<PAGE>
File No.005-49223
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 13E-3
AMENDMENT NO. 1
RULE 13E-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
----------------
DECISIONONE HOLDINGS CORP.
(Name of Issuer)
----------------
DECISIONONE HOLDINGS CORP.
KENNETH DRAEGER
(Name of Persons Filing Statement)
COMMON STOCK, $0.01 PAR VALUE 13-345409
(Title of Class of Securities) (I.R.S. Employer Identification Number)
-----------------
KENNETH DRAEGER
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
DECISIONONE HOLDINGS CORP.
50 EAST SWEDESFORD ROAD
FRAZER, PENNSYLVANIA 19355
(610) 296-6000
(Name, Address and Telephone Number of Persons Authorized to Receive Notices
and Communications on Behalf of the Persons Filing Statement)
------------------
COPIES TO:
DAVID R. KING, ESQ. GEORGE R. BASON, JR., ESQ.
MORGAN, LEWIS & BOCKIUS DAVIS POLK & WARDWELL
2000 ONE LOGAN SQUARE 450 LEXINGTON AVENUE
PHILADELPHIA, PA 19103 NEW YORK, NY 10017
JUNE 2, 1997
(Date Proxy Statement First Published, Sent or Given to Security Holders)
-------------------
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].
<PAGE>
DecisionOne Holdings Corp., a Delaware corporation (the "Company") and
Kenneth Draeger, Chairman and Chief Executive Officer of the Company, hereby
submit Amendment No. 1 to their Rule 13e-3 Transaction Statement on Schedule
13E-3 (as amended, the "Statement"). The Statement relates to a proposed
Agreement and Plan of Merger dated as of May 4, 1997 (the "Merger Agreement")
among the Company and Quaker Holding Co. ("Merger Sub"), a Delaware
corporation, pursuant to which MergerSub will be merged with and into the
Company (the "Merger"). Pursuant to the Merger, each share (a "Share") of
common stock, par value $0.01 per share, of the Company issued and outstanding
immediately prior to the effective time of the Merger (other than (i) Shares
held by the Company as treasury stock or owned by MergerSub, which Shares
shall be canceled, and (ii) Shares as to which appraisal rights have been
exercised) will be, subject to certain limitations, converted at the election
of the holder thereof, subject to the terms described in the proxy
statement/prospectus of the Company (the "Proxy Statement/Prospectus"), into
(a) the right to receive $23.00 in cash, or (b) the right to retain one fully
paid and nonassessable share of common stock of the Company following the
Merger.
This Statement is intended to satisfy the reporting requirements of Section
13(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Proxy Statement/Prospectus was filed by the Company with the Securities
and Exchange Commission (the "Commission") immediately prior to the filing of
this Statement.
The cross reference sheet below is being supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the Proxy
Statement/Prospectus of the information required to be included in response to
the items of this Statement. The information in the Proxy
Statement/Prospectus, including all exhibits thereto, is hereby expressly
incorporated herein by reference and the responses to each item in this
Statement are qualified in their entirety by the information contained in the
Proxy Statement/Prospectus.
2
<PAGE>
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM IN
SCHEDULE 13E-3 WHERE LOCATED IN THE PROXY STATEMENT/PROSPECTUS
- ------------------ -----------------------------------------------------------
<S> <C>
Item 1(a) Cover Page; SUMMARY -- The Company
Item 1(b) DESCRIPTION OF COMPANY CAPITAL STOCK -- General; THE SPECIAL
MEETING -- Record Date; -- Vote Required
Item 1(c)-(d) PRICE OF THE COMMON STOCK; FINANCIAL STATEMENTS OF THE
COMPANY -- Consolidated Statements of Shareholder's Equity;
Notes to Consolidated Financial Statements: Note 15,
Shareholder's Equity and Redeemable Preferred Stock
Item 1(e) FINANCIAL STATEMENTS OF THE COMPANY -- Notes to Consolidated
Financial Statements: Note 15, Shareholder's Equity and
Redeemable Preferred Stock
Item 1(f) **
Item 2(a)-(g) This Amendment No. 1 to Schedule 13E-3 is being filed by
the issuer and Kenneth Draeger.
Item 3(a)(1)-(2) **
Item 3(b) THE MERGER -- Background of the Merger; -- Effect on Stock and
Employee Benefits Matters; -- Interests of Certain Persons in
the Merger; DIRECTORS AND EXECUTIVE OFFICERS OF THE
COMPANY; SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT; CERTAIN RELATIONSHIPS AND TRANSACTIONS;
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS; CERTAIN
PROVISIONS OF THE VOTING AGREEMENT
Item 4(a) Pages i-ii; SUMMARY -- The Merger; THE MERGER; CERTAIN
PROVISIONS OF THE MERGER AGREEMENT; CERTAIN PROVISIONS OF
THE VOTING AGREEMENT
Item 4(b) THE MERGER -- Effect on Stock and Employee Benefits Matters;
-- Interests of Certain Persons in the Merger
Item 5(a)-(g) SUMMARY; RISK FACTORS; THE MERGER; DESCRIPTION OF COMPANY
CAPITAL STOCK; CERTAIN PROVISIONS OF THE MERGER AGREEMENT;
CERTAIN PROVISIONS OF THE VOTING AGREEMENT; MANAGEMENT
FOLLOWING THE MERGER
Item 6(a), (c)(1)-(2) SUMMARY -- The Merger: Merger
Consideration; -- Merger Financing; THE MERGER -- Merger
Consideration; -- Merger Financing; CERTAIN PROVISIONS
OF THE MERGER AGREEMENT -- Financing; MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- Liquidity and Capital
Resources -- Financing
Item 6(b) SUMMARY -- The Merger: Certain Fees and Expenses; -- Expenses;
THE MERGER -- Information Concerning the Company's Financial
Advisor; CERTAIN PROVISIONS OF THE MERGER
AGREEMENT -- Expenses; MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Company
History; FINANCIAL STATEMENTS OF THE COMPANY -- Notes to
Consolidated Financial Statements: Note 5, Subsequent Event
3
<PAGE>
ITEM IN
SCHEDULE 13E-3 WHERE LOCATED IN THE PROXY STATEMENT/PROSPECTUS
- ------------------ -----------------------------------------------------------
Item 6(d) **
Item 7(a)-(c) SUMMARY -- The Special Meeting; THE MERGER -- Recommendation
of the Board of Directors; Reasons for the Merger
Item 7(d) SUMMARY; RISK FACTORS; THE MERGER -- Federal Income Tax
Consequences; -- Interests of Certain Persons in the Merger;
CERTAIN PROVISIONS OF THE MERGER AGREEMENT; MANAGEMENT
FOLLOWING THE MERGER
Item 8(a)-(b) SUMMARY -- The Special Meeting; THE SPECIAL MEETING; THE
MERGER -- Recommendation of the Board of Directors; Reasons
for the Merger; -- Opinion of Financial Advisor; -- Valuation
of the Common Stock; -- Valuation of the Consideration to be
Received in the Merger; -- Certain Projections of Future
Operations and Other Information; Annex C; PRICE OF THE
COMMON STOCK; FINANCIAL STATEMENTS OF THE COMPANY -- Notes to
Consolidated Financial Statements
Item 8(c) THE SPECIAL MEETING -- Required Votes
Item 8(d) **
Item 8(e) SUMMARY -- The Special Meeting; THE MERGER -- Recommendation
of the Board of Directors; -- Reasons for the Merger
Item 8(f) **
Item 9(a)-(c) SUMMARY -- The Special Meeting; THE MERGER -- Opinion of
Financial Advisor; -- Valuation of the Common Stock; --
Valuation of the Consideration to be Received in the
Merger; -- Information Concerning the Company's Financial
Advisor; and Annex C
Item 10(a) SUMMARY -- The Merger; THE MERGER -- Interests of Certain
Persons in the Merger; SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT; COMPENSATION OF EXECUTIVE
OFFICERS AND DIRECTORS
Item 10(b) **
Item 11 SUMMARY -- The Merger; THE MERGER; CERTAIN PROVISIONS OF THE
MERGER AGREEMENT; Annex A; CERTAIN PROVISIONS OF THE VOTING
AGREEMENT; Annex B; DESCRIPTION OF COMPANY CAPITAL STOCK;
and COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Item 12(a)-(b) THE SPECIAL MEETING -- Matters to be Considered; -- Required
Votes; CERTAIN PROVISIONS OF THE VOTING AGREEMENT; Annex B
Item 13(a) SUMMARY -- The Merger; THE SPECIAL MEETING -- Appraisal Rights;
DISSENTING STOCKHOLDERS' RIGHTS; Annex D
Item 13(b) **
Item 13(c) **
Item 14(a) SUMMARY -- Summary Selected Historical and Unaudited Pro
Forma Combined Condensed Financial Information; FINANCIAL
STATEMENTS OF THE COMPANY
4
<PAGE>
ITEM IN
SCHEDULE 13E-3 WHERE LOCATED IN THE PROXY STATEMENT/PROSPECTUS
- -----------------------------------------------------------------------------
Item 14(b) PRO FORMA FINANCIAL INFORMATION
Item 15(a)-(b) THE MERGER -- Solicitation of Proxies
Item 16 **
Item 17(a) **
Item 17(b) Annex C
Item 17(c) Annex A; Annex B
Item 17(d) **
Item 17(e) Annex D
Item 17(f) **
</TABLE>
- ------------
* The information requested by this item is not required to be included
in the Proxy Statement/Prospectus.
** The Items is inapplicable or the answer thereto is in the negative.
ITEM 1. ISSUER AND CLASS OF SECURITIES SUBJECT TO THE TRANSACTION
(a) The information set forth on the cover page of, and under "SUMMARY --
The Company" in the Proxy Statement/Prospectus is incorporated herein by
reference.
(b) The information set forth under "DESCRIPTION OF COMPANY CAPITAL STOCK
-- General" and "THE SPECIAL MEETING -- Record Date; -- Vote Required" is
incorporated herein by reference.
(c)-(d) The information set forth under "PRICE OF THE COMMON STOCK", and
"FINANCIAL STATEMENTS OF THE COMPANY -- Consolidated Statements of
Shareholder's Equity", "Notes to Consolidated Financial Statements: Note 15,
Shareholder's Equity and Redeemable Preferred Stock" is incorporated herein by
reference.
(e) The information set forth under "FINANCIAL STATEMENTS OF THE COMPANY --
Notes to Consolidated Financial Statements: Note 15, Shareholder's Equity and
Redeemable Preferred Stock" is incorporated herein by reference.
(f) Not applicable.
ITEM 2. IDENTITY AND BACKGROUND
(a) DecisionOne Holdings Corp. is the issuer of the class of equity
securities which is the subject of the Rule 13e-3 transaction; Kenneth Draeger
is the Chairman and Chief Executive Officer of DecisionOne Holdings Corp.
(b) The information under "SUMMARY -- The Company" is incorporated herein
by reference.
(c)-(d) and (g) The information under "DIRECTORS AND EXECUTIVE OFFICERS OF
THE COMPANY" is incorporated herein by reference.
(e) Mr. Draeger has not, during the last five years, been convicted in a
criminal proceeding.
(f) Mr. Draeger has not, during the last five years, been a party to any
civil proceeding of the type described in item 2(f) of Schedule 13E-3.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS
(a)(1)-(2) Not applicable.
5
<PAGE>
(b) The information set forth under "THE MERGER -- Background of the
Merger; -- Effect on Stock and Employee Benefits Matters; -- Interests of
Certain Persons in the Merger", "DIRECTORS AND EXECUTIVE OFFICERS OF THE
COMPANY", "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT",
"CERTAIN RELATIONSHIPS AND TRANSACTIONS", "COMPENSATION OF EXECUTIVE OFFICERS
AND DIRECTORS" and "CERTAIN PROVISIONS OF THE VOTING AGREEMENT" is
incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTIONS
(a) The information set forth on pages i-ii and "SUMMARY -- The Merger",
"THE MERGER", "CERTAIN PROVISIONS OF THE MERGER AGREEMENT" and "CERTAIN
PROVISIONS OF THE VOTING AGREEMENT" is incorporated herein by reference.
(b) The information set forth under "THE MERGER -- Effect on Stock and
Employee Benefits Matters; -- Interests of Certain Persons in the Merger" is
incorporated herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OF AFFILIATE
(a)-(g) The information set forth under "SUMMARY", "RISK FACTORS", "THE
MERGER", "DESCRIPTION OF COMPANY CAPITAL STOCK", "CERTAIN PROVISIONS OF THE
MERGER AGREEMENT", "CERTAIN PROVISIONS OF THE VOTING AGREEMENT", and
"MANAGEMENT FOLLOWING THE MERGER" is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a), (c)(1)-(2) The information set forth under "SUMMARY -- The Merger:
Merger Consideration; -- Merger Financing", "THE MERGER -- Merger
Consideration; -- Merger Financing" and "CERTAIN PROVISIONS OF THE MERGER
AGREEMENT -- Financing"; "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- Liquidity and Capital Resources --
Financing" is incorporated herein by reference.
(b) The information set forth under "SUMMARY -- The Merger: Certain Fees
and Expenses; -- Expenses", "THE MERGER -- Information Concerning the
Company's Financial Advisor", "CERTAIN PROVISIONS OF THE MERGER AGREEMENT --
Expenses", "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- Company History" and "FINANCIAL STATEMENTS OF THE
COMPANY -Notes to Consolidated Financial Statements: Note 5, Subsequent Event"
is incorporated herein by reference.
(d) Not applicable.
ITEM 7. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS
(a)-(c) The information set forth under "SUMMARY -- The Special Meeting",
and "THE MERGER -- Recommendation of the Board of Directors; Reasons for the
Merger" is incorporated herein by reference.
(d) The information set forth under "SUMMARY", "RISK FACTORS", "THE
MERGER", " -- Federal Income Tax Consequences", " -- Interests of Certain
Persons in the Merger", "CERTAIN PROVISIONS OF THE MERGER AGREEMENT", and
"MANAGEMENT FOLLOWING THE MERGER" is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTIONS
(a)-(b) The information set forth under "SUMMARY -- The Special Meeting",
"THE SPECIAL MEETING", "THE MERGER -- Recommendation of the Board of
Directors; -- Reasons for the Merger; -- Opinion of Financial Advisor; --
Valuation of the Common Stock; -- Valuation of the Consideration to be
Received in the Merger", "Annex C", "PRICE OF THE COMMON STOCK", and
"FINANCIAL STATEMENTS OF THE COMPANY -- Notes to Consolidated Financial
Statements" is incorporated herein by reference.
6
<PAGE>
(c) The information set forth under "THE SPECIAL MEETING -- Required Votes"
is incorporated herein by reference.
(d) No representative was hired solely on behalf of unaffiliated security
holders.
(e) The information set forth under "SUMMARY -- The Special Meeting", and
"THE MERGER -- Recommendation of the Board of Directors; Reasons for the
Merger" is incorporated herein by reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS
(a)-(c) The information set forth under "SUMMARY -- The Special Meeting",
"THE MERGER -- Opinion of Financial Advisor; -- Valuation of the Common Stock;
-- Valuation of the Consideration to be Received in the Merger; -- Information
Concerning the Company's Financial Advisor", and "Annex C" is incorporated
herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER
(a) The information set forth under "SUMMARY -- The Merger", "THE MERGER --
Interests of Certain Persons in the Merger", "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT", and "COMPENSATION OF EXECUTIVE OFFICERS AND
DIRECTORS" is incorporated herein by reference.
(b) No transactions of the type required to be disclosed by Item 10(b) have
been effected in the past 60 days.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE
ISSUER'S SECURITIES
The information set forth under "SUMMARY -- The Merger", "THE MERGER",
"CERTAIN PROVISIONS OF THE MERGER AGREEMENT", "Annex A", "CERTAIN PROVISIONS
OF THE VOTING AGREEMENT", "Annex B", "DESCRIPTION OF COMPANY CAPITAL STOCK",
"COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS", is incorporated herein by
reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD
TO THE TRANSACTION
(a)-(b) The information set forth under "THE SPECIAL MEETING -- Matters to
be Considered; -- Required Votes", "CERTAIN PROVISIONS OF THE VOTING
AGREEMENT" and "Annex B" is incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION
(a) The information set forth under "SUMMARY -- The Merger", "THE SPECIAL
MEETING -- Appraisal Rights", "DISSENTING STOCKHOLDERS' RIGHTS", and "Annex D"
is incorporated herein by reference.
(b) Not applicable.
(c) **
ITEM 14. FINANCIAL INFORMATION
(a) The information set forth under "SUMMARY -- Summary Selected Historical
and Unaudited Pro Forma Combined Condensed Financial Information" and
"Financial Statements of the Company" is incorporated herein by reference.
(b) The information set forth under "PRO FORMA FINANCIAL INFORMATION" and
"FINANCIAL STATEMENTS OF THE COMPANY" is incorporated herein by reference.
7
<PAGE>
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED
(a)-(b) The information set forth under "THE MERGER -- Solicitation of
Proxies" is incorporated herein by reference.
ITEM 16. ADDITIONAL INFORMATION
Reference is hereby made to the Proxy Statement/Prospectus and to each
exhibit attached thereto, each of which is incorporated by reference herein.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS
(a) Not applicable.
(b)(1) Opinion of Smith Barney Inc. (incorporated by reference to Annex C to
the Proxy Statement/ Prospectus).
(b)(2) Presentation by Smith Barney Inc. to the Board of Directors of
DecisionOne Holdings Corp. on May 4, 1997.
(c)(1) Agreement and Plan of Merger dated as of May 4, 1997 between
DecisionOne Holdings Corp. and Quaker Holding Co. (incorporated by reference
to Exhibit A to the Proxy Statement/Prospectus).
(c)(2) Voting Agreement and Irrevocable Proxy dated as of May 4, 1997
among DecisionOne Holdings Corp., Quaker Holding Co. and certain stockholders
of DecisionOne Holdings Corp. (incorporated by reference to Exhibit B to the
Proxy Statement/Prospectus).
(d) Proxy Statement/Prospectus and related Notice of Special Meeting and
Proxy (incorporated by reference to the Proxy Statement/Prospectus and related
material filed under a Registration Statement on Form S-4 by DecisionOne
Holdings Corp. on the date hereof).
(e) Section 262 of the General Corporation Law of the State of Delaware
(incorporated by reference to Exhibit D to the Proxy Statement/Prospectus).
(f) Not applicable.
8
<PAGE>
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is
true, complete and correct.
Dated: July 9, 1997
DECISIONONE HOLDINGS CORP.
By: /s/ Thomas J. Fitzpatrick
---------------------------------
Name: Thomas J. Fitzpatrick
Title: Vice President and Chief Financial Officer
9
<PAGE>
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is
true, complete and correct.
Dated: July 9, 1997
By: /s/ Kenneth Draeger
---------------------------------
Name: Kenneth Draeger
10
<PAGE>
===============================================================================
Presentation to The Board of Directors of
DELTA
===============================================================================
MAY 4, 1997
Smith Barney Inc.
<PAGE>
MATERIAL FOR THE BOARD OF DIRECTORS
OF
DELTA, INC.
The following pages contain material provided to the Board of Directors of
Delta, Inc. ("Delta" or the Company) by Smith Barney Inc. ("Smith Barney") in
the context of meetings of the Board of Directors held to evaluate the potential
sale of the Company. The accompanying material was compiled or prepared on a
confidential basis solely for the use by the Board of Directors and not with a
view toward public disclosure under state and federal securities laws. The
information contained in this material was obtained from the Company and other
sources. Any estimates and projections for the Company contained herein have
been prepared by management or are based upon such estimates and projections,
and involve numerous and significant subjective determinations, which may or may
not be correct. No representation or warranty, expressed or implied, is made as
to the accuracy or completeness of such information and nothing contained herein
is, or shall be relied upon as, a promise or representation, whether as to the
past or the future. This material was not prepared for use by readers not as
familiar with the business and affairs of Delta as the Board of Directors and,
accordingly, neither Delta nor Smith Barney nor their respective legal or
financial advisors or accountants take any responsibility for the accompanying
material when used by persons other than the Board of Directors of Delta.
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
TAB
EXECUTIVE SUMMARY
===============================================================================
Transaction Overview 1
Issues for Consideration 2
OVERVIEW OF DELTA
===============================================================================
Trading Analysis 3
Analyst Commentaries 4
VALUATION ANALYSIS
===============================================================================
Valuation Summary 5
Valuation Matrix 6
EXHIBITS
===============================================================================
Comparable Company Analysis A
Precedent Transaction Analysis B
Premiums Paid Analysis C
Company Projections -- Stand Alone D
Company Projections -- Leveraged Scenario E
<PAGE>
- -------------------------------------------------------------------------------
EXECUTIVE SUMMARY
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
TRANSACTION OVERVIEW
- -------------------------------------------------------------------------------
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- -------------------------------------------------------------------------------
TRANSACTION OVERVIEW
DLJ's merchant banking fund has submitted a proposal for an
approximate $977 million(1) leveraged recapitalization of the Company,
representing a stated value of $23.00 per share, payable in cash and
stub equity
Financing for the recapitalization will be provided from the following
sources (in millions):
Bank credit facility $475.0
High yield debt offering $150.0
Equity capital contribution $318.0
Rollover equity (nominal value) $34.0
------
$977.0
The equity capital contribution will be broken out as follows (in
millions):
DLJ common equity $225.0
Management common equity $8.0
Preferred equity / discount notes $ 85.0
------
$318.0
The company will also have access to a $100 million revolving credit
facility
Notes:
- -------
(1) Includes nominal rollover equity of $34 million and transaction costs of
approximately $53 million.
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- -------------------------------------------------------------------------------
TRANSACTION OVERVIEW
The structure of the transaction will be a reverse merger of
MergerSub into the Company, with holders of the Company's common
stock (the "Common Stock") receiving either $23.00 in cash or
electing to retain their shares of Common Stock
In the event that holders of less than 1,474,345 shares of Common
Stock (5.3% of the outstanding stock) elect to retain their shares,
non-electing holders will retain a pro rata share of Common Stock in
order to ensure that 5.3% of the Common Stock remains outstanding
In the event that holders of more than 1,474,345 shares of Common
Stock elect to retain their shares, such electing holders will only
retain their pro rata share of 5.3% of the Common Stock and will
receive cash for their remaining shares
Option and warrant holders will receive the difference between $23.00
and the strike price on their securities, payable solely in cash.
The value of the consideration to the holders of the Common Stock in
the transaction has been estimated to be approximately $22.50:
Cash consideration $21.78
Stub equity $.60 - $ 1.07
-------------
$22.38 - $22.85
The cash consideration is calculated as follows (in millions, except
per share amounts)(1):
Primary shares outstanding 27.8
Less: Stub shares (1.5)
Shares to be converted in merger into cash 26.3
Cash merger price $23.00
------
Aggregate proceeds $605.9
Primary shares outstanding 27.8
Cash per share to holders of Common Stock $21.78
Notes:
(1) Numbers reflect rounding.
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- -------------------------------------------------------------------------------
TRANSACTION OVERVIEW
Estimate of Stub Valuation:
DLJ common $225.0
Management common(1) 10.0
Warrants(2) -
------
Capital committed to purchase equity $235.0
Percentage of equity purchased 88.75%
Implied value of 100% of the Common Equity $264.8
Estimate of stub equity value (11.25%) $29.8
Value per existing primary share of Common Stock $1.07
LTM EBIT $66.0
Mean multiple of comparable companies 13.0x
Enterprise value $858.0
Less: Debt (625.6)
Less: Preferred (85.0)
-------
Implied value of 100% of the Common Equity $147.4
Estimate of stub equity value (11.25%) $16.6
Value per existing primary share of Common Stock $0.60
A discounted cash flow analysis and the restricted liquidity of the
stub equity was also considered
Notes:
- ------
(1) Assumes $2.5 million is financed by bank term loan.
(2) Represents 1.4 million warrants with an exercise price of $0.01 per share.
3
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- -------------------------------------------------------------------------------
TRANSACTION OVERVIEW
The merger agreement provides for a break-up fee of 3% of the equity
value of the transaction plus $5,750,000 expense reimbursement
(totaling approximately $26.7 million or $.96 per share)
A condition to the merger will be the execution by certain
significant shareholders of a voting agreement and an irrevocable
proxy relating to approximately 30% of the Common Stock which
restricts the transfer of such shares and provides that the
shareholders will vote such shares in favor of a merger with
MergerSub. The shareholders subject to such voting arrangement own
approximately 55% of the outstanding stock
<TABLE>
<CAPTION>
ESTIMATED SOURCES ESTIMATED USES
--------------------------------------------------- --------------------------------------------------------
<S> <C>
Senior Secured Debt $475 Cash Merger Payment to Primary Equity $606
Subordinated Debt 150 Cashout of options and warrants 58
Common Equity (1) 233 Roll-over Equity (Nominal Value) 34
Preferred Equity / Discount Notes 85 Refinancing of Existing Bank Debt 226
Roll-over Equity (Nominal Value) 34 Transaction Costs 40
Management Payment 13
---- ----
Total Sources $977 Total Uses $977
</TABLE>
Notes:
(1) Includes $8 million from management.
4
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- -------------------------------------------------------------------------------
TRANSACTION OVERVIEW
<TABLE>
<S> <C>
SECURED BANK CREDIT FACILITY
Committed Amount $575 million - $475 million of term loans in three tranches and a $100 million
6 year revolving credit
Collateral First priority perfected lien on all property and assets of the Company
Term A Facility $200 million with a 6 year maturity at LIBOR + 250bp (approximately 8.50%)(1)
Term B Facility $150 million with a 7 year maturity at LIBOR + 300bp (approximately 9.00%)(1)
Term C Facility $125 million with a 8 year maturity at LIBOR + 325bp (approximately 9.25%)(1)
HIGH YIELD DEBT
Security Senior Subordinated Notes
Amount $150 million
Term 10 years
Estimated Coupon 11%
PREFERRED STOCK / DISCOUNT NOTES
Security To be determined
Amount $85 million (accreting to $158.3 million in 5 years)
Estimated term 12 years
Estimated dividend / coupon 13% - 13.5%
Non-Cash Pay Period 5-6 years
WARRANTS
Security Warrants to purchase Common Stock
Amount Exercisable for 10% of the fully diluted shares of Common Stock to be outstanding
(1,417,180 shares)
Term 10 years
Estimated exercise price $.01 per share
</TABLE>
Notes:
(1) Rates are estimated. At the option of borrower, interest on the Term A, Term
B, and Term C facilities may also accrue pursuant to an Alternative Base Rate
calculated by t the lender.
5
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- -------------------------------------------------------------------------------
TRANSACTION OVERVIEW
(Amounts in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
SCHEDULED AMORTIZATION OF DEBT (1)
FISCAL YEAR ENDED JUNE 30,
1998 1999 2000 2001 2002
Year 1 Year 2 Year 3 Year 4 Year 5
----------------- ---------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
SENIOR SECURED DEBT
Term A Facility $5,000 $10,000 $20,000 $40,000 $50,000
Term B Facility 1,500 1,500 1,500 1,500 1,500
Term C Facility 1,250 1,250 1,250 1,250 1,250
----------------------------------------------------------------------------------------
TOTAL $7,750 $12,750 $22,750 $42,750 $52,750
SENIOR SUBORDINATED NOTES - - - - -
PAY-IN-KIND PREFERRED SECURITY - - - - -
----------------------------------------------------------------------------------------
TOTAL SCHEDULED AMORTIZATION OF DEBT $7,750 $12,750 $22,750 $42,750 $52,750
=========================================================================================
</TABLE>
Note:
- --------------------------------------------------------------
(1) Does not reflect the paydown of debt from excess cash flow.
6
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- -------------------------------------------------------------------------------
TRANSACTION OVERVIEW
(Amounts in thousands)
<TABLE>
<CAPTION>
CREDIT STATISTICS
FISCAL YEAR ENDED JUNE 30,
INTEREST COVERAGE RATIOS PRO FORMA 1998 1999 2000 2001 2002
- ------------------------ 1997 YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
EBITDA (1) $108,598 $124,200 $149,780 $175,100 $204,700 $231,600
Total Debt (2) 625,600 609,263 580,521 529,707 459,604 361,307
Pay-In-Kind Preferred Security 96,263 96,263 109,017 123,462 139,821 158,347
-------- -----------------------------------------------------------------
Total Debt + Pay-In-Kind Preferred Security $721,863 $705,525 $689,538 $653,169 $599,425 $519,654
TOTAL DEBT COVERAGES
- --------------------
EBITDA / Total Interest Expense 1.8x 2.1 x 2.6x 3.2x 4.1 x 5.5x
EBITDA / Senior Interest Expense 2.6x 3.0x 3.8x 4.9x 6.7x 9.9x
EBITDA / Fixed Charges (3) 1.6x 1.7x 2.1x 2.5x 3.1x 3.8x
EBITDA-CapEx / Total Interest Expense 1.6x 1.8x 2.3x 2.9x 3.8x 5.0x
EBITDA-CapEx / Senior Interest Expense 2.3x 2.7x 3.4x 4.4x 6.1x 9.1x
EBITDA-CapEx / Fixed Charges 1.4x 1.6x 1.9x 2.3x 2.8x 3.5x
LEVERAGE RATIOS
- ---------------
Total Debt / EBITDA 5.8x 4.9x 3.9x 3.0x 2.2x 1.6x
Total Debt + Pay-In-Kind Preferred / EBITDA 6.6x 5.7x 4.6x 3.7x 2.9x 2.2x
Total Debt/Capitalization 133.4% 133.7% 127.2% 117.4% 103.1% 83.9%
Total Debt+Pay-In-Kind Preferred/Capitalization 153.9% 154.9% 151.1% 144.7% 134.4% 120.7%
</TABLE>
Notes:
- -------------------------------------------------------------------------------
(1) EBITDA is comprised of EBIT plus depreciation and amortization and excludes
the amortization of repairable parts purchases. (2) Excess cash after required
scheduled amortization payments is applied pro rata to pay down term loans. (3)
Fixed Charges are comprised of total interest expense and Pay-ln-Kind Preferred
dividends.
7
<PAGE>
- -------------------------------------------------------------------------------
ISSUES FOR CONSIDERATION
- ------------------------------------------------------------------------------
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- -------------------------------------------------------------------------------
ISSUES FOR CONSIDERATION
Amount and Form of Consideration
Warrants with Nominal Exercise Price
Accretion of Preferred Stock / Discount Notes
Certainty of Financing Commitments
Terms of Lock-ups
Fiduciary Outs
Amount of Break-up Fee / Expense Reimbursement
Closing Conditions/Outs
Utilization of Leveraged Recapitalization Accounting
Degree of Leverage after Transaction
Ability to achieve business plan
Effect on customers and vendors
Valuation / Liquidity of Stub Equity
Alternative Transactions
Potential for strategic or other financial parties to emerge
Impact of inability to pool
8
<PAGE>
- -------------------------------------------------------------------------------
OVERVIEW OF DELTA
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
TRADING ANALYSIS
- -------------------------------------------------------------------------------
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- -------------------------------------------------------------------------------
STOCK TRADING ANALYSES
DELTA
GRAPHICAL MATERIAL OMITTED
The graph shows the daily stock prices and volume for the Delta
common stock for the period of April 4, 1996 to May 2, 1997
Daily Prices: April 4, 1996 to May 2, 1997
9
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- -------------------------------------------------------------------------------
STOCK TRADING ANALYSES
DELTA
GRAPHICAL MATERIAL OMITTED
The graph shows the daily stock prices and volume for the Delta
common stock for the period of October 30, 1996 to May 2, 1997
Daily Prices: October 30, 1996 to May 2, 1997
10
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- ------------------------------------------------------------------------------
STOCK TRADING ANALYSES
DELTA
Percent of Total Volume Traded at Specified Prices
April 4, 1996 to May 2, 1997
GRAPHICAL MATERIAL OMITTED
DAILY CLOSING PRICE
Graph shows 37,835,800 cumulative shares, 138% of the
27,468,000 shares outstanding as reported on 5/02/97.
11
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- ------------------------------------------------------------------------------
STOCK TRADING ANALYSES
DELTA
Percent of Total Volume Traded at Specified Prices
October 30, 1996 to May 2, 1997
GRAPHICAL MATERIAL OMITTED
DAILY CLOSING PRICE
Graph shows 12,324,400 cumulative shares, 45% of the
27,468,000 shares outstanding as reported on 5/02/97.
12
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- -----------------------------------------------------------------------------
STOCK TRADING ANALYSES
CLOSING PRICE
GRAPHICAL MATERIAL OMITTED
The graph shows the closing prices of the Delta common stock compared
to the S&P (Computer Software Services), the S&P (Composite Index)
and the Comparables for the period of April 4, 1996 to May 2, 1997
Weekly: April 4, 1996 to May 2, 1997
Comparables is a composite of: BTC, CSC, DGN, EDS, UIS, VST, WANG
Source: IDD Information Services/Tradeline
13
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- ------------------------------------------------------------------------------
STOCK TRADING ANALYSES
CLOSING PRICE
GRAPHICAL MATERIAL OMITTED
The graph shows the closing prices of the Delta common stock compared
to the S&P (Computer Software Services), the S&P (Composite Index)
and the Comparables for the period of October 30, 1996 to May 2, 1997
Weekly: October 30, 1996 to May 2, 1997
Comparables is a composite of: BTC, CSC, DGN, EDS, UIS, VST, WANG
Source: IDD Information Services/Tradeline
14
<PAGE>
- -------------------------------------------------------------------------------
ANALYST COMMENTARIES
- -------------------------------------------------------------------------------
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- -------------------------------------------------------------------------------
ANALYST COMMENTARIES
Moshe Katri, Oppenheimer & Co., Inc.
RATING STOCK PRICE TARGET STOCK PRICE LONG TERM GROWTH RATE
Market Perform $15.00 NA NA
Delta reported Q3/97 earnings per share of $0.32. While this was a 28% increase
over Q3/96 EPS of $0.25, it was one penny short of our estimate and the
Street's consensus. Although the company's Q3/97 revenues were about $6 million
above our estimates, its operating margin was 60 basis points below our
expectations. This was due to the fact that Delta's SG&A costs rose by nearly
27%.
Jeff Kessler, Lehman Brothers
RATING STOCK PRICE TARGET STOCK PRICE LONG TERM GROWTH RATE
Outperform $15.25 NA 15.0%
Delta reported EPS of $0.32, slightly ahead of our estimate of $0.31 on better
than expected gross margins despite reporting revenues of $205.1 million that
were slightly below our estimate of $207.0 million. With the exception of the
amortization of goodwill which, at $6.4 million, was ahead of our estimate of
$5.8 million as a result of the Memorex-Telex acquisition, the reported figures
were within $0.3 of estimates, indicating that Delta has found its base and
should be able to grow its business from this new base. As evidence of this,
revenues grew at 18.8% over last year while operating income and EPS grew at
29.2% and 27.4% respectively.
Also of importance, Delta has begun to market several branded service offerings
aimed at providing bundled packages of hardware/ software/network services to
customers. We believe that these products will ultimately give Delta the
opportunity to sell more value added, higher margin services to their customers.
Barry Bosak, Smith Barney Inc.
RATING STOCK PRICE TARGET STOCK PRICE LONG TERM GROWTH RATE
Buy / High Risk $15.00 $20.00 15.0%
Delta's 3Q (numbers) began to show progress we wanted to see. Management had
pointed to recovery in 3Q and 4Q after the stumble in 1Q. This is occurring for
two reasons--better revenues and higher gross margins. There is apparently
improved efficiency with the field service force--faster response, shorter
learnin curve, quicker solutions, etc.
We sense the renewed excitement at the company after seven months of rebuilding
some of the infrastructure needed for new and old services.
15
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- -------------------------------------------------------------------------------
ANALYST COMMENTARIES
Daniel Kunsler, J.P. Morgan Securities
RATING STOCK PRICE TARGET STOCK PRICE LONG TERM GROWTH RATE
Buy $15.00 $22.00 NA
The entire tone of the business appears to be building on the improvement noted
in the December quarter. Service contract activity has intensified with
significant wins from Amerada Hess, Novacare, Electronic Data Systems,
Consolidated Freightways, and Travelers, as well as a field warranty agreement
with Apple Computer.
The likely sources of gross margin improvement are process improvements
resulting in more revenues per field service employee, as well as through the
effect of a shifting product mix toward automatic offerings such as help desk.
Delta's earnings of $0.32 were a penny shy of out estimate and the consensus of
$0.33. We should add that there was no "whisper" of anything higher, with the
street essentially electing to hold Delta's feet to the fire. By any absolute
measure, this was a very good quarter and the company appears to be delivering
on its promise of building a consistent, predictable business model.
We come away from the quarter even more confident in our BUY recommendation and
$22 target.
Moshe Katri, Oppenheimer & Co.
RATING STOCK PRICE TARGET STOCK PRICE LONG TERM GROWTH RATE
Market Perform $15.00 NA NA
We are adjusting our EPS estimate for FY 1997 downward from $1.20 to $1.12. The
adjustment reflects the Company's inability to accelerate its top-line growth.
This is especially true this fiscal year, which has been impacted by a business
erosion rate of roughly 3%. On the other hand, management indicated internal
top-line growth of roughly 6% and additional revenues from the acquisition of
Memorex Telex. Nonetheless, these results do not compare favorably industry
peers. Given these results, we continue to advise caution.
16
<PAGE>
- -------------------------------------------------------------------------------
VALUATION ANALYSIS
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
VALUATION SUMMARY
- -------------------------------------------------------------------------------
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- ------------------------------------------------------------------------------
VALUATION SUMMARY GRAPH - DELTA
GRAPHICAL MATERIAL OMITTED
The graph summarizes the Comparable Company Evaluation, the Precedent
Transaction Analysis and the Discounted Cash Flow Analysis
17
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- ------------------------------------------------------------------------------
VALUATION SUMMARY - DELTA
(Dollars in Millions, Except Per Share Data)
COMPARABLE PUBLIC COMPANY VALUATION
<TABLE>
<CAPTION>
IMPLIED
DELTA
FINANCIAL MULTIPLE ADJ. MULTIPLE RANGE (2) ENTERPRISE VALUE EQUITY VALUE PER SHARE (3)
---------------------- ---------------- ------------ -------------
STATISTIC @ $22.50 LOW HIGH LOW HIGH LOW HIGH LOW HIGH
--------- -------- --- ---- --- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LTMEBITDA(1) $101.4 9.2 x 6.0 x 7.4 x $611.4 $747.3 $364.9 $500.7 $12.02 $16.49
CY 1997E EBITDA (1) 116.4 8.0 5.0 6.1 576.2 704.2 329.6 457.6 10.86 15.07
LTM EBIT 66.0 14.1 11.7 14.3 772.0 943.6 525.4 697.0 17.31 22.96
CY 1997E EBIT 77.9 11.9 8.4 10.2 651.8 796.6 405.2 550.0 13.35 18.12
LTM Net Income 30.2 22.6 17.1 20.9 -- -- 517.2 632.1 17.04 20.82
CY 1997E Net Income 37.6 18.1 16.0 19.6 -- -- 603.0 737.0 19.86 24.28
CY 1998E Net Income 50.3 13.6 10.3 12.5 -- -- 516.4 631.1 17.01 20.79
VALUATION RANGE $15.35 $19.79
</TABLE>
Notes:
(1) EBITDA represents earnings before interest, taxes, depreciation, and
amortization (other than amortization of repairables). (2) Reflects mean
multiples of comparable public companies plus / minus 10%. See Tab A for
details.
(3) Based on equily value divided by 30.357 fully diluted shares.
18
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- ------------------------------------------------------------------------------
VALUATION SUMMARY - DELTA
(Dollars in Millions, Except Per Share Data)
<TABLE>
<CAPTION>
PRECEDENT TRANSACTIONS -- PRECEDENT MULTIPLES
IMPLIED DELTA ADJ. MULTIPLE RANGE (1) ENTERPRISE VALUE EQUITY VALUE PER SHARE (2)
FINANCIAL MULTIPLE ----------------------- ---------------- ----------- --------------
LTM(3) STATISTIC @ $22.50 LOW HIGH LOW HIGH LOW HIGH LOW HIGH
- ----------------- --------- -------- --- ---- --- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EBITDA (4)(5) $101.4 9.2 x 8.7 x 10.7 x $885.2 $1,081.9 $638.6 $835.4 $21.04 $27.52
EBIT (4) 66.0 14.1 14.5 17.7 956.1 1,168.6 709.5 922.0 23.37 30.37
</TABLE>
<TABLE>
<CAPTION>
PRECEDENT TRANSACTIONS -- PREMIUM PAID ANALYSIS
PREMIUM PER SHARE (2)
------------------ ------------------
LOW HIGH LOW HIGH
--- ---- --- ----
<S> <C> <C> <C> <C>
Current Market Price $16.50 25.0% 35.0% $20.63 $22.28
</TABLE>
PREMIUM TO RECENT MARKET VALUES
MARKET PREMIUM
PRICE @ $22.50
----- --------
Current $16.50 36.4%
Prior Week Average 15.43 45.8%
One Month Average 15.31 47.0%
Two Month Average 15.48 45.4%
VALUATION RANGE $21.68 $26.72
Notes:
(1) Reflects mean multiples of precedent transactions plus / minus 10%. See
Tab B for details.
(2) Based on equity value divided by 30.357 fully diluted shares.
(3) LTM based on 12/31/96 results.
(4) Excludes restructuring charge of $3.6 million.
(5) EBITDA represents earnings before interest, taxes, depreciation and
amortization (other than amortization of repairables).
19
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- ------------------------------------------------------------------------------
DISCOUNTED CASH FLOW ANALYSIS: DELTA
(Amounts in thousands, except for per share data)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JUNE 30,
-----------------------------------------------
PROJECTED
----------------------------------------------- NORMALIZED
1998 1999 2000 2001 2002 CASH
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 FLOW
------ ------ ------ ------ ------ ----
<S> <C> <C> <C> <C> <C> <C>
EBIT $84,000 $ 108,180 $ 132,000 $ 158,800 $ 182,600 $ 182,600
Less: Cash Taxes (25,200) (37,863) (46,200) (55,580) (63,910) (63,910)
-------------------------------------------------------------
PRO FORMA AFTER-TAX OPERATING INCOME 58,800 70,317 85,800 103,220 118,690 118,690
Plus: Depreciation and Amortization 40,200 41,600 43,100 45,900 49,000 49,000
Less: (Increase)/Decrease in Working Capital (9,122) (4,631) (1,602) (2,152) (2,588) (2,588)
Less: Capital Expenditures (13,000) (14,300) (15,700) (17,300) (19,000) (19,000)
Less: Cash in excess of Repairable Parts Purchases Amortization (5,700) (11,100) (9,900) (12,100) (5,100) (5,100)
-------------------------------------------------------------
FREE CASH FLOW $71,178 $81,886 $ 101,698 $ 117,568 $ 141,002 $ 141,002
=============================================================
</TABLE>
<TABLE>
<CAPTION>
------------------------------------- ----------------------------------------
DISCOUNTED TERMINAL VALUE TOTAL ENTERPRISE VALUE
2002 EBITDA MULTIPLES 2002 EBITDA MULTIPLES
5.0X 6.0X 7.0X 5.0X 6.0X 7.0X
------------ ------------ ------------ ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DISCOUNT RATE: 14.0% $601,429 $721,715 $842,000 14.0% $938,359 $1,058,645 $1,178,931
15.0% 575,731 690,877 806,023 15.0% 903,733 1,018,879 1,134,025
16.0% 551,339 661,607 771,874 16.0% 870,772 981,040 1,091,307
------------ ------------ ------------ ------------ -------------- -------------
Less: Pro Forma Debt Outstanding ($226,000) ($226,000) ($226,000)
Plus: Cash 11,000 11,000 11000
------------ -------------- -------------
Adjustments to Total Enterprise Value ($215,000) ($215,000) ($215,000)
IMPLIED EQUITY VALUE
2002 EBITDA MULTIPLES
5.0X 6.0X 7.0X
------------ -------------- -------------
DISCOUNT RATE: 14.0% $723,359 $843,645 $963,931
15.0% 688,733 803,879 919,025
16.0% 655,772 766,040 876,307
------------ -------------- -------------
IMPLIED EQUITY VALUE PER SHARE
2002 EBITDA MULTIPLES
5.0X 6.0X 7.0X
------------ -------------- -------------
DISCOUNT RATE: 14.0% $24.14 $28.15 $32.17
15.0% $22.98 $26.83 $30.67
16.0% $21.88 $25.56 $29.24
------------ -------------- -------------
</TABLE>
20
<PAGE>
- -------------------------------------------------------------------------------
VALUATION MATRIX
- -------------------------------------------------------------------------------
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- ------------------------------------------------------------------------------
VALUATION MATRIX - DELTA
(Dollars in Millions, Except Per Share Dara)
<TABLE>
<CAPTION>
ESTIMATED CONSIDERATION PER SHARE
---------------------------------
<S> <C> <C> <C>
Estimated Consideration Per Share $22.00 $22.50 $23.00
Premium to Market Price ($16.50) 33.3% 36.4% 39.4%
Fully Diluted Shares Outstanding 30.4 30.4 30.4
Equity Value $667.9 $683.0 $698.2
Plus: Debt (1) 3/31/97E 259.5 259.5 259.5
Less: Cash 3/31/97E (12.9) (12.9) (12.9)
Enterprise Value $914.4 $929.6 $944.8
-------------------------- ------------------------
Financial ENTERPRISE COMPARABLE PRECEDENT
Statistic VALUE/ COMPANIES TRANSACTIONS
------------------------------------ ------------------------- ------------------------
CYE Dec. 30, RANGE RANGE
EBITDA LTM $101.4 9.0 x 9.2 x 9.3 x 6.0 x - 7.4x 8.7x - 10.7x
1997E 116.4 7.9 8.0 8.1 5.0 - 6.1 --- - ---
EBIT LTM $66.0 13.9 x 14.1 x 14.3 x 11.7 - 14.3x 14.5x - 17.7x
x
1997E 77.9 11.7 11.9 12.1 8.4 - 10.2 --- - ---
NET EQUITY
VALUE/
------------------------------------
NET LNCOME LTM $30.2 22.1 x 22.6 x 23.1 x 17.1 - 20.9x
x
1997E 37.6 17.7 18.1 18.6 16.0 - 19.6
1998E 50.3 13.3 13.6 13.9 10.3 - 12.5
</TABLE>
Notes:
(1) Includes liability of approximately $12.8 million for management payments.
21
<PAGE>
- -------------------------------------------------------------------------------
COMPARABLE COMPANY ANALYSIS
- -------------------------------------------------------------------------------
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- ------------------------------------------------------------------------------
COMPARABLE COMPANY ANALYSIS OF SELECTED COMPUTER SERVICES FIRMS
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Adjusted Total
Financial Price Market Market Debt/ Latest 12 Months EBITDA EBIT
COMPANY Ticker Data 5/2/97 Value Value(1) Book Cap Revenues EBITDA EBIT Margin Margin
------- ------ ---- ------ ----- -------- -------- --------- ------ ---- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BancTec, Inc. BTC Dec-96 $23.75 $516.4 $597.6 34.6% $554.0 $101.9 $64.1 18.4% 11.6%
Computer Sciences Corp CSC Dec-96 66.88 5,312.4 6,377.3 41.8% 5,373.3 668.9 349.3 12.4% 6.5%
Data General Corporation DGN Dec-96 20.00 866.8 832.3 30.5% 1,343.1 146.3 42.5 10.9% 3.2%
Electronic Data EDS Dec-96 37.13 18,085.820,021.231.8% 14,441.32,766.41,585.6 19.2% 11.0%
Systems Corp.
Unisys UIS Dec-96 6.13 1,071.0 3,897.5 56.6% 6,370.5 657.1 327.4 10.3% 5.1%
Corporation
Vanstar VST Jan-97 8.25 366.6 576.3 5.4% 2,116.0 107.4 92.3 5.1% 4.4%
Corporation
Wang Laboratories, Inc. WANG Dec-96 18.13 673.5 988.8 28.8% 1,187.5 132.7 23.1 11.2% 1.9%
Mean: 32.8% 12.5% 6.2% 0.86x
Median: 31.8% 11.2% 5.1% 0.83
DELTA MAR-97 $16.50 $482.1 $715.8 55.1% $743.8 $101.4 $66.0 13.6% 8.9% 0.96X
<CAPTION>
Multiples of AMV Three Year
Latest 12 Months LTM Historical Growth Rates
COMPANY Revenue EBITDA EBIT P/E Revenues EBITDA EBIT Net
------- ------- ------ ---- --- ------- ------ ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BancTec, Inc. 1.08x 5.9x 9.3x 13.9x NM NM NM NM
Computer Sciences Corp 1.19 9.5x 18.3x 27.9 24.1% 29.9% 28.3% 25.5%
Data General Corporation 0.62 5.7x 19.6x 25.6 8.6% 54.5% NM NM
Electronic Data 1.39 7.2x 12.6x 19.4 19.3% 16.8% 12.6% 8.8%
Systems Corp.
Unisys 0.61 5.9x 11.9x NM 2.2% (13.2%)(15.4%) NM
Corporation
Vanstar 0.27 5.4x 6.2x 8.0 NM NM NM NM
Corporation
Wang Laboratories, Inc. 0.83 7.5x 42.8x NM 12.9% 24.5% 11.2% NM
Mean: 6.7x 13.0x 19.0x 13.4% 22.5% 9.2% 17.2%
Median:5.9x 12.3x 19.4 12.9% 24.5% 11.9% 17.2%
DELTA 7.1X 10.8X 15.9X 67.9% 49.4% 73.1% 91.3%
</TABLE>
(1) Adjusted market value is defined as market value of the common equity plus
net debt (total debt less cash) plus book value of preferred stock.
Note: Restructuring charges and extraordinary items are excluded.
Outliers are in italics and are excluded from all summary calculations.
22
<PAGE>
PROJECT DELTA
CONFIDENTIAL May 1997
- ------------------------------------------------------------------------------
COMPARABLE COMPANY ANALYSIS OF SELECTED COMPUTER SERVICES FIRMS
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Multiples of
AMV
Projected Implied Projected Projected
Calendar 1997 96-'97 Growth Margins 1997 Calendar EPS (1)
------------------------- --------------------- ----------- -------- ------------------
COMPANY Ticker Revenues EBITDA(2) EBIT Revenues EBITDA EBIT EBITDA EBIT Revenues EBITDA EBIT 1996A 1997 1998
------- ------ -------- -------- --- -------- ---- ---- ------ ---- -------- ------ ---- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BancTec, BTC $600.7 $113.5 $72.5 8.4% 11.4% 13.1% 18.9% 12.1% 0.99x 5.3x 8.2x $1.77 $2.03 $2.31
Inc.
Computer CSC 6,379.1 1,106.1 743.1 18.7% 65.4% 112.7% 17.3% 11.6% 1.00 5.8x 8.6x 2.81 3.30 3.82
Sciences
Corp.
Data DGN 1,559.5 189.0 68.5 16.1% 29.2% 61.2% 12.1% 4.4% 0.53 4.4x 12.2x 0.80 1.21 NA
General
Corporation
Electronic EDS 16,136.5 3,208.7 1,889.3 11.7% 16.0% 19.2% 19.9% 11.7% 1.24 6.2x 10.6x 2.07 2.38 2.73
Data
Systems
Corp.
Unisys UIS 6,662.6 819.1 494.1 4.6% 24.7% 50.9% 12.3% 7.4% 0.58 4.8x 7.9x (0.33) 0.39 0.68
Corporation
Vanstar VST 2,335.8 90.5 72.8 10.4% (15.7%)(21.1%) 3.9% 3.1% 0.25 6.4x 7.9x 0.73 1.01 1.27
Corporation
Wang WANG 1,372.2 179.0 104.8 15.5% 34.9% 353.5% 13.0% 7.6% 0.72 5.5x 9.4x 0.26 0.50 NA
Laboratories,
Inc.
Mean: 13.9% 8.3% 0.76x 5.5x 9.3x
Median: 13.0% 7.6% 0.72 5.5x 8.6x
DELTA $828.1 $197.9 $99.5 11.3% 95.2% 50.8% 23.9% 12.0% 0.86X 3.6X 7.2X $1.15 $1.27 NA
<CAPTION>
Proj. 5 '97 '98
Implied Calendar Year P/E P/E
EPS P/E Multiples Proj. as % as %
Growth ----------------- EPS of of
COMPANY '96-'97 1996A 1997 1998 Growth Gr. Gr.
------- ------- ---- ---- ---- ------ --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
BancTec, 14.7% 13.4x 11.7x 10.3x 12.3% 95.1% 83.6%
Inc.
Computer 17.5% 23.8 20.2 17.5 17.9% 113.1% 97.8%
Sciences
Corp.
Data 51.4% 25.1 16.6 NA 12.5% 132.5% NA
General
Corporation
Electronic 15.0% 17.9 15.6 13.6 14.9% 104.7% 91.3%
Data
Systems
Corp.
Unisys NM (18.6) 15.7 9.0 4.8% 327.2% 187.7%
Corporation
Vanstar 37.9% 11.3 8.2 6.5 20.0% 41.0% 32.5%
Corporation
Wang 90.4% 69.7 36.6 NA 18.8% 194.8% NA
Laboratories,
Inc.
Mean: 37.8% 20.4x 17.8x 11.4x 14.5% 144.1% 98.6%
Median: 27.7% 17.9 15.7 10.3 14.9% 113.1% 91.3%
DELTA 10.5% 14.4X 13.0X NA 17.5% 74.5% NA
</TABLE>
(1) Adjusted market value is defined as market value of the common equity plus
net debt (total debt less cash) plus book value of preferred stock. (2) When
not available, projected D&A calculated based on LTM D&A as a % of LTM
revenues applied to projected revenues. Note: Restructuring charges and
extraordinary items are excluded.
23
<PAGE>
----------------------------------------
PRECEDENT TRANSACTION ANALYSIS
----------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Project Delta
CONFIDENTIAL May 1997
- --------------------------------------------------------------------------------------------
SELECTED ACQUISITIONS IN THE COMPUTER SERVICES INDUSTRIES
(dollars in thousands, except per share data)
Purchase Price / LTM:
----------------------------------
Date Purchase Net Tang. Cash
Ann. Target/Acquiror Price Income Bk. Value Flow
- -------- ---------------------------- --------- -------- --------- -------
<S> <C> <C> <C> <C> <C>
10/17/96 Triad Systems Corp. / Hicks, $193,100 30.6 x NM x NA x
Muse, & Cooperative
Computing
07/24/96 I-NET / Wang Laboratories, 166,700 NM NM NM
Inc.
06/05/96 The Genix Group (MCN Corp.) / 109,000 NA NA NA
Affiliated Computer
Services
05/20/96 AmeriData Technologies Inc. / 490,000 25.6 1.8 5.9
GE Capital Services
05/11/96 NCS Financial Systems / 95,000 NM 5.8 NA
SunGuard Data Systems Inc.
04/24/96 Dataflex - Certain Assets / 42,000 NA NA NA
Vanstar Corp
04/10/96 Dataserv Inc. / Wang 28,500 NA NA NA
Laboratories, Inc.
04/03/96 Trecom Business Systems, Inc. 145,000 NA NA NA
/ Amdahl Corporation
10/23/95 Decision Servcom Inc. / 250,000 115.3* 1.3 NA
Business Sys. Serv. (Bell
Atlantic)
09/13/95 DMR Group Inc. Amdahl 139,000 37.9 4.1 NA
Corporation
05/08/95 GE Capital Systems Support 75,000 (a) NA NA NA
Svc. / International
Business Machines
08/15/94 Assets of Groupe Bull S.A. / $160,300 NA 2.7 NA
Wang Laboratories, Inc.
<CAPTION>
Transaction Value / LTM:
-----------------------------------------------
Date Enterprise EBITDA
Ann. Value Revenue EBITDA EBIT - CapEx
- -------- ---------- --------- ------- ------ -------
<C> <C> <C> <C> <C> <C>
10/17/96 $244,000 1.4 x 10.9 x 18.5 x NA x
07/24/96 206,700 0.6 NM NM NM
06/05/96 137,500 1.3 9.2 17.2 NA
05/20/96 800,650 0.5 11.3 13.4 18.9
05/11/96 96,300 1.6 6.5 9.9 NA
04/24/96 42,000 0.3 NA NA NA
04/10/96 28,500 0.3 NA NA NA
04/03/96 145,000 1.0 NA NA NA
10/23/95 250,000 0.5 NA 24.8 NA
09/13/95 140,400 0.7 11.3 17.2 NA
05/08/95 75,000 (a) 0.4 NA NA NA
08/15/94 143,100 0.3 NA 17.0 NA
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Project Delta
CONFIDENTIAL May 1997
- ---------------------------------------------------------------------------------------
SELECTED ACQUISITIONS IN THE COMPUTER SERVICES INDUSTRIES
(dollars in thousands, except per share data)
Purchase Price / LTM:
----------------------------------
Date Purchase Net Tang. Cash
Ann. Target/Acquiror Price Income Bk. Value Flow
- -------- -------------------- ----------- ------ --------- ------
<S> <C> <C> <C> <C> <C>
10/20/93 Future Now Inc. / $84,808 (b) 11.4 x 1.3 x 7.9 x
Intelligent
Electronics Inc.
05/05/92 TRW Inc.-Customer 100,000 NA NA NA
Service /
ComputerLand Corp
<CAPTION>
Transaction Value / LTM:
--------------------------------------------------
Date Enterprise EBITDA
Ann. Value Revenue EBITDA EBIT - CapEx
- -------- ---------- ------- ------ ---- --------
<C> <C> <C> <C> <C> <C>
10/20/93 $159,203 0.3 x 9.0 x 11.0 x 10.6 x
05/05/92 100,000 0.9 NA NA NA
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MAXIMUM 37.9 x 5.8 x 7.9 x 1.60 x 11.3 x 24.8 x 18.9 x
MEAN 26.4 2.8 6.9 0.73 9.7 16.1 14.7
MEDIAN 28.1 2.2 5.9 0.56 9.2 17.1 10.6
MINIMUM 11.4 1.3 5.9 0.29 6.5 9.9 10.6
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
NOTES
- ---------
Neither entries which are marked with an asterisk nor entries showing 'NA' or
'NM' are used to calculate summary multiples.
(a) Midpoint of estimate range
(b) Implied purchase price. Intelligent Electronics raised its stake in Future
Now from 24% to 31.1% by purchasing newly issued shares.
25
<PAGE>
--------------------------------
PREMIUMS PAID ANALYSIS
--------------------------------
<PAGE>
<TABLE>
<CAPTION>
PROJECT DELTA
CONFIDENTIAL May 1997
- ---------------------------------------------------------------------------------------------------------------
PREMIUMS PAID ANALYSIS - TRANSACTION VALUES BETWEEN $800 MILLION AND $1 BILLION
(DOLLARS IN MILLIONS)
Date Transaction Equity Price Per
Ann. Target Name Acquiror Name Value Value Share
- -------- ---------------------------- ------------------------------ ----------- ------ ---------
<C> <C> <C> <C> <C> <C>
04/21/97 Goulds Pumps Inc ITT Industries Inc $940.4 $801.2 $37.00
04/16/97 Pharmacy Corp of America Inc Capstone Pharmacy Services Inc 862.5 NA ---
04/14/97 Total Petroleum(North Amer) Ultramar Diamond Shamrock 822.8 386.8 9.94
Ltd
04/11/97 AT&T Submarine Systems Inc Tyco International Ltd 850.0 NA ---
04/07/97 Pure Atria Corp Rational Software Corp 839.8 850.8 21.04
03/14/97 Security Capital, Milwaukee, Marshall & Ilsley, Milwaukee, 917.4 917.4 92.00
WI WI
03/12/97 National Education Corp Sylvan Learning Systems Inc 846.9 769.4 20.37
02/27/97 Collective Bancorp, New Summit Bancorp, Princeton, NJ 916.1 913.9 44.08
Jersey
02/24/97 EchoStar Communications Corp News Corp Ltd 1000.0 NA ---
02/24/97 Chubb Life Insur Co of Jefferson-Pilot Corp 875.0 NA ---
America
01/16/97 Wellsford Residential Ppty Tr Equity Residential Pptys Trust 945.2 462.2 27.03
01/15/97 Value Health Inc Columbia/HCA Healthcare Corp 971.1 1,149.9 20.50
01/07/97 American Medical Response Inc MedTrans Inc(Laidlaw Inc) 922.1 878.7 40.00
01/06/97 Environmental Services Rollins Environmental Services 990.0 NA ---
11/22/96 Thompson Miniwax Holding Corp Sherwin-Williams Co 830.0 NA ---
11/18/96 Tyco Toys Inc Mattel Inc 961.0 849.6 12.16
11/07/96 Alamo Rent-A-Car Inc Republic Industries Inc 815.0 NA ---
11/04/96 United Carolina Bancshares Southern Natl, Winston-Salem, 977.1 977.1 40.01
NC
11/04/96 Mellon Bank-50 Amer Auto Assn PNC Bank Corp 887.9 NA ---
10/29/96 Carter-Wallace Inc Investor 941.4 679.2 20.00
10/28/96 Mark Twain Bancshares, MO Mercantile Bancorp, St Louis, 817.4 836.0 49.50
MO
10/23/96 Conrail Inc Norfolk Southern Corp 943.0 9,323.1 115.00
10/07/96 Resort Condominiums Intl. Inc HFS Inc 825.0 NA ---
09/09/96 ShopKo Stores Inc Phar-Mor Inc 938.7 640.7 19.50
08/26/96 American Travellers Corp Conseco Inc 954.3 882.7 36.91
08/15/96 Spaiding & Evenflo(Cisneros) Kohlberg Kravis Roberts & Co 912.0 NA ---
06/26/96 Kemet Corp Vishay Intertechnology Inc 929.1 830.3 22.00
06/25/96 Heine Securities Corp Franklin Resources Inc 805.8 NA ---
06/12/96 USL Capital Corp-Vehicle Associates First Capital Corp 901.0 NA ---
Fleet
06/06/96 Atria Software Inc Pure Software Inc 925.9 936.7 61.01
06/03/96 Avis Inc HFS Inc 800.0 NA ---
05/31/96 Cajun Elec Power-Non-Nuclear Southwestern Electric Power Co 900.0 NA ---
05/23/96 USL Capital-Rail Services First Union Rail(First Union) 957.0 NA ---
05/09/96 Transok Inc Tejas Gas Corp 890.0 NA ---
03/29/96 Western Forestlands (IP) R-F Timber Co 905.0 NA ---
03/29/96 MediSense Inc Abbott Laboratories 801.7 817.3 45.00
03/21/96 Masco Home Furnishings(Masco) Furnishings International Inc 1000.0 NA ---
03/08/96 TKR Cable Co Tele-Communications Inc 843.0 NA ---
03/07/96 Choice Hotels International Shareholders $908.0 $908.0 $14.50
<CAPTION>
Date Premium Prior to Announcement Date (%) Form of
Ann. 1 day 1 week 4 weeks Acquisition
- -------- --------- ---------- ----------- -----------
<C> <C> <C> <C> <C>
04/21/97 61.7 57.4 60.9 Merger
04/16/97 Merger
04/14/97 -1.8 -0.6 0.7 Merger
04/11/97 Acq. of Assets
04/07/97 18.5 23.3 23.8 Merger
03/14/97 8.9 9.9 15.9 Merger
03/12/97 19.0 49.5 35.8 Merger
02/27/97 15.6 22.9 29.6 Merger
02/24/97 Acq. Maj. Int.
02/24/97 Acq. of Assets
01/16/97 7.6 9.2 9.8 Merger
01/15/97 1.2 0.6 Merger
01/07/97 21.2 23.1 36.8 Merger
01/06/97 Acq. of Assets
11/22/96 Acq. of Assets
11/18/96 73.7 80.1 94.5 Merger
11/07/96 Merger
11/04/96 45.5 60.0 68.5 Merger
11/04/96 Acq. of Assets
10/29/96 68.4 68.4 60.0 Merger
10/28/96 16.8 17.2 17.5 Merger
10/23/96 62.0 60.3 60.3 Acq. Part.
Int.
10/07/96 Acq. of Assets
09/09/96 20.0 27.9 33.3 Merger
08/26/96 30.1 37.4 81.2 Merger
08/15/96 Merger
06/26/96 30.4 35.4 -1.1 Merger
06/25/96 Acq. of Assets
06/12/96 Acq. of Assets
06/06/96 -2.8 -5.8 8.9 Merger
06/03/96 Merger
05/31/96 Acq. of Assets
05/23/96 Acq. of Assets
05/09/96 Acq. of Assets
03/29/96 Acq. Maj. Int.
03/29/96 48.8 48.8 39.0 Merger
03/21/96 Acq. of Assets
03/08/96 Acq. Rem. Int.
03/07/96 Acquisition
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
PROJECT DELTA
CONFIDENTIAL May 1997
- --------------------------------------------------------------------------------------------------------------
PREMIUMS PAID ANALYSIS - TRANSACTION VALUES BETWEEN $800 MILLION AND $1 BILLION
(DOLLARS IN MILLIONS)
Date Transaction Equity Price Per
Ann. Target Name Acquiror Name Value Value Share
- -------- ----------------------------- ----------------------------- ----------- ------ ---------
<C> <C> <C> <C> <C> <C>
03/05/96 Barrett Banks-Mortgage Svc HomeSide Lending Inc $879.1 NA ---
02/20/96 Sierra On-Line Inc CUC International Inc 902.8 972.6 45.93
02/16/96 Circle K Corp Tosco Corp 954.2 790.4 30.81
02/15/96 Journal Communications Inc Undisclosed Acquiror 1,00.0 NA 70.00
02/14/96 Helene Curtis Industries Inc Unilever NV 838.4 479.6 70.00
02/07/96 Pyxis Corp Cardinal Health Inc 871.5 905.9 24.14
01/09/96 AC Nielsen Co Shareholders 886.8 886.8 15.63
12/26/95 Life Insurance Co of Virginia General Electric Capital Corp 960.0 NA ---
11/30/95 PYA/Monarch Inc(Sara Lee Corp) JP Foodservice Inc 943.6 NA ---
09/29/95 Prudential Reinsurance Hldgs Investors 837.5 NA ---
09/28/95 Bank of California Union Bank San Francisco CA 804.5 NA ---
09/13/95 Mobile Commun Corp of America MobileMedia Corp 930.0 NA ---
08/17/95 Rockefeller Center Properties Investor Group 975.0 NA ---
08/07/95 Kraft General Foods-Baking Div CPC International Inc 865.0 NA ---
07/17/95 Automotive Industries Holding Lear Seating Corp 815.4 587.4 33.50
06/08/95 National Medical Care Inc Investor Group 800.0 NA ---
05/15/95 Foothill Group Inc Norwest Corp, Minneapolis, MN 910.2 426.8 25.99
04/12/95 Six Flags Theme Parks Inc Investor Group 1,000.0 NA ---
03/31/95 Continental Medical Systems Horizon Healthcare Corp 903.9 577.3 14.98
03/24/95 National Car Rental System Inc NCR Acquisition Corp 1,000.0 NA ---
03/23/95 Sammons Commun-Remaining Cable Investor Group 800.0 NA ---
03/20/95 Unisys Corp-Defense Electn Bus Loral Corp 862.0 NA ---
03/10/95 Sammons Commun-Certain Cable Investor Group 962.5 NA ---
03/06/95 Texasgulf Inc(Elf Aquitaine) Potash Corp of Saskatchewan 835.0 NA ---
03/02/95 Abbey Healthcare Group Inc Homedco Group Inc 863.7 651.7 60.90
02/28/95 National Gypsum Co BPB Industries PLC 963.0 980.2 48.50
02/13/95 Interface Grp-Exhibition Unit Softbank Corp 800.0 NA ---
<CAPTION>
Date Premium Prior to Announcement Date (%) Form of
Ann. 1 day 1 week 4 weeks Acquisition
- -------- --------- ---------- ----------- --------------
<S> <C> <C> <C> <C>
03/05/96 Acq. of Assets
02/20/96 69.3 71.7 90.4 Merger
02/16/96 45.8 42.5 68.8 Merger
02/15/96 Merger
02/14/96 18.6 30.2 71.8 Merger
02/07/96 53.3 60.9 66.5 Merger
01/09/96 Acquisition
12/26/95 Acq. of Assets
11/30/95 Acq. of Assets
09/29/95 Acquisition
09/28/95 Merger
09/13/95 Merger
08/17/95 Merger
08/07/95 Acq. of Assets
07/17/95 3.9 10.7 45.7 Merger
06/08/95 Merger
05/15/95 11.2 13.0 23.8 Merger
04/12/95 Acq. Maj. Int.
03/31/95 110.2* 135.0* 121.9* Merger
03/24/95 Acq. of Assets
03/23/95 Acq. of Assets
03/20/95 Acq. of Assets
03/10/95 Acq. of Assets
03/06/95 Merger
03/02/95 118.5* 118.5* 118.5* Merger
02/28/95 48.1 42.6 38.6 Merger
02/13/95 Acq. of Assets
</TABLE>
- ------------------------------------------------------------------------------
Mean 30.6% 34.5% 43.2%
Median 20.6% 32.8% 37.7%
High 73.7% 80.1% 94.5%
Low -2.8% -5.8% -1.1%
- ------------------------------------------------------------------------------
* Denotes Outliers
Source: Securities Data Company Inc.
27
<PAGE>
--------------------------------------------
COMPANY PROJECTIONS -- STAND ALONE
--------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
PROJECT DELTA
CONFIDENTIAL STAND-ALONE SCENARIO May 1997
- -----------------------------------------------------------------------------------------------------------------------------------
HISTORICAL AND PROJECTED FINANCIAL STATEMENTS: DELTA
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATE)
INCOME STATEMENTS
Fiscal Years Ended June 30,
---------------------------------------------------------------------------------------------------
Historical Projected
----------------------------------------- -------------------------------------------------------
1994 1995 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES $108,416 $163,020 $540,191 $783,251 $873,000 $960,300 $1,056,300 $1,162,000 $1,278,200
Cost of Revenues 76,980 113,483 402,316 581,167 634,700 690,020 757,900 829,300 916,700
GROSS PROFIT 31,436 49,537 137,875 202,084 238,300 270,280 298,400 332,700 361,500
Operating Expenses:
S,G&A 16,474 21,982 69,237 106,986 127,800 134,500 137,600 143,900 147,700
Amortization of Intangibles 2,448 6,776 15,673 23,357 26,500 27,600 28,800 30,000 31,200
Total Operating Expenses 18,922 28,758 84,910 130,343 154,300 162,100 166,400 173,900 178,900
OPERATING INCOME 12,514 20,779 52,965 71,741 84,000 108,180 132,000 158,800 182,600
Interest Expense 4,847 2,468 14,714 14,743 13,166 9,762 5,263 1,322 0
Interest Income 0 0 0 0 (460) (480) (480) (1,662) (5,374)
PRETAX INCOME 7,667 18,311 38,251 56,998 71,294 98,898 127,217 159,140 187,974
Income Taxes (755) 7,324 15,307 23,903 29,230 40,548 52,159 65,248 77,070
NET INCOME AVAILABLE TO COMMON $8,422 $10,987 $22,944 $33,095 $42,063 $58,350 $75,058 $93,893 $110,905
EARNINGS PER SHARE $0.37 $0.47 $0.90 $1.10 $1.40 $1.94 $2.50 $3.13 $3.70
Fully-Diluted Shares Outstanding 22,595 23.149 25,430 30,000 30,000 30,000 30,000 30,000 30,000
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
PROJECT DELTA
CONFIDENTIAL STAND-ALONE SCENARIO May 1997
- ----------------------------------------------------------------------------------------------------------------------------------
HISTORICAL AND PROJECTED FINANCIAL STATEMENTS: DELTA
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATE)
BALANCE SHEETS: DELTA
AS OF JUNE 30, AS OF JUNE 30,
HISTORICAL PROJECTED
--------------------------------- ----------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002
---------- ---------- ----------- ------------ ----------- ----------- --------- -----------
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and Cash Equivalents $2,659 8,221 $11,000 $12,000 $12,000 $12,000 $71,114 $197,609
Accounts Receivable 27,758 92,650 128,000 131,548 144,703 159,168 175,096 192,605
Inventories 4,024 30,130 36,000 37,386 41,590 45,682 49,985 55,253
Other 9,266 12,770 8,000 7,857 8,643 9,507 10,458 11,504
---------- ---------- ----------- ------------ ----------- ----------- --------- -----------
Total Current Assets 43,707 143,771 183,000 188,791 206,936 226,357 306,653 456,972
Repairable Parts, Net 27,360 154,970 198,000 203,700 214,800 224,700 236,800 241,900
Intangibles, Net 34,568 164,659 192,000 179,900 170,300 159,500 147,500 134,300
P,P&E, Net 4,429 32,430 33,000 32,300 32,600 34,000 35,400 36,600
Other 25,489 18,680 20,000 20,000 20,000 20,000 20,000 20,000
---------- ---------- ----------- ------------ ----------- ----------- --------- -----------
TOTAL ASSETS $135,553 $514,510 $626,000 $624,691 $644,636 $664,557 $746,353 $889,772
========== ========== =========== ============ =========== =========== ========= ===========
LIABILITIES AND S/H'S EQUITY
Accounts Payable $33,185 $89,564 $102,000 $106,943 $ 118,154 $ 129,777 $142,003 $155,713
Deferred Revenues 40,222 38,485 65,000 56,553 58,578 64,434 70,882 77,970
Other Liabilities 2,704 479 4,000 3,174 3,450 3,790 4,147 4,584
---------- ---------- ----------- ------------ ----------- ----------- --------- -----------
Total Current Liabilities 76,111 128,528 171,000 166,669 180,183 198,001 217,032 238,267
Long-Term Debt (include. Cur. Port.) 25,571 190,903 226,000 179,117 121,264 40,676 0 0
Other Liabilities 12,383 14,286 17,000 24,842 30,776 38,409 47,958 59,236
Redeemable Preferred Stock 6,811 0 0 0 0 0 0 0
Preferred Stock 0 0 0 0 0 0 0 0
Common Stock 14,677 180,793 212,000 254,063 312,413 387,471 481,364 592,269
---------- ---------- ----------- ------------ ----------- ----------- --------- -----------
Total Stockholders' Equity 14,677 180,793 212,000 254,063 312,413 387,471 481,364 592,269
TOTAL LIABILITIES AND S/H'S EQUITY $135,553 $514,510 $626,000 $624,691 $644,636 $664,557 $746,353 $889,772
========== ========== =========== ============ =========== =========== ========= ===========
Check 0.0 0.0 0.0 0.0 0.0 0.0 (0.0) 0.0
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
PROJECT DELTA
CONFIDENTIAL STAND-ALONE SCENARIO May 1997
- ----------------------------------------------------------------------------------------------------------------
HISTORICAL AND PROJECTED FINANCIAL STATEMENTS: DELTA
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATE)
CASH FLOW STATEMENTS: DELTA
Fiscal Years Ended June 30,
-------------------------------------------------------------------
Projected
-------------------------------------------------------------------
1998 1999 2000 2001 2002
---- ---- ---- ---- ----
OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net Income $42,063 $58,350 $75,058 $93,893 $110,905
Depreciation 13,700 14,000 14,300 15,900 17,800
Amortization of Repairable Parts 79,300 80,500 88,700 94,100 109,200
Amortization of Intangibles 26,500 27,600 28,800 30,000 31,200
Deferred Tax Expense 7,842 5,934 7,633 9,548 11,278
(Increase)/Decrease in Working Capital (9,122) (4,631) (1,602) (2,152) (2,588)
-------------------------------------------------------------------
Cash Flow from Operations 160,283 181,753 212,889 241,290 277,795
INVESTING ACTIVITIES
Capital Expenditures 13,000 14,300 15,700 17,300 19,000
Repairable Parts Purchases 85,000 91,600 98,600 106,200 114,300
Acquisitions 14,400 18,000 18,000 18,000 18,000
-------------------------------------------------------------------
Cash Flow before Financing Activities 47,883 57,853 80,589 99,790 126,495
FINANCING ACTIVITIES
Proceeds from/(repayment of) bank revolver (46,883) (57,853) (80,589) (40,676) 0
-------------------------------------------------------------------
Cash Flow after Financing Activities 1,000 0 0 59,114 126,495
Increase/(Decrease) in Cash $1,000 $0 $0 $59,114 $126,495
Beginning Cash Balance 11,000 12,000 12,000 12,000 71,114
Ending Cash Balance 12,000 12,000 12,000 71,114 197,609
</TABLE>
30
<PAGE>
---------------------------------------------------
COMPANY PROJECTIONS -- LEVERAGED SCENARIO
---------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
PROJECT DELTA
CONFIDENTIAL LEVERAGED SCENARIO May 1997
- ------------------------------------------------------------------------------------------
HISTORICAL AND PROJECTED FINANCIAL STATEMENTS: DELTA
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATE)
INCOME STATEMENTS
FISCAL YEARS ENDED JUNE 30,
HISTORICAL
1994 1995 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $108,416 $163,020 $540,191 $783,251
Cost of Revenues 76,980 113,483 402,316 581,167
------------ ------------ ------------ ------------
GROSS PROFIT 31,436 49,537 137,875 202,084
Operating Expenses:
S,G&A 16,474 21,982 69,237 106,986
Amortization of Intangibles 2,448 6,776 15,673 23,357
------------ ------------ ------------ ------------
Total Operating Expenses 18,922 28,758 84,910 130,343
------------ ------------ ------------ ------------
OPERATING INCOME 12,514 20,779 52,965 71,741
Existing Interest Expense 4,847 2,468 14,714 14,743
New Interest Expense 0 0 0 0
Amortization of Financing Fees 0 0 0 0
Interest Income 0 0 0 0
------------ ------------ ------------ ------------
PRETAX INCOME 7,667 18,311 38,251 56,998
Income Taxes (755) 7,324 15,307 23,903
------------ ------------ ------------ ------------
Net Income 8,422 10,987 22,944 33,095
PIK Preferred Dividends 0 0 0 0
------------ ------------ ------------ ------------
NET INCOME AVAILABLE TO COMMON $8,422 $10,987 $22,944 $33,095
============ ============ ============ ============
EARNINGS PER SHARE $0.37 $0.47 $0.90 $1.10
Fully-Diluted Shares Outstanding 22,595 23,149 25,430 30,000
<CAPTION>
FISCAL YEARS ENDED JUNE 30,
-----------------------------------------------------------------
PROJECTED
-----------------------------------------------------------------
1998 1999 2000 2001 2002
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
REVENUES $873,000 $960,300 $1,056,300 $1,162,000 $1,278,200
Cost of Revenues 634,700 690,020 757,900 829,300 916700
------------ ------------ ------------ ------------- ------------
GROSS PROFIT 238,300 270,280 298,400 332,700 361,500
Operating Expenses:
S,G&A 127,800 134,500 137,600 143,900 147,700
Amortization of Intangibles 26,500 27,600 28,800 30,000 31,200
------------ ------------ ------------ ------------- ------------
Total Operating Expenses 154,300 162,100 166,400 173,900 178,900
------------ ------------ ------------ ------------- ------------
OPERATING INCOME 84,000 108,180 132,000 158,800 182,600
Existing Interest Expense 0 0 0 0 0
New Interest Expense 57,897 55,921 52,443 47,184 39,860
Amortization of Financing Fees 2,550 2,550 2,550 2,550 2,550
Interest Income (460) (480) (480) (480) (480)
------------ ------------ ------------ ------------- ------------
PRETAX INCOME 24,014 50,189 77,487 109,546 140,670
Income Taxes 9,846 20,578 31,770 44,914 57,675
------------ ------------ ------------ ------------- ------------
Net Income 14,168 29,612 45,717 64,632 82,995
PIK Preferred Dividends 11,263 12,755 14,445 16,359 18,526
(PIK) (PIK) (PIK) (PIK) (PIK)
------------ ------------ ------------ ------------- ------------
NET INCOME AVAILABLE TO COMMON $2,906 $16,857 $31,273 $48,273 $64,469
============ ============ ============ ============= ============
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
PROJECT DELTA
CONFIDENTIAL LEVERAGED SCENARIO May 1997
- -----------------------------------------------------------------------------------------
HISTORICAL AND PROJECTED FINANCIAL STATEMENTS: DELTA
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATE)
BALANCE SHEETS: DELTA
AS OF JUNE 30,
PROJECTED PRO FORMA
------------------------------------- AS OF
1995 1996 1997 6/30/97
---- ---- ---- -------
ASSETS
<S> <C> <C> <C> <C>
Cash and Cash Equivalents $2,659 $8,221 $11,000 $11,000
Accounts Receivable 27,758 92,650 128,000 128,000
Inventories 4,024 30,130 36,000 36,000
Prepaid Expenses and Other Assets 9,266 12,770 8,000 8,000
------------ ------------ ------------ ------------
Total Current Assets 43,707 143,771 183,000 183,000
Repairable Parts, Net 27,360 154,970 198,000 198,000
Intangibles 34,568 164,659 192,000 192,000
P,P&E, Net 4,429 32,430 33,000 33,000
Transaction Goodwill 0 0 0 0
Financing Costs 0 0 0 19,775
Other 25,489 18,680 20,000 20,000
------------ ------------ ------------ ------------
TOTAL ASSETS $135,553 $514,510 $626,000 $645,775
============ ============ ============ ============
LIABILITIES AND S/H'S EQUITY
Accounts Payable $33,185 $89,564 $102,000 $102,000
Deferred Revenues 40,222 38,485 65,000 65,000
Other Liabilities 2,704 479 4,000 4,000
------------ ------------ ------------ ------------
Total Current Liabilities 76,111 128,528 171,000 171,000
Long-Term Debt (include. Cur. Port.) 25,571 190,903 226,000 0
Bank Revolver 0 0 0 600
Term A Bank Loan 0 0 0 200,000
Term B Bank Loan 0 0 0 150,000
Term C Bank Loan 0 0 0 125,000
------------ ------------ ------------ ------------
Total Term Loans 0 0 0 475,000
Subordinated Debt 0 0 0 150,000
Other Liabilities 12,383 14,286 17,000 17,000
Redeemable Preferred Stock 6,811 0 0 0
PIK Preferred Stock 0 0 0 85,000
Preferred Stock ~ 0 0 0 0
Common Stock 14,677 180,793 212,000 (252,825)
------------ ------------ ------------ ------------
Total Stockholders' Equity 14,677 180,793 212,000 (252,825)
TOTAL LIAB.AND S/H'S EQUITY $135,553 $514,510 $626,000 $645,775
============ ============ ============ ============
CHECK 0.0 0.0 0.0 0.0
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30,
--------------------------------------------------------------
PROJECTED
--------------------------------------------------------------
1998 1999 2000 2001 2002
---- ---- ---- ---- ----
ASSETS
<S> <C> <C> <C> <C> <C>
Cash and Cash Equivalents $12,000 $12,000 $12,000 $12,000 $12,000
Accounts Receivable 131,548 144,703 159,168 175,096 192,605
Inventories 37,386 41,590 45,682 49,985 55,253
Prepaid Expenses and Other Assets 7,857 8,643 9,507 10,458 11,504
------------ ------------ ------------ ------------ ------------
Total Current Assets 188,791 206,936 226,357 247,539 271,362
Repairable Parts, Net 203,700 214,800 224,700 236,800 241,900
Intangibles 179,900 170,300 159,500 147,500 134,300
P,P&E, Net 32,300 32,600 34,000 35,400 36,600
Transaction Goodwill 0 0 0 0 0
Financing Costs 17,225 14,676 12,126 9,576 7,027
Other 20,000 20,000 20,000 20,000 20,000
------------ ------------ ------------ ------------ ------------
TOTAL ASSETS $641,917 $659,311 $676,683 $696,815 $711,189
============ ============ ============ ============ ============
LIABILITIES AND S/H'S EQUITY
Accounts Payable $106,943 $118,154 $129,777 $142,003 $155,713
Deferred Revenues 56,553 58,578 64,434 70,882 77,970
Other Liabilities 3,174 3,450 3,790 4,147 4,584
------------ ------------ ------------ ------------ ------------
Total Current Liabilities 166,669 180,183 198,001 217,032 238,267
Long-Term Debt (include. Cur. Port.) 0 0 0 0 0
Bank Revolver 0 0 0 0 0
Term A Bank Loan 191,637 174,964 143,559 93,217 29,504
Term B Bank Loan 145,978 139,395 128,808 118,029 99,166
Term C Bank Loan 121,648 116,162 107,340 98,358 82,638
------------ ------------ ------------ ------------ ------------
Total Term Loans 459,263 430,521 379,707 309,604 211,307
Subordinated Debt 150,000 150,000 150,000 150,000 150,000
Other Liabilities 19,642 22,653 27,302 33,875 42,315
Redeemable Preferred Stock 0 0 0 0 0
PIK Preferred Stock 96,263 109,017 123,462 139,821 158,347
Preferred Stock ~ 0 0 0 0 0
Common Stock (249,919) (233,062) (201,790) (153,516) (89,048)
------------ ------------ ------------ ------------ ------------
Total Stockholders' Equity (249,919) (233,062) (201,790) (153,516) (89,048)
TOTAL LIAB.AND S/H'S EQUITY $641,917 $659,311 $676,683 $696,815 $711,189
============ ============ ============ ============ ============
CHECK 0.0 0.0 (0.0) (0.0) (0.0)
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
PROJECT DELTA
CONFIDENTIAL LEVERAGED SCENARIO May 1997
- ---------------------------------------------------------------------------------------------------------------------
HISTORICAL AND PROJECTED FINANCIAL STATEMENTS: DELTA
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATE)
CASH FLOW STATEMENTS: DELTA
FISCAL YEAR ENDED JUNE 30,
PROJECTED
1998 1999 2000 2001 2002
---- ---- ---- ---- ----
OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net Income $14,168 $29,612 $45,717 $64,632 $82,995
Depreciation 13,700 14,000 14,300 15,900 17,800
Amortization of Repairable Parts 79,300 80,500 88,700 94,100 109,200
Amortization of Intangibles 26,500 27,600 28,800 30,000 31,200
Amortization of Financing Costs 2,550 2,550 2,550 2,550 2,550
Amortization of New Transaction Goodwill 0 0 0 0 0
Deferred Tax Expense 2,642 3,011 4,649 6,573 8,440
(Increase)/Decrease in Working Capital (9,122) (4,631) (1,602) (2,152) (2,588)
------------ ------------ ------------ ------------- ------------
Cash Flow from Operations 129,737 152,642 183,114 211,603 249,597
INVESTING ACTIVITIES
Capital Expenditures 13,000 14,300 15,700 17,300 19,000
Repairable Parts Purchases 85,000 91,600 98,600 106,200 114,300
Purchases of Companies 14,400 18,000 18,000 18,000 18,000
------------ ------------ ------------ ------------- ------------
Cash Flow before Financing Activities 17,337 28,742 50,814 70,103 98,297
FINANCING ACTIVITIES
Proceeds from/(repayment of) bank revolver (600) 0 (0) 0 0
Proceeds from/(repayment of) existing debt 0 0 0 0 0
Proceeds from/(repayment of)Term A Loan (8,363) (16,673) (31,405) (50,342) (63,714)
Proceeds from/(repayment of Term B Loan (4,022) (6,583) (10,587) (10,779) (18,864)
Proceeds from/(repayment of) Term C Loan (3,352) (5,486) (8,822) (8,983) (15,720)
Proceeds from/(repayment of) subordinated debt 0 0 0 0 0
Preferred Dividends - - - - -
------------ ------------ ------------ ------------- ------------
Cash Flow after Financing Activities 1,000 0 0 0 (0)
Increase/(Decrease) in Cash $1,000 $0 $0 $0 ($0)
Beginning Cash Balance 11,000 12,000 12,000 12,000 12,000
Ending Cash Balance 12,000 12,000 12,000 12,000 12,000
</TABLE>
33
