Professional Documents
Culture Documents
Blaine Kitchenware Calculation
Blaine Kitchenware Calculation
TN Exhbit 1
Effects of the Proposed Repurchase on Blaine's 2006 Balance Sheet ($ in Thousands)
Debt 0 Debt
Equity 488,363 Equity
Total 488,363 Total
Note: The post-transaction equity figure should be (488,363 - (18.50*14,000)), which is a reduction equal to $259MM
Exhibit 3 Selected Operating and Financial Data for Public Kitchenware Producers
TN Exhibit 2: Effect of Repurchase on Blaine's 2006 Income Statement ($ in ThousanTN Exhibit 3: Comparison of 2006 Distributable Funds with and without the Repurchase ($
Restate 2006 I/S to give effect to the repo 2006 2006
2006 BLAINE's ACCOUNT w/o Repo with Repo Tax Bill
Post-Repo Int. Rate 6.75% EBITDA 73,860 73,860
EBIT 63,946 less depreciation (9,914) (9,914)
Plus: Other Income 0 EBIT 63,946 63,946
Less: Interest expense 3,375 EBIT/Int 18.9 Plus: Other Income 13,506 0
Earnings Before Tax 60,571 Coverage Less: Interest expense 0 (3,375)
Less: Taxes 18,629 Earnings Before Tax 77,451 60,571
Net Income 41,942 Less: Taxes 30.8% (23,821) (18,626) (5,196)
Post-Repo Pre-Repo Net Income 53,630 41,945
Net Income 41,942 53,630
Shares 45,052 59,052 SHAREHOLDERS' ACCOUNT
EPS $ 0.93 $ 0.91 Dividends @ 100% payout 53,630 41,945
Book Equity 229,363 488,363 Earnings on excess cash 0 13,506
ROE 18.3% 11.0% Pre-tax income 53,630 55,451
2006 taxes 18,626 23,821 taxes delta (5,196) Taxes @ 36% 36% (19,307) (19,962) 655
Net 34,323 35,489
Value Creation
LENDERS ACCOUNT
Tax Shield ('thousands) Interest earned 0 3,375
Change in debt 259,000 $ 14.98 Taxes 0 (1,038) 1,038
Tax Rate 30.75% Net 0 2,337
Value created 79,643
Shares 59,052 DISTRIBUTABLE FUNDS Difference
Tax shield gain/sh $ 1.35 Shareholders after tax 34,323 35,489 1,165
Share price before repo $ 16.25 Lenders after tax 0 2,337 2,337
Share price + gain $ 17.60 3,502
Purchase price $ 18.50 Total taxes (43,128) (39,626) 3,502
Premium paid 12,618 Thousand Note: for simplicity, shareholders' personal tax rate is assumed to be 36%; lenders' tax rate is assumed
Final share price $ 16.70 752,250 to equal Blaine's 30.8%
Debt ###
Shares ### Tax rate 40%
EV 0.79205143
675
Part of Tn Exhibit 5: Computing Minimum WACC for Blaine over a Range of Capital Structures
Cost Cost
Debt / Debt / Unlevered Levered of of Assumptions
Debt Cap. Equity Beta Beta Equity Debt WACC Marginal Tax Rate 30.80%
Existing 1 (230,866) -31.7% -24.1% 0.74 0.56 7.82% 5.02% 9.20% Risk-Free Rate 5.02%
Proposal 50,000 674,788 6.899% 7.4% 0.74 0.78 8.87% 6.75% 8.54% Market Risk Premium 5.00%
AAA 84,041 11.4% 12.8% 0.74 0.80 9.03% 5.67% 8.45% Debt Beta 0.00
AA- 14.2% 16.6% 0.74 0.82 9.13% 5.82% 8.40%
A 20.8% 26.2% 0.74 0.87 9.38% 5.87% 8.27% Cash to employ 209,000
BBB+ 22.3% 28.8% 0.74 0.88 9.44% 6.85% 8.39%
BB 28.3% 39.5% 0.74 0.94 9.72% 8.00% 8.53%
B+ 30.9% 44.6% 0.74 0.97 9.85% 9.12% 8.76%
Part of TN Exhibit 5
Blaine Debt Waterfall:
10-year Treasury 5.02% Debt Relationships: Proposal AAA AA- A BBB+ BB B+
Interest FY 2006 EBIT 73,860 73,860 73,860 73,860 73,860 73,860 73,860
Coverage Debt Default Interest Expense 3,375 4,765 6,423 9,232 12,310 16,413 19,696
Ratio Rating Spread Coverage Ratio 21.9x 15.5x 11.5x 8.0x 6.0x 4.5x 3.8x
>13.0 AAA 0.65%
9.5 - 12.0 AA- 0.80%
7.0 - 9.5 A 0.85% Estimated Cost of Debt 6.75% 5.67% 5.82% 5.87% 6.85% 8.00% 9.12%
5.0 - 7.00 BBB+ 1.83%
4.0 - 5.0 BB 2.98% Implied Debt 50,000 84,041 110,354 157,282 179,707 205,166 215,964
2.50 - 4.0 B+ 4.10%
Harvard Business Publishing
ess Publishing
st of Capital
ess Publishing
INC
holders' Equity:
26,106 28,589 31,936
22,605 24,921 27,761
14,225 17,196 16,884
62,935 70,705 76,581
1,794 3,151 4,814
15,111 18,434 22,495
79,840 92,290 103,890
417,377 458,538 488,363
& Shareholders' Equity 497,217 550,829 592,253
in BKI's historical balance sheets, e.g. Property, Plant & Equipment Note: Many items in BKI's historical balance sheets, e.g. Property, Plant & Equipment
by the firm's acquisitions. have been affected by the firm's acquisitions.