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As Of Filer Filing For·On·As Docs:Size Issuer Agent 3/27/08 Getty Images Inc SC 13E3 10:59M Getty Images Inc Donnelley … Solutions/FA Abe Acquisition Corp. Abe Investment, L.P. Getty Investments L.L.C. Hellman & Friedman Capital Partners VI, L.P. Jonathan Klein Mark Getty |
Document/Exhibit Description Pages Size
1: SC 13E3 Tender-Offer Statement - Going-Private Transaction HTML 140K
2: EX-99.(B)(1) Senior Secured Credit Facilities Commitment HTML 177K
Letter
3: EX-99.(C)(2) Presentation of Goldman Sachs to the Board of HTML 178K
Directors, Dated February 24, 2008
4: EX-99.(C)(3) Draft Presentation of Goldman Sachs, Dated HTML 189K
February 18, 2008
5: EX-99.(C)(4) Draft Presentation of Goldman Sachs, Dated HTML 200K
February 7, 2008
6: EX-99.(C)(5) Draft Presentation of Goldman Sachs, Dated HTML 104K
December 2007
7: EX-99.(C)(6) Draft Presentation of Goldman Sachs, Dated HTML 71K
November 28, 2007
8: EX-99.(C)(7) Draft Presentation of Goldman Sachs, Dated HTML 33K
November 6, 2007
9: EX-99.(C)(8) Draft Presentation of Goldman Sachs, Dated HTML 112K
October 10, 2007
10: EX-99.(C)(9) Draft Presentation of Goldman Sachs, Dated HTML 222K
September 19, 2007
| Draft Presentation of Goldman Sachs, dated February 18, 2008 |
Exhibit (c) (3)
PRELIMINARY
Goldman Sachs
Project Closeup: Board Discussion Materials
Goldman, Sachs & Co. 18-Feb-2008
PRELIMINARY
Goldman Sachs
I. Transaction Summary
II. Public Market Trading Analysis
III. Financial Analysis
IV. LBO Analysis
Appendix A: Additional Financial Sensitivities
Appendix B: Additional Exhibits
Appendix C: Leveraged Recapitalization / Stock Buyback Analysis
Goldman Sachs does not provide accounting, tax, or legal advice. Notwithstanding anything in this document to the contrary, and except as required to enable compliance with applicable securities law, you (and each of your employees, representatives, and other agents) may disclose to any and all persons the US federal income and state tax treatment and tax structure of the transaction and all materials of any kind (including tax opinions and other tax analyses) that are provided to you relating to such tax treatment and tax structure, without Goldman Sachs imposing any limitation of any kind.
PRELIMINARY
Goldman Sachs
I. Transaction Summary
Transaction Summary 3
PRELIMINARY
Goldman Sachs
Process Overview
Getty Images Board of Directors authorized the launch of a process to evaluate a potential sale of the Company on October 23, 2007.
5 sponsors, chosen by Getty Images Board of Directors in consultation with Goldman Sachs, were invited to participate in phase 1. All submitted indications of interest on November 26, 2007, with value indications ranging from $37 - $45 per share. One sponsor was eliminated from the process by the Getty Images Board of Directors in consultation with Goldman Sachs.
Based on inbound interest during phase 1, three additional sponsors chosen by the Getty Images Board of Directors in consultation with Goldman Sachs, were invited to participate in the process and evaluated phase 1 due diligence information. All three provided verbal indications of interest during the week of December 17, 2007, with value indications ranging from “mid-to-high $30’s” - $40 per share. One was eliminated from the process by the independent voting members of the Getty Images Board of Directors in consultation with Goldman Sachs. The remaining two sponsors submitted written indications of interest on December 21, 2007, with value indications ranging from $38 - $41 per share.
Beginning December 20, 2007, Getty Investments and its advisor, Allen & Co. were allowed access to data room information and management to evaluate Getty Investments’ view on potential participation in a transaction.
Six sponsors were invited by Getty Images’ Board of Directors in consultation with Goldman Sachs to participate in phase 2 of the process.
Two strategic buyers, chosen by the independent voting members of the Getty Images Board of Directors in consultation with Goldman Sachs, were contacted during the week of January 14th. Both of them declined to participate in the process. Additional strategic buyers have made inbound inquiries after the leak of the transaction by the NY Times on January 21. After careful consideration of all strategic inquiries, the independent voting members of the Getty Images Board of Directors in consultation with Goldman Sachs, invited one of the strategics to participate in the process on January 30, 2008. To date, this strategic buyer continues to evaluate confidential information and has held meetings with management.
Since the press leak on January 21, Goldman Sachs has taken inbound calls from other private equity firms. The independent voting members of the Getty Images Board of Directors in consultation with Goldman Sachs carefully evaluated all inquires and have decided not to invite any additional participants into the process.
All six of the private equity participants in the process were invited to submit final bids on January 22, 2008, with the final bid date set for February 4, 2008.
Two private equity firms submitted final proposals on February 4, 2008:
— H&F: $32.75 per share, with committed financing
— Sponsor C: $30.00 per share, without financing
After several rounds of negotiations, H&F increased their proposal to $34.00 per share on February 7, 2008.
After several meetings and deliberations, the independent voting members of the Getty Images Board authorized Goldman Sachs, Weil, Gotshal and the Company to negotiate final documentation for a potential transaction with H&F at $34 per share. Since that decision, H&F has been permitted to discuss rollover and license agreement with Getty Investments and incentive and employment opportunities with management of Getty Images.
Transaction Summary 4
PRELIMINARY
Goldman Sachs
Transaction Summary
($ in millions, except per share amounts)
Current Market (1): H&F
Price Per Share (2) $ 24.82 $ 34.00
Premium Analysis
Current ($ 24.82) 0.0% 37.0%
10 Day Average ($ 25.62)(3.1)% 32.7%
Undisturbed Price 18-Jan-08 ($ 21.94) 13.1% 55.0%
30 Day Average ($ 25.03)(0.8)% 35.8%
90 Day Average ($ 27.25)(8.9)% 24.8%
180 Day Average ( $ 28.36)(12.5)% 19.9%
1 Year Average ($ 38.35)(35.3)%(11.3)%
FD Share Count (2) 60.9 61.1
Equity Value $ 1,511 $ 2,076
Net Debt - Current (3)(19)(19)
Enterprise Value 1,492 2,057
Multiples Analysis
EBITDA Metric (4)
CY2007A (Adj) $ 314 4.8x 6.6x
EPS
CY2007A $ 2.22 11.2 x 15.3 x
CY2008E:
Mgmt Plan $ 2.25 11.0 x 15.1x
Central Sensitivity to Mgmt Plan $ 2.05 12.1 x 16.6 x
IBES $ 2.03 12.2 x 16.7 x
CY2009E
Mgmt Plan $ 2.55 9.7 x 13.3 x
Central Sensitivity to Mgmt Plan $ 2.01 12.3 x 16.9 x
IBES $ 2.14 11.6 x 15.9 x
Note: 2007A EBITDA (Adj) adds back ESO expense of $14.0mm, per GYI management. EPS estimates include ESO expense.
1 As of close of trading on15-Feb-2008
2 Share count and options per GYI management as of 1-Feb-2008
3 Cash and debt as of 31-Dec-2007 per GYI management
4 Source: Management Plan estimates per GYI Management. Central Sensitivity to Management Plan per GYI independent voting members of BoD guidance. IBES per IBES median estimates
Transaction Summary 5
PRELIMINARY
Goldman Sachs
Transaction Summary
Capitalization
($ in millions, except per share amounts)
H&F
Price Per Share $ 34.00
Total Uses
Equity + Total Debt $ 2,421
Expenses 50
Pro Forma Cash 50
Total Uses $ 2,521
Total Sources
Total Cash $ 364
New Debt 960
New Equity Required 1,197
Equity as % of Total Cap (1) 55.5%
Total Sources $ 2,521
“Getty Investments” equity value at deal price ($34): $319mm
“Getty Investments” equity value as percent of new equity required is 26.6%
Source: Cash and Debt per GYI management as of December 31, 2007. Basic shares, options and RSU’s as of December 31, 2007, adjusted for new RSU grants through February 1, 2008 per GYI management. Expenses, pro forma cash and new debt estimates per H&F proposal letter as of February 7, 2008. Getty Investments equity value per schedule 13D/A filing as of September 28, 2007 Note: Does not include potential tax impact of convertible redemption
1 Defined as equity required as a percentage of total sources - cash
Transaction Summary 6
PRELIMINARY
Goldman Sachs
II. Public Market Trading Analysis
Public Market Trading Analysis 7
PRELIMINARY
Goldman Sachs
Historical Performance
($ in millions, except per share amounts)
$ 1,000 $ 100
$ 900 $ 858 $ 90
$ 807
$ 800 $ 733 $ 80
$ 700 $ 70
$ 622 $ 600 38.9% 38.9% $ 60
36.6%
$ 523 $ 485 $ 500 $ 463 31.5% $ 50
$ 451 36.4% 27.1%
$ 400 $ 40 Closing Price (USD)
20.8% $ 314 $ 314
18.4% 19.2% $ 286
$ 300 19.1% $ 30
$ 248 $ 227 19.5% $ 24.82
$ 200 $ 185 $ 165 $ 20
$ 101 14.1%
$ 85 $ 94 $ 94 $ 100 $ 10
$ 35 $ 35 $ 16 $ 19 $ 0 $ 0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Revenue EBITDA EBITDA Margin Stock Price
Source: Public filings and GYI management
Note: 2006 and 2007 EBITDA excludes restructuring costs and one-time items
Public Market Trading Analysis 8
PRELIMINARY
Goldman Sachs
IBES EPS Estimates Over Time vs. Stock Performance
$ 4.50 $ 100.00
$ 90.00
$ 4.00
$ 80.00
$ 3.50
$ 70.00
$ 3.00
$ 2.14 $ 60.00 Closing Stock Price
EPS Estimate 2009E
$ 2.50
$ 2.34 $ 2.46 $ 50.00
2006A
2005A
$ 2.00 $ 2.22
2007A
$ 40.00
$ 2.03
2008E
$ 1.50
$ 30.00
$ 24.82
$ 1.00
YoY EPS Growth $ 20.00
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
$ 0.50 36.0% 5.1%(9.8%)(8.6%) 5.4%
$ 10.00
$ 0.00 $ 00.00
Feb-2005 Feb-2006 Feb-2007 Feb-2008
Monthly from 15-Feb-2005 to 15-Feb-2008
2005 2006 2007 2008 2009 Stock Price
Source: FactSet
Note: 2005A-2007A EPS exclude certain one-time costs. 2008-2009E EPS estimates based on IBES median estimates.
Public Market Trading Analysis 9
PRELIMINARY
Goldman Sachs
Quarterly Street Expectations and Management’s Revised Guidance
($ in millions except per share data)
As of 01-May -2007 As of 01-Aug-2007 As of 01-Nov-2007 As of 31-Jan-2008
Guidance for Q2 2007 Guidance for Q3 2007 Guidance for Q4 2007 Guidance for Q1 2008
Management Guidance for Next Quarter
Revenue – actual $ 218 $ 209 $ 218
YoY change 6.5% 5.5% 7.1%
Revenue – updated guidance1 $ 218 $ 210 $ 210 $ 220
Revenue – previous Street2 $ 210 $ 221 $ 214 $ 217
expectations
Guidance/previous street difference 3.8%(5.0)%(1.9)%(1.4)%
EPS – actual $ 0.57 $ 0.47 $ 0.49
YoY change(3.4)%(24.2)%(22.2)%
EPS – updated guidance1 $ 0.58 $ 0.47 $ 0.48 $ 0.45
EPS – previous Street expectations2 $ 0.65 $ 0.61 $ 0.54 $ 0.54
Guidance/previous street difference(10.1)%(23.0)%(11.1)%(16.7)%
CY2008 guidance as of January 31, 2008
— CY2008 revenue of $900mm vs. previous street expectations of $884mm – 1.8% increase
— CY2008 EPS of $2.00 to $2.10 vs. previous street expectations of $2.16 – 5.1% decrease
Company estimate is that CY2007 revenue declined ~3% on an organic and currency neutral basis
Source: GYI press releases, press articles, Thomson Financial and IBES
Note: EPS is pro forma EPS excluding one-time items. Summing quarterly EPS does not total to CY2007 EPS of $2.22 because of rounding.
1 Guidance given during earnings announcement for previous quarter
2 Street expectations at time of earnings announcement for previous quarter
Public Market Trading Analysis 10
PRELIMINARY
Goldman Sachs
Management Plan vs. Results
($ in millions except per share amounts)
2006 2007
Management Plan at beginning of year
Revenue $ 850 $ 875
EBITDA (book) 344 329
EPS (original plan) $ 2.80 $ 2.74
EPS - adjusted (1) 3.00 2.75
Acquisitions
Revenue $ 27 $ 42
EBITDA (book) 17 8
EPS $ 0.02 $(0.12)
Actual reported
Revenue $ 807 $ 858
EBITDA (book) 297 294
EPS $ 2.11 $ 2.10
Pro Forma Estimate Excluding Acquisitions and FX benefits (2)
Revenue $ 815 $ 790
EBITDA (book) 305 270
EPS $ 2.35 $ 2.06
Difference: Pro Forma Estimate - Management Plan
Revenue $(35) $(85)
EBITDA (book)(39)(60)
EPS Difference $(0.65) $(0.69)
Percentage Difference: Pro Forma Estimate - Management Plan
Revenue(4.1)%(9.7)%
EBITDA (book)(11.3)%(18.1)%
EPS Difference(21.8)%(25.2)%
Source: GYI Management
Note: EBITDA (book) does not add back ESO and one-time items
1 EPS adjusted to reflect actual WASO for comparative purposes to pro forma estimates excluding acquisitions and FX benefits.
2 Excludes acquisitions and adjusts for effects of changes in foreign currency rates
Public Market Trading Analysis 11
PRELIMINARY
Goldman Sachs
Historical Stock Price Performance
Averages: 30 Day 90 Day 180 Day One Year Three Year
GYI $ 25.03 $ 27.25 $ 28.36 $ 38.35 $ 58.09
3 Year
$ 100
$ 90
$ 80
$ 70
Closing Price (USD) $ 60 Average = $ 58.09
$ 50
$ 40
$ 34.00
$ 30 Undisturbed Price
(18-Jan-2008): $ 21.94 $ 24.82
$ 20
Feb- Aug- Feb- Aug- Feb- Aug- Feb-
2005 2005 2006 2006 2007 2007 2008
Daily from 15-Feb-2005 to 15-Feb-2008
1 Year
$ 60
$ 50
Closing Price (USD) $ 40 Average = $ 38.35
$ 34.00
$ 30
Undisturbed Price $ 24.82
(18-Jan-2008): $ 21.94
$ 20
Feb- Apr- Jun- Aug- Oct- Dec- Feb-
2007 2007 2007 2007 2007 2007 2008
Daily from 15-Feb-2007 to 15-Feb-2008
Source: FactSet.
Note: Undisturbed price represents stock price on January 18, 2008, one trading day prior to speculation about a potential transaction appeared in the press.
Public Market Trading Analysis 12
PRELIMINARY
Goldman Sachs
Market Developments Since Phase 1 Proposals
Phase 1 Proposals Received on November 26, 2007
Absolute Stock Price Performance
$ 30
$ 26.62
(Feb 8 - 1 trading day prior to
NYT article reporting no bids
above current market value)
Closing Price (USD)
$ 28
Average = $ 26.91
$ 26
$ 27.40
(Feb 1 - 1 trading day after
Q4 ‘07 earnings $ 24.82
announcement)
$ 24
$ 21.94
(Jan 18-1 trading day
prior to NYT article on
potential sale)
$ 22
$ 20
26-Nov- 12-Dec- 28-Dec- 13-Jan- 29-Jan- 14-Feb-
2007 2007 2007 2008 2008 2008
Daily from 26-Nov-2007 to 15-Feb-2008
Relative Stock Price Performance
110%
100%
(3.1%)
(4.1%)
Indexed Price 90%
(13.8%)
80%
70%
26-Nov- 12-Dec- 28-Dec- 13-Jan- 29-Jan- 14-Feb-
2007 2007 2007 2008 2008 2008
Daily from 26-Nov-2007 to 15-Feb-2008
Getty Images Inc Dow Jones Indus. Avg S&P 500 Index
% Change from 26-Nov-2007 to Undisturbed 18-Jan-2008: (23.8%)
% Change from 26-Nov-2007 to Today: (13.8%)
Source: FactSet
Public Market Trading Analysis 13
PRELIMINARY
Goldman Sachs
Market Developments Since Phase 1 Proposals
Phase 1 Proposals Received on November 26, 2007
NTM P/E
14.0x
13.0x
12.2x
NTM PE (x) 12.0x
11.0x
10.3x (Jan 18)
10.0x
26-Nov- 11-Dec- 27-Dec- 14-Jan- 30-Jan- 14-Feb-
2007 2007 2007 2008 2008 2008
Daily from 26-Nov-2007 to 15-Feb-2008
% Change from 26-Nov-2007 to Undisturbed 18-Jan-2008: (23.1%)
% Change from 26-Nov-2007 to Today: (9.2%)
LTM EBITDA (adj)
6.0x
5.5x
5.0x
EV / LTM EBITDA Multiple 4.8x
4.5x
4.2x (Jan 18)
4.0x
26-Nov- 12-Dec- 28-Dec- 13-Jan- 29-Jan- 14-Feb-
2007 2007 2007 2008 2008 2008
Daily from 26-Nov-2007 to 15-Feb-2008
% Change from 26-Nov-2007 to Undisturbed 18-Jan-2008: (26.5%)
% Change from 26-Nov-2007 to Today: (16.7%)
Source: FactSet
Note: LTM EBITDA adjusted to add back ESO expenses of $15.3mm (2006) and $14.0mm (2007). After Jan 1, 2008, LTM EBITDA based on 2007 actual EBITDA adjusted for $14.0mm ESO expense and $6.0mm in non-recurring items.
Public Market Trading Analysis 14
PRELIMINARY
Goldman Sachs
Historical LTM EBITDA (adj) Multiples
Average
Last 3 years 12.0 x
Last 1 year 7.2 x
Last 6 months 5.5 x
3 Year
22x
20x
18x
16x
14x
12x
10x
EV / LTM EBITDA Multiple 8x
At Offer
6.6 x
6x
4.8x
4x
2x
Feb-2005 Nov-2005 Aug-2006 May-2007 Feb-2008
Daily from 15-Feb-2005 to 15-Feb-2008
1 Year ($ in millions except per share amount)
11x Q3 Guidance: 01 Aug-2007
New Prev. Street
10x Revenue $ 210 $ 221
EPS $ 0.47 $ 0.61
9x
Q4 Guidance: 01-Nov-2007
New Prev. Street
8x Revenue $ 210 $ 214
EPS $ 0.48 $ 0.54
7x
At Offer
6.6x
EV / LTM EBITDA Multiple 6x
5x
4.8x
4x
Feb-2007 May-2007 Aug-2007 Nov-2007 Feb-2008
Daily from 15-Feb-2007 to 15-Feb-2008
Source: FactSet
Note: LTM EBITDA adjusted for one-time items and ESO expense. After Jan 1, 2008, LTM EBITDA based on 2007 actual EBITDA adjusted for $14.0mm ESO expense and $6.0mm in non-recurring items.
Public Market Trading Analysis 15
PRELIMINARY
Goldman Sachs
Historical LTM EBITDA Multiples and Relative Change
Average
3 Year 1 Year 6 Months Current
Getty Images 12.0x 7.4x 5.7x 5.1x
Selected Companies 11.9 10.3 9.6 9.7
Newspaper Companies 9.1 8.4 7.9 7.5
Radio Companies 11.3 10.6 9.6 8.4
Music Companies 10.1 8.9 7.9 7.2
Television Stations 9.3 9.4 9.0 9.3
3 Year Relative Change in Multiples
175%
150%
125%
0.1 %
100%
(21.0)%
(28.9)%
75%(30.7)%
(37.4)%
50%
Indexed EV to LTM Ebitda Multiple (x)
(69.8)%
25%
0%
Feb-2005 Nov-2005 Aug-2006 May-2007 Feb-2008
Daily from 15-Feb-2005 to 15-Feb-2008
1 Year Relative Change in Multiples
120%
100%
(4.8)%
(15.9)%
80%
(22.9)%
(32.1)%
(32.8)%
Indexed EV to LTM Ebitda Multiple (x) 60%
(48.5)%
40%
Feb-2007 May-2007 Aug-2007 Nov-2007 Feb-2008
Daily from 15-Feb-2007 to 15-Feb-2008
Getty Images Selected Companies Newspaper Companies Radio Companies Music Companies Television Stations
Source: FactSet
Note: Selected companies include: Adobe, Avid Technology, Jupitermedia, Omnicom, Interpublic, WPP, Harte Hanks; Newspaper Companies include: Gannett, McClatchy, The New York Times, EW Scripps, Washington Post, Belo, GateHouse Media, Lee Enterprises, Media General; Radio Companies include: Citadel, Cox Radio, Cumulus Media, Entercom Communications; Music Companies include: Live Nation, Warner Music Group; Television Stations include: Entravision, Hearst-Argyle, LIN Television, Sinclair Broadcast Group. Current LTM EBITDA for Selected Companies in table represents median 2007 EBITDA as of 15-Feb-2008
Public Market Trading Analysis 16
PRELIMINARY
Goldman Sachs
Historical Next Twelve Months (NTM) P/E Multiples
Average
Last 3 years 23.1 x
Last 1 year 15.9 x
Last 6 months 13.1 x
3 Year
40x
35x
30x
NTM PE (x) 25x
20x
16.7x
16.6x
15x 15.1x
12.2x
10x
Feb-2005 Sep-2005 Apr-2006 Dec-2006 Jul-2007 Feb-2008
Daily from 15-Feb-2005 to 15-Feb-2008
1 Year ($ in millions except per share amount)
Q3 Guidance: 01 Aug-2007
22x New Prev. Street
Revenue $ 210 $ 221
EPS $ 0.47 $ 0.61
20x
Q4 Guidance: 01-Nov-2007
New Prev. Street
Revenue $ 210 $ 214
18x
EPS $ 0.48 $ 0.54
16.7x
16.6x
16x
NTM PE (x) 15.1x
14x
12x 12.2x
10x
Feb-2007 Apr-2007 Jul-2007 Sep-2007 Nov-2007 Feb-2008
Daily from 15-Feb-2007 to 15-Feb-2008
Getty Images Management ‘08 Central Sensitivity to Mgmt ‘08 IBES ‘08
Source: FactSet
Note: “IBES ‘08” represents deal value of $34.00 at IBES median 2008 EPS estimate of $2.03; “Management ‘08” represents deal value of $34.00 at GYI Management 2008 EPS estimate of $2.25; “Central Sensitivity to Mgmt ‘08” represents deal value of $34.00 at 2008 EPS estimate of $2.05
Public Market Trading Analysis 17
PRELIMINARY
Goldman Sachs
Historical NTM P/E Multiples and Relative Change1
Average
3 Year 1 Year 6 Months Current
Getty Images 23.1x 15.9x 13.1x 12.2x
Selected Companies 20.1 21.3 19.7 17.0
Newspaper Companies 17.4 17.6 16.1 13.8
Radio Companies 19.3 17.2 15.2 13.7
Television Stations 26.9 28.6 25.4 24.6
3 Year Relative Change in Multiples
180%
160%
140%
120%
100%
Indexed PE (x)
(23.0)%
80%
(10.0)%
60%(34.2)%
(39.5)%
40%
(62.5)%
20%
Feb-2005 Nov-2005 Aug-2006 May-2007 Feb-2008
Daily from 15-Feb-2005 to 15-Feb-2008
1 Year Relative Change in Multiples
180%
160%
140%
120%
100%
Indexed PE (x) (5.8)%
(29.2)%
80%
(30.2)%
(35.2)%
60%
(38.6)%
40%
20%
Feb-2007 May-2007 Aug-2007 Nov-2007 Feb-2008
Daily from 15-Feb-2007 to 15-Feb-2008
Getty Images Selected Companies Newspaper Companies Radio Companies Television Stations
Source: FactSet
Note: Selected companies include: Adobe, Avid Technology, Jupitermedia, Omnicom, Interpublic, Harte Hanks; Newspaper Companies include: Gannett, McClatchy, The New York Times, EW Scripps, Washington Post, Belo, GateHouse Media, Lee Enterprises, Media General; Radio Companies include: Citadel, Cox Radio, Cumulus Media, Entercom Communications; Television Stations include: Entravision, Hearst-Argyle, LIN Television, Sinclair Broadcast Group. After January 1, 2008, Jupitermedia and Interpublic 2008 EPS (as of 15-Feb-2008) are used for NTM EPS. Current NTM P/E for Selected Companies in table represents median 2008 P/E as of 15-Feb-2008
1 Music Companies not shown because of lack of meaningful data.
Public Market Trading Analysis 18
PRELIMINARY
Goldman Sachs
Valuation Comparison of Selected Companies
($ in millions, except per share data)
Closing% of 52 Equity EV/ Calendarized 5-Year 2008
Price Week Market Enterprise EBITDA P/E Multiples EPS PE/5-Year
Company 15-Feb-2008 High Cap Value 2007 2007 2008 2009 CAGR EPS CAGR
Getty Images Inc. $ 24.82 44 % $ 1,511 $ 1,492 5.1 x 11.2 x 12.2 x 11.6 x 10.0 % 1.2 x
Jupitermedia Corp. $ 3.03 30 % $ 109 $ 189 6.9 x 50.5 x 27.5 x 17.8 x 10.0 % 2.8 x
Selected Digital Media Services Software Companies
Adobe Systems Inc. $ 34.67 72 % $ 20,022 $ 18,028 11.7 x 21.3 x 18.8 x 16.3 x 15.0 % 1.3 x
Avid Technology Inc. 22.06 57 970 746 13.6 17.9 27.6 22.5 12.0 2.3
Mean 65 % 12.7 x 19.6 x 23.2 x 19.4 x 13.5 % 1.8 x
Median 65 12.7 19.6 23.2 19.4 13.5 1.8
Selected Marketing Services Companies
Harte Hanks 16.90 60 1,191 1,428 7.1 13.4 13.1 12.1 10.4 1.3
Interpublic Group of Companies Inc. 8.52 65 4,016 5,651 9.9 44.8 17.0 13.0 10.0 1.7
Omnicom Group Inc. 46.58 85 15,234 18,025 9.7 15.8 14.0 12.7 12.5 1.1
WPP Group plc 11.79 76 14,492 17,542 8.7 13.5 11.9 10.8 11.0 1.1
Mean 71 % 8.9 x 21.9 x 14.0 x 12.2 x 11.0 % 1.3 x
Median 70 9.2 14.6 13.6 12.4 10.7 1.2
Overall Comparative Metrics
Mean 64 % 9.7 x 25.3 x 18.6 x 15.0 x 11.5 % 1.6 x
Median 65 9.7 17.9 17.0 13.0 11.0 1.3
Note: Overall comparative metrics includes all selected companies, except GYI
Source: Latest publicly available financial statements. Enterprise Value based on diluted shares outstanding. EBITDA and EPS are based on IBES median estimates and/or other Wall Street research. All research estimates have been calendarized to December.
Public Market Trading Analysis 19
PRELIMINARY
Goldman Sachs
Research Analysts’ Views
GYI EPS Estimates & Recommendations
GYI EPS Estimates & Recommendations
Broker Date Rating FY 2008E EPS FY 2009E EPS
Argus Research Corp 11-Feb-2008 Hold $ 2.00 $ 2.14
Canaccord Adams 4-Feb-2008 Hold 2.05 -
Citigroup 7-Feb-2008 Hold 2.03 2.22
Deutsche Bank 6-Feb-2008 Hold 2.05 -
Goldman Sachs 4-Feb-2008 - 2.00 2.19
JPMorgan 1-Feb-2008 Hold 2.08 -
Kaufman Brothers 1-Feb-2008 Hold 1.76 1.69
Lehman Brothers 1-Feb-2008 Hold 2.00 2.10
Natixis Bleichroeder 1-Feb-2008 Hold 1.92 1.73
Oppenheimer & Co. 1-Feb-2008 Hold 2.07 2.25
Pacific Crest Securities 7-Feb-2008 Hold 2.05 2.29
Piper Jaffray 1-Feb-2008 Hold 2.00 2.12
Robert W. Baird & Co. 4-Feb-2008 Hold 2.04 2.25
Thomas Weisel Partners 1-Feb-2008 Hold 1.94 2.10
William Blair & Co. 4-Feb-2008 Strong Buy 2.07 -
Mean $ 2.00 $ 2.10
Median 2.03 2.14
15-Feb-2008: $ 26.72 Median: $ 30.00 Present Value1
Thomas Weisel Partners $ 32
(1-Feb-2008) $ 28.23
Citigroup $31
(7-Feb-2008) $ 27.35
Lehman Brothers $31
(1-Feb-2008) $ 27.35
Robert W. Baird & Co.
$31 $ 27.35
(4-Feb-2008)
Canaccord Adams $30
(04-Feb-2008) $ 26.47
Global Crown Capital
$30 Avg. $ 25.30 $ 26.47
(20-Nov-2007)
Goldman Sachs $ 29
(04-Feb-2008) $ 25.58
Piper Jaffray $ 27
(1-Feb-2008) $ 23.82
Natixis Bleichroeder $ 26
(1-Feb-2008) $ 22.50
Deutsche Bank $ 25
(6-Feb-2008) $ 22.05
Kaufman Brothers $ 24
(1-Feb-2008) $ 21.17
$ 22 $ 24 $ 26 $ 28 $ 30 $ 32 $ 34 $ 36 $ 38
Evolution of Research Analysts Recommendation for GYI
September 2006
Strong Buy
22%
Hold
61% Buy
17%
December 2006
Strong Buy
20%
Hold
80%
September 2007
Underperform Strong Buy
6% 6%
Buy
6%
Hold
83%
15-Feb-2008
Strong
Buy
7%
Hold
93%
Source: FactSet, Wall Street research and Bloomberg.
1Present value of target price calculated assuming a 12 month price target discounted back 1 year at illustrative GYI cost of equity of 13.4%.
Public Market Trading Analysis 20
PRELIMINARY
Goldman Sachs
Research Analysts’ Views
Selected Commentary
Opportunities
“We do believe iStockPhoto continues to be undervalued by investors. In 2008 we estimate iStock could contribute $95.1mm in revenue.” (Thomas Weisel, 1-Feb-2008)
“Getty has been investing aggressively in an effort to build out additional revenue streams through internal investment and acquisitions. As a result of this focus, the company is much better diversified than several years back and now boasts operations in areas outside of creative still single imagery…” (William Blair, 1-Feb-2008)
“While we believe it is too early to declare that the company’s core CSSI business has found a bottom, the fourth quarter offered up some encouraging signs of hope that a bottom may be near.”
(William Blair, 1-Feb-2008)
“Despite the challenges at Getty, its business model remains compelling and capable of generating significant amounts of free cash flow (FCF).” (William Blair, 1-Feb-2008)
“Film in particular could become an important driver in the future as technology on the internet and handheld devices makes film a more and more viable alternative to stills in Getty’s traditional end markets.” (Robert W. Baird, 1-Feb-2008)
“The Editorial segment showed 50% year-over-year growth. We expect that 2008 being an election and Olympic year that the Editorial area will continue to be a highlight for the company.” (Kaufman, 1-Feb-2008)
“Getty remains by far the leader of the stock photography industry, with revenues three times greater than its biggest competitor, Corbis.” (Robert W. Baird, 1-Feb-2008)
Risks
“The broader issues around the use of imagery within the advertising and media environment remain largely unchanged since last year as we continue to see pressure related to micro-payment substitution, competition and changes in purchasing patterns.” (Thomas Weisel, 1-Feb-2008)
“We believe the steps management has taken to improve the business have helped to offset a further acceleration of declines. While we view this as a positive, we believe it too early to call stabilization in the core business.” (Lehman Brothers, 1-Feb-2008)
“iStock is growing rapidly (84% yr-yr increase in downloads in the recent 3Q07) and Getty is well positioned to benefit from this trend.
The unknown, however, is the extent to which micropayments will cannibalize traditional RF.” (Robert W. Baird, 1-Feb-2008)
“A downturn in the advertising market could negatively affect demand for the company’s photographic images, which are used primarily in marketing and advertising campaigns. Specifically, the stock photography market saw decreased demand during the 2001–2003 advertising market slump. Similarly, a failure of the Internet to develop as an advertising medium may result in our revenue estimates and 12-month target price not being achieved.” (Natixis Bleichroeder, 1-Feb-2008)
“Competition from existing firms or new entrants may affect the pricing structure of the industry or result in a loss of market share for Getty.” (Natixis Bleichroeder, 1-Feb-2008)
“With over half of Getty’s revenue non-U.S. dollar-denominated, currency fluctuations may negatively affect our financial forecasts.” (Natixis Bleichroeder, 1-Feb-2008)
Public Market Trading Analysis 21
PRELIMINARY
Goldman Sachs
III. Financial Analysis
Financial Analysis 22
PRELIMINARY
Goldman Sachs
Central Sensitivity to Management Plan
Per GYI Board Independent Voting Members’ Guidance ($ in millions except per share amounts)
‘07-’12 ‘08-’12
2005A 2006A 2007A 2008E 2009E 2010E 2011E 2012E CAGR CAGR
Revenue $733.2 $806.6 $857.6 $918.6 $950.6 $990.1 $1,022.1 $1,064.7 4.4% 3.8%
Growth % 17.8% 10.0% 6.3% 7.1% 3.5% 4.2% 3.2% 4.2%
EBITDA - Adjusted $285.5 $314.0 $313.6 $323.5 $321.1 $340.9 $360.6 $388.8 4.4% 4.7%
Margin % 38.9% 38.9% 36.6% 35.2% 33.8% 34.4% 35.3% 36.5%
Growth % 26.0% 10.0% (0.1%) 3.2% (0.7%) 6.2% 5.8% 7.8%
EBIT - Adjusted $225.4 $226.0 $207.6 $202.2 $204.9 $237.3 $258.5 $290.5 7.0% 9.5%
Margin % 30.7% 28.0% 24.2% 22.0% 21.6% 24.0% 25.3% 27.3%
Growth % 32.9% 0.3% (8.1%) (2.6%) 1.3% 15.8% 8.9% 12.4%
Unlevered free cash flow $158.0 $135.1 $176.2 $184.3 $182.6 $194.7 $206.7 $222.7 4.8% 4.8%
Margin % 21.6% 16.8% 20.5% 20.1% 19.2% 19.7% 20.2% 20.9%
Growth % 45.2% (14.5%) 30.3% 4.6% (0.9%) 6.6% 6.1% 7.8%
Proforma EPS $2.34 $2.46 $2.22 $2.05 $2.01 $2.44 $2.71 $3.10 6.9% 10.9%
Growth % 36.0% 5.1% (9.8%) (7.7%) (1.8%) 21.3% 11.1% 14.2%
Source: Central Sensitivity to Management Plan per GYI Board independent voting members’ guidance. 2008 per specific revenue and EPS guidance. 2009-2012 assumes decrease of 3.75% in annual revenue growth rate and operating margin relative to Management Plan estimates per GYI management. For example, Central Sensitivity to Management Plan 2009 revenue growth is 3.5% and operating margin is 21.6% relative to 2009 Management Plan revenue growth and operating margin of 7.2% and 25.3%.
Note: Proforma EPS excludes one-time items. EBITDA adjusted to exclude one-time items and ESO. EBIT adjusted to exclude one-time items.
Financial Analysis 23
PRELIMINARY
Goldman Sachs
Illustrative Present Value of Future Stock Prices
($ per share)
Central Sensitivity to Management Plan per GYI Board Independent Voting Members’ Guidance ‘08-’12 CAGR: 10.9%
1 Year Forward
P/E Multiple
Today PV of ‘09E Share Price PV of ‘10E Share Price PV of ‘11E Share Price PV of ‘12E Share Price
FY ‘08 EPS FY ‘09 EPS FY ‘10 EPS FY ‘11 EPS FY ‘12 EPS
$ 2.05 $ 2.01 $ 2.44 $ 2.71 $ 3.10
10.0 x $20.50 $17.75 $19.00 $18.63 $18.77
11.0 x 22.55 19.52 20.90 20.49 20.65
12.0 x 24.59 21.30 22.80 22.35 22.52
13.0 x 26.64 23.07 24.70 24.21 24.40
14.0 x 28.69 24.85 26.60 26.08 26.28
15.0 x 30.74 26.62 28.50 27.94 28.15
16.0 x 32.79 28.40 30.40 29.80 30.03
IBES Estimates – 5 Year IBES EPS CAGR: 10.0%
1 Year Forward
P/E Multiple
Today PV of ‘09E Share Price
FY ‘08 EPS FY ‘09 EPS
$ 2.03 $ 2.14
10.0 x $20.30 $18.88
11.0 x $22.33 $20.77
12.0 x $24.36 $22.65
13.0 x $26.39 $24.54
14.0 x $28.42 $26.43
15.0 x $30.45 $28.32
16.0 x $32.48 $30.21
Source: Central Sensitivity to Management Plan per GYI Board independent voting members’ guidance. Street per IBES median estimates.
Note: Assumes illustrative cost of equity discount rate of 13.35% based on risk free rate of 4.82% (10 year average of 10 year Treasury as of 15-Feb-2008), risk premium of 5.16% (Ibbotson) and beta of 1.65 (Barra historical beta).
Financial Analysis 24
PRELIMINARY
Goldman Sachs
Illustrative 5-Year Discounted Cash Flow Analysis
Central Sensitivity to Management Plan per GYI Board Independent Voting Members’ Guidance ($ per share)
EV/LTM EBITDA (adj) Multiples
Current (15-Feb-08) 4.8 x
Undist Price (18-Jan-08) 4.2 x
Perpetuity Growth Method – Financial Sensitivity
WACC
Terminal Growth Rate
1.0% 1.5% 2.0% 2.5% 3.0%
10.0% $ 37.96 $ 39.52 $ 41.28 $ 43.28 $ 45.55
11.0% 34.37 35.60 36.95 38.47 40.17
12.0% 31.42 32.39 33.47 34.66 35.98
13.0% 28.94 29.74 30.62 31.56 32.61
14.0% 26.83 27.49 28.21 28.99 29.84
Terminal Value Multiple Method – Financial Sensitivity
WACC
Terminal Multiple of 2012E EBITDA
4.5x 5.5x 6.5x 7.5x
10.0% $ 30.94 $ 34.83 $ 38.70 $ 42.57
11.0% 29.89 33.61 37.32 41.02
12.0% 28.88 32.46 36.01 39.55
13.0% 27.92 31.36 34.76 38.15
14.0% 27.01 30.31 33.56 36.81
Source: Central Sensitivity to Management Plan per GYI Board independent voting members’ guidance
Note: Assumes mid-year convention discounting of cash flows for CY2008-CY2012. In perpetuity growth method, mid-year convention is used for discounting of terminal value. In terminal value multiple method, end of year discounting is used for terminal value which is based on LTM 2012 EBITDA. Current and 18-Jan-08 EV/LTM EBITDA based on EBITDA adjusted to exclude one-time items and ESO expense.
Financial Analysis 25
PRELIMINARY
Goldman Sachs
Historical vs. Projected Capex and Acquisition Investment
($ in millions)
Historical vs. Projected Capex and Acquisition Investment
Management Plan
‘03-’07 ‘08-’12
2003A 2004A 2005A 2006A 2007A 2008E 2009E 2010E 2011E 2012E Average Average
Revenue $523.2 $622.3 $733.2 $806.6 $857.6 $940.0 $1,008.0 $1,087.7 $1,163.6 $1,255.7
YoY Growth 13.0% 18.9% 17.8% 10.0% 6.3% 9.6% 7.2% 7.9% 7.0% 7.9% 13.2% 7.9%
Currency Neutral Growth 6.2% 13.8% 16.4% 10.3% 1.8% - - - - - 9.7% -
Capex $35.3 $36.7 $57.8 $61.5 $62.9 $62.6 $62.5 $60.8 $61.2 $61.9 $50.8 $61.8
Capex as % of Sales 6.8% 5.9% 7.9% 7.6% 7.3% 6.7% 6.2% 5.6% 5.3% 4.9% 7.1% 5.7%
Acquisitions $5.5 $25.6 $234.4 $198.3 $254.7 $0.0 $0.0 $0.0 $0.0 $0.0 $143.7 $0.0
Acquisitions as % of Sales 1.1% 4.1% 32.0% 24.6% 29.7% 0.0% 0.0% 0.0% 0.0% 0.0% 18.3% 0.0%
Capex + Acquisitions $40.8 $62.3 $292.2 $259.9 $317.6 $62.6 $62.5 $60.8 $61.2 $61.9 $194.6 $61.8
Capex + Acquisitions as % of Sales 7.8% 10.0% 39.9% 32.2% 37.0% 6.7% 6.2% 5.6% 5.3% 4.9% 25.4% 5.7%
Management Plan Discounted Cash Flow Analysis – Revenue Growth and Capex + Acquisitions Sensitivity1
Normalized Capex plus Acquisitions for Terminal Value FCF
Incremental FY08E-FY12E Annual Revenue Growth Implied Capex
(5.0%)(2.5%) 0.0% 2.5% 5.0%% of ‘12 Rev
$ 200 $ 22.54 $ 25.58 $ 28.89 $ 32.45 $ 36.30 15.9%
$ 145 27.76 30.79 34.05 37.59 41.41 11.5%
$ 110 31.07 34.07 37.32 40.84 44.67 8.8%
$ 76 34.24 37.23 40.47 43.99 47.82 6.1%
$ 45 37.15 40.12 43.36 46.89 50.71 3.6%
Implied ‘07-’12 Revenue CAGR
2.9% 5.4% 7.9% 10.4% 12.9%
Source: Historical sales, capex and acquisition data per annual public filings. Management Plan estimates per GYI management
1 Assumes mid-year convention discounting for cash flows. Assumes discount rate of 12.0% and perpetuity growth rate of 1.5%. Incremental revenue growth sensitivity shows increase or decrease in revenue growth for each year as assumed in GYI management plan. For example if management plan revenue growth in a given year is 10%, in the (5.0%) case revenue growth case, the sensitivity revenue growth is 5%. Change applies to every year of the projected period CY08-CY12. EBIT margins, D&A, capex, eso, and tax rates are constant with GYI management plan.
Financial Analysis 26
PRELIMINARY
Goldman Sachs
Gray Page
Financial Analysis 27
PRELIMINARY
Goldman Sachs
Management Plan Estimates per GYI Management
($ in millions except per share amounts)
‘07-’12 ‘08-’12
2005A 2006A 2007A 2008E 2009E 2010E 2011E 2012E CAGR CAGR
Revenue $733.2 $806.6 $857.6 $940.0 $1,008.0 $1,087.7 $1,163.6 $1,255.7 7.9% 7.5%
Growth % 17.8% 10.0% 6.3% 9.6% 7.2% 7.9% 7.0% 7.9%
EBITDA - Adjusted $285.5 $314.0 $313.6 $343.0 $371.3 $405.1 $440.1 $488.1 9.3% 9.2%
Margin % 38.9% 38.9% 36.6% 36.5% 36.8% 37.2% 37.8% 38.9%
Growth % 26.0% 10.0% (0.1%) 9.4% 8.3% 9.1% 8.6% 10.9%
EBIT - Adjusted $225.4 $226.0 $207.6 $221.8 $255.1 $301.4 $337.9 $389.7 13.4% 15.1%
Margin % 30.7% 28.0% 24.2% 23.6% 25.3% 27.7% 29.0% 31.0%
Growth % 32.9% 0.3% (8.1%) 6.8% 15.0% 18.2% 12.1% 15.3%
Unlevered free cash flow $158.0 $135.1 $176.2 $196.0 $213.4 $235.0 $256.7 $285.4 10.1% 9.8%
Margin % 21.6% 16.8% 20.5% 20.8% 21.2% 21.6% 22.1% 22.7%
Growth % 45.2% (14.5%) 30.3% 11.3% 8.9% 10.1% 9.2% 11.2%
Proforma EPS $2.34 $2.46 $2.22 $2.25 $2.55 $3.15 $3.60 $4.22 13.7% 16.9%
Growth % 36.0% 5.1% (9.8%) 1.6% 13.0% 23.6% 14.3% 17.2%
Source: Management plan estimates per GYI management
Note: Proforma EPS excludes one-time items.
Financial Analysis 28
PRELIMINARY
Goldman Sachs
Illustrative Present Value of Future Stock Prices
($ per share)
Management Plan Estimates per GYI Management – ‘08-’12 CAGR : 16.9%
1 Year Forward
P/E Multiple
Today PV of ‘09E Share Price PV of ‘10E Share Price PV of ‘11E Share Price PV of ‘12E Share Price
FY ‘08 EPS FY ‘09 EPS FY ‘10 EPS FY ‘11 EPS FY ‘12 EPS
$ 2.25 $ 2.55 $ 3.15 $ 3.60 $ 4.22
10.0 x $22.54 $22.47 $24.50 $24.70 $25.53
11.0 x 24.80 24.71 26.95 27.17 28.08
12.0 x 27.05 26.96 29.40 29.64 30.64
13.0 x 29.31 29.20 31.84 32.11 33.19
14.0 x 31.56 31.45 34.29 34.58 35.74
15.0 x 33.82 33.70 36.74 37.05 38.30
16.0 x 36.07 35.94 39.19 39.52 40.85
IBES Estimates – 5 Year IBES EPS CAGR: 10.0%
1 Year Forward
P/E Multiple
Today PV of ‘09E Share Price
FY ‘08 EPS FY ‘09 EPS
$ 2.03 $ 2.14
10.0 x $20.30 $18.88
11.0 x $22.33 $20.77
12.0 x $24.36 $22.65
13.0 x $26.39 $24.54
14.0 x $28.42 $26.43
15.0 x $30.45 $28.32
16.0 x $32.48 $30.21
Source: Management plan estimates per GYI management. Street per IBES median estimates.
Note: Assumes illustrative cost of equity discount rate of 13.35% based on risk free rate of 4.82% (10 year average of 10 year Treasury as of 15-Feb-2008), risk premium of 5.16% (Ibbotson) and beta of 1.65 (Barra historical beta)
Financial Analysis 29
PRELIMINARY
Goldman Sachs
Illustrative 5-Year Discounted Cash Flow Analysis
Management Plan Estimates per GYI Management ($ per share)
EV/LTM EBITDA (adj) Multiples
Current (15-Feb-08) 4.8 x
Undist Price (18-Jan-08) 4.2 x
Perpetuity Growth Method – Financial Sensitivity
WACC
Terminal Growth Rate
1.0% 1.5% 2.0% 2.5% 3.0%
10.0% $ 47.64 $ 49.68 $ 51.96 $ 54.56 $ 57.52
11.0% 43.00 44.59 46.35 48.32 50.53
12.0% 39.20 40.47 41.86 43.39 45.10
13.0% 36.04 37.07 38.19 39.41 40.76
14.0% 33.35 34.20 35.12 36.12 37.21
Perpetuity Growth Method – Operating Sensitivity1
Incremental FY08E - FY12E Operating Margin
Incremental FY08E-FY12E Annual Revenue Growth
(5.0%)(2.5%) 0.0% 2.5% 5.0%
(5.0%) $29.40 $31.90 $34.60 $37.53 $40.70
(2.5%) 31.83 34.57 37.54 40.76 44.26
0.0% 34.24 37.23 40.47 43.99 47.82
2.5% 36.65 39.88 43.40 47.22 51.38
5.0% 39.05 42.53 46.32 50.45 54.93
Implied FY08E-FY12E Revenue CAGR
2.9% 5.4% 7.9% 10.4% 12.9%
Terminal Value Multiple Method – Financial Sensitivity
WACC
Terminal Multiple of 2012E EBITDA
4.5x 5.5x 6.5x 7.5x
10.0% $ 37.75 $ 42.61 $ 47.46 $ 52.32
11.0% 36.46 41.10 45.74 50.38
12.0% 35.22 39.66 44.10 48.53
13.0% 34.04 38.29 42.54 46.78
14.0% 32.91 36.99 41.05 45.11
Terminal Value Multiple Method – Operating Sensitivity2
Incr. FY08E - FY12E
Operating Margin
Incremental FY08E-FY12E Annual Revenue Growth
(5.0%)(2.5%) 0.0% 2.5% 5.0%
(5.0%) $29.76 $31.99 $34.42 $37.05 $39.90
(2.5%) 31.93 34.38 37.04 39.93 43.07
0.0% 34.10 36.76 39.66 42.81 46.24
2.5% 36.26 39.14 42.28 45.69 49.40
5.0% 38.41 41.51 44.89 48.57 52.57
Implied ‘07-’12 Revenue CAGR
2.9% 5.4% 7.9% 10.4% 12.9%
Source: Management Plan estimates per GYI management
Note: Assumes mid-year convention discounting of cash flows for CY2008-CY2012. In perpetuity growth method, mid-year convention is used for discounting of terminal value. In terminal value multiple method, end of year discounting is used for terminal value which is based on LTM 2012 EBITDA For example if management plan revenue growth in a given year is 10% and operating margin is 30%, in the (5.0%) case revenue growth and (5.0%) operating margin case, the sensitivity revenue growth is 5% and operating margin is 25%. The change applies to every year of the projected period CY2008-CY2012. Gross margins, D&A, capex, eso, and tax rates are constant with GYI management plan estimates for ‘08-’12. Current and 18-Jan-08 EV/LTM EBITDA based on EBITDA adjusted to exclude one-time items and ESO expense.
1 Assumes discount rate of 12.0% and 1.5% perpetuity growth.
2 Assumes discount rate of 12.0% and exit LTM EBITDA multiple of 5.5x.
Financial Analysis 30
PRELIMINARY
Goldman Sachs
Illustrative 5 - Year Discounted Cash Flow Analysis
Revenue & Operating Margin Sensitivities to Management Plan per GYI Board Independent
Voting Members’ Guidance ($ in millions)
EV/LTM EBITDA (adj) Multiples
Current (15-Feb-08) 4.8 x
Undist Price (18-Jan-08) 4.2 x
(2.5)% Revenue & (2.5)% Operating Margin
WACC
Terminal Multiple of 2012E EBITDA
4.5x 5.5x 6.5x 7.5x
10.0% $ 32.75 $ 36.92 $ 41.07 $ 45.21
11.0% 31.63 35.62 39.59 43.55
12.0% 30.57 34.38 38.18 41.97
13.0% 29.54 33.20 36.85 40.47
14.0% 28.57 32.08 35.57 39.05
(5.0)% Revenue & (2.5)% Operating Margin
WACC
Terminal Multiple of 2012E EBITDA
4.5x 5.5x 6.5x 7.5x
10.0% $ 30.45 $ 34.27 $ 38.07 $ 41.86
11.0% 29.41 33.07 36.71 40.33
12.0% 28.42 31.93 35.42 38.88
13.0% 27.48 30.85 34.19 37.51
14.0% 26.58 29.82 33.01 36.20
(2.5)% Revenue & (5.0)% Operating Margin
WACC
Terminal Multiple of 2012E EBITDA
4.5x 5.5x 6.5x 7.5x
10.0% $ 30.46 $ 34.36 $ 38.24 $ 42.11
11.0% 29.41 33.15 36.86 40.56
12.0% 28.41 31.99 35.55 39.09
13.0% 27.45 30.90 34.30 37.69
14.0% 26.55 29.85 33.11 36.37
(5.0)% Revenue & (5.0)% Operating Margin
WACC
Terminal Multiple of 2012E EBITDA
4.5x 5.5x 6.5x 7.5x
10.0% $ 28.35 $ 31.94 $ 35.51 $ 39.06
11.0% 27.38 30.83 34.24 37.63
12.0% 26.46 29.76 33.03 36.28
13.0% 25.58 28.74 31.88 35.00
14.0% 24.74 27.77 30.78 33.77
Source: Management plan per GYI management adjusted for incremental annual revenue growth and operating margin sensitivities per GYI Board independent voting members’ guidance Note: Assumes Terminal Value Multiple Method. Assumes mid-year convention discounting for cash flows in CY08-CY12. Terminal value based on LTM EBITDA in year 5 is discounted 5 years. Incremental revenue growth and operating margin sensitivities show increase or decrease for each year relative to Management Plan estimates per GYI Management. For example if management plan revenue growth in a given year is 10% and operating margin is 30%, in the (5.0%) case revenue growth and (5.0%) operating margin case, the sensitivity revenue growth is 5% and operating margin is 25%. The change applies to every year of the projected period CY2008-CY2012. Gross margins, D&A, capex, eso, and tax rates are constant with GYI management plan estimates for ‘08-’12. Current and 18-Jan-08 EV/LTM EBITDA based on EBITDA adjusted to exclude one-time items and ESO expense.
Financial Analysis 31
PRELIMINARY
Goldman Sachs
IV. LBO Analysis
LBO Analysis 32
PRELIMINARY
Goldman Sachs
Illustrative LBO Credit Statistics
Central Sensitivity to Management Plan per GYI Board Independent Voting Members’ Guidance
($ in millions)
2004 2005 2006 2007A 2008E 2009E 2010E 2011E 2012E
Total Revenue $622.3 $733.2 $806.6 $857.6 $918.6 $950.6 $990.1 $1,022.1 $1,064.7
Revenue growth 17.8% 10.0% 6.3% 7.1% 3.5% 4.2% 3.2% 4.2%
GAAP EBITDA $224.4 $284.2 $297.1 $293.5 $303.7 $300.9 $320.2 $339.3 $367.1
Non-Cash Compensation $0.6 $1.3 $15.3 $14.0 $19.8 $20.2 $20.7 $21.3 $21.8
One-Time Items1 $1.5 $0.0 $1.6 $6.0
Pro Forma Adjusted EBITDA $226.5 $285.5 $314.0 $313.6 $323.5 $321.1 $340.9 $360.6 $388.8
EBITDA margin 36.4% 38.9% 38.9% 36.6% 35.2% 33.8% 34.4% 35.3% 36.5%
Free Cash Flow: Pro Forma
PF Adj. EBITDA $313.6 $323.5 $321.1 $340.9 $360.6 $388.8
Interest Expense 77.6 72.2 60.3 50.9 37.6 20.0
Interest Income 1.8 1.8 1.8 1.8 1.8 1.8
Cash Interest Expense, net 75.9 70.4 58.6 49.2 35.9 18.2
Cash Taxes 49.5 48.5 53.1 66.2 78.6 96.1
Capex 62.9 62.6 62.5 60.8 61.2 61.9
Increase in Working Capital(3.4) 1.2 0.8 1.0 0.8 1.1
Free Cash Flow for Debt Service $128.8 $140.8 $146.2 $163.7 $184.2 $211.6
Cumulative Free Cash Flow for Debt Service $140.8 $286.9 $450.6 $634.8 $846.3
Capitalization and Credit Statistics:
Revolver $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
New Senior Secured Facility2 940.7 799.9 653.8 490.1 305.9 94.4
Total Debt $940.7 $799.9 $653.8 $490.1 $305.9 $94.4
PF Adj. EBITDA / Interest Expense 4.0x 4.5x 5.3x 6.7x 9.6x 19.5x
(PF Adj. EBITDA - Capex) / Interest Expense 3.2x 3.6x 4.3x 5.5x 8.0x 16.4x
Senior Secured Debt / PF Adj. EBITDA 3.0x 2.5x 2.0x 1.4x 0.8x 0.2x
Total Debt / PF Adj. EBITDA 3.0x 2.5x 2.0x 1.4x 0.8x 0.2x
Total Debt / (PF Adj. EBITDA - Capex) 3.8x 3.1x 2.5x 1.7x 1.0x 0.3x
Total Net Debt / PF Adj. EBITDA 2.8x 2.3x 1.9x 1.3x 0.7x 0.1x
Source: Central Sensitivity to Management Plan per GYI Board independent voting members’ guidance. Balance sheet as of December 31, 2007 per GYI management
Note: 2004-2006 figures reflect restated numbers; 2007 actuals are preliminary pre-audit figures per GYI management. Pro forma adjusted EBITDA adds back ESO and one-time items. Pro forma adjusted EBITDA does not adjust for full year impact of acquisitions.
1 Includes expenses due to exchange fees related to the exchange of debentures (2004), stock option expense review (2006-2007), deal costs relating to aborted acquisition of Jupiter Media (2007) and fees related to potential transaction (2007).
2 Assumes 3.00x LTM EBITDA (adj) (Dec-2007) Bank Debt at L+475bps (LIBOR floor of 3.5%)
LBO Analysis 33
PRELIMINARY
Goldman Sachs
Preliminary LBO Returns Analysis
IRR Sensitivity to Offer Price and LTM Exit Multiple
Central Sensitivity to Mgmt Plan per GYI Board Independent Voting Members’ Guidance – 3x 2007A EBITDA (adj) Multiple
5% Equity Allocation to Employees
LTM EBITDA Mult.
% Premium
Exit LTM
EBITDA Multiple
Offer Price
5.8 x 6.2 x 6.6 x 7.0 x 7.4 x
20.9 % 28.9 % 37.0 % 45.0 % 53.1 %
$ 30.00 $ 32.00 $ 34.00 $ 36.00 $ 38.00
4.5x 10.3% 7.7% 5.5% 3.5% 1.7%
5.5x 14.9% 12.2% 9.9% 7.8% 5.9%
6.5x 18.9% 16.1% 13.7% 11.5% 9.6%
7.5x 22.4% 19.6% 17.1% 14.8% 12.8%
10% Equity Allocation to Employees
LTM EBITDA Mult.
% Premium
Offer Price
5.8 x 6.2 x 6.6 x 7.0 x 7.4 x
20.9 % 28.9 % 37.0 % 45.0 % 53.1 %
$ 30.00 $ 32.00 $ 34.00 $ 36.00 $ 38.00
4.5x 9.1% 6.6% 4.3% 2.4% 0.6%
5.5x 13.7% 11.0% 8.7% 6.6% 4.8%
6.5x 17.6% 14.9% 12.5% 10.3% 8.4%
7.5x 21.1% 18.3% 15.8% 13.6% 11.6%
15% Equity Allocation to Employees
LTM EBITDA Mult.
% Premium
Exit LTM
EBITDA Multiple
Offer Price
5.8 x 6.2 x 6.6 x 7.0 x 7.4 x
20.9 % 28.9 % 37.0 % 45.0 % 53.1 %
$ 30.00 $ 32.00 $ 34.00 $ 36.00 $ 38.00
4.5x 7.9% 5.4% 3.1% 1.2% (0.6%)
5.5x 12.4% 9.8% 7.5% 5.4% 3.6%
6.5x 16.3% 13.6% 11.2% 9.1% 7.2%
7.5x 19.7% 16.9% 14.5% 12.3% 10.3%
Source: Central Sensitivity to Management Plan per GYI Board independent voting members’ guidance
Note: Assumes LIBOR floor of 3.50%, $50mm minimum cash balance, and exit in year five. Assumes 3.00x LTM EBITDA (adj) (Dec-2007) Bank Debt at L+475bps.
LBO Analysis 34
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Gray Page
LBO Analysis 35
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Illustrative LBO Credit Statistics
Management Plan ($ in millions)
2004 2005 2006 2007A 2008E 2009E 2010E 2011E 2012E
Total Revenue $622.3 $733.2 $806.6 $857.6 $940.0 $1,008.0 $1,087.7 $1,163.6 $1,255.7
Revenue growth 17.8% 10.0% 6.3% 9.6% 7.2% 7.9% 7.0% 7.9%
GAAP EBITDA $224.4 $284.2 $297.1 $293.5 $323.2 $351.1 $384.3 $418.8 $466.3
Non-Cash Compensation $0.6 $1.3 $15.3 $14.0 $19.8 $20.2 $20.7 $21.3 $21.8
One-Time Items1 $1.5 $0.0 $1.6 $6.0
Pro Forma Adjusted EBITDA $226.5 $285.5 $314.0 $313.6 $343.0 $371.3 $405.1 $440.1 $488.1
EBITDA margin 36.4% 38.9% 38.9% 36.6% 36.5% 36.8% 37.2% 37.8% 38.9%
Free Cash Flow: Pro Forma
PF Adj. EBITDA $313.6 $343.0 $371.3 $405.1 $440.1 $488.1
Interest Expense 77.6 71.7 58.0 45.0 26.7 8.2
Interest Income 1.8 1.8 1.8 1.8 1.8 3.9
Cash Interest Expense, net 75.9 69.9 56.3 43.3 24.9 4.3
Cash Taxes 49.5 55.9 72.3 91.2 110.7 136.3
Capex 62.9 62.6 62.5 60.8 61.2 61.9
Increase in Working Capital (3.4) 1.7 1.8 2.1 2.0 2.4
Free Cash Flow for Debt Service $128.8 $152.8 $178.5 $207.7 $241.2 $283.2
Cumulative Free Cash Flow for Debt Service $152.8 $331.3 $539.0 $780.3 $1,063.5
Capitalization and Credit Statistics:
Revolver $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
New Senior Secured Facility2 940.7 787.9 609.5 401.7 160.5 0.0
Total Debt $940.7 $787.9 $609.5 $401.7 $160.5 $0.0
PF Adj. EBITDA / Interest Expense 4.0x 4.8x 6.4x 9.0x 16.5x 59.4x
(PF Adj. EBITDA - Capex) / Interest Expense 3.2x 3.9x 5.3x 7.6x 14.2x 51.8x
Senior Secured Debt / PF Adj. EBITDA 3.0x 2.3x 1.6x 1.0x 0.4x 0.0x
Total Debt / PF Adj. EBITDA 3.0x 2.3x 1.6x 1.0x 0.4x 0.0x
Total Debt / (PF Adj. EBITDA - Capex) 3.8x 2.8x 2.0x 1.2x 0.4x 0.0x
Total Net Debt / PF Adj. EBITDA 2.8x 2.2x 1.5x 0.9x 0.3x -0.4x
Source: Management Plan estimates per GYI management. Balance sheet as of December 31, 2007 per GYI management
Note: 2004-2006 figures reflect restated numbers; 2007 actuals are preliminary pre-audit figures per GYI management. Pro forma adjusted EBITDA adds back ESO and one-time items. Pro forma adjusted EBITDA does not adjust for full year impact of acquisitions.
1 Includes expenses due to exchange fees related to the exchange of debentures (2004), stock option expense review (2006-2007), deal costs relating to aborted acquisition of Jupiter Media (2007) and fees related to potential transaction (2007).
2 Assumes 3.00x LTM EBITDA (adj) (Dec-2007) Bank Debt at L+475bps (LIBOR floor of 3.5%)
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Preliminary LBO Returns Analysis
IRR Sensitivity to Offer Price and LTM Exit Multiple Management Plan – 3x 2007A EBITDA (adj) Multiple
5% Equity Allocation to Employees
LTM EBITDA Mult.
% Premium
Exit LTM
EBITDA Multiple
Offer Price
5.8 x 6.2 x 6.6 x 7.0 x 7.4 x
20.9 % 28.9 % 37.0 % 45.0 % 53.1 %
$ 30.00 $ 32.00 $ 34.00 $ 36.00 $ 38.00
4.5x 17.8% 15.1% 12.6% 10.5% 8.6%
5.5x 22.3% 19.4% 16.9% 14.7% 12.7%
6.5x 26.2% 23.3% 20.7% 18.4% 16.3%
7.5x 29.7% 26.7% 24.0% 21.7% 19.5%
10% Equity Allocation to Employees
LTM EBITDA Mult.
% Premium
Exit LTM
EBITDA Multiple
Offer Price
5.8 x 6.2 x 6.6 x 7.0 x 7.4 x
20.9 % 28.9 % 37.0 % 45.0 % 53.1 %
$ 30.00 $ 32.00 $ 34.00 $ 36.00 $ 38.00
4.5x 16.5% 13.8% 11.4% 9.3% 7.4%
5.5x 21.0% 18.2% 15.7% 13.5% 11.5%
6.5x 24.9% 21.9% 19.4% 17.1% 15.1%
7.5x 28.3% 25.3% 22.7% 20.3% 18.2%
15% Equity Allocation to Employees
LTM EBITDA Mult.
% Premium
Exit LTM
EBITDA Multiple
Offer Price
5.8 x 6.2 x 6.6 x 7.0 x 7.4 x
20.9 % 28.9 % 37.0 % 45.0 % 53.1 %
$ 30.00 $ 32.00 $ 34.00 $ 36.00 $ 38.00
4.5x 15.2% 12.5% 10.2% 8.1% 6.2%
5.5x 19.6% 16.8% 14.4% 12.2% 10.2%
6.5x 23.4% 20.6% 18.0% 15.8% 13.8%
7.5x 26.9% 23.9% 21.3% 19.0% 16.9%
Source: Management plan estimates per GYI management
Note: Assumes LIBOR floor of 3.50%, $50mm minimum cash balance, and exit in year five. Assumes 3.00x LTM EBITDA (adj) (Dec-2007) Bank Debt at L+475bps.
LBO Analysis 37
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Appendix A: Additional Financial Sensitivities
Additional Financial Sensitivities 38
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Revenue and Operating Margin Sensitivities
Per GYI Board Independent Voting Members’ Guidance
(2.5)% Revenue & (2.5)% Operating Margin
07-’12
2005A 2006A 2007A 2008E 2009E 2010E 2011E 2012E CAGR
Revenue $733.2 $806.6 $857.6 $918.6 $962.1 $1,014.1 $1,059.4 $1,116.9 5.4%
Growth % 17.8% 10.0% 6.3% 7.1% 4.7% 5.4% 4.5% 5.4%
EBIT - Adjusted $225.4 $226.0 $207.6 $193.7 $219.4 $255.7 $281.2 $318.7 9.0%
Margin % 30.7% 28.0% 24.2% 21.1% 22.8% 25.2% 26.5% 28.5%
Growth % 32.9% 0.3% (8.1%) (6.7%) 13.2% 16.5% 10.0% 13.3%
(5.0)% Revenue & (2.5)% Operating Margin
07-’12
2005A 2006A 2007A 2008E 2009E 2010E 2011E 2012E CAGR
Revenue $733.2 $806.6 $857.6 $897.1 $917.2 $943.8 $962.5 $990.6 2.9%
Growth % 17.8% 10.0% 6.3% 4.6% 2.2% 2.9% 2.0% 2.9%
EBIT - Adjusted $225.4 $226.0 $207.6 $189.2 $209.2 $238.0 $255.4 $282.6 6.4%
Margin % 30.7% 28.0% 24.2% 21.1% 22.8% 25.2% 26.5% 28.5%
Growth % 32.9% 0.3% (8.1%) (8.8%) 10.5% 13.8% 7.3% 10.7%
(2.5)% Revenue & (5.0)% Operating Margin
07-’12
2005A 2006A 2007A 2008E 2009E 2010E 2011E 2012E CAGR
Revenue $733.2 $806.6 $857.6 $918.6 $962.1 $1,014.1 $1,059.4 $1,116.9 5.4%
Growth % 17.8% 10.0% 6.3% 7.1% 4.7% 5.4% 4.5% 5.4%
EBIT - Adjusted $225.4 $226.0 $207.6 $170.8 $195.4 $230.3 $254.7 $290.8 7.0%
Margin % 30.7% 28.0% 24.2% 18.6% 20.3% 22.7% 24.0% 26.0%
Growth % 32.9% 0.3% (8.1%) (17.7%) 14.4% 17.9% 10.6% 14.2%
(5.0)% Revenue & (5.0)% Operating Margin
07-’12
2005A 2006A 2007A 2008E 2009E 2010E 2011E 2012E CAGR
Revenue $733.2 $806.6 $857.6 $897.1 $917.2 $943.8 $962.5 $990.6 2.9%
Growth % 17.8% 10.0% 6.3% 4.6% 2.2% 2.9% 2.0% 2.9%
EBIT - Adjusted $225.4 $226.0 $207.6 $166.8 $186.2 $214.4 $231.4 $257.9 4.4%
Margin % 30.7% 28.0% 24.2% 18.6% 20.3% 22.7% 24.0% 26.0%
Growth % 32.9% 0.3% (8.1%) (19.6%) 11.7% 15.1% 7.9% 11.5%
Source: Management plan per GYI management adjusted for incremental annual revenue growth and operating margin sensitivities per GYI Board independent voting members’ guidance. Street estimates per IBES median estimates Note: Incremental revenue growth and operating margin sensitivities show increase or decrease for each year relative to Management Plan estimates per GYI Management. For example if management plan revenue growth in a given year is 10% and operating margin is 30%, in the (5.0%) case revenue growth and (5.0%) operating margin case, the sensitivity revenue growth is 5% and operating margin is 25%. The change applies to every year of the projected period CY2008-CY2012. Gross margins, D&A, capex, eso, and tax rates are constant with GYI management plan estimates for ‘08-’12
Additional Financial Sensitivities 39
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Revenue and Operating Margin Sensitivities
FX Adjusted Management Plans
10% FX Adjusted
‘07E -’12E
2005A 2006A 2007A 2008E 2009E 2010E 2011E 2012E CAGR
Revenue $ 733.2 $ 806.6 $ 857.6 $ 886.6 $ 950.9 $ 1,026.3 $ 1,097.7 $ 1,184.1 6.7%
Growth % 17.8% 10.0% 6.3% 3.4% 7.3% 7.9% 7.0% 7.9%
EBIT - Adjusted $ 225.4 $ 226.0 $ 207.6 $ 198.4 $ 229.7 $ 274.0 $ 308.0 $ 356.7 11.4%
Margin % 30.7% 28.0% 24.2% 22.4% 24.2% 26.7% 28.1% 30.1%
Growth % 32.9% 0.3% (8.1%) (4.4%) 15.8% 19.3% 12.4% 15.8%
20% FX Adjusted
‘07E -’12E
2005A 2006A 2007A 2008E 2009E 2010E 2011E 2012E CAGR
Revenue $ 733.2 $ 806.6 $ 857.6 $ 832.8 $ 893.8 $ 964.8 $ 1,031.7 $ 1,112.5 5.3%
Growth % 17.8% 10.0% 6.3% (2.9%) 7.3% 7.9% 6.9% 7.8%
EBIT - Adjusted $ 225.4 $ 226.0 $ 207.6 $ 171.1 $ 200.4 $ 241.9 $ 273.2 $ 318.2 8.9%
Margin % 30.7% 28.0% 24.2% 20.5% 22.4% 25.1% 26.5% 28.6%
Growth % 32.9% 0.3% (8.1%) (17.6%) 17.1% 20.7% 12.9% 16.5%
30% FX Adjusted
‘07E -’12E
2005A 2006A 2007A 2008E 2009E 2010E 2011E 2012E CAGR
Revenue $ 733.2 $ 806.6 $ 857.6 $ 779.1 $ 836.7 $ 903.4 $ 965.8 $ 1,040.9 4.0%
Growth % 17.8% 10.0% 6.3% (9.2%) 7.4% 8.0% 6.9% 7.8%
EBIT - Adjusted $ 225.4 $ 226.0 $ 207.6 $ 143.9 $ 171.0 $ 209.8 $ 238.3 $ 279.7 6.1%
Margin % 30.7% 28.0% 24.2% 18.5% 20.4% 23.2% 24.7% 26.9%
Growth % 32.9% 0.3% (8.1%) (30.7%) 18.9% 22.7% 13.6% 17.4%
Source: Management Plan per GYI management adjusted for effect of 10%, 20% and 30% strengthening of USD on revenue and expenses in 2008 and same growth rates as the management plan thereafter. Effects of FX adjustment are per GYI management. Management Plan uses the average of November 2007 USD/Eur exchange rates for projection period.
Additional Financial Sensitivities 40
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Appendix B: Additional Exhibits
Additional Exhibits 41
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Weighted Average Cost of Capital
Methodology
Unlevered Beta Calculation
Market Values(Levered Beta)
Levered Tax Net Debt(1-t) Net Debt(1-t) Net Debt(1-t)
1+ 1+
Equity (1) Debt Beta (2) Rate Equity Equity Equity
Omnicom Group Inc. $ 15,234 $ 3,207 1.23 35% 0.11 1.11 1.11
Interpublic Group of Companies Inc 4,016 2,606 1.55 35% 0.17 1.17 1.32
Adobe Systems Inc. 20,022 0 1.68 35% (0.06) 0.94 1.80
Avid Technology Inc. 970 0 1.24 35% (0.13) 0.87 1.42
Median Asset Beta: 1.37
Implied WACC using Median Asset Beta
Risk Free Risk Levered Cost of Cost of Debt Equity
Rate (3) Premium (4) Beta Debt Equity Capitalization Capitalization WACC
Getty Images 4.82% 5.16% 1.38 8.50% 11.97% 19.43% 80.57% 10.72%
Implied WACC using Getty Historical Beta
Risk Free Risk Levered Cost of Cost of Debt Equity
Rate (3) Premium (4) Beta Debt Equity Capitalization Capitalization WACC
Getty Images 4.82% 5.16% 1.65 8.50% 13.35% 19.43% 80.57% 11.83%
1 Market Values as of 15-Feb-2008.
2 Historical Barra levered Beta.
3 Risk Free Rate calculated as 10 year average of 10 year Treasury as of 15-Feb-2008.
4 Equity Risk Premium per Ibbotson Long Horizon Equity Risk Premium.
Note: All market values in U.S. dollars; Harte Hanks not included in the WACC analysis because their beta is an outlier with the peer group. WPP not included in the WACC analysis because their levered beta was not available.
Additional Exhibits 42
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Selected Newspaper and Music Transactions
2003 - Present
Trailing EBITDA Multiple
19.8x
Dow Jones/News Corp
10.3x
GateHouse Media / Gannett (4 dailies)
9.4x
Tribune ESOP LBO
10.7x
GateHouse Media / Copley Press (7 dailies, 2 weeklies)
8.8x
McClatchy / Avista (Minneapolis Star Tribune)
11.3x
DJ (Loc Pap) / Community
9.1x
Loc Invstr / Phila. Inq & Daily News (McClatchy)
11.2x
The McClatchy Company / Knight Ridder
14.1x
Lee Enterprises / Pulitzer
Median = 10.5x
8.3x
Edgar Bronfman, THLee, Bain, Provid / Warn Music Grp (Time Warn)
Ann. Date May- 2007 Apr- 2007 Apr- 2007 Mar- 2007 Dec- 2006 Oct- 2006 May- 2006 Mar- 2006 Jan- 2005 Nov- 2003
EV $5,766 $410 $12,941 $380 $530 $283 $562 $6,680 $1,481 $2,600
($mm)
Newspaper Music
Source: Public filings, press releases and external research reports Note: Trailing EBITDA multiple is EV to LTM EBITDA
Additional Exhibits 43
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Appendix C: Leveraged Recapitalization / Stock Buyback Analysis
Leveraged Recapitalization / Stock Buyback Analysis 44
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Levered Recap Alternatives
Central Sensitivity to Management Plan per GYI Board Independent Voting Members’ Guidance
($ in millions)
Increasing Leverage
Status Quo Case 1 Case 2
$385mm total debt
Refinance extant convert and $630mm total debt $940mm total debt
Description line of credit 2x LTM EBITDA Leverage 3x LTM EBITDA Leverage
Illustrative Cost of Debt1 L+325bps L+325bps, 96 OID L+375bps, 96 OID
Repurchase $0 $220 $517
One Time Repurchase as % of NA 14.5% 34.1%
Market Cap2
PF Cash Balance $364 $364 $364
Total Gross Debt $385 $630 $940
Pro Forma Debt / LTM 1.2x 2.0x 3.0x
EBITDA (adj) (2007A)
Illustrative Premia Paid N/A 15% 20%
EPS Impact
CY’08 /’12 Acc /(Dil) 3.5% / 7.4% 7.0% / 18.1%
‘08-’12 EPS CAGR 10.9% 12.0% 13.7%
Soure: Central Sensitivity to Management Plan per GYI Board independent voting members’ guidance. Status quo cash and debt as of December 31, 2007 balance sheet per GYI management
Note: Repurchase as % of market cap as of 15-Feb-08. Status quo scenario assumes $385mm refinancing (for extant convertible, potential related taxes, and line of credit) takes place at the end of Q1 2008. Potential related taxes assumed to be $40mm per GYI management. Case 1 and Case 2 financings assumed to take place at the end of Q1 2008
1 Assumes LIBOR floor of 3.5%
2 As of February 15, 2008
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Illustrative EPS Impact of Recapitalization
Central Sensitivity to Management Plan per GYI Board Independent Voting Members’ Guidance
Summary EPS Accretion Analysis
FY2008E FY2009E FY2010E FY2011E FY2012E ‘08-‘12 EPS CAGR
Status Quo EPS $ 2.05 $ 2.01 $ 2.44 $ 2.71 $ 3.10 10.9%
YoY Growth (7.7%) (1.8%) 21.3% 11.1% 14.2%
2x LTM EBITDA Leverage
Pro Forma EPS $ 2.12 $ 2.10 $ 2.59 $ 2.89 $ 3.33 12.0%
YoY Growth (4.6%) (0.9%) 23.2% 11.5% 15.4%
Accretion/Dilution 3.5% 4.6% 6.0% 6.6% 7.4%
3x LTM EBITDA Leverage
Pro Forma EPS $ 2.19 $ 2.20 $ 2.78 $ 3.13 $ 3.66 13.7%
YoY Growth (1.3%) 0.3% 26.4% 12.8% 16.9%
Accretion/Dilution 7.0% 9.5% 13.8% 15.8% 18.1%
Source: Central Sensitivity to Management Plan estimates per GYI Board independent voting members’ guidance adjusted for Status Quo, Case 1 and Case 2 refinancing/recapitalization scenarios
Leveraged Recapitalization / Stock Buyback Analysis 46
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Illustrative Value Impact of Recapitalization
Central Sensitivity to Management Plan per GYI Board Independent Voting Members’ Guidance
EPS Impact: 2008E-2012E
$ 3.66
$ 3.80
$ 3.60
$ 3.40 $ 3.33
$ 3.13
$ 3.20
$ 2.78 $ 2.89 $ 3.10
$ 3.00
$ 2.80 $ 2.59
$ 2.60
$ 2.19 $ 2.20 $ 2.71
$ 2.40
$ 2.20 $ 2.44
$ 2.00 $ 2.12
$ 2.05 $ 2.10
$ 1.80 $ 2.01
FY2008E FY2009E FY2010E
2x LTM EBITDA Leverage 3x LTM EBITDA Leverage Status Quo EPS
Stock Price Sensitivity - Present Value
Stock Price Sensitivity
P/E
‘08 EPS 10.0 x 12.0 x 14.0 x 16.0 x
Status Quo $ 2.05 $ 20.50 $ 24.59 $ 28.69 $ 32.79
2x LTM EBITDA Leverage $ 2.12 21.18 25.42 29.65 $ 33.89
3x LTM EBITDA Leverage $ 2.19 21.90 26.28 30.67 $ 35.05
Stock Price Sensitivity
P/E1
‘10 EPS 10.0 x 12.0 x 14.0 x 16.0 x
Status Quo $ 2.44 $ 19.00 $ 22.80 $ 26.60 $ 30.40
2x LTM EBITDA Leverage $ 2.59 $ 20.14 $ 24.17 $ 28.19 $ 32.22
3x LTM EBITDA Leverage $ 2.78 $ 21.63 $ 25.95 $ 30.28 $ 34.61
Source: Central Sensitivity to Management Plan per GYI Board independent voting members’ guidance adjusted for Status Quo, Case 1 and Case 2 refinancing/recapitalization scenarios
Note: Present value of 2010 share price based on discount rate of 13.4% (risk free rate of 4.82% (10 year Treasury as of 15-Feb-2008), risk premium of 5.16% (Ibbotson) and beta of 1.65 (Barra historical beta))
Leveraged Recapitalization / Stock Buyback Analysis 47
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Gray Page
Leveraged Recapitalization / Stock Buyback Analysis 48
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Levered Recap Alternatives
Management Plan
($ in millions)
Increasing Leverage
Status Quo Case 1 Case 2
$385mm total debt
Refinance extant convert and $630mm total debt $940mm total debt
Description line of credit 2x LTM EBITDA Leverage 3x LTM EBITDA Leverage
Illustrative Cost of Debt1 L+325bps L+325bps, 96 OID L+375bps, 96 OID
Repurchases $0 $220 $517
One Time Repurchase as % of NA 14.5% 34.1%
Market Cap2
PF Cash Balance $364 $364 $364
Total Gross Debt $385 $630 $940
Pro Forma Debt / LTM EBITDA 1.2x 2.0x 3.0x
(2007A)
Illustrative Premia Paid N/A 15% 20%
EPS Impact
CY‘08 /‘12 Acc /(Dil) 4.1% / 9.1% 8.9% / 23.3%
‘08-‘12 EPS CAGR 16.9% 18.3% 20.7%
Soure: Management Plan per GYI Management. Status quo cash and debt as of December 31, 2007 balance sheet per GYI management
Note: Repurchase as % of market cap as of 15-Feb-08. Status quo scenario assumes $385mm refinancing (for extant convertible, potential related taxes, and line of credit) takes place at the end of Q1 2008. Potential related taxes assumed to be $40mm per GYI management. Case 1 and Case 2 financings assumed to take place at the end of Q1 2008
1 Assumes LIBOR floor of 3.5%
2 As of February 15, 2008
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Illustrative EPS Impact of Recapitalization
Management Plan
Summary EPS Accretion Analysis
FY2008E FY2009E FY2010E FY2011E FY2012E ‘08-‘12 EPS CAGR
Status Quo EPS $ 2.25 $ 2.55 $ 3.15 $ 3.60 $ 4.22 16.9%
YoY Growth 1.6% 13.0% 23.6% 14.3% 17.2%
2x LTM EBITDA Leverage
Pro Forma EPS $ 2.34 $ 2.72 $ 3.39 $ 3.90 $ 4.60 18.3%
YoY Growth 5.6% 15.8% 24.9% 15.0% 17.8%
Accretion/Dilution 4.1% 6.7% 7.8% 8.4% 9.1%
3x LTM EBITDA Leverage
Pro Forma EPS $ 2.45 $ 2.95 $ 3.76 $ 4.37 $ 5.20 20.7%
YoY Growth 10.4% 20.4% 27.5% 16.1% 19.0%
Accretion/Dilution 8.9% 15.9% 19.5% 21.4% 23.3%
Source: Management Plan estimates per GYI management adjusted for Status Quo, Case 1 and Case 2 refinancing/recapitalization scenarios
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Illustrative Value Impact of Recapitalization
Management Plan
EPS Impact: 2008E-2012E
$ 5.80 $ 5.20
$ 5.30
$ 4.80 $ 4.37 $ 4.60
$ 4.30 $ 3.76 $ 3.90 $ 4.22
$ 3.80 $ 3.39
$ 2.95
$ 3.30
$ 2.45 $ 3.60
$ 2.80 $ 3.15
$ 2.30 $ 2.34 $ 2.72
$ 2.55
$ 2.25
$ 1.80
FY2008E FY2009E FY2010E
2x LTM EBITDA Leverage 3x LTM EBITDA Leverage Status Quo EPS
Stock Price Sensitivity - Present Value
Stock Price Sensitivity
P/E
‘08 EPS 10.0 x 12.0 x 14.0 x 16.0 x
Status Quo $ 2.25 $ 22.54 $ 27.05 $ 31.56 $ 36.07
2x LTM EBITDA Leverage $ 2.34 23.45 28.14 32.83 $ 37.51
3x LTM EBITDA Leverage $ 2.45 24.52 29.42 34.32 $ 39.23
Stock Price Sensitivity
P/E1
‘10 EPS 10.0 x 12.0 x 14.0 x 16.0 x
Status Quo $ 3.15 $ 24.50 $ 29.40 $ 34.29 $ 39.19
2x LTM EBITDA Leverage $ 3.39 $ 26.41 $ 31.69 $ 36.98 $ 42.26
3x LTM EBITDA Leverage $ 3.76 $ 29.27 $ 35.13 $ 40.98 $ 46.83
Source: Management Plan estimates per GYI management adjusted for Status Quo, Case 1 and Case 2 refinancing/recapitalization scenarios
Note: Present value of 2010 share price based on discount rate of 13.4% (risk free rate of 4.82% (10 year Treasury as of 15-Feb-2008), risk premium of 5.16% (Ibbotson) and beta of 1.65 (Barra historical beta))
Leveraged Recapitalization / Stock Buyback Analysis 51
| This ‘SC 13E3’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| Filed on: | 3/27/08 | PREM14A | ||
| 2/15/08 | ||||
| 2/7/08 | ||||
| 2/4/08 | 4 | |||
| 2/1/08 | 4 | |||
| 1/31/08 | 8-K | |||
| 1/30/08 | ||||
| 1/22/08 | 8-K | |||
| 1/18/08 | ||||
| 1/1/08 | ||||
| 12/31/07 | 10-K | |||
| 12/21/07 | ||||
| 12/20/07 | ||||
| 12/17/07 | ||||
| 11/26/07 | ||||
| 10/23/07 | ||||
| 9/28/07 | SC 13D/A | |||
| List all Filings | ||||