Leveraged Buyout (LBO) Model

Input Values
*Enter values in yellow cells.

Estimated Cost of Deal: Debt Assumptions:

Curent Stock Price $6.00 $ amt Assumed Debt
Offer Premium 10.00% % Maturity Year
Offer Price Per Share 6.60 $ amt Annual Repayment
No. of Shares outstanding 100,000 nos. Coupon Rate
Equity Purchase Price $660,000 $ amt Average Interest
Optional Prepayment
Existing Debt Retired $185,000 $ amt
Assumed Debt $65,000 $ amt Bank Revolver
Expensed Transaction Costs $2,500 $ amt Coupon Rate
Capitalized Financing Costs $10,888 $ amt Revolver limit
Cash Infusion $27,500 $ amt Undrawn Commitment Fee

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

Term Years
Annual Repayment
Sources of Funds: Coupon Rate
Excess Cash $5,000 $ amt Average Interest
Debt: Fees Optional Prepayment
Assumed Debt $65,000 $ amt
Bank Revolver $200,888 $ amt 0.75% Term Loan "B"
Term Loan "A" $80,000 $ amt 1.50% Term Years
Term Loan "B" $55,000 $ amt 1.75% Annual Repayment
Senior Notes $65,000 $ amt 2.00% Bullet Year Repayment
Subordinated Notes $40,000 $ amt 2.50% Coupon Rate
Mezzanine Debt $70,000 $ amt 2.75% Average Interest
Seller Notes $25,000 $ amt 0.00% Optional Prepayment
Preferred:
Preferred Stock $60,000 $ amt 2.00% Senior Notes
Equity: Maturity Year
Common - Sponsor Equity $220,000 $ amt Coupon Rate
Management Equity $40,000 $ amt Average Interest
New Equity $25,000 $ amt Optional Prepayment
Total $950,888 $ amt
Subordinated Notes
Maturity Year
Goodwill / Bargain Purchase: Coupon Rate
Equity Purchase Price $660,000 $ amt Average Interest
Add: Years PIK
Existing Goodwill $20,000 $ amt Optional Prepayment
Less:
Net Assets (Book Value) $464,749 $ amt Mezzanine Debt
Fixed Assets (PP&E) Write-up $2,450 $ amt Maturity Year
Identifiable Tangibles Write-up $1,200 $ amt Coupon Rate
Deferred Tax Liability - existing $1,400 $ amt Average Interest
DTL Created on Assets Write-up ($1,278) $ amt Years PIK
Goodwill/(Gain from Bargain Purchase) $211,479 $ amt Optional Prepayment

Seller Notes
Term Years
Annual Repayment
Coupon Rate
Average Interest
Years PIK
Optional Prepayment

Preferred Stock
Preferred Stock Dividend
Years PIK
Pref Stock Retired Year
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Income/BS Assumptions:
Income Statement:
9 select no. Sales Year 1 $1,100,000 $ amt
11.11% % of FV Sales - Annual Increase 10.00% %
4.25% % annual Cost of goods sold 45.00% % of revenue
1 1=Yes 0=No Cost of goods sold - Annual Increase 0.25% %
1 1=Yes 0=No SG&A expenses 14.00% % of revenue
SG&A expenses - Annual Increase 0.50% %
Other expenses 12.00% % of revenue
4.75% % annual Other expenses - Annual Increase 0.15% %
$600,000 $ amt
1.00% % annual Balance Sheet:
Accounts receivable 18.00% % of revenue
Accounts receivable - Annual Increase 5.00% %
8 select no. Inventories 20.00% % of COGS
12.50% % of FV Inventories - Annual Increase 4.00% %
5.50% % annual Prepaids 4.50% % of revenue
1 1=Yes 0=No Prepaids - Annual Increase 2.00% %
1 1=Yes 0=No Other current assets 12.00% % of revenue
Other current assets - Annual Increase 2.50% %
Other long-term assets 4.00% % of revenue
11 select no. Other long-term assets - Annual Increase 0.50% %
4.00% % of FV
60.00% % of FV Accounts payable 15.00% % of COGS plus inventory in
5.25% % annual Accounts payable - Annual Increase 2.00% %
1 1=Yes 0=No Accrued expenses 6.00% % of revenue
1 1=Yes 0=No Accrued expenses - Annual Increase 1.50% %
Other current liabilities 8.00% % of revenue
Other current liabilities - Annual Increase 1.00% %
9 select no. Capex 10.00% % of revenue
4.25% % annual Capex Start Year 1 in years
1 1=Yes 0=No Capex Interval 1 in years
1 1=Yes 0=No

Other Assumptions:
12 select no. Cash Minimum $50,000 $ amt
4.50% % annual On / Off 1 1=On. 0=Off.
0 1=Yes 0=No
5 enter no. Tax Rate 35.00% %
1 1=Yes 0=No Year 1 2010 year

14 select no. DCF Assumptions:

4.50% % annual Discount Rate (WACC) 7.00% %
0 1=Yes 0=No Discount Rate Range 1.0% %
5 enter no. EBITDA Terminal Value Multiple 6.0x x
1 1=Yes 0=No EBITDA Multiple Range 2.0x x
Perpetuity Growth Rate 3.00% %
Perpetuity Growth Range 0.5% %
7 select no. Net Debt $583,388 $ amt
14.29% % of FV
5.25% % annual
1 1=Yes 0=No
5 enter no.
1 1=Yes 0=No

7.00% % annual
5 enter no.
select no.
Financing Annual
Costs Amortization
Period (Yrs)
4,500 450 10
1,200 150
963 88
1,300 144
1,000 83
1,925 138
0 0
10,888 1,053
1,200
12,088
Income Statements

Year 2010 2011 2012 2013 2014

Year No. 1 2 3 4 5

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

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

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

Operating Expenses 286,000 315,665 348,408 384,548 424,438

SG&A expenses 154,000 170,247 188,208 208,064 230,015
Other expenses 132,000 145,418 160,200 176,484 194,423

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

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

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

Interest Expense 32,061 30,509 26,835 22,778 20,741

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

Other Expenses (Income) (197) (297) 353 (35) (257)

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

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

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

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

Dividend 6,700 7,194 7,659 8,245 8,955

Preferred Stock Dividend 4,200 4,494 4,809 5,145 5,505
Common Stock Dividend 2,500 2,700 2,850 3,100 3,450

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

2015 2016 2017 2018 2019
6 7 8 9 10

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

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

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

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

254,281 281,108 310,765 343,551 379,795
214,187 235,959 259,944 286,367 315,476

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

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

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

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

0 0 0 0 0
14,005 12,049 8,161 6,000 6,000
0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
97 0 0 0 0
1,640 0 0 0 0
317 0 0 0 0

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

2,271 450 450 450 450

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

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

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

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

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

5,891 5,891 5,891 5,891 5,891
3,500 3,700 4,000 4,100 4,400

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

Balance Sheets

Year Pre-Acq Adj Post-Acq 2010 2011 2012

Year No. 0 1 2 3

ASSETS

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

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

Non-Current Assets:
Goodwill 20,000 191,479 211,479 211,479 211,479 211,479
Intangible Assets 950 1,200 2,150 1,971 1,792 1,613
Capitalized Financing Costs 0 10,888 10,888 9,835 8,782 6,979
Other Long-Term Assets 15,000 15,000 44,000 48,642 53,774
PP&E:
Gross PP&E 500,000 2,450 502,450 502,450 612,450 733,450
Capex 0 0 110,000 121,000 133,100
Depreciation (Current) 0 0 72,745 84,845 93,718
Accumulated Depreciation 25,000 25,000 97,745 182,590 276,308
Net PP&E 475,000 477,450 514,705 550,860 590,242

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

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

LIABILITIES & EQUITY

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

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

Deferred Tax Liability 1,400 (123) 1,278 5,873 6,119 6,366

Long-Term Debt:
Existing Debt 250,000 (185,000) 65,000 57,778 0 0
Bank Revolver 0 200,888 200,888 213,470 213,470 213,470
Term Loan "A" 0 80,000 80,000 70,000 57,264 0
Term Loan "B" 0 55,000 55,000 52,800 50,600 29,091
Senior Notes 0 65,000 65,000 65,000 65,000 65,000
Subordinated Notes 0 40,000 40,000 41,800 43,681 45,647
Mezzanine Debt 0 70,000 70,000 73,150 76,442 79,882
Seller Notes 0 25,000 25,000 22,680 20,235 17,659
Total Long Term Debt 250,000 600,888 596,678 526,692 450,748

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

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

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

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

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

Balance Sheet Check 0 0 0 0 0 0

2013 2014 2015 2016 2017 2018 2019
4 5 6 7 8 9 10

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

305,078 352,365 406,982 470,064 542,924 627,077 724,274
149,337 171,268 196,421 225,267 258,350 296,291 339,804
69,917 78,447 88,018 98,756 110,804 124,322 139,489
189,201 213,324 240,523 271,190 305,766 344,752 388,707

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

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

1,433 1,254 1,075 896 717 538 358
5,464 4,071 1,800 1,350 900 450 0
59,447 65,719 72,652 80,317 88,790 98,157 108,513

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

146,410 161,051 177,156 194,872 214,359 235,795 259,374
104,176 117,597 128,669 101,352 115,643 127,868 149,482
380,485 498,082 626,751 728,103 843,747 971,614 1,121,096
632,475 675,929 724,416 817,935 916,651 1,024,578 1,134,470

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

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

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

91,859 102,560 114,508 127,849 142,743 159,373 177,940
120,677 134,072 148,954 165,488 183,857 204,266 226,939

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

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

0 0 0 0 0 0 0
213,470 213,470 161,317 57,619 0 0 0
0 0 0 0 0 0 0
0 0 0 0 0 0 0
5,819 0 0 0 0 0 0
47,701 2,147 0 0 0 0 0
83,476 36,454 0 0 0 0 0
14,943 12,081 0 0 0 0 0
 365,410 264,152 161,317 57,619 0 0 0

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

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

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

285,000 285,000 285,000 285,000 285,000 285,000 285,000
614,884 811,203 1,029,603 1,299,064 1,593,877 1,917,400 2,265,129

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

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

0 0 0 0 0 0 0
Cash Flows

Year 2010 2011 2012 2013

Year No. 1 2 3 4

Cash flows from operating activities

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

Non-cash adjustments:
Depreciation and amortization 72,924 85,024 93,898 104,355
Amortization of Capitalized Financing Costs 1,053 1,053 1,803 1,515
Increase (Decrease) in Deferred Tax Liability 4,595 247 247 2,280
Accrued Interest Subordinated Notes 1,800 1,881 1,966 2,054
Accrued Interest Mezzanine Debt 3,150 3,292 3,440 3,595
Accrued Interest Seller Notes 1,252 1,127 995 856
Accrued Interest Preferred Stock 4,200 4,494 4,809 5,145

Changes in operating assets and liabilities:

(Increase) decrease in accounts receivable (113,000) (30,690) (35,447) (40,941)
(Increase) decrease in inventories (3,001) (14,539) (16,674) (19,123)
(Increase) decrease in prepaids & other assets (114,500) (22,869) (25,752) (28,998)
Increase (decrease) in accounts payable 22,900 11,041 10,801 12,166
Increase (decrease) in accrued exp & other liabilities 108,000 17,457 19,437 21,642

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

Cash flows from investing activities

Purchase of property & equipment (110,000) (121,000) (133,100) (146,410)
(Increase) decrease in other long-term assets (29,000) (4,642) (5,132) (5,673)

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

Cash flows from financing activities

Increase (decrease) in Existing Debt (7,222) (57,778) 0 0
Increase (decrease) in Term Loan "A" (10,000) (12,736) (57,264) 0
Increase (decrease) in Term Loan "B" (2,200) (2,200) (21,509) (29,091)
Increase (decrease) in Senior Notes 0 0 0 (59,181)
Increase (decrease) in Subordinated Notes 0 0 0 0
Increase (decrease) in Mezzanine Debt 0 0 0 0
Increase (decrease) in Seller Notes (3,571) (3,571) (3,571) (3,571)
Increase (decrease) in Preferred Stock 0 0 0 0

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

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

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

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

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

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

Free Cash Flows

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

Add: Amortization of non-deductible goodwill & intangibles 0 0 0 0
EBIT (Adj) 246,076 263,450 286,746 311,398
Less: Tax on EBIT (Adj) 86,127 92,207 100,361 108,989
Unlevered Net Income 159,949 171,242 186,385 202,409
Plus: D&A & other non-cash charges affecting EBIT 72,924 85,024 93,898 104,355
Less: Capital Expenditures 110,000 121,000 133,100 146,410
Less: Increase in Net (non-cash) Working Capital 99,601 39,600 47,635 55,254
Less: (Increase) decrease in Deferred Tax (4,595) (247) (247) (2,280)
Unlevered Free Cash Flows (UFCF) 27,868 95,913 99,794 107,380

Debt Repayment

Cash Available for Debt Repayment

Cash at beginning of year 77,500 50,000 50,000 50,000
Net cash provided by (used in) operating activities 121,911 201,928 220,576 243,926
Net cash provided by (used in) investing activities (139,000) (125,642) (138,232) (152,083)
Sub-total 60,411 126,286 132,344 141,843
Minimum Cash Balance 50,000 50,000 50,000 50,000
Cash Available for Debt Repayment 10,411 76,286 82,344 91,843

Mandatory Repayment
Existing Debt 7,222 7,222 0 0
Term Loan "A" 10,000 10,000 10,000 0
Term Loan "B" 2,200 2,200 2,200 2,200
Senior Notes 0 0 0 0
Subordinated Notes 0 0 0 0
Mezzanine Debt 0 0 0 0
Seller Notes 3,571 3,571 3,571 3,571
Preferred Stock 0 0 0 0
Sub-total 22,994 22,994 15,771 5,771

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

Incremental Revolver 12,583 0 0 0
Cash Available for Optional Repayment 0 53,292 66,572 86,072

Optional Repayment
Existing Debt 0 50,556 0 0
Term Loan "A" 0 2,736 47,264 0
Term Loan "B" 0 0 19,309 26,891
Senior Notes 0 0 0 59,181
Subordinated Notes 0 0 0 0
Mezzanine Debt 0 0 0 0
Seller Notes 0 0 0 0
 Bank Revolver 0 0 0 0
Sub-total 0 53,292 66,572 86,072

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

Cash Flow Check 0 0 0 0

2014 2015 2016 2017 2018 2019
5 6 7 8 9 10

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

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

1,393 2,271 450 450 450 450
11,657 11,675 20,859 53,405 37,782 (4,989)
2,147 0 0 0 0 0
3,756 0 0 0 0 0
709 0 0 0 0 0
5,505 0 0 0 0 0

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

(21,932) (25,152) (28,846) (33,083) (37,941) (43,513)
(32,653) (36,769) (41,405) (46,625) (52,503) (59,123)
13,704 15,438 17,392 19,594 22,077 24,876
24,097 26,830 29,874 33,264 37,038 41,240

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

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

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

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

0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
(5,819) 0 0 0 0 0
(47,701) (2,147) 0 0 0 0
(50,779) (36,454) 0 0 0 0
(3,571) (12,081) 0 0 0 0
0 0 0 0 0 0

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

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

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

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

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

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

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

0 0 0 0 0 0
336,292 367,027 439,960 475,435 517,499 555,100
117,702 128,460 153,986 166,402 181,125 194,285
218,590 238,568 285,974 309,033 336,374 360,815
117,776 128,849 101,532 115,822 128,047 149,661
161,051 177,156 194,872 214,359 235,795 259,374
64,071 74,270 86,067 99,710 115,483 133,717
(11,657) (11,675) (20,859) (53,405) (37,782) 4,989
122,901 127,665 127,426 164,192 150,925 112,395

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

275,193 286,924 306,235 364,780 374,319 359,134
(167,323) (184,089) (202,536) (222,832) (245,162) (269,730)
157,870 152,834 153,698 191,948 263,486 352,890
50,000 50,000 50,000 50,000 50,000 50,000
107,870 102,834 103,698 141,948 213,486 302,890

0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
3,571 3,571 0 0 0 0
0 0 0 0 0 0
3,571 3,571 0 0 0 0

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

0 0 0 0 0 0
104,299 99,263 103,698 141,948 213,486 302,890

0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
5,819 0 0 0 0 0
47,701 2,147 0 0 0 0
50,779 36,454 0 0 0 0
0 8,509 0 0 0 0
 0 52,153 103,698 57,619 0 0
104,299 99,263 103,698 57,619 0 0

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

0 0 0 0 0 0
Depreciation & Amortization

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

PP&E Write-up $2,450
Fair Value PP&E $502,450
Accumulated Depreciation 25,000
Net PP&E $477,450

Year 2010 2011 2012

Year No. 1 2 3

Existing PP&E (incl Write-up)

Beginning Amt Remaining Life Salvage
Class 1 $90,000 12 $900 7,425 7,425 7,425
Class 2 85,000 10 800 8,420 8,420 8,420
Class 3 60,000 8 600 7,425 7,425 7,425
Class 4 242,450 6 600 40,308 40,308 40,308
477,450 2,900 63,578 63,578 63,578

Capex
Year Capex Useful Life Salvage
1 $110,000 12 9,167 9,167 9,167
2 121,000 10 0 12,100 12,100
3 133,100 15 0 0 8,873
4 146,410 14 0 0 0
5 161,051 12 0 0 0
6 177,156 16 0 0 0
7 194,872 15 0 0 0
8 214,359 15 0 0 0
9 235,795 12 0 0 0
10 259,374 12 0 0 0
1,753,117 0 9,167 21,267 30,140

Computed Depreciation 72,745 84,845 93,718

Manual Depreciation 40,000 40,000 40,000

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

Period (Yrs)
Amortization of Intangibles (incl Write-up) 12 179 179 179
Impairment of Goodwill 0 0 0
Total Cost ($)
Amortization of Capitalized Financing Costs 10,888 1,053 1,053 1,803
Bank Revolver 450 450 450
Term Loan "A" 150 150 900
Term Loan "B" 88 88 88
Senior Notes 144 144 144
Subordinated Notes 83 83 83
Mezzanine Debt 138 138 138
Seller Notes 0 0 0
Tax Depreciation & Amortization: Tax PP&E $415,000

Existing PP&E (Tax)

Beginning Amt Remaining Life Salvage
Class 1 $130,000 12 $900 10,758 10,758 10,758
Class 2 105,000 10 800 10,420 10,420 10,420
Class 3 95,000 8 600 11,800 11,800 11,800
Class 4 85,000 6 600 14,067 14,067 14,067
415,000 2,900 47,045 47,045 47,045

Capex
Year Capex Useful Life Salvage
1 $110,000 12 9,167 9,167 9,167
2 121,000 8 0 15,125 15,125
3 133,100 15 0 0 8,873
4 146,410 9 0 0 0
5 161,051 4 0 0 0
6 177,156 16 0 0 0
7 194,872 15 0 0 0
8 214,359 2 0 0 0
9 235,795 12 0 0 0
10 259,374 12 0 0 0
1,753,117 0 9,167 24,292 33,165

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

Period (Yrs)
Amortization of Intangibles (incl Write-up) 15 143 143 143
Amortization of Goodwill 15 14,099 14,099 14,099
 Depreciation Method
0 0=SLN 1=Sum of Years
Manual or Computed Depreciation
1 0=Manual 1=Computed
Goodwill & Intangibles Amortization
0=Not Deductible 1=Tax Deductible
1 Tax Deductible

2013 2014 2015 2016 2017 2018 2019

4 5 6 7 8 9 10

7,425 7,425 7,425 7,425 7,425 7,425 7,425

8,420 8,420 8,420 8,420 8,420 8,420 8,420
7,425 7,425 7,425 7,425 7,425 0 0
40,308 40,308 40,308 0 0 0 0
63,578 63,578 63,578 23,270 23,270 15,845 15,845

9,167 9,167 9,167 9,167 9,167 9,167 9,167

12,100 12,100 12,100 12,100 12,100 12,100 12,100
8,873 8,873 8,873 8,873 8,873 8,873 8,873
10,458 10,458 10,458 10,458 10,458 10,458 10,458
0 13,421 13,421 13,421 13,421 13,421 13,421
0 0 11,072 11,072 11,072 11,072 11,072
0 0 0 12,991 12,991 12,991 12,991
0 0 0 0 14,291 14,291 14,291
0 0 0 0 0 19,650 19,650
0 0 0 0 0 0 21,615
40,598 54,019 65,091 78,082 92,373 112,023 133,637

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

40,000 40,000 40,000 40,000 40,000 40,000 40,000

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

179 179 179 179 179 179 179

0 0 0 0 0 0 0

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

450 450 450 450 450 450 450
0 0 0 0 0 0 0
700 0 0 0 0 0 0
144 722 0 0 0 0 0
83 83 583 0 0 0 0
138 138 1,238 0 0 0 0
0 0 0 0 0 0 0
 Depreciation Method
0 0=SLN 1=Sum of Years

10,758 10,758 10,758 10,758 10,758 10,758 10,758

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

9,167 9,167 9,167 9,167 9,167 9,167 9,167

15,125 15,125 15,125 15,125 15,125 15,125 0
8,873 8,873 8,873 8,873 8,873 8,873 8,873
16,268 16,268 16,268 16,268 16,268 16,268 16,268
0 40,263 40,263 40,263 40,263 0 0
0 0 11,072 11,072 11,072 11,072 11,072
0 0 0 12,991 12,991 12,991 12,991
0 0 0 0 107,179 107,179 0
0 0 0 0 0 19,650 19,650
0 0 0 0 0 0 21,615
49,433 89,696 100,768 113,759 220,939 200,325 99,636

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

143 143 143 143 143 143 143

14,099 14,099 14,099 14,099 14,099 14,099 14,099
Income Tax Calculation

Year 2010 2011 2012 2013 2014

Year No. 1 2 3 4 5

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

Add: Book Depreciation 72,745 84,845 93,718 104,176 117,597

Add: Book (Gain) Loss on Assets Sale 1,250 1,350 1,450 1,550 1,650
Add: Book Impairment of Goodwill 0 0 0 0 0
Add: Book Amortization of Intangibles 179 179 179 179 179
Add: Non-Deductible Expenses 0 0 0 0 0

Less: Tax Depreciation 56,212 71,337 80,210 96,478 136,741

Less: Tax (Gain) Loss on Assets Sale 1,350 1,500 1,600 1,700 1,750
Less: Tax Amortization of Goodwill 14,099 14,099 14,099 14,099 14,099
Less: Tax Amortization of Intangibles 143 143 143 143 143

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

Less: NOLs Used 15,500 0 0 0 0

Post-NOL Taxable Income 201,082 232,534 258,855 282,140 282,501

Cash Taxes Payable 70,379 81,387 90,599 98,749 98,875

Total Book Tax 74,974 81,633 90,846 101,029 110,533

Increase (Decrease) in Deferred
Tax Liability 4,595 247 247 2,280 11,657

Beginning NOL Balance 15,500 0 0 0 0

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

Projected Asset Sales:

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

Book Basis of Assets 2,750 3,150 3,550 3,950 4,350

Tax Basis of Assets 2,650 3,000 3,400 3,800 4,250

Book Gain (Loss) on Sale 1,250 1,350 1,450 1,550 1,650

Tax Gain (Loss) on Sale 1,350 1,500 1,600 1,700 1,750

Allocation to Balance Sheet:

PP&E: 1,500 1,700 1,900 2,100 2,300
Other Long-Term Assets 1,250 1,450 1,650 1,850 2,050
2015 2016 2017 2018 2019
6 7 8 9 10

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

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

1,750 1,850 1,950 2,050 2,150
0 0 0 0 0
179 179 179 179 179
0 0 0 0 0

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

1,900 2,000 2,200 2,300 2,500
14,099 14,099 14,099 14,099 14,099
143 143 143 143 143

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

0 0 0 0 0

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

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

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

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

0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
0 0 0 0 0

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

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

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

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

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

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

2,250 2,450 2,650 2,850 3,050
Weighted Average Cost of Capital

Risk Free Rate (Treasury Bill Rate) 5.00% WACC

Market Risk Premium 4.50% 0 = Manual 1 = Computed
Levered Beta 1.20 1 Computed

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

Total Debt 600,888 4.76%

Post-Tax 3.10%

Estimated Cost of Preferred Stock

Preferred Stock 60,000 7.00%

Estimated Cost of Equity (CAPM)

Total Book Equity 282,500 16.03%

Beta Calculation

Levered Beta 1.20

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

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

Tax Rate 35.00%

Unlevered Beta 0.94

Relevered Beta 2.45

 WACC Manual
nual 1 = Computed WACC
Computed 8.50%

Computed WACC
Proportion Rate Wtd. Cost
63.69% 3.10% 1.97%
6.36% 7.00% 0.45%
29.95% 16.03% 4.80%

7.22%
Discounted Cash Flow Analysis

NPV of Free Cash Flow

NPV of FCFF @ 6.00% 802,189

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

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

Terminal Value @ 4.0x 2,819,044 Terminal Value @ 6.00%

Terminal Value @ 6.0x 4,228,567 Terminal Value @ 7.00%
Terminal Value @ 8.0x 5,638,089 Terminal Value @ 8.00%

FV of Terminal Value (Perpetuity) PV of Terminal Value (Pe

2.5% 3.0% 3.5%
Terminal Value @ 6.00% 3,291,577 3,858,906 4,653,167 Terminal Value @ 6.00%
Terminal Value @ 7.00% 2,560,116 2,894,180 3,323,690 Terminal Value @ 7.00%
Terminal Value @ 8.00% 2,094,640 2,315,344 2,585,093 Terminal Value @ 8.00%

Total Enterprise Value

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

Total Equity Value

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

Total Equity Value Per Share

EBITDA Multiple Method Perpetuity Growth Method
4.0x 6.0x 8.0x 2.5% 3.0%
6.0% $17.93 $25.80 $33.67 6.0% $20.57 $23.74
7.0% $16.10 $23.26 $30.43 7.0% $14.78 $16.48
8.0% $14.43 $20.96 $27.49 8.0% $11.08 $12.10
 PV of Terminal Value (EBITDA)
4.0x 6.0x 8.0x
1,574,140 2,361,210 3,148,279
1,433,059 2,149,589 2,866,119
1,305,763 1,958,645 2,611,526

PV of Terminal Value (Perpetuity)

2.5% 3.0% 3.5%
1,838,000 2,154,793 2,598,304
1,301,433 1,471,254 1,689,596
970,224 1,072,452 1,197,398

Percentage Split of DCF Analysis

ity Growth Method
3.5% EBITDA Multiple Method
$3,400,493 Cash Flow % of TEV: 4.0x 6.0x 8.0x
$2,449,636 @ 6.00% 33.8% 25.4% 20.3%
$1,918,294 @ 7.00% 34.7% 26.1% 21.0%
@ 8.00% 35.6% 26.9% 21.6%
Terminal Value % of TEV:
@ 6.00% 66.2% 74.6% 79.7%
ity Growth Method @ 7.00% 65.3% 73.9% 79.0%
3.5% @ 8.00% 64.4% 73.1% 78.4%
$2,817,105
$1,866,249 Perpetuity Growth Method
$1,334,907 Cash Flow % of TEV: 2.5% 3.0% 3.5%
@ 6.00% 30.4% 27.1% 23.6%
@ 7.00% 36.9% 34.1% 31.0%
@ 8.00% 42.6% 40.2% 37.6%
ity Growth Method Terminal Value % of TEV:
3.5% @ 6.00% 69.6% 72.9% 76.4%
$28.17 @ 7.00% 63.1% 65.9% 69.0%
$18.66 @ 8.00% 57.4% 59.8% 62.4%
$13.35
IRR / Returns Calculation

Exit Year 2018 9

Equity Allocation on Exit Investment Undiluted % Allocation Diluted Allocation

Common - Sponsor Equity $220,000 77.19% 0.00% 63.30% 2,565,228

Management Equity 40,000 14.04% 0.00% 11.51% 466,405
New Equity 25,000 8.77% 2.00% 9.19% 372,555
Subordinated Notes 40,000 N/A 3.00% 3.00% 121,578
Mezzanine Debt 70,000 N/A 5.00% 5.00% 202,630
Preferred Stock 60,000 N/A 4.00% 4.00% 162,104
Management Performance Equity N/A N/A 4.00% 4.00% 162,104

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

Cash Flows & IRR Post-Acq 2010 2011 2012 2013

0 1 2 3 4

Subordinated Notes
Initial Investment (40,000)
Cash Interest 0 0 0 0
Repayment 0 0 0 0
Principal 0 0 0 0
Participation on Exit 0 0 0 0
IRR 21.41% (40,000) 0 0 0 0

Mezzanine Debt
Initial Investment (70,000)
Cash Interest 0 0 0 0
Repayment 0 0 0 0
Principal 0 0 0 0
Participation on Exit 0 0 0 0
IRR 20.56% (70,000) 0 0 0 0

Preferred Stock
Initial Investment (60,000)
Cash Dividend 0 0 0 0
Repayment 0 0 0 0
Principal 0 0 0 0
Participation on Exit 0 0 0 0
IRR 18.54% (60,000) 0 0 0 0

Common - Sponsor Equity

Initial Investment (220,000)
Cash Dividend 1,930 2,084 2,200 2,393
Participation on Exit 0 0 0 0
IRR 31.82% (220,000) 1,930 2,084 2,200 2,393
Management Equity
Initial Investment (40,000)
Cash Dividend 351 379 400 435
Participation on Exit 0 0 0 0
IRR 36.21% (40,000) 351 379 400 435

New Equity
Initial Investment (25,000)
Cash Dividend 219 237 250 272
Participation on Exit 0 0 0 0
IRR 35.42% (25,000) 219 237 250 272
 Allocation of Exit Proceeds

EBITDA Multiple (Exit Year) 6.0x

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

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

Equity Value - Allocable Proceeds 4,052,606

2014 2015 2016 2017 2018 2019

5 6 7 8 9 10

0 97 0 0 0 0
47,701 2,147 0 0 0 0
0 0 0 0 0 0
0 0 0 0 121,578 0
47,701 2,243 0 0 121,578 0

0 1,640 0 0 0 0
50,779 36,454 0 0 0 0
0 0 0 0 0 0
0 0 0 0 202,630 0
50,779 38,094 0 0 202,630 0

0 5,891 5,891 5,891 5,891 0

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

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

0 0 0 0 2,565,228 0
2,663 2,702 2,856 3,088 2,568,393 0
484 491 519 561 575 0
0 0 0 0 628,509 0
484 491 519 561 629,085 0

303 307 325 351 360 0

0 0 0 0 372,555 0
303 307 325 351 372,915 0
Ratio Analysis

Year 2010 2011 2012 2013 2014

Year No. 1 2 3 4 5

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

Leverage Ratios
Total Debt / EBITDA 2.1x 1.7x 1.4x 1.1x 0.8x
Total Debt / (EBITDA - Capex) 3.2x 2.6x 2.1x 1.6x 1.2x
Net Debt / EBITDA 1.9x 1.6x 1.2x 0.9x 0.7x
Senior Debt / EBITDA 1.4x 1.1x 0.8x 0.5x 0.5x

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

(EBITDA - Capex) / Total Interest 5.8x 6.5x 7.8x 9.6x 11.2x

(EBITDA - Capex) / Senior Interest 8.1x 9.4x 12.1x 16.6x 20.7x
(EBITDA - Capex) / Cash Interest 8.1x 9.4x 12.1x 16.6x 20.7x

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

Asset Utilization
Total Asset Turnover (Sales) 0.9x 0.9x 0.9x 0.9x 0.9x
Fixed Asset Turnover (Sales) 2.2x 2.3x 2.3x 2.4x 2.5x

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

Liquidity Ratios
Current Ratio 2.3x 2.3x 2.3x 2.4x 2.4x
Quick (Acid Test) Ratio 1.1x 1.1x 1.1x 1.1x 1.1x

Returns
Return on Equity (ROE) 38.72% 30.19% 25.61% 22.52% 20.02%
Return on Assets (ROA) 13.25% 12.24% 12.27% 12.28% 12.19%
Operating Results
Sales Growth N/A 10.00% 10.00% 10.00% 10.00%
Gross Margin 55.00% 54.89% 54.77% 54.66% 54.55%
EBITDA Margin 29.00% 28.80% 28.60% 28.40% 28.19%
EBIT Margin 22.37% 21.77% 21.54% 21.27% 20.88%
Pre-Tax Profit Ratio 19.47% 19.28% 19.50% 19.72% 19.61%
 2015 2016 2017 2018 2019
6 7 8 9 10

0.3x 0.3x 0.3x 0.3x 0.2x

0.2x 0.1x 0.0x 0.0x 0.0x
0.2x 0.1x 0.0x 0.0x 0.0x

0.5x 0.3x 0.1x 0.1x 0.1x

0.8x 0.4x 0.2x 0.2x 0.2x
0.4x 0.2x -0.1x -0.3x -0.4x
0.3x 0.1x 0.0x 0.0x 0.0x

22.6x 30.2x 42.1x 54.3x 59.3x

35.4x 44.9x 72.5x 107.6x 117.5x
22.6x 30.2x 42.1x 54.3x 59.3x

14.5x 19.3x 26.8x 34.5x 37.5x

22.8x 28.8x 46.2x 68.3x 74.2x
14.5x 19.3x 26.8x 34.5x 37.5x

16.7x 24.5x 33.8x 43.5x 46.7x

0.9x 0.9x 0.9x 0.8x 0.8x

2.5x 2.5x 2.5x 2.4x 2.4x

4.4x 4.2x 4.1x 3.9x 3.8x

4.7x 4.4x 4.2x 4.0x 3.8x
6.4x 6.3x 6.1x 6.0x 5.9x
83.1 86.5 89.9 93.5 97.2
78.2 82.1 86.2 90.6 95.1
57.1 58.2 59.4 60.6 61.8

2.4x 2.5x 2.7x 3.0x 3.1x

1.1x 1.2x 1.4x 1.6x 1.7x

18.41% 18.85% 17.26% 16.05% 14.82%

12.17% 13.32% 12.68% 11.92% 11.14%
10.00% 10.00% 10.00% 10.00% 10.00%
54.43% 54.32% 54.21% 54.09% 53.98%
27.99% 27.79% 27.58% 27.38% 27.17%
20.72% 22.58% 22.18% 21.95% 21.40%
19.78% 22.03% 21.87% 21.76% 21.24%