SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2 TO
SCHEDULE 13E-3
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
CANNON EXPRESS, INC.
(Name of Issuer)
CANNON EXPRESS, INC.
(Name of Person(s) Filing Proxy Statement)
Class B Common Stock
(Title or Class of Securities)
137694-20-4
(CUSIP Number of Class of Securities)
Dean G. Cannon
1457 Robinson
P.O. Box 364
Springdale, AR 72764
(501)751-9209
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of Person(s) Filing Statement)
Copies to:
Richard N. Massey, Esq.
Rose Law Firm
120 East Fourth Street
Little Rock, AR 72201
(501)375-9131
This Statement is filed in connection with (check appropriate box):
a. X The filing of solicitation materials or an information statement
subject to Regulation 14A [17 CFR 240.14a-1 to 240.14b-1],
Regulation 14C [17 CFR 240.14c-1 to 240.14c-101] or Rule
13e-3(c) [Section 240.13e-3(c)] under the Securities Exchange
Act of 1934.
b. __ The filing of a registration statement under the Securities Act
of 1933.
c. __ A tender offer.
d. __ None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies:
___________________________________________________________________________
Instruction: Eight copies of this statement, including all exhibits,
should be filed with the Commission.
___________________________________________________________________________
Calculation of Filing Fee:
Transaction Amount of filing fee
valuation*
$19,497,168 $3,899.43
* Transaction valuation calculated by the number of shares proposed to
be acquired (2,166,352) by the amount of cash or the value of
securities to be exchanged therefor, as applicable (in each case,
$9.00 per share).
__ Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
Amount Previously Paid:____________
Form or Registration No.:__________
Filing Party:______________________
Date Filed:________________________
CANNON EXPRESS, INC.
______________________________
SCHEDULE 13E-3
CROSS REFERENCE SHEET
______________________________
The following cross reference sheet is supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the Schedule 14A
Proxy Statement (the "Proxy Statement") filed concurrently herewith by the
Issuer with the Securities and Exchange Commission in connection with the
Rule 13e-3 transaction of the information required to be included in
response to the Items of this Schedule 13E-3. The information in the Proxy
Statement is hereby expressly incorporated herein by reference in this
Schedule 13E-3 and the responses to each item in this Schedule 13E-3 are
qualified in their entirety by the provisions of the Proxy Statement.
Item in Schedule 13E-3 Location and Caption in
Information Statement
Item 1 - Issuer and Class of
Security Subject to the Transaction
(a) . . . . . . . . . . . . . . . . Outside Front Cover Page,
"Summary"
(b) . . . . . . . . . . . . . . . . "Purpose of Special Meeting;
Outstanding Stock and Voting
Rights"
(c) . . . . . . . . . . . . . . . . "Market for the Common Stock;
Dividends"
(d) . . . . . . . . . . . . . . . . "Market for the Common Stock;
Dividends"
(e) . . . . . . . . . . . . . . . . *
(f) . . . . . . . . . . . . . . . . "Security Ownership of
Management, "Principal
Shareholders; Class A
Dilution"
Item 2 - Identity and Background . . . . Outside Front Cover Page,
"Purpose of Special Meeting"
Item 3 - Past Contacts, Transactions or
Negotiations
(a) . . . . . . . . . . . . . . . . *
(b) . . . . . . . . . . . . . . . . *
__________________________
*The item is inapplicable or the answer is negative.
Item 4 - Terms of the Transaction
(a) . . . . . . . . . . . . . . . . "Summary - The Recapitalization
Plan," "Description of the
Transaction - The
Recapitalization Plan"
(b) . . . . . . . . . . . . . . . . "Description of Transaction -
Interests of Certain Persons"
Item 5 - Plans or Proposals of the Issuer
or Affiliate
(a) . . . . . . . . . . . . . . . . *
(b) . . . . . . . . . . . . . . . . *
(c) . . . . . . . . . . . . . . . . "Description of Transaction -
Conduct of the Company's Business
After the Recapitalization Plan;"
Special Factors - Opinion of
Financial Advisor"
(d) . . . . . . . . . . . . . . . . *
(e) . . . . . . . . . . . . . . . . *
(f) . . . . . . . . . . . . . . . . "Description of Transaction -
Conduct of the Company's Business
After the Recapitalization Plan"
(g) . . . . . . . . . . . . . . . . "Description of Transaction -
Conduct of the Company's Business
After the Recapitalization Plan"
Item 6 - Source and Amounts of Funds
or Other Consideration
(a) . . . . . . . . . . . . . . . . "Description of Transaction -
Source of Funds"
(b) . . . . . . . . . . . . . . . . "Expenses"
(c) . . . . . . . . . . . . . . . . *
(d) . . . . . . . . . . . . . . . . *
Item 7 - Purpose(s), Alternatives, Reasons
and Effects
(a) . . . . . . . . . . . . . . . . "Special Factors - Background and
Reasons for the Recapitalization
Plan"
(b) . . . . . . . . . . . . . . . . "Special Factors - Background and
Reasons for the Recapitalization
Plan"
__________________________
*The item is inapplicable or the answer is negative.
2
(c) . . . . . . . . . . . . . . . . "Special Factors - Background and
Reasons for the Recapitalization
Plan"
(d) . . . . . . . . . . . . . . . . "Special Factors - Background and
Reasons for the Recapitalization
Plan;" "Description of
Transaction - The
Recapitalization Plan, Conduct of
the Company's Business after the
Recapitalization Plan, Comparison
of Capital Stock Before and After
Recapitalization Plan, Federal
Income Tax Consequences,
Interests of Certain Persons"
Item 8 - Fairness of the Transaction
(a) . . . . . . . . . . . . . . . . "Special Factors - Recommendation
of Special Committee"
(b) . . . . . . . . . . . . . . . . "Special Factors - Recommendation
of Special Committee"
(c) . . . . . . . . . . . . . . . . "Outstanding Stock and Voting
Rights;" "Special Factors -
Recommendation of Special
Committee"
(d) . . . . . . . . . . . . . . . . "Special Factors - Recommendation
of Special Committee"
(e) . . . . . . . . . . . . . . . . "Special Factors - Recommendation
of Special Committee"
(f) . . . . . . . . . . . . . . . . *
Item 9 - Reports, Opinions, Appraisals and
Certain Negotiations
(a) . . . . . . . . . . . . . . . . "Special Factors - Opinion of
Financial Advisor"
(b) . . . . . . . . . . . . . . . . "Special Factors - Opinion of
Financial Advisor"
(c) . . . . . . . . . . . . . . . . "Special Factors - Opinion of
Financial Advisor"
Item 10 - Interest in Securities of the Issuer
(a) . . . . . . . . . . . . . . . . "Security Ownership of
Management", "Principal
Shareholders; Class A Dilution"
__________________________
*The item is inapplicable or the answer is negative.
3
(b) . . . . . . . . . . . . . . . . *
Item 11 - Contracts, Arrangements or *
Understandings with Respect to the
Issuer's Securities
Item 12 - Present Intention and
Recommendation of Certain Persons
with Regard to the Transaction
(a) . . . . . . . . . . . . . . . . "Outstanding Stock and Voting
Rights"
(b) . . . . . . . . . . . . . . . . "Special Factors - Recommendation
of Special Committee"
Item 13 - Other Provisions of the Transaction
(a) . . . . . . . . . . . . . . . . "Description of the Transaction -
Dissenters' Appraisal Rights"
(b) . . . . . . . . . . . . . . . . *
(c) . . . . . . . . . . . . . . . . *
Item 14 - Financial Information
(a) . . . . . . . . . . . . . . . . "Historical Financial
Information"; "Pro Forma
Financial Information"
(b) . . . . . . . . . . . . . . . . "Pro Forma Financial Information"
Item 15 - Persons and Assets Employed,
Retained or Utilized
(a) . . . . . . . . . . . . . . . . *
(b) . . . . . . . . . . . . . . . . *
Item 16 - Additional Information *
Item 17 - Material to Be Filed as Exhibits
(a) . . . . . . . . . . . . . . . . *
(b) (1) . . . . . . . . . . . "Opinion of Llama Company,"
Exhibit B to Proxy Statement on
Schedule 14A
(b)(2). . . . . . . . . . . . . . Project Lonestar - Special
Committee Presentation, Exhibit
(b)(2) to this Schedule 13E-3
(c) . . . . . . . . . . . . . . . . *
(d) . . . . . . . . . . . . . . . . Proxy Statement on Schedule 14A
4
(e) . . . . . . . . . . . . . . . . *
(f) . . . . . . . . . . . . . . . . *
__________________________
*The item is inapplicable or the answer is negative.
5
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
CANNON EXPRESS, INC.
By: /s/ Dean G. Cannon
Dean G. Cannon
President, Chairman of the
Board, Chief Executive Officer
and Chief Accounting Officer
Date: March 19, 1996
6
CANNON EXPRESS, INC.
________________________
SCHEDULE 13E-3
EXHIBIT INDEX
________________________
Exhibit
Number Exhibit
(b) (1) Fairness Opinion of Llama Company (attached as Exhibit B
to the Proxy Statement filed as Exhibit (d) hereto).
(b)(2) Project Lonestar - Special Committee Presentation, dated
January 25, 1996, of Llama Company.
(d) Proxy Statement dated March 19, 1996 filed
concurrently herewith and incorporated herein by this
reference.
7
EXHIBIT (b)(2)
PROJECT LONESTAR
SPECIAL COMMITTEE PRESENTATION
January 25, 1996 Llama Company
TABLE OF CONTENTS
I. Presentation Objectives..........................................1
II. Analysis of Historical Price and Volume..........................2
III. Analysis of Comparable Companies.................................3
IV. Analysis of Other Going Private Transactions.....................4
V. Analysis of Dual Class Stock Trading Variance....................5
VI. Discounted Cash Flow Analysis....................................6
VII. Analysis Summary.................................................7
VIII. Recapitalization.................................................8
i
Presentation Objectives
- - Review a summary of the financial analysis performed pursuant to the
engagement to render a fairness opinion.
- - Discuss other information pertinent to the determination of a fair
price to the public B holders.
1
ANALYSIS OF HISTORICAL PRICE AND VOLUME
- - January 23, 1996
- Closing price Class A $9.27 with a volume of 600 shares.
- Closing price Class B $6.75 with a volume of 1,100 shares.
- - Review historical trading prices and volume.
- - Review other publicly available information.
2
<TABLE>
LONESTAR
CLASS B COMMON STOCK
ANALYSIS OF HISTORICAL MARKET PRICES AND VOLUME FOR CY 1995 AND YTD 1996
<CAPTION>
Average from Average from Average for Average for Average
for
<S> 1/1/95 to 7/1/95 to Trailing Trailing Trailing
CLASS B MARKET PRICES Current (1) Current (1) 90 Days (1) 4 Weeks(1) 1
Week(1)
<C> <C> <C> <C> <C>
Average Trade Price $11.06 $9.55 $7.32 $6.77 $6.72
Average Bid Price $10.51 $8.72 $6.84 $6.74 $6.70
Average Ask Price $12.27 $10.53 $8.39 $8.24 $8.23
Average Trade Price Weighted by Volume $9.95 $8.85 $6.71 $6.66 $6.44
Average Bid Price Weighted by Volume $9.43 $8.36 $6.66 $6.62 $6.53
Average Ask Price Weighted by Volume $11.25 $10.24 $8.22 $8.19 $8.14
Spread between Bid and Ask $1.76 $1.81 $1.55 $1.51 $1.53
Percent Spread between Bid and Ask 16.73% 20.80% 22.60% 22.36% 22.76%
Last Trade:
Closing Trade Price $6.38
Trading Volume 78,200
Number of Trades 3
CLASS B TRADING VOLUME
Average Daily Volume 4,726 6,029 6,145 22,000 22,350
Average Weekly Volume 11,563 15,877 13,467 38,500 89,400
Weekly Volume as % of Publicly-Held Outstanding 1.24% 1.70% 1.44% 4.12% 9.56%
Weekly Volume as % of Total Outstanding 0.53% 0.73% 0.62% 1.78% 4.13%
Days Shares Traded 136 78 28 7 4
Number of Trading Days 270 144 62 19 5
% of Days Shares Traded 50.37% 54.17% 45.16% 36.84% 80.00%
CLASS A PRICE AND VOLUME
Average Trade Price $12.52 $11.52 $9.88 $9.00 $9.13
Average Weekly Volume (2) 11,296 12,238 4,085 2,675 3,100
Weekly Volume as % of Publicly-Held Outstanding 1.21% 1.32% 0.44% 0.29% 0.33%
Weekly Volume as % of Total Outstanding 0.52% 0.57% 0.19% 0.12% 0.14%
Last Trade:
Closing Trade Price $9.13
Trading Volume 700
Number of Trades 4
A Premium to B 13.16% 20.67% 34.94% 33.02% 35.91%
B as a % of A 88.37% 82.87% 74.10% 75.17% 73.58%
<FN>
(1) As of January 25, 1996
(2) As of latest full week
</TABLE>
Lonestar
Stock Prices for Class A and Class B Common Stock
Calendar Year 1992 to January 25, 1996
THE FOLLOWING NARRATIVE DESCRIPTION OF GRAPHIC MATERIAL THAT HAS BEEN
OMITTED FROM THE ELECTRONIC FILING IS PROVIDED PURSUANT TO SECTION 304(A)
OF REGULATION S-T: The omitted graph depicts the average weekly trading
prices of Class A and Class B Common Stock from 1992 to January 25, 1996.
The source of the information was Bloomberg Financial Markets. The
vertical axis of the chart contains the stock price per share and it begins
at two dollars ($2) and increases to sixteen dollars ($16) in one dollar
($1) increments. The horizontal axis of the chart contains the calendar
years and it begins shortly before 1992 and continues into the middle of
1995. With a few exceptions, the graph depicts that the Class B Common
Stock has generally traded at prices less than or equal to the Class A
Common Stock. The graph also depicts that the Class B Common Stock has
frequently traded at prices below the Class A Common Stock, with a price
difference as high as approximately two dollars ($2) per share at times.
Lonestar
Annual Trading Volume for Class A and Class B Common Stock
Calendar Year 1992 to 1995
THE FOLLOWING NARRATIVE DESCRIPTION OF GRAPHIC MATERIAL THAT HAS BEEN
OMITTED FROM THE ELECTRONIC FILING IS PROVIDED PURSUANT TO SECTION 304(A)
OF REGULATION S-T: The omitted graph depicts the annual trading volume for
the Class A and Class B Common Stock from 1992 to 1995. The source of the
information was Bloomberg Financial Markets. The vertical axis of the
chart contains trading volume and it begins at 500,000 shares and increases
to 3,500,000 in increments of 250,000. The horizontal axis contains the
calendar years and it begins in 1992 and ends in 1995. At the start of
each of the following years, the chart depicts the approximate trading
volume for the Class A and Class B Common Stock as follows:
<TABLE>
<CAPTION>
Class A Class B
Year Common Stock Common Stock
<S> <C> <C>
1992 Between 3,250,000 and 3,500,000 Not Applicable
1993 Between 1,250,000 and 1,500,000 Between 750,000 and 1,000,000
1994 Between 750,000 and 1,000,000 Between 750,000 and 1,000,000
1995 Between 500,000 and 750,000 Between 500,000 and 750,000
</TABLE>
ANALYSIS OF COMPARABLE COMPANIES
- - Discuss ratio analysis
- - Review key financial comparisons
- - Discuss other information relative to comparable companies
3
<TABLE>
LONESTAR
ANALYSIS OF COMPARABLE COMPANIES*
PRICE MULTIPLES
<CAPTION>
Average Weekly
Trading Volume P/E
as % of Total Current Stock Market Trailing Estimated
Outstanding Shares Price 1/25/96 Capitalization(3) 12 Months EPS 1995 P/Book
<S> <C> <C> <C> <C> <C> <C>
Cannon Express Inc. Class A 0.52% $9.13 $19,722,337 7.73 8.69 1.49
Cannon Express Inc. Class B 0.47% $6.38 $13,810,494 5.40 6.07 1.04
___________
$33,532,831
$49,612,933
___________
$83,145,764
GROWTH TRUCKLOAD SEGMENT
USA Truck Inc. 0.44% $10.75 $115,541,950 15.58 17.92 2.48
Transport Corp. of America 2.36% $10.50 $95,128,288 11.80 10.61 2.01
Heartland Express Inc. 1.29% $21.31 $278,226,078 15.01 19.03 2.97
Frozen Food Express Inc. 0.80% $8.88 $150,151,398 13.87 20.64 2.01
M.S. Carriers Inc. 2.42% $15.50 $255,054,400 13.25 15.05 1.28
Swift Transportation Co. 1.95% $16.75 $495,933,913 18.01 18.21 3.32
Werner Enterprises Inc. 1.90% $19.75 $536,924,141 13.81 14.01 1.66
Landstar System Inc. 4.66% $24.00 $404,076,192 11.37 11.71 2.50
_____________________________________________________________________________________
Simple Average 1.98% 14.09 15.90 2.28
Weighted Average (2) 2.25% 14.37 15.70 2.35
<CAPTION>
P/Op. Income P/EBIT(1) P/EBITDA(1) P/Sales
<S> <C> <C> <C> <C>
Cannon Express Inc. Class A 3.76 3.74 2.13 0.49
Cannon Express Inc. Class B 2.62 2.62 1.49 0.34
GROWTH TRUCKLOAD SEGMENT
USA Truck Inc. 9.07 8.98 4.76 1.07
Transport Corp. of America 6.73 5.71 3.27 0.51
Heartland Express Inc. 9.15 9.09 5.94 1.45
Frozen Food Express Inc. 3.70 8.43 5.18 0.51
M.S. Carriers Inc. 7.40 7.34 3.08 0.61
Swift Transportation Co. 9.02 8.93 5.40 0.96
Werner Enterprises Inc. 8.28 8.21 4.11 0.88
Landstar System Inc. 5.81 5.81 4.27 0.26
____________________________________________________
Simple Average 7.40 7.81 4.50 0.78
Weighted Average (2) 7.70 7.91 4.59 0.80
<FN>
(1) EBIT and EBITDA includes non-operating expense.
(2) Average multiples have been weighted by market capitalization.
(3) Market Capitalization = Market Value of Equity + Book Value of Debt.
</TABLE>
<TABLE>
LONESTAR
ANALYSIS OF COMPARABLE COMPANIES*
KEY FINANCIAL DATA
<CAPTION>
________________Net Sales_______________ ____Operating Expenses(1)___
Trailing 12 Trailing Trailing
Months Ended FY 1992(7) FY 1994 12 Months FY 1994 12 Months
<S> <C> <C> <C> <C> <C> <C>
Cannon Express Inc.(3) 9/95 $43,256,494 $79,030,217 $82,310,237 $67,360,311 $71,523,910
GROWTH TRUCKLOAD SEGMENT
USA Truck Inc. 9/95 $63,038,461 $92,511,364 $101,252,610 $78,625,271 $89,315,885
Transport Corp. of America 9/95 $93,631,288 $127,424,807 $138,658,294 $118,302,249 $128,193,750
Heartland Express Inc.(4) 9/95 $205,213,782 $224,248,262 $191,770,379 $197,163,390 $161,458,257
Frozen Food Express Inc. 9/95 $194,888,000 $274,620,000 $288,074,000 $234,350,000 $248,527,000
M.S. Carriers Inc. 9/95 $181,303,289 $292,882,828 $333,157,106 $263,222,357 $305,783,254
Swift Transportation Co. 9/95 $233,409,000 $365,889,000 $443,001,000 $325,041,000 $395,941,000
Werner Enterprises Inc. 9/95 $361,791,000 $516,006,000 $561,838,000 $455,769,000 $501,792,000
Landstar System Inc. 9/95 $672,450,000 $984,359,000 $1,181,968,000 $938,597,000 $1,129,010,000
<CAPTION>
Trailing Trailing Trailing Trailing Trailing
12 Months 12 Months 12 Months 12 Months 12 Months
Op. Income(1) EBIT(2) Dep. & Amort. EBITDA(2) Net Income
<S> <C> <C> <C> <C> <C>
Cannon Express Inc.(3) $10,786,327 $10,825,625 $8,211,585 $19,037,210 $5,244,526
GROWTH TRUCKLOAD SEGMENT
USA Truck Inc. $11,936,725 $12,056,049 $10,689,706 $22,745,755 $6,927,720
Transport Corp. of America $10,464,544 $12,337,807 $9,197,075 $21,534,882 $5,890,784
Heartland Express Inc.(4) $30,312,122 $30,519,527 $16,208,141 $46,727,668 $18,498,127
Frozen Food Express Inc. $39,547,000 $17,361,000 $10,885,000 $28,246,000 $10,605,000
M.S. Carriers Inc. $27,373,852 $27,602,901 $38,156,935 $65,759,836 $15,330,328
Swift Transportation Co. $47,060,000 $47,527,000 $31,076,000 $78,603,000 $23,345,000
Werner Enterprises Inc. $60,046,000 $60,576,000 $60,339,000 $120,915,000 $35,928,000
Landstar System Inc. $52,958,000 $52,958,000 $18,993,000 $71,951,000 $27,097,000
<CAPTION>
Current Average Weekly
___________________EPS___________________ Shares Weighted Average Trading Volume
FY 1992(7) FY 1994 Trailing 12 Mths Outstanding Shrs Outstanding 1/1/95-1/12/96
<S> <C> <C> <C> <C> <C> <C>
Cannon Express Inc.(3) $0.47 $1.35 $1.18 4,327,704 4,441,151
GROWTH TRUCKLOAD SEGMENT
USA Truck Inc. $0.44 $0.80 $0.69 9,692,728 10,067,876 42,830
Transport Corp. of America $0.36 $0.78 $0.89 6,420,619 6,707,507 151,457
Heartland Express Inc.(4) $0.72 $0.77 $1.42 13,016,600 13,016,600 168,318
Frozen Food Express Inc. $0.75 $0.72 $0.64 16,242,411 16,494,000 130,064
M.S. Carriers Inc. $0.97 $1.31 $1.17 12,878,300 13,071,960 311,321
Swift Transportation Co. $0.43 $0.89 $0.93 24,620,353 25,342,000 478,902
Werner Enterprises Inc. $1.06 $1.45 $1.43 25,160,716 25,173,000 478,220
Landstar System Inc. $0.67 $1.90 $2.11 12,777,633 12,816,000 595,488
<CAPTION> Number of
_____Long-Term Debt(6)_______ ____Stockholders Equity____ Tractors as
FY 1994 9/30/95 FY 1994 9/30/95 of 9/30/95 (8)
<S> <C> <C> <C> <C> <C>
Cannon Express Inc.(3) $35,353,262 $39,447,724 $25,323,275 $27,161,606 745
GROWTH TRUCKLOAD SEGMENT
USA Truck Inc. $9,426,853 $8,352,129 $38,644,876 $43,607,736 790
Transport Corp. of America $17,455,541 $20,301,190 $30,189,269 $34,953,312 1,110
Heartland Express Inc.(4) $705,437 $0 $78,050,202 $93,509,844 935
Frozen Food Express Inc. $9,000,000 $6,000,000 $64,288,000 $72,835,000 1,110
M.S. Carriers Inc. $51,186,613 $38,339,181 $147,923,733 $158,089,155 2,365
Swift Transportation Co. $52,238,000 $57,230,000 $111,342,000 $128,021,000 3,846
Werner Enterprises Inc. $30,000,000 $40,000,000 $276,414,000 $299,387,000 4,000
Landstar System Inc. $30,510,000 $77,931,000 $105,161,000 $123,187,000 9,188
<CAPTION>
KEY FINANCIAL STATISTICS AND RATIOS
3 Year Annual 3 Year Annual Trailing ____Operating Ratio(1)_____ Trailing
Comp. Revenue Comp. EPS 12 Months Trailing 12 Months
Growth Rate Growth Rate Return on Equity FY 1994 12 Months Profit Margin
<S> <C> <C> <C> <C> <C> <C>
Cannon Express Inc.(3) 35.17% 69.48% 19.31% 85.23% 86.90% 6.37%
GROWTH TRUCKLOAD SEGMENT
USA Truck Inc. 21.14% 34.84% 15.89% 84.99% 88.21% 6.84%
Transport Corp. of America 16.66% 47.20% 16.85% 92.84% 92.45% 4.25%
Heartland Express Inc. 4.53% 3.41% 19.78% 87.92% 84.19% 9.65%
Frozen Food Express Inc. 18.71% -2.02% 14.56% 85.34% 86.27% 3.68%
M.S. Carriers Inc. 27.10% 16.21% 9.70% 89.87% 91.78% 4.60%
Swift Transportation Co. 25.20% 43.87% 18.24% 88.84% 89.38% 5.27%
Werner Enterprises Inc. 19.43% 16.96% 12.00% 88.33% 89.31% 6.39%
Landstar System Inc. 20.99% 68.40% 22.00% 95.35% 95.52% 2.29%
__________________________________________________________________________________________
19.22% 28.61% 16.13% 89.18% 89.64% 5.37%
__________________________________________________________________________________________
<CAPTION>
Long-Term
_______Estimated EPS (5)_____ Debt to (Market Cap +
1995 1996 Dividend Yield Total Capital(6) LTD)/Revenues
<S> <C> <C> <C> <C> <C>
Cannon Express Inc.(3) $1.05 $1.30 None 64.62% 88.67%
GROWTH TRUCKLOAD SEGMENT
USA Truck Inc. $0.60 $0.72 None 20.65% 122.36%
Transport Corp. of America $0.99 $1.30 None 44.22% 83.25%
Heartland Express Inc. $1.12 $1.29 None 0.86% 145.08%
Frozen Food Express Inc. $0.43 $0.76 1.35% 7.61% 54.21%
M.S. Carriers Inc. $1.03 $1.32 None 25.96% 88.06%
Swift Transportation Co. $0.92 $1.19 None 39.49% 124.87%
Werner Enterprises Inc. $1.41 $1.62 0.61% 11.79% 102.69%
Landstar System Inc. $2.05 $2.34 None 44.16% 40.78%
__________________________
24.34% 95.16%
--------------------------
<FN>
(1) Gain on sale of assets has been eliminated from operating expenses, income, and ratio whenever possible.
(2) EBIT and EBITDA includes non-operating expense.
(3) Cannon's fiscal year ends June 30. The company's EBIT and EBITDA has been adjusted downwards for gain on marketable
securities. Earnings estimates for Cannon Express are for FY 1996 ending June 30, 1996 and FY 1997 ending June 30, 1997.
(4) Adjusted merger cost and gain on sale of assets out of operating expenses, operating income, EBIT and EBITDA for Heartland
Express.
(5) Source of earnings estimates: Nelson Publications.
(6) Long-term debt includes current portion of debt. It has not been adjusted for off-balance sheet operating leases.
(7) Revenues and earnings per share for fiscal year 1992 are included to facilitate the calculation of the three year
compounded
annual growth rates.
(8) Number of tractors for Heartland, Werner, and Landstar are as of December 31, 1994. No information was available as of
September 30, 1995.
*
</TABLE>
THE PROJECTIONS SET FORTH HEREIN ARE BASED UPON, AND MUST BE READ IN
CONJUNCTION WITH, THE ASSUMPTIONS SET FORTH IN "FOOTNOTES TO ASSUMPTIONS -
BASE CASE" AT THE END OF THIS EXHIBIT.
<TABLE>
LONESTAR
ANALYSIS OF COMPARABLE COMPANIES
IMPLIED VALUATION OF LONESTAR'S CLASS B STOCK BASED ON DISCOUNT OF COMPANY'S P/E TO MARKET P/Es
<CAPTION> Trailing
1995 to Week One Month
HISTORICAL AVERAGE P/Es(1) 1993 1994 1995 Ending 1/19/96 to 1/25/96
<S> <C> <C> <C> <C> <C>
Cannon Express Inc. Class A 13.781 14.668 10.333 10.308 10.198
Cannon Express Inc. Class B 12.216 13.102 9.246 9.166 7.392
USA Truck Inc. 28.326 26.968 18.148 18.022 15.357
Transport Corp. of America N/A N/A N/A N/A 12.310
Heartland Express Inc. 27.567 42.586 25.047 24.908 22.713
Frozen Food Express Inc. 21.437 20.613 15.293 15.215 13.716
M.S. Carriers Inc. 21.446 20.300 15.337 15.499 18.048
Swift Transportation Co. 20.352 26.037 19.792 19.686 17.430
Werner Enterprises Inc. 20.465 20.175 14.602 14.594 14.335
Landstar System Inc. 20.114 19.366 14.180 14.034 11.609
_____________________________________________________________________________
Average P/E for Comparables 22.815 25.149 17.486 17.423 15.690
_____________________________________________________________________________
DISCOUNT OF LONESTAR'S CLASS B'S
P/E TO MARKET 53.54% 52.10% 52.88% 52.61% 47.11%
<CAPTION>
IMPLIED VALUATION FOR LONESTAR'S 1 Month Average 1 Year Average 3 Year Average
CLASS B STOCK Discount Discount(3) Discount
<S> <C> <C> <C>
Discount to Market P/Es 47.11% 52.88% 52.84%
Current Market P/E(2) 15.70 15.70 15.70
Implied PE for Lonestar 7.40 8.30 8.29
Trailing 12 Months EPS as of 12/31/95 $0.87 $0.87 $0.87
__________________________________________________
Implied Valuation for Lonestar $6.43 $7.22 $7.22
__________________________________________________
--------------------------------------------------
<FN>
(1) Average P/E multiples apply to calendar years. Source: Bloomberg Financial Markets
(2) Weighted average P/E for all comparable companies based on closing stock prices as of 1/25/96 and estimated
EPS for 1995 calendar year. Earnings estimates are from Nelson Publications.
(3) Based on 1995 calendar year.
</TABLE>
<TABLE>
LONESTAR
ANALYSIS OF COMPARABLE COMPANIES
IMPLIED VALUATION OF LONESTAR'S CLASS B STOCK BASED ON DISCOUNT OF COMPANY'S P/E TO MARKET P/Es
<CAPTION>
Trailing
1995 to Week One Month
HISTORICAL AVERAGE P/Es(1) 1993 1994 1995 Ending 1/19/96 to 1/25/96
<S> <C> <C> <C> <C> <C>
Cannon Express Inc. Class A 13.781 14.668 10.333 10.308 10.198
Cannon Express Inc. Class B 12.216 13.102 9.246 9.166 7.392
USA Truck Inc. 28.326 26.968 18.148 18.022 15.357
Transport Corp. of America N/A N/A N/A N/A 12.310
Heartland Express Inc. 27.567 42.586 25.047 24.908 22.713
Frozen Food Express Inc. 21.437 20.613 15.293 15.215 13.716
M.S. Carriers Inc. 21.446 20.300 15.337 15.499 18.048
Swift Transportation Co. 20.352 26.037 19.792 19.686 17.430
Werner Enterprises Inc. 20.465 20.175 14.602 14.594 14.335
Landstar System Inc. 20.114 19.366 14.180 14.034 11.609
_____________________________________________________________________________
Average P/E for Comparables 22.815 25.149 17.486 17.423 15.690
_____________________________________________________________________________
DISCOUNT OF LONESTAR'S CLASS B'S
P/E TO MARKET 53.54% 52.10% 52.88% 52.61% 47.11%
<CAPTION>
IMPLIED VALUATION FOR LONESTAR'S 1 Month Average 1 Year Average 3 Year Average
CLASS B STOCK Discount Discount(3) Discount
<S> <C> <C> <C>
Discount to Market P/Es 47.11% 52.88% 52.84%
Current Market P/E(2) 15.70 15.70 15.70
Implied PE for Lonestar 7.40 8.30 8.29
Estimated EPS for Fiscal Year 1996(4) $1.05 $1.05 $1.05
__________________________________________________
Implied Valuation for Lonestar $7.77 $8.72 $8.71
__________________________________________________
--------------------------------------------------
<FN>
(1) Average P/E multiples apply to calendar years. Source: Bloomberg Financial Markets
(2) Weighted average P/E for all comparable companies based on closing stock prices as of 1/25/96 and estimated
EPS for 1995 calendar year. Earnings estimates are from Nelson Publications.
(3) Based on 1995 calendar year.
(4) Estimated EPS applies to fiscal year 1996 ending June 30, 1996. Source: Nelson Publications.
</TABLE>
ANALYSIS OF OTHER GOING PRIVATE TRANSACTIONS
- - Non-merger and acquisition transaction premiums and financial analysis.
- - Merger and acquisition going private transaction premiums in the trucking
and shipping industry.
- - Merger and acquisition going private transaction premiums in other
industries.
- - Discuss other information relative to other going private transactions.
4
<TABLE>
Lonestar
Analysis of Other Transactions
Premiums for Going Private Transactions in Last 2 Years
<CAPTION>
Ticker Date Transaction
Symbol Announced Company Description Price
<S> <C> <C> <C> <C> <C>
1 CNSC 05/18/95 Conesco Industries, Ltd. Reverse Split $3.80
2 RIOC 03/09/95 Royal International Optical Reverse Split $1.25
3 EE 05/26/95 Esquire Radio & Electronics, Inc. Self-Tender Offer $54.35
4 BDRM 08/04/94 Body Drama, Inc.(1) Tender Offer $2.93
5 HOF 12/06/89 Hofmann Industries, Inc. Tender Offer $8.25
6 DINE 04/13/95 Mascott Corporation Tender Offer/Merger $1.55
7 LDB 09/13/94 LDB Corporation(2) Merger $7.50
8 PETT 11/22/93 Pettibone Corp. Management Buy-Out $3.50
9 CSOF 10/18/93 Corporate Software, Inc. Tender Offer/Mgmt. Led Buy-Out $15.00
10 KTM 04/28/94 Ketema Inc.(3) Merger/Takeover $15.00
<CAPTION>
Ticker ____________Price____________ ________________Premium____________________
Symbol 1 day prior 1 week prior 1 month prior 1 day prior 1 wk prior(4) 1 month prior
<S> <C> <C> <C> <C> <C> <C>
1 CNSC No trades $2.625 $2.500 44.76% 52.00%
2 RIOC $0.313 No trades $0.875 300.00% 42.86%
3 EE $48.250 No trades $48.250 12.64% 12.64%
4 BDRM $1.625 $1.875 $1.375 80.31% 56.27% 113.09%
5 HOF $6.375 $6.250 $5.500 29.41% 32.00% 50.00%
6 DINE No trades $1.500 $1.000 3.33% 55.00%
7 LDB No trades $5.250 $4.500 42.86% 66.67%
8 PETT $3.375 $3.750 $3.000 3.70% -6.67% 16.67%
9 CSOF $11.250 $11.000 $11.250 33.33% 36.36% 33.33%
10 KTM $13.000 $13.125 $12.375 15.38% 14.29% 21.21%
______________________________________
Average 67.83% 32.84% 46.35%
--------------------------------------
Minimum 3.70% 3.33% 12.64%
Maximum 300.00% 56.27% 113.09%
_______________________________________
Adjusted Average 34.22% 32.72% 42.22%
---------------------------------------
<FN>
(1) Company successfully completed tender offer at offer price even though it was sued by shareholders. The Company's stock
traded as high as $5 a year prior to offer.
(2) Initial offer price was set at $5.50 a share but had to be increased to $7.50 a share.
(3) Initial offer was set at $13.125 a share but had to be increased to $15 a share.
(4) Average does not include premium for Pettibone Corporation.
Source: Datatimes and Bloomberg
</TABLE>
<TABLE>
Lonestar
Analysis of Other Transactions
Price Multiples for Going Private Transactions in Last 2 Years
<CAPTION>
Ticker Date Transaction
Symbol Announced Company Description Price Time Period
<S> <C> <C> <C> <C> <C> <C>
1 CNSC 05/18/95 Conesco Industries, Ltd. Reverse Split $3.80 12/94
2 RIOC 03/09/95 Royal International Optical Reverse Split $1.25 3/94
3 EE 05/26/95 Esquire Radio & Electronics, Inc. Self-Tender Offer $54.35
4 BDRM 08/04/94 Body Drama, Inc. (1) Tender Offer $2.93
5 HOF 12/06/89 Hofmann Industries, Inc. Tender Offer $8.25
6 DINE 04/13/95 Mascott Corporation Tender Offer/Merger $1.55
7 LDB 09/13/94 LDB Corporation (2) Going private/Merger $7.50
8 PETT 11/22/93 Pettibone Corp. Management Buy-Out $3.50 3/93
9 CSOF 10/18/93 Corporate Software, Inc. Tender Offer/Mgmt. Led Buy-Out $15.00 12/92
10 KTM 04/28/94 Ketema Inc. (3) Merger/Takeover $15.00 2/94
<CAPTION>
Ticker -------------- Per Share Data------------ ------------ Price Multiples -------------
Symbol Sales Cash Flow Operating Inc. Earnings Book Value Sales Cash Flow Operating Inco Earnings Book
Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 CNSC 10.1 $0.87 $0.77 $0.34 $5.32 0.38 4.39 4.95 11.18 0.71
2 RIOC 11.56 (0.07) (0.09) (0.09) 1.56 0.11 (16.78) (13.18) (13.89) 0.80
3 EE
4 BDRM
5 HOF
6 DINE
7 LDB
8 PETT 9.67 0.40 0.46 0.32 2.31 0.36 8.75 7.61 10.94 1.52
9 CSOF 51.45 0.93 1.67 1.00 9.26 0.29 16.13 8.98 15.00 1.62
10 KTM 35.02 (1.68) 1.53 0.42 16.33 0.43 (8.93) 9.80 35.71 0.92
___________________________________________________
0.31 9.76 7.84 18.21 1.11
</TABLE>
<TABLE>
Lonestar
Analysis of Other Transactions
M & A Going Private Transactions Involving Companies in Similar Industry in Last 5 Years
Criteria
Public U.S. Companies that Went Private in Last 5 Years
Trucking & Shipping, Non-Air Industry
No Restriction on Transaction Size
<CAPTION>
Date Date
Announced Effective Target Name Acquiror Name
<S> <C> <C> <C> <C>
1 02/16/90 08/31/90 AIFS Inc Marina Holdings Corp
2 02/26/90 Builders Transport Inc Comcar Industries Inc
3 07/03/90 05/25/93 Regency Cruises Inc Rainbow Cruises Inc
4 04/23/91 09/29/91 Courier Dispatch Group Inc CDG Acquisition Corp
5 03/14/95 04/25/95 Leaseway Transportation Corp Penske Truck Leasing Co LP
<CAPTION>
Premium 1 Premium 1 Premium 4 Shares
Price per day prior to week prior to weeks prior to Outstanding
Share announcement (1) announcement announcement Actual (mil)
<S> <C> <C> <C> <C> <C>
1 $6.50 48.6% 48.6% 44.4% 3.29
2 $15.00 57.9% 53.8% 55.8% 4.91
3 $2.60 28.0% 32.1% 38.7% 23.29
4 $4.37 -0.1% 52.0% 94.2% 2.50
5 $20.00 54.6% 55.3% 60.0% 9.99
________________________________________________
47.3% 48.4% 58.6%
================================================
<FN>
(1) Average does not include premium for Courier Dispatch Group.
Source: Securities Data Company
</TABLE>
<TABLE>
Lonestar
Analysis of Other Transactions
M & A Going Private Transactions Involving Companies in Other Industries in Last 18 Months
Criteria
Public U.S. Companies that Went Private in Last 18 Months
All Industries, excluding High-Tech
Transaction Size of $40 million or less
<CAPTION>
Date Date
Announced Effective Target Name Acquiror Name
<S> <C> <C> <C> <C>
1 09/18/95 12/05/95 Bliss & Laughlin Industries BRW (Veritas Capital Corp)
2 11/03/95 11/03/95 Marshalltown Financial Corp BancSecurity Corp
3 09/13/94 01/30/95 LDB Corp Investor Group
4 09/27/94 12/21/94 Revell-Monogram Inc Hallmark Cards Inc
5 10/03/94 11/14/94 Information America Inc West Publishing Co
6 10/04/94 12/15/94 Laser Precision Corp GN Great Nordic Ltd
7 11/01/94 10/16/95 Mickelberry Communications Union Capital Corp
8 12/14/94 03/01/95 Galveston-Houston Co GHI Acquisition Co
9 03/02/95 08/30/95 DATEQ Information Network Trans Union (Marmon Holdings)
10 04/06/95 08/31/95 Intermetrics Inc Apollo Holding Inc
11 06/05/95 09/01/95 Designatronics Inc Dyson & Dyson & Dunn Inc
<CAPTION>
Premium 1 Premium 1 Premium 4 Shares
Price per day prior to weeks prior to weeks prior to Outstanding
Share announcement (1) announcement announcement Actual (mil)
<S> <C> <C> <C> <C> <C>
1 $9.50 11.8% 24.6% 22.6% 3.97
2 $16.75 9.8% 17.5% 9.8% 1.41
3 $7.50 42.9% 42.9% 42.9% 1.85
4 $6.38 10.9% 4.1% 10.9% 4.67
5 $6.00 54.8% 65.5% 84.6% 4.88
6 $8.00 36.2% 45.5% 39.1% 4.84
7 $4.25 47.8% 78.9% 61.9% 5.88
8 $2.25 28.6% 38.5% 28.6% 16.96
9 $5.41 27.3% 27.3% 27.3% 3.38
10 $6.80 60.0% 60.0% 43.2% 4.00
11 $6.00 45.5% 29.7% 29.7% 2.87
________________________________________________
34.1% 39.5% 36.4%
Source: Securities Data Company
</TABLE>
Analysis of Dual Class Stock Trading Variance
___________________________________________________________________________
- - Review the companies' performance.
- - Review other dual Class stocks performance.
- - Review trading volume analysis.
- - Discuss other information relative to dual Class stock performance.
___________________________________________________________________________
January 25, 1996 5 Llama Company
<TABLE>
Lonestar
Analysis of Stock Price Variance of Dual Class Stock for Period from 1993 to 1995(1)
<CAPTION>
Stock Price Variance Average Price Variance
90 Day 1 Year 3 Years
<S> <C> <C> <C>
Group of 10 Dual Class Companies 96.07% 95.68% 95.54%
Lonestar 68.55% 86.07% 87.58%
<FN>
(1) Based on average monthly closing trade prices. Soure:Infovest
</TABLE>
<TABLE>
Lonestar
Analysis of Stock Price Variance of Dual Class Stock from 1993 to 1995(1)
Discount of Non Voting Class to Voting Class Stock
<CAPTION>
Commerce Crawford Marsh Super- Playboy
Date Advanta Corp. Bandag Inc. Clearing House & Company Markets, Inc. Molex Inc. Ent. Inc.
<S> <C> <C> <C> <C> <C> <C> <C>
1/93 88.01% 96.56% 93.68% 92.91% 98.59% 94.54% 101.88%
2/93 87.35% 95.77% 94.41% 94.96% 96.96% 94.13% 100.65%
3/93 87.47% 94.11% 94.17% 96.02% 89.22% 92.67% 98.41%
4/93 86.21% 96.32% 100.42% 97.59% 91.60% 93.03% 100.84%
5/93 82.87% 96.61% 98.37% 95.13% 90.85% 92.80% 105.81%
6/93 80.81% 97.79% 95.73% 97.72% 93.81% 89.96% 111.98%
7/93 86.73% 95.43% 97.51% 100.28% 94.13% 92.54% 114.86%
8/93 88.65% 96.73% 96.92% 102.65% 97.70% 90.68% 114.90%
9/93 87.49% 95.42% 96.48% 102.38% 99.34% 91.48% 118.58%
10/93 85.13% 94.76% 99.19% 101.47% 99.59% 91.61% 117.96%
11/93 82.78% 94.97% 97.14% 99.88% 94.42% 93.38% 112.07%
12/93 86.79% 94.83% 97.40% 102.11% 95.68% 93.34% 114.71%
1/94 90.37% 94.66% 90.02% 104.86% 96.12% 95.79% 116.22%
2/94 96.01% 92.64% 95.73% 103.87% 91.57% 95.25% 116.69%
3/94 94.35% 94.74% 95.58% 104.73% 93.10% 95.97% 105.66%
4/94 92.62% 95.78% 95.78% 105.25% 94.07% 97.66% 100.00%
5/94 89.37% 91.43% 96.90% 103.99% 92.32% 94.89% 104.33%
6/94 90.94% 89.97% 97.59% 102.22% 90.81% 95.32% 101.54%
7/94 92.63% 89.24% 97.57% 101.93% 95.21% 94.82% 97.84%
8/94 91.60% 89.82% 98.82% 99.11% 90.67% 93.42% 99.60%
9/94 93.71% 90.45% 98.40% 100.70% 90.27% 92.69% 102.76%
10/94 93.59% 88.98% 98.63% 100.13% 89.69% 93.65% 103.94%
11/94 94.22% 88.20% 98.46% 100.92% 93.92% 94.23% 101.23%
12/94 94.67% 88.10% 98.68% 99.80% 92.43% 91.70% 106.09%
1/95 94.06% 88.66% 98.00% 100.14% 92.19% 91.85% 106.72%
2/95 93.38% 90.36% 95.77% 100.13% 91.92% 94.62% 101.03%
3/95 93.33% 90.58% 98.66% 98.91% 86.29% 95.28% 98.46%
4/95 94.41% 94.49% 96.47% 99.19% 90.82% 94.41% 99.50%
5/95 92.73% 92.58% 97.79% 99.94% 96.05% 95.17% 98.51%
6/95 91.53% 90.83% 98.87% 99.48% 91.50% 94.32% 98.61%
7/95 90.73% 90.31% 98.41% 99.51% 91.72% 92.84% 101.00%
8/95 89.84% 93.28% 95.62% 99.67% 84.43% 93.09% 96.84%
9/95 92.26% 91.64% 94.94% 99.05% 85.51% 92.91% 92.08%
10/95 92.18% 96.00% 99.91% 99.81% 91.46% 93.97% 90.96%
11/95 93.48% 96.60% 98.77% 99.61% 92.53% 93.63% 92.32%
12/95 94.08% 97.57% 99.80% 99.13% 95.40% 95.36% 91.15%
_______________________________________________________________________________________________________________________
3 Year Average 90.45% 93.23% 97.13% 100.14% 92.83% 93.69% 103.77%
1 Year Average 92.67% 92.74% 97.75% 99.55% 90.82% 93.95% 97.27%
90 day Average 93.25% 96.72% 99.49% 99.52% 93.13% 94.32% 91.48%
<CAPTION>
J.M. Smucker Tecumseh Average for Cannon
Date Company Products, Inc. Viacom Inc. 10 Companies Express, Inc.
<S> <C> <C> <C> <C> <C>
1/93 93.23% 94.68% 95.04% 78.13%
2/93 92.42% 96.75% 94.82% 89.66%
3/93 92.64% 95.95% 95.01% 86.67%
4/93 94.15% 94.60% 95.55% 100.00%
5/93 92.87% 95.02% 93.57% 86.05%
6/93 91.94% 98.84% 93.57% 100.00%
7/93 93.31% 92.50% 90.94% 111.11%
8/93 93.32% 97.84% 90.90% 60.71%
9/93 89.00% 94.47% 90.40% 92.59%
10/93 91.24% 96.71% 90.89% 76.60%
11/93 90.42% 96.85% 87.56% 86.96%
12/93 92.84% 96.45% 91.01% 79.25%
1/94 95.91% 99.70% 91.82% 92.31%
2/94 89.12% 97.14% 86.73% 80.00%
3/94 88.16% 87.90% 85.26% 81.48%
4/94 94.53% 85.11% 87.65% 95.56%
5/94 93.58% 87.44% 94.56% 81.25%
6/94 94.41% 90.36% 92.71% 88.42%
7/94 88.89% 101.47% 88.36% 78.72%
8/94 90.28% 102.92% 87.99% 85.11%
9/94 90.46% 102.46% 90.20% 102.17%
10/94 91.18% 103.07% 96.48% 96.00%
11/94 91.62% 100.67% 96.99% 102.08%
12/94 93.04% 102.78% 97.51% 89.09%
1/95 94.64% 100.30% 97.67% 99.08%
2/95 93.54% 101.13% 97.91% 103.92%
3/95 90.67% 99.10% 98.14% 88.52%
4/95 92.76% 103.09% 98.11% 99.09%
5/95 92.02% 103.26% 98.41% 88.89%
6/95 90.14% 101.77% 98.92% 90.20%
7/95 89.77% 102.61% 99.65% 98.11%
8/95 87.97% 103.48% 99.74% 89.80%
9/95 88.67% 102.83% 99.92% 69.57%
10/95 88.96% 101.51% 100.00% 65.96%
11/95 89.06% 102.48% 100.37% 61.90%
12/95 90.52% 104.20% 101.17% 77.78%
___________________________________________________________________________
3 Year Average 91.59% 98.26% 94.32% 95.54% 87.58%
1 Year Average 90.73% 102.14% 99.17% 95.68% 86.07%
90 day Average 89.52% 102.73% 100.51% 96.07% 68.55%
<FN>
(1) Based on average monthly closing trade prices. Soure:Infovest
</TABLE>
Discounted Cash Flow Analysis
___________________________________________________________________________
- - Review five year forecast assumptions.
- - Review free cash flow calculation.
- - Discuss present value analysis.
- - Discuss determination of discount rate.
- - Discuss other information relative to discounted cash flow analysis.
___________________________________________________________________________
January 25, 1996 6 Llama Company
<TABLE>
Lonestar
Discounted Cash Flow Analysis
Discount Rate 19.23%
<CAPTION>
1 2 3 4 5 6
1996 1997 1998 1999 2000 Residual(2)
<S> <C> <C> <C> <C> <C> <C>
Net Income 4,505 5,148 7,415 9,798 9,990 9,990
Interest Expense 3,037 3,037 3,181 4,450 6,518 6,518
Taxes (1) 990 1,392 2,923 5,656 5,817 5,817
Depreciation 10,058 11,312 12,050 15,155 21,140 21,140
Gain on Sale of Assets 0 0 0 (2,651) 0 0
___________________________________________________________________
EBITDA 18,590 20,889 25,569 32,408 43,465 43,465
___________________________________________________________________
CAPEX
Gross CAPEX 25,028 7,000 35,488 49,901 57,244 21,140
Sales Proceeds (3,077) 0 (5,339) (8,442) (6,587) (8,915)
_______________________________________________________
Net CAPEX 21,951 7,000 30,149 41,459 50,657 12,225
___________________________________________________________________
Free Cash Flow (3,361) 13,889 (4,580) (9,051) (7,192) 31,240
___________________________________________________________________
Discount Factor 1.1923 1.4216 1.6949 2.0209 2.4095 2.4095
PV of FCF (2,819) 9,770 (2,702) (4,479) (2,985)
Cumulative PV of FCF (3,215)
Residual Value (2) 162,454
PV of Residual 67,422
Working Capital at 6/30/95 23,497
______
Enterprise Value 87,705
______
Less Debt at 6/30/95 (3) (44,080)
______
Net Equity Value 43,625
======
Number of Shares Outstanding 4,328
Equity Value per Outstanding Share $10.08
======
<FN>
(1) Provision for income tax net of other adjustments.
(2) Gross CAPEX for residual value is assumed to be equal to depreciation in FY 2000. Sales proceeds is related to retirement
of replaced equipment.
(3) Includes current portion of long-term debt.
</TABLE>
THE PROJECTIONS SET FORTH HEREIN ARE BASED UPON, AND MUST BE READ IN
CONJUNCTION WITH, THE ASSUMPTIONS SET FORTH IN "FOOTNOTES TO ASSUMPTIONS -
BASE CASE" AT THE END OF THIS EXHIBIT.
<TABLE>
Lonestar
Discounted Cash Flow Analysis
Discount Rate 18.00%
<CAPTION>
1 2 3 4 5 6
1996 1997 1998 1999 2000 Residual (2)
<S> <C> <C> <C> <C> <C> <C>
Net Income 4,505 5,148 7,415 9,798 9,990 9,990
Interest Expense 3,037 3,037 3,181 4,450 6,518 6,518
Taxes (1) 990 1,392 2,923 5,656 5,817 5,817
Depreciation 10,058 11,312 12,050 15,155 21,140 21,140
Gain on Sale of Assets 0 0 0 (2,651) 0 0
___________________________________________________________________
EBITDA 18,590 20,889 25,569 32,408 43,465 43,465
___________________________________________________________________
CAPEX
Gross CAPEX 25,028 7,000 35,488 49,901 57,244 21,140
Sales Proceeds (3,077) 0 (5,339) (8,442) (6,587) (8,915)
_______________________________________________________
Net CAPEX 21,951 7,000 30,149 41,459 50,657 12,225
___________________________________________________________________
Free Cash Flow (3,361) 13,889 (4,580) (9,051) (7,192) 31,240
___________________________________________________________________
Discount Factor 1.1800 1.3924 1.6430 1.9388 2.2878 2.2878
PV of FCF (2,848) 9,975 (2,788) (4,668) (3,144)
Cumulative PV of FCF (3,473)
Residual Value (2) 173,556
PV of Residual 75,863
Working Capital at 6/30/95 23,497
______
Enterprise Value 95,887
______
Less Debt at 6/30/95 (3) (44,080)
______
Net Equity Value 51,807
======
Number of Shares Outstanding 4,328
Equity Value per Outstanding Share $11.97
======
<FN>
(1) Provision for income tax net of other adjustments.
(2) Gross CAPEX for residual value is assumed to be equal to depreciation in FY 2000. Sales proceeds is related to retirement
of replaced equipment.
(3) Includes current portion of long-term debt.
</TABLE>
THE PROJECTIONS SET FORTH HEREIN ARE BASED UPON, AND MUST BE READ IN
CONJUNCTION WITH, THE ASSUMPTIONS SET FORTH IN "FOOTNOTES TO ASSUMPTIONS -
BASE CASE" AT THE END OF THIS EXHIBIT.
<TABLE>
Lonestar
Weighted Average Cost of Capital
<CAPTION>
<S> <C>
Assumptions
___________
Effective Income Tax Rate 38.50%
Cost of Debt 6.00%
Amount of Debt at 6/30/95 $44,080
Cost of Equity (1) 39.00%
Amount of Market Equity at 1/23/96 34,649
Weighted Average Cost of Capital (2) 19.23%
=======
<FN>
(1) The company's historical one year annual growth rate for earnings per
share was used as a proxy for the cost of equity.
(2) Weighted Average Cost of Capital = ((1-Tax Rate)*(Debt
Cost*Debt)+(Equity Cost*Equity))/(Debt+Equity)
</TABLE>
<TABLE>
Lonestar
Calculation of Discount Rates for Selected Public Companies (1)
<CAPTION>
Company Price on 1/24/96 Shares Total Debt Market Cap. Discount Rate
TRUCKLOAD
<S> <C> <C> <C> <C> <C>
J.B. Hunt Transport $15.88 38,692,399 $368,880,000 $983,121,834 17.88%
M.S. Carriers $16.75 12,878,300 $55,440,750 $271,152,275 18.30%
Builders Transport $7.75 5,094,338 $204,304 $39,685,424 27.00%
Werner Enterprises $19.75 25,160,716 $40,000,000 $536,924,141 17.29%
______
Simple Average 20.12%
______
Weighted Average (2) 17.97%
======
LESS THAN TRUCKLOAD
Arkansas Best Freight $6.50 19,513,708 $359,416 $127,198,518 19.10%
American Freightways $10.56 30,836,305 $172,206 $325,880,678 17.48%
Consolidated Freight $24.63 43,535,593 $468,537,000 $1,540,600,978 17.84%
Yellow Corp. $12.00 28,105,797 $339,975 $337,609,539 21.44%
______
Simple Average 18.97%
______
Weighted Average (2) 18.38%
======
<FN>
(1) Source of numbers for calculating discount rates: Value Line Publishing, Inc.
(2) Weighted by market capitalization.
</TABLE>
<TABLE>
LONESTAR
ANALYSIS SUMMARY
<CAPTION>
<S> <C> <C>
I. Analysis of Historical Price and Volume $6.38-$9.25
- Day Prior $6.38
- One Week Prior 6.72
- Four Weeks Prior 6.77
- 90 Days Prior 7.32
- Average Trade Prices on the Four Largest
Volume Days (9/95-1/96)
($9.25, $8.938, $7.00, $6.38)
II. Analysis of Comparable Companies
- Various Price Multiples Comparisons N/A
- Price Multiples Adjusted for Company Historical
Discount to Market P/E's $6.43-$8.72
III. Analysis of Other Going Private Transactions $8.46-$9.07
- Going Private - Last 2 years (one week prior
32.72%-one month prior 42.22%)
$8.46-$9.07
- M & A Going Private in Similar Industry
Last 5 years
47.3%-58.6%
$9.39-$10.11
- M & A Going Private Last 18 Months
34.1%-39.5%
$8.55-$8.89
IV. Analysis of Dual Class Stock Trading Variance $6.38-$8.77
- Company Variance (69.9% on 1/25/96)
- Other Dual Class Stocks Variance (96.07%
for 90 days prior to 1/26/96)
V. Discounted Cash Flow Analysis $10.08-$11.97
- 18% Discount Rate $11.97
- 19.23% Discount Rate $10.08
Note: Closing Stock Price Last Trade Date January 25, 1996:
- Class A $9.125
- Class B $6.375
</TABLE>
THE PROJECTIONS SET FORTH HEREIN ARE BASED UPON, AND MUST BE READ IN
CONJUNCTION WITH, THE ASSUMPTIONS SET FORTH IN "FOOTNOTES TO ASSUMPTIONS -
BASE CASE" AT THE END OF THIS EXHIBIT.
Recapitalization
___________________________________________________________________________
- - Discuss assumptions used in recapitalization.
- - Review impact of recapitalization on liquidity, leverage and shareholder
returns, EPS and book value per share.
___________________________________________________________________________
January 25, 1996 8 Llama Company
<TABLE>
Lonestar
Impact of Recapitalization on Key Financial Ratios as of December 31, 1995
<CAPTION>
Actual Pro-Forma
_________ _________
<S> <C> <C> <C>
Liquidity 1.81 1.23
Current Ratio
Leverage
Debt to Equity 206.69% 336.23%
Debt to Capital 67.39% 77.08%
Return on Equity 14.22% 23.13%
Earnings per Share (1) $0.90 $1.21
Book Value per Share (1) $6.31 $5.21
Trailing 12 Months Net Income
through Dec. 31, 1995 $3,884,179
Total Number of Outstanding Shares 4,327,704 3,221,405
<FN>
(1) Based on total outstanding shares.
</TABLE>
<TABLE>
Lonestar
Impact of Recapitalization on Key Financial Ratios
For Fiscal Years Ending June 30,
<CAPTION>
1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C>
WITH RECAPITALIZATION
Liquidity
Current Ratio 1.30 0.89 0.80 0.97 1.10
Leverage
Debt to Equity 300.92% 205.72% 198.04% 205.23% 231.02%
Debt to Capital 75.06% 67.29% 66.45% 67.24% 69.79%
Return on Equity 23.22% 20.02% 22.71% 23.27% 19.17%
Earnings per Share (1) $1.39 $1.50 $2.20 $2.94 $3.00
Book Value per Share (1) $6.00 $7.50 $9.71 $12.65 $15.65
WITHOUT RECAPITALIZATION
Liquity
Current Ratio 1.90 1.29 1.14 1.35 1.39
Leverage
Debt to Equity 194.44% 141.73% 145.64% 159.77% 186.74%
Debt to Capital 66.04% 58.63% 59.29% 61.50% 65.13%
Return on Equity 15.10% 14.72% 17.49% 18.77% 16.07%
Earnings per Share (1) $1.04 $1.19 $1.71 $2.26 $2.31
Book Value per Share (1) $6.89 $8.08 $9.79 $12.06 $14.37
<FN>
(1) Based on total outstanding shares.
</TABLE>
THE PROJECTIONS SET FORTH HEREIN ARE BASED UPON, AND MUST BE READ IN
CONJUNCTION WITH, THE ASSUMPTIONS SET FORTH IN "FOOTNOTES TO ASSUMPTIONS -
BASE CASE" AT THE END OF THIS EXHIBIT.
<TABLE>
Lonestar
Actual and Pro-Forma Balance Sheet as of December 31, 1995
<CAPTION>
Actual Adjustment Pro-Forma
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents 18,384,944 (10,524,793) 7,860,151
Marketable securities 4,642,015 4,642,015
Receivables, less allowance for doubtful accounts
Trade 8,578,326 8,578,326
Other 58,358 58,358
Prepaid expenses and supplies 1,283,082 1,283,082
________________________________________________
Total current assets 32,946,725 (10,524,793) 22,421,932
Property and Equipment
Land, Buildings and improvements 1,143,453 1,143,453
Revenue equipment 69,076,700 69,076,700
Service, office and other equipment 2,158,288 2,158,288
________________________________________________
72,378,441 0 72,378,441
Less allowances for depreciation 14,221,293 14,221,293
________________________________________________
Net property and equipment 58,157,148 0 58,157,148
Other Assets:
Receivable from stockholders 23,406 23,406
Restricted cash 814,974 814,974
Other 1,116,636 1,116,636
________________________________________________
Total other assets 1,955,016 0 1,955,016
Total Assets 93,058,889 (10,524,793) 82,534,096
================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable 661,504 661,504
Accrued expenses:
Insurance reserves 1,472,945 1,472,945
Other 1,822,340 1,822,340
Federal and state income taxes payable 1,384,639 1,384,639
Deferred Income Taxes 75,000 75,000
Current portion of long-term debt 12,822,744 12,822,744
________________________________________________
Total current liabilities 18,239,172 0 18,239,172
Long-term debt, less current portion 43,640,227 43,640,227
Deferred income taxes 3,292,000 3,292,000
Other liabilities 569,632 569,632
Stockholders' Equity
Class A common stock 22,195 22,195
Class B common stock 22,245 (22,245) 0
Additional paid-in capital 3,542,356 (10,502,548) (6,960,192)
Retained earnings 22,633,859 22,633,859
Unrealized holding losses on marketable securities,
net of income tax benefits 1,468,978 1,468,978
________________________________________________
27,689,633 (10,524,793) 17,164,840
Less treasury stock, at cost 371,775 371,775
________________________________________________
Total stockholders' equity 27,317,858 (10,524,793) 16,793,065
Total Liabilities & Stockholders' Equity 93,058,889 (10,524,793) 82,534,096
================================================
</TABLE>
<TABLE>
LONESTAR
CLASS B REVERSE SPLIT
(IN THOUSANDS EXCEPT SHARE PRICE)
<S> <C> <C>
Class B Reverse Split Share Price $9.00
Class A Closing Trade Price as of 1/24/96 $9.27
Total Outstanding Class B Shares 2,166 100.00%
Majority Shareholder's Outstanding Class B Shares (1) 1,091 50.38%
________________
Remaining Class B Shares 1,075 49.62%
_______
Class B Reverse Split Share Price $9.00
______
Amount Required for Reverse Split $9,675
Placement & Transaction Fees 850
_______
Total Funds Required for Recapitalization $10,525
SOURCES & USES OF RECAPITALIZATION
Sources:
Cash $10,525
=======
Uses:
Reverse Split of Class B Shares $9,675
Placement & Transaction Fees 850
_______
$10,525
=======
<FN>
(1) Assumes that majority shareholder's dependents tendered 140,000 shares
in the reverse split.
</TABLE>
<TABLE>
LONESTAR
TOTAL OUTSTANDING SHARES WITH REVERSE SPLIT OF CLASS B SHARES
(In Thousands)
<CAPTION>
Class A Class B
<S> <C> <C> <C> <C>
Total Outstanding Shares 2,161 2,166
Number of Reverse Split Class B Shares (1,075)
_______
Class B Shares Held by Majority Shareholder 1,091
Conversion of Majority Shareholder's Class B Shares (1,091)
Majority Shareholder's Class A Shares on Conversion (1) 1,060
________________________________
Total Outstanding Shares after Transaction 3,221 0
CALCULATION OF CONVERSION RATIO FROM CLASS B TO CLASS A
Class B Reverse Split Share Price $9.00
Class A Closing Trade Price as of 1/24/96 $9.27
Conversion Ratio 0.9713
Pre-Recapitalization Post Recapitalization
Shares Shares
CLASS A SHARE OWNERSHIP Outstanding % Outstanding %
_______________________ _________________________________________________
Majority Shareholder 1,231 56.97% 2,291 71.13%
Public 930 43.03% 930 28.87%
_________________________________________________
2,161 100.00% 3,221 100.00%
<FN>
(1) Assumes a conversion ratio of 0.9713 ($9.00/$9.27) Class A shares for each Class B share.
</TABLE>
<TABLE>
Resid. Value Method: Perp Income Statement for Lonestar
Recapitalization
<CAPTION>
(in thousands of $) 1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C>
Operating revenue $94,799 $106,401 $122,913 $156,843 $202,962
Salaries, wages & fringe bft 32,098 36,189 41,401 53,398 68,936
Operating supplies & expense 28,634 32,284 36,934 47,636 61,497
Insurance, taxes & licenses 9,763 11,007 12,592 16,241 20,967
Rents & purchased trnsprtion 4,028 4,132 4,241 4,355 4,475
Other 1,686 1,901 2,175 2,805 3,621
______ _______ _______ _______ _______
Operating expenses and costs 76,209 85,513 97,343 124,435 159,496
Depreciation & Amortization 10,058 11,312 12,050 15,155 21,140
______ _______ _______ _______ _______
Operating Income $8,532 $9,576 $13,520 $17,253 $22,326
Interest & dividend income 741 469 448 430 383
______ _______ _______ _______ _______
Total Interest Expense 3,828 4,034 4,174 5,442 7,481
Gain (loss)-disposal of asset 0 0 0 2,651 0
______ _______ _______ _______ _______
Income before income taxes $5,445 $6,011 $9,793 $14,892 $15,228
Other Adjustment 1,126 1,126 1,057 294 269
______ _______ _______ _______ _______
Current prov. for inc. tax 999 1,188 2,713 5,439 5,594
Deferred prov. for inc. tax (29) 0 0 0 0
______ _______ _______ _______ _______
Provision for income taxes 970 1,188 2,713 5,439 5,594
______ _______ _______ _______ _______
Net income $4,475 $4,823 $7,080 $9,452 $9,634
====== ======= ======= ======= =======
Primary EPS $1.39 $1.50 $2.20 $2.94 $3.00
</TABLE>
THE PROJECTIONS SET FORTH HEREIN ARE BASED UPON, AND MUST BE READ IN
CONJUNCTION WITH, THE ASSUMPTIONS SET FORTH IN "FOOTNOTES TO ASSUMPTIONS -
BASE CASE" AT THE END OF THIS EXHIBIT.
<TABLE>
Resid. Value Method: Perp Balance Sheet for Lonestar
Recapitalization
<CAPTION>
(in thousands of $) 1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C>
Cash & cash equivalents $6,884 $6,452 $6,100 $5,162 $13,354
Marketable securities 2,500 2,500 2,500 2,500 2,500
Trade receivables 10,957 12,335 14,295 18,323 23,799
Other receivables 662 662 662 662 662
Prepaid expenses & supplies 2,086 2,351 2,690 3,469 4,479
______ ______ ______ ______ ______
Total current assets $23,089 $24,300 $26,246 $30,117 $44,794
Property & equipment 80,558 87,558 105,168 134,345 175,859
Less: Accum. depreciation 20,777 32,089 31,600 31,822 43,819
______ ______ ______ ______ ______
Net property and equipment 59,781 55,469 73,568 102,523 132,040
Receivable from stockholders 23 23 23 23 23
Restricted cash 814 814 814 814 814
Other 1,294 1,294 1,294 1,294 1,294
______ ______ ______ ______ ______
Other Assets 2,131 2,131 2,131 2,131 2,131
______ ______ ______ ______ ______
Total Assets $85,001 $81,900 $101,945 $134,771 $178,965
====== ====== ======= ======= =======
Trade accounts payable $485 $543 $615 $781 $996
Cur port existing senior LTD 10,221 10,645 9,033 2,335 919
Cur port New Senior LTD 3,624 12,173 18,727 21,676 31,049
Federal & State income taxes 120 147 335 671 690
Insurance reserves 1,610 1,815 2,077 2,678 3,458
Other accrued expenses 1,680 1,894 2,167 2,795 3,608
______ ______ ______ ______ ______
Total current liabilities $17,740 $27,217 $32,954 $30,937 $40,721
Existing senior L-T debt 25,132 14,488 5,455 3,119 2,200
New senior L-T debt 19,022 12,266 28,527 56,253 81,948
Deferred income taxes 3,833 3,833 3,833 3,833 3,833
______ ______ ______ ______ ______
Total Liabilities $65,727 $57,804 $70,769 $94,142 $128,702
Class A common stock 22 22 22 22 22
Additional paid-in capital (6,961) (6,961) (6,961) (6,961) (6,961)
Treasury stock (372) (372) (372) (372) (372)
Unrealized hldg. loss-mkt sec 927 927 927 927 927
Retained earnings 25,658 30,481 37,560 47,013 56,647
______ ______ ______ ______ ______
Total stockholders' equity 19,274 24,097 31,176 40,629 50,263
______ ______ ______ ______ ______
Total Liabilities and Equity $85,001 $81,900 $101,945 $134,771 $178,965
====== ====== ======= ======= =======
</TABLE>
THE PROJECTIONS SET FORTH HEREIN ARE BASED UPON, AND MUST BE READ IN
CONJUNCTION WITH, THE ASSUMPTIONS SET FORTH IN "FOOTNOTES TO ASSUMPTIONS -
BASE CASE" AT THE END OF THIS EXHIBIT.
<TABLE>
Resid. Value Method: Perp FAS 95 Cash Flow for Lonestar
Recapitalization
<CAPTION>
(in thousands of $) 1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Operating revenue $94,799 $106,401 $122,913 $156,843 $202,962
Salaries, wages & fringe bft $32,098 $36,189 $41,401 $53,398 $68,936
Operating supplies & licenses 28,634 32,284 36,934 47,636 61,497
Insurance, taxes & licenses 9,763 11,007 12,592 16,241 20,967
Rents & purchased trnsprtion 4,028 4,132 4,241 4,355 4,475
Other 1,686 1,901 2,175 2,805 3,621
_______ _______ _______ ________ ________
Operating expenses and costs $76,209 $85,513 $97,343 $124,435 $159,496
Depreciation & Amortization $10,058 $11,312 $12,050 15,155 21,140
_______ _______ _______ ________ ________
Total Interest Expense $3,828 $4,034 $4,174 $5,442 $7,481
Operating Profit (after Int) $4,704 $5,542 $9,346 $11,811 $14,845
_______ _______ _______ ________ ________
Tax. Oper. Profit (aft Int.) $4,704 $5,542 $9,346 $11,811 $14,845
Current prov. for inc. tax 999 1,188 2,713 5,439 5,594
Depreciation Expense: Funds $10,058 $11,312 $12,050 $15,155 $21,140
Incr. in Accounts Payable 26 57 73 166 215
Incr. in Income Tax Payable (316) 27 188 336 19
Incr. in insurance reserves 273 205 261 602 779
Incr. in other accrued exp. 194 214 273 628 813
Incr. in Trade Receivables 1,872 1,377 1,960 4,028 5,475
Incr. in Prepaid Expenses 406 266 339 780 1,010
Non-Operating Profit 741 469 448 430 383
Non-Oper. Sources (FAS 95) (279) 0 0 0 0
_______ _______ _______ ________ ________
Net Cash from Operations $12,124 $14,995 $17,626 $18,881 $26,116
======= ======= ======= ======== ========
INVESTING ACTIVITIES:
Purchase of property & equip $25,028 $7,000 $35,488 $49,901 $57,244
Proceeds from Asset Sales 3,077 0 5,339 8,442 6,587
_______ _______ _______ ________ ________
Net Cash Used in Investing $21,951 $7,000 $30,149 41,459 50,657
======= ======= ======= ======== ========
FINANCING ACTIVITIES:
Incr. cur port exist sen LTD $1,494 $424 ($1,612) ($6,698) ($1,416)
Incr. cur port new sen. LTD 3,624 8,549 6,554 2,949 9,373
_______ _______ _______ ________ ________
Incr. in Curr Port. L-T Debt $5,118 $8,973 $4,942 ($3,749) $7,957
Inc. in exist. senior LT debt (10,221) (10,644) (9,033) (2,336) (919)
Inc. in new senior LT debt 19,022 (6,756) 16,261 27,726 25,695
_______ _______ _______ ________ ________
Incr. in Debt: Scheduled 8,801 (17,400) 7,228 25,390 24,776
_______ _______ _______ ________ ________
Net Cash Prov. by Financing $13,919 ($8,427) $12,170 $21,641 $32,733
======= ======= ======= ======== ========
</TABLE>
THE PROJECTIONS SET FORTH HEREIN ARE BASED UPON, AND MUST BE READ IN
CONJUNCTION WITH, THE ASSUMPTIONS SET FORTH IN "FOOTNOTES TO ASSUMPTIONS -
BASE CASE" AT THE END OF THIS EXHIBIT.
<TABLE>
Resid. Value Method: Perp FAS 95 Cash Flow for Lonestar
Recapitalization
<CAPTION>
(in thousands of $) 1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C>
Incr. in Cash & Cash Equiv. $4,092 ($432) ($353) ($937) $8,192
Cash & Cash Equiv. (beg.) 5,292 9,384 8,952 8,600 7,662
______ _____ _____ _____ ______
Cash & Cash Equiv. (end) 9,384 8,952 8,600 7,662 15,854
====== ===== ===== ===== ======
</TABLE>
THE PROJECTIONS SET FORTH HEREIN ARE BASED UPON, AND MUST BE READ IN
CONJUNCTION WITH, THE ASSUMPTIONS SET FORTH IN "FOOTNOTES TO ASSUMPTIONS -
BASE CASE" AT THE END OF THIS EXHIBIT.
<TABLE>
Resid. Value Method: Perp Financial Ratios for Lonestar
Recapitalization
<CAPTION>
(in thousands of $) 1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C>
Custom Ratio #1
_______________
Custom Ratio #2
_______________
Operating Ratio 91.000 91.000 89.000 89.000 89.000
Operating Income Margin 0.090 0.090 0.110 0.110 0.110
Net Profit Margin 0.047 0.045 0.058 0.060 0.047
Total Debt to Capital 0.751 0.673 0.664 0.672 0.698
Debt Service Coverage 1.481 1.168 0.947 0.976 1.380
Times Interest Earned 2.422 2.490 3.346 3.736 3.035
Fixed Asset Turnover 1.586 1.918 1.671 1.530 1.537
Total Asset Turnover 1.115 1.299 1.206 1.164 1.134
Custom Ratio #3
_______________
Current Ratio 1.301 0.893 0.796 0.973 1.100
Debt to Equity 300.924 205.722 198.040 205.231 231.016
Debt to Capital 75.058 67.291 66.447 66.238 69.790
Return on Equity 23.216 20.015 22.709 23.265 19.167
Primary Earnings on Equity 1.394 1.502 2.205 2.944 3.000
Book Value per Share 6.002 7.504 9.709 12.653 15.653
Total Shares Outstanding 3.211 3.211 3.211 3.211 3.211
</TABLE>
THE PROJECTIONS SET FORTH HEREIN ARE BASED UPON, AND MUST BE READ IN
CONJUNCTION WITH, THE ASSUMPTIONS SET FORTH IN "FOOTNOTES TO ASSUMPTIONS -
BASE CASE" AT THE END OF THIS EXHIBIT.
<TABLE>
Cannon Express, Inc.
Projected Income Statement Assumptions For Fiscal Years Ending June 30.
Base Case
<CAPTION>
1996 1997 1998 1999
2000
<S> <C> <C> <C> <C> <C> <C>
Freight Revenue per Mile $1.06308 $1.06041 $1.07358 $1.06708
$1.07395
Beginning Tractors 712 920 920 1,185
1,530
Ending Tractors 920 920 1,185 1,530
1,975
__________ __________ ___________ ___________
___________
Average Number of Tractors 816 920 1,053 1,358
1,753
Miles per Tractor 106,000 106,000 106,000 106,000
106,000
Total Miles 86,496,000 97,520,000 111,565,000 143,895,000
185,765,000
Intermodal Revenue
Base Intermodal Revenue $2,711,926
Intermodal Revenue Growth Rate 5.00% 5.00% 5.00% 5.00%
5.00%
Operating Expenses per Mile
Salaries, Wages & Fringe Benefits $0.37109 $0.37109 $0.37109 $0.37109
$0.37109
Operating Supplies and Expenses $0.33105 $0.33105 $0.33105 $0.33105
$0.33105
Insurance, Taxes, & Licenses $0.11287 $0.11287 $0.11287 $0.11287
$0.11287
Other $0.01949 $0.01949 $0.01949 $0.01949
$0.01949
Intermodal Exp. as % Intermodal Rev 72.81% 72.81% 72.81% 72.81%
72.81%
Rents & Purchased Transportation
Base Rent & Purchased Transportation $1,954,947
Rents & Purchased Transportation Growth Rate 0.00% 0.00% 0.00% 0.00%
0.00%
Book Depreciation (No Residual)
Tractors 76 months
Trailers 86 months
Building & Facilities 20 years
General Capital Expenditure 3 years
Interest Rates
Interest Income on Cash & Marketable Securities 5.00% 5.00% 5.00% 5.00%
5.00%
Senior Secured Long-Term Debt (TRAC Leases)
Existing 7.50% 7.50% 7.50% 7.50%
7.50%
New 7.50% 7.50% 7.50% 7.50%
7.50%
Book Gain on Sale of Revenue Equipment from
FY 1996 to FY 2000 0% 0% 0% 0%
0%
Book Gain on Sale of Tractors Financed with
TRAC lease in 5/95
Sales Proceeds 40.00%
TRAC Payment 25.00%
______
Gain on Sale of Equipment 15.00%
______
Income Tax Rate 38.50% 38.50% 38.50% 38.50%
38.50%
Adjustments to Income Tax Provision $1,126,320 $1,126,320 $1,056,920 $293,520
$269,060
Number of Total Outstanding Shares
(Without Recapitalization) 4,327,704 4,327,704 4,327,704 4,327,704
4,327,704
</TABLE>
THE PROJECTIONS SET FORTH HEREIN ARE BASED UPON, AND MUST BE READ IN
CONJUNCTION WITH, THE ASSUMPTIONS SET FORTH IN "FOOTNOTES TO ASSUMPTIONS -
BASE CASE" AT THE END OF THIS EXHIBIT.
<TABLE>
Cannon Express, Inc.
Projected Balance Sheet Assumptions For Fiscal Years Ending June 30.
Base Case
<CAPTION>
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Trade Receivables Directly variable with operating revenues. Historical trend increase in trade
receivables = 11.873% of increase in operating revenues.
Prepaid Expenses & Supplies 21.362% of insurance, taxes, and licenses
CURRENT LIABILITIES
Trade Accounts Payable )
Federal & State Income Tax )______________Variable based on related expenses
Insurance Reserves )
Other Accrued Expenses )
<CAPTION>
Property & Equipment
AVERAGE PRICE OF FLEET EQUIPMENT TRACTOR TRAILER
<S> <C> <C> <C> <C> <C>
Calendar Year 1995 $60,952 $16,929
Calendar Year 1996 $61,000 $17,000
Calendar Year 1997 $62,000 $17,000
Calendar Year 1998 $63,000 $17,000
Calendar Year 1999 $64,000 $17,000
Calendar Year 2000 $65,000 $17,000
AVERAGE SALE PROCEEDS PER UNIT OF
REVENUE EQUIPMENT
FY 1996 $28,755 NA
FY 1997 NA NA
FY 1998 $20,117 $1,500
FY 1999 $24,829 NA
FY 2000 $27,430 $1,500
6/30/95 Senior Long-Term Debt (TRAC Leases)
1996 1997 1998 1999 2000
Beginning Balance $44,080,533 $35,353,261 $25,132,454 $14,487,600 $5,454,511
Principal Payments $8,727,272 $10,220,807 $10,644,854 $9,033,089 $2,335,353
Ending Balance $35,353,261 $25,132,454 $14,487,600 $5,454,511 $3,119,158
New Senior Long-Term Debt (TRAC Leases)
Tractor
Term 42 months
TRAC Payment 45.00%
Trailer
Term 60 months
TRAC Payment 30.00%
</TABLE>
THE PROJECTIONS SET FORTH HEREIN ARE BASED UPON, AND MUST BE READ IN
CONJUNCTION WITH, THE ASSUMPTIONS SET FORTH IN "FOOTNOTES TO ASSUMPTIONS -
BASE CASE" AT THE END OF THIS EXHIBIT.
Cannon Express, Inc.
Footnote to Assumptions
Base Case
OVERVIEW
The following sets forth a description of certain significant assumptions
underlying financial statement forecasts for the Company. These
assumptions, which are viewed as conservative, were developed during the
second half of calendar year 1995 through early January 1996. During this
period economic conditions and market forces (among other factors) impacted
the uncertainty of future performance and hence the projections. In most
cases, assumptions were based on the Company's past performance and the
continuation of certain trends, as set forth below. Neither management of
the Company and Llama Company can provide assurance that historical
factors, trends and relationships which underlie these assumptions will
continue. Generally accepted accounting principles were not employed in
our financial projections. THE PROJECTED FINANCIAL STATEMENTS TO WHICH
THESE ASSUMPTIONS RELATE WERE PREPARED SOLELY FOR THE PURPOSE OF CONDUCTING
CERTAIN FINANCIAL ANALYSIS REGARDING A PROPOSED RECAPITALIZATION OF THE
COMPANY AND SHOULD NOT BE RELIED UPON FOR ANY OTHER REASON OR PURPOSE.
PARTICULARLY, NO PERSON SHOULD RELY UPON THESE PROJECTIONS OR ASSUMPTIONS
IN MAKING AN INVESTMENT DECISION WITH RESPECT TO THE COMPANY'S COMMON
STOCK. MANY OF THE MATTERS DISCUSSED IN THE PROJECTED FINANCIAL STATEMENTS
AND THE FOLLOWING ASSUMPTIONS, AND THUS THE CONCLUSIONS DRAWN THEREBY,
CONTEMPLATE FACTORS WHICH ARE AND WILL BE BEYOND THE CONTROL AND PREDICTIVE
ABILITY OF MANAGEMENT. MANAGEMENT AND LLAMA COMPANY CAN GIVE NO ASSURANCE
THAT ANY FACTOR, RELATIONSHIP OR TREND SET FORTH HEREIN WILL PERFORM OR
OCCUR AS ASSUMED.
INCOME STATEMENT
Freight Revenue per Mile Based on Company's past performance with
downward adjustment from fiscal year
1995 based on then current industry
trends and the belief that current
over-capacity in the truckload industry
may continue into the future. No
adjustments were made for growth,
cyclicality, inflation, or extraordinary
events. Also excludes intermodal
revenue.
Miles per Tractor Based on Company's past performance and
applies to total miles per tractor
including empty miles and out of service
time. Assumes that the Company will not
experience a reduction in miles per
tractor as a result of industry
over-capacity or a shortage of qualified
drivers, either of which would impact
total revenues.
Average Number of Tractors Represents simple average. It is not
weighted by the period of time tractors
were held.
Intermodal Revenue Company expects intermodal revenue to
grow at a nominal rate of 5% a year.
Fiscal year 1996 intermodal revenue is
based on fiscal year 1995 numbers with a
5% growth rate.
Operating Expenses per Mile Based on Company's past performance and
assumed to be consistent with fiscal
year 1995 numbers with no adjustments
for growth, cyclicality, inflation, and
extraordinary events.
Intermodal Expenses Based on Company's past performance. It
is consistent with fiscal year 1995's
intermodal expenses and assumes that it
varies proportionately with intermodal
revenues.
Rents & Purchased Transportation Company expects stable rental of revenue
equipment with rents and purchased
transportation consistent with fiscal
year 1995's numbers with no adjustments
for growth.
Depreciation Depreciation is a fixed expense related
to the purchase and retirements of
capital equipment and planned expansion
of administration and maintenance
facilities. For book purposes,
depreciation is assumed to be straight
line. Fleet equipment is assumed to be
depreciated down to its TRAC payment at
the end of its lease term. Equipment
leases are assumed to be capital leases
for accounting purposes.
Gain or Loss on Sale of Equipment For book purposes, it is assumed that
there is no gain or loss on the sale of
fleet equipment with the exception of
revenue equipment purchased in May 1995.
Income Tax Provision Assumed to be statutory rate with
adjustments for leases; with book tax
provision representing a blended rate of
35% for federal tax and 5.5% for state
tax.
No. of Total Outstanding Shares The total number of outstanding shares
were used in the calculation of earnings
per share. This is made up of 2,161,352
shares of Class A and 2,166,352 shares
of Class B common stock.
BALANCE SHEET
Current Assets and Current
Liabilities Current assets such as trade
receivables, prepaid expenses and
supplies and current liabilities such as
trade accounts payable, federal and
state income tax, insurance reserves and
other accrued expenses were trended off
the Company's latest four year
historical average.
Property and Equipment Company assumes that it finances 100% of
its revenue equipment purchase. Company
expects to expand its administrative
building and build a new maintenance
facility to accommodate growth in fiscal
year 1997. For projection purposes, it
is assumed that this expansion is
financed with internal cash. Similarly,
Company expects to spend $500,000 a year
from fiscal year 1998 to fiscal year
2000 for general capital expenditures to
keep pace with its growth. This may
include computers, communications
equipment, fixtures, etc.
Senior Long-Term Debt TRAC leases are treated as capitalized
leases for accounting purposes.
Revenue Equipment Purchase Based on Company's past performance.
Provided by the Company based on its
plans to grow at approximately 29% a
year, with the exception of fiscal year
1997. Company intends to target a
tractor to trailer ratio of 1.50 to
1.00.
