© Corporate Finance Institute. All rights reserved.

Historical Results Forecast Period

FINANCIAL STATEMENTS 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Balance Sheet Check OK OK OK OK OK OK OK OK OK OK

Assumptions
LIVE SCENARIO
Revenue Growth (% Change) 0.0% 15.8% 11.2% 8.4% 5.9% 9.0% 9.0% 9.0% 9.0% 9.0%
Cost of Goods Sold (% of Revenue) 38.3% 40.7% 37.4% 37.0% 37.6% 42.0% 47.0% 50.0% 36.0% 35.0%
Salaries and Benefits (% of Revenue) 25.9% 19.2% 18.2% 16.2% 16.7% 17.0% 17.0% 17.0% 17.0% 17.0%
Rent and Overhead ($000's) 10,963 10,125 10,087 11,020 11,412 15,000 15,000 15,000 15,000 15,000
Depreciation & Amortization (% of PP&E) 42.9% 42.9% 42.9% 42.9% 42.9% 35.0% 35.0% 35.0% 35.0% 35.0%
Interest (% of Debt) 5.0% 5.0% 5.0% 5.0% 5.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Tax Rate (% of Earnings Before Tax) 31.2% 29.2% 28.7% 29.0% 29.1% 28.0% 28.0% 28.0% 28.0% 28.0%
Accounts Receivable (Days) 18 18 18 18 18 18 18 18 18 18
Inventory (Days) 73 73 73 73 73 80 90 100 100 100
Accounts Payable (Days) 37 37 37 37 37 37 37 37 37 37
Capital Expenditures ($000's) 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000
Debt Issuance (Repayment) ($000's) - - (20,000) - - - - (20,000) - -
Equity Issued (Repaid) ($000's) 70,000 - - - - - - - - -

Income Statement

Reveneue 102,007 118,086 131,345 142,341 150,772 164,341 179,132 195,254 212,827 231,981
Cost of Goods Sold (COGS) 39,023 48,004 49,123 52,654 56,710 69,023 84,192 97,627 76,618 81,193
Gross Profit 62,984 70,082 82,222 89,687 94,062 95,318 94,940 97,627 136,209 150,788
Expenses
Salaries and Benefits 26,427 22,658 23,872 23,002 25,245 27,938 30,452 33,193 36,181 39,437
Rent and Overhead 10,963 10,125 10,087 11,020 11,412 15,000 15,000 15,000 15,000 15,000
Depreciation & Amortization 19,500 18,150 17,205 16,544 16,080 13,132 13,786 14,211 14,487 14,667
Interest 2,500 2,500 1,500 1,500 1,500 3,000 3,000 1,000 1,000 1,000
Total Expenses 59,390 53,433 52,664 52,066 54,237 59,070 62,239 63,404 66,668 70,103
Earnings Before Tax 3,594 16,649 29,558 37,622 39,825 36,248 32,702 34,223 69,542 80,684

Taxes 1,120 4,858 8,483 10,908 11,598 10,149 9,156 9,582 19,472 22,592
Net Earnings 2,474 11,791 21,075 26,713 28,227 26,098 23,545 24,641 50,070 58,093

Balance Sheet
Assets
Cash 67,971 81,210 83,715 111,069 139,550 160,754 178,262 176,693 229,009 285,034
Accounts Receivable 5,100 5,904 6,567 7,117 7,539 8,105 8,834 9,629 10,496 11,440
Inventory 7,805 9,601 9,825 10,531 11,342 15,128 20,760 26,747 20,991 22,245
Property & Equipment 45,500 42,350 40,145 38,602 37,521 39,389 40,603 41,392 41,905 42,238
Total Assets 126,376 139,065 140,252 167,319 195,951 223,375 248,458 254,461 302,401 360,957

Liabilities
Accounts Payable 3,902 4,800 4,912 5,265 5,671 6,997 8,535 9,896 7,767 8,231
Debt 50,000 50,000 30,000 30,000 30,000 30,000 30,000 10,000 10,000 10,000
Total Liabilities 53,902 54,800 34,912 35,265 35,671 36,997 38,535 19,896 17,767 18,231
Shareholder's Equity
Equity Capital 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000
Retained Earnings 2,474 14,265 35,340 62,053 90,280 116,378 139,924 164,564 214,634 272,727
Shareholder's Equity 72,474 84,265 105,340 132,053 160,280 186,378 209,924 234,564 284,634 342,727
Total Liabilities & Shareholder's Equity 126,376 139,065 140,252 167,319 195,951 223,375 248,458 254,461 302,401 360,957

Check 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

Cash Flow Statement

Operating Cash Flow
Net Earnings 2,474 11,791 21,075 26,713 28,227 26,098 23,545 24,641 50,070 58,093
Plus: Depreciation & Amortization 19,500 18,150 17,205 16,544 16,080 13,132 13,786 14,211 14,487 14,667
Less: Changes in Working Capital 9,003 1,702 775 903 827 3,026 4,823 5,421 (2,760) 1,734
Cash from Operations 12,971 28,239 37,505 42,354 43,480 36,204 32,508 33,431 67,317 71,025

Investing Cash Flow

Investments in Property & Equipment 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000
Cash from Investing 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000

Financing Cash Flow

Issuance (repayment) of debt - - (20,000) - - - - (20,000) - -
Issuance (repayment) of equity 70,000 - - - - - - - - -
Cash from Financing 70,000 - (20,000) - - - - (20,000) - -

Net Increase (decrease) in Cash 67,971 13,239 2,505 27,354 28,480 21,204 17,508 (1,569) 52,317 56,025
Opening Cash Balance - 67,971 81,210 83,715 111,069 139,550 160,754 178,262 176,693 229,009
Closing Cash Balance 67,971 81,210 83,715 111,069 139,550 160,754 178,262 176,693 229,009 285,034

Supporting Schedules
Working Capital Schedule
Accounts Receivable 5,100 5,904 6,567 7,117 7,539 8,105 8,834 9,629 10,496 11,440
Inventory 7,805 9,601 9,825 10,531 11,342 15,128 20,760 26,747 20,991 22,245
Accounts Payable 3,902 4,800 4,912 5,265 5,671 6,997 8,535 9,896 7,767 8,231
Net Working Capital (NWC) 9,003 10,705 11,480 12,382 13,210 16,236 21,059 26,480 23,720 25,454
Change in NWC 9,003 1,702 775 903 827 3,026 4,823 5,421 (2,760) 1,734

Depreciation Schedule
PPE Opening 50,000 45,500 42,350 40,145 38,602 37,521 39,389 40,603 41,392 41,905
Plus Capex 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000
Less Depreciation 19,500 18,150 17,205 16,544 16,080 13,132 13,786.04 14,210.93 14,487.10 14,666.62
PPE Closing 45,500 42,350 40,145 38,602 37,521 39,389 40,603 41,392 41,905 42,238

Debt & Interest Schedule

Debt Opening 50,000 50,000 50,000 30,000 30,000 30,000 30,000 30,000 10,000 10,000
Issuance (repayment) - - (20,000) - - - - (20,000) - -
Debt Closing 50,000 50,000 30,000 30,000 30,000 30,000 30,000 10,000 10,000 10,000
Interest Expense 2,500 2,500 1,500 1,500 1,500 3,000 3,000 1,000 1,000 1,000

DCF Model
Assumptions
Tax Rate 30%
Discount Rate 11%
Perpetual Growth Rate 5%
EV/EBITDA Multiple 7.6x
Transaction Date 6/30/2018
Fiscal Year End 12/31/2018
Current Price 16.00
Shares Outstanding 20,000
Discounted Cash Flow Entry 2018 2019 2020 2021 2022 Exit Terminal Value
Date 6/30/2018 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2022 EV/EBITDA 732,268
Time periods 0 1 2 3 4 Perp. Growth 964,449
Year frac. 0.50 1.00 1.00 1.00 1.00 1.00 Average 848,358

EBIT 39,248 35,702 35,223 70,542 81,684

Less: Cash Taxes 11,774 10,710 10,567 21,162 24,505
NOPAT 27,473 24,991 24,656 49,379 57,179
Plus: D&A 13,132 13,786 14,211 14,487 14,667
EBITDA 52,380 49,488 49,434 85,029 96,351
Less: Capex 15,000 15,000 15,000 15,000 15,000
Less: Changes in NWC 3,026 4,823 5,421 (2,760) 1,734
Unlevered FCFF 22,579 18,954 18,446 51,626 55,111 848,358

Transaction FCFF - 11,290 18,954 18,446 51,626 55,111 848,358

IRR FCFF (210,450) 11,290 18,954 18,446 51,626 55,111 848,358

Intrinsic Value Market Value Rate of Return

Enterprise Value 641,397 Market Cap 320,000 Current Price 16.00
Plus: Cash 139,550 Plus: Debt 30,000 Target Price 37.55
Less: Debt 30,000 Less: Cash 139,550 TP Upside 135%
Equity Value 750,947 Enterprise Value 210,450 IRR 45%

Equity Value/Share 37.55 Equity Value/Share 16.00

Assumptions
Tax Rate 30%
Discount Rate 11%
Perpetual Growth Rate 5%
EV/EBITDA Multiple 8.5x
Current Price 19.50
Shares Outstanding 30,000

Discounted Cash Flow Entry Year 1 Year 2 Year 3 Year 4

Date 6/30/2018 12/31/2018 12/31/2019 12/31/2020 12/31/2021
Time period 0 1 2 3
Year frac. 0.5 1.0 1.0 1.0
EBIT 14,258 15,637 26,390 25,710
EBITDA 31,490 35,426 39,248 52,478
Unlevered FCFF 13,762 14,378 21,856 25,421
Transaction FCFF - 6,881 14,378 21,856 25,421

Intrinsic Enterprise Value 451,512

Year 5 Exit Terminal Value
12/31/2022 12/31/2022 EV/EBITDA 593,555
4 Perp. Growth 611,363
1.0 1.0 Average 602,459
41,903
69,830
34,935
34,935 602,459