INCOME STATEMENT

(in $ millions, except per share amounts)

Actual Forecast
2022 2023 2024 2025 2026 2027
Sales 3,400.0 3,600.0 3,933.4 4,194.7 4,343.0 4,496.5
Cost of sales 1,200.0 1,300.0 1,416.0 1,510.1 1,563.5 1,618.7
Gross profit 2,200.0 2,300.0 2,517.4 2,684.6 2,779.5 2,877.7
Selling, general, and administrative 800.0 835.0 904.7 964.8 998.9 1,034.2
Depreciation and amortization 76.0 84.0 94.7 109.1 121.2 132.0
Operating income 1,324.0 1,381.0 1,518.0 1,610.7 1,659.4 1,711.6
Interest expense 26.5 26.5 26.5 26.5 26.5 26.5
Income before income taxes 1,297.5 1,354.5 1,491.5 1,584.2 1,632.9 1,685.1
Income tax expense 272.5 284.4 313.2 332.7 342.9 353.9
Net income 1,025.0 1,070.1 1,178.3 1,251.5 1,290.0 1,331.2

HISTORICAL PERFORMANCE AND ASSUMPTIONS

Transaction growth 5.0% 4.0% 3.0% 2.0% 1.0% 1.0%
Ticket size growth 3.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Comp store sales growth 8.2% 6.1% 5.1% 4.0% 3.0% 3.0%
Growth in locations 15.0% 10.0% 8.0% 5.0% 1.0% 1.0%
New location productivity 50.0% 50.0% 50.0% 50.0% 50.0% 50.0%
Sales growth 16.3% 11.4% 9.3% 6.6% 3.5% 3.5%
Gross margin 64.7% 63.9% 64.0% 64.0% 64.0% 64.0%
Selling, general, and administrative (%) 23.5% 23.2% 23.0% 23.0% 23.0% 23.0%
Depreciation on income statement (%) 80.0% 80.0% 80.0% 80.0% 80.0% 80.0%
Cost of debt 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Effective tax rate 21% 21% 21% 21% 21% 21%
Stock compensation (% of SG&A) 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
2028
4,655.4
1,676.0
2,979.5
1,070.8
143.6
1,765.2
26.5
1,738.7
365.1
1,373.6

1.0% Change in number of customers per store to slowly decline to steady state.
2.0% Change in average ticket size per customer to change at approximate rate of inflation.
3.0% Net compound effect of above two drivers.
1.0% Slowing to steady state growth
50.0% Assume new locations arrive half way through the year on average.
3.5% Continued deceleration to steady state growth rate of 3.5%.
64.0% Approximately flat
23.0% Continued slight scale efficiencies
80.0% Approximately flat
5.0% Constant cost of debt
21% Asssumed continued ETR at corporate statutory rate
5.0% Approximately flat
BALANCE SHEET
(in $ millions, except per share amounts)
Actual Forecast
2022 2023 2024 2025 2026 2027
Cash 989.0 1,115.8 393.3 209.7 130.3 134.9
Accounts receivable 400.0 420.0 452.6 482.7 499.7 517.4
Inventory 350.0 360.0 388.0 413.7 428.3 443.5
Other current assets 50.0 40.0 39.3 41.9 43.4 45.0
Current assets 1,789.0 1,935.8 1,273.3 1,148.1 1,101.8 1,140.8
Property, plant, and equipment, net 1,200.0 1,300.0 1,456.8 1,553.6 1,608.5 1,665.4
Operating lease ROU 400.0 400.0 400.0 400.0 400.0 400.0
Goodwill 200.0 200.0 200.0 200.0 200.0 200.0
Intangibles 50.0 45.0 40.0 35.0 30.0 25.0
Other long-term assets 40.0 45.0 51.1 54.5 56.5 58.5
Total assets 3,679.0 3,925.8 3,421.2 3,391.2 3,396.8 3,489.6

Accounts payble 300.0 320.0 349.2 372.3 385.5 399.1

Deferred revenues 200.0 220.0 236.0 251.7 260.6 269.8
Operating lease liabilities, current 50.0 50.0 50.0 50.0 50.0 50.0
Short-term debt 30.0 30.0 30.0 30.0 30.0 30.0
Current portion of long-term debt 100.0 100.0 100.0 100.0 100.0 100.0
Other current liabilities 20.0 15.0 19.7 21.0 21.7 22.5
Current liabilities 700.0 735.0 784.8 825.0 847.8 871.4
Long-term debt 400.0 400.0 400.0 400.0 400.0 400.0
Operating lease liabilities, long-term 350.0 350.0 350.0 350.0 350.0 350.0
Total liabilities 1,450.0 1,485.0 1,534.8 1,575.0 1,597.8 1,621.4
Shareholders' equity 2,229.0 2,440.8 1,886.4 1,816.2 1,799.0 1,868.2
Total liabilities and shareholders' equity 3,679.0 3,925.8 3,421.2 3,391.2 3,396.8 3,489.6

Balance sheet check - - - - - -

HISTORICAL PERFORMANCE AND ASSUMPTIONS

Cash (% of revenue) 29.1% 31.0% 10.0% 5.0% 3.0% 3.0%
DSO 42.94 42.58 42.00 42.00 42.00 42.00
DIO 106.46 101.08 100.00 100.00 100.00 100.00
Other current assets (% of revenue) 1.5% 1.1% 1.0% 1.0% 1.0% 1.0%
PPE Turnover 2.83 2.77 2.70 2.70 2.70 2.70
Average useful life 15.00 15.00 15.00 15.00 15.00 15.00
Other long-term assets (% of revenue) 1.2% 1.3% 1.3% 1.3% 1.3% 1.3%

DPO 91.25 89.85 90.00 90.00 90.00 90.00

Deferred revenues (% of revenue) 5.9% 6.1% 6.0% 6.0% 6.0% 6.0%
Other current liabilities (% of revenue) 0.6% 0.4% 0.5% 0.5% 0.5% 0.5%
2028
139.7 See assumptions
535.7 See assumptions
459.2 See assumptions
46.6 See assumptions
1,181.1
1,724.2 See assumptions
400.0 Stays constant $
200.0 Stays constant $
20.0 Reduces by amortization $
60.5 See assumptions
3,585.8

413.2 See assumptions

279.3 See assumptions
50.0 Stays constant $
30.0 Stays constant $
100.0 Stays constant $
23.3 See assumptions
895.9
400.0 Stays constant $
350.0 Stays constant $
1,645.9
1,940.0 Plug
3,585.8

3.0% Slowly reduce to lower cash levels

42.00 Assumed continued slight improvement
100.00 Assumed continued slight improvement
1.0% Assumed continued slight improvement
2.70 Assumed continued slight improvement
15.00 Assumed approximately constant
1.3% Assumed approximately constant

90.00 Assumed approximately constant

6.0% Assumed approximately constant
0.5% Assumed approximately constant
STATEMENT OF CASH FLOWS
(in $ millions, except per share amounts)
Actual Forecast
2022 2023 2024 2025 2026
Operating section
Net income 1,025.0 1,070.1 1,178.3 1,251.5 1,290.0

Noncash items
Depreciation 90.0 100.0 113.3 131.3 146.6
Amortization 5.0 5.0 5.0 5.0 5.0
Stock-based compensation 40.0 41.8 45.2 48.2 49.9

Changes in working capital assets and liabilties

Accounts receivable (10.0) (20.0) (32.6) (30.1) (17.1)
Inventory 5.0 (10.0) (28.0) (25.8) (14.6)
Accounts payable (5.0) 20.0 29.2 23.2 13.2
Deferred revenues 12.0 20.0 16.0 15.7 8.9
Other, net 2.0 5.0 5.3 (1.3) (0.7)
Changes in cash from operating activities 1,164.0 1,231.8 1,331.8 1,417.9 1,481.1

Investing section
Capital expenditures (175.0) (200.0) (270.2) (228.1) (201.5)
Investments in other long-term assets - (5.0) (6.1) (3.4) (1.9)
Acquisitions (400.0) - - - -
Changes in cash from investing activities (575.0) (205.0) (276.3) (231.5) (203.4)

Financing section
Debt transactions, net 300.0 - - - -
Equity transactions, net (300.0) (900.0) (1,778.0) (1,370.0) (1,357.1)
Changes in cash from financing activities - (900.0) (1,778.0) (1,370.0) (1,357.1)

Total changes in cash 589.0 126.8 (722.5) (183.6) (79.4)

Cash balance, beginning 400.0 989.0 1,115.8 393.3 209.7
Cash balance, ending 989.0 1,115.8 393.3 209.7 130.3

Cash check - - - (0.0) -

Forecast
2027 2028

1,331.2 1,373.6

160.0 174.4
5.0 5.0
51.7 53.5

(17.7) (18.3)
(15.1) (15.7)
13.6 14.1
9.2 9.5
(0.8) (0.8)
1,537.2 1,595.4

(216.8) (233.3)
(2.0) (2.1)
- -
(218.8) (235.4)

- -
(1,313.7) (1,355.3) Plug
(1,313.7) (1,355.3)

4.6 4.8
130.3 134.9
134.9 139.7

0.0 0.0
SCHEDULE OF FIXED AND INTANGIBLE ASSETS
(in $ millions, except per share amounts)
Actual Forecast
2022 2023 2024 2025 2026 2027 2028
PPE, gross 1,500.0 1,700.0 1,970.2 2,198.3 2,399.7 2,616.6 2,849.9
A/D 300.0 400.0 513.3 644.7 791.2 951.2 1,125.6
PPE, net 1,200.0 1,300.0 1,456.8 1,553.6 1,608.5 1,665.4 1,724.2

Depreciation 90.0 100.0 113.3 131.3 146.6 160.0 174.4

Intangibles, gross 60.0 60.0 60.0 60.0 60.0 60.0 60.0

Accumulated amortization 10.0 15.0 20.0 25.0 30.0 35.0 40.0
Intangibles, net 50.0 45.0 40.0 35.0 30.0 25.0 20.0

Amortization 5.0 5.0 5.0 5.0 5.0 5.0 5.0

Assumed constant $ amoratization based on last year of actual amortization.
NOPAT AND NOA CALCULATIONS
(in $ millions, except per share amounts)
Actual Forecast
2022 2023 2024 2025 2026 2027 2028
Calculate NOA
Operating assets 2,690.0 2,810.0 3,027.9 3,181.5 3,266.5 3,354.7 3,446.2
Operating liabilities 920.0 955.0 1,004.8 1,045.0 1,067.8 1,091.4 1,115.9
Net operating assets (NOA) 1,770.0 1,855.0 2,023.0 2,136.5 2,198.7 2,263.3 2,330.3

Calculate NOPAT
Operating revenues 3,400.0 3,600.0 3,933.4 4,194.7 4,343.0 4,496.5 4,655.4
Cost of goods sold 1,200.0 1,300.0 1,416.0 1,510.1 1,563.5 1,618.7 1,676.0
Gross margin 2,200.0 2,300.0 2,517.4 2,684.6 2,779.5 2,877.7 2,979.5
Operating expenses 876.0 919.0 999.4 1,073.8 1,120.1 1,166.2 1,214.3
EBIT 1,324.0 1,381.0 1,518.0 1,610.7 1,659.4 1,711.6 1,765.2
Tax on EBIT 278.0 290.0 318.8 338.3 348.5 359.4 370.7
NOPAT 1,046.0 1,091.0 1,199.3 1,272.5 1,310.9 1,352.1 1,394.5

Investment (change in NOA) 76.0 85.0 168.0 113.4 62.2 64.6 67.1
ROIC 60.2% 61.8% 61.2% 60.5% 60.6% 60.7%
Investment rate (∆NOA/NOPAT) 7.3% 7.8% 14.0% 8.9% 4.7% 4.8% 4.8%
g(Sales) 5.9% 9.3% 6.6% 3.5% 3.5% 3.5%
g(NOPAT) 4.3% 9.9% 6.1% 3.0% 3.1% 3.1%
g(Investment) 11.8% 97.7% -32.5% -45.1% 3.8% 3.8%
g(NOA) 4.8% 9.1% 5.6% 2.9% 2.9% 3.0%
CAPEX 175.0 200.0 270.2 228.1 201.5 216.8 233.3
Depreciation 90.0 100.0 113.3 131.3 146.6 160.0 174.4
DISCOUNTED CASH FLOW VALUATION
(in $ millions, except per share amounts)

Actual
Method I 2022 2023 2024
NOPAT 1,046.0 1,091.0 1,199.3

Add back non-cash operating expenses

Depreciation and amortization 95.0 105.0 118.3

Gross cash flow 1,141.0 1,196.0 1,317.6

Less net investments in working capital 4.0 15.0 (10.1)

Less net investment in fixed assets and other noncurrent assets

(-) Capital expenditures for PPE (175.0) (200.0) (270.2)
(-) Other net changes in long-term operating assets and liabilities - (5.0) (6.1)

Free cash flow 970.0 1,006.0 1,031.2

Method II
NOPAT 1,046.0 1,091.0 1,199.3
(-) Net change in NOA (76.0) (85.0) (168.0)

Free cash flow 970.0 1,006.0 1,031.2

Check difference between methods - - -

DCF Valuation
Free Cash Flows (Explicit forecast horizon) 1,031.2
WACC 11.0%
Discount Factor = 1/(1+WACC)t 0.90
PV of FCFt 929.0

Sum of PV of FCF over forecast horizon 4,418.7

Free Cash Flows Beyond horizon (i.e., Continuing or Terminal Value) =

[FCFT+1 / (WACC-g)] / [1+WACC]T 10,142.5
Terminal growth rate, g = 3%
Terminal value year (i.e., # of years forecast), T = 5

OPERATING VALUE: PV of all future Free Cash Flows 14,561.22

Add financial assets:

(+) Value of Cash and ST Investments0 1,115.8
(+) Value of LT Investments0 -
(+) Other -
ENTERPRISE VALUE: 15,677.05

Subtract other financial claims:

(-)Debt0 (530.0)
(-) Value of stock comp outstanding0* (1-tax rate) (5.3)

EQUITY VALUE: 15,141.7

# shares outstanding (millions): 1,000.0

Value per share = Value of Equity / # of shares $ 15.14

 Forecast
2025 2026 2027 2028
1,272.5 1,310.9 1,352.1 1,394.5

136.3 151.6 165.0 179.4

1,408.8 1,462.5 1,517.1 1,573.9

(18.3) (10.4) (10.7) (11.1)

(228.1) (201.5) (216.8) (233.3)

(3.4) (1.9) (2.0) (2.1)

1,159.1 1,248.7 1,287.5 1,327.4

1,272.5 1,310.9 1,352.1 1,394.5

(113.4) (62.2) (64.6) (67.1)

1,159.1 1,248.7 1,287.5 1,327.4

- - - -

1,159.1 1,248.7 1,287.5 1,327.4

0.81 0.73 0.66 0.59

940.7 913.0 848.1 787.8
Option Value based on the Black-Scholes Model:

Black-Scholes Option Pricing Model

Inputs:
Stock Price (S) $10.00
Strike Price (X) $8.00
Volatility (s) 19.80%
Risk-free Rate 2.20%
Time to expiration (T) 5 yrs
Dividend Yield 2.90%
# of Options (000) 5,212
# Shares Outstanding (000) 1,000,000
Tax Rate 21.00%
Output:

D1 0.64632
D2 0.20358
N(D1) 0.74096
N(D2) 0.58066
Call Price $2.24811
Put Price $0.76456
Value of Call Options (000) $11,717

RSU oustanding (000) (see footnote) -

Value of RSU outstanding (000) $0

Value of options + RSU $11,717

Less: Unrecognized expense ($000) $5,000
Before tax value of stock comp outstanding ($000) $6,717
After-tax Stock Comp Value (000) $5,307

Source: http://www3.nd.edu/~scorwin/fin70610/BlackScholes.xls