<PAGE> 1
Exhibit (c)(2)
PROJECT MOTOWN
PRESENTATION TO THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS
CONFIDENTIAL
------------
September 8, 2000
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PROJECT MOTOWN | SEPTEMBER 8, 2000
CONFIDENTIAL
================================================================================
CONFIDENTIAL MATERIAL FOR THE SPECIAL COMMITTEE
The following pages contain material provided to the Special Committee of the
Board of Directors ("Special Committee") of JLK Direct Distribution Inc. ("JLK"
or the "Company") by CIBC World Markets Corp. ("CIBC") in connection with the
proposed transaction involving JLK and Kennametal Inc. ("Kennametal"). The
accompanying material was compiled or prepared on a confidential basis solely
for the use of the Special Committee and not with a view toward public
disclosure under state and federal securities laws or otherwise. The information
contained in this material was obtained from the Company and public sources, and
was relied upon by CIBC without assuming responsibility of independent
verification as to the accuracy or completeness of such information. Any
estimates and projections for the Company contained herein have been supplied by
the management of the Company, and involve numerous and significant subjective
determinations, which 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
representation or warranty, 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 the Company as the Special Committee and, accordingly, neither the
Special Committee, the Company nor CIBC or their respective legal or financial
advisors or accountants take any responsibility for the accompanying material
when used by persons other than the Special Committee.
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PROJECT MOTOWN | SEPTEMBER 8, 2000
TABLE OF CONTENTS
================================================================================
1 EXECUTIVE SUMMARY
2 COMPANY OVERVIEW
3 INDUSTRY OVERVIEW
4 VALUATION OVERVIEW
5 APPENDICES
A Management Projections
B Comparable Companies Analysis
C Precedent Transactions Analysis
D Leveraged Buyout Analysis
E Minority Buyout Transactions Analysis
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PROJECT MOTOWN | SEPTEMBER 8, 2000
1 EXECUTIVE SUMMARY
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PROJECT MOTOWN | SEPTEMBER 8, 2000
EXECUTIVE SUMMARY
================================================================================
INTRODUCTION
* JLK Direct Distribution Inc.'s ("JLK" or the "Company") outstanding
common stock consists of both Class A and Class B shares. As of June
30, 2000, JLK has a total of 24,510,410 outstanding common stock
shares, of which Class A accounts for 4,273,410 shares and Class B
accounts for 20,237,000 shares
* Kennametal Inc. ("Kennametal") currently owns 100% of the Class B
common stock of JLK, which represents an 82.6% economic interest and
97.9% of the combined voting power of the Company's shareowners
* On November 17, 1999 Kennametal's management announced it had engaged
Goldman, Sachs to explore strategic alternatives regarding its JLK
subsidiary, including a possible divestiture
* On January 25, 2000 the JLK Board of Directors (the "Board") passed a
resolution to create a Special Committee in connection with the
proposed sale or other transfer, directly or indirectly, of all or a
significant portion of the assets or securities of the Company to a
prospective acquiror. The Board appointed Mr. Jeffery M. Boetticher and
Mr. Irwin L. Elson from the Board to serve as members of the Special
Committee. CIBC World Markets Corp. ("CIBC") and Morgan, Lewis &
Bockius LLP ("Morgan Lewis") were retained by the Special Committee as
its financial and legal advisors, respectively
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PROJECT MOTOWN | SEPTEMBER 8, 2000
EXECUTIVE SUMMARY
================================================================================
INTRODUCTION
* In marketing JLK, Goldman Sachs conducted an extensive full auction
process but was ultimately unsuccessful in soliciting an acceptable
bid. The details about the auction process are summarized in the
following chart:
--------------------------------------------------------------------------------
VALUATIONS PER SHARE
--------------------
LOW HIGH MEAN
--------------------------------------------------------------------------------
81 POTENTIAL BUYERS CONTACTED -- -- --
--------------------------------------------------------------------------------
46 OFFERING MEMORANDUMS DELIVERED -- -- --
--------------------------------------------------------------------------------
10 INITIAL INDICATIONS OF INTEREST RECEIVED $9.00 $16.00 $12.50
--------------------------------------------------------------------------------
6 INVITED BACK Process Terminated
3 REMAINED
0 FINAL BIDS
* On May 2, 2000 Kennametal announced it had concluded its evaluation of
strategic alternatives for JLK and had decided to terminate
consideration of a possible divestiture, concluding that market
conditions in the industrial distribution industry were preventing
Kennametal from realizing an acceptable value for its investment
* Also on May 2, 2000 JLK announced the resignation of Mr. Richard J.
Orwig as President and CEO and that Mr. Boetticher would be replacing
Mr. Orwig on an interim basis. In addition, JLK announced the creation
of an Executive Office under Mr. Boetticher's leadership, which
includes Mr. Markos Tambakeras, President and CEO of Kennametal, and
Mr. Elson, an original founder and former President of the predecessor
of JLK
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PROJECT MOTOWN | SEPTEMBER 8, 2000
EXECUTIVE SUMMARY
================================================================================
INTRODUCTION
* On July 20, 2000, Kennametal announced it had made a proposal to JLK to
acquire the outstanding Class A shares of JLK which Kennametal does not
already own at a price of $6.70 per share in cash ("Proposal
Announcement"). The aggregate value of the transaction would be
approximately $28.7 million to acquire the minority interest of
approximately 4.3 million shares
* Immediately thereafter, the Special Committee recontacted CIBC and
Morgan Lewis to assist in evaluating the offer
* On August 3, 2000, after the Special Committee had asked for
Kennametal's position with regard to considering third party offers to
acquire its stake in JLK, Kennametal indicated by letter that, based on
the results of the recently completed sales process, it does not
believe that a sale transaction would be successfully completed at this
time, especially in light of the deterioration of JLK's performance. As
a result, Kennametal indicated it was not requesting, authorizing or
interested in another sales process being pursued at this time
* On August 11, 2000, the Special Committee delivered a letter to
Kennametal advising that its offer of $6.70 per share was inadequate
from a financial point of view and would welcome the opportunity to
discuss any revised proposal in the event that Kennametal wishes to
modify its offer
* On August 23, 2000, Goldman Sachs, on behalf of Kennametal,
confidentially presented a modified offer of $7.75 per share by letter
to the Special Committee
* On August 30, 2000, after extensive negotiations, Kennametal agreed to
increase its offer to $8.75 per share, subject to negotiation of a
definitive agreement
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PROJECT MOTOWN | SEPTEMBER 8, 2000
EXECUTIVE SUMMARY
================================================================================
INTRODUCTION
* In its role as financial advisor to the Special Committee, CIBC has
evaluated the fairness, from a financial point of view, of the
consideration to be paid to the holders of the Company's Class A common
stock. As part of the due diligence process CIBC has performed, among
other things:
* Discussions and meetings with management team regarding the
operations of the Company
* Review of the historical and projected financial performance
of the Company as prepared by management
* Review of publicly available information and filings of the
company, including annual reports, 10-K's, 10-Q's and proxy
statements
* Review of the historical market prices and trading volume for
the Class A Common Stock
* Review and analysis of certain publicly available financial
data and information for certain companies and transactions
that we deemed comparable to the transaction
* Examination of the draft merger agreement
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PROJECT MOTOWN | SEPTEMBER 8, 2000
EXECUTIVE SUMMARY
================================================================================
MOTOWN SITUATION OVERVIEW
COMPANY FINANCIAL OVERVIEW
* After a period of strong revenue growth from $188
million in FY1995 to $532 million in FY1999, JLK
revenue fell to $499 million for FY2000. Overall, the
revenue CAGR for the period from FY1995 to FY2000 is
21.5%
* During the same period, operating margins have
declined from approximately 10.4% in 1995 to 5.8% in
2000
* After terminating consideration of a possible
divestiture, JLK's Executive Office conducted a
thorough review of JLK's operations and it became
apparent that there were substantial operational and
financial issues that needed to be addressed to
improve company performance
MARKET PERFORMANCE
* JLK's stock price has significantly underperformed
the overall markets as measured by the Dow Jones
Industrial Average ("Dow Jones") and the S&P 500
Index ("S&P 500")
* Since JLK's IPO (6/27/97), the stock price of JLK has
returned -75.2%, compared to a return of 46.5% and
69.3% for the Dow Jones and the S&P 500, respectively
* During the 1 year period from 7/20/99 to 7/20/00, the
stock price of JLK returned -36.3%, compared to
returns of -1.4% and 8.6% for the Dow Jones and S&P
500, respectively
* Since JLK's IPO (6/27/97) and during the 1 year
period prior to Proposal Announcement from 7/20/99 to
7/20/00, an index of comparable companies(1) returned
-33.9% and -26.6%, respectively
-------------------
(1) Consists of Airgas, Applied Industrial Tech., Industrial Distribution
Group, Lawson Products, MSC Industrial Direct, W.W. Grainger and WESCO
International.
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PROJECT MOTOWN | SEPTEMBER 8, 2000
EXECUTIVE SUMMARY
================================================================================
MOTOWN SITUATION OVERVIEW
EQUITY RESEARCH COMMENTARY
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
Estimates Rating(1)
5 Year Est. EPS
Analyst Company Date FY01 EPS (S) Growth (%) Hold Buy Strong Buy
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles Harris CIBC World Markets June 21, 2000 $0.75 NA + o-----
Joanna Shatney Goldman,Sachs June 14, 2000 0.70 15.0 +
Elaine Thomson Merrill Lynch June 14, 2000 0.80 10.0 + o-----
Mark Koznarek Midwest Research January 7, 2000 0.75 10.0 + o------------
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Coverage Comments
--------------------------------------------------------------------------------
CIBC World Markets * "JLK's problems can be broken into three areas:
Harris slower than expected sales, higher than anticipated
June 21, 2000 operating costs and above-budgeted costs for new
software."
* "Without any real visibility or confidence in the
estimates, investors are not likely to find JLK
attractive regardless of perceived valuation."
* "On June 13, 2000 ... rather than earnings increasing
to about $0.29 vs. $0.21, it now appears they will
be a lot closer to $0.13."
Merrill Lynch * "We have reduced our fiscal 2000 EPS estimate from
Thomson $0.90 to $0.74, and fiscal 2001 from $1.05 to
June 14, 2000 $0.80."
* "The company points to two reasons for the shortfall:
sales are now expected to be flat with a year ago, ...
SG&A costs will be higher than expected due to
problems associated with systems implementation."
* "If Kennametal could not obtain an acceptable price
for JLK ... we expect that a chance of a sale in the
near term with the reduction in expected earnings is
very limited."
--------------------------------------------------------------------------------
(1) "+" INDICATES THE CURRENT RATINGS.
"o-----" INDICATES EFFECT OF RECENT UPGRADE/DOWNGRADE.
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PROJECT MOTOWN | SEPTEMBER 8, 2000
EXECUTIVE SUMMARY
================================================================================
MOTOWN SITUATION OVERVIEW
FACTORS AFFECTING VALUATION
* Kennametal majority ownership (approximately 82.6%
economic interest and 97.9% voting interest)
* Small market capitalization ($155 million at a stock
price of $6.31 on 9/7/00)
* Limited public float (approximately 3.9 million
shares, excluding shares held by insiders)
* Limited trading liquidity (average of 18,419 shares
traded over the 3 months prior to Proposal
Announcement)
* Operating and management problems have caused a
material deterioration in business
* The terms of JLK's supply agreement with Kennametal
subject to termination upon a change of control
* JLK has struggled to meet Wall Street's quarterly
performance expectations as shown below:
JLK EARNINGS HISTORY
<TABLE>
<CAPTION>
EARNINGS
ESTIMATED EPS ($) ACTUAL EPS ($) SURPRISE (%)
---------------------------------------------------------------------------
<S> <C> <C> <C>
MAR-98 $0.31 $0.29 -6.5%
JUN-98 $0.25 $0.24 -4.0%
SEP-98 $0.17 $0.15 -11.8%
DEC-98 $0.21 $0.21 --
MAR-99 $0.26 $0.26 --
JUN-99 $0.26 $0.21 -19.2%
SEP-99 $0.17 $0.17 --
DEC-99 $0.18 $0.18 --
MAR-00 $0.26 $0.26 --
JUN-00 $0.29 $0.13 -55.2%
---------------------------------------------------------------------------
</TABLE>
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PROJECT MOTOWN | SEPTEMBER 8, 2000
2 COMPANY OVERVIEW
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PROJECT MOTOWN | SEPTEMBER 8, 2000
COMPANY OVERVIEW
================================================================================
BUSINESS OVERVIEW
* JLK was formed in April 1997 through a combination of Kennametal's two
distribution operations: the J&L mail order/catalog operations which was
acquired in 1990, and the Full Service Supply ("FSS") integrated supply
business. On June 27, 1997, JLK consummated an initial public offering of
4.9 million shares, representing approximately 19.6% of the Company's
outstanding stock.
* Between April 1997 and May 1998, the Company acquired eight distribution
companies that more than doubled its distribution/mail order sales and
store base:
* Strelinger Company (4/1997)
* Mill & Abrasive Supply, Inc. (5/1997)
* Car-Max Tool & Cutter, Inc. (10/1997)
* GRS Industrial Supply Co. (12/1997)
* Production Tools Sales, Inc. (1/1998)
* Dalworth Tool & Supply, Inc. (3/1998)
* ATS Industrial Supply Co. (3/1998)
* Strong Tool Co. (5/1998)
* As of June 30, 2000, J&L has 30 retail stores and 10 customer service
center locations, and FSS has 189 individual customers representing 284
independent locations(1)
JLK FY 2000 SALES BY OPERATIONS(1)
$219.6 MM $137.2 MM
--------- ---------
"J+L" Mail "FSS"
Order/ Integrated Supply
Catalog 27%
44%
[PIE GRAPH]
J&L Europe Acquisitions
5% 24%
$23.6 MM $118.9 MM
-------- ---------
-------------------------------
(1) Source: Company.
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PROJECT MOTOWN | SEPTEMBER 8, 2000
COMPANY OVERVIEW
================================================================================
FINANCIAL REVIEW
(Dollars in Millions, June 30 Fiscal Year End)
[GRAPHIC]
REVENUES
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
$188.2 $244.0 $316.2 $425.3 $531.6 $499.3
JLK--Growth Rate
EBIT
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
$19.6 $24.9 $32.2 $41.3 $34.5 $28.9
JLK--% Margin
EBITDA
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
$20.9 $26.4 $34.0 $46.5 $43.3 $38.3
JLK--% Margin
NET INCOME
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
$11.8 $15.1 $19.3 $27.0 $20.4 $16.9
JLK--% Margin
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PROJECT MOTOWN | SEPTEMBER 8, 2000
COMPANY OVERVIEW
================================================================================
FINANCIAL FORECAST(1)
(Dollars in Millions)
<TABLE>
<CAPTION>
FY 6/30
ACTUAL PROJECTED UPSIDE CASE
--------------- ------------------------------------------
1999 2000 2001 2002 2003 2004 2005
--------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES $531.6 $499.3 $523.2 $565.6 $614.4 $671.5 $738.3
GROWTH -- -6.1% 4.8% 8.1% 8.6% 9.3% 9.9%
EBITDA 43.3 38.3 38.0 47.6 57.8 71.0 83.5
MARGIN 8.1% 7.7% 7.3% 8.4% 9.4% 10.6% 11.3%
EBIT 34.5 28.9 29.0 38.4 49.1 61.6 73.5
MARGIN 6.5% 5.8% 5.5% 6.8% 8.0% 9.2% 10.0%
NET INCOME 20.4 16.9 17.9 24.4 31.9 40.7 49.4
MARGIN 3.8% 3.4% 3.4% 4.3% 5.2% 6.1% 6.7%
</TABLE>
[GRAPHIC]
<TABLE>
<CAPTION>
FY 6/30
ACTUAL PROJECTED CONSERVATIVE CASE
--------------- ------------------------------------------
1999 2000 2001 2002 2003 2004 2005
--------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES $531.6 $499.3 $523.2 $549.2 $583.7 $618.8 $656.0
GROWTH -- -6.1% 4.8% 5.0% 6.3% 6.0% 6.0%
EBITDA 43.3 38.3 38.0 43.0 50.5 58.8 68.2
MARGIN 8.1% 7.7% 7.3% 7.8% 8.7% 9.5% 10.4%
EBIT 34.5 28.9 29.0 33.9 41.8 49.3 58.3
MARGIN 6.5% 5.8% 5.5% 6.2% 7.2% 8.0% 8.9%
NET INCOME 20.4 16.9 17.9 21.3 26.7 32.0 38.3
MARGIN 3.8% 3.4% 3.4% 3.9% 4.6% 5.2% 5.8%
</TABLE>
[GRAPHIC]
(1) Source: Management estimates
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PROJECT MOTOWN | SEPTEMBER 8, 2000
COMPANY OVERVIEW
================================================================================
PRICE/VOLUME GRAPH -- SINCE IPO (6/27/97 - PRESENT)
Since JLK'S IPO, JLK has traded as high as $39.38 (03/17/98) and as low as $4.50
(0/7/13/99)
[GRAPHIC]
A. 06/27/97 JLK Initial Public Offering at a price of $20 per share
B. 11/05/97 JLK announces agreement to acquire GRS Industrial Supply Company
C. 01/05/98 JLK acquires Production Tool Sales, Inc.
D. 02/18/98 JLK announces an agreement to acquire Dalworth Tool & Supply, Inc.
E. 03/17/98 JLK announces a letter of intent to acquire Strong Tool Co.
F. 03/31/98 JLK acquires ATS Industrial Supply
G. 06/08/98 JLK announces program to repurchase up to 20% of its outstanding
Class A Stock
H. 09/17/98 Richard Orwig is elected President and CEO of JLK
I. 03/16/99 Debut of JLK website
J. 11/17/99 Kennametal announces the engagement of Goldman Sachs to explore
strategic alternatives regarding JLK, including a possible
divestiture
K. 05/02/00 JLK announces the resignation of Richard Orwig as President and
CEO; Kennametal announces that it will not divest JLK
L. 07/20/00 Kennametal offers to buy the remaining shares of JLK it does not
already own for $6.70 per share
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PROJECT MOTOWN | SEPTEMBER 8, 2000
COMPANY OVERVIEW
================================================================================
PRICE/VOLUME GRAPH -- 1 YEAR PRIOR TO PROPOSAL ANNOUNCEMENT (7/20/99 - 7/20/00)
During the 12 months prior to Proposal Announcement, JLK traded as high as
$11.63 (02/14/00) and as low as $4.50 (07/13/00)
[GRAPHIC]
A. 11/17/99 Kennametal announces the engagement of Goldman Sachs to explore
strategic alternatives regarding JLK, including a possible
divestiture
B. 12/15/99 CIBC issues research report reducing fiscal 2000 EPS estimates to
$0.90 from $0.97 due to softer order rates
C. 02/14/00 Filed 10-Q for the period ended 12/31/99. Reported earnings of
$0.18 per share for the quarter ended 12/31/999 vs. $0.21 per
share for the same period a year ago.
D. 05/02/00 JLK announces the resignation of Richard Orwig as President and
CEO; Kennametal declares that it will not sell JLK
E. 06/22/00 CIBC issues research report reducing fiscal 2000 fourth quarter
EPS estimates to $0.13 from $0.27 after the Company announced that
earnings would be materially shy of expectations
F. 07/20/00 Kennametal offers to buy the remaining shares of JLK it does not
already own for $6.70
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PROJECT MOTOWN | SEPTEMBER 8, 2000
COMPANY OVERVIEW
================================================================================
RELATIVE PRICE PERFORMANCE -- SINCE IPO (6/27/97 - PRESENT)
[GRAPHIC]
S&P 500: +69.3
Dow Jones: + 46.5%
Composite (1): -33.9%
JLK: -75.2%
-Comparable Companies Composite(1) -S&P 500 -Dow Jones -JLK
(1) Comparable Companies Composite consists of Airgas, Applied Industrial
Tech., Industrial Distribution Group, Lawson Products, MSC Industrial
Direct, W.W. Grainger and WESCO International
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PROJECT MOTOWN | SEPTEMBER 8, 2000
COMPANY OVERVIEW
================================================================================
RELATIVE PRICE PERFORMANCE -- 1 YEAR PRIOR TO PROPOSAL ANNOUNCEMENT (7/20/99 -
7/20/00)
[GRAPHIC]
S&P 500: +8.6%
Dow Jones: -1.4%
Composite (1): -26.6%
JLK: -36.3%
-Comparable Companies Composite(1) -S&P 500 -Dow Jones -JLK
(1) Comparable Companies Composite consists of Airgas, Applied Industrial
Tech., Industrial Distribution Group, Lawson Products, MSC Industrial
Direct, W.W. Grainger and WESCO International
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PROJECT MOTOWN | SEPTEMBER 8, 2000
COMPANY OVERVIEW
================================================================================
VOLUME TRADED - 3 MONTHS PRIOR TO PROPOSAL ANNOUNCEMENT (4/20/00 - 7/20/00)(1)
[GRAPHIC]
-----------------------------
AVERAGE DAILY TRADING VOLUME:
18,419 SHARES
-----------------------------
PRICE VOLUME
----- ------
less than $5.00 8.2%/321,200
$5.00 - $6.00 6.1%/238,600
$6.00 - $7.00 10.0%/388,000
$7.00 - $8.00 4.0%/154,200
$8.00 greater than/= 1.5%/58,400
---------------
(1) Note: Public float consists of 3.1 million shares held by institutional
shareholders and 0.8 million shares held by retail shareholders. 1.2
million cumulative shares have been traded during the period, representing
29.8% of the public float of 3.9 million shares outstanding.
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PROJECT MOTOWN | SEPTEMBER 8, 2000
COMPANY OVERVIEW
================================================================================
VOLUME TRADED - 6 MONTHS PRIOR TO PROPOSAL ANNOUNCEMENT (1/20/00 - 7/20/00)(1)
[GRAPHIC]
-----------------------------
AVERAGE DAILY TRADING VOLUME:
15,849 SHARES
-----------------------------
PRICE VOLUME
----- ------
less than $5.00 8.2%/321,200
$5.00 - $6.00 6.1%/238,600
$6.00 - $7.00 10.0%/388,000
$7.00 - $8.00 4.0%/154,200
$8.00 - $9.00 7.3%/285,800
$9.00 - $10.00 7.9%/309,000
$10.00 - $11.00 3.7%/144,100
$11.00 greater than/= 4.4%/171,900
---------------
(1) Note: Public float consists of 3.1 million shares held by institutional
shareholders and 0.8 million shares held by retail shareholders. 2.0
million cumulative shares have been traded during the period, representing
51.7% of the public float of 3.9 million shares outstanding.
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PROJECT MOTOWN | SEPTEMBER 8, 2000
COMPANY OVERVIEW
================================================================================
OWNERSHIP PROFILE
INSTITUTIONAL HOLDERS
<TABLE>
<CAPTION>
COMMON
INSTITUTIONAL HOLDERS SHARES PERCENT
------------------------------------------------ ---------- -------
<S> <C> <C>
KENNAMETAL, INC. 20,256,999 82.6%
..................................................................................
FIRST PACIFIC 881,100 3.6%
PUTNAM INVESTMENT MANAGEMENT 532,554 2.2%
ATLANTIC INVESTMENT MANAGEMENT 379,300 1.5%
BRANDYWINE ASSET MANAGEMENT 319,500 1.3%
DIMENSIONAL FUND ADVISORS 306,800 1.3%
REICH & TANG ASSET MANAGEMENT 199,900 0.8%
WESTPORT ADVISORS 154,000 0.6%
NEUBERGER BERMAN 46,100 0.2%
VANGUARD GROUP 39,300 0.2%
BARCLAYS BANK 39,094 0.2%
GTE INVESTMENT MANAGEMENT 28,700 0.1%
STATE STREET 28,000 0.1%
GOLDMAN SACHS 23,900 0.1%
OTHERS 84,544 0.3%
------------------------------------------------ ---------- -------
TOTAL INSTITUTIONAL OWNERSHIP 23,319,791 95.1%
</TABLE>
INSIDER OWNERSHIP
<TABLE>
<CAPTION>
COMMON
INSIDERS(1) SHARES PERCENT
------------------------------------------------ ---------- -------
<S> <C> <C>
Michael W. Ruprich 107,500 0.4%
William R. Newlin 68,900 0.3%
John M. Beaudoin 52,200 0.2%
Irwin L. Elson 25,100 0.1%
Diana L. Scott 22,000 0.1%
Aloysius T. Mclaughlin, Jr. 17,500 0.1%
Jeffrey M. Boetticher 16,000 0.1%
Others 47,250 0.2%
------------------------------------------------ ---------- -------
TOTAL INSIDERS 356,450 1.5%
</TABLE>
DISTRIBUTION SUMMARY
<TABLE>
<CAPTION>
SHARES PERCENT
------------- -------
<S> <C> <C>
Class B Stock (Kennametal) 20,256,999 82.6%
Class A Stock:
Institutional 3,062,792 12.5%
Retail 832,289 3.4%
Insider 378,309 1.5%
------------- -------
Total Class A Stock 4,273,390 17.4%
================================================= ============= =======
TOTAL SHARES OUTSTANDING(2) 24,530,389 100.0%
</TABLE>
Class B Stock (Kennametal) 82.6%
Institutional 12.5%
Retail 3.4%
Insider 1.5%
[PIE GRAPH]
---------------
Source: CDA Spectrum dated 6/30/00, Proxy dated 10/26/99.
(1) Insider ownership includes stock credits and options/warrants exercisable
based on the Proxy Statement disclosure.
(2) Fully diluted shares outstanding based on treasury method calculation.
Total number of options outstanding as of 6/30/99 based on 10-K disclosure
was 0.544 million at a weighted average price of $18.02 per share.
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PROJECT MOTOWN | SEPTEMBER 8, 2000
3 INDUSTRY OVERVIEW
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PROJECT MOTOWN | SEPTEMBER 8, 2000
INDUSTRY OVERVIEW
================================================================================
INDUSTRY OVERVIEW
* The size of the industrial maintenance, repair and operations ("MRO")
distribution industry in the U.S. is estimated to be approximately $250
billion and is served by more than 60,000 distributors. This industry is
expected to grow at the growth rate of the Gross Domestic Product.
Industrial distribution of metalworking consumables is a highly fragmented
niche within the broader industrial MRO distribution industry.
* The metalworking consumables distribution industry is characterized by
multiple channels of distribution. The distribution channels in this
industry include retail outlets, small dealers, regional and national
distributors utilizing direct sales forces and manufacturers'
representatives. The Company estimates the size of this industry in the
U.S. at approximately $50 billion, with more than 20,000 distributors, very
few of which have annual sales greater than $10 million.
* The following table provides a list of JLK's top ten competitors in the
metalworking consumables distribution industry in the U.S.
JLK's Top Ten Competitors
* Airgas * McMaster Carr Supply Co.
* Cameron & Barkley Co. * MSC Industrial Direct Co., Inc.
* DoAll Co. * Production Tool Supply Co.
* Ferguson Enterprises * Travers Tool Co., Inc.
* Industrial Distribution Group, Inc. * W.W. Grainger, Inc.
Source: Company
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PROJECT MOTOWN | SEPTEMBER 8, 2000
INDUSTRY OVERVIEW
================================================================================
INDUSTRY OVERVIEW
* The customer base for metalworking consumables and related products can be
divided into three categories: small-, medium- and large-sized customers.
* SMALL-SIZED customers range from one-man machine shops to small
facilities that make annual purchases of less than $10,000. The
primary focus for small-sized customers is ease of product select and
procurement. This customer base is typically serviced by small local
dealers/distributors and catalog distributors.
* MEDIUM-SIZED customers include small industrial parts manufacturers
that specialize in a particular product category and act as suppliers
to the larger industrial manufacturing companies. The annual purchases
of these medium-sized customers are usually between $10,000 and
$50,000. In addition to relative ease of product selection and
procurement, medium-sized customers are also focused on product price
and technical assistance. This customer base is usually serviced by a
combination of catalog distributors, local and regional distributors
and manufacturers' representatives.
* LARGE-SIZED customers include manufacturers and parts suppliers in the
automotive, aerospace, defense and oil and gas industries, and other
industrial manufacturing companies that cut, work and grind metal as
part of the manufacturing process. These large customers typically
make annual purchases in excess of $50,000 and are highly focused on
price, technical assistance and cost savings in the selection,
procurement and use of metalworking consumables in complex
manufacturing processes. Large-sized customers are typically serviced
by factory direct sales representatives, manufacturers'
representatives, local and large national distributors and integrated
supply service providers.
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PROJECT MOTOWN | SEPTEMBER 8, 2000
INDUSTRY OVERVIEW
================================================================================
INDUSTRY TRENDS
* The Company believes that the metalworking consumables distribution
industry is currently being shaped by three major trends: supply chain
integration, e-commerce expansion and consolidation
* SUPPLY CHAIN INTEGRATION -- The Company estimates that approximately 60% of
the total cost of procuring industrial supplies is associated with product
costs, while 40% is associate with the administrative cost of selecting and
purchasing the product. As a result, manufacturers seek to streamline the
selection and procurement process at manufacturing facilities. This has led
to manufacturers outsourcing complex procurement and possession processes
needed to supply metalworking products that are critical to their
manufacturing operations.
* The following figure illustrates the rapid growth of the integrated supply
market.
INTEGRATED SUPPLY MARKET ($ IN BILLIONS)
[GRAPHIC]
Source: Frank Lynn & Associates
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<PAGE> 27
PROJECT MOTOWN | SEPTEMBER 8, 2000
INDUSTRY OVERVIEW
================================================================================
INDUSTRY TRENDS
* E-COMMERCE EXPANSION -- The Internet is already having a significant
influence on the metalworking consumables distribution industry and the MRO
industry in general. Widespread applications include on-line trading, book
buying, auction bidding and catalog merchandising. In addition, e-Commerce
in the industry will enable completely integrated customer ordering,
shipment and inventory restocking is expected to drive significant industry
consolidation.
* CONSOLIDATION -- Consolidation in the metalworking consumables industry is
being driven by two major forces: (i) size; and (ii) rapid technological
advancement. With the demand for single-source procurement hastened by the
development of integrated supply solutions, size has become an increasingly
important competitive advantage for distributors. Size provides the
benefits of purchasing power, greater technical skills and the ability to
offer a broader range of products.
Technological advancement, the advent of the Internet and increasingly
sophisticated IT programs have allowed for consolidation to occur in the
industry by facilitating the integration of large, complex distributors
with geographically dispersed locations.
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PROJECT MOTOWN | SEPTEMBER 8, 2000
INDUSTRY OVERVIEW
================================================================================
INDUSTRY OVERVIEW
* The Industrial Distribution sector as a whole has underperformed the
overall market for the past two years. The reasons for the poor performance
include:
* Weak industrial manufacturing markets;
* Poorly orchestrated acquisition strategies, especially "roll ups";
* Real and perceived competition from new economy companies (i.e.
exchanges); and
* Time consuming and expensive information system integrations
* As a result, many companies have failed to meet Wall Street's earnings
expectations and have lost considerable equity market value as shown in the
chart below:
<TABLE>
<CAPTION>
Share Price ($) Relative Change
Company Name Ticker 9/1/98 9/7/00 1998 to Present
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Airgas, Inc. ARG 12 1/16 6 3/8 -47.15%
Applied Industrial Technologies, Inc. AIT 16 3/4 17 1.49%
Fastenal Company FAST 31 11/16 61 1/8 92.90%
Genuine Parts Company GPC 32 1/2 20 15/16 -35.58%
Grainger (W.W.), Inc. GWW 41 7/8 29 13/16 -28.81%
Hughes Supply, Inc. HUG 26 1/2 20 4/5 -21.51%
Industrial Distribution Group, Inc. IDC 11 1/16 2 7/8 -74.01%
JLK Direct Distribution, Inc. JLK 11 1/16 6 5/16 -42.94%
Lawson Products, Inc. LAWS 23 25 1/8 9.24%
MSC Industrial Direct Co., Inc. MSM 20 1/8 16 -20.50%
Noland Company NOLD 22 1/2 17 3/4 -21.11%
Premier Farnell PLC PFP 7 5/8 15 96.72%
Strategic Distribution, Inc. STRD 3 3/16 2 -37.25%
WESCO International, Inc. (1) WCC 18 9 3/16 -48.96%
--------------------------------------------------------------------------------------------------------------------------
Median -25.16%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) IPO to Present.
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<PAGE> 29
PROJECT MOTOWN | SEPTEMBER 8, 2000
4 VALUATION OVERVIEW
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<PAGE> 30
PROJECT MOTOWN | SEPTEMBER 8, 2000
VALUATION OVERVIEW
================================================================================
DESCRIPTION OF METHODOLOGIES
CIBC World Markets reviewed various market indicators and employed the following
methodologies
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Methodology Advantages Limitations
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PUBLICLY TRADED Reflects current, market-based valuation information * Financial information available for
COMPANIES ANALYSIS the companies is generally limited to
historical data and 1-2 years
financial forecasts-- no long-term
projections
* Current market multiples may be
market driven and may not be
representative of long-term growth
prospects
* Does not take into account control
premium
------------------------------------------------------------------------------------------------------------------------------------
PRECEDENT Reflects direct evidence of value in an * Similar constraints as publicly
TRANSACTIONS ANALYSIS acquisition context-- including any 'control premium' traded companies analysis
* Precedent multiples depend on market
conditions at the time of the
transaction
------------------------------------------------------------------------------------------------------------------------------------
DISCOUNTED CASH FLOW Reflects expected future cash flow of the business -- * Financial information is necessarily
ANALYSIS directly related to the business being valued based on the judgment of management
preparing projections
* Does not include any "synergies"
available to an acquiror
------------------------------------------------------------------------------------------------------------------------------------
LEVERAGED BUYOUT ANALYSIS Reflects what a financial buyer can afford to pay for * Stand-alone LBO does not include
a company subject to financing limitations and required synergies and may underestimate
rates of return on investment strategic sale value
* Value obtained is sensitive to
projections and operating assumptions
------------------------------------------------------------------------------------------------------------------------------------
PREMIUMS PAID IN Reflects premiums paid in minority buyout transactions * May be impacted by liquidity of stock
MINORITY BUYOUT
TRANSACTIONS ANALYSIS * Typically does not involve change of
control premium
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 31
PROJECT MOTOWN | SEPTEMBER 8, 2000
VALUATION OVERVIEW
================================================================================
VALUATION SUMMARY
(Figures in Dollars per Share)
[GRAPHIC]
(A) Current Price (9/7/00): $6.31
(B) Original Offer Price: $6.70
(C) Final Offer Price: $8.75
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<PAGE> 32
PROJECT MOTOWN | SEPTEMBER 8, 2000
VALUATION OVERVIEW
================================================================================
VALUATION SUMMARY
(Figures in Thousands, Except per Share Data)
Cash (6/30/00) $2,888
Debt (6/30/00) 18,735
Fully Diluted Shares Outstanding 24,510.4
<TABLE>
<CAPTION>
I. COMPARABLE COMPANY ANALYSIS
---------------------------------------------------------------------------------------------------------
ADJ. MULTIPLE RANGE (1) ENTERPRISE VALUE
FINANCIAL ----------------------- ------------------------
STATISTIC LOW HIGH LOW HIGH
--------- --- ---- --- ----
<S> <C> <C> <C> <C> <C>
LTM EBITDA $38,317.0 4.7x 7.8x $181,899.3 $297,546.5
LTM EBIT $28,929.0 6.4x 11.1x $185,065.6 $320,362.2
LTM EPS $0.69 9.3x 18.2x -- --
CY 2000E EBITDA $35,349.5 5.0x 7.3x $177,029.9 $259,300.9
CY 2000E EBIT $26,153.0 7.0x 10.5x $183,711.2 $274,172.6
CY 2000E EPS $0.63 8.8x 15.7x -- --
CY 2001E EBITDA (Conservative Case) $42,967.3 4.4x 6.5x $188,263.0 $280,038.7
CY 2001E EBIT (Conservative Case) $33,901.6 5.9x 9.1x $198,937.9 $309,936.0
CY 2001E EPS (Conservative Case) $0.86 7.5x 13.0x -- --
</TABLE>
<TABLE>
<CAPTION>
I. COMPARABLE COMPANY ANALYSIS
--------------------------------------------------------------------------------------------
EQUITY VALUE PRICE PER SHARE AMOUNT
------------------------- ----------------------
LOW HIGH LOW HIGH
--- ---- --- ----
<S> <C> <C> <C> <C>
LTM EBITDA $166,052.5 $281,699.7 $6.77 $11.49
LTM EBIT $169,218.9 $304,515.5 $6.90 $12.42
LTM EPS -- -- $6.93 $9.38
CY 2000E EBITDA $161,183.2 $243,454.2 $6.58 $9.93
CY 2000E EBIT $167,864.5 $258,325.9 $6.85 $10.54
CY 2000E EPS -- -- $6.05 $8.19
CY 2001E EBITDA (Conservative Case) $172,416.3 $264,191.9 $7.03 $10.78
CY 2001E EBIT (Conservative Case) $183,091.1 $294,089.3 $7.47 $12.00
CY 2001E EPS (Conservative Case) -- -- $6.83 $9.25
REFERENCE RANGE $6.82 $10.44
</TABLE>
<TABLE>
<CAPTION>
II. PRECEDENT TRANSACTION ANALYSIS
---------------------------------------------------------------------------------------------------------
ADJ. MULTIPLE RANGE (2) ENTERPRISE VALUE
FINANCIAL ----------------------- ------------------------
STATISTIC LOW HIGH LOW HIGH
--------- --- ---- --- ----
<S> <C> <C> <C> <C> <C>
CY 2000E EBITDA $35,349.5 6.9x 8.8x $245,228.1 $310,136.2
CY 2000E EBIT $26,153.0 7.9x 10.3x $205,987.1 $269,058.9
CY 2000E EPS $0.63 11.0x 16.5x -- --
</TABLE>
<TABLE>
<CAPTION>
II. PRECEDENT TRANSACTION ANALYSIS
--------------------------------------------------------------------------------------------
EQUITY VALUE PRICE PER SHARE AMOUNT
------------------------- ----------------------
LOW HIGH LOW HIGH
--- ---- --- ----
<S> <C> <C> <C> <C>
CY 2000E EBITDA $229,381.3 $294,289.5 $9.36 $12.01
CY 2000E EBIT $190,140.4 $253,212.1 $7.76 $10.33
CY 2000E EPS -- -- $7.41 $10.03
REFERENCE RANGE $8.18 $10.79
</TABLE>
----------------------------
(1) EBITDA and EBIT multiples are based on the mean plus/minus one standard
deviation. EPS multiples are based on the actual low and high ranges.
(2) Based on the mean plus/minus one standard deviation.
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<PAGE> 33
PROJECT MOTOWN | SEPTEMBER 8, 2000
VALUATION OVERVIEW
================================================================================
VALUATION SUMMARY
(Figures in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
III. DISCOUNTED CASH FLOW ANALYSIS(1)
------------------------------------------------------------------------------------------------------------------------------------
DISCOUNT RATE EBITDA EXIT MULTIPLE EQUITY VALUE
------------- -------------------- ------------
LOW HIGH LOW HIGH LOW HIGH
--- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C> <C>
Based upon Upside Case 2001-2005 Projections 14.0% 18.0% 5.5x 6.5x $295,259.7 $387,802.3
PERPETUITY GROWTH RATE EQUITY VALUE
---------------------- ------------
LOW HIGH LOW HIGH
--- ---- --- ----
3.0% 4.0% $226,916.7 $344,175.7
DISCOUNT RATE EBITDA EXIT MULTIPLE EQUITY VALUE
------------- -------------------- ------------
LOW HIGH LOW HIGH LOW HIGH
--- ---- --- ---- --- ----
Based upon Conservative Case 2001-2005 Projections 12.0% 16.0% 5.5x 6.5x $238,614.9 $318,998.5
PERPETUITY GROWTH RATE EQUITY VALUE
---------------------- ------------
LOW HIGH LOW HIGH
--- ---- --- ----
3.0% 4.0% $163,210.7 $269,304.2
</TABLE>
<TABLE>
<CAPTION>
III. DISCOUNTED CASH FLOW ANALYSIS(1)
-------------------------------------------------------------------------------------------------------------
PRICE PER SHARE AMOUNT
----------------------
LOW HIGH
--- ----
<S> <C> <C> <C>
Based upon Upside Case 2001-2005 Projections $12.05 $15.82
PRICE PER SHARE AMOUNT
----------------------
LOW HIGH
--- ----
$9.26 $14.04
REFERENCE RANGE $10.65 $14.93
PRICE PER SHARE AMOUNT
----------------------
LOW HIGH
--- ----
Based upon Conservative Case 2001-2005 Projections $9.74 $13.01
PRICE PER SHARE AMOUNT
----------------------
LOW HIGH
--- ----
$6.66 $10.99
REFERENCE RANGE $8.20 $12.00
</TABLE>
-----------------------------
(1) Based on management estimates.
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<PAGE> 34
PROJECT MOTOWN | SEPTEMBER 8, 2000
VALUATION OVERVIEW
================================================================================
VALUATION SUMMARY
(Figures in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
IV. LEVERAGED BUYOUT ANALYSIS(1)
------------------------------------------------------------------------------------------------------------------------------------
EBITDA EXIT MULTIPLE IRR RETURN EQUITY VALUE
-------------------- ---------- ------------
LOW HIGH LOW HIGH LOW HIGH
--- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C> <C>
Based upon Upside Case 2001-2005 Projections 5.5x 6.5x 35.0% 40.0% $208,828.7 $225,005.6
EBITDA EXIT MULTIPLE IRR RETURN EQUITY VALUE
-------------------- ---------- ------------
LOW HIGH LOW HIGH LOW HIGH
--- ---- --- ---- --- ----
Based upon Conservative Case 2001-2005 Projections 5.5x 6.5x 35.0% 39.9% $178,926.0 $188,975.3
</TABLE>
<TABLE>
<CAPTION>
IV. LEVERAGED BUYOUT ANALYSIS
-------------------------------------------------------------------------------------------------------------
PRICE PER SHARE AMOUNT
----------------------
LOW HIGH
--- ----
<S> <C> <C> <C>
Based upon Upside Case 2001-2005 Projections $8.52 $9.18
REFERENCE RANGE $8.52 $9.18
PRICE PER SHARE AMOUNT
----------------------
LOW HIGH
--- ----
Based upon Conservative Case 2001-2005 Projections $7.30 $7.71
REFERENCE RANGE $7.30 $7.71
</TABLE>
<TABLE>
<CAPTION>
V. PREMIUMS PAID IN MINORITY BUYOUT TRANSACTIONS(2)
------------------------------------------------------------------------------------------------------------------------------------
JLK PRICE PRIOR TO ANNOUNCEMENT AVERAGE PREMIUM PRICE PER SHARE AMOUNT
------------------------------- --------------- ----------------------
1 DAY 1 WEEK 4 WEEKS 1 DAY 1 WEEK 4 WEEKS 1 DAY 1 WEEK 4 WEEKS
----- ------ ------- ----- ------ ------- ----- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Prices Prior to Announcement Date $5.81 $4.50 $5.19 28.6% 33.9% 40.5% $7.48 $6.03 $7.29
REFERENCE RANGE $6.03 $7.48
</TABLE>
-----------------------------
(1) Based on management estimates.
(2) Announced minority buyout transactions for the period 8/1/98 - YTD 2000.
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<PAGE> 35
PROJECT MOTOWN | SEPTEMBER 8, 2000
VALUATION OVERVIEW
================================================================================
COMPARABLE COMPANIES ANALYSIS
(Figures in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
LAST SHARES
TICKER FISCAL LTM O/S PRICE @ MARKET
COMPANY SYMBOL YEAR DATE (000) 9/07/00 CAP. DEBT
------- ------ ---- ---- ----- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Current Trading Price - JLK JLK Jun-99 Jun-00 24,510 $6.31 $154,722 $18,735
Original Offer Price - JLK JLK Jun-99 Jun-00 24,510 $6.70 $164,220 $18,735
FINAL OFFER PRICE - JLK JLK JUN-99 JUN-00 24,510 $8.75 $214,466 $18,735
Airgas ARG Mar-00 Jun-00 67,147 $6.38 $428,060 $886,006
Applied Industrial Tech. (1) AIT Jun-00 Jun-00 20,550 17.00 349,358 112,168
Industrial Distribution Group IDG Dec-99 Jun-00 8,877 2.88 25,521 44,436
Lawson Products LAWS Dec-99 Jun-00 9,757 25.13 245,154 0
MSC Industrial Direct MSM Aug-99 May-00 70,070 16.00 1,121,123 87,067
W.W. Grainger GWW Dec-99 Jun-00 94,050 29.81 2,803,866 425,772
WESCO International (2) WCC Dec-99 Jun-00 49,454 9.19 454,357 789,945
</TABLE>
<TABLE>
<CAPTION>
52 - WEEK
PRICE RANGE
FIRM ------------------ PRICE IN
COMPANY CASH VALUE HIGH LOW RANGE
------- ---- ----- ---- --- -----
<S> <C> <C> <C> <C> <C>
Current Trading Price - JLK $2,888 $170,569 $11.69 $4.50 25%
Original Offer Price - JLK $2,888 $180,067 $11.69 $4.50 31%
FINAL OFFER PRICE - JLK $2,888 $230,313 $11.69 $4.50 59%
Airgas $0 $1,314,066 $13.13 $4.63 21%
Applied Industrial Tech. (1) 12,349 449,177 18.31 14.31 67%
Industrial Distribution Group 695 69,262 4.81 2.25 24%
Lawson Products 18,296 226,858 26.00 20.50 84%
MSC Industrial Direct 5,645 1,202,545 23.25 7.50 54%
W.W. Grainger 57,139 3,172,499 56.88 28.50 5%
WESCO International (2) 17,239 1,227,063 17.44 5.50 31%
</TABLE>
SECTION 2: MULTIPLE ANALYSIS
<TABLE>
<CAPTION>
FIRM VALUE/REVENUE MULTIPLE FIRM VALUE/EBITDA MULTIPLE
----------------------------- --------------------------------
COMPANY LTM 2000E 2001E LTM 2000E 2001E
------- --- ----- ----- --- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Current Trading Price - JLK 0.3x 0.3x 0.3x 4.5x 4.8x 3.8x
Original Offer Price - JLK 0.4x 0.4x 0.3x 4.7x 5.1x 4.0x
FINAL OFFER PRICE - JLK 0.5x 0.5x 0.4x 6.0x 6.5x 5.1x
Airgas 0.8x 0.8x 0.8x 6.3x 6.2x 5.7x
Applied Industrial Tech. (1) 0.3x 0.3x 0.3x 5.6x 5.3x 4.5x
Industrial Distribution Group 0.1x 0.1x 0.1x 5.1x 4.8x 4.2x
Lawson Products 0.7x NA NA 4.5x NA NA
MSC Industrial Direct 1.6x* 1.4x* 1.1x* 12.1x* 10.4x* 8.1x*
W.W. Grainger 0.7x 0.6x 0.6x 8.2x 7.5x 6.3x
WESCO International (2) 0.3x 0.3x 0.3x 7.9x 7.1x 6.6x
-----------------------------------------------------------------------------------------------------------
High 0.8x 0.8x 0.8x 8.2x 7.5x 6.6x
MEDIAN 0.5x 0.3x 0.3x 6.0x 6.2x 5.7x
Mean 0.5x 0.4x 0.4x 6.3x 6.2x 5.4x
Low 0.1x 0.1x 0.1x 4.5x 4.8x 4.2x
-----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FIRM VALUE/EBIT MULTIPLE P/E MULTIPLE
-------------------------------- --------------------------------
COMPANY LTM 2000E 2001E LTM 2000E 2001E
------- --- ----- ----- --- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Current Trading Price - JLK 5.9x 6.5x 4.7x 9.2x 10.0x 6.9x
Original Offer Price - JLK 6.2x 6.9x 5.0x 9.7x 10.6x 7.3x
FINAL OFFER PRICE - JLK 8.0x 8.8x 6.4x 12.7x 13.8x 9.5x
Airgas 11.2x 11.1x 9.8x 12.0x 11.8x 9.7x
Applied Industrial Tech. (1) 7.8x 7.4x 6.2x 11.3x 10.3x 8.3x
Industrial Distribution Group 7.8x 7.1x 5.8x 9.5x 9.6x 8.2x
Lawson Products 5.2x NA NA 9.3x NA NA
MSC Industrial Direct 13.8x* 12.1x* 9.2x* 21.8x* 19.2x* 15.9x*
W.W. Grainger 11.3x 10.0x 8.2x 18.2x 15.7x 13.0x
WESCO International (2) 9.2x 8.2x 7.5x 10.8x 8.8x 7.5x
------------------------------------------------------------------------------------------------------------
High 11.3x 11.1x 9.8x 18.2x 15.7x 13.0x
MEDIAN 8.5x 8.2x 7.5x 11.1x 10.3x 8.3x
Mean 8.7x 8.8x 7.5x 11.9x 11.2x 9.3x
Low 5.2x 7.1x 5.8x 9.3x 8.8x 7.5x
------------------------------------------------------------------------------------------------------------
</TABLE>
* Excludes data outliers.
(1) Shares outstanding are from the 10-Q for the period ended March 31, 2000.
(2) Includes $337.6 million A/R securitization program based on 10-K disclosure.
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<PAGE> 36
PROJECT MOTOWN | SEPTEMBER 8, 2000
VALUATION OVERVIEW
================================================================================
PRECEDENT TRANSACTIONS ANALYSIS
(Figures in Millions, Except per Share Data)
<TABLE>
<CAPTION>
DATE NET FIRM
TARGET NAME ACQUIROR NAME ANNOUNCED DEBT VALUE
----------- ------------- --------- ---- -----
<S> <C> <C> <C> <C>
JLK DIRECT DISTRIBUTION INC KENNAMETAL INC TBD $15.8 $230.3
Bruckner Supply Co Inc WESCO Distribution Inc 09/11/98 $3.5 $101.3
White Cap Industries Inc Investor Group 07/22/99 54.7 239.0
Tristar Aerospace Co AlliedSignalInc 11/01/99 107.0 283.8
Vallen Corp Hagemeyer NV 11/15/99 16.8 199.0
JA Sexauer Inc (Dyson Kissner) Wilmar Industries Inc 11/15/99 0.0 85.0
Wilmar Industries Inc Investor Group 12/23/99 62.0 290.9
Cameron Ashley Building Prods Guardian Industries 01/17/00 170.6 342.0
Barnett Inc. (Waxman USA) Wilmar Industries Inc 07/10/00 33.0 241.6
Westburne Inc Rexel S.A. 07/20/00 126.2 1,116.1
HIGH
MEAN
MEDIAN
LOW
</TABLE>
<TABLE>
<CAPTION>
PREMIUMS PAID
-----------------------------
EQUITY OFFER 1 DAY 1 WEEK 1 MONTH
TARGET NAME VALUE PRICE PRIOR PRIOR PRIOR
----------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
JLK DIRECT DISTRIBUTION INC $214.5 $8.75 50.5% 94.4% 68.7%
Bruckner Supply Co Inc $99.1 NA NA NA NA
White Cap Industries Inc 185.4 $16.50 49.2% 45.1% 55.3%
Tristar Aerospace Co 182.0 9.50 43.4% 67.0% 65.2%
Vallen Corp 184.0 25.00 26.6% 47.1% 83.5%
JA Sexauer Inc (Dyson Kissner) 86.4 NA NA NA NA
Wilmar Industries Inc 229.8 18.25 30.4% 27.0% 18.7%
Cameron Ashley Building Prods 171.4 18.35 64.0% 59.6% 101.1%
Barnett Inc. (Waxman USA) 214.0 13.15 25.2% 35.3% 29.9%
Westburne Inc 989.9 22.75 14.0% 23.0% 20.7%
HIGH 64.0% 67.0% 101.1%
MEAN 36.1% 43.4% 53.5%
MEDIAN 30.4% 45.1% 55.3%
LOW 14.0% 23.0% 18.7%
</TABLE>
<TABLE>
<CAPTION>
LTM
------------------------------------------------
TARGET NAME ACQUIROR NAME NET INCOME REVENUE EBITDA EBIT
----------- ------------- ---------- ------- ------ ----
<S> <C> <C> <C> <C> <C>
JLK DIRECT DISTRIBUTION INC KENNAMETAL INC $16.9 $499.3 $38.3 $28.9
Bruckner Supply Co Inc WESCO Distribution Inc $8.5 $241.3 $13.6 $13.5
White Cap Industries Inc Investor Group 10.6 304.2 26.3 21.4
Tristar Aerospace Co AlliedSignalInc 15.6 207.4 35.5 33.0
Vallen Corp Hagemeyer NV 12.0 387.0 23.9 19.1
JA Sexauer Inc (Dyson Kissner) Wilmar Industries Inc 5.2 79.0 10.2 9.4
Wilmar Industries Inc Investor Group 13.9 295.5 32.3 29.1
Cameron Ashley Building Prods Guardian Industries 17.1 1,138.4 51.8 39.3
Barnett Inc. (Waxman USA) Wilmar Industries Inc 15.9 278.8 34.3 28.6
Westburne Inc Rexel S.A. 88.9 2,753.0 163.3 142.0
HIGH
MEAN
MEDIAN
LOW
</TABLE>
<TABLE>
<CAPTION>
LTM
--------------------------------------------
EQUITY VALUE/ FIRM VALUE/
------------- ----------------------------
TARGET NAME NET INCOME REVENUE EBITDA EBIT
----------- ---------- ------- ------ ----
<S> <C> <C> <C> <C>
JLK DIRECT DISTRIBUTION INC 12.7x 0.5x 6.0x 8.0x
Bruckner Supply Co Inc 11.7x 0.4x 7.4x 7.5x
White Cap Industries Inc 17.6 0.8 9.1 11.2
Tristar Aerospace Co 11.7 1.4 8.0 8.6
Vallen Corp 15.3 0.5 8.3 10.4
JA Sexauer Inc (Dyson Kissner) 16.5 1.1 8.3 9.0
Wilmar Industries Inc 16.5 1.0 9.0 10.0
Cameron Ashley Building Prods 10.0 0.3 6.6 8.7
Barnett Inc. (Waxman USA) 13.4 0.9 7.0 8.5
Westburne Inc 11.1 0.4 6.8 7.9
HIGH 17.6x 1.4x 9.1x 11.2x
MEAN 13.8 0.7 7.9 9.1
MEDIAN 13.4 0.8 8.0 8.7
LOW 10.0 0.3 6.6 7.5
</TABLE>
[CIBC WORLD MARKETS LOGO]
36
<PAGE> 37
PROJECT MOTOWN | SEPTEMBER 8, 2000
VALUATION OVERVIEW
================================================================================
DISCOUNTED CASH FLOW ANALYSIS (EBITDA MULTIPLE METHOD) - UPSIDE CASE
(Figures in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
ACTUAL PROJECTED
---------- ---------------------------------------------------------------------
Fiscal Year End 06/30 2000 2001 2002 2003 2004 2005
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues $499,292.0 $523,194.0 $565,566.0 $614,410.0 $671,521.0 $738,255.0
EBITDA 38,317.0 38,005.0 47,569.0 57,791.0 71,022.0 83,496.0
Less: Depreciation & Amortization (9,388.0) (9,005.0) (9,132.0) (8,741.0) (9,463.0) (9,947.0)
---------- ---------- ---------- ---------- ---------- ----------
EBIT 28,929.0 29,000.0 38,437.0 49,050.0 61,559.0 73,549.0
Less: Income Taxes @ 39.5% (11,427.0) (11,455.0) (15,182.6) (19,374.8) (24,315.8) (29,051.9)
---------- ---------- ---------- ---------- ---------- ----------
UNLEVERED AFTER-TAX INCOME 17,502.0 17,545.0 23,254.4 29,675.3 37,243.2 44,497.1
Plus: Depreciation & Amortization 9,388.0 9,005.0 9,132.0 8,741.0 9,463.0 9,947.0
Less: Capital Expenditures (7,699.0) (6,867.0) (7,000.0) (7,000.0) (7,000.0) (7,000.0)
Less: Working Capital Investment (24,403.9) 13,698.9 5,596.0 2,635.0 (1,264.0) (3,336.0)
---------- ---------- ---------- ---------- ---------- ----------
FREE CASH FLOW $ (5,212.9) $ 33,381.9 $ 30,982.4 $ 34,051.3 $ 38,442.2 $ 44,108.1
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
TERMINAL VALUE BASED ON EBITDA
MULTIPLE --------------------------------------------------------------------------------------------------
EXIT MULTIPLE IN YEAR 5 (2005) 5.5 X EBITDA | 6.0 X EBITDA 6.5 X EBITDA
--------------------------------------------------------------------------------------------------
14.0% 16.0% 18.0% 14.0% 16.0% 18.0% 14.0% 16.0% 18.0%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Discounted Free Cash Flows
2001 - 2005 $121,775.2 $115,849.4 $110,373.6 $121,775.2 $115,849.4 $110,373.6 $121,775.2 $115,849.4 $110,373.6
Discounted Terminal Value 238,508.6 218,644.4 200,732.8 260,191.2 238,521.2 218,981.2 281,873.8 258,398.0 237,229.7
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
ENTERPRISE VALUE 360,283.8 334,493.8 311,106.4 381,966.4 354,370.6 329,354.8 403,649.0 374,247.4 347,603.3
Less: Debt, Preferred &
Minority Interest @
06/30/00(1) (18,734.7) (18,734.7) (18,734.7) (18,734.7) (18,734.7) (18,734.7) (18,734.7) (18,734.7) (18,734.7)
Plus: Cash @ 06/30/00 2,888.0 2,888.0 2,888.0 2,888.0 2,888.0 2,888.0 2,888.0 2,888.0 2,888.0
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
IMPLIED EQUITY VALUE $344,437.1 $318,647.1 $295,259.7 $366,119.7 $338,523.9 $313,508.1 $387,802.3 $358,400.6 $331,756.5
========== ========== ========== ========== ========== ========== ========== ========== ==========
-------------------------------
Shares Outstanding 24,510.4
-------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
EQUITY VALUE BASED ON EBITDA MULTIPLE
-----------------------------------------------------------------------------------------
EBITDA Terminal Multiple
Discount ---------------------------------------------------------------
Rate 5.5x 6.0x 6.5x
-------- --------------- --------------- ---------------
<S> <C> <C> <C>
14.0% $14.05 $14.94 $15.82
16.0% $13.00 $13.81 $14.62
18.0% $12.05 $12.79 $13.54
-----------------------------------------------------------------------------------------
</TABLE>
---------------
(1) Assumes that A/R securitization program has been unwound.
[CIBC WORLD MARKETS LOGO]
37
<PAGE> 38
PROJECT MOTOWN | SEPTEMBER 8, 2000
VALUATION OVERVIEW
================================================================================
DISCOUNTED CASH FLOW ANALYSIS (PERPETUITY METHOD) - UPSIDE CASE
(Figures in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
ACTUAL PROJECTED
---------- ---------------------------------------------------------------------
Fiscal Year End 06/30 2000 2001 2002 2003 2004 2005
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sales $499,292.0 $523,194.0 $565,566.0 $614.410.0 $671,521.0 $738,255.0
EBITDA 38,317.0 38,005.0 47,569.0 57,791.0 71,022.0 83,496.0
Less: Depreciation & Amortization (9,388.0) (9,005.0) (9,132.0) (8,741.0) (9,463.0) (9,947.0)
---------- ---------- ---------- ---------- ---------- ----------
EBIT 28,929.0 29,000.0 38,437.0 49,050.0 61,559.0 73,549.0
Less: Income Taxes @ 39.5% (11,427.0) (11,455.0) (15,182.6) (19,374.8) (24,315.8) (29,051.9)
---------- ---------- ---------- ---------- ---------- ----------
UNLEVERED AFTER-TAX INCOME 17,502.0 17,545.0 23,254.4 29,675.3 37,243.2 44,497.1
Plus: Depreciation & Amortization 9,388.0 9,005.0 9,132.0 8,741.0 9,463.0 9,947.0
Less: Capital Expenditures (7,699.0) (6,867.0) (7,000.0) (7,000.0) (7,000.0) (7,000.0)
Less: Working Capital Investment (24,403.9) 13,698.9 5,596.0 2,635.0 (1,264.0) (3,336.0)
---------- ---------- ---------- ---------- ---------- ----------
FREE CASH FLOW $ (5,212.9) $ 33,381.9 $ 30,982.4 $ 34,051.3 $ 38,442.2 $ 44,108.1
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
TERMINAL VALUE BASED ON FREE
CASH FLOW --------------------------------------------------------------------------------------------------
PERPETUITY GROWTH AFTER YEAR 3.0% PERPETUITY GROWTH RATE 3.5% PERPETUITY GROWTH RATE 4.0% PERPETUITY GROWTH RATE
2005 --------------------------------------------------------------------------------------------------
14.0% 16.0% 18.0% 14.0% 16.0% 18.0% 14.0% 16.0% 18.0%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Discounted Free Cash Flows
2001 - 2005 $121,775.2 $115,849.4 $110,373.6 $121,775.2 $115,849.4 $110,373.6 $121,775.2 $115,849.4 $110,373.6
Discounted Terminal Value 214,505.8 166,388.3 132,389.9 225,811.3 173,883.8 137,619.9 238,247.2 182,004.0 143,223.4
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
ENTERPRISE VALUE 336,281.0 282,237.7 242,763.5 347,586.4 289,733.2 247,993.5 360,022.4 297,853.4 253,597.0
Less: Debt, Preferred &
Minority Interest @
06/30/00(1) (18,734.7) (18,734.7) (18,734.7) (18,734.7) (18,734.7) (18,734.7) (18,734.7) (18,734.7) (18,734.7)
Plus: Cash @ 06/30/00 2,888.0 2,888.0 2,888.0 2,888.0 2,888.0 2,888.0 2,888.0 2,888.0 2,888.0
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
IMPLIED EQUITY VALUE $320,434.3 $266,390.9 $226,916.7 $331,739.7 $273,886.5 $232,146.7 $344,175.7 $282,006.7 $237,750.3
========== ========== ========== ========== ========== ========== ========== ========== ==========
-------------------------------
Shares Outstanding 24,510.4
-------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
EQUITY VALUE PER SHARE BASED ON PERPETUITY GROWTH
-----------------------------------------------------------------------------------------
Terminal Growth Rate
Discount ---------------------------------------------------------------
Rate 3.0% 3.5% 4.0%
-------- --------------- --------------- ---------------
<S> <C> <C> <C>
14.0% $13.07 $13.53 $14.04
16.0% $10.87 $11.17 $11.51
18.0% $9.26 $9.47 $9.70
-----------------------------------------------------------------------------------------
</TABLE>
---------------
(1) Assumes that A/R securitization program has been unwound.
[CIBC WORLD MARKETS LOGO]
38
<PAGE> 39
PROJECT MOTOWN | SEPTEMBER 8, 2000
VALUATION OVERVIEW
================================================================================
DISCOUNTED CASH FLOW ANALYSIS (EBITDA MULTIPLE METHOD) - CONSERVATIVE CASE
(Figures in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
ACTUAL PROJECTED
---------- ---------------------------------------------------------------------
Fiscal Year End 06/30 2000 2001 2002 2003 2004 2005
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues $499,292.0 $523,194.0 $549,230.0 $583,707.0 $618,844.0 $655,952.0
EBITDA 38,317.0 38,005.0 43,026.0 50,495.0 58,805.0 68,249.0
Less: Depreciation & Amortization (9,388.0) (9,005.0) (9,132.0) (8,741.0) (9,463.0) (9,947.0)
---------- ---------- ---------- ---------- ---------- ----------
EBIT 28,929.0 29,000.0 33,894.0 41,754.0 49,342.0 58,302.0
Less: Income Taxes @ 39.5% (11,427.0) (11,455.0) (13,388.1) (16,492.8) (19,490.1) (23,029.3)
---------- ---------- ---------- ---------- ---------- ----------
UNLEVERED AFTER-TAX INCOME 17,502.0 17,545.0 20,505.9 25,261.2 29,851.9 35,272.7
Plus: Depreciation & Amortization 9,388.0 9,005.0 9,132.0 8,741.0 9,463.0 9,947.0
Less: Capital Expenditures (7,699.0) (6,867.0) (7,000.0) (7,000.0) (7,000.0) (7,000.0)
Less: Working Capital Investment (24,403.9) 13,698.9 (8,566.0) (9,509.0) (10,114.0) (10,832.0)
---------- ---------- ---------- ---------- ---------- ----------
FREE CASH FLOW $ (5,212.9) $ 33,381.9 $ 14,071.9 $ 17,493.2 $ 22,200.9 $ 27,387.7
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
TERMINAL VALUE BASED ON EBITDA
MULTIPLE --------------------------------------------------------------------------------------------------
EXIT MULTIPLE IN YEAR 5 (2005) 5.5 X EBITDA | 6.0 X EBITDA | 6.5 X EBITDA
--------------------------------------------------------------------------------------------------
12.0% 14.0% 16.0% 12.0% 14.0% 16.0% 12.0% 14.0% 16.0%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Discounted Free Cash Flows
2001 - 2005 $ 83,124.2 $ 79,286.7 $ 75,743.3 $ 83,124.2 $ 79,286.7 $ 75,743.3 $ 83,124.2 $ 79,286.7 $ 75,743.3
Discounted Terminal Value 212,994.7 194,955.2 178,718.3 232,357.9 212,678.4 194,965.4 251,721.1 230,401.5 211,212.5
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
ENTERPRISE VALUE 296,118.9 274,241.8 254,461.6 315,482.1 291,965.0 270,708.8 334,845.2 309,688.2 286,955.9
Less: Debt, Preferred &
Minority Interest @
06/30/00(1) (18,734.7) (18,734.7) (18,734.7) (18,734.7) (18,734.7) (18,734.7) (18,734.7) (18,734.7) (18,734.7)
Plus: Cash @ 06/30/00 2,888.0 2,888.0 2,888.0 2,888.0 2,888.0 2,888.0 2,888.0 2,888.0 2,888.0
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
IMPLIED EQUITY VALUE $280,272.2 $258,395.1 $238,614.9 $299,635.3 $276,118.3 $254,862.0 $318,998.5 $293,841.5 $271,109.2
========== ========== ========== ========== ========== ========== ========== ========== ==========
-------------------------------
Shares Outstanding 24,510.4
-------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
EQUITY VALUE BASED ON EBITDA MULTIPLE
-----------------------------------------------------------------------------------------
EBITDA Terminal Multiple
Discount ---------------------------------------------------------------
Rate 5.5x 6.0x 6.5x
-------- --------------- --------------- ---------------
<S> <C> <C> <C>
12.0% $11.43 $12.22 $13.01
14.0% $10.54 $11.27 $11.99
16.0% $ 9.74 $10.40 $11.06
-----------------------------------------------------------------------------------------
</TABLE>
---------------
(1) Assumes that A/R securitization program has been unwound.
[CIBC WORLD MARKETS LOGO]
39
<PAGE> 40
PROJECT MOTOWN | SEPTEMBER 8, 2000
VALUATION OVERVIEW
================================================================================
DISCOUNTED CASH FLOW ANALYSIS (PERPETUITY METHOD) - CONSERVATIVE CASE
(Figures in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
ACTUAL PROJECTED
---------- ---------------------------------------------------------------------
Fiscal Year End 06/30 2000 2001 2002 2003 2004 2005
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sales $499,292.0 $523,194.0 $549,230.0 $583,707.0 $618,844.0 $655,952.0
EBITDA 38,317.0 38,005.0 43,026.0 50,495.0 58,805.0 68,249.0
Less: Depreciation & Amortization (9,388.0) (9,005.0) (9,132.0) (8,741.0) (9,463.0) (9,947.0)
---------- ---------- ---------- ---------- ---------- ----------
EBIT 28,929.0 29,000.0 33,894.0 41,754.0 49,342.0 58,302.0
Less: Income Taxes @ 39.5% (11,427.0) (11,455.0) (13,388.1) (16,492.8) (19,490.1) (23,029.3)
---------- ---------- ---------- ---------- ---------- ----------
UNLEVERED AFTER-TAX INCOME 17,502.0 17,545.0 20,505.9 25,261.2 29,851.9 35,272.7
Plus: Depreciation & Amortization 9,388.0 9,005.0 9,132.0 8,741.0 9,463.0 9,947.0
Less: Capital Expenditures (7,699.0) (6,867.0) (7,000.0) (7,000.0) (7,000.0) (7,000.0)
Less: Working Capital Investment (24,403.9) 13,698.9 (8,566.0) (9,509.0) (10,114.0) (10,832.0)
---------- ---------- ---------- ---------- ---------- ----------
FREE CASH FLOW $ (5,212.9) $ 33,381.9 $ 14,071.9 $ 17,493.2 $ 22,200.9 $ 27,387.7
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
TERMINAL VALUE BASED ON FREE
CASH FLOW --------------------------------------------------------------------------------------------------
PERPETUITY GROWTH AFTER YEAR 3.0% PERPETUITY GROWTH RATE | 3.5% PERPETUITY GROWTH RATE | 4.0% PERPETUITY GROWTH RATE
2005 --------------------------------------------------------------------------------------------------
12.0% 14.0% 16.0% 12.0% 14.0% 16.0% 12.0% 14.0% 16.0%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Discounted Free Cash Flows
2001 - 2005 $ 83,124.2 $ 79,286.7 $ 75,743.3 $ 83,124.2 $ 79,286.7 $ 75,743.3 $ 83,124.2 $ 79,286.7 $ 75,743.3
Discounted Terminal Value 177,852.6 133,191.3 103,314.1 189,228.7 140,211.1 107,968.3 202,026.8 147,932.9 113,010.3
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
ENTERPRISE VALUE 260,976.8 212,478.0 179,057.5 272,352.9 219,497.8 183,711.6 285,151.0 227,219.6 188,753.6
Less: Debt, Preferred &
Minority Interest @
06/30/00(1) (18,734.7) (18,734.7) (18,734.7) (18,734.7) (18,734.7) (18,734.7) (18,734.7) (18,734.7) (18,734.7)
Plus: Cash @ 06/30/00 2,888.0 2,888.0 2,888.0 2,888.0 2,888.0 2,888.0 2,888.0 2,888.0 2,888.0
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
IMPLIED EQUITY VALUE $245,130.1 $196,631.3 $163,210.7 $256,506.2 $203,651.1 $167,864.9 $269,304.2 $211,372.8 $172,906.9
========== ========== ========== ========== ========== ========== ========== ========== ==========
-------------------------------
Shares Outstanding 24,510.4
-------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
EQUITY VALUE PER SHARE BASED ON PERPETUITY GROWTH
-----------------------------------------------------------------------------------------
Terminal Growth Rate
Discount ---------------------------------------------------------------
Rate 3.0% 3.5% 4.0%
-------- --------------- --------------- ---------------
<S> <C> <C> <C>
12.0% $10.00 $10.47 $10.99
14.0% $ 8.02 $ 8.31 $ 8.62
16.0% $ 6.66 $ 6.85 $ 7.05
-----------------------------------------------------------------------------------------
</TABLE>
---------------
(1) Assumes that A/R securitization program has been unwound.
[CIBC WORLD MARKETS LOGO]
40
<PAGE> 41
PROJECT MOTOWN | SEPTEMBER 8, 2000
VALUATION OVERVIEW
================================================================================
LBO RETURNS SUMMARY - UPSIDE CASE
(Figures in Thousands, Except per Share Data)
PURCHASE PRICE @ $8.52
<TABLE>
<CAPTION>
SOURCES AND USES OF FUNDS
SOURCES OF FUNDS AMOUNT RATE PERCENT
---------------- --------- ---- -------
<S> <C> <C> <C>
Bank Revolver $ 0.0 8.5% 0.0%
Acquisition Senior Debt(1) 105,371.8 9.7% 44.9%
Acquisition PIK Preferred 0.0 12.5% 0.0%
Acquisition Subordinated Debt(2) 47,896.3 12.5% 20.4%
Equity Sponsor 81,293.5 34.7%
---------- -----
TOTAL SOURCES OF FUNDS $234,561.5 100.0%
USES OF FUNDS
-------------
Purchase of Motown Common Equity $208,828.7 89.0%
Existing Motown Current Debt 18,734.7 8.0%
Existing Motown Senior Debt 0.0 0.0%
Transaction Costs 2,400.0 1.0%
Deferred Fees 4,598.0 3.0% 2.0%
---------- -----
TOTAL USES OF FUNDS $234,561.5 100.0%
</TABLE>
<TABLE>
SUMMARY CREDIT/LEVERAGE STATISTICS
2000 PF 2001 2002
-----------------------------
<S> <C> <C> <C>
Total Debt, Preferred & Minority Interest/EBITDA 4.0x 3.5x 2.4x
EBITDA/Fixed Charges 3.8x 2.4x 3.3x
(EBITDA-Capex)/Fixed Charges 3.0x 1.9x 2.8x
</TABLE>
<TABLE>
<CAPTION>
EQUITY SPONSOR IRR CALCULATION
EBITDA MULTIPLE 2003 2004 2005
--------------- -----------------------------
<S> <C> <C> <C>
5.5x 37.4% 39.4% 37.5%
6.0x 42.9% 42.6% 40.0%
6.5x 48.1% 46.0% 42.4%
</TABLE>
PURCHASE PRICE @ 9.18
SOURCES AND USES OF FUNDS
<TABLE>
<CAPTION>
SOURCES OF FUNDS AMOUNT RATE PERCENT
---------------- --------- ---- -------
<S> <C> <C> <C>
Bank Revolver $ 0.0 8.5% 0.0%
Acquisition Senior Debt(1) 105,371.8 9.7% 44.9%
Acquisition PIK Preferred 0.0 12.5% 0.0%
Acquisition Subordinated Debt(2) 47,896.3 12.5% 20.4%
Equity Sponsor 97,570.3 41.6%
---------- -----
TOTAL SOURCES OF FUNDS $250,838.3 106.9%
USES OF FUNDS
-------------
Purchase of Motown Common Equity $225,005.6 95.9%
Existing Motown Current Debt 18,734.7 8.0%
Existing Motown Senior Debt 0.0 0.0%
Transaction Costs 2,500.0 1.1%
Deferred Fees 4,598.0 3.0% 2.0%
---------- -----
TOTAL USES OF FUNDS $250,838.3 106.9%
</TABLE>
<TABLE>
SUMMARY CREDIT/LEVERAGE STATISTICS
2000 PF 2001 2002
-----------------------------
<S> <C> <C> <C>
Total Debt, Preferred & Minority Interest/EBITDA 4.0x 3.5x 2.4x
EBITDA/Fixed Charges 3.8x 2.4x 3.3x
(EBITDA-Capex)/Fixed Charges 3.0x 1.9x 2.8x
</TABLE>
<TABLE>
<CAPTION>
EQUITY SPONSOR IRR CALCULATION
EBITDA MULTIPLE 2003 2004 2005
--------------- -----------------------------
<S> <C> <C> <C>
5.5x 29.3% 32.8% 32.5%
6.0x 34.5% 36.3% 35.0%
6.5x 39.3% 39.5% 37.3%
</TABLE>
(1) Assumed at 400 bps above 10-year Treasury Notes.
(2) Rate is made equivalent to 12.5% coupon rate on subordinated debt. Attached
warrants are assumed at 12% of company equity.
These adjustments are made to achieve an approximate 22% IRR for debt
holders.
[CIBC WORLD MARKETS LOGO]
41
<PAGE> 42
PROJECT MOTOWN | SEPTEMBER 8, 2000
VALUATION OVERVIEW
================================================================================
LBO RETURNS SUMMARY - CONSERVATIVE CASE
(Figures in Thousands, Except per Share Data)
PURCHASE PRICE @ $7.30
<TABLE>
<CAPTION>
SOURCES AND USES OF FUNDS
SOURCES OF FUNDS AMOUNT RATE PERCENT
---------------- --------- ---- -------
<S> <C> <C> <C>
Bank Revolver $ 0.0 8.5% 0.0%
Acquisition Senior Debt(1) 105,371.8 9.7% 51.6%
Acquisition PIK Preferred 0.0 12.5% 0.0%
Acquisition Subordinated Debt(2) 47,896.3 12.5% 23.4%
Equity Sponsor 51,090.8 25.0%
---------- -----
TOTAL SOURCES OF FUNDS $204,358.8 100.0%
USES OF FUNDS
-------------
Purchase of Motown Common Equity $178,926.0 87.6%
Existing Motown Current Debt 18,734.7 9.2%
Existing Motown Senior Debt 0.0 0.0%
Transaction Costs 2,100.0 1.0%
Deferred Fees 4,598.0 3.0% 2.2%
---------- -----
TOTAL USES OF FUNDS $204,358.8 100.0%
</TABLE>
<TABLE>
SUMMARY CREDIT/LEVERAGE STATISTICS
2000 PF 2001 2002
-----------------------------
<S> <C> <C> <C>
Total Debt, Preferred & Minority Interest/EBITDA 4.0x 3.5x 2.4x
EBITDA/Fixed Charges 3.8x 2.4x 3.0x
(EBITDA-Capex)/Fixed Charges 3.0x 1.9x 2.5x
</TABLE>
<TABLE>
<CAPTION>
EQUITY SPONSOR IRR CALCULATION
EBITDA MULTIPLE 2003 2004 2005
--------------- -----------------------------
<S> <C> <C> <C>
5.5x 38.6% 38.0% 36.8%
6.0x 45.7% 42.5% 40.0%
6.5x 52.3% 46.7% 42.9%
</TABLE>
PURCHASE PRICE @ 7.71
SOURCES AND USES OF FUNDS
<TABLE>
<CAPTION>
SOURCES OF FUNDS AMOUNT RATE PERCENT
---------------- --------- ---- -------
<S> <C> <C> <C>
Bank Revolver $ 0.0 8.5% 0.0%
Acquisition Senior Debt(1) 105,371.8 9.7% 51.6%
Acquisition PIK Preferred 0.0 12.5% 0.0%
Acquisition Subordinated Debt(2) 47,896.3 12.5% 24.4%
Equity Sponsor 61,240.0 30.0%
---------- -----
TOTAL SOURCES OF FUNDS $214,508.0 105.0%
USES OF FUNDS
-------------
Purchase of Motown Common Equity $188,975.3 92.5%
Existing Motown Current Debt 18,734.7 9.2%
Existing Motown Senior Debt 0.0 0.0%
Transaction Costs 2,200.0 1.1%
Deferred Fees 4,598.0 3.0% 2.2%
---------- -----
TOTAL USES OF FUNDS $214,508.0 105.0%
</TABLE>
<TABLE>
SUMMARY CREDIT/LEVERAGE STATISTICS
2000 PF 2001 2002
-----------------------------
<S> <C> <C> <C>
Total Debt, Preferred & Minority Interest/EBITDA 4.0x 3.5x 2.4x
EBITDA/Fixed Charges 3.8x 2.4x 3.0x
(EBITDA-Capex)/Fixed Charges 3.0x 1.9x 2.5x
</TABLE>
<TABLE>
<CAPTION>
EQUITY SPONSOR IRR CALCULATION
EBITDA MULTIPLE 2003 2004 2005
--------------- -----------------------------
<S> <C> <C> <C>
5.5x 30.5% 31.8% 31.9%
6.0x 37.2% 36.2% 35.0%
6.5x 43.3% 40.2% 37.8%
</TABLE>
(1) Assumed at 400 bps above 10-year Treasury Notes.
(2) Rate is made equivalent to 12.5% coupon rate on subordinated debt. Attached
warrants are assumed at 12% of company equity.
These adjustments are made to achieve an approximate 22% IRR for debt
holders.
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<PAGE> 43
PROJECT MOTOWN | SEPTEMBER 8, 2000
VALUATION OVERVIEW
================================================================================
MINORITY BUYOUT PREMIUMS PAID ANALYSIS
* Parameters:
* Announced domestic minority buyout transactions for the period 8/1/98 --
YTD 2000
* Offer price premium measured as premium over share price of the target as
of one day, one week, and four weeks prior to the Proposal Announcement
date of July 20, 2000
Average Premium Above Share Price Prior to Announcement
1 Day 1 Week 4 Weeks
-------------------------------------------------------
28.6% 33.9% 40.5%
Price Prior to
Announcement
7/20/00 7/13/00 6/22/00
-------------------------------------------------------
$5.81 $4.50 $5.19
Implied Share Price Based On
1 Day Premium 1 Week Premium 4 Week Premium
-------------------------------------------------------
$7.48 $6.03 $7.29
Implied Share Price Range
Low Mid High
-------------------------------------------------------
$6.03 $7.29 $7.48
Source: Securities Data Corporation
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<PAGE> 44
PROJECT MOTOWN | SEPTEMBER 8, 2000
5 APPENDICES
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<PAGE> 45
PROJECT MOTOWN | SEPTEMBER 8, 2000
A MANAGEMENT PROJECTIONS
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<PAGE> 46
PROJECT MOTOWN | SEPTEMBER 8, 2000
MANAGEMENT PROJECTIONS
================================================================================
MOTOWN INCOME STATEMENT -- UPSIDE CASE
(Figures in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
ACTUAL PROJECTED
---------------------------------------------- ----------------------------------------------
Fiscal Year End 06/30 1996 1999 2000 2001 2002 2003 2004 2005
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $425,348.0 $531,642.0 $499,292.0 $523,194.0 $565,566.0 $614,410.0 $671,521.0 $738,255.0
Cost of Goods Sold 277,417.0 361,717.0 340,333.0 357,198.0 385,329.0 417,161.0 453,903.0 496,077.0
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
GROSS PROFIT 147,931.0 169,925.0 158,959.0 165,996.0 180,237.0 197,249.0 217,618.0 242,178.0
SG&A 101,438.0 126,644.0 120,642.0 127,991.0 132,668.0 139,458.0 146,596.0 158,682.0
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
EBITDA 46,493.0 43,281.0 38,317.0 38,005.0 47,569.0 57,791.0 71,022.0 83,496.0
Depreciation 5,185.0 8,749.0 4,659.0 5,596.0 5,993.0 6,418.0 7,275.0 7,759.0
Amortization 0.0 0.0 4,729.0 3,409.0 3,139.0 2,323.0 2,188.0 2,188.0
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
EBIT 41,308.0 34,532.0 28,929.0 29,000.0 38,437.0 49,050.0 61,559.0 73,549.0
Interest Expense (net) (3,068.0) 881.0 1,395.0 (361.0) (1,534.0) (3,259.0) (5,228.0) (7,512.0)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
PRE-TAX INCOME 44,376.0 33,651.0 27,534.0 29,361.0 39,971.0 52,309.0 66,787.0 81,061.0
Provision for Taxes 17,300.0 13,291.0 10,672.5 11,451.0 15,589.0 20,401.0 26,047.0 31,614.0
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
NET INCOME TO COMMON $ 27,076.0 $ 20,360.0 $ 16,861.6 $ 17,910.0 $ 24,382.0 $ 31,908.0 $ 40,740.0 $ 49,447.0
========== ========== ========== ========== ========== ========== ========== ==========
Number of Shares Outstanding 25,076.0 24,513.0 24,515.0 24,600.0 24,600.0 24,600.0 24,600.0 24,600.0
Fully Diluted E.P.S. (In Dollars) $ 1.07 $ 0.83 $ 0.69 $ 0.73 $ 0.99 $ 1.30 $ 1.66 $ 2.01
MARGIN & GROWTH RATE ANALYSIS
-----------------------------
Revenue Growth -- 25.0% (6.1)% 4.8% 8.1% 8.6% 9.3% 9.9%
COGS as a % of Sales 65.2% 68.0% 68.2% 68.3% 68.1% 67.9% 67.6% 67.2%
Gross Margin 34.8% 32.0% 31.8% 31.7% 31.9% 32.1% 32.4% 32.8%
SG&A as a % of Sales 23.8% 23.8% 24.2% 24.5% 23.5% 22.7% 21.8% 21.5%
EBITDA Margin 10.9% 8.1% 7.7% 7.3% 8.4% 9.4% 10.6% 11.3%
EBIT Margin 9.7% 6.5% 5.8% 5.5% 6.8% 8.0% 9.2% 10.0%
Effective Tax Rate 39.0% 39.5% 38.8% 39.0% 39.0% 39.0% 39.0% 39.0%
Pre-Tax Margin 10.4% 6.3% 5.5% 5.6% 7.1% 8.5% 9.9% 11.0%
Net Margin 6.4% 3.8% 3.4% 3.4% 4.3% 5.2% 6.1% 6.7%
Net Income Growth -- (24.8)% (17.2)% 6.2% 36.1% 30.9% 27.7% 21.4%
</TABLE>
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<PAGE> 47
PROJECT MOTOWN | SEPTEMBER 8, 2000
MANAGEMENT PROJECTIONS
================================================================================
MOTOWN INCOME STATEMENT -- UPSIDE CASE (CALENDARIZED)
(Figures in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
ESTIMATED PROJECTED
--------- ----------------------------------------------------------------------
Calendar Year End 12/31 CY 2000 CY 2001 CY 2002 CY 2003 CY 2004
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Sales $511,191.0 $548,229.7 $588,902.3 $641,696.1 $703,404.7
Cost of Goods Sold 349,912.0 375,033.4 400,537.5 434,715.3 474,052.6
---------- ---------- ---------- ---------- ----------
GROSS PROFIT 161,279.0 173,196.3 188,364.9 206,980.7 229,352.1
SG&A 125,929.5 128,058.5 135,912.1 142,868.3 152,370.4
---------- ---------- ---------- ---------- ----------
EBITDA 35,349.5 45,137.8 52,452.8 64,112.4 76,981.7
Depreciation & Amortization 5,127.5 5,785.7 6,196.1 6,827.5 7,506.2
Amortization 4,069.0 3,280.0 2,749.1 2,258.5 2,188.0
---------- ---------- ---------- ---------- ----------
EBIT 26,153.0 36,072.1 43,507.6 55,026.5 67,287.5
Interest Expense (net) 798.0 (985.9) (2,358.2) (4,199.7) (6,319.2)
---------- ---------- ---------- ---------- ----------
PRE-TAX INCOME 25,355.0 37,058.0 45,865.8 59,226.2 73,606.7
Provision for Taxes 9.755.5 14,454.0 17,888.0 23,098.5 28,706.8
---------- ---------- ---------- ---------- ----------
NET INCOME TO COMMON $ 15,599.6 $ 22,604.0 $ 27,977.7 $ 36,127.7 $ 44,900.0
========== ========== ========== ========== ==========
Number of Shares Outstanding 24,600.0 24,600.0 24,600.0 24,600.0 24,600.0
Fully Diluted E.P.S. (In Dollars) $ 0.63 $ 0.92 $ 1.14 $ 1.47 $ 1.83
MARGIN & GROWTH RATE ANALYSIS
-----------------------------
Revenue Growth -- 7.2% 7.4% 9.0% 9.6%
COGS as a % of Sales 68.6% 68.4% 68.0% 67.7% 67.4%
Gross Margin 31.5% 31.6% 32.0% 32.3% 32.6%
SG&A as a % of Sales 24.6% 23.4% 23.1% 22.3% 21.7%
EBITDA Margin 6.9% 8.2% 8.9% 10.0% 10.9%
EBIT Margin 5.1% 6.6% 7.4% 8.6% 9.6%
Effective Tax Rate 38.5% 39.0% 39.0% 39.0% 39.0%
Pre-Tax Margin 5.0% 6.8% 7.8% 9.2% 10.5%
Net Margin 3.1% 4.1% 4.8% 5.6% 6.4%
Net Income Growth -- 44.9% 23.8% 29.1% 24.3%
</TABLE>
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<PAGE> 48
PROJECT MOTOWN | SEPTEMBER 8, 2000
MANAGEMENT PROJECTIONS
================================================================================
MOTOWN BALANCE SHEET -- UPSIDE CASE
(Figures in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
ACTUAL PROJECTED
----------------------- -----------------------------------------------------------
Fiscal Year End 06/30 1999 2000 2001 2002 2003 2004 2005
----------- ---------- ---------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and Cash Equivalents $2,807.0 $2,888.0 $17,014.0 $49,285.0 $85,738.0 $127,855.0 $177,101.0
Accounts Receivable 72,130.0 79,065.0 74,978.0 81,390.0 84,992.0 93,764.0 100,707.0
Inventory 101,770.0 123,435.9 113,851.0 106,577.0 104,452.0 105,277.0 108,721.0
Other Current Assets 6,870.0 12,838.0 13,231.0 13,287.0 13,346.0 13,407.0 13,471.0
----------- ---------- ---------- ---------- ----------- ----------- ----------
TOTAL CURRENT ASSETS 183,577.0 218,226.9 219,074.0 250,539.0 288,528.0 340,303.0 400,000.0
Net Property, Plant & Equipment 25,096.0 28,136.0 29,407.0 30,414.0 30,996.0 30,721.0 29,962.0
Existing Goodwill 63,817.0 59,088.0 55,679.0 52,540.0 50,217.0 48,029.0 45,841.0
Other Assets 8,531.0 2,720.8 2,777.0 2,797.0 2,818.0 2,840.0 2,862.0
----------- ---------- ---------- ---------- ----------- ----------- ----------
TOTAL ASSETS $281,021.0 $308,171.7 $306,937.0 $336,290.0 $372,559.0 $421,893.0 $478,665.0
=========== ========== ========== ========== =========== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank Revolver $14,576.0 $18,734.7 $0.0 $0.0 $0.0 $0.0 $0.0
Accounts Payable 25,634.0 37,410.0 37,600.0 42,089.0 44,650.0 51,384.0 56,783.0
Other Current Liabilities 15,050.0 13,439.0 13,669.0 13,970.0 15,580.0 17,240.0 18,956.0
----------- ---------- ---------- ---------- ----------- ----------- ----------
TOTAL CURRENT LIABILITIES 55,260.0 69,583.7 51,269.0 56,059.0 60,230.0 68,624.0 75,739.0
Other Liabilities 5,175.0 4,524.0 3,624.0 3,805.0 3,995.0 4,195.0 4,405.0
Deferred Tax 5,519.0 2,530.0 2,600.0 2,600.0 2,600.0 2,600.0 2,600.0
Existing Senior Debt Motown 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Existing Subordinated Debt Motown 0.0 0.0 0.0 0.0 0.0 0.0 0.0
----------- ---------- ---------- ---------- ----------- ----------- ----------
TOTAL LONG TERM DEBT 0.0 0.0 0.0 0.0 0.0 0.0 0.0
----------- ---------- ---------- ---------- ----------- ----------- ----------
TOTAL LIABILITIES 65,954.0 76,637.7 57,493.0 62,464.0 66,825.0 75,419.0 82,744.0
Common Equity 215,067.0 231,534.0 249,444.0 273,826.0 305,734.0 346,474.0 395,921.0
----------- ---------- ---------- ---------- ----------- ----------- ----------
TOTAL LIABILITIES AND EQUITY $281,021.0 $308,171.7 $306,937.0 $336,290.0 $372,559.0 $421,893.0 $478,665.0
=========== ========== ========== ========== =========== =========== ==========
Total Debt $14,576.0 $18,734.7 $0.0 $0.0 $0.0 $0.0 $0.0
Total Debt, Preferred & Minority Interest 14,576.0 18,734.7 0.0 0.0 0.0 0.0 0.0
Net Debt, Preferred & Minority Interest 11,769.0 15,846.7 (17,014.0) (49,285.0) (85,738.0) (127,855.0) (177,101.0)
Total Book Equity 215,067.0 231,534.0 249,444.0 273,826.0 305,734.0 346,474.0 395,921.0
Total Book Capitalization 229,643.0 250,268.7 249,444.0 273,826.0 305,734.0 346,474.0 395,921.0
</TABLE>
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<PAGE> 49
PROJECT MOTOWN | SEPTEMBER 8, 2000
MANAGEMENT PROJECTIONS
================================================================================
MOTOWN CASH FLOW -- UPSIDE CASE
(Figures in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
ACTUAL PROJECTED
---------- ---------------------------------------------------------------
Fiscal Year End 06/30 2000 2001 2002 2003 2004 2005
---------- ---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATIONS
Net Income $ 16,861.6 $ 17,910.0 $24,382.0 $31,908.0 $ 40,740.0 $ 49,447.0
Depreciation & Amortization 4,659.0 5,596.0 5,993.0 6,418.0 7,275.0 7,759.0
Amortization of Existing Goodwill 4,729.0 3,409.0 3,139.0 2,323.0 2,188.0 2,188.0
Amortization of Intangible Assets 0.0 0.0 0.0 0.0 0.0 0.0
Deferred Taxes (2,989.0) 70.0 0.0 0.0 0.0 0.0
Minority Interest 0.0 0.0 0.0 0.0 0.0 0.0
Change in Working Capital (24,403.9) 13,698.9 5,596.0 2,635.0 (1,264.0) (3,336.0)
Change in Other Assets 5,810.2 (56.2) (20.0) (21.0) (22.0) (22.0)
Change in Other Liabilities (651.0) (900.0) 181.0 190.0 200.0 210.0
---------- ---------- --------- --------- ---------- ----------
CASH PROVIDED/(USED) BY OPERATING
ACTIVITIES $ 4,015.9 $ 39,727.7 $39,271.0 $43,453.0 $ 49,117.0 $ 56,246.0
CASH FLOW FROM INVESTING ACTIVITIES
Capital Expenditures (7,699.0) (6,867.0) (7,000.0) (7,000.0) (7,000.0) (7,000.0)
---------- ---------- --------- --------- ---------- ----------
CASH PROVIDED/(USED) BY INVESTING
ACTIVITIES $ (7,699.0) $ (6,867.0) $(7,000.0) $(7,000.0) $ (7,000.0) $ (7,000.0)
CASH FLOW FROM FINANCING ACTIVITIES
Change in Existing Senior Debt Motown 0.0 0.0 0.0 0.0 0.0 0.0
Change in Existing Subordinated Debt Motown 0.0 0.0 0.0 0.0 0.0 0.0
Change in Existing Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0
Dividend Paid to Common Shareholders 0.0 0.0 0.0 0.0 0.0 0.0
Change in Common Equity 0.0 0.0 0.0 0.0 0.0 0.0
---------- ---------- --------- --------- ---------- ----------
CASH PROVIDED/(USED) BY FINANCING
ACTIVITIES 0.0 0.0 0.0 0.0 0.0 0.0
---------- ---------- --------- --------- ---------- ----------
Minimum Cash 2,888.0 2,900.0 2,900.0 2,900.0 2,900.0 2,900.0
(Deficiency)/Excess Cash (3,764.1) 32,848.7 46,385.0 82,838.0 124,955.0 174,201.0
(Payments)/Borrowings on Revolver 3,764.1 (18,734.7) 0.0 0.0 0.0 0.0
---------- ---------- --------- --------- ---------- ----------
TOTAL CHANGE IN CASH $ 81.0 $ 14,126.0 $32,271.0 $36,453.0 $ 42,117.0 $ 49,246.0
========== ========== ========= ========= ========== ==========
Beginning Cash Balance 2,807.0 2,888.0 17,014.0 49,285.0 85,738.0 127,855.0
Change in Cash 81.0 14,126.0 32,271.0 36,453.0 42,117.0 49,246.0
---------- ---------- --------- --------- ---------- ----------
ENDING CASH BALANCE $ 2,888.0 $ 17,014.0 $49,285.0 $85,738.0 $127,855.0 $177,101.0
========== ========== ========= ========= ========== ==========
</TABLE>
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<PAGE> 50
PROJECT MOTOWN | SEPTEMBER 8, 2000
MANAGEMENT PROJECTIONS
================================================================================
MOTOWN INCOME STATEMENT -- CONSERVATIVE CASE
(Figures in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
ACTUAL PROJECTED
---------------------------------------------- ----------------------------------------------
Fiscal Year End 06/30 1996 1999 2000 2001 2002 2003 2004 2005
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $425,348.0 $531,642.0 $499,292.0 $523,194.0 $549,230.0 $583,707.0 $618,844.0 $655,952.0
Cost of Goods Sold 277,417.0 361,717.0 340,333.0 357,198.0 374,912.0 397,570.0 421,464.0 445,933.0
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
GROSS PROFIT 147,931.0 169,925.0 158,959.0 165,996.0 174,318.0 186,137.0 197,380.0 210,019.0
SG&A 101,438.0 126,644.0 120,642.0 127,991.0 131,292.0 135,642.0 138,575.0 141,770.0
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
EBITDA 46,493.0 43,281.0 38,317.0 38,005.0 43,026.0 50,495.0 58,805.0 68,249.0
Depreciation 5,185.0 8,749.0 4,659.0 5,596.0 5,993.0 6,418.0 7,275.0 7,759.0
Amortization 0.0 0.0 4,729.0 3,409.0 3,139.0 2,323.0 2,188.0 2,188.0
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
EBIT 41,308.0 34,532.0 28,929.0 29,000.0 33,894.0 41,754.0 49,342.0 58,302.0
Interest Expense (net) (3,068.0) 881.0 1,395.0 (361.0) (1,104.0) (1,967.0) (3,065.0) (4,451.0)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
PRE-TAX INCOME 44,376.0 33,651.0 27,534.0 29,361.0 34,998.0 43,721.0 52,407.0 62,753.0
Provision for Taxes 17,300.0 13,291.0 10,672.5 11,451.0 13,649.0 17,051.0 20,439.0 24,474.0
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
NET INCOME TO COMMON $ 27,076.0 $ 20,360.0 $ 16,861.6 $ 17,910.0 $ 21,349.0 $ 26,670.0 $ 31,968.0 $ 38,279.0
========== ========== ========== ========== ========== ========== ========== ==========
Number of Shares Outstanding 25,277.0 24,513.0 24,515.0 24,600.0 24,600.0 24,600.0 24,600.0 24,600.0
Fully Diluted E.P.S. (In Dollars) $ 1.07 $ 0.83 $ 0.69 $ 0.73 $ 0.87 $ 1.08 $ 1.30 $ 1.56
MARGIN & GROWTH RATE ANALYSIS
-----------------------------
Revenue Growth -- 25.0% (6.1)% 4.8% 5.0% 6.3% 6.0% 6.0%
COGS as a % of Sales 65.2% 68.0% 68.2% 68.3% 68.3% 68.1% 68.1% 68.0%
Gross Margin 34.8% 32.0% 31.8% 31.7% 31.7% 31.9% 31.9% 32.0%
SG&A as a % of Sales 23.8% 23.8% 24.2% 24.5% 23.9% 23.2% 22.4% 21.6%
EBITDA Margin 10.9% 8.1% 7.7% 7.3% 7.8% 8.7% 9.5% 10.4%
EBIT Margin 9.7% 6.5% 5.8% 5.5% 6.2% 7.2% 8.0% 8.9%
Effective Tax Rate 39.0% 39.5% 38.8% 39.0% 39.0% 39.0% 39.0% 39.0%
Pre-Tax Margin 10.4% 6.3% 5.5% 5.6% 6.4% 7.5% 8.5% 9.6%
Net Margin 6.4% 3.8% 3.4% 3.4% 3.9% 4.6% 5.2% 5.8%
Net Income Growth -- (24.8)% (17.2)% 6.2% 19.2% 24.9% 19.9% 19.7%
</TABLE>
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<PAGE> 51
PROJECT MOTOWN | SEPTEMBER 8, 2000
MANAGEMENT PROJECTIONS
================================================================================
MOTOWN INCOME STATEMENT -- CONSERVATIVE CASE (CALENDARIZED)
(Figures in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
ESTIMATED PROJECTED
--------- ----------------------------------------------------------------------
Calendar Year End 12/31 CY 2000 CY 2001 CY 2002 CY 2003 CY 2004
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Sales $511,191.0 $535,658.0 $565,702.2 $600,494.5 $636,573.2
Cost of Goods Sold 349,912.0 365,289.6 385,737.4 408,985.9 433,154.6
---------- ---------- ---------- ---------- ----------
GROSS PROFIT 161,279.0 170,368.3 179,964.8 191,508.6 203,418.6
SG&A 125,929.5 127,401.0 133,370.3 137,043.3 140,101.5
---------- ---------- ---------- ---------- ----------
EBITDA 35,349.5 42,967.3 46,594.5 54,465.3 63,317.1
Depreciation & Amortization 5,127.5 5,785.7 6,196.1 6,827.5 7,506.2
Amortization 4,069.0 3,280.0 2,749.1 2,258.5 2,188.0
---------- ---------- ---------- ---------- ----------
EBIT 26,153.0 33,901.6 37,649.3 45,379.3 53,622.8
Interest Expense (net) 798.0 (780.5) (1,516.3) (2,491.6) (3,727.2)
---------- ---------- ---------- ---------- ----------
PRE-TAX INCOME 25,355.0 34,682.1 39,165.6 47,870.9 57,350.0
Provision for Taxes 9,755.5 13,527.1 15,274.4 18,669.7 22,366.8
---------- ---------- ---------- ---------- ----------
NET INCOME TO COMMON $ 15,599.6 $ 21,155.0 $ 23,891.2 $ 29,201.2 $ 34,983.2
========== ========== ========== ========== ==========
Number of Shares Outstanding 24,600.0 24,600.0 24,600.0 24,600.0 24,600.0
Fully Diluted E.P.S. (In Dollars) $ 0.63 $ 0.86 $ 0.97 $ 1.19 $ 1.42
MARGIN & GROWTH RATE ANALYSIS
-----------------------------
Revenue Growth -- 4.8% 5.6% 6.2% 6.0%
COGS as a % of Sales 68.6% 68.2% 68.2% 68.1% 68.0%
Gross Margin 31.5% 31.8% 31.8% 31.9% 32.0%
SG&A as a % of Sales 24.6% 23.8% 23.6% 22.8% 22.0%
EBITDA Margin 6.9% 8.0% 8.2% 9.1% 9.9%
EBIT Margin 5.1% 6.3% 6.7% 7.6% 8.4%
Effective Tax Rate 38.5% 39.0% 39.0% 39.0% 39.0%
Pre-Tax Margin 5.0% 6.5% 6.9% 8.0% 9.0%
Net Margin 3.1% 3.9% 4.2% 4.9% 5.5%
Net Income Growth -- 35.6% 12.9% 22.2% 19.8%
</TABLE>
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<PAGE> 52
PROJECT MOTOWN | SEPTEMBER 8, 2000
MANAGEMENT PROJECTIONS
================================================================================
MOTOWN BALANCE SHEET -- CONSERVATIVE CASE
(Figures in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
ACTUAL PROJECTED
------------------------ ------------------------------------------------------------------
Fiscal Year End 06/30 1999 2000 2001 2002 2003 2004 2005
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and Cash Equivalents $ 2,807.0 $ 2,888.0 $ 17,014.0 $ 32,090.0 $ 51,161.0 $ 75,656.0 $ 106,238.0
Accounts Receivable 72,130.0 79,065.0 74,978.0 78,786.0 83,766.0 88,941.0 94,413.0
Inventory 101,770.0 123,435.9 113,851.0 120,695.0 129,228.0 138,243.0 147,857.0
Other Current Assets 6,870.0 12,838.0 13,231.0 13,287.0 13,346.0 13,407.0 13,471.0
---------- ---------- ---------- ---------- ---------- ---------- -----------
TOTAL CURRENT ASSETS 183,577.0 218,226.9 219,074.0 244,858.0 277,501.0 316,247.0 361,979.0
Net Property, Plant & Equipment 25,096.0 28,136.0 29,407.0 30,414.0 30,996.0 30,721.0 29,962.0
Existing Goodwill 63,817.0 59,088.0 55,679.0 52,540.0 50,217.0 48,029.0 45,841.0
Other Assets 8,531.0 2,720.8 2,777.0 2,797.0 2,818.0 2,840.0 2,862.0
---------- ---------- ---------- ---------- ---------- ---------- -----------
TOTAL ASSETS $281,021.0 $308,171.7 $306,937.0 $330,609.0 $361,532.0 $397,837.0 $ 440,644.0
========== ========== ========== ========== ========== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank Revolver $ 14,576.0 $ 18,734.7 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Accounts Payable 25,634.0 37,410.0 37,600.0 39,472.0 41,950.0 44,475.0 47,142.0
Other Current Liabilities 15,050.0 13,439.0 13,669.0 13,939.0 15,524.0 17,136.0 18,787.0
---------- ---------- ---------- ---------- ---------- ---------- -----------
TOTAL CURRENT LIABILITIES 55,260.0 69,583.7 51,269.0 53,411.0 57,474.0 61,611.0 65,929.0
Other Liabilities 5,175.0 4,524.0 3,624.0 3,805.0 3,995.0 4,195.0 4,405.0
Deferred Tax 5,519.0 2,530.0 2,600.0 2,600.0 2,600.0 2,600.0 2,600.0
Existing Senior Debt Motown 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Existing Subordinated Debt Motown 0.0 0.0 0.0 0.0 0.0 0.0 0.0
---------- ---------- ---------- ---------- ---------- ---------- -----------
TOTAL LONG TERM DEBT 0.0 0.0 0.0 0.0 0.0 0.0 0.0
---------- ---------- ---------- ---------- ---------- ---------- -----------
TOTAL LIABILITIES 65,954.0 76,637.7 57,493.0 59,816.0 64,069.0 68,406.0 72,934.0
Common Equity 215,067.0 231,534.0 249,444.0 270,793.0 297,463.0 329,431.0 367,710.0
---------- ---------- ---------- ---------- ---------- ---------- -----------
TOTAL LIABILITIES AND EQUITY $281,021.0 $308,171.7 $306,937.0 $330,609.0 $361,532.0 $397,837.0 $ 440,644.0
========== ========== ========== ========== ========== ========== ===========
Total Debt $ 14,576.0 $ 18,734.7 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Total Debt, Preferred &
Minority Interest 14,576.0 18,734.7 0.0 0.0 0.0 0.0 0.0
Net Debt, Preferred &
Minority Interest 11,769.0 15,846.7 (17,014.0) (32,090.0) (51,161.0) (75,656.0) (106,238.0)
Total Book Equity 215,067.0 231,534.0 249,444.0 270,793.0 297,463.0 329,431.0 367,710.0
Total Book Capitalization 229,643.0 250,268.7 249,444.0 270,793.0 297,463.0 329,431.0 367,710.0
</TABLE>
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<PAGE> 53
PROJECT MOTOWN | SEPTEMBER 8, 2000
MANAGEMENT PROJECTIONS
================================================================================
MOTOWN CASH FLOW -- CONSERVATIVE CASE
(Figures in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
ACTUAL PROJECTED
---------- -----------------------------------------------------------------
Fiscal Year End 06/30 2000 2001 2002 2003 2004 2005
---------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATIONS
Net Income $ 16,861.6 $17,910.0 $21,349.0 $26,670.0 $ 31,968.0 $ 38,270.0
Depreciation & Amortization 4,659.0 5,596.0 5,933.0 6,418.0 7,275.0 7,759.0
Amortization of Existing Goodwill 4,729.0 3,409.0 3,139.0 2,323.0 2,188.0 2,188.0
Amortization of Intangible Assets 0.0 0.0 0.0 0.0 0.0 0.0
Deferred Taxes (2,989.0) 70.0 0.0 0.0 0.0 0.0
Minority Interest 0.0 0.0 0.0 0.0 0.0 0.0
Change in Working Capital (24,403.9) 13,698.9 (8,566.0) (9,509.0) (10,114.0) (10,832.0)
Change in Other Assets 5,810.2 (56.2) (20.0) (21.0) (22.0) (22.0)
Change in Other Liabilities (651.0) (900.0) 181.0 190.0 200.0 210.0
---------- --------- --------- --------- ----------- ----------
CASH PROVIDED/(USED) BY
OPERATING ACTIVITIES $ 4,015.9 $39,727.7 $22,076.0 $26,071.0 $ 31,495.0 $ 37,582.0
CASH FLOW FROM INVESTING ACTIVITIES
Capital Expenditures (7,699.0) (6,867.0) (7,000.0) (7,000.0) (7,000.0) (7,000.0)
---------- --------- --------- --------- ----------- ----------
CASH PROVIDED/(USED) BY
INVESTING ACTIVITIES $(7,699.0) $ (6,867.0) $(7,000.0) $(7,000.0) $ (7,000.0) $ (7,000.0)
CASH FLOW FROM FINANCING ACTIVITIES
Change in Existing Senior Debt Motown 0.0 0.0 0.0 0.0 0.0 0.0
Change in Existing Subordinated
Debt Motown 0.0 0.0 0.0 0.0 0.0 0.0
Change in Existing Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0
Dividend Paid to Common Shareholders 0.0 0.0 0.0 0.0 0.0 0.0
Change in Common Equity 0.0 0.0 0.0 0.0 0.0 0.0
---------- --------- --------- --------- ----------- ----------
CASH PROVIDED/(USED) BY
FINANCING ACTIVITIES 0.0 0.0 0.0 0.0 0.0 0.0
---------- --------- --------- --------- ----------- ----------
Minimum Cash 2,888.0 2,900.0 2,900.0 2,900.0 2,900.0 2,900.0
(Deficiency)/Excess Cash (3,764.1) 32,848.7 29,190.0 48,261.0 72,756.0 103,338.0
(Payments)/Borrowings on Revolver 3,764.1 (18,734.7) 0.0 0.0 0.0 0.0
---------- --------- --------- --------- ----------- ----------
TOTAL CHANGE IN CASH $ 81.0 $14,126.0 $15,076.0 $19,071.0 $ 24,495.0 $ 30,582.0
---------- --------- --------- --------- ----------- ----------
Beginning Cash Balance 2,807.0 2,888.0 17,014.0 32,090.0 51,161.0 75,656.0
Change in Cash 81.0 14,126.0 15,076.0 19,071.0 24,495.0 30,582.0
---------- --------- --------- --------- ----------- ----------
ENDING CASH BALANCE $ 2,888.0 $17,014.0 $32,090.0 $51,161.0 $ 75,656.0 $106,238.0
---------- --------- --------- --------- ----------- ----------
</TABLE>
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<PAGE> 54
PROJECT MOTOWN | SEPTEMBER 8, 2000
B COMPARABLE COMPANIES ANALYSIS
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54
<PAGE> 55
PROJECT MOTOWN | SEPTEMBER 8, 2000
COMPARABLE COMPANIES ANALYSIS
================================================================================
COMPARABLE COMPANIES OVERVIEW
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
COMPANY DESCRIPTION
------- -----------
<S> <C>
Airgas The largest distributor of industrial, medical and specialty gases in North America. It classifies its
operations into two business segments: Distribution and Gas Operations. Distribution's principal products
and services include packaged and small bulk gases, gas cylinder and welding equipment rental, hardgoods and
safety products. The Gas Operations segment consists of domestic and foreign operating companies that
produce and distribute certain gas products, principally dry ice, carbon dioxide, specialty gases and
nitrous oxide.
------------------------------------------------------------------------------------------------------------------------------------
Applied Industrial
Technologies Distributes industrial products, including bearings, power transmission components, hydraulic and pneumatic
components; industrial rubber products; linear motion products; and general maintenance and specialty items
manufactured by others. It also provides mechanical, rubber, and fluid power shop services, including
engineering design, and electrical, gearing, material handling, hose, and fluid power systems. It
distributes its products to a wide variety of industrial customers primarily in the United States.
------------------------------------------------------------------------------------------------------------------------------------
Industrial Distribution
Group Supplier of cost-effective, flexible procurement solutions for manufacturers and other users of industrial
maintenance, repair, operating and production (MROP) products. It distributes a full line of these products,
emphasizing its specialized expertise in product applications. Its principal product categories include
abrasives, cutting tools, hand and power tools, coolants, lubricants and adhesives.
------------------------------------------------------------------------------------------------------------------------------------
Lawson Products Distributor of approximately 70,000 expendable maintenance, repair and replacement products. It also
distributes 12,000 production components (mostly fasteners) to the O.E.M. (original equipment manufacturer)
marketplace.
------------------------------------------------------------------------------------------------------------------------------------
MSC Industrial Direct One of the largest direct marketers of a broad range of industrial products to small and mid-sized
industrial customers throughout the United States. It distributes a full line of industrial products, such
as cutting tools, abrasives, measuring instruments, machine tool accessories, safety equipment, fasteners,
welding supplies and electrical supplies, intended to satisfy its customers' maintenance, repair and
operations (MRO) supplies requirements.
------------------------------------------------------------------------------------------------------------------------------------
W.W. Grainger Provider of maintenance, repair, and operating (MRO) supplies, services, and related information to
businesses and institutions. It offers a breadth of MRO solutions by combining products, services,
and information.
------------------------------------------------------------------------------------------------------------------------------------
WESCO International Provider of electrical products and other industrial MRO supplies and services in North America. It is also
a provider of integrated supply services, and its integrated supply solutions and outsourcing services
fulfill all of a customer's industrial MRO procurement needs through a highly automated, proprietary
electronic procurement and inventory replenishment system.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 56
PROJECT MOTOWN | SEPTEMBER 8, 2000
COMPARABLE COMPANIES ANALYSIS
================================================================================
COMPARABLE COMPANIES OVERVIEW(1)
FIRM VALUE/LTM REVENUES FIRM VALUE/LTM EBITDA
MSM 1.6x MSM 12.1x
ARG 0.8x GWW 8.2x
LAWS 0.7x WCC 7.9x
GWW 0.7x ARG 6.3x
JLK 0.3x AIT 5.6x
WCC 0.3x IDG 5.1x
AIT 0.3x LAWS 4.5x
IDG 0.1x JLK 4.5x
FIRM VALUE/LTM EBIT PRICE/EARNINGS
MSM 13.8x MSM 21.8x
GWW 11.3x GWW 18.2x
ARG 11.2x ARG 12.0x
WCC 9.2x AIT 11.3x
IDG 7.8x WCC 10.8x
AIT 7.8x IDG 9.5x
JLK 5.9x LAWS 9.3x
LAWS 5.2x JLK 9.2x
(1) As of September 7, 2000.
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<PAGE> 57
PROJECT MOTOWN | SEPTEMBER 8, 2000
COMPARABLE COMPANIES ANALYSIS
================================================================================
COMPARABLE COMPANIES OVERVIEW
LTM REVENUES ($ MILLIONS) LTM EBITDA MARGIN
GWW $4,734 LAWS 15.0%
WCC $3,691 ARG 13.2%
ARG $1,572 MSM 13.1%
AIT $1,572 GWW 8.2%
MSM $ 759 JLK 7.7%
IDG $ 547 AIT 5.1%
JLK $ 499 WCC 4.2%
LAWS $ 337 IDG 2.5%
LTM EBIT MARGIN LTM NET INCOME MARGIN
LAWS 13.0% LAWS 8.1%
MSM 11.5% MSM 6.6%
ARG 7.5% JLK 3.4%
GWW 5.9% GWW 3.3%
JLK 5.8% ARG 2.2%
AIT 3.7% AIT 2.0%
WCC 3.6% WCC 1.2%
IDG 1.6% IDG 0.5%
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<PAGE> 58
PROJECT MOTOWN | SEPTEMBER 8, 2000
COMPARABLE COMPANIES ANALYSIS
================================================================================
COMPARABLE COMPANIES SUMMARY
(Figures in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
52 - WEEK
LAST SHARES PRICE RANGE
TICKER FISCAL LTM O/S PRICE @ MARKET FIRM -------------- PRICE IN
COMPANY SYMBOL YEAR DATE (000) 9/07/00 CAP. DEBT CASH VALUE HIGH LOW RANGE
----------------------- ------ ------ ------ ------ ------- ---------- -------- ------- ---------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------------
Current Trading Price -
JLK JLK Jun-99 Jun-00 24,510 $ 6.31 $ 154,722 $ 18,735 $ 2,888 $ 170,569 $11.69 $ 4.50 25%
Original Offer Price -
JLK JLK Jun-99 Jun-00 24,510 $ 6.70 $ 164,220 $ 18,735 $ 2,888 $ 180,067 $11.69 $ 4.50 31%
FINAL OFFER PRICE -
JLK JLK JUN-99 JUN-00 24,510 $ 8.75 $ 214,466 $ 18,735 $ 2,888 $ 230,313 $11.69 $ 4.50 59%
----------------------------------------------------------------------------------------------------------------------------------
Airgas ARG Mar-00 Jun-00 67,147 $ 6.38 $ 428,060 $886,006 $ 0 $1,314,066 $13.13 $ 4.63 21%
Applied Industrial
Tech.(1) AIT Jun-00 Jun-00 20,550 17.00 349,358 112,168 12,349 449,177 18.31 14.31 67%
Industrial Distribution
Group IDG Dec-99 Jun-00 8,877 2.88 25,521 44,436 695 69,262 4.81 2.25 24%
Lawson Products LAWS Dec-99 Jun-00 9,757 25.13 245,154 0 18,296 226,858 26.00 20.50 84%
MSC Industrial Direct MSM Aug-99 May-00 70,070 16.00 1,121,123 87,067 5,645 1,202,545 23.25 7.50 54%
W.W. Grainger GWW Dec-99 Jun-00 94,050 29.81 2,803,866 425,772 57,139 3,172,499 56.88 28.50 5%
WESCO International(2) WCC Dec-99 Jun-00 49,454 9.19 454,357 789,945 17,239 1,227,063 17.44 5.50 31%
</TABLE>
SECTION 2: MULTIPLE ANALYSIS
<TABLE>
<CAPTION>
FIRM VALUE/REVENUE MULTIPLE FIRM VALUE/EBITDA MULTIPLE FIRM VALUE/EBIT MULTIPLE P/E MULTIPLE
--------------------------- -------------------------- ------------------------ ----------------------
COMPANY LTM 2000E 2001E LTM 2000E 2001E LTM 2000E 2001E LTM 2000E 2001E
----------------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------------
Current Trading Place -
JLK 0.3x 0.3x 0.3x 4.5x 4.8x 3.8x 5.9x 6.5x 4.7x 9.2x 10.0x 6.9x
Original Offer Price -
JLK 0.4x 0.4x 0.3x 4.7x 5.1x 4.0x 6.2x 6.9x 5.0x 9.7x 10.6x 7.3x
FINAL OFFER PRICE - JLK 0.5X 0.5X 0.4X 6.0X 6.5X 5.1X 8.0X 8.8X 6.4X 12.7X 13.8X 9.5X
----------------------------------------------------------------------------------------------------------------------------------
Airgas 0.8x 0.8x 0.8x 6.3x 6.2x 5.7x 11.2x 11.1x 9.8x 12.0x 11.8x 9.7x
Applied Industrial
Tech.(1) 0.3x 0.3x 0.3x 5.6x 5.3x 4.5x 7.8x 7.4x 6.2x 11.3x 10.3x 8.3x
Industrial Distribution
Group 0.1x 0.1x 0.1x 5.1x 4.8x 4.2x 7.8x 7.1x 5.8x 9.5x 9.6x 8.2x
Lawson Products 0.7x NA NA 4.5x NA NA 5.2x NA NA 9.3x NA NA
MSC Industrial Direct 1.6x* 1.4x* 1.1x* 12.1x* 10.4x* 8.1x* 13.8x 12.1x 9.2x* 21.8x* 19.2x* 15.9x*
W.W. Grainger 0.7x 0.6x 0.6x 8.2x 7.5x 6.3x 11.3x 10.0x 8.2x 18.2x 15.7x 13.0x
WESCO International(2) 0.3x 0.3x 0.3x 7.9x 7.1x 6.6x 9.2x 8.2x 7.5x 10.8x 8.8x 7.5x
----------------------------------------------------------------------------------------------------------------------------------
High 0.8x 0.8x 0.8x 8.2x 7.5x 6.6x 11.3x 11.1x 9.8x 18.2x 15.7x 13.0x
MEDIAN 0.5X 0.3X 0.3X 6.0X 6.2X 5.7X 8.5X 8.2X 7.5X 11.1X 10.3X 8.3X
Mean 0.5x 0.4x 0.4x 6.3x 6.2x 5.4x 8.7x 8.8x 7.5x 11.9x 11.2x 9.3x
Low 0.1x 0.1x 0.1x 4.5x 4.8x 4.2x 5.2x 7.1x 5.8x 9.3x 8.8x 7.5x
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Excludes data outliers.
(1) Shares outstanding are from the 10-Q for the period ended March 31, 2000.
(2) Includes $337.6 million A/R securitization program based on 10-K disclosure.
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<PAGE> 59
PROJECT MOTOWN | SEPTEMBER 8, 2000
COMPARABLE COMPANIES ANALYSIS
================================================================================
COMPARABLE COMPANIES SUMMARY
(Figures in Thousands)
SECTION 3: MARGIN ANALYSIS
<TABLE>
<CAPTION>
GROSS NET GROSS EBITDA EBIT NET GROWTH
COMPANY REV. PROFIT EBITDA EBIT INCOME MARGIN MARGIN MARGIN MARGIN RATE(1)
----------------------- ---------- ---------- -------- -------- -------- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
JLK $ 499,292 $ 154,300 $ 38,317 $ 28,929 $ 16,862 30.9% 7.7% 5.8% 3.4% 15.0%
------------------------------------------------------------------------------------------------------------------------------------
Airgas $1,571,839 $ 745,113 $207,032 $117,146 $ 37,008 47.4% 13.2% 7.5% 2.4% 11.1%
Applied Industrial Tech. 1,571,705 391,590 80,705 57,717 31,048 24.9% 5.1% 3.7% 2.0% 12.3%
Industrial Distribution
Group 546,804 119,655 13,694 8,870 2,630 21.9% 2.5% 1.6% 0.5% 20.0%
Lawson Products 337,196 220,147 50,416 43,919 27,365 65.3% 15.0% 13.0% 8.1% NA
MSC Industrial Direct 758,881 292,246 99,542 86,988 49,782 38.5% 13.1% 11.5% 6.6% 28.3%
W.W. Grainger 4,734,051 1,689,767 386,489 281,169 154,822 35.7% 8.2% 5.9% 3.3% 12.3%
WESCO International(2) 3,691,218 652,688 156,136 134,003 42,071 17.1% 4.2% 3.6% 1.1% 20.0%
------------------------------------------------------------------------------------------------------------------------------------
High $4,734,051 $1,689,767 $386,489 $281,169 $154,822 65.3% 15.0% 13.0% 8.1% 28.3%
Median 1,571,705 391,590 99,542 86,988 37,008 35.7% 8.2% 5.9% 2.4% 16.2%
MEAN 1,887,385 587,315 142,002 104,259 49,247 35.9% 8.8% 6.7% 3.4% 17.3%
Low 337,196 119,655 13,694 8,870 2,630 17.7% 2.5% 1.6% 0.5% 11.1%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Source: Factset FirsCall
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<PAGE> 60
PROJECT MOTOWN | SEPTEMBER 8, 2000
C PRECEDENT TRANSACTIONS ANALYSIS
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<PAGE> 61
PROJECT MOTOWN | SEPTEMBER 8, 2000
PRECEDENT TRANSACTIONS ANALYSIS
================================================================================
PRECEDENT TRANSACTIONS OVERVIEW
<TABLE>
<CAPTION>
TARGET DESCRIPTION ACQUIROR DESCRIPTION
------ ----------- -------- -----------
<S> <C> <C> <C>
Bruckner Supply Co. Inc. Provider of integrated supply WESCO Distribution Co. Wesco International, Inc. is a
procurement services and provider of integrated supply
outsourcing activities for large solutions, electrical products
industrial companies. and other industrial MRO
supplies and services in North
America.
-----------------------------------------------------------------------------------------------------------------------------------
White Cap Industries Inc. Sells pro-oriented products, Investor Group CEO Greg Grosch, and an
including construction materials, affiliate of Leonard Green &
hand tools, fasteners, structural Partners LP
connectors, power tools, light
construction equipment, steel
reinforcing bar, bulk and collated
gun nails and specialty
cementatious products.
-----------------------------------------------------------------------------------------------------------------------------------
Tristar Aerospace Co. Provider of customized AlliedSignal Inc. Manufacturing company serving
inventory management customers worldwide with
services to original equipment aerospace products and
manufacturers and a services, automotive products,
distributor of aerospace chemicals, fibers, plastics and
fasteners, fastening systems advanced materials.
and related hardware.
-----------------------------------------------------------------------------------------------------------------------------------
Vallen Corp. Provider of integrated safety Hagemeyer NV A global business to business
products and related services as distribution and services group
well as other industrial MRO focusing on Professional
products to customers, including Products and Services and
total safety solutions programs in Information Technology
customers' working Products and Services.
environments.
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 62
PROJECT MOTOWN | SEPTEMBER 8, 2000
PRECEDENT TRANSACTIONS ANALYSIS
================================================================================
PRECEDENT TRANSACTIONS OVERVIEW
<TABLE>
<CAPTION>
TARGET DESCRIPTION ACQUIROR DESCRIPTION
------ ----------- -------- -----------
<S> <C> <C> <C>
JA Sexauer (Dyson Kissner) Distributor of plumbing Wilmar Industries Distributor and direct
specialties to institutional marketer of plumbing
facilities throughout the United specialties, electrical,
States and Canada. hardware and other products
to facilities maintenance
markets throughout North
America.
-----------------------------------------------------------------------------------------------------------------------------------
Wilmar Industries Distributor and direct Investor Group Parthenon Capital and Chase
marketer of plumbing Capital Partners
specialties, electrical,
hardware and other products
to facilities maintenance
markets throughout North
America.
-----------------------------------------------------------------------------------------------------------------------------------
Cameron Ashley Distributor of a broad line of Guardian Industries Manufacturer of float glass and
building products that are fiber glass products for the
used principally in home construction industries.
improvement and new
residential construction.
-----------------------------------------------------------------------------------------------------------------------------------
Barnett Inc. (Waxman USA) Direct marketer and Wilmar Industries Inc. Distributor and direct
distributor of plumbing, marketer of plumbing
electrical, hardware, security specialties, electrical,
hardware and HVAC products hardware and other products
throughout the United States, to facilities maintenance
the Caribbean and South markets throughout North
America. America.
-----------------------------------------------------------------------------------------------------------------------------------
Westburne Inc. Integrated logistic and Rexel SA Distributor of low voltage
distribution organization electrical parts and supplies.
operating throughout North
America.
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 63
PROJECT MOTOWN | SEPTEMBER 8, 2000
PRECEDENT TRANSACTIONS ANALYSIS
================================================================================
Precedent Transactions Analysis
(Figures in Millions, Except per Share Data)
<TABLE>
<CAPTION>
PREMIUMS PAID
----------------
DATE NET FIRM EQUITY OFFER 1 DAY 1 WEEK 1 MONTH
TARGET NAME ACQUIROR NAME ANNOUNCED DEBT VALUE VALUE PRICE PRIOR PRIOR PRIOR
---------------------- ---------------------- --------- ---- ----- ------ ----- ----- ----- -----
-----------------------------------------------------------------------------------------------------------------------------------
JLK DIRECT DISTRIBUTION INC KENNAMETAL INC TBD $15.8 $230.3 $214.5 $8.75 50.5% 94.4% 68.7%
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bruckner Supply Co Inc. WESCO Distribution Inc 09/11/98 $3.5 $101.3 $99.1 NA NA NA NA
White Cap Industries Inc Investor Group 07/22/99 54.7 239.0 185.4 $16.50 49.2% 45.1% 55.3%
Tristar Aerospace Co AlliedSignal Inc 11/01/99 107.0 283.8 182.0 9.50 43.4% 67.0% 65.2%
Vallen Corp Hagemeyer NV 11/15/99 16.8 199.0 184.0 25.00 26.6% 47.1% 83.5%
JA Sexauer Inc (Dyson Kissner) Wilmar Industries Inc 11/15/99 0.0 85.0 86.4 NA NA NA NA
Wilmar Industries Inc Investor Group 12/23/99 62.0 290.9 229.8 18.25 30.4% 27.0% 18.7%
Cameron Ashley Building Prods Guardian Industries 01/17/00 170.6 342.0 171.4 18.35 64.0% 59.6% 101.1%
Barnett Inc. (Waxman USA) Wilmar Industries Inc 07/10/00 33.0 241.6 214.0 13.15 25.2% 35.3% 29.9%
Westburne Inc. Rexel S.A. 07/20/00 126.2 1,116.1 989.9 22.75 14.0% 23.0% 20.7%
-----------------------------------------------------------------------------------------------------------------------------------
HIGH 64.0% 67.0% 101.1%
MEAN 36.1% 43.4% 53.5%
MEDIAN 30.4% 45.1% 55.3%
LOW 14.0% 23.0% 18.7%
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
LTM LTM
------------------------------------ ----------------------------------
EQUITY
VALUE/
------- ------ ------ ------ ------ FIRM VALUE/
NET NET -------------------------
TARGET NAME ACQUIROR NAME INCOME REVENUE EBITDA EBIT INCOME REVENUE EBITDA EBIT
---------------------- ---------------------- ------- ------- ------ ------ ------ ------- -------- ----
-----------------------------------------------------------------------------------------------------------------------------------
JLK DIRECT DISTRIBUTION INC KENNAMETAL INC $16.9 $499.3 $38.3 $28.9 12.7 x 0.5 x 6.0 x 8.0 x
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bruckner Supply Co Inc. WESCO Distribution Inc $8.5 $241.3 $13.6 $13.5 11.7 x 0.4 x 7.4 x 7.5 x
White Cap Industries Inc Investor Group 10.6 304.2 26.3 21.4 17.6 0.8 9.1 11.2
Tristar Aerospace Co AlliedSignal Inc 15.6 207.4 35.5 33.0 11.7 1.4 8.0 8.6
Vallen Corp Hagemeyer NV 12.0 387.0 23.9 19.1 15.3 0.5 8.3 10.4%
JA Sexauer Inc (Dyson Kissner) Wilmar Industries Inc 5.2 79.0 10.2 9.4 16.5 1.1 8.3 9.0
Wilmar Industries Inc Investor Group 13.9 295.5 32.3 29.1 16.5 1.0 9.0 10.0
Cameron Ashley Building Prods Guardian Industries 17.1 1,138.4 51.8 39.3 10.0 0.3 6.6 8.7
Barnett Inc. (Waxman USA) Wilmar Industries Inc 15.9 278.8 34.3 28.6 13.4 0.9 7.0 8.5
Westburne Inc. Rexel S.A. 88.9 2,753.0 163.3 142.0 11.1 0.4 6.8 7.9
-----------------------------------------------------------------------------------------------------------------------------------
HIGH 17.6 x 1.4 x 9.1 x 11.2 x
MEAN 13.8 0.7 7.9 9.1
MEDIAN 13.4 0.8 8.0 8.7
LOW 10.0 0.3 6.6 7.5
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[CIBC WORLD MARKETS LOGO]
63
<PAGE> 64
PROJECT MOTOWN | SEPTEMBER 8, 2000
D LEVERAGED BUYOUT ANALYSIS
[CIBC WORLD MARKETS LOGO]
64
<PAGE> 65
PROJECT MOTOWN | SEPTEMBER 8, 2000
LEVERAGED BUYOUT ANALYSIS
================================================================================
TRANSACTION SUMMARY -- UPSIDE CASE
(Figures in Thousands, Except per Share Data)
TRANSACTION ASSUMPTIONS
------------------------------------------------------------------
Transaction Date: 06/30/00
Goodwill Amortization Period 25
Deferred Financing Fees Amortization Period 7
TRADING INFORMATION
------------------------------------------------------------------
<TABLE>
<CAPTION>
MOTOWN
-------------------------
ENTERPRISE VALUE CURRENT @ DEAL
---------------- ------- ------
<S> <C> <C>
Share Price 9/7/00 $ 6.31 $ 8.52
==========
Fully Diluted Shares 24,510.4 24,510.4
Equity Market Value $154,722.0 $208,828.7
Plus: Debt, Preferred & MI 18,734.7 18,734.7
Less: Cash (2,888.0) (2,888.0)
---------- ----------
Enterprise Value $170,568.7 $224,675.4
MULTIPLE ANALYSIS
2000 E P/E FYE 06/30 9.2x 12.4x
2001 E P/E 8.7 11.7
2000 E EBITDA 4.5 5.9
2001 E EBITDA 4.5 5.9
</TABLE>
DEBT CAPACITY ANALYSIS
------------------------------------------------------------------
<TABLE>
<S> <C>
Trailing EBITDA $ 38,317.0
Debt/EBITDA Coverage 4.0x
----------
Implied Debt Capacity $153,268.0
Less Current Debt (18,734.7)
----------
Incremental Debt Capacity $134,533.3
</TABLE>
GOODWILL CALCULATION
------------------------------------------------------------------
<TABLE>
<S> <C>
Purchase Price of Equity $208,828.7
Plus: Transaction Costs 2,400.0
Less: Tangible Book Value of Motown 172,446.0
----------
TOTAL DEAL GOODWILL $ 38,782.7
==========
Amortization Period (Years) 25.0
Annual Amortization of Transaction Goodwill $ 1,551.3
</TABLE>
EQUITY SOURCES
-------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount Ownership
------ ---------
<S> <C> <C>
Management $ 0.0 0.0%
Roll-over Equity 0.0 0.0%
Financial Sponsor 81,293.5 100.0%
--------- ------
Total Equity $81,293.5 100.0%
</TABLE>
SOURCES AND USES OF FUNDS
------------------------------------------------------------------
<TABLE>
<CAPTION>
SOURCES OF FUNDS AMOUNT RATE PERCENT
---------------- ------ ---- -------
<S> <C> <C> <C>
Bank Revolver $ 0.0 8.5% 0.0%
Acquisition Senior Debt (1) 105,371.8 9.7% 44.9%
Acquisition PIK Preferred 0.0 12.5% 0.0%
Acquisition Subordinated Debt (2) 47,896.3 12.5% 20.4%
Equity Sponsor 81,293.5 34.7%
---------- ------
TOTAL SOURCES OF FUNDS $234,561.5 100.0%
USES OF FUNDS
-------------
Purchase of Motown Common Equity $208,828.7 89.0%
Existing Motown Current Debt 18,734.7 8.0%
Existing Motown Senior Debt 0.0 0.0%
Transaction Costs 2,400.0 1.0%
Deferred Fees 4,598.0 3.0% 2.0%
---------- ------
TOTAL USES OF FUNDS $234,561.5 100.0%
</TABLE>
EQUITY SPONSOR IRR CALCULATION
------------------------------------------------------------------
<TABLE>
<CAPTION>
EBITDA MULTIPLE 2003 2004 2005
---------------- ---- ---- ----
<S> <C> <C> <C>
5.5x 37.4% 39.0% 37.5%
6.0x 42.9% 42.6% 40.0%
6.5x 48.1% 46.0% 42.4%
</TABLE>
SUMMARY CREDIT/LEVERAGE STATISTICS
------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 PF 2001 2002
------- ---- ----
<S> <C> <C> <C>
Total Debt, Preferred & Minority Interest/EBITDA 4.0x 3.5x 2.4x
EBITDA/Fixed Charges 3.8x 2.4x 3.3x
(EBITDA-Capex)/Fixed Charges 3.0x 1.9x 2.8x
</TABLE>
(1) Assumed at 400 bps above 10-year Treasury Notes.
(2) Rate is made equivalent to 12.5% coupon rate on subordinated debt. Attached
warrants are assumed at 8% of company equity.
These adjustments are made to achieve an approximate 22% IRR for debt
holders.
[CIBC WORLD MARKETS LOGO]
65
<PAGE> 66
PROJECT MOTOWN | SEPTEMBER 8, 2000
LEVERAGED BUYOUT ANALYSIS
================================================================================
LEVERAGED BUYOUT ANALYSIS -- UPSIDE CASE
(Figures in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
ESTIMATED PROJECTED
---------- --------------------------------------------------------------
2000 PF 2001 2002 2003 2004 2005
---------- ---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT ITEMS
----------------------
Revenue $499,292.0 $523,194.0 $565,566.0 $614,410.0 $ 67,521.0 $738,255.0
EBITDA 38,317.0 38,005.0 47,569.0 57,791.0 71,022.0 83,496.0
EBIIDA-Capex 30,618.0 31,138.0 40,569.0 50,791.0 64,022.0 76,496.0
EBIT 32,106.7 30,857.7 40,024.7 49,821.7 62,195.7 74,185.7
Cash Interest Expense 10,112.3 10,112.3 7,648.9 5,153.6 2,174.3 (500.4)
Total Fixed Charges (1) 10,112.3 16,099.3 14,384.3 12,730.9 10,698.8 9,089.7
BALANCE SHEET ITEMS
-------------------
Total Debt $105,371.8 $ 79,921.2 $ 54,139.9 $ 23,359.0 $0.0 $0.0
Total Debt, Preferred & MI 153,268.0 133,804.4 114,758.6 91,555.0 76,720.5 86,310.6
Net Debt 150,380.0 130,916.4 111,870.6 88,667.0 60,041.4 25,078.8
Equity 81,293.5 87,007.2 99,094.8 117,868.2 145,096.7 180,240.0
---------- ---------- ---------- ---------- ---------- ----------
Total Capitalization 231,673.5 217,923.6 210,965.4 206,535.2 205,138.1 205,318.9
Total Debt/EBITDA 2.8x 2.lx l.1x 0.4x 0.0x 0.0x
Total Debt, Preferred & MI/EBITDA 4.0 3.5 2.4 1.6 1.1 1.0
Net Debt/Equity 185.0% 150.5% 112.9% 75.2% 41.4% 13.9%
Net Debt/Capitalization 64.9% 60.1% 53.0% 42.9% 29.3% 12.2%
COVERAGES
EBITDA/Cash Interest Expense 3.8x 3.8x 6.2x 11.2x 32.7x NM
(EBITDA - Capex)/Cash Interest Expense 3.0 3.1 5.3 9.9 29.4 NM
EBITDA/Fixed Charges (1) 3.8 2.4 3.3 4.5 6.6 9.2
(EBITDA - Capex)/Fixed Charges 3.0 1.9 2.8 4.0 6.0 8.4
</TABLE>
(1) Fixed charges defined as cash interest plus PIK preferred dividends.
[CIBC WORLD MARKETS LOGO]
66
<PAGE> 67
PROJECT MOTOWN | SEPTEMBER 8, 2000
LEVERAGED BUYOUT ANALYSIS
================================================================================
TRANSACTION SUMMARY -- UPSIDE CASE
(Figures in Thousands, Except per Share Data)
TRANSACTION ASSUMPTIONS
------------------------------------------------------------------
Transaction Date: 06/30/00
Goodwill Amortization Period 25
Deferred Financing Fees Amortization Period 7
TRADING INFORMATION
------------------------------------------------------------------
<TABLE>
<CAPTION>
MOTOWN
-------------------------
ENTERPRISE VALUE CURRENT @ DEAL
---------------- ------- ------
<S> <C> <C>
Share Price 9/7/00 $ 6.31 $ 9.18
==========
Fully Diluted Shares 24,510.4 24,510.4
Equity Market Value $154,722.0 $225,005.6
Plus: Debt, Preferred & MI 18,734.7 18,734.7
Less: Cash (2,888.0) (2,888.0)
---------- ----------
Enterprise Value $170,568.7 $240,852.3
MULTIPLE ANALYSIS
2000 E P/E FYE 06/30 9.2x 13.3x
2001 E P/E 8.7 12.6
2000 E EBITDA 4.5 6.3
2001 E EBITDA 4.5 6.3
</TABLE>
DEBT CAPACITY ANALYSIS
------------------------------------------------------------------
<TABLE>
<S> <C>
Trailing EBITDA $ 38,317.0
Debt/EBITDA Coverage 4.0x
----------
Implied Debt Capacity $153,268.0
Less Current Debt (18,734.7)
----------
Incremental Debt Capacity $134,533.3
</TABLE>
GOODWILL CALCULATION
------------------------------------------------------------------
<TABLE>
<S> <C>
Purchase Price of Equity $225,005.6
Plus: Transaction Costs 2,500.0
Less: Tangible Book Value of Motown 172,446.0
----------
TOTAL DEAL GOODWILL $ 55,059.6
==========
Amortization Period (Years) 25.0
Annual Amortization of Transaction Goodwill $ 2,202.4
</TABLE>
EQUITY SOURCES
-------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount Ownership
------ ---------
<S> <C> <C>
Management $ 0.0 0.0%
Roll-over Equity 0.0 0.0%
Financial Sponsor 97,570.3 100.0%
--------- ------
Total Equity $97,570.3 100.0%
</TABLE>
SOURCES AND USES OF FUNDS
------------------------------------------------------------------
<TABLE>
<CAPTION>
SOURCES OF FUNDS AMOUNT RATE PERCENT
---------------- ------ ---- -------
<S> <C> <C> <C>
Bank Revolver $ 0.0 8.5% 0.0%
Acquisition Senior Debt (1) 105,371.8 9.7% 42.0%
Acquisition PIK Preferred 0.0 12.5% 0.0%
Acquisition Subordinated Debt (2) 47,896.3 12.5% 19.1%
Equity Sponsor 97,570.3 38.9%
---------- ------
TOTAL SOURCES OF FUNDS $250,838.3 100.0%
USES OF FUNDS
-------------
Purchase of Motown Common Equity $225,005.6 89.7%
Existing Motown Current Debt 18,734.7 7.5%
Existing Motown Senior Debt 0.0 0.0%
Transaction Costs 2,500.0 1.0%
Deferred Fees 4,598.0 3.0% 1.8%
---------- ------
TOTAL USES OF FUNDS $250,838.3 100.0%
</TABLE>
EQUITY SPONSOR IRR CALCULATION
------------------------------------------------------------------
<TABLE>
<CAPTION>
EBITDA MULTIPLE 2003 2004 2005
---------------- ---- ---- ----
<S> <C> <C> <C>
5.5x 29.3% 32.8% 32.5%
6.0x 34.5% 36.3% 35.0%
6.5x 39.3% 39.5% 37.3%
</TABLE>
SUMMARY CREDIT/LEVERAGE STATISTICS
------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 PF 2001 2002
------- ---- ----
<S> <C> <C> <C>
Total Debt, Preferred & Minority Interest/EBITDA 4.0x 3.5x 2.4x
EBITDA/Fixed Charges 3.8x 2.4x 3.3x
(EBITDA-Capex)/Fixed Charges 3.0x 1.9x 2.8x
</TABLE>
(1) Assumed at 400 bps above 10-year Treasury Notes.
(2) Rate is made equivalent to 12.5% coupon rate on subordinated debt. Attached
warrants are assumed at 8% of company equity.
These adjustments are made to achieve an approximate 22% IRR for debt
holders.
[CIBC WORLD MARKETS LOGO]
67
<PAGE> 68
PROJECT MOTOWN | SEPTEMBER 8, 2000
LEVERAGED BUYOUT ANALYSIS
================================================================================
LEVERAGED BUYOUT ANALYSIS -- UPSIDE CASE
(Figures in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
ESTIMATED PROJECTED
----------- --------------------------------------------------------------
2000 PF 2001 2002 2003 2004 2005
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT ITEMS
Revenue $499,292.0 $523,194.0 $565,566.0 $614,410.0 $671,521.0 $738,255.0
EBITDA 38,317.0 38,005.0 47,569.0 57,791.0 71,022.0 83,496.0
EBITDA-Capex 30,618.0 31,138.0 40,569.0 50,791.0 64,022.0 76,496.0
EBIT 31,455.6 30,206.6 39,373.6 49,170.6 61,544.6 73,534.6
Cash Interest Expense 10,112.3 10,112.3 7,648.9 5,153.6 2,174.3 (500.4)
Total Fixed Charges (1) 10,112.3 16,099.3 14,384.3 12,730.9 10,698.8 9,089.7
BALANCE SHEET ITEMS
Total Debt $105,371.8 $ 79,921.2 $ 54,139.9 $ 23,359.0 $ 0.0 $ 0.0
Total Debt, Preferred & MI 153,268.0 133,804.4 114,758.6 91,555.0 76,720.5 86,310.6
Net Debt 150,380.0 130,916.4 111,870.6 88,667.0 60,041.4 25,078.8
Equity 97,570.3 102,632.9 114,069.5 132,191.9 158,769.2 193,261.5
---------- ---------- ---------- ---------- ---------- ----------
Total Capitalization 247,950.3 233,549.4 225,940.1 220,858.9 218,810.6 218,340.4
Total Debt/EBITDA 2.8x 2.lx l.1x 0.4x 0.0x 0.0x
Total Debt, Preferred & MI/EBITDA 4.0 3.5 2.4 1.6 1.1 1.0
Net Debt/Equity 154.1% 127.6% 98.1% 67.1% 37.8% 13.0%
Net Debt/Capitalization 60.6% 56.1% 49.5% 40.1% 27.4% 11.5%
COVERAGES
EBITDA/Cash Interest Expense 3.8x 3.8x 6.2x 11.2x 32.7x NM
(EBITDA - Capex)/Cash Interest Expense 3.0 3.1 5.3 9.9 29.4 NM
EBITDA/Fixed Charges (1) 3.8 2.4 3.3 4.5 6.6 9.2
(EBITDA - Capex)/Fixed Charges 3.0 1.9 2.8 4.0 6.0 8.4
</TABLE>
(1) Fixed charges defined as cash interest plus PIK preferred dividends.
[CIBC WORLD MARKETS LOGO]
68
<PAGE> 69
PROJECT MOTOWN | SEPTEMBER 8, 2000
LEVERAGED BUYOUT ANALYSIS
================================================================================
TRANSACTION SUMMARY -- CONSERVATIVE CASE
(Figures in Thousands, Except per Share Data)
TRANSACTION ASSUMPTIONS
------------------------------------------------------------------
Transaction Date: 06/30/00
Goodwill Amortization Period 25
Deferred Financing Fees Amortization Period 7
TRADING INFORMATION
------------------------------------------------------------------
<TABLE>
<CAPTION>
MOTOWN
-------------------------
ENTERPRISE VALUE CURRENT @ DEAL
---------------- ------- ------
<S> <C> <C>
Share Price 9/7/00 $ 6.31 $ 7.30
==========
Fully Diluted Shares 24,510.4 24,510.4
Equity Market Value $154,722.0 $178,926.0
Plus: Debt, Preferred & MI 18,734.7 18,734.7
Less: Cash (2,888.0) (2,888.0)
---------- ----------
Enterprise Value $170,568.7 $194,772.7
MULTIPLE ANALYSIS
2000 E P/E FYE 06/30 9.2x 10.6x
2001 E P/E 8.7 10.0
2000 E EBITDA 4.5 5.1
2001 E EBITDA 4.5 5.1
</TABLE>
DEBT CAPACITY ANALYSIS
------------------------------------------------------------------
<TABLE>
<S> <C>
Trailing EBITDA $ 38,317.0
Debt/EBITDA Coverage 4.0x
----------
Implied Debt Capacity $153,268.0
Less Current Debt (18,734.7)
----------
Incremental Debt Capacity $134,533.3
</TABLE>
GOODWILL CALCULATION
------------------------------------------------------------------
<TABLE>
<S> <C>
Purchase Price of Equity $178,926.0
Plus: Transaction Costs 2,100.0
Less: Tangible Book Value of Motown 172,446.0
----------
TOTAL DEAL GOODWILL $ 8,580.0
==========
Amortization Period (Years) 25.0
Annual Amortization of Transaction Goodwill $ 343.2
</TABLE>
EQUITY SOURCES
-------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount Ownership
------ ---------
<S> <C> <C>
Management $ 0.0 0.0%
Roll-over Equity 0.0 0.0%
Financial Sponsor 51,090.8 100.0%
--------- ------
Total Equity $51,090.8 100.0%
</TABLE>
SOURCES AND USES OF FUNDS
------------------------------------------------------------------
<TABLE>
<CAPTION>
SOURCES OF FUNDS AMOUNT RATE PERCENT
---------------- ------ ---- -------
<S> <C> <C> <C>
Bank Revolver $ 0.0 8.5% 0.0%
Acquisition Senior Debt (1) 105,371.8 9.7% 51.6%
Acquisition PIK Preferred 0.0 12.5% 0.0%
Acquisition Subordinated Debt (2) 47,896.3 12.5% 23.4%
Equity Sponsor 51,090.8 25.0%
---------- ------
TOTAL SOURCES OF FUNDS $204,358.8 100.0%
USES OF FUNDS
-------------
Purchase of Motown Common Equity $178,926.0 87.6%
Existing Motown Current Debt 18,734.7 9.2%
Existing Motown Senior Debt 0.0 0.0%
Transaction Costs 2,100.0 1.0%
Deferred Fees 4,598.0 3.0% 2.2%
---------- ------
TOTAL USES OF FUNDS $204,358.8 100.0%
</TABLE>
EQUITY SPONSOR IRR CALCULATION
------------------------------------------------------------------
<TABLE>
<CAPTION>
EBITDA MULTIPLE 2003 2004 2005
---------------- ---- ---- ----
<S> <C> <C> <C>
5.5x 38.6% 38.0% 36.8%
6.0x 45.7% 42.5% 40.0%
6.5x 52.3% 46.7% 42.9%
</TABLE>
SUMMARY CREDIT/LEVERAGE STATISTICS
------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 PF 2001 2002
------- ---- ----
<S> <C> <C> <C>
Total Debt, Preferred & Minority Interest/EBITDA 4.0x 3.5x 2.4x
EBITDA/Fixed Charges 3.8x 2.4x 3.0x
(EBITDA-Capex)/Fixed Charges 3.0x 1.9x 2.5x
</TABLE>
(1) Assumed at 400 bps above 10-year Treasury Notes.
(2) Rate is made equivalent to 12.5% coupon rate on subordinated debt. Attached
warrants are assumed at 12% of company equity.
These adjustments are made to achieve an approximate 22% IRR for debt
holders.
[CIBC WORLD MARKETS LOGO]
69
<PAGE> 70
PROJECT MOTOWN | SEPTEMBER 8, 2000
LEVERAGED BUYOUT ANALYSIS
================================================================================
LEVERAGED BUYOUT ANALYSIS -- CONSERVATIVE CASE
(Figures in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
ESTIMATED PROJECTED
--------- -------------------------------------------------------------------
2000 PF 2001 2002 2003 2004 2005
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT ITEMS
Revenue $499,292.0 $523,194.0 $549,230.0 $583,707.0 $618,844.0 $655,952.0
EBITDA 38,317.0 38,005.0 43,026.0 50,495.0 58,805.0 68,249.0
EBITDA-Capex 30,618.0 31,138.0 36,026.0 43,495.0 51,805.0 61,249.0
EBIT 33,314.8 32,065.8 36,689.8 43,733.8 51,186.8 60,146.8
Cash Interest Expense 10,112.3 10,112.3 7,648.9 6,793.6 5,519.4 3,702.6
Total Fixed Charges (1) 10,112.3 16,099.3 14,384.3 14,370.9 14,043.9 13,292.7
BALANCE SHEET ITEMS
Total Debt $105,371.8 $79,921.2 $71,084.0 $57,919.4 $39,149.4 $14,003.7
Total Debt, Preferred & MI 153,268.0 133,804.4 131,702.7 126,115.5 115,869.9 100,314.3
Net Debt 150,380.0 130,916.4 128,814.7 123,227.5 112,981.9 97,426.3
Equity 51,090.8 58,012.6 68,526.2 83,035.4 101,941.9 126,382.4
---------- ---------- ---------- ---------- ---------- ----------
Total Capitalization 201,470.8 188,929.0 197,340.9 206,262.9 214,923.8 223,808.7
Total Debt/EBITDA 2.8x 2.1x 1.7x 1.1x 0.7x 0.2x
Total Debt, Preferred & MI/EBITDA 4.0 3.5 3.1 2.5 2.0 1.5
Net Debt/Equity 294.3% 225.7% 188.0% 148.4% 110.8% 77.1%
Net Debt/Capitalization 74.6% 69.3% 65.3% 59.7% 52.6% 43.5%
COVERAGES
EBITDA/Cash Interest Expense 3.8x 3.8x 5.6x 7.4x 10.7x 18.4x
(EBITDA - Capex)/Cash Interest Expense 3.0 3.1 4.7 6.4 9.4 16.5
EBITDA/Fixed Charges (1) 3.8 2.4 3.0 3.5 4.2 5.1
(EBITDA - Capex)/Fixed Charges 3.0 1.9 2.5 3.0 3.7 4.6
</TABLE>
(1) Fixed charges defined as cash interest plus PIK preferred dividends.
[CIBC WORLD MARKETS LOGO]
70
<PAGE> 71
PROJECT MOTOWN | SEPTEMBER 8, 2000
LEVERAGED BUYOUT ANALYSIS
================================================================================
TRANSACTION SUMMARY -- CONSERVATIVE CASE
(Figures in Thousands, Except per Share Data)
TRANSACTION ASSUMPTIONS
------------------------------------------------------------------
Transaction Date: 06/30/00
Goodwill Amortization Period 25
Deferred Financing Fees Amortization Period 7
TRADING INFORMATION
------------------------------------------------------------------
<TABLE>
<CAPTION>
MOTOWN
-------------------------
ENTERPRISE VALUE CURRENT @ DEAL
---------------- ------- ------
<S> <C> <C>
Share Price 9/7/00 $ 6.31 $ 7.71
==========
Fully Diluted Shares 24,510.4 24,510.4
Equity Market Value $154,722.0 $188,975.3
Plus: Debt, Preferred & MI 18,734.7 18,734.7
Less: Cash (2,888.0) (2,888.0)
---------- ----------
Enterprise Value $170,568.7 $204,822.0
MULTIPLE ANALYSIS
2000 E P/E FYE 06/30 9.2x 11.2x
2001 E P/E 8.7 10.6
2000 E EBITDA 4.5 5.3
2001 E EBITDA 4.5 5.4
</TABLE>
DEBT CAPACITY ANALYSIS
------------------------------------------------------------------
<TABLE>
<S> <C>
Trailing EBITDA $ 38,317.0
Debt/EBITDA Coverage 4.0x
----------
Implied Debt Capacity $153,268.0
Less Current Debt (18,734.7)
----------
Incremental Debt Capacity $134,533.3
</TABLE>
GOODWILL CALCULATION
------------------------------------------------------------------
<TABLE>
<S> <C>
Purchase Price of Equity $188,975.3
Plus: Transaction Costs 2,200.0
Less: Tangible Book Value of Motown 172,446.0
----------
TOTAL DEAL GOODWILL $ 18,729.3
==========
Amortization Period (Years) 25.0
Annual Amortization of Transaction Goodwill $ 749.2
</TABLE>
EQUITY SOURCES
-------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount Ownership
------ ---------
<S> <C> <C>
Management $ 0.0 0.0%
Roll-over Equity 0.0 0.0%
Financial Sponsor 61,240.0 100.0%
--------- ------
Total Equity $61,240.0 100.0%
</TABLE>
SOURCES AND USES OF FUNDS
------------------------------------------------------------------
<TABLE>
<CAPTION>
SOURCES OF FUNDS AMOUNT RATE PERCENT
---------------- ------ ---- -------
<S> <C> <C> <C>
Bank Revolver $ 0.0 8.5% 0.0%
Acquisition Senior Debt (1) 105,371.8 9.7% 49.1%
Acquisition PIK Preferred 0.0 12.5% 0.0%
Acquisition Subordinated Debt (2) 47,896.3 12.5% 22.3%
Equity Sponsor 61,240.0 28.5%
---------- ------
TOTAL SOURCES OF FUNDS $214,508.0 100.0%
USES OF FUNDS
-------------
Purchase of Motown Common Equity $188,975.3 88.1%
Existing Motown Current Debt 18,734.7 8.7%
Existing Motown Senior Debt 0.0 0.0%
Transaction Costs 2,200.0 1.0%
Deferred Fees 4,598.0 3.0% 2.1%
---------- ------
TOTAL USES OF FUNDS $214,508.0 100.0%
</TABLE>
EQUITY SPONSOR IRR CALCULATION
------------------------------------------------------------------
<TABLE>
<CAPTION>
EBITDA MULTIPLE 2003 2004 2005
---------------- ---- ---- ----
<S> <C> <C> <C>
5.5x 30.5% 31.8% 31.9%
6.0x 37.2% 36.2% 35.0%
6.5x 43.3% 40.2% 37.8%
</TABLE>
SUMMARY CREDIT/LEVERAGE STATISTICS
------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 PF 2001 2002
------- ---- ----
<S> <C> <C> <C>
Total Debt, Preferred & Minority Interest/EBITDA 4.0x 3.5x 2.4x
EBITDA/Fixed Charges 3.8x 2.4x 3.0x
(EBITDA-Capex)/Fixed Charges 3.0x 1.9x 2.5x
</TABLE>
(1) Assumed at 400 bps above 10-year Treasury Notes.
(2) Rate is made equivalent to 12.5% coupon rate on subordinated debt. Attached
warrants are assumed at 8% of company equity.
These adjustments are made to achieve an approximate 22% IRR for debt
holders.
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PROJECT MOTOWN | SEPTEMBER 8, 2000
LEVERAGED BUYOUT ANALYSIS
================================================================================
LEVERAGED BUYOUT ANALYSIS -- CONSERVATIVE CASE
(Figures in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
ESTIMATED PROJECTED
--------- -------------------------------------------------------------------
2000 PF 2001 2002 2003 2004 2005
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT ITEMS
Revenue $499,292.0 $523,194.0 $549,230.0 $583,707.0 $618,844.0 $655,952.0
EBITDA 38,317.0 38,005.0 43,026.0 50,495.0 58,805.0 68,249.0
EBITDA-Capex 30,618.0 31,138.0 36,026.0 43,495.0 51,805.0 61,249.0
EBIT 32,908.8 31,659.8 36,283.8 43,327.8 50,780.8 59,740.8
Cash Interest Expense 10,112.3 10,112.3 7,648.9 6,793.6 5,519.4 3,702.6
Total Fixed Charges (1) 10,112.3 16,099.3 14,384.3 14,370.9 14,043.9 13,292.7
BALANCE SHEET ITEMS
Total Debt $105,371.8 $79,921.2 $71,084.0 $57,919.4 $39,149.4 $14,003.7
Total Debt, Preferred & MI 153,268.0 133,804.4 131,702.7 126,115.5 115,869.9 100,314.3
Net Debt 150,380.0 130,916.4 128,814.7 123,227.5 112,981.9 97,426.3
Equity 61,240.0 67,755.9 77,863.5 91,966.8 110,467.3 134,501.8
---------- ---------- ---------- ---------- ---------- ----------
Total Capitalization 211,620.0 198,672.3 206,678.3 215,194.2 223,449.2 231,928.1
Total Debt/EBITDA 2.8x 2.1x 1.7x 1.1x 0.7x 0.2x
Total Debt, Preferred & MI/EBITDA 4.0 3.5 3.1 2.5 2.0 1.5
Net Debt/Equity 245.6% 193.2% 165.4% 134.0% 102.3% 72.4%
Net Debt/Capitalization 71.1% 65.9% 62.3% 57.3% 50.6% 42.0%
COVERAGES
EBITDA/Cash Interest Expense 3.8x 3.8x 5.6x 7.4x 10.7x 18.4x
(EBITDA - Capex)/Cash Interest Expense 3.0 3.1 4.7 6.4 9.4 16.5
EBITDA/Fixed Charges (1) 3.8 2.4 3.0 3.5 4.2 5.1
(EBITDA - Capex)/Fixed Charges 3.0 1.9 2.5 3.0 3.7 4.6
</TABLE>
(1) Fixed charges defined as cash interest plus PIK preferred dividends.
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PROJECT MOTOWN | SEPTEMBER 8, 2000
E MINORITY BUYOUT TRANSACTIONS ANALYSIS
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PROJECT MOTOWN | SEPTEMBER 8, 2000
MINORITY BUYOUT TRANSACTIONS ANALYSIS
================================================================================
MINORITY BUYOUT TRANSACTIONS
<TABLE>
<CAPTION>
VALUE OF
DATE DATE TRANSACTION 1 DAY 1 WEEK
ANNOUNCED EFFECTIVE TARGET NAME ACQUIROR NAME ($ MM) PREMIUM PREMIUM
--------- --------- ----------- ------------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
08/15/2000 Pending Infinity Broadcasting Corp Viacom Inc(Natl Amusements) $ 16,665.9 13.6% 7.0%
08/14/2000 Pending BHC Communications Inc News Corp Ltd 887.7 16.4% 13.4%
07/24/2000 Pending Phoenix Investment Partners Phoenix Home Life Mutual 383.3 14.3% 11.1%
07/11/2000 Pending In Home Health Inc Manor Care Inc 19.1 12.5% 17.4%
06/22/2000 Pending American Educational Products G C Associates Holding Corp 3.4 3.9% 3.9%
06/05/2000 Pending Jenny Craig Inc SJF Enterprises Inc 25.6 114.3% 150.0%
05/04/2000 Pending Petroglyph Energy Inc Intermountain Industries 7.4 10.0% 60.0%
04/25/2000 Pending MPW Industrial Services Group Investor Group 122.4 56.1% 58.0%
04/24/2000 07/17/2000 Cherry Corp Investor Group 144.5 103.1% 109.1%
03/27/2000 06/27/2000 Hartford Life(ITT Hartford) Hartford Financial Services 1,324.6 18.6% 40.3%
03/23/2000 06/08/2000 Homestead Village Inc Security Capital Group Inc 156.8 49.1% 56.2%
03/21/2000 Pending CNA Surety Corp(CNA Financial) Continental Casualty(CNA Finl) 218.4 -7.1% 10.6%
03/21/2000 Pending Travelers Property Casualty Citigroup Inc 2,449.3 24.5% 39.5%
03/17/2000 Pending Vastar Resources Inc BP Amoco PLC 1,575.7 16.2% 35.0%
02/22/2000 06/15/2000 IXnet Inc(IPC Information) Global Crossing Ltd 876.9 18.1% 22.8%
02/14/2000 Pending CareInsite Inc(Medical Mgr) Healtheon/WebMD Inc 1,883.8 5.3% -0.7%
02/02/2000 Pending Thermo Instrument Systems Inc Thermo Electron Corp 831.7 27.0% 33.2%
01/31/2000 05/03/2000 Metrika Systems Corp Thermo Instrument Systems Inc 14.2 -6.5% 0.0%
01/31/2000 06/28/2000 ONIX Systems Inc Thermo Instrument Systems Inc 23.1 2.9% 16.1%
01/31/2000 05/12/2000 Thermo Optek Corp Thermo Instrument Systems Inc 51.8 6.7% -5.1%
01/31/2000 04/20/2000 Thermo BioAnalysis(Thermo) Thermo Instrument Systems Inc 167.9 51.4% 55.6%
01/31/2000 05/12/2000 ThermoQuest Corp Thermo Instrument Systems Inc 96.9 36.0% 47.0%
01/31/2000 04/04/2000 Thermo Sentron Inc(Thermedics) Thermedics(Thermo Electron) 30.7 7.4% 6.9%
01/31/2000 04/12/2000 Thermedics Detection Inc Thermedics(Thermo Electron) 17.0 0.8% 0.8%
01/31/2000 06/28/2000 Sunrise Intl Leasing Inc King Management Corp 17.0 -4.5% 0.0%
01/19/2000 04/19/2000 Conning Corp Metropolitan Life Insurance Co 73.5 15.6% 38.9%
01/19/2000 02/09/2000 Trigen Energy Corp Elyo(Suez Lyonnaise des Eaux) 159.2 38.2% 42.4%
01/11/2000 Pending Hayes Lemmerz International Investor Group 165.2 1.2% 23.5%
12/17/1999 08/15/2000 ThermoTrex Corp Thermo Electron Corp 36.9 -5.7% -0.7%
12/15/1999 08/15/2000 ThermoLase Corp(Thermo Trex) Thermo Electron Corp 34.4 2.7% 14.8%
12/08/1999 Pending Robertson-Ceco Corp Heico Companies LLC 57.0 46.0% 43.8%
12/01/1999 Pending Boise Cascade Office Products Boise Cascade Corp 205.3 43.5% 55.3%
11/16/1999 Pending Thermo TerraTech Inc(Thermo) Thermo Electron Corp 80.7 -15.8% -9.4%
11/12/1999 Pending Howmet International Inc Cordant Technologies Inc 261.4 20.9% 18.8%
11/05/1999 11/05/1999 PEC Israel Economic Corp Discount Investment Corp(IDB) 320.0 0.2% 1.0%
10/21/1999 Pending Student Loan Corporation Citigroup Inc 180.0 11.5% 11.6%
10/20/1999 06/06/2000 Thermoretec Corp Thermo Electron Corp 56.9 27.3% 33.3%
10/20/1999 05/16/2000 Randers Killam Gr Thermo Electron Corp 6.7 12.5% 12.5%
09/20/1999 Pending Trigen Energy Corp Elyo(Suez Lyonnaise des Eaux) 132.7 14.3% 20.5%
07/13/1999 01/07/2000 Thermo Vision(Thermo Inst) Thermo Instrument Systems Inc 11.9 75.0% 60.0%
06/22/1999 Pending National Processing Inc National City, Cleveland, Ohio 58.2 23.6% 33.3%
</TABLE>
<TABLE>
<CAPTION>
DATE DATE 4 WEEKS
ANNOUNCED EFFECTIVE TARGET NAME ACQUIROR NAME PREMIUM AVERAGE % ACQUIRED
--------- --------- ----------- ------------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
08/15/2000 Pending Infinity Broadcasting Corp Viacom Inc(Natl Amusements) 13.2% 11.3% 35.7%
08/14/2000 Pending BHC Communications Inc News Corp Ltd 10.0% 13.3% 20.0%
07/24/2000 Pending Phoenix Investment Partners Phoenix Home Life Mutual 29.0% 18.1% 40.0%
07/11/2000 Pending In Home Health Inc Manor Care Inc 12.5% 14.1% 38.6%
06/22/2000 Pending American Educational Products G C Associates Holding Corp 5.3% 4.4% 39.3%
06/05/2000 Pending Jenny Craig Inc SJF Enterprises Inc 140.0% 134.8% 33.0%
05/04/2000 Pending Petroglyph Energy Inc Intermountain Industries 35.4% 35.1% 41.8%
04/25/2000 Pending MPW Industrial Services Group Investor Group 16.4% 43.5% 43.0%
04/24/2000 07/17/2000 Cherry Corp Investor Group 70.3% 94.2% 46.0%
03/27/2000 06/27/2000 Hartford Life(ITT Hartford) Hartford Financial Services 43.3% 34.1% 18.5%
03/23/2000 06/08/2000 Homestead Village Inc Security Capital Group Inc 98.8% 68.0% 13.0%
03/21/2000 Pending CNA Surety Corp(CNA Financial) Continental Casualty(CNA Finl) 18.9% 7.5% 37.0%
03/21/2000 Pending Travelers Property Casualty Citigroup Inc 35.1% 33.0% 15.0%
03/17/2000 Pending Vastar Resources Inc BP Amoco PLC 69.4% 40.2% 18.1%
02/22/2000 06/15/2000 IXnet Inc(IPC Information) Global Crossing Ltd 25.9% 22.3% 27.0%
02/14/2000 Pending CareInsite Inc(Medical Mgr) Healtheon/WebMD Inc (3.4)% 0.4% 31.0%
02/02/2000 Pending Thermo Instrument Systems Inc Thermo Electron Corp 94.3% 51.5% 11.2%
01/31/2000 05/03/2000 Metrika Systems Corp Thermo Instrument Systems Inc 46.9% 13.5% 29.5%
01/31/2000 06/28/2000 ONIX Systems Inc Thermo Instrument Systems Inc 38.5% 19.1% 19.7%
01/31/2000 05/12/2000 Thermo Optek Corp Thermo Instrument Systems Inc 41.2% 14.2% 5.0%
01/31/2000 04/20/2000 Thermo BioAnalysis(Thermo) Thermo Instrument Systems Inc 53.4% 53.4% 32.7%
01/31/2000 05/12/2000 ThermoQuest Corp Thermo Instrument Systems Inc 61.9% 48.3% 10.0%
01/31/2000 04/04/2000 Thermo Sentron Inc(Thermedics) Thermedics(Thermo Electron) 6.9% 7.1% --
01/31/2000 04/12/2000 Thermedics Detection Inc Thermedics(Thermo Electron) 14.3% 5.3% --
01/31/2000 06/28/2000 Sunrise Intl Leasing Inc King Management Corp 1.2% -1.1% 41.0%
01/19/2000 04/19/2000 Conning Corp Metropolitan Life Insurance Co 52.1% 35.5% 39.0%
01/19/2000 02/09/2000 Trigen Energy Corp Elyo(Suez Lyonnaise des Eaux) 31.9% 37.5% 4.0%
01/11/2000 Pending Hayes Lemmerz International Investor Group 38.8% 21.2% 22.4%
12/17/1999 08/15/2000 ThermoTrex Corp Thermo Electron Corp 3.2% -1.1% 17.8%
12/15/1999 08/15/2000 ThermoLase Corp(Thermo Trex) Thermo Electron Corp 30.1% 15.9% 13.5%
12/08/1999 Pending Robertson-Ceco Corp Heico Companies LLC 41.5% 43.8% 30.6%
12/01/1999 Pending Boise Cascade Office Products Boise Cascade Corp 60.0% 52.9% 18.1%
11/16/1999 Pending Thermo TerraTech Inc(Thermo) Thermo Electron Corp 11.6% -4.5% 13.0%
11/12/1999 Pending Howmet International Inc Cordant Technologies Inc 38.1% 25.9% 15.4%
11/05/1999 11/05/1999 PEC Israel Economic Corp Discount Investment Corp(IDB) 2.8% 1.3% 30.7%
10/21/1999 Pending Student Loan Corporation Citigroup Inc 0.8% 8.0% 20.0%
10/20/1999 06/06/2000 Thermoretec Corp Thermo Electron Corp 34.9% 31.8% 28.0%
10/20/1999 05/16/2000 Randers Killam Gr Thermo Electron Corp 33.3% 19.4% 4.0%
09/20/1999 Pending Trigen Energy Corp Elyo(Suez Lyonnaise des Eaux) 18.1% 17.7% 47.3%
07/13/1999 01/07/2000 Thermo Vision(Thermo Inst) Thermo Instrument Systems Inc 107.4% 80.8% --
06/22/1999 Pending National Processing Inc National City, Cleveland, Ohio 60.0% 39.0% 12.0%
</TABLE>
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PROJECT MOTOWN | SEPTEMBER 8, 2000
MINORITY BUYOUT TRANSACTIONS ANALYSIS
================================================================================
MINORITY BUYOUT TRANSACTIONS
<TABLE>
<CAPTION>
VALUE OF
DATE DATE TRANSACTION 1 DAY 1 WEEK
ANNOUNCED EFFECTIVE TARGET NAME ACQUIROR NAME ($ MM) PREMIUM PREMIUM
--------- --------- ----------- ------------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
06/10/1999 Pending Hawks Industries Inc North Star Exploration 23.0 16.4% 60.0%
06/04/1999 08/25/1999 Intek Global Corp Securicor Communications 51.9 32.1% 26.9%
06/03/1999 06/16/1999 Genentech Inc Roche Holding AG 4,818.4 279.3% 281.5%
05/21/1999 12/10/1999 ThermoSpectra(Thermo Instr) Thermo Instrument Systems Inc 26.1 39.1% 43.8%
05/07/1999 07/30/1999 J Ray McDermott SA McDermott International Inc 514.5 16.8% 13.1%
05/05/1999 10/29/1999 Thermo Power Corp Thermo Electron Corp 34.8 5.5% -1.5%
04/29/1999 08/09/1999 Killeam Properties Inc Killeam Inc 1.9 10.0% 10.0%
04/12/1999 06/30/1999 Meadowcraft Inc Investor Group 53.2 64.9% 63.3%
04/01/1999 08/15/1999 Aqua Alliance Inc Vivendi SA 117.1 28.9% 19.0%
03/24/1999 11/04/1999 Knoll Inc(Warburg, Pincus) Warburg, Pincus Ventures Inc 490.8 83.6% 51.9%
03/21/1999 07/01/1999 Spelling Entertainment Group Viacom Inc(Natl Amusements) 191.6 8.3% 43.1%
03/09/1999 06/30/1999 Sun Energy Partners LP Kerr-McGee Corp 43.4 41.5% 43.8%
03/08/1999 08/10/1999 LabOne Inc(Lab Holdings Inc) Lab Holdings Inc 34.3 17.2% 10.3%
03/08/1999 12/01/1999 ENStar Inc Investor Group 13.2 56.3% 58.7%
01/22/1999 06/11/1999 Treadco Inc Arkansas Best Corp 22.7 38.5% 46.9%
12/03/1998 04/08/1999 Banner Aerospace Inc Fairchild Corp 82.4 25.7% 41.9%
11/16/1998 12/23/1999 Western Beef Inc Cactus Acquisitions Inc 13.6 25.0% 14.8%
11/12/1998 05/14/1999 Aquila Gas Pipeline Corp UtiliCorp United Inc 43.2 23.1% 17.4%
10/27/1998 12/14/1998 Citizens Corp(Hanover Ins Co) Allmerica Financial Corp 212.4 20.6% 17.2%
10/22/1998 04/29/1999 BA Merchant Svcs(BankAmerica) Bank of America National Trust 339.4 47.1% 56.2%
10/21/1998 11/30/1998 Capital Factors Holdings Inc Union Planters Bk Nat Assoc 22.2 4.5% 8.9%
10/16/1998 02/12/1999 BRC Holdings Inc Affiliated Computer Services 131.9 17.1% 16.9%
09/29/1998 10/07/1998 Newmont Gold Co Newmont Mining Corp 264.8 -5.2% 20.8%
09/23/1998 12/17/1998 J&L Specialty Steel Inc Usinor SA 115.0 100.0% 112.5%
09/23/1998 02/25/1999 Ryerson Tull Inc Inland Steel Industries Inc 61.2 -8.5% -11.6%
09/08/1998 12/15/1998 PEC Israel Economic Corp Investor Group 125.0 60.0% 55.7%
08/24/1998 11/19/1998 Tele-Commun Intl(Tele-Commun) Liberty Media(Tele-Commun) 379.1 -1.1% -4.5%
</TABLE>
<TABLE>
<CAPTION>
DATE DATE 4 WEEKS
ANNOUNCED EFFECTIVE TARGET NAME ACQUIROR NAME PREMIUM AVERAGE % ACQUIRED
--------- --------- ----------- ------------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
06/10/1999 Pending Hawks Industries Inc North Star Exploration 55.2% 43.8% --
06/04/1999 08/25/1999 Intek Global Corp Securicor Communications 22.0% 27.0% 43.7%
06/03/1999 06/16/1999 Genentech Inc Roche Holding AG 279.3% 280.0% 33.0%
05/21/1999 12/10/1999 ThermoSpectra(Thermo Instr) Thermo Instrument Systems Inc 61.0% 48.0% 8.0%
05/07/1999 07/30/1999 J Ray McDermott SA McDermott International Inc 19.2% 16.4% 37.0%
05/05/1999 10/29/1999 Thermo Power Corp Thermo Electron Corp 41.2% 15.0% 22.0%
04/29/1999 08/09/1999 Killeam Properties Inc Killeam Inc 7.3% 9.1% 38.0%
04/12/1999 06/30/1999 Meadowcraft Inc Investor Group 77.8% 68.7% 27.0%
04/01/1999 08/15/1999 Aqua Alliance Inc Vivendi SA 101.7% 49.9% 17.0%
03/24/1999 11/04/1999 Knoll Inc(Warburg, Pincus) Warburg, Pincus Ventures Inc 46.4% 60.6% 41.8%
03/21/1999 07/01/1999 Spelling Entertainment Group Viacom Inc(Natl Amusements) 54.5% 35.3% 19.1%
03/09/1999 06/30/1999 Sun Energy Partners LP Kerr-McGee Corp 50.8% 45.4% 1.8%
03/08/1999 08/10/1999 LabOne Inc(Lab Holdings Inc) Lab Holdings Inc 8.5% 12.0% 19.5%
03/08/1999 12/01/1999 ENStar Inc Investor Group 51.5% 55.5% 35.5%
01/22/1999 06/11/1999 Treadco Inc Arkansas Best Corp 24.1% 36.5% 49.0%
12/03/1998 04/08/1999 Banner Aerospace Inc Fairchild Corp 40.8% 36.1% 30.8%
11/16/1998 12/23/1999 Western Beef Inc Cactus Acquisitions Inc 22.8% 20.9% 28.0%
11/12/1998 05/14/1999 Aquila Gas Pipeline Corp UtiliCorp United Inc 68.4% 36.3% 18.4%
10/27/1998 12/14/1998 Citizens Corp(Hanover Ins Co) Allmerica Financial Corp 20.9% 19.6% 18.2%
10/22/1998 04/29/1999 BA Merchant Svcs(BankAmerica) Bank of America National Trust 42.0% 48.4% 32.8%
10/21/1998 11/30/1998 Capital Factors Holdings Inc Union Planters Bk Nat Assoc 2.9% 5.5% 12.7%
10/16/1998 02/12/1999 BRC Holdings Inc Affiliated Computer Services 15.2% 16.4% 49.0%
09/29/1998 10/07/1998 Newmont Gold Co Newmont Mining Corp 62.4% 26.0% 6.3%
09/23/1998 12/17/1998 J&L Specialty Steel Inc Usinor SA 37.8% 83.4% 46.5%
09/23/1998 02/25/1999 Ryerson Tull Inc Inland Steel Industries Inc -40.8% -20.3% 13.6%
09/08/1998 12/15/1998 PEC Israel Economic Corp Investor Group 50.5% 55.4% 18.7%
08/24/1998 11/19/1998 Tele-Commun Intl(Tele-Commun) Liberty Media(Tele-Commun) -9.9% -5.2% 18.9%
</TABLE>
AUGUST 1998 - PRESENT
HIGH 279.3% 281.5% 279.3%
MEAN 28.6% 33.9% 40.5%
MEDIAN 17.2% 21.8% 36.6%
LOW -15.8% -11.6% -40.8%
AUGUST 1998 - PRESENT
75TH% 38.6% 47.0% 53.7%
50TH% 17.2% 21.8% 36.6%
25TH% 6.4% 10.5% 14.9%
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