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					Advanced Investment Banking Training Guide

Confidential

This material may not be given away or sold in any manner or in any form to any person, business, or to any other type of entity. Any violations should be reported by contacting Wall Street Advisors LLC at 1-888-IBANK-99.

Copyright © 1997 by Wall Street Advisors LLC & Roberto Milk

Introduction
Welcome to the world of Investment Banking! By purchasing the Advanced Guide, you’ve made a decision to seriously pursue this career. The Advanced Guide is meant as a continuation of our Investment Banking Training Guide and is written under the assumption that the reader has fully read the Training Guide. Thus, as a forewarning, you will not learn as much from the Advanced Guide without the frame of reference provided by the Investment Banking Training Guide. We strongly discourage reading this guide before reading the Training Guide. Having said that, we believe this guide is an extremely powerful tool for prospective Corporate Finance Analyst and Associate candidates because it gives you in-depth knowledge of exactly what you will be doing on the job. We encourage you to peruse the Excel models on disk that accompany the Advanced Guide in order to obtain a better understanding of modeling and how sophisticated models are created. Well, to all of you, again -- good luck in your endeavor. We know personally how you feel right now -- your choice of field and firm define an important crossroads in your life. The first section of the Advanced Guide covers pitchbooks and should serve the purpose of enhancing your knowledge on the pitchbook and its components. The second section provides a mocked-up prospectus and should help you understand the basics of drafting public equity transactions. The third section introduces modeling through projected income statement models. The fourth section approaches valuation through comparable companies and DCF models and covers the context of M&A and public equity transactions. As a final word, prospective Associates, as opposed to prospective Analysts, are under considerably more pressure because they are expected to know this material. If a prospective Analyst knows this material, they’ve got a job in corporate finance practically guaranteed. The Associate, however, must be prepared to answer the following typical interview questions: 1) If I am an acquiror, what types of things am I looking for in a prospective target? 2) What are three ways of valuing a company? 3) What type of discount rate would I use in valuing the cash flows of a particular company? 4) How do I arrive at the WACC for a given company? 5) What project in a previous job or class involved valuing a company and how did you value that company? The answers to all these questions are in this guide. However, as a rule of thumb, always remember to discuss your projects in macro terms. Bankers are macro thinkers. In other words, when discussing a project in which you valued a company, use the following format as a guideline to your approach: The company specializes in

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X and derives revenues from Y. Last year they did $Z million in sales. Their competitors are A, B and C. The industry seems to be moving towards G. Their biggest competitive strength is E. We valued them based on the D methodology and concluded that the company was worth about $R. The most important thing is to sound calm, collected, and refined. Your project discussions should be macro and succinct. If the interviewer wants more details, let her dig them out -- that way you can address what most interests her. Remember, the interviewer is judging you on presentation because, as an Associate, you will be constantly explaining analyses to clients.

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Copyright © 1997 by Wall Street Advisors LLC & Roberto Milk

Section I Sample Pitchbooks
A. Sample Media & Entertainment Pitch

Film Financing Corporation

Presentation on Greenleaf Securities

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Film Financing Corporation Table of Contents

I. II.

Greenleaf Securities Overview The Media & Entertainment Investment Banking Group Overview

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Greenleaf Securities Overview Capital Markets Summary

Investment Banking
New York, San Francisco, London, Paris, Mexico City, Buenos Aires
INDUSTRY PRODUCT SPECIALIZATION SPECIALIZATION

Consumer/Retail Media & Entertainment Oil & Gas Technology Telecom

Public Equity Investment Grade Debt High Yield Debt Private Equity M&A

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Greenleaf Securities Overview Capital Markets Summary

Research
28 Analysts on the 1997 Institutional Investor All-America Research Team

INDUSTRY SPECIALIZATION Consumer/Retail Envirnomental Financial Services Health Care Media & Entertainment Oil & Gas Technology Telecom

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Greenleaf Securities Overview Capital Markets Summary

Sales & Trading
New York, San Francisco, London, Paris, Mexico City, Buenos Aires

NASDAQ NYSE ASE EQUITY DEBT DERIVATIVES

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Greenleaf Securities Overview Investment Banking

• Strategic focus on companies with market capitalizations ranging from $50 million to $500 million. • Specialization on companies in high growth phase. • Excellent track record of supporting IPOs with top class research. • Ranked fourth in 1997 Lead Managed IPOs and sixth in 1997 Co-Managed IPOs. • Ranked first in 1997 Equity Transactions under $40 million. • Ranked third in 1997 High Yield Transactions.

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Greenleaf Securities Overview Investment Banking

Powerful Distribution Network
• Strong Institutional Sales effort with over 65 dedicated institutional salesmen. • Institutional relationships with top tier mutual funds, insurance companies and pension plans. • Excellent retail distribution network with over 500 retail brokers.

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Greenleaf Securities Overview Investment Banking

I nternational Capabilities
• 10 international retail offices in Asia, Europe and Latin America. • 30 International Institutional Salespeople. • Ranked sixth in privatization advisory.

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Media & Entertainment Group Overview Investment Banking Capabilities

INVESTMENT BANKING
• 25 Media & Entertainment Investment Banking professionals • Media & Entertainment Investment Banking Group lead managed 13 transactions totaling over $3.5 billion in 1997 • Access to 4 dedicated product groups with a full range of expertise

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Media & Entertainment Group Overview Dedicated Research Support

Media & Entertainment Investment Banking Group

High Yield Ronald Reager Group Head

Private Equity Sandy FrankMills Group Head Investment Grade Debt Craig Kicsh Group Head

M&A Donald Youngest Group Head

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Media & Entertainment Group Overview Dedicated Research Support

RESEARCH SUPPORT
• 6 Media & Entertainment group equity analysts provide comprehensive coverage of over 65 companies • Media & Entertainment Research effort led by All- American Research Analysts Dan Disnel and Laura Guester.

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Media & Entertainment Group Overview Dedicated Research Support

Laura Guestner Provides M arket Support
Recognized Ability Named #3 in Stock Picking Skill and #2 in Estimate Accuracy in the Wall Street Journal, All-Star Analyst 1997 Survey. Investors following her Buy recommendations would have achieved an average annualized return of 30.0% during a period when the S&P returned a 17.1%. Luara has a proven track record of dedicated client support. In particular, she has supported new issues through the immediate publication of full research reports following an offering by a client company, as well as ongoing research publication and follow-on marketing. Laura has maintained continuity of coverage on all of the companies for whom we have managed equity offerings. Of this group, six out of eight are currently rated “Buy”.

Aftermarket Support

Ongoing Market Support

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Summary Points – Pitch #1
• • Both Research and Sales & Trading are used by bankers to promote the investment bank to potential clients. Good Research, in particular, is extremely important to companies. Senior bankers with sufficient clout will often bring Research Analysts to important initial pitches to demonstrate the potential research support. Breadth and experience in Sales (institutional and retail) equals distribution. Most banks are organized along industry group and product group lines. Depending on the deal, different product groups will be involved on the deal team. The following are probable deal team representations: 1) $50 MM Public Equity Deal = Media & Entertainment Group. 2) $150 MM High Yield Deal for a Film Studio Acquisition = Media & Entertainment Group, High Yield Group, M&A Group. 3) Sale of Film Studio = Media & Entertainment Group, M&A Group. 4) $25MM Private Equity Deal for a Private Cable Company = Media & Entertainment Group, Private Equity Group. 5) LBO of Radio Broadcasting Company = Media & Entertainment Group, High Yield Group, M&A Group. The key in constructing a deal team is to have experts in the client’s industry working in conjunction with experts in the transaction’s specialized product areas.

• •

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B. Sample Introduction to Pitchbook for Financial Services Company

Auto Funding Corporation

Presentation on Financing Alternatives

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Auto Funding Corporation Table of Contents

I.

Management’s Objectives

II. Executive Summary III. Auto-Backed Market Overview IV. Private Equity Financing V. Valuation Analysis VI. Investment Banking Capabilities VII. Capital Funding Model

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Auto Funding Corporation Management’s Objectives

Summary Points
• Obtain subordinated capital to support the growth in auto loan receivables. • Successfully initiate an auto loan securitization program. • Develop a long term capital funding plan to access appropriate securities markets during rapid growth phase. • Minimize dilution to existing shareholders. • Establish a relationship with an investment bank who can provide a comprehensive range of services as the Company’s needs expand.

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Auto Funding Corporation Executive Summary

Executive Summary
• A securitization program involving 100% of the loans originated will result in the highest potential GAAP net income, and hence, potential valuation. • The subordinated tranche (“B-Piece”) plus the initial cash spread account of such securitizations will likely be at least 25% of the face amount outstanding for the initial transaction. As the Company accumulates more historical static pool data and successfully completes one or more transactions, these levels may decrease dramatically. • The Company may have to retain all or a portion of the B-Piece for initial securitizations, which is the critical variable in the capital funding plan. • Due to the Company’s recent rapid growth and lack of securitization track record, Private Equity is the most feasible form of growth capital for the Company at this time.

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Auto Funding Corporation Executive Summary

Executive Summary
• In addition to the current financing of $20 million, the Company needs to raise approximately $30 million of Private Equity during the next 12-months in order to finance its rapidly growing securitization program. • Based on preliminary analysis, the Private Equity offering could be executed at a post-money valuation range of $95 million to $110 million, representing a dilution range of approximately 31% to 27%. • In order to fund the Company’s projected growth, the financing should be closed by July 1, 1996. • Based on the current projections, an IPO could provide the necessary funding for 1997.

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Auto Funding Corporation Executive Summary

Issues to Consider
• Scaleability of growth; • Backup warehousing/financing options; • Timing of Securitizations; • Timing of the IPO.

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Summary Points – Pitch #2
• Don’t worry about the details of securitization. You will only delve into the minutiae of securitizations if you are in the Financial Services Group or if you are in the Asset-backed Product Group. Securitization is probably the most complex financial product out there. A typical pitch will begin with a summary of what the client wants. Understanding the needs of the client is necessary before solutions or options are prescribed. Remember this -- it is an important concept. A strong pitch will also summarize the prescribed financing, provide a model highlighting the impact of that financing, and delineate the pros and cons of choosing that financing route. Associates are typically expected to put all this information together with the assistance of Analysts and under the guidance of the relationship banker (typically MD or Director).

•

•

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C. Sample Introduction to M&A Sellside Advisory Pitchbook

Project Hybrid - Table of Contents
I. Perceived Management Objectives

II. Proposed Positioning of Project Hybrid III. Preliminary Valuation Analysis of Project Hybrid IV. Prospective Buyers V. Timetable VI. Greentree Securities M&A Capabilities

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Perceived Management Objectives
• CEO (Majority Shareholder) of regional department store retailer seeking to sell stake in order to retire; • No apparant heir or successor; • Private company structure provides limited liquidity for CEO -- Needs to sell company in order to obtain liquidity; • Seeking to maximize sale price and yet find buyer that will successfully manage business and maintain brand identity.

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Proposed Positioning of Project Hybrid
• Consistent record of same store revenue growth, well in excess of department store retailer averages; • Geographic concentration in West Coast and Texas; • Significant relationships with key suppliers; • High level of repeat customers and store charge card buyers; • Strong brand recognition and excellent mall anchor tenant dynamics; • Well managed organization in need of new leader; • Elimination of potential costs and redundancies available to a prospective buyer.

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Prospective Buyers
Likely Strategic Acquirors
Montgomery Ward Proffitt’s Inc. Michaels Stores Inc. May Department Stores Co. JC Penney Co.

Possible Strategic Acquirors
Limited Inc. Heilig-Meyers Co. Stage Stores Inc. Carson Pirie Scott & Co. K Mart Corp.

Financial Buyers
Berkshire Partners Chase Capital Golder, Thoma, Cressey, Rauner Harvest Venture Partners Patricof & Co. Ventures Welsh, Carson, Anderson & Stowe

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Preliminary Timetable
TASKS RESPONSIBILITY TIMELINE Investment Company's Bankers Company Lawyers MONTH 1 MONTH 2 MONTH 3 MONTH 4 X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X

Identify Potential Buyers Conduct Due Diligence Prepare Sale Memorandum Contact Potential Buyers Provide Potential Buyers the Sale Memorandum Solicit Non-Binding Bids from Buyers Select Second Round Participants Interested Buyers to Conduct On-Site Due Diligence Provide Draft Definitive Agreement to Buyers Receive Final Bids with Marked-up Definitive Agreement Select Finalist Negotiate Final Definitive Agreement Signing and Closing

X X X X X X X X X X X

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Copyright © 1997 by Wall Street Advisors LLC & Roberto Milk

Summary Points – Pitch #3
• Again, notice how the pitch begins with the perceived objectives of the company. Particularly in an M&A situation, the bankers should fully understand the drivers behind the transaction. Why are they selling? In this case, the CEO/majority shareholder of the company wants to sell his stake in order to retire (which is a common M&A sell-side assignment). The due diligence that you will conduct soon will tell you if this is really the motivation or if there is something more ominous (like the Company is deteriorating and the CEO just wants out before something bad happens). How will the company be positioned? This is basically a way for the client or potential client to ensure that the bankers have identified the important selling highlights. Positioning is another way to refer to the way that a Company’s highlights will be summarized to potential buyers. Who are the buyers? This is the next big question. Oftentimes, during a pitch, the CEO will say, “We’ve been approached several times by those cheapos -- they only wanted to pay be 50% of what I’m worth,” or “Wait a minute! Take these guys off the list! I wouldn’t do a deal with those scoundrels if my life depended on it!” or “Hey -- you forgot such and such company! How well do you know my industry anyway? I’m paying you big bucks here.” The approach of a strategic acquiror will be focused on the following items: - Will the Target get me more exposure in certain geographic areas? - What other competitive or strategic advantages will this get me? - How much of the Target’s corporate overhead can I really cut? - Will I convert the Target’s stores and name into mine? - Do I currently own stores in the same malls? If so, will I be competing against myself?

•

•

•

•

The approach of a financial investor (typically a Buyout shop) will be: - How much debt can I put on the target? - How quickly can I put together a new management team to run the company? - What is the time horizon before I can take the company public or sell it to a strategic investor?

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Copyright © 1997 by Wall Street Advisors LLC & Roberto Milk

II. Sample Secondary Prospectus

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PROSPECTUS

1,000,000 Shares

[LOGO]

Livebeat DJs
Common Stock

Of the 1,000,000 shares of common stock, $0.02 par value (the "Common Stock"), offered hereby, 800,000 shares are being sold by Livebeat DJs, Inc. ("Livebeat DJs" or the "Company") and 200,000 shares are being sold by certain selling shareholders of the Company (the "Selling Shareholders"). The Company will not receive any of the proceeds from the sale of Common Stock by the Selling Shareholders. See "Principal and Selling Shareholders." The Common Stock of the Company is included for quotation in The Nasdaq Stock Market's Small-Cap Market (the "Nasdaq Small-Cap Market") under the symbol "BONE." On January 21, 1998, the last reported price of the Common Stock on the Nasdaq Small-Cap Market was $31.25 per share. See "Price Range of Common Stock." An application has been made for inclusion of the Common Stock on The Nasdaq Stock Market's National Market (the "Nasdaq National Market") under the symbol "BONE." See "Risk Factors" on pages 10 to 20 for a discussion of certain material factors that should be considered in connection with an investment in the Common Stock offered hereby. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price to Public $31.25 $31,250,000 Underwriting Discounts and Commissions(1) $1.72 $1,720,000 Proceeds to Company(2) $29.53 $23,624,000 Proceeds to Selling Shareholders $29.53 $5,906,000

Per Share ................................. Total(3) ....................................

(1) (2) (3)

The Company and the Selling Shareholders have agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. See "Underwriting." Before deducting expenses payable by the Company estimated to be $500,000. The Company has granted the several Underwriters a 30-day over-allotment option to purchase up to 150,000 additional shares of the Common Stock on the same terms and conditions as set forth above.

The shares of Common Stock are offered by the several Underwriters subject to delivery by the Company and the Selling Shareholders and acceptance by the Underwriters, to prior sale and to withdrawal, cancellation or modification of the offer without notice. Delivery of the shares to the Underwriters is expected to be made at the office of Greenleaf Securities Incorporated, One New York Plaza, New York, New York, on or about __________, 1997.

Greenleaf Securities Incorporated
__________________________, 1997

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PROSPECTUS SUMMARY
As used in this Prospectus, unless the context otherwise requires, the "Company" refers to Livebeat DJs, Inc., a Delaware corporation, and its subsidiaries, including the University Joint Venture Companies. Unless otherwise indicated, the information in this Prospectus assumes that the Underwriter’s over-allotment option will not be exercised. The Company Livebeat DJs acquires and operates DeeJay companies in California, Arizona and Nevada. From December 1994 (when the Company acquired its first DeeJay company) through December 1997, the Company acquired 57 DeeJay companies. The acquisitions have been completed at an average multiple of 6x EBITDA, an amount that management believes is lower than the average price paid by the major DeeJay operators in the United States market. The following table summarizes certain information regarding the acquisitions of the Company’s DeeJay companies...[more] DeeJay Industry Overview The industry is highly competitive…[more] Expansion and Acquisition Strategy The Company seeks to maintain a highly disciplined approach to expansion... [more]. The Company focuses its acquisition efforts on creating hubs in cities with more than 60,000 people and then acquiring competitors to achieve a dominant market presence. Currently, the Company owns a library of 110,000 record titles that it can make available to any of its acquired companies. Concurrent with the Offering, the Company will acquire DeeJay companies in New Mexico, Texas and Colorado…[more]. Operating Strategy Upon consummation of an acquisition, the Company immediately begins to standardize operations…[more] The Offering Common Stock Offered by the Company................................ Common Stock Offered by the Selling Shareholders .............. Common Stock Outstanding after the Offering ...................... Use of Proceeds by the Company............................................. Nasdaq Small-Cap Market Symbol .......................................... Projected Nasdaq National Market Symbol ............................ 800,000 Shares 200,000 Shares 5,000,000 Shares Repayment of indebtedness, acquisitions and capital expenditures. See "Use of Proceeds." BONE BONE

Summary Selected Consolidated Financial and Other Data The summary selected consolidated financial and other data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and Notes thereto included elsewhere in this

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Prospectus. The historical statements of operations data set forth below with respect to the years ended March 31, 1995, 1996 and 1997 and the historical balance sheet data at March 31, 1997, are derived from the Company's audited Consolidated Financial Statements and the Notes thereto included elsewhere in this Prospectus.
Year Ended March 31, 1995 1996 1997 (in thousands, except per share data) Statements of Operations Data: Revenues ......................................................................... Operating costs............................................................... General and administrative expenses ........................... Depreciation ................................................................... Amortization .................................................................. Operating income........................................................... Interest and other expense............................................. Income before income taxes ......................................... Income tax expense ........................................................ Net income (loss)............................................................ Earnings per share Other Operating Data: EBITDA(1) ...................................................................... Net cash from operating activities ................................ Net investing activities................................................... Net cash provided by (used in) financing activities .... $15,000 5,000 2,000 1,000 500 6,500 4,000 2,500 1,000 1,500 $ .375 $25,000 10,000 3,000 2,000 2,000 8,000 6,000 2,000 800 1,200 $ .30 $45,000 16,000 4,000 4,000 4,000 17,000 9,000 8,000 3,200 4,800 $ 1.20

8,000 1,000 (4,000) (400)

12,000 8,000 (23,000) 14,000

25,000 13,000 (27,000) 17,000

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March 31, 1997 Actual As Adjusted (2) Balance Sheet Data: Cash and cash equivalents........................................................................... Total assets.................................................................................................... Debt ............................................................................................................... Total stockholders equity.............................................................................

$

2,000 50,000 40,000 30,000

$ 10,124 58,124 25,000 53,124

(1) "EBITDA" is defined as net income (loss) before (i) income tax expense, (ii) interest expense, (iii) interest and other income, (iv) amortization, and (v) depreciation. Although EBITDA is not a measure of performance calculated in accordance with generally accepted accounting principles ("GAAP"), management believes that it is useful to an investor in evaluating the Company because it is a measure widely used in the DeeJay industry to evaluate performance. (2) The summary as adjusted information set forth reflects the sale by the Company of _______ shares of Common Stock offered hereby at an assumed offering price of $_________ per share and the application of the estimated net proceeds therefrom.

RISK FACTORS An investment in the shares of Common Stock offered hereby involves a high degree of risk. Prospective investors should consider carefully the following risk factors, in addition to the other information contained in this Prospectus, in connection with an investment in the Common Stock offered hereby. Limited Operating History in Industry. Although certain members of management have experience in the Deejay industry, the Company has only been operating DeeJay companies for five years. Sustainability of Recent Growth Through Acquisitions. The Company's growth and pace of acquisitions has placed, and will continue to place, a substantial burden on the Company's management, operational, financial and accounting resources. The successful management of this growth will require the Company to continue to implement and improve its financial and management information systems and to train, motivate and manage its employees. There can be no assurance that the Company will be able to identify, consummate or integrate acquisitions without substantial delays, costs or other problems. Dependence on Acquisitions for Future Growth. The Company's growth strategy is dependent principally on its ability to acquire existing Deejay systems. Successful acquisitions involve a number of factors that are difficult to control, including the identification of potential acquisition candidates, the willingness of owners to sell on reasonable terms and the satisfactory completion of negotiations. There can be no assurance that the Company will be able to identify and timely acquire acceptable acquisition candidates on terms favorable to the Company. Assuming the availability of capital, the Company's plans include an aggressive acquisition program. Reliance on Key Personnel. The operations and financial performance of the Company are highly dependent upon the continued involvement of Steve Wynne, CEO, Richard Rodriguez, CFO and Pete Gomez, COO. Competition. The industry is highly competitive and is currently characterized by significant changes in technology.

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Labor Relations. Approximately 80% of the Company's employees are unionized. The Company believes its relations with employees are good. USE OF PROCEEDS The net proceeds to the Company from the sale of 800,000 shares of Common Stock offered by the Company hereby, at an assumed public offering price of $31.25 per share (the last reported price of the Common Stock on the Nasdaq Small-Cap Market on January 21, 1997), after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, are estimated to be $23.124 million. The Company will not receive any proceeds from the sale of Common Stock by the Selling Shareholders. Approximately $15 million of the net proceeds of the Offering will be used to redeem certain indebtedness. The remaining net proceeds will be used primarily to finance the expansion of the Company's business, including acquisitions.

PRICE RANGE OF COMMON STOCK The Common Stock is included for quotation in the Nasdaq Small-Cap Market under the symbol "BONE." The following table sets forth, for the periods indicated, the high and low bid information for the Common Stock, as reported by the Nasdaq Small-Cap Market: {High Low Table} DIVIDEND POLICY The Company has not historically declared or paid dividends on its Common Stock and has no plans to do so in the foreseeable future.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the Company's Consolidated Financial Statements and the Notes thereto included elsewhere in this Prospectus. The Consolidated Financial Statements provide additional information regarding the Company's financial activities and condition. Moreover, this discussion contains forward looking statements that include risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward looking statements. Results of Operations Year Ended March 31, 1996 Compared to the Year Ended March 31, 1997 Revenues. Revenues increased { } % from ${ } million in Fiscal 1996 to ${ } million in Fiscal 1997 primarily as a result of the acquisitions described above. Operating Costs. Operating costs increased { }% from $11.4 million in Fiscal 1996 to ${} million in Fiscal 1997 primarily as a result of the acquisitions described above. General and Administrative Expense. General and administrative expense increased {}% to ${}million in Fiscal 1997.

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Depreciation and Amortization. Depreciation and amortization increased {}% from $3.0 million in Fiscal 1996 to ${} million in Fiscal 1997. This increase was attributable to the amortization related to new acquisitions and increased depreciation of capital expenditures in existing systems. BUSINESS More detailed disclosure on the company’s business and strategy than the company overview section in the front. Sections typically include: Industry Acquisition and Expansion Strategy Operating Strategy Competition Management and Employees Facilities, and Legal Proceedings. MANAGEMENT Directors, Executive Officers and Key Employees Name Steve Wynne Richard Rodriguez Pete Gomez Age 70 40 32 Position Chairman of the Board and Chief Executive Officer President, Chief Financial Officer and Director Senior Vice President and Chief Operating Officer

Sample Bio: Richard Rodriguez has been a Vice President of the Company since 1994 and was named President and Chief Financial Officer in 1995. Mr. Rodriguez has worked in association with Mr. Wynne for the past seven years and, prior to joining Livebeat DJs, was a Disc Jockey for Live 105 in San Francisco. CERTAIN TRANSACTIONS During fiscal year 1998, Pete Gomez was indebted to the Company in the amount of approximately $104,000, including accrued and unpaid interest by virtue of a loan that had been made in 1994. In March 1998, the Company agreed that Mr. Gomez could satisfy his obligation. LIVEBEAT DeeJays, INC. AND SUBSIDIARIES Index to Consolidated Financial Statements Page

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Report of Independent Accountants ....................................................................................... Consolidated Financial Statements: Consolidated Balance Sheets at March 31, 1995, 1996 and 1997.......................................... Consolidated Statements of Operations for the fiscal years ended March 31, 1995, 1996 and 1996 Consolidated Statements of Cash Flows for the fiscal years ended March 31, 1995, 1996 and 1997.............................................................................................................................. Notes to Consolidated Financial Statements..........................................................................

F-2 F-3 F-__ F-__ F-__

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Summary Points – Sample Prospectus
• A public offering offers an opportunity for large shareholders to sell their shares. These shares are called “secondary shares”. Whereas “primary shares” are new shares issued by the company and thus serve as new capital, secondary shares are simply a transfer from one owner to another. This concept is important because oftentimes insiders (such as the company management) sell shares in public offerings. However, the institutions that the deal will be marketed to typically don’t like to see insiders selling when they are being asked to buy. Thus, as a rule of thumb, investment banks don’t like to underwrite deals where secondary shares make up a large part of the total shares offered. Notice how in a Follow-On or Secondary Offering (don’t get the term “Secondary” offering confused with secondary shares), the company is already public and thus the transaction is “priced” at the closing price of the last trading day before the deal (see the top paragraph of the prospectus). This is different from an IPO where the transaction is “priced” in the following manner: 1) The investment bankers, along with the co-managers and the Research Analysts set up a range based on a valuation that they believe they can successfully sell to the public. For instance, if the company has 10 million shares and the valuation is $300 million, then the IPO range would be $29 to $31. If the client agrees with this initial range then the deal is on. Remember, the underwriters want to be sure they completely sell the deal and, at the same time, get the best price for the client. 2) During the roadshow, the lead manager’s syndicate desk (which is in charge of running public market transactions) begins to receive indications of interest from the institutions. Based on initial feedback the range might be revised say to $31-$33. 3) After the roadshow is done, the client and the bankers get together in New York for the final “pricing”. The pricing occurs the night before the transaction (never on a Friday though). The syndicate receives the orders from the institutions which might be: Fidelity: 100,000 shares at $31; only 50,000 at $31.50; only 30,000 at $32; and 0 at $32.50. Putnam: 70,000 shares at $31; only 40,000 at $32.00; only 10,000 at $33. Then, based on overall demand, the deal gets “priced”. If there is sufficient demand, the deal might get priced at the high end of the range: $33, or even above the range: $34.

•

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•

The content of the prospectus is taken extremely seriously, particularly because the investment bank’s name is on the cover and thus the underwriters are liable for any material misstatements. For this reason, drafting a prospectus can be a tedious task. In addition, for those of you that can’t stand lawyers, you’re in for a rude awakening: both the company’s lawyers and your own (the underwriter’s) lawyers are always present and always arguing over minutiae, especially the Risk Factors section. As annoying as these arguments are, they are nonetheless very important. Take the Risk Factors section: nobody ever reads them (they’re usually steeped in “legalese”) unless something goes wrong and the stock tanks -- then investors pore through them to find a loophole for a lawsuit. The Associate and senior Analyst are largely responsible for filling in the [more] statements that you see in this prospectus. In other words, they are expected to be primary contributors to the packaging and recounting of the client’s story. This is a key concept. Understand that within the context of a deal, you will be expected to know how to best position the company in the marketplace. Obviously, you are not expected to do this Day One. Thus, don’t say in an interview that you know how to best position companies and tell their stories. However, an experienced banker in a particular industry group should understand the macro drivers of their industry, the profile of the institutional buyers, and how the client compares and differs from their competition. Due diligence is another task reserved for Associates and senior Analysts. The underwriters must be sure that the company indeed fulfills everything it claims to fulfill in the prospectus. The financial statements are audited and thus the burden of their validity falls on the company’s accountants. However, the accountants won’t “comfort” all numbers (comforting means signing off as to the validity). For instance, in the opening paragraph of the Livebeat Summary, the sentence states that: “Currently, the Company owns a library of 110,000 record titles...” This is a number that the accountants probably won’t comfort and thus the banking due diligence team must bear the brunt of the validity of this statement (they need to apply a methodology to physically count the records). These little items are extremely important because if the stock is priced at $32 and then it tanks to $10 over the next six months, there will be a lot of pissed off investors out there. If an investor finds out that in reality Livebeat only has 30,000 records and the company has been spending a lot of money to increase its record library, he has serious grounds for a lawsuit against the company and the underwriters. He can claim that he bought the new issue based on a belief that the company had over 100,000 record titles, which was false and misleading. The junior bankers that were on the due diligence team that signed off on that number better go find a new job.

•

•

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•

In sum, there are two important drivers to drafting the prospectus. First, as a banker, you are trying to best place the issue and thus increase the marketability of the transaction by best telling the company’s story. Second, as a potentially liable party, you are trying to cover your rear end in every possible way. You want to be sure that everything is stated accurately, that the accountants are on top of all the numbers, that the lawyers have fully laid out every possible risk factor, and that your team has effectively conducted due diligence. All this on top of the most important thing: keeping your client happy (making sure the client gets a good price, minimizing the pain in drafting sessions by keeping the lawyers in check, and maintaining as smooth and painless of a roadshow as possible). A final sidenote on the marketability vs. legal liability issue. Most investment banks draft really dry “legalese” prospectuses and save all of the real sales points for the roadshow presentation. Why? Because the roadshow presentation is less of a legal document and is usually only reserved for institutional buyers (and is hardly ever handed out).

•

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III. Projected Income Statements

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V International, Inc.
PROJECTED INCOME STATEMENT (in thousands, except per share data)
H istorical -- Years Ending Dec. 31, 1995 1996 1997 Projected -- Years Ending December 31, 1998 1999 2000

Net Sales Cost of Sales Gross Profit Selling, General & Administrative (SG&A) EBIT Interest Expense Other Expense (Income) Income Before Income Taxes Income Taxes Net Income Common Shares Outstanding EPS
40.0%

$

45,111 24,811 20,300 12,546 7,754 1,450 54 6,250 2,500

$

50,232 27,125 23,107 13,002 10,105 1,450 89 8,566 3,426

$

53,455 29,400 24,055 13,545 10,510 1,450 58 9,002 3,601

$

88,222 50,100 38,122 19,045 19,077 1,450 101 17,526 7,010

$

108,338 62,000 46,338 19,545 26,793 1,450 122 25,221 10,089

$

116,753 66,869 49,885 20,045 29,840 1,450 148 28,242 11,297

$

3,750 5,000

$

5,139 5,125

$

5,401 5,250

$

10,516 6,124

$

15,133 6,174

$

16,945 6,224

$

0.75

$

1.00

$

1.03

$

1.72

$

2.45

$

2.72

Other Data

EBIT Addback: Depreciation & Amortization EBITDA
Growth Analysis

7,754 1,125 $ 8,879 $

10,105 1,205 11,310 $

10,510 1,254 11,764 $

19,077 1,352 20,429 $

26,793 1,452 28,245 $

29,840 1,478 31,318

Net Sales EBITDA Net Income
Margin Analysis

11.4% 27.4% 37.1%

6.4% 4.0% 5.1%

65.0% 73.7% 94.7%

22.8% 38.3% 43.9%

7.8% 10.9% 12.0%

Gross Profit EBIT Income Before Income Taxes Net Income
Stock Data

45.0% 17.2% 13.9% 8.3%

46.0% 20.1% 17.1% 10.2%

45.0% 19.7% 16.8% 10.1%

43.2% 21.6% 19.9% 11.9%

42.8% 24.7% 23.3% 14.0%

42.7% 25.6% 24.2% 14.5%

Average Stock Price/Projected Stock Price P/E Multiple/Projected P/E Multiple Market Cap

$ $

16.60 $ 22.1x 83,000 $

18.18 $ 18.1x 93,173 $

21.40 20.8x 112,350

$ $

35.20 $ 20.5x 215,570 $

50.25 $ 20.5x 310,222 $

55.81 20.5x 347,372

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V International, Inc.
PROJECTED INCOME STATEMENT ASSUMPTIONS (in thousands, except per share data)
Historical -- Years Ending Dec. 31, 1995 Revenue Assumptions 1996 1997 Projected -- Years Ending December 31, 1998 1999 2000

Total US Households With Children Penetration of V-Chip V-Chip Households New V-Chip Households
Breakdown of Distribution Channel to New V-Chip Households

48,000 10.0% 4,800 4,800

49,000 25.0% 12,250 7,450

50,000 40.0% 20,000 7,750

Cable Distribution Channel Retail Distribution Channel New Television Distribution Channel Total V-Chips Sold through Cable Market Dist. Channel Total V-Chips Sold through Retail Market Dist. Channel Total V-Chips Sold through New Television Dist. Channel
Market Share to V-International

25.0% 25.0% 50.0% 1,200 1,200 2,400

20.0% 20.0% 60.0% 1,490 1,490 4,470

10.0% 10.0% 80.0% 775 775 6,200

Cable Distribution Channel Retail Distribution Channel New Television Distribution Channel
Total V-Chips sold by V-International

50.0% 35.0% 50.0%

45.0% 30.0% 55.0%

40.0% 25.0% 60.0%

Cable Distribution Channel Retail Distribution Channel New Television Distribution Channel
Revenue Per Unit to V-International

600 420 1,200

671 447 2,459

310 194 3,720

Cable Distribution Channel Retail Distribution Channel New Television Distribution Channel
Total Revenue to V-International

$ $ $

16.00 18.00 12.00

$ $ $

16.00 18.00 12.00

$ $ $

16.00 18.00 12.00

Cable Distribution Channel Retail Distribution Channel New Television Distribution Channel Total V-Chip Revenue Traditional Revenue Total Revenue
106.0%

9,600 7,560 14,400 $ $ 45,111 45,111 $ $ 50,232 50,232 $ $ 53,455 53,455 $ $ $ 31,560 56,662 88,222 $ $ $

10,728 8,046 29,502 48,276 60,062 108,338 $ $ $

4,960 3,488 44,640 53,088 63,666 116,753

Other Assumptions

Projected V-Chip Gross Margin Projected Traditional Rev. Gross Margin Additional S,G&A Annual Increase in S,G&A Capital Needed for V-Chip Rollout Current Stock Price Shares Issued to Finance V-Chip Rollout
$ $ $ $ $

40.0% 45.0% 5,000 500 18,000 20.60 874

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Summary Points – Projected Income Statement #1
The key element in preparing a good projected income statement is clearly defined assumptions. As we stated in the Training Guide, the great modelers are those that can clearly isolate and define the assumptions. In modeling terms, these major assumptions are called the “drivers”. The first step to clearly laying out your assumptions is identifying the drivers. The major drivers are almost always associated to revenues -- to the “topline”. “What drives growth?”, “How do they make money?”, “Where do sales come from?” -- these are the first questions you must ask. In the case of V-Intl, the major driver of new growth is the V-Chip and thus the major driver to the model is the “Penetration of V-Chip” line. Changes to this line will have a significant impact on the results of the model. Therefore, this line must be backed up with serious studies on the industry, timing of FCC regulations, beliefs of industry insiders, estimates from Research Analysts, and beliefs of company management. Secondary drivers are the breakdown of V-Chip distribution channels (how end consumers will purchase access to the V-Chip) and the projected market share of our client. Again, these secondary drivers have a major impact on the model and thus they must be backed up with industry studies, studies on the competitors, licensing agreements, and signed contracts with cable companies, retail distributors, and new television manufacturers. Other topline assumptions that wouldn’t be considered drivers would be the revenue per unit to our client, the projected growth rate of traditional revenue, and the items in the “other assumptions” subsection. After growth is determined, you must get comfortable with margins. The best measure of future costs is historical costs. V-Intl would outsource manufacturing and based on the manufacturer’s contract the cost per unit would be about 60% of the revenue per unit thus yielding a gross margin of 40%. S,G&A or “overhead” costs, according to company expectations, will need to increase $5 million for the V-Chip rollout. In order to rollout the V-Chip the company needs $18 million. Now, the question for you is: “how will they best finance that need?” From a corporate finance standpoint, looking at their historical cash flow (EBITDA) of more than $10 million, you can assume that the company could borrow more money. If, for instance, the $18 million needed were borrowed for a fixed 10% interest rate, then the company would need to pay $1.8 million annually. Coupled with its current debt payment of $1.45 million that would be a total of $3.25 million of interest payments which could be adequately covered by cash flow. However, particularly in these growth situations, companies may seek to finance growth through equity for several reasons: (i) they want a bigger public market float for liquidity purposes -- it may get them off a small market such as the NASDAQ Small Cap Market and onto a larger market such as the NASDAQ National Market; (ii) they want good research coverage which only comes from the larger investment banks; and (iii) they want to attract long-term institutional holders as shareholders.

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Note in the model that the primary drivers are coded pink and the assumptions are coded in blue. Also, the “hardwired” numbers are coded in blue. Hardwired numbers are numbers taken from historical statements. The reason for doing this is that you never know who will need to pick up your model and quickly understand it. You may be out of the office on another transaction when the MD on the deal suddenly needs to check out your model. Thus, on screen, it must make immediate sense to him. It must be easy for him to “tweak’ assumptions and drivers. Thus, establishing conventions such as these makes it easier for another person to understand your model and, most importantly, they will change only assumptions and drivers and not black cells (which are formula cells). This is extremely important as your models become more complex. In sum, projecting an income statement is first about understanding drivers of growth and laying out assumptions. Second, about costs. Third, about financing growth.

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Econo Hotel Corporation
Assumptions
(Dollars in Thousands)

New Property Expansion Assumptions Hotels: Expansion Cost Per Room (in thousands) Stabilized Revenue (% of Expansion Cost) Stabilized Operating Profit (% of Revenue) Stabilized Operating Yield (% of Expansion Cost) Annual Depreciation (% of Expansion Cost) Growth: Inflation Factor

Base Projection Assumptions

$

34.50 36.5% 28.8% 10.5% 6.0%

2.0%

Operating Profit Margins: Hotels & Restaurants Equity Financing Equity Financing Proceeds to Company Quarter of Financing Other: Interest Rate on Debt Effective Income Tax Rate Run Rate EBITDA Multiple Target Cash Balance $

28.8%

YES 40,000 Q9

$

8.0% 39.0% 9.5 x 1,500

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Econo Hotel Corporation
Projected Expansion Schedule & Income Statement
(Dollars in Thousands, FY end 12/31) PF 1997 Q1 New Properties Hotels: Rooms Purchased Hotels: Amount Invested Total Investment in New Properties Income Statement Revenues Hotels & Restaurants Total Revenues Operating Costs & Expenses Hotels & Restaurants Total Expenses Gross Operating Profit Other Expenses EBITDA Depreciation Interest Net Income Before Taxes Income Taxes @ 39% Net Income $ 71% 38,120 38,120 27,435 27,435 10,685 1,410 9,275 4,802 800 3,672 1,432 2,240 $ 9,845 9,845 7,010 7,010 2,835 364 2,471 1,252 348 871 340 531 $ 10,238 10,238 7,290 7,290 2,949 379 2,570 1,317 397 855 334 522 $ 11,183 11,183 7,962 7,962 3,221 414 2,807 1,472 566 769 300 469 $ 11,576 11,576 8,242 8,242 3,334 428 2,906 1,537 612 757 295 462 $ 42,842 42,842 30,504 30,504 12,339 1,585 10,753 5,579 1,923 3,252 1,268 1,984 $ 12,049 12,049 8,579 8,579 3,470 482 2,988 1,615 675 699 273 426 $ 12,678 12,678 9,027 9,027 3,651 507 3,144 1,718 770 656 256 400 $ 13,623 13,623 9,699 9,699 3,923 545 3,378 1,873 933 572 223 349 $ 14,252 14,252 10,148 10,148 4,105 570 3,535 1,977 1,025 533 208 325 $ 52,601 52,601 37,452 37,452 15,149 2,104 13,045 7,183 3,402 2,460 959 1,501 $ $ 100 3,450 3,450 $ $ 125 4,313 4,313 $ $ 300 10,350 10,350 $ $ 125 4,313 4,313 $ $ 650 22,425 22,425 $ $ 150 5,175 5,175 $ $ 200 6,900 6,900 $ $ 300 10,350 10,350 $ $ 200 6,900 6,900 $ $ 850 29,325 29,325 Q2 Q3 Q4 1998 Q1 Q2 Q3 Q4 1999

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Econo Hotel Corporation
Projected Financial Data & Cash Flow Schedule
(Dollars in Thousands, FY end 12/31) PF 1997 Q1 Valuation Trailing EBITDA Run Rate EBITDA Cap. Value at 9.5x Run Rate EBITDA Debt Outstanding Debt to Total Market Capitalization Margins Gross Operating Profit EBITDA Other Expenses Net Income Cash Flow Cash Flow From Operations Capital Purchases Capital Replacements Equity Financing Cash Before Debt Financing Debt Financing (Paydown) Net Cash Flow Beginning Cash Balance Ending Cash Balance Credit Facility Credit Facility (Beg. Balance) Cash Available to Paydown Debt Funding Need Unadjusted Ending Revolving Credit Facility Ending Revolving Credit Facility Cash Increase Funding (Paydown) Credit Facility (End. Balance) $ 10,000 $ $ 10,000 7,400 17,400 17,400 7,400 17,400 $ $ 17,400 2,474 19,874 19,874 2,474 19,874 $ $ 19,874 8,409 28,282 28,282 8,409 28,282 $ $ 28,282 2,314 30,596 30,596 2,314 30,596 $ $ 10,000 20,596 96,152 96,152 20,596 30,596 $ $ 30,596 3,134 33,730 33,730 3,134 33,730 $ $ 33,730 4,782 38,512 38,512 4,782 38,512 $ $ 38,512 8,128 46,640 46,640 8,128 46,640 $ $ 46,640 4,598 51,238 51,238 4,598 51,238 $ $ 30,596 20,642 170,121 170,121 20,642 51,238 $ $ $ (3,450) $ (3,450) (6,900) 7,400 500 1,000 1,500 $ $ $ 1,839 (4,313) (2,474) 2,474 0 1,500 1,500 $ $ $ $ 1,941 (10,350) (8,409) 8,409 (0) $ 1,500 1,500 $ $ $ 1,999 (4,313) (2,314) 2,314 0 1,500 1,500 $ $ $ $ 5,779 (22,425) (20,096) 20,596 500 1,000 1,500 $ $ $ $ 2,041 (5,175) (3,134) 3,134 1,500 1,500 $ $ $ $ 2,118 (6,900) (4,782) 4,782 0 1,500 1,500 $ $ $ $ 2,222 (10,350) (8,128) 8,128 (0) $ 1,500 1,500 $ $ $ 2,302 (6,900) (4,598) 4,598 0 1,500 1,500 $ $ $ $ 8,683 (29,325) (20,642) 20,642 0 1,500 1,500 28.0% 24.3% 3.7% 5.9% 28.8% 25.1% 3.7% 5.4% 28.8% 25.1% 3.7% 5.1% 28.8% 25.1% 3.7% 4.2% 28.8% 25.1% 3.7% 4.0% 28.8% 25.1% 3.7% 4.6% 28.8% 24.8% 4.0% 3.5% 28.8% 24.8% 4.0% 3.2% 28.8% 24.8% 4.0% 2.6% 28.8% 24.8% 4.0% 2.3% 28.8% 24.8% 4.0% 2.9% $ 9,275 9,275 88,108 10,000 11.3% $ 9,884 93,900 17,400 18.5% 10,279 97,653 19,874 20.4% 11,227 106,661 28,282 26.5% 11,623 110,415 30,596 27.7% 10,753 11,623 102,157 30,596 30.0% $ 11,270 11,952 113,545 33,730 29.7% $ 11,845 12,577 119,479 38,512 32.2% $ 12,416 13,514 128,379 46,640 36.3% $ 13,045 14,138 134,313 51,238 38.1% $ 13,045 14,138 123,929 51,238 41.3% Q2 Q3 Q4 1998 Q1 Q2 Q3 Q4 1999

$

1,000

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Copyright © 1997 by Wall Street Advisors LLC & Roberto Milk

Summary Points – Projected Income Statement #2
This model is a sophisticated projection model. It carefully lays out the growth drivers and cost assumptions. In addition, it projects both cash flow and balance sheet data. Projecting cash flow is important for bankers (as you will see in the valuation section) because it provides the basis for both valuation and financing decisions. In this case, the model is “fully flowing” -- it allows for changes in financing mechanisms (Credit Line vs. Equity Infusion). To create a “fully flowing” model, you must create a circular function. Why? Think of the flow of the model in one period -- the amount of debt needed is linked to the amount of cash flow for the period, the amount of cash flow for the period is reduced by the amount of interest paid, and the amount of interest paid is directly tied to the amount of debt that is outstanding -- it’s a circle. Modern spreadsheet applications (Excel is the best) allow you to effectively work within a circular environment. To create and maneuver a circular function in Excel, you must go to Tools -- Options and set the calculation panel to “iteration”. On some of our more sophisticated models which call for double loops based on debt and equity financing, we have to set our iterations to at least 1000 and have at least 64 MB of RAM. On this model, you’ll be fine with 75 to 100 iterations and 16 MB of RAM. Thus, using this model as a tool, you could ask the CFO -- “What is your expansion plan?” (or “What are your various expansion plans?”). In this model, the CFO could give his most likely expansion scenario in terms of rooms built per quarter. You could then respond: “For expansion plan X, you need to have access to a line of credit of $55 million. When you approach a 40% Debt to Total Market Capitalization (which, as a rule of thumb, is about as much debt as the public markets like to see on a company), then we can issue equity to deleverage. “ Notice on the assumptions page how the equity financing has a quarter attached to it as a driver. That quarter defines the timing of the equity offering. If the expansion plans are increased then more debt will be incurred, resulting in a 40% Debt to Total Market Capitalization perhaps in Q6 which might then be the target quarter for the Equity Offering. Get it? You have created a model that allows for a variety of expansion plans and financing solutions to meet those plans. Your model has effectively become a tool for the company. In fact, some of our models have actually been given to CFOs after transactions have closed for their internal budgeting and financing applications. There are several open issues. First -- the term “cash flow”. Everybody uses this term loosely. Sometimes cash flow means EBITDA, sometimes it means cash flow from operations, and sometimes it means free cash flow (cash flow available to equityholders after capital expenditures and net working capital

This material may not be given away or sold in any manner or in any form to any person, business, or to any other type of entity. Any violations should be reported by contacting Wall Street Advisors LLC at 1-888-IBANK-99.

Copyright © 1997 by Wall Street Advisors LLC & Roberto Milk

expenditures are incurred -- important for DCF analyses). When you hear the term, you just have to decipher the context. M&A folks almost always mean EBITDA because when they advise clients on purchasing decisions, they don’t care about the target’s interest expense -- they only care about the interest expense that will be incurred by the acquirer after financing the acquisition. Thus, M&A folks care about a target’s cash flow before financing and EBITDA is a proxy for this. Lenders care about EBITDA because that is what is available to them. They ask, “is the projected EBITDA two times the interest they will owe us or three times?” This is called interest coverage. Equity investors, on the other hand, often care more about earnings or free cash flow (we’ll se that later) because that is what is available to them. In sum, notice how a “fully flowing” projection model goes beyond the projected income statement model and incorporates elements from the Balance Sheet (the Credit Line) and elements from the Cash Flow Statement in order to project financing needs and thus prepare a client for financing decisions today in order to meet those future needs.

This material may not be given away or sold in any manner or in any form to any person, business, or to any other type of entity. Any violations should be reported by contacting Wall Street Advisors LLC at 1-888-IBANK-99.

Copyright © 1997 by Wall Street Advisors LLC & Roberto Milk

Project On-Air Travel Literature
Projected Revenue and Profit
(amounts in thousands)

Given Industry Data Total amount of International passengers Aggregate value of travel literature purchased at airports 380,000 100,000

$

Assumptions Total amount of International passengers Percent of Intl. passengers that purchase guides at airport Number of Intl. passengers that purchase guides at airport Aggregate value of travel literature purchased at airports Avg. expenditure per Intl. traveler % of Intl passengers that fly on a plane that offers Company's travel literature % of Intl passengers on a plane with Company's services that purchase travel literature Profit Margin on Company's literature $ $ 380,000 5.0% 19,000 100,000 5.26 35.0% 5.0% 40.0%

Projected Revenue Total amount of International passengers % of Intl passengers that fly on a plane that offers Company's travel literature Number of Intl passengers that fly on a plane with Company's travel literature % of Intl passengers on a plane with Company's services that purchase travel literature Number of Intl passengers on a plane with Company's services that purchase literature Avg. Price of Company's literature Total Revenue Profit Margin on Company's literature Profit $ $ $ 380,000 35% 133,000 5% 6,650 5.26 35,000 40.0% 14,000

This material may not be given away or sold in any manner or in any form to any person, business, or to any other type of entity. Any violations should be reported by contacting Wall Street Advisors LLC at 1-888-IBANK-99.

Copyright © 1997 by Wall Street Advisors LLC & Roberto Milk

Project On-Air Travel Literature
Sensitivity Analysis
(amounts in thousands)

Profit (in thousands)

% of Intl passengers that fly on a plane that offers Company's travel literature 14,000 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 5.0% $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 10.0% $4,000 $8,000 $12,000 $16,000 $20,000 $24,000 15.0% $6,000 $12,000 $18,000 $24,000 $30,000 $36,000 20.0% $8,000 $16,000 $24,000 $32,000 $40,000 $48,000 25.0% $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 30.0% $12,000 $24,000 $36,000 $48,000 $60,000 $72,000 35.0% $14,000 $28,000 $42,000 $56,000 $70,000 $84,000

Percent of Intl. Passengers on a Plane with Company's Svcs. that purchase literature

Summary Points – Projected Income Statement #3 This model is a basic projected profit model. In this case, the imaginary company is a larger entity that is considering, as an adjunct to current businesses, entering into the travel literature business for international travelers. This model only focuses on profit and not initial or start-up costs. The next step would be to analyze the start-up costs, determine the projected cash flows, and decide whether the project is worth pursuing -- a classic capital budgeting question. Note again how the assumptions are clearly defined. In this case, having clearly defined assumptions allows for the sensitivity table shown above. Many of the models you will build for pitches or for companies that haven’t provided you with detailed financial information will employ a sensitivity table as above. It allows company management or senior bankers to visually input their own assumptions and see the results. Focus on how assumptions are generated. This is important for your interviews. You may be given case studies like this and asked to orally determine the economic feasibility of the project. The ideal answer is for you to ask the right questions and thus determine the drivers and assumptions.

This material may not be given away or sold in any manner or in any form to any person, business, or to any other type of entity. Any violations should be reported by contacting Wall Street Advisors LLC at 1-888-IBANK-99.

Copyright © 1997 by Wall Street Advisors LLC & Roberto Milk


				
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Description: Investment Banking Interview Preparation