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Apple Inc. - Financial Statements($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)
Assumptions & Valuation Overview
Valuation Date: 1/29/2010 Last Historical Year: 2009 Days in Year: 360Company Name: Apple Inc. Debt Issue Date: 2010 Debt Amount: $1,000 Share Price: $192.06 Share Units: 1000 Tax Rate: 30%
Basic Shares Outstanding: 900,678 Options Calculations (in Thousands Except Exercise Price):Basic Equity Value: $172,984 Diluted Shares Outstanding: 920,526 ExerciseDiluted Equity Value: $176,796 Name Number Price Dilution
Less: Cash & Investments $35,395 Tranche A 34,375 $81.17 19,847Plus: Debt $0 Tranche BPlus: Minority Interest $0 Tranche CPlus: Preferred Stock $0 Tranche DPlus: Other Liabilities $0 Tranche E
Enterprise Value: $141,401 Total 19,847
Historical ProjectionsFY 2007 FY 2008 FY 2009 FY 2010E FY 2011E FY 2012E FY 2013E FY 2014E
EV / Revenue: 5.8 x 3.8 x 3.3 x 2.6 x 2.3 x 2.0 x 1.9 x 1.7 xEV / EBIT: 30.4 x 16.0 x 11.4 x 9.1 x 7.8 x 7.0 x 6.4 x 6.0 xEV / EBITDA: 28.4 x 15.1 x 10.7 x 8.6 x 7.3 x 6.6 x 6.1 x 5.7 x
Equity Value / FCF: 37.3 x 20.8 x 17.1 x Err:522 Err:522 Err:522 Err:522 Err:522P / E: 48.9 x 28.3 x 21.2 x Err:522 Err:522 Err:522 Err:522 Err:522P / BV: 7.9 x 5.6 x Err:522 Err:522 Err:522 Err:522 Err:522
Operating Assumptions
Historical ProjectionsFY 2007 FY 2008 FY 2009 FY 2010E FY 2011E FY 2012E FY 2013E FY 2014E
Revenue Growth %: 27.2% 52.5% 14.4% 25.0% 17.0% 11.0% 9.0% 7.0%COGS % Revenue: 66.2% 64.1% 59.0% 59.0% 59.0% 59.0% 59.0% 59.0%R&D % Revenue: 2.4% 2.0% 1.9% 1.9% 1.9% 1.9% 1.9% 1.9%SG&A % Revenue: 11.1% 8.9% 8.3% 8.3% 8.3% 8.3% 8.3% 8.3%
Stock-Based Compensation % Revenue: 1.0% 1.4% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7%Depreciation & Amortization % Revenue: 1.3% 1.3% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7%Effective Cash Interest Rate: 5.3% 3.4% 1.4% 1.0% 1.0% 2.0% 2.0% 3.0%Debt Interest Rate: 0.0% 0.0% 0.0% 9.0% 9.0% 9.0% 9.0% 9.0%Effective Tax Rate: 30.2% 31.6% 31.8% 30.0% 30.0% 30.0% 30.0% 30.0%
Accounts Receivable % Revenue: 6.5% 7.8% 7.8% 7.8% 7.8% 7.8% 7.8%Accounts Receivable Days: 23.3 28.2 28.2 28.2 28.2 28.2 28.2Inventory % COGS: 2.1% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8%Amortization of Intangibles: $40 $37 $28 $13 $10
Accounts Payable % COGS: 23.0% 22.1% 22.1% 22.1% 22.1% 22.1% 22.1%Accounts Payable Days: 82.6 79.6 79.6 79.6 79.6 79.6 79.6Accrued Expenses % Operating Expenses: 102.9% 87.6% 87.6% 87.6% 87.6% 87.6% 87.6%Short-Term Deferred Revenue % Revenue: 4.3% 4.8% 4.8% 4.8% 4.8% 4.8% 4.8%Long-Term Deferred Revenue % Revenue: 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
CapEx % Revenue: 3.0% 2.9% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7%
Income StatementFY 2007 FY 2008 FY 2009 FY 2010E FY 2011E FY 2012E FY 2013E FY 2014E
Revenue: $24,578 $37,491 $42,905 $53,631 $62,749 $69,651 $75,919 $81,234 Cost of Goods Sold: $16,282 $24,049 $25,324 $31,655 $37,037 $41,111 $44,811 $47,948
Gross Profit: $8,296 $13,442 $17,581 $21,976 $25,712 $28,540 $31,109 $33,286 Operating Expenses:
Research & Development: $596 $759 $830 $1,038 $1,214 $1,348 $1,469 $1,572 Selling, General & Administrative: $2,724 $3,345 $3,566 $4,458 $5,216 $5,789 $6,311 $6,752
Total Operating Expenses: $3,320 $4,103 $4,397 $5,496 $6,430 $7,137 $7,780 $8,324
Depreciation & Amortization of PP&E: $327 $496 $734 $917 $1,073 $1,192 $1,299 $1,390 Amortization of Intangibles: $0 $0 $0 $40 $37 $28 $13 $10 Stock-Based Compensation: $242 $516 $710 $888 $1,038 $1,153 $1,256 $1,344
Operating Income: $4,407 $8,327 $11,740 $14,635 $17,133 $19,030 $20,761 $22,218 Interest Income: $647 $653 $407 Err:522 Err:522 Err:522 Err:522 Err:522Interest Expense: $0 $0 $0 ($45) ($90) ($90) ($90) ($90)Other Income & Expense: ($48) ($33) ($81) $0 $0 $0 $0 $0
Pre-Tax Income: $5,006 $8,947 $12,066 Err:522 Err:522 Err:522 Err:522 Err:522Income Tax Provision: $1,511 $2,828 $3,831 Err:522 Err:522 Err:522 Err:522 Err:522
Net Income: $3,495 $6,119 $8,235 Err:522 Err:522 Err:522 Err:522 Err:522
Earnings Per Share (EPS): $3.93 $6.78 $9.08 Err:522 Err:522 Err:522 Err:522 Err:522Diluted Shares Outstanding: 889,292 902,139 907,005 907,005 907,005 907,005 907,005 907,005
EBIT: $4,649 $8,843 $12,450 $15,523 $18,171 $20,183 $22,017 $23,562 EBITDA: $4,976 $9,339 $13,184 $16,480 $19,282 $21,403 $23,329 $24,962 Levered Free Cash Flow: $4,735 $8,505 $10,311 Err:522 Err:522 Err:522 Err:522 Err:522Book Value Per Share (BV): $24.17 $34.56 Err:522 Err:522 Err:522 Err:522 Err:522
Balance SheetFY 2008 FY 2009 FY 2010E FY 2011E FY 2012E FY 2013E FY 2014E
Assets:Current Assets:
Cash & Cash-Equivalents: $11,875 $6,559 Err:522 Err:522 Err:522 Err:522 Err:522Short-Term Securities: $10,236 $26,282 $26,282 $26,282 $26,282 $26,282 $26,282
Accounts Receivable: $2,422 $3,361 $4,201 $4,915 $5,456 $5,947 $6,364 Inventory: $509 $455 $569 $665 $739 $805 $861 Deferred Tax Assets: $1,044 $4 $4 $4 $4 $4 $4 Other Current Assets: $3,920 $3,140 $3,140 $3,140 $3,140 $3,140 $3,140
Total Current Assets: $30,006 $39,801 Err:522 Err:522 Err:522 Err:522 Err:522
Long-Term Assets:Long-Term Securities: $2,379 $2,554 $2,554 $2,554 $2,554 $2,554 $2,554 Plants, Property & Equipment: $2,455 $2,839 $3,352 $3,951 $4,617 $5,342 $6,118 Goodwill: $207 $207 $207 $207 $207 $207 $207 Other Intangible Assets: $285 $354 $314 $277 $249 $236 $226 Other Assets: $839 $2,011 $2,011 $2,011 $2,011 $2,011 $2,011
Total Assets: $36,171 $47,766 Err:522 Err:522 Err:522 Err:522 Err:522
Liabilities & Shareholders' Equity:Current Liabilities:
Accounts Payable: $5,520 $5,601 $7,001 $8,191 $9,093 $9,911 $10,605 Accrued Expenses: $4,224 $3,852 $4,815 $5,634 $6,253 $6,816 $7,293 Deferred Revenue: $1,617 $2,053 $2,566 $3,003 $3,333 $3,633 $3,887
Total Current Liabilities: $11,361 $11,506 $14,383 $16,828 $18,679 $20,360 $21,785
Long-Term Liabilities:Deferred Revenue: $768 $853 $1,066 $1,248 $1,385 $1,509 $1,615 Long-Term Debt: $0 $0 $1,000 $1,000 $1,000 $1,000 $1,000 Other Long-Term Liabilities: $1,745 $3,502 $3,502 $3,502 $3,502 $3,502 $3,502
Total Liabilities: $13,874 $15,861 $19,951 $22,577 $24,565 $26,371 $27,902
Shareholders' Equity:Common Stock: $7,177 $7,177 $7,177 $7,177 $7,177 $7,177 $7,177 Additional Paid-In Capital: $0 $1,185 $2,073 $3,111 $4,263 $5,520 $6,864 Treasury Stock: $0 $0 $0 $0 $0 $0 $0 Retained Earnings: $15,129 $23,364 Err:522 Err:522 Err:522 Err:522 Err:522Accumulated Other Comprehensive Income: ($9) $179 $179 $179 $179 $179 $179
Total Shareholders' Equity: $22,297 $31,905 Err:522 Err:522 Err:522 Err:522 Err:522
Total Liabilities & SE: $36,171 $47,766 Err:522 Err:522 Err:522 Err:522 Err:522
BALANCE CHECK: $0.000 $0.000 Err:522 Err:522 Err:522 Err:522 Err:522
Cash Flow StatementFY 2007 FY 2008 FY 2009 FY 2010E FY 2011E FY 2012E FY 2013E FY 2014E
Operating Activities:Net Income: $3,495 $6,119 $8,235 Err:522 Err:522 Err:522 Err:522 Err:522Depreciation & Amortization of PP&E: $327 $496 $734 $917 $1,073 $1,192 $1,299 $1,390 Amortization of Intangibles: $0 $0 $0 $40 $37 $28 $13 $10 Stock-Based Compensation: $242 $516 $710 $888 $1,038 $1,153 $1,256 $1,344 Deferred Income Tax Expense: $73 $398 $1,040 $0 $0 $0 $0 $0 Loss on PP&E: $12 $22 $26 $0 $0 $0 $0 $0 Changes in Operating Assets & Liabilities:
Accounts Receivable: ($385) ($785) ($939) ($840) ($714) ($541) ($491) ($416)Inventory: ($76) ($163) $54 ($114) ($97) ($73) ($66) ($56)Other Current Assets: ($1,279) ($274) $780 $0 $0 $0 $0 $0 Other Assets: $285 $289 ($1,172) $0 $0 $0 $0 $0 Accounts Payable: $1,494 $596 $81 $1,400 $1,190 $901 $818 $694 Deferred Revenue: $566 $718 $521 $727 $618 $468 $425 $360 Other Liabilities: $716 $1,664 $1,385 $963 $819 $620 $563 $477
Cash Flow from Operations: $5,470 $9,596 $11,455 Err:522 Err:522 Err:522 Err:522 Err:522
Investing Activities:Purchases of Securities: ($11,719) ($22,965) ($46,724) $0 $0 $0 $0 $0 Proceeds from Maturities & Sales: $9,424 $16,243 $30,678 $0 $0 $0 $0 $0 Purchases of LT Investments: ($17) ($38) ($101) $0 $0 $0 $0 $0 Capital Expenditures: ($735) ($1,091) ($1,144) ($1,430) ($1,673) ($1,857) ($2,024) ($2,166)Acquisition of Intangibles: ($251) ($108) ($69) $0 $0 $0 $0 $0 Other: $49 ($230) ($74) $0 $0 $0 $0 $0 Cash Flow from Investing: ($3,249) ($8,189) ($17,434) ($1,430) ($1,673) ($1,857) ($2,024) ($2,166)
Financing Activities:Proceeds from Common Stock: $365 $483 $475 $0 $0 $0 $0 $0 Common Stock Repurchased: $0 $0 $0 $0 $0 $0 $0 $0 Dividends Issued: $0 $0 $0 $0 $0 $0 $0 $0 Tax Benefits from Stock-Based Comp: $377 $757 $270 $0 $0 $0 $0 $0 Raise / (Pay Off) Long-Term Debt $0 $0 $0 $1,000 $0 $0 $0 $0 Cash Used for Equity Awards: ($3) ($124) ($82) $0 $0 $0 $0 $0 Cash Flow from Financing: $739 $1,116 $663 $1,000 $0 $0 $0 $0
Increase / Decrease in Cash: $2,960 $2,523 ($5,316) Err:522 Err:522 Err:522 Err:522 Err:522Cash & Cash Equivalents: $9,352 $11,875 $6,559 Err:522 Err:522 Err:522 Err:522 Err:522
Valuation Summary - Apple Inc.($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)
Valuation Statistics - Apple Inc. Apple Inc. - Range of Valuation Multiples / Premiums
25th 75thMinimum Pecentile Median Pecentile
Methodology Name Multiple Multiple Multiple Multiple
Public Company Comparables:2009 EV / Revenue: 0.3 x 0.5 x 1.1 x 2.8 x2010E EV / Revenue: 0.3 x 0.5 x 1.0 x 2.3 x2009 EV / EBITDA: 4.4 x 7.3 x 7.6 x 10.6 x2010E EV / EBITDA: 3.7 x 5.1 x 5.5 x 6.8 x2009 P / E: 15.0 x 16.1 x 19.7 x 29.1 x2010E P / E: 10.9 x 12.2 x 16.3 x 16.6 x
Precedent Transactions:Trailing EV / Revenue: 0.4 x 1.9 x 2.7 x 6.0 xForward EV / Revenue: 0.4 x 2.1 x 2.7 x 5.0 xTrailing EV / EBITDA: 8.7 x 11.5 x 14.4 x 17.3 xForward EV / EBITDA: 9.6 x 13.4 x 19.1 x 23.9 x
Discounted Cash Flow Analysis:11-15% Discount Rate, 5-9x Terminal Multiple:
Apple Inc. - Range of Valuation Multiples / Premiums Apple Inc. - Implied Per Share Value Range
Applicable 25th 75thMaximum Apple Inc. Minimum Pecentile Median Pecentile MaximumMultiple Figure Multiple Multiple Multiple Multiple Multiple
3.1 x $42,905 $ 52.12 $ 59.64 $ 89.08 $ 170.37 $ 181.29 2.6 x $53,631 54.32 66.62 96.83 173.80 189.43
11.5 x $13,184 101.49 143.02 146.90 190.08 203.41 8.4 x $16,480 103.84 129.06 137.54 160.94 187.95
47.2 x $9.08 136.10 145.77 179.19 264.11 428.24 44.6 x Err:522 Err:522 Err:522 Err:522 Err:522 Err:522
8.3 x $42,905 $ 57.41 $ 129.08 $ 165.82 $ 319.62 $ 424.32 7.5 x $53,631 63.66 163.31 198.04 328.66 472.85
39.7 x $13,184 162.40 202.99 244.29 285.53 606.40 32.8 x $16,480 211.19 277.70 379.76 465.76 625.62
$ 163.88 $ 182.19 $ 201.98 $ 223.36 $ 246.46
Balance Sheet Adjustment: $35,395
Min. 25th Median 75th11-15% Discount Rate, 5-9x Terminal Multiple: $ 163.88 $ 182.19 $ 201.98 $ 223.36
Forward EV / EBITDA: $ 211.19 $ 277.70 $ 379.76 $ 465.76 Trailing EV / EBITDA: $ 162.40 $ 202.99 $ 244.29 $ 285.53 Forward EV / Revenue: $ 63.66 $ 163.31 $ 198.04 $ 328.66 Trailing EV / Revenue: $ 57.41 $ 129.08 $ 165.82 $ 319.62
2010E P / E: Err:522 Err:522 Err:522 Err:5222009 P / E: $ 136.10 $ 145.77 $ 179.19 $ 264.11 2010E EV / EBITDA: $ 103.84 $ 129.06 $ 137.54 $ 160.94 2009 EV / EBITDA: $ 101.49 $ 143.02 $ 146.90 $ 190.08 2010E EV / Revenue: $ 54.32 $ 66.62 $ 96.83 $ 173.80 2009 EV / Revenue: $ 52.12 $ 59.64 $ 89.08 $ 170.37
11-15% Discount Rate, 5-9x Terminal Multiple:
Forward EV / EBITDA:
Trailing EV / EBITDA:
Forward EV / Revenue:
Trailing EV / Revenue:
2010E P / E:
2009 P / E:
2010E EV / EBITDA:
2009 EV / EBITDA:
2010E EV / Revenue:
2009 EV / Revenue:
$0.00 $100.00 $200.00 $300.00 $400.00 $500.00 $600.00 $700.00
Min to 25th
25th to Median
Median to 75th
75th to Max
Public Company Comparables
Precedent Transactions
Discounted Cash Flow Analysis
Max Min Point 25 Point Med Point 75 Point Max Point $ 246.46 $ 163.88 $ 18.31 $ 19.79 $ 21.38 $ 23.10
$ 625.62 $ 211.19 $ 66.51 $ 102.06 $ 86.00 $ 159.85 $ 606.40 $ 162.40 $ 40.59 $ 41.30 $ 41.24 $ 320.86 $ 472.85 $ 63.66 $ 99.65 $ 34.73 $ 130.62 $ 144.19 $ 424.32 $ 57.41 $ 71.67 $ 36.74 $ 153.80 $ 104.70
Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 $ 428.24 $ 136.10 $ 9.67 $ 33.43 $ 84.92 $ 164.13 $ 187.95 $ 103.84 $ 25.23 $ 8.47 $ 23.41 $ 27.01 $ 203.41 $ 101.49 $ 41.53 $ 3.87 $ 43.18 $ 13.33 $ 189.43 $ 54.32 $ 12.31 $ 30.21 $ 76.97 $ 15.63 $ 181.29 $ 52.12 $ 7.53 $ 29.44 $ 81.29 $ 10.93
11-15% Discount Rate, 5-9x Terminal Multiple:
Forward EV / EBITDA:
Trailing EV / EBITDA:
Forward EV / Revenue:
Trailing EV / Revenue:
2010E P / E:
2009 P / E:
2010E EV / EBITDA:
2009 EV / EBITDA:
2010E EV / Revenue:
2009 EV / Revenue:
$0.00 $100.00 $200.00 $300.00 $400.00 $500.00 $600.00 $700.00
Min to 25th
25th to Median
Median to 75th
75th to Max
Public Company Comparables
Precedent Transactions
Discounted Cash Flow Analysis
Comparable Companies - US-Based Hardware & Networking Companies with Over $20 Billion Revenue($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)
Operating Statistics CapitalizationShare Equity Enterprise Revenue EBITDA
Company Name Price Value Value 2009 2010E 2009Hewlett-Packard Company $ 47.07 $ 114,779 $ 124,430 $ 114,552 $ 124,179 $ 16,433 Dell Inc. 12.90 25,241 15,080 51,430 55,380 3,426 Cisco Systems, Inc. 22.47 131,739 106,671 34,807 41,163 10,076 Intel Corporation 19.40 107,224 92,786 32,784 39,941 12,708 Motorola, Inc. 6.15 14,239 10,665 23,457 22,056 926
Maximum $ 47.07 $ 131,739 $ 124,430 $ 114,552 $ 124,179 $ 16,433 75th Percentile 22.47 114,779 106,671 51,430 55,380 12,708 Median $ 19.40 $ 107,224 $ 92,786 $ 34,807 $ 41,163 $ 10,076 25th Percentile 12.90 25,241 15,080 32,784 39,941 3,426 Minimum 6.15 14,239 10,665 23,457 22,056 926
Apple Inc. $ 192.06 $ 176,796 $ 141,401 $42,905 $ 53,631 $13,184
Valuation Statistics Capitalization Enterprise Value / Enterprise Value / Share Equity Enterprise Revenue EBITDA
Company Name Price Value Value 2009 2010E 2009Hewlett-Packard Company $ 47.07 $ 114,779 $ 124,430 1.1 x 1.0 x 7.6 xDell Inc. 12.90 25,241 15,080 0.3 x 0.3 x 4.4 xCisco Systems, Inc. 22.47 131,739 106,671 3.1 x 2.6 x 10.6 xIntel Corporation 19.40 107,224 92,786 2.8 x 2.3 x 7.3 xMotorola, Inc. 6.15 14,239 10,665 0.5 x 0.5 x 11.5 x
Maximum $ 47.07 $ 131,739 $ 124,430 3.1 x 2.6 x 11.5 x75th Percentile 22.47 114,779 106,671 2.8 x 2.3 x 10.6 xMedian $ 19.40 $ 107,224 $ 92,786 1.1 x 1.0 x 7.6 x25th Percentile 12.90 25,241 15,080 0.5 x 0.5 x 7.3 xMinimum 6.15 14,239 10,665 0.3 x 0.3 x 4.4 x
Apple Inc. $ 192.06 $ 176,796 $ 141,401 3.3 x 2.6 x 10.7 x
Comparable Companies - US-Based Hardware & Networking Companies with Over $20 Billion Revenue
ProjectedEBITDA EPS Revenue EBITDA Margin
2010E 2009 2010E Growth 2009 2010E $ 18,186 $ 3.14 $ 3.87 8.4% 14.3% 14.6% 4,129 0.79 1.18 7.7% 6.7% 7.5% 12,774 0.97 1.38 18.3% 28.9% 31.0% 18,332 0.41 1.17 21.8% 38.8% 45.9% 1,927 (1.70) 0.14 (6.0%) 3.9% 8.7%
$ 18,332 $ 3.14 $ 3.87 21.8% 38.8% 45.9% 18,186 0.97 1.38 18.3% 28.9% 31.0% $ 12,774 $ 0.79 $ 1.18 8.4% 14.3% 14.6% 4,129 0.41 1.17 7.7% 6.7% 8.7% 1,927 (1.70) 0.14 (6.0%) 3.9% 7.5%
$16,480 $9.08 Err:522 25.0% 30.7% 30.7%
Enterprise Value / EBITDA P / E Multiple
2010E 2009 2010E6.8 x 15.0 x 12.2 x3.7 x 16.4 x 10.9 x8.4 x 23.1 x 16.3 x5.1 x 47.2 x 16.6 x5.5 x NM 44.6 x
8.4 x 47.2 x 44.6 x6.8 x 29.1 x 16.6 x5.5 x 19.7 x 16.3 x5.1 x 16.1 x 12.2 x3.7 x 15.0 x 10.9 x
8.6 x 21.2 x Err:522
Networking & Hardware M&A Transactions Over $1 Billion with US-Based Sellers Since 1/1/2008($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)
Apple Inc. - Comparable M&A Transactions
Equity EnterpriseAcquirer Name Target Name Date Value Value
Hewlett-Packard Company 3Com 11/11/2009 $ 3,180 $ 2,714 Cisco Systems, Inc. Starent Networks 10/13/2009 2,777 2,386 Emerson Electric Co. Avocent 10/6/2009 1,114 1,147 EMC Corporation Data Domain 7/8/2009 2,362 2,085 Oracle Corporation Sun Microsystems 4/20/2009 7,075 5,392 Brocade Communication Systems, Inc. Foundry Networks 7/21/2008 2,899 2,063
Maximum $ 7,075 $ 5,392 75th Percentile 3,110 2,632
Median $ 2,838 $ 2,235 25th Percentile 2,466 2,068
Minimum 1,114 1,147
Operating Metrics Valuation MultiplesEV / EV / EV / EV /
Trailing Forward Trailing Forward Trailing Forward Trailing ForwardRevenue Revenue EBITDA EBITDA Revenue Revenue EBITDA EBITDA
$ 1,265 $ 1,223 $ 152 $ 110 2.1 x 2.2 x 17.8 x 24.6 x 288 320 154 110 8.3 x 7.5 x 15.5 x 21.6 x 611 542 105 93 1.9 x 2.1 x 10.9 x 12.3 x 301 375 53 64 6.9 x 5.6 x 39.7 x 32.8 x 13,256 12,462 623 559 0.4 x 0.4 x 8.7 x 9.6 x 621 633 156 125 3.3 x 3.3 x 13.2 x 16.5 x
$ 13,256 $ 12,462 $ 623 $ 559 8.3 x 7.5 x 39.7 x 32.8 x 1,104 1,075 155 121 6.0 x 5.0 x 17.3 x 23.9 x $ 616 $ 587 $ 153 $ 110 2.7 x 2.7 x 14.4 x 19.1 x 378 417 117 97 1.9 x 2.1 x 11.5 x 13.4 x 288 320 53 64 0.4 x 0.4 x 8.7 x 9.6 x
Discounted Cash Flow Analysis - Apple Inc.($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)
Apple Inc. - Cash Flow ProjectionsFY 2010E FY 2011E FY 2012E FY 2013E FY 2014E
Revenue: $53,631 $ 62,749 $ 69,651 $ 75,919 $ 81,234 EBITDA: $16,480 $ 19,282 $ 21,403 $ 23,329 $ 24,962 Operating Income: $14,635 $ 17,133 $ 19,030 $ 20,761 $ 22,218
Less: Taxes ($4,391) ($5,140) ($5,709) ($6,228) ($6,665)
Plus: Depreciation $917 $1,073 $1,192 $1,299 $1,390 Plus: Amortization $40 $37 $28 $13 $10 Plus: Stock-Based Compensation $888 $1,038 $1,153 $1,256 $1,344
Less: Increase in Working Capital: $2,136 $1,815 $1,374 $1,248 $1,058 Less: Capital Expenditures ($1,430) ($1,673) ($1,857) ($2,024) ($2,166)
Unlevered Free Cash Flow $12,795 $ 14,284 $ 15,211 $ 16,324 $ 17,189 Present Value of Free Cash Flow $12,064 $ 11,971 $ 11,332 $ 10,811 $ 10,119
Normal Discount Period: 1.000 2.000 3.000 4.000 5.000Mid-Year Discount: 0.500 1.500 2.500 3.500 4.500
Free Cash Flow Growth Rate: 11.6% 6.5% 7.3% 5.3%
Apple Inc. - Net Present Value Sensitivity - Terminal Growth RatesDiscount Rate
$ 204.96 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% 16.0%0.0% $ 220.90 $ 214.27 $ 207.97 $ 201.98 $ 196.28 $ 190.85 $ 185.68 1.0% $ 220.90 $ 214.27 $ 207.97 $ 201.98 $ 196.28 $ 190.85 $ 185.68 2.0% $ 220.90 $ 214.27 $ 207.97 $ 201.98 $ 196.28 $ 190.85 $ 185.68 3.0% $ 220.90 $ 214.27 $ 207.97 $ 201.98 $ 196.28 $ 190.85 $ 185.68 4.0% $ 220.90 $ 214.27 $ 207.97 $ 201.98 $ 196.28 $ 190.85 $ 185.68 5.0% $ 220.90 $ 214.27 $ 207.97 $ 201.98 $ 196.28 $ 190.85 $ 185.68
Apple Inc. - Net Present Value Sensitivity - Terminal EBITDA MultiplesDiscount Rate
$ 204.96 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% 16.0%4.0 x $ 170.39 $ 165.99 $ 161.81 $ 157.83 $ 154.03 $ 150.40 $ 146.95 5.0 x $ 187.23 $ 182.09 $ 177.20 $ 172.54 $ 168.11 $ 163.88 $ 159.86
Term
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BITD
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6.0 x $ 204.06 $ 198.18 $ 192.59 $ 187.26 $ 182.19 $ 177.37 $ 172.77 7.0 x $ 220.90 $ 214.27 $ 207.97 $ 201.98 $ 196.28 $ 190.85 $ 185.68 8.0 x $ 237.74 $ 230.37 $ 223.36 $ 216.70 $ 210.36 $ 204.33 $ 198.59 9.0 x $ 254.58 $ 246.46 $ 238.75 $ 231.42 $ 224.44 $ 217.81 $ 211.50 Te
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Apple Inc. - DCF Assumptions & Output
Use Multiples Method? YesDiscount Rate: 12.5%
Terminal EBITDA Multiple: 7.0 xTerminal Growth Rate: 3.0%Terminal Value: $ 174,733
PV of Terminal Value: $96,980 Sum of PV of Cash Flows: $56,296 Enterprise Value: $153,276
Terminal Value % EV: 63.3%
Enterprise Value: $153,276 Balance Sheet Adjustment: $35,395 Implied Equity Value: $188,671
Implied Price Per Share: $ 204.96
WACC Analysis - Apple Inc.($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)
Discount Rate Calculation - AssumptionsRisk-Free Rate: 4.38%Equity Risk Premium: 7.00%Interest Rate on Debt: 9.00%
Comparable Companies - Unlevered Beta CalculationLevered Equity Unlevered
Name Beta Debt Value Tax Rate BetaHewlett-Packard Company 1.04 $ 15,830 $ 114,779 20.0% 0.94 Dell Inc. 1.31 3,793 25,241 27.0% 1.18 Cisco Systems, Inc. 1.23 10,273 131,739 22.0% 1.16 Intel Corporation 1.17 2,224 107,224 33.0% 1.15 Motorola, Inc. 1.87 3,925 14,239 34.0% 1.58
Median 1.23 1.16
Apple Inc. 1.57
Apple Inc. - Levered Beta & WACC CalculationUnlevered Equity Levered
Beta Debt Value Tax Rate Beta
Apple Inc. 1.16 $0 $ 176,796 30% 1.16
Cost of Equity Based on Comparables: 12.50%Cost of Equity Based on Historical Beta: 15.37%
WACC = Cost of Equity * % Equity + Cost of Debt * % Debt * (1 - Tax Rate) + Cost of Preferred Stock * % Preferred Stock
WACC 12.50%
WACC = Cost of Equity * % Equity + Cost of Debt * % Debt * (1 - Tax Rate) + Cost of Preferred Stock * % Preferred Stock
Merger Model - Apple Inc. and Research in Motion Limited($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)
Transaction Assumptions
Per Share Purchase Price: $75.00 Equity Purchase Price:% Cash: 33.3% Cash Used:% Debt: 33.3% Debt Issued:% Stock: 33.3% New Shares Issued:Foregone Cash Interest Rate: 1.0% Debt Interest Rate:
Revenue Synergy %: 10.0% Revenue Synergy COGS %:Cost Synergies % OpEx: 10.0%
Goodwill Creation & Balance Sheet Adjustments
Goodwill Calculation: Fixed Asset Write-Up:Equity Purchase Price: $43,049 PP&E Write-Up %:Less: Seller Book Value: ($6,987) PP&E Write-Up Amount:Plus: Write-Off of Existing Goodwill: $147 Depreciation Period (Years):
Total Allocable Purchase Premium: $36,209 Intangible Asset Write-Up:
Less: Write-Up of PP&E: ($174) Purchase Price to Allocate:Less: Write-Up of Intangibles: ($7,242) % Allocated to Intangibles:Less: Write-Down of DTL: ($43) Intangibles Write-Up Amount:Plus: New Deferred Tax Liability: $2,225 Amortization Period (Years):
Total Goodwill Created: $30,975 New Deferred Tax Liability:
Buyer - Financial Profile Seller - Financial Profile
Buyer Name: Apple Inc. Seller Name: Research in Motion LimitedShare Price: $192.06 Share Price:Diluted Shares Outstanding: 920,526 Diluted Shares Outstanding:Diluted Equity Value: $176,796 Diluted Equity Value:Enterprise Value: $141,401 Enterprise Value:Tax Rate: 30% Tax Rate:
Buyer - Income Statement Seller - Income Statement
FY 2010E FY 2011ERevenue: $53,631 $62,749 Revenue:Cost of Goods Sold: $31,655 $37,037 Cost of Goods Sold:
Gross Profit: $21,976 $25,712 Gross Profit:
Operating Expenses: $5,496 $6,430 Operating Expenses:
Depreciation of PP&E: $917 $1,073 Depreciation of PP&E:Amortization of Intangibles: $40 $37 Amortization of Intangibles:Stock-Based Compensation: $888 $1,038 Stock-Based Compensation:
Operating Income: $14,635 $17,133 Operating Income:Interest Income / (Expense): Err:522 Err:522 Interest Income / (Expense):
Pre-Tax Income: Err:522 Err:522 Pre-Tax Income:Income Tax Provision: Err:522 Err:522 Income Tax Provision:
Net Income: Err:522 Err:522 Net Income:
Earnings Per Share (EPS): Err:522 Err:522 Earnings Per Share (EPS):Diluted Shares Outstanding: 907,005 907,005 Diluted Shares Outstanding:
Combined Income Statement
FY 2010E FY 2011ECombined Revenue: $70,862 $83,617
Revenue Synergies: $1,723 $2,087 Cost of Goods Sold: $41,410 $48,905
Revenue Synergy COGS: $862 $1,043 Gross Profit: $30,313 $35,755
Operating Expenses: $8,193 $9,689 OpEx Synergies: $270 $326
Depreciation of PP&E: $1,348 $1,637 Depr. of PP&E Write-Up: $22 $22
Amortization of Intangibles: $399 $470 Amort. of New Intangibles: $1,448 $1,448
Stock-Based Compensation: $939 $1,101
Operating Income: $18,233 $21,713 Interest Income / (Expense): Err:522 Err:522Foregone Interest on Cash: ($143) ($143)Interest Paid on New Debt: ($1,291) ($1,291)
Pre-Tax Income: Err:522 Err:522Income Tax Provision: Err:522 Err:522
Net Income: Err:522 Err:522
Earnings Per Share (EPS): Err:522 Err:522
Diluted Shares Outstanding: 981,719 981,719
Accretion / Dilution: Err:522 Err:522Accretion / Dilution %: Err:522 Err:522
Sensitivity Analysis - Year 1 EPS Accretion/Dilution and Purchase Price vs. Operating Expense Synergies:
Expense Synergies % Seller OpEx:
Per S
hare
Pur
chas
e Pr
ice
Sensitivity Analysis - Year 1 EPS Accretion/Dilution and Purchase Price vs. Revenue Synergies:
Revenue Synergies % Seller Revenue:
Per S
hare
Pur
chas
e Pr
ice
$43,049 $14,350 $14,350
74,7149.0%
50.0%
10.0%$174
8
$36,209 20.0%
$7,242 5
$2,225
Research in Motion Limited$62.91
572,951$36,044 $33,547
28%
FY 2010E FY 2011E$17,231 $20,868
$9,755 $11,869 $7,476 $9,000
$2,698 $3,259
$431 $563 $359 $433
$52 $63
$3,937 $4,682 $25 $33
$3,962 $4,714 $1,148 $1,343
$2,814 $3,371
$5.03 $6.02 560,000 560,000
Sensitivity Analysis - Year 1 EPS Accretion/Dilution and Purchase Price vs. Operating Expense Synergies:
Expense Synergies % Seller OpEx:
Revenue Synergies % Seller Revenue:
Merger Model - Seller Diluted Share Count & Combined Balance Sheets($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)
Diluted Share & Enterprise Value Calculations - Seller
Company Name: Research in Motion Limited Options Calculations - Current Price:Share Price: $62.91 Offer Price Per Share: $75.00 Tax Rate: 28% Exercise
Name Number PriceCurrent Share Price: Purchase Price: Tranche A 10,470 $38.57
Basic Shares Outstanding: 568,900 Basic Shares Outstanding: 568,900 Tranche BBasic Equity Value: $35,789 Basic Equity Value: $42,668 TotalDiluted Shares Outstanding: 572,951 Diluted Shares Outstanding: 573,986Diluted Equity Value: $36,044 Diluted Equity Value: $43,049 Options Calculations - Purchase Price:
Less: Cash & Investments $2,498 Less: Cash & Investments $2,498 Plus: Debt $0 Plus: Debt $0 ExercisePlus: Minority Interest $0 Plus: Minority Interest $0 Name Number PricePlus: Preferred Stock $0 Plus: Preferred Stock $0 Tranche A 10,470 $38.57 Plus: Other Liabilities $0 Plus: Other Liabilities $0 Tranche B
Enterprise Value: $33,547 Enterprise Value: $40,551 Total
Balance Sheets - Buyer, Seller & Combined
Assets: Buyer Seller Adjustments CombinedCurrent Assets:
Cash & Short-Term Securities: $32,841 $1,664 ($14,350) $20,156 Accounts Receivable: $3,361 $2,613 $0 $5,974 Inventory: $455 $573 $0 $1,028 Deferred Tax Assets: $4 $176 $0 $180 Other Current Assets: $3,140 $190 $0 $3,330
Total Current Assets: $39,801 $5,215 ($14,350) $30,667
Long-Term Assets:Long-Term Securities: $2,554 $834 $0 $3,388 Plants, Property & Equipment: $2,839 $1,737 $174 $4,750 Goodwill: $207 $147 $30,828 $31,182 Other Intangible Assets: $354 $1,291 $7,242 $8,887 Other Assets: $2,011 $0 $0 $2,011
Total Assets: $47,766 $9,224 $23,894 $80,884
Liabilities & Shareholders' Equity:Current Liabilities:
Accounts Payable: $5,601 $496 $0 $6,097 Accrued Expenses: $3,852 $1,604 $0 $5,456 Deferred Revenue: $2,053 $67 $0 $2,120
Total Current Liabilities: $11,506 $2,167 $0 $13,673
Long-Term Liabilities:Deferred Revenue: $853 $0 $0 $853 Long-Term Debt: $0 $0 $14,350 $14,350 Deferred Income Tax Liability: $0 $43 $2,181 $2,225 Other Long-Term Liabilities: $3,502 $28 $0 $3,530
Total Liabilities: $15,861 $2,238 $16,531 $34,630
Shareholders' Equity:Common Stock: $7,177 $2,236 ($2,236) $7,177 Additional Paid-In Capital: $1,185 $139 $14,211 $15,535 Treasury Stock: $0 ($45) $45 $0 Retained Earnings: $23,364 $4,664 ($4,664) $23,364 Accumulated Other Comprehensive Income: $179 ($8) $8 $179
Total Shareholders' Equity: $31,905 $6,987 $7,363 $46,255
Total Liabilities & SE: $47,766 $9,224 $23,894 $80,884
Options Calculations - Current Price:
Dilution4,051
4,051
Options Calculations - Purchase Price:
Dilution5,086
5,086