Financial Lbo Model Over Excel

LBO FIN36085 Final Exam - LBO Model Golden Flash Manufacturing (000s) SOURCES & USES Purchase Price / Enterprise Value $ 165,269 LBO Sources of Cash LBO Uses of Cash Historical EBITDA @ Close Equity Investment from Buyer $ 167,269 Seller Proceeds (i.e. pay the OLDCO equity holders) $ 160,269 OLDCO Equity Value EV as Multiple of Min EBITDA ERROR:#DIV/0! Subordinated Debt Borrowed $ - OLDCO Debt $ 5,000 Subordinated Debt EBITDA Multiple 2.5x Senior Debt Borrowed $ - Transaction Expenses $ 1,000 Senior Debt EBITDA Multiple 1.5x Financing Fees $ 1,000 Transaction Expenses Transaction Expenses (come out of post-close retained earnings) $ 1,000 Financing Fees (capitalized on balance sheet) $ 1,000 Total $ 167,269 Total $ 167,269 Financial Statements Golden Flash Manufacturing (000s) Historical Transaction Projected Projected Projected Projected Projected INCOME STATEMENT 20X1 20X2 20X3 20X4 20X5 20X6 20X7 Revenue 121,216 128,945 Growth (%) NA 0.0% 0.0% 0.0% 0.0% 0.0% Cost of Goods Sold (Net of D&A) 86,220 91,951 % of Sales ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0! Gross Profit % of Sales Selling General &Administrative (aka "fixed costs") (doesn't include Dep&Amort) 10,812 11,893 % of Sales ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0! EBITDA % of Sales Depreciation 1,474 1,622 Amortization - - EBIT (1,474) (1,622) Interest Expense 400 400 Pretax Income (1,874) (2,022) - - - - - Income Tax Expense 4,676 5,158 Tax Rate NM NM 35.0% 35.0% 35.0% 35.0% 35.0% Net Income BALANCE SHEET ADJUSTMENTS Source Source Use Use Use Use Post-Closing Historical Post-Closing tc={2FA82F91-8F41-4431-BA04-B44BB76145B7}: [Threaded comment] Your version of Excel allows you to read this threaded comment; however, any edits to it will get removed if the file is opened in a newer version of Excel. Learn more: https://go.microsoft.com/fwlink/?linkid=870924 Comment: Calculated on the right in column U Projected Projected Projected Projected Projected Pre-Closing Equity Debt Oldco Equity Oldco Debt Trnsctn Fees Fnce Fees BALANCE SHEET 20X1 20X2 20X3 20X4 20X5 20X6 20X7 20X2 20X2 Current Assets Cash 4,653 - 12,918 (1,000) (1,000) Accounts Receivable 10,326 - 11,358 Inventory 5,642 - 6,206 Prepaid Expenses 1,849 - - - - - - 1,849 Total Current Assets 22,470 - - - - - - 32,332 - PP&E, Net of Accum. Depreciation 11,853 - 12,231 Other Assets Capitalized Financing Fee - 1,000 800 600 400 200 - - 1,000 1,000 Goodwill - 127,991 - 127,991 127,991 Other Long Term Asset - - - - - - - - Total Other Assets - 128,991 800 600 400 200 - - 128,991 TOTAL ASSETS 34,323 128,991 800 600 400 200 - 44,563 128,991 Current Liabilities Accounts Payable 6,623 - - - - - - 7,285 Total Current Liabilities 6,623 - - - - - - 7,285 - Long Term Liabilities OLDCO Notes Payable - - - - - - - - - OLDCO Current Maturities of Long Term Debt - - - - - - - - - OLDCO Long Term Debt, Net of Current Maturities 5,000 - - - - - - 5,000 NEWCO Revolving Line of Credit - 2,000 4,000 6,000 8,000 10,000 - NEWCO Subordinated Debt - NEWCO Senior Debt - TOTAL LIABILITIES 11,623 - 2,000 4,000 6,000 8,000 10,000 12,285 - Common Stock 5,015 - - - - - - 5,015 Retained Earnings 17,685 - 27,263 (1,000) TOTAL EQUITY 22,700 - - - - - - 32,278 - TOTAL LIABILITIES & EQUITY 34,323 - 2,000 4,000 6,000 8,000 10,000 44,563 - Check??? (assets = liab & equity) 128,990.8 <--sources match uses? BALANCE SHEET ASSUMPTIONS AR Days Sales 31 0 37 37 36 36 35 Inventory Days COGS 24 0 12 12 12 12 12 AP Days COGS 28 0 14 14 14 14 14 Projected Projected Projected Projected Projected CASH FLOW STATEMENT 20X1 20X2 20X3 20X4 20X5 20X6 20X7 CASH FLOW FROM OPERATING ACTIVITIES Net Income Add Back Non-Cash Items Depreciation Amortization Changes in Working Capital Accounts Receivable Inventory Accounts Payable Net Cash Provided by Operating Activities - - - - - CASH FLOW FROM INVESTING ACTIVITIES Capital Expenditures - Purchase of PP&E Net Cash Used in Investing Activities - - - - - CASH FLOW FROM FINANCING ACTIVITIES Revolving Credit Facility (Line of Credit) 2,000 2,000 2,000 2,000 2,000 Subordinated Debt - - - - - Senior Debt - - - - - Net Cash Provided by (Used in) Fnce Activities 2,000 2,000 2,000 2,000 2,000 Net Cash Flow Beginning Cash Balance Ending Cash Balance Supporting Schedules Golden Flash Manufacturing (000s) Projected Projected Projected Projected Projected DEBT SCHEDULE 20X1 20X2 20X3 20X4 20X5 20X6 20X7 Period 1 Period 2 Period 3 Period 4 Period 5 Revolving Line of Credit Cash Balance @ Beg of Year (End of Last Year) Plus: Free Cash Flow from Operations and CAPEX Plus: Free Cash Flow from Financing (BEFORE L.O.C.) Less: Minimum Cash Balance 2,000 2,000 2,000 2,000 2,000 Total Cash Available or (Required) from Revolver (2,000) (2,000) (2,000) (2,000) (2,000) Revolver Balance - 2,000 4,000 6,000 8,000 10,000 Interest Paid 8% Subordinated Debt (Mezzanine / Sub Debt) Beginning Balance - - - - - Plus: Additions - - - - - - Less: Scheduled Amortization NA - - - - - Ending Balance - - - - - - Interest Paid (calc based on average of this year and last year * int rate) 12% Senior Debt Beginning Balance - - - - - Plus: Additions - - - - - - Less: Scheduled Loan Paydown 5 yrs - - - - - Ending Balance - - - - - - Interest Paid (calc based on average of this year and last year * int rate) 8% Interest Expense Total Interest 0 0 0 0 0 Projected Projected Projected Projected Projected PP&E SCHEDULE 20X1 20X2 20X3 20X4 20X5 20X6 20X7 Period 1 Period 2 Period 3 Period 4 Period 5 PP&E+ Category 1 Beginning Balance: PP&E Plus: Capital Expenditures Less: Depreciation Useful Life Asset Base Asset Base 7 yrs 0 - - - - - CapEx Period 1 7 yrs 2,250 321 321 321 321 321 Period 2 7 yrs 2,500 357 357 357 357 Period 3 7 yrs 2,750 393 393 393 Period 4 7 yrs 3,500 500 500 Period 5 7 yrs 4,000 571 Total Depreciation 321 679 1,071 1,571 2,143 Ending Balance: PP&E - (321) (679) (1,071) (1,571) (2,143) post-deal Projected Projected Projected Projected Projected AMORTIZATION SCHEDULE 20X1 20X2 20X3 20X4 20X5 20X6 20X7 Period 1 Period 2 Period 3 Period 4 Period 5 Capitalized Financing Fee Asset 1,000 800 600 400 200 - Amortization 5 yrs 200 200 200 200 200 Goodwill Balance 127,991 Amortization (straight-line) 20 yrs - - - - Total Amortization (to income statement and CF) 200 200 200 200 200 EXIT ANALYSIS Golden Flash Manufacturing (000s) IMPLIED VALUATION CALCULATION (EXIT) 20X7 EBITDA Multiple 7.0x EBITDA Enterprise Value Less: Debt Plus: Cash Equity Value $ - OWNERSHIP STRUCTURE Equity Investors 92% Subordinated Debt Lenders 8% <---because we gave the sub debt lenders warrants Total 100% EQUITY INVESTORS 12/31/22 12/31/23 12/31/24 12/31/25 12/31/26 12/31/27 Interest Rate NA Equity Investor Ownership of the firm (%) 92.0% Exit Year 5 Equity Investment of Buyer $ - $ - $ - $ - <----don't forget equity investors don't own 100% Equity Value (make sure negative) IRR Cash Multiple NM SUBORDINATED DEBT INVESTORS 12/31/22 12/31/23 12/31/24 12/31/25 12/31/26 12/31/27 Interest Rate Equity (%) (sub debt received 8% of equity to give some upside) 8.0% Exit Year 5 Total Sub Debt Cashflow $ - $ - $ - $ - $ - $ - Interest Paid On Sub Debt Final Equity Value (total final equity value * % ownership by sub debt lenders) Principal $ - IRR <--they get a turbo boost over their interest earnings because of the equity kicker Cash Multiple NM 51104 Hints Comments 1 Income Statement: COGS and SG&A shown net of Dep &Amort. 2 Whenever a line item is color-coded, that means the values come from one of the schedules below 3 Make sure you fill in all cells highlighted in yellow. 4 In the balance sheet adjustments for the deal, make sure the post-closing balances. 5 Don't forget to do the Exit Analysis at the end 6 If you enter just a numeric value into a cell you won't get credit for it. Only formulas will get credit. 51104 Grading ProblemType WorksheetName Range Comparison Grade CTC CorrectFeedback IncorrectFeedback CELL LBO B8 Reference() AND MOEValue(.01) 1 E34 CELL LBO F22:J22 Reference() AND MOEValue(.01) 1 CELL LBO E23 Reference() AND MOEValue(.01) 1 CELL LBO F25:J25 Reference() AND MOEValue(.01) 1 F22:J22,F26:J26 CELL LBO D26:E26 Reference() AND MOEValue(.01) 1 CELL LBO D28:J28 Reference() AND MOEValue(.01) 1 D22:J22,D25:J25 CELL LBO D29:J29 Reference() AND MOEValue(.01) 1 D22:J22,D28:J28 CELL LBO F31:J31 Reference() AND MOEValue(.01) 1 F22:J22,F32:J32 CELL LBO D32:E32 Reference() AND MOEValue(.01) 1 CELL LBO D34:J34 Reference() AND MOEValue(.01) 1 D28:J28,D31:J31 CELL LBO D35:J35 Reference() AND MOEValue(.01) 1 D22:J22,D34:J34 CELL LBO F37:J37 Reference() AND MOEValue(.01) 1 F180:J180 CELL LBO F38:J38 Reference() AND MOEValue(.01) 1 F194:J194 CELL LBO F40:J40 Reference() AND MOEValue(.01) 1 F34:J34,F37:J38 CELL LBO F42:J42 Reference() AND MOEValue(.01) 1 F161:J161 CELL LBO F46:J46 Reference() AND MOEValue(.01) 1 F44:J44,F47:J47 CELL LBO D49:J49 Reference() AND MOEValue(.01) 1 D44:J44,D46:J46 CELL LBO F56:J56 Reference() AND MOEValue(.01) 1 F129:J129 CELL LBO N56 Reference() AND MOEValue(.01) 1 N88 CELL LBO O56 Reference() AND MOEValue(.01) 1 O83:O84 CELL LBO P56 Reference() AND MOEValue(.01) 1 P66,P88:P89 CELL LBO Q56 Reference() AND MOEValue(.01) 1 Q78:Q80 CELL LBO F57:J57 Reference() AND MOEValue(.01) 1 F22:J22,F96:J96 CELL LBO F58:J58 Reference() AND MOEValue(.01) 1 F25:J25,F97:J97 CELL LBO F62:J62 Reference() AND MOEValue(.01) 1 F182:J182 CELL LBO F66:J66 Reference() AND MOEValue(.01) 1 F191:J191 CELL LBO F83:J83 Reference() AND MOEValue(.01) 1 F150:J150 CELL LBO F84:J84 Reference() AND MOEValue(.01) 1 F157:J157 CELL LBO F89:J89 Reference() AND MOEValue(.01) 1 F49:J49 CELL LBO D93 Reference() AND MOEValue(.01) 1 D70,D92 CELL LBO F93:J93 Reference() AND MOEValue(.01) 1 F70:J70,F92:J92 CELL LBO L93 Reference() AND MOEValue(.01) 1 L70,L92 CELL LBO U56:U59 Reference() AND MOEValue(.01) 1 L56:S59 CELL LBO U62 Reference() AND MOEValue(.01) 1 L62:S62 CELL LBO U67:U68 Reference() AND MOEValue(.01) 1 L67:S67,U65:U67 CELL LBO U73 Reference() AND MOEValue(.01) 1 L73:S73 CELL LBO U78:U80 Reference() AND MOEValue(.01) 1 L78:S80 CELL LBO U83:U84 Reference() AND MOEValue(.01) 1 L83:S84 CELL LBO U88:U89 Reference() AND MOEValue(.01) 1 L88:S89 CELL LBO U93 Reference() AND MOEValue(.01) 1 U70,U92 CELL LBO F104:J104 Reference() AND MOEValue(.01) 1 F49:J49 CELL LBO F107:J107 Reference() AND MOEValue(.01) 1 F180:J180 CELL LBO F108:J108 Reference() AND MOEValue(.01) 1 F194:J194 CELL LBO F111:J111 Reference() AND MOEValue(.01) 1 E57:J57 CELL LBO F112:J112 Reference() AND MOEValue(.01) 1 E58:J58 CELL LBO F113:J113 Reference() AND MOEValue(.01) 1 E73:J73 CELL LBO F118:J118 Reference() AND MOEValue(.01) 1 F169:J169 CELL LBO F127:J127 Reference() AND MOEValue(.01) 1 F115:J115,F119:J119,F125:J125 CELL LBO F128:J128 Reference() AND MOEValue(.01) 1 E56:I56 CELL LBO F129:J129 Reference() AND MOEValue(.01) 1 F127:J128 CELL LBO F138:J138 Reference() AND MOEValue(.01) 1 E56:I56 CELL LBO F139:J139 Reference() AND MOEValue(.01) 1 F115:J115,F119:J119 CELL LBO F140:J140 Reference() AND MOEValue(.01) 1 F123:J124 CELL LBO F151:J151 Reference() AND MOEValue(.01) 1 E150:J150 CELL LBO F158:J158 Reference() AND MOEValue(.01) 1 E157:J157 CELL LBO F167:J167 Reference() AND MOEValue(.01) 1 E182:I182 CELL LBO F169:J169 Reference() AND MOEValue(.01) 1 C175:C179 CELL LBO F191:J191 Reference() AND MOEValue(.01) 1 F192:J192 CELL LBO F192 Reference() AND MOEValue(.01) 1 E191,D192 CELL LBO J203 Reference() AND MOEValue(.01) 1 J34 CELL LBO J204 Reference() AND MOEValue(.01) 1 J202:J203 CELL LBO J205 Reference() AND MOEValue(.01) 1 J82:J84 CELL LBO J206 Reference() AND MOEValue(.01) 1 J56 CELL LBO E221 Reference() AND MOEValue(.01) 1 F8 CELL LBO J221 Reference() AND MOEValue(.01) 1 J207,B218 CELL LBO B224 FormulaValue(IRR(E221:J221)) OR FormulaValue(IRR($E$221:$J$221)) 1 CELL LBO B230 Reference() AND MOEValue(.01) 1 D151 CELL LBO F235:J235 Reference() AND MOEValue(.01) 1 F151:J151 CELL LBO J236 Reference() AND MOEValue(.01) 1 J207,J211 CELL LBO B239 FormulaValue(IRR(E234:J234)) OR FormulaValue(IRR($E$234:$J$234)) 1 51104 Vid 1 LBO Company Name (000s) SOURCES & USES Purchase Price / Enterprise Value SOURCES USES Historical EBITDA @ Close Equity Seller Proceeds OLDCO Equity Value EV as Multiple of Min EBITDA Subordinated Debt OLDCO Debt Subordinated Debt EBITDA Multiple Senior Debt Trnsctn Expenses Senior Debt EBITDA Multiple Financing Fees Transaction Expenses Trnsctn Expenses Financing Fees Total Total Financial Statements Company Name (000s) Historical Transaction Projected Projected Projected Projected Projected INCOME STATEMENT 20X1 20X2 20X3 20X4 20X5 20X6 20X7 Revenue 98,287 108,115 118,927 130,820 143,902 158,292 174,121 Growth (%) NA 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% Cost of Goods Sold (Net of D&A) 73,715 81,087 89,195 98,115 107,926 118,719 130,591 % of Sales 75.0% 75.0% 75.0% 75.0% 75.0% 75.0% 75.0% Gross Profit 24,572 27,029 29,732 32,705 35,975 39,573 43,530 % of Sales 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% SG&A (Net of D&A) 10,812 11,893 13,082 14,063 15,110 16,225 17,412 % of Sales 11.0% 11.0% 11.0% 10.8% 10.5% 10.3% 10.0% EBITDA 13,760 15,136 16,650 18,642 20,866 23,348 26,118 % of Sales 14.0% 14.0% 14.0% 14.3% 14.5% 14.8% 15.0% Depreciation 1,474 1,622 2,069 2,069 2,819 3,319 3,890 Amortization - - - - - - - EBIT 12,286 13,514 14,581 16,573 18,047 20,029 22,228 Interest Expense ON 400 400 - - - - - Pretax Income 11,886 13,114 14,581 16,573 18,047 20,029 22,228 Income Tax Expense 4,676 5,158 5,103 5,801 6,316 7,010 7,780 Tax Rate NM NM 35.0% 35.0% 35.0% 35.0% 35.0% Net Income 7,210 7,957 9,478 10,773 11,731 13,019 14,448 BALANCE SHEET ADJUSTMENTS Pre-Closing Source Source Use Use Use Use Post-Closing Historical Transaction Projected Projected Projected Projected Projected Equity Debt Oldco Equity Oldco Debt Trnsctn Fees Fnce Fees BALANCE SHEET 20X1 20X2 20X3 20X4 20X5 20X6 20X7 20X2 20X2 Current Assets Cash 4,653 12,918 21,625 30,880 41,878 53,440 66,852 12,918 12,918 Accounts Receivable 10,326 11,358 12,056 13,261 14,193 15,612 16,697 11,358 11,358 Inventory 5,642 6,206 6,827 7,510 8,261 9,087 9,996 6,206 6,206 Prepaid Expenses 1,849 1,849 1,849 1,849 1,849 1,849 1,849 1,849 1,849 Total Current Assets 22,470 32,332 42,357 53,500 66,181 79,988 95,393 32,332 32,332 PP&E, Net of Accum. Depreciation 11,853 12,231 12,412 12,844 12,775 12,956 13,066 12,231 12,231 Other Assets Capitalized Financing Fee - - - - - - - - - Goodwill - - - - - - - - - Other Long Term Asset - - - - - - - - - Total Other Assets - - - - - - - - - TOTAL ASSETS 34,323 44,563 54,770 66,343 78,955 92,944 108,459 44,563 44,563 Current Liabilities Accounts Payable 6,623 7,285 8,014 8,815 9,697 10,666 11,733 7,285 7,285 Total Current Liabilities 6,623 7,285 8,014 8,815 9,697 10,666 11,733 7,285 7,285 Long Term Liabilities OLDCO Notes Payable - - - - - - - - - OLDCO Current Maturities of Long Term Debt - - - - - - - - - OLDCO Long Term Debt, Net of Current Maturities 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 NEWCO Revolving Line of Credit - - - - - - - NEWCO Subordinated Debt - - - - - - - NEWCO Senior Debt - - - - - - - TOTAL LIABILITIES 11,623 12,285 13,014 13,815 14,697 15,666 16,733 12,285 12,285 Common Stock 5,015 5,015 5,015 5,015 5,015 5,015 5,015 5,015 5,015 Retained Earnings 17,685 27,263 36,741 47,513 59,244 72,263 86,711 27,263 27,263 TOTAL EQUITY 22,700 32,278 41,756 52,528 64,259 77,278 91,726 32,278 32,278 TOTAL LIABILITIES & EQUITY 34,323 44,563 54,770 66,343 78,955 92,944 108,459 44,563 44,563 Check 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 BALANCE SHEET ASSUMPTIONS AR Days 38 38 37 37 36 36 35 Inventory Days 28 28 28 28 28 28 28 AP Days 33 33 33 33 33 33 33 Projected Projected Projected Projected Projected CASH FLOW STATEMENT 20X1 20X2 20X3 20X4 20X5 20X6 20X7 CASH FLOW FROM OPERATING ACTIVITIES Net Income 9,478 10,773 11,731 13,019 14,448 Add Back Non-Cash Items Depreciation 2,069 2,069 2,819 3,319 3,890 Amortization - - - - - Changes in Working Capital Accounts Receivable (697) (1,206) (932) (1,419) (1,084) Inventory (621) (683) (751) (826) (909) Accounts Payable 729 801 882 970 1,067 Net Cash Provided by Operating Activities 10,957 11,754 13,748 15,062 17,412 CASH FLOW FROM INVESTING ACTIVITIES Capital Expenditures - Purchase of PP&E (2,250) (2,500) (2,750) (3,500) (4,000) Net Cash Used in Investing Activities (2,250) (2,500) (2,750) (3,500) (4,000) CASH FLOW FROM FINANCING ACTIVITIES Revolving Credit Facility (Line of Credit) - - - - - Subordinated Debt - - - - - Senior Debt - - - - - Net Cash Provided by (Used in) Fnce Activities - - - - - Net Cash Flow 8,707 9,254 10,998 11,562 13,412 Beginning Cash Balance 12,918 21,625 30,880 41,878 53,440 Ending Cash Balance 21,625 30,880 41,878 53,440 66,852 Supporting Schedules Company Name (000s) Projected Projected Projected Projected Projected DEBT SCHEDULE 20X1 20X2 20X3 20X4 20X5 20X6 20X7 Period 1 Period 2 Period 3 Period 4 Period 5 Revolving Line of Credit Cash Balance @ Beg of Year (End of Last Year) 12,918 21,625 30,880 41,878 53,440 Plus: Free Cash Flow from Operations and Investing 8,707 9,254 10,998 11,562 13,412 Plus: Free Cash Flow from Financing (BEFORE L.O.C.) - - - - - Less: Minimum Cash Balance 2,000 2,000 2,000 2,000 2,000 Total Cash Available or (Required) from L.O.C. 19,625 28,880 39,878 51,440 64,852 Revolver Balance - - - - - - Interest Paid 8% Subordinated Debt (Mezzanine / Sub Debt) Beginning Balance - - - - - Plus: Additions - - - - - - Less: Scheduled Amortization NA - - - - - Ending Balance - - - - - - Interest Paid 12% - - - - - Senior Debt Beginning Balance - - - - - Plus: Additions - - - - - - Less: Scheduled Amortization 5 yrs - - - - - Ending Balance - - - - - - Interest Paid 8% - - - - - Interest Expense Total Interest 0 0 0 0 0 Projected Projected Projected Projected Projected PP&E SCHEDULE 20X1 20X2 20X3 20X4 20X5 20X6 20X7 Period 1 Period 2 Period 3 Period 4 Period 5 PP&E+ Category 1 Beginning Balance: PP&E 12,231 12,412 12,844 12,775 12,956 Plus: Capital Expenditures 2,250 2,500 2,750 3,500 4,000 Less: Depreciation Useful Life Asset Base Asset Base 7 yrs 12,231 1,747 1,747 1,747 1,747 1,747 CapEx Period 1 7 yrs 2,250 321 321 321 321 321 Period 2 7 yrs 2,500 357 357 357 Period 3 7 yrs 2,750 393 393 393 Period 4 7 yrs 3,500 500 500 Period 5 7 yrs 4,000 571 Total Depreciation 2,069 2,069 2,819 3,319 3,890 Ending Balance: PP&E 12,231 12,412 12,844 12,775 12,956 13,066 Projected Projected Projected Projected Projected AMORTIZATION SCHEDULE 20X1 20X2 20X3 20X4 20X5 20X6 20X7 Period 1 Period 2 Period 3 Period 4 Period 5 Capitalized Financing Fee Asset - - - - - - Amortization 5 yrs - - - - - EXIT ANALYSIS Company Name (000s) IMPLIED VALUATION CALCULATION (EXIT) 20X7 EBITDA Multiple EBITDA Enterprise Value Less: Debt Plus: Cash Equity Value OWNERSHIP STRUCTURE Equity Subordinated Debt Total EQUITY Interest Rate Equity (%) Exit Year 5 Investment Equity Value IRR Cash Multiple SUBORDINATED DEBT Interest Rate Equity (%) Exit Year 5 Investment Interest Paid Equity Value Principal IRR Cash Multiple Vid 2 LBO Company Name (000s) SOURCES & USES Purchase Price / Enterprise Value $ 100,000 SOURCES USES Historical EBITDA @ Close 15,136 Equity $ 41,455 Seller Proceeds $ 95,000 OLDCO Equity Value EV as Multiple of Min EBITDA 6.6x Subordinated Debt $ 37,840 OLDCO Debt $ 5,000 Subordinated Debt EBITDA Multiple 2.5x Senior Debt $ 22,704 Trnsctn Expenses $ 1,000 Senior Debt EBITDA Multiple 1.5x Financing Fees $ 1,000 Transaction Expenses Trnsctn Expenses $ 1,000 Financing Fees $ 1,000 Total $ 102,000 Total $ 102,000 Financial Statements Company Name (000s) Historical Transaction Projected Projected Projected Projected Projected INCOME STATEMENT 20X1 20X2 20X3 20X4 20X5 20X6 20X7 Revenue 98,287 108,115 118,927 130,820 143,902 158,292 174,121 Growth (%) NA 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% Cost of Goods Sold (Net of D&A) 73,715 81,087 89,195 98,115 107,926 118,719 130,591 % of Sales 75.0% 75.0% 75.0% 75.0% 75.0% 75.0% 75.0% Gross Profit 24,572 27,029 29,732 32,705 35,975 39,573 43,530 % of Sales 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% SG&A (Net of D&A) 10,812 11,893 13,082 14,063 15,110 16,225 17,412 % of Sales 11.0% 11.0% 11.0% 10.8% 10.5% 10.3% 10.0% EBITDA 13,760 15,136 16,650 18,642 20,866 23,348 26,118 % of Sales 14.0% 14.0% 14.0% 14.3% 14.5% 14.8% 15.0% Depreciation 1,474 1,622 2,069 2,069 2,819 3,319 3,890 Amortization - - - - - - - EBIT 12,286 13,514 14,581 16,573 18,047 20,029 22,228 Interest Expense ON 400 400 - - - - - Pretax Income 11,886 13,114 14,581 16,573 18,047 20,029 22,228 Income Tax Expense 4,676 5,158 5,103 5,801 6,316 7,010 7,780 Tax Rate NM NM 35.0% 35.0% 35.0% 35.0% 35.0% Net Income 7,210 7,957 9,478 10,773 11,731 13,019 14,448 BALANCE SHEET ADJUSTMENTS Pre-Closing Source Source Use Use Use Use Post-Closing Historical Transaction Projected Projected Projected Projected Projected Equity Debt Oldco Equity Oldco Debt Trnsctn Fees Fnce Fees BALANCE SHEET 20X1 20X2 20X3 20X4 20X5 20X6 20X7 20X2 20X2 Current Assets Cash 4,653 12,918 21,625 30,880 41,878 53,440 66,852 12,918 12,918 Accounts Receivable 10,326 11,358 12,056 13,261 14,193 15,612 16,697 11,358 11,358 Inventory 5,642 6,206 6,827 7,510 8,261 9,087 9,996 6,206 6,206 Prepaid Expenses 1,849 1,849 1,849 1,849 1,849 1,849 1,849 1,849 1,849 Total Current Assets 22,470 32,332 42,357 53,500 66,181 79,988 95,393 32,332 32,332 PP&E, Net of Accum. Depreciation 11,853 12,231 12,412 12,844 12,775 12,956 13,066 12,231 12,231 Other Assets Capitalized Financing Fee - - - - - - - - - Goodwill - - - - - - - - - Other Long Term Asset - - - - - - - - - Total Other Assets - - - - - - - - - TOTAL ASSETS 34,323 44,563 54,770 66,343 78,955 92,944 108,459 44,563 44,563 Current Liabilities Accounts Payable 6,623 7,285 8,014 8,815 9,697 10,666 11,733 7,285 7,285 Total Current Liabilities 6,623 7,285 8,014 8,815 9,697 10,666 11,733 7,285 7,285 Long Term Liabilities OLDCO Notes Payable - - - - - - - - - OLDCO Current Maturities of Long Term Debt - - - - - - - - - OLDCO Long Term Debt, Net of Current Maturities 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 NEWCO Revolving Line of Credit - - - - - - - NEWCO Subordinated Debt - - - - - - - NEWCO Senior Debt - - - - - - - TOTAL LIABILITIES 11,623 12,285 13,014 13,815 14,697 15,666 16,733 12,285 12,285 Common Stock 5,015 5,015 5,015 5,015 5,015 5,015 5,015 5,015 5,015 Retained Earnings 17,685 27,263 36,741 47,513 59,244 72,263 86,711 27,263 27,263 TOTAL EQUITY 22,700 32,278 41,756 52,528 64,259 77,278 91,726 32,278 32,278 TOTAL LIABILITIES & EQUITY 34,323 44,563 54,770 66,343 78,955 92,944 108,459 44,563 44,563 Check 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 BALANCE SHEET ASSUMPTIONS AR Days 38 38 37 37 36 36 35 Inventory Days 28 28 28 28 28 28 28 AP Days 33 33 33 33 33 33 33 Projected Projected Projected Projected Projected CASH FLOW STATEMENT 20X1 20X2 20X3 20X4 20X5 20X6 20X7 CASH FLOW FROM OPERATING ACTIVITIES Net Income 9,478 10,773 11,731 13,019 14,448 Add Back Non-Cash Items Depreciation 2,069 2,069 2,819 3,319 3,890 Amortization - - - - - Changes in Working Capital Accounts Receivable (697) (1,206) (932) (1,419) (1,084) Inventory (621) (683) (751) (826) (909) Accounts Payable 729 801 882 970 1,067 Net Cash Provided by Operating Activities 10,957 11,754 13,748 15,062 17,412 CASH FLOW FROM INVESTING ACTIVITIES Capital Expenditures - Purchase of PP&E (2,250) (2,500) (2,750) (3,500) (4,000) Net Cash Used in Investing Activities (2,250) (2,500) (2,750) (3,500) (4,000) CASH FLOW FROM FINANCING ACTIVITIES Revolving Credit Facility (Line of Credit) - - - - - Subordinated Debt - - - - - Senior Debt - - - - - Net Cash Provided by (Used in) Fnce Activities - - - - - Net Cash Flow 8,707 9,254 10,998 11,562 13,412 Beginning Cash Balance 12,918 21,625 30,880 41,878 53,440 Ending Cash Balance 21,625 30,880 41,878 53,440 66,852 Supporting Schedules Company Name (000s) Projected Projected Projected Projected Projected DEBT SCHEDULE 20X1 20X2 20X3 20X4 20X5 20X6 20X7 Period 1 Period 2 Period 3 Period 4 Period 5 Revolving Line of Credit Cash Balance @ Beg of Year (End of Last Year) 12,918 21,625 30,880 41,878 53,440 Plus: Free Cash Flow from Operations and Investing 8,707 9,254 10,998 11,562 13,412 Plus: Free Cash Flow from Financing (BEFORE L.O.C.) - - - - - Less: Minimum Cash Balance 2,000 2,000 2,000 2,000 2,000 Total Cash Available or (Required) from L.O.C. 19,625 28,880 39,878 51,440 64,852 Revolver Balance - - - - - - Interest Paid 8% Subordinated Debt (Mezzanine / Sub Debt) Beginning Balance - - - - - Plus: Additions - - - - - - Less: Scheduled Amortization NA - - - - - Ending Balance - - - - - - Interest Paid 12% - - - - - Senior Debt Beginning Balance - - - - - Plus: Additions - - - - - - Less: Scheduled Amortization 5 yrs - - - - - Ending Balance - - - - - - Interest Paid 8% - - - - - Interest Expense Total Interest 0 0 0 0 0 Projected Projected Projected Projected Projected PP&E SCHEDULE 20X1 20X2 20X3 20X4 20X5 20X6 20X7 Period 1 Period 2 Period 3 Period 4 Period 5 PP&E+ Category 1 Beginning Balance: PP&E 12,231 12,412 12,844 12,775 12,956 Plus: Capital Expenditures 2,250 2,500 2,750 3,500 4,000 Less: Depreciation Useful Life Asset Base Asset Base 7 yrs 12,231 1,747 1,747 1,747 1,747 1,747 CapEx Period 1 7 yrs 2,250 321 321 321 321 321 Period 2 7 yrs 2,500 357 357 357 Period 3 7 yrs 2,750 393 393 393 Period 4 7 yrs 3,500 500 500 Period 5 7 yrs 4,000 571 Total Depreciation 2,069 2,069 2,819 3,319 3,890 Ending Balance: PP&E 12,231 12,412 12,844 12,775 12,956 13,066 Projected Projected Projected Projected Projected AMORTIZATION SCHEDULE 20X1 20X2 20X3 20X4 20X5 20X6 20X7 Period 1 Period 2 Period 3 Period 4 Period 5 Capitalized Financing Fee Asset - - - - - - Amortization 5 yrs - - - - - EXIT ANALYSIS Company Name (000s) IMPLIED VALUATION CALCULATION (EXIT) 20X7 EBITDA Multiple EBITDA Enterprise Value Less: Debt Plus: Cash Equity Value OWNERSHIP STRUCTURE Equity Subordinated Debt Total EQUITY Interest Rate Equity (%) Exit Year 5 Investment Equity Value IRR Cash Multiple SUBORDINATED DEBT Interest Rate Equity (%) Exit Year 5 Investment Interest Paid Equity Value Principal IRR Cash Multiple Vid 3 LBO Company Name (000s) SOURCES & USES Purchase Price / Enterprise Value $ 100,000 SOURCES USES Historical EBITDA @ Close 15,136 Equity $ 41,455 Seller Proceeds $ 95,000 OLDCO Equity Value EV as Multiple of Min EBITDA 6.6x Subordinated Debt $ 37,840 OLDCO Debt $ 5,000 Subordinated Debt EBITDA Multiple 2.5x Senior Debt $ 22,704 Trnsctn Expenses $ 1,000 Senior Debt EBITDA Multiple 1.5x Financing Fees $ 1,000 Transaction Expenses Trnsctn Expenses $ 1,000 Financing Fees $ 1,000 Total $ 102,000 Total $ 102,000 Financial Statements Company Name (000s) Historical Transaction Projected Projected Projected Projected Projected INCOME STATEMENT 20X1 20X2 20X3 20X4 20X5 20X6 20X7 Revenue 98,287 108,115 118,927 130,820 143,902 158,292 174,121 Growth (%) NA 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% Cost of Goods Sold (Net of D&A) 73,715 81,087 89,195 98,115 107,926 118,719 130,591 % of Sales 75.0% 75.0% 75.0% 75.0% 75.0% 75.0% 75.0% Gross Profit 24,572 27,029 29,732 32,705 35,975 39,573 43,530 % of Sales 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% SG&A (Net of D&A) 10,812 11,893 13,082 14,063 15,110 16,225 17,412 % of Sales 11.0% 11.0% 11.0% 10.8% 10.5% 10.3% 10.0% EBITDA 13,760 15,136 16,650 18,642 20,866 23,348 26,118 % of Sales 14.0% 14.0% 14.0% 14.3% 14.5% 14.8% 15.0% Depreciation 1,474 1,622 2,069 2,069 2,819 3,319 3,890 Amortization - - 200 200 200 200 200 EBIT 12,286 13,514 14,381 16,373 17,847 19,829 22,028 Interest Expense ON 400 400 6,176 5,812 5,449 5,086 4,722 Pretax Income 11,886 13,114 8,206 10,561 12,398 14,744 17,306 Income Tax Expense 4,676 5,158 2,872 3,696 4,339 5,160 6,057 Tax Rate NM NM 35.0% 35.0% 35.0% 35.0% 35.0% Net Income 7,210 7,957 5,334 6,865 8,059 9,583 11,249 BALANCE SHEET ADJUSTMENTS Pre-Closing Source Source Use Use Use Use Post-Closing Historical Transaction Projected Projected Projected Projected Projected Equity Debt Oldco Equity Oldco Debt Trnsctn Fees Fnce Fees BALANCE SHEET 20X1 20X2 20X3 20X4 20X5 20X6 20X7 20X2 20X2 Current Assets Cash 4,653 12,918 13,141 14,146 17,131 20,917 26,788 12,918 41,455 60,545 (95,000) (5,000) (1,000) (1,000) 12,918 Accounts Receivable 10,326 11,358 12,056 13,261 14,193 15,612 16,697 11,358 11,358 Inventory 5,642 6,206 6,827 7,510 8,261 9,087 9,996 6,206 6,206 Prepaid Expenses 1,849 1,849 1,849 1,849 1,849 1,849 1,849 1,849 1,849 Total Current Assets 22,470 32,332 33,872 36,766 41,434 47,465 55,329 32,332 32,332 PP&E, Net of Accum. Depreciation 11,853 12,231 12,412 12,844 12,775 12,956 13,066 12,231 12,231 Other Assets Capitalized Financing Fee - 1,000 800 600 400 200 - - 1,000 1,000 Goodwill - 62,722 62,722 62,722 62,722 62,722 62,722 - 62,722 62,722 Other Long Term Asset - - - - - - - - - Total Other Assets - 63,722 63,522 63,322 63,122 62,922 62,722 - 63,722 TOTAL ASSETS 34,323 108,285 109,806 112,931 117,331 123,343 131,117 44,563 108,285 Current Liabilities Accounts Payable 6,623 7,285 8,014 8,815 9,697 10,666 11,733 7,285 7,285 Total Current Liabilities 6,623 7,285 8,014 8,815 9,697 10,666 11,733 7,285 7,285 Long Term Liabilities OLDCO Notes Payable - - - - - - - - - - OLDCO Current Maturities of Long Term Debt - - - - - - - - - - OLDCO Long Term Debt, Net of Current Maturities 5,000 - - - - - - 5,000 (5,000) - NEWCO Revolving Line of Credit - - - - - - - NEWCO Subordinated Debt 37,840 37,840 37,840 37,840 37,840 37,840 37,840 37,840 NEWCO Senior Debt 22,704 18,163 13,623 9,082 4,541 - 22,704 22,704 TOTAL LIABILITIES 11,623 67,830 64,017 60,278 56,619 53,047 49,573 12,285 67,830 Common Stock 5,015 41,455 41,455 41,455 41,455 41,455 41,455 5,015 41,455 (5,015) 41,455 Retained Earnings 17,685 (1,000) 4,334 11,198 19,257 28,840 40,089 27,263 (27,263) (1,000) (1,000) TOTAL EQUITY 22,700 40,455 45,789 52,653 60,712 70,295 81,544 32,278 40,455 TOTAL LIABILITIES & EQUITY 34,323 108,285 109,806 112,931 117,331 123,343 131,117 44,563 108,285 Check 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 BALANCE SHEET ASSUMPTIONS AR Days 38 38 37 37 36 36 35 Inventory Days 28 28 28 28 28 28 28 AP Days 33 33 33 33 33 33 33 Projected Projected Projected Projected Projected CASH FLOW STATEMENT 20X1 20X2 20X3 20X4 20X5 20X6 20X7 CASH FLOW FROM OPERATING ACTIVITIES Net Income 5,334 6,865 8,059 9,583 11,249 Add Back Non-Cash Items Depreciation 2,069 2,069 2,819 3,319 3,890 Amortization 200 200 200 200 200 Changes in Working Capital Accounts Receivable (697) (1,206) (932) (1,419) (1,084) Inventory (621) (683) (751) (826) (909) Accounts Payable 729 801 882 970 1,067 Net Cash Provided by Operating Activities 7,013 8,046 10,276 11,826 14,412 CASH FLOW FROM INVESTING ACTIVITIES Capital Expenditures - Purchase of PP&E (2,250) (2,500) (2,750) (3,500) (4,000) Net Cash Used in Investing Activities (2,250) (2,500) (2,750) (3,500) (4,000) CASH FLOW FROM FINANCING ACTIVITIES Revolving Credit Facility (Line of Credit) - - - - - Subordinated Debt - - - - - Senior Debt (4,541) (4,541) (4,541) (4,541) (4,541) Net Cash Provided by (Used in) Fnce Activities (4,541) (4,541) (4,541) (4,541) (4,541) Net Cash Flow 222 1,005 2,985 3,785 5,872 Beginning Cash Balance 12,918 13,141 14,146 17,131 20,917 Ending Cash Balance 13,141 14,146 17,131 20,917 26,788 Supporting Schedules Company Name (000s) Projected Projected Projected Projected Projected DEBT SCHEDULE 20X1 20X2 20X3 20X4 20X5 20X6 20X7 Period 1 Period 2 Period 3 Period 4 Period 5 Revolving Line of Credit Cash Balance @ Beg of Year (End of Last Year) 12,918 13,141 14,146 17,131 20,917 Plus: Free Cash Flow from Operations and Investing 4,763 5,546 7,526 8,326 10,412 Plus: Free Cash Flow from Financing (BEFORE L.O.C.) (4,541) (4,541) (4,541) (4,541) (4,541) Less: Minimum Cash Balance 2,000 2,000 2,000 2,000 2,000 Total Cash Available or (Required) from L.O.C. 11,141 12,146 15,131 18,917 24,788 Revolver Balance - - - - - - Interest Paid 8% Subordinated Debt (Mezzanine / Sub Debt) Beginning Balance 37,840 37,840 37,840 37,840 37,840 Plus: Additions 37,840 - - - - - Less: Scheduled Amortization NA - - - - - Ending Balance 37,840 37,840 37,840 37,840 37,840 37,840 Interest Paid 12% 4,541 4,541 4,541 4,541 4,541 Senior Debt Beginning Balance 22,704 18,163 13,623 9,082 4,541 Plus: Additions 22,704 - - - - - Less: Scheduled Amortization 5 yrs 4,541 4,541 4,541 4,541 4,541 Ending Balance 22,704 18,163 13,623 9,082 4,541 - Interest Paid 8% 1,635 1,271 908 545 182 Interest Expense Total Interest 6,176 5,812 5,449 5,086 4,722 Projected Projected Projected Projected Projected PP&E SCHEDULE 20X1 20X2 20X3 20X4 20X5 20X6 20X7 Period 1 Period 2 Period 3 Period 4 Period 5 PP&E+ Category 1 Beginning Balance: PP&E 12,231 12,412 12,844 12,775 12,956 Plus: Capital Expenditures 2,250 2,500 2,750 3,500 4,000 Less: Depreciation Useful Life Asset Base Asset Base 7 yrs 12,231 1,747 1,747 1,747 1,747 1,747 CapEx Period 1 7 yrs 2,250 321 321 321 321 321 Period 2 7 yrs 2,500 357 357 357 Period 3 7 yrs 2,750 393 393 393 Period 4 7 yrs 3,500 500 500 Period 5 7 yrs 4,000 571 Total Depreciation 2,069 2,069 2,819 3,319 3,890 Ending Balance: PP&E 12,231 12,412 12,844 12,775 12,956 13,066 Projected Projected Projected Projected Projected AMORTIZATION SCHEDULE 20X1 20X2 20X3 20X4 20X5 20X6 20X7 Period 1 Period 2 Period 3 Period 4 Period 5 Capitalized Financing Fee Asset 1,000 800 600 400 200 - Amortization 5 yrs 200 200 200 200 200 EXIT ANALYSIS Company Name (000s) IMPLIED VALUATION CALCULATION (EXIT) 20X7