<=History Pro Forma =>

Operating Forecasts 2010 2011 2012 2013 2014 2015 2016 2017

US Sales 330 328 330

International Sales 29 32 36
Net Sales 359 360 366
Cost of Goods Sold 160 150 140
Depreciation 24 9 9
Marketing Expense 23 24 24
Other SG&A 107 108 111
EBIT 45 69 82

Supplementary Schedules
Net Working Capital
working cash 10 10 10
A/R 98 99 100
Inventory 310 291 272
Other CA 7 7 7
A/P 90 90 90
Net working capital 335 317 299
D NWC

Other assets 45 45 45
D Other assets

Beginning net PP&E 144 140 132

Capital Expenditures 20 20 20
Depreciation 24 28 26
Ending Net PP&E 140 132 126

Free Cash Flow Calculation Pro Forma =>

2013 2014 2015 2016 2017
EBIT
EBIT(1-t) tax rate = 40%
Depreciation
Capital expenditures
D NWC
D Other assets
Free cash flow
Terminal value Perp. g = 3%

Discount factor
PV(FCF + TV)
PV Enterprise
Less EOY 2008 Debt 301
Estimated Equity Value
number of shares (000,000s) 10

Value per share $ -

Pro forma assumptions

0.5% annual growth

13.0% annual growth

38.0% of sales
20.0% of beginning net PP&E
7.0% of sales
30.0% of sales

2.8% of sales
100 days sales outstanding
708 days of COGS
2.0% of sales
90 days of cash op expenses

12.50% of sales

given
20% of beginning net PP&E

WACC Calculation
Asset beta 0.82
Risk-free rate 4.86%
Market Risk Premium 5.00%
Cost of debt 6.00%
Target D/V 35%

Implied debt beta

growing perpetuity
Re-levered equity beta
Cost of equity
WACC
 <=History Pro Forma =>
Operating Forecasts 2010 2011 2012 2013 2014 2015 2016

US Sales 250 255 265

International Sales 225 240 260
Net Sales 475 495 525
Cost of Goods Sold 200 205 230
Depreciation 40 55 46
Marketing Expense 52 53 53
Other SG&A 148 152 152
EBIT 35 30 44

Supplementary Schedules
Net Working Capital
working cash 40 30 21
A/R 175 179 181
Inventory 250 262 271
Other CA 33 34 34
A/P 83 85 86
Net working capital 415 419 422
D NWC

Other assets 24 24 24
D Other assets

Beginning net PP&E 307 277 232

Capital Expenditures 10 10 10
Depreciation 40 55 46
Ending Net PP&E 277 232 195

Free Cash Flow Calculation Pro Forma =>

2013 2014 2015 2016
EBIT
EBIT(1-t) tax rate = 40%
Depreciation
Capital expenditures
D NWC
D Other assets
Free cash flow
Terminal value Perp. g = 3%

Discount factor
PV(FCF + TV)
PV Enterprise
Less EOY 2008 Debt 235
Estimated Equity Value
number of shares (000,000s) 8.0

Value per share $ -

2017 Pro forma assumptions

4.0% annual growth

8.0% annual growth

43.8% of sales
20.0% of beginning net PP&E
10.0% of sales
29.0% of sales

4.0% of sales
126 days sales outstanding
430 days of COGS
6.5% of sales
136 days of COGS

4.7% of sales

given
20% of beginning net PP&E

2017 WACC Calculation

Asset beta 0.82
Risk-free rate 4.86%
Market Risk Premium 5.00%
Cost of debt 6.00%
Target D/V 27%

Implied debt beta

growing perpetuity
Re-levered equity beta
Cost of equity
WACC