COMPANY A FINANCIAL MODEL

HISTORIC VARIABLES AND ASSUMPTIONS FOR PROJECTIONS

HISTORICAL VARIABLES AND DRIVERS
Fiscal Year Ending December 31,
2001A
2002A
2003A
2004A
2005A

ASSUMPTIONS FOR PROJECTIONS

Fiscal Year Ending December 31,
2006P
2007P
2008P
2009P
2010P

Income Statement Drivers / Assumptions

na

5.0%

4.8%

4.5%

4.3%

5.0%

5.0%

5.0%

5.0%

5.0%

COGS as % of Revenue

20.0%

20.0%

20.0%

20.0%

20.0%

20.0%

20.0%

20.0%

20.0%

20.0%

Depreciation as % of Gross PP&E

1.6%

1.5%

1.5%

1.5%

1.4%

2.0%

2.0%

2.0%

2.0%

2.0%

SG&A as % of Sales

25.0%

25.0%

25.0%

25.0%

25.0%

25.0%

25.0%

25.0%

25.0%

25.0%

Other Income / (Expense)

$2.0

$0.0

($2.0)

$1.0

$0.0

$0.0

$0.0

$0.0

$0.0

$0.0

Tax Rate

40.0%

40.0%

40.0%

40.0%

40.0%

40.0%

40.0%

40.0%

40.0%

40.0%

Balance Sheet Drivers / Assumptions

Days Accounts Receivable
Days Inventory
Other Current Assets

30
45
$1.0

30
45
$1.0

30
45
$1.0

30
45
$1.0

30
45
$1.0

30
45
$1.0

30
45
$1.0

30
45
$1.0

30
45
$1.0

30
45
$1.0

7.5%
$0.0
49
10.0%
$0.0
$2.0

$0.0
$25
$0
7.0%
$0.0
50
10.0%
$1.0
$2.0

$0.0
$25
$0
7.0%
$0.0
50
10.0%
$1.0
$2.0

$0.0
$25
$0
7.0%
$0.0
50
10.0%
$1.0
$2.0

$0.0
$25
$0
7.0%
$0.0
50
10.0%
$1.0
$2.0

$0.0
$25
$0
7.0%
$0.0
50
10.0%
$1.0
$2.0

Amortization

Amortize Goodwill? (yes or no)

Amortize Term Loan
Amortize Unsecured Loan
Capex as % of Sales
Asset Disposition
Days Payable
Accrued Liabilities as % of COGS
Other Current Liabilities
Other Liailities

Interest Rates
Revolver
Term Loan
Unsecured Debt
LIBOR
Interest earned on cash

na
na
50
10.0%
$1.0
$1.0

5.7%
$0.0
52
10.0%
$0.0
$2.0

6.4%
$2.0
48
10.0%
$2.0
$1.0

7.0%
$1.0
51
10.0%
$1.0
$0.0

2.0%+li
2.0%+li
12.0%

6.00%
6.00%
12.00%

6.00%
6.00%
12.00%

6.00%
6.00%
12.00%

6.00%
6.00%
12.00%

6.00%
6.00%
12.00%

6.25%
6.25%
12.00%

6.50%
6.50%
12.00%

6.75%
6.75%
12.00%

7.00%
7.00%
12.00%

7.25%
7.25%
12.00%

2%

4.00%
2.00%

4.00%
2.00%

4.00%
2.00%

4.00%
2.00%

4.00%
2.00%

4.25%
2.25%

4.50%
2.50%

4.75%
2.75%

5.00%
3.00%

5.25%
3.25%

Page 1

COMPANY A FINANCIAL MODEL

COGS as % of
Sales

SENSITIVITIES
($ in millions)
$84.2
14%
16%
18%
20%
22%
24%
26%

2010 EBITDA FOR RANGE OF REVENUE GROWTH RATES AND COGS

Annual Revenue Growth Rate
-20%
-15%
-10%
-5%
0%
5%
10%
15%
$24.0
$32.5
$43.2
$56.6
$73.2
$93.4
$117.9
$147.2
$23.2
$31.4
$41.8
$54.8
$70.8
$90.4
$114.0
$142.4
$22.4
$30.3
$40.4
$52.9
$68.4
$87.3
$110.2
$137.6
$21.6
$29.3
$39.0
$51.1
$66.0
$84.2
$106.3
$132.7
$20.8
$28.2
$37.6
$49.2
$63.6
$81.2
$102.4
$127.9
$20.1
$27.2
$36.1
$47.4
$61.2
$78.1
$98.6
$123.1
$19.3
$26.1
$34.7
$45.5
$58.8
$75.0
$94.7
$118.3
Shading indicates base case scenario

Page 2

20%
$182.1
$176.2
$170.2
$164.2
$158.3
$152.3
$146.3

COMPANY A FINANCIAL MODEL

HISTORICAL FINANCIAL STATEMENTS
Fiscal Year Ending December 31,
2001A
2002A
2003A
2004A
2005A

($ in millions)
Income Statement
Revenue
% Growth

PROJECTED FINANCIAL STATEMENTS

Fiscal Year Ending December 31,
2006P
2007P
2008P
2009P
2010P

$100.0
na

$105.0
5.0%

$110.0
4.8%

$115.0
4.5%

$120.0
4.3%

$126.0
5.0%

$132.3
5.0%

$138.9
5.0%

$145.9
5.0%

$153.2
5.0%

$20.0
20.0%

$21.0
20.0%

$22.0
20.0%

$23.0
20.0%

$24.0
20.0%

$25.2
20.0%

$26.5
20.0%

$27.8
20.0%

$29.2
20.0%

$30.6
20.0%

Depreciation

$5.0

$5.0

$5.0

$5.0

$5.0

$7.1

$7.3

$7.5

$7.7

$7.9

Amortization

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Gross Profit
Gross Profit

$75.0
75.0%

$79.0
75.2%

$83.0
75.5%

$87.0
75.7%

$91.0
75.8%

$93.7
74.4%

$98.6
74.5%

$103.7
74.6%

$109.0
74.7%

$114.6
74.9%

SG&A Expenses
SG&A as % of Revenue

$25.0
25.0%

$26.3
25.0%

$27.5
25.0%

$28.8
25.0%

$30.0
25.0%

$31.5
25.0%

$33.1
25.0%

$34.7
25.0%

$36.5
25.0%

$38.3
25.0%

Operating Income / EBIT

Operating Income / EBIT Margin

$50.0
50.0%

$52.8
50.2%

$55.5
50.5%

$58.3
50.7%

$61.0
50.8%

$62.2
49.4%

$65.5
49.5%

$68.9
49.6%

$72.6
49.7%

$76.4
49.9%

EBITDA
EBITDA Margin
EBITDA Growth

$55.0
55.0%
na

$57.8
55.0%
5.0%

$60.5
55.0%
4.8%

$63.3
55.0%
4.5%

$66.0
55.0%
4.3%

$69.3
55.0%
5.0%

$72.8
55.0%
5.0%

$76.4
55.0%
5.0%

$80.2
55.0%
5.0%

$84.2
55.0%
5.0%

Interest Expense
Interest Income
Net Interest Expense

$25.0
0.2
24.8

$24.5
0.2
24.3

$24.6
0.5
24.1

$24.6
0.7
23.9

$24.6
1.0
23.6

$24.1
1.6
22.5

$22.6
1.6
21.0

$21.3
1.8
19.5

$19.9
2.0
17.8

$18.3
2.4
15.9

2.0

0.0

(2.0)

1.0

0.0

0.0

0.0

0.0

0.0

0.0

27.2

28.4

29.4

35.4

37.4

39.8

44.5

49.4

54.7

60.4

Taxes
Tax Rate

10.9
40.0%

11.4
40.0%

11.8
40.0%

14.2
40.0%

15.0
40.0%

15.9
40.0%

17.8
40.0%

19.8
40.0%

21.9
40.0%

24.2
40.0%

Net Income
Net Margin
Net Income Growth
(1) Excludes depreciation and amortization

$16.3
16.3%
na

$17.1
16.2%
4.5%

$17.6
16.0%
3.4%

$21.2
18.5%
20.4%

$22.4
18.7%
5.7%

$23.9
18.9%
6.3%

$26.7
20.2%
12.0%

$29.7
21.3%
11.0%

$32.8
22.5%
10.7%

$36.3
23.7%
10.4%

(1)

Cost of Goods Sold

COGS as % of Revenue

Other Income / (Expense)

Pretax Income

Page 3

COMPANY A FINANCIAL MODEL

($ in millions)

Balance Sheet
Assets
Cash
Accounts Receivable
Inventory
Other Current Assets
Total Current Assets

HISTORICAL FINANCIAL STATEMENTS

Fiscal Year Ending December 31,
2001A
2002A
2003A
2004A
2005A

PROJECTED FINANCIAL STATEMENTS

Fiscal Year Ending December 31,
2006P
2007P
2008P
2009P
2010P

$5.0
8.2
2.5
1.0
16.7

$21.3
8.6
2.6
1.0
33.6

$39.9
9.0
2.8
1.0
52.6

$57.4
9.5
2.9
1.0
70.7

$76.9
9.9
3.0
1.0
90.7

$63.9
10.5
3.2
1.0
78.6

$63.3
11.0
3.3
1.0
78.6

$65.2
11.6
3.5
1.0
81.3

$70.1
12.2
3.6
1.0
86.9

$78.1
12.8
3.8
1.0
95.7

Gross PP&E
Cumulative Depreciation
Net PP&E

318.9
25.0
293.9

324.9
30.0
294.9

329.9
35.0
294.9

336.1
40.0
296.1

345.1
45.0
300.1

353.9
52.1
301.9

363.2
59.3
303.9

372.9
66.8
306.1

383.1
74.5
308.7

393.9
82.3
311.5

Goodwill
Total Assets

5.0
315.6

5.0
333.5

5.0
352.6

5.0
371.9

5.0
395.9

5.0
385.4

5.0
387.4

5.0
392.4

5.0
400.6

5.0
412.2

Liabilities
Accounts Payable
Accrued Liabilities
Other Current Liabilities
Total Current Liabilities

$2.8
2.0
1.0
5.8

$3.0
2.1
0.0
5.1

$2.9
2.2
2.0
7.1

$3.3
2.3
1.0
6.6

$3.3
2.4
0.0
5.7

$3.5
2.5
1.0
7.0

$3.7
2.6
1.0
7.3

$3.9
2.8
1.0
7.6

$4.1
2.9
1.0
8.0

$4.3
3.1
1.0
8.3

Revolving Credit Facility

Term Loan
Unsecured Debt
Other Liabilities
Total Liabilities

8.9
200.0
100.0
1.0
315.6

9.3
200.0
100.0
2.0
316.4

9.7
200.0
100.0
1.0
317.9

10.2
200.0
100.0
0.0
316.7

10.6
200.0
100.0
2.0
318.3

0.0
175.0
100.0
2.0
284.0

0.0
150.0
100.0
2.0
259.3

0.0
125.0
100.0
2.0
234.6

0.0
100.0
100.0
2.0
210.0

0.0
75.0
100.0
2.0
185.3

$0.0
0.0
0.0

$17.1
0.0
17.1

$34.7
0.0
34.7

$55.1
0.0
55.1

$77.6
0.0
77.6

$101.4
0.0
101.4

$128.1
0.0
128.1

$157.8
0.0
157.8

$190.6
0.0
190.6

$226.9
0.0
226.9

$315.6
0.0

$333.5
0.0

$352.6
0.0

$371.9
0.0

$395.9
0.0

$385.4
0.0

$387.4
0.0

$392.4
0.0

$400.6
0.0

$412.2
0.0

Shareholders Equity
Retained Earnings
Other
Total Shareholders Equity
Total Liabilities and Equity
Check

Page 4

COMPANY A FINANCIAL MODEL

($ in millions)

Cash Flow
Net Income
Plus / (minus):
Depreciation and Amortization
Changes in Working Capital
Accounts Receivable
Inventory
Other Current Assets
Accounts Payable
Accrued Liabilities
Other Current Liabilities
Change in Other Liabilities
Cash Flows from Operations

HISTORICAL FINANCIAL STATEMENTS

Fiscal Year Ending December 31,
2001A
2002A
2003A
2004A
2005A

PROJECTED FINANCIAL STATEMENTS

Fiscal Year Ending December 31,
2006P
2007P
2008P
2009P
2010P

na

$17.1

$17.6

$21.2

$22.4

$23.9

$26.7

$29.7

$32.8

$36.3

na

5.0

5.0

5.0

5.0

7.1

7.3

7.5

7.7

7.9

na
na
na
na
na
na
na
na

(0.4)
(0.1)
0.0
0.3
0.1
(1.0)
1.0
$21.9

(0.4)
(0.1)
0.0
(0.1)
0.1
2.0
(1.0)
$23.1

(0.4)
(0.1)
0.0
0.3
0.1
(1.0)
(1.0)
$24.1

(0.4)
(0.1)
0.0
0.0
0.1
(1.0)
2.0
$28.0

(0.6)
(0.2)
0.0
0.2
0.1
1.0
0.0
31.5

(0.5)
(0.2)
0.0
0.2
0.1
0.0
0.0
33.6

(0.6)
(0.2)
0.0
0.2
0.1
0.0
0.0
36.7

(0.6)
(0.2)
0.0
0.2
0.1
0.0
0.0
40.1

(0.6)
(0.2)
0.0
0.2
0.1
0.0
0.0
43.7

Cash Flows from Investing

Capital Expenditures
Asset Dispostions
Cash Flows from Investing

na
na
na

($6.0)
0.0
($6.0)

($7.0)
2.0
($5.0)

($8.0)
1.0
($7.0)

($9.0)
0.0
($9.0)

($8.8)
0.0
(8.8)

($9.3)
0.0
(9.3)

($9.7)
0.0
(9.7)

($10.2)
0.0
(10.2)

($10.7)
0.0
(10.7)

Cash Flows from Financing

Change in Revolver
Change in Term Loan
Change in Unsecured Debt
Total Cash Flows from Financing

na
na
na
na

$0.4
0.0
0.0
$0.4

$0.4
0.0
0.0
$0.4

$0.4
0.0
0.0
$0.4

$0.4
0.0
0.0
$0.4

($10.6)
(25.0)
0.0
(35.6)

$0.0
(25.0)
0.0
(25.0)

$0.0
(25.0)
0.0
(25.0)

$0.0
(25.0)
0.0
(25.0)

$0.0
(25.0)
0.0
(25.0)

Total Cash Flow

na

$16.3

$18.5

$17.6

$19.5

($13.0)

($0.7)

$2.0

$4.9

$8.0

Beginning Cash Position

Change in Cash Position
Ending Cash Position

na
na
na

$5.0
16.3
21.3

$21.3
18.5
39.9

$39.9
17.6
57.4

$57.4
19.5
76.9

$76.9
(13.0)
63.9

$63.9
(0.7)
63.3

$63.3
2.0
65.2

$65.2
4.9
70.1

$70.1
8.0
78.1

Page 5

COMPANY A FINANCIAL MODEL

($ in millions)
Cash flow before Revolver
Debt and Interest Schedule
Revolver
Beginning Revolver Balance
(Paydown) / Drawdown
Ending Revolver Balance
Interest Rate
Interest Expense

HISTORICAL FINANCIAL STATEMENTS

Fiscal Year Ending December 31,
2001A
2002A
2003A
2004A
2005A

PROJECTED FINANCIAL STATEMENTS

Fiscal Year Ending December 31,
2006P
2007P
2008P
2009P
2010P
$74.5
$63.3
$65.2
$70.1
$78.1

$8.9
0.4
9.3
6.0%
$0.5

$9.3
0.4
9.7
6.0%
$0.6

$9.7
0.4
10.2
6.0%
$0.6

$10.2
0.4
10.6
6.0%
$0.6

$10.6
(10.6)
0.0
6.25%
$0.33

$0.0
0.0
0.0
6.50%
$0.00

$0.0
0.0
0.0
6.75%
$0.00

$0.0
0.0
0.0
7.00%
$0.00

$0.0
0.0
0.0
7.25%
$0.00

Term Loan
Term Loan Beginning Balance
(Paydown) / Drawdown
Term Loan Ending Balance
Interest Rate
Interest Expense

$200.0
0.0
200.0
6.0%
$12.0

$200.0
0.0
200.0
6.0%
$12.0

$200.0
0.0
200.0
6.0%
$12.0

$200.0
0.0
200.0
6.0%
$12.0

$200.0
(25.0)
175.0
6.25%
$11.7

$175.0
(25.0)
150.0
6.50%
$10.6

$150.0
(25.0)
125.0
6.75%
$9.3

$125.0
(25.0)
100.0
7.00%
$7.9

$100.0
(25.0)
75.0
7.25%
$6.3

Unsecured Debt
Unsecured Debt Beginning Balance
(Paydown) / Drawdown
Unsecured Debt Ending Balance
Interest Rate
Interest Expense

$100.0
0.0
100.0
12.0%
$12.0

$100.0
0.0
100.0
12.0%
$12.0

$100.0
0.0
100.0
12.0%
$12.0

$100.0
0.0
100.0
12.0%
$12.0

$100.0
0.0
100.0
12%
$12.0

$100.0
0.0
100.0
12%
$12.0

$100.0
0.0
100.0
12%
$12.0

$100.0
0.0
100.0
12%
$12.0

$100.0
0.0
100.0
12%
$12.0

Total Interest Expense

24.5

24.6

24.6

24.6

24.1

22.6

21.3

19.9

18.3

Interest Earned on Cash

0.2

0.5

0.7

1.0

1.6

1.6

1.8

2.0

2.4

Page 6

Model
Discounted Cash Flow Analysis
($ in millions)
2006

Fiscal Year Ending December 31,

2007
2008
2009

Net sales

$126.0

$132.3

$138.9

$145.9

EBITDA

69.3

72.8

76.4

80.2

62.2
24.9
37.3
(8.8)
0.6
7.1
$36.2

65.5
26.2
39.3
(9.3)
(0.4)
7.3
$36.9

68.9
27.6
41.4
(9.7)
(0.4)
7.5
$38.7

72.6
29.0
43.5
(10.2)
(0.4)
7.7
$40.6

1.00
0.89

2.00
0.80

3.00
0.71

4.00
0.64

$32.3

$29.4

$27.5

$25.8

$473.8
100
50
10

$106.9

$77.5

$384.5

EBIT
Less: Taxes
Debt-free earnings
Less: capital expenditures
Less: (increase)/decrease in working capital
Plus: depreciation and amortization
Net debt-free cash flow
Discount period
Discount factor
Present value fo debt-free cash flow
Present value of enterprise

$473.8
Debt
cash
No. of shares

Discount Rate

DCF Sensitivity analysis

473.8
10.0%
11.0%
12.0%
13.0%
14.0%

6.0x
$460.4
442.7
426.0
410.0
394.9

42.38
Terminal multiple
6.5x
7.0x
$486.5
$512.7
467.7
492.7
449.9
473.8
432.9
455.7
416.7
438.6

Equity Value
$423.8
EV/No of shares $42.38

7.5x
$538.9
517.7
497.7
478.6
460.5

Min
432.9

Ev/no of sh

382.9
38.29

ecember 31,
2010

Terminal Value

$153.2
84.2

DCF Assumptions

76.4
30.5
45.8
(10.7)
(0.4)
7.9
$42.5

Tax Rate
Discount rate
Terminal multiple
Valuation Date

5.00
0.57
$24.1

2010 EBITDA
Terminal multiple
Terminal value
Discount period
Discount factor
PV of terminal value

40.0%
12.0%
7.0x
12/31/2005

7 times of sales,ebida,ebit,pat multi

$84.2
7.0x
$589.6
5.00
0.57
$334.6
debt free earnings=ebit-interset,ebt-taxes

$358.7

tiple
8.0x
$565.0
542.7
521.6
501.5
482.3

Max
517.7
467.7
46.77

inner box talks abt valuation range

7 times of sales,ebida,ebit,pat multiple