Discounted Cashflow Multiples and Implied Valuation Range

(U.S. dollars, thousands)

Multiple Range

EBITDA

Low
#REF!

Median
#REF!

High
#REF!

2014 EBITDA
#REF!

Implied
Enterprise Value
$
7,770

Implied Enterprise Value

Less Net Debt

Implied Equity Value

7,770
20%

Control Premium

10%
$

Add Net Debt

Adjusted Implied Enterprise Value

mfr public range

median

Liquidity Discount

Adjusted Implied Equity Value

dcf range
lbo range
precedent range

7,770

6,837
6,837

#REF!

#REF!
#REF!

#REF!
#REF!

#REF!
#REF!

#REF!
#REF!

#REF!
#REF!

139180
112608
114406
112608
35%

26,572
#REF!

0.0%
#REF!

#REF!

#REF!

#VALUE!
#REF!

#VALUE!
#REF!

ABC Company, Inc. Recapitalization Analysis

(figures in U.S. dollars, thousands)

Company Name:
Company Fiscal Year Ended:
Date of Transaction Analysis:
Date of Transaction Offer:
Pro Forma Year:
Sources of Funds
New Equity Sponsor
Rollover
New Mezzanine w/ Warrants

New Mezzanine w/ Warrants

New Senior Notes
New Revolving Credit Facility
Total Sources
Uses of Funds
Proceeds to Seller
Rollover
Balance Sheet Cash
Short-Term Notes Payable
Line of Credit
Longterm Debt
Advisory Fees
Financing Fees
Total Uses

Key Inputs & Assumptions

ABC Company, Inc.
12/31/14
9/25/14
12/31/14
2014
Amount
Ownership
5,000
80.0%
1,250
20.0%
---100.0%

1,035
2,070
3,105
$12,460
Amount
11,264
1,250
(1,554)
-1,000
500
--$12,460

Rate
10.0%
9.0%
8.0%

Rate

2.0%

Exit EBITDA Multiple:

Exit EBITDA Sensitivity:
Total Sources/2014E EBITDA:
Interest Rate (1=Avg., 2=Beg.,
Paydown Debt? ("Yes", "No")
Opt/Warr
--10.0%
3.0%
13.0%

Diluted
70.8%
26.5%
2.7%
100.0%

Debt / EBITDA
2014E
0.50x
1.00x
1.50x
3.00x

2015P
0.43x
0.87x
1.30x
2.61x

5.0x
1.0x
6.0x
3
No
%Sources
40.1%
10.0%
---

8.3%
16.6%
24.9%
100.0%
%Uses
90.4%
10.0%
(12.5%)
--8.0%
4.0%
----100.0%

ABC Company, Inc. Income Statement

(figures in U.S. dollars, thousands)
FYE December 31:

2013A

Net Sales
Sales Growth
COGS
Gross Profit
Gross Margin (% of Sales)

$15,000

2014E

2015P

2016P

9,000
6,000
40.0%

$17,250
15.0%
10,350
6,900
40.0%

$19,838
15.0%
11,903
7,935
40.0%

$22,813
15.0%
13,688
9,125
40.0%

SG&A Expense
% of Sales
Operating Profit (EBIT)

4,600
30.7%
1,400

5,290
30.7%
1,610

6,084
30.7%
1,852

6,996
30.7%
2,129

Depreciation & Amortization Expense

% of Sales
EBITDA
% of Sales

400
2.7%
1,800
12.0%

460
2.7%
2,070
12.0%

529
2.7%
2,381
12.0%

608
2.7%
2,738
12.0%

150
1,250

150
1,460

498
1,354

486
1,643

500
40.0%
750
5.0%

584
40.0%
876
5.1%

514
38.0%
839
4.2%

624
38.0%
1,019
4.5%

Net Interest Expense

Pretax Income (EBT)
Taxes
Effective Tax Rate
Net Income
% of sales

ABC Company, Inc. Cashflow Statement

(figures in U.S. dollars, thousands)
FYE December 31:

2014E

2015P

2016P

Net Income / (Loss)

Depreciation
Change in Accounts Receivable
Change in Inventory
Change in Prepaid Expenses
Change in Accounts Payable
Change in Accrued Expenses
Total Operating Activities

$876
460
(225)
(188)
(15)
75
30
$1,014

$839
529
(259)
(216)
(17)
86
35
$997

$1,019
608
(298)
(248)
(20)
99
40
$1,201

Capital Expenditures
Total Investing Activities

(460)
($460)

(529)
($529)

(608)
($608)

----------

----------

----------

554
1,000
$1,554

468
1,554
$2,022

592
2,022
$2,614

Dividends
Equity Issued
Short-Term Notes Payable
Change in Line of Credit
Change in Longterm Debt
New Mezzanine w/Warrants
New Senior Notes
New Revolving Credit Facility
Total Financing Activities
Change in Cash +/(-)
Beginning Cash Balance
Ending Cash Balance

ABC Company, Inc. Balance Sheet

(figures in U.S. dollars, thousands)
FYE December 31:
Minimum Cash
Cash & Cash Equivalents
Accounts Receivable
Inventory
Prepaid Expenses
Total Current Assets

1,000
1,500
1,250
100
3,850

1,554
1,725
1,438
115
4,831

$1,554
1,725
1,438
115
4,831

2015P
$500
$2,022
1,984
1,653
132
5,791

Net Property, Plant & Equipment

Intangible Assets / Goodwill
Deposits
Total Noncurrent Assets

1,000
--1,000

1,000
--1,000

1,000
7,934
-8,934

1,000
7,934
-8,934

1,000
7,934
-8,934

Total Assets

4,850

5,831

13,765

14,725

15,883

500
200
700

575
230
805

575
230
805

661
265
926

760
304
1,065

--

--

--

--

--

Short-Term Notes Payable

Line of Credit
Longterm Debt
New Mezzanine w/ Warrants
New Senior Notes
New Revolving Credit Facility
Total Long-Term Debt

-1,000
500
---1,500

-1,000
500
---1,500

--500
1,035
2,070
3,105
6,710

--500
1,035
2,070
3,105
6,710

--500
1,035
2,070
3,105
6,710

Total Liabilities

2,200

2,305

7,515

7,636

7,775

Total Shareholders' Equity

2,650

3,526

6,250

7,089

8,108

Total Liabilities & Shareholders' Equity

Balance

4,850
0.000

5,831
0.000
0.000

13,765
0.000
0.000

14,725
0.000
0.000

15,883
0.000
0.000

Accounts Payable
Accrued Expenses
Total Current Liabilities
Other Non-Current Liabilities

2013A

2014E

2014PF

2016P
$500
$2,614
2,281
1,901
152
6,949

ABC Company, Inc. Financial Statement Assumptions

(figures in U.S. dollars, thousands)
FYE December 31:

2013A

2014E

2015P

2016P

Capital Expenditures (% of Sales)

Capital Expenditures

2.7%
400

2.7%
460

2.7%
529

2.7%
608

Assets (Sales days)

Accounts Receivable
Inventory
Prepaid Expenses

36.5
50.7
2.4

36.5
50.7
2.4

36.5
50.7
2.4

36.5
50.7
2.4

Liabilities (COGS days)

Accounts Payable
Accrued Expenses

20.3
8.1

20.3
8.1

20.3
8.1

20.3
8.1

5.5x
2,150

6.0x
2,473
323

6.3x
2,843
371

6.5x
3,270
427

Working Capital
Current Ratio
Net Working Capital
Change in Net Working Capital

Outputs
FYE Ended:
2017
2018
Summary of Equity Sponsor Returns
Trailing EBITDA Multiple
4.0x
5.0x
6.0x

15.4%
25.6%
34.4%

17.9%
25.0%
31.1%

2019

2020

19.1%
24.4%
29.0%

19.6%
23.9%
27.5%

16.3%
17.6%
18.9%

15.9%
17.1%
18.2%

$4,488
5,594
6,699

$5,500
6,771
8,042

Summary of Mezzanine Holder Returns

Trailing EBITDA Multiple
4.0x
5.0x
6.0x

17.8%
19.9%
21.9%

16.8%
18.4%
20.0%

Value of Management Stake

Trailing EBITDA Multiple
4.0x
5.0x
6.0x

$2,881
3,717
4,553

$3,622
4,583
5,544

Summary Credit Statistics

EBITDA/Tot. Int. Exp.

EBITDA-Capex/Tot. Int. Exp.
Total Debt/EBITDA
Senior Debt/EBITDA
Total Debt/Total Cap

2014PF
4.2x
3.2x
3.2x
2.5x
0.5x

2015P

2016P
4.8x
3.7x

5.6x
4.4x

2.8x
2.2x
0.5x

2.5x
1.9x
0.5x

2017P

2018P

2019P

2020P

$26,235
15.0%
15,741
10,494
40.0%

$30,170
15.0%
18,102
12,068
40.0%

$34,696
15.0%
20,818
13,878
40.0%

$39,900
15.0%
23,940
15,960
40.0%

8,045
30.7%
2,449

9,252
30.7%
2,816

10,640
30.7%
3,238

12,236
30.7%
3,724

700
2.7%
3,148
12.0%

805
2.7%
3,620
12.0%

925
2.7%
4,164
12.0%

1,064
2.7%
4,788
12.0%

471
1,977

453
2,363

431
2,807

405
3,319

751
38.0%
1,226
4.7%

898
38.0%
1,465
4.9%

1,067
38.0%
1,740
5.0%

1,261
38.0%
2,058
5.2%

2017P

2018P

2019P

2020P

$1,226
700
(342)
(285)
(23)
114
46
$1,435

$1,465
805
(394)
(328)
(26)
131
52
$1,705

$1,740
925
(453)
(377)
(30)
151
60
$2,017

$2,058
1,064
(520)
(434)
(35)
173
69
$2,376

(700)
($700)

(805)
($805)

(925)
($925)

(1,064)
($1,064)

----------

----------

----------

----------

736
2,614
$3,350

901
3,350
$4,251

1,092
4,251
$5,342

1,312
5,342
$6,654

2017P
$500
$3,350
2,624
2,186
175
8,334

2018P
$500
$4,251
3,017
2,514
201
9,983

2019P
$500
$5,342
3,470
2,891
231
11,934

2020P
$500
$6,654
3,990
3,325
266
14,235

1,000
7,934
-8,934

1,000
7,934
-8,934

1,000
7,934
-8,934

1,000
7,934
-8,934

17,268

18,917

20,868

23,169

875
350
1,224

1,006
402
1,408

1,157
463
1,619

1,330
532
1,862

--

--

--

--

--500
1,035
2,070
3,105
6,710

--500
1,035
2,070
3,105
6,710

--500
1,035
2,070
3,105
6,710

--500
1,035
2,070
3,105
6,710

7,934

8,118

8,329

8,572

9,334

10,799

12,539

14,597

17,268
0.000
0.000

18,917
0.000
0.000

20,868
0.000
0.000

23,169
0.000
0.000

2017P

2018P

2019P

2020P

2.7%
700

2.7%
805

2.7%
925

2.7%
1,064

36.5
50.7
2.4

36.5
50.7
2.4

36.5
50.7
2.4

36.5
50.7
2.4

20.3
8.1

20.3
8.1

20.3
8.1

20.3
8.1

6.8x
3,760
490

7.1x
4,324
564

7.4x
4,973
649

7.6x
5,719
746