here is the question to develop a pro forma modified cash flow analysis

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UVA-F-1693 Exhibit 3 AMERICAN GREETINGS American Greetings Balance Sheet (in millions of dollars) 2009 2010 (Feb 2010) (Feb 2011) 2011E (Feb 2012) Cash and Cash Equivalents Trade Accounts Receivable Inventories Prepaid Expenses Other Current Assets Total Current Assets 216 120 180 138 136 164 148 94 679 128 172 130 190 131 54 677 72 716 Net Property, Plant, and Equipment and Other Assets Total Assets 850 1,529 832 1,547 859 1,536 Debt Due within One Year Accounts Payable Other Current Liabilities Current Liabilities 95 272 0 87 245 332 0 87 255 343 369 Long-Term Debt Other Liabilities Shareholders' Equity Total Liabilities and Shareholders' Equity 329 196 636 1,529 233 219 763 1,547 235 206 752 1,536 Data source: Company accounts, management and case writer estimates. 6 Fiscal year ends February of subsequent year. AMERICAN GREETINGS Financial Forecast Assumptions Actual 2011 *********** Forecast *********** 2012 2013 2014 2015 Bullish Scenario Revenue Growth Operating Margin Net Working Capital Turnover Fixed Asset Turnover 5.3% 9.4% 5.02 1.95 1,0% 9.0% 6.00 1.95 1.5% 9.0% 6.50 1.95 2.0% 9.0% 7.00 1.95 2.5% 9.0% 7.50 1.95 Bearish Scenario Revenue Growth Operating Margin Net Working Capital Turnover Fixed Asset Turnover 5.3% 9.4% 5.02 1.95 0.0% 8.0% 6.00 1.95 0.0% 7.0% 6.50 1.95 0.0% 6.0% 7.00 1.95 0.0% 5.0% 7.50 1.95 Note: The ratios are defined in the following manner: Revenue Growth is the annual percentage change in total revenue, Operating Margin is operating income divided by total revenue, Net Working Capital Tumover is total revenue divided by net working capital where net working capital is current assets less current liabilities, Fixed Asset Turnover is total revenue divided by net PP&E and other assets. Data source: Case writer estimates. portit (1-Ta) UVA-F-1693 Exhibit 2 AMERICAN GREETINGS American Greetings Income Statement, December 2011 (in millions of dollars) 810 2008 2009 2010 2011E (Feb 2009) (Feb 2010) (Feb 2011) (Feb 2012) Total American Greetings Figures Total Revenue 1,691 1,636 1,593 1,677 Material Labor, and Other Pruduction Costs 713 682 743 Selling. Distribution, and Marketing Expenses 619 508 478 526 Administrative and General Expenses 226 276 261 258 Goodwill and Other Intangible Asset Impairment 290 0 0 0 Other Operating Expenses 0 3 (6) Operating Income (253) 139 175 157 Net Interest and Other Nonoperating Expenses 22 18 19 28 Income Before Income Tax Expense (275) 121 156 129 Income Tax Expense 39 69 47 Net Income (228) 82 87 82 1 Earnings Per Share (Basic) Dividends per Share (4.89) 0.60 2.07 0.36 2.18 0.56 2.22 0.60 By Business Unit Operating Segment Net Sales North American Social Expression Products International Social Expression Products Retail Operations AG Interactive 1,095 271 179 83 1,215 344 1,235 254 12 80 1,191 262 78 68 Operating Segment Earnings North American Social Expression Products International Social Expression Products Retail Operations AG Interactive 218 20 148 20 70 (78) (19) (162) 236 17 (35) 11 14 Total Revenue by Product Category Everyday Greeting Cards Seasonal Greeting Cards Gift Packaging Other Revenue All Other Products 704 357 240 44 764 369 221 38 244 753 377 223 32 207 823 408 239 32 345 176 Data source: Company accounts, management and case writer estimates. 2. What is the implied share price that corresponds to a 3.5-times EBITDA multiple? Develop a pro forma modified cash flow analysis for American Greetings for fiscal years 2012 through 2015 based on the two sets of ratios in case Exhibit 8. 1. Bullish Scenario 2. Bearish Scenario Based on the discounted cash flows associated with the fiscal years 2012 through 2015forecast developed for Question 7; what is: 1. The implied enterprise value of American Greetings 2. The corresponding share price? AMERICAN GREETINGS Comparable Firms, End of 2011 (in millions of dollars except share price) Shares Enterprise EBITDA Share Price Outstanding Total Cash Total Debt Value Revenue EBITDA Multiple 86 182 204 714 568 35 1.660 984 1.050 7 American Greetings Blyth Consolidated Graphics CSS Industries Deluxe Hallmark Lancaster Colony Meredith Scholastic 12.51 56.80 48.28 19.92 22.76 NA 69.34 32.65 29.97 38.3 8.2 10.2 9.7 50.9 NA 27.3 44.8 31.1 10 31 235 101 197 0 742 NA 0 250 215 12 30 359 NA 156 194 1.901 NA 1,890 1,712 1,145 NA 162 26 114 5.6 65 53 NA 122 7.1 1,090 1,350 1,950 189 ROA ROE Bond Rating Beta 1.63 BB+ 7% 4% 5% 1.60 B 1.45 BB 4% 1.36 American Greetings Blyth Consolidated Graphics CSS Industries Deluxe Hallmark Lancaster Colony Meredith Scholastic 11% 9% 10% 2% 55% NA 19% 15% 8% 13% NA 14% 7% B 1.85 NA 0.42 1.75 1.04 BB BB- * EBITDA miltiple is defined as Enterprise Value divided by EBITDA ** The ratings for Cons. Graphics and Meredith are estimated by case writer. Data source: Yahoo! Finance, Standard & Poor's, Mergent. UVA-F-1693 Exhibit 3 AMERICAN GREETINGS American Greetings Balance Sheet (in millions of dollars) 2009 2010 (Feb 2010) (Feb 2011) 2011E (Feb 2012) Cash and Cash Equivalents Trade Accounts Receivable Inventories Prepaid Expenses Other Current Assets Total Current Assets 216 120 180 138 136 164 148 94 679 128 172 130 190 131 54 677 72 716 Net Property, Plant, and Equipment and Other Assets Total Assets 850 1,529 832 1,547 859 1,536 Debt Due within One Year Accounts Payable Other Current Liabilities Current Liabilities 95 272 0 87 245 332 0 87 255 343 369 Long-Term Debt Other Liabilities Shareholders' Equity Total Liabilities and Shareholders' Equity 329 196 636 1,529 233 219 763 1,547 235 206 752 1,536 Data source: Company accounts, management and case writer estimates. 6 Fiscal year ends February of subsequent year. AMERICAN GREETINGS Financial Forecast Assumptions Actual 2011 *********** Forecast *********** 2012 2013 2014 2015 Bullish Scenario Revenue Growth Operating Margin Net Working Capital Turnover Fixed Asset Turnover 5.3% 9.4% 5.02 1.95 1,0% 9.0% 6.00 1.95 1.5% 9.0% 6.50 1.95 2.0% 9.0% 7.00 1.95 2.5% 9.0% 7.50 1.95 Bearish Scenario Revenue Growth Operating Margin Net Working Capital Turnover Fixed Asset Turnover 5.3% 9.4% 5.02 1.95 0.0% 8.0% 6.00 1.95 0.0% 7.0% 6.50 1.95 0.0% 6.0% 7.00 1.95 0.0% 5.0% 7.50 1.95 Note: The ratios are defined in the following manner: Revenue Growth is the annual percentage change in total revenue, Operating Margin is operating income divided by total revenue, Net Working Capital Tumover is total revenue divided by net working capital where net working capital is current assets less current liabilities, Fixed Asset Turnover is total revenue divided by net PP&E and other assets. Data source: Case writer estimates. portit (1-Ta) UVA-F-1693 Exhibit 2 AMERICAN GREETINGS American Greetings Income Statement, December 2011 (in millions of dollars) 810 2008 2009 2010 2011E (Feb 2009) (Feb 2010) (Feb 2011) (Feb 2012) Total American Greetings Figures Total Revenue 1,691 1,636 1,593 1,677 Material Labor, and Other Pruduction Costs 713 682 743 Selling. Distribution, and Marketing Expenses 619 508 478 526 Administrative and General Expenses 226 276 261 258 Goodwill and Other Intangible Asset Impairment 290 0 0 0 Other Operating Expenses 0 3 (6) Operating Income (253) 139 175 157 Net Interest and Other Nonoperating Expenses 22 18 19 28 Income Before Income Tax Expense (275) 121 156 129 Income Tax Expense 39 69 47 Net Income (228) 82 87 82 1 Earnings Per Share (Basic) Dividends per Share (4.89) 0.60 2.07 0.36 2.18 0.56 2.22 0.60 By Business Unit Operating Segment Net Sales North American Social Expression Products International Social Expression Products Retail Operations AG Interactive 1,095 271 179 83 1,215 344 1,235 254 12 80 1,191 262 78 68 Operating Segment Earnings North American Social Expression Products International Social Expression Products Retail Operations AG Interactive 218 20 148 20 70 (78) (19) (162) 236 17 (35) 11 14 Total Revenue by Product Category Everyday Greeting Cards Seasonal Greeting Cards Gift Packaging Other Revenue All Other Products 704 357 240 44 764 369 221 38 244 753 377 223 32 207 823 408 239 32 345 176 Data source: Company accounts, management and case writer estimates. 2. What is the implied share price that corresponds to a 3.5-times EBITDA multiple? Develop a pro forma modified cash flow analysis for American Greetings for fiscal years 2012 through 2015 based on the two sets of ratios in case Exhibit 8. 1. Bullish Scenario 2. Bearish Scenario Based on the discounted cash flows associated with the fiscal years 2012 through 2015forecast developed for Question 7; what is: 1. The implied enterprise value of American Greetings 2. The corresponding share price? AMERICAN GREETINGS Comparable Firms, End of 2011 (in millions of dollars except share price) Shares Enterprise EBITDA Share Price Outstanding Total Cash Total Debt Value Revenue EBITDA Multiple 86 182 204 714 568 35 1.660 984 1.050 7 American Greetings Blyth Consolidated Graphics CSS Industries Deluxe Hallmark Lancaster Colony Meredith Scholastic 12.51 56.80 48.28 19.92 22.76 NA 69.34 32.65 29.97 38.3 8.2 10.2 9.7 50.9 NA 27.3 44.8 31.1 10 31 235 101 197 0 742 NA 0 250 215 12 30 359 NA 156 194 1.901 NA 1,890 1,712 1,145 NA 162 26 114 5.6 65 53 NA 122 7.1 1,090 1,350 1,950 189 ROA ROE Bond Rating Beta 1.63 BB+ 7% 4% 5% 1.60 B 1.45 BB 4% 1.36 American Greetings Blyth Consolidated Graphics CSS Industries Deluxe Hallmark Lancaster Colony Meredith Scholastic 11% 9% 10% 2% 55% NA 19% 15% 8% 13% NA 14% 7% B 1.85 NA 0.42 1.75 1.04 BB BB- * EBITDA miltiple is defined as Enterprise Value divided by EBITDA ** The ratings for Cons. Graphics and Meredith are estimated by case writer. Data source: Yahoo! Finance, Standard & Poor's, Mergent