Uploaded byDeb Sahoo, MBA(Finance), MS(EE), BTech(EE),
LBO of NVIDIA
- The document analyzes a potential leveraged buyout of Nvidia Corporation. Key details include: - Nvidia is a leading designer of graphics processing units with a market cap of $9.11B. The proposed purchase price is $18.50 per share for a total equity value of $10.9B. - Rationale for the LBO includes Nvidia's strong financials, attractive balance sheet, and growth opportunities in mobile markets. The exit strategy considers a potential IPO or sale to strategic acquirers. - Financial projections estimate the transaction would yield a 31.2% IRR and 3.9x cash on cash return through an exit in 2018 at a 6.0
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More from Deb Sahoo, MBA(Finance), MS(EE), BTech(EE),
LBO of NVIDIA
- 1. LEVERAGED BUYOUT OFNVIDIA DEB SAHOO MBA, ROSS SCHOOL OF BUSINESS, UNIVERSITY OF MICHIGAN, ANN ARBOR MS, EE, UNIVERSITY OF SOUTHERN CALIFORNIA B-TECH, EE, IIT December 31, 2013
- 2. 4 Company Overview 6 LBO Rationale 8 Financials 10 IndustryComparables 11 Financial Statements Projections Assumptions 21 Transaction Analysis 23 Return Analysis 32 Exit Strategies 36 2 TABLE OF CONTENTS Executive Summary
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- 4. Price Performance •Company: NvidiaCorporation •Headquarter: Santa Clara, CA •CEO: Jen-Hsun Huang •Number of Employees: 8,000 •Mobile processors used in cell phones, tablets and auto infotainment systems •Key industry player in GPU market •Established customer base Valuation Key Financials Purchase Price Offer Price per Share $18.50 Fully Diluted Shares 589.0 Equity Purchase Price Plus: Existing Net Debt Enterprise Value $10,896.5 (2,628.2) $8,268.3 Return Exit Year Entry Multiple Exit Multiple IRR Cash Return 4 •Stock Price: $16.08 •52 Week High: $16.32 •52 Week Low: $11.92 •Stock Beta: 1.36 2018 10.9x 6.0x 31.2% 3.9x •Ticker: NVDA •Market Cap: $9.11B •Number of Shares: 568.54MM •2013 EBITDA: $787.84MM •LTM P/EPS: 20.9 •Total Enterprise Value: $6,063.58MM •5 Year Sales Growth: 10% •5 Year EBITDA Growth: 58% •5 Year Avg. ROE: 8.4% •Leverage: 0.006x •Price to Book Value: 2.8x •Price to Sales: 2.4x •Inst. Own: 82% EXECUTIVE SUMMARY Target Overview
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- 6. NVIDIA Corporation (NVIDIA)is engaged in creating the graphics chips used in personal computers (PCs) Three segments: graphics processing unit (GPU) Business, professional solutions business (PSB) and consumer products business (CPB) Products and Services •GeForce •Quadro •Tegra •Tesla •Grid •NVS Mobile processors used in cell phones, tablets and auto infotainment systems and designers use GPUs to create visual effects in movies and create everything from golf clubs to jumbo jets Brands: GeForce, Quadro and Tesla Industry Comparables 6 Customers COMPANY OVERVIEW Company Overview
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- 8. Growing EBITDA Low DebtLevel Attractive Balance Sheet 8 LBO RATIONALE Steady Cash Flow From Operations (CFO)
- 9. Stock Price hasnot appreciated over last three years ! Enterprise Value 9 Decreasing Valuation LBO RATIONALE 3 Yr. Stock Price
- 10. Strong Financials •Strong managementteam •Potential for expense reduction •Growth potential in mobile markets •Potential to enter new market segment with partnership with leading industry players such as Intel •Large amount of cash in hand •Heavy Asset Base for loan collateral •Clean balance sheet with low Leverage •Predictable and steady cash flow in the past Industry Positioning Viable Exit Strategy •Strong defensible market position •Product differentiation through high R&D •Economy of Scale and Scope •Known brand name with key customers •Adequate strategic buyers such as ARMH, INTEL , SAMSUNG for exit strategy •Increased dominant position and expanded geographical presence will increase visibility in investor community for IPO •Adequate number of PE firms with matching investment criteria 10 LBO RATIONALE Value Creation
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- 12. All figures inMillion $, except per share data Revenue Cost of Goods Sold Gross Profit Jan09 Jan10 Jan11 Jan12 Jan13 $ 3,424.86 $ 3,326.45 $ 3,543.31 $ 3,997.93 $ 4,280.16 $ 2,250.59 $ 2,149.52 $ 2,134.22 $ 1,941.41 $ 2,053.82 $ 1,174.27 $ 1,176.92 $ 1,409.09 $ 2,056.52 $ 2,226.34 Selling, General, &Admin. Expense $ 362.22 $ 367.02 $ 361.51 $ 405.61 $ 430.82 Advertising $ - $ - $ - $ - $ - Research &Development $ 855.88 $ 908.85 $ 848.83 $ EBITDA 1,002.61 $ 1,147.28 $ 185.33 $ 140.81 $ 480.34 $ 889.84 $ 911.48 $ 185.02 $ 196.66 $ 186.99 $ 204.21 $ 226.24 Operating Income $ (70.70) $ (98.95) $ 255.75 $ 648.30 $ 648.24 Interest Income $ 42.86 19.06 $ 19.15 $ 19.91 Interest Expense $ (0.41) $ Other Income (Minority Interest) $ Depreciation, Depletion and Amortization Pre-Tax Income $ Tax Provision $ Net Income (Continuing Operations) $ Net Income (Discontinued Operations) $ Net Income $ Preferred dividends $ - $ $ (42.95) $ 12.91 $ (30.04) $ - $ (30.04) $ - $ 23.12 $ (3.32) $ - $ (82.29) $ 14.31 $ (67.99) $ - $ (67.99) $ - $ (3.13) $ (3.09) $ (3.29) - $ - $ - 271.17 $ 663.40 $ 662.04 (18.02) $ (82.31) $ (99.50) 253.15 $ 581.09 $ 562.54 - $ - $ - 253.15 $ 581.09 $ 562.54 - $ - $ - EPS (Basic) $ (0.05) $ (0.12) $ 0.44 $ 0.96 $ 0.91 EPS (Diluted) $ (0.05) $ (0.12) $ 0.43 $ 0.94 $ 0.90 Shares Outstanding (Diluted) 12 548 550 589 616 625 FINANCIALS Five Year Income Statement
- 13. All figures inMillion $, except per share data Jan09 Jan10 Jan11 Jan12 Jan13 Cash And Cash Equivalents $ 417.69 $ 447.22 $ 665.36 $ 667.88 $ 732.79 Marketable Securities $ 837.70 $ 1,281.01 $ 1,825.20 $ 2,461.70 $ 2,995.10 Cash, Cash Equivalents, Marketable Securities $ 1,255.39 $ 1,728.23 $ 2,490.56 $ 3,129.58 $ 3,727.88 Accounts Receivable $ 318.44 $ 374.96 $ 348.77 $ 336.14 $ 454.25 $ 122.02 $ 76.94 $ 67.88 $ 84.93 $ 164.32 67.63 Inventories, Raw Materials & Components Inventories, Work In Process $ 38.75 $ 67.50 $ 72.70 $ 62.93 $ Inventories, Inventories Adjustments $ - $ - $ - $ - $ Inventories, Finished Goods $ $ 186.24 $ 204.95 $ Inventories, Other Total Inventories $ $ 377.06 (0.00) 537.83 $ $ (0.00) $ 330.67 $ - $ 345.53 $ 192.44 340.30 $ $ $ 187.73 (0.00) 419.69 Other Current Assets $ 56.30 $ 46.97 $ 42.09 $ 99.34 $ 173.44 Total Current Assets $ 2,167.96 $ 2,480.83 $ 3,226.95 $ 3,905.36 $ 4,775.26 218.50 Land And Improvements $ 217.87 $ 217.37 $ 217.37 $ 218.50 $ Buildings And Improvements $ 29.22 $ 29.22 $ 29.33 $ 30.87 $ 30.87 Machinery, Furniture, Equipment $ 593.69 $ 667.53 $ 769.64 $ 724.82 $ 828.69 Construction In Progress Gross Property, Plant and Equipment Accumulated Depreciation $ 5.36 $ 4.09 $ 4.47 $ 11.09 $ 24.09 $ 1,008.75 $ 1,088.48 $ 1,193.94 $ 1,156.53 $ 1,288.78 $ (382.96) $ (625.08) $ (596.46) $ Property, Plant and Equipment $ 625.80 $ (516.63) $ 571.86 $ 568.86 $ 560.07 $ (712.64) 576.14 Intangible Assets $ 516.95 $ 490.30 $ 658.59 $ 967.17 $ 953.36 Other Long Term Assets $ 40.03 $ 42.93 $ 40.85 $ 120.33 $ 107.48 Total Assets $ 3,350.73 $ 3,585.92 $ 4,495.25 $ 5,552.93 $ 6,412.25 218.86 356.43 Accounts Payable $ Total Tax Payable $ Other Accrued Expenses $ 503.48 722.34 - $ 344.53 $ 286.14 $ 335.07 $ $ 1.78 $ 4.58 $ 6.94 $ 3.17 $ 388.27 $ 331.80 $ 281.86 $ 307.86 623.87 $ 667.46 Accounts Payable & Accrued Expenses $ $ 734.58 $ 622.52 $ Current Portion of Long-Term Debt $ - $ - $ - $ Other Current Liabilities $ 56.25 $ 49.80 $ 320.16 $ 306.09 Total Current Liabilities $ 778.59 $ 784.38 $ 942.68 $ Long-Term Debt $ 25.63 $ 24.45 $ 23.39 $ $ 25.63 $ 24.45 $ 23.39 $ Capital Lease Obligation PensionAndRetirementBenefit $ - $ - $ - $ DeferredTaxAndRevenue $ 75.25 $ 17.74 $ 209.13 $ - $ - $ 308.77 929.96 $ 976.22 21.44 $ 19.00 21.44 $ 19.00 333.66 $ $ 429.10 Other Long-Term Liabilities $ 151.85 $ 111.95 $ 347.71 $ 455.81 $ 589.32 Total Liabilities $ 956.08 $ 920.78 $ 1,313.78 $ 1,407.20 $ 1,584.54 0.65 0.70 $ 0.72 Common Stock $ - $ Preferred Stock $ - $ Retained Earnings $ 1,964.17 $ Additional Paid-In Capital $ 1,889.26 $ Treasury Stock $ (1,463.27) $ Total Equity $ 2,394.65 $ 13 - $ - $ $ - $ 1,896.18 $ 2,219.40 $ (1,463.27) $ 2,665.14 $ 2,149.33 $ 2,730.42 $ $ 3,246.09 2,500.58 $ 2,900.90 $ 3,193.62 (1,479.39) $ (1,496.90) $ (1,622.71) 3,181.46 $ 4,145.72 $ 4,827.70 FINANCIALS Five Year Balance Sheet
- 14. All figures inMillion $, except per share data Jan09 Jan10 (30.04) $ Jan11 Net Income $ (67.99) $ Cumulative Effect Of Accounting Change $ - $ - Net Foreign Currency Exchange Gain $ - $ - Jan12 Jan13 253.15 $ 581.09 $ 562.54 $ - $ - $ - $ - $ - $ - Net Income From Continuing Operations $ (30.04) $ (67.99) $ 253.15 $ 581.09 $ 562.54 Depreciation, Depletion and Amortization $ 185.02 $ 196.66 186.99 $ 204.21 $ 226.24 348.87 $ 26.34 $ 26.24 $ (118.94) (14.13) $ 18.88 $ (78.95) (14.80) $ (20.29) $ Change In Receivables $ Change In Inventory $ Change In Prepaid Assets $ Change In Payables And Accrued Expense $ (224.33) $ Change In Working Capital $ Change In DeferredTax $ Cash Flow from Discontinued Operations $ - $ - $ - Cash Flow from Others $ 150.99 $ 243.86 $ Cash Flow from Operations $ 249.36 $ 487.81 $ Purchase Of Property, Plant, Equipment $ Sale Of Property, Plant, Equipment $ Purchase Of Business $ Sale Of Business $ Purchase Of Investment $ Sale Of Investment $ Net Intangibles Purchase And Sale $ Cash From Discontinued Investing Activities $ Cash Flow from Investing $ (209.37) $ Net Issuance of Stock $ (350.09) $ Net Issuance of Preferred Stock $ - Net Issuance of Debt $ Cash Flow for Dividends $ Other Financing (177.30) $ (56.74) $ 204.66 $ 1.58 $ 8.53 $ (16.94) $ 126.63 $ (33.33) $ 136.42 151.70 (23.28) $ (21.15) $ 21.53 $ (407.67) $ - $ (77.60) $ 42.53 $ 97.29 $ 2.15 $ (112.32) (2.65) $ 19.06 $ 31.86 $ - $ - 86.61 $ 102.66 $ 115.86 675.80 $ 909.16 $ (97.89) $ $ - $ - $ (27.95) $ - $ - $ - $ - $ - $ (999.95) $ 1,226.65 (1,193.95) $ $ 752.43 $ - $ - $ - $ - $ (519.33) $ (1,719.70) $ 1,170.08 $ - $ - $ (649.68) $ (138.74) $ - 824.17 (183.31) $ - (348.88) $ - - $ (1,964.90) $ 1,310.74 $ - $ - $ (2,378.45) 1,817.41 - (1,143.36) $ (743.99) 138.03 $ 177.28 $ 195.86 $ (35.07) $ - $ - $ - $ - - $ - $ - $ - $ $ 0.81 $ Cash Flow from Financing $ (349.27) $ Net Change in Cash 14 Free Cash Flow $ $ (76.97) $ (0.57) $ (1.61) $ (2.05) - $ - $ (46.87) 15.32 $ 42.47 $ 68.71 236.72 $ (15.27) 61.06 $ 192.02 $ (309.28) $ 29.53 $ 218.14 $ 2.52 $ 64.91 (158.31) $ 410.21 $ 577.91 $ 770.42 $ 640.86 FINANCIALS Five Year Cash Flow Statement
- 15. Ratios Jan09 Jan10 Jan11 Jan12 Jan13 Return on Equity% -1.3 -2.6 8 14 11.7 Return on Assets % -0.9 -1.9 5.6 10.5 8.8 Return on Capital - Joel Greenblatt % -9.3 -17.3 45 115.8 100.1 Debt to Equity 0.011 0.009 0.007 0.005 0.004 Gross Margin % 34.3 35.4 39.8 51.4 52 Operating Margin % -2.1 -3 7.2 16.2 15.1 Net Margin % -0.9 -2 7.1 14.5 13.1 Total Equity to Total Asset 0.715 0.743 0.708 0.747 0.753 LT Debt to Total Asset 0.008 0.007 0.005 0.004 0.003 Asset Turnover 1.022 0.928 0.788 0.72 0.667 0 0 0 0 0.082 Days Sales Outstanding 33.9 41.1 35.9 30.7 38.7 Days Inventory 87.2 56.2 59.1 64 74.6 4.2 6.5 6.2 5.7 4.9 0.66 0.65 0.6 0.49 0.48 0.157 0.099 0.098 0.085 0.098 Dividend Payout Ratio Inventory Turnover COGS to Revenue Inventory to Revenue 15 FINANCIALS Five Year Key Annual Ratios
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- 17. 17 INDUSTRY COMPARABLES Key IndustryComparables
- 18. 18 INDUSTRY COMPARABLES 3 Yr.Stock Performance of Key Industry Comparables
- 19. Company Ticker FY-1 P/E FY-0 NVIDIA Corporation NVDA 15.6 13.6 20.9 2.9 2.0 2.8 11.8 11.9 15.1 2.3 1.8 2.4 Texas Instruments,Inc. TXN 15.5 20.5 26.0 9.7 8.8 11.3 13.9 12.1 17.1 2.5 2.8 4.0 Qualcomm, Inc. QCOM 17.8 17.2 19.0 4.0 0.0 4.3 23.1 15.3 16.8 5.7 4.8 5.2 Marvell Technology MRVL 15.8 17.3 26.9 3.2 2.1 3.0 14.5 8.3 16.7 2.9 1.6 2.3 Freescale Semiconductor FSL 0.0 0.0 0.0 0.0 0.0 -0.9 84.3 17.8 53.6 0.6 0.7 1.0 Broadcom Corporation BRCM 17.9 26.8 33.7 3.7 8.1 5.4 9.9 11.4 9.9 2.2 2.4 2.1 Intel Corp INTC 10.2 9.7 14.1 3.9 3.0 3.3 12.8 13.5 12.2 2.4 2.0 2.5 Advanced Micro Devices AMD 8.3 0.0 0.0 3.1 0.0 -13.7 30.0 0.0 0.0 0.6 0.3 0.6 Mean 12.6 13.1 17.6 3.8 3.0 1.9 25.0 11.3 17.7 2.4 2.0 2.5 Median 15.6 15.4 20.0 3.4 2.0 3.2 14.2 12.0 15.9 2.3 1.9 2.4 19 TTM FY-1 P/B FY-0 TTM FY-1 P/FCF FY-0 TTM FY-1 P/S FY-0 TTM INDUSTRY COMPARABLES Valuation Comparison – I
- 20. Company Ticker FY-1 EV/Sales FY-0 NVIDIA Corporation NVDA 1.5 0.9 1.4 6.7 4.2 7.5 9.2 5.9 11.6 Texas Instruments,Inc. TXN 2.6 2.8 3.8 8.9 10.8 13.9 12.0 18.2 21.7 Qualcomm, Inc. QCOM 4.9 4.0 4.0 11.6 10.1 11.1 16.6 13.9 15.2 Marvell Technology MRVL 2.0 0.9 1.3 8.8 6.0 12.0 11.3 9.5 22.2 Freescale Semiconductor FSL 2.0 2.1 2.5 9.7 12.0 16.2 32.6 18.2 23.8 Broadcom Corporation BRCM 1.7 2.3 1.7 11.0 16.2 17.0 13.3 27.0 29.4 Intel Corp INTC 2.1 1.8 2.2 4.7 4.3 6.3 6.5 6.6 10.9 Advanced Micro Devices AMD 0.5 0.5 0.8 7.0 0.0 -18.5 9.6 0.0 9.3 Mean 2.2 1.9 2.2 8.6 8.0 8.2 13.9 12.4 18.0 Median 2.0 2.0 2.0 8.9 8.1 11.5 11.6 11.7 18.5 20 TTM EV/EBITDA FY-1 FY-0 TTM FY-1 EV/EBIT FY-0 TTM INDUSTRY COMPARABLES Valuation Comparison – II
- 21. Gross Margin (%) FY-1 FY-0 TTM EBITMargin (%) FY-1 FY-0 TTM Net Margin (%) FY-1 FY-0 TTM Company Ticker NVIDIA Corporation NVDA 51.4% 52.0% 55.4% 16.2% 15.1% 13.4% 14.5% 13.1% 11.3% Texas Instruments, Inc. TXN 49.3% 49.7% 54.8% 21.8% 15.4% 26.0% 16.3% 13.7% 19.4% Qualcomm, Inc. QCOM 62.9% 60.5% 58.1% 29.7% 29.1% 24.5% 31.9% 27.6% 23.2% Marvell Technology MRVL 56.8% 52.9% 50.1% 17.8% 9.3% 10.2% 18.1% 9.7% 11.1% Freescale Semiconductor FSL 41.4% 41.6% 43.6% 6.0% 11.7% 14.5% -9.0% -2.6% 2.1% Broadcom Corporation BRCM 50.9% 49.7% 51.4% 12.9% 8.4% 15.7% 12.5% 9.0% 14.7% Intel Corp INTC 62.5% 62.1% 62.4% 32.4% 27.4% 26.0% 24.0% 20.6% 21.9% Advanced Micro Devices AMD 44.8% 22.8% 35.7% 5.6% -19.5% 6.5% 7.5% -21.8% 3.3% Mean 52.5% 48.9% 51.4% 17.8% 12.1% 17.1% 14.5% 8.7% 13.4% Median 51.2% 50.9% 53.1% 17.0% 13.4% 15.1% 15.4% 11.4% 13.0% 21 INDUSTRY COMPARABLES Margin Comparison
- 22. Company Ticker Debt / Equity(%) FY-1 FY-0 TTM NVIDIA Corporation NVDA 0.5% 0.4% 0.4% 74.7% 75.3% 75.6% 0.4% 0.3% 0.3% Texas Instruments, Inc. TXN 51.1% 51.9% 46.7% 53.4% 54.7% 57.4% 20.5% 20.9% 21.6% Qualcomm, Inc. QCOM 0.0% 0.0% 0.0% 77.9% 79.3% 79.3% 0.0% 0.0% 0.0% Marvell Technology MRVL 0.0% 0.0% 0.0% 86.9% 85.2% 83.5% 0.0% 0.0% 0.0% Freescale Semiconductor FSL 192.9% 201.0% 166.9% Broadcom Corporation BRCM 72.1% 69.9% 69.8% 72.1% 69.9% 69.8% 13.2% 12.4% 12.3% Intel Corp INTC 16.0% 26.3% 24.4% 64.6% 60.7% 61.2% 10.0% 15.6% 14.5% Advanced Micro Devices AMD 126.8% 379.6% 472.1% 32.1% 13.5% 10.1% 30.8% 50.9% 47.3% Mean 14.9% 48.4% 57.0% 41.3% 37.0% 39.8% 33.5% 37.6% 32.9% Median 8.3% 13.4% 12.4% 68.4% 65.3% 65.5% 11.6% 14.0% 13.4% 22 -147.1% -140.8% -157.5% Equity / Total Assets (%) FY-1 FY-0 TTM LT Debt / Assets (%) FY-1 FY-0 TTM -131.2% -142.9% -118.5% INDUSTRY COMPARABLES Capitalization Comparison
- 23. Diluted EPS ($) FY-1 FY-0 TTM FCFper Share ($) FY-1 FY-0 TTM Book Value Per Share ($) FY-1 FY-0 TTM Company Ticker NVIDIA Corporation NVDA $ 0.94 $ 0.90 $ 0.77 $ 1.25 $ 1.03 $ 1.06 $ 6.77 $ 7.83 $ Texas Instruments, Inc. TXN $ 1.88 $ 1.51 $ 1.70 $ 2.08 $ 2.55 $ 2.57 $ 9.61 $ 9.89 $ 10.10 Qualcomm, Inc. QCOM $ 3.51 $ 3.91 $ 3.92 $ 2.71 $ 4.41 $ 4.41 $ 19.65 $ 21.04 $ 21.04 Marvell Technology MRVL $ 0.99 $ 0.54 $ 0.54 $ 1.07 $ 1.11 $ 0.86 $ Freescale Semiconductor FSL $ (1.82) $ (0.41) $ (0.49) $ (0.43) $ 0.61 $ 0.30 $ (18.21) $ (18.20) $ (17.54) Broadcom Corporation BRCM $ 1.65 $ 1.25 $ 0.88 $ 2.98 $ 2.93 $ 3.02 $ 11.97 $ 13.78 $ 13.94 Intel Corp INTC $ 2.39 $ 2.13 $ 1.85 $ 1.88 $ 1.52 $ 2.16 $ 9.18 $ 10.36 $ 11.15 Advanced Micro Devices AMD $ 0.66 $ (1.60) $ (0.86) $ 0.18 $ (0.64) $ (0.71) $ 2.28 $ 0.75 $ 0.60 Mean $ 1.28 $ 1.03 $ 1.04 $ 1.47 $ 1.69 $ 1.71 $ 6.23 $ 6.68 $ 6.98 Median $ 1.32 $ 1.08 $ 0.83 $ 1.57 $ 1.32 $ 1.61 $ 8.89 $ 8.93 $ 9.59 23 8.59 $ 7.96 $ 7.47 9.07 INDUSTRY COMPARABLES Per Share Data
- 24. Company Ticker Return on Equity(%) FY-1 FY-0 TTM NVIDIA Corporation NVDA 14% 12% 11% 11% 9% 8% 116% 100% 90% Texas Instruments, Inc. TXN 20% 16% 23% 11% 9% 13% 42% 32% 54% Qualcomm, Inc. QCOM 18% 19% 17% 14% 15% 13% 199% 241% 212% Marvell Technology MRVL 12% 7% 9% 11% 6% 8% 96% 66% 74% Freescale Semiconductor FSL 0% 0% 0% -12% -3% 2% 19% 39% 32% Broadcom Corporation BRCM 14% 9% 16% 10% 6% 11% 194% 133% 241% Intel Corp INTC 28% 22% 21% 18% 13% 13% 74% 51% 38% Advanced Micro Devices AMD 31% -220% 44% 10% -30% 4% 41% -161% 79% Mean 17% -17% 18% 9% 3% 9% 98% 63% 102% Median 16% 10% 16% 11% 8% 10% 85% 59% 77% 24 Return on Assets (%) FY-1 FY-0 TTM Return on Capital (%) FY-1 FY-0 TTM INDUSTRY COMPARABLES Ratios
- 25. FINANCIAL STATEMENTS PROJECTIONSASSUMPTIONS 25
- 26. Income Statement Projection Period Year1 2014 Year 3 2016 Year 4 2017 Year 5 2018 Year 6 2019 Year 7 2020 Year 8 2021 Year 9 2022 Year 10 2023 8.0% 50.0% 10.0% -% 5.0% -% 1.0% 7.0% 50.0% 10.0% -% 5.0% -% 1.0% 6.0% 50.0% 10.0% -% 5.0% -% 1.0% 5.0% 50.0% 10.0% -% 5.0% -% 1.0% 3.0% 50.0% 10.0% -% 5.0% -% 1.0% 3.0% 50.0% 10.0% -% 5.0% -% 1.0% 3.0% 50.0% 10.0% -% 5.0% -% 1.0% 3.0% 50.0% 10.0% -% 5.0% -% 1.0% 3.0% 50.0% 10.0% -% 5.0% -% 1.0% 3.0% 50.0% 10.0% -% 5.0% -% 1.0% Year 1 2014 Year 2 2015 Year 3 2016 Year 4 2017 Year 5 2018 Year 6 2019 Year 7 2020 Year 8 2021 Year 9 2022 Year 10 2023 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Year 1 2014 Sales (% growth) Cost of Goods Sold (% sales) SG&A (% sales) Other Expense / (Income) (% of sales) Depreciation & Amortization (% sales) Amortization (% sales) Interest Income Year 2 2015 Year 2 2015 Year 3 2016 Year 4 2017 Year 5 2018 Year 6 2019 Year 7 2020 Year 8 2021 Year 9 2022 Year 10 2023 39.0 68.0 5.0% 60.0 16.0% 1.0% 39.0 68.0 5.0% 60.0 16.0% 1.0% 39.0 68.0 5.0% 60.0 16.0% 1.0% 39.0 68.0 5.0% 60.0 16.0% 1.0% 39.0 68.0 5.0% 60.0 16.0% 1.0% 39.0 68.0 5.0% 60.0 16.0% 1.0% 39.0 68.0 5.0% 60.0 16.0% 1.0% 39.0 68.0 5.0% 60.0 16.0% 1.0% 39.0 68.0 5.0% 60.0 16.0% 1.0% 39.0 68.0 5.0% 60.0 16.0% 1.0% Cash Flow Statement Capital Expenditures (% sales) Projection Period Balance Sheet Assumptions Balance Sheet Days Sales Outstanding (DSO) Days Inventory Held (DIH) Prepaids and Other Current Assets (% sales) Days Payable Outstanding (DPO) Accrued Liabilities (% sales) Other Current Liabilities (% sales) 26 Projection Period FINANCIAL STATEMENTS PROJECTIONS ASSUMPTIONS Income Statement and Cash Flow Statement Assumptions
- 27.
- 28. Calculation of FullyDiluted Shares Outstanding Purchase Price Public (1) / Private (2) 1 Offer Price per Share $18.50 Fully Diluted Shares Outstanding Equity Purchase Price Plus: Total Debt Plus: Preferred Securities Plus: Noncontrolling Interest Less: Cash and Cash Equivalents Enterprise Value Premium Calculation Stock Trading at (If Public) Premium Paid (If Public) 589.0 $10,896.5 Offer Price per Share Stock Trading at Basic Shares Outstanding Plus: Shares from In-the-Money Options Less: Shares Repurchased $18.50 $16.00 589.0 - Net New Shares from Options Plus: Shares from Convertible Securities 404.8 Fully Diluted Shares Outstanding (3,033.0) Options/Warrants $8,268.3 Number of Exercise Tranche Shares Price 589.000 In-the-Money Shares Proceeds $16.00 Tranche 1 16% Tranche 2 Tranche 3 - - - - Tranche 4 - - - - Tranche 5 - - - - Total - - - Convertible Securities Conversion Price Amount Issue 1 Issue 2 Issue 3 Issue 4 Issue 5 Total 28 - - Conversion Ratio - New Shares - TRANSACTION ANALYSIS Fully Diluted Shares and Purchase Price Calculation
- 29. TRANSACTION ANALYSIS Sources andUses of Funds Sources of Funds Multiple of EBITDA % of Total Equity % Amount Sources 12/31/2013 Cumulative Pricing Revolving Credit Term Loan A 5,000.0 -% 43.0% -x 6.6x -x 6.6x L+325 bps L+300 bps Term Loan B 2,000.0 17.2% 2.6x 9.3x L+350 bps Term Loan C 2nd Lien Senior Notes 1,000.0 -% -% 8.6% -x -x 1.3x 9.3x 9.3x 10.6x L+350 bps L+350 bps 3.000% Senior Subordinated Notes Sponsor Equity Rollover Equity Management Equity Cash on Hand 3,127.9 500.0 -% 26.9% -% -% 4.3% -x 4.1x -x -x 0.7x 10.6x 14.7x 14.7x 14.7x 15.4x 10.000% $11,627.9 100.0% 15.4x 15.4x 100% 0% 0% Total Sources Uses of Funds Purchase Price % of Total Uses Amount Purchase Target Equity Repay Existing Debt Tender / Call Premiums $10,896.5 404.8 - Financing Fees Investment Banking Fees Legal Fees 160.3 82.7 82.7 Other Fees and Expenses 1.0 Total Uses 29 $11,627.9 Offer Price per Share Fully Diluted Shares 10.9x 6.0x 31.2% $10,896.5 Exit Multiple (2,628.2) IRR $8,268.3 1.4% 0.7% Transaction Multiples 0.7% 0.0% Enterprise Value / Sales LTM 12/31/2013 $4,092.8 2013E 4,092.8 Enterprise Value / EBITDA LTM 12/31/2013 $755.6 2013E 2018 589.0 Entry Multiple 93.7% Equity Purchase Price 3.5% Plus: Existing Net Debt - % Enterprise Value 100.0% Return $18.50 Exit Year 839.0 Cash Return 3.9x Options Financing Structure 2.0x Operating Scenario 2.0x Cash Flow Sweep Cash Balance 10.9x Average Interest 9.9x Financing Fees 5 1 1 1 1 1
- 30. Financing Fees Fees Structure 4 Size RevolvingCredit Size Term Loan A Term Loan B (%) $300.0 5,000.0 2,000.0 Term Loan C 2nd Lien 1.750% 1.750% 1.750% - Senior Notes Senior Subordinated Notes Senior Bridge Facility Senior Subordinated Bridge Facility Other Financing Fees & Expenses ($) $5.3 87.5 35.0 - 1,000.0 1,000.0 - - 2.250% 2.250% 1.000% 1.000% 22.5 10.0 - Total Financing Fees $160.3 Amortization of Financing Fees Year 1 2014 Term Revolving Credit Size Term Loan A Term Loan B Term Loan C 2nd Lien Senior Notes Senior Subordinated Notes Senior Bridge Facility Senior Subordinated Bridge Facility Other Financing Fees & Expenses Annual Amortization Administrative Agent Fee 30 6 5 7 7 10 10 10 10 10 Year 2 2015 Year 3 2016 Year 4 2017 Year 5 2018 Year 6 2019 Year 7 2020 Year 8 2021 Year 9 2022 Year 10 2023 $0.9 17.5 5.0 2.3 1.0 - $0.9 17.5 5.0 2.3 1.0 - $0.9 17.5 5.0 2.3 1.0 - $0.9 17.5 5.0 2.3 1.0 - $0.9 17.5 5.0 2.3 1.0 - $0.9 5.0 2.3 1.0 - 5.0 2.3 1.0 - 2.3 1.0 - 2.3 1.0 - 2.3 1.0 - $26.6 $26.6 $26.6 $26.6 $26.6 $9.1 $8.3 $3.3 $3.3 $3.3 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 TRANSACTION ANALYSIS Financing Fees Amortization
- 31. $ in Millions IncomeStatement Historical Period 2011 2010 Sales % growth Cost of Goods Sold Gross Profit % margin Selling, General & Administrative % sales Other Expense / (Income) EBITDA % margin Depreciation & Amortization $3,543.3 NA 2012 $3,997.9 12.8% $4,280.2 7.1% $4,092.8 NA $4,092.8 (4.4%) Year 1 2014 Year 2 2015 Year 3 2016 Year 4 2017 Year 5 2018 Year 6 2019 Year 7 2020 Year 8 2021 Year 9 2022 Year 10 2023 $4,420.3 8.0% $4,729.7 7.0% $5,013.5 6.0% $5,264.1 5.0% $5,422.1 3.0% $5,584.7 3.0% $5,752.3 3.0% $5,924.8 3.0% $6,102.6 3.0% $6,285.7 3.0% 2,134.2 1,941.4 2,053.8 1,858.7 2,046.4 2,210.1 2,364.8 2,506.7 2,632.1 2,711.0 2,792.4 2,876.1 2,962.4 3,051.3 3,142.8 $1,409.1 39.8% $2,056.5 51.4% $2,226.3 52.0% $2,234.1 54.6% $2,046.4 50.0% $2,210.1 50.0% $2,364.8 50.0% $2,506.7 50.0% $2,632.1 50.0% $2,711.0 50.0% $2,792.4 50.0% $2,876.1 50.0% $2,962.4 50.0% $3,051.3 50.0% $3,142.8 50.0% 361.5 10.2% 405.6 10.1% 430.8 10.1% 424.0 10.4% 450.2 11.0% 442.0 10.0% 473.0 10.0% 501.3 10.0% 526.4 10.0% 542.2 10.0% 558.5 10.0% 575.2 10.0% 592.5 10.0% 610.3 10.0% 628.6 10.0% 604.8 798.4 921.0 1,054.5 757.2 $442.7 12.5% $852.5 21.3% $874.5 20.4% $755.6 18.5% $839.0 20.5% $1,768.1 40.0% $1,891.9 40.0% $2,005.4 40.0% $2,105.7 40.0% $2,168.8 40.0% $2,233.9 40.0% $2,300.9 40.0% $2,369.9 40.0% $2,441.0 40.0% $2,514.3 40.0% 187.0 204.2 226.2 242.7 204.6 221.0 236.5 250.7 263.2 271.1 279.2 287.6 296.2 305.1 314.3 - Amortization EBIT % margin Projection Period LTM Pro forma 12/31/2013 2013 $255.7 7.2% $648.3 16.2% $648.2 15.1% $512.9 12.5% - - - - - - - - - - - - - - - - - - - - - $634.4 15.5% $1,547.1 35.0% $1,655.4 35.0% $1,754.7 35.0% $1,842.5 35.0% $1,897.7 35.0% $1,954.7 35.0% $2,013.3 35.0% $2,073.7 35.0% $2,135.9 35.0% $2,200.0 35.0% 300.0 130.0 30.0 1.5 0.2 200.8 129.4 30.0 1.5 0.2 77.5 131.0 30.0 1.5 0.2 26.0 127.9 30.0 1.5 0.2 89.7 30.0 1.5 0.2 27.1 30.0 1.5 0.2 30.0 1.5 0.2 30.0 1.5 0.2 30.0 1.5 0.2 30.0 1.5 0.2 30.0 1.5 0.2 Cash Interest Expense Amortization of Deferred Financing Fees $461.7 26.6 $361.8 26.6 $240.1 26.6 $185.5 26.6 $121.3 26.6 $58.8 26.6 $31.7 9.1 $31.7 8.3 $31.7 3.3 $31.7 3.3 $31.7 3.3 Total Interest Expense Interest Income $488.3 $388.4 (12.7) $266.7 - $212.2 - $147.9 - $85.4 (2.1) $40.8 (10.3) $39.9 (22.5) $34.9 (35.2) $34.9 (48.3) $34.9 (61.9) Interest Expense Revolving Credit Facility Term Loan A Term Loan B Term Loan C Existing Term Loan 2nd Lien Senior Notes Senior Subordinated Notes Commitment Fee on Unused Revolver Administrative Agent Fee Net Interest Expense $375.8 $266.7 $212.2 $147.9 $83.3 $30.5 $17.4 ($13.4) ($27.0) Earnings Before Taxes Income Tax Expense 1,171.3 445.1 1,388.7 527.7 1,542.5 586.2 1,694.5 643.9 1,814.4 689.5 1,924.2 731.2 1,995.9 758.5 2,074.0 788.1 2,149.3 816.8 2,227.0 846.3 $726.2 $861.0 $956.4 $1,050.6 $1,125.0 $1,193.0 $1,237.5 $1,285.9 $1,332.6 $1,380.8 16.4% 18.2% 19.1% 20.0% 20.7% 21.4% 21.5% 21.7% 21.8% 22.0% Year 1 2014 Year 2 2015 Year 3 2016 Year 4 2017 Year 5 2018 Year 6 2019 Year 7 2020 Year 8 2021 Year 9 2022 Year 10 2023 8.0% 50.0% 10.0% -% 5.0% -% 1.0% 38.0% 7.0% 50.0% 10.0% -% 5.0% -% 1.0% 38.0% 6.0% 50.0% 10.0% -% 5.0% -% 1.0% 38.0% 5.0% 50.0% 10.0% -% 5.0% -% 1.0% 38.0% 3.0% 50.0% 10.0% -% 5.0% -% 1.0% 38.0% 3.0% 50.0% 10.0% -% 5.0% -% 1.0% 38.0% 3.0% 50.0% 10.0% -% 5.0% -% 1.0% 38.0% 3.0% 50.0% 10.0% -% 5.0% -% 1.0% 38.0% 3.0% 50.0% 10.0% -% 5.0% -% 1.0% 38.0% 3.0% 50.0% 10.0% -% 5.0% -% 1.0% 38.0% Net Income % margin Income Statement Assumptions Sales (% YoY growth) Cost of Goods Sold (% margin) SG&A (% sales) Other Expense / (Income) (% of sales) Depreciation & Amortization (% of sales) Amortization (% of sales) Interest Income Tax Rate 31 2010 NA 60.2% 10.2% 17.1% 5.3% -% 2011 12.8% 48.6% 10.1% 20.0% 5.1% -% 2012 7.1% 48.0% 10.1% 21.5% 5.3% -% LTM Pro forma 12/31/2013 2013 NA 45.4% 10.4% 25.8% 5.9% -% (4.4%) 50.0% 11.0% 18.5% 5.0% -% 1.0% ($0.3) TRANSACTION ANALYSIS Income Statement Projection
- 32. $ in Millions BalanceSheet Projection Period Opening 2013 Cash and Cash Equivalents Accounts Receivable Inventories Prepaids and Other Current Assets Total Current Assets Property, Plant and Equipment, net Goodwill and Intangible Assets Other Assets Deferred Financing Fees Total Assets Accounts Payable Accrued Liabilities Other Current Liabilities Adjustments (+) (-) $3,033.0 447.6 380.3 188.9 Year 3 2016 Year 4 2017 Year 5 2018 Year 6 2019 Year 7 2020 Year 8 2021 Year 9 2022 Year 10 2023 505.4 440.6 236.5 535.7 467.0 250.7 562.5 490.4 263.2 $428.1 579.3 505.1 271.1 $1,630.5 596.7 520.2 279.2 $2,876.6 614.6 535.8 287.6 $4,166.1 633.1 551.9 296.2 $5,502.4 652.1 568.5 305.1 $6,886.8 671.6 585.5 314.3 $4,049.8 $3,549.8 $1,105.1 $1,182.4 $1,253.4 $1,316.0 $1,783.6 $3,026.7 $4,314.7 $5,647.3 $7,028.0 $8,458.2 595.4 963.8 102.3 - 595.4 7,539.6 102.3 160.3 595.4 7,539.6 102.3 133.6 595.4 7,539.6 102.3 107.0 595.4 7,539.6 102.3 80.4 595.4 7,539.6 102.3 53.8 595.4 7,539.6 102.3 27.1 595.4 7,539.6 102.3 18.0 595.4 7,539.6 102.3 9.8 595.4 7,539.6 102.3 6.5 595.4 7,539.6 102.3 3.3 $5,711.4 $11,947.5 $9,476.1 $9,526.8 $9,571.1 $9,607.2 $10,048.1 $11,282.1 $12,561.8 $13,891.2 $15,268.7 $16,695.6 333.3 652.6 - 333.3 652.6 - 363.3 707.2 44.2 388.7 756.8 47.3 412.1 802.2 50.1 432.7 842.3 52.6 445.6 867.5 54.2 459.0 893.6 55.8 472.8 920.4 57.5 487.0 948.0 59.2 501.6 976.4 61.0 516.6 1,005.7 62.9 $985.9 $1,114.8 $1,192.8 $1,264.4 $1,327.6 $1,367.4 $1,408.4 $1,450.7 $1,494.2 $1,539.0 $1,585.2 5,000.0 2,000.0 1,000.0 - 1,693.5 1,980.0 1,000.0 - 825.3 1,960.0 1,000.0 - 1,801.6 1,000.0 - 723.9 1,000.0 - 1,000.0 - 1,000.0 - 1,000.0 - 1,000.0 - 1,000.0 - 1,000.0 - $1,390.7 $8,985.9 $5,788.3 $4,978.1 $4,066.0 $3,051.4 $2,367.4 $2,408.4 $2,450.7 $2,494.2 $2,539.0 $2,585.2 4,320.6 2,961.5 3,687.8 4,548.7 5,505.1 6,555.7 7,680.7 8,873.7 10,111.1 11,397.0 12,729.6 14,110.4 404.8 - 6,575.9 160.3 $985.9 Total Liabilities Year 2 2015 472.3 411.8 221.0 Total Current Liabilities Noncontrolling Interest All Shareholders' Equity Year 1 2014 $2,533.0 447.6 380.3 188.9 Revolving Credit Facility Term Loan A Term Loan B Term Loan C Existing Term Loan 2nd Lien Senior Notes Senior Subordinated Notes Other Debt Other Long-Term Liabilities (500.0) Pro Forma 2013 5,000.0 2,000.0 (404.8) 1,000.0 - 2,961.5 (4,320.6) 595.4 7,539.6 102.3 (0.0) Total Shareholders' Equity $4,320.6 $2,961.5 $3,687.8 $4,548.7 $5,505.1 $6,555.7 $7,680.7 $8,873.7 $10,111.1 $11,397.0 $12,729.6 $14,110.4 Total Liabilities and Equity $5,711.4 $11,947.5 $9,476.1 $9,526.8 $9,571.1 $9,607.2 $10,048.1 $11,282.1 $12,561.8 $13,891.2 $15,268.7 $16,695.6 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 31.0 31.0 (10.4) 0.7 (11.0) 0.6 (11.5) 0.5 (11.9) 0.3 (12.2) 0.4 (12.6) 0.4 (13.0) 0.4 (13.4) 0.4 (13.8) 0.4 Balance Check Net Working Capital (Increase) / Decrease in Net Working Capital Balance Sheet Assumptions Current Assets Days Sales Outstanding (DSO) Days Inventory Held (DIH) Prepaid and Other Current Assets (% of sales) Current Liabilities Days Payable Outstanding (DPO) Accrued Liabilities (% of sales) Other Current Liabilities (% of sales) 32 Opening 2013 Pro forma 2013 (9.7) 40.6 Year 1 2014 Year 2 2015 Year 3 2016 Year 4 2017 Year 5 2018 Year 6 2019 Year 7 2020 Year 8 2021 Year 9 2022 Year 10 2023 39.9 67.8 4.6% 39.9 67.8 4.6% 39.0 68.0 5.0% 39.0 68.0 5.0% 39.0 68.0 5.0% 39.0 68.0 5.0% 39.0 68.0 5.0% 39.0 68.0 5.0% 39.0 68.0 5.0% 39.0 68.0 5.0% 39.0 68.0 5.0% 39.0 68.0 5.0% 59.4 15.9% -% 59.4 15.9% -% 60.0 16.0% 1.0% 60.0 16.0% 1.0% 60.0 16.0% 1.0% 60.0 16.0% 1.0% 60.0 16.0% 1.0% 60.0 16.0% 1.0% 60.0 16.0% 1.0% 60.0 16.0% 1.0% 60.0 16.0% 1.0% 60.0 16.0% 1.0% TRANSACTION ANALYSIS Balance Sheet Projection and Adjustments
- 33. $ in Millions CashFlow Statement Projection Period Year 1 2014 Operating Activities Net Income Plus: Depreciation & Amortization Plus: Amortization Plus: Amortization of Financing Fees Changes in Working Capital Items (Inc.) / Dec. in Accounts Receivable (Inc.) / Dec. in Inventories (Inc.) / Dec. in Prepaid and Other Current Assets Inc. / (Dec.) in Accounts Payable Inc. / (Dec.) in Accrued Liabilities Inc. / (Dec.) in Other Current Liabilities (Inc.) / Dec. in Net Working Capital Cash Flow from Operating Activities Investing Activities Capital Expenditures Other Investing Activities Cash Flow from Investing Activities Financing Activities Revolving Credit Facility Term Loan A Term Loan B Term Loan C Existing Term Loan 2nd Lien Senior Notes Senior Subordinated Notes Other Debt Dividends Equity Issuance / (Repurchase) Cash Flow from Financing Activities Excess Cash for the Period Beginning Cash Balance Ending Cash Balance Cash Flow Statement Assumptions Capital Expenditures (% of sales) 33 Year 2 2015 $726.2 221.0 26.6 Year 3 2016 $861.0 236.5 26.6 Year 4 2017 $956.4 250.7 26.6 Year 5 2018 $1,050.6 263.2 26.6 $1,125.0 271.1 26.6 Year 6 2019 Year 7 2020 $1,193.0 279.2 9.1 Year 8 2021 $1,237.5 287.6 8.3 Year 9 2022 $1,285.9 296.2 3.3 Year 10 2023 $1,332.6 305.1 3.3 $1,380.8 314.3 3.3 (24.7) (31.4) (32.1) (33.1) (28.8) (15.5) (30.3) (26.4) (14.2) (26.8) (23.4) (12.5) (16.9) (14.7) (7.9) (17.4) (15.2) (8.1) (17.9) (15.6) (8.4) (18.4) (16.1) (8.6) (19.0) (16.6) (8.9) (19.6) (17.1) (9.2) 30.0 54.6 44.2 25.4 49.5 3.1 23.3 45.4 2.8 20.6 40.1 2.5 13.0 25.3 1.6 13.4 26.0 1.6 13.8 26.8 1.7 14.2 27.6 1.7 14.6 28.4 1.8 15.0 29.3 1.8 40.6 0.7 0.6 0.5 0.3 0.4 0.4 0.4 0.4 0.4 $1,014.5 $1,124.8 $1,234.3 $1,341.0 $1,423.0 $1,481.7 $1,533.7 $1,585.8 $1,641.4 $1,698.7 (221.0) - (236.5) - (250.7) - (263.2) - (271.1) - (279.2) - (287.6) - (296.2) - (305.1) - (314.3) - ($221.0) ($236.5) ($250.7) ($263.2) ($271.1) ($279.2) ($287.6) ($296.2) ($305.1) ($314.3) (3,306.5) (20.0) - (868.3) (20.0) - (825.3) (158.4) - (1,077.8) - (723.9) - - - - - - ($3,326.5) ($888.3) ($983.6) ($1,077.8) ($723.9) - - - - - ($2,533.0) 2,533.0 - - - $428.1 - $1,202.5 428.1 $1,246.1 1,630.5 $1,289.5 2,876.6 $1,336.2 4,166.1 $1,384.4 5,502.4 - - - - $428.1 $1,630.5 $2,876.6 $4,166.1 $5,502.4 $6,886.8 Year 1 2014 Year 2 2015 Year 3 2016 Year 4 2017 Year 5 2018 Year 6 2019 Year 7 2020 Year 8 2021 Year 9 2022 Year 10 2023 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% TRANSACTION ANALYSIS Cash Flow Statement Projections
- 34. $ in Millions DebtSchedule Projection Period Pro forma 2013 Forward LIBOR Curve 3.00% Year 4 2017 Year 5 2018 Year 6 2019 Year 7 2020 Year 8 2021 Year 9 2022 Year 10 2023 3.00% 3.15% 3.30% 3.60% 4.00% 4.35% 4.80% 4.85% 5.10% 5.25% $1,124.8 (236.5) $1,234.3 (250.7) $1,341.0 (263.2) $1,423.0 (271.1) $1,481.7 (279.2) $1,533.7 (287.6) $1,585.8 (296.2) $1,641.4 (305.1) $1,698.7 (314.3) $793.5 (20.0) 2,533.0 $888.3 (20.0) - $983.6 (20.0) - $1,077.8 (20.0) - $1,151.9 (20.0) - $1,202.5 428.1 $1,246.1 1,630.5 $1,289.5 2,876.6 $1,336.2 4,166.1 $1,384.4 5,502.4 $868.3 $963.6 $1,057.8 $1,131.9 $1,630.5 $2,876.6 $4,166.1 $5,502.4 $6,886.8 -% -% -% -% -% 100.0% $5,000.0 (3,306.5) $1,693.5 (868.3) $825.3 (825.3) - - - - - - - - - - - - - - $5,000.0 3.000% 5 years Beginning Balance Mandatory Repayments Optional Repayments Ending Balance $1,693.5 $825.3 6.00% 200.8 Interest Rate Interest Expense Term Loan B Size Spread Term Repayment Schedule Year 3 2016 $3,306.5 MinCash - Cash Available for Optional Debt Repayment Term Loan A Size Spread Term Repayment Schedule Year 2 2015 $1,014.5 (221.0) Cash Flow from Operating Activities Cash Flow from Investing Activities Cash Available for Debt Repayment Total Mandatory Repayments Cash From Balance Sheet Year 1 2014 6.15% 77.5 6.30% 26.0 6.60% - $1,801.6 (20.0) (1,057.8) 7.00% - 7.35% - 7.80% - 7.85% - 8.10% - 8.25% - $2,000.0 3.500% 7 years 1.0% Per Annum, Bullet at Maturity Beginning Balance Mandatory Repayments Optional Repayments $2,000.0 (20.0) - $1,980.0 (20.0) - $1,960.0 (20.0) (138.4) $1,980.0 $1,960.0 $1,801.6 $723.9 6.50% 129.4 6.65% 131.0 6.80% 127.9 7.10% 89.7 7.50% 27.1 7.85% - 8.30% - 8.35% - 8.60% - 8.75% - Beginning Balance Repayment $1,000.0 - $1,000.0 - $1,000.0 - $1,000.0 - $1,000.0 - $1,000.0 - $1,000.0 - $1,000.0 - $1,000.0 - $1,000.0 - Ending Balance $1,000.0 $1,000.0 $1,000.0 $1,000.0 $1,000.0 $1,000.0 $1,000.0 $1,000.0 $1,000.0 $1,000.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 Ending Balance Interest Rate Interest Expense Senior Notes Size Coupon Term Interest Expense 34 $723.9 (20.0) (703.9) - - - - - - - - - - - $1,000.0 3.000% 10 years TRANSACTION ANALYSIS Debt Schedule
- 35. Free Cash Flow ProjectionPeriod Historical Period 2010 2011 2012 LTM 12/31/2013 Pro forma 2013 Year 1 2014 Sales % growth $3,543.3 NA $3,997.9 12.8% $4,280.2 7.1% $4,092.8 NA $4,092.8 (4.4%) Gross Profit % margin Year 2 2015 Year 3 2016 Year 4 2017 Year 5 2018 Year 6 2019 Year 7 2020 Year 8 2021 Year 9 2022 Year 10 2023 $4,420.3 8.0% $4,729.7 7.0% $5,013.5 6.0% $5,264.1 5.0% $5,422.1 3.0% $5,584.7 3.0% $5,752.3 3.0% $5,924.8 3.0% $6,102.6 3.0% $6,285.7 3.0% $1,409.1 39.8% $2,056.5 51.4% $2,226.3 52.0% $2,234.1 54.6% $2,046.4 50.0% $2,210.1 50.0% $2,364.8 50.0% $2,506.7 50.0% $2,632.1 50.0% $2,711.0 50.0% $2,792.4 50.0% $2,876.1 50.0% $2,962.4 50.0% $3,051.3 50.0% $3,142.8 50.0% EBITDA % margin $442.7 12.5% $852.5 21.3% $874.5 20.4% $755.6 18.5% $839.0 20.5% $1,768.1 40.0% $1,891.9 40.0% $2,005.4 40.0% $2,105.7 40.0% $2,168.8 40.0% $2,233.9 40.0% $2,300.9 40.0% $2,369.9 40.0% $2,441.0 40.0% $2,514.3 40.0% Capital Expenditures % sales 2,529.0 71.4% 488.0 12.2% 616.0 14.4% 616.0 15.1% 616.0 15.1% 221.0 5.0% 236.5 5.0% 250.7 5.0% 263.2 5.0% 271.1 5.0% 279.2 5.0% 287.6 5.0% 296.2 5.0% 305.1 5.0% 314.3 5.0% 461.7 488.3 361.8 388.4 240.1 266.7 185.5 212.2 121.3 147.9 58.8 85.4 31.7 40.8 31.7 39.9 31.7 34.9 31.7 34.9 31.7 34.9 Cash Interest Expense Total Interest Expense Free Cash Flow EBITDA Less: Cash Interest Expense Plus: Interest Income Less: Income Taxes Less: Capital Expenditures Less: Increase in Net Working Capital $1,768.1 (361.8) 12.7 (445.1) (221.0) 40.6 $2,005.4 (185.5) (586.2) (250.7) 0.6 $2,105.7 (121.3) (643.9) (263.2) 0.5 $2,168.8 (58.8) 2.1 (689.5) (271.1) 0.3 $2,233.9 (31.7) 10.3 (731.2) (279.2) 0.4 $2,300.9 (31.7) 22.5 (758.5) (287.6) 0.4 $2,369.9 (31.7) 35.2 (788.1) (296.2) 0.4 $2,441.0 (31.7) 48.3 (816.8) (305.1) 0.4 $2,514.3 (31.7) 61.9 (846.3) (314.3) 0.4 $793.5 793.5 Free Cash Flow Cumulative Free Cash Flow $1,891.9 (240.1) (527.7) (236.5) 0.7 $888.3 1,681.8 $983.6 2,665.4 $1,077.8 3,743.2 $1,151.9 4,895.1 $1,202.5 6,097.6 $1,246.1 7,343.7 $1,289.5 8,633.2 $1,336.2 9,969.4 $1,384.4 11,353.8 $428.1 $1,630.5 $2,876.6 $4,166.1 $5,502.4 $6,886.8 Capitalization Cash Revolving Credit Facility Term Loan A Term Loan B Term Loan C Existing Term Loan 2nd Lien Other Debt Total Senior Secured Debt Senior Notes Total Senior Debt Senior Subordinated Notes Total Debt Shareholders' Equity Total Capitalization % of Bank Debt Repaid $2,533.0 - - - - 5,000.0 2,000.0 - 1,693.5 1,980.0 - 825.3 1,960.0 - 1,801.6 - $7,000.0 $3,673.5 $2,785.3 $1,801.6 $723.9 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0 $8,000.0 $4,673.5 $3,785.3 $2,801.6 $1,723.9 $1,000.0 $1,000.0 $1,000.0 $1,000.0 $1,000.0 $1,000.0 $8,000.0 $4,673.5 $3,785.3 $2,801.6 723.9 - $1,723.9 - $1,000.0 - $1,000.0 - $1,000.0 - $1,000.0 - $1,000.0 - $1,000.0 2,961.5 3,687.8 4,548.7 5,505.1 6,555.7 7,680.7 8,873.7 10,111.1 11,397.0 12,729.6 14,110.4 $10,961.5 $8,361.3 $8,334.0 $8,306.8 $8,279.6 $8,680.7 $9,873.7 $11,111.1 $12,397.0 $13,729.6 $15,110.4 47.5% 60.2% 74.3% 89.7% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% - Credit Statistics % Debt / Total Capitalization 73.0% 55.9% 45.4% 33.7% 20.8% 11.5% 10.1% 9.0% 8.1% 7.3% 6.6% EBITDA / Cash Interest Expense (EBITDA - Capex) / Cash Interest Expense 1.8x 0.5x 4.9x 4.3x 7.9x 6.9x 10.8x 9.5x 17.4x 15.2x 36.9x 32.3x 70.6x 61.8x 72.7x 63.6x 74.9x 65.5x 77.1x 67.5x 79.4x 69.5x EBITDA / Total Interest Expense (EBITDA - Capex) / Total Interest Expense 1.7x 0.5x 4.6x 4.0x 7.1x 6.2x 9.5x 8.3x 14.2x 12.5x 25.4x 22.2x 54.8x 47.9x 57.7x 50.5x 67.9x 59.4x 69.9x 61.2x 72.0x 63.0x Senior Secured Debt / EBITDA Senior Debt / EBITDA Total Debt / EBITDA Net Debt / EBITDA 8.3x 9.5x 9.5x 6.5x 2.1x 2.6x 2.6x 2.6x 1.5x 2.0x 2.0x 2.0x 0.9x 1.4x 1.4x 1.4x 0.3x 0.8x 0.8x 0.8x -x 0.5x 0.5x 0.3x -x 0.4x 0.4x (0.3x) -x 0.4x 0.4x (0.8x) -x 0.4x 0.4x (1.3x) -x 0.4x 0.4x (1.8x) -x 0.4x 0.4x (2.3x) 35 TRANSACTION ANALYSIS Free Cash Flow , Capitalization and Credit Statistics Summary
- 36.
- 37. $ in Millions ReturnsAnalysis Initial Sponsor Equity Initial Rollover Equity Initial Management Equity Total Initial Equity $3,127.9 $3,127.9 100% 0% 0% 100% Projection Period Pro forma 2013 Entry EBITDA Multiple Year 1 2014 Year 2 2015 Year 3 2016 Year 4 2017 Year 5 2018 Year 6 2019 Year 7 2020 Year 8 2021 Year 9 2022 Year 10 2023 10.9x EBITDA Exit EBITDA Multiple $1,768.1 $1,891.9 $2,005.4 $2,105.7 $2,168.8 $2,233.9 $2,300.9 $2,369.9 $2,441.0 $2,514.3 $10,608.7 $11,351.3 $12,032.3 $12,634.0 $13,013.0 $13,403.4 $13,805.5 $14,219.6 $14,646.2 $15,085.6 1,693.5 1,980.0 1,000.0 - 825.3 1,960.0 1,000.0 - 1,801.6 1,000.0 - 723.9 1,000.0 - 1,000.0 - 1,000.0 - 1,000.0 - 1,000.0 - 1,000.0 - 1,000.0 - $4,673.5 - $3,785.3 - $2,801.6 - $1,723.9 - $1,000.0 428.1 $1,000.0 1,630.5 $1,000.0 2,876.6 $1,000.0 4,166.1 $1,000.0 5,502.4 $1,000.0 6,886.8 $4,673.5 $3,785.3 $2,801.6 $1,723.9 $571.9 ($1,876.6) ($3,166.1) ($4,502.4) ($5,886.8) Less: Fees and Expenses Investment Banking Fees (1% of Transcation Value) Legal Fees (1% of Transaction Value) Other Fees and Expenses ($1MM) 106.1 106.1 1.0 113.5 113.5 1.0 120.3 120.3 1.0 126.3 126.3 1.0 130.1 130.1 1.0 134.0 134.0 1.0 138.1 138.1 1.0 142.2 142.2 1.0 146.5 146.5 1.0 150.9 150.9 1.0 Toal Fees and Expenses 213.2 228.0 241.6 253.7 261.3 269.1 277.1 285.4 293.9 302.7 $5,721.9 $7,338.0 $8,989.0 $10,656.4 $12,179.8 $13,764.8 $15,405.0 $17,100.4 $18,854.7 $20,669.7 6.0x Enterprise Value at Exit Less: Net Debt Revolving Credit Term Loan A Term Loan B Term Loan C Existing Term Loan 2nd Lien Senior Notes Senior Subordinated Notes Other Debt Total Debt Less: Cash and Cash Equivalents Net Debt All Equity Value at Exit Cash Return Sponsor IRR Sponsor Equity % Initial Equity Investment Equity Proceeds IRR 37 ($630.5) 1.8x 100% 2.3x 2.9x 3.4x 3.9x 4.4x 4.9x 5.5x 6.0x 6.6x Year 1 2014 Year 2 2015 Year 3 2016 Year 4 2017 Year 5 2018 Year 6 2019 Year 7 2020 Year 8 2021 Year 9 2022 Year 10 2023 ($3,127.9) $5,721.9 ($3,127.9) $7,338.0 ($3,127.9) $8,989.0 ($3,127.9) $10,656.4 ($3,127.9) $12,179.8 ($3,127.9) $13,764.8 ($3,127.9) $15,405.0 ($3,127.9) $17,100.4 ($3,127.9) $18,854.7 ($3,127.9) $20,669.7 20.8% 82.9% 53.2% 42.2% 35.9% 31.2% 28.0% 25.6% 23.7% 22.1% RETURN ANALYSIS Return Analysis
- 38. IRR - AssumingExit in 2018E Entry Multiple 31.2% 6.0x 9.9x 10.4x 10.9x 11.4x 11.9x 5.0x 26.3% 26.3% 26.3% 26.3% 26.3% 26.3% 5.5x 28.9% 28.9% 28.9% 28.9% 28.9% 28.9% Exit Multiple 6.0x 31.2% 31.2% 31.2% 31.2% 31.2% 31.2% 6.5x 33.5% 33.5% 33.5% 33.5% 33.5% 33.5% 7.0x 35.5% 35.5% 35.5% 35.5% 35.5% 35.5% IRR Sensitivity Analysis w.r.t Exit Multiple and Exit Year Assuming 4.6x Entry Multiple IRR - Assuming 10.9x Entry Multiple Exit Multiple 38 5.0x 5.5x 6.0x 6.5x 7.0x 2018 31.2% 26.3% 28.9% 31.2% 33.5% 35.5% 2019 28.0% 24.4% 26.3% 28.0% 29.7% 31.2% Exit Year 2020 25.6% 22.8% 24.2% 25.6% 26.9% 28.1% 2021 23.7% 21.4% 22.6% 23.7% 24.7% 25.6% 2022 22.1% 20.3% 21.2% 22.1% 22.9% 23.7% RETURN ANALYSIS IRR Sensitivity Analysis w.r.t Entry Multiple and Exit Multiple Assuming Exit in 2016
- 39. Financing Structures Structure 1 Base $300.0 Revolving CreditDraw Term Loan A Term Loan B Term Loan C 2nd Lien Senior Notes 3 Structure 2 $300.0 4 Structure 3 $300.0 5 Structure 4 $300.0 5,000.0 1,000.0 500.0 Sources of Funds Revolving Credit Size 2 Structure 1 $300.0 5,000.0 2,000.0 500.0 6,000.0 2,000.0 500.0 6,000.0 2,000.0 1,000.0 5,000.0 2,000.0 1,000.0 Senior Subordinated Notes Sponsor Equity 100% - - - - 4,627.9 3,627.9 2,627.9 2,127.9 3,127.9 500.0 - 500.0 - 500.0 - 500.0 - 500.0 - $11,627.9 $11,627.9 $11,627.9 $11,627.9 $11,627.9 $10,896.5 404.8 $10,896.5 404.8 $10,896.5 404.8 $10,896.5 404.8 $10,896.5 404.8 Tender / Call Premiums Financing Fees 160.3 160.3 160.3 160.3 160.3 Investment Banking Fees 82.7 82.7 82.7 82.7 82.7 Legal Fees Other Fees and Expenses 82.7 1.0 82.7 1.0 82.7 1.0 82.7 1.0 82.7 1.0 - - - - - Rollover Equity Management Equity Cash on Hand Other Source Total Sources of Funds 0% 0% Uses of Funds Target Equity Purchase Price Repay Existing Bank Debt Total Uses of Funds $11,627.9 $11,627.9 $11,627.9 $11,627.9 $11,627.9 5 Year IRR 28.6% 34.4% 38.6% 31.2% Cash Return 39 24.8% 3.0x 3.5x 4.4x 5.1x 3.9x RETURN ANALYSIS Alternative Financing Structures and Corresponding IRRs
- 40. Prepared by Deb Sahoo MBA, Finance,University of Michigan MS, EE, University of Southern California B-Tech, EE, IIT 40