operating model build v31

7/27/2019 Operating Model Build v31

1/20

Step 1

Fractional years per period 0.50 1.00 1.00 1.00 1.00 1.00

x Income Statement

MRY Fiscal Years Ending December 31,

($ in millions) 2012 2013 2014 2015 2016 2017

Total revenue $440.8COGS 234.4

Gross profit 206.4

SG&A 79.6

EBITDA 126.8

Depreciation 14.0

Amortization 11.6

Stock-based comp 10.8

EBIT 90.4

EBITA 112.8

Interest (income) / expenseCash NA

Revolver interest NA

Revolver undrawn commitment fee NA

Senior credit facility NA

Subordinated note NA

Convertible bond NA

Interest (income) / expense 19.0

Equity income in affiliates

Other (income) / expense

Income before taxes 71.4Provision for tax 28.4

GAAP net income 43.0

Net income attributable to noncontrolling interests

Preferred dividends

GAAP net income available to common $43.0

Capital expenditures $15.2

x Balance Sheet


($ in millions) 2012 2013 2014 2015 2016 2017

Assets

Cash and equivalents $157.1

Accounts receivable 136.4

Inventory

Deferred tax asset, current 8.8

Other current assets 8.2

Total current assets 310.6

PP&E, gross 44.0

( ) Accumulated depreciation (6.0)

PP&E, net 38.0

Goodwill 61.1

Other intangible assets 37.5

Equity investments

Other assets 14.3

Total assets $461.4

Liabilities & Shareholders' Equity

Accounts payable $20.7

A d 15 4


2/20

Step 2

x Income Statement


($ in millions) 2012 2013 2014 2015 2016 2017

Total revenue $440.8 $462.8 $486.0 $510.3 $535.8 $562.6

COGS 234.4 246.1 258.4 271.3 284.9 299.2

Gross profit 206.4 216.7 227.6 238.9 250.9 263.4

SG&A 79.6 83.6 87.8 92.1 96.8 101.6EBITDA 126.8 133.1 139.8 146.8 154.1 161.8

Depreciation 14.0 14.7 15.4 16.2 17.0 17.9

Amortization 11.6 11.6 11.6 11.6 11.6 11.6

Stock-based comp 10.8 11.3 11.9 12.5 13.1 13.8

EBIT 90.4 95.5 100.9 106.5 112.4 118.6

EBITA 112.8 118.4 124.4 130.6 137.1 144.0

Interest (income) / expense

Cash NA

Revolver interest NA

Revolver undrawn commitment fee NASenior credit facility NA

Subordinated note NA

Convertible bond NA

Interest (income) / expense 19.0



Income before taxes 71.4 95.5 100.9 106.5 112.4 118.6

Provision for tax 28.4 38.2 40.3 42.6 45.0 47.4

GAAP net income 43.0 57.3 60.5 63.9 67.4 71.1


Preferred dividends

GAAP net income available to common $43.0 $57.3 $60.5 $63.9 $67.4 $71.1

Capital expenditures $15.2 $16.0 $16.8 $17.6 $18.5 $19.4

Key Performance Metrics & Drivers

Sales growth 4.9% 5.0% 5.0% 5.0% 5.0% 5.0%

COGS / sales 53.2% 53.2% 53.2% 53.2% 53.2% 53.2%

SG&A / sales 18.1% 18.1% 18.1% 18.1% 18.1% 18.1%

Depreciation / sales 3.2% 3.2% 3.2% 3.2% 3.2% 3.2%

Amortization / sales 2.6% 2.5% 2.4% 2.3% 2.2% 2.1%

Stock-based comp / sales 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%

Capex / sales 3.4% 3.4% 3.4% 3.4% 3.4% 3.4%

Tax rate 39.8% 40.0% 40.0% 40.0% 40.0% 40.0%

x Balance Sheet Page 2 of 20


3/20

Step 3

x Income Statement

x Balance Sheet


($ in millions) 2012 2013 2014 2015 2016 2017

Assets


Accounts receivable 136.4

Inventory

Deferred tax asset, current 8.8

Other current assets 8.2

Total current assets 310.6

PP&E, gross 44.0 60.0 76.7 94.3 112.8 132.2

( ) Accumulated depreciation (6.0) (20.7) (36.2) (52.4) (69.4) (87.3)

PP&E, net 38.0 39.2 40.6 41.9 43.4 44.9

Goodwill 61.1 61.1 61.1 61.1 61.1 61.1

Other intangible assets 37.5 25.9 14.3 2.7 Equity investments

Other assets 14.3 14.3 14.3 14.3 14.3 14.3

Total assets $461.4 $140.5 $130.2 $120.0 $118.8 $120.3


Accounts payable $20.7

Accrued expenses 15.4

Client deposits

Income taxes payable 2.9Deferred revenue 20.0

Other current liabilities 36.2

Current portion of long-term debt

Total current liabilities 95.2

Revolver 15.0

Senior credit facility

Subordinated note 45.5

Convertible bond 190.0

Total debt 250.5

Net deferred tax liability / (asset) (15.4)Other long-term liabilities 17.9 17.9 17.9 17.9 17.9 17.9

Total liabilities 348.2 17.9 17.9 17.9 17.9 17.9

Noncontrolling interests

Preferred stock

Common equity 113.3 181.9 254.3 330.7 416.6 508.5

Total liabilities & shareholders' equity $461.4 $199.8 $272.2 $348.6 $434.5 $526.4

Check (59.305) (142.002) (228.602) (315.736) (406.097)Page 3 of 20


4/20

Step 4

x Income Statement

x Balance Sheet


($ in millions) 2012 2013 2014 2015 2016 2017

Assets


Accounts receivable 136.4 143.3 150.4 157.9 165.8 174.1

Inventory

Deferred tax asset, current 8.8 9.3 9.7 10.2 10.7 11.3

Other current assets 8.2 8.6 9.1 9.5 10.0 10.5

Total current assets 310.6 161.2 169.2 177.7 186.6 195.9

PP&E, gross 44.0 60.0 76.7 94.3 112.8 132.2


PP&E, net 38.0 39.2 40.6 41.9 43.4 44.9

Goodwill 61.1 61.1 61.1 61.1 61.1 61.1

Other intangible assets 37.5 25.9 14.3 2.7

Equity investments

Other assets 14.3 14.3 14.3 14.3 14.3 14.3

Total assets $461.4 $301.7 $299.5 $297.7 $305.4 $316.2


Accounts payable $20.7 $21.7 $22.8 $23.9 $25.1 $26.4

Accrued expenses 15.4 16.1 17.0 17.8 18.7 19.6

Client deposits

Income taxes payable 2.9 3.1 3.2 3.4 3.6 3.7

Deferred revenue 20.0 21.0 22.1 23.2 24.3 25.5

Other current liabilities 36.2 38.0 39.9 41.9 44.0 46.2


Total current liabilities 95.2 99.9 104.9 110.2 115.7 121.5

Revolver 15.0




Total debt 250.5 Net deferred tax liability / (asset) (15.4)

Other long-term liabilities 17.9 17.9 17.9 17.9 17.9 17.9



Preferred stock

Common equity 113.3 181.9 254.3 330.7 416.6 508.5


Check 1.930 (77.705) (161.090) (244.849) (331.665)

x Working Capital


($ in millions) 2012 2013 2014 2015 2016 2017

Net Working Capital

Accounts receivable $136.4 $143.3 $150.4 $157.9 $165.8 $174.1

Inventory



Non-cash current assets 153.5 161.2 169.2 177.7 186.6 195.9

Accounts payable 20.7 21.7 22.8 23.9 25.1 26.4

Accrued expenses 15 4 16 1 17 0 17 8 18 7 19 6


5/20

Step 5

x Income Statement

x Balance Sheet


($ in millions) 2012 2013 2014 2015 2016 2017

Assets

Cash and equivalents $157.1 $248.6 $328.2 $411.6 $495.3 $582.2


Inventory




PP&E, gross 44.0 60.0 76.7 94.3 112.8 132.2


PP&E, net 38.0 39.2 40.6 41.9 43.4 44.9

Goodwill 61.1 61.1 61.1 61.1 61.1 61.1Other intangible assets 37.5 25.9 14.3 2.7

Equity investments

Other assets 14.3 14.3 14.3 14.3 14.3 14.3

Total assets $461.4 $550.2 $627.7 $709.3 $800.7 $898.4



Accrued expenses 15.4 16.1 17.0 17.8 18.7 19.6

Client deposits Income taxes payable 2.9 3.1 3.2 3.4 3.6 3.7





Revolver 15.0




Total debt 250.5

Net deferred tax liability / (asset) (15.4)




Preferred stock

Common equity 113.3 181.9 254.3 330.7 416.6 508.5


Check 250.500 250.500 250.500 250.500 250.500

x Cash Flow Statement


($ in millions) 2012 2013 2014 2015 2016 2017

Operating Activities

Net income $57.3 $60.5 $63.9 $72.8 $78.1

Depreciation 14.7 15.4 16.2 17.0 17.9

Amortization of intangibles 11.6 11.6 11.6 2.7

Stock-based compensation 11.3 11.9 12.5 13.1 13.8


Cash dividends from equity investments

Non-cash noncontrolling (minority) interest

Income statement adjustments 37 6 38 9 40 3 32 8 31 7


6/20

Step 6

x Income Statement

x Balance Sheet


x Working Capital

x Debt Schedule

MRY Fiscal Years Ending December 31,($ in millions) 2012 2013 2014 2015 2016 2017

Scheduled Debt Amortization (%)


Subordinated note

Debt Triggers

Average interest? No

Fixed Rate / Spread to Senior Preferred Convertible Conversion Cash

Coupon LIBOR Debt? Security? Security? Price Sweep

Revolver 4.25% Yes No No 100.0%

Senior credit facility 4.75% Yes No No 100.0%

Subordinated note 8.25% No No No

Convertible bond 9.50% No No Yes $26.77

Preferred stock 10.25% No Yes No

Page 6 of 20


7/20

Step 7

x Income Statement

x Balance Sheet


($ in millions) 2012 2013 2014 2015 2016 2017

Assets



Inventory




PP&E, gross 44.0 60.0 76.7 94.3 112.8 132.2


PP&E, net 38.0 39.2 40.6 41.9 43.4 44.9Goodwill 61.1 61.1 61.1 61.1 61.1 61.1


Equity investments

Other assets 14.3 14.3 14.3 14.3 14.3 14.3

Total assets $461.4 $550.2 $627.7 $709.3 $800.7 $898.4



Accrued expenses 15.4 16.1 17.0 17.8 18.7 19.6Client deposits






Revolver 15.0 15.0 15.0 15.0 15.0 15.0


Subordinated note 45.5 45.5 45.5 45.5 45.5 45.5

Convertible bond 190.0 190.0 190.0 190.0 190.0 190.0Total debt 250.5 250.5 250.5 250.5 250.5 250.5

Net deferred tax liability / (asset) (15.4)




Preferred stock

Common equity 113.3 181.9 254.3 330.7 416.6 508.5


Check


x Working Capital

x Debt Schedule


($ in millions) 2012 2013 2014 2015 2016 2017

Debt Schedule

Revolver

Beginning balance $15.0 $15.0 $15.0 $15.0 $15.0

( ) R l d d


8/20

Step 8

x Income Statement

x Balance Sheet



($ in millions) 2012 2013 2014 2015 2016 2017


Net income $57.3 $60.5 $63.9 $72.8 $78.1

Depreciation 14.7 15.4 16.2 17.0 17.9





Non-cash noncontrolling (minority) interest

Income statement adjustments 37.6 38.9 40.3 32.8 31.7(Increase) / decrease in working capital (2.9) (3.1) (3.2) (3.4) (3.5)

Increase / (decrease) in net DTL 15.4

(Increase) / decrease in other assets

Increase / (decrease) in other liabilities

Balance sheet adjustments 12.5 (3.1) (3.2) (3.4) (3.5)

Cash flow from operating activities $107.4 $96.4 $101.0 $102.2 $106.2

Investing Activities

Cash flow from investing activities ($16.0) ($16.8) ($17.6) ($18.5) ($19.4)

Financing Activities

Revolver ($15.0)


Subordinated note

Convertible bond

Preferred stock

Cash flow from financing activities ($15.0)

Change in cash $76.5 $79.6 $83.4 $83.8 $86.8

x Working Capital

x Debt Schedule


($ in millions) 2012 2013 2014 2015 2016 2017

Beginning cash balance $157.1 $233.6 $313.2 $396.6 $480.3

( ) Minimum cash balance (100.0) (100.0) (100.0) (100.0) (100.0)Excess cash / (cash deficit) 57.1 133.6 213.2 296.6 380.3

( + ) Cash flow available for debt service 91.5 79.6 83.4 83.8 86.8

Total cash available for debt service 148.6 213.2 296.6 380.3 467.2


Subordinated note

Convertible bond

( ) Scheduled debt repayment

Cash available for sweep / (revolver draw-down) $148.6 $213.2 $296.6 $380.3 $467.2

Optional debt repaymentRevolver ($15.0)


Subordinated note

Total optional debt repayment ($15.0)


9/20

x Income Statement


($ in millions) 2012 2013 2014 2015 2016 2017

Total revenue $440.8 $462.8 $486.0 $510.3 $535.8 $562.6COGS 234.4 246.1 258.4 271.3 284.9 299.2

Gross profit 206.4 216.7 227.6 238.9 250.9 263.4

SG&A 79.6 83.6 87.8 92.1 96.8 101.6

EBITDA 126.8 133.1 139.8 146.8 154.1 161.8

Depreciation 14.0 14.7 15.4 16.2 17.0 17.9

Amortization 11.6 11.6 11.6 11.6 2.7

Stock-based comp 10.8 11.3 11.9 12.5 13.1 13.8

EBIT 90.4 95.5 100.9 106.5 121.3 130.2

EBITA 112.8 118.4 124.4 130.6 137.1 144.0

Interest (income) / expenseCash NA (0.4) (0.5) (0.7) (0.9) (1.1)

Revolver interest NA 1.2

Revolver undrawn commitment fee NA 0.4 0.5 0.5 0.5 0.5


Subordinated note NA 3.8 3.8 3.8 3.8 3.8

Convertible bond NA 18.1 18.1 18.1 18.1 18.1

Interest (income) / expense 19.0 23.0 21.8 21.6 21.4 21.2



Income before taxes 71.4 72.5 79.1 84.9 99.9 108.9Provision for tax 28.4 29.0 31.6 34.0 40.0 43.6

GAAP net income 43.0 43.5 47.5 50.9 59.9 65.4


Preferred dividends




Sales growth 4.9% 5.0% 5.0% 5.0% 5.0% 5.0%

COGS / sales 53.2% 53.2% 53.2% 53.2% 53.2% 53.2%

SG&A / sales 18.1% 18.1% 18.1% 18.1% 18.1% 18.1%


Amortization / sales 2.6% 2.5% 2.4% 2.3% 0.5%


Capex / sales 3.4% 3.4% 3.4% 3.4% 3.4% 3.4%

Tax rate 39.8% 40.0% 40.0% 40.0% 40.0% 40.0%

x Balance Sheet


x Working Capital

x Debt Schedule

MRY Fiscal Years Ending December 31,($ in millions) 2012 2013 2014 2015 2016 2017


( ) Minimum cash balance (100.0) (100.0) (100.0) (100.0) (100.0)

h / ( h d f )


10/20

x Income Statement

x Balance Sheet


MRY sca ears n ng ecem er ,($ in millions) 2012 2013 2014 2015 2016 2017


Net income $43.5 $47.0 $49.9 $58.3 $63.8

Depreciation 14.7 15.4 16.2 17.0 17.9





Non-cash noncontrolling (minority) interest PIK accrual Convertible bond 9.0 9.5 9.9

PIK accrual Preferred stock

Income statement adjustments 46.7 48.4 50.2 32.8 31.7

(Increase) / decrease in working capital (2.9) (3.1) (3.2) (3.4) (3.5)

Increase / (decrease) in net DTL 15.4

(Increase) / decrease in other assets

Increase / (decrease) in other liabilities

Balance sheet adjustments 12.5 (3.1) (3.2) (3.4) (3.5)

Cash flow from operating activities $102.6 $92.3 $96.9 $87.8 $91.9

Investing Activities

Cash flow from investing activities ($16.0) ($16.8) ($17.6) ($18.5) ($19.4)

Financing Activities

Revolver ($15.0)


Subordinated note

Convertible bond

Preferred stock Cash flow from financing activities ($15.0)

Change in cash $71.7 $75.5 $79.3 $69.3 $72.5

x Working Capital

x Debt Schedule

MRY F scal Years End ng December 31,

($ in millions) 2012 2013 2014 2015 2016 2017


( ) Minimum cash balance (100.0) (100.0) (100.0) (100.0) (100.0)

Excess cash / (cash deficit) 57.1 128.8 204.3 283.6 353.0

( + ) Cash flow available for debt service 86.7 75.5 79.3 69.3 72.5

Total cash available for debt service 143.8 204.3 283.6 353.0 425.4


Subordinated note

Convertible bond

( ) Scheduled debt repayment

Cash available for sweep / (revolver draw-down) $143.8 $204.3 $283.6 $353.0 $425.4

Optional debt repayment

Revolver ($15.0)



11/20

x Income Statement

MRY F scal Years End ng December 31,

($ in millions) 2012 2013 2014 2015 2016 2017

Total revenue $440.8 $462.8 $486.0 $510.3 $535.8 $562.6

COGS 234.4 246.1 258.4 271.3 284.9 299.2

Gross profit 206.4 216.7 227.6 238.9 250.9 263.4

SG&A 79.6 83.6 87.8 92.1 96.8 101.6

EBITDA 126.8 133.1 139.8 146.8 154.1 161.8

Depreciation 14.0 14.7 15.4 16.2 17.0 17.9

Amortization 11.6 11.6 11.6 11.6 2.7

Stock-based comp 10.8 11.3 11.9 12.5 13.1 13.8

EBIT 90.4 95.5 100.9 106.5 121.3 130.2

EBITA 112.8 118.4 124.4 130.6 137.1 144.0


Cash NA (0.4) (0.6) (0.8) (1.0) (1.1)Revolver interest NA 1.2










GAAP net income 43.0 43.5 47.0 49.9 58.3 63.8


Preferred dividends




Sales growth 4.9% 5.0% 5.0% 5.0% 5.0% 5.0%

COGS / sales 53.2% 53.2% 53.2% 53.2% 53.2% 53.2%

SG&A / sales 18.1% 18.1% 18.1% 18.1% 18.1% 18.1%




Capex / sales 3.4% 3.4% 3.4% 3.4% 3.4% 3.4%

Tax rate 39.8% 40.0% 40.0% 40.0% 40.0% 40.0%

x Balance Sheet

MRY sca ears n ng ecem er ,

($ in millions) 2012 2013 2014 2015 2016 2017

Assets



Inventory




PP&E, gross 44.0 60.0 76.7 94.3 112.8 132.2


PP&E net 38 0 39 2 40 6 41 9 43 4 44 9


12/20

Step 12

x Income Statement

x Balance Sheet


x Working Capital

x Debt Schedule

x Equity Investments

x Depreciation Schedule


($ in millions) 2012 2013 2014 2015 2016 2017

Capital expenditures $16.0 $16.8 $17.6 $18.5 $19.4

Book Depreciation (straight-line)

Useful life (yrs) 10.0Midpoint convention Yes

2013 $16.0 $0.8 $1.6 $1.6 $1.6 $1.6

2014 $16.8 0.8 1.7 1.7 1.7

2015 $17.6 0.9 1.8 1.8

2016 $18.5 0.9 1.8

2017 $19.4 1.0

Book depreciation of capex 0.8 2.4 4.2 6.0 7.8

( + ) Book depreciation of existing fixed assets 13.9 13.0 12.1 11.1 10.0

Total book depreciation expense $14.7 $15.4 $16.2 $17.0 $17.9

Modified Accelerated Cost Recovery System (MACRS) Depreciation

MACRS Property Class

Year 3 5 7 10 15 20

1 33.33% 20.00% 14.29% 10.00% 5.00% 3.75%

2 44.45% 32.00% 24.49% 18.00% 9.50% 7.22%

3 14.81% 19.20% 17.49% 14.40% 8.55% 6.68%

4 7.41% 11.52% 12.49% 11.52% 7.70% 6.18%

5 11.52% 8.93% 9.22% 6.93% 5.71%6 5.76% 8.92% 7.37% 6.23% 5.29%

7 8.93% 6.55% 5.90% 4.89%

8 4.46% 6.55% 5.90% 4.52%

9 6.56% 5.91% 4.46%

10 6.55% 5.90% 4.46%

11 3.28% 5.91% 4.46%

12 5.90% 4.46%

13 5.91% 4.46%

14 5.90% 4.46%

15 5.91% 4.46%

16 2.95% 4.46%

17 4.46%

18 4.46%

19 4.46%

20 4.46%

21 2.23%

Total 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Source: IRS Publication 946, Table A-1.

Property class (yrs) 10.0

2013 $16.0 $1.6 $2.9 $2.3 $1.8 $1.5

2014 $16.8 1.7 3.0 2.4 1.9

2015 $17.6 1.8 3.2 2.5

2016 $18.5 1.8 3.3


13/20

Step 13

x Income Statement


($ in millions) 2012 2013 2014 2015 2016 2017

Total revenue $440.8 $462.8 $486.0 $510.3 $535.8 $562.6

COGS 234.4 246.1 258.4 271.3 284.9 299.2

Gross profit 206.4 216.7 227.6 238.9 250.9 263.4

SG&A 79.6 83.6 87.8 92.1 96.8 101.6EBITDA 126.8 133.1 139.8 146.8 154.1 161.8

Depreciation 14.0 14.7 15.4 16.2 17.0 17.9

Amortization 11.6 11.6 11.6 11.6 2.7

Stock-based comp 10.8 11.3 11.9 12.5 13.1 13.8

EBIT 90.4 95.5 100.9 106.5 121.3 130.2

EBITA 112.8 118.4 124.4 130.6 137.1 144.0


Cash NA (0.4) (0.6) (0.8) (1.0) (1.1)


Revolver undrawn commitment fee NA 0.4 0.5 0.5 0.5 0.5Senior credit facility NA








GAAP net income 43.0 43.5 47.0 49.9 58.3 63.8


Preferred dividends




Sales growth 4.9% 5.0% 5.0% 5.0% 5.0% 5.0%

COGS / sales 53.2% 53.2% 53.2% 53.2% 53.2% 53.2%

SG&A / sales 18.1% 18.1% 18.1% 18.1% 18.1% 18.1%Depreciation / sales 3.2% 3.2% 3.2% 3.2% 3.2% 3.2%



Capex / sales 3.4% 3.4% 3.4% 3.4% 3.4% 3.4%

Tax rate 39.8% 40.0% 40.0% 40.0% 40.0% 40.0%

x Balance Sheet


x Working Capital

x Debt Schedule



x Tax Schedule


($ in millions) 2012 2013 2014 2015 2016 2017

Federal tax rate 38.1% 38.1% 38.1% 38.1% 38.1%

State and local tax rate 3.0% 3.0% 3.0% 3.0% 3.0%

Blended tax rate 39.8% 40.0% 40.0% 40.0% 40.0% 40.0%


14/20

Step 14

x Income Statement

x Balance Sheet


x Working Capital

x Debt Schedule



x Tax Schedule


($ in millions) 2012 2013 2014 2015 2016 2017

Federal tax rate 38.1% 38.1% 38.1% 38.1% 38.1%


Blended tax rate 39.8% 40.0% 40.0% 40.0% 40.0% 40.0%

Cash Taxes & Net DTL

EBITDA $133.1 $139.8 $146.8 $154.1 $161.8

( ) Tax depreciation (14.7) (15.4) (16.2) (17.0) (17.9)

( ) Tax amortization of intangible assets (11.6) (11.6) (11.6) (2.7)

( ) Tax amortization of tax-deductible goodwill

( ) Stock-based compensation (11.3) (11.9) (12.5) (13.1) (13.8)

( + ) Interest income / (expense) (23.0) (22.6) (23.3) (24.0) (23.9)

( + ) Distributed equity income in affiliates

( + ) Other income / (expense)

Total taxable income 72.5 78.3 83.2 97.2 106.3

( ) NOL used (64.2)

State and local taxable income 8.3 78.3 83.2 97.2 106.3

( ) State and local cash taxes (0.2) (2.3) (2.5) (2.9) (3.2)

Federal taxable income $8.0 $75.9 $80.7 $94.3 $103.1

Acquired NOL Subject to Section 382

Annual Sec. 382 NOL deduction limit

Remaining NOL life (yrs)

Acquired NOL subject to Sec. 382

Beginning balance

( ) NOL used

( ) NOL expired

Ending balance

Unused limitation carryforward

Beginning balance

( + ) Carryforward created

( ) Carryforward used Ending balance

Unencumbered NOL

Remaining NOL life (yrs) 15.00 14.00 13.00 12.00 11.00 10.00

Beginning balance $64.2

( + ) NOL created

( ) NOL used (64.2)

( ) NOL expired

Ending balance $64.2

DTA attributable to NOL

Beginning balance $25 7


15/20

Step 15

x Income Statement

x Balance Sheet


x Working Capital

x Debt Schedulex Equity Investments


x Tax Schedule


($ in millions) 2012 2013 2014 2015 2016 2017

Federal tax rate 38.1% 38.1% 38.1% 38.1% 38.1%


Blended tax rate 39.8% 40.0% 40.0% 40.0% 40.0% 40.0%

Cash Taxes & Net DTL

EBITDA $133.1 $139.8 $146.8 $154.1 $161.8

( ) Tax depreciation (14.7) (15.4) (16.2) (17.0) (17.9)

( ) Tax amortization of intangible assets (11.6) (11.6) (11.6) (2.7)

( ) Tax amortization of tax-deductible goodwill

( ) Stock-based compensation (11.3) (11.9) (12.5) (13.1) (13.8)

( + ) Interest income / (expense) (23.0) (22.6) (23.3) (24.0) (23.9)

( + ) Distributed equity income in affiliates ( + ) Other income / (expense)

Total taxable income 72.5 78.3 83.2 97.2 106.3

( ) NOL used (64.2)

State and local taxable income 8.3 78.3 83.2 97.2 106.3

( ) State and local cash taxes (0.2) (2.3) (2.5) (2.9) (3.2)

Federal taxable income $8.0 $75.9 $80.7 $94.3 $103.1

Federal cash taxes $3.1 $29.0 $30.8 $36.0 $39.3

( + ) State and local cash taxes 0.2 2.3 2.5 2.9 3.2

Total cash taxes payable 3.3 31.3 33.3 38.9 42.5

Acquired NOL Subject to Section 382

Annual Sec. 382 NOL deduction limit

Remaining NOL life (yrs)

Acquired NOL subject to Sec. 382

Beginning balance

( ) NOL used

( ) NOL expired

Ending balance

Unused limitation carryforward

Beginning balance

( + ) Carryforward created

( ) Carryforward used

Ending balance

Unencumbered NOL

Remaining NOL life (yrs) 15.00 14.00 13.00 12.00 11.00 10.00

Beginning balance $64.2

( + ) NOL created

( ) NOL used (64 2)


16/20

x Income Statement

x Balance Sheet


($ in millions) 2012 2013 2014 2015 2016 2017

Assets



Inventory




PP&E, gross 44.0 60.0 76.7 94.3 112.8 132.2

( ) Accumulated depreciation (6.0) (20.7) (36.2) (52.4) (69.4) (87.3)PP&E, net 38.0 39.2 40.6 41.9 43.4 44.9

Goodwill 61.1 61.1 61.1 61.1 61.1 61.1


Equity investments

Other assets 14.3 14.3 14.3 14.3 14.3 14.3

Total assets $461.4 $540.7 $614.1 $691.6 $768.6 $852.0


Accounts payable $20.7 $21.7 $22.8 $23.9 $25.1 $26.4Accrued expenses 15.4 16.1 17.0 17.8 18.7 19.6

Client deposits






Revolver 15.0


Subordinated note 45.5 45.5 45.5 45.5 45.5 45.5Convertible bond 190.0 199.0 208.5 218.4 218.4 218.4

Total debt 250.5 244.5 254.0 263.9 263.9 263.9

Net deferred tax liability / (asset) (15.4) 10.3 10.3 10.3 10.3 10.3




Preferred stock

Common equity 113.3 168.1 227.0 289.4 360.9 438.5


Check


x Working Capital

x Debt Schedule


x Depreciation Schedulex Tax Schedule


Step 17


17/20

Step 17

x Income Statement

x Balance Sheet


x Working Capital

x Debt Schedule

x Equity Investmentsx Depreciation Schedule

x Tax Schedule

x Shares Outstanding


($ in millions) 2012 2013 2014 2015 2016 2017

Stock Options

Current share price $9.16

Options Outstanding Options Exercisable

Number of Average Number of Average Treasury

Options Strike Options Strike Method

Tranche 1 0.402 $9.13 0.209 $9.04 0.003

Tranche 2 0.120 9.93 0.059 10.03

Tranche 3 0.466 11.60 0.221 11.53

Tranche 4 0.300 12.64 0.300 12.69

Tranche 5 0.520 19.48 0.269 19.54 Tranche 6 0.422 27.03 0.211 27.06

Tranche 7 0.375 45.78 0.187 45.75

Tranche 8

Tranche 9

Tranche 10

Total Treasury Method shares 0.003

Convertible Securities

Face value

Convertible bond $190.0 $199.0 $208.5 $218.4 $218.4 $218.4Preferred stock

Conversion price

Convertible bond $26.77 $26.77 $26.77 $26.77 $26.77 $26.77

Preferred stock

Convertible shares

Convertible bond 7.097 7.435 7.788 8.158 8.158 8.158

Preferred stock

EPS if converted

Convertible bond $1.27 $1.27 $1.35 $1.42 $1.63 $1.75

Preferred stock $1.22 $1.23 $1.33 $1.41 $1.65 $1.81

Basic EPS $1.22 $1.23 $1.33 $1.41 $1.65 $1.81

Is conversion dilutive?

Convertible bond No No No No Yes Yes

Preferred stock No No No No No No

Fully Diluted Shares Outstanding

Basic shares outstanding (BSO) 35.340 35.340 35.340 35.340 35.340 35.340

( + ) In-the-money Treasury Method option shares 0.003 0.003 0.003 0.003 0.003 0.003

( + ) Shares from Convertible bond 8 158 8 158


18/20

x Income Statement


($ in millions) 2012 2013 2014 2015 2016 2017

Total revenue $440.8 $462.8 $486.0 $510.3 $535.8 $562.6

COGS 234.4 246.1 258.4 271.3 284.9 299.2

Gross profit 206.4 216.7 227.6 238.9 250.9 263.4

SG&A 79.6 83.6 87.8 92.1 96.8 101.6

EBITDA 126.8 133.1 139.8 146.8 154.1 161.8

Depreciation 14.0 14.7 15.4 16.2 17.0 17.9

Amortization 11.6 11.6 11.6 11.6 2.7

Stock-based comp 10.8 11.3 11.9 12.5 13.1 13.8

EBIT 90.4 95.5 100.9 106.5 121.3 130.2

EBITA 112.8 118.4 124.4 130.6 137.1 144.0


Cash NA (0.4) (0.6) (0.8) (1.0) (1.2)











GAAP net income 43.0 43.5 47.0 49.9 58.4 63.8


Preferred dividends



Common dividend per share $0.01 $0.01 $0.01 $0.01 $0.01 $0.01


Sales growth 4.9% 5.0% 5.0% 5.0% 5.0% 5.0%

COGS / sales 53.2% 53.2% 53.2% 53.2% 53.2% 53.2%

SG&A / sales 18.1% 18.1% 18.1% 18.1% 18.1% 18.1%




Capex / sales 3.4% 3.4% 3.4% 3.4% 3.4% 3.4%

Tax rate 39.8% 40.0% 40.0% 40.0% 40.0% 40.0%

x Balance Sheet


($ in millions) 2012 2013 2014 2015 2016 2017

Assets

Cash and equivalents $157.1 $238.7 $313.9 $392.9 $461.9 $534.0Accounts receivable 136.4 143.3 150.4 157.9 165.8 174.1

Inventory



Step 19


19/20

Step 19

x Income Statement


($ in millions) 2012 2013 2014 2015 2016 2017

Total revenue $440.8 $462.8 $486.0 $510.3 $535.8 $562.6

COGS 234.4 246.1 258.4 271.3 284.9 299.2

Gross profit 206.4 216.7 227.6 238.9 250.9 263.4

SG&A 79.6 83.6 87.8 92.1 96.8 101.6EBITDA 126.8 133.1 139.8 146.8 154.1 161.8

Depreciation 14.0 14.7 15.4 16.2 17.0 17.9

Amortization 11.6 11.6 11.6 11.6 2.7

Stock-based comp 10.8 11.3 11.9 12.5 13.1 13.8

EBIT 90.4 95.5 100.9 106.5 121.3 130.2

EBITA 112.8 118.4 124.4 130.6 137.1 144.0


Cash NA (0.4) (0.6) (0.8) (1.0) (1.2)


Revolver undrawn commitment fee NA 0.4 0.5 0.5 0.5 0.5Senior credit facility NA








GAAP net income 43.0 43.5 47.0 49.9 58.4 63.8


Preferred dividends


GAAP to cash reconciliation

Amortization $7.0 $7.0 $7.0 $7.0 $1.6

Stock-based comp 6.5 6.8 7.1 7.5 7.9 8.3

One-time charges

Cash net income available to common $56.5 $57.2 $61.1 $64.4 $67.9 $72.1

GAAP diluted EPS $1.22 $1.23 $1.33 $1.41 $1.34 $1.47

Cash diluted EPS $1.60 $1.62 $1.73 $1.82 $1.56 $1.66


Common dividend per share $0.01 $0.01 $0.01 $0.01 $0.01 $0.01


Sales growth 4.9% 5.0% 5.0% 5.0% 5.0% 5.0%

GAAP earnings growth NA 1.1% 8.0% 6.3% 16.9% 9.3%

Cash earnings growth NA 1.3% 6.7% 5.4% 5.4% 6.2%

COGS / sales 53.2% 53.2% 53.2% 53.2% 53.2% 53.2%

SG&A / sales 18.1% 18.1% 18.1% 18.1% 18.1% 18.1%




Capex / sales 3.4% 3.4% 3.4% 3.4% 3.4% 3.4%

Gross margin 46.8% 46.8% 46.8% 46.8% 46.8% 46.8%

EBITDA margin 28.8% 28.8% 28.8% 28.8% 28.8% 28.8%

EBIT margin 20.5% 20.6% 20.8% 20.9% 22.6% 23.1%

EBITA margin 25.6% 25.6% 25.6% 25.6% 25.6% 25.6%

GAAP net margin 9.8% 9.4% 9.7% 9.8% 10.9% 11.3%

Cash net margin 12.8% 12.4% 12.6% 12.6% 12.7% 12.8%

% % % % % %

Step 20


20/20

x Income Statement

x Balance Sheet


x Working Capital

x Debt Schedule

x Equity Investmentsx Depreciation Schedule

x Tax Schedule

x Shares Outstanding

x Summary Credit Metrics


($ in millions) 2012 2013 2014 2015 2016 2017

Capitalization

Total debt 244.5 254.0 263.9 263.9 263.9

Net debt 5.8 (59.9) (129.0) (198.0) (270.1)

Senior debt

Preferred stock

Total capitalization 412.2 480.2 552.2 623.3 700.6

Interest Expense

Senior interest expense $1.6 $0.5 $0.5 $0.5 $0.5

Cash interest expense 14.4 13.7 14.2 25.0 25.0Total interest expense 23.4 23.2 24.1 25.0 25.0

Fixed charges (total interest & preferred dividends) 23.4 23.2 24.1 25.0 25.0

Coverage

EBITDA $133.1 $139.8 $146.8 $154.1 $161.8

EBITDA / senior interest expense 82.0x 279.6x 293.6x 308.3x 323.7x

EBITDA / cash interest expense 9.2x 10.2x 10.4x 6.2x 6.5x

EBITDA / total interest expense 5.7x 6.0x 6.1x 6.2x 6.5x

EBITDA / fixed charges 5.7x 6.0x 6.1x 6.2x 6.5x

EBITDA capex $117.2 $123.0 $129.2 $135.7 $142.4

(EBITDA capex) / senior interest expense 72.2x 246.1x 258.4x 271.3x 284.9x

(EBITDA capex) / cash interest expense 8.1x 9.0x 9.1x 5.4x 5.7x

(EBITDA capex) / total interest expense 5.0x 5.3x 5.4x 5.4x 5.7x

(EBITDA capex) / fixed charges 5.0x 5.3x 5.4x 5.4x 5.7x

EBITDA capex WC $114.3 $120.0 $126.0 $132.3 $138.9

(EBITDA capex WC) / senior interest expense 70.4x 240.0x 252.0x 264.5x 277.8x

(EBITDA capex WC) / cash interest expense 7.9x 8.8x 8.9x 5.3x 5.6x

(EBITDA capex WC) / total interest expense 4.9x 5.2x 5.2x 5.3x 5.6x

(EBITDA capex WC) / fixed charges 4.9x 5.2x 5.2x 5.3x 5.6x

Leverage

Senior debt / total capitalization

Net debt / total capitalization 1.41% NM NM NM NM

Senior debt / EBITDA

Total debt / EBITDA 1.84x 1.82x 1.80x 1.71x 1.63x

Net debt / EBITDA 0.04x NM NM NM NM

Net debt + preferred / EBITDA 0.04x NM NM NM NMPage 20 of 20

operating model build v31

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