1. LBO PITCH: BUCKLE NYSE:BKE
By: Kelvin Li May 2016

2. COMPANY OVERVIEW Product overview & company details Merchandise mix
Description
The Buckle, Inc. operates as a retailer of casual apparel, footwear, and accessories for young men and women in the United States.
The company markets a selection of brand name casual apparel, including denims, other casual bottoms, tops, sportswear, outerwear, accessories, and footwear. It operates stores under the Buckle and The Buckle names. The company also sells its products through its Website, buckle.com.
As of March 28, 2016, it operated 468 retail stores in 44 states. The company was formerly known as Mills Clothing, Inc. and changed its name to The Buckle.
Key financials
Share
Mkt. Cap EV
P/E
EV/EBITDA
% of 52
Price
(mm)
(LTM)
Wk. High
$24.58
1186.5
988.8
8.0x
3.8x
36%
Financial data
Annotated stock chart
Reports Sales Results followed by Q2 Results
Reports Sales Results
Retirement of Senior VP of Women’s Merchandising
Board Meeting
Announced Cash Dividend
$0.23
Board Meeting
Annual general meeting
Board Meeting
Announced Shelf Registration
Reports Sales Results
Reports Q3 Sales
SOURCE: CapitalIQ, Company Filings

3. INDUSTRY OVERVIEW Product Overview & Segmentation Peer name:
Gross margin %
EBITDA margin 1 yr % change
SOURCE:CapitalIQ

4. RATIONALE FOR BUYOUT Heavy undervaluation compared to peers
Clean balance sheet with strong asset base for collateral
BKE has historically never had debt on its balance sheet increasing the possibility of acquiring cheap debt when leveraged.
The average cost of debt of peers is approximately 5%; fairly low.
BKE has 468 stores that can be used as collateral for debt as they are owned and not leased.
Industry cost of debt
Peer group
Consistent free cash flow generation
Historic FCF generation demonstrates consistency
Strong factors supporting FCF generation
FCF generation:
BKE derives approximately 42% of its sales from its denims line. This fashion style is timeless and is difficult to differentiate oneself in, therefore keeping CF consistent.
Compared to close competitors American Eagle (AEO), Abercrombie (ANF), and Gap (GPS), BKE must close at least 9 stores to match the closure rate of its peers. This will increase free cash flow to be allocated in more growth areas or be used to draw down debt during the buyout.
9.4% of sales were online compared to peers ANG and AEO at 23.9%, 18.5% respectively. The opportunity to increase online sales can be done by implementing buy online pick-up in-store (BOPIS) and the new electronic loyalty program this year
Opportunities to cut costs:
EBIT margins struggling, the opportunity to cut costs through headcount reductions is possible as payroll increases prove to be a problem. EBIT margins peaked at 23% and lie at 22%.
SOURCE:CapitalIQ, Annual report BKE, Deutsche bank equity research

5. LBO TRANSACTION SUMMARY
Sources of Funds
% of Total
Multiple
Uses of Funds
Purchase Price
Amount
Sources
of EBITDA
Pricing
% of Total Uses
Revolving Credit Facility Size 25
LIBOR+n/a bps
Equity Purchase Price
1543.4
97.8%
Offer Price / Share
32.0
Revolving Credit Facility Draw
0.0
0.0%
0.0x
n/a
Repay Existing Bank Debt
Fully Diluted Shares
48.3
Term Loan A
Tender/Call Premiums
Term Loan B
850.0
53.9%
2.9x
LIBOR bps
Financing Fees
20.0
1.3%
Add: Existing Net Debt
-197.7
Term Loan C
Other Fees and Expenses
15.0
1.0% EV
1345.7
2nd Lien -
Return Analysis
Senior Notes
Senior Subordinated Notes
300.0
19.0%
1.0x
10%
Exit Year
2020
Equity Contribution
321.3
20.4%
1.1x
Entry Multiple
4.7x
Rollover Equity
Exit Multiple
5.0x
Cash on Hand
107.1
6.8%
0.4x
IRR
31%
Total Sources of Funds
1578.4
100%
Total Uses of Funds
Cash Return
3.8x
Financial Data Summary
Historic
Projected
2013
2014
2015
2016
2017
2018
2019
Sales
1124.0
1128.0
1153.1
1168.0
1171.4
1177.7
1186.9
1199.2
% Growth
0.4%
2.2%
0.3%
0.5%
0.8%
Gross Profit
609.62
618.4
620.2
623.5
628.5
635.0
% GPM
53.0%
52.9%
EBITDA
290.8
288.7
289.1
298.0
298.8
300.4
302.8
306.0
% margin
26%
25%
Capex
(37.4)
(37.5)
(37.7)
(38.0)
(38.4)
% of sales
3.2%
Cash Interest Expense
(47.5)
(43.3)
(39.1)
(35.7)
(32.1)
Total Interest Expense
(27.5)
Less: Cash Interest Expense
Add: Interest Income
Less: Taxes
(89.1)
(83.5)
(85.6)
(87.6)
(90.1)
Less: Capex
Less: Increase in NWC
(21.4)
(0.3)
(0.5)
(0.7)
Free Cash Flow
124.0
113.3
137.9
141.0
144.8
Cumulative FCF
237.3
375.2
516.2
661.0
Capitalization
Cash
52.5
3.3
Revolving Credit Facility
661.1
419.7
282.0
141.2
Other Debt
Total Senior Secured Debt
Total Debt
1,150.0
961.1
719.7
582.0
441.2
Shareholder's Equity
355.3
469.6
608.5
751.0
896.8
1,046.7
Total Capitalization
1,505.3
1,430.7
1,328.2
1,333.0
1,338.0
1,346.7
% Bank Debt Repaid
22%
51%
67%
83%
Credit Statistics
% Debt/Total Capitalization
76%
54%
44%
33%
EBITDA/ Cash Interest Expense
6.3x
6.9x
7.7x
8.5x
9.5x
EBITDA/ Total Interest Expense
10.9x
Senior Secured Debt/EBITDA
2.2x
1.4x
0.9x
0.5x
Total Debt/EBITDA
3.2x
2.4x
1.9x
1.5x
SOURCE:CapitalIQ, Annual report BKE

6. EXPECTED VALUE ON STOCK
Football field analysis on implied street pricing
Analysis on Valuation
Weighting on methods
Expected IRR from purchase price
Weight
Value
Total
EV/Rev LTM 0.5x-0.8x
20%
3.9
$38.9
EV/Rev FY+1 0.4x-0.8x
3.8
EV/EBITDA LTM 4.9x-9.1x
10%
4.6
EV/EBITDA FY+1 4.5x-8.0x
4.3
EV/UFCF 9.4x-16.2x
4.2
P/E LTM 12.7x-26.4x
6.0
P/E FY+1 9.6x-19.0x
Prescedents EV/EBITDA 11.9x-14.2x
8.2
Calculation of Exit MV
2020E EBITDA
306.0
Exit EV/EBITDA Multiple (Historic multiple around 6x-7x, chose 5x)
5.0
Implied Exit EV
1529.8
Add: Cash
3.3
Less: Debt
296.7
Less: Pref. Shares
Less: Minority Interest
Exit Market Cap
1236.3
Pro Forma
Projected
2015
2016
2017
2018
2019
2020
Initial Equity Investment
-321.3
Dividends Issued
Exit Equity Value
1236.3
Total
IRR
31%
Cash Return
3.8x
SOURCE:CapitalIQ, Annual report BKE

7. APPENDIX

8. RETURN ANALYSIS PER YEAR
Return dependent on investment exit period
Pro Forma
Projected
2015
2016
2017
2018
2019
2020
Entry EV/EBITDA Multiple
4.7x
Initial Equity Investment
321.3
EBITDA
298.0
298.8
300.4
302.8
306.0
Exit EV/EBITDA Multiple
5.0x
EV When Exited
1,489.9
1,494.2
1,502.2
1,514.0
1,529.8
Revolving Credit Facility
0.0
Term Loan B
661.1
419.7
282.0
141.2
Senior Subordinated Notes
300.0
Other Debt
Total Debt
961.1
719.7
582.0
441.2
Less: Cash and Cash Equivalents
107.1
3.3
Net Debt
854.0
296.7
Exit MV
635.9
774.5
920.2
1,072.8
1,233.0
Cash Return
2.0x
2.4x
2.9x
3.3x
3.8x
(321.3)
Exiting MV
Internal Rate of Return (IRR)
98%
55%
42%
35%
31%
SOURCE:CapitalIQ, Annual report BKE

9. PROFORMA INCOME STATEMENT
DCF Growth Assumptions Used
Historic
Projected
2013
2014
2015
2016
2017
2018
2019
2020
Sales
1124.0
1128.0
1153.1
1168.0
1171.4
1177.7
1186.9
1199.2
% growth
0.4%
2.2%
1.3%
0.3%
0.5%
0.8%
1.0%
COGS
528.2
530.5
543.5
549.6
551.1
554.1
558.5
564.3
Gross Profit
595.8
597.5
609.6
618.4
620.2
623.5
628.5
635.0
% margin
53.0%
52.9%
SG&A
305.0
308.9
320.5
321.4
323.1
325.7
329.0
% of sales
27.1%
27.4%
27.8%
Other Expenses
0.0
EBITDA
290.8
288.7
289.1
298.0
298.8
300.4
302.8
306.0
D&A
32.6
31.7
32.1
33.1
33.2
33.4
33.6
34.0
EBIT
258.2
257.0
264.9
265.7
267.1
269.2
272.0
23.0%
22.8%
22.3%
22.7%
Interest Expense
Revolving Credit Facility
Term Loan A
Term Loan B
17.3
13.2
8.9
5.6
1.9
Term Loan C
Existing Term Loan
2nd Lien
Senior Notes
Senior Subordinated Notes
30.0
Commitment Fee on Unused Revolver
0.1
Administrative Agent Fee
Cash Interest Expense
47.5
43.3
39.1
35.7
Amortization of Deferred Financing Fees
-20.0
Total Interest Expense
27.5
Interest Income
Net Interest Expense
Earnings Before Taxes
237.4
222.4
228.0
233.5
239.9
Income Tax Expense
89.1
83.5
85.6
87.6
90.1
Net Income
148.3
138.9
142.4
145.8
149.9
12.7%
11.9%
12.1%
12.3%
12.5%
SOURCE:CapitalIQ, Annual report BKE

10. PROFORMA BALANCE SHEET
DCF Growth Assumptions Used
Historic
Adjustments
Pro Forma
Projected
2015 + -
2016
2017
2018
2019
2020
Cash and Cash Equivalents
159.6
-107.1
52.5
107.1
0.0
3.3
Accounts Receivable
8.6
5.6
5.7
Inventories
129.9
121.7
122.1
122.7
123.7
125.0
Prepaids and Other Current Assets
26.5
17.3
Total Current Assets
324.6
251.7
145.0
145.7
146.7
151.4
Property, Plant, and Equipment, net
172.7
176.9
181.2
185.5
189.9
194.3
Goodwill and Intangible Assets
1188.1
Other Assets
30.6
Deferred Financing Fees
15.1
20.0
35.1
Total Assets
543.0
1662.5
1560.1
1565.1
1570.4
1579.5
Accounts Payable
35.7
36.7
36.8
37.0
37.3
Accrued Liabilities
46.9
48.7
Other Current Liabilities
39.7
Total Current Liabilities
122.3
124.0
125.1
125.2
125.4
125.7
Revolving Credit Facility
Term Loan A
Term Loan B
850.0
661.1
419.7
282.0
141.2
Term Loan C
Existing Term Loan
2nd Lien
Senior Notes
Senior Subordinated Notes
300.0
Other Debt
Other Long-Term Liabilities
65.4
Total Liabilities
187.7
1150.6
910.2
772.6
632.1
491.1
Noncontrolling Interest
Shareholder's Equity
355.3
321.3
-355.3
469.6
608.5
751.0
896.8
1046.7
Total Shareholder's Equity
Total Liabilities and Equity
1620.2
1518.7
1523.6
1528.9
1537.8
Balance Check
YES
Net Working Capital
37.9
59.3
59.5
60.0
60.7
61.7
(Increase)/Decrease in NWC
(21.4)
(0.3)
(0.5)
(0.7)
(1.0)
SOURCE:CapitalIQ, Annual report BKE

11. PROFORMA CASH FLOW STATEMENT
Projected
2016
2017
2018
2019
2020
Operating Activities
Net Income
148.3
138.9
142.4
145.8
149.9
Plus: D&A
33.1
33.2
33.4
33.6
34.0
Plus: Amortization of Financing Fees
(20.0)
0.0
Changes in Working Capital Items:
(Inc.) / Dec. A/R
3.0
(0.0)
(0.1)
(Inc.) / Dec. Inventories
8.2
(0.4)
(0.7)
(1.0)
(1.3)
(Inc.) / Dec. Prepaid and Other Current Assets
9.2
Inc. / (Dec.) in A/P
1.0
0.1
0.2
0.3
Inc. / (Dec.) Accrued Liabilities
1.8
Inc. / (Dec.) Other Current Liabilities
(Inc.) / Dec. NWC
12.4
(0.3)
(0.5)
Cash Flow from Operating Activities
173.8
171.8
175.3
178.8
182.9
Investing Activities
Capex.
(37.4)
(37.5)
(37.7)
(38.0)
(38.4)
Other Investing Activities
Cash Flow from Investing Activities
Financing Activities
Revolving Credit Facility
Term Loan A
Term Loan B
(188.9)
(241.4)
(137.6)
(140.8)
(141.2)
Term Loan C
Existing Term Loan
2nd Lien
Senior Notes
Senior Subordinated Notes
Other Debt
Dividends
Equity Issuance / (Repurchase)
Cash Flow from Financing Activities
Excess Cash for the Period
(52.5)
(107.1)
3.3
Beginning Cash Balance
159.6
107.1
Ending Cash Balance
SOURCE:CapitalIQ, Annual report BKE

12. TRANSACTION ASSUMPTIONS & SOURCES AND USES
Implied EV/EBITDA from Offer Premium 5x
Offer Price/Share
$32.0
Offer Premium (25% Prescedents 1 wk Prior Premium)
30%
Fully Diluted Shares Outstanding
48.3
Equity Purchase Price (mm)
$1,543.4
Plus: Debt
$0.0
Plus: Preferred Shares
Plus: Minority Interest
Less: Cash and Cash Equivalents
$197.7
Enterprise Value (mm)
$1,345.7
Credit Parameters
Parameters
Actual
Debt/EBITDA x
4.0x
Senior Bank Debt/ EBITDA
3.0x
2.9x
% of Total
Multiple
Sources of Funds
Amount
Sources
of EBITDA
Pricing
Uses of Funds
% of Total Uses
Revolving Credit Facility Size 25
LIBOR+n/a bps
Equity Purchase Price
1543.4
97.8%
Revolving Credit Facility Draw
0.0
0.0%
0.0x
n/a
Repay Existing Bank Debt
Term Loan A
Tender/Call Premiums
Term Loan B
850.0
53.9%
2.9x
LIBOR bps
Financing Fees
20.0
1.3%
Term Loan C
Other Fees and Expenses
15.0
1.0%
2nd Lien -
Senior Notes
Senior Subordinated Notes
300.0
19.0%
1.0x
10%
Equity Contribution
321.3
20.4%
1.1x
Rollover Equity
Cash on Hand
107.1
6.8%
0.4x
Total Sources of Funds
1578.4
Total Uses of Funds
100%
Notes
Financing $20 and Other Fees and Expenses at$15 , assumptions based off similar sized clothing peers
SOURCE:CapitalIQ, Annual report BKE

13. DEBT SCHEDULE Assuming CF sweep Curve Pulled from Bloomberg Pro Forma
Pro Forma
Projected
2015
2016
2017
2018
2019
2020
Forward LIBOR Curve
0.63%
0.79%
0.94%
1.04%
1.14%
1.23%
Cash Flow from Operating Activities
173.8
171.8
175.3
178.8
182.9
Cash Flow from Investing Activities
(37.4)
(37.5)
(37.7)
(38.0)
(38.4)
Cash Available for Debt Repayment
136.4
134.4
137.6
140.8
144.5
Mandatory Repayments
(8.5)
Cash from Balance Sheet
52.5
107.1
0.0
Cash Available for Optional Debt Repayment
180.4
232.9
129.1
132.3
136.0
Revolving Credit Facility
Size of Facility 25
LIBOR Spread (n/a assume 3%) 3%
Term (AIF claims 7 yrs) 7
Commitment Fee on Unused Debt
0.50%
Beginning Balance
0.0
Drawdown (Repayment)
Ending Balance
Interest Rate
3.8%
3.9%
4.0%
4.1%
4.2%
Interest Expense
Commitment Fee
0.1
Senior Subordinated Notes
Size
300
Coupon
10%
Term (assume 10 no term sheet) 10
Beginning Balance
300.0
Repayment
0.0
Ending Balance
Interest Expense
30.0
Term Loan B Facility
Size
850
LIBOR Spread
1.50%
Term (assume 5 no term sheet) 5
Repayment Sched
1% /yr, Bullet at Maturity
Beginning Balance
850.0
661.1
419.7
282.0
141.2
Mandatory Repayments
(8.5)
Optional Repayments
(180.4)
(232.9)
(129.1)
(132.3)
(132.7)
Ending Balance
0.0
Interest Rate
2.3%
2.4%
2.5%
2.6%
2.7%
Interest Expense
17.3
13.2
8.9
5.6
1.9
SOURCE:CapitalIQ, Annual report BKE

14. COMPARABLES BKE comparables Mkt EV EV/Rev EV/EBITDA EV/UFCF P/E PEG
Mkt EV
EV/Rev
EV/EBITDA
EV/UFCF
P/E
PEG
Stores
Same Store
All values in USD
Cap (mm)
(mm)
LTM
FY+1
Opened
Closed
Sales Growth
Footwear Comps:
DSW Inc. (NYSE:DSW)
1,880.6
1,622.1
0.6x
5.6x
11.7x
14.9x
14.4x
1.6x 56 11 1%
Foot Locker, Inc. (NYSE:FL)
7,998.3
7,107.3
1.0x
0.9x
6.5x
6.0x
16.2x
15.3x
12.4x
1.2x - 9%
Finish Line Inc. (NasdaqGS:FINL)
824.3
744.8
0.4x
5.9x
5.0x
76.6x
40.7x
12.6x 10 62 2%
Discount Retailers:
Big Lots Inc. (NYSE:BIG)
2,212.9
2,221.1
6.1x
5.8x
8.8x
15.9x
13.4x
1.3x 9 20
Dollar Tree, Inc. (NasdaqGS:DLTR)
18,616.7
25,223.0
14.7x
10.8x NM
62.7x
21.4x
566 41
Costco Wholesale Corporation (NasdaqGS:COST)
64,590.8
64,944.8
0.5x
13.6x
12.7x
28.2x
26.2x
2.6x 26 3 7%
Target Corp. (NYSE:TGT)
45,114.8
53,836.8
0.7x
0.8x
7.3x
7.1x
9.6x
14.3x
1.5x 15 13
Dollar General Corporation (NYSE:DG)
23,822.3
26,634.9
11.6x
10.5x
29.0x
21.0x
18.2x
730 36 3%
Wal-Mart Stores Inc. (NYSE:WMT)
208,445.9
252,839.9
7.5x
8.0x
15.7x
14.5x
16.0x
4.2x 0%
Fred's, Inc. (NasdaqGS:FRED)
502.3
549.5
0.3x
0.2x
15.0x
24.1x
49.7x 8
Fashion Retailers:
Chico's FAS Inc. (NYSE:CHS)
1,568.2
1,520.3
5.7x
5.3x
13.1x
14.6x
1.4x
(2%)
Urban Outfitters Inc. (NasdaqGS:URBN)
3,173.4
2,997.0
11.4x
15.2x 31 5
American Eagle Outfitters, Inc. (NYSE:AEO)
2,507.6
2,247.6
4.8x
4.4x
12.2x
Abercrombie & Fitch Co. (NYSE:ANF)
1,626.3
1,376.0
4.3x
3.9x
5.1x
47.2x
19.8x
(3%)
Express Inc. (NYSE:EXPR)
1,281.6
1,164.3
4.1x
3.8x
12.1x
9.9x 6%
Five Below, Inc. (NasdaqGS:FIVE)
2,101.2
2,001.8
2.4x
2.0x
17.4x
14.1x
63.2x
36.7x
29.6x 74
Nordstrom Inc. (NYSE:JWN)
7,855.8
10,065.8
14.2x 32 1
Kohl's Corp. (NYSE:KSS)
7,166.0
11,167.0
4.7x
4.6x
10.6x
9.5x
1.1x
Dillard's Inc. (NYSE:DDS)
2,225.9
2,848.4
4.0x
8.4x
9.0x
9.1x
Ascena Retail Group Inc. (NasdaqGS:ASNA)
1,465.9
2,829.1
5.5x
8.7x
(1%)
The Gap, Inc. (NYSE:GPS)
7,392.4
7,753.4
3.5x
7.4x
8.3x
249
237
L Brands, Inc. (NYSE:LB)
19,355.5
22,519.5
1.9x
1.8x
8.5x
17.2x
16.7x
1.7x
217 93
J. C. Penney Company, Inc. (NYSE:JCP)
2,421.3
6,354.3
6.3x
95.8x
24.0x 5%
Tailored Brands, Inc. (NYSE:TLRD)
710.0
2,335.9
6.4x
Macy's, Inc. (NYSE:M)
9,783.2
16,687.2
5.4x
12.5x
9.7x
The Buckle, Inc. (NYSE:BKE)
1,186.5
988.8
8.9x
(4%)
(Discount) Premium to Mean
17%
31%
(50%)
(37%)
(58%)
(62%)
(53%)
(63%)
75th Percentile
14,200.0
19,603.4
26.4x
19.0x
25th Percentile
1,582.7
2,056.6
4.9x
4.5x
9.4x
Mean
17,785.7
21,183.7
7.6x
6.6x
17.8x
21.1x
19.1x
137 39
Median
15.1x 17
SOURCE:CapitalIQ, Annual report BKE

15. DISCOUNTED CASH FLOW BKE discounted cash flow BKE Discounted Cash Flow
Historic
Projected
2013
2014
2015
CAGR
2016
2017
2018
2019
2020
Revenue (Base Case )
1,124.0
1,128.0
1,153.1
1.3%
1,168.0
1,171.4
1,177.7
1,186.9
1,199.2
% Sales Growth yr/yr
5.7%
0.4%
2.2%
0.3%
0.5%
0.8%
1.0%
COGS
528.2
530.5
543.5
549.6
551.1
554.1
558.5
564.3
Gross Profit
595.8
597.5
609.6
1.2%
618.4
620.2
623.5
628.5
635.0
SG&A
305.0
308.9
320.5
321.4
323.1
325.7
329.0
R&D -
Other Expenses
EBITDA
290.8
288.7
289.1
298.0
298.8
300.4
302.8
306.0
D&A
32.6
31.7
32.1
33.1
33.2
33.4
33.6
34.0
EBIT
258.2
257.0
(0.2%)
264.9
265.7
267.1
269.2
272.0
TV(Multiples)
Less: Taxes
(97.1)
(96.6)
(96.1)
(99.4)
(99.7)
(100.2)
(101.0)
(102.1)
1777.6
Add: D&A
1324.6
Less: Increse in NWC
(29.8)
(9.1)
(14.9)
12.4
(0.3)
(0.5)
(0.7)
(1.0)
Less: Capex
(28.8)
(45.5)
(34.6)
(37.4)
(37.5)
(37.7)
(38.0)
(38.4)
TV (GGM)
UFCF
135.1
137.5
143.5
3.1%
173.6
161.4
162.0
163.1
164.6
3139.0
PV of UFCF
163.6
135.8
128.9
122.6
2339.0
WACC 6%
Implied EV (GGM)
3177.0
Implied EV (Multiples)
2162.5
Implied Share Price (GGM)
69.9
Implied Share Price (Multiples)
48.9
Implied EV from GGM
Implied EV from Multiples
Perpetuity Growth Rate
Terminal Multiple
3177.0
0.30%
0.40%
0.50%
0.60%
0.70%
WACC
2162.5
3.8x
4.8x
5.8x
6.8x
7.8x
4.1%
4610
4712
4819
4933
5054
1832
2083
2334
2585
2835
5.1%
3695
3756
3819
3886
3955
1768
2007
2246
2485
2724
6.1%
3096
3136
3177
3220
3264
1707
1935
2163
2391
2619
7.1%
2673
2700
2729
2759
2789
1648
1866
2301
2519
8.1%
2357
2378
2398
2420
2442
1593
1801
2009
2216
2424
Implied Share Price from GGM
Implied Share Price from Multiples
0.0
100
102
104
106
109 42 47 52 58 63 81 82 83 85 86 41 46 51 56 61 68 69 70 71 72 39 44 49 54 59 60 62 38 43 53 55 37 50
Terminal Value
Perpetuity Growth Rate
0.5%
PV TV/ Implied EV (GGM)
74%
Terminal Multiple (median comps)
5.81
PV TV/ Implied EV (multiples)
61%
SOURCE:CapitalIQ, Annual report BKE

16. PROJECTION SCHEDULE Projection Schedule 2013 2014 2015 3 yr avg. 2016
2013
2014
2015
3 yr avg.
2016
2017
2018
2019
2020
Notes
Marginal tax rate
37.6%
37.4%
37.5%
3yr Avg.
COGS % of Rev
47.0%
47.1%
SG&A % of Rev
27.1%
27.4%
27.8%
D&A % of Rev
2.9%
2.8%
Capex % of Rev
2.6%
4.0%
3.0%
3.2%
NWC Projections:
Day sales outstanding
1.1
1.4
2.7
1.7
Inventory turnover
5.1
4.3
4.2
4.5
Days payable outstanding
23.6
25.6
24.0
24.4
A/R
3.5
8.6
5.5
5.6
5.7
DSO Avg.
Inventory
103.9
124.1
129.9
119.3
121.7
122.1
122.7
123.7
125.0
Inv. Turnover Avg
Prepaid Expenses
17.0
19.3
15.8
17.3
Other Current Assets
0.0
A/P
34.1
37.1
35.7
36.7
36.8
37.0
37.3
37.7
DPO Avg.
Accrued Liabilities
52.3
46.9
48.7
Other Current Liabilities
Current Assets
124.3
147.7
154.2
142.1
144.7
145.0
145.7
146.7
148.1
Current Liabilities
86.4
84.1
82.6
84.4
85.4
85.5
85.7
86.0
NWC
37.9
63.7
71.6
57.7
59.3
59.5
60.0
60.7
61.7
SOURCE:CapitalIQ, Annual report BKE

17. BETA COMPS & EQUITY CALCULATION
Only Fashion and Footwear Companies were included
Beta Comps
Beta
Debt/Equity %
Tax Rate %
DSW Inc. (NYSE:DSW)
0.75 -
38.12%
Chico's FAS Inc. (NYSE:CHS)
0.86
14.4%
Urban Outfitters Inc. (NasdaqGS:URBN)
1.08
13.2%
35.87%
American Eagle Outfitters, Inc. (NYSE:AEO)
0.77
33.73%
Abercrombie & Fitch Co. (NYSE:ANF)
1.26
25.8%
29.37%
Express Inc. (NYSE:EXPR)
1.32
11.3%
38.90%
Five Below, Inc. (NasdaqGS:FIVE)
0.91
37.75%
Big Lots Inc. (NYSE:BIG)
0.6
8.6%
36.96%
Kohl's Corp. (NYSE:KSS)
0.88
85.7%
36.99%
Dillard's Inc. (NYSE:DDS)
1.2
46.0%
38.52%
Ascena Retail Group Inc. (NasdaqGS:ASNA)
1.51
7.6%
36.33%
The Gap, Inc. (NYSE:GPS)
1.17
68.0%
33.16%
L Brands, Inc. (NYSE:LB)
32.54%
Wal-Mart Stores Inc. (NYSE:WMT)
0.23
59.8%
34.32%
Foot Locker, Inc. (NYSE:FL)
0.68
5.1%
37.13%
Fred's, Inc. (NasdaqGS:FRED)
1.35
13.1%
Tailored Brands, Inc. (NYSE:TLRD)
1.47
37.46%
Finish Line Inc. (NasdaqGS:FINL)
0.92
35.21%
Macy's, Inc. (NYSE:M)
0.85
179.6%
30.31%
Average:
0.98
41%
35.45%
Beta Calculation
Industry Average Levered Beta
0.98
Industry Average Debt/Equity
41%
Industry Tax Rate
35%
Unlevered Beta
0.77
BKE Tax Rate
37%
BKE Debt/Equity
0.00
Levered Beta
Cost of Equity Calc
Rf (10yr Tbill)
1.35%
Beta
0.77
Equity Risk Premium (Damodoran)
5.11%
Rm (from Damodoran + 1%)
7.46%
Cost of Equity
6.1%
SOURCE:CapitalIQ, Annual report BKE

18. PRESCEDENT TRANSACTIONS
BKE prescedent transaction
Date of
Target
Buyers
Financed 
Transaction
Mkt. EV
EV/
P/E
Premium
Announcement
Company
Value
Cap (mm)
(mm)
EBITDA
1 Day Prior (%)
1 Week Prior (%)
1 Month Prior (%)
08/07/2014
Lululemon Athletica Inc. (NasdaqGS:LULU)
Advent International Corporation
Cash
922.7
10,945.0
5,884.7
11.9x
23.6x
5.2%
9.3%
3.2%
03/03/2016
Tumi Holdings, Inc. (NYSE:TUMI)
Samsonite International S.A. (SEHK:1910)
2,444.1
2,334.4
2,317.3
14.2x
27.8x
34.0%
41.3%
52.3%
Mean
1,683.4
6,639.7
4,101.0
13.0x
25.7x
19.6%
25.3%
27.7%
Median
High
Low
SOURCE:CapitalIQ, Annual report BKE