<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
--------------
COHR Inc.
(Name of the Issuer)
COHR Inc.
(Name of Persons Filing Statement)
Common Stock, par value $0.01 per share
(including the associated preferred stock purchase rights)
(Title of Class of Securities)
192567105
(CUSIP Number of Class of Securities)
Raymond E. List
President and Chief Executive Officer
COHR Inc.
21540 Plummer Street
Chatsworth, California 91311
Telephone: (818) 773-2647
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
--------------
with a copy to:
Robert B. Knauss, Esq.
Munger, Tolles & Olson LLP
355 South Grand Avenue
35th Floor
Los Angeles, California 91311
Telephone: (213) 683-9100
This statement is filed in connection with (check the appropriate box):
a. / / 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
Exchange Act of 1933.
c. /x/ 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. / /
Calculation of Filing Fee
----------------------------------------------------------------------
Transaction Value - $21,760,466(1) Filing Fee - $4,352.10
----------------------------------------------------------------------
/ / 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: Filing party:
--------------- --------------
Form or registration no.: Date filed:
---------------- ----------------
- ------------------------
(1) For purposes of calculating the filing fee only. This calculation assumes
the purchase by TCF Acquisition Corporation (the "Purchaser") of the
approximately 3,347,764 shares of Common Stock of COHR Inc. which are not owned
by the Purchaser and its affiliates, Three Cities Fund II, L.P. and Three Cities
Offshore II C.V.
<PAGE> 2
INTRODUCTION
This Rule 13e-3 Transaction Statement (the "Statement") is being filed
by COHR Inc., a Delaware corporation (the "Company"), in connection with the
tender offer by TCF Acquisition Corporation, a Delaware corporation (the
"Purchaser"), to purchase for $6.50 per share, net to the seller in cash, all
the issued and outstanding common stock, par value $0.01 per share, of the
Company not already owned by the Purchaser and its affiliates, Three Cities Fund
II, L.P. and Three Cities Offshore II C.V. (together, the "Three Cities Funds"),
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated January 4, 1999, as supplemented by the Supplements to the Offer to
Purchase dated February 4, 1999 and February 19, 1999 (as may be amended or
supplemented from time to time, the "Offer to Purchase") and in the related
Letter of Transmittal (the terms and conditions of which, together with any
amendments or supplements thereto, collectively constitute the "Offer"), copies
of which are filed as Exhibits (d)(1) (as supplemented by Exhibit(d)(2) and
(d)(3)) and (d)(4) hereto, respectively. The Company filed its
Solicitation/Recommendation Statement on Schedule 14D-9 on January 6, 1999,
which was subsequently amended by Amendment No. 1 thereto filed on February 5,
1999, by Amendment No. 2 thereto filed on February 8, 1999, and Amendment No. 3
thereto filed on February 19, 1999 (as may be amended or supplemented from time
to time, the "Schedule 14D-9"), copies of which are filed as Exhibits (d)(7),
(d)(8), (d)(9), and (d)(10), respectively. The information set forth in the
Schedule 14D-9, including all annexes, schedules, and exhibits thereto, is
expressly incorporated herein by references.
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The issuer of the class of equity security which is the subject of
the Offer and the Merger is COHR Inc., a Delaware corporation (the "Company").
The address of the Company's principal executive offices is 21540 Plummer
Street, Chatsworth, California 91311-4103.
(b) The title of the securities which are subject of the Rule 13e-3
transaction is common stock, par value $0.01 per share (the "Common Stock"). The
Common Stock includes the preferred stock purchase rights issued pursuant to a
Rights Agreement, dated as of November 23, 1998 and as amended as of December
24, 1998, between the Company and Chase Mellon Shareholders Services, LLC. The
number of shares of Common Stock which were outstanding on February 17, 1999 was
6,433,189. The approximate number of holders of record of the Common Stock on
February 17, 1999 was 80.
(c) The principal market in which the Common Stock is traded is the
Nasdaq National Market. The information in Section 12 ("Price Range of Shares")
of the Offer to Purchase is incorporated herein by reference.
(d) The Company has not paid any dividends during the past two years
with respect to the Common Stock. The Amended and Restated Plan and Agreement of
Merger dated as of February 4, 1999 (the "Merger Agreement") between the
Purchaser and the Company prohibits the Company from paying any dividends prior
to the merger of the Purchaser with and into the Company contemplated by the
Merger Agreement (the "Merger").
(e) The Company made an offering of Common Stock pursuant to a public
offering dated November 19, 1996. In that offering, the Company offered
1,900,000 shares of Common Stock at a price of $20.00 per share. In that
offering, the Company sold 1,500,000 shares of Common Stock and realized $27.7
million in net proceeds after fees and other selling expenses.
(f) The Company has not purchased any of its Common Stock since April
1, 1996. On December 24, 1998, the Three Cities Funds purchased 3,085,425 shares
of Common Stock for $5.125 per share.
1
<PAGE> 3
ITEM 2. IDENTITY AND BACKGROUND.
This Statement is being filed by the Company, the issuer of the class
of securities that is the subject of the Offer and the Merger.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a) Not applicable.
(b) The information set forth in Item 4(b)(1) ("Background") of the
Schedule 14D-9 is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in Section 2 ("Purpose of the Offer and
the Proposed Merger; Plans for the Company"), Section 7 ("Terms of the Offer"),
Section 8 ("Acceptance for Payment and Payment for Shares"), Section 10
("Withdrawal Rights"), Section 11 ("Conditions of the Offer") and Section 16
("The Merger") of the Offer to Purchase is incorporated herein by reference.
(b) There is no term or arrangement concerning the Offer and the Merger
relating to any securityholder of the Company which is not identical to that
relating to other holders of the same class of securities of the Company, except
that the Purchaser will not receive any payment as a result of the Merger with
regard to Common Stock it owns.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(e) The information set forth in Item 3 ("Identity and Background")
of the Schedule 14D-9 is incorporated herein by reference.
(f)-(g) The information set forth in Section 4 ("Certain Effects of the
Transaction") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(d) The Company estimates that the total cost of the Offer and the
Merger to the Company will be approximately $329,312.10, consisting of filing
fees of $4,312.10, legal fees of $250,000, printing costs of $60,000 and
solicitation expenses of $15,000. The Company will use cash reserves to pay such
costs.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) - (c) The information set forth in Item 4 ("The Solicitation or
Recommendation") of the Schedule 14D-9 is incorporated herein by reference. With
respect to federal tax consequences, the information set forth in Section 3
("Certain Federal Income Tax Consequences") of the Offer to Purchase is
incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)-(e) The information set forth in Item 4 ("The Solicitation or
Recommendation") of Schedule 14D-9 is incorporated herein by reference. The
Offer and the Merger are not structured so that approval of at least a majority
of unaffiliated securityholders is required. A majority of the directors of the
Company are independent and are not affiliated with the Three Cities Funds or
employees of the Company (the "Independent Directors"). The Company's financial
advisor, Lehman Brothers Inc. ("Lehman Brothers"), assisted the directors of the
Company in negotiating the terms of the Offer and the Merger, and provided an
opinion to the directors that the cash consideration to be received by the
holders of shares of Common Stock in the Offer and the Merger was fair, from a
financial point of view, to such holders (other than the Purchaser and the Three
Cities Funds). The Independent Directors unanimously approved the Offer and the
Merger.
2
<PAGE> 4
(f) The Company has not received during the preceding 18 months a firm
offer from an unaffiliated person for (A) the merger or consolidation of the
Company into or with such person or of such person into or with the Company, (B)
the sale or other transfer of all or any substantial part of the assets of the
Company, or (C) securities of the Company which would enable the holder thereof
to exercise control of the Company. The information set forth in Item 4 ("The
Solicitation or Recommendation") of the Schedule 14D-9 is incorporated herein
by reference.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)-(c) The information set forth in Item 4(b)(2) ("Reasons for
Recommendations") of the Schedule 14D-9 is incorporated herein by reference. A
copy of the Lehman Brothers presentation to the Board of Directors of the
Company dated December 23, 1998, which is referenced in such Item 4(b)(2) and
filed as Exhibit (b)(2) hereto, is available for inspection and copying at the
principal executive offices of the Company during its regular business hours by
any interested equity securityholder of the Company or his representative who
has been so designated in writing. Written requests for inspection should be
directed to the Company at its principal executive offices, Attention: Daniel F.
Clark, Corporate Secretary.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) Not applicable.
(b) None.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE
ISSUER'S SECURITIES.
The information set forth in Item 2 ("Tender Offer of the Bidder") and
Item 3 ("Identity and Background") of the Schedule 14D-9 is incorporated herein
by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH
REGARD TO THE TRANSACTION.
(a) The directors and executive officers of the Company, who together
own slightly more than 2% of the outstanding Common Stock, have agreed to tender
their shares in response to the Purchaser's tender offer (unless a tender by a
particular director or officer might lead to liability under Section 16(b) of
the Securities Exchange Act of 1934, as amended, in which case the director or
officer will vote in favor of the Merger).
(b) The information set forth in Item 4(a) ("Recommendations of the
Board of Directors") and in Item 4(b)(2) ("Reasons for Recommendations") of the
Schedule 14D-9 is incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in Section 16 ("The Merger") of the Offer
to Purchase is incorporated herein by reference.
(b) No provision has been made by the Company, herein in connection
with the Offer or the Merger to allow unaffiliated securityholders to obtain
access to the corporate files of the Company or to obtain counsel or appraisal
services at the expense of the Company.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The financial information contained in the Company's Annual
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<PAGE> 5
Report on Form 10-K for the years ended March 31, 1998 and March 31, 1997 (as
amended) and its Quarterly Report of Form 10-Q for the period ended December 31,
1998 is incorporated herein by reference.
(b) The Company does not believe pro forma data is material with regard
to the Offer or the Merger.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) No officer, employee, class of employees or corporate asset of the
Company has been or is proposed to be employed, availed or utilized by the
Company in connection with the Offer or the Merger, except to the extent that,
in order to comply with requirements of the Securities Exchange Act of 1934,
officers and employees of the Company have been required to prepare a filing on
Schedule 14D-9 with regard to the Offer and amendments to that filing, and
except to the extent that officers or employees of the Company may participate
in preparation of a proxy statement or information statement relating to the
Merger, if one is required.
(b) The information set forth in Item 5 ("Persons Retained, Employed or
to be Compensated") of the Schedule 14D-9 is incorporated herein by reference.
ITEM 16. ADDITIONAL INFORMATION.
The Company does not believe any additional information is necessary to
make the statements made above in light of the circumstances under which they
are made, not materially misleading.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a) Not applicable.
(b)(1) Fairness opinion of Lehman Brothers Inc.(1)
(2) Presentation to the Board of Directors of the Company by Lehman
Brothers Inc. dated December 23, 1998.
(c) Amended and Restated Plan and Agreement of Merger, dated as of
February 4, 1999.(1)
(d) (1) Offer to Purchase, dated January 4, 1999.(2)
(2) Supplement to Offer to Purchase, dated February 5, 1999. (3)
(3) Supplement to Offer to Purchase, dated February 19, 1999. (6)
(4) Letter of Transmittal.(3)
(5) Notice of Guaranteed Delivery.(3)
(6) Summary Advertisement as published on January 4, 1999.(2)
(7) Schedule 14D-9 of the Company, filed on January 6, 1999. (4)
(8) Amendment No. 1 to Schedule 14D-9 of the Company, filed on
February 5, 1999. (5)
(9) Amendment No. 2 to Schedule 14D-9 of the Company, filed on
February 8, 1999. (1)
(10) Amendment No. 3 to Schedule 14D-9 of the Company, filed on
February 19, 1999. (7)
(e) Description of Appraisal Rights.(2)
(f) None.
4
<PAGE> 6
- -------------------
(1) Incorporated by reference to Amendment No. 2 to the Schedule 14D-9 filed
by the Company on February 8, 1999.
(2) Incorporated by reference to the Schedule 14D-1 filed by the Purchaser and
Three Cities Funds on January 4, 1999.
(3) Incorporated by reference to Amendment No. 1 to the Schedule 14D-1 filed
by the Purchaser and the Three Cities Funds on February 5, 1999.
(4) Incorporated by reference to the Schedule 14D-9 filed by the Company on
January 6, 1999.
(5) Incorporated by reference to Amendment No. 1 to the Schedule 14D-9 filed
by the Company on February 5, 1999.
(6) Incorporated by reference to Amendment No. 3 to the Schedule 14D-1 filed
by the Purchaser and the Three Cities on February 19, 1999.
(7) Incorporated by reference to Amendment No. 3 to the Schedule 14D-9 filed
by the Company on February 19, 1999.
5
<PAGE> 7
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
COHR INC.
By: /s/ RAYMOND E. LIST
-----------------------------------------
Raymond E. List
President and Chief Executive Officer
6
<PAGE> 1
EXHIBIT (b)(2)
Confidential
PROJECT GRINCH
Fairness Opinion Presentation
December 23, 1998
LEHMAN BROTHERS
<PAGE> 2
TABLE OF CONTENTS
================================================================================
I. TRANSACTION SUMMARY
----------------------------------------------------------------------
II. ANALYSIS OF CHRISTMAS
----------------------------------------------------------------------
III. VALUATION CONSIDERATIONS
----------------------------------------------------------------------
<PAGE> 3
TRANSACTION SUMMARY
================================================================================
OVERVIEW OF CURRENT PROPOSAL
<TABLE>
<S> <C>
DEAL MECHANICS: Tree will purchase Strong Capital Management, Inc.'s and Franklin Resources,
Inc.'s combined 51.1% interest by December 31, 1998 (the "Majority Shareholders")
Tender offer for minority shareholders (the "Minority Shareholders") to commence
shortly thereafter
INITIAL CASH PURCHASE PRICE $[5.00] per share to Majority Shareholders
OFFERED BY TREE: $[5.25] per share to Minority Shareholders
LITIGATION CONTINGENCY: [If litigation is settled before expiration of the tender and if the settlement
consumes less than $[3.0] million of Christmas cash, the tender offer will be
increased by $[1.00] per share]
BREAKUP FEE: $[1.0-1.5] million -- Roughly $0.19 per share, or 3.5% of the Transaction value
BOARD CALL OPTION: [The Board may, within [45 days] following the launch of the tender, call the
shares purchased by Tree if the Company receives a higher offer]
MATERIAL CONTINGENCIES TO
CLOSING:
</TABLE>
1
<PAGE> 4
TRANSACTION SUMMARY
================================================================================
PURCHASE PRICE SUMMARY
($ in millions, except per share data)
<TABLE>
<CAPTION>
PROCEEDS TO CHRISTMAS MINORITY SHAREHOLDERS $ 5.25 $ 5.75 $ 6.25
---------- ---------- ----------
<S> <C> <C> <C>
% PREMIUM TO CURRENT STOCK PRICE ON 12/22/98: $4.00 31.3% 43.8% 56.3%
EQUITY VALUE (a) $ 33.0 $ 34.5 $ 36.1
LESS OPTION PROCEEDS (b) 0.0 0.0 0.0
LESS WARRANT PROCEEDS (b) 0.0 0.0 0.0
---------- ---------- ----------
FULLY DILUTED EQUITY VALUE 33.0 34.5 36.1
LESS CASH PLUS DEBT (c) (12.1) (12.1) (12.1)
---------- ---------- ----------
VALUE OF COMPANY LESS CASH 20.8 22.4 24.0
========== ========== ==========
</TABLE>
- ---------
(a) 51.1% assumed purchased at $5.00 per share. Remainder assumed purchased at
$5.25 per share plus $0.00, $0.50, and $1.00 litigation contingency
payments.
(b) All options and warrants are out of the money at current stock price,
except 17,500 options at a strike price of $5.13.
(c) Net debt based on $0.69 in debt less $12.83 million in cash per Christmas'
10Q as of September 30, 1998.
2
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TRANSACTION SUMMARY
================================================================================
PREMIA OFFERED IN TRANSACTION RELATIVE TO RECENT CHRISTMAS STOCK PRICES
<TABLE>
<CAPTION>
% PREMIUM
AVERAGE --------------------------------------
STOCK PRICE $5.25 $5.75 $6.25
----------- ------- ------- -------
<S> <C> <C> <C> <C>
DECEMBER 22, 1998 $4.00 31.3% 43.8% 56.3%
10 DAY AVERAGE $3.65 43.8% 57.5% 71.2%
30 DAY AVERAGE $3.21 63.6% 79.1% 94.7%
60 DAY AVERAGE $3.08 70.5% 86.7% 102.9%
90 DAY AVERAGE $3.02 73.8% 90.4% 107.0%
180 DAY AVERAGE $3.85 36.4% 49.4% 62.3%
52 WEEK AVERAGE $6.81 (22.9%) (15.6%) (8.2%)
52 WEEK HIGH $13.00 (59.6%) (55.8%) (51.9%)
52 WEEK LOW $2.56 104.9% 124.4% 143.9%
</TABLE>
3
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TRANSACTION SUMMARY
================================================================================
PREMIA PAID IN COMPARABLE 100% CASH TRANSACTIONS, $75 MILLION OR LESS IN THE
OUTSOURCING INDUSTRY(a)
<TABLE>
<CAPTION>
PREMIUM TO STOCK PRICE PRIOR TO ANNOUNCEMENT
-------------------------------------------------------------
COMPARABLE TRANSACTIONS ONE DAY ONE MONTH LTM HIGH LTM LOW
- ----------------------- ------- --------- -------- -------
<S> <C> <C> <C> <C>
MEAN 28.3% 36.4% 5.5% 127.9%
MEDIAN 30.0% 37.1% 6.9% 106.7%
HIGH 35.1% 71.1% 28.3% 285.0%
LOW 13.8% 5.7% -24.1% 60.0%
</TABLE>
<TABLE>
<CAPTION>
CHRISTMAS OFFER PRICE ONE DAY ONE MONTH LTM HIGH LTM LOW
- --------------------- ------- --------- -------- -------
<S> <C> <C> <C> <C>
$5.25 23.5% 100.0% -59.6% 104.9%
$5.75 35.3% 119.0% -55.8% 124.4%
$6.25 47.1% 138.1% -51.9% 143.9%
</TABLE>
(a) Based on results from 8 transactions from 1995 to the present.
4
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TRANSACTION SUMMARY
================================================================================
<TABLE>
<CAPTION>
CAPITAL MARKETS OVERVIEW CHRISTMAS
----------
<S> <C>
Share Price (12/22/98) $ 4.00
30-Day Average $ 3.21
52-Week High $ 13.00
52-Week Low $ 2.56
Primary Shares Outstanding (a) 6.4
Options (a) 0.0
Warrants(a) 0.0
Less Shares Repurchased using Options Proceeds (a) 0.0
Less Shares Repurchased using Warrants Proceeds (a) 0.0
----------
Fully Diluted Shares 6.4
Fully Diluted Equity Value of Shares $ 25.7
Plus Debt 0.7
Less Cash(c) (12.8)
----------
Value of the Company Less Cash $ 13.6
==========
LTM Revenue $ 102.7
LTM Net Income (Loss) (d) $ (17.6)
1999E EPS (b) $ (0.55)
2000E EPS (b) $ 0.25
3 Year EPS Growth Rate (b) 53.7%
</TABLE>
- ----------
(a) All options and warrants are out of the money at current stock price,
except 17,500 at a strike price of $5.13.
(b) Christmas' estimates per Management.
(c) Cash as of September 30, 1998. Current cash is $12.1 million less debt.
(d) Excludes $11.4 million in special charges.
5
<PAGE> 8
ANALYSIS OF CHRISTMAS
================================================================================
SELECTED BALANCE SHEET DATA AT SEPTEMBER 30, 1998
($ in millions)
<TABLE>
<CAPTION>
Christmas
---------
<S> <C>
CASH & EQUIVALENTS $ 12.8 (a)
CURRENT ASSETS 37.6
---------
TOTAL ASSETS 46.4
=========
CURRENT LIABILITIES $ 14.8
LONG-TERM LIABILITIES 0.5
---------
TOTAL LIABILITIES 15.4
---------
COMMON STOCK AND PAID IN CAPITAL $ 56.0
ACCUMULATED DEFICIT (25.0)
---------
TOTAL SHAREHOLDERS' EQUITY 31.0
---------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 46.4
=========
</TABLE>
- ---------
(a) Current cash is $12.1 million per management.
6
<PAGE> 9
ANALYSIS OF CHRISTMAS
================================================================================
HISTORICAL STOCK PRICE PERFORMANCE
[HISTORICAL STOCK PRICE PERFORMANCE GRAPH]
7
<PAGE> 10
ANALYSIS OF CHRISTMAS
================================================================================
HISTORICAL STOCK PRICE PERFORMANCE
CHRISTMAS VS. COMPARABLE COMPANIES(a) VS. S&P 400 INDEX
[HISTORICAL STOCK PRICE PERFORMANCE GRAPH]
- ----------
(a) Comparable Companies Index consists of Adac Labs, American Residential
Services, DecisionOne Holdings, Diagnostic Health Services and Transcend
Services.
8
<PAGE> 11
ANALYSIS OF CHRISTMAS
================================================================================
TRADING VOLUME ANALYSIS - DECEMBER 20, 1997 THROUGH JUNE 20, 1998
[TRADING VOLUME ANALYSIS BAR GRAPH]
9
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ANALYSIS OF CHRISTMAS
================================================================================
TRADING VOLUME ANALYSIS - JUNE 20, 1998 THROUGH CURRENT
[TRADING VOLUME ANALYSIS BAR GRAPH]
10
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ANALYSIS OF CHRISTMAS
================================================================================
AVERAGE DAILY TRADING VOLUME
<TABLE>
<CAPTION>
TRADING PERIOD AVERAGE DAILY SHARES TRADED AVERAGE TRADING PRICE
-------------- --------------------------- ---------------------
<S> <C> <C>
Last 30 Days 23,467 $3.21
Last 60 Days 28,621 $3.08
Last 90 Days 26,602 $3.02
Last 180 Days 32,349 $3.85
Last 12 Months 77,882 $6.81
Last 24 Months 76,676 $13.27
</TABLE>
11
<PAGE> 14
ANALYSIS OF CHRISTMAS
================================================================================
OWNERSHIP ANALYSIS (a)
<TABLE>
<CAPTION>
Shares % Owned
------------ ------------
<S> <C> <C>
INSTITUTION/FUND OWNERSHIP
Strong Capital Management 1,663,525 25.9%
Franklin Resources 1,623,700 25.2%
Pioneering Management Corp 555,500 8.6%
Citicorp 491,400 7.6%
Fusion Capital Management 404,200 6.3%
Dimensional Fund Advisors 256,600 4.0%
------------ ------------
TOTAL INSTITUTIONAL SHARES HELD 5,209,237 81.0%
BENEFICIAL OWNERS AND DIRECTORS
Healthcare Association of Southern California 803,030 12.5%
All Directors and Executive Officers as a Group 252,084 3.9%
Others 168,649 2.6%
------------ ------------
TOTAL SHARES OUTSTANDING (b) 6,433,000 100.0%
============ ============
</TABLE>
- ---------
(a) Per December 1998 CDA/Spectrum Run.
(b) All options are out of the money based on the current stock price, except
17,500 options at an exercise price of $5.13.
12
<PAGE> 15
VALUATION CONSIDERATIONS
================================================================================
CHRISTMAS HISTORICAL AND PROJECTED OPERATING PERFORMANCE ANALYSIS
($ in millions, except per share data)
<TABLE>
<CAPTION>
HISTORICAL PROJECTED
-------------------------------------- -------------------------------------------------------------
1996 1997 1998(a) 1999(b) 2000 2001 2002 2003
-------------------------------------- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues $ 66.3 $ 86.2 $ 102.1 $ 97.1 $ 85.5 $ 90.1 $ 97.2 $ 105.0
Operating income 3.5 3.1 (19.3) (6.5) 2.1 4.1 6.6 9.1
Net income (c) 2.1 2.3 (15.9) (3.6) 1.6 2.9 4.4 5.9
Shares outstanding 2.4 5.5 6.4 6.4 6.4 6.4 6.4 6.4
EPS $ 0.89 $ 0.42 ($ 2.47) ($ 0.55) $ 0.25 $ 0.45 $ 0.69 $ 0.92
GROWTH RATES
Revenues 30.1% 18.5% -4.9% -12.0% 5.4% 7.9% 8.0%
Operating Income -10.7% NM 66.3% NM 97.8% 60.5% 36.6%
Net Income 8.6% NM 77.6% NM 79.3% 53.9% 33.3%
CAGR 2000-2003
Revenue CAGR 7.0%
EPS CAGR 53.7%
</TABLE>
- --------------
(a) Excludes $11.4 million in special charges.
(b) 1999 figures are normalized per Management, excludes $3.7 million of
Special Charges.
(c) Assumes income tax of 39%, NOL carryforward not applied.
13
<PAGE> 16
VALUATION CONSIDERATIONS
================================================================================
SUMMARY OF FISCAL 1998 SPECIAL CHARGES AND NON-RECURRING CHARGES
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT ($ MILLIONS)
----------- -------------------
<S> <C>
MASTERPLAN
Goodwill and asset writedowns(1) $ 9.1
Additional provision for bad debts 5.6
Inventory writedown 2.5
Inventory to book physical adjustment 1.2
---------
TOTAL MASTERPLAN $ 18.4
---------
CORPORATE
Legal and accounting charges related to Special Review(1) $ 1.2
Severance Costs(1) 1.1
Professional Outside Services 1.3
---------
TOTAL CORPORATE $ 3.6
---------
TOTAL CHARGES $ 22.0
=========
</TABLE>
(1) Classified as Special Charges.
14
<PAGE> 17
VALUATION CONSIDERATIONS
================================================================================
CHRISTMAS HISTORICAL AND PROJECTED OPERATING PERFORMANCE ANALYSIS BY SEGMENT
($ in millions, except per share data)
<TABLE>
<CAPTION>
HISTORICAL (c) PROJECTED (c)
---------------------------------- ---------------------------------------------------------
1996 1997 1998 (a) 1999 (b) 2000 2001 2002 2003
---------------------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MASTERPLAN
REVENUES $ 48.2 $ 66.0 $ 81.7 $ 77.2 $ 66.5 $ 70.2 $ 75.8 $ 81.9
% GROWTH -- 37.1% 23.7% -5.5% -13.9% 5.6% 8.0% 8.0%
OPERATING INCOME 1.4 1.0 (10.1) (3.7) 2.9 3.5 6.1 8.2
% MARGIN 2.9% 1.5% NM NM 4.3% 5.0% 8.0% 10.0%
PURCHASE CONNECTION
REVENUES 18.1 20.2 20.5 20.0 19.0 19.9 21.4 23.1
% GROWTH -- 11.7% 1.4% -2.6% -4.6% 4.6% 7.6% 7.6%
OPERATING INCOME 6.8 6.4 5.8 8.0 8.4 8.9 9.2 9.9
% MARGIN 37.4% 31.6% 28.5% 39.9% 43.9% 44.4% 42.9% 43.0%
CORPORATE SUPPORT (5.0) (4.7) (10.0) (10.4) (8.7) (8.4) (8.8) (9.3)
</TABLE>
- ----------
(a) 1998 figures exclude special charges of $11.4 million.
(b) 1999 figures exclude special charges of $3.7 million.
(c) 80% of D&A allocated to MasterPlan; 20% of D&A allocated to Purchase
Connection; MasterPlan bad debt at 0.75% of revenues.
15
<PAGE> 18
VALUATION CONSIDERATIONS
================================================================================
CURRENT MARKET MULTIPLES OF COMPARABLE COMPANIES
<TABLE>
<CAPTION>
CHRISTMAS COMPARABLE COMPANIES (a)
-------------------------------------------------- ------------------------------------------------
Current
$ 4.00 $ 5.25 $ 5.75 $ 6.25 Median Mean High Low
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Share Price to:
CY 1998E EPS NM NM NM NM 9.8x 11.0x 17.0x 6.3x
CY 1999E EPS 80.0x 105.0x 115.0x 125.0x 11.8x 11.2x 14.2x 7.8x
CY 2000E EPS 9.8x 12.9x 14.1x 15.3x 9.9x 9.5x 11.8x 6.9x
Firm Value(b):
LTM Revenue 0.1x 0.2x 0.2x 0.3x 1.0x 1.1x 1.8x 0.4x
LTM EBIT NM NM NM NM 12.7x 22.8x 44.4x 5.0x
</TABLE>
- ----------
(a) Comparable Companies include Adac Labs, American Residential Services,
DecisionOne Holdings, Diagnostic Health Services, and Transcend Services.
(b) Firm value is defined as market value plus debt (plus minority interest)
minus cash.
16
<PAGE> 19
VALUATION CONSIDERATIONS
================================================================================
DISCOUNTED FORWARD P/E ANALYSIS
2001E EPS $0.45
<TABLE>
<CAPTION>
2001E DISCOUNTED STOCK PRICES
-----------------------------------
8.0x 10.0x 12.0x
-------- -------- --------
<S> <C> <C> <C>
30.0% $ 2.59 $ 3.24 $ 3.89
DISCOUNT 35.0% $ 2.47 $ 3.09 $ 3.71
RATES
40.0% $ 2.36 $ 2.95 $ 3.55
</TABLE>
2002E EPS $0.69
<TABLE>
<CAPTION>
2002E DISCOUNTED STOCK PRICES
-----------------------------------
8.0x 10.0x 12.0x
-------- -------- --------
<S> <C> <C> <C>
30.0% $ 3.06 $ 3.82 $ 4.59
DISCOUNT 35.0% $ 2.81 $ 3.51 $ 4.21
RATES
40.0% $ 2.59 $ 3.24 $ 3.88
</TABLE>
17
<PAGE> 20
VALUATION CONSIDERATIONS
================================================================================
REVIEW OF SPRING 1998 AUCTION PROCESS -- FINAL BIDS
[INFORMATION REDACTED DUE TO CONFIDENTIALITY UNDERSTANDINGS BETWEEN THE PARTIES]
18
<PAGE> 21
VALUATION CONSIDERATIONS
================================================================================
VARIANCE FROM MARCH 1998 PROJECTIONS
<TABLE>
<CAPTION>
FY 1998 FY 1999E
---------------------------------------- ----------------------------------------
CURRENT
MARCH 1998 MARCH 1998 MGMT
PROJECTIONS ACTUAL VARIANCE PROJECTIONS PROJECTIONS VARIANCE
----------- ------------ -------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
MASTERPLAN
REVENUE $ 79.4 $ 81.7 2.9% $ 80.0 $ 77.2 -3.5%
OPERATING PROFIT ($ 5.1) ($ 10.1)(1) -98.0% $ 1.2 ($ 3.7)(1) -404.8%
PURCHASE CONNECTION
REVENUE $ 20.1 $ 20.5 1.8% $ 20.4 $ 20.0 -2.2%
OPERATING PROFIT $ 5.7 $ 5.8(2) 3.1% $ 7.2 $ 8.0(2) 10.7%
CORPORATE
REVENUE $ 0.3 $ 0.0 -100.0% $ 0.0 $ 0.0 NM
OPERATING PROFIT ($ 9.2) ($ 10.0)(3) -9.0% ($ 8.2) ($ 10.4)(3) -26.4%
</TABLE>
<TABLE>
<CAPTION>
FY 2000E
-----------------------------------------
CURRENT
MARCH 1998 MGMT
PROJECTIONS PROJECTIONS VARIANCE
----------- ----------- --------
<S> <C> <C> <C>
MASTERPLAN
REVENUE $ 88.0 $ 66.5 -24.5%
OPERATING PROFIT $ 4.7 $ 2.9(1) -38.0%
PURCHASE CONNECTION
REVENUE $ 21.8 $ 19.0 -12.5%
OPERATING PROFIT $ 7.9 $ 8.4(2) 6.2%
CORPORATE
REVENUE $ 0.0 $ 0.0 NM
OPERATING PROFIT ($ 8.2) ($ 8.7)(3) -5.6%
</TABLE>
- -------------------------
(1) Excludes special charges; bad debt normalized at 0.75% of revenues; 80% of
D&A allocated to MasterPlan.
(2) 20% of D&A allocated to Purchase Connection.
(3) Excludes special charges and bad debt.
19
<PAGE> 22
VALUATION CONSIDERATIONS
================================================================================
HYPOTHETICAL BREAK-UP ANALYSIS - SPRING AUCTION VALUES
<TABLE>
<CAPTION>
POTENTIAL CASH PURCHASE PRICE LOW MEDIUM HIGH
---------- ---------- ----------
<S> <C> <C> <C>
MASTERPLAN(1) $ 15.0 $ 17.5 $ 20.0
PURCHASE CONNECTION(1) 35.0 40.0 45.0
---------- ---------- ----------
PRE-TAX PROCEEDS TO COMPANY $ 50.0 $ 57.5 $ 65.0
(LESS TAXES ON ASSET SALES)(2) (11.7) (13.7) (15.6)
(LESS WINDING DOWN COSTS) (3.0) (3.0) (3.0)
PLUS CASH 14.4 14.4 14.4
LESS: LITIGATION SETTLEMENT (4.0) (4.0) (4.0)
---------- ---------- ----------
TOTAL PROCEEDS TO SHAREHOLDER $ 45.7 $ 51.3 $ 56.8
========== ========== ==========
PER SHARE VALUE AT:
100% OF PURCHASE PRICE ACHIEVED $ 7.10 $ 7.97 $ 8.83
75% OF PURCHASE PRICE ACHIEVED $ 5.69 $ 6.34 $ 6.99
50% OF PURCHASE PRICE ACHIEVED $ 4.28 $ 4.71 $ 5.14
</TABLE>
(1) Reflects range of final bids received from Spring auction process.
(2) Assumes estimated tax bases for MasterPlan and Purchase Connection of $32.7
million and $5.0 million, respectively, per management; NOL excluded from
calculation.
20
<PAGE> 23
VALUATION CONSIDERATIONS
================================================================================
DISCOUNTED FUTURE BREAK-UP VALUATION SUMMARY - SALE AT 3/31/00 (1)
<TABLE>
<CAPTION>
CUSTOMER RETENTION RATE
---------------------------------------
100% 80% 60%
-------- -------- --------
<S> <C> <C> <C>
MASTERPLAN PER SHARE SALE PROCEEDS(1)
REVENUE VALUATION $ 3.53 $ 2.82 $ 2.12
EBIT VALUATION $ 2.31 $ 1.85 $ 1.39
PURCHASE CONNECTION PER SHARE SALES PROCEEDS(1)
REVENUE VALUATION $ 3.12 $ 2.49 $ 1.87
EBIT VALUATION $ 4.66 $ 3.73 $ 2.80
CASH PER SHARE(2) $ 0.68 $ 0.68 $ 0.68
-------- -------- --------
TOTAL AVERAGE VALUE PER SHARE $ 7.49 $ 6.13 $ 4.77
======== ======== ========
</TABLE>
(1) MasterPlan numbers discounted at 35%; Purchase Connection numbers
discounted at 20%; NOL excluded from analysis.
(2) Cash assumes $14.4 million of cash at March 31, 2000 less $3.0 million in
winding down costs, $3.0 million in operating losses and $4.0 million in
litigation expenses.
21
<PAGE> 24
VALUATION CONSIDERATIONS
================================================================================
CURRENT SALE VERSUS REMAIN INDEPENDENT
<TABLE>
<CAPTION>
SALE AT YEAR-END 1998 REMAIN INDEPENDENT
- ---------------------------------------------------- ----------------------------------------------------------------------
IMPLIED FORWARD % OF PROJECTED EPS P/E REQUIRED TO
ACQUISITION FUTURE VALUE STOCK PRICE AT TO BREAK EVEN WITH CURRENT BREAK-EVEN WITH
PRICE PER PREMIUM TO: OF PRETAX 12/31/00 AT P/E OF:(2) SALE AT FORWARD P/E OF: CURRENT SALE:
SHARE AT ------------------ SALE PROCEEDS ----------------------------------------------------------------------
YEAR-END 1998 CURRENT 52-WK HI AT 12/31/00(1) 8.0X 10.0X 12.0X 8.0X 10.0X 12.0X
------------- ------- -------- -------------- ----- ----- ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$5.25 31.3% -59.6% $6.94 $3.60 $4.50 $5.40 192.9% 154.3% 128.6% 15.4x
$5.75 43.8% -55.8% $7.60 $3.60 $4.50 $5.40 211.2% 169.0% 140.8% 16.9x
$6.25 56.3% -51.9% $8.27 $3.60 $4.50 $5.40 229.6% 183.7% 153.1% 18.4x
</TABLE>
(1) Assumes 15% compounded annual return on sale proceeds.
(2) Assumes 2001 EPS of $0.45 per management.
22
<PAGE> 25
CHRISTMAS COMPARABLE COMPANY ANALYSIS
================================================================================
MARKET MULTIPLES OF COMPARABLE COMPANIES
($ in millions, except per share data)
<TABLE>
<CAPTION>
STOCK SHARES NET
PRICE O/S MARKET REVENUE EBIT EBITDA INCOME
COMPANY 12/21/98 (MM) VALUE (LTM) (LTM) (LTM) (LTM)
- ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
ADAC LABORATORIES $ 25.38 21.5 $ 546.1 $ 308.9 $ 44.8 $ 55.5 $ 24.6
AMERICAN RESIDENTIAL SERVICES 3.13 15.9 49.7 480.1 21.6 33.2 5.9
DECISION ONE 6.16 12.6 77.5 799.5 18.4 61.7 (38.8)
DIAGNOSTIC HEALTH SERVICES 2.00 11.4 22.9 58.8 13.2 20.1 5.6
TRANSCEND SERVICES 1.81 21.5 39.0 50.7 1.1 2.8 0.1
CHRISTMAS $ 4.00 6.4 $ 25.7 $ 102.7 ($ 20.5) ($ 18.6) ($ 17.6)
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------- -----------------------------
EPS CY1998 CY1999 CY2000 CY1999 REVENUE EBIT EBITDA
COMPANY (LTM) EPS (z) EPS (z) EPS P/E/G (LTM) (LTM) (LTM)
- ------- ----- ------- ------- ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ADAC LABORATORIES $ 1.23 17.0 x 14.2 x 11.8 x 0.9 x 1.8 x 12.7 x 10.3 x
AMERICAN RESIDENTIAL SERVICES 0.30 9.8 x 7.8 x 6.9 x 0.6 x 0.4 x 9.5 x 6.2 x
DECISION ONE (3.08) NA NA NM NM 1.0 x 44.4 x 13.3 x
DIAGNOSTIC HEALTH SERVICES 0.46 6.3 x 11.8 x 9.9 x 0.6 x 1.1 x 5.0 x 3.3 x
TRANSCEND SERVICES 0.00 NM NA NM NM 0.9 x 42.5 x 16.3 x
MEAN 11.0 x 11.2 x 9.5 x 0.7 x 1.1 x 22.8 x 9.9 x
MEDIAN 9.8 x 11.8 x 9.9 x 0.6 x 1.0 x 12.7 x 10.3 x
Christmas ($ 2.74) NM 80.0 x 9.8 x 1.4 x 0.1 x NM NM
</TABLE>
23
<PAGE> 26
PREMIA PAID IN COMPARABLE TRANSACTIONS
================================================================================
PREMIA PAID IN COMPARABLE 100% CASH TRANSACTIONS, $75 MILLION OR LESS IN THE
OUTSOURCING INDUSTRY
<TABLE>
<CAPTION>
PREMIUM PRIOR TO ANNOUNCEMENT DATE
DATE TRANSACTION -----------------------------------------------
ANNOUNCED TARGET COMPANY ACQUIROR VALUE 1 DAY (%) 1 MONTH (%) LTM HIGH LTM LOW
- --------- -------------- -------- ----------- --------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
4/29/96 LDI Corp NationsBank Corp $ 28.1 31.2% 49.1% -3.5% 82.2%
8/23/96 Computer Petroleum Corp United Communications 12.0 28.3% 71.1% 28.3% 285.0%
9/15/98 InnoServ Technologies GE Medical Systems 13.1 30.8% 41.7% 17.2% 183.3%
12/11/95 Earth Technology Corp Tyco International Ltd 69.6 35.1% 32.5% -5.9% 88.2%
1/16/96 Orthopedic Technology Depuy Inc (Corange Ltd) 45.2 26.4% 49.0% 17.5% 131.8%
2/13/96 Medical Innovations Horizon/CMS Healthcare 30.3 13.8% 5.7% -24.1% 60.0%
1/15/98 Mediq Bruckman 526.0 31.8% 26.1% 24.7% 125.2%
11/26/97 UHOS JW Childs 133.0 29.2% 15.9% -10.1% 67.6%
MEAN 28.3% 36.4% 5.5% 127.9%
MEDIAN 30.0% 37.1% 6.9% 106.7%
HIGH 35.1% 71.1% 28.3% 285.0%
LOW 13.8% 5.7% -24.1% 60.0%
</TABLE>
24
