treehouse foods, inc

TreeHouse Foods, Inc. (NYSE: THS)

Mike Saheiha

Questions to Answer

I. What are your initial observations of

Treehouse Foods?

II. 2014-2015 Outlook?

III. Would you buy THS shares? Why?

IV. What type of company would be an

attractive target for THS?

Financial Overview

Company Overview

Outlook 2014-2015

Potential Acquisitions

Leveraged Buyout

Agenda

Company Overview Operational Overview

Private Label Food Supplier

• Retail Grocery

• Foodservice/Manufacturers

• Regional Brands

Founded in 2005 (IPO same year)

• Composed entirely of acquisitions

• 11 total since 2005

Premise

• Private label growing at 2x brand label food service

• Continued acquisition of self-sustaining business will spur growth

Divisions of Bay Valley

• Bay Valley Foods

• E.D. Smith

• Sturm Foods

• S.T. Specialty Foods

• Cain’s

• Associated Brands (US/CAN)

Top Spots

• Pickle/Pepper supplier

• Private non-dairy creamer

• Shelf stable cheese/ pudding for

food service/manufacturing

• Private salad dressings

• Private soup

Company Overview Acquisitions

Year Company Offering

2005 Dean Specialty Foods (Corporate Foundation)

2006 Del Monte Soups

2007 San Antonio Farms Salsas

E.D. Smith Salad Dressings, Jams & Jellies, Pie-Fillings

2010 Sturm Foods Sugar-Free Drinks, Hot Cereals

S.T. Specialty Foods Mac & Cheese, Side Dishes

2013 Naturally Fresh, Inc. Dressings, Sauces, Marinades, Dips

Cain’s Foods Shelf Stable Mayonnaise, Dressings, Sauces

Associated Brands Powdered Drinks, Teas, Sweeteners

2014 Proternergy Natural Foods Soups & Gravy

Flagstone Foods Health Snacks

Company Overview Brands

Financial Overview

Company Overview

Outlook 2014-2015


Leveraged Buyout

Agenda

Market Statistics Market Activity

Key Statistics (as of 11/15/14)

Current Price $ 82.50

Dividend Yield 0.00%

Mkt Cap ($M) $ 3,492.23

Enterprise Value ($M) $ 5,033.23

52 Wk High $ 86.95

52 Wk Low $ 62.76

% off 52Wk Low 31.5%

Shares Outstanding 42.33

Insider Ownership 1.07%

Insider Transactions 8.8%

Institutional Ownership 94.3%

Short Ratio 6.17

Beta 0.930

Corporate AA Avg. 2.78%

Corporate AA Cur. 3.07%

Shares

• No Dividend Offered

• Selling well off 52-Week lows

Trading

• Insider Ownership Increasing

• Short Ratio High

• Adverse effect of rates

Summary

• Share price likely overextended

and generating high short

interest in adverse interest rate

environment

Fundamentals Market Activity

Earnings/Assets

• “Expensive Earnings”

• Earnings on Book Lows

• Cash Flow negative

• Weak Capitalization

Summary

• Weak overall capitalization and

earnings on assets in addition to

high PE suggest THS shares

overpriced.

Fundamental Ratios (MRFY)

P/E (cash adjusted) 37.6

EV/EBITDA 17.5

P/S 1.5

P/BV 2.0

P/Tang BV 2.3

FCF Yield -2.00%

ROE 5.36%

ROIC 1.83%

AFCF/PPE* -140.71%

Total Debt/Equity Ratio 0.9

Inventory Turnover 3.4

Receivables Turnover 10.2

Days Sales Outstanding 35.8

Current Ratio 2.98

Quick Ratio 0.09

Long Term Debt /Equity 0.91

Piotroski 4

Altman 3.7

Beneish -1.8

Earnings Revenues

$2,050.00 $2,182.00 $2,294.00

$2,982.20

$3,608.46

2011 2012 2013 2014E 2015E

Net Income

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

$-

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

2011 2012 2013 2014E 2015E

NET INCOME % of Sales

Summary

• Revenue expected to increase 30% yoy

• Net Income expected to increase 80% yoy

• Acquisitions in 2014 will change the earnings

character of THS Dramatically

Cash Flows Free Cash Flows Explained

$105.00

$245.00

$156.00

$205.00 $217.00 $192.00

$37.00

$884.00

$66.00 $100.00

$294.00

$1,273.00

2009 2010 2011 2012 2013 TTM

CFO CAPEX

Cash from Operations

• CAGR 15%

• Considerable Growth

Capital Expenditures

• Regular Acquisitions

• ~$2.3B in 5 years

Summary

• Strong growth is being

over-shadowed by large

acquisitions making

organic activity

indistinguishable from

inorganic

Questions to Answer

I.) What are your initial observations of

Treehouse Foods? Treehouse foods is a serial acquirer whose value is

derived from continuing acquisitions in a rapidly expanding

industry. Due to the high rate of acquisitions, efficiency

must become a priority or THS will face higher overhead

costs than necessary as well as untenable debt levels. You

as principal banker will benefit from advising regular

acquisitions of THS as well as restructuring efforts by

utilizing their sound earnings foundation as a basis for all

transactions.

Financial Overview

Company Overview

Outlook 2014-2015


Leveraged Buyout

Agenda

Outlook 2014-2015 Revenues

2014

• Wall Street Average

Estimate 30% yoy

• 4Q 2014 growth of 42%

qoq

2015

• Wall Street Average

Estimate 21% yoy

• My Estimate 39%

Summary

• Aggressive acquisition

policy will be greatest

driving force of growth

$619.00 $628.00

$796.00

$939.00 $976.56

$1,015.62 $1,056.25

$1,098.50

2014-03 2014-06 2014-09 2014-12 2015-03 2015-06 2015-09 2015-12

Explained

Comparable Asset Model Valuation Spread

2014

• The range of competitors

is broad in terms of

market cap and

revenues

2015

• A tightening range

improves confidence in a

sustainable price

increase

Summary

• THS could well trade at a

level with its competitors

in a market driven by

consolidation

Explained

$63.71 $62.76

$51.44

$68.03

$72.60

$102.96

$86.95 $89.29

$112.97

$122.64

Target Range 52-Week 2014 2015 2016

Questions to Answer

II.) 2014-2015 Outlook? Based on Wall Street estimates, the outlook for

Treehouse Foods is bright, with growth being underpinned

by a very aggressive expansion policy. Further, a brief

analysis of their earnings suggests that THS could easily

surpass estimates for 2015. THS holds great potential as

they continue to bolster their earnings by expanding in a

fast growing sector and the opportunity to begin trading in a

range along with its competitors is open.

Operating Model Assumptions

THS will continue to acquire comparable companies annually

• Market Cap $200-500 M

• Revenue ~40% Sale Price (P/S 2.5)

THS will expand assets 8-12% annually

THS will pay down debt as soon as possible

• 20-30% within 5 years after leveraged acquisition

THS will issue dividend

• 40% rate in FY 2016

Current interest rate environment continues into 2015

THS shares see no drastic changes in market volatility

Discounted Cash Flows

Key Statistics

Current Price 82.50$

Dividend Yield 0%

Shares Outstanding 42.3

Mkt Cap ($M) 3,500.0$

Enterprise Value (163.6)$

52 Wk High 86.95$

52 Wk Low 62.76$

% off 52Wk Low 31%

Beta 0.93

Corporate AA -30 days 2.78%

Corporate AA Current 3.07%

Free Cash Flows

Historic Projections

2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E

EBIAT 100.00$ 138.00$ 148.00$ 140.00$ 136.00$ 135.17$ 262.03$ 296.90$ 325.56$ 347.91$

Depreciation & Amortization 47.0 70.0 83.0 98.0 109.0 121.2 72.2 83.6 94.4 104.5

Net Working Capital Adjustments

Total Current Asset Adjustment (70.0) (27.0) (120.0) (62.0) (226.0) (29.4) (44.2) (63.6) (6.4)

Total Current Liability Adjustment 53.0 (32.0) 16.0 53.0 258.4 25.7 72.5 84.8 210.9

Change in Net Working Capital (17.0) (59.0) (104.0) (9.0) 32.4 (3.8) 28.3 21.2 204.5

Capital Expenditures 37.0 40.0 69.0 70.0 83.8 109.2 126.5 95.2 158.2

Unlevered Free Cash Flow 154.0$ 132.0$ 65.0$ 166.0$ 205$ 221.2$ 282.3$ 345.9$ 498.7$

WACC 10.00%

Discount Period Accounting Period Ends: 12 1.000 2.000 3.000 4.000 5.000

Discount Factor 0.91 0.83 0.75 0.68 0.62

Present Value of Free Cash Flow 154.0$ 132.0$ 65.0$ 166.0$ 186.4$ 182.8$ 212.1$ 236.3$ 309.7$

Discounted Cash Flows

Step-wise

• Using a proprietary method to project “free cash flow

yields”

• Prevailing Corporate AA rates and Beta taken into

consideration

• Yield then used to “discover” fair price of THS shares

in its current market environment for a given time

horizon

• Fair price is discounted according to AA ratio and

Beta

HEIBAAS Valuation

Projection Period 4

Current FCF/S 3.92$

5yr Average FCF/S 3.05$

Average Projected FCF/S 3.95$

5yr Average FCY 3.70%

Projected Growth Rate 6.64%

Average AA Yield 2.78%

Current AA Yield 3.07%

Corporate AA Yield Ratio 0.91

Heibaas Valuation 90.6$

Beta Discount Rate 9.30%

Purchase Price 82.2$

Current Price 82.50$

Projected Free Cash Flow Yield

2013 2014E 2015E 2016E 2017E 2018E

8.00% 4.94% 4.72% 4.76% 4.82% 5.07%

9.00% 4.90% 4.66% 4.68% 4.71% 4.92%

10.00% 4.8% 4.85% 4.60% 4.59% 4.60% 4.79%

11.00% 4.81% 4.54% 4.51% 4.50% 4.66%

12.00% 4.76% 4.48% 4.43% 4.40% 4.53%

Projected Growth Rate

2013 2014E 2015E 2016E 2017E 2018E

8.00% 33.51% 12.98% 8.77% 6.82% 6.48%

9.00% 32.28% 12.21% 8.11% 6.20% 5.87%

10.00% 31.08% 11.46% 7.46% 5.60% 5.28%

11.00% 29.90% 10.72% 6.82% 5.01% 4.69%

12.00% 28.74% 9.99% 6.19% 4.43% 4.13%

Discounted Cash Flows Valuation Spread Explained

Theory

• Most equities trade on a

multiple of free cash flows

• Predict FCF and historic FCF

yields help develop potential

trading range

• Discounted to Corporate AA

rates and Beta

• If shares trade at or below the

“fair price” for a time horizon, it

is considered a “Buy”

Interpreted

• FY 2015 fair price range

$73.87-$96.41

• THS shares will trade in that

range and higher leading up to

FY 2015 earnings release

Conclusion: Buy

$71.34

$62.76

$66.72

$73.87 $76.12

$77.25

$94.52

$86.95 $85.91

$96.41

$100.41 $102.91

TargetRange

52-Week 2014E 2015E 2016E 2017E

*See appendix for accompanying

technical analysis

Questions to Answer

III.) Would you buy THS shares? Why? THS shares have much potential to appreciate with

continued M&A activity. However, its position is currently

unstable given the presence of formidable competitors and

the inherent risks of a rapid acquisition policy. With time,

THS may stabilize and improve efficiency becoming an

attractive long term holding. For the time being, the

greatest value to be derived is in managing their M&A

transactions.

Financial Overview

Company Overview

Outlook 2014-2015


Leveraged Buyout

Agenda

Potential Target Criteria Transaction

• Market capitalization no more

than two-thirds THS

• Comparable earnings

multiples

• Strong revenue growth to fit

“bolt -on” strategy

• High returns on book with low

debt burden

• The high price and

momentum of THS shares in

the current M&A environment

would make an all-stock deal

attractive

• Earnings must be robust to

support obligations of

transaction (interest/fees)

given the capital

encumbrance of THS

• Earnings on Assets needed to

justify transaction

B&G Foods Overview Statistics

Revenue Growth Transaction

• Producer of private label foods for

food distribution, retail, wholesale

• Operates similarly to THS

including numerous acquisitions

• Breadth of both product offerings

and synergies generate value

The deal would be completed in the

midst of BGS expansion with stock

and debt and represents the last

major acquisition for some time due to

scale.

BGS Average

Market Cap $1,550 --

PE 32.3 28.0

Revenue Growth (3yr Avg) 12.1% 14.5%

Net Income Growth (3yr Avg) 17.4% 37.9%

Net Margin 5.9% 5.0%

ROE 13.8% 7.5%

Debt/ Equity 2.9 0.8

$544.00

$634.00

$725.00

$857.80 $888.70

2011-12 2012-12 2013-12 2014-12 E 2015-12 E

B&G Foods Transaction 5-Year DCF

Terms of Transaction

Market Capitalization $ 1,600.00

TTM Revenues 857.8

Price/ Sales 1.9

Offer Price $ 1,930.05

Price/ Sales 2.25

Premium 21%

Financing

Debt 482.5

Stock 1,447.5

Debt/ Equity 0.97

Discounted Cash Flows (Less: Interest)

PV of Free Cash Flow $ 831.63

Enterprise Value 7,977.1

FV of Enterprise Value 10,675.1

PV of Enterprise Value 6,628.4

Terminal Value $ 7,460.03

Net Debt 3,029.5

PV of Equity $ 4,430.5

Shares 59.9

Implied Value $ 73.99

% of Current -10%

J&J Snack Foods Overview Statistics

Revenue Growth Transaction

• Producer of frozen foods and

snack items

• Operates similarly to THS

including numerous acquisitions

• Maker of Luigi’s Italian Ice, ICEE,

Slush Puppie, and Super Pretzels

The deal would increase THS

considerably with a high earning

competitor and represents the last

major acquisition for some time due to

scale.

JJSF Average

Market Cap $1,920 --

PE 27.6 28.0

Revenue Growth (3yr Avg) 7.6% 14.5%

Net Income Growth (3yr Avg) 10% 37.9%

Net Margin 7.7% 5.0%

ROE 13.3% 7.5%

Debt/ Equity 0 0.8

$744.00 $831.00 $868.00 $904.00

$957.17

2011-09 2012-09 2013-09 2014-09 2015-12 E

J&J Snack Foods Transaction 5-Year DCF

Terms of Transaction

Market Capitalization $ 1,900.00

TTM Revenues 919.0

Price/ Sales 2.07

Offer Price $ 2,300.00

Price/ Sales 2.50

Premium 21%

Financing

Debt 575.0

Stock 1,725.0

Debt/ Equity 0.62

Discounted Cash Flows (Less: Interest)

PV of Free Cash Flow $ 940.4


FV of Enterprise Value 10,474.3

PV of Enterprise Value 6,503.7

Term $ 7,444.1

Net Debt 2,035.0

Pv Equity $ 5,409.1

Shares 63.24

Implied Value $ 85.53

% of Current 4%

Financial Overview

Company Overview

Outlook 2014-2015


Leveraged Buyout

Agenda

Leveraged Buyout Premise Free Cash Flows

• THS sells for well under $10B which means it could be a target

• Considering the high leverage of THS, leveraged buyout not recommended

Assumptions

Assumptions

Base Year 2014

Sponsor Target IRR 25.00%

Exit Mulitple 5.0x

Tax Rate 33.92%

Net Debt $1,528

Ownership at Exit 10%

Implied Share Price

Terminal EBITDA $ 696.17

Exit Multiple 5.0x


Less: Net Debt 1,528.0

Equity Value 5,028.0

Sponsor Ownership at Exit 90.0%

Sponsor Equity Value at Exit 4,525.2

Sponsor Expected IRR 25.0%

Sponsor Equity at Closing 1,482.8

Net Debt at Closing 1,528.0

Implied EV at Closing $ 3,010.8

PV of FCF 198

Termial Value 3,208.8

Diluted Shares Outstanding 42

Implied Share Price $ 75.80

Questions to Answer

IV.) What type of company would be an

attractive target for THS? The most attractive target for THS is a firm with a similar

business model in the private label packaging industry that

generates adequate earnings to cover the interest burden

of the acquisition. The target should also produce notable

products with a low debt burden to accommodate future

leveraging. Considering that THS has several large

competitors with similarly aggressive expansion strategies,

it would be best that they acquired one of these

competitors to relieve pressure and improve earnings.

Appendix

Comparable Assets Comparable Asset Model yahooFinance

TKR DMND BGS JJSF LNCE THS FLO HAIN INGR Average

Market Data

Market Cap 952.2 1,580.0 1,920.0 2,080.0 3,500.0 4,070.0 5,460.0 5,870.0

Enterprise Value 1,600.0 2,590.0 1,830.0 2,420.0 5,020.0 4,730.0 6,260.0 7,130.0

PEG Ratio (FyF) 1.0 1.5 2.6 2.2 1.9 1.7 1.8 1.8

PE 0.0 32.3 27.6 29.5 40.7 21.3 41.3 15.3 28.0

PB 3.3 4.4 3.5 2.1 2.0 3.4 3.4 2.6 3.0

PS 0.9 1.9 2.1 1.2 1.2 1.1 2.4 1.0 1.5

Revenue Growth (3yr Average) (3.6) 12.1 7.6 21.6 8.1 13.4 24.8 12.8 14.5

Net Income Growth (3yr Average) 0.0 17.4 10.0 215.3 (1.5) 19.0 36.5 32.8 37.9

Operating Margin (3.2) 15.3 11.6 6.6 7.2 7.8 9.4 10.2 8.9

Net Margin (19.0) 5.9 7.7 10.4 2.9 5.0 5.7 6.5 5.0

ROA (13.9) 3.1 1.1 10.4 2.4 7.5 4.9 7.4 4.9

ROE (73.1) 13.8 13.3 19.4 5.3 1.2 9.1 17.1 7.5

Debt/ Equity 2.2 2.9 0.0 0.4 0.9 0.7 0.5 0.9 0.8

Financials

Balance Sheet

Total Assets 1,193.0 1,484.0 705.0 1,765.0 2,721.0 2,504.0 2,965.0 5,360.0

Total Debt 909.0 1,106.0 142.0 846.0 1,448.0 1,428.0 1,345.0 2,956.0

Equity 284.0 378.0 563.0 919.0 1,273.0 1,076.0 1,620.0 2,404.0

Cash Flows

Free Cash Flow (122.0) 100.0 68.0 66.0 136.0 171.0 143.0 321.0

Income Statement TTM

Revenue 865.0 725.0 919.0 1,761.0 2,294.0 3,751.0 2,154.0 6,653.0

EBITDA

Operating Income (27.0) 154.0 107.0 127.0 178.0 335.0 228.0 613.0

Net Income Growth (3yr Average) (165.0) 52.0 72.0 79.0 87.0 231.0 140.0 396.0

Comparable Assets Multiples Analysis

2014 STDEV

Ev/Revenues 1.85 3.02 1.99 1.42 1.68 1.25 2.91 1.24 0.65

EV/EBITDA -20.25 14.90 12.63 13.34 17.31 9.93 22.68 10.14 12.10

EV/Operating Income -59.26 13.95 17.61 19.55 25.38 14.00 27.46 13.49 26.28

PE -5.77 25.69 26.74 27.21 39.93 17.48 39.00 17.19 13.57

2015 STDEV

Ev/Revenues 1.73 2.91 1.91 1.31 1.39 1.23 2.28 1.22 0.56

EV/EBITDA -18.99 14.38 12.13 12.37 11.71 9.73 17.77 9.97 10.71


PE -3.28 24.80 25.68 25.24 19.63 17.12 30.59 16.89 9.71

2016 STDEV

Ev/Revenues 1.66 2.69 1.84 1.14 1.20 1.12 2.10 1.10 0.54

EV/EBITDA -18.21 13.28 11.67 10.70 10.12 8.91 16.40 8.98 10.07


PE -3.15 22.90 24.71 21.83 16.17 15.67 28.23 15.22 9.02

Comparable Assets Multiples Analysis Valuation

2014 High Mean Median Low 2014 2015 2016

Ev/Revenues 3.02 1.78 1.77 1.24 EV/Revenues

EV/EBITDA 22.68 10.08 12.98 -20.25 Mean 1.78 1.75 1.61

EV/Operating Income 27.46 9.02 15.81 -59.26 Median 1.77 1.56 1.43

PE 39.93 23.43 26.21 -5.77 Low 1.24 1.22 1.10

2015 Revenues 2,982.0 3,608.5 4,182.1

Ev/Revenues 2.91 1.75 1.56 1.22

EV/EBITDA 17.77 8.63 11.92 -18.99 Enterprise Value

EV/Operating Income 21.54 12.10 13.89 -14.29 Mean 5,304.9 6,306.5 6,715.8

PE 30.59 19.58 22.22 -3.28 Median 5,267.9 5,628.7 5,975.9

Low 3,704.1 4,405.6 4,599.1

2016

Ev/Revenues 2.69 1.61 1.43 1.10 Net Debt

EV/EBITDA 16.40 7.73 10.41 -18.21 Long Term Debt 1559 1559 1559

EV/Operating Income 19.87 10.90 12.49 -13.70 Cash 31 31 31

PE 28.23 17.70 19.00 -3.15

Implied Equity Value

Mean 3,776.9 4,778.5 5,187.8

Median 3,739.9 4,100.7 4,447.9

Low 2,176.1 2,877.6 3,071.1

Price 82.5 82.5 82.5

Shares Outstanding 42.3 42.3 42.3

Per Share

Mean 89.29 112.97 122.64

Median 88.41 96.94 105.15

Low 51.44 68.03 72.60

Premium

Mean 8% 37% 49%

Median 7% 18% 27%

Low -38% -18% -12%

Per Share Value

Target Range52-Week 2014 2015 2016

102.96$ 86.95$ 89.29$ 112.97$ 122.64$

39.25$ 24.19$ 37.84$ 44.94$ 50.04$

63.71$ 62.76$ 51.44$ 68.03$ 72.60$

Income Statement Operating Model Historic Quarterly Projections

2009 2010 2011 2012 2013 2013-09 2013-12 2014-03 2014-06 2014-09 2014-12E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Revenue 1,512.0 1,817.0 2,050.0 2,182.0 2,294.0 567.0 660.0 619.0 628.0 796.0 939.2 2,982.2 3,608.5 4,182.1 4,719.0 5,227.3 5,998.6 6,598.5 7,258.3 7,984.2 8,782.6

Cost of revenue 1,185.0 1,386.0 1,577.0 1,728.0 1,818.0 452.0 524.0 486.0 492.0 637.0 743.6 2,358.6 2,834.0 3,284.7 3,712.9 4,119.9 4,721.2 5,192.1 5,712.2 6,284.6 6,913.4

Gross profit 326.0 431.0 473.0 454.0 476.0 115.0 137.0 133.0 136.0 159.0 195.6 623.6 774.5 897.4 1,006.1 1,107.4 1,277.4 1,406.4 1,546.2 1,699.5 1,869.1

Operating expenses

Sales, General, & Administrative 131.0 151.0 156.0 143.0 158.0 39.0 53.0 64.0 57.0 73.0 85.2 279.2 283.4 327.2 367.8 408.2 475.0 517.7 569.4 626.5 689.7

Restructuring, merger and acquisition 6.0 1.0 4.0 0.9 0.9 2.5 3.1 3.7 4.4 4.5 5.1 5.6 6.2 6.8

Other operating expenses 7.0 28.0 41.0 37.0 35.0 9.0 10.0 11.0 11.0 15.0 16.5 53.5 59.7 71.0 80.6 88.1 101.8 111.6 123.0 135.3 148.7

Total operating expenses 138.0 179.0 197.0 180.0 193.0 48.0 63.0 75.0 68.0 88.0 102.6 333.6 345.6 401.3 452.1 500.7 581.2 634.4 698.0 768.0 845.2

0.0

EBITDA 188.0 252.0 276.0 274.0 283.0 67.0 74.0 58.0 68.0 71.0 93.0 290.0 428.9 496.1 554.0 606.8 696.2 772.0 848.1 931.5 1,023.9

Depreciation & Amortization 47.0 70.0 83.0 98.0 109.0 25.0 28.0 27.0 26.0 30.0 38.2 121.2 72.2 83.6 94.4 104.5 120.0 118.8 130.6 143.7 158.1

Operating income 131.0 177.0 188.0 177.0 178.0 41.0 52.0 50.0 45.0 48.0 54.8 197.8 356.7 412.4 459.7 502.2 576.2 653.2 717.5 787.8 865.8

Other income (expense) 10.0 6.0 5.0 -1.0 -4.0 1.0 -6.0 -19.0 -2.0 -7.0 -10.3 -38.3 -11.5 -14.9 -18.8 -23.4 -27.3 -27.3 -30.5 -34.1 -37.8

EBIT 141.0 183.0 193.0 176.0 174.0 42.0 46.0 31.0 43.0 41.0 65.1 180.1 345.2 397.5 440.9 478.9 548.9 626.0 686.9 753.7 828.0

Interest Expense 18.0 46.0 53.0 52.0 49.0 13.0 12.0 11.0 9.0 10.0 17.5 47.5 83.8 80.4 76.6 64.6 105.9 105.9 97.4 85.7 70.3

Income before taxes 122.0 136.0 140.0 124.0 125.0 29.0 34.0 20.0 34.0 31.0 47.6 132.6 261.4 317.2 364.3 414.2 443.1 520.1 589.5 668.0 757.8

Provision for income taxes 41.0 45.0 45.0 36.0 38.0 7.0 12.0 6.0 12.0 11.0 16.0 45.0 83.1 100.6 115.3 131.0 141.0 165.0 187.0 211.9 240.4

Net income 81.0 91.0 94.0 88.0 87.0 23.0 23.0 14.0 22.0 20.0 31.6 87.6 178.3 216.5 249.0 283.3 302.0 355.1 402.6 456.1 517.4

Earnings per Share

Basic 2.54$ 2.59$ 2.64$ 2.44$ 2.39$ 0.62$ 0.62$ 0.39$ 0.59$ 0.48$ 0.75$ 2.07$ 4.18$ 5.02$ 5.70$ 6.39$ 6.68$ 7.68$ 8.47$ 9.28$ 10.11$

Diluted 2.48$ 2.51$ 2.56$ 2.38$ 2.33$ 0.61$ 0.61$ 0.38$ 0.57$ 0.47$ 0.73$ 2.02$ 4.08$ 4.90$ 5.57$ 6.25$ 6.54$ 7.52$ 8.29$ 9.09$ 9.92$

Dividends

Dividends Per Share -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 2.01$ 2.28$ 2.55$ 2.67$ 3.07$ 3.39$ 3.71$ 4.04$

Rate % Net Income 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 40% 40% 40% 40% 40% 40% 40% 40%

EPS Ex. Dividend 2.54$ 2.59$ 2.64$ 2.44$ 2.39$ 0.62$ 0.62$ 0.39$ 0.59$ 0.48$ 0.75$ 2.07$ 4.18$ 3.01$ 3.42$ 3.83$ 4.01$ 4.61$ 5.08$ 5.57$ 6.07$

Weighted average shares outstanding

Basic 32.0 35.0 36.0 36.0 36.0 36.0 37.0 37.0 37.0 41.0 42.3 42.3 42.7 43.1 43.7 44.3 45.2 46.2 47.6 49.2 51.2

Diluted 33.0 36.0 37.0 37.0 37.0 37.0 38.0 38.0 38.0 42.0 43.3 43.3 43.7 44.1 44.7 45.3 46.2 47.2 48.6 50.2 52.2

Assumptions on Income Statement

2009 2010 2011 2012 2013 2013-09 2013-12 2014-03 2014-06 2014-09 2014-12E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Organic Revenue Growth 20% 13% 6% 5% 16% -6% 1% 27% 18% 30% 21% 15% 12% 10% 10% 10% 10% 10% 10%

Revenue Growth 20% 13% 6% 5% 16% -6% 1% 27% 18% 30% 21% 16% 13% 11% 15% 10% 10% 10% 10%

COGS % Sales 78% 76% 77% 79% 79% 80% 79% 79% 78% 80% 79% 79% 79% 79% 79% 79% 79% 79% 79% 79% 79%

Gross Margins 22% 24% 23% 21% 21% 20% 21% 21% 22% 20% 21% 21% 21% 21% 21% 21% 21% 21% 21% 21% 21%

Sales, General, & Administrative % Sales 9% 8% 8% 7% 7% 7% 8% 10% 9% 9% 9% 9% 8% 8% 8% 8% 8% 8% 8% 8% 8%

Restructuring 0% 0% 0% 0% 0% 0% 1% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Other Operating % of Sales 0% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2%

Total Operating Expenses % of Sales 9% 10% 10% 8% 8% 8% 10% 12% 11% 11% 11% 11% 10% 10% 10% 10% 10% 10% 10% 10% 10%

EBITDA % Sales 12% 14% 13% 13% 12% 12% 11% 9% 11% 9% 10% 10% 12% 12% 12% 12% 12% 12% 12% 12% 12%

D&A % Sales 3% 4% 4% 4% 5% 4% 4% 4% 4% 4% 4% 4% 2% 2% 2% 2% 2% 2% 2% 2% 2%

Operating Income % Sales 9% 10% 9% 8% 8% 7% 8% 8% 7% 6% 6% 7% 10% 10% 10% 10% 10% 10% 10% 10% 10%

Other Income (Expense) % Sales 1% 0% 0% 0% 0% 0% -1% -3% 0% -1% -1% -1% 0% 0% 0% 0% 0% 0% 0% 0% 0%

EBIT % Sales 9% 10% 9% 8% 8% 7% 7% 5% 7% 5% 7% 6% 10% 10% 9% 9% 9% 9% 9% 9% 9%

Interest Expense % Sales 1% 3% 3% 2% 2% 2% 2% 2% 1% 1% 1% 2% 5% 5% 5% 5% 5% 5% 5% 5% 5%

Income Before Taxes % Sales 8% 7% 7% 6% 5% 5% 5% 3% 5% 4% 5% 4% 7% 8% 8% 8% 7% 8% 8% 8% 9%

Provision for Income Taxes % EBT 34% 33% 32% 29% 30% 24% 35% 30% 35% 35% 34% 34% 32% 32% 32% 32% 32% 32% 32% 32% 32%

Net Income % Sales 5% 5% 5% 4% 4% 4% 3% 2% 4% 3% 3% 3% 5% 5% 5% 5% 5% 5% 6% 6% 6%

Balance Sheet Balance Sheet Historic Quarterly Projections

2009 2010 2011 2012 2013 2013-09 2013-12 2014-03 2014-06 2014-09 2014-12 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Assets

Current assets

Cash

Cash and cash equivalents 4.0 6.0 3.0 94.0 46.0 108.0 46.0 16.0 17.0 22.0 331.5 738.5 786.2 725.5 712.6 675.7 673.3 685.7 692.0 689.5 645.5

Short-term investments 9.0 8.0 9.0 9.0 9.0 9.0 10.6 10.6 6.2 7.1 8.1 9.5 13.7 13.9 14.7 16.0 17.4

Total cash 4.0 6.0 3.0 94.0 55.0 116.0 55.0 24.0 26.0 31.0 342.1 749.1 792.4 732.7 720.7 685.2 687.0 699.6 706.7 705.5 662.9

Receivables 87.0 127.0 115.0 125.0 153.0 134.0 153.0 151.0 155.0 225.0 203.2 203.2 163.5 126.5 102.5 78.2 113.3 101.2 86.4 68.5 68.5

Inventories 265.0 287.0 329.0 347.0 406.0 423.0 406.0 413.0 499.0 677.0 561.8 561.8 642.1 714.2 792.7 813.8 907.0 1,025.1 1,015.1 995.5 964.4

Deferred income taxes 3.0 3.0 4.0 8.0 22.0 8.0 22.0 22.0 13.0 9.0 20.5 20.5 19.7 23.4 27.6 32.1 38.2 39.9 43.6 48.2 53.4

Prepaid expenses 7.0 13.0 13.0 0.0 14.0 17.0 14.0 17.0 25.0 32.0 33.9 33.9 23.5 28.3 32.4 36.7 50.9 53.9 57.3 62.4 68.0

Other current assets 4.0 4.0 4.0 14.0 0.0 0.0 0.0 0.0 0.0 0.0 1.6 1.6 1.6 2.3 3.1 3.9 9.4 9.4 9.4 9.4 9.4

Total current assets 371.0 441.0 468.0 588.0 650.0 699.0 650.0 627.0 719.0 974.0 1,163.1 1,570.1 1,642.8 1,627.4 1,679.0 1,649.9 1,805.8 1,929.2 1,918.7 1,889.5 1,826.5

Non-current assets

Property, plant and equipment

Gross property, plant and equipment 428.0 576.0 637.0 713.0 800.0 752.0 800.0 791.0 849.0 904.0 956.7 956.7 1,010.9 1,094.5 1,140.7 1,242.7 1,493.1 1,638.3 1,798.0 1,973.6 2,166.8

Accumulated Depreciation -152.0 -190.0 -231.0 -288.0 -338.0 -327.0 -338.0 -335.0 -352.0 -364.0 -396.7 -396.7 -450.8 -522.0 -601.9 -689.8 -844.4 -930.2 -1,024.5 -1,128.3 -1,242.5

Net property, plant and equipment 276.0 386.0 407.0 425.0 462.0 425.0 462.0 456.0 497.0 540.0 560.0 560.0 560.0 572.5 538.8 552.9 648.7 708.1 773.5 845.3 924.4

Goodwill 575.0 1,076.0 1,068.0 1,073.0 1,119.0 1,071.0 1,119.0 1,113.0 1,164.0 1,674.0 1,747.3 1,747.3 1,747.3 1,779.5 1,814.4 1,850.7 2,098.2 2,098.2 2,098.2 2,098.2 2,098.2

Intangible assets 163.0 464.0 438.0 418.0 476.0 412.0 476.0 464.0 512.0 738.0 761.5 761.5 779.6 817.6 859.6 905.0 1,066.0 1,099.0 1,135.3 1,175.2 1,219.1

Other long-term assets 24.0 23.0 21.0 14.0 19.0 14.0 16.0 20.0 21.0 22.1 22.1 22.1 22.6 23.1 23.7 27.4 27.4 27.4 27.4 27.4

Total non-current assets 1,014.0 1,950.0 1,936.0 1,937.0 2,071.0 1,927.0 2,071.0 2,049.0 2,193.0 2,972.0 3,090.9 3,090.9 3,109.0 3,192.1 3,235.9 3,332.2 3,840.3 3,932.7 4,034.3 4,146.1 4,269.0

Total assets 1,384.0 2,391.0 2,405.0 2,526.0 2,721.0 2,626.0 2,721.0 2,676.0 2,912.0 3,947.0 4,254.0 4,661.0 4,751.8 4,819.5 4,914.8 4,982.2 5,646.1 5,861.9 5,953.0 6,035.6 6,095.6

Liabilities and stockholders' equity

Liabilities

Current liabilities

Short-term debt 1.0 1.0 2.0 2.0 2.0 2.0 2.0 2.0 4.0 4.0 119.6 119.6 196.0 198.3 200.6 349.7 472.2 478.1 484.1 490.2 496.3

Accounts payable 109.0 121.0 154.0 155.0 154.0 163.0 219.0 244.0 292.0 292.0 236.0 286.7 346.2 393.4 497.1 531.7 569.9 622.7 680.5

Accrued liabilities 60.0 37.0 84.0 60.0 84.0 54.0 33.0 78.0 86.7 86.7 92.0 111.6 134.5 149.2 188.6 199.4 216.4 236.7 258.9

Other current liabilities 149.0 202.0 27.0 37.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total current liabilities 150.0 203.0 171.0 187.0 240.0 216.0 240.0 219.0 293.0 327.0 498.4 498.4 524.0 596.6 681.4 892.2 1,157.9 1,209.2 1,270.4 1,349.5 1,435.7

Non-current liabilities

Long-term debt 402.0 976.0 903.0 898.0 939.0 909.0 939.0 900.0 1,017.0 1,559.0 1,825.0 1,825.0 1,825.0 1,751.5 1,667.9 1,408.3 2,306.4 2,306.4 2,121.9 1,867.3 1,531.2

Deferred taxes liabilities 45.0 195.0 202.0 212.0 229.0 216.0 229.0 228.0 241.0 307.0 307.0 307.0 307.0 307.0 307.0 307.0 307.0 307.0 307.0 307.0 307.0

Other long-term liabilities 31.0 39.0 54.0 49.0 40.0 40.0 40.0 38.0 26.0 36.0 37.9 37.9 37.9 38.7 39.6 40.6 47.0 47.0 47.0 47.0 47.0

Total non-current liabilities 478.0 1,210.0 1,160.0 1,160.0 1,208.0 1,165.0 1,208.0 1,166.0 1,283.0 1,901.0 2,169.9 2,169.9 2,169.9 2,097.2 2,014.5 1,755.9 2,660.4 2,660.4 2,475.8 2,221.2 1,885.1

Total liabilities 628.0 1,413.0 1,331.0 1,347.0 1,448.0 1,381.0 1,448.0 1,384.0 1,576.0 2,228.0 2,668.2 2,668.2 2,693.9 2,693.8 2,695.9 2,648.1 3,818.2 3,869.5 3,746.2 3,570.7 3,320.8

Stockholders' equity

Common stock 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

Additional paid-in capital 588.0 703.0 715.0 727.0 749.0 740.0 749.0 765.0 777.0 1,153.0 1,161.1 1,161.1 1,191.4 1,228.2 1,272.8 1,327.8 1,397.4 1,484.4 1,592.0 1,725.3 1,890.9

Retained earnings 195.0 286.0 381.0 469.0 556.0 533.0 556.0 570.0 592.0 612.0 643.6 643.6 821.9 951.8 1,101.2 1,271.2 1,452.4 1,665.5 1,907.0 2,180.7 2,491.1

Accumulated other comprehensive income -27.0 -12.0 -22.0 -17.0 -32.0 -28.0 -32.0 -44.0 -33.0 -47.0 -219.0 188.0 44.6 -54.3 -155.0 -264.9 -1,021.9 -1,157.5 -1,292.3 -1,441.2 -1,607.3

Total stockholders' equity 756.0 978.0 1,074.0 1,179.0 1,273.0 1,246.0 1,273.0 1,292.0 1,336.0 1,719.0 1,585.8 1,992.8 2,057.9 2,125.7 2,219.0 2,334.0 1,827.9 1,992.4 2,206.7 2,464.8 2,774.8

Total liabilities and stockholders' equity 1,384.0 2,391.0 2,405.0 2,526.0 2,721.0 2,626.0 2,721.0 2,676.0 2,912.0 3,947.0 4,254.0 4,661.0 4,751.8 4,819.5 4,914.8 4,982.2 5,646.1 5,861.9 5,953.0 6,035.6 6,095.6

Cash Flows Cash Flows Historic Quarterly Projections

2009 2010 2011 2012 2013 2013-09 2013-12 2014-03 2014-06 2014-09 2014-12 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Cash Flows From Operating Activities

Net income 81.0 91.0 94.0 88.0 87.0 23.0 23.0 14.0 22.0 20.0 31.6 87.6 87.6 178.3 216.5 249.0 283.3 302.0 355.1 402.6 456.1

Depreciation & amortization 47.0 70.0 83.0 98.0 109.0 25.0 28.0 27.0 26.0 30.0 38.2 121.2 72.2 83.6 94.4 104.5 120.0 118.8 130.6 143.7 158.1

Deferred income taxes 19.0 9.0 15.0 6.0 (12.0) (1.0) (13.0) (2.0) 1.0 (2.0) 11.5 8.5 (0.7) 3.7 4.1 4.5 6.1 1.7 3.8 4.6 5.1

Stock based compensation 13.0 16.0 15.0 13.0 16.0 5.0 4.0 4.0 6.0 7.0 8.1 25.1 4.4 (0.7) (0.7) (1.2) (2.6) (0.2) (0.8) (1.3) (1.4)

Receivables (40.0) 12.0 (10.0) (28.0) (134.0) (19.0) 2.0 (4.0) (70.0) 33.7 (38.3) 39.7 42.2 29.6 30.1 4.9 12.0 14.8 18.0 0.0

Inventory (14.0) 34.0 (43.0) (8.0) (11.0) (24.0) 56.0 (10.0) (46.0) (54.0) 150.8 40.8 (80.3) (56.4) (61.6) (3.4) 26.9 (118.1) 10.1 19.6 31.1

Prepaid expenses (1.0) 0.0 4.0 6.0 3.0 4.0 3.0 (2.0) (8.0) (1.0) (0.2) (11.2) 10.4 (4.0) (3.4) (3.4) (8.6) (3.0) (3.4) (5.1) (5.6)

Short-term debt 0.0 1.0 0.0 0.0 2.0 0.0 0.0 2.0 0.0 115.4 117.4 76.4 2.2 2.3 148.9 121.8 5.9 6.0 6.1 6.1

Accounts payable 0.0 109.0 12.0 33.0 155.0 (1.0) 9.0 56.0 25.0 35.2 125.2 (56.0) 45.1 53.3 40.8 60.4 34.6 38.3 52.7 57.8

Accrued liabilities 0.0 60.0 (23.0) 47.0 60.0 24.0 (30.0) (21.0) 45.0 4.6 (1.4) 5.3 17.8 21.0 12.6 25.5 10.8 17.0 20.3 22.2

Other working capital 53.0 (202.0) 17.0 (13.0) 0.0 0.0 0.0 37.0 (37.0) (1.6) (1.6) 0.0 (0.7) (0.8) (0.8) (5.5) 0.0 0.0 0.0 0.0

Other non-cash items (40.0) 12.0 8.0 6.0 (14.0) (83.0) 10.0 24.0 (23.0) 31.0 0.0 32.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net cash provided by operating activities 105.0 245.0 156.0 205.0 217.0 32.0 115.0 36.0 48.0 (6.0) 427.3 505.3 159.0 310.9 354.9 581.7 632.3 364.6 571.4 661.3 729.6

Cash Flows From Investing Activities

Investments in property, plant, and equipment (37.0) (40.0) (69.0) (70.0) (75.0) (17.0) (22.0) (18.0) (12.0) (35.0) (18.8) (83.8) (108.3) (125.5) (94.4) (156.8) (180.0) (230.9) (254.0) (279.4) (307.4)

Property, plant, and equipment reductions 0.0 0.0 0.0 0.0 1.0 1.0 (1.0) 1.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Acquisitions, net (844.0) 3.0 (30.0) (219.0) (35.0) (184.0) 1.0 (142.0) (860.0) (184.0) (1185.0) 0.0 (80.9) (87.6) (91.3) (621.3) 0.0 0.0 0.0 0.0

Purchases of investments (8.0) 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

Sales/Maturities of investments 3.0 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

Purchases of intangibles (22.0) (9.0) (9.0) (6.0) (1.0) (3.0) (3.0) (2.0) (2.0) (9.4) (16.4) (36.1) (41.8) (47.2) (52.3) (60.0) (66.0) (72.6) (79.8) (87.8)

Other investing activities 0.0 1.0 (1.1) (0.1) 0.0 (0.5) (0.5) (0.5) (3.7) 0.0 0.0 0.0 0.0

Net cash used for investing activities (34.0) (906.0) (74.0) (109.0) (307.0) (51.0) (210.0) (20.0) (157.0) (897.0) (213.3) (1284) (144.3) (248.6) (229.7) (300.9) (865.0) (296.9) (326.6) (359.3) (395.2)

Cash Flows From Financing Activities

Debt issued 912.0 263.0 321.0 517.0 286.0 120.0 425.0 742.0 587.0 82.0 1836.0 0.0 36.0 39.0 40.6 276.8 0.0 0.0 0.0 0.0

Debt repayment (74.0) (339.0) (341.0) (325.0) (477.0) (190.0) (90.0) (165.0) (529.0) (445.0) 0.0 (1139.0) 0.0 (109.5) (122.6) (300.2) 0.0 0.0 (184.5) (254.6) (336.1)

Common stock issued 111.0 16.0 12.0 376.0 8.1 412.1 30.3 36.8 44.6 55.0 69.6 87.0 107.6 133.4 165.5

Excess tax benefit from stock based compensation 0.0 6.0 4.0 3.0 4.0 3.0 1.0 5.0 4.0 3.0 3.5 15.5 2.7 (0.4) (0.4) (0.8) (1.6) (0.1) (0.5) (0.8) (0.9)

Common Dividends 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 (86.6) (99.6) (113.3) (120.8) (142.0) (161.0) (182.5) (207.0)

Other financing activities 5.0 (27.0) (10.0) (4.0) 1.0 (1.0) 3.0 (310.0) (110.0) 765.0 1.9 346.9 0.0 0.8 0.9 0.9 6.4 0.0 0.0 0.0 0.0

Net cash provided by (used for) financing activities (70.0) 663.0 (84.0) (6.0) 46.0 97.0 34.0 (46.0) 107.0 911.0 95.5 1471.5 33.0 (122.9) (138.1) (317.7) 230.4 (55.2) (238.4) (304.5) (378.4)

Effect of exchange rate changes 1.0 1.0 (1.0) 2.0 (3.0) 2.0 0.0 (1.0) 3.0 (2.0) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net change in cash 2.0 2.0 (3.0) 91.0 (48.0) 80.0 (62.0) (31.0) 1.0 5.0 309.5 692 47.7 (60.6) (12.9) (36.9) (2.4) 12.5 6.3 (2.5) (44.0)

Cash at beginning of period 3.0 4.0 6.0 3.0 94.0 28.0 108.0 46.0 16.0 17.0 22.0 46.0 738.5 786.2 725.5 712.6 675.7 673.3 685.7 692.0 689.5

Cash at end of period 4.0 6.0 3.0 94.0 46.0 108.0 46.0 16.0 17.0 22.0 331.5 738.5 786.2 725.5 712.6 675.7 673.3 685.7 692.0 689.5 645.5

1

Free Cash Flow

Operating cash flow 105.0 245.0 156.0 205.0 217.0 32.0 115.0 36.0 48.0 (6.0) 427.3 505.3 159.0 310.9 354.9 581.7 632.3 364.6 571.4 661.3 729.6

Capital expenditure (37.0) (62.0) (78.0) (80.0) (81.0) (17.0) (25.0) (22.0) (14.0) (37.0) (28.2) (100.2) (144.3) (167.3) (141.6) (209.1) (239.9) (296.9) (326.6) (359.3) (395.2)

Free cash flow 68.0 183.0 78.0 125.0 136.0 15.0 90.0 14.0 33.0 (44.0) 399.1 405.1 14.7 143.6 213.3 372.6 392.3 67.6 244.7 302.0 334.4

Free Cash Flows Free Cash Flows


2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

EBIAT 100.00$ 138.00$ 148.00$ 140.00$ 136.00$ 135.17$ 262.03$ 296.90$ 325.56$ 347.91$ 407.91$ 460.97$ 499.95$ 541.85$ 587.66$

Depreciation & Amortization 47.0 70.0 83.0 98.0 109.0 121.2 72.2 83.6 94.4 104.5 120.0 118.8 130.6 143.7 158.1

Current Asset Adjustments

Receivables (40.0) 12.0 (10.0) (28.0) (50.2) 39.7 37.0 24.0 24.3 (35.0) 12.0 14.8 18.0 0.0

Inventories (22.0) (42.0) (18.0) (59.0) (155.8) (80.3) (72.1) (78.5) (21.1) (93.3) (118.1) 10.1 19.6 31.1

Deferred income taxes 0.0 (1.0) (4.0) (14.0) 1.5 0.7 (3.7) (4.1) (4.5) (6.1) (1.7) (3.8) (4.6) (5.1)

Prepaid expenses (6.0) 0.0 13.0 (14.0) (19.9) 10.4 (4.8) (4.2) (4.2) (14.2) (3.0) (3.4) (5.1) (5.6)

Other current assets 0.0 0.0 (10.0) 14.0 (1.6) 0.0 (0.7) (0.8) (0.8) (5.5) 0.0 0.0 0.0 0.0

Total Current Asset Adjustment (70.0) (27.0) (120.0) (62.0) (226.0) (29.4) (44.2) (63.6) (6.4) (154.1) (110.8) 17.7 27.9 20.3

Current Liability Adjustments

Short-term debt 0.0 1.0 0.0 0.0 117.6 76.4 2.3 2.4 149.0 122.5 5.9 6.0 6.1 6.1

Accounts payable 0.0 109.0 12.0 33.0 138.0 (56.0) 50.7 59.5 47.2 103.7 34.6 38.3 52.7 57.8

Accrued liabilities 0.0 60.0 (23.0) 47.0 2.7 5.3 19.6 23.0 14.7 39.4 10.8 17.0 20.3 22.2

Other current liabilities 53.0 (202.0) 27.0 (27.0) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total Current Liability Adjustment 53.0 (32.0) 16.0 53.0 258.4 25.7 72.5 84.8 210.9 265.7 51.3 61.2 79.1 86.2

Capital Expenditures 37.0 40.0 69.0 70.0 83.8 108.3 125.5 94.4 156.8 180.0 230.9 254.0 279.4 307.4

Unlevered Free Cash Flow 154.0$ 132.0$ 65.0$ 166.0$ 205$ 222.2$ 283.4$ 346.7$ 500.1$ 459.5$ 289.3$ 455.5$ 513.2$ 544.9$

WACC 10.00%

Discount Period Accounting Period Ends: 12 1.000 2.000 3.000 4.000 5.000 6.000 7.000 8.000 9.000 10.000

Discount Factor 0.91 0.83 0.75 0.68 0.62 0.56 0.51 0.47 0.42 0.39

Present Value of Free Cash Flow 154.0$ 132.0$ 65.0$ 166.0$ 186.4$ 183.6$ 212.9$ 236.8$ 310.5$ 259.4$ 148.4$ 212.5$ 217.6$ 210.1$

Discounted Cash Flows HEIBAAS Valuation

2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

AA Rate BETA WACC

0.91 0% 9% 74.7 83.8 87.3 89.5 93.9 93.4 88.0 85.2 82.6 79.8

0.91 0% 10% 74.7 83.3 86.3 88.0 91.8 91.0 85.4 82.4 79.6 76.7

0.91 0% 11% 74.7 82.7 85.2 86.5 89.8 88.6 83.0 79.8 76.8 73.7

0.91 9% 9% 67.8 76.0 79.2 81.2 85.1 84.7 79.8 77.3 74.9 72.4

0.91 9% 10% 67.8 75.5 78.2 79.8 83.2 82.5 77.5 74.8 72.2 69.5

0.91 9% 11% 67.8 75.0 77.3 78.5 81.4 80.4 75.3 72.4 69.7 66.9

0.91 11% 9% 66.7 74.9 78.0 79.9 83.8 83.4 78.6 76.1 73.7 71.3

0.91 11% 10% 66.7 74.4 77.0 78.6 82.0 81.2 76.3 73.6 71.1 68.5

0.91 11% 11% 66.7 73.9 76.1 77.2 80.2 79.1 74.1 71.3 68.6 65.8

0.95 0% 9% 78.4 88.0 91.7 94.0 98.5 98.1 92.4 89.5 86.7 83.8

0.95 0% 10% 78.4 87.4 90.6 92.4 96.4 95.5 89.7 86.6 83.6 80.5

0.95 0% 11% 78.4 86.9 89.5 90.8 94.2 93.0 87.1 83.8 80.6 77.4

0.95 9% 9% 71.1 79.8 83.2 85.2 89.4 89.0 83.8 81.2 78.6 76.0

0.95 9% 10% 71.1 79.3 82.2 83.8 87.4 86.6 81.4 78.5 75.8 73.0

0.95 9% 11% 71.1 78.8 81.2 82.4 85.5 84.4 79.0 76.0 73.1 70.2

0.95 11% 9% 70.1 78.6 81.9 83.9 88.0 87.6 82.5 79.9 77.4 74.8

0.95 11% 10% 70.1 78.1 80.9 82.5 86.0 85.3 80.1 77.3 74.6 71.9

0.95 11% 11% 70.1 77.6 79.9 81.1 84.2 83.1 77.8 74.8 72.0 69.1

1.04 0% 9% 85.9 96.4 100.4 102.9 107.9 107.4 101.2 98.0 95.0 91.8

1.04 0% 10% 85.9 95.8 99.2 101.2 105.5 104.6 98.3 94.8 91.5 88.2

1.04 0% 11% 85.9 95.1 98.0 99.5 103.2 101.9 95.4 91.8 88.3 84.8

1.04 9% 9% 77.9 87.4 91.1 93.3 97.9 97.4 91.8 88.9 86.1 83.2

1.04 9% 10% 77.9 86.9 90.0 91.8 95.7 94.9 89.1 86.0 83.0 80.0

1.04 9% 11% 77.9 86.3 88.9 90.2 93.6 92.4 86.6 83.2 80.1 76.9

1.04 11% 9% 76.7 86.1 89.7 91.9 96.4 95.9 90.4 87.5 84.8 81.9

1.04 11% 10% 76.7 85.5 88.6 90.3 94.2 93.4 87.7 84.7 81.8 78.7

1.04 11% 11% 76.7 85.0 87.5 88.8 92.2 91.0 85.2 82.0 78.9 75.7

Target Range 52-Week 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

High 94.52$ 86.95$ 85.91$ 96.41$ 100.41$ 102.91$ 107.93$ 107.44$ 101.20$ 97.99$ 94.96$ 91.75$

Range 23.17$ 24.19$ 19.20$ 22.54$ 24.28$ 25.66$ 27.78$ 28.32$ 27.08$ 26.73$ 26.37$ 25.91$

Low 71.34$ 62.76$ 66.72$ 73.87$ 76.12$ 77.25$ 80.16$ 79.12$ 74.12$ 71.27$ 68.59$ 65.85$

Target

Range

Choke

Point

Momentum

Loss

Fibonacci 181

Fibonacci 100

Fibonacci 281

B&G Foods Operating Model

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Revenue 1,512.0 1,817.0 2,050.0 2,182.0 2,294.0 3,109.9 4,711.8 6,360.9 7,315.0 8,192.8 9,176.0

Cost of revenue 1,185.0 1,386.0 1,577.0 1,728.0 1,818.0 2,446.9 3,675.2 4,961.5 5,705.7 6,390.4 7,157.2

Gross profit 326.0 431.0 473.0 454.0 476.0 663.0 1,036.6 1,399.4 1,609.3 1,802.4 2,018.7

Operating expenses

Sales, General, & Administrative 131.0 151.0 156.0 143.0 158.0 353.7 471.2 636.1 731.5 819.3 917.6

Restructuring, merger and acquisition 6.0

Other operating expenses 7.0 28.0 41.0 37.0 35.0 57.0 80.0 80.0 80.0 80.0 80.0

Total operating expenses 138.0 179.0 197.0 180.0 193.0 411.7 551.2 716.1 811.5 899.3 997.6

EBITDA 188.0 252.0 276.0 274.0 283.0 305.3 485.4 683.3 797.8 903.1 1,021.1

Depreciation & Amortization 47.0 70.0 83.0 98.0 109.0 115.0 141.4 190.8 219.5 245.8 275.3

Operating income 131.0 177.0 188.0 177.0 178.0 219.3 344.1 492.5 578.4 657.4 745.8

Other income (expense) 10.0 6.0 5.0 (1.0) (4.0) (33.0) (20.0) (20.0) (20.0) (20.0) (20.0)

EBIT 141.0 183.0 193.0 176.0 174.0 186.3 324.1 472.5 558.4 637.4 725.8

Interest Expense 18.0 46.0 53.0 52.0 49.0 78.6 194.4 194.4 194.4 194.4 194.4

Income before taxes 122.0 136.0 140.0 124.0 125.0 107.7 129.7 278.1 363.9 442.9 531.4

Provision for income taxes 41.0 45.0 45.0 36.0 38.0 36.9 45.4 97.3 127.4 155.0 186.0

Net income 81.0 91.0 94.0 88.0 87.0 70.8 84.3 180.7 236.6 287.9 345.4

Shares Outstanding

Basic 32.0 35.0 36.0 36.0 36.0 59.9 59.9 59.9 59.9 59.9 59.9

Diluted 33.0 36.0 37.0 37.0 37.0 60.9 60.9 60.9 60.9 60.9 60.9

Earnings per Share

Basic 2.53$ 2.60$ 2.61$ 2.44$ 2.42$ 1.18$ 1.41$ 3.02$ 3.95$ 4.81$ 5.77$

Diluted 2.45$ 2.53$ 2.54$ 2.38$ 2.35$ 1.16$ 1.38$ 2.97$ 3.89$ 4.73$ 5.67$

B&G Foods Balance Sheet Consolidation

BGS THS PF

2014-09 2014-09 ADD LESS 2014-09E

Assets

Current assets

Cash

Cash and cash equivalents 6 22 28

Short-term investments 9 9

Total cash 6 31 0 0 37

Receivables 68 225 293

Inventories 133 677 810

Deferred income taxes 4 9 4 9

Prepaid expenses 8 32 40

Other current assets 13 0 13

Total current assets 232 974 0 4 1202

Non-current assets


Gross property, plant and equipment 240 904 1144

Accumulated Depreciation -125 -364 -489

Net property, plant and equipment 115 540 0 0 655

Goodwill 370 1674 1729.75 370 3403.75

Intangible assets 951 738 1689

Other long-term assets 30 21 51

Total non-current assets 1466 2972 1729.75 370 5798.75

Total assets 1698 3947 1729.75 374 7000.75


Liabilities

Current liabilities

Short-term debt 21 4 25

Accounts payable 50 244 294

Accrued liabilities 28 78 106

Other current liabilities 18 0 18

Total current liabilities 116 327 0 0 443


Long-term debt 1025 1559 482.5125 3066.513

Deferred taxes liabilities 201 307 201 307

Other long-term liabilities 2 36 38

Total non-current liabilities 1229 1901 482.5125 201 3411.513

Total liabilities 1345 2228 482.5125 201 3854.513


Common stock 1 0 1 0

Additional paid-in capital 128 1153 1447.538 128 2600.538

Retained earnings 227 612 246.3005 592.6995

Accumulated other comprehensive income -2 -47 2 -47

Total stockholders' equity 353 1719 1449.538 375.3005 3146.237

Total liabilities and stockholders' equity 1698 3947 1932.05 576.3005 7000.75

J&J Snack Foods PF Corp Operating Model

2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Revenue 3,972.9 4,494.9 5,058.7 5,707.4 6,496.2 7,509.4 8,529.5 9,695.7 11,043.4 12,602.1

Cost of revenue 3,033.1 3,400.0 3,845.2 4,351.6 4,948.0 5,713.3 6,484.9 7,379.1 8,406.9 9,590.5

Gross profit 939.8 1,094.9 1,213.5 1,355.8 1,548.2 1,796.1 2,044.6 2,316.6 2,636.5 3,011.6

Operating expenses

Sales, General and administrative 480.1 500.1 553.8 623.5 718.8 843.3 943.2 1,070.9 1,221.9 1,397.9

1.4

Other operating expenses 52.0 4.5 5.1 5.7 6.5 7.5 8.5 9.7 11.0 12.6

Total operating expenses 533.5 504.5 558.9 629.3 725.3 850.8 951.8 1,080.6 1,233.0 1,410.5

EBITDA 427.4 590.4 654.7 726.5 822.8 945.3 1,092.8 1,236.0 1,403.5 1,601.1

Depreciation & Amortization 164.0 192.1 218.8 247.3 281.7 321.4 367.6 418.5 476.5 543.3

Operating income 292.3 398.2 435.8 479.3 541.2 624.0 725.2 817.4 927.0 1,057.8

Other income (expense) -25.3 0.7 -1.9 -7.9 -10.8 -14.5 -8.9 -12.4 -16.1 -18.5

EBIT 267.1 398.9 433.9 471.4 530.4 609.5 716.4 805.1 910.9 1,039.2

Interest Expense 43.7 106.7 106.7 106.7 106.7 106.7 106.7 106.7 106.7 106.7

Income before taxes 223.4 292.2 327.2 364.7 423.7 502.8 609.7 698.4 804.2 932.5

Provision for income taxes 78.5 98.4 109.3 122.1 142.8 170.3 205.0 234.7 270.7 314.2

Net income 145.8 193.8 217.9 242.6 281.0 332.5 404.7 463.6 533.5 618.3

Earnings per share

Basic 2.31$ 3.06$ 3.45$ 3.84$ 4.44$ 5.26$ 6.40$ 7.33$ 8.44$ 9.78$

Diluted -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Weighted average shares outstanding

Basic 63 63 63 63 63 63 63 63 63 63

Diluted 64 64 64 64 64 64 64 64 64 64

J&J Snack Foods Balance Sheet Consolidation

JJSF THS PF

2014-06 2014-09 ADD LESS 2009-12

Assets

Current assets

Cash

Cash and cash equivalents 68 22 90

Short-term investments 9 9

Total cash 68 31 0 0 99

Receivables 109 225 334

Inventories 80 677 757

Deferred income taxes 5 9 5 9

Prepaid expenses 4 32 36

Total current assets 266 974 0 5 1235

Non-current assets


Gross property, plant and equipment 535 904 1439

Accumulated Depreciation -376 -364 -740

Net property, plant and equipment 159 540 0 0 699

Equity and other investments 132 132

Goodwill 86 1674 1771 86 3445

Intangible assets 52 738 790

Other long-term assets 4 21 25

Total non-current assets 433 2972 1771 86 5091

Total assets 698 3947 1771 91 6326


Liabilities

Current liabilities

Short-term debt 4 4

Capital leases 0 0

Accounts payable 67 244 311

Taxes payable 2 2 0

Accrued liabilities 29 78 107

Other current liabilities 6 6

Total current liabilities 104 327 0 2 428


Long-term debt 1559 575 2134

Capital leases 0 0

Deferred taxes liabilities 46 307 46 307

Other long-term liabilities 1 36 37

Total non-current liabilities 47 1901 575 46 2478

Total liabilities 151 2228 575 48 2906


Additional paid-in capital 31 1153 1725 31 2878

Retained earnings 520 612 543 589

Accumulated other comprehensive income -4 -47 4 -47

Total stockholders' equity 548 1719 1729 574 3420

Total liabilities and stockholders' equity 698 3947 2304 622 6326

J&J Snack Foods Synergies

THS 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Without Synergies

Revenue 2,982.2 3,608.5 4,182.1 4,719.0 5,227.3 5,998.6 6,598.5 7,258.3 7,984.2 8,782.6

SGA 279.2 283.4 327.2 367.8 408.2 475.0 517.7 569.4 626.5 689.7

Tax 45.0 83.1 100.6 115.3 131.0 141.0 165.0 187.0 211.9 240.4

With Synergies

Revenue 2,982.2 3,608.5 4,061.1 4,581.9 5,215.1 6,028.5 6,847.4 7,783.6 8,865.5 10,116.9

SGA 360.4 401.4 444.6 500.6 577.1 677.0 757.2 859.7 981.0 1,122.2

Tax 59.0 79.0 87.7 98.0 114.6 136.8 164.6 188.4 217.3 252.2

Net Synergies (95.1) (113.9) (225.5) (252.5) (164.8) (167.9) 9.8 233.6 521.5 890.0

JJSF 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Without Synergies

Revenue 957.2 1,033.6 1,118.6 1,214.0 1,309.8 1,422.2 1,539.4 1,667.0 1,805.5 1,954.7

SGA 209.6 213.1 228.3 247.4 268.3 295.3 316.1 342.0 370.8 402.0

Tax 38.6 17.5 17.0 16.7 15.3 12.4 20.4 20.9 21.7 22.8

With Synergies

Revenue 957.2 1,082.9 1,218.8 1,375.1 1,565.1 1,809.2 2,055.0 2,335.9 2,660.6 3,036.2

SGA 115.7 120.5 133.4 150.2 173.2 203.2 227.2 258.0 294.4 336.8

Tax 18.9 23.7 26.3 29.4 34.4 41.0 49.4 56.6 65.2 75.7

Net Synergies 113.6 135.8 185.8 245.6 331.4 450.5 575.5 717.2 887.9 1,093.8

J&J Snack Foods

Free Cash Flows

PF Corp 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

EBIAT 189.5 300.5 324.6 349.3 387.7 439.2 511.4 570.3 640.2 725.0

D&A 164.0 192.1 218.8 247.3 281.7 321.4 367.6 418.5 476.5 543.3

LESS: Capex 109.1 118.2 128.1 138.7 150.3 162.8 176.4 191.1 207.0 224.2

LESS: dNWC 39.8 45.1 50.7 57.2 65.1 75.3 85.5 97.2 110.7 126.4

LESS: Interest Expense 43.7 106.7 106.7 106.7 106.7 106.7 106.7 106.7 106.7 106.7

Free Cash Flows 160.9 222.7 258.0 293.9 347.2 415.7 510.4 593.9 692.3 811.0

Present Value of FCF $146.25 $184.01 $193.81 $200.73 $215.58 $234.65 $261.89 $277.04 $293.61 $312.69

Realizable Synergies 1 2 3 4 5 6 7 8 9 10

PF Corp 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Total 18.5 21.9 (39.7) (6.9) 166.7 282.7 585.3 950.8 1,409.5 1,983.7

PV of Synergies 16.8 18.1 (29.8) (4.7) 103.5 159.6 300.3 443.6 597.8 764.8

5 Years

Cumulative PV of Synergies 103.9

Per Share

Basic 1.64$

Diluted 1.62$

Leverage Buyout Sources & Allocation of Capital

% of MRFY P/

Rate Balance Total EBITDA

Cash 0% 22.0 0.43% 0.08

Revolver 6% 10% 493.2 9.57% 1.74

Senior Debt 6% 30% 1,545.6 30.00% 5.46

Sub Debt 12% 20% 1,030.4 20.00% 3.64

Mezzanine 12% 10% 515.2 10.00% 1.82

Sponsor Equity 10% 30% 1,545.6 30.00% 5.46

Total sources 100.0% 5,152.0 100.00% 18.20

Equity purchase price 3,500.0 67.93% 12.37

Refinance debt 1,528.0 29.66% 5.40

Fund cash balance 71.5 1.39% 0.25

Transaction costs 1.5% 52.5 1.02% 0.19

Total uses 5,152.0 100.00% 18.20

Close Details

Price 82.50$

Date of Close 12/31/2014

MRFY EBITDA 283.00

Exit Year 5

Assumptions

Base Year 2014

Sponsor Target IRR 25.00%

Exit Mulitple 5.0x

Tax Rate 33.92%

Net Debt $1,528

Ownership at Exit 10%

Leverage Buyout Debt Schedule

1 Rate 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Revolver 6.0%

BB $493 $327 $430 $416 $460 $384 $274 $232 $288 $80

Mandatory Paydown Yes (166) 103 (14) 44 (77) (110) (42) 56 (207) (7)

Optional Paydown 0.00% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

EB $493 $327 $430 $416 $460 $384 $274 $232 $288 $80 $74

Interest Expense 25 23 25 26 25 20 15 16 11 5

Senior Debt 6.0%

BB $1,546 $1,712 $1,712 $1,712 $1,712 $1,712 $1,712 $1,712 $1,712 $1,712

Mandatory Paydown Yes 166 0 0 0 0 0 0 0 0 0


EB $1,546 $1,712 $1,712 $1,712 $1,712 $1,712 $1,712 $1,712 $1,712 $1,712 $1,712


Sub Debt 12.0%

BB $1,030 $1,030 $1,030 $1,030 $1,030 $1,030 $1,030 $1,030 $1,030 $1,030



EB $1,030 $1,030 $1,030 $1,030 $1,030 $1,030 $1,030 $1,030 $1,030 $1,030 $1,030


Mezzanine 12.0%

BB $515 $515 $515 $515 $515 $515 $515 $515 $515 $515



EB $515 $515 $515 $515 $515 $515 $515 $515 $515 $515 $515


Net Debt $3,584 $3,584 $3,687 $3,673 $3,717 $3,641 $3,531 $3,489 $3,545 $3,338 $3,331

Total Interest Expense $308 $311 $314 $314 $313 $308 $303 $304 $299 $293

Leverage Buyout Free Cash Flows 1 2 3 4 5 6 7 8 9 10


2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

EBIAT 100.00$ 138.00$ 148.00$ 140.00$ 136.00$ 135.17$ 262.03$ 296.90$ 325.56$ 347.91$ 407.91$ 460.97$ 499.95$ 541.85$ 587.66$

Depreciation & Amortization 47.0 70.0 83.0 98.0 109.0 121.2 72.2 83.6 94.4 104.5 120.0 118.8 130.6 143.7 158.1

Current Asset Adjustments

Total Current Asset Adjustment (70.0) (27.0) (120.0) (62.0) (226.0) (29.4) (44.2) (63.6) (6.4) (154.1) (110.8) 17.7 27.9 20.3

Total Current Liability Adjustment 53.0 (32.0) 16.0 53.0 258.4 25.7 72.5 84.8 210.9 265.7 51.3 61.2 79.1 86.2

Net Working Capital Adjustment (17.0) (59.0) (104.0) (9.0) 32.4 (3.8) 28.3 21.2 204.5 111.6 (59.5) 78.9 107.1 106.5

Capital Expenditures 37.0 40.0 69.0 70.0 83.8 108.3 125.5 94.4 156.8 180.0 230.9 254.0 279.4 307.4

Interest Payment 307.8 310.9 313.5 314.5 313.5 307.9 303.3 303.8 299.2 292.8

Debt Paydown 0.0 102.8 (14.1) 44.2 (76.5) (110.1) (41.5) 55.6 (207.3) (6.7)

Unlevered Free Cash Flow 154.0$ 132.0$ 65.0$ 166.0$ (102.8)$ 14.1$ (44.2)$ 76.5$ 110.1$ 41.5$ (55.6)$ 207.3$ 6.7$ 245.4$

WACC 10.00%

Discount Period Accounting Period Ends: 12 1.000 2.000 3.000 4.000 5.000 6.000 7.000 8.000 9.000 10.000

Discount Factor 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00

Present Value of Free Cash Flow 154.0$ 132.0$ 65.0$ 166.0$ (102.8)$ 14.1$ (44.2)$ 76.5$ 110.1$ 41.5$ (55.6)$ 207.3$ 6.7$ 245.4$

Implied Share Price

Terminal EBITDA 696.17$

Exit Multiple 5.0x


Less: Net Debt 1,528.0

Equity Value 5,028.0

Sponsor Ownership at Exit 90.0%

Sponsor Equity Value at Exit 4,525.2

Sponsor Expected IRR 25.0%

Sponsor Equity at Closing 1,482.8

Net Debt at Closing 1,528.0

Implied EV at Closing 3,010.8$

PV of FCF 198

Termial Value 3,208.8

Diluted Shares Outstanding 42

Implied Share Price 75.80$

treehouse foods, inc

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