Department of Finance

University of Dhaka
Course Name: Cases in Financial Decision Making
Course Code: F-506
Report on “Optimum Capital Structure of B/E Aerospace. INC”

Submitted to:

Dr. Gazi Mohammad Hasan Jamil

Associate Professor
Department of Finance
University of Dhaka

Submitted by:
GROUP#08
Section: B
Batch: 21st
Department of Finance
University of Dhaka

Name MBA Roll Remarks

Faima Akter 21-911
Atkia Nabiha Rahman 21-927
Mohammad Inzamul Huq 21-1050

Date of Submission: 20th February, 2020

 Letter of Transmittal
February 20, 2020
Dr. Gazi Mohammad Hasan Jamil
Associate Professor
Department of Finance
University of Dhaka
Subject: Submission of report on “Optimal Capital Structure of B/E Aerospace Inc.
Dear Sir,
It gives us great pleasure to submit our report on “Optimal Capital Structure of B/E Aerospace
Inc.” This topic was assigned by our respected course teacher Dr. Gazi Mohammad Hasan Jamil,
Associate Professor, Department of Finance, University of Dhaka. While making the report, we
came across many struggling and pleasant experiences. But the valuable experiences we have
gained during the period will undoubtedly benefit us in the years ahead.

We have tried sincerely to comprehend and translate our knowledge in writing this report. We
enjoyed this group work and gladly attend any of your calls to clarify on our point, if necessary.
Hope you would find the report in appropriate manner.

Sincerely yours,

__________________

On behalf group no 8
Faima Akter
Roll no: 21-911, Section: B
Batch: 21st
Department of Finance,
University of Dhaka.
 Acknowledgement
It is a pleasure for us to submit this report to our respected teacher Dr. Gazi Mohammad Hasan
Jamil, Associate Professor, Department of Finance, University of Dhaka. At first we want to
convey our thanks and gratitude to him for assigning us to prepare the report. It would not have
been possible for us to complete the report without his help.

In preparing this report, we got full co-operation from our group-mates and that was a great
advantage for us. We would like to thank all the members of our group who helped us sincerely
from every aspect. An individual can achieve no noble achievement by his/her alone trial. We
are indebted to a number of persons for their kind recommendation, direction, co-operation and
their collaboration.

All of the efforts ended at a desired point for the co-operation and hard work, sincerity and
seriousness of our group members and our combined effort was really helpful for making this
report. So, all of them as well as our group members are worth of pure compliment.
Executive Summary
 Methodology
We have used the information available in the case and some website to find out the value for
each share. The case published by University of Virginia on “Optimum Capital Structure of B/E
Aerospace Inc.”. In case of unavailability of any information, we have used our judgment and
realistic assumption.
Chapter 01: Case Overview
Chapter 02: Economic Analysis
Chapter 03: Industry Analysis
Chapter
Chapter
04: Company
04: Valuation
Analysis
Chapter 05: Valuation on
Different Alternatives
 Absolute Valuation
To find out the optimal capital structure of B/E Aerospace Inc. we have calculated intrinsic value
of B/E Aerospace based on the forecasted period from 2005-2009. For the purpose of this
valuation we have first of all converted the fiscal year ended to calendar year ended. We need
same level of data to maintain the consistency. For our valuation we have taken some
assumptions which are tabulated below:

Table: Key assumptions and inputs for valuation

Assumptions
1 Fixed Asset percentage 75%
Short term asset percentage 25%
Total Asset 100%
2 Risk Free Rate (3 years Treasury Notes) 3.51%
3 Annual terminal growth rate 6.50%
United states GDP growth rate 3.80%
United states Inflation rate 2.70%
4 Long term asset will remain fixed after 2014
5 Working Capital will increase at the rate of sales growth rate 10%

Weighted average cost of capital (WACC) for Base Scenario:

For calculating WACC we have taken 14 year average market return of NASDAQ and the beta
given in our case. We have used CAPM model to calculate cost of equity which is 23.60%.For
cost of debt we have found out the credit ratings of the company using different ratios. The result
is as follows:

PARTICULARS Median Bond Ratings

Times-interest- 0.29 CCC
earned(EBIT/Interest)
EBITDA interest coverage 0.67 CCC
 (EBITDA/Interest)
Net CF/Total debt -2.86% CCC
Free CF/Total Debt 9.08% BBB
Return on capital 10.58% BB
Operating income/Sales 3.25% CCC
Total debt/ Total capital 92.35% CCC

We have calculated WACC to different capital Structure. The calculation is shown below:

Table: Calculation of WACC

Market Return 13.81%

Risk-Free Rate (Given, 3 year T-bond rate) 3.51%
Beta 1.95
Cost of Equity 23.60%
Cost of Debt 9.21%
Effective tax rate 5.56%
Debt 679
Stock 180
Weight of Debt 79%
Weight of stock 21%
WACC 11.83%

To calculate the market return monthly price data of NASDAQ index has been taken from year
1990-2004.

Here, the WACC is 11.83% for the base scenario.

Value per share under the base case scenario:

Table: Value per share for base scenario Amount in million USD

Particulars 2005 2006 2007 2008 2009

EBIT 22.66108815 24.927197 27.41992 30.16191 33.1781
EBIT(1-tax) 21.40113165 23.5412448 25.89537 28.48491 31.3334
Capital 0 0 0 0 0
expenditure
Depreciation 46.27107222 46.2710722 46.27107 46.27107 46.27107
Changes in 8.573333333 9.43066667 10.37373 11.41111 12.55222
 NWC
Free cash flow 59.09887054 60.3816504 61.79271 63.34487 65.05225
(FCF)
Present value of 52.84706299 48.2823421 44.18372 40.50216 37.19381 1299.825
FCF
743.1785
Value of 966.1875447
operation
Cash and cash 168.267
equivalent
Enterprise 1134.454545
Value
Total debt 679
FCF to Equity 455.4545447
Number of 55.50
Shares
Value per share $8.20 Overvalue
d
Current share $10.20
price
The FCFF valuation based on the forecasted information shows that the price per share of B/E
Aerospace Incorporation should be $8.20. However, the current market price of the share is
$10.20. This indicates that the shares are overvalued

Simulation and Sensitivity Analysis:

Simulation tells us how different change in an independent variables change the dependent
variables remaining other things constant. On the other hand sensitivity analysis tells us how 1%
changes in independent variables change the dependent variable.

We have also run simulation model and sensitivity analysis in the base case with the help of
Crystal ball. In this case our dependent variable is Value per share and the independent variables
are sales growth rate, tax rate, terminal growth rate, depreciation rate and WACC. The result is
as follows:
Here we can see that at 95% confidence level value per share will be within the range of 2.70 to
24.43. That means all the independent variables separately holding ceteris paribus condition will
make the furcating variables within the range of those values if the simulation is conducted
10000 times.

Our sensitivity result of this base case is as follows:

In sensitivity Chart we see that only two variables are affecting the values of share price
significantly. One is WACC and the other is terminal growth rate. For one % change of WACC
the values per share will be decreased by 91%. Again for increasing 1% of terminal growth rate
value per share will decrease by 9%.

Relative Valuation
As all competitor data was not available so we couldn’t calculate some value for relative
valuation. As Boeing is not perfect competitor so we couldn’t take this company’s data. Other
two companies C&D and Britax are both private companies. So they cannot be considered for
relative valuation. That’s why we have considered Zodiac for our relative valuation. Result is
shown as follows:

Zodiac Aerospace
Share Number 52775425
Price in 2004 6.57
Sales 400
Sales in Euro 544000000
Sales Per Share 10.30782793
price to sales 0.637379673
Sales of B/E 10.45045045
Price Per share 6.660904693
Overvalued

As we already know the share price in 2004 is 10.2 relative price is 6.66 we the share is
overvalued in the market.
 Chapter 06: Alternative
Courses of Actions

Alternative scenarios
Some alternative scenarios of the capital structure of B/E Aerospace Incorporation have been
considered and based on these scenarios financial information are forecasted to calculate the
value per share. These scenarios are

 $50 million from the available cash can be used to repay debt
 $100 million worth of shares can be issued to repay debt and reduce the interest expense
 The company can repurchase some stocks when cash becomes available
 Addition of deferred tax to the equity
 The company may face a terrorist attack in 2005
Alternative 1: Repayment of debt worth of $50 million from available cash
Table: Calculation of WACC

Market Return 13.81%

Risk-Free Rate (Given, 3 year T-bond rate) 3.51%
Beta 1.95
Cost of Equity 23.60%
Cost of Debt 9.21%
Effective tax rate 5.56%
Debt 629
Stock 180
Weight of Debt 78%
Weight of stock 22%
WACC 12.01%

After the repayment, the amount of total debt is reduced to USD 629 million from USD 679
million. Total amount of equity has remained unchanged. New weight of debt is 78% and weight
of equity is 22%. Weighted average cost of capital is 12.01%.

Table: Value per share after the repayment of debt Amount in million USD

Particulars 2005 2006 2007 2008 2009

EBIT 22.66 24.93 27.42 30.16 33.18
EBIT(1-tax) 21.40113165 23.54124 25.89537 28.48491 31.3334
Cap. Ex. 0 0 0 0 0
Depreciation 46.27107222 46.27107 46.27107 46.27107 46.27107
Changes in 8.573333333 9.430667 10.37373 11.41111 12.55222
NWC
FCF 59.09887054 60.38165 61.79271 63.34487 65.05225
PV of FCF 52.71977746 48.05004 43.86523 40.11336 36.74805 1237.154
698.8691
Value of 920.3655711
 operation
Cash and cash 118.27
equivalent
Enterprise 1038.632238
Value
Total debt 629.00
FCFE 409632237.81
Number of 55500000.00
Shares
Value per $7.38 Overvalued
share
Current share $10.20
price

Change in the capital structure leads the value per share of the company to $7.38. Comparing
with the current share price it can be concluded that the shares of the company are overvalued.

Alternative 2: Issuing $100 million worth of shares to repay debt and reduce
the interest expense
Table: Calculation of WACC

Market Return 13.81%

Risk-Free Rate (Given, 3 year T-bond rate) 3.51%
Beta 1.95
Cost of Equity 23.60%
Cost of Debt 9.21%
Effective tax rate 5.56%
Debt 579
Stock 280
Weight of Debt 67%
Weight of stock 33%
 WACC 13.55%

After the new issue of stock and repayment of debt with the issued money, the total amount of
debt reduced to USD 579 million and value of equity increased to USD 280 million. New weight
of debt is 67% and weight of equity is 33%. Weighted average cost of capital is 13.55%.

Table: Value per share after the issue of new stock Amount in million USD

Particulars 2005 2006 2007 2008 2009

EBIT 22.66108815 24.927197 27.4199 30.1619 33.1781
2 1
EBIT(1-tax) 21.40113165 23.541244 25.8953 28.4849 31.3334
8 7 1
Cap. Ex. 0 0 0 0 0
Depreciation 46.27107222 46.271072 46.2710 46.2710 46.2710
2 7 7 7
Changes in 8.573333333 9.4306666 10.3737 11.4111 12.5522
NWC 7 3 1 2
FCF 59.09887054 60.381650 61.7927 63.3448 65.0522
4 1 7 5
PV of FCF 52.05 46.830705 42.2061 38.1033 34.4609 982.704
7 6 3 2
520.579
6
Value of 734.2272382
operation
Cash and cash 168.267
equivalent
Enterprise 902.4942382
Value
Total debt 579
FCFE 323.4942382 323494238
Number of 65.3 65300000
Shares
Value per share $4.95 Overvalue
d
Current share $10.20
price
The FCFF valuation based on the information, if the second alternative is chosen, shows that the
price per share of B/E Aerospace Incorporation should be $4.95. However, the current market
price of the share is $10.20. This indicates that the shares are overvalued.

Alternative 3: Stock Repurchase

The company repurchased 9.80 million shares at the end of year 2004 at the current market price.
Due to the repurchase equity value reduced to USD 80 million. Total amount of debt remain
unchanged.

Table: Calculation of WACC

Market Return 13.81%

Risk-Free Rate (Given, 3 year T-bond rate) 3.51%
Beta 1.95
Cost of Equity 23.60%
Cost of Debt 9.21%
Effective tax rate 5.56%
Debt 679
Stock 80
Weight of Debt 89%
Weight of stock 11%
WACC 10.34%

Table: Value per share after the stock repurchase Amount million USD

Particulars 2005 2006 2007 2008 2009

EBIT 22.66108815 24.927197 27.41992 30.16191 33.1781
EBIT(1-tax) 21.40113165 23.5412448 25.89537 28.48491 31.3334
Cap. Ex. 0 0 0 0 0
Depreciation 46.27107222 46.2710722 46.27107 46.27107 46.27107
Changes in 8.573333333 9.43066667 10.37373 11.41111 12.55222
NWC
FCF 59.09887054 60.3816504 61.79271 63.34487 65.05225
PV of FCF 53.5606947 49.5951285 45.99793 42.73459 39.77383 1804.184
1103.102
Value of 1334.76455
operation
Cash and cash 68.26666667
 eq.
Enterprise Value 1403.031216
Total debt 679
FCFE 724.0312164 724031216
Number of 45.69607843 45696078.4
Shares
Value per share $15.84 Undervalue
d
Current share $10.2
price

Though the intrinsic value of the share seems good after stock repurchase, it can create serious
liquidity issue for the company because this strategy will reduce the cash balance significantly.

Alternative 4: Addition of deferred tax asset to equity

Table: Calculation of WACC

Management believes that addition of USD 75 million deferred tax will result in a one-time
income benefit. It will increase the equity to USD 255 million.

Market Return 13.81%

Risk-Free Rate (Given, 3 year T-bond rate) 3.51%
Beta 1.95
Cost of Equity 23.60%
Cost of Debt 9.21%
Effective tax rate 5.56%
Debt 629
Stock 255
Weight of Debt 71%
Weight of stock 29%
 WACC 13.02%

Table: Value per share after the addition of deferred tax Amount million USD

Particulars 2005 2006 2007 2008 2009

EBIT 22.66108815 24.927197 27.41992 30.16191 33.1781
EBIT(1-tax) 21.40113165 23.5412448 25.89537 28.48491 31.3334
Cap. Ex. 0 0 0 0 0
Depreciation 46.27107222 46.2710722 46.27107 46.27107 46.27107
Changes in NWC 8.573333333 9.43066667 10.37373 11.41111 12.55222
FCF 59.09887054 60.3816504 61.79271 63.34487 65.05225
PV of FCF 52.29063045 47.2709547 42.80272 38.8231 35.27653

Value of operation 792.6832713

Cash and cash eq. 168.267
Enterprise Value 960.9502713
Total debt 629
FCFE 281.9502713 281950271
Number of Shares 55.5 55500000
Value per share $5.98 Overvalued
Current share price $10.20

The FCFF valuation based on the information, if the fourth alternative is chosen, shows that the
price per share of B/E Aerospace Incorporation should be $5.98. However, the current market
price of the share is $10.20. This indicates that the shares are overvalued.

Alternative 5: If terrorist attack occurs in 2005

If any terrorist attack occurs in 2005, the management of the company expects that the sales
revenue will be decreased by 11.30% in 2005. After that the management believes that the
company will experience 7% sales revenue growth. Due to the attack terminal growth rate will
be reduced to 5%. What capital structure will protect the company is given below:

Scenario 1: Debt 79%, Equity 21% and WACC 11.83%

Table: Value per share when there is no change in capital structure Amount million USD

Particulars 2005 2006 2007 2008 2009

FCF 54.9542867 55.3049117 55.65436 55.99998 56.33867
PV of FCF 49.1409163 44.2228832 39.79461 35.8059 32.2118 866.11
 495.20
Value of 696.379427
operation
Cash and cash 168.267
eq.
Enterprise Value 864.646427
Total debt 679
FCFE 185.646427 185646427
Number of 55.5 55500000
Shares
Value per share $3.34 Overvalued
Current share $10.20
price

Scenario 2: Debt 78%, Equity 22% and WACC 12.01%

Table: Value per share when $50 million USD is used to repay debt Amount in million USD

Particulars 2005 2006 2007 2008 2009

FCF 54.95429 55.30491171 55.65436 55.99998 56.33867
PV of FCF 49.06195 44.08086508 39.60307 35.57629 31.95381 843.8745
478.6233
Value of 678.8993
operation
Cash and cash 118.267
eq.
Enterprise Value 797.1663
Total debt 629
FCFE 168.1663
Number of 55.5
Shares
Value per share $3.03 Overvalued
Current share $10.20
price

Scenario 3: Debt 71%, Equity 29% and WACC 13.02%

Table: Value per share when deferred tax is added to equity Amount in million USD

Particulars 2005 2006 2007 2008 2009

FCF 54.95429 55.30491171 55.65436 55.99998 56.33867
PV of FCF 48.62351 43.29653062 38.55079 34.32153 30.55133 737.601
399.9862
 Value of 595.3299
operation
Cash and cash 168.267
eq.
Enterprise Value 763.5969
Total debt 629
FCFE 134.5969
Number of 55.5
Shares
Value per share $2.43 Overvalued
Current share $10.20
price

Scenario 4: Debt 67%, Equity 33% and WACC 13.55%

Table: Value per share when $50 million USD worth of shares is issued to repay debt (Amount in million
USD)

Particulars 2005 2006 2007 2008 2009

FCF 54.95429 55.30491171 55.65436 55.99998 56.33867
PV of FCF 48.39655 42.89329666 38.01349 33.68521 29.84495 691.8784
366.517
Value of 559.3505
operation
Cash and cash 168.267
eq.
Enterprise Value 727.6175
Total debt 579
FCFE 148.6175
Number of 65.3
Shares
Value per share $2.28 Overvalued
Current share $10.20
price
It is observed that in the all the cases the intrinsic value of stock is less than the current market
price at the time of terrorist attack. That means the shares are overvalued. Among the four
scenarios no change in capital structure provides the highest value which is $3.34. So, the
company should stay at their current capital structure in times of terrorist attack.

Simulation and Sensitivity analysis:

We have also run simulation and sensitivity analysis in the case of Terrorist Attack. . In this case
our dependent variable is Value per share and the independent variables are sales growth rate, tax
rate, terminal growth rate, depreciation rate and WACC. The result is as follows:
Here we can see that at 95% confidence level value per share will be within the range of .12 to
10.28. That means all the independent variables separately holding ceteris paribus condition will
make the furcating variables within the range of those values if the simulation is conducted
100000 times.

Our sensitivity result of this base case is as follows:

In sensitivity Chart we see that only two variables are affecting the values of share price
significantly. One is WACC and the other is terminal growth rate. For one % change of WACC
the values per share will be decreased by 84%. Again for increasing 1% of terminal growth rate
value per share will decrease by15. 9%.
Decision: Cash Dividend or Repurchase:
In our case manager is also concerned about cash dividend or stock repurchase in case of funds
availability. So we have also considered this issue in our case. First of all to elicit interest in
equity company must have enough positive earning or higher retained earnings. In case of B/E
aerospace both are absent. From 2003 annual reports we have found that this company has large
amount of negative retained earnings. In the forecasted period we can notice that the company
will have negative net income. Adjusting this negative income retained earnings cannot be offset.

In this case giving cash dividend and stock repurchase won’t be a good decision. The forcased
scenario will be as follows:

Retained earnings
-381.00
2003 2004 2005 2006 2007 2008 2009
-382.00

-383.00
Retained earnings
-384.00

-385.00

-386.00

-387.00

Again the company has highest possibility of bankruptcy in near future. So in case of fund
availability they shouldn’t declare cash dividend or repurchase any stock.

Recommendations:

Considering the above valuation and other alternative scenarios we can summarize the result as
follows:

  Stock Repurchase Base Case Cash Pay Deferred Equity

tax Issue
 Debt Level 89% 79% 78% 71% 67%
WACC 10.337% 11.826% 12.012% 13.018% 13.554%
Value of The firm 1403 1134 1039 961 902
Value Per share 15.84 8.21 7.38 5.98 4.95

Here we can see that value per share is and value of the firm is higher in case of Stock
Repurchase. But this alternative is not viable, as the company has large amount of negative
earnings and net income. In this case our next alternative is the base case where the company
sold some shares and paid the debt holder of 156million dollar at the end of the base period.

So we are suggesting them to continue at the capital structure of 79%/21%.

Appendix:
1. Ratings:
Statement of operations data 31/12/2001 31/12/2002 31/12/2003 31/12/2004
Net Sales 678.15 601.5 624.4 725.20
Cost of sales 511.18 417.9 453.6 491.20
Gross Profit 166.97 183.6 170.8 234.00
Operating expenses 0.00 0.00
Selling, general & admin 136.87 144.5 105.8 117.87
Research & development & Engineering 44.40 43.5 44.7 52.00
Operating earnings -14.30 -4.4 20.3 64.13
Interest expenses, net 59.45 69 70.6 79.20
Loss on debt 7.75 0 1.2 0.00
Loos/ Earnings before tax -81.50 -73.4 -51.5 -15.07
Income taxes 1.87 2.7 2 1.87
Net Loss/ Earnings -83.37 -76.1 -53.5 -16.93
Basic net loss/earnings per share 0.00 0 0.00
Net loss/earnings -3.28 -2.327217125 -1.49 -0.31
Weighted Avg. common shares 25.40 32.7 36 55.50

Balance Sheet Data 2001

31/12/2001 2002 2003 2004 2005
31/12/2002 2006 31/12/2003
2007 2008 2009
31/12/2004
Statement
Cash & Cashof operations
Equivalents data 142.97 156.9 147.6 168.27
NetWorking
sales Capital 678.15 601.50 624.40
283.15 725.20262.9797.72 877.492 965.2412
274.3 1061.765 1167.942
85.73
Cost of sales
Total Assets 511.18 417.90 453.60
1096.25 491.201067.1
568.8425 625.7268 688.2995
1052.5 757.1294 832.8424
1430.80
Gross
Totalprofit
Debt 166.97 183.60 170.80
813.93 234.00 836
228.8775 251.7652 276.9417
882 304.6359 335.0995
679.00
Operating expenses
Stockholders Equity 135.30 69.3 31.9 180.00
Total general
Selling, Capital & administrative 136.87 144.50 949.23
105.80 117.87905.30 913.90 205.4593
154.3646 169.801 186.7811 859.00
226.0052
Other financial
Research, Data & engineering
development 44.40 43.50 44.70 52.00 51.8518 57.03698 62.74068 69.01475 75.91622
Dep& Amortization
Operating earnings -14.30 -4.40 42.80
20.30 64.13 46.8 28.3 30.16191 33.1781
22.66109 24.9272 27.41992 28.00
Capital ex. 14.45 -17.4 11.2 -14.27
Interest expenses, net 59.45 69.00 70.60 79.20 62.54 62.54 62.54 62.54 62.54
CF from operation 57.90 24.4 -25.5 -1.20
Loss on debt extinguishment 7.75 0.00 1.20 0.00 0.00 0.00 0.00 0.00 0.00
CF from investing -195.52 6.9 -10.6 -29.20
(Loss) Earnings
CF from before income taxes
financing -81.50 -73.40 -51.50
224.75 -15.07 0.7 -39.87 -37.61 -35.12
24 -32.37 -29.361.87
Income
EBITDA taxes 1.87 2.70 2.00
28.50 1.87 42.4 2.22 2.09 1.95
47.4 1.80 1.63
92.13
NetNet
(loss)
Cashearnings
Flow -83.37 -76.10 -53.500.00 -16.93-29.30-42.09 -39.70 -37.07
-25.20 -34.17 -30.99
11.07
Basic
Freenet (loss)
Cash Flowearnings per share: 0.00 75.947 -57.400 222.300
Net (loss) earnings -3.28 -2.19 -1.49 -0.31 -0.76 -0.72 -0.67 -0.62 -0.56
Weighted average common shares 25.40 34.80 36.00 55.50 55.50 55.50 55.50 55.50 55.50
2. Pro forma
Balance sheet data 2001 2002 2003 2004 2005 2006 2007 2008 2009
Cash and cash equivalents 142.967 156.9 147.6 168.267
Working capital 283.15 262.9 274.3 85.733 94.30667 103.7373 114.1111 125.5222 138.0744
Total assets 1096.25 1067.1 1052.5 1430.8 1468.854 1510.957 1557.539 1609.076 1666.096
Total debt 813.933 836 882 679 679 679 679 679 679
Stockholders’ equity 135.3 69.3 31.9 180 180 180 180 180 180
Fixed asset 822.1875 800.325 789.375 1073.1 1073.1 1073.1 1073.1 1073.1 1073.1
Depreciation 42.80 46.80 28.30 28.00 46.27107 46.27107 46.27107 46.27107 46.27107
Chnages in net working capital -20.25 11.4 -188.567 8.573 9.430667 10.37373 11.41111 12.55222
Short term asset 274.0625 266.775 263.125 357.7 395.7542 437.8568 484.4385 535.9759 592.9961
 3. Forecasting under terrorist attack

2001 2002 2003 2004 2005 2006 2007 2008 2009

Statement of operations data
Net sales 678.15 601.50 624.40 725.20 643.232 688.2583 736.4363 787.9869 843.146
Cost of sales 511.18 417.90 453.60 491.20 458.6794 490.787 525.1421 561.902 601.2351
Gross profit 166.97 183.60 170.80 234.00 184.5526 197.4713 211.2943 226.0849 241.9108
Operating expenses
Selling, general & administrative 136.87 144.50 105.80 117.87 124.47 133.1829 142.5058 152.4812 163.1548
Research, development & engineering 44.40 43.50 44.70 52.00 41.81008 44.73679 47.86836 51.21915 54.80449
Operating earnings -14.30 -4.40 20.30 64.13 18.2725 19.55157 20.92018 22.3846 23.95152
Interest expenses, net 59.45 69.00 70.60 79.20 57.9309 57.9309 57.9309 57.9309 57.9309
Loss on debt extinguishment 7.75 0.00 1.20 0.00 0.00 0.00 0.00 0.00 0.00
(Loss) Earnings before income taxes -81.50 -73.40 -51.50 -15.07 -39.66 -38.38 -37.01 -35.55 -33.98
Income taxes 1.87 2.70 2.00 1.87 2.20 2.13 2.06 1.98 1.89
Net (loss) earnings -83.37 -76.10 -53.50 -16.93 -41.86 -40.51 -39.07 -37.52 -35.87
Basic net (loss) earnings per share:
Net (loss) earnings -3.28 -2.19 -1.49 -0.31 -0.75 -0.73 -0.70 -0.68 -0.65
Weighted average common shares 25.40 34.80 36.00 55.50 55.50 55.50 55.50 55.50 55.50

Balance sheet data 2001 2002 2003 2004 2005 2006 2007 2008 2009
Cash and cash equivalents 142.967 156.9 147.6 168.267 118.267
Working capital 283.15 262.9 274.3 85.733 94.30667 103.7373 114.1111 125.5222 138.0744
Total assets 1096.25 1067.1 1052.5 1430.8 1468.854 1510.957 1557.539 1609.076 1666.096
Total debt 813.933 836 882 679 629
Stockholders’ equity 135.3 69.3 31.9 180 255 255 255 255 255
Fixed asset 822.1875 800.325 789.375 1073.1 1073.1 1073.1 1073.1 1073.1 1073.1
Depreciation 42.80 46.80 28.30 28.00 46.27107 46.27107 46.27107 46.27107 46.27107
Chnages in net working capital -20.25 11.4 -188.567 8.573 9.430667 10.37373 11.41111 12.55222
Short term asset 274.0625 266.775 263.125 357.7 395.7542 437.8568 484.4385 535.9759 592.9961

4. Common size:
 12/31/2001 12/31/2002 12/31/2003 12/31/2004 Average Balance sheet data 12/31/2001 12/31/2002 12/31/2003 12/31/2004 Average
Net sales 100.00% 100.00% 100.00% 100.00% Cash and cash equivalents 13.04% 14.70% 14.02% 11.76% 13.38%
Cost of sales 75.38% 69.48% 72.65% 67.73% 71.31% Working capital 25.83% 24.64% 26.06% 5.99% 20.63%
Gross profit 24.62% 30.52% 27.35% 32.27% 28.69% Total assets 100% 100% 100% 100% 100%
Operating expenses Total debt 74.25% 78.34% 83.80% 47.46% 70.96%
Selling, general & administrative 20.18% 24.02% 16.94% 16.25% 19.35% Stockholders’ equity 12.34% 6.49% 3.03% 12.58% 8.61%
Research, development & engineering 6.55% 7.23% 7.16% 7.17% 7.03%
Operating earnings -2.11% -0.73% 3.25% 8.84% 2.31%
Interest expenses, net 8.77% 11.47% 11.31% 10.92% 10.62%
Loss on debt extinguishment 1.14% 0.00% 0.19% 0.00% 0.33%
(Loss) Earnings before income taxes -12.02% -12.20% -8.25% -2.08% -8.64%
Income taxes 0.28% 0.45% 0.32% 0.26% 0.33%
Net (loss) earnings -12.29% -12.65% -8.57% -2.33% -8.96%