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Year Ended December 31, 2008

Net Sales Growth rate
Net sales

$191,100,000.00

New Construction

$120,010,800.00

62.80%
Repair and Conversion

$71,089,200.00

37.20%

78.09% Cost of sales
21.91% Gross profit

$149,231,000.00
41,869,000

Operating expenses:

0% General and administrative
Rent

-

3% Selling and marketing
28.37% EBIT
36% Taxes

36,389,000

EBIT(1-T)

23,366,000

5,480,000
13,023,000

+ Depreciation

-3%
-7.85%

457

- Capital Expenditures

(6,000,000)

- Chg WC

(15,007,853)

FCFF

2,358,604

-

Discounted Cash Flows at WACC

FCFF

2,358,604

Terminal Value
Total Discounted Cash Flows

2,358,604
116,785,783

Enterprise Value
Cost of Capital
Terminal Value Growth Rate

15%
1%

Summary DCF Valuation
DCF Enterprise Value
$116,785,783.2
Less: Net Debt
(10,905,000)
Equity Value
###
Shares Outstanding
6,987,000
Price per Share
$15.1540

2009

2010

$110,838,000.00

2011

1.00%

-42.00%

2012

1.00%

$111,946,380.00

$113,065,843.80

1.00%
$114,196,502.24

$39,748,800.00

$40,857,180.00

$41,976,643.80

$43,107,302.24

0.00%

0.00%

20.00%

0.00%

$71,089,200.00

$71,089,200.00

$71,089,200.00

$71,089,200.00

$86,553,980.00

$87,419,519.80

$88,293,715.00

$89,176,652.15

24,284,020

24,526,860

24,772,129

25,019,850

-

-

-

-

3,178,400.00

3,210,184.00

3,242,285.84

3,274,708.70

31,444,741

31,759,188

32,076,780

32,397,548

11,253,534

11,366,070

11,479,730

11,594,528

20,191,206

20,393,118

20,597,050

20,803,020

265

268

270

273

(3,480,000)

(3,514,800)

(3,549,948)

(3,585,447)

(6,303,298)

87,046

87,916

88,795

10,408,173

16,965,632

17,135,288

17,306,641

Year
1

2

3

4

10,408,173

16,965,632

17,135,288

17,306,641

9,050,585

12,828,455

11,266,730

9,895,128

2013

1.00%

Terminal Year
1.00%

$115,338,467.26
$44,249,267.26

0.00%
$71,089,200.00
$90,068,418.67
25,270,049
3,307,455.79
32,721,523
11,710,473
21,011,050
276
(3,621,302)
89,683
17,479,707

5

17,654,504

TV
10%

17,479,707
126,103,603
71,386,281

126,103,603

Sales 2010 Increase

-50%
-40%
-30%
-20%
-10%
0%
5%
10%

-0.38
0.05
0.47
0.9
1.32
1.75
1.96
2.17

12%

14%
0.43
0.99
1.54
2.09
2.64
3.19
3.46
3.74

16%
1.24
1.92
2.6
3.28
3.95
4.63
4.97
5.31
average

EBIT Margins
18%
2.05
2.86
3.66
4.47
5.27
6.07
6.48
6.88

20%
2.86
3.79
4.72
5.66
6.59
7.52
7.98
8.45

$6.12

3.67
4.73
5.79
6.84
7.9
8.96
9.49
10.02

22%
4.48
5.67
6.85
8.03
9.22
10.4
10.99
11.58

24%
5.29
6.6
7.91
9.22
10.53
11.84
12.5
13.15

26%
6.1
7.54
8.98
10.41
11.85
13.29
14
14.72

DJO Sum
FY Est.
12/31/07E
Revenue Growth Rate
Revenue
26.50% EBITDA
-Interest Expense
16.39%
-Change WC
8.28%
-Taxes
8.28%
-Capex

873,572
253,833
-176,485
-15,700
10,969
-21,286

FCF
NOL

51,331

EBITDA/Interest Expense
EBITDA Margin
EBITDA-Capex/Int Exp

1.44
29.06%
1.32

Leverage Test
Consolidated Secured Debt Ratio
Senior Debt
EBITDA Requirement
EBITDA
Covenant Violation

Se

a
M
a
r
g
i
n
s

15%
20%
22%
24%

-4%
0.62
0.90
1.00
1.11

26.50%
28%

1.25
1.33

DJO Summary Financials and Projections
FY Est.
12/31/08E

12/31/09E

12/31/10E

12/31/11E

980,194
259,600
-173,067
-17,472
-10,728
-34,613

8.28%
1,061,354
281,259
-173,067
-13,300
-11,616
-37,479

8.28%
1,149,234
304,547
-173,067
-14,401
-12,578
-40,583

8.28%
1,244,391
329,764
-173,067
-15,594
-13,620
-43,943

23,720

45,797

63,919

83,541

1.50
26.48%
1.30

1.63
26.50%
1.41

1.76
26.50%
1.53

1.91
26.50%
1.65

4.25
1055
248,235
281,259
No

3.5
1055
301,429
304,547
No

-2%
0.64
0.91
1.03
1.14
1.27
1.36

Sensitivity Analysis: EBITDA-Capex/Interest Expense (2009)
Revenue Growth
0%
2%
4%
0.65
0.66
0.68
0.93
0.95
0.97
1.05
1.07
1.09
1.16
1.18
1.21
1.30
1.39

1.33
1.41

1.35
1.44

12/31/12E
8.28%
1,347,426
357,068
-173,067
-16,885
-14,747
-47,581
104,788

2.06
26.50%
1.79

nse (2009)
6%
0.69
0.99
1.11
1.23

8%
0.70
1.01
1.13
1.25

10%
0.71
1.03
1.15
1.28

1.38
1.47

1.40
1.50

1.43
1.52

Year Ended December 31, 2008
Net sales
Cost of sales

374,080

Gross profit

606,114

Operating expenses:
Selling, general and administrative

445,396

Research and development
Amortization and impairment of
acquired intangibles

26,938

EBIT (loss)

34,826

98,954

Taxes
EBIT(1-t)
+ Depreciation
- Capital Expenditures
- Chg WC

FCFF
Other income (expense):
Interest income

1,662

Interest expense

($173,162.00)

Other income (expense), net

($9,134.00)

Loss on early extinguishment of debt
Loss from continuing
operations before income
taxes and minority interests

-

Benefit for income taxes

($49,071.00)

Minority interests

1,049

Loss from continuing operations

($97,786.00)

Discontinued operations:
Net loss

($145,808.00)

ember 31, 2008
$980,194.00

($97,786.00)

Q2 2009
Sales
Hip
US
Knee
US
Dental
US
Other
US
Total Reconstructive Products
US
Fixation
US
Spine
US
Other Products (Including Braces)
US
Total net Sales
US
Europe
Other Int'l

449.31
0
57
0
50.28
0
47.55
0
604.81
352.64
192.87
59.3
604.81

Q3 2009
Sales
Increase
5%
16%
3%
8%
-16%
-10%
6%
26%
453.8
1%
13%
57
0%
1%
53.8
7%
15%
50.4
6%
14%
$615
2%
$387.90
10%
167.8
-13%
59.3
0%