) (91,843)

Net increase (decrease) in cash (40,083) 0 0 0

Cash at beginning of year 77,500 50,000 50,000 50,000

Cash available for Bank Revolver 37,417 50,000 50,000 50,000

Added (retired) Bank Revolver 12,583 0 0 0

A12

Amit Tandon: Includes Depreciation on PP&E, Impairment of Goodwill and Amortization of Intangible Assets. Excludes Amortization of Capitalized Financing Costs.

Cash at end of year 50,000 50,000 50,000 50,000

Free Cash Flows

EBIT 246,076 263,450 286,746 311,398

Add: Amortization of non-deductible goodwill & intangibles 0 0 0 0

EBIT (Adj) 246,076 263,450 286,746 311,398

Less: Tax on EBIT (Adj) 86,127 92,207 100,361 108,989

Unlevered Net Income 159,949 171,242 186,385 202,409

Plus: D&A & other non-cash charges affecting EBIT 72,924 85,024 93,898 104,355

Less: Capital Expenditures 110,000 121,000 133,100 146,410

Less: Increase in Net (non-cash) Working Capital 99,601 39,600 47,635 55,254

Less: (Increase) decrease in Deferred Tax (4,595) (247) (247) (2,280)Unlevered Free Cash Flows (UFCF) 27,868 95,913 99,794 107,380

Debt Repayment

Cash Available for Debt Repayment

Cash at beginning of year 77,500 50,000 50,000 50,000

Net cash provided by (used in) operating activities 121,911 201,928 220,576 243,926

Net cash provided by (used in) investing activities (139,000) (125,642) (138,232) (152,083)

Sub-total 60,411 126,286 132,344 141,843

Minimum Cash Balance 50,000 50,000 50,000 50,000

Cash Available for Debt Repayment 10,411 76,286 82,344 91,843

Mandatory Repayment

Existing Debt 7,222 7,222 0 0

Term Loan "A" 10,000 10,000 10,000 0

Term Loan "B" 2,200 2,200 2,200 2,200

Senior Notes 0 0 0 0

Subordinated Notes 0 0 0 0

Mezzanine Debt 0 0 0 0

Seller Notes 3,571 3,571 3,571 3,571

Preferred Stock 0 0 0 0

Sub-total 22,994 22,994 15,771 5,771

Cash Balance (12,583) 53,292 66,572 86,072

Incremental Revolver 12,583 0 0 0

Cash Available for Optional Repayment 0 53,292 66,572 86,072

Optional Repayment

Existing Debt 0 50,556 0 0

Term Loan "A" 0 2,736 47,264 0

Term Loan "B" 0 0 19,309 26,891

Senior Notes 0 0 0 59,181

Subordinated Notes 0 0 0 0

Mezzanine Debt 0 0 0 0

Seller Notes 0 0 0 0

A61

Amit Tandon: With the introduction of impairment testing of goodwill, there is no regular charge to the income statement for goodwill. This might result in irregular income statement charges as and when impairments materialize and as a result of which EBIT volatility would increase. Free Cash Flows need to be normalized for any volatility on account of goodwill impairment charges, which might need to be excluded for EBIT.

A64

Amit Tandon: Calculated by multiplying the marginal tax rate by EBIT after adding back items which are not tax deductible such as non-deductible goodwill amortization & non-deductible intangibles amortization..

A66

Amit Tandon: Includes all depreciation and amortization subtracted from EBITDA to arrive at EBIT, excluding non-deductible goodwill amortization & non-deductible intangibles amortization..

A69

Amit Tandon: Increase in Deferred Taxes will have a positive impact on Cash Flows.

A70

Amit Tandon: Free cash flow equals EBIT less taxes plus D&A less capital expenditures less the change in working capital (ie. any investments or increase in net working capital which is "current assets - current liabilities"). Unlevered Free Cash flows are available to both debt and equity holders.

A96

Amit Tandon: Bank Revolver is not incremented for Optional Repayments.

Bank Revolver 0 0 0 0

Sub-total 0 53,292 66,572 86,072

Cash at end of year 50,000 50,000 50,000 50,000

Cash Flow Check 0 0 0 0

2014 2015 2016 2017 2018 20195 6 7 8 9 10

196,319 218,400 269,461 294,813 323,523 347,729

117,776 128,849 101,532 115,822 128,047 149,661

1,393 2,271 450 450 450 450

11,657 11,675 20,859 53,405 37,782 (4,989)

2,147 0 0 0 0 0

3,756 0 0 0 0 0

709 0 0 0 0 0

5,505 0 0 0 0 0

(47,287) (54,617) (63,082) (72,860) (84,153) (97,197)

(21,932) (25,152) (28,846) (33,083) (37,941) (43,513)

(32,653) (36,769) (41,405) (46,625) (52,503) (59,123)

13,704 15,438 17,392 19,594 22,077 24,876

24,097 26,830 29,874 33,264 37,038 41,240

275,193 286,924 306,235 364,780 374,319 359,134

(161,051) (177,156) (194,872) (214,359) (235,795) (259,374)

(6,272) (6,933) (7,665) (8,473) (9,367) (10,356)

(167,323) (184,089) (202,536) (222,832) (245,162) (269,730)

0 0 0 0 0 0

0 0 0 0 0 0

0 0 0 0 0 0

(5,819) 0 0 0 0 0

(47,701) (2,147) 0 0 0 0

(50,779) (36,454) 0 0 0 0

(3,571) (12,081) 0 0 0 0

0 0 0 0 0 0

(107,870) (50,681) 0 0 0 0

0 52,153 103,698 141,948 129,157 89,404

50,000 50,000 50,000 50,000 134,329 263,486

50,000 102,153 153,698 191,948 263,486 352,890

0 (52,153) (103,698) (57,619) 0 0

50,000 50,000 50,000 134,329 263,486 352,890

336,292 367,027 439,960 475,435 517,499 555,100

0 0 0 0 0 0

336,292 367,027 439,960 475,435 517,499 555,100

117,702 128,460 153,986 166,402 181,125 194,285

218,590 238,568 285,974 309,033 336,374 360,815

117,776 128,849 101,532 115,822 128,047 149,661

161,051 177,156 194,872 214,359 235,795 259,374

64,071 74,270 86,067 99,710 115,483 133,717

(11,657) (11,675) (20,859) (53,405) (37,782) 4,989

122,901 127,665 127,426 164,192 150,925 112,395

50,000 50,000 50,000 50,000 134,329 263,486

275,193 286,924 306,235 364,780 374,319 359,134

(167,323) (184,089) (202,536) (222,832) (245,162) (269,730)

157,870 152,834 153,698 191,948 263,486 352,890

50,000 50,000 50,000 50,000 50,000 50,000

107,870 102,834 103,698 141,948 213,486 302,890

0 0 0 0 0 0

0 0 0 0 0 0

0 0 0 0 0 0

0 0 0 0 0 0

0 0 0 0 0 0

0 0 0 0 0 0

3,571 3,571 0 0 0 0

0 0 0 0 0 0

3,571 3,571 0 0 0 0

104,299 99,263 103,698 141,948 213,486 302,890

0 0 0 0 0 0

104,299 99,263 103,698 141,948 213,486 302,890

0 0 0 0 0 0

0 0 0 0 0 0

0 0 0 0 0 0

5,819 0 0 0 0 0

47,701 2,147 0 0 0 0

50,779 36,454 0 0 0 0

0 8,509 0 0 0 0

0 52,153 103,698 57,619 0 0

104,299 99,263 103,698 57,619 0 0

50,000 50,000 50,000 134,329 263,486 352,890

0 0 0 0 0 0

Depreciation & Amortization

Book Depreciation & Amortization: Gross PP&E $500,000

PP&E Write-up $2,450

Fair Value PP&E $502,450

Accumulated Depreciation 25,000

Net PP&E $477,450

Year 2010 2011 2012Year No. 1 2 3

Existing PP&E (incl Write-up)Beginning Amt Remaining Life Salvage

Class 1 $90,000 12 $900 7,425 7,425 7,425 Class 2 85,000 10 800 8,420 8,420 8,420 Class 3 60,000 8 600 7,425 7,425 7,425 Class 4 242,450 6 600 40,308 40,308 40,308

477,450 2,900 63,578 63,578 63,578

CapexYear Capex Useful Life Salvage

1 $110,000 12 9,167 9,167 9,167 2 121,000 10 0 12,100 12,100 3 133,100 15 0 0 8,873 4 146,410 14 0 0 0 5 161,051 12 0 0 0 6 177,156 16 0 0 0 7 194,872 15 0 0 0 8 214,359 15 0 0 0 9 235,795 12 0 0 0

10 259,374 12 0 0 0 1,753,117 0 9,167 21,267 30,140

Computed Depreciation 72,745 84,845 93,718 Manual Depreciation 40,000 40,000 40,000

Total Book Depreciation 72,745 84,845 93,718

Period (Yrs)Amortization of Intangibles (incl Write-up) 12 179 179 179 Impairment of Goodwill 0 0 0

Total Cost ($)Amortization of Capitalized Financing Costs 10,888 1,053 1,053 1,803

Bank Revolver 450 450 450 Term Loan "A" 150 150 900 Term Loan "B" 88 88 88 Senior Notes 144 144 144 Subordinated Notes 83 83 83 Mezzanine Debt 138 138 138 Seller Notes 0 0 0

B15

Amit Tandon: Beginning Amount is the "Net PP&E". Depreciable Amount = Beginning Amount minus Salvage Value, where Depreciable Amount will be the total Depreciation provided over the Remaining Useful Life of the asset.

C15

Amit Tandon: On acquisition, management determines the remaining useful life and salvage value.

A43

Amit Tandon: As per SFAS 142, for book accounting purpose, goodwill is not amortized but, rather, tested for impairment. For tax purposes, Section 197 of the IRS tax code requires straight-line amortization of all intangible assets (including goodwill) over 15 years only in an: (i) Asset acquisition or (ii) a Stock acquisition with a Section 338 election.

Tax Depreciation & Amortization: Tax PP&E $415,000

Existing PP&E (Tax)Beginning Amt Remaining Life Salvage

Class 1 $130,000 12 $900 10,758 10,758 10,758 Class 2 105,000 10 800 10,420 10,420 10,420 Class 3 95,000 8 600 11,800 11,800 11,800 Class 4 85,000 6 600 14,067 14,067 14,067

415,000 2,900 47,045 47,045 47,045

CapexYear Capex Useful Life Salvage

1 $110,000 12 9,167 9,167 9,167 2 121,000 8 0 15,125 15,125 3 133,100 15 0 0 8,873 4 146,410 9 0 0 0 5 161,051 4 0 0 0 6 177,156 16 0 0 0 7 194,872 15 0 0 0 8 214,359 2 0 0 0 9 235,795 12 0 0 0

10 259,374 12 0 0 0 1,753,117 0 9,167 24,292 33,165

Total Tax Depreciation 56,212 71,337 80,210

Period (Yrs)Amortization of Intangibles (incl Write-up) 15 143 143 143 Amortization of Goodwill 15 14,099 14,099 14,099

B63

Amit Tandon: Beginning Amount is the "Net Depreciable PP&E". Depreciable Amount = Beginning Amount minus Salvage Value, where Depreciable Amount will be the total Depreciation provided over the Remaining Useful Life of the asset.

C63

Amit Tandon: On acquisition, management determines the remaining useful life and salvage value.

A88

Amit Tandon: As per FAS 141r, for book accounting purpose, goodwill is not amortized but, rather, tested for impairment. For tax purposes, Section 197 of the IRS tax code requires straight-line amortization of all intangible assets (including goodwill) over 15 years only in an: (i) Asset acquisition or (ii) a Stock acquisition with a Section 338 election.

Depreciation Method Goodwill & Intangibles Amortization

0 0=SLN 1=Sum of Years 0=Not Deductible 1=Tax Deductible

1 Tax Deductible

Manual or Computed Depreciation

1 0=Manual 1=Computed

2013 2014 2015 2016 2017 2018 20194 5 6 7 8 9 10

7,425 7,425 7,425 7,425 7,425 7,425 7,425 8,420 8,420 8,420 8,420 8,420 8,420 8,420 7,425 7,425 7,425 7,425 7,425 0 0

40,308 40,308 40,308 0 0 0 0 63,578 63,578 63,578 23,270 23,270 15,845 15,845

9,167 9,167 9,167 9,167 9,167 9,167 9,167 12,100 12,100 12,100 12,100 12,100 12,100 12,100 8,873 8,873 8,873 8,873 8,873 8,873 8,873

10,458 10,458 10,458 10,458 10,458 10,458 10,458 0 13,421 13,421 13,421 13,421 13,421 13,421 0 0 11,072 11,072 11,072 11,072 11,072 0 0 0 12,991 12,991 12,991 12,991 0 0 0 0 14,291 14,291 14,291 0 0 0 0 0 19,650 19,650 0 0 0 0 0 0 21,615

40,598 54,019 65,091 78,082 92,373 112,023 133,637

104,176 117,597 128,669 101,352 115,643 127,868 149,482 40,000 40,000 40,000 40,000 40,000 40,000 40,000

104,176 117,597 128,669 101,352 115,643 127,868 149,482

179 179 179 179 179 179 179 0 0 0 0 0 0 0

1,515 1,393 2,271 450 450 450 450 450 450 450 450 450 450 450

0 0 0 0 0 0 0 700 0 0 0 0 0 0 144 722 0 0 0 0 0 83 83 583 0 0 0 0

138 138 1,238 0 0 0 0 0 0 0 0 0 0 0

N4

Amit Tandon: As per SFAS 142, for book accounting purpose, goodwill is not amortized but, rather, tested for impairment. For tax purposes, Section 197 of the IRS tax code requires straight-line amortization of all intangible assets (including goodwill) over 15 years only in an: (i) Asset acquisition or (ii) a Stock acquisition with a Section 338 election.

Depreciation Method0 0=SLN 1=Sum of Years

10,758 10,758 10,758 10,758 10,758 10,758 10,758 10,420 10,420 10,420 10,420 10,420 10,420 10,420 11,800 11,800 11,800 11,800 11,800 0 0 14,067 14,067 14,067 0 0 0 0 47,045 47,045 47,045 32,978 32,978 21,178 21,178

9,167 9,167 9,167 9,167 9,167 9,167 9,167 15,125 15,125 15,125 15,125 15,125 15,125 0 8,873 8,873 8,873 8,873 8,873 8,873 8,873

16,268 16,268 16,268 16,268 16,268 16,268 16,268 0 40,263 40,263 40,263 40,263 0 0 0 0 11,072 11,072 11,072 11,072 11,072 0 0 0 12,991 12,991 12,991 12,991 0 0 0 0 107,179 107,179 0 0 0 0 0 0 19,650 19,650 0 0 0 0 0 0 21,615

49,433 89,696 100,768 113,759 220,939 200,325 99,636

96,478 136,741 147,813 146,738 253,917 221,504 120,814

143 143 143 143 143 143 143 14,099 14,099 14,099 14,099 14,099 14,099 14,099

Income Tax Calculation

Year 2010 2011 2012 2013 2014Year No. 1 2 3 4 5

Net Income before Tax 214,212 233,238 259,559 288,655 315,807

Add: Book Depreciation 72,745 84,845 93,718 104,176 117,597 Add: Book (Gain) Loss on Assets Sale 1,250 1,350 1,450 1,550 1,650 Add: Book Impairment of Goodwill 0 0 0 0 0 Add: Book Amortization of Intangibles 179 179 179 179 179 Add: Non-Deductible Expenses 0 0 0 0 0

Less: Tax Depreciation 56,212 71,337 80,210 96,478 136,741 Less: Tax (Gain) Loss on Assets Sale 1,350 1,500 1,600 1,700 1,750 Less: Tax Amortization of Goodwill 14,099 14,099 14,099 14,099 14,099 Less: Tax Amortization of Intangibles 143 143 143 143 143

Pre-NOL Taxable Income 216,582 232,534 258,855 282,140 282,501

Less: NOLs Used 15,500 0 0 0 0

Post-NOL Taxable Income 201,082 232,534 258,855 282,140 282,501 Cash Taxes Payable 70,379 81,387 90,599 98,749 98,875

Total Book Tax 74,974 81,633 90,846 101,029 110,533 Increase (Decrease) in Deferred

Tax Liability 4,595 247 247 2,280 11,657

Beginning NOL Balance 15,500 0 0 0 0 Current Year NOL 0 0 0 0 0 NOLs Used 15,500 0 0 0 0 Ending NOL Balance 0 0 0 0 0

Projected Asset Sales:

Estimated Sale Proceeds 4,000 4,500 5,000 5,500 6,000

Book Basis of Assets 2,750 3,150 3,550 3,950 4,350 Tax Basis of Assets 2,650 3,000 3,400 3,800 4,250

Book Gain (Loss) on Sale 1,250 1,350 1,450 1,550 1,650 Tax Gain (Loss) on Sale 1,350 1,500 1,600 1,700 1,750

Allocation to Balance Sheet:PP&E: 1,500 1,700 1,900 2,100 2,300

A29

Amit Tandon: If Cash Taxes exceed Book Taxes, a Deferred Tax Asset (DTA) is created, which is similar to a reduction in DTL.

A41

Amit Tandon: Currently, only Book & Tax Gain (Loss) on Sale have been taken in this model. The allocation to Balance Sheet & Sale Proceeds are yet to be accounted for.

Other Long-Term Assets 1,250 1,450 1,650 1,850 2,050

2015 2016 2017 2018 20196 7 8 9 10

350,447 429,310 468,774 513,099 550,800

128,669 101,352 115,643 127,868 149,482

1,750 1,850 1,950 2,050 2,150

0 0 0 0 0

179 179 179 179 179

0 0 0 0 0

147,813 146,738 253,917 221,504 120,814

1,900 2,000 2,200 2,300 2,500

14,099 14,099 14,099 14,099 14,099

143 143 143 143 143

317,091 369,713 316,188 405,150 565,055

0 0 0 0 0

317,091 369,713 316,188 405,150 565,055

110,982 129,399 110,666 141,802 197,769

122,656 150,259 164,071 179,585 192,780

11,675 20,859 53,405 37,782 (4,989)

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

6,500 7,000 7,500 8,000 8,500

4,750 5,150 5,550 5,950 6,350

4,600 5,000 5,300 5,700 6,000

1,750 1,850 1,950 2,050 2,150

1,900 2,000 2,200 2,300 2,500

2,500 2,700 2,900 3,100 3,300

2,250 2,450 2,650 2,850 3,050

Weighted Average Cost of Capital

Risk Free Rate (Treasury Bill Rate) 5.00% WACCMarket Risk Premium 4.50% 0 = Manual 1 = ComputedLevered Beta 1.20 1 Computed

Estimated Cost of Debt Amount Int. Rate Wtd. Rate Computed WACCExisting Debt 65,000 4.25% 0.46%Bank Revolver 200,888 4.75% 1.59% Cost of Debt (Post-Tax)Term Loan "A" 80,000 5.50% 0.73% Cost of Preferred StockTerm Loan "B" 55,000 5.25% 0.48% Cost of EquitySenior Notes 65,000 4.25% 0.46%Subordinated Notes 40,000 4.50% 0.30% WACCMezzanine Debt 70,000 4.50% 0.52%Seller Notes 25,000 5.25% 0.22%

Total Debt 600,888 4.76%Post-Tax 3.10%

Estimated Cost of Preferred StockPreferred Stock 60,000 7.00%

Estimated Cost of Equity (CAPM)Total Book Equity 282,500 16.03%

Beta Calculation

Levered Beta 1.20

Pre-Acquisition:Debt $250,000 Equity $600,000 Preferred Stock $0 Debt/Equity Ratio 0.42 Preferred Stock/Equity Ratio 0.00

Post-Acquisition:Debt $600,888 Equity $282,500 Preferred Stock $60,000 Debt/Equity Ratio 2.13 Preferred Stock/Equity Ratio 0.21

Tax Rate 35.00%

Unlevered Beta 0.94

Relevered Beta 2.45

A7

Amit Tandon: "Industry" Beta, of comparable companies.

C27

Amit Tandon: The Capital Asset Pricing Model (CAPM): The CAPM formula states the cost of equity equals the risk free rate plus the multiplication of Beta (Relevered Beta) times the equity risk premium.

A32

Amit Tandon: Equity investors have 2 risks - business risks and financial risks (due to gearing ie. debt & preferred stock). Unlevering will get a Beta with only the business risks and this is required to be re-levered with the company's gearing.

A34

Amit Tandon: "Industry" Beta, of comparable companies.

A36

Amit Tandon: Pre-Acquisition Market Values of Debt, Common Equity & Preferred Stock to be taken.

WACC Manual0 = Manual 1 = Computed WACC

Computed 8.50%

Computed WACCProportion Rate Wtd. Cost

63.69% 3.10% 1.97%6.36% 7.00% 0.45%

29.95% 16.03% 4.80%

7.22%

Discounted Cash Flow Analysis

NPV of Free Cash Flow

NPV of FCFF @ 6.00% 802,189 NPV of FCFF @ 7.00% 760,040 NPV of FCFF @ 8.00% 720,896

FV of Terminal Value (EBITDA) PV of Terminal Value (EBITDA)

Terminal Value @ 4.0x 2,819,044 Terminal Value @ 6.00%Terminal Value @ 6.0x 4,228,567 Terminal Value @ 7.00%Terminal Value @ 8.0x 5,638,089 Terminal Value @ 8.00%

FV of Terminal Value (Perpetuity) PV of Terminal Value (Perpetuity)2.5% 3.0% 3.5%

Terminal Value @ 6.00% 3,291,577 3,858,906 4,653,167 Terminal Value @ 6.00%Terminal Value @ 7.00% 2,560,116 2,894,180 3,323,690 Terminal Value @ 7.00%Terminal Value @ 8.00% 2,094,640 2,315,344 2,585,093 Terminal Value @ 8.00%

Total Enterprise ValueEBITDA Multiple Method Perpetuity Growth Method

4.0x 6.0x 8.0x 2.5% 3.0%6.0% $2,376,329 $3,163,399 $3,950,468 6.0% $2,640,189 $2,956,982 7.0% $2,193,100 $2,909,629 $3,626,159 7.0% $2,061,474 $2,231,295 8.0% $2,026,659 $2,679,541 $3,332,422 8.0% $1,691,120 $1,793,348

Total Equity ValueEBITDA Multiple Method Perpetuity Growth Method

4.0x 6.0x 8.0x 2.5% 3.0%6.0% $1,792,941 $2,580,011 $3,367,081 6.0% $2,056,801 $2,373,595 7.0% $1,609,712 $2,326,242 $3,042,771 7.0% $1,478,086 $1,647,907 8.0% $1,443,272 $2,096,153 $2,749,035 8.0% $1,107,732 $1,209,961

Total Equity Value Per ShareEBITDA Multiple Method Perpetuity Growth Method

4.0x 6.0x 8.0x 2.5% 3.0%6.0% $17.93 $25.80 $33.67 6.0% $20.57 $23.74 7.0% $16.10 $23.26 $30.43 7.0% $14.78 $16.48 8.0% $14.43 $20.96 $27.49 8.0% $11.08 $12.10

PV of Terminal Value (EBITDA)

4.0x 6.0x 8.0x1,574,140 2,361,210 3,148,279 1,433,059 2,149,589 2,866,119 1,305,763 1,958,645 2,611,526

PV of Terminal Value (Perpetuity)2.5% 3.0% 3.5%

1,838,000 2,154,793 2,598,304 1,301,433 1,471,254 1,689,596

970,224 1,072,452 1,197,398

Total Enterprise Value Percentage Split of DCF AnalysisPerpetuity Growth Method

3.5% EBITDA Multiple Method$3,400,493 Cash Flow % of TEV: 4.0x 6.0x 8.0x$2,449,636 @ 6.00% 33.8% 25.4% 20.3%$1,918,294 @ 7.00% 34.7% 26.1% 21.0%

@ 8.00% 35.6% 26.9% 21.6%Terminal Value % of TEV:

Total Equity Value @ 6.00% 66.2% 74.6% 79.7%Perpetuity Growth Method @ 7.00% 65.3% 73.9% 79.0%

3.5% @ 8.00% 64.4% 73.1% 78.4%$2,817,105 $1,866,249 Perpetuity Growth Method$1,334,907 Cash Flow % of TEV: 2.5% 3.0% 3.5%

@ 6.00% 30.4% 27.1% 23.6%@ 7.00% 36.9% 34.1% 31.0%

Total Equity Value Per Share @ 8.00% 42.6% 40.2% 37.6%Perpetuity Growth Method Terminal Value % of TEV:

3.5% @ 6.00% 69.6% 72.9% 76.4%$28.17 @ 7.00% 63.1% 65.9% 69.0%$18.66 @ 8.00% 57.4% 59.8% 62.4%$13.35

IRR / Returns Calculation

Exit Year 2018 9

Equity Allocation on Exit Investment Undiluted % Allocation Diluted Allocation

Common - Sponsor Equity $220,000 77.19% 0.00% 63.30% 2,565,228 Management Equity 40,000 14.04% 0.00% 11.51% 466,405 New Equity 25,000 8.77% 2.00% 9.19% 372,555 Subordinated Notes 40,000 N/A 3.00% 3.00% 121,578 Mezzanine Debt 70,000 N/A 5.00% 5.00% 202,630 Preferred Stock 60,000 N/A 4.00% 4.00% 162,104 Management Performance Equity N/A N/A 4.00% 4.00% 162,104

Total 455,000 100.00% 18.00% 100.00% 4,052,606

Cash Flows & IRR Post-Acq 2010 2011 2012 20130 1 2 3 4

Subordinated NotesInitial Investment (40,000)Cash Interest 0 0 0 0 Repayment 0 0 0 0 Principal 0 0 0 0 Participation on Exit 0 0 0 0

IRR 21.41% (40,000) 0 0 0 0

Mezzanine DebtInitial Investment (70,000)Cash Interest 0 0 0 0 Repayment 0 0 0 0 Principal 0 0 0 0 Participation on Exit 0 0 0 0

IRR 20.56% (70,000) 0 0 0 0

Preferred StockInitial Investment (60,000)Cash Dividend 0 0 0 0 Repayment 0 0 0 0 Principal 0 0 0 0 Participation on Exit 0 0 0 0

IRR 18.54% (60,000) 0 0 0 0

Common - Sponsor EquityInitial Investment (220,000)Cash Dividend 1,930 2,084 2,200 2,393 Participation on Exit 0 0 0 0

IRR 31.82% (220,000) 1,930 2,084 2,200 2,393

Management EquityInitial Investment (40,000)Cash Dividend 351 379 400 435 Participation on Exit 0 0 0 0

IRR 36.21% (40,000) 351 379 400 435

New EquityInitial Investment (25,000)Cash Dividend 219 237 250 272 Participation on Exit 0 0 0 0

IRR 35.42% (25,000) 219 237 250 272

Allocation of Exit Proceeds

EBITDA Multiple (Exit Year) 6.0xEBITDA (Exit Year) 645,545 Exit Year Enterprise Value 3,873,273

Less: Debt 0 Less: Preferred Stock 84,153 Add: Excess Cash 263,486

Equity Value - Allocable Proceeds 4,052,606

2014 2015 2016 2017 2018 20195 6 7 8 9 10

0 97 0 0 0 0 47,701 2,147 0 0 0 0

0 0 0 0 0 0 0 0 0 0 121,578 0

47,701 2,243 0 0 121,578 0

0 1,640 0 0 0 0 50,779 36,454 0 0 0 0

0 0 0 0 0 0 0 0 0 0 202,630 0

50,779 38,094 0 0 202,630 0

0 5,891 5,891 5,891 5,891 0 0 0 0 0 0 0 0 0 0 0 84,153 0 0 0 0 0 162,104 0 0 5,891 5,891 5,891 252,148 0

2,663 2,702 2,856 3,088 3,165 0 0 0 0 0 2,565,228 0

2,663 2,702 2,856 3,088 2,568,393 0

484 491 519 561 575 0 0 0 0 0 628,509 0

484 491 519 561 629,085 0

303 307 325 351 360 0 0 0 0 0 372,555 0

303 307 325 351 372,915 0

Ratio Analysis

Year 2010 2011 2012 2013 2014Year No. 1 2 3 4 5

Capital RatiosDebt Ratio 0.7x 0.6x 0.5x 0.5x 0.4xTotal Debt / Book Capitalization 0.6x 0.5x 0.4x 0.3x 0.2xTotal Debt / Equity 1.6x 1.1x 0.7x 0.5x 0.3x

Leverage RatiosTotal Debt / EBITDA 2.1x 1.7x 1.4x 1.1x 0.8xTotal Debt / (EBITDA - Capex) 3.2x 2.6x 2.1x 1.6x 1.2xNet Debt / EBITDA 1.9x 1.6x 1.2x 0.9x 0.7xSenior Debt / EBITDA 1.4x 1.1x 0.8x 0.5x 0.5x

Interest CoverageEBITDA / Total Interest 8.8x 10.0x 12.0x 14.9x 17.3xEBITDA / Senior Interest 12.3x 14.4x 18.6x 25.5x 32.1xEBITDA / Cash Interest 12.3x 14.4x 18.6x 25.5x 32.1x

(EBITDA - Capex) / Total Interest 5.8x 6.5x 7.8x 9.6x 11.2x(EBITDA - Capex) / Senior Interest 8.1x 9.4x 12.1x 16.6x 20.7x(EBITDA - Capex) / Cash Interest 8.1x 9.4x 12.1x 16.6x 20.7x

EBIT / Total Interest 6.8x 7.5x 9.1x 11.2x 12.8x

Asset UtilizationTotal Asset Turnover (Sales) 0.9x 0.9x 0.9x 0.9x 0.9xFixed Asset Turnover (Sales) 2.2x 2.3x 2.3x 2.4x 2.5x

Activity RatiosInventory Turnover (COGS) 5.1x 5.1x 4.9x 4.7x 4.6xAccounts Receivable Turnover (Sales) 7.8x 5.7x 5.4x 5.1x 4.9xAccounts Payable Turnover (COGS & Inv) 7.9x 7.0x 6.8x 6.7x 6.5xInventory Holding Period (Days) 71.9 71.1 73.9 76.9 79.9 Days Receivable (Sales) 47.0 64.4 67.6 71.0 74.5 Days Payable (COGS & Inv) 46.4 52.2 53.8 54.8 55.9

Liquidity RatiosCurrent Ratio 2.3x 2.3x 2.3x 2.4x 2.4xQuick (Acid Test) Ratio 1.1x 1.1x 1.1x 1.1x 1.1x

ReturnsReturn on Equity (ROE) 38.72% 30.19% 25.61% 22.52% 20.02%Return on Assets (ROA) 13.25% 12.24% 12.27% 12.28% 12.19%

A9

Amit Tandon: Debt Ratio = Total Debt / Total Assets. Total debt is the sum of a company's current liabilities and long-term liabilities, and total assets are the sum of fixed assets and current assets and other assets such as 'goodwill'. A company's debt ratio should be compared with their industry average or other competing firms. The debt/asset ratio shows the proportion of a company's assets which are financed through debt. If the ratio is less than 0.5, most of the company's assets are financed through equity. If the ratio is greater than 0.5, most of the company's assets are financed through debt. Companies with high debt/asset ratios are said to be "highly leveraged", & not highly liquid.

A39

Amit Tandon: This measures the number of times inventory is turned over. It is useful in determining whether a firm is carrying excess stock in inventory.

A40

Amit Tandon: Indication of how quickly the company collects its accounts receivable. Arrived at by dividing "Annual Credit Sales" by Accounts Receivable.

A41

Amit Tandon: The accounts payable turnover ratio indicates how many times a company pays off its suppliers during an accounting period. A falling ratio indicates that the company is taking longer to pay its suppliers. A falling accounts payable turnover ratio may suggest one of two scenarios. First, the business might be experiencing cash flow problems or disputed invoices with suppliers, which leads to slower payment. However, a successful business may extend payments to make the best possible use of cash and might have negotiated more favorable payment terms with suppliers. Additional analysis is therefore advised when faced with a changing accounts payable turnover ratio.

A42

Amit Tandon: The number of days worth of inventory on hand.

A43

Amit Tandon: Also known as "Average Collection Period". This is the number of days that credit sales remain in accounts receivable before they are collected.

A44

Amit Tandon: This ratio shows how many days it takes to pay accounts payable ie. the average length of time trade payables are outstanding before they are paid.

A48

Amit Tandon: A generally acceptable current ratio is 2 to 1. But whether or not a specific ratio is satisfactory depends on the nature of the business and the characteristics of its current assets and liabilities. The minimum acceptable current ratio is obviously 1:1, but that relationship is usually playing it too close for comfort.

A49

Amit Tandon: An acid-test of 1:1 is considered satisfactory unless the majority of your "quick assets" are in accounts receivable, and the pattern of accounts receivable collection lags behind the schedule for paying current liabilities.

Operating ResultsSales Growth N/A 10.00% 10.00% 10.00% 10.00%Gross Margin 55.00% 54.89% 54.77% 54.66% 54.55%EBITDA Margin 29.00% 28.80% 28.60% 28.40% 28.19%EBIT Margin 22.37% 21.77% 21.54% 21.27% 20.88%Pre-Tax Profit Ratio 19.47% 19.28% 19.50% 19.72% 19.61%

2015 2016 2017 2018 20196 7 8 9 10

0.3x 0.3x 0.3x 0.3x 0.2x0.2x 0.1x 0.0x 0.0x 0.0x0.2x 0.1x 0.0x 0.0x 0.0x

0.5x 0.3x 0.1x 0.1x 0.1x0.8x 0.4x 0.2x 0.2x 0.2x0.4x 0.2x -0.1x -0.3x -0.4x0.3x 0.1x 0.0x 0.0x 0.0x



16.7x 24.5x 33.8x 43.5x 46.7x

0.9x 0.9x 0.9x 0.8x 0.8x2.5x 2.5x 2.5x 2.4x 2.4x

4.4x 4.2x 4.1x 3.9x 3.8x4.7x 4.4x 4.2x 4.0x 3.8x6.4x 6.3x 6.1x 6.0x 5.9x83.1 86.5 89.9 93.5 97.2 78.2 82.1 86.2 90.6 95.1 57.1 58.2 59.4 60.6 61.8

2.4x 2.5x 2.7x 3.0x 3.1x1.1x 1.2x 1.4x 1.6x 1.7x

18.41% 18.85% 17.26% 16.05% 14.82%12.17% 13.32% 12.68% 11.92% 11.14%

10.00% 10.00% 10.00% 10.00% 10.00%54.43% 54.32% 54.21% 54.09% 53.98%27.99% 27.79% 27.58% 27.38% 27.17%20.72% 22.58% 22.18% 21.95% 21.40%19.78% 22.03% 21.87% 21.76% 21.24%

lbo dcf model

Documents

gross ppamp

existing ppamp

deferred tax

ppamp

cash flow

term assets

current assets

exit year