Err:502

($ in Millions Except Per Share Amounts)

Transaction Assumptions
Buyer Name:
Seller Name:

United Technologies Corp

Goodrich Corporation

Premium to Seller's Share Price:

Per Share Purchase Price:
Equity Purchase Price:

% Cash:
% Stock:
% Debt:

0.0%
25.0%
75.0%

Cash Used:
Stock Issued - Dollar Value:
Debt Issued:

Foregone Cash Interest Rate:

Buyer's P / E Multiple:
Debt Interest Rate:

0.5%
11.3 x
3.0%

"Cost" of Cash:
"Cost" of Issuing Stock:
"Cost" of Debt:

Weighted "Cost" of Acquisition for Buyer:

3.8%

Rough Approximation: The Deal Will Be.

Accretive <--------------

Revenue Synergies as % of Seller Revenue:

Operating Margin on Revenue Synergies:
Cost Synergies as % of Seller Expenses:

7.5%
20.0%
3.0%

"Yield" of Seller AT Purchase Price:

This ignores synergies, new amortization / depreciation, transaction
fees, write-downs, etc. and ONLY factors in the foregone interest
on cash, additional shares, and interest on new debt.
ALSO: Note how we are using the Equity Purchase Price of the seller,
NOT its normal Market Cap - that's one of the many reasons this rule
doesn't hold up in real life! Making it more accurate here.

Purchase Price Allocation & Pro-Forma Balance Sheet Adjustments

Goodwill Calculation:
Equity Purchase Price:
Less: Seller Book Value:
Plus: Write-Off of Existing Goodwill:
Total Allocable Purchase Premium:
Less: Write-Up of PP&E:
Less: Write-Up of Intangibles:
Less: Write-Off of Existing DTL:
Plus: Write-Off of Existing DTA:
Plus: New Deferred Tax Liability:
Total Goodwill Created:

15,921
(3,739)
1,991
14,173

Fixed Asset Write-Up:

PP&E Write-Up %:
PP&E Write-Up Amount:
Depreciation Period (Years) - Book:
Yearly Depreciation Expense - Book:

(163)
(2,835)
(584)
234
921
11,747

Intangible Asset Write-Up:

Excess Purchase Price to Allocate:
% Allocated to Intangibles:
Intangibles Write-Up Amount:
Amortization Period (Years) - Book:
Yearly Amortization Expense - Book:

New Deferred Tax Liability:

Combined Income Statement:

Debit
Buyer + Seller Revenue:
Revenue Synergies:
Total Revenue:

Adjustments
Credit
Close Date

Combined Years
Year 1
$
72,241
685
72,926

Buyer + Seller Costs and Expenses:

Expenses Associated with Revenue Synergies:
Cost Synergies:
Total Costs and Expenses:

61,438
548
(232)
61,754

Total Operating Income:

Buyer + Seller Interest Income / (Expense):
Foregone Interest on Cash:
Interest Paid on New Debt:
New Amortization of Intangibles Expense:
New Depreciation Expense:
Pre-Tax Income:

11,172
(741)
(358)
(567)
(20)
9,485

Income Taxes:
Tax Rate:

(2,940)
31.0%

Net Income:

6,545

Diluted Shares Outstanding:

Shares Issued in Transaction:
Total New Shares Outstanding:
EPS:
Buyer Standalone EPS:
Accretion / (Dilution):
Accretion / (Dilution) %:

903.0
52.6
955.7
$
$
$

6.85
6.72
0.13
1.9%

Calculations Excluding Synergies, New D&A, and Txn Fees:

Plus: New Amortization of Intangibles:
Plus: New Depreciation Expense:
Less: Net Effect of Synergies:
Pro-Forma Pre-Tax Income:

567
20
(369)
9,704

Income Taxes:
Tax Rate:

(3,008)
31.0%

Pro-Forma Net Income:

6,696

Pro-Forma EPS:
Buyer Standalone EPS:
Pro-Forma Accretion / (Dilution):
Pro-Forma Accretion / (Dilution) %:

$
$
$

7.01
6.72
0.29
4.3%

Combined Balance Sheet:

Pre-Transaction
Buyer
Seller
Assets:
Current Assets:
Cash & Cash-Equivalents:
Other Current Assets:
Total Current Assets:

2,707
22,647
25,354

987
4,280
5,267

Adjustments
Credit
Close Date

Debit

3,694
26,927
30,621

Long-Term Assets:
PP&E, Net:
Goodwill:
Other Intangible Assets:
Deferred Tax Assets:
Other Long-Term Assets:
Total Long-Term Assets:

6,371
21,466
6,922
34,759

1,633
1,991
917
234
671
5,447

Total Assets:

60,113

10,714

Liabilities & Equity:

Current Liabilities:
Short-Term Debt:
Other Current Liabilities:
Total Current Liabilities:

18,662
18,662

27
2,026
2,052

27
20,688
20,714

Long-Term Liabilities:
Long-Term Debt:
Deferred Income Tax Liability:
Other Long-Term Liabilities:
Total Long-Term Liabilities:

10,010
8,879
18,889

2,374
584
1,965
4,923

584
-

11,941
921
-

24,325
921
10,844
36,090

Total Liabilities:

37,551

6,975

Equity:

22,562

3,739

Total Liabilities & Equity:

Balance Check:

60,113
OK!

10,714
OK!

163
11,747
2,835
-

1,991
234
-

8,168
33,213
3,752
7,593
52,726
83,347

56,804
3,739

3,980

26,542
$

83,347
OK!

Sensitivity Analysis - GAAP / IFRS EPS Accretion/Dilution and Purchase Price vs. Cash/Stock Split:

Per Share Purchase

Price

1.9%
137.50
135.00
132.50
130.00
127.50
125.00
122.50
120.00
117.50
115.00

5.0%
4.5%
4.8%
5.0%
5.3%
5.5%
5.8%
6.1%
6.3%
6.6%
6.9%

10.0%
3.5%
3.8%
4.0%
4.3%
4.6%
4.9%
5.2%
5.4%
5.7%
6.0%

15.0%
2.5%
2.8%
3.1%
3.4%
3.7%
4.0%
4.3%
4.6%
4.9%
5.2%

Purchase Consideration - % Stock

20.0%
25.0%
30.0%
1.6%
0.6%
(0.3%)
1.9%
1.0%
0.1%
2.2%
1.3%
0.4%
2.5%
1.6%
0.7%
2.8%
1.9%
1.1%
3.1%
2.2%
1.4%
3.4%
2.6%
1.7%
3.7%
2.9%
2.1%
4.0%
3.2%
2.4%
4.3%
3.5%
2.7%

35.0%
(1.1%)
(0.8%)
(0.5%)
(0.1%)
0.2%
0.6%
0.9%
1.3%
1.6%
2.0%

Sensitivity Analysis - GAAP / IFRS EPS Accretion/Dilution and Purchase Price vs. Revenue Synergy Percentage:

Per Share Purchase

Price

1.9%
137.50
135.00
132.50
130.00
127.50
125.00
122.50
120.00
117.50
115.00

3.5%
(0.1%)
0.2%
0.5%
0.8%
1.1%
1.5%
1.8%
2.1%
2.4%
2.7%

4.5%
0.1%
0.4%
0.7%
1.0%
1.3%
1.6%
2.0%
2.3%
2.6%
2.9%

5.5%
0.3%
0.6%
0.9%
1.2%
1.5%
1.8%
2.2%
2.5%
2.8%
3.1%

Revenue Synergy Percentage:

6.5%
7.5%
8.5%
0.4%
0.6%
0.8%
0.8%
1.0%
1.2%
1.1%
1.3%
1.5%
1.4%
1.6%
1.8%
1.7%
1.9%
2.1%
2.0%
2.2%
2.4%
2.4%
2.6%
2.8%
2.7%
2.9%
3.1%
3.0%
3.2%
3.4%
3.3%
3.5%
3.7%

9.5%
1.0%
1.4%
1.7%
2.0%
2.3%
2.6%
3.0%
3.3%
3.6%
3.9%

Sensitivity Analysis - GAAP / IFRS EPS Accretion/Dilution and Purchase Price vs. Cost Synergy Percentage:

Per Share Purchase

Price

1.9%
137.50
135.00
132.50
130.00
127.50
125.00
122.50
120.00
117.50
115.00

1.0%
(0.6%)
(0.3%)
0.0%
0.3%
0.6%
1.0%
1.3%
1.6%
1.9%
2.2%

1.5%
(0.5%)
(0.2%)
0.1%
0.4%
0.7%
1.1%
1.4%
1.7%
2.0%
2.3%

2.0%
(0.4%)
(0.1%)
0.2%
0.5%
0.8%
1.2%
1.5%
1.8%
2.1%
2.4%

Cost Synergy Percentage:

2.5%
3.0%
3.5%
(0.3%)
(0.2%)
(0.1%)
(0.0%)
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
0.8%
0.9%
1.0%
1.1%
1.3%
1.4%
1.5%
1.6%
1.7%
1.8%
1.9%
2.0%
2.1%
2.2%
2.3%
2.4%
2.5%
2.6%
2.7%

4.0%
(0.0%)
0.3%
0.6%
0.9%
1.2%
1.6%
1.9%
2.2%
2.5%
2.8%

Sensitivity Analysis - GAAP / IFRS EPS Accretion/Dilution and Purchase Price vs. Debt Interest Rate:

Per Share Purchase

Price

1.9%
137.50
135.00
132.50
130.00
127.50
125.00
122.50
120.00
117.50
115.00

1.0%
3.4%
3.7%
3.9%
4.2%
4.5%
4.8%
5.0%
5.3%
5.6%
5.9%

1.5%
2.7%
3.0%
3.3%
3.6%
3.8%
4.1%
4.4%
4.7%
5.0%
5.3%

2.0%
2.0%
2.3%
2.6%
2.9%
3.2%
3.5%
3.8%
4.1%
4.4%
4.7%

Debt Interest Rate:

2.5%
3.0%
3.5%
1.3%
0.6%
(0.0%)
1.6%
1.0%
0.3%
1.9%
1.3%
0.6%
2.3%
1.6%
0.9%
2.6%
1.9%
1.3%
2.9%
2.2%
1.6%
3.2%
2.6%
1.9%
3.5%
2.9%
2.3%
3.8%
3.2%
2.6%
4.1%
3.5%
2.9%

4.0%
(0.7%)
(0.4%)
(0.1%)
0.3%
0.6%
1.0%
1.3%
1.7%
2.0%
2.4%

$
$
$

47.4%
127.50
15,921
3,980
11,941
0.3%
8.9%
2.1%
5.6%

mortization / depreciation, transaction

NLY factors in the foregone interest
d interest on new debt.

the Equity Purchase Price of the seller,

hat's one of the many reasons this rule
aking it more accurate here.

10.0%
163
8
20

14,173
20.0%
2,835
5
567
$

921

Combined Years
Year 2
$
76,606
746
77,351
64,776
596
(251)
65,121
12,230
(741)
(358)
(567)
(20)
10,544
(3,216)
30.5%
7,328
896.0
52.6
948.6
$
$
$

7.73
7.49
0.23
3.1%

567
20
(400)
10,731
(3,273)
30.5%
7,458
$
$
$

7.86
7.49
0.37
4.9%

40.0%
(2.0%)
(1.7%)
(1.3%)
(1.0%)
(0.6%)
(0.2%)
0.1%
0.5%
0.8%
1.2%

45.0%
(2.9%)
(2.5%)
(2.1%)
(1.8%)
(1.4%)
(1.0%)
(0.7%)
(0.3%)
0.1%
0.4%

10.5%
1.2%
1.5%
1.9%
2.2%
2.5%
2.8%
3.1%
3.5%
3.8%
4.1%

11.5%
1.4%
1.7%
2.1%
2.4%
2.7%
3.0%
3.3%
3.7%
4.0%
4.3%

4.5%
0.1%
0.4%
0.7%
1.0%
1.3%
1.6%
2.0%
2.3%
2.6%
2.9%

5.0%
0.2%
0.5%
0.8%
1.1%
1.4%
1.7%
2.1%
2.4%
2.7%
3.0%

4.5%
(1.4%)
(1.1%)
(0.7%)
(0.4%)
(0.0%)
0.3%
0.7%
1.1%
1.4%
1.8%

5.0%
(2.1%)
(1.7%)
(1.4%)
(1.0%)
(0.6%)
(0.3%)
0.1%
0.5%
0.8%
1.2%

Err:502
($ in Millions Except Per Share Amounts)
Err:502

Err:502

Share Price:
Shares Outstanding (Millions):
Market Cap:
Buyer Average Tax Rate:

$
$

75.61
908.7
68,708
30.7%

Buyer - Income Statement

Revenue:

Share Price:
Shares Outstanding (Millions):
Market Cap:
Seller Average Tax Rate:
Seller - Income Statement

Current
Year
$
59,163

Costs and Expenses:

Projected Years
Year 1
Year 2
$
63,107 $
66,665

50,794

53,717

Revenue:

Historical
Year
$
8,154

56,413

Costs and Expenses:

6,884

Operating Income:
Interest Expense & Other:
Pre-Tax Income:

1,269
(153)
1,117

Operating Income:
Interest Expense & Other:
Pre-Tax Income:

8,369
(592)
7,777

9,390
(596)
8,794

10,252
(592)
9,660

Income Taxes:
Tax Rate:

(2,388)
30.7%

(2,726)
31.0%

(2,946)
30.5%

Income Taxes:
Tax Rate:

6,714

Net Income:

782

Earnings Per Share (EPS):

Average Shares Outstanding:

6.22
125.6

Net Income:

Earnings Per Share (EPS):

Average Shares Outstanding:

5,389

5.92 $
910.5

6,068

6.72 $
903.0

7.49
896.0

(335)
30.0%

Buyer - Balance Sheet:

Seller - Balance Sheet:

Historical
Year

Assets:
Current Assets:
Cash & Cash-Equivalents:
Other Current Assets:
Total Current Assets:

Long-Term Assets:
PP&E, Net:
Goodwill:
Other Long-Term Assets:
Total Long-Term Assets:
Total Assets:

2,707
22,647
25,354

Year 1

6,371
21,466
6,922
34,759
$

60,113

Projected
Year 2

6,304
24,049
30,353

6,511
21,151
6,922
34,584
$

64,937

10,358
25,313
35,671

6,654
20,836
6,922
34,412
$

70,083

Liabilities & Equity:

Current Liabilities:
Short-Term Debt:
Other Current Liabilities:
Total Current Liabilities:

18,662
18,662

19,906
19,906

21,029
21,029

Long-Term Liabilities:
Long-Term Debt:
Other Long-Term Liabilities:
Total Long-Term Liabilities:

10,010
8,879
18,889

10,010
8,893
18,903

10,010
8,906
18,916

Total Liabilities:

37,551

38,809

39,945

Equity:

22,562

26,128

30,138

Total Liabilities & Equity:

Balance Check:

60,113
OK!

64,937
OK!

70,083
OK!

Historical
Year
Assets:
Current Assets:
Cash & Cash-Equivalents:
Accounts Receivable, Net:
Inventories, Net:
Prepaid Expenses:
Income Taxes Receivable:
Total Current Assets:

Long-Term Assets:
PP&E, Net:
Goodwill:
Other Intangible Assets, Net:
Deferred Income Tax Asset:
Other Assets:
Total Long-Term Assets:
Total Assets:
Liabilities & Equity:
Current Liabilities:
Short-Term Debt:
Accounts Payable:
Accrued Expenses:
Income Taxes Payable:
Total Current Liabilities:

987
1,343
2,877
60
5,267

1,633
1,991
917
234
671
5,447
$

10,714

27
769
1,211
46
2,052

Long-Term Liabilities:
Long-Term Debt & Capital Leases:
Pension Obligations:
Other Postretirement Benefits:
Long-Term Income Taxes Payable:
Other Long-Term Liabilities:
Deferred Income Tax Liability:
Total Long-Term Liabilities:

2,374
904
286
174
600
584
4,923

Total Liabilities:

6,975

Equity:

3,739

Total Liabilities & Equity:

Balance Check:

10,714
OK!

$
$

86.48
124.9
10,799
30.0%

Projected Years
Year 1
Year 2
$
9,134 $
9,941

$
$

7,721

8,363

1,413
(145)
1,268

1,578
(149)
1,430

(380)
30.0%

(429)
30.0%

888

7.09 $
125.2

1,001
8.03
124.6

Year 1

Projected
Year 2

829
1,472
3,156
78
5,535

1,936
1,991
917
278
815
5,937

1,077
1,602
3,418
85
6,183

2,107
1,991
917
314
887
6,215

11,472

12,398

27
754
1,366
19
2,166

27
817
1,479
22
2,344

2,374
904
286
237
678
614
5,094

2,374
904
286
267
738
692
5,262

7,260

7,607

4,213

4,791

11,472
OK!

12,398
OK!