TRANSACTION ASSUMPTIONS Price of share on March 16, 2005 Premium Purchase Price Shares outstanding (in millions) Basic equity value (in millions) Diluted shares outstanding (in millions) Diluted equity value Plus: Existing debt (in millions) Less: Cash, cash equivalents, short term investments (in millions) Implied enterprise value (in millions) Fees and expenses (in millions) Implied pro forma enterprise value EBITDA of 2005 EBITDA multiple $24.77 8%$26.75
Source: http://money.cnn.com/2005/03/17/news/for
220.55 $5,900.00 $242.69$6,492.41
Net Income of 2005/ diluted earnings per share purchase price*Shares outstanding
$2,312.00 -$2,203.00$6,601.41
sum of short term borrowings, long term debt and cu
$368.00$6,969.41 $662.00 10.53
EV/EBITDA
CALCULATION OF DILUTED SHARES OUTSTANDING (USING TREASURY STOCK METHOD) Number of options (in millions) Tranch Tranche A 4.70 Tranche B 6.00 Tranche C 12.20 Tranche D 5.40 Tranche E 0.70 Total 29.00SOURCES OF CASH ($ in millions) Available cash $2 billion senior secured credit facility Unsecured bridge loan Secured European bridge loan Mortgage loan agreements Sponsor equity $966 700 1,900 1,000 800 1300.00 $6,666.00
Price $8.00 $6.00 $5.00 $6.00 $4.00
Dilution (in millions) 3.182034719 4.546628987 9.737343561 4.091966088 0.586960032 22.14493339
USES OF CASH ($ in millions) Purchase of common stock Purchase of stock options and restricted stock Settlement of equity security units Purchase of all stock warrants
$5,900 227 114.00 17 368 40 $6,666.00
Transaction feesSeverance, bonuses and related payroll taxes
Summary of Fees ($ in millions) Advisory fees and expenses Financing fees Sponsor fees Other fees and expenses Total 1 Year LIBOR Historical Chart January February March April May June July August September October November December Average Value DEBT ($ in millions)
$78.00 135 81.00 74 $368.00
from 10K filing for the fiscal year ended January 28, 2
20064.9410% 5.1530% 5.2480% 5.4220% 5.4140% 5.7660% 5.5910% 5.4500% 5.2990% 5.3350% 5.2440% 5.3140% 5.3481%
20075.4410% 5.3330% 5.2010% 5.2970% 5.3885% 5.4048% 5.4256% 5.2450% 5.2750% 4.9013% 4.6375% 4.4575% 5.1673%
20084.2238% 2.8494% 2.7088% 2.4863% 3.0788% 3.1638% 3.3106% 3.2525% 3.2069% 3.9625% 3.1738% 2.7663% 3.1820%
20092.0038% 1.9750% 2.1194% 1.9719% 1.8769% 1.6000% 1.1731% 1.4975% 1.3300% 1.2638% 1.1994% 1.0175% 1.5857%
Interest rate $2 billion senior secured credit facility (5 years term loan) Unsecured bridge loan (6 years term loan) Secured European bridge loan Mortgage loan agreements (2 years term loan) $700.00 973 1,000 800 $3,473.00 LIBOR+2.75% LIBOR+5.25% LIBOR+1.5% LIBOR+1.3%
200656.68658333 103.1193508 53.18466667 $212.99
Annual Interes 200755.42086667 101.3600047 51.73813333 $208.52
Total
OPERATING ASSUMPTIONSHistorical
2003 Revenue growth % Cost of Sales % Revenue SG&A % Revenue Depreciation and Amortization % Revenue Restructuring and other charges % Revenue Interest Expense Effective cash interest rate Effective tax rate (income tax/pretax income) Account receivables % revenue Accounts receivales days Inventory % Cost of sales Accounts payables % Cost of sales Accounts payables days Capex % Revenue TOYS R US INCOME STATEMENT ($ in millions) Net Sales Cost of Sales Gross Margin SG&A EBITDA Depreciation and Amortization Restructuring and other charges EBIT Interest expense Interest and other income Pretax income Income tax (expense)/benefit Net income 2003 $11,305.00 -$7,799.00 $3,506.00 -$2,724.00 $782.00 -$339.00 $0.00 $443.00 -$119.00 $9.00 $333.00 -$120.00 $213.00 2004 $11,320.00 -$7,646.00 $3,674.00 -$3,026.00 $648.00 -$368.00 -$63.00 $217.00 -$142.00 $18.00 $93.00 -$30.00 $63.0068.99% 24.10% 3.00% 0.00% 0.13% 67.54% 26.73% 3.25% 0.56% from debt table 32.26% 1.29% 4.71 27.39% 13.37% 48.79 2.31%
2004-1.94% 67.62% 26.41% 3.19% 0.04%
2005
0.83%36.04% -30.57% 1.38% 5.03 25.10% 13.63% 49.75 2.42%
2005 $11,100.00 -$7,506.00 $3,594.00 -$2,932.00 $662.00 -$354.00 -$4.00 $304.00 -$130.00 $19.00 $193.00 $59.00 $252.00
BALANCE SHEET ($ in millions) ASSETS Cash and cash equivalents Short-term investments Accounts and other receivables Merchandise inventories Net property assets held for sale Current portion of derivative assets Prepaid expenses and other current assets Total current assets PROPERTY, PLANT AND EQUIPMENT Real estate, net Other, net Total PP&E Goodwill, net Derivative assets Deferred tax asset Other assets Total Assets
2004.00 1432.00 571.00 146.00 2094.00 163.00 162.00 161.00 4729.00 2165.00 2274.00 4439.00 348.00 77.00 399.00 273.00 10265.00
LBO Transaction Adjustments and adjustments in between March 2005.00 2005 and 2006 1250.00 953.00 153.00 1884.00 7.00 1.00 159.00 4407.00 2393.00 1946.00 4339.00 353.00 43.00 426.00 200.00 9768.00 -974.70 5.45 237.07
1652.70
678.00 LIABILITIES AND STOCKHOLDERS EQUITY Short-term borrowings Accounts payable Accrued expenses and other current liabilities Income taxes payable Current portion of long-term debt Total current liabilities Long-term debt Deferred income taxes Derivative liabilities
0.00 1022.00 866.00 319.00 657.00 2864.00 2349.00 538.00 26.00
0.00 1023.00 881.00 245.00 452.00 2601.00 1860.00 485.00 16.00
67.93
348.00
-1860.00
Deferred rent liability Other liabilities Minority interest in Toysrus.com $2 billion senior secured credit facility (5 years term loan) Unsecured bridge loan (6 years term loan) Total liabilities STOCKHOLDERS' EQUITY Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive loss Restricted stock Treasury shares, at cost Total stockholders equity
280.00 225.00 9.00
269.00 212.00 0.00 700.00 973.00
6291.00
5443.00
30.00 407.00 5308.00 -64.00 0.00 -1707.00 3974.00
30.00 405.00 5560.00 -7.00 -5.00 -1658.00 4325.00
-30.00 895.00
678.00 Total liabilities and stockholders equity Balance check CASH FLOW STATEMENTS ($ in millions) CASH FLOWS FROM OPERATING ACTIVITIES Net earnings Adjustments to reconcile net earnings to net cash from operating activities: Depreciation and amortization Amortization of restricted stock Deferred income taxes Other non cash items Changes in operating assets and liabilities: Accounts and other receivables Merchandise inventories Prepaid expenses and other operating assets Accounts payable, accrued expenses, and other liabilities Income taxes payable Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures, net Proceeds from sale of fixed assets Purchase of SB Toys, Inc. Purchase of short-term investments and other Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Short-term borrowings, net Long-term borrowings Long-term debt repayment Decrease/(increase) in restricted cash Proceeds from issuance of stock and contracts to purchase stock Proceeds from exercise of stock options Net cash (used in)/provided by financing activities Effect of exchange rate changes on cash and cash equivalents CASH AND CASH EQUIVALENTS (Decrease)/increase during year Beginning of year CASH AT THE END OF THE YEAR DEBT AND INTEREST SCHEDULES$2 billion senior secured credit facility (5 years term loan) Mandatory principal repayment Optional principal repayment Ending balance Unsecured bridge loan (6 years term loan) Mandatory principal repayment Optional principal repayment Ending balance Mortgage loan agreements (2 years term loan) Mandatory principal repayment
10265.00 $0 2004 63.00 368.00 0.00 27.00 56.00 62.00 133.00 28.00 117.00 -53.00 801.00 2005
9768.00 $0 LBO Adjustments 252.00 354.00 7.00 -40.00 0.00 -5.00 221.00 76.00 -45.00 -74.00 746.00
-262.00 0.00 0.00 -572.00 -834.00
-269.00 216.00 -42.00 -382.00 -477.00
0.00 792.00 -370.00 60.00 0.00 0.00 482.00 -40.00
0.00 0.00 -503.00 0.00 0.00 27.00 -476.00 25.00
409.00 1023.00 1432.00 2006 $700.00 0 275.30 $424.70 973 0 2007
-182.00 1432.00 1250.00 2008
-966.00
$424.70 0 -$2,112.58 2537.284067
2537.284067 0 -1703.874141 4241.158208
800 0
Optional principal repayment Ending balance
Valuation in year 5 assuming EBITDA exit multiple of 7
2006
2007
2008
EBITDA Total enterprise value Debt Equity value - future value IRRValuation in year 5 assuming EBITDA exit multiple of 8.0
1300
EBITDA Total enterprise value Debt Equity value - future value IRR
1300
From annual report 2005
from 10K filing for the fiscal year ended January 28, 2006, NOTE 2 MERGER TRANSACTION
20100.9844% 0.8463% 0.8394% 0.9200% 1.0156% 1.2041% 1.6063% 1.0367% 0.8431% 0.7778% 0.7622% 0.7866% 0.9685%
20110.7809% 0.7813% 0.7903% 0.7825% 0.7610% 0.7295% 0.7335% 0.7603% 0.8000% 0.8649% 0.9356% 1.0711% 0.8159%
Source: http://www.moneycafe.com/library/libor.htm
2008
2009
2010
2011
41.523708 30.349842 26.029792 82.042955 66.51128 60.50641 59.021215
from 10K filing for the fisca $927 million out of $1900 million was paid off in 2005
Was completely paid back in Feb 2006. 123.56666 96.861122 86.536202 59.021215
Projections
2006 7% 68.05% 25.75% 3.15% 0.02%0.83% 34.00% 1.33% 4.87 26.24% 13.50% 49.27 2.37%
2007 7% 68.05% 25.75% 3.15% 0.02% 0.83%34.00% 1.33% 4.87 26.24% 13.50% 49.27 2.37%
2008 7% 68.05% 25.75% 3.15% 0.02% 0.83%34.00% 1.33% 4.87 26.24% 13.50% 49.27 2.37%
2009 7% 68.05% 25.75% 3.15% 0.02% 0.83%34.00% 1.33% 4.87 26.24% 13.50% 49.27 2.37%
2010 7% 68.05% 25.75% 3.15% 0.02% 0.83%34.00% 1.33% 4.87 26.24% 13.50% 49.27 2.37%
2011 7% 68.05% 25.75% 3.15% 0.02% 0.83%34.00% 1.33% 4.87 26.24% 13.50% 49.27 2.37%
Avg of 2003, 2004, 2005 = Avg of 2003, 2004, 2005 = Avg of 2003, 2004, 2005 = Avg of 2003, 2004, 2005 =
68.05% 25.75% 3.15% 0.20%
from debt table
Average of 2003, 2004. We ignored 2005 because they lost revenue Average of 2004, 2005 1.33% Average of 2004, 2005 4.87 Average of 2004, 2005 26.24% Average of 2004, 2005 13.50% Average of 2004, 2005 49.27 Average of 2004, 2005 2.37%
2006 $11,877.00 -$8,082.30 $3,794.70 -$3,058.33 $736.37 -$374.13 -$2.38 $359.87 -$212.99 $14.64 $161.52 $106.60 $268.12
2007 $12,708.39 -$8,648.06 $4,060.33 -$3,272.41 $787.92 -$400.31 -$2.54 $385.06 -$208.52 $0.00 $176.55 $116.52 $293.07
2008 $13,597.98 -$9,253.42 $4,344.55 -$3,501.48 $843.07 -$428.34 -$2.72 $412.02 -$123.57 $2.34 $290.80 $191.93 $482.72
2009 2010 2011 $14,549.84 $15,568.32 $16,658.11 -$9,901.16 -$10,594.24 -$11,335.84 $4,648.67 $4,974.08 $5,322.27 -$3,746.58 -$4,008.84 -$4,289.46 $902.09 $965.24 $1,032.80 -$458.32 -$490.40 -$524.73 -$2.91 -$3.11 -$3.33 $440.86 $471.72 $504.74 -$96.86 -$86.54 -$59.02 $0.00 $0.00 $0.00 $344.00 $385.18 $445.72 $227.04 $254.22 $294.17 $571.04 $639.41 $739.89
2006.00 275.30 953.00 158.45 2121.07 7.00 1.00 159.00 3674.81 2393.00 1853.24 4246.24 2005.70 43.00 426.00 200.00 10595.75
2007.00 -2112.58 953.00 169.54 2269.54 7.00 1.00 159.00 1446.50 2393.00 0.00 2393.00 2005.70 43.00 426.00 200.00 6514.21
2008.00 -1703.87 953.00 181.41 2428.41 7.00 1.00 159.00 2025.94 2393.00 1747.03 4140.03 2005.70 43.00 426.00 200.00 8840.68
2009.00 -1211.48 953.00 194.10 2598.40 7.00 1.00 159.00 2701.03 2393.00 0.00 2393.00 2005.70 43.00 426.00 200.00 7768.73
2010.00 -1355.66 953.00 207.69 2780.29 7.00 1.00 159.00 2752.32 2393.00 1625.43 4018.43 2005.70 43.00 426.00 200.00 9445.46
2011.00 -1677.64 953.00 222.23 2974.91 7.00 1.00 159.00 2639.50 2393.00 0.00 2393.00 2005.70 43.00 426.00 200.00 7707.20
We took off $966 million from the end cash balance of 2006 becaus
0.00 1090.93 881.00 245.00 800.00 3016.93 0.00 485.00 16.00
0.00 1167.30 881.00 245.00 0.00 2293.30 0.00 485.00 16.00
0.00 1249.01 881.00 245.00 0.00 2375.01 0.00 485.00 16.00
0.00 1336.44 881.00 245.00 700.00 3162.44 0.00 485.00 16.00
0.00 1429.99 881.00 245.00 973.00 3528.99 0.00 485.00 16.00
0.00 1530.09 881.00 245.00 0.00 2656.09 0.00 485.00 16.00
Existing debt was paid off, so current portion of long term debt is on $2 billion senior secured credit facility (5 years term loan) has to be Unsecured bridge loan (6 years term loan) has to be paid back in 20
269.00 212.00 0.00 700.00 973.00 5671.93
269.00 212.00 0.00 700.00 973.00 4948.30
269.00 212.00 0.00 700.00 973.00 5030.01
269.00 212.00 0.00 0.00 973.00 5117.44
269.00 212.00 0.00 0.00 0.00 4510.99
269.00 212.00 0.00 0.00 0.00 3638.09
0.00 1300.00 5560.00 -7.00 -5.00 -1658.00 5190.00
0.00 1300.00 5560.00 -7.00 -5.00 -1658.00 5190.00
0.00 1300.00 5560.00 -7.00 -5.00 -1658.00 5190.00
0.00 1300.00 5560.00 -7.00 -5.00 -1658.00 5190.00
0.00 1300.00 5560.00 -7.00 -5.00 -1658.00 5190.00
0.00 1300.00 5560.00 -7.00 -5.00 -1658.00 5190.00
10861.93 $266 2006 268.12 374.13 7.00 -40.00 0.00 -5.45 -237.07 0.00 67.93 0.00 434.66
10138.30 $3,624 2007 293.07 400.31 7.00 -40.00 0.00 -164.09 -2032.47 -1120.00 1099.37 245.00 -1311.82
10220.01 $1,379 2008 482.72 428.34 7.00 -40.00 0.00 -22.96 -307.34 0.00 158.08 0.00 705.84
10307.44 $2,539 2009 571.04 458.32 7.00 -40.00 0.00 -24.57 -328.86 0.00 169.14 0.00 812.08
9700.99
8828.09
$256 1120.88327 2010 639.41 490.40 7.00 -40.00 0.00 -26.29 -351.88 0.00 180.98 0.00 899.63 2011 739.89 524.73 7.00 -40.00 0.00 -28.13 -376.51 0.00 193.65 0.00 1020.64
-281.36 0.00 0.00 0.00 -281.36
-301.06 0.00 0.00 0.00 -301.06
-322.13 0.00 0.00 0.00 -322.13
-344.68 0.00 0.00 0.00 -344.68
-368.81 0.00 0.00 0.00 -368.81
-394.62 0.00 0.00 0.00 -394.62
0.00 1673.00 -1860.00 0.00 0.00 0.00 -187.00 25.00
0.00 0.00 -800.00 0.00 0.00 0.00 -800.00 25.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 25.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 25.00
0.00 0.00 -700.00 0.00 0.00 0.00 -700.00 25.00
0.00 0.00 -973.00 0.00 0.00 0.00 -973.00 25.00
-8.70 284.00 275.30 2009
-2387.87 275.30 -2112.58 2010
408.71 -2112.58 -1703.87 2011
492.40 -1703.87 -1211.48
-144.18 -1211.48 -1355.66
-321.98 -1355.66 -1677.64
We have taken care of the cash used for LBO in cash flow statemen
4241.1582 5452.6353 0 700 -1211.4771 -2055.658 5452.6353 6808.293
2009
2010
2011 $1,032.80
0 #NUM!
$1,032.80
0 #NUM!
1) a new $2.0 billion secured revolving credit facility, of which $700 million was drawn at closing, (2) a new $1.9 billion unsecured bridge loan agreement, all of which was drawn at closing, (3) a new secured $1.0 billion European bridge loan facility and multi-currency revolving credit facilities in an amount of up to 95 million and 145 million, of which $1.0 billion was drawn at closing, and (4) $800 million of new mortgage loan agreements 2003 Build-A-Bear Workshop 26.33% GameStop Corp. 20.66% Mothercare Plc. 200441.18% 16.71%
200519.94% 16.72%
200620.80% 67.78% 5.58%
Average 27.06%
Median 23.57%
