EXHIBIT (c)(4)
Confidential
Project Harbor
PRESENTATION TO THE BOARD OF DIRECTORS
AUGUST 1, 2000
SALOMON SMITH BARNEY
--------------------
A member of citigroup
<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Confidential Material
The following pages contain material that was provided to the Board of Harbor
("Harbor" or the "Company") by Salomon Smith Barney Inc. ("SSB") in connection
with the potential merger transaction involving the Company and Riverside. The
accompanying material was compiled or prepared on a confidential basis solely
for use by the Board of Directors of Harbor (the "Board") and not with a view
toward public disclosure under any securities laws or otherwise. The
information utilized in preparing this material was obtained from management of
the Company ("Management") and public sources. Any estimates and projections
for the Company contained herein have been prepared by Management, or are based
upon such estimates and projections, and involve numerous and significant
subjective determinations, which may or may not prove to be correct. No
representation or warranty, express 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, whether as to the past or the future. Because
this material was prepared for use in the context of an oral presentation to
the Board, which is familiar with the business and the affairs of the Company,
neither the Company nor SSB nor any of their respective legal or financial
advisors take any responsibility for the accuracy or completeness of any of the
material if used by persons other than the Board. Neither the Company nor SSB
undertakes any obligation to update or otherwise revise the accompanying
materials.
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--------------------
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Table of Contents
1 TRANSACTION OVERVIEW
2 OVERVIEW OF SALE PROCESS
3 STOCK TRADING ANALYSIS
4 HARBOR VALUATION ANALYSIS
Appendix
A. Comparable Company Analysis
B. Premiums Paid Analysis
C. Precedent Transaction Analysis
D. Discounted Cash Flow Analysis
E. Weighted Average Cost of Capital Analysis
F. Harbor Equity Investments
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
1 TRANSACTION OVERVIEW
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Transaction Overview
TERMS/CONDITIONS COMMENTS
--------------------------------------------------------------------------------
Acquiror: o Riverside
Structure: o Leveraged recapitalization
Public Consideration: o $16.90 per share in cash plus merger
consideration adjustment
Parent Consideration: o $50.0 million in rollover common equity
o $36.1 million Series A preferred stock
o $3.3 million of additional common
equity associated with the preferred
o $46.1 million cash plus merger consideration
adjustment
RAM Consideration: o $25.0 million in rollover common equity
o $50.7 million cash plus merger consideration
adjustment
Merger Consideration
Adjustment: o Adjustment for the contingent value of
investment in Saturn Electronics and
Engineering, Inc. ("Saturn")
o First $18.0 million in proceeds realized
accrues to Riverside
o Next $22.0 million in proceeds realized
accrues to Harbor's shareholders
o Next $16.7 million in proceeds realized
accrues to Riverside
o 60% of the proceeds realized above
$56.7 million accrues to Harbor's
shareholders, the remaining 40% accrues
to Riverside
o Any proceeds from the sale of equity
investments other than Saturn in excess of
$125.0 million would be added to the Saturn
adjustment above and treated in the same
manner
--------------------------------------------------------------------------------
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Transaction Overview (continued)
TERMS/CONDITIONS COMMENTS
--------------------------------------------------------------------------------
Other Key Conditions: o Regulatory clearance
o No material adverse change
o Majority of disinterested shareholder
approval
o Minimum proceeds from the sale of equity
investments other than Saturn of $125.0
million
o Exchange and Voting Agreement executed with
Parent/RAM
Financing Covenants: o Debt and equity commitment letters provided
at signing
o Commercially reasonable efforts to fund
merger
Non Solicitation: o Market provisions subject to fiduciary out
Termination Provisions: o Mutual consent
o 12/20/00
o Legal injunction
o Failure to obtain approval of the
disinterested shareholders
o Material breach of representations or
covenants by counterparty not capable of
being cured by 12/20/00
Break up Fee: o $16.0 million, inclusive of fees and expenses
(capped at $2.0 million)
Sale of Equity Investments: o CVC is expected to purchase certain equity
investments for total consideration of
$125.0 million (Approximately $99.1 million
after-tax)
o Proceeds from sale to be used to reduce
Harbor debt concurrent with the transaction
Parent "Put": o Parent will enter into a subordinated loan
agreement:
o Standby commitment of $100.0 million
o Expires 10/31/03
o Rate is higher of T+400 bps or comparable
debt + 150 bps, capped at 14.5% (with an
escalator)
--------------------------------------------------------------------------------
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Transaction Economics
<TABLE>
(Dollars in millions, except per share data)
At Offer Price
At Offer Price Including Merger
At Market(a) Excluding Saturn Consideration Adjustment(b)
------------ ---------------- ---------------------------
<S> <C> <C> <C>
Cash Value per Share $ 11.56 $ 16.90 $ 16.90
Contingent Value Per Share from Saturn -- -- $ 1.20
--------- --------- ---------
Total Value per Share $ 11.56 $ 16.90 $ 18.10
Implied Premiums
LTM High - $17.69 (8/26/99) (34.6%) (4.5%) 2.3%
LTM Low - $10.50 (7/10/00) 10.1% 61.0% 72.4%
Market - $11.56(a) -- 46.2% 56.5%
----------------------------------------------------------------------------------------------------------------------------
Number of Shares
Basic Shares Outstanding 44.740 44.740 44.740
Options 0.953 2.318 2.327
--------- --------- ---------
Fully Diluted Shares Outstanding 45.693 47.058 47.068
Adjusted Equity Market Capitalization $ 528.3 $ 795.3 $ 851.9
LESS: Options Proceeds (5.2) (24.9) (25.0)
--------- --------- ---------
Equity Value $ 523.2 $ 770.4 $ 826.9
PLUS: Debt(c) 1,336.0 1,336.0 1,336.0
LESS: Cash(c) (3.0) (3.0) (3.0)
LESS: After-tax Proceeds from Sale of Equity Inv. 0.0 (99.1) (d) (99.1) (d)
PLUS: Other Adjustments 0.0 11.8 (e) 12.1 (e)
--------- --------- ---------
Firm Value $ 1,856.2 $ 2,016.1 $ 2,072.9
========= ========= =========
----------------------------------------------------------------------------------------------------------------------------
Implied Multiples
EBITDA(c)
LTM 6.1x 6.6x 6.8x
2000 5.8 6.3 6.5
2001 4.9 5.4 5.5
EBIT(c)
LTM 8.4x 9.1x 9.3x
2000 8.1 8.8 9.0
2001 6.6 7.2 7.4
EPS(f)
2000 6.2x 9.1x 9.7x
2001 4.4 6.5 7.0
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
---------
Note (1): Company LTM financial statistics represent latest twelve months
as of 6/30/00 and are pro forma for adjustments including
acquisitions/dispositions-related costs.
(a) Closing price of $11.56 as of 7/28/00.
(b) For illustrative purposes only, refer to Appendix F for Saturn valuation
assumptions. Assumes total value of Saturn shares owned by Harbor based on
midpoint of filing range.
(c) Balance Sheet and LTM Income Statement information as of 6/30/00 supplied
by Management.
(d) Based on estimated pretax proceeds from sale of equity investments other
than Saturn of $125 million as provided by Management.
(e) Includes an $8 million charge as a result of the cash cost of the K-Tech
guaranteed stock and a cash cost of phantom stock and options. Current
phantom stock amount of 224,826 shares and phantom options of 13,000
shares at strike price of $16.50 per share.
(f) EPS estimates are based on Management estimates as of May 2000.
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
2 OVERVIEW OF SALE PROCESS
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Overview of Sale Process
BACKGROUND
o In March 1999, Harbor requested that SSB assist Harbor in a review of
strategic alternatives available to maximize shareholder value
o During April and May, SSB met with management to perform initial due
diligence
o On May 18, 1999, Harbor's Board of Directors met with Management and SSB
to review the following:
o Factors generally influencing market valuation
o Shareholder value creation alternatives
o Following this review, the Board of Directors requested that SSB assist
Harbor in exploring a potential sale of the Company
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Overview of Sale Process
Potential Buyers
-------------------------
Strategic Financial
--------- ---------
Initially Identified (58) 46 12
Contacted (19) 13 6
Sent Confidential Memorandum (10) 6 4
Received Indications (2)(a) 0 2
Entered into Negotations (1) 0 1
-------------------------------------------------------------------------------
(Re)Contacted (7)(b) 5 2
Sent Confidential Memorandum/
Updated Information (3) 2 1
Received Indications (3)(c) 2 1
Entered into Negotiations (1) 0 1
Note: (#) indicates number of parties involved.
(a) One potential buyer rescinded its indication due to antitrust concerns.
(b) Three newly identified parties and four parties previously contacted.
(c) Received two indications for the automotive segment and one for entire
company.
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Overview of Sale Process
STAGE 1
o In June and July 1999, in-depth due diligence was conducted and
confidential marketing materials were prepared
o A comprehensive group of potential buyers was reviewed and a selected
group of both strategic and financial parties was subsequently approached
o In August 1999, a customary marketing process began
o Throughout the process, Harbor, with the assistance of SSB, continued to:
o Evaluate potential alternatives
o Maintain contact with previously identified buyers
o Initiate contact with new potential buyers
o Two financial buyers submitted initial indications of interest
o One party rescinded its bid due to antitrust concerns related to a
portfolio investment
o Harbor entered into negotiations with the other party, which eventually
terminated
STAGE 2
o Four previously identified potential buyers were re-contacted and three
newly identified buyers were contacted
o Two indications of interest for the automotive segment and one indication
for the entire Company were received
o Indications for the automotive segment were deemed by Harbor to be
insufficient in terms of value, structure and/or commitment to pursue a
transaction
o Negotiations for sale of the entire Company began with Riverside
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Overview of Harbor's Current Situation
A COMBINATION OF CORPORATE, INDUSTRY AND MARKET FACTORS IMPACT HARBOR'S
VALUATION INCLUDING, BUT NOT LIMITED TO:
<TABLE>
CORPORATE FACTORS INDUSTRY FACTORS MARKET FACTORS
----------------- ---------------- --------------
<S> <C> <C>
o Small Size o Cyclicality o Low Liquidity
o High Leverage o Consolidation Trend o Limited Research Coverage
o Lower Relative Growth Expectations o Systems vs. Components
o Complex Corporate Structure
o Mixed Earnings Predictability and
Performance
</TABLE>
MARKET AND COMPANY-SPECIFIC FACTORS CONSIDERED IN CONNECTION WITH A SALE OF THE
ENTIRE COMPANY INCLUDED, BUT WERE NOT LIMITED TO:
o Stock Price Performance
o Public Market Multiples
o High Leverage/Inability to Fund Acquisitions
o Tax Leakage on Separation of Businesses
o Automotive Industry Outlook
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Current Automotive Industry Outlook
DECLINE IN BUILD RATE EXPECTED
o Record North American production levels are anticipated to slow
CHANGING INDUSTRY DYNAMICS
o OEM and supplier consolidation continues
o Pressures placed on suppliers increase
o Competitors are growing larger and more global
o M&A drivers in supplier sector remain intact
NEGATIVE EQUITY INVESTOR SENTIMENT TOWARD AUTOMOTIVE SECTOR
o Concerns of cyclical peak have depressed public valuations
o Value funds have experienced outflows, impacting demand for stocks of
industrial companies
WEAK FINANCING ENVIRONMENT
o No automotive equity new issues in over 12 months
o High yield market has experienced mutual fund outflows, widening spreads
and difficult new issue conditions
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
3 STOCK TRADING ANALYSIS
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Harbor Stock Price Performance
DAILY DATA -- 7/28/1999 THROUGH 7/28/2000
[GRAPHIC depicting Harbor share price and
volume traded from 7/28/99 through 7/28/00
with annotation for events described below.]
<TABLE>
<S> <C> <C> <C> <C> <C>
(a) 08/26/99 Announced acquisition of Windfall (d) 02/02/00 Harbor Specialty Tubing, a subsidiary
Products, manufacturer of of Harbor is acquired by Advanced
transportation-related powder metal Tubular Products
components
(b) 08/31/99 Announced construction of a new powder (e) 02/28/00 Announced 1999 results, Net Income was
metal facility in Mexico $92.4 million or $1.84 per share vs.
$97.5 million or $1.83 per share a year
ago
(c) 11/03/99 Announced third quarter results, Net (f) 05/03/00 Announced first quarter results, Net
Income increased 20 percent to $20.2 Income in the first quarter increased
million or $0.41 per share vs. $16.8 8% to $25.8 million or $0.51 per share
million or $0.33 per share a year ago vs. $23.9 million or $0.47 per share a
year ago
</TABLE>
Source: Salomon Smith Barney; Company reports
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Harbor Relative Stock Price Performance
DAILY DATA: 7/28/1999 THROUGH 7/28/2000
[GRAPHIC depicting Harbor price performance
relative to the S&P 500 Index and a selected
Automotive Index (described in footnote 1 below)
from 7/28/99 through 7/28/00 with annotation for
events described below.]
<TABLE>
<S> <C> <C> <C> <C> <C>
(a) 08/26/99 Announced acquisition of Windfall (d) 02/02/00 Harbor Specialty Tubing, a subsidiary of
Products, manufacturer of Harbor is acquired by Advanced Tubular
transportation-related powder metal Products
components
(b) 08/31/99 Announced construction of a new powder (e) 02/28/00 Announced 1999 results, Net Income was
metal facility in Mexico $92.4 million or $1.84 per share vs. $97.5
million or $1.83 per share a year ago
(c) 11/03/99 Announced third quarter results, Net (f) 05/03/00 Announced first quarter results, Net
increased 20 percent to $20.2 million Income in quarter increased 8% to $25.8
or $0.41 per share vs. $16.8 million million or $0.51 per share vs. $23.9
or $0.33 per share a year ago million or $0.47 per share a year ago
</TABLE>
Source: Salomon Smith Barney; Company reports
1 Automotive Index Includes: Amcast Industrial, American Axle, Borg Warner,
Dura Automotive, Hayes Lemmerz, Intermet, Simpson Industries, Superior
Industries, Tower Automotive
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Harbor Percentage Traded at Specified Prices
DAILY DATA -- 7/28/1999 THROUGH 7/28/2000
[GRAPHIC depicting Harbor share price percentage
traded at specific prices for the last twelve
months and last six months]
Weighted Volume Traded/ Volume Traded/
Average Shares Outstanding Public Float
-- Last Twelve Months $12.94 44.6% 77.5%
-- Last Six Months $11.99 23.5% 40.8%
Source: Salomon Smith Barney 7/31/00
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Recent Wall Street Commentary on Harbor
<TABLE>
EPS estimates Price
Report Date Analyst/Firm Rating 2000/2001 Targets Analyst Commentary
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/05/00 Wendy B. Caplan Hold $1.85/$2.05 "Mid-Teen" o We are downgrading Harbor to Hold from Strong Buy on
ING Barings concerns about its transportation end-markets. In
addition, we are lowering our 2000 and 2001 estimates
to $1.85 from $2.00 and to $2.05 from $2.30,
respectively.
o In our opinion, on a long-term basis, once the market
discounts Harbor's transition to diversified industrial
from automotive supplier the stock could trade at an 8x
multiple, implying a mid-teen target.
-----------------------------------------------------------------------------------------------------------------------------------
05/05/00 Stephen J. Girsky Neutral $1.98/NA NA o Harbor trades at about 5.9x EV/2000E EBITDA in line
Morgan Stanley with the peer group average of about 5.8x. Given
Dean Witter current valuation levels, we prefer to remain neutral
on the stock.
-----------------------------------------------------------------------------------------------------------------------------------
05/03/00 Harriet C. Baldwin Buy $1.95/NA $25.00 o Our 12-month price target is $25 (13x our 2000 EPS
Deutsche Bank estimate of $1.95).
o We believe that there is upside to our $1.95 2000
Harbor EPS estimate if the North American auto build
rate is at or above 17 MM for 2000.
o We rate Harbor shares Buy based on the company's strong
market shares, proprietary and low-cost manufacturing
processes.
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
Summary Analyst Views(b) Consensus Estimates
-------------------------------------------------- ---------------------------------------------------
Strong Buys Buys Holds Sells CY2000 CY2001
-------------------------------------------------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0 1 2 0 First Call (a) $1.95 $2.05
-------------------------------------------------- ---------------------------------------------------
Management Estimates $1.86 $2.60
---------------------------------------------------
</TABLE>
----------------
(a) As of 7/28/00.
(b) Excludes ABN Amro convertible research.
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
4 HARBOR VALUATION ANALYSIS
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Overview of Financial Performance and Projections
FISCAL 1996 - 2000
<TABLE>
(Dollars in Millions)
------------------------------------------------------------------------
Fiscal Year Ending December 31,
---------------------------------------------------------
Historical Estimated 1996-2000
--------------------------------------------------------- CAGR/
1996(a) 1997(a) 1998(a) 1999(b) 2000(b) Avg. Margin
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue $1,334.0 $1,439.0 $1,555.0 $1,689.9 $1,759.7 7.2%
Growth -- 7.9% 8.1% 8.7% 4.1% --
EBITDA 249.0 269.0 294.0 300.8 320.8 6.5%
EBITDA Margin 18.7% 18.7% 18.9% 17.8% 18.2% 18.5
Net Income 69.0 76.0 87.0 87.3 93.0 7.7%
Net Income Margin 5.2% 5.3% 5.6% 5.2% 5.3% 5.3
-----------------------------------------------------------------------------------------------
</TABLE>
MANAGEMENT PROJECTIONS
<TABLE>
(Dollars in Millions)
Fiscal Year Ending December 31,
--------------------------------------------
Estimated(b) 2001-2004
-------------------------------------------- CAGR/
2001 2002 2003 2004 Avg. Margin
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $1,934.6 $2,116.5 $2,276.0 $2,443.0 8.1%
Growth 9.9% 9.4% 7.5% 7.3% --
EBITDA 376.6 419.1 456.3 489.9 9.2%
Net Income Margin 19.5% 19.8% 20.0% 20.1% 19.8
Net Income 133.9 164.2 190.3 225.7 19.0%
Net Income Margin 6.9% 7.8% 8.4% 9.2% 8.1
-----------------------------------------------------------------------------------------------
</TABLE>
(a) Management historical pro forma for 1996-1998 as utilized in the July 1999
Offering Memorandum. 1996-1998 financial results have been adjusted to
include T Co., interest expense in 1996 for share repurchases, and
eliminations of businesses/equity affiliates sold during the period.
(b) Pro forma estimates for 1999 and projections for 2000-2004 are based on
May 2000 Management estimates. 1999 financial results are pro forma for
the Windfall acquisition.
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Strategic Plan Execution Risk
AUTOMOTIVE INDUSTRY DYNAMICS | Harbor Management faces
| several significant
o Anticipated downturn in automotive cycle | challenges as it attempts
o Continued OEM consolidation | to execute its strategic
o Continued price pressure and outsourcing of | plan which reflects
more responsibilities to suppliers | increasing margins and
o Continued supplier rationalization and | growth rates.
consolidation |
o Competitors are increasing critical mass |
|
CAPITAL STRUCTURE |
|
o High leverage and depressed stock price: |
o Limits ability to grow through acquisition |
or internal investment |
o Impacts ability to weather downturn |
|
OPERATING PERFORMANCE |
|
o Predictability of earnings |
o Underperformance of several business units |
|
INTERNAL ISSUES |
|
o Demands on management time and focus related to |
sale process |
o Difficulty of sustaining morale |
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Valuation Summary
[GRAPHIC depicting summary bar chart reference ranges of
valuation methodologies on the next page. Lines depict
the current price per share of $11.56(a), offer price per
share of $16.90, and offer price per share plus merger consideration
adjustment of $18.10(c) and a shaded area depicting the 52-week trading
range. (b) refers to the derivation of the Premiums Paid Analysis.]
Note: Shaded area represents 52-week trading range from $10.50 to $17.50,
as of July 28, 2000.
(a) Stock price as of 7/28/00.
(b) Comparable company plus premiums of 30-40% based on the mean and median of
the premiums paid one day prior to announcement in Appendix B.
(c) Refer to Appendix F for Saturn valuation assumptions. Assumes total value
of Saturn shares owned by Harbor based on midpoint of filing range.
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Valuation Summary
<TABLE>
Comparable Company Analysis
----------------------------------------------------------------------------------------------------
Equity Value
Multiple Range Firm Value Equity Value(b) Per Share(c)
Operating -------------- ------------------- --------------- ---------------
Data(a) Low High Low High Low High Low High
--------- ----- ------ ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LTM EBITDA $303.2 4.0x 5.0x $1,212.8 $1,516.0 NM $295.2 NM $ 6.27
LTM EBIT 221.7 6.5 7.5 1,441.1 1,662.8 220.2 441.9 4.68 9.39
2000E EPS $ 1.86 5.0x 7.0x -- -- -- -- $ 9.30 $13.02
2001E EPS 2.60 4.0 6.0 -- -- -- -- 10.40 15.60
--------------------------------
Reference Range $ 6.00 $12.00
--------------------------------
Premiums Paid Analysis
----------------------------------------------------------------------------------------------------
Public comparable plus premiums of 30-40% based on the mean and --------------------------------
median of premiums paid (Appendix B) Reference Range $ 7.80 $16.80
--------------------------------
Precedent Transaction Analysis
----------------------------------------------------------------------------------------------------
Equity Value
Multiple Range Firm Value Equity Value(b) Per Share(c)
Operating -------------- ------------------- ---------------- ---------------
Data(a) Low High Low High Low High Low High
--------- ----- ------ ----- ------ ----- ------ ----- ------
LTM EBITDA $303.2 5.5x 7.0x $1,667.6 $2,122.4 $446.8 $ 901.6 $ 9.49 $19.16
LTM EBIT 221.7 9.0 11.0 1,995.3 2,438.7 774.5 1,217.9 16.46 25.88
--------------------------------
Reference Range $13.00 $19.00
--------------------------------
Discounted Cash Flow Analysis (Management Estimate)
----------------------------------------------------------------------------------------------------
Equity Value
Per Share(c)
---------------
Low High
----- ------
Year 5 EBITDA Exit Multiple Range of 4.0x - 5.0x & WACC Range of 9.0% - 10.0%
--------------------------------
Reference Range $15.50 $24.00
--------------------------------
</TABLE>
---------
Note (1): Company LTM financial statistics represent latest twelve months as of
6/30/00 and are pro forma for adjustments including acquisitions and
dispositions.
(a) Company LTM financial statistics represent latest twelve months ended
6/30/00. Forward statistics based on Management estimates.
(b) Equity Value equals Firm Value less total debt and preferred of $1,336
million, plus cash of $3 million, plus pretax equity investments of
$125 million, (net of taxes of $26 million), less other adjustments of
$12 million, plus option proceeds of $25 million.
(c) Based on 47.1 million fully diluted shares outstanding (out-of-the-money
convertible subordinated debentures not included).
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
APPENDIX
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
A. Comparable Company Analysis
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
<TABLE>
Comparable Company Analysis
Public Total
Stock Market LTM 5-Year Debt Price/
Valuation Statistics Price 52 Week Value of LTM EBIT EPS /Market Book
(Dollars in Millions, Except Stock Price) 7/28/00 High-Low Equity Revenues Margin Growth(1) Cap. Value
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Amcast Industrial Corporation (AIZ) $10.63 $18.25-8.00 $ 89 $ 603 3.7% 9.0% 65.0% 0.6x
American Axle & Manufacturing (AXL) 14.88 $17.13-11.38 690 3,091 8.4% 10.7% 52.6% 2.3
Borg-Warner Automotive (BWA) 33.38 $51.06-29.75 902 2,638 10.0% 12.6% 50.0% 0.8
Dura Automotive Systems Inc. (DRRA)(3) 10.09 $30.25-9.88 176 3,008 6.7% 15.5% 87.7% 0.4
Hayes Lemmerz International, Inc. (HAZ) 13.88 $31.50-11.69 421 2,303 11.7% 14.5% 80.0% 1.9
Intermet Corporation (INMT) 7.03 $14.50-4.56 178 1,244 9.5% 11.0% 72.1% 0.7
Simpson Industries, Inc. (SMPS) 7.75 $12.63-7.00 140 544 7.4% 12.3% 47.7% 1.0
Superior Industries International (SUP) 29.50 $34.38-22.94 770 590 18.5% 11.3% 5.5% 2.1
Tower Automotive, Inc. (TWR) 11.75 $23.94-11.31 550 2,357 10.3% 14.0% 66.9% 0.7
-------------------------------------------------------------------------------------------------------------------------
Mean $1,819.7 9.6% 12.3% 58.6% 1.2x
Median $2,203.3 9.5% 12.3% 65.0% 0.8x
-------------------------------------------------------------------------------------------------------------------------
Harbor(4) $11.56 $17.69-10.50 $526 $1,690 13.2% 12.4% 81.1% 1.7x
Harbor (5) $11.56 $17.69-10.50 $523 $1,708 13.0% 19.0% 71.9% 1.6x
Harbor (offer price)(5)(6) $16.90 $17.69-10.50 $770 $1,708 13.0% 19.0% 63.4% 2.4x
Harbor (offer price plus adjust.)(5)(6)(7) $18.10 $17.69-10.50 $827 $1,708 13.0% 19.0% 61.8% 2.6x
</TABLE>
Note: EBITDA, EBIT, Net Income to Common, and EPS adjusted for unusual and
nonrecurring items.
*Denotes outlier excluded from MEAN calculation; LTM: Latest Twelve Months;
NM: Not Meaningful
(1) Source: EPS estimates taken from I/B/E/S; Forward estimates taken from
First Call earnings report.
(2) Firm Value equals equity value (all fully diluted shares at the stock
price less any option proceeds) plus straight debt, minority interest,
straight preferred stock, all out-of-the-money converts, less cash and
investments in affiliates.
(3) Pro forma for Excel and Adwest acquisitions.
(4) Based on publicly available information; LTM data as of 3/31/00; Estimates
based on First Call
(5) Based on Management projections; LTM data as of 6/30/00
(6) Firm Value at offer price includes after tax proceeds from sale of
affiliates and Other Adjustments (as outlined in page 3)
(7) Includes merger consideration adjustment
(Financial data to be continued)
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--------------------
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<PAGE>
(Financial data--continued)
PROJECT HARBOR - CONFIDENTIAL
<TABLE>
Comparable Company Analysis
Firm Value/
------------
LTM
P/E(1) ------------
Valuation Statistics ---------------- Firm
(Dollars in Millions, Except Stock Price) 2000(E) 2001(E) Value(2) EBITDA EBIT
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Amcast Industrial Corporation (AIZ) 13.4x NA $ 253 4.7x 11.3x
American Axle & Manufacturing (AXL) 5.5 5.1x 1,506 4.3 5.8
Borg-WArner Automotive (BWA) 5.9 5.3 1,634 4.1 6.2
Dura Automotive Systems Inc. (DRRA)(3) 2.5 2.1 1,456 4.8 7.3
Hayes Lemmerz International, Inc. (HAZ) 6.7 NA 2,075 5.1 7.7
Intermet Corporation (INMT) 4.3 3.7 633 3.5 5.4
Simpson Industries, Inc. (SMPS) 6.7 6.3 256 3.9 6.4
Superior Industries International (SUP) 10.0 9.0 726 5.3 6.6
Tower Automotive, Inc. (TWR) 4.7 4.2 1,616 4.5 6.6
------------------------------------------------------------------------------------
Mean 4.5x 7.0x
Median 4.5x 6.6x
------------------------------------------------------------------------------------
Harbor(4) 5.9x 5.6x $1,778 5.9x 8.0x
Harbor (5) 6.2x 4.4x $1,856 6.1x 8.4x
Harbor (offer price)(5)(6) 9.1x 6.5x $2,016 6.6x 9.1x
Harbor (offer price plus adjust.)(5)(6)(7) 9.7x 7.0x $2,073 6.8x 9.3x
</TABLE>
Note: EBITDA, EBIT, Net Income to Common, and EPS adjusted for unusual and
nonrecurring items.
*Denotes outlier excluded from MEAN calculation; LTM: Latest Twelve Months;
NM: Not Meaningful
(1) Source: EPS estimates taken from I/B/E/S; Forward estimates taken from
First Call earnings report.
(2) Firm Value equals equity value (all fully diluted shares at the stock
price less any option proceeds) plus straight debt, minority interest,
straight preferred stock, all out-of-the-money converts, less cash and
investments in affiliates.
(3) Pro forma for Excel and Adwest acquisitions.
(4) Based on publicly available information; LTM data as of 3/31/00; Estimates
based on First Call
(5) Based on Management projections; LTM data as of 6/30/00
(6) Firm Value at offer price includes after tax proceeds from sale of
affiliates and Other Adjustments (as outlined in page 3)
(7) Includes merger consideration adjustment
SALOMON SMITH BARNEY
--------------------
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
B. Premiums Paid Analysis
SALOMON SMITH BARNEY
--------------------
A member of citigroup
<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Premiums Paid Analysis - Transactions from $1.5 Billion to $2.5 Billion
(1999 - Present)
<TABLE>
Firm Equity Closing Prices Premiums %
Date Value Value Purchase ---------------- ---------------
Announced Target Name Acquiror Name ($MM) ($MM) Price 1 day 1 week 1 day 1 week
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/13/00 Groupe GTM Vinci SA $1,815 $1,713 $110.99 $ 98.49 $ 96.05 12.7% 15.6%
07/07/00 Dexter Corp Invitrogen Corp 1,692 1,464 62.50 48.00 48.00 30.2 30.2
06/26/00 Lilly Industries Inc Valspar Corp 1,728 1,388 31.75 12.88 14.00 146.6 126.8
06/20/00 Saatchi & Saatchi PLC Publicis SA 1,806 1,760 7.56 5.00 5.03 51.1 50.4
05/29/00 Mark IV Industries Inc BC Partners 2,113 1,225 23.00 21.13 21.13 8.9 8.9
05/22/00 MedQuist Inc Philips Electronics NV 1,763 1,831 51.00 38.81 38.50 31.4 32.5
05/12/00 Hussmann International Inc Ingersoll-Rand Co 1,892 1,567 29.00 13.38 13.13 116.8 121.0
05/08/00 Ancor Communications Inc QLogic Corp 1,705 1,706 52.77 31.19 32.31 69.2 63.3
05/04/00 Telegate AG (Metro Intl) Seat Pagine Gialle SPA 1,706 1,700 133.51 123.74 119.29 7.9 11.9
05/01/00 Rexall Sundown Inc Koninklijke Numico NV 1,646 1,665 24.00 19.25 17.06 24.7 40.7
05/01/00 Shared Medical Systems Corp Siemens Corp(Siemens AG) 2,215 2,057 73.00 39.44 40.25 85.1 81.4
04/05/00 Harbinger Corp Peregrine Systems Inc 1,857 1,866 42.16 22.13 29.64 90.6 42.2
04/03/00 Admiral PLC CMG PLC 2,079 2,116 33.45 22.78 21.94 46.9 52.5
04/03/00 American National Can Group Rexam PLC 1,978 994 18.00 13.13 12.69 37.1 41.9
03/27/00 Spyglass Inc OpenTV Corp(MIH Ltd) 2,394 2,428 122.29 69.88 64.56 75.0 89.4
03/22/00 Metamor Worldwide Inc PSINet Inc 1,964 1,848 44.55 16.00 16.25 178.4 174.2
03/14/00 Howmet International Inc Alcoa Inc 2,213 2,126 21.00 18.50 18.63 13.5 12.8
02/21/00 Snyder Communications Inc Havas Advertising SA 2,247 2,257 29.50 20.50 22.25 43.9 32.6
02/17/00 US Home Corp Lennar Corp 1,588 845 36.00 24.88 25.25 44.7 42.6
02/14/00 Medical Manager Corp Healtheon/WebMD Inc 1,763 1,692 42.19 65.00 64.00 (35.1) (34.1)
02/14/00 NetOptix Corp Corning Inc 1,674 1,665 149.18 136.00 121.22 9.7 23.1
02/07/00 InterVU Inc Akamai Technologies Inc 2,361 2,387 139.99 117.00 92.50 19.6 51.3
01/24/00 BTP PLC Clariant AG 1,964 1,712 9.89 5.73 5.94 72.6 66.4
01/12/00 Etec Systems Inc Applied Materials Inc 1,793 1,845 78.41 42.56 43.50 84.2 80.3
01/11/00 Esat Telecom Group PLC BT Hawthorn Ltd 1,990 1,875 50.00 29.68 25.17 68.5 98.6
01/07/00 SplitRock Services Inc McLeodUSA Inc 1,970 1,764 28.12 22.13 19.88 27.1 41.5
12/17/99 NCL Holding ASA Arrasas Ltd (Star Cruises
PLC) 1,910 1,049 4.40 2.86 2.88 54.1 52.7
12/17/99 United Biscuits (Holdings) PLC Finalrealm 2,492 2,159 4.27 3.03 2.88 40.9 48.0
12/15/99 NCL Holding ASA Star Cruises PLC 1,910 1,049 4.40 2.86 2.88 54.1 52.7
11/22/99 DII Group Flextronics International 2,131 1,790 65.41 51.81 50.19 26.2 30.3
</TABLE>
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--------------------
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Premiums Paid Analysis - Transactions from $1.5 Billion to $2.5 Billion:
1999 - Present (continued)
<TABLE>
Firm Equity Closing Prices Premiums %
Date Value Value Purchase ---------------- ---------------
Announced Target Name Acquiror Name ($MM) ($MM) Price 1 day 1 week 1 day 1 week
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/15/99 Amway Japan Ltd (Amway Corp) Investor Group $1,713 $2,049 $ 14.20 $ 9.44 $ 9.48 50.5% 49.7%
11/14/99 Oak Industries Inc Corning Inc 1,861 1,659 75.01 49.75 45.00 50.8 66.7
11/08/99 PageNet Arch Communications Group
Inc 1,985 88 0.85 0.97 1.09 (12.3) (22.3)
11/04/99 Eastern Enterprises KeySpan Corp 2,352 1,760 64.00 51.56 50.38 24.1 27.0
10/18/99 Clarify Inc Nortel Networks Corp 1,840 1,878 68.49 43.34 46.03 58.0 48.8
10/18/99 Comair Holdings Inc Delta Air Lines Inc 2,239 2,304 23.50 17.94 18.44 31.0 27.5
10/14/99 DSP Communications Inc Intel Corp 1,657 1,688 36.00 28.00 24.75 28.6 45.5
10/04/99 Seita Tabacalera SA 2,500 3,346 64.66 65.85 59.33 (1.8) 9.0
09/30/99 FlyCast Communications CMGI Inc 1,858 1,865 122.95 38.00 30.25 223.6 306.4
09/28/99 Genesys Telecommun Labs Alcatel SA 1,700 1,744 52.08 40.88 36.63 27.4 42.2
09/24/99 ASARCO Inc Grupo Mexico SA de CV 2,128 1,189 29.75 19.00 20.06 56.6 48.3
09/23/99 EarthLink Network Inc MindSpring Enterprises Inc 1,993 2,318 53.09 43.50 41.31 22.0 28.5
09/13/99 Smart Modular Technologies Inc Solectron Corporation 1,824 1,946 39.53 23.50 21.44 68.2 84.4
08/23/99 United Water Resources Inc Suez Lyonnaise des Eaux SA 2,293 1,454 35.00 31.06 24.13 12.7 45.1
08/18/99 Excel Switching Corp Lucent Technologies Inc 1,586 1,636 37.11 27.56 25.38 34.6 46.2
08/16/99 Poco Petroleums Ltd Burlington Resources Inc 2,315 1,584 11.67 9.13 0.00 27.9 --
07/13/99 Corporate Express Inc Buhrmann NV 2,344 1,064 9.70 8.56 7.84 13.3 23.7
06/28/99 Big Flower Holdings Inc Investor Group 1,772 924 36.75 32.81 33.63 12.0 9.3
06/23/99 Newsquest PLC Gannett UK Ltd (Gannett
Co Inc) 1,675 1,463 7.31 6.76 6.95 8.2 5.2
06/22/99 AboveNet Communications Inc Metromedia Fiber Network
Inc 1,509 1,553 49.94 37.88 25.63 31.9 94.9
06/15/99 CMP Group Inc Energy East Corp 1,572 960 29.50 20.06 20.56 47.0 43.5
06/14/99 Coach USA Inc Stagecoach Holdings PLC 1,836 1,197 42.00 38.63 29.88 8.7 40.6
06/09/99 Richfood Holdings Inc SuperValu Inc 1,592 885 18.50 14.88 12.81 24.4 44.4
06/01/99 Associated Group Inc Liberty Media Group (AT&T
Corp) 1,694 1,489 67.47 65.00 65.25 3.8 3.4
06/01/99 Witco Corp Crompton & Knowles Corp 1,831 979 16.98 17.50 15.94 (3.0) 6.5
05/28/99 SkyTel Communications Inc MCI WorldCom 1,684 1,303 19.97 19.31 20.06 3.4 (0.5)
05/20/99 PennzEnergy Co Devon Energy Corp 2,252 676 14.10 14.63 13.31 (3.6) 5.9
05/14/99 Hillsdown Holdings PLC Investor Group 1,964 1,509 2.36 1.39 1.30 69.9 81.4
05/04/99 Cie des Gaz Petrole Primagaz SHV Holdings NV 1,947 1,932 91.46 80.40 73.31 13.8 24.8
05/04/99 Wang Laboratories Inc Getronics NV 1,806 1,490 29.25 25.50 23.81 14.7 22.8
</TABLE>
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--------------------
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Premiums Paid Analysis - Transactions from $1.5 Billion to $2.5 Billion:
1999 - Present (continued)
<TABLE>
Firm Equity Closing Prices Premiums %
Date Value Value Purchase ---------------- ---------------
Announced Target Name Acquiror Name ($MM) ($MM) Price 1 day 1 week 1 day 1 week
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
04/13/99 GeoTel Communications Corp Cisco Systems Inc $1,854 $1,914 $60.50 $44.25 $45.31 36.7% 33.5%
04/12/99 Kwik-Fit Holdings PLC FAH Investments 1,751 1,612 8.99 6.77 6.74 32.9 33.3
04/01/99 King World Productions Inc CBS Corp 2,034 2,592 33.06 29.94 29.31 10.4 12.8
03/09/99 Sony Chemical Corp Sony Corp 1,527 1,527 46.74 39.10 35.81 19.5 30.5
03/02/99 Nine West Group Inc Jones Apparel Group Inc 1,542 996 26.69 22.75 19.56 17.3 36.4
03/02/99 XYLAN Corp Alcatel SA 1,793 1,822 37.00 26.94 22.00 37.4 68.2
03/01/99 Cultor Oy Danisco A/S 1,740 1,395 19.81 9.25 9.36 114.3 111.7
03/01/99 Reltec Corp GEC PLC 2,102 1,741 29.50 21.75 19.94 35.6 48.0
02/22/99 Southwest Gas Corp Southern Union Co 1,864 1,024 33.50 24.38 24.69 37.4 35.7
02/11/99 Fingerhut Cos Inc Federated Department
Stores 1,605 1,344 25.00 18.81 20.38 32.9 22.7
02/10/99 Pycraft & Arnold Holdings PLC Fishers International PLC 1,763 1,764 1.13 0.88 0.93 28.9 21.0
02/08/99 Stakis PLC Ladbroke Group PLC
(Hilton Grp) 2,161 1,812 2.36 1.77 1.64 33.5 43.7
02/01/99 Aeroquip-Vickers Inc Eaton Corp 2,012 1,648 58.00 35.25 34.50 64.5 68.1
01/26/99 Agouron Pharmaceuticals Inc Warner-Lambert Co 2,184 2,194 60.00 53.16 57.75 12.9 3.9
01/11/99 English China Clays PLC Imetal SA (Parfinance) 1,526 1,264 4.10 2.62 2.71 56.2 51.0
---------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Mean 40.7 46.8
Median 31.9 42.0
--------------------------------------------------------------------------------------
</TABLE>
Source: Securities Data Corporation.
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--------------------
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
C. Precedent Transaction Analysis
SALOMON SMITH BARNEY
--------------------
A member of citigroup
<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Precedent Transaction Analysis
<TABLE>
(US$ in millions) Multiples of Transaction Value/
------------------------------
Date Transaction LTM LTM
of Ann. Target Acquiror Value EBITDA EBIT
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
05/09/00 p GNB Technologies Exide Corporation $ 368.0 5.3x 10.0x
02/15/00 Dr. Meleghy GmbH & Co. KG Tower Automotive 110.0 5.2 9.2
02/15/00 Invensys plc - Australian Axle & Stamping Dana Corporation 63.0 NA 5.9
02/01/00 p Jason Inc. Management/Saw Mill Capital 335.0 6.5 10.0
01/28/00 Invensys plc - Automotive Sealing Systems CVC Capital Partners 400.0 NA 7.3
01/20/00 Mark IV BC Partners 2,000.0 7.1 10.5
01/07/00 Tritech Precision Carlyle Group 297.3 7.2 15.0
12/24/99 Invensys plc - Automotive Anti-Vibration
Business Trelleborg AB 250.0 NA 8.1
12/14/99 Transportation Technologies Industries, Inc. Management 381.5 5.2 7.3
11/23/99 TRW -Lucas Diesel Systems Delphi Automotive 871.0 5.9 NA
11/08/99 Autocam Aurora Capital Group 236.6 7.2 12.6
08/03/99 Eaton Fluid Power Division Borg Warner 264.6 5.5 7.0
07/27/99 Standard Products Cooper Tire & Rubber Co. 757.4 6.2 11.4
06/23/99 Citation Corporation Kelso & Company 620.0 7.1 13.3
06/15/99 Active Tool & Manufacturing Tower Automotive 325.0 7.2 9.0
04/28/99 Walbro Corporation TI Group plc 570.6 7.2 13.3
04/27/99 Hilite Industries Carreras, Kestner & Co. 94.0 6.6 9.2
04/21/99 J.L. French Hidden Creek Industries 629.2 7.6 13.6
03/11/99 MPS Industries American Axle 60.0 6.3 8.6
02/12/99 Colfor American Axle 170.0 7.1 10.6
01/26/99 Adwest Automotive Dura Automotive 330.0 7.6 10.7
01/19/99 Excel Industries Dura Automotive 475.6 5.7 13.1
01/04/99 Volvo - Heavy Truck Axle Division Meritor 130.0 4.8 8.7
-----------------------------------------------------------------------------------------------------------------------
Mean 6.4x 10.2x
Median 6.6 10.0
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Publicly available information
P = Pending
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--------------------
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
D. Discounted Cash Flow Analysis
SALOMON SMITH BARNEY
--------------------
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Discounted Cash Flow Analysis - Management Estimate
(Dollars in Millions)
Fiscal Year Ending December 31,
--------------------------------------------------------
2000 2001 2002 2003 2004
-------------------------------------------------------------------------------
Revenues $1,759.7 $1,934.6 $2,116.5 $2,276.0 $2,443.0
Growth 4.1% 9.9% 9.4% 7.5% 7.3%
EBITDA $ 320.8 $ 376.6 $ 419.1 $ 456.3 $ 489.9
EBITDA Margin 18.2% 19.5% 19.8% 20.0% 20.1%
EBIT $ 230.0 $ 279.9 $ 317.2 $ 349.3 $ 377.7
EBIT Margin 13.1% 14.5% 15.0% 15.3% 15.5%
Capital
Expenditure 99.9 106.3 105.4 100.0 106.7
Unlevered Free
Cash Flow $ 194.7 $ 153.4 $ 181.7 $ 216.2 $ 229.4
-------------------------------------------------------------------------------
Terminal EBITDA Multiple Range Terminal EBITDA Multiple Range
------------------------------ ------------------------------
4.00x 4.50x 5.00x 4.00x 4.50x 5.00x
------------------------------ ------------------------------
Implied Terminal P/E Multiple(a) Implied Terminal P/E Multiple(a)
-------------------------------- --------------------------------
5.6x 6.5x 7.4x 5.6x 6.5x 7.4x
-------------------------------- --------------------------------
Terminal Value Terminal Value
-------------------------------- --------------------------------
$1,932 $2,174 $2,416 $1,932 $2,174 $2,416
-------------------------------- --------------------------------
Equity Value per Share
WACC Present Value of Firm @ 6/30/00 WACC as of 6/30/00(b)
----------------------------------------- -------------------------------
9.00% $2,027 $2,191 $2,355 9.00% $17.13 $20.61 $24.09
9.50% 1,993 2,153 2,314 9.50% 16.41 19.82 23.23
10.00% 1,960 2,117 2,274 10.00% 15.70 19.04 22.38
----------------------------------------- -------------------------------
---------
Source: Management's May 2000 projections.
Note: Equity Value equals Firm Value less total debt and preferred of $1,336
million, plus cash of $3 million, less other adjustments $12 million, plus
proceeds from sale of equity investments of $125 million (net of taxes of
$26 million), plus option proceeds of $25 million.
(a) One year forward P/E multiple.
(b) Based on 47.1 million fully diluted shares outstanding (out-of-the-money
convertible subordinated debentures not included).
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--------------------
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
E. Weighted Average Cost of Capital Analysis
SALOMON SMITH BARNEY
--------------------
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Weighted Average Cost of Capital Analysis
<TABLE>
SELECTED BETAS -- COMPARABLE COMPANIES(c) WACC -- EQUITY-BASED CALCULATION
---------------------------------------------------- ------------------------------------------------------------------
Equity Range
----------------
Company Beta Low High
==================================================== ==================================================================
<S> <C> <C> <C> <C>
Amcast Industrial Corporation (AIZ) 0.80 U.S. Risk Free Rate (10 Year U.S. Treasury)(a) 5.98% 5.98%
American Axle & Manufacturing (AXL) NM (f)
Borg-Warner Automotive (BWA) 1.11 Equity Market Risk Premium (b) 5.50% 7.50%
Dura Automotive Systems Inc. (DRRA) 1.51 Equity Beta (c) 1.08 1.08
Hayes Lemmerz International, Inc. (HAZ) 0.62 -------------------------------------------------------------------
Intermet Corporation (INMT) 1.05 Adjusted Equity Market Risk premium 5.93% 8.09%
Simpson Industries, Inc. (SMPS) 0.43
Superior Industries International (SUP) 1.18
Tower Automotive, Inc. (TWR) 1.48 Cost of Equity 11.91% 14.07%
----------------------------------------------------
Median 1.08
---------------------------------------------------- Cost of Debt
------------------------------------------------------------------
U.S. Risk Free Rate (10 Year U.S. Treasury)(a) 5.98% 5.98%
Credit Spread(d) 4.00% 4.00%
------------------------------------------------------------------
Cost of Debt (Pretax) 9.98% 9.98%
Effective Marginal tax Rate(e) 35.00% 35.00%
------------------------------------------------------------------
Cost of Debt (Aftertax) 6.49% 6.49%
Debt/Capitalization (Market) 57.50% 57.50%
WACC 8.79% 9.71%
------------------------------------------------------------------
</TABLE>
(a) As of July 25, 2000.
(b) Ibbotson Associates. Based on Data from 1926-1995.
(c) Historical beta based on BARRA, Inc. data.
(d) Salomon Smith Barney estimate.
(e) Based on Harbor's 1999 effective marginal tax rate, from 12/31/99 10-K.
(f) Excluded from beta calculation due to recent initial public offering on
January 28, 1999.
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--------------------
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
F. Harbor Equity Investments
SALOMON SMITH BARNEY
--------------------
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Harbor Equity Investments - Excluding Saturn
O CVC is expected to purchase the following investments for $125.0 million
of total consideration pre-tax ($99.1 million after-tax)
O The valuation of Harbor's equity investments is impacted by liquidity
issues
o Limited public float and trading in public investments
o Private company illiquidity
<TABLE>
(Dollars in Milions)
Percent Estimated Tax After-tax Management
Entity Owned Value Basis Value Valuation Methodology
--------------------------- ------- --------- ----- --------- ------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PUBLICLY TRADED
Titan International(a) 16% $16.5 $ 3.0 $11.8 Current market value of shares
Delco Remy International(a) 12% 23.1 6.0 17.1 Current market value of shares
Tower Automotive(a) <1% 4.7 2.0 3.8 Current market value of shares
NON-PUBLIC(B)
MSX International 45% 90.0 20.0 65.5 5.8x midpoint of pro forma 1999 and 2000E EBITDA
Advanced Accessory System 9% 10.0 3.0 7.6 6.25x 2000 EBITDA
American Commercial Plastic 20% 6.4 7.0 6.6 Includes $5.4 million debt plus estimated equity value
ICI 15% 3.6 3.4 3.5 Value at time of purchase
Qualitor 18% 10.6 10.6 10.6 Value at time of purchase
Eliminations and other (4.3) (3.9) (3.5)
------ ----- ------
Total $160.6 $51.1 $122.9
====== ===== ======
Current CVC Purchase Price $125.0 $51.1 $ 99.1
====== ===== ======
Implied Discount (22%)
</TABLE>
(a) Based on share prices as of July 28, 2000
(b) Management estimates as of June 25, 2000
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--------------------
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<PAGE>
PROJECT HARBOR - CONFIDENTIAL
Harbor Equity Investments - Saturn
ILLUSTRATIVE SATURN VALUATION BASED ON S-1 FILING RANGE (A)
(In millions, except per share data)
<TABLE>
Implied Equity
Price Range Value
----------------- -----------------
Shares Low High Low High
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Total Pro Forma for IPO 36.94 $10.00 - $12.00 $369.4 $443.3
Harbor Proceeds(b)(c) 4.93 10.00 - 12.00 45.9 - 55.1
Harbor's remaining stake at IPO price(d) 5.85 10.00 - 12.00 58.5 - 70.2
------ ------ ------ ------ ------
Total Harbor Stake 10.78 10.00 - 12.00 $104.4 - $125.2
</TABLE>
PER SHARE PROCEEDS TO HARBOR SHAREHOLDERS
<TABLE>
Low High
------ ------
<S> <C> <C>
Total Value of Harbor Stake $104.4 $125.2
Less: First $18.0 million to Riverside (18.0) (18.0)
Less: Next $22.0 million to Harbor shareholders (22.0) (22.0)
Less: $16.7 million to Riverside (16.7) (16.7)
------ ------
Additional Proceeds 47.7 68.5
Less: 40% of additional proceeds allocated to Riverside (19.1) (27.4)
------ ------
Additional Proceeds to Harbor Shareholders 28.6 41.1
Total proceeds to Harbor shareholders(e) $ 50.6 $ 63.1
Shares eligible for merger consideration adjustment 47.058 47.058
Total Proceeds/Share $ 1.08 $ 1.34
------
Estimate of Proceeds/Share(f) $ 1.20
-------
</TABLE>
(a) Source: Saturn Electronics & Engineering Inc. S-1, filed on July 24, 2000.
(b) Assumes over-allotment option is exercised.
(c) Reflects 7% gross spread on IPO proceeds only.
(d) Excludes fees associated with subsequent liquidation and distribution of
shares not included in the IPO.
(e) Includes the $22.0 million to Harbor above.
(f) Rounded midpoint of implied range.
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--------------------
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25
