ServiceCo Model Completed

8/3/2019 ServiceCo Model Completed

1/22

Project ServiceCoDCF

($MM)

Fiscal Year Ending December 31,

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Net Sales $6,400.0 $6,600.0 $6,800.0 $7,050.0 $7,300.0 $7,600.0 $7,600.0 $7,600.0 $7,600.0 $7,600.0

% Growth -- 3.1% 3.0% 3.7% 3.5% 4.1% 0.0% 0.0% 0.0% 0.0%

EBITDA 800.0 825.0 884.0 916.5 949.0 988.0 988.0 988.0 988.0 988.0

% of Net Sa 12.5% 12.5% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0%

Depreciation & Amort. 50.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

EBIT 750.0 825.0 884.0 916.5 949.0 988.0 988.0 988.0 988.0 988.0

% of Net Sa 11.7% 12.5% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0%

Interest Expense 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Interest Income 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net Interest Expense 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other Income / (Expense) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Earnings Before Taxes 750.0 825.0 884.0 916.5 949.0 988.0 988.0 988.0 988.0 988.0

Taxes 292.5 321.8 344.8 357.4 370.1 385.3 385.3 385.3 385.3 385.3

% Effective 39.0% 39.0% 39.0% 39.0% 39.0% 39.0% 39.0% 39.0% 39.0% 39.0%

Net Income $457.5 $503.3 $539.2 $559.1 $578.9 $602.7 $602.7 $602.7 $602.7 $602.7

Plus

A-TInterest Expense 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Depreciation & Amort. 50.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Less

Inv. in Non-Cash WC 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

% of Chang -- 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Capital Expenditures 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

% of Net Sa 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Inv. in Other Non-Current Assets 10.0 10.5 11.0 11.6 12.2 12.8 13.4 14.1 14.8 15.5

Chng. in Other Non-Current Liab. (10.0) (10.5) (11.0) (11.6) (12.2) (12.8) (13.4) (14.1) (14.8) (15.5)

Other / Restructuring 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Unlev. Free Cash Flow $507.5 $503.3 $539.2 $559.1 $578.9 $602.7 $602.7 $602.7 $602.7 $602.7

Terminal Year Figures

Total Debt, Pref. Stock & MI 0.0 EBITDA 988.0

Cash 0.0 EBIT 988.0

Diluted Shares (MM) 0.0

Exit EBITDA Multiple High

Exit EBITDA Multiple Low

Discount Rate High

Discount Rate Low

Project ServiceCo

5-Year DCF - Exit Trailing EBITDA Multiple

($MM, except per share amounts)

Valuation Matrix as of January 1, 2008

Trailing Exit EBITDA Multiple 0.0 0.0 0.0

Discount Rate 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

PV of 1st Year Cash Flow $503.3 $503.3 $503.3 $503.3 $503.3 $503.3 $503.3 $503.3 $503.3

PV of Cash Flows Through Year 5 2,279.9 2,279.9 2,279.9 2,279.9 2,279.9 2,279.9 2,279.9 2,279.9 2,279.9

Terminal Value 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Implied EBIT Multiple 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Implied Perpetual Grow (100.0%) (100.0%) (100.0%) (100.0%) (100.0%) (100.0%) (100.0%) (100.0%) (100.0%)

PV ofTerminal Value 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Asset Value 2,783.1 2,783.1 2,783.1 2,783.1 2,783.1 2,783.1 2,783.1 2,783.1 2,783.1

Less Total Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Plus Cash 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0


2/22

Equity Value $2,783.1 $2,783.1 $2,783.1 $2,783.1 $2,783.1 $2,783.1 $2,783.1 $2,783.1 $2,783.1

Equity Value Per Share NM NM NM NM NM NM NM NM NM

% Value in Terminus 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

% Value in Cash Flows 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

$2,783.1 to $2,783.1

NM to NM

Prem/(Disc) to Unaffected Stock Price 0.0% to 0.0%


3/22

2017

$7,600.0

0.0%

988.0

13.0%

0.0

988.0

13 0%


4/22

Investment Banks, Hedge Funds and Private Equity: The New Paradigm

erviceCo Case (Chapter 4)

General

Make sure to enable iterative calculation with maxium iteration set to 1000.

Formulas cells are in black text.

Cells with number inputs are in blue text.

Cells that can be modified are in blue text with yellow highlighting. Only change these cells.

These cells are the financials and assumptions which can be changed that drive your valuation model.

Mini-LBOModel

Enter in the operating projections provided by the case in the LBO model. These figures will flow through the DCF model.Assume that ServiceCo's existing $800 million in debt is rolled over in the buyout. In addition, assume ServiceCo maintains a cash balance of $200 million.

Assume the Company does not have any stock options.

Enter in the leverage and interest parameters provided by the case.

Calculate the fees and expenses associated with the transaction and then the incremental amortization associated with the expenses.

Given the projections, leverage and rate assumptions, adjust the purchase price/share and exit multiple to determine the maximum that a financial sponsor

could pay per share and achieve 15 20% returns in five years. Perform the same analysis under a credit market downturn scenario.

Remember to review the credit statistics to assess the risk / return profile of the transaction.

5-Yr DCFModel

The operating projections are pulled from the Mini-LBO model.

The model assumes ServiceCo's existing $800 million in debt is a long term bond and incurs annual interest payments of 8%.

As with the LBO analysis, assume the Company maintains a cash balance of $200 million throughout the projection period.

Calculate the Company's weighted average cost of capital (WACC) based on the information provided in the case and the following formula:

WACC = Cost ofEquity x [ E / (E + D)] + Cost of Debt (1 - Effective Tax Rate) x [D / (E + D)], where:

Cost ofEquity = Risk Free Rate + Unlevered Beta x Equity Market Risk Premium, and

E and D are the Equity and Debt portions of the capital structure, respectively.

Determine the appropriate exit multiple range and whether the discount rate assumption or the exit multiple assumption has a larger impact on valuation.

In addition to the base case, consider the impact of potential synergies on valuation.

Remember: onl chan e in uts in the cells hi hli hted in ellow and blue text


5/22


($MM)


2007 2008 2009 2010 2011 2012 2013 2014 2015

Net Sales $6,400.0 $6,600.0 $6,800.0 $7,050.0 $7,300.0 $7,600.0 $7,600.0 $7,600.0 $7,600.0

% Growth -- 3.1% 3.0% 3.7% 3.5% 4.1% 0.0% 0.0% 0.0%

EBITDA 800.0 825.0 884.0 916.5 949.0 988.0 988.0 988.0 988.0

% of Net Sales 12.5% 12.5% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0%

Depreciation & Amort. 50.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0EBIT 750.0 825.0 884.0 916.5 949.0 988.0 988.0 988.0 988.0

% of Net Sales 11.7% 12.5% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0%

Interest Expense 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Interest Income 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net Interest Expense 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other Income / (Expense) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Earnings Before Taxes 750.0 825.0 884.0 916.5 949.0 988.0 988.0 988.0 988.0

Taxes 292.5 321.8 344.8 357.4 370.1 385.3 385.3 385.3 385.3

% Effective Rate 39.0% 39.0% 39.0% 39.0% 39.0% 39.0% 39.0% 39.0% 39.0%

Net Income $457.5 $503.3 $539.2 $559.1 $578.9 $602.7 $602.7 $602.7 $602.7

Plus

A-TInterest Expense 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Depreciation & Amort. 50.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Less

Inv. in Non-Cash WC 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

% of Change in Net Sales -- 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Capital Expenditures 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

% of Net Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Inv. in Other Non-Current Asse 10.0 10.5 11.0 11.6 12.2 12.8 13.4 14.1 14.8

Chng. in Other Non-Current Lia (10.0) (10.5) (11.0) (11.6) (12.2) (12.8) (13.4) (14.1) (14.8)

Other / Restructuring 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Unlev. Free Cash Flow $507.5 $503.3 $539.2 $559.1 $578.9 $602.7 $602.7 $602.7 $602.7



Cash 0.0 EBIT 988.0


Exit EBITDA Multiple High

Exit EBITDA Multiple Low

Discount Rate High

Discount Rate Low

Project ServiceCo





Discount Rate 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

PV of 1st Year Cash Flow $503.3 $503.3 $503.3 $503.3 $503.3 $503.3 $503.3 $503.3

PV of Cash Flows Through Year 5 2,279.9 2,279.9 2,279.9 2,279.9 2,279.9 2,279.9 2,279.9 2,279.9

Terminal Value 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Implied EBIT Multiple 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Implied Perpetual Growth Rate (100.0%) (100.0%) (100.0%) (100.0%) (100.0%) (100.0%) (100.0%) (100.0%)

PV ofTerminal Value 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Asset Value 2,783.1 2,783.1 2,783.1 2,783.1 2,783.1 2,783.1 2,783.1 2,783.1

Less Total Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Plus Cash 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0


6/22


7/22

2016 2017

$7,600.0 $7,600.0

0.0% 0.0%

988.0 988.0

13.0% 13.0%

0.0 0.0

988.0 988.0

13.0% 13.0%

0.0 0.0

0.0 0.0

0.0 0.0

0.0 0.0988.0 988.0

385.3 385.339.0% 39.0%

$602.7 $602.7

0.0 0.0

0.0 0.00.0 0.0


8/22

$2,783.1

NM

0.0%

100.0%


9/22

Project ServiceCoLBO

($MM)

Sources Uses

Leverage Amount Percent Amount Percent Agg. Considera

Agg. Considera

Cash -$ 0.0% Purchase of Equity -$ 0.0% 2007E EBITDA

New Bank Debt - 0.0% Refinance Exisiting Debt 0.0% 2008E EBITDA

New Bond Debt - 0.0% Transaction Fees & Expenses 0.0% Purchase Pri

Tranche C - 0.0% Implied Sha

New Equity - 0.0% 2007 Total Le

Exit

Total Sources 0.0x -$ 0.0% Total Uses -$ 0.0% EBITDA

Multiple

(0.5)

Interest Rate Assumptions

New Bank Debt (% Spread to LIBOR) 0.5

New Bond Debt (%)

Tranche C (%)


Pro Forma Projected

2007 2008 2009 2010 2011 2012 2013 2014

SUMMARY FINANCIALSNet Sales -$ -$

% Growth -- 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

EBITDA - - - - - - - -

% Margin 0.0% 0.0%

Depreciation & Amortization - -

New Amortization of Intangibles - - - - - - - -

EBIT - - - - - - - -

Total Cash Interest Expense - - - - - - - -

Interest Income - - - - - - - -

Other Income - - - - - - - -

EBT - - - - - - - -

Taxable Income - - - - - - - -

Income Tax Expense - - - - - - - -

% Marginal Rate 39.0% 39.0% 39.0% 39.0% 39.0% 39.0% 39.0% 39.0%

Net Income - - - - - - - -

Depreciation & Amortization - - - - - - - -

Inv. in Non-Cash Working Capital - -

% of Change Net Sales -- 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Capital Expenditures - -

% of Net Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Free Cash Flow - - - - - - - -

Total Cash - - - - - - -New Bank Debt - - - - - - - -

New Bond Debt - - - - - - - -

Tranche C - - - - - - - -

Total Debt - - - - - - - -

Total Shareholders' Equity 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0

Book Capitalization 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0

CREDIT STATISTICS

Total Debt / EBITDA NM NM NM NM NM NM NM NM

EBITDA / Interest NM NM NM NM NM NM NM NM

(EBITDA - CapEx) / Interest NM NM NM NM NM NM NM NM

(EBITDA - CapEx - WC) / Interest NM NM NM NM NM NM NM NM

EBIT / Interest NM NM NM NM NM NM NM NMTotal Debt / Book Capitalization 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

FFO / Total Debt NM NM NM NM NM NM NM NM

FCF / Total Debt 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

DEBT PAYDOWN Retired In

New Bank Debt NM NM NM NM NM NM NM NM NM

New Bond Debt NM NM NM NM NM NM NM NM NM

Tranche C NM NM NM NM NM NM NM NM NM


10/22

- - - - - - -

- - - - - - -

- - - - - - -

LIBOR Curve

2007 2008 2009 2010 2011 2012 2013 2014

6.13% 6.07% 5.66% 5.68% 5.81% 5.81% 5.81% 5.81%


11/22

Deal and Returns Summary Share Information

-$ Diluted Share Calc

Basic Shares

0.0 Options 0

0.0

Diluted Shares -

-100.0% Current Share Price 22.000

0.0x

IRR Check

Aggregate Equity 5-Year Investment Year 1 Year 2 Year 3 Year 4 Year 5 IRR

Value Value Return 0.0 0.0 0.0 0.0 0.0 0.0 0.0%

-$ -$ 0.0% 0.0 0.0 0.0 0.0 0.0 0.0 0.0%

- - 0.0% 0.0 0.0 0.0 0.0 0.0 0.0 0.0%

- - 0.0%

Goodwill Calculation

2015 2016 2017 Equity Purchase Price -$

Shareholder's Equity 1,000.0

-$ -$ -$ Old Goodwill and Intangibles 1,800.0

0.0% 0.0% 0.0% Prepaid Fees & Expenses -

- - - New Goodwill 800.0$

0.0% 0.0% 0.0% % of Goodwill Deemed Intangible

- - - Years of Amortization

- - - New Annual Amortization -

- - -

- - -

- - -

- - -

- - -

- - -

- - -

39.0% 39.0% 39.0%

- - -

- - -

- - -

0.0% 0.0% 0.0%

- - -

0.0% 0.0% 0.0%

- - -

- - -

- - -

- - -

- - -

- - -

1,000.0 1,000.0 1,000.0

1,000.0 1,000.0 1,000.0

NM NM NM

NM NM NM

NM NM NM

NM NM NM

NM NM NM

0.0% 0.0% 0.0%

NM NM NM

0.0% 0.0% 0.0%

NM NM NM

NM NM NMNM NM NM


12/22

- - -

- - -

- - -

2015 2016 2017

5.81% 5.81% 5.81%


13/22


($MM)


2007 2008 2009 2010 2011 2012 2013 2014 2015

Net Sales $6,400.0 $6,600.0 $6,800.0 $7,050.0 $7,300.0 $7,600.0 $7,904.0 $8,220.2 $8,549.0

% Growth -- 3.1% 3.0% 3.7% 3.5% 4.1% 4.0% 4.0% 4.0%

EBITDA 800.0 825.0 884.0 916.5 949.0 988.0 1,027.5 1,068.6 1,111.4

% of Net Sales 12.5% 12.5% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0%

Depreciation & Amort. 50.0 60.0 70.0 90.0 110.0 130.0 135.2 140.6 146.2EBIT 750.0 765.0 814.0 826.5 839.0 858.0 892.3 928.0 965.1

% of Net Sales 11.7% 11.6% 12.0% 11.7% 11.5% 11.3% 11.3% 11.3% 11.3%

Interest Expense 64.0 64.0 64.0 64.0 64.0 64.0 64.0 64.0 64.0

Interest Income 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net Interest Expense 64.0 64.0 64.0 64.0 64.0 64.0 64.0 64.0 64.0

Other Income / (Expense) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Earnings Before Taxes 686.0 701.0 750.0 762.5 775.0 794.0 828.3 864.0 901.1

Taxes 267.5 273.4 292.5 297.4 302.3 309.7 323.0 337.0 351.4

% Effective Rate 39.0% 39.0% 39.0% 39.0% 39.0% 39.0% 39.0% 39.0% 39.0%

Net Income $418.5 $427.6 $457.5 $465.1 $472.8 $484.3 $505.3 $527.0 $549.7

Plus

A-TInterest Expense 39.0 39.0 39.0 39.0 39.0 39.0 39.0 39.0 39.0

Depreciation & Amort. 50.0 60.0 70.0 90.0 110.0 130.0 135.2 140.6 146.2

Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Less

Inv. in Non-Cash WC (30.0) (5.0) (7.0) (10.0) (12.0) (14.0) (15.2) (15.8) (16.4)

% of Change in Net Sales -- 2.5% 3.5% 4.0% 4.8% 4.7% 5.0% 5.0% 5.0%

Capital Expenditures (80.0) (100.0) (110.0) (115.0) (120.0) (130.0) (135.2) (140.6) (146.2)

% of Net Sales 1.3% 1.5% 1.6% 1.6% 1.6% 1.7% 1.7% 1.7% 1.7%

Inv. in Other Non-Current Asse 10.0 10.5 11.0 11.6 12.2 12.8 13.4 14.1 14.8

Chng. in Other Non-Current Lia (10.0) (10.5) (11.0) (11.6) (12.2) (12.8) (13.4) (14.1) (14.8)

Other / Restructuring 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Unlev. Free Cash Flow $397.5 $421.7 $449.5 $469.2 $489.8 $509.4 $529.1 $550.3 $572.3



Cash 200.0 EBIT 858.0


Exit EBITDA Multiple High 9.0

Exit EBITDA Multiple Low 8.0

Discount Rate High 10.0%

Discount Rate Low 8.0%

Project ServiceCo





Discount Rate 8.0% 9.0% 10.0% 8.0% 9.0% 10.0% 8.0% 9.0%

PV of 1st Year Cash Flow $390.4 $386.8 $383.3 $390.4 $386.8 $383.3 $390.4 $386.8

PV of Cash Flows Through Year 5 1,464.5 1,418.7 1,374.8 1,464.5 1,418.7 1,374.8 1,464.5 1,418.7

Terminal Value 7,904.0 7,904.0 7,904.0 8,398.0 8,398.0 8,398.0 8,892.0 8,892.0

Implied EBIT Multiple 9.2 9.2 9.2 9.8 9.8 9.8 10.4 10.4

Implied Perpetual Growth Rate 1.2% 2.1% 3.0% 1.6% 2.5% 3.4% 1.9% 2.8%

PV ofTerminal Value 5,379.3 5,137.1 4,907.8 5,715.5 5,458.1 5,214.5 6,051.7 5,779.2

Asset Value 7,234.3 6,942.6 6,665.9 7,570.5 7,263.7 6,972.6 7,906.7 7,584.7

Less Total Debt 800.0 800.0 800.0 800.0 800.0 800.0 800.0 800.0

Plus Cash 200.0 200.0 200.0 200.0 200.0 200.0 200.0 200.0


14/22

Equity Value $6,634.3 $6,342.6 $6,065.9 $6,970.5 $6,663.7 $6,372.6 $7,306.7 $6,984.7

Equity Value Per Share $26.54 $25.37 $24.26 $27.88 $26.65 $25.49 $29.23 $27.94

% Value in Terminus 74.4% 74.0% 73.6% 75.5% 75.1% 74.8% 76.5% 76.2%

% Value in Cash Flows 25.6% 26.0% 26.4% 24.5% 24.9% 25.2% 23.5% 23.8%

Valuation Range

Equity Value $6,342.6 to $6,984.7

Equity Value Per Share $25.37 to $27.94

Prem/(Disc) to Unaffected Stock Price 15.3% to 27.0%


15/22

2016 2017

$8,890.9 $9,246.6

4.0% 4.0%

1,155.8 1,202.1

13.0% 13.0%

152.1 158.2

1,003.7 1,043.9 ebit

11.3% 11.3%

64.0 64.0

0.0 0.0

64.0 64.0

0.0 0.0

939.7 979.9

366.5 382.2

39.0% 39.0%

$573.2 $597.7

39.0 39.0

152.1 158.2

0.0 0.0

(17.1) (17.8)

5.0% 5.0%

(152.1) (158.2)

1.7% 1.7%

15.5 16.3

(15.5) (16.3)

0.0 0.0

$595.2 $619.0

10.0%

$383.3

1,374.88,892.0

10.4

3.8%

5,521.2

7,279.4


16/22

$6,679.4

$26.72

75.8%

24.2%


17/22

Project ServiceCoLBO

($MM)

Sources Uses

Leverage Amount Percent Amount Percent Agg. Considera

Agg. Considera

Cash -$ 0.0% Purchase of Equity 6,575.0$ 88.3% 2007E EBITDA

New Bank Debt 2.5x 2,000.0 26.9% Refinance Exisiting Debt 800.0 10.7% 2008E EBITDA

New Bond Debt 3.0x 2,400.0 32.2% Transaction Fees & Expenses 68.0 0.9% Purchase Pri

Tranche C - 0.0% Implied Sha

New Equity 3,043.0 40.9% 2007 Total Le

Exit

Total Sources 5.5x 7,443.0$ 100.0% Total Uses 7,443.0$ 100.0% EBITDA

Multiple

8.5

Interest Rate Assumptions 9.0

New Bank Debt (% Spread to LIBOR) L+2.500% 9.5

New Bond Debt (%) 10.000%

Tranche C (%)


Pro Forma Projected

2007 2008 2009 2010 2011 2012 2013 2014

SUMMARY FINANCIALSNet Sales 6,400.0$ 6,600.0$ 6,800.0$ 7,050.0$ 7,300.0$ 7,600.0$ 7,904.0$ 8,220.2$

% Growth -- 3.1% 3.0% 3.7% 3.5% 4.1% 4.0% 4.0%

EBITDA 800.0 825.0 884.0 916.5 949.0 988.0 1,027.5 1,068.6

% Margin 12.5% 12.5% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0%

Depreciation & Amortization 50.0 60.0 70.0 90.0 110.0 130.0 135.2 140.6

New Amortization of Intangibles 93.0 93.0 93.0 93.0 93.0 93.0 93.0 93.0

EBIT 657.0 672.0 721.0 733.5 746.0 765.0 799.3 835.0

Total Cash Interest Expense 412.6 396.0 370.2 349.7 327.3 300.2 269.9 235.3

Interest Income - - - - - - - -

Other Income - - - - - - - -

EBT 244.3 276.0 350.8 383.8 418.7 464.8 529.4 599.7

Taxable Income 337.4 369.0 443.8 476.8 511.7 557.8 622.4 692.7

Income Tax Expense 131.6 143.9 173.1 186.0 199.6 217.5 242.8 270.2

% Marginal Rate 39.0% 39.0% 39.0% 39.0% 39.0% 39.0% 39.0% 39.0%

Net Income 112.8 132.1 177.7 197.8 219.1 247.2 286.7 329.5

Depreciation & Amortization 143.0 153.0 163.0 183.0 203.0 223.0 228.2 233.6

Inv. in Non-Cash Working Capital (30.0) (5.0) (7.0) (10.0) (12.0) (14.0) (15.2) (15.8)

% of Change Net Sales -- 2.5% 3.5% 4.0% 4.8% 4.7% 5.0% 5.0%

Capital Expenditures (80.0) (100.0) (110.0) (115.0) (120.0) (130.0) (135.2) (140.6)

% of Net Sales 1.3% 1.5% 1.6% 1.6% 1.6% 1.7% 1.7% 1.7%

Free Cash Flow 145.8 180.1 223.7 255.9 290.1 326.3 364.5 406.8

Total Cash 200.0 200.0 200.0 200.0 200.0 200.0 200.0 200.0New Bank Debt 2,000.0 1,819.9 1,596.2 1,340.3 1,050.2 723.9 359.4 -

New Bond Debt 2,400.0 2,400.0 2,400.0 2,400.0 2,400.0 2,400.0 2,400.0 2,352.6

Tranche C - - - - - - - -

Total Debt 4,400.0 4,219.9 3,996.2 3,740.3 3,450.2 3,123.9 2,759.4 2,352.6

Total Shareholders' Equity 1,112.8 1,244.8 1,422.5 1,620.3 1,839.4 2,086.7 2,373.3 2,702.9

Book Capitalization 5,512.8 5,464.7 5,418.7 5,360.6 5,289.6 5,210.6 5,132.7 5,055.5

CREDIT STATISTICS

Total Debt / EBITDA 5.5 5.1 4.5 4.1 3.6 3.2 2.7 2.2

EBITDA / Interest 1.9 2.1 2.4 2.6 2.9 3.3 3.8 4.5

(EBITDA - CapEx) / Interest 1.7 1.8 2.1 2.3 2.5 2.9 3.3 3.9

(EBITDA - CapEx - WC) / Interest 1.7 1.8 2.1 2.3 2.5 2.8 3.3 3.9

EBIT / Interest 1.6 1.7 1.9 2.1 2.3 2.5 3.0 3.5Total Debt / Book Capitalization 79.8% 77.2% 73.7% 69.8% 65.2% 60.0% 53.8% 46.5%

FFO / Total Debt 5.8% 4.6% 6.2% 7.7% 9.5% 12.1% 15.3% 20.0%

FCF / Total Debt 3.3% 4.3% 5.6% 6.8% 8.4% 10.4% 13.2% 17.3%

DEBT PAYDOWN Retired In

New Bank Debt > 6.9 100.0% 91.0% 87.7% 84.0% 78.4% 68.9% 49.6% 0.0%

New Bond Debt > 10.0 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 98.0%

Tranche C NM NM NM NM NM NM NM NM NM


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1.0 1.0 1.0 1.0 1.0 1.0 0.9

1.0 1.0 1.0 1.0 1.0 1.0 1.0

- - - - - - -

LIBOR Curve

2007 2008 2009 2010 2011 2012 2013 2014

6.13% 6.07% 5.66% 5.68% 5.81% 5.81% 5.81% 5.81%


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39.6

Deal and Returns Summary Share Information

7,375.0$ Diluted Share Calc

Basic Shares 250

9.2 Options 0

8.9

26.30 Diluted Shares 250.00

19.5% Current Share Price 22.000

5.5x

IRR Check

Aggregate Equity 5-Year Investment Year 1 Year 2 Year 3 Year 4 Year 5 IRR

Value Value Return (3,043.0) 0.0 0.0 0.0 0.0 5,610.0 13.0%

8,733.9$ 5,610.0$ 13.0% (3,043.0) 0.0 0.0 0.0 0.0 6,123.8 15.0%

9,247.7 6,123.8 15.0% (3,043.0) 0.0 0.0 0.0 0.0 6,637.5 16.9%

9,761.4 6,637.5 16.9%

Goodwill Calculation

2015 2016 2017 Equity Purchase Price 6,575.0$

Shareholder's Equity 1,000.0

8,549.0$ 8,890.9$ 9,246.6$ Old Goodwill and Intangibles 1,800.0

4.0% 4.0% 4.0% Prepaid Fees & Expenses 68.0

1,111.4 1,155.8 1,202.1 New Goodwill 7,443.0$

13.0% 13.0% 13.0% % of Goodwill Deemed Intangible 25.00%

146.2 152.1 158.2 Years of Amortization 20

93.0 93.0 93.0 New Annual Amortization 93.0

872.1 910.7 950.9

189.6 138.5 81.6

- - -

- - -

682.5 772.2 869.2

775.5 865.2 962.3

302.5 337.4 375.339.0% 39.0% 39.0%

380.0 434.7 494.0

239.3 245.1 251.2

(16.4) (17.1) (17.8)

5.0% 5.0% 5.0%

(146.2) (152.1) (158.2)

1.7% 1.7% 1.7%

456.6 510.7 569.2

200.0 200.0 200.0- - -

1,896.0 1,385.3 816.1

- - -

1,896.0 1,385.3 816.1

3,082.9 3,517.6 4,011.6

4,978.9 4,903.0 4,827.7

1.7 1.2 0.7

5.9 8.3 14.7

5.1 7.2 12.8

5.0 7.1 12.6

4.6 6.6 11.7

38.1% 28.3% 16.9%

27.8% 42.4% 79.9%

24.1% 36.9% 69.7%

NM NM NM

80.6% 73.1% 58.9%

NM NM NM


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- - -

1.0 1.0 1.0

- - -

2015 2016 2017

5.81% 5.81% 5.81%


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Trading Comps Service Co.Metric Multiple EV Debt Cash Equity Value No. of shares (Mn)

CY07E EV/EBIDTA 800 8.00 6400 800 200 5800 250

CY07E EV/EBIDTA 800 9.00 7200 800 200 6600 250

CY08E EV/EBIDTA 825 7.00 5775 800 200 5175 250

CY08E EV/EBIDTA 825 8.00 6600 800 200 6000 250

CY07E P/E 1.46 17.00

CY07E P/E 1.46 18.00

CY08E P/E 1.5 16.00CY08E P/E 1.5 17.00

Transaction Comps

2007E EBIDTA 800 9.00 7200 800 200 6600 250

2007E EBIDTA 800 10.00 8000 800 200 7400 250

2007E EBIT 750 13.00 9750 800 200 9150 250

2007E EBIT 750 14.00 10500 800 200 9900 250


22/22

Documents

ServiceCo Model Completed