Goldman sachs case competition (1st place) 2015 by Bruin Asset Management

an ag em en t tM

Goldman Sachs Case Competition

Active Gear to acquire Mercury Athletic Footwear

Ice Point Solutions Darren Tan Darryl Tan Fangfei Li Will Wolf

 Encompassing both Active Gear and Mercury Athletic Footwear

 Active management of inventory and production lead times

 Individuals would compete to anticipate and exploit fashion trends  Casual Segment: Style, price, and general quality

 Low growth, but with fairly stable profit margins

Inventory Management

 Athletic Segment: Brand Image, specialized engineering for performance, price

 Mature, but highly competitive industry

Competition

General Information

an ag em en t

Industry Overview

 8-10 months to complete a new design, associated samples, and production specifications  4-6 months were required for manufacturing start-up before new orders could be filled

Retailers

 Few firms sold through company-retail stores  Majority sold through department stores, independent specialty retailers, sporting goods stores, boutiques and wholesalers  Little success for firms with ecommerce

Ice Point Solutions

Company Overviews Mercury Athletic Footwear

an ag em en t

Active Gear Demographics

Demographics

 Broad and mainstream market  Originally affluent urban and suburban family members ages 25 to 45  Image that is prosperous, active, and fashion-conscious

 15 to 25 year old; active interest in extreme sports  Image that is iconoclastic and nonconformist  People in the global youth culture of alternative music, TV, and clothing

Products

Distribution

The companies are fundamentally different.

Revenues    

$470.3 million in revenue for 2006 $60.4 million in operating income for 2006 42% from athletic footwear 58% from casual footwear

 Casual footwear: 5,700 department, specialty, and general retail stores via a network of wholesalers and independent distributors  Athletic footwear: Independent sales representatives to a limited number of sporting good stores, pro shops, and specialty footwear retailers  A small percentage of both were sold through Active Gear’s website

 Athletic shoes that have a classic image  Casual shoes that have classic syling  Small portfolio with longer lifecycles

 Men’s athletic footwear: Inexpensive to produce with basic materials; loyal customers pay medium to high prices  Men’s casual footwear: Promising designs, but delayed due to bad weather and strikes and cannibalization of products  Women’s athletic footwear: High cost of building brand image and awareness  Women’s casual footwear: Sales faltered after promotional support was reduced Distribution  Retail, athletic, department, specialty stores, catalogs, and the Internet  No geographic region accounted for more than 10% of the sales

Revenues  $431.1 million in revenue for 2006  $58.1 million in EBITDA for 2006

Ice Point Solutions

Mercury Athletic Footwear’s Weaknesses

Active Gear’s Weaknesses •

Small Size

•

Small size of Active Gear creates a competitive disadvantage because of the recent consolidation of contract manufacturers Currently manufacturers favor firms who could offer longer production runs

Lack of Reliable Manufacturers

Mercury Athletic Footwear’s Men’s Casual sector was disrupted by bad weather and strikes

•

Poor Inventory Management

DSI 10 days longer than the industry average

Big Box Retailers

61.1 Days compared to Active Gear’s 42.5 Days

•

Decreasing Operating Margins

Active Gear cannot really use discount retailers due to its brand I mage, but this hurts sales growth and the company only grew at a rate of 2.2% for the past 3 years

Tradeoff for increase in growth through discounted retailers

Larger Size

Combination

Growth Rate

•

an ag em en t

WACC Calculations Acquisition Rationale

Manufacturer Scrutiny

Inventory System Adoption

Better Operating Margins

Ice Point Solutions

Potential Sources of Value

Manufacturing and Distribution Synergies

an ag em en t

Synergies on the Supply Side Lead to a Reduction in Costs

Growth Potential

• Economies of scale created in manufacturing due to larger post-merger size, can gain additional savings by providing longer production-runs to Chinese manufacturers • Economies of scope regarding distribution, increasing the distribution network ‘s size and resilience as well as reaching a larger target audience • Leverage experience of Mercury’s supply-chain managers throughout AGI to maintain effeciency

Acquisition Risks

• AGI gains exposure to growing yet historically unenterable discount retail space through Mercury’s product line without compromising core AGI brand • Mercury Athletic Footwear gains improved inventory management and efficiency, but retains autonomous status outside of merged production lines and logistics

• Completely different products and market demographics may make the company images’ clash if combined and potentially difficult to manage • Mercury Athletic Footwear has lower EBITDA margins, and recently failed to launch their women’s casual lines • The athletic footware market is more prone to fashion cycles than the relatively unvolitile niche AGI primarily participates in

Ice Point Solutions

Assumptions for the Mercury Athletic Working Model Income Statement Projections Mean

2007

2008

15.40% -5.76% 12.72% -20.05%

44.20% -6.75% 14.31% -15.17%

29.80% -6.25% 13.51% -17.61%

15.00% 1.00% 12.00% 0.00%

12.00% 2.00% 11.00% 0.00%

13.46% 15.64% 9.50% 0.85%

12.11% 16.38% 10.76% -2.34%

14.34% 15.95% 10.28% -2.29%

13.30% 15.99% 10.18% -1.26%

13.30% 15.99% 10.18% 0.00%

0.08% 2.26%

0.09% 1.74% 2.23%

0.08% 2.50% 2.20%

0.08% 2.23%

1.77% 2.50% 6.93%

1.77% 2.50% 6.37%

2004

2005

2006

Mean

2007

3.58% 31.20 15.72% 2.29%

5.63% 39.32 19.74% 4.41%

2.48% 38.87 16.97% 2.36%

3.90% 36.47 17.48% 3.02%

0.87% 36.47 17.48% 3.02%

$1,031 $554 $5,657

$35,740 $34,605 $11,884

15.2 4.23%

16.4 6.69%

15.9 4.83%

15.8 5.25%

15.9 5.27%

$1,635 $8,131

$13,795 $9,256

$11,654 $9,080

$9,028 $8,822

$11,654 $9,080

36.5

63.8

2011

8.00% 3.00% 7.00% 0.00%

5.00% 3.00% 5.00% 0.00%

13.30% 15.99% 10.18% 0.00%

1.77% 2.50% 6.36%

1.77% 2.50% 6.37%

1.77% 2.50% 6.35%

2009

2010

2011

0.86% 36.47 17.48% 3.02%

PPE current = PPE previous year + CapEx - Depreciation $43,853 $26,875 $43,853 $43,853 $43,853 $43,051 $26,070 $43,051 $43,051 $43,051 $11,162 $9,568 $11,162 $11,162 $11,162

$43,853 $43,051 $11,162

15.9 5.27%

$11,654 $9,080

2008

Historical Cash Cycle Ratios Days Sales Inventory Days Sales Outstanding Oustanding

2010

10.00% 2.00% 9.00% 0.00%

Assets Current Assets Cash (% of Revenue) A/R (Days Sales Outstanding) Inventory (% of Rev) Prepaid Expenses (% of Rev) Non-Current Assets Property, Plant and Equipment Trademarks & Other Intangibles Goodwill Other Assets Liabilities Current Liabilities A/P (Days Payable Outstanding) Accrued Expenses (% of Total OE*) Non-Current Liabilities Deferred Taxes Pension Obligation

2009

EBIT Segmented revenue projections: • MA: conservative decreasing growth rate • MC: approaching a long-term growth rate • WA: conservative decreasing growth rate • WC: at zero revenue growth and discontinued after 1 year

an ag em en t

2006

2005

Revenue Growth Men's Athletic Men's Casual Women's Athletic Women's Casual EBIT Margins Men's Athletic Men's Casual Women's Athletic Women's Casual Expenses as % of revenue Corporate Overhead Capital Expenditures Depreciation Expense Balance Sheet Projections

2004

Changes in Working Capital

Days Prepaid Outstanding

Days Payable Outstanding

Days Accrued Outstanding

2007

2008

2009

2010

2011

11.0

15.9

17.3

$4,569

$2,648

$9,805

$8,687

$6,234

Segmented EBIT margins are held at constant % of segmented revenues (3-yr mean): • COGS, SG&A and D&A are highly correlated with sales • D&A is directly related to company’s capital spending which supports topline growth Corporate Overhead held at constant % of overall revenues

Balance Sheet Accounts

Current Assets • Cash at a lower % of revenues • A/R at constant DSO (3-yr mean) • Inventory at constant % of revenue (3-yr mean) • Prepaid expenses at constant % of revenue (3-yr mean) Non-current Assets • PP&E calculated based on PPE current • Other non-current accounts held at constant LTM value Current Liabilities • A/P at constant DPO (3-yr mean) • Accrued expenses at constant % of revenue Non-current Liabilities • Held at constant LTM value Working Capital • WC projections based on historical cash cycle ratios • Increase in WC is volatile but in line with company changes Projections are simplified, conservative and largely in line with historical revenues, expenses and cash cycles

Ice Point Solutions

Mercury Athletic DCF Analysis Discounted Cash Flow Analysis

11.18%

2.02%

423,837 8,487 47,005

427,333 8,659 53,036

11.13%

12.83%

9,587 56,592

9,781 62,817

% Margin

11.81%

12.85%

% Growth

9.24%

11.00%

4,569 11,983 18,802 21,238

2,648 12,226 21,214 26,729

Less: Operating Expenses (Consolidated) Less: Corporate Overhead Operating Income (EBIT) % Growth

Plus: Depreciation & Amortization Expense EBITDA

(-) Changes in working capital (-) Capital Expenditure (-) Taxes Unlevered Free Cash Flow WACC

10.60% 19,203

Sensitivity Analysis

7.18%

4.80%

465,110 9,422 57,605

498,535 10,098 61,686

522,522 10,583 64,612

8.61%

7.08%

4.74%

10,643 68,248

11,406 73,092

11,954 76,566

12.83%

12.82%

12.81%

8.65%

7.10%

4.75%

9,805 13,303 23,042 22,098

8,687 14,258 24,674 25,473

6,234 14,943 25,845 29,544

21,851

Long-Term Growth Rate Calculation

16,334

2011

EBIT

$64,612

EBIT(1-t)

$38,767

Total Reinvestments

$9,223

Reinvestment Rate

23.79%

BV Equity (80% Capital)

$259,352

BV Debt (20% of Capital)

$64,838

Total Capital

$324,190

Return on Capital

11.96%

Long-Term Growth Rate

2.84%

Terminal Value Calculation 17,024

17,852 Long-Term Growth Rate

Long-Term Growth Rate

0.84%

1.84%

2.84%

3.84%

4.84%

9.6%

309,935

340,092

379,178

431,846

506,667

10.1%

292,474

318,790

352,361

396,665

457,832

10.6%

276,816

299,935

329,015

366,706

417,496

11.1%

262,698

283,130

308,511

340,889

383,620

11.6%

249,905

268,059

290,360

318,413

354,771

WACC

8.82%

Discounted Cash Flows

2011 $597,717

% Growth

2010 $570,319

Revenues (Consolidated)

2009 $532,137

an ag em en t

2008 $489,028

2007 $479,329

2.84%

Terminal Value

391,805

Discounted Terminal Value

263,752

Sum of Discounted Cash Flows

92,263

Current Enterprise Value

329,015

Ice Point Solutions

Merger Analysis â&#x20AC;&#x201C; Free Cash Flows Combined Income Statement FY 2008E

Operating Expenses OpEx Synergies OpEx Synergies % Depreciation & Amortization Depreciation of PP&E Write-Up Amortization of New Intangibles EBITDA % margin

847,583 84,758 0 17,458 326 4,053 211,061 0

Operating Income % margin Interest Income / (Expense) Less: Forgone Interest on Cash Less: Interest Paid on New Debt Less: Principal repayment Pre-Tax Income Income Tax Provision

189,224 0 5,122 0 1,316 21,934 160,852 64,341 96,511

1,031,943 29,260 514,038 14,630 532,534

FY 2010E 1,080,371 29,260 538,212 14,630 556,788

FY2011E 1,118,225 29,260 557,099 14,630 575,755

859,763 85,976 0 17,813 326 4,053 219,636 0

906,991 90,699 0 18,840 326 4,053 230,280 0

949,957 94,996 0 19,771 326 4,053 240,039 0

983,476 98,348 0 20,490 326 4,053 247,726 0

197,444 0 5,122 0 1,316 21,934 169,071 67,629

207,062 0 5,122 0 1,316 21,934 178,689 71,476

215,889 0 5,122 0 1,316 21,934 187,516 75,007

222,856 0 5,122 0 1,316 21,934 194,484 77,793

101,443

107,213

112,510

116,690

se As FY 2007E

FY 2008E

189,224 113,535 21,837 24,276 15,184 95,911 95,911

EBIT EBIT (1 - Tax Rate) Add: Depreciation and Amortization Less: Capitalization Expenditures Less: Increases in Net Working Capital Free Cash Flow Cumulative FCF

FY 2009E

Combined Free Cash Flow Projections

Net Income

978,793 29,260 487,502 14,630 505,921

959,256 29,260 477,771 14,630 496,114

an ag em en t

FY 2007E Combined Revenue Revenue Synergies Cost of Goods Sold Revenue Synergy COGS Gross Profit

FY 2009E 197,444 118,466 22,192 24,771 5,118 110,769 206,681

FY 2010E 207,062 124,237 23,219 26,105 12,326 109,025 315,705

FY2011E 215,889 129,533 24,150 27,323 11,260 115,101 430,806

222,856 133,714 24,869 28,275 8,859 121,448 552,255

Ice Point Solutions

Merger Analysis – Sensitivity Analysis Sensitivity Analysis: Operating synergies

Financing • Amount of cash required on to be on hand must cover 90 days of operations ($100M) • As not all operating expenses within a 90 day period can be assumed things like wages, inventory loss, utilities, etc. that can be readily or plausibly covered with cash, we benchmark our required operational cash to be half of this number. • As this number, $50M, stands very close to AGI's final cash on hand for 2006, $56M, we will finance this merger without any input of cash. case without further information, we will assume this coupon on all debt of all

Synergies

coupon to a 15-year bond.

maturities. To not make a highly implausible debt scenario, we will attached this

• Cost of debt will be assumed off Lietke's estimate of 6%. As this is a self contained

• No cannibalization of products upon merger. However, we also believe there to be no revenue synergies.

• Revenue synergies: AGI can provide Mercury with a 40% increase in inventory

efficiency. This equates to a roughly 6.7% increase in revenues (only for Mercury) due to synergies of Revenue.

• Substantial COGS synergies due to economies of scale, better bargaining positions,

increased specialization of infrastructure, and longer production runs benchmarked at 10%.

0% Cumulative FCF Residual Cash (10% premium) Residual Cash (30% premium) 1% Cumulative FCF Residual Cash (10% premium) Residual Cash (30% premium) 2% Cumulative FCF Residual Cash (10% premium) Residual Cash (30% premium) 3% Cumulative FCF Residual Cash (10% premium) Residual Cash (30% premium) 4% Cumulative FCF Residual Cash (10% premium) Residual Cash (30% premium) 5% Cumulative FCF Residual Cash (10% premium) Residual Cash (30% premium) 6% Cumulative FCF Residual Cash (10% premium) Residual Cash (30% premium) 7% Cumulative FCF Residual Cash (10% premium) Residual Cash (30% premium) 8% Cumulative FCF Residual Cash (10% premium) Residual Cash (30% premium) 9% Cumulative FCF Residual Cash (10% premium) Residual Cash (30% premium) 10% Cumulative FCF Residual Cash (10% premium) Residual Cash (30% premium)

45,056 45,056 19,481 16,542 50,142 50,142 24,567 21,627 55,227 55,227 29,652 26,713 60,313 60,313 34,738 31,798 65,398 65,398 39,823 36,884 70,484 70,484 44,909 41,969 75,569 75,569 49,994 47,055 80,655 80,655 55,079 52,140 85,740 85,740 60,165 57,226 90,826 90,826 65,250 62,311 95,911 95,911 70,336 67,397

59,183 104,240 33,608 75,725 64,342 114,484 38,767 85,969 69,501 124,728 43,925 96,213 74,659 134,972 49,084 106,457 79,818 145,216 54,242 116,702 84,976 155,460 59,401 126,946 90,135 165,704 64,559 137,190 95,293 175,948 69,718 147,434 100,452 186,193 74,877 157,678 105,611 196,437 80,035 167,922 110,769 206,681 85,194 178,166

an ag em en t

Discussion of Assumptions:

54,605 158,845 29,030 130,331 60,047 174,531 34,472 146,017 65,489 190,217 39,914 161,703 70,931 205,903 45,356 177,389 76,373 221,589 50,798 193,075 81,815 237,275 56,240 208,761 87,257 252,961 61,681 224,447 92,699 268,647 67,123 240,133 98,141 284,333 72,565 255,819 103,583 300,019 78,007 271,505 109,025 315,705 83,449 287,191

58,104 216,949 32,528 188,434 63,803 238,334 38,228 209,820 69,503 259,720 43,928 231,206 75,203 281,106 49,627 252,591 80,903 302,492 55,327 273,977 86,602 323,878 61,027 295,363 92,302 345,263 66,727 316,749 98,002 366,649 72,426 338,134 103,701 388,035 78,126 359,520 109,401 409,421 83,826 380,906 115,101 430,806 89,526 402,292

62,440 279,388 36,864 250,874 68,341 306,675 42,765 278,160 74,241 333,962 48,666 305,447 80,142 361,248 54,567 332,734 86,043 388,535 60,468 360,020 91,944 415,822 66,369 387,307 97,845 443,108 72,269 414,594 103,746 470,395 78,170 441,880 109,647 497,681 84,071 469,167 115,547 524,968 89,972 496,453 121,448 552,255 95,873 523,740

Ice Point Solutions

Comparable Companies

LTM Revenue

LTM Earnings

an ag em en t

Comparable Companies Revenue CAGR EBIT MarginEBITDA Margin 2000-2006

Net Income Margin

EBIT Multiple

EBITDA Multiple

P/E Multiple

B/V Multiple

6.1%

2.7%

5.5x

3.9x

6.8x

0.9x

23.1%

13.4%

18.0x

16.9x

31.6x

6.0x

11.5%

4.9%

6.8x

5.1x

9.1x

1.6x

8.9%

5.0%

7.3x

5.5x

6.6x

0.7x

$2,545,058

$67,679

6.6%

4.4%

Marina Wilderness

$313,556

$41,923

17.8%

22.1%

General Shoe Corp

$1,322,392

$64,567

11.2%

8.8%

$552,594

$27,568

4.6%

6.9%

Victory Athletic

$15,403,547

$1,433,760

7.9%

14.1%

16.0%

9.3%

22.1x

19.2x

27.1x

6.0x

Surfside Footwear

$1,241,529

$73,124

10.1%

9.3%

10.8%

5.9%

7.4x

6.3x

8.6x

1.4x

Alpine Company

$1,614,648

$112,015

6.2%

6.9%

9.0x

7.6x

10.4x

2.0x

Heartland Outdoor Footwear

$1,176,144

$86,156

8.5%

10.8%

12.6%

7.3%

12.0x

10.1x

18.6x

3.1x

$516,182

$79,170

14.4%

19.9%

20.2%

15.3%

6.2x

6.0x

5.5x

1.2x

$2,742,850

$220,662

9.7%

11.9%

13.5%

7.9%

10.5x

9.0x

13.8x

2.5x

Average

• • • •

Operating Metrics (Post-Merger)

12.2%

Templeton Athletic

10.4%

Kinsley Coulter Products

D&B Shoe Company

Revenue CAGR- 3.1% EBITDA Margin – 22.2% EBIT Margin– 20.0% Net Income Margin- 10.3%

Ice Point Solutions

an ag em en t

Upside/Downside Considerations Upside

• Discount shoe market expands as expected

Larger size allows for inherently more efficient and cheaper production

•

Ability to source more suppliers and shippers without suffering effects of high costs/lack of efficiency results in a more resilient supply chain

•

Inventory management expected to improve for Mercury line of products

•

Downside

• Discount shoe market stagnates, limiting avenues for further growth of AGI

Diversity in products presents managerial challenge for firms with traditionally limited product classes

•

Mercury’s product line has inherently more exposure to the boom-bust cycle of fashion trends, requiring rapid and often bold transitions between product lines

•

• This directly challenges AGI’s desired production cost-saving measure of promising suppliers longer production runs in addition to conflicting with historic managerial ethos

Ice Point Solutions

Investment Recommendation

Financing

an ag em en t

We assume a premium of 10% for the purchasing price of Mercury. However, high expected free cash flows allows Mercury to participate in a bidding war if necessary, potentially paying a premium of 30%

Due to the high on-hand cash requirements of AGI, we believe that we will be unable to use any cash in the acquisition of Mercury

Given healthy margins, we can assume that AGI has access to reasonably priced credit. With a 20Y and 30Y T-Bond yielding 4.73% and 4.93% respectively, we believe that the given cost of debt, 6%, is a reasonable coupon for a 15-year bond Ice Point Solutions

Thank You Questions?

an ag em en t

Calculation of Beta

an ag em en t

Appendixes: Calculation of WACC WACC

Net Debt

Debt/Equity

Equity Beta (Levered)

Beta Equity/(Equit (Unlevered) y&Debt)

D&B Shoe Company

$420,098

$125,442

0.299

2.68

2.272

Marina Wilderness

$1,205,795

($91,559)

-0.076

1.94

2.033

General Shoe Corp Kinsley Coulter Products

$533,463

$171,835

0.322

1.92

1.609

$165,560

$82,236

0.497

1.12

0.863

Victory Athletic

$35,303,250

$7,653,207

0.217

0.97

0.858

Surfside Footwear

$570,684

$195,540

0.343

2.13

1.766

Alpine Company Heartland Outdoor Footwear

$1,056,033

$300,550

0.285

1.27

$1,454,875

($97,018)

-0.067

1.01

Templeton Athletic

$397,709

$169,579

0.426

0.98

Average

$4,567,496

$945,535

0.249

1.56

Asset Beta

0.770

2.064

1.082

2.099

0.756

1.452

0.668

0.748

0.822

0.797

0.745

1.586

Equity Market Value

0.778

0.989

1.052

1.071

1.082

0.781

0.701

0.687

1.369

0.82

1.28

1.533024917

Risk Free Rate

4.73%

Risk Premium

4.9700%

Cost of Equity

12.35%

E/V

0.8

Cost of Debt

D/V

0.2

1 - tax rate

0.6

WACC

10.60%

1.085

Mercury Relevered Beta

Ice Point Solutions

Appendixes: Active Gear Working Model

an ag em en t

Active Gear Income Statement Income Statement Projections 2004 450,174 1.70%

2005 469,704 4.34%

2006 470,286 0.12%

2007E 479,927 2.05%

2008E 489,765 2.05%

2009E 499,806 2.05%

2010E 510,052 2.05%

2011E 520,508 2.05%

COGS

223,617

231,583

234,494

238,107

242,988

247,969

253,053

258,240

49.7%

49.3%

49.9%

49.61%

226,557

238,121

235,792

241,820

246,777

251,836

256,999

262,267

50.3%

50.7%

50.1%

50.4%

159,142

164,180

167,006

169,281

172,751

176,293

179,907

183,595

35.35%

34.95%

35.51%

35.27%

% Revenue

Gross Profit Margin

Total SGA Expenses % Revenues

73,942

68,786

72,539

15.0%

15.7%

14.6%

15.1%

D&A

7,049

7,343

8,366

7,871

1.6%

1.8%

1.64%

% of revenues

Total Operating Expenses EBIT

74,026

75,544

77,092

78,673

15.1%

8,032

8,197

8,365

8,536

1.64%

415259 64,668

423771 65,994

432459 67,347

441324 68,727

450371 70,136

13.5%

5122

59,546 12.4% 23818.47805

60,872 12.4% 24348.75725

62,225 12.4% 24889.90717

63,605 12.5% 25442.15067

65,014 12.5% 26005.71516

67,415

Margin

EBITDA

Revenue % Growth

66,599

60,420

13.4%

14.2%

12.8%

Total Other expenses

6303

4391

5122

54,064 12.0% 19192

62,208 13.2% 21089

55,298 11.8% 19349

35.5%

33.9%

35.0%

40%

34,872

41,120

35,949

35,728

36,523

37,335

38,163

39,009

7.7%

8.8%

7.6%

7.44%

7.46%

7.47%

7.48%

7.49%

CapEx

8361

12046

12293

12545

12802

13065

13332

% of revenues

1.78%

2.56%

Tax Rate

Net Income % Revenue

EBT Margin Less: Taxes

60,366

Margin

Assumptions

Revenue Growth - Historical Mean Constant COGS Margins (mean) Constant SGA Expense Margins Constant EBITDA Margins Constant D&A as percentage of revenues Other Expenses â&#x20AC;&#x201C; LTM 40% Tax Rate

Ice Point Solutions

Appendixes: Active Gear Working Model â&#x20AC;&#x201C; Balance Sheets Assumptions

AGI Balance Sheet 2005

2006

2007E

Assets Cash & Cash Equivalents

92,735

63,949

54,509

Accounts Receivable

46,507

50,649

61,322

Inventory

38,493

50,140

56,030

Prepaid Expenses

8,298

10,051

12,223

Deferred Taxes

8,681

8,080

6,519

Derivative Assets Total Current Assets

1,813

184,682

190,655

24,712

28,392

6,414

12,273

14,360

Goodwill

4,249

11,851

Other Assets

2,982

3,079

Total Assets

232,053

236,596

15,711

Accrued Expenses

37,211

Taxes Payable

10,421

Total Current Liabilities Long Term Debt Deferred Compensation Deferred Taxes Total Owner's Equity Total Liabilities and Owner's Equity

54,637

55,757

56,900

58,067

59,257

49,816

50,837

51,879

52,943

54,028

10,530

10,746

10,966

11,191

11,420

8,054

8,220

8,388

8,560

8,735

636

649

662

675

689

196,950

200,987

205,107

209,312

213,603

32,814

37,327

41,932

46,632

51,428

14,360

11,915

3,249

248,571

259,288

267,838

276,564

285,468

294,555

Cash & Cash Equivalents Accounts Receivable

% of Total Revenues (Historical Mean) % of Total Revenues (Historical Mean) % of Total Revenues Inventory (Historical Mean) % of Total Revenues Prepaid Expenses (Historical Mean) % of Total Revenues Deferred Taxes (Historical Mean) % of Total Revenues Derivative Assets (Historical Mean) PPE current = PPE previous year + PPE CapEx - Depreciation Intangible Assets

LTM

Goodwill

LTM

Other Assets

LTM

29,188

33,009

26,753

27,301

27,861

28,432

29,015

30,533

36,718

36,113

36,853

37,609

38,380

13,263

10,162

11,677

11,917

12,161

12,410

39,166 Accounts Payable Expenses (Historical Mean) 12,665

4,514

878

1,903

1,942

1,982

2,022

2,064

67,858

73,004

80,767

76,446

78,013

79,612

81,244

82,910

Other

79,473

3,249

Derivative Liabilities

77,877

11,915

Accounts Payable

2011E

76,312

Liabilities & Owners Equity

2010E

74,779

23,694

Intangible Assets

2009E

73,277

PPE

0 194,714

2008E

an ag em en t

2004

% of Operating

Accrued Expenses Taxes Payable

% of Operating Expenses (Historical Mean) % of Operating Expenses (Historical Mean)

178,173

150,240

140,047

3,763

4,814

3,919

Long Term Debt

LTM

2,180

323

Deferred Compensation

LTM

-19,921

8,216

23,837

38,876

45,859

52,986

60,258

67,679

Deferred Taxes

LTM

232,053

236,596

248,571

259,288

267,838

276,564

285,468

294,555

Ice Point Solutions

Appendixes: Merger Analysis

Total Allocable Purchase Premium Less: Write-Up of PP&E

Less: Write-Up of Intangibles Less: Write-Down of DTL Plus: New Deferred Tax Liability Total Goodwill Created

43,051 202,645 1,631

20,264 11,654

8,758 177,853

2010E

2011E 1,080,371 538,212 949,957 19,771 150,184 19,771 130,413 5,122 125,291 50,117 75,175

1,118,225 557,099 983,476 20,490 155,239 20,490 134,748 5,122 129,626 51,851 77,776

an ag em en t

1,031,943 514,038 906,991 18,840 143,792 18,840 124,952 5,122 119,830 47,932 71,898

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

Plus: Write-Off of Existing Goodwill

373,661 214,067

Goodwill Calculation: Equity Purchase Price Less: Seller Book Value

2009E 978,793 487,502 859,763 17,813 136,843 17,813 119,030 5,122 113,908 45,563 68,345

Goodwill Creation & Balance Sheet Adjustments

2008E

2007E 959,256 477,771 847,583 17,458 129,131 17,458 111,673 5,122 106,551 42,620 63,931

Income Statement Consolidated Revenues COGS Less: Operating Expenses Add: Depreciation and Amortization EBITDA Less: Depreciation and Amortization Total Operating Income(EBIT) Less: Other Expenses Earnings Before Tax Less Taxes (40%): Net Income

5.00% 1630.9 5

Intangible Asset Write-Up: Purchase Price to Allocate:

202645

% Allocated to Intangibles: Intangibles Write-Up Amount:

10% 20264

Amortization Period (Years):

Ice Point Solutions