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As Of Filer Filing For·On·As Docs:Size Issuer Agent 2/19/08 Bright Horizons Family Solut… Inc SC 13E3 12:16M Bright Horizons Family Solut… Inc Bowne of Atlanta Inc/FA Bain Capital Fund X, L.P. Joshua Bekenstein Swingset Acquistion Corp. Swingset Holdings Corp. |
Document/Exhibit Description Pages Size
1: SC 13E3 Bright Horizons Family Solutions SC 13E3 HTML 110K
2: EX-99.(B)(1) EX-99.(B)(1) Letter Agreement, Dated as of HTML 61K
January 14, 2008, Among Goldman Sachs
Credit Partners, L.P., Swingset Holdings
Corp. and Swingset Acquisition Corp.
3: EX-99.(B)(2) EX-99.(B)(2) Letter Agreement, Dated as of HTML 67K
January 14, 2008, Among Gs Mezzanine
Partners V,L.P., Swingset Holdings Corp.
and Swingset Acquisition Corp.
4: EX-99.(B)(3) EX-99.(B)(3) Limited Guarantee, Dated as of HTML 41K
January 14, 2008,By Bain Capital Fund X,
L.P. in Favor of Bright Horizons Family
Solutions, Inc.
5: EX-99.(B)(4) EX-99.(B)(4) Letter Agreement, Dated as of HTML 28K
January 14, 2008, Among Bain Capital
Fund X, L.P. and Swingset Holdings Corp.
6: EX-99.(C)(3) EX-99.(C)(3) Presentation of Goldman, Sachs & HTML 73K
Co. to the Special Committee of the
Board of Directors of Bright Horizons
Family Solutions, Inc., Dated June 13,
2007.
7: EX-99.(C)(4) EX-99.(C)(4) Presentation of Goldman, Sachs & HTML 36K
Co. to the Special Committee of the
Board of Directors of Bright Horizons
Family Solutions, Inc., Dated November
6, 2007.
8: EX-99.(C)(5) EX-99.(C)(5) Presentation of Goldman, Sachs & HTML 30K
Co. to the Special Committee of the
Board of Directors of Bright Horizons
Family Solutions, Inc. Dated January 9,
2008.
9: EX-99.(C)(6) EX-99.(C)(6) Presentation of Goldman, Sachs & HTML 21K
Co. to the Special Committee of the
Board of Directors of Bright Horizons
Family Solutions, Inc. Dated January 13,
2008.
10: EX-99.(C)(7) EX-99.(C)(7) Presentation of Evercore Group HTML 181K
L.L.C to the Special Committee of the
Board of Directors of Bright Horizons
Family Solutions, Inc. Dated November 6,
2007.
11: EX-99.(C)(8) EX-99.(C)(8) Presentation of Evercore Group HTML 91K
L.L.C to the Special Committee of the
Board of Directors of Bright Horizons
Family Solutions, Inc. Dated January 9,
2008.
12: EX-99.(C)(9) EX-99.(C)(9) Presentation of Evercore Group HTML 97K
L.L.C. to the Special Committee of the
Board of Directors of Bright Horizons
Family Solutions, Inc., Dated January
13, 2008.
| Ex-99.(c)(9) |
| PROJECT SWINGSET Presentation to the Special Committee of the Board of Directors January 13, 2008 evercore partners |
| Confidential |
| Table of Contents |
| Confidential |
| Transaction Overview Section I Historical Stock Price Performance and Trading Activity II |
| Historical and Projected Financial Summary III |
| Overview of Valuation IV Appendix Other Information evercore partners |
| These Materials haw been prepared by Evercore Group L.L.C. (“Evercore”) for the Special Committee of the Board of Directors of Bright Horizons family Solutions, Inc. (“Swingset” or the “Company “) to whom such materials are direct/.)’ addressed and delivered and may not be used or relied upon for any purpose other than as specifically con fen/plated by a written agreement with Evercore. These materials are based on information provided by or on behalf of the Company and I or other potential transaction participants, from public sources or othenwse reviewed by Evercore. Evercore assumes no responsibility for independent investigation or verification of such information and has relied on such information being complete and accurate in all material respects. To the extent such information includes estimates and forecasts of future financial performance prepared ly or reviewed with the management of the Company and/or other potential transaction participants or obtained’from public sources, Evercore has assumed that such estimates and forecasts have been reasonably prepared on bases reflecting the best currently available estimates and judgments of such management (or, with respect to estimates and forecasts obtained front public sources, represent reasonable estimates). No representation or warranty, express or implied, is made as to the accuracy or completeness of such information and nothing contained herein is, or shall be relied upon as, a representation, whether as to the past, the present or the future. These materials were designed for use by specific persons familiar with the business and affairs of the Company, These materials are not intended to provide the sole basis for evaluating, and should not lie considered a recommendation with respect to, any transaction or other matter. These materials have been developed by and are proprietary to Evercore and were prepared exclusively for the benefit and internal use of the Special Committee of the Board of Directors of the Company. These materials were compiled on a confidential basis for use by the Special Committee of the Board of Directors of the Company in evaluating the potential transaction described herein and not with a view to public disclosure or filing thereof under state or federal securities laws, and may not be reproduced, disseminated, quoted or referred to, in whole or in part, without the prior written consent of Evercore. These materials do not constitute an offer or solicitation to sell or purchase any securities and are not a commitment by Evercore (or any affiliate) to provide or arrange any financing for any transaction or /o purchase any security in connection therewith. Evercore assumes no obligation to update or ofhennise revise these materials. These materials may not reflect information known to other professionals in other business areas of Evercore and its affiliates. Evercore and its affiliates do not provide legal, accounting or tax advice. Accordingly, any statements contained herein as to fax matters were neither written nor intended ly Evercore or its affiliates to be used and cannot be used by any taxpayer for the purpose of avoiding tax penal ties that may be imposed on such taxpayer. Each person should seek legal, accounting and tax advice based on his, her or its particular circumstances from independent advisors regarding the impact of the transactions or matters described herein. evercore partners |
| I. Transaction Overview |
| Confidential |
| Transaction Profile |
| ($ in millions, except per share data) |
| The purpose of this presentation is to provide the Special Committee of the Board of Directors of Bright Horizons Family Solutions, Inc. (“Swingset” or the “Company”) with a summary of our analyses underlying our opinion as to the fairness, from a financial point of view, to the holders of the Company Common Stock (other than holders of the Company Common Stock that are affiliates of Parent and the Rollover Holders), of the cash consideration to be received by such holders in connection with the proposed transaction. Transaction Value Financial Summary <3> Offer Price per Share Implied Transaction Multiples $48.25 Times: Fully diluted shares outstanding (mm) (l> 27.2 Equity Market Value $ 1 ,31 5 Plus: Net Debt (Cash) p) M Total Enterprise VaSue $1,318 — LTM 2006 2007E 2008E Ql 2008E |
| Revenue $697.9 |
| $775. 1 $853.0 $789.0 |
| % Growth H.l% 10.1% 9.8% EB1TDA $90.5 |
| S103.2 $118.8 $105,4 % Margin 13.0% 13.3% 13.9% 13.4% EBITDAE’1” $94.1 $107.9 $123.8 |
| $110.2 % Margin 13.5% 13.9% 14.5% 14.0% Net Income $41 .7 $45.5 $53.5 |
| $46.5 % Margin 6.0% 5.9% 6.3% 5.9% LTM 2007E 2008E Ql 2008E TEV/Rcvenue 1.7x l.Sx L7x TEV/EBITDA 12.8 11. 1 12.5 |
| TEV/EB1TDAE 12.2 10.6 12.0 P/E 28.5 24.5 28.0 |
| (1) Fully diluted shares outstanding calculated using the treasury method and based on shares outstanding as of 12/19/07 and current options outstanding as provided by Company management. (2) Net debt (net cash) estimated as of 03/3!/OS per Company management. (3) Management Projections, as provided so prospective buyers, were provided by management of the Company. (4) Excludes non-cash equity expense. |
| evercore partners4 |
| Transaction OverviewConfidential Evercore Evaluation Process b In connection with rendering our opinion, we have, among other tilings: — Reviewed certain publicly available business and financial information relating to the Company that we deemed to be relevant; — Reviewed certain historical and projected non-public financial statements and other historical and projected non-public financial |
| and operating data relating to the Company prepared and furnished to us by management of the Company; — Discussed the past and current operations, financial projections and current financial condition of the Company with |
| management of the Company (including their views on the risks and uncertainties of achieving such projections); - Reviewed the reported prices and the historical trading activity of the common stock of the Company; — Compared certain financial information of the Company with similar, publicly-available information for certain publicly-traded companies that we deemed relevant; — Reviewed the financial terms, to the extent availabkj of certain transactions that we deemed relevant; — Reviewed a draft of the Agreement dated January 12, 2008; and — Performed such other analyses and examinations and considered such other factors that we deemed appropriate |
| h For purposes of our analysis and opinion, we have assumed and relied upon, without undertaking any independent verification of, the accuracy and completeness of all of the information publicly available, and all of the information supplied or otherwise made available to, discussed with, or reviewed by us, and we assume no liability therefor · For purposes of rendering our opinion, members of the management of the Company have provided us certain financial projections (the “Management Projections”) — With respect to the Management Projections, we have assumed that they have been reasonably prepared on bases reflecting the best available estimates and good faith judgments of management of the Company as to the matters covered thereby h The full text of our opinion provided with this presentation sets forth assumptions made, matters considered and limitations on the review undertaken in conjunction with the opinion. You are urged to read the opinion carefully and in its entirety evercore partners s |
| II. Historical Stock Price Performance and Trading Activity evercore partners |
| Historical Stock Price Performance and Trading Activity |
| Confidential |
| Swingset Share Price Performance: Last Two Years |
| o o o - 1,500 ‘« J3 “o > 07/26/07: Announces Q2 EPS of $0.47, exceeding consensus estimate of S0.46 |
| 0) .« *G ft. <u i-t « Efi |
| $50 “I |
| $45 - $40 - $35 - $30 - |
| Offer Premium/(Discount) I Day 1 Month 3 Months 6 Months 1 Year 2 Years Average Share Price Prem./ (Disc.) —— — |
| S32.79 35.01 37.08 47.1% 37.8% 30.1% 39.46 39.11 38.63 22.3% 23.4% 24.9% —— — |
| 07/26/07: Announces Q2EPSofS0.40, exceeding consensus estimate of 50.37 04/26/06: Announces Ql EPS of S0.36, exceeding consensus estimate oFS0.34 Proposed Offer Price: $48.25 02/15/07: Announces Q4 EPS of $0.41, exceeding consensus estimate of $0.39, and forecast 2007 earnings of SI.77 to SI.82 10/26/06: Announces as-expected Q3 EPS of SO.37 and lower than expected revenue; lowers full-year revenue growth guidance to 11-12% from previous guidance of 13-14% |
| 05/31/07: Australian media reports that Swingset might be a takeover target of ABC Learning Centres |
| 10/17/07: Cuts Q3 EPS forecast from $0,41 toS0.38 - 3,000 - 2,000 - 2,500 -1,000 L 500 |
| $25 01/12/06 |
| 06/06/06 10/30/06 03/25/07 08/18/07 |
| 0 01/11/08 Source: FactSut, Company press rdrassrs ami industry news sources. evercore partners |
| Historical Stock Price Performance and Trading Activity Confidential |
| Swingset Trading Multiple Analysis Upon Q3 Earnings Announcement |
| Sse<f3) |
| 14.0x -i 3 Month Prior Average: 11.8x 3 Month Post Average: 11.2x 14.0.x -, 3 Month Prior Average: 10. fix |
| Average Since: 9.4x |
| 12,0x - lO.Ox - 8.0x |
| 13.0x |
| 10/26/06 |
| lUx |
| 12.0x - 10.0* - S.Gx ll.Gx .^ft^Jl\ 10/17/07 |
| a.gx |
| 24.8x |
| 36.0X -, 32.0x -28.Ox -24.0x -20.0X -16.0x |
| 3 Month Prior Average: 26.8x 3 Month Post Average: 25.2x |
| 10/26/06 |
| 32.0x -i |
| 28.0x - 24.0x” - 20.0x - 16.0x |
| 3 Month Prior Average: 23.6x |
| Average Since: 21.3x 26.0x ^ 10/17/07 |
| 19.4x |
| Source: FactSet, Fur the purposes of tl^is analysis, the forward EBITDA multiple is based on a multiple nf the estimated current full-year financial pcrfnrmimcc. evercore partners |
| Historical Stock Price Performance and Trading Activity |
| Confidential |
| Swingset 3»Year Trailing EBITDA Multiple |
| IS.Ox -i IG.Ox - 14.0x - 12.0x - lO.Ox - |
| Current — 01/11/08 |
| Offer Price (1) Average Last 1 Year (01/12/07 — 01/11/08) Last 2 Years (01/12/06 — 01/11/08) Last 3 Years (01/12/05 - 01/11/08) 2007 2006 2005 |
| 8,8x 12.8 |
| 10.8 11.5 12.4 10.8 12.2 14.3 |
| 8.8x |
| 8.0x Jan-OS |
| JuI-05 Jnn-06 Jul-Ofi Jan-07 Jul-07 Jan-08 |
| Source: FactSet. (1) “Hie Offer Price trailing HB1TDA multiple is based on the estimated 2007E EBITDA, as provided by Company management in the Management Projections. evercore partners |
| Historical Stock Price Performance and Trading Activity |
| Confidential |
| Swingset 3-Year Historical Forward P/E |
| 40.0x 35.0x - 30.0x 25.Ox - 20.0x |
| Current — 01/11/08 |
| Offer Price {l> Average Last 1 Year (01/12/07 — 01/11/08) Last 2 Years (01/12/06 — 01/11/08) Last 3 Years (01/12/05 - 01/11/08) 2007 2006 2005 |
| 16.8x |
| 24.5 20.8 22.2 24.2 20.9 23.8 28.1 15.0x Jan-OS |
| Jul-05 Jan-06 JuI-06 Jan-07 Jul-07 Jan-08 |
| Source: FactSet. (I) ‘Die Offer Price forward P/IJ multiple is based on the estimated 2008E EPS, as provided by Company management in the Management Projections. evercore partners |
| 10 |
| Historical Stock Price Performance and Trading Activity |
| Confidential |
| Swingset 3-Year Historical Forward P/E/G |
| 1.8x n l.Gx- 1.4x- 1.2x - l.Ox- |
| Current — Ol/H/08 |
| Offer Price “> Average Last 1 Year (01/12/07 — 01/11/08) Last 2 Years (01/12/06 — 01/11/08) Last 3 Years (01/12/05 - 01/11/08) 2007 2006 2005 |
| 0.9x 1.2 |
| 1.1 1.1 1.2 1.1 1.2 1.4 |
| 0.9x |
| O.Sx Jan-OS |
| Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 |
| Source: FactSes. (!) Tlic Offer Price forward P/E/G ratio is based on the esumaicd 2008E EPS and the 5-ymr net income growth rale provided by Company management in the Management Projections. evercore partners |
| 11 |
| Historical Stock Price Performance and Trading Activity |
| Confidential |
| Indexed Share Price Performance 120 - |
| o o ·o g CJ -o |
| 200 |
| 180 160 140 100 80 - 60 |
| | | | % Change — 6 Months 1 Year 2 Years —— —— — |
| | | | Swiiigset (22.0%) (15.0%) (17.2%) Prc-K-1 2 Schools/Centers <” (28.9%) (38.3%) (32,3%) For-Profit Colleges pl 14.0% 62.4% 57.8% S&P 500 (9.5%) (2.1%) 8.9% NASDAQ (9.7%) (2.5%) 5.3% Russell 2000 (17.6%) (11.3%) (0.3%) —— —— —— — |
| 120 -i |
| 1 100 ·d g V 1 80 60 |
| Swings ct |
| ABC Learning Nobel Learning |
| % Change (22.0%) |
| (32.8%) |
| (7.6%) |
| 01/12/06 “Swtnjjsct -5&PSOU |
| 01/11/07 |
| Ptc-K-12 Schools/Censers (J) NASDAQ |
| 01/11/08 |
| - For-Profil Colleges (2) -HuBstllZOOO |
| 07/12/07 -Swingsel A&C Lcflrnirtfi — Niibe! Learning 01/11/08 |
| Sourer Factsct. (1) Prc-K-12 Schools/Ccniirrs Group includes ABC ix^rning and Nr>bc! Lcnrninj;. (2) Fur-Profit Colleges Group includes Apollo Group, Gipdh* Education, Career Education, Corinthian Colleges, DcVry, ITT llducntionnJ Scmccs, I Jncoin liducatJonui Sen-ices, Stnycr Education and UnivcrsnJ Technical Institute. evercore partners |
| 12 |
| III. Historical and Projected Financial Summary evercore partners Historical and Projected Financial Summary |
| Confidential |
| Historical Financial Summary ($ in minions) $1,000 — $125 -$100 • $75 -$50 -$25 - $800 -$600 -$400 J $200 -$0 - 5-Year CAGR: 13.7% 5-Year CAGR: 23.4% $103 $ 91 $775 $75 Si pi ^ $698 rajrag %£?%§%&$ P%^4:f4ii m5&&ifr$3 $625 E^ i|! $552 p,™ fill 111 $46 mm itii • mm w $473 mm im Sill ill $408 ™ |jj|ij Is pjfl wm & nbsp; te 111 ^ ra ra |i|| ^8 Ilil ^B tttf ^S ^h tiii pi pi tal pa mi 111 111 111 pi lill is fill m li m iii &nb sp; iiii issi iin tea ma bib teal 2002 2003 2004 2005 2006 2007E’” 2002 2003 2004 2005 2006 2007E |
| $100 -$80 -$60 - $50 ~ $40 -$30 -$20 -$10 $40 -$20 ~ 5-Year CAGR: 24.3% 5-Year CAGR: 12.8% S46 $42 ppg S37 $ 71 |
| m ^J |j|| lljijj 111 S57 $58 $20 ^S W flljj ||f| $32 $3G S34 H tr—q M F^ » B W ^15 llt^lll ,}^^ (Psi Hi » * « iii sn 2002 2003 2004 2005 2006 2007E 2002 2003 2004 2005 2006 2007E Source: Company management, (1) Includes partial year revenue from UA\V contract and forecasted center closings. (2} Includes acquisition spending. |
| evercore partners |
| 14 |
| Historical and Projected Financial Summary |
| Confidential |
| Historical Financial Summary (cont’d) |
| 16.0% 9.6% 11.1% 8.8% |
| 20.0% -i 15.0% - 10.0% - 5.0% - 13.3% 15.0% 13.0% 11.0% 9.0% 7.0% 5.0% 13.0% 13‘3% 2003 2004 2005 2006 2007E 2002 2003 2004 2005 2006 2007E |
| 7.5% |
| 10.0% - |
| 8.0% “ |
| 5.9% 6.0% 5.9% |
| no/ — 5 0% • *— -o- — .U /D 4.2% _^~— -^~ 3.8% “I^i-~~~~~~~^’’^ 4.0% — *- ‘ *” 2.0% - — 0.0% “i i i i — i............................... |
| 15.0% 12.0% 9.0% 6.0% 3.0% 0.0% 11.3% |
| 2002 2003 2004 2005 2006 2007E |
| 2002 2003 2004 2005 2006 2007E |
| Source: Corn piny mnnagirmcnt. (1) Includes partial year revenue from UAW contract and forecasted center closings. (2} Includes acquisition spending. evercore partners |
| 15 |
| Historical and Projected Financial Summary |
| Confidential |
| Management Projections Summary |
| ($ in millions) |
| 2007E $1,500 -i $1,000 $500 $0 |
| 5-Year CAGR: 12.5% |
| $853 $966 $775 sIM^ 2009E 2008E 2007E’ |
| $1,093 |
| 2010E |
| $1,235 |
| 2011E |
| $1,396 |
| 2012E |
| $250 |
| $200 $150 $100 $50 $0 |
| 5-Year CAGR: 16.1% |
| $140 $103 2009E 2008E |
| $164 |
| 2010E |
| $189 |
| 2011E |
| $217 |
| 2012E |
| $125 i 5-Year CAGR: 19,7% 1 — |
| $100 — $95 |
| $80 JIH |
| S75 — $66 ^^^^ |
| $53 *1HIII s^^^ |
| $50 — $46 ^^^i^ I§^P |
| $25 — ilii |
| c»n |
| $112 $100 |
| $80 $60 $40 $20 $0 |
| | | 5-Year CAGR: 7.7% — |
| | | |
| $58 $59 SCO |
| Illi ^illlp |
| Illi jjl |
| ^ifi-il IHI —— — |
| $84 |
| $75 $73 i^^t* |
| ji%z^ |
| illi ^p |
| 111 S -— - |
| 2007E 2008E 2009E |
| 2010E 2011E 2012E 2007E 2008E 2009E 2010E 2011E 2012E |
| Source: Company management, as provided id prospective buyers, (!) Includes partial year
revenue from U/\W contract and forecasted censer closings. (2) Includes acquisition spending. evercore partners |
| 16 |
| Historical and Projected Financial Summary |
| Confidential |
| Management Projections Summary (cont’d) |
| 11.1% |
| 20.0% i 15.0% - 10.0% - 13,3% 13.0% 13.0% —$ ....... 4. |
| 16.0% 15.0% “ 14.0% -13.0% - 13.3% 13.9% 14.5% 15.0% 15.3% 15.6% |
| 5.0% - |
| 12.0% |
| 2007E”’ 2008E 2009E 2010E 2011E 2012E |
| 2007E 2008E 2009E 2010E 2011E 2012E |
| 63% 5.9% |
| 10.0% 8.0% 6.0% -4.0% -2.0% -0.0% |
| 6.9% 7.3% 7.7% 8.0% |
| 15.0% - |
| 12.0% - |
| 9.0% — T. ™% 6.2% 6‘8% |
| 6.0% — ~~~~~^~-~ — ~___^___— — — •*——. _ |
| 3.0% - |
| a fin/ |
| 5.9% 6.0% |
| 2007E 2008E 2009E 2010E 2011E 2012E |
| 2007E 2008E 2009E 2010E 201IE 2012E |
| Source: Company management, as provided to prospective buyers, (?) Includes piirtk! year revenue from UA\V contract and forecasted center closings. (2) Includes acquisition spending. evercore partners |
| 17 |
| Historical and Projected Financial Summary |
| Confidential |
| Projected Revenue By Business |
| ($ in millions) |
| | | | 5-Year CAGR: 3.9% 1 — |
| | | | $1,000 — ! $901 $923 |
| - cq/sq $878 $800 — eon1? ^iohcs ifiSW! $762 p^ ggj^ %m fuSsSS jSpi! «ip Mj ^P $600 — PK i*i liSi fe» lit siSill $400 ‘ fe^tS f^^lS ilitfE ^^si feSgSKK >^S-^ SS ^s 118 |
| •"^Sf%f fe^^l ^Sf ^^J: ^^pr^ ^t^iii4 $200 — £!git§ Ipg^lg » PlifS ^^!,| pp^i 11 |
| ^fc ill 11 111 |
| ^™fc^% ^^-^4 S^^sS ^PS^-’-i^ — 1 1 |
| $0 “r~~ 1 1 ‘ 2007E13’ 2008E 2009E 2011E 2012E 2010E % Crew/A 9.6% 6.0% 5.1% ?.tf% 2.5% 3.5% —— —— —— — |
| $60 “ 5-Year CAGR: 39.1% j — $37 |
| $40 — $32 |
| $25 jg,lV>a pp ^M $18 |
| rj,-|^ $20 — ^ipl;? ^^^^^ — •P^ £7 — m P — ‘^ t “rt’ 1 ‘^’: ~ : •’” i” 1 $0...................... “’ — r ‘ 2007E 2008E 2009E 2010E 2011E 2012E % Crow/A 6?J% 50.4’% J^.0% ^5.^% /tf.9% |
| | $414 |
| iiil 5- Year CAGR: NA — $500 -......................................................................................................... $400 - 51286 5300 “ tiiy^i — $200 — si7? m $89 ^^ $100- S26 ___gin IIJ $0 — _,, . im.™, iSKtiK.si i!Eia=esi jsaissjEtS — •PV < i i 2012E t < i 44.3% 75 2007E 2008E 2009E 2010E 2011E ii Organic Acquisition H Transition % Growth NA 244.9% 97.6% 61,8% # of Centers 52 56 62 6$ —— — |
| $21 |
| *w ‘ S-Ycar CAGR: 25.0% j — $40 -$20 ~ $13 $17 e-y $9 * — SH Ills lili 111 |
| — $0 ‘ ‘ • i ‘ i 2007E 2008E 2009E 2010E 2011E 2012E % Growth 25.0% 25.0% 25.0% 25.0% 25.0% |
| Source: Company mflnngement, as prm’idcd 10 prospective buyers. (1) includes partiil j’tar revenue from UAW contract and forecasted center closings. (2) includes incremental revenue in consortium backup or full-service ccmcrs. evercore partners |
| 18 |
| Historical and Projected Financial Summary |
| Confidential |
| | | | | | Projected New Center Growth } ($ in millions) —— —— 2007E 2012E CAGR $ Change % Total A 2007E 2012E CAGR $ Change % Total A —— —— —— —— — Net Base Center (1) S762 5923 SI 62 26.1% Net Base Center (1> S149 S208 6.9% S59 39,3% 3.9% New Center — Organic 0 240 NA 240 38.7% New Center — Organic 0 29 NA 29 19.2% New Center — Acquisition 0 115 NA 115 18.5% New Center — Acquisition 0 25 NA 25 17.0% New Center — Transition 0 59 NA 59 9.6% New Center — Transition 0 13. NA___11 8.6% —— — Subtotal — New Center 0 414 414 66.7% Subtotal — New Center 0 67 NA 67 44.7% NA BUCA(2) 7 30 4.8% BUCA ‘•’ 3 17 46.3% 15 10.0% 37 39.1% College Coach 7 21 14 2.3% College Coach 4 13 25.5% 9 5.9% 25.0% Management Adjustment (0} 0 NA___Q QJ.% Management Adjustment m Q. NA Q 0.1% —— — Total Revenue $775 $1,396 12.5% $620 100.0% Total Center Profit $156 $305 14,4% $149 100.0% 2002 2003 2004 2005 2006 2007E 2008E } 2009E 201 OE 201 IE 20I2E —— —— —— —— — |
| | | | | | New Center Additions — Organic 26 21 16 15 23 27 34 36 38 41 44 |
| Acquisition 53 27 17 45 19 4 10 12 15 17 21 |
| Transition 8 12 22 12 I S 8 8 2 10 10 |
| Total 87 60 60 72 49 39 52 56 62 68 75 |
| New Center Additions — % Growth — Organic (19.2%) (23.8%) (6.3%) 53.3% 17.4% 25.9% 5.9% 5.6% 7.9% 7.3% Acquisition (49.1%) (37.0%) 164.7% (57.8%) (78.9%) 150.0% 20.0% 25.0% 13.3% 235% Transition 5CLQ%___125.0% (55.6%) f41.7%l 14.3% 0.0% 0.0% 12.5% 11.1% 0.0% —— —— —— — Total (31.0%) 0.0% 20.0% (31.9%) (20.4%) 33.3% 7.7% 10.7% 9.7% 10.3% Source: Managcmem Projections, as provided to prospective buyers, were provided by mamgcmem of the Company. (1) Includes partial year revenue from UA\V contract and forecasted center closings. (2) Induiics incremental revenue in consortium backup or CuH-scrvicc centers. — |
| evercore partners |
| 19 |
| IV. Overview of Valuation |
| evercore partners |
| Overview of Valuation |
| Confidential |
| Summary Valuation Analysis |
| Current Price: S32.79 |
| Offer Price: S’18.25 |
| 52-Week Intraday Trading Range Public Company Trading Analysis 9.0x — 11 .Ox 200BE THV/EBITDA 20.0x — 25.0x 2008E P/E !.Ox-!.5x2008EP/E/G Precedent Transactions Analysis 1.5x — 2.0x LTM Ql 2008ETEV/Revenue 11.Ox — 15.0s LTM Ql 2008 ETEV/EBITDA Present Value of Future Stock Price S.Sx — 10.5x 2012E EBITDA multiple; 9.5%-11.5% Cost of Equity 19.0x — 24.0x 2012E P/E multiple; 9.5%-11.5% Cost of Equity Discounted Cash Flow Analysis 8.5x — lO.Sx EBITDA exit multiple; 9.5%-11.5% WACC Leveraged Buyout Analysis 8.5x — 10.5x EBSTDA exit multiple; 15.0% — 25.0% IRR; S775mm debt Indicathv Terms — B2/B Rating Maximum F/e.\- — lj-ss Than B2/K Rating S32.53 J547.75 I 1 S39.33 1 S39.45 S49.31 I $38‘8» $58.32 S43.55 S58.02 ! S42.66 S58.14 S46.39 S60.92 i S46.55 $64.08 f I ! ) S47.44 SGI.78 S^O.24 S55.25 t S39.84 S5-1.65 |
| S25.00 $30.00 S35.00 $40.00 S45.00 SSO.OO S55.00 SGO.OO SC5.00 $70.00 Noic: Tliis summarj’ of ceri:iin analyses is provided for Hiusirntivc purposes on!y, does not represent all of the analyses performed by !i\[crccjrc and should be considered together with the information set forth elsewhere in this presentation. Note; Valuation as of 03/31/08, Fully diluted shares Gulssamling calculated using the treasury method and based on shares outstanding as of 12/19/07 and current options outsianding as provided by Company management. Net debt (net cash) csdmated as of 03/31/08 per Company management. evercore partners |
| 21 |
| Overview of Valuation |
| Confidential |
| Analysis of Select Publicly Traded Companies ($ in millions, except per share data) % of Market Total Share Price 52-Week Equity Enserprise TEV / Sales TEV / EBITDA P/E P/E/G —— — Company 01/11/08 High Value Value 2007E 200BE 2007E 2008E 2007E 2008E 2007E 2008E —— —— —— —— —— —— — Swingset — Offer Proposal (IJ $48.25 101,0% 51,315 $1,318 1.7x LSx 12.8x ll.lx 28.Sx 24. 5x 1.4x 1.2x Swingset — Management Projections ‘"' 32.79 68.7% 883 891 1.1 1.0 8.6 7.5 19.4 16.6 1.0 0.8 |
| Swingset — Research Estimates 32.79 68.7% 891 898 1.2 1.1 8.8 7.7 19.4 16.8 1.0 0.9 |
| Prt-K-t 2 Mmoiit Centers — ABC Learning Centres S4.I10 55.2V., SI, 90 1 52,862 1.7x mx 8.5x 6.8x 11, 7x 9.7x 0.8x 0.6x Nobel I-carning Communities, Inc. 14.18 86.8% 152 156 0.8 0.7 8,6 7.8 19.2 18.3 1.0 0.9 |
| -— -— -— -— -— —— — Mean l,2x l.Ox 8.5x 7.3x lS.4x 14.0x 0.9x O.Sx Median 1.2 1.0 8.5 7.3 15.4 14,0 0.9 0.8 |
| —— -— -— -— -— —— — \-tir-Pmfil Colin,’! — ApoHo Group, Inc. $76.81 94.7% 513,038 512,348 4.3x 3.8x 16.0x 13.7x 29.4x 24.9x 2.0x I.7x ITT Bduasuonal Services, Inc. 80.55 C> !.1% 3,258 3,136 3.6 3.1 1 1.9 9,9 21.9 18.0 I.I 0.9 |
| DeVry Inc. 5S.’i2 92.4% 4,018 3,774 3.8 3.4 23.8 18.5 43.0 30.0 2.f) 1.4 |
| Career Education Corp. 20.08 34.7% 1,833 1,405 0.8 0.8 6.8 5.8 20.4 15,7 1.8 1.4 |
| Siraycr Education Corp, 174.01 88.8% 2,556 2,394 7.5 6.3 22.0 18.5 39.2 33.2 2.2 1.8 |
| Corinthian Colleges, Inc. 12.48 68.4% 1,059 1,085 1.1 1,0 11.5 8.7 33.2 23.2 1.5 I.I Capeila Education Company (56.38 88.1% i,182 1,057 4.7 3.8 26.6 20.7 51.2 40.2 1,9 1.5 |
| Universal Technical institute 15.25 56.2% •S3! 355 1.0 1.0 8.4 8,2 23.1 23.3 1.7 1.7 |
| Uncoln Educational Services Corporation 13.85 85.6% 369 379 1.1 !.! 10.2 8.0 29.9 20.2 1.8 1.2 |
| -— -— -— —— -— —— — Mean 3.1x 2.7x 15.2x 12.4x 32.4x 2S.4x l,8x 1.4x Median 3,6 3.1 11.9 9.9 29.9 23.3 1.8 1.4 |
| —— -— -— —— -— —— — Other Etittran’nn Smites — Washington Post $794.02 89.7%, 57,554 57,245 1.7x I.Gx 10.8x 9.6x 2fl.7x 22.8x 3.7x 3.2x Scholastic Corp. 32.75 81.9% 1,270 1,560 0.7 0.7 6.6 6.4 14.9 13,3 1.1 0.9 |
| Blackboard Inc. 36.01 72.2% 1,093 1,043 4.4 3.7 19.8 15.2 41.0 32.8 1.7 1.4 |
| School Specialty, Inc. 32.70 81. 1% 688 1,128 1.1 1.0 8.5 7.8 36,9 13.9 SJ 0.9 |
| Renaissance Learning, Inc. 13.89 80,7% 403 394 3.7 3.5 29.0 18.3 60.4 34.7 NA NA The Princeton Review, Inc. <!) 8.14 75,4% 313 268 !,9 . 1.8 36.7 20.4 NM NM NA NA -— -— —— —— —— — — Mean 2.3x 2.1x 18.6* 13.0x 32.0x 23,5x 1.9x l.Gx Median 1.8 1.7 15.3 12.4 26.7 22.8 1.4 1.2 |
| —— -— -— —— —— —— — Source: Company filings and 1IJES consensus estimates. Management Projections, as provided w prospective buyers, were pro vidcd by management of the Company. (1) Net debt (net cash) estimated as of 03/31/08 per Company management. (2) Fully diluted shares outstanding calculated iod and based on shares outstanding as of 1 2/ 1 9/07 and current options outstanding as provided by Company management. using the treasury met (3) On 07/23/07, The Princeton Review completed a S60 million Series C financing round led by Bain Capital Ventures and also announced a new CEO. In November 2007, the company named a new CFO Preferrec and COO. — |
| 22 |
| evercore partners |
| Overview of Valuation |
| Confidential |
| Analysis of Select Precedent Transactions ($ in millions) Ann. Date Target Acquiror TEV TEV / LFQ — |
| Revenue EBITDA — 08/ 1 3/07 Leapfrog Day Nurseries Ltd “> Busy Bees Childcare Ltd $63 0.7x 12.4x 06/28/07 Asquith Day Nurseries Ltd Dawnay Day, Sword fisli Investments 190 NA NA 06/04/07 Laureate Education Inc Doug Becker (CEO), KKR, Citigroup PE, SAC Capital 3,883 3.1 16.6 |
| 12/14/06 Busy Bees Childcare Ltd “’ ABC Learning Centres Ltd 110 NA NA 12/53/06 La Petite Academy Inc. w ABC Learning Centres Ltd 330 0.8 10.2 |
| 09/25/06 Educate Inc w Educate Management, Sterling Capital, Citigroup PE 534 1.5 10.7 |
| 09/05 /06 College Conch, LLC Bright Horizons Family Solutions 12 1.9 NA 08/08/06 Children’s Courtyard LP |S) Learning Care Group Inc 66 NA 6.1 |
| 07/07/06 Hutchisons Child Care Svsc Ltd ABC Learning Centres Ltd 78 1.8 16.5 |
| 06/21/06 Concorde Career Colleges, Inc Liberty Partners 97 1.0 12.6 |
| 03/15/06 Kids Campus Ltd ABC Learning Centres Ltd 133 3.4 41.4 |
| 03/06/06 Education Management Corporation Providence Equity, Goldman Sachs Capital 3,141 2.9 10.9 |
| 11/15/05 Learning Care Group Inc ABC Learning Centres Lid 176 0.8 16.1 |
| 06/28/05 ChildrenFirst Inc Bright Horizons Family 50 1.6 NA 1 1 /05/04 KindcrCare Learning Ctr Inc Knowledge Learning Corp 973 1.1 6.9 |
| 09/09/04 Child Care Centres Australia ABC Learning Centres Ltd 53 2.0 17.7 |
| 09/09/04 Peppercorn Mgmt Grp Ltd ABC Learning Centres Ltd 160 2.0 18.9 |
| 04/30/04 Leapfrog Day Nurseries Nord Anglia Education PLC 107 2.7 16.6 |
| 03/26/03 Whitman Education Group, inc Career Education Corp 268 2.4 15.7 |
| 03/18/03 Ross University DeVry 310 5.0 12.4 |
| 03/ i 1 /03 Sylvan Learning Systems K-1 2 Tutoring ((l> Apollo Management LP 288 1.3 8.5 |
| 03/04/03 Aramark Educational Resources ^ Knowledge Learning Corp 265 0,6 5.0 |
| 04/27/98 CorpotateFamily Solutions Inc Bright: Horizons Holdings inc 118 1.4 38.4 |
| 03/30/98 Children’s Discover;’ Centers Knowledge Beginnings Inc 91 1.0 8.7 |
| 03/30/98 Jigsaw Day Nurseries Ltd Jigsaw Management / 3i 50 4.3 NA 03/19/98 La Petite Academy (Vestar/LPA) Chase Capital Partners 290 NA NA -— — Mean Median 2,0x IS.lx 1.7 12,5 |
| —— — Source: Public filings, Wail Street research, press releases and other information. publicly available < H Based on 20i)9i7. EB1TDA estimate ner Comnanv Brcss release. Offer Price (8) 1.7x 12.5x| —— — |
| (2) Based on 2008E EBITDAR estimate per Company press release. LFQ revenue estimated from Company investor presentatiots. (3) Based on IOQ ofiast reported quarter ending 04/08/00 and 10K of fiscal year ending 07/02/05. {4J Based on 2007E EBITDA of S50 million per Company proxy statement (05/11 /07); LFQ IiBITDA of S2d million implies 20.5x multiple, (5) Based on 2007E KBiTDA estimate in Company press release. (6) Based on average estimated transaction value of S275-S300 million, (7) Includes $40 million assumed debt, which is subject to right of prepayment for S25 miilion within 12 months of closing. (8} Based on latest trailing fotecasted results through 1Q 2008E, as provided by Company management in the Management Projections.. evercore partners |
| 23 |
| Overview of Valuation |
| Confidential |
| Present Value of Future Stock Price Analysis a |
| aa |
| Assumed 2Q12E EBITDA Multiple Assumed Cost of Equity 9.0x 9.5x 8,5x 10.5x lO.Ox |
| 9.5% 350.55 $53.14 S55.74 $58.33 S60.92 |
| 10.0% 49.47 52.01 54.54 57.08 59.62 |
| 10.5% 48.41 50.90 53.38 55.86 58.35 |
| 11.0% 47.39 49.82 52.25 54.68 57.11 |
| 11.5% 46.39 48.77 51.14 53.52 55.90 —— —— —— —— — |
| Assumed 2012E P/E Multiple — Assumed Cost of Equity 19.Qx 2Q.3x —— — |
| 21.5x 24.0x 22.8x |
| 9.5% 550.73 354.06 $57.40 S60.74 $64.08 |
| 10.0% 49.64 52.91 56.17 59.44 62.70 |
| 10.5% 48.58 51.78 54.97 58.17 61.37 |
| 11.0% 47.55 50.68 53.81 56.94 60.07 |
| 11.5% 46.55 49.61 52.67 55.73 58.80 —— —— —— —— — |
| Source: Management Projections, as provided to prospective buyers, were provided hy management of
the Company. Note: Vacation as of 03/31/08. evercore partners |
| 24 |
| Overview of Valuation |
| Confidential |
| Discounted Cash Flow Analysis |
| Terminal EBITDA Multiple 9.0x 10.5x 8.5x 9.5x lO.Ox Discount Rate |
| 9,5% $51.41 $54.00 S56.60 S59.19 $61.78 |
| 10.0% 50,38 52,92 55.45 57.99 60.53 |
| 10.5% 49.38 51.86 54.34 56.82 59.31 |
| 11.0% 48.40 50.83 53.26 55.69 58.12 |
| 11.5% 47.44 49,82 52.20 54.58 56.96 —— —— —— —— — |
| Terminal EBITDA Multiple Discount Rate 9.0x 8.5x lO.Sx 9.5x lO.Ox |
| 9.5% 2.8% 3.2% 3.5% 3.8% 4,0% |
| 10.0% 3.3% 3.6% 4.0% 4.3% 4.5% |
| 10.5% 3.8% 4.1% 4.4% 4,7% 5.0% |
| 11.0% 4.2% 4.6% 4.9% 5.2% 5.4% |
| 11.5% 4.7% 5.0% 5.3% 5.6% 5.9% —— —— —— —— — |
| Source: iManagemcnt Projections, as provided to prospective buyers, were provided by management of the Company. Note: Valuation as of 03/31/08. Fully diluted shares outstanding calculated using the treasury method and based on shares outstanding as of 12/19/07 and current options outstanding as provided b)’Company management. Net debt (net cash) estimated as of 03/31/08 per Company management. evercore partners |
| 25 |
| Overview of Valuation |
| Confidential |
| Discounted Cash Flow Sensitivity Analysis |
| in io/ _*^-\/ss////////^:’///<-/< Y\l.r/a^f0fy7//,^4r,w/^//^, •”,:M”/V/,fcty/.’,v/’///s?/s. 20.0% - 15.0% 10.0% 5,0% - 11.1% 13.3% 13.1% B.0% 13.0% ^v^^r^-^-^>^^x^’-^^” •^//,;//. ‘•’/,-f,’,’.,-^-v,, ‘//,-j/,;.•.. 10.3% 10.1% 10.0% 10.0% |
| 16.0% 15.0% -14.0% 13.0% -12.0% 13.3% 14.5% |
| 13.9% ^ 13.2% |
| 15.0% |
| 13.7% |
| 15.3% |
| 14.1% |
| 15.6% |
| 14.3% |
| 2007E’” 2008E 2009E 2010E 2011E 2012E «ai*$j!wsBa^j unagtrncnt Projections -’-• Sensitivity Range |
| 2007E 2008E 2009E 2010E 2011E 2012E |
| *™*"m Management Projections ‘ Sensitivity Runge |
| EBITDA Margin Reduction Revenue Growth Rate Reduction Qbps 75bps 150bps 225bps 300bps |
| Gbps SO.OO (SI .34) (S2.65) ($3.94) (S5.20) 25bps (0.95) (2.26) (3.55) (4.82) (6.06) |
| 50bps (1.89) (3.19) (4.45) (5.70) (6.91) |
| 75bps (2.84) (4.11) (5.35) (6.58) (7.77) |
| 100bps (3.79) (5.03) (6.26) (7.45) (8.63) |
| 125 bps (4-74) (5.96) (7.16) (8.33) (9.49) |
| —— —— —— —— — |
| Note: Based on (lie midpoint of tlic range of the terminal multiple (9.5x 2012E BliiTDA) :md discount rate (10.5%), Source: Management Projections, as provided to prospective buyers, were provided by management of the Company. Hvercorc discussed the past and current operations, financial projections and current financial condition of the Company \vith management of the Company (including their views on the risks and uncertainties of achieving such projections). Note: The sensiuvity analysis assumes depreciation and amortisation, capital expenditures and working capital are bilscti on a percentage of revenue as implied by the Management Projections. (1) includes partial year revenue from UAW contract and forecasted center dosings. evercore partners |
| 26 |
| ($ in millions, except per share data) |
| | | LTM 1Q08 EBITDAE Coupon Net Amount % Total — — |
| | | Amount Leverage Indicative Max Flex OID Amount Term Loan (net of OID) S357.7 26.2% — Revolver SOU » L + 375 2,0% $0.0 Mezzanine Debt 300.0 21.9% TermLonn 365.0 3.3x L + 375 L + 550 2.0% 357.7 HoldCoPIK 110.0 8,0% Mezzanine Debt 300.0 2.7 11.50% 12.36% 300,0 Sponsor Equity 599,1 43.8% — HoldCoPIK 110.0 LD 13.00% 13.86% 1,110,0 Total Sources $1,366.8 100.0% — Total Debt S775.0 7.0x S767.7 — Share Price S48.25 Equity Purchase Price $1,314.7 |
| FD Shares (mm) 27.2 Refinance Existing Debt 9.9 |
| — Equity Value £1,314.7 Existing Cash (6.9) |
| Net Debt M Financing Fees 20.5 |
| Total Enterprise Value SI, 317.7 Advisory Fees 28.6 |
| — Total Uses $1,366.8 |
| As a Multiple of: 2007E 2008E — Revenue 1.7x 1,5x EBITDA 12.8 11.1 |
| EBITDAE 12.2 10.6 |
| EPS 28.5 24.5 |
| Source: Based on draft financing and other related documents received to date and, therefore, may be subject to change. FulSy diluted shares outstanding calculased using the treasury method and based on shares outstanding as of 12/19/07 and current options outstanding as provided by Company management. Net debt (net cash) csumaied as of 03/31 /OS per Company management. Note that analysis excludes any sponsor fees paid or additional management incentive compensation. — |
| evercore partners |
| 27 |
1
| Overview of Valuation |
| Confidential |
| Leveraged Buyout Analysis Required Assumed Total Debt / Ql 2008E EBITDAE — IRR 6.5x 6.8x 7.0x 7.3x 7.5x |
| Required Assumed 2012E EBITDA Exit Multiple — IRH 8.5x 9.0x 9.5x lO.Ox 10.5x |
| ~S.CONT15.0% $50.58 S50.86 $51.14 $51.42 S51.70 |
| 17,5% 48.03 48.38 48.72 49.07 49.42 |
| 20.0% 45.77 46.18 46.59 46.99 47.40 |
| 22.5% 43.77 44.23 44.69 45.15 45.61 |
| 25.0% 41.99 42.50 43.00 43.51 44.02 —— —— — —— — |
| 15.0% 17.5% 20.0% 22.5% 25.0% S47.03 S49.09S5!.!4 553.19 S55.25 45.01 46.8748.72 50.58 52.43 43.23 44.91 46.5948.26 49.94 41.65 43.17 44.6946.21 47.73 40.23 41.62 43.00 44.39 45.77 |
| Note; Assumes 9.5x 2012E EB1TDA exit multiple. |
| Note: Assumes leverage of 7.0x Toial Debt / Ql 200BB liBITDAE |
| Required Assumed Total Debt / Ql 2Q08E
EBITDAE IRR 6.5x 6.8x 7.0x 7.3x 7.5x |
| Required Assumed 2012E EBITDA Exit Multiple |
| IRR 8.5x 9.0x 9.5x lO.Ox lO.Sx |
| 15.0% 550.04 S50.29 $50.54 S50.80 $51,05 |
| 17.5% 47.54 47.86 48.18 48.51 48.83 |
| 20.0% 45.33 45.71 46.10 46.48 46.87 |
| 22.5% 43.37 43.81 44.25 44.69 45.13 |
| 25.0% 41.62 42.11 42.60 43.09 43.58 —— —— — —— — |
| 15.0% 546.43 548.49 S50.54 552.60 S54.65 |
| 17.5% 44.48 46.33 48.18 50.04 51.89 |
| 20.0% 42.74 44.42 46.10 47.78 49.45 |
| 22.5% 41.20 42.73 44.25 45.77 47.29 |
| 25.0% 39.84 41.22 42.60 43.98 45.37 —— —— — —— — |
| Nnte: Assumes 9.5x 2012E EBiTDA exit multiple. |
| Note: Assumes leverage of 7.0x Told Debt / Ql 2008E EB1TDAR. |
| Source; Management Projections, as provided to prospective buyers, were provided by management of the Company. Bused on draft financing and other related documents received to date and, therefore, may be subject to change. Noie: Valuation as of 03/31/08. Fully diluted shares outstanding calculated using the treasury method and based on snares outstanding as of 12/J9/07 and current options outstanding as provided by Company management. Net debt (net cash} estimated as of 03/31 /08 per Company management. !.everage assumed to remain proportion:)! between term loan, mezzanine debt and Holdco PIK, (1) Based on indicative financing terms per GS proposal. (2) Assumes interest rate on Senior Debt increases the maximum 175 bps per GS proposal {125 bp.s market flex plus 50 bps Ratings Condition flex). evercore partners |
| 28 |
2
| Overview of Valuation |
| Confidential |
| Analysis of Premiums Paid |
| Premium Paid Premium Paid |
| Number of Transactions 1 Day Prior \ Week Prior 1 Month Prior Number of Transactions I Day Prior I Week Prior 1 Month Prior — — — —— —— — 77 77 77 23 23 23 Mean 24.0% 25.3% 28.7% Mean 18.9% 21.3% 23-5% Median 21.3% 23.0% 26.4% Median 19.4% 20.3% 20.5% High Low 101.6% (9.5%) 88.4% (8.0%) 133.4% (10.5%) High Low 49.3% (1,3%) 66.4% (6.8%) 87.3% (10.5%) —— — —— — —— — —— — |
| j Proposed Offer 47.1% 39.0% 29.1% : 1 1 Proposed Offer 47.1% 39.0% 29.1% | —— — —— — —— — —— — |
| Source: SDC Database and FactSet, evercore partners |
| 29 |
3
| evercore partners |
| evercore partners |
| Other Information |
| Confidential |
| Summary Management Projections ($ in millions) 2007E 2008E 2009E 2010E 2011E 2012E CAGR —— — —— —— —— — — bhsc Center $761.5 S807.0 $847.9 S877.6 $900.6 $923.4 3.9% New Center 0.0 25.9 89.4 176.7 286.0 414.1 NA College Co;ich 6.9 8.6 10.8 13.5 16.8 21.1 25.0% BUCA 5.6 9.0 13.4 18.8 23.5 27.0 37.0% Memberships 1.5 3.1 4.7 6.4 8.1 9.9 46.0% Management Adjustments (0.4) (0.6) 0.0 0.0 0.0 0.0 NA —— — -— -— -— — — Total Revenue S775.1 $853,0 S966.3 51,092.9 31,235.0 $1,395.5 12.5% % Growth 10,1% 13.3% 13.1% 13.0% 13.0% EB1TDA S103.2 S118.8 $140.2 S164.1 $189.3 $217.4 16.1% % Margin 13.)% 13.9% 14.5% 15.0% 15.3% If. 6% % Grmt’lb 15.0% 18.1% 17.0% 15.)% 14.!)% EBITDAE S107.9 S123.8 SI 46.0 $170.1 $195.5 S223.9 15,7% % Margin 13.9% 14.5% 15.1% 15.6% 15.8% 16.0% % Groa’tli 14.6% 18.0% 16.5% 14.9% 14.5% EDIT S79.5 392,2 $111.7 SI 31. 9 $154.4 $179.8 17.7% % Margin /0J% 10.8% 11.6% 72./% 12.5% 12.9% % Graa’th 16.1% 21.1% 18.1% 17.0% 16.4% Net Income S45.5 $53.5 S66.4 $79,6 S94.6 $112.0 19.7% % Margin 5.9% 6.3% 6.9% 7.3% 7.7% 8.0% % Growth 17.5% 24.1% 20.0% 1S.9% 183% Capital 37.5 34.0 38.6 50,6 45.0 47.4 |
| Acquisitions 20.3 24.5 21.5 24.0 28.3 36.4 |
| —— — —— —— —— — Capital Expenditures S57.8 S58.5 S60.1 $74.6 $73,3 $83.7 |
| % of Sales 7.5% 6.9% 6.2% 6.8% 5.?% 6.0% Change in WC 4.9 6.9 6.7 7.3 7.8 8.6 |
| % o/JWftf ftrJ% 0.5% 0.7% 0.7% 0.6% 0.6% Debt 21.9 0.0 0.0 0.0 0.0 0.0 |
| Cash 5.0 16.5 65.0 116.9 188.9 271.8 |
| -— — —— —— —— — Net Debt (Net Cash) 16.9 (16.5) (65.0) (116.9) (188.9) (271.8) |
| Source: Company management, as provided in prospective buyers. — |
| evercore partners |
| 32 |
| Other Information |
| Confidential |
| Equity Research Analyst Financial Projections ($ in millions) 2G08E 2009E 2010E 2007E 2008E 2009E 2010E 2011E 2012E 2007 E 2011E 2012E — — — Revenue EBITDA BofA (12/04/07) S775.5 S84S.O S932.5 BofA (12/04/07) SI SI 19.4 SI 39.4 03.2 Stifcl (tO/29/07) 775.-! S53.9 - Stifcl (10/29/07) 113,i .... 99.fi Biiird (10/26/07) 77-1.8 852.0 951.9 Haird (10/26/07) 116.0 - 102.3 Signal Hill (10/20/07) 770.2 853.4 943.7 Signal Hill (10/26/07) 119.2 133.1 1(13.7 Thinkliqiiity ( 10/26/07) 775.2 855.2 .... Thmldkjuiiy (10/26/07) I01.fi 112.2 - SunTrust (10/26/07) 77-S.9 870.0 - SunTrust (i 0/20/07) l^chman (08/OB/07) 17> 773.6 841.0 934.5 Lehman (08/08/07) ra !!8.6 135.2 151.6 1,027.0 1,124,2 1,225.5 105.5 109.2 188.0 — — — Mean $775.1 S8S2.9 S941.4 51,027.0 Mean $116.4 S135.9 $151.6 51,124.2 51,225.5 5102.6 5169,2 SI88.0 Median 77S.2 853.4 939.-1 1,027.0 Median 5117.3 5135.2 S151.6 1,124.2 1,225,5 $102.7 $169.2 $188.0 — — — I/B/E/S S77S.3 S851.2 S941.3 I/B/E/S S117.1 S134.0 5103.9 Management Projections 5775.1 S8S3.0 S966.3 51,092.9 $1,235.0 Management Projections S103.2 5118.8 S140.2 5164.1 51,395.5 5189.3 S217.4 2007E 2008E 2009E 2010E 20I1E 2012E 2007E 2008E 2009E 2010E 201 IE 2012E — — — Revenue Growth Raics Capital Expenditures"1 — |
| BofA (12/04/07) 9.0% 10.3% BofA (12/04/07) S42.3 S46.6 S53.5 Stifcl (10/29/07) 10.1% Stifel (10/29/07) 27.3 - |
| 31,0 |
| Baird (10/26/07) 10.0% 12.1% Baird{ 10/26/07) 38.5 .... |
| 32.0 |
| Signal Hill (10/26/07) 9.9% 10.6% Signal Hill (10/26/07) Thinfcl-quity (SO/26/07) 10.3% ... - ThinkEi|uhy (10/26/07) SunTrus: (10/26/07) 12.3% - SunTrust (10/26/07) Lehman (08/08/07) (2) 8.7% 11.1% 9.9% Lehman (OB/08/07) l!l 29.4 32.7 35.9 |
| 9.5% 9.0% 27. J 39.3 42.9 |
| — — — |
| Mean 10.0% 11.0% 9.9% Mean S34.4 $39.7 S35.9 9.5% 9.0% Median 10.0% S35.9 Median $39.3 S42.9 34.0 39.7 |
| 10.9% 9.9% 9,5% 9.0% 31.5 35.9 39.3 |
| 42.9 |
| — — — |
| I/B/E/S 9.8% 10.6% I/B/E/S Management Projections 10.1% 13.3% 13,1% Management Projections $57.8 S58.S $60.1 574.6 |
| 13.0% 13,0% 573.3 583.7 |
| Source: Wall Sircet research. Management Projections, as provided to prospective buyers, were provided by management of the Company. (1) Equity research analysts did not forecast acquisition expenditures. Capita] expenditures projections provided by management in the Management Projections include acquisitions. (2) i^chman Brothers has since discontinued coverage pending analyst change. — |
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| evercore partners Other Information |
| Confidential |
| Research Analyst Summary Price Targets Firm Analyst Premium / (Discount) to — — Target Current Date Recommendation Price Offer Share Price Price — — Matrix USA Drmiel Scalzi 12/28/07 Sell NA NA NA BMO Capita! Markets Jeffrey Siiber 12/10/07 Market Perform $40.00 22.0% (17.1%) Bank of America Kevin Dohcrty 12/04/07 Neutral 40.00 22.0% (17.1%) Stifel Nicolaus Robert L. Craig 10/26/07 Hold NA NA NA Robert W. Baird Amy W. Junker 10/26/07 Neutral 41.00 25.0% (15.0%) Signal Hill Capital Group Trace Urdan 10/26/07 Buy NA NA NA ThinkEquity Partners LLC Nate Swanson 10/26/07 Accumulate 41.00 25.0% (15,0%) SunTrust Robinson Humphrey Mark Hughes Firms “On Hold” 10/25/07 Buy 57.00 73.8% 18.1% Ptndiw Aittihst C.haiive — — Mean $43.80 (9.2%) (15.0%) 33.6% Median $41.00 |
| 25.0% — — Current Share Price (01/11/08) $32.79 \ — Offer Price $48.25 | — Lehman Anthers Michael l^asser 07/30/07 On Hold $41.00 25.0% (15,0%) Credit S/iisse Brandon Dobcll 04/30/07 OitHoM 43.00 31.}% (10.9%) Source: Wall Street research. — |
| evercore partners |
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| Other Information |
| Confidential |
| Research Analyst Commentary — 3Q07 Earnings Announcement |
| “We believe the preannouncement of third quarter results was a serious jolt to investors, as a record 2 million shares traded on October 18 (or 20 times the prior daily moving average) and pushed the stock down nearly 17%...The company needs to regain investor confidence and demonstrate that it can return the business to its targeted topiine growth of 13- i 4%. Visibility into existing operations appears to have diminished as the company scales, while timing of new center openings remains dependent on pace of the customers. We expect valuation to remain depressed as third quarter operational challenges linger into 2008, while the UAW/Ford roil-off remains a headwind until the anniversary in the second quarter 2008.” |
| “We are maintaining our Neutral rating based on the carryover effect of undcrperforming centers, margin deterioration, and lack of visibility into long-term growth rates.” |
| ”... Underperformance at 35 community P&L centers negatively impacted 3Q07 results. While we have confidence that management will resolve the issues, the underperformance will diminish results for the next several quarters.” ”.. .Operating margin declined 60 basis points year on year and the operating margin for 2007 is expected to be flat year on year. This represented the first quarter of margin deterioration in over 10 years,” ”...We are waiting for evidence that the company’s growth rates have stabilized. The revenue guidance for 2007 and 2008 indicates that growth is expected to decelerate in 2008 for the fifth consecutive year. The 10% revenue growth in 2008 would be the lowest in the last ten years.” “The inability to adjust staffing levels at the 35 centers negatively impacted the gross margin, which was 100 basis points below our expectations. While management has initiatives in place to rejuvenate enrollment growth (through marketing support) and implement more efficient staffing patterns, we believe it could take six to nine months for the company to weather the impact. As such, management lowered its FY07 EPS guidance to S1.68-S1.70 from $1.77-$ 1.80.” “Q3 is typically a tough enrollment period due to a portion of enrollments that must be back-filled as children leave Swingset centers and move into preschool. An under-estimation of how quickly the company could back-fill enrollments, as well as underperformance at a select group of centers in Colorado, drove the shortfall vs. our expectations. It is important to note that the enrollment impact at the 35 centers was not related to die economy, or any specific company or industry, except for the Colorado-based centers (acquired in 2005 and 2006).” “This is the first pre-announcement we can recall from this company whose business tends to be very stable and predictable given long duration contracts, high client retention and client/end market and geographic diversity. The gradual business mix transition to higher margin, but higher risk P&L centers, which now represent 65% of the total (and within that, consortium centers which comprise about 25% of full service locations), does increase enrollment risk and may modestly increase the company’s exposure to economic influences including consumer pressures.” Source: Wall Street research. evercore partners |
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| Other Information |
| Confidential |
| Research Analyst Commentary — General |
| “We are encouraged the company has been able to maintain its wage-price parity of 4% — 5% tuition increases and 3% — 4% wage increases, an important factor in maintaining margin expansion. In addition, we continue to believe Swingset should improve operating performance characteristics through its consortium center model given the potential gross margin contribution these centers can have. However, losses generated from ramping centers continue to drag on margins and should do so through the remainder of 2007. We would become more positive on the company’s potential when we begin to see evidence of increased contribution from consortium centers.” |
| “Swingset’s shares have been range bound over the past six months, mostly due to the uncertainty of the company’s top-line growth outlook and the overhang of the UAW situation. We believe the key to Swingset’s longer-term price appreciation is evidence that the company can sustain a healthy rate of new center additions for the foreseeable future.” |
| “We believe the corporate daycare market is attractive because of its consistent demand and the opportunity For margin expansion during economic slowdowns, when daycare worker wages lag price increases. Swingset may fail to achieve this target multiple if its new centers are more costly to ramp up than expected or if the company is unable to successfully integrate the acquisition of a competing daycare provider.” |
| “We believe Swingset will enjoy continued margin expansion from several sources: Organic growth of existing centers (higher utilization), acquisitions, transition of management contracts, maturity of international centers, pricing power versus labor costs, and the increasing contributions of die backup center business. Nonetheless, die stock’s performance may be constrained by moderating revenue growth as well as newly moderating gross margin expansion and EPS outperformance.” “Long term we see positive opportunities for the remaining pieces of Swingset’s business as the new center pipeline is solid (60+ centers) and the average center size ramps up (especially in International) as weli as ramping contributions from back-up care centers and College Coach. We remain a bit puzzled as to the size of the opportunity relative to the size of Swingset’s sales and execution groups, particularly as we believe existing customers should be a market opportunity ripe for the picking. That said, we also recognize hiring an additional 5-10 salespeople globally would create a sizable headwind for operating margins, one that management might not be willing to make given the current revenue growth profile,” Source: Wall Strccl research. evercore part |
| This ‘SC 13E3’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| Filed on: | 2/19/08 | PREM14A | ||
| 1/13/08 | ||||
| 1/12/08 | ||||
| List all Filings | ||||