Model Assignment Aug-23

Instructions
TTC
Background
TTC ("TTC" or the "Company") is the publisher and direct marketer of The Great Courses. The Company is currently owned by its founder and CEO, Mr. Alcaraz, who is looking to sell
100% of the Company to a financial sponsor after winning Wimbledon. TTC has a 31 Dec fiscal year end. Please model results assuming the transaction closes on 31 Dec 2006.
Instructions
1) Use the provided financial statements (I/S, B/S, CFS) to create a fully functional LBO model. The cash flow statement should be built-up from net income.
Please add rows, any other calculations as needed.
2) Utilize LBO Assumptions provided below.
3) Create 5 yr projected financials, utilizing the historical financials and note any key assumptions.
4) Create summary output, including:
a) Sources & Uses
b) Proforma Ownership Table
c) Entry valuation
d) Credit metrics
e) Returns (3, 4 and 5 year returns with appropriate sensitivities)
LBO Assumptions
1) 9.0x FYE 12/06A EBITDA Purchase Multiple (pre fees).
2) Total PF Leverage of 5.5x LTM EBITDA.
$15m Revolver, undrawn at close - SOFR+300 interest rate, 50bps undrawn RCF commitment fee
4.5x Term Loan - SOFR+500 interest rate, 1% yearly mandatory amortization, 100% excess FCF sweep
1.0x Mezzanine - 13% interest rate (assume 8% cash interest, 5% PIK)
Assume a SOFR curve in-line with market
3) The transaction closes on 31/12/06.
4) $3 million of deal fees and expenses.
5) Investment is in the form of common equity.
6) 10% management options on common equity struck at the deal price.
Income Statement
TTC
($ thousands)
FYE Dec 31, FYE Dec 31, Notes for Key Projection Assumptions
2002A 2003A 2004A 2005A 2006B 2007F 2007P 2008P 2009P 2010P 2011P
Total Revenue $29,636 $32,253 $39,165 $45,282 $50,820 $55,313

% Growth n/a 8.8% 21.4% 15.6% 12.2% 8.8%
Cost of Goods Sold

Manufacturing 6,655 6,509 7,241 7,573 7,924 8,579
Royalties 965 1,354 1,558 1,809 2,160 2,340
Amortisation of Production Costs 1,206 1,679 1,919 2,349 2,494 2,972
Sales Taxes 55 50 59 81 82 82
Marketing 9,995 9,904 13,452 16,116 18,968 20,126
Customer Service 1,072 1,217 1,757 1,800 1,955 2,012
Shipping 3,408 3,571 4,007 4,599 5,061 5,453
Product Development 487 427 597 893 1,197 1,216
Total Cost of Goods Sold 23,843 24,711 30,590 35,220 39,841 42,780
Cost of Goods Sold Margin 80.5% 76.6% 78.1% 77.8% 78.4% 77.3%
Gross Profit $5,793 $7,542 $8,575 $10,062 $10,979 $12,533

% Growth 19.5% 23.4% 21.9% 22.2% 21.6% 22.7%
Operating Expenses
Information Technology 639 777 697 993 891 1,003
Human Resources 195 238 316 396 365 352
General & Administrative 788 1,040 1,198 1,414 1,595 1,605
Performance Bonus 408 573 665 783 899 1,080
Total Operating Expenses 2,030 2,628 2,876 3,586 3,750 4,040
Operating Expense Margin 6.8% 8.1% 7.3% 7.9% 7.4% 7.3%
Operating Income $3,763 $4,914 $5,699 $6,476 $7,229 $8,493

Operating Income Margin 12.7% 15.2% 14.6% 14.3% 14.2% 15.4%
Depreciation / Amortisation 1,853 2,300 2,791 3,449 3,697 4,137
EBITDA (1) 5,616 7,214 8,490 9,925 10,926 12,630
Addbacks/Adjustments
Consulting (2) - - 21 1,021 517 -
Other (40) (1) 136 62 22 -
Adjusted EBITDA (3) 5,576 7,213 8,647 11,008 11,465 12,630

Adjusted EBITDA Margin 18.8% 22.4% 22.1% 24.3% 22.6% 22.8%
Selected Financial Data
Capitalised Investments
Production Cost Expenditures 1,863 2,446 2,469 2,814 3,379 3,521
Property & Equipment Expenditures 463 306 1,390 1,818 755 496
(1) Earnings before interest, taxes, depreciation and amortisation.

(2) One-time consulting expenses.
(3) Earnings before interest, taxes, depreciation, amortisation and extraordinary and nonrecurring expenses.
Cash Flow Statement
TTC
($ thousands)
FYE Dec 31, FYE Dec 31, Notes for Key Projection Assumptions
2002A 2003A 2004A 2005A 2006B 2007F 2007A 2008A 2009A 2010A 2011A
OPERATING ACTIVITIES
INVESTING ACTIVITIES
FINANCING ACTIVITIES
Cash Flow for FY Ended
Balance Sheet
TTC
($ thousands)
FYE Dec 31, Pro Forma FYE Dec 31, Notes for Key Projection Assumptions
2002A 2003A 2004A 2005A 2006B 2007F Adj. 2006A 2007P 2008P 2009P 2010P 2011P
Current Assets
Cash or Cash Equivalents 4,213 5,439 5,067 6,738
Accounts Receivable 119 89 218 212
Inventory 792 1,285 1,429 1,637
Production Costs, net 2,707 3,474 4,024 4,489
Prepaid Marketing 1,447 1,338 2,849 3,655
Royalty Advances 653 604 609 665
Total Current Assets $9,931 $12,229 $14,196 $17,396
Property and Equipment, net 1,873 1,515 3,000 3,801

Other Assets, net 199 152 411 340
Total Assets $12,003 $13,896 $17,607 $21,537
Current Liabilities
Accounts Payable 1,322 1,435 2,111 2,629
Accrued Expenses 177 182 378 318
Customer Refunds 515 550 599 624
Professor Royalties Payable 305 465 418 606
Profit Share 296 350 161 487
Total Current Liabilities $2,615 $2,982 $3,667 $4,664
Notes Payable, BB&T 438 265 146 255

Notes Payable, BB&T Redemption 3,751 2,965 2,239 1,513
Capital Leases 511 395 1,109 910
Total Liabilities $7,315 $6,607 $7,161 $7,342
Total Stockholders' Equity 4,688 7,290 10,445 14,195

Total Liabilities & Stockholders' Equity $12,003 $13,897 $17,606 $21,537
Check - - 1 1 -
Debt Balance Schedule

TTC
($ thousands)
FYE Dec 31, Pro Forma FYE Dec 31, Notes for Key Projection Assumptions
2002A 2003A 2004A 2005A 2006B 2007F Adj. 2006A 2007P 2008P 2009P 2010P 2011P
Revolving Credit Facility

BOP Balance
+ Drawdown
- Paydown
EOP Balance
Term Loan
BOP Balance
- Amortization
- Paydown
EOP Balance
Mezzanine Debt
BOP Balance
+ PIK Interest
- Paydown
EOP Balance
Cash Interest Expense

RCF
Term Loan
Mezzanine Debt
Total Cash Interest Expense
Credit Metrics
Total Leverage
Net Leverage
Interest Coverage
Fixed Charge Coverage

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Instructions

Total Revenue $29,636 $32,253 $39,165 $45,282 $50,820 $55,313

Cost of Goods Sold

Gross Profit $5,793 $7,542 $8,575 $10,062 $10,979 $12,533

Operating Income $3,763 $4,914 $5,699 $6,476 $7,229 $8,493

Depreciation / Amortisation 1,853 2,300 2,791 3,449 3,697 4,137

EBITDA (1) 5,616 7,214 8,490 9,925 10,926 12,630

Adjusted EBITDA (3) 5,576 7,213 8,647 11,008 11,465 12,630

Selected Financial Data

(1) Earnings before interest, taxes, depreciation and amortisation.

Cash Flow for FY Ended

Property and Equipment, net 1,873 1,515 3,000 3,801

Notes Payable, BB&T 438 265 146 255

Total Stockholders' Equity 4,688 7,290 10,445 14,195

Debt Balance Schedule

Revolving Credit Facility

Cash Interest Expense

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