1

Nike Inc. Stock Pitch

NYSE: NKE – BUY at $51.10 USD 0.49 (0.95%)

November 26, 2016

Anwar KhanWaseem Manan

Manar Agha

2

-0.1%

-24 %

-5.1%

$65

$75

$85

$95

$105

$115

Nov-15 Feb-16 May-16 Aug-16 Nov-16

Price remains near 52 Week Low

S&P500 NKE S&P500 Consumer Discretionary

⎻ Nike, Inc. designs, develops, markets and sells athletic apparel, footwear and accessories to towards men, women and children worldwide

⎻ Nike has a very experienced senior management team with over a 100 years of combined experience whose continued push into product innovation has helped it to differentiate itself from competitors

⎻ There are seven key product categories in the NIKE and Jordan brands : Running, Basketball, Football, Men and Women’s training, NIKE sportswear and action sports

⎻ Nike has strong associations with it’s products and world class athletes, building a considerable moat around it’s brand

Company Overview

Overview of Nike Inc.

Source : Bloomberg, FactSet, Nike’s 10K, Thomson One Analytics

52 Week Performance

Management Subsidiaries

⎻ With more than 30 years of experience at Nike, Parker helps lead the

growth of the Nike brand and industry-breakthroughs in product

design.

Mark Parker: Chairman, President and CEO, Nike, Inc.

⎻ After joining the company in 1992, Edwards is responsible for leading

all category and geographic business units.

Trevor Edwards: President, Nike Brand

⎻ Previous to joining Nike, Campion held leadership roles at Walt

Disney Company. Starting 2007, he led all aspects of Financial

Management for Nike’s flagship brands.

Andy Campion: EVP, Chief Financial Officer

⎻ Hurley is an American multinational corporation that

specializes in marketing and selling of surf apparel and

accessories. It was acquired by Nike in 2002.

⎻ Jordan Brand designs and produces basketball

footwear and athletic clothing under Nike, and is

endorsed by the 6 time NBA Champion, Michael Jordan.

⎻ Converse, Inc. manufactures and designs athletic

footwear and apparel. Its products are sold

through more than 12,000 retailers.

3

⎻ Leading innovator in footwear and performance apparel

⎻ Recently announced Nike Hyperadapt 1.0, performance footwear with adaptive lacing for a proper comfort and fit

⎻ NIKE+ leads connectivity and engagement in a growing wearable market, provides access to Nike services, including customizable footwear and apparel recommendations, guided workouts and motivational music mixes

⎻ Other leading innovations include, Nike Anti-Clog Technology, Nike Flyknight, Air VaporMax, AeroSwift

Core Business

Nike Innovation, 2016 Product Line

Source : Bloomberg, FactSet, Nike’s 10K, Thomson One Analytics

Product Innovation in Track & Field, Football & Basketball

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

United

States

China Germany Canada United

Kingdom

France Japan RoW

Lots of room to diversify across multiple geographies

61%

28%

5%6%

Footwear and Apparel make up 89% of the revenues

Footwear

Apparel

Accessories

Other

Segmented Revenue Geographical Revenue Breakdown

Total LTM

Revenue

$33B

4

4.5

4.6

4.7

4.8

4.9

5.0

5.1

Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16

Un

em

plo

yme

nt

Ra

te %

Source: U.S. Bureau of Labor Statistics

Macro Outlook

U.S Unemployment Rate remains low in 2016

Source : IBIS World Industry Research, U.S Bureau of Labor Statistics, FRED, World Bank, McKinsey Analysis

$

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Dis

po

sa

ble

In

co

me

Source: FRED, NKE 10K

Real Disposable Income (bn, left)

NKE's Annual Revenue (mm, right)

China’s Structural Transition to ConsumptionU.S Disposable Income peaking post ’08 recession

1015 17

22 20

12

1213

15 21

3

4

4

3

3

10

109

11

11

5

77

5

5

7

67

8

8

8

11

10

11

13

44

3633

24

18

2005 2010 2013 2020 2030

Discretionary Household Products Necessities

Food

Apparel

Healthcare

Household products

Housing & Utilities

Personal Items

Recreation, Education

& Culture

Transportation &

Communication

CAGR

2013-30

5.3

6.5

7.6

Per-household annual consumption in China by category, %

5

⎻ Globally, the market for sports apparel and footwear is estimated to be worth $350 billion in sales, jumping 42% in the past 7 years

⎻ Global footwear (including performance, outdoor and sports-inspired) is projected to grow at an annualized rate of 7.3%

⎻ The sports industry (ticket, media and advertising revenue) is growing faster than GDP both in fast-growing economies (BRIC) and in more mature markets in Europe and North America

⎻ Increase in life expectancy (aging baby boomers) and increase in health awareness are leading towards an increase in exercise within developing and emerging markets, leading to an expected 6% CAGR growth of Sports Apparel over 2015-2020

Industry Outlook

Industry Overview

Global Sports Apparel by Type: Absolute Value Growth and % CAGR 2015-2020

Global Sports Footwear by Type: Absolute Value Growth and % CAGR 2015-2020

Source : IBIS World Industry Research, Euromonitor International, Morgan Stanley, AT Kearney

0%

1%

2%

3%

4%

5%

0

5,000

10,000

15,000

20,000

Performance

Apparel

Outdoor Apparel Sports-Inspired

Apparel

CA

GR

20

15

-20

20

US

$ m

illio

n

Absolute Value Growth (US$ million) 2015-2020 % CAGR 2015-2020

0%

2%

4%

6%

8%

10%

0

5,000

10,000

15,000

20,000

Performance

Footwear

Outdoor Footwear Sports-Inspired

Footwear

CA

GR

20

15

-20

20

US

$ m

illio

n

Absolute Value Growth (US$ million) 2015-2020 % CAGR 2015-2020

15%

20%

25%

30%

35%

40%

45%

1980 1985 1990 1995 2000 2005 2010 2015

Pa

rtic

ipa

tio

n R

ate

Boys Total Girls

High School Sports Participation Rate

6Investment Thesis

⎻ Cash on Hand: Currently, Nike has approximately $5.46B in cash on its balance sheet. Management has indicated that this could be used for acquisitions to further diversify its product offerings or for increased investments in R&D/”Demand Creation”.

⎻ Free Cash Flow Generation: Nike has maintained Free Cash Flow generation throughout the last five years at an annual CAGR of 22%. In addition, Cash Returned on Assets has averaged a CAGR of 17%.

⎻ Share repurchases: Nike announced 12B Share Repurchase Program in Q4 2015. The current Share Repurchase program of 8B is expected to complete by the end of 2016.

⎻ Dividend Increases: Nike plans to maintain a dividend payout range of 25%-35%. On November 19, 2015, it announced a 14% increase in its split-adjusted quarterly dividend, to $0.16. FCF Yield also remains well above 3.5%.

Nike is well poised for potential M&A activity while maintaining dividend/share repurchase programs in the near future.

Source : Morgan Stanley, Euromonitor International, Nike’s 10K, McKinsey Analysis

Strong Financial Position DTC Growth Strategy

Nike is the fastest growing DTC business with the lowest P/E Multiple

⎻ Nike forecasts DTC Sales to grow $16B by 2020

⎻ DTC channel offers Nike the potential to customize customer orders with 3D printing, while collecting valuable consumer data

⎻ DTC strategy expected to add 0.3-0.5 % pts on gross margin each year, strongly outpacing margin improvements by competitors

⎻ Online sales further enhance DTC strategy, while Nike’s e-commerce sales grew 55% YoY to $1.2B in fiscal year 2015, making up 3.9% of total yearly revenues

Nike’s DTC Strategy spearheaded by investment in E-Commerce will proliferate its growth over the coming years as the company benefits from access to Global Markets.

0.0%

5.0%

10.0%

15.0%

NIKE B Median adidas PUMA Under Armour

A

Superior Margin Efficiency against Competitors

EBIT Margin EBIT Margin NTM Net Margin Net Margin NTM

407

392

376

362

339

322

815

761

707

683

592

536

2019E

2018E

2017E

2016

2015

2014

Total Store Counts, projected 42% growth

by 2019Domestic

Stores

International

Stores

$

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

%

5%

10%

15%

20%

25%

LULU UA ADS NKE

DTC

Re

ven

ue

($

, b

n)

DTC Comparison

23 P/E

27 P/E

53 P/E

27 P/E

DTC Revenue

TTM Comp

(inc. E-com)

7Valuation I : Comparable Companies Analysis

Source : Bloomberg, FactSet, Capital IQ, Thompson One, Nike 10K, NASDAQ

EV/EBITDA Price / Earnings Net Debt/

EBITDA

Historical Diluted EPS

Growth (%)

EBITDA

MarginFree

Cash Flow

Yield

Dividend

YieldCompany Name Fiscal Period Market Value Enterprise

ValueLTM FY1 FY2 FY1 FY2 1Yr 3Yr FY1

NIKE B 05/31/2016 82,626.3 79,898.3 17.91x 14.54x 12.48x 20.94x 18.45x -0.61x 12.41 64.16 15.8% 2.03% 1.12%

Average 11,941.8 12,235.9 15.23x 13.29x 11.46x 29.34x 24.26x -0.33x 10.95 114.57 13.1% 1.74% 0.94%

Median 7,985.8 7,652.6 14.37x 13.20x 11.50x 24.11x 21.07x -0.68x 11.49 25.54 12.82% 2.11% 0.76%

Footwear

adidas 06/30/2016 33,987.1 35,110.3 16.24x 16.81x 14.82x 29.97x 26.18x 0.53x 79.57 49.57 9.7% 3.57% 1.78%

PUMA 06/30/2016 3,751.0 3,502.8 25.74x 16.65x 12.85x 57.72x 37.43x -1.87x -12.70 -2.67 5.1% -3.11% 0.25%

SKECHERS USA A 06/30/2016 3,271.0 2,782.5 6.34x 6.06x 5.45x 12.55x 11.63x -1.27x 26.96 808.79 12.5% 2.45% 0.00%

VF 07/02/2016 22,404.1 24,536.6 12.51x 11.83x 10.75x 17.25x 15.79x 1.09x 19.23 14.37 16.6% 3.32% 2.14%

Apparel

Under Armour A 06/30/2016 12,246.7 13,140.6 24.49x 21.37x 18.21x 50.89x 44.13x 1.67x -7.58 36.70 12.2% -1.93% 0.00%

Ralph Lauren A 07/02/2016 8,117.5 7,986.5 7.55x 8.19x 7.78x 18.17x 16.77x -0.12x -46.90 -54.29 14.4% 7.11% 2.07%

Lululemon Athletica 07/31/2016 7,854.2 7,318.8 16.85x 14.56x 12.25x 26.95x 22.90x -1.23x 3.74 4.86 21.2% 1.78% 0.00%

Columbia Sportswear 06/30/2016 3,902.9 3,509.2 12.13x 10.83x 9.58x 21.27x 19.24x -1.42x 25.31 59.24 13.1% 0.73% 1.27%

Comparable Companies Analysis

Commentary Broker Outlook

$56$58$60$62$64$66$68$70$72$74

%

%20

%40

%60

%80

%100

Underweight + Sell Rating Buy + Overweight Rating

Hold Rating Target Price

⎼ Nike has one of the largest dividend yields amongst its comparable at 1.12%

⎼ Nike trades in line with industry median EV/EBITDA multiples and at a discount in P/E multiples

⎼ We expect NKE to grow LT gross margins, through cost reductions, pricing power and DTC expansion

⎼ We believe NKE’s growth opportunities in emerging economies are underestimated by analyst forecasts for FY2017 and FY2018

8Valuation II : Discounted Cash Flow Analysis

Source : Bloomberg, FactSet, Capital IQ, Thompson One, Nike 10K, NASDAQ

Discounted Cash Flow - Inputs & Assumptions

Enterprise Value Calculation (Exit Multiple)

Cumulative Present Value of FCF $11,325.0

Terminal Value

Terminal Year EBITDA

(2022E)$6,384.4

Exit Multiple 19.5x

Terminal Value $124,444.0

Discount Factor 0.72

Present Value of Terminal Value $89,142.7

% of Enterprise Value 88.7%

Enterprise Value $112,122.0

Implied Equity Value and Share Price (Exit Multiple)

Enterprise Value $100,467.7

Less: Total Debt(2,059.0)

Less: Preferred Securities -

Less: Non-controlling Interest -

Plus: Cash and Cash Equivalents 4,787.0

Implied Equity Value $103,195.7

Shares Outstanding 1,721.0

Implied Share Price $59.9

DCF Perpetuity Growth Method

Perpetuity Growth Rate 4.04%

2022 FCF3,493.7

Terminal Value 87,397.7

Present value of FCF 11,325.0

Enterprise Value 98,722.7

Less : Total Debt (2,059.0)

Less : Non-controlling Interest -

Plus : Cash and Cash

Equivalents4,787.0

Equity Value 101,450.7

Shares Outstanding 1,721.0

Implied DCF Share Price $58.9

Weighted Average Cost of Capital Calculation

Capital Structure

Debt-to-Total Capitalization 2.1%

Equity-to-Total Capitalization97.9%

Cost of Debt

Cost of Debt 2.3%

Tax Rate14.1%

After-tax Cost of Debt 2.0%

Cost of Equity

Risk-free Rate(1) 2.3%

Market Risk Premium(2) 6.9%

Levered Beta 0.68

Cost of Equity 7.0%

WACC 6.9%

Historical Period CAGR LTM Projection Period CAGR

2014 2015 2016 ('14 - '16) 2017 2018 2019 2020 2021 2022 ('18 - '22)

Sales $27,785.0 $30,696.0 $32,464.0 8.1% $33,035.0 $36,999.2 $39,959.1 $44,354.6 $48,790.1 $53,181.2 10.0%

% growth NA 10.5% 5.8% 1.8% 12.0% 8.0% 11.0% 10.0% 9.0%

COGS 15,341.0 16,754.0 17,991.0 18,454.0 20,719.6 22,377.1 24,838.6 27,322.5 29,781.5

Gross Profit $12,444.0 $13,942.0 $14,473.0 7.8% $14,581.0 $16,279.6 $17,582.0 $19,516.0 $21,467.6 $23,399.7 9.9%

% margin 44.8% 45.4% 44.6% 44.1% 44.0% 44.0% 44.0% 44.0% 44.0%

SG&A 8,766.0 9,892.0 10,469.0 10,789.0 11,839.7 12,786.9 14,193.5 15,612.8 17,018.0

EBITDA $3,678.0 $4,050.0 $4,004.0 4.3% $3,792.0 $4,439.9 $4,795.1 $5,322.6 $5,854.8 $6,381.7 11.0%

% margin 13.2% 13.2% 12.3% 11.5% 12.0% 12.0% 12.0% 12.0% 12.0%

Depreciation & Amortization 518.0 606.0 649.0 668.0 740.0 799.2 887.1 975.8 1,063.6

EBIT $3,160.0 $3,444.0 $3,355.0 3.0% $3,124.0 $3,699.9 $3,995.9 $4,435.5 $4,879.0 $5,318.1 11.2%

% margin 11.4% 11.2% 10.3% 9.5% 10.0% 10.0% 10.0% 10.0% 10.0%

Taxes 445.6 485.6 473.1 440.5 521.7 563.4 625.4 687.9 749.9

EBIAT $2,714.4 $2,958.4 $2,881.9 3.0% $2,683.5 $3,178.2 $3,432.5 $3,810.1 $4,191.1 $4,568.3 11.2%

Plus: Depreciation & Amortization 518.0 606.0 649.0 668.0 740.0 799.2 887.1 975.8 1,063.6

Less: Capital Expenditures (880.0) (963.0) (1,143.0) (1,093.0) (1,110.0) (1,198.8) (1,330.6) (1,463.7) (1,595.4)

Less: Increase in Net Working Capital (712.8) (412.1) (611.9) (617.5) (611.3)

Unlevered Free Cash Flow $2,095.5 $2,620.8 $2,754.6 $3,085.7 $3,425.2

WACC 6.9%

Discount Period 1.0 2.0 3.0 4.0 5.0

Discount Factor 0.94 0.88 0.82 0.77 0.72

Present Value of Free Cash Flow $1,960.2 $2,293.4 $2,254.9 $2,362.9 $2,453.5

9

$0.0

$15,000.0

$30,000.0

$45,000.0

$60,000.0

$75,000.0

$90,000.0

2% 4% 6% 8% 10%

Ab

so

lute

Va

lue

Gro

wth

(U

S$

Mm

)

CAGR 2015-20

Dynamic Growth Countries to 2020Absolute Value Growth vs. 2015-20 CAGR

Catalysts

China as Top Priority

⎻ China expected to contribute US$77B by 2020, while India is on pace with a CAGR of 7% to achieve growth of US$26B

⎻ The number of marathons in China have doubled and viewership of basketball has nearly tripled since 2015

⎻ Aging demographics have lead to higher gym membership enrolment, growing at an estimated CAGR of 2.3% in China and 7.1% in India until 2020

If Nike increases presence in China while tapping into women’s apparel, Nike will continue to see more room for growth alongside its expanding DTC Strategy.

Source : Morgan Stanley, Euromonitor International, Nike’s 10K, McKinsey Analysis

Emerging Fashion Future Hotspots Opportunity in Womenswear

45

63

74

55

37

26

2025

2010

2004

Women's Apparel

Market SizePercent of Sales

3.3

4.8

2004-10 2010-25

Women’s Apparel Market

GrowthCAGR, percent

45%

Midmarket

Luxury

72

86

93

28

14

7

2025

2010

2004

Growth in Female Fashion and Performance Gear

⎻ Boom in running and women’s training increased the demand for functional but fashionable products.

⎻ Recent openings of women’s only stores in Newport Beach, California and Shanghai aim to tap into this trend. Nike aims to have 1,000 premium spaces dedicated to women by 2020, both within it’s own stores and sports retailers.

Nike is well positioned to exploit the strong growing trend in womenswear, as men’s apparel and footwear products become saturated.

China

Vietnam

India

Saudi Arabia

Columbia

Mexico

Romania

UAE

Mature

Markets

International

Markets

10Risks

Increasing Inventory

⎻ Due to decreased consumer spending and high industry inventory levels, Nike is subject to significantly high order flows and over-filled supply channels. Looking forward, Nike plans to adjust inventory levels, bring better innovation, and drive stronger sell-through to customers.

FX Fluctuations

⎻ Sales have been hurt by economic weakness in Europe. Since Nike is nearly 60% international, its global portfolio is diverse enough to withstand weakness in any individual market. However, unanticipated swings in FX rates create risks to Nike’s EPS.

Emerging Competitors

⎻ Under Armour could continue to take share in the kids demographic, potentially taking loyal long-term customers away from Nike. In addition, Adidas’s pipeline of new products may gradually gain share from Nike.

Failure to Maintain High-Quality Endorsers

⎻ As competition increases, the costs associated with establishing and retaining high level sponsorship increases. Failure of retention will lead to increasing cost, as on-field authenticity with Nike’s product association may be lost, requiring increasing marketing investments.

If Nike fails to normalize inventory levels and successfully differentiate from its competitors, it risks losing profit and market share.

Source : Morgan Stanley, Euromonitor International, Nike’s 10K

High ImpactLow Impact

Highly

Likely

Not

Likely

G1

C2 C1

O1

G2

O2

Sponsorship Retention (C1)

Proliferation of E-Commerce (C2)

Competitor Risks

Implementation of DTC Strategy (O1)

Supply Chain Disruption (O2)

Operational Risks

US Normalization of Interest Rates (G1)

Slower Consumer Spending (G2)

Global Macro Risks

Risks in the Medium to Short Term Scenario Analysis

11

Source : Bloomberg, Factset, Capital IQ, Thompson One, Nike 10K, NASDAQ

Share Price Sensitivity

Exit Multiple

66.7 18.5x 19.0x 19.5x 20.0x 20.5x

WA

CC

5.9% 59.87 61.26 62.65 64.04 65.43

6.4% 58.57 59.93 61.29 62.65 64.01

6.9% 57.31 58.63 $59.96 61.29 62.62

7.4% 56.08 57.38 58.67 59.97 61.27

7.9% 54.88 56.15 57.42 58.69 59.96

Share Price Sensitivity

Target Return

Current Share Price $51.10

Target Share Price $60.32

Equity Upside 18.04%

Dividend Yield 1.12%

12 - Month Return 19.16%

Return Analysis

Recommendation - Buy

$74

$58

$55

$119

$81.01

$65

$32

$27

$19

$30

$31

$52

$54

$5 $20 $35 $50 $65 $80 $95 $110 $125 $140 $155

EV / LTM EBIDTA

EV / FY1 EBIDTA

EV / FY2 EBIDTA

Price / Earnings FY1

Price / Earnings FY2

Dividend Discount Model

DCF

Implied Price

Va

lua

tio

n M

etr

ic

Football Field ChartImplied share

**Note : Share price was calculated by using the average of all median multiples

0200040006000

48

.50

49

.50

50

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51

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52

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54

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55

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58

.50

59

.50

60

.50

61

.50

62

.50

63

.50

Perpetuity Growth SimulationMonte Carlo Simulation, Over 99% Buy + Hold

Rating

0200040006000

49

.50

50

.50

51

.50

52

.50

53

.50

54

.50

55

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56

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58

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59

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.50

62

.50

63

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64

.50

Exit Multiple SimulationMonte Carlo Simulation, Over 99% Buy + Hold

Rating

Current

Share Price

Implied

Share Price

12Appendix

-10%

-5%

0%

5%

10%

'70 '75 '80 '85 '90 '95 '00 '05 '10 '15

Source: World Bank

Slowing GDP Growth from Developed Economies

European Union Japan United States

-15%

-10%

-5%

0%

5%

10%

15%

20%

'70 '75 '80 '85 '90 '95 '00 '05 '10 '15

Source: World Bank

Emerging Markets doing the heavy lifting

Brazil Russian Federation India China

13Appendix : Growth in the near term

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16

Source: FRED

U.S Real GDP, YoY Historical

0

0.5

1

1.5

2

2.5

2016E 2017E 2018E 2019E 2020E

Source: FRED, Economist, World Bank

Forecasted Real GDP growth 2016-2021E

0

0.5

1

1.5

2

2.5

2016E 2017E 2018E 2019E 2020E

Source: FRED, Economist, World Bank

Forecasted Inflation 2016-2021E

14Appendix : Fed Movement Likely in December…

$50,000

$51,000

$52,000

$53,000

$54,000

$55,000

$56,000

$57,000

01-01-2010 03-01-2011 05-01-2012 07-01-2013 09-01-2014

Source: FRED

Real median household income

Real Median Household Income

$1.15

$1.20

$1.25

$1.30

$1.35

$1.40

$1.45

$1.50

09-15-2015 01-15-2016 05-15-2016 09-15-2016

Source: Bank of Canada

USD shows sign of strengthening

USD/CAD Exchange Rate

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2015 2016 2017 2018 2019

Source: Bloomberg

FOMC Dot Plot

0.00

1.00

2.00

3.00

4.00

5.00

6.00

Source: Bank of Canada, FRED

100% market expectation of Fed movement in December

Fed Funds Rate Canada Overnight Target Rate

15Appendix : Sensitivity Analysis

Enterprise Value Implied Equity Value

Exit Multiple Exit Multiple

100,467.7 18.5x 19.0x 19.5x 20.0x 20.5x 103,195.7 18.5x 19.0x 19.5x 20.0x 20.5x

WA

CC

5.9% 100,300 102,696 105,092 107,487 109,883

WA

CC

5.9% 103,028 105,424 107,820 110,215 112,611

6.4% 98,068 100,408 102,748 105,088 107,427 6.4% 100,796 103,136 105,476 107,816 110,155

6.9% 95,896 98,182 $100,468 102,753 105,039 6.9% 98,624 100,910 $103,196 105,481 107,767

7.4% 93,784 96,017 98,250 100,483 102,716 7.4% 96,512 98,745 100,978 103,211 105,444

7.9% 91,729 93,910 96,092 98,274 100,456 7.9% 94,457 96,638 98,820 101,002 103,184

Implied Share Price PV of Terminal Value as % of Enterprise Value

Exit Multiple Exit Multiple

60.0 18.5x 19.0x 19.5x 20.0x 20.5x 0.9 18.5x 19.0x 19.5x 20.0x 20.5x

WA

CC

5.9% 59.87 61.26 62.65 64.04 65.43

WA

CC

5.9% 88.4% 88.6% 88.9% 89.2% 89.4%

6.4% 58.57 59.93 61.29 62.65 64.01 6.4% 88.3% 88.6% 88.8% 89.1% 89.3%

6.9% 57.31 58.63 $59.96 61.29 62.62 6.9% 88.2% 88.5% 88.7% 89.0% 89.2%

7.4% 56.08 57.38 58.67 59.97 61.27 7.4% 88.1% 88.4% 88.6% 88.9% 89.1%

7.9% 54.88 56.15 57.42 58.69 59.96 7.9% 88.0% 88.3% 88.5% 88.8% 89.0%

Implied Perpetuity Growth Rate Implied Enterprise Value / LTM EBITDA

Exit Multiple Exit Multiple

0.0 18.5x 19.0x 19.5x 20.0x 20.5x 21.6 18.5x 19.0x 19.5x 20.0x 20.5x

WA

CC

5.9% 2.9% 3.0% 3.1% 3.1% 3.2%

WA

CC

5.9% 21.6x 22.1x 22.6x 23.1x 23.6x

6.4% 3.4% 3.5% 3.5% 3.6% 3.7% 6.4% 21.1x 21.6x 22.1x 22.6x 23.1x

6.9% 3.9% 4.0% 4.0% 4.1% 4.2% 6.9% 20.6x 21.1x 21.6x 22.1x 22.6x

7.4% 4.4% 4.4% 4.5% 4.6% 4.7% 7.4% 20.2x 20.6x 21.1x 21.6x 22.1x

7.9% 4.9% 4.9% 5.0% 5.1% 5.1% 7.9% 19.7x 20.2x 20.7x 21.1x 21.6x

16Appendix : DCF Assumptions

Assumptions 2014 2015 2016 2017 2018 2019 2020 2021 2022

Sales (% growth)NA 10.5% 5.8% 1.8% 12.0% 8.0% 11.0% 10.0% 9.0%

COGS (% sales)55.2% 54.6% 55.4% 55.9% 56.0% 56.0% 56.0% 56.0% 56.0%

SG&A (% sales)31.5% 32.2% 32.2% 32.7% 32.0% 32.0% 32.0% 32.0% 32.0%

Depreciation & Amortization (% sales)1.9% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%

Capital Expenditures (% sales)3.2% 3.1% 3.5% 3.3% 3.0% 3.0% 3.0% 3.0% 3.0%

Tax Rate14.1% 14.1% 14.1% 14.1% 14.1% 14.1% 14.1% 14.1% 14.1%

Working Capital (% sales)13.9% 13.9% 13.9% 13.9% 13.9%