Investment Banking

Valuation, Leveraged Buyouts,

and Mergers & Acquisitions
LBO Analysis - Completed

JOSHUA ROSENBAUM
JOSHUA PEARL

ValueCo Corporation
Leveraged Buyout Analysis

Financing Structure:
Operating Scenario:

($ in millions, fiscal year ending December 31)

Structure 1
Base

Transaction Summary
Sources of Funds
% of Total
Amount
Revolving Credit Facility
Term Loan A
Term Loan B
Term Loan C
2nd Lien
Senior Notes
Senior Subordinated Notes
Equity Contribution
Rollover Equity
Cash on Hand
Total Sources

Sources
-

450.0
300.0
385.0
25.0
$1,160.0

Uses of Funds

Purchase Price

Multiple of EBITDA
9/30/2008

% of Total

Cumulative

-%
-%
38.8%

-x
-x
3.1x

-x
-x
3.1x

-%
-%

-x
-x

3.1x
3.1x

-x
2.0x
2.6x
-x
0.2x
7.9x

3.1x
5.1x
7.7x
7.7x
7.9x
7.9x

-%
25.9%
33.2%
-%
2.2%
100.0%

Pricing
L+325 bps
NA

Purchase ValueCo Equity

Repay Existing Debt

L+350 bps
NA

Tender / Call Premiums

Financing Fees

20.0

Other Fees and Expenses

15.0

NA
NA
10.000%

Amount
$825.0
300.0

Total Uses

$1,160.0

Offer Price per Share

Return Analysis
$16.50 Exit Year

Uses

Fully Diluted Shares

71.1% Equity Purchase Price
25.9% Plus: Existing Net Debt
-%
Enterprise Value

2013
7.5x

50.0 Entry Multiple

$825.0 Exit Multiple
275.0
IRR
$1,100.0

7.5x
NA
NM

Cash Return

1.7%
1.3%

Transaction Multiples
Enterprise Value / Sales
LTM 9/30/2008
$977.8
2008E
1,000.0
Enterprise Value / EBITDA
LTM 9/30/2008
$146.7
150.0
100.0% 2008E

Options
Financing Structure
1.1x Operating Scenario
1.1x Cash Flow Sweep
Cash Balance
7.5x Average Interest
7.3x Financing Fees

1
1
1
1
1
1

Summary Financial Data

Historical Period
LTM

Pro forma

Year 1

Year 2

Year 3

Projection Period
Year 5
Year 6

Year 4

Year 7

Year 8

Year 9

Year 10

2005
$780.0
NA

2006
$850.0
9.0%

2007
$925.0
8.8%

9/30/2008
$977.8
NA

2008
$1,000.0
8.1%

2009
$1,080.0
8.0%

2010
$1,144.8
6.0%

2011
$1,190.6
4.0%

2012
$1,226.3
3.0%

2013
$1,263.1
3.0%

2014
$1,301.0
3.0%

2015
$1,340.0
3.0%

2016
$1,380.2
3.0%

2017
$1,421.6
3.0%

2018
$1,464.3
3.0%

Gross Profit
% margin

$308.1
39.5%

$337.9
39.8%

$370.0
40.0%

$391.1
40.0%

$400.0
40.0%

$432.0
40.0%

$457.9
40.0%

$476.2
40.0%

$490.5
40.0%

$505.2
40.0%

$520.4
40.0%

$536.0
40.0%

$552.1
40.0%

$568.7
40.0%

$585.7
40.0%

EBITDA
% margin

$109.2
14.0%

$123.3
14.5%

$138.8
15.0%

$146.7
15.0%

$150.0
15.0%

$162.0
15.0%

$171.7
15.0%

$178.6
15.0%

$183.9
15.0%

$189.5
15.0%

$195.1
15.0%

$201.0
15.0%

$207.0
15.0%

$213.2
15.0%

$219.6
15.0%

15.0
1.9%

18.0
2.1%

18.5
2.0%

19.6
2.0%

20.0
2.0%

21.6
2.0%

22.9
2.0%

23.8
2.0%

24.5
2.0%

25.3
2.0%

26.0
2.0%

26.8
2.0%

27.6
2.0%

28.4
2.0%

29.3
2.0%

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$162.0
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(21.6)
(8.0)
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$171.7
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(22.9)
(6.5)
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$178.6
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(23.8)
(4.6)
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$183.9
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(24.5)
(3.6)
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$189.5
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(25.3)
(3.7)
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$195.1
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(26.0)
(3.8)
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$201.0
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(26.8)
(3.9)
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$207.0
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(27.6)
(4.0)
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$213.2
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(28.4)
(4.1)
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$219.6
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(29.3)
(4.3)
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Sales
% growth

Capital Expenditures
% sales
Cash Interest Expense
Total Interest Expense
Free Cash Flow
EBITDA
Less: Cash Interest Expense
Plus: Interest Income
Less: Income Taxes
Less: Capital Expenditures
Less: Increase in Net Working Capital
Free Cash Flow
Cumulative Free Cash Flow

Capitalization
Cash

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Revolving Credit Facility

Term Loan A
Term Loan B
Term Loan C
Existing Term Loan
2nd Lien
Other Debt
Total Senior Secured Debt

450.0
$450.0

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Senior Notes
Total Senior Debt

$450.0

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Senior Subordinated Notes

Total Debt

300.0
$750.0

300.0
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300.0
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300.0
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300.0
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300.0
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300.0
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300.0
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300.0
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300.0
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300.0
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370.0
$1,120.0

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Shareholders' Equity
Total Capitalization
% of Bank Debt Repaid

Credit Statistics
% Debt / Total Capitalization
EBITDA / Cash Interest Expense
(EBITDA - Capex) / Cash Interest Expense
EBITDA / Total Interest Expense
(EBITDA - Capex) / Total Interest Expense
Senior Secured Debt / EBITDA
Senior Debt / EBITDA
Total Debt / EBITDA
Net Debt / EBITDA

67.0%

-x
-x

-x
-x

-x
-x

-x
-x

-x
-x

-x
-x

-x
-x

-x
-x

-x
-x

-x
-x

-x
-x

-x
-x

-x
-x

-x
-x

-x
-x

-x
-x

-x
-x

-x
-x

-x
-x

-x
-x

-x
-x

-x
-x

3.0x
3.0x
5.0x
5.0x

-x
-x
-x
Err:522

-x
-x
-x
Err:522

-x
-x
-x
Err:522

-x
-x
-x
Err:522

-x
-x
-x
Err:522

-x
-x
-x
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-x
-x
-x
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-x
-x
-x
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-x
-x
-x
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-x
-x
-x
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($ in millions, fiscal year ending December 31)

Income Statement
Historical Period
LTM

Pro forma

Year 1

Year 2

Year 3

Year 4

Projection Period
Year 5
Year 6

Year 7

Year 8

Year 9

Year 10

2005
$780.0
NA

2006
$850.0
9.0%

2007
$925.0
8.8%

9/30/2008
$977.8
NA

2008
$1,000.0
8.1%

2009
$1,080.0
8.0%

2010
$1,144.8
6.0%

2011
$1,190.6
4.0%

2012
$1,226.3
3.0%

2013
$1,263.1
3.0%

2014
$1,301.0
3.0%

2015
$1,340.0
3.0%

2016
$1,380.2
3.0%

2017
$1,421.6
3.0%

2018
$1,464.3
3.0%

Cost of Goods Sold

Gross Profit
% margin

471.9
$308.1
39.5%

512.1
$337.9
39.8%

555.0
$370.0
40.0%

586.7
$391.1
40.0%

600.0
$400.0
40.0%

648.0
$432.0
40.0%

686.9
$457.9
40.0%

714.4
$476.2
40.0%

735.8
$490.5
40.0%

757.9
$505.2
40.0%

780.6
$520.4
40.0%

804.0
$536.0
40.0%

828.1
$552.1
40.0%

853.0
$568.7
40.0%

878.6
$585.7
40.0%

Selling, General & Administrative

% sales

198.9
25.5%

214.6
25.3%

231.3
25.0%

244.4
25.0%

250.0
25.0%

270.0
25.0%

286.2
25.0%

297.6
25.0%

306.6
25.0%

315.8
25.0%

325.2
25.0%

335.0
25.0%

345.1
25.0%

355.4
25.0%

366.1
25.0%

Other Expense / (Income)

EBITDA
% margin

$109.2
14.0%

$123.3
14.5%

$138.8
15.0%

$146.7
15.0%

$150.0
15.0%

$162.0
15.0%

$171.7
15.0%

$178.6
15.0%

$183.9
15.0%

$189.5
15.0%

$195.1
15.0%

$201.0
15.0%

$207.0
15.0%

$213.2
15.0%

$219.6
15.0%

Depreciation & Amortization

EBIT
% margin

15.6
$93.6
12.0%

17.0
$106.3
12.5%

18.5
$120.3
13.0%

19.6
$127.1
13.0%

20.0
$130.0
13.0%

21.6
$140.4
13.0%

22.9
$148.8
13.0%

23.8
$154.8
13.0%

24.5
$159.4
13.0%

25.3
$164.2
13.0%

26.0
$169.1
13.0%

26.8
$174.2
13.0%

27.6
$179.4
13.0%

28.4
$184.8
13.0%

29.3
$190.4
13.0%

29.3
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30.0
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30.0
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30.0
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30.0
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30.0
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30.0
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30.0
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30.0
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30.0
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30.0
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30.0
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0.2
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2.5
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0.2
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2.5
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0.2
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2.5
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0.2
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2.5
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0.2
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2.5
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0.2
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2.5
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0.2
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2.5
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0.2
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2.2
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0.2
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1.0
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0.2
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1.0
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0.2
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1.0
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-

8.0%
60.0%
25.0%
-%
2.0%
-%
3.0%
38.0%

6.0%
60.0%
25.0%
-%
2.0%
-%
3.0%
38.0%

4.0%
60.0%
25.0%
-%
2.0%
-%
3.0%
38.0%

3.0%
60.0%
25.0%
-%
2.0%
-%
3.0%
38.0%

3.0%
60.0%
25.0%
-%
2.0%
-%
3.0%
38.0%

3.0%
60.0%
25.0%
-%
2.0%
-%
3.0%
38.0%

3.0%
60.0%
25.0%
-%
2.0%
-%
3.0%
38.0%

3.0%
60.0%
25.0%
-%
2.0%
-%
3.0%
38.0%

3.0%
60.0%
25.0%
-%
2.0%
-%
3.0%
38.0%

3.0%
60.0%
25.0%
-%
2.0%
-%
3.0%
38.0%

Sales
% growth

Interest Expense
Revolving Credit Facility
Term Loan A
Term Loan B
Term Loan C
Existing Term Loan
2nd Lien
Senior Notes
Senior Subordinated Notes
Commitment Fee on Unused Revolver
Administrative Agent Fee
Cash Interest Expense
Amortization of Deferred Financing Fees
Total Interest Expense
Interest Income
Net Interest Expense
Earnings Before Taxes
Income Tax Expense
Net Income
% margin
Income Statement Assumptions
Sales (% YoY growth)
Cost of Goods Sold (% margin)
SG&A (% sales)
Other Expense / (Income) (% of sales)
Depreciation & Amortization (% of sales)
Amortization (% of sales)
Interest Income
Tax Rate

NA
60.5%
25.5%
-%
2.0%
-%

9.0%
60.3%
25.3%
-%
2.0%
-%

8.8%
60.0%
25.0%
-%
2.0%
-%

NA
60.0%
25.0%
-%
2.0%
-%

8.1%
60.0%
25.0%
-%
2.0%
-%
3.0%

($ in millions, fiscal year ending December 31)

Balance Sheet
Opening

Adjustments

Cash and Cash Equivalents

Accounts Receivable
Inventories
Prepaids and Other Current Assets
Total Current Assets

2008
$25.0
165.0
125.0
10.0
$325.0

Property, Plant and Equipment, net

Goodwill and Intangible Assets
Other Assets

650.0
175.0
75.0

125.0

20.0

Deferred Financing Fees

(25.0)

Pro Forma
2008

Year 1

Year 2

Year 3

Year 4

Projection Period
Year 5
Year 6

Year 7

Year 8

Year 9

Year 10

165.0
125.0
10.0
$300.0

2009
Err:522
178.2
135.0
10.8
Err:522

2010
Err:522
188.9
143.1
11.4
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2011
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196.4
148.8
11.9
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2012
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202.3
153.3
12.3
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2013
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208.4
157.9
12.6
Err:522

2014
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214.7
162.6
13.0
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2015
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221.1
167.5
13.4
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2016
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227.7
172.5
13.8
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2017
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234.6
177.7
14.2
Err:522

2018
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241.6
183.0
14.6
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650.0
300.0
75.0

650.0
300.0
75.0

650.0
300.0
75.0

650.0
300.0
75.0

650.0
300.0
75.0

650.0
300.0
75.0

650.0
300.0
75.0

650.0
300.0
75.0

650.0
300.0
75.0

650.0
300.0
75.0

650.0
300.0
75.0

20.0

17.5

15.1

12.6

10.2

7.7

5.3

3.1

2.1

1.0

$1,225.0

$1,345.0

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75.0
100.0

75.0
100.0

81.0
108.0

85.9
114.5

89.3
119.1

92.0
122.6

94.7
126.3

97.6
130.1

100.5
134.0

103.5
138.0

106.6
142.2

109.8
146.4

Other Current Liabilities

Total Current Liabilities

25.0
$200.0

25.0
$200.0

27.0
$216.0

28.6
$229.0

29.8
$238.1

30.7
$245.3

31.6
$252.6

32.5
$260.2

33.5
$268.0

34.5
$276.0

35.5
$284.3

36.6
$292.9

Revolving Credit Facility

Term Loan A
Term Loan B
Term Loan C
Existing Term Loan
2nd Lien
Senior Notes
Senior Subordinated Notes
Other Debt

300.0
-

450.0
300.0
-

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300.0
-

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300.0
-

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300.0
-

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300.0
-

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300.0
-

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300.0
-

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300.0
-

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300.0
-

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300.0
-

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300.0
-

Other Long-Term Liabilities

Total Liabilities

25.0
$525.0

25.0
$975.0

25.0
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25.0
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25.0
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25.0
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25.0
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25.0
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25.0
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25.0
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25.0
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25.0
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Noncontrolling Interest
Shareholders' Equity
Total Shareholders' Equity

700.0
$700.0

370.0
$370.0

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Total Liabilities and Equity

Total Assets
Accounts Payable
Accrued Liabilities

450.0
(300.0)
300.0

370.0

(700.0)

$1,225.0

$1,345.0

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Balance Check

0.000

0.000

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Net Working Capital

(Increase) / Decrease in Net Working Capital

100.0

100.0

108.0
(8.0)

114.5
(6.5)

119.1
(4.6)

122.6
(3.6)

126.3
(3.7)

130.1
(3.8)

134.0
(3.9)

138.0
(4.0)

142.2
(4.1)

146.4
(4.3)

60.2
76.0

60.2
76.0

60.2
76.0

60.2
76.0

60.2
76.0

60.2
76.0

60.2
76.0

60.2
76.0

60.2
76.0

60.2
76.0

60.2
76.0

60.2
76.0

1.0%

1.0%

1.0%

1.0%

1.0%

1.0%

1.0%

1.0%

1.0%

1.0%

1.0%

1.0%

Balance Sheet Assumptions

Current Assets
Days Sales Outstanding (DSO)
Days Inventory Held (DIH)
Prepaid and Other Current Assets (% of sales)
Current Liabilities
Days Payable Outstanding (DPO)
Accrued Liabilities (% of sales)
Other Current Liabilities (% of sales)

45.6

45.6

45.6

45.6

45.6

45.6

45.6

45.6

45.6

45.6

45.6

45.6

10.0%
2.5%

10.0%
2.5%

10.0%
2.5%

10.0%
2.5%

10.0%
2.5%

10.0%
2.5%

10.0%
2.5%

10.0%
2.5%

10.0%
2.5%

10.0%
2.5%

10.0%
2.5%

10.0%
2.5%

($ in millions, fiscal year ending December 31)

Cash Flow Statement

Operating Activities
Net Income
Plus: Depreciation & Amortization
Plus: Amortization of Financing Fees

Year 1

Year 2

Year 3

Year 4

2009

2010

2011

2012

Projection Period
Year 5
Year 6
2013

2014

Year 7

Year 8

Year 9

Year 10

2015

2016

2017

2018

Err:522
21.6
2.5

Err:522
22.9
2.5

Err:522
23.8
2.5

Err:522
24.5
2.5

Err:522
25.3
2.5

Err:522
26.0
2.5

Err:522
26.8
2.2

Err:522
27.6
1.0

Err:522
28.4
1.0

Err:522
29.3
1.0

(13.2)
(10.0)
(0.8)

(10.7)
(8.1)
(0.6)

(7.6)
(5.7)
(0.5)

(5.9)
(4.5)
(0.4)

(6.1)
(4.6)
(0.4)

(6.3)
(4.7)
(0.4)

(6.4)
(4.9)
(0.4)

(6.6)
(5.0)
(0.4)

(6.8)
(5.2)
(0.4)

(7.0)
(5.3)
(0.4)

Inc. / (Dec.) in Accounts Payable

Inc. / (Dec.) in Accrued Liabilities
Inc. / (Dec.) in Other Current Liabilities
(Inc.) / Dec. in Net Working Capital

6.0
8.0
2.0
(8.0)

4.9
6.5
1.6
(6.5)

3.4
4.6
1.1
(4.6)

2.7
3.6
0.9
(3.6)

2.8
3.7
0.9
(3.7)

2.8
3.8
0.9
(3.8)

2.9
3.9
1.0
(3.9)

3.0
4.0
1.0
(4.0)

3.1
4.1
1.0
(4.1)

3.2
4.3
1.1
(4.3)

Cash Flow from Operating Activities

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

(21.6)
-

(22.9)
-

(23.8)
-

(24.5)
-

(25.3)
-

(26.0)
-

(26.8)
-

(27.6)
-

(28.4)
-

(29.3)
-

($21.6)

($22.9)

($23.8)

($24.5)

($25.3)

($26.0)

($26.8)

($27.6)

($28.4)

($29.3)

Err:522
Err:522
Err:522
Err:522
Err:522
-

Err:522
Err:522
Err:522
Err:522
Err:522
-

Err:522
Err:522
Err:522
Err:522
Err:522
-

Err:522
Err:522
Err:522
Err:522
Err:522
-

Err:522
Err:522
Err:522
Err:522
Err:522
-

Err:522
Err:522
Err:522
Err:522
Err:522
-

Err:522
Err:522
Err:522
Err:522
Err:522
-

Err:522
Err:522
Err:522
Err:522
Err:522
-

Err:522
Err:522
Err:522
Err:522
Err:522
-

Err:522
Err:522
Err:522
Err:522
Err:522
-

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522
Err:522

Err:522
Err:522
Err:522

Err:522
Err:522
Err:522

Err:522
Err:522
Err:522

Err:522
Err:522
Err:522

Err:522
Err:522
Err:522

Err:522
Err:522
Err:522

Err:522
Err:522
Err:522

Err:522
Err:522
Err:522

Err:522
Err:522
Err:522

2.0%

2.0%

2.0%

2.0%

2.0%

2.0%

2.0%

2.0%

2.0%

2.0%

Changes in Working Capital Items

(Inc.) / Dec. in Accounts Receivable
(Inc.) / Dec. in Inventories
(Inc.) / Dec. in Prepaid and Other Current Assets

Investing Activities
Capital Expenditures
Other Investing Activities
Cash Flow from Investing Activities
Financing Activities
Revolving Credit Facility
Term Loan A
Term Loan B
Term Loan C
Existing Term Loan
2nd Lien
Senior Notes
Senior Subordinated Notes
Other Debt
Dividends
Equity Issuance / (Repurchase)
Cash Flow from Financing Activities
Excess Cash for the Period
Beginning Cash Balance
Ending Cash Balance
Cash Flow Statement Assumptions
Capital Expenditures (% of sales)

($ in millions, fiscal year ending December 31)

Debt Schedule

Forward LIBOR Curve

Pro forma

Year 1

Year 2

Year 3

Year 4

2008

2009

2010

2011

2012

2013

2014

Year 7

Year 8

Year 9

Year 10

2015

2016

2017

2018

3.00%

3.15%

3.30%

3.60%

4.00%

4.35%

4.80%

4.85%

5.10%

5.25%

Cash Flow from Operating Activities

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Cash Flow from Investing Activities

Cash Available for Debt Repayment
Total Mandatory Repayments
MinCash
Cash From Balance Sheet
Cash Available for Optional Debt Repayment

(21.6)
Err:522
(4.5)
Err:522

(22.9)
Err:522
Err:522
Err:522
Err:522

(23.8)
Err:522
Err:522
Err:522
Err:522

(24.5)
Err:522
Err:522
Err:522
Err:522

(25.3)
Err:522
Err:522
Err:522
Err:522

(26.0)
Err:522
Err:522
Err:522
Err:522

(26.8)
Err:522
Err:522
Err:522
Err:522

(27.6)
Err:522
Err:522
Err:522
Err:522

(28.4)
Err:522
Err:522
Err:522
Err:522

(29.3)
Err:522
Err:522
Err:522
Err:522

Beginning Balance
Drawdown/(Repayment)
Ending Balance

Err:522
Err:522

Err:522
Err:522
Err:522

Err:522
Err:522
Err:522

Err:522
Err:522
Err:522

Err:522
Err:522
Err:522

Err:522
Err:522
Err:522

Err:522
Err:522
Err:522

Err:522
Err:522
Err:522

Err:522
Err:522
Err:522

Err:522
Err:522
Err:522

Interest Rate
Average Interest Expense
Commitment Fee

6.25%
Err:522
Err:522

6.40%
Err:522
Err:522

6.55%
Err:522
Err:522

6.85%
Err:522
Err:522

7.25%
Err:522
Err:522

7.60%
Err:522
Err:522

8.05%
Err:522
Err:522

8.10%
Err:522
Err:522

8.35%
Err:522
Err:522

8.50%
Err:522
Err:522

Revolving Credit Facility

Revolving Credit Facility Size
Spread
Term
Commitment Fee on Unused Portion

Term Loan B Facility

Size
Spread
Term
Repayment Schedule

3.00%

Projection Period
Year 5
Year 6

$100.0
3.250%
6 years
0.50%

$450.0
3.500%
7 years
1.0% Per Annum, Bullet at Maturity

Beginning Balance
Mandatory Repayments
Optional Repayments
Ending Balance

$450.0
(4.5)
Err:522
Err:522

Err:522
Err:522
Err:522
Err:522

Err:522
Err:522
Err:522
Err:522

Err:522
Err:522
Err:522
Err:522

Err:522
Err:522
Err:522
Err:522

Err:522
Err:522
Err:522
Err:522

Err:522
Err:522
Err:522
Err:522

Err:522
Err:522
Err:522
Err:522

Err:522
Err:522
Err:522
Err:522

Err:522
Err:522
Err:522
Err:522

Interest Rate
Interest Expense

6.50%
Err:522

6.65%
Err:522

6.80%
Err:522

7.10%
Err:522

7.50%
Err:522

7.85%
Err:522

8.30%
Err:522

8.35%
Err:522

8.60%
Err:522

8.75%
Err:522

$300.0
$300.0

$300.0
$300.0

$300.0
$300.0

$300.0
$300.0

$300.0
$300.0

$300.0
$300.0

$300.0
$300.0

$300.0
$300.0

$300.0
$300.0

$300.0
$300.0

30.0

30.0

30.0

30.0

30.0

30.0

30.0

30.0

30.0

30.0

Senior Subordinated Notes

Size
Coupon
Term
Beginning Balance
Repayment
Ending Balance
Interest Expense

$300.0
10.000%
10 years

($ in millions, fiscal year ending December 31)

Returns Analysis
Pro forma

Year 1

Year 2

Year 3

Year 4

2008

2009

2010

2011

2012

Projection Period
Year 5
Year 6
2013

2014

Year 8

Year 9

Year 10

2015

2016

2017

2018

7.5x

Entry EBITDA Multiple

Initial Equity Investment
EBITDA
Exit EBITDA Multiple
Enterprise Value at Exit

$385.0
$162.0

$171.7

$178.6

$183.9

$189.5

$195.1

$201.0

$207.0

$213.2

$219.6

$1,215.0

$1,287.9

$1,339.4

$1,379.6

$1,421.0

$1,463.6

$1,507.5

$1,552.8

$1,599.3

$1,647.3

Err:522
Err:522
Err:522
Err:522
Err:522
300.0
Err:522
Err:522
Err:522

Err:522
Err:522
Err:522
Err:522
Err:522
300.0
Err:522
Err:522
Err:522

Err:522
Err:522
Err:522
Err:522
Err:522
300.0
Err:522
Err:522
Err:522

Err:522
Err:522
Err:522
Err:522
Err:522
300.0
Err:522
Err:522
Err:522

Err:522
Err:522
Err:522
Err:522
Err:522
300.0
Err:522
Err:522
Err:522

Err:522
Err:522
Err:522
Err:522
Err:522
300.0
Err:522
Err:522
Err:522

Err:522
Err:522
Err:522
Err:522
Err:522
300.0
Err:522
Err:522
Err:522

Err:522
Err:522
Err:522
Err:522
Err:522
300.0
Err:522
Err:522
Err:522

Err:522
Err:522
Err:522
Err:522
Err:522
300.0
Err:522
Err:522
Err:522

Err:522
Err:522
Err:522
Err:522
Err:522
300.0
Err:522
Err:522
Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

Err:522

7.5x

Less: Net Debt

Revolving Credit Facility
Term Loan A
Term Loan B
Term Loan C
Existing Term Loan
2nd Lien
Senior Notes
Senior Subordinated Notes
Other Debt
Total Debt
Less: Cash and Cash Equivalents
Net Debt
Equity Value at Exit
Cash Return

NM

NM

NM

NM

NM

NM

NM

NM

NM

NM

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

2009
($385.0)
Err:522

Initial Equity Investment

Equity Proceeds

IRR

NA

2010
($385.0)
Err:522

NA

2011
($385.0)
Err:522

NA

2012
($385.0)
Err:522

NA

2013
($385.0)
Err:522

NA

2014
($385.0)
Err:522

NA

IRR - Assuming Exit in 2013E

NA
Entry
Multiple

Year 7

6.5x
7.0x
7.5x
8.0x
8.5x

6.5x
NA
NA
NA
NA
NA

7.0x
NA
NA
NA
NA
NA

Exit Multiple
7.5x
NA
NA
NA
NA
NA

2015
($385.0)
Err:522

NA

2016
($385.0)
Err:522

NA

2017
($385.0)
Err:522
NA

2018
($385.0)
Err:522
NA

IRR - Assuming 7.5x Entry Multiple

8.0x
NA
NA
NA
NA
NA

8.5x
NA
NA
NA
NA
NA

Exit
Multiple

6.5x
7.0x
7.5x
8.0x
8.5x

2011
NA
NA
NA
NA
NA

2012
NA
NA
NA
NA
NA

Exit Year
2013
NA
NA
NA
NA
NA

2014
NA
NA
NA
NA
NA

2015
NA
NA
NA
NA
NA

Assumptions Page 1 - Income Statement and Cash Flow Statement

Year 1

Year 2

Year 3

Year 4

2009

2010

2011

2012

Projection Period
Year 5
Year 6
2013

2014

Year 7

Year 8

Year 9

Year 10

2015

2016

2017

2018

Income Statement Assumptions

Sales (% growth)
Base
Sponsor
Management
Downside 1
Downside 2

1
2
3
4
5

8.0%
8.0%
10.0%
12.0%
5.0%
2.0%

6.0%
6.0%
8.0%
10.0%
4.0%
2.0%

4.0%
4.0%
6.0%
8.0%
3.0%
2.0%

3.0%
3.0%
4.0%
6.0%
3.0%
2.0%

3.0%
3.0%
3.0%
4.0%
3.0%
2.0%

3.0%
3.0%
3.0%
4.0%
3.0%
2.0%

3.0%
3.0%
3.0%
4.0%
3.0%
2.0%

3.0%
3.0%
3.0%
4.0%
3.0%
2.0%

3.0%
3.0%
3.0%
4.0%
3.0%
2.0%

3.0%
3.0%
3.0%
4.0%
3.0%
2.0%

Cost of Goods Sold (% sales)

Base
Sponsor
Management
Downside 1
Downside 2

1
2
3
4
5

60.0%
60.0%
60.0%
59.0%
61.0%
62.0%

60.0%
60.0%
60.0%
59.0%
61.0%
62.0%

60.0%
60.0%
60.0%
59.0%
61.0%
62.0%

60.0%
60.0%
60.0%
59.0%
61.0%
62.0%

60.0%
60.0%
60.0%
59.0%
61.0%
62.0%

60.0%
60.0%
60.0%
59.0%
61.0%
62.0%

60.0%
60.0%
60.0%
59.0%
61.0%
62.0%

60.0%
60.0%
60.0%
59.0%
61.0%
62.0%

60.0%
60.0%
60.0%
59.0%
61.0%
62.0%

60.0%
60.0%
60.0%
59.0%
61.0%
62.0%

SG&A (% sales)
Base
Sponsor
Management
Downside 1
Downside 2

1
2
3
4
5

25.0%
25.0%
25.0%
24.0%
26.0%
27.0%

25.0%
25.0%
25.0%
24.0%
25.0%
26.0%

25.0%
25.0%
25.0%
24.0%
25.0%
26.0%

25.0%
25.0%
25.0%
24.0%
25.0%
26.0%

25.0%
25.0%
25.0%
24.0%
25.0%
26.0%

25.0%
25.0%
25.0%
24.0%
25.0%
26.0%

25.0%
25.0%
25.0%
24.0%
25.0%
26.0%

25.0%
25.0%
25.0%
24.0%
25.0%
26.0%

25.0%
25.0%
25.0%
24.0%
25.0%
26.0%

25.0%
25.0%
25.0%
24.0%
25.0%
26.0%

Depreciation & Amortization (% sales)

Base
Sponsor
Management
Downside 1
Downside 2

1
2
3
4
5

2.0%
2.0%
2.0%
2.0%
2.0%
2.0%

2.0%
2.0%
2.0%
2.0%
2.0%
2.0%

2.0%
2.0%
2.0%
2.0%
2.0%
2.0%

2.0%
2.0%
2.0%
2.0%
2.0%
2.0%

2.0%
2.0%
2.0%
2.0%
2.0%
2.0%

2.0%
2.0%
2.0%
2.0%
2.0%
2.0%

2.0%
2.0%
2.0%
2.0%
2.0%
2.0%

2.0%
2.0%
2.0%
2.0%
2.0%
2.0%

2.0%
2.0%
2.0%
2.0%
2.0%
2.0%

2.0%
2.0%
2.0%
2.0%
2.0%
2.0%

Interest Income
Base
Sponsor
Management
Downside 1
Downside 2

1
2
3
4
5

3.0%
3.0%
3.0%
3.0%
3.0%
3.0%

3.0%
3.0%
3.0%
3.0%
3.0%
3.0%

3.0%
3.0%
3.0%
3.0%
3.0%
3.0%

3.0%
3.0%
3.0%
3.0%
3.0%
3.0%

3.0%
3.0%
3.0%
3.0%
3.0%
3.0%

3.0%
3.0%
3.0%
3.0%
3.0%
3.0%

3.0%
3.0%
3.0%
3.0%
3.0%
3.0%

3.0%
3.0%
3.0%
3.0%
3.0%
3.0%

3.0%
3.0%
3.0%
3.0%
3.0%
3.0%

3.0%
3.0%
3.0%
3.0%
3.0%
3.0%

Cash Flow Statement Assumptions

Capital Expenditures (% sales)
Base
Sponsor
Management
Downside 1
Downside 2

1
2
3
4
5

2.0%
2.0%
2.0%
2.0%
2.5%
2.5%

2.0%
2.0%
2.0%
2.0%
2.5%
2.5%

2.0%
2.0%
2.0%
2.0%
2.5%
2.5%

2.0%
2.0%
2.0%
2.0%
2.5%
2.5%

2.0%
2.0%
2.0%
2.0%
2.5%
2.5%

2.0%
2.0%
2.0%
2.0%
2.5%
2.5%

2.0%
2.0%
2.0%
2.0%
2.5%
2.5%

2.0%
2.0%
2.0%
2.0%
2.5%
2.5%

2.0%
2.0%
2.0%
2.0%
2.5%
2.5%

2.0%
2.0%
2.0%
2.0%
2.5%
2.5%

Assumptions Page 2 - Balance Sheet

Year 1

Year 2

Year 3

Year 4

2009

2010

2011

2012

Projection Period
Year 5
Year 6
2013

2014

Year 7

Year 8

Year 9

Year 10

2015

2016

2017

2018

Current Assets
Days Sales Outstanding (DSO)
Base
Sponsor
Management
Downside 1
Downside 2

1
2
3
4
5

60.2
60.2
60.2
65.0
59.0
57.7

60.2
60.2
60.2
65.0
59.0
57.7

60.2
60.2
60.2
65.0
59.0
57.7

60.2
60.2
60.2
65.0
59.0
57.7

60.2
60.2
60.2
65.0
59.0
57.7

60.2
60.2
60.2
65.0
59.0
57.7

60.2
60.2
60.2
65.0
59.0
57.7

60.2
60.2
60.2
65.0
59.0
57.7

60.2
60.2
60.2
65.0
59.0
57.7

60.2
60.2
60.2
65.0
59.0
57.7

Days Inventory Held (DIH)

Base
Sponsor
Management
Downside 1
Downside 2

1
2
3
4
5

76.0
76.0
76.0
76.0
80.0
82.0

76.0
76.0
76.0
76.0
80.0
82.0

76.0
76.0
76.0
76.0
80.0
82.0

76.0
76.0
76.0
76.0
80.0
82.0

76.0
76.0
76.0
76.0
80.0
82.0

76.0
76.0
76.0
76.0
80.0
82.0

76.0
76.0
76.0
76.0
80.0
82.0

76.0
76.0
76.0
76.0
80.0
82.0

76.0
76.0
76.0
76.0
80.0
82.0

76.0
76.0
76.0
76.0
80.0
82.0

Prepaids and Other Current Assets (% sales)

Base
Sponsor
Management
Downside 1
Downside 2

1
2
3
4
5

1.0%
1.0%
1.0%
1.0%
1.0%
1.0%

1.0%
1.0%
1.0%
1.0%
1.0%
1.0%

1.0%
1.0%
1.0%
1.0%
1.0%
1.0%

1.0%
1.0%
1.0%
1.0%
1.0%
1.0%

1.0%
1.0%
1.0%
1.0%
1.0%
1.0%

1.0%
1.0%
1.0%
1.0%
1.0%
1.0%

1.0%
1.0%
1.0%
1.0%
1.0%
1.0%

1.0%
1.0%
1.0%
1.0%
1.0%
1.0%

1.0%
1.0%
1.0%
1.0%
1.0%
1.0%

1.0%
1.0%
1.0%
1.0%
1.0%
1.0%

Current Liabilities
Days Payable Outstanding (DPO)
Base
Sponsor
Management
Downside 1
Downside 2

1
2
3
4
5

45.6
45.6
45.6
47.0
42.5
40.0

45.6
45.6
45.6
47.0
42.5
40.0

45.6
45.6
45.6
47.0
42.5
40.0

45.6
45.6
45.6
47.0
42.5
40.0

45.6
45.6
45.6
47.0
42.5
40.0

45.6
45.6
45.6
47.0
42.5
40.0

45.6
45.6
45.6
47.0
42.5
40.0

45.6
45.6
45.6
47.0
42.5
40.0

45.6
45.6
45.6
47.0
42.5
40.0

45.6
45.6
45.6
47.0
42.5
40.0

Accrued Liabilities (% sales)

Base
Sponsor
Management
Downside 1
Downside 2

1
2
3
4
5

10.0%
10.0%
10.0%
10.0%
10.0%
10.0%

10.0%
10.0%
10.0%
10.0%
10.0%
10.0%

10.0%
10.0%
10.0%
10.0%
10.0%
10.0%

10.0%
10.0%
10.0%
10.0%
10.0%
10.0%

10.0%
10.0%
10.0%
10.0%
10.0%
10.0%

10.0%
10.0%
10.0%
10.0%
10.0%
10.0%

10.0%
10.0%
10.0%
10.0%
10.0%
10.0%

10.0%
10.0%
10.0%
10.0%
10.0%
10.0%

10.0%
10.0%
10.0%
10.0%
10.0%
10.0%

10.0%
10.0%
10.0%
10.0%
10.0%
10.0%

Other Current Liabilities (% sales)

Base
Sponsor
Management
Downside 1
Downside 2

1
2
3
4
5

2.5%
2.5%
2.5%
2.5%
2.5%
2.5%

2.5%
2.5%
2.5%
2.5%
2.5%
2.5%

2.5%
2.5%
2.5%
2.5%
2.5%
2.5%

2.5%
2.5%
2.5%
2.5%
2.5%
2.5%

2.5%
2.5%
2.5%
2.5%
2.5%
2.5%

2.5%
2.5%
2.5%
2.5%
2.5%
2.5%

2.5%
2.5%
2.5%
2.5%
2.5%
2.5%

2.5%
2.5%
2.5%
2.5%
2.5%
2.5%

2.5%
2.5%
2.5%
2.5%
2.5%
2.5%

2.5%
2.5%
2.5%
2.5%
2.5%
2.5%

($ in millions)

Assumptions Page 3 - Financing Structures and Fees

Financing Structures

Purchase Price
1

Sources of Funds
Revolving Credit Facility Size
Revolving Credit Facility Draw
Term Loan A
Term Loan B
Term Loan C
2nd Lien
Senior Notes
Senior Subordinated Notes
Equity Contribution
Rollover Equity
Cash on Hand
Total Sources of Funds

Structure
3

Public / Private Target

4

Structure 1
$100.0
450.0
300.0
385.0
-

Structure 2
$100.0
125.0
350.0
300.0
360.0
-

Structure 3
$100.0
25.0
350.0
150.0
250.0
385.0
-

Structure 4
$100.0
425.0
325.0
410.0
-

25.0
$1,160.0

25.0
$1,160.0

$1,160.0

$1,160.0

Status Quo

$20.0

$825.0
300.0
-

$825.0
300.0
-

$825.0
300.0
-

$825.0
300.0
-

Financing Fees
Other Fees and Expenses
-

20.0
15.0
-

20.0
15.0
-

20.0
15.0
-

20.0
15.0
-

20.0
-

$1,160.0

$1,160.0

$1,160.0

$1,160.0

$20.0

Total Uses of Funds

Entry EBITDA Multiple

LTM 9/30/2008 EBITDA
Enterprise Value

20.0
-

Uses of Funds
Equity Purchase Price
Repay Existing Bank Debt
Tender / Call Premiums

Less: Total Debt

Less: Preferred Securities
Less: Noncontrolling Interest
Plus: Cash and Cash Equivalents
Equity Purchase Price

(300.0)
25.0
$825.0

Calculation of Fully Diluted Shares Outstanding

Offer Price per Share

$16.50

Basic Shares Outstanding

50.000

Tranche
Tranche 1
Tranche 2

($)

Exercise

Shares

Price

In-the-Money
Shares

Proceeds

Tranche 3

Tranche 4

Tranche 5
Total

Term Loan B
Term Loan C

450.0
-

1.750%
-

7.9
-

2nd Lien
Senior Notes
Senior Subordinated Notes
Senior Bridge Facility
Senior Subordinated Bridge Facility
Other Financing Fees & Expenses

300.0
300.0

2.250%
2.250%
1.000%
1.000%

6.8
3.0
0.6

Issue 1
Issue 2
Issue 3
Issue 4
Issue 5

$20.0

Total

$1.8
-

Number of
-

$100.0
-

Total Financing Fees

50.000

Options/Warrants

(%)
1.750%
1.750%

Revolving Credit Facility Size

Term Loan A

Fully Diluted Shares Outstanding

Fees
Size

7.5x
146.7
$1,100.0

Plus: Shares from In-the-Money Options

Less: Shares Repurchased
Net New Shares from Options
Plus: Shares from Convertible Securities

Financing Fees
Structure 1

Convertible Securities
Amount

Conversion

Conversion

New

Price

Ratio

Shares

Amortization of Financing Fees

Term
Revolving Credit Facility Size
Term Loan A
Term Loan B
Term Loan C
2nd Lien
Senior Notes
Senior Subordinated Notes
Senior Bridge Facility
Senior Subordinated Bridge Facility
Other Financing Fees & Expenses
Annual Amortization
Administrative Agent Fee

6
7
10
10
10

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

2009

2010

2011

2012

2013

2014

2015

2016

2017

Year 10
2018

$0.3
1.1
0.7
0.3
0.1

$0.3
1.1
0.7
0.3
0.1

$0.3
1.1
0.7
0.3
0.1

$0.3
1.1
0.7
0.3
0.1

$0.3
1.1
0.7
0.3
0.1

$0.3
1.1
0.7
0.3
0.1

1.1
0.7
0.3
0.1

0.7
0.3
0.1

0.7
0.3
0.1

0.7
0.3
0.1

$2.5

$2.5

$2.5

$2.5

$2.5

$2.5

$2.2

$1.0

$1.0

$1.0

0.2

0.2

0.2

0.2

0.2

0.2

0.2

0.2

0.2

0.2

Copyright 2009 by Joshua Rosenbaum and Joshua Pearl. All rights reserved.
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