miami university 2015 william blair i-banking competition winner

Armstrong FoodsMatt Bender | Michael Loffredo | Alex Vielmetti | Joe Wavering

William Blair Case Competition — 2015

Executive Summary

Industry Drivers

Company Overview

Valuation Analysis

Strategic Options

3

4

7

11

17

24Final Thoughts

Executive

SummaryIndustry Drivers Company

OverviewValuation

Analysis

Strategic

OptionsFinal Thoughts

Executive Summary

Potential Buyers

Valuation Ranges

Compelling

Story

Key

Financials

and Valuation

Sell-Side

Advisory

Armstrong Foods is a leading distributor of

food & beverage products with forays into

restaurant products

Maintains market position with a proven

management team, strong brand recognition,

and a loyal customer base

Valuation analyses place Armstrong’s enterprise

value between $450mm — $480mm

2015E Revenue: $318.3mm

2015E EBITDA: $49.7mm

Historic 3 year EBITDA CAGR: (2.4%)

Analyses of past transactions and potential for

synergies leads to a recommendation of

pursuing a sale to a financial sponsor

A strategic buyer is viable as well, particularly if

they would consider retaining current

management

3

Sources: Company Financials, Team Projections

Enterprise Value (mm)

400 440 480 520 560 600

Comparable Companies (9.0x - 9.5x)

Precedent Transactions (8.6x - 9.1x)

DCF Perpetuity Growth (9.1x - 10.1x)

DCF Exit Multiple (10.5x - 11.4x)

Leveraged Buyout (8.9x - 9.8x)

Industry Drivers

4

Executive


OverviewValuation

Analysis

Strategic


Industry Overview

The foodservice distribution industry is currently very fragmented with no single company controlling more than 3% of the total market. Additionally, there are low barriers to entry.

Moderate revenue growth in the food & beverage industry, combined with a low volume environment and a desire for suppliers to innovate, is placing downward pressure on distributors moving forward.

Armstrong is well-

positioned for the top

channels in the industry

and has potential to

move into the growing

segments

$200

$210

$220

$230

$240

$250

$260

$270

2009 2010 2011 2012 2013 2014 2015P

Bil

lion

s

Foodservice Industry Growth

$87

$66

$27

$18

$18

$13

$0 $20 $40 $60 $80

LSR

FSR

Retail hosts

Travel and Leisure

Education

Healthcare

2015E Top Distributor Channels by Sales

Billions

Armstrong can succeed

in a low-growth

environment by

concentrating on high-

margin revenue segments

while gaining market

share

5

Sources: Sysco Investor Presentation, IBIS World

Executive


OverviewValuation

Analysis

Strategic


Margins and Multiples

Distribution EBITDA Margins

Current Transaction Environment

There are currently strong multiples (relative to historicals) being placed on high-quality companies for several reasons

Few strong companies available

Vertical integration is being explored as an option

M&A remains as one of the few ways to drive growth in this industry

F&B Transaction Multiples

Distribution margins vary significantly by industry

Food service is very low at ~3% due to high costs of raw materials

Armstrong is very well-positioned in the industry with an EBITDA margin of ~18%

Distributors need to cut costs and continue to innovate in order to remain competitive

Food Service Margins

14.8%

6.5%

3.2%

15.1%

5.1%

3.1%

5.8%

0.0%

4.0%

8.0%

12.0%

16.0%

Auto Building Food &Consumer

Industrial Healthcare Technology Electrical

8.7x 8.5x 8.2x

9.7x8.9x

12.6x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

2009 2010 2011 2012 2013 2014

EV/EBITDA EV/Sales

6

Sources: Harris Williams, Bloomberg

Company Overview

7

Executive


OverviewValuation

Analysis

Strategic


Armstrong’s Profile

Armstrong Foods is a leading distribution company with a nationwide network focused primarily on food & beverage and restaurant products.

The Company is moving to expand into restaurant services to maintain its strong growth rate as well as working to grow an already large and diverse customer base.

53.9%

25.4%

17.3%

3.5%

2015 Revenue Breakdown

Food Products

Beverage Products

Restaurant Supply Products

Restaurant Service

Superior margins

compared to competitors

While currently focused

on product sales, the

Company is pushing

service sales, which

should result in

increased margins in the

future

$50

$55 $59

$63

$70

$77

10%

12%

14%

16%

18%

20%

$40

$60

$80

2015E 2016P 2017P 2018P 2019P 2020P

Projected EBITDA Growth and Margins

EBITDA EBITDA Margin

Sources: Team Projections, Company Materials

8

Executive


OverviewValuation

Analysis

Strategic


Customer and Product Diversification

Customer Philosophy

Armstrong focuses on building long-term relationships with customers

Top 10 customers were responsible for 64.3% of revenue in 2015

Potential to build relationships with schools and universities and a larger number of individual restaurants

Breakdown of Customer Base

Breadth of Products

60.5%

28.4%

8.9% 2.2%

Larger Chains

Grocery Stores

Family owned

International

Food Products

2013-2015E Sales

CAGR: (1.3%)

Beverage Products

2013-2015E Sales

CAGR: 3.7%

Restaurant Supplies

2013-2015E Sales

CAGR: 10.3%

Restaurant Service

2013-2015E Sales

CAGR: 40.0%

Packaged foods, fresh and organic foods, pre-

prepped meals

Packaged drinks, fountain drink machine refills,

kegs and alcohol for restaurants and bars

Flatware, linens, cleaning supplies

CO2 system service for carbonated beverages,

beverage system installation, appliance repair and

maintenance

Core Segments

Food

Products

Beverage

ProductsSecondary Segments

Restaurant

Supplies

Restaurant

Services

9


Executive


OverviewValuation

Analysis

Strategic


Positioning Analysis

W

TO

S

The Company boasts top-three rankings

in food products & restaurant products

Top management in the industry

Expansive distribution network

for restaurants and grocery

stores

Further expansion into the

high margin restaurant service

industry

Potential for relationships with

school and university customer bases

Strategic acquisition to supplement

current organic growth prospects

Armstrong’s biggest customer accounts

for 20.5% of 2015E sales

Net cash position does not make for an

optimal capital structure

Variable transportation costs

could swing upwards and

depress margins

Low barriers to entry and high

fragmentation lead to very

competitive landscape

Low switching costs pose threat

of lost customers

Low growth in core segments

10


Valuation Analysis

11

Executive


OverviewValuation

Analysis

Strategic


400 440 480 520 560 600






Valuation Overview

Valuation Range

2015E EBITDA Multiple: 8.0x 8.9x 9.7x

Enterprise Value (millions):

10.5x 11.3x 12.1x

Valuation Range:

450mm — 480mm

12

Sources: Team Projections

Executive


OverviewValuation

Analysis

Strategic


($ in millions except per share data)

Company NameTicker &

PriceMarket Enterprise LTM 2015E LTM EBITDA Enterprise Value

Exchange Cap Value EBITDA Revenue EBITDA Margin LTM EBITDA LTM Revenue 2015E EBITDA

Chefs' Warehouse, Inc., The CHEF US $15.35 409.4 719.8 44.1 918.1 72.6 4.9% 16.3x 0.8x 9.7x

Colabor Group, Inc. GCL CN $0.88 23.2 168.4 15.8 1,238.3 34.9 1.6% 10.7x 0.1x 6.9x

Core-Mark Holding Company, Inc. CORE US $80.05 1,844.8 1,979.1 110.6 10,618.7 153.4 1.0% 17.9x 0.2x 12.6x

Performance Food Group PFGC US $22.51 2,259.2 3,692.5 289.4 15,270.0 320.7 1.8% 12.8x 0.2x 10.5x

SpartanNash Company SPTN US $28.67 1,071.9 1,596.5 202.0 7,880.7 233.1 2.6% 7.9x 0.2x 6.7x

United Natural Foods, Inc. UNFI US $51.71 2,581.7 3,113.7 305.8 8,185.0 333.1 3.7% 10.2x 0.4x 9.3x

Armstrong Foods 49.7 318.3 49.7 15.6%

High 2,581.7 3,692.5 305.8 15,270.0 333.1 4.9% 17.9x 0.8x 12.6x

3rd Quartile 2,155.6 2,830.1 267.5 10,010.3 298.8 3.4% 15.4x 0.3x 10.3x

Median 1,458.3 1,787.8 156.3 8,032.8 193.3 2.2% 11.7x 0.2x 9.5x

Mean 1,365.0 1,878.3 161.3 7,351.8 191.3 2.6% 12.6x 0.3x 9.3x

1st Quartile 575.0 939.0 60.7 2,898.9 92.8 1.6% 10.3x 0.2x 7.5x

Low 23.2 168.4 15.8 918.1 34.9 1.0% 7.9x 0.1x 6.7x

Comparable Company Analysis

Valuation Commentary Implied Valuation

Armstrong Foods' 2015E EBITDA $49.7

Comparable Multiple Range 9.0x 9.5x

Enterprise Value Range $447.3 $472.9

Comparable companies derive majority of revenue from food &

beverage distribution in North America

Much of the industry is comprised of vertically

integrated food companies that operate from

manufacturing to distribution

2015E forward multiples better represent Armstrong’s valuation

13

Sources: Team Projections, Bloomberg

*as of October 29, 2015

Executive


OverviewValuation

Analysis

Strategic


Precedent Transactions Analysis


Target Company AcquirerTransaction Announcement Transaction

PremiumTransaction Value

Type Date Value Revenue EBIT EBITDA

Michael Foods Group, Inc. POST Holdings, Inc. Strategic 4/17/2014 2,450.0 -- -- -- 9.5x

Allen Brothers, Inc. The Chefs' Warehouse, Inc. Strategic 12/11/2013 29.9 -- -- -- 7.0x

Nash Finch Company Spartan Company Strategic 7/22/2013 688.1 0.8% 0.1x 11.7x 6.9x

T&G Global LTD BayWa AG Strategic 3/9/2012 241.6 11.2% 0.6x 18.4x 9.6x

Skor Food Group, Inc., The Colabor Group, Inc. Strategic 3/22/2011 35.6 91.9% 0.2x 8.6x 6.7x

Michael Foods Group, Inc. Goldman Sachs Capital Sponsor 5/20/2010 1,568.8 -- 1.7x 16.7x 11.8x

High 1.7x 18.4x 11.8x

3rd Quartile 0.9x 17.1x 9.6x

Median 0.4x 14.2x 8.3x

Mean 0.7x 13.8x 8.6x

1st Quartile 0.2x 10.9x 7.0x

Low 0.1x 8.6x 6.7x

Implied ValuationValuation Commentary

Armstrong Foods' 2015E EBITDA $49.7

Precedent Multiple Range 8.6x 9.1x

Enterprise Value Range $427.4 $452.3

14

Sources: Team Projections, Bloomberg, Harris Williams

Numerous precedent transactions were strategic acquisitions by

comparable companies

Lack of recent deals lead to depressed multiples

Multiple expansion in past 18 months

Executive


OverviewValuation

Analysis

Strategic


Discounted Cash Flows Analysis

Implied Valuation

Perpetuity Growth Method

Perpetuity Growth Rate 2.75%

Terminal Value 553.2

PV of Terminal Value 351.5

Plus: PV of Future FCF 115.5

Enterprise Value 467.0

Exit Multiple Method

Exit Multiple 9.0x

Terminal Value 690.5

PV of Terminal Value 438.8

Plus: PV of Future FCF 115.5

Enterprise Value 554.2

WACC Calculations

Capital Structure

Debt 35.1

Market Value of Equity 536.7

Beta* 0.93

Equity Risk Premium 6.6%

Size Premium 1.6%

Risk Free Rate 2.0%

Cost of Equity 9.8%

Pretax Cost of Debt* 7.0%

Tax Rate 37.5%

Cost of Debt 4.4%

WACC 9.5%

* Using comparables

Valuation Commentary

Growth assumptions

Revenue growth peaks in 2017 at 6.6%

Normalized margins

Comparable assumptions

Beta was calculated from unlevering then relevering

comparable betas

Cost of debt was estimated using debt comparables

15


($ in millions) Estimated Projected

2015E 2016P 2017P 2018P 2019P 2020P

EBITDA 49.7 54.5 58.9 63.3 70.3 76.7

Less: D&A 15.9 16.7 17.8 18.2 19.2 20.1

EBIT 33.8 37.8 41.1 45.2 51.1 56.6

Tax Effect @ 37.5% 12.7 14.2 15.4 16.9 19.2 21.2

NOPAT 21.1 23.6 25.7 28.2 31.9 35.4

Add: D&A 15.9 16.7 17.8 18.2 19.2 20.1

Less: CapEx 12.5 12.6 13.4 15.1 16.8 18.4

Less: Acqusition Costs 0.0 0.0 0.0 0.0 0.0 0.0

Less: Changes in NWC 2.6 2.3 0.9 1.0 0.7

Free Cash Flow 25.1 27.8 30.4 33.3 36.3

PV of FCF 22.9 23.1 23.1 23.2 23.1

Executive


OverviewValuation

Analysis

Strategic


Leveraged Buyout Analysis

Sensitivity AnalysisValuation Commentary

Strong, consistent cash flows make Armstrong a good target

for an acquisition by a financial sponsor

Low capital expenditures drive cash available for debt

repayment

Transaction assumptions:

Purchase Multiple: 9.3x

Exit Multiple: 9.3x

Investment horizon of 5 years

Exit Multiple

8.3x 8.8x 9.3x 9.8x 10.3x

Spo

nso

r T

arg

et

IRR

15.0% 478.1 496.9 515.7 534.6 553.4

17.5% 454.8 471.7 488.6 505.5 522.4

20.0% 434.3 449.5 464.7 479.9 495.1

22.5% 416.2 429.9 443.6 457.3 471.0

25.0% 400.1 412.5 424.9 437.3 449.7

16


Capital Structure Assumptions

Interest Rates

Revolver L+ 175 bps

Term Loan A L+ 340 bps

Subordinated Note 7.6%

Principal Repayment Rates

(per Annum)

Revolver N/A

Term Loan A 5.0%

Subordinated Note 0.0% 0

200

400

600

800

2016P 2017P 2018P 2019P 2020P

Equity Debt

% of

Total Ratio

Leverage Ratio 5.5x

Revolver 0.0% 0.0x

Term Loan A 63.6% 3.5x

Subordinated Note 36.4% 2.0x

Check 100.0% 5.5x

(in

mil

lion

s)

Strategic Options

17

Executive


OverviewValuation

Analysis

Strategic


Potential Acquisition Targets

Industry:

Financials:

Rationale:

Distributor of OEM repair and

maintenance equipment for the

restaurant and foodservice industry

No Financials

Food distributor that focuses on specialty

foods. Provides perishable products from

vendors to restaurants and other clients

$42.5m Revenue

$19.3m Market Cap

($6.65m) EBITDA

Parts Town would provide Armstrong

Foods with additional exposure to the

restaurant services segment, where

they command high margins. Parts

Town is currently a portfolio

company of Summit Partners, who

would be looking for an exit in 2017,

after their principle investment in

2013.

Innovative Food Holdings would

allow Armstrong to diversify their

food product distribution offerings.

IFH has major contracts with US

Foods, this mismanaged company

would be a solid acquisition at a

reasonable price.

18

Sources: Bloomberg, Google, Company Websites

Executive


OverviewValuation

Analysis

Strategic


400

450

500

550

600

No Acquisition Acquisition in 2017

DCF Perpetuity Growth DCF Exit Multiple Leveraged Buyout

Potential Acquisition Impact

Discounted Cash Flow

Leveraged Buyout

0

20

40

60

80

100

2015E 2016E 2017E 2018E 2019E 2020E

Armstrong EBITDA

Base Company Incremental Addition

(in

mil

lion

s)

(in

mil

lion

s)

~$470mm ~$500mm

(30)

(15)

0

15

30

2016E 2017E 2018E 2019E 2020E

Cash Available for Debt Repayment

Base Company Incremental Addition

19

Sources: Team Projections

Exit Multiple

Spo

nso

r T

arg

et

IRR 8.3x 8.8x 9.3x 9.8x 10.3x

15.0% 514.3 535.8 557.4 578.9 600.5

17.5% 487.3 506.6 526.0 545.3 564.6

20.0% 463.5 480.9 498.3 515.7 533.1

22.5% 442.5 458.2 473.9 489.6 505.3

25.0% 424.0 438.2 452.4 466.5 480.7

(in

mil

lion

s)

Executive


OverviewValuation

Analysis

Strategic


Strategic Buyer Universe

Description RationaleMetrics

LTM Revenue:

$8,185mm

Market Cap:

$2,695mm

Privately Held

Privately Held

Privately Held

Privately Held

TriMark delivers foodservice

supplies and equipment on a

national scale to primarily the

restaurant industry.

Food Services of America is a

family owned foodservice

distributor operating in the

west and Midwest.

United Natural Foods is an

industry leading distributor of

organic and other nutritional

foods.

Gordon Food Service is the

largest broadline foodservice

distributor in the US. They

serve restaurants, schools, and

the healthcare system.

Reinhart FoodService

distributes a wide range of

branded foods as well as

provides services for its diverse

client base.

Reinhart has the size to acquire Armstrong, and has

complementary operations. They also have access to key

end-markets including the healthcare and education

industries that are untapped by Armstrong.

Gordon would offer Armstrong a customer base in new end-

markets and boasts the strong consumer brands that fit with

existing product lines. Gordon also has the value-add

services that Armstrong is expanding into.

United Natural Foods would enable Armstrong to grow its

business substantially in the organic sector. UNFI’s

experience with the acquisition of Trudeau Distributing

Company would also offer a number of advantages.

Food Services of America has the requisite size and capital to

finance Armstrong’s future growth endeavors. FSA also has

the extensive distribution experience to make the acquisition

mutually beneficial.

TriMark has market-leading expertise in kitchen equipment

and foodservices. They would enable Armstrong position

itself better in the high growth restaurant equipment and

services sectors.

20


Executive


OverviewValuation

Analysis

Strategic


Financial Sponsors Universe

Criteria Rationale

Revenue < $300mm

EBITDA $5mm - $50mm

Revenue < $300mm

Castle Harlan

EV < $1B

EV < $1B

EBITDA < $200mm

Arbor Investments focuses exclusively on middle-market food & beverage

companies. Arbor has experience in the food distribution industry and a number

of currently held companies that could offer synergy opportunities.

Swander Pace Capital looks to partner with the management teams of middle-

market firms who can provide synergies to their current holdings. Their portfolio

includes beverage, branded foods, foodservice, and specialty distribution

companies.

Castle Harlan targets middle-market firms with moderate growth profiles. They

currently hold Gold Star Foods, the leading food distributor for schools in the

southwest. Castle Harlan also owns a distributor of books, videos, and music

products, further demonstrating their relevant experience.

TSG Consumer Partners looks for companies with a conservative capital structure

who have a competitive advantage in their distribution channels. Their current

portfolio boasts a variety of branded foods & beverages, as well as a restaurant

segment.

21


Executive


OverviewValuation

Analysis

Strategic


Financial Sponsors (cont.)

Criteria Rationale

Revenue $50mm-$1.5B

EV $50mm-$500mm

EV < $500mm

EV < $2B

Sun Capital Partners is extremely active in the food & beverage space and looks

for companies that need growth capital. They have an extensive portfolio of both

restaurants and branded foods & beverages.

H.I.G. Capital seeks to partner with experienced management teams to add value

through portfolio synergies. Their current holdings include a focus on specialty

distribution and the food & beverage industries.

Brynwood Partners targets companies that operate in niche sections of the

middle-market. Their current portfolio consists of firms who are in the

production and distribution of packaged foods.

Olympus Partners has a team approach that spans a number of target industries.

One such industry is the consumer and restaurant space with holdings in fast food

franchises and branded foods.

22


Executive


OverviewValuation

Analysis

Strategic


Selected Buyers

Arbor has extensive experience in food & beverage companies that operate in several stages of

the overall supply chain. The firm has managed food manufacturers, food distributors and

packagers, and food retailers. Additionally, Arbor currently maintains a broad portfolio that

would allow for potential synergies. Because they operate companies in many parts of the supply

chain, it may be possible for greater synergies to be realized than in a more singular transaction.

Some portfolio companies are shown below.

Reinhart represents the best strategic buyer for a number of reasons. They have the strong

branded food & beverage products to push through existing distribution channels, as well as the

expertise with restaurant equipment and services that Armstrong needs to grow their burgeoning

segments. Reinhart’s size would make this acquisition possible, and there would be significant

potential synergies as a result of the transaction. Some brands are shown below.

23


Final Thoughts

24

Executive


OverviewValuation

Analysis

Strategic


Recommendation

Strategic vs. Sponsored

Final Recommendation

We recommend that Armstrong Foods engages in a sale to Arbor Investments

Expertise in the food & beverage industry and high potential synergies with portfolio companies

We believe that this route represents the greatest value for Armstrong Foods

Implied valuation range of $450 — $480mm

A sale to a sponsored buyer offers Armstrong a number of advantages

Broadest range of experiences within the food & beverage industry

Synergies with both upstream and downstream portfolio companies

Strategic buyers typically get rid of the existing management team: one of Armstrong’s greatest assets

Acquisition Recommendation

25

Sources: Team Projections, Company Websites

Appropriate size and

improvement opportunities

Strong product offerings to

diversify Armstrong’s

distribution

Enterprise Value (mm)

400 440 480 520 560 600






Appendix

26

Executive


OverviewValuation

Analysis

Strategic


PF Income Statement (no acquisition)

($ in millions) Acquistion 0

(FY ended December 31,)

Income Statement

Historical Estimated Projected

2013 2014 2015E 2016P 2017P 2018P 2019P 2020P

Food Products 175.9 172.4 171.5 173.2 177.6 182.0 185.7 189.4

Beverage Products 75.0 77.3 80.7 84.8 89.8 95.2 99.9 103.9

Restaurant Supply Products 45.3 49.0 55.1 61.7 66.3 71.3 75.5 78.6

Restaurant Service 5.6 8.1 11.0 14.8 21.5 30.1 39.1 47.0

Total Revenue 301.8 306.7 318.3 334.5 355.2 378.6 400.3 418.9

Product Costs (incl. Transportation & Labor) 192.5 206.0 207.5 211.0 216.9 226.5 234.8 241.7

Service Costs 3.1 4.5 5.5 7.1 10.1 14.1 18.4 22.1

Gross Profit 106.2 96.2 105.4 116.4 128.2 137.9 147.2 155.1

SG&A 69.4 65.9 71.6 78.6 87.0 92.8 96.1 98.4

EBIT 36.8 30.3 33.8 37.8 41.2 45.2 51.1 56.6

Interest Expense 2.5 2.5 2.5 2.5 2.5 2.5

Tax Provision 13.8 11.4 11.8 13.3 14.5 16.0 18.2 20.3

Net Income 23.0 18.9 19.6 22.1 24.2 26.7 30.4 33.9

Depreciation & Amortization 16.6 16.3 15.9 16.7 17.8 18.2 19.2 20.1

Capital Expenditures 10.5 12.0 12.5 12.6 13.4 15.1 16.8 18.4

Adjusted EBITDA 53.4 46.5 49.7 54.5 58.9 63.3 70.3 76.7

27

Executive


OverviewValuation

Analysis

Strategic


PF Income Statement (with acquisition)

($ in millions) Acquistion 1

(FY ended December 31,)

Income Statement

Historical Estimated Projected

2013 2014 2015E 2016P 2017P 2018P 2019P 2020P

Food Products 175.9 172.4 171.5 173.2 203.6 208.7 212.9 217.1

Beverage Products 75.0 77.3 80.7 84.8 89.8 95.2 99.9 103.9

Restaurant Supply Products 45.3 49.0 55.1 61.7 66.3 71.3 75.5 78.6

Restaurant Service 5.6 8.1 11.0 14.8 30.3 42.4 55.1 66.2

Total Revenue 301.8 306.7 318.3 334.5 390.0 417.6 443.5 465.8

Product Costs (incl. Transportation & Labor) 192.5 206.0 207.5 211.0 239.9 243.8 252.4 259.8

Service Costs 3.1 4.5 5.5 7.1 10.1 19.9 25.9 31.1

Gross Profit 106.2 96.2 105.4 116.4 128.2 153.8 165.2 174.9

SG&A 69.4 65.9 71.6 78.6 92.2 102.3 106.4 109.5

EBIT 36.8 30.3 33.8 37.8 41.2 51.5 58.7 65.5

Interest Expense 2.5 2.5 5.1 6.0 6.0 6.0

Tax Provision 13.8 11.4 11.8 13.3 13.5 17.1 19.8 22.3

Net Income 23.0 18.9 19.6 22.1 22.6 28.5 33.0 37.2

Depreciation & Amortization 16.6 16.3 15.9 16.7 17.8 20.0 21.3 22.4

Capital Expenditures 10.5 12.0 12.5 12.6 13.4 16.7 18.6 20.5

Adjusted EBITDA 53.4 46.5 49.7 54.5 58.9 71.5 80.0 87.8

28

Executive


OverviewValuation

Analysis

Strategic


Income Statement Assumptions

29

Assumptions

Estimated Projected

Income Statement 2015E 2016P 2017P 2018P 2019P 2020P

Food Products Growth (2.0%) (0.5%) 1.0% 2.5% 2.5% 2.0% 2.0%

Beverage Products Growth 3.0% 4.5% 5.0% 6.0% 6.0% 5.0% 4.0%

Restaurant Supply Products Growth 8.1% 12.5% 12.0% 7.5% 7.5% 6.0% 4.0%

Restaurant Service Growth 45.1% 35.0% 35.0% 45.0% 40.0% 30.0% 20.0%

Revenue Growth 1.6% 3.8% 5.1% 6.2% 6.6% 5.7% 4.6%

Gross Profit Margin (9.4%) 9.5% 10.5% 10.1% 36.4% 36.8% 37.0%

EBITDA Margin (12.8%) 6.7% 9.8% 8.1% 16.7% 17.6% 18.3%

Tax Rate 37.5% 37.5% 37.5% 37.5% 37.5% 37.5% 37.5% 37.5%

Average Interest Expense 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0%

Product Costs (incl. Transportation & Labor) 65.0% 69.0% 67.5% 66.0% 65.0% 65.0% 65.0% 65.0%

Service Costs 55.4% 55.6% 50.0% 48.0% 47.0% 47.0% 47.0% 47.0%

D&A as a % of Revenue 5.5% 5.3% 5.0% 5.0% 5.0% 4.8% 4.8% 4.8%

Capex as a % of Revenue 3.5% 3.9% 3.9% 3.8% 3.8% 4.0% 4.2% 4.4%

SG&A as a % of Revenue 23.0% 21.5% 22.5% 23.5% 24.5% 24.5% 24.0% 23.5%

Executive


OverviewValuation

Analysis

Strategic


Beta Calculation


Comparable Capital Structure

Company Levered Beta Equity Debt Tax Rate Unlevered Beta

Performance Food Group 2.71 493.0 1442.5 41.0% 1.00

United Natural Foods, Inc. 0.98 2280.9 549.4 39.6% 0.85

Core-Mark Holding Company, Inc. 1.09 1368.5 148.8 35.6% 1.02

The Chefs' Warehouse, Inc. 1.07 564.4 312.7 43.0% 0.82

SpartanNash 1.03 1239.6 537.7 35.0% 0.81

Avg: 0.90

Armstrong's Capital Structure

Unlevered Beta 0.90

Equity 536.7

Debt 35.1

Tax Rate 37.5%

Levered Beta 0.93

30

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