Apple Inc.

- Financial Statements
($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)
Assumptions & Valuation Overview
Valuation Date:
Company Name:
Share Price:

1/29/2010
Apple Inc.
$192.06

Last Historical Year:

Debt Issue Date:
Share Units:

Basic Shares Outstanding:

Basic Equity Value:
Diluted Shares Outstanding:
Diluted Equity Value:
Less: Cash & Investments
Plus: Debt
Plus: Minority Interest
Plus: Preferred Stock
Plus: Other Liabilities
Enterprise Value:

900,678
$172,984
920,526
$176,796
$35,395
$0
$0
$0
$0
$141,401

Options Calculations (in Thousands Except Exercise Price):

Name
Tranche A
Tranche B
Tranche C
Tranche D
Tranche E
Total

Number
34,375

2009
2010
1000

Exercise
Price
$81.17

Days in Year:
Debt Amount:
Tax Rate:

Dilution
19,847

19,847

Historical
Projections
FY 2007 FY 2008 FY 2009 FY 2010E FY 2011E FY 2012E
EV / Revenue:
EV / EBIT:
EV / EBITDA:

5.8 x
30.4 x
28.4 x

3.8 x
16.0 x
15.1 x

3.3 x
11.4 x
10.7 x

2.6 x
9.1 x
8.6 x

2.3 x
7.8 x
7.3 x

2.0 x
7.0 x
6.6 x

Equity Value / FCF:

P / E:
P / BV:

37.3 x
48.9 x

20.8 x
28.3 x
7.9 x

17.1 x
21.2 x
5.6 x

13.5 x
16.6 x
4.1 x

12.1 x
14.1 x
3.1 x

10.9 x
12.2 x
2.4 x

Operating Assumptions

Historical
Projections
FY 2007 FY 2008 FY 2009 FY 2010E FY 2011E FY 2012E
Revenue Growth %:
COGS % Revenue:
R&D % Revenue:
SG&A % Revenue:

27.2%
66.2%
2.4%
11.1%

52.5%
64.1%
2.0%
8.9%

14.4%
59.0%
1.9%
8.3%

25.0%
59.0%
1.9%
8.3%

17.0%
59.0%
1.9%
8.3%

11.0%
59.0%
1.9%
8.3%

Stock-Based Compensation % Revenue:

Depreciation & Amortization % Revenue:
Effective Cash Interest Rate:
Debt Interest Rate:
Effective Tax Rate:

1.0%
1.3%
5.3%
0.0%
30.2%

1.4%
1.3%
3.4%
0.0%
31.6%

1.7%
1.7%
1.4%
0.0%
31.8%

1.7%
1.7%
1.0%
9.0%
30.0%

1.7%
1.7%
1.0%
9.0%
30.0%

1.7%
1.7%
2.0%
9.0%
30.0%

6.5%
23.3
2.1%

7.8%
28.2
1.8%

7.8%
28.2
1.8%
$40

7.8%
28.2
1.8%
$37

7.8%
28.2
1.8%
$28

23.0%
82.6
102.9%
4.3%
2.0%

22.1%
79.6
87.6%
4.8%
2.0%

22.1%
79.6
87.6%
4.8%
2.0%

22.1%
79.6
87.6%
4.8%
2.0%

22.1%
79.6
87.6%
4.8%
2.0%

2.9%

2.7%

2.7%

2.7%

2.7%

Accounts Receivable % Revenue:

Accounts Receivable Days:
Inventory % COGS:
Amortization of Intangibles:
Accounts Payable % COGS:
Accounts Payable Days:
Accrued Expenses % Operating Expenses:
Short-Term Deferred Revenue % Revenue:
Long-Term Deferred Revenue % Revenue:
CapEx % Revenue:

3.0%

Income Statement

Revenue:
Cost of Goods Sold:

FY 2007

FY 2008

FY 2009 FY 2010E FY 2011E FY 2012E

$24,578
$16,282

$37,491
$24,049

$42,905
$25,324

$53,631
$31,655

$62,749
$37,037

$69,651
$41,111

Gross Profit:
Operating Expenses:
Research & Development:
Selling, General & Administrative:
Total Operating Expenses:
Depreciation & Amortization of PP&E:
Amortization of Intangibles:
Stock-Based Compensation:

$8,296

$13,442

$17,581

$21,976

$25,712

$28,540

$596
$2,724
$3,320

$759
$3,345
$4,103

$830
$3,566
$4,397

$1,038
$4,458
$5,496

$1,214
$5,216
$6,430

$1,348
$5,789
$7,137

$327
$0
$242

$496
$0
$516

$734
$0
$710

$918
$40
$888

$1,073
$37
$1,038

$1,192
$28
$1,153

Operating Income:
Interest Income:
Interest Expense:
Other Income & Expense:
Pre-Tax Income:
Income Tax Provision:

$4,407
$647
$0
($48)
$5,006
$1,511

$8,327 $11,740 $14,635 $17,133 $19,030

$653
$407
$424
$568
$1,443
$0
$0
($45)
($90)
($90)
($33)
($81)
$0
$0
$0
$8,947 $12,066 $15,014 $17,610 $20,383
$2,828
$3,831
$4,504
$5,283
$6,115

Net Income:

$3,495

$6,119

$8,235

Earnings Per Share (EPS):

Diluted Shares Outstanding:

$3.93
889,292

$6.78
902,139

$9.08
907,005

$4,649
$4,976
$4,735

$8,843
$9,339
$8,505
$24.17

EBIT:
EBITDA:
Levered Free Cash Flow:
Book Value Per Share (BV):

$12,450
$13,184
$10,311
$34.56

$10,510
$11.59
907,005
$15,523
$16,480
$13,061
$47.17

$12,327
$13.59
907,005
$18,171
$19,282
$14,618
$61.94

$14,268
$15.73
907,005
$20,183
$21,403
$16,158
$78.98

Balance Sheet
FY 2008
Assets:
Current Assets:
Cash & Cash-Equivalents:
Short-Term Securities:

$11,875
$10,236

FY 2009 FY 2010E FY 2011E FY 2012E

$6,559
$26,282

$20,620
$26,282

$35,238
$26,282

$51,396
$26,282

Accounts Receivable:
Inventory:
Deferred Tax Assets:
Other Current Assets:
Total Current Assets:

$2,422
$509
$1,044
$3,920
$30,006

$3,361
$455
$4
$3,140
$39,801

$4,201
$569
$4
$3,140
$54,816

$4,915
$665
$4
$3,140
$70,245

$5,456
$739
$4
$3,140
$87,017

Long-Term Assets:
Long-Term Securities:
Plants, Property & Equipment:
Goodwill:
Other Intangible Assets:
Other Assets:
Total Assets:

$2,379
$2,455
$207
$285
$839
$36,171

$2,554
$2,839
$207
$354
$2,011
$47,766

$2,554
$3,352
$207
$314
$2,011
$63,253

$2,554
$3,951
$207
$277
$2,011
$79,245

$2,554
$4,617
$207
$249
$2,011
$96,654

Liabilities & Shareholders' Equity:

Current Liabilities:
Accounts Payable:
Accrued Expenses:
Deferred Revenue:
Total Current Liabilities:

$5,520
$4,224
$1,617
$11,361

$5,601
$3,852
$2,053
$11,506

$7,001
$4,815
$2,566
$14,383

$8,191
$5,634
$3,003
$16,828

$9,093
$6,253
$3,333
$18,679

Long-Term Liabilities:
Deferred Revenue:
Long-Term Debt:
Other Long-Term Liabilities:
Total Liabilities:

$768
$0
$1,745
$13,874

$853
$0
$3,502
$15,861

$1,066
$1,000
$3,502
$19,951

$1,248
$1,000
$3,502
$22,577

$1,385
$1,000
$3,502
$24,565

$7,177
$1,185
$0
$23,364
$179

$7,177
$2,073
$0
$33,874
$179

$7,177
$3,111
$0
$46,201
$179

$7,177
$4,263
$0
$60,470
$179

Shareholders' Equity:
Common Stock:
Additional Paid-In Capital:
Treasury Stock:
Retained Earnings:
Accumulated Other Comprehensive Income:

$7,177
$0
$0
$15,129
($9)

Total Shareholders' Equity:

$22,297

$31,905

$43,302

$56,668

$72,089

Total Liabilities & SE:

$36,171

$47,766

$63,253

$79,245

$96,654

$0.000

$0.000

$0.000

$0.000

$0.000

BALANCE CHECK:
Cash Flow Statement
FY 2007
Operating Activities:
Net Income:
$3,495
Depreciation & Amortization of PP&E:
$327
Amortization of Intangibles:
$0
Stock-Based Compensation:
$242
Deferred Income Tax Expense:
$73
Loss on PP&E:
$12
Changes in Operating Assets & Liabilities:
Accounts Receivable:
($385)
Inventory:
($76)
Other Current Assets:
($1,279)
Other Assets:
$285
Accounts Payable:
$1,494
Deferred Revenue:
$566
Other Liabilities:
$716
Cash Flow from Operations:
$5,470
Investing Activities:
Purchases of Securities:
Proceeds from Maturities & Sales:
Purchases of LT Investments:
Capital Expenditures:
Acquisition of Intangibles:
Other:
Cash Flow from Investing:

FY 2008
$6,119
$496
$0
$516
$398
$22

FY 2009 FY 2010E FY 2011E FY 2012E

$8,235
$734
$0
$710
$1,040
$26

$10,510
$918
$40
$888
$0
$0

$12,327
$1,073
$37
$1,038
$0
$0

$14,268
$1,192
$28
$1,153
$0
$0

($785)
($939)
($840)
($714)
($541)
($163)
$54
($114)
($97)
($73)
($274)
$780
$0
$0
$0
$289
($1,172)
$0
$0
$0
$596
$81
$1,400
$1,190
$901
$718
$521
$727
$618
$468
$1,664
$1,385
$963
$819
$620
$9,596 $11,455 $14,491 $16,292 $18,015

($11,719) ($22,965) ($46,724)

$0
$0
$0
$9,424
$16,243
$30,678
$0
$0
$0
($17)
($38)
($101)
$0
$0
$0
($735)
($1,091) ($1,144) ($1,430) ($1,673) ($1,857)
($251)
($108)
($69)
$0
$0
$0
$49
($230)
($74)
$0
$0
$0
($3,249) ($8,189)
### ($1,430) ($1,673) ($1,857)

Financing Activities:
Proceeds from Common Stock:
Common Stock Repurchased:
Dividends Issued:
Tax Benefits from Stock-Based Comp:
Raise / (Pay Off) Long-Term Debt
Cash Used for Equity Awards:
Cash Flow from Financing:
Increase / Decrease in Cash:
Cash & Cash Equivalents:

$365
$0
$0
$377
$0
($3)
$739
$2,960
$9,352

$483
$0
$0
$757
$0
($124)
$1,116
$2,523
$11,875

$475
$0
$0
$270
$0
($82)
$663

$0
$0
$0
$0
$1,000
$0
$1,000

$0
$0
$0
$0
$0
$0
$0

$0
$0
$0
$0
$0
$0
$0

($5,316) $14,061
$6,559 $20,620

$14,618
$35,238

$16,158
$51,396

ays in Year:
ebt Amount:

360
$1,000
30%

t Exercise Price):

ojections
FY 2013E FY 2014E
1.9 x
6.4 x
6.1 x

1.7 x
6.0 x
5.7 x

10.1 x
11.1 x
2.0 x

9.1 x
9.8 x
1.6 x

ojections
FY 2013E FY 2014E
9.0%
59.0%
1.9%
8.3%

7.0%
59.0%
1.9%
8.3%

1.7%
1.7%
2.0%
9.0%
30.0%

1.7%
1.7%
3.0%
9.0%
30.0%

7.8%
28.2
1.8%
$13

7.8%
28.2
1.8%
$10

22.1%
79.6
87.6%
4.8%
2.0%

22.1%
79.6
87.6%
4.8%
2.0%

2.7%

2.7%

FY 2013E FY 2014E
$75,919
$44,811

$81,234
$47,948

$31,109

$33,286

$1,469
$6,311
$7,780

$1,572
$6,752
$8,324

$1,299
$13
$1,256

$1,390
$10
$1,344

$20,761 $22,218
$1,780
$3,223
($90)
($90)
$0
$0
$22,450 $25,351
$6,735
$7,605
$15,715
$17.33
907,005
$22,017
$23,329
$17,507
$97.70

$17,746
$19.56
907,005
$23,562
$24,962
$19,382
$118.76

FY 2013E FY 2014E

$68,903
$26,282

$88,285
$26,282

$5,947
$805
$4
$3,140
###

$6,364
$861
$4
$3,140
###

$2,554
$5,342
$207
$236
$2,011
###

$2,554
$6,118
$207
$226
$2,011
###

$9,911
$6,816
$3,633
$20,360

$10,605
$7,293
$3,887
$21,785

$1,509
$1,000
$3,502
$26,371

$1,615
$1,000
$3,502
$27,902

$7,177
$5,520
$0
$76,185
$179

$7,177
$6,864
$0
$93,930
$179

$89,061
###
$0.000

###
###
$0.000

FY 2013E FY 2014E
$15,715
$1,299
$13
$1,256
$0
$0

$17,746
$1,390
$10
$1,344
$0
$0

($491)
($416)
($66)
($56)
$0
$0
$0
$0
$818
$694
$425
$360
$563
$477
$19,532 $21,548

$0
$0
$0
$0
$0
$0
($2,024) ($2,166)
$0
$0
$0
$0
($2,024) ($2,166)

$0
$0
$0
$0
$0
$0
$0

$0
$0
$0
$0
$0
$0
$0

$17,507
$68,903

$19,382
$88,285

Err:502
($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)
Err:502

Methodology Name
Public Company Comparables:
2009 EV / Revenue:
2010E EV / Revenue:
2009 EV / EBITDA:
2010E EV / EBITDA:
2009 P / E:
2010E P / E:
Precedent Transactions:
Trailing EV / Revenue:
Forward EV / Revenue:
Trailing EV / EBITDA:
Forward EV / EBITDA:
Discounted Cash Flow Analysis:
11-15% Discount Rate, 5-9x Terminal Multiple:

Err:502
25th
Pecentile
Multiple

Minimum
Multiple

0.3
0.3
4.4
3.7
15.0
10.9

x
x
x
x
x
x

0.5
0.5
7.3
5.1
16.1
12.2

x
x
x
x
x
x

0.4
0.4
8.7
9.6

x
x
x
x

1.9
2.1
11.5
13.4

x
x
x
x

Thousands)
Err:502

Err:502

75th
Pecentile
Multiple

Median
Multiple

Maximum
Multiple

Applicable
Err:502
Figure

Minimum
Multiple

25th
Pecentile
Multiple

1.1
1.0
7.6
5.5
19.7
16.3

x
x
x
x
x
x

2.8
2.3
10.6
6.8
29.1
16.6

x
x
x
x
x
x

3.1
2.6
11.5
8.4
47.2
44.6

x
x
x
x
x
x

$42,905
$53,631
$13,184
$16,480
$9.08
$11.59

52.12
54.32
101.49
103.84
136.10
126.68

59.64
66.62
143.02
129.06
145.77
140.94

2.7
2.7
14.4
19.1

x
x
x
x

6.0
5.0
17.3
23.9

x
x
x
x

8.3
7.5
39.7
32.8

x
x
x
x

$42,905
$53,631
$13,184
$16,480

57.41
63.66
162.40
211.19

129.08
163.31
202.99
277.70

163.88

182.19

Err:502

Median
Multiple

75th
Pecentile
Multiple

Maximum
Multiple

89.08
96.83
146.90
137.54
179.19
188.68

170.37
173.80
190.08
160.94
264.11
192.55

181.29
189.43
203.41
187.95
428.24
516.50

165.82
198.04
244.29
379.76

319.62
328.66
285.53
465.76

424.32
472.85
606.40
625.62

201.98

223.36

246.46

Balance Sheet Adjustment:

$35,395

Public Company Comparables

2009 EV / Revenue:
2010E EV / Revenue:
2009 EV / EBITDA:
2010E EV / EBITDA:
2009 P / E:
2010E P / E:

Precedent Transactions
Trailing EV / Revenue:
Forward EV / Revenue:
Trailing EV / EBITDA:
Forward EV / EBITDA:

Discounted Cash Flow Analysis

11-15% Discount Rate, 5-9x Terminal Multiple:
$-

11-15% Discount Rate, 5-9x Terminal Multiple:

$100.00

$200.00

$300.00

Min.
25th
$ 163.88 $ 182.19

Forward EV / EBITDA:
Trailing EV / EBITDA:
Forward EV / Revenue:
Trailing EV / Revenue:

$
$
$
$

211.19
162.40
63.66
57.41

$
$
$
$

277.70
202.99
163.31
129.08

2010E P / E:
2009 P / E:
2010E EV / EBITDA:
2009 EV / EBITDA:
2010E EV / Revenue:
2009 EV / Revenue:

$
$
$
$
$
$

126.68
136.10
103.84
101.49
54.32
52.12

$
$
$
$
$
$

140.94
145.77
129.06
143.02
66.62
59.64

$400.00

75th to Max
Median to
75th
25th to
Median
Min to 25th

$300.00

$400.00

$500.00

$600.00

$700.00

Median
75th
Max
Min Point 25 Point
Med Point 75 Point
$ 201.98 $ 223.36 $ 246.46 $ 163.88 $ 18.31 $ 19.79 $ 21.38
$
$
$
$

379.76
244.29
198.04
165.82

$
$
$
$

465.76
285.53
328.66
319.62

$
$
$
$

625.62
606.40
472.85
424.32

$
$
$
$

211.19
162.40
63.66
57.41

$
$
$
$

66.51
40.59
99.65
71.67

$
$
$
$

102.06
41.30
34.73
36.74

$
$
$
$

86.00
41.24
130.62
153.80

$
$
$
$
$
$

188.68
179.19
137.54
146.90
96.83
89.08

$
$
$
$
$
$

192.55
264.11
160.94
190.08
173.80
170.37

$
$
$
$
$
$

516.50
428.24
187.95
203.41
189.43
181.29

$
$
$
$
$
$

126.68
136.10
103.84
101.49
54.32
52.12

$
$
$
$
$
$

14.26
9.67
25.23
41.53
12.31
7.53

$
$
$
$
$
$

47.74
33.43
8.47
3.87
30.21
29.44

$
$
$
$
$
$

3.87
84.92
23.41
43.18
76.97
81.29

Max Point
$ 23.10
$
$
$
$

159.85
320.86
144.19
104.70

$
$
$
$
$
$

323.95
164.13
27.01
13.33
15.63
10.93

Comparable Companies - US-Based Hardware & Networking Companies with Over $20
($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)
Operating Statistics
Company Name
Hewlett-Packard Company
Dell Inc.
Cisco Systems, Inc.
Intel Corporation
Motorola, Inc.

Share
Price
$ 47.07
12.90
22.47
19.40
6.15

Capitalization
Equity
Enterprise
Revenue
Value
Value
2009
$ 114,779 $ 124,430 $ 114,552
25,241
15,080
51,430
131,739
106,671
34,807
107,224
92,786
32,784
14,239
10,665
23,457

Maximum
75th Percentile
Median
25th Percentile
Minimum

$ 47.07
22.47
$ 19.40
12.90
6.15

$ 131,739
114,779
$107,224
25,241
14,239

$ 124,430
106,671
$ 92,786
15,080
10,665

$ 114,552
51,430
$ 34,807
32,784
23,457

Apple Inc.

$192.06

$176,796

$141,401

$42,905

Company Name
Hewlett-Packard Company
Dell Inc.
Cisco Systems, Inc.
Intel Corporation
Motorola, Inc.

Share
Price
$ 47.07
12.90
22.47
19.40
6.15

Capitalization
Equity
Enterprise
Value
Value
$ 114,779 $ 124,430
25,241
15,080
131,739
106,671
107,224
92,786
14,239
10,665

Maximum
75th Percentile
Median
25th Percentile
Minimum

$ 47.07
22.47
$ 19.40
12.90
6.15

$ 131,739
114,779
$107,224
25,241
14,239

$ 124,430
106,671
$ 92,786
15,080
10,665

3.1 x
2.8 x
1.1 x
0.5 x
0.3 x

Apple Inc.

$192.06

$176,796

$141,401

3.3 x

Valuation Statistics

Enterprise Value /
Revenue
2009
1.1 x
0.3 x
3.1 x
2.8 x
0.5 x

mpanies with Over $20 Billion Revenue

Thousands)

Revenue
2010E
$ 124,179
55,380
41,163
39,941
22,056
$ 124,179
55,380
$ 41,163
39,941
22,056
$ 53,631

Enterprise Value /
Revenue
2010E
1.0
0.3
2.6
2.3
0.5

x
x
x
x
x

EBITDA
2009
2010E
$ 16,433 $ 18,186
3,426
4,129
10,076
12,774
12,708
18,332
926
1,927

2009
2010E
$
3.14 $
3.87
0.79
1.18
0.97
1.38
0.41
1.17
(1.70)
0.14

16,433
12,708
$ 10,076
3,426
926
$13,184

18,332
18,186
$ 12,774
4,129
1,927
$16,480

Enterprise Value /
EBITDA
2009
2010E
7.6 x
6.8
4.4 x
3.7
10.6 x
8.4
7.3 x
5.1
11.5 x
5.5

x
x
x
x
x

EPS

3.14 $
0.97
0.79 $
0.41
(1.70)
$9.08

Projected
Revenue
Growth
8.4%
7.7%
18.3%
21.8%
(6.0%)

EBITDA Margin
2009
14.3%
6.7%
28.9%
38.8%
3.9%

3.87
1.38
1.18
1.17
0.14

21.8%
18.3%
8.4%
7.7%
(6.0%)

38.8%
28.9%
14.3%
6.7%
3.9%

11.59

25.0%

30.7%

P / E Multiple
2009
2010E
15.0 x
12.2
16.4 x
10.9
23.1 x
16.3
47.2 x
16.6
NM
44.6

x
x
x
x
x

2.6 x
2.3 x
1.0 x
0.5 x
0.3 x

11.5 x
10.6 x
7.6 x
7.3 x
4.4 x

8.4 x
6.8 x
5.5 x
5.1 x
3.7 x

47.2 x
29.1 x
19.7 x
16.1 x
15.0 x

44.6 x
16.6 x
16.3 x
12.2 x
10.9 x

2.6 x

10.7 x

8.6 x

21.2 x

16.6 x

EBITDA Margin
2010E
14.6%
7.5%
31.0%
45.9%
8.7%
45.9%
31.0%
14.6%
8.7%
7.5%
30.7%

Networking & Hardware M&A Transactions Over $1 Billion with US-Based Sellers Since
($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)
Err:502

Acquirer Name
Hewlett-Packard Company
Cisco Systems, Inc.
Emerson Electric Co.
EMC Corporation
Oracle Corporation
Brocade Communication Systems, Inc.

Target Name
3Com
Starent Networks
Avocent
Data Domain
Sun Microsystems
Foundry Networks
Maximum
75th Percentile
Median
25th Percentile
Minimum

Date
11/11/2009
10/13/2009
10/6/2009
7/8/2009
4/20/2009
7/21/2008

h US-Based Sellers Since 1/1/2008

n Thousands)
Operating Metrics

Valuatio

Equity
Enterprise Trailing
Value
Value
Revenue
$
3,180 $
2,714 $
1,265
2,777
2,386
288
1,114
1,147
611
2,362
2,085
301
7,075
5,392
13,256
2,899
2,063
621

Forward
Revenue
$
1,223
320
542
375
12,462
633

Trailing
EBITDA
$
152
154
105
53
623
156

Forward
EBITDA
$
110
110
93
64
559
125

7,075
3,110
2,838
2,466
1,114

$
$

5,392
2,632
2,235
2,068
1,147

$
$

13,256
1,104
616
378
288

12,462
1,075
587
417
320

623
155
153
117
53

559
121
110
97
64

EV /
Trailing
Revenue
2.1 x
8.3 x
1.9 x
6.9 x
0.4 x
3.3 x
8.3 x
6.0 x
2.7 x
1.9 x
0.4 x

Valuation Multiples
EV /
EV /
Forward
Trailing
Revenue
EBITDA
2.2 x
17.8 x
7.5 x
15.5 x
2.1 x
10.9 x
5.6 x
39.7 x
0.4 x
8.7 x
3.3 x
13.2 x
7.5 x
5.0 x
2.7 x
2.1 x
0.4 x

39.7 x
17.3 x
14.4 x
11.5 x
8.7 x

EV /
Forward
EBITDA
24.6 x
21.6 x
12.3 x
32.8 x
9.6 x
16.5 x
32.8 x
23.9 x
19.1 x
13.4 x
9.6 x

Err:502
($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)
Err:502
FY 2010E FY 2011E FY 2012E
Revenue:
EBITDA:
Operating Income:

$53,631
$16,480
$14,635

Less: Taxes

($4,391)

Plus: Depreciation
Plus: Amortization
Plus: Stock-Based Compensation
Less: Increase in Working Capital:
Less: Capital Expenditures
Unlevered Free Cash Flow
Present Value of Free Cash Flow
Normal Discount Period:
Mid-Year Discount:

$918
$40
$888
$2,136
($1,430)
$12,795
$12,064
1.000
0.500

Free Cash Flow Growth Rate:

$62,749
$ 19,282
$ 17,133

$69,651
$ 21,403
$ 19,030

($5,140)

($5,709)

$1,073
$37
$1,038

$1,192
$28
$1,153

$1,815
($1,673)

$1,374
($1,857)

$14,284
$11,971

$15,211
$11,332

2.000
1.500

3.000
2.500

11.6%

6.5%

Terminal
Growth Rate

Err:502
10.0%
$ 220.90
$ 220.90
$ 220.90
$220.90
$ 220.90
$ 220.90

11.0%
$ 214.27
$ 214.27
$ 214.27
$214.27
$ 214.27
$ 214.27

Discount Rate
12.0%
13.0%
14.0%
$ 207.97 $201.98 $ 196.28
$ 207.97 $201.98 $ 196.28
$ 207.97 $201.98 $ 196.28
$207.97 $201.98 $196.28
$ 207.97 $201.98 $ 196.28
$ 207.97 $201.98 $ 196.28

$ 204.96
10.0%
4.0 x $ 170.39
5.0 x $ 187.23

11.0%
$ 165.99
$ 182.09

Discount Rate
12.0%
13.0%
14.0%
$ 161.81 $157.83 $ 154.03
$ 177.20 $172.54 $ 168.11

$ 204.96
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%

Terminal
EBITDA
Multiple

Err:502

Terminal
EBITDA
Multiple

6.0 x
7.0 x
8.0 x
9.0 x

$ 204.06
$220.90
$ 237.74
$ 254.58

$ 198.18
$214.27
$ 230.37
$ 246.46

$ 192.59
$207.97
$ 223.36
$ 238.75

$187.26
$201.98
$216.70
$231.42

$ 182.19
$196.28
$ 210.36
$ 224.44

n Thousands)
Err:502
FY 2013E FY 2014E
$75,919
$ 23,329
$ 20,761

$81,234
$ 24,962
$ 22,218

($6,228)

($6,665)

$1,299
$13
$1,256

$1,390
$10
$1,344

$1,248
($2,024)

$1,058
($2,166)

$16,324
$10,811

$17,189
$10,119

4.000
3.500

5.000
4.500

7.3%

5.3%

e
15.0%
$ 190.85
$ 190.85
$ 190.85
$190.85
$ 190.85
$ 190.85

16.0%
$ 185.68
$ 185.68
$ 185.68
$185.68
$ 185.68
$ 185.68

15.0%
$ 150.40
$ 163.88

16.0%
$ 146.95
$ 159.86

Use Multiples Method?

Discount Rate:

Yes
12.5%

Terminal EBITDA Multiple:

Terminal Growth Rate:
Terminal Value:

7.0 x
3.0%
$ 174,733

PV of Terminal Value:
Sum of PV of Cash Flows:
Enterprise Value:

$96,980
$56,296
$153,276

Terminal Value % EV:

63.3%

Enterprise Value:
Balance Sheet Adjustment:
Implied Equity Value:

$153,276
$35,395
$188,671

Implied Price Per Share:

$ 204.96

$ 177.37
$190.85
$ 204.33
$ 217.81

$ 172.77
$185.68
$ 198.59
$ 211.50

Err:502
($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)
Discount Rate Calculation - Assumptions
Risk-Free Rate:
Equity Risk Premium:
Interest Rate on Debt:

4.38%
7.00%
9.00%

Comparable Companies - Unlevered Beta Calculation

Levered
Equity
Name
Beta
Debt
Value
Hewlett-Packard Company
1.04 $ 15,830 $ 114,779
Dell Inc.
1.31
3,793
25,241
Cisco Systems, Inc.
1.23
10,273
131,739
Intel Corporation
1.17
2,224
107,224
Motorola, Inc.
1.87
3,925
14,239
Median

1.23

Apple Inc.

1.57

Tax Rate
20.0%
27.0%
22.0%
33.0%
34.0%

Err:502
Unlevered
Beta
Apple Inc.

1.16

Debt
$0

Equity
Value
$176,796

Tax Rate
30%

Cost of Equity Based on Comparables:

Cost of Equity Based on Historical Beta:

WACC = Cost of Equity * % Equity + Cost of Debt * % Debt * (1 - Tax Rate) + Cost of Preferred Sto
WACC

housands)

Unlevered
Beta
0.94
1.18
1.16
1.15
1.58
1.16

Levered
Beta
1.16
12.50%
15.37%

e) + Cost of Preferred Stock * % Preferred Stock

12.50%

Err:502
($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)
Transaction Assumptions
Per Share Purchase Price:
% Cash:
% Debt:
% Stock:
Foregone Cash Interest Rate:

$75.00
33.3%
33.3%
33.3%
1.0%

Revenue Synergy %:
Cost Synergies % OpEx:

10.0%
10.0%

Equity Purchase Price:

Cash Used:
Debt Issued:
New Shares Issued:
Debt Interest Rate:
Revenue Synergy COGS %:

Goodwill Creation & Balance Sheet Adjustments

Goodwill Calculation:
Equity Purchase Price:
Less: Seller Book Value:
Plus: Write-Off of Existing Goodwill:
Total Allocable Purchase Premium:
Less: Write-Up of PP&E:
Less: Write-Up of Intangibles:
Less: Write-Down of DTL:
Plus: New Deferred Tax Liability:
Total Goodwill Created:

$43,049
($6,987)
$147
$36,209
($174)
($7,242)
($43)
$2,225
$30,975

Fixed Asset Write-Up:

PP&E Write-Up %:
PP&E Write-Up Amount:
Depreciation Period (Years):

Intangible Asset Write-Up:

Purchase Price to Allocate:
% Allocated to Intangibles:
Intangibles Write-Up Amount:
Amortization Period (Years):
New Deferred Tax Liability:

Buyer - Financial Profile

Buyer Name:
Share Price:
Diluted Shares Outstanding:
Diluted Equity Value:
Enterprise Value:
Tax Rate:

Seller - Financial Profile

Apple Inc.
$192.06
920,526
$176,796
$141,401
30%

Buyer - Income Statement

Revenue:
Cost of Goods Sold:
Gross Profit:

Seller Name:
Share Price:
Diluted Shares Outstanding:
Diluted Equity Value:
Enterprise Value:
Tax Rate:

Seller - Income Statement

FY 2010E FY 2011E
$53,631 $62,749
$31,655
$37,037
$21,976 $25,712

Revenue:
Cost of Goods Sold:
Gross Profit:

Operating Expenses:

$5,496

$6,430

Depreciation of PP&E:
Amortization of Intangibles:
Stock-Based Compensation:

$918
$40
$888

$1,073
$37
$1,038

Depreciation of PP&E:
Amortization of Intangibles:
Stock-Based Compensation:

Operating Income:
Interest Income / (Expense):
Pre-Tax Income:
Income Tax Provision:

$14,635
$379
$15,014
$4,504

$17,133
$478
$17,610
$5,283

Operating Income:
Interest Income / (Expense)
Pre-Tax Income:
Income Tax Provision:

Net Income:

$10,510

$12,327

Net Income:

Earnings Per Share (EPS):

Diluted Shares Outstanding:

$11.59
907,005

$13.59
907,005

Combined Income Statement

Combined Revenue:
Revenue Synergies:
Cost of Goods Sold:
Revenue Synergy COGS:
Gross Profit:
Operating Expenses:
OpEx Synergies:
Depreciation of PP&E:
Depr. of PP&E Write-Up:
Amortization of Intangibles:
Amort. of New Intangibles:
Stock-Based Compensation:

FY 2010E FY 2011E
$70,862 $83,617
$1,723
$2,087
$41,410
$48,905
$862
$1,043
$30,313 $35,755
$8,193
$270

$9,689
$326

$1,348
$22
$399
$1,448
$939

$1,637
$22
$470
$1,448
$1,101

Operating Income:
Interest Income / (Expense):
Foregone Interest on Cash:
Interest Paid on New Debt:
Pre-Tax Income:
Income Tax Provision:

$18,233 $21,713
$404
$510
($143)
($143)
($1,291)
($1,291)
$17,203 $20,789
$5,161
$6,237

Net Income:

$12,042

$14,552

$12.27

$14.82

Earnings Per Share (EPS):

Operating Expenses:

Earnings Per Share (EPS):

Diluted Shares Outstanding:

Diluted Shares Outstanding:

Accretion / Dilution:
Accretion / Dilution %:

981,719

981,719

$0.68
5.9%

$1.23
9.1%

Per Share Purchase

Price

Sensitivity Analysis - Year 1 EPS Accretion/Dilution and Purchase Price vs. Operating Ex

5.9%
$110.00
$105.00
$100.00
$ 95.00
$ 90.00
$ 85.00
$ 80.00
$ 75.00
$ 70.00
$ 65.00

0.0%
(8.2%)
(6.5%)
(4.8%)
(3.0%)
(1.2%)
0.6%
2.4%
4.2%
6.0%
7.9%

2.0%
(7.9%)
(6.2%)
(4.5%)
(2.7%)
(0.9%)
0.9%
2.7%
4.5%
6.4%
8.3%

Expense Synergies % Seller OpEx:

4.0%
6.0%
8.0%
(7.6%)
(7.3%)
(7.0%)
(5.9%)
(5.6%)
(5.2%)
(4.1%)
(3.8%)
(3.5%)
(2.4%)
(2.0%)
(1.7%)
(0.6%)
(0.3%)
0.1%
1.2%
1.5%
1.9%
3.0%
3.4%
3.7%
4.9%
5.2%
5.5%
6.7%
7.0%
7.4%
8.6%
8.9%
9.3%

Per Share Purchase

Price

Sensitivity Analysis - Year 1 EPS Accretion/Dilution and Purchase Price vs. Revenue Syn

5.9%
$110.00
$105.00
$100.00
$ 95.00
$ 90.00
$ 85.00
$ 80.00
$ 75.00
$ 70.00
$ 65.00

0.0%
(11.8%)
(10.1%)
(8.3%)
(6.6%)
(4.8%)
(3.1%)
(1.3%)
0.6%
2.4%
4.2%

2.0%
(10.7%)
(9.0%)
(7.3%)
(5.6%)
(3.8%)
(2.0%)
(0.2%)
1.6%
3.5%
5.3%

Revenue Synergies % Seller Revenue:

4.0%
6.0%
8.0%
(9.7%)
(8.7%)
(7.7%)
(8.0%)
(7.0%)
(5.9%)
(6.3%)
(5.2%)
(4.2%)
(4.5%)
(3.5%)
(2.4%)
(2.7%)
(1.7%)
(0.7%)
(1.0%)
0.1%
1.1%
0.9%
1.9%
3.0%
2.7%
3.7%
4.8%
4.5%
5.6%
6.6%
6.4%
7.4%
8.5%

n Thousands)

quity Purchase Price:

ash Used:
ebt Issued:
ew Shares Issued:
ebt Interest Rate:

$43,049
$14,350
$14,350
74,714
9.0%

evenue Synergy COGS %:

50.0%

ixed Asset Write-Up:

P&E Write-Up %:
P&E Write-Up Amount:
epreciation Period (Years):

10.0%
$174
8

ntangible Asset Write-Up:

urchase Price to Allocate:
% Allocated to Intangibles:
tangibles Write-Up Amount:
mortization Period (Years):

ew Deferred Tax Liability:

$36,209
20.0%
$7,242
5
$2,225

eller - Financial Profile

eller Name:
Research in Motion Limited
hare Price:
$62.91
iluted Shares Outstanding:
572,951
iluted Equity Value:
$36,044
nterprise Value:
$33,547
28%

eller - Income Statement

ost of Goods Sold:

Gross Profit:

FY 2010E FY 2011E
$17,231 $20,868
$9,755
$11,869
$7,476
$9,000

perating Expenses:

$2,698

$3,259

Depreciation of PP&E:
Amortization of Intangibles:
Stock-Based Compensation:

$431
$359
$52

$563
$433
$63

perating Income:
Interest Income / (Expense):
re-Tax Income:
come Tax Provision:

$3,937
$25
$3,962
$1,148

$4,682
$33
$4,714
$1,343

et Income:

$2,814

$3,371

arnings Per Share (EPS):

iluted Shares Outstanding:

$5.03
560,000

$6.02
560,000

se Price vs. Operating Expense Synergies:

rgies % Seller OpEx:

10.0%
12.0%
(6.6%)
(6.3%)
(4.9%)
(4.6%)
(3.2%)
(2.8%)
(1.4%)
(1.1%)
0.4%
0.7%
2.2%
2.5%
4.0%
4.3%
5.9%
6.2%
7.7%
8.0%
9.6%
9.9%

14.0%
(6.0%)
(4.3%)
(2.5%)
(0.7%)
1.0%
2.9%
4.7%
6.5%
8.4%
10.3%

16.0%
(5.7%)
(3.9%)
(2.2%)
(0.4%)
1.4%
3.2%
5.0%
6.9%
8.7%
10.6%

se Price vs. Revenue Synergies:

gies % Seller Revenue:

10.0%
12.0%
(6.6%)
(5.6%)
(4.9%)
(3.9%)
(3.2%)
(2.1%)
(1.4%)
(0.4%)
0.4%
1.4%
2.2%
3.2%
4.0%
5.1%
5.9%
6.9%
7.7%
8.8%
9.6%
10.7%

14.0%
(4.6%)
(2.9%)
(1.1%)
0.7%
2.5%
4.3%
6.1%
8.0%
9.8%
11.7%

16.0%
(3.6%)
(1.8%)
(0.1%)
1.7%
3.5%
5.3%
7.2%
9.0%
10.9%
12.8%

Merger Model - Seller Diluted Share Count & Combined Balance Sheets
($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)
Diluted Share & Enterprise Value Calculations - Seller
Company Name:
Share Price:
Offer Price Per Share:

Research in Motion Limited

$62.91
$75.00
Tax Rate:

Current Share Price:

Basic Shares Outstanding:
568,900
Basic Equity Value:
$35,789
Diluted Shares Outstanding:
572,951
Diluted Equity Value:
$36,044
Less: Cash & Investments
$2,498
Plus: Debt
$0
Plus: Minority Interest
$0
Plus: Preferred Stock
$0
Plus: Other Liabilities
$0
Enterprise Value:
$33,547

28%

Purchase Price:
Basic Shares Outstanding:
Basic Equity Value:
Diluted Shares Outstanding:
Diluted Equity Value:
Less: Cash & Investments
Plus: Debt
Plus: Minority Interest
Plus: Preferred Stock
Plus: Other Liabilities
Enterprise Value:

568,900
$42,668
573,986
$43,049
$2,498
$0
$0
$0
$0
$40,551

Balance Sheets - Buyer, Seller & Combined

Assets:
Current Assets:
Cash & Short-Term Securities:
Accounts Receivable:
Inventory:
Deferred Tax Assets:
Other Current Assets:
Total Current Assets:

Buyer
$32,841
$3,361
$455
$4
$3,140
$39,801

Seller
$1,664
$2,613
$573
$176
$190
$5,215

Adjustments

Long-Term Assets:
Long-Term Securities:
Plants, Property & Equipment:
Goodwill:
Other Intangible Assets:
Other Assets:
Total Assets:

$2,554
$2,839
$207
$354
$2,011
$47,766

$834
$1,737
$147
$1,291
$0
$9,224

Liabilities & Shareholders' Equity:

Current Liabilities:
Accounts Payable:
Accrued Expenses:
Deferred Revenue:
Total Current Liabilities:

$5,601
$3,852
$2,053
$11,506

$496
$1,604
$67
$2,167

Long-Term Liabilities:
Deferred Revenue:
Long-Term Debt:
Deferred Income Tax Liability:
Other Long-Term Liabilities:
Total Liabilities:

$853
$0
$0
$3,502
$15,861

$0
$0
$43
$28
$2,238

Shareholders' Equity:
Common Stock:
Additional Paid-In Capital:
Treasury Stock:
Retained Earnings:
Accumulated Other Comprehensive Income:
Total Shareholders' Equity:

$7,177
$1,185
$0
$23,364
$179
$31,905

$2,236
$139
($45)
$4,664
($8)
$6,987

Total Liabilities & SE:

$47,766

$9,224

Options Calculations - Current Price:

Name
Tranche A
Tranche B
Total

Number
10,470

Exercise
Price
$38.57

Dilution
4,051
4,051

Options Calculations - Purchase Price:

Name
Tranche A
Tranche B
Total

Number
10,470

Exercise
Price
$38.57

Dilution
5,086
5,086

Adjustments

Combined

($14,350)
$0
$0
$0
$0
###

$20,156
$5,974
$1,028
$180
$3,330
$30,667

$0
$174
$30,828
$7,242
$0
$23,894

$3,388
$4,750
$31,182
$8,887
$2,011
$80,884

$0
$0
$0
$0

$6,097
$5,456
$2,120
$13,673

$0
$14,350
$2,181
$0
$16,531

$853
$14,350
$2,225
$3,530
$34,630

($2,236)
$14,211
$45
($4,664)
$8
$7,363
$23,894

$7,177
$15,535
$0
$23,364
$179
$46,255
$80,884

Apple Inc. - Basic LBO Model

($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)
Transaction Assumptions
Current Share Price:
Offer Premium:
Offer Price Per Share:
% Debt:
% Equity:
Purchase Price Calculations:
Basic Shares Outstanding:
Basic Equity Value:
Diluted Shares Outstanding:
Diluted Equity Value:
Less: Cash & Investments
Plus: Debt
Plus: Minority Interest
Plus: Preferred Stock
Plus: Other Liabilities
Enterprise Value:

$192.06
20.0%
$192.06
50.0%
50.0%

900,678
$172,984
920,526
$176,796
$35,395
$0
$0
$0
$0
###

Equity Purchase Price:

Enterprise Value:
EBITDA Purchase Multiple:
Debt Required:
Equity Used:
EBITDA Exit Multiple:
Advisory Fee %:
Financing Fee %:
Options Calculations - Purchase Price:

Name
Tranche A
Tranche B
Total

Exercise
Number
Price
34,375
$81.17

Dilution
19,847
19,847

Debt Assumptions
Debt %:
Bank Debt %:
High-Yield Debt %:

50.0%
75.0%
25.0%

Debt Required:
Bank Debt:
High-Yield Debt:

Bank Debt Interest Rate:

High-Yield Debt Interest Rate:

8.0%
11.0%

Bank Debt Principal Repayment %:

High-Yield Debt Principal Repayment %:

Sources & Uses

Sources:
Bank Debt:
High-Yield Debt:
Investor Equity:
Total Sources:

Uses:
$39,779
$13,260
$123,824
###

Equity Value of Company:

Advisory Fees:
Financing Fees:
Total Uses:

Operating Assumptions
Initial Cash Balance:
Minimum Cash Balance:

$6,559
$5,000

FY 2007

Historical
FY 2008
FY 2009

Projections
FY 2010E FY 2011E FY 2012E

Revenue Growth %:
COGS % Revenue:
R&D % Revenue:
SG&A % Revenue:

27.2%
66.2%
2.4%
11.1%

52.5%
64.1%
2.0%
8.9%

14.4%
59.0%
1.9%
8.3%

25.0%
59.0%
1.9%
8.3%

17.0%
59.0%
1.9%
8.3%

11.0%
59.0%
1.9%
8.3%

Stock-Based Compensation % Revenue:

Depreciation & Amortization % Revenue:
Effective Cash Interest Rate:
Effective Tax Rate:

1.0%
1.3%
5.3%
30.2%

1.4%
1.3%
3.4%
31.6%

1.7%
1.7%
1.4%
31.8%

1.7%
1.7%
1.0%
30.0%

1.7%
1.7%
1.0%
30.0%

1.7%
1.7%
2.0%
30.0%

1.7%
2.7%

$40
4.0%
2.7%

$37
2.9%
2.7%

$28
2.0%
2.7%

Amortization of Intangibles:
Change in Working Capital % Revenue:
CapEx % Revenue:

5.4%
3.0%

5.5%
2.9%

Income Statement
FY 2007

FY 2008

FY 2009

FY 2010E FY 2011E FY 2012E

Revenue:
Cost of Goods Sold:
Gross Profit:
Operating Expenses:
Research & Development:
Selling, General & Administrative:
Total Operating Expenses:

$24,578
$16,282
$8,296

$37,491
$24,049
$13,442

$42,905
$25,324
$17,581

$53,631
$31,655
$21,976

$62,749
$37,037
$25,712

$69,651
$41,111
$28,540

$596
$2,724
$3,320

$759
$3,345
$4,103

$830
$3,566
$4,397

$1,038
$4,458
$5,496

$1,214
$5,216
$6,430

$1,348
$5,789
$7,137

$327
$0
$242

$496
$0
$516

$734
$0
$710

$918
$40
$888

$1,073
$37
$1,038

$1,192
$28
$1,153

Operating Income:
Interest Income / (Expense):
Pre-Tax Income:
Income Tax Provision:

$4,407
$599
$5,006
$1,511

$8,327
$620
$8,947
$2,828

$11,740
$326
$12,066
$3,831

$14,635 $17,133 $19,030

($8,627) ($7,954) ($6,850)
$6,008
$9,179 $12,180
$1,802
$2,754
$3,654

Net Income:
EBITDA:

$3,495
$4,976

$6,119
$9,339

$8,235
$13,184

$4,205
$16,480

FY 2007

FY 2008

Depreciation & Amortization of PP&E:

Amortization of Intangibles:
Stock-Based Compensation:

$6,425
$19,282

$8,526
$21,403

Cash Flow Statement

Operating Activities:
Net Income:
Depreciation & Amortization of PP&E:
Amortization of Intangibles:
Stock-Based Compensation:
Decrease (Increase) in Working Capital:
Cash Flow from Operations:
Capital Expenditures:
Free Cash Flow:

FY 2009

FY 2010E FY 2011E FY 2012E

$4,205
$918
$40
$888
$2,136
$8,186

$6,425
$1,073
$37
$1,038
$1,815
$10,389

($1,430)

($1,673)

$6,756

$8,716

$8,526
$1,192
$28
$1,153
$1,374
$12,273
($1,857)
$10,415

Beginning Cash Balance:

Plus: Free Cash Flow:
Less: Minimum Cash Balance:

$6,559
$6,756
($5,000)

$5,000
$8,716
($5,000)

$5,000
$10,415
($5,000)

Cash Available for Debt Repayment:

Cash Used for Debt Repayment:

$8,315
($8,315)

$8,716
$10,415
($8,716) ($10,415)

Beginning Cash Balance:

Net Change in Cash:
Ending Cash Balance:

$6,559
($1,559)
$5,000

$5,000
$0
$5,000

$5,000
$0
$5,000

Debt & Interest Schedules

FY 2007

FY 2008

FY 2009

FY 2010E FY 2011E FY 2012E

Beginning Bank Debt:

Mandatory Repayment:
Optional Repayment:
Ending Bank Debt:

$39,779
$71,453
$62,736
($3,978) ($7,977) ($7,977)
($338)
($740) ($2,439)
$71,453 $62,736 $52,321

Beginning High-Yield Debt:

Mandatory Repayment:
Optional Repayment:
Ending High-Yield Debt:

$26,589
$0
$0
$26,589

Interest Paid on Debt:

Interest Earned on Cash:

($8,974)
$346

Net Interest Income / (Expense):

$26,589
$0
$0
$26,589
($8,292)
$338

$26,589
$0
$0
$26,589
($7,527)
$677

($8,627) ($7,954) ($6,850)

Investor Returns
FY 2007

FY 2008

FY 2009

FY 2010E FY 2011E FY 2012E

EBITDA:
EBITDA Multiple:
Enterprise Value:
Investor Equity:

$13,184
10.7 x
$141,401
($123,824)

IRR:

$0

$0

$0

12.3%

Purchase Premium /
Per-Share Price

Sensitivity Analysis - 5-Year IRR and Purchase Premium vs. Exit Multiple

$278.49
$268.88
$259.28
$249.68
$240.08
$230.47
$220.87
$211.27
$201.66
$192.06

12.3%
45.0%
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%

6.0 x
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%

7.0 x
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%

8.0 x
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%

Exit Multiple:
9.0 x
10.0 x
11.0 x
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%

12.0 x
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%

Purchase Premium /
Per-Share Price

Sensitivity Analysis - 5-Year IRR and Purchase Premium vs. % Debt:

$278.49
$268.88
$259.28
$249.68
$240.08
$230.47
$220.87

12.3%
45.0%
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%

30.0%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%

35.0%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%

40.0%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%

45.0%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%

% Debt:
50.0%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%

55.0%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%

60.0%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%

Purchase Pre
Per-Share

$211.27
$201.66
$192.06

10.0%
5.0%
0.0%

12.3%
12.3%
12.3%

12.3%
12.3%
12.3%

12.3%
12.3%
12.3%

12.3%
12.3%
12.3%

12.3%
12.3%
12.3%

12.3%
12.3%
12.3%

12.3%
12.3%
12.3%

$176,796
$141,401
10.7 x
$53,039
$88,398
10.0 x
0.02%
0.06%

$53,039
$39,779
$13,260
10.0%
0.0%

$176,796
$35
$32
###

ojections
FY 2013E FY 2014E
9.0%
59.0%
1.9%
8.3%

7.0%
59.0%
1.9%
8.3%

1.7%
1.7%
2.0%
30.0%

1.7%
1.7%
3.0%
30.0%

$13
1.6%
2.7%

$10
1.3%
2.7%

FY 2013E FY 2014E

$75,919
$44,811
$31,109

$81,234
$47,948
$33,286

$1,469
$6,311
$7,780

$1,572
$6,752
$8,324

$1,299
$13
$1,256

$1,390
$10
$1,344

$20,761 $22,218
($5,947)
($4,563)
$14,813 $17,655
$4,444
$5,297
$10,369
$23,329

$12,359
$24,962

FY 2013E FY 2014E
$10,369
$1,299
$13
$1,256
$1,248
$14,186
($2,024)
$12,161

$12,359
$1,390
$10
$1,344
$1,058
$16,161
($2,166)
$13,995

$5,000
$12,161
($5,000)

$5,000
$13,995
($5,000)

$12,161
$13,995
($12,161) ($13,995)
$5,000
$0
$5,000

$5,000
$0
$5,000

FY 2013E FY 2014E
$52,321
$40,159
($7,977)
($7,977)
($4,185)
($6,018)
$40,159 $26,165
$26,589
$0
$0
$26,589

$26,589
$0
$0
$26,589

($6,624)
$677

($5,578)
$1,015

($5,947)

($4,563)

FY 2013E FY 2014E

$0

$24,962
10.0 x
$249,618
$230,700

13.0 x
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%

14.0 x
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%

65.0%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%

70.0%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%

12.3%
12.3%
12.3%

12.3%
12.3%
12.3%

Apple Inc. - More Advanced LBO Model

($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)
Transaction Assumptions
Current Share Price:
Offer Premium:
Offer Price Per Share:
Leverage Ratio:

$192.06
20.0%
$230.47
6.0 x

Purchase Price Calculations:

Basic Shares Outstanding:
Basic Equity Value:
Diluted Shares Outstanding:
Diluted Equity Value:
Less: Cash & Investments
Plus: Debt
Plus: Minority Interest
Plus: Preferred Stock
Plus: Other Liabilities
Enterprise Value:

Equity Purchase Price:

Enterprise Value:
EBITDA Purchase Multiple:
Debt Required:
Equity Used:
EBITDA Exit Multiple:

900,678
$207,581
922,947
$212,713
$35,395
$0
$0
$0
$0
$177,318

Advisory Fee %:
Financing Fee %:
Legal & Misc. Fees:

6.0 x
10,000
40.0%
30.0%
20.0%
10.0%

Debt Required:
Revolver:
Term Loan A:
Term Loan B:
Subordinated Note:
PIK Loan:

Options Calculations - Pu
Name
Tranche A
Tranche B
Total

Debt Assumptions
Leverage Ratio:
Units for LIBOR:
Term Loan A %:
Term Loan B %:
Subordinated Note %:
PIK Loan %:
Interest Rates:
Revolver:
Term Loan A:
Term Loan B:
Subordinated Note:
PIK Loan:

Principal Re
L + 250
L + 350
L + 500
11.00%
13.00%

Revolver:
Term Loan A:
Term Loan B:
Subordinated Note:
PIK Loan:

Sources & Uses

Sources:
Excess Cash:
Term Loan A:

Us
$1,559
$31,642

Term Loan B:
Subordinated Note:
PIK Loan:
Investor Equity:
Total Sources:

$23,731
$15,821
$7,910
$132,152
$212,815

Equity Value of Company:

Advisory Fees:
Capitalized Financing Fees:
Legal & Misc. Fees:
Total Uses:

Goodwill Creation & Balance Sheet Adjustments

Goodwill Calculation:
Equity Purchase Price:
Less: Seller Book Value:
Plus: Write-Off of Existing Goodwill:
Total Allocable Purchase Premium:
Less: Write-Up of PP&E:
Less: Write-Up of Intangibles:
Less: Write-Down of DTL:
Plus: New Deferred Tax Liability:
Total Goodwill Created:
Financing Fees Amortization Period:

Fixed Asset Write-Up:

PP&E Write-Up %:
PP&E Write-Up Amount:
Depreciation Period (Years):

$212,713
($31,905)
$207
$181,015

Intangible Asset Write-Up

Purchase Price to Allocate:
% Allocated to Intangibles:
Intangibles Write-Up Amount
Amortization Period (Years):

($284)
($36,203)
$0
$10,946
$155,475
5

New Deferred Tax Liability:

Operating Assumptions
Initial Cash Balance:
Minimum Cash Balance:

$6,559
$5,000
Historical
FY 2007
FY 2008

FY 2009

Revenue Growth %:
COGS % Revenue:
R&D % Revenue:
SG&A % Revenue:

27.2%
66.2%
2.4%
11.1%

52.5%
64.1%
2.0%
8.9%

14.4%
59.0%
1.9%
8.3%

Stock-Based Compensation % Revenue:

Depreciation & Amortization % Revenue:
Effective Cash Interest Rate:
Effective Tax Rate:

1.0%
1.3%
5.3%
30.2%

1.4%
1.3%
3.4%
31.6%

1.7%
1.7%
1.4%
31.8%

6.5%
23.3
2.1%

7.8%
28.2
1.8%

Accounts Receivable % Revenue:

Accounts Receivable Days:
Inventory % COGS:
Amortization of Intangibles:

Accounts Payable % COGS:

Accounts Payable Days:
Accrued Expenses % Operating Expenses:
Short-Term Deferred Revenue % Revenue:
Long-Term Deferred Revenue % Revenue:
CapEx % Revenue:

3.0%

23.0%
82.6
102.9%
4.3%
2.0%

22.1%
79.6
87.6%
4.8%
2.0%

2.9%

2.7%

Income Statement
Historical
FY 2008

FY 2009

$24,578
$16,282
$8,296

$37,491
$24,049
$13,442

$42,905
$25,324
$17,581

$596
$2,724
$3,320

$759
$3,345
$4,103

$830
$3,566
$4,397

$327

$496

$734

$0
$242

$0
$516

$0
$710

Operating Income:
Interest Income / (Expense):
Pre-Tax Income:
Income Tax Provision:

$4,407
$599
$5,006
$1,511

$8,327
$620
$8,947
$2,828

$11,740
$326
$12,066
$3,831

Net Income:
EBITDA:

$3,495
$4,976

$6,119
$9,339

$8,235
$13,184

FY 2007
Revenue:
Cost of Goods Sold:
Gross Profit:
Operating Expenses:
Research & Development:
Selling, General & Administrative:
Total Operating Expenses:
Depreciation & Amortization of PP&E:
Depreciation of PP&E Write-Up:
New Intangibles Amortization:
Amortization of Financing Fees:
Amortization of Intangibles:
Stock-Based Compensation:

Balance Sheet
Historical
FY 2008 FY 2009
Assets:
Current Assets:
Cash & Cash-Equivalents:
Short-Term Securities:
Accounts Receivable:
Inventory:
Deferred Tax Assets:

$11,875
$10,236
$2,422
$509
$1,044

$6,559
$26,282
$3,361
$455
$4

Other Current Assets:

Total Current Assets:

$3,920
$30,006

$3,140
$39,801

Long-Term Assets:
Long-Term Securities:
Plants, Property & Equipment:
Goodwill:
Other Intangible Assets:
Capitalized Financing Fees:
Other Assets:
Total Assets:

$2,379
$2,455
$207
$285
$0
$839
$36,171

$2,554
$2,839
$207
$354
$0
$2,011
$47,766

Liabilities & Shareholders' Equity:

Current Liabilities:
Revolver:
Accounts Payable:
Accrued Expenses:
Deferred Revenue:
Total Current Liabilities:

$0
$5,520
$4,224
$1,617
$11,361

$0
$5,601
$3,852
$2,053
$11,506

Long-Term Liabilities:
Deferred Revenue:
Existing Long-Term Debt:
Term Loan A:
Term Loan B:
Subordinated Note:
PIK Loan:
Deferred Tax Liability:
Other Long-Term Liabilities:
Total Liabilities:

$768
$0
$0
$0
$0
$0
$0
$1,745
$13,874

$853
$0
$0
$0
$0
$0
$0
$3,502
$15,861

Shareholders' Equity:
Common Stock:
Additional Paid-In Capital:
Treasury Stock:
Sponsor Common Equity:
Retained Earnings:
Accumulated Other Comprehensive Income:
Total Shareholders' Equity:

$7,177
$7,177
$0
$1,185
$0
$0
$0
$0
$15,129
$23,364
($9)
$179
$22,297 $31,905

Total Liabilities & SE:

$36,171

$47,766

$0

$0

BALANCE CHECK:
Cash Flow Statement

FY 2007

Historical
FY 2008

Net Income:
Depreciation & Amortization of PP&E:
Depreciation of PP&E Write-Up:
New Intangibles Amortization:
Amortization of Financing Fees:
Accrual of PIK Note:
Amortization of Intangibles:
Stock-Based Compensation:
Changes in Operating Assets & Liabilities:
Accounts Receivable:
Inventory:
Other Current Assets:
Other Assets:
Accounts Payable:
Deferred Revenue:
Other Liabilities:
Cash Flow from Operations:
Capital Expenditures:
Cash Flow Available for Debt Repayment:
Revolver:
Term Loan A:
Term Loan B:
Subordinated Note:
PIK Loan:
Total Cash Flow Used to Repay Debt:
Net Change in Cash & Cash Equivalents:
Beginning Cash Balance:
Ending Cash Balance:
Debt & Interest Schedules

LIBOR Curve:
Interest Rate Assumptions:
Revolver:

LIBOR +
2.50%

Fixed
Interest

FY 2009

Term Loan A:
Term Loan B:
Subordinated Note:
PIK Loan:
Interest Income / (Expense) Calculations:
Revolver:
Term Loan A:
Term Loan B:
Subordinated Note:
PIK Loan:
Cash:
Net Interest Income / (Expense):
Sources of Funds:
Beginning Cash Balance:
Less: Minimum Cash Balance:
Plus: Cash Flow Available for Debt Repayment:
Subtotal Before Revolver:
Revolver Borrowing Required:
Total Sources of Funds:
Uses of Funds:
Mandatory Debt Repayment:
Term Loan A:
Term Loan B:
Subordinated Note:
PIK Loan:
Mandatory Repayment Total:
Optional Debt Repayment:
Revolver:
Term Loan A:
Term Loan B:
Subordinated Note:
PIK Loan:
Optional Repayment Total:
Cash Generated on Balance Sheet:
Total Uses of Funds:

3.50%
5.00%
11.00%
13.00%

Thousands)

quity Purchase Price:

nterprise Value:
BITDA Purchase Multiple:
ebt Required:
quity Used:
BITDA Exit Multiple:

$212,713
$177,318
13.4 x
$79,104
$133,609
10.0 x

dvisory Fee %:
nancing Fee %:
egal & Misc. Fees:

0.02%
0.06%
$10

ptions Calculations - Purchase Price:

Exercise
Number
Price
Dilution
34,375
$81.17
22,268
22,268

ebt Required:

$79,104
$2,000
$31,642
$23,731
$15,821
$7,910

erm Loan A:
erm Loan B:
ubordinated Note:

Principal Repayment %:
N/A
10.0%
5.0%
0.0%
0.0%

erm Loan A:
erm Loan B:
ubordinated Note:

Uses:

quity Value of Company:

dvisory Fees:
apitalized Financing Fees:
egal & Misc. Fees:
otal Uses:

ixed Asset Write-Up:

P&E Write-Up %:
P&E Write-Up Amount:
epreciation Period (Years):

ntangible Asset Write-Up:

urchase Price to Allocate:
% Allocated to Intangibles:
tangibles Write-Up Amount:
mortization Period (Years):

ew Deferred Tax Liability:

$212,713
$43
$49
$10
###

10.0%
$284
8

$181,015
20.0%
$36,203
5

$10,946

Transaction Adjustments
Projections
Debit
Credit
FY 2009 FY 2010E FY 2011E FY 2012E FY 2013E FY 2014E
25.0%
59.0%
1.9%
8.3%

17.0%
59.0%
1.9%
8.3%

11.0%
59.0%
1.9%
8.3%

9.0%
59.0%
1.9%
8.3%

7.0%
59.0%
1.9%
8.3%

1.7%
1.7%
1.0%
30.0%

1.7%
1.7%
1.0%
30.0%

1.7%
1.7%
2.0%
30.0%

1.7%
1.7%
2.0%
30.0%

1.7%
1.7%
3.0%
30.0%

7.8%
28.2
1.8%
$40

7.8%
28.2
1.8%
$37

7.8%
28.2
1.8%
$28

7.8%
28.2
1.8%
$13

7.8%
28.2
1.8%
$10

22.1%
79.6
87.6%
4.8%
2.0%

22.1%
79.6
87.6%
4.8%
2.0%

22.1%
79.6
87.6%
4.8%
2.0%

22.1%
79.6
87.6%
4.8%
2.0%

22.1%
79.6
87.6%
4.8%
2.0%

2.7%

2.7%

2.7%

2.7%

2.7%

Transaction Adjustments
Projections
Debit
Credit
FY 2009 FY 2010E FY 2011E FY 2012E FY 2013E FY 2014E
$53,631
$31,655
$21,976

$62,749
$37,037
$25,712

$69,651
$41,111
$28,540

$75,919
$44,811
$31,109

$81,234
$47,948
$33,286

$1,038
$4,458
$5,496

$1,214
$5,216
$6,430

$1,348
$5,789
$7,137

$1,469
$6,311
$7,780

$1,572
$6,752
$8,324

$918

$1,073

$1,192

$1,299

$1,390

$40
$888

$37
$1,038

$28
$1,153

$13
$1,256

$10
$1,344

$14,635

$17,133

$19,030

$20,761

$22,218

$14,635
$4,391

$17,133
$5,140

$19,030
$5,709

$20,761
$6,228

$22,218
$6,665

$10,245
$16,480

$11,993
$19,282

$13,321
$21,403

$14,532
$23,329

$15,552
$24,962

Transaction Adjustments
Projections
Debit
Credit
FY 2009 FY 2010E FY 2011E FY 2012E FY 2013E FY 2014E

$0
$0
$0
$0
$0

$1,559
$0
$0
$0
$0

$5,000
$26,282
$3,361
$455
$4

$17,795
$26,282
$4,201
$569
$4

$32,079
$26,282
$4,915
$665
$4

$47,290
$26,282
$5,456
$739
$4

$63,614
$26,282
$5,947
$805
$4

$80,803
$26,282
$6,364
$861
$4

$0

$0
$284
$155,475
$36,203
$49
$0

$0

$3,140
$51,991

$3,140
$67,086

$3,140
$82,911

$3,140
$99,793

$3,140
###

$0
$2,554
$2,554
$2,554
$2,554
$2,554
$2,554
$0
$3,123
$3,635
$4,235
$4,901
$5,626
$6,402
$207 $155,475 $155,475 $155,475 $155,475 $155,475 $155,475
$0
$36,557
$36,517
$36,480
$36,452
$36,439
$36,429
$0
$49
$49
$49
$49
$49
$49
$0
$2,011
$2,011
$2,011
$2,011
$2,011
$2,011
###
###
###
###
###
###

$0
$0
$0
$0

$0
$0
$0
$0

$0
$0
$0
$0
$0
$0
$0
$0

$0
$0
$31,642
$23,731
$15,821
$7,910
$10,946
$0

$7,177
$1,185
$0
$0
$23,417
$179

$3,140
$38,242

$0
$5,601
$3,852
$2,053
$11,506

$853
$0
$31,642
$23,731
$15,821
$7,910
$10,946
$3,502
###

$0
$7,001
$4,815
$2,566
$14,383

$1,066
$0
$31,642
$23,731
$15,821
$7,910
$10,946
$3,502
###

$0
$8,191
$5,634
$3,003
$16,828

$1,248
$0
$31,642
$23,731
$15,821
$7,910
$10,946
$3,502
###

$0
$9,093
$6,253
$3,333
$18,679

$1,385
$0
$31,642
$23,731
$15,821
$7,910
$10,946
$3,502
###

$0
$9,911
$6,816
$3,633
$20,360

$1,509
$0
$31,642
$23,731
$15,821
$7,910
$10,946
$3,502
###

$0
$10,605
$7,293
$3,887
$21,785

$1,615
$0
$31,642
$23,731
$15,821
$7,910
$10,946
$3,502
###

$0
$0
$0
$0
$0
$0
$0
$0
$0
$888
$1,926
$3,078
$4,335
$5,679
$0
$0
$0
$0
$0
$0
$0
$132,152 $132,152 $132,152 $132,152 $132,152 $132,152 $132,152
$0
($53) $10,192
$22,185
$35,506
$50,039
$65,591
$0
$0
$0
$0
$0
$0
$0
###
###
###
###
###
###
###

###

###

###

###

###

$0

$0

$0

$0

$0

$0

Transaction Adjustments
Projections
Debit
Credit
FY 2009 FY 2010E FY 2011E FY 2012E FY 2013E FY 2014E
$10,245
$918

$11,993
$1,073

$13,321
$1,192

$14,532
$1,299

$15,552
$1,390

$40
$888

$37
$1,038

$28
$1,153

$13
$1,256

$10
$1,344

($840)
($714)
($541)
($491)
($416)
($114)
($97)
($73)
($66)
($56)
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$1,400
$1,190
$901
$818
$694
$727
$618
$468
$425
$360
$963
$819
$620
$563
$477
$14,225 $15,957 $17,068 $18,349 $19,355
($1,430)

($1,673)

($1,857)

($2,024)

($2,166)

$12,795

$14,284

$15,211

$16,324

$17,189

$12,795

$14,284

$15,211

$16,324

$17,189

$5,000
$17,795

$17,795
$32,079

$32,079
$47,290

$47,290
$63,614

$63,614
$80,803

Projections
FY 2010E FY 2011E FY 2012E FY 2013E FY 2014E
4.55%

4.78%

4.94%

4.75%

4.40%

7.05%

7.28%

7.44%

7.25%

6.90%

8.05%
9.55%
11.00%
13.00%

8.28%
9.78%
11.00%
13.00%

8.44%
9.94%
11.00%
13.00%

8.25%
9.75%
11.00%
13.00%

7.90%
9.40%
11.00%
13.00%

$0
$0
$0
$0
$0
($2,547) ($2,620) ($2,671) ($2,610) ($2,500)
($2,266) ($2,321) ($2,359) ($2,314) ($2,231)
($1,740) ($1,740) ($1,740) ($1,740) ($1,740)
($1,028) ($1,028) ($1,028) ($1,028) ($1,028)
$402
$538
$1,370
$1,686
$3,031
($7,180) ($7,172) ($6,428) ($6,007) ($4,468)

$5,000
$17,795
$32,079
$47,290
$63,614
($5,000) ($5,000) ($5,000) ($5,000) ($5,000)
$12,795
$14,284
$15,211
$16,324
$17,189
$12,795 $27,079 $42,290 $58,614 $75,803
$0
$0
$0
$0
$0
$12,795 $27,079 $42,290 $58,614 $75,803

$3,164
$1,187
$0
$0
$4,351

$3,164
$1,187
$0
$0
$4,351

$3,164
$1,187
$0
$0
$4,351

$3,164
$1,187
$0
$0
$4,351

$3,164
$1,187
$0
$0
$4,351

$0
$8,445
$0
$0
$0
$8,445

$0
$22,729
$0
$0
$0
$22,729

$0
$28,477
$9,462
$0
$0
$37,939

$0
$28,477
$22,545
$0
$0
$51,022

$0
$28,477
$22,545
$0
$0
$51,022

$0
$12,795

$0
$27,079

$0
$42,290

$3,242
$58,614

$20,430
$75,803