IBC Spring 2017 Freshman Case Competition

1. Discussion Materials | February 3rd , 2017
Recommendation to Staples Inc. | Board of Directors
1

2. The I.U. Morgan Team
The Team 2
Tim Johnson
Majors: Finance and Real Estate
Hometown: Cape Cod, Massachusetts
Christina Adams
Majors: Accounting and Finance
Hometown: Wheaton, Illinois
Michael Smith
Majors: Finance
Hometown: Columbia, Maryland
Majors: Finance and Accounting
Hometown: Cincinnati, Ohio
Jake Winans Austin Adamczyk
Major: Finance
Hometown: Fulton, Maryland
Tom Strong
Majors: Finance and Accounting
Hometown: Bordeaux, France

3. Table of Contents
Table of Contents 3
I. Executive Summary 4
II. Industry and Company Analysis 6
III. Strategic Recommendation 11
IV. Appendix 18

4. I. Executive Summary
4

5. Executive Summary
Executive Summary 5
• I.U. Morgan proposes that Staples acquires NetScout Systems in order to further develop their markets within IT optimization, cyber securities,
and strategically grow their United States customer base
• This potential acquisition will allow Staples to expand upon its Business Advantage package and grant them a larger, more diverse number of
resources as they continue to differentiate their company within the digital maintenance market
Macroeconomic & Industry
Outlook
Strategic Positioning for
M&A
Proposal
• Consumer spending is expected to
increase over the span of the next three
years
• Consumer Confidence Index is at a 13-
year high
• Consolidation among the largest firms
leaves few remaining major retailers
within the industry
• Increasing competition from online,
substitute retailers
• Decline of the office supplies industry is
predicted to continue over the course of
the next five years
• Many of the core products within the
industry are now viewed as outdated
• With physical office supplies dwindling
in terms of significance within the
business world year after year, IT and
network operations management and
security are becoming imperative for all
businesses across the globe
• History of technology companies
performing positively post-acquisition
is a key factor for the M&A
• Other specialty retailers across various
industries have acquired smaller,
developing companies in successful
attempts to diversify and expand both
their products and consumer base
• A greater number of convenient online
services allows companies to capitalize
on the high Consumer Confidence Index
• Considering the steady decline within
the office supplies industry, expansion
into more relevant and developing
markets is of the utmost importance
• A great number of businesses are
expanding their presence within the
digital market, and the demand for
consistent digital maintenance and
security is rapidly increasing as a result
• Using cash, Staples will execute an open
market share repurchase of SPLS;
Nasdaq (65 million shares) at the
purchase price of $9.05 using 60% of
cash reserves
• Post share repurchase, Staples Inc.
Acquires NetScout Systems Inc.
Offer Price: $44.01 per share
(35% Control Premium)

6. II. Industry and Company Analysis
6

7. • U.S. GDP projected to grow 2.7% in 2017 and 3% in 2018
• Trump administration will likely cut corporate tax rates, deregulate,
and increase infrastructure spending
• Trump administration could also enact high tariffs, increasing costs
of importing goods for many U.S. companies
• U.S. PMI Composite continuing steady upward trend, reaching 55.4
in January 2017, from 50 in February of 2016
• Consumer Confidence Index has increased to 113.7 in December
from 109.4 in November, reaching a 13-year high
• Consumer spending expected to average 2.5% growth per year over
the next three years
• Federal Reserve expected to raise rates by 75 basis points this year,
showing strong optimism in U.S. economy
Macroeconomic & Industry Analysis
Macroeconomic & Industry Analysis 7
• Office supplies industry expected to continue its decline in the next
five years
• Economy is digitalizing, with online growth and decline in floor
space
• Increasing competition from substitute retail industries, especially
online retailers providing lower prices and at-home convenience
• Consolidation among largest firms leaves few remaining major
retailers
• IVA forecasted to decline at an average annual rate of 6.2%
• Some of industry decline is result of many core products becoming
obsolete
• Households account for 45% of industry sales, while small and
medium sized businesses account for another 44.6%
Macroeconomic Trends Industry Trends
Office Supply Store Forecast
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
U.S. GDP
($B)
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
$10,000
$12,000
$14,000
$16,000
2015 2016 2017 2018 2019 2020
Revenue Growth %

8. • Headquartered in Framingham, Massachusetts
• Founded in 1985 by two former rivals in the New England
supermarket industry
• IPO on April 27th, 1989 with $325 million shares sold at stock
adjusted price of $0.74
• Ticker Symbol: SPLS (NASDAQ)
• Market Capitalization: $6.0501 billion
• Currently employs over 79,075 people
• Recorded revenue of $21.1 billion in 2015, down 6.37% from $22.5
billion in 2014
• Holds over 36% of industry market share
• Subsidiaries: Quill Corporation, Staples Business Advantage,
Corporate Express, PNI Media
Staples Company Overview
Company Overview 8
• Staples has completed over nine acquisitions in past ten years
• November 2016: Q3 earnings call unveils “Staples 20/20” strategic
plan
• November 2016: Agrees to sell U.K. retail division to Hilco as
international sales continue to decline
• September 2016: Appoints Shira Goodman as CEO, a veteran of 25
years
• August 2016: Pays Office Depot $250 million breakup fee for
blocked merger due to anti-trust concerns
• March 2016: Staples introduces its Business Advantage package to
small-medium sized companies
• July 2014: Acquires PNI Digital Media, a Canadian printing
software company for $67.3 million in cash
Business Description Recent Developments
Growth and Revenue
-8%
-6%
-4%
-2%
0%
2%
$19,000
$19,500
$20,000
$20,500
$21,000
$21,500
2015 2016 2017 2018 2019
Revenue Growth %
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20 Stock hits 13-year
low after FTC files
suit to block Office
Depot merger
Historical Stock Chart (5Y)
Staples shares
are currently
up over 4.3%
YTD,
underperformi
ng the
NASDAQ and
S&P500 by
17.4% and
13.1%
respectively
Staples announces
purchase of
Lonesource
Stock advances
over 30% based
on speculation
of merger with
Office Depot

9. Small Businesses
27.80%
Households for
Education Purposes
22.50%
Large Businesses
16.80%
Households for
General Purposes
15.30%
Other
17.60%
• Main products include office supplies and equipment, office
machines, technology, office furniture, staples, and more
• Main services include printing, marketing, shipping, tech, office,
and finance
• Products sold through brick-and-mortar locations as well as online
• Focusing on mid-market customers with Staples Business
Advantage
• 85% of revenue comes from within North America, with only 15%
international
• Number one office supply superstore in United States and
worldwide leader in the office category
• Working towards goals of over 60% sales from beyond office
supplies, over 80% sales delivered, and over 95% of sales from
North America
Staples Strategic Focus
Strategic Focus 9
Major Market Segmentation
North America
85%
International
15%
Geographic Segmentation
Office Supplies
and Equipment
44.60%
Office Machines
28.50%
Technology
13.00%
Services 8.20%
Office Furniture 5.70%
Sales SegmentationProducts and Services

10. Staples Football Field Analysis
Football Field Analysis 10
52-Week
Range
DCF
Precedent
Transactions
Comparables
$6 $8 $10 $12 $14 $16 $18
Implied Share Price Range

11. III. Strategic Recommendation
11

12. • Using cash, Staples will execute an open market share repurchase of
SPLS; Nasdaq (65 million shares) at the purchase price of $9.05
using 60% of cash reserves (1B)
• The target share price post-buyback is between $11.50 and $12.00
• Share price will rise as a result of increased EPS and share holder
confidence
• Staples used this strategy in both 2007 and 2011 to raise their EPS by
an average of 17% from the respective previous years
Strategic Recommendation
Strategic Recommendation 12
• The increased share price from the share repurchase provides
substantial utility in capital to assist in the acquisition of NetScout
• Staples Acquires NetScout Systems, which will operate under the
Staples brand
• Staples benefits from the synergy between NetScout and Staples
Business Advantage
• Offer Price: $44.01 per share (35% Control Premium)
• Transaction Currency: 40% Stock, 40%Debt, 20% Cash
Share BuyBack Acquisition of NetScout
Staples EPS Growth Shareholder Aspirations
• According to I.U. Morgan analysts, Staples stock is currently
undervalued
• Buying back shares at an undervalued price gives confidence to
shareholders and will increase the stock price
• Staples has consistently underperformed in comparison to its index
(Nasdaq)
• Staples has over 1 billion in cash on hand, able to purchase 107+
million shares outstanding
• Staples would be protected from tax on cash
• EPS and subsequently share price is projected to increase
-20%
-10%
0%
10%
20%
30%
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EPS Growth %, YoY
File a 10B-18 with the
SEC, announce share
repurchase (N-23-c3)
Using industry
practices of ASR to
complete repurchase
timeline of 6 months
Allow market trends and analyst
reports to help bolster share price
following increased EPS
Research, propose & close
NetScout (with fairness
opinion)

13. Strategic Rationale
Strategic Rationale 13
Potential Risks & Mitigations
• Acquisition of NetScout may not meet the expectations of
technology portion of Staples’ Business Advantage Series
• NetScout may not be able to handle the larger network that Staples
serves
• NetScout provides solutions that are used in various service
providers, enterprise and government networks, meaning Staples
will be exposed to new sectors improving the technology portion of
their Business Advantage Series
• NetScout has successfully reacted and changed their practices after
numerous acquisitions and company changes
Culture Fit
• Both companies are headquartered in Massachusetts, less than 40
minutes apart
• Companies share many similar corporate responsibility incentives
including ROHS and WEEE
• Similar mission alignment between both companies as they pride
themselves on reliability and “24/7 performance”
• NetScout Systems is a member of Technology Alliance Partners,
which Staples has worked with in the past with successful results
Strategic Fit
• Staples is looking to diversify their product and develop a strong
presence in the IT services industry
• Through the acquisition of NetScout Systems Staples stands to
significantly bolster the technology portion of their Business
Advantage services
• NetScout Systems serves as a Tier 1 ERP software solution, able to
meet the demands and breadth of Staples corporate clients
• As Staples moves to a digital focus closing all stores that do not turn
a profit, NetScout Systems offers a sustainable business model for
the retention of Staples’ international clients
• Staples would have the utilitarian position and resources to
accommodate NetScout Systems growth due to ample increases in
client base
Acquisition & Integration
42.54%
27.29%
16.87%
7.85%
5.46%
Office supplies and
equipment
Office machines
Technology
Services
Office furniture
Post-Acquisition Revenues

14. • Headquartered in Westford, Massachusetts
• Founded as Network General in 1984 by Anil Singhal, who is still
the company’s President, CEO, and Chairman
• IPO on August 12th, 1999 with 3 million shares sold at $11 per share
• Ticker Symbol: NTCT (NASDAQ)
• Market Capitalization: $2.880 billion
• Currently employs over 3,144 people
• Focus on mid-market and large corporate customers
NetScout Company Overview
Company Target Overview 14
Business Description
NetScout shares
are currently up
over 59% YTD,
outperforming
the NASDAQ
and S&P500 by
38% and 42%
respectively
Historical Stock Chart (5Y)
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
NetScout
announces plans
to acquire
businesses from
Danaher for
$2.6B
Stock down over 20% in
one day over missed
earnings
4 large
shareholders
hold more than
30% of
NetScout
Ownership
Volume Weighted
Average Price
Expected Return
on Investment
11.19%
$35.28
35.7%
57.6%$18.67
$29.60
$28.29
32.7%
19.83%
7.75%
7.32%
5.38%
Major Shareholders

15. • R&D expense rose 64% YoY to $209 million in 2016
• Acquired technology assets of Avvasi Inc. in August 2016
• Acquired multiple communications businesses from Danaher for
$2.6 billion in July 2015 to expand customer base, fortify
distribution, and accelerate adoption of the cybersecurity industry
• Businesses acquired from Danaher include Tektronic
Communications, Arbor Networks, Fluke Networks, and VSS
• Acquired Fox Replay in October 2011, a Dutch information
assurance and cybersecurity company
• Acquired Psytechnics in April 2011, a U.K. voice and video
management company
• Recorded revenue of $955 million in 2015, up 110% from $453
million in 2014
• NetScout designs, develops, manufactures, markets, and supports
products that enable businesses and service providers to report and
manage performance of computer networks and business software
applications
• Collects information used to optimize application and network
performance
• Working towards solidifying and expanding its information
assurance and cybersecurity business
• Sells products directly and through distributers to government and
corporate customers
NetScout Strategic Focus
Strategic Focus 15
Recent DevelopmentsProducts and Services
Growth and Revenue
0%
20%
40%
60%
80%
100%
120%
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
2015 2016 2017 2018 2019
Revnues Growth %
North America
71%
Asia
15%
Europe
14%
Geographic Segmentation

16. Key Employees
Key Employees 16
Anil K. Singhal Michael Szabados
Jean Bua Daryle DeBalski
Founder, Chairman of the Board, President and Chief Executive Officer
• Co-founded NetScout in June of
1984 and has served as CEO and as
a director on the company’s Board
since inception
• Credited with numerous
innovations in the field of network
traffic monitoring and analysis
Chief Operating Officer
• Served as NetScout’s Chief
Operating Officer since April 2007
• Previously served as the Senior
Vice President, Product Operations
• Held senior leadership roles with
multiple companies: UB Networks,
SynOptics/Bay Networks, and
MIPS Corporation
Executive Vice President and Chief Financial Officer
• Served as NetScout’s Chief
Financial Officer and Treasurer
since November 2011
• Before NetScout, Ms. Bua served as
Executive Vice President, Finance
and Treasurer of American Tower
Corporation
Senior Vice President, Research & Development and General Manager, Tools
• Joined NetScout in July 2015 after
NetScout’s acquisition of
Danaher’s Communications, where
he was general manager for the
Fluke Networks Enterprise
business unit
• Mr. DeBalski has more than 20
years of software industry
experience from a variety of
companies

17. NetScout Football Field Analysis
Football Field Analysis 17
$15 $20 $25 $30 $35 $40 $45 $50 $55
Implied Share Price Range
52-Week
Range
DCF
Precedent
Transactions
Comparables

18. IV. Appendix
18

19. Staples Precedent Transactions Analysis
Comparable Companies Analysis 19
Target Acquirer
Announced
Date
Purchase
Type
Equity Value
(in millions)
Transaction
Value (in
millions) TV/Revenue TV/EBIT TV/EBITDA
OfficeMax OfficeDepot 2/20/2013 All-Stock $ 1,323.84 $ 1,789.20 .99x 14.31x 11.16x
Lamrite
West Inc
Michaels
Cos Inc 2/2/2016 Cash $ 150.00 $ 150.00 .31x 15.59x 7.53x
Alfonso
Nutrition
Vitamin
Shoppe 6/9/2014 Cash $ 80.00 $ 80.00 .95x 12.87x 21.25x
THSD
GNC
Holdings 4/17/2014 Cash $ 7.50 $ 7.50 .86x 19.7x 6.29x
High $ 1,323.84 $ 1,789.20 .99x 19.7x 21.25x
Low $ 7.50 $ 7.50 .31x 12.87x 6.29x
Mean $ 390.34 $ 506.68 0.7775x 15.6175x 11.5575x

20. NetScout Precedent Transactions Analysis
Target Precedent Transactions 20
Target Acquirer
Announced
Date
Purchase
Type
Equity Value
(in millions)
Transaction
Value (in
millions) TV/Revenue TV/EBIT TV/EBITDA
Net Optics
Inc Ixia 10/29/2013 Cash $ 190.00 $ 190.00 1.52x 307.9x 43.02x
Airwave
Solutions
Ltd
Motorola
Solutions
Ltd 12/3/2015 Cash $ 817.50 $ 817.50 2.54x 13.98x 10.17x
ADC India
Communications
CommScope
Holding Co Inc 9/4/2015 Cash $ 47.68 $ 47.68 1.06x 11.31x 7.69x
Transmode
AB
Infinera
Corp 4/9/2015
Cash &
Stock $ 2,659.40 $ 2,954.20 2.91x 31.39x 18.62x
High $ 2,659.40 $ 2,954.20 2.91x 307.9x 43.02x
Low $ 47.68 $ 47.68 1.06x 11.31x 7.69x
Mean $ 928.65 $ 1,002.35 2.0075x 91.145x 19.8x

21. Staples Comparable Companies
Staples Comparables 21
Staples Comparable Anaysis
*All values in Millions Except Share Price Data
Company Name Ticker
Share
Price
52 Week
High
% of 52
week High
Enterprise
Value
Market
Cap
EV/EBITD
A TTM
EV/EBITD
A NTM
EV/EBIT
TTM
EV/Sales
TTM
Debt/Equit
y P/E TTM P/E NTM
Total
Debt/
EBITDA
EBITDA/
Int.
Expense
Staples SPLS 9.02 11.37 79% 5,872.95 5,893.95 4.335 4.298 6.47 0.284 19.224 9.208 10.249 0.751 9.921
Tier 1 Comparables
Office Depot ODP 4.34 7.91 54.87% 2,608.95 3,073.95 3.511 2.922 5.672 0.18 94.136 13.525 10.914 2.031 7.989
Essendant ESND 20.77 34.99 59.36% 1,897.57 1,211.23 7.751 7.505 9.674 0.354 98.975 17.75 10.973 2.926 11.897
Micheals Cos Inc MIK 20.02 31.36 63.84% 6,916.56 4,556.11 8.253 8.308 9.562 1.408 9.53 11.45 3.305 6.012
Williams-Sonoma Inc] WSM 47.72 61.97 77.01% 4,433.18 4,626.83 6.709 6.521 8.993 0.891 0.161 15.191 14.249 0
Dicks Sporting Goods DKS 50.71 62.88 80.65% 4,254.70 4,367.25 5.776 7.846 7.834 0.585 0.357 13.614 16.723 0.009 183.617
Mean 28.712 39.822 0.671434 4022.192 3567.074 6.4 6.6204 8.347 0.6836 48.40725 13.922 12.8618 1.6542 52.37875
Median 20.77 34.99 0.638393 4254.7 4367.249 6.709 7.505 8.993 0.585 47.2465 13.614 11.45 2.031 9.943
Low 4.34 7.91 0.548673 1897.565 1211.233 3.511 2.922 5.672 0.18 0.161 9.53 10.914 0 6.012
High 50.71 62.88 0.806457 6916.564 4626.825 8.253 8.308 9.674 1.408 98.975 17.75 16.723 3.305 183.617
Tier 2 Comparables
Cabellas Inc CAB 54.26 63.3 85.72% 8,405.02 3,169.17 18.097 20.305 25.335 2.102 308.135 16.173 19.729 12.132 20.289
Autonation Inc AN 51.77 54.15 95.60% 12,630.17 6,610.57 12.657 11.409 14.509 0.605 259.384 15.349 12.993 6.107 7
Bed Bath and Beyond BBBY 40.04 52.71 75.96% 8,574.47 7,676.24 5.123 4.895 6.126 0.708 58.604 9.882 8.788 0.896 19.136
GNC GNC 8.63 35.9 24.04% 3,762.07 2,366.08 7.651 5.566 8.659 1.425 309.982 10.613 3.733 2.954 11.458
Best Buy Co BBY 44.31 49.4 89.70% 7,541.15 9,043.15 3.55 5.071 5.141 0.191 40.635 10.784 13.307 0.838 26.55
Mean 39.802 51.092 0.742044 8182.576 5773.042 9.4156 9.4492 11.954 1.0062 195.348 12.5602 11.71 4.5854 16.8866
Median 44.31 52.71 0.857188 8405.016 6610.57 7.651 5.566 8.659 0.708 259.384 10.784 12.993 2.954 19.136
Low 8.63 35.9 0.24039 3762.074 2366.082 3.55 4.895 5.141 0.191 40.635 9.882 3.733 0.838 7
High 54.26 63.3 0.956048 12630.17 9043.147 18.097 20.305 25.335 2.102 309.982 16.173 19.729 12.132 26.55
Valuation implied By P/E
Net Income
Financial
Metric
Fully
Diluted
Shares
TTM 0.93 9.53 17.75 5765.76 10738.95 650.55 8.8629 16.5075
Next Year Estmates 0.88 10.914 16.723 6248.09 9573.65 650.55 9.60432 14.71624
Valuation Implied By EV/EBITDA
EBITDA
Financial
Metric
Less: Net
Debt
Fully
Diluted
Shares
TTM 1369 3.511 8.253 4806.559 11298.36 1047 4835.559 11327.36 650.55 7.433032 17.41197
Next Year Estmates 1366.45 2.922 8.308 3992.767 11352.47 1047 4021.767 11381.47 650.55 6.182103 17.49515
Multiple Range
Implied Share Price
Range
Multiple Range
Implied Share Price
Range
Implied Equity Value
Implied Equity Value
Implied Enterprise
Value

22. NetScout Comparable Companies
NetScout Comparables 22
Netscout Comparable Anaysis
*All values in Millions Except Share Price Data
Company Name Ticker
Share
Price
52 Week
High
% of 52
week High
Enterprise
Value
Market
Cap
EV/EBITD
A TTM
EV/EBITD
A NTM
EV/EBIT
TTM
EV/Sales
TTM
Debt/Equit
y P/E TTM P/E NTM
Total
Debt/
EBITDA
EBITDA/
Int.
Expense
Netscout NTCT 32.6 33.95 96.02% 2,876.56 2,879.95 14.759 9.324 110.446 2.535 12.278 118.734 16.614 1.67 28.389
Tier 1 Comparables
Viavi Solutions VIAV 9.28 9.45 98.20% 1,592.01 2,034.31 14.114 11.453 33.029 1.794 85.347 82.13 26.707 5.206 3.165
IXIA XXIA 19.4 19.5 99.49% 1,510.08 1,597.15 18.257 15.796 59.872 3.05 7.231 159.451 30.727 0.423 10.657
Plantronics Inc PLT 53.04 57.79 91.78% 1,944.79 1,877.39 12.974 10.627 15.04 2.223 156.726 22.696 17.775 3.421 5.69
Finistar Corporation FNSR 29.84 36.85 80.98% 2,858.37 3,249.98 14.05 8.3 26.385 2.134 19.784 32.642 13.7 1.612 12.198
Cienna Corp CIEN 24.46 25.32 96.60% 3,625.13 3,415.44 11.774 8.748 21.812 1.394 164.75 43.14 14.211 4.101 5.434
Mean 27.204 29.782 0.934098 2306.075 2434.854 14.2338 10.9848 31.2276 2.119 86.7676 68.0118 20.624 2.9526 7.4288
Median 24.46 25.32 0.966035 1944.785 2034.311 14.05 10.627 26.385 2.134 85.347 43.14 17.775 3.421 5.69
Low 9.28 9.45 0.809769 1510.08 1597.154 11.774 8.3 15.04 1.394 7.231 22.696 13.7 0.423 3.165
High 53.04 57.79 0.994872 3625.125 3415.439 18.257 15.796 59.872 3.05 164.75 159.451 30.727 5.206 12.198
Tier 2 Comparables
Motorola Solutions MSI 81 87.55 92.52% 16,932.22 13,559.22 11.661 10.163 14.169 2.901 21.305 17.222 3.569 6.613
Adtran Inc ADTN 21.8 23.75 91.79% 956.38 1,052.66 18.681 13.715 25.996 1.502 5.589 36.122 23.59 0.523 89.503
Arris International ARRS 28.76 31.52 91.24% 6,671.73 5,447.73 8.921 7.582 22.085 1.081 83.643 25.533 10.346 2.833 7.663
Ubiquiti Networks UBNT 62.73 63 99.57% 4,738.27 5,111.79 17.86 16.412 18.288 6.583 46.211 22.583 20.433 0.843
Calamp Corp CAMP 14.79 19.67 75.19% 569.37 525.17 14.186 11.572 28.103 1.696 73.794 46.859 14.11 3.238 5.684
Mean 41.816 45.098 0.900628 5973.591 5139.312 14.2618 11.8888 21.7282 2.7526 52.30925 30.4804 17.1402 2.2012 27.36575
Median 28.76 31.52 0.917895 4738.269 5111.791 14.186 11.572 22.085 1.696 60.0025 25.533 17.222 2.833 7.138
Low 14.79 19.67 0.751906 569.365 525.166 8.921 7.582 14.169 1.081 5.589 21.305 10.346 0.523 5.684
High 81 87.55 0.995714 16932.22 13559.22 18.681 16.412 28.103 6.583 83.643 46.859 23.59 3.569 89.503
Valuation implied By P/E
Net Income
Financial
Metric
Fully
Diluted
Shares
TTM 0.193 22.696 159.451 401.1154 2818.041 91.572 4.380328 30.77404
Next Year Estmates 1.893 13.7 30.727 2374.837 5326.396 91.572 25.9341 58.16621
Valuation Implied By EV/EBITDA
EBITDA
Financial
Metric
Less: Net
Debt
Fully
Diluted
Shares
TTM 179.675 11.774 18.257 2115.493 3280.326 300 2891.493 4056.326 91.572 31.57617 44.29658
Next Year Estmates 308.5 8.3 15.796 2560.55 4873.066 300 3336.55 5649.066 91.572 36.43636 61.68988
Implied Share Price
Range
Multiple Range Implied Equity Value
Implied Share Price
Range
Multiple Range
Implied Enterprise
Value Implied Equity Value

23. Discounted Cash Flow Analysis (Staples)
23Discounted Cash Flow Analysis
Pro Forma Income Statement
Actual FYE Projected FYE
2014A 2015A 2016A LTM 2017E 2018E 2019E 2020E 2021E
0.5 1.5 2.5 3.5 4.5
Total Revenues (Sales) $ 23,144.26 $ 22,492.00 $ 21,059.00 $ 20,476.00 20,467.00 $19,824.70 $ 19,713.50 $ 19,939.33 $20,168.63
% Growth -2.82% -6.37% -2.77% -0.04% -3.14% -0.56% 1.15% 1.15%
Cost of Sales (COGS) $ 17,111.96 $ 16,691.00 $ 15,545.00 $ 15,168.00 $ 15,212.60 $ 14,700.00 $ 14,588.00 $ 14,854.83 $ 15,150.03
% Sales 135.25% 134.76% 135.47% 134.99% 134.54% 134.86% 135.14% 134.23% 133.13%
Net Operating Revenues $ 6,032.30 $ 5,801.00 $ 5,514.00 $ 5,308.00 $ 5,254.40 $ 5,124.70 $ 5,125.50 $ 5,084.50 $ 5,018.60
% Margin 26.06% 25.79% 26.18% 25.92% 25.67% 25.85% 26.00% 25.50% 24.88%
Selling, General, & Administrative $ 4,735.29 $ 4,815.00 $ 4,600.00 $ 4,382.00 $ 3,887.95 $ 3,751.84 $ 3,761.90 $ 3,749.50 $ 3,667.60
% Sales 20.46% 21.41% 21.84% 21.40% 19.00% 18.93% 19.08% 18.80% 18.18%
EBITDA (Adjusted) $ 1,699.80 $ 1,443.00 $ 1,379.00 $ 1,369.00 $ 1,366.45 $ 1,372.86 $ 1,363.60 $ 1,335.00 $ 1,351.00
% Margin 7.34% 6.42% 6.55% 6.69% 6.68% 6.92% 6.92% 6.70% 6.70%
Less: D&A $ 55.41 $ 62.00 $ 67.00 444 437.74 455.72 429.93 399 418
% Sales 0.24% 0.28% 0.32% 2.17% 2.14% 2.30% 2.18% 2.00% 2.07%
EBIT $ 1,644.39 $ 1,381.00 $ 1,312.00 $ 925.00 928.71 917.14 $ 933.67 $ 936.00 $ 933.00
% Margin 7.10% 6.14% 6.23% 4.52% 4.54% 4.63% 4.74% 4.69% 4.63%
Taxes 511.40529 403.252 378.9056 259.925 260.96751 257.71634 262.36127 263.016 262.173
Tax Rate 31.10% 29.20% 28.88% 28.10% 28.10% 28.10% 28.10% 28.10% 28.10%
EBIAT 1132.98471 977.748 933.0944 665.075 667.74249 659.42366 671.30873 672.984 670.827
Plus: D&A 55.41 62 67 444 437.74 455.72 429.93 399 418
Less: (Inc.) In Net Working Capital $ 156.10 $ 67.00 $ 131.00 $ 53.00 52.97670443 51.31417757 51.02634792 51.61088543 52.20441061
Less: Capital Expenditures $ 371.20 $ 361.00 $ 381.00 $ 324.00 $ 290.80 $ 324.50 $ 319.70 $ 375.00 $ 375.00
Unlevered Free Cash Flow 661.09471 611.748 488.0944 732.075 761.7057856 739.3294824 730.5123821 645.3731146 661.6225894
WACC 6.91%
Discount Factor 96.71% 90.46% 84.61% 79.14% 74.02%
Present Value $ 736.67 $ 668.79 $ 618.09 $ 510.74 $ 489.74
WACC
Calculation
Target Capital
Structure
Debt-to-Total Capitalization
18.80%
Equity-to-Total Capitalization
81.20%
Cost of
Debt
Cost of
Debt 2.34%
Tax Rate 34.84%
After Tax Cost
of Debt
2.29%
Cost of Equity
Risk-Free Rate
2.51%
Market Risk
Premium
6.93%
Levered Beta
0.79
Exected Market
Return
9.44%
Size Premium
Cost of Equity
7.98%
CAPM 7.98%
WACC 6.91%

24. Discounted Cash Flow Analysis (NetScout)
24Discounted Cash Flow Analysis