VALUATION PROJECT WORKBOOK

1. CONFIDENTIAL VALUATION PROJECT WORKBOOK SUMMER ANALYST PROGRAM – 2007 PRELIMINARY | SUBJECT TO FURTHER REVIEW AND EVALUATION THESE MATERIALS MAY NOT BE USED OR RELIED UPON FOR ANY PURPOSE OTHER THAN AS SPECIFICALLY CONTEMPLATED BY A WRITTEN AGREEMENT WITH CREDIT SUISSE.

2. Table of Contents • 1 Overview of Valuation Project • 2 Sample Project • 3 Weekly Assignments and Resources • A Public Information Book (PIB) • B Company Profile • C Equity Comps / M&A Comps • D DCF and WACC Analysis • E Merger Consequences Analysis If you have any questions regarding materials in this book, or the valuation project in general, don’t hesitate to call us: Anna Golynskaya Phil Kohn Training Leader Training Leader anna.golynskaya@credit-suisse.com phil.kohn@credit-suisse.com (212) 538-5442 (212) 538-0558 Miriam Roshan Jeff VollingTraining Leader Training Leader (212) 325-1822 (212) 325-5529 miriam.roshan@credit-suisse.com jeffrey.volling@credit-suisse.com

3. 1. Overview of Valuation Project

4. Overview of Valuation Project • Welcome to Credit Suisse! In addition to meeting a ton of new people and having fun for the next 10 weeks, we figured it would be helpful for you to return to college your senior year having learned something about what Investment Bankers do • Several analysts, associates, and Vice Presidents from across the division have worked hard to put the following materials together as your “one-stop shop” for banking how to’s • In addition to your group staffing assignments over the next two months, you will also be asked to complete a group valuation project to be submitted by Week 9 of your program. The submission will include the following: • A company profile • Equity comps and M&A comps • DCF valuation • Merger consequences analysis • At the end of the summer, August 2nd, your team will be asked to present, in a short session, your analyses and conclusions to a team of bankers • This project will be completed gradually over the course of the summer and we will be holding 4 sessions (1 every week) to cover each of the topics or analysis we will be asking you to do • You will be required to turn in you work for the topic covered each week at the following weeks session (i.e., you will go over profiles in first session and turn them in at the second session) • We plan to return your assignment within one week so you can see if you are on the right track and where you may need to improve

5. Note: Due to the fact that the deal was announced on 3/13/06, for all valuations, please use all public information available as of then (latest filing would be the 12/25/05 10-K) and stock prices and research as of 3/10/06. Project Schedule and Key Dates This schedule provides a set of guidelines to help you plan your final project.

6. 2. Sample Project

7. USF Corporation – Company Profile Status: Public (Nasdaq: USFC) Headquarters: Chicago, IL Website: www.usfc.com Employees: 21,000 Management and Board of Directors Company Overview • Provides comprehensive supply chain management services in four business segments: • “Less-than-truckload” segment, carriers provide regional and inter-regional delivery throughout the United States • “Truckload” segment offers premium regional and national truckload services • “Logistics” segment provides dedicated fleet, cross-dock operations, supply chain management, contractual warehousing, domestic ocean freight forwarding and reverse logistics services • “Information Technology” segment provides support activities including corporate sales and various financial management functions • USF provide services to a wide variety of customers, with no single customer accounting for more than 3.3% of revenue Source: Company filings and Capital IQ. Source: Company filings and FactSet. Recent News Ownership • 1/28/2005: USF Corporation reported fourth quarter and full year 2004 results, missed Wall Street earnings • 12/13/2004: Announced opening of two new terminals serving the Southern Minnesota and Decatur, Alabama areas • 11/2/2004: Richard P. DiStasio stepped down as CEO, Paul Liska was named interim CEO • 10/22/2004: Reported third quarter 2004 results, missed Wall Street earnings • 9/9/2004: USF Holland announced the opening of eight (8) Northeast terminals, service city includes: Baltimore, MD Albany, NY, Allentown, PA, Harrisburg, PA, Philadelphia, PA, Wilkes Barre, PA, Syracuse, NY, and Richmond, VA Source: Company filings, and website. Source: Company filings and ShareWorld.

8. USF Corporation (Cont’d) Stock Price Performance Market and Trading Data Financial Overview Source: Company filings and Wall Street equity research. Source: Company filings and Wall Street equity research. Note: EPS projections based on I/B/E/S consensus.

9. Comparable Company Analysis

10. Selected Precedent Transactions Source: Securities Data Corporation, public filings and news reports. (1) Enterprise Value = Value of Common + Total Debt – Cash. (2) EBITDA, EBIT and Net Income exclude extraordinary items and accounting changes.

11. WACC Schedule

12. Discounted Cash Flow Analysis

13. Potential Merger Assumptions Key Assumptions

14. Merger Consequences Analysis

15. 3. Weekly Assignments and Resources A. Public Information Book (PIB)

16. Summer Assignment – PIB • Assignment • Prior to the June 30th training session, please assemble a PIB on Knight Ridder • Make sure that your PIB has all the sections outlined on the next page • Insert numbered tabs between each section “blue sheets” between each item in the same tab, if multiple items exist. For example, put a blue sheet between each research report • Have the Copy Center make a double-sided bound copy of your PIB • Key Takeaways • After completing this section, you should be familiar with most of the tools that are available to access public information • Research reports are expensive!!! Purchase only those that are appropriate • Be prepared to answer questions like: • 1. Where do I go to get the latest SEC filing? • 2. Where do I go to get an ownership run? • 3. Have any major events occurred at the Company in the recent quarter?

17. Public Information Book Resources • Sample Table of Contents • Where to Get the Material

18. 3. Weekly Assignments and Resources B. Company Profile

19. Summer Assignment – Company Profile • Assignment • In the format shown on the sample pages, create a two page company profile for Knight Ridder Corporation • Make sure you include: • Company Overview • Market Statistics (download from FactSet) • Financial Overview • Stock Price Performance • Directors and Officers • Products • Current Ownership • Helpful Hint: The financial overview summary sheet in your Abacus shell (see Tab C) is a good template from which to copy and paste market stats and financial overviews • Key Takeaways • At the end of this section, you should be able to answer the following: • 1. What are Knight Ridder Corporation’s primary business segments? • 2. How has Knight Ridder Corporation performed in the last year with respect to: • Earnings? • Stock price? • Any relationship between the two? 3. Any important events occur at the Company over the past year?

20. Agenda • Creating a general two page company profile • Keys to a successful acquisition ideas presentation

21. Keys to a Successful Acquisition Ideas Presentation • Know Your Audience • Use a Systematic Approach • Remember the Formula: Strategic Fit + Availability = A Good Idea • Demonstrate Industry Knowledge • Revisit “Old” Ideas Selectively • Stimulate Discussion and Ask Questions • Summarize Conclusions and Develop Follow-up Plan A successful acquisition ideas presentation delivers a focused set of ideas with a point of view and a rationale.

22. Considerations in Determining Fit Strategic General Financial • Client specified • Size • Industry • Technology • Geographic scope (international vs. domestic) • Product synergies • Markets • Customers • Distribution • Manufacturing • Operating synergies • Corporate cost savings • S,G & A cost savings • Other • Organic growth prospects of target • Management talent • Technology or other proprietary assets • Leverage • Accretion / dilution • Market perception

23. Signals of Availability / Lack Thereof Signs of Availability Signs of Lack of Availability • Parent is a LBO sponsor • Filed equity offering with large secondary component • Previous failed attempt to sell (“busted auction”) or spin-off (“busted IPO”) • Takeover speculation • Undervalued, depressed or declining stock price • Shareholder activism • Potential odd man out in rapidly consolidating industry or segment • Changes in senior management or aging senior management with no obvious successor • Dramatic revisions in corporate strategy • Need to expand internationally or to retrench • Need for capital • Failure or inability to grow new products organically • Parent reorganizing or realigning businesses, possibly in preparation for a sale • Division with no logical strategic fit with the parent (“corporate orphan”) • Division underperforming or less profitable than core business • Insiders control a meaningful percent of the stock and have no evident need for liquidity • Family-owned with the next generation preparing or prepared to assume leadership • Majority owned by another company that has obvious reason to hold onto the business • Strong and consistent stock performance • The current parent is the most obvious best owner for the business The current parent has identified the business as a core business and/or the equity market is in favor of current parent owning the business Consider the target’s defensive posture vis-a-vis a hostile offer, but remember … the valuation/rationale must be even more compelling to justify an unsolicited approach Note: It is also important to review the valuation multiples of the publicly-traded Parent Company which owns the “target” subsidiary. If sale proceeds (after tax) imply lower valuation multiples (EBITDA, EBITA and Net Income) than those at which the parent stock is selling, the transaction would be dilutive to overall value and thus would probably be a non-starter as a sale candidate today

24. Acquisition Screening – Information Sources • SIC code lists • Equity analyst research • “Competition” sections of prospectuses and 10-Ks of comparable companies • Research reports relating to the Client and its core industry group competitors • Value Line for Client and its competitors • S&P Tear Sheets (with word search) • OneSource (U.S. Public, U.S. Private, and U.K. Public SIC Code Summary Analyses) • Industry trade association lists • Trade publications • WorldScope database (Global Buyers List) • FactSet “comp builder” • SDC M&A summaries

25. Business section of 10K / Annual Report finance.yahoo.com business profile Research reports Company Web site VentureSource (private companies) Your PIB can be a great resource (See Tab A) Creating a General Company Profile Company Overview Business Description The Boeing Company is an aerospace firm. The Company operates in principal areas that include commercial airplanes, military aircraft, missile systems, space and communications and customer and commercial financing. Business Segments • The Commercial Airplanes segment is involved in development, production and marketing of commercial jet aircraft and providing related support services, principally to the commercial airline industry worldwide. • The Military Aircraft and Missile Systems segment is involved in the research, development, production, modification and support of military aircraft including fighter, transport and attack aircraft, as well as helicopters and missiles. • The Space and Communications segment is involved in the research, development, production, modification and support of space systems, missile defense systems, satellites and satellite launching vehicles, rocket engines and information and battle management systems. • The Customer and Commercial Financing segment is primarily engaged in the financing of commercial and private aircraft and commercial equipment. Competitors The Company competes with Lockheed Martin, Raytheon, BAE Systems, Northrop Grumman, Matra BAe Dynamics Alenia and The European Aeronautics Defense & Space Corporation. • 10K / Annual Report • Research reports • Company Web site • PIB • 10K / Annual Report • Research reports • finance.yahoo.com business profile • Company Web site • PIB

26. Creating a General Company Profile Therapeutic Focus – 2003 Highlight product mix or any particular asset that might be of interest to your Audience • Company Web site • Research reports • 10K / Annual report Note: Currently there is no similar pie graph in USF profile but it is a possibility for your Knight Ridder profile (or other profiles you will be expected to do in your respective groups). Financial Overview • You can find the historical information from company filings • The projections will come from research • PIB

27. Creating a General Company Profile Market and Trading Data • This should come from your equity comp shell (See Tab C) • Keep in mind, you may update this profile often (e.g. latest stock price or estimates) so keeping your comps flexible is key

28. Creating a General Company Profile Stock Price Performance • ActiveGraph made from Excel and FactSet • Keep in mind, you may update this often • Plot either standalone or against peer group. If showing peer group, use the companies in your equity comps (see Tab C) but exclude the company you are profiling

29. Creating a General Company Profile Ownership • ShareWorld • Proxy (for insider ownership) • FactSet Recent News • 1/28/2005: USF Corporation reported fourth quarter and full year 2004 results, missed Wall Street earnings • 12/13/2004: Announced opening of two new terminals serving the Southern Minnesota and Decatur, Alabama areas • 11/2/2004: Richard P. DiStasio stepped down as CEO, Paul Liska was named interim CEO • 10/22/2004: Reported third quarter 2004 results, missed Wall Street earnings • 9/9/2004: USF Holland announced the opening of eight (8) Northeast terminals, service city includes: Baltimore, MD Albany, NY, Allentown, PA, Harrisburg, PA, Philadelphia, PA, Wilkes Barre, PA, Syracuse, NY, and Richmond, VA • Company news releases • Factiva • Equity research

30. Creating a General Company Profile Management and Board • Proxy • finance.yahoo.com • Company Web site • Sometimes you will see profiles with a brief biography of the directors and officers

31. 3. Weekly Assignments and Resources C. Equity Comps

32. Summer Assignment – Equity Comps • For your assignment, you are to submit an Equity Comp output page for Knight RidderAS OF THE DATE OF THE ACQUISITION (3/10/06) • You must first find comparable companies. For this project, you need only Knight Ridder Corporation and three comparable companies • Include McClatchy Company and New York Times Co as comps and find one comp on your own • Input ABACUS shells for these comps using FactSet, the companies’ financials and Wall Street research to find the following multiples: • 2006E and 2007EV/revenue • 2006E and 2007E EV/EBITDA • 2006E and 2007E EV/EBIT • 2006E and 2007E P/E • 2006E and 2007E EBITDA margins • When necessary, make sure to calendarize the financials • Make sure to check your output and see if something looks abnormal • If so, you’ve likely made a mistake

33. Summer Assignment – Equity Comps (Cont’d) • Helpful Hint #1: If you’ve inserted your data properly into the input pages, ABACUS will generate a formatted and linked output page for you: Go to ABACUS / New Summary Sheet / Forward Multiple Analysis • Helpful Hint #2: The output page converts all currencies to US$. If you are using a foreign company, make sure you input the proper exchange rate in the appropriate section of the shell • Key Takeaways • At the end of this section, you should be able to answer the following: • 1. On what basis did you choose your one other comparable? • 2. In retrospect, are they “good” comps? Why or why not? • 3. How is Knight Ridder trading relative to its peer group? • 4. Can you explain its relative valuation? Why does it trade at a premium or discount to its peers? Think of its relative earnings, margins, market share, size, etc. • 5. What does this mean to a potential buyer?

34. Agenda • What are Equity Comps and Why Do We Do Them? • Finding Comparable Companies • Collecting the Data • Using the Compco Model • Common Pitfalls • Interpreting the Results • USF Corporation: sample equity comps

35. What Are Equity Comps and Why Do We Do Them? • A big part of an investment banker’s job is to value companies • More than anything else, clients want to know what their companies areworth – especially relative to their peers • One way to value companies is to infer (or compare) their value based on the public trading values of other companies with similar characteristics • Because not all companies are the same size or have the same capital structure, we need to establish universal metrics that can apply to all companies within a group • These metrics almost always take the form of a ratio or “multiple”, where the numerator is a measure of trading value (Enterprise Value; Market Value) and the denominator is an operating statistic (EBITDA, Net Income) • The most common metrics are Enterprise Value / EBITDAand Market Value / Net Income (or P/E) • The calculation and interpretation of these metrics is a Comparable Company Analysis, or Compco Analysis • Helpful Hint: The right terminology for this analysis is the Comparable Company Analysis, but since bankers like to complicate matters, this analysis is referred to differently by each group. Don’t get confused if you’re asked to do equity comps, compcos, comps, and a comparable company analysis all in one night: They all mean the same thing!

36. OK, So What Are Enterprise and Equity Value? • Enterprise Value is the total dollar value of a business, represented by the sum of all of the ownership interests in the business • Note: Enterprise Value is sometimes referred to as Adjusted Market Value, Firm Value or (in early-stage biotech) Technology Value • In broad terms, there are two types of ownership interests in a business – Debt and Equity • The public market value of a business’ equity is referred to as its equity value, market value or market capitalization • We calculate a business’ Enterprise Value by summing the public market values of its debt and equity • Caveat: Because the trading value of debt securities is less volatile than equity securities, we typically use the book value of debt rather than the market value to save time • Enterprise Value is an important measure because it makes companies with different capital structures more comparable

37. OK, So What Are Enterprise and Equity Value? • Enterprise Value = Value of All Business’ Assets = Equity Value + Net Debt(1) • Equity Value = Value of the Shareholders’ Equity = Current Stock Price x Shares Outstanding(2) Liabilities and Shareholders’ Equity Assets Net Debt Enterprise Value Enterprise Value Equity Value (1) Net Debt equals long-term debt + short-term debt + “out of the money” convertible debt + minority interest + preferred stock + capitalized leases – cash and cash equivalents. (2) The proper way to calculate Equity Value is to use the diluted number of shares outstanding, which includes all “in the money” and exercisable stock options.

38. Fair Enough, But Help Me With This EBITDA Thing • EBITDA is an accounting measure of how much cash flow a business generates from its operations • EBITDA excludes interest, taxes and depreciation and amortization because these items vary from company to company – for reasons which generally do not impact value – making them harder to compare on a consistent basis • Interest is a function of capital structure • Taxes are a function of incorporation and tax structure • Depreciation is a function of depreciation policy / asset lives • Amortization is a function of how acquisitive a company has been • EBITDA = Earnings before Interest, Taxes, Depreciation and Amortization • We place emphasis on Enterprise Value / EBITDA because this metric excludes most variables which do not affect value (or can be easily changed) making companies more comparable for valuation purposes

39. Let’s Recap • The absolute value of a business is expressed by its Enterprise and Equity Value • Enterprise Value is the total value of all ownership interests in a business • Equity Value is the value of the equity in a business • The relative value of a business is expressed by a “multiple” of its absolute value to its operating results • “GE is trading at 22x its 2006E projected EBITDA” – Translation: The ratio of GE’s Enterprise Value to its forecasted 2006E EBITDA is 22 • “Walmart’s 2006E P/E multiple is 18x” – Translation: The ratio of Walmart’s equity value to its forecasted 2006 net income is 18 • Enterprise Value / EBITDA is an important metric because it eliminates non-value impacting variables which otherwise make companies less comparable Enterprise Value Multiples Equity Value Multiples Enterprise Value / Sales Enterprise Value / EBITDA Enterprise Value / EBIT Industry Specific Metrics (EV / Fiber Miles) Equity Value / Net Income Price / Earnings Equity Value / Tangible Book Value Other Industry Specific Metrics

40. Finding Comparable Companies • Look for companies with characteristics similar to those of the business being valued: • Sources to check to initially select comparables: • Your colleagues (before you start, make sure someone hasn’t done it already!) • Associates and Officers – most of the time they will pick them for you • Proxy Statements • Equity research reports and analysts • SIC code searches – FactSet, OneSource, Library • S&P Tearsheets • Value Line • Trade publications • IPO or other prospectuses • 10K – Competition section Operational Financial • Seasonality • Cyclicality • Strategy • Customers • Industry • Products • Distribution Channels • Markets • Size • Growth Profile (Sales, EBITDA, Earnings) • Margins (Gross Profit, EBIT, Net Income) • Leverage Note: This rule does not apply to your summer valuation project – sorry guys!

41. Collecting The Data – What Do I Need? • Most recent financial statements – LTM financials • 10-K, 20-F or Annual Report (available 90 days after end of period) • 10-Q quarterly or interim report (available 45 days after end of period) • Earnings Releases (typically available 2-3 weeks after the end of the quarter) • Don’t miss these – they are the most updated information available • Often have complete income statements and balance sheets • Other Press Releases • EPS Forecasts – Be Consistent! • First Call • I/B/E/S • Operating Projections • CS Equity Research • Equity Research from other firm • I/B/E/S • Stock Price Information • Current / 52 week high-low

42. Why Do I Need It? Where Do I Get It? • 10-K / Annual Report • LTM Income Statement Information • Options/Convertible Data • 10-Q / Quarterly Report • LTM Income Statement Information • Balance Sheet Information • Basic Shares Outstanding • 8-Ks / Report of a Material Event • Pro Forma Information for Acquisitions or Other Transactions • Earnings Announcements • Thomson Research (from InfoCentral – IBD Internal website) • FactSet on your PC • OneSource on your PC • SEC Edgar Archives (www.sec.gov) • Disclosure workstations (in library) • Sedar.com (for Canadian companies) • Documents Library on EMA 28 at x5-4000 (use library as a last resort – they will always take longer to pull docs than you will) 10-Ks, 10-Qs, 8-Ks EPS Forecasts Why Do I Need It and Where Do I Get It? • Research analysts submit their EPS estimates to publicly available centralized databases (First Call, I/B/E/S) • The mean or “consensus” estimate represents the Street view of a Company’s expected performance • We use Street view to calculate P/E multiples • FactSet (First Call, I/B/E/S) on your PC • First Call website (InfoCentral) • Detailed First Call reports (6th Floor) • Bloomberg terminals (Nelson's)

43. Operating Projections Stock Price Information OtherInformation Why Do I Need It and Where Do I Get It? Why Do I Need It? Where Do I Get It? • Research analysts project what a Company’s income statement will look like in the future • We use these models to calculate projected EBITDA • The research report you select is VERY important and will influence your valuation multiples • You should always select a research report which has an EPS forecast close to the consensus • CS Research & Analytics • Call CS Research Analyst for updated model • Research Bank Web (Info Central) – for non-CS research • Multex.com – for non-CS research • Research Bank workstations (older reports) • Library request at x5-4000 (for older or hard to find research reports) • To calculate equity and enterprise value • FactSet on your PC • Investment Banking Workstation on your PC • Bloomberg terminals • To calculate equity and enterprise value • FactSet on your PC • Investment Banking Workstation on your PC • Bloomberg terminals

44. Data Collection Best Practices (How To Keep My Associate Happy and Get a Big Bonus) • Keep a Record • Print out hardcopies of all source documents (10-Ks, 10-Qs, EPS Projections, Analyst Reports) • Leave a Trail / Be Organized • Highlight data and tab pages used from source documents and use folders for each company • Use “Comments” function in Excel to footnote items that need explanation (i.e., approximations, assumptions, calculations and unusual items) • Be Complete • Supply your Associate with all source documents, a printout of the equity comps and an electronic copy for all companies to be checked • Be Efficient • Work sequentially through companies, so that your Associate can start checking while you continue working • Be a Thinker • Check your results. If something looks wrong, it probably is • Never assume FactSet downloads or other people’s comps are correct

45. The ticker identifies the company you are creating a comp file for and is used by Factset to select data to download The financial statement dates identify which historical and projected years you are generating multiples for. These dates drive the model’s column headings Note: The dates do not drive which data FactSet downloads; FactSet defaults to the most recently available data It is important to fill out the user information so that other people using your model can call you with questions 1. General Company Information / User General Company Information User Information

46. 2. Diluted Share Calculation / Options and Convertible Debt Schedules • In general, Equity Value = Current Stock Price x Basic Shares Outstanding • However, most companies have securities which represent contingent shares – meaning they are not shares today, but can become shares if certain conditions are met – and as a result, we need to make adjustments to basic shares outstanding • The most common of these securities are options / warrants • Options are a price right or option granted to management to purchase their company’s stock at a pre-specified or strike price • Management profits if the market price of the stock exceeds the strike price when they exercise the options. Hence, Management is only likely to exercise his/her options under these circumstances • Options are reported in the 10-K. Companies typically disclose the number of options that are outstanding and exercisable • Exercisable options are vested and can be used to purchase shares today. Exercisable options, NOT outstanding, are relevant for equity comp purposes • The method we use for calculating the impact on basic shares outstanding of options is called the Treasury Stock Method

47. ($14.02 x 8.2) / $17.74 Calculating Diluted Shares Outstanding Using the Treasury Stock Method

48. What About Convertible Debt and Preferred? • Investment Bankers have created hybrid securities which pay interest like straight debt, but become common stock if certain conditions are met • Convertible Debt • Convertible Preferred • Other Equity-Linked Securities • Convertible securities are NOT evaluated using the Treasury Stock Method • Most important thing to remember: Convertible Securities are treated as either debt or equity for valuation purposes – NOT both

49. What About Convertible Debt and Preferred? Example: A company has a convertible preferred security with a face value of $1,114 million that pays a dividend of 6.5% and has a conversion price of $18.00 Current Price > $18.00  Treated as Equity Current Price < $18.00  Treated as Debt • Income Statement Effect • None • Equity Value Effect • None • Net Debt Effect • Should include full amount of convertibles ($1,114) • Income Statement Effect • Debt: Interest backed out • Preferred: Dividend backed out ($1,114 x 6.5% = $72.4) • Equity Value Effect • Additional shares outstanding from conversion (add $1,114/$18 = 61.9 to shares outstanding) • Net Debt Effect • Debt does NOT include face value of converted debt/preferred

50. 2. Treasury Method Diluted Share Calculation / Options and Convertible Debt Schedules • Treasury Method Fully Diluted Share Calculation • ($ in millions, except per share data)