Re:
Two reasons: 1) the double digit growth was primarily due to acquisitions and not organic growth (covered in the How to Analyze a 10K course) 2) the relationship between CapEx and depreciation is fairly close (however do note that HRH is a services-based company so while CapEx and depreciation may... Two reasons:
1) the double digit growth was primarily due to acquisitions and not organic growth (covered in the How to Analyze a 10K course)
2) the relationship between CapEx and depreciation is fairly close (however do note that HRH is a services-based company so while CapEx and depreciation may not be as relevant as for a capital-intensive business, but the relative relationship between CapEx and depreciation is still a valid comparison) Read More

Re: Diluted earnings per share
Ultimately, we are trying to calculate Diluted EPS in the most conservative form possible, which in this case means treating the convertible debt as if they were converted to common equity. In 2002 and 2001, the convertible debt was NOT converted and therefore, interest payments were physically paid... Ultimately, we are trying to calculate Diluted EPS in the most conservative form possible, which in this case means treating the convertible debt as if they were converted to common equity. In 2002 and 2001, the convertible debt was NOT converted and therefore, interest payments were physically paid. If the convertible debt was converted, then the interest would not have been paid. That is the reason why in 2002 and 2001, we added back interest to NI, and then increased the denominator, number of shares outstanding, to calculate Diluted EPS. However, in 2003 (late 2002 actually), the convertible debt was indeed converted and as such, no interest was paid in 2003 due to the converts; hence we did not make the same adjustment in 2003. You can verify this on page 37-38, Note I - Net Income Per Share: specifically, look at the 2nd line of the table. All we are doing historically is trying to match reported figures. In addition, the footnote states that the converts were converted November 2002, which is why the interest amount and number shares amount in 2002 vs. 2001 is also different, since it's being prorated. Read More

Re: Total Debt
To be most conservative, for the purpose of credit ratios, preferred would have some portion of it counted as debt. This is covered in more detail in our credit modeling courses, but usually straight preferred would count 80% as debt and 20% as equity.

Re: What is Happening to
Essentially, because the mandatory debt repayment is hard coded, when you flick the refi switch to be ON, the beginning balance goes to zero, but the hard coded repayments make the balance go negative, which is a big no-no (recall revolver formula that says no negative balances allowed in debt other... Essentially, because the mandatory debt repayment is hard coded, when you flick the refi switch to be ON, the beginning balance goes to zero, but the hard coded repayments make the balance go negative, which is a big no-no (recall revolver formula that says no negative balances allowed in debt otherwise the model self implodes).

What needs to be done in this case is to make the mandatory repayment figures more dynamic to account for the refi all switch:
1) Take the mandatory repayments figures for Tranche 1 (should be I31:M31) and copy/paste as values to I29:M29
2) Format the values in I29:M29 as white font (ctrl+shift+w with the WST macros installed)
3) Then go to I31 and update with this formula: -MIN(I30,-I29)
4) Highlight I31:M31 and ctrl+R to fill in all five years
5) Don't miss the negative sign in front of the MIN and the negative sign in front of I29

The logic is that you are comparing the beginning balance vs. the original mandatory repayments. Thus, on Refi All scenario, this will wipe out the mandatory repayments and loo like Tranche 2 - all zeroes. On Refi None scenario, the original numbers pre-LBO will remain.

In the real world, sometimes we'll decide to selectively refi certain tranches of debt and then you'll need the mandatory repayments for each tranche individually and you can apply the same logic for all. Read More

Re: Super-Advanced Merger Modeling - IS
Thank you for your queries and the attention to detail: (1) The FINAL and correct answer is that EBITDA does NOT include Transaction Debt Financing Fees because it would normally be considered Interest Expense in US GAAP. Therefore, the video is wrong and this is considered an ERRATA NOTICE: row ... Thank you for your queries and the attention to detail:

(1) The FINAL and correct answer is that EBITDA does NOT include Transaction Debt Financing Fees because it would normally be considered Interest Expense in US GAAP. Therefore, the video is wrong and this is considered an ERRATA NOTICE: row 28 in Merger IS should be excluded from the EBITDA calculation.

(2) That is correct, both of those shall be fully anchored OR if not anchored, then in years two to four, would be an equal left. This mistake was actually corrected in later on in the video course.

Thank you and keep up the great work! Read More