Simple LBO Model

By Alexander D. Jarvis
www.alexanderjarvis.com
www.50folds.com
@adjblog / @50folds
 Perpetual
LBO Analysis

Transaction Overview: Perpetual

Company name Perpetual Circ Breaker 1.00

Sources and Uses: Key Transaction Assumptions:

Uses: LBO / Recapitalization (LBO = 1, Recap. = 0)
Price Per Share 40.0 Preferred Stock (Cash = 1, PIK = 0)
Fully Dilluted Shares Outstanding (MM) 4,299.9 Fiscal Year End (Last Full Year)
Purchase Price of Equity $1,719.9 Refinance Existing Debt (Yes = 1, No = 0)
Repayment Existing Debt 0.0
Total Fees 20.5 Purchase Price Assumptions:
Total Uses of Funds $1,740.4 Total Purchase Price of Equity
Offer Price Per Share
Sources:
Revolver Facility $0.0 Multiples: 2010
Excess Cash 0.0 EBITDA $154.3
New Term Loan 525.0 FV / EBITDA 11.3x
High Yield Debt 0.0
Senior Subordinated Debt 0.0 Goodwill Calculation:
Junior Subordinated Debt 0.0 Purchase Price of Equity
PIK Preferred Stock 0.0 Less: Tangible Book Equity
New Cash Equity 1,215.4 Excess Purchase Price to Allocate
Total Sources of Funds $1,740.4 % of Excess PP Allocated to Intangibles
Write-Up of Identifiable Intangible Assets
Ownership Table: Write-Off of Target's Existing Goodwill
Party: $ Invested: Primary %: Fully Dil. %: Allocation to Goodwill (Before DTL Allocation)
Total Equity Sponsor $1,205.4 99.2% 89.3% DTL From Write-Up of Assets
Management Cash 10.0 0.8% 0.7% Stock or asset (0 or 1)
Management Options -- 10.0% 10.0% Total goodwill created
High Yield Warrants -- 0.0% 0.0% Goodwill Amortization
Preferred Warrants -- 0.0% 0.0%

Key Financing Assumptions: New Equity Sponsor IRR Analysis:

Instrument: Amount: Interest Rate: % of Ttl Cap.: Exit Year
Revolver Facility $0.0 6.0% 0.0% Multiple Err:523 Err:523
New Term Loan 525.0 6.0% 30.2 13.0x 23.2% 19.8%
High Yield Debt 0.0 8.0% 0.0 13.5 24.8% 20.9%

LBO Analysis -2- Confidential

 Perpetual
LBO Analysis

Transaction Overview: Perpetual

Senior Subordinated Debt 0.0 8.0% 0.0 14.0 26.4% 22.0%
Junior Subordinated Debt 0.0 8.0% 0.0 14.5 27.9% 23.0%
New PIK Preferred Stock 0.0 6.0% 0.0
New Cash Equity 1,215.4 -- 69.8

LBO Analysis -3- Confidential

 Perpetual
LBO Analysis

Transaction Overview: Perpetual

Multiple of Multiple of Amount Management IRR Analysis:

Financing Alternatives: -10 EBITDA -11 EBITDA Raised Exit Year
Revolver Facility 0.0x 0.0x $0.0 Multiple Err:523 Err:523
New Term Loan 3.0 2.8 $525.0 13.0x 200.6% 133.7%
High Yield Debt 0.0 0.0 $0.0 13.5 204.5% 135.9%
Senior Subordinated Debt 0.0 0.0 0.0 14.0 208.3% 138.0%
Junior Subordinated Debt 0.0 0.0 0.0 14.5 212.0% 140.1%
Total Debt / EBITDA $525.0
Depreciation and Amortization Assumptions:
Financing Fees: Goodwill Tax Deductible (Yes = 1, No = 0)
Instrument: Amount: Fees: Total Fee: Book Goodwill Amortization Period
Revolver Facility $0.0 1.0% $0.0 Amortise Goodwill
New Term Loan 525.0 2.0% 10.5 Book Financing Costs Amortization Period
High Yield Debt 0.0 2.0% 0.0
Senior Subordinated Debt 0.0 1.5% 0.0 Operating Assumptions:
Junior Subordinated Debt 0.0 1.0% 0.0 Interest Rate on Excess Cash
New PIK Preferred Stock 0.0 1.0% 0.0 Minimum Cash
M&A Fee 10.0 10.0 Annual Pre-Tax SG&A Savings
Total Fees $20.5 Int. Expense Method (-1=Beg., 0=Avg., 1=End Bal.)
Financing feees $10.5 Tax Rate
Advisory fees $10.0 Year of EBITDA Multiple for Debt Raising
Amortization of Underwriting Costs $1.1
Fully Diluted Shares Outstanding (Amounts In M)
Capital Structure: Pre-Deal Post-Deal Market Price
Total Assets $750.5 $2,209.7 Shares Outstanding
Total Debt (Long and Short Term) 45.0 570.0
Total PIK Preferred Stock 0.0 0.0 Treasury Stock Method:
Total Cash 187.5 187.5 Options Outstanding
Excess Cash 0.0% 0.0 0.0 Implied Value
Book Equity $359.4 $1,205.4 Mgmt contribution
Mgmt equity
Fully Diluted Shares Outstanding

LBO Analysis -4- Confidential

 1
0
2010
0

$1,719.9
$40.0

2011
$172.9
10.1x

$1,719.9
359.4
$1,360.5
20.0%
$272.1
(134.9)
1,223.3
(88.2)
0
1,311.5
54.4

Exit Year
Err:523
17.7%
18.5%

LBO Analysis -5- Confidential

 19.3%
20.1%

LBO Analysis -6- Confidential

 Exit Year
Err:523
100.9%
102.3%
103.7%
105.0%

ssumptions:
0
5 Years
Yes
10 Years

5.2%
$0.0
0.0
Avg.
32.4%
2010

(Amounts In M)
$30.97
39.9

3.14
0.97
-
-
42.999

LBO Analysis -7- Confidential

 Perpetual
Financial Summary and Credit Statistics

Financial Summary Projected Fiscal Year Ended December 31,

Err:523 Err:523 Err:523 Err:523 Err:523
Revenue $531.2 $563.1 $596.9 $626.7 $658.1
Gross Profit 478.1 506.8 537.2 564.1 592.3
EBITDA 172.9 188.1 199.4 209.3 219.8
EBIT 111.0 124.2 133.4 141.1 149.4
Net Income 40.0 48.9 55.1 60.4 65.9

Operating Statistics
Revenue Growth 5.0% 6.0% 6.0% 5.0% 5.0%
EBITDA Growth 12.1% 8.8% 6.0% 5.0% 5.0%
EBIT Growth (20.4%) 11.9% 7.4% 5.8% 5.8%
Net Income Growth (56.7%) 22.4% 12.7% 9.5% 9.2%

Gross Margin 90.0% 90.0% 90.0% 90.0% 90.0%

EBITDA Margin 32.6% 33.4% 33.4% 33.4% 33.4%
EBIT Margin 20.9% 22.1% 22.3% 22.5% 22.7%
Net Income Margin 7.5% 8.7% 9.2% 9.6% 10.0%

Credit Statistics
Total Debt $286.3 $178.9 $64.1 $45.0 $45.0
Total Capitalization $1,533.4 $1,474.9 $1,415.2 $1,456.5 $1,522.4
Total Debt / Total Book Cap. 18.7% 12.1% 4.5% 3.1% 3.0%

Total Debt / EBITDA 1.7x 1.0x 0.3x 0.2x 0.2x

EBITDA / Total Interest Expense 6.8 7.4 7.9 8.3 8.7
EBITDA / Net Interest Expense 6.8 7.4 7.9 8.3 8.7
(EBITDA - CapEx) / Total Int. Expense 6.4 7.0 7.4 7.8 8.2

LBO Analysis -8- Confidential

 Perpetual
Income Statement

Income Statement Projected Fiscal Year Ended December 31,

(Dollars in Millions 2010 Err:523 Err:523 Err:523 Err:523 Err:523
Revenue $505.9 $531.2 $563.1 $596.9 $626.7 $658.1
Cost of Goods Sold 50.6 53.1 56.3 59.7 62.7 65.8

Gross Profit $455.3 $478.1 $506.8 $537.2 $564.1 $592.3

SG&A $60.1 $53.1 $50.7 $53.7 $56.4 $59.2

Staff ex equity remuneration 195.4 201.9 214.0 226.8 238.2 250.1
Rent 18.7 19.7 20.9 22.1 23.2 24.4

EBITDA pre-bonus $181.1 $203.4 $221.3 $234.6 $246.3 $258.6

Margin 39.8% 42.6% 43.7% 43.7% 43.7% 43.7%

Equity remuneration $26.8 $30.5 $33.2 $35.2 $36.9 $38.8

EBITDA post-bonus $154.3 $172.9 $188.1 $199.4 $209.3 $219.8
Margin 33.9% 36.2% 37.1% 37.1% 37.1% 37.1%

Depreciation Expense $14.9 $6.5 $8.4 $10.5 $12.7 $15.0

Amortization of Goodwill 0.0 54.4 54.4 54.4 54.4 54.4
Amortization of Financing Costs 0.0 1.1 1.1 1.1 1.1 1.1

EBIT $139.5 $111.0 $124.2 $133.4 $141.1 $149.4

Interest Expense $2.8 $25.3 $25.3 $25.3 $25.3 $25.3

Interest (Income) 0.0 0.0 0.0 0.0 0.0 0.0

EBT $136.7 $85.7 $99.0 $108.1 $115.9 $124.1

Income Taxes $44.3 $45.7 $50.0 $53.0 $55.5 $58.2

Pro-Forma Net Income $92.4 $40.0 $48.9 $55.1 $60.4 $65.9

PIK Preferred Stock $0.0 $0.0 $0.0 $0.0 $0.0 $0.0

Pro-Forma Net Income to Common $92.4 $40.0 $48.9 $55.1 $60.4 $65.9

EPS $2.149 $0.930 $1.138 $1.282 $1.404 $1.533

Fully Diluted Shares Outstanding 43.0 43.0 43.0 43.0 43.0 43.0

Reconciliation to statutory
Profit on disposal of aset ($2.6) 0.0 0.0 0.0 0.0 0.0
Impariment of securities 4.8 0.0 0.0 0.0 0.0 0.0
Share of loss on investees 0.0 0.0 0.0 0.0 0.0 0.0
Total $2.1 $0.0 $0.0 $0.0 $0.0 $0.0

Pro-Forma Net Income to Common $90.3 $40.0 $48.9 $55.1 $60.4 $65.9

EPS $209.918 $92.947 $113.758 $128.172 $140.357 $153.325

LBO Analysis -9- Confidential

 Fully Diluted Shares Outstanding 43.0 43.0 43.0 43.0 43.0 43.0

LBO Analysis - 10 - Confidential

 Margins
Gross Profit Margin 90.0% 90.0% 90.0% 90.0% 90.0% 90.0%
EBITDA Margin 30.5% 32.6% 33.4% 33.4% 33.4% 33.4%
EBIT Margin 27.6% 20.9% 22.1% 22.3% 22.5% 22.7%
Net Income Margin 18.3% 7.5% 8.7% 9.2% 9.6% 10.0%

Operating Assumptions
Revenue Growth -- 5.0% 6.0% 6.0% 5.0% 5.0%
COGS / Revenue 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
SG&A / Revenue 11.9% 10.0% 9.0% 9.0% 9.0% 9.0%
Staff / Revenue 38.6% 38.0% 38.0% 38.0% 38.0% 38.0%
Rent / Revenue 3.7% 3.7% 3.7% 3.7% 3.7% 3.7%
Operating Expense / Revenue 3.7% 51.7% 50.7% 50.7% 50.7% 50.7%
Equity remuneration / EBITDA pre-bonus 14.8% 15.0% 15.0% 15.0% 15.0% 15.0%
Income Tax Rate 32.4% 32.4% 32.4% 32.4% 32.4% 32.4%

LBO Analysis - 11 - Confidential

 Perpetual
LBO - Balance Sheet Adjustments

Balance Sheet Adjustments StandAlone Adjustments Pro Forma

(Dollars in Millions 2010 Financing Accounting 2010
Cash and Short-term Investments $187.5 (a) $0.0 $187.5
Liquid Investments 49.9 49.9
Structured products 188.8 188.8
Other Current Assets 0.0 0.0

Total Current Assets $426.2 $426.2

Net Property, Plant and Equipment $27.8 $27.8

Goodwill and other intangibles 134.9 (b) ($134.9) $1,311.5 (d) 1,311.5
Intangibles (Inc. Software) 28.6 282.6 (e) 311.2
Investment in Unconsolidated Subs. 0.0 0.0
Other Long-term Assets 133.0 133.0

Total Assets $750.5 $2,209.7

Structure products $189.6 $189.6

Other Current Liabilities 154.9 154.9
Deferred Revenue 0.0 0.0

Total Current Liabilities $344.5 $344.5

Revolver Facility $0.0 (c) $0.0 $0.0

Existing Straight Debt 45.0 $0.0 (f) 45.0
New Term Loan 0.0 (c) 525.0 525.0
High Yield Debt 0.0 (c) 0.0 0.0
Senior Subordinated Debt 0.0 (c) 0.0 0.0
Junior Subordinated Debt 0.0 (c) 0.0 0.0

Total Debt $45.0 $570.0

Deferred Taxes $0.0 $88.2 $88.2

Minority Interest 1.7 1.7
Other Long-term Liabilities 0.0 0.0

Total Liabilities $391.2 $1,004.3

PIK Preferred Stock $0.0 (c) $0.0 $0.0

Common Stockholders Equity 359.4 (c) 1,215.4 ($369.4) (g) (h) (i) 1,205.4

Total Liabilities and Shareholders Equity $750.6 $2,209.8

Difference 0.052 Error $0.1

(a) Excess cash used to finance transaction. (e) Financing fees (Ex advisory)

LBO Analysis - 12 - Confidential

 (b) Existing goodwill eliminated for LBO scenario only. (f) Refinancing of existing debt.
(c) Other sources of financing (I.e. new cash equity) (g) Elimination of existing book equity.
(d) New goodwill created by LBO purchase (No Recap. Goodwill) (h) Equity adjustment due to elimination of existing goodwill.
(i) Immediately book M&A fees

LBO Analysis - 13 - Confidential

 Perpetual
Balance Sheet

Balance Sheet Pro Forma Projected Fiscal Year Ended December 31,
(Dollars in Millions 2010 Err:523 Err:523 Err:523 Err:523 Err:523
Cash and Short-term Investments $187.5 $0.0 $0.0 $0.0 $102.4 $232.0
Accounts Receivable 49.9 52.4 55.5 58.9 61.8 64.9
Inventory 188.8 198.2 210.1 222.7 233.8 245.5
Other Current Assets 0.0 0.0 0.0 0.0 0.0 0.0

Total Current Assets $426.2 $250.6 $265.6 $281.6 $398.0 $542.4

Net Property, Plant and Equipment $27.8 $32.3 $36.0 $38.8 $39.4 $37.7
Goodwill 1,311.5 1,257.1 1,202.7 1,148.2 1,093.8 1,039.4
Other Intangible Assets 311.2 310.2 309.1 308.1 307.0 306.0
Investment in Unconsolidated Subs. 0.0 0.0 0.0 0.0 0.0 0.0
Other Long-term Assets 133.0 133.0 133.0 133.0 133.0 133.0

Total Assets $2,209.7 $1,983.1 $1,946.4 $1,909.7 $1,971.3 $2,058.5

Accounts Payable $189.6 $199.0 $211.0 $223.6 $234.8 $246.5

Other Current Liabilities 154.9 162.6 172.4 182.7 191.9 201.5
Deferred Revenue 0.0 0.0 0.0 0.0 0.0 0.0

Total Current Liabilities $344.5 $361.7 $383.4 $406.4 $426.7 $448.0

Revolver Facility $0.0 $0.0 $0.0 $0.0 $0.0 $0.0

Existing Straight Debt 45.0 45.0 45.0 45.0 45.0 45.0
New Term Loan 525.0 241.3 133.9 19.1 0.0 0.0
High Yield Debt 0.0 0.0 0.0 0.0 0.0 0.0
Senior Subordinated Debt 0.0 0.0 0.0 0.0 0.0 0.0
Junior Subordinated Debt 0.0 0.0 0.0 0.0 0.0 0.0

Total Debt $570.0 $286.3 $178.9 $64.1 $45.0 $45.0

Deferred Taxes $88.2 $88.2 $88.2 $88.2 $88.2 $88.2

Minority Interest 1.7 1.7 1.7 1.7 1.7 1.7
Other Long-term Liabilities 0.0 0.0 0.0 0.0 0.0 0.0

Total Liabilities $1,004.3 $737.8 $652.1 $560.3 $561.5 $582.8

PIK Preferred Stock $0.0 $0.0 $0.0 $0.0 $0.0 $0.0

Common Stockholders Equity 1,205.4 1,245.4 1,294.3 1,349.4 1,409.8 1,475.7

Total Liabilities and Shareholders Equity $2,209.8 $1,983.2 $1,946.5 $1,909.7 $1,971.3 $2,058.6

Difference 0.052 0.052 0.052 0.052 0.052 0.052

LBO Analysis - 14 - Confidential

 Perpetual
Cash Flow and Debt Schedules

Cash Flow Statement Projected Fiscal Year Ended December 31,

(Dollars in Millions Err:523 Err:523 Err:523 Err:523 Err:523
Net Income to Common $40.0 $48.9 $55.1 $60.4 $65.9

Depreciation and Amortization 61.9 63.9 66.0 68.2 70.4

Preferred Dividends (non-cash) 0.0 0.0 0.0 0.0 0.0
Increase in Deferred Taxes 0.0 0.0 0.0 0.0 0.0
Changes in Working Capital 5.3 6.7 7.1 6.2 6.6
Capital Expenditures (11.0) (12.1) (13.3) (13.3) (13.3)

Free Cash Flow $96.2 $107.4 $114.9 $121.5 $129.6

Equity Issuance 0.0 0.0 0.0 0.0 0.0

Straight Debt Issuance / (Repayment) 0.0 0.0 0.0 0.0 0.0

Total Operating Cash Flow $96.2 $107.4 $114.9 $121.5 $129.6

Revolver Facility Borrowing / (Payment) 0.0 0.0 0.0 0.0 0.0

New Term Loan (Payment) (283.7) (107.4) (114.9) (19.1) 0.0
High Yield Debt (Payment) 0.0 0.0 0.0 0.0 0.0
Senior Subordinated Debt (Payment) 0.0 0.0 0.0 0.0 0.0
Junior Subordinated Debt (Payment) 0.0 0.0 0.0 0.0 0.0

Total Debt Borrowing / (Payment) ($283.7) ($107.4) ($114.9) ($19.1) $0.0

Beginning Cash $187.5 $0.0 $0.0 $0.0 $102.4

Change in Cash (187.5) 0.0 0.0 102.4 129.6

Total Ending Cash $0.0 $0.0 $0.0 $102.4 $232.0

Free Cash Flow Projected Fiscal Year Ended December 31,

(Dollars in Millions Err:523 Err:523 Err:523 Err:523 Err:523
Beginning Cash $187.5 $0.0 $0.0 $0.0 $102.4
Minimum Cash Balance 0.0 0.0 0.0 0.0 0.0

Excess Cash Available $187.5 $0.0 $0.0 $0.0 $102.4

Free Cash Flow Available / (Required) $283.7 $107.4 $114.9 $121.5 $232.0

Interest Expense Schedule

(Dollars in Millions
Existing Straight Debt 5.1% $2.3 $2.3 $2.3 $2.3 $2.3
LBO Analysis - 15 - Confidential
 Perpetual
Cash Flow and Debt Schedules

Revolver Facility 6.0% 0.0 0.0 0.0 0.0 0.0

New Term Loan 6.0% 23.0 11.3 4.6 0.6 0.0
High Yield Debt 8.0% 0.0 0.0 0.0 0.0 0.0
Senior Subordinated Debt 8.0% 0.0 0.0 0.0 0.0 0.0
Junior Subordinated Debt 8.0% 0.0 0.0 0.0 0.0 0.0

Total Interest Expense $25.3 $13.5 $6.9 $2.9 $2.3

Total Debt Schedule

(Dollars in Millions
Existing Straight Debt $45.0 $45.0 $45.0 $45.0 $45.0
Revolver Facility 0.0 0.0 0.0 0.0 0.0
New Term Loan 241.3 133.9 19.1 0.0 0.0
High Yield Debt 0.0 0.0 0.0 0.0 0.0
Senior Subordinated Debt 0.0 0.0 0.0 0.0 0.0
Junior Subordinated Debt 0.0 0.0 0.0 0.0 0.0

Total Debt $286.3 $178.9 $64.1 $45.0 $45.0

Existing Straight Debt

(Dollars in Millions
Beginning Balance $45.0 $45.0 $45.0 $45.0 $45.0
Borrowings 0.0 0.0 0.0 0.0 0.0
Payments 0.0 0.0 0.0 0.0 0.0

Ending Balance $45.0 $45.0 $45.0 $45.0 $45.0

Revolver Facility Projected Fiscal Year Ended December 31,

(Dollars in Millions Err:523 Err:523 Err:523 Err:523 Err:523
Beginning Balance $0.0 $0.0 $0.0 $0.0 $0.0
Borrowings 0.0 0.0 0.0 0.0 0.0
Payments 0.0 0.0 0.0 0.0 0.0

Ending Balance $0.0 $0.0 $0.0 $0.0 $0.0

New Term Loan

(Dollars in Millions
Beginning Balance $525.0 $241.3 $133.9 $19.1 $0.0
Payments 283.7 107.4 114.9 19.1 0.0

LBO Analysis - 16 - Confidential

 Perpetual
Cash Flow and Debt Schedules

Ending Balance $241.3 $133.9 $19.1 $0.0 $0.0

High Yield Debt

(Dollars in Millions
Beginning Balance $0.0 $0.0 $0.0 $0.0 $0.0
Payments 0.0 0.0 0.0 0.0 0.0

Ending Balance $0.0 $0.0 $0.0 $0.0 $0.0

Senior Subordinated Debt

(Dollars in Millions
Beginning Balance $0.0 $0.0 $0.0 $0.0 $0.0
Payments 0.0 0.0 0.0 0.0 0.0

Ending Balance $0.0 $0.0 $0.0 $0.0 $0.0

Junior Subordinated Debt

(Dollars in Millions
Beginning Balance $0.0 $0.0 $0.0 $0.0 $0.0
Payments 0.0 0.0 0.0 0.0 0.0

Ending Balance $0.0 $0.0 $0.0 $0.0 $0.0

LBO Analysis - 17 - Confidential

 Perpetual
PP&E, Depreciation and Amortization Tables

PP&E Summary: Projected Fiscal Year Ended December 31,

(Dollars in Millions Err:523 Err:523 Err:523 Err:523 Err:523
Beginning PP&E $27.8 $32.3 $36.0 $38.8 $39.4
Depreciation (6.5) (8.4) (10.5) (12.7) (15.0)
Capital Expenditures 11.0 12.1 13.3 13.3 13.3

Ending PP&E $32.3 $36.0 $38.8 $39.4 $37.7

Capital Expenditures
(Dollars in Millions
Capital Expenditures $10.0 $11.0 $12.1 $13.3 $13.3 $13.3
% of Revenue 2.0% 2.1% 2.1% 2.2% 2.1% 2.0%

Additional CapEx 10.0%

PP&E Book Depreciation

(Dollars in Millions
Existing PP&E Life 5.0 New CapEx Life 6.0
Half-Year Convention (Yes = 1, No = 0) 1

Beginning PP&E $27.8 $5.6 $5.6 $5.6 $5.6 $5.6

Err:523 $11.0 $0.9 $1.8 $1.8 $1.8 $1.8
Err:523 12.1 1.0 2.0 2.0 2.0
Err:523 13.3 1.1 2.2 2.2
Err:523 13.3 1.1 2.2
Err:523 13.3 1.1

Total Book Depreciation $6.5 $8.4 $10.5 $12.7 $15.0

LBO Analysis - 18 - Confidential

 Perpetual
PP&E, Depreciation and Amortization Tables

Goodwill Amortization Projected Fiscal Year Ended December 31,

(Dollars in Millions Err:523 Err:523 Err:523 Err:523 Err:523
Beginning Goodwill $272.1 $217.7 $163.3 $108.8 $54.4
Amortization ($54.4) ($54.4) ($54.4) ($54.4) ($54.4)

Ending Goodwill $217.7 $163.3 $108.8 $54.4 $0.0

Goodwill Life 5.0

Goodwill Amortization $272.1 $54.4 $54.4 $54.4 $54.4 $54.4

LBO Analysis - 19 - Confidential

 Perpetual
Equity Return Analysis

Firm Value Matrix Multiple of EBITDA

(Dollars in Millions 13.0x 13.5x 14.0x 14.5x
Err:523 $199.4 $2,591.9 $2,691.6 $2,791.3 $2,891.0
Err:523 209.3 2,721.5 2,826.2 2,930.9 3,035.6
Err:523 219.8 2,857.6 2,967.5 3,077.4 3,187.3

Equity Value Matrix

(Dollars in Millions
Err:523 $64.1 $2,527.9 $2,627.5 $2,727.2 $2,826.9
Err:523 (57.4) 2,778.9 2,883.6 2,988.3 3,093.0
Err:523 (187.0) 3,044.6 3,154.5 3,264.4 3,374.4

(a) Total Net Debt equals total debt and preferred stock less excess cash.

Fully Diluted Ownership Structure

(Dollars in Millions
Total Equity Sponsor 89.3%
Management 10.7%

Equity Sponsor Return

Exit Investment @ 13.0x Projected Fiscal Year Ended December 31,

(Dollars in Millions 2010 Err:523 Err:523 Err:523 Err:523 Err:523
23% ($1,205.4) $2,256.4
20% (1,205.4) $2,480.5
18% (1,205.4) $2,717.6

Exit Investment @ 13.5x

(Dollars in Millions
25% ($1,205.4) $2,345.3
21% (1,205.4) $2,573.9
18% (1,205.4) $2,815.7

Exit Investment @ 14.0x

(Dollars in Millions
26% ($1,205.4) $2,434.3
LBO Analysis - 20 - Confidential
 Perpetual
Equity Return Analysis
22% (1,205.4) $2,667.3
19% (1,205.4) $2,913.8

Exit Investment @ 14.5x

(Dollars in Millions
28% ($1,205.4) $2,523.3
23% (1,205.4) $2,760.8
20% (1,205.4) $3,011.9

LBO Analysis - 21 - Confidential

 Perpetual
Equity Return Analysis

Management Return

Exit Investment @ 13.0x Projected Fiscal Year Ended December 31,

(Dollars in Millions 2010 Err:523 Err:523 Err:523 Err:523 Err:523
201% ($10.0) $271.5
134% (10.0) $298.5
101% (10.0) $327.0

Exit Investment @ 13.5x

(Dollars in Millions
204% ($10.0) $282.2
136% (10.0) $309.7
102% (10.0) $338.8

Exit Investment @ 14.0x

(Dollars in Millions
208% ($10.0) $292.9
138% (10.0) $321.0
104% (10.0) $350.6

Exit Investment @ 14.5x

(Dollars in Millions
212% ($10.0) $303.6
140% (10.0) $332.2
105% (10.0) $362.4

LBO Analysis - 22 - Confidential

 Perpetual
Discounted Cash Flow Analysis

Free Cash Flow Summary Projected Fiscal Year Ended December 31,
(Dollars in Millions) Err:523 Err:523 Err:523 Err:523 Err:523
Earnings Before Interest and Taxes (EBIT) $111.0 $124.2 $133.4 $141.1 $149.4

Income Tax on EBIT 36.0 40.2 43.2 45.7 48.4

% of EBIT 32.4% 32.4% 32.4% 32.4% 32.4%

After-tax EBIT $75.0 $84.0 $90.2 $95.4 $101.0

Add: Non-Cash Items

Depreciation $6.5 $8.4 $10.5 $12.7 $15.0
Amortization 55.5 55.5 55.5 55.5 55.5
Increase in Deferred Taxes 0.0 0.0 0.0 0.0 0.0
Other Operating Cash Flows 0.0 0.0 0.0 0.0 0.0

Funds Provided $61.9 $63.9 $66.0 $68.2 $70.4

Less:
Changes in Working Capital $5.3 $6.7 $7.1 $6.2 $6.6
Capital Expenditures (11.0) (12.1) (13.3) (13.3) (13.3)

Unlevered Free Cash Flow $131.3 $142.4 $149.9 $156.6 $164.7

Err:523
12.0x 12.5x 13.0x 13.5x 14.0x

Implied Terminal Value

$2,637.8 $2,747.7 $2,857.6 $2,967.5 $3,077.4

PV of Free Cash Flow from Operations $530.4 $530.4 $530.4 $530.4 $530.4
Plus: PV of Terminal Multiple 1,496.8 1,559.1 1,621.5 1,683.8 1,746.2

WACC: 12.0% Firm Value $2,027.1 $2,089.5 $2,151.8 $2,214.2 $2,276.6

TV % of Firm Value 73.8% 74.6% 75.4% 76.0% 76.7%

WACC Firm Value as of 31, December 2010 WACC Equity Value as of 31, December 2010
11.0% $2,109.7 $2,174.9 $2,240.1 $2,305.4 $2,370.6 11.0% $2,296.7 $2,361.9 $2,427.2 $2,492.4 $2,557.6
11.5% 2,067.9 2,131.6 2,195.4 2,259.2 2,323.0 11.5% 2,254.9 2,318.7 2,382.4 2,446.2 2,510.0
12.0% 2,027.1 2,089.5 2,151.8 2,214.2 2,276.6 12.0% 2,214.1 2,276.5 2,338.9 2,401.2 2,463.6
12.5% 1,987.4 2,048.4 2,109.4 2,170.4 2,231.3 12.5% 2,174.4 2,235.4 2,296.4 2,357.4 2,418.4
13.0% 1,948.7 2,008.3 2,068.0 2,127.6 2,187.3 13.0% 2,135.7 2,195.3 2,255.0 2,314.6 2,374.3