2012 Duff & Phelps YOUniversity Deal Challenge

February 18, 2012

Table of Contents
I. Executive Summary II. Company Overview III. Management Plan IV. Additional Information V. Deliverables

I. Executive Summary

CONFIDENTIAL

Executive Summary
Barkley Enterprises is a private consumer goods company based in the United States. Barkley manufactures and sells products throughout North and South America. The company operates two separate business lines: o Snacks; and o Personal Hygiene. Revenue in 2010 was approximately $882 million, and is forecast to be $925 million in 2011. EBITDA in 2010 was approximately $140 million, and is forecast to be $152 million in 2011. Barkley has been family-owned and operated since its founding. However, after careful consideration, the current management team decided recently to put the company up for sale. In the interest of maximizing proceeds, management is open to selling segments of the business separately but has not yet determined an optimal deal structure.

II. Company Overview

CONFIDENTIAL

Business Description
Barkley was founded by George Barkley in 1935 and the company has been familyowned and operated ever since. The current CEO is the great-granddaughter of the founder. Headquartered in Atlanta, GA. Overview of the Snacks business: Began by selling peanuts throughout the Southeastern U.S. Expanded products over time to include pretzels, potato chips, corn chips, and various other snack foods. Expanded into Latin America through the acquisition of a Puerto Rican company in the 1990s. Current footprint includes all of North America, Colombia, Peru, and Venezuela. The company owns over 20 different brands. The majority are well-recognized, local brands.
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Business Description, continued

Overview of the Personal Hygiene business: Started in the 1950s by a cousin of George Barkleys. Merged with Barkley Enterprises several years later. Products include soaps, shampoos, and deodorants. The business was originally focused on branded products, but it has recently expanded into private label manufacturing. Private label customers include primarily large retailers and hotel chains. Footprint only includes the United States and Canada. Branded products sold under three main brands. The price point for Barkleys products is near the low end of the range for products in their categories. The company manufactures all of its products. Workforce includes approximately 3,500 employees and a highly experienced senior management team.
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Historical Financial Information - Snacks

Revenue (000s) & Margin Trends

$700,000 $650,000 $600,000 Revenue $550,000 $500,000 $450,000 $400,000 2007A 2008A 2009A 2010A Revenue EBITDA Margin 17.5% 17.0% 16.5% 16.0% 15.5% 15.0% 14.5% EBITDA Margin

2007A 2010A Highlights

Revenue growth over the past four years driven by continued expansion in Latin America New markets include Peru and Colombia EBITDA margin reduction in recent years caused by difficult economic environment and higher marketing costs associated with expansion

Historical Financial Information - Snacks

Detailed Financial Results (thousands)
2007A North America Revenue Latin America Revenue Total Revenue Costs of Goods Sold Sales & Marketing General & Admin Total Expenses EBITDA Depreciation EBIT Capital Expenditures $ $ $ $ $ $ $ 477,900 $ 92,850 570,750 $ 290,512 $ 95,886 86,183 472,581 $ 98,169 $ 22,985 75,184 $ 30,000 $ 2008A 498,928 $ 106,499 605,427 $ 308,768 $ 99,895 92,630 501,293 $ 104,133 $ 22,985 81,148 $ 23,000 $ 2009A 507,908 $ 113,847 621,756 $ 333,261 $ 98,237 94,507 526,005 $ 95,750 $ 23,448 72,303 $ 23,500 $ 2010A 536,859 130,014 666,873 350,775 106,700 98,697 556,172 110,701 23,910 86,791 24,000

Historical Financial Information - Snacks

Common Size (% of Revenue)
2007A North America Revenue Latin America Revenue Total Revenue Costs of Goods Sold Sales & Marketing General & Admin Total Expenses EBITDA Depreciation EBIT Capital Expenditures 83.7% 16.3% 100.0% 50.9% 16.8% 15.1% 82.8% 17.2% 4.0% 13.2% 5.3% 2008A 82.4% 17.6% 100.0% 51.0% 16.5% 15.3% 82.8% 17.2% 3.8% 13.4% 3.8% 2009A 81.7% 18.3% 100.0% 53.6% 15.8% 15.2% 84.6% 15.4% 3.8% 11.6% 3.8% 2010A 80.5% 19.5% 100.0% 52.6% 16.0% 14.8% 83.4% 16.6% 3.6% 13.0% 3.6%

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Historical Financial Information - Snacks

Growth Trends
2007A North America Revenue Latin America Revenue Total Revenue Costs of Goods Sold Sales & Marketing General & Admin Total Expenses EBITDA Depreciation EBIT Capital Expenditures N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 2008A 4.4% 14.7% 6.1% 6.3% 4.2% 7.5% 6.1% 6.1% 0.0% 7.9% -23.3% 2009A 1.8% 6.9% 2.7% 7.9% -1.7% 2.0% 4.9% -8.1% 2.0% -10.9% 2.2% 2010A 5.7% 14.2% 7.3% 5.3% 8.6% 4.4% 5.7% 15.6% 2.0% 20.0% 2.1%

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Historical Financial Information Personal Hygiene

Revenue (000s) & Margin Trends
$240,000 $220,000 $200,000 Revenue $180,000 14.0% $160,000 $140,000 $120,000 $100,000 2007A 2008A Revenue 2009A EBITDA Margin 2010A 13.0% 12.0% 11.0% 17.0% 16.0% 15.0% EBITDA Margin

2007A 2010A Highlights

Significant revenue growth in 2008 and 2009 driven in part by the addition of two large private label customers Overall EBITDA margin decreased because private label is a lower margin business and margins continue to contract due to increased pricing pressure from large retailers

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Historical Financial Information Personal Hygiene

Detailed Financial Results (thousands)
2007A Branded Products Private Label Total Revenue Costs of Goods Sold Sales & Marketing General & Admin Total Expenses EBITDA Depreciation EBIT Capital Expenditures $ $ $ $ $ $ $ 120,750 $ 42,000 162,750 $ 87,502 $ 20,722 28,197 136,421 $ 26,330 $ 4,508 21,822 $ 8,000 $ 2008A 123,769 $ 58,800 182,569 $ 101,373 $ 22,678 31,373 155,424 $ 27,145 $ 5,348 21,797 $ 8,000 $ 2009A 125,006 $ 79,380 204,386 $ 116,622 $ 24,504 36,238 177,364 $ 27,023 $ 5,625 21,398 $ 5,000 $ 2010A 128,132 87,318 215,450 123,880 24,471 37,931 186,282 29,168 5,810 23,358 5,200

Other Metrics Gross Margin - Branded Gross Margin - Private EBITDA - Branded EBITDA - Private

49.1% 38.0% 17.8% 11.5%

48.5% 36.0% 17.5% 9.3%

48.3% 34.5% 16.8% 7.6%

48.5% 33.7% 17.4% 7.9%

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Historical Financial Information Personal Hygiene

Common Size (% of Revenue)
2007A Branded Products Private Label Total Revenue Costs of Goods Sold Sales & Marketing General & Admin Total Expenses EBITDA Depreciation EBIT Capital Expenditures 74.2% 25.8% 100.0% 53.8% 12.7% 17.3% 83.8% 16.2% 2.8% 13.4% 4.9% 2008A 67.8% 32.2% 100.0% 55.5% 12.4% 17.2% 85.1% 14.9% 2.9% 11.9% 4.4% 2009A 61.2% 38.8% 100.0% 57.1% 12.0% 17.7% 86.8% 13.2% 2.8% 10.5% 2.4% 2010A 59.5% 40.5% 100.0% 57.5% 11.4% 17.6% 86.5% 13.5% 2.7% 10.8% 2.4%

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Historical Financial Information Personal Hygiene

Growth Trends
2007A Branded Products Private Label Total Revenue Costs of Goods Sold Sales & Marketing General & Admin Total Expenses EBITDA Depreciation EBIT Capital Expenditures N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 2008A 2.5% 40.0% 12.2% 15.9% 9.4% 11.3% 13.9% 3.1% 18.6% -0.1% 0.0% 2009A 1.0% 35.0% 12.0% 15.0% 8.1% 15.5% 14.1% -0.4% 5.2% -1.8% -37.5% 2010A 2.5% 10.0% 5.4% 6.2% -0.1% 4.7% 5.0% 7.9% 3.3% 9.2% 4.0%

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Historical Financial Information Overall Balance Sheet

September 30, 2011
30-Sep-2011 Cash & Cash Equivalents Accounts Receivable Inventories Deferred Taxes Other Current Assets Total Current Assets PP&E (net) Intangibles Goodwill Other Assets Total Assets $ 152,549 75,920 122,452 8,943 24,300 384,164 246,390 7,483 25,320 45,322 708,679 Equity Total Liabilities and Equity $ 333,210 708,679 Accounts Payable Accrued Expenses Current Portion of Debt Income Taxes Payable Total Current Liabilities Long-term Debt Deferred Income Taxes Other Long-term Liabilities Pension Liability Total Liabilities $ 30-Sep-2011 120,438 34,975 24,555 2,031 181,999 85,342 23,298 10,498 74,332 375,469

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III. Management Plan

CONFIDENTIAL

2011 Budget and 2012-2014 Estimates - Snacks

2011B North America Revenue Latin America Revenue Total Revenue Costs of Goods Sold Sales & Marketing General & Admin Total Expenses EBITDA Depreciation EBIT Capital Expenditures $ $ $ $ $ $ $ 554,039 $ 145,095 699,134 $ 365,647 $ 110,463 102,773 578,883 $ 120,251 $ 24,373 95,879 $ 24,500 $

2012E 569,552 $ 159,605 729,156 $ 379,161 $ 114,478 105,728 599,367 $ 129,790 $ 24,835 104,955 $ 25,000 $

2013E 584,930 $ 173,969 758,899 $ 394,627 $ 118,388 106,246 619,261 $ 139,637 $ 25,728 113,910 $ 33,500 $

2014E 600,138 187,887 788,025 409,773 122,144 106,383 638,300 149,725 25,900 123,825 31,000

Note: 2011B is a combination of actual results through September 2011 and a forecast for Q4 2011.

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2011 Budget and 2012-2014 Estimates Snacks, Continued

Highlights: Barkley projects continued moderate revenue growth in North America due to limited expansion opportunities Higher revenue growth is expected in Latin America as the company expands within existing markets and enters new ones Gross margins are expected to remain relatively stable As the business increases its scale in Latin America, marketing and overhead costs are expected to decrease (as a % of overall revenue) Capital expenditures are expected to be high in 2013/2014 as the company builds additional manufacturing and distribution facilities in Latin America

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2011 Budget and 2012-2014 Estimates Personal Hygiene

2011B Branded Products Private Label Total Revenue Costs of Goods Sold Sales & Marketing General & Admin Total Expenses EBITDA Depreciation EBIT Capital Expenditures $ $ $ $ $ $ $ 131,976 $ 94,303 226,279 $ 130,378 $ 24,624 39,471 194,473 $ 31,806 $ 5,995 25,811 $ 5,400 $ 2012E 134,615 $ 99,962 234,577 $ 135,528 $ 25,133 40,226 200,887 $ 33,690 $ 6,180 27,510 $ 5,600 $ 2013E 137,307 $ 105,959 243,267 $ 141,020 $ 25,796 40,415 207,230 $ 36,037 $ 6,365 29,672 $ 5,800 $ 2014E 140,054 112,317 252,370 146,680 26,481 42,071 215,232 37,139 6,020 31,119 6,000

Other Metrics Gross Margin - Branded Gross Margin - Private EBITDA - Branded EBITDA - Private

48.8% 33.4% 18.2% 8.3%

49.0% 33.1% 18.8% 8.4%

49.0% 33.0% 19.3% 9.0%

49.0% 33.0% 19.3% 9.0%

Note: 2011B is a combination of actual results through September 2011 and a forecast for Q4 2011.
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2011 Budget and 2012-2014 Estimates Personal Hygiene, Continued

Branded Products Highlights: Barkley projects that the more mature branded products business will grow at a moderate rate in the future as the company attempts to maintain market share in a competitive environment. Gross margins have been stable in the past and are expected to remain at current levels. As the business had increased its overall scale, overhead costs as a percentage of revenue have slowly decreased, and this trend is expected to continue with additional revenue growth.

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2011 Budget and 2012-2014 Estimates Personal Hygiene, Continued

Private Label Highlights: Managements primary initiative is continuing the expansion of the private label business. While lower margin, management sees opportunities to add new private label customers as the current economic situation in the United States has resulted in more and more retailers planning to offer their own low-cost versions of basic personal hygiene products. Historically, pricing pressures from large retailers have resulted in a steady decrease in gross margin. However, the company has recently been able to streamline its manufacturing process to lower costs and believes that flat gross margins can be maintained in the future. The business is driven less by consumer demand and more heavily by the ability to maintain relationships with customers and provide product at a low cost. Customer attrition is therefore generally higher in this business compared to branded products; however, the company already has an average customer tenure of seven years, which is above the industry average. While customers are currently particularly price-sensitive as consumers seek out the best values, the company expects customer additions to more than offset any customer losses going forward.

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IV. Additional Information

CONFIDENTIAL

Revenue and Cost Synergy Opportunities

Barkleys business is highly complementary with larger peer companies. Management believes a combination with a larger industry peer could lead to moderate revenue synergies for its branded products related to an expanded distribution network. Management estimates higher annual growth associated with Barkleys current footprint of 1% in North America and 2% in Latin America over the next five years. Management believes a combination with a larger industry peer with comparable products would lead to procurement savings due to scale advantages. This is expected to lift gross margins for each business by 1.5% into perpetuity. A combination with an industry peer would also lead to reductions in redundant overhead costs. Management estimates annual reductions to G&A (as a percentage of revenue) of 2% by 2013 for each business. To achieve these reductions, total one-time restructuring costs of $20 million would likely need to be incurred.
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Other Details Personal Hygiene

Personal Hygiene private label business: All customers generally have a similar gross margin and fixed asset requirement per dollar of revenue as the overall business. Barkley has generally been able to achieve revenue growth for existing customers in the range of 2-3% annually. S&M costs have averaged approximately 4-5% of revenue historically, compared to branded products S&M costs of approximately 15-16% of revenue. These S&M expense levels are expected to remain constant into the future. Fixed costs have historically represented approximately 20% of COGS, 25% of S&M costs and 90% of G&A costs.

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V. Deliverables

CONFIDENTIAL

Deliverables
Deliverable #1
Research potential buyers of Barkley Enterprises in the consumer products industry. What are the important characteristics for a potential buyer or buyers? Based on your analysis, recommend a buyer or buyers. What would the buyer(s) be willing to pay and why? Conclusions should assess all facts and circumstances, including consideration of the value perspective of opposing parties (e.g., you must consider value perspectives of the potential buyer(s) and the seller). Assume a deal close (and valuation date) of October 31, 2011. Deliverables must include, but are not limited to: Your teams recommendation for best buyer(s) Discounted cash flow (DCF) model(s) for Barkley showing concluded enterprise value(s) and calculations for revenue, EBITDA , depreciation, capital expenditures, working capital, present value factors, and residual period amounts. Synergy considerations, if any, should be shown separately. Key inputs should also be detailed in the models. Calculation of the weighted average cost of capital (WACC) for use in the DCF model(s) Market approach analysis showing indicated enterprise value(s) and using public information on comparable companies and/or recent transactions Qualitative list of issues analyzed, and support for final assumptions
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Deliverables, continued
Deliverable #2 After a transaction is completed, the buyer of the Personal Hygiene business learns that Daves Discounts Inc., a major private label customer acquired in 2008 that accounted for approximately 20% of total private label revenue, is planning to discontinue its relationship with Barkley (effective at the end of 2011) in favor of another manufacturer. Upon further investigation, the buyer has reason to believe that Barkley knew of the pending customer loss prior to the deal negotiations and did not disclose it during due diligence. If true, this would be contrary to the representations made by Barkley in the purchase agreement . A dispute ensues regarding Barkleys liability for economic damages suffered by the buyer due to the customer defection. During the resulting litigation, you have been identified as a financial expert and asked to calculate such alleged damages. Generally, assuming Barkley is found liable, what factors should be considered when estimating damages in this case and why? What amount of damages would you recommend the buyer assert they have suffered? Substantiate your opinion with a quantitative analysis. Do not incorporate this situation into your analysis for what a potential buyer(s) would pay for Barkley under Deliverable #1.

Form of All Deliverables Please provide a document containing your qualitative analysis (likely completed in PowerPoint) and your quantitative analysis (likely Excel). Your deliverable should clearly present your conclusions and provide an understanding of how you arrived at them.
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