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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)(8) |
| Confidential PROJECT SWINGSET Presentation to the Special Committee of the Board of Directors January 9, 2008 evercore partners |
| Table of Contents Confidential Section Transaction Overview I Historical Stock Price Performance and Trading Activity II Historical and Projected Financial Summary III Overview of Valuation IV Appendix Other Information A EvtiRCORE partners 1 |
| These materials have been prepared by Even-on Group JLLC (“Even-ore”) for the Special Committee of the Board of Dim ‘tors of Bright Horizons Family Solutions, Inc. (“Sn’ingsst” or the “Company “) So whom such materials mi’ directly addressed anil delivered and may no! be used or relied upon for any purpose other than as specifically contemplated by a written agreement with Evercore. These materials arc based on information provided by or on be half of the Company and I or other potential transaction participants, Irani public sources or othenvise reviewed by Evercore. Evercore assumes no responsibility for independent investigation or aerification of such information and has relied on such information being complete and accurate in all material respects. To (be extent such information includes estimates and forecasts Oj’future financial’performance prepared by or reviewed with the management of the Company and! or other potential transaction participants or obtained from public sources, Eiiercore 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 from public sources, represent reasonable estimates). No representation or n/airanty, 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 ihe 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 be considered a recommendation with respect to, any transaction or other matter. These materials ham been developed by and are proprietary to Even-ore 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 ofEvercore. 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 atrange any finandngfor any transaction or to purchase any security in connection therewith. Evercore assumes no obligation to update or otbenvise revise these materials. These materials may not reflect information known to other professionals in other business areas ofEvercore and its affiliates. Evsrcore and its affiliates do not provide legal, accounting or tax advice. According, any statements contained herein as to tax matters were neither written nor intended by Evercore or its affiliates to be used and cannot be used by any taxpayer for the purpose of avoiding tax penalties 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 oj the transactions or matters described herein. |
| I. Transaction Overview evercore partners |
| 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. ___• tt- • Offer Price per Share 548.25 Transaction Value _. ___,, ... , , •,-,•< m limes: rally diluted shares outstanding (mm) ( 27.2 Equity Market Value §1,315 Plus: Net Debt (Cash) (-> 3J) Total Enterprise Value §1,318 Financial Summary ^ LTM 2006 2007E 2008E Ql 2008E Revenue §697.9 5775.1 5853.0 $789.0 % Growth 11.1% 10.1% 9,8% EBITDA $90.5 $103.2 5118.8 $105,4 %Matytn 13.0% 13.3% 13.9% 13.4% EBITDAE0” S94.1 5107.9 $123.8 $110.2 %Maiyii 13.5% 13.9% 14.5% 14.0% Net Income $41.7 545.5 553.5 $46.5 % Margin 6.0% 5.9% 6.3% 3.9°/« Implied Transaction Multiples 2007E 200815 Ql 2008E TEX V Revenue 1.7x l,5x 1.7x TEV/EBITDA 12.8 11.1 12.5 TEV/EBITDAE 12.2 10.6 12.0 P/E 28.5 24.5 28.0 (1) I’uliy diiuu’d shares uulsl.inJinj’ citlcithueJ usini> the ircasiir)- mclhoii unJ b;ised on sliart’s iHiiss^rtJin^;« of 12/19/07 imil currtnl options outstanding as provided by Comrnmy nwn:<(;(;int:iH. (2) nl-i dirbi (iil-i c.ish) ustimmud ;is «f 03/31/OK pt’f Crimpany m;miigi:mL-nt. (5) M.snn.m-’niL-ni I’mjuciiuns, :is proriJi’J Ui prospective bisyci’S, were pruvklcJ by i™n:ij>u’mi:m of the f-nmp;my. (4} KxcluJus nnn-cnsb ecjiuiy expense. evhrcore partners 4 |
| Transaction Overview Confidential Evercore Evaluation Process h In connection with rendering our opinion, we have, among other things: - 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 die 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 available, of certain transactions that we deemed relevant; - Reviewed a draft of the Agreement dated January 9, 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 a 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 5 |
| 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 Offer Premium/ (Discount) Average Prcm./ Share Price___(Disc.) 1 Day S33.39 44.5% 1 Month 35.49 36.0% 3 Months 37.66 28.1% 6 Months 39,63 21.8% j—1 lYcar 39.16 23,2% |—li—1 10/17/07: Cuts Q3 $50 “I 7 Years 38,67 24,8% 02/15/07: 05/31/07: Australian EPS forecast from r 3,000 ___Announces Q4 EPS ___ mcdin reports that $0.41 to $0.38 n Af\tt t> • c^ooc of §0,41, exceeding Swingset might be a —^— Proposed Offer Price: 548.25 ,• ,, r , b h > / F consensus estimate of takeover target of I / ___1039, and forecast ABC Learning Centres ,f / — 2,500 $45 — I ~~~~~~~~~~~~] 20Q7 eamj of !—1 fe 07/26/07: Announces Bf* Sl.77 to SI.82 \ !\ J Q2EPSofS0.40, J1 LI___III___I \. I ft/ !• ( \ 1 f P\ ! * exceedine consensus f ‘ i P i I\ f I e.tio.a^ofSlT | ff| L \K 1 I ‘ 2,000 i“A aw /W W^r \M -h jC I W I I—1 07/26/07: Announces W U ™ $35- |/y| ?* l||’ 10/26/06: Announces as- Q2 EPS of 50.47, “’’ ! lA >° I if expected Q3 EPS of $0.37 exceeding consensus f — 1 nnn { I !/ and lower than expected esamate of S0.46 ‘ |
| 04/26/06: Announces Ql * revenue; bwecs ^.^ I—^—1 EPS of S0.36, exceeding Ecvenue ^^ guidaflce Eo $30 — I consensus estimate of S0.34 | , u]2,,/0 from ptcvlous guidnncc of 13-14% ” 50° $25 4——r—1——————1— —1——-———h 0 01/09/06 06/03/06 10/27/06 03/22/07 08/15/07 01/08/08 Source; l-’aclSt’l, Company press ix-k^cs mul Lndusln1 ntws sources. evercore partners 7 |
| Historical Stock Price Performance and Trading Activity Confidential Swingset Trading Multiple Analysis Upon Q3 Earnings Announcement jplBilfiililffiii^^ lipIii§S88Sjf|j^^ 3 Month Prior Average: ll.8x 3 Month Prior Average: lO.Gx 14.0x -| ___3 Monti1 Post Average: 11.2x___ 14.Ox -s ___Aycfiigc Since: 9.4x___ 13.0x jV”-i r* | 1ZOX- KfV^ . 111. 12-Ox- 116< V^ “-^x^r-3 , >k|- 10-fe- 10.0x-!"WM/ ‘ Sw-^ 1 l^A-A fv K/^A K^/v^V Nyn/^ 9.0x B.0x -I—1— —— 8 Ox J___ 10/26/06 ‘ 10/17/07 3 Month Prior Average: 26.8x 3 Month Prior Average: 23.Gx 36-0x I | 3 Month Post Average; 25.2x j 32-0x 1 |___Average Since: 21.3x___ 32‘°X ‘ . 28.0x - [ZB.Bx |
| 2fi.0x 2B.Ox- /JV—j ^1 ,o,^v^^^’ U^___/-^;5 ,.- ^^_r— -"•^^v/N,jv^\_.,i20.Ox — ” V\ 20‘OX- |
| ».7xi 16,0x J—‘— IG.Ox J—‘— 10/26/06 10/17/07 SiHircu: i-’nctSi-!. l-’cir ihc puquiscs (if (Ins nniilysis, the Convict! lUMTDA mulliplc is b:isi.-d on ;i nnilliple of [lit- esiinwiuii currt-in ru!l-yi::ir finnncia! pc:rrorm;inci.-, Ev ergo re partners 8 |
| Historical Stock Price Performance and Trading Activity Confidential Swingset 3-Year Trailing EBITDA Multiple 18(}x Current — 01/08/08 9.0x’ ^ 1 i Offer Price<" 12.8iy ait Average ,f Last 1 Year (01/09/07 — 01/08/08) 10.8 jj W Last 2 Years (01/09/06 — 01/08/08) 11.5 IG.Ox — jy \ Last 3 Years (01/10/05 — 01/08/08) 12.4 JI I 2007 10.8 ./A I LI . 2006 12.2"~~^y^-A_| y ,(L 2Q05___14.314.0.x- ‘ |ii| f —"~^^-Ji iV ^ ^^tF^^^ \ p/ 10. o.v • y ^^~~r^-^L g.Ox H—.—i—,— —1—1— —1—1 Jan-OS Jul-05 Jan-OG Jul-06 Jan-07 Ju!-07 Jan-08 Source: S’’:iaSi:t. (!) Tlic OffiT Price nailing liHI’l’DA mukipli: is l);isixi nil lilt usiimaicd 20D7li liHITDA, ;!S proviiJixl by Company mansucmunl. ill I he Mnn,if>vmenl Prcijecdons. evercorh partners 9 |
| Historical Stock Price Performance and Trading Activity
ConGdemMSwingset 3™Year Historical Forward P/E
4Q.IK- -i Current — 01/08/08 17.Ix Offer Price (” 24.5 Average Last 1 Year (01/09/07 — 01/08/08) 20.8
Last 2 Years (01/09/06 — 01/08/08) 22.335-Ox- l,.j Last 3 Years (01/10/05 — 01/08/08) 24.2
J’l 2007 20.8 tj I 2006 23.8/ \ ,, 2005 28.1 f \ ft, —_—
3°’°” il J iVA ,
r/r—f^-JT *wi ^-^AV ~ rV^-___^M ^ A V ^V ^^Vj—^fM^FV
2°’0>:”
1] A L/V V
1 1! 17. Ix15.Ox -|—‘—’—1—1— —1—1—1— —r Jan-05 Jul-05 Jan-06
Jui-06 Jan-07 Jul-07 Jan~08 Source: i;:iclSd.
(1) Thf Offer 1’ncc ffiA\’;ird P/l’l mulsiplc is biiscd imi oil: L^timiHcd 200HIC KPS, ;is
jirovijfd i^y Comp;iny miin^cmcnl in lilt: M;in;ii^cmiHhnt Pri^L-ctHjn:;. evercore partners 10 |
| Historical Stock Price Performance and Trading Activity Confidential Swingset 3-Year Historical Forward P/E/G [Current — Ol7o8/08 0.9x t8x 1 Offer Price|1! 1.2 Average Last 1 Year (01/09/07 — 01/08/08) 1.1 tj Last 2 Years (01/09/06 — 01/08/08) 1.1 16x PI Last 3 Years (01/10/05 - 01/08/08) 1.2 , , |i 2007 1,1 ft; \ ft* 2°°6 U sir 1 M/S [ 2005___1.4_"*-tfK^yLj/ rt /i 1 / ^~^p-—~-^-^_^ , I tA I |
| I "•• it ^^l~V^’^-^ a /• A PUfMl / “^T^—-^-___fl h W/ * f ^^W^\4j 1 w ‘ Llr/^ V 1(‘ 0.9x O.gxJ—,—,— —r—,——,—r Jan-OS Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08Snurcc: l’’;lclSc’t. (I) Tin: Dfftr I’ricL- fiir\v;ird i’/Ii/ti f.itio is b;istJ <m lilt I’SUnintcJ 2(lilK1i MI’S ;ind llie 5-yi.Mr net incomt growih rait pnjviik’d by flumpany mnn:ij;Lninii in liiL- i\!:iir,!iiu-iin.-iil i’rojcciirtns.evercore partners 11 |
| Historical Stock Price Performance and Trading Activity Confidential Indexed Share Price Performance ~~_ % Change 1 ___,,, , H ,, ,, ., % Change 6 Months 1 Year 2 Years |
| ——t3— Swingset ~~~7^~“a^) (M.8%) ^’“f” .<%&*> P«-K.t2 Schools/Centers’” (27.2%) (34,9%) (29.9%) ABC LcaminK (30.6% 200 For-Profit Colics <” 4.1% 50.7% 38.1% 120 |NobelI^.rmnR—(TJ^j S&P500 (9.2%) (1.6%) 7.8% I NASDAQ (8.6%) (0.1%) 5.3% | 180 Russell 2000 (17.4%) (9.4%) (0.2%) U/p^| IW\ I -g 100 -ilAj i I. ‘•!’• p rA | ,-A/vA ^“b^f^f^C^ “ N ^H y^^v*^!l %,80 “ ^ ” i1 j 60 ·!-- ..•.-—-, 70 -.-.—, 01/09/06 01/08/07 01/08/08 07/09/07 01/08/08—SiYtni>»i I’rc’K.lSSciimila/Cciitcfiitl)—For-1’rofil CnSStires (2) ,. . ,, ......*” h —Swiii|;sc( ADCLcaininE —N«be Lcarnins .......S&l’SOO NASDAQ —ItuisciS 20011 h h h Source: [’’nciscl,(1) !’ri—K-12 Schi)i)ls/CniltT5 Ciroup mcludus AB<- l..uLirntn)< :iml Nnbd l.u;lniinjv (2) i-’nr-l’iitfn < ‘.tillc-gcs (iroup includes Apollo CSruup, C;!|K’il;i l;Juc;Hion, (Inrc’L’r Ikluc.ilion, C!nrinl!)i;iii Colleges, DL-Vry, I’lT l:!ijtic:iti<)fl:ii Stn’scts, Lincoln Kduc;ilion;i) Sc’rviccs, hu;ivlt ICiliicuinn unil Univcrs-.i! ‘I’t’chnicnl Instilua’ evercore partners 12 |
| III.Historical and Projected Financial Summary | Confidential | evercore partners |
| Historical Financial Summary EBITDA Capital Expenditures (2) Net Income Revenue Source: Company management. (1) Includes partial year revenue from UAW contract and forecasted center closings. (2) Includes acquisition spending. ($ in millions) (1) Historical and Projected Financial Summary | 14 |
| Historical and Projected Financial Summary | Confidential | Historical Financial Summary (cont’d) | 10,0% 16.0% 15.0% :13.0% j11.0% j | 8.8% 9.0% -j fr-”7,0% 5.0% 10.7% 9.6% _,_..-*” . ............. 4” | 13.0% 13‘3% 12.0% ^ ...... 4 ................... —"' | 2004 | 2002 2003 2004 2005 2006 2007E |
10.0% 8.0% 6.0% 4.0% ; 2.0% 0.0% !•-3.8% *-4.2%<!•—5.0% 5.9%_-*— | 6.0% 5.9% |
—f, | 15.0% i 12.0% | 9.0%6.0%j3.0% i 0.0% | 7.8% 7.5% |
—if-,-,. | 6.2%,/’ | —4’’’ | 11.3% | /*\ | 8.2% “-*.^ 7.5% |
~~"~-$- | 2002 2003 2004 2005 2006 2007E | 2002 2003 2004 2005 2006 2007E | Suurci:: Gmip;iny m;tnn^i:nU’ni. (1) Inciudus partial year rcvcnut1 from i I AW contract anil t’urccaiiti.’d cuilur closing’ (2) Inciudus aci|u:si(ion spundinj;. evhrcorb partners | 15 |
| Historical and Projected Financial Summary | Confidential | Management Projections Summary ($ in millions) $1,500 $1,3% $250 | 5-Ycar CAGR: 12.! >% 5-Ycar CAGR: 16.1% $1,235 •mm j w $1,093 rtSE^s m $200 $189 s $966 »i $164 pill! gfifl PSBB3 ,, ,, jllfll $1,000 ‘ $775 $853 Bill BBSs Bi $iso — $140 Sill IP ^1 sp^^pS $119 fJSBH lilt! lit!!! JSiSli IIIS $103 iii ii|^ m liii ppii U S| S | · il H ** 111 Itf $100 n S | ·· ii^SS’;-,1-! i lii HI ‘ ll^lil i^SE-t-3 ^"'^vS’; p sjiSpSb -$m$tm st^ Jj^^iSSJJl 111 III | ·%4s^| Slrtlii ^gfe^l R $50 - $500 Hi 11 ^Hlp l»il llffi^l $0 111 W te s ss- $o liil | 1 ‘ ‘ i i , ; | 2007E (l) 2008E 2009E 2010E 2011E 2012E 2007E 2008E 2009E 2010E 2011E 2012E | $125 ‘ $112 $1°° | 5-Ycat CAGR: 19, T/ ‘o 5-Year CAGR: 7.7% | $84 | $100 $95 IS $80 $75 $73 | $80 iftiSl i ,,,,, ssgsa ejs^pei iiSili | fea lilii > $58 $59 $60 | $75 $66 iliS! :itm $go - ,___c^m m^ iliil i^ Si | lii Biif ili Si sssfSi fSSBS liSS fsftSfl l«sS?8 fe«S8 ^Jift^ l^f^fts ili i«i W !i» liii 111 $53 *46 ^ ill ws«i <s,ia .. fSSKsl isiir pii pill llffii ill ill eiif $50 am ilti 11 | · ;i>41’ iliil pill 111! pii | $25 BBS ItJiSl | · III pa ill $20 — 11 Hif SHI 3811 plWl Bill lilt hissa liiii pii m 111 ISIS ill ill lii | en i fill! llll iill liil ilSi | $0 | · 1 ‘ *” | · ‘ | 2007E 2008E 2009E 2010E 2011E 2012E 2007E 2008E 2009E 2010E 2011E 2012E | Source: <!n mpanv man^m/menl, us provided to prospective buvurn. | (!) Include [inirliitl vt’iir rt’VLiiitJC from LI AW cuniracl :ind furcciiHtud cunicr closing. | (2) Include iiLXjuistlion sp^nduij^. | evercore partners | 16 |
| Historical and Projected Financial Summary | Confidential |
| Management Projections Summary (cont’d) 20.0% 16.0% 15.6% 15.0% 10.0% 5,0% — 15.0% 13.3% 13.1% 13.0% 13.0% 15.3% 15.0% ^ “^ 14.5% ,,^—‘*...................................................................................... D.9% ^^” B.3% ^,- ^’” ^.-^’"^ 11.1% /^ v ^ ~~* 14 n% *.___lO-l’/V^ 14‘u/0 ~""— — 4,-’ 13.0% - 2007E(I) 2008E 2009E 2010E 2011E 2012E 2007E 2008E 2009E 2010E 2011E 2012E 15.0% - 7 7o/ 8.0% •j •jo/ 1.1 /a 10.0% — 6.9% ^ * 12.0% 8.0% -6.0% 4.0% >• to/ » ^— ^ — ^— •” J 2.0% • 0.0% E 01)/ O.J % _, — . * 7‘5% 6.9% ,w 6.8% Source: Q (i) 5,v% -^ — * ,, 6‘2% f 5.9% 6.0% include (2) *~— *"~~ 9.0% — • “’ ‘ ‘ T “ “ — ......... •,, — — -i .-.^ j Include 6.0% 3.0% • 2007E 2008E 2009E 2010E 2011E 2012E •:-•• i i “ •’” ••••” 1 i 0,0% 2007E 2008E 2009E 2010E 2011E 2012E mpany miucim’mcni, us pnividud lit prospective buyers, ^ p;iriial vt’iir revenue from UAW c<jnir;ici -,ind foreCLiHtvd center closing, > iic^Liisiljon spending. |
| evercore partners |
| 17 |
| Historical and Projected Financial Summary |
| Confidential |
| | | | | | Projected Revenue By Business } ($ in millions) } —— —— 5-Year CAGE: 3.9s/ ) 5-Year CAGR: NA —— — — |
| | | | | | $1,000 $901 S923 $500 |
| $807 $848 5878 $414 |
| $800 $762 B • bus^^ “^^^ $400 • fiiflia ;=«s«;as |IitlSi| SSiSi •is m ilfi ill $286 ;.:-.•: |
| «:5ia $600 lill ill! ill iiil $300 •-;-.-••:•;: |
| $400 • pi m -iili i <S177 -V; BS*7ta •Hi! mm $200 i *i;/ HyS; Hii IS*S J>i^ iim [gasijsa msszm — ^ ::UV Si »«l ^1^1 jlilip fSHSfA Jioitssl lip $0 $26 ™ H| • • $200 ill liil Hill IS III 111 $100 ^rr^r’ fe&^iSi pSfl^i ^^^^; ^fe^gi —— —— — $0 : i $0 i 2007E ‘” 2008E 2009E 2010E 2011E 2012E 2007E 2008E 2009E 2010E 2011E 2012E % Growth P.<S% tf.0% j.;% 3.5% 2.6% 2,5% 2 Organic Acquisition iSTransiuon % Growth NA 244.9% 97.6% 61.5% 44. S% ftoJCcisters 52 56 62 6S 75 |
| — $60 $60 |
| 5-Year CAGR: 39.1°, il 5-Year CAGR: 25,0% —— — — $40 — $37 $32 ^^ $40 |
| | $25 ;y;i^%;:gj $20 • $ 12 fl o iiffll ai«i $20 $21 *1 ^ 517 k^™ $7 ,, |^^r.«.7T^ n in in u o-n vi-J :ss:gis;3 _. ISl! Sill *plo ^i^;^ iSflll HIP en 5i’i pis^sq •3SSK3 SSj]! Bgtl’a SSsSSI $7 59 ^.^si ||g| |||g ma Ittgsl iiSIIS jlliH K:Sll -— — $0 -; $0 .—.... T.-_- — ,.......— , . |
| 2007E 2008E 2009E 2010E 2011E 2012E 2007E 2Q08E 2009E 2010E 2011E 2012E % Crmi’I/i 69.)% SO. 5% JJ?.0% ^J,tf% /tf.^% % Growth 25.0% 25.0% 25.0% 25.0% 25.0% Source: Gmipany iran;ij;i;fni!in, :is provided 10 prospective buyers. (1) Includes p;mi;il yu:ir revenue from CDninKt and fur^ciislud cuntc’f tlosini^. UAW (2) Includes inci’cniciuai revenue m con?nrlium bitckup or luH-KLTvicc CL-niurs. —— — | evercore partnERxS | 18 |
| Historical and Projected Financial Summary |
| Confidential |
| Projected New Center Growth ($ in millions) 2007E 2012E CAGR $ Change % Total A 2007E 2012E CAGR $ Change % Total A Net Base Center <!) S762 S923 3.9% 5162 26.1% Net Base Center (!| $149 §208 6.9% Ł59 39.3% 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 13 8.6% Subtotal — New Center 0 414 NA 414 66.7% Subtotal — New Center 0 67 NA 67 44,7% BUCA (2) 7 37 39.1% 30 4.8% BUCA p> 3 17 46.3% 15 10,0% College Conch 7 21 25.0% 14 2.3% College Conch 4 13 25.5% 9 5,9% Management .Adjustment m Q NA 2 (11% Management Adjustment ® 0 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 2011E 2012E | 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 27 12 788 8 2 1Q 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% 23.5% Transition 50.0% 125.0% C55.6%^ (41.7%) 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: Maniijitmrni Protections •>\$ pruviiictl U) prospective buyers, vvlti,’ provided hv m:tii:i^cnicii!. of ihe Company. (1) Includes p:mhl \t:it rt:vciuio frum UAW” coiUr:tct niui osin^K. ffjrccuMcd EL’ntur c (2) inducts n cmiHorliism backup nr ful!“Sc,T\hicu cunicrs. mcrcmi1!!!:!! irvt’iiUf |
| evercore partners |
| 19 |
| IV. Overview of Valuation |
| evercore partners |
| Overview of Valuation |
| Confidential |
| Summary Valuation Analysis · • |
| Current Price: S33.39 |
| Offer Price: $48.25 |
| S58.02 560.92 SG4.08 561-78 52-Wcck Imraday Trading Range Public Company Trading Analysis 9.0x — 11.Ox 2008ETEV/EBITDA 20.0x — 25.0s 2008E P/li I.Ox- 1.5x2008E)VE/G Precedent Transactions Analysis 1.5x — 2.0x LTM Ql 2008ETEV/Rcvenue 11.Ox — 15.0* LTM Q} 200Birmv/EBFFDA Present Value of Future Stock Price S.Sx — !0.5x 2012E EBITDA multiple; 9.5%-11.5% Cost of Equity 19,0x — 24.0x 2012n P/E multiple; 9.5%-11.5% Cost of Equity Discounted Cash Flow Analysis 8.5x — 10.5x EBITDA exit multiple; 9.5%-11.5% WACC Leveraged Buyout Analysis B.Sx — 10.5x EBITDA exit multiple; 15.0% — 25.0% lRR;S775mm debt Iniiicaliiv Tarns — B2/B Rating Maximum Flex — Less Than B2/B Ruling S33.U 547.75 S3<)-« S48.05 539,45 S49.31 |
| S58.32 S38.88 c 11 c c r^^!‘"^H^^ S43.55 l^^ligS S42.66 S46.39 Hi S46.55 If S47.44 I iEPSFI S40.24 S39.84 S55.25 S54.65 S25.00 $30.00 535.00 $40.00 $45.00 S50.00 S55.00 $60.00 $65.00 570.00 NiHu: This i;iimm;iry nf cL-rtiiin ;iii;i!yscs is provided fnr i1lusir;iiivc puqioscs only, dues not reprei^t’ol sill of the :iiv.il\-Hus purft jrmi:J bv livurcorc and should be’ considered logether wilh the informiuiun sei forth L’l.se\vhere in ihis pruseiK;itinn. Nnlci Valuation us of IW/3I/I1K. h’uily Jilulcil slv.ires ouistniiJing calail;Ued usin;; thu la-isury medmd :ind bnsed on sh;ires iiolsiiindin.q ;is of 12/1’J/l^ anil current options ouislandiiiH us provided by Cumpimy m;in;igenieni. Nel debl (nei cash) i;s!ini;ned :is iifO.VSI /OB per Cumpim)’ m:niiigemi;ni. |
| Ev e rc o re part n e r s 21 |
| Overview of Valuation Confidential |
| Analysis of Select Publicly Traded Companies ($ in millions, except per share da fa) % of Market Total Share Price 52-Week Equity Enlcqirisc Company TEV / Sales TEV / EBIT DA P/E P/E/G 01/08/08 High Value Value — 2007 E 2008E 2007E 200BE 2007E 2008E 2007E 2008E —— —— —— — Swingsct — Offer Proposal “’ $48.25 101.0% S1,31S $1,318 1.7x 1.5x 12. Bx ll.lx 28.5x 24.5x i.4x 1.2x Swingsei — Management Projections ‘"' 33.39 69,9% 900 907 1.2 1.1 8.8 7.6 19.7 1G.9 1.0 0.9 |
| Swingset — Research Estimates 33,39 69.9% <J08 915 1.2 1.1 9.0 7.8 19.7 17.1 1.1 0.9 |
| Prc-K-12 Schools /Cutters — ABC Learning Centres $4.21 58.9% 52,001 52,950 1.7x 1.4x 8.9x 7.1x 12.5x 10.4s 0.8s 0.7x Nobel Learning Com muni lies, Inc. 14.16 80.7% 151 155 0.8 0.7 B.6 7.8 19.1 18.3 1.0 0.9 |
| -— -— -— -— -— —— — Mean 1.3x l.Ox 8.7x 7.4x 15.8x 14,3x 0.9.x 0.8x Median 1.3 1.0 8.7 7.4 15.8 14.3 0.9 0.8 |
| —— -— -— -— -— —— — Far-Profit CoHews — Apollo Group, Inc. S6B.11 84.3% 511,534 510,845 3.8x 3,5x !4.3x 12.7x 20. 5x 23.0x 1.8x 1.6s IT!’ Educational Services, Inc. SO. 10 00.8% 3,242 3,120 3.6 3.1 11.8 9.9 21.8 17.9 1.1 0.9 |
| DeVry Inc. 49.56 82.6% 3,588 3,344 3.4 3.0 21.1 16.4 38.5 26.9 1.8 .2 |
| Career Education Corp. 22.06 60.1% 2,014 1,580 0.9 0.9 7.7 6.5 22.4 17.3 1,9 .5 |
| Straycr Education Corp, 156.10 79.7% 2,292 3,130 6.7 5.6 19.5 16,5 35.1 29.8 1.9 .6 |
| Corinthian Colleges, Inc. 13.33 73.0% 1,131 1,157 1.2 1.0 12.2 9.3 35.5 24.8 1.6 .1 |
| Capcila Education Company 02.40 82.8% 1,110 985 4.4 3.5 24.8 19.3 48.1 37.7 1.8 .4 |
| Universal Technical institute 15.78 58.2% 446 370 1.1 1.0 8.7 8.5 23.9 24.1 1.8 .8 |
| Lincoln Educational Services Corporation 13,79 85.2% 367 377 1.1 1.1 10.1 7.9 29.8 20.1 1.8 1.2 |
| -— -— -— —— -— —— — Mean 2.9x 2.5x 14.5x 11.9x 31.3x 24.6x 1.7x 1.4x Median 3.4 3.0 12,2 9.9 29.8 24.1 1.8 1.4 |
| —— -— -— —— -— —— — Oilier Eifueatimi Stmius — Washington Post S793.50 89.6% 57,549 57,240 1.7x 1.6x 10.8x 9.6x 2<J.7x 23.0x 3.7x 3.2x Scholastic Corp. 32.54 81. 4% 1,260 1,551 0.7 0.7 6.6 6.4 14.8 13.2 !.! 0.9 |
| Blackboard Inc. 37.21 74.6% 1,130 1,080 4.5 3.9 20.5 15.8 42.3 33.9 1.8 1.4 |
| School Specialty, Inc. 32.65 81.0% 687 U27 1.1 1.0 8.5 7.8 16.8 13.9 1.1 0.9 |
| Renaissance Learning, Inc. 13.50 78.4% 392 3S3 3.6 3.4 28.2 17.7 58.7 33,8 NA NA The Princeton Review, inc. ™ 8.25 76.4% 317 273 2.0 1.9 37.3 20.8 NM NM NA NA -— -— -— —— —— — — Mean 2.3.x 2.1x 18.6* 13.0x 31.9x 23.Sx 1.9x l.Gx Median 1.8 1.7 15.6 12.7 26.7 23.0 1.4 1.2 |
| —— -— -— —— —— —— — Source: Company filings and iHKS consensus estimates, cmcrK Projections, as provided lo prospective buyers, vvere provided by management t f the Company. Manai> (1) Nt’( debt (nei cash) esumascd as fii’03/3!/t)H per (Company management. (2) I’uliy diluted shares outstanding melhixl itnti based on shares ouls landing as of 12/19/07 and current options outsiane in^ us p; provided bv ( Nimpiinv mun^cmcm. calculated using the treasury (3) On 07/23/117, The Princeton Review completed a SMI million d financing round leJ by Bain Capital Ventures mid a !si> announced a :ie« Cl-O. In Ni > number 200?, thu company nnniL’tl :i new Series C Preiem. C]1;C) and COO. — |
| evercore partners |
| Overview of Valuation |
| Confidential |
| Analysis of Select Precedent Transactions ($ in millions) Ann, Dute Target Acquirer TEV TEV / LFQ — Revenue EBITDA — 08/13/07 Leapfrog Day Nurseries Ltd (l) Busy Bees Chiidcare Ltd S63 0.7 x 12. -4s 06/28/07 Asijtiith Day Nurseries Ltd Dawnay Day, Sword fish Investments 190 NA NA 06/04/07 Laureate Education fnc Doug Becker (CEO), KKR, Citigroup PE, SAC Capital 3,883 3.1 16.6 12/14/06 Busy Bees Chikkare Ltd w ABC Learning Centres Ltd no NA NA 12/13/06 La Petite Academy Inc. (3) ABC Learning Centres Ltd 330 0.8 10.2 Educate Management, Sterling Capita], Citigroup 09/25/06 Educate Inc (4> PI ; 534 1.5 10.7 09/05/06 College Conch, LLC Bright Horizons Family Solutions 12 1.9 NA OS/08/06 Children’s Courtyard LP (5) 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 /OS Concorde Career Colleges, Inc Liberty Partners 97 1.0 12.6 03/15/OC Kills 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 Ltd 176 0.8 16.1 06/28/05 Chi!drenl;irst Inc Bright Horizons Family 50 1.6 NA 1 1/05/04 KinderCare 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 G rp Ltd ABC Learning Centres Ltd 160 2.0 18.9 04/30/04 Leapfrog Day Nurseries Nord Angtia Education PLC 107 2,7 16.6 03/26/03 Whitman Education Group, Inc Career Education Carp 268 2.4 15.7 03/18/03 Ross University DcVry 310 5.0 12.4 03/11/03 Sylvan Learning Systems K-1 2 Tutoring"' Apollo Management LP 288 1.3 8.5 03/04/03 Aramark Educational Resources ro Knowledge Learning Corp 265 0.6 5.0 04/27/98 Corporatel-’amily Solutions Inc Bright Horizons Holdings Inc 118 1.4 38-4 03/30/98 Children’s Discovery 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: m Base 1’ubiic filings, Wall Street research, press releases information. and other public])- available d on 200!)B IilllTDA estimate tier Commnv press release. Offer Price m 1.7x 12.Sxj —— — |
| (2) Bused on 200HE liUITDAK estimate per Company press release. LFQ revenue estimated from Company investor presentation. (3) llnsed on IOQ of last reported quarter ending IM/i>M/l](i :ind 1DK of fiscal year untling 07/02/05. (•!} Based on 2007E liBITDA of S50 million per Company proxy statement {05/ U/07); i.I;Q liBITOA of S26 million implies 20.5x multiple (5) Buscii on 2()l)7li liBITDA eslimati; ill Company press release. ((>) Based on average estimated transaction value ofS275-S3(M) miltioii. (7) Includes S-ID million ^i.ssuniud lirlir. \\rlnch is sublet to right of prepayment for S25 miUiun wilhin 12 months of cloHm^, (H) H^sed on latest trailing IbreCasted nsuhs throujrh iQ 2()()Hii, us provided by Compiiny nisn:ij;emeni in the Management Projcciions., |
| evercore partners |
| 23 |
| Overview of Valuation |
| Confidential |
| Present Value of Future Stock Price Analysis |
| Assumed 2012E EBITDA Multiple — Assumed Cost of Equity 8.5x —— — |
| lO.Sx 9.0x 9,5x lO.Ox |
| 9.5% $50.55 $53.14 555,74 $58.33 $60.92 |
| 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 |
| Assumed 2012E P/E Multiple Cost of Equity 19.0x 24.0x 20.3x 21.5x 22.8x |
| 9.5% $50.73 554.06 $57.40 $60.74 $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: M;in;ij^L*nK’n! Projections, :is provided to proHpcctive buyers, we’re provided by m;m;ijje’mens of uk Gompuny, Nolu: Viiluntion as i>f 03/31/08. EVERCORE PAR’l’NERS |
| Overview of Valuation |
| Confidential |
| Discounted Cash Flow Analysis |
| Terminal EBITDA Multiple Discount Rate lO.Ox 9.0x 9.5x 8.5x 10.5x |
| 9,5% 551.41 $54.00 $56.60 $59.19 561,78 |
| 10.0% 50.38 52.92 55.45 57.99 60.53 |
| 10.5% 49.38 51.86 54.34 56.82 59,3! |
| 11.0% 48.40 50.83 53.26 55.69 58.12 |
| 11.5% 47.44 49.82 52.20 54.58 56.96 |
| Terminal EBITDA Multiple Discount Rate 8.5x lO.Ox 9.0x 10.5x 9.5x |
| 9.5% 2.8% 3.2% 3.5% • 3.8% 4.0% |
| 10.0% 3.3% 3.6% 4.0% 4.3% 4.5% |
| 10.5% 3.8% 4.1% 4.4% 4.7% 5.0% |
| 11.0% 4.2% 4.6% 4.9% 5.2% 5.4% |
| 11.5% 4.7% 5.0% 5.3% 5.6% 5.9% |
| Source; Ntanagurncni Projections, us provided to pmspt-’ciivtr buyurs, were provided by maim^cmcm of the Ounpany. Note; Valurtlion ;is of03/31/UH. Fully diluted shares outsL:uiit!tn^ c;ilculiiiud usm^ ilic iR-.i.^ur)1 metUik! imJ Ixised on shuros ouisluiulinj’ us *’if 12/ l’J/07 nnd current options ouishinding ;is provided by Company munii^cmcni. Nut dubi (injl c;isli) ustiiiiiUud its of D3/31/08 per Company m^naii«t.’mcni. evercore partners |
| 25 |
| Overview of Valuation |
| Confidential |
| Discounted Cash Flow Sensitivity Analysis |
| 14.5% 13.9% 11.1% 13.3% 14.1% |
| 20.0% 15.0% 10.0% - 13.3% 13.1% B.0% 13.0% ^ 10.3% 10.1% 10.0% 10.0% |
| 16,0% 15.0% 14.0% 13.0% i 13.2% 15.0% 15.3% |
| 14.3% 15.6% |
| 5.0% |
| 12.0% |
| 2008E 2009E 2007E’ «•&*«"• Management Projections 2010E 2011E 2012E :- Sensitivity Range 2007E 2008E 2009E ·*=$=>Management Projections 2010E 2011E 2012E - Sensitivity Range |
| EBITDA Margin Reduction Revenue Growth Rate Reduction Obps 75bps 150bps 225bps 300bps |
| Obps 50.00 ($1-34) (§2.65) ($3.94) (35.20) |
| 25bps (0.95) (2.26) (3.55) (4.82) (6.06) |
| 50bps (1.89) (3.19) (4.45) (5.70) (6.91) |
| 75bps (2.84) (4.11) (5.35) (6.58) (7.77) |
| 100 bps (3.79) (5.03) (6.26) (7.45) (8.63) |
| 125 bps (4.74) (5.96) (7.16) (8.33) (9.49) |
| —— —— —— —— — |
| Nine: Based on the midpoint of the r;mj>c of the terminal multiple (‘J.Sx 2012K KBITDA) and discount rule (10.5” n). Source: Managi’intni Projections, as provided id prospective buyers, wure provided by rranai>i:mcni of iht Company, Kvcrcore discussed the past and curreni openilions, Ilii;!iid;i1 prnit’Ciions :ind curreni fm;inci:i! condition of the Comp:my with m;in;i|^emeni of tlie C«mp;i:iy (indudiiii; their viovs on die risks and uncertainties of -.ichifvin.u; such pnijcctiuns). Note: ‘Hie scnsiiivitv nn;ilysis assumes depreciation and jimiirliastion, capitiil L-xpendituruS aiul wnrliinj; capita! are based on :i percenlaye of revenue as implied by the Munajiemeni 1’rojeclions (1) Includes parsiii! ye-.ir reventii’ from IJA\V contract and forecasted center closings, |
| EVE RC O R E pa RTN ERS |
| 26 |
| Overview of Valuation |
| Confidential |
| Leveraged Buyout Analysis — Sources and Uses |
| ($ in millions, except per share data) |
| Revolver Term Lonn Mezzanine Debt HoldCo PIK Total Debt Amount LTM 1Q08 EBITDAE Coupon Net OID Amount Leverage Indicative Max Flex L + 375 3.3x L -I- 375 L -I- 550 2.7 11.50% 2.0% SO.O |0.0 365.0 300.0 12.36% 1.0 13.00% 2.0% 357.7 jlQ.0 $775.0 13.86% 300.0 110.0 §767.7 — |
| 7.0x |
| Term Loan (neE of OID) Mezzanine Debt HoldCo PIK Sponsor Equity Total Sources Amount%i Total $357.7 26.2% 300.0 21.9% 110.0 8.0% 599.1 43.8% $1,366.8 100.0% |
| Shnre Price FD Shares (mm) Equity Value Net Debt Total Enterprise Value As a Multiple of: Revenue EBITDA EBITDAE EPS |
| 2007 E 1.7s 12.8 12.2 28.5 |
| S48.25 2Z2 11,314.7 M 51,317.7 2008P 1.5x 11.1 10.6 24.5 |
| Equity Purchase Price Refinance Existing Debt Existing Cash Financing Fees Advisor)’ Fees Total Uses |
| 51,314.7 9.9 (6.9) 20.5 |
| 2M $1,366.8 Source: Based on draft fin.uidn^ and oiliur minted documents received so date and, ihertfnre, may bu subject lu ch;ini>e. i’’ul!y dilutt’J sh:irts ouisiamSing t;jlculiUcJ usinj; ihe [rcasurj1 method unJ belaud on shurt’s ouis{;indiiig:is ul” 12/59/07 and current options outswiidiiij; as pnivided by (jimpany m;inngement, Nel debt (:icl cish) t-stimateJ as of(l3/,^l/()K per Company management. Nine lli:it analysis excludes any spnnsor fees paid ur adiiitional ni:in:ijiemi’nl inceniive compensation. |
| evercore partners |
| 27 |
| Overview of Valuation |
| Confidential |
| Leveraged Buyout Analysis |
| Required Assumed Total Debt / Ql 2008E EBITDAE Required IRR Assumed 2012E EBITDA Exit Multiple IRR 6.5x 6.8x 7.0x 7.3x 7.5x 8.5x 9.0x 9.5x lO.Ox 10.5x 15.0% $50.58 $50.86 §51.14 551,42 $51.70 15.0% $47.03 $49.09 S5L14 $53,19 $55.25 |
| 17.5% 48.034 8,3848 .72 49.07 49,42 17.5% 45,014 6.874S .72 50.58 52,43 |
| 20.0% 45.774 6.1846 .59 46.99 47.40 20.0% 43.234 4.9146 ,59 48.26 49.94 |
| 22.5% 43.774 4.2344 .69 45,15 45.61 22.5% 41.654 3.1744 ,69 46.21 47.73 |
| 25.0% 41.994 2.5043 .00 43.51 44,02 25.0% 40.244 1.6243 .00 44.39 45.77 |
| Note: Assume N’">ic: Assume s <>.5x 201 2B BU1TDA oxit multiple. kwmgtj of 7. Ox Total Debt /qi 20l)8Er; BITDAK Required Assumed Total Debt / Ql 2008E EBITDAE Required IRR Assumed 2012E EBITDA Exit Multiple IRR 6,5x 6.8x 7.0x 7.3x 7.5x 8.5x 9.0* 9.5x lO.Ox 10.5x 15.0% $50.04 ?50.29 $50,54 $50.80 $51.05 15.0% §46.43 §48,49 $50.54 S52.60 $54.65 |
| 17.5% 47.544 7.8648 .18 48.51 48.83 17.5% 44.484 6.3348 .18 50.04 51.89 |
| 20.0% 45.334 5.7146 .10 46.48 46,87 20.0% 42.744 4,4246 .10 47.78 49.45 |
| 22.5% 43.374 3.8144 .25 44.69 45.13 22.5% 41.204 2.7344 .25 45.77 47.29 |
| 25.0% 41.624 2.1142 .60 43.09 43.58 25.0% 39.844 1,2242 .60 43.98 45.37 |
| Note: Assumes Wx 2012!?. KrMTHA exit multiple. Note: Assumes leverage of 7.0x Total Debt / O] 2(!(H»E SiBlTDAli;. Source: Management Projections, as provided tit prospective buyers, were provided by management of the Company, Based on drafl financing and other related documents received to date and, therd’cire, may be subject so chunjje. Note: \’nlti3tii.)n as of 03/31/OK, l;ully diluted sliares outstandinj,; calculated using the treason’ method and based on sbares uuisiandinji us of 12/l’J/(t7 and current opiions ouisianditi}; as provided by (Innip.iiiy nuiUficmcru. Net debt (lit1!, cash) estimated as of (W/1I/OH per Company management. Leverage assumed to remain proportional between term lis;sn, niexx.iiiiine debt and I loldco 1’IK. (1) I^ised on indicative financing ternis pt-r CiS pn^posal. (2) Assumes interest rale on Senior Del.:! increases the maximum 175 bps per GS proposal (125 bps market flex plus 50 bps K;tlinu,s Oiiidiijnii ilex). EviiRcoRE partnef^s |
| 28 |
| Overview of Valuation |
| Confidential |
| Analysis of Premiums Paid |
| Premium Paid |
| Premium Paid |
| 1 Day Prior |
| 1 Week Prior 1 Month Prior 1 Day Prior 1 Week Prior I Month Prior |
| Number of Transactions 77 77 77 Number of Transactions 23 23 23 |
| Mean Median High Low 24,0% 21,3% 101.6% (9,5%) |
| 25.3% 23.0% 88.4% (8.C 28.7% |
| 26.4% 133.4% (10.5%) |
| Mean Median |
| High Low |
| 18.9% 19.4% 49.3% (1.3%) 21.3% 20.3% 66.4% (6.8%) 23.5% 20.5% 87.3% (10.5%) |
| I Proposed Offer |
| 44.5% |
| 37.6% 3O4% | [Proposed Offer 44.5% 37.6% 30.4% |
| SourCL-: SDC Database ami l;:ictHe!. |
| evercore partners |
| 29 |
| Appendix |
| evercore partners |
| Other Information |
| evercore partners |
| Other Information |
| Confidential |
| Summary Management Projections ($ in millions) 2007E 2008 E 2009E 2010E 2011E 2012E CAGR Base Center $76 1.5 $807.0 S847.9 $877.6 S900.6 $923.4 3.9% New Center 0.0 25.9 89.4 176.7 286.0 414.1 NA College Coach 6.9 s.6 10.8 13.5 16.8 21.1 25.0% BUG A 5.6 9.0 S3.4 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 $775.1 S853.0 S966.3 SI, 092.9 $1,235.0 $1,395.5 12.5% % Growth 10.1% li,3% 11.1% 13.0% 13.0% EI3ITDA $103.2 SI 18.8 $140.2 $164.1 $189.3 $217.4 16.1% % Margin 13.3% 13.9% 14.5% 15.0% 1>3% 15.6% % Growth 15,0% IS.1% 17,0% 15.3% 14.9% EB1TDAE S107.9 $123.8 $146.0 S170.1 3195.5 $223.9 15.7% % Margin n.9% t-l.5% IS, 1% 15.6% I5.S% 16.0% % Growth 14.6% ts.o% 16.5% 14.9% 14.5% EBIT $79.5 S92.2 $111.7 $131.9 $154.4 $179.8 17.7% % Margin /OJ% IO.S% 11.6% 12.1% 12.5% 12.9% % Growth 16.1% 21.1% 1S.1% 17.0% 16,4% Ne! Income $45.5 $53.5 $66.4 $79.6 $94.6 $112.0 19.7% % Margin 5.5% 6J% 6,9% 7.3% 7.7% S.0% % Gnrn’th 17.5% 24.1% 20.0% 1S.9% IS.3% 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 |
| Capita! Expenditures $57.8 S58.5 $60,1 574.6 $73.3 $83.7 |
| % ofSaltt 7.5% 6.9% 6.2% 6.8% 5,9% 6.0% Change in \VC 4.9 6.9 6.7 7.3 7.8 8.6 |
| % fl/MVfj fttf% O.S% 0.7% 0.7% 0.6% 0.6% Dcbi 21.9 0.0 0.0 0.0 0,0 0.0 |
| Cush 5.0 16.5 65.0 116.9 J88.9 271.8 |
| nci Debt (Net Cash) 16.9 (16.5) (65.0) (116,9) (188.9) (271.8) |
| Source: Gimp.im’ m:in;>i;cni<.’nt, as provided In prospective buyers. |
| E V E R C O R E pa RT N E R S |
| Other Information |
| Confidential |
| Equity Research Analyst Financial Projections ($ in millions) 2009E 2010E 2011E 2007E 200SE 2009E 2010E 2011E 2012E 2007 E 2008E 2012E Revenue EBITDA BofA (!2/04/U7) $775.5 S845.0 5932.5 . BofA (12/04/07) SilB.2 SI 19.-! SI 39.4 Slifei (10/29/07) 775.4 B53.9 . Slifcl (10/29/07) 99.6 113.1 |
| Baird( 10/26/07) 774.fi BS2.0 954.9 Baird (10/26/07) 102,3 llfj.O . |
| Signal Hill (I0/2f./07) 776.2 853.4 943.7 Signal Hill (10/26/07) 103.7 119.2 133.! ThinkEquity (10/26/07) 775.2 K55.2 . ‘l’hinkEt|Liiiy( 10/26/07) lOf. 6 112.2 . |
| SunTrust (10/26/1)7) 774.9 H70.U — SunTrust (10/26/07) — — . |
| Lehman (08/08/07) ra 773.6 841.0 934.5 1,027.0 1,124.2 Lehman (OB/08/07) i:’ 105.5 11B.6 135.2 |
| 1,225.5 151,6 |
| 169,2 |
| SHB.O Mean S775.I S8S2.9 S94U $1,027.0 $1,124.2 Mean 5102,6 5116.4 $135,9 |
| 51,225.5 $151.6 |
| 5169.2 |
| $188.0 |
| Median 775,2 853.4 939.1 1,027.0 1,124.2 Median $102.7 $117.3 S135.2 1,225.5 $151.6 |
| 5169.2 |
| 5188.0 |
| I/B/E/S $775.:; S851.2 $941.3 . I/B/E/S S 103.9 S117.1 S13-1.0 Management Projections S775.1 5853.0 S9G6.3 $1,092.9 $1,235.0 Management Projections 5103.2 $118.8 $140.2 |
| 51,395,5 $164.1 |
| 5189.3 |
| S217.4 2007E 2008E 2009E 2010E 2011E 2032E 2007 E 2008E 20D9E 2010E 2011E 2012E Revenue Growth Rates Capital Expenditures (l> BofA (12/04/07) 9.0’ii. 10.3”,’,, , BofA (12/04/07) S53.5 S42.3 S4d.fi Slifc! (10/29/07) 10.1% — . Stifd (10/29/07) 3J.O 27.3 . |
| Bainl{ 10/26/07) 10.0% 11!% . BairJ (10/2fi/()7) 32.0 3H.5 . |
| Signal Mill (10/26/07) 9.9% 10.6% . Signal 11111(10/26/07) — — . |
| Thinkiiquity (10/26/07) 10.3% — . Thinkliijuity ( 10/26/07) — — . |
| SunTrust (10/26/07) 12.3” SunTrust (I0/2f>/07) — . |
| Lehman (OR/08/07) (2) 8.7% 11.1% 9.9’!’,, 9.5% y.’fn Lehman (08/08/07) Cl 27,! 29.4 32.7 |
| 35.9 |
| 39.3 |
| 42.9 |
| Mean Median 10,0% 10.0% 11.0% 10.9% 9.9% 9.5% Mean Median $35.9 31.5 $34.4 34.0 S39.7 9.0% 9.9% 9.5% S35.9 9.0% S39.3 S42.9 39.7 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% 13.0% 13.0% Management Projections $57.8 S58.S 560,1 |
| $74.6 |
| $73.3 |
| $83.7 |
| Sourcu: \Vall Sttuul research. Manaj^nuMit Projrciinns, us pr< Ahidetl u> pro^pucuvi: buyers, were provided l>y tnniVAgumciK of the Company. (1) l’.t|iniy research aniily.Hts dii.1 n^l fort’caiil aci.]uisilirin expeiuliture^. f^ipiliii expeiKluures projecunns provided by niiinai^emt:!!! m iht1 Mana^cmeni Projrctions inckide ;iCc]uisilions (2) Lehman Brutheis has since di.scununued coverage pending anal\-st chani^1. evercore partners |
| 33 |
| Other Information |
| Confidential |
| Research Analyst Summary Price Targets Firm Analyst Date Recommendation Target Price Premium / (Discount) to Current Share Price Offer Price Matrix USA Daniel Scnlzi 12/28/07 Sell NA NA NA BMO Capital Markets Jeffrey Silbcr 12/10/07 Market Perform S40.00 19.8% (17,1%) Bnnk of America Kevin Doherty 12/04/07 Neutral 40.00 19.8% (17.1%) Stifei Nicolaus Robert L, Craig 10/26/07 Hold NA NA NA Robert W. Baird Amy W, Junker 10/26/07 Neutral 41.00 22.8% (15.0%) Signal Bill Capital Group Trace Urdan 10/26/07 Buy NA NA NA ThiakEquity Partners LLC Nate Swansea 10/26/07 Accumulate 41.00 22.8% (15.0%) SunTrust Robinson Humphrey Mark Hughes Finus “O/i Hold” 10/25/07 Buy 57.00 70.7% 18.1% Penilinv Analyst CbanM Mean Median $43.80 $41.00 31.2% (9.2%) (15.0%) 22.8V,, Current Share Price (01/08/08) 533.39 |
| Offer Price $48.25 |
| Lehman Brothers Michael Lasscr 071)0107 On Hold S41.00 22,8% (15.0%) Cralil Snitsf Biwirfo/1 Dohcll 04/30/07 On Hold 43.00 2S.S% (10,9%) |
| Source Wiill Siren rt’si-:irc)i ever c o r e P a in’ n h r s |
| Other Information |
| Confidential |
| Research Analyst Commentary — 3Q07 Earnings Announcement “We believe ihe preannounccrncnt of third quarter results wns 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 lo regain investor confidence and demonstrate diat it can return the business to its targeted topline growth of 13-14%. 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 die UAW/Ford roll-off remains a headwind until the anniversary in the second quarter 2008.” “We are maintaining our Neutral rating based on the carryover effect of underperforming 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 underper forma nee will diminish results for die next several quarters.” ”...Operating margin declined 60 basis points year on year and the operating margin for 2007 \? 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 die 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 $1.68-11.70 from §1.7741.80.” “Q3 is typically a tough enrollment period due to a portion of enrollments that must be back-fslled as children leave Swingsct 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 the economy, or any specific company or industry, except for the Colorado-based centers (acquired in 2005 and 2006).” “This is die 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.” |
| Suurct’: Will! Sired ix’Hi:;irch 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 mode! 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 cf the UAW situation. We believe the key to Swingset’s longer-verm price appreciation is evidence dint the coracany 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 the backup center business. Nonetheless, the 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 well 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 n market opportunity ripe for the picking. That said, we also recognize luring 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; Will) Struct research. EVHRCORE PARTN ERS |
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| This ‘SC 13E3’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| Filed on: | 2/19/08 | PREM14A | ||
| 1/9/08 | ||||
| List all Filings | ||||