John M.

Case
Income Statement
1985 1986 1987 1988 1989 1990 1991 1992
Sales 16,024 16,844 17,686 18,570 19,498 20,472 21,496 22,570
Expansion 0 1,000 1,400 1,960 2,744 3,114 3,535 4,012
Net Sales 16,024 17,844 19,086 20,530 22,242 23,586 25,030 26,582
COGS 9454 10,528 11,261 12,113 13,123 13,916 14,768 15,684
Intial Investment 200 - - - - - - -
Merchandising 450 450 - - - - - -
S&A Expense 3429 3,819 4,084 4,393 4,760 5,047 5,357 5,689
EBIT 2491 3,047 3,741 4,024 4,359 4,623 4,906 5,210
Financing Expense 249 175 0 0 0 0
Interest Expense 1675 1538 1369 908 800 800 800 800
Profit Before Tax 567 1334 2372 3116 3559 3823 4,106 4,410
Fed Tax 1 88 208 370 486 555 596 944 1,058
Profit after Tax 478 1126 2002 2630 3004 3227 3,162 3,352
EPS 0.96 2.25 4.00 5.26 6.01 6.29 6.17 6.54
2.99% 6.31% 10.49% 12.81% 13.51% 13.68% 12.63% 12.61%
1 - Starting in 1991 we used a tax rate of 23% and grew the tax rate by 1 percent each year

Balance Sheet Net Working Capital

(000's) 1985 1986 1987 1988 1989 1990 (000's)
Assets1 Cash
Cash 9486 10564 11299 12154 13167 13963 Acct Rec.
Acct Rec 4182 4657 4981 5358 5805 6156 Inv.
Inv 1026 1142 1222 1314 1423 1510 C/L
total Current Asset 14694 16363 17502 18826 20396 21629 NWC
Net, P,P,&E2 2310 2270 2230 2190 2150 2110
Misc. Asset. 122 136 145 156 169 179
Total Assets 17126 18769 19877 21172 22715 23918
Liab.
Acct. Payable3 6023 6461 5490 4087 2565 489
Accrued Expenses4 383 427 457 491 532 564
Accrued Inc. Tax5 26 61 108 142 162 174
Current liab. 6432 6949 6055 4720 3259 1228
Common Stock6 500 500 500 500 500 508
Retained Earnings 10194 11320 13322 15952 18956 22183
Total Liab. & S/E 17126 18769 19877 21172 22715 23918

1- All assets were calculated using persentage of net sales

2-Assumed a 5 year straight line depreciation with $0 salvage value on the $200,000 intial investment for the expansion pro
3-Plug figure
4- Calculated as a percentage of Selling and Admin. Expenses
5-Calculated as a percentage of Fed. Income Taxes
6-500,000 shares from Management group plus warrants issued in 1990 to Venture Capitalists
 1993 1994 1995 1996
23,699 24,884 26,128 27,434
4,554 5,168 5,866 6,658
28,253 30,052 31,994 34,093
16,669 17,731 18,877 20,115
- - - -
- - - -
6,046 6,431 6,847 7,296
5,538 5,890 6,271 6,682

- - - -
5,538 5,890 6,271 6,682
1,384 1,531 1,693 1,871
4,153 4,359 4,578 4,811
8.10 8.50 8.93 9.38
14.70% 14.50% 14.31% 14.11%

Net Working Capital

1985 1986 1987 1988 1989 1990
9486 10564 11299 12154 13167 13963
4182 4657 4981 5358 5805 6156
1026 1142 1222 1314 1423 1510
(6432) (6949) (6055) (4720) (3259) (1228)
8262 9414 11447 14106 17137 20401

nt for the expansion project

John M Case
Free Cash Flow Valuation
1985 1986 1987 1988 1989 1990
1
EBIT*(1-T) 2107 2520 3053 3195 3400 3583
Add Non-Cash 240 260 284 300 310 340
Less:Increase in NWC 156 162 170 180 190 200
Less:Cap expense 770 584 142 150 466 600
Free Cash Flow 1421 2034 3025 3165 3054 3123

Debt Retirement Schedule

Bank Loan 2 1421 2034 2545 2355
Sellers' Debt 480 5520
Subordinated Loan 3 0 699 2801

Price-Earnings Multiple
DeLuther Wakefield Co. Officomp
P/E Ratio 8.7 7.2 10.5
Avg. P/E Ratios 8.8

Case Co. 1985 1986 1987 1988 1989 1990

Projected Net Income 478 1126 2002 2630 3004 3227
Avgerage net Income 2078

Multiple EV 19765 28397.6

Selling Price 20000
Bank Loan 6000
Company Cash 4000
Seller's Debt 6000
Equity 500
Subordinate Loan 3500

1 - Starting in 1991 we used a tax rate of 23% and grew the tax rate by 1 percent each year
2 -Loan paid off by cash flow and new bank term loan of 2.355 million to be paid off the following year
3 - In 1992 the loan to the VC is completely paid off plus a payment of 1.17 million in order to guarantee the VC's 22% IRR
 WACC Coupon Rate
Bank Loan 12%
1991 1992 1993 1994 1995 1996 Sellers' Debt 4%
3778 3960 4154 4359 4578 4811 Subordinate Loan 9%
340 340 340 340 340 340 WACC 8.40%
210 220 230 240 250 260
600 600 600 600 600 600 Bank Weight 6000/19500=.308
3308 3480 3664 3859 4068 4291 Seller's Debt 6000/19500=.308
VC Loan 7500/19500=.385

Used the Weighted Average Cost of Debt for the

Payouts until all debts hav

Bank Loan is repaid first because it is the Senior d

Case's Debt is repaid second because of its 5-yea
Venture Capital debt is repaid last because it is
the Bank's and Case's debt 5-year te
19764800
Assumed tax rate as computed in case exhibi

arantee the VC's 22% IRR

 Coupon Rate Weight
30.8%
30.8%
38.5%

6000/19500=.308
6000/19500=.308
7500/19500=.385

Average Cost of Debt for the WACC due to no anticipated Dividend

Payouts until all debts have been repayed

rst because it is the Senior debt

second because of its 5-year term
bt is repaid last because it is subordinate to
k's and Case's debt 5-year term

as computed in case exhibit

Venture Capitalist Valuation
1985 1986 1987 1988 1989
Initial Outlay -3500
Interest Revenue 315 315 315 315
Principal Repayment 699
8,160 Warrants @ $55.88 per share

Venture Capitalist Contribution 3500

Interest Payments at 9%
Warrant Value 13% of 3500 455

3500
1990

252
2801
456

1990
Equity 28398
Selling Pric 20000
Bank Loan 6000
Company C 4000
Seller's De 6000
Equity 500
Subordinat 3500
 1991 1992 1993 1994 1995 1996
0 0 0 0 0 0
340 340 340 340 340 340
210 220 230 240 250 260
600 600 600 600 600 600
-470 -480 -490 -500 -510 -520

1991 1992 1993 1994 1995 1996

21,496 22,570 23,699 24,884 26,128 27,434
3,535 4,012 4,554 5,168 5,866 6,658
25,030 26,582 28,253 30,052 31,994 34,093
14,768 15,684 16,669 17,731 18,877 20,115
- - - - - -
- - - - - -
5,357 5,689 6,046 6,431 6,847 7,296
7,834 8,526 9,294 10,145 11,092 12,145
Price-Earnings Multiple
DeLuther Wakefield Officomp
P/E Ratio 8.7 7.2 10.5
Avg. P/E Ra 8.8

Case Co. 1985 1986 1987 1988 1989 1990

Projected 478 1126 2002 2630 3004 3227
Avgerage n 2078