Paraphrase and Summary PracticeA paraphrase represents a resta.docx

Paraphrase and Summary Practice
A paraphrase represents a restated version of something written
by the original author without using the same words. It indicates
the meaning of the text, but the wording and structure are
different from the original. Paraphrased material will be about
the same length as the original work. Keep in mind that a
paraphrase must contain a citation because the ideas originate
from another source.
A summary is similar to a paraphrase in that it consists of an
original author’s ideas written without using the same words. A
summary differs from a paraphrase in that it represents a
condensed version of the main ideas.
This handout can help you become more familiar with correctly
paraphrasing information from a source. Use the following
guidelines when paraphrasing or summarizing text:
· Read the information from the source, then go to a new page
on the computer or close the book as you begin recording the
main ideas. Any time you look back and forth from the source
to the page you are writing on, you risk inadvertently copying
from the source.
· Use your own words to record what you believe the author
said.
· Add a citation.
· Check the source when you have finished writing to be sure
you have written the content in your own words.
Plagiarism results if any of the following elements are present
in your paraphrase:
· Synonyms are substituted for some of the original words, but
most of the other words remain the same.

· Three or four consecutive words in a phrase from the source
are used without quotation marks.
· The citation is missing from your paraphrase. If no citation is
used, the material appears to the reader as your own idea.
Try It! Paraphrase and Summary Practice
Test yourself to see how well you can paraphrase and
summarize information from a source. Remember to follow the
guidelines to prevent plagiarism. After your practice, ask
yourself the following questions, and make changes as
necessary:
· Did you use any of the same words that appear in the original?
· Did you include a citation?
1. Original source:
“Although even low levels of physical activity can provide
some health benefits, evidence indicates that moderate to high
levels of physical activity are required to provide major health
benefits” (Powers, Dodd, & Jackson, 2014, Ch. 2). Note: when
citing direct quotes, use page numbers whenever possible, but
chapter and paragraph headings are also permissible if there are
no page numbers, as in this ebook.
Try paraphrasing:
Possible paraphrase:
A little exercise can be beneficial to our health, but activity that
is more strenuous ensures that we remain as healthy as we can
be (Powers, Dodd, & Jackson, 2014, Ch. 2). Note: when citing a
paraphrase, it is best to include the page number. However, the
use of chapters, headings, and paragraph numbers is permissible
in the absence of a page number, as long as the citation is as
specific as possible.

2. Original source:
“A special kind of persuasive request is one that casts the
request as a problem–solution message. With this strategy, you
first present a problem that you and the readers share—called
the common-ground persuasion technique—and then show how
doing as you propose will solve the problem for all concerned”
(Rentz & Lentz, 2014, Ch. 9).
Try paraphrasing:
A problem–solution message can be used when you need to
make a persuasive request. The problem presented will be one
that is common to you and the audience, but you will show how
that problem can be solved so that the outcome is beneficial for
everyone (Rentz & Lentz, 2014, Ch. 9).
3. Original source:
“The investments announced today, through USDA's Rural
Business Enterprise Grant (RBEG) program, promote the
development of small and emerging businesses in rural areas.
RBEGs may also be used to help fund distance learning
networks and employment-related adult education programs.
Eligible applicants include local public entities, private non-
profit corporations and federally recognized Indian Tribes”
(Freeman, 2014, para.3).
Try paraphrasing:
The Rural Business Enterprise Grant (RBEG) is offered to small
and new businesses not located in cities. The grant can be
applied toward education programs related to employment and
is often used by local entities, nonprofits, and Native American
tribes (Freeman, 2014, para.3).

4. Original source:
“While we argue the need for selecting and focusing on a single
model of critical thinking throughout a business curriculum, we
also advocate enabling students to recognize the key elements
of critical thinking across different representations. Students
ultimately need to be able to recognize and embrace critical
thinking in their workplaces, even when it appears in a different
form than the one they learned in school, as it undoubtedly
will” (Bloch & Spataro, 2014).
Try paraphrasing:
Bloch and Spataro (2014) argue that it is beneficial for students
to focus on one model of critical thinking in their business
curriculum, but that they must remain open to different models
once they begin to apply critical thinking in the workplace.
5. Original source:
Schawbel, D. (5 June 2014). Become a LinkedIn power user.
Career Services. Retrieved from
http://www.phoenix.edu/forward/careers/2014/06/how-to-use-
linkedin-to-find-job-opportunities.html
Try summarizing the short article above:
Possible summary:
Author Dan Schawbel (2014) offers some useful tips to make
the most of a LinkedIn account. You should have a complete
and detailed profile that adequately describes your skills,
interests, and experience. You should also become affiliated
with groups that are pertinent to your industry. When making
connections, do not be shy about adding people you know and
have worked with. A large connection base can be helpful when
researching potential employers. Reaching out to your
connections can provide you with valuable information and new
connections as you search. The process can take time, so it is

best not to give up easily. LinkedIn can be useful for your
career if you are persistent.
6. Original work:
Smiley, T. (14 July 2014). How to turn an interview into a
conversation. Career Services. Retrieved from
http://www.phoenix.edu/career-services/articles/how-to-turn-an-
interview-into-a-conversation.html
Try summarizing the short article above:
Possible summary:
Tavis Smiley (2014) recommends a few methods for
transitioning an interview into a conversation. He advocates for
asking questions early to demonstrate that you are a good
listener who is interested. Smiley also recommends asking
open-ended questions. Rather than questions that provoke a one-
word answer, end your questions with why, or how. It also helps
to find out a little bit about your interviewer beforehand, using
Google or LinkedIn. Finally, be sure your non-verbal
communication skills are on point. If you use these techniques,
the interviewer will not be aware that you were driving the
conversation all along.
References
Bloch, J., & Spataro, S. (2014). Cultivating critical-thinking
dispositions throughout the business curriculum. Business
Communication Quarterly, 77(3), 249–265. DOI:
10.1177/2329490614538094
Freeman, W. (2014). USDA invests in small and emerging rural
businesses and rural transportation. United States Department of
Agriculture. Retrieved from
http://www.usda.gov/wps/portal/usda/usdahome?contentid=2014
/10/0232.xml
Hughes, J. E. (4 June 2014). How to develop good study habits.
Phoenix Forward. Retrieved from
http://www.phoenix.edu/forward/student-life/2014/06/how-to-
develop-good-study-habits.html

Powers, S., Dodd, S., & Jackson, E. (2014). Total fitness and
wellness (6th ed.). Retrieved from the University of Phoenix
eBook Collection database.
Rentz, K., & Lentz, P. (2014). Lesikar’s business
communication: Connecting in a digital world (13th ed.).
Retrieved from the University of Phoenix eBook Collection
database.
Schawbel, D. (5 June 2014). Become a LinkedIn power user.
Phoenix Forward. Retrieved from
http://www.phoenix.edu/forward/careers/2014/06/how-to-use-
linkedin-to-find-job-opportunities.html
[Double click inside this box to begin typing your paraphrase].
[Double click inside this box to begin typing your summary].
[Double click inside this box to begin typing your summary].

Center for Writing Excellence. Updated: November 2015
2
IntroductionIllustrating the Deal Structuring and Valuation
ProcessThe purpose of this Microsoft Excel spreadsheet model
is to provide anan example of how the modelbuilding process
outlined in Chapter 9 of the textbook (Mergers and Acquisitions
and Other Corporate(3rd edition) by Donald DePamphilis can be
used to develop the initial offer price and subsequentcounter-
offers during deal negotiations. The model is intended to serve
as a template or patternfor constructing M&A financial
models.1 As such, the spreadsheet model contained on this
diskettemodel containedtained on this CD-ROMshould be
altered to reflect the unique characteristics of each
situation.The spreadsheet model follows a four-step model
building process. Each step contains the numberof worksheets
needed to satisfy the requirements of each step. Each worksheet
is identified by a self-explanatory title and the "short name"
used in developing the worksheet linkages. Appendices A andB
include the projected timeline, milestones, and individual(s)
responsible for each activity required tocomplete the
transaction.StepWorksheet TitleShort Name1Determine
Acquirer and Target Standalone ValuationsAcquirer 5-Year
Forecast and Standalone ValuationBP_App_B1Acquirer
Historical Data and RatiosBP_App_B2Acquirer Debt
Repayment SchedulesBP_App_B3Acquirer Cost of Equity and
Capital CalculationBP_App_B4Target 5-Year Forecast and
Standalone ValuationAP_App_B1Target Historical Data and
RatiosAP_App_B2Target Cost of Equity and Capital
CalculationAP_App_B32Value Combined Acquirer and Target
Firms Including SynergyCombined Firm's 5-Year Forecast and
ValuationAP_App_CSynergy EstimationAP_App_D3Determine
Initial Offer Price for Target FirmOffer Price
DeterminationAP_App_EAlternative Valuation

SummariesAP_App_F4Determine Combined Firm's Ability to
Finance TransactionCombined Firm's Financing
CapacityAP_App_GAppendix AAcquisition
TimelineAP_App_A1Appendix BSummary: Milestones and
Responsible Individual(s)AP_App_A2Please be aware that a
number of worksheets use the "iteration" calculation option of
Excel.This option may have to be turned on for the worksheets
to operate correctly. If the program givesyou a "circular
reference warning," please go to Tools, Options, Calculation
and turn on theiteration feature. Ten iterations will usually be
enough to solve any circular reference; however,the number
may vary with different versions of Excel. Individual model
simulations can be mostefficiently generated by making
relatively small incremental changes to a few key
assumptionsunderlying the model. Key assumptions include
such variables as sales growth and the cost ofsales as a percent
of sales.The use of Excel's interation capability will
accommodate the "circularity or circular references"inherent in
the model. For example, the change in cash and investments
impacts interest income,which in turn affects net income and
the change in cash and investments.1This illustration was
adapted from a Loyola Marymount University MBA paper by
Jon Murray,Christian Klawitter, Kenin McConahey, and Addie
Stalk entitled "Mattel Proposes to Buy JAKKSPacific," May 2,
2002. The author would like to acknowledge the special
contribution Addie Stalkmade to this paper.
BP_App_B1Step 1: Acquirer 5-Year Forecast and Standalone
ValuationForecast Assumptions 2006 -
201020062007200820092010Net Sales Growth
Rate4.0%4.0%4.0%4.0%4.0%Cost of Sales (Variable) / Sales
%52.5%51.5%51.0%50.5%50.5%Depreciation & Amortization /
Gross Fixed Assets %8.3%8.3%8.3%8.3%8.3%Selling Expenses
/ Sales (%)14.5%14.5%14.5%14.5%14.5%G&A Expenses /
Sales (%)19.0%18.5%18.0%17.2%16.4%Interest on Cash &
Marketable Securities5.0%5.0%5.0%5.0%5.0%Interest Rate on
New Debt (%)8.3%8.3%8.3%8.3%8.3%Marginal Tax

Rate18.0%22.0%25.0%30.0%37.0%Other Current Operations
Assets / Sales (%)35.0%35.0%35.0%35.0%35.0%Other Assets /
Sales (%)35.0%30.0%25.0%20.0%20.0%Gross Fixed Assets /
Sales (%)25.0%25.0%25.0%25.0%25.0%Minimum Cash
Balance / Sales (%)4.5%4.5%4.5%4.5%4.5%Current Liabilities
/ Sales (%)30.0%30.0%28.0%26.0%25.0%Common Shares
Outstanding (Mil)426.0426.0426.0426.0426.0Cost of Capital:
2006 - 2010 (%)11.81%1)Cost of Capital: Terminal Period
(%)10.31%1)Sustainable Cash Flow Growth Rate
(%)4.00%Market Value of Long-Term
Debt$1,171millionHistorical FinancialsProjected
Financials200220032004200520062007200820092010Income
Statement ($mil)1)Net
Sales4,7794,6984,5964,6704,8575,0515,2535,4635,682Less:Var
iable Cost of
Sales2,3152,2862,3332,4152,4492,4962,5702,6462,751Deprecia
tion1001038175101105109113118Total Cost of
Sales2,4152,3892,4142,4902,5502,6012,6792,7592,869Gross
Profit2,3642,3102,1822,1802,3072,4502,5742,7042,812Less:Sal
es Expense761786685681704732762792824G&A
Expense780863868908923934946940932Amortization of
Intangibles324152525252525252Other expense (income),
net15(5)(19)(16)(16)(16)(16)(16)Total Sales and G&A
Expense1,5741,6951,5991,6221,6631,7031,7431,7681,792Opera
ting Profits (EBIT)7906155835586447478319361,021Plus:
Interest Income- 0- 0- 02340477496Less: Interest
Expense901111321531271281219696Net Profits Before
Taxes7005044514055406597579151,021Less:
Taxes201131625597145189274378Net Profits After
Taxes500373390350443514567640643Balance Sheet (as of
12/31/2005)Current
AssetsCash695213247232219227236246256Other Operating
Assets1,7671,8451,6051,5191,7001,7681,8391,9121,989Total
Current
Assets2,4622,0581,8521,7521,9181,9952,0752,1582,244Investm
ents2455827111,2351,674Gross Fixed

Assets9391,1591,1471,1211,2141,2631,3131,3661,420Less:
Accum. Depr. & Amort.3374224224735746797889011,019Net
Fixed Assets602737725648640584526465402Other
Assets8521,8192,0971,9141,9141,9131,9131,9131,913Total
Assets3,9154,6134,6744,3134,7185,0755,2245,7716,233Current
Liabilities1,1731,3171,5651,5021,4571,5151,4711,4201,420Lon
g-Term DebtExisting
Debt6649849831,2421,2421,021640589400New Debt- 0- 0- 0-
0- 0- 0- 0- 0- 0Other
Liabilities144141163166172179186194201Total
Liabilities1,9822,4422,7112,9102,8722,7152,2972,2032,022Co
mmon
Stock7282,0411,9231,8361,8361,8361,8361,8361,836Retained
Earnings1,20513040(433)105241,0911,7312,375Shareholders'
Equity1,9332,1711,9631,4031,8462,3602,9273,5684,211Total
Liabilities & Shareholders'
Equity3,9154,6134,6744,3144,7185,0755,2245,7716,233Addend
um: Check(0)10(0)- 0- 0- 0- 0- 0Shares Outstanding
(millions)291.6390.8421.6426.0426.0426.0426.0426.0426.0Effe
ctive Tax
Rate28.6%26.0%13.7%13.6%18.0%22.0%25.0%30.0%37.0%Ear
nings per Share$ 1.71$ 0.95$ 0.92$ 0.82$ 1.04$ 1.21$
1.33$ 1.50$ 1.51Long-Term
Debt/Equity37%48%53%93%70%46%24%18%11%Addendum:
Working Capital1,288741287249461480604738824Free Cash
FlowEBIT (1-t)564455503482528583623655643Plus:
Depreciation and
Amortization132144133127153157161165170Less: Gross
Capital Expenditures201221(12)(26)9349515355Less: Change
in Working Capital(200)(548)(454)(37)2121812413386Free
Cash Flow6959261,102672375672609635672PV: 2006 - 2010$
2,100PV: Terminal Value$ 6,342Notes:Total PV (Market
Value of the Firm)$ 8,4421) The historical financial
statements have been adjusted for the discontinued
operations.Less: Market Value of Long-Term Debt$ 1,1712)
For the long-term, the Acquirer believes its weighted average

cost of funds is the appropriate measurePlus: Excess Cash
(Investments)$ 245to discount cash flows.Equity Value$
7,517Equity Value per Share$ 17.64
&C&"Arial,Bold"&14
MATTEL Business Plan 2001-2005 Financial
Forecast&R&UAppendix B-1
&LMattel Business Plan&C&P of &N&R&D
Excluding non-recurring charges and discontinued operations
BP_App_B2Step 1 Continued: Acquirer Historical Data and
RatiosHistorical RatiosHistorical Financial
Ratios2002200320042005AverageMinimumMaximumNet Sales
Growth Rate1)-1.7%-2.2%1.6%-0.8%-2.2%1.6%Cost of Sales
(Variable) / Sales
%2)50.5%50.8%52.5%53.3%51.8%50.5%53.3%Depreciation &
Amortization / Gross Fixed Assets
%3)10.7%8.9%7.1%6.7%8.3%6.7%10.7%Selling Expenses /
Sales (%)4)15.9%16.7%14.9%14.6%15.5%14.6%16.7%G&A
Expenses / Sales
(%)5)16.3%18.4%18.9%19.4%18.3%16.3%19.4%Interest on
Cash & Marketable
Securities6)3.0%3.5%4.0%5.0%3.9%3.0%5.0%Interest Rate on
Debt (%)7)6.0%5.6%5.5%6.7%6.0%5.5%6.7%Tax
Rate8)28.6%26.0%13.7%13.6%20.5%13.6%28.6%Other Assets /
Sales (%)9)17.8%38.7%45.6%41.0%35.8%17.8%45.6%Gross
Fixed Assets / Sales
(%)10)19.6%24.7%25.0%24.0%23.3%19.6%25.0%Cash Balance
/ Sales (%)11)14.5%4.5%5.4%5.0%7.4%4.5%14.5%Other
Current (Operations) Assets / Sales
(%)12)37.0%39.3%34.9%32.5%35.9%32.5%39.3%Current
Liabilities / Sales
(%)13)24.6%28.0%34.1%32.2%29.7%24.6%34.1%Debt /
Equity34.4%45.3%50.1%88.5%54.6%34.4%88.5%Notes:1)The
Acquirer's business plan refocuses the company to capitalize on
its core strengths. The firm's traditional markets are
mature.Annual average market growth of 2% is expected over
the next five years. The Acquirer's initiatives are expected to

provide an additional 2% bygaining market share in the U.S.
and expanding into new markets.2)Bringing down the Cost of
Sales to 50.5% over the next four years will be achieved
through the following actions:- the reduction of excess
manufacturing capacity,- the termination of a variety of
licensing and other contractual arrangements that did not
deliver adequate profitability,- the elimination of product lines
that did not meet required levels of profitability, and- the
improvement of supply chain performance and
economics.3)Depreciation as percent of Gross Fixed Assets has
been estimated at the average ratio over the historical
period.4)The elimination of underperforming product lines will
allow the company to spend sales dollars more
effectively.5)Although G&A expense shows an increase in 2004
and 2005, this percentage is expected to decrease over the
nextfew years to 16.5% as a result of major efficiency
initiatives, including- the elimination of approximately 350
positions at the US-based headquarters and in certain other
subsidiaries.- the closing of certain international offices, and-
an increase in efficiency in supply chain communication.6)A
blended rate, combining non-interest bearing deposits and
marketable securities, is used in the forecast.7)The interest on
Current Debt is calculated based on the existing interest rates
on the debt.The interest rate on future debt will be estimated at
the interest rate on Moody's A rated debt as of December
2000.8)The tax rate shown is the tax on income after exclusion
of non-recurring charges. The actual tax rate was 24.5% for
2000,5,36.3% for 2004 and 28.6% for 2003. As of December
31, 2005, the Acquirer had US Net Operating loss carry-
forwards totalling $1.1 billion.Utilization of these carry-
forwards is subject to annual limitations. As a result of the loss
carry-forwards, the income tax rate for2006-2008 is estimated at
18%, 22% and 25%.The tax rate is estimated to increase to 30%
in 2009 and 37% in 2010.9)Other Assets include $515 million in
deferred income taxes. Without this amount the ratio of Other
Assets / Sales would havebeen 29%. As losses are used, the

percentage of Other Assets will be reduced over the next three
years.10)Elimination of excess capacity will be balanced by
increased investment in new equipment. Gross Fixed Assets
areexpected to grow in line with sales during the forecast
period.11)To ensure sufficient liquidity a minimum cash
balance of 4.5% is included in the forecast.12)Working capital
has been reduced to below desirable levels over the last few
years putting a strain on the funding of current operations.To
ensure sufficient Current Assets to fund operations a minimum
level of 35% for Other Current Operating Assets is included in
the forecast.13)Current Liabilities as a % of Sales are above
average in 2005 as a result of severance pay and other charges
resulting from theprovisions for elimination of redundant
positions (see item 5). This percentage is expected to be
reduced gradually over the forecast period.
&C&"Arial,Bold"&14MATTEL Business Plan 2001-2005
Historical Ratios and Explanations of
Assumptions&"Arial,Regular"&10
&R&UAppendix B-2
&LMattel Business Plan&C&F&A&R&D
BP_App_B3Step 1 Continued: Acquirer Debt Repayment
SchedulesMaturity Schedule and Interest Rates - Existing Long-
Term Debt for Forecast Period(Amounts in thousands)Maturity
ScheduleTotal
Debt20062007200820092001020112012201320142015Debt
Category12/31/05Maturing AmountInterest RateMaturing
AmountInterest RateMaturing AmountInterest RateMaturing
AmountInterest RateMaturing AmountInterest
RateAmount%Amount%Amount%Amount%Amount%Long-
Term Debt
1)690,710190,7105.500%350,0005.500%150,0005.500%Medium
-Term
Notes540,50030,5007.500%30,0007.500%30,0007.500%50,0007
.500%-
00.000%50,0007.500%50,0007.500%100,0007.500%100,0007.5
00%100,0007.500%Mortgage

Note42,38069410.150%76710.150%84910.150%93910.150%39,
13110.150%Total Debt
2)1,273,59031,1947.559%221,4775.787%380,8495.668%50,939
7.549%189,1316.462%50,0007.500%50,0007.500%100,0007.50
0%100,0007.500%100,0007.500%Remaining BalanceBeg.
Bal20062007200820092010Debt Category1/1/06Ending
BalanceInterest RateEnding BalanceInterest RateEnding
BalanceInterest RateEnding BalanceInterest RateEnding
BalanceInterest RateLong-Term
Debt690,710690,7105.500%500,0005.500%150,0005.500%150,
0005.500%- 05.500%Medium-Term
Notes540,500510,0007.500%480,0007.500%450,0007.500%400,
0007.500%400,0007.500%Mortgage
Note42,38041,68610.150%40,91910.150%40,07010.150%39,13
110.150%- 010.150%- 0Total
Debt1,273,5901,242,3966.477%1,020,9196.627%640,0707.197
%589,1317.167%400,0007.500%- 0Interest
Payments20062007200820092010Interest
Rate6.477%6.627%7.197%7.167%7.500%Beginning
Balance1,273,5901,242,3961,020,919640,070589,131Interest on
LT, MT, & Mort. Debt82,49182,33073,47845,87244,185Credit
Facility 3)700,000728,000757,120787,405818,901Interest on
Credit Facility44,38046,15548,00149,92151,918Total
Interest126,871128,485121,47995,79496,103- 0Notes:1)Long-
Term Debt consists of:- Euro Notes190,710- Unsecured term
loan-2008200,000- Senior Notes-2008150,000- Senior Notes -
2010150,000Total690,7102)Including short-term portion that
matures in 2005 that is included in Current Liabilities. Interest
rate is calculated as a weighted average of long-term, medium
term, and mortgage note interest rates.Note the weighted
average interest rates associated with the principal repayments
are used on Worksheet BP_App_B4 to calculate the dollar value
of coupon in estimatin3)The Acquirer has a $1 billion unsecured
committed facility for seasonal financing, as wellas $400
million in foreign credit line.Average usage
is50%or$700million.Interest rate is Commercial Paper

rate6.34%Need for credit lines is assumed to keep pace with
sales growth at4.00%
&C&"Arial,Bold"&14MATTEL Business Plan
2001 - 2005
Debt Maturity Schedule and Interest Payments&R&UAppendix
B-3
&LMattel Business Plan&C&F - &A&R&D
BP_App_B4Step 1 Continued: Acquirer Cost of Equity and
Capital CalculationsFinancial Benchmarks as of December 31,
2005Prime9.50%10 -Year T-Note5.24%Commercial Paper 3-
months6.34%Federal Funds Rate6.40%CD's 6
months6.30%Moody's A8.33%Industry Long-term
Debt/Equity50.00%Calculation of Cost of Equity and
CapitalRisk-free Rate5.24%Acquirer's Unlevered
Beta1.401)Acquirer's Target D/(D+E) Ratio50%Acquirer's
Target Tax Rate37%Acquirer's Levered Beta1.84Market Risk
Premium5.50%Acquirer's Cost of Debt8.33%Acquirer's Cost of
Equity15.37%Acquirer's Weighted Cost of
Capital10.31%Additional Risk Premium1.50%2)Adjusted Cost
of Capital11.81%Calculation of Market Value of Current Long-
Term DebtDiscount Rate - Moody's
Aaa8.33%2006200720082009201020112012201320142015Total
Int.
Rate7.56%5.79%5.67%7.55%6.46%7.50%7.50%7.50%7.50%7.5
0%BegBal1,273,5901,242,3961,020,919640,070589,131400,000
350,000300,000200,000100,000-
0Payments:Principal31,194221,477380,84950,939189,13150,00
050,000100,000100,000100,0001,273,590Interest95,09165,4894
7,07246,39531,95928,12524,37518,75011,2503,750Total Debt
Int+Principal126,285286,966427,92197,334221,09078,12574,37
5118,750111,250103,750Discounted Value$1,170,7621) If the
firm is a public company, the levered beta may be estimated
directly. However, if it is a private firm, an unlevered beta
associated with a comparablecompany may be adjusted for the
leverage of the firm for which the levered beta is to be
calculated.2) The analyst in this instance believes the estimated

cost of debt and equity does not adequately account for risk that
is specific to the firm. Therefore,1.5% is added to the cost of
capital to create the adjusted cost of capital. The magnitude of
this adjustment is based on what the analyst believesto be the
cost of capital for firms exhibiting risk comparable to the
Acquirer.
&C&"Arial,Bold"&14
MATTEL Business Plan 2001 - 2005
Supplemental Financial Data&R&UAppendix B-4
&LMattel Business Plan&C&F - &A&R&D
AP_App_B1Step 1 Continued: Target 5- Year Forecast and
Standalone ValuationForecast Assumptions 2006 -
201020062007200820092010Net Sales Growth
Rate15.0%15.0%10.0%8.0%5.0%Cost of Sales (Variable) /
Sales %60.2%59.7%59.5%59.5%59.5%Depreciation &
%10.0%10.0%10.0%10.0%10.0%Selling Expenses / Sales
(%)15.0%15.0%15.0%15.0%15.0%G&A Expenses / Sales
(%)14.5%14.5%14.1%14.1%14.1%Interest on Cash &
Marketable Securities1)5.0%5.0%5.0%5.0%5.0%Interest Rate
on New Debt (%)7.2%7.2%7.2%7.2%7.2%Marginal Tax
Rate29.0%29.5%30.0%30.5%31.0%Other Current Operations
Assets / Sales (%)30.0%30.0%30.0%30.0%30.0%Other Assets /
Sales ($5 million decrease per year)5.005.005.005.005.00Gross
(%)12.0%12.0%12.0%12.0%12.0%Minimum Cash Balance /
Sales (%)6.0%6.0%6.0%6.0%6.0%Current Liabilities / Sales
(%)25.0%25.0%25.0%25.0%25.0%Common Shares Outstanding
(Mil)19.119.119.119.119.1Cost of Capital: 2006 - 2010
(%)13.55%Cost of Capital: Terminal Period
(%)11.50%3)Sustainable Cash Flow Growth Rate
(%)4.00%Market Value of Long-Term
Debt$1.4millionHistorical FinancialsProjected
Statement ($mil)Net
Sales4285184252290334367396416Less:Variable Cost of

Sales2549103141171195214231243Depreciation135934455Tota
l Cost of Sales2652108150175199218236248Gross
Profit163376102115134149161169Less:Sales
Expense6.301328384450555962G&A
Expense5.601124434248525659Amortization of Intangibles- 0-
0- 0- 0- 0- 0- 0- 0- 0Other expense (income), net
2)01(4)(15)(16)(16)(16)(16)(16)Total Sales and G&A
Expense1225476670839199105Operating Profits
(EBIT)4929374652586163Plus: Interest Income- 0-
02468101316Less: Interest Expense00- 0- 00000- 0Net Profits
Before Taxes3830405160687480Less:
Taxes2.8622293642485255Balance SheetCurrent
Assets1216618687100110119125Total Current
Assets1529158129104120132143150Investments951361862403
00Gross Fixed Assets4617303540444850Less: Accum. Depr. &
Amort.125111418232732Net Fixed
Assets3412192122212018Other
Assets2626641019691868176Total
Assets4459233249317369425484544Current
Liabilities1215444273839299104Long-Term DebtExisting
Debt66011110- 0New Debt- 0- 0- 0- 0- 0- 0- 0- 0- 0Other
Liabilities18214544768694102106Common
Stock2227155144144144144144144Retained
Earnings411326197139187239294Shareholders'
Equity2638188205241283331382437Total Liabilities &
Shareholders' Equity4459233249317369425484544Addendum:
Check(0)(0)0(0)- 0- 0- 0- 0- 0Shares Outstanding
(millions)6.98.513.919.119.119.119.119.119.1Effective Tax
Rate18.8%22.6%27.5%29.0%29.0%29.5%30.0%30.5%31.0%Ear
nings per Share$ 0.40$ 0.75$ 1.58$ 1.50$ 1.91$ 2.20$
2.50$ 2.70$ 2.88Addendum: Working
Capital314113873237404446Free Cash FlowEBIT (1-
t)3721263337404244Plus: Depreciation and

Amort.135934455Less: Gross Capital
Expenditures33101355442Less: Change in Working
Capital(4)1099(26)(55)5432Free Cash
Flow6(3)(84)498631374044PV: 2006 - 2010$172.4PV: Terminal
Value$324.33)Total PV (Market Value of the Firm)$496.7Less:
Market Value of Long-Term Debt$1.4Plus: Excess Cash
(Investments)$95.4Equity Value$590.7Equity Value per
Share$30.99Notes:1) Blended rate on interest-bearing cash
accounts and short-term money market instruments.2) The
Target receives certain licensing income from a joint venture.
In 2000 this licensing income was $15.9 million.The Target
expects an increase in licensing income but for the valuation
this income has been held stable through 2005.3) The terminal
period cost of capital is reduced to 11.5%. The Target's cost of
capital will remain higher than that of the Acquirer's because of
its low leverage.
&C&"Arial,Bold"&14Acquisition Plan - JAKKS
Financial Forecast 2001 - 2005 and Valuation
JAKKS&R&UAppendix B-1
&LAcquisition Plan JAKKS&C&P of &N&R&D
AP_App_B2Step 1 Continued: Target Historical Data and
RatiosHistorical RatiosHistorical Financial
Ratios2002200320042005AverageMinimumMaximumNet Sales
Growth Rate1)103.2%115.5%37.3%85.4%37.3%115.5%Cost of
Sales (Variable) / Sales
%2)61.7%61.0%58.6%59.4%60.2%58.6%61.7%Depreciation &
%3)27.8%46.2%27.1%31.3%33.1%27.1%46.2%Selling
Expenses / Sales
(%)4)15.0%15.0%15.0%15.0%15.0%15.0%15.0%G&A
Expenses / Sales
(%)5)13.3%13.2%12.8%16.9%14.1%12.8%16.9%Interest on
Cash & Marketable
Securities6)0.0%0.0%1.6%8.9%2.6%0.0%8.9%Interest Rate on
Debt (%)7)7.0%7.1%0.0%0.0%3.5%0.0%7.1%Tax
Rate8)18.8%22.6%27.5%29.0%24.5%18.8%29.0%Other Current

Operations Assets / Sales
(%)9)29.5%19.0%33.0%34.0%28.9%19.0%34.0%Other Assets /
Sales (%)10)61.4%30.3%34.7%40.1%41.6%30.3%61.4%Gross
(%)11)9.4%7.6%9.2%11.7%9.5%7.6%11.7%Cash Balance /
Sales (%)12)6.0%14.6%52.7%17.0%22.6%6.0%52.7%Current
Liabilities / Sales
(%)13)27.6%17.5%24.1%16.5%21.4%16.5%27.6%Capital
Expenditures / Gross Fixed
Assets14)74.2%38.8%61.7%43.1%54.4%38.8%74.2%Debt /
Equity15)23.0%15.7%0.0%0.5%9.8%0.0%23.0%Notes:1)During
the last few years, the Target has acquired several small
companies which have contributed to its large growth in net
sales. For purposes of the valuation,we assume a higher growth
rate than the mature industry (2-4%) in which the Target
competes, because the Target derives a large portion of its sales
fromsegments whose growth is exceeding the overall market
growth rate. We assume 10% growth for the next 2 years, after
which we expect growth to decline graduallyto 5% in 2010.
Beyond 2010, the Target's growth is expected to mirror the
industry's long-term 4% rate of growth.2)The Target has
realized cost of sales efficiencies in their recent acquisitions.
They have reduced licensing and royalty payouts by acquiring
technologyand viable brands with extended life. However, the
use of outside manufacturers results in inherently higher
manufacturing costs than those of the Acquirer.3)Depreciation
of Gross Fixed Assets has been set at 10% to assume a 10 year
depreciation cycle which is standard for most long-lived assets
in this industry.4)Selling expenses will remain flat as a
percentage of sales within our model.5)The Target has
experienced some growth in G&A expenses due to acquisition
related overhead. In a stable environment we expect overhead to
normalizeat 14.1% by 2008 and continue at that level through
2010.6)A blended rate, combining non-interest bearing deposits
and marketable securities at federal funds rate, is used in the
forecast.7)The interest on Current Debt is calculated based on

the existing interest rates on the debt.The interest rate on future
debt will be calculate at Moody's Aaa rate for debt as of
December 31, 2005.8)The Target's tax rate in 2005 was 29%.
The company's overall tax rate is favorably impacted by Hong
Kong operations that pay tax at 16.5%.The tax rate is assumed
to increase slightly during the forecast period.9)Other Current
Operations assets are assumed to be maintained at about the
average rate of the past years at 30%.10)Other Assets include
about $70 million in Goodwill resulting from a number of
acquisitions during the period from 1997-2000.2002-2005The
forecast assumes no acquisitions. As a result of amortization
Other Assets will decline by $5 million a year. Note that at the
time of this acquisitionfinancial accounting standards still
required the amortization of acquisition-related
goodwill.11)Fixed assets as a percentage of sales will be
increased to 12% to sustain growth of the business. Fixed assets
mainly consists of molds and toolingand 12% will provide a
reasonable replenishment rate of these assets.12)The Target is
producing cash balances in excess of financing needs. Cash
balances for the projected years have been forecast at a
minimumlevel of 6%. This is slightly higher than the minimum
level for the Acquirer (4.5%) because the Target's smaller
balance sheet providesless flexibility in meeting unanticipated
cash needs.13)Current Liabilities have decreased substantially
over the last few year as allowances and reserves for
obsolescence have gone down as a percentage of sales.In our
model we assume 25% to be conservative.14)Capital
Expenditures have been high in the past as the Target has been
acquiring fixed assets as part of their recent acquisitions.We
have projected a decrease in capital expenditures as the forecast
does not include projections for acquisitions.15)The target's
management is assumed to continue its 2004-2005 trend and
keep debt to a minimum through 2010.
Historical Rates and Explanations for Rates Used in Forecast /
Valuation JAKKS&R&UAppendix B-2

&LAcquisition Plan JAKKS&C&F&R&D
AP_App_B3Step 1 Continued: Target Cost of Equity and
Capital CalculationFinancial Benchmarks as of December 31,
2005As of 12/31/2005Prime9.50%Key Valuation
IndicatorsIndustry Average 1)AcquirerTarget10 -Year T-
Note5.24%P/E14.517.76.12)Commercial Paper 3-
months6.34%P/S1.51.30.72)Federal Funds Rate6.40%LT
Debt/Equity50%89%1%2)CD's 6 months6.30%ROI - 5 year
avg.12.6%4.7%15.1%1)Moody's A8.30%ROE - 5 year
avg.17.3%8.1%16.2%1)Supplemental Financial DataStock Price
as of 12/31/2000$ 14.55$ 9.13Risk-free Rate5.24%Current
stock price$ 16.03$ 14.25Target's Unlevered Beta1.51Market
Risk Premium5.50%Target's Cost of Equity13.55%Target's level
of D/E0%Target Tax Rate31%Levered Beta1.51Market Value of
Current Long-Term Debt (in thousands)Discount Rate - Moody's
Aaa7.21%20062007200820092010Int.
Rate7.75%7.75%7.75%7.75%7.75%BegBal1,4001,000600200-
0Payments:Principal400400400200200Interest9362318- 0Total
Debt Cash Flow493462431208200Discounted
Value$1,369Notes:1) From investment research reports.2)
Based on financial data in statements and year-end stock price.
Supplemental Financial Data JAKKS&R&UAppendix B-3
&LAcquisition Plan JAKKS&C&F&R&D
AP_App_CStep 2: Combined Firm's 5-Year Forecast and
ValuationConsolidated Acquirer and Target - including
SynergyForecast Assumptions 2006 -
201020062007200820092010SumCost of Sales
Synergy3.910.813.813.814.356.5Selling Expenses
Synergy1.63.33.33.33.314.9G&A Expenses
Synergy1.63.33.33.33.314.7Integration Expenses(1.1)- 0- 0- 0-
0(1.1)Cost of Capital: 2006 - 2010 (%)11.81%1)85.0Cost of
Capital: Terminal Period (%)10.31%1)Sustainable Cash Flow
Growth Rate (%)4.0%1)Market Value of Long-Term
Debt$1,172Historical FinancialsProjected

Statement ($mil)1)Net Sales of Combined
Firms4,8214,7844,7794,9225,1475,3855,6205,8596,098Increme
ntal Sales Due to SynergyTotal
Sales4,8214,7844,7794,9225,1475,3855,6205,8596,098Less:- 0-
0- 0- 0- 0Variable Cost of
Sales2,3392,3352,4362,5562,6202,6922,7842,8772,994Deprecia
tion1011068684104109113118123Cost of Sales
Synergy(4)(11)(14)(14)(14)Total Cost of
Sales2,4402,4412,5212,6402,7212,7902,8842,9813,103Gross
Profit2,3802,3432,2582,2822,4262,5952,7362,8792,995Less:- 0-
0- 0- 0- 0Sales Expense767799712719748782817852886Sales
Expense Synergy(2)(3)(3)(3)(3)G&A
Expense785874891951965983997996990G&A Expense
Synergy(2)(3)(3)(3)(3)Integration Expenses1- 0- 0- 0-
0Amortization of Intangibles324152525252525252Other
expense (income), net26(9)(34)(32)(32)(32)(32)(32)Total Sales
and G&A
Expense1,5861,7201,6461,6881,7311,7791,8281,8611,890Opera
ting Profits (EBIT)7946236125946968169091,0181,105Plus:
Interest Income- 0- 02429485887113Less: Interest
Expense911111321531271291229696Net Profits Before
Taxes7045124824455977368451,0091,122Less:
Taxes502379411378485573635712719Balance SheetCurrent
Assets1,7791,8611,6651,6051,7871,8681,9492,0312,113Total
Current
Assets2,4772,0862,0091,8802,0232,1152,2072,3012,394Investm
ents- 0- 0- 0- 03477429401,5392,059Gross Fixed
Assets9421,1651,1641,1501,2491,3031,3571,4131,470Less:
Accum. Depr. & Amort.3384244274845886978109281,051Net
Fixed Assets604741737667661606547485419Other
Assets8771,8442,1612,0152,0102,0051,9991,9941,989Total
Assets3,9584,6724,9074,5625,0405,4685,6936,3196,861Current
Liabilities1,1851,3321,6101,5441,5301,5991,5631,5201,524Lon
g-Term DebtExisting

Debt6709899831,2431,2441,022641589400New Debt- 0- 0- 0-
0- 0- 0- 0- 0- 0Other
Liabilities1,9992,4632,7572,9542,9472,8022,3922,3052,128Co
mmon
Stock7502,0682,0781,9801,9801,9801,9801,9801,980Retained
Earnings1,21014172(372)1136871,3222,0342,753Shareholders'
Equity1,9592,2092,1501,6082,0932,6663,3024,0144,733Total
Liabilities & Shareholders'
Equity3,9594,6724,9074,5625,0405,4685,6936,3196,861Addend
um: Check-000-000000Shares Outstanding
(millions)299399435445445445445445445Effective Tax
Rate29%26%15%15%19%22%25%29%36%Addendum: Working
Capital1,292754400336493517644781870Free Cash FlowEBIT
(1-t)567462523505565636683718708Plus: Depreciation and
Amort.133147138136156161165170175Less: Gross Capital
Expenditures204223(2)(13)9954555657Less: Change in
Working Capital(204)(537)(355)(64)1572312813788Free Cash
Flow7019231,016718466720666696738PV: 2006 -
2010$2,336PV: Terminal Value$6,964Total PV (Market Value
of the Firm)$9,300Less: Market Value of Long-Term
Debt$1,171Plus: Excess Cash (Investments)$347Equity
Value$8,475Notes:1) The acquisition will make up a minor part
of the Acquirer's total value. The Acquirer's target D/E ratio
remains unchanged. Therefore, the Acquirer's cost of capitalhas
been used in the valuation of the combined companies.
Although the Acquirer expects certain product lines to grow
faster than the overall market for a number ofyears, the long-
term industry growth is forecast at 4%, because the market is
rapidly maturing.
Forecast 2001 -2005 and Valuation of Combined Companies
&RAppendix C
AP_App_DStep 2 Continued: Synergy EstimationSummary of
Expected SynergyAssumes Deal closes on March 31, 2006 and

actions take effect July 1, 2006.(In millions)1)The total annual
savings of the closing of the Hong Kong office will
be:20062007200820092010Expense Category-
Rent250,0000.130.250.250.250.2550% COS/50% Sales
Expense- Elimination of 15 back office positionsat $35,000
each525,0000.260.530.530.530.53G&A- Elimination of 10
professional positionsat 90,000
each900,0000.450.900.900.900.9050% COS/50% Sales
ExpenseTotal1,675,0000.841.681.681.681.682)As a result of the
closure of the Hong Kong Office the following additional
expenseswill be incurred in 2006: 1)20062007200820092010- 3
Months Rent62,5000.0650% COS / 50% Sales Expense- 1
Month's pay for back office positions43,7500.04Integration
Expense- Average 3 months' pay for
professionalpositions225,0000.23Integration
ExpenseTotal331,2500.333)20062007200820092010Termination
of 3rd Party manufacturing
agreements:2)3.009.0012.0012.0012.50100% COS4)Termination
of rental contracts: 3)20062007200820092010Malibu
Headquarters (CA)0.501.001.001.001.0050% G&A/25%
Sales/25% COSDexter Michigan Office
(MI)0.200.400.400.400.4050% COS/ 50% SalesInternational
Toy Center New York (showroom)
(NY)0.400.800.800.800.80100% SalesWarehouse space in City
of Industry (CA)0.751.501.501.501.50100% SalesWarehouse
space in New Brunswick (NJ)- 0- 0- 0- 0-
0Total1.853.703.703.703.705)Termination of employees in
U.S.: 4)- 75 employees with average pay
of1.503.003.003.003.0075% G&A/25%COS$40,000, including
benefits.6)Severance pay as a result of terminations.
5)0.37Integration Expense7)Retention bonuses for key
employees 6)0.50Integration ExpenseGrand
total6.017.420.420.420.985.0Notes:1)The rental market is tight
in Hong Kong. Although we are contractually allowedto sublet
the office, we would prefer not to be involved in managing a
new tenant.We expect the landlord will be pleased to let us out

of the rental agreement, becausehe will be able to increase the
rent. At most we expect to pay an estimated 3 months of rent
ascompensation for the inconvenience.2)The Acquirer will
terminate 3rd party contracts as soon as possible. This will
occur either at the end ofthe contract or earlier if a financially
favorable agreement can be reached.The Acquirer expects to
save approximately 10% of manufacturing costs by
manufacturingin-house, as a result of using excess
manufacturing capacity and economies of scale asa result of the
Acquirer's buying power.3)Rental contract for Malibu
Headquarters expires in July 2006.Rental contract for
Showroom in International Toy Center expires December
2006.Rental contract for office space in Dexter, Michigan does
not expire until 2008. We willattempt to come to a financial
agreement with landlord or sublet space.Rental contract for
warehouse in City of Industry expires in 2008. Because the
newAlameda corridor commercial space is at a premium in the
City of Industry, we see no problemterminating the agreement
or subletting space at a higher rental rate.The warehouse in New
Brunswick fits well with the Acquirer's distribution
organization and will beretained.4)The Target has 155
employees in U.S. None of the employees is represented by a
union.The 45 employees involved in the design, sales and
marketing of toys will be integrated intothe Acquirer's
divisions. The 25 employees working at the New Brunswick
warehouse will be retained.All other (75) employees, involved
in back-office, customer service, distributionand warehousing
functions will be terminated.5)Because there is no union
contract, the Acquirer has no obligation to provide severance
pay; however,to prevent disputes, the Acquirer will provide a
severance package that includes from 1 to 3 months of
paydepending on period of employment. Because average
seniority is less than 3 years, the Acquirer expectsto pay an
average of 1.5 months of severance pay per employee. (1.5 *
$3,300 * 75 = $371,250)6)Retention bonuses for key creative
employees. An estimated 25 employees will be offered

averageretention bonuses of $20,000 to stay on for at least 18
months.
Financial Summary of Synergy&R&UAppendix D
AP_App_EStep 3: Offer Price DeterminationOffer Price
Supporting DataAcquirer Share Price 1)$ 16.03Target Share
Price 1)$ 14.25Proposed % of Synergy Shared with
Target30%Target Shares Outstanding (Mil)19.1Acquirer Shares
Outstanding (Mil)426.0Cash Portion of Offer Price
(%)0Standalone ValueConsolidated Acquirer + TargetValue of
SynergyAcquirerTargetWithout Synergy (1)With Synergy
(2)PVNS (1) - (2)Discounted Cash Flow Valuations ($Mil)$
7,517$ 591$ 8,107$ 8,475$ 368Minimum Offer Price
(PVMIN) ($Mil)$ 272Maximum Offer Price (PVMAX) ($Mil)$
640Initial Offer Price ($Mil)$ 383Initial Offer Price Per Share
($)$ 20.03Purchase Price Premium Per Share41%Cash Per
Share ($)$ - 0Share Exchange Ratio1.25New Shares Issued by
Acquirer23.867Total Shares Outstanding Acquirer after
acquisition449.867Ownership Distribution in New FirmAcquirer
shareholders (%)95%Target shareholders (%)5%EPS at Initial
Offer Price20062007200820092010Acquirer's Forecastof EPS
afterAcquisition$ 1.04$ 1.21$ 1.33$ 1.50$ 1.51Acquirer's
Forecastof EPS afterAcquisition$ 1.08$ 1.27$ 1.41$ 1.58$
1.60Weighted Average Valuation CalculationValueWeighting
FactorWeighted ValueDiscounted Cash Flow Valuation$
59150%$ 295Comparable Firms - Earnings Valuation 3)$
42725%$ 107Comparable Firms - Sales Valuation 3)$
41325%$ 103Weighted Average Valuation$
505OfferOfferResulting Earnings Per Share After
Acquisitions4PricePrice% Shared20062007200820092010Per
Share$-millionsSynergy$20.0338330%$ 1.08$ 1.27$ 1.41$
1.58$ 1.60Notes$21.9641940%$ 1.07$ 1.27$ 1.41$ 1.58$
1.591) Share prices as of close of business on March 31,
2006..$23.8845650%$ 1.07$ 1.26$ 1.40$ 1.57$ 1.582)
The initial offer price will be based on 30% synergy

sharing.$25.8149360%$ 1.06$ 1.26$ 1.39$ 1.56$ 1.573)
See "Relative Valuations Summary".$27.7453070%$ 1.06$
1.25$ 1.38$ 1.55$ 1.574) Post-acquisition EPS for different
offer prices equals consolidated net income after taxes divided
by the sum of acquirer shares outstanding plus new shares
issuedby the acquirer. New shares issued equals the number of
target shares outstanding times the share exchange ratio (SER).
Consolidated EPS will declineas the offer price increases as
more shares of acquirer stock must be issued for each share of
target stock outstanding.
Initial Offer Price Determination&"Arial,Regular"&10
&R&UAppendix E
&LAcquisition Plan JAKKS&R&D
AP_App_FStep 3 Continued: Alternative Valuation
SummariesAs of 12/31/05As of 12/31/05PRICE/SALES
VALUATIONPRICE/ EARNINGS
VALUATIONCOMPARABLE
COMPANIESPRICE/SALESCOMPARABLE
COMPANIESP/ECompany 11.3Company 114.6Company
21.5Company 211.0Company 31.4Company 312.0Company
41.5Company 410.0Company 51.4Company
511.0TOTAL7.1TOTAL58.6AVERAGE1.4AVERAGE11.7TAR
GET PROJECTED SALES (2001)290.1TARGET PROJECTED
EARNINGS (2001)36.4PROJECTED VALUE OF TARGET (In
millions)412.6PROJECTED VALUE OF TARGET (In
millions)427.2
Relative Valuations Summary&R&UAppendix F
AP_App_GStep 4: Combined Firms' Financing
CapacityProjected Financials20062007200820092010Forecast
CommentsIncome Statement ($Millions)Net
Sales5,1475,3855,6205,8596,098Less: Cost of
Sales2,7212,7902,8842,9813,103Gross
Profit2,4262,5952,7362,8792,995Less: Sales, General & Admin.

Exp.1,7301,7791,8281,8611,890Integration Expenses(1)- 0- 0-
0- 0Operating Profits (EBIT)6968169091,0181,105Plus: Interest
Income29485887113Less: Interest Expense1271291229696Net
Profits Before Taxes5977368451,0091,122Less:
Taxes485573635712719Earnings per share ($/Share)$ 1.08$
1.27$ 1.41$ 1.58$ 1.60Based on 426 million existing
Acquirer shares andBalance Sheet (12/31)23,836 million new
shares (total shares after acquisition 449.836 million).Current
AssetsCash & Marketable
Securities5829891,1981,8092,340Other Current
Assets1,7871,8681,9492,0312,113Total Current
Assets2,3692,8573,1473,8404,453Gross Fixed
Assets1,2491,3031,3571,4131,470Less: Accumulated
Depreciation5886978109281,051Net Fixed
Assets661606547485419Other
Assets2,0102,0051,9991,9941,989Total
Assets5,0405,4685,6936,3196,861Current
Liabilities1,5301,5991,5631,5201,524Long-term debtExiting
Debt1,2441,022641589400Value Creation SummaryTransaction
related debt- 0- 0- 0- 0- 0($Millions)Total Long-term
Debt1,2441,022641589400Consolidated Value after
Acquisition8,475Other Liabilities174181188196204Pre-
acquisition Equity ValueCommon
Stock1,9801,9801,9801,9801,980Acquirer7,517Retained
Earnings1136871,3222,0342,753Target591Shareholders'
Equity2,0932,6663,3024,0144,733Total8,107Total
Liabilities+Shareholders'
Equity5,0405,4685,6936,3196,861Value Created368- 0- 0- 0- 0-
0Distribution of ValueAddendum:Acquirer95%348Long-term
debt / Equity59%38%19%15%8%Target5%20Total368
Consolidated Financial Statements based on Initial Offer
Price&R&UAppendix G
AP_App_A1Appendix A: Acquisition

TimelineJanuaryFebruaryMarchAprilMayJuneJulyAugustSeptem
berOctoberNovemberDecemberwk1wk2wk3wk4wk5wk1wk2wk3
wk4wk1wk2wk3wk4wk1wk2wk3wk4wk1wk2wk3wk4wk5wk1w
k2wk3wk4wk1wk2wk3wk4wk5wk1wk2wk3wk4wk1wk2wk3wk4
wk1wk2wk3wk4wk5wk1wk2wk3wk4wk1wk2wk3wk4wk5KEY
ACTIVITIES317142128411182541118251815222961320273101
724181522295121926291623307142128411182529162330Pre-
AcquisitionSearchScreenFirst ContactNegotiationRefine
ValueStructure DealDue DiligenceFinancingPlan Financial
DetailDECISION: Proceed/Walk AwayImplementation
PlanningCLOSINGPost-AcquisitionOffice ClosuresHong Kong
OfficeThird Party Manufacturing Agreement
TerminationTermination of Rental ContractMalibu
HeadquartersDexter OfficeCity of Industry WarehouseNew
York ShowroomReduction of Work ForceInterviewInitiate
ActionCompleteStaff Relocation ProgramInterviewInitiate
ActionCompleteCommunication ProgramPublic Relations
(ongoing)Advertising (ongoing)AnnouncementHoliday Ad
CampaignCorporate
MaterialsAnnouncementWebsiteLaunchFully IntegratedInitiate
ActionDevelopment/OngoingTarget Completion Date
&RAppendix A
AP_App_A2Appendix B: Summary: Milestones and
Responsible Individual(s)KEY ACTIVITIESEstimated Time
FrameManagerDurationDeadlinePre-AcquisitionSearch3
weeks31-DecCOO/Exec StaffScreen3 weeks13-JanPresidentFirst
Contact3 weeks20-JanPresidentNegotiationCFORefine Value11
weeks24-MarPresident/CFOStructure Deal9 weeks24-
MarCFODue Diligence8 weeks24-MarCOOFinancing11
weeks24-MarTreasurerPlan Financial Detail11 weeks24-
MarExec StaffDECISION: Proceed/Walk Away1 week24-
MarPresident/COOImplementation Planning11 weeks24-
MarExec StaffCLOSING3 weeks7-AprExec StaffPost-
AcquisitionOffice ClosuresCOOHong Kong Office18 weeks30-
JunDirector of FinanceThird Party Manufacturing Agreement

Termination18 weeks30-JunCOOTermination of Rental
ContractCOOMalibu Headquarters18 weeks30-JunCOODexter
Office18 weeks30-JunCOOCity of Industry Warehouse18
weeks30-JunCOONew York Showroom18 weeks30-
JunCOOReduction of Work Force24 weeks4-AugVice Pres
HRStaff Relocation Program24 weeksVice Pres
HRCommunication ProgramVice Pres CommunicationsPublic
Relations (ongoing)weeklyongoingVice Pres
CommunicationsAdvertising (ongoing)weeklyongoingVice Pres
MrktgCorporate Materials11 weeksVice Pres MrktgWebsite27
weeks4-AugVice Pres Mrktg

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