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EFTA00605877.pdf

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Recognition of Tufts Gain in Exchanges ► Provided that the $1B of debt remains outstanding as structured currently (i.e., no personal guarantees by individuals, no guarantee by AGM, etc.), the $800M of gain deferred from the 2007 distribution will be recognized over time as founders exchange APP interests. As that gain is recognized, additional basis step-up will be delivered to APO Corp., resulting in additional future TRA benefits payable to founders. ► The following examples were prepared using certain assumptions, including: ► No changes in current law corporate or individual tax rates ► Blended tax rate for individuals of 35% (portion ordinary, portion subject to 3.8% NIl tax, etc.) ► Combined federal and state corporate tax rate of 40% ► Discount rate of 7.5% ► Net sales price per unit of $22 on all sales (and excludes future dividends) ► Assumes APO Corp. has income to currently utilize deductions attributes on a current basis El ERNST & YOUNG Qualify In Uverylhing We Do Page 1 EFTA00605877 Recognition of Tufts Gain in Exchanges Sale of 7.5% of Interests and Recognition of 7.5% of Tufts Gain LB (Amounts in Millions) MR JH Total Equity Cash Proceeds ($22/unit) $152.0 $96.7 $96.7 $345.4 Cash Taxes on Equity Proceeds (35% effective rate) 53.2 33.9 33.9 120.9 Gain Recognized - Tufts Gain 26.4 16.8 16.8 60.0 Cash Taxes on Tufts Gain (35% effective rate) 9.2 5.9 5.9 21.0 Total Cash Taxes 62.4 39.7 39.7 141.9 Net After-Tax Equity Cash Proceeds $89.5 $57.0 $57.0 $203.5 Effective Tax Rate (Equity + Tufts Gain) 41.1% 41.1% 41.1% 41.1% NPV of After-Tax TRA Payments (i 7.5% Discount Rate) NPV of After-Tax TRA Payments - Cash Equity Sales $18.3 $11.7 $11.7 $41.7 NPV of After-Tax TRA Payments - Tufts Gain $4.9 $3.1 $3.1 $11.1 NPV Total After-Tax TRA Payments $23.2 $14.8 $14.8 $52.8 NPV Value (After-Tax Proceeds + TRA Value) $112.8 $71.8 $71.8 $256.3 (1) Excludes future dividends; assumes $22 per share net price only. El ERNST & YOUNG Quality In Everything We Do Page 2 EFTA00605878 Recognition of Tufts Gain in Exchanges Sale of 7.5% of Interests Annually From 2013 Through 2016 and Sale of Remaining 70% in 2017 With Tufts Gain Recognized Ratably LB (Amounts in Millions) MR JH Total Total Equity Cash Proceeds ($22/unit) (1) $2,026.4 $1,289.5 $1,289.5 $4,605.5 Total Cash Taxes on Equity (35% effective rate) 709.2 451.3 451.3 1,611.9 Total Gain Recognized - Tufts Gain 352.0 224.0 224.0 800.0 Total Cash Taxes on Tufts Gain (35% effective rate) 123.2 78.4 78.4 280.0 Total Cash Taxes 832.4 529.7 529.7 1,891.9 Net After-Tax Equity Cash Proceeds $1,194.0 $759.8 $759.8 $2,713.5 Effective Tax Rate (Equity + Tufts Gain) 41.1% 41.1% 41.1% 41.1% NPV Summary @ 7.5% Discount Rate Total Equity Cash Proceeds (@ 7.5% Disc.) (1) $1,609.1 $1,024.0 $1,024.0 $3,657.1 Total Cash Taxes on Equity Proceeds 563.2 358.4 358.4 1,280.0 Total Gain Recognized - Tufts Gain 279.5 177.9 177.9 635.3 Total Cash Taxes on Tufts Gain (35% effective rate) 97.8 62.3 62.3 222.3 Total Cash Taxes 661.0 420.7 420.7 1,502.3 NPV of Net After-Tax Equity Cash Proceeds $948.1 $603.3 $603.3 $2,154.8 NPV of After-Tax TRA Payments (@ 7.5% Discount Rate) NPV of After-Tax TRA Payments - Cash Equity Sales $194.1 $123.5 $123.5 $441.1 NPV of After-Tax TRA Payments - Tufts Gain 51.8 33.0 33.0 117.8 NPV Total After-Tax TRA Payments $245.9 $156.5 $156.5 $558.9 Total NPV Value (After-Tax Proceeds + TRA Value) 1.194.0 759.8 759.8 2.713.7 (1) Excludes future dividends; assumes $22 per share net price only. El ERNST & YOUNG Quality hi Everything We Do Page 3 EFTA00605879 Deferral of Tufts Gain Through Guarantees ► A personal guarantee of the debt by the founders will avoid recognition of any Tufts gain on annual exchanges and defer such gain until the guarantee is eliminated. This deferral of gain will also defer any TRA benefits associated with the Tufts gain, and may result in an elimination of those TRA benefits altogether based on the current TRA agreement (although consideration should be given to amending the TRA agreement to avoid this result). ► Even in the worst case scenario, where all TRA benefits related to the Tufts gain are lost, the NPV of the deferral of taxes on the Tufts gain may exceed the NPV of the lost TRA benefits, depending on the period over which the Tufts gain is deferred and the discount rate used. ► The following examples were computed using assumptions consistent with previous examples, modified by the following: ► Assumes personal guarantee of debt (and, therefore, no recognition of Tufts gain) until sale of final interest in APP. ► Assumes worst case scenario — that TRA agreement is not amended and that no TRA benefits are paid to the founders for basis step-up to APO Corp. related to the Tufts gain U ERNST & YOUNG Quality In Everything We Do Page 4 EFTA00605880 Deferral of Tufts Gain Through Guarantees Sale of 7.5% of Interests and Deferral of 7.5% of Tufts Gain for 20 Years LB (Amounts in Millions) MR JH Total Total Equity Cash Proceeds ($22/unit) (1) $152.0 $96.7 $96.7 $345.4 Total Cash Taxes on Equity (35% effective rate) 53.2 33.9 33.9 120.9 Total Gain Recognized - Tufts Gain (In 2032) 26.4 16.8 16.8 60.0 Total Cash Taxes on Tufts Gain (35% effective rate) 9.2 5.9 5.9 21.0 Total Cash Taxes 62.4 39.7 39.7 141.9 Net After-Tax Equity Cash Proceeds $89.5 $57.0 $57.0 $203.5 Effective Tax Rate (Equity + Tufts Gain) 41.1% 41.1% 41.1% 41.1% NPV Summary @ 7.5% Discount Rate Total Equity Cash Proceeds (@ 7.5% Disc.) (1) $152.0 $96.7 $96.7 $345.4 Total Cash Taxes on Equity Proceeds 53.2 33.9 33.9 120.9 Total Gain Recognized - Tufts Gain 6.7 4.2 4.2 15.2 Total Cash Taxes on Tufts Gain (35% effective rate) 2.3 1.5 1.5 5.3 Total Cash Taxes 55.5 35.3 35.3 126.2 NPV of Net After-Tax Equity Cash Proceeds $96.5 $61.4 $61.4 $219.2 NPV of After-Tax TRA Payments (@ 7.5% Discount Rate) NPV of After-Tax TRA Payments - Cash Equity Sales $18.3 $11.7 $11.7 $41.7 NPV of After-Tax TRA Payments - Tufts Gain 0.0 0.0 0.0 0.0 NPV Total After-Tax TRA Payments $18.3 $11.7 $11.7 $41.7 Total NPV Value (After-Tax Proceeds + TRA Value) w/Guarantee 114.8 73.1 73.1 260.9 Total NPV Value (After-Tax Proceeds + TRA Value) No Guarantee 112.8 71.8 71.8 256.3 Benefit/Detriment of Guarantee 2.0 1.3 1.3 4.6 El ERNST & YOUNG Quality In Everything We Do Page 5 EFTA00605881 Deferral of Tufts Gain Through Guarantees Sale of 7.5% of Interests and Deferral of 7.5% of Tufts Gain for 5 Years LB (Amounts in Millions) MR JH Total Total Equity Cash Proceeds ($22/unit) (1) $152.0 $96.7 $96.7 $345.4 Total Cash Taxes on Equity (35% effective rate) 53.2 33.9 33.9 120.9 Total Gain Recognized - Tufts Gain (In 2017) 26.4 16.8 16.8 60.0 Total Cash Taxes on Tufts Gain (35% effective rate) 9.2 5.9 5.9 21.0 Total Cash Taxes 62.4 39.7 39.7 141.9 Net After-Tax Equity Cash Proceeds $89.5 $57.0 $57.0 $203.5 Effective Tax Rate (Equity + Tufts Gain) 41.1% 41.1% 41.1% 41.1% NPV Summary @ 7.5% Discount Rate Total Equity Cash Proceeds (@ 7.5% Disc.) (1) $152.0 $96.7 $96.7 $345.4 Total Cash Taxes on Equity Proceeds 53.2 33.9 33.9 120.9 Total Gain Recognized - Tufts Gain 19.8 12.6 12.6 44.9 Total Cash Taxes on Tufts Gain (35% effective rate) 6.9 4.4 4.4 15.7 Total Cash Taxes 60.1 38.3 38.3 136.6 NPV of Net After-Tax Equity Cash Proceeds $91.9 $58.5 $58.5 $208.8 NPV of After-Tax TRA Payments (@ 7.5% Discount Rate) NPV of After-Tax TRA Payments - Cash Equity Sales $18.3 $11.7 $11.7 $41.7 NPV of After-Tax TRA Payments - Tufts Gain 0.0 0.0 0.0 0.0 NPV Total After-Tax TRA Payments $18.3 $11.7 $11.7 $41.7 Total NPV Value (After-Tax Proceeds + TRA Value) w/Guarantee 110.2 70.1 70.1 250.5 Total NPV Value (After-Tax Proceeds + TRA Value) No Guarantee 112.8 71.8 71.8 256.3 Benefit/Detriment of Guarantee (2.6) (1.6) (1.6) (5.8) El ERNST & YOUNG Qualify in Everything We 1)o Page 6 EFTA00605882 Deferral of Tufts Gain Through Guarantees Sale of 7.5% of Interests Annually From 2013 Through 2016 and Sale of Remaining 70% in 2017 With Tufts Gain Recognized Entirely in 2017 (5 Year Deferral) LB (Amounts in Millions) MR JH Total Total Equity Cash Proceeds ($22/unit) (1) $2,026.4 $1,289.5 $1,289.5 $4,605.5 Total Cash Taxes on Equity (35% effective rate) 709.2 451.3 451.3 1,611.9 Total Gain Recognized - Tufts Gain (In 2017) 352.0 224.0 224.0 800.0 Total Cash Taxes on Tufts Gain (35% effective rate) 123.2 78.4 78.4 280.0 Total Cash Taxes 832.4 529.7 529.7 1.891.9 Net After-Tax Equity Cash Proceeds $1,194.0 $759.8 $759.8 $2,713.5 Effective Tax Rate (Equity + Tufts Gain) 41.1% 41.1% 41.1% 41.1% NPV Summary @ 7.5% Discount Rate Total Equity Cash Proceeds (@ 7.5% Disc.) (1) $1,609.1 $1,024.0 $1,024.0 $3,657.1 Total Cash Taxes on Equity Proceeds 563.2 358.4 358.4 1,280.0 Total Gain Recognized - Tufts Gain 264.4 168.3 168.3 600.9 Total Cash Taxes on Tufts Gain (35% effective rate) 92.5 58.9 58.9 210.3 Total Cash Taxes 655.7 417.3 417.3 1,490.3 NPV of Net After-Tax Equity Cash Proceeds $953.4 $606.7 $606.7 $2,166.8 NPV of After-Tax TRA Payments (@ 7.5% Discount Rate) NPV of After-Tax TRA Payments - Cash Equity Sales $194.1 $123.5 $123.5 $441.1 NPV of After-Tax TRA Payments - Tufts Gain 0.0 0.0 0.0 0.0 NPV Total After-Tax TRA Payments $194.1 $123.5 $123.5 $441.1 Total NPV Value (After-Tax Proceeds + TRA Value) w/Guarantee 1,147.5 730.2 730.2 2,607.9 Total NPV Value (After-Tax Proceeds + TRA Value) No Guarantee 1,194.0 759.8 759.8 2,713.7 Benefit/Detriment of Guarantee (46.6) (29.6) (29.6) (105.8) El ERNST &YOUNG Quality In Everything We Do Page 7 EFTA00605883 Deferral of Tufts Gain Through Guarantees Sale of 7.5% of Interests Annually From 2013 Through 2016, Sale of 69% in 2017 and Sale of Remaining 1% in 2032 With Tufts Gain Recognized Entirely in 2032 (20 Year Deferral) LB (Amounts in Millions) MR JH Total Total Equity Cash Proceeds ($22/unit) (1) $2,026.4 $1,289.5 $1,289.5 $4,605.5 Total Cash Taxes on Equity (35% effective rate) 709.2 451.3 451.3 1,611.9 Total Gain Recognized - Tufts Gain (In 2032) 352.0 224.0 224.0 800.0 Total Cash Taxes on Tufts Gain (35% effective rate) 123.2 78.4 78.4 280.0 Total Cash Taxes 832.4 529.7 529.7 1.891.9 Net After-Tax Equity Cash Proceeds $1,194.0 $759.8 $759.8 $2,713.5 Effective Tax Rate (Equity + Tufts Gain) 41.1% 41.1% 41.1% 41.1% NPV Summary @ 7.5% Discount Rate Total Equity Cash Proceeds (@ 7.5% Disc.) (1) $1,599.1 $1,017.6 $1,017.6 $3,634.3 Total Cash Taxes on Equity Proceeds 559.7 356.2 356.2 1,272.0 Total Gain Recognized - Tufts Gain 89.0 56.6 56.6 202.3 Total Cash Taxes on Tufts Gain (35% effective rate) 31.1 19.8 19.8 70.8 Total Cash Taxes 590.8 376.0 376.0 1,342.8 NPV of Net After-Tax Equity Cash Proceeds $1,008.3 $641.6 $641.6 $2,291.5 NPV of After-Tax TRA Payments (@ 7.5% Discount Rate) NPV of After-Tax TRA Payments - Cash Equity Sales $192.9 $122.7 $122.7 $438.3 NPV of After-Tax TRA Payments - Tufts Gain 0.0 0.0 0.0 0.0 NPV Total After-Tax TRA Payments $192.9 $122.7 $122.7 $438.3 Total NPV Value (After-Tax Proceeds + TRA Value) w/Guarantee 1,201.1 764.3 764.3 2,729.8 Total NPV Value (After-Tax Proceeds + TRA Value) No Guarantee 1,194.0 759.8 759.8 2.713.7 Benefit/Detriment of Guarantee 7.1 4.5 4.5 16.1 El ERNST &YOUNG Quality In Everything We Do Page 8 EFTA00605884 Deferral of Tufts Gain Through Guarantees Summary of Scenarios 7.5% Discount Rate Net After-Tax Equity Cash Proceeds Plus: NPV of After-Tax TRA - Cash Equity Sales Plus: NPV of After-Tax TRA - Tufts Gain Less: NPV of Future Tax - Tufts Gain NPV Value (After-Tax Proceeds + TRA Value) Difference versus No Deferral Net After-Tax Equity Cash Proceeds Plus: NPV of After-Tax TRA - Cash Equity Sales Plus: NPV of After-Tax TRA - Tufts Gain Less: NPV of Future Tax - Tufts Gain NPV Value (After-Tax Proceeds + TRA Value) Difference versus No Deferral Net After-Tax Equity Cash Proceeds Plus: NPV of After-Tax TRA - Cash Equity Sales Plus: NPV of After-Tax TRA - Tufts Gain Less: NPV of Future Tax - Tufts Gain NPV Value (After-Tax Proceeds + TRA Value) Difference versus No Deferral Leon Black 7.5% Sale NPV of Total Sale No Deferral 5 yr Def. 20 yr Def. No Deferral 5 yr Def. 20 yr Def. $89.5 $98.8 $98.8 $948.1 $1,045.9 $1,039.4 18.3 18.3 18.3 194.1 194.1 192.9 4.9 - - 51.8 - - - (6.9) (2.3) - (92.5) (31.1) $112.8 $110.2 $114.8 $1,194.0 $1,147.5 $1,201.1 ($2.6) $2.0 ($46.6) $7.1 Marc Rowan 7.5% Sale NPV of Total Sale No Deferral 5 yr Def. 20 yr Def. No Deferral 5 yr Def. 20 yr Def. $57.0 $62.9 $62.9 $603.3 $665.6 $661.4 11.7 11.7 11.7 123.5 123.5 122.7 3.1 - - 33.0 - - - (4.4) (1.5) - (58.9) (19.8) $71.8 $70.1 $73.1 $759.8 $730.2 $764.3 ($1.6) $1.3 ($29.6) $4.5 Josh Harris 7.5% Sale NPV of Total Sale No Deferral 5 yr Def. 20 yr Def. No Deferral 5 yr Def. 20 yr Def. $57.0 $62.9 $62.9 $603.3 $665.6 $661.4 11.7 11.7 11.7 123.5 123.5 122.7 3.1 - - 33.0 - - - (4.4) (1.5) - (58.9) (19.8) $71.8 $70.1 $73.1 $759.8 $730.2 $764.3 ($1.6) $1.3 ($29.6) $4.5 El ERNST & YOUNG Qualify In Everything Wr Do Page 9 EFTA00605885 Blocker Tax Rate 40.0% Individual Tax Rate 35.0% Discount Rate 7.5% JOAN Share of Value 65.0% Gross Tax Liability for Cash Received 4,605 Tax Liability Per Annum Run-Off 73% Gross Asset 1,018 Asset Per Annum Run-Off 7.5% Run-Off Period 15 Yrs % of 'IRA Benefits Following Amendment 0.0% EFTA00605886 Tax Deferral Analysis m mmx,m. unless <Attune noted) clatarceden Vtruita • IlautneeelA,frili iNsiodo = Alrosilin aI Mont) !Wake Tax Rate 40% I raleadual T2,. Rale 39% redivide's' Manta Rate Dtweam Raw R% Tax Raft 5.0% 73% 100% 119% ISA% 17.5% 201% Tax Ran ANIII Shut at Vain 650% 250% (5110) ($59) (523) 171 512 522 $211 2.9.0% Gaon Tn. Landow itt Cash ReCt1“11 4005 273% (101) (0 0 (16) S 20 29 36 27.5% Tax I 'able* per Annum Run01 7.9% MO% (91) (0 0 (8) 14 28 37 43 30.0% 323% 0511 (11) 1 11 16 45 SI 32.5% Gloss Awl 1118 330% (LIZ (781) (526) 31 45 53 511 33.0% Ann pet Annum Runt Iff 7.9/* 373% 001 ( 13) 19 40 53 61 66 37.5% Run{ HT Penal 15 Yes 4120% (52) (31 26 48 61 69 73 40.0% 2 3 4 3 6 7 0 9 10 11 12 12/111 12/11/14E 12/11/ISE 121)1116E 12/1 1/170 12/1111161 12/11/M1 12/11/201i 12/11/211* 12/1 1/211* 12/111211: 12/11/241. Tax Labia y Run.O17 duo 130, 05 Luau (5120119) 1.930 ($13029) 'tr.. ($120.100 3.495 ($12010) ($1.112223 3.611 3.739 $000 3.079 SOSO 4106 SCA 4214 $0.0) 4.419 MOO 4.662 $0.00 4.959 SOW 5.139 I 12/31/13 %Inane 1 12/31/14 Valero 0.000 I wee 3374 3.495 1611 3.739 3.879 4.036 4.214 4.419 4.662 4.959 3 11/31/15 Vniage 0.000 1.930 3.374 1495 3011 3.739 1579 4036 4214 4.419 4.612 4 11/31/16 Vniage 0.00 0000 1.930 3374 3.495 1611 3.739 3179 4.036 4.214 4419 S 11/31/ Ii Vniage 0.00 .000 0.000 17732 31.038 31152 31224 34.195 35.687 37.130 38765 6 11/31/18 Vniage 0.00 eset0 0.000 0.0)0 0100 0100 QOM 0010 0.000 0.000 MO 7 11/31/19 Vniage 0.000 014)0 0.000 (U.00 0000 0030 QM 0010 0000 0.000 MO 5 11/31/20 Vniage 0.00 eno0 0100 (U00 0.000 00'' WOO 0.0(0 0.(00 0000 0103 9 11/31/21 Vniage 0.00 eno0 0100 (00 0.00 WO, 0.000 0.0(0 0.(00 0.900 MO It/ 11/31/22 Vniagc 0.00 alai 0.00 (00 0000 (Ii 0401 0.0(0 0.(00 0.900 MO II 11/31/23 Verann 0.00 alai 0010 (00 0000 Win WOO 0.0(0 0.(00 0.900 MO 12 11/31/24 Vntagc 0.00 alai 0010 0000 OA KO Win WOO 0.0(0 OX00 0.900 MO 13 11/31/23 Vntagc 0.00 alai 0010 0000 0000 Win WOO 0.0(0 0.(00 0.900 0100 14 11/31/26 Venugc 0.00 alai 0010 0000 OA KO u. 0100 0010 0.0/0 0.900 0100 IS 11/31/27 Veteran 0.00 alai 0010 0000 0000 00 . r 0.000 0.0(0 OX00 0.900 0100 16 11/31/28 Vniagc 0.00 alai 0100 0000 0000 Win 0.000 0.0(0 OX00 0.900 0100 17 11/31/29 Verann 0.00 alai 0100 0000 0000 Win WOO 0.0(0 OX00 0.900 0100 IS 11/31/30 Vniagc image alai 0100 0000 0000 Win WOO 0.0(0 OX00 0.900 01300 19 12/31/31 V emagc 0.00 eel*Si 0.1100 0.000 0.00 Win WOO 0.00) 0(00 0.900 0100 20 12,131/32 Vnexec 0.90 IP •• 9 0900 0.000 0180 0.110 00o 0000 MO (IWO 0.00 now Total Asset Run-Off 1030 5-303 8.798 12.019 31.971 45.762 47417 .0.091 50142 53.017 55092 58.144 Nei Cash Flows (110.964) (113.390) (112.093) (103.431) (1.030.241) 43.762 47.417 50.942 53.017 55332 50.144 09.091 NPV or Cash Taxes 04274 NPV o(TRA Bend*. 5419 NPV or Nei Cash Flows (9990 Model • Cash (20 Year Et° Castanet Rae 3.0% (167) O9) <51) (42) (34) (26) MO Ii 12/11/IM 50.00 ~I~~~~~~~~~~~~~~~~~~~E 61270 7.5% 10.0% (531) ($7) (21) 1 (14) 26 (6) IS 3 27 11 35 19 43 14 IS 12111/26Ii 12/1 1/270 MO) WOO 6.695 1498 5165 6695 5339 5.865 4.959 5.119 42-886 45.619 0010 0.000 0010 0.000 0.000 0000 0.000 0.00 0.000 CWOO 0.000 CWOO 0.000 0.000 0.000 0880 0.000 0880 0.000 0.00 0.000 00:00 0.000 0.(00 0.000 WOO 1000 01.00 1180 0090 65.746 72.016 65.746 72.016 EFTA00605887 Tax Deferral Analysis ."3 Jai». 115x1e. 11.,4 or .120. 111.1 - 14.16-41•2 Rae lasmina 311•cmum Ras 414banum Rr Dawn Ratt T/a 51% 73% MAS 423% ISMS 173% »I% Tails 5.9% 73% 164% AMU Siint orion 159% 01101 0591 (t5) 11/1 111 123 SU aW 14.1 (1511 In G0.4 tit 144144v Aa ). 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