MIC - Project MICC PRELIMINARY DRAFT Project MICC Model...

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Unformatted text preview: Project MICC PRELIMINARY DRAFT Project MICC Model John Yoshida 4/8/2012 Project MICC PRELIMINARY DRAFT Global Variables Summary ($MM except where noted) Variable Name prelim projn mdate days T_Name T_Ticker units A_Case EM EM_F PGR PGR_F V_DATE WACC WACC_F Description "Preliminary Draft" trailer Project name Date which market data is pulled Number of days in a year Target name Target ticker Units trailer Case Selector DCF exit multiple DCF exit multiple flex DCF perpetual growth rate DCF perpetual growth rate flex DCF valuation date DCF discount rate DCF discount rate flex Project MICC PRELIMINARY DRAFT Adobe Systems Incorporated Summary #NAME? Market Data as of: BASIC INFORMATION Project Name: Currency: Market Data as of: # of Days Target Name: Target Ticker: CURRENT CASE: Selector MICC CS Case 3 Case 4 Case 5 MICC USD 2/27/2012 365 2/27/2012 MICC 1 Adobe Systems Incorporated ADBE GENERAL STATISTICS Current Share Price 52-Week High 52-Week Low % off 52-Week High Current Fiscal Year End SHARE BUYBACK CONTROL Forward P/E 12.46 $33.27 $35.99 $22.67 7.6% 11/30/2012 CALCULATION OF MARKET VALUE AND AGGREGATE VALUE Diluted Shares Outstanding 512.557 Current Share Price $33.27 Market Value $17,053 + Short Term Debt 9.2 + Long Term Debt 1505.1 + Preferred 0.0 - Non Controlling Interest 0.0 + / - Other Adjustments 0.0 - Cash and Equivalents 989.5 Aggregate Value $17,578 CALCULATION OF DILUTED SHARES Shares Outstanding ITM Options Outstanding Potential Shares Options Proceeds Shares Repurchased Under TSM Diluted Shares Outstanding 493.803 51.673 545.476 $1,095 32.919 512.557 Options Table Options 34.802 16.871 0.000 0.000 0.000 51.673 WASP $31.47 $0.00 $0.00 $0.00 $0.00 Options ITM 34.802 16.871 0.000 0.000 0.000 51.673 Proceeds $1,095.22 $0.00 $0.00 $0.00 $0.00 $1,095.22 Project MICC PRELIMINARY DRAFT Adobe Systems Incorporated Drivers ($MM except where noted) FY2009A 11/27/2009 HISTORICAL FY2010A 12/3/2010 FY2011A 12/2/2011 FY2012E 11/30/2012 FY2013E 11/29/2013 PROJECTED FY2014E 11/28/2014 FY2015E 11/27/2015 FY2016E 12/2/2016 - 29.0% 29.0% 29.0% 29.0% 29.0% 29.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 4.7% 4.7% 8.5% 8.5% 8.9% 8.9% 7.9% 7.9% 6.9% 6.9% 2,945.9 2,945.9 2,945.9 2,945.9 2,945.9 3,800.0 3,800.0 3,800.0 3,800.0 3,800.0 4,216.3 4,216.3 4,216.3 4,216.3 4,216.3 4,413.8 4,789.2 5,216.2 5,629.0 6,018.2 10.1% 10.1% 10.1% 10.1% 10.1% 10.1% 10.6% 10.6% 10.6% 10.6% 10.6% 10.6% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% MICC CS Case 3 Case 4 Case 5 296.7 296.7 296.7 296.7 296.7 403.5 403.5 403.5 403.5 403.5 437.9 437.9 437.9 437.9 437.9 458.4 497.4 541.7 584.6 625.0 SG&A % Margin MICC CS Case 3 Case 4 Case 5 43.5% 43.5% 43.5% 43.5% 43.5% 43.5% 42.8% 42.8% 42.8% 42.8% 42.8% 42.8% 42.7% 42.7% 42.7% 42.7% 42.7% 42.7% 42.7% 42.7% 42.7% 42.7% 42.7% 42.7% 42.7% 42.7% 42.7% 42.7% MICC CS Case 3 Case 4 Case 5 1,280.7 1,280.7 1,280.7 1,280.7 1,280.7 1,627.7 1,627.7 1,627.7 1,627.7 1,627.7 1,800.4 1,800.4 1,800.4 1,800.4 1,800.4 1,884.8 2,045.1 2,227.4 2,403.7 2,569.9 R&D % Margin MICC CS Case 3 Case 4 Case 5 19.2% 19.2% 19.2% 19.2% 19.2% 19.2% 17.9% 17.9% 17.9% 17.9% 17.9% 17.9% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 565.1 565.1 565.1 565.1 565.1 680.3 680.3 680.3 680.3 680.3 738.1 738.1 738.1 738.1 738.1 772.6 838.4 913.1 985.4 1,053.5 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 1.9% 1.9% 1.9% 1.9% 1.9% 1.9% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% Amortization (Not in Cost of Sales) 71.6 72.1 71.6 72.1 71.6 72.1 71.6 72.1 71.6 72.1 42.8 42.8 42.8 42.8 42.8 44.8 48.7 53.0 57.2 61.1 3.3% 3.3% 3.3% 3.3% 3.3% 3.3% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% Total Depreciation 95.9 95.9 95.9 95.9 95.9 107.5 107.5 107.5 107.5 107.5 117.5 117.5 117.5 117.5 117.5 123.0 133.5 145.4 156.9 167.7 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 3.1% 3.1% 3.1% 3.1% 3.1% 3.1% 3.1% 3.1% 3.1% 3.1% 3.1% 3.1% 3.1% 3.1% 3.1% 3.1% MICC CS Case 3 Case 4 Case 5 Total Amortization 164.0 164.0 164.0 164.0 164.0 169.7 169.7 169.7 169.7 169.7 131.5 131.5 131.5 131.5 131.5 137.7 149.4 162.7 175.6 187.7 MICC CS Case 3 Case 4 Case 5 44.9% 44.9% 44.9% 44.9% 44.9% 44.9% 17.9% 17.9% 17.9% 17.9% 17.9% 17.9% 19.5% 19.5% 19.5% 19.5% 19.5% 19.5% 19.5% 19.5% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% INCOME STATEMENT DRIVERS Revenue % Growth MICC CS Case 3 Case 4 Case 5 Revenue MICC CS Case 3 Case 4 Case 5 Cost of Sales % Margin MICC CS Case 3 Case 4 Case 5 Cost of Sales SG&A R&D MICC CS Case 3 Case 4 Case 5 Amortization (Not in Cost of Sales) % Margin MICC CS Case 3 Case 4 Case 5 MICC CS Case 3 Case 4 Case 5 Total Depreciation % Margin MICC CS Case 3 Case 4 Case 5 MICC CS Case 3 Case 4 Case 5 Total Amortization % Margin MICC CS Case 3 Case 4 Case 5 Tax Rate % Project MICC PRELIMINARY DRAFT Adobe Systems Incorporated Drivers ($MM except where noted) FY2009A 11/27/2009 HISTORICAL FY2010A 12/3/2010 FY2011A 12/2/2011 FY2012E 11/30/2012 FY2013E 11/29/2013 PROJECTED FY2014E 11/28/2014 FY2015E 11/27/2015 FY2016E 12/2/2016 4.1% 4.1% 4.1% 4.1% 4.1% 4.1% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Capital Expenditures (119.6) (119.6) (119.6) (119.6) (119.6) (169.6) (169.6) (169.6) (169.6) (169.6) (210.3) (210.3) (210.3) (210.3) (210.3) (220.1) (220.1) (238.9) (238.9) (260.2) (260.2) (280.8) (280.8) (300.2) (300.2) 5.7% 5.7% 5.7% 5.7% 5.7% 5.7% 6.1% 6.1% 6.1% 6.1% 6.1% 6.1% 6.8% 6.8% 6.8% 6.8% 6.8% 6.8% 6.8% 6.8% 6.8% 6.8% 6.8% 6.8% 6.8% 6.8% 6.8% 6.8% Stock-based Compensation Expense 167.6 231.1 167.6 231.1 167.6 231.1 167.6 231.1 167.6 231.1 286.1 286.1 286.1 286.1 286.1 299.5 299.5 325.0 325.0 354.0 354.0 382.0 382.0 408.4 408.4 (300.0) (300.0) (300.0) (300.0) 0.0 – 0.0 – 0.0 – CASH FLOW STATEMENT DRIVERS Capital Expenditures % Revenue MICC CS Case 3 Case 4 Case 5 MICC CS Case 3 Case 4 Case 5 Stock-based Compensation Expense % Revenue MICC CS Case 3 Case 4 Case 5 MICC CS Case 3 Case 4 Case 5 Treasury Share Buybacks MICC CS Case 3 Case 4 Case 5 (350.0) (350.0) (350.0) (350.0) (350.0) (350.0) (850.0) (850.0) (850.0) (850.0) (850.0) (850.0) (695.0) (695.0) (695.0) (695.0) (695.0) (695.0) Project MICC PRELIMINARY DRAFT Adobe Systems Incorporated Drivers ($MM except where noted) FY2009A 11/27/2009 HISTORICAL FY2010A 12/3/2010 FY2011A 12/2/2011 FY2012E 11/30/2012 FY2013E 11/29/2013 PROJECTED FY2014E 11/28/2014 FY2015E 11/27/2015 FY2016E 12/2/2016 50.9 50.9 50.9 50.9 50.9 50.9 53.2 53.2 53.2 53.2 53.2 53.2 54.9 54.9 54.9 54.9 54.9 54.9 55.0 55.0 55.0 55.0 55.0 55.0 55.0 55.0 55.0 55.0 (30.7) (30.7) (56.6) (56.6) (64.3) (64.3) (62.2) (62.2) (58.6) (58.6) WORKING CAPITAL ITEMS Receivable Days MICC CS Case 3 Case 4 Case 5 MICC CS Case 3 Case 4 Case 5 Cash Flow Change in Trade Receivables 172.3 (134.3) 172.3 (134.3) 172.3 (134.3) 172.3 (134.3) 172.3 (134.3) (81.1) (81.1) (81.1) (81.1) (81.1) MICC CS Case 3 Case 4 Case 5 Trade Receivables 410.9 410.9 410.9 410.9 410.9 554.3 554.3 554.3 554.3 554.3 634.4 634.4 634.4 634.4 634.4 665.1 721.7 786.0 848.2 906.9 Payable Days MICC CS Case 3 Case 4 Case 5 72.5 72.5 72.5 72.5 72.5 72.5 47.4 47.4 47.4 47.4 47.4 47.4 72.2 72.2 72.2 72.2 72.2 72.2 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 1.3 1.3 7.5 7.5 8.5 8.5 8.2 8.2 7.8 7.8 MICC CS Case 3 Case 4 Case 5 Cash Flow Change in Trade Payables (13.6) (10.1) (13.6) (10.1) (13.6) (10.1) (13.6) (10.1) (13.6) (10.1) 32.2 32.2 32.2 32.2 32.2 MICC CS Case 3 Case 4 Case 5 Trade Payables 58.9 58.9 58.9 58.9 58.9 52.4 52.4 52.4 52.4 52.4 86.7 86.7 86.7 86.7 86.7 87.9 95.4 103.9 112.1 119.9 34.7% 34.7% 34.7% 34.7% 34.7% 34.7% 20.8% 20.8% 20.8% 20.8% 20.8% 20.8% 26.3% 26.3% 26.3% 26.3% 26.3% 26.3% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% Minimum Cash 1,022.2 1,022.2 1,022.2 1,022.2 1,022.2 791.7 791.7 791.7 791.7 791.7 1,110.0 1,110.0 1,110.0 1,110.0 1,110.0 1103.5 1,103.5 1197.3 1,197.3 1304.0 1,304.0 1407.3 1,407.3 1504.6 1,504.6 Minimum Cash % of Revenue MICC CS Case 3 Case 4 Case 5 MICC CS Case 3 Case 4 Case 5 Project MICC PRELIMINARY DRAFT Adobe Systems Incorporated Income Statement ($MM except where noted) HISTORICAL FY2009A FY2010A 11/27/2009 12/3/2010 FY2011A 12/2/2011 FY2012E 11/30/2012 PROJECTED FY2013E FY2014E 11/29/2013 11/28/2014 FY2015E 11/27/2015 FY2016E 12/2/2016 INCOME STATEMENT Revenue 2,946 3,800 4,216 4,414 4,789 5,216 5,629 6,018 – 29% 11% 4.7% 8.5% 8.9% 7.9% 6.9% Cost of Sales % Margin 297 10.1% 404 10.6% 438 10.4% 458 10.4% 497 10.4% 542 10.4% 585 10.4% 625 10.4% Total Gross Profit % Margin 2,649 89.9% 3,396 89.4% 3,778 89.6% 3,955 89.6% 4,292 89.6% 4,674 89.6% 5,044 89.6% 5,393 89.6% SG&A % Margin 1,281 43.5% 1,628 42.8% 1,800 42.7% 1,885 42.7% 2,045 42.7% 2,227 42.7% 2,404 42.7% 2,570 42.7% Research & Development % Margin 565 19.2% 680 17.9% 738 17.5% 773 17.5% 838 17.5% 913 17.5% 985 17.5% 1,053 17.5% 41 23 98 – – – – – 72 2.4% 72 1.9% 43 1.0% 45 1.0% 49 1.0% 53 1.0% 57 1.0% 61 1.0% 732 24.8% 1,016 26.7% 1,197 28.4% 1,253 28.4% 1,360 28.4% 1,481 28.4% 1,598 28.4% 1,709 28.4% Total Amortization % Margin 164 5.6% 170 4.5% 132 3.1% 138 3.1% 149 3.1% 163 3.1% 176 3.1% 188 3.1% Total Depreciation % Margin 96 3.3% 108 2.8% 118 2.8% 123 2.8% 133 2.8% 145 2.8% 157 2.8% 168 2.8% Total D&A % Margin 260 8.8% 277 7.3% 249 5.9% 261 5.9% 283 5.9% 308 5.9% 332 5.9% 355 5.9% Reported EBITDA % Margin 950 32.3% 1,270 33.4% 1,348 32.0% Adjusted EBITDA % Margin 992 33.7% 1,294 34.0% 1,446 34.3% 1,514 34.3% 1,643 34.3% 1,789 34.3% 1,931 34.3% 2,064 34.3% 31.4 3.4 (17.0) 11.0 13.1 57.0 (6.1) (49.9) (3.0) 67.0 5.9 (64.1) 16 63 – (47.3) 26 63 – (37.1) 39 63 – (24.2) 52 47 – 4.6 66 44 – 22.5 Reported Pre-Tax Income % Margin 702 23.8% 943 24.8% 1,035 24.6% Adjusted Pre-Tax Income % Margin 743 25.2% 966 25.4% 1,133 26.9% 1,206 27.3% 1,323 27.6% 1,457 27.9% 1,603 28.5% 1,731 28.8% Income Tax Expense Effective Tax Rate Tax Adjustment Adjusted Tax Rate 315 44.9% 18.5 44.9% 168 17.9% 4.2 17.9% 202 19.5% 19.1 19.5% 236 19.5% 265 20.0% 291 20.0% 321 20.0% 346 20.0% Reported Net Income % Margin 387 13.1% 775 20.4% 833 19.8% Adjusted Net Income % Margin 409 13.9% 794 20.9% 912 21.6% 970 22.0% 1,058 22.1% 1,165 22.3% 1,282 22.8% 1,385 23.0% 529 527 505 0 0 0 0 0 Reported Earnings per Share % Growth $0.73 – $1.47 101.4% $1.65 12.2% Adjusted Earnings per Share % Growth $0.77 – $1.51 94.9% $1.81 19.9% #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! % Growth Restructuring and other related charges Amortization (Not in Cost of Sales) % Margin Adjusted EBIT % Margin Interest and Other Income (expense) Interest Expense Investment Gains (losses) Change to EBIT Diluted Shares Outstanding Project MICC PRELIMINARY DRAFT Adobe Systems Incorporated Income Statement ($MM except where noted) HISTORICAL FY2009A FY2010A 11/27/2009 12/3/2010 SHARE BUYBACK SCHEDULE Beginning Shares $ Amount (Repurchased) / Issued $ EPS P/E Repurchase Price Shares (Repurchased) / Issued Ending Shares FY2011A 12/2/2011 FY2012E 11/30/2012 512.6 512.6 (300.0) #DIV/0! 12.46 #DIV/0! #DIV/0! #DIV/0! PROJECTED FY2013E FY2014E 11/29/2013 11/28/2014 #DIV/0! (300.0) #DIV/0! 12.46 #DIV/0! #DIV/0! #DIV/0! #DIV/0! – #DIV/0! 12.46 #DIV/0! #DIV/0! #DIV/0! FY2015E 11/27/2015 FY2016E 12/2/2016 #DIV/0! – #DIV/0! 12.46 #DIV/0! #DIV/0! #DIV/0! #DIV/0! – #DIV/0! 12.46 #DIV/0! #DIV/0! #DIV/0! Project MICC PRELIMINARY DRAFT Adobe Systems Incorporated Cash Flow Statement ($MM except where noted) HISTORICAL FY2009A FY2010A 11/27/2009 12/3/2010 FY2011A 12/2/2011 FY2012E 11/30/2012 PROJECTED FY2013E FY2014E 11/29/2013 11/28/2014 FY2015E 11/27/2015 FY2016E 12/2/2016 CASH FLOW STATEMENT Cash Flow from Operating Activities Adjusted Net Income Depreciation and Accretion Amortization Stock-Based Compensation Expense Deferred Income Taxes Unrealized (Gains) Losses on Investments Retirements and Disposals of Property and Equipment Tax Benefits From Employee Stock Option Plans Other Non-Cash Items Excess Tax Benefits from Stock-Based Compensation 409 118 164 168 50 12 1 44 2 (12) 794 123 170 231 (172) 12 1 11 3 (16) 912 139 132 286 51 (4) 15 10 15 (10) 970 123 138 300 – – – – – – 1,058 133 149 325 – – – – – – 1,165 145 163 354 – – – – – – 1,282 157 176 382 – – – – – – 1,385 168 188 408 – – – – – – Decrease (Increase) in Trade Receivable Prepaid Expenses and Other Current Assets Increase (Decrease) in Trade Payable Accrued Restructuring Increase (Decrease) in Other Current Liabilities Change in Net Working Capital 172 22 (14) (8) 12 184 (134) (40) (10) (27) 189 (23) (81) (5) 32 72 60 78 (31) – 1 – – (29) (57) – 7 – – (49) (64) – 9 – – (56) (62) – 8 – – (54) (59) – 8 – – (51) 1,141 1,132 1,622 1,501 1,617 1,772 1,943 2,098 Cash Flow from Investing Activities Purchases of Short-term Investments Maturities of Short-term Investments Proceeds from Sales of Short-term Investments Acquisitions, net cash Purchases of Property and Equipment Proceeds from Sale of Property and Equipment Purchases of Long-term Investments, Intangibles and Other Assets Proceeds From Sales of Long-term Investments Other (1,307) 464 1,057 (1,583) (120) – (29) 18 3 (2,601) 644 1,134 (193) (170) 32 (28) 20 2 (1,861) 486 1,148 (259) (210) – (66) 5 (0) – – – – (220) – – – – – – – – (239) – – – – – – – – (260) – – – – – – – – (281) – – – – – – – – (300) – – – – Cash from Investing Activities (1,497) (1,159) (757) (220) (239) (260) (281) (300) (350) 180 12 650 – (14) – (850) 139 16 1,493 (1,004) – (11) (695) 145 10 – (10) – – (300) – – – (9) – – (300) – – – (10) – – 0 – – – – – – 0 – – – (600) – – 0 – – – – – – 478 (215) (550) (309) (310) – (600) – 15 12 4 – – – – – 136 886 (230) 1,022 318 792 971 1,110 1,068 2,081 1,511 3,149 1,062 4,660 1,798 5,722 1,022 792 1,110 2,081 3,149 4,660 5,722 7,520 1,021 34.7% 962 25.3% 1,412 33.5% 1,281 29.0% 1,378 28.8% 1,511 29.0% 1,662 29.5% 1,798 29.9% Cash from Operating Activities Cash Flow from Financing Activities Purchases of Treasury Stock Proceeds from Issuance of Treasury Stock Excess Tax Benefits from Stock Based Compensation Proceeds From Debt Repayment of Debt and Capital Lease Obligations Repayment of Acquired Debt Debt Issuance Costs Cash from Financing Activities Effect of Exchange Rate Differences Net Change Net Increase in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of the Year Cash and Cash Equivalents at End of Year Free Cash Flow % Margin '10 - '15 CAGR Project MICC PRELIMINARY DRAFT Adobe Systems Incorporated Balance Sheet ($MM except where noted) HISTORICAL FY2009A FY2010A 11/27/2009 12/3/2010 FY2011A 12/2/2011 FY2012E 11/30/2012 PROJECTED FY2013E FY2014E 11/29/2013 11/28/2014 FY2015E 11/27/2015 FY2016E 12/2/2016 BALANCE SHEET Assets Cash and Cash Equivalents Short Term Investments Trade Receivables Deferred Income Taxes Prepaid Expenses and Other 1,022 905 411 77 81 792 1,718 554 83 110 1,110 1,922 634 92 133 2,081 1,922 665 92 133 3,149 1,922 722 92 133 4,660 1,922 786 92 133 5,722 1,922 848 92 133 7,520 1,922 907 92 133 Total Current Assets 2,496 3,258 3,892 4,894 6,018 7,594 8,718 10,574 Property and Equipment - Net Goodwill Purchased and Other Intangibles - Net Investment in Lease Receivable Other Assets 388 3,495 527 207 191 449 3,642 457 207 170 528 3,849 546 207 90 625 3,849 408 207 90 730 3,849 258 207 90 845 3,849 96 207 90 969 3,849 (80) 207 90 1,102 3,849 (267) 207 90 Total Assets 7,305 8,183 9,112 10,073 11,153 12,681 13,754 15,555 Liabilities and Shareholder's Equity Current Portion of Debt Trade Payables Capital Lease Obligations Accrued Restructuring Other Current Liabilties – 59 – 38 748 – 52 9 8 999 – 87 9 81 1,074 – 88 – 81 1,074 – 95 – 81 1,074 – 104 – 81 1,074 – 112 – 81 1,074 – 120 – 81 1,074 Total Current Liabilities 845 1,068 1,251 1,243 1,250 1,259 1,267 1,275 Long-term Debt Deferred Revenue Accrued Restructuring Income Taxes Payable Deferred Income Taxes Other Liabilities 1,000 37 7 224 252 27 1,514 49 8 165 103 42 1,505 55 7 157 182 51 1,505 55 7 157 182 51 1,495 55 7 157 182 51 1,495 55 7 157 182 51 895 55 7 157 182 51 895 55 7 157 182 51 Total Liabilities 2,392 2,949 3,208 3,200 3,197 3,206 2,614 2,622 0 2,390 5,323 (2,824) 24 0 2,458 6,023 (3,264) 17 0 2,754 6,649 30 (3,530) 0 3,053 7,619 (270) (3,530) 0 3,378 8,677 (570) (3,530) 0 3,732 9,843 (570) (3,530) 0 4,114 11,125 (570) (3,530) 0 4,523 12,510 (570) (3,530) Total Equity 4,913 5,234 5,904 6,873 7,956 9,476 11,140 12,933 Total Liabilities and Shareholder's Equity 7,305 8,183 9,112 10,073 11,153 12,681 13,754 15,555 Yes Yes Yes Yes Yes Yes Yes Yes Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income (Loss) Check? Project MICC PRELIMINARY DRAFT Adobe Systems Incorporated Balance Sheet ($MM except where noted) HISTORICAL FY2009A FY2010A 11/27/2009 12/3/2010 FY2011A 12/2/2011 FY2012E 11/30/2012 PROJECTED FY2013E FY2014E 11/29/2013 11/28/2014 FY2015E 11/27/2015 FY2016E 12/2/2016 DEBT SCHEDULE Beginning Cash Cash Flow Available for Debt Payment Minimum Cash Balance Mandatory Payments Cash Available for Debt Repayment Revolving Credit Facility Beginning Balance Mandatory (Payment) Additional Borrowing (Repayment) Ending Balance Facility Fee Interest Rate Interest Expense 1,110 981 1,103 (9) 978 Cash Available After Revolving Credit Facility Service Capital Lease Beginning Balance Mandatory (Payment) Ending Balance 20 Cash Available After Capital Lease Service $600MM Feb. 2010 3.25% Senior Notes due: Beginning Balance Mandatory Borrowing (Payment) Additional Borrowing (Repayment) Ending Balance Interest Rate Interest Expense No 600 No Cash Available After $900MM Feb. 2010 4.75% Senior Notes due 2/1/2020 Service Ending Cash Interest Rate on Cash Interest Income Total Interest Expense Total Borrowing (Repayment) Total Debt – – – – 1 1.1% 0 – – – – 1 1.1% 0 – – – – 1 1.1% 0 – – – – 1 1.1% 0 – – – – 1 1.1% 0 1,952 3,356 4,315 6,015 20 (9) 10 10 (10) – – – – – – – 1,952 3,356 4,315 6,015 600 – 0 600 3.3% 19.5 600 – 0 600 3.3% 19.5 600 – 0 600 3.3% 19.5 600 (600) 0 – 3.3% 3.5 – – 0 – 3.3% – 1,952 3,356 4,315 6,015 900 – 0 900 4.8% 42.75 900 – 0 900 4.8% 42.75 900 – 0 900 4.8% 42.75 900 – 0 900 4.8% 42.75 900 – 0 900 4.8% 42.75 978 1,952 3,356 4,315 6,015 2,081 1.00% 16 3,149 1.00% 26 4,660 1.00% 39 5,722 1.00% 52 7,520 1.00% 66 63 63 63 47 44 (9) 1,510 (10) 1,500 – 1,500 (600) 900 – 900 2/1/2015 Cash Available After $600MM Feb. 2010 3.25% Senior Notes due: Service $900MM Feb. 2010 4.75% Senior Notes due 2/1/2020 Beginning Balance Mandatory Payment Additional Borrowing (Repayment) Ending Balance Interest Rate Interest Expense 5,722 1,798 1,505 – 6,015 978 – 0.1% 4,660 1,662 1,407 (600) 4,315 978 Yes 3,149 1,511 1,304 – 3,356 978 1000 (Capacity) 2,081 1,078 1,197 (10) 1,952 900 Project MICC PRELIMINARY DRAFT Adobe Systems Incorporated Discounted Cash Flow Analysis Output ($MM except where noted) DCF CONTROLS Valuation Date FY End DCF Years Market Risk Premium WACC WACC Flex Current Case: 2/19/2012 11/30/2012 5.0 5.0% 10.0% 0.5% MICC PGR PGR Flex Exit Multiple Exit Multiple_Flex EXIT MULTIPLE METHOD Exit Multiple Discount Rate PV of Unlevered Cash Flow PV of Terminal Value Aggregate Value Net Debt Equity Value Shares Outstanding Implied Price/Share % Premium (Discount) to Current Share Price Terminal Value Analysis % Value in Unlevered FCF % Value in Terminal Value Implied Current Valuation Multiples 2012E AV / Revenue 2013E AV / Revenue 2012E AV / EBITDA 2013E AV / EBITDA Implied Perpetuity Growth Implited Terminal Value Multiples 2015 Revenue Exit Multiple 9.5% 0.0x 10.0% 10.5% 9.5% 0.0x 10.0% 10.5% 9.5% 0.0x 10.0% 10.5% Project MICC PRELIMINARY DRAFT Adobe Systems Incorporated Discounted Cash Flow Analysis Output ($MM except where noted) DCF CONTROLS Valuation Date FY End DCF Years Market Risk Premium WACC WACC Flex Current Case: 2/19/2012 11/30/2012 5.0 5.0% 10.0% 0.5% MICC PGR PGR Flex Exit Multiple Exit Multiple_Flex PERPETUITY GROWTH METHOD Perpetuity Growth Rate Discount Rate PV of Unlevered Cash Flow PV of Terminal Value Aggregate Value Net Debt Equity Value Shares Outstanding Implied Price/Share % Premium (Discount) to Current Share Price Terminal Value Analysis % Value in Unlevered FCF % Value in Terminal Value Implied Current Valuation Multiples 2012E AV / Revenue 2013E AV / Revenue 2012E AV / EBITDA 2013E AV / EBITDA Implited Terminal Value Multiples 2015 Revenue Exit Multiple 2015 EBIDA Exit Multiple 9.5% 0.0% 10.0% 10.5% 9.5% 0.0% 10.0% 10.5% 9.5% 0.0% 10.0% 10.5% Project MICC PRELIMINARY DRAFT Adobe Systems Incorporated Discounted Cash Flow Analysis Output ($MM except where noted) Market Data as of 2/27/2012 Capital Breakdown Market Value of Equity Net Debt Preferred Total Capital Value 17,052.8 524.8 0.0 17,577.6 % of Total Capital 97.0% 3.0% 0.0% 100.0% Weighted Costs Weighted Cost of Debt Weighted Cost of Equity Weighted Cost of Preferred Weighted Average Cost of Capital 0.1% 9.4% 0.0% 9.5% Capital Asset Pricing Model Cost of Equity = Risk-free Rate + Beta*(Market Risk Premium) Cost of Debt Cost of Debt Tax Rate After-tax Cost of Debt 4.2% 19.5% 3.3% Cost of Equity Risk-free Rate Beta Market Risk Premium Cost of Equity 1.98% 1.55 5.0% 9.7% Cost of Preferred Preferred Stock Dividend Net Price of Preferred Cost of Preferred 0.0 0.0 0.0% Project MICC PRELIMINARY DRAFT Adobe Systems Incorporated Discounted Cash Flow Analysis ($MM except where noted) FY2011A 12/2/2011 FY2012E 11/30/2012 FY2013E 11/29/2013 FY2014E 11/28/2014 FY2015E 11/27/2015 FY2016E 12/2/2016 Total Revenue % Growth 4,216.3 4,413.8 4.7% 4,789.2 8.5% 5,216.2 8.9% 5,629.0 7.9% 6,018.2 6.9% EBITDA % Margin 1,446.1 34.3% 1,513.8 34.3% 1,642.6 34.3% 1,789.0 34.3% 1,930.6 34.3% 2,064.1 34.3% EBIT % Margin 1,197.1 28.4% 1,253.2 28.4% 1,359.7 28.4% 1,481.0 28.4% 1,598.2 28.4% 1,708.7 28.4% Tax Expense % Tax Rate 234.0 19.5% 245.0 19.5% 271.9 20.0% 296.2 20.0% 319.6 20.0% 341.7 20.0% NOPAT % Margin 963.0 22.8% 1,008.2 22.8% 1,087.8 22.7% 1,184.8 22.7% 1,278.5 22.7% 1,366.9 22.7% 260.7 299.5 (29.5) (220.1) 310.6 282.8 325.0 (49.1) (238.9) 319.9 308.1 354.0 (55.8) (260.2) 346.0 332.4 382.0 (54.0) (280.8) 379.7 355.4 408.4 (50.9) (300.2) 412.7 1,318.7 1,407.7 1,530.8 1,658.2 1,779.7 78% 7/10/2012 Yes 0.4 100% 5/31/2013 Yes 1.3 100% 5/30/2014 Yes 2.3 100% 5/29/2015 Yes 3.3 100% 5/30/2016 Yes 4.3 1,029.7 1,407.7 1,530.8 1,658.2 1,779.7 DISCOUNTED CASH FLOW MODEL Cash Flow Adjustments Total D&A Stock-based Compensation Expense Change in Net Working Capital Capital Expenditure Total Cash Flow Adjustments Unlevered Free Cash Flow Valuation Date Adjustment Cash Flow Date Include Cash Flow Discount Period Time Adjusted Unlevered Free Cash Flow Terminus FY2016E 12/2/2016 Project MICC PRELIMINARY DRAFT Adobe Systems Incorporated Discounted Cash Flow Analysis ($MM except where noted) PRESENT VALUE CALCULATIONS Present Value = (Future Value) / (1+WACC)^(Discount Period) PV of 2011E - 2015E CF FY2012E 993.8 992.1 990.3 WACC 9.5% 10.0% 10.5% FY2013E 1,253.3 1,246.1 1,238.8 FY2014E 1,245.0 1,232.2 1,219.5 FY2015E 1,232.0 1,213.7 1,195.8 Perpetuity Growth Rate Method Terminal Value PV of Terminal Value 9.5% 10.0% 10.5% Perpetuity Growth Rate 0.0% 0.0% WACC WACC Perpetuity Growth Rate 0.0% 0.0% 0.0% Implied Terminal Value Revenue Multiple Implied Terminal Value EBITDA Multiple Perpetuity Growth Rate 0.0% 0.0% 0.0% 9.5% 10.0% 10.5% Perpetuity Growth Rate 0.0% 0.0% WACC WACC 0.0% 9.5% 10.0% 10.5% 0.0% 9.5% 10.0% 10.5% Exit Multiple Method Terminal Value PV of Terminal Value Terminal Value Revenue Multiple WACC Exit Multiple 0.0x 0.0x Exit Multiple 0.0x 0.0x 0.0x WACC 9.5% 10.0% 10.5% 9.5% 10.0% 10.5% 0.0x 0.0x Exit Multiple 0.0x 0.0x 9.5% 10.0% 10.5% Implied Perpetual Growth Rate 0.0x WACC WACC Exit Multiple 0.0x 0.0x 9.5% 10.0% 10.5% FY2016E 1,206.7 1,183.4 1,160.7 Total PV 5,930.9 5,867.5 5,805.2 ...
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