Consumer and Retail Industry Update February 2013 Member FINRA/SIPC www.harriswilliams.com Consumer and Retail Industry Update February 2013 What We’ve • The National Retail Federation released its 2013 economic forecast, projecting that retail Been Reading industry sales will increase 3.4% in 2013. “Retailers will … [focus] on providing value for their shoppers through unique promotions in stores and online and exclusive product lines.” Read the press release here. • PwC has released a report on 2012 consumer M&A activity, finding that “strong retail and consumer deal activity in 2012 drove both deal volume and value up ... Private equity activity in the retail sector comprised nearly 40 percent of deal volume and 55 percent of deal value, and IPO volume increased 38 percent.” Read the article here. • The New York Times has reported that Swatch has agreed to purchase Harry Winston Watches and Jewelry. “Swatch … has agreed to pay $750 million to acquire the brand from Toronto-based Harry Winston Diamond Corp. and will also assume as much as $250 million in debt, a joint statement said. The acquisition includes the Harry Winston production company in Geneva and more than 500 employees globally.” Read the article here. • According to Reuters, K-Swiss has agreed to be acquired by South Korean retailer E-Land World for $4.75 per share, valuing the company at approximately $170 million. Read the article here. Contacts Richmond Boston Cleveland London Minneapolis Philadelphia San Francisco Phone: +1 (804) 648-0072 Phone: +1 (617) 482-7501 Phone: +1 (216) 689-2400 Phone: +44 203 170 8838 Phone: +1 (612) 359-2700 Phone: +1 (267) 675-5900 Phone: +1 (415) 288-4260 Fax: +1 (804) 648-0073 Fax: +1 (617) 482-7503 Fax: +1 (216) 689-2401 Fax: +44 207 681 1907 Fax: +1 (612) 359-2701 Fax: +1 (267) 675-5901 Fax: +1 (415) 288-4269 For more information regarding our consumer experience, please contact: Glenn Gurtcheff ([email protected]) or Tim Alexander ([email protected]) at +1 (612) 359-2700; John Neuner IV ([email protected]) at +1 (804) 648-0072; or Red Norrie ([email protected]) at +44 20 7518 8906. 1 of 16 Equity Trading Overview February 2013 Median Median TEV/ Median TEV/ Key Trading Number of Sector Enterprise Change in Stock Price LTM Multiples Forward Mulitples Statistics Companies Value ($mm) 3 mos. 12 mos. Revenue EBITDA Revenue EBITDA (detail begins Consumer Products on page 6) Apparel & Footwear 35 $1,529 2.1% 13.8% 1.13x 8.9x 1.08x 8.3x Automotive Products 12 2,963 7.5% 23.9% 0.60x 11.0x 0.54x 10.0x Home & Office Furniture & Furnishings 14 849 9.7% 10.2% 0.63x 9.5x 0.63x 7.5x Household Products 11 5,520 9.3% 25.3% 1.43x 9.5x 1.39x 8.9x Personal Care Products 13 4,020 2.8% 6.3% 1.12x 9.4x 1.03x 7.9x Recreational & Leisure Products 21 446 3.5% 17.9% 1.00x 8.4x 1.02x 7.3x Retail Apparel & Footwear Retail 43 962 (1.8%) 13.2% 0.58x 6.4x 0.56x 5.6x Catalog & Specialty Distribution 7 302 14.4% 14.7% 0.27x 7.1x 0.25x 8.2x Department Chains 9 6,680 (5.9%) 8.4% 0.62x 6.6x 0.60x 6.6x Discount Stores & Mass Merchants 13 2,278 (4.0%) 3.3% 0.61x 7.8x 0.62x 7.6x Furniture & Furnishings Retailers 13 1,127 1.4% 12.7% 1.03x 7.7x 0.97x 6.6x Internet Retail 13 585 9.7% 14.8% 1.18x 16.2x 0.98x 10.3x Specialty & Other Retail 28 1,422 9.1% 13.1% 0.68x 9.1x 0.69x 7.6x Consumer Products 106 $2,246 5.5% 15.8% 1.06x 9.5x 1.03x 8.1x Retail 126 $1,127 1.4% 13.1% 0.62x 7.7x 0.62x 7.6x Consumer & Retail Index 232 $1,422 3.5% 13.2% 0.68x 8.9x 0.69x 7.6x Public Company Household Products Sector Automotive Products Performance Recreational & Leisure Products (12-month % Internet Retail change in Catalog & Specialty Distribution stock price) Apparel & Footwear Apparel & Footwear Retail Consumer & Retail Index Specialty & Other Retail Furniture & Furnishings Retailers S&P 500 Home & Office Furniture & Furnishings Department Chains Personal Care Products Discount Stores & Mass Merchants 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 2 of 16 Equity Markets Overview February 2013 225 Consumer 110.5% 200 and Retail 84.3% Industry Stock Performance 175 80.5% 150 Index 125 100 75 50 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Dow Jones U.S. Consumer Goods Index Dow Jones Retail Index S&P 500 Index Recent Equity Transaction Gross Proceeds Offerings Close Date Filing Date Issuer Ticker Type ($mm) Use of Funds 01/29/13 01/15/13 Five Below Inc FIVE Follow-On $463.9 General Corp. Purp. 01/24/13 10/24/12 Bright Horizons Family BFAM IPO 222.2 General Corp. Purp. 01/15/13 01/22/13 EZCORP Inc EZPW Follow-On 28.3 Investment in Securities 01/17/13 01/17/13 Bauer Performance Sports Ltd BAU Follow-On 35.3 General Corp. Purp. 12/20/12 12/20/12 SW China Imports Inc SWCI Follow-On 16.2 General Corp. Purp. 12/13/12 03/13/12 Harbinger Group Inc HRG Follow-On 150.0 General Corp. Purp. 12/07/12 04/18/12 Conn's Inc CONN Follow-On 169.2 Investment in Securities, Repayment of Debt 11/19/12 10/16/12 Hudsons Bay Co TSX:HBC IPO 366.4 General. Corp. Purp. / Working Capital 11/08/12 10/16/2012 Tumi Holdings Inc TUMI Follow-On 213.1 General Corp. Purp. 11/01/12 09/09/11 Restoration Hardware Holdings, Inc. RH IPO 142.5 General Corp. Purp. / Repayment of Debt 10/19/12 9/24/2012 Aspen Group Inc ASPU Follow-On 52.6 General Corp. Purp. 10/10/12 09/26/12 Bauer Performance Sports Ltd BAU Follow-On 41.6 General Corp. Purp. 10/08/12 04/30/12 Sears Hometown & Outlet Stores SHOS Rights Offering 346.5 General Corp. Purp. 10/03/12 09/13/12 WageWorks Inc WAGE Follow-On 105.0 General Corporate Purp. / Working Capital 3 of 16 M&A Overview February 2013 Announced Quarterly Consumer M&A Activity Last 10 Deals Announced 160 Consumer Announced Target Buyer 140 1/31/2013 WMS Industries Inc. Scientific Games Corporation and Retail 15 1/24/2013 Blocksworld Linden Research, Inc. M&A 1/24/2013 Hume Travel Corporation Corporate Travel Management 120 1/22/2013 Lysse E & A Industries, Inc. __ 23 1/22/2013 KIVA Designs, Inc., KIVA Brand Baggallini, Inc. 100 1/19/2013 Becker Monument Company Bell Memorials 1/18/2013 Personal Retailing, Inc. JustFabulous 80 1/16/2013 K-Swiss Inc. E. Land World Company 9 5 20 1/16/2013 ReStockIt, LLC Acme Paper & Supply Co. 6 10 14 10 128 1/15/2013 Genceutic Naturals Nature's Answer, Inc. 60 13 13 12 11 10 18 98 40 4 LTM Deal Statistics Number Number ofTransactions 72 72 66 65 61 63 63 56 56 55 Transaction Multiples 48 49 47 Aggregate Number 20 37 Value ($bn) of Deals EV / Revenue EV / EBITDA 0 $38.7 401 0.95x 10.0x 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 Note: Transactions based on publicly available information PEG Acquirer Strategic Acquirer Consumer and Announced Consumer Transactions Median Consumer Transaction Multiples Retail M&A 16.0x 1.75x $120 500 Trends 450 14.0x 1.50x $100 __ 400 Number ofTransactions Number 12.0x 11.2x 11.0x Multiple Sales LTM / EV $84.9 $79.7 10.7x 1.25x 350 10.3x 10.0x $80 10.0x 8.9x 300 8.4x 1.00x $60 250 8.0x 0.75x 200 $40.3 6.0x $40 $38.3 150 $28.6 $29.7 0.50x __ 4.0x $22.1 __ 100 Multiple EBITDA LTM / EV $20 2.0x 0.25x 50 Aggregate Transaction Value ($ in billions) in ($ Value Aggregate Transaction $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 Median LTM Median LTM Trading Multiples Consumer Private Equity Investments and Exits Trading 12.0x 120 10.9x 111 Multiples and 10.6x 10.7x 10.3x 10.5x 10.3x 10.3x 9.9x 10.0x 9.9x Announced 9.7x 9.7x 97 10.0x 9.5x 9.3x 100 9.2x 9.1x 9.0x 9.1x 9.2x 9.1x 9.2x 8.7x 8.8x Private Equity 8.5x ' 81 M&A Activity 8.0x 80 76 73 71 72 72 58 59 59 6.0x 60 53 54 53 53 48 4.0x 40 37 33 31 Number of Investments 28 Median Trading Multiples Trading Median 2.0x 20 0.0x 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Number of Investments Number of Exits Consumer Products Retail 4 of 16 Debt Market Overview February 2013 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 Average Spread Over LIBOR Over Average Spread L + 100 $2 Loan VolumeLoan byQuarter ($ billions)in $0 L + 0 4Q06 2Q07 4Q07 2Q08 4Q08 2Q09 4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Pro Rata Institutional Revolving Credit / Term Loan A Weighted-Average Institutional Credit Statistics Average Secondary Spread 8.0x L + 1200 2007 2008 2009 2010 2011 2012 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 02/01/13 DineEquity Inc, DineEquity Inc Eating places $75,000,000 Revolver/Line >= 1 Yr.