Leveraged Buyout Analysis of NVIDIA Corporation

LEVERAGED BUYOUT OF NVIDIA
DEB SAHOO
MBA, ROSS SCHOOL OF BUSINESS, UNIVERSITY OF MICHIGAN, ANN ARBOR
MS, EE, UNIVERSITY OF SOUTHERN CALIFORNIA
B-TECH, EE, IIT

December 31, 2013

4

Company Overview

6

LBO Rationale

8

Financials

10

Industry Comparables

11

Financial Statements Projections Assumptions

21

Transaction Analysis

23

Return Analysis

32

Exit Strategies

36

2

TABLE OF CONTENTS

Executive Summary

Price Performance

•Company: Nvidia Corporation
•Headquarter: Santa Clara, CA
•CEO: Jen-Hsun Huang
•Number of Employees: 8,000
•Mobile processors used in cell phones, tablets and auto
infotainment systems
•Key industry player in GPU market
•Established customer base

Valuation

Key Financials
Purchase Price

Offer Price per Share

$18.50

Fully Diluted Shares

589.0

Equity Purchase Price
Plus: Existing Net Debt
Enterprise Value

$10,896.5
(2,628.2)
$8,268.3

Return
Exit Year
Entry Multiple
Exit Multiple
IRR
Cash Return
4

•Stock Price: $16.08
•52 Week High: $16.32
•52 Week Low: $11.92
•Stock Beta: 1.36

2018
10.9x
6.0x
31.2%
3.9x

•Ticker: NVDA
•Market Cap: $9.11B
•Number of Shares: 568.54MM
•2013 EBITDA: $787.84MM
•LTM P/EPS: 20.9
•Total Enterprise Value: $6,063.58MM
•5 Year Sales Growth: 10%
•5 Year EBITDA Growth: 58%
•5 Year Avg. ROE: 8.4%
•Leverage: 0.006x
•Price to Book Value: 2.8x
•Price to Sales: 2.4x
•Inst. Own: 82%

EXECUTIVE SUMMARY

Target Overview

NVIDIA Corporation (NVIDIA) is engaged in creating the
graphics chips used in personal computers (PCs)
Three segments: graphics processing unit (GPU) Business,
professional solutions business (PSB) and consumer
products business (CPB)

Products and Services
•GeForce
•Quadro
•Tegra
•Tesla
•Grid
•NVS

Mobile processors used in cell phones, tablets and auto
infotainment systems and designers use GPUs to create
visual effects in movies and create everything from golf
clubs to jumbo jets
Brands: GeForce, Quadro and Tesla

Industry Comparables

6

Customers

COMPANY OVERVIEW

Company Overview

Growing EBITDA

Low Debt Level

Attractive Balance Sheet

8

LBO RATIONALE

Steady Cash Flow From Operations (CFO)

Stock Price has not
appreciated over last
three years !

Enterprise Value

9

Decreasing Valuation

LBO RATIONALE

3 Yr. Stock Price

Strong Financials

•Strong management team
•Potential for expense reduction
•Growth potential in mobile markets
•Potential to enter new market segment with
partnership with leading industry players such as
Intel

•Large amount of cash in hand
•Heavy Asset Base for loan collateral
•Clean balance sheet with low Leverage
•Predictable and steady cash flow in the past

Industry Positioning

Viable Exit Strategy

•Strong defensible market position
•Product differentiation through high R&D
•Economy of Scale and Scope
•Known brand name with key customers

•Adequate strategic buyers such as ARMH, INTEL ,
SAMSUNG for exit strategy
•Increased dominant position and expanded
geographical presence will increase visibility in
investor community for IPO
•Adequate number of PE firms with matching
investment criteria

10

LBO RATIONALE

Value Creation

All figures in Million $, except per share data
Revenue
Cost of Goods Sold
Gross Profit

Jan09

Jan10

Jan11

Jan12

Jan13

$

3,424.86

$

3,326.45

$

3,543.31

$

3,997.93

$

4,280.16

$

2,250.59

$

2,149.52

$

2,134.22

$

1,941.41

$

2,053.82

$

1,174.27

$

1,176.92

$

1,409.09

$

2,056.52

$

2,226.34

Selling, General, &Admin. Expense

$

362.22

$

367.02

$

361.51

$

405.61

$

430.82

Advertising

$

-

$

-

$

-

$

-

$

-

Research &Development

$

855.88

$

908.85

$

848.83

$

EBITDA

1,002.61

$

1,147.28

$

185.33

$

140.81

$

480.34

$

889.84

$

911.48

$

185.02

$

196.66

$

186.99

$

204.21

$

226.24

Operating Income

$

(70.70) $

(98.95) $

255.75

$

648.30

$

648.24

Interest Income

$

42.86

19.06

$

19.15

$

19.91

Interest Expense

$

(0.41) $

Other Income (Minority Interest)

$

Depreciation, Depletion and Amortization

Pre-Tax Income

$

Tax Provision

$

Net Income (Continuing Operations)

$

Net Income (Discontinued Operations)

$

Net Income

$

Preferred dividends

$

-

$
$

(42.95) $
12.91

$

(30.04) $
-

$

(30.04) $
-

$

23.12

$

(3.32) $
-

$

(82.29) $
14.31

$

(67.99) $
-

$

(67.99) $
-

$

(3.13) $

(3.09) $

(3.29)

-

$

-

$

-

271.17

$

663.40

$

662.04

(18.02) $

(82.31) $

(99.50)

253.15

$

581.09

$

562.54

-

$

-

$

-

253.15

$

581.09

$

562.54

-

$

-

$

-

EPS (Basic)

$

(0.05) $

(0.12) $

0.44

$

0.96

$

0.91

EPS (Diluted)

$

(0.05) $

(0.12) $

0.43

$

0.94

$

0.90

Shares Outstanding (Diluted)

12

548

550

589

616

625

FINANCIALS

Five Year Income Statement


Jan09

Jan10

Jan11

Jan12

Jan13

Cash And Cash Equivalents

$

417.69

$

447.22

$

665.36

$

667.88

$

732.79

Marketable Securities

$

837.70

$

1,281.01

$

1,825.20

$

2,461.70

$

2,995.10

Cash, Cash Equivalents, Marketable Securities

$

1,255.39

$

1,728.23

$

2,490.56

$

3,129.58

$

3,727.88

Accounts Receivable

$

318.44

$

374.96

$

348.77

$

336.14

$

454.25

$

122.02

$

76.94

$

67.88

$

84.93

$

164.32
67.63

Inventories, Raw Materials & Components
Inventories, Work In Process

$

38.75

$

67.50

$

72.70

$

62.93

$

Inventories, Inventories Adjustments

$

-

$

-

$

-

$

-

$

Inventories, Finished Goods

$

$

186.24

$

204.95

$

Inventories, Other
Total Inventories

$
$

377.06
(0.00)
537.83

$
$

(0.00) $
330.67

$

-

$

345.53

$

192.44
340.30

$
$
$

187.73
(0.00)
419.69

Other Current Assets

$

56.30

$

46.97

$

42.09

$

99.34

$

173.44

Total Current Assets

$

2,167.96

$

2,480.83

$

3,226.95

$

3,905.36

$

4,775.26
218.50

Land And Improvements

$

217.87

$

217.37

$

217.37

$

218.50

$

Buildings And Improvements

$

29.22

$

29.22

$

29.33

$

30.87

$

30.87

Machinery, Furniture, Equipment

$

593.69

$

667.53

$

769.64

$

724.82

$

828.69

Construction In Progress
Gross Property, Plant and Equipment
Accumulated Depreciation

$

5.36

$

4.09

$

4.47

$

11.09

$

24.09

$

1,008.75

$

1,088.48

$

1,193.94

$

1,156.53

$

1,288.78

$

(382.96)

$

(625.08)

$

(596.46)

$

Property, Plant and Equipment

$

625.80

$

(516.63) $
571.86

$

568.86

$

560.07

$

(712.64)
576.14

Intangible Assets

$

516.95

$

490.30

$

658.59

$

967.17

$

953.36

Other Long Term Assets

$

40.03

$

42.93

$

40.85

$

120.33

$

107.48

Total Assets

$

3,350.73

$

3,585.92

$

4,495.25

$

5,552.93

$

6,412.25

218.86

356.43

Accounts Payable

$

Total Tax Payable

$

Other Accrued Expenses

$

503.48
722.34

-

$

344.53

$

286.14

$

335.07

$

$

1.78

$

4.58

$

6.94

$

3.17

$

388.27

$

331.80

$

281.86

$

307.86

623.87

$

667.46

Accounts Payable & Accrued Expenses

$

$

734.58

$

622.52

$

Current Portion of Long-Term Debt

$

-

$

-

$

-

$

Other Current Liabilities

$

56.25

$

49.80

$

320.16

$

306.09

Total Current Liabilities

$

778.59

$

784.38

$

942.68

$

Long-Term Debt

$

25.63

$

24.45

$

23.39

$

$

25.63

$

24.45

$

23.39

$

Capital Lease Obligation
PensionAndRetirementBenefit

$

-

$

-

$

-

$

DeferredTaxAndRevenue

$

75.25

$

17.74

$

209.13

$

-

$

-

$

308.77

929.96

$

976.22

21.44

$

19.00

21.44

$

19.00

333.66

$
$

429.10

Other Long-Term Liabilities

$

151.85

$

111.95

$

347.71

$

455.81

$

589.32

Total Liabilities

$

956.08

$

920.78

$

1,313.78

$

1,407.20

$

1,584.54

0.65

0.70

$

0.72

Common Stock

$

-

$

Preferred Stock

$

-

$

Retained Earnings

$

1,964.17

$

Additional Paid-In Capital

$

1,889.26

$

Treasury Stock

$

(1,463.27)

$

Total Equity

$

2,394.65

$

13

-

$

-

$

$

-

$

1,896.18

$

2,219.40

$

(1,463.27) $
2,665.14

$

2,149.33

$

2,730.42

$
$

3,246.09

2,500.58

$

2,900.90

$

3,193.62

(1,479.39)

$

(1,496.90)

$

(1,622.71)

3,181.46

$

4,145.72

$

4,827.70

FINANCIALS

Five Year Balance Sheet


Jan09

Jan10

(30.04) $

Jan11

Net Income

$

(67.99) $

Cumulative Effect Of Accounting Change

$

-

$

-

Net Foreign Currency Exchange Gain

$

-

$

-

Jan12

Jan13

253.15

$

581.09

$

562.54

$

-

$

-

$

-

$

-

$

-

$

-

Net Income From Continuing Operations

$

(30.04) $

(67.99) $

253.15

$

581.09

$

562.54

Depreciation, Depletion and Amortization

$

185.02

$

196.66

186.99

$

204.21

$

226.24

348.87

$

26.34

$

26.24

$

(118.94)

(14.13) $

18.88

$

(78.95)

(14.80) $

(20.29)

$

Change In Receivables

$

Change In Inventory

$

Change In Prepaid Assets

$

Change In Payables And Accrued Expense

$

(224.33) $

Change In Working Capital

$

Change In DeferredTax

$

Cash Flow from Discontinued Operations

$

-

$

-

$

-

Cash Flow from Others

$

150.99

$

243.86

$

Cash Flow from Operations

$

249.36

$

487.81

$

Purchase Of Property, Plant, Equipment

$

Sale Of Property, Plant, Equipment

$

Purchase Of Business

$

Sale Of Business

$

Purchase Of Investment

$

Sale Of Investment

$

Net Intangibles Purchase And Sale

$

Cash From Discontinued Investing Activities

$

Cash Flow from Investing

$

(209.37) $

Net Issuance of Stock

$

(350.09) $

Net Issuance of Preferred Stock

$

-

Net Issuance of Debt

$

Cash Flow for Dividends

$

Other Financing

(177.30) $

(56.74) $
204.66

$

1.58

$

8.53

$

(16.94) $

126.63

$

(33.33) $

136.42

151.70

(23.28) $

(21.15) $

21.53

$

(407.67) $
-

$

(77.60) $

42.53

$

97.29

$

2.15

$

(112.32)

(2.65) $

19.06

$

31.86

$

-

$

-

86.61

$

102.66

$

115.86

675.80

$

909.16

$

(97.89) $

$

-

$

-

$

(27.95) $

-

$

-

$

-

$

-

$

-

$

(999.95) $
1,226.65

(1,193.95) $

$

752.43

$

-

$

-

$

-

$

-

$

(519.33) $

(1,719.70) $
1,170.08

$

-

$

-

$

(649.68) $

(138.74) $
-

824.17
(183.31)

$

-

(348.88) $

-

-

$

(1,964.90) $
1,310.74

$

-

$

-

$

(2,378.45)
1,817.41
-

(1,143.36) $

(743.99)

138.03

$

177.28

$

195.86

$

(35.07)

$

-

$

-

$

-

$

-

-

$

-

$

-

$

-

$

$

0.81

$

Cash Flow from Financing

$

(349.27) $

Net Change in Cash
14
Free Cash Flow

$
$

(76.97) $

(0.57) $

(1.61) $

(2.05)

-

$

-

$

(46.87)

15.32

$

42.47

$

68.71

236.72

$

(15.27)

61.06

$

192.02

$

(309.28) $

29.53

$

218.14

$

2.52

$

64.91

(158.31) $

410.21

$

577.91

$

770.42

$

640.86

FINANCIALS

Five Year Cash Flow Statement

Ratios

Jan09

Jan10

Jan11

Jan12

Jan13

Return on Equity %

-1.3

-2.6

8

14

11.7

Return on Assets %

-0.9

-1.9

5.6

10.5

8.8

Return on Capital - Joel Greenblatt %

-9.3

-17.3

45

115.8

100.1

Debt to Equity

0.011

0.009

0.007

0.005

0.004

Gross Margin %

34.3

35.4

39.8

51.4

52

Operating Margin %

-2.1

-3

7.2

16.2

15.1

Net Margin %

-0.9

-2

7.1

14.5

13.1

Total Equity to Total Asset

0.715

0.743

0.708

0.747

0.753

LT Debt to Total Asset

0.008

0.007

0.005

0.004

0.003

Asset Turnover

1.022

0.928

0.788

0.72

0.667

0

0

0

0

0.082

Days Sales Outstanding

33.9

41.1

35.9

30.7

38.7

Days Inventory

87.2

56.2

59.1

64

74.6

4.2

6.5

6.2

5.7

4.9

0.66

0.65

0.6

0.49

0.48

0.157

0.099

0.098

0.085

0.098

Dividend Payout Ratio

Inventory Turnover
COGS to Revenue
Inventory to Revenue

15

FINANCIALS

Five Year Key Annual Ratios

17

INDUSTRY COMPARABLES

Key Industry Comparables

18


3 Yr. Stock Performance of Key Industry Comparables

Company

Ticker

FY-1

P/E
FY-0

NVIDIA Corporation

NVDA

15.6

13.6

20.9

2.9

2.0

2.8

11.8

11.9

15.1

2.3

1.8

2.4

Texas Instruments, Inc.

TXN

15.5

20.5

26.0

9.7

8.8

11.3

13.9

12.1

17.1

2.5

2.8

4.0

Qualcomm, Inc.

QCOM

17.8

17.2

19.0

4.0

0.0

4.3

23.1

15.3

16.8

5.7

4.8

5.2

Marvell Technology

MRVL

15.8

17.3

26.9

3.2

2.1

3.0

14.5

8.3

16.7

2.9

1.6

2.3

Freescale Semiconductor FSL

0.0

0.0

0.0

0.0

0.0

-0.9

84.3

17.8

53.6

0.6

0.7

1.0

Broadcom Corporation

BRCM

17.9

26.8

33.7

3.7

8.1

5.4

9.9

11.4

9.9

2.2

2.4

2.1

Intel Corp

INTC

10.2

9.7

14.1

3.9

3.0

3.3

12.8

13.5

12.2

2.4

2.0

2.5

Advanced Micro Devices

AMD

8.3

0.0

0.0

3.1

0.0

-13.7

30.0

0.0

0.0

0.6

0.3

0.6

Mean

12.6

13.1

17.6

3.8

3.0

1.9

25.0

11.3

17.7

2.4

2.0

2.5

Median

15.6

15.4

20.0

3.4

2.0

3.2

14.2

12.0

15.9

2.3

1.9

2.4

19

TTM

FY-1

P/B
FY-0

TTM

FY-1

P/FCF
FY-0

TTM

FY-1

P/S
FY-0

TTM


Valuation Comparison – I

Company

Ticker

FY-1

EV/Sales
FY-0

NVIDIA Corporation

NVDA

1.5

0.9

1.4

6.7

4.2

7.5

9.2

5.9

11.6


TXN

2.6

2.8

3.8

8.9

10.8

13.9

12.0

18.2

21.7

Qualcomm, Inc.

QCOM

4.9

4.0

4.0

11.6

10.1

11.1

16.6

13.9

15.2

Marvell Technology

MRVL

2.0

0.9

1.3

8.8

6.0

12.0

11.3

9.5

22.2

Freescale Semiconductor

FSL

2.0

2.1

2.5

9.7

12.0

16.2

32.6

18.2

23.8


BRCM

1.7

2.3

1.7

11.0

16.2

17.0

13.3

27.0

29.4

Intel Corp

INTC

2.1

1.8

2.2

4.7

4.3

6.3

6.5

6.6

10.9


AMD

0.5

0.5

0.8

7.0

0.0

-18.5

9.6

0.0

9.3

Mean

2.2

1.9

2.2

8.6

8.0

8.2

13.9

12.4

18.0

Median

2.0

2.0

2.0

8.9

8.1

11.5

11.6

11.7

18.5

20

TTM

EV/EBITDA
FY-1
FY-0
TTM

FY-1

EV/EBIT
FY-0

TTM


Valuation Comparison – II

Gross Margin (%)
FY-1
FY-0
TTM

EBIT Margin (%)
FY-1
FY-0
TTM

Net Margin (%)
FY-1
FY-0
TTM

Company

Ticker

NVIDIA Corporation

NVDA

51.4%

52.0%

55.4%

16.2%

15.1%

13.4%

14.5%

13.1%

11.3%


TXN

49.3%

49.7%

54.8%

21.8%

15.4%

26.0%

16.3%

13.7%

19.4%

Qualcomm, Inc.

QCOM

62.9%

60.5%

58.1%

29.7%

29.1%

24.5%

31.9%

27.6%

23.2%

Marvell Technology

MRVL

56.8%

52.9%

50.1%

17.8%

9.3%

10.2%

18.1%

9.7%

11.1%


FSL

41.4%

41.6%

43.6%

6.0%

11.7%

14.5%

-9.0%

-2.6%

2.1%


BRCM

50.9%

49.7%

51.4%

12.9%

8.4%

15.7%

12.5%

9.0%

14.7%

Intel Corp

INTC

62.5%

62.1%

62.4%

32.4%

27.4%

26.0%

24.0%

20.6%

21.9%


AMD

44.8%

22.8%

35.7%

5.6%

-19.5%

6.5%

7.5%

-21.8%

3.3%

Mean

52.5%

48.9%

51.4%

17.8%

12.1%

17.1%

14.5%

8.7%

13.4%

Median

51.2%

50.9%

53.1%

17.0%

13.4%

15.1%

15.4%

11.4%

13.0%

21


Margin Comparison

Company

Ticker

Debt / Equity (%)
FY-1
FY-0
TTM

NVIDIA Corporation

NVDA

0.5%

0.4%

0.4%

74.7%

75.3%

75.6%

0.4%

0.3%

0.3%


TXN

51.1%

51.9%

46.7%

53.4%

54.7%

57.4%

20.5%

20.9%

21.6%

Qualcomm, Inc.

QCOM

0.0%

0.0%

0.0%

77.9%

79.3%

79.3%

0.0%

0.0%

0.0%

Marvell Technology

MRVL

0.0%

0.0%

0.0%

86.9%

85.2%

83.5%

0.0%

0.0%

0.0%


FSL

192.9%

201.0%

166.9%


BRCM

72.1%

69.9%

69.8%

72.1%

69.9%

69.8%

13.2%

12.4%

12.3%

Intel Corp

INTC

16.0%

26.3%

24.4%

64.6%

60.7%

61.2%

10.0%

15.6%

14.5%


AMD

126.8%

379.6%

472.1%

32.1%

13.5%

10.1%

30.8%

50.9%

47.3%

Mean

14.9%

48.4%

57.0%

41.3%

37.0%

39.8%

33.5%

37.6%

32.9%

Median

8.3%

13.4%

12.4%

68.4%

65.3%

65.5%

11.6%

14.0%

13.4%

22

-147.1% -140.8% -157.5%

Equity / Total Assets (%)
FY-1
FY-0
TTM

LT Debt / Assets (%)
FY-1
FY-0
TTM

-131.2% -142.9% -118.5%


Capitalization Comparison

Diluted EPS ($)
FY-1
FY-0
TTM

FCF per Share ($)
FY-1
FY-0
TTM

Book Value Per Share ($)
FY-1
FY-0
TTM

Company

Ticker

NVIDIA Corporation

NVDA

$

0.94 $

0.90 $

0.77

$

1.25 $

1.03 $

1.06

$

6.77 $

7.83 $


TXN

$

1.88 $

1.51 $

1.70

$

2.08 $

2.55 $

2.57

$

9.61 $

9.89 $ 10.10

Qualcomm, Inc.

QCOM

$

3.51 $

3.91 $

3.92

$

2.71 $

4.41 $

4.41

$ 19.65 $ 21.04 $ 21.04

Marvell Technology

MRVL

$

0.99 $

0.54 $

0.54

$

1.07 $

1.11 $

0.86

$


FSL

$ (1.82) $ (0.41) $ (0.49)

$ (0.43) $

0.61 $

0.30

$ (18.21) $ (18.20) $ (17.54)


BRCM

$

1.65 $

1.25 $

0.88

$

2.98 $

2.93 $

3.02

$ 11.97 $ 13.78 $ 13.94

Intel Corp

INTC

$

2.39 $

2.13 $

1.85

$

1.88 $

1.52 $

2.16

$

9.18 $ 10.36 $ 11.15


AMD

$

0.66 $ (1.60) $ (0.86)

$

0.18 $ (0.64) $ (0.71)

$

2.28 $

0.75 $

0.60

Mean

$

1.28 $

1.03 $

1.04

$

1.47 $

1.69 $

1.71

$

6.23 $

6.68 $

6.98

Median

$

1.32 $

1.08 $

0.83

$

1.57 $

1.32 $

1.61

$

8.89 $

8.93 $

9.59

23

8.59 $

7.96 $

7.47

9.07


Per Share Data

Company

Ticker

Return on Equity (%)
FY-1
FY-0
TTM

NVIDIA Corporation

NVDA

14%

12%

11%

11%

9%

8%

116%

100%

90%


TXN

20%

16%

23%

11%

9%

13%

42%

32%

54%

Qualcomm, Inc.

QCOM

18%

19%

17%

14%

15%

13%

199%

241%

212%

Marvell Technology

MRVL

12%

7%

9%

11%

6%

8%

96%

66%

74%


FSL

0%

0%

0%

-12%

-3%

2%

19%

39%

32%


BRCM

14%

9%

16%

10%

6%

11%

194%

133%

241%

Intel Corp

INTC

28%

22%

21%

18%

13%

13%

74%

51%

38%


AMD

31%

-220%

44%

10%

-30%

4%

41%

-161%

79%

Mean

17%

-17%

18%

9%

3%

9%

98%

63%

102%

Median

16%

10%

16%

11%

8%

10%

85%

59%

77%

24

Return on Assets (%)
FY-1
FY-0
TTM

Return on Capital (%)
FY-1
FY-0
TTM


Ratios

FINANCIAL STATEMENTS PROJECTIONS ASSUMPTIONS

25

Income Statement

Projection Period
Year 1
2014

Year 3
2016

Year 4
2017

Year 5
2018

Year 6
2019

Year 7
2020

Year 8
2021

Year 9
2022

Year 10
2023

8.0%
50.0%
10.0%
-%
5.0%
-%
1.0%

7.0%
50.0%
10.0%
-%
5.0%
-%
1.0%

6.0%
50.0%
10.0%
-%
5.0%
-%
1.0%

5.0%
50.0%
10.0%
-%
5.0%
-%
1.0%

3.0%
50.0%
10.0%
-%
5.0%
-%
1.0%

3.0%
50.0%
10.0%
-%
5.0%
-%
1.0%

3.0%
50.0%
10.0%
-%
5.0%
-%
1.0%

3.0%
50.0%
10.0%
-%
5.0%
-%
1.0%

3.0%
50.0%
10.0%
-%
5.0%
-%
1.0%

3.0%
50.0%
10.0%
-%
5.0%
-%
1.0%

Year 1
2014

Year 2
2015

Year 3
2016

Year 4
2017

Year 5
2018

Year 6
2019

Year 7
2020

Year 8
2021

Year 9
2022

Year 10
2023

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

Year 1
2014

Sales (% growth)
Cost of Goods Sold (% sales)
SG&A (% sales)
Other Expense / (Income) (% of sales)
Depreciation & Amortization (% sales)
Amortization (% sales)
Interest Income

Year 2
2015

Year 2
2015

Year 3
2016

Year 4
2017

Year 5
2018

Year 6
2019

Year 7
2020

Year 8
2021

Year 9
2022

Year 10
2023

39.0
68.0
5.0%
60.0
16.0%
1.0%

39.0
68.0
5.0%
60.0
16.0%
1.0%

39.0
68.0
5.0%
60.0
16.0%
1.0%

39.0
68.0
5.0%
60.0
16.0%
1.0%

39.0
68.0
5.0%
60.0
16.0%
1.0%

39.0
68.0
5.0%
60.0
16.0%
1.0%

39.0
68.0
5.0%
60.0
16.0%
1.0%

39.0
68.0
5.0%
60.0
16.0%
1.0%

39.0
68.0
5.0%
60.0
16.0%
1.0%

39.0
68.0
5.0%
60.0
16.0%
1.0%

Cash Flow Statement

Capital Expenditures (% sales)

Projection Period

Balance Sheet Assumptions
Balance Sheet

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

26

Projection Period

FINANCIAL STATEMENTS PROJECTIONS ASSUMPTIONS

Income Statement and Cash Flow Statement Assumptions

Calculation of Fully Diluted Shares Outstanding

Purchase Price
Public (1) / Private (2)

1


$18.50

Fully Diluted Shares Outstanding
Equity Purchase Price
Plus: Total Debt
Plus: Preferred Securities
Plus: Noncontrolling Interest
Less: Cash and Cash Equivalents
Enterprise Value
Premium Calculation
Stock Trading at (If Public)
Premium Paid (If Public)

589.0
$10,896.5

Stock Trading at
Basic Shares Outstanding
Plus: Shares from In-the-Money Options
Less: Shares Repurchased

$18.50
$16.00
589.0
-

Net New Shares from Options
Plus: Shares from Convertible Securities

404.8
Fully Diluted Shares Outstanding
(3,033.0) Options/Warrants
$8,268.3
Number of
Exercise

Tranche

Shares

Price

589.000

In-the-Money
Shares

Proceeds

$16.00 Tranche 1
16% Tranche 2
Tranche 3

-

-

-

-

Tranche 4

-

-

-

-

Tranche 5

-

-

-

-

Total

-

-

-

Convertible Securities
Conversion
Price

Amount
Issue 1
Issue 2
Issue 3
Issue 4
Issue 5
Total

28

-

-

Conversion
Ratio
-

New
Shares
-

TRANSACTION ANALYSIS

Fully Diluted Shares and Purchase Price Calculation


Sources and Uses of Funds
Sources of Funds
Multiple of EBITDA

% of Total
Equity %

Amount

Sources

12/31/2013

Cumulative

Pricing

Revolving Credit
Term Loan A

5,000.0

-%
43.0%

-x
6.6x

-x
6.6x

L+325 bps
L+300 bps

Term Loan B

2,000.0

17.2%

2.6x

9.3x

L+350 bps

Term Loan C
2nd Lien
Senior Notes

1,000.0

-%
-%
8.6%

-x
-x
1.3x

9.3x
9.3x
10.6x

L+350 bps
L+350 bps
3.000%

Senior Subordinated Notes
Sponsor Equity
Rollover Equity
Management Equity
Cash on Hand

3,127.9
500.0

-%
26.9%
-%
-%
4.3%

-x
4.1x
-x
-x
0.7x

10.6x
14.7x
14.7x
14.7x
15.4x

10.000%

$11,627.9

100.0%

15.4x

15.4x

100%
0%
0%

Total Sources
Uses of Funds

Purchase Price
% of Total
Uses

Amount
Purchase Target Equity
Repay Existing Debt
Tender / Call Premiums

$10,896.5
404.8
-

Financing Fees
Investment Banking Fees
Legal Fees

160.3
82.7
82.7

Other Fees and Expenses

1.0

Total Uses

29

$11,627.9

Fully Diluted Shares

10.9x
6.0x
31.2%

$10,896.5 Exit Multiple
(2,628.2) IRR
$8,268.3

1.4%
0.7%
Transaction Multiples
0.7%
0.0% Enterprise Value / Sales
LTM 12/31/2013
$4,092.8
2013E
4,092.8
Enterprise Value / EBITDA
LTM 12/31/2013
$755.6
2013E

2018

589.0 Entry Multiple

93.7% Equity Purchase Price
3.5% Plus: Existing Net Debt
- % Enterprise Value

100.0%

Return
$18.50 Exit Year

839.0

Cash Return

3.9x

Options
Financing Structure
2.0x Operating Scenario
2.0x Cash Flow Sweep
Cash Balance
10.9x Average Interest
9.9x Financing Fees

5
1
1
1
1
1

Financing Fees
Fees
Structure 4

Size

Revolving Credit Size
Term Loan A
Term Loan B

(%)

$300.0
5,000.0
2,000.0

Term Loan C
2nd Lien

1.750%
1.750%
1.750%

-

Senior Notes
Senior Bridge Facility
Senior Subordinated Bridge Facility
Other Financing Fees & Expenses

($)
$5.3
87.5
35.0

-

1,000.0
1,000.0
-

-

2.250%
2.250%
1.000%
1.000%

22.5
10.0
-

Total Financing Fees

$160.3

Amortization of Financing Fees
Year 1
2014

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

30

6
5
7
7
10
10
10
10
10

Year 2
2015

Year 3
2016

Year 4
2017

Year 5
2018

Year 6
2019

Year 7
2020

Year 8
2021

Year 9
2022

Year 10
2023

$0.9
17.5
5.0
2.3
1.0
-

$0.9
17.5
5.0
2.3
1.0
-

$0.9
17.5
5.0
2.3
1.0
-

$0.9
17.5
5.0
2.3
1.0
-

$0.9
17.5
5.0
2.3
1.0
-

$0.9
5.0
2.3
1.0
-

5.0
2.3
1.0
-

2.3
1.0
-

2.3
1.0
-

2.3
1.0
-

$26.6

$26.6

$26.6

$26.6

$26.6

$9.1

$8.3

$3.3

$3.3

$3.3

0.2

0.2

0.2

0.2

0.2

0.2

0.2

0.2

0.2

0.2


Financing Fees Amortization

$ in Millions
Income Statement
Historical Period
2011

2010
Sales
% growth
Cost of Goods Sold
Gross Profit
% margin
Selling, General & Administrative
% sales
Other Expense / (Income)
EBITDA
% margin
Depreciation & Amortization

$3,543.3
NA

2012

$3,997.9
12.8%

$4,280.2
7.1%

$4,092.8
NA

$4,092.8
(4.4%)

Year 1
2014

Year 2
2015

Year 3
2016

Year 4
2017

Year 5
2018

Year 6
2019

Year 7
2020

Year 8
2021

Year 9
2022

Year 10
2023

$4,420.3
8.0%

$4,729.7
7.0%

$5,013.5
6.0%

$5,264.1
5.0%

$5,422.1
3.0%

$5,584.7
3.0%

$5,752.3
3.0%

$5,924.8
3.0%

$6,102.6
3.0%

$6,285.7
3.0%

2,134.2

1,941.4

2,053.8

1,858.7

2,046.4

2,210.1

2,364.8

2,506.7

2,632.1

2,711.0

2,792.4

2,876.1

2,962.4

3,051.3

3,142.8

$1,409.1
39.8%

$2,056.5
51.4%

$2,226.3
52.0%

$2,234.1
54.6%

$2,046.4
50.0%

$2,210.1
50.0%

$2,364.8
50.0%

$2,506.7
50.0%

$2,632.1
50.0%

$2,711.0
50.0%

$2,792.4
50.0%

$2,876.1
50.0%

$2,962.4
50.0%

$3,051.3
50.0%

$3,142.8
50.0%

361.5
10.2%

405.6
10.1%

430.8
10.1%

424.0
10.4%

450.2
11.0%

442.0
10.0%

473.0
10.0%

501.3
10.0%

526.4
10.0%

542.2
10.0%

558.5
10.0%

575.2
10.0%

592.5
10.0%

610.3
10.0%

628.6
10.0%

604.8

798.4

921.0

1,054.5

757.2

$442.7
12.5%

$852.5
21.3%

$874.5
20.4%

$755.6
18.5%

$839.0
20.5%

$1,768.1
40.0%

$1,891.9
40.0%

$2,005.4
40.0%

$2,105.7
40.0%

$2,168.8
40.0%

$2,233.9
40.0%

$2,300.9
40.0%

$2,369.9
40.0%

$2,441.0
40.0%

$2,514.3
40.0%

187.0

204.2

226.2

242.7

204.6

221.0

236.5

250.7

263.2

271.1

279.2

287.6

296.2

305.1

314.3

-

Amortization
EBIT
% margin

Projection Period
LTM
Pro forma
12/31/2013
2013

$255.7
7.2%

$648.3
16.2%

$648.2
15.1%

$512.9
12.5%

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

$634.4
15.5%

$1,547.1
35.0%

$1,655.4
35.0%

$1,754.7
35.0%

$1,842.5
35.0%

$1,897.7
35.0%

$1,954.7
35.0%

$2,013.3
35.0%

$2,073.7
35.0%

$2,135.9
35.0%

$2,200.0
35.0%

300.0
130.0
30.0
1.5
0.2

200.8
129.4
30.0
1.5
0.2

77.5
131.0
30.0
1.5
0.2

26.0
127.9
30.0
1.5
0.2

89.7
30.0
1.5
0.2

27.1
30.0
1.5
0.2

30.0
1.5
0.2

30.0
1.5
0.2

30.0
1.5
0.2

30.0
1.5
0.2

30.0
1.5
0.2

Cash Interest Expense
Amortization of Deferred Financing Fees

$461.7
26.6

$361.8
26.6

$240.1
26.6

$185.5
26.6

$121.3
26.6

$58.8
26.6

$31.7
9.1

$31.7
8.3

$31.7
3.3

$31.7
3.3

$31.7
3.3

Total Interest Expense
Interest Income

$488.3

$388.4
(12.7)

$266.7
-

$212.2
-

$147.9
-

$85.4
(2.1)

$40.8
(10.3)

$39.9
(22.5)

$34.9
(35.2)

$34.9
(48.3)

$34.9
(61.9)

Interest Expense
Revolving Credit Facility
Term Loan A
Term Loan B
Term Loan C
Existing Term Loan
2nd Lien
Senior Notes
Commitment Fee on Unused Revolver
Administrative Agent Fee

Net Interest Expense

$375.8

$266.7

$212.2

$147.9

$83.3

$30.5

$17.4

($13.4)

($27.0)

Earnings Before Taxes
Income Tax Expense

1,171.3
445.1

1,388.7
527.7

1,542.5
586.2

1,694.5
643.9

1,814.4
689.5

1,924.2
731.2

1,995.9
758.5

2,074.0
788.1

2,149.3
816.8

2,227.0
846.3

$726.2

$861.0

$956.4

$1,050.6

$1,125.0

$1,193.0

$1,237.5

$1,285.9

$1,332.6

$1,380.8

16.4%

18.2%

19.1%

20.0%

20.7%

21.4%

21.5%

21.7%

21.8%

22.0%

Year 1
2014

Year 2
2015

Year 3
2016

Year 4
2017

Year 5
2018

Year 6
2019

Year 7
2020

Year 8
2021

Year 9
2022

Year 10
2023

8.0%
50.0%
10.0%
-%
5.0%
-%
1.0%
38.0%

7.0%
50.0%
10.0%
-%
5.0%
-%
1.0%
38.0%

6.0%
50.0%
10.0%
-%
5.0%
-%
1.0%
38.0%

5.0%
50.0%
10.0%
-%
5.0%
-%
1.0%
38.0%

3.0%
50.0%
10.0%
-%
5.0%
-%
1.0%
38.0%

3.0%
50.0%
10.0%
-%
5.0%
-%
1.0%
38.0%

3.0%
50.0%
10.0%
-%
5.0%
-%
1.0%
38.0%

3.0%
50.0%
10.0%
-%
5.0%
-%
1.0%
38.0%

3.0%
50.0%
10.0%
-%
5.0%
-%
1.0%
38.0%

3.0%
50.0%
10.0%
-%
5.0%
-%
1.0%
38.0%

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

31

2010
NA
60.2%
10.2%
17.1%
5.3%
-%

2011
12.8%
48.6%
10.1%
20.0%
5.1%
-%

2012
7.1%
48.0%
10.1%
21.5%
5.3%
-%

LTM
Pro forma
12/31/2013
2013
NA
45.4%
10.4%
25.8%
5.9%
-%

(4.4%)
50.0%
11.0%
18.5%
5.0%
-%
1.0%

($0.3)


Income Statement Projection

$ in Millions
Balance Sheet
Projection Period
Opening
2013
Cash and Cash Equivalents
Accounts Receivable
Inventories
Prepaids and Other Current Assets
Total Current Assets
Property, Plant and Equipment, net
Goodwill and Intangible Assets
Other Assets
Deferred Financing Fees
Total Assets
Accounts Payable
Accrued Liabilities
Other Current Liabilities

Adjustments
(+)
(-)

$3,033.0
447.6
380.3
188.9

Year 3
2016

Year 4
2017

Year 5
2018

Year 6
2019

Year 7
2020

Year 8
2021

Year 9
2022

Year 10
2023

505.4
440.6
236.5

535.7
467.0
250.7

562.5
490.4
263.2

$428.1
579.3
505.1
271.1

$1,630.5
596.7
520.2
279.2

$2,876.6
614.6
535.8
287.6

$4,166.1
633.1
551.9
296.2

$5,502.4
652.1
568.5
305.1

$6,886.8
671.6
585.5
314.3

$4,049.8

$3,549.8

$1,105.1

$1,182.4

$1,253.4

$1,316.0

$1,783.6

$3,026.7

$4,314.7

$5,647.3

$7,028.0

$8,458.2

595.4
963.8
102.3
-

595.4
7,539.6
102.3
160.3

595.4
7,539.6
102.3
133.6

595.4
7,539.6
102.3
107.0

595.4
7,539.6
102.3
80.4

595.4
7,539.6
102.3
53.8

595.4
7,539.6
102.3
27.1

595.4
7,539.6
102.3
18.0

595.4
7,539.6
102.3
9.8

595.4
7,539.6
102.3
6.5

595.4
7,539.6
102.3
3.3

$5,711.4

$11,947.5

$9,476.1

$9,526.8

$9,571.1

$9,607.2

$10,048.1

$11,282.1

$12,561.8

$13,891.2

$15,268.7

$16,695.6

333.3
652.6
-

333.3
652.6
-

363.3
707.2
44.2

388.7
756.8
47.3

412.1
802.2
50.1

432.7
842.3
52.6

445.6
867.5
54.2

459.0
893.6
55.8

472.8
920.4
57.5

487.0
948.0
59.2

501.6
976.4
61.0

516.6
1,005.7
62.9

$985.9

$1,114.8

$1,192.8

$1,264.4

$1,327.6

$1,367.4

$1,408.4

$1,450.7

$1,494.2

$1,539.0

$1,585.2

5,000.0
2,000.0
1,000.0
-

1,693.5
1,980.0
1,000.0
-

825.3
1,960.0
1,000.0
-

1,801.6
1,000.0
-

723.9
1,000.0
-

1,000.0
-

1,000.0
-

1,000.0
-

1,000.0
-

1,000.0
-

1,000.0
-

$1,390.7

$8,985.9

$5,788.3

$4,978.1

$4,066.0

$3,051.4

$2,367.4

$2,408.4

$2,450.7

$2,494.2

$2,539.0

$2,585.2

4,320.6

2,961.5

3,687.8

4,548.7

5,505.1

6,555.7

7,680.7

8,873.7

10,111.1

11,397.0

12,729.6

14,110.4

404.8
-

6,575.9
160.3

$985.9

Total Liabilities

Year 2
2015

472.3
411.8
221.0

Total Current Liabilities

Noncontrolling Interest
All Shareholders' Equity

Year 1
2014

$2,533.0
447.6
380.3
188.9

Term Loan A
Term Loan B
Term Loan C
Existing Term Loan
2nd Lien
Senior Notes
Other Debt
Other Long-Term Liabilities

(500.0)

Pro Forma
2013

5,000.0
2,000.0
(404.8)
1,000.0
-

2,961.5

(4,320.6)

595.4
7,539.6
102.3
(0.0)

Total Shareholders' Equity

$4,320.6

$2,961.5

$3,687.8

$4,548.7

$5,505.1

$6,555.7

$7,680.7

$8,873.7

$10,111.1

$11,397.0

$12,729.6

$14,110.4

Total Liabilities and Equity

$5,711.4

$11,947.5

$9,476.1

$9,526.8

$9,571.1

$9,607.2

$10,048.1

$11,282.1

$12,561.8

$13,891.2

$15,268.7

$16,695.6

0.000

0.000

0.000

0.000

0.000

0.000

0.000

0.000

0.000

0.000

0.000

0.000

31.0

31.0

(10.4)
0.7

(11.0)
0.6

(11.5)
0.5

(11.9)
0.3

(12.2)
0.4

(12.6)
0.4

(13.0)
0.4

(13.4)
0.4

(13.8)
0.4

Balance Check
Net Working Capital
(Increase) / Decrease in Net Working Capital

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)

32

Opening
2013

Pro forma
2013

(9.7)
40.6
Year 1
2014

Year 2
2015

Year 3
2016

Year 4
2017

Year 5
2018

Year 6
2019

Year 7
2020

Year 8
2021

Year 9
2022

Year 10
2023

39.9
67.8
4.6%

39.9
67.8
4.6%

39.0
68.0
5.0%

39.0
68.0
5.0%

39.0
68.0
5.0%

39.0
68.0
5.0%

39.0
68.0
5.0%

39.0
68.0
5.0%

39.0
68.0
5.0%

39.0
68.0
5.0%

39.0
68.0
5.0%

39.0
68.0
5.0%

59.4
15.9%
-%

59.4
15.9%
-%

60.0
16.0%
1.0%

60.0
16.0%
1.0%

60.0
16.0%
1.0%

60.0
16.0%
1.0%

60.0
16.0%
1.0%

60.0
16.0%
1.0%

60.0
16.0%
1.0%

60.0
16.0%
1.0%

60.0
16.0%
1.0%

60.0
16.0%
1.0%


Balance Sheet Projection and Adjustments

$ in Millions
Cash Flow Statement
Projection Period
Year 1
2014
Operating Activities
Net Income
Plus: Depreciation & Amortization
Plus: Amortization
Plus: Amortization of Financing Fees
Changes in Working Capital Items
(Inc.) / Dec. in Accounts Receivable
(Inc.) / Dec. in Inventories
(Inc.) / Dec. in Prepaid and Other Current Assets
Inc. / (Dec.) in Accounts Payable
Inc. / (Dec.) in Accrued Liabilities
Inc. / (Dec.) in Other Current Liabilities
(Inc.) / Dec. in Net Working Capital
Cash Flow from Operating Activities
Investing Activities
Capital Expenditures
Other Investing Activities
Cash Flow from Investing Activities
Financing Activities
Term Loan A
Term Loan B
Term Loan C
Existing Term Loan
2nd Lien
Senior 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)

33

Year 2
2015

$726.2
221.0
26.6

Year 3
2016

$861.0
236.5
26.6

Year 4
2017

$956.4
250.7
26.6

Year 5
2018

$1,050.6
263.2
26.6

$1,125.0
271.1
26.6

Year 6
2019

Year 7
2020

$1,193.0
279.2
9.1

Year 8
2021

$1,237.5
287.6
8.3

Year 9
2022

$1,285.9
296.2
3.3

Year 10
2023

$1,332.6
305.1
3.3

$1,380.8
314.3
3.3

(24.7)
(31.4)
(32.1)

(33.1)
(28.8)
(15.5)

(30.3)
(26.4)
(14.2)

(26.8)
(23.4)
(12.5)

(16.9)
(14.7)
(7.9)

(17.4)
(15.2)
(8.1)

(17.9)
(15.6)
(8.4)

(18.4)
(16.1)
(8.6)

(19.0)
(16.6)
(8.9)

(19.6)
(17.1)
(9.2)

30.0
54.6
44.2

25.4
49.5
3.1

23.3
45.4
2.8

20.6
40.1
2.5

13.0
25.3
1.6

13.4
26.0
1.6

13.8
26.8
1.7

14.2
27.6
1.7

14.6
28.4
1.8

15.0
29.3
1.8

40.6

0.7

0.6

0.5

0.3

0.4

0.4

0.4

0.4

0.4

$1,014.5

$1,124.8

$1,234.3

$1,341.0

$1,423.0

$1,481.7

$1,533.7

$1,585.8

$1,641.4

$1,698.7

(221.0)
-

(236.5)
-

(250.7)
-

(263.2)
-

(271.1)
-

(279.2)
-

(287.6)
-

(296.2)
-

(305.1)
-

(314.3)
-

($221.0)

($236.5)

($250.7)

($263.2)

($271.1)

($279.2)

($287.6)

($296.2)

($305.1)

($314.3)

(3,306.5)
(20.0)
-

(868.3)
(20.0)
-

(825.3)
(158.4)
-

(1,077.8)
-

(723.9)
-

-

-

-

-

-

($3,326.5)

($888.3)

($983.6)

($1,077.8)

($723.9)

-

-

-

-

-

($2,533.0)
2,533.0

-

-

-

$428.1
-

$1,202.5
428.1

$1,246.1
1,630.5

$1,289.5
2,876.6

$1,336.2
4,166.1

$1,384.4
5,502.4

-

-

-

-

$428.1

$1,630.5

$2,876.6

$4,166.1

$5,502.4

$6,886.8

Year 1
2014

Year 2
2015

Year 3
2016

Year 4
2017

Year 5
2018

Year 6
2019

Year 7
2020

Year 8
2021

Year 9
2022

Year 10
2023

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%


Cash Flow Statement Projections

$ in Millions
Debt Schedule
Projection Period
Pro forma
2013
Forward LIBOR Curve

3.00%

Year 4
2017

Year 5
2018

Year 6
2019

Year 7
2020

Year 8
2021

Year 9
2022

Year 10
2023

3.00%

3.15%

3.30%

3.60%

4.00%

4.35%

4.80%

4.85%

5.10%

5.25%

$1,124.8
(236.5)

$1,234.3
(250.7)

$1,341.0
(263.2)

$1,423.0
(271.1)

$1,481.7
(279.2)

$1,533.7
(287.6)

$1,585.8
(296.2)

$1,641.4
(305.1)

$1,698.7
(314.3)

$793.5
(20.0)
2,533.0

$888.3
(20.0)
-

$983.6
(20.0)
-

$1,077.8
(20.0)
-

$1,151.9
(20.0)
-

$1,202.5
428.1

$1,246.1
1,630.5

$1,289.5
2,876.6

$1,336.2
4,166.1

$1,384.4
5,502.4

$868.3

$963.6

$1,057.8

$1,131.9

$1,630.5

$2,876.6

$4,166.1

$5,502.4

$6,886.8

-%

-%

-%

-%

-%

100.0%

$5,000.0
(3,306.5)

$1,693.5
(868.3)

$825.3
(825.3)

-

-

-

-

-

-

-

-

-

-

-

-

-

-

$5,000.0
3.000%
5 years

Beginning Balance
Mandatory Repayments
Optional Repayments
Ending Balance

$1,693.5

$825.3

6.00%
200.8

Interest Rate
Interest Expense

Term Loan B
Size
Spread
Term
Repayment Schedule

Year 3
2016

$3,306.5

MinCash
-

Cash Available for Optional Debt Repayment
Term Loan A
Size
Spread
Term
Repayment Schedule

Year 2
2015

$1,014.5
(221.0)

Cash Flow from Operating Activities
Cash Flow from Investing Activities
Cash Available for Debt Repayment
Total Mandatory Repayments
Cash From Balance Sheet

Year 1
2014

6.15%
77.5

6.30%
26.0

6.60%
-

$1,801.6
(20.0)
(1,057.8)

7.00%
-

7.35%
-

7.80%
-

7.85%
-

8.10%
-

8.25%
-

$2,000.0
3.500%
7 years
1.0% Per Annum, Bullet at Maturity

Beginning Balance
Mandatory Repayments
Optional Repayments

$2,000.0
(20.0)
-

$1,980.0
(20.0)
-

$1,960.0
(20.0)
(138.4)

$1,980.0

$1,960.0

$1,801.6

$723.9

6.50%
129.4

6.65%
131.0

6.80%
127.9

7.10%
89.7

7.50%
27.1

7.85%
-

8.30%
-

8.35%
-

8.60%
-

8.75%
-

Beginning Balance
Repayment

$1,000.0
-

$1,000.0
-

$1,000.0
-

$1,000.0
-

$1,000.0
-

$1,000.0
-

$1,000.0
-

$1,000.0
-

$1,000.0
-

$1,000.0
-

Ending Balance

$1,000.0

$1,000.0

$1,000.0

$1,000.0

$1,000.0

$1,000.0

$1,000.0

$1,000.0

$1,000.0

$1,000.0

30.0

30.0

30.0

30.0

30.0

30.0

30.0

30.0

30.0

30.0

Ending Balance
Interest Rate
Interest Expense
Senior Notes
Size
Coupon
Term

Interest Expense

34

$723.9
(20.0)
(703.9)
-

-

-

-

-

-

-

-

-

-

-

$1,000.0
3.000%
10 years


Debt Schedule

Free Cash Flow
Projection Period

Historical Period
2010

2011

2012

LTM
12/31/2013

Pro forma
2013

Year 1
2014

Sales
% growth

$3,543.3
NA

$3,997.9
12.8%

$4,280.2
7.1%

$4,092.8
NA

$4,092.8
(4.4%)

Gross Profit
% margin

Year 2
2015

Year 3
2016

Year 4
2017

Year 5
2018

Year 6
2019

Year 7
2020

Year 8
2021

Year 9
2022

Year 10
2023

$4,420.3
8.0%

$4,729.7
7.0%

$5,013.5
6.0%

$5,264.1
5.0%

$5,422.1
3.0%

$5,584.7
3.0%

$5,752.3
3.0%

$5,924.8
3.0%

$6,102.6
3.0%

$6,285.7
3.0%

$1,409.1
39.8%

$2,056.5
51.4%

$2,226.3
52.0%

$2,234.1
54.6%

$2,046.4
50.0%

$2,210.1
50.0%

$2,364.8
50.0%

$2,506.7
50.0%

$2,632.1
50.0%

$2,711.0
50.0%

$2,792.4
50.0%

$2,876.1
50.0%

$2,962.4
50.0%

$3,051.3
50.0%

$3,142.8
50.0%

EBITDA
% margin

$442.7
12.5%

$852.5
21.3%

$874.5
20.4%

$755.6
18.5%

$839.0
20.5%

$1,768.1
40.0%

$1,891.9
40.0%

$2,005.4
40.0%

$2,105.7
40.0%

$2,168.8
40.0%

$2,233.9
40.0%

$2,300.9
40.0%

$2,369.9
40.0%

$2,441.0
40.0%

$2,514.3
40.0%

Capital Expenditures
% sales

2,529.0
71.4%

488.0
12.2%

616.0
14.4%

616.0
15.1%

616.0
15.1%

221.0
5.0%

236.5
5.0%

250.7
5.0%

263.2
5.0%

271.1
5.0%

279.2
5.0%

287.6
5.0%

296.2
5.0%

305.1
5.0%

314.3
5.0%

461.7
488.3

361.8
388.4

240.1
266.7

185.5
212.2

121.3
147.9

58.8
85.4

31.7
40.8

31.7
39.9

31.7
34.9

31.7
34.9

31.7
34.9

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

$1,768.1
(361.8)
12.7
(445.1)
(221.0)
40.6

$2,005.4
(185.5)
(586.2)
(250.7)
0.6

$2,105.7
(121.3)
(643.9)
(263.2)
0.5

$2,168.8
(58.8)
2.1
(689.5)
(271.1)
0.3

$2,233.9
(31.7)
10.3
(731.2)
(279.2)
0.4

$2,300.9
(31.7)
22.5
(758.5)
(287.6)
0.4

$2,369.9
(31.7)
35.2
(788.1)
(296.2)
0.4

$2,441.0
(31.7)
48.3
(816.8)
(305.1)
0.4

$2,514.3
(31.7)
61.9
(846.3)
(314.3)
0.4

$793.5
793.5

Free Cash Flow
Cumulative Free Cash Flow

$1,891.9
(240.1)
(527.7)
(236.5)
0.7
$888.3
1,681.8

$983.6
2,665.4

$1,077.8
3,743.2

$1,151.9
4,895.1

$1,202.5
6,097.6

$1,246.1
7,343.7

$1,289.5
8,633.2

$1,336.2
9,969.4

$1,384.4
11,353.8

$428.1

$1,630.5

$2,876.6

$4,166.1

$5,502.4

$6,886.8

Capitalization
Cash
Term Loan A
Term Loan B
Term Loan C
Existing Term Loan
2nd Lien
Other Debt
Total Senior Secured Debt
Senior Notes
Total Senior Debt
Total Debt
Shareholders' Equity
Total Capitalization
% of Bank Debt Repaid

$2,533.0

-

-

-

-

5,000.0
2,000.0
-

1,693.5
1,980.0
-

825.3
1,960.0
-

1,801.6
-

$7,000.0

$3,673.5

$2,785.3

$1,801.6

$723.9

1,000.0

1,000.0

1,000.0

1,000.0

1,000.0

1,000.0

1,000.0

1,000.0

1,000.0

1,000.0

1,000.0

$8,000.0

$4,673.5

$3,785.3

$2,801.6

$1,723.9

$1,000.0

$1,000.0

$1,000.0

$1,000.0

$1,000.0

$1,000.0

$8,000.0

$4,673.5

$3,785.3

$2,801.6

723.9
-

$1,723.9

-

$1,000.0

-

$1,000.0

-

$1,000.0

-

$1,000.0

-

$1,000.0

-

$1,000.0

2,961.5

3,687.8

4,548.7

5,505.1

6,555.7

7,680.7

8,873.7

10,111.1

11,397.0

12,729.6

14,110.4

$10,961.5

$8,361.3

$8,334.0

$8,306.8

$8,279.6

$8,680.7

$9,873.7

$11,111.1

$12,397.0

$13,729.6

$15,110.4

47.5%

60.2%

74.3%

89.7%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

-

Credit Statistics
% Debt / Total Capitalization

73.0%

55.9%

45.4%

33.7%

20.8%

11.5%

10.1%

9.0%

8.1%

7.3%

6.6%

EBITDA / Cash Interest Expense
(EBITDA - Capex) / Cash Interest Expense

1.8x
0.5x

4.9x
4.3x

7.9x
6.9x

10.8x
9.5x

17.4x
15.2x

36.9x
32.3x

70.6x
61.8x

72.7x
63.6x

74.9x
65.5x

77.1x
67.5x

79.4x
69.5x

EBITDA / Total Interest Expense
(EBITDA - Capex) / Total Interest Expense

1.7x
0.5x

4.6x
4.0x

7.1x
6.2x

9.5x
8.3x

14.2x
12.5x

25.4x
22.2x

54.8x
47.9x

57.7x
50.5x

67.9x
59.4x

69.9x
61.2x

72.0x
63.0x

Senior Secured Debt / EBITDA
Senior Debt / EBITDA
Total Debt / EBITDA
Net Debt / EBITDA

8.3x
9.5x
9.5x
6.5x

2.1x
2.6x
2.6x
2.6x

1.5x
2.0x
2.0x
2.0x

0.9x
1.4x
1.4x
1.4x

0.3x
0.8x
0.8x
0.8x

-x
0.5x
0.5x
0.3x

-x
0.4x
0.4x
(0.3x)

-x
0.4x
0.4x
(0.8x)

-x
0.4x
0.4x
(1.3x)

-x
0.4x
0.4x
(1.8x)

-x
0.4x
0.4x
(2.3x)

35


Free Cash Flow , Capitalization and Credit Statistics Summary

$ in Millions
Returns Analysis
Initial Sponsor Equity
Initial Rollover Equity
Initial Management Equity
Total Initial Equity

$3,127.9
$3,127.9

100%
0%
0%
100%
Projection Period
Pro forma
2013

Entry EBITDA Multiple

Year 1
2014

Year 2
2015

Year 3
2016

Year 4
2017

Year 5
2018

Year 6
2019

Year 7
2020

Year 8
2021

Year 9
2022

Year 10
2023

10.9x

EBITDA
Exit EBITDA Multiple

$1,768.1

$1,891.9

$2,005.4

$2,105.7

$2,168.8

$2,233.9

$2,300.9

$2,369.9

$2,441.0

$2,514.3

$10,608.7

$11,351.3

$12,032.3

$12,634.0

$13,013.0

$13,403.4

$13,805.5

$14,219.6

$14,646.2

$15,085.6

1,693.5
1,980.0
1,000.0
-

825.3
1,960.0
1,000.0
-

1,801.6
1,000.0
-

723.9
1,000.0
-

1,000.0
-

1,000.0
-

1,000.0
-

1,000.0
-

1,000.0
-

1,000.0
-

$4,673.5
-

$3,785.3
-

$2,801.6
-

$1,723.9
-

$1,000.0
428.1

$1,000.0
1,630.5

$1,000.0
2,876.6

$1,000.0
4,166.1

$1,000.0
5,502.4

$1,000.0
6,886.8

$4,673.5

$3,785.3

$2,801.6

$1,723.9

$571.9

($1,876.6)

($3,166.1)

($4,502.4)

($5,886.8)

Less: Fees and Expenses
Investment Banking Fees (1% of Transcation Value)
Legal Fees (1% of Transaction Value)
Other Fees and Expenses ($1MM)

106.1
106.1
1.0

113.5
113.5
1.0

120.3
120.3
1.0

126.3
126.3
1.0

130.1
130.1
1.0

134.0
134.0
1.0

138.1
138.1
1.0

142.2
142.2
1.0

146.5
146.5
1.0

150.9
150.9
1.0

Toal Fees and Expenses

213.2

228.0

241.6

253.7

261.3

269.1

277.1

285.4

293.9

302.7

$5,721.9

$7,338.0

$8,989.0

$10,656.4

$12,179.8

$13,764.8

$15,405.0

$17,100.4

$18,854.7

$20,669.7

6.0x

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

All Equity Value at Exit
Cash Return

Sponsor IRR
Sponsor Equity %
Initial Equity Investment
Equity Proceeds

IRR

37

($630.5)

1.8x

100%

2.3x

2.9x

3.4x

3.9x

4.4x

4.9x

5.5x

6.0x

6.6x

Year 1
2014

Year 2
2015

Year 3
2016

Year 4
2017

Year 5
2018

Year 6
2019

Year 7
2020

Year 8
2021

Year 9
2022

Year 10
2023

($3,127.9)
$5,721.9

($3,127.9)
$7,338.0

($3,127.9)
$8,989.0

($3,127.9)
$10,656.4

($3,127.9)
$12,179.8

($3,127.9)
$13,764.8

($3,127.9)
$15,405.0

($3,127.9)
$17,100.4

($3,127.9)
$18,854.7

($3,127.9)
$20,669.7
20.8%

82.9%

53.2%

42.2%

35.9%

31.2%

28.0%

25.6%

23.7%

22.1%

RETURN ANALYSIS

Return Analysis

IRR - Assuming Exit in 2018E

Entry
Multiple

31.2%
6.0x
9.9x
10.4x
10.9x
11.4x
11.9x

5.0x
26.3%
26.3%
26.3%
26.3%
26.3%
26.3%

5.5x
28.9%
28.9%
28.9%
28.9%
28.9%
28.9%

Exit Multiple
6.0x
31.2%
31.2%
31.2%
31.2%
31.2%
31.2%

6.5x
33.5%
33.5%
33.5%
33.5%
33.5%
33.5%

7.0x
35.5%
35.5%
35.5%
35.5%
35.5%
35.5%

IRR Sensitivity Analysis w.r.t Exit Multiple and Exit Year Assuming 4.6x Entry Multiple

IRR - Assuming 10.9x Entry Multiple

Exit
Multiple

38

5.0x
5.5x
6.0x
6.5x
7.0x

2018
31.2%
26.3%
28.9%
31.2%
33.5%
35.5%

2019
28.0%
24.4%
26.3%
28.0%
29.7%
31.2%

Exit Year
2020
25.6%
22.8%
24.2%
25.6%
26.9%
28.1%

2021
23.7%
21.4%
22.6%
23.7%
24.7%
25.6%

2022
22.1%
20.3%
21.2%
22.1%
22.9%
23.7%

RETURN ANALYSIS

IRR Sensitivity Analysis w.r.t Entry Multiple and Exit Multiple Assuming Exit in 2016

Financing Structures
Structure
1
Base
$300.0

Revolving Credit Draw
Term Loan A
Term Loan B
Term Loan C
2nd Lien
Senior Notes

3
Structure 2
$300.0

4
Structure 3
$300.0

5
Structure 4
$300.0

5,000.0
1,000.0
500.0

Sources of Funds

2
Structure 1
$300.0
5,000.0
2,000.0
500.0

6,000.0
2,000.0
500.0

6,000.0
2,000.0
1,000.0

5,000.0
2,000.0
1,000.0

Sponsor Equity

100%

-

-

-

-

4,627.9

3,627.9

2,627.9

2,127.9

3,127.9

500.0
-

500.0
-

500.0
-

500.0
-

500.0
-

$11,627.9

$11,627.9

$11,627.9

$11,627.9

$11,627.9

$10,896.5
404.8

$10,896.5
404.8

$10,896.5
404.8

$10,896.5
404.8

$10,896.5
404.8

Tender / Call Premiums
Financing Fees

160.3

160.3

160.3

160.3

160.3

Investment Banking Fees

82.7

82.7

82.7

82.7

82.7

Legal Fees
Other Fees and Expenses

82.7
1.0

82.7
1.0

82.7
1.0

82.7
1.0

82.7
1.0

-

-

-

-

-

Rollover Equity
Management Equity
Cash on Hand
Other Source
Total Sources of Funds

0%
0%

Uses of Funds
Target Equity Purchase Price
Repay Existing Bank Debt

Total Uses of Funds

$11,627.9

$11,627.9

$11,627.9

$11,627.9

$11,627.9

5 Year IRR

28.6%

34.4%

38.6%

31.2%

Cash Return
39

24.8%
3.0x

3.5x

4.4x

5.1x

3.9x

RETURN ANALYSIS

Alternative Financing Structures and Corresponding IRRs

Prepared
by
Deb Sahoo
MBA, Finance, University of Michigan
MS, EE, University of Southern California
B-Tech, EE, IIT

40

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