Consumer and Retail Industry Update January 2012 Member FINRA/SIPC www.harriswilliams.com Consumer and Retail Industry Update January 2012 What We’ve Been Reading • Reuters reports that retail sales should improve in 2012 but at a slower rate than last year. “The National Retail Federation projected sales would rise 3.4 percent this year, down from 4.7 percent growth in 2011...” Read the article here. • SkinMedica, Inc., the fastest growing professional skin care company in the U.S., acquired Colorescience, a science-based mineral makeup company in a merger transaction on January 9, 2012 from VMG Partners for an undisclosed amount. Read the announcement here. • Texas-based Fossil, Inc. announced that it has entered into an agreement to acquire Skagen Designs, Ltd. and certain international affiliates for approximately $335 million and 150,000 shares of Fossil, Inc. common stock. Read the announcement here. • Perfume and fragrance retailer Perfumania will acquire Parlux Fragrances, a manufacturer and distributor of fragrances and beauty products, for $170 million. The transaction is expected to close in the first half of 2012. Read the announcement here. Contacts Richmond Boston Cleveland London Minneapolis Philadelphia San Francisco Phone: +1 (804) 648-0072 Phone: +1 (617) 482-7501 Phone: +1 (216) 222-9870 Phone: +44 203 170 8838 Phone: +1 (612) 359-2700 Phone: +1 (267) 675-5900 Phone: +1 (415) 288-4260 Fax: +1 (804) 648-0073 Fax: +1 (617) 482-7503 Fax: +1 (216) 222-0158 Fax: +44 207 681 1907 Fax: +1 (612) 359-2701 Fax: +1 (267) 675-5901 Fax: +1 (415) 288-4269 For more information regarding our consumer experience, please contact Glenn Gurtcheff ([email protected]), Tim Alexander ([email protected]), Jeff Cleveland ([email protected]), or Ryan Budlong ([email protected]) at +1 (612) 359-2700. 1 of 16 Equity Trading Overview January 2012 Median Median TEV/ Median TEV/ Key Trading Number of Sector Enterprise Change in Stock Price LTM Multiples Forward Mulitples Statistics Companies Value ($mm) 3 mos. 12 mos. Revenue EBITDA Revenue EBITDA (detail begins Consumer Products on page 6) Apparel & Footwear 35 $1,429 (2.3%) (1.6%) 1.10x 9.2x 1.12x 8.5x Automotive Products 13 2,188 9.8% 29.2% 0.59x 10.6x 0.55x 9.4x Home & Office Furniture & Furnishings 14 750 4.7% (12.7%) 0.60x 8.2x 0.67x 6.9x Household Products 11 3,965 8.8% 5.1% 1.36x 8.8x 1.33x 7.8x Personal Care Products 17 1,978 4.8% 17.5% 1.42x 9.0x 1.43x 8.7x Recreational & Leisure Products 21 340 8.0% 16.6% 0.78x 9.8x 0.91x 7.2x Retail Apparel & Footwear Retail 45 1,066 0.2% 6.3% 0.64x 6.3x 0.61x 5.6x Catalog & Specialty Distribution 8 431 14.4% 16.2% 0.15x 6.7x 0.15x 6.8x Department Chains 9 9,165 (4.6%) (8.5%) 0.54x 6.1x 0.55x 6.5x Discount Stores & Mass Merchants 13 2,863 2.4% 11.0% 0.59x 7.6x 0.64x 7.3x Furniture & Furnishings Retailers 14 955 11.5% 20.2% 0.91x 8.2x 0.87x 7.2x Internet Retail 13 745 (0.6%) (18.4%) 1.40x 11.3x 1.27x 8.4x Specialty & Other Retail 30 1,127 11.2% 4.3% 0.60x 8.4x 0.55x 7.7x Consumer Products 111 $1,703 6.4% 10.8% 0.94x 9.1x 1.01x 8.1x Retail 132 $1,066 2.4% 6.3% 0.60x 7.6x 0.61x 7.2x Consumer & Retail Index 243 $1,127 4.8% 6.3% 0.64x 8.4x 0.67x 7.3x Public Company Automotive Products Sector Furniture & Furnishings Retailers Performance Personal Care Products (12-month % Recreational & Leisure Products change in Catalog & Specialty Distribution stock price) Discount Stores & Mass Merchants Consumer & Retail Index Apparel & Footwear Retail Household Products Specialty & Other Retail S&P 500 Apparel & Footwear Department Chains Home & Office Furniture & Furnishings Internet Retail (30.0%) (25.0%) (20.0%) (15.0%) (10.0%) (5.0%) 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 2 of 16 Equity Markets Overview January 2012 140 Consumer and Retail 16.6% Industry Stock 120 Performance 9.1% (11.6%) 100 Index 80 60 40 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Dow Jones U.S. Consumer Goods Index Dow Jones Retail Index S&P 500 Index Recent Equity Transaction Gross Proceeds Offerings Close Date Filing Date Issuer Ticker Type ($mm) Use of Funds 12/08/11 12/06/11 Express Inc EXPR Follow-On $368.0 General Corp. Purp. 12/06/11 11/23/11 Bankrate Inc RATE Follow-On 251.6 General Corp. Purp. 12/06/11 03/01/10 Dollar General Corp DG Follow-On 1,121.3 General Corp. Purp. 12/05/11 08/17/10 Exact Sciences Corp EXAS Follow-On 28.8 General Corp. Purp., Product Development/R&D 12/01/11 12/01/11 ExlService Holdings Inc EXLS Follow-On 50.5 General Corp. Purp. 11/17/11 06/10/11 Mattress Firm Holding Corp MFRM IPO 105.6 General Corp. Purp. 10/19/11 05/24/11 Coldwater Creek Inc CWTR Follow-On 22.5 General Corp. Purp. 10/12/11 11/18/10 Sally Beauty Holdings Inc SBH Follow-On 346.7 General Corp. Purp. 09/15/11 09/02/11 RPX Corp RPXC Follow-On 70.7 General Corp. Purp. 09/13/11 10/05/09 ExlService Holdings Inc EXLS Follow-On 92.0 General Corp. Purp. and Reduce Indebtedness 09/08/11 09/07/11 Dollar General Corp DG Follow-On 999.1 General Corp. Purp. 08/19/11 08/05/11 Swisher Hygiene Inc SWI Follow-On 45.3 General Corp. Purp. 07/21/11 06/24/10 Francesca's Holdings Corp FRAN IPO 195.5 General Corp. Purp. and Reduce Indebtedness 07/01/11 07/01/11 Tilly's Inc TLYS IPO 100.0 General Corp. Purp. and Pursue Acquisition 3 of 16 M&A Overview January 2012 1 Announced 120 Quarterly Consumer M&A Activity Last 10 Deals Announced Consumer Announced Target Buyer and Retail 100 1/16/2012 Burlington Basket Company LaMont Limited 26 1/12/2012 Opa Cove, LLC Swimways Corporation M&A 1/12/2012 Gunther's Athletic Service, Inc. Riddell Sports Group, Inc. __ 80 14 1/12/2012 Mindnautilus.Com Corporation School Health Corporation 9 5 1/10/2012 Cabinotch Columbia Forest Products 6 9 1/10/2012 Cosmetic Labs of America Visual Pak Company 10 15 13 13 60 13 1/9/2012 Skagen Designs, Ltd. Fossil, Inc. 19 11 9 1/9/2012 HopBet Inc., Fire Bet Shuffle Master Inc. 1/6/2012 Colorescience SkinMedica, Inc. 1/6/2012 Robar, Inc. Cutie Pie Baby, Inc. 40 81 4 Number Number ofTransactions 74 72 72 65 61 64 55 56 56 54 50 LTM Deal Statistics 48 46 20 1 37 Aggregate Number Transaction Multiples 16 Value ($bn) of Deals EV / Revenue EV / EBITDA 0 $41.0 278 0.95x 9.8x 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 Note: Transactions based on publicly available information PEG Acquirer Strategic Acquirer Consumer and Announced Consumer Transactions Median Consumer Transaction Multiples Retail M&A $100 500 16.0x 1.75x $84.9 450 14.0x 1.50x Trends $79.7 $80 400 __ Number ofTransactions Number 12.0x 11.2x Multiple Sales LTM / EV 11.0x 10.7x 350 10.3x 1.25x 10.0x $60 300 8.9x 8.4x 1.00x 250 8.0x $40.3 0.75x $40 200 6.0x $28.6 $29.6 150 0.50x $22.1 __ 4.0x __ $20 100 Multiple EBITDA LTM / EV 2.0x 0.25x 50 Aggregate Transaction Value ($ in billions) in ($ Value AggregateTransaction $0.3 0.0x $0 0 0.0x 0.00x 2006 2007 2008 2009 2010 2011 2012 2006 2007 2008 2009 2010 2011 2012 Aggregate Deal Value # of deals EV / LTM EBITDA EV / LTM Sales Announced PEG Investments by Segment (Last 3 Years) Consumer PEG Investments and Exits Consumer Industry Number of 120 Private Equity 110 M&A Activity Segment Companies Apparel & Footwear 21 100 97 Specialty & Other Retail 23 ' 81 Personal Care Products 15 80 73 73 Home & Office Furniture & Furnishings 9 71 Recreational & Leisure Products 18 59 59 59 60 53 54 54 53 Household Products 13 49 Internet Retail 11 37 40 33 Automotive Products 5 30 Number of Investments 27 Discount Stores & Mass Merchants 4 Furniture & Furnishings Retailers 2 20 Catalog & Specialty Distribution 1 1 1 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Number of Investments Number of Exits (1) 1Q12 data is QTD. 4 of 16 Debt Market Overview January 2012 Key Retail Quarterly Retail Loan Volume Average Spread on Retail Loans Credit Statistics $12 L + 500 ___ $10 __ L + 400 $8 L + 300 $6 L + 200 $4 AverageSpread Over LIBOR L + 100 $2 Loan VolumeLoan byQuarter ($ billions)in $0 L + 0 4Q05 2Q06 4Q06 2Q07 4Q07 2Q08 4Q08 2Q09 4Q09 2Q10 4Q10 2Q11 4Q11 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Pro Rata Institutional Revolving Credit / Term Loan A Weighted-Average Institutional Credit Statistics Average Secondary Spread 8.0x L + 1200 2006 2007 2008 2009 2010 2011 L + 1000 6.0x L + 800 4.0x L + 600 L + 400 EBITDA Multiple EBITDA 2.0x AverageSpread Over LIBOR L + 200 0.0x L + 0 Debt/EBITDA Senior EBITDA/Cash EBITDA - Debt/EBITDA Interest Capex/Cash Interest Recent Date Effective Borrower Name Description Deal Amount Type Rating Spread 01/20/12 ThermaSys Corp Motor vehicle parts and accessories $112,000,000 Other Loan NR / NR 500 Consumer and 01/18/12 Cardone Industries Motor vehicle parts and accessories 250,000,000 Term Loan NR / NR N/A Retail Debt 01/18/12 Cardone Industries Motor vehicle parts and accessories 50,000,000 Revolver/Line >= 1 Yr.