<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934)
STERLING CHEMICALS, INC.
(NAME OF THE ISSUER)
STERLING CHEMICALS, INC.
THE STERLING GROUP, INC.
STX ACQUISITION CORP.
GORDON A. CAIN
WILLIAM A. MCMINN
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE ("COMMON STOCK"), OF THE REGISTRANT
(TITLE OF CLASS OF SECURITIES)
------------------------
858903-10-7
(CUSIP NUMBER OF CLASS OF SECURITIES)
<TABLE>
<CAPTION>
<S> <C> <C>
J. VIRGIL WAGGONER FRANK J. HEVRDEJS FRANK J. HEVRDEJS
PRESIDENT AND CHIEF EXECUTIVE OFFICER PRESIDENT PRESIDENT
STERLING CHEMICALS, INC. THE STERLING GROUP, INC. STX ACQUISITION CORP.
1200 SMITH STREET, SUITE 1900 EIGHT GREENWAY PLAZA EIGHT GREENWAY PLAZA
HOUSTON, TEXAS 77002-4312 SUITE 702 SUITE 702
HOUSTON, TEXAS 77046 HOUSTON, TEXAS 77046
</TABLE>
(NAME, ADDRESSES AND TELEPHONE NUMBERS OF PERSONS AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT)
-------------------
This statement is filed in connection with (check the appropriate box):
(a) [x] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under
the Securities Exchange Act of 1934.
(b) [ ] The filing of a registration statement under the Securities Act of 1933.
(c) [ ] A tender offer.
(d) [ ] None of the above.
Check the following box if soliciting materials or information statement
referred to in checking box (a) are preliminary copies: [x]
------------------
CALCULATION OF FILING FEE
===============================================================================
TRANSACTION VALUATION AMOUNT OF FILING FEE
$640,664,844* $125.00**
===============================================================================
* Calculated based on a proposed cash payment of $12.00 per share for
53,388,737 shares.
[x] Check box if any part of the fee is offset as provided by Rule D-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: $128,133.00
Form or Registration No.: Preliminary Proxy Statement
Filing Party: Sterling Chemicals, Inc.
Date Filed: May 23, 1996
** Paid herewith.
================================================================================
<PAGE>
INTRODUCTION
This Rule 13e-3 Transaction Statement (the "Statement") relates to the
Amended and Restated Agreement and Plan of Merger, dated as of April 24, 1996
(the "Merger Agreement"), between Sterling Chemicals, Inc., a Delaware
corporation (the "Company") and STX Acquisition Corp., a Delaware corporation
("STX Acquisition"). STX Acquisition was formed in April 1996 by an investor
group led by The Sterling Group, Inc. ("TSG") and The Unicorn Group, L.L.C. to
effect the Merger. A copy of the Merger Agreement is attached as Annex A to the
Proxy Statement filed by the Company (the "Proxy Statement"). The Proxy
Statement is attached hereto as Exhibit (d)(1).
Upon the terms and subject to the conditions of the Merger Agreement, at
the effective time of the transaction (the "Effective Time"): (a) STX
Acquisition will be merged with and into the Company (the "Merger"), with the
Company continuing as the surviving corporation (the "Surviving Corporation");
(b) the current directors of the Company will resign and will be replaced by the
director candidates to be nominated by STX Acquisition; (c) substantially all of
the operating assets and associated liabilities of the Company will be
transferred to STX Chemicals Corp. ("Chemicals"), a wholly-owned subsidiary of
the Surviving Corporation; (d) the stockholders of the Company will be entitled
to (i) retain shares in the Surviving Corporation ("Rollover Shares") to the
extent that they make an election to do so (a "Rollover Election"), subject to
pro rata reduction in the event that Rollover Elections have been made to retain
more than an aggregate of 5.0 million Rollover Shares and (ii) receive $12.00
cash for each share of Common Stock of the Company ("Common Stock") not retained
as a Rollover Share (the "Cash Payment"); and (e) the issued and outstanding
shares of common stock of STX Acquisition will be converted into shares of
common stock of the Surviving Corporation. Depending on the number of Rollover
Shares, the issued and outstanding shares of common stock of STX Acquisition
will be converted into up to 8,589,580 shares of common stock of the Surviving
Corporation, representing approximately 79% of the total outstanding shares of
the Surviving Corporation.
The following cross reference sheet shows the location in the preliminary
Proxy Statement relating to the Merger filed by the Company with the Securities
and Exchange Commission. The information in the preliminary Proxy Statement,
including all annexes thereto, is hereby expressly incorporated herein by
reference and the responses to each item of this Statement are qualified in
their entirety by the provisions of the preliminary Proxy Statement. The Proxy
Statement will be completed and, if appropriate, amended, prior to the time it
is first sent or given to stockholders of the Company. This Statement will be
amended to reflect such completion or amendment of the Proxy Statement.
1
<PAGE>
CROSS REFERENCE SHEET
ITEM IN
SCHEDULE 13E-3 LOCATION IN PROXY STATEMENT
- --------------------------- ---------------------------------------------------
Item 1(a) and (b).......... Outside Front Cover Page, "SUMMARY--Parties to the
Transaction," "--Votes Required" "--Market Prices
and Dividends," "THE SPECIAL MEETING--Purpose;
Record Date; Voting at the Special Meeting," "--
Votes Required" and "MARKET PRICES; DIVIDENDS."
Item 1(c) and (d).......... "SUMMARY--Market Prices; Dividends" and "MARKET
PRICES; DIVIDENDS"
Item 1(e).................. Not applicable.
Item 1(f).................. Not applicable.
Item 2(a)-(d) and (g)...... Outside Front Cover Page, "SUMMARY--Parties to the
Transaction, "--Transaction Sponsors,"
"INCORPORATION BY REFERENCE" and ANNEX D.
Item 2(e) and (f).......... Negative.
Item 3(a) and (b).......... "SUMMARY--Background," "Fairness of the Merger,"
"--Opinion of Financial Advisor," "SPECIAL FACTORS
--Background," "--Fairness of the Merger", "--
Opinion of Financial Advisor," "--Purpose and
Structure of the Transaction," and "CERTAIN
FINANCIAL PROJECTIONS."
Item 4(a) and 4(b)......... Outside Front Cover Page, "SUMMARY--Terms of
the Merger," "--Effective Time of the Merger," "--
Interests of Certain Persons in the Merger," "--
Conditions to Consummation of the Merger," "--No
Solicitation; Fiduciary Duties," "--Termination;
Fees and Expenses," "SPECIAL FACTORS--Purpose and
Structure of the Transaction," "THE MERGER--Terms
of the Merger," "--Interests of Certain Persons in
the Merger," "--Effective Time of the Merger," "--
Summary of the Terms of Related Agreements," "--
Appraisal Rights of Dissenting Stockholders" and
ANNEX A.
2
<PAGE>
Item 5(a) - (g)............ "SUMMARY--Terms of the Merger," "--Interests of
Certain Persons in the Merger," "SPECIAL FACTORS--
Purpose and Structure of the Transaction," "--Risks
and Effects of the Merger," "--The Company's
Business After the Merger," "THE MERGER--Interests
of Certain Persons in the Merger," "--Source and
Amount of Funds" and "DIRECTORS AND EXECUTIVE
OFFICERS OF THE SURVIVING CORPORATION."
Item 6(a), (c) and (d)..... "SUMMARY--Financing Arrangements," and "THE
MERGER--Source and Amount of Funds."
Item 6(b).................. "SUMMARY--Financing Arrangements," "THE
MERGER--Source and Amount of Funds" and "FEES
AND EXPENSES."
Item 7(a) - (d)............ Outside Front Cover Page, "SUMMARY--Background,"
"--Recommendation of the Board; Fairness of the
Merger," "--Opinion of Financial Advisor," "--
Appraisal Rights of Dissenting Stockholders,"
"--Certain Tax Consequences of the Merger,"
"--Interests of Certain Persons in the Merger,"
"SPECIAL FACTORS--Background," "--Fairness of the
Merger," "--Purpose and Structure of the
Transaction," "--Recommendation of the Board,"
"--Opinion of Financial Advisor," "--Risks and
Effects of the Merger," "--Certain Tax Consequences
of the Merger," "--The Company's Business After the
Merger," "THE MERGER--Interests of Certain Persons
in the Merger" and "--Appraisal Rights of
Dissenting Stockholders."
Item 8(a) - (f)............ Outside Front Cover Page, "SUMMARY--Background,"
"--Recommendation of the Board," "--Fairness of the
Merger," "--Opinion of Financial Advisor," "--Votes
Required," "THE SPECIAL MEETING--Votes Required,"
"SPECIAL FACTORS--Background," "--Recommendation of
the Board," "--Fairness of the Merger," "--Opinion
of Financial Advisor," "CERTAIN FINANCIAL
PROJECTIONS" and ANNEX B.
Item 9(a) - (c)............ "SUMMARY--Background," "--Recommendation of the
Board; Fairness of the Merger," "--Opinion of
Financial Advisor," "--Interests of Certain Persons
in the Merger," "SPECIAL FACTORS--Background," "--
Fairness of the Merger" "--Recommendation of the
Board," "--Opinion of Financial Advisor," "CERTAIN
FINANCIAL PROJECTIONS" and ANNEX B.
Item 10(a) and (b)......... "SUMMARY--Interests of Certain Persons in the
Merger," "THE MERGER--Interests of Certain Persons
in the Merger," "STOCK OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS," and ANNEX D.
Item 11.................... "SUMMARY--Terms of Related Agreements," "THE
MERGER--Summary of the Terms of Related
Agreements" and ANNEX A.
3
<PAGE>
Item 12(a) and (b)......... "SUMMARY--Recommendation of the Board; Fairness of
the Merger," "--Terms of Related Agreements,"
"SPECIAL FACTORS--Recommendation of the Board" and
"THE MERGER--Summary of the Terms of Related
Agreements."
Item 13(a)................. Outside Front Cover Page, "SUMMARY--Votes
Required," "--Appraisal Rights of Dissenting
Stockholders," "THE SPECIAL MEETING--Votes
Required," "THE MERGER--Appraisal Rights of
Dissenting Stockholders," the Notice of Special
Meeting and ANNEX C.
Item 13(b)................. "SPECIAL FACTORS--Fairness of the Merger."
Item 13(c)................. Not applicable.
Item 14(a)................. "SUMMARY--Summary Historical Financial Data" and
"SELECTED HISTORICAL FINANCIAL DATA."
Item 14(b)................. "SUMMARY--Summary Pro Forma Financial Data" and
"PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS AND
OTHER INFORMATION."
Item 15(a)................. "SPECIAL FACTORS--Risks and Effects of the Merger,"
"--The Company's Business After the Merger," "THE
MERGER," "DIRECTORS AND EXECUTIVE OFFICERS OF THE
SURVIVING CORPORATION," "FEES AND EXPENSES" and
ANNEX A.
Item 15(b)................. "THE SPECIAL MEETING--Revocation and Use of
Proxies; Solicitation."
Item 16.................... Proxy Statement, Letter to Stockholders and Notice
of Special Meeting.
Item 17.................... Separately included herewith.
4
<PAGE>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION
(a) and (b) The information set forth on the Outside Front Cover Page and
in "SUMMARY--Parties to the Transaction," "--Votes Required," "THE SPECIAL
MEETING--Purpose; Record Date; Voting at the Special Meeting," "--Votes
Required" "MARKET PRICES; DIVIDENDS" of the Proxy Statement is incorporated
herein by reference.
(c) and (d) The information set forth in "SUMMARY--Market Prices;
Dividends" and "MARKET PRICES; DIVIDENDS" of the Proxy Statement is incorporated
herein by reference.
(e) Not applicable.
(f) Not applicable.
ITEM 2. IDENTITY AND BACKGROUND.
(a) - (d) and (g) This Statement is being filed by TSG, STX Acquisition,
the Company, which is the issuer of the Common Stock, the class of equity
securities to which this Statement relates, Mr. Gordon A. Cain and Mr. William
A. McMinn (collectively, the "Filing Persons"). The information set forth on the
Outside Front Cover Page and in "SUMMARY--Parties to the Transaction" "--
Transaction Sponsors," "INCORPORATION BY REFERENCE" and ANNEX D of the Proxy
Statement is incorporated herein by reference.
(e) and (f) During the last five years, none of the Filing Persons, nor
to the best of their knowledge any of the officers, directors or control persons
of the Filing Persons, (i) has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining further violations of, or prohibiting activities subject
to, Federal or State securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a) and (b) The information set forth in "SUMMARY--Background," "--
Fairness of the Merger," "--Opinion of Financial Advisor," "SPECIAL FACTORS--
Background," "Fairness of the Merger," "--Opinion of Financial Advisor," "--
Purpose and Structure of the Transaction," and "CERTAIN FINANCIAL PROJECTIONS"
of the Proxy Statement is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) and (b) The information set forth on the Outside Front Cover Page and
in "SUMMARY--Terms of the Merger," "--Effective Time of the Merger,"
"--Interests of Certain Persons in the Merger," "--Conditions to Consummation of
the Merger," "--No Solicitation; Fiduciary Duties," "--Termination; Fees and
Expenses," "SPECIAL FACTORS--Purpose and Structure of the Transaction," "THE
MERGER--Terms of the Merger," "--Interests of Certain Persons in the Merger,"
"--Summary of the Terms of Related Agreements" and "--Appraisal Rights of
Dissenting Stockholders" and ANNEX A of the Proxy Statement is incorporated by
reference.
5
<PAGE>
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a) - (g) The information set forth in "SUMMARY--Terms of the Merger,"
"--Interests of Certain Persons in the Merger," "SPECIAL FACTORS--Purpose and
Structure of the Transaction," "--Risks and Effects of the Merger," "--The
Company's Business After the Merger," "THE MERGER--Interests of Certain Persons
in the Merger," "--Source and Amount of Funds" and "DIRECTORS AND EXECUTIVE
OFFICERS OF THE SURVIVING CORPORATION" of the Proxy Statement is incorporated
herein by reference.
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.
(a), (c) and (d) The information set forth in "SUMMARY--Financing
Arrangements" and "THE MERGER--Source and Amount of Funds" of the Proxy
Statement is incorporated herein by reference.
(b) The information set forth in "SUMMARY--Financing Arrangements," "THE
MERGER--Source and Amount of Funds" and "FEES AND EXPENSES" of the Proxy
Statement is incorporated herein by reference.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) - (d) The information set forth on the Outside Front Cover Page and
in "SUMMARY--Background," "--Recommendation of the Board; Fairness of the
Merger," "--Opinion of Financial Advisor," "--Appraisal Rights of Dissenting
Stockholders," "--Certain Tax Consequences of the Merger," "--Interests of
Certain Persons in the Merger," "SPECIAL FACTORS--Background," "--Fairness of
the Merger," "--Purpose and Structure of the Transaction," "--Recommendation of
the Board," "--Opinion of Financial Advisor," "--Risks and Effects of the
Merger," "--Certain Tax Consequences of the Merger," "THE MERGER--Interests of
Certain Persons in the Merger," and "--Appraisal Rights of Dissenting
Stockholders" of the Proxy Statement is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a) - (f) The information set forth on the Outside Front Cover Page and
in "SUMMARY--Background," "--Recommendation of the Board; Fairness of the
Merger," "--Opinion of Financial Advisor," "--Votes Required," "THE SPECIAL
MEETING--Votes Required," "SPECIAL FACTORS--Background," "--Recommendation of
the Board," "--Fairness of the Merger," "--Opinion of Financial Advisor,"
"CERTAIN FINANCIAL PROJECTIONS" and Annex B of the Proxy Statement is
incorporated herein by reference.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a) - (c) The information set forth in "SUMMARY--Background,"
"--Recommendation of the Board; Fairness of the Merger," "--Opinion of Financial
Advisor," "--Interests of Certain Persons in the Merger," "SPECIAL FACTORS--
Background," "--Fairness of the Merger," "--Recommendation of the Board," "--
Opinion of Financial Advisor," "CERTAIN FINANCIAL PROJECTIONS" and Annex B of
the Proxy Statement is incorporated herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) and (b) The information set forth in "SUMMARY--Interests of Certain
Persons in the Merger," "THE MERGER--Interests of Certain Persons in the
Merger," "STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS" and
Annex D of the Proxy Statement is incorporated herein by reference.
6
<PAGE>
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The information set forth in "SUMMARY--Terms of Related Agreements," "THE
MERGER--Summary of the Terms of Related Agreements," and ANNEX A of the Proxy
Statement is incorporated herein by reference. See also exhibits (c)(1), (c)(2),
(c)(3), (c)(4), (c)(5), (c)(6), (c)(7), and (c)(8) attached hereto.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a) and (b) The information set forth in "SUMMARY--Recommendation of the
Board; Fairness of the Merger," "SPECIAL FACTORS--Recommendation of the Board"
and "THE MERGER--Summary of the Terms of Related Agreements" of the Proxy
Statement is incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in the Outside Front Cover Page, "SUMMARY--
Votes Required," "--Appraisal Rights of Dissenting Stockholders," "THE SPECIAL
MEETING--Votes Required," "THE MERGER--Appraisal Rights of Dissenting
Stockholders" and ANNEX C of the Proxy Statement, and in the Notice of Special
Meeting attached to the Proxy Statement, is incorporated herein by reference.
(b) The information set forth in "SPECIAL FACTORS--Fairness of the
Merger" of the Proxy Statement is incorporated herein by reference.
(C) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The information set forth in "SUMMARY--Summary Historical Financial
Data" and "SELECTED HISTORICAL FINANCIAL DATA" of the Proxy Statement is
incorporated herein by reference.
(b) The information set forth in "SUMMARY - Summary Pro Forma Financial
Data," and "PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS AND OTHER INFORMATION"
of the Proxy Statement is incorporated herein by reference.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) The information set forth in "SPECIAL FACTORS--Risks and Effects
of the Merger," "--The Company's Business After the Merger," "THE
MERGER," "DIRECTORS AND EXECUTIVE OFFICERS OF THE SURVIVING CORPORATION," "FEES
AND EXPENSES" and ANNEX A of the Proxy Statement is incorporated herein by
reference.
(b) The information set forth in "THE SPECIAL MEETING--Revocation and Use
of Proxies; Solicitation" of the Proxy Statement is incorporated herein by
reference.
ITEM 16. ADDITIONAL INFORMATION.
Additional information concerning the Merger is set forth in the Proxy
Statement, Letter to Stockholders and Notice of Special Meeting which are
attached hereto as Exhibit (d)(1).
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
+(a) Credit Agreement among STX Chemicals Corp., Texas Commerce Bank
National Association, Credit Suisse and the financial institutions
named therein.
7
<PAGE>
+(b)(1) Fairness opinion dated April 24, 1996 delivered by
Lazard Freres & Co. LLC (filed herewith as Annex B to the Proxy
Statement that is filed as Exhibit (d)(1) hereto).
(b)(2) Reports of Lazard Freres & Co. LLC dated April 2, 1996 and April
24, 1996 and delivered to the Board of Directors on April 2, 1996
and April 24, 1996.
+(c)(1) Merger Agreement (filed herewith as Annex A to the Proxy
Statement that is filed as Exhibit (d)(1) hereto).
+(c)(2) Inducement Agreement dated as of April 24, 1996.
+(c)(3) Form of Tag-Along Agreement (filed herewith as Exhibit A to Annex
A to the Proxy Statement that is filed as Exhibit (d)(1) hereto).
+(c)(4) Agreement and Irrevocable Proxy executed by J. Virgil Waggoner,
dated as of April 24, 1996.
+(c)(5) Agreement and Irrevocable Proxy executed by Gordon A. Cain, dated
as of April 24, 1996.
+(c)(6) Agreement and Irrevocable Proxy executed by Robert W. Roten, dated
as of April 24, 1996.
+(c)(7) Agreement and Irrevocable Proxy executed by Frank J. Hevrdejs,
dated as of April 24, 1996.
+(c)(8) Agreement and Irrevocable Proxy executed by William C. Oehmig,
dated as of April 24, 1996.
+(d)(1) Proxy Statement of the Company, Notice of Special Meeting of
Stockholders of the Company, Letter to Stockholders of the
Company, Rollover Election Form and Proxy Card.
+(e)(1) Section 262 of the Delaware General Corporation Law (filed
herewith as Annex C to the Proxy Statement that is filed as
Exhibit (d)(1) hereto).
(f) None.
- ----------------
+ Previously filed.
8
<PAGE>
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this Statement is true,
complete and correct.
Dated: August 2, 1996
STERLING CHEMICALS, INC.
By: /s/ J. VIRGIL WAGGONER
J. Virgil Waggoner
President and Chief Executive Officer
9
<PAGE>
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this Statement is true,
complete and correct.
Dated: August 2, 1996
THE STERLING GROUP, INC.
By: /s/ FRANK J. HEVRDEJS
Name: Frank J. Hevrdejs
Title: President
10
<PAGE>
SIGNATURE
---------
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this Statement is true,
complete and correct.
Dated: August 2, 1996
STX ACQUISITION CORP.
By: /s/ FRANK J. HEVRDEJS
Name: Frank J. Hevrdejs
Title: President
11
<PAGE>
SIGNATURE
---------
After due inquiry and to the best of his knowledge and belief, the
undersigned certifies that the information set forth in this Statement is true,
complete and correct.
Dated: August 2, 1996
/s/ GORDON A. CAIN
-------------------------
GORDON A. CAIN
12
<PAGE>
SIGNATURE
---------
After due inquiry and to the best of his knowledge and belief, the
undersigned certifies that the information set forth in this Statement is true,
complete and correct.
Dated: August 2, 1996
/s/ WILLIAM A. MCMINN
-----------------------------------
WILLIAM A. MCMINN
13
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- --------- -----------
+(a) Credit Agreement among STX Chemicals Corp., Texas
Commerce Bank National Association, Credit Suisse and the
financial institutions named therein.
+(b)(1) Fairness opinion dated April 24, 1996 delivered by
Lazard Freres & Co. LLC (filed herewith as Annex B
to the Proxy Statement that is filed as Exhibit
(d)(1) hereto).
(b)(2) Reports of Lazard Freres & Co. LLC dated April 2, 1996 and April
24, 1996 and delivered to the Board of Directors on April 2, 1996
and April 24, 1996.
+(c)(1) The Merger Agreement (filed herewith as Annex A to
the Proxy Statement that is filed as Exhibit (d)(1)
hereto).
+(c)(2) Inducement Agreement dated as of April 24, 1996.
+(c)(3) Form of Tag-Along Agreement (filed herewith as
Exhibit A to Annex A to the Proxy Statement that is
filed as Exhibit (d)(1) hereto).
+(c)(4) Agreement and Irrevocable Proxy executed by
J. Virgil Waggoner, dated as of April 24, 1996.
+(c)(5) Agreement and Irrevocable Proxy executed by
Gordon A. Cain, dated as of April 24, 1996.
+(c)(6) Agreement and Irrevocable Proxy executed by
Robert W. Roten, dated as of April 24, 1996.
+(c)(7) Agreement and Irrevocable Proxy executed by
Frank J. Hevrdejs, dated as of April 24, 1996.
+(c)(8) Agreement and Irrevocable Proxy executed by
William C. Oehmig, dated as of April 24, 1996.
+(d)(1) Proxy Statement of the Company, Notice of Special
Meeting of Stockholders of the Company, Letter to
Stockholders of the Company, Rollover Election Form
and Proxy Card.
+(e)(1) Section 262 of the Delaware General Corporation Law
(filed herewith as Annex C to the Proxy Statement that
is filed as Exhibit (d)(1) hereto).
(f) None.
- ------------
+ Previously filed.
14
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================================================================================
PROJECT PLATE
Analyses Supplement
================================================================================
LAZARD FRERES & CO. LLC APRIL 2, 1996
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE Table of Contents
- --------------------------------------------------------------------------------
Page
------
<S> <C>
I. STANDALONE PLATE EXHIBITS
A. Annual Cost Savings - $0
- Company Revised Base Case................................. 1
- Company Revised Downside Case............................. 2
B. Annual Cost Savings - $30
- Company Revised Base Case................................. 3
- Company Revised Downside Case............................. 4
II. LBO ANALYSIS - STERLING GROUP STRUCTURE
A. Annual Cost Savings - $0
- Company Revised Base Case................................. 5
- Company Revised Downside Case............................. 9
B. Annual Cost Savings - $30
- Company Revised Base Case................................. 13
- Company Revised Downside Case............................. 17
III. RECAPITALIZATION ANALYSIS
A. Share Repurchase/Special Dividend - Annual Cost Savings - $0
- Company Revised Base Case - $400 million.................. 21
- Company Revised Base Case - $500 million.................. 25
- Company Revised Downside Case - $400 million.............. 29
- Company Revised Downside Case - $500 million.............. 33
- Analysis of Blended Share Price - Base Case............... 37
- Post-Repurchase Trading Analysis - Base Case.............. 39
- Analysis of Blended Share Price - Downside Case........... 44
- Post-Repurchase Trading Analysis - Downside Case.......... 46
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE Table of Contents
- --------------------------------------------------------------------------------
Page
------
<S> <C>
III. RECAPITALIZATION ANALYSIS (CONT'D)
A. Share Repurchase/Special Dividend - Annual Cost Savings - $30
- Company Revised Base Case - $400 million.................. 51
- Company Revised Base Case - $500 million.................. 55
- Company Revised Downside Case - $400 million.............. 59
- Company Revised Downside Case - $500 million.............. 63
- Analysis of Blended Share Price - Base Case............... 67
- Post-Repurchase Trading Analysis - Base Case.............. 69
- Analysis of Blended Share Price - Downside Case........... 74
- Post-Repurchase Trading Analysis - Downside Case.......... 76
IV. DCF ANALYSIS
A. Company Revised Base Case
- Annual Cost Savings - $0.................................. 81
B. Company Revised Downside Case
- Annual Cost Savings $0.................................... 84
V. PUBLIC COMPARABLE COMPANIES
A. Equity Comparables............................................ 87
B. Credit Comparables............................................ 90
C. Historical Credit Comparables................................. 92
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE I. STANDALONE PLATE EXHIBITS
- ---------------------------------------------------------------------------------------------------------------------------
COMPANY REVISED BASE CASE
STANDALONE INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS - $0
(Dollars in millions except per share date)
ACTUAL PROJECTED
----------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Petrochemicals EBITDA $ 21.5 $ 62.3 $239.5 $ 126.1 $122.3 $ 76.3 $117.7 $133.1
Pulp Chemicals EBITDA 32.7 27.1 44.7 61.8 85.8 104.4 102.9 94.7
- --------------------- ------ ------ ------ ------- ------ ------ ------ ------
Operating EBITDA 54.2 89.4 284.2 187.9 208.1 180.6 220.7 227.8
Cost Savings - - - - - - - -
Total EBITDA 54.2 89.4 284.2 187.9 208.1 180.6 220.7 227.8
Less: Depreciation (38.8) (40.9) (43.0) (39.1) (52.8) (55.1) (55.1) (55.1)
- ------------------ ------ ------ ------ ------- ------ ------ ------ ------
EBIT 15.4 48.5 241.2 148.8 155.3 125.6 165.6 172.7
SAR's & Other Income - - - (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Income (Expense) (22.4) (20.2) (14.6) (10.2) (3.6) 10.7 27.9 47.5
- ------------------------- ------ ------ ------ ------- ------ ------ ------ ------
Pretax Income (7.0) 28.3 226.6 135.9 149.3 135.1 192.3 219.0
Income Taxes 1.5 (9.3) (76.6) (47.6) (52.2) (47.3) (67.3) (76.7)
- ------------------ ------ ------ ------ ------- ------ ------ ------ ------
NET INCOME ($5.5) $ 19.1 $150.0 $ 88.3 $ 97.0 $ 87.8 $125.0 $142.4
- ---------------------------------------------------------------------------------------------------------------
E.P.S $ 2.69 $ 1.59 $ 1.74 $ 158 $ 2.24 $ 2.56
Shares Outstanding 55.7 55.7 55.7 55.7 55.7 55.7
- ---------------------------------------------------------------------------------------------------------------
Plus: Deferred Taxes $ 1.0 $ 10.2 $ 12.3 $ 8.1 $ 7.2 $ 6.7
Plus: Dep. & Amortization 43.0 39.1 52.8 55.1 55.1 55.1
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (1.5) 0.4
Less: Capital Expenditures (53.9) (104.2) (47.5) (31.5) (25.0) (25.0)
------ ------- ------ ------ ------ ------
Free Cash Flow $141.4 $ 3.7 $111.4 $137.5 $160.8 $179.5
====== ======= ====== ====== ====== ======
Cash & Investments $ 0.0 $ 0.0 $ 24.6 $162.1 $322.9 $502.4
Debt
Long-Term Debt $129.6
Short-Term Debt 3.2
--------------- ------
Total $132.8 $ 86.8 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Net Debt $132.8 $ 86.8 ($24.6) ($162.1) ($322.9) ($502.4)
Common Equity $239.3 $327.6 $424.6 $512.5 $637.5 $779.8
</TABLE>
- 1 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE I. STANDALONE PLATE EXHIBITS
- ---------------------------------------------------------------------------------------------------------------------------
COMPANY REVISED DOWNSIDE CASE
STANDALONE INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS - $0
(Dollars in millions except per share data)
ACTUAL PROJECTED
----------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Petrochemicals EBITDA $ 21.5 $ 62.3 $239.5 $ 101.1 $ 71.2 $ 41.8 $ 79.9 $ 94.9
Pulp Chemicals EBITDA 32.7 27.1 44.7 61.8 72.0 78.4 90.0 82.5
- --------------------- ------ ------ ------ ------- ------ ------ ------ ------
Operating EBITDA 54.2 89.4 284.2 162.9 143.2 120.2 170.0 177.4
Cost Savings - - - - - - - -
Total EBITDA 54.2 89.4 284.2 162.9 143.2 120.2 170.0 177.4
Less: Depreciation (38.8) (40.9) (43.0) (39.1) (52.1) (53.4) (53.4) (53.4)
- ------------------ ------ ------ ------ ------- ------ ------ ------ ------
EBIT 15.4 48.5 241.2 123.8 91.1 66.8 116.5 123.9
SAR's & Other Income - - - (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Income (Expense) (22.4) (20.2) (14.6) (11.2) (7.2) 3.3 15.7 30.2
- ------------------------- ------ ------ ------ ------- ------ ------ ------ ------
Pretax Income (7.0) 28.3 226.6 109.9 81.4 68.8 131.1 153.0
Income Taxes 1.5 (9.3) (76.6) (38.5) (28.5) (24.1) (45.9) (53.5)
- ------------------ ------ ------ ------ ------- ------ ------ ------ ------
NET INCOME ($5.5) $ 19.1 $150.0 $ 71.4 $ 52.9 $ 44.7 $ 85.2 $ 99.4
- ---------------------------------------------------------------------------------------------------------------
E.P.S $ 2.69 $ 1.28 $ 0.95 $ 0.80 $ 1.53 $ 1.79
Shares Outstanding 55.7 55.7 55.7 55.7 55.7 55.7
- ---------------------------------------------------------------------------------------------------------------
Plus: Deferred Taxes $ 1.10 $ 10.2 $ 12.3 $ 8.1 $ 7.2 $ 6.7
Plus: Dep. & Amortization 43.0 39.1 52.1 53.4 53.4 53.4
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (3.4) 0.4
Less: Capital Expenditures (53.9) (104.2) (31.7) (25.0) (25.0) (25.0)
------ ------- ------ ------ ------ ------
Free Cash Flow $141.4 ($ 13.2) $ 82.4 $ 99.3 $177.4 $135.0
====== ======= ====== ====== ====== ======
Cash & Investments $ 0.0 $ 0.0 $ 0.0 $ 78.0 $195.4 $330.5
Debt
Long-Term Debt $129.6
Short-Term Debt 3.2
--------------- ------
Total $132.8 $ 103.7 $ 21.3 $ 0.0 $ 0.0 $ 0.0
Net Debt $132.8 $ 103.7 $ 21.3 ($ 78.0) ($195.4) ($330.5)
Common Equity $239.3 $ 310.7 $363.6 $408.4 $493.6 $593.0
</TABLE>
- 2 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE I. STANDALONE PLATE EXHIBITS
- ---------------------------------------------------------------------------------------------------------------------------
COMPANY REVISED BASE CASE
STANDALONE INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS - $30
(Dollars in millions except per share data)
ACTUAL PROJECTED
----------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Petrochemicals EBITDA $ 21.5 $ 62.3 $239.5 $ 126.1 $122.3 $ 76.3 $117.7 $133.1
Pulp Chemicals EBITDA 32.7 27.1 44.7 61.8 85.8 104.4 102.9 94.7
- --------------------- ------ ------ ------ ------- ------ ------ ------ ------
Operating EBITDA 54.2 89.4 284.2 187.9 208.1 180.6 220.7 227.8
Cost Savings - - - - 30.0 30.0 30.0 30.0
Total EBITDA 54.2 89.4 284.2 187.9 238.1 210.6 250.7 257.8
Less: Depreciation (38.8) (40.9) (43.0) (39.1) (52.8) (55.1) (55.1) (55.1)
- ------------------ ------ ------ ------ ------- ------ ------ ------ ------
EBIT 15.4 48.5 241.2 148.8 185.3 155.6 195.6 202.7
SAR's & Other Income - - - (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Income (Expense) (22.4) (20.2) (14.6) (10.2) (2.4) 14.3 34.1 56.5
- ------------------------- ------ ------ ------ ------- ------ ------ ------ ------
Pretax Income (7.0) 28.3 226.6 135.9 180.4 168.7 228.5 258.0
Income Taxes 1.5 (9.3) (76.6) (47.6) (63.1) (59.0) (80.0) (90.3)
- ------------------ ------ ------ ------ ------- ------ ------ ------ ------
NET INCOME ($5.5) $ 19.1 $150.0 $ 88.3 $117.3 $109.7 $148.5 $167.7
- ---------------------------------------------------------------------------------------------------------------
E.P.S $ 2.69 $ 1.59 $ 2.11 $ 1.97 $ 2.67 $ 3.01
Shares Outstanding 55.7 55.7 55.7 55.7 55.7 55.7
- ---------------------------------------------------------------------------------------------------------------
Plus: Deferred Taxes $ 1.0 $ 10.2 $ 12.3 $ 8.1 $ 7.2 $ 6.7
Plus: Dep. & Amortization 43.0 39.1 52.8 55.1 55.1 55.1
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (1.5) 0.4
Less: Capital Expenditures (53.9) (104.2) (47.5) (31.5) (25.0) (25.0)
------ ------- ------ ------ ------ ------
Free Cash Flow $141.4 $ 3.7 $131.7 $159.4 $184.3 $204.9
====== ======= ====== ====== ====== ======
Cash & Investments $ 0.0 $ 0.0 $ 44.8 $204.2 $388.5 $593.3
Debt
Long-Term Debt $129.6
Short-Term Debt 3.2
--------------- ------
Total $132.8 $ 86.8 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Net Debt $132.8 $ 86.8 ($44.8) ($204.2) ($388.5) ($593.3)
Common Equity $239.3 $ 327.6 $444.9 $554.5 $703.1 $870.8
</TABLE>
- 3 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE I. STANDALONE PLATE EXHIBITS
- ---------------------------------------------------------------------------------------------------------------------------
COMPANY REVISED DOWNSIDE CASE
STANDALONE INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS - $30
(Dollars in millions except per share data)
ACTUAL PROJECTED
----------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Petrochemicals EBITDA $ 21.5 $ 62.3 $239.5 $ 101.1 $ 71.2 $ 41.8 $ 79.9 $ 94.9
Pulp Chemicals EBITDA 32.7 27.1 44.7 61.8 72.0 78.4 90.0 82.5
- --------------------- ------ ------ ------ ------- ------ ------ ------ ------
Operating EBITDA 54.2 89.4 284.2 162.9 143.2 120.2 170.0 177.4
Cost Savings - - - - 30.0 30.0 30.0 30.0
Total EBITDA 54.2 89.4 284.2 162.9 173.2 150.2 200.0 207.4
Less: Depreciation (38.8) (40.9) (43.0) (39.1) (52.1) (53.4) (53.4) (53.4)
- ------------------ ------ ------ ------ ------- ------ ------ ------ ------
EBIT 15.4 48.5 241.2 123.8 121.1 96.8 146.5 153.9
SAR's & Other Income - - - (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Income (Expense) (22.4) (20.2) (14.6) (11.2) (6.0) 6.8 21.9 39.2
- ------------------------- ------ ------ ------ ------- ------ ------ ------ ------
Pretax Income (7.0) 28.3 226.6 109.9 112.6 102.4 167.3 192.0
Income Taxes 1.5 (9.3) (76.6) (38.5) (39.4) (35.8) (58.5) (67.2)
- ------------------ ------ ------ ------ ------- ------ ------ ------ ------
NET INCOME ($5.5) $ 19.1 $150.0 $ 71.4 $ 73.2 $ 66.6 $108.7 $124.8
- ---------------------------------------------------------------------------------------------------------------
E.P.S $ 2.69 $ 1.28 $ 1.31 $ 1.20 $ 1.95 $ 2.24
Shares Outstanding 55.7 55.7 55.7 55.7 55.7 55.7
- ---------------------------------------------------------------------------------------------------------------
Plus: Deferred Taxes $ 1.0 $ 10.2 $ 12.3 $ 8.1 $ 7.2 $ 6.7
Plus: Dep. & Amortization 43.0 39.1 52.1 53.4 53.4 53.4
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (3.4) 0.4
Less: Capital Expenditures (53.9) (104.2) (31.7) (25.0) (25.0) (25.0)
------ ------- ------ ------ ------ ------
Free Cash Flow $141.4 ($ 13.2) $102.7 $121.1 $141.0 $160.4
====== ======= ====== ====== ====== ======
Cash & Investments $ 0.0 $ 0.0 $ 0.0 $120.1 $261.1 $421.4
Debt
Long-Term Debt $129.6
Short-Term Debt 3.2
--------------- ------
Total $132.8 $ 103.7 $ 1.0 $ 0.0 $ 0.0 $ 0.0
Net Debt $132.8 $ 103.7 $ 1.0 ($120.1) ($261.1) ($421.4)
Common Equity $239.3 $ 310.7 $383.9 $450.5 $559.2 $684.0
</TABLE>
- 4 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE II. LBO ANALYSIS-STERLING GROUP STRUCTURE-COMPANY REVISED BASE CASE
- ----------------------------------------------------------------------------------------
SUMMARY ANALYSIS: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions)
<S> <C> <C> <C> <C>
LBO ASSUMPTIONS CAPITAL STRUCTURE
Total Shares Outstanding 55.7 Bank Debt $325.0 39.1%
Shares Repurchased 51.0 Subordinated Debt 275.0 33.1%
Shares Rolled Over 4.6 Dis. Notes (Zero) 100.0 12.0%
Purchase Price Per Share $12.00 Rollover Equity 55.7 6.7%
New Equity 75.0 9.0%
Purchase Price for Equity $612.6 ------
Rollover Equity Value 55.7 Total $830.7 100.0%
Assumed Debt 133.0 ====== ======
SAR Cost 13.8
Fees and Expenses 15.6
------ Interest Rate-Bank 8.4%
Enterprise Value $830.7 Interest Rate-Sub. 11.5%
====== Interest Rate-Dis. (Zero) 13.0%
Purchase x '95 EBITDA 2.9x Effective Tax Rate 35.0%
Exit Multiple of EBITDA 4.0x Interest Rate-Cash 4.0%
Effective Date Sep-95
DILUTION Shares Value
------ -----
Equity Warrants 10.0% Rolled Over Shares 4.641 $ 55.7
Warrant Strike Price $0.00 New Equity Shares 6.250 75.0
------ ------
Primary Shares Outstanding 10.891 130.7
Equity Warrants 1.089 13.1
------ -----
Fully Diluted Shares
Outstanding 11.980 $143.8
</TABLE>
- 5 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE II. LBO ANALYSIS - STERLING GROUP STRUCTURE - COMPANY REVISED BASE CASE
- ------------------------------------------------------------------------------------------
SUMMARY ANALYSIS: 1997 - 2000 ANNUAL COST SAVINGS - $0
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ANNUAL PROJECTED
------------------------------- -------------------------------------------------------
LBO ANALYSIS 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ----
Bank Debt $256.8 $186.7 $133.0 $348.5 $269.3 $168.2 $ 48.8 $ 0.0
Sub. Debt 275.0 275.0 275.0 275.0 275.0
Dis. Notes (Zero) 113.0 127.7 144.3 163.0 184.2
----------------- ------ ------ ------ ------ ------
Total Debt $736.5 $672.0 $587.5 $486.9 $459.2
Cash $ 0.0 0.0 0.0 0.0 0.0 84.0
Net Debt $133.0 $736.5 $672.0 $587.5 $486.9 $375.2
EPS (Fully Diluted) ($0.10) $ 0.34 $ 2.69 $ 4.02 $ 4.18 $ 5.42 $ 5.42 $ 6.22
At Closing
----------
Equity Value at 4x EBITDA Multiple $130.7 $ 4.3 $150.4 $130.3 $391.1 $531.3
Equity Value Per Share (Primary) $48.79
Equity Value Per Share (Fully Diluted) $44.35
LBO FIVE YEAR RATE OF RETURN TO EQUITY
Original Equity Purchase Price Per Share $10.00 $11.00 $12.00 $13.00 $14.00
Exit Multiple 4.0x 41% 36% 31% 25% 20%
of EBITDA 4.5x 46% 41% 36% 31% 26%
5.0x 50% 45% 40% 35% 31%
</TABLE>
- 6 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE II. LBO ANALYSIS - STERLING GROUP STRUCTURE - COMPANY REVISED BASE CASE
- ------------------------------------------------------------------------------------------
ASSUMED INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS - $0
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ANNUAL PROJECTED
------------------------------- -------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ----
Operating EBITDA $ 54.2 $ 89.4 $284.2 $185.2 $205.6 $179.5 $219.5 $226.6
Cost Savings - - - - - - - -
EBITDA 54.2 89.4 284.2 185.2 205.6 179.5 219.5 226.6
Less: Depreciation (38.8) (40.9) (43.0) (39.1) (52.8) (55.1) (55.1) (55.1)
----------------- ------ ------ ------ ------ ------ ------ ------ ------
EBIT 15.4 48.5 241.2 146.1 152.8 124.4 164.4 171.6
Interest Expense (Bank) (22.4) (20.2) (14.6) (27.4) (29.4) (22.7) (14.2) (4.1)
Interest Expense (Sub) (31.6) (31.6) (31.6) (31.6) (31.6)
Interest Expense (Dis.-Zero) (13.0) (14.7) (16.6) (18.8) (21.2)
---------------------------- ------ ------ ------ ------ ------
Total Interest Expense (72.0) (75.7) (70.9) (64.6) (56.9)
Pretax Income (7.0) 28.3 229.4 74.1 77.1 53.4 99.9 114.6
Income Taxes 1.5 (9.2) (78.1) (25.9) (27.0) (18.7) (35.0) (40.1)
------------ ------ ------ ------ ------ ------ ------ ------ ------
NET INCOME ($5.5) $19.1 $150.0 $48.1 $50.1 $34.7 $64.9 $74.5
Plus: Deferred Taxes $1.0 $10.2 $12.3 $8.1 $7.2 $6.7
Plus: Dep. & Amortization 43.0 39.1 52.8 55.1 55.1 55.1
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (1.5) 0.4
Less: Capital Expenditures (53.9) (104.2) (47.5) (31.5) (25.0) (25.0)
Plus: Non-Cash Interest 0.0 13.0 14.7 16.6 18.8 21.2
------ ------ ------ ------ ------ ------
Free Cash Flow $141.4 ($23.5) $79.2 $101.0 $119.4 $132.8
-------------- ====== ====== ====== ====== ====== ======
Cash Balances
Cash & Investments beginning $0.0 $0.0 $0.0 $0.0 $0.0
Free Cash Flow (23.5) 79.2 101.0 119.4 132.8
------ ------ ------ ------ ------
Cash Available to Pay Debt (23.5) 79.2 101.0 119.4 132.8
Cash Repayment Balances
Senior Debt 23.5 (79.2) (101.0) (119.4) (48.8)
Cash Balance 0.0 0.0 0.0 0.0 84.0
Cash Interest Income 0.0 0.0 0.0 0.0 0.0
</TABLE>
- 7 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE II. LBO ANALYSIS - STERLING GROUP STRUCTURE - COMPANY REVISED BASE CASE
- ------------------------------------------------------------------------------------------
CREDIT STATISTICS: 1997-2000 ANNUAL COST SAVINGS - $0
<S> <C> <C> <C> <C> <C> <C>
ACTUAL PROJECTED PRO FORMA
-----------------------------------------------------
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
Coverage Ratios
Total Net Debt/EBITDA 0.5x 4.0x 3.3x 3.3x 2.2x 1.7x
EBITDA/Net Interest 19.5x 2.6x 2.7x 2.5x 3.4x 4.0x
EBITDA/Cash Net Interest 19.5x 3.1x 3.4x 3.3x 4.8x 6.3x
(EBITDA-CapEx)/Net Interest 15.8x 1.1x 2.1x 2.1x 3.0x 3.5x
(EBITDA-CapEx)/Cash Net Interest 15.8x 1.4x 2.6x 2.7x 4.2x 5.6x
EBIT/Net Interest 16.5x 2.0x 2.0x 1.8x 2.5x 3.0x
EBIT/Cash Net Interest 16.5x 2.5x 2.5x 2.3x 3.6x 4.8x
</TABLE>
- 8 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE II. LBO ANALYSIS - STERLING GROUP STRUCTURE - COMPANY REVISED BASE CASE
- ------------------------------------------------------------------------------------------
SUMMARY ANALYSIS: 1997 - 2000 ANNUAL COST SAVINGS - $0
(Dollars in millions)
<S> <C> <C> <C> <C>
LBO ASSUMPTIONS CAPITAL STRUCTURE
Total Shares Outstanding 55.7 Bank Debt $325.0 39.1%
Shares Repurchased 51.0 Subordinated Debt 275.0 33.1%
Shares Rolled Over 4.6 Dis. Notes (Zero) 100.0 12.0%
Purchase Price Per Share $12.00 Rollover Equity 55.7 6.7%
New Equity 75.0 9.0%
-----
Purchase Price for Equity $612.6 Total $830.7 100.0%
Rollover Equity Value 55.7 ====== ======
Assumed Debt 133.0
SAR Cost 13.8 Interest Rate - Bank 8.4%
Fees and Expenes 15.6 Interest Rate - Sub. 11.5%
---------------- ------ Interest Rate - Dis. (Zero) 13.0%
Enterprise Value $830.7 Effective Tax Rate 35.0%
====== Interest Rate - Cash 4.0%
Purchase x '95 EBITDA 2.9x
Exit Multiple of EBITDA 4.0x Shares Value
Effective Date Sep-95 ------ -----
Rolled Over Shares 4.641 $55.7
DILUTION New Equity Shares 6.250 75.0
----- -----
Equity Warrants 10.0% Primary Shares Outstanding 10.891 130.7
Warrant Strike Price $0.00 Equity Warrants 1.089 13.1
------ -----
Fully Diluted Shares Outstanding 11.980 $143.8
</TABLE>
- 9 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE II. LBO ANALYSIS - STERLING GROUP STRUCTURE - COMPANY REVISED DOWNSIDE CASE
- ---------------------------------------------------------------------------------------------
SUMMARY ANALYSIS: 1997 - 2000 ANNUAL COST SAVINGS - $0
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ANNUAL PROJECTED
------------------------------- -------------------------------------------------------
LBO ANALYSIS 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ----
Bank Debt $256.8 $186.7 $133.0 $364.7 $313.1 $247.8 $168.2 $ 75.1
Sub. Debt 275.0 275.0 275.0 275.0 275.0
Dis. Notes (Zero) 113.0 127.7 144.3 163.0 184.2
----------------- ------ ------ ------ ------ ------
Total Debt $752.7 $715.7 $667.1 $606.2 $534.4
Cash $ 0.0 0.0 0.0 0.0 0.0 0.0
Net Debt $133.0 $752.7 $715.7 $667.1 $606.2 $534.4
EPS (Fully Diluted) ($0.10) $ 0.34 $ 2.69 $ 2.66 $ 0.62 $(0.49) $ 2.39 $ 3.02
At Closing
----------
Equity Value at 4x EBITDA Multiple $130.7 ($112.0) ($153.1) ($191.0) $ 69.0 $170.4
Equity Value Per Share (Primary) $15.65
Equity Value Per Share (Fully Diluted) $14.22
LBO FIVE YEAR RATE OF RETURN TO EQUITY
Original Equity Purchase Price Per Share $10.00 $11.00 $12.00 $13.00 $14.00
Exit Multiple 4.0x 21% 14% 5% -5% -21%
of EBITDA 4.5x 27% 21% 14% 6% -4%
5.0x 33% 26% 20% 14% 6%
</TABLE>
- 10 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE II.LBO ANALYSIS-STERLING GROUP STRUCTURE-COMPANY REVISED DOWNSIDE CASE
- ----------------------------------------------------------------------------------------
ASSUMED INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions)
ACTUAL PROJECTED
-------------------------- -------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating EBITDA $54.2 $89.4 $284.2 $160.2 $140.7 $119.0 $168.8 $176.2
Cost Savings - - - - - - - -
EBITDA 54.2 89.4 284.2 160.2 140.7 119.0 168.8 176.2
Less: Depreciation (38.8) (40.9) (43.0) (39.1) (52.1) (53.4) (53.4) (53.4)
----- ----- ----- ----- ----- ------ ------ ------
EBIT 15.4 48.5 241.2 121.1 88.6 65.6 115.3 122.8
Interest Expense (Bank) (22.4) (20.2) (14.6) (27.4) (30.8) (26.4) (20.9) (14.2)
Interest Expense (Sub) (31.6) (31.6) (31.6) (31.6) (31.6)
Interest Expense (Dis.-Zero) (13.0) (14.7) (16.6) (18.8) (21.2)
----- ----- ----- ----- -----
Total Interest Expense (72.0) (77.1) (74.6) (71.3) (67.0)
Pretax Income (7.0) 28.3 229.4 49.0 11.5 (9.1) 44.1 55.7
Income Taxes 1.5 (9.2) (78.1) (17.2) (4.0) 3.2 (15.4) (19.5)
----- ----- ----- ----- ----- ------ ------ ------
NET INCOME ($5.5) $19.1 $150.0 $31.9 $7.5 ($5.9) $28.6 $36.2
Plus: Deferred Taxes $1.0 $10.2 $12.3 $8.1 $7.2 $6.7
Plus: Dep. & Amortization 43.0 39.1 52.1 53.4 53.4 53.4
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (3.4) 0.4
Less: Capital Expenditures (53.9) (104.2) (31.7) (25.0) (25.0) (25.0)
Plus: Non-Cash Interest 0.0 13.0 14.7 16.6 18.8 21.2
----- ----- ----- ------ ------ ------
Free Cash Flow $141.4 ($39.7) $51.7 $65.3 $79.6 $93.0
===== ===== ===== ====== ====== ======
Cash Balances
Cash & Investments beginning $0.0 $0.0 $0.0 $0.0 $0.0
Free Cash Flow (39.7) 51.7 65.3 79.6 93.0
----- ----- ------ ------ ------
Cash Available to Pay Debt (39.7) 51.7 65.3 79.6 93.0
Cash Repayment Balances
Senior Debt 39.7 (51.7) (65.3) (79.6) (93.0)
Cash Balance 0.0 0.0 0.0 0.0 0.0
Cash Interest Income 0.0 0.0 0.0 0.0 0.0
</TABLE>
- 11 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE II. LBO ANALYSIS-STERLING GROUP STRUCTURE-COMPANY REVISED DOWNSIDE CASE
- -----------------------------------------------------------------------------------------
SUMMARY ANALYSIS: 1997-2000 ANNUAL COST SAVINGS-$0
PROJECTED PRO FORMA
ACTUAL -------------------------------------------------
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Coverage Ratios
Total Net Debt/EBITDA 0.5x 4.7x 5.1x 5.6x 3.6x 3.0x
EBITDA/Net Interest 19.5x 2.2x 1.8x 1.6x 2.4x 2.6x
EBITDA/Cash Net Interest 19.5x 2.7x 2.3x 2.1x 3.2x 3.8x
(EBITDA-CapEx)/Net Interest 15.8x 0.8x 1.4x 1.3x 2.0x 2.3x
(EBITDA-CapEx)/Cash Net Interest 15.8x 0.9x 1.7x 1.6x 2.7x 3.3x
EBIT/Net Interest 16.5x 1.7x 1.1x 0.9x 1.6x 1.8x
EBIT/Cash Net Interest 16.5x 2.1x 1.4x 1.1x 2.2x 2.7x
</TABLE>
- 12 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE II. LBO ANALYSIS-STERLING GROUP STRUCTURE-COMPANY REVISED DOWNSIDE CASE
- -----------------------------------------------------------------------------------------
SUMMARY ANALYSIS: 1997-2000 ANNUAL COST SAVINGS-$30
(Dollars in millions)
<S> <C> <C> <C> <C>
LBO ASSUMPTIONS CAPITAL STRUCTURE
Total Shares Outstanding 55.7 Bank Debt $325.0 39.1%
Shares Repurchased 51.0 Subordinated Debt 275.0 33.1%
Shares Rolled Over 4.6 Dis. Notes (Zero) 100.0 12.0%
Purchase Price Per Share $12.00 Rollover Equity 55.7 6.7%
New Equity 75.0 9.0%
------
Purchase Price for Equity $612.6 Total $830.7 100.0%
Rollover Equity Value 55.7 ====== =====
Assumed Debt 133.0
SAR Cost 13.8
Fees and Expenses 15.6 Interest Rate-Bank 8.4%
------ Interest Rate-Sub. 11.5%
Enterprise Value $830.7 Interest Rate-Dis. (Zero) 13.0%
====== Effective Tax Rate 35.0%
Purchase x '95 EBITDA 2.9x Interest Rate-Cash 4.0%
Exit Multiple of EBITDA 4.0x
Effective Date Sep-95
DILUTION Shares Value
------ -----
Equity Warrants 10.0% Rolled Over Shares 4.641 $55.7
Warrant Strike Price $0.00 New Equity Shares 6.250 75.0
------ -----
Primary Shares Outstanding 10.891 130.7
Equity Warrants 1.089 13.1
------ -----
Fully Diluted Shares
Outstanding 11.980 $143.8
</TABLE>
- 13 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE II. LBO ANALYSIS - STERLING GROUP STRUCTURE - COMPANY REVISED BASE CASE
- ------------------------------------------------------------------------------------------
SUMMARY ANALYSIS: 1997 - 2000 ANNUAL COST SAVINGS - $30
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ANNUAL PROJECTED
------------------------------- -------------------------------------------------------
LBO ANALYSIS 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ----
Bank Debt $256.8 $186.7 $133.0 $348.5 $249.8 $128.2 $ 0.0 $ 0.0
Sub. Debt 275.0 275.0 275.0 275.0 275.0
Dis. Notes (Zero) 113.0 127.7 144.3 163.0 184.2
----------------- ------ ------ ------ ------ ------
Total Debt $736.5 $652.5 $547.5 $438.0 $459.2
Cash $ 0.0 0.0 0.0 0.0 13.0 168.5
Net Debt $133.0 $736.5 $652.5 $547.5 $425.1 $290.7
EPS (Fully Diluted) ($0.10) $ 0.34 $ 2.69 $ 4.02 $ 5.81 $ 4.62 $ 7.23 $ 8.07
At Closing
----------
Equity Value at 4x EBITDA Multiple $130.7 $ 4.3 $289.9 $290.4 $572.9 $735.8
Equity Value Per Share (Primary) $67.56
Equity Value Per Share (Fully Diluted) $61.42
LBO FIVE YEAR RATE OF RETURN TO EQUITY
Original Equity Purchase Price Per Share $10.00 $11.00 $12.00 $13.00 $14.00
Exit Multiple 4.0x 49% 44% 39% 34% 30%
of EBITDA 4.5x 53% 48% 44% 39% 35%
5.0x 57% 52% 48% 43% 39%
</TABLE>
- 14 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE II. LBO ANALYSIS - STERLING GROUP STRUCTURE - COMPANY REVISED BASE CASE
- ------------------------------------------------------------------------------------------
ASSUMED INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS - $30
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ANNUAL PROJECTED
------------------------------- -------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ----
Operating EBITDA $ 54.2 $ 89.4 $284.2 $185.2 $205.6 $179.5 $219.5 $226.6
Cost Savings - - - - 30.0 30.0 30.0 30.0
EBITDA 54.2 89.4 284.2 185.2 235.6 209.5 249.5 256.6
Less: Depreciation (38.8) (40.9) (43.0) (39.1) (52.8) (55.1) (55.1) (55.1)
----------------- ------ ------ ------ ------ ------ ------ ------ ------
EBIT 15.4 48.5 241.2 146.1 182.8 154.4 194.4 201.6
Interest Expense (Bank) (22.4) (20.2) (14.6) (27.4) (29.4) (21.1) (10.8) 0.0
Interest Expense (Sub) (31.6) (31.6) (31.6) (31.6) (31.6)
Interest Expense (Dis.-Zero) (13.0) (14.7) (16.6) (18.8) (21.2)
---------------------------- ------ ------ ------ ------ ------
Total Interest Expense (72.0) (75.7) (69.3) (61.2) (52.8)
Pretax Income (7.0) 28.3 229.4 74.1 107.1 85.1 133.2 148.7
Income Taxes 1.5 (9.2) (78.1) (25.9) (37.5) (29.8) (46.6) (52.1)
------------ ------ ------ ------ ------ ------ ------ ------ ------
NET INCOME ($5.5) $19.1 $150.0 $48.1 $69.6 $55.3 $86.6 $96.7
Plus: Deferred Taxes $1.0 $10.2 $12.3 $8.1 $7.2 $6.7
Plus: Dep. & Amortization 43.0 39.1 52.8 55.1 55.1 55.1
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (1.5) 0.4
Less: Capital Expenditures (53.9) (104.2) (47.5) (31.5) (25.0) (25.0)
Plus: Non-Cash Interest 0.0 13.0 14.7 16.6 18.8 21.2
------ ------ ------ ------ ------ ------
Free Cash Flow $141.4 ($23.5) $98.7 $121.6 $141.1 $155.0
====== ====== ====== ====== ====== ======
Cash Balances
Cash & Investments beginning $0.0 $0.0 $0.0 $0.0 $13.0
Free Cash Flow (23.5) 98.7 121.6 141.1 155.0
-------------- ------ ------ ------ ------ ------
Cash Available to Pay Debt (23.5) 98.7 121.6 141.1 168.0
Cash Repayment Balances
Senior Debt 23.5 (98.7) (121.6) (128.2) 0.0
Cash Balance 0.0 0.0 0.0 13.0 168.5
Cash Interest Income 0.0 0.0 0.0 0.0 0.5
</TABLE>
- 15 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE II. LBO ANALYSIS-STERLING GROUP STRUCTURE-COMPANY REVISED BASE CASE
- -------------------------------------------------------------------------------------
SUMMARY ANALYSIS: 1997-2000 ANNUAL COST SAVINGS-$30
PROJECTED
ACTUAL -------------------------------------------------
LBO ANALYSIS 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Coverage Ratios
Total Net Debt/EBITDA 0.5x 4.0x 2.8x 2.6x 1.7x 1.1x
EBITDA/Net Interest 19.5x 2.6x 3.1x 3.0x 4.1x 4.9x
EBITDA/Cash Net Interest 19.5x 3.1x 3.9x 4.0x 5.9x 8.3x
(EBITDA-CapEx)/Net Interest 15.8x 1.1x 2.5x 2.6x 3.7x 4.4x
(EBITDA-CapEx)/Cash Net Interest 15.8x 1.4x 3.1x 3.4x 5.3x 7.4x
EBIT/Net Interest 16.5x 2.0x 2.4x 2.2x 3.2x 3.9x
EBIT/Cash Net Interest 16.5x 2.5x 3.0x 2.9x 4.6x 6.5x
</TABLE>
- 16 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE II. LBO ANALYSIS-STERLING GROUP STRUCTURE-COMPANY REVISED DOWNSIDE CASE
- ----------------------------------------------------------------------------------------
SUMMARY ANALYSIS: 1997-2000 ANNUAL COST SAVINGS-$30
(Dollars in millions)
<S> <C> <C> <C> <C>
LBO ASSUMPTIONS CAPITAL STRUCTURE
Total Shares Outstanding 55.7 Bank Debt $325.0 39.1%
Shares Repurchased 51.0 Subordinated Debt 275.0 33.1%
Shares Rolled Over 4.6 Dis. Notes (Zero) 100.0 12.0%
Purchase Price Per Share $12.00 Rollover Equity 55.7 6.7%
New Equity 75.0 9.0%
------
Purchase Price for Equity $612.6 Total $830.7 100.0%
Rollover Equity Value 55.7 ====== =====
Assumed Debt 133.0
SAR Cost 13.8
Fees and Expenses 15.6 Interest Rate-Bank 8.4%
------ Interest Rate-Sub. 11.5%
Enterprise Value $830.7 Interest Rate-Dis. (Zero) 13.0%
====== Effective Tax Rate 35.0%
Purchase x '95 EBITDA 2.9x Interest Rate-Cash 4.0%
Exit Multiple of EBITDA 4.0x
Effective Date Sep-95
DILUTION Shares Value
------ -----
Equity Warrants 10.0% Rolled Over Shares 4.641 $55.7
Warrant Strike Price $0.00 New Equity Shares 6.250 75.0
------ -----
Primary Shares Outstanding 10.891 130.7
Equity Warrants 1.089 13.1
------ -----
Fully Diluted Shares
Outstanding 11.980 $143.8
</TABLE>
- 17 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE II.LBO ANALYSIS-STERLING GROUP STRUCTURE-COMPANY REVISED DOWNSIDE CASE
- ----------------------------------------------------------------------------------------
SUMMARY ANALYSIS: 1997-2000 ANNUAL COST SAVINGS-$30
(Dollars in millions)
ACTUAL PROJECTED
-------------------------- -------------------------------------------------
LBO ANALYSIS 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bank Debt $256.8 $186.7 $133.0 $364.7 $293.6 $207.7 $106.4 $0.0
Sub. Debt 275.0 275.0 275.0 275.0 275.0
Dis. Notes (Zero) 113.0 127.7 144.3 163.0 184.2
----------------- ------ ------ ------ ------ ------
Total Debt $752.7 $696.2 $627.0 $544.4 $459.2
Cash $0.0 0.0 0.0 0.0 0.0 9.5
Net Debt $133.0 $752.7 $696.2 $627.0 $544.4 $449.7
EPS (Fully Diluted) ($0.10) $0.34 $2.69 $2.66 $2.25 $1.23 $4.20 $4.94
At Closing
----------
Equity Value at 4x EBITDA Multiple $130.7 ($112.0) ($13.6) ($30.9) $250.7 $375.1
Equity Value Per Share (Primary) $34.44
Equity Value Per Share (Fully Diluted) $31.31
LBO FIVE YEAR RATE OF RETURN TO EQUITY
Original Equity Purchase Price Per Share $10.00 $11.00 $12.00 $13.00 $14.00
Exit Multiple 4.0x 34% 28% 22% 16% 9%
of EBITDA 4.5x 39% 33% 28% 22% 16%
5.0x 43% 38% 33% 28% 23%
</TABLE>
- 18 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE II.LBO ANALYSIS-STERLING GROUP STRUCTURE-COMPANY REVISED DOWNSIDE CASE
- ----------------------------------------------------------------------------------------
ASSUMED INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS-$30
(Dollars in millions)
ACTUAL PROJECTED
-------------------------- -------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating EBITDA $54.2 $89.4 $284.2 $160.2 $140.7 $119.0 $168.8 $176.2
Cost Savings - - - - 30.0 30.0 30.0 30.0
EBITDA 54.2 89.4 284.2 160.2 170.7 149.0 198.8 206.2
Less: Depreciation (38.8) (40.9) (43.0) (39.1) (52.1) (53.4) (53.4) (53.4)
----- ----- ----- ----- ----- ------ ------ ------
EBIT 15.4 48.5 241.2 121.1 118.6 95.6 145.3 152.8
Interest Expense (Bank) (22.4) (20.2) (14.6) (27.4) (30.8) (24.8) (17.5) (9.0)
Interest Expense (Sub) (31.6) (31.6) (31.6) (31.6) (31.6)
Interest Expense (Dis.-Zero) (13.0) (14.7) (16.6) (18.8) (21.2)
----- ----- ----- ----- -----
Total Interest Expense (72.0) (77.1) (73.0) (67.9) (61.8)
Pretax Income (7.0) 28.3 229.4 49.0 41.5 22.6 77.4 91.0
Income Taxes 1.5 (9.2) (78.1) (17.2) (14.5) (7.9) (27.1) (31.8)
----- ----- ----- ----- ----- ------ ------ ------
NET INCOME ($5.5) $19.1 $150.0 $31.9 $27.0 $14.7 $50.3 $59.1
Plus: Deferred Taxes $1.0 $10.2 $12.3 $8.1 $7.2 $6.7
Plus: Dep. & Amortization 43.0 39.1 52.1 53.4 53.4 53.4
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (3.4) 0.4
Less: Capital Expenditures (53.9) (104.2) (31.7) (25.0) (25.0) (25.0)
Plus: Non-Cash Interest 0.0 13.0 14.7 16.6 18.8 21.2
----- ----- ----- ------ ------ ------
Free Cash Flow $141.4 ($39.7) $71.2 $85.8 $101.3 $115.9
===== ===== ===== ====== ====== ======
Cash Balances
Cash & Investments beginning $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Free Cash Flow (39.7) 71.2 85.8 101.3 115.9
----- ----- ------ ------ ------
Cash Available to Pay Debt (39.7) 71.2 85.8 101.3 115.9
Cash Repayment Balances
Senior Debt 39.7 (71.2) (85.8) (101.3) (106.4)
Cash Balance 0.0 0.0 0.0 0.0 9.5
Cash Interest Income 0.0 0.0 0.0 0.0 0.0
</TABLE>
- 19 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE II. LBO ANALYSIS-STERLING GROUP STRUCTURE-COMPANY REVISED DOWNSIDE CASE
- -----------------------------------------------------------------------------------------
SUMMARY ANALYSIS: 1997-2000 ANNUAL COST SAVINGS-$30
PROJECTED
ACTUAL -------------------------------------------------
LBO ANALYSIS 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Coverage Ratios
Total Net Debt/EBITDA 0.5x 4.7x 4.1x 4.2x 2.7x 2.2x
EBITDA/Net Interest 19.5x 2.2x 2.2x 2.0x 2.9x 3.3x
EBITDA/Cash Net Interest 19.5x 2.7x 2.7x 2.6x 4.0x 5.1x
(EBITDA-CapEx)/Net Interest 15.8x 0.8x 1.8x 1.7x 2.6x 2.9x
(EBITDA-CapEx)/Cash Net Interest 15.8x 0.9x 2.2x 2.2x 3.5x 4.5x
EBIT/Net Interest 16.5x 1.7x 1.5x 1.3x 2.1x 2.5x
EBIT/Cash Net Interest 16.5x 2.1x 1.9x 1.7x 3.0x 3.8x
</TABLE>
- 20 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE I. STANDALONE PLATE EXHIBITS
- ---------------------------------------------------------------------------------------------------------------------------
SCENARIO: SHARE REPURCHASE-$400m-COMPANY REVISED BASE CASE
ASSUMPTIONS
- ----------------------------------------------------------------------------------------------------------------------------
Current Share Price (3/29/95) $12.63 Senior Bank Debt @ 8.4% $273.4 Current Shares Outstanding 55.7
Offer Price $12.00 Senior Bank Debt @ 11.0% 273.4 # of Shares Repurchased 33.3
------------------------ ------ ----
Equity Repurchased $400.0 Total Debt $546.8 # of Pro Forma Shares 22.4
Transaction Expenses $14.0 Assumed Debt $132.8
- ----------------------------------------------------------------------------------------------------------------------------
PRO FORMA INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS - $0
(Dollars in millions except per share data)
PROJECTED
ACTUAL -------------------------------------------
1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Petrochemicals EBITDA $239.5 $ 126.1 $122.3 $ 76.3 $117.7 $133.1
Pulp Chemicals EBITDA 44.7 61.8 85.8 104.4 102.9 94.7
- --------------------- ------ ------- ------ ------ ------ ------
Operating EBITDA 284.2 187.9 208.1 180.6 220.7 227.8
Cost Savings - - - - - -
Total EBITDA 284.2 187.9 208.1 180.6 220.7 227.8
Less: Depreciation (43.0) (39.1) (52.8) (55.1) (55.1) (55.1)
- ------------------ ------ ------- ------ ------ ------ ------
EBIT 241.2 148.8 155.3 125.6 165.6 172.7
SAR's & Other Income - (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Expense
Company Debt (14.6) 0.0 0.0 0.0 0.0 0.0
Senior Bank Debt @ 8.4% 0.0 (23.1) (25.1) (18.5) (10.2) (0.4)
Senior Sub. Debt @ 11.0% 0.0 (30.1) (30.1) (30.1) (30.1) (30.1)
------------------------ ------ ------- ------ ------ ------ ------
Total Interest Expense (14.6) (53.1) (55.2) (48.6) (40.3) (30.4)
Pretax Income 212.0 93.0 97.7 75.8 124.2 141.1
Income Taxes (62.0) (32.5) (34.2) (26.5) (43.5) (49.4)
- ------------------ ------ ------- ------ ------ ------ ------
NET INCOME $150.0 $ 60.4 $ 63.5 $ 49.3 $ 80.7 $ 91.7
- ------------------------------ --------------------------------------------------------------
E.P.S $ 2.69 $ 2.70 $ 2.84 $ 2.20 $ 3.61 $ 4.10
Shares Outstanding 55.7 22.4 22.4 22.4 22.4 22.4
- ------------------------------ --------------------------------------------------------------
Plus: Deferred Taxes $ 1.0 $ 10.2 $ 12.3 $ 8.1 $ 7.2 $ 6.7
Plus: Dep. & Amortization 43.0 39.1 52.8 55.1 55.1 55.1
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (1.5) 0.4
Less: Capital Expenditures (53.9) (104.2) (47.5) (31.5) (25.0) (25.0)
------ ------- ------ ------ ------ ------
Free Cash Flow $141.4 ($24.2) $ 77.9 $ 99.0 $116.5 $128.9
====== ======= ====== ====== ====== ======
</TABLE>
- 21 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
SCENARIO: DISTRIBUTION-$400 MILLION-COMPANY REVISED BASE CASE
DEBT CALCULATIONS: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions except per share data)
PROJECTED
--------------------------------------------------
1996 1997 1998 1999 2000
------- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Cash & Investments $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Debt
Long-Term Debt $ 129.6
Short-Term Debt 3.2
--------------- --------
Total Company Debt $ 132.8 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Senior Bank Debt $ 273.4 $297.6 $219.7 $120.8 $ 4.3 $ 0.0
Senior Sub. Deb. 273.4 273.4 273.4 273.4 273.4 148.8
---------------- -------- ------- ------- ------ ------ ------
Incremental Debt 546.8 571.0 493.1 394.1 277.7 148.8
---------------- -------- ------- ------- ------ ------ ------
Total Debt $ 546.8 $571.0 $493.1 $394.1 $277.7 $148.8
Common Equity $ 239.3
Incremental Effect (400.0)
------------------ --------
Total ($ 160.7) ($100.3) ($ 36.8) $ 12.4 $ 93.1 $184.9
Net Income $ 150.0 $ 60.4 $ 63.5 $ 49.3 $ 80.7 $ 91.7
Cash Balances
Cash & Investments beginning $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Free Cash Flow (24.2) 77.9 99.0 116.5 128.9
-------------- ------- ------- ------ ------ ------
Cash Available to Pay Debt (24.2) 77.9 99.0 116.5 128.9
Cash Repayment Balances
Senior Debt 24.2 (77.9) (99.0) (116.5) (4.3)
Cash Balance 0.0 0.0 0.0 0.0 124.6
Senior Sub. Debt 0.0 0.0 0.0 0.0 (124.6)
Cash Balance 0.0 0.0 0.0 0.0 0.0
Interest Income 0.0 0.0 0.0 0.0 0.0
</TABLE>
- 22 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE II. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
SCENARIO: DISTRIBUTION-$400 MILLION-COMPANY REVISED BASE CASE
CREDIT STATISTICS: 1997-2000 ANNUAL COST SAVINGS-$0
PROJECTED PRO FORMA
ACTUAL PRO FORMA -------------------------------------------------
1995 1995 1996 1997 1998 1999 2000
---- --------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Leverage Ratios
Net Debt/Book Capitalization 36% 216% 121% 108% 97% 75% 45%
Coverage Ratios
Total Debt/EBITDA 0.5x 1.9x 3.0x 2.4x 2.2x 1.3x 0.7x
EBITDA/Interest 19.5x 5.3x 3.5x 3.8x 3.7x 5.5x 7.5x
(EBITDA-CapEx)/Interest 15.8x 4.3x 1.6x 2.9x 3.1x 4.9x 6.7x
EBIT/Interest 16.5x 4.5x 2.8x 2.8x 2.6x 4.1x 5.7x
</TABLE>
- 23 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- ---------------------------------------------------------------------------------------------------------------------------
SCENARIO: SPECIAL DIVIDEND-$400 MILLION-COMPANY REVISED BASE CASE
- ---------------------------------------------------------------------------------------------------------------------------
ASSUMPTIONS
Current Shares Outstanding 55.7 Senior Bank Debt @ 8.4% $273.4 Cash Dividend $400.0
Senior Bank Debt @ 11.0% 273.4 Trans. Expenses 14.0
------------------------ ------ Assumed Debt 132.8
Total Debt $546.8 ------
Total Uses $546.8
- ----------------------------------------------------------------------------------------------------------------------------
PRO FORMA INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS - $0
(Dollars in millions except per share data)
PROJECTED
ACTUAL -------------------------------------------
1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Petrochemicals EBITDA $239.5 $ 126.1 $122.3 $ 76.3 $117.7 $133.1
Pulp Chemicals EBITDA 44.7 61.8 85.8 104.4 102.9 94.7
- --------------------- ------ ------- ------ ------ ------ ------
Operating EBITDA 284.2 187.9 208.1 180.6 220.7 227.8
Cost Savings - - - - - -
Total EBITDA 284.2 187.9 208.1 180.6 220.7 227.8
Less: Depreciation (43.0) (39.1) (52.8) (55.1) (55.1) (55.1)
- ------------------ ------ ------- ------ ------ ------ ------
EBIT 241.2 148.8 155.3 125.6 165.6 172.7
SAR's & Other Income - (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Expense
Company Debt (14.6) 0.0 0.0 0.0 0.0 0.0
Senior Bank Debt @ 8.4% 0.0 (23.1) (25.1) (18.5) (10.2) (0.4)
Senior Sub. Debt @ 11.0% 0.0 (30.1) (30.1) (30.1) (30.1) (30.1)
------------------------ ------ ------- ------ ------ ------ ------
Total Interest Expense (14.6) (53.1) (55.2) (48.6) (40.3) (30.4)
Pretax Income 226.6 93.0 97.7 75.8 124.2 141.1
Income Taxes (76.6) (32.5) (34.2) (26.5) (43.5) (49.4)
- ------------------ ------ ------- ------ ------ ------ ------
NET INCOME $150.0 $ 60.4 $ 63.5 $ 49.3 $ 80.7 $ 91.7
- ------------------------------ --------------------------------------------------------------
E.P.S $ 2.69 $ 1.08 $ 1.14 $ 0.88 $ 1.45 $ 1.65
Shares Outstanding 55.7 55.7 55.7 55.7 55.7 55.7
- ------------------------------ --------------------------------------------------------------
Plus: Deferred Taxes $ 1.0 $ 10.2 $ 12.3 $ 8.1 $ 7.2 $ 6.7
Plus: Dep. & Amortization 43.0 39.1 52.8 55.1 55.1 55.1
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (1.5) 0.4
Less: Capital Expenditures (53.9) (104.2) (47.5) (31.5) (25.0) (25.0)
- -------------------------- ------ ------- ------ ------ ------ ------
Free Cash Flow $141.4 ($24.2) $ 77.9 $ 99.0 $116.5 $128.9
====== ======= ====== ====== ====== ======
</TABLE>
- 24 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- ---------------------------------------------------------------------------------------------------------------------------
SCENARIO: SHARE REPURCHASE-$500m-COMPANY REVISED BASE CASE
ASSUMPTIONS
- ----------------------------------------------------------------------------------------------------------------------------
Current Share Price (3/29/95) $12.63 Senior Bank Debt @ 8.4% $324.9 Current Shares Outstanding 55.7
Offer Price $12.00 Senior Sub. Debt @ 11.5% 324.9 # of Shares Repurchased 41.7
------------------------ ------ ----
Equity Repurchased $500.0 Total Debt $649.8 # of Pro Forma Shares 14.0
Transaction Expenses $17.0 Assumed Debt $132.8
- ----------------------------------------------------------------------------------------------------------------------------
PRO FORMA INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS - $0
(Dollars in millions except per share data)
PROJECTED
ACTUAL -------------------------------------------
1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Petrochemicals EBITDA $239.5 $ 126.1 $122.3 $ 76.3 $117.7 $133.1
Pulp Chemicals EBITDA 44.7 61.8 85.8 104.4 102.9 94.7
- --------------------- ------ ------- ------ ------ ------ ------
Operating EBITDA 284.2 187.9 208.1 180.6 220.7 227.8
Cost Savings - - - - - -
Total EBITDA 284.2 187.9 208.1 180.6 220.7 227.8
Less: Depreciation (43.0) (39.1) (52.8) (55.1) (55.1) (55.1)
- ------------------ ------ ------- ------ ------ ------ ------
EBIT 241.2 148.8 155.3 125.6 165.6 172.7
SAR's & Other Income - (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Expense
Company Debt (14.6) 0.0 0.0 0.0 0.0 0.0
Senior Bank Debt @ 8.4% 0.0 (27.4) (30.1) (24.2) (16.6) (7.5)
Senior Sub. Debt @ 11.0% 0.0 (37.4) (37.4) (37.4) (37.4) (37.4)
------------------------ ------ ------- ------ ------ ------ ------
Total Interest Expense (14.6) (64.8) (67.5) (61.6) (53.9) (44.8)
Pretax Income 212.0 81.3 85.4 62.8 110.5 126.7
Income Taxes (62.0) (28.5) (29.9) (22.0) (38.7) (44.4)
- ------------------ ------ ------- ------ ------ ------ ------
NET INCOME $150.0 $ 52.9 $ 55.5 $ 40.8 $ 71.8 $ 82.4
- ------------------------------ --------------------------------------------------------------
E.P.S $ 2.69 $ 3.77 $ 3.95 $ 2.91 $ 5.12 $ 5.87
Shares Outstanding 55.7 14.0 14.0 14.0 14.0 14.0
- ------------------------------ --------------------------------------------------------------
Plus: Deferred Taxes $ 1.0 $ 10.2 $ 12.3 $ 8.1 $ 7.2 $ 6.7
Plus: Dep. & Amortization 43.0 39.1 52.8 55.1 55.1 55.1
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (1.5) 0.4
Less: Capital Expenditures (53.9) (104.2) (47.5) (31.5) (25.0) (25.0)
- -------------------------- ------ ------- ------ ------ ------ ------
Free Cash Flow $141.4 ($31.8) $ 69.9 $ 90.5 $107.6 $119.5
====== ======= ====== ====== ====== ======
</TABLE>
- 25 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
SCENARIO: DISTRIBUTION-$500 MILLION-COMPANY REVISED BASE CASE
DEBT CALCULATIONS: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions except per share data)
PROJECTED
--------------------------------------------------
1996 1997 1998 1999 2000
------- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Cash & Investments $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Debt
Long-Term Debt $ 129.6
Short-Term Debt 3.2
--------------- --------
Total Company Debt $ 132.8 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Senior Bank Debt $ 324.9 $356.6 $286.8 $196.2 $ 88.6 $ 0.0
Senior Sub. Deb. 324.9 324.9 324.9 324.9 324.9 294.0
---------------- -------- ------- ------- ------- ------- ------
Incremental Debt 649.8 681.5 611.7 521.1 413.5 294.0
---------------- -------- ------- ------- ------- ------- ------
Total Debt $ 649.8 $681.5 $611.7 $521.1 $413.5 $294.0
Common Equity $ 239.3
Incremental Effect (500.0)
------------------ --------
Total ($ 260.7) ($207.9) ($152.4) ($111.5) ($ 39.7) $ 42.7
Net Income $ 150.0 $ 52.9 $ 55.5 $ 40.8 $ 71.8 $ 82.4
Cash Balances
Cash & Investments beginning $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Free Cash Flow (31.8) 69.9 90.5 107.6 119.5
-------------- ------- ------- ------- ------- ------
Cash Available to Pay Debt (31.8) 69.9 90.5 107.6 119.5
Cash Repayment Balances
Senior Debt 31.8 (69.9) (90.5) (107.6) (88.6)
Cash Balance 0.0 0.0 0.0 0.0 30.9
Senior Sub. Debt 0.0 0.0 0.0 0.0 (30.9)
Cash Balance 0.0 0.0 0.0 0.0 0.0
Interest Income 0.0 0.0 0.0 0.0 0.0
</TABLE>
- 26 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE II. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
SCENARIO: DISTRIBUTION-$500 MILLION-COMPANY REVISED BASE CASE
CREDIT STATISTICS: 1997-2000 ANNUAL COST SAVINGS-$0
PROJECTED PRO FORMA
ACTUAL PRO FORMA -------------------------------------------------
1995 1995 1996 1997 1998 1999 2000
---- --------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Leverage Ratio
Net Debt/Book Capitalization 36% 254% 144% 133% 127% 111% 87%
Coverage Ratios
Total Debt/EBITDA 0.5x 2.3x 3.6x 2.9x 2.9x 1.9x 1.3x
EBITDA/Interest 19.5x 4.4x 2.9x 3.1x 2.9x 4.1x 5.1x
(EBITDA-CapEx)/Interest 15.8x 3.6x 1.3x 2.4x 2.4x 3.6x 4.5x
EBIT/Interest 16.5x 3.7x 2.3x 2.3x 2.0x 3.1x 3.9x
</TABLE>
- 27 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- ---------------------------------------------------------------------------------------------------------------------------
SCENARIO: SHARE REPURCHASE-$500m-COMPANY REVISED BASE CASE
- ----------------------------------------------------------------------------------------------------------------------------
ASSUMPTIONS
Current Shares Outstanding 55.7 Senior Bank Debt @ 8.4% $324.9 Cash Dividend $500.0
Senior Sub. Debt @ 11.5% 324.9 Trans. Expenes 17.0
------------------------ ------ Assumed Debt 132.8
Total Debt $649.8 ------
Total Uses $649.8
- ----------------------------------------------------------------------------------------------------------------------------
PRO FORMA INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS - $0
(Dollars in millions except per share data)
PROJECTED
ACTUAL -------------------------------------------
1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Petrochemicals EBITDA $239.5 $ 126.1 $122.3 $ 76.3 $117.7 $133.1
Pulp Chemicals EBITDA 44.7 61.8 85.8 104.4 102.9 94.7
- --------------------- ------ ------- ------ ------ ------ ------
Operating EBITDA 284.2 187.9 208.1 180.6 220.7 227.8
Cost Savings - - - - - -
Total EBITDA 284.2 187.9 208.1 180.6 220.7 227.8
Less: Depreciation (43.0) (39.1) (52.8) (55.1) (55.1) (55.1)
- ------------------ ------ ------- ------ ------ ------ ------
EBIT 241.2 148.8 155.3 125.6 165.6 172.7
SAR's & Other Income - (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Expense
Company Debt (14.6) 0.0 0.0 0.0 0.0 0.0
Senior Bank Debt @ 8.4% 0.0 (27.4) (30.1) (24.2) (16.6) (7.5)
Senior Sub. Debt @ 11.5% 0.0 (37.4) (37.4) (37.4) (37.4) (37.4)
------------------------ ------ ------- ------ ------ ------ ------
Total Interest Expense (14.6) (64.8) (67.5) (61.6) (53.9) (44.8)
Pretax Income 226.6 81.3 85.4 62.8 110.5 126.7
Income Taxes (76.6) (28.5) (29.9) (22.0) (38.7) (44.4)
- ------------------ ------ ------- ------ ------ ------ ------
NET INCOME $150.0 $ 52.9 $ 55.5 $ 40.8 $ 71.8 $ 82.4
- ------------------------------ --------------------------------------------------------------
E.P.S $ 2.69 $ 0.95 $ 1.00 $ 0.73 $ 1.29 $ 1.48
Shares Outstanding 55.7 55.7 55.7 55.7 55.7 55.7
- ------------------------------ --------------------------------------------------------------
Plus: Deferred Taxes $ 1.0 $ 10.2 $ 12.3 $ 8.1 $ 7.2 $ 6.7
Plus: Dep. & Amortization 43.0 39.1 52.8 55.1 55.1 55.1
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (1.5) 0.4
Less: Capital Expenditures (53.9) (104.2) (47.5) (31.5) (25.0) (25.0)
- -------------------------- ------ ------- ------ ------ ------ ------
Free Cash Flow $141.4 ($31.8) $ 69.9 $ 90.5 $107.6 $119.5
====== ======= ====== ====== ====== ======
</TABLE>
- 28 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- ---------------------------------------------------------------------------------------------------------------------------
SCENARIO: SHARE REPURCHASE-$400m-COMPANY REVISED BASE CASE
ASSUMPTIONS
- ----------------------------------------------------------------------------------------------------------------------------
Current Share Price (3/29/95) $12.63 Senior Bank Debt @ 8.4% $273.4 Current Shares Outstanding 55.7
Offer Price $12.00 Senior Sub. Debt @ 11.0% 273.4 # of Shares Repurchased 33.3
------------------------ ------ ----
Equity Repurchased $400.0 Total Debt $546.8 # of Pro Forma Shares 22.4
Transaction Expenses $14.0 Assumed Debt $132.8
- ----------------------------------------------------------------------------------------------------------------------------
PRO FORMA INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS - $0
(Dollars in millions except per share data)
PROJECTED
ACTUAL -------------------------------------------
1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Petrochemicals EBITDA $239.5 $ 101.1 $ 71.2 $ 41.8 $ 79.9 $ 94.9
Pulp Chemicals EBITDA 44.7 61.8 72.0 78.4 90.0 82.5
- --------------------- ------ ------- ------ ------ ------ ------
Operating EBITDA 284.2 162.9 143.2 120.2 170.0 177.4
Cost Savings - - - - - -
Total EBITDA 284.2 162.9 143.2 120.2 170.0 177.4
Less: Depreciation (43.0) (39.1) (52.1) (53.4) (53.4) (53.4)
- ------------------ ------ ------- ------ ------ ------ ------
EBIT 241.2 123.8 91.1 66.8 116.5 123.9
SAR's & Other Income - (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Expense
Company Debt (14.6) 0.0 0.0 0.0 0.0 0.0
Senior Bank Debt @ 8.4% 0.0 (23.1) (26.5) (22.2) (16.9) (10.4)
Senior Sub. Debt @ 11.0% 0.0 (30.1) (30.1) (30.1) (30.1) (30.1)
------------------------ ------ ------- ------ ------ ------ ------
Total Interest Expense (14.6) (53.1) (56.6) (52.3) (47.0) (40.5)
Pretax Income 212.0 67.9 32.0 13.3 68.4 82.2
Income Taxes (62.0) (23.8) (11.2) (4.6) (23.9) (28.8)
- ------------------ ------ ------- ------ ------ ------ ------
NET INCOME $150.0 $ 44.2 $ 20.8 $ 8.6 $ 44.4 $ 53.5
- ------------------------------ --------------------------------------------------------------
E.P.S $ 2.69 $ 1.97 $ 0.93 $ 0.39 $ 1.99 $ 2.39
Shares Outstanding 55.7 22.4 22.4 22.4 22.4 22.4
- ------------------------------ --------------------------------------------------------------
Plus: Deferred Taxes $ 1.0 $ 10.2 $ 12.3 $ 8.1 $ 7.2 $ 6.7
Plus: Dep. & Amortization 43.0 39.1 52.1 53.4 53.4 53.4
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (3.4) 0.4
Less: Capital Expenditures (53.9) (104.2) (31.7) (25.0) (25.0) (25.0)
- -------------------------- ------ ------- ------ ------ ------ ------
Free Cash Flow $141.4 ($40.5) $ 50.3 $ 63.2 $ 76.7 $ 89.0
====== ======= ====== ====== ====== ======
</TABLE>
- 29 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
SCENARIO: DISTRIBUTION-$400 MILLION-COMPANY REVISED DOWNSIDE CASE
DEBT CALCULATIONS: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions except per share data)
PROJECTED
--------------------------------------------------
1996 1997 1998 1999 2000
------- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Cash & Investments $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Debt
Long-Term Debt $ 129.6
Short-Term Debt 3.2
--------------- --------
Total Company Debt $ 132.8 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Senior Bank Debt $ 273.4 $313.8 $263.5 $200.3 $123.6 $ 34.6
Senior Sub. Deb. 273.4 273.4 273.4 273.4 273.4 273.4
---------------- -------- ------- ------- ------- ------- ------
Incremental Debt 546.8 587.2 536.9 473.7 397.0 308.0
---------------- -------- ------- ------- ------- ------- ------
Total Debt $ 546.8 $587.2 $536.9 $473.7 $397.0 $308.0
Common Equity $ 239.3
Incremental Effect (400.0)
------------------ --------
Total ($ 160.7) ($116.6) ($ 95.7) ($ 87.1) ($ 42.7) $ 10.8
Net Income $ 150.0 $ 44.2 $ 20.8 $ 8.6 $ 44.4 $ 53.5
Cash Balances
Cash & Investments beginning $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Free Cash Flow (40.5) 50.3 63.2 76.7 89.0
-------------- ------- ------- ------- ------- ------
Cash Available to Pay Debt (40.5) 50.3 63.2 76.7 89.0
Cash Repayment Balances
Senior Debt 40.5 (50.3) (63.2) (76.7) (89.0)
Cash Balance 0.0 0.0 0.0 0.0 0.0
Senior Sub. Debt 0.0 0.0 0.0 0.0 0.0
Cash Balance 0.0 0.0 0.0 0.0 0.0
Interest Income 0.0 0.0 0.0 0.0 0.0
</TABLE>
- 30 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE II. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
SCENARIO: DISTRIBUTION-$400 MILLION-COMPANY REVISED DOWNSIDE CASE
CREDIT STATISTICS: 1997-2000 ANNUAL COST SAVINGS-$0
PROJECTED PRO FORMA
ACTUAL PRO FORMA -------------------------------------------------
1995 1995 1996 1997 1998 1999 2000
---- --------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Leverage Ratio
Net Debt/Book Capitalization 36% 216% 125% 122% 123% 112% 97%
Coverage Ratios
Total Debt/EBITDA 0.5x 1.9x 3.6x 3.7x 3.9x 2.3x 1.7x
EBITDA/Interest 19.5x 5.3x 3.1x 2.5x 2.3x 3.6x 4.4x
(EBITDA-CapEx)/Interest 15.8x 4.3x 1.1x 2.0x 1.8x 3.1x 3.8x
EBIT/Interest 16.5x 4.5x 2.3x 1.6x 1.3x 2.5x 3.1x
</TABLE>
- 31 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- ---------------------------------------------------------------------------------------------------------------------------
SCENARIO: SHARE REPURCHASE-$400 MILLION-COMPANY REVISED DOWNSIDE CASE
- ----------------------------------------------------------------------------------------------------------------------------
ASSUMPTIONS
Current Shares Outstanding 55.7 Senior Bank Debt @ 8.4% $273.4 Cash Dividend $400.0
Senior Sub. Debt @ 11.0% 273.4 Trans. Expenses 14.0
------------------------ ------ ----
Total Debt $546.8 Assumed Debt 132.8
Total Uses $546.8
- ----------------------------------------------------------------------------------------------------------------------------
PRO FORMA INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS - $0
(Dollars in millions except per share data)
PROJECTED
ACTUAL -------------------------------------------
1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Petrochemicals EBITDA $239.5 $ 101.1 $ 71.2 $ 41.8 $ 79.9 $ 94.9
Pulp Chemicals EBITDA 44.7 61.8 72.0 78.4 90.0 82.5
- --------------------- ------ ------- ------ ------ ------ ------
Operating EBITDA 284.2 162.9 143.2 120.2 170.0 177.4
Cost Savings - - - - - -
Total EBITDA 284.2 162.9 143.2 120.2 170.0 177.4
Less: Depreciation (43.0) (39.1) (52.1) (53.4) (53.4) (53.4)
- ------------------ ------ ------- ------ ------ ------ ------
EBIT 241.2 123.8 91.1 66.8 116.5 123.9
SAR's & Other Income - (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Expense
Company Debt (14.6) 0.0 0.0 0.0 0.0 0.0
Senior Bank Debt @ 8.4% 0.0 (23.1) (26.5) (22.2) (16.9) (10.4)
Senior Sub. Debt @ 11.0% 0.0 (30.1) (30.1) (30.1) (30.1) (30.1)
------------------------ ------ ------- ------ ------ ------ ------
Total Interest Expense (14.6) (53.1) (56.6) (52.3) (47.0) (40.5)
Pretax Income 226.6 67.9 32.0 13.3 68.4 82.2
Income Taxes (76.6) (23.8) (11.2) (4.6) (23.9) (28.8)
- ------------------ ------ ------- ------ ------ ------ ------
NET INCOME $150.0 $ 44.2 $ 20.8 $ 8.6 $ 44.4 $ 53.5
- ------------------------------ --------------------------------------------------------------
E.P.S $ 2.69 $ 0.79 $ 0.37 $ 0.15 $ 0.80 $ 0.96
Shares Outstanding 55.7 55.7 55.7 55.7 55.7 55.7
- ------------------------------ --------------------------------------------------------------
Plus: Deferred Taxes $ 1.0 $ 10.2 $ 12.3 $ 8.1 $ 7.2 $ 6.7
Plus: Dep. & Amortization 43.0 39.1 52.1 53.4 53.4 53.4
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (3.4) 0.4
Less: Capital Expenditures (53.9) (104.2) (31.7) (25.0) (25.0) (25.0)
- -------------------------- ------ ------- ------ ------ ------ ------
Free Cash Flow $141.4 ($40.5) $ 50.3 $ 63.2 $ 76.7 $ 89.0
====== ======= ====== ====== ====== ======
</TABLE>
- 32 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- ---------------------------------------------------------------------------------------------------------------------------
SCENARIO: SHARE REPURCHASE-$500m-COMPANY REVISED DOWNSIDE CASE
ASSUMPTIONS
- ----------------------------------------------------------------------------------------------------------------------------
Current Share Price (3/29/95) $12.63 Senior Bank Debt @ 8.4% $324.9 Current Shares Outstanding 55.7
Offer Price $12.00 Senior Sub. Debt @ 11.5% 324.9 # of Shares Repurchased 41.7
------------------------ ------ ----
Equity Repurchased $500.0 Total Debt $649.8 # of Pro Forma Shares 14.0
Transaction Expenses $17.0 Assumed Debt $132.8
- ----------------------------------------------------------------------------------------------------------------------------
PRO FORMA INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS - $0
(Dollars in millions except per share data)
PROJECTED
ACTUAL -------------------------------------------
1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Petrochemicals EBITDA $239.5 $ 101.1 $ 71.2 $ 41.8 $ 79.9 $ 94.9
Pulp Chemicals EBITDA 44.7 61.8 72.0 78.4 90.0 82.5
- --------------------- ------ ------- ------ ------ ------ ------
Operating EBITDA 284.2 162.9 143.2 120.2 170.0 177.4
Cost Savings - - - - - -
Total EBITDA 284.2 162.9 143.2 120.2 170.0 177.4
Less: Depreciation (43.0) (39.1) (52.1) (53.4) (53.4) (53.4)
- ------------------ ------ ------- ------ ------ ------ ------
EBIT 241.2 123.8 91.1 66.8 116.5 123.9
SAR's & Other Income - (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Expense
Company Debt (14.6) 0.0 0.0 0.0 0.0 0.0
Senior Bank Debt @ 8.4% 0.0 (27.4) (31.5) (27.9) (23.3) (17.5)
Senior Sub. Debt @ 11.0% 0.0 (37.4) (37.4) (37.4) (37.4) (37.4)
------------------------ ------ ------- ------ ------ ------ ------
Total Interest Expense (14.6) (64.8) (68.8) (65.3) (60.6) (54.9)
Pretax Income 212.0 56.3 19.8 0.3 54.7 67.8
Income Taxes (62.0) (19.7) (6.9) (0.1) (19.1) (23.7)
- ------------------ ------ ------- ------ ------ ------ ------
NET INCOME $150.0 $ 36.6 $ 12.8 $ 0.2 $ 35.6 $ 44.1
- ------------------------------ --------------------------------------------------------------
E.P.S $ 2.69 $ 2.61 $ 0.92 $ 0.02 $ 2.53 $ 3.14
Shares Outstanding 55.7 14.0 14.0 14.0 14.0 14.0
- ------------------------------ --------------------------------------------------------------
Plus: Deferred Taxes $ 1.0 $ 10.2 $ 12.3 $ 8.1 $ 7.2 $ 6.7
Plus: Dep. & Amortization 43.0 39.1 52.1 53.4 53.4 53.4
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (3.4) 0.4
Less: Capital Expenditures (53.9) (104.2) (31.7) (25.0) (25.0) (25.0)
- -------------------------- ------ ------- ------ ------ ------ ------
Free Cash Flow $141.4 ($48.0) $ 42.4 $ 54.8 $ 67.8 $ 79.7
====== ======= ====== ====== ====== ======
</TABLE>
- 33 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
SCENARIO: DISTRIBUTION-$500 MILLION-COMPANY REVISED DOWNSIDE CASE
DEBT CALCULATIONS: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions except per share data)
PROJECTED
--------------------------------------------------
1996 1997 1998 1999 2000
------- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Cash & Investments $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Debt
Long-Term Debt $ 129.6
Short-Term Debt 3.2
--------------- --------
Total Company Debt $ 132.8 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Senior Bank Debt $ 324.9 $372.9 $330.5 $275.8 $208.0 $128.3
Senior Sub. Deb. 324.9 324.9 324.9 324.9 324.9 324.9
---------------- -------- ------- ------- ------- ------- -------
Incremental Debt 649.8 697.8 655.4 600.7 532.9 453.2
---------------- -------- ------- ------- ------- ------- -------
Total Debt $ 649.8 $697.8 $655.4 $600.7 $532.9 $453.2
Common Equity $ 239.3
Incremental Effect (500.0)
------------------ --------
Total ($ 260.7) ($224.1) ($211.3) ($211.1) ($175.5) ($131.4)
Net Income $ 150.0 $ 36.6 $ 12.8 $ 0.2 $ 35.6 $ 44.1
Cash Balances
Cash & Investments beginning $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Free Cash Flow (48.0) 42.4 54.8 67.8 79.7
-------------- ------- ------- ------- ------- -------
Cash Available to Pay Debt (48.0) 42.4 54.8 67.8 79.7
Cash Repayment Balances
Senior Debt 48.0 (42.4) (54.8) (67.8) (79.7)
Cash Balance 0.0 0.0 0.0 0.0 0.0
Senior Sub. Debt 0.0 0.0 0.0 0.0 0.0
Cash Balance 0.0 0.0 0.0 0.0 0.0
Interest Income 0.0 0.0 0.0 0.0 0.0
</TABLE>
- 34 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
SCENARIO: DISTRIBUTION-$500 MILLION-COMPANY REVISED DOWNSIDE CASE
CREDIT STATISTICS: 1997-2000 ANNUAL COST SAVINGS-$0
PROJECTED PRO FORMA
ACTUAL PRO FORMA -------------------------------------------------
1995 1995 1996 1997 1998 1999 2000
---- --------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Leverage Ratio
Net Debt/Book Capitalization 36% 254% 147% 148% 154% 149% 141%
Coverage Ratios
Total Debt/EBITDA 0.5x 2.3x 4.3x 4.6x 5.0x 3.1x 2.6x
EBITDA/Interest 19.5x 4.4x 2.5x 2.1x 1.8x 2.8x 3.2x
(EBITDA-CapEx)/Interest 15.8x 3.6x 0.9x 1.6x 1.5x 2.4x 2.8x
EBIT/Interest 16.5x 3.7x 1.9x 1.3x 1.0x 1.9x 2.3x
</TABLE>
- 35 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- ---------------------------------------------------------------------------------------------------------------------------
SCENARIO: SPECIAL DIVIDEND-$500 MILLION-COMPANY REVISED DOWNSIDE CASE
- ----------------------------------------------------------------------------------------------------------------------------
ASSUMPTIONS
Current Share Price 55.7 Senior Bank Debt @ 8.4% $324.9 Cash Dividend $500.0
Senior Sub. Debt @ 11.5% 324.9 Trans. Expenses 17.0
------------------------ ------ Assumed Debt 132.8
Total Debt $649.8 ------
Total Uses $649.8
- ----------------------------------------------------------------------------------------------------------------------------
PRO FORMA INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS - $0
(Dollars in millions except per share data)
PROJECTED
ACTUAL -------------------------------------------
1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Petrochemicals EBITDA $239.5 $ 101.1 $ 71.2 $ 41.8 $ 79.9 $ 94.9
Pulp Chemicals EBITDA 44.7 61.8 72.0 78.4 90.0 82.5
- --------------------- ------ ------- ------ ------ ------ ------
Operating EBITDA 284.2 162.9 143.2 120.2 170.0 177.4
Cost Savings - - - - - -
Total EBITDA 284.2 162.9 143.2 120.2 170.0 177.4
Less: Depreciation (43.0) (39.1) (52.1) (53.4) (53.4) (53.4)
- ------------------ ------ ------- ------ ------ ------ ------
EBIT 241.2 123.8 91.1 66.8 116.5 123.9
SAR's & Other Income - (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Expense
Company Debt (14.6) 0.0 0.0 0.0 0.0 0.0
Senior Bank Debt @ 8.4% 0.0 (27.4) (31.5) (27.9) (23.3) (17.5)
Senior Sub. Debt @ 11.5% 0.0 (37.4) (37.4) (37.4) (37.4) (37.4)
------------------------ ------ ------- ------ ------ ------ ------
Total Interest Expense (14.6) (64.8) (68.8) (65.3) (60.6) (54.9)
Pretax Income 226.6 56.3 19.8 0.3 54.7 67.8
Income Taxes (76.6) (19.7) (6.9) (0.1) (19.1) (23.7)
- ------------------ ------ ------- ------ ------ ------ ------
NET INCOME $150.0 $ 36.6 $ 12.8 $ 0.2 $ 35.6 $ 44.1
- ------------------------------ --------------------------------------------------------------
E.P.S $ 2.69 $ 0.66 $ 0.23 $ 0.00 $ 0.64 $ 0.79
Shares Outstanding 55.7 55.7 55.7 55.7 55.7 55.7
- ------------------------------ --------------------------------------------------------------
Plus: Deferred Taxes $ 1.0 $ 10.2 $ 12.3 $ 8.1 $ 7.2 $ 6.7
Plus: Dep. & Amortization 43.0 39.1 52.1 53.4 53.4 53.4
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (3.4) 0.4
Less: Capital Expenditures (53.9) (104.2) (31.7) (25.0) (25.0) (25.0)
- -------------------------- ------ ------- ------ ------ ------ ------
Free Cash Flow $141.4 ($48.0) $ 42.4 $ 54.8 $ 67.8 $ 79.7
====== ======= ====== ====== ====== ======
</TABLE>
- 36 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
ANALYSIS OF BLENDED SHARE PRICE
(Dollars in millions except per share data)
SCENARIO: COMPANY REVISED BASE CASE: 1997-2000 ANNUAL COST SAVINGS-$0
Current Stock Price $12.625
<S> <C> <C> <C> <C> <C>
Repurchase Price $10.00 $11.00 $12.00 $13.00 $14.00
$ Repurchases (millions) $ 400 $ 400 $ 400 $ 400 $ 400
% Repurchased 71.8% 65.3% 59.8% 55.2% 51.3%
------ ------ ------ ------ ------
# of Shares Repurchased 40.0 36.4 33.3 30.8 28.6
Pro Forma # of Shares 15.7 19.3 22.4 24.9 27.1
Pro Forma EPS:
1996E $ 3.85 $ 3.13 $ 2.70 $ 2.42 $ 2.23
1997E 4.04 3.28 2.84 2.55 2.34
Blended Share Price Assuming
No Change Post-Repurchase $10.74 $11.56 $12.25 $12.83 $13.33
Implied Share Price Effects:
Pro-Rated Repurchases $ 7.18 $ 7.18 $ 7.18 $ 7.18 $ 7.18
Remaining Interest (a) 4.34 4.34 4.34 4.34 4.34
------ ------ ------ ------ ------
Blended Share Price $11.52 $11.52 $11.52 $11.52 $11.52
====== ====== ====== ====== ======
Pro Forma Stock Price (a) $15.40 $12.50 $10.81 $ 9.70 $ 8.91
</TABLE>
- ----------------
(a) Assumes post-trading multiple settles at 4.0x 1996 estimatted EPS.
- 37 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
ANALYSIS OF BLENDED SHARE PRICE
(Dollars in millions except per share data)
SCENARIO: COMPANY REVISED BASE CASE: 1997-2000 ANNUAL COST SAVINGS-$0
Current Stock Price $12.625
<S> <C> <C> <C> <C> <C>
Repurchase Price $10.00 $11.00 $12.00 $13.00 $14.00
$ Repurchases (millions) $ 500 $ 500 $ 500 $ 500 $ 500
% Repurchased 89.8% 81.6% 74.8% 69.1% 64.1%
------ ------ ------ ------ ------
# of Shares Repurchased 50.0 45.5 41.7 38.5 35.7
Pro Forma # of Shares 5.7 10.2 14.0 17.2 20.0
Pro Forma EPS:
1996E $ 9.28 $ 5.16 $ 3.77 $ 3.07 $ 2.65
1997E 9.74 5.42 3.95 3.22 2.78
Blended Share Price Assuming
No Change Post-Repurchase $10.27 $11.30 $12.16 $12.88 $13.51
Implied Share Price Effects:
Pro-Rated Repurchases $ 8.98 $ 8.98 $ 8.98 $ 8.98 $ 8.98
Remaining Interest (a) 3.80 3.80 3.80 3.80 3.80
------ ------ ------ ------ ------
Blended Share Price $12.77 $12.77 $12.77 $12.77 $12.77
====== ====== ====== ====== ======
Pro Forma Stock Price (a) $37.10 $20.64 $15.07 $12.27 $10.58
</TABLE>
- ----------------
(a) Assumes post-trading multiple settles at 4.0x 1996 estimatted EPS.
- 38 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
POST-REPURCHASE TRADING ANALYSIS-COMPANY REVISED BASE CASE: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions except per share data)
SCENARIO 1: $10 REPURCHASE STOCK PRICE
PRO FORMA PRICE/ MARKET CAPITALIZATION/
EARNINGS PER SHARE PRICE/E.P.S. CASH FLOW PER SHARE (A) EBITDA
REPURCHASE STOCK PRICE ------------------ ---------------------- ----------------------- ----------------------
AMOUNT POST TRANSACTION 1996E 1997E 1996E 1997E 1996E 1997E 1996E 1997E
- ---------- ---------------- -------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$400 $ 4.00 $3.85 $4.04 1.0x 1.0x 0.6x 0.5x 3.2x 2.9x
$ 5.00 1.3x 1.2x 0.7x 0.6x 3.3x 3.0x
$ 6.00 1.6x 1.5x 0.9x 0.7x 3.4x 3.1x
$ 7.00 1.8x 1.7x 1.0x 0.9x 3.5x 3.2x
$ 8.00 2.1x 2.0x 1.1x 1.0x 3.6x 3.2x
$ 9.00 2.3x 2.2x 1.3x 1.1x 3.7x 3.3x
$10.00 2.6x 2.5x 1.4x 1.2x 3.7x 3.4x
$11.00 2.9x 2.7x 1.6x 1.3x 3.8x 3.5x
$12.00 3.1x 3.0x 1.7x 1.5x 3.9x 3.5x
$13.00 3.4x 3.2x 1.9x 1.6x 4.0x 3.6x
$14.00 3.6x 3.5x 2.0x 1.7x 4.1x 3.7x
REPURCHASE
AMOUNT
- ----------
$500 $ 4.00 $9.28 $9.74 0.4x 0.4x 0.2x 0.2x 3.6x 3.2x
$ 5.00 0.5x 0.5x 0.3x 0.2x 3.6x 3.3x
$ 6.00 0.6x 0.6x 0.3x 0.3x 3.6x 3.3x
$ 7.00 0.8x 0.7x 0.4x 0.3x 3.7x 3.3x
$ 8.00 0.9x 0.8x 0.4x 0.4x 3.7x 3.3x
$ 9.00 1.0x 0.9x 0.5x 0.4x 3.7x 3.4x
$10.00 1.1x 1.0x 0.6x 0.5x 3.8x 3.4x
$11.00 1.2x 1.1x 0.6x 0.5x 3.8x 3.4x
$12.00 1.3x 1.2x 0.7x 0.6x 3.8x 3.5x
$13.00 1.4x 1.3x 0.7x 0.6x 3.9x 3.5x
$14.00 1.5x 1.4x 0.8x 0.7x 3.9x 3.5x
</TABLE>
- ---------------
(a) Cash flow per share defined as net income plus deferred taxes, plus
depreciation and amortization, divided by the pro forma number of shares
outstanding.
- 39 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
POST-REPURCHASE TRADING ANALYSIS-COMPANY REVISED BASE CASE: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions except per share data)
SCENARIO 2: $11 REPURCHASE STOCK PRICE
PRO FORMA PRICE/ MARKET CAPITALIZATION/
EARNINGS PER SHARE PRICE/E.P.S. CASH FLOW PER SHARE (A) EBITDA
REPURCHASE STOCK PRICE ------------------ ---------------------- ----------------------- ----------------------
AMOUNT POST TRANSACTION 1996E 1997E 1996E 1997E 1996E 1997E 1996E 1997E
- ---------- ---------------- -------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$400 $ 4.00 $3.13 $3.28 1.3x 1.2x 0.7x 0.6x 3.3x 3.0x
$ 5.00 1.6x 1.5x 0.9x 0.8x 3.4x 3.1x
$ 6.00 1.9x 1.8x 1.1x 0.9x 3.5x 3.2x
$ 7.00 2.2x 2.1x 1.2x 1.1x 3.6x 3.3x
$ 8.00 2.6x 2.4x 1.4x 1.2x 3.7x 3.4x
$ 9.00 2.9x 2.7x 1.6x 1.4x 3.8x 3.5x
$10.00 3.2x 3.0x 1.8x 1.5x 3.9x 3.6x
$11.00 3.5x 3.4x 1.9x 1.7x 4.0x 3.6x
$12.00 3.8x 3.7x 2.1x 1.8x 4.1x 3.7x
$13.00 4.2x 4.0x 2.3x 2.0x 4.2x 3.8x
$14.00 4.5x 4.3x 2.5x 2.1x 4.4x 3.9x
REPURCHASE
AMOUNT
- ----------
$500 $ 4.00 $5.16 $5.42 0.8x 0.7x 0.4x 0.3x 3.7x 3.3x
$ 5.00 1.0x 0.9x 0.5x 0.4x 3.7x 3.4x
$ 6.00 1.2x 1.1x 0.6x 0.5x 3.8x 3.4x
$ 7.00 1.4x 1.3x 0.7x 0.6x 3.8x 3.5x
$ 8.00 1.6x 1.5x 0.8x 0.7x 3.9x 3.5x
$ 9.00 1.7x 1.7x 0.9x 0.8x 3.9x 3.6x
$10.00 1.9x 1.8x 1.0x 0.8x 4.0x 3.6x
$11.00 2.1x 2.0x 1.1x 0.9x 4.1x 3.7x
$12.00 2.3x 2.2x 1.2x 1.0x 4.1x 3.7x
$13.00 2.5x 2.4x 1.3x 1.1x 4.2x 3.8x
$14.00 2.7x 2.6x 1.4x 1.2x 4.2x 3.8x
</TABLE>
- ---------------
(a) Cash flow per share defined as net income plus deferred taxes, plus
depreciation and amortization, divided by the pro forma number of shares
outstanding.
- 40 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
POST-REPURCHASE TRADING ANALYSIS-COMPANY REVISED BASE CASE: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions except per share data)
SCENARIO 3: $12 REPURCHASE STOCK PRICE
PRO FORMA PRICE/ MARKET CAPITALIZATION/
EARNINGS PER SHARE PRICE/E.P.S. CASH FLOW PER SHARE (A) EBITDA
REPURCHASE STOCK PRICE ------------------ ---------------------- ----------------------- ----------------------
AMOUNT POST TRANSACTION 1996E 1997E 1996E 1997E 1996E 1997E 1996E 1997E
- ---------- ---------------- -------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$400 $ 4.00 $2.70 $2.84 1.5x 1.4x 0.8x 0.7x 3.4x 3.1x
$ 5.00 1.9x 1.8x 1.0x 0.9x 3.5x 3.2x
$ 6.00 2.2x 2.1x 1.2x 1.0x 3.6x 3.3x
$ 7.00 2.6x 2.5x 1.4x 1.2x 3.7x 3.4x
$ 8.00 3.0x 2.8x 1.6x 1.4x 3.9x 3.5x
$ 9.00 3.3x 3.2x 1.8x 1.6x 4.0x 3.6x
$10.00 3.7x 3.5x 2.0x 1.7x 4.1x 3.7x
$11.00 4.1x 3.9x 2.2x 1.9x 4.2x 3.8x
$12.00 4.4x 4.2x 2.4x 2.1x 4.3x 3.9x
$13.00 4.8x 4.6x 2.6x 2.3x 4.5x 4.0x
$14.00 5.2x 4.9x 2.9x 2.4x 4.6x 4.1x
REPURCHASE
AMOUNT
- ----------
$500 $ 4.00 $3.77 $3.95 1.1x 1.0x 0.5x 0.5x 3.8x 3.4x
$ 5.00 1.3x 1.3x 0.7x 0.6x 3.8x 3.5x
$ 6.00 1.6x 1.5x 0.8x 0.7x 3.9x 3.5x
$ 7.00 1.9x 1.8x 1.0x 0.8x 4.0x 3.6x
$ 8.00 2.1x 2.0x 1.1x 0.9x 4.1x 3.7x
$ 9.00 2.4x 2.3x 1.2x 1.0x 4.1x 3.7x
$10.00 2.7x 2.5x 1.4x 1.2x 4.2x 3.8x
$11.00 2.9x 2.8x 1.5x 1.3x 4.3x 3.9x
$12.00 3.2x 3.0x 1.6x 1.4x 4.4x 3.9x
$13.00 3.5x 3.3x 1.8x 1.5x 4.4x 4.0x
$14.00 3.7x 3.5x 1.9x 1.6x 4.5x 4.1x
</TABLE>
- ---------------
(a) Cash flow per share defined as net income plus deferred taxes, plus
depreciation and amortization, divided by the pro forma number of shares
outstanding.
- 41 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
POST-REPURCHASE TRADING ANALYSIS-COMPANY REVISED BASE CASE: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions except per share data)
SCENARIO 4: $13 REPURCHASE STOCK PRICE
PRO FORMA PRICE/ MARKET CAPITALIZATION/
EARNINGS PER SHARE PRICE/E.P.S. CASH FLOW PER SHARE (A) EBITDA
REPURCHASE STOCK PRICE ------------------ ---------------------- ----------------------- ----------------------
AMOUNT POST TRANSACTION 1996E 1997E 1996E 1997E 1996E 1997E 1996E 1997E
- ---------- ---------------- -------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$400 $ 4.00 $2.42 $2.55 1.7x 1.6x 0.9x 0.8x 3.4x 3.1x
$ 5.00 2.1x 2.0x 1.1x 1.0x 3.6x 3.2x
$ 6.00 2.5x 2.4x 1.4x 1.2x 3.7x 3.3x
$ 7.00 2.9x 2.7x 1.6x 1.4x 3.8x 3.5x
$ 8.00 3.3x 3.1x 1.8x 1.6x 4.0x 3.6x
$ 9.00 3.7x 3.5x 2.0x 1.7x 4.1x 3.7x
$10.00 4.1x 3.9x 2.3x 1.9x 4.2x 3.8x
$11.00 4.5x 4.3x 2.5x 2.1x 4.4x 3.9x
$12.00 5.0x 4.7x 2.7x 2.3x 4.5x 4.1x
$13.00 5.4x 5.1x 3.0x 2.5x 4.6x 4.2x
$14.00 5.8x 5.5x 3.2x 2.7x 4.8x 4.3x
REPURCHASE
AMOUNT
- ----------
$500 $ 4.00 $3.07 $3.22 1.3x 1.2x 0.7x 0.6x 3.8x 3.5x
$ 5.00 1.6x 1.6x 0.8x 0.7x 3.9x 3.5x
$ 6.00 2.0x 1.9x 1.0x 0.9x 4.0x 3.6x
$ 7.00 2.3x 2.2x 1.2x 1.0x 4.1x 3.7x
$ 8.00 2.6x 2.5x 1.3x 1.1x 4.2x 3.8x
$ 9.00 2.9x 2.8x 1.5x 1.3x 4.3x 3.9x
$10.00 3.3x 3.1x 1.7x 1.4x 4.4x 4.0x
$11.00 3.6x 3.4x 1.9x 1.6x 4.5x 4.0x
$12.00 3.9x 3.7x 2.0x 1.7x 4.6x 4.1x
$13.00 4.2x 4.0x 2.2x 1.9x 4.7x 4.2x
$14.00 4.6x 4.3x 2.4x 2.0x 4.7x 4.3x
</TABLE>
- ---------------
(a) Cash flow per share defined as net income plus deferred taxes, plus
depreciation and amortization, divided by the pro forma number of shares
outstanding.
- 42 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
POST-REPURCHASE TRADING ANALYSIS-COMPANY REVISED BASE CASE: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions except per share data)
SCENARIO 5: $14 REPURCHASE STOCK PRICE
PRO FORMA PRICE/ MARKET CAPITALIZATION/
EARNINGS PER SHARE PRICE/E.P.S. CASH FLOW PER SHARE (A) EBITDA
REPURCHASE STOCK PRICE ------------------ ---------------------- ----------------------- ----------------------
AMOUNT POST TRANSACTION 1996E 1997E 1996E 1997E 1996E 1997E 1996E 1997E
- ---------- ---------------- -------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$400 $ 4.00 $2.23 $2.34 1.8x 1.7x 1.0x 0.8x 3.5x 3.1x
$ 5.00 2.2x 2.1x 1.2x 1.1x 3.6x 3.3x
$ 6.00 2.7x 2.6x 1.5x 1.3x 3.8x 3.4x
$ 7.00 3.1x 3.0x 1.7x 1.5x 3.9x 3.5x
$ 8.00 3.6x 3.4x 2.0x 1.7x 4.1x 3.7x
$ 9.00 4.0x 3.8x 2.2x 1.9x 4.2x 3.8x
$10.00 4.5x 4.3x 2.5x 2.1x 4.4x 3.9x
$11.00 4.9x 4.7x 2.7x 2.3x 4.5x 4.1x
$12.00 5.4x 5.1x 3.0x 2.5x 4.6x 4.2x
$13.00 5.8x 5.6x 3.2x 2.7x 4.8x 4.3x
$14.00 6.3x 6.0x 3.5x 3.0x 4.9x 4.5x
REPURCHASE
AMOUNT
- ----------
$500 $ 4.00 $2.65 $2.78 1.5x 1.4x 0.8x 0.7x 3.9x 3.5x
$ 5.00 1.9x 1.8x 1.0x 0.8x 4.0x 3.6x
$ 6.00 2.3x 2.2x 1.2x 1.0x 4.1x 3.7x
$ 7.00 2.6x 2.5x 1.4x 1.2x 4.2x 3.8x
$ 8.00 3.0x 2.9x 1.6x 1.3x 4.3x 3.9x
$ 9.00 3.4x 3.2x 1.8x 1.5x 4.4x 4.0x
$10.00 3.8x 3.6x 2.0x 1.7x 4.5x 4.1x
$11.00 4.2x 4.0x 2.2x 1.8x 4.6x 4.2x
$12.00 4.5x 4.3x 2.3x 2.0x 4.7x 4.3x
$13.00 4.9x 4.7x 2.5x 2.2x 4.8x 4.4x
$14.00 5.3x 5.0x 2.7x 2.3x 4.9x 4.5x
</TABLE>
- ---------------
(a) Cash flow per share defined as net income plus deferred taxes, plus
depreciation and amortization, divided by the pro forma number of shares
outstanding.
- 43 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
ANALYSIS OF BLENDED SHARE PRICE
(Dollars in millions except per share data)
SCENARIO: COMPANY REVISED DOWNSIDE CASE: 1997-2000 ANNUAL COST SAVINGS-$0
Current Stock Price $12.625
<S> <C> <C> <C> <C> <C>
Repurchase Price $10.00 $11.00 $12.00 $13.00 $14.00
$ Repurchases (millions) $ 400 $ 400 $ 400 $ 400 $ 400
% Repurchased 71.8% 65.3% 59.8% 55.2% 51.3%
------ ------ ------ ------ ------
# of Shares Repurchased 40.0 36.4 33.3 30.8 28.6
Pro Forma # of Shares 15.7 19.3 22.4 24.9 27.1
Pro Forma EPS:
1996E $ 2.81 $ 2.28 $ 1.97 $ 1.77 $ 1.63
1997E 1.33 1.08 0.93 0.84 0.77
Blended Share Price Assuming
No Change Post-Repurchase $10.74 $11.56 $12.25 $12.83 $13.33
Implied Share Price Effects:
Pro-Rated Repurchases $ 7.18 $ 7.18 $ 7.18 $ 7.18 $ 7.18
Remaining Interest (a) 3.17 3.17 3.17 3.17 3.17
------ ------ ------ ------ ------
Blended Share Price $10.35 $10.35 $10.35 $10.35 $10.35
====== ====== ====== ====== ======
Pro Forma Stock Price (a) $11.25 $ 9.14 $ 7.90 $ 7.09 $ 6.51
</TABLE>
- ----------------
(a) Assumes post-trading multiple settles at 4.0x 1996 estimated EPS.
- 44 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
ANALYSIS OF BLENDED SHARE PRICE
(Dollars in millions except per share data)
SCENARIO: COMPANY REVISED DOWNSIDE CASE: 1997-2000 ANNUAL COST SAVINGS-$0
Current Stock Price $12.625
<S> <C> <C> <C> <C> <C>
Repurchase Price $10.00 $11.00 $12.00 $13.00 $14.00
$ Repurchases (millions) $ 500 $ 500 $ 500 $ 500 $ 500
% Repurchased 89.8% 81.6% 74.8% 69.1% 64.1%
------ ------ ------ ------ ------
# of Shares Repurchased 50.0 45.5 41.7 38.5 35.7
Pro Forma # of Shares 5.7 10.2 14.0 17.2 20.0
Pro Forma EPS:
1996E $ 6.42 $ 3.57 $ 2.61 $ 2.12 $ 1.83
1997E 2.25 1.25 0.92 0.75 0.64
Blended Share Price Assuming
No Change Post-Repurchase $10.27 $11.30 $12.16 $12.88 $13.51
Implied Share Price Effects:
Pro-Rated Repurchases $ 8.98 $ 8.98 $ 8.98 $ 8.98 $ 8.98
Remaining Interest (a) 2.63 2.63 2.63 2.63 2.63
------ ------ ------ ------ ------
Blended Share Price $11.61 $11.61 $11.61 $11.61 $11.61
====== ====== ====== ====== ======
Pro Forma Stock Price (a) $25.69 $14.29 $10.43 $ 8.49 $ 7.33
</TABLE>
- ----------------
(a) Assumes post-trading multiple settles at 4.0x 1996 estimated EPS.
- 45 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
POST-REPURCHASE TRADING ANALYSIS-COMPANY REVISED DOWNSIDE CASE: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions except per share data)
SCENARIO 1: $10 REPURCHASE STOCK PRICE
PRO FORMA PRICE/ MARKET CAPITALIZATION/
EARNINGS PER SHARE PRICE/E.P.S. CASH FLOW PER SHARE (A) EBITDA
REPURCHASE STOCK PRICE ------------------ ---------------------- ----------------------- ----------------------
AMOUNT POST TRANSACTION 1996E 1997E 1996E 1997E 1996E 1997E 1996E 1997E
- ---------- ---------------- -------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$400 $ 4.00 $2.81 $1.33 1.4x 3.0x 0.7x 0.7x 3.7x 4.3x
$ 5.00 1.8x 3.8x 0.8x 0.9x 3.8x 4.4x
$ 6.00 2.1x 4.5x 1.0x 1.1x 3.9x 4.5x
$ 7.00 2.5x 5.3x 1.2x 1.3x 4.0x 4.6x
$ 8.00 2.8x 6.0x 1.3x 1.5x 4.1x 4.7x
$ 9.00 3.2x 6.8x 1.5x 1.7x 4.2x 4.8x
$10.00 3.6x 7.5x 1.7x 1.8x 4.3x 4.9x
$11.00 3.9x 8.3x 1.8x 2.0x 4.4x 5.0x
$12.00 4.3x 9.0x 2.0x 2.2x 4.5x 5.1x
$13.00 4.6x 9.8x 2.2x 2.4x 4.6x 5.2x
$14.00 5.0x 10.6x 2.4x 2.6x 4.7x 5.4x
REPURCHASE
AMOUNT
- ----------
$500 $ 4.00 $6.42 $2.25 0.6x 1.8x 0.3x 0.3x 4.1x 4.7x
$ 5.00 0.8x 2.2x 0.3x 0.4x 4.2x 4.7x
$ 6.00 0.9x 2.7x 0.4x 0.4x 4.2x 4.8x
$ 7.00 1.1x 3.1x 0.5x 0.5x 4.2x 4.8x
$ 8.00 1.2x 3.5x 0.5x 0.6x 4.3x 4.9x
$ 9.00 1.4x 4.0x 0.6x 0.7x 4.3x 4.9x
$10.00 1.6x 4.4x 0.7x 0.7x 4.3x 4.9x
$11.00 1.7x 4.9x 0.7x 0.8x 4.4x 5.0x
$12.00 1.9x 5.3x 0.8x 0.9x 4.4x 5.0x
$13.00 2.0x 5.8x 0.9x 1.0x 4.4x 5.1x
$14.00 2.2x 6.2x 0.9x 1.0x 4.5x 5.1x
</TABLE>
- ---------------
(a) Cash flow per share defined as net income plus deferred taxes, plus
depreciation and amortization, divided by the pro forma number of shares
outstanding.
- 46 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
POST-REPURCHASE TRADING ANALYSIS-COMPANY REVISED DOWNSIDE CASE: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions except per share data)
SCENARIO 2: $11 REPURCHASE STOCK PRICE
PRO FORMA PRICE/ MARKET CAPITALIZATION/
EARNINGS PER SHARE PRICE/E.P.S. CASH FLOW PER SHARE (A) EBITDA
REPURCHASE STOCK PRICE ------------------ ---------------------- ----------------------- ----------------------
AMOUNT POST TRANSACTION 1996E 1997E 1996E 1997E 1996E 1997E 1996E 1997E
- ---------- ---------------- -------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$400 $ 4.00 $2.28 $1.08 1.8x 3.7x 0.8x 0.9x 3.8x 4.4x
$ 5.00 2.2x 4.6x 1.0x 1.1x 4.0x 4.5x
$ 6.00 2.6x 5.6x 1.2x 1.4x 4.1x 4.6x
$ 7.00 3.1x 6.5x 1.4x 1.6x 4.2x 4.8x
$ 8.00 3.5x 7.4x 1.7x 1.8x 4.3x 4.9x
$ 9.00 3.9x 8.4x 1.9x 2.0x 4.4x 5.0x
$10.00 4.4x 9.3x 2.1x 2.3x 4.5x 5.2x
$11.00 4.8x 10.2x 2.3x 2.5x 4.7x 5.3x
$12.00 5.3x 11.1x 2.5x 2.7x 4.8x 5.4x
$13.00 5.7x 12.1x 2.7x 3.0x 4.9x 5.6x
$14.00 6.1x 13.0x 2.9x 3.2x 5.0x 5.7x
REPURCHASE
AMOUNT
- ----------
$500 $ 4.00 $3.57 $1.25 1.1x 3.2x 0.5x 0.5x 4.2x 4.8x
$ 5.00 1.4x 4.0x 0.6x 0.7x 4.3x 4.9x
$ 6.00 1.7x 4.8x 0.7x 0.8x 4.4x 5.0x
$ 7.00 2.0x 5.6x 0.8x 0.9x 4.4x 5.0x
$ 8.00 2.2x 6.4x 1.0x 1.1x 4.5x 5.1x
$ 9.00 2.5x 7.2x 1.1x 1.2x 4.6x 5.2x
$10.00 2.8x 8.0x 1.2x 1.3x 4.6x 5.3x
$11.00 3.1x 8.8x 1.3x 1.5x 4.7x 5.3x
$12.00 3.4x 9.6x 1.4x 1.6x 4.7x 5.4x
$13.00 3.6x 10.4x 1.5x 1.7x 4.8x 5.5x
$14.00 3.9x 11.2x 1.7x 1.9x 4.9x 5.5x
</TABLE>
- ---------------
(a) Cash flow per share defined as net income plus deferred taxes, plus
depreciation and amortization, divided by the pro forma number of shares
outstanding.
- 47 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
POST-REPURCHASE TRADING ANALYSIS-COMPANY REVISED DOWNSIDE CASE: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions except per share data)
SCENARIO 3: $12 REPURCHASE STOCK PRICE
PRO FORMA PRICE/ MARKET CAPITALIZATION/
EARNINGS PER SHARE PRICE/E.P.S. CASH FLOW PER SHARE (A) EBITDA
REPURCHASE STOCK PRICE ------------------ ---------------------- ----------------------- ----------------------
AMOUNT POST TRANSACTION 1996E 1997E 1996E 1997E 1996E 1997E 1996E 1997E
- ---------- ---------------- -------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$400 $ 4.00 $1.97 $0.93 2.0x 4.3x 1.0x 1.0x 3.9x 4.4x
$ 5.00 2.5x 5.4x 1.2x 1.3x 4.0x 4.6x
$ 6.00 3.0x 6.4x 1.4x 1.6x 4.2x 4.8x
$ 7.00 3.5x 7.5x 1.7x 1.8x 4.3x 4.9x
$ 8.00 4.1x 8.6x 1.9x 2.1x 4.5x 5.1x
$ 9.00 4.6x 9.7x 2.2x 2.4x 4.6x 5.2x
$10.00 5.1x 10.7x 2.4x 2.6x 4.7x 5.4x
$11.00 5.6x 11.8x 2.6x 2.9x 4.9x 5.5x
$12.00 6.1x 12.9x 2.9x 3.1x 5.0x 5.7x
$13.00 6.6x 14.0x 3.1x 3.4x 5.1x 5.8x
$14.00 7.1x 15.0x 3.3x 3.7x 5.3x 6.0x
REPURCHASE
AMOUNT
- ----------
$500 $ 4.00 $2.61 $0.92 1.5x 4.4x 0.7x 0.7x 4.3x 4.9x
$ 5.00 1.9x 5.5x 0.8x 0.9x 4.4x 5.0x
$ 6.00 2.3x 6.6x 1.0x 1.1x 4.5x 5.1x
$ 7.00 2.7x 7.6x 1.1x 1.3x 4.6x 5.2x
$ 8.00 3.1x 8.7x 1.3x 1.5x 4.7x 5.3x
$ 9.00 3.5x 9.8x 1.5x 1.6x 4.8x 5.4x
$10.00 3.8x 10.9x 1.6x 1.8x 4.9x 5.5x
$11.00 4.2x 12.0x 1.8x 2.0x 4.9x 5.6x
$12.00 4.6x 13.1x 2.0x 2.2x 5.0x 5.7x
$13.00 5.0x 14.2x 2.1x 2.4x 5.1x 5.8x
$14.00 5.4x 15.3x 2.3x 2.5x 5.2x 5.9x
</TABLE>
- ---------------
(a) Cash flow per share defined as net income plus deferred taxes, plus
depreciation and amortization, divided by the pro forma number of shares
outstanding.
- 48 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
POST-REPURCHASE TRADING ANALYSIS-COMPANY REVISED DOWNSIDE CASE: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions except per share data)
SCENARIO 4: $13 REPURCHASE STOCK PRICE
PRO FORMA PRICE/ MARKET CAPITALIZATION/
EARNINGS PER SHARE PRICE/E.P.S. CASH FLOW PER SHARE (A) EBITDA
REPURCHASE STOCK PRICE ------------------ ---------------------- ----------------------- ----------------------
AMOUNT POST TRANSACTION 1996E 1997E 1996E 1997E 1996E 1997E 1996E 1997E
- ---------- ---------------- -------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$400 $ 4.00 $1.77 $0.84 2.3x 4.8x 1.1x 1.2x 4.0x 4.5x
$ 5.00 2.8x 6.0x 1.3x 1.5x 4.1x 4.7x
$ 6.00 3.4x 7.2x 1.6x 1.8x 4.3x 4.9x
$ 7.00 4.0x 8.4x 1.9x 2.0x 4.4x 5.0x
$ 8.00 4.5x 9.6x 2.1x 2.3x 4.6x 5.2x
$ 9.00 5.1x 10.8x 2.4x 2.6x 4.7x 5.4x
$10.00 5.6x 12.0x 2.7x 2.9x 4.9x 5.6x
$11.00 6.2x 13.2x 2.9x 3.2x 5.0x 5.7x
$12.00 6.8x 14.4x 3.2x 3.5x 5.2x 5.9x
$13.00 7.3x 15.6x 3.5x 3.8x 5.3x 6.1x
$14.00 7.9x 16.8x 3.7x 4.1x 5.5x 6.3x
REPURCHASE
AMOUNT
- ----------
$500 $ 4.00 $2.12 $0.75 1.9x 5.4x 0.8x 0.9x 4.4x 5.0x
$ 5.00 2.4x 6.7x 1.0x 1.1x 4.5x 5.1x
$ 6.00 2.8x 8.1x 1.2x 1.3x 4.6x 5.3x
$ 7.00 3.3x 9.4x 1.4x 1.6x 4.7x 5.4x
$ 8.00 3.8x 10.7x 1.6x 1.8x 4.8x 5.5x
$ 9.00 4.2x 12.1x 1.8x 2.0x 4.9x 5.6x
$10.00 4.7x 13.4x 2.0x 2.2x 5.0x 5.7x
$11.00 5.2x 14.8x 2.2x 2.5x 5.2x 5.9x
$12.00 5.7x 16.1x 2.4x 2.7x 5.3x 6.0x
$13.00 6.1x 17.4x 2.6x 2.9x 5.4x 6.1x
$14.00 6.6x 18.8x 2.8x 3.1x 5.5x 6.2x
</TABLE>
- ---------------
(a) Cash flow per share defined as net income plus deferred taxes, plus
depreciation and amortization, divided by the pro forma number of shares
outstanding.
- 49 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
POST-REPURCHASE TRADING ANALYSIS-COMPANY REVISED DOWNSIDE CASE: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions except per share data)
SCENARIO 5: $14 REPURCHASE STOCK PRICE
PRO FORMA PRICE/ MARKET CAPITALIZATION/
EARNINGS PER SHARE PRICE/E.P.S. CASH FLOW PER SHARE (A) EBITDA
REPURCHASE STOCK PRICE ------------------ ---------------------- ----------------------- ----------------------
AMOUNT POST TRANSACTION 1996E 1997E 1996E 1997E 1996E 1997E 1996E 1997E
- ---------- ---------------- -------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$400 $ 4.00 $1.63 $0.77 2.5x 5.2x 1.2x 1.3x 4.0x 4.6x
$ 5.00 3.1x 6.5x 1.5x 1.6x 4.2x 4.8x
$ 6.00 3.7x 7.8x 1.7x 1.9x 4.4x 5.0x
$ 7.00 4.3x 9.1x 2.0x 2.2x 4.5x 5.1x
$ 8.00 4.9x 10.4x 2.3x 2.5x 4.7x 5.3x
$ 9.00 5.5x 11.7x 2.6x 2.9x 4.9x 5.5x
$10.00 6.1x 13.0x 2.9x 3.2x 5.0x 5.7x
$11.00 6.8x 14.3x 3.2x 3.5x 5.2x 5.9x
$12.00 7.4x 15.6x 3.5x 3.8x 5.4x 6.1x
$13.00 8.0x 16.9x 3.8x 4.1x 5.5x 6.3x
$14.00 8.6x 18.2x 4.1x 4.5x 5.7x 6.5x
REPURCHASE
AMOUNT
- ----------
$500 $ 4.00 $1.83 $0.64 2.2x 6.2x 0.9x 1.0x 4.5x 5.1x
$ 5.00 2.7x 7.8x 1.2x 1.3x 4.6x 5.2x
$ 6.00 3.3x 9.3x 1.4x 1.6x 4.7x 5.4x
$ 7.00 3.8x 10.9x 1.6x 1.8x 4.8x 5.5x
$ 8.00 4.4x 12.4x 1.9x 2.1x 5.0x 5.7x
$ 9.00 4.9x 14.0x 2.1x 2.3x 5.1x 5.8x
$10.00 5.5x 15.6x 2.3x 2.6x 5.2x 5.9x
$11.00 6.0x 17.1x 2.6x 2.8x 5.3x 6.1x
$12.00 6.6x 18.7x 2.8x 3.1x 5.5x 6.2x
$13.00 7.1x 20.2x 3.0x 3.4x 5.6x 6.4x
$14.00 7.6x 21.8x 3.3x 3.6x 5.7x 6.5x
</TABLE>
- ---------------
(a) Cash flow per share defined as net income plus deferred taxes, plus
depreciation and amortization, divided by the pro forma number of shares
outstanding.
- 50 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- ---------------------------------------------------------------------------------------------------------------------------
SCENARIO: SHARE REPURCHASE-$400m-COMPANY REVISED BASE CASE
ASSUMPTIONS
- ----------------------------------------------------------------------------------------------------------------------------
Current Share Price (3/29/95) $12.63 Senior Bank Debt @ 8.4% $273.4 Current Shares Outstanding 55.7
Offer Price $12.00 Senior Sub. Debt @ 11.0% 273.4 # of Shares Repurchased 33.3
------------------------ ------ ----
Equity Repurchased $400.0 Total Debt $546.8 # of Pro Forma Shares 22.4
Transaction Expenses $14.0 Assumed Debt $132.8
- ----------------------------------------------------------------------------------------------------------------------------
PRO FORMA INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS - $30
(Dollars in millions except per share data)
PROJECTED
ACTUAL -------------------------------------------
1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Petrochemicals EBITDA $239.5 $ 126.1 $122.3 $ 76.3 $117.7 $133.1
Pulp Chemicals EBITDA 44.7 61.8 85.8 104.4 102.9 94.7
- --------------------- ------ ------- ------ ------ ------ ------
Operating EBITDA 284.2 187.9 208.1 180.6 220.7 227.8
Cost Savings - - 30.0 30.0 30.0 30.0
Total EBITDA 284.2 187.9 238.1 210.6 250.7 257.8
Less: Depreciation (43.0) (39.1) (52.8) (55.1) (55.1) (55.1)
- ------------------ ------ ------- ------ ------ ------ ------
EBIT 241.2 148.8 185.3 155.6 195.6 202.7
SAR's & Other Income - (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Expense
Company Debt (14.6) 0.0 0.0 0.0 0.0 0.0
Senior Bank Debt @ 8.4% 0.0 (23.1) (25.1) (16.9) (6.8) 0.0
Senior Sub. Debt @ 11.0% 0.0 (30.1) (30.1) (30.1) (30.1) (23.7)
------------------------ ------ ------- ------ ------ ------ ------
Total Interest Expense (14.6) (53.1) (55.2) (47.0) (36.9) (23.7)
Pretax Income 212.0 93.0 127.7 107.4 157.6 177.8
Income Taxes (62.0) (32.5) (44.7) (37.6) (55.1) (62.2)
- ------------------ ------ ------- ------ ------ ------ ------
NET INCOME $150.0 $ 60.4 $ 83.0 $ 69.8 $102.4 $115.6
- ------------------------------ --------------------------------------------------------------
E.P.S $ 2.69 $ 2.70 $ 3.71 $ 3.12 $ 4.58 $ 5.17
Shares Outstanding 55.7 22.4 22.4 22.4 22.4 22.4
- ------------------------------ --------------------------------------------------------------
Plus: Deferred Taxes $ 1.0 $ 10.2 $ 12.3 $ 8.1 $ 7.2 $ 6.7
Plus: Dep. & Amortization 43.0 39.1 52.8 55.1 55.1 55.1
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (1.5) 0.4
Less: Capital Expenditures (53.9) (104.2) (47.5) (31.5) (25.0) (25.0)
- -------------------------- ------ ------- ------ ------ ------ ------
Free Cash Flow $141.4 ($24.2) $ 97.4 $119.5 $138.2 $152.7
====== ======= ====== ====== ====== ======
</TABLE>
- 51 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- ----------------------------------------------------------------------------------------
SCENARIO: DISTRIBUTION-$400 MILLION-COMPANY REVISED BASE CASE
DEBT CALCULATIONS: 1997-2000 ANNUAL COST SAVINGS-$30
(Dollars in millions)
PROJECTED
-------------------------------------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Cash & Investments $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Debt
Long-Term Debt $129.6
Short-term Debt 3.2
--------------- ------
Total Company Debt $132.8 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Senior Bank Debt $273.4 $297.6 $200.2 $ 80.7 $ 0.0 $ 0.0
Senior Sub. Deb. 273.4 273.4 273.4 273.4 215.9 63.2
---------------- ------ ------ ------ ------- ------ -------
Incremental Debt 546.8 571.0 473.6 354.1 215.9 63.2
---------------- ------ ------ ------ ------- ------ -------
Total Debt $546.8 $571.0 $473.6 $ 354.1 $215.9 $ 63.2
Common Equity $239.3
Incremental Effect (400.0)
------------------ ------
Total ($160.7) ($100.3) ($17.3) $ 52.5 $154.9 $270.5
Net Income $150.0 $ 60.4 $ 83.0 $ 69.8 $102.4 $115.6
Cash Balances
Cash & Investments beginning $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Free Cash Flow (24.2) 97.4 119.5 138.2 152.7
-------------- ------ ------ ------- ------ -------
Cash Available to Pay Debt (24.2) 97.4 119.5 138.2 152.7
Cash Repayment Balances
Senior Debt 24.2 (97.4) (119.5) (80.7) 0.0
Cash Balance 0.0 0.0 0.0 (57.5) (152.7)
Senior Sub. Debt 0.0 0.0 0.0 0.0 0.0
Cash Balance 0.0 0.0 0.0 0.0 0.0
Interest Income 0.0 0.0 0.0 0.0 0.0
</TABLE>
- 52 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
SCENARIO: DISTRIBUTION-$400 MILLION-COMPANY REVISED BASE CASE
CREDIT STATISTICS: 1997-2000 ANNUAL COST SAVINGS-$30
PROJECTED PRO FORMA
ACTUAL PRO FORMA -------------------------------------------------
1995 1995 1996 1997 1998 1999 2000
---- --------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Leverage Ratio
Net Debt/Book Capitalization 36% 216% 121% 104% 87% 58% 19%
Coverage Ratios
Total Debt/EBITDA 0.5x 1.9x 3.0x 2.0x 1.7x 0.9x 0.2x
EBITDA/Interest 19.5x 5.3x 3.5x 4.3x 4.5x 6.8x 10.9x
(EBITDA-CapEx)/Interest 15.8x 4.3x 1.6x 3.5x 3.8x 6.1x 9.8x
EBIT/Interest 16.5x 4.5x 2.8x 3.4x 3.3x 5.3x 8.5x
</TABLE>
- 53 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- ---------------------------------------------------------------------------------------------------------------------------
SCENARIO: SHARE REPURCHASE-$400 MILLION-COMPANY REVISED BASE CASE
- ----------------------------------------------------------------------------------------------------------------------------
ASSUMPTIONS
Current Shares Outstanding 55.7 Senior Bank Debt @ 8.4% $273.4 Cash Dividend $400.0
Senior Sub. Debt @ 11.0% 273.4 Trans. Expenses 14.0
------------------------ ------ Assumed Debt 132.8
Total Debt $546.8 ------
Total Uses $546.8
- ----------------------------------------------------------------------------------------------------------------------------
PRO FORMA INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS - $30
(Dollars in millions except per share data)
PROJECTED
ACTUAL -------------------------------------------
1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Petrochemicals EBITDA $239.5 $ 126.1 $122.3 $ 76.3 $117.7 $133.1
Pulp Chemicals EBITDA 44.7 61.8 85.8 104.4 102.9 94.7
- --------------------- ------ ------- ------ ------ ------ ------
Operating EBITDA 284.2 187.9 208.1 180.6 220.7 227.8
Cost Savings - - 30.0 30.0 30.0 30.0
Total EBITDA 284.2 187.9 238.1 210.6 250.7 257.8
Less: Depreciation (43.0) (39.1) (52.8) (55.1) (55.1) (55.1)
- ------------------ ------ ------- ------ ------ ------ ------
EBIT 241.2 148.8 185.3 155.6 195.6 202.7
SAR's & Other Income - (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Expense
Company Debt (14.6) 0.0 0.0 0.0 0.0 0.0
Senior Bank Debt @ 8.4% 0.0 (23.1) (25.1) (16.9) (6.8) 0.0
Senior Sub. Debt @ 11.0% 0.0 (30.1) (30.1) (30.1) (30.1) (23.7)
------------------------ ------ ------- ------ ------ ------ ------
Total Interest Expense (14.6) (53.1) (55.2) (47.0) (36.9) (23.7)
Pretax Income 226.6 93.0 127.7 107.4 157.6 177.8
Income Taxes (76.6) (32.5) (44.7) (37.6) (55.1) (62.2)
- ------------------ ------ ------- ------ ------ ------ ------
NET INCOME $150.0 $ 60.4 $ 83.0 $ 69.8 $102.4 $115.6
- ------------------------------ --------------------------------------------------------------
E.P.S $ 2.69 $ 1.08 $ 1.49 $ 1.25 $ 1.84 $ 2.08
Shares Outstanding 55.7 55.7 55.7 55.7 55.7 55.7
- ------------------------------ --------------------------------------------------------------
Plus: Deferred Taxes $ 1.0 $ 10.2 $ 12.3 $ 8.1 $ 7.2 $ 6.7
Plus: Dep. & Amortization 43.0 39.1 52.8 55.1 55.1 55.1
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (1.5) 0.4
Less: Capital Expenditures (53.9) (104.2) (47.5) (31.5) (25.0) (25.0)
- -------------------------- ------ ------- ------ ------ ------ ------
Free Cash Flow $141.4 ($24.2) $ 97.4 $119.5 $138.2 $152.7
====== ======= ====== ====== ====== ======
</TABLE>
- 54 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- ---------------------------------------------------------------------------------------------------------------------------
SCENARIO: SHARE REPURCHASE-$500m-COMPANY REVISED BASE CASE
ASSUMPTIONS
- ----------------------------------------------------------------------------------------------------------------------------
Current Share Price (3/29/95) $12.63 Senior Bank Debt @ 8.4% $324.9 Current Shares Outstanding 55.7
Offer Price $12.00 Senior Sub. Debt @ 11.5% 324.9 # of Shares Repurchased 41.7
------------------------ ------ ------
Equity Repurchased $500.0 Total Debt $649.8 # of Pro Forma Shares 14.0
Transaction Expenses $ 17.0 Assumed Debt $132.8
- ----------------------------------------------------------------------------------------------------------------------------
PRO FORMA INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS - $30
(Dollars in millions except per share date)
PROJECTED
ACTUAL -------------------------------------------
1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Petrochemicals EBITDA $239.5 $ 126.1 $122.3 $ 76.3 $117.7 $133.1
Pulp Chemicals EBITDA 44.7 61.8 85.8 104.4 102.9 94.7
- --------------------- ------ ------- ------ ------ ------ ------
Operating EBITDA 284.2 187.9 208.1 180.6 220.7 227.8
Cost Savings - - 30.0 30.0 30.0 30.0
Total EBITDA 284.2 187.9 238.1 210.6 250.7 257.8
Less: Depreciation (43.0) (39.1) (52.8) (55.1) (55.1) (55.1)
- ------------------ ------ ------- ------ ------ ------ ------
EBIT 241.2 148.8 185.3 155.6 195.6 202.7
SAR's & Other Income - (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Expense
Company Debt (14.6) 0.0 0.0 0.0 0.0 0.0
Senior Bank Debt @ 8.4% 0.0 (27.4) (30.1) (22.6) (13.2) (2.3)
Senior Sub. Debt @ 11.5% 0.0 (37.4) (37.4) (37.4) (37.4) (37.4)
------------------------ ------ ------- ------ ------ ------ ------
Total Interest Expense (14.6) (64.8) (67.5) (59.9) (50.5) (39.6)
Pretax Income 212.0 81.3 115.4 94.5 143.9 161.9
Income Taxes (62.0) (28.5) (40.4) (33.1) (50.4) (56.7)
- ------------------ ------ ------- ------ ------ ------ ------
NET INCOME $150.0 $ 52.9 $ 75.0 $ 61.4 $ 93.5 $105.3
- ------------------------------ --------------------------------------------------------------
E.P.S $ 2.69 $ 3.77 $ 5.34 $ 4.38 $ 6.67 $ 7.50
Shares Outstanding 55.7 14.0 14.0 14.0 14.0 14.0
- ------------------------------ --------------------------------------------------------------
Plus: Deferred Taxes $ 1.0 $ 10.2 $ 12.3 $ 8.1 $ 7.2 $ 6.7
Plus: Dep. & Amortization 43.0 39.1 52.8 55.1 55.1 55.1
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (1.5) 0.4
Less: Capital Expenditures (53.9) (104.2) (47.5) (31.5) (25.0) (25.0)
- -------------------------- ------ ------- ------ ------ ------ ------
Free Cash Flow $141.4 ($31.8) $ 89.4 $111.1 $129.3 $142.4
====== ======= ====== ====== ====== ======
</TABLE>
- 55 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- ----------------------------------------------------------------------------------------
SCENARIO: DISTRIBUTION-$500 MILLION-COMPANY REVISED BASE CASE
DEBT CALCULATIONS: 1997-2000 ANNUAL COST SAVINGS-$30
(Dollars in millions except per share data)
PROJECTED
-------------------------------------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Cash & Investments $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Debt
Long-Term Debt $129.6
Short-term Debt 3.2
--------------- ------
Total Company Debt $132.8 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Senior Bank Debt $324.9 $356.6 $267.3 $ 156.1 $ 26.8 $ 0.0
Senior Sub. Deb. 324.9 324.9 324.9 324.9 324.9 209.3
---------------- ------ ------ ------ ------- ------ -------
Incremental Debt 649.8 681.5 592.2 481.0 351.7 209.3
---------------- ------ ------ ------ ------- ------ -------
Total Debt $649.8 $681.5 $592.2 $ 481.0 $351.7 $ 209.3
Common Equity $239.3
Incremental Effect (500.0)
------------------ ------
Total ($260.7) ($207.9) ($132.9) ($ 71.5) $ 22.1 $127.3
Net Income $150.0 $ 52.9 $ 75.0 $ 61.4 $ 93.5 $105.3
Cash Balances
Cash & Investments beginning $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Free Cash Flow (31.8) 89.4 111.1 129.3 142.4
-------------- ------ ------ ------- ------ -------
Cash Available to Pay Debt (31.8) 89.4 111.1 129.3 142.4
Cash Repayment Balances
Senior Debt 31.8 (89.4) (111.1) (129.3) (26.8)
Cash Balance 0.0 0.0 0.0 0.0 115.6
Senior Sub. Debt 0.0 0.0 0.0 0.0 (115.6)
Cash Balance 0.0 0.0 0.0 0.0 0.0
Interest Income 0.0 0.0 0.0 0.0 0.0
</TABLE>
- 56 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE II. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
SCENARIO: DISTRIBUTION-$500 MILLION-COMPANY REVISED BASE CASE
CREDIT STATISTICS: 1997-2000 ANNUAL COST SAVINGS-$30
PROJECTED PRO FORMA
ACTUAL PRO FORMA -------------------------------------------------
1995 1995 1996 1997 1998 1999 2000
---- --------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Leverage Ratio
Net Debt/Book Capitalization 36% 254% 144% 129% 117% 94% 62%
Coverage Ratios
Total Debt/EBITDA 0.5x 2.3x 3.6x 2.5x 2.3x 1.4x 0.8x
EBITDA/Interest 19.5x 4.4x 2.9x 3.5x 3.5x 5.0x 6.5x
(EBITDA-CapEx)/Interest 15.8x 3.6x 1.3x 2.8x 3.0x 4.5x 5.9x
EBIT/Interest 16.5x 3.7x 2.3x 2.7x 2.6x 3.9x 5.1x
</TABLE>
- 57 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- ---------------------------------------------------------------------------------------------------------------------------
SCENARIO: SPECIAL DIVIDEND-$500 MILLION-COMPANY REVISED BASE CASE
ASSUMPTIONS
- ----------------------------------------------------------------------------------------------------------------------------
Current Shares Outstanding 55.7 Senior Bank Debt @ 8.4% $324.9 Cash Dividend $500.0
Senior Sub. Debt @ 11.5% 324.9 Trans. Expenses 17.0
------------------------ ------ Assumed Debt 132.8
Total Debt $649.8 ------
Total Uses $649.8
- ----------------------------------------------------------------------------------------------------------------------------
PRO FORMA INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS-$30
(Dollars in millions except per share data)
PROJECTED
ACTUAL -------------------------------------------
1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Petrochemicals EBITDA $239.5 $ 126.1 $122.3 $ 76.3 $117.7 $133.1
Pulp Chemicals EBITDA 44.7 61.8 85.8 104.4 102.9 94.7
- --------------------- ------ ------- ------ ------ ------ ------
Operating EBITDA 284.2 187.9 208.1 180.6 220.7 227.8
Cost Savings - - 30.0 30.0 30.0 30.0
Total EBITDA 284.2 187.9 238.1 210.6 250.7 257.8
Less: Depreciation (43.0) (39.1) (52.8) (55.1) (55.1) (55.1)
- ------------------ ------ ------- ------ ------ ------ ------
EBIT 241.2 148.8 185.3 155.6 195.6 202.7
SAR's & Other Income - (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Expense
Company Debt (14.6) 0.0 0.0 0.0 0.0 0.0
Senior Bank Debt @ 8.4% 0.0 (27.4) (30.1) (22.6) (13.2) 2.3
Senior Sub. Debt @ 11.5% 0.0 (37.4) (37.4) (37.4) (37.4) (37.4)
------------------------ ------ ------- ------ ------ ------ ------
Total Interest Expense (14.6) (64.8) (67.5) (59.9) (50.5) (39.6)
Pretax Income 226.6 81.3 115.4 94.5 143.9 161.9
Income Taxes (76.6) (28.5) (40.4) (33.1) (50.4) (56.7)
- ------------------ ------ ------- ------ ------ ------ ------
NET INCOME $150.0 $ 52.9 $ 75.0 $ 61.4 $ 93.5 $105.3
- ------------------------------ --------------------------------------------------------------
E.P.S $ 2.69 $ 0.95 $ 1.35 $ 1.10 $ 1.68 $ 1.89
Shares Outstanding 55.7 55.7 55.7 55.7 55.7 55.7
- ------------------------------ --------------------------------------------------------------
Plus: Deferred Taxes $ 1.0 $ 10.2 $ 12.3 $ 8.1 $ 7.2 $ 6.7
Plus: Dep. & Amortization 43.0 39.1 52.8 55.1 55.1 55.1
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (1.5) 0.4
Less: Capital Expenditures (53.9) (104.2) (47.5) (31.5) (25.0) (25.0)
- -------------------------- ------ ------- ------ ------ ------ ------
Free Cash Flow $141.4 ($31.8) $ 89.4 $111.1 $129.3 $142.4
====== ======= ====== ====== ====== ======
</TABLE>
- 58 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- ---------------------------------------------------------------------------------------------------------------------------
SCENARIO: SHARE REPURCHASE-$400m-COMPANY REVISED DOWNSIDE CASE
ASSUMPTIONS
- ----------------------------------------------------------------------------------------------------------------------------
Current Share Price (3/29/95) $12.63 Senior Bank Debt @ 8.4% $273.4 Current Shares Outstanding 55.7
Offer Price $12.00 Senior Sub. Debt @ 11.0% 273.4 # of Shares Repurchased 33.3
------------------------ ------ ----
Equity Repurchased $400.0 Total Debt $546.8 # of Pro Forma Shares 22.4
Transaction Expenses $14.0 Assumed Debt $132.8
- ----------------------------------------------------------------------------------------------------------------------------
PRO FORMA INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS-$30
(Dollars in millions except per share data)
PROJECTED
ACTUAL -------------------------------------------
1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Petrochemicals EBITDA $239.5 $ 101.1 $ 71.2 $ 41.8 $ 79.9 $ 94.9
Pulp Chemicals EBITDA 44.7 61.8 72.0 78.4 90.0 82.5
- --------------------- ------ ------- ------ ------ ------ ------
Operating EBITDA 284.2 162.9 143.2 120.2 170.0 177.4
Cost Savings - - 30.0 30.0 30.0 30.0
Total EBITDA 284.2 162.9 173.2 150.2 200.0 207.4
Less: Depreciation (43.0) (39.1) (52.1) (53.4) (53.4) (53.4)
- ------------------ ------ ------- ------ ------ ------ ------
EBIT 241.2 123.8 121.1 96.8 146.5 153.9
SAR's & Other Income - (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Expense
Company Debt (14.6) 0.0 0.0 0.0 0.0 0.0
Senior Bank Debt @ 8.4% 0.0 (23.1) (26.5) (20.6) (13.5) (5.2)
Senior Sub. Debt @ 11.0% 0.0 (30.1) (30.1) (30.1) (30.1) (30.1)
------------------------ ------ ------- ------ ------ ------ ------
Total Interest Expense (14.6) (53.1) (56.6) (50.7) (43.6) (35.3)
Pretax Income 212.0 67.9 62.0 44.9 101.7 117.5
Income Taxes (62.0) (23.8) (21.7) (15.7) (35.6) (41.1)
- ------------------ ------ ------- ------ ------ ------ ------
NET INCOME $150.0 $ 44.2 $ 40.3 $ 29.2 $ 66.1 $ 76.3
- ------------------------------ --------------------------------------------------------------
E.P.S $ 2.69 $ 1.97 $ 1.80 $ 1.31 $ 2.96 $ 3.41
Shares Outstanding 55.7 22.4 22.4 22.4 22.4 22.4
- ------------------------------ --------------------------------------------------------------
Plus: Deferred Taxes $ 1.0 $ 10.2 $ 12.3 $ 8.1 $ 7.2 $ 6.7
Plus: Dep. & Amortization 43.0 39.1 52.1 53.4 53.4 53.4
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (3.4) 0.4
Less: Capital Expenditures (53.9) (104.2) (31.7) (25.0) (25.0) (25.0)
- -------------------------- ------ ------- ------ ------ ------ ------
Free Cash Flow $141.4 ($40.5) $ 69.8 $ 83.8 $ 98.4 $111.9
====== ======= ====== ====== ====== ======
</TABLE>
- 59 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- ----------------------------------------------------------------------------------------
SCENARIO: DISTRIBUTION-$400 MILLION-COMPANY REVISED DOWNSIDE CASE
DEBT CALCULATIONS: 1997-2000 ANNUAL COST SAVINGS-$30
(Dollars in millions except per share data)
PROJECTED
-------------------------------------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Cash & Investments $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Debt
Long-Term Debt $129.6
Short-term Debt 3.2
--------------- ------
Total Company Debt $132.8 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Senior Bank Debt $273.4 $313.8 $244.0 $ 160.2 $ 61.9 $ 0.0
Senior Sub. Deb. 273.4 273.4 273.4 273.4 273.4 223.3
---------------- ------ ------ ------ ------- ------ -------
Incremental Debt 546.8 587.2 517.4 433.6 335.3 223.3
---------------- ------ ------ ------ ------- ------ -------
Total Debt $546.8 $587.2 $517.4 $ 433.6 $335.3 $ 223.3
Common Equity $239.3
Incremental Effect (400.0)
------------------ ------
Total ($160.7) ($116.6) ($76.2) $ 47.0 $ 19.1 $ 95.4
Net Income $150.0 $ 44.2 $ 40.3 $ 29.2 $ 66.1 $ 76.3
Cash Balances
Cash & Investments beginning $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Free Cash Flow (40.5) 69.8 83.8 98.4 111.9
-------------- ------ ------ ------- ------ -------
Cash Available to Pay Debt (40.5) 69.8 83.8 98.4 111.9
Cash Repayment Balances
Senior Debt 40.5 (69.8) (83.8) (98.4) (61.9)
Cash Balance 0.0 0.0 0.0 0.0 50.1
Senior Sub. Debt 0.0 0.0 0.0 0.0 (50.1)
Cash Balance 0.0 0.0 0.0 0.0 0.0
Interest Income 0.0 0.0 0.0 0.0 0.0
</TABLE>
- 60 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
SCENARIO: DISTRIBUTION-$400 MILLION-COMPANY REVISED DOWNSIDE CASE
CREDIT STATISTICS: 1997-2000 ANNUAL COST SAVINGS-$30
PROJECTED PRO FORMA
ACTUAL PRO FORMA -------------------------------------------------
1995 1995 1996 1997 1998 1999 2000
---- --------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Leverage Ratio
Net Debt/Book Capitalization 36% 216% 125% 117% 112% 95% 70%
Coverage Ratios
Total Debt/EBITDA 0.5x 1.9x 3.6x 3.0x 2.9x 1.7x 1.1x
EBITDA/Interest 19.5x 5.3x 3.1x 3.1x 3.0x 4.6x 5.9x
(EBITDA-CapEx)/Interest 15.8x 4.3x 1.1x 2.5x 2.5x 4.0x 5.2x
EBIT/Interest 16.5x 4.5x 2.3x 2.1x 1.9x 3.4x 4.4x
</TABLE>
- 61 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- ---------------------------------------------------------------------------------------------------------------------------
SCENARIO: SHARE REPURCHASE-$400m-COMPANY REVISED BASE CASE
- ---------------------------------------------------------------------------------------------------------------------------
ASSUMPTIONS
Current Shares Outstanding 55.7 Senior Bank Debt @ 8.4% $273.4 Cash Dividend $400.00
Senior Sub. Debt @ 11.0% 273.4 Trans. Expenses 14.0
------------------------ ------ Assumed Debt 132.8
Total Debt $546.8 ------
Total Uses $546.8
- ----------------------------------------------------------------------------------------------------------------------------
PRO FORMA INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS - $30
(Dollars in millions except per share data)
PROJECTED
ACTUAL -------------------------------------------
1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Petrochemicals EBITDA $239.5 $ 101.1 $ 71.2 $ 41.8 $ 79.9 $ 94.9
Pulp Chemicals EBITDA 44.7 61.8 72.0 78.4 90.0 82.5
- --------------------- ------ ------- ------ ------ ------ ------
Operating EBITDA 284.2 162.9 143.2 120.2 170.0 177.4
Cost Savings - - 30.0 30.0 30.0 30.0
Total EBITDA 284.2 162.9 173.2 150.2 200.0 207.4
Less: Depreciation (43.0) (39.1) (52.1) (53.4) (53.4) (53.4)
- ------------------ ------ ------- ------ ------ ------ ------
EBIT 241.2 123.8 121.1 96.8 146.5 153.9
SAR's & Other Income - (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Expense
Company Debt (14.6) 0.0 0.0 0.0 0.0 0.0
Senior Bank Debt @ 8.4% 0.0 (23.1) (26.5) (20.6) (13.5) (5.2)
Senior Sub. Debt @ 11.0% 0.0 (30.1) (30.1) (30.1) (30.1) (30.1)
------------------------ ------ ------- ------ ------ ------ ------
Total Interest Expense (14.6) (53.1) (56.6) (50.7) (43.6) (35.3)
Pretax Income 226.6 67.9 62.0 44.9 101.7 117.5
Income Taxes (76.6) (23.8) (21.7) (15.7) (35.6) (41.1)
- ------------------ ------ ------- ------ ------ ------ ------
NET INCOME $150.0 $ 44.2 $ 40.3 $ 29.2 $ 66.1 $ 76.3
- ------------------------------ --------------------------------------------------------------
E.P.S $ 2.69 $ 0.79 $ 0.72 $ 0.52 $ 1.19 $ 1.37
Shares Outstanding 55.7 55.7 55.7 55.7 55.7 55.7
- ------------------------------ --------------------------------------------------------------
Plus: Deferred Taxes $ 1.0 $ 10.2 $ 12.3 $ 8.1 $ 7.2 $ 6.7
Plus: Dep. & Amortization 43.0 39.1 52.1 53.4 53.4 53.4
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (3.4) 0.4
Less: Capital Expenditures (53.9) (104.2) (31.7) (25.0) (25.0) (25.0)
- -------------------------- ------ ------- ------ ------ ------ ------
Free Cash Flow $141.4 ($40.5) $ 69.8 $ 83.8 $ 98.4 $111.9
====== ======= ====== ====== ====== ======
</TABLE>
- 62 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- ---------------------------------------------------------------------------------------------------------------------------
SCENARIO: SHARE REPURCHASE-$500m-COMPANY REVISED DOWNSIDE CASE
ASSUMPTIONS
- ---------------------------------------------------------------------------------------------------------------------------
Current Share Price (3/29/95) $12.63 Senior Bank Debt @ 8.4% $324.9 Current Shares Outstanding 55.7
Offer Price $12.00 Senior Sub. Debt @ 11.5% 324.9 # of Shares Repurchased 41.7
------------------------ ------ ------
Equity Repurchased $500.0 Total Debt $649.8 # of Pro Forma Shares 14.0
Transaction Expenses $ 17.0 Assumed Debt $132.8
- ----------------------------------------------------------------------------------------------------------------------------
PRO FORMA INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS - $30
(Dollars in millions except per share data)
PROJECTED
ACTUAL -------------------------------------------
1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Petrochemicals EBITDA $239.5 $ 101.1 $ 71.2 $ 41.8 $ 79.9 $ 94.9
Pulp Chemicals EBITDA 44.7 61.8 72.0 78.4 90.0 82.5
- --------------------- ------ ------- ------ ------ ------ ------
Operating EBITDA 284.2 162.9 143.2 120.2 170.0 177.4
Cost Savings - - 30.0 30.0 30.0 30.0
Total EBITDA 284.2 162.9 173.2 150.2 200.0 207.4
Less: Depreciation (43.0) (39.1) (52.1) (53.4) (53.4) (53.4)
- ------------------ ------ ------- ------ ------ ------ ------
EBIT 241.2 123.8 121.1 96.8 146.5 153.9
SAR's & Other Income - (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Expense
Company Debt (14.6) 0.0 0.0 0.0 0.0 0.0
Senior Bank Debt @ 8.4% 0.0 (27.4) (31.5) (26.2) (19.9) (12.3)
Senior Sub. Debt @ 11.5% 0.0 (37.4) (37.4) (37.4) (37.4) (37.4)
------------------------ ------ ------- ------ ------ ------ ------
Total Interest Expense (14.6) (64.8) (68.8) (63.6) (57.2) (49.7)
Pretax Income 212.0 56.3 49.8 32.0 88.1 103.1
Income Taxes (62.0) (19.7) (17.4) (11.2) (30.8) (36.1)
- ------------------ ------ ------- ------ ------ ------ ------
NET INCOME $150.0 $ 36.6 $ 32.3 $ 20.8 $ 57.3 $ 67.0
- ------------------------------ --------------------------------------------------------------
E.P.S $ 2.69 $ 2.61 $ 2.30 $ 1.48 $ 4.08 $ 4.77
Shares Outstanding 55.7 14.0 14.0 14.0 14.0 14.0
- ------------------------------ --------------------------------------------------------------
Plus: Deferred Taxes $ 1.0 $ 10.2 $ 12.3 $ 8.1 $ 7.2 $ 6.7
Plus: Dep. & Amortization 43.0 39.1 52.1 53.4 53.4 53.4
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (3.4) 0.4
Less: Capital Expenditures (53.9) (104.2) (31.7) (25.0) (25.0) (25.0)
- -------------------------- ------ ------- ------ ------ ------ ------
Free Cash Flow $141.4 ($48.0) $ 61.9 $ 75.3 $ 89.5 $102.6
====== ======= ====== ====== ====== ======
</TABLE>
- 63 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- ----------------------------------------------------------------------------------------------------
SCENARIO: DISTRIBUTION-$500 MILLION-COMPANY REVISED DOWNSIDE CASE
DEBT CALCULATIONS: 1997-2000 ANNUAL COST SAVINGS-$30
(Dollars in millions)
PROJECTED
-------------------------------------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Cash & Investments $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Debt
Long-Term Debt $129.6
Short-term Debt 3.2
--------------- ------
Total Company Debt $132.8 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Senior Bank Debt $324.9 $372.9 $311.0 $ 235.7 $146.2 $ 43.6
Senior Sub. Deb. 324.9 324.9 324.9 324.9 324.9 324.9
---------------- ------ ------ ------ ------- ------ -------
Incremental Debt 649.8 697.8 635.9 560.6 471.1 368.5
---------------- ------ ------ ------ ------- ------ -------
Total Debt $649.8 $697.8 $635.9 $ 560.6 $471.1 $ 368.5
Common Equity $239.3
Incremental Effect (500.0)
------------------ ------
Total ($260.7) ($224.1) ($191.8) ($171.0) ($113.7) ($46.8)
Net Income $150.0 $ 36.6 $ 32.3 $ 20.8 $ 57.3 $ 67.0
Cash Balances
Cash & Investments beginning $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Free Cash Flow (48.0) 61.9 75.3 89.5 102.6
-------------- ------ ------ ------- ------ ------
Cash Available to Pay Debt (48.0) 61.9 75.3 89.5 102.6
Cash Repayment Balances
Senior Debt 48.0 (61.9) (75.3) (89.5) (102.6)
Cash Balance 0.0 0.0 0.0 0.0 0.0
Senior Sub. Debt 0.0 0.0 0.0 0.0 0.0
Cash Balance 0.0 0.0 0.0 0.0 0.0
Interest Income 0.0 0.0 0.0 0.0 0.0
</TABLE>
- 64 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -------------------------------------------------------------------------------------------------------------------------
SCENARIO: DISTRIBUTION-$500 MILLION-COMPANY REVISED DOWNSIDE CASE
CREDIT STATISTICS: 1997-2000 ANNUAL COST SAVINGS-$30
PROJECTED PRO FORMA
ACTUAL PRO FORMA -------------------------------------------------
1995 1995 1996 1997 1998 1999 2000
---- --------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Leverage Ratios
Net Debt/Book Capitalization 36% 254% 147% 143% 144% 132% 115%
Coverage Ratios
Total Debt/EBITDA 0.5x 2.3x 4.3x 3.7x 3.7x 2.4x 1.8x
EBITDA/Interest 19.5x 4.4x 2.5x 2.5x 2.4x 3.5x 4.2x
(EBITDA-CapEx)/Interest 15.8x 3.6x 0.9x 2.1x 2.0x 3.1x 3.7x
EBIT/Interest 16.5x 3.7x 1.9x 1.8x 1.5x 2.6x 3.1x
</TABLE>
- 65 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- ---------------------------------------------------------------------------------------------------------------------------
SCENARIO: SPECIAL DIVIDEND-$500 MILLION-COMPANY REVISED DOWNSIDE CASE
- ---------------------------------------------------------------------------------------------------------------------------
ASSUMPTIONS
Current Shares Outstanding 55.7 Senior Bank Debt @ 8.4% $324.9 Cash Dividend $500.00
Senior Sub. Debt @ 11.5% 324.9 Trans. Expenses 17.0
------------------------ ------ Assumed Debt 132.8
Total Debt $649.8 ------
Total Uses $649.8
- ----------------------------------------------------------------------------------------------------------------------------
PRO FORMA INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS - $30
(Dollars in millions except per share data)
PROJECTED
ACTUAL -------------------------------------------
1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Petrochemicals EBITDA $239.5 $ 101.1 $ 71.2 $ 41.8 $ 79.9 $ 94.9
Pulp Chemicals EBITDA 44.7 61.8 72.0 78.4 90.0 82.5
- --------------------- ------ ------- ------ ------ ------ ------
Operating EBITDA 284.2 162.9 143.2 120.2 170.0 177.4
Cost Savings - - 30.0 30.0 30.0 30.0
Total EBITDA 284.2 162.9 173.2 150.2 200.0 207.4
Less: Depreciation (43.0) (39.1) (52.1) (53.4) (53.4) (53.4)
- ------------------ ------ ------- ------ ------ ------ ------
EBIT 241.2 123.8 121.1 96.8 146.5 153.9
SAR's & Other Income - (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Expense
Company Debt (14.6) 0.0 0.0 0.0 0.0 0.0
Senior Bank Debt @ 8.4% 0.0 (27.4) (31.5) (26.2) (19.9) (12.3)
Senior Sub. Debt @ 11.5% 0.0 (37.4) (37.4) (37.4) (37.4) (37.4)
------------------------ ------ ------- ------ ------ ------ ------
Total Interest Expense (14.6) (64.8) (68.8) (63.6) (57.2) (49.7)
Pretax Income 226.6 56.3 49.8 32.0 88.1 103.1
Income Taxes (76.6) (19.7) (17.4) (11.2) (30.8) (36.1)
- ------------------ ------ ------- ------ ------ ------ ------
NET INCOME $150.0 $ 36.6 $ 32.3 $ 20.8 $ 57.3 $ 67.0
- ------------------------------ --------------------------------------------------------------
E.P.S $ 2.69 $ 0.66 $ 0.58 $ 0.37 $ 1.03 $ 1.20
Shares Outstanding 55.7 55.7 55.7 55.7 55.7 55.7
- ------------------------------ --------------------------------------------------------------
Plus: Deferred Taxes $ 1.0 $ 10.2 $ 12.3 $ 8.1 $ 7.2 $ 6.7
Plus: Dep. & Amortization 43.0 39.1 52.1 53.4 53.4 53.4
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (3.4) 0.4
Less: Capital Expenditures (53.9) (104.2) (31.7) (25.0) (25.0) (25.0)
- -------------------------- ------ ------- ------ ------ ------ ------
Free Cash Flow $141.4 ($48.0) $ 61.9 $ 75.3 $ 89.5 $102.6
====== ======= ====== ====== ====== ======
</TABLE>
- 66 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
ANALYSIS OF BLENDED SHARE PRICE
(Dollars in millions except per share data)
SCENARIO: COMPANY REVISED BASE CASE: 1997-2000 ANNUAL COST SAVINGS-$30
Current Stock Price $12.625
<S> <C> <C> <C> <C> <C>
Repurchase Price $10.00 $11.00 $12.00 $13.00 $14.00
$ Repurchases (millions) $ 400 $ 400 $ 400 $ 400 $ 400
% Repurchased 71.8% 65.3% 59.8% 55.2% 51.3%
------ ------ ------ ------ ------
# of Shares Repurchased 40.0 36.4 33.3 30.8 28.6
Pro Forma # of Shares 15.7 19.3 22.4 24.9 27.1
Pro Forma EPS:
1996E $ 3.85 $ 3.13 $ 2.70 $ 2.42 $ 2.23
1997E 5.29 4.29 3.71 3.33 3.06
Blended Share Price Assuming
No Change Post-Repurchase $10.74 $11.56 $12.25 $12.83 $13.33
Implied Share Price Effects:
Pro-Rated Repurchases $ 7.18 $ 7.18 $ 7.18 $ 7.18 $ 7.18
Remaining Interest (a) 4.34 4.34 4.34 4.34 4.34
------ ------ ------ ------ ------
Blended Share Price $11.52 $11.52 $11.52 $11.52 $11.52
====== ====== ====== ====== ======
Pro Forma Stock Price (a) $15.40 $12.50 $10.81 $ 9.70 $ 8.91
</TABLE>
- ----------------
(a) Assumes post-trading multiple settles at 4.0x 1996 estimated EPS.
- 67 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
ANALYSIS OF BLENDED SHARE PRICE
(Dollars in millions except per share data)
SCENARIO: COMPANY REVISED BASE CASE: 1997-2000 ANNUAL COST SAVINGS-$30
Current Stock Price $12.625
<S> <C> <C> <C> <C> <C>
Repurchase Price $10.00 $11.00 $12.00 $13.00 $14.00
$ Repurchases (millions) $ 500 $ 500 $ 500 $ 500 $ 500
% Repurchased 89.8% 81.6% 74.8% 69.1% 64.1%
------ ------ ------ ------ ------
# of Shares Repurchased 50.0 45.5 41.7 38.5 35.7
Pro Forma # of Shares 5.7 10.2 14.0 17.2 20.0
Pro Forma EPS:
1996E $ 9.28 $ 5.16 $ 3.77 $ 3.07 $ 2.65
1997E 13.16 7.32 5.34 4.35 3.75
Blended Share Price Assuming
No Change Post-Repurchase $10.27 $11.30 $12.16 $12.88 $13.51
Implied Share Price Effects:
Pro-Rated Repurchases $ 8.98 $ 8.98 $ 8.98 $ 8.98 $ 8.98
Remaining Interest (a) 3.80 3.80 3.80 3.80 3.80
------ ------ ------ ------ ------
Blended Share Price $12.77 $12.77 $12.77 $12.77 $12.77
====== ====== ====== ====== ======
Pro Forma Stock Price (a) $37.10 $20.64 $15.07 $12.27 $10.58
</TABLE>
- ----------------
(a) Assumes post-trading multiple settles at 4.0x 1996 estimated EPS.
- 68 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
POST-REPURCHASE TRADING ANALYSIS-COMPANY REVISED BASE CASE: 1997-2000 ANNUAL COST SAVINGS-$30
(Dollars in millions except per share data)
SCENARIO 1: $10 REPURCHASE STOCK PRICE
PRO FORMA PRICE/ MARKET CAPITALIZATION/
EARNINGS PER SHARE PRICE/E.P.S. CASH FLOW PER SHARE (A) EBITDA
REPURCHASE STOCK PRICE ------------------ ---------------------- ----------------------- ----------------------
AMOUNT POST TRANSACTION 1996E 1997E 1996E 1997E 1996E 1997E 1996E 1997E
- ---------- ---------------- -------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$400 $ 4.00 $3.85 $5.29 1.0x 0.8x 0.6x 0.4x 3.2x 2.6x
$ 5.00 1.3x 0.9x 0.7x 0.5x 3.3x 2.6x
$ 6.00 1.6x 1.1x 0.9x 0.6x 3.4x 2.7x
$ 7.00 1.8x 1.3x 1.0x 0.7x 3.5x 2.8x
$ 8.00 2.1x 1.5x 1.1x 0.8x 3.6x 2.8x
$ 9.00 2.3x 1.7x 1.3x 1.0x 3.7x 2.9x
$10.00 2.6x 1.9x 1.4x 1.1x 3.7x 3.0x
$11.00 2.9x 2.1x 1.6x 1.2x 3.8x 3.0x
$12.00 3.1x 2.3x 1.7x 1.3x 3.9x 3.1x
$13.00 3.4x 2.5x 1.9x 1.4x 4.0x 3.2x
$14.00 3.6x 2.6x 2.0x 1.5x 4.1x 3.2x
REPURCHASE
AMOUNT
- ----------
$500 $ 4.00 $9.28 $13.16 0.4x 0.3x 0.2x 0.2x 3.6x 2.8x
$ 5.00 0.5x 0.4x 0.3x 0.2x 3.6x 2.8x
$ 6.00 0.6x 0.5x 0.3x 0.2x 3.6x 2.9x
$ 7.00 0.8x 0.5x 0.4x 0.3x 3.7x 2.9x
$ 8.00 0.9x 0.6x 0.4x 0.3x 3.7x 2.9x
$ 9.00 1.0x 0.7x 0.5x 0.4x 3.7x 2.9x
$10.00 1.1x 0.8x 0.6x 0.4x 3.8x 3.0x
$11.00 1.2x 0.8x 0.6x 0.4x 3.8x 3.0x
$12.00 1.3x 0.9x 0.7x 0.5x 3.8x 3.0x
$13.00 1.4x 1.0x 0.7x 0.5x 3.9x 3.0x
$14.00 1.5x 1.1x 0.8x 0.6x 3.9x 3.1x
</TABLE>
- ---------------
(a) Cash flow per share defined as net income plus deferred taxes, plus
depreciation and amortization, divided by the pro forma number of shares
outstanding.
- 69 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
POST-REPURCHASE TRADING ANALYSIS-COMPANY REVISED BASE CASE: 1997-2000 ANNUAL COST SAVINGS-$30
(Dollars in millions except per share data)
SCENARIO 2: $11 REPURCHASE STOCK PRICE
PRO FORMA PRICE/ MARKET CAPITALIZATION/
EARNINGS PER SHARE PRICE/E.P.S. CASH FLOW PER SHARE (A) EBITDA
REPURCHASE STOCK PRICE ------------------ ---------------------- ----------------------- ----------------------
AMOUNT POST TRANSACTION 1996E 1997E 1996E 1997E 1996E 1997E 1996E 1997E
- ---------- ---------------- -------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$400 $ 4.00 $3.13 $4.29 1.3x 0.9x 0.7x 0.5x 3.3x 2.6x
$ 5.00 1.6x 1.2x 0.9x 0.7x 3.4x 2.7x
$ 6.00 1.9x 1.4x 1.1x 0.8x 3.5x 2.8x
$ 7.00 2.2x 1.6x 1.2x 0.9x 3.6x 2.9x
$ 8.00 2.6x 1.9x 1.4x 1.0x 3.7x 2.9x
$ 9.00 2.9x 2.1x 1.6x 1.2x 3.8x 3.0x
$10.00 3.2x 2.3x 1.8x 1.3x 3.9x 3.1x
$11.00 3.5x 2.6x 1.9x 1.4x 4.0x 3.2x
$12.00 3.8x 2.8x 2.1x 1.6x 4.1x 3.3x
$13.00 4.2x 3.0x 2.3x 1.7x 4.2x 3.4x
$14.00 4.5x 3.3x 2.5x 1.8x 4.4x 3.4x
REPURCHASE
AMOUNT
- ----------
$500 $ 4.00 $5.16 $7.32 0.8x 0.5x 0.4x 0.3x 3.7x 2.9x
$ 5.00 1.0x 0.7x 0.5x 0.4x 3.7x 2.9x
$ 6.00 1.2x 0.8x 0.6x 0.4x 3.8x 3.0x
$ 7.00 1.4x 1.0x 0.7x 0.5x 3.8x 3.0x
$ 8.00 1.6x 1.1x 0.8x 0.6x 3.9x 3.1x
$ 9.00 1.7x 1.2x 0.9x 0.7x 3.9x 3.1x
$10.00 1.9x 1.4x 1.0x 0.7x 4.0x 3.2x
$11.00 2.1x 1.5x 1.1x 0.8x 4.1x 3.2x
$12.00 2.3x 1.6x 1.2x 0.9x 4.1x 3.2x
$13.00 2.5x 1.8x 1.3x 1.0x 4.2x 3.3x
$14.00 2.7x 1.9x 1.4x 1.0x 4.2x 3.3x
</TABLE>
- ---------------
(a) Cash flow per share defined as net income plus deferred taxes, plus
depreciation and amortization, divided by the pro forma number of shares
outstanding.
- 70 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
POST-REPURCHASE TRADING ANALYSIS-COMPANY REVISED BASE CASE: 1997-2000 ANNUAL COST SAVINGS-$30
(Dollars in millions except per share data)
SCENARIO 3: $12 REPURCHASE STOCK PRICE
PRO FORMA PRICE/ MARKET CAPITALIZATION/
EARNINGS PER SHARE PRICE/E.P.S. CASH FLOW PER SHARE (A) EBITDA
REPURCHASE STOCK PRICE ------------------ ---------------------- ----------------------- ----------------------
AMOUNT POST TRANSACTION 1996E 1997E 1996E 1997E 1996E 1997E 1996E 1997E
- ---------- ---------------- -------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$400 $ 4.00 $2.70 $3.71 1.5x 1.1x 0.8x 0.6x 3.4x 2.7x
$ 5.00 1.9x 1.3x 1.0x 0.8x 3.5x 2.8x
$ 6.00 2.2x 1.6x 1.2x 0.9x 3.6x 2.9x
$ 7.00 2.6x 1.9x 1.4x 1.1x 3.7x 3.0x
$ 8.00 3.0x 2.2x 1.6x 1.2x 3.9x 3.0x
$ 9.00 3.3x 2.4x 1.8x 1.4x 4.0x 3.1x
$10.00 3.7x 2.7x 2.0x 1.5x 4.1x 3.2x
$11.00 4.1x 3.0x 2.2x 1.7x 4.2x 3.3x
$12.00 4.4x 3.2x 2.4x 1.8x 4.3x 3.4x
$13.00 4.8x 3.5x 2.6x 2.0x 4.5x 3.5x
$14.00 5.2x 3.8x 2.9x 2.1x 4.6x 3.6x
REPURCHASE
AMOUNT
- ----------
$500 $ 4.00 $3.77 $5.34 1.1x 0.7x 0.5x 0.4x 3.8x 3.0x
$ 5.00 1.3x 0.9x 0.7x 0.5x 3.8x 3.0x
$ 6.00 1.6x 1.1x 0.8x 0.6x 3.9x 3.1x
$ 7.00 1.9x 1.3x 1.0x 0.7x 4.0x 3.1x
$ 8.00 2.1x 1.5x 1.1x 0.8x 4.1x 3.2x
$ 9.00 2.4x 1.7x 1.2x 0.9x 4.1x 3.3x
$10.00 2.7x 1.9x 1.4x 1.0x 4.2x 3.3x
$11.00 2.9x 2.1x 1.5x 1.1x 4.3x 3.4x
$12.00 3.2x 2.2x 1.6x 1.2x 4.4x 3.4x
$13.00 3.5x 2.4x 1.8x 1.3x 4.4x 3.5x
$14.00 3.7x 2.6x 1.9x 1.4x 4.5x 3.6x
</TABLE>
- ---------------
(a) Cash flow per share defined as net income plus deferred taxes, plus
depreciation and amortization, divided by the pro forma number of shares
outstanding.
- 71 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
POST-REPURCHASE TRADING ANALYSIS-COMPANY REVISED BASE CASE: 1997-2000 ANNUAL COST SAVINGS-$30
(Dollars in millions except per share data)
SCENARIO 4: $13 REPURCHASE STOCK PRICE
PRO FORMA PRICE/ MARKET CAPITALIZATION/
EARNINGS PER SHARE PRICE/E.P.S. CASH FLOW PER SHARE (A) EBITDA
REPURCHASE STOCK PRICE ------------------ ---------------------- ----------------------- ----------------------
AMOUNT POST TRANSACTION 1996E 1997E 1996E 1997E 1996E 1997E 1996E 1997E
- ---------- ---------------- -------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$400 $ 4.00 $2.42 $3.33 1.7x 1.2x 0.9x 0.7x 3.4x 2.7x
$ 5.00 2.1x 1.5x 1.1x 0.8x 3.6x 2.8x
$ 6.00 2.5x 1.8x 1.4x 1.0x 3.7x 2.9x
$ 7.00 2.9x 2.1x 1.6x 1.2x 3.8x 3.0x
$ 8.00 3.3x 2.4x 1.8x 1.3x 4.0x 3.1x
$ 9.00 3.7x 2.7x 2.0x 1.5x 4.1x 3.2x
$10.00 4.1x 3.0x 2.3x 1.7x 4.2x 3.3x
$11.00 4.5x 3.3x 2.5x 1.9x 4.4x 3.4x
$12.00 5.0x 3.6x 2.7x 2.0x 4.5x 3.6x
$13.00 5.4x 3.9x 3.0x 2.2x 4.6x 3.7x
$14.00 5.8x 4.2x 3.2x 2.4x 4.8x 3.8x
REPURCHASE
AMOUNT
- ----------
$500 $ 4.00 $3.07 $4.35 1.3x 0.9x 0.7x 0.5x 3.8x 3.0x
$ 5.00 1.6x 1.1x 0.8x 0.6x 3.9x 3.1x
$ 6.00 2.0x 1.4x 1.0x 0.7x 4.0x 3.2x
$ 7.00 2.3x 1.6x 1.2x 0.9x 4.1x 3.2x
$ 8.00 2.6x 1.8x 1.3x 1.0x 4.2x 3.3x
$ 9.00 2.9x 2.1x 1.5x 1.1x 4.3x 3.4x
$10.00 3.3x 2.3x 1.7x 1.2x 4.4x 3.5x
$11.00 3.6x 2.5x 1.9x 1.4x 4.5x 3.5x
$12.00 3.9x 2.8x 2.0x 1.5x 4.6x 3.6x
$13.00 4.2x 3.0x 2.2x 1.6x 4.7x 3.7x
$14.00 4.6x 3.2x 2.4x 1.7x 4.7x 3.7x
</TABLE>
- ---------------
(a) Cash flow per share defined as net income plus deferred taxes, plus
depreciation and amortization, divided by the pro forma number of shares
outstanding.
- 72 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
POST-REPURCHASE TRADING ANALYSIS-COMPANY REVISED BASE CASE: 1997-2000 ANNUAL COST SAVINGS-$30
(Dollars in millions except per share data)
SCENARIO 5: $14 REPURCHASE STOCK PRICE
PRO FORMA PRICE/ MARKET CAPITALIZATION/
EARNINGS PER SHARE PRICE/E.P.S. CASH FLOW PER SHARE (A) EBITDA
REPURCHASE STOCK PRICE ------------------ ---------------------- ----------------------- ----------------------
AMOUNT POST TRANSACTION 1996E 1997E 1996E 1997E 1996E 1997E 1996E 1997E
- ---------- ---------------- -------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$400 $ 4.00 $2.23 $3.06 1.8x 1.3x 1.0x 0.7x 3.5x 2.8x
$ 5.00 2.2x 1.6x 1.2x 0.9x 3.6x 2.9x
$ 6.00 2.7x 2.0x 1.5x 1.1x 3.8x 3.0x
$ 7.00 3.1x 2.3x 1.7x 1.3x 3.9x 3.1x
$ 8.00 3.6x 2.6x 2.0x 1.5x 4.1x 3.2x
$ 9.00 4.0x 2.9x 2.2x 1.6x 4.2x 3.3x
$10.00 4.5x 3.3x 2.5x 1.8x 4.4x 3.4x
$11.00 4.9x 3.6x 2.7x 2.0x 4.5x 3.5x
$12.00 5.4x 3.9x 3.0x 2.2x 4.6x 3.7x
$13.00 5.8x 4.3x 3.2x 2.4x 4.8x 3.8x
$14.00 6.3x 4.6x 3.5x 2.6x 4.9x 3.9x
REPURCHASE
AMOUNT
- ----------
$500 $ 4.00 $2.65 $3.75 1.5x 1.1x 0.8x 0.6x 3.9x 3.1x
$ 5.00 1.9x 1.3x 1.0x 0.7x 4.0x 3.1x
$ 6.00 2.3x 1.6x 1.2x 0.9x 4.1x 3.2x
$ 7.00 2.6x 1.9x 1.4x 1.0x 4.2x 3.3x
$ 8.00 3.0x 2.1x 1.6x 1.1x 4.3x 3.4x
$ 9.00 3.4x 2.4x 1.8x 1.3x 4.4x 3.5x
$10.00 3.8x 2.7x 2.0x 1.4x 4.5x 3.6x
$11.00 4.2x 2.9x 2.2x 1.6x 4.6x 3.7x
$12.00 3.5x 3.2x 2.3x 1.7x 4.7x 3.7x
$13.00 4.9x 3.5x 2.5x 1.9x 4.8x 3.8x
$14.00 5.3x 3.7x 2.7x 2.0x 4.9x 3.9x
</TABLE>
- ---------------
(a) Cash flow per share defined as net income plus deferred taxes, plus
depreciation and amortization, divided by the pro forma number of shares
outstanding.
- 73 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
ANALYSIS OF BLENDED SHARE PRICE
(Dollars in millions except per share data)
SCENARIO: COMPANY REVISED DOWNSIDE CASE: 1997-2000 ANNUAL COST SAVINGS-$30
Current Stock Price $12.625
<S> <C> <C> <C> <C> <C>
Repurchase Price $10.00 $11.00 $12.00 $13.00 $14.00
$ Repurchases (millions) $ 400 $ 400 $ 400 $ 400 $ 400
% Repurchased 71.8% 65.3% 59.8% 55.2% 51.3%
------ ------ ------ ------ ------
# of Shares Repurchased 40.0 36.4 33.3 30.8 28.6
Pro Forma # of Shares 15.7 19.3 22.4 24.9 27.1
Pro Forma EPS:
1996E $ 2.81 $ 2.28 $ 1.97 $ 1.77 $ 1.63
1997E 2.57 2.09 1.80 1.62 1.49
Blended Share Price Assuming
No Change Post-Repurchase $10.74 $11.56 $12.25 $12.83 $13.33
Implied Share Price Effects:
Pro-Rated Repurchases $ 7.18 $ 7.18 $ 7.18 $ 7.18 $ 7.18
Remaining Interest (a) 3.17 3.17 3.17 3.17 3.17
------ ------ ------ ------ ------
Blended Share Price $10.35 $10.35 $10.35 $10.35 $10.35
====== ====== ====== ====== ======
Pro Forma Stock Price (a) $11.25 $ 9.14 $ 7.90 $ 7.09 $ 6.51
</TABLE>
- ----------------
(a) Assumes post-trading multiple settles at 4.0x 1996 estimated EPS.
- 74 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
ANALYSIS OF BLENDED SHARE PRICE
(Dollars in millions except per share data)
SCENARIO: COMPANY REVISED DOWNSIDE CASE: 1997-2000 ANNUAL COST SAVINGS-$30
Current Stock Price $12.625
<S> <C> <C> <C> <C> <C>
Repurchase Price $10.00 $11.00 $12.00 $13.00 $14.00
$ Repurchases (millions) $ 500 $ 500 $ 500 $ 500 $ 500
% Repurchased 89.8% 81.6% 74.8% 69.1% 64.1%
------ ------ ------ ------ ------
# of Shares Repurchased 50.0 45.5 41.7 38.5 35.7
Pro Forma # of Shares 5.7 10.2 14.0 17.2 20.0
Pro Forma EPS:
1996E $ 6.42 $ 3.57 $ 2.61 $ 2.12 $ 1.83
1997E 5.67 3.16 2.30 1.88 1.62
Blended Share Price Assuming
No Change Post-Repurchase $10.27 $11.30 $12.16 $12.88 $13.51
Implied Share Price Effects:
Pro-Rated Repurchases $ 8.98 $ 8.98 $ 8.98 $ 8.98 $ 8.98
Remaining Interest (a) 2.63 2.63 2.63 2.63 2.63
------ ------ ------ ------ ------
Blended Share Price $11.61 $11.61 $11.61 $11.61 $11.61
====== ====== ====== ====== ======
Pro Forma Stock Price (a) $25.69 $14.29 $10.43 $ 8.49 $ 7.33
</TABLE>
- ----------------
(a) Assumes post-trading multiple settles at 4.0x 1996 estimated EPS.
- 75 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
POST-REPURCHASE TRADING ANALYSIS-COMPANY REVISED DOWNSIDE CASE: 1997-2000 ANNUAL COST SAVINGS-$30
(Dollars in millions except per share data)
SCENARIO 1: $10 REPURCHASE STOCK PRICE
PRO FORMA PRICE/ MARKET CAPITALIZATION/
EARNINGS PER SHARE PRICE/E.P.S. CASH FLOW PER SHARE (A) EBITDA
REPURCHASE STOCK PRICE ------------------ ---------------------- ----------------------- ----------------------
AMOUNT POST TRANSACTION 1996E 1997E 1996E 1997E 1996E 1997E 1996E 1997E
- ---------- ---------------- -------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$400 $ 4.00 $2.81 $2.57 1.4x 1.6x 0.7x 0.6x 3.7x 3.5x
$ 5.00 1.8x 1.9x 0.8x 0.7x 3.8x 3.6x
$ 6.00 2.1x 2.3x 1.0x 0.9x 3.9x 3.7x
$ 7.00 2.5x 2.7x 1.2x 1.0x 4.0x 3.8x
$ 8.00 2.8x 3.1x 1.3x 1.2x 4.1x 3.9x
$ 9.00 3.2x 3.5x 1.5x 1.3x 4.2x 4.0x
$10.00 3.6x 3.9x 1.7x 1.5x 4.3x 4.1x
$11.00 3.9x 4.3x 1.8x 1.6x 4.4x 4.2x
$12.00 4.3x 4.7x 2.0x 1.8x 4.5x 4.2x
$13.00 4.6x 5.1x 2.2x 1.9x 4.6x 4.3x
$14.00 5.0x 5.5x 2.4x 2.1x 4.7x 4.4x
REPURCHASE
AMOUNT
- ----------
$500 $ 4.00 $6.42 $5.67 0.6x 0.7x 0.3x 0.2x 4.1x 3.9x
$ 5.00 0.8x 0.9x 0.3x 0.3x 4.2x 3.9x
$ 6.00 0.9x 1.1x 0.4x 0.4x 4.2x 3.9x
$ 7.00 1.1x 1.2x 0.5x 0.4x 4.2x 4.0x
$ 8.00 1.2x 1.4x 0.5x 0.5x 4.3x 4.0x
$ 9.00 1.4x 1.6x 0.6x 0.5x 4.3x 4.0x
$10.00 1.6x 1.8x 0.7x 0.6x 4.3x 4.1x
$11.00 1.7x 1.9x 0.7x 0.6x 4.4x 4.1x
$12.00 1.9x 2.1x 0.8x 0.7x 4.4x 4.1x
$13.00 2.0x 2.3x 0.9x 0.8x 4.4x 4.2x
$14.00 2.2x 2.5x 0.9x 0.8x 4.5x 4.2x
</TABLE>
- ---------------
(a) Cash flow per share defined as net income plus deferred taxes, plus
depreciation and amortization, divided by the pro forma number of shares
outstanding.
- 76 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
POST-REPURCHASE TRADING ANALYSIS-COMPANY REVISED DOWNSIDE CASE: 1997-2000 ANNUAL COST SAVINGS-$30
(Dollars in millions except per share data)
SCENARIO 2: $11 REPURCHASE STOCK PRICE
PRO FORMA PRICE/ MARKET CAPITALIZATION/
EARNINGS PER SHARE PRICE/E.P.S. CASH FLOW PER SHARE (A) EBITDA
REPURCHASE STOCK PRICE ------------------ ---------------------- ----------------------- ----------------------
AMOUNT POST TRANSACTION 1996E 1997E 1996E 1997E 1996E 1997E 1996E 1997E
- ---------- ---------------- -------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$400 $ 4.00 $2.28 $2.09 1.8x 1.9x 0.8x 0.7x 3.8x 3.6x
$ 5.00 2.2x 2.4x 1.0x 0.9x 4.0x 3.7x
$ 6.00 2.6x 2.9x 1.2x 1.1x 4.1x 3.8x
$ 7.00 3.1x 3.4x 1.4x 1.3x 4.2x 3.9x
$ 8.00 3.5x 3.8x 1.7x 1.5x 4.3x 4.1x
$ 9.00 3.9x 4.3x 1.9x 1.7x 4.4x 4.2x
$10.00 4.4x 4.8x 2.1x 1.8x 4.5x 4.3x
$11.00 4.8x 5.3x 2.3x 2.0x 4.7x 4.4x
$12.00 5.3x 5.8x 2.5x 2.2x 4.8x 4.5x
$13.00 5.7x 6.2x 2.7x 2.4x 4.9x 4.6x
$14.00 6.1x 6.7x 2.9x 2.6x 5.0x 4.7x
REPURCHASE
AMOUNT
- ----------
$500 $ 4.00 $3.57 $3.16 1.1x 1.3x 0.5x 0.4x 4.2x 4.0x
$ 5.00 1.4x 1.6x 0.6x 0.5x 4.3x 4.0x
$ 6.00 1.7x 1.9x 0.7x 0.6x 4.4x 4.1x
$ 7.00 2.0x 2.2x 0.8x 0.7x 4.4x 4.2x
$ 8.00 2.2x 2.5x 1.0x 0.8x 4.5x 4.2x
$ 9.00 2.5x 2.9x 1.1x 1.0x 4.6x 4.3x
$10.00 2.8x 3.2x 1.2x 1.1x 4.6x 4.3x
$11.00 3.1x 3.5x 1.3x 1.2x 4.7x 4.4x
$12.00 3.4x 3.8x 1.4x 1.3x 4.7x 4.5x
$13.00 3.6x 4.1x 1.5x 1.4x 4.8x 4.5x
$14.00 3.9x 4.4x 1.7x 1.5x 4.9x 4.6x
</TABLE>
- ---------------
(a) Cash flow per share defined as net income plus deferred taxes, plus
depreciation and amortization, divided by the pro forma number of shares
outstanding.
- 77 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
POST-REPURCHASE TRADING ANALYSIS-COMPANY REVISED DOWNSIDE CASE: 1997-2000 ANNUAL COST SAVINGS-$30
(Dollars in millions except per share data)
SCENARIO 3: $12 REPURCHASE STOCK PRICE
PRO FORMA PRICE/ MARKET CAPITALIZATION/
EARNINGS PER SHARE PRICE/E.P.S. CASH FLOW PER SHARE (A) EBITDA
REPURCHASE STOCK PRICE ------------------ ---------------------- ----------------------- ----------------------
AMOUNT POST TRANSACTION 1996E 1997E 1996E 1997E 1996E 1997E 1996E 1997E
- ---------- ---------------- -------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$400 $ 4.00 $1.97 $1.80 2.0x 2.2x 1.0x 0.9x 3.9x 3.7x
$ 5.00 2.5x 2.8x 1.2x 1.1x 4.0x 3.8x
$ 6.00 3.0x 3.3x 1.4x 1.3x 4.2x 3.9x
$ 7.00 3.5x 3.9x 1.7x 1.5x 4.3x 4.1x
$ 8.00 4.1x 4.4x 1.9x 1.7x 4.5x 4.2x
$ 9.00 4.6x 5.0x 2.2x 1.9x 4.6x 4.3x
$10.00 5.1x 5.5x 2.4x 2.1x 4.7x 4.4x
$11.00 5.6x 6.1x 2.6x 2.3x 4.9x 4.6x
$12.00 6.1x 6.7x 2.9x 2.6x 5.0x 4.7x
$13.00 6.6x 7.2x 3.1x 2.8x 5.1x 4.8x
$14.00 7.1x 7.8x 3.3x 3.0x 5.3x 5.0x
REPURCHASE
AMOUNT
- ----------
$500 $ 4.00 $2.61 $2.30 1.5x 1.7x 0.7x 0.6x 4.3x 4.1x
$ 5.00 1.9x 2.2x 0.8x 0.7x 4.4x 4.2x
$ 6.00 2.3x 2.6x 1.0x 0.9x 4.5x 4.2x
$ 7.00 2.7x 3.0x 1.1x 1.0x 4.6x 4.3x
$ 8.00 3.1x 3.5x 1.3x 1.2x 4.7x 4.4x
$ 9.00 3.5x 3.9x 1.5x 1.3x 4.8x 4.5x
$10.00 3.8x 4.3x 1.6x 1.5x 4.9x 4.6x
$11.00 4.2x 4.8x 1.8x 1.6x 4.9x 4.6x
$12.00 4.6x 5.2x 2.0x 1.7x 5.0x 4.7x
$13.00 5.0x 5.6x 2.1x 1.9x 5.1x 4.8x
$14.00 5.4x 6.1x 2.3x 2.0x 5.2x 4.9x
</TABLE>
- ---------------
(a) Cash flow per share defined as net income plus deferred taxes, plus
depreciation and amortization, divided by the pro forma number of shares
outstanding.
- 78 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
POST-REPURCHASE TRADING ANALYSIS-COMPANY REVISED DOWNSIDE CASE: 1997-2000 ANNUAL COST SAVINGS-$30
(Dollars in millions except per share data)
SCENARIO 4: $13 REPURCHASE STOCK PRICE
PRO FORMA PRICE/ MARKET CAPITALIZATION/
EARNINGS PER SHARE PRICE/E.P.S. CASH FLOW PER SHARE (A) EBITDA
REPURCHASE STOCK PRICE ------------------ ---------------------- ----------------------- ----------------------
AMOUNT POST TRANSACTION 1996E 1997E 1996E 1997E 1996E 1997E 1996E 1997E
- ---------- ---------------- -------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$400 $ 4.00 $1.77 $1.62 2.3x 2.5x 1.1x 1.0x 4.0x 3.7x
$ 5.00 2.8x 3.1x 1.3x 1.2x 4.1x 3.9x
$ 6.00 3.4x 3.7x 1.6x 1.4x 4.3x 4.0x
$ 7.00 4.0x 4.3x 1.9x 1.7x 4.4x 4.2x
$ 8.00 4.5x 4.9x 2.1x 1.9x 4.6x 4.3x
$ 9.00 5.1x 5.6x 2.4x 2.1x 4.7x 4.5x
$10.00 5.6x 6.2x 2.7x 2.4x 4.9x 4.6x
$11.00 6.2x 6.8x 2.9x 2.6x 5.0x 4.7x
$12.00 6.8x 7.4x 3.2x 2.9x 5.2x 4.9x
$13.00 7.3x 8.0x 3.5x 3.1x 5.3x 5.0x
$14.00 7.9x 8.7x 3.7x 3.3x 5.5x 5.2x
REPURCHASE
AMOUNT
- ----------
$500 $ 4.00 $2.12 $1.88 1.9x 2.1x 0.8x 0.7x 4.4x 4.2x
$ 5.00 2.4x 2.7x 1.0x 0.9x 4.5x 4.2x
$ 6.00 2.8x 3.2x 1.2x 1.1x 4.6x 4.3x
$ 7.00 3.3x 3.7x 1.4x 1.2x 4.7x 4.4x
$ 8.00 3.8x 4.3x 1.6x 1.4x 4.8x 4.5x
$ 9.00 4.2x 4.8x 1.8x 1.6x 4.9x 4.6x
$10.00 4.7x 5.3x 2.0x 1.8x 5.0x 4.7x
$11.00 5.2x 5.9x 2.2x 2.0x 5.2x 4.8x
$12.00 5.7x 6.4x 2.4x 2.1x 5.3x 4.9x
$13.00 6.1x 6.9x 2.6x 2.3x 5.4x 5.0x
$14.00 6.6x 7.5x 2.8x 2.5x 5.5x 5.1x
</TABLE>
- ---------------
(a) Cash flow per share defined as net income plus deferred taxes, plus
depreciation and amortization, divided by the pro forma number of shares
outstanding.
- 79 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE III. RECAPITALIZATION ANALYSIS
- -----------------------------------------------------------------------------------------
POST-REPURCHASE TRADING ANALYSIS-COMPANY REVISED DOWNSIDE CASE: 1997-2000 ANNUAL COST SAVINGS-$30
(Dollars in millions except per share data)
SCENARIO 5: $14 REPURCHASE STOCK PRICE
PRO FORMA PRICE/ MARKET CAPITALIZATION/
EARNINGS PER SHARE PRICE/E.P.S. CASH FLOW PER SHARE (A) EBITDA
REPURCHASE STOCK PRICE ------------------ ---------------------- ----------------------- ----------------------
AMOUNT POST TRANSACTION 1996E 1997E 1996E 1997E 1996E 1997E 1996E 1997E
- ---------- ---------------- -------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$400 $ 4.00 $1.63 $1.49 2.5x 2.7x 1.2x 1.0x 4.0x 3.8x
$ 5.00 3.1x 3.4x 1.5x 1.3x 4.2x 3.9x
$ 6.00 3.7x 4.0x 1.7x 1.6x 4.4x 4.1x
$ 7.00 4.3x 4.7x 2.0x 1.8x 4.5x 4.3x
$ 8.00 4.9x 5.4x 2.3x 2.1x 4.7x 4.4x
$ 9.00 5.5x 6.1x 2.6x 2.3x 4.9x 4.6x
$10.00 6.1x 6.7x 2.9x 2.6x 5.0x 4.7x
$11.00 6.8x 7.4x 3.2x 2.8x 5.2x 4.9x
$12.00 7.4x 8.1x 3.5x 3.1x 5.4x 5.0x
$13.00 8.0x 8.7x 3.8x 3.4x 5.5x 5.2x
$14.00 8.6x 9.4x 4.1x 3.6x 5.7x 5.4x
REPURCHASE
AMOUNT
- ----------
$500 $ 4.00 $1.83 $1.62 2.2x 2.5x 0.9x 0.8x 4.5x 4.2x
$ 5.00 2.7x 3.1x 1.2x 1.0x 4.6x 4.3x
$ 6.00 3.3x 3.7x 1.4x 1.2x 4.7x 4.4x
$ 7.00 3.8x 4.3x 1.6x 1.4x 4.8x 4.6x
$ 8.00 4.4x 4.9x 1.9x 1.7x 5.0x 4.7x
$ 9.00 4.9x 5.6x 2.1x 1.9x 5.1x 4.8x
$10.00 5.5x 6.2x 2.3x 2.1x 5.2x 4.9x
$11.00 6.0x 6.8x 2.6x 2.3x 5.3x 5.0x
$12.00 6.6x 7.4x 2.8x 2.5x 5.5x 5.1x
$13.00 7.1x 8.0x 3.0x 2.7x 5.6x 5.3x
$14.00 7.6x 8.7x 3.3x 2.9x 5.7x 5.4x
</TABLE>
- ---------------
(a) Cash flow per share defined as net income plus deferred taxes, plus
depreciation and amortization, divided by the pro forma number of shares
outstanding.
- 80 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE DCF ANALYSIS OF PLATE-COMPANY REVISED BASE CASE
- ----------------------------------------------------------------------------------------
ASSUMED INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions except per share data)
ACTUAL PROJECTED
-------------------------- -------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $518.7 $700.8 $1,030.2 $856.7 $905.0 $886.9 $909.8 $906.9
Operating EBITDA 54.2 89.4 284.2 187.9 208.1 180.6 220.7 227.8
Cost Savings - - - - - - - -
EBITDA 54.2 89.4 284.2 187.9 208.1 180.6 220.7 227.8
Less: D & A (38.8) (40.9) (43.0) (39.1) (52.8) (55.1) (55.1) (55.1)
----- ----- -------- ----- ----- ------ ------ ------
EBIT 15.4 48.5 241.2 148.8 155.3 125.6 165.6 172.7
SAR's & Other Income - - 2.8 (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Income/(Expense) (22.4) (20.2) (14.6) (10.2) (3.6) 10.7 27.9 47.4
----- ----- ------ ------ ------
Pretax Income (7.0) 28.3 228.2 135.9 149.3 135.1 192.3 219.0
Income Taxes 1.5 (9.2) (78.1) (47.6) (52.2) (47.3) (67.3) (76.7)
----- ----- -------- ----- ----- ------ ------ ------
NET INCOME ($5.5) $19.1 $150.0 $88.3 $97.0 $87.8 $125.0 $142.4
Plus: Deferred Taxes $1.0 $10.2 $12.3 $8.1 $7.2 $6.7
Plus: Dep. & Amortization 43.0 39.1 52.8 55.1 55.1 55.1
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (1.7) 0.4
Less: Capital Expenditures (53.9) (104.2) (47.5) (31.5) (25.0) (25.0)
-------- ----- ----- ------ ------ ------
Free Cash Flow $141.4 $3.7 $111.4 $137.5 $160.6 $179.5
======== ===== ===== ====== ====== ======
Unlevered Cash Flow for DCF $151.9 $10.4 $113.7 $130.6 $142.5 $148.7
SUMMARY OF DISCOUNTED CASH FLOW VALUATION
<CAPTION>
PV OF TERMINAL VALUE FOR 5 YEAR SUM OF PV OF
AVERAGE EBITDA EXIT MULTIPLES CASH FLOWS AND TERMS. VALUE
DISCOUNT PRESENT VALUE ---------------------------------- -----------------------------------
RATE OF CASH FLOWS 4.0x 5.0x 6.0x 4.0x 5.0x 6.0x
- -------- --------------- ------- ------- ------- ------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $391.1 $509.2 $636.5 $763.8 $900.3 $1,027.6 $1,154.9
11.0% 379.2 486.7 608.4 730.0 865.9 987.5 $1,109.2
12.0% 367.7 465.3 581.7 698.0 833.1 949.4 $1,065.8
13.0% 356.8 445.1 556.4 667.7 801.9 913.2 $1,024.5
DISCOUNT ----------------------------------
RATE NET DEBT TOTAL EQUITY VALUE PER SHARE IMPLIED PERPETUAL GROWTH RATE
- -------- --------------- ---------------------------------- -----------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $132.8 $13.78 $16.07 $18.35 -8.1% -4.5% -2.1%
11.0% 13.16 15.35 17.53 -7.1% -3.5% -1.1%
12.0% 12.57 14.66 16.75 -6.1% -2.5% -0.1%
13.0% 12.01 14.01 16.01 -5.1% -1.5% 0.9%
----------------------------------
</TABLE>
- 81 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE DCF ANALYSIS OF PETROCHEMICALS-COMPANY REVISED BASE CASE
- ----------------------------------------------------------------------------------------
ASSUMED INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions except per share data)
ACTUAL PROJECTED
-------------------------- -------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $399.4 $578.3 $886.2 $689.6 $707.3 $664.7 $690.2 $695.5
Operating EBITDA 21.5 62.3 239.5 126.1 122.3 76.3 117.7 133.1
Cost Savings - - - - - - - -
EBITDA 21.5 62.3 239.5 126.1 122.3 76.3 117.7 133.1
Less: D & A (25.0) (26.3) (28.4) (25.0) (35.5) (37.8) (37.8) (37.8)
----- ----- -------- ----- ----- ------ ------ ------
EBIT (3.5) 36.0 213.4 101.1 86.7 38.5 79.9 95.3
SAR's & Other Income - - (0.8) (1.4) - - - -
Interest Expense (9.4) (9.7) (1.4) 4.0 8.3 15.4 23.2 33.1
----- ----- -------- ----- ----- ------ ------ ------
Pretax Income (12.9) 26.3 211.2 103.7 95.1 53.8 103.1 128.4
Income Taxes 3.9 (8.4) (70.8) (36.3) (33.3) (18.8) (36.1) (44.9)
----- ----- -------- ----- ----- ------ ------ ------
NET INCOME ($9.0) $17.9 $140.4 $67.4 $61.8 $35.0 $67.0 $83.5
Plus: Deferred Taxes ($3.9) $2.6 $4.0 ($1.3) ($1.3) ($1.3)
Plus: Dep. & Amortization 28.4 25.0 35.5 37.8 37.8 37.8
Less: Change in Working Capital (0.9) (30.5) 2.2 15.1 (1.9) (0.4)
Less: Capital Expenditures (45.7) (53.7) (35.4) (26.5) (20.0) (20.0)
-------- ----- ----- ------ ------ ------
Free Cash Flow $118.2 $10.9 $68.2 $60.2 $81.6 $99.6
======== ===== ===== ====== ====== ======
Unlevered Cash Flow for DCF $119.2 $8.3 $62.8 $50.2 $66.5 $78.0
SUMMARY OF DISCOUNTED CASH FLOW VALUATION
<CAPTION>
PV OF TERMINAL VALUE FOR 5 YEAR SUM OF PV OF
AVERAGE EBITDA EXIT MULTIPLES CASH FLOWS AND TERM. VALUE
DISCOUNT PRESENT VALUE ---------------------------------- -----------------------------------
RATE OF CASH FLOWS 4.0x 5.0x 6.0x 4.0x 5.0x 6.0x
- -------- --------------- ------- ------- ------- ------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $191.0 $285.8 $357.3 $428.8 $476.8 $548.3 $619.8
11.0% 185.2 273.2 341.5 409.8 458.4 526.7 $595.0
12.0% 179.7 261.2 326.5 391.8 440.9 506.2 $571.5
13.0% 174.4 249.9 312.3 374.8 424.3 486.8 $549.2
DISCOUNT ----------------------------------
RATE NET DEBT TOTAL EQUITY VALUE PER SHARE IMPLIED PERPETUAL GROWTH RATE
- -------- --------------- ---------------------------------- -----------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $0.0 $8.56 $9.84 $11.13 -6.9% -3.6% -1.3%
11.0% 8.23 9.46 10.68 -5.9% -2.6% -0.3%
12.0% 7.92 9.09 10.26 -4.9% -1.6% 0.7%
13.0% 7.62 8.74 9.86 -3.9% -0.6% 1.7%
----------------------------------
</TABLE>
- 82 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE DCF ANALYSIS OF PULP CHEMICALS-COMPANY REVISED BASE CASE
- ----------------------------------------------------------------------------------------
ASSUMED INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions except per share data)
ACTUAL PROJECTED
-------------------------- -------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $119.3 $122.5 $144.0 $160.7 $199.4 $223.9 $219.6 $211.4
EBITDA 32.7 27.1 44.7 61.8 85.8 104.4 102.9 94.7
Less: D & A (13.8) (14.6) (14.6) (14.1) (17.2) (17.3) (17.3) (17.3)
----- ----- -------- ----- ----- ------ ------ ------
EBIT 18.9 12.5 30.1 47.7 68.6 87.1 85.7 77.5
SAR's & Other Income - - - (1.4) (2.5) (1.2) (1.2) (1.2)
Interest Expense (13.0) (12.4) (13.2) (13.7) (11.7) (5.1) 3.4 12.1
----- ----- -------- ----- ----- ------ ------ ------
Pretax Income 5.9 0.1 16.9 32.6 54.4 80.8 87.9 88.4
Income Taxes (2.4) 1.1 (7.2) (11.4) (19.0) (28.3) (30.8) (30.9)
----- ----- -------- ----- ----- ------ ------ ------
NET INCOME $3.5 $1.2 $9.7 $21.2 $35.3 $52.5 $57.2 $57.4
Plus: Deferred Taxes $5.0 $7.6 $8.3 $9.4 $8.5 $8.0
Plus: Dep. & Amortization 14.6 14.1 17.2 17.3 17.3 17.3
Less: Change in Working Capital 2.2 0.8 (5.4) 2.9 0.4 0.8
Less: Capital Expenditures (8.2) (50.6) (12.1) (5.0) (5.0) (5.0)
-------- ----- ----- ------ ------ ------
Free Cash Flow $23.2 ($6.9) $43.3 $77.1 $78.3 $78.5
======== ===== ===== ====== ====== ======
Unlevered Cash Flow for DCF $30.8 $2.0 $51.0 $80.4 $76.1 $70.6
SUMMARY OF DISCOUNTED CASH FLOW VALUATION
<CAPTION>
PV OF TERMINAL VALUE FOR 5 YEAR SUM OF PV OF
AVERAGE EBITDA EXIT MULTIPLES CASH FLOWS AND TERM. VALUE
DISCOUNT PRESENT VALUE ---------------------------------- -----------------------------------
RATE OF CASH FLOWS 4.0x 5.0x 6.0x 4.0x 5.0x 6.0x
- -------- --------------- ------- ------- ------- ------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $200.2 $223.4 $279.2 $335.0 $423.6 $479.4 $535.3
11.0% 194.0 213.5 266.9 320.2 407.5 460.9 $514.3
12.0% 188.1 204.1 255.2 306.2 392.2 443.3 $494.3
13.0% 182.5 195.2 244.1 292.9 377.7 426.5 $475.3
DISCOUNT ----------------------------------
RATE NET DEBT TOTAL EQUITY VALUE PER SHARE IMPLIED PERPETUAL GROWTH RATE
- -------- --------------- ---------------------------------- -----------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $132.8 $5.22 $6.22 $7.23 -5.6% -2.5% -0.4%
11.0% 4.93 5.89 6.85 -4.6% -1.5% 0.6%
12.0% 4.66 5.57 6.49 -3.6% -0.5% 1.6%
13.0% 4.40 5.27 6.15 -2.6% 0.5% 2.6%
----------------------------------
</TABLE>
- 83 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE DCF ANALYSIS OF PLATE-COMPANY REVISED DOWNSIDE CASE
- ----------------------------------------------------------------------------------------
ASSUMED INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions except per share data)
ACTUAL PROJECTED
-------------------------- -------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $518.7 $700.8 $1,030.2 $785.4 $827.0 $812.4 $849.9 $847.4
Operating EBITDA 54.2 89.4 284.2 162.9 143.2 120.2 170.0 177.4
Cost Savings - - - - - - - -
EBITDA 54.2 89.4 284.2 162.9 143.2 120.2 170.0 177.4
Less: D & A (38.8) (40.9) (43.0) (39.1) (52.1) (53.4) (53.4) (53.4)
----- ----- -------- ----- ----- ------ ------ ------
EBIT 15.4 48.5 241.2 123.8 91.1 66.8 116.5 123.9
SAR's & Other Income - - 2.8 (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Income/(Expense) (22.4) (20.2) (14.6) (11.2) (7.2) 3.3 15.7 30.2
----- ----- -------- ----- ----- ------ ------ ------
Pretax Income (7.0) 28.3 228.2 109.9 81.4 68.8 131.1 153.0
Income Taxes 1.5 (9.2) (78.1) (38.5) (28.5) (24.1) (45.9) (53.5)
----- ----- -------- ----- ----- ------ ------ ------
NET INCOME ($5.5) $19.1 $150.0 $71.4 $52.9 $44.7 $85.2 $99.4
Plus: Deferred Taxes 1.0 10.2 12.3 8.1 7.2 6.7
Plus: Dep. & Amortization 43.0 39.1 52.1 53.4 53.4 53.4
Less: Change in Working Capital 1.3 (29.7) (3.2) 18.0 (3.4) 0.4
Less: Capital Expenditures (53.9) (104.2) (31.7) (25.0) (25.0) (25.0)
-------- ----- ----- ------ ------ ------
Free Cash Flow $141.4 (13.2) $82.4 $99.3 $117.4 $135.0
======== ===== ===== ====== ====== ======
Unlevered Cash Flow for DCF $151.9 ($5.9) $87.1 $97.2 $107.2 $115.4
SUMMARY OF DISCOUNTED CASH FLOW VALUATION
<CAPTION>
PV OF TERMINAL VALUE FOR 5 YEAR SUM OF PV OF
AVERAGE EBITDA EXIT MULTIPLES CASH FLOWS AND TERM. VALUE
DISCOUNT PRESENT VALUE ---------------------------------- -----------------------------------
RATE OF CASH FLOWS 4.0x 5.0x 6.0x 4.0x 5.0x 6.0x
- -------- --------------- ------- ------- ------- ------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $284.5 $384.3 $480.3 $576.4 $668.8 $764.8 $860.9
11.0% 275.5 367.3 459.1 550.9 642.8 734.6 $826.4
12.0% 266.9 351.2 439.0 526.8 618.1 705.9 $793.7
13.0% 258.7 335.9 419.9 503.9 594.6 678.6 $762.6
DISCOUNT ----------------------------------
RATE NET DEBT TOTAL EQUITY VALUE PER SHARE IMPLIED PERPETUAL GROWTH RATE
- -------- --------------- ---------------------------------- -----------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $132.8 $9.62 $11.35 $13.07 -8.6% -4.9% -2.4%
11.0% 9.16 10.80 12.45 -7.6% -3.9% -1.4%
12.0% 8.71 10.29 11.87 -6.6% -2.9% -0.4%
13.0% 8.29 9.80 11.31 -5.6% -1.9% 0.6%
----------------------------------
</TABLE>
- 84 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE DCF ANALYSIS OF PETROCHEMICALS-COMPANY REVISED DOWNSIDE CASE
- ----------------------------------------------------------------------------------------
ASSUMED INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions except per share data)
ACTUAL PROJECTED
-------------------------- -------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $399.4 $578.3 $886.2 $633.9 $646.6 $620.3 $644.3 $649.2
Operating EBITDA 21.5 62.3 239.5 101.1 71.2 41.8 79.9 94.9
Cost Savings - - - - - - - -
EBITDA 21.5 62.3 239.5 101.1 71.2 41.8 79.9 94.9
Less: D & A (25.0) (26.3) (28.4) (25.0) (34.8) (36.2) (36.2) (36.2)
----- ----- -------- ----- ----- ------ ------ ------
EBIT (3.5) 36.0 213.4 76.1 36.3 5.6 43.8 58.7
SAR's & Other Income - - (0.8) (1.4) - - - -
Interest Expense (9.4) (9.7) (1.4) 3.1 5.4 10.3 15.3 21.8
----- ----- -------- ----- ----- ------ ------ ------
Pretax Income (12.9) 26.3 211.2 77.8 41.7 15.9 59.1 80.5
Income Taxes 3.9 (8.4) (70.8) (27.2) (14.6) (5.6) (20.7) (28.2)
----- ----- -------- ----- ----- ------ ------ ------
NET INCOME ($9.0) $17.9 $140.4 $50.6 $27.1 $10.3 $38.4 $52.3
Plus: Deferred Taxes ($3.9) $2.6 $4.0 ($1.3) ($1.3) ($1.3)
Plus: Dep. & Amortization 28.4 25.0 34.8 36.2 36.2 36.2
Less: Change in Working Capital (0.9) (30.5) 2.2 15.1 (1.9) (0.4)
Less: Capital Expenditures (45.7) (53.7) (19.6) (20.0) (20.0) (20.0)
-------- ----- ----- ------ ------ ------
Free Cash Flow $118.2 ($6.0) $48.6 $40.3 $51.4 $66.8
======== ===== ===== ====== ====== ======
Unlevered Cash Flow for DCF $119.2 ($8.0) $45.1 $33.7 $41.4 $52.6
SUMMARY OF DISCOUNTED CASH FLOW VALUATION
<CAPTION>
PV OF TERMINAL VALUE FOR 5 YEAR SUM OF PV OF
AVERAGE EBITDA EXIT MULTIPLES CASH FLOWS AND TERM. VALUE
DISCOUNT PRESENT VALUE ---------------------------------- -----------------------------------
RATE OF CASH FLOWS 4.0x 5.0x 6.0x 4.0x 5.0x 6.0x
- -------- --------------- ------- ------- ------- ------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $116.3 $193.2 $241.5 $289.7 $309.5 $357.8 $406.0
11.0% 112.6 184.6 230.8 276.9 297.2 343.3 $389.5
12.0% 109.0 176.5 220.7 264.8 285.5 329.7 $373.8
13.0% 105.6 168.9 211.1 253.3 274.4 316.6 $358.9
DISCOUNT ----------------------------------
RATE NET DEBT TOTAL EQUITY VALUE PER SHARE IMPLIED PERPETUAL GROWTH RATE
- -------- --------------- ---------------------------------- -----------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $0.0 $5.56 $6.42 $7.29 -6.9% -3.5% -1.3%
11.0% 5.34 6.16 6.99 -5.9% -2.5% -0.3%
12.0% 5.13 5.92 6.71 -4.9% -1.5% -0.7%
13.0% 4.93 5.68 6.44 -3.9% -0.5% 1.7%
----------------------------------
</TABLE>
- 85 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE DCF ANALYSIS OF PULP CHEMICALS-COMPANY REVISED DOWNSIDE CASE
- ----------------------------------------------------------------------------------------
ASSUMED INCOME AND CASH FLOW: 1997-2000 ANNUAL COST SAVINGS-$0
(Dollars in millions except per share data)
ACTUAL PROJECTED
-------------------------- -------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $119.3 $122.5 $144.0 $151.5 $180.4 $192.1 $205.6 $198.1
EBITDA 32.7 27.1 44.7 61.8 72.0 78.4 90.0 82.5
Less: D & A (13.8) (14.6) (14.6) (14.1) (17.2) (17.3) (17.3) (17.3)
----- ----- -------- ----- ----- ------ ------ ------
EBIT 18.9 12.5 30.1 47.7 54.8 61.1 72.8 65.3
SAR's & Other Income - - - (1.4) (2.5) (1.2) (1.2) (1.2)
Interest Expense (13.0) (12.4) (13.2) (13.7) (12.2) (7.1) (0.3) 7.0
----- ----- ----- ----- ----- ------ ------ ------
Pretax Income 5.9 0.1 16.9 32.6 40.0 52.8 71.3 71.1
Income Taxes (2.4) 1.1 (7.2) (11.4) (14.0) (18.5) (25.0) (24.9)
----- ----- -------- ----- ----- ------ ------ ------
NET INCOME ($3.5) $1.2 $9.7 $21.2 $26.0 $34.3 $46.3 $46.2
Plus: Deferred Taxes $5.0 $7.6 $8.3 $9.4 $8.5 $8.0
Plus: Dep. & Amortization 14.6 14.1 17.2 17.3 17.3 17.3
Less: Change in Working Capital 2.2 0.8 (5.4) 2.9 (1.5) 0.8
Less: Capital Expenditures (8.2) (50.6) (12.1) (5.0) (5.0) (5.0)
-------- ----- ----- ------ ------ ------
Free Cash Flow $23.2 ($6.9) $34.0 $58.9 $65.6 $67.3
======== ===== ===== ====== ====== ======
Unlevered Cash Flow for DCF $30.8 $2.0 $42.0 $63.5 $65.8 $62.7
SUMMARY OF DISCOUNTED CASH FLOW VALUATION
<CAPTION>
PV OF TERMINAL VALUE FOR 5 YEAR SUM OF PV OF
AVERAGE EBITDA EXIT MULTIPLES CASH FLOWS AND TERM. VALUE
DISCOUNT PRESENT VALUE ---------------------------------- -----------------------------------
RATE OF CASH FLOWS 4.0x 5.0x 6.0x 4.0x 5.0x 6.0x
- -------- --------------- ------- ------- ------- ------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $168.2 $191.1 $238.9 $286.7 $359.3 $407.1 $454.9
11.0% 163.0 182.7 228.3 274.0 345.6 391.3 $436.9
12.0% 157.9 174.6 218.3 262.0 332.6 376.2 $419.9
13.0% 153.1 167.1 208.8 250.6 320.2 361.9 $403.7
DISCOUNT ----------------------------------
RATE NET DEBT TOTAL EQUITY VALUE PER SHARE IMPLIED PERPETUAL GROWTH RATE
- -------- --------------- ---------------------------------- -----------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $132.8 $4.07 $4.92 $5.78 -5.3% -2.3% -0.2%
11.0% 3.82 4.64 5.46 -4.3% -1.3% 0.8%
12.0% 3.59 4.37 5.15 -3.3% -0.3% 1.8%
13.0% 3.36 4.11 4.86 -2.3% 0.7% 2.8%
----------------------------------
</TABLE>
- 86 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE V. PUBLIC MARKET COMPARABLE COMPANIES
- -----------------------------------------------------------------------------------------
SUMMARY MARKET AND OPERATING DATA ON SELECTED COMPARABLE CHEMICAL COMPANIES
($ in millions, except share data)
COMMODITY CHEMICAL COMPANIES
-------------------------------------------------------------------
STERLING CYTEC DOW GEORGIA GEON
MEDIAN(a) CHEMICALS, INC. INDUSTRIES CHEMICAL GULF COMPANY
--------- --------------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Latest Quarter End (LTM) 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
Latest Fiscal Yer End 9/30/95 12/31/95 12/31/95 12/31/95 12/31/95
MAJOR PRODUCTS Styrene Specialty Diversified Commodity PVC Resins
commodity and Hybrid Chemicals and polymer Diversified
chemicals Chemicals chemicals Chemicals
CURRENT MARKET INFORMATION
Ticker STX CYT DOW GGC GON
Stock Price (as of 3/29/96) $ 12.63 $ 84.50 $ 87.00 $ 37.50 $ 26.63
52-Week High 13.38 88.38 90.00 39.50 31.38
52-Week Low 7.38 32.63 65.38 28.13 23.38
Price as % of High 94.8% 94.4% 95.6% 96.7% 94.9% 84.9%
Shares Outstanding (MM) 55.7 16.7 248.4 36.9 24.9
Market Value (b) $ 703.1 $1,409.5 $21,611.9 $1,383.2 $ 662.7
Market Capitalization (c) 811.1 1,463.6 25,470.9 1,673.1 737.9
Indicated Dividend $ 0.00 $ 0.00 $ 3.00 $ 0.32 $ 0.50
Dividend Yield 0.00% 0.00% 3.45% 0.85% 1.88%
- ------------------------------------------------------------------------------------------------------------------------
MARKET CAPITALIZATION AS A
MULTIPLE OF: (C)
1997E Net Sales NA x 0.9 x NA x NA x 1.6 x 0.6 x
1996E Net Sales 1.0 0.9 1.1 1.2 1.7 0.6
LTM Net Sales 1.0 0.8 1.2 1.3 1.5 0.6
1997E EBITDA NA x 3.9 x NA x NA x 5.6 x 4.6 x
1996E EBITDA 5.6 4.4 6.5 4.8 6.9 5.5
LTM EBITDA 4.7 3.0 6.9 4.7 4.6 4.0
1997E EBIT NA x 5.3 x NA x NA x 6.5 x 7.3 x
1996E EBIT 8.1 5.6 10.5 6.9 8.1 9.6
LTM EBIT 5.5 3.6 11.9 6.4 5.1 5.8
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
1997E I/B/E/S Estimated
EPS (d) 10.3 x 7.3 x 13.6 x 10.8 x 9.4 x 11.8 x
1996E I/B/E/S Estimated
EPS (d) 11.8 8.1 15.9 11.6 12.0 17.6
LTM EPS 8.6 4.9 19.1 10.5 7.9 9.8
Book Value Per Share 3.2 x 2.8 x 4.1 3.1 x NM x 3.0 x
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
I/B/E/S 5-YEAR GROWTH RATE 7.0% 4.0% 18.0% 8.0% 11.5% 7.0%
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
LEVERAGE RATIOS:
Total Debt/Total Book Cap. 37.5% 31.2% 16.1% 37.6% 85.2% 32.2%
Net Debt/Market Cap. 12.3% 13.3% 3.7% 7.7% 17.3% 10.2%
Total Debt/EBITDA 0.9 x 0.4 x 0.3 1.0 x 0.8 x 0.6 x
- ------------------------------------------------------------------------------------------------------------------------
SUMMARY CAPITALIZATION: 12/31/95 12/31/95 9/30/95 12/31/95 9/30/95
---------- ---------- ---------- ---------- ----------
Cash & Investments $ 5.6 $ 12.0 $ 3,450.0 $ 2.5 $ 31.6
Short-Term Debt 13.4 4% 0.0 0% 698.0 5% 0.0 0% 14.0 4%
Long-Term Debt 100.2 28% 66.0 16% 4,705.0 33% 292.4 85% 92.8 28%
Minority Interest 0.0 0% 0.0 0% 1,775.0 12% 0.0 0% 0.0 0%
Preferred Equity @ Liq. 0.0 0% 0.1 0% 131.0 1% 0.0 0% 0.0 0%
Common Equity 250.1 69% 342.8 84% 7,048.0(ae) 49% 50.6 15% 224.6 68%
------- ------- --------- ------- -------
Total Book Cap. (e) $363.7 $408.9 $14,357.0 $343.0 $331.4
======= ======= ========= ======= =======
</TABLE>
<TABLE>
<CAPTION>
COMMODITY CHEMICAL COMPANIES
-------------------------------------------------------------------
LYONDELL METHANEX OLIN REXENE UNION
PETROCHEMICAL CORPORATION CORPORATION CORPORATION CARBIDE
--------------- ----------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
Latest Quarter End (LTM) 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
Latest Fiscal Yer End 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
MAJOR PRODUCTS Diversified Methanol Diversified Diversified Diversified
Petrochemicals Chemicals Chemicals Chemicals
(Brass)
CURRENT MARKET INFORMATION
Ticker LYO MEOHF OLN RXN UK
Stock Price (as of 3/29/96) $ 30.50 $ 6.75 $ 87.00 $ 13.38 $ 49.63
52-Week High 32.25 11.00 88.88 15.63 49.88
52-Week Low 21.13 6.00 50.38 5.88 28.38
Price as % of High 95% 61% 97.9% 85.6% 99.5%
Shares Outstanding (MM) 80.0 189.0 24.8 18.7 134.5
Market Value (b) $ 2,440 $ 1,276 $ 2,157.9 $ 249.9 $6,672.3
Market Capitalization (c) $ 3,713 $ 1,302 2,767.6 377.7 7,716.3
Indicated Dividend $ 0.90 $ 0.00 $ 24.0 $ 0.16 $ 0.75
Dividend Yield 2.95% 0.00% 2.76% 1.20% 1.51%
- ------------------------------------------------------------------------------------------------------------------------
MARKET CAPITALIZATION AS A
MULTIPLE OF: (C)
1997E Net Sales 0.9 x 1.5 x NA x NA x NA x
1996E Net Sales 0.8 1.6 0.8 0.7 1.2
LTM Net Sales 0.8 1.0 0.9 0.6 1.3
1997E EBITDA 4.9 x 4.6 x NA x NA x NA x
1996E EBITDA 6.7 5.3 6.5 3.2 5.7
LTM EBITDA 4.7 3.2 7.2 2.6 5.0
1997E EBIT 5.7 x 8.1 x NA x NA x NA x
1996E EBIT 8.2 8.8 10.1 3.8 7.4
LTM EBIT 5.3 4.3 11.3 3.0 6.3
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
1997E I/B/E/S Estimated
EPS (d) 7.8 x 21.1 x 13.4 x 6.6 x 9.7 x
1996E I/B/E/S Estimated
EPS (d) 10.7 23.3 13.5 8.5 10.6
LTM EPS 1.9 6.0 15.9 3.9 9.2
Book Value Per Share 6.4 x 1.1 2.8 x 1.8 x 3.3 x
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
I/B/E/S 5-YEAR GROWTH RATE 8.0% NA 6.5% 6.5% 7.0%
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
LEVERAGE RATIOS:
Total Debt/Total Book Cap. 49.6% 27.2% 39.1% 55.5% 37.4%
Net Debt/Market Cap. 21.9% 2.0% 19.2% 33.8% 11.3%
Total Debt/EBITDA 1.0 x 1.1 1.4 x 1.2 x 0.9 x
- ------------------------------------------------------------------------------------------------------------------------
SUMMARY CAPITALIZATION: 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
---------- ---------- ---------- ---------- ----------
Cash & Investments $ 10 $ 400 $ 7.5 $ 47.3 $449.0
Short-Term Debt 17.3 1% 24.4 2% 122.1 9% 0.0 0% 38.0 1%
Long-Term Debt 807.0 49% 401.3 26% 417.8 30% 175.0 56% 1,285 36%
Minority Interest 459.0 28% 0.0 0% 0.0 0% 0.0 0% 24.0 1%
Preferred Equity @ Liq. 0.0 0% 0.0 0% 77.3 6% 0.0 0% 146.0 4%
Common Equity 380.0 23% 1,139.6 73% 764.0 55% 140.2 44% 2,045.0 58%
------- ------- --------- ------- --------
Total Book Cap. (e) $1,663 $1,565 $ 1,381.2 $315.2 $3,538.0
======= ======= ========= ======= ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE V. PUBLIC MARKET COMPARABLE COMPANIES
- -----------------------------------------------------------------------------------------
SUMMARY MARKET AND OPERATING DATA ON SELECTED COMPARABLE CHEMICAL COMPANIES
($ in millions, except share data)
COMMODITY CHEMICAL COMPANIES
-------------------------------------------------------------------
STERLING CYTEC DOW GEORGIA GEON
MEDIAN(a) CHEMICALS, INC. INDUSTRIES CHEMICAL GULF COMPANY
--------- --------------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
SALES
1997E $ 895.5 (aa) NA NA $ 1,074.5 (ag) $ 1,236.4 (ah)
1996E 863.1 (aa) 1,363.8 (s) 22,000.0 (ac) 988.8 (ag) 1,144.8 (ah)
LTM 981.1 1,260.1 20,200.0 1,081.6 1,267.8
LFY 1,030.2 1,260.1 20,200.0 1,081.6 1,267.8
LFY-1 700.8 1,101.3 20,015.0 955.3 1.208.6
EBITDA (g)
1997E $ 205.6 (aa) NA NA 297.0 (ag) 161.1
1996E 185.2 (aa) 225.8 (s) 5,280.0 (ac) 243.0 (ag) 135.3 (ah)
LTM 267.9 212.6 5,446.0 (ad) 360.0 183.9 (ai)
LFY 285.8 212.6 5,446.0 360.0 183.9
LFY-1 88.7 (ab) 154.6 3,983.0 258.0 160.1
EBIT (h)
1997E $ 152.8 (aa) NA NA $ 258.0 (ag) $ 101.1 (ah)
1996E 146.1 (aa) 139.2 (s) 3,680.0 (ac) 207.0 (ag) 77.0 (ah)
LTM 224.5 122.7 4,004.0 (ad) 327.9 127.2 (ai)
LFY 242.8 122.7 4,004.0 (ad) 327.9 127.2 (ai)
LFY-1 47.8 (ab) 68.5 2,458.0 230.2 101.9
NET INCOME (i)
1997E 95.7 (aa) NA NA $ 141.3 (ag) $ 58.2 (ah)
1996E 86.4 (aa) 87.6 (s) 1,900.0 (ac) 111.0 (ag) 43.4 (ah)
LTM 143.7 83.8 2,223.1 (af) 186.5 70.5
LFY 153.2 83.8 (t) 2,223.1 (af) 186.5 70.5 (ai)
LFY-1 17.6 (ab) 47.7 931.0 122.2 57.9
EARNINGS PER SHARE
I/B/E/S 1997E 1.72 (aa) 6.21 (d) 8.05 (d) 3.98 (d) 2.26 (d)
I/B/E/S 1997E 1.55 (aa) 5.30 (d) 7.50 (d) 3.12 (d) 1.51 (d)
Valueline 1997E NA NA (s) NA (ac) NA (ag) 2.50 (ah)
Valueline 1996E 1.15 4.60 (s) 7.65 (ac) 4.25 (ag) 1.80 (ah)
LTM 2.58 4.42 8.29 4.73 2.72
LFY 2.75 4.42 8.29 4.73 2.72
LFY-1 0.32 2.51 3.37 2.88 2.06
EBITDA MARGIN (g)
1997E NA 23.0 % NA NA 27.6 % 13.0 %
1996E 21.1 % 21.5 % 16.6 % 24.0 % 24.6 % 11.8 %
LTM 24.9 % 27.3 % 16.9 % 27.0 % 33.3 % 14.5 %
LFY 24.9 % 27.7 % 16.9 % 27.0 % 33.3 % 14.5 %
LFY-1 15.5 % 12.7 % 14.0 % 19.9 % 27.0 % 13.2 %
EBIT MARGIN (h)
1997E NA 17.1 % NA NA 24.0 % 8.2 %
1996E 16.4 % 16.9 % 10.2 % 16.7 % 20.9 % 6.7 %
LTM 20.1 % 22.9 % 9.7 % 19.8 % 30.3 % 10.0 %
LFY 20.1 % 23.6 % 9.7 % 19.8 % 30.3 % 10.0 %
LFY-1 11.2 % 6.8 % 6.2 % 12.3 % 24.1 % 8.4 %
NET INCOME MARGIN
1997E NA 10.7 % NA NA 13.1 % 4.7 %
1996E 7.5 % 10.0 % 6.4 % 8.6 % 11.2 % 3.8 %
LTM 10.8 % 14.6 % 6.7 % 11.0 % 17.2 % 5.6 %
LFY 10.8 % 14.9 % 6.7 % 11.0 % 17.2 % 5.6 %
LFY-1 4.7 % 2.5 % 4.3 % 4.7 % 12.8 % 4.8 %
</TABLE>
<TABLE>
<CAPTION>
COMMODITY CHEMICAL COMPANIES
------------------------------------------------------------------------
LYONDELL METHANEX OLIN REXENE UNION
MEDIAN(a) PETROCHEMICAL CORPORATION CORPORATION CORPORATION CARBIDE
--------- ------------- ----------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
SALES
1997E $4,110.0 (ax) $ 846.1 (ay) NA NA NA
1996E 4,710.0 (ax) 826.2 (ay) 3,300.0 (aj) 560.0 (az) 6,500.0 (ak)
LTM 4,936.0 1,249.2 3,149.8 615.2 5,888.0
LFY 4,936.0 1,249.2 3,149.8 615.2 5,888.0
LFY-1 3,857.0 1,487.9 2,658.0 538.0 4,865.0
EBITDA (g)
1997E 765.0 280.7 NA NA NA
1996E 552.0 247.7 429.0 (aj) 118.7 (az) 1,365.0 (ak)
LTM 792.0 400.9 387.0 146.6 1,532.0 (al)
LFY 792.0 400.9 387.0 146.6 1,532.0 (am)
LFY-1 489.0 611.7 308.0 94.8 830.0
EBIT (h)
1997E $ 651.0 (ax) $ 161.5 (ay) NA NA NA
1996E 453.0 (aX) 147.2 (ay) 274.0 (aj) 99.2 (az) 1,040.0 (ak)
LTM 706.0 303.3 244.5 125.1 1,226.0 (al)
LFY 706.0 303.3 244.5 125.1 1,226.0 (al)
LFY-1 424.0 537.2 168.0 75.8 556.0 (am)
NET INCOME (i)
1997E $ 350.0 (ax) $(35.5)(ay) NA NA NA
1996E 224.0 (aX) 4.2 (ay) 150.0 (aj) 49.7 (az) 885.0 (ak)
LTM 389.0 215.4 133.6 65.4 851.8 (al)
LFY 389.0 215.4 133.6 65.4 851.8 (al)
LFY-1 223.0 442.7 84.4 (4.3) 382.1 (an)
EARNINGS PER SHARE
I/B/E/S 1997E 3.90 (d) 0.32 (d) 6.51 (d) 2.02 (d) 5.11 (d)
I/B/E/S 1997E 2.84 (d) 0.29 (d) 6.44 (d) 1.57 (d) 4.68 (d)
Valueline 1997E NA (ah) NA (ah) NA (aj) NA (ah) NA (ak)
Valueline 1996E NA (ah) NA (ah) 6.15 (aj) NA (ah) 5.70 (ak)
LTM 15.94 1.13 5.48 3.42 5.38 (ao)
LFY 15.94 1.13 5.48 3.42 5.38 (ao)
LFY-1 9.57 2.24 3.62 (0.37) 2.24 (ao)
EBITDA MARGIN (g)
1997E 18.6 % 33.2 % NA NA NA
1996E 11.7 % 30.0 % 13.0 % 21.2 % 21.0 %
LTM 16.0 % 32.1 % 12.3 % 23.8 % 26.0 %
LFY 16.0 % 32.1 % 12.3 % 23.8 % 26.0 %
LFY-1 12.7 % 41.1 % 11.6 % 17.6 % 17.1 %
EBIT MARGIN (h)
1997E 15.8 % 19.1 % NA NA NA
1996E 9.6 % 17.8 % 8.3 % 17.7 % 16.0 %
LTM 14.3 % 24.3 % 7.8 % 20.3 % 20.8 %
LFY 14.3 % 24.3 % 7.8 % 20.3 % 20.8 %
LFY-1 11.0 % 36.1 % 6.3 % 14.1 % 11.4 %
NET INCOME MARGIN
1997E 8.5 % (4.2)% NA NA NA
1996E 4.8 % 0.5 % 4.5 % 8.9 % 13.6 %
LTM 7.9 % 17.2 % 4.2 % 10.6 % 14.5 %
LFY 7.9 % 17.2 % 4.2 % 10.6 % 14.5 %
LFY-1 5.8 % 29.8 % 3.2 % (0.8)% 7.9 %
</TABLE>
<PAGE>
PROJECT PLATE V. PUBLIC MARKET COMPARABLE COMPANIES
- -------------------------------------------------------------------------------
SUMMARY MARKET AND OPERATING DATA ON SELECTED COMPARABLE CHEMICAL COMPANIES
($ in millions, except share data)
FOOTNOTES
(a) Median calculation.
(b) Market Value defined as shares outstanding multiplied by current stock
price on 3/29/96.
(c) Market Capitalization defined as market value of common equity plus
short-term debt, long-term debt, minority interest, and preferred stock at
liquidation less cash and investments.
(d) Mean earnings estimates are as reported by the Institutional Brokers
Estimate System (I/B/E/S) database, dated 3/29/96.
(e) Total Book Capitalization defined as book value of common equity plus
short-term debt, long-term debt, minority interest, and preferred stock at
liquidation.
(f) Represents Compounded Annual Growth Rate from Latest Fiscal Year to Latest
Fiscal Year + 2.
(g) EBITDA defined as Earnings Before Interest, Taxes, Depreciation, and
Amortization.
(h) EBIT defined as Earnings Before Interest and Taxes.
(i) Net Income is defined as Net Income Available to Common Stockholders (i.e.,
after preferred dividends, where applicable).
(j) Projected financial information as reported by Valueline, February 2, 1996.
(k) Fiscal Year 1994 EBIT and EBITDA results for Arco exclude a pre-tax
restructuring charge of $30 million and a $26 million pre-tax benefit from
insurance proceeds.
(l) Fiscal Year 1994 Net Income results for Arco exclude an after-tax
restructuring charge of $19 million and a $12 million after-tax benefit
from insurance proceeds.
(m) Projected financial information as reported by Valueline,
December 29, 1995.
(n) Rohm & Haas announced a quarterly dividend increase on July 24, 1995 from
37 cents to 41 cents, effective as of the third quartr of the current
fiscal year.
(o) 1995 EBIT and EBITDA results for Rohm & Haas exclude a $26 million pre-tax
charge related to waste site clean-up.
(p) Fiscal Year 1994 EBIT and EBITDA results for Rohm & Haas exclude a $17
million pre-tax restructuring charge.
(q) LTM Net Income results for Rohm & Haas exclude a $17 million after-tax
charge related to waste site clean-up.
(r) Fiscal Year 1994 Net Income results for Rohm & Haas exclude a $17 million
pre-tax restructuring charge, tax effected at 38% (i.e., $10.5 million
after-tax).
(s) Projected financial information as reported by Salomon Brothers,
December 6, 1995.
(t) Excludes a $195 million charge for the excess of the repurchase price of
preferred stock over the related book value and a gain of $193 million
resulting from a reversal of the valuation allowance. Reported on a fully-
diluted basis.
(u) Projected financial information as reported by Valueline,
December 29, 1995.
(v) 1995 EBIT is estimated using 1994 EBIT margin applied against 1995 net
sales as reported in the press release dated January 29, 1995.
(w) Excludes an after-tax special charge of $4.1 million.
(x) 1994 EBIT and EBITDA for Ethyl exclude a $10.72 million charge for
environmental remediation and an $8 million gain on a legal settlement.
(y) 1994 Net Income for Ethyl excludes a $10.72 million pre-tax charge for
environmental remediation and an $8 million pre-tax gain on a legal
settlement, with a net after-tax effect of $1.69 million.
(z) Projected financial information as reported by Valueline, December 1, 1995.
(aa) Projected financial information as per management.
(ab) Excludes a $2.6 million gain on sale of assets, tax-effected at 40% where
applicable.
(ac) Projected financial information as reported by Valueline, February 2, 1996.
(ad) 1995 EBIT and EBITDA results exclude a pre-tax charge of $330 million for
Dow Chemical's share of Dow Corning's bankruptcy filing costs.
(ae) The common equity amount has been adjusted downward by a $103 million
guaranteed ESOP obligation and excludes temporary equity reclassified in
anticipation of stock repurchase.
(af) 1995 Net Income results exclude an after-tax charge of $1.24 per common
share for Dow Chemical's share of Dow Corning's bankruptcy filing costs.
(ag) Source: DLJ research report dated March 6, 1996.
(ah) Projected financial information as reported by DLJ research report dated
March 11, 1996.
(ai) 1995 EBIT and EBITDA for Geon excludes $64 million in restructuring
charges, tax-effected at 40% where applicable.
(aj) Projected financial information as reported by Valueline, February 2, 1996.
(ak) Projected financial information as reported by Valueline, February 2, 1996.
(al) 1995 EBIT results for Union Carbide exclude a $381 million pre-tax gain on
the reduction of its equity interest in UCAR, a pre-tax gain of $161
million relating to UCAR's IPO, a pre-tax charge of $68 milion for post-
retirement benefits, and a $191 million pre-tax charge for future lease
obligations on unused office space (all tax-effected at 40% where
applicable).
(am) Fiscal Year 1994 EBIT and EBITDA results for Union Carbide exclude a $81
million pre-tax gain on the sale of assets, a $24 million pre-tax charge
for the write-off of an investment in India, a $12 million pre-tax loss on
the sale of assets, $74 pre-tax million associated with legal costs related
to divested companies and a $24 million pre-tax gain on the sale of its
preferred stock investment in OSi Specialties.
(ao) Earnings per share are calculated on a fully diluted basis for Union
Carbide.
(ap) Projected financial information as reported by Valueline, February 2, 1996.
(aq) 1995 EBIT is estimated using 1994 EBIT margin applied against 1995 net
sales as reported in the press release dated January 29, 1995.
(ar) Fiscal Year 1994 EBIT and EBITDA results for Monsanto exclude a $40 million
net pre-tax restructuring charge and a $33 million one-time pre-tax gain on
a tax settlement with the IRS.
(as) Excludes a fourth quarter restructuring charge of $0.17 per share in 1995.
(at) Fiscal Year 1994 Net Income results for Monsanto exclude a $22 million net
after-tax restructuring charge and a $21 million one-time after-tax gain on
a tax settlement with the IRS.
(au) Includes $59.1 million in minority interest.
(av) Excludes restructuring costs of $150 million and a $99.7 million gain on
the sale of a minority interest in its soda ash facility, both tax effected
at 35%.
(aw) Depreciation estimate of $270 million from Value Line research dated
February 9, 1996.
(ax) Source: Donaldson Lufkin & Jenrette Research Report dated January 29, 1996.
(ay) Source: CIBC Wood Gundy research report dated January 16, 1996.
(az) Source: Select Equity Group research report dated October 5, 1995.
- 89 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE V. PUBLIC MARKET COMPARABLE COMPANIES
- -----------------------------------------------------------------------------------------------------
COMPARABLE CREDIT ANALYSIS OF SELECTED CHEMICAL COMPANIES
(Figure Amounts and Shares in Millions, Except per Share Data)
STERLING GENERAL GEORGIA
CHEMICALS CHEMICAL GULF
--------- -------- --------
Business Description Produces intermediate Supplier of soda ash Integrated manuf. of
commodity petro- calcium chloride, water caustic soda, chlorine
chemicals & chems. chemicals, sulfur sodium chlorate, VCM,
for the pulp and paper products, fine & elec- vinyl resins, cumene,
Industries tronic chemicals phenol, & methanol
Latest Fiscal Year (LFY) ended 9/30/95 12/31/94 12/31/95
Latest 12 Months (LTM) ended 12/31/95 9/30/95 12/31/95
<S> <C> <C> <C> <C> <C> <C> <C>
Bond Trading Statistics:
---------------------------------------------------------------------------------------------------------------------
Ranking Sr. Sub. Senior
Maturity 8/15/03 11/15/05
Rating B2/B+ Bal/BBB-
Coupon 9.250% 7.625%
Price (as of 3/22/96) 100.75 91.72
Yield-to-Worst 8.832% 8.921%
Yield-to-Worst Date 8/15/01 11/15/05
----------------------------------------------------------------------------------------------------------------------
Book Capitalization as of: 12/31/95 9/30/95 12/31/95
- --------------------------
Cash and Equivalents $5.6 $18.8 $2.5
S-T Debt 13.4 13.0 0.0
L-T Debt 100.2 260.0 292.4
-------- ------- -------
Total Debt 113.6 31.2% 273.0 292.4 85.2%
Preferred Stock 0.0 0.0% 0.0 0.0 0.0%
Minority Interests 0.0 0.0% 0.0 48.5 0.0%
Shareholders' Equity 250.1 68.8% (205.2) 50.6 14.8%
-------- ------- -------
Total Capitalization 363.7 100.0% 67.8 100.0% 343.0 100.0%
======== ======= =======
Coverages & Ratios
---------------------------------------------------------------------------------------------------------------------
EBIT/Interest-LFY 16.6 x 3.3 x 13.2 x
EBIT/Interest LTM 21.0 4.3 13.2
EBITDA/Interest-LFY 19.6 x 4.0 x 14.5 x
EBITDA/Interest LTM 25.1 5.3 14.5
(EBITDA-CapEx)/Int.-LFY 15.9 x 3.4 x 11.0 x
(EBITDA-CapEx)/Int.-LTM 18.8 4.2 11.0
Total Debt/LTM EBITDA 0.4 x 2.1 x 0.8 x
Total Debt/Total Book Cap. 31.2% 402.9% 85.2%
Net Debt/Net Book Cap. 30.2% 519.2% 85.1%
---------------------------------------------------------------------------------------------------------------------
Equity Market Statistics
- ------------------------
Market Value of Equity $703.1 NA $1,383.2
Market Capitalization 811.1 NA 1,673.1
Total Debt/Market Cap. 14.0% NA 17.5%
Net Debt/Market Cap. 13.3% NA 17.3%
Profitability Ratios
---------------------------------------------------------------------------------------------------------------------
EBIT Margins LFY 23.6% 22.8% 30.3%
EBIT Margins LTM 22.9% 22.7% 30.3%
EBITDA Margins LFY 27.7% 28.2% 33.3%
EBITDA Margins LTM 27.3% 28.2% 33.3%
---------------------------------------------------------------------------------------------------------------------
Harris Chemical
North America Methanex Pioneer
---------------- -------- -------
Business Description Pioneer of inorganic Produce & market Manufactures chlorine,
chemical products, chemicals grade meth- caustic soda, and
salt, soda ash, boron, anol for the manuf. of related chemicals
chemicals & potash formaldehyde, acetic for water treatment,
fertilizers acid & other plastics and other.
Latest Fiscal Year (LFY) ended 3/25/95 12/31/95 12/31/94
Latest 12 Months (LTM) ended 12/23/95 12/31/95 9/30/95
Bond Trading Statistics:
---------------------------------------------------------------------------------------------------------------------
Ranking Sr. Sub. Sr. Sub. Senior Senior Senior
Maturity 10/15/03 7/15/01 8/15/02 8/15/05 4/1/05
Rating B3/B B2/B+ Ba1/BBB+ Ba1/BBB+ B2/B+
Coupon 10.750% 10.250% 7.400% 7.750% 13.375%
Price (as of 3/22/96) 96.00 97.50 99.79 99.27 113.97
Yield-to-Worst 11.554% 10.875% 7.440% 7.860% 10.410%
Yield-to-Worst Date 10/15/03 7/15/01 8/15/02 12/1/04 4/1/00
---------------------------------------------------------------------------------------------------------------------
Book Capitalization as of: 12/23/95 12/31/95 9/30/95
- --------------------------
Cash and Equivalents $ 0.0 $399.6 $8.5
S-T Debt 12.5 24.4 0.0
L-T Debt 821.5 401.3 146.5
-------- ------- -------
Total Debt 834.1 425.7 27.2% 146.5 78.3%
Preferred Stock 0.0 0.0 0.0% 0.0 0.0%
Minority Interests 0.0 0.0 0.0% 0.0 0.0%
Shareholders' Equity (282.5) 1,139.6 72.8% 40.6 21.7%
-------- ------- -------
Total Capitalization 551.6 100.0% 1,565.3 100.0% 187.1 100.0%
======== ======= =======
Coverages & Ratios
---------------------------------------------------------------------------------------------------------------------
EBIT/Interest-LFY 0.6 x 35.0 x 1.6 x
EBIT/Interest LTM 0.4 35.0 2.1
EBITDA/Interest-LFY 1.4 x 46.2 x 3.7 x
EBITDA/Interest LTM 1.0 46.2 3.2
(EBITDA-CapEx)/Int.-LFY 0.8 x 25.4 x 2.8 x
(EBITDA-CapEx)/Int.-LTM 0.5 25.4 2.3
Total Debt/LTM EBITDA 7.5 x 1.1 x 4.5 x
Total Debt/Total Book Cap. 151.2% 27.2% 78.3%
Net Debt/Net Book Cap. 151.2% 2.2% 77.2%
---------------------------------------------------------------------------------------------------------------------
Equity Market Statistics
- ------------------------
Market Value of Equity NA $1,275.8 NA
Market Capitalization NA 1,301.8 NA
Total Debt/Market Cap. NA 32.7% NA
Net Debt/Market Cap. NA 2.0% NA
Profitability Ratios
---------------------------------------------------------------------------------------------------------------------
EBIT Margins LFY 10.5% 24.3% 6.1%
EBIT Margins LTM 10.3% 24.3% 15.3%
EBITDA Margins LFY 23.2% 32.1% 14.2%
EBITDA Margins LTM 23.4% 32.1% 23.3%
---------------------------------------------------------------------------------------------------------------------
Rexene
------
Business Description Manufactures products
such as plastic film,
polyethylene, polypro-
pylene, resins
& styrene
Latest Fiscal Year (LFY) ended 12/31/95
Latest 12 Months (LTM) ended 12/31/95
Bond Trading Statistics:
---------------------------------------------------------------------------------------------------------------------
Ranking Senior
Maturity 12/1/04
Rating B1/BB-
Coupon 11.750%
Price (as of 3/22/96) 104.00
Yield-to-Worst 10.885%
Yield-to-Worst Date 12/1/02
---------------------------------------------------------------------------------------------------------------------
Book Capitalization as of: 12/31/95
- --------------------------
Cash and Equivalents $47.3
S-T Debt 0.0
L-T Debt 175.0
-------
Total Debt 175.0 55.5%
Preferred Stock 0.0 0.0%
Minority Interests 0.0 0.0%
Shareholders' Equity 140.2 44.5%
-------
Total Capitalization 315.2 100.0%
=======
Coverages & Ratios
---------------------------------------------------------------------------------------------------------------------
EBIT/Interest-LFY 2.6 x
EBIT/Interest LTM 2.6
EBITDA/Interest-LFY 3.1 x
EBITDA/Interest LTM 3.1
(EBITDA-CapEx)/Int.-LFY 1.9 x
(EBITDA-CapEx)/Int.-LTM 1.9
Total Debt/LTM EBITDA 1.2 x
Total Debt/Total Book Cap. 55.5%
Net Debt/Net Book Cap. 47.7%
---------------------------------------------------------------------------------------------------------------------
Equity Market Statistics
- ------------------------
Market Value of Equity $248.4
Market Capitalization 376.1
Total Debt/Market Cap. 46.5%
Net Debt/Market Cap. 34.0%
Profitability Ratios
---------------------------------------------------------------------------------------------------------------------
EBIT Margins LFY 20.3%
EBIT Margins LTM 20.3%
EBITDA Margins LFY 23.8%
EBITDA Margins LTM 23.8%
---------------------------------------------------------------------------------------------------------------------
-90-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE V. PUBLIC MARKET COMPARABLE COMPANIES
- -----------------------------------------------------------------------------------------------------
COMPARABLE CREDIT ANALYSIS OF SELECTED CHEMICAL COMPANIES
(Figure Amounts and Shares in Millions, Except per Share Data)
Sterling General Georgia Harris Chemical
Chemicals Chemical Gulf North America Methanex Pioneer Rexene
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales
LFY 1,030.2 441.3 1,081.6 459.6 1,249.2 167.2 615.2
LTM 981.1 456.1 1,081.6 475.2 1,249.2 140.4 615.2
EBIT
LFY 242.8 100.6(a) 327.9 48.3 303.3 10.1 125.1
LTM 224.5 103.4(a) 327.9 49.1 303.3 21.5 125.1
EBITDA
LFY 285.8 124.6(a) 360.0 106.5 400.9 23.7 146.6
LTM 267.9 128.4(a) 360.0 111.4 400.9 32.7 146.6
CapEx
LFY 54.0 19.6 86.3 42.1 181.1 5.7 54.6
LTM 67.1 27.2 86.3 51.0 181.1 9.4 54.6
Interest Expense
LFY 14.6 30.8 24.9 78.5 8.7 6.4 47.5(b)
LTM 10.7 24.3 24.9 112.3 8.7 10.2 47.5
Depreciation & Amortization
LFY 43.0 24.0 32.1 58.1 97.6 13.6 21.5
LTM 43.4 25.0 32.1 62.3 97.6 11.2 21.5
</TABLE>
- ----------
(a) Adjusted for a $9 MM one time expenses related to the Richmond incident
costs in 1994.
(b) Includes non-cash interest
- 91 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE V. PUBLIC MARKET COMPARABLE COMPANIES
- -----------------------------------------------------------------------------------------------------
HISTORICAL COMPARABLE CREDIT ANALYSIS OF SELECTED RECAPITALIZED CHEMICAL COMPANIES
(Figure Amounts and Shares in Millions, Except per Share Data)
General
Quantum Vista Chemical
------- ----- --------
Business Description Manufactures Petro- Manuf. commodity & Supplier of soda ash
chemicals & markets specialty chemicals calcium chloride, water
propane. Products: eg. surfactants for use chemicals, sulfur
poly-ethylene and in detergents, PVC and products, fine & elec-
-propylene and AA other plastics tronic chemicals
Date of Recapitalization 3/89 6/89 11/89
Latest Fiscal Year (LFY) ended 12/31/88 9/30/88 12/31/88
Latest 12 Months (LTM) ended 12/31/88 3/31/89 9/30/89
<S> <C> <C> <C> <C> <C> <C> <C>
Bond Trading Statistics:
---------------------------------------------------------------------------------------------------------------------
Ranking Snr. Sub. Snr. Sub. Snr. Sub. Sr. Sec 1 Sr. Sec. 2
Maturity 3/15/99 3/15/04 7/21/98 11/1/94 11/1/98
Rating B1 B1 NR Ba3 B2
Coupon 12.500% 13.000% 12.25% floating 10.500% 14.000%
Price (as of Recapitalization) 100.00 100.00 100.00 100.00 100.00
Amount Issued $300 $500 $200 $200 $150
---------------------------------------------------------------------------------------------------------------------
Book Capitalization as of: 12/31/88 3/31/89 9/30/89
- --------------------------
Cash and Equivalents $248.9 $0.9 $1.6
S-T Debt 8.2 0.0 0.0
L-T Debt 2,221.3 597.1 410.0
-------- ------- -------
Total Debt 2,229.5 114.5% 597.1 152.0% 410.0 191.5%
Preferred Stock 0.0 0.0% 0.0 0.0% 0.0 0.0%
Minority Interests 0.0 0.0% 0.0 0.0% 48.5 22.6%
Shareholders' Equity (281.9) -14.5% (204.4) -52.0% (244.4) -114.1%
-------- ------- -------
Total Capitalization 1,947.6 100.0% 392.7 100.0% 214.1 100.0%
======== ======= =======
Coverages & Ratios
---------------------------------------------------------------------------------------------------------------------
EBIT/Interest-LFY 3.3 x 3.9 x 1.8 x
EBIT/Interest LTM 3.3 3.9 1.8
EBITDA/Interest-LFY 4.0 x 4.5 x 2.3 x
EBITDA/Interest LTM 4.0 4.6 2.6
(EBITDA-CapEx)/Int.-LFY 2.5 x 3.6 x 2.0 x
(EBITDA-CapEx)/Int.-LTM 2.5 3.3 2.3
Total Debt/LTM EBITDA 2.4 x 2.4 x 2.9 x
Total Debt/Total Book Cap. 114.5% 152.0% 191.5%
Net Debt/Net Book Cap. 116.6% 152.2% 192.2%
---------------------------------------------------------------------------------------------------------------------
Equity Market Statistics
- ------------------------
Market Value of Equity $989.0 $656.3 NA
Market Capitalization 2,969.6 1,252.5 NA
Total Debt/Market Cap. 75.1% 47.7% NA
Net Debt/Market Cap. 66.7% 47.6% NA
Profitability Ratios
---------------------------------------------------------------------------------------------------------------------
EBIT Margins LFY 26.0% 27.6% 20.4%
EBIT Margins LTM 26.0% 28.1% 22.6%
EBITDA Margins LFY 31.5% 32.0% 25.6%
EBITDA Margins LTM 31.5% 32.7% 27.6%
---------------------------------------------------------------------------------------------------------------------
Georgia
Gulf Huntsman Rexene
------- -------- ------
Business Description Integrated manuf. of Manuf. commodity Manufactures products
caustic soda, chlorine, chemicals, eg. ethyl- such as plastic film,
sodium chlorate, VCM, ene & propylene, and polyethylene,polypro-
vinyl resins, cumene, specialty chem.s eg pylene, resins
phenol & methanol sufcactants & amines & styrene
Date of Recapitalization 3/90 4/94 11/94
Latest Fiscal Year (LFY) ended 12/31/89 12/31/93 12/31/93
Latest 12 Months (LTM) ended 12/31/89 12/31/93 9/30/94
Bond Trading Statistics:
---------------------------------------------------------------------------------------------------------------------
Ranking Senior Sub. 1st Mtge 1st Mtge Senior
Maturity 4/15/00 4/15/01 4/15/04 12/1/04
Rating B2 B1/BB- B1/BB- B1/B+
Coupon 15.000% 10.625% 11.000% 11.750%
Price (as of Recapitalization) 100.00 100.00 100.00 100.00
Amount Issued $200 $200 $400 $175
---------------------------------------------------------------------------------------------------------------------
Book Capitalization as of: 12/31/89 12/31/93 9/30/94
- --------------------------
Cash and Equivalents $ 5.0 $4.0 $26.2
S-T Debt 24.2 3.0 10.0
L-T Debt 714.9 794.0 265.0
-------- ------- -------
Total Debt 739.2 278.6% 797.0 88.9% 275.0 82.1%
Preferred Stock 0.0 0.0% 0.0 0.0% 0.0 0.0%
Minority Interests 0.0 0.0% 0.0 0.0% 0.0 0.0%
Shareholders' Equity (473.9) -178.6% 100.0 11.1% 60.0 17.9%
-------- ------- -------
Total Capitalization 265.3 100.0% 897.0 100.0% 335.0 100.0%
======== ======= =======
Coverages & Ratios
---------------------------------------------------------------------------------------------------------------------
EBIT/Interest-LFY 2.9 x 0.5 x 0.3 x
EBIT/Interest LTM 2.9 0.5 1.0
EBITDA/Interest-LFY 3.1 x 1.3 x 0.8 x
EBITDA/Interest LTM 3.1 1.3 1.5
(EBITDA-CapEx)/Int.-LFY 2.5 x 0.4 x 0.4 x
(EBITDA-CapEx)/Int.-LTM 2.5 0.4 0.9
Total Debt/LTM EBITDA 2.3 x 7.7 x 3.9 x
Total Debt/Total Book Cap. 278.6% 88.9% 82.1%
Net Debt/Net Book Cap. 282.1% 88.8% 80.6%
---------------------------------------------------------------------------------------------------------------------
Equity Market Statistics
- ------------------------
Market Value of Equity $1,096.6 NA $122.2
Market Capitalization 1,830.8 NA 371.0
Total Debt/Market Cap. 40.4% NA 74.1%
Net Debt/Market Cap. 40.1% NA 67.1%
Profitability Ratios
---------------------------------------------------------------------------------------------------------------------
EBIT Margins LFY 29.9% 38.4% 3.4%
EBIT Margins LTM 29.9% 38.4% 9.9%
EBITDA Margins LFY 31.8% 108.0% 8.4%
EBITDA Margins LTM 31.8% 108.0% 14.3%
---------------------------------------------------------------------------------------------------------------------
</TABLE>
- 92 -
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE V. PUBLIC MARKET COMPARABLE COMPANIES
- -----------------------------------------------------------------------------------------------------
HISTORICAL CREDIT ANALYSIS OF SELECTED RECAPITALIZED CHEMICAL COMPANIES
(Figure Amounts and Shares in Millions, Except per Share Data)
General Georgia
Quantum Vista Chemical Gulf Huntsman Rexene
<S> <C> <C> <C> <C> <C> <C>
Net Sales
LFY 2,921.9 781.4 493.6 995.9 96.3 429.4
LTM 2,921.9 776.7 518.5 995.9 96.3 488.9
EBIT
LFY 759.8 215.5 100.6(a) 298.2 37.0 14.5
LTM 759.8 218.5 117.3(a) 298.2 37.0 48.6
EBITDA
LFY 919.6 249.9 126.4(a) 316.9 104.0 36.0
LTM 919.6 253.7 143.1(a) 316.9 104.0 70.1
CapEx
LFY 334.2 48.1 15.7 54.2 73.0 17.0
LTM 334.2 68.5 17.8 54.2 73.0 27.4
Interest Expense
LFY 230.2 55.7 54.9 103.8 80.0 47.5
LTM 230.2 55.7 54.9 103.8 80.0 47.8
Depreciation & Amortization
LFY 159.8 34.4 25.9 18.7 67.0 21.5
LTM 159.8 35.2 25.8 18.7 67.0 21.5
</TABLE>
- ----------
(a) Adjusted for a $9 MM one time expenses related to the Richmond incident
costs in 1994.
(b) Pro Forma results derived from the balance sheet as of last fiscal year,
assuming constant debt balances through the year.
- 93 -
<PAGE>
================================================================================
STERLING CHEMICALS, INC.
April 24, 1996
================================================================================
LAZARD FRERES & CO. LLC APRIL 24, 1996
<PAGE>
TOPICS FOR DISCUSSION
. Review of events subsequent to April 2
. Valuation summary
. Principal open issues in the Sterling Group negotiation
. Review of the Sterling Group contract
. Summary
LAZARD FRERES & CO. LLC APRIL 24, 1996
<PAGE>
EVENTS SUBSEQUENT TO APRIL 2
. Sterling Group negotiations
. Gantrade/Acetex discussions
. Other bidders
. Huntsman Corporation
LAZARD FRERES & CO. LLC APRIL 24, 1996
<PAGE>
VALUATION SUMMARY
. See Annex
LAZARD FRERES & CO. LLC APRIL 24, 1996
<PAGE>
STERLING GROUP: PRINCIPAL OPEN ISSUES
. Consequences of breach
. Financing condition
. Equity financing
LAZARD FRERES & CO. LLC APRIL 24, 1996
<PAGE>
REVIEW OF THE STERLING GROUP CONTRACT
. To be discussed
LAZARD FRERES & CO. LLC APRIL 24, 1996
<PAGE>
SUMMARY
. Price
. Structure
. Terms
. Marketing process
. Valuation
. Risks
LAZARD FRERES & CO. LLC APRIL 24, 1996
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE DCF ANALYSIS OF PETROCHEMICALS-COMPANY REVISED BASE CASE
- ----------------------------------------------------------------------------------------------------------------------------------
ASSUMED INCOME AND CASH FLOW:
(Dollars in millions except per share data)
ACTUAL PROJECTED
-------------------------- 9 Mnths 3 Mnths ------------------------------------------------
1993 1994 1995 Jun-96 Sep-96 1996 1997 1998 1999 2000
---- ---- ---- ------- -------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $518.7 $700.8 $1,030.2 $619.3 $243.8 $ 863.1 $895.5 $865.7 $909.8 $906.9
Operating EBITDA 54.2 89.4 284.2 123.9 64.0 187.9 208.1 180.6 220.7 227.8
Cost Savings - - - - - - - - - -
EBITDA 54.2 89.4 284.2 123.9 64.0 187.9 208.1 180.6 220.7 227.8
Less: D & A (38.8) (40.9) (43.0) (27.2) (11.8) (39.1) (52.8) (55.1) (55.1) (55.1)
----------- ----- ----- -------- ------ ------ ------- ------ ------ ------ ------
EBIT 15.4 48.5 241.2 96.6 52.2 148.8 155.3 125.6 165.6 172.7
SAR's & Other Income - - 2.8 (2.0) (0.7) (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Income/(Expense) (22.4) (20.2) (14.6) (6.1) (2.3) (8.4) 7.2 0.8 6.3 12.3
-------------------------- ----- ----- -------- ------ ------ ------- ------ ------ ------ ------
Pretax Income (7.0) 28.3 228.2 88.5 49.2 137.7 145.6 125.2 170.7 183.9
Income Taxes 1.5 (9.2) (78.1) (31.0) (17.2) (48.2) (51.0) (43.8) (59.8) (64.4)
------------ ----- ----- -------- ------ ------ ------- ------ ------ ------ ------
NET INCOME ($5.5) $19.1 $ 150.0 $ 57.5 $ 32.0 $ 89.5 $ 94.7 $ 81.4 $111.0 $119.5
Plus: Deferred Taxes 1.0 8.3 2.8 11.0 13.9 15.4 13.1 12.1
Plus: Dep. & Amortization 43.0 27.2 11.8 39.1 52.8 55.1 55.1 55.1
Less: Change in Working
Capital 8.5 (50.3) 4.3 (45.9) 16.7 17.3 (3.2) 0.4
Less: Capital Expenditures (53.9) (78.1) (26.1) (104.2) (47.5) (31.5) (25.0) (25.0)
-------------------------- -------- ------ ------ ------- ------ ------ ------ ------
Free Cash Flow $ 148.7 ($35.4) $ 24.9 ($10.5) $130.5 $137.6 $151.0 $162.1
======== ====== ====== ======= ====== ====== ====== ======
Unlevered Cash Flow for DCF $159.1 ($31.4) $ 26.4 ($5.0) $135.2 $137.1 $146.9 $154.1
SUMMARY OF DISCOUNTED CASH FLOW VALUATION
<CAPTION>
PV OF TERMINAL VALUE FOR 5 YEAR SUM OF PV OF
AVERAGE EBITDA EXIT MULTIPLES CASH FLOWS AND TERM. VALUE
DISCOUNT PRESENT VALUE ---------------------------------- -----------------------------------
RATE OF CASH FLOWS 4.0x 4.5x 5.0x 4.0x 4.5x 5.0x
- -------- --------------- ------- ------- ------- ------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $406.2 $509.2 $572.9 $636.5 $915.4 $979.1 $1,042.7
11.0% 393.7 486.7 547.5 608.4 880.4 941.2 $1,002.0
12.0% 381.7 465.3 523.5 581.7 847.0 905.2 $963.4
13.0% 370.2 445.1 500.7 556.4 815.3 871.0 $926.6
DISCOUNT ----------------------------------
RATE NET DEBT TOTAL EQUITY VALUE PER SHARE IMPLIED PERPETUAL GROWTH RATE
- -------- --------------- ---------------------------------- -----------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $136.0 $14.00 $15.14 $16.28 -8.4% -6.4% -4.7%
11.0% 13.37 14.46 15.55 -7.4% -5.4% -3.7%
12.0% 12.77 13.81 14.86 -6.4% -4.4% -2.7%
13.0% 12.20 13.20 14.20 -5.4% -3.4% -1.7%
----------------------------------
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE DCF ANALYSIS OF PETROCHEMICALS-COMPANY REVISED BASE CASE
- ----------------------------------------------------------------------------------------------------------------------------------
ASSUMED INCOME AND CASH FLOW:
(Dollars in millions except per share data)
ACTUAL PROJECTED
-------------------------- 9 Mnths 3 Mnths ------------------------------------------------
1993 1994 1995 Jun-96 Sep-96 1996 1997 1998 1999 2000
---- ---- ---- ------- -------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $399.4 $578.3 $886.2 $501.5 $194.4 $696.0 $697.8 $643.6 $690.2 $695.5
Operating EBITDA 21.5 62.3 239.5 80.6 45.6 126.1 123.5 76.3 117.7 133.1
Cost Savings - - - - - - - - - -
EBITDA 21.5 62.3 239.5 80.6 45.6 126.1 123.5 76.3 117.7 133.1
Less: D & A (25.0) (26.3) (28.4) (16.7) (8.3) (25.0) (35.5) (37.8) (37.8) (37.8)
----------- ----- ----- -------- ------ ------ ------- ------ ------ ------ ------
EBIT (3.5) 36.0 213.4 63.8 37.3 101.1 88.0 38.5 79.9 95.3
SAR's & Other Income - - (0.8) (1.0) (0.3) (1.4) (1.3) - - -
Interest Expense (9.4) (9.7) (1.4) 0.0 0.0 0.0 0.0 4.3 6.4 9.1
---------------- ----- ----- -------- ------ ------ ------- ------ ------ ------ ------
Pretax Income (12.9) 26.3 211.2 62.8 36.9 99.7 86.7 42.7 86.3 104.4
Income Taxes 3.9 (8.4) (70.8) (22.0) (12.9) (34.9) (30.4) (15.0) (30.2) (36.5)
------------ ----- ----- -------- ------ ------ ------- ------ ------ ------ ------
NET INCOME ($9.0) $17.9 $ 140.4 $ 40.8 $ 24.0 $ 64.8 $ 56.4 $ 27.8 $ 56.1 $ 67.8
Plus: Deferred Taxes ($3.9) $0.6 $0.2 $0.8 $2.7 ($1.9) ($1.9) ($1.9)
Plus: Dep. & Amortization 28.4 16.7 8.3 25.0 35.5 37.8 37.8 37.8
Less: Change in Working
Capital 6.3 (51.6) 4.8 (46.8) 22.2 14.3 (3.4) (0.4)
Less: Capital Expenditures (45.7) (42.4) (11.2) (53.7) (35.4) (26.5) (20.0) (20.0)
-------------------------- -------- ------ ------ ------- ------ ------ ------ ------
Free Cash Flow $ 125.5 ($35.9) $ 26.1 ($9.8) $ 81.3 $ 51.6 $ 68.6 $ 83.4
======== ====== ====== ======= ====== ====== ====== ======
Unlevered Cash Flow for DCF $126.4 ($35.9) $ 26.1 ($9.8) $ 81.3 $ 48.8 $ 64.5 $ 77.5
SUMMARY OF DISCOUNTED CASH FLOW VALUATION
<CAPTION>
PV OF TERMINAL VALUE FOR 5 YEAR SUM OF PV OF
AVERAGE EBITDA EXIT MULTIPLES CASH FLOWS AND TERM. VALUE
DISCOUNT PRESENT VALUE ---------------------------------- -----------------------------------
RATE OF CASH FLOWS 4.0x 4.5x 5.0x 4.0x 4.5x 5.0x
- -------- --------------- ------- ------- ------- ------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $187.1 $286.5 $322.3 $358.1 $473.6 $509.4 $545.2
11.0% 181.3 273.8 308.0 342.2 455.1 489.3 $523.5
12.0% 175.7 261.8 294.5 327.2 437.5 470.2 $503.0
13.0% 170.4 250.4 281.7 313.0 420.8 452.1 $483.4
DISCOUNT ----------------------------------
RATE NET DEBT TOTAL EQUITY VALUE PER SHARE IMPLIED PERPETUAL GROWTH RATE
- -------- --------------- ---------------------------------- -----------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $ 0.0 $8.50 $9.14 $9.79 -6.8% -4.9% -3.4%
11.0% 8.17 8.78 9.40 -5.8% -3.9% -2.4%
12.0% 7.85 8.44 9.03 -4.8% -2.9% -1.4%
13.0% 7.56 8.12 8.68 -3.8% -1.9% -0.4%
----------------------------------
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE DCF ANALYSIS OF PULP CHEMICALS-COMPANY REVISED BASE CASE
- ----------------------------------------------------------------------------------------------------------------------------------
ASSUMED INCOME AND CASH FLOW:
(Dollars in millions except per share data)
ACTUAL PROJECTED
-------------------------- 9 Mnths 3 Mnths ------------------------------------------------
1993 1994 1995 Jun-96 Sep-96 1996 1997 1998 1999 2000
---- ---- ---- ------- -------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $119.3 $122.5 $144.0 $117.7 $ 49.3 $167.1 $197.7 $222.2 $219.6 $211.4
EBITDA 32.7 27.1 44.7 43.3 18.5 61.8 84.6 104.4 102.9 94.7
Less: D & A (13.8) (14.6) (14.6) (10.5) (3.6) (14.1) (17.2) (17.3) (17.3) (17.3)
----------- ------ ----- -------- ------ ------ ------- ------ ------ ------ ------
EBIT 18.9 12.5 30.1 32.8 14.9 47.7 67.4 87.1 85.7 77.5
SAR's & Other Income - - - (1.0) (0.3) (1.4) (1.3) (1.2) (1.2) (1.2)
Interest Expense (13.0) (12.4) (13.2) (6.6) (2.2) (8.8) (8.9) (5.8) (0.3) 3.1
---------------- ------ ----- -------- ------ ------ ------- ------ ------ ------ ------
Pretax Income 5.9 0.1 16.9 25.2 12.3 37.5 57.2 80.1 84.2 79.4
Income Taxes (2.4) 1.1 (7.2) (8.8) (4.3) (13.1) (20.0) (28.1) (29.5) (27.8)
------------ ------ ----- -------- ------ ------ ------- ------ ------ ------ ------
NET INCOME $ 3.5 $ 1.2 $ 9.7 $ 16.4 $ 8.0 $ 24.4 $ 37.2 $ 52.1 $ 54.7 $ 51.6
Plus: Deferred Taxes $ 5.0 $ 7.7 $ 2.6 $ 10.3 $ 11.3 $ 17.3 $ 15.0 $ 14.0
Plus: Dep. & Amortization 14.6 10.5 3.6 14.1 17.2 17.3 17.3 17.3
Less: Change in Working
Capital 2.2 1.3 (0.5) 0.9 (5.5) 2.9 0.2 0.8
Less: Capital Expenditures (8.2) (35.7) (14.8) (50.6) (12.1) (5.0) (5.0) (5.0)
-------------------------- -------- ------ ------ ------- ------ ------ ------ ------
Free Cash Flow $ 23.2 $ 0.2 ($1.2) ($1.0) $ 48.1 $ 84.6 $ 82.2 $ 78.7
======== ====== ====== ======= ====== ====== ====== ======
Unlevered Cash Flow for DCF $ 30.8 $ 4.5 $ 0.3 $ 4.8 $ 53.9 $ 88.3 $ 82.4 $ 76.6
SUMMARY OF DISCOUNTED CASH FLOW VALUATION
<CAPTION>
PV OF TERMINAL VALUE FOR 5 YEAR SUM OF PV OF
AVERAGE EBITDA EXIT MULTIPLES CASH FLOWS AND TERM. VALUE
DISCOUNT PRESENT VALUE ---------------------------------- -----------------------------------
RATE OF CASH FLOWS 4.0x 4.5x 5.0x 4.0x 4.5x 5.0x
- -------- --------------- ------- ------- ------- ------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $219.1 $222.7 $250.6 $278.4 $441.9 $469.7 $497.6
11.0% 212.4 212.9 239.5 266.1 425.3 451.9 $478.5
12.0% 206.0 203.6 229.0 254.4 409.5 435.0 $460.4
13.0% 199.8 194.7 219.0 243.4 394.5 418.8 $443.2
DISCOUNT ----------------------------------
RATE NET DEBT TOTAL EQUITY VALUE PER SHARE IMPLIED PERPETUAL GROWTH RATE
- -------- --------------- ---------------------------------- -----------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $136.0 $5.49 $5.99 $6.49 -11.4% -9.0% -7.1%
11.0% 5.19 5.67 6.15 -10.4% -8.0% -6.1%
12.0% 4.91 5.37 5.82 -9.4% -7.0% -5.1%
13.0% 4.64 5.08 5.51 -8.4% -6.0% -4.1%
----------------------------------
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE DCF ANALYSIS OF PLATE-COMPANY REVISED DOWNSIDE CASE
- ----------------------------------------------------------------------------------------------------------------------------------
ASSUMED INCOME AND CASH FLOW
(Dollars in millions except per share data)
ACTUAL PROJECTED
-------------------------- 9 Mnths 3 Mnths ------------------------------------------------
1993 1994 1995 Jun-96 Sep-96 1996 1997 1998 1999 2000
---- ---- ---- ------- -------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $518.7 $700.8 $1,030.2 $611.9 $226.1 $838.0 $813.0 $794.0 $849.9 $847.4
Operating EBITDA 54.2 89.4 284.2 116.5 46.4 162.9 143.2 120.2 170.0 177.4
Cost Savings - - - - - - - - - -
EBITDA 54.2 89.4 284.2 116.5 46.4 162.9 143.2 120.2 170.0 177.4
Less: D & A (38.8) (40.9) (43.0) (27.2) (11.8) (39.1) (52.1) (53.4) (53.4) (53.4)
----------- ----- ----- -------- ------ ------ ------- ------ ------ ------ ------
EBIT 15.4 48.5 241.2 89.3 34.5 123.8 91.1 66.8 116.5 123.9
SAR's & Other Income - - 2.8 (2.0) (0.7) (2.7) (2.5) (1.2) (1.2) (1.2)
Interest Income/(Expense) (22.4) (20.2) (14.6) (6.1) (2.3) (8.4) (7.7) (0.2) 3.6 8.0
------------------------- ----- ----- -------- ------ ------ ------- ------ ------ ------ ------
Pretax Income (7.0) 28.3 228.2 81.1 31.6 112.7 80.9 65.4 118.9 130.7
Income Taxes 1.5 (9.2) (78.1) (28.4) (11.1) (39.4) (28.3) (22.9) (41.6) (45.8)
------------ ----- ----- -------- ------ ------ ------- ------ ------ ------ ------
NET INCOME ($5.5) $19.1 $ 150.0 $ 52.7 $ 20.5 $ 73.2 $ 52.6 $ 42.5 $ 77.3 $ 85.0
Plus: Deferred Taxes 1.0 7.9 2.6 10.5 9.7 7.9 7.5 6.5
Plus: Dep. & Amortization 43.0 27.2 11.8 39.1 52.1 53.4 53.4 53.4
Less: Change in Working
Capital 8.5 (43.8) 8.2 (35.5) 33.0 13.8 (3.2) 0.1
Less: Capital Expenditures (53.9) (78.1) (26.1) (104.2) (31.7) (25.0) (25.0) (25.0)
-------------------------- -------- ------ ------ ------- ------ ------ ------ ------
Free Cash Flow $ 148.7 ($34.1) $ 17.1 ($16.9) $115.7 $ 92.6 $110.1 $120.0
======== ====== ====== ======= ====== ====== ====== ======
Unlevered Cash Flow for DCF $ 159.1 ($30.1) $ 18.6 ($11.5) $120.7 $ 92.7 $107.7 $114.9
SUMMARY OF DISCOUNTED CASH FLOW VALUATION
<CAPTION>
PV OF TERMINAL VALUE FOR 5 YEAR SUM OF PV OF
AVERAGE EBITDA EXIT MULTIPLES CASH FLOWS AND TERM. VALUE
DISCOUNT PRESENT VALUE ---------------------------------- -----------------------------------
RATE OF CASH FLOWS 4.0x 4.5x 5.0x 4.0x 4.5x 5.0x
- -------- --------------- ------- ------- ------- ------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $303.9 $384.3 $432.3 $480.3 $688.2 $736.2 $784.3
11.0% 294.6 367.3 413.2 459.1 661.9 707.8 $753.7
12.0% 285.6 351.2 395.1 439.0 636.8 680.7 $724.6
13.0% 277.1 335.9 377.9 419.9 613.0 655.0 $696.9
DISCOUNT ----------------------------------
RATE NET DEBT TOTAL EQUITY VALUE PER SHARE IMPLIED PERPETUAL GROWTH RATE
- -------- --------------- ---------------------------------- -----------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $136.0 $9.92 $10.78 $11.64 -8.8% -6.7% -5.0%
11.0% 9.44 10.27 11.09 -7.8% -5.7% -4.0%
12.0% 8.99 9.78 10.57 -6.8% -4.7% -3.0%
13.0% 8.56 9.32 10.07 -5.8% -3.7% -2.0%
----------------------------------
</TABLE>
A-4
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE DCF ANALYSIS OF PETROCHEMICALS-COMPANY REVISED DOWNSIDE CASE
- ----------------------------------------------------------------------------------------------------------------------------------
ASSUMED INCOME AND CASH FLOW:
(Dollars in millions except per share data)
ACTUAL PROJECTED
-------------------------- 9 Mnths 3 Mnths ------------------------------------------------
1993 1994 1995 Jun-96 Sep-96 1996 1997 1998 1999 2000
---- ---- ---- ------- -------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $399.4 $578.3 $886.2 $494.2 $176.8 $671.0 $629.1 $595.9 $644.3 $649.2
Operating EBITDA 21.5 62.3 239.5 73.2 27.9 101.1 72.4 41.8 79.9 94.9
Cost Savings - - - - - - - - - -
EBITDA 21.5 62.3 239.5 73.2 27.9 101.1 72.4 41.8 79.9 94.9
Less: D & A (25.0) (26.3) (28.4) (16.7) (8.3) (25.0) (34.8) (36.2) (36.2) (36.2)
----------- ----- ----- -------- ------ ------ ------- ------ ------ ------ ------
EBIT (3.5) 36.0 213.4 56.5 19.6 76.1 37.6 5.6 43.8 58.7
SAR's & Other Income - - (0.8) (1.0) (0.3) (1.4) (1.3) - - -
Interest Expense (9.4) (9.7) (1.4) 0.0 0.0 0.0 0.0 3.5 4.8 6.6
---------------- ----- ----- -------- ------ ------ ------- ------ ------ ------ ------
Pretax Income (12.9) 26.3 211.2 55.4 19.3 74.7 36.3 9.1 48.6 65.2
Income Taxes 3.9 (8.4) (70.8) (19.4) (6.8) (26.2) (12.7) (3.2) (17.0) (22.8)
------------ ----- ----- -------- ------ ------ ------- ------ ------ ------ ------
NET INCOME ($9.0) $17.9 $ 140.4 $ 36.0 $ 12.5 $ 48.6 $ 23.6 $ 5.9 $ 31.6 $ 42.4
Plus: Deferred Taxes ($3.9) $0.1 $0.0 $0.2 $4.1 ($1.5) ($1.5) ($1.5)
Plus: Dep. & Amortization 28.4 16.7 8.3 25.0 34.8 36.2 36.2 36.2
Less: Change in Working
Capital 6.3 (45.1) 8.7 (36.4) 26.7 12.2 (2.8) (0.3)
Less: Capital Expenditures (45.7) (42.4) (11.2) (53.7) (19.6) (20.0) (20.0) (20.0)
-------------------------- -------- ------ ------ ------- ------ ------ ------ ------
Free Cash Flow $ 125.5 ($34.6) $ 18.3 ($16.2) $ 69.6 $ 32.8 $ 43.5 $ 56.8
======== ====== ====== ======= ====== ====== ====== ======
Unlevered Cash Flow for DCF $ 126.4 ($34.6) $ 18.3 ($16.2) $ 69.6 $ 30.6 $ 40.4 $ 52.5
SUMMARY OF DISCOUNTED CASH FLOW VALUATION
<CAPTION>
PV OF TERMINAL VALUE FOR 5 YEAR SUM OF PV OF
AVERAGE EBITDA EXIT MULTIPLES CASH FLOWS AND TERM. VALUE
DISCOUNT PRESENT VALUE ---------------------------------- -----------------------------------
RATE OF CASH FLOWS 4.0x 4.5x 5.0x 4.0x 4.5x 5.0x
- -------- --------------- ------- ------- ------- ------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $125.9 $193.8 $218.0 $242.2 $319.7 $343.9 $368.1
11.0% 122.0 185.2 208.4 231.5 307.2 330.3 $353.5
12.0% 118.2 177.1 199.2 221.4 295.3 317.4 $339.6
13.0% 114.6 169.4 190.6 211.7 284.0 305.2 $326.3
DISCOUNT ----------------------------------
RATE NET DEBT TOTAL EQUITY VALUE PER SHARE IMPLIED PERPETUAL GROWTH RATE
- -------- --------------- ---------------------------------- -----------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $0.0 $5.74 $6.17 $6.61 -6.8% -5.0% -3.5%
11.0% 5.52 5.93 6.35 -5.8% -4.0% -2.5%
12.0% 5.30 5.70 6.10 -4.8% -3.0% -1.5%
13.0% 5.10 5.48 5.86 -3.8% -2.0% -0.5%
----------------------------------
</TABLE>
A-5
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE DCF ANALYSIS OF PULP CHEMICALS-COMPANY REVISED DOWNSIDE CASE
- ----------------------------------------------------------------------------------------------------------------------------------
ASSUMED INCOME AND CASH FLOW:
(Dollars in millions except per share data)
ACTUAL PROJECTED
-------------------------- 9 Mnths 3 Mnths ------------------------------------------------
1993 1994 1995 Jun-96 Sep-96 1996 1997 1998 1999 2000
---- ---- ---- ------- -------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $119.3 $122.5 $144.0 $117.7 $49.3 $167.1 $183.9 $198.1 $205.6 $198.1
EBITDA 32.7 27.1 44.7 43.3 18.5 61.8 70.8 78.4 90.0 82.5
Less: D&A (13.8) (14.6) (14.6) (10.5) (3.6) (14.1) (17.2) (17.3) (17.3) (17.3)
--------- ------ ------ ------ ------ ------ ----- ------ ------ ------ ------
EBIT 18.9 12.5 30.1 32.8 14.9 47.7 53.5 61.1 72.8 65.3
SAR's & Other Income - - - (1.0) (0.3) (1.4) (1.3) (1.2) (1.2) (1.2)
Interest Expense (13.0) (12.4) (13.2) (6.6) (2.2) (8.8) (8.9) (6.0) (2.2) 1.3
---------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Pretax Income 5.9 0.1 16.9 25.2 12.3 37.5 43.4 54.0 69.4 65.4
Income Taxes (2.4) 1.1 (7.2) (8.8) (4.3) (13.1) (15.2) (18.9) (24.3) (22.9)
------------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET INCOME $ 3.5 $ 1.2 $ 9.7 $ 16.4 $ 8.0 $ 24.4 $ 28.2 $ 35.1 $ 45.1 $ 42.5
Plus: Deferred Taxes $ 5.0 $ 7.7 $ 2.6 $ 10.3 $ 5.6 $ 9.4 $ 9.0 $ 8.0
Plus: Dep. & Amortization 14.6 10.5 3.6 14.1 17.2 17.3 17.3 17.3
Less: Change in Working
Capital 2.2 1.3 (0.5) 0.9 6.4 1.6 (0.4) 0.4
Less: Capital Expenditures (8.2) (35.7) (14.8) (50.6) (12.1) (5.0) (5.0) (5.0)
-------------------------- ------ ------ ------ ------ ------ ------ ------ ------
Free Cash Flow $ 23.2 $ 0.2 ($ 1.2) ($ 1.0) $ 45.3 $ 58.3 $ 66.0 $ 63.2
====== ====== ====== ======= ====== ====== ====== ======
Unlevered Cash Flow for DCF $ 30.8 $ 4.5 $ 0.3 $ 4.8 $ 51.1 $ 62.1 $ 67.4 $ 62.3
SUMMARY OF DISCOUNTED CASH FLOW VALUATION
<CAPTION>
PV OF TERMINAL VALUE FOR 5 YEAR SUM OF PV OF
AVERAGE EBITDA EXIT MULTIPLES CASH FLOWS AND TERM. VALUE
DISCOUNT PRESENT VALUE ---------------------------------- -----------------------------------
RATE OF CASH FLOWS 4.0x 4.5x 5.0x 4.0x 4.5x 5.0x
- -------- --------------- ------- ------- ------- ------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $178.0 $190.5 $214.3 $238.1 $368.5 $392.3 $416.1
11.0% 172.6 182.1 204.8 227.6 354.7 377.4 $400.2
12.0% 167.4 174.1 195.8 217.6 341.5 363.3 $385.0
13.0% 162.5 166.5 187.3 208.1 329.0 349.8 $370.6
DISCOUNT ----------------------------------
RATE NET DEBT VALUE PER SHARE IMPLIED PERPETUAL GROWTH RATE
- -------- --------------- ---------------------------------- -----------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
10.0% $136.0 $4.17 $4.60 $5.03 -10.3% -8.1% -6.3%
11.0% 3.93 4.33 4.74 -9.3% -7.1% -5.3%
12.0% 3.69 4.08 4.47 -8.3% -6.1% -4.3%
13.0% 3.46 3.84 4.21 -7.3% -5.1% -3.3%
----------------------------------
</TABLE>
A-6
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE LBO ANALYSIS - STERLING GROUP STRUCTURE - COMPANY REVISED BASE CASE
- ------------------------------------------------------------------------------------------------------------------------------------
SUMMARY ANALYSIS
(Dollars in millions except per share)
OPERATING STATISTICS PROJECTED
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating EBITDA $187.9 $208.1 $180.6 $220.7 $227.8
Net Income $57.6
Net Debt $378.8
<CAPTION>
VALUE OF EQUITY AT 9/30/96
Terminal Value PV of Terminal Value
At EBITDA Exit Multiples At EBITDA Exit Multiples At EBITDA Exit Multiples of:
------------------------------ ------------------------------- ---------------------------------
Discount Rate 4.0x 4.5x 5.0x 4.0x 4.5x 5.0x 4.0x 4.5x 5.0x
------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
25.0% $532.5 $646.4 $760.3 $218.1 $264.8 $311.4 Implied Net Income Multiplies
30.0% 186.4 226.3 266.2 -----------------------------
35.0% 160.3 194.6 228.9 9.2x 11.2x 13.2x
<CAPTION>
Discount Rate Total Equity Value Per Share
------------- -------------------------------
<S> <C> <C> <C>
25.0% $18.02 $21.88 $25.73
30.0% 15.41 18.70 22.00
35.0% 13.25 16.08 18.92
A-7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT PLATE LBO ANALYSIS - STERLING GROUP STRUCTURE - COMPANY REVISED DOWNSIDE CASE
- ------------------------------------------------------------------------------------------------------------------------------------
SUMMARY ANALYSIS
(Dollars in millions except per share)
OPERATING STATISTICS PROJECTED
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating EBITDA $162.9 $143.2 $120.2 $170.0 $177.4
Net Income $19.6
Net Debt $535.6
<CAPTION>
VALUE OF EQUITY AT 9/30/96
Terminal Value PV of Terminal Value
At EBITDA Exit Multiples At EBITDA Exit Multiples At EBITDA Exit Multiples of:
------------------------------ ------------------------------- ---------------------------------
Discount Rate 4.0x 4.5x 5.0x 4.0x 4.5x 5.0x 4.0x 4.5x 5.0x
------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
25.0% $173.9 $262.6 $351.2 $71.2 $107.5 $143.9 Implied Net Income Multiplies
30.0% 60.9 91.9 123.0 -----------------------------
35.0% 52.3 79.0 105.7 8.9x 13.4x 17.9x
<CAPTION>
Discount Rate Total Equity Value Per Share
------------- -------------------------------
<S> <C> <C> <C>
25.0% $5.89 $8.89 $11.89
30.0% 5.03 7.60 10.16
35.0% 4.33 6.53 8.74
A-8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPARISON OF SG OFFER TO SELECTED CHEMICAL COMPANIES
($ in millions)
SG OFFER (a)(b) PETROCHEM. BUSINESS (d)
-------------------- -------------------------
BASE DOWNSIDE GEON GEORGIA LYONDELL REXENE UNION BASE DOWNSIDE
CASE CASE COMPANY GULF PETROCHEM. CORP. CARBIDE CASE CASE
------- -------- -------- ------- ---------- ------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MARKET CAPITALIZATION $804.3(c) $804.3(c) $764.5 $1,700.8 $3,899.0 $377.7 $7,384.0 $529.0 $529.0
(US$MM)
IMPLIED MULTIPLES:
LTM Revenue 0.8x 0.8 0.6x 1.6x 0.8x 0.6x 1.3x 0.6x 0.6x
LFY + 1 Revenue 0.9 1.0 0.7 1.7 0.8 0.7 1.3 0.8 0.8
LFY + 2 Revenue 0.9 1.0 0.6 1.6 0.9 NA 1.2 0.8 0.6
LTM EBITDA 3.0x 3.0x 4.2x 4.7x 4.9x 2.6x 4.8x 2.2x 2.2x
LFY + 1 EBITDA 4.3 5.0 5.7 7.0 7.1 3.2 7.0 4.2 5.3
LFY + 2 EBITDA 3.9 5.7 4.7 5.7 5.1 NA 6.4 4.3 7.4
LTM EBIT 3.6x 3.6x 6.0x 5.2x 5.5x 3.0x 6.0x 2.5x 2.5x
LFY + 1 EBIT 5.5 6.6 9.9 8.2 8.6 3.8 10.2 5.3 7.1
LFY + 2 EBIT 5.3 9.1 7.6 6.6 6.0 NA 9.2 6.1 14.6
LTM Net Income 4.6x 4.6x 9.9x 8.1x 6.1x 3.9x 8.7x 2.8x 2.8x
LFY + 1 Net Income 7.7 9.6 19.1 12.4 11.1 8.3 10.5 6.2 8.4
LFY + 2 Net Income 7.1 12.9 12.0 9.9 7.9 6.5 9.5 6.3 14.5
SELECTED OPERATING STATISTICS:
5-Year I/B/E/S/ Growth Est. 4.0% 4.0% 8.0% 14.0% 8.0% 7.3% 7.0% NA NA
LTM EBITDA Margin 27.1% 27.1% 14.5% 33.3% 16.0% 23.8% 26.0% 26.9% 26.9%
LFY + 1 EBITDA Margin 21.5% 19.1% 11.8% 24.6% 11.7% 21.2% 18.4% 17.9% 25.3%
LFY + 2 EBITDA Margin 23.0% 17.3% 13.0% 27.6% 18.6% NA 18.7% 17.5% 18.1%
- ----------------------------
(a) Multiples implied by transaction price.
(b) Company projections used: March 1996 revised projection of FY 1996-1998 performance.
(c) Multiples for revenues, EBITDA and EBIT use the transaction value, multiples for net income use the assumed equity
value of $668.4 m.
(d) Multiples implied by the valuation of the Petrochemicals business of STX derived from a Pulp Chemicals business valuation
of $330 million (equivalent to the highest bid) as is outlined in Appendix B.
</TABLE>
<PAGE>
================================================================================
PROJECT PLATE
PRESENTATION TO THE BOARD OF DIRECTORS
================================================================================
LAZARD FRERES & CO. LLC APRIL 2, 1996
<PAGE>
PROJECT PLATE Discussion Objectives
- --------------------------------------------------------------------------------
. Review of the Sale Process
. Review of Results
. Valuation Update
. Potential Alternatives
- 1 -
<PAGE>
PROJECT PLATE Review of the Sale Process
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DATE EVENT COMMENTS
- --------------------------- ----------------------- --------------------------
<S> <C> <C>
18 December Special Committee . Begin drafting
meeting decides to Information Memorandum
market the Company . Initial contacts made
over subsequent 3 weeks
. Buyer due diligence
begins in January
25 January First round bids due . 2 bids on Pulp
Chemicals; 5 bids on the
Company as a whole; 13
not interested or dropped out
29 January Discussions announced . Stock price rises
. Receive a number of
new approaches
22 February Special Committee . New entrants admitted
progress report . Final bid deadline
communicated to potential
buyers
29 March Final bids due . A number of potential
buyers drop out
. Acetex bid for Pulp
Chemicals
. Gantrade bid for
Petrochemicals
. Sterling Group bid for
the Company
. Occidental orally
reaffirms bid for the
Company
. A number of potential
buyers request more time
1 April Special Committee . Occidental rescinds
meeting proposal
Note: Process reflects discussions with over 35 potential buyers.
- -----
</TABLE>
- 2 -
<PAGE>
PROJECT PLATE Review of Results
- --------------------------------------------------------------------------------
MARKET FEEDBACK
PETROCHEMICALS:
. Industry plans to add styrene capacity, especially in the Far East
. Cost competitiveness
. BP control of Acrylonitrile and Acetic technology
. Texas City environmental a major concern
. BP interest defensive, not strategic
. Integrated facility, but all of Texas City not strategic to any one party
. Texas City value in the low $400 mm
PULP CHEMICALS:
. No strategic buyers for Pulp Chemicals
. Concerns about generator royalty stream; near-term growth but long-term
cyclical, commodity characteristics
. Pulp Chemicals value in the low $300 mm
WHOLE COMPANY:
. Timing in the cycle
. Company "shop worn" in the marketplace
. Segments bear no relation to each other
. Tax leakage of splitting segments
- 3 -
<PAGE>
PROJECT PLATE Review of Results
- --------------------------------------------------------------------------------
COMMENTS ON FINAL ROUND DROP-OUTS
. Amoco Timing considerations. Driven primarily by
styrene. Real interest unclear
. Dow Decided not sufficiently interested to be
competitive on price
. Hanson Revised proposal for Pulp Chemicals too low (ca.
$260 million), based on concerns about ERCO
royalties outlook and cyclicality
. Huls Decided not a good strategic fit
. LG Group Notional value of $650 million for Petrochemicals,
but unwilling to confirm in writing by March 29
. Mitsubishi Chemical Not prepared to meet evaluation deadlines
. NOVA Concern regarding environmental issues
. Occidental Had reaffirmed initial indication at 0.45 share,
or approximately $12 per Company share at current
prices. Ultimately dropped out due to last-minute
concerns about shareholder and market reaction
. Phillips Internal competition for capital
- 4 -
<PAGE>
PROJECT PLATE Review of Results
- --------------------------------------------------------------------------------
SUMMARY OF BIDDER EVALUATIONS
<TABLE>
<CAPTION>
BIDDER PULP CHEMICALS (MM) PETROCHEMICALS (MM) COMPANY (PER SHARE)
First Round:
<S> <C> <C> <C>
Acetex $330-370 $10.50
Danielson 15.00
Hanson 350
Huff 400
Koch 10-11
Occidental 9.56
Sterling Group 11.25
Second Round:
Acetex 313
Gantrade $410
Hanson 260
Huff 266
LG Group 650
Lyondell/BP 10-11
Occidental 12.04
Phillips 10-13
Sterling Group 12.00
</TABLE>
- 5 -
<PAGE>
PROJECT PLATE Review of Results
- --------------------------------------------------------------------------------
ACQUISITION PROPOSALS: THE STERLING GROUP ("SG")
SUMMARY DESCRIPTION
. SG proposal is a change of control recapitalization/leveraged buyout
transaction for the whole company
. Proposal expires on April 5 at 5:00 p.m. Houston time
TERMS
. 91.7% (or 51,049,158) of the current outstanding shares would be purchased at
$12 per share
. 8.3% (or 4,640,833) of the outstanding shares would be retained by existing
shareholders
- At $12 per share this represents rollover of $55.7 million of equity value
- Resulting ownership: 43% primary and 39% fully diluted
. New equity of $75 million would be provided to the Company
- At $12 per share this represents 6.25 million shares
- Resulting ownership: 57% primary and 52% fully diluted
. Existing debt of $133 million would be taken out
. $700 million of debt would need to be raised
- $325 million of bank debt ($300 million term and $25 million out of $100
million revolver)
- $275 million of Sr. Subordinated Notes
- $100 million of Sr. Secured Discount Notes with equity warrants
representing 10% of outstanding shares
- 6 -
<PAGE>
PROJECT PLATE Review of Results
- --------------------------------------------------------------------------------
ACQUISITION PROPOSALS: THE STERLING GROUP ("SG")
. Chemical Securities and Credit Suisse provided a commitment letter on the
bank debt subject to the terms of a letter agreement dated March 4, 1996 (not
included)
. Chemical Securities and CS First Boston each provided a highly confident
letter on the high yield debt
. SG provided a highly confident letter that the equity can be raised
. Clipper Group (affiliate of CS First Boston) provided a letter indicating
"strong interest" in providing $25 million of equity financing
. No indicative terms on the debt financing were provided
CONDITIONS/LEGAL ISSUES
. Financing condition
. Financing due diligence
. No marked up contract submitted with proposal, although there have been
extensive discussions between legal counsels
. 8.3% rollover requirement
. Acquisition vehicle a shell
. Break-up fee of $4 million on signing of LOI and increases to $8 million
under merger agreement
. No shop/right of first refusal
- 7 -
<PAGE>
PROJECT PLATE Review of Results
- --------------------------------------------------------------------------------
ACQUISITION PROPOSALS: THE STERLING GROUP ("SG")
SOURCES AND USES
(in millions)
SOURCES
$100 MM Revolver $ 25
Bank Term Loan 300
Sr. Sub. Notes 275
Sr. Secured Dis. Notes 100
New Equity 75
Rollover Equity 56
----
Total $831
USES
Debt as of 3/31/96 $133
Purchase of 91.7% of Equity 613
Rollover Equity 56
SARs 14
Expenses (plug) 15
----
Total $831
- 8 -
<PAGE>
PROJECT PLATE Review of Results
- --------------------------------------------------------------------------------
ACQUISITION PROPOSALS: ACETEX CORPORATION ("ACETEX")
SUMMARY DESCRIPTION
. Acetex proposal is to purchase all of the assets of Sterling Canada, Inc.
("SCI") for $313 million "plus the trade liabilities of [SCI]"
. Proposal expires April 5 at 5:00 pm New York time
TERMS
. Purchase price assumes SCI and its subsidiaries are debt free
. Purchase price will be decreased by SAR payments made to employees
. Purchase includes cash, accounts receivables, intellectual property, license
agreements, intangibles, and all capital stock of subsidiaries of SCI
. Acetex has commitment letters from Chase to provide $310 million of credit
facilities and from Griffiths McBurney to purchase $60 million of
Acetex equity on a firm bought deal basis
. No indicative terms on financing provided
CONDITIONS/LEGAL ISSUES
. Transaction is structured as an asset purchase. Tax advice of Arthur
Andersen and Piper & Marbury is that an asset transaction can be structured
to be tax neutral relative to a stock transaction (SCI would utilize its
NOLs)
. Acetex may elect to purchase the stock of SCI
. Financing is not a condition to closing
---
- 9 -
<PAGE>
PROJECT PLATE Review of Results
- --------------------------------------------------------------------------------
ACQUISITION PROPOSALS: ACETEX CORPORATION ("ACETEX")
CONDITIONS/LEGAL ISSUES (CONT'D)
. The transaction is contingent upon (i) satisfactory review of environmental
matters, (ii) pension plan obligations being fully funded and (iii) Valdosta
continuing on or ahead of schedule
. Asking for rights of first refusal
. Asking for break-up fee of $15 million
. No marked up contract submitted with proposal, although there have been
extensive discussions between legal counsels
- 10 -
<PAGE>
PROJECT PLATE Review of Results
- --------------------------------------------------------------------------------
ACQUISITION PROPOSALS: ACETEX CORPORATION ("ACETEX")
SOURCES AND USES
(in millions)
SOURCES(1)
$310 MM Credit Facilities $253
New Equity 60
----
Total $313
USES
Assets of SCI $313
- -------------------
(1) Acetex has not specified the interplay between equity and credit
facilities sources of funds in financing the transaction.
- 11 -
<PAGE>
PROJECT PLATE Review of Results
- --------------------------------------------------------------------------------
ACQUISITION PROPOSALS: GANTRADE CORPORATION ("GANTRADE")
SUMMARY DESCRIPTION
. Enterprise value offered for Texas City of $410 million. Would purchase
stock of Sterling Chemicals net of other liabilities
. Proposal expires on April 15 at 5:00 p.m. New York time
TERMS
. All Cash
. No indicative terms on financing provided
. Commitment letter from J.P. Morgan on bank financing of $250 million
. Highly confident letter from J.P. Morgan on $100 million high yield
. Based on Feb. 29, 1996 balance sheet excluding Pulp Chemicals (although
includes $133 million of net debt)
. Management rollover of up to 20 percent, or $15 million, of equity
contribution of $74 million. (Needs clarification)
. Marked up purchase agreement included
- 12 -
<PAGE>
PROJECT PLATE Review of Results
- --------------------------------------------------------------------------------
ACQUISITION PROPOSALS: GANTRADE CORPORATION ("GANTRADE")
CONDITIONS/LEGAL ISSUES
. Environmental, legal and other due diligence. Environmental may be an issue
. Financing contingency
. Negotiating a mutually acceptable agreement
. Pulp Chemicals sale successfully closed
- 13 -
<PAGE>
PROJECT PLATE Review of Results
- --------------------------------------------------------------------------------
ACQUISITION PROPOSALS: GANTRADE CORPORATION ("GANTRADE")
SOURCES AND USES(1)
(in millions)
SOURCES
$75 MM Revolver $ 25
Bank Term Debt 225
Sr. Sub. Debt 100
Equity 74
----
Total $424
USES
New Purchase of Equity $272
Debt (net of cash) 133
Other Liabilities Assumed 5(2)
Expenses 14
----
Total $424
- ---------------
(1) Structure assumes a company not including Pulp Chemicals, but including $133
million of net debt.
(2) Not defined.
- 14 -
<PAGE>
PROJECT PLATE Review of Results
- --------------------------------------------------------------------------------
ACQUISITION PROPOSALS: W.R. HUFF ("HUFF")
SUMMARY DESCRIPTION
. Huff proposal is to purchase the issued and outstanding stock of SCI for
$266 million
. Proposal expires on April 8, 1996
TERMS
. $240 million initial payment (1)
. $26 million paid on completion of Valdosta (1)
. With transaction costs of $14 million, uses total $280 million. This amount
excludes SAR costs
. BT Securities provided "strong interest" letter on financing
. Huff fund would provide $60 million of equity
- ------------------
(1) Split between initial payment and "Valdosta" payment dependent on Valdosta
progress.
- 15 -
<PAGE>
PROJECT PLATE Review of Results
- --------------------------------------------------------------------------------
ACQUISITION PROPOSALS: W.R. HUFF("HUFF")
CONDITIONS/LEGAL ISSUES
. Financial, legal, environmental and business due diligence
. Financing condition for lenders
. Continue to meet or exceed 1996 projections
. Valdosta completion staying on track
. Free and clear of all liabilities except for working capital accounts and
certain post employment benefits with limits
- 16 -
<PAGE>
PROJECT PLATE Discussion Objectives
- --------------------------------------------------------------------------------
ACQUISITION PROPOSALS: W.R. HUFF ("HUFF")
SOURCES AND USES
(in millions)
SOURCES
$25 MM Revolver --
Bank Term Loan $120
Senior Sub. Notes 100
New Equity 60
----
Total $280
USES
Initial Purchase $240
Valdosta Payment 26
Expenses 14
----
Total $280
- 17 -
<PAGE>
PROJECT PLATE Review of Results
- --------------------------------------------------------------------------------
ACQUISITION PROPOSALS
OTHERS
. Lyondell/BP Salomon Brothers called on Friday. Indicating $10 to
$11 per share cash bid for whole company. A letter stating
this was requested
. Phillips Possible interest in investment in recapitalization/LBO or
BP joint venture for whole company
. Coastal Worked over weekend. Uncertain where they will come out
- 18 -
<PAGE>
PROJECT PLATE Review of Results
- --------------------------------------------------------------------------------
ESTIMATED TIME SCHEDULE TO CONSUMMATE
<TABLE>
<CAPTION>
STERLING PROCESS BUYER PROCESS
------------------------------------------------------------
<C> <S> <C>
April 2, 1996 Board Meeting
April 19, 1996 Sign Definitive Agreement. Sign Definitive Agreement
Press Release. Begin Preparing Proxy
April 23, 1996 File Proxy with SEC File Prospectus with SEC
June 24, 1996 SEC Clearance SEC Clearance
June 28, 1996 Mail Proxy and Solicit Votes Begin Marketing
August 16, 1996 Shareholder Meeting
August 19, 1996 Pricing
August 22, 1996 Close Close
</TABLE>
. Above schedule assumes SEC review
. If SEC review avoided, schedule could be compressed by 30 to 45 days
- 19 -
<PAGE>
PROJECT PLATE Valuation Update
- --------------------------------------------------------------------------------
BREAK-UP ANALYSIS
($ in millions, except share amounts)
<TABLE>
<CAPTION>
BASED ON BIDS COMPARATIVE VALUES
-------------- --------------------------------------------
<S> <C> <C> <C>
Petrochemicals $ 410 $ 450 $ 500
Pulp Chemicals 313 350 350
------ ------ ------
Total $ 723 800 850
Less:
Net Debt 133 133 133
SARs 9 11 12
Environmental 14 14 14
------ ------ ------
Pre-tax Asset Value 567 642 691
Less:
Taxes on Pulp Chemicals
Sales at 38% 51 65 65
------ ------ ------
Net Asset Value 516 577 626
Net Asset Value per Share $ 9.26 $10.36 $11.24
Tax Loss per Share 0.92 1.17 1.17
------ ------ ------
Pre-tax Value per Share $10.18 $11.53 $12.41
====== ====== ======
</TABLE>
- 20 -
<PAGE>
PROJECT PLATE Valuation Update
- --------------------------------------------------------------------------------
OTHER SALE ALTERNATIVES
<TABLE>
<CAPTION>
ORIGINAL VALUATION ADDITIONAL INFORMATION CURRENT VALUATION
- ---------------------------- ------------------------------------- -------------------------------
<C> <S> <C>
PETROCHEMICALS: NEGATIVES: PETROCHEMICALS:
$400 to $600 mm Environmental liability ($14+ mm) $410 mm
Severance cost (-$12 mm A-T)
PULP CHEMICALS: Higher net debt ($133 mm) PULP CHEMICALS:
$350 to $450 mm Texas City cost structure ($15-30 mm) $313 mm
Expected falloff in ERCO royalties
NET DEBT: New EB unit needed ($25mm) NET DEBT:
$91 mm YTD results below projections $133 mm
B.C. 2002 environmental regulation
WHOLE COMPANY: $10/ton "temporary" chlorate reduction WHOLE COMPANY:
Industrial: $12 to $15/share Company projections lowered Industrial: $10 to $13/share
LBO: $10 to $12 /share LBO: $10 to $12/share
POSITIVES: Recap: $11 to $12/share
Improving petrochemicals outlook
</TABLE>
- 21 -
<PAGE>
PROJECT PLATE Potential Alternatives
- --------------------------------------------------------------------------------
. Remain independent and do nothing
. Remain independent and recapitalize
. Sell to Sterling Group
. Explore BP joint venture purchase
- 22 -
<PAGE>
PROJECT PLATE Potential Alternatives
- --------------------------------------------------------------------------------
REMAIN INDEPENDENT AND DO NOTHING:
ADVANTAGES ISSUES
- --------------------------------- --------------------------------------------
. Retain control over operations . Likely stock price performance
. Can seek a transaction at a . Attitudes of shareholders seeking an exit
better time in the cycle
. Cost structure addressed to . Long-term management and ownership issues
the benefit of existing
shareholders
. Conservatively financed . Competitive position may deteriorate
- 23 -
<PAGE>
PROJECT PLATE Potential Alternatives
- --------------------------------------------------------------------------------
REMAIN INDEPENDENT AND RECAPITALIZE:
ADVANTAGES ISSUES
- ---------------------------------- --------------------------------------------
. May retain control over . Weaker capital structure
operations
. Can seek a sale at a better . Outsider may be able to borrow more
time in the cycle
. Enhanced shareholder value . Impact of exiting managers on sentiment
near-term
. Cost structure addressed to . Long-term management and ownership issues
the benefit of existing
shareholders
. The Board can control
parameters, subject to financial
market conditions
- 24 -
<PAGE>
PROJECT PLATE Potential Alternatives
- --------------------------------------------------------------------------------
RECAPITALIZATION ANALYSIS
<TABLE>
<S> <C> <C> <C>
Incremental Debt $300 $400 $500
Existing Net Debt plus Expenses 133 + 11 133+ 14 133 + 17
-------------- -------------- -------------
Total Net Debt $444 $547 $650
% Repurchased @ $12/share 44.9% 59.8% 74.8%
Proforma Interest $ 43 $ 53 $ 65
Incremental Debt Per Share $ 5.39 $ 7.18 $ 8.98
Net Debt Per Share $ 7.97 $ 9.82 $ 11.67
Trough EBITDA Coverage
Base Case 4.2x 3.4x 2.8x
Downside Case 2.8 2.3 1.8
EBITDA
1996E $187.9 $187.9 $187.9
1997E 208.1 208.1 208.1
Proforma EPS of Stub
1996E $ 2.18 $ 2.70 $ 3.77
1997E 2.29 2.84 3.95
Implied P/E @ Stub Value of: 1996E 1997E 1996E 1997E 1996E 1997E
----- ----- ----- ----- ----- -----
$8.00 3.7x 3.5x 3.0x 2.8x 2.1x 2.0x
$10.00 4.6 4.4 3.7 3.5 2.7 2.5
$12.00 5.5 5.2 4.4 4.2 3.2 3.0
$14.00 6.4 6.1 5.2 4.9 3.7 3.5
Implied EBITDA Multiple @ Stub Value of: 1996E 1997E 1996E 1997E 1996E 1997E
----- ----- ----- ----- ----- -----
$8.00 3.7x 3.3x 3.9x 3.5x 4.1x 3.7x
$10.00 4.0 3.6 4.1 3.7 4.2 3.8
$12.00 4.3 3.9 4.3 3.9 4.4 3.9
$14.00 4.6 4.2 4.6 4.1 4.5 4.1
</TABLE>
- 25 -
<PAGE>
PROJECT PLATE Potential Alternatives
- --------------------------------------------------------------------------------
SELL TO STERLING GROUP:
ADVANTAGES ISSUES
- ----------------------------- -----------------------------------------------
. Shareholders realize . Highly conditional proposal, with important
value now parameters undisclosed
. Control transferred to . Concerns about market acceptance of Discount
new hands Notes, potentially leading to cram-down
and/or price renegotiation
. Possible continued . Financing market risk during lengthy
ownership stake (limited) pre-closing period
. Evident, strong . Ultimate resale and/or split-up likely
interest in a transaction
. Trading value, if any, of the stub
. Management acceptance of transaction
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<PAGE>
PROJECT PLATE Potential Alternatives
- --------------------------------------------------------------------------------
EXPLORE BP JOINT VENTURE PURCHASE:
ADVANTAGES ISSUES
- ----------------------------- ----------------------------------------------
. May yield more certain . Significant uncertainties as to likelihood,
value outcome price and conditions
. Can be pursued in . Joint ventures usually cumbersome to
parallel with other negotiate: timing may be a concern
avenues
. Long-term "home" for the
Company
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