Bank of America Investment Banking Pitch Book
(4)
Appendix
Illustrative Present Value of KCP Potential Tax Benefits
Section 382 Limitation (
Implied Equity Value
Long-Term Tax-Exempt Rate
382 Base Limitation (Annual Limitation)
Projected Tax Benefits
KCP Pre-Tax Earnings
Permanent Items
Profit Before Tax
Deferred Tax Asset Benefit
NOL Utilized™
Total Tax Benefit
After-Tax Cash Flow Impact (
Beginning NOL Balance
Less: NOL Utilized
Ending NOL Balance
8.0%
10.0%
12.0%
$294
3.26%
$10
2H 2012E
Net Present Value of Potential Tax Benefits
Discount
Rate
$13.6
0.1
$13.7
$4.5
9.3
$13.7
$5.4
$53.3
(9.3)
$44.0
13
Built-in-Gain
15-Year Limitation
Annual Limitation (First 5 Years)
2013E
$18.8
0.3
$19.1
$1.0
17.3
$18.2
$7.1
Net Built-in-Gain Limitation
$44.0
(17.3)
$26.7
2014E
$30.5
0.3
$30.8
$2.5
17.3
$19.8
$7.7
$26.7
(17.3)
$9.5
Implied
Value
$29.5
28.0
26.7
2015E
$37.0
0.3
$37.3
$6.4
9.5
$15.8
$6.2
$9.5
(9.5)
$0.0
Implied Value
Per Share
$1.55
1.45
1.40
2016E and
Thereafter
$115
15
$8
$39.4
Source: Kenneth Cole Productions management projections
Note: Subject to change. Based on ter date as provided by Kenneth Cole Productions as of May 21. 2012 BefA Merrill Lynch does not pude tax advice, and nothing herein shall constitute or be construed as tax ador
Dollars is millions, except per share values.
(1) Section 382 limitation based on data provided by Kenneth Cole Productions management,
(2)
Besed on a 515.25 per share price, assuming 10.3 million class A shares and 89 milion class shares outstanding
2.5 million options outstanding with a ghted average exercise price of $16.24 per sher (strike prices ranging from
55.36-534.27 per share) and 0.5 milion RSL C Calculated pursuant to the treasury stock method. Acumes all
options and stock and outstanding ned apen change of contr
Long-term exempt AFR as of May 2012, as provided by Kenneth Cole Productions management.
Net built-in-gain mitation as per Kenneth Cole Productions management.
Mustrative 2015E pretex comings as provided by Kenneth Cole Productions management
Reflects deferred tax avset benefits of $21 million realized from 2016E througe 2022E and $18 million ind
thereafter with an average sitzation perial of 25 years per Kenneth Cole Productions management.
$39.4
$15.4
(7) As provided by Kenneth Cole Productions management.
(8)
Includes deferned MAX asset benefits, including items such as deferred compensation, depreciation and
amortization, as per Kenneth Cole Production management,
(9)
Reflects misure of i) profit before tax less deferred tex asset hengit() sum of annual
Nimitations (517 million, including 59 millim of wction 382 limitation and 58 million of net build-in-gaie
Nitation) and (ii) beginning NOL Palence of the respective war.
(20) 2H 2012 begining balance of 555 million per Kenneth Cole Practions management Assames39% tax rate
(11) Present ofurs discounted to June 30, 2012 ing mid-year convention Assames 19 milion
dilated shares per Kenneth Cole Productions management. Per share calves rounded te nearest $0.05.
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