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Berkshire Partners: Bidding for Carter's

Harvard Business School Case 9-205-058
Courseware 9-211-709

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1
Forecasted Financial Data and Ratios, adapted from case Exhibit 7a (in thousands of dollars and percent)

Assume 2001E 2002P 2003P 2004P 2005P 2006P

Net Sales 537,300 618,800 711,600 817,300 938,800 985,740

% growth 13.8% 15.2% 15.0% 14.9% 14.9% 5.0%
Management 13.8% 15.2% 15.0% 14.9% 14.9% 5.0%

Gross Profit 221,900 260,900 302,400 348,300 400,400 420,420

margin 41.3% 42.2% 42.5% 42.6% 42.7% 42.7%
Management 41.3% 42.2% 42.5% 42.6% 42.7% 42.7%

SG&A 146,800 172,200 193,300 214,100 238,800 250,740

% of sales 27.3% 27.8% 27.2% 26.2% 25.4% 25.4%
Management 27.3% 27.8% 27.2% 26.2% 25.4% 25.4%

EBITDA 75,100 88,700 109,100 134,200 161,600 169,680

% of sales 14.0% 14.3% 15.3% 16.4% 17.2% 17.2%

Depreciation 20,000 21,100 21,800 24,400 28,100 29,505

EBIT 55,100 67,600 87,300 109,800 133,500 140,175

% of sales 10.3% 10.9% 12.3% 13.4% 14.2% 14.2%

Capex 20,500 19,500 21,000 21,500 22,500 22,500

% of sales 3.8% 3.2% 3.0% 2.6% 2.4% 2.3%
Management 3.8% 3.2% 3.0% 2.6% 2.4% 2.3%

Source: Adapted from Malcolm P. Baker and James Quinn, "Berkshire Partners: Bidding for Carters",
HBS no. 205-058 (Boston: Harvard Business Publishing, 2005, 2008), Exhibit 7a, page 12.
Selected Data on Public Companies Comparable to Carter's (in millions of dollars except where noted)

Stock Price P/E Ratio P/E Ratio

Company Business Description June 13, 2001 2001E 2002E

Nike Designs, develops, and markets athletic and $41.35 19.2x 15.8x
recreational footwear and apparel and sells
a line of athletic performance equipment

Jones Apparel Designs, markets, and wholesales its own $40.90 13.7x 12.0x
branded apparel, footwear, and
acccessories; also licenses and markets
branded costume jewelry, women's
footwear, and apparel

Tommy Hilfiger Designs, sources, and markets men's and $13.65 9.0x 7.9x
women's active/sportswear and jeans,
accessories, footwear, fragrances, and
home furnishings
Liz Claiborne Designs and markets a portfolio of retail- $24.92 12.3x 10.9x
based and department store-based brands
with consumer franchises.

Source: Adapted from Malcolm Baker and James Quinn, "Berkshire Partners: Bidding for Carter's", HBS no. 205-058 (Boston: Ha
ere noted)

Earnings Interest- Market

Growth Rate IPO Date Revenue EBIT EBITDA Bearing Debt Capitalization

15% 1980 9,488.8 1,014.2 1,211.6 1,296.6 7,224.3

17% 1991 4,115.3 645.9 757.3 1,482.1 5,343.6

10% 1992 1,836.7 194.6 302.1 567.0 1,245.7

12% 1981 3,186.7 333.4 417.9 519.6 2,650.2

er's", HBS no. 205-058 (Boston: Harvard Business Press, 2005, 2008), Exhibit 8, p. 14; business descriptions adapted from Thomson ONE Banker, access
 5-Year
Average
Leverage Net Income

8.4% 589.7

17.1% 327.6

18.1% 130.2

4.4% 184.6

from Thomson ONE Banker, accessed January 2011.

Selected Data on Transactions Comparable to Carter's (in millions of dollars over the previous 12 months except where note

Value of Target:
Target Name Target Business Description Acquirer Name Transaction Revenues

Too Inc Manufacturers and retails girls' clothing Financial buyers 581.1 376.9

McNaughton Manufactures and wholesales women's Jones Apparel Group 565.4 521.9
Apparel Group clothing

Unitog Co Manufactures, wholesales, and supplies Cintas Corp 370.8 275.2

uniforms

Donna Karan Manufactures women's and men's clothing LVMH SA 247.2 662.9
International

Koret of CA (Levi Manufactures women's suits Kellwood Co 141.6 295.4

Strauss)

Happy Kids Inc Manufactures and wholesales children's HIG Capital LLC 119.6 170.1
clothing

Source: SDC, accessed January 2011.

months except where noted)

Pretax
EBIT EBITDA Income Net Income Transaction Date

28.5 39.0 28.5 17.1 24-Aug-99

67.6 80.3 43.5 25.7 19-Jun-01

25.3 42.7 20.2 12.5 24-Mar-99

23.3 28.7 20.8 18.4 27-Nov-01

11.2 15.4 5.0 2.3 29-Apr-99

19.9 20.4 18.6 9.1 17-Dec-99