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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-3
Amendment No. 2
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the
Securities Exchange Act of 1934)
WILMAR INDUSTRIES, INC.
-----------------------
(Name of the Issuer)
Wilmar Industries, Inc.
WM Acquisition, Inc.
Parthenon Investors, L.P.
Parthenon Investment Advisors, L.L.C.
Parthenon Investment Partners, L.L.C.
John C. Rutherford
Ernest K. Jacquet
William Green
Michael J. Grebe
---------------------------------------------
(Name of Persons Filing Statement)
Common Stock, no par value
--------------------------
(Title of Class of Securities)
971426101
---------
(CUSIP Number of Class of Securities)
James M. Dubin, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
(212) 373-3000
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications
on Behalf of Persons Filing Statement)
This statement is filed in connection with (check the appropriate box):
a. [x] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act of
1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: [x]
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Calculation of filing fee:
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Transaction Valuation* Amount of Filing Fee
- --------------------------------------------------------------------------------
$230,041,702 $46,008
================================================================================
* For purposes of calculating the filing fee only. This amount assumes the
purchase of 12,407,826 outstanding shares of Common Stock, no par value, of
Wilmar Industries, Inc. ("Common Stock"), less 164,384 shares held by a
member of Wilmar Industries, Inc.'s management, at $18.25 cash per share
and the product of 1,107,538 shares subject to options, 921,632 of which
are being cashed out, at $18.25 per share less the $11.09 per share
weighted average exercise price of the option shares being cashed out. The
amount of the filing fee, calculated in accordance with Regulation 240.0-11
under the Securities Exchange Act of 1934, equals 1/50 of one percentum of
the value of the securities to be purchased.
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: $46,008
Form or Registration No.: Schedule 14A
Filing Party: Wilmar Industries, Inc.
Date Filed: February 4, 2000
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF THIS
TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN
THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL AND A CRIMINAL
OFFENSE.
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Introduction
------------
This Rule 13e-3 Transaction Statement (the "STATEMENT") relates to the
Agreement and Plan of Merger and Recapitalization dated as of December 22, 1999
(as amended, the "MERGER AGREEMENT") between Wilmar Industries, Inc., a New
Jersey corporation ("WILMAR," the "ISSUER" or the "COMPANY") and WM Acquisition,
Inc., a New Jersey corporation ("MERGERCO"). A copy of the Merger Agreement is
attached as Appendix A to the Proxy Statement filed by the Company (the "PROXY
STATEMENT").
The Merger Agreement provides, among other things, for the merger of
MergerCo into the Company (the "MERGER") with the Company continuing as the
surviving corporation (the "SURVIVING CORPORATION"). In the Merger, (a) each
outstanding share of common stock, no par value (the "COMMON STOCK"), of the
Company will be converted into the right to receive $18.25 in cash (except that
any shares held by MergerCo or held in the Company's treasury will be canceled);
(b) each outstanding share of Class C Preferred Stock, par value $.10 per share
(the "CLASS C PREFERRED STOCK"), of the Company will be converted into (i)
.5486558 shares of Common Stock and (ii) 1.7701344 shares of Cumulative Senior
Preferred Stock, par value $.01 per share (the "SENIOR PREFERRED STOCK"), of the
Company; (c) each outstanding share of common stock, no par value, of MergerCo
("MERGERCO COMMON STOCK") will be converted into one share of Common Stock; and
(d) each outstanding share of preferred stock, par value $0.01 per share (the
"MERGERCO PREFERRED STOCK"), of MergerCo will be converted into one share of
Senior Preferred Stock.
Prior to the Merger, William Green, Chairman and Chief Executive
Officer of the Company, will exchange 164,384 shares of Common Stock
(representing approximately 8% of the shares of Common Stock owned by him and
less than 1% of the outstanding Common Stock) for 164,384 shares of Class C
Preferred Stock pursuant to a Voting and Exchange Agreement, dated as of
December 22, 1999, between the Company and Mr. Green (the "EXCHANGE AGREEMENT").
In the Merger, all such shares of Class C Preferred Stock will be converted into
shares of Common Stock and Senior Preferred Stock as described above. In
addition, immediately after the Merger, Michael Grebe, William Sanford and
Michael Toomey, members of Wilmar's management prior to the Merger, will
purchase in the aggregate 65,341 shares of Common Stock and in the aggregate
83,466 shares of Senior Preferred Stock, and may elect, prior to the closing of
the Merger, to purchase an additional 116,533 shares of Senior Preferred Stock.
As a result of the Merger and these related transactions, following the Merger,
(x) Parthenon Investors, L.P., a Delaware limited partnership ("PARTHENON"), CB
Capital Investors, LLC, a Delaware limited liability company, and/or one or more
of its affiliates (collectively, "CHASE"), and The Chase Manhattan Bank, as
Trustee for First Plaza Group Trust, a pension trust managed by General Motors
Investment Management Corporation (the "FIRST PLAZA TRUST," and, together with
Parthenon, Chase and certain other institutional investors, the
3
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"INVESTORS "), will collectively own approximately 86.1% of the outstanding
Common Stock and approximately 97.2% of the Senior Preferred Stock, and (y)
Messrs. Green, Grebe, Sanford and Toomey (together, the "MANAGEMENT
SHAREHOLDERS") will collectively own approximately 13.9% of the outstanding
Common Stock and approximately 2.8% of the outstanding Senior Preferred Stock.
Parthenon is a private investment vehicle formed for the purpose of
investing in acquisition transactions. MergerCo was formed by Parthenon (a
major shareholder of MergerCo) to effect the Merger. Parthenon Investment
Advisors, L.L.C., a Delaware limited liability company ("Advisors"), is the
general partner of Parthenon, Parthenon Investment Partners, L.L.C., a Delaware
limited liability company ("Partners"), is the managing member of Advisors, and
Messrs. Rutherford and Jacquet are each managing members of Partners. Parthenon,
Advisors, Partners and Mr. Rutherford are collectively referred to herein as the
"Parthenon Affilitates." Mr. Jacquet also serves on the Board of Directors of
Wilmar.
The information in the Proxy Statement relating to the Merger filed by
the Company with the Securities and Exchange Commission (the "COMMISSION"),
including all appendices thereto, is hereby expressly incorporated herein by
reference and the responses to each item of this Statement are qualified in
their entirety by the provisions of the Proxy Statement. The Proxy Statement
will be completed and, if appropriate, amended prior to the time it is first
sent or given to stockholders of the Company. This Statement will be amended to
reflect such completion or amendment of the Proxy Statement.
4
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SPECIAL FACTORS
Item 7. Purposes, Alternatives, Reasons and Effects in a Going-Private
- ------ --------------------------------------------------------------
Transaction.
-----------
(a) Purposes. The information set forth in the Sections "Special
--------
Factors--Background of the Merger and Recapitalization," "--Purposes and Reasons
for the Merger and Recapitalization; Recommendations of Wilmar's Board of
Directors and the Special Committee" and "--Opinion of Financial Advisor to the
Special Committee" of the Proxy Statement is incorporated herein by reference.
(b) Alternatives. The information set forth in the Sections "Special
------------
Factors--Background of the Merger and Recapitalization," "--Purposes and
Reasons for the Merger and Recapitalization; Recommendations of Wilmar's Board
of Directors and the Special Committee" and "--Opinion of Financial Advisor to
the Special Committee" of the Proxy Statement is incorporated herein by
reference.
(c) Reasons. The information set forth in the Sections "Special
-------
Factors--Background of the Merger and Recapitalization," "--Purposes and
Reasons for the Merger and Recapitalization; Recommendations of Wilmar's Board
of Directors and the Special Committee," "--Opinion of Financial Advisor to the
Special Committee" and "--Benefits and Detriments of the Merger to Wilmar and
Wilmar's Shareholders" of the Proxy Statement is incorporated herein by
reference.
(d) Effects. The information set forth in the Sections "Questions and
-------
Answers about the Merger and Recapitalization," "Special Factors--Continuing
Interests of the Investors and Management Shareholders in Wilmar," "--Benefits
and Detriments of the Merger to Wilmar and Wilmar's Shareholders," "--Benefits
and Detriments of the Merger to the Investors and the Management Shareholders,"
"Additional Considerations--Interests of Certain Persons in the Merger and
Recapitalization; Continued Ownership of Wilmar after the Merger," "--
Consequences of the Merger and Recapitalization," "--Material Federal Income Tax
Considerations" and "--Financing; Source of Funds" of the Proxy Statement is
incorporated herein by reference.
Item 8. Fairness of the Going-Private Transaction.
- ------ -----------------------------------------
(a) Fairness. The information set forth in the Section "Special
--------
Factors--Purposes and Reasons for the Merger and Recapitalization;
Recommendations of Wilmar's Board of Directors and the Special Committee" of the
Proxy Statement is incorporated herein by reference.
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(b) Factors Considered in Determining Fairness. The information set
------------------------------------------
forth in the Sections "Special Factors--Background of the Merger and
Recapitalization," "--Continuing Interests of the Investors and Management
Shareholders in Wilmar," "--Purposes and Reasons for the Merger and
Recapitalization; Recommendations of Wilmar's Board of Directors and the Special
Committee," "--Opinion of Financial Advisor to the Special Committee," and
"Certain Financial Projections" of the Proxy Statement is incorporated herein by
reference.
(c) Approval of Security Holders. No, the transaction is not
----------------------------
structured in such a way that approval of at least a majority of unaffiliated
security holders is required. The information set forth in the Section
"Information Concerning the Special Meeting" of the Proxy Statement is
incorporated herein by reference.
(d) Unaffiliated Representative. The information set forth in the
---------------------------
Section "Special Factors--Background of the Merger and Recapitalization" of the
Proxy Statement is incorporated herein by reference.
(e) Approval of Directors. The information set forth in the Sections
---------------------
"Special Factors--Background of the Merger and Recapitalization" and "--Purposes
and Reasons for the Merger and Recapitalization; Recommendations of Wilmar's
Board of Directors and the Special Committee" of the Proxy Statement is
incorporated herein by reference.
(f) Other Offers. The information set forth in the Sections "Special
------------
Factors--Background of the Merger and Recapitalization," "--Purposes and Reasons
for the Merger and Recapitalization; Recommendations of Wilmar's Board of
Directors and the Special Committee," and "--Opinion of Financial Advisor to the
Special Committee" of the Proxy Statement is incorporated herein by reference.
Item 9. Reports, Opinions, Appraisals and Negotiations.
- ------ ----------------------------------------------
(a) Report, Opinion or Appraisal. The information set forth in the
----------------------------
Sections "Special Factors--Background of the Merger and Recapitalization," "--
Opinion of Financial Advisor to the Special Committee," "Certain Financial
Projections" and "Appendix B--Fairness Opinion of William Blair & Company, LLC"
of the Proxy Statement is incorporated herein by reference.
(b) Preparer and Summary of the Report, Opinion or Appraisal. The
--------------------------------------------------------
information set forth in the Sections "Special Factors--Background of the Merger
and Recapitalization," "--Opinion of Financial Advisor to the Special
Committee," "Certain Financial Projections" and "Appendix B--Fairness Opinion of
William Blair & Company, LLC" of the Proxy Statement is incorporated herein by
reference.
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(c) Availability of Documents. Not applicable. The information set
-------------------------
forth in the Sections "Certain Financial Projections" and "Appendix B--Fairness
Opinion of William Blair & Company, LLC" of the Proxy Statement is incorporated
herein by reference.
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OTHER DISCLOSURE
Item 1. Summary Term Sheet.
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The information set forth in the Section "Summary Term Sheet" of the
Proxy Statement is incorporated herein by reference.
Item 2. Subject Company Information.
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(a) Name and Address. The name of the issuer is Wilmar Industries,
----------------
Inc., a New Jersey corporation, which has its principal executive offices at 303
Harper Drive, Moorestown, New Jersey 08057, telephone number (853) 439-1222.
The information set forth in the Section "Information Concerning the Special
Meeting--The Companies" of the Proxy Statement is incorporated herein by
reference.
(b) Securities. The class of equity securities that is the subject of
----------
the Rule 13e-3 transaction to which this Statement relates is common stock, no
par value, of the Company. As of February 3, 2000, there were approximately
12,243,442 shares of Common Stock issued and outstanding. The information set
forth in the Sections "Common Stock Market Price and Dividend Information" and
"Information Concerning the Special Meeting--Record Date and Voting" of the
Proxy Statement is incorporated herein by reference.
(c) Trading Market and Price. The information set forth in the
------------------------
Section "Common Stock Market Price and Dividend Information" is incorporated
herein by reference.
(d) Dividends. The information set forth in the Section "Common Stock
---------
Market Price and Dividend Information" is incorporated herein by reference.
(e) Prior Public Offerings. The Company has made no underwritten
----------------------
public offering of the Common Stock for cash during the past three years that
the Common Stock was registered under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), or exempt from registration thereunder pursuant to
Regulation A thereunder.
(f) Prior Stock Purchases. The information set forth in the Section
---------------------
"Common Stock Purchase Information" of the Proxy Statement is incorporated
herein by reference.
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Item 3. Identity and Background of Filing Persons.
- ------ -----------------------------------------
(a) Name and Address. This Statement is being filed by Wilmar
----------------
Industries, Inc., WM Acquisition, Inc., Parthenon Investors, L.P., Parthenon
Investment Advisors, L.L.C., Parthenon Investment Partners, L.L.C., John C.
Rutherford, Ernest K. Jacquet, William Green and Michael J. Grebe. With respect
to the Company, MergerCo and the Parthenon Affiliates other than John C.
Rutherford, please refer to Schedule A.1. With respect to William Green, Michael
Grebe, John C. Rutherford and Ernest K. Jacquet, please refer to Schedule A.2.
Schedules A.1 and A.2 to this Statement also set forth certain information as
required by Instruction C regarding each executive officer and director of
MergerCo, each person controlling MergerCo and the Parthenon Affiliates other
than John C. Rutherford and each executive officer and director of any
corporation or other person ultimately in control of MergerCo and the Parthenon
Affiliates other than John C. Rutherford. The information set forth in the
Sections "Information Concerning the Special Meeting--Record Date and Voting,"
"Current Management of Wilmar," and "Certain Information Concerning WM
Acquisition and its Affiliates" of the Proxy Statement is incorporated herein by
reference.
(b) Business and Background of Entities. With respect to the Company,
-----------------------------------
MergerCo and the Parthenon Affiliates other than John C. Rutherford,
please refer to Schedule A.1. With respect to entities under
Instruction C, please also refer to Schedule A.1. Neither the
Company, MergerCo, the Parthenon Affiliates other than John C.
Rutherford, nor any of the entities under Instruction C related to
such filing persons, has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or was a party
to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was subject
to a judgment, decree or final order enjoining future violations of,
or prohibiting activities subject to, federal or state securities
laws or finding any violation with respect to such laws during the
last five years. The information set forth in the Sections
"Information Concerning the Special Meeting--Record Date and Voting"
and "Certain Information Concerning WM Acquisition and its
Affiliates" of the Proxy Statement is incorporated herein by
reference.
(c) Business and Background of Natural Persons. With respect to
William Green, Michael Grebe, John C. Rutherford and Ernest K.
Jacquet, please refer to Schedule A.2. With respect to natural
persons under Instruction C, please also refer to Schedule A.2.
Neither Mr. Green, Mr. Grebe, Mr. Rutherford, Mr. Jacquet, nor any of
the natural persons under Instruction C related to the Company,
MergerCo or the Parthenon Affiliates other than John C. Rutherford,
has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or was a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting activities subject to, federal or state securities laws
or finding any violation with respect to such laws during the last
five years. The information set forth in the Sections "Information
Concerning the Special Meeting--Record Date and Voting," "Current
Management of Wilmar," and "Certain Information Concerning WM
Acquisition and its Affiliates" of the Proxy Statement is
incorporated herein by reference.
Item 4. Terms of the Transaction.
- ------ ------------------------
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(a) Material Terms. The information set forth in the Sections
--------------
"Summary Term Sheet," "Information Concerning the Special Meeting--Vote
Required," "Special Factors--Background of the Merger and Recapitalization," "--
Exchange of Shares by William Green," "--Continuing Interests of the Investors
and Management Shareholders in Wilmar," "--Purposes and Reasons for the Merger
and Recapitalization; Recommendations of Wilmar's Board of Directors and the
Special Committee," "--Opinion of Financial Advisor to the Special Committee,"
"--Benefits and Detriments of the Merger to Wilmar and Wilmar's Shareholders,"
"--Benefits and Detriments of the Merger to the Investors and the Management
Shareholders," "--Material Federal Income Tax Considerations," "--Accounting
Treatment" ,"--Financing; Source of Funds," and "The Merger Agreement" and "The
Voting and Exchange Agreement" of the Proxy Statement is incorporated herein by
reference.
(c) Different Terms. The information set forth in the Sections
---------------
"Special Factors--Exchange of Shares by William Green," "--Continuing Interests
of the Investors and Management Shareholders in Wilmar," "--Benefits and
Detriments of the Merger to Wilmar and Wilmar's Shareholders," "--Benefits and
Detriments of the Merger to the Investors and the Management Shareholders"
and "The Voting and Exchange Agreement" of the Proxy Statement is incorporated
herein by reference.
(d) Appraisal Rights. The information set forth in the Section
----------------
"Rights of Dissenting Shareholders" of the Proxy Statement is incorporated
herein by reference.
(e) Provisions for Unaffiliated Security Holders. None.
--------------------------------------------
(f) Eligibility for Listing or Trading. Not applicable.
----------------------------------
Item 5. Past Contacts, Transactions, Negotiations and Agreements.
- ------ --------------------------------------------------------
(a) Transactions. None.
------------
(b) Significant Corporate Events. The information set forth in the
----------------------------
Sections "Special Factors--Background of the Merger and Recapitalization,"
"--Exchange of Shares by William Green," "--Continuing Interests of the
Investors and Management Shareholders in Wilmar" and "The Voting and Exchange
Agreement" of the Proxy Statement is incorporated herein by reference.
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(c) Negotiations or Contacts. The information set forth in the
------------------------
Sections "Special Factors--Background of the Merger and Recapitalization,"
"--Exchange of Shares by William Green," "--Continuing Interests of the
Investors and Management Shareholders in Wilmar" and "The Voting and Exchange
Agreement" of the Proxy Statement is incorporated herein by reference.
(e) Agreements Involving the Subject Company's Securities. The
-----------------------------------------------------
information set forth in the Sections "Special Factors--Background of the Merger
and Recapitalization," "--Exchange of Shares by William Green," "--Continuing
Interests of the Investors and Management Shareholders in Wilmar,"
"Additional Considerations--Interests of Certain Persons in the Merger and
Recapitalization; Continued Ownership of Wilmar after the Merger,"
"--Consequences of the Merger and Recapitalization," "--Financing; Source of
Funds," "The Merger Agreement" and "The Voting and Exchange Agreement" of
the Proxy Statement is incorporated herein by reference.
Item 6. Purposes of the Transaction and Plans or Proposals.
- ------ --------------------------------------------------
(b) Use of Securities Acquired. The information set forth in the
--------------------------
Section "Additional Considerations--Plans for Wilmar After the Merger" of the
Proxy Statement is incorporated herein by reference.
(c) Plans. The information set forth in the Sections "Additional
-----
Considerations--Plans for Wilmar After the Merger," "--Interests of Certain
Persons in the Merger and Recapitalization; Continued Ownership of Wilmar After
the Merger," "--Consequences of the Merger and Recapitalization" and "--
Financing; Source of Funds" of the Proxy Statement is incorporated herein by
reference.
Item 10. Source and Amount of Funds or Other Consideration.
- ------- -------------------------------------------------
(a) Source of Funds. The information set forth in the Sections
---------------
"Additional Considerations--Financing; Source of Funds," and "--Fees and
Expenses" of the Proxy Statement is incorporated herein by reference.
(b) Conditions. The information set forth in the Section "Additional
----------
Considerations--Financing; Source of Funds" of the Proxy Statement is
incorporated herein by reference.
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(c) Expenses. The information set forth in the Section "Additional
--------
Considerations--Fees and Expenses" of the Proxy Statement is incorporated herein
by reference.
(d) Borrowed Funds. The information set forth in the Sections
--------------
"Additional Considerations--Financing; Source of Funds" and "--Fees and
Expenses" of the Proxy Statement is incorporated herein by reference.
Item 11. Interest in Securities of the Subject Company.
- ------- ---------------------------------------------
(a) Securities Ownership. The information set forth in the Sections
--------------------
"Security Ownership of Certain Beneficial Owners and Management" and Common
Stock Purchase Information" of the Proxy Statement is incorporated herein by
reference. Also, the information set forth in the Schedule 13D filed with the
Commission by certain of the Investors, the entities listed on Schedule A-1
hereto, Ernest K. Jacquet and John C. Rutherford on December 22, 1999 and the
information set forth in Amendment No. 3 to Schedule 13D filed with the
Commission by William Green on December 22, 1999 is incorporated herein by
reference.
(b) Securities Transactions. The information set forth in the
-----------------------
Sections "Special Factors--Background of the Merger and Recapitalization,"
"--Exchange of Shares by William Green," "The Voting and Exchange Agreement,"
"Common Stock Market Price and Dividend Information" and "Common Stock Purchase
Information" of the Proxy Statement is incorporated herein by reference.
Item 12. The Solicitation or Recommendation.
- ------- ----------------------------------
(d) Intent to Tender or Vote in a Going-Private Transaction. The
-------------------------------------------------------
information set forth in the Sections "Questions and Answers about the Merger
and Recapitalization," "Information Concerning the Special Meeting," "Special
Factors--Background of the Merger and Recapitalization," "--Exchange of
Shares by William Green," "--Continuing Interests of the Investors and
Management Shareholders in Wilmar," "--Purposes and Reasons for the Merger and
Recapitalization; Recommendations of Wilmar's Board of Directors and the Special
Committee," "Additional Considerations--Interests of Certain Persons in the
Merger and Recapitalization; Continued Ownership of Wilmar after the Merger" and
"The Voting and Exchange Agreement" of the Proxy Statement is incorporated
herein by reference.
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(e) Recommendations of Others. The information set forth in the
-------------------------
Sections "Questions and Answers about the Merger and Recapitalization,"
"Information Concerning the Special Meeting," "Special Factors--Exchange of
Shares by William Green," "--Purposes and Reasons for the Merger and
Recapitalization; Recommendations of Wilmar's Board of Directors and the Special
Committee" and "The Voting and Exchange Agreement" of the Proxy Statement is
incorporated herein by reference.
Item 13. Financial Statements.
- ------- --------------------
(a) Financial Information. The information set forth in the Sections
---------------------
"Selected Historical Consolidated Financial Data" and "Documents Incorporated by
Reference" of the Proxy Statement is incorporated herein by reference.
(b) Pro Forma Information. Not applicable.
---------------------
Item 14. Persons/Assets Retained, Employed, Compensated or Used.
- ------- ------------------------------------------------------
(a) Solicitations or Recommendations. The information set forth in
--------------------------------
the Section "Information Concerning The Special Meeting--Voting, Revocation and
Solicitations of Proxies" of the Proxy Statement is incorporated herein by
reference.
(b) Employees and Corporate Assets. The information set forth in the
------------------------------
Sections "Questions and Answers about the Merger and Recapitalization,"
"Information Concerning the Special Meeting," "Special Factors--Exchange of
Shares by William Green," "--Purposes and Reasons for the Merger and
Recapitalization; Recommendations of Wilmar's Board of Directors and the Special
Committee," "Additional Considerations--Interests of Certain Persons in the
Merger and Recapitalization; Continued Ownership of Wilmar after the Merger" and
"The Voting and Exchange Agreement" of the Proxy Statement is incorporated
herein by reference.
Item 15. Additional Information.
- ------- ----------------------
(b) Other Material Information. The information set forth in the
--------------------------
Sections "Certain Financial Projections" and "Additional Considerations--
Shareholder Lawsuit Challenging the Merger and Recapitalization" of the Proxy
Statement is incorporated herein by reference.
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Item 16. Exhibits.
- ------- --------
(a) (2) Proxy Statement.
(c) The board books of William Blair & Company, LLC. dated
December 22, 1999 and October 4, 1999.
Preliminary Discussion Materials for Financing Sources, dated as of
December 4, 1999, prepared by PaineWebber Incorporated.
PaineWebber Incorporated Comparable Data.
(d) The Merger Agreement is attached as Appendix A to the Proxy Statement.
The Amended and Restated Voting and Exchange Agreement is attached as
Appendix C to the Proxy Statement.
14
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After due inquiry and to the best of its knowledge and belief, the
undersigned certify that the information set forth in this Statement is true,
complete and correct.
WILMAR INDUSTRIES, INC.
By: /s/ William Green
---------------------------
Name: William Green
Title: Chairman and Chief Executive Officer
WM ACQUISITION, INC.
By: /s/ Drew Sawyer
---------------------------
Name: Drew Sawyer
Title: Vice President
PARTHENON INVESTORS, L.P.
By: PARTHENON INVESTMENT ADVISORS L.L.C.
its general partner
By: PARTHENON INVESTMENT PARTNERS L.L.C.
its Managing Member
By: /s/ Ernest K. Jacquet
---------------------------
Name: Ernest K. Jacquet
Title: Managing Member
PARTHENON INVESTMENT ADVISORS, L.L.C.
By: PARTHENON INVESTMENT PARTNERS L.L.C.
its Managing Member
By: /s/ Ernest K. Jacquet
---------------------------
Name: Ernest K. Jacquet
Title: Managing Member
PARTHENON INVESTMENT PARTNERS, L.L.C.
By: /s/ Ernest K. Jacquet
---------------------------
Name: Ernest K. Jacquet
Title: Managing Member
/s/ John C. Rutherford
------------------------------
John C. Rutherford
/s/ Ernest K. Jacquet
------------------------------
Ernest K. Jacquet
/s/ William Green
------------------------------
William Green
/s/ Michael J. Grebe
------------------------------
Michael J. Grebe
Date: April 18, 2000
<PAGE>
SCHEDULE A.1
------------
Entities
--------
<TABLE>
<CAPTION>
Name, Business Address and State of
Business Telephone Number Principal Business Organization Nature of Affiliation
- ----------------------------- -------------------------------------- ------------- --------------------------
<C> <S> <C> <C>
1. Wilmar Industries, Inc. Marketer and distributor New Jersey Issuer.
303 Harper Drive of repair and maintenance
Moorestown, NJ 08057 products.
(856) 439-1222
2. WM Acquisition, Inc. Nonsubstantive transitory merger New Jersey Indirectly under common
c/o Parthenon Capital, Inc. vehicle. control with the Issuer.
200 State Street
Boston, MA 02109
(617) 478-7000
3. Parthenon Investors, L.P. Private investment vehicle which Delaware Parent of WM
c/o Parthenon Capital, Inc. invests in and acquires businesses. Acquisition, Inc.
200 State Street
Boston, MA 02109
(617) 478-7000
4. Parthenon Investment Private investment vehicle which Delaware General Partner of
Advisors, L.L.C. invests in and acquires businesses. Parthenon Investors, L.P.
c/o Parthenon Capital, Inc.
200 State Street
Boston, MA 02109
(617) 478-7000
5. Parthenon Investment Private investment vehicle which Delaware Managing Member of
Partners, L.L.C. invests in and acquires businesses. Parthenon Investment
c/o Parthenon Capital, Inc. Advisors, L.L.C.
200 State Street
Boston, MA 02109
(617) 478-7000
</TABLE>
<PAGE>
SCHEDULE A.2
------------
Natural Persons
---------------
<TABLE>
<CAPTION>
Current Principal
Occupation or Prior Material
Name and Address Employment and Name Occupations,
of Occupation and Principal Positions, Offices or
or Employment Citizenship Business of Employer Employment Nature of Affiliation
-------------------- ------------- --------------------------------- --------------------- -------------------------
<S> <C> <C> <C> <C>
1. William Green United States Chairman and Chief Executive Same for the past Chairman and Chief
303 Harper Drive Officer of Wilmar Industries, five years. Executive Officer of
Moorestown, NJ Inc., a marketer and distributor the Issuer.
08057 of repair and maintenance
products.
2. Michael J. Grebe United States President of Wilmar President President of the
303 Harper Drive Industries, Inc. since October 1999, Issuer.
Moorestown, NJ Executive Vice
08057 President and
Chief Operating
Officer from November
1998 to October 1999.
Group Vice President of
Airgas, Inc., a distributor
of industrial gas, welding
products and related
equipment, from April 1986
to November 1998.
3. John C. Rutherford New Zealand Managing Director of Chairman and Indirectly controls WM
200 State Street Parthenon Capital, Inc., a Founder of The Acquisition, Inc.
Boston, MA 02109 private equity investment firm Parthenon Group,
(5/98 to present). Boston, MA, a
management
consulting firm
(1991 - present).
4. Ernest K. Jacquet United States Managing Director of General Partner of Indirectly controls WM
200 State Street Parthenon Capital, Inc., a Summit Partners, Acquisition, Inc. and is
Boston, MA 02109 private equity investment firm Boston, MA, a also a director of the
(5/98 to present). venture capital firm Issuer.
(5/90 - 5/98). Also
a director of the
Issuer from 1995 -
1998 and 1998 -
present.
5. Drew Sawyer United States Principal of Parthenon Capital, Principal of The Officer and Director of
200 State Street Inc., a private equity Parthenon Group, WM Acquisition, Inc.
Boston, MA 02109 investment firm (5/98 to Boston, MA, a
present). management
consulting firm
(7/95-5/98), and
MBA student at
Harvard Business
School, Cambridge,
MA (9/94-6/95).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Current Principal
Occupation or Prior Material
Name and Address Employment and Name Occupations,
of Occupation and Principal Positions, Offices or
or Employment Citizenship Business of Employer Employment Nature of Affiliation
-------------------- ------------- --------------------------------- --------------------- -------------------------
<S> <C> <C> <C> <C>
6. Samantha Trotman United States Principal of Parthenon Capital, Chief Financial Officer and Director of
200 State Street Inc., a private equity Officer of WM Acquisition, Inc.
Boston, MA 02109 investment firm (11/98 - Physicians Quality
present). Care, Waltham,
MA, a physician
management
company (12/96 -
11/98), and Associate
of Bain Capital,
Boston, MA, a
private equity
investment firm
(8/93 - 12/96).
7. Bruce MacRae United States General Partner of Parthenon Chief Executive Officer of WM
200 State Street Capital, Inc., a private equity Officer and director, Acquisition, Inc.
Boston, MA 02109 investment firm (8/98 - Flow Control
present). Equipment, Inc.,
Houston, TX, an oil
field equipment
company (8/96 -
6/98), and Principal
of The Parthenon
Group, Boston,
MA, a management
consulting firm
(8/91 - 8/96).
</TABLE>
<PAGE>
WILLIAM BLAIR & COMPANY
LIMITED LIABILITY COMPANY
CORPORATE FINANCE
<PAGE>
CORPORATE FINANCE
TRANSACTION OVERVIEW AND VALUATION PRESENTATION
TO THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS
REGARDING
PROJECT LIBERTY
DECEMBER 22, 1999
William Blair & Company
Limited Liability Company
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
I. Transaction Overview
II. Background on Patriots
III. Implied Valuation Summary
IV. Preliminary Valuation Analysis for Eagles
A. Overview
o Key Assumptions
o Combination Analysis with Tanga
o Historical and Projected Financials
o Stock Price / Volume Charts
o Research Analysts Estimates and Ratings
o Ownership Profile
o Price Distribution of Shares Traded
B. Valuation Analysis
o Comparable Public Company Analysis
o Relative Index Performance
o Comparable Merger Analysis
o Merger Premiums Analysis
o Discounted Cash Flow Analysis
o Leveraged Re-capitalization Analysis
V. Form of Fairness Opinion
- -------------------------------------------------------- William Blair & Company
2 Limited Liability Company
<PAGE>
TRANSACTION OVERVIEW
- --------------------------------------------------------------------------------
o All cash acquisition at $18.25 per share
o Implies fully diluted equity value of $233 million and enterprise value of
$297 million
o Parthenon Capital leading acquisition, both debt and equity
commitments are expected to be in place
<TABLE>
<CAPTION>
Expected Equity Amount Percent Expected Debt Amount
--------------- ------ ------- ------------- ------
<S> <C> <C> <C> <C>
Parthenon Capital $ 65.0 48.5% Fleet Boston Robertson $ 60.0 (1)
Stephens, Revolver
Chase Capital $ 40.0 29.9% Fleet Boston Robertson $100.0
Stephens, Term
GM Pension $ 25.0 18.7% Fleet Boston Robertson $ 40.0
Stephens, Mezzanine
Bill Green and Management $ 4.0 3.0%
------ ------- ------
TOTAL $134.0 100.0% TOTAL $200.0
(1) $33 million is expected to be drawn at closing, leaving $27 million additional availability.
</TABLE>
o Bill Green investing $3.0 million or 2.3% of total equity required (and
8.2% of his $36.5 million total holdings)
o Expected timetable to close
-> Estimated week of Dec 20th seek and receive Board approval and
announce transaction
-> Week of Jan 3rd file preliminary proxy with SEC, commence loan
syndication process
-> Week of Jan 10th make HSR filing
-> Week of Feb 7th resolve SEC comments
-> Week of Feb 11th mail proxy to shareholders
-> Week of March 27th shareholders meeting and closing
o Key contract features
-> Standard public company reps and warranties, no survival
post-closing
-> $7.0 million breakup fee or $0.55 per share (plus $1.0 million
maximum expenses) or 3.0% equity value and 2.4% of enterprise
value
-> No ability to solicit other offers but do have ability to
terminate for superior proposal (we are required to disclose
alternative proposals)
-> Bill Green required to vote his shares in favor of merger
- -------------------------------------------------------- William Blair & Company
3 Limited Liability Company
<PAGE>
BACKGROUND ON PATRIOTS
- --------------------------------------------------------------------------------
o Parthenon Group
- Well respected high-end strategy consulting firm (Bain, BCG,
McKinsey)
- Formed in 1991, has $35 mil in revenue, 140 employees, offices in
Boston and London
o Parthenon Capital
- Founded in 1998
- $350 million equity and subdebt fund
- Investors in fund include:
Chase, Bank of America, BancBoston, Duke University, Oregon
State Treasury, General Mills, GM, Mobil, etc.
- Staff of 19 including 13 professionals
- Strong private equity backgrounds (Bain, Summit, etc.)
- Ernest Jacquet and John Rutherford, managing partners
- 5 transactions closed to date
- Leverage the Parthenon Group Consultancy for strategic advice for
portfolio companies
- Credible, well respected group with intimate knowledge of Eagles
- Direct equity financing capability for $50-$70 million of total
equity required
- Access to remainder from limited partners
- -------------------------------------------------------- William Blair & Company
4 Limited Liability Company
<PAGE>
PROJECT LIBERTY
IMPLIED VALUATION ANALYSIS
- --------------------------------------------------------------------------------
Dollars in millions, except per share amounts
-------- --------
Assumed Share Price $ 14.00 $ 18.25
-------- --------
Premium to 12/22/99 Closing Price 0.0% 30.4%
Shares Outstanding 12.41 12.41
CSE's 0.20 0.38
-------- --------
Diluted Shares Outstanding 12.61 12.79
PRO FORMA EAGLES WITH TANGA:
Implied Market Capitalization $ 176.5 $ 233.4
Net Debt Outstanding $ 63.7 $ 63.7
-------- --------
Total Value $ 240.2 $ 297.1
EAGLES RESULT: IMPLIED MULTIPLES
-------------- -----------------
Total Value / LTM Revenue $287.9 0.83 1.03
--------
Total Value / LTM EBIT $ 28.0 8.6 10.6
Total Value / LTM EBITDA $ 33.3 7.2 8.9
--------
Total Value / 99E Revenue $295.6 0.81 1.01
Total Value / 99E EBIT $ 28.2 8.5 10.5
Total Value / 99E EBITDA $ 33.7 7.1 8.8
Price per Share / LTM EPS $ 1.03 13.6 17.7
--------
Price per Share / 99E EPS $ 1.05 13.3 17.4
Price per Share / 00E EPS $ 1.25 11.2 14.5
--------
<PAGE>
- --------------------------------------------------------------------------------
OVERVIEW OF EAGLES
- -------------------------------------------------------- William Blair & Company
6 Limited Liability Company
<PAGE>
KEY ASSUMPTIONS
- --------------------------------------------------------------------------------
o Relied upon management's base case assumptions
o Assumptions used are the same as those used for the October 4, 1999
meeting except for:
- Lower Tanga operating assumptions based on due diligence
- $5.0 million lower purchase price negotiated for Tanga purchase,
reflecting Tanga's reduced earnings expectations
- Slightly higher interest costs due to increased LIBOR
- Slightly different assumptions regarding Tanga intangible
amortization
o All ongoing growth rate and margin assumptions for core Eagles and
Tanga businesses are consistent with management's previous assumptions
o With the Tanga acquisition complete, all analysis is based upon
pro-forma information reflecting this acquisition
- -------------------------------------------------------- William Blair & Company
7 Limited Liability Company
<PAGE>
EAGLES / TANGA COMBINATION ANALYSIS
- --------------------------------------------------------------------------------
Dollars in millions, except per share amounts
COMBINED INCOME STATEMENTS
<TABLE>
<CAPTION>
1998 Pro-Forma 1999 Pro-Forma
-------------------------------- --------------------------------
EAGLES TANGA ADJUST. COMBINED EAGLES TANGA ADJUST. COMBINED
------ ----- ------- -------- ------ ----- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue 192.6 75.9 0.0 268.5 217.4 78.2 0.0 295.6
Gross Profit 56.1 36.2 0.0 92.3 63.7 37.3 0.0 100.9
Operating Expenses 36.5 25.6 0.0 62.1 42.0 26.8 0.0 68.9
EBITA 19.6 10.5 0.0 30.2 21.6 10.4 0.0 32.1
Total Amortization 1.0 0.6 2.1 3.7 1.1 0.6 2.1 3.8
------ ----- ------- -------- ------ ----- ------- --------
EBIT 18.6 10.0 -2.1 26.5 20.5 9.9 -2.1 28.2
Interest Expense (Income) -1.5 0.0 6.1 4.6 -1.1 0.0 6.1 5.0
------ ----- ------- -------- ------ ----- ------- --------
Pre-Tax Income 20.2 10.0 -8.2 21.9 21.6 9.9 -8.2 23.3
Taxes 7.7 3.8 -2.4 9.1 8.3 3.7 -2.4 9.7
------ ----- ------- -------- ------ ----- ------- --------
Net Income 12.5 6.2 -5.8 12.8 13.3 6.1 -5.8 13.6
Shares 13.5 13.5 12.9 12.9
------ --------
EPS 0.92 0.95 1.03 1.05
------ --------
EPS Pickup 0.03 0.02
Amortization 1.0 0.6 2.1 3.7 1.1 0.6 2.1 3.8
Depreciation 1.0 0.4 0.0 1.4 1.2 0.4 0.0 1.6
EBITDA 20.6 10.9 0.0 31.6 22.8 10.8 0.0 33.7
Revenue Growth 12.9% 3.0% 10.1%
EBIT Growth 10.0% -1.1% 6.6%
EPS Growth 11.4% 10.7%
Gross Profit % 29.1% 47.7% 34.4% 29.3% 47.7% 34.2%
EBIT % 9.7% 13.1% 9.9% 9.4% 12.6% 9.6%
EBITA % 10.2% 13.9% 11.2% 10.0% 13.3% 10.9%
1999 As Reported 2000 As - Reported
-------------------------------- --------------------------------
EAGLES TANGA ADJUST. COMBINED EAGLES TANGA ADJUST. COMBINED
------ ----- ------- -------- ------ ----- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue 217.4 6.5 0.0 223.9 243.5 80.6 0.0 324.0
Gross Profit 63.7 3.1 0.0 66.8 71.3 38.4 0.0 109.7
Operating Expenses 42.0 2.2 0.0 44.3 46.4 27.6 0.0 74.0
EBITA 21.6 0.9 0.0 22.5 25.0 10.7 0.0 35.7
Total Amortization 1.1 0.0 0.2 1.4 1.1 0.6 2.1 3.8
------ ----- ------- -------- ------ ----- ------- --------
EBIT 20.5 0.8 -0.2 21.1 23.9 10.2 -2.1 31.9
Interest Expense (Income) -1.1 0.0 0.5 -0.6 -0.9 0.0 5.9 5.0
------ ----- ------- -------- ------ ----- ------- --------
Pre-Tax Income 21.6 0.8 -0.7 21.8 24.8 10.2 -8.1 26.9
Taxes 8.3 0.3 -0.2 8.4 9.5 3.9 -2.3 11.1
------ ----- ------- -------- ------ ----- ------- --------
Net Income 13.3 0.5 -0.5 13.3 15.2 6.3 -5.7 15.8
Shares 12.9 12.9 12.6 12.6
------ -------- ------ --------
EPS 1.03 1.03 1.21 1.25
------ -------- ------ --------
EPS Pickup 0.00 0.05
Amortization 1.1 0.0 0.2 1.4 1.1 0.6 2.1 3.8
Depreciation 1.2 0.0 0.0 1.2 1.4 0.4 0.0 1.8
EBITDA 22.8 0.9 0.0 23.7 26.4 11.2 0.0 37.5
Revenue Growth 12.0% 3.0% 9.6%
EBIT Growth 16.4% 3.2% 13.0%
EPS Growth 17.5% 19.3%
Gross Profit % 29.3% 47.7% 29.8% 29.3% 47.7% 33.9%
EBIT % 9.4% 12.6% 9.4% 9.8% 12.6% 9.8%
EBITA % 10.0% 13.3% 10.1% 10.3% 13.3% 11.0%
TRANSACTION ASSUMPTIONS
ANNUAL
INTEREST INTEREST
Total Purchase Price 85.0 SOURCE OF FUNDS AMOUNT RATE EXPENSE
Financing Fees 1.0
Transaction Fees 1.0 Excess Cash 23.0 4.50% 1.0
-----
Total Uses 87.0 New Borrowings 64.0 7.88% 5.0
----- ----
Multiple of 1998 EBITDA Paid 7.8 Total 87.0 6.1
Multiple of 1999 EBITDA Paid 7.9
Percent of 1999 Year Post-Deal 8.3% AMORTIZATION DETAIL TOTAL ANNUAL TAX
Tanga Tangible Net Worth 18.5 YEARS AMORT. AMORT. DEDUCTIBLE
Debt Assumed 0.0 Financing Fees 5 1.0 0.2 Y
New Goodwill 67.5 Trademark 40 14.5 0.4 N
Tax Rate on Deductible 38.0% Customer Lists 30 10.0 0.3 N
Goodwill 35 43.0 1.2 N
--------------
Total Amortization 68.5 2.1
- --------------------------------------------------------------------------------
(1) Tanga gross profit adjusted to include freight cost, making it comparable to
Eagles. EBIT is adjusted to eliminate DKM management fee and other expenses
not recurring post-transaction.
(2) $1.5 million of Pro-Forma combined annual amortization expense is deductible
for tax purposes. All other is non-deductible.
</TABLE>
<PAGE>
EAGLES / TANGA COMBINATION ANALYSIS
- --------------------------------------------------------------------------------
Dollars in millions, except per share amounts
COMBINED INCOME STATEMENTS
<TABLE>
<CAPTION>
2001 As - Reported 2002 As - Reported
-------------------------------- --------------------------------
EAGLES TANGA ADJUST. COMBINED EAGLES TANGA ADJUST. COMBINED
------ ----- ------- -------- ------ ----- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue 271.5 87.0 0.0 358.4 301.3 94.0 0.0 395.3
Gross Profit 79.5 41.5 0.0 121.0 88.3 44.8 0.0 133.1
Operating Expenses 51.0 29.9 0.0 80.9 56.0 32.2 0.0 88.3
EBITA 28.5 11.6 0.0 40.1 32.2 12.5 0.0 44.8
Total Amortization 1.1 0.6 2.1 3.8 1.1 0.6 2.1 3.8
------ ----- ------- -------- ------ ----- ------- --------
EBIT 27.4 11.0 -2.1 36.3 31.1 12.0 -2.1 41.0
Interest Expense (Income) -1.2 0.0 5.1 3.9 -1.6 0.0 4.3 2.7
Pre-Tax Income 28.6 11.0 -7.2 32.4 32.7 12.0 -6.5 38.2
Taxes 11.1 4.2 -2.0 13.3 12.7 4.5 -1.7 15.5
------ ----- ------- -------- ------ ----- ------- --------
Net Income 17.5 6.8 -5.2 19.1 20.0 7.4 -4.7 22.7
Shares 12.6 12.6 12.6 12.6
------ ------- ------ --------
EPS 1.39 1.51 1.59 1.80
------ ------- ------ --------
EPS Pickup 0.13 0.21
Amortization 1.1 0.6 2.1 3.8 1.1 0.6 2.1 3.8
Depreciation 1.6 0.4 0.0 2.0 1.8 0.5 0.0 2.3
EBITDA 30.1 12.0 0.0 42.1 34.0 13.0 0.0 47.0
Revenue Growth 11.5% 8.0% 10.6% 11.0% 8.0% 10.3%
EBIT Growth 14.9% 8.5% 13.8% 13.6% 8.4% 12.9%
EPS Growth 14.7% 20.7% 14.7% 19.1%
Gross Profit % 29.3% 47.7% 33.8% 29.3% 47.7% 33.7%
EBIT % 10.1% 12.7% 10.1% 10.3% 12.7% 10.4%
EBITA % 10.5% 13.3% 11.2% 10.7% 13.3% 11.3%
2003 As - Reported 2004 As - Reported
-------------------------------- --------------------------------
EAGLES TANGA ADJUST. COMBINED EAGLES TANGA ADJUST. COMBINED
------ ----- ------- -------- ------ ----- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue 332.9 101.5 0.0 434.4 366.2 109.6 0.0 475.8
Gross Profit 97.6 48.4 0.0 145.9 107.3 52.2 0.0 159.5
Operating Expenses 61.3 34.8 0.0 96.1 66.7 37.6 0.0 104.3
EBITA 36.3 13.5 0.0 49.8 40.7 14.6 0.0 55.3
Total Amortization 1.1 0.6 2.1 3.8 1.1 0.6 2.1 3.8
------ ----- ------- -------- ------ ----- ------- --------
EBIT 35.2 13.0 -2.1 46.0 39.6 14.0 -2.1 51.5
Interest Expense (Income) -1.9 0.0 3.3 1.4 -2.2 0.0 2.2 0.0
------ ----- ------- -------- ------ ----- ------- --------
Pre-Tax Income 37.1 13.0 -5.5 44.6 41.8 14.0 -4.3 51.5
Taxes 14.4 4.9 -1.3 17.9 16.1 5.3 -0.9 20.6
------ ----- ------- -------- ------ ----- ------- --------
Net Income 22.7 8.0 -4.1 26.6 25.6 8.7 -3.4 30.9
Shares 12.6 12.6 12.6 12.6
------ -------- ------ --------
EPS 1.80 2.12 2.03 2.45
------ -------- ------ --------
EPS Pickup 0.31 0.42
Amortization 1.1 0.6 2.1 3.8 1.1 0.6 2.1 3.8
Depreciation 2.0 0.5 0.0 2.5 2.2 0.5 0.0 2.7
EBITDA 38.3 14.0 0.0 52.3 42.9 15.2 0.0 58.0
Revenue Growth 10.5% 8.0% 9.9% 10.0% 8.0% 9.5%
EBIT Growth 13.0% 8.4% 12.3% 12.4% 8.4% 11.8%
EPS Growth 13.5% 17.3% 12.7% 16.0%
Gross Profit % 29.3% 47.7% 33.6% 29.3% 47.7% 33.5%
EBIT % 10.6% 12.8% 10.6% 10.8% 12.8% 10.8%
EBITA % 10.9% 13.3% 11.5% 11.1% 13.3% 11.6%
</TABLE>
<PAGE>
PROJECT LIBERTY
HISTORICAL AND PROJECTED INCOME STATEMENTS
In thousands, except per share amounts
- --------------------------------------------------------------------------------
FISCAL YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
EAGLES STAND ALONE (BEFORE TANGA)
-----------------------------------------------------------------------------
ACTUAL
-----------------------------------------------------------------------------
1994 1995 1996 1997 1998 LTM (2)
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 47,679 $ 60,823 $ 100,644 $ 150,793 $ 192,605 $ 209,688
Cost of Sales 32,787 41,835 70,853 106,605 136,488 148,097
--------- --------- --------- --------- --------- ---------
Gross Profit 14,892 18,988 29,792 44,188 56,117 61,591
Operating & Selling Expenses 9,963 13,083 20,886 31,141 37,471 41,331
--------- --------- --------- --------- --------- ---------
Operating Income 4,930 5,905 8,905 13,047 18,646 20,260
Interest Expense, net 289 1,164 (551) (1,580) (1,511) (1,275)
--------- --------- --------- --------- --------- ---------
Pre-tax Income 4,640 4,740 9,456 14,627 20,157 21,535
Income Taxes (1) 1,860 1,896 3,593 5,393 7,692 8,291
--------- --------- --------- --------- --------- ---------
Net Income $ 2,780 $ 2,844 $ 5,863 $ 9,234 $ 12,465 $ 13,244
========= ========= ========= ========= ========= =========
Weighted Average Shares 9,071 7,937 11,557 13,335 13,504 13,113
Earnings Per Share $ 0.31 $ 0.36 $ 0.51 $ 0.69 $ 0.92 $ 1.01
Cash Flow Items:
EBITDA 5,142 6,235 9,640 14,439 20,618 22,485
Depreciation & Amortization 212 330 735 1,392 1,972 2,225
Capital Expenditures 766 507 1,169 1,671 1,555 1,748
Margin Analysis:
Gross Margin 31.2% 31.2% 29.6% 29.3% 29.1% 29.4%
EBITDA Margin 10.8% 10.3% 9.6% 9.6% 10.7% 10.7%
Operating Margin 10.3% 9.7% 8.8% 8.7% 9.7% 9.7%
Net Margin 5.8% 4.7% 5.8% 6.1% 6.5% 6.3%
Growth Rates:
Net Sales 27.6% 65.5% 49.8% 27.7%
EBITDA 21.3% 54.6% 49.8% 42.8%
Operating Income 19.8% 50.8% 46.5% 42.9%
Net Income 2.3% 106.1% 57.5% 35.0%
EPS 16.9% 41.6% 36.5% 33.3%
EAGLES STAND ALONE
(BEFORE TANGA)
----------------------- EAGLES AS
ESTIMATED REPORTED EAGLES PRO FORMA W/ TANGA
----------------------- W/TANGA ------------------------------------
1999 E 2000 E 1999 E LTM (2) 1999 E 2000 E
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 217,369 $ 243,453 $ 223,886 $ 287,894 $ 295,575 $ 324,005
Cost of Sales 153,696 172,121 157,107 189,031 194,630 214,283
--------- --------- --------- --------- --------- ---------
Gross Profit 63,673 71,332 66,779 98,863 100,945 109,722
Operating & Selling Expenses 43,171 47,473 45,632 70,878 72,717 77,826
--------- --------- --------- --------- --------- ---------
Operating Income 20,502 23,859 21,147 27,985 28,228 31,896
Interest Expense, net (1,118) (900) (612) 4,800 4,957 5,028
--------- --------- --------- --------- --------- ---------
Pre-tax Income 21,620 24,759 21,759 23,185 23,271 26,868
Income Taxes (1) 8,324 9,532 8,437 9,649 9,683 11,065
--------- --------- --------- --------- --------- ---------
Net Income $ 13,296 $ 15,227 $ 13,322 $ 13,536 $ 13,588 $ 15,803
========= ========= ========= ========= ========= =========
Weighted Average Shares 12,927 12,598 12,927 13,113 12,927 12,598
Earnings Per Share $ 1.03 $ 1.21 $ 1.03 $ 1.03 $ 1.05 $ 1.25
Cash Flow Items:
EBITDA 22,802 26,359 23,739 33,312 33,663 37,510
Depreciation & Amortization 2,300 2,500 2,592 5,327 5,435 5,614
Capital Expenditures 1,739 1,948 1,791 2,303 2,365 2,592
Margin Analysis:
Gross Margin 29.3% 29.3% 29.8% 34.3% 34.2% 33.9%
EBITDA Margin 10.5% 10.8% 10.6% 11.6% 11.4% 11.6%
Operating Margin 9.4% 9.8% 9.4% 9.7% 9.6% 9.8%
Net Margin 6.1% 6.3% 6.0% 4.7% 4.6% 4.9%
Growth Rates:
Net Sales 12.9% 12.0% 9.6%
EBITDA 10.6% 15.6% 11.4%
Operating Income 10.0% 16.4% 13.0%
Net Income 6.7% 14.5% 16.3%
EPS 11.4% 17.5% 19.3%
</TABLE>
- --------------------------------------------------------------------------------
(1) Taxes for Fiscal Years 1994 and 1995 are Pro Forma as if the Company had
been a C Corporation.
(2) Last twelve months ended 9/24/99.
<PAGE>
PROJECT LIBERTY
HISTORICAL BALANCE SHEET
In thousands, except per share amounts
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As Reported
----------------------------------------------- Pro Forma
12/27/96 12/26/97 12/25/98 9/24/99 for Tanga
Assets --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash & Equivalents (1) (2) $ 42,875 $ 31,007 $ 30,909 $ 25,893 $ 307
Accounts Receivable, net 16,141 23,802 27,535 36,184 46,135
Inventory 17,669 24,980 30,129 29,379 39,846
Prepaid Expenses & Other Current Assets 657 898 386 370 3,444
Deferred Income Taxes 768 1,227 1,498 1,419 --
--------- --------- --------- --------- ---------
Total Current Assets 78,110 81,914 90,457 93,245 89,732
Property, Plant & Equipment, net 2,461 3,541 4,183 4,731 9,369
Goodwill 4,932 18,121 22,134 21,687 84,747
Other Assets 2,806 4,539 4,922 4,830 12,370
--------- --------- --------- --------- ---------
TOTAL ASSETS $ 88,309 $ 108,115 $ 121,696 $ 124,494 $ 196,218
========= ========= ========= ========= =========
Liabilities and Stockholders' Equity
Current Liabilities:
Notes Payable $ 285 $ 725 $ 1,209 $ -- $ 64,000
Long-term Debt, Current -- -- -- -- --
Accounts Payable (2) 8,537 13,245 11,992 17,584 20,518
Accrued Expenses & Other Current Liabilities 2,053 2,875 4,294 4,923 9,630
Accrued Interest -- -- -- -- --
Income Taxes Payable 1,934 221 412 652 --
--------- --------- --------- --------- ---------
Total Current Liabilities 12,810 17,066 17,907 23,159 94,148
Long-term Debt -- 500 -- -- --
Commitments & Contingent Liabilities -- -- -- -- 735
Stockholder's Equity:
Preferred Stock -- -- -- -- --
Common Stock 96,979 102,794 103,569 103,726 103,726
Retained Earnings (Deficit) (21,479) (12,245) 220 10,413 10,413
Less Treasury Stock -- -- -- (12,804) (12,804)
--------- --------- --------- --------- ---------
Total Stockholders' Equity 75,500 90,549 103,789 101,335 101,335
--------- --------- --------- --------- ---------
TOTAL LIABILITIES & EQUITY $ 88,309 $ 108,115 $ 121,696 $ 124,494 $ 196,218
========= ========= ========= ========= =========
</TABLE>
- --------------------------------------------------------------------------------
(1) Includes cash, restricted cash and investments.
(2) Adjusted to reflect a $2 million reduction in payables and an associated
reduction in cash related to payments made to vendors on September 27, 1999.
<PAGE>
PROJECT LIBERTY
HISTORICAL CASH FLOW STATEMENT
In thousands, except per share amounts
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31
1995 1996 1997 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Income $ 3,117 $ 5,863 $ 9,234 $ 12,465
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 330 735 1,392 1,972
Deferred Income Taxes (408) (250) (205) (271)
Gain on Disposition of Property & Equipment -- (3) (2) 17
Changes in Assets and Liabilities:
Accounts Receivable (2,641) (990) (2,767) (2,804)
Inventory (4,328) (245) (4,343) (4,278)
Prepaid Expenses & Other Current (66) (18) (623) 501
Other Assets (316) (63) 122 (15)
Accounts Payable 2,887 (3,858) 2,787 (1,253)
Accrued Expenses & Other Current 484 (353) 123 (29)
Accrued Interest 197 (213) --
Income Taxes Payable 1,021 803 (1,525) 475
-------- -------- -------- --------
Net Cash Provided by Operating Activities 277 1,408 4,194 6,779
Investing Activities:
Purchase of Property & Equipment (507) (1,173) (1,679) (1,560)
Proceeds from Sale of Property & Equipment -- 4 8 4
Proceeds from Sale of (Purchase of) Short-Term Investments -- (3,927) 3,927 --
Acquisition of Businesses, Including Escrow (3,573) (9,111) (15,000) (5,596)
-------- -------- -------- --------
Net Cash Used in Investing Activities (4,080) (14,207) (12,744) (7,151)
Financing Activities
Net (Repayments) Proceeds of Notes Payable 6,409 (9,923) (260) (100)
Proceeds of Long-Term Debt - Bank 2,000
Principal Repayments on Long-Term Debt:
Banks (2,730) (1,500)
Related Parties (102) (2,941)
Issuance of Common Stock 55
Repurchase of Common Stock (15,117)
Repurchase of Series A Preferred Stock, Plus Accrued Dividends (13,871)
Repurchase of Series B Preferred Stock, Plus Accrued Dividends (6,343)
Proceeds from the Issuance of Subordinated Debentures 4,000 (4,000)
Proceeds from the Issuance of Common Stock - IPO 46,153
Proceeds from the Issuance of Common Stock - Secondary 43,427
Issuance of Series A Preferred Stock 12,945
Distributions to Stockholders (3,723)
Net Proceeds from Exercise of Stock Options 1,306 360
-------- -------- -------- --------
Net Cash Provided by Financing Activities 3,737 51,002 1,046 260
-------- -------- -------- --------
Net Increase (Decrease) in Cash (66) 38,204 (7,505) (112)
Cash at Beginning of Year 91 25 38,229 30,724
-------- -------- -------- --------
Cash at End of Year $ 25 $ 38,229 $ 30,724 $ 30,612
======== ======== ======== ========
</TABLE>
<PAGE>
EAGLES STOCK PERFORMANCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
1,400,000 $25.00
Daily: Since 1/1/1999 Offer Price: $18.25
1,200,000 $20.00
1,000,000 ---------------------------------------------------------------------------------------
$15.00
800,000
$10.00
600,000
400,000 $ 5.00
200,000
0 $ 0.00
1/4/99 1/25/99 2/12/99 3/5/99 3/25/99 4/15/99 5/5/99 5/25/99 6/15/99 7/6/99 7/26/99 8/13/99 9/2/99
9/23/99 10/13/99 11/2/99 11/22/99 12/13/99
</TABLE>
Volume Close
- -------------------------------------------------------- William Blair & Company
8 Limited Liability Company
<PAGE>
EAGLES STOCK PERFORMANCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
3,500,000 Weekly: Since IPO Date $35.00
Offer Price: $18.25
3,000,000 $30.00
2,500,000 $25.00
2,000,000 $20.00
IPO Price: $11.00
1,500,000 $15.00
1,000,000 $10.00
500,000 $ 5.00
0 $ 0.00
1/24/96 5/3/96 8/9/96 11/15/96 2/21/97 5/30/97 9/5/97 12/12/97 3/20/98 6/26/98 10/2/98 1/8/99 4/16/99
7/23/99 10/29/99
</TABLE>
Volume Close
- -------------------------------------------------------- William Blair & Company
9 Limited Liability Company
<PAGE>
EAGLES RESEARCH ANALYSIS SUMMARY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ESTIMATES
----------------- LAST STOCK PRICE
INVESTMENT BANK ANALYST RATING 1999E 2000E LTGR % UPDATE AT UPDATE
--------------- ------- ------ ----- ----- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
William Blair & Company Chuck McDonald Strong Buy $ 1.03 $ 1.20 20.0% 12/7/99 $ 13.31
Robert W. Baird & Co. Jeffrey Germanotta Short-Term $ 1.04 $ 1.20 25.0% 12/3/99 $ 13.00
Market Perform
----------------------------------------------------------------
Average $ 1.04 $ 1.20 22.5%
Median $ 1.04 $ 1.20 22.5%
----------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Note: Christopher Feiss (DB Alex. Brown) dropped coverage of the Company after
Q3 earnings release.
- -------------------------------------------------------- William Blair & Company
10 Limited Liability Company
<PAGE>
- --------------------------------------------------------------------------------
EAGLES OWNERSHIP PROFILE
- -------------------------------------------------------- William Blair & Company
11 Limited Liability Company
<PAGE>
PROJECT LIBERTY
EAGLES OWNERSHIP PROFILE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OWNER NAME SHARES HELD PERCENT HELD LAST REPORT
---------- ----------- ------------ -----------
<S> <C> <C> <C>
Officers & Directors Subtotal 2,056,545 16.6%
Institutional Subtotal 9,411,590 75.9%
Retail Accounts 939,691 7.6%
----------- ------------
Total Shares Outstanding 12,407,826 100.0%
=========== ============
OFFICERS & DIRECTORS
- --------------------
GREEN WILLIAM S 2,013,536 16.2% 07/01/99
GROSS FRED B 43,009 0.3% 07/01/99
TOP INSTITUTIONAL HOLDERS (1)
- -----------------------------
DRESDNER RCM GLOBAL INVESTORS 1,787,200 14.4% 09/30/99
T. ROWE PRICE ASSOCIATES, INC. 1,611,564 13.0% 09/30/99
ALEX BROWN CAP ADV&TRUST 1,280,156 10.3% 09/30/99
WASATCH ADVISORS, INC. 766,630 6.2% 09/30/99
DIMENSIONAL FD ADVISORS, INC. 450,616 3.6% 09/30/99
J. & W. SELIGMAN & CO., INC. 445,900 3.6% 09/30/99
DENVER INVESTMENT ADVR LLC 441,200 3.6% 09/30/99
WILLIAM HARRIS INVESTORS INC. 385,900 3.1% 09/30/99
WILLIAM BLAIR&CO L.L.C. INV MGM 306,650 2.5% 09/30/99
D. F. DENT & COMPANY, INC. 216,281 1.7% 09/30/99
FASCIANO, MICHAEL F 210,000 1.7% 09/30/99
BANKERS TRUST N Y CORP 201,150 1.6% 09/30/99
LASALLE NATIONAL BANK 163,800 1.3% 09/30/99
HENDERSON INVESTORS LTD. 143,500 1.2% 09/30/99
BARCLAYS BANK PLC 132,812 1.1% 09/30/99
ROYCE & ASSOCIATES, INC. 112,500 0.9% 09/30/99
CREDIT SUISSE ASSET MGMT LLC(U 112,000 0.9% 09/30/99
AXA FINANCIAL, INC. 87,000 0.7% 09/30/99
</TABLE>
<PAGE>
PROJECT LIBERTY
EAGLES OWNERSHIP PROFILE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OWNER NAME SHARES HELD PERCENT HELD LAST REPORT
---------- ----------- ------------ -----------
<S> <C> <C> <C>
AIM MANAGEMENT GROUP, INC. 85,000 0.7% 09/30/99
BRANDYWINE ASSET MGMT, INC. 71,500 0.6% 09/30/99
MFS INVESTMENT MANAGEMENT 66,600 0.5% 09/30/99
EATON, VANCE MANAGEMENT, INC. 50,000 0.4% 09/30/99
CITIGROUP INVESTMENTS INC. 45,756 0.4% 09/30/99
CALIFORNIA STATE TEACH RETIRE 42,700 0.3% 09/30/99
N.Y. STATE TEACH RETIRE SYS 38,700 0.3% 09/30/99
NORTHERN TRUST COMPANY OF CT 34,200 0.3% 09/30/99
MERCURY ASSET MANAGEMENT LTD. 23,800 0.2% 09/30/99
MELLON PRIVATE ASSET MGMT 18,350 0.1% 09/30/99
PARADIGM ASSET MGMT CO, LLC 17,900 0.1% 09/30/99
MSDW ADVR INC. 17,200 0.1% 09/30/99
NORTHERN TRUST COMPANY 14,500 0.1% 09/30/99
FLEET BOSTON CORPORATION 11,200 0.1% 09/30/99
CIBC WORLD MARKETS CORP. 10,600 0.1% 09/30/99
OTHER INSTITUTIONAL 8,725 0.1%
</TABLE>
- --------------------------------------------------------------------------------
(1) Source: CDA/Spectrum - Prism for Research
<PAGE>
SUMMARY OF EAGLES HISTORICAL TRADING
- --------------------------------------------------------------------------------
o Approximately 24 million shares have traded in LTM as of 12/22/99
o Weighted average share price over that period is $14.35
o Highest volume of shares traded between $13.00 and $14.00
o 86.9% of shares traded below $18.25
SUMMARY RESULTS: % OF TRADING
VOLUME
BELOW THIS
PRICE PRICE
------- ------------
$ 16.00 79.8%
$ 17.00 81.8%
$ 18.00 86.9%
$ 19.00 86.9%
$ 20.00 87.2%
- -------------------------------------------------------- William Blair & Company
12 Limited Liability Company
<PAGE>
PROJECT LIBERTY
PRICE DISTRIBUTION OF HISTORICAL TRADING ACTIVITY
LATEST TWELVE MONTHS AS OF 12/22/99
- --------------------------------------------------------------------------------
EAGLES SHARES
<TABLE>
<CAPTION>
% of Total % of Total
% of Total Common Public
% of Total Volume % of Total Shares % of Total Float
Greater but Cummulative Volume Traded at Common Traded at Public Traded at
than or Less Shares Shares Traded at or Below Shares or Below Float or Below
Equal to than Traded Traded This Price This Price Outstanding(1) This Price Outstanding(2) This Price
- -------- ------ --------- ---------- ---------- ---------- -------------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------- ---------- ----------
$10.00 $11.00 2,586,700 2,586,700 10.8% 10.8% 20.8% 20.8% 24.9% 24.9%
11.00 12.00 3,486,600 6,073,300 14.5% 25.3% 28.1% 48.9% 33.5% 58.4%
12.00 13.00 3,519,800 9,593,100 14.6% 39.9% 28.4% 77.3% 33.9% 92.3%
13.00 14.00 5,285,500 14,878,600 22.0% 61.9% 42.6% 119.9% 50.9% 143.1%
14.00 15.00 3,265,200 18,143,800 13.6% 75.5% 26.3% 146.2% 31.4% 174.6%
15.00 16.00 1,039,200 19,183,000 4.3% 79.8% 8.4% 154.6% 10.0% 184.6%
16.00 17.00 469,600 19,652,600 2.0% 81.8% 3.8% 158.4% 4.5% 189.1%
17.00 18.00 1,225,300 20,877,900 5.1% 86.9% 9.9% 168.3% 11.8% 200.9%
18.00 19.00 -- 20,877,900 0.0% 86.9% 0.0% 168.3% 0.0% 200.9%
19.00 20.00 66,300 20,944,200 0.3% 87.2% 0.5% 168.8% 0.6% 201.5%
20.00 21.00 570,000 21,514,200 2.4% 89.5% 4.6% 173.4% 5.5% 207.0%
21.00 22.00 933,200 22,447,400 3.9% 93.4% 7.5% 180.9% 9.0% 216.0%
22.00 23.00 764,800 23,212,200 3.2% 96.6% 6.2% 187.1% 7.4% 223.3%
23.00 24.00 819,600 24,031,800 3.4% 100.0% 6.6% 193.7% 7.9% 231.2%
---------- ---------- ---------- ----------
24,031,800
</TABLE>
WEIGHTED AVERAGE SHARE PRICE: $ 14.35
- --------------------------------------------------------------------------------
(1) Based on 12,407,826 shares outstanding per 9/24/99 quarterly report.
(2) Excludes 2,013,536 shares held by Company CEO.
<PAGE>
- --------------------------------------------------------------------------------
PRELIMINARY VALUATION
ANALYSIS FOR EAGLES
- -------------------------------------------------------- William Blair & Company
13 Limited Liability Company
<PAGE>
VALUATION SUMMARY: EAGLES
- --------------------------------------------------------------------------------
Implied Price per Share
---------------------------
Valuation Measure Low High
----------------- ------- -------
Comparable Company Analysis (1) $ 15.67 -- $ 18.46
Comparable Merger Analysis $ 16.38 -- $ 19.97
Discounted Cash Flow Analysis $ 17.38 -- $ 21.76
Leveraged Re-Cap Analysis $ 15.25 -- $ 17.00
-----------------------------------------------------
AVERAGE $ 16.17 -- $ 19.30
-----------------------------------------------------
(1) Assumes 35% merger premium.
- -------------------------------------------------------- William Blair & Company
14 Limited Liability Company
<PAGE>
SUMMARY OF COMPARABLE COMPANY ANALYSIS
- --------------------------------------------------------------------------------
o Used group of 12 business-to-business direct marketers and distributors
o On average, the group is 38.7% off of their respective 52 week high share
prices
o Eagles is currently trading at a slight premium to the comparable multiples
<TABLE>
<CAPTION>
SUMMARY RESULTS:
Comparable Multiples Implied Price
----------------------------------- -----------------------------------
Relevant Range Relevant Range
----------------- -----------------
Statistic Low High Median Mean Low High Median Mean
--------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Value / LTM Revenue $287,894 0.50 x -- 0.70 x 0.40 x 0.60 x $ 6.27 -- $10.78 $ 4.02 $ 8.53
Total Value / LTM EBIT $ 27,985 7.9 x -- 8.9 x 8.0 x 8.4 x $12.31 -- $14.49 $12.52 $13.40
Total Value / LTM EBITDA $ 33,312 5.8 x -- 6.8 x 5.8 x 6.4 x $10.13 -- $12.73 $10.13 $11.69
Share Price / 1999E EPS $ 1.05 11.5 x -- 13.0 x 10.0 x 12.5 x $12.09 -- $13.66 $10.51 $13.14
Share Price / 2000E EPS $ 1.25 9.5 x -- 11.0 x 8.6 x 10.6 x $11.92 -- $13.80 $10.79 $13.30
----------------------------------------------------------------------
Average (1) $11.61 -- $13.67 $10.99 $12.88
----------------------------------------------------------------------
With 35% Merger Premium
-----------------------------------
Relevant Range
-----------------
Low High Median Mean
------ ------ ------ ------
<S> <C> <C> <C> <C>
Total Value / LTM Revenue $ 8.47 -- $14.55 $ 5.43 $11.51
Total Value / LTM EBIT $16.61 -- $19.57 $16.91 $18.09
Total Value / LTM EBITDA $13.67 -- $17.19 $13.67 $15.78
Share Price / 1999E EPS $16.32 -- $18.45 $14.19 $17.74
Share Price / 2000E EPS $16.09 -- $18.63 $14.56 $17.95
----------------------------------------------------------------------
Average (1) $15.67 -- $18.46 $14.83 $17.39
----------------------------------------------------------------------
(1) Excludes revenue multiple for average
</TABLE>
- -------------------------------------------------------- William Blair & Company
15 Limited Liability Company
<PAGE>
<TABLE>
<CAPTION>
COMPARABLE COMPANIES FOR PROJECT LIBERTY
Summary Market Statistics
Priced as of 12/22/99
- ------------------------------------------------------------------------------------------------------------------------------------
Cal. 99E P/E / Ca. 00E P/E /
Price / Earnings Ratio Long- Long- Long-
Stock Price --------------------------------- Term Term Term Mkt Prc/
-------------------------- % Change Most EPS EPS EPS Book
52 Week Since Recent Growth Growth Growth Value
Low High 12/22/99 High FY LTM Cal. 99E Cal. 00E Rate Rate Rate Per Share
----- ------ -------- ------ ------ ------ -------- -------- ----- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AIRGAS $7.88 -- $14.00 $8.50 -39.3% 11.9 x 12.0 x 14.5 x 12.1 x 14.8% 98.2% 81.8% 1.2 x
APPLIED INDUSTRIAL TECH 11.13 -- 19.06 16.88 -11.5% 18.1 14.7 15.1 12.0 14.8% 101.8% 80.9% 1.2
BARNETT (1) 7.25 -- 17.63 9.38 -46.8% 10.0 9.9 9.5 8.3 17.5% 54.1% 47.6% 1.6
HUGHES SUPPLY 17.88 -- 30.00 21.56 -28.1% 8.5 8.1 7.7 6.8 15.7% 49.2% 43.2% 1.0
INDUSTRIAL DISTR GROUP 2.25 -- 8.50 3.00 -64.7% 4.0 8.1 9.7 7.1 20.0% 48.4% 35.7% 0.2
JLK DIRECT DISTR (2) 7.00 -- 13.50 8.38 -38.0% 10.1 9.9 9.6 8.4 15.0% 63.8% 55.8% 0.9
LAWSON PRODUCTS 20.38 -- 28.06 23.50 -16.3% 12.4 10.4 NA NA 5.0% NA NA 1.7
MSC INDL DIRECT INC 7.50 -- 27.31 13.06 -52.2% 18.1 18.1 17.9 16.3 28.8% 62.1% 56.7% 2.5
NCH CORP 44.25 -- 65.88 44.75 -32.1% 10.5 10.3 NA NA NA NA NA 1.1
WW GRAINGER 36.88 -- 58.13 45.94 -21.0% 18.8 19.9 21.3 18.4 13.1% 162.3% 140.3% 3.1
WATSCO INC 9.75 -- 19.88 10.56 -46.9% 11.7 10.6 10.3 8.7 20.9% 49.1% 41.8% 1.0
WESCO INTL INC 5.50 -- 22.88 7.31 -68.0% NMF NMF 9.8 7.5 22.5% 43.3% 33.2% 2.8
Average -38.7% 12.2 x 12.0 x 12.5 x 10.6 x 17.1% 73.2% 61.7% 1.5 x
Median -38.6% 11.7 10.4 10.0 8.6 15.7% 58.1% 51.7% 1.2
EAGLES
Current Price (3) $10.00 -- $23.75 $14.00 -41.1% 15.2 x 13.6 x 13.3 x 11.2 x 25.0% 53.3% 44.6% 1.7 x
Offer Price (4) $18.25 17.7 17.4 14.5
</TABLE>
<TABLE>
<CAPTION>
Total Value /
------------------------------
LTM LTM Oper. LTM LTM Mkt. LTM
Sales Income EBITDA Sales (MM) Cap. (MM) Ended
----- -------- ------ --------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
AIRGAS 0.9 x 15.4 x 7.8 x $1,530.6 $596.8 09/99
APPLIED INDUSTRIAL TECH 0.3 8.8 6.0 1,529.4 353.4 09/99
BARNETT (1) 0.7 6.6 5.5 256.4 152.3 09/99
HUGHES SUPPLY 0.4 8.0 6.6 2,745.9 503.6 07/99
INDUSTRIAL DISTR GROUP 0.1 8.7 5.6 529.8 25.8 09/99
JLK DIRECT DISTR (2) 0.4 5.9 4.7 518.2 205.3 09/99
LAWSON PRODUCTS 0.7 5.9 5.1 309.0 243.2 09/99
MSC INDL DIRECT INC 1.5 11.7 10.6 651.5 888.9 08/99
NCH CORP 0.3 4.5 3.5 788.1 242.0 07/99
WW GRAINGER 1.0 12.2 9.9 4,457.6 4,289.8 09/99
WATSCO INC 0.4 8.0 6.8 1,159.7 307.7 09/99
WESCO INTL INC 0.2 5.5 4.7 3,350.8 315.8 09/99
Average 0.6 x 8.4 x 6.4 x $1,485.6 $677.1
Median 0.4 8.0 5.8 973.9 311.8
EAGLES
Current Price (3) 0.8 x 8.5 x 7.1 x $287.9 $173.7 09/99
Offer Price (4) 1.0 10.6 8.9
- ----------------------------------------------------------------------
(1) Barnett announced on 12/13/99 that it has retained an investment bank to
explore strategic alternatives that will maximize shareholder value.
(2) JLK's parent company, Kennametal, Inc., announced on 11/17/99 that it may
sell JLK Direct.
(3) Valuation is based on 12.40 million shares currently outstanding.
(4) Valuation is based on 12.79 million fully diluted shares at a purchase price
of $18.25.
</TABLE>
LTM = Latest Twelve Months, CAGR = Compounded Annual Growth Rate,
NA = Not Available, NMF = Not Meaningful
William Blair & Company
<PAGE>
<TABLE>
<CAPTION>
COMPARABLE COMPANIES FOR PROJECT LIBERTY
Summary Operating Statistics
- ------------------------------------------------------------------------------------------------------------------------------
Gross Profit as a Operating Income as a Net Income as a
% of Sales % of Sales % of Sales 3 YR CAGR
------------------- -------------------- ------------------- ---------------------
LTM 4 YR Avg LTM 4 YR Avg LTM 4 YR Avg Sales Net Inc
----- -------- ----- -------- ---- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AIRGAS 46.2% 47.4% 6.1% 9.2% 3.3% 3.7% 23.0% 8.9%
APPLIED INDUSTRIAL TECH 25.2% 25.9% 3.3% 3.8% 1.6% 1.9% 10.1% -5.1%
BARNETT (1) 33.1% 33.7% 10.6% 11.8% 6.0% 6.9% 23.7% 20.5%
HUGHES SUPPLY 22.3% 20.4% 4.5% 4.1% 2.3% 2.3% 24.1% 33.8%
INDUSTRIAL DISTR GROUP 22.3% 23.7% 1.5% 2.5% 0.6% 1.5% 158.4% 108.4%
JLK DIRECT DISTR (2) 32.0% 32.8% 6.8% 9.1% 4.0% 5.6% 29.6% 10.6%
LAWSON PRODUCTS 65.7% 67.7% 12.1% 12.8% 7.8% 8.1% 9.4% -0.1%
MSC INDL DIRECT INC 40.2% 40.9% 12.6% 13.3% 7.5% 8.7% 28.7% 13.2%
NCH CORP 44.8% 46.2% 6.2% 7.0% 3.1% 3.9% 0.6% -12.5%
W W GRAINGER 36.9% 36.2% 8.5% 9.6% 4.9% 5.7% 9.8% 8.5%
WATSCO INC 23.3% 22.1% 5.2% 5.4% 2.5% 2.6% 54.0% 65.9%
WESCO INTL INC 17.7% 17.8% 3.9% 3.2% 1.0% 1.3% NA NA
--------------------------------------------------------------------------------------------------------------------------
Average 34.1% 34.6% 6.8% 7.7% 3.7% 4.4% 33.8% 22.9%
Median 32.5% 33.2% 6.1% 8.1% 3.2% 3.8% 23.7% 10.6%
--------------------------------------------------------------------------------------------------------------------------
EAGLES 29.4% 29.8% 9.7% 9.3% 6.3% 5.9% 46.8% 58.7%
Return on
Return on Average Common Equity / Total Debt / Net Debt /
Average Assets Common Equity Capitalization Capitalization Net Capitalization
-------------- ------------- --------------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
AIRGAS 3.1% 11.4% 36.7% 63.3% 63.3%
APPLIED INDUSTRIAL TECH 3.4% 6.7% 74.6% 25.4% 22.4%
BARNETT (1) 12.4% 18.1% 74.3% 25.7% 21.5%
HUGHES SUPPLY 5.9% 13.6% 49.7% 50.3% 49.9%
INDUSTRIAL DISTR GROUP 3.5% 5.8% 71.5% 28.5% 28.1%
JLK DIRECT DISTR (2) 7.4% 9.9% 97.0% 3.0% 1.3%
LAWSON PRODUCTS 10.9% 14.9% 100.0% 0.0% -19.0%
MSC INDL DIRECT INC 10.7% 14.4% 83.6% 16.4% 15.9%
NCH CORP 5.1% 9.6% 96.8% 3.2% -11.8%
W W GRAINGER 11.6% 18.5% 79.8% 20.2% 17.9%
WATSCO INC 5.4% 10.3% 63.6% 36.4% 35.5%
WESCO INTL INC 3.2% 140.2% 21.2% 78.8% 77.4%
-------------------------------------------------------------------------------------------------------------------
Average 6.9% 22.8% 70.7% 29.3% 25.2%
Median 5.6% 12.5% 74.4% 25.6% 22.0%
-------------------------------------------------------------------------------------------------------------------
EAGLES 10.8% 12.8% 61.3% 38.7% 38.6%
LTM = Latest Twelve Months, CAGR = Compounded Annual Growth Rate,
NA = Not Available, NMF = Not Meaningful
</TABLE>
William Blair & Company
<PAGE>
RELATIVE INDUSTRY PERFORMANCE
- --------------------------------------------------------------------------------
300 Indexed: 1/24/96 = 100 300
Weekly: Since IPO Date
250 250
200 200
150 150
100 100
50 50
1/24/96 4/19/96 7/12/96 10/4/96 12/27/96 3/21/97 6/13/97 9/5/97 11/28/97
2/20/98 5/15/98 8/7/98 10/30/98 1/22/99 4/16/99 7/9/99 10/1/99
Eagles Comps Index S&P 500 Index
- -------------------------------------------------------- William Blair & Company
16 Limited Liability Company
<PAGE>
SUMMARY OF COMPARABLE MERGER ANALYSIS
- --------------------------------------------------------------------------------
o Selected group of 10 comparable mergers for business-to-business direct
marketers and distributors of MRO and industrial/building products
<TABLE>
<CAPTION>
SUMMARY RESULTS:
Comparable Multiples Implied Price
----------------------------------- -----------------------------------
Relevant Range Relevant Range
----------------- -----------------
Statistic Low High Median Mean Low High Median Mean
--------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Value / LTM Revenue $287,894 0.55 x -- 0.80 x 0.57 x 0.77 x $ 7.40 -- $13.03 $ 7.85 $12.35
Total Value / LTM EBIT $ 27,985 10.0 x -- 11.5 x 11.2 x 10.0 x $16.90 -- $20.18 $ 19.53 $16.90
Total Value / LTM EBITDA $ 33,312 8.0 x -- 9.5 x 9.1 x 8.5 x $15.86 -- $19.76 $ 18.72 $17.16
-------------------------------------------------------------------------
Average (1) $16.38 -- $19.97 $ 19.12 $17.03
-------------------------------------------------------------------------
</TABLE>
(1) Excludes revenue multiple for average.
- -------------------------------------------------------- William Blair & Company
17 Limited Liability Company
<PAGE>
PROJECT LIBERTY
Comparable Merger and Acquisition Transactions for Eagles
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Transaction
Value
Announced Completed Target Target Business Description Acquiror ($MM)
--------- --------- -------------------------- ------------------------------ ---------------------- -----------
<S> <C> <C> <C> <C> <C>
07/22/99 Pending White Cap Industries Inc Whl constr & mining mach Leonard Green Partners 238.9
05/08/98 07/08/98 Century Maintenance Supply Whl repair, maintenance supply Freeman Spogli 262.6
Inc.
04/24/98 06/05/98 WESCO Distribution Inc (CDW) Whl electrical, indl products Cypress Group 1,014.0
Distributor of repair and
02/02/98 02/02/98 Chad Supply, Inc. maintenance products Hughes Supply Inc. 46.0
10/22/97 12/02/97 Shelter Components Corp. Distributes building materials. Kevco Inc 143.6
Whl maintenance and repair
01/17/97 03/14/97 Maintenance Warehouse products Home Depot, Inc. 272.3
11/11/96 03/26/97 Strober Organization Inc. Distributes building materials Hamilton Acquisition LLC 28.1
09/27/96 09/27/96 Salem Corp. Wholesale industrial mach & equip Salem Group 35.6
Distributes roofing, siding, &
07/04/96 07/04/96 Allied Buildings Corp. insulation CRH Plc 121.0
Distributes pipe, valve and Hughes Supply
03/28/96 03/28/96 Southwest Stainless Inc fitting products Incorporated 117.4
AVERAGE 227.9
MEDIAN 132.3
Equity Transaction Value / LTM
Value -----------------------------
Target Acquiror ($MM) Sales EBIT EBITDA
-------------------------- ---------------------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
White Cap Industries Inc Leonard Green Partners 185.4 0.79 x 11.2 x 9.1 x
Century Maintenance Supply Freeman Spogli 122.6 1.52 12.6 12.0
Inc.
WESCO Distribution Inc (CDW) Cypress Group 670.5 0.38 11.9 10.5
Chad Supply, Inc. Hughes Supply Inc. 46.0 0.77 10.2 9.2
Shelter Components Corp. Kevco Inc 136.5 0.29 12.0 9.4
Maintenance Warehouse Home Depot, Inc. 245.4 2.16 13.0 11.9
Strober Organization Inc. Hamilton Acquisition LLC 32.0 0.22 5.5 4.4
Salem Corp. Salem Group 46.6 0.25 7.1 5.3
Allied Buildings Corp. CRH Plc NA 0.28 NA 7.0
Hughes Supply
Southwest Stainless Inc Incorporated 106.0 1.07 6.9 6.5
AVERAGE 176.8 0.77 x 10.0 x 8.5 x
MEDIAN 122.6 0.57 11.2 9.1
</TABLE>
<PAGE>
SUMMARY OF MERGER PREMIUM ANALYSIS
- --------------------------------------------------------------------------------
o Analyzed public company transactions since 1/1/98 with Enterprise Value
between $200 and $500 million
o 194 transactions using purchase accounting
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
MERGER PREMIUM ANALYSIS:
TRANSACTION PREMIUM EAGLES
---------------------------------------- PREMIUM
LOW HIGH MEAN MEDIAN AS OF 12/22/99
------ ------ ----- ------ --------------
<S> <C> <C> <C> <C> <C>
One Day Before Announcement -10.7% -- 132.5% 31.1% 25.9% 30.4%
One Week Before Announcement -29.9% -- 141.4% 36.5% 30.0% 27.0%
- --------------------------------------------------------------------------------------------
---------------------------------------
<S> <C>
Offer Price $18.25
Close 12/22/1999 $14.00
Close 12/15/1999 $14.38
---------------------------------------
</TABLE>
- -------------------------------------------------------- William Blair & Company
18 Limited Liability Company
<PAGE>
SUMMARY OF DISCOUNTED CASH FLOW ANALYSIS
- --------------------------------------------------------------------------------
KEY ASSUMPTIONS:
o Management's base case assumptions for five years of results through 2004
o Eagle's base (pre-Tanga) revenue growth of 11.5%, 11.0%, 10.5%, and 10.0% for
2001 - 2004
o Eagles base gross margins held constant at 1999(P) level of 29.3%
o Eagles base operating margin improves over projection period: 10.1%, 10.3%,
10.6%, 10.8% for 2001 - 2004
o Tanga assumes 3.0% revenue growth in 1999 and 2000, 8.0% thereafter and
constant EBITDA margins
SUMMARY RESULTS:
Discount Rate
------------------------------
12.5% 13.5% 14.5%
------------------------------
------
Terminal 7.5 $19.24 $18.29 $17.38
------
EBITDA 8.0 $20.50 $19.49 $18.53
------
Multiple 8.5 $21.76 $20.70 $19.68
------
- -------------------------------------------------------- William Blair & Company
19 Limited Liability Company
<PAGE>
PROJECT LIBERTY (INCLUDING ACQUISITION OF TANGA)
Discounted Cash Flow Analysis
- --------------------------------------------------------------------------------
Dollars in millions, except per share amounts
<TABLE>
<CAPTION>
Discount Rate 13.5%
Terminal EBITDA Multiple 8.0
- ---------------------------------------------------------------------------------------------------------------------
WACC CALCULATION
Base Case ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------- Equity Risk Premium 11.0%
2000 2001 2002 2003 2004 Risk Free Rate 6.4%
----- ----- ----- ----- ----- Levered Beta 0.74
Revenue 324.0 358.4 395.3 434.4 475.8 Borrowing Rate 9.0%
EBITDA 37.5 42.1 47.0 52.3 58.0 Tax Rate 38.0%
Debt % of Cap 10.0%
EBIT 31.9 36.3 41.0 46.0 51.5 Cost of Equity 14.4%
Tax 13.0 14.7 16.4 18.4 20.4 After Tax Cost of Debt 5.6%
----------------------------------------- Weighted Cost of Capital 13.5%
EBIT after Tax 18.9 21.6 24.5 27.7 31.0 ------------------------------------
Plus Depreciation 1.8 2.0 2.3 2.5 2.7
Plus Amortization 3.8 3.8 3.8 3.8 3.8
Less Capex 2.6 2.9 3.2 3.5 3.8
Less Change in NWC 6.3 7.6 8.1 8.6 9.1
-----------------------------------------
Free Cash Flow 15.7 17.0 19.3 21.9 24.7
Terminal Value 464.2
-----
Total Cash Flows 15.7 17.0 19.3 21.9 488.9
Present Value of Enterprise $313.0
Current Net Debt $63.7
------
Implied Equity Value $249.3
Shares & CSEs Outstanding 12.79
------
Equity Value Per Share $19.49
</TABLE>
- --------------------------------------------------------------------------------
SENSITIVITY ANALYSIS Discount Rate
------------------------------
12.5% 13.5% 14.5%
Terminal EBITDA Multiples ------------------------------
7.5 $19.24 $18.29 $17.38
8.0 $20.50 $19.49 $18.53
8.5 $21.76 $20.70 $19.68
- --------------------------------------------------------------------------------
<PAGE>
SUMMARY OF LEVERAGED RECAPITALIZATION ANALYSIS
- --------------------------------------------------------------------------------
Key Assumptions:
o Same operating assumptions as discounted cash flow analysis
o Financed through term debt at 9.1% and mezzanine debt at 12% plus warrants
to achieve 18.0% IRR
o Debt financing of 5.1x 1999 EBITDA (3.9x for senior, 1.2x for mezzanine)
o Exit multiple of 8.5x EBITDA in 2004
o To achieve 25% - 30% expected IRR implies a price range of $15.25-$17.00 per
share
1999
IMPLIED
COMBINED EBITDA
SUMMARY RESULTS: DEAL PRICE EQUITY IRR MULTIPLE
------------------------------------
$14.00 35.2% 7.2
$14.25 34.1% 7.3
$14.50 33.1% 7.4
$14.75 32.1% 7.5
$15.00 31.2% 7.6
$15.25 30.3% 7.7
$15.50 29.4% 7.8
$15.75 28.6% 7.9
$16.00 27.8% 8.0
$16.25 27.0% 8.1
$16.50 26.3% 8.2
$16.75 25.5% 8.3
$17.00 24.9% 8.4
$17.25 24.2% 8.4
$17.50 23.5% 8.5
$17.75 22.9% 8.6
$18.00 22.3% 8.7
------------------------------------
$18.25 21.7% 8.8
------------------------------------
- ------------------------------------------------------- William Blair & Company
20 Limited Liability Company
<PAGE>
PROJECT LIBERTY (INCLUDING ACQUISITION OF TANGA) William Blair & Company
Leveraged Re-Cap Analysis ($000s) Limited Liability Company
- --------------------------------------------------------------------------------
Fiscal Year Ends 12/31
<TABLE>
<CAPTION>
---------- --------------------------------------------------------------
Pro Forma Pro Forma Projected
1999 2000 2001 2002 2003 2004
---------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 295,575 $ 324,005 $ 358,446 $ 395,265 $ 434,419 $ 475,832
Annual Growth N/A 9.6% 10.6% 10.3% 9.9% 9.5%
EBITA $ 32,072 $ 35,707 $ 40,111 $ 44,778 $ 49,832 $ 55,277
EBITA Margin 10.9% 11.0% 11.2% 11.3% 11.5% 11.6%
Amortization Expense 3,844 8,368 8,368 8,368 8,368 8,368
---------- --------------------------------------------------------------
EBIT $ 28,228 $ 27,339 $ 31,743 $ 36,410 $ 41,464 $ 46,909
Interest Expense:
Term A & B Debt 4,957 10,197 9,192 8,187 7,182 6,177
Revolver -- 1,827 2,354 2,729 2,857 2,704
Mezzanine Debt -- 4,800 4,800 4,800 4,800 4,800
---------- --------------------------------------------------------------
Pre-Tax Income $ 23,271 $ 10,515 $ 15,397 $ 20,694 $ 26,624 $ 33,228
Taxes (On Deductible Items) @ 38.0% 9,683 6,606 8,461 10,474 12,727 15,237
----------
Net Income $ 13,588 $ 3,909 $ 6,936 $ 10,220 $ 13,897 $ 17,991
========== ==============================================================
Add: Depreciation 1,591 1,803 2,035 2,270 2,507 2,748
Add: Amortization 3,844 8,368 8,368 8,368 8,368 8,368
Less: Capital Expenditures 2,592 2,868 3,162 3,475 3,807
Less: Change in Working Capital 6,255 7,577 8,100 8,614 9,111
--------------------------------------------------------------
Cash Flow Available including Terminal Value $ 5,234 $ 6,895 $ 9,596 $ 12,683 $ 509,403
Scheduled Term Repayments 11,000 11,000 11,000 11,000 67,611
Revolver Repayments (Borrowings) (5,766) (4,105) (1,404) 1,683 29,592
Mezzanine Debt Repayments -- -- -- -- 40,000
----------
Residual Equity Value 372,200
- -----------------------------------------------------------------------------------------------------------------------------------
Cash Flow to Mezzanine Debt Holders (40,000) 4,800 4,800 4,800 4,800 61,970
Mezzanine Debt IRR 18.0%
- -----------------------------------------------------------------------------------------------------------------------------------
Combined Cash Flow to Preferred & Common Equity (133,000) -- -- -- -- 355,030
Combined Equity IRR 21.7%
- -----------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------
Debt Balances: BEGINNING 2000 2001 2002 2003 2004
--------- --------------------------------------------------------------
Term A & B Debt 111,611 100,611 89,611 78,611 67,611 --
Revolver Debt 20,000 25,766 29,871 31,275 29,592 --
Mezzanine Debt 40,000 40,000 40,000 40,000 40,000 --
- -----------------------------------------------------------------------------------------------------------------------------------
EBITDA 33,663 37,510 42,146 47,048 52,339 58,025
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PROJECT LIBERTY (INCLUDING ACQUISITION OF TANGA William Blair & Company
Leveraged Re-Cap Analysis ($000s) Limited Liability Company
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Structure Assumptions:
<S> <C> <C> <C> <C>
Assumed Shares Outstanding: 12,790 SOURCES OF CASH AMOUNT % OF CAPITAL
Assumed Price Per Share for ReCap $ 18.25 Revolver 20,000 6.6%
Assumed Equity Value of Re-capitalization: 233,418 Term A & B Debt 111,611 36.6%
Implied Total Value (Equity Value less Excess Cash plus Debt) 297,111 Mezzanine Debt 40,000 13.1%
Total Value / 1999 EBITDA 8.8 Preferred Equity 132,000 43.3%
Senior Debt (Revolver & Term) as Multiple of 1999 EBITDA: 3.9 Common Equity 1,000 0.3%
Total Financing as Multiple 1999 EBITDA: 5.1 Excess Cash 307 0.1%
Pro Forma 1999 EBITDA: 33,663 -------
Exit at end of Year 5 304,918
Term & Revolver Interest Rate: 9.1% USES OF CASH
Mezzanine Debt Rate: 12.0% Existing Debt to be Paid Down 64,000
Mezzanine Debt Equity Warrants (%): 4.6% Equity to Owners 233,418
Preferred Stock Accrual Rate: 14.0% Transaction Costs 7,500
Assumed Exit Multiple of EBITDA: 8.5 x Contribution to Working Capital --
-------
304,918
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Resulting Coverage: 1999 2000 2001 2002 2003 2004
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EBITA/Interest Expense 2.12 2.45 2.85 3.36 4.04
EBITDA/Interest Expense 2.23 2.58 2.99 3.53 4.24
Total Debt to EBITDA 5.10 4.44 3.78 3.19 2.62 --
Senior Debt (Revolver & Term) to EBITDA 3.91 3.37 2.83 2.34 1.86 --
%
Equity to Existing Owners: OWNERSHIP
Amount Paid for Equity $ 233,418 Equity Required in Deal: 133,000 100.0%
Shares Owned by BG 2,080 BG Rolled Equity: 3,000 2.3%
% of BG Shares Rolled into Deal 8% --------------------
Dollar Amount Rolled by Insiders at assumed deal price $ 3,000 Additional Equity Required: 130,000 97.7%
Net Equity to be Paid Out $ 230,418 % of Old Equity Taken Out: 98.7%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Goodwill Amortization Detail: Interest Rate Calculation:
Tangible Book Value $ 4,218 LIBOR (6 Month) 6.03%
Purchase Price Paid $ 297,111 Revolver (300 Basis Points over LIBOR) 9.03%
New Goodwill $ 292,893 Term A Debt (300 Basis Points over LIBOR) 9.03%
Amortization Period 35 Term B Debt (325 Basis Points over LIBOR) 9.28%
Annual Amortization $ 8,368
Blended Interest Rate 9.14%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PROJECT LIBERTY (INCLUDING ACQUISITION OF TANGA)
Leveraged Re-Cap Analysis ($000s)
- --------------------------------------------------------------------------------
Sensitivity Analysis at Various Deal Prices -- Resulting Impact on Equity IRR
and EBITDA Multiple
<TABLE>
<CAPTION>
1999
Implied
Combined EBITDA
Deal Price Equity IRR Multiple
BASE CASE: ----------------------------------
<S> <C> <C> <C> <C>
Price on 12/22/99 $ 14.00 $14.00 35.2% 7.2
Assumed Premium in Deal (Base Case) 30.4% $14.25 34.1% 7.3
Total Value to 1999 EBITDA 8.8 x $14.50 33.1% 7.4
Total Value to 2000 EBITDA 7.9 x $14.75 32.1% 7.5
$15.00 31.2% 7.6
$17.25 24.2% 8.4
$17.50 23.5% 8.5
$17.75 22.9% 8.6
$18.00 22.3% 8.7
----------------------------------
$18.25 21.7% 8.8
----------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
FORM OF FAIRNESS OPINION
- -------------------------------------------------------- William Blair & Company
21 Limited Liability Company
<PAGE>
William Blair & Company
Limited Liability Company
DRAFT FORM OF FAIRNESS OPINION
December 22, 1999
Special Committee of the Board of Directors
Board of Directors
Wilmar Industries, Inc.
303 Harper Drive
Moorestown, NJ 08057
Gentlemen:
We understand that Wilmar Industries, Inc. (the "Company") and W
Acquisitions, Inc. ("Merger Sub") are proposing to enter into an Agreement and
Plan of Merger ("the "Agreement") which will provide, among other things, for
the merger (the "Merger") of Merger Sub with and into the Company. Under the
terms set forth in a draft of the Agreement dated December 22, 1999, at the
effective time of the Merger (the "Effective Time"), each share of common stock,
no par value, of the Company (the "Common Stock") issued and outstanding
immediately prior to the Effective Time (other than Shares owned by Merger Sub
shall by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive, without interest, an amount in
cash equal to $18.25 (the "Merger Consideration"). The terms and conditions of
the Merger are set out more fully in the Agreement.
You have asked us whether, in our opinion, the Merger Consideration is
fair from a financial point of view and as of the date hereof to the "Holders of
Common Stock". The "Holders of Common Stock" shall be defined as all holders of
Common Stock outstanding as of the date hereof, other than Merger Sub, any
affiliates of Merger Sub, and the Chairman of the Company (the "Chairman").
For purposes of this opinion we have, among other things:
(i) reviewed certain publicly available financial statements and
other business and financial information of the Company;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning the Company prepared by
the Company's management;
(iii) reviewed drafts dated December 17, 1999 of certain financial
forecasts and other forward looking financial information
prepared by the Company's management;
(iv) held discussions with the management of the Company concerning
the business, past and current operations, financial condition
and future prospects of the Company;
(v) reviewed the financial terms and conditions set forth in the
draft of the Agreement furnished to us;
222 WEST ADAMS STREET CHICAGO, ILLINOIS 60606 312-236-1600
<PAGE>
2
(vi) reviewed the stock price and trading history of Company Common
Stock;
(vii) compared the financial performance of the Company and the prices
and trading activity of Company Common Stock with that of
certain other publicly traded companies comparable with the
Company;
(viii) compared the financial terms of the Merger with the financial
terms, to the extent publicly available, of other transactions
that we deemed relevant;
(ix) prepared a discounted cash flow analysis of the Company;
(x) prepared a leveraged acquisition analysis of the Company;
(xi) participated in discussions among representatives of the Company
and its legal advisors; and
(xii) made such other studies and inquiries, and took into account
such other matters, as we deemed relevant, including our
assessment of general economic, market and monetary conditions
as of the date hereof.
In our review and analysis, and in arriving at our opinion, we have
assumed and relied upon the accuracy and completeness of all of the financial
and other information provided to us (including information furnished to us
orally or otherwise discussed with us by the Company's management) or publicly
available and have neither attempted to verify, nor assumed responsibility for
verifying, any of such information. We have relied upon the assurances of the
Company's management that it is not aware of any facts that would make such
information inaccurate or misleading. Furthermore, we did not obtain or make, or
assume any responsibility for obtaining or making, any independent evaluation or
appraisal of the properties, assets or liabilities (contingent or otherwise) of
the Company, nor were we furnished with any such evaluation or appraisal. With
respect to the financial forecasts and projections (and the assumptions and
bases therefore) for the Company that we have reviewed, upon the advice of the
Company's management, we have assumed that such forecasts and projections have
been reasonably prepared in good faith on the basis of reasonable assumptions
and reflect the best currently available estimates and judgments of management
as to the future financial condition and performance of the Company, and we have
further assumed that such projections and forecasts will be realized in the
amounts and in the time periods currently estimated. We have assumed that the
Merger will be consummated upon the terms set forth in the Agreement without
material alteration thereof. In addition, we have assumed that the historical
financial statements of the Company reviewed by us have been prepared and fairly
presented in accordance with U.S. generally accepted accounting principles
consistently applied. We have relied as to all legal matters relevant to
rendering our opinion on the advice of counsel.
This opinion is necessarily based upon market, economic and other
conditions as in effect on, and information made available to us as of, the date
hereof. It should be understood that subsequent developments may affect the
conclusion expressed in this opinion and that we disclaim any undertaking or
obligation to advise any person of any change in any matter affecting this
opinion which may come or be brought to our attention after the date of this
opinion. Our opinion is limited to the fairness, from a financial point of view
and as to the date hereof, of the Merger Consideration to the Holders of Common
Stock. We do not express any opinion as to (i) the value of any employee
agreement or other arrangement entered into in connection with the Merger or
<PAGE>
3
(ii) any tax or other consequences that might result from the Merger. Our
opinion does not address the relative merits of the Merger and the other
business strategies that the Company's Board of Directors or the Special
Committee thereof has considered or may be considering, nor does it address the
decision of the Company's Board of Directors or the Special Committee thereof to
proceed with the Merger.
In connection with the preparation of our opinion, we were requested to
approach, and held discussions with certain third parties to solicit indications
of interest in a possible business combination with the Company.
William Blair & Company is nationally recognized investment banking firm
that has been engaged in the investment banking business since 1935. We
continually undertake the valuation of investment securities in connection with
public offerings, private placements, business combinations, estate and gift tax
valuations and similar transactions. We have acted as the investment banker to
the Company in connection with the Merger and will receive a fee from the
Company for our services, a significant portion of which is contingent upon
consummation of the Merger. In addition, the Company has agreed to indemnify us
for certain liabilities that may arise out of the rendering of this opinion.
In the past, we have provided certain investment banking services to the
Company for which we have been paid fees, including acting as co-managing
underwriter for two offerings of the Company's securities and providing advice
with respect to certain acquisitions. We maintain a market in the shares of
Company Common Stock. In the ordinary course of business, we may trade in the
Company's securities for our own account and the account of our customers and,
accordingly, may at any time hold a long or short position in the Company's
securities.
Our opinion expressed herein is provided for the information of the
Board of Directors of the Company and the Special Committee thereof in
connection with its evaluation of the Merger. Our opinion is not intended to be
and does not constitute a recommendation to any stockholder of the Company as to
how such stockholder should vote, or take any other action, with respect to the
Merger. This opinion may not be summarized, described or referred to or
furnished to any party except with our express prior written consent.
Based upon and subject to the foregoing considerations, it is our
opinion that, as of the date hereof, the Merger Consideration is fair to the
Holders of Common Stock, from a financial point of view.
Very truly yours,
-------------------------------
WILLIAM BLAIR & COMPANY, L.L.C.
<PAGE>
William Blair & Company, L.L.C.
222 West Adams Street, Chicago, Illionis 60606 312-236-1600
Chicago - London - Vaduz - Zurich
<PAGE>
WILLIAM BLAIR & COMPANY
Limited Liability Company
CORPORATE FINANCE
<PAGE>
CORPORATE FINANCE
[_]
PRELIMINARY TRANSACTION OVERVIEW AND VALUATION PRESENTATION
TO THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS
REGARDING
PROJECT LIBERTY
OCTOBER 4, 1999
William Blair & Company
Limited Liability Company
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
I. Overview of William Blair & Company
II. Background on Merger Discussion
o Long Term Overview
o Recent History
III. Comparison of Preliminary Proposals
o Terms and Conditions
o Comparison of Timetables
o Background on Tanga
o Background on Vikings
o Background on Patriots
o Implied Valuation Summary
IV. Preliminary Valuation Analysis for Eagles
A. Overview
o Historical and Projected Financials
o Stock Price / Volume Chart
o Research Analysts Estimates and Ratings
o Ownership Profile
o Distribution of Shares Trade
B. Valuation Analysis
o Comparable Public Companies
o Relative Index Performance
o Comparable Acquisitions
o Historical EBITDA Multiples
o Merger Premiums
o Discounted Cash Flow
o Leveraged Recapitalization
o Combination Analysis with Vikings
V. Preliminary Valuation Analysis for Vikings
A. Overview
o Historical and Projected Financials
o Stock Price / Volume Chart
o Relative Index Performance
o Research Analysts Estimates and Ratings
o Ownership Profile
o Distribution of Shares Traded
B. Valuation Analysis
o Comparable Public Companies
o Relative P/E Performance
o Discounted Cash Flow
VI. Possible Next Steps
William Blair & Company
- --------------------------------------------------------------------------------
2 Limited Liability Company
<PAGE>
- --------------------------------------------------------------------------------
OVERVIEW OF WILLIAM BLAIR & COMPANY
William Blair & Company
- --------------------------------------------------------------------------------
3 Limited Liability Company
<PAGE>
WILLIAM BLAIR & COMPANY
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
o FULL SERVICE INVESTMENT BANK FOUNDED IN 1935
o NATIONAL IN SCOPE, WITH INTERNATIONAL REACH
o FOCUSED ON GROWTH COMPANIES
o OVER 800 EMPLOYEES WORLDWIDE
o 100% OWNED BY ACTIVE PRINCIPALS
William Blair & Company
- --------------------------------------------------------------------------------
4 Limited Liability Company
<PAGE>
WILLIAM BLAIR & COMPANY OVERVIEW
- --------------------------------------------------------------------------------
CORPORATE FINANCE
o Serve High Quality Growth Companies
o Public Equity Financing
- Manage over 230 public offerings since 1992
- Approximately $21 billion of equity raised
since 1992
o Mergers & Acquisitions
- Over 150 transactions in the last ten years
- Over 60 transactions since 1997
o Private Equity Financing
EQUITY RESEARCH
o 36 industry analysts
o Follow over 275 companies
EQUITY SALES
o Domestic Institutional Equity Sales
- 24 salespeople with an average tenure of eight
years
- Cover all major institutions
- Over 700 institutional accounts throughout
the U.S.
o International Institutional Equity Sales
- 17 salespeople with an average tenure of
thirteen years
- Consistently one of the top distributors of OTC
stocks in Europe
- Over 200 institutional accounts outside the U.S.
o Retail Sales
- 85 salespeople
- Over $8 billion in customer assets
- Average $94 million of assets per broker
William Blair & Company
- --------------------------------------------------------------------------------
5 Limited Liability Company
<PAGE>
WILLIAM BLAIR & COMPANY OVERVIEW
- --------------------------------------------------------------------------------
TRADING
o Market Maker in 165 stocks
o Dominate trading in stocks Blair has brought public
DEBT FINANCE
o Over 150 corporate debt transactions since 1981
o 56 professionals with an average tenure of six years
o Value-added focus in corporate and public debt financing
INVESTMENT MANAGEMENT
o Over $10 billion in managed assets; six mutual funds
MERCHANT BANKING
o Six funds totaling over $920 million in committed capital
o Comprised of venture, buyout and mezzanine financing
activities
William Blair & Company
- --------------------------------------------------------------------------------
6 Limited Liability Company
<PAGE>
SPECIALTY DISTRIBUTION EXPERIENCE
- -------Overview of William Blair & Company--------------------------------------
EQUITY OFFERINGS:
$144,900,000 $38,640,000 $76,000,000
Convergent [GRAPHIC] [GRAPHIC]
Communications[LOGO]
Initial Public Offering Follow-On Offering Initial Public Offering
$25,550,000 $37,292,000
ScanSource[LOGO] AFTERMARKET CDW
TECHNOLOGY [LOGO]
CORP. [LOGO]
Follow-On Offering Follow-On Offering
$100,901,000 $80,454,000 $50,600,000
Barnett Inc. [LOGO] NCS HealthCare, Inc. WILMAR
[LOGO] [LOGO]
Initial Public Offering Initial Public Offering Initial Public Offering
$35,699,000 $38,250,000
PEAK [LOGO] CREATIVE COMPUTERS, INC.
[LOGO]
Follow-On Offering Initial Public Offering
$62,889,000 $80,850,000 $30,188,000
PC Connection, Inc. [LOGO] DAISYTEK[LOGO] BARNETT INC.
[LOGO]
Initial Public Offering Follow-On Offering Follow-On Offering
$139,035,000 $77,500,000 $229,123,000
NCS HealthCare, Inc. WILMAR HENRY SCHEIN
[LOGO] [LOGO] [LOGO]
Follow-On Offering Follow-On Offering Follow-On Offering
$113,436,000 $67,719,000 $60,375,000
HENRY SCHEIN CDW CREATIVE COMPUTERS, INC.
[LOGO] [LOGO] [LOGO]
Initial Public Offering Follow-On Offering Follow-On Offering
$26,220,000 $41,800,000
TESSCO [LOGO] CDW
[LOGO]
Initial Public Offering Follow-On Offering
William Blair & Company
- --------------------------------------------------------------------------------
7 Limited Liability Company
<PAGE>
SPECIALTY DISTRIBUTION EXPERIENCE (CONTINUED)
- --------------------------------------------------------------------------------
MERGERS & ACQUISITIONS:
Not Disclosed $355,700,000
Cypress Medical Products[LOGO] AmeriPride
Services, Inc.
[LOGO]
Acquired by Cypress Acquired by ASI Merger
Medical Holding Corp. Corp.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
$7,000,000 $150,000,000
TESSCO[LOGO] inmac[LOGO]
Acquired Cartwright Acquired by Micro Warehouse,
Communication Inc.
$65,000,000 Not Disclosed $202,100,000 $236,000,000
HENRY SCHEIN UNIFORMS TO YOU PEAK RESEARCH
[LOGO] [LOGO] [LOGO] MEDICAL, INC.
[LOGO]
Acquired General Acquired by Cintas Acquired by Moore Acquired by
Injectables & Vaccines Corporation Limited Baxter International
$39,000,000 $407,900,000 Not Disclosed
LCR Corporation United Stationers GRAINGER
[LOGO] [LOGO] [LOGO]
Acquired by Acquired by
Edmundson International Associated Stationers Buy-Side Advisory
</TABLE>
William Blair & Company
- --------------------------------------------------------------------------------
8 Limited Liability Company
<PAGE>
<TABLE>
<CAPTION>
RECENT WILLIAM BLAIR PUBLIC ADVISORIES
- -------------------------------------------------------------------------------------------------
DATE SELLER BUYER VALUE
<S> <C> <C> <C> <C>
3/16/98 Safety-Kleen Corporation * Laidlaw Environmental Services $2.1 Billion
11/23/98 Electronic Payment Services Concord EFS * $1.0 Billion
10/21/97 International Dairy Queen * Bershire Hathaway $585 Million
8/25/97 Mosinee Paper * Wausau Paper $442 Million
10/22/98 Jones Lang Woolton LaSalle Partners * $435 Million
8/24/99 Periphonics* (pending) Nortel Networks Corporation $394 Million
3/26/99 Juno Lighting * Fremont Partners $368 Million
2/3/97 Kysor Industrial * Scotsman Industries $344 Million
10/25/98 TheraTech, Inc. * Watson Pharmaceuticals $300 Million
12/1/97 Uarco, Inc. Standard Register * $245 Million
12/4/96 Research Medical * Baxter $236 Million
4/23/97 Peak Technologies * Moore Corporation $202 Million
3/5/98 Uniforms To You * Cintas Corporation $196 Million
3/25/99 MR Group PLC * Lason, Inc. $160 Million
11/23/98 Infratest-Burke NFO Worldwide * $145 Million
9/5/97 Versa Technologies * Applied Power $141 Million
5/28/98 Donnelley Enterprise Solutions * Bowne & Company $110 Million
5/19/99 First Commonwealth * Guardian Life $98 Million
</TABLE>
William Blair & Company
- --------------------------------------------------------------------------------
9 * Indicates Blair Client Limited Liability Company
<PAGE>
RELEVANT RESEARCH
- --------------------------------------------------------------------------------
o Airgas o Miami Computer Supply
o Barnett o Micro Warehouse
o Black Box o MSC Industrial Direct Co.
o Boise Cascade Office Products o PC Connection
o Cardinal Health o NCS HealthCare
o CDW Computer Center o Omnicare
o Cintas Corporation o Patterson Dental
o Creative Computer Centers o Sears
o Daisytek o Servicemastesr
o Fastenal Company o Tessco Technologies
o Global Imaging o W.W. Grainger
o Henry Schein o Wilmar Industries
o Home Depot
o Lowe's
William Blair & Company
- --------------------------------------------------------------------------------
10 Limited Liability Company
<PAGE>
RELATIONSHIP WITH EAGLES
- --------------------------------------------------------------------------------
o Co-manager on IPO
o Co-manager on Follow-on
o Consistent Research Coverage
o Introductions and Discussions with:
> Seahawks
> Dolfins
> Falcons
> Vikings
o Inquiries into:
> Cardinals
> Cowboys
> Packers
o Prepared potential selling
memorandum
o Advised on:
> Colts
> Share Repurchase
> Tanga
> Quarterly Press Release
> Key Hires
William Blair & Company
- --------------------------------------------------------------------------------
11 Limited Liability Company
<PAGE>
TRADING SUPPORT FOR EAGLES
- --------------------------------------------------------------------------------
PERCENTAGE OF TOTAL VOLUME
JANUARY 1, 1998 TO PRESENT
[CHART OMITTED]
50.5%-
40.0%-
38.1%
30.0%-
27.2%
20.0%-
10.0%-
7.4%
4.0% 3.9%
0.0%-
- --------------------------------------------------------------------------------
WILLIAM BLAIR ROBERT BAIRD BT ALEX BROWN SPEAR LEEDS HERZOG HEINE
William Blair & Company
- --------------------------------------------------------------------------------
12 Limited Liability Company
<PAGE>
<TABLE>
<CAPTION>
WILLIAM BLAIR TEAM
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT BANKING - CHICAGO
<S> <C> <C> <C>
Kelly Drake Rick Stearns Brett Paschke Todd Buehl
o Principal o Vice President o Associate o Analyst
o 8 years at Blair o 6 years at Blair o 3 years at Blair o 2 years at Blair
o 10 years industry o 7 years industry o 7 years industry o Wharton (BS)
experience experience experience
o Swarthmore (BA) o Amherst (BA) o Princeton (BA)
o Chicago (MBA) o Kellogg (MBA) o Harvard (MBA)
INVESTMENT BANKING - LONDON INVESTMENT BANKING - DEBT
o Office in London for 15 years o 21 Debt Finance professionals
o 7 Corporate Finance o Experience in senior and
professionals PROJECT LIBERTY mezzanine debt
o Over 45 years of industry
experience
RESEARCH
o 36 Research Analysts
o Over 275 Companies Covered
o Chuck McDonald covers Eagles
o Significant Business-to-Business
Distribution Coverage
</TABLE>
William Blair & Company
- --------------------------------------------------------------------------------
13 Limited Liability Company
<PAGE>
TRANSACTION TEAM BIOGRAPHIES
- --------------------------------------------------------------------------------
KELLEY DRAKE - PRINCIPAL, joined William Blair & Company in 1992 and has been
involved in more than 40 merger advisory assignments and equity offerings. Kelly
graduated from Swathmore College (BA) in 1987 with a degree in Economics with
Distinction and Phi Beta Kappa and the University of Chicago (MBA) in Finance
with Honors in 1992. Between years of business school, Kelley worked for Lehman
Brothers in New York. Prior to business school, Kelley worked for three years in
management consulting in New York and London for Putnam, Hayes and Bartlett and
National Economic Research Associates providing expert economic analysis to
companies involved in a variety of complex litigation and regulatory matters.
RICK STEARNS is a vice president in William Blair & Company's Corporate Finance
Department. While at William Blair, he has worked on a variety of transactions
including initial public offerings, secondary offerings, public company mergers,
private company sales, and private placements of equity. Prior to business
school, Rick worked as a financial analysts at William Blair for 3 years and as
financial consultant to start-up companies in San Francisco for a year. During
business school he worked for Lehman Brothers in New York. Rick received his
B.A. from Amherst College in 1990 and graduated with highest honors from the
J.L. Kellogg Graduate School of Management in 1996 where he received his M.M.
BRETT L. PASCHKE is an associate in the Business Services Group of the Corporate
Finance Department at William Blair & Company. Brett has over seven years of
investment banking and transaction experience. While at William Blair, he has
worked on a variety of transactions including initial public offerings,
secondary offerings, public company mergers, private company sales, and private
placements. Recently completed deals include equity offerings for Acxiom,
Ritchie Bros., OneSource, Miami Computer Supply, Charles River Associates,
Professional Detailing Inc., Hon Industries, and Metzler Group; the leveraged
recapitalization of Juno Lighting; the sale of MSCI to Lason, the merger of
Mosinee and Wausau paper companies,; and a private placements of convertible
preferred equity for Paladin and Marketing Services Group. Prior to joining
William Blair, Brett worked as a financial analyst in the Investment Banking
Division at Goldman, Sachs & Co. in both New York and Los Angeles, and for KPMG
Peat Marwick. While at KPMG, Brett spent three years working on privatization
transactions in the former Soviet Union. Brett has an A.B. with honors from
Princeton University and an MBA with honors from the Harvard Business School.
TODD M. BUEHL joined the Corporate Finance department of William Blair & Company
as a financial analysts in 1998 and has worked on a number of merger advisories
and equity offerings. He previously worked as an acquisition analyst for ABC
Supply Co., Inc., a distributor of building products. Todd earned his BS with
honors from the Wharton School of the University of Pennsylvania, with
concentrations in Finance and Real Estate in 1998.
William Blair & Company
- --------------------------------------------------------------------------------
14 Limited Liability Company
<PAGE>
- --------------------------------------------------------------------------------
BACKGROUND ON MERGER
DISCUSSIONS
William Blair & Company
- --------------------------------------------------------------------------------
15 Limited Liability Company
<PAGE>
BACKGROUND ON MERGER DISCUSSIONS
- --------------------------------------------------------------------------------
o Over the last 2 years substantial change in competitive landscape
o Consolidation opportunities in core market more constrained and competitive
o Substantial reduction in equity valuations
- Reduced earnings expectations
- Concerns about future long term growth
- Small cap stocks significant underperformance
- Distribution section valuations down considerably
- "Consolidators" valuations down considerably
o Exploration into ways to enhance shareholder value
- Merger with strategic buyer
- Share repurchases
- Acquisition program acceleration
- Leveraged buyout / recapitalization
o Discussions with numerous possible merger partners
o Two potentially attractive preliminary proposals to consider
William Blair & Company
- --------------------------------------------------------------------------------
16 Limited Liability Company
<PAGE>
LONG TERM HISTORY
- --------------------------------------------------------------------------------
EAGLES INDEX
$35 -250
$30
$25 -200
$20
$15 -150
$10
$5 -50
$0 0
1/26/96
4/19/96
7/12/96
10/4/96 EAGLES
12/27/96
3/21/97 COMPS INDEX
6/13/97
9/5/97 S&P 500 INDEX
11/28/97
2/20/98
5/15/98
8/7/98
10/30/98
1/22/99
4/16/99
7/9/99
9/29/99
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
3/95 Summit Recap
1/96 IPO at $11.00
7/96 Follow-On at $17.85
1/97 Dolfins acquires 49ners
5/97 - 10/97 Discussions to acquire Colts
7/97 Jets acquires Bills
9/97 - 10/97 Initial meetings with Seahawks and Bucks
2/98 Chargers acquires Colts
2/98 - 7/98 Extensive discussions with Seahawks and Bucks
8/98 Packers acquires Jets
8/98 - 9/98 Discussions with Falcons
Indication received, pooling transaction
Implied value of $19.00 - $25.00/share
Exchange ration of .95 to 1 (MSM $20.00 - $27.00)
10/98 Discussions with Falcons terminate
10/98 Announce in-line Q3 but lower 1999 EPS guidance, $1.20 to $1.10
10/98 Grebe hired as COO
11/98 Discussions with Dolfins and Packers
2/99 Discuss options, consider putting out book, decide against
3/99 Announce in-line Q4 but lower 1999 EPS guidance, $1.10 to $1.01
3/99 Commence 1 mil share repurchase program (completed 6/99)
4/99 Sanford hired as CFO
5/99 Review of options: additional share repurchase vs. acquisitions
5/99 Begin receiving inquiries from financial buyers about MBO
5/99 Tanga acquisition discussions commence
6/99 Blair makes initial contact with Vikings
William Blair & Company
- --------------------------------------------------------------------------------
17 Limited Liability Company
<PAGE>
RECENT HISTORY
- --------------------------------------------------------------------------------
EAGLES VIKINGS & INDEX
$20 -$50
$18 -$45
$16 -$40
$14 -$35
$12 -$30
-$25
$10 -$20
4/2/99
4/16/99
4/30/99
5/14/99 EAGLES
5/28/99
6/11/99 VIKINGS
6/25/99
7/9/99 S&P 500 INDEX
7/23/99
8/6/99
8/20/99
9/3/99
9/17/99
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
5/27/99 Meeting regarding Tanga with DKM in New York
6/09/99 Received limited but essential Tanga information
6/17/99 Submitted proposal for Tanga $84 - $86 (7.6x EBITDA)
7/1/99 Received additional limited information from Tanga
7/1/99 Meeting with key Vikings executives in Chicago (ECL $43.12)
7/2/99 Agreed on revised $90 mil prices for Tanga (8x EBITDA)
8/3/99 Learned of accounting concerns at Tanga; probable delay
8/3/99 Meeting with key Vikings executives & CEO in Mpls (ECL $42.56)
8/13/99 Vikings board discussed possible merger with Eagles
8/19/99 Received Vikings proposal $20 - $22/share pooling (ECL $39.50)
9/1/99 Vikings conducted follow-up diligence in Philadelphia, 8 members
of management
9/15/99 Received revised proposal $22/share pooling (ECL $35.62)
9/17/99 Received Patriots proposal $18/share cash
9/21/99 Learned Tanga will be further delayed until Oct. 8 - Oct. 15
9/27 - 10/1 Patriots verbally increased proposal to $19.00/ share cash
Vikings verbally provided detail on terms:
With Tanga ($22.00), Without Tanga ($20.00)
Collar provisions established
William Blair & Company
- --------------------------------------------------------------------------------
18 Limited Liability Company
<PAGE>
- --------------------------------------------------------------------------------
COMPARISON OF PRELIMINARY
PROPOSALS
William Blair & Company
- --------------------------------------------------------------------------------
19 Limited Liability Company
<PAGE>
PRELIMINARY TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
VIKINGS
o All stock pooling, tax free exchange
-> $22.00/share with Tanga
-> $20.00/share without Tanga
o Both subject to collar provisions, $3.00 plus/minus
o Lower base price if Vikings price at announcement falls below $34.00
without Tanga or below $35.00 with Tanga
Subject to:
o Completion of due diligence
o Negotiation of definitive merger agreement
o Confirmation of pooling account treatment
o Board approval
o Seeking exclusivity for sixty days
PATRIOTS
o All cash acquisition at $19.00/share
o No financing contingency
o Maybe a two step tender offer for shares
o More likely a proxy/merger process
Subject to:
o Receiving debt financing commitments
o Receiving equity participation commitments
o Finalizing due diligence
o Negotiation of definitive agreement
o Seeking exclusivity period
William Blair & Company
- --------------------------------------------------------------------------------
20 Limited Liability Company
<PAGE>
DETAIL ON VIKINGS COLLAR PROVISIONS
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
o When we began discussions with Vikings, their stock was
around $40.00/share
o At $22.00 price for Eagles, would have implied an exchange
ration of .55 to 1
o Would have resulted in the issuance of 7.1 mil Vikings
shares for the 12.9 mil Eagles shares outstanding
o As stock price has fallen, Vikings has held the $22.00
value for Eagles down to $35.00 price for Vikings shares
o At $35.00 Vikings price, exchange ration is .63 to 1,
resulting in 8.1 mil Vikings shares issued to Eagles (14%
more)
o Base price (of $22.00 with Tanga and $20.00 without Tanga)
is reduced if Vikings price falls below $35.00 and
$34.00 respectively
o Base price and symmetrical $3.00 collar would be set at
announcement
o Base price would depend on 10 day avg. in Vikings price at
announcement
o Eagles would have a walkaway right if Vikings fell too far
below low end of collar range
William Blair & Company
- --------------------------------------------------------------------------------
21 Limited Liability Company
<PAGE>
<TABLE>
<CAPTION>
DETAIL ON VIKINGS COLLAR PROVISIONS
- ------------------------------------------------------------------------------------------------------------------------------------
o Vikings latest price on Friday 10/01/99: $33.31 BASE PRICE
------------------------------
ALONE WITH TANGA
-------------- -----------
$19.59 $20.93
EAGLES ALONE
VALUE PER SHARE RECEIVED AT CLOSING IF STOCK AT CLOSING IS:
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRICE AT $27.00 $28.00 $29.00 $30.00 $31.00 $32.00 $33.00 $34.00 $35.00 $36.00
------------------------------------------------------------------------------------------------------------
ANNOUNCE:
$31.00 $17.58 $18.24 $18.24 $18.24 $18.24 $18.24 $18.24 $18.24 $18.77 $19.31
$32.00 $17.53 $18.17 $18.82 $18.82 $18.82 $18.82 $18.82 $18.82 $18.82 $19.36
- ------------------- ---------------------------------------------------------------------------
$33.00 $17.47 $18.12 $18.76 $19.41 $19.41 $19.41 $19.41 $19.41 $19.41 $19.41
- ------------------- ---------------------------------------------------------------------------
$34.00 $17.42 $18.06 $18.71 $19.35 $20.00 $20.00 $20.00 $20.00 $20.00 $20.00
- ------------------- ----------------------------------------------------------------
$35.00 $16.88 $17.50 $18.13 $18.75 $19.38 $20.00 $20.00 $20.00 $20.00 $20.00
- ------------------- -----------------------------------------------------
$36.00 $18.00 $18.67 $19.33 $20.00 $20.67 $21.33 $22.00 $22.00 $22.00 $22.00
$37.00 $17.47 $18.12 $18.76 $19.41 $20.06 $20.71 $21.35 $22.00 $22.00 $22.00
$38.00 $16.97 $17.60 $18.23 $18.86 $19.49 $20.11 $20.74 $21.37 $22.00 $22.00
EAGLES ALONE
VALUE PER SHARE RECEIVED AT CLOSING IF STOCK AT CLOSING IS:
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PRICE AT $37.00 $38.00 $39.00 $40.00 $41.00 $42.00
-------------------------------------------------------------------
ANNOUNCE:
$31.00 $19.84 $20.38 $20.92 $21.45 $21.99 $22.53
$32.00 $19.90 $20.44 $20.97 $21.51 $22.05 $22.59
- -------------------
$33.00 $19.95 $20.49 $21.03 $51.57 $22.11 $22.65
- ------------------- -------------
$34.00 $20.00 $20.54 $21.08 $21.62 $22.16 $22.70
- ------------------- ------------------------
$35.00 $20.00 $20.00 $20.53 $21.05 $21.58 $22.11
- ------------------- ------------------------
$36.00 $22.00 $22.00 $22.00 $22.56 $23.13 $23.69
$37.00 $22.00 $22.00 $22.00 $22.00 $22.55 $23.10
$38.00 $22.00 $22.00 $22.00 $22.00 $22.00 $22.54
</TABLE>
<TABLE>
<CAPTION>
EAGLES WITH TANGA
VALUE PER SHARE RECEIVED AT CLOSING IF STOCK AT CLOSING IS:
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRICE AT $27.00 $28.00 $29.00 $30.00 $31.00 $32.00 $33.00 $34.00 $35.00 $36.00
------------------------------------------------------------------------------------------------------------
ANNOUNCE:
$31.00 $18.79 $19.49 $19.49 $19.49 $19.49 $19.49 $19.49 $19.49 $20.06 $20.63
$32.00 $18.73 $19.42 $20.11 $20.11 $20.11 $20.11 $20.11 $20.11 $20.11 $20.69
- ------------------- ----------------------------------------------------------------------------------
$33.00 $18.67 $19.36 $20.05 $20.74 $20.74 $20.74 $20.74 $20.74 $20.74 $20.74
- ------------------- ------------------------------------------------------------------------
$34.00 $18.61 $19.30 $19.99 $20.68 $21.37 $21.37 $21.37 $21.37 $21.37 $21.37
- ------------------- -------------------------------------------------------------
$35.00 $18.56 $19.25 $19.94 $20.63 $21.31 $22.00 $22.00 $22.00 $22.00 $22.00
- ------------------- --------------------------------------------------
$36.00 $18.00 $18.67 $19.33 $20.00 $20.67 $21.33 $22.00 $22.00 $22.00 $22.00
$37.00 $17.47 $18.12 $18.76 $19.41 $20.06 $20.71 $21.35 $22.00 $22.00 $22.00
$38.00 $16.97 $17.60 $18.23 $18.86 $19.49 $20.11 $20.74 $21.37 $22.00 $22.00
EAGLES WITH TANGA
VALUE PER SHARE RECEIVED AT CLOSING IF STOCK AT CLOSING IS:
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PRICE AT $37.00 $38.00 $39.00 $40.00 $41.00 $42.00
------------------------------------------------------------------
ANNOUNCE:
$31.00 $21.21 $21.78 $22.35 $22.92 $23.50 $24.07
$32.00 $21.26 $21.84 $22.41 $22.99 $23.56 $24.14
- -------------------
$33.00 $21.32 $21.90 $22.47 $23.05 $23.62 $24.20
- ------------------- --------
$34.00 $21.37 $21.95 $22.53 $23.10 $23.68 $24.26
- ------------------- -------------------
$35.00 $22.00 $22.00 $22.58 $23.16 $23.74 $24.32
- ------------------- -------------------
$36.00 $22.00 $22.00 $22.00 $22.56 $23.13 $23.69
$37.00 $22.00 $22.00 $22.00 $22.00 $22.55 $23.10
$38.00 $22.00 $22.00 $22.00 $22.00 $22.00 $22.54
</TABLE>
William Blair & Company
- --------------------------------------------------------------------------------
22 Limited Liability Company
<PAGE>
COMPARISON OF TIMETABLES
- --------------------------------------------------------------------------------
VIKINGS
Likely Timing (without Tanga)
Oct. 4th Continue due diligence, negotiate definitive
merger agreement
Oct. 29th Board approval, sign definitive agreement, set
price and collar, announce transaction
Nov. 8th File preliminary proxy with SEC and make HSR
filing
Dec. 8th Receive SEC comments and respond with review (10
days without)
Dec. 22nd Receive clearance from SEC and HSR early
termination
Set shareholder meeting date and mail Proxy's
Jan. 22nd Shareholder vote, approve transaction, close
PATRIOTS
Likely Timing Assuming Tender Offer (without Tanga)
Oct. 4th Continue due diligence, negotiate definitive
merger agreement
Oct. 29th Receive financing commitments,
Board approval, sign definitive agreement,
announce transaction
Nov. 8th File tender offer documents launch tender and
working HSR file
Dec. 6th Close tender (1st half)
Dec. 13th o if greater than or equal to 90% tender, can
close merger within week short form
- --------------------------------------------------------------------------------
Dec. 16th o if less than or equal to 90% tender, file
proxy with SEC, 10 days no review
Jan. 15th Shareholder vote to close out the back end, close
transaction
William Blair & Company
- --------------------------------------------------------------------------------
23 Limited Liability Company
<PAGE>
BACKGROUND ON TANGA
- --------------------------------------------------------------------------------
Business Profile
o Owned for 20+ years as one of several portfolio companies
of DKM, a financial holding company based in New York
o Leader in providing plumbing repair parts to institutional
market
o Large direct sales force, 200 reps
o Strong reputation and brand name
o Four distribution centers, U.S. and Canada
o Diversified national consumer base across all key
institutional markets Education, Hospital, Office
Buildings, Lodgings, Nursing Homes, Government, etc.
o Aging management team
o Recognize need to expand distribution, product line,
systems to grow more rapidly
Financial Profile
o $75 mil revenues, modest CAGR growth of 3.5% 1995-1998
o Highly profitable, $11.2 mil EBITDA, 14.8% vs. Eagles 10.6%
o High merchandise gross margins, 55% vs. Eagles 43%
Strategic Rationale for Acquisition
o Launches Eagles into leading position in institutional
market
o Opportunities to expand Tanga's product line and
distribution
o Purchasing leverage resulting from product overlap
o Administrative cost savings resulting from consolidation of
back office
Financial Impact of Transaction
o $90 mil purchase price, all cash
o 8.0x EBITDA
o Use $20.0 mil excess cash, borrow remaining $70 mil
o Debt/pro forma EBITDA, 2x
o Highly accretive to EPS by $0.08 in 2000 or 7% using
conservative assumptions
o Opportunities to substantially accelerate growth and
profitability over long term
William Blair & Company
- --------------------------------------------------------------------------------
24 Limited Liability Company
<PAGE>
BACKGROUND ON VIKINGS
- --------------------------------------------------------------------------------
Business Profile
o $2.8 billion global leader in cleaning and sanitizing
o #1 position in 7 of 8 markets
o (professional products, institutional, food &
beverage, pest elimination, Kay (quick serve),
textile care, kitchen equipment repair, vehicle
care)
o Fragmented competition in each line of business
o Consistent track record in growth in revenues, 5 year CAGR
of revenues (11.4%) and EPS (13.9%)
o Diverse institutional customer base (restaurants, lodging,
healthcare, education, food & beverage)
o Powerful sales and service organization, 8,700 strong
o New product development strength a key to growth and
margins
o High levels of recurring revenues, systems & consumables
o Very strong national accounts relationships
o "Circle customer, circle globe" strategy
o Benefit from global leadership position as customers
consolidate vendor base
Financial Profile
o $2.0 billion revenues U.S., $.8 billion in 50% owned Henkel
JV, Europe
o 55% gross margins, 20% EBITDA margins
o 134 million shares at $34.00, $4.6 billion market cap
o Strong balance sheet, debt/cap of 30%, debt/EBITDA of .8x
o Have historically traded generally in line or slight
premium to the S&P 500 multiple
o Have grown EPS more rapidly then the S&P 500, 13-15% vs.
5-9%
o Combination of 7-10% organic growth and accretive
acquisitions
o Trade at 23.1x 2000 EPS ($34/$1.47) vs. S&P 500 at 29.0x
o Trades at 11.1x LTM EBITDA
o Henkel, very large German specialty chemicals company and
JV partner, owns 24%, CEO Al Schuman owns 1%
o Pays a quarterly dividend of $0.105 per share, or $0.42
annually, resulting in a 1.3% yield
William Blair & Company
- --------------------------------------------------------------------------------
25 Limited Liability Company
<PAGE>
VIKINGS EPS & RELATIVE P/E
- --------------------------------------------------------------------------------
[CHART OMITTED]
$1.40 35x
$1.20 30x
$1.00 25x
$0.80 20x
$0.60 15x
$0.40 10x
$0.20 5x
$0.00 0x
- --------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 LTM*
EPS ECL P/E S&P P/E
* LTM period ended 6/30/99
William Blair & Company
- --------------------------------------------------------------------------------
26 Limited Liability Company
<PAGE>
BACKGROUND ON VIKINGS
- --------------------------------------------------------------------------------
o ADVANTAGES OF VIKINGS MERGER WITH EAGLES:
- Adds new complementary business line for institutional
accounts ("circle customer")
- Leverages strong relationships with national accounts to
accelerate Eagles institutional growth
- Eagles provides strong organic growth and platform for
additional acquisitions
- Expand Vikings product offering to multifamily housing
(pest elimination, janitorial supplies)
- Possibly utilize Eagles distribution for Vikings
fulfillment
- Accretive to earnings and enhances reported growth rates,
size and market cap
o ADDITIONAL ADVANTAGES OF MERGER WITH EAGLES AFTER TANGA IS COMPLETED
INCLUDE:
- Vikings acquiring business with already strong
institutional presence
- Better received and understood by Wall Street
- Allows Vikings to better justify substantial premium and
pay higher price per share for Eagles, same EBITDA multiple
- Provides for rapid reported revenue growth (purchase
accounting for Tanga acquisition)
- Eagles margins blended with Tanga are higher and more
consistent with Vikings margins
William Blair & Company
- --------------------------------------------------------------------------------
27 Limited Liability Company
<PAGE>
BACKGROUND ON PATRIOTS
- --------------------------------------------------------------------------------
o Parthenon Group
- Well respected high-end strategy consulting firm (Bain,
BCG, McKinsey)
- Formed in 1991, has $35 mil in revenue, 140 employees,
offices in Boston and London
o Parthenon Capital
- Founded in 1998
- $350 million equity and subdebt fund
- Investors in fund include:
Chase, Bank of America, BancBoston, Duke
University, Oregon State Treasury, General Mills,
GM, Mobil, etc.
- Staff of 19 including 13 professionals
- Strong private equity backgrounds (Bain, Summit, etc.)
- Ernest Jacquet and John Rutherford, managing partners
- 5 transactions closed to date
- Leverage the Parthenon Group Consultancy for strategic
advice for portfolio companies
- Credible, well respected group with intimate knowledge of
Eagles
- Direct equity financing capability for around 1/2 of
required amount
$110-$120 equity required without Tanga
$150-$160 equity required with Tanga
- Access to remainder from limited partners
William Blair & Company
- --------------------------------------------------------------------------------
28 Limited Liability Company
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY
IMPLIED VALUATION ANALYSIS
- ----------------------------------------------------------------------------------------------------------------------------
Dollars in millions, except per share amounts
<S> <C> <C>
---------------- ----------------
Assumed Share Price $12.75 $18.00
---------------- ----------------
Premium to 9/30/99 Closing Price 0.0% 41.2%
Diluted Shares Outstanding 12.9 12.9
EAGLES ALONE:
- ----------------------------------------------------------------------------------------------------------------------------
Implied Market Capitalization $164.5 $232.2
Net Debt Outstanding $(23.0) $(23.0)
---------------- ----------------
Total Value $141.5 $209.2
EAGLES RESULT: IMPLIED MULTIPLES
Total Value / 99E Revenue $ 217.4 0.65 0.96
----------------
Total Value / 99E EBITDA $ 22.8 6.2 9.2
----------------
Price per Share / 99E EPS $ 1.03 12.4 17.5
Price per Share / 00E EPS $ 1.21 10.5 14.9
- ----------------------------------------------------------------------------------------------------------------------------
PROJECT LIBERTY
IMPLIED VALUATION ANALYSIS
- ------------------------------------------------------------------------------------------------------------------------------------
Dollars in millions, except per share amounts
<S> <C> <C> <C> <C> <C>
--------------- ---------------- ---------------- --------------- ----------------
Assumed Share Price $19.00 $20.00 $21.00 $22.00 $23.00
--------------- ---------------- ---------------- --------------- ----------------
Premium to 9/30/99 Closing Price 49.0% 56.9% 64.7% 72.5% 80.4%
Diluted Shares Outstanding 12.9 12.9 12.9 12.9 12.9
EAGLES ALONE:
- -------------------------------------------------------------------------------------------------------------------------------
Implied Market Capitalization $245.1 $258.0 $270.9 $283.8 $296.7
Net Debt Outstanding $(23.0) $(23.0) $(23.0) $(23.0) $(23.0)
--------------- ---------------- ---------------- --------------- ----------------
Total Value $222.1 $235.0 $247.9 $260.8 $273.7
IMPLIED MULTIPLES
Total Value / 99E Revenue 1.02 1.08 1.14 1.20 1.26
--------------- ----------------
Total Value / 99E EBITDA 9.7 10.3 10.9 11.4 12.0
--------------- ----------------
Price per Share / 99E EPS 18.4 19.4 20.4 21.4 22.3
Price per Share / 00E EPS 15.7 16.5 17.4 18.2 19.0
- -------------------------------------------------------------------------------------------------------------------------------
PRO FORMA EAGLES WITH TANGA:
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Implied Market Capitalization $164.5 $232.2
Net Debt Outstanding $69.0 $69.0
---------------- ---------------- -----
Total Value $233.5 $301.2
EAGLES RESULT: IMPLIED MULTIPLES
------------------- --------------------------------------------------------
Total Value / 99E Revenue $ 295.6 0.79 1.02
Total Value / 99E EBITDA $ 34.1 6.8 8.8
Price per Share / 99E EPS $ 1.10 11.6 16.4
Price per Share / 00E EPS $ 1.29 9.9 14.0
- ---------------------------------------------------------------------------------------------------------------------------------
PRO FORMA EAGLES WITH TANGA:
- -----------------------------------------------------------------------------------------------------------------------------
Implied Market Capitalization $245.1 $258.0 $270.9 $283.8 $296.7
Net Debt Outstanding $69.0 $69.0 $69.0 $69.0 $69.0
------------------ ------------------- ------------------ ------------------- ---------
Total Value $314.1 $327.0 $339.9 $352.8 $365.7
IMPLIED MULTIPLES
----------------------------------------------------------------------------------------
Total Value / 99E Revenue 1.06 1.11 1.15 1.19 1.24
----------
Total Value / 99E EBITDA 9.2 9.6 10.0 10.3 10.7
----------
Price per Share / 99E EPS 17.3 18.2 19.1 20.0 20.9
Price per Share /00E EPS 14.7 15.5 16.3 17.1 17.8
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
William Blair & Company
- --------------------------------------------------------------------------------
29 Limited Liability Company
<PAGE>
- --------------------------------------------------------------------------------
OVERVIEW OF EAGLES
William Blair & Company
- --------------------------------------------------------------------------------
30 Limited Liability Company
<PAGE>
<TABLE>
<CAPTION>
EAGLES STOCK PERFORMANCE
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
WEEKLY: SINCE IPO
<S> <C>
3,500,000 35.00
3,000,000 30.00
2,500,000 25.00
2,000,000 20.00
1,500,000 15.00
1,000,000 10.00
500,000 5.00
0 0
- ------------------------------------------------------------------------------------------------------------------
1/26/96 5/10/96 8/23/96 12/6/97 3/21/97 7/3/97 10/17/97 1/30/98 5/15/98 8/28/98 12/11/98 3/26/99 7/9/99
</TABLE>
VOLUME CLOSE
William Blair & Company
- --------------------------------------------------------------------------------
31 Limited Liability Company
<PAGE>
EAGLES RESEARCH ANALYSIS SUMMARY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ESTIMATES
---------------------------- LAST STOCK PRICE
INVESTMENT BANK ANALYST RATING 1999E 2000E LTGR% UPDATE AT UPDATE
- --------------- ------- ------ ---------------------------- ----- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William Blair & Company Chuck McDonald Strong Buy $1.03 $1.20 20.0% 9/28/99 $12.38
Detusche Banc Alex Brown Christopher Feiss Buy $1.01 $1.15 25.0% 9/19/99 $12.31
Robert Baird Jeffrey Germanotta Short-Term $1.03 $1.19 25.0% 9/12/99 $12.81
Market Perform
-------------------------------------------------------------------------------
AVERAGE $1.02 $1.18 23.3%
MEDIAN $1.03 $1.19 25.0%
-------------------------------------------------------------------------------
</TABLE>
William Blair & Company
- --------------------------------------------------------------------------------
32 Limited Liability Company
<PAGE>
- --------------------------------------------------------------------------------
EAGLES OWNERSHIP PROFILE
- --------------------------------------------------------------------------------
William Blair & Company
- --------------------------------------------------------------------------------
33 Limited Liability Company
<PAGE>
SUMMARY OF EAGLES HISTORICAL TRADING
- --------------------------------------------------------------------------------
o 24 million shares have traded in LTM as of 9/24/99
o Weighted average share price over that period is $15.50
o Highest volume of shares traded between $13.00 and $14.00
SUMMARY RESULTS:
% OF TRADING
VOLUME
BELOW THIS
PRICE PRICE
------------ ---------
$18.00 78.3%
$19.00 79.9%
$20.00 81.5%
$21.00 86.1%
$22.00 91.0%
William Blair & Company
- --------------------------------------------------------------------------------
34 Limited Liability Company
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY
EAGLES OWNERSHIP PROFILE
SHARES PERCENT LAST
OWNER NAME HELD HELD REPORT
- ----------------------------- --------- ------ --------
<S> <C> <C> <C>
OFFICERS & DIRECTORS SUBTOTAL 2,056,545 16.59%
INSTITUTIONAL SUBTOTAL 9,724,981 78.45%
RETAIL ACCOUNTS 615,474 4.96%
---------- ------
Total Shares Outstanding 12,397,000 100.00%
========== ======
OFFICERS & DIRECTORS
- --------------------
GREEN WILLIAMS S 2,013,536 16.24% 06/01/99
GROSS FRED B 43,009 0.35% 06/01/99
TOP INSITUTIONAL HOLDERS
- ------------------------
DRESDNER RCM GLOBAL INVESTORS 1,784,900 14.40% 06/30/99
T. ROWE PRICE ASSOCIATES, INC. 1,488,464 12.01% 06/30/99
ALEX BROWN CAP ADV & TRUST 1,362,457 10.99% 06/30/99
WASATCH ADVISORS, INC. 650,525 5.25% 06/30/99
DENVER INVESTMENT ADVR LLC 559,000 4.51% 06/30/99
J. & W. SELIGMAN & CO., INC. 470,000 3.79% 06/30/99
DIMENSIONAL FD ADVISORS, INC. 421,916 3.40% 06/30/99
WILLIAM HARRIS INVESTORS INC. 385,900 3.11% 06/30/99
WILLIAM BLAIR & CO. L.L.C. INV MGM 339,425 2.74% 06/30/99
D.F. DENT & COMPANY, INC. 242,681 1.96% 06/30/99
BANKERS TRUST N Y CORP 211,150 1.70% 06/30/99
FASCIANO, MICHAEL F 210,000 1.69% 06/30/99
OPPENHEIMER FUNDS INC. 200,000 1.61% 06/30/99
SKYLINE ASSET MANAGEMENT L.P. 171,700 1.39% 06/30/99
LASALLE NATIONAL BANK 169,300 1.37% 06/30/99
BARCLAYS BANK PLC 145,442 1.17% 06/30/99
HENDERSON INVESTORS LTD. 143,500 1.16% 06/30/99
ROYCE & ASSOCIATES, INC. 99,500 0.80% 06/30/99
</TABLE>
William Blair & Company
- --------------------------------------------------------------------------------
35 Limited Liability Company
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY
EAGLES OWNERSHIP PROFILE
- ----------------------------------------------------------------------------------------------------------
SHARES PERCENT LAST
OWNER NAME HELD HELD REPORT
- -------------------------------- ------ ----- -------
<S> <C> <C> <C>
EQUITABLE COMPANIES INC 87,000 0.70% 06/30/99
BRANDYWINE ASSET MGMT, INC. 71,500 0.58% 06/30/99
MASSACHUSETTS FINL SERV. CO. 66,600 0.54% 06/30/99
CITIGROUP INC. 53,513 0.43% 06/30/99
CALIFORNIA STATE TEACH RETIRE 53,400 0.43% 06/30/99
EATON, VANCE MANAGEMENT, INC. 50,000 0.40% 06/30/99
N.Y. STATE TEACH RETIRE SYS 49,500 0.40% 06/30/99
MELLON PRIVATE ASSET MGMT 37,516 0.30% 06/30/99
MERCURY ASSET MANAGEMENT LTD. 33,000 0.27% 06/30/99
NORTHERN TRUST COMPANY OF CT 30,100 0.24% 06/30/99
AIM CAPITAL MANAGEMENT INC. 30,000 0.24% 06/30/99
NORTHERN TRUST COMPANY 20,604 0.17% 06/30/99
STATE STR BK & TRUST CO BOSTON 18,850 0.15% 06/30/99
PARADIGM ASSET MGMT CO, LLC 17,200 0.14% 06/30/99
COLLEGE RETIRE EQUITIES 13,300 0.11% 06/30/99
OTHER INSTITUTIONAL 37,038 0.30%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY
PRICE DISTRIBUTION OF HISTORICAL TRADING ACITVITY
LATEST TWELVE MONTHS AS OF 9/24/99
- ----------------------------------------------------------------------------------------------------------------------------------
EAGLES SHARES % OF TOTAL % OF TOTAL
% OF TOTAL COMMON PUBLIC
% OF TOTAL VOLUME % OF TOTAL SHARES % OF TOTAL FLOAT
GREATER BUT CUMULATIVE VOLUME TRADED AT COMMON TRADED AT PUBLIC TRADED AT
THAN OR LESS SHARES SHARES TRADED AT OR BELOW SHARES OR BELOW FLOAT OR BELOW
EQUAL TO THAN TRADED TRADED THIS PRICE THIS PRICE OUTSTANDING(1) THIS PRICE OUTSTANDING(2) THIS PRICE
-------- ---- ------ ------ ---------- ---------- -------------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$10.00 $11.00 1,663,100 1,663,100 6.9% 6.9% 13.4% 13.4% 16.0% 16.0%
11.00 12.00 2,619,400 4,282,500 10.9% 17.8% 21.1% 34.5% 25.2% 41.2%
12.00 13.00 2,712,900 6,995,400 11.3% 29.1% 21.9% 56.4% 26.1% 67.4%
13.00 14.00 4,750,000 11,745,400 19.8% 48.9% 38.3% 94.7% 45.7% 113.1%
14.00 15.00 2,204,200 13,949,600 9.2% 58.1% 17.8% 112.5% 21.2% 134.3%
15.00 16.00 517,600 14,467,200 2.2% 60.2% 4.2% 116.7% 5.0% 139.3%
16.00 17.00 1,834,400 16,301,600 7.6% 67.9% 14.8% 131.5% 17.7% 157.0%
17.00 18.00 2,500,100 18,801,700 10.4% 78.3% 20.2% 151.7% 24.1% 181.1%
18.00 19.00 393,300 19,195,000 1.6% 79.9% 3.2% 154.8% 3.8% 184.9%
19.00 20.00 388,500 19,583,500 1.6% 81.5% 3.1% 158.0% 3.7% 188.6%
20.00 21.00 1,090,200 20,673,700 4.5% 86.1% 8.8% 166.8% 10.5% 199.1%
21.00 22.00 1,193,600 21,867,300 5.0% 91.0% 9.6% 176.4% 11.5% 210.6%
22.00 23.00 985,500 22,852,800 4.1% 95.1% 7.9% 184.3% 9.5% 220.1%
23.00 24.00 867,600 23,720,400 3.6% 98.8% 7.0% 191.3% 8.4% 228.4%
24.00 25.00 269,000 23,989,400 1.1% 99.9% 2.2% 193.5% 2.6% 231.0%
25.00 26.00 29,200 24,018,600 0.1% 100.0% 0.2% 193.7% 0.3% 231.3%
-----------
24,018,600
Weighted Average Share Price: $15.50
(1) Based on 12,397,000 shares outstanding per 6/30/99 quarterly report.
(2) Excludes 2,079,036 shares held by Company CEO.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY
HISTORICAL AND PROJECTED INCOME STATEMENTS: EAGELS
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
- ------------------------------------------------------------------------------------------------------------------------------------
FISCAL YEARS ENDED DECEMBER 31
ACTUAL ESTIMATED (2) PRO FORMA W/TANGA
------------------------------------------------------- --------------------- ---------------------
1994 1995 1996 1997 1998 1999 E 2000 E 1999 E 2000 E
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $ 47,679 $ 60,823 $ 100,644 $ 150,793 $ 192,605 $ 217,369 $ 243,453 $ 295,600 $ 324,000
Cost of Sales 32,787 41,835 70,853 106,605 136,488 153,696 172,121 194,700 214,300
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Gross Profit 14,892 18,988 29,792 44,188 56,117 63,673 71,332 100,900 109,700
Operating & Selling Expenses 7,068 9,098 14,168 21,024 26,357 30,393 33,706 59,022 63,233
Corporate G&A Expenses 2,895 3,985 6,718 9,857 11,114 12,778 13,767 12,778 13,767
Other Expense - - - 259 - - - - -
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Operating Income 4,929 5,905 8,905 13,047 18,646 20,502 23,859 29,100 32,700
Interest Expense, net 289 1,164 (551) (1,580) (1,511) (1,118) (900) 4,800 5,000
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Pre-tax Income 4,640 4,740 9,456 14,627 20,157 21,620 24,759 24,300 27,700
Income Taxes (1) 1,860 1,896 3,593 5,393 7,692 8,324 9,532 10,100 11,400
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net Income $ 2,780 $ 2,844 $ 5,863 $ 9,234 $ 12,465 $ 13,296 $ 15,227 $ 14,200 $ 16,300
========= ========= ========= ========= ========= ========= ========= ========= =========
Weighted Average Shares 9,071 7,937 11,557 13,335 13,504 12,927 12,598 12,927 12,598
Earnings Per Share $ 0.31 $ 0.36 $ 0.51 $ 0.69 $ 0.92 $ 1.03 $ 1.21 $ 1.10 $ 1.29
CASH FLOW ITEMS:
EBITDA 5,141 6,235 9,640 14,439 20,618 22,802 26,359 34,100 37,900
Depreciation & Amortization 212 330 735 1,392 1,972 2,300 2,500 5,000 5,200
Capital Expenditures 766 507 1,169 1,671 1,555 1,739 1,948 2,365 2,592
MARGIN ANALYSIS:
Gross Margin 31.2% 31.2% 29.6% 29.3% 29.1% 29.3% 29.3% 34.1% 33.9%
EBITDA Margin 10.8% 10.3% 9.6% 9.6% 10.7% 10.5% 10.8% 11.5% 11.7%
Operating Margin 10.3% 9.7% 8.8% 8.7% 9.7% 9.4% 9.8% 9.8% 10.1%
Net Margin 5.8% 4.7% 5.8% 6.1% 6.5% 6.1% 6.3% 4.8% 5.0%
GROWTH RATES:
Net Sales 33.8% 27.6% 65.5% 49.8% 27.7% 12.9% 12.0% 9.6%
EBITDA 57.3% 21.3% 54.6% 49.8% 42.8% 10.6% 15.6% 11.1%
Operating Income 58.4% 19.8% 50.8% 46.5% 42.9% 10.0% 16.4% 12.4%
Net Income 18.1% 2.3% 106.1% 57.5% 35.0% 6.7% 14.5% 14.8%
EPS NA 16.9% 41.6% 36.5% 33.3% 11.4% 17.5% 17.8%
- --------------------------------------
(1) Taxes for Fiscal Years 1994 and 1995 are Pro Forma as if the Company had been a C Corporation.
(2) Estimates provided by William Blair & Company.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY
HISTORICAL BALANCE SHEET: EAGLES
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
- ------------------------------------------------------------------------------------------------------------------------------------
AS REPORTED
----------------------------------------------------------- PRO FORMA
12/27/96 12/26/97 12/25/98 6/25/99 for Tanga
-------- --------- -------- --------- ---------
Assets
Current Assets:
<S> <C> <C> <C> <C> <C>
Cash & Equivalents (1) $ 42,875 $ 31,007 $ 30,909 $ 22,968 $ 0
Accounts Receivable, net 16,141 23,802 27,535 33,542 43,300
Inventory 17,669 24,980 30,129 30,704 40,700
Prepaid Expenses & Other Current Assets 657 898 386 596 3,600
Deferred Income Taxes 768 1,227 1,498 1,439 -
-------- --------- -------- --------- ---------
Total Current Assets 78,110 81,914 90,457 89,250 87,600
Property, Plant & Equipment, net 2,461 3,541 4,183 4,725 7,400
Goodwill 4,932 18,121 22,134 21,814 99,300
Other Assets 2,806 4,539 4,922 4,700 600
-------- --------- -------- --------- ---------
TOTAL ASSETS $ 88,309 $ 108,115 $121,696 $ 120,489 $ 194,900
======== ========= ======== ========= =========
Liabilities and Stockholders' Equity
Current Liabilities:
Notes Payable $ 285 $ 725 $ 1,209 $ 500 $ 0
Long-term Debt, Current - - - - -
Accounts Payable 8,537 13,245 11,992 17,295 20,600
Accrued Expenses & Other Current Liabilities 2,053 2,875 4,294 4,970 7,200
Accrued Interest - - - - -
Income Taxes Payable 1,934 221 412 263 -
-------- --------- -------- --------- ---------
Total Current Liabilities 12,810 17,066 17,907 23,029 27,800
Long-term Debt - 500 - - 69,500
Commitments & Contingent Liabilities - - - - -
Stockholders' Equity:
Preferred Stock - - - - -
Common Stock 96,979 102,794 103,569 103,640 103,700
Retained Earnings (Deficit) (21,479) (12,245) 220 6,624 6,700
Less Treasury Stock - - - (12,804) (12,800)
-------- --------- -------- --------- ---------
Total Stockholders' Equity 75,500 90,549 103,789 97,460 97,600
======== ========= ======== ========= =========
TOTAL LIABILITIES & EQUITY $ 88,309 $ 108,115 $121,696 $ 120,489 $ 194,900
======== ========= ======== ========= =========
</TABLE>
- ------------------------------------------
(1) Includes cash, restricted cash and investments.
<PAGE>
<TABLE>
<CAPTION>
EAGLES / TANGA COMBINATION ANALYSIS
Wilmar Assumed Tanga Standalone Assumptions
- ------------------------------------------------------------------------------
Dollars in millions, except per share amounts
COMBINED INCOME STATEMENTS
1998 PRO FORMA 1999 PRO FORMA
------------------------------------ ---------------------------------------
EAGLES TANGA ADJUST COMBINED EAGLES TANGA ADJUST COMBINED
------ ----- ------ -------- ------ ----- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue 192.6 75.9 0.0 268.5 217.4 78.2 0.0 295.6
Gross Profit 56.1 36.2 0.0 92.3 63.7 37.3 0.0 100.9
Operating Expenses 36.5 25.6 0.0 62.1 42.0 26.4 0.0 68.4
EBITA 19.6 10.6 0.0 30.2 21.6 10.9 0.0 32.5
Total Amortization 1.0 0.1 2.2 3.3 1.1 0.1 2.2 3.4
------------------------------------ ---------------------------------------
EBIT 18.6 10.4 -2.2 26.9 20.5 10.7 -2.2 29.1
Interest Expense (Income) -1.5 0.0 5.9 4.4 -1.1 0.0 5.9 4.8
------------------------------------ ---------------------------------------
Pre-Tax Income 20.2 10.4 -8.1 22.5 21.6 10.7 -8.1 24.2
Taxes 7.7 4.0 -2.4 9.3 8.3 4.1 -2.4 10.1
------------------------------------ ---------------------------------------
Net Income 12.5 6.4 -5.8 13.1 13.3 6.6 -5.8 14.2
Shares 13.5 13.5 12.9 12.9
------- -------
EPS $0.92 $0.97 $1.03 $1.09
------- -------
EPS Pickup $0.05 $0.07
Cash EPS $0.98 $1.18 $1.10 $1.32
Amortization 1.0 0.1 2.2 3.3 1.1 0.1 2.2 3.4
Depreciation 1.0 0.4 0.0 1.4 1.2 0.4 0.0 1.6
EBITDA 20.6 11.0 0.0 31.6 22.8 11.3 0.0 34.1
Revenue Growth 12.9% 3.0% 10.1%
EBIT Growth 10.0% 3.0% 8.1%
EPS Growth 11.4% 12.6%
Gross Profit % 29.1% 47.7% 34.4% 29.3% 47.7% 34.2%
EBIT % 9.7% 13.7% 10.0% 9.4% 13.7% 9.8%
EBITA % 10.2% 13.9% 11.2% 10.0% 13.9% 11.0%
</TABLE>
<TABLE>
<CAPTION>
EAGLES / TANGA COMBINATION ANALYSIS
Wilmar Assumed Tanga Standalone Assumptions
- ------------------------------------------------------------------------------
Dollars in millions, except per share amounts
COMBINED INCOME STATEMENTS
(continued)
1999 AS - REPORTED 2000 AS - REPORTED
------------------------------------ ---------------------------------------
EAGLES TANGA ADJUST COMBINED EAGLES TANGA ADJUST COMBINED
------ ----- ------ -------- ------ ----- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue 217.4 13.1 0.0 230.4 243.5 80.6 0.0 324.0
Gross Profit 63.7 6.2 0.0 69.9 71.3 38.4 0.0 109.7
Operating Expenses 42.0 4.4 0.0 46.4 46.4 27.2 0.0 73.6
EBITA 21.6 1.8 0.0 23.5 25.0 11.2 0.0 36.2
Total Amortization 1.1 0.0 0.4 1.5 1.1 0.1 2.2 3.4
------------------------------------ ---------------------------------------
EBIT 20.5 1.8 -0.4 21.9 23.9 11.1 -2.2 32.8
Interest Expense (Income) -1.1 0.0 1.0 -0.1 -0.9 0.0 5.9 5.0
------------------------------------ ---------------------------------------
Pre-Tax Income 21.6 1.8 -1.4 22.1 24.8 11.1 -8.1 27.7
Taxes 8.3 0.7 -0.4 8.6 9.5 4.3 -2.4 11.4
------------------------------------ ---------------------------------------
Net Income 13.3 1.1 -1.0 13.4 15.2 6.8 -5.8 16.3
Shares 12.9 12.9 12.6 12.6
------- ------ ------- -------
EPS $1.03 $1.04 $1.21 $1.29
------- ------ ------- -------
EPS Pickup $0.01 $0.08
Cash EPS $1.10 $1.14 $1.28 $1.52
Amortization 1.1 0.0 0.4 1.5 1.1 0.1 2.2 3.4
Depreciation 1.2 0.1 0.0 1.3 1.4 0.4 0.0 1.8
EBITDA 22.8 1.9 0.0 24.7 26.4 11.6 0.0 38.0
Revenue Growth 12.0% 3.0% 9.6%
EBIT Growth 16.4% 3.0% 12.7%
EPS Growth 17.5% 18.1%
Gross Profit % 29.3% 47.7% 30.3% 29.3% 47.7% 33.9%
EBIT % 9.4% 13.7% 9.5% 9.8% 13.7% 10.1%
EBITA % 10.0% 13.9% 10.2% 10.3% 13.9% 11.2%
</TABLE>
<TABLE>
<CAPTION>
EAGLES / TANGA COMBINATION ANALYSIS
Wilmar Assumed Tanga Standalone Assumptions
- ------------------------------------------------------------------------------
Dollars in millions, except per share amounts
COMBINED INCOME STATEMENTS
TRANSACTION ASSUMPTIONS
(continued)
ANNUAL
INTEREST INTEREST
SOURCE OF FUNDS AMOUNT RATE EXPENSE
--------------- ---------- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Total Purchase Price 90.0
Financing Fees 1.0
Transaction Fees 1.0 Excess Cash 23.0 4.50% 1.0
----------
Total Uses 92.0 New Borrowings
Multiple of 1998 EBITDA Paid 8.2 Revolver 14.0 7.12% 1.0
Multiple of 1999 EBITDA Paid 8.0 Term 55.0 7.12% 3.9
---------- -----------
Percent of 1999 Year Post-Deal 16.7% Total New Borrowings 69.0 4.9
---------- -----------
Tanga Tangible Net Worth 19.2 Total 92.0 5.9
Debt Assumed 0.0
New Goodwill 71.8
Tax Rate on Deductible 38.5% Amortization Detail TOTAL ANNUAL TAX
YEARS AMORT. AMORT. DEDUCTIBLE
----- ------ ------ ----------
Financing Fees 5 1.0 0.2 Y
Customer Lists (10%) 20 7.2 0.4 N
Goodwill (90%) 40 64.6 1.6 N
-----------------------
Total Amortization 72.8 2.2
</TABLE>
<TABLE>
<CAPTION>
EAGLES / TANGA COMBINATION ANALYSIS
Wilmar Assumed Tanga Standalone Assumptions
- ------------------------------------------------------------------------------
Dollars in millions, except per share amounts
COMBINED INCOME STATEMENTS
TRANSACTION ASSUMPTIONS
(continued)
TOTAL PURCHASE PRICE
FIANCING FEES COMBINED ADVANCE MAX
TRANSACTION FEES BALANCE ELIGIBLE RATES AVAILABLE
------- -------- ----- ---------
<S> <C> <C> <C> <C> <C>
Total Uses Trade Receivables 43.3 95% 85% 35.0
Multiple of 1998 EBITDA Paid Inventory 40.7 95% 60% 23.2
Multiple of 1999 EBITDA Paid -------
Percent of 1999 Year Post-Deal Total 58.2
Tanga Tangible Net Worth Desired Revolver Availability at Closing 44.1
Debt Assumed
New Goodwill
Revolver Draw Down at Closing 14.0
Tax Rate on Deductible Term Debt 55.0
-------
Total New Borrowings 69.0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EAGLES / TANGA COMBINATION ANALYSIS
Wilmar Assumed Tanga Standalone Assumptions
- -----------------------------------------------------------------------------------------------------
Dollars in millions, excpet per share amounts
COMBINED INCOME STATEMENTS
2001 AS - REPORTED 2002 AS - REPORTED
-------------------------------------------- ------------------------------------------
EAGLES TANGA ADJUST COMBINED EAGLES TANGA ADJUST COMBINED
------ ----- ------ -------- ------ ----- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue 271.5 87.0 0.0 358.4 301.3 94.0 0.0 395.3
Gross Profit 79.5 41.5 0.0 121.0 88.3 44.8 0.0 133.1
Operating Expenses 51.0 29.4 0.0 80.4 56.0 31.7 0.0 87.7
EBITA 28.5 12.1 0.0 40.6 32.2 13.1 0.0 45.3
Total Amortization 1.1 0.1 2.2 3.4 1.1 0.1 2.2 3.4
-------------------------------------------- ------------------------------------------
EBIT 27.4 12.0 -2.2 37.2 31.1 12.9 -2.2 41.9
Interest Expense (Income) -1.2 0.0 5.1 3.9 -1.6 0.0 4.4 2.8
-------------------------------------------- ------------------------------------------
Pre-Tax Income 28.6 12.0 -7.3 33.3 32.7 12.9 -6.6 39.1
Taxes 11.0 4.6 -2.0 13.6 12.6 5.0 -1.8 15.8
-------------------------------------------- ------------------------------------------
Net Income 17.6 7.4 -5.2 19.7 20.1 8.0 -4.8 23.3
Shares 12.6 12.6 12.6 12.6
--------- --------- ---------- ---------
EPS $1.40 $1.57 $1.60 $1.85
--------- --------- ---------- ---------
EPS Pickup $0.17 $0.25
Cash EPS $1.47 $1.79 $1.67 $2.08
Amortization 1.1 0.1 2.2 3.4 1.1 0.1 2.2 3.4
Depreciation 1.6 0.5 0.0 2.1 1.8 0.5 0.0 2.3
EBITDA 30.1 12.6 0.0 42.7 34.0 13.6 0.0 47.6
Revenue Growth 11.5% 8.0% 10.6% 11.0% 8.0% 10.3%
EBIT Growth 14.9% 8.1% 13.6% 13.6% 8.1% 12.7%
EPS Growth 15.5% 21.1% 14.5% 18.2%
Gross Profit % 29.3% 47.7% 33.8% 29.3% 47.7% 33.7%
EBIT % 10.5% 13.8% 10.4% 10.3% 13.8% 10.6%
EBITA % 10.5% 13.9% 11.3% 10.7% 13.9% 11.5%
EAGLES / TANGA COMBINATION ANALYSIS
Wilmar Assumed Tanga Standalone Assumptions
- -----------------------------------------------------------------------------------------------------
Dollars in millions, excpet per share amounts
COMBINED INCOME STATEMENTS
(continued)
2003 AS - REPORTED 2004 AS - REPORTED
---------------------------------------------- ----------------------------------
EAGLES TANGA ADJUST COMBINED EAGLES TANGA ADJUST COMBINED
------ ----- ------ -------- ------ ----- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue 332.9 101.5 0.0 434.4 366.2 109.6 0.0 475.8
Gross Profit 97.6 48.4 0.0 145.9 107.3 52.2 0.0 159.5
Operating Expenses 61.3 34.2 0.0 95.5 66.7 37.0 0.0 103.6
EBITA 36.3 14.1 0.0 50.4 40.7 15.3 0.0 55.9
Total Amortization 1.1 0.1 2.2 3.4 1.1 0.1 2.2 3.4
--------------------------------------- -----------------------------------
EBIT 35.2 14.0 -2.2 47.0 39.6 15.1 -2.2 52.5
Interest Expense (Income) -1.9 0.0 3.5 1.6 -2.2 0.0 2.4 0.2
--------------------------------------- -----------------------------------
Pre-Tax Income 37.1 14.0 -5.7 45.4 41.8 15.1 -4.6 52.3
Taxes 14.3 5.4 -1.4 18.2 16.1 5.8 -1.0 20.9
--------------------------------------- -----------------------------------
Net Income 22.8 8.6 -4.3 27.2 25.7 9.3 -3.6 31.4
Shares 12.6 12.6 12.6 12.6
---------- -------- -------- --------
EPS $1.81 $2.16 $2.04 $2.49
---------- -------- -------- --------
EPS Pickup $0.34 $0.45
Cash EPS $1.88 $2.38 $2.11 $2.72
Amortization 1.1 0.1 2.2 3.4 1.1 0.1 2.2 3.4
Depreciation 2.0 0.5 0.0 2.5 2.2 0.6 0.0 2.8
EBITDA 38.3 14.7 0.0 52.9 42.9 15.8 0.0 58.7
Revenue Growth 10.5% 8.0% 9.9% 10.0% 8.0% 9.5%
EBIT Growth 13.0% 8.1% 12.2% 12.4% 8.1% 11.7%
EPS Growth 13.3% 16.6% 12.6% 15.6%
Gross Profit % 29.3% 47.7% 33.6% 29.3% 47.7% 33.5%
EBIT % 10.6% 13.8% 10.8% 10.8% 13.8% 11.0%
EBITA % 10.9% 13.9% 11.6% 11.1% 13.9% 11.7%
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PRELIMINARY VALUATION
ANALYSIS FOR EAGLES
- --------------------------------------------------------------------------------
William Blair & Company
- --------------------------------------------------------------------------------
35 Limited Liability Company
<PAGE>
<TABLE>
<CAPTION>
VALUATION SUMMARY: EAGLES
- ----------------------------------------------------------------------------------------------------------------------------------
WITHOUT TANGA WITH TANGA
------------- ----------
IMPLIED PRICE PER SHARE IMPLIED PRICE PER SHARE
----------------------- -----------------------
LOW HIGH LOW HIGH
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Comparable Company Valuation (1) $ 17.53 -- $ 19.42 $ 16.95 -- $ 19.41
Comparable Merger Valuation $ 16.06 -- $ 19.63 $ 18.27 -- $ 19.28
Discounted Cash Flow Analysis $ 18.05 -- $ 21.32 $ 17.43 -- $ 21.92
Leveraged Re-Cap Analysis $ 15.00 -- $ 18.00 $ 15.00 -- $ 18.00
AVERAGE $ 16.66 -- $ 19.59 $ 16.91 -- $ 19.65
(1) Assumes 35% merger premium.
</TABLE>
William Blair & Company
- --------------------------------------------------------------------------------
36 Limited Liability Company
<PAGE>
SUMMARY OF COMPARABLE COMPANY ANALYSIS
o USED GROUP OF 13 BUSINESS-TO-BUSINESS DIRECT MARKETERS AND
DISTRIBUTORS
o ON AVERAGE, THE GROUP IS 35.6% OFF OF THEIR RESPECTIVE 52 WEEK
HIGH SHARE PRICES
o EAGLE IS TRADING VERY NEAR THE COMPARABLE MULTIPLES
SUMMARY RESULTS:
EAGLES ALONE
<TABLE>
<CAPTION>
MULTIPLE RANGE IMPLIED PRICE WITH 35% MERGER PREMIUM
--------------------------- ---------------------------- --------------------------
STATISTIC LOW HIGH LOW HIGH LOW HIGH
--------- --- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C>
TV/1999(P) Revenue $ 217,369 0.5x - 0.7x $10.17 - $13.54 $13.73 - $18.27
TV/1999(P) EBIT $ 20,502 8.2x - 9.2x $14.77 - $16.36 $19.94 - $22.09
TV/1999(P) EBITDA $ 22,802 6.2x - 7.2x $12.70 - $14.47 $17.15 - $19.53
1999(P) P/E $ 1.03 12.0x - 13.0x $12.36 - $13.39 $16.69 - $18.08
2000(P)P/E $ 1.21 10.0x - 11.0x $12.10 - $13.31 $16.34 - $17.97
---------------------------------------------------------------------------------------
Average(1) $12.98 - $14.38 $17.53 - $19.42
---------------------------------------------------------------------------------------
EAGLE WITH TANGA
MULTIPLE RANGE IMPLIED PRICE WITH 35% MERGER PREMIUM
--------------------------- ---------------------------- --------------------------
STATISTIC LOW HIGH LOW HIGH LOW HIGH
--------- --- ---- --- ---- --- ----
TV/1999(P) Revenue $ 295,600 0.5x - 0.7x $ 6.07 - $10.65 $ 8.19 - $14.38
TV/1999(P) EBIT $ 29,100 8.2x - 9.2x $13.11 - $15.37 $17.70 - $20.74
TV/1999(P) EBITDA $ 34,100 6.2x - 7.2x $11.00 - $13.64 $14.85 - $18.42
1999(P) P/E $ 1.10 12.0x - 13.0x $13.20 - $14.30 $17.82 - $19.31
2000(P) P/E $ 1.29 10.0x - 11.0x $12.90 - $14.19 $17.42 - $19.16
---------------------------------------------------------------------------------------
Average(1) $12.55 - $14.38 $16.95 - $19.41
---------------------------------------------------------------------------------------
</TABLE>
(1) Excludes revenue multiples.
William Blair & Company
- --------------------------------------------------------------------------------
37 Limited Liability Company
<PAGE>
<TABLE>
<CAPTION>
COMPARABLE COMPANIES FOR EAGLES
Summary Market Statistics
Priced as of 9/30/99
- ----------------------------------------------------------------------------------------------
Price/Earnings Ration
---------------------
Stock Price
----------- % of Most
52 Week 52 Week Recent
Low High 9/30/99 High FY LTM
--- ---- ------- ---- ------ ---
<S> <C> <C> <C> <C> <C> <C>
AIRGAS $ 7.88 -- $ 14.00 $ 11.63 83.0% 16.2x 16.4x
APPLIED INDUSTRIAL TECH 11.13 -- 19.06 18.00 94.4% 13.0 18.8
BARNETT 7.50 -- 17.63 9.19 52.1% 10.6 9.9
HUGHES SUPPLY 17.88 -- 30.00 21.75 72.5% 8.5 8.1
INDUSTRIAL DISTR GROUP 3.31 -- 8.50 3.31 39.0% 4.4 6.5
JLK DIRECT DISTR 7.00 -- 13.50 7.50 55.6% 7.0 8.7
LAWSON PRODUCTS 20.38 -- 28.06 21.63 77.1% 11.4 9.9
MSC INDL DIRECT INC 8.00 -- 27.31 9.00 33.0% 13.0 11.8
NCH CORP 44.25 -- 69.63 45.19 64.9% 10.6 10.4
W W GRAINGER 36.44 -- 58.13 48.06 82.7% 19.7 20.1
WATSCO INC 10.38 -- 20.00 11.38 56.9% 12.6 11.6
WESCO INTL INC 12.38 -- 22.88 14.13 61.7% 15.7 15.2
- ----------------------------------------------------------------------------------------------
Average 64.4% 11.9x 12.3x
Median 63.3 12.0 11.0
- ----------------------------------------------------------------------------------------------
EAGLES $ 10.19 -- $ 25.75 $ 12.88 50.0% 14.0x 13.1x
- ----------------------------------------------------------------------------------------------
Eagles with Premium of: 39.8% $ 18.00
47.6% $ 19.00
55.3% $ 20.00
63.1% $ 21.00
70.9% $ 22.00
- ----------------------------------------------------------------------------------------------
ACQUISITION TARGETS 6.38 -- 18.00 16.50 91.7% 18.1 17.4
- -------------------
WHITE CAP INDS CORP
</TABLE>
<TABLE>
<CAPTION>
COMPARABLE COMPANIES FOR EAGLES
Summary Market Statistics
Priced as of 9/30/99
- -----------------------------------------------------------------------------------------------
Cal.99EP/E Cal. 00E P/E
-----------------------
Long Term Long Term Long Term Mkt Prc/
EPS Growth EPS Growth EPS Growth Book Value
Cal. 99E Cal 00E Rate Rate Rate Per Share
-------- ------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
AIRGAS 20.1x 16.6x 14.8% 136.0% 112.2% 1.7x
APPLIED INDUSTRIAL TECH 16.4 13.2 15.8% 104.0% 83.5% 1.3
BARNETT 9.3 8.1 18.3% 50.7% 44.2% 1.7
HUGHES SUPPLY 7.8 6.9 15.0% 51.8% 46.0% 1.0
INDUSTRIAL DISTR GROUP 4.4 4.1 13.8% 32.0% 29.6% 0.2
JLK DIRECT DISTR 8.3 6.8 15.0% 55.6% 45.2% 0.9
LAWSON PRODUCTS NA NA NA NA NA 1.6
MSC INDL DIRECT INC 12.3% 10.9 27.0% 45.7% 40.4% 1.8
NCH CORP NA NA NA NA NA 1.2
W W GRAINGER 21.6 18.3 12.1% 178.1% 151.0% 3.3
WATSCO INC 10.4 9.0 22.4% 46.6% 40.0% 1.1
WESCO INTL INC 14.8 11.1 25.5% 58.1% 43.6% 6.7
- -----------------------------------------------------------------------------------------------
Average 12.6x 10.5x 18.0% 75.9% 63.6% 1.9x
Median 11.4 9.9 15.4% 53.7% 44.7% 1.4
- -----------------------------------------------------------------------------------------------
EAGLES 12.6x 10.9x 23.3% 54.2% 46.8% 1.6x
- -----------------------------------------------------------------------------------------------
Eagles with Premium of: 17.6x 15.3x
18.6x 16.1x
19.6x 16.9x
20.6x 17.8x
21.6x 18.6x
- ----------------------------------------------------------------------------------------------
ACQUISITION TARGETS 14.7 11.6 28.7% 51.3% 40.4% 2.2
- -------------------
WHITE CAP INDS CORP
</TABLE>
LTM = Latest Twelve Months. CAGR = Compounded Annual Growth Rate.
NA = Not Available. NMF = Not Meaningful.
<TABLE>
<CAPTION>
COMPARABLE COMPANIES FOR EAGLES
Summary Market Statistics
Priced as of 9/30/99
(continued)
- -----------------------------------------------------------------------------------------------------
Total Value/
--------------------------------------------
LTM LTM Oper LTM LTM Mkt. LTM
Sales Income EBITDA Sales(MM) Cap.(MM) Ended
----- ------- ------ --------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
AIRGAS 1.1 x 15.6x 8.6x $1,539.9 $ 822.8 06/99
APPLIED INDUSTRIAL TECH 0.3 10.8 7.8 1,521.4 381.7 03/99
BARNETT 0.8 7.3 6.2 226.0 149.0 03/99
HUGHES SUPPLY 0.4 8.1 6.7 2,745.9 508.0 07/99
INDUSTRIAL DISTR GROUP 0.2 8.6 5.8 514.4 28.4 06/99
JLK DIRECT DISTR 0.4 5.4 4.3 530.1 183.8 03/99
LAWSON PRODUCTS 0.6 5.3 4.6 302.0 223.9 06/99
MSC INDL DIRECT INC 1.1 7.9 7.1 636.3 612.5 05/99
NCH CORP 0.3 4.6 3.5 788.1 244.4 07/99
W W GRAINGER 1.1 12.3 10.1 4,402.2 4,487.0 06/99
WATSCO INC 0.5 9.2 8.0 1,143.7 326.5 06/99
WESCO INTL INC 0.3 9.3 8.1 3,225.3 674.2 06/99
- -----------------------------------------------------------------------------------------------------
Average 0.6x 8.7x 6.7x $1,464.6 $ 720.2
Median 0.4 8.3 6.9 965.9 354.1
- -----------------------------------------------------------------------------------------------------
EAGLES 0.7x 6.9x 6.3x $ 203.2 $ 159.6 06/99
- -----------------------------------------------------------------------------------------------------
Eagles with Premium of: 1.0x 10.1x 9.1x
1.1x 10.7x 9.7x
1.1x 11.3x 10.3x
1.2x 12.0x 10.8x
1.2x 12.6x 11.4x
- -----------------------------------------------------------------------------------------------------
ACQUISITION TARGET
WHITE CAP INDS CORP 0.8 10.8 8.8 304.2 177.0 06/99
</TABLE>
William Blair & Company
<PAGE>
<TABLE>
<CAPTION>
COMPARABLE COMPANIES FOR EAGLES
SUMMARY OPERATING STATISTICS
- ---------------------------------------------------------------------------------------------------------------------
Gross Profit as a Operating Income as a Net Income as a
% of Sales % of Sales % of Sales 3 YR CAGR
-------------- ------------------- ---------------- -------------------
LTM 4 YR Av LTM 4 YR Avg LTM 4 YR Avg Sales Net Inc.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AIRGAS 46.6% 47.4% 7.1% 9.2% 3.3% 3.7% 23.0% 8.9%
APPLIED INDUSTRIAL TECH 25.7% 25.8% 3.0% 4.0% 1.4% 2.0% 12.2% 21.2%
BARNETT 33.4% 33.9% 11.3% 12.3% 6.7% 7.5% 22.3% 19.4%
HUGHES SUPPLY 22.3% 21.5% 4.5% 4.1% 2.3% 2.3% 25.4% 35.9%
INDUSTRIAL DISTR GROUP 22.5% 23.7% 1.8% 2.5% 0.8% 1.5% 158.4% 108.4%
JLK DIRECT DISTR 32.4% 32.8% 6.7% 10.1% 4.0% 6.2% 31.2% 31.8%
LAWSON PRODUCTS 66.1% 67.7% 12.1% 12.7% 7.8% 8.1% 9.4% -0.1%
MSC INDL DIRECT INC 40.8% 41.2% 13.4% 13.5% 8.1% 8.8% 32.9% 34.4%
NCH CORP 44.8% 46.2% 6.2% 7.0% 3.1% 3.9% 0.6% -12.5%
W W GRAINGER 37.0% 36.2% 8.9% 9.6% 5.2% 5.7% 9.8% 8.5%
WATSCO INC 23.1% 22.1% 5.1% 5.4% 2.5% 2.6% 54.0% 65.9%
WESCO INTL INC 17.8% 17.8% 3.7% 3.2% 0.9% 1.3% NA NA
WHITE CAP INDS CORP 32.9% 32.1% 7.0% 5.8% 3.5% 2.3% NA NA
- ---------------------------------------------------------------------------------------------------------------------
Average 34.3% 34.5% 7.0% 7.7% 3.8% 4.3% 34.5% 29.3%
Median 32.9% 32.8% 6.7% 7.0% 3.3% 3.7% 23.0% 21.2%
- ---------------------------------------------------------------------------------------------------------------------
EAGLES 29.4% 29.8% 9.8% 9.3% 6.4% 5.8% 46.8% 63.7%
</TABLE>
<TABLE>
<CAPTION>
RETURN ON
RETURN ON AVERAGE COMMON EQUITY/ TOTAL DEBT/ NET DEBT/
AVERAGE ASSETS COMMON EQUITY CAPITALIZATION CAPITALIZATION NET CAPITALIZATION
------------------ ------------------ ---------------- ------------------ -------------------
<S> <C> <C> <C> <C> <C>
AIRGAS 3.1% 11.4% 35.3% 64.7% 64.7%
APPLIED INDUSTRIAL TECH 6.0% 12.0% 69.5% 30.5% 26.7%
BARNETT 16.5% 20.9% 70.0% 30.0% 29.8%
HUGHES SUPPLY 5.9% 13.6% 49.7% 50.3% 49.9%
INDUSTRIAL DISTR GROUP 3.5% 5.8% 68.7% 31.3% 30.6%
JLK DIRECT DISTR 12.3% 18.8% 96.4% 3.6% 2.6%
LAWSON PRODUCTS 10.9% 14.9% 100.0% 0.0% -24.7%
MSC INDL DIRECT INC 12.9% 15.9% 84.4% 15.6% 14.6%
NCH CORP 5.1% 9.6% 96.8% 3.2% -11.8%
W W GRAINGER 11.6% 18.5% 77.3% 22.7% 20.7%
WATSCO INC 5.4% 10.3% 57.5% 42.5% 41.7%
WESCO INTL INC 3.5% NMF 17.3% 82.7% 81.4%
WHITE CAP INDS CORP 7.0% 14.0% 59.9% 40.1% 39.6%
- -----------------------------------------------------------------------------------------------------------------------------------
Average 8.0% 13.8% 67.9% 32.1% 28.1%
Median 6.0% 13.8% 69.5% 30.5% 29.8%
- -----------------------------------------------------------------------------------------------------------------------------------
EAGLES 10.8% 12.8% 99.5% 0.5% -29.4%
</TABLE>
LTM = Latest Twelve Months. CAGR - Compounded Annual Growth Rate.
NA = Not Available. NMF = Not Meaningful.
William Blair & Company
<PAGE>
RELATIVE INDUSTRY PERFORMANCE
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Eagles COMPS INDEX S&P 500 INDEX
$35 1/26/96 250
$30 4/19/96 200
$25 7/12/96 150
$20 10/4/96 50
$15 12/27/96 100
$10 3/21/97 50
$5 6/13/97 0
$0 9/5/97 0
11/28/97
2/20/98
5/15/98
8/7/98
10/30/98
1/22/99
4/16/99
7/9/99
9/29/99
William Blair & Company
- --------------------------------------------------------------------------------
38 Limited Liability Company
<PAGE>
SUMMARY OF COMPARABLE MERGER ANALYSIS
o SELECTED GROUP OF 10 COMPARABLE DEALS FOR BUSINESS-TO-BUSINESS DIRECT
MARKETERS AND DISTRIBUTORS OF MRO AND INDUSTRIAL/BUILDING PRODUCTS
SUMMARY RESULTS:
<TABLE>
<CAPTION>
OPERATING STATISTIC (000'S) AVERAGE IMPLIED PRICE PER SHARE
--------------------------------- ----------- ---------------------------
W/O TANGA W/TANGA MULTIPLE W/O TANGA W/TANGA
----------- --------- -------- --------- -------
<S> <C> <C> <C> <C> <C>
Total Value / 1999 (P) Revenue $217,369 $295,600 0.85x $16.06 $14.09
Total Value / 1999 (P) EBIT $20,502 $ 29,100 10.4x $18.27 $18.07
Total Value / 1999 (P) EBITDA $22,802 $ 34,100 8.9x $17.44 $18.09
------------------------------------------
AVERAGE (1) $17.85 $18.08
------------------------------------------
</TABLE>
(1) Excludes revenue multiple.
William Blair & Company
- --------------------------------------------------------------------------------
39 Limited Liability Company
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY
Comparable Merger and Acquisition Transaction for Eagles
- ----------------------------------------------------------------------------------------------------------------------
ANNOUNCED COMPLETE TARGET TARGET BUSINESS DESCRIPTION
- --------- -------- ------------------------------- ------------------------------
<S> <C> <C> <C>
07/22/99 Pending White Cap Industries Inc. Whl constr & mining mach
05/08/98 07/08/98 Century Maintenance Supply Inc. Whl repair maintenance supply
04/24/98 06/05/98 WESCO Distribution Inc (CDW) Whl electrical indl products
02/02/98 02/02/98 Chad Supply, Inc. Distributor of repair and maintenance
10/22/97 12/02/97 Shelter Components Corp Distributes building materials
01/17/97 03/14/97 Maintenance Warehouse Whl maintenance and repair products
11/11/96 03/26/97 Strober Organization Inc Distributes building materials
09/10/96 12/02/96 Acklands-Industrials Supplies Wholesale industrial supplies
07/04/96 07/04/96 Allied Buildings Corp. Distributes roofing, siding & insulation
03/28/96 03/28/96 Southwest Stainless Inc Distributes pipe, valve and fitting products
PROJECT LIBERTY
Comparable Merger and Acquisition Transaction for Eagles
- ----------------------------------------------------------------------------------------------------------------------
TRANSACTION EQUITY Transaction Value/LTM
VALUE VALUE ------------------------------------
ANNOUNCED ACQUIROR ($MM) ($MM) SALES EBIT EBITDA
- --------- ---------------------- ------------ ------- ----- ----- -------
07/22/99 Leonard Green Partners 238.95 185.39 0.79x 11.2x 9.1x
05/08/98 Freeman Spogli 262.55 122.55 1.52 12.6 12.0
04/24/98 Cypress Group 1,013.99 670.45 0.38 11.9 10.5
02/02/98 Hughes Supply Inc. 45.99 45.99 0.77 10.2 9.2
10/22/97 Kevco Inc. 143.60 136.50 0.29 12.0 9.4
01/17/97 Home Depot, Inc. 272.28 245.43 2.16 13.0 11.9
11/11/96 Hamilton Acquisition LLC 28.13 32.00 0.22 5.5 4.4
09/10/96 WW Grainger Inc. 296.15 NA 0.99 NA NA
07/04/96 CRH Plc 121.00 NA 0.28 NA 7.0
03/28/96 Hughes Supply Incorporated 117.39 106.00 1.07 6.9 6.5
-----------------------------------------------------------------------------------------------
AVERAGE 254.00 193.04 0.85x 10.40x 8.88x
MEDIAN 191.27 129.53 0.78 11.54 9.20
-----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY
Comparable Historical EBITDA Multiples
- ------------------------------------------------------------------------------------------------
All dollars in thousands, except per share amounts
EAGLE HISTORICAL EBITDA MULTIPLE
- ------------------------------------------------------------------------------------------------
DILUTED
SHARES REPORTED TRAILING
YEAR STOCK OUT LAST EQUITY NET ENTERPRISE TRAILING BITDA
ENDING PRICE QTR VALUE DEBT VALUE EBITDA MULTIPLE
-------- --------- -------- --------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 $ 22.41 13,204 $ 295,902 $ (42,590) $ 253,312 $ 9,640 26.3 x
12/31/97 $ 23.62 13,473 $ 318,232 $ (29,783) $ 288,449 $ 14,698 19.6 x
12/31/98 $ 20.80 13,508 $ 280,966 $ (29,700) $ 251,266 $ 20,619 12.2 x
LTM 6/30/99 $ 13.00 12,782 $ 166,166 $ (22,468) $ 143,698 $ 21,970 6.5 x
Today $ 12.88 12,782 $ 164,568 $ (22,468) $ 142,100 $ 21,970 6.5 x
BARNETT HISTORICAL EBITDA MULTIPLE
- ------------------------------------------------------------------------------------------------
DILUTED
SHARES REPORTED TRAILING
YEAR STOCK OUT LAST EQUITY NET ENTERPRISE TRAILING BITDA
ENDING PRICE QTR VALUE DEBT VALUE EBITDA MULTIPLE
-------- --------- -------- --------- --------- ---------- -------- --------
6/30/96 $ 28.75 15,928 $ 457,930 $ (1,707) $ 456,223 $ 18,402 24.8 x
6/30/97 $ 24.50 16,223 $ 397,464 $ (4,429) $ 393,035 $ 22,030 17.8 x
6/30/98 $ 20.25 16,322 $ 330,521 $ 264 $ 330,785 $ 27,195 12.2 x
LTM 3/31/99 $ 8.75 16,216 $ 141,890 $ 37,191 $ 179,081 $ 30,058 6.0 x
Today $ 9.19 16,216 $ 149,025 $ 37,191 $ 186,216 $ 30,058 6.2 x
MSC INDUSTRIAL HISTORICAL EBITDA MULTIPLE
- ------------------------------------------------------------------------------------------------
DILUTED
SHARES REPORTED TRAILING
YEAR STOCK OUT LAST EQUITY NET ENTERPRISE TRAILING BITDA
ENDING PRICE QTR VALUE DEBT VALUE EBITDA MULTIPLE
-------- --------- -------- --------- --------- ---------- -------- --------
8/31/96 $ 15.88 63,573 $1,009,218 $ 42,998 $1,052,216 $ 46,196 22.8 x
8/31/97 $ 20.31 68,382 $1,389,009 $ (10,461) $1,378,548 $ 64,071 21.5 x
8/31/98 $ 21.06 69,287 $1,459,357 $ (5,400) $1,453,957 $ 83,477 17.4 x
LTM 5/31/99 $ 18.88 68,151 $1,286,350 $ 58,892 $1,345,242 $ 94,152 14.3 x
Today $ 9.00 68,151 $ 613,359 $ 58,892 $ 672,251 $ 94,152 7.1 x
</TABLE>
- -------------------------------------------------------------------------------
(1) Home Depot acquired Maintenance Warehouse in Jan 1997 for 11.9x EBITDA.
(2) Freeman Spolig acquired Century Maintenance in Aug. 1998 for 12.0x EBITDA.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF MERGER PREMIUM ANALYSIS
o ANALYZED DEALS SINCE 1/1/98 WITH ENTERPRISE VALUE BETWEEN $200 AND $500
MILLION
o 225 DEALS TOTAL: 58 POOLING TRANSACTION AND 167 PURCHASE TRANSACTIONS
AVERAGE DEAL PREMIUM (1)
POOLING TRANSACTIONS PURCHASE TRANSACTIONS
----------------------------- -----------------------------
RANGE AVERAGE RANGE AVERAGE
----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
First Quartile 54.7% -- 119.6% 77.8% 48.2% -- 111.6% 68.8%
Second Quartile 33.0% -- 50.8% 41.1% 28.9% -- 47.8% 37.8%
Third Quartile 25.4% -- 32.4% 29.3% 15.7% -- 27.8% 21.7%
Fourth Quartile -10.9% -- 22.9% 9.4% -29.9% -- 15.6% 7.0%
- -----------------------------------------------------------------------------------------
ALL TRANSACTIONS 38.71% 33.96%
- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------
(1) Offer premium over closing price one week prior to announcement. EAGLES PRICE: $12.75
PURCHASE PRICE PREMIUM
-------------- ------------
<S> <C> <C>
$18.00 41.2%
$19.00 49.0%
$20.00 56.9%
$21.00 64.7%
$22.00 72.5%
----------------------------------------
</TABLE>
William Blair & Company
- --------------------------------------------------------------------------------
40 Limited Liability Company
<PAGE>
SUMMARY OF DISCOUNTED CASH FLOW ANALYSIS
KEY ASSUMPTIONS:
o Projected five years of results through 2004
o Used public estimates endorsed by management for 1999 and 2000
o Revenue growth of 11.5%, 11.0%, 10.5% And 10.0% for 2001 - 2004
o Gross margins held constant at 1999(p) level of 29.3%
o Operating margin improves over projection period: 10.1%, 10.3%, 10.6%, 10.8%
For 2001 - 2004
o Analyzed two scenarios: eagles alone and eagles with tanga
o Tanga assumes 3.0% revenue growth in 1999 and 2000, 8.0% thereafter and
constant EBITDA margins
SUMMARY RESULTS:
<TABLE>
<CAPTION>
EAGLES ALONE EAGLES WITH TANGA
Discount Rate Discount Rate
-------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
12.0% 13.0% 14.0% 12.0% 13.0% 14.0%
Terminal -------------------------- Terminal --------------------------
EBITDA 7.5 $19.43 $18.72 $18.05 EBITDA 7.5 $19.34 $18.36 $17.43
Multiple 8.0 $20.38 $19.62 $18.91 Multiple 8.0 $20.63 $19.59 $18.61
8.5 $21.32 $20.53 $19.77 8.5 $21.92 $20.83 $19.79
</TABLE>
William Blair & Company
- --------------------------------------------------------------------------------
41 Limited Liability Company
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY (ASSUMING NO ACQUISITION OF TANGA)
Discounted Cash Flow Analysis
- -----------------------------------------------------------------------------------------------------------------------------------
Dollars in millions, except per share amounts
BASE CASE
-----------------------------------------------------------------------------------------
2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C>
Revenue 243.5 271.5 301.3 332.9 366.2
EBITDA 26.4 30.1 34.0 38.3 42.9
EBIT 23.9 27.4 31.1 35.2 39.6
EBIT after tax 14.5 16.7 19.0 21.5 24.2
Plus Depreciation 1.4 1.6 1.8 2.0 2.2
Plus Amortization 1.1 1.1 1.1 1.1 1.1
Less Capex 1.9 2.2 2.4 2.7 2.9
Less Changes in NWC 5.7 6.2 6.6 7.0 7.3
-----------------------------------------------------------------------------------------
Free Cash Flow 9.3 11.0 12.9 15.0 17.3
Terminal Value 343.2
-------------
Total Cash Flows 9.3 11.0 12.9 15.0 360.5
Present Value of Enterprise $230.7
Current Net Debt ($22.5)
--------------
Implied Equity Value $253.2
Share & CSEs Outstanding 12.9
--------------
Equity Value Per Share $19.62
- -------------------------------------------------------------------------------------------------
Sensitivity Tables DISCOUNT RATE
- ------------------- ---------------------------------------------
12.0% 13.0% 14.%
---------------------------------------------
Terminal EBITDA Multiples
7.5 $19.43 $18.72 $18.05
8.0 $20.38 $19.62 $18.91
8.5 $21.32 $20.53 $19.77
WACC CALCULATION
- ------------------------------------------------------------------------------------------------
Equity Risk Premium 10.5%
Risk Free Rate 6.0%
Levered Beta 0.74%
Borrowing Rate 9.0%
Tax Rate 38.0%
Debt % of Cap 10.0%
Cost of Equity 13.8%
After Tax Cost of Debt 5.6%
Weighted Cost of Capital 13.0%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY (WITH TANGA)
- ------------------------------------------------------------------------------------------------
Discounted Cash Flow Analysis
Dollars in millions, except per share amounts
Discount Rate 13.0%
Terminal EBITDA Multiple 8.0
- ------------------------------------------------------------------------------------------------
BASE CASE
----------------------------------------------------------
2000 2001 2002 2003 2004
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue 324.0 358.4 395.3 434.4 475.8
EBITDA 38.0 42.7 47.6 52.9 58.7
EBIT 32.8 37.2 41.9 47.0 52.5
EBIT after tax 19.1 21.9 24.8 27.9 31.4
Plus Depreciation 1.8 2.1 2.3 2.5 2.8
Plus Amortization 3.4 3.4 3.4 3.4 3.4
Less Capex 2.6 2.9 3.2 3.5 3.8
Less Changes in NWC 6.3 7.6 8.1 8.6 9.1
-----------------------------------------------------------
Free Cash Flow 15.4 16.9 19.2 21.7 24.7
Terminal Value 469.6
-------------
Total Cash Flows 15.4 16.9 19.2 21.7 494.3
Present Value of Enterprise $321.8
Current Net Debt $ 69.9
-----------
Implied Equity Value $252.8
Share & CSEs Outstanding 17.9
-----------
Equity Value Per Share $ 19.59
Sensitivity Tables DISCOUNT RATE
- ---------------------------- ----------------------------------------------------
12.0% 13.0% 14.0%
----------------------------------------------------
Terminal EBITDA Multiples
7.5 $19.34 $18.36 $17.43
8.0 $20.63 $19.59 $18.61
8.5 $21.92 $20.83 $19.79
</TABLE>
- --------------------------------------------------------------------------------
WACC CALCULATION
- -------------------
Equity Risk Premium 10.5%
Risk Free Rate 6.0%
Levered Beta 0.74
Borrowing Rate 9.0%
Tax Rate 38.0%
Debt % of Cap 10.0%
Cost of Equity 13.8%
After Tax Cost of Debt 5.6%
Weighted Cost of Capital 13.0%
<PAGE>
SUMMARY OF LEVERAGED RECAPITALIZATION ANALYSIS
KEY ASSUMPTIONS:
o Same operating assumptions as discounted cash flow analysis
o Financed through senior debt at 8.5% And mezzanine debt at 13% plus warrants
(for 18.0% Irr)
o Debt financing of 5.0X 1999 ebitda (3.5X for senior, 1.5X for mezzanine)
o Exit multiple of 8.5X ebitda in 2004
o Analyzed two scenarios: Eagles Alone and Eagles with Tanga
SUMMARY RESULTS: EAGLES ALONE EAGLES WITH TANGA
Deal Price Equity IRR Deal Price Equity IRR
---------- ---------- ---------- ----------
$15.00 31.8% $15.00 28.7%
$15.50 29.4% $15.50 27.1%
$16.00 27.2% $16.00 25.6%
$16.50 25.3% $16.50 24.3%
$17.00 23.5% $17.00 23.0%
$17.50 21.8% $17.50 21.8%
$18.00 20.3% $18.00 20.6%
$18.50 18.9% $18.50 19.6%
$19.00 17.6% $19.00 18.5%
$19.50 16.3% $19.50 17.6%
$20.00 15.2% $20.00 16.7%
$20.50 14.1% $20.50 15.8%
$21.00 13.0% $21.00 14.9%
$21.50 12.0% $21.50 14.1%
$22.00 11.1% $22.00 13.3%
William Blair & Company
- --------------------------------------------------------------------------------
42 Limited Liability Company
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY (ASSUMING NO ACQUISITION OF TANGA) WILLIAM BLAIR & COMPANY
LEVERAGED RE-CAP ANALYSIS ($000S) LIMITED LIABILITY COMPANY
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Structure Assumptions: % OF
<S> <C> <C> <C> <C>
Assumed Shares Outstanind 12,900 SOURCES OF CASH AMOUNT CAPITAL
--------------- ------ -------
Assumed Price Per Share for ReCap $ 19.00 Senior Debt 79,800 31.3%
Assumed Equity Value of Re-Capitalization: 245,000 Mezzanine Debt 34,200 13.4%
Implied Total Value (Equity Value less Excess Cash plus Debt) 222,600 Equity 118,600 46.5%
Total Value / 1999 EBITDA 9.8 Excess Cash 22,500 8.8%
----------
Senior Debt as Multiple of 1999 EBITDA: 3.5 255,100
Total Financing as Multiple of 1999 EBITDA: 5.0 USE OF CASH
-----------
Pro Forma 1999 EBITDA: 22,800 Existing Debt to be Paid Down -
Exit at end of Year 5 Equity to Owners 245,100
Senior Debt Interest Rate: 8.5% Transaction Costs 10,000
Mezzanine Debt Rate: 13.0% Contribution to Working Capital -
--------
Mezzanine Debt Equity Warrants (%): 4.4% 255,100
Management Equity Warrants (%): 5.0%
Assumed Exit Multiple of EBITDA: 8.5 x
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RESULTING COVERAGE: 1999 2000 2001 2002 2003 2004
----------------------------------------------
EBIT/Interest Expense 2.13 2.47 2.87 3.39 4.07
EBITDA/Interest Expense 2.35 2.71 3.14 3.69 4.41
Total Debt to EBITDA 5.00 4.26 3.63 3.06 2.52 -
Senior Debt to EBITDA 3.50 2.97 2.49 2.05 1.62 -
EQUITY TO EXISTING OWNERS % OWNERSHIP
---------
Amount Paid for Equity $ 245,100 Equity Required in Deal: 118,600 100.0%
Shares Owned by BG 2,080 BG Rolled Equity: 7,904 6.7%
-------------------
% of BG Shares Rolled into Deal 20% Additional Equity Required: 110,696 93.3%
===================
Dollar Amount Rolled by Insiders at assumed deal price $ 7,904
Net Equity to be Paid Out $ 237,196 % of Old Equity Taken Out: 96.8%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY (ASSUMING NO ACQUISITION OF TANGA) WILLIAM BLAIR & COMPANY
LEVERAGED RE-CAP ANALYSIS ($000S) LIMITED LIABILITY COMPANY
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal Year Ends 12/31
PRO FORMA PRO FORMA PROJECTED
1999 2000 2001 2002 2003 2004
------------ -----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 217,400 $ 243,500 $ 271,500 $ 301,300 $ 332,900 $ 366,200
Annual Growth N/A 12.0% 11.5% 11.0% 10.5% 10.0%
EBIT $ 20,500 $ 23,900 $ 27,400 $ 31,100 $ 35,200 $ 39,600
Operating Margin 9.40% 9.8% 10.1% 10.3% 10.6% 10.8%
Interest Expense:
Senior Debt (1,100) 6,783 6,660 6,383 5,934 5,283
Mezzanine Debt - 4,446 4,446 4,446 4,446 4,446
----------- -------------------------------------------------------
Pre-Tax Income $ 21,600 $ 12,671 $ 16,294 $ 20,271 $ 24,820 $ 29,871
----------- -------------------------------------------------------
Taxes @ 38.0% 8,300 6,031 7,408 8,919 10,648 12,567
Net Income $ 13,300 $ 6,640 $ 8,887 $ 11,352 $ 14,173 $ 17,304
=========== =======================================================
Add: Depreciation & Amortization 2,300 2,500 2,700 2,900 3,100 3,300
Less: Capital Expenditures 1,948 2,172 2,410 2,663 2,930
Less: Change in Working Capital 5,740 6,160 6,556 6,952 7,326
-------------------------------------------------------
Cash Flow Available including Terminal Value $ 1,452 $ 3,255 $ 5,286 $ 7,657 $ 374,999
Senior Debt Repayments 1,452 3,255 5,286 7,657 62,150
Mezzanine Debt Repayments - - - - 34,200
- ---------------------------------------------------------------------------------------------------------------------------------
Cash Flow to Mezzanine Debt Holders (34,200) 4,446 4,446 4,446 4,446 50,872
Mezzanine Debt IRR 18.0%
- ---------------------------------------------------------------------------------------------------------------------------------
Total Cash Flow to Equity (118,600) - - - - 266,422
Total Equity IRR 17.6%
- ---------------------------------------------------------------------------------------------------------------------------------
Management Equity 7,391
- ---------------------------------------------------------------------------------------------------------------------------------
Net Cash Flow to Equity (118,600) - - - - 259,031
Net Equity IRR 16.9%
- ---------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------
Debt Balances: BEGINNING 2000 2001 2002 2003 2004
-------------------------------------------------------
Senior Debt 79,800 78,348 75,093 69,808 62,150 -
Mezzanine Debt 34,200 34,200 34,200 34,200 34,200 -
-
- ---------------------------------------------------------------------------------------------------------------------------------
EBITDA 22,800 26,400 30,100 34,000 38,300 42,900
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY (ASSUMING NO ACQUISITION OF TANGA) WILLIAM BLAIR & COMPANY
LEVERAGED RE-CAP ANALYSIS ($000S) LIMITED LIABILITY COMPANY
- ------------------------------------------------------------------------------------------------------------------------------------
Sensitivity Analysis at Various Deal Prices - Resulting Impact on Equity IRR and EBITDA Multiple
1999
IMPLIED
DEAL EBITDA % PREMIUM
PRICE EQUITY IRR MULTIPLE TO CURRENT
----------------------------------------------
BASE CASE:
<S> <C> <C> <C> <C> <C>
Price on 10/1/99 12.75 $ 15.00 31.8% 7.5 17.6%
Assumed Premium in Deal (Base Case) 49.00% $ 15.50 29.4% 7.8 21.6%
Total Value to 1999 EBITDA 9.8 x $ 16.00 27.2% 8.1 25.5%
Total Value to 2000 EBITDA 8.4 x $ 16.50 25.3% 8.3 29.4%
$ 17.00 23.5% 8.6 33.3%
$ 17.50 21.8% 8.9 37.3%
$ 18.00 20.3% 9.2 41.2%
$ 18.50 18.9% 9.5 45.1%
$ 19.00 17.6% 9.8 49.0%
$ 19.50 16.3% 10.0 52.9%
$ 20.00 15.2% 10.3 56.9%
$ 20.50 14.1% 10.6 60.8%
$ 21.00 13.0% 10.9 64.7%
$ 21.50 12.0% 11.2 68.6%
$ 22.00 11.1% 11.5 72.5%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY (WITH TANGA) WILLIAM BLAIR & COMPANY
LEVERAGED RE-CAP ANALYSIS ($000S) LIMITED LIABILITY COMPANY
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
STRUCTURE ASSUMPTIONS: % OF
Assumed Shares Outstanding 12,900 SOURCES OF CASH AMOUNT CAPITAL
--------------- ------ --------
<S> <C> <C> <C> <C>
Assumed Price Per Share for ReCap $ 19.00 Senior Debt 119,350 36.8%
Assumed Equity Value of Re-Capitalization: 245,100 Mezzanine Debt 51,150 15.8%
Implied Total Value (Equity Value less Excess Cash plus Debt) 314,100 Equity 153,600 47.4%
Total Value / 1999 EBITDA 9.2 Excess Cash - 0.0%
---------
Senior Debt as Multiple of 1999 EBITDA: 3.5 324,100
Total Financing as Multiple of 1999 EBITDA: 5.0 USE OF CASH
-----------
Pro Forma 1999 EBITDA: 34,100 Existing Debt to be Paid Down 69,000
Exit at end of Year 5.0 Equity to Owners 245,100
Senior Debt Interest Rate: 8.5% Transaction Costs 10,000
Mezzanine Debt Rate: 13.0% Contribution to Working Capital -
--------
Mezzanine Debt Equity Warrants (%): 4.8% 324,100
Management Equity Warrants (%): 5.0%
Assumed Exit Multiple of EBITDA: 8.5 x
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RESULTING COVERAGE: 1999 2000 2001 2002 2003 2004
------------------------------------------------------
EBIT/Interest Expense 1.95 2.27 2.65 3.13 3.76
EBITDA/Interest Expense 2.26 2.61 3.01 3.53 4.21
Total Debt to EBITDA 5.00 4.36 3.72 3.14 2.59 -
Senior Debt to EBITDA 3.50 3.01 2.52 2.06 1.62 -
EQUITY TO EXISTING OWNERS % OWNERSHIP
-----------
Amount Paid for Equity $ 245,100 Equity Required in Deal: 153,600 100.0%
Shares Owned by BG 2,080 BG Rolled Equity: 7,904 5.1%
---------------------------
% of BG Shares Rolled into Deal 20% Additional Equity Required: 145,696 94.9%
Dollar Amount Rolled by Insiders at assumed deal price $ 7,904
Net Equity to be Paid Out $ 237,196 % of Old Equity Taken Out: 96.8%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY (WITH TANGA) WILLIAM BLAIR & COMPANY
LEVERAGED RE-CAP ANALYSIS ($000S) LIMITED LIABILITY COMPANY
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal Year Ends 12/31
----------- --------------------------------------------------------------
PRO FORMA PRO FORMA PROJECTED
1999 2000 2001 2002 2003 2004
----------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 295,600 $ 324,000 $ 358,400 $ 395,300 $ 434,400 $ 475,800
Annual Growth N/A 9.6% 10.6% 10.3% 9.9% 9.5%
EBIT $ 29,100 $ 32,800 $ 37,200 $ 41,900 $ 47,000 $ 52,500
Operating Margin 9.8% 10.1% 10.4% 10.6% 10.8% 11.0%
Interest Expense:
Senior Debt 4,800 10,145 9,719 9,150 8,353 7,298
Mezzanine Debt - 6,650 6,650 6,650 6,650 6,650
----------- -------------------------------------------------------------
Pre-Tax Income $ 24,300 $ 16,006 $ 20,831 $ 26,101 $ 31,997 $ 38,553
----------- -------------------------------------------------------------
Taxes @ 38.0% 10,100 7,298 9,132 11,134 13,375 15,866
Net Income $ 14,200 $ 8,708 $ 11,699 $ 14,967 $ 18,622 $ 22,687
=========== =============================================================
Add: Depreciation & Amortization 5,000 5,200 5,500 5,700 5,900 6,200
Less: Capital Expenditures 2,600 2,900 3,200 3,500 3,800
Less: Change in Working Capital 6,300 7,600 8,100 8,600 9,100
-------------------------------------------------------------
Cash Flow Available including Terminal Value $ 5,008 $ 6,699 $ 9,367 $ 12,422 $ 514,937
Senior Debt Repayments 5,008 6,699 9,367 12,422 85,854
Mezzanine Debt Repayments - - - - 51,150
- -----------------------------------------------------------------------------------------------------------------------------------
Cash Flow to Mezzanine Debt Holders (51,150) 6,650 6,650 6,650 6,650 76,075
Mezzanine Debt IRR 18.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Cash Flow to Equity (153,600) - - - - 359,657
Total Equity IRR 18.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Management Equity 10,303
- ------------------------------------------------------------------------------------------------------------------------------------
Net Cash Flow to Equity (153,600) - - - - 349,354
Net Equity IRR 17.9%
- ------------------------------------------------------------------------------------------------------------------------------------
----------- --------------------------------------------------------------
Debt Balances: BEGINNING 2000 2001 2002 2003 2004
----------- --------------------------------------------------------------
Senior Debt 119,350 114,342 107,643 98,276 85,854 -
Mezzanine Debt 51,150 51,150 51,150 51,150 51,150 -
-
- ------------------------------------------------------------------------------------------------------------------------------------
EBITDA 34,100 38,000 42,700 47,600 52,900 58,700
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY (WITH TANGA) WILLIAM BLAIR & COMPANY
LEVERAGED RE-CAP ANALYSIS ($000S) LIMITED LIABILITY COMPANY
- ------------------------------------------------------------------------------------------------------------------------------------
Sensitivity Analysis at Various Deal Prices - Resulting Impact on Equity IRR and EBITDA Multiple
1999
IMPLIED
EBITDA % PREMIUM
DEAL PRICE EQUITY IRR MULTIPLE TO CURRENT
--------------------------------------------------------
BASE CASE:
<S> <C> <C> <C> <C> <C>
Price on 10/1/99 12.75 $ 15.00 28.7% 7.7 17.6%
Assumed Premium in Deal (Base Case) 49.0% $ 15.50 27.1% 7.9 21.6%
Total Value to 1999 EBITDA 9.2 x $ 16.00 25.6% 8.1 25.5%
Total Value to 2000 EBITDA 8.3 x $ 16.50 24.3% 8.3 29.4%
$ 17.00 23.0% 8.5 33.3%
$ 17.50 21.8% 8.6 37.3%
$ 18.00 20.6% 8.8 41.2%
$ 18.50 19.6% 9.0 45.1%
$ 19.00 18.5% 9.2 49.0%
$ 19.50 17.6% 9.4 52.9%
$ 20.00 16.7% 9.6 56.9%
$ 20.50 15.8% 9.8 60.8%
$ 21.00 14.9% 10.0 64.7%
$ 21.50 14.1% 10.2 68.6%
$ 22.00 13.3% 10.3 72.5%
</TABLE>
<PAGE>
SUMMARY OF EAGLES / VIKINGS COMBINATION
ANALYSIS
- --------------------------------------------------------------------------------
Key Assumptions:
o Same operating assumptions as discounted cash flow analysis
o Assumed a pooling transaction at $20.00 without Tanga and $22.00 with Tanga
o Evaluated impact on 1999 and 2000 EPS of Vikings
o Assumed a Viking share price of $35.00
o Combination accelerates Vikings growth (particularly with Tanga acquisition)
o Vikings projected EPS of $1.30 for 1999 and $1.47 for 2000.
<TABLE>
<CAPTION>
SUMMARY RESULTS:
EAGLES ALONE EAGLES WITH TANGA
ACCRETION/DILUTION % ACCRETION/DILUTION %
------------------ ------------- ------------------ ----------
<S> <C> <C> <C> <C>
1999 $0.026 2.03% $0.020 1.56%
2000 $0.031 2.10% $0.031 2.10%
</TABLE>
William Blair & Company
- --------------------------------------------------------------------------------
43 Limited Liability Company
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY (ASSUMING NO ACQUISITION OF TANGA)
Eagles-Vikings Combination Analysis
In thousands, except per share amounts
- ------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
EAGLES PRICE PER SHARE: $ 20.00 VIKINGS STOCK PRICE: $ 35.00
EAGLES SHARES: 12,900 NEW SHARES ISSUED: 7,371
---------
EQUITY VALUE: $ 258,000 ACCOUNTING: Pooling
- -------------------------------------------------------------------------------------------
1997 1998 1999 2000
------------------------------- --------------------------------
Vikings Vikings Vikings Eagles Combined Vikings Eagles Combined
----------- --------- ------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue 1,640,352 1,888,226 2,065,000 217,400 2,282,400 2,270,000 243,500 2,513,500
EBIT 218,504 261,980 290,000 20,500 310,500 328,000 23,900 351,900
EBITDA 319,383 383,951 425,000 22,800 447,800 473,000 26,400 499,400
Net Income 133,955 154,506 175,000 13,300 188,300 198,000 15,200 213,200
Shares & CSE's 133,822 134,047 135,000 0 135,000 135,000 0 135,000
Shares Issued 0 0 0 7,371 7,371 0 7,371 7,371
--------- --------- --------- --------- --------- --------- ---------- ---------
Total Shares 133,822 134,047 135,000 7,371 142,371 135,000 7,371 142,371
---------------------------------------------------------------------
EPS $ 1.00 $ 1.15 $ 1.30 $ 1.32 $ 1.47 $ 1.50
---------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Accretion / (Dilution) $ 0.03 $ 0.03
Accretion / (Dilution) % 2.03% 2.10%
- ---------------------------------------------------------------------------------------------------------------------
Reported Revenue Growth 9.93% 10.13%
Reported EPS Growth 13.14% 13.22%
2001
-------------------------------------
Vikings Eagles Combined
-------------------------------------
Revenue 2,451,600 271,500 2,723,100
EBIT 360,800 27,400 388,200
EBITDA 515,251 30,100 545,351
Net Income 220,762 17,600 238,362
Shares & CSE's 135,000 0 135,000
Shares Issue 0 7,371 7,371
--------- -------- -------
Total Shares 135,000 7,371 142,371
-------------------------------------
EPS $ 1.64 $ 1.67
-------------------------------------
- --------------------------------------------------------------
Accretion / Dilution $ 0.04
Accretion / Dilution % 2.38%
- --------------------------------------------------------------
Reported Revenue Growth 8.00% 8.34%
Reported EPS Growth 11.50% 11.80%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY (WITH TANGA)
Eagles-Vikings Combination Analysis
In thousands, except per share amounts
- ------------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
EAGLES PRICE PER SHARE: $ 22.00 VIKINGS STOCK PRICE: $ 35.00
EAGLES SHARES: 12,900 NEW SHARES ISSUED: 8,109
---------
EQUITY VALUE: $ 283,800 ACCOUNTING: Pooling
- -------------------------------------------------------------------------------------------
1999(1) 2000
1997 1998 ---------------------------------- ----------------------------------
VIKINGS VIKINGS VIKINGS EAGLES COMBINED VIKINGS EAGLES COMBINED
--------- -------- --------- -------- --------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue 1,640,352 188,226 2,065,000 230,400 2,295,400 2,270,000 324,000 2,594,000
EBIT 218,504 261,980 290,000 21,900 311,900 328,000 32,800 360,800
EBITDA 319,383 383,951 425,000 24,700 449,700 473,000 38,000 511,000
Net Income 133,955 154,506 175,000 13,400 188,400 198,000 16,300 214,300
Shares & CSE's 133,822 134,047 135,000 0 135,000 135,000 0 135,000
Shares Issued 0 0 0 8,109 8,109 0 8,109 8,109
--------- -------- --------- -------- --------- --------- ------- ---------
Total Shares 133,822 134,047 135,000 8,109 143,109 135,000 8,109 143,109
-----------------------------------------------------------------------------------------------
---------------------------------- --------- --------------------
EPS $ 1.00 $ 1.15 $ 1.30 $ 1.32 $ 1.47 $ 1.50
---------------------------------- --------- --------------------
- -------------------------------------------------------------------------------------------------------------------------------
Accretion / Dilution $ 0.02 $ 0.03
Accretion / Dilution % 1.56% 2.10%
- -------------------------------------------------------------------------------------------------------------------------------
Reported Revenue Growth 9.93% 13.01%
Reported EPS Growth 13.14% 13.75%
2001
---------------------------------
VIKINGS EAGLES COMBINED
---------------------------------
Revenue 2,451,600 358,400 2,810,000
EBIT 360,800 37,200 398,000
EBITDA 515,251 42,700 557,951
Net Income 220,762 19,700 240,462
Shares & CSE's 135,000 0 135,000
Shares Issue 0 8,109 8,109
Total Shaes 135,000 8,109 143,109
--------- -------- ---------
-----------------------------------
EPS $ 1.64 $ 1.68
-----------------------------------
- ------------------------------ -----------------------------------
Accretion / Dilution $ 0.05
Accretion / Dilution % % 2.75%
- ------------------------------ -----------------------------------
Reported Revenue Growth 8.00% 8.33%
Reported EPS Growth 11.50% 12.21%
- -----------------------------
(1) Assumes the acquisition of Tanga impacts only 2 months of 1999.
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
OVERVIEW OF VIKINGS
William Blair & Company
- --------------------------------------------------------------------------------
44 Limited Liability Company
<PAGE>
VIKINGS FINANCIAL OVERVIEW
- --------------------------------------------------------------------------------
o Consistent Record of Growth
o Sales: 11.5% CAGR 1996-1999E
o EBIT: 16.1% CAGR 1996-1999E
o EPS: 15.2% CAGR 1996-1999E
o Strong and Improving Profitability
o Steady Gross Margins of 55.0%
o Operating Margin Improves to 14.0% from 12.4% in 1996
o Strong Balance Sheet
o $190 Million Working Capital
o 30% Debt/Capital
William Blair & Company
- --------------------------------------------------------------------------------
45 Limited Liability Company
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY
Vikings Historical & Projected Income Statement
In thousands, except per share amounts
===================================================================================================================
Actual LTM Estimated (1)
------------------------------------ ---------- -----------------------
1996 1997 1998 6/30/99 1999 2000
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $1,490,009 $1,640,352 $1,888,226 $1,993,124 $2,065,000 $2,270,000
Cost of Sales 674,953 722,084 851,173 900,298 925,000 1,022,000
---------- ---------- ---------- ---------- ---------- ----------
Gross Profits 815,056 918,268 1,037,053 1,092,826 1,140,000 1,248,000
S, G & A Expenses 629,739 699,764 775,073 814,301 850,000 920,000
---------- ---------- ---------- ---------- ---------- ----------
Operating Income 185,317 218,504 261,980 278,525 290,000 328,000
Interest Expense, net 14,372 12,637 21,742 23,329 24,000 24,000
---------- ---------- ---------- ---------- ---------- ----------
Interest Before Taxes and JV 170,945 205,867 240,238 255,196 266,000 304,000
Earnings from JV 13,011 13,433 16,050 16,566 19,000 21,000
Income Taxes 70,771 85,345 101,782 107,111 110,000 127,000
---------- ---------- ---------- ---------- ---------- ----------
Net Income $ 113,185 $ 133,955 $ 154,506 $ 164,651 $ 175,000 $ 198,000
========== ========== ========== ========== ========== ==========
Shares and CSE's 132,817 133,822 134,047 134,829 135,000 135,000
Earnings Per Share $ 0.85 $ 1.00 $ 1.15 $ 1.22 $ 1.30 $ 1.47
Cash Flow Items:
EBITDA $ 274,840 $ 319,383 $ 383,951 $ 407,546 $ 425,000 $ 473,000
Depreciation & Amortization 89,523 100,879 121,971 129,021 135,000 145,000
Capital Expenditures 108,234 118,243 140,571 136,442 154,800 185,000
Margin Analysis:
Gross Margin 54.7% 56.0% 54.9% 54.8% 55.2% 55.0%
EBITDA Margin 18.4% 19.5% 20.3% 20.4% 20.6% 20.8%
Operating Margin 12.4% 13.3% 13.9% 14.0% 14.0% 14.4%
Net Margin 7.6% 8.2% 8.2% 8.3% 8.5% 8.7%
Growth Rates:
Net Sales 11.1% 10.1% 15.1% 9.4% 9.9%
EBITDA 15.0% 16.2% 20.2% 10.7% 11.3%
Operating Income 13.9% 17.9% 19.9% 10.7% 13.1%
Net Income 14.1% 18.4% 15.3% 13.3% 13.1%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimates provided by CS First Boston research dated 9/17/99.
<PAGE>
VIKINGS STOCK PERFORMANCE
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
6,000,000 50.00
WEEKLY: LAST FIVE YEARS 45.00
5,000,000
40.00
35.00
4.000,000
30.00
3,000,000 25.00
20.00
2,000,000
15.00
10.00
1,000,000
5.00
0 0.00
9/30/94
2/17/95
7/7/95
11/24/95
4/12/96
8/30/96
1/17/97
6/6/97
10/24/97
3/13/98
7/31/98
12/18/98
5/7/99
9/24/99
----------------------
==== Volume ____ Close
----------------------
William Blair & Company
- --------------------------------------------------------------------------------
46 Limited Liability Company
<PAGE>
RELATIVE INDEX PERFORMANCE
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
450 -
400 -
350 - WEEKLY: LAST FIVE YEARS
INDEX: 9/30/94 = 100
300 -
250 -
200 -
150 -
100 -
50 -
0 -
9/30/94
2/17/95
7/7/95
11/24/95
4/12/96
8/30/96
1/17/97
6/6/97
10/24/97
3/13/98
7/31/98
12/18/98
5/7/99
9/24/99
- --------------------------------------------------------------------------------
------Vikings
Branded Consumable Products
- -----Specialty Chemicals
- -----S&P 500
William Blair & Company
- --------------------------------------------------------------------------------
47 Limited Liability Company
<PAGE>
<TABLE>
<CAPTION>
VIKINGS RESEARCH ANALYSIS SUMMARY
====================================================================================================================================
ESTIMATES
----------------------- LAST STOCK PRICE
INVESTMENT BANK ANALYST RATING 1999E 2000E LTGR% UPDATE AT UPDATE
- --------------------------- --------------- -------------- --------- -------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Bank of America Montgomery Mark Gulley Market Perform $ 1.30 $ 1.50 15.0% 9/24/99 $32.56
CS First Boston David Begleiter Buy $ 1.30 $ 1.47 13.0% 9/17/99 $34.94
Morgan Stanley DW Robert Ottenstein Outperform $ 1.30 $ 1.45 13.0% 9/15/99 $35.62
Goldman Sachs Kimberly Ritrievi Recommend List $ 1.30 $ 1.47 15.0% 9/9/99 $36.50
Dain Raucher Staff Buy $ 1.30 $ 1.45 13.5% 9/9/99 $36.50
JP Morgan Gilbert Yang Buy $ 1.30 $ 1.50 14.0% 9/9/99 $36.50
Piper Jaffray Stephen Jacobs Strong Buy $ 1.30 $ 1.46 13.5% 9/9/99 $36.50
Merrill Lynch Karen Gilsenan Near-Term Neutral $ 1.30 $ 1.45 15.0% 9/1/99 $37.62
Ingalls & Snyder Staff Buy / Hold $ 1.30 $ 1.45 13.0% 9/1/99 $37.62
------------------------------------------------------------------------------
AVERAGE $ 1.30 $ 1.47 13.9%
MEDIAN $ 1.30 $ 1.46 13.5%
------------------------------------------------------------------------------
</TABLE>
William Blair & Company
- --------------------------------------------------------------------------------
48 Limited Liability Company
<PAGE>
- --------------------------------------------------------------------------------
VIKINGS OWNERSHIP PROFILE
William Blair & Company
- --------------------------------------------------------------------------------
49 Limited Liability Company
<PAGE>
PROJECT LIBERTY
COMBINED OWNERSHIP ANALYSIS
================================================================================
- --------------------------------------------------------
Stock Price: Vikings $ 35.00
Stock Price: Eagles $ 12.75
Merger Conversion Factor 0.63
Offer Price $ 22.00
Merger Premium 72.5%
- --------------------------------------------------------
<TABLE>
<CAPTION>
Vikings % Eagles % Combined %
----------- ----- ---------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Henkel 31,242,176 24.1% -- 0.0% 31,242,176 22.7%
Allan Schuman 1,166,123 0.9% -- 0.0% 1,166,123 0.8%
Other Vikings Officers & Directors 1,341,489 1.0% -- 0.0% 1,341,489 1.0%
All Others 95,892,212 74.0% -- 0.0% 95,892,213 69.8%
Bill Green -- 0.0% 2,013,536 16.2% 1,265,651 0.9%
Other Officers & Directors -- 0.0% 43,009 0.3% 27,034 0.0%
All Others -- 0.0% 10,340,455 83.4% 6,499,715 4.7%
----------- ----- ---------- ----- ----------- -----
Totals 129,642,000 100.0% 12,397,000 100.0% 137,434,401 100.0%
=========== ===== ========== ===== =========== =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY
VIKINGS OWNERSHIP PROFILE
===================================================================================================================
SHARES PERCENT LAST
OWNER NAME HELD HELD REPORT
- ------------------------------------------ ------------- --------- -----------
<S> <C> <C> <C>
HENKEL SUBTOTAL 31,242,176 24.10%
OFFICERS & DIRECTORS SUBTOTAL 2,507,612 1.93%
INSTITUTIONAL SUBTOTAL 62,282,990 48.04%
RETAIL ACCOUNTS 33,609,222 25.92%
------------- ---------
TOTAL SHARES OUTSTANDING 129,642,000 100.00%
============= =========
HENKEL
- ------
HENKEL KGAA 16,575,512 12.79% 03/31/99
HC INVESTMENTS 14,666,664 11.31% 03/31/99
OFFICERS & DIRECTORS
- --------------------
SCHUMAN ALLAN L 1,166,123 0.90% 03/31/99
SHANNON MICHAEL EDWARD 777,888 0.60% 03/31/99
SPOONER JOHN P 142,376 0.11% 03/31/99
MCCARTY JAMES L 122,712 0.09% 03/31/99
MARCANTONIO RICHARD L 39,323 0.03% 03/31/99
SCHALL RICHARD L 37,912 0.03% 03/31/99
RICHARDS REUBEN F 33,912 0.03% 03/31/99
BLOCK RUTH S 32,443 0.03% 03/31/99
HOWARD JAMES J 29,112 0.02% 03/31/99
WOESTE ALBRECHT 28,519 0.02% 03/31/99
SCHULZ ROLAND 27,508 0.02% 03/31/99
LEVIN JERRY W 24,832 0.02% 03/31/99
UYTERHOEVEN HUGO E 23,194 0.02% 03/31/99
BILLER LESLIE S 10,000 0.01% 03/31/99
JOHNSON JOEL W 9,158 0.01% 03/31/99
GRUNDHOFER JERRY A 2,600 0.00% 03/31/99
TOP INSTITUTIONAL HOLDERS
- -------------------------
TRIMARK INVESTMENT MGMT, INC. 4,256,400 3.28% 03/31/99
BARCLAYS BANK PLC 3,427,610 2.64% 06/30/99
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY
VIKINGS OWNERSHIP PROFILE
===================================================================================================================
SHARES PERCENT LAST
OWNER NAME HELD HELD REPORT
- ------------------------------------------ ------------- --------- -----------
<S> <C> <C> <C>
FIDELITY MGMT & RESEARCH CO 3,006,638 2.32% 6/30/99
CAPITAL GUARDIAN TRUST COMPANY 2,609,700 2.01% 6/30/99
EATON, VANCE MANAGEMENT, INC. 2,475,611 1.91% 6/30/99
PAINEWEBBER GROUP INC. 2,384,794 1.84% 6/30/99
STATE STR BK & TRUST CO BOSTON 2,152,073 1.66% 6/30/99
U S BANCORP 2,115,902 1.63% 6/30/99
VANGUARD GROUP 1,893,608 1.46% 6/30/99
BANKERS TRUST NY CORP 1,790,930 1.38% 6/30/99
GAMCO INVESTORS, INC. 1,767,600 1.36% 6/30/99
STEIN ROE & FRANHAM, INC. 1,537,385 1.19% 6/30/99
CITIGROUP INC. 1,336,179 1.03% 6/30/99
DELAWARE MANAGEMENT CO 1,307,100 1.01% 6/30/99
UNITED STATES TRUST CO OF NY 1,293,119 1.00% 6/30/99
MELLON PRIVATE ASSET MGMT 1,183,583 0.91% 6/30/99
ARIEL CAPITAL MANAGEMENT INC. 1,048,825 0.81% 6/30/99
ATLANTA CAPITAL MGMT CO. L.L.C. 1,037,380 0.80% 6/30/99
TIAA-CREF INVESTMENT MGMT INC. 1,000,500 0.77% 6/30/99
SUNTRUST BANKS INC 995,927 0.77% 6/30/99
INVISTA CAPITAL MGMT, INC. 981,837 0.76% 6/30/99
AMERICAN FAMILY INSUR GROUP 866,000 0.67% 6/30/99
COLLEGE RETIRE EQUITIES 807,701 0.62% 6/30/99
NEW YORK STATE COMMON RET FD 771,800 0.60% 6/30/99
WACHOVIA ASSET MANAGEMENT 752,293 0.58% 6/30/99
ALLEGHANY CORPORATION 747,313 0.58% 6/30/99
BRUNDAGE, STORY AND ROSE, LLC 728,927 0.56% 6/30/99
DENVER INVESTMENT ADVR LLC 725,380 0.56% 6/30/99
CALIFORNIA PUBLIC EMP RET SYS 723,793 0.56% 6/30/99
IL STATE BOARD OF INVESTMENT 690,800 0.53% 6/30/96
GEEWAX, TERKER & COMPANY 681,450 0.53% 6/30/99
FIRSTAR INV RESEARCH & MGMT CO 675,780 0.52% 6/30/99
NJ STATE DIVISION INVESTMENT 654,000 0.50% 6/30/97
OTHER INSTITUTIONAL 13,855,052 10.69%
</TABLE>
<PAGE>
SUMMARY OF VIKINGS HISTORICAL TRADING
- --------------------------------------------------------------------------------
o 68 million shares have traded in LTM as of 9/24/99
o Average daily trading volume is 285,200 shares or $10.7 million (based on
$37.58/share)
o Weighted average share price over that period is $37.58
o Highest volume of shares traded between $39.00 and $40.00
SUMMARY RESULTS: % OF TRADING
VOLUME
ABOVE
PRICE THIS PRICE
----- ------------
$ 32.00 81.1%
$ 33.00 79.3%
$ 34.00 76.1%
$ 35.00 75.5%
$ 36.00 70.3%
William Blair & Company
- --------------------------------------------------------------------------------
50 Limited Liability Company
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY
PRICE DISTRIBUTION OF HISTORICAL TRADING ACTIVITY
LATEST TWELVE MONTHS AS OF 9/24/99
====================================================================================================================================
VIKINGS SHARES % OF TOTAL % OF TOTAL
% OF TOTAL COMMON PUBLIC
% OF TOTAL VOLUME % OF TOTAL SHARES % OF TOTAL FLOAT
GREATER BUT CUMULATIVE VOLUME TRADED AT COMMON TRADED AT PUBLIC TRADED AT
THAN OR LESS SHARES SHARES TRADED AT OR BELOW SHARES OR BELOW FLOAT OR BELOW
EQUAL TO THAN TRADED TRADED THIS PRICE THIS PRICE OUTSTANDING (1) THIS PRICE OUTSTANDING (2) THIS PRICE
- -------- ---- ------ ------ ---------- ---------- --------------- ---------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------- ------- ------
$26.00 $27.00 - - 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
27.00 28.00 868,000 868,800 1.3% 1.3% 0.7% 0.7% 0.9% 0.9%
28.00 29.00 1,399,900 2,268,700 2.1% 3.3% 1.1% 1.7% 1.4% 2.3%
29.00 30.00 3,657,800 5,926,500 5.4% 8.7% 2.8% 4.6% 3.8% 6.1%
30.00 31.00 4,337,200 10,263,700 6.4% 15.1% 3.3% 7.9% 4.5% 10.6%
31.00 32.00 2,612,900 12,876,600 3.8% 18.9% 2.0% 9.9% 2.7% 13.2%
32.00 33.00 1,179,000 14,055,600 1.7% 20.7% 0.9% 10.8% 1.2% 14.5%
33.00 34.00 2,176,700 16,232,300 3.2% 23.9% 1.7% 12.5% 2.2% 16.7%
34.00 35.00 414,800 16,647,100 0.6% 24.5% 0.3% 12.8% 0.4% 17.1%
35.00 36.00 3,530,400 20,177,500 5.2% 29.7% 2.7% 15.6% 3.6% 20.8%
36.00 37.00 6,092,200 26,269,700 9.0% 38.6% 4.7% 20.3% 6.3% 27.0%
37.00 38.00 3,707,300 29,977,000 5.5% 44.1% 2.9% 23.1% 3.8% 30.8%
38.00 39.00 5,437,700 35,414,700 8.0% 52.1% 4.2% 27.3% 5.6% 36.4%
39.00 40.00 9,338,100 44,752,800 13.7% 65.8% 7.2% 34.5% 9.6% 46.0%
40.00 41.00 3,414,600 48,167,400 5.0% 70.8% 2.6% 37.2% 3.5% 49.5%
41.00 42.00 7,351,000 55,518,400 10.8% 81.6% 5.7% 42.8% 7.6% 57.1%
42.00 43.00 7,575,800 63,094,200 11.1% 92.8% 5.8% 48.7% 7.8% 64.9%
43.00 44.00 4,693,800 67,788,000 6.9% 99.7% 3.6% 52.3% 4.8% 69.7%
44.00 45.00 219,100 68,007,100 0.3% 100.0% 0.2% 52.5% 0.2% 69.9%
---------- -------- ------- ------
68,007,100
</TABLE>
- ----------------------------------------------------
Weighted Average Share Price: $ 37.58
- ----------------------------------------------------
- -------------------------------------------------------------------------------
(1) Based on 129,642,000 shares outstanding per 6/30/99 quarterly report.
(2) Excludes 32,408,299 shares held by Henkel and CEO.
<PAGE>
PRELIMINARY VALUATION
ANALYSIS FOR VIKINGS
William Blair & Company
- --------------------------------------------------------------------------------
51 Limited Liability Company
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF COMPARABLE COMPANY ANALYSIS
o No one company is directly comparable to Vikings
o Selected two groups: Branded Consumable Products and Specialty Chemicals
o Branded consumable product companies trade at a premium to specialty
chemicals
o Vikings currently trades at the average multiples of these two groups
SUMMARY RESULTS:
Average Multiples
-----------------------------------------------------------------
Price/Earnings Total Value/LTM Cal. 2000
------------------------------ ------------------------------ P/E LT
LTM 1999 E 2000 E SALES EBIT EBITDA GROWTH RATE
----- ------ ------ ----- ---- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Branded Consumable Products 29.6 x 27.0 x 24.0 x 2.5 x 16.9 x 13.0 x 182.6%
Specialty Chemicals 20.6 19.3 17.3 2.1 13.8 10.0 151.4%
- ----------------------------------------------------------------------------------------------------------------------
Overall Average 25.1 23.1 20.6 2.3 15.4 11.5 167.0%
- ----------------------------------------------------------------------------------------------------------------------
Vikings (JV Equity Method) 28.0 x 26.3 x 23.2 x 2.4 x 16.9 x 11.6 x 165.8%
Vikings (JV Consolidated) 15.1 x 10.6 x
</TABLE>
William Blair & Company
- --------------------------------------------------------------------------------
52 Limited Liability Company
<PAGE>
<TABLE>
<CAPTION>
COMPARABLE COMPANIES FOR VIKINGS
Summary Market Statistics
Priced as of 9/30/99
====================================================================================================================================
PRICE / EARNINGS RATIO
STOCK PRICE ---------------------------------------------
-------------------------------------- MOST LONG TERM
52 WEEK RECENT EPS GROWTH
LOW HIGH 9/30/99 FY LTM CAL. 99E. CAL. 00E. RATE
------------ ------------ ---------- ------------ --------- ---------- --------- -----------
BRANDED CONSUMABLE PRODUCTS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CHURCH & DWIGHT INC $13.75 - $25.09 $25.00 $33.5 x 27.0 x 25.8 x 22.9 x 15.0%
CLOROX CO/DE 37.56 - 66.47 38.25 27.1 26.1 22.6 20.1 13.3%
COLGATE-PALMOLIVE CO 33.56 - 58.88 45.75 35.1 33.3 31.5 27.9 12.5%
PROCTER & GAMBLE CO 69.63 - 104.13 93.75 36.2 36.2 30.9 27.3 13.5%
UNILEVER 64.13 - 98.84 68.13 25.6 25.5 24.0 21.6 11.8%
Average 31.5 x 29.6 x 27.0 x 24.0 x 13.2%
Median 33.5 27.0 25.8 22.9 13.3%
SPECIALTY CHEMICALS
FULLER (H.B.) CO. 34.00 - 72.88 60.88 22.6 19.9 15.5 12.9 12.0%
GREAT LAKES CHEMICAL 35.50 - 50.00 38.06 17.2 16.0 15.9 13.7 12.8%
MINNESOTA MINING & MFG CO 69.31 - 100.00 96.06 26.5 25.1 23.8 21.5 11.3%
NALCO CHEMICAL CO 25.69 - 52.50 50.50 25.0 23.4 23.2 22.0 10.0%
SIGMA-ALDRICH 24.50 - 35.25 31.75 19.4 18.9 18.0 16.3 12.3%
- ------------------------------------------------------------------------------------------------------------------------------------
Average 22.1 x 20.6 x 19.3 x 17.3 x 11.7%
Median 22.6 19.9 18.0 16.3 12.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Overall Average 26.8 x 25.1 x 23.1 x 20.6 x 12.4%
Overall Median 26.1 25.3 23.5 21.6 12.4%
VIKINGS $26.13 - $44.44 $34.13 29.7 x 28.0 x 26.3 x 23.2 x 14.0%
COMPARABLE COMPANIES FOR VIKINGS
Summary Market Statistics
Priced as of 9/30/99
====================================================================================================================================
(continued)
CAL.99E P/E/ CAL.00E P/E/ TOTAL VALUE /
LONG-TERM LONG-TERM MKT PRC / ---------------------------------
EPS GROWTH EPS GROWTH BOOK VALUE LTM LTM OPER LTM LTM MKT. LTM
RATE RATE PER SHARE SALES INCOME EBITDA SALES (MM) CAP. (MM) ENDED
---------- ---------- ---------- ----- -------- ------- --------- -------- ------
BRANDED CONSUMABLE PRODUCTS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CHURCH & DWIGHT INC 171.8% 152.9% 4.6 x 1.4 x 19.1 x 14.3 x $719.9 $972.1 06/99
CLOROX CO/DE 170.3% 151.9% 5.8 3.6 18.1 14.3 2,875.9 9,027.2 03/99
COLGATE-PALMOLIVE CO 252.3% 223.1% 19.2 3.2 18.9 15.2 9,015.9 26,672.0 06/99
PROCTER & GAMBLE CO 229.2% 201.9% 12.0 3.4 20.8 15.5 38,125.0 123,295.3 06/99
UNILEVER 203.3% 183.3% 5.0 0.9 7.9 5.9 45,228.0 38,938.9 06/99
Average 205.4% 182.6% 9.3 x 2.5 x 16.9 x 13.0 x $19,192.9 $39,781.1
Median 203.3% 183.3% 5.8 3.2 18.9 14.3 9,015.9 26,672.0
SPECIALTY CHEMICALS
FULLER (H.B.) CO. 129.1% 107.3% 2.4 0.9 11.9 7.9 1,370.0 853.4 05/99
GREAT LAKES CHEMICAL 123.9% 107.4% 2.0 1.8 13.1 9.2 1,366.7 2,226.0 06/99
MINNESOTA MINING & MFG CO 210.4% 190.6% 6.3 2.7 15.4 11.5 15,190.0 38,689.1 06/99
NALCO CHEMICAL CO 231.7% 219.6% 5.2 2.4 15.8 11.3 1,598.1 3,370.2 06/99
SIGMA-ALDRICH 146.7% 132.4% 2.5 2.6 12.9 10.1 1,244.9 3,202.2 06/99
- ------------------------------------------------------------------------------------------------------------------------------------
Average 168.4% 151.4% 3.7 x 2.1 x 13.8 x 10.0 x $4,153.9 $9,668.2
Median 146.7% 132.4% 2.5 2.4 13.1 10.1 1,370.0 3,202.2
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Overall Average 186.9% 167.0% 6.5 x 2.3 x 15.4 x 11.5 x $11,673.4 $24,724.6
Overall Median 187.6% 168.1% 5.1 2.5 15.6 11.4 2,237.0 6,198.7
- ------------------------------------------------------------------------------------------------------------------------------------
VIKINGS 187.5% 165.8% 6.2 x 2.4 x 16.9 x 11.6 x $1,993.1 $4,418.2 06/99
LTM = Latest Twelve Months, CAGR = Compounded Annual Growth Rate, NA = Not Available, NMF = Not Meaningful
</TABLE>
William Blair & Company
<PAGE>
<TABLE>
<CAPTION>
Comparable Companies for Vikings
Summary Operating Statistics
- -------------------------------------------------------------------------------------------------------------------------
Gross Profit as a Operating Income as a
% of Sales % of Sales
-------------------------------- ----------------------------------
LTM 4 YR Avg LTM 4 YR Avg
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
CHURCH & DWIGHT INC 44.5% 43.9% 7.3% 4.8%
CLOROX CO/DE 56.8% 55.4% 20.1% 18.7%
COLGATE-PALMOLIVE CO 52.9% 50.0% 17.2% 14.8%
PROCTER & GAMBLE CO 44.4% 42.7% 16.4% 15.4%
UNILEVER NA NMF 10.9% 9.0%
FULLER (H.B.) CO 31.6% 31.5% 7.4% 6.3%
GREAT LAKES CHEMICAL 28.2% 28.7% 13.6% 14.3%
MINNESOTA MINING & MFG CO 41.8% 44.0% 17.3% 17.2%
NALCO CHEMICAL CO 54.6% 55.8% 15.4% 16.5%
SIGMA-ALDRICH 52.8% 51.9% 19.8% 21.6%
- ----------------------------------------------------------------------------------------------------------
Average 45.3% 44.9% 14.5% 13.9%
Median 44.5% 44.0% 15.9% 15.1%
- ----------------------------------------------------------------------------------------------------------
VIKINGS 54.8% 55.2% 14.0% 12.9%
</TABLE>
<TABLE>
Net Income as a
% of Sales 3 YEAR CAGR
----------------------------- -------------------------
LTM 4 YR AVG. SALES NET. INC.
---------- -------------- -------- ----------
<S> <C> <C> <C> <C>
CHURCH & DWIGHT INC 5.2% 3.8% 12.1% 33.5%
CLOROX CO/DE 10.8% 10.2% 11.4% 14.1%
COLGATE-PALMOLIVE CO 5.5% 7.7% 2.4% 19.7%
PROCTER & GAMBLE CO 9.9% 9.6% 2.6% 7.3%
UNILEVER 7.9% 5.8% -3.3% 10.3%
FULLER (H.B.) CO 2.9% 2.6% 2.7% 2.7%
GREAT LAKES CHEMICAL 8.2% 8.6% 2.6% -8.0%
MINNESOTA MINING & MFG CO 10.2% 10.4% 3.7% 3.0%
NALCO CHEMICAL CO 9.8% 10.8% 9.0% 2.4%
SIGMA-ALDRICH 13.7% 14.2% 7.6% 8.1%
- -----------------------------------------------------------------------------------------
Average 8.4% 8.4% 5.1% 9.3%
Median 9.0% 9.1% 3.2% 7.7%
- -----------------------------------------------------------------------------------------
VIKINGS 8.3% 7.8% 12.1% 15.9%
</TABLE>
<TABLE>
Return on
Return on Averave Common Equity/ Total Debt/ Net Debt/
Average Assets Common Equity Capitalization Capitalization Net Capitalization
---------------- ---------------- ----------------- ----------------- ------------------
<S> <C> <C> <C> <C> <C>
CHURCH & DWIGHT INC 8.0% 16.0% 80.3% 19.7% 12.0%
CLOROX CO/DE 10.3% 28.1% 50.1% 49.9% 48.1%
COLGATE-PALMOLIVE CO 11.1% 38.8% 30.2% 61.8% 59.5%
PROCTER & GAMBLE CO 11.9% 30.1% 47.9% 43.8% 35.3%
UNILEVER 10.1% 38.7% 50.0% 46.6% 0.0%
FULLER (H.B.) CO 3.4% 9.9% 49.5% 50.4% 50.0%
GREAT LAKES CHEMICAL 4.8% 8.7% 67.4% 32.6% 16.1%
MINNESOTA MINING & MFG CO 10.8% 24.9% 72.8% 27.2% 22.8%
NALCO CHEMICAL CO 9.4% 21.7% 53.0% 47.0% 45.4%
SIGMA-ALDRICH 12.4% 14.6% 99.7% 0.3% -2.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Average 9.2% 23.2% 60.1% 37.9% 28.7%
Median 10.2% 23.3% 51.5% 45.2% 29.1%
- ------------------------------------------------------------------------------------------------------------------------------------
VIKINGS 10.7% 24.9% 68.3% 31.7% 29.7%
LTM = Latest Twelve Months, CAGR = Compounded Annual Growth Rate, NA= Not Available, NMF = Not Meaningful
</TABLE>
William Blair & Company
<PAGE>
VIKINGS EPS & RELATIVE P/E
[GRAPH OMITTED]
$1.40 35X
$1.20 30X
$1.00 25X
$0.80 20X
$0.60 15X
$0.40 10X
$0.20 5X
$0.00 0X
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 LTM*
*LTM period ended 6/30/99 EPS ECL P/E S&P P/E
William Blair & Company
- --------------------------------------------------------------------------------
53 Limited Liability Company
<PAGE>
SUMMARY OF DISCOUNTED CASH FLOW ANALYSIS
- --------------------------------------------------------------------------------
KEY ASSUMPTIONS:
o Projected five years of results through 2004
o Used research analysts' consensus estimates for 1999 and 2000
o Revenue growth of 8.0% for 2001 - 2004 (1996 - 1999E CAGR: 11.5%)
o Operating income growth of 10.0% (1996 - 1999E CAGR: 16.1%)
o J V earnings growth of 8.0% (1996 - 1999E CAGR: 13.5%)
SUMMARY RESULTS:
Discount Rate
--------------------------------------------
10.0% 11.0% 12.0%
--------------------------------------------
Terminal
EBITDA 10.0 $34.97 $33.43 $31.96
Multiple 10.5 $36.54 $34.92 $33.39
11.0 $38.10 $36.42 $34.82
William Blair & Company
- --------------------------------------------------------------------------------
54 Limited Liability Company
<PAGE>
<TABLE>
<CAPTION>
PROJECT LIBERTY
Discounted Cash Flow Analysis of Vikings
- --------------------------------------------------------------------------------
Dollars in millions, except per share amounts
Discount Rate 11.0%
Terminal EBITDA Multiple 10.5
- -------------------------------------------------------------------------------------------
Projected
------------------------------------------------------
2000 2001 2002 2003 2004
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue 2,270.0 2,451.6 2,647.7 2,859.5 3,088.3
EBITDA 473.0 515.3 569.0 622.4 681.9
EBIT 328.0 360.8 396.9 436.6 480.2
Margin 114.4% 14.7% 15.0% 15.3% 15.5%
EBIT after tax 196.8 216.5 238.1 261.9 288.1
Plus JV Earnings 21.0 22.1 23.8 25.7 27.8
Plus Depreciation and Amortization 145.0 154.5 172.1 185.9 200.7
Less Capex 185.0 183.9 198.6 214.5 231.6
Less Change in NWC 19.5 17.3 18.6 20.1 21.7
------------------------------------------------------
Free Cash Flow 158.3 191.9 216.8 238.9 263.3
Terminal Value (11x EBITDA) 7,150.1
------------------------------------------------------
Total Cash Flows 158.3 191.9 216.8 238.9 7,413.4
Present Value of Enterprise $5,013.8
Current Net Debt (6/30/99) $299.3
----------
Implied Equity Value $4,714.5
Shares & CSEs Outstanding 135.0
----------
Equity Value Per Share $34.92
- -------------------------------------------------------------------------------------------
Discount Rate
-------------------------------------------
10.0% 11.0% 12.0%
-------------------------------------------
Terminal EBIDTA Multiple
<S> <C> <C> <C> <C>
10.0 $34.97 $33.43 $31.96
10.5 $36.54 $34.92 $33.39
11.0 $38.10 $36.42 $34.82
- -------------------------------------------------------------------------------------------
WACC CALCULATION ASSUMPTIONS FOR 2001 - 2004
Equity Risk Premium 8.0% Revenue Growth 8.0%
Risk Free Rate 6.0% Avg. EBIT Growth Rate 10.0%
Levered Beta 0.71 JV Earnings Growth 8.0%
Borrowing Rate 7.5% Tax Rate 40.0%
Tax Rate 40.0% Depr & Amort (% of Sales) 6.5%
Debt % of Cap 10.0% Capex (7.5% of Sales) 7.5%
Cost of Equity 11.7% NWC (% of Sales) 9.5%
After Tax Cost of Debt 4.5%
Weighted Cost of Capital 11.0%
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
NEXT STEPS
William Blair & Company
- --------------------------------------------------------------------------------
55 Limited Liability Company
<PAGE>
CONSIDERATIONS FOR POSSIBLE NEXT STEPS
o Timing and steps required for a Tanga decision
o Process with two potentially interested parties
- Timing options: delay both, proceed with both, proceed
with one
- Due diligence requests and meetings
- Contract preparation and negotiation
- Financing timetable
- Post-signing SEC and shareholder process and timetable
- Vikings stock price movement, price and collar provisions
- Exclusivity requests, expense reimbursement requests and
possible threats to walk away
o Consideration of possible discussions with other parties
o Consideration of other possible alternatives
OCTOBER 1999
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NOVEMBER 1999
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21 22 23 24 25 26 27
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DECEMBER 1999
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Su M Tu W Th Fr Sa
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1 2 3 4
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5 6 7 8 9 10 11
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12 13 14 15 16 17 18
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19 20 21 22 23 24 25
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26 27 28 29 30 31
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JANUARY 2000
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Su M Tu W Th Fr Sa
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1
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2 3 4 5 6 7 8
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9 10 11 12 13 14 15
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16 17 18 19 20 21 22
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William Blair & Company
- --------------------------------------------------------------------------------
56 Limited Liability Company
<PAGE>
<TABLE>
<CAPTION>
BUSINESS-TO-BUSINESS WHOLSALERS PROJECT TWO
- -------------------------------
Comparative Company Analysis as of 12/8/99
- ------------------------------------------------------------------------------------------------------------------------------------
($ in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Equity 2-Year Total Enterprise Value Multiples
---------------------------------
Enterprise Market LTM Revenue LTM LTM LTM
Company Name Value Value Revenue Growth Revenue EBITDA EBIT
------------------------------- -------------- ------------- ------------- ------- ------- ------- -------
Barnett, Inc. $188.6 $162.5 $263.2 26.2% 0.72x 5.7x 6.7x
Ecolab, Inc. 4,532.4 4,495.9 2,047.6 12.6 2.21 10.8 15.9
------- -------
Guest Supply, Inc. 152.7 104.6 317.7 24.8 0.48 7.6 10.3
JLK Direct Distribution, Inc. 220.5 217.5 518.2 5.3 0.43 5.0 6.3
MSC Industrial Direct Co., Inc. 922.0 854.9 673.0 24.0 1.37 9.8 10.9
W.W. Grainger, Inc. 4,809.4 4,484.5 4,457.6 6.2 1.08 10.3 12.7
Hughes Supply, Inc. 1,048.1 555.7 2,745.9 15.8 0.38 7.0 8.4
Noland Co. 108.0 65.7 482.5 -2.4(1) 0.22 9.2 21.1
------- -------
Industrial Distribution Group 75.2 30.1 549.6 51.7 0.14 5.5 8.4
-------
Strategic Distributors, Inc. 65.4 46.5 271.7 54.1 0.24 34.6 NM
-------
Century Maintenance Supply NA NA 223.9 39.4 0.64 5.2 5.5
Mean 23.4% 0.6x 7.6x 8.7x
Harmonic Mean 14.8 0.4 7.0 8.0
Median 24.0 0.5 7.3 8.4
High 54.1 1.4 10.8 12.7
Low -2.4 0.2 5.0 5.5
-------------------------------------------------------------------------
LTM Data: Stand Alone:
Wilmar Industries, Inc. $149.9 $175.5 $213.0 12.8% 0.70x 6.6x 7.3x
at closing 12/08/99
Wilmar Industries, Inc. 201.8 227.4 213.0 12.8 0.95 8.8 9.8
at $18.25 per share
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Market Value Multipl 5-Year LTM LTM LTM LTM Net LTM Last Fiscal
-----------------------------
LTM 2000 E 2001 E Est Earning EBIT Gross EBITDA Income Return on Year
Company Name Net Income EPS EPS Growth Margin Margin Margin Margin Assets ROA
------------------------------- --------- -------- --------- --------- -------- ------- ------- ------- --------- ---------
Barnett, Inc. 10.5x 8.8x 7.3x 20.0% 10.6% 33.1% 12.7% 5.9% 10.1% 12.5%
Ecolab, Inc. 33.8 22.9 20.2 13.0 14.0 54.9 20.5 6.5 8.7 10.7
--------- -------- --------- -------
Guest Supply, Inc. 14.5 10.6 8.9 20.0 4.7 20.9 6.3 2.3 5.1 3.7
JLK Direct Distribution, Inc. 10.5 8.8 7.6 15.0 6.8 32.0 8.5 4.0 7.3 7.4
MSC Industrial Direct Co., Inc. 17.4 15.9 12.2 30.0 12.6 40.2 14.0 7.3 9.6 10.7
W.W. Grainger, Inc. 20.5 18.8 16.7 12.0 8.5 36.9 10.5 4.9 9.8 11.6
---------
Hughes Supply, Inc. 8.6 7.5 6.5 15.0 4.5 22.3 5.5 2.3 5.3 5.9
Noland Co. 10.9 NA NA NA 1.1 19.6 2.4 1.2 2.6 2.6
Industrial Distribution Group 6.7 8.3 6.9 20.0 1.6 22.4 2.5 0.8 2.0 4.0
Strategic Distributors, Inc. NM 9.4 7.1 32.0 NM 19.8 0.7 NM -2.0(1) -1.0(1)
------- --------- --------
Century Maintenance Supply NA NA NA NA 11.6 27.5 12.2 4.6 12.8 14.7
12.5x 11.0x 8.1x 19.7% 7.6% 30.0% 8.3% 4.0% 6.5% 7.5%
11.1 10.0 7.8 17.7 3.9 27.0 5.3 2.5 5.3 6.1
10.7 9.1 7.3 20.0 7.6 27.5 8.5 4.3 7.3 7.4
20.5 18.8 12.2 32.0 14.0 54.9 14.0 7.3 12.8 14.7
6.7 7.5 6.5 12.0 1.1 19.6 2.4 0.8 -2.0 -1.0
----------------------------------------------------------------------------------------------
LTM Data: Stand Alone:
Wilmar Industries, Inc. 12.8x 11.8x 9.6x 22.0% 9.7% 29.4% 10.7% 6.4% 11.1% 11.2%
at closing 12/08/99
Wilmar Industries, Inc. 16.6 15.2 12.5 22.0 9.7 29.4 10.7 6.4 11.1 11.2
at $18.25 per share
<S> <C> <C> <C> <C>
LTM Last Fiscal LTM Last Fiscal
Inventory Year Sales to Year
Company Name Turns Inventory Turns Assets Sales to Assets
------------------------------- ---------- --------- --------- ---------
Barnett, Inc. 3.3x 3.6x 1.7x 2.1x
Ecolab, Inc. 5.5 5.3 1.3 1.3
Guest Supply, Inc. 5.7 6.1 2.2 2.4
JLK Direct Distribution, Inc. 3.3 3.6 1.8 1.9
MSC Industrial Direct Co., Inc. 1.8 2.1 1.3 1.5
W.W. Grainger, Inc. 4.2 4.5 2.0 2.1
Hughes Supply, Inc. 5.0 5.2 2.3 2.5
Noland Co. 5.8 5.4 2.1 2.1
Industrial Distribution Group 6.8 9.1 2.5 3.4
Strategic Distributors, Inc. 6.1 7.3 2.4 2.3
Century Maintenance Supply 4.5 5.0 2.8 3.1
4.7x 5.2x 2.0x 2.2x
4.1 4.5 1.9 2.1
5.0 5.2 2.1 2.1
6.8 9.1 2.8 3.4
1.8 2.1 1.3 1.3
-----------------------------------------------------------
LTM Data: Stand Alone:
Wilmar Industries, Inc. 5.1x 5.0x 1.7x 1.7x
at closing 12/08/99
Wilmar Industries, Inc. 5.1 5.0 1.7 1.7
at $18.25 per share
Footnotes
- ---------
* Outliers not included in mean and median calculations. Outliers indicated by:
-------
(1) Excluded for harmonic mean calculation only.
- ------------------------------------------------------------------------------------------------------------------------------------
DRAFT - FOR DISCUSSION PURPOSES ONLY
</TABLE>
<PAGE>
BUSINESS-TO-BUSINESS WHOLSALERS PROJECT TWO
- -----------------------------------
Printed on 17-Apr-00
Comparative Company Analysis At 8:56
- --------------------------------------------------------------------------------
($ in millions, except per share data)
Footnotes
(1) Based on treasury stock method.
(2) The harmonic mean is the reciprocal of the mean of an array of
reciprocal values. It reduces the effect of outliers on the data set.
(3) LTM = Latest twelve months.
(4) EBITDA = Earnings before interest, taxes, depreciation and amortization.
(5) EBIT = Earnings before interest and taxes.
(6) Total Book Capitalization = book value of common equity plus total debt
plus book value of preferred stock plus minority interests less
unconsolidated investments.
Barnett, Inc.
(1) Net Sales and Net Income Pro-Forma after certain acquisitions
COGS, SG&A, Net Interest Expense, D&A, and Cap-Ex are calculated using
margins as reported.
Ecolab, Inc.
(1) Net Sales and Net Income Pro-Forma after certain acquisitions
COGS, SG&A, Net Interest Expense, D&A, and Cap-Ex are calculated using
margins as reported.
(2) S,G&A excludes non-recurring non-tax affected gain of $1.5 million on
insurance policies held by company on employees.
Guest Supply, inc.
(1) Revenues and Net Income for quarter ending 7/2/99 are pro forma adjusting
for a 40 week period. COGS, SG&A, Net Interest Expense, D&A, and Cap-Ex
are calculated using margins as reported.
(2) 1997 COGS excludes inventory write-off of $2.2 million. Net Income has
also been adjusted on an after tax basis.
JLK Direct Distribution, Inc.
(1) 1998 and 1997 revenue numbers are Pro Forma after certain acquisitions
(the impact on Net Income was immaterial) COGS, SG&A, Net Interest
Expense, D&A, and Cap-Ex are calculated using margins as reported.
MSC Industrial Direct Co., Inc.
(1) 1999, 1998 and 1997 revenue and Net Income numbers are Pro Forma after
certain acquisitions COGS, SG&A, Net Interest Expense, D&A, and Cap-Ex
are calculated using margins as reported.
W.W. Grainger, Inc.
(1) 1996 revenue, EBIT, and Net Income are Pro Forma after certain
acquisitions Net Interest Expense, D&A, and Cap-Ex are calculated using
margins as reported.
Hughes Supply
(1) 1998 and 1997 revenue and Net Income numbers are Pro Forma after certain
acquisitions COGS, SG&A, Net Interest Expense, D&A, and Cap-Ex are
calculated using margins as reported.
Noland
(1) 1996 revenue, EBIT, and Net Income are Pro Forma after certain
acquisitions Net Interest Expense, D&A, and Cap-Ex are calculated using
margins as reported.
Industrial Distribution Group
(1) Net Sales and Net Income are Pro-Forma after certain acquisitions COGS,
SG&A, Net Interest Expense, D&A, and Cap-Ex are calculated using margins
as reported.
(2) S,G&A excludes non-recurring charge of $693,000
(3) Calculated using exercise price of all outstanding options
Strategic Distributors
(1) Net Sales and Net Income are Pro-Forma
COGS, SG&A, Net Interest Expense, D&A, and Cap-Ex are calculated using
margins as reported.
Century Maintenance Supply, Inc.
(1) 1996 and 1997 revenue and Net Income numbers are Pro Forma after certain
acquisitions COGS, SG&A, Net Interest Expense, D&A, and Cap-Ex are
calculated using margins as reported.
(2) S,G&A excludes stock based comp charge of $.074 mm
(3) S,G&A excludes stock based comp charge of $4.092 mm
(4) S,G&A excludes stock based comp charge of $4.092 mm
(5) S,G&A excludes stock based comp charge of $6.968776 mm
(6) Net Income includes tax affected addback of $8.702 mm recap expense and
stock based comp charge
(7) Net Income includes tax affected addback of $7.982310 mm recap expense
and stock based comp charge
(8) Net Income includes tax affected addback of $6.968 mm stock comp charges
and stock based comp charge
Wilmar Industries, Inc.
(1) 1998,1997 and 1996 revenue and Net Income numbers are Pro Forma after
certain acquisitions COGS, SG&A, Net Interest Expense, D&A, and Cap-Ex
are calculated using margins as reported.
Wilmar Industries, Inc. Pro Forma
(1) Pro Forma Revenues, COGS, SGA, EBIT, EBITDA taken from provided model
DRAFT - FOR DISCUSSION PURPOSES ONLY
<PAGE>
<TABLE>
<CAPTION>
BUSINESS-TO-BUSINESS WHOLSALERS PROJECT TWO
- ---------------------------------------
Printed on 17-Apr-00
Comparable Transaction Analysis At 9:06 PM
- ---------------------------------------------------------------------------------------------------------------------------
($ in millions, except per share data)
One Day One Total Equity LTM LTM LTM
Annc. Prior Week Enterprise Market LTM EBITDA EBIT Net Income
Acquiror/Target Date Premium Premium Value Value Revenue Margin Margin Margin
-------------- ------- ------- ------- ----------- ------ -------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Leonard Green & Partners 7/22/99 49.2 45.1 % $237.1 $185.4 $310.7 8.6 % 7.1 % 3.3
White Cap Industries
Freeman Spogli & Co. 5/8/98 NM NM 262.5 164.1 201.4 12.9 12.4 6.2
Century Maintenance Supply, Inc.
Cypress Group LLC 4/24/98 NM NM 1,130.3 751.2 2,597.7 4.2 3.7 0.8
WESCO Distribution, Inc.
Invacare Corp 12/17/97 8.0 13.3 130.6 130.8 100.0 9.7 8.5 4.6
Suburban Ostomy Supply Co., Inc.
AlliedSignal Inc. 12/8/97 NM NM 345.0 180.3 243.0 11.6 10.4 2.7
Banner Aerospace (Hardw. and Pac Aero Sectors)
FinishMaster Inc. 10/15/97 25.5 33.3 116.6 69.2 226.3 4.1 1.6 -1.8
Thompson PBE, Inc.
Kimberly-Clark Corp. 9/4/97 -6.2 -4.0 419.6 421.3 153.0 25.8 21.1 12.9
Tecnol Medical Products Inc.
Unisource Worldwide Inc. 8/11/97 4.3 25.4 153.7 136.7 308.3 4.6 3.0 1.5
National Sanitary Supply Co.
Henry Schein Inc. 8/4/97 28.8 40.7 315.1 315.2 257.0 7.2 6.2 3.9
Sullivan Dental Products
Home Depot Inc. 1/16/97 NM NM 245.4 235.2 125.9 18.2 16.7 9.1
Maintenance Warehouse / America Corp.
Mean 10.7% 9.1% 4.3%
Harmonic Mean 7.6 5.2 NA
Median 9.2 7.8 3.6
High 25.8 21.1 12.9
Low 4.1 1.6 -1.8
--------------------------------------------------
<CAPTION>
BUSINESS-TO-BUSINESS WHOLSALERS (Continued) PROJECT TWO
- -------------------------------------------
Printed on 17-Apr-00
Comparable Transaction Analysis At 9:06 PM
- ---------------------------------------------------------------------------------------------------------------------------
($ in millions, except per share data)
Equity Market
Total Enterprise Value Multiples Value Multiples
-------------------------------- ---------------
Annc. LTM LTM LTM Net Book
Acquiror/Target Date Revenue EBITDA EBIT Income Value
--------------- ----- -------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Leonard Green & Partners 7/22/99 0.8x 8.8x 10.8 17.6x 2.4x
White Cap Industries
Freeman Spogli & Co. 5/8/98 1.3 0.1 10.5 11.6 NM
Century Maintenance Supply, Inc.
Cypress Group LLC 4/24/98 0.4 0.3 11.8 38.3 6.6
-----
WESCO Distribution, Inc.
Invacare Corp 12/17/97 1.3 13.5 15.3 28.2 8.5
----
Suburban Ostomy Supply Co., Inc.
AlliedSignal Inc. 12/8/97 1.4 2.2 13.7 27.8 -2.3
-------
Banner Aerospace (Hardw. and PacAero Sectors)
FinishMaster Inc. 10/15/97 0.5 2.7 32.4 NM NM
----
Thompson PBE, Inc.
Kimberly-Clark Corp. 9/4/97 2.7 10.6 13.0 21.4 4.1
Tecnol Medical Products Inc.
Unisource Worldwide Inc. 8/11/97 0.5 10.9 16.4 29.1 3.3
----
National Sanitary Supply Co.
Henry Schein Inc. 8/4/97 1.2 17.1 19.9 31.4 4.8
---- ----- -----
Sullivan Dental Products
Home Depot Inc. 1/16/97 1.9 10.7 11.7 20.4 17.3
-----
Maintenance Warehouse / America Corp.
Mean 1.2x 11.1x 11.9 22.3x 4.9x
Harmonic Mean 0.9 10.9 11.8 20.3 4.1
Median 1.3 10.7 11.7 21.4 4.5
High 2.7 13.5 13.7 29.1 8.5
Low 0.4 8.8 10.5 11.6 2.4
--------------------------------------------------------------------------------
Footnotes
* Outliers not included in mean and median calculations. Outliers indicated by:__________
DRAFT - FOR DISCUSSION PURPOSES ONLY
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
December 1998
- ------------------------------------------------------------------------------------------------------------------------------------
SUMMARY ANALYSIS OF SELECTED MERGERS AND ACQUISITIONS
(Dollars in thousands; based on results for the latest twelve months prior to the transaction)
Multiples of Equity Purchase Price:
-------------------------------------------
Equity Projected Tangible
Target/ Announcement Transaction % Premium Purchase Net Net Income [4] Cash Book
-----------------
Acquiror Date Value [1] to Price [2] Price [3] Income Current Current+1 Flow [5] Value
- ----------------------------------- ---------- ---------- ----------- ---------- ------ ------- --------- -------- --------
White Cap Industries 07/22/99 237,072 49.15% 185,388 17.56 NA NA 11.70 2.35
Leonard Green & Partners
Century Maintenance Supply, Inc. 05/08/98 262,500 NM 164,101 11.60 NA NA 10.95 NM
Freeman Spogli & Co.
WESCO Distribution, Inc. 04/24/98 1,130,300 NM 751,200 38.33 NA NA 20.85 6.64
Cypress Group LLC
Suburban Ostomy Supply Co., Inc. 12/17/97 130,590 8.05% 130,792 28.22 20.61 16.10 22.85 8.48
Invacare Corp
Banner Aerospace (Hardw. and 12/08/97 345,000 NM 180,254 27.84 NA NA 19.04 (2.26)
--------
PacAero Sectors
AlliedSignal Inc.
Thompson PBE, Inc. 10/15/97 116,554 25.49% 69,161 NM 33.33 22.86 17.57 NM
FinishMaster Inc.
Tecnol Medical Products Inc. 09/04/97 419,570 -6.23% 421,332 21.42 19.46 16.64 15.92 4.06
-----------
Kimberly-Clark Corp.
National Sanitary Supply Co. 08/11/97 153,688 4.35% 136,705 29.10 1.48 NA 14.20 3.29
Unisource Worldwide Inc.
Sullivan Dental Products 08/04/97 315,060 28.83% 315,248 31.38 26.54 23.50 23.78 4.85
Henry Schein Inc.
Maintenance Warehouse / 01/16/97 245,400 NM 235,245 20.45 NA NA 17.55 17.26
America Corp.
Home Depot Inc.
-----------
<S> <C> <C> <C> <C>
Multiples of Transaction Value:
------------------------------------
Target/ Total
Acquiror Sales EBITDA [6] EBIT [7] Assets
- ----------------------------------- ------- ---------- -------- --------
White Cap Industries 0.76 8.84 10.82 1.37
Leonard Green & Partners
Century Maintenance Supply, Inc. 1.30 10.14 10.52 3.30
Freeman Spogli & Co.
WESCO Distribution, Inc. 0.44 10.31 11.77 1.17
Cypress Group LLC
Suburban Ostomy Supply Co., Inc. 1.31 13.48 15.34 x 2.88 x
--------
Invacare Corp
Banner Aerospace (Hardw. and 1.42 12.20 13.65 3.56
PacAero Sectors
AlliedSignal Inc.
Thompson PBE, Inc. 0.52 12.68 32.38 0.90
--------
FinishMaster Inc.
Tecnol Medical Products Inc. 2.74 10.64 13.01 2.42
Kimberly-Clark Corp.
National Sanitary Supply Co. 0.50 10.93 16.43 1.30
Unisource Worldwide Inc.
Sullivan Dental Products 1.23 17.10 19.87 2.91
Henry Schein Inc.
Maintenance Warehouse / 1.95 10.73 11.70 4.21
America Corp.
Home Depot Inc.
NOTES:
[1] Transaction value equals Equity Purchase Price plus book value of total debt and preferred stock less cash and cash
equivalents.
[2] Price Premium is based on the equity purchase vs. the price one day prior to the announcement.
[3] Purchase price equals the fully diluted number of common shares outstanding multiplied by the share price.
[5] Cash Flow equals net income from continuing operations plus depreciation, amortization and deferred taxes.
[6] EBITDA is Earnings Before Depreciation, Amortization, Interest, and Taxes.
[7] EBIT is Earnings Before Interest and Taxes.
Excludes outliers from mean and median calculations. Outliers indicated by:
-----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(In thousands, except per share data)
Target: White Cap Industries
Acquiror: Leonard Green & Partners
Announcement date: 07/22/99 3 months Year End
---------------------------- ----------
LTM 03/26/99 03/25/98 03/27/99
---------- ----------- -------- ----------
Net Sales: $310,650 $80,515 $68,637 $298,772 (1)
Cost of Goods Sold: 208,277 54,130 46,563 200,710
---------- ----------- -------- ----------
Gross Profit: 102,373 26,385 22,074 98,062
SG&A 80,456 20,405 16,882 76,933
Other expense (income) 0 0 0 0
---------- ----------- -------- ----------
EBIT 21,917 5,980 5,192 21,129
Interest Expense(net) 4,058 1,019 881 3,920
Non-op expense (income) 0 0 0 0
---------- ----------- -------- ----------
Pretax Income 17,859 4,961 4,311 17,209
Tax Expense 7,044 1,960 1,707 6,791
Tax effect @ 38% for extra (257) 0 0 (257)
---------- ----------- -------- ----------
N.I. before extra. 10,559 3,001 2,604 10,162
Extra. losses (gains) 675 0 0 675 (2)
Net Income $10,141 $3,001 $2,604 $9,744
========= ========== ======= =========
EBIT $21,917 $5,980 $5,192 $21,129
Depreciation 3,009 831 637 2,815
Amortization 1,890 514 396 1,772
EBITDA $26,816 $7,325 $6,225 $25,716
---------- ----------- -------- ----------
N.I. before extra. $10,559 $3,001 $2,604 $10,162
Depreciation 3,009 831 637 2,815
Amortization 1,890 514 396 1,772
Def. taxes 390 0 179 569
Cash flow from ops $15,848 $4,346 $3,816 $15,318
---------- ----------- -------- ----------
Shares O/S 10,725 Options Price
Share Price $16.500 all cash 661 $3.750
---------- -----------------
Equity Purchase Price $185,388 $8,421
Cash $1,994 (3)
Total Debt 53,672
Prfd. Stock 6
Transaction Value $237,072
----------
Book Value $78,746 Stock Price Premium Paid
Goodwill 0 DAY 7/21/99 49.2%
Tangible Bk. Value $78,746 $11.06
----------
WEEK 7/15/99 45.1%
Total Assets $173,192 $11.38
=========
</TABLE>
Notes:
(1) 1999 is Pro Forma with all subsequent data generated off historical margins
of revenue
(2) Extraordinary adjustment to back into provided pro-forma net income
(3) Balance sheet date as of March 27, 1999
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(In thousands, except per share data)
Target: Century Maintenance Supply, Inc.
Acquiror: Freeman Spogli & Co.
Announcement date: 05/08/98 6 months Year End
--------------------------- -----------
LTM 06/30/98 06/30/97 12/31/97
---------- ----------- -------- -----------
Net Sales: $201,432 $94,182 $58,761 $166,011 (1)
Cost of Goods Sold: 146,108 68,598 42,468 119,978
---------- ----------- -------- -----------
Gross Profit: 55,324 25,584 16,293 46,033
SG&A 30,372 14,182 9,097 25,287
Other expense (income) 0 0 0 0
---------- ----------- -------- -----------
EBIT 24,952 11,402 7,196 20,746
Interest Expense(net) 1,699 719 323 1,303
Non-op expense (income) 0 0 0 0
---------- ----------- -------- -----------
Pretax Income 23,253 10,684 6,873 19,443
Tax Expense 9,103 4,146 2,612 7,569 (2)
Tax effect @ 38% for extra 0 0 0 0
---------- ----------- -------- -----------
N.I. before extra. 14,151 6,538 4,261 11,874
Extra. losses (gains) 1,571 0 6,344 7,915 (3)
---------- ----------- -------- -----------
Net Income $12,579 $6,538 ($2,930) $2,996 (4)
========== =========== ======== ===========
EBIT $24,952 $11,402 $7,196 $20,746
Depreciation 938 310 246 874
Amortization 0 0 0 0
EBITDA $25,890 $11,712 $7,442 $21,619
---------- ----------- -------- -----------
N.I. before extra. $14,151 $6,538 $4,261 $11,874
Depreciation 938 310 246 874
Amortization 0 0 0 0
Def. taxes (99) 0 0 (99)
---------- ----------- -------- -----------
Cash flow from ops $14,989 $6,848 $4,507 $12,649
========== =========== ======== ===========
Shares O/S 0
Share Price $0.000 all cash
----------
Equity Purchase Price $164,101
Cash $4,151 $4,151
Total Debt 102,550 102,550
Prfd. Stock 0 0
----------
Transaction Value $262,500
----------
Book Value ($81,598)
Goodwill 0
----------
Tangible Bk. Value ($81,598)
----------
Total Assets $79,607
=========
Notes:
(1) 1997 is Pro Forma fro July 11th acquisition, with all subsequent data generated off historical margins of revenues
(2) Pro Forma provision for income taxes
(3) Includes stock based compensation charge
(4) Includes minority interest expense
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Target: WESCO Distribution, Inc.
Acquiror: Cypress Group LLC
Announcement date: 04/24/98 3 months Year End
--------------------------- ------------
LTM 03/31/98 03/31/97 12/31/97
------------- ------------ -------- ------------
Net Sales: $2,597,718 $0 $0 $2,597,718 (1)
Cost of Goods Sold: 2,071,418 0 0 2,071,418
------------- ------------ -------- ------------
Gross Profit: 526,300 0 0 526,300
SG&A 430,300 0 0 430,300
Other expense (income) 0 0 0 0
------------- ------------ -------- ------------
EBIT 96,000 0 0 96,000
Interest Expense(net) 47,900 0 0 47,900
Non-op expense (income) 15,400 0 0 15,400
------------- ------------ -------- ------------
Pretax Income 32,700 0 0 32,700
Tax Expense 13,100 0 0 13,100
Tax effect @ 38% for extra 0 0 0 0
------------- ------------ -------- ------------
N.I. before extra. 19,600 0 0 19,600
Extra. losses (gains) 0 0 0 0
------------- ------------ -------- ------------
Net Income $19,600 $0 $0 $19,600
============ =========== ======= ===========
EBIT $96,000 $0 $0 $96,000
Depreciation 13,600 0 0 13,600
Amortization 0 0 0 0
------------- ------------ -------- ------------
EBITDA $109,600 $0 $0 $109,600
------------- ------------ -------- ------------
N.I. before extra. $19,600 $0 $0 $19,600
Depreciation 13,600 0 0 13,600
Amortization 0 0 0 0
Def. taxes 2,837 0 0 2,837
------------- ------------ -------- ------------
Cash flow from ops $36,037 $0 $0 $36,037
------------- ------------ -------- ------------
Shares O/S 0
Share Price $0.000 all cash
-------------
Equity Purchase Price $751,200
Cash $0
Net Debt 379,100
Prfd. Stock 0
-------------
Transaction Value $1,130,300 $1,185,100 Actual Balance Sheet
------------- --------
$18,405
Book Value $193,125 350,544
Goodwill 80,031 11,416
-------------
Tangible Bk. Value $113,094
-------------
Total Assets $962,048
============
Notes:
(1) 1997 is Pro Forma giving effect to the material acquisitions of Avon Electrical and Brown Wholesale Electric
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(In thousands, except per share data)
Target: Suburban Ostomy Supply Co., Inc.
Acquiror: Invacare Corp
Announcement date: 12/17/97 3 months Year End
--------------------------- --------
LTM 11/29/97 11/30/96 08/30/97
---------- ----------- -------- --------
Net Sales: $99,967 $27,490 $21,963 $94,440
Cost of Goods Sold: 73,623 19,853 16,845 70,615
---------- ----------- -------- --------
Gross Profit: 26,344 7,637 5,118 23,825
SG&A 17,832 5,519 3,010 15,323
Other expense (income) 0 0 0 0
---------- ----------- -------- --------
EBIT 8,512 2,118 2,108 8,502
Interest Expense(net) 109 14 342 437
Non-op expense (income) (30) 22 26 (26) (2)
---------- ----------- -------- --------
Pretax Income 8,433 2,082 1,740 8,192
Tax Expense 3,799 969 769 3,599
Tax effect @ 38% for extra 0 0 99 99
---------- ----------- -------- --------
N.I. before extra. 4,634 1,113 1,070 4,692
Extra. losses (gains) 0 0 (260) (1) (260) (1)
Net Income $4,634 $1,113 $1,231 $4,853
========= ========== ======= =======
EBIT $8,512 $2,118 $2,108 $8,502
Depreciation 1,178 359 213 1,032
Amortization 0 0 0 0
EBITDA $9,690 $2,477 $2,321 $9,534
---------- ----------- -------- --------
N.I. before extra. $4,634 $1,113 $1,070 $4,692
Depreciation 1,178 359 213 1,032
Amortization 0 0 0 0
Def. taxes (87) 0 0 (87)
---------- ----------- -------- --------
Cash flow from ops $5,725 $1,472 $1,283 $5,637
---------- ----------- -------- --------
Shares O/S 10,539 Options Price
Share Price $11.750 All Cash 736 $2.290
----------------
Equity Purchase Price $130,792 $6,963
Cash $2,202
Total Debt 2,000
Prfd. Stock 0
Transaction Value $130,590
----------
Book Value $34,585 Stock PricePremium Paid
Goodwill 19,166 DAY ######## 8.0%
--------- $10.88
Tangible Bk. Value $15,419
----------
WEEK ######## 13.3%
Total Assets $45,312 $10.38
=========
Notes:
(1) Pro forma adjustment as if the cmpany had sold 3.9 mm shares of common sufficient to fund 7/3/95 recap.
(2) Includes accretion expense of preferred stock
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(In thousands, except per share data)
Target: Banner Aerospace (Hardw. and PacAero Sectors)
Acquiror: AlliedSignal Inc.
Announcement date: 12/08/97 3 months Year End (1)
------------------------ ----------
LTM 03/31/96 03/31/95 09/30/97
---------- -------- -------- ----------
Net Sales: $243,026 $0 $0 $243,026
Cost of Goods Sold: 157,798 0 0 157,798
---------- -------- -------- ----------
Gross Profit: 85,228 0 0 85,228
SG&A 59,954 0 0 59,954
Other expense (income) 0 0 0 0
---------- -------- -------- ----------
EBIT 25,274 0 0 25,274
Interest Expense(net) 15,554 0 0 15,554
Non-op expense (income) 0 0 0 0
---------- -------- -------- ----------
Pretax Income 9,720 0 0 9,720
Tax Expense 3,246 0 0 3,246
Tax effect @ 38% for extra 0 0 0 0
---------- -------- -------- ----------
N.I. before extra. 6,474 0 0 6,474
---------- -------- -------- ----------
Extra. losses (gains) 0 0 0 0
Net Income $6,474 $0 $0 $6,474
========= ======= ======= =========
EBIT $25,274 $0 $0 $25,274
Depreciation 2,995 0 0 2,995 (2)
Amortization 0 0 0 0
---------- -------- -------- ----------
EBITDA $28,269 $0 $0 $28,269
---------- -------- -------- ----------
N.I. before extra. $6,474 $0 $0 $6,474
Depreciation 2,995 0 0 2,995
Amortization 0 0 0 0
Def. taxes 0 0 0 0
---------- -------- -------- ----------
Cash flow from ops $9,469 $0 $0 $9,469
---------- -------- -------- ----------
Shares O/S 0
Share Price $0.000 all stock
Equity Purchase Price $180,254 (3)
Cash $0
Total Debt 164,746
Prfd. Stock 0
----------
Transaction Value $345,000
----------
Book Value ($60,798)
Goodwill 19,089
----------
Tangible Bk. Value ($79,887)
----------
Total Assets $96,910
=========
Notes:
(1) Shows six months calendarized.
(2) Depreciation calculated as a percentage of 1997 total corporate sales.
Banner's 1997 revenue & depreciation used as a proxy.
(3) Backed into utilizing provided TEV and prior balance sheet.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(In thousands, except per share data)
Target: Thompson PBE, Inc.
Acquiror: FinishMaster Inc.
Announcement date: 10/15/97 9 months Year End
----------------------------- ----------
LTM 06/30/97 06/30/96 09/30/96
----------- ----------- ---------- ----------
Net Sales: $226,309 $151,505 $128,084 $202,888 (1)
Cost of Goods Sold: 146,592 97,959 80,305 128,938
----------- ----------- ---------- ----------
Gross Profit: 79,717 53,546 47,779 73,950
SG&A 76,117 47,919 40,076 68,274
Other expense (income) 0 0 0 0
----------- ----------- ---------- ----------
EBIT 3,599 5,627 7,703 5,675
Interest Expense(net) 4,465 3,146 1,642 2,961
Non-op expense (income) 0 0 0 0
----------- ----------- ---------- ----------
Pretax Income (866) 2,481 6,061 2,714
Tax Expense (417) 606 2,515 1,492
Tax effect @ 38% for extra (1,374) (1,374) 0 0
----------- ----------- ---------- ----------
N.I. before extra. (1,823) 501 3,546 1,222
Extra. losses (gains) 3,616 3,616 0 0
Net Income ($4,065) ($1,741) $3,546 $1,222
========== ========== ========= =========
EBIT $3,599 $5,627 $7,703 $5,675
Depreciation 5,595 3,852 2,944 4,687
Amortization 0 0 0 0
----------- ----------- ---------- ----------
EBITDA $9,194 $9,479 $10,647 $10,362
----------- ----------- ---------- ----------
N.I. before extra. ($1,823) $501 $3,546 $1,222
Depreciation 5,595 3,852 2,944 4,687
Amortization 0 0 0 0
Def. taxes 164 0 0 164
----------- ----------- ---------- ----------
Cash flow from ops $3,936 $4,353 $6,490 $6,073
----------- ----------- ---------- ----------
Shares O/S 8,645 Options Price
Share Price $8.000 all cash 665 $11.580 ($2)
------------------
Equity Purchase Price $69,161 $0
-----------
Cash $155
Total Debt 47,548
Prfd. Stock 0
-----------
Transaction Value $116,554
-----------
Book Value $49,135 Stock Price Premium Paid
Goodwill 62,333 DAY ######## 25.5%
Tangible Bk. Value ($13,198) $6.38
-----------
WEEK ######## 33.3%
Total Assets $129,064 $6.00
==========
Notes:
(1) 1996 is Pro Forma, with all subsequent data generated off historical margins of revenues
(2) Straight average of range of outstanding options
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(In thousands, except per share data)
Target: Tecnol Medical Products Inc.
Acquiror: Kimberly-Clark Corp.
Announcement date: 09/04/97 9 months Year End
----------------------------- ----------
LTM 08/31/97 08/30/96 12/31/96
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales: $152,982 $116,142 $107,553 $144,393
Cost of Goods Sold: 84,473 64,150 62,269 82,592
---------- ----------- ---------- ----------
Gross Profit: 68,510 51,992 45,284 61,802
SG&A 34,408 27,541 26,188 33,056
Other expense (income (2) 1,850 1,414 1,274 1,710
---------- ----------- ---------- ----------
EBIT 32,251 23,037 17,822 27,036
Interest Expense(net) (43) (67) 632 656
Non-op expense (income) 2,058 (6) (221) 1,843
---------- ----------- ---------- ----------
Pretax Income 30,236 23,110 17,411 24,537
Tax Expense 10,569 8,212 5,630 7,987
Tax effect @ 38% for extra. 0 0 (209) (209)
---------- ----------- ---------- ----------
N.I. before extra. 19,668 14,898 11,572 16,342
Extra. losses (gains) 0 0 550 (1) 550
Net Income $19,668 $14,898 $11,231 $16,001
========== =========== ========== ==========
EBIT $32,251 $23,037 $17,822 $27,036
Depreciation 4,968 3,418 3,160 4,711
Amortization 2,230 1,615 1,704 2,318
EBITDA $39,449 $28,070 $22,686 $34,065
---------- ----------- ---------- ----------
N.I. before extra. $19,668 $14,898 $11,572 $16,342
Depreciation 4,968 3,418 3,160 4,711
Amortization 2,230 1,615 1,704 2,318
Def. taxes (401) 0 0 (401)
Cash flow from ops $26,465 $19,930 $16,436 $22,971
---------- ----------- ---------- ----------
Shares O/S 20,012 Options Price
Share Price $20.630 All Stock 1,423 $14.665 (3)
------------------
Equity Purchase Price $421,332 $8,491
Cash $11,129
Total Debt 9,367
Prfd. Stock 0
Transaction Value $419,570
----------
Book Value $142,750 Stock PricePremium Paid
Goodwill 38,903 DAY 9/3/97 -6.2%
Tangible Bk. Value $103,847 $22.00
----------
WEEK 8/28/97 -4.0%
Total Assets $173,243 $21.50
==========
</TABLE>
Notes:
(1) Includes one time $550,000 litigation fee
(2) Includes R&D expenses
(3) Straight average of range of outstanding options
Page 9
<PAGE>
<TABLE>
<CAPTION>
(In thousands, except per share data)
Target: National Sanitary Supply Co.
Acquiror: Unisource Worldwide Inc.
Announcement date: 08/11/97 6 months Year End
----------------------------- ----------
LTM 06/30/97 06/29/96 12/31/96
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales: $308,340 $152,702 $154,487 $310,125
Cost of Goods Sold: 204,926 101,804 103,997 207,119
---------- ----------- ---------- ----------
Gross Profit: 103,414 50,898 50,490 103,006
SG&A 94,058 47,069 46,028 93,017
Other expense (income) 0 0 0 0
---------- ----------- ---------- ----------
EBIT 9,356 3,829 4,462 9,989
Interest Expense(net) 0 0 0 0
Non-op expense (income) 1,326 673 694 1,347
---------- ----------- ---------- ----------
Pretax Income 8,030 3,156 3,768 8,642
Tax Expense 3,332 1,314 1,615 3,633
Tax effect @ 38% for extra 0 0 0 0
---------- ----------- ---------- ----------
N.I. before extra. 4,698 1,842 2,153 5,009
Extra. losses (gains) 0 0 0 0
Net Income $4,698 $1,842 $2,153 $5,009
========= ========== ========= =========
EBIT $9,356 $3,829 $4,462 $9,989
Depreciation 3,282 3,262 (1) 3,333 (1) 3,353
Amortization 1,421 1,454 1,539 1,506
EBITDA $14,059 $8,545 $9,334 $14,848
---------- ----------- ---------- ----------
N.I. before extra. $4,698 $1,842 $2,153 $5,009
Depreciation 3,282 3,262 3,333 3,353
Amortization 1,421 1,454 1,539 1,506
Def. taxes 225 349 (260) (384)
Cash flow from ops $9,626 $6,907 $6,765 $9,484
---------- ----------- ---------- ----------
Shares O/S 6,270 Options Price
Takeover Price $21.000 all cash 447.142 $9.732 ($3)
------------------
Equity Purchase Price $136,705 $5,038
Cash $1,114 ($2)
Total Debt 18,097
Prfd. Stock 0
Transaction Value $153,688 $14.19
----------
Book Value $67,219 Stock Price Premium Paid
Goodwill 25,679 DAY 8/10/97 4.3% (4)
Tangible Bk. Value $41,540 $20.13
----------
WEEK 8/4/97 25.4%
Total Assets $118,015 $16.75
=========
Notes:
(1) Cash Flow Items for 6 months is estimated using margins from 3 month cash flows per revenues
(2) Balance sheet data taken from amended 10-Q dtd. 8/29/97
(3) Weighted average exercise price
(4) Stock dnt 2 prior trading days to announcement
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(In thousands, except per share data)
Target: Sullivan Dental Products
Acquiror: Henry Schein Inc.
Announcement date: 08/04/97 6 months Year End
----------------------------- ----------
LTM 06/30/97 06/29/96 12/31/96
---------- ----------- ---------- ----------
Net Sales: $257,017 $128,392 $112,957 $241,583 (1)
Cost of Goods Sold: 168,648 84,149 74,439 158,937
---------- ----------- ---------- ----------
Gross Profit: 88,370 44,242 38,518 82,646
SG&A 72,513 36,961 33,349 68,901
Other expense (income) 0 0 0 0
---------- ----------- ---------- ----------
EBIT 15,857 7,282 5,170 13,745
Interest Expense(net) 88 15 206 279
Non-op expense (income) (974) (417) (418) (975)
---------- ----------- ---------- ----------
Pretax Income 16,744 7,684 5,382 14,441
Tax Expense 6,697 3,074 2,153 5,776
Tax effect @ 38% for extra 0 0 0 0
---------- ----------- ---------- ----------
N.I. before extra. 10,047 4,610 3,229 8,665
Extra. losses (gains) 0 0 0 0
Net Income $10,047 $4,610 $3,229 $8,665
========== =========== ========== ==========
EBIT $15,857 $7,282 $5,170 $13,745
Depreciation 2,568 1,346 1,018 2,240
Amortization 0 0 0 0
EBITDA $18,426 $8,627 $6,187 $15,986
---------- ----------- ---------- ----------
N.I. before extra. $10,047 $4,610 $3,229 $8,665
Depreciation 2,568 1,346 1,018 2,240
Amortization 0 0 0 0
Def. taxes 642 0 0 642
Cash flow from ops $13,257 $5,956 $4,246 $11,548
---------- ----------- ---------- ----------
Shares O/S 10,028 Options Price
Share Price $28.665 (2) All Stock 1,385 $8.590
------------------
Equity Purchase Price $315,248 $27,796
Cash $188
Total Debt 0
Prfd. Stock 0
Transaction Value $315,060
----------
Book Value $84,417 Stock PricePremium Paid
Goodwill 19,373 DAY 8/3/97 28.8%
Tangible Bk. Value $65,044 $22.25
----------
WEEK 7/28/97 40.7%
Total Assets $108,406 $20.38
==========
Notes:
(1) All 1996 year end data taken from M&A Agreement dtd. 8/3/97
(2) Assumes $39 share price for Schein on date of announcement
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(In thousands, except per share data)
Target: Maintenance Warehouse / America Corp.
Acquiror: Home Depot Inc.
Announcement date: 01/16/97 9 months Year End
------------------------ ----------
LTM 09/30/96 09/30/95 12/31/95
---------- -------- -------- ----------
Net Sales: $125,881 $96,673 $87,829 $117,037
Cost of Goods Sold: 75,604 58,131 52,305 69,778
---------- -------- -------- ----------
Gross Profit: 50,277 38,542 35,525 47,259
SG&A 29,302 22,130 20,597 27,770
Other expense (income) 0 0 0 0
---------- -------- -------- ----------
EBIT 20,974 16,412 14,928 19,490
Interest Expense(net) 2,417 1,825 1,663 2,256
Non-op expense (income) 0 0 0 0
---------- -------- -------- ----------
Pretax Income 18,557 14,588 13,265 17,234
Tax Expense 7,052 5,543 (1) 5,041 (1) 6,549 (1)
Tax effect @ 38% for extra 0 0 0 0
---------- -------- -------- ----------
N.I. before extra. 11,505 9,044 8,224 10,685
Extra. losses (gains) 0 0 0 0
Net Income $11,505 $9,044 $8,224 $10,685
========= ======= ======= =========
EBIT $20,974 $16,412 $14,928 $19,490
Depreciation 1,902 1,414 1,392 1,880
Amortization 0 0 0 0
---------- -------- -------- ----------
EBITDA $22,876 $17,826 $16,319 $21,369
---------- -------- -------- ----------
N.I. before extra. $11,505 $9,044 $8,224 $10,685
Depreciation 1,902 1,414 1,392 1,880
Amortization 0 0 0 0
Def. taxes 0 0 0 0
---------- -------- -------- ----------
Cash flow from ops $13,407 $10,458 $9,616 $12,565
---------- -------- -------- ----------
Shares O/S 0
Share Price $0.000 All Stock
----------
Equity Purchase Price $235,245
Cash $1,042
Total Debt 11,197
Prfd. Stock 0
----------
Transaction Value $245,400
----------
Book Value $13,631
Goodwill 0
Tangible Bk. Value $13,631
----------
Total Assets $58,236
=========
Notes:
(1) Corporation is an S-Corp. Income taxes calculatated at a 38%.
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