HANSSON PRIVATE LABEL

Operating Results:
Revenue
Less: Cost of Goods Sold
Gross Profit
Less: Selling, General & Administrative
EBITDA
Less: Depreciation
EBIT
Less: Interest Expense
EBT
Less: Taxes
Net Income

Revenue Growth
Gross Margin
Selling, General & Administrative/Revenue
EBITDA Margin
EBIT Margin
Net Income Margin
Effective Tax Rate

Income Statement

2003
$503.4
405.2
98.2
37.8
60.4
6.8
53.6
5.5
48.1
19.2
$28.9

2004
$543.7
432.3
111.4
44.6
66.8
6.2
60.6
5.8
54.8
22.0
$32.8

2005
$587.2
496.2
91.0
45.8
45.2
6.0
39.2
5.9
33.3
13.3
$20.0

2006
$636.1
513.4
122.7
51.5
71.2
5.9
65.3
5.3
60.0
24.0
$36.0

2007
$680.7
558.2
122.5
49.0
73.5
6.1
67.4
3.3
64.1
25.6
$38.5

Margins:
NA
19.5%
7.5%
12.0%
10.6%
5.7%
39.9%

8.0%
20.5%
8.2%
12.3%
11.1%
6.0%
40.1%

8.0%
15.5%
7.8%
7.7%
6.7%
3.4%
39.9%

8.3%
19.3%
8.1%
11.2%
10.3%
5.7%
40.0%

7.0%
18.0%
7.2%
10.8%
9.9%
5.7%
39.9%

Harvard Business Publishing

HANSSON PRIVATE LABEL

Assets:
Cash & Cash Equivalents
Accounts Receivable
Inventory
Total Current Assets

Balance Sheet

2003
$4.3
62.1
57.7
124.1

2004
$5.1
70.1
58.0
133.2

2005
$4.8
78.8
61.2
144.8

2006
$7.8
87.1
61.9
156.8

2007
$5.0
93.3
67.3
165.6

201.4
12.3
$337.8

202.9
12.1
$348.2

203.1
11.8
$359.7

202.3
12.5
$371.6

204.4
10.8
$380.8

$42.2

$45.0

$51.6

$53.4

$58.1

91.6

82.8

73.8

65.8

54.8

204.0
$337.8

220.4
$348.2

234.3
$359.7

252.4
$371.6

267.9
$380.8

62.1
57.7
42.2
77.6

70.1
58.0
45.0
83.1

78.8
61.2
51.6
88.4

87.1
61.9
53.4
95.6

93.3
67.3
58.1
102.5

Net Working Capital/Revenue

15.4%

15.3%

15.1%

15.0%

15.1%

Days Sales Outstanding

Days Sales Inventory
Days Payable Outstanding (1)
Cash-to-Cash

44.4x
41.3x
34.3x
51.4x

46.4x
38.4x
34.0x
50.8x

48.3x
37.5x
34.3x
51.6x

49.3x
35.0x
34.0x
50.3x

49.3x
35.6x
34.4x
50.5x

Property, Plant & Equipment

Other Non-Current Assets
Total Assets
Liabilities & Owners' Equity:
Accounts Payable & Accrued Liabilities
Long-Term Debt
Owners' Equity
Total Liabilities & Owners' Equity

Net Working Capital:

Accounts Receivable
Plus: Inventory
Less: Accounts Payable & Accrued Expenses
Net Working Capital

(1) Based on total operating expenses excluding depreciation.

Harvard Business Publishing

HANSSON PRIVATE LABEL

Cash From Operations:

Net Income
Plus: Depreciation
Less: Increase in Accounts Receivable
Less: Increase in Inventory
Plus: Increase in Accounts Payable
Total Cash From Operations
Cash From Investing:
Capital Expenditures
Plus: Increases in Other Non-Current Assets
Total Cash Used in Investing
Cash From Financing:
Repayment of Debt
Plus: Dividend Payments
Cash Used in Financing
Total Cash Generated

Cash Flow

2003
$28.9
6.8
3.1
0.5
0.3
$32.4

2004
$32.8
6.2
8.0
0.3
2.8
$33.5

2005
$20.0
6.0
8.7
3.2
6.6
$20.7

2006
$36.0
5.9
8.3
0.7
1.8
$34.7

2007
$38.5
6.1
6.2
5.4
4.7
$37.7

$7.3
0.5
$7.8

$7.7
(0.2)
$7.5

$6.2
(0.3)
$5.9

$5.1
0.7
$5.8

$8.2
(1.7)
$6.5

$8.0
14.4
$22.4

$8.8
16.4
$25.2

$9.0
6.1
$15.1

$8.0
17.9
$25.9

$11.0
23.0
$34.0

$2.2

$0.8

($0.3)

$3.0

($2.8)

Harvard Business Publishing

HANSSON
PRIVATE LABEL
ho

Market
Company:
Value
Cathleen Sinclair
298.9
General Health & Beau
319.3
Women's Care Compan
498.6
Skin Care Enterprises
1,204.2

Company:
Cathleen Sinclair
General Health & Beauty
Women's Care Company
Skin Care Enterprises
Average

Comparable Companies

Net Enterprise
Debt
Value
1,329.6
1,628.5
63.1
382.4
55.3
553.9
371.9
1,576.1

EBITDA
19.0%
13.9%
13.3%
12.5%
14.6%

Equity
Beta Revenue EBITDA
2.22
1,346.8
255.3
1.95
446.1
61.9
1.14
397.3
52.7
1.35
1,247.6
155.8

EBIT
163.4
51.9
49.3
125.4

Net
Income
21.5
23.8
77.0
65.3

Book
Value
(1,112.8)
204.2
43.7
316.2

EBIT Earnings Revenue EBITDA

12.1%
1.6%
1.2x
6.4x
11.6%
5.3%
0.9x
6.2x
12.4%
19.4%
1.4x
10.5x
10.1%
5.2%
1.3x
10.1x
11.6%
7.9%
1.2x
8.3x

EBIT
10.0x
7.4x
11.2x
12.6x
10.3x

P/E
13.9x
13.4x
6.5x
18.4x
13.1x

P/B
NM
1.6x
11.4x
3.8x
5.6x

Harvard Business Publishing

HANSSON PRIVATE LABEL

Company:
Cathleen Sinclair
General Health & Beauty
Women's Care Company
Skin Care Enterprises
Average
Debt/
Value
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%

Debt/
Equity
0.0%
5.3%
11.1%
17.6%
25.0%
33.3%

Weighted Average Cost of Capital

Debt/
Value
81.6%
16.5%
10.0%
23.6%
32.9%

Debt/
Equity
444.9%
19.8%
11.1%
30.9%
49.1%

Equity
Beta
2.22
1.95
1.14
1.35
1.67

Debt
Beta
0.25
0.00
0.00
0.00
0.06

Asset
Beta
0.79
1.74
1.07
1.14
1.18

Asset
Beta
1.18
1.18
1.18
1.18
1.18
1.18

Equity
Beta
1.18
1.22
1.26
1.31
1.36
1.42

Cost of
Equity
9.67%
9.86%
10.07%
10.30%
10.56%
10.86%

Cost of
Debt
7.75%
7.75%
7.75%
7.75%
7.75%
7.75%

WACC
9.67%
9.60%
9.53%
9.45%
9.38%
9.31%

Assumptions:
10-Year Treasury
Market Risk Premium

3.75%
5.00%

Tax Rate

40.0%

Est. Hansson EBITDA Multiple

Est. Hansson Enterprise Value

7.0x
514.5

Existing Net Debt

Plus: New Expansion Debt
Total Estimated Debt

49.8
57.9
107.7

Existing D/V
Estimated New D/V

9.7%
20.9%

Assumed Debt Beta

Estimated Cost of Debt

0.00
7.75%

Harvard Business Publishing

HANSSON PRIVATE LABEL

Operating Assumptions

Operating Assumptions
Revenue Projection:
Total Capacity (000's)
Capacity Utilization
Unit Volume
Selling Price Per Unit - Growing at
Revenue

2009
80,000
60.0%
48,000
1.77
84,960

2010
80,000
65.0%
52,000
1.81
93,881

2011
80,000
70.0%
56,000
1.84
103,124

2012
80,000
75.0%
60,000
1.88
112,700

2013
80,000
80.0%
64,000
1.92
122,618

2014
80,000
85.0%
68,000
1.95
132,887

2015
80,000
85.0%
68,000
1.99
135,545

2016
80,000
85.0%
68,000
2.03
138,256

2017
80,000
85.0%
68,000
2.07
141,021

2018
80,000
85.0%
68,000
2.12
143,841

1.0%
3.0%
3.0%

0.94
3,600
2,250

0.95
3,708
2,318

0.96
3,819
2,387

0.97
3,934
2,459

0.98
4,052
2,532

0.99
4,173
2,608

1.00
4,299
2,687

1.01
4,428
2,767

1.02
4,560
2,850

1.03
4,697
2,936

3.5%

4
160.0
640.0

4
165.6
662.4

6
171.4
1,028.4

6
177.4
1,064.4

6
183.6
1,101.6

6
190.0
1,140.2

6
196.7
1,180.1

6
203.6
1,221.4

6
210.7
1,264.1

6
218.1
1,308.4

20.00
2,000
40,000
450
18,000.0

20.70
2,000
41,400
473
19,570.9

21.42
2,000
42,849
509
21,814.0

22.17
2,000
44,349
545
24,190.2

22.95
2,000
45,901
582
26,706.0

23.75
2,000
47,507
618
29,368.2

24.59
2,000
49,170
618
30,396.1

25.45
2,000
50,891
618
31,460.0

26.34
2,000
52,672
618
32,561.1

27.26
2,000
54,516
618
33,700.7

18,640.0

20,233.3

22,842.4

25,254.6

27,807.6

30,508.4

31,576.2

32,681.4

33,825.2

35,009.1

Selling, General & Administrative/Revenue

7.8%

7.8%

7.8%

7.8%

7.8%

7.8%

7.8%

7.8%

7.8%

7.8%

Working Capital Assumptions (1):

Days Sales Outstanding
Days Sales Inventory
Days Payable Outstanding

47.6x
37.6x
34.2x

47.6x
37.6x
34.2x

47.6x
37.6x
34.2x

47.6x
37.6x
34.2x

47.6x
37.6x
34.2x

47.6x
37.6x
34.2x

47.6x
37.6x
34.2x

47.6x
37.6x
34.2x

47.6x
37.6x
34.2x

47.6x
37.6x
34.2x

Hourly Labor Cost Per Unit

0.38

0.38

0.39

0.40

0.42

0.43

0.45

0.46

0.48

0.50

3.15%

Units Per Total Labor Hours

0.05

0.06

0.06

0.06

0.06

0.06

0.06

0.06

0.06

0.06

0.34%

Production Costs:
Raw Materials Per Unit Growing at
Manufacturing Overhead Growing at
Maintenance Expense Growing at
Salaried Labor Cost:
Managers
Average Annual Fully Loaded Cost
Total Salaried Labor Cost
Hourly Labor Cost:
Average Fully Loaded Hourly Cost
Hours Per Year
Cost Per Hourly Employee
Number of Hourly Workers
Total Hourly Labor Cost (000's)
Total Labor Cost

2.0%

3.5%

(1) Based on historical averages.

Harvard Business Publishing

HANSSON PRIVATE LABEL

Cost Components:
Facility Expansion
Manufacturing Equipment
Packaging Equipment
Working Capital (1)
Total Investment

Amount
$10,000
20,000
15,000
12,868
57,868

Investment

Est. Life
20yrs.
10yrs.
10yrs.

Percent
Cost of
Depr' Maintenance Maintenance
500
5.0%
500
2,000
5.0%
1,000
1,500
5.0%
750
0
0.0%
0
4,000
2,250

(1) The increase in working capital is not expected to ocurr upfront

at the time of the initial investment. It is assumed to take place
throughout the year, and should be considered as part of the
2009 cash flows.
Note: working capital is defined as accounts receivable plus inventory
less accounts payable and accrued expenses. At the end of the
project, working capital will be returned in an amount equal to
accounts receivable less accounts payable.

Harvard Business Publishing

Historical Ratio Analysis

2003

2004

2005

2006

2007

Profitability Ratios
Profit Margin
Return on Assets (ROA)
Return on Equity (ROE)
Return on Invested Capital (ROI
Gross Margin

5.7%
8.6%
14.2%
10.9%
19.5%

6.0%
9.4%
14.9%
12.0%
20.5%

3.4%
5.6%
8.5%
7.6%
15.5%

5.7%
9.7%
14.3%
12.3%
19.3%

5.7%
10.1%
14.4%
12.5%
18.0%

Asset Management Ratios

Accrount Receivable Turnover
Inventory Turnover
Current Asset Turnover
PP&E Turnover (Fixed Asset Tur
Total Asset Turnover

8.11
7.02
4.06
2.50
1.49

7.76
7.45
4.08
2.68
1.56

7.45
8.11
4.06
2.89
1.63

7.30
8.29
4.06
3.14
1.71

7.30
8.29
4.11
3.33
1.79

Liability and Liquidity Ratios

Current Ratio
Quick Ratio (Asset Test)
Cash Ratio
Total Debt Ratio
Debt-to-Equity Ratio
Equity Multiplier
Times Interest Earned Ratio
Cash Coverage Ratio
Capital Intensity

2.94
1.57
0.10
0.40
0.66
1.7x
9.75
10.98
0.67

2.96
1.67
0.11
0.37
0.58
1.6x
10.45
11.52
0.64

2.81
1.62
0.09
0.35
0.54
1.5x
6.64
7.66
0.61

2.94
1.78
0.15
0.32
0.47
1.5x
12.32
13.43
0.58

2.85
1.69
0.09
0.30
0.42
1.4x
20.42
22.27
0.56

Year: 2007
Company:
Market Value
Cathleen Sinclair
298.9
General Health & Beauty
319.3
Women's Care Company
498.6
Skin Care Enterprises
1,204.2
Average (Excluding Cathleen Si
674.0
Median (Excluding Cathleen Sin
498.6
Max (Excluding Cathleen Sincla 1,204.2
Min (Excluding Cathleen Sincla
319.3
Hansson Private Label
406.8

Net Debt Enterprise ValueEquity Beta

1,329.6
1,628.5
2.22
63.1
382.4
1.95
55.3
553.9
1.14
371.9
1,576.1
1.35
163.4
837.5
1.5
63.1
553.9
1.4
371.9
1,576.1
2.0
55.3
382.4
1.1
107.7
514.5
1.36

Revenue EBITDA EBITNet IncomeBook Value

1,346.8
255.3
###
21.5
(1,112.8)
446.1
61.9
51.9
23.8
204.2
397.3
52.7
49.3
77.0
43.7
1,247.6
155.8
###
65.3
316.2
697.0
90.1
75.6
55.4
188.0
446.1
61.9
51.9
65.3
204.2
1,247.6
155.8
###
77.0
316.2
397.3
52.7
49.3
23.8
43.7
680.7
73.5
67.4
38.5
267.9

Company:
EBITDA/Revenue
EBIT/Renevue
Earnings/Revenue
EV/RevenueEV/EBITDAEV/EBIT P/E
Cathleen Sinclair
19.0%
12.1%
1.6%
1.2x
6.4x
10.0x 13.9x
General Health & Beauty
13.9%
11.6%
5.3%
0.9x
6.2x
7.4x 13.4x
Women's Care Company
13.3%
12.4%
19.4%
1.4x
10.5x
11.2x 6.5x
Skin Care Enterprises
12.5%
10.1%
5.2%
1.3x
10.1x
12.6x 18.4x
Average (Exluding Cathleen Sin
13.2%
11.4%
10.0%
1.2x
8.9x
10.4x 12.8x
Median (Excluding Cathleen Sin
13.3%
11.6%
5.3%
1.3x
10.1x
11.2x 13.4x
Max (Excluding Cathleen Sincla
13.9%
12.4%
19.4%
1.4x
10.5x
12.6x 18.4x
Min (Excluding Cathleen Sincla
12.5%
10.1%
5.2%
0.9x
6.2x
7.4x
6.5x
Hansson Private Label
10.8%
9.9%
5.7%
0.8x
7.0x
7.6x 10.6x

P/B
NM
1.6x
11.4x
3.8x
5.6x
3.8x
11.4x
1.6x
1.5x

Book Value

Time Period

2008

2009

2010

2011

2012

2013

2014

2015

2016

Operating Results:
Revenue
84,960
Less: Raw Material Costs
45,120
Less: Labor Expense
18,640
Less: Manufacturing Overhead
3,600
Less: Maintenance Expense
2,250
Less: Selling, General & Administrative Expense 6,627
EBITDA
8,723
Less: Depreciation
4,000
EBIT
4,723
Less: Taxes
1,889
NOPAT
2,834

93,881
49,369
20,233
3,708
2,318
7,323
10,930
4,000
6,930
2,772
4,158

103,124
53,698
22,842
3,819
2,387
8,044
12,334
4,000
8,334
3,334
5,000

112,700
58,109
25,255
3,934
2,459
8,791
14,154
4,000
10,154
4,061
6,092

122,618
62,603
27,808
4,052
2,532
9,564
16,059
4,000
12,059
4,824
7,235

132,887
67,181
30,508
4,173
2,608
10,365
18,051
4,000
14,051
5,620
8,431

135,545
67,852
31,576
4,299
2,687
10,573
18,559
4,000
14,559
5,823
8,735

138,256
68,531
32,681
4,428
2,767
10,784
19,065
4,000
15,065
6,026
9,039

2,834
4,000
12,865

4,158
4,000
1,473

5,000
4,000
1,443

6,092
4,000
1,529

7,235
4,000
1,586

8,431
4,000
1,644

8,735
4,000
425

9,039
4,000
432

Un-Levered Free Cash Flow

NOPAT
Plus: Depreciation
Less: Change in Net Working Capital
Plus: Net Working Capital Recovery
Less: Initial Investment
Un-Levered Free Cash Flow

45,000
###

(6,031)

6,685

7,558

8,563

9,649

10,787

12,310

12,607

Cost of Capital (Discount Rate)

PV of Un-Levered Free Cash Flow
Cumulative Free Cash Flow

9.38%
###
###

(5,514)
(50,514)

5,588
(44,926)

5,775
(39,151)

5,982
(33,168)

6,164
(27,005)

6,299
(20,705)

6,573
(14,133)

6,154
(7,979)

NPV
IRR
Payback Period (Break even point)

###
13%
9.15
11,234
8,874
7,243
12,865

12,413
9,805
7,880
14,338

13,635
10,771
8,625
15,781

14,901
11,771
9,362
17,310

16,213
12,807
10,123
18,896

17,571
13,879
10,909
20,541

17,922
14,157
11,114
20,965

18,280
14,440
11,323
21,397

Accounts Receivable
Plus: Inventory
Less: Accounts Payable
Net Working Capital

10

2017

2018

141,021
69,216
33,825
4,560
2,850
11,000
19,569
4,000
15,569
6,228
9,342

143,841
69,908
35,009
4,697
2,936
11,220
20,071
4,000
16,071
6,429
9,643

9,342
4,000
440

9,643
4,000
447
22,284

12,902

35,480

5,758
(2,221)

14,476
12,255

18,646
14,729
11,538
21,837

19,019
15,023
11,758
22,284

Revenue (Cashflow)

NPV

Variance/Sensitivity
(measured by standard
deviation)

Original Assumption Utilization rate assumption *1.1

Original Assumption Original utilization rate assumption
Original Assumption- Utilization rate assumption *0.9

20,776
12,255
3,734

8521

1st

Original Assumption Selling Price Per Unit - Growing at 2.

Original Assumption Selling Price Per Unit - Growing at 2.
Original Assumption- Selling Price Per Unit - Growing at 2.

15,548
12,255
8,996

3276

4th

Costs (Cashflow)

NPV

Variance/Sensitivity
(measured by standard
deviation)

Original Assumption Average Fully Loaded Hourly Cost at

Original Assumption Average Fully Loaded Hourly Cost at
Original Assumption- Average Fully Loaded Hourly Cost at

10,840
12,255
13,646

1403

6th

Original Assumption Raw Materials Per Unit Growing at 1.

Original Assumption Raw Materials Per Unit Growing at 1.
Original Assumption- Raw Materials Per Unit Growing at 1.

11,339
12,255
13,167

914

7th

Working Capital

NPV

Variance/Sensitivity
(measured by standard
deviation)

10% increase: 47.6*1.1

Days Sales Outstandin Original Assumption (47.6)
10% decrease: 47.6*0.9

11,493
12,255
13,018

763

8th

10% increase: 37.6*1.1

Days Sales Inventory Original Assumption (37.6)
10% decrease: 37.6*0.9

11,653
12,255
12,857

602

9th

10% increase: 34.2*1.1

Days Payable Outstan Original Assumption 34.2
10% decrease: 34.2*0.9

12,734
12,255
11,777

479

10th

WACC (Risk)
Original Assumption 9.38%*1.1
Original Assumption 9.38%
Original Assumption- 9.38*0.9
Initial Investment
Original Assumption 10% increase 45000*1.1
Original Assumption Initial Investment of 45000
Original Assumption- 10% decrease 45000*0.9
Equity Beta
Original Assumption 10% increase: 1.36*1.1
Original Assumption Initial Equity Beta of 1.36
Original Assumption- 10% decrease: 1.36*0.9

NPV
8,723
12,255
15,695
NPV
7,755
12,255
16,755
NPV
10,304
12,255
14,360

Variance/Sensitivity
(measured by standard
deviation)
3486

3rd

Variance/Sensitivity
(measured by standard
deviation)
4500

2nd

Variance/Sensitivity
(measured by standard
deviation)
2029

5th