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Discounted Cash Flow (DCF) Valuation

Fiscal Year
Number of weeks

Forward Estimates

Long Term Forward Estimates

Terminal Year

2000
52

2001
52

2002
52

2003
53

2004
52

2005
52

2006
52

2007
53

2008
52

2009
52

2010
52

2011
53

$20,087.5

$22,241.4
10.7%
1,440.4
-10.0%
6.48%
1,119.6
-14.1%
5.03%
41.8%
651.9
320.8
8.2%
1.44%
(322.4)
650.3
(713.6)
2.22x
3.2%
(63.3)

$24,181.5
8.7%
1,519.7
5.5%
6.28%
1,209.4
8.0%
5.00%
38.0%
749.8
310.3
-3.3%
1.28%
106.1
1,166.2
(1,108.8)
3.57x
4.6%
57.4

$26,478.7
9.5%
1,668.2
9.8%
6.30%
1,364.3
12.8%
5.15%
38.0%
845.8
303.9
-2.1%
1.15%
(203.2)
946.5
(850.0)
2.80x
3.2%
96.5

$28,861.8
9.0%
1,832.7
9.9%
6.35%
1,515.3
11.1%
5.25%
38.0%
939.5
317.4
4.5%
1.10%
(209.7)
1,047.2
(850.0)
2.68x
2.9%
197.2

$31,315.1
8.5%
2,004.2
9.4%
6.40%
1,671.7
10.3%
5.34%
38.0%
1,036.4
332.5
4.7%
1.06%
(216.3)
1,152.6
(850.0)
2.56x
2.7%
302.6

$33,820.3
8.0%
2,181.4
8.8%
6.45%
1,830.8
9.5%
5.41%
38.0%
1,135.1
350.6
5.5%
1.04%
(221.5)
1,264.2
(850.0)
2.42x
2.5%
414.2

$35,849.5
6.0%
2,294.0
5.2%
6.40%
1,922.3
5.0%
5.36%
38.0%
1,191.8
371.7
6.0%
1.04%
(221.5)
1,342.0
(850.0)
2.29x
2.4%
492.0

$38,000.5
6.0%
2,412.4
5.2%
6.35%
2,018.4
5.0%
5.31%
38.0%
1,251.4
394.0
6.0%
1.04%
(221.5)
1,423.9
(850.0)
2.16x
2.2%
573.9

$40,280.5
6.0%
2,537.0
5.2%
6.30%
2,119.3
5.0%
5.26%
38.0%
1,314.0
417.6
6.0%
1.04%
(221.5)
1,510.1
(850.0)
2.04x
2.1%
660.1

$42,697.3
6.0%
2,668.0
5.2%
6.25%
2,225.3
5.0%
5.21%
38.0%
1,379.7
442.7
6.0%
1.04%
(221.5)
1,600.8
(850.0)
1.92x
2.0%
750.8

$45,259.2
6.0%
2,805.8
5.2%
6.20%
2,336.6
5.0%
5.16%
38.0%
1,448.7
469.2
6.0%
1.04%
(221.5)
1,696.4
(850.0)
1.81x
1.9%
846.4

9.54%
1
0.91
88.1

9.54%
2
0.83
164.4
86.6%

9.54%
3
0.76
230.2
40.1%

9.54%
4
0.69
287.7
25.0%

9.54%
5
0.63
312.0
8.4%

9.54%
6
0.58
332.2
6.5%

9.54%
7
0.53
348.8
5.0%

9.54%
8
0.48
362.2
3.8%

9.54%
9
0.44
372.8
2.9%

In millions

Net Sales
% Growth
EBITDA
% Growth
% Margin
Operating profit (EBIT)
% Growth
% Margin
Tax rate
NOPAT
Depreciation and amortization
% Growth
% Margin
Change in WC providing/(requiring) cash
Operating Cash Flows
Capex - Additions to PP&E
Capex/D&A
Capex % of sales
Unlevered FCF

1,600.1
7.97%
1,303.5
6.49%
40.0%
782.1
296.6
1.48%
(306.2)
772.5
(695.3)
2.34x
3.5%
77.2

Discount Rate (WACC)

Projection Year
Discount Factor 1/((1+WACC)^Projection Year)
Present Value of Free Cash Flows (Unlevered FCF)
Yoy % change in FCF
Assumptions

Long term sales growth

Operating Leverage in LT Projections (if any)
Long term growth rate in EBIT

Calculation of DilutedShares/Options Outstanding

6.00%
-1.00%
3.00%

Discount Rate (WACC) Worksheet

Public Market Price/Share

Diluted Shares O/S (TS Method)
Public Market Capitalization
Debt 2002A
Cash 2002A
Net Debt 2002A
Public Market Enterprise Value
E/(D+E) @ Public Mkt Value
D/(D+E) @ Public Mkt Value

$27.93
394.6
11,022.4
1,113.1
700.4
412.7
11,435.1
96.39%
3.61%

Avg. Pretax Int.Exp. (Annual.) 2002A

Marginal Tax Rate

4.61%
38.0%

Cost of Equity= rf+beta( Rm-Rf)

Risk Free rate: Rf
Unlevered Beta
Risk premium (Rm-Rf)

9.79%
3.87%
0.8
7.40%

WACC=E/(D+E)* Re+ D/(D+E)*Rd(1-T)

9.54%

Current Share Price

Actual Basic Share Count
Date of Share Count
Source of share count

2,406.7
3.0%
38.0%
1,492.1
469.2

(221.5)
1,739.9
(850.0)
1.81x
889.9

Terminal Value

Sum of PV of FCF (8 years)

WACC
Long term growth rate in EBIT
Present value of terminal Value
Terminal Value as % of Total Value

$27.93
393.6
3/3/2003
2002 10K

2,498.3
9.5%
3.0%
5,992.4
70.6%

Intrinsic ("Fair") Value Calculation

Options Data

Batch 1
Batch 2
Batch 3
Batch 4
Batch 5
Batch 6
Total

Date:
Options
0.275
2.784
7.646
3.766
4.586
4.333
23.390

Strike
$13.10
$18.61
$29.83
$31.92
$40.63
$60.45

12/28/2002 Source:

2002 10K

In the $?
Yes
Yes
No
No
No
No

Proceeds
$3.6
$51.8
$0.0
$0.0
$0.0
$0.0
$55.4
$18.11

Include?
0.275
2.784
0.000
0.000
0.000
0.000
3.059
Actual avg strike price

Basic Shares Outstanding

Fully Diluted Shares Outstanding
Fully Diluted Shares Outstanding (Treasury Stock Method)

For Illustrative Purposes Only

EV (Equity Value + Net Debt)

- Debt
+ Cash
Net Debt
Equity Value (Market Capitalization)
Diluted Shares O/S
Fair Value Per Share

8,490.7
1,113.1
700.4
412.7
8,078.0
394.6
$20.47

393.6
396.6
394.6

Copyright 2003 by Wall Street Prep, Inc. All rights reserved.

Sensitivity Anaysis 1 - Terminal Value Approach - Growth In Perpetuity Method

WACC
From Model 9.54%
8.00%
9.00%
Sensitivity 10.00%
11.00%
12.00%

WACC
From Model 9.54%
8.00%
9.00%
Sensitivity 10.00%
11.00%
12.00%

PV of FCF

2,498.3
2,713.8
2,571.2
2,438.4
2,314.6
2,199.0

PV of Terminal Value
at a Perpetual Growth Rate of:
2.0%
3.0%
4.0%
5,197.6
5,992.4
7,074.1
7,419.1
8,902.9
11,128.7
5,853.0
6,828.5
8,194.2
4,717.3
5,391.2
6,289.7
3,865.2
4,348.3
4,969.5
3,208.9
3,565.4
4,011.1

Equity Value (EV - Net Debt)

2.0%
3.0%
4.0%
7,283.3
8,078.0
9,159.7
9,720.3
11,204.1
13,429.8
8,011.5
8,987.1
10,352.8
6,743.0
7,416.9
8,315.4
5,767.0
6,250.2
6,871.4
4,995.2
5,351.7
5,797.4

Fair Value Per Share

2.0%
3.0%
$18.46
$20.47
$24.63
$28.39
$20.30
$22.77
$17.09
$18.79
$14.61
$15.84
$12.66
$13.56

Enterpise Value
2.0%
3.0%
7,696.0
8,490.7
10,133.0
11,616.8
8,424.2
9,399.8
7,155.7
7,829.6
6,179.7
6,662.9
5,407.9
5,764.4

4.0%
9,572.4
13,842.5
10,765.5
8,728.1
7,284.1
6,210.1

4.0%
$23.21
$34.03
$26.23
$21.07
$17.41
$14.69

Sensitivity Anaysis 2 - Terminal Value Approach - EBITDA Exit Multiple Method

WACC
From Model 9.54%
8.00%
9.00%
Sensitivity 10.00%
11.00%
12.00%

WACC
From Model 9.54%
8.00%
9.00%
Sensitivity 10.00%
11.00%
12.00%

PV of FCF

2,498.3
2,713.8
2,571.2
2,438.4
2,314.6
2,199.0

PV of Terminal Value as
Multiple of 2011 EBITDA
6.0x
7.0x
7,414.1
8,649.8
8,421.6
9,825.2
7,751.2
9,043.1
7,139.6
8,329.6
6,581.2
7,678.0
6,070.8
7,082.6

Equity Value (EV - Net Debt)

6.0x
7.0x
8.0x
9,499.8
10,735.5
11,971.1
10,722.8
12,126.4
13,530.0
9,909.8
11,201.6
12,493.5
9,165.3
10,355.3
11,545.2
8,483.0
9,579.9
10,676.8
7,857.1
8,868.9
9,880.7

8.0x
9,885.5
11,228.8
10,335.0
9,519.5
8,774.9
8,094.4

Fair Value Per Share

6.0x
7.0x
$24.07
$27.20
$27.17
$30.73
$25.11
$28.38
$23.22
$26.24
$21.50
$24.27
$19.91
$22.47

For Illustrative Purposes Only

Enterpise Value
6.0x
7.0x
9,912.5
11,148.2
11,135.5
12,539.1
10,322.5
11,614.3
9,578.0
10,768.0
8,895.7
9,992.6
8,269.8
9,281.6

8.0x
12,383.8
13,942.7
12,906.2
11,957.9
11,089.5
10,293.4

8.0x
$30.33
$34.28
$31.66
$29.25
$27.05
$25.04

Copyright 2003 by Wall Street Prep, Inc. All rights reserved.