<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)
(Amendment No. 1)
HOLNAM INC.
(NAME OF THE ISSUER)
'HOLDERBANK' FINANCIERE GLARIS, LTD.,
HOLDERNAM INC. AND HOLCEM INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
436429 10 4
(CUSIP NUMBER OF CLASS OF SECURITIES)
JOSEPH W. SCHMIDT, ESQ.
WHITMAN BREED ABBOTT & MORGAN
200 PARK AVENUE
NEW YORK, NEW YORK 10166
(212) 351-3210
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
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. [ ] 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)
[SECTIONS 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. [X] NONE OF THE ABOVE.
CHECK THE FOLLOWING BOX IF THE SOLICITING MATERIALS OR INFORMATION
STATEMENT REFERRED TO IN CHECKING BOX (A) ARE
PRELIMINARY COPIES: [ ]
PAGE 1 OF PAGES
EXHIBIT INDEX ON PAGE 5
<PAGE>
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION AMOUNT OF FILING FEE
VALUATION*
<S> <C>
$57,284,363, based
on 7,488,152 shares
of Holnam Inc. Common
Stock times $7.65 per share $11,457.00**
</TABLE>
*Set forth the amount on which the filing fee is calculated and state how it was
determined.
**Previously paid.
[ ] Check box if any part of the fee is offset as provided in Rule 0-11(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: ______________
Form or Registration No: _____________
Filing Party: ________________________
Date Filed: __________________________
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS
The Exhibit Index set forth on page 5 of this Transaction Statement is
incorporated herein by reference.
<PAGE>
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.
<TABLE>
<S> <C>
'HOLDERBANK' FINANCIERE GLARIS LTD.
Dated: January 12, 1994 By /s/ Thomas Schmidheiny
______________________
Name: Thomas Schmidheiny
Title: Chairman
By /s/ Pierre Haesler
______________________
Name: Pierre Haesler
Title: Secretary
HOLDERNAM INC.
Dated: January 12, 1994 By /s/ Peter Byland
______________________
Name: Peter Byland
Title: President
HOLCEM INC.
Dated: January 12, 1994 By /s/ Peter Byland
______________________
Name: Peter Byland
Title: President
</TABLE>
<PAGE>
APPENDIX
GRAPHIC AND IMAGE MATERIAL
IN EXHIBIT 17(b)(2):
page 5
This page of the paper format version of the document contains a Holnam
ownership structure chart showing 'Holderbank' Financiere Glaris, Ltd.
(Holderbank) as the owner of 100% of Holdernam, Inc. which in turn is the owner
of 95.2% of Holnam, Inc. which in turn is the owner of 75% of Holnam Texas
Limited Partnership and 59.5% of St. Lawrence Cement, Inc. Public Shareholders
are shown to own 4.8% of Holnam, Inc. (NYSE Listing) and 40.5% of St. Lawrence
Cement, Inc. (Toronto/Montreal Listing).
page 17
This page of the paper format version of the document contains two charts:
the first the monthly indexed common stock price history of Holnam Inc. from
March 31, 1990 to September 30, 1993 as compared to an industry composite
(consisting of Lafarge Corp., Medusa Corp., Southdown Inc. and St. Lawrence
Cement), the S&P400 Industrials and Lafarge Corp.
the second shows the monthly common stock price and trading volume history of
Holnam Inc. from March 31, 1990 to September 30, 1993.
page 24
This page of the paper format version of the document contains a chart
showing the daily common stock price history of Lafarge Corporation from
10/1/92 to 9/30/93.
page 43
This page of the paper format version of the document contains a world map.
page 50
This page of the paper format version of the document contains four charts:
the first shows the leading managers of common stock offerings for January 1,
1993 -- June 30, 1993 with Goldman Sachs leading at 19.7%.
the second shows the leading managers of common stock offerings for 1988 -- 1992
with Goldman Sachs leading at 24.9%.
the third shows the leading managers of initial public offerings for January 1,
1993 -- June 30, 1993 with Goldman Sachs leading at 17.5%.
the fourth shows the leading managers of IPOs for 1988 -- 1992 with Goldman
Sachs leading at 28.6%.
<PAGE>
IN EXHIBIT 17(b)(3):
Exhibit 17(b)(3) - Presentation Material from Merrill Lynch
dated November 15, 1993
page 5
This page of the paper format version of the document
contains a chart which shows historical and projected
earnings for St. Lawrence as approximately negative $31
million for 1992, negative $9 million for 1993, $0 million
for 1994, $15 million for 1995, $31 million for 1996 and $38
million for 1997. The expected average year-on-year
earnings increase (1995-1997) is stated to be approximately
59%. This page states that the sources of the information
in the chart are Holnam and St. Lawrence Management and
Annual Reports and notes that a CAD/USD exchange rate of
1.30 is assumed.
page 6
This page of the paper format version of the document
contains a chart which graphically represents equity market
valuation principles for cyclical companies such as St.
Lawrence. It states that international investors primarily
value equities on future earnings expectations and that
cyclical companies experience cyclical expansion and
contraction of P/E multiples. Net income is compared to
time.
page 7
This page of the paper format version of the document
contains a chart which is a reproduction of the chart on
page 5.
page 8
This page of the paper format version of the document
contains a chart which shows projected market values for St.
Lawrence as approximately $300 million in 1994, $462 million
in 1995 and $500 million in 1996 based on projected P/E
multiples of 19.5x for 1994, 15.0x for 1995 and 13.0x for
1996. Investor total return of investment (calculated as
the compounded rate of return of projected market values) in
St. Lawrence (1994-1996) is stated to be approximately 29%
per annum. This page notes that a CAD/USD exchange rate of
1.30 is assumed.
page 9
This page of the paper format version of the document
contains a chart which shows total cumulative free cash
flows for St. Lawrence (assuming 100% ownership) as
approximately $10 million in 1994, $18 million in 1995, $23
million in 1996 and $63 million in 1997. This page states
that the sources of the information in the chart are Holnam
and St. Lawrence Management and notes that a CAD/USD
exchange rate of 1.30 is assumed.
page 10
This page of the paper format version of the document
contains a chart which shows historical and projected
earnings for Holnam Operations (which represents all of the
operations of Holnam except for Holnam's Texas Limited
Partnership and St. Lawrence) as approximately negative $29
million for 1992, negative $64 million for 1993, $29 million
for 1994, $45 million for 1995, $65 million for 1996 and $80
million for 1997. The expected average year-on-year
earnings increase (1994-1997) is stated to be approximately
20%. This page states that the sources of the information
in the chart are Holnam and St. Lawrence Management and
Annual Reports.
page 11
This page of the paper format version of the document
contains a chart which shows projected market values for
Holnam consolidated (which represents all of the operations
of Holnam including Holnam's Texas Limited Partnership and
St. Lawrence) of approximately $920 million in 1994, $1,292
million in 1995 and $1,455 million in 1996 based on
projected P/E multiples of 15.0x for 1994, 14.0x for 1995
and 13.0x for 1996. Investor total return of investment
(calculated as the compounded rate of return of projected
market values) in Holnam (1994-1996) is stated to be
approximately 26% per annum. This page states that the
information in the chart assumes a 59.5% stake in St.
Lawrence and a 75% stake in the Texas Limited Partnership.
page 12
This page of the paper format version of the document
contains a chart which shows total cumulative free cash
flows for Holnam (assuming 100% ownership) of approximately
$47 million in 1994, $120 million in 1995, $200 million in
1996 and $316 million in 1997. This page states that the
sources of the information in the chart are Holnam and St.
Lawrence Management and notes that the numbers in the chart
include Holnam's 59.5% stake in St. Lawrence and its 75%
stake in the Texas Limited Partnership.
page 13
This page of the paper format version of the document
contains a chart which compares the internal rate of return
("IRR") for Holderbank based on five strategic alternatives.
Alternative I assumes a 79.8% stake in Holnam and status quo
ownership for St. Lawrence resulting in an IRR of 20.0% for
Holderbank. Alternative II assumes a 68% stake in Holnam
and a 100.0% stake in St. Lawrence resulting in an IRR of
17.78% for Holderbank. Alternative III assumes status quo
ownership for both Holnam and St. Lawrence resulting in an
IRR of 25.8% for Holderbank. Alternative IV assumes a
100.0% stake in both Holnam and St. Lawrence resulting in an
IRR of 30.4% for Holderbank. Alternative V assumes a 100.0%
stake in Holnam and status quo ownership for St. Lawrence
resulting in an IRR of 27.5%.
page 18
This page of the paper format version of the document
contains a chart which shows the relative share price
performance from August 24, 1993 to November 5, 1993 among
Lafarge Coppee, Lafarge Corporation and Holderbank. It is
noted that the Lafarge Corp. roadshow coincided with the
Lafarge Coppee share price divergence and that investors'
interest for the cement sector did not benefit Lafarge
Coppee.
page 19
This page of the paper format version of the document
contains a chart which shows the relative US$ trading volume
from August 24, 1993 to November 5, 1993 among Lafarge
Coppee, Lafarge Corporation and Holderbank. It is noted
that there was no visible afterdeal buying for Lafarge
Coppee and that Holderbank's relative volume was
consistently above Lafarge Coppee's.
page 21
This page of the paper format version of the document
contains a chart which shows relative valuations between
Holderbank and Lafarge Coppee. In comparison to Lafarge
Coppee, Holderbank's market value to estimated 1994 earnings
was negative 15%, market value to estimated 1994 cash flow
was negative 27%, market capitalization to current capacity
was negative 37% and market capitalization to the latest
fiscal year output was negative 36%.
<PAGE>
IN EXHIBIT 17(b)(4):
Exhibit 17(b)(4) - Presentation Material from Merrill Lynch
dated January 7, 1994
page 2
This page of the paper format version of the document
contains two charts. The first chart on this page shows US
historical cement volumes in millions of tons from 1973
through 1992. The second chart on this page shows US
historical nominal and real cement prices from 1974 through
1992. Nominal and real prices have been indexed to 1992
dollars. This page states that the sources of the
information used in the charts are the Commerce Department
and P.C.A.
page 3
This page of the paper format version of the document
contains two charts. The first chart on this page shows the
stock prices for Holnam Inc. in absolute terms and relative
to the Standard & Poors 500 composite price index from
January 1, 1993 through January 4, 1994. The second chart
on this page shows the stock prices for St. Lawrence Cement
in absolute terms and relative to the Toronto SE (300)
composite price index from January 1, 1993 through January
4, 1994. This page states that the source of the
information used in the charts is Datastream.
page 4
This page of the paper format version of the document
contains two charts. The first chart on the page shows
stock prices and trading volumes for Holnam Inc. from
January 1, 1993 through January 4, 1994. The second chart
on the page shows stock prices and trading volumes for St.
Lawrence from January 1, 1993 through January 4, 1994. This
page states that the source of the information used in the
charts is Datastream.
page 5
This page of the paper format version of the document
contains two charts. The first chart on this page shows the
projected cement volumes and prices for Holnam Operations
from 1991 through 2002 that are detailed on pages 31 and 32.
The second chart on this page shows the projected cement
volumes and prices for St. Lawrence Cement from 1991 through
2002 that are detailed on page 41.
page 6
This page of the paper format version of the document
contains two charts. The first chart on this page shows
historical and projected sales from 1991 through 2002 for
Holnam Operations and St. Lawrence Cement. This information
is detailed on pages 33 and 44. The second chart on this
page shows historical and projected EBIT from 1991 through
2002 for Holnam Operations and St. Lawrence Cement. This
information is detailed on pages 33 and 44.
page 7
This page of the paper format version of the document
contains two charts. The first chart on this page shows
historical and projected capital expenditures from 1991
through 2002 for Holnam Operations and St. Lawrence Cement.
This information is detailed on pages 34 and 46. The second
chart on this page shows historical and projected free cash
flow from 1991 through 2002 for Holnam Operations and St.
Lawrence Cement. This information is detailed on pages 34
and 46.
page 8
This page of the paper format version of the document
contains two charts which summarize the trading multiple
valuation detailed on pages 23 and 24. The first chart
shows aggregate equity valuation ranges for Holnam Inc. of
(i) $904,360 thousand to $1,061,091 thousand utilizing
share price/1994 EPS trading multiples, (ii) $542,853
thousand to $1,151,374 thousand utilizing market
capitalization/EBIT trading multiples and (iii) $608,998
thousand to $1,224,775 thousand utilizing market
capitalization/1994 EBITDA trading multiples. The second
chart shows per share valuation ranges for Holnam Inc. of
(i) $6.30 to $7.39 utilizing share price/1994 EPS trading
multiples, (ii) $3.78 to $8.02 utilizing market
capitalization/EBIT trading multiples and (iii) $4.24 to
$8.53 utilizing market capitalization/1994 EBITDA trading
multiples.
page 9
This page of the paper format version of the document
contains two charts which summarize the discounted cash flow
valuation of Holnam Inc. detailed on pages 23, 25 and 27.
The first chart shows aggregate equity valuation ranges for
Holnam Inc. based on three scenarios: (i) $479,189 thousand
to $649,321 thousand utilizing a valuation of St. Lawrence
as a going concern, (ii) $588,000 thousand to $802,723
thousand utilizing a discounted cash flow valuation of St.
Lawrence and (iii) $648,963 thousand to $819,095 thousand
utilizing the market value of St. Lawrence as of January 5,
1994. The second chart shows per share valuation ranges for
Holnam Inc. based on three scenarios: (i) $3.34 to $4.52
utilizing a valuation of St. Lawrence as a going concern,
(ii) $4.09 to $5.59 utilizing a discounted cash flow
valuation of St. Lawrence and (iii) $4.52 to $5.70 utilizing
the market value of St. Lawrence as of January 5, 1994.
page 10
This page of the paper format version of the document
contains two charts which summarize the acquisition multiple
valuation of Holnam Inc. detailed on pages 23, 26 and 27.
The first chart shows aggregate equity valuation ranges for
Holnam Inc. based on three scenarios: (i) $396,084 thousand
to $924,175 thousand utilizing a valuation of St. Lawrence
as a going concern, (ii) $504,895 thousand to $1,032,986
thousand utilizing a discounted cash flow valuation of St.
Lawrence and (iii) $565,858 thousand to $1,093,949 thousand
utilizing the market value of St. Lawrence as of January 5,
1994. The second chart shows per share valuation ranges for
Holnam Inc. based on three scenarios: (i) $2.76 to $6.43
utilizing a valuation of St. Lawrence as a going concern,
(ii) $3.52 to $7.19 utilizing a discounted cash flow
valuation of St. Lawrence and (iii) $3.94 to $7.62 utilizing
the market value of St. Lawrence as of January 5, 1994.
page 11
This page of the paper format version of the document
contains two charts which summarize the valuation
methodologies utilized by Merrill Lynch that are detailed on
pages 23 to 29. The first chart shows aggregate equity
valuation ranges (i) of $413,771 thousand to $1,060,076
thousand calculated from Holnam Inc.'s 52-week low and high
stock market values detailed on page 23, (ii) $542,853
thousand to $1,224,775 thousand calculated from the trading
multiples analysis detailed on pages 23 and 24, (iii)
$479,189 thousand to $819,095 thousand calculated from the
discounted cash flow analysis detailed on pages 23, 25 and
27 and (iv) $396,084 thousand to $1,093,949 thousand
calculated from the acquisition multiple analysis detailed
on pages 23, 26 and 27. The second chart shows equity
valuation ranges per share (i) of $2.88 to $6.75 calculated
from Holnam Inc.'s 52-week low and high stock market values
detailed on pages 22 and 23, (ii) $3.78 to $8.53 calculated
from the trading multiple analysis detailed on pages 23 and
24, (iii) $3.34 to $5.70 calculated from the discounted cash
flow analysis detailed on pages 23, 25 and 27 and (iv) $2.76
to $7.62 calculated from the acquisition multiple analysis
detailed on pages 23, 25 and 26.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
- --------- ------------------------------------------------------------------------------------------ --------
<S> <C> <C>
17(b)(1) Opinion of Merrill Lynch, Pierce Fenner & Smith Incorporated, dated January 7, 1994,
incorporated by reference from Annex B to the Disclosure Statement and Notice filed as
Exhibit 17(d) hereto...................................................................... *
17(b)(2) Presentation Material from Goldman Sachs dated October 11, l993...........................
17(b)(3) Presentation Material from Merrill Lynch dated November 15, l993..........................
17(b)(4) Presentation Material from Merrill Lynch dated January 7, 1994............................
17(d) Preliminary Copy of Disclosure Statement and Notice....................................... *
17(e) The description of appraisal rights set forth under the caption 'The Merger -- Appraisal
Rights' and the copy of Section 262 of the Delaware General Corporation Law attached as
Annex C to the Disclosure Statement and Notice are incorporated herein by reference....... --
</TABLE>
- ------------
* Previously filed.
5
<PAGE>
<PAGE>
PRESENTATION TO
HOLNAM INC.
REGARDING A U.S. EQUITY OFFERING
Prepared by
Goldman, Sachs & Co.
October 11, 1993
<PAGE>
TABLE OF EXHIBITS
EXHIBIT
<TABLE>
<S> <C> <C>
I. HOLNAM'S POTENTIAL OBJECTIVES IN AN EQUITY OFFERING.............................................. 1
II. KEY ISSUES TO CONSIDER........................................................................... 2
III. EQUITY MARKET OVERVIEW........................................................................... 3
Equity Market Outlook New Issue Environment
IV. FINANCIAL CONSIDERATIONS......................................................................... 4
Holnam Capitalization
Historical and Projected Financial Statements
V. VALUATION CONSIDERATIONS......................................................................... 5
Stock Price Performance
Public Market Valuation Parameters
Operating Margin Comparison of Comparable Companies
Pro Forma Analysis
Case Study of Lafarge
VI. POSITIONING THE COMPANY.......................................................................... 6
Positioning the Holnam 'Story'
Factors Affecting the Offering
SUMMARY WALL STREET ANALYST COMMENTARY
VII. Structuring and Marketing the Equity Offering.................................................... 7
Successful Execution; Stages of an IPO
VIII. GOLDMAN SACHS' CAPABILITIES...................................................................... 8
</TABLE>
2
<PAGE>
EXHIBIT I
HOLNAM'S POTENTIAL OBJECTIVES IN A EQUITY OFFERING
The decision to issue equity and become a truly 'public' company is a
fundamental strategic decision for both Holnam and Holderbank
<TABLE>
<CAPTION>
<S> <C>
Capital Requirements................ New source of funding for:
attractive capital projects
acquisitions
Deleveraging
Financial Risk...................... Reduce leverage in capital structure
Reduce dependence on Holderbank
Diversify away from banks
Rating agency considerations and cost of debt
Shareholder Returns................. Positive earnings outlook
Cyclical upturn for industry
Holderbank dilution
Structural Issues................... Increase liquidity of common stock
Broaden ownership base and create research following
Ownership level of Holderbank going forward
Market Issues....................... Success of Lafarge offering
Currently strong market for cyclicals
IPO-like offering approach
</TABLE>
<PAGE>
EXHIBIT 2
KEY ISSUES TO CONSIDER
<TABLE>
<S> <C>
Holderbank Long term ownership objectives
Ongoing financial support
Alternative investment opportunities
St. Lawrence Outlook for Canadian/Middle Atlantic markets
Long term strategic objectives
Financial exposure vs. operational control
Eventual consolidation of minority shareholdings
Structural Reverse stock split (4:1)
Timing
Use of proceeds
Co-ordination with possible parent ADR program
</TABLE>
[a Holnam ownership structure chart appears here showing 'Holderbank' Financiere
Glaris, Ltd. (Holderbank) as the owner of 100% of Holdernam, Inc. which in turn
is the owner of 95.2% of Holnam, Inc. which in turn is the owner of 75% of
Holnam Texas Limited Partnership and 59.5% of St. Lawrence Cement, Inc. Public
Shareholders are shown to own 4.8% of Holnam, Inc. (NYSE Listing) and 40.5% of
St. Lawrence Cement, Inc. (Toronto/Montreal Listing).]
<PAGE>
EQUITY MARKET OUTLOOK
RECENT PERFORMANCE OF U.S. EQUITY MARKET
<TABLE>
<CAPTION>
1/2/92- 1/4/93-
COMPOSITE 12/31/92 10/05/93
- -------------------------------------------------------------------------- -------- --------
<S> <C> <C>
DJIA...................................................................... 4.1% 8.4%
S&P 500................................................................... 4.3 5.9
NASDAQ
Composite................................................................. 15.4 13.8
</TABLE>
Our renewed bullishness for equities is linked to four key factors:
The U.S. economy continues on its path of gradual and fitful recovery.
Equities are notably undervalued relative to inflation and interest
rates.
There is continued demand for equities as individuals shift their
financial asset portfolios.
We are encouraged by the competitiveness of U.S. corporations relative
to others in the G-7 with regard to labor costs, capital costs, and capital
availability.
We have revised the asset allocation guidelines for our several model
portfolios. We recommend that balanced portfolios hold 65% equities (previously
55%), 30% bonds (previously 40%) and 5% cash (unchanged). The increased equity
weighing is a result of three key factors:
Consensus economic forecasts for the major industrial economies have
declined to levels that are comparable to our own expectations.
President Clinton's policy initiatives no longer represent the source
of uncertainty they did earlier in the year.
The President has begun to define the parameters of his upcoming
healthcare reform package.
Importantly, the superior performance of bonds during the past several
months has created an opportunity for equities to enjoy better performance in
the months to come.
THE NEW ISSUE ENVIRONMENT
New issue volume reached record levels during 1992 and has continued with
the same fervor during 1993.
$72 billion of equity was issued during 1992 versus $63 billion for
1991 and $33 billion for 1989 and 1990 combined.
Initial public offerings in 1992 accounted for 44% of all new issues
versus 30% in all of 1991.
$81.9 billion of equity was issued for the first nine months of 1993
versus $61.7 billion in the same period last year.
We anticipate very heavy issuance for the remainder of 1993.
The new issue market is currently very healthy.
Demand for equities is liquidity driven.
Investors are hungry for yield.
Despite record supply, IPO's have performed well
<PAGE>
ANALYSIS OF IPO'S
THROUGH SEPTEMBER 25, 1993
<TABLE>
<CAPTION>
CURRENT PRICE
RELATIVE PRICING RELATIVE TO
--------------------------- OFFER PRICE
#OF IPOS BELOW WITHIN ABOVE --------------
MONTH PRICED RANGE RANGE RANGE BELOW ABOVE
- ------------------------------------------------------------ -------- ----- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
January..................................................... 19 3 7 9 8 11
February.................................................... 30 3 19 8 10 20
March....................................................... 49 4 32 13 17 32
April....................................................... 24 5 16 3 9 15
May......................................................... 39 8 19 12 11 28
June........................................................ 45 13 17 15 14 31
July........................................................ 46 9 25 12 10 36
August...................................................... 68 19 44 5 30 38
September................................................... 38 5 21 12 18 20
Totals...................................................... 358 69 200 89 127 231
Percentages................................................. 19.3% 55.9% 24.9% 35.5% 64.3%
First Quarter............................................... 98 10 58 30 35 63
Percentages................................................. 10.2% 59.2% 30.6% 35.7% 64.3%
Second Quarter.............................................. 108 26 52 30 34 74
Percentages................................................. 24.1% 48.1% 27.8% 31.5% 68.5%
Third Quarter As of 9/25/93................................. 152 33 90 29 58 94
Percentage.................................................. 21.7% 59.2% 19.1% 38.2% 61.8%
</TABLE>
<PAGE>
Exhibit 4
HOLNAM CONSOLIDATED CAPITALIZATION
Location of Debt
<TABLE>
<CAPTION>
St.
Holnam Lawrence
------ --------
<S> <C> <C> <C> <C>
Senior Notes, $361.8m X X Bank Revolving Credits (Estimated)
Term Notes and 30.0 X Holderbank Senior Revolving Credit
Loans 20.9 X 1993 - 1997 Prudential Notes
70.0 X 9.85% Term Loan due in 2001
30.0 X 8.03% Term due in 1998
5.6 X Other notes and loans
Industrial 18.0 X 5% IRB due in 2000 (per refinancing)
Revenue 53.3 X 6.8% due between 1999 and 2009
Bonds 1.6 X 5.8% Pollution Control Bonds due 1993
26.7 X Limited Partnership IRB
4.6 X Other
Subordinated 9.0 X 8% senior subordinated notes
Notes 50.0 X Currently non-interest bearing
subordinated notes (Held by Holderbank)
16.1 X 9.6% subordinated notes due in 1998
5.0 X 16% subordinated notes due in 1998
Other 12.3 X Sinking Fund Debentures
2.8 X Capital Lease Obligations
(17.8) X X Less current Maturities
Preferred 30.0 0% Preferred Stock (Hold by Holderbank)
135.3 million shares outstanding Ownership: 95.2% Holderbank
Market Value = $677 million 1.0% Institutional
(assuming $5.00 per share) 3.8% Other
</TABLE>
<PAGE>
HOLNAM CONSOLIDATED CAPITALIZATION
(Dollars in millions)
<TABLE>
<CAPTION>
As of June 30,
1993
------------------
<S> <C> <C> <C>
SHORT TERM DEBT: Miscellaneous Short Term Borrowings $ 3.0
Current Maturities of Long Term Debt 17.8
---------
Total Short Term Debt 20.8 1.7 %
LONG TERM DEBT:
Total Revolving Credit Lines (Est.) (a) 361.8
Senior Notes, and Loans 9.85% Term Loan due in 2001 70.0
8.03% Term Loan due 1998 30.0
Holderbank Senior Revolving Credit 30.0
1993-1997 Prudential Notes 20.9
Other notes and loans 5.5
Internal Revenue Bonds 5% IRB due in 2000 18.0
6.8% due between 1999 and 2009 53.3
5.8% Pollution Control Revenue Bonds due 1993 1.6
Limited Partnership IRB 26.7
Other 4.6
Subordinated Notes 8% senior subordinated notes payable
semiannually through 1997 9.0
Currently non-interest bearing subordinated
notes (Holderbank) 50.0
9.6% subordinated notes due in 1998 16.1
16% subordinated notes due in 1998 5.0
9.25% of Sinking Fund Debentures 12.3
Capital Lease Obligations 2.8
Less Current Maturities (17.8 )
---------
Total Long Term Debt 700.8 57.4 %
---------
Total Debt 721.6 59.1 %
SHAREHOLDERS' EQUITY: Minority Interest 115.3
Preferred Stock (Holderbank) 30.0
Common Equity 353.5
---------
Total Shareholders' Equity 498.8 40.9 %
--------- ------
TOTAL CAPITALIZATION: $1,220.4 100.0 %
--------- ------
</TABLE>
(a) $225M due 1995, unsecured, interest not to exceed LIBOR plus 5.625%.
Canadian $200M due 1994, convertible to a term loan over 6 year period.
$35M Credit Agreement due 1994, converts to term loan. Interest at 8%. $25M
Floating unsecured long term revolving credit.
<PAGE>
HOLNAM CONSOLIDATED
HISTORICAL AND PROJECTED INCOME STATEMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------- YEARS ENDED DECEMBER 31,
SIX MONTHS 1990 1991 1992 JUNE 30, ---------------------------
ENDED ACTUAL ACTUAL ACTUAL 1993 1993E 1994E 1995E
---------- ---------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales $1,074,579 $ 979,297 $ 946,176 $400,121
Cost of Sales 912,771 857,520 836,066 353,888
---------- ---------- ---------- --------
Gross Margin 161,808 121,777 110,110 46,233
Selling, General and
Administrative Expenses 116,392 119,997 109,789 52,146
Unusual Charges -- 61,672 11,037 --
Interest Expense 58,942 56,534 51,808 23,085
Other Income (Loss) 3,103 4,416 (4,469 ) (3,958 )
---------- ---------- ---------- --------
Income before Income Taxes and
Minority Equity in Net Income (10,423) (112,010 ) (66,993 ) (25,040 )
Income Tax Provision 6,168 (13,794 ) (23,657 ) (4,864 )
Minority Equity in Net Income
(Loss) (8,525) 3,162 (14,764 ) (3,839 )
---------- ---------- ---------- --------
Net Income (Loss) before change in
accounting principles (25,116) (95,054 ) (28,572 ) (16,337 ) $ 1,404
---------- ---------- --------- -------- --------
Cumulative effect of change in
accounting principle -- -- -- (65,700 ) (65,700)
Net Income (Loss) $ (25,116) $ (95,054 ) $ (28,572 ) $(82,037) $(64,296) $ 36,576 $ 58,875
---------- ---------- ---------- -------- -------- --------
---------- ---------- ---------- -------- -------- --------
Average shares outstanding (000's) 115,670 134,782 134,883 135,291 135,300 135,300 135,300
Net Income (loss) per share before
change in accounting principle (0.22) (0.71 ) (0.21 ) (0.12 ) 0.01 0.27 0.44
EPS $ (0.22) $ (0.71 ) $ (0.21 ) $ (0.61 ) $ (0.48) $ 0.27 $ 0.44
</TABLE>
- ------------
(1) Assumes St. Lawrence has net income of (C$10m) in 1993, C$0 in 1994, and
C$15m in 1995 (exchange rate of 1:1.34)
(2) Assumes Holnam Texas Limited Partnership has net income of $8.0m in 1993,
$10m in 1994, and $10m in 1995.
<PAGE>
HOLNAM CONSOLIDATED
HISTORICAL BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31 AS OF
------------------------------------- JUNE 30,
1990 ACTUAL 1991 ACTUAL 1992 ACTUAL 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash $ 7,589 $ 12,155 $ 7,527 $ 4,211
Accounts Receivable 200,276 182,828 178,540 235,748
Inventories and Supplies 188,227 199,524 177,875 195,019
Prepayments 10,307 11,702 5,271 5,688
----------- ----------- ----------- -----------
Total Current Assets 416,399 406,209 369,213 440,666
Property, Plant & Equipment, Net 958,868 929,114 855,882 914,441
OTHER ASSETS:
Cost in Excess of Net Fixed Assets 59,232 58,761 62,008 61,078
Other 58,670 62,505 66,029 75,206
----------- ----------- ----------- -----------
Total Other Assets 117,902 121,266 128,037 136,284
----------- ----------- ----------- -----------
LIABILITIES
Current Liabilities:
Accounts Payable & Accrued Liabilities $ 117,143 $ 125,800 $ 126,354 $ 123,452
Current Maturities of Long Term Debt & Notes 8,005 12,909 16,013 20,846
----------- ----------- ----------- -----------
Total Current Liabilities 125,148 138,709 142,367 144,298
Long Term Debt 541,114 606,605 584,452 700,765
Deferred Income Taxes 94,575 74,210 58,253 58,228
Deferred Credits & Liabilities 23,949 27,795 21,484 89,366
Minority Equity 134,335 128,692 111,100 115,281
STOCKHOLDER'S EQUITY
Common Stock 1,348 1,349 1,350 1,353
Paid-in Capital 456,424 456,810 457,156 458,305
Retained Earnings 100,236 5,182 (23,390) (105,427 )
Currency Translation Adjustment 17,040 17,867 360 (778 )
----------- ----------- ----------- -----------
Total Stockholder's Equity 575,048 481,208 435,476 383,453
----------- ----------- ----------- -----------
Total Liabilities & Stockholder's Equity $ 1,494,169 $ 1,456,589 $ 1,353,132 $1,491,391
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
<PAGE>
HOLNAM CONSOLIDATED
STATEMENT OF CASH FLOW
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
SIX MONTHS
----------------------------------------- ENDED
1990 ACTUAL 1991 ACTUAL 1992 ACTUAL JUNE 30, 1993
----------- ----------- ----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)......................................... $ 25,116 $ (95,054) $ (28,572) $ (82,037)
Noncash charges (credits)
Depreciation, depletion and amortization of goodwill.... 76,792 82,157 79,918
Net (gain) loss on disposition of fixed assets............ (1,003) (917) (2,256)
Deferred income taxes..................................... (659) (19,554) (11,945)
----------- ----------- -----------
Minority interest in net income, net of dividends paid.... (2,081) (8,154) (16,598)
Unusual items............................................. 61,672 11,037 65,700
CHANGES IN ASSETS AND LIABILITIES
(Increase) decrease in receivables................... 9,251 17,754 (3,433)
(Increase) decrease in inventories and supplies...... (19,033) (1,955) 13,356
(Increase) decrease in prepayments................... 3,752 613 3,666
(Increase) decrease in accounts payable and
liabilities........................................ (17,113) (2,943) (2,503)
(Increase) decrease in other operating activities.... 10,901 3,828 12,110)
----------- ----------- -----------
Cash provided by operating activities..................... 15,207 37,447 30,560 (61,260)
----------- ----------- ----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets......................... 3,385 4,005 15,529 6,266
Capital expenditures................................. (94,410) (54,178) (47,753) (25,924)
Investment in affiliates............................. (114,038) (45,090) (5,688) (56,393)
Advances to Box-Crow................................. (4,500) (8,026) -- --
Other investing activities................................ (7,463) (986) 244 419
----------- ----------- ----------- -------------
Cash used for investing activities................... (210,920) (104,275) 37,668 75,632
----------- ----------- ----------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of borrowings.............................. (347,656) (263,026) (221,993) (2,529)
Proceeds from borrowings............................. 411,547 332,097 217,158 97,539
Issuance of common stock............................. 100,147 387 347 1,152
Issuance of subordinated debt........................ -- -- -- --
Issuance of PIK preferred stock...................... -- -- -- 30,000
Other................................................ 1,146 1,936 3,968 946
----------- ----------- ----------- -------------
Cash (used for) provided by financing activities..... 165,184 71,394 2,480 127,108
----------- ----------- ----------- -------------
Net increase (decrease) in cash and cash
equivalents........................................ (21,529) 4,566 (4,628) (9,784)
Cash and Cash Equivalents, beginning of year.............. 29,118 7,589 12,155 7,527
----------- ----------- ----------- -------------
Cash and Cash Equivalents, end of year.................... $ 7,589 $ 12,155 $ 7,527 $ 4,211
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
</TABLE>
<PAGE>
HOLNAM CONSOLIDATED
INCOME STATEMENTS
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
-------------------------------------------------------
1991A 1992A 1993E 1994E 1995(A)
-------- -------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
REVENUE................................................ $525,290 $560,342 $547,298 $595,471 $639,039
Cost of Sales.......................................... 470,141 480,908 454,476 470,229 496,292
-------- -------- -------- -------- -------
Gross Margin........................................... 55,149 79,434 92,822 125,242 142,747
Selling Expense........................................ 27,318 28,214 29,617 30,599 31,398
General and Administrative Expense..................... 32,362 28,742 30,150 30,786 31,528
Other (Income) Expense................................. (3,540) (1,634) (2,250) (1,719) (1,638)
-------- -------- -------- -------- -------
Total Expense..................................... 56,140 55,322 57,517 59,666 61,288
-------- -------- -------- -------- -------
Earnings Before Interest and Taxes..................... (911) 24,112 35,305 65,576 81,459
Interest Expense(d).................................... 39,186 35,583 33,000 34,000 32,000
-------- -------- -------- -------- -------
Income (Loss) before income taxes, unusual expenses and
cumulative effect of an accounting change............ (40,177) (11,471) 2,305 31,576 49,459
Unusual expenses....................................... 60,364 -- -- -- --
-------- -------- -------- -------- -------
Income (Loss) before income taxes and cumulative effect
of accounting change................................. (100,541) (11,471) 2,305 31,576 49,459
Provision (Credit) for income taxes.................... (10,385) 109 2,415 2,500 4,800
-------- -------- -------- -------- -------
Income (loss) before cumulative effect of accounting
change............................................... (90,156) (11,580) (110) 29,076 44,659
Holnam Texas Limited Partnership....................... -- -- 5,922 7,500 7,500
Cumulative effect of accounting change -- net of taxes
(b).................................................. -- -- 64,000 -- --
-------- -------- -------- -------- -------
Net Income (Loss)...................................... $(90,156) $(11,580) $(58,188) $ 36,576 $52,159
-------- -------- -------- -------- -------
-------- -------- -------- -------- -------
Gross Margin %......................................... 10.5% 14.2% 17.0% 21.0% 22.3%
Operating Margin % (c)................................. 0.0% 4.9% 6.9% 11.5% 13.2%
</TABLE>
- ------------
(a) 1995 sales volume includes approximately 450,000 T of purchased cement at a
margin of $3.25/T.
(b) One time charge for transition obligation related to FAS 106
(Post-Retirement benefits Other Than Pensions).
(c) Definition; Operating Margin = (EBIT - Other Income)/Revenue.
(d) Tijeras lease expense subtracted and put into Cost of Sales.
Note: In order to be consistent with the 1993 plan, certain reclassifications
have been made to the 1991 and 1992 figures. Additionally, 1993, 1994 and
1995 EBIT reflects annual retiree medical benefit costs based on FAS 106
of $6.0M, $6.4M and $6.7M, respectively. These annual costs would have
been in the range of $3.5M - $4.0M under the previous accounting standard.
<PAGE>
HOLNAM CONSOLIDATED
(EQUITY BASIS) BALANCE SHEET
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------
1991A 1992A 1993E 1993E 1993E
---------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash............................................... $ 12,155 $ 7,527 $ 6,372 $ 1,603 $ 1,841
Accounts Receivable................................ 76,584 72,287 67,311 82,923 90,511
Inventories and Supplies........................... 118,499 104,685 113,970 100,893 90,271
Prepayments........................................ 7,112 2,999 1,542 2,999 2,999
---------- -------- -------- -------- --------
Total Current Assets.......................... 214,350 187,498 189,195 188,418 185,622
Property, Plant & Equipment, net................... 558,950 531,124 529,471 531,887 529,651
Other Assets:
Cost in Excess of Net Fixed Assets............ 39,892 38,534 36,653 34,934 33,134
Investment in St. Lawrence.................... 197,691 162,718 156,411 172,390 188,768
Other.............................................. 15,874 15,256 58,339 15,256 15,256
---------- -------- -------- -------- --------
Total Other Assets............................ 253,457 216,508 251,403 222,580 237,158
---------- -------- -------- -------- --------
Total Assets.................................. $1,026,757 $935,130 $970,069 $942,885 $952,431
---------- -------- -------- -------- --------
---------- -------- -------- -------- --------
Liabilities and Net Worth
Current Liabilities:
Accounts Payable & Accrued Liabilities........ $ 74,897 $ 69,950 $ 68,220 $ 75,395 $ 81,998
Current Maturities of Long Term Debt &
Notes....................................... 15,327 10,252 6,906 7,129 15,424
---------- -------- -------- -------- --------
Total Current Liabilities..................... 90,224 80,202 75,126 82,524 97,422
Long Term Debt................................ 409,611 379,823 386,418 348,607 275,391
Deferred Income Taxes......................... 17,966 18,145 17,025 15,785 16,445
Deferred Credits & Liabilities................ 27,748 21,484 89,366 88,381 88,381
Stockholders' Equity
Common Stock.................................. 1,349 1,350 31,353 1,350 1,350
Paid in Capital............................... 456,810 457,156 458,305 457,156 457,156
Retained Earnings............................. 5,182 (23,390) (86,746) (51,278) 15,926
Currency Translation Adjustment............... 17,867 360 (778) 360 360
---------- -------- -------- -------- --------
Total Stockholders' Equity.................... 481,208 435,476 402,134 407,588 474,792
---------- -------- -------- -------- --------
Total Liabilities & Stockholders' Equity........... $1,026,757 $935,130 $970,069 $942,885 $952,431
---------- -------- -------- -------- --------
---------- -------- -------- -------- --------
</TABLE>
Note: (i) Equity basis balance sheet reflects Holnam's investment in St.
Lawrence on the equity method. Holnam's share of St. Lawrence results
in a loss of approximately $5M, $17M, and $5M for 1991, 1992, and 1993
respectively and an income of $16M and $23M for 1994 and 1995
respectively. Additionally, deferred credits and liabilities in 1993,
1994 and 1995 includes a balance related to FAS 106 of $72.5M, $75.0M
and $77.4M respectively.
(ii) 1994 and 1995 estimates have not been altered to reflect Holnam Texas
Limited Partnership.
<PAGE>
HOLNAM OPERATIONS
STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------------------------------------
1991A 1992A 1993E 1994E 1995E
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).......................................... $(90,156) $(11,580) $(58,188) $29,076 $44,659
NONCASH CHARGES (CREDITS):
Depreciation, depletion and amortization of
goodwill............................................ 50,351 48,407 48,384 50,187 51,724
Net (gain) loss on disposition of fixed assets........ (78) (2,186) (194) -- --
Deferred income taxes................................. (13,577) 179 1,880 640 680
Unusual items......................................... 60,634 -- 64,000 -- --
CHANGES IN ASSETS AND LIABILITIES:
(Increase) decrease in receivables.................... 6,034 3,083 4,039 (6,763) (7,588)
(Increase) decrease in inventories and supplies....... (9,637) 12,853 (9,487) 9,201 10,622
(Increase) decrease in prepayments.................... 1,304 3,963 1,454 -- --
(Increase) decrease in accounts payable and
liabilities......................................... 5,079 (5,289) (4,516) 2,557 6,603
(Increase) decrease in other operating activities..... 7,136 (4,127) (868) -- --
------- ------- ------- ------- -------
Cash provided by operating activities............ 16,820 45,303 46,504 84,898 106,680
------- ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets.......................... 1,062 12,724 3,218 -- --
Capital expenditures.................................. (29,348) (31,800) (44,456) (53,208) (47,688)
Investment in affiliates.............................. (10,207) (1,551) (37,034) -- --
Advances to Box-Crow.................................. (8,026) -- -- -- --
Dividends received from St. Lawrence.................. 8,841 1,968 -- -- 6,167
Other investing activities............................ (1,937) 2,374 (711) 1,506 124
------- ------- ------- ------- -------
Cash used for investing activities............... (39,615) (16,285) (78,983) (51,702) (41,397)
------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Preferred Stock........................... 30,000
Net proceeds (repayment) -- revolver.................. (90,000) (20,000) (12,000) (31,000) (59,000)
Proceeds from short term borrowings................... -- 3,000 55,500 -- --
Repayment of short term borrowings.................... -- -- (58,500) -- --
Repayment of other borrowings......................... (68,026) (66,993) (14,829) (6,180) (6,045)
Proceeds from other borrowings........................ 185,000 50,000 30,000 -- --
Issuance of common stock.............................. 387 347 1,153 -- --
Cash (used for) provided by financing
activities..................................... 27,361 (33,646) 31,324 (37,180) (65,045)
------- ------- ------- ------- -------
Net increase (decrease) in cash and cash
equivalents.................................... 4,566 (4,628) (1,155) (3,984) 238
Cash and Cash Equivalents, beginning of year............... 7,589 12,155 7,527 6,372 2,388
------- ------- ------- ------- -------
Cash and Cash Equivalents, end of year..................... $12,155 $ 7,527 $ 6,372 $ 2,388 $ 2,626
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
Note: 1994 and 1995 estimates have not been altered to reflect Holnam Texas
Limited Partnership.
<PAGE>
EXHIBIT 5
[Two charts appear here.
The first shows the monthly indexed common stock price history of Holnam
Inc. from March 31, 1990 to September 30, 1993 as compared to an industry
composite (consisting of Lafarge Corp., Medusa Corp., Southdown Inc. and St.
Lawrence Cement), the S&P400 Industrials and Lafarge Corp.
The second shows the monthly common stock price and trading volume history
of Holnam Inc. from March 31, 1990 to September 30, 1993.]
<PAGE>
PUBLIC MARKET VALUATION PARAMETERS
<TABLE>
<CAPTION>
% OF LEVERAGED
TICKER STOCK PRICE 52-WEEK EQUITY MARKET
SYMBOL 10/8/93 HIGH CAP. $M DEBT $M CAP. $M
------ ----------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Holnam Inc......... HLN $5.00 88.9% $ 677 $718 $1,395
Comparables:
Lafarge Corp... LAF 19.63 98.7 1,299 540 1,839
Medusa Corp.... MSA 37.13 99.3 409 104 513
Southdown
Inc.......... SDW 23.88 92.3 405 304 709
St. Lawrence
(b).......... ST.A 5.37 72.5 230 211 441
Mean of
Comparables...... 90.7% -- --
<CAPTION>
LTM LTM LTM
DEBT TO % DIVIDEND SALES EBITDA EBITDA
TOTAL CAP. YIELD MULTIPLE $M MULTIPLE
---------- ---------- -------- ------ ------
<S> <<C> <C> <C> <C> <C>
Holnam Inc......... 59.0% 0.0% 1.4x $89.3 15.6x
Comparables:
Lafarge Corp... 42.7 1.5 1.3 161.3 11.4
Medusa Corp.... 73.5 1.1 2.4 32.5 15.7
Southdown
Inc.......... 50.9 0.0 1.5 71.0 10.0
St. Lawrence
(b).......... 44.6 0.0 1.2 (2.2) N.A.
Mean of
Comparables...... 55.6% 0.7% 1.6 13.2
</TABLE>
- ------------
(a) Source: IBES, except Holnam and St. Lawrence, which have been derived from
management estimates.
(b) Converted to US $ at exchange rate 1:1.34
<TABLE>
<CAPTION>
LTM
------------------------ P/E MUTIPLES(A)
GROSS OPERATING NET ------------------------------------ HISTORICAL
MARGIN MARGIN MARGIN 1993E $M 1993P/E 1994E $M 1994P/E PEAK
------- --------- ------ -------- ------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Holnam Inc........... 12.3% 1.0% (1.2)% $ 1.4 483.6x $36.6 18.5x 12.5x
Comparables:
Lafarge Corp.... 14.7 2.6 (1.7) 9.4 138.8 49.1 26.4 8.2
Medusa Corp..... 18.4 9.9 5.6 16.0 25.6 22.0 18.6 15.3
Southdown
Corp.......... 17.1 4.4 3.7 1.4 298.4 14.0 28.8 6.4
St. Lawrence.... 19.6 (8.2) (7.1) (7.5) NM 0.0 NM 6.4
Mean of
Comparables........ 16.4 1.9 (0.7) 236.6x 23.1x 9.8x
</TABLE>
iii
<PAGE>
OPERATING MARGIN COMPARISON
<TABLE>
<CAPTION>
6 MONTHS ENDED JUNE 30TH
YEARS ENDED DECEMBER 31, -----------------------------
-------------------------- 1993
HOLNAM OPERATIONS 1990 1991 1992 1992 1993 ESTIMATED
- ----------------------------------------------------- ------ ------ ------ ------ ------ ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Net Sales............................................ 516.8 525.3 560.3 256.1 242.3 547.3
Cost of Sales........................................ 459.6 465.3 476.1 224.0 208.4 449.7
Gross Profit......................................... 57.1 59.9 84.2 32.1 33.9 97.6
------ ------ ------ ------ ------ ---------
Operating Profit..................................... (3.8) 0.3 27.3 4.5 4.0 37.9
Net Income........................................... (37.6) (90.2) (11.6) (16.1) (10.0) 5.8
------ ------ ------ ------ ------ ---------
------ ------ ------ ------ ------ ---------
Gross Margin......................................... 11.1% 11.4% 15.0% 12.5% 14.0% 17.8
Operating Margin..................................... (0.7) 0.1 4.9 1.8 1.7 6.9
Net Margin........................................... (7.3) (17.2) (2.1) (6.3) (4.1) 1.1
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 6 MONTHS ENDED JUNE 30TH
-------------------------- --------------------------
HOLNAM CONSOLIDATED 1990 1991 1992 1992 1993 LTM
- ------------------------------------------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Sales.............................................. $1,074.6 $979.3 $946.2 $401.9 $400.1 $944.4
Cost of Sales.......................................... 912.8 857.5 836.0 362.0 353.9 827.9
Gross Profit........................................... 161.8 121.8 110.2 39.9 46.2 116.5
------ ------ ------ ------ ------ ------
Operating Profit(a).................................... 45.4 1.8 0.3 (14.9) (5.9) 9.3
Net Income(a)(b)....................................... (25.1) (54.3) (21.3) (26.2) (16.3) (11.4)
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Gross Margin........................................... 15.1% 12.4% 11.6% 9.9% 11.5% 12.3%
Operating Margin....................................... 4.2 0.2 0.0 (3.7) (1.5) 1.0
Net Margin............................................. (2.3) (5.5) (2.3) (6.5) (4.1) (1.2)
</TABLE>
- ------------
Notes:
(a) Excludes Unusual charges of $11m in 1992 and $61.7m in 1991.
(b) Before $65.7m 1993 Accounting principles change.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 6 MONTHS ENDED JUNE 30TH
-------------------------------- ----------------------------
LAFARGE CORP 1990 1991 1992 1992 1993 LTM
- ------------------------------------------------ -------- -------- -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Net Sales....................................... $1,769.6 $1,568.8 $1,511.2 $625.6 $586.2 $1,471.8
Cost of Sales................................... 1,451.2 1,344.5 1,289.4 581.2 547.4 1,255.6
Gross Profit.................................... 318.4 224.3 221.8 44.4 38.8 216.2
-------- -------- -------- ------ ------ --------
Operating Profit................................ 158.8 9.6 18.9 (53.0) (33.2) 38.7
Net Income...................................... 42.9 (50.4) (37.1) (63.0) (50.6) (24.7)
-------- -------- -------- ------ ------ --------
-------- -------- -------- ------ ------ --------
Gross Margin.................................... 18.0% 14.3% 14.7% 7.1% 6.6% 14.7%
Operating Margin................................ 9.0 0.6 1.3 (8.5) (5.7) 2.6
Net Margin...................................... 2.4 (3.2) (2.5) (10.1) (8.6) (1.7)
</TABLE>
Definition: Operating Profit = Earnings before Interest and Tax -- Other Income
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 6 MONTHS ENDED JUNE 30TH
-------------------------- ----------------------------
MEDUSA CORP. 1990 1991 1992 1992 1993 LTM
- ----------------------------------------------------- ------ ------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Net Sales............................................ $191.8 $173.4 $181.8 $ 77.5 $ 93.7 $1,989.0
Cost of Sales........................................ 149.5 142.1 149.2 65.8 78.1 161.5
Gross Profit......................................... 42.3 31.3 32.6 11.7 15.6 36.5
------ ------ ------ ------ ------ --------
Operating Profit..................................... 28.0 16.8 16.9 3.3 6.0 19.6
Net Income........................................... 14.7 8.1 9.1 0.8 2.7 11.0
------ ------ ------ ------ ------ --------
------ ------ ------ ------ ------ --------
Gross Margin......................................... 22.1% 18.1% 17.9% 15.1% 16.6% 18.4%
Operating Margin..................................... 14.6 9.7 9.3 4.3 6.4 9.9
Net Margin........................................... 7.7 4.7 5.0 1.0 2.9 5.6
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 6 MONTHS ENDED JUNE 30TH
-------------------------- --------------------------
SOUTHDOWN CORP. 1990 1991 1992 1992 1993 LTM
- ------------------------------------------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Sales.............................................. $565.9 $506.9 $507.4 $244.1 $250.5 $513.8
Cost of Sales.......................................... 449.2 44.9 438.5 212.2 199.6 425.9
Gross Profit........................................... 116.7 62.0 68.9 31.9 50.9 87.9
------ ------ ------ ------ ------ ------
Operating Profit(a).................................... 47.6 (15.7) 4.8 (0.1) 17.5 22.4
Net Income(a)(b)....................................... 7.6 (49.7) (31.5) (14.4) (1.8) (18.9)
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Gross Margin........................................... 20.6% 12.2% 13.6% 13.1% 20.3% 17.1%
Operating Margin....................................... 8.4 (3.1) 0.9 (0.0) 7.0 4.4
Net Margin............................................. 1.3 (9.8) (6.2) (5.9) (0.7) (3.7)
</TABLE>
- ------------
Notes:
(a) Excludes $21.4m 1992 write down of environmental services assets
(b) Before $48.5m 1993 Accounting principles change
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 6 MONTHS ENDED JUNE 30TH
-------------------------- --------------------------
ST. LAWRENCE (CANADIAN $) 1990 1991 1992 1992 1993 LTM
- ------------------------------------------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Sales.............................................. $629.9 $504.5 $467.1 $179.7 $189.0 $476.4
Cost of Sales.......................................... 490 381.4 378.1 143.7 148.7 383.1
Gross Profit........................................... 139.9 123.1 89.0 36.0 40.3 93.3
------ ------ ------ ------ ------ ------
Operating Profit....................................... 41.3 (8.5) (46.6) (29.3) (21.6) (38.9)
Net Income............................................. 24.2 (5.7) (39.9) (19.7) (13.8) (34.0)
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Gross Margin........................................... 22.2% 24.4% 19.1% 20.0% 21.3% 19.6%
Operating Margin....................................... 6.6 (1.7) (10.0) (16.3) (11.4) (8.2)
Net Margin............................................. 3.8 (1.1) (8.5) (11.0) (7.3) (7.1)
</TABLE>
ii
<PAGE>
PRO FORMA IMPACT OF ISSUANCE OF COMMON STOCK (A) HOLNAM INC.
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA FOR THE ISSUANCE OF:
JUNE 30, 1993 $150M COMMON STOCK $200M COMMON STOCK $200M COMMON STOCK
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and
Equivalents...... $4,211 $4,211 $4,221 $4,211
Capitalization
Short
Term
Debt............. $20,846 1.7% $20,846 1.7% $20,846 1.7% $20,846 1.7%
Long Term
Debt............. 700,765 57.4 550,765 45.1 500,765 41.0 450,765 36.9
----------- ------- ----------- ------- ----------- ------- ----------- -------
Total
Debt............. 721,611 57.7 571,611 46.8 521,611 42.7 471,611 38.6
Shareholders'
Equity
Minority
Interests........ 115,281 9.4 115,281 9.4 115,281 9.4 115,281 9.4
Preferred
Stock............ 30,000 2.5 30,000 2.5 30,000 2.5 30,000 2.5
Common
Equity............ 353,453 29.0 503,453 41.3 553,453 45.4 603,453 49.4
----------- ------- ----------- ------- ----------- ------- ----------- -------
Total
Shareholders'
Equity............ 498,734 40.9 648,734 53.2 698,734 57.3 748,734 61.4
----------- ------- ----------- ------- ----------- ------- ----------- -------
Total
Capitalization... $1,220,345 100.0% $1,220,345 100.0% $1,220,345 100.0% $1,220,345 100.0%
----------- ------- ----------- ------- ----------- ------- ----------- -------
----------- ------- ----------- ------- ----------- ------- ----------- -------
EBITDA/Interest
Coverage(b)(c)-
LTM.............. 1.9x 2.3x 2.5x 2.7x
Debt to
Total
Capitalization
%................ 59.1% 46.8% 42.7% 38.6%
Common
Shares
Outstanding:
Existing........... 135,300 135,300 135,300 135,300
New
Shares............ 30,000 40,000 50,000
Total
Shares
Outstanding...... 135,300 165,300 175,300 185,300
% of Shares Held by
Holderbank....... 95.2 77.9 73.5 69.5
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
FULL FULL FULL FULL
YEAR YEAR YEAR YEAR
NET NET % NET % NET %
INCOME INCOME PICKUP INCOME PICKUP INCOME PICKUP
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income/%Pick-up(d)(e)(f)
-- 1993E....................................... 1,404 10,404 640.8 13,404 854.5 16,404 1,068.1
-- 1994E....................................... 36,576 45,576 24.6 48,576 32.8 51,576 41.0
-- 1995E....................................... 58,875 67,875 15.3 70,875 20.4 73,875 25.5
EPS/% Pickup (Dilution)(d)(e)(f)
-- 1993E....................................... 0.01 0.06 506.4 0.08 636.7 0.09 752.9
-- 1994E....................................... 0.27 0.28 2.0 0.28 2.5 0.28 3.0
-- 1995E....................................... 0.44 0.41 (5.6) 0.40 (7.1) 0.40 (8.4)
</TABLE>
(a) Assumptions:
(1) 100% proceeds used for extant debt repayment.
(2) Rate on extent debt (pre-tax) 6%.
(3) 0% Tax Rate.
(4) Shares Issued at $5.00 as 10/8/93.
(5) US$ vs. C$ exchange rate 1:1.34.
(b) Depreciation and Amortization estimated at $80m for LTM.
(c) Excludes $11.0m unusual charge for 1992.
(d) Assumes that St. Lawrence Cement has Net Income in 1993 of (C$10m), in 1994
$0m, and C$15m in 1995.
(e) Before one time charge for accounting changes under FAS 106 in 1993.
(f) Assumes Holnam Texas L.P. has Net Income of $8.0m in 1993, $10.0m in 1994,
$10.0m in 1995.
[A chart appears here showing the daily common stock price history of Lafarge
Corporation from 10/1/92 to 9/30/93.]
iv
<PAGE>
PRO FORMA IMPACT OF ISSUANCE OF COMMON STOCK (A)
LAFARGE CORP (@$18.25 PER SHARE AND .88C SPREAD)
<TABLE>
<CAPTION>
PRO FORMA FOR THE
ISSUANCE OF:
JUNE 30, ---------------------
1993 6.75M COMMON STOCK
-------- ----------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Cash and Equivalents............................................ $ 35,700 $ 35,700
Capitalization
Short Term Debt................................................. $ 64,287 5.1% $ 64,287 5.1%
Long Term Debt.................................................. 562,905 44.5 476,055 37.5
---------- ------- ---------- -------
Total Debt...................................................... 627,192 49.6 540,242 42.7
Shareholders' Equity
Preferred Stock............................................... 0.0 0 0.0
Common Equity................................................. 637,375 50.4 724,225 57.3
---------- ------- ---------- -------
Total Shareholders' Equity.................................... 637,375 50.4 724,225 57.3
---------- ------- ---------- -------
Total Capitalization.......................................... $1,264,567 100.0% $1,264,567 100.0%
---------- ------- ---------- -------
---------- ------- ---------- -------
EBITDA/Interest Coverage LTM.................................... 3.5x 4.0x
Debt to Total Capitalization %.................................. 49.6% 42.7%
Common Shares Outstanding:
Existing........................................................ 59,451 59,451
New Shares...................................................... 6,750
Total Shares Outstanding........................................ 59,451 66,201
</TABLE>
<TABLE>
<CAPTION>
FULL FULL
YEAR YEAR
NET NET
INCOME INCOME % PICKUP
------ ------ --------
<S> <C> <C> <C>
Net Income/%Pick-up
-- 1993E......................................................................... 9,360 13,581 45.1
-- 1994E......................................................................... 49,140 53,361 8.6
EPS/%Pickup (Dilution) EPS EPS %PICKUP
------ ------ --------
-- 1993E......................................................................... 0.16 0.21 30.3
-- 1994E......................................................................... 0.83 0.81 (2.5)
------ ------ --------
</TABLE>
(a) Assumptions:
(1) 100% proceeds used for extant debt repayment.
(2) Rate on extant debt (pre-tax) 6%.
(3) 40% Tax Rate.
(4) Shares Issued @ $18.25 with 88c Spread.
<PAGE>
EXHIBIT 6
POSITIONING THE HOLNAM 'STORY'
POSITIVE SELLING POINTS
<TABLE>
<S> <C>
Market Leader Leading North American manufacturer of cement and construction
materials
-largest cement producer in U.S.
-good geographic exposure (Midwest, Southeast, Texas)
Low Cost Producer Cost reduction efforts have resulted in low cost position
Restructuring now essentially complete
-smart acquisitions
-closed underperforming plants
Low Transportation Costs Extensive networking of plant facilities
Favorable Industry Trends Low interest rates should contribute to more construction recovery
Public spending on infrastructure should increase as well
Pricing should improve with high capacity utilization and low imports
'Anti-dumping' quotas in place to restrict cheap imports
Technology Benefits from technology sharing with Holderbank
High quality facilities
Market Timing Well positioned for cyclical upturn
Positive earnings momentum
Improving Financial Results Positive 1993 quarterly trend
Box-Crow acquisition is paying off
Profitable 1994 (consolidated) expected
St. Lawrence turnaround could further enhance earnings
NOL shield will leverage earnings recovery
</TABLE>
<PAGE>
POTENTIAL INVESTOR CONCERNS
<TABLE>
<S> <C>
Imports Longer term exposure
Impact of NAFTA?
Recent Financial Performance Substantial recent operating losses
Canada still in recession
Ability of the company to pay a dividend
Leverage Overleveraged balance sheet
Limited financial flexibility
Pricing Timing and sustainability of recovery
Import protection over long term
Competitive Position Certain plants exposed competitively
- Tijeras
-Seattle
Waste fuels permitting outlook
Completion of Denver Airport project
Relationship with Holderbank Perception of 'bailing out'
</TABLE>
<PAGE>
FACTORS AFFECTING THE OFFERING
<TABLE>
<S> <C> <C>
Ownership Considerations Holderbank current holdings 128.8 million
Maximum offering size to maintain 80% ownership
assuming no new purchase: 25.7 million
</TABLE>
<TABLE>
<S> <C> <C>
Trading Characteristics Average Monthly Trading Volume
Last Month: 201,600 shs
Last 3 Months: 160,600
Last Year: 228,900
</TABLE>
<TABLE>
<CAPTION>
PERCENT AGGREGATE
NUMBER OF INSTITUTIONAL SHARES
Institutional Ownership INSTITUTIONS OWNERSHIP (MILLION)
------------ ------------- ---------
<S> <C> <C> <C> <C>
Holnam
June 30, 1992 20 1% 1.7
June 30, 1993 20 1 1.4
Comparable Group
June 30, 1993
Lafarge 47 17% 10.0
Medusa 52 51 5.6
Southdown 65 64 11.0
-- -- ---------
</TABLE>
<PAGE>
HOLNAM INC
COMMON STOCK OWNERSHIP ANALYSIS
<TABLE>
<CAPTION>
MKT VALUE AS SHARES HELD %
INSTITUTION OF FUND OF 10/04/93 ON 06/93 HOLDING
- --------------------------------------------------------------------------- ------------ ----------- -------
<S> <C> <C> <C>
Wells Fargo Ins Tr Na...................................................... $1,540,026 324,216 0.2%
Mellon Bank Corporation.................................................... 1,431,270 301,320 0.2%
California State Teachers Retirement Sys................................... 646,964 136,203 0.1%
Fidelity Mgmt & Res Corp................................................... 592,515 124,740 0.1%
Chase Manhattan Corporation................................................ 402,054 84,643 0.1%
Hancock John Mutual Life................................................... 340,190 71,619 0.1%
Travelers Corporation...................................................... 237,500 50,000 0.0%
Vanguard Index-Extnd Mkt................................................... 217,883 45,870 0.0%
Invista Capital Mgmt Inc................................................... 201,595 42,441 0.0%
Nothwestern Mutual Life Insurance Co....................................... 201,595 42,441 0.0%
Dimensional Funds Advs..................................................... 172,425 36,300 0.0%
Prudential Insurance Company of America.................................... 168,886 35,555 0.0%
Vanguard Total Stk Mkt..................................................... 95,950 20,200 0.0%
Boston Company............................................................. 89,300 18,800 0.0%
Vanguard Small Cap Stock................................................... 54,150 11,400 0.0%
First of America Bank...................................................... 47,500 10,000 0.0%
Schwab Charles Invt Mgmt................................................... 44,175 9,300 0.0%
Norwest Colorado Inc....................................................... 5,173 1,089 0.0%
Paine Webber Group......................................................... 5,026 1,058 0.0%
Total shares, Institutional Investors...................................... 1,367,418 1.0%
Shares outstanding (millions).............................................. 135.3
Market value (millions).................................................... $625
Number of institutions..................................................... 20
</TABLE>
29
<PAGE>
MEDUSA CORP
<TABLE>
<CAPTION>
MKT VALUE AS SHARES HELD %
INSTITUTION OF FUND OF 10/04/93 ON 06/93 HOLDING
- --------------------------------------------------------------------------- ------------ ----------- -------
<S> <C> <C> <C>
Fidelity Mgmt & Res Corp................................................... $51,430,613 1,413,900 12.9%
Capital Growth Mgmt........................................................ 19,969,875 549,000 5.0%
College Retirement Equities Fund........................................... 14,073,306 386,895 3.5%
Ubs Asset Mgmt (Ny) Inc.................................................... 10,581,488 290,900 2.6%
Babson David L & Co........................................................ 8,722,725 239,800 2.2%
Rcm Capital Management..................................................... 8,268,038 227,300 2.1%
Wells Fargo Inst. Tr Na.................................................... 8,092,928 222,486 2.0%
Dimensional Fund Advs...................................................... 7,769,700 213,600 1.9%
Lazard Freres & Co......................................................... 7,147,688 196,500 1.8%
Pacific Mutual Life Ins.................................................... 7,107,675 195,400 1.8%
Federated Investors Incorporated........................................... 6,241,950 171,600 1.6%
National City Bk/Cleveld................................................... 5,274,375 145,000 1.3%
Dalton Greiner Hartman..................................................... 5,256,188 144,500 1.3%
Bankers Trust Company...................................................... 5,093,300 140,022 1.3%
First Pacific Advisors..................................................... 3,819,375 105,000 1.0%
Harris Associates, L.P..................................................... 3,590,213 98,700 0.9%
Zweig Advisors Inc......................................................... 3,357,413 92,300 0.8%
Wilshire Associates, Inc................................................... 2,636,787 72,489 0.7%
Frontier Capital Mgmt Co................................................... 2,218,875 61,000 0.6%
Mellon Bank Corporation.................................................... 1,933,350 54,800 0.5%
Total shares, Institutional Investors...................................... 5,636,154 51.2%
Shares outstanding (millions).............................................. 10.8
Market value (millions).................................................... $287
Number of institutions..................................................... 52
</TABLE>
30
<PAGE>
LAFARGE CORP
<TABLE>
<CAPTION>
MKT VALUE AS SHARES HELD %
INSTITUTION OF FUND OF 10/04/93 ON 06/93 HOLDING
- --------------------------------------------------------------------------- ------------ ----------- -------
<S> <C> <C> <C>
Fidelity Mgmt & Res Corp................................................... $49,265,875 2,699,500 4.5%
Scudder Stevens and Clark.................................................. 19,075,265 1,045,220 1.8%
IG Investment Mgmt Ltd..................................................... 15,578,200 853,600 1.4%
Mackenzie Financial Corp................................................... 13,083,954 716,929 1.2%
Nm Capital Mgmt Inc........................................................ 11,056,945 605,860 1.0%
Merrill Lynch Asset Management............................................. 7,701,500 422,000 0.7%
Wells Fargo Inst. Tr Na.................................................... 7,148,306 391,688 0.7%
Fisher Investments Inc..................................................... 7,090,764 388,535 0.7%
First Bank System.......................................................... 6,215,950 340,600 0.6%
Usaa Investment Mgmt....................................................... 5,018,750 275,000 0.5%
Wilshire Associates, Inc................................................... 4,254,075 233,100 0.4%
First Pacific Advisors..................................................... 3,286,825 180,100 0.3%
Florida State Board of Administration...................................... 3,206,525 175,700 0.3%
Weiss Peck & Greer......................................................... 2,974,750 163,000 0.3%
California State Teachers Retirement Sys................................... 2,609,659 142,995 0.2%
Mellon Bank Corporation.................................................... 2,600,443 142,490 0.2%
Tempest Isenhart Chafee.................................................... 2,389,381 130,925 0.2%
State Street Resr & Mgmt................................................... 2,175,400 119,200 0.2%
Capital Research & Management.............................................. 2,098,750 115,000 0.2%
Fondis..................................................................... 1,825,000 100,000 0.2%
Total shares, Institutional Investors...................................... 10,039,519 16.9%
Shares outstanding (millions).............................................. 59.5
Market value (millions).................................................... $952
Number of institutions..................................................... 47
</TABLE>
31
<PAGE>
SOUTHDOWN INC
<TABLE>
<CAPTION>
MKT VALUE AS SHARES HELD %
INSTITUTION OF FUND OF 10/04/93 ON 06/93 HOLDING
- --------------------------------------------------------------------------- ------------ ----------- -------
<S> <C> <C> <C>
Blum, Richard C & Assocs................................................... $57,317,300 2,363,600 13.9%
Newsouth Capital Mgmt...................................................... 48,173,353 1,986,530 11.7%
Fidelity Mgmt & Res Corp................................................... 23,862,000 984,000 5.8%
Gamco Investors............................................................ 13,394,900 552,367 3.2%
Wells Fargo Inst. Tr Na.................................................... 12,159,096 501,406 2.9%
Dimensional Fund Advs...................................................... 11,660,855 480,860 2.8%
College Retirement Equities Fund........................................... 8,377,745 345,474 2.0%
Connor Clark & Co. Ltd..................................................... 7,946,725 327,700 1.9%
Scudder Stevens and Clark.................................................. 7,726,050 318,600 1.9%
Beutel Goodman Cap Ltd..................................................... 6,068,750 251,000 1.5%
Babson David L & Co........................................................ 5,778,775 238,300 1.4%
Calif Public Employee Retirement........................................... 4,597,800 189,600 1.1%
California State Teachers Retirement Sys................................... 4,119,251 169,866 1.0%
Gruman Corp. Pension Fd.................................................... 4,081,275 168,300 1.0%
Harris Bankcorporation..................................................... 3,938,200 162,400 1.0%
Kahn Brothers & Co Inc..................................................... 3,304,063 136,250 0.8%
Bankers Trust Company...................................................... 3,200,709 131,988 0.8%
Prudential Corp Plc........................................................ 2,985,175 123,100 0.7%
Fisher Investments Inc..................................................... 2,779,050 114,600 0.7%
State Street Boston Corporation............................................ 2,136,425 88,100 0.5%
Total Shares, Institutional Investors...................................... 10,984,866 64.6%
Shares outstanding (millions).............................................. $116.9
Market value (millions).................................................... $272
Number of institutions..................................................... 65
</TABLE>
32
<PAGE>
SUMMARY OF WALL STREET ANALYSTS' VIEWS
ON THE CEMENT INDUSTRY
MARCH 9TH, 1993, ANALYST; J. GOLDFARB, MERRILL LYNCH ON 'THE CEMENT INDUSTRY'
I BELIEVED MARKET WAS ABOUT TO ENTER UPTURN; BUT THAT IT WAS TOO EARLY TO
RECOMMEND PURCHASE OF STOCK, DUE TO UNCERTAINTIES OVER PRICE INCREASES AND
TIMING OF DEMAND INCREASES.
II INDUSTRY FUNDAMENTALS STRONG IN THE MID 1990'S AS:
(i) Tightening of supply and demand; Demand on an upward sloping trendline
but capacity on a slow secular decline.
(ii) Anti-dumping ruling from the International Trade Commission, should
prevent a repeat of the 1980's, where imports held prices down.
(iii)U.S. cement prices to increase to world market levels.
(iv) Companies with substantial operating leverages, coupled with higher
prices and volumes, should lead to dramatic increased in earnings and returns.
JUNE 2ND 1993, ANALYST; H. CASTILLO, MORGAN STANLEY ON LAFARGE CORPORATION
I PREDICTS CYCLICAL UPTURN IN INDUSTRY:
(i) Industry capacity utilization at 91%, a 21 year high, and almost no new
capacity being built; supply and demand imbalance.
(ii) Prices have started to rise in first two quarters, and seem to have
stuck.
(iii)Imports from exceptionally low cost countries have been effectively
blocked by anti-dumping actions, while cement prices in neighbouring Mexico and
Canada are already higher.
(iv) Growth in housing starts predicted.
33
<PAGE>
SUMMARY OF WALL STREET ANALYSTS'
VIEWS ON THE CEMENT INDUSTRY
II LAFARGE WELL POSITIONED (PLACED ON MORGAN STANLEY'S RECOMMENDED LIST)
(i) Low transportation costs; Lafarge benefits from a network of plants and
waterway distribution facilities across the Great Lakes region and the central
U.S.
(ii) Excess capacity through its Canadian operations, coupled with a good
distribution network, should allow it to gain market share as others are unable
to raise production to meet demand.
(iii)Lower cost producer in the industry; the company has increased its use
of waste fuels to cut energy costs, shed isolated or unprofitable assets, and
increased productivity.
AUGUST 8TH 1993, ANALYST; J. SHIRY, MCDONALD & COMPANY ON MEDUSA CORP.
I BELIEVED STOCK WAS FULLY VALUED AFTER ITS RECENT RUN-UP IN PRICE. DOWNGRADED
THE COMPANY FROM A LONG-TERM BUY TO HOLD.
II INDUSTRY FUNDAMENTALS GOOD WITH PREDICTED SUPPLY AND DEMAND IMBALANCES.
34
<PAGE>
EXHIBIT 7
Successful Execution:
Stages of a Public Offering
Structuring the Offering
Creating the Investment Story
Targeting the Appropriate Investors
Marketing the Offering
Pricing and Allocation
Aftermarket Support: Research and Trading
35
<PAGE>
STRUCTURING THE OFFERING
A wide array of issues must be carefully addressed when structuring the
offering:
Use of proceeds
Mix of primary v. secondary shares
Dividend policy
Size of offering
Green shoe (over-allotment option)
Lock-up agreements
Employee benefit plans, charter amendments, etc.
Stock option and employee awards
36
<PAGE>
CREATING THE INVESTMENT STORY
Develop key selling points highlighting business strengths and future
opportunities
Prepare Prospectus to serve as marketing platform
Prepare Roadshow presentation including formal remarks, audio-visual
materials and responses to likely questions
Position Holnam to communicate the strengths of the Company and the unique
investment opportunity that Holnam offers
Create expectations for future performance that are realistic and
sustainable
Begin a positive and constructive dialogue between Holnam management and
prospective investors
37
<PAGE>
TARGETING THE APPROPRIATE INVESTORS
Target a broad range of high quality long-term investors
Specifically identify major institutional investors who can provide
leadership and momentum for the transaction
Focus in particular upon one-on-one meetings to provide core orders
Utilize different distribution channels to access distinct types of
investors
-Domestic institutional demand through managers' institutional sales
force(s)
-International demand through separate overseas syndicate
-Retail (including high net worth individual investors) through sales
forces of both managers and syndicate members
Develop on-going aftermarket demand for Holnam shares by reaching a broad
group of potential investors and creating 'scarcity value' for the shares
38
<PAGE>
MARKETING THE OFFERING
Marketing process begins with internal conference calls and presentations
to managers' sales forces
Internal sales memos highlight and reinforce key selling points
Research analyst plans key role in 'warming-up' potential investors to
promote their attendance at roadshow meetings
Roadshow presentation is the key event in the marketing process
Most important institutional orders will be generated through one-on-one
meetings and conference calls with management
Lead Manager must determine real size and quality of each order in order to
ensure allocation of shares to the best quality orders
39
<PAGE>
PRICING AND ALLOCATION
Pricing is determined by assessing the strength and quality of investor
demand and investors' return objectives and valuation criteria.
It is critical to price shares at a level which allows them to trade up in
the immediate aftermarket.
Developing demand well in excess of the offering size is required to ensure
a good aftermarket.
The Lead Manager must determine the real size and quality of each order to
ensure the allocation of shares to the best investors.
Among institutional investors, key allocation criteria will include
attendance at roadshow meetings (especially one-on-ones), ownership of
comparable companies, commitment to Holnam and size of investment position
required.
The Lead Manager is also responsible for determining allocations between
the domestic and international tranches and to each syndicate member in each
tranche.
40
<PAGE>
AFTERMARKET SUPPORT: RESEARCH AND TRADING
Goldman Sachs will plan an active role in the after market support of
Holnam.
A well executed offering will build the foundation for a strong
aftermarket.
The Lead Manager must ensure liquidity for Holnam shares by
maintaining a strong trading presence.
A goal of the offering would be to promote active research coverage of
Holnam.
The Lead Manager should work in concert with management in the
development of an investor relations program.
The offering will be the beginning of a long-term relationship between
Holnam and its investors.
41
<PAGE>
EXHIBIT 8
GOLDMAN SACHS' EQUITY SALES AND DISTRIBUTION CAPABILITIES
<TABLE>
<S> <C>
Broad Penetration Approximately 103,000 institutional and private client
accounts
Approximately one third of sales volume occurs in
transactions with private client base
Productive Sales Force Over 450 institutional and private client salespeople
Our salespeople are nearly four times as productive as
the industry average
75% have advanced degrees
Strong Distribution Sold over 50% of shares of lead-managed equity issues
sized $100 million or greater during the last three
years
Sold over 75% of shares of sole-managed equity offerings
of $100 million or greater during the last three years
Worldwide Breadth Over 120 international sales professionals
Offices in New York, London, Frankfurt, Zurich, Tokyo,
Hong Kong and Singapore
Worldwide Trading Presence One of only 10 U.S. members of Tokyo Stock Exchange,
also member of London and Frankfurt Stock Exchanges
11 international specialist traders
Market maker in over 2,000 equity and equity related
securities
</TABLE>
<PAGE>
GOLDMAN SACHS' DISTRIBUTION NETWORK
Total Worldwide Sales Force: 216 Institutional Sales, 261 Private Client
Services
<TABLE>
<S> <C>
Chicago 22 Institutional Sales
29 Private Client Services
Memphis 15 Private Client Services
San Francisco 6 Institutional Sales
23 Private Client Services
Los Angeles 6 Institutional Sales
23 Private Client Services
Dallas 15 Private Client Services
Houston 17 Private Client Services
Miami 16 Private Client Services
New York 55 Institutional Sales
47 Private Client Services
Boston 8 Institutional Sales
16 Private Client Services
Philadelphia 18 Private Client Services
Zurich 3 Institutional Sales
7 Private Client Services
Singapore 6 Private Client Services
Hong Kong 3 Institutional Sales
6 Private Client Services
Tokyo 42 Institutional Sales
Frankfurt 5 Institutional Sales
5 Private Client Services
London 66 Institutional Sales
18 Private Client Services
</TABLE>
[A world map is also included on this page]
<PAGE>
GOLDMAN SACHS PRIVATE CLIENT SALESFORCE
In addition to a preeminent institutional salesforce, Goldman Sachs has a unique
and powerful private client salesforce.
Philosophy of asset allocation with a long-term view
Typical role of sole broker and 'financial headquarters' for private
clients, allowing for unmatched control in placement of equity offerings
Approximately 260 salespeople in 10 domestic and 5 foreign offices, 75%
holding advanced degrees
Client base consisting of individuals with average assets of $20-25 million
and small institutions
Broad geographic coverage
'Productivity' per salesperson over 4 times Security Industry Association
average (as measured by total gross credits)
Average order on underwritings approximately 5,000 shares, versus 'Street'
retail average of approximately 500 shares
Average of 25% of lead managed equity offerings placed with our private
clients
<PAGE>
1993 INSTITUTIONAL INVESTORS
SURVEY RANKING
Institutional Investors clearly consider Goldman Sachs their best equity
service provider
BEST
EQUITY MARKET SERVICE
<TABLE>
<CAPTION>
FIRM POINTS
----------------------------------------------------------------------------------------------------- ------
<S> <C> <C>
1. Goldman Sachs........................................................................................ 156
2. Merrill Lynch........................................................................................ 129
3. Morgan Stanley....................................................................................... 61
4. Smith Barney, Harris Upham........................................................................... 51
5. Donaldson Lufkin & Jenrette.......................................................................... 45
</TABLE>
BEST
EQUITY RESEARCH
<TABLE>
<CAPTION>
FIRM POINTS
----------------------------------------------------------------------------------------------------- ------
<S> <C> <C>
1. Goldman Sachs........................................................................................ 129
2. Merrill Lynch........................................................................................ 109
3. Morgan Stanley....................................................................................... 60
4. Donaldson Lufkin & Jenrette.......................................................................... 56
5. PaineWebber.......................................................................................... 45
</TABLE>
BEST
IPOS AND SERVICES
<TABLE>
<CAPTION>
FIRM POINTS
----------------------------------------------------------------------------------------------------- ------
<S> <C> <C>
1. Merrill Lynch........................................................................................ 100
2. Goldman Sachs........................................................................................ 83
3. Alex Brown & Sons.................................................................................... 51
4. Morgan Stanley....................................................................................... 44
5. Donaldson Lufkin & Jenrette.......................................................................... 30
</TABLE>
MOST EFFECTIVE
EXECUTION AND BLOCK TRADES
<TABLE>
<CAPTION>
FIRM POINTS
----------------------------------------------------------------------------------------------------- ------
<S> <C> <C>
1. Goldman Sachs........................................................................................ 171
2. Merrill Lynch........................................................................................ 110
3. Morgan Stanley....................................................................................... 66
4. Salomon Brothers..................................................................................... 49
5. Bear Stearns......................................................................................... 38
</TABLE>
BEST
SERVICE OVERALL
<TABLE>
<CAPTION>
FIRM POINTS
----------------------------------------------------------------------------------------------------- ------
<S> <C> <C>
1. Goldman Sachs........................................................................................ 168
2. Merrill Lynch........................................................................................ 162
3. Morgan Stanley....................................................................................... 60
4. Shearson Lehman Brothers............................................................................. 56
5. Smith Barney, Harris Upham........................................................................... 54
</TABLE>
Source: Financial World magazine, March 16, 1993, survey of 150 Chief Investment
Officers.
<PAGE>
1993 CFO SURVEY RANKINGS
Goldman Sachs is the clear favorite of corporate CFOs, placing first in 11
of 22 categories overall, and second in 7
BEST SERVICE IN
EQUITY UNDERWRITING
<TABLE>
<CAPTION>
FIRM POINTS
----------------------------------------------------------------------------------------------------- ------
<S> <C> <C>
1. Goldman Sachs........................................................................................ 190
2. Merrill Lynch........................................................................................ 156
3. Morgan Stanley....................................................................................... 68
4. First Boston......................................................................................... 36
5. Shearson Lehman Brothers............................................................................. 30
</TABLE>
BEST
EQUITY RESEARCH
<TABLE>
<CAPTION>
FIRM POINTS
----------------------------------------------------------------------------------------------------- ------
<S> <C> <C>
1. Goldman Sachs........................................................................................ 150
2. Merrill Lynch........................................................................................ 121
3. Morgan Stanley....................................................................................... 48
4. First Boston......................................................................................... 47
5. Salomon Brothers..................................................................................... 40
</TABLE>
BEST
EQUITY MARKET SERVICE
<TABLE>
<CAPTION>
FIRM POINTS
----------------------------------------------------------------------------------------------------- ------
<S> <C> <C>
1. Goldman Sachs........................................................................................ 97
2. Merrill Lynch........................................................................................ 77
3. J.P. Morgan.......................................................................................... 32
4. First Boston......................................................................................... 28
5. Morgan Stanley....................................................................................... 27
</TABLE>
Source: Financial World magazine, March 16, 1993, survey of 150 Chief Financial
Officers.
BEST
SERVICE OVERALL
<TABLE>
<CAPTION>
FIRM POINTS
----------------------------------------------------------------------------------------------------- ------
<S> <C> <C>
1. Goldman Sachs........................................................................................ 185
2. Merrill Lynch........................................................................................ 129
3. First Boston (tie)................................................................................... 59
J.P Morgan (tie)..................................................................................... 59
4. Morgan Stanley....................................................................................... 55
</TABLE>
BEST SERVICE IN UNDERWRING
INVESTMENT-GRADE DEBT
<TABLE>
<CAPTION>
FIRM POINTS
----------------------------------------------------------------------------------------------------- ------
<S> <C> <C>
1. Goldman Sachs........................................................................................ 150
2. Merrill Lynch........................................................................................ 127
3. Salomon Brothers..................................................................................... 100
4. Morgan Stanley....................................................................................... 63
5. First Boston......................................................................................... 48
</TABLE>
<PAGE>
BEST SERVICE IN
MERGERS AND ACQUISITIONS
<TABLE>
<CAPTION>
FIRM POINTS
----------------------------------------------------------------------------------------------------- ------
<S> <C> <C>
1. Goldman Sachs........................................................................................ 139
2. Morgan Stanley....................................................................................... 74
3. First Boston......................................................................................... 53
4. Merrill Lynch........................................................................................ 50
5. J.P. Morgan.......................................................................................... 37
</TABLE>
Source: Financial World magazine, March 16, 1993, survey of 150 Chief Financial
Officers.
EUROMONEY INTERNATIONAL CAPITAL MARKETS RATINGS
'It is hard to find an area of the international capital markets in which
Goldman is not a major player. It is the top ranked international equity house.'
<TABLE>
<CAPTION>
BANK RATING TREND
- ------------------------------------------ ------------------------------ ------------------------------------
<S> <C> <C>
Goldman Sachs............................. *****
Merrill Lynch............................. *****
Lehman Brothers........................... ****
CS First Boston........................... ****
Morgan Stanley............................ ****
Salomon Brothers.......................... *** 1/2
</TABLE>
***** A leading house in all markets
**** A major player, but with significant areas of weaknesses
*** Medium-ranking player in major markets with strong niches
** A weaker house with some strengths in particular niches
* A participant in some markets but with no areas of leadership
Source: January 1993 Euromoney
[Four charts appear here.
The first shows the leading managers of common stock offerings for January 1,
1993 -- June 30, 1993 with Goldman Sachs leading at 19.7%.
The second shows the leading managers of common stock offerings for 1988 -- 1992
with Goldman Sachs leading at 24.9%.
The third shows the leading managers of initial public offerings for January 1,
1993 -- June 30, 1993 with Goldman Sachs leading at 17.5%.
The fourth shows the leading managers of IPOs for 1988 -- 1992 with Goldman
Sachs leading at 28.6%.]
<PAGE>
- --------------------------------------------------------------------------------
Presentation to
'Holderbank'
Equity Strategy Advisory Assignment
November 15, 1993
- --------------------------------------------------------------------------------
[LOGO] Merrill Lynch 'HolderBank'
1
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
Background to Merrill Lynch Financial Advisory Assignment
Holderbank's Considerations
- ------------------------------------------------------
[ ] Benefits of Holman 'IPO'
[ ] Buy-out of St. Lawrence
minorities with Holnam shares
Merrill Lynch's Credentials
- ------------------------------------------------------
[ ] Global cement research capability
[ ] Experience with Holderbank
[ ] World leader in equity activities
Specific Merrill Lynch Assignment
------------------------------------------------------------------
[ ] Analyze Holnam 'IPO' proposal
[ ] Consider Holnam alternatives
[ ] Consider St. Lawrence alternatives
- --------------------------------------------------------------------------------
[LOGO] Merrill Lynch 'HolderBank'
2
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
Assignment Overview
<TABLE>
<S> <C>
Holderbank's [ ] Maximize Holderbank's share valuation
Long-term [ ] Maximize financing efficiency -- Minimize costs
Objectives -- Optimize access to cash flows
[ ] Optimize management's control of subsidiaries
Merrill Lynch's [ ] Advise Holderbank in adopting the appropriate equity strategy to ensure
Assignment Holderbank's long-term objectives
Objectives I II III IV V
US/Canadian Holnam 'IPO' 'IPO' Status Quo Squeeze-out Squeeze-out
Alternatives St. Status Quo Buy-out Status Quo Buy-out Status Quo
Lawrence with shares with cash
</TABLE>
- --------------------------------------------------------------------------------
[LOGO] Merrill Lynch 'HolderBank'
3
<PAGE>
Analysis Procedures
- --------------------------------------------------------------------------------
Summary
Expert Participants
------------------------------------------------------
[ ] Holderbank/Holnam
[ ] Merrill Lynch (US/Europe/Canada)
Corporate Finance
Mergers and Acquistions
Research
[ ] Shearman & Sterling
[ ] Dewe Rogerson
Information Review
------------------------------------------------------
[ ] Internal
Holnam 1993-1995 Strategic Plan
St. Lawrence 1993 Budget
US 'IPO' Presentation and Memo
[ ] External
Merrill Lynch Research
Competitor Data
- --------------------------------------------------------------------------------
[LOGO] Merrill Lynch 'HolderBank'
4
<PAGE>
Analysis Presentation
- --------------------------------------------------------------------------------
Summary
<TABLE>
<S> <C>
Subsidiary [ ] St. Lawrence
Analysis [ ] Holnam
Alternatives [ ] Holderbank
Analysis
Competitor [ ] Lafarge Coppee Case Study
Analysis [ ] Holderbank Relative Equity Valuation
[ ] Merrill Lynch Recommendations
</TABLE>
- --------------------------------------------------------------------------------
[LOGO] Merrill Lynch 'HolderBank'
5
<PAGE>
Holderbank Alternatives
- --------------------------------------------------------------------------------
Free Cash Flow Analysis
<TABLE>
<CAPTION>
Alternative
<S> <C> <C> <C> <C> <C> <C>
I II III IV V
Holderbank US$71mm+ US$71mm+ US$ 268mm +
Economics Cumulative Holnam Holnam Holnam St. Lawrence
1994-1997 Free Cash Flow Dividends Dividends Dividends US$290 mm Dividends
US$71mm+ US$71mm+ US $221 mm+
Cumulative Net Holnam Holnam Holnam St. Lawrence
Free Cash Flow Dividends Dividends Dividends US$79 mm Dividends
Holderbank Free Cash Flow Holnam Holnam Holnam Annual Free Annual Free
Economics Dividends Dividends Dividends Cash Flow Cash Flow
Beyond 1997 1997: 1997:
US$119 mm US$90 mm
</TABLE>
(1) Assumes repayment of acquisition debts (Holnam:US$47mm and St. Lawrence:
US$164mm).
(2) Assumes repayment of acquisition debtr (Holnam: US$47 mm).
- --------------------------------------------------------------------------------
[LOGO] Merrill Lynch 'HolderBank'
6
<PAGE>
Holderbank Alternatives
- --------------------------------------------------------------------------------
Qualitative Analysis of Most Efficient Alternative-Alternative IV
<TABLE> <C>
<S>
Principal [ ] Ensure complete management control in US and Canada
Advantages [ ] Eliminate ongoing shareholder litigation concerns
[ ] Confirm to all investors that Holderbank is the 'flagship'
[ ] Confirm to all investors that Holderbank is an
industrial group and not a portfolio holding
company
[ ] Position Holderbank to US investors
as the principal worldwide cement
play
Principal [ ] Could limit entrepreneurship of subsidiary management
Disadvantages
[ ] Eliminate stock market feedback of subsidiaries
[ ] Temporary increase in leverage
</TABLE>
- --------------------------------------------------------------------------------
[LOGO] Merrill Lynch 'HolderBank'
7
<PAGE>
Holderbank Alternatives
- --------------------------------------------------------------------------------
Portfolio Company Discount Concerns
<TABLE>
<CAPTION>
<S> <C>
Company/Group Discount
- ------------------------------------------------------------------------------------------------------------------
[ ] Compagnie Financiere de Suez -33%
[ ] SPEP -24%
[ ] Industrivarden -30%
[ ] US Closed-End Funds -5%
</TABLE>
- --------------------------------------------------------------------------------
[LOGO] Merrill Lynch 'HolderBank'
8
<PAGE>
Lafarge Coppee Case Study
- --------------------------------------------------------------------------------
Overview
<TABLE>
<S> <C>
Background [ ] Lafarge Coppee has bought out minorities where
possible
[ ] Lafarge Corp. minority (pre-float): US$ 480
million (45%)
[ ] Lafarge Corp. needed funds for operations and
acquistions
Actions [ ] Issue US$ 105 million of Lafarge Corp. primary
shares
[ ] Lafarge Coppee subscribed for US$ 19.25 million in
additional Lafarge Corp. shares
Results [ ] Lafarge Corp. offering extremely well received
[ ] Lafarge Coppee has underperformed significantly
both Lafarge Corp. and Holderbank
</TABLE>
- --------------------------------------------------------------------------------
[LOGO] Merrill Lynch 'HolderBank'
9
<PAGE>
Lafarge Coppee Case Study
- --------------------------------------------------------------------------------
Holnam 'IPO' Considerations
<TABLE>
<S> <C>
Holnam [ ] 'IPO' would be very well received
Perspective [ ] Use of proceeds will be a concern
[ ] Increased public shareholder responsibility
Holderbank [ ] Weaken Holderbank's position as a global cement
Perspective play
[ ] Would draw investors out of Holderbank by
providing alternatives to play the 'hot' US story
[ ] Would dilute Holderbank's perception as
a management/operating company
[ ] Very difficult to reverse
</TABLE>
- --------------------------------------------------------------------------------
[LOGO] Merrill Lynch 'HolderBank'
10
<PAGE>
Holderbank Equity Valuation
- --------------------------------------------------------------------------------
Principal Reasons for Holderbank Discount to Lafarge Coppee
<TABLE>
<CAPTION>
<S> <C>
Investor [ ] Lack of interim reporting
Issues [ ] Less developed investor relations program
[ ] Less diverse international shareholder base
Structural [ ] No control premium
Issues
</TABLE>
- --------------------------------------------------------------------------------
[LOGO] Merrill Lynch 'HolderBank'
11
<PAGE>
Holderbank Equity Valuation
- --------------------------------------------------------------------------------
Recommended Actions
<TABLE>
<S> <C>
Investor Relations [ ] Implement interim reporting
[ ] Discontinue provisions of estimates and preliminary results
[ ] Provide information packages on significant actions
[ ] Expand mailing lists
[ ] Increase annual events
[ ] Increase IR resources
Shareholder [ ] Diversify to new investors (US/Europe)
Base
Structural [ ] Optimize control of subsidiaries
</TABLE>
- --------------------------------------------------------------------------------
[LOGO] Merrill Lynch 'HolderBank'
12
<PAGE>
Merrill Lynch Recommendations
- --------------------------------------------------------------------------------
Summary
<TABLE>
<S> <C>
Actions [ ] Squeeze out Holnam minority
[ ] Buy out St. Lawrence minority
[ ] Increase resources for Holderbank investor relatins
Principal [ ] Enhance Holderbank's overall share valuation
Results [ ] Ensure full acess to US and Canadian cash flows
[ ] Focus investors on Holderbank as core global cement investment
[ ] Preserve Holderbank's operating/management company image
</TABLE>
- --------------------------------------------------------------------------------
[LOGO] Merrill Lynch 'HolderBank'
13
<PAGE>
Procedural Issues
- --------------------------------------------------------------------------------
Holnam Squeeze-Out
<TABLE>
<S> <C>
Recommended [ ] Short form merger (Delaware law)
Approach [ ] 100% certainty of completion
Necessary [ ] No shareholder approval necessary
[ ] Corporate Steps resolution and announcement
[ ] Disclosure/fiduciary obligations
[ ] Independent fairness opinion
[ ] Shareholder's rights for fair value
Timing [ ] 10-12 weeks from preliminary decision date
</TABLE>
- --------------------------------------------------------------------------------
[LOGO] Merrill Lynch 'HolderBank'
14
<PAGE>
PRESENTATION TO THE EXECUTIVE COMMITTEE OF
[LOGO]HOLDERBANK
[LOGO]MERRILL LYNCH
<PAGE>
PRESENTATION TO THE EXECUTIVE COMMITTEE OF
[LOGO]HOLDERBANK
JANUARY 1994
[LOGO]MERRILL LYNCH
<PAGE>
PROJECT CROSSROADS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
A. LIST OF MATERIALS REVIEWED
B. EXECUTIVE SUMMARY
C. COMPANY PROFILES AND VALUATION CONSIDERATIONS
Holnam, Inc
Holnam Operations
Valuation Considerations: Holnam Operations
St. Lawrence Cement
Valuation Considerations: St. Lawrence Cement
US and Canadian Cement Industry Characteristics
D. VALUATION ANALYSIS
Valuation Summary
Valuation Holnam Operations
Valuation St. Lawrence
Valuation Net Operating Losses
E. HISTORICAL AND PROJECTED FINANCIAL STATEMENTS, PROJECTION ASSUMPTIONS AND
FINANCIAL ANALYSIS
Holnam Operations
St. Lawrence
F. CASE STUDIES: RECENT ACQUISITIONS IN THE CEMENT INDUSTRY
G. GLOSSARY
[LOGO]MERRILL LYNCH [LOGO]HOLDERBANK
<PAGE>
A
<PAGE>
PROJECT CROSSROADS
- --------------------------------------------------------------------------------
LIST OF MATERIALS REVIEWED
GENERAL INDUSTRY INFORMATION
Merrill Lynch Research Reports ('The Cement Industry' -- September 1, 1993)
'The Monitor' -- a monthly analysis of trends in the Construction and
Cement Industry by the Portland Cement Association -- U.S. and Canada
editions (October 1993)
HOLNAM, INC.
Stock Price data and trading volumes
10K: Dec - 92, Dec - 91
10Q: March 1991 (September 1993)
Annual Reports: 1990 - 1992
Proxy Statement and Prospectus for the Merger
between 'Ideal Basic Industries Inc.' and 'Holnam, Inc.'
Holnam Operations 1993 - 1995 Strategic Plan (April 1993)
Holnam Operations 1994 Preliminary Draft Profit Plan (December 20, 1993)
ST. LAWRENCE CEMENT INC.
Stock Price data and trading volumes
Annual Reports: 1983 - 1992
St. Lawrence Five-Year Plan
1994 - 1998 - (December 29, 1993)
St. Lawrence 1993 Budget - (January 1993)
[LOGO]MERRILL LYNCH [LOGO]HOLDERBANK
<PAGE>
B
<PAGE>
C
<PAGE>
PROJECT CROSSROADS
- --------------------------------------------------------------------------------
COMPANY PROFILE -- HOLNAM, INC.
Holnam, Inc. ('Holnam') through Holdernam Inc., is a 95.2% owned subsidiary
of Holderbank Financiere Glaris AG.
Holnam is listed on the New York Stock Exchange and 4.8% of its shares are
widely held.
Holnam directly operates 14 cement manufacturing plants in the United
States ('Holnam Operations') and owns 59.5% of the outstanding shares of St.
Lawrence Cement, a Montreal-based cement and building materials company which
is listed on the Toronto and Montreal Stock Exchanges.
Holnam Operations and St. Lawrence Cement are two distinct operating units
with separate management and separate internal reporting systems. Both units
are fully consolidated under Holnam. Inc. for financial reporting purposes.
As a result of a series of mergers, acquisitions and disposals and several
years of operating losses, Holnam has accumulated net operating loss carry
forwards ('NOLs') in the amount of $484 million.
[LOGO]MERRILL LYNCH [LOGO]HOLDERBANK
<PAGE>
PROJECT CROSSROADS
- --------------------------------------------------------------------------------
PROFILE -- HOLNAM OPERATIONS
Holnam Operations is the leading cement manufacturer in the United States
with an estimated overall market share of 12.5% in 1993.
The unit's total manufacturing capacity at the end of 1993 amounted to
11.225 million short tons (s.t.) divided among 14 plants located throughout the
United States with the exception of the North East.
In 1993, cement accounted for 95% of Holnam Operations' total sales, the
balance consisted of other building material and waste management activities.
Holnam Operations' marketing efforts are organised into three geographic
divisions: South East, Central and West, accounting for 26%, 34% and 40% of
volume sales, respectively.
The West Division was strengthened by the acquisition of a modern cement
plant in Texas in May, 1993. The plant has a cement manufacturing capacity of 1
million s.t. per year.
Holnam Operations also operates 78 cement distribution terminals.
[LOGO]MERRILL LYNCH [LOGO]HOLDERBANK
<PAGE>
PROJECT CROSSROADS
- --------------------------------------------------------------------------------
PROFILE -- HOLNAM OPERATIONS
<TABLE>
<CAPTION>
CAPACITY SUBSTANTIALLY
('000 REFURBISHED/
PLANT STATE S.T.) PROCESS BUILT EXTENDED OWNED LEASED
- --------------------------------- --------------- -------- -------- ----- ------------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
ADA Oklahoma 610 Wet 1959 -- [x]
Artesia Mississippi 525 Wet 1934 -- [x]
Clarkesville Missouri 1,400 Wet 1967 -- [x]
Devil's Slide Utah 350 Wet 1948 -- [x]
Dundee Michigan 1,070 Wet 1959 -- [x]
F. Collins Colorado 460 Dry 1981 1990 [x]
Holly Hill South Carolina 1,200 Wet 1966 1973 [x]
Mason City Iowa 900 Dry 1966 1975 [x]
Midlothian Texas 1,000 Dry 1986 -- [x]
Portland Colorado 885 Wet 1947 1974 [x]
Seattle Washington 490 Wet 1967 -- [x]
Theodore Alabama 1,500 Dry 1981 -- [x]
Tijeras New Mexico 505 Dry 1959 1980 [x]
Trident Montana 330 Wet 1973 -- [x]
</TABLE>
[LOGO]MERRILL LYNCH [LOGO]HOLDERBANK
<PAGE>
PROJECT CROSSROADS
- --------------------------------------------------------------------------------
VALUATION CONSIDERATIONS: CHARACTERISTICS OF HOLNAM OPERATIONS
Holnam Operations expects to produce near its maximum capacity of approx.
11.225 million s. t. per year from 1994 to 1997 in line with the industry trend.
Management expects that Holnam Operations will be able to increase its
prices through 1997 at least in line with the industry trend. Holnam Operations
has no long term delivery commitments at below-market prices and has achieved a
recent improvement in its customer mix towards more higher price accounts.
Due to capacity constraints Holnam will have to acquire additional cement
quantities in the market place which will be resold to Holnam customers.
However, it is expected that Holnam Operations will not generate significant
profits or losses from this additional business.
In 1991 Holnam Operations began a cost reduction program aiming to achieve
$50 million of cost savings on a volume and inflation-adjusted basis by 1994.
Approximately $30 million of savings have already been achieved by 1993. The
average costs of sales per ton of cement have decreased from $47.07 in 1991 to
$45.55 in 1993 and are expected to fall to $44.93 in 1994.
Holnam Operations' fixed asset base is comparatively old: out of 14 plants,
4 were built or substantially refurbished in the past 15 years, the balance
dates back to between 1947 and 1975.
Approximately 40% of Holnam Operations' current cement production is based
on the more efficient dry manufacturing process as compared to a US industry
average of 69%.
[LOGO]MERRILL LYNCH [LOGO]HOLDERBANK
<PAGE>
PROJECT CROSSROADS
- --------------------------------------------------------------------------------
VALUATION CONSIDERATIONS: CHARACTERISTICS OF HOLNAM OPERATIONS (CONT'D)
Three out of fourteen plants have permits to use waste-derived fuels, two
further plants have applications for waste fuel permits pending.
Holnam Operations' management expects that the company will either have to
make substantial investments in its fixed assets or suffer a reduction in
margins as the company becomes less competitive.
For purposes of this valuation it has been assumed that Holnam Operations
will have to invest $50 million per year (in addition to its usual maintenance
investments of $50 million) as of 1997 to remain profitable over the period of
the forthcoming cycle through 2002.
[LOGO]MERRILL LYNCH [LOGO]HOLDERBANK
<PAGE>
PROJECT CROSSROADS
- --------------------------------------------------------------------------------
PROFILE -- ST. LAWRENCE CEMENT
St. Lawrence Cement ('St. Lawrence') is a vertically integrated
manufacturer of building products including cement, aggregates and concrete and,
in addition, has two construction companies.
Cement represents the largest division within St. Lawrence accounting for
42% of sales in 1993, the Aggregate, Concrete and Construction/Other Divisions
accounted for 10%, 25% and 23% respectively.
St. Lawrence operates three cement plants in Canada with a total capacity
of 3 million metric tons (m.t.) and two cement plants in the North Eastern
United States with a total capacity of 1.15 million s.t., as well as 14 cement
distribution terminals in Canada and 13 cement distribution terminals in the
United States.
St. Lawrence's cement marketing activities are divided into three
geographic divisions, Ontario, Quebec/Maritimes and USA accounting for 20%, 20%
and 49% of volume sales, respectively. The remaining 11% are sold in other
markets and to special projects.
The company is a cement market leader in Ontario with a 30% market share
and in Quebec with a 40% market share and has a strong position in the relevant
regional market in the United States with a 14% market share.
St. Lawrence also operates 56 ready-mix plants, 665 ready-mix trucks, 20
quarries and sandpits and two construction operations with facilities in
Montreal, Quebec and Oaksville, Ontario.
[LOGO]MERRILL LYNCH [LOGO]HOLDERBANK
<PAGE>
PROJECT CROSSROADS
- --------------------------------------------------------------------------------
PROFILE -- ST. LAWRENCE CEMENT
<TABLE>
<CAPTION>
CAPACITY
('000
PLANT PROVINCE/STATE TONS) PROCESS OWNED
- --------------------------------------------------------------------- --------------- -------- -------- ------
<S> <C> <C> <C> <C>
Mississauga Ontario 1,300(m.t.) Dry [x]
Joliette Quebec 1,100(m.t.) Dry [x]
Beauport Quebec 600(m.t.) Wet [x]
Catskill New York 600(s.t.) Wet [x]
Hagerstown Maryland 550(s.t.) Dry [x]
</TABLE>
[LOGO]MERRILL LYNCH [LOGO]HOLDERBANK
<PAGE>
PROJECT CROSSROADS
- --------------------------------------------------------------------------------
VALUATION CONSIDERATIONS -- CHARACTERISTICS OF ST LAWRENCE CEMENT
St Lawrence is currently experiencing improvements in its major markets
and, with the US market, is expected to produce at up to 90% of capacity in
1994, up from 60% in 1993.
The company expects to fully participate in industry price increases over
the next few years. Substantial cement volumes are sold to a few major projects
under long term contracts which have price adjustment clauses.
St Lawrence's largest cement plant in Mississauga, Ontario, requires
substantial capital expenditure (potentially Can $75 million) over the next
three years to improve environmental standards and improve cost efficiency.
The cement plant in Catskill, New York had been scheduled to close down in
1995. However, a new management team has achieved a turnaround and the plant
benefits from the closure of a neighbouring competitors' plant. It is now
scheduled to continue operating for at least 4-5 years.
The remaining cement plants are highly cost competitive and compare
favourably with industry standards.
In 1992, St Lawrence entered a major restructuring programme which is
scheduled to result in cost savings of Can $40-50 million by 1995 on a volume
and inflation -- adjusted basis. Approximately Can $20 million are expected to
be gained from non-core asset sales by 1994.
[LOGO]MERRILL LYNCH [LOGO]HOLDERBANK
<PAGE>
PROJECT CROSSROADS
- --------------------------------------------------------------------------------
VALUATION CONSIDERATIONS: INDUSTRY CHARACTERISTICS (U.S.A.)
The US Cement Industry is a cyclical industry (approx. 10-year cycle)
closely correlated to Housing Starts as a leading indicator.
The cyclical low point of the Cement Industry was reached in 1991 and the
industry is now moving towards an expected peak in 1996/1997.
The last downward cycle led to a major industry consolidation eliminating
many small cement companies in the market place.
The industry consolidation has eliminated overcapacity and domestic cement
demand is expected to exceed domestic production capacity for several years to
come.
Cement production is highly capital intensive. The addition of new domestic
production capacity is unlikely at current cement price levels which do not
justify the necessary capital expenditure of $150-200 per ton of newly built
capacity.
[LOGO]MERRILL LYNCH [LOGO]HOLDERBANK
<PAGE>
PROJECT CROSSROADS
- --------------------------------------------------------------------------------
VALUATION CONSIDERATIONS: INDUSTRY CHARACTERISTICS (U.S.A. CONT'D)
US Cement prices are expected to increase in the short-term during the
up-cycle through 1996/1997. However, cement prices have declined on an
inflation-adjusted basis over the past 20 years and this trend is expected to
continue in the medium to long-term.
The last cyclical peak in the US cement industry attracted substantial
imports keeping US price levels down. The current cycle is expected to be
less affected by importers:
Overcapacity in overseas markets has been substantially reduced
Freight costs have increased
Cement price levels are substantially higher in many overseas markets
Domestic manufacturers are comparatively more efficient than during the
last cycle and likely to resist competition from imports
US authorities have imposed tariffs to avoid dumping from low cost
importers based in Mexico and Venezuela
Environmental legislation is critical to the cost structure of the Cement
Industry in the US:
Kiln dust and SO2 emissions from current plants are subject to
stringent regulations leading to substantial capital expenditure
requirements.
Enhanced cost efficiency depends largely on manufacturers' ability to
utilise waste-derived fuels in the manufacturing process which is
subject to increasingly strict permit procedures.
[LOGO]MERRILL LYNCH [LOGO]HOLDERBANK
<PAGE>
PROJECT CROSSROADS
- --------------------------------------------------------------------------------
VALUATION CONSIDERATIONS: INDUSTRY CHARACTERISTICS (CANADA)
The Canadian Cement Industry tends to be substantially more vertically
integrated than the US Cement Industry. All major cement manufacturers in Canada
are also involved in the concrete and aggregate businesses.
The business cycle in Canada tends to lag the United States by one year,
the next peak for the cement industry is expected by 1998.
Canada traditionally exports over 1/3 of its Cement production volume into
the US market but there continues to be overcapacity particularly in Quebec.
The expectations for the current up-cycle in the Canadian Cement Industry
are lower than in the US due to the large Canadian federal and province budgets
deficit and the lack of funds available for public spending on infrastructure
projects.
[LOGO]MERRILL LYNCH [LOGO]HOLDERBANK
<PAGE>
D
<PAGE>
HOLNAM, INC.
VALUATION SUMMARY (1)
<TABLE>
<CAPTION>
AGGREGATE VALUE OF EQUITY VALUE PER HOLNAM INC. SHARE
------------------------------------------------ ------------------------------------------------
LAST PRICE 52-WEEK 52-WEEK LAST PRICE 52-WEEK 52-WEEK
4/1/94 HIGH LOW 4/1/94 HIGH LOW
---------------- ------------- --------------- ---------------- ------------- ---------------
'000 US$ EXCEPT PER SHARE
<S> <C> <C> <C> <C> <C> <C>
Stock Market Trading
Values............. 970,312 1,060,076 413,771 $ 6.75 $7.38 $2.88
TRADING MULTIPLE STOCK PRICE/ MARKET CAP./ MARKET CAP./ STOCK PRICE/ MARKET CAP./ MARKET CAP./
ANALYSIS HOLNAM INC. 1994 E.P.S. 1994 EBIT 1994 EBITDA 1994 E.P.S. 1994 EBIT 1994 EBITDA
- --------------------- ---------------- ------------- --------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
High................. 1,061,091 1,151,374 1,224,775 $ 7.39 $8.02 $8.53
Mean................. 968,896 863,472 941,850 $ 6.75 $6.01 $6.56
Low.................. 904,360 542,853 608,998 $ 6.30 $3.78 $4.24
DISCOUNTED CASHFLOW ST. LAWRENCE ST. LAWRENCE ST. LAWRENCE ST. LAWRENCE ST. LAWRENCE ST. LAWRENCE
ANALYSIS(9) GOING CONCERN(2) DCF VALUE(3) MARKET VALUE(4) GOING CONCERN(2) DCF VALUE(3) MARKET VALUE(4)
- --------------------- ---------------- ------------- --------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Base Case............ 479,189 588,000 648,963 $ 3.34 $4.09 $4.52
Upside Case 1 (8).... 564,255 687,929 734,029 $ 3.93 $4.79 $5.11
Upside Case 2 (8).... 649,321 802,723 819,095 $ 4.52 $5.59 $5.70
ACQUISITION MULTIPLE ST. LAWRENCE ST. LAWRENCE ST. LAWRENCE ST. LAWRENCE ST. LAWRENCE ST. LAWRENCE
ANALYSIS GOING CONCERN(5) DCF VALUE(6) MARKET VALUE(7) GOING CONCERN(5) DCF VALUE(6) MARKET VALUE(7)
- --------------------- ---------------- ------------- --------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
High................. 924,175 1,032,986 1,093,949 $ 6.43 $7.19 $7.62
Mean................. 686,185 794,996 855,958 $ 4.78 $5.54 $5.96
Low.................. 396,084 504,895 565,858 $ 2.76 $3.52 $3.94
</TABLE>
- ------------
(1) Based on the assumption of conversion of Preferred PIKs and excercise of
In-The-Money Options: Total number of shares outstanding: 143,623,439
(2) DCF Value of Holnam Operations using WACC (10.92%) and PV of Terminal Value
applying EBIT multiple of 14.8x to 1994-2002 average EBIT+ NPV of St.
Lawrence Dividends + Value of NOLs
(3) DCF Value of Holnam Operations using WACC (10.92%) and PV of Terminal Value
applying EBIT multiple of 14.8x to 1994-2002 average EBIT+ 59.5% of DCF
Value of St. Lawrence + Value of NOLs
(4) DCF Value of Holnam Operations using WACC (10.92%) and PV of Terminal Value
applying EBIT multiple of 14.8x to 1994-2002 average EBIT+ 59.5% of Market
Value of St. Lawrence (based on stockprice 5/1/94) +
(5) Imputed Equity Value of Holnam Operations based on Acquisition Comparable
Analysis+ NPV of St. Lawrence Dividends + Value of NOLs
(6) Imputed Equity Value of Holnam Operations based on Acquisition Comparable
Analysis+ 59.5% of DCF Value of St. Lawrence + Value of NOLs
(7) Imputed Equity Value of Holnam Operations based on Acquisition Comparables +
Market Value of St. Lawrence (based on stock price 5/1/94) + Value of NOLs
(8) Upside Cases assume average cement prices to be higher than projected by
Holnam Management: $1.00/s.t. for Upside Case 1, $3.00/s.t. for Upside Case
2
23
<PAGE>
HOLNAM, INC.
TRADING MULTIPLE VALUATION ANALYSIS
<TABLE>
<CAPTION>
STOCK
PRICE/ MARKET CAP./ MARKET CAP./
1994 E.P.S. 1994 EBIT 1994 EBITDA
----------- ------------ --------------
US$ IN MILLIONS EXCEPT PER SHARE
<S> <C> <C> <C>
TRADING MULTIPLE SUMMARY
LAFARGE CORP. (1).............................................. 23.0x 15.7x 8.3
MEDUSA CORP. (2)............................................... 20.4 13.1 9.7
SOUTHDOWN, INC. (3)............................................ 19.6 9.5 6.0
ST. LAWRENCE CEMENT, INC. (4).................................. 103.5* 20.2* 8.5
MULTIPLE ANALYSIS
High........................................................... 23.0 15.7 9.7
Mean........................................................... 21.0 12.8 8.0
Low............................................................ 19.6 9.5 6.0
IMPUTED AGGREGATE EQUITY VALUE OF HOLNAM, INC.
High........................................................... 1,061.1 1,151.4 1,224.8
Mean........................................................... 968.9 863.5 941.9
Low............................................................ 904.4 542.9 609.0
IMPUTED VALUE PER SHARE OF HOLNAM, INC. (5)
High........................................................... $ 7.39 $ 8.02 $ 8.53
Mean........................................................... $ 6.75 $ 6.01 $ 6.56
Low............................................................ $ 6.30 $ 3.78 $ 4.24
</TABLE>
- ------------
* Excluded from Multiple Analysis
(1) Source for company data underlying multiples: Merrill Lynch & Co. equity
research report dated September 2, 1993
(2) Source for company data underlying multiples: Merrill Lynch & Co. equity
research report dated October 28, 1993
(3) Source for company data underlying multiples: Merrill Lynch & Co. equity
research report dated November 2,1993
(4) Source for company data underlying multiples: Draft Budget of St. Lawrence
dated December 29, 1993
(5) Based on Holnam Inc. proforma EPS, EBIT and EBITDA data taking minority
interests in St. Lawrence and TLP, effect of NOLs and contribution from
excercise of in-the-money options into account
24
<PAGE>
HOLNAM OPERATIONS
DISCOUNTED CASHFLOW ANALYSIS
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
------- -------- -------- -------- --------
(US$ IN '000)
<S> <C> <C> <C> <C> <C>
EBIT....................................... 89,161 100,206 107,293 133,025 130,699
Less Taxes @ 40.0%......................... 35,664 40,082 42,917 53,210 52,280
------ ------- ------- ------- -------
After Tax EBIT 53,497 60,123 64,376 79,815 78,419
+ Depreciation & Amortisation (2).......... 27,279 42,934 49,903 52,220 56,737
+ Change in Provisions..................... 6,737 6,984 7,174 7,863 7,801
- -Changes in Net Working Capital............ (1,885) 38,167 4,065 2,475 28
- -Capital Expenditures...................... 61,900 58,685 46,239 100,000 100,000
------- -------- -------- -------- --------
Unlevered Free Cash Flow................... 27,498 13,189 71,149 37,423 42,928
<CAPTION>
1999 2000 2001 2002
-------- -------- -------- --------
<S> <C> <C> <C> <C>
EBIT....................................... 82,350 54,766 50,171 80,148
Less Taxes @ 40.0%......................... 32,940 21,907 20,068 32,059
------- ------- ------- -------
After Tax EBIT 49,410 32,860 30,102 48,089
+ Depreciation & Amortisation (2).......... 51,085 65,326 68,322 70,122
+ Change in Provisions..................... 6,506 5,767 5,644 6,447
- -Changes in Net Working Capital............ (7,727) (4,671) 206 6,401
- -Capital Expenditures...................... 100,000 100,000 100,000 100,000
-------- -------- -------- --------
Unlevered Free Cash Flow................... 14,727 8,624 3,863 18,257
</TABLE>
PRESENT VALUE CALCULATION:
<TABLE>
<CAPTION>
PLUS (B) LESS (C) = (D)
(A) PRESENT VALUE OF TERMINAL NET PRESENT VALUE OF
DISCOUNTED VALUE EQUITY
UNLEVERED BASED ON AVERAGE EBIT NET DEBT BASED ON AVERAGE EBIT
CASH MULTIPLES(1) POSITION MULTIPLES(4)
DISCOUNT FLOWS -------------------------- -------- --------------------------
RATE 1994-2002 12.0 14.8 19.6 12.0 14.8 19.6
------ -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WACC minus 2.00%............... 8.92 % 170,007 511,692 631,087 835,763 385,350 296,349 415,744 620,421
WACC minus 1.00%............... 9.92 % 164,311 471,287 581,254 769,769 385,350 250,248 360,215 548,730
WACC........................... 10.92 % 158,905 434,397 535,756 709,515 385,350 207,952 309,311 483,070
WACC plus 1.00%................ 11.92 % 153,770 400,687 494,180 654,455 385,350 169,107 262,600 422,875
WACC plus 2.00%................ 12.92 % 148,889 369,859 456,159 604,102 385,350 133,397 219,698 367,641
</TABLE>
SENSITIVITY ANALYSIS TO WEIGHTED AVERAGE CEMENT PRICES:
<TABLE>
<CAPTION>
NET PRESENT VALUE OF EQUITY
(3) BASED ON AVERAGE EBIT
MANAGEMENT PROJECTIONS MULTIPLES (4)
FOR WEIGHTED -----------------------------
AVERAGE CEMENT PRICES DISCOUNT RATE (WACC) 12.0 14.8 19.6
- -------------------------------------------------------- -------------------- ------- ------- -------
<S> <C> <C> <C> <C>
plus $0.00.............................................. @ 10.9% 207,952 309,311 483,070
plus $1.00.............................................. @ 10.9% 282,610 394,377 585,977
plus $2.00.............................................. @ 10.9% 357,269 479,443 688,885
plus $3.00.............................................. @ 10.9% 431,928 564,509 791,793
plus $4.00.............................................. @ 10.9% 506,586 649,576 894,700
</TABLE>
- ------------
(1) Due to cyclicality of the industry, the average EBIT over the period of the
projected cycle was used as the basis for determining Terminal Value.
Multiples used are average historical EBIT multiples of comparable companies
over a ten-year period (Lafarge, Southdown, Medusa, 1983-1993)
(2) Tax depreciation which differs substantially from book depreciation: After
years of accelerated depreciation, book depreciation is higher now higher
than tax depreciation.
(3) Sensitivity Analysis assumes that cement prices are increased for each year
of the projection period by the amounts shown
(4) Shaded boxes show data used in Valuation Summary
25
<PAGE>
HOLNAM OPERATIONS
COMPARABLE TRANSACTIONS ANALYSIS
SUMMARY OF COMPARABLE TRANSACTIONS
<TABLE>
<CAPTION>
TRANSACTION VALUE CEMENT CAPACITY PRICE PER UNIT
DATE ACQUIROR TARGET (US$ '000) (1) (S.T. '000) (US$/S.T.) (2)
- -------- -------------- ------------------------- ----------------- --------------- --------------
US$ IN '000
<S> <C> <C> <C> <C> <C>
May-93.. Holnam Inc. Midlothian 91,400 1,000 $ 91.40
Feb-93.. Medusa Lafarge Plant 45,600 850 $ 53.65
Feb-91.. Ssangyong Riverside 173,000 1,700 $ 101.76
Feb-91.. Beazer Gifford-Hill 60,700 690 $ 87.97
Dec-90.. Lafarge Missouri/Davenport 147,700 2,600 $ 56.81
Sep-89.. Cem. Mexicanos Pacific Coast (Lone Star) 80,000 900 $ 88.89
</TABLE>
IMPUTED EQUITY VALUE OF HOLNAM OPERATIONS
<TABLE>
<CAPTION>
PRICE/TON OF CAPACITY X CAPACITY = IMPUTED VALUE HOLNAM OP. CEMENT ASSETS +
- ----------------------------------------------- -------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
High $101.76 10,975(3) High 1,116,868
Mean $ 80.08 10,975 Mean 878,877
Low $ 53.65 10,975 Low 588,776
<CAPTION>
EST. VALUE OF NON-
CEMENT ASSETS - NET DEBT = IMPUTED EQUITY VALUE HOLNAM OPERATIONS
--------------------- ------------------ ------------------------------------------
<C> <C> <C> <C> <C> <C>
22,780(4) 385,350 High 754,298
22,780 385,350 Mean 516,307
22,780 385,350 Low 226,206
</TABLE>
- ------------
(1) Transaction Value = Cash Purchase Price + Debt assumed
(2) Price per unit of Cement production capacity including necessary
distribution facilities, working capital etc.
(3) Total capacity is 11.225 million tons, but due to minority interest in TLP
only 10.975 million tons actually belong to Holnam Operations.
(4) No detailed financial data available except sales: Valued at 1994 sales
multiple of 1.30x based on cement industry average multiple.
26
<PAGE>
ST. LAWRENCE CEMENT
VALUATION TO HOLNAM SHAREHOLDERS
1. GOING CONCERN VALUE: DISCOUNTED DIVIDEND ANALYSIS
<TABLE>
<CAPTION>
PROJECTED ST. LAWRENCE DIVIDEND STREAM TO HOLNAM (5)
------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999 2000 2001 2002
---- ----- ----- ------ ------ ------ ------ ----- -----
(000 US$)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average Dividend 1994 to 2002................... 9,044
Discount rate: (2).............................. 16.4%
NPV of Dividends 1994 to 2002:.................. 35,457 417 1,512 9,571 12,795 12,948 12,745 13,999 9,987 7,421
NPV of Terminal Value (1)....................... 18,723
------
Discounted Dividend Value:...................... 54,180
------
------
</TABLE>
2. LIQUIDATION VALUE: DISCOUNTED CASHFLOW ANALYSIS-VALUATION OF HOLNAM STAKE
<TABLE>
<CAPTION>
DCF VALUE OF EQUITY (3) DCF VALUE OF EQUITY (4) DCF VALUE OF
(CAN$ '000) (US$ '000) HOLNAM STAKE (5)
----------------------- ----------------------- ----------------
<S> <C> <C> <C>
Base Case.................................. 342,418 273,935 162,991
Upside Case 1 (7).......................... 373,644 298,915 177,854
Upside Case 2 (7).......................... 436,096 348,877 207,582
</TABLE>
3. LIQUIDATION VALUE: MARKET VALUE OF HOLNAM STAKE
<TABLE>
<CAPTION>
(CAN$ '000) (US$ '000) HOLNAM STAKE (5)
---------- --------- ----------------
<S> <C> <C> <C> <C>
Market Value at Closing Price 5/1/94:....................... $10.63 470,491 376,393 223,954
Market Value at 52-week high:............................... $11.75 520,308 416,247 247,667
Market Value at 52-week low:................................ $ 5.00 221,408 177,126 105,390
</TABLE>
- ------------
<TABLE>
<S> <C>
(1) Terminal Value is based on perpetual dividend stream using the average 1994 to 2002 dividend and
perpetual growth rate of 4.0%
(2) Dividends are discounted using St. Lawrence's cost of equity @ 16.4%
(3) DCF of unlevered Cashflows @ St. Lawrence WACC of 11.35% and Terminal Value based on average EBIT
multiple to average EBIT over the projection period @ 14.8x
(4) Can$/US$ FX rate: 1.2500
(5) Reflects Percentage Ownership in St. Lawrence of: 59.5%
(6) Number of shares outstanding: (in '000) 44,282
(7) Upside Cases assume average cement prices to be higher than projected by St. Lawrence Management:
$1.00/s.t. for Upside Case 1, $3.00/s.t. for Upside Case 2
</TABLE>
27
<PAGE>
ST. LAWRENCE CEMENT
DISCOUNTED CASHFLOW ANALYSIS
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
------- -------- -------- -------- --------
(CAN$ IN '000)
<S> <C> <C> <C> <C> <C>
EBIT.............................................. 26,110 68,065 86,842 90,790 91,459
Less Taxes @ 34.5%................................ 9,008 23,482 29,960 31,323 31,553
------ ------ ------ ------ ------
After Tax EBIT.................................... 17,102 44,583 56,882 59,467 59,906
+ Depreciation.................................... 35,791 39,321 40,117 40,828 42,466
+ Change in Provisions............................ 611 1,938 2,445 3,255 2,654
- Changes in Net Working Capital................. 10,212 18,255 6,228 9,506 11,386
- Capital Expenditures........................... 45,000 45,000 45,000 45,000 45,000
------- -------- -------- -------- --------
Unlevered Free Cash Flow.......................... (1,708) 22,587 48,215 49,044 48,640
<CAPTION>
1999 2000 2001 2002
-------- -------- -------- --------
<S> <C> <C> <C> <C>
EBIT.............................................. 92,587 68,468 52,741 41,524
Less Taxes @ 34.5%................................ 31,943 23,621 18,196 14,326
------- ----- ----- ------
After Tax EBIT.................................... 60,645 44,846 34,545 27,198
+ Depreciation.................................... 39,919 40,493 41,013 41,486
+ Change in Provisions............................ 2,654 2,654 2,654 2,654
- Changes in Net Working Capital................. (17,605) (3,088) (1,810) 621
- Capital Expenditures........................... 45,000 45,000 45,000 45,000
-------- -------- -------- --------
Unlevered Free Cash Flow.......................... 75,822 46,080 35,023 25,717
</TABLE>
PRESENT VALUE CALCULATION:
<TABLE>
<CAPTION>
PLUS (B) LESS (C) = (D)
(A) PRESENT VALUE OF TERMINAL NET PRESENT VALUE OF
DISCOUNTED VALUE EQUITY
UNLEVERED BASED ON AVERAGE EBIT NET DEBT BASED ON AVERAGE EBIT
CASH MULTIPLES(1) POSITION MULTIPLES(3)
DISCOUNT FLOWS -------------------------- -------- --------------------------
RATE 1994-2002 12.0 14.8 19.6 12.0 14.8 19.6
------ -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WACC minus 1.00%................ 9.35 % 217,211 368,847 454,911 602,450 242,000 344,058 430,123 577,661
WACC minus 0.50%................ 10.35 % 207,295 339,833 419,127 555,060 242,000 305,128 384,422 520,356
WACC............................ 11.35 % 197,975 313,333 386,444 511,777 242,000 269,307 342,418 467,751
WACC plus 0.50%................. 12.35 % 189,207 289,109 356,567 472,211 242,000 236,315 303,774 419,417
WACC plus 1.00%................. 13.35 % 180,952 266,948 329,235 436,014 242,000 205,900 268,187 374,966
</TABLE>
SENSITIVITY ANALYSIS TO WEIGHTED AVERAGE CEMENT PRICES:
<TABLE>
<CAPTION>
NET PRESENT VALUE OF EQUITY
(2) BASED ON AVERAGE EBIT
MANAGEMENT PROJECTIONS MULTIPLES (3)
FOR WEIGHTED -----------------------------
AVERAGE CEMENT PRICES DISCOUNT RATE (WACC) 12.0 14.8 19.6
- -------------------------------------------------------- -------------------- ------- ------- -------
<S> <C> <C> <C> <C>
plus $0.00.............................................. @ 11.4% 269,307 342,418 467,751
plus $1.00.............................................. @ 11.4% 296,921 373,644 505,169
plus $2.00.............................................. @ 11.4% 324,534 404,870 542,588
plus $3.00.............................................. @ 11.4% 352,149 436,096 580,007
plus $4.00.............................................. @ 11.4% 379,763 467,323 617,426
</TABLE>
- ------------
(1) Due to cyclicality of the industry, the average EBIT over the period of the
projected cycle was used as the basis for determining Terminal Value.
Multiples used are average historical EBIT multiples of comparable companies
over a ten-year period (Lafarge, Southdown, Medusa, 1983-1993)
(2) Sensitivity Analysis assumes that cement prices are increased for each year
of the projection period by the amounts shown
(3) Shaded boxes show data used in Valuation Summary
28
<PAGE>
HOLNAM, INC.
NOL VALUATION
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
(US$ IN '000)
<S> <C> <C> <C> <C> <C>
Holnam Operations Pretax Profit............... 48,336 76,870 89,537 118,548 121,101
Adjustment to Taxable Income (1).............. 24,800 14,846 12,702 12,844 11,117
-------- -------- -------- -------- --------
Est. Holnam, Inc. Taxable Income.............. 73,136 91,715 102,239 131,391 132,218
Tax Payable................................... 1,463 1,834 2,045 2,628 7,442
------- ------- ------- ------- -------
NOL Beginning of Year (1)..................... 484,200 412,527 322,646 222,451 93,688
Taxable Income................................ 73,136 91,715 102,239 131,391 132,218
Income Tax Saving @ 40%....................... 29,254 36,686 40,896 52,557 45,445
Alternative Minimum Tax @ 2% (2).............. 1,463 1,834 2,045 2,628 0
Effective Tax Saving.......................... 27,792 34,852 38,851 49,929 45,445
NOL End of Year............................... 412,527 322,646 222,451 93,688 0
Tax Credit on AMT (3)......................... 1,463 3,297 5,342 7,970 0
-------- -------- -------- -------- --------
DCF Value of Tax Savings @ Holnam's WACC (10.92%) 114,844
<CAPTION>
1999 2000 2001 2002
------- ------- ------- -------
<S> <C> <C> <C> <C>
Holnam Operations Pretax Profit............... 75,402 48,366 44,146 74,935
Adjustment to Taxable Income (1).............. 19,863 8,995 9,630 11,697
------- ------- ------- -------
Est. Holnam, Inc. Taxable Income.............. 95,265 57,361 53,776 86,632
Tax Payable................................... 38,106 22,945 21,510 34,653
------- ------- ------- -------
NOL Beginning of Year (1)..................... 0 0 0 0
Taxable Income................................ 95,265 57,361 53,776 86,632
Income Tax Saving @ 40%....................... 0 0 0 0
Alternative Minimum Tax @ 2% (2).............. 0 0 0 0
Effective Tax Saving.......................... 0 0 0 0
NOL End of Year............................... 0 0 0 0
Tax Credit on AMT (3)......................... 0 0 0 0
------- ------- ------- -------
</TABLE>
- ------------
(1) Estimated aggregate amount of available NOLs at 1/1/94 as provided by
Holnam' Counsel
(2) Alternative Minimum Tax rate of 20% less credit for NOLs (90% of 20%):
effective rate = 2%
(3) Alternative Minimum Tax is creditable and may be deducted from Taxes Payable
after NOL's are used up
29
<PAGE>
HOLNAM OPERATIONS
VOLUME STATISTICS
<TABLE>
<CAPTION>
HISTORICAL
------------------ FORECAST BUDGET
S.T. IN '000 1991 1992 1993 1994
- ---------------------------------------- ------- ------- -------- -------
<S> <C> <C> <C> <C>
SOUTH EAST DIVISION
Santee Region........................... 1,345 963 1,027 1,020
Florida/Georgia Region................ -- 815 827 665
Southern Region......................... 742 902 955 1,113
Rainbow Products........................ 23 36 -- --
Mid-South Region..................... 293 -- -- --
------- ------- -------- -------
Sub Total............................... 2,403 2,716 2,809 2,798
------- ------- -------- -------
CENTRAL DIVISION
South Central Region.................... 687 792 800 926
North Central Region.................... 943 1,021 960 980
Midwest Region.......................... 711 845 775 924
Northern Region......................... 882 1,021 820 941
------- ------- -------- -------
Sub Total............................... 3,223 3,679 3,355 3,771
------- ------- -------- -------
WEST DIVISION
Texas/Gulf(1)........................... -- -- 876 1,212
Montana Northwest....................... -- -- -- 308
Oklahoma/Arkansas Region................ 393 468 644 481
Houston Region.......................... 234 247 -- --
Colorado Region......................... 875 1,161 1,146 1,091
New Mexico Region....................... 652 313 343 395
Utah Region............................. -- 394 400 446
Pacific Region.......................... 1,001 911 688 487
Oil Well Region......................... 186 134 125 --
------- ------- ------- -------
SUB TOTAL............................... 3,341 3,628 4,222 4,420
------- ------- -------- -------
Effect of Investment Program............ 0 0 0 0
------- ------- -------- -------
TOTAL CEMENT SOLD....................... 8,967 10,023 10,386 10,989
------- ------- -------- -------
------- ------- -------- -------
Growth Rates(2)(3)
SOUTH EAST DIVISION..................... NA 13.0% 3.4% -0.4%
CENTRAL DIVISION........................ NA 14.1% -8.8% 12.4%
WEST DIVISION........................... NA 8.6% 16.4% 4.7%
TOTAL CEMENT SOLD....................... NA 11.8% 3.6% 5.8%
------- ------- -------- -------
------- ------- -------- -------
Total US Cement Consumption (PCA)....... 76,228 80,948 82,240 88,191
% Growth................................ NA 6.2% 1.6% 7.2%
Holnam Market Share..................... 11.8% 12.4% 12.6% 12.5%
<CAPTION>
PROJECTIONS
------------------------------------------------------------------------------------
S.T. IN '000 1995 1996 1997 1998 1999 2000 2001 2002
- ---------------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SOUTH EAST DIVISION
Santee Region........................... 1,021 1,021 1,021 975 928 882 882 928
Florida/Georgia Region.................. 666 666 666 635 605 575 575 605
Southern Region......................... 1,114 1,114 1,114 1,063 1,013 962 962 1,013
Rainbow Products........................ -- -- -- -- -- -- -- --
Mid-South Region...................... -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Sub Total............................... 2,801 2,801 2,801 2,673 2,546 2,419 2,419 2,546
------- ------- ------- ------- ------- ------- ------- -------
CENTRAL DIVISION
South Central Region.................... 927 927 927 885 843 801 801 843
North Central Region.................... 981 981 981 936 892 847 847 892
Midwest Region.......................... 925 925 925 883 841 799 799 841
Northern Region......................... 942 942 942 899 856 813 813 856
------- ------- ------- ------- ------- ------- ------- -------
Sub Total............................... 3,775 3,775 3,775 3,603 3,432 3,260 3,260 3,432
------- ------- ------- ------- ------- ------- ------- -------
WEST DIVISION
Texas/Gulf(1)........................... 1,213 1,213 1,213 1,158 1,103 1,048 1,048 1,103
Montana Northwest....................... 308 308 308 294 280 266 266 280
Oklahoma/Arkansas Region................ 481 481 481 460 438 416 416 438
Houston Region.......................... -- -- -- -- -- -- -- --
Colorado Region......................... 1,092 1,092 1,092 1,042 993 943 943 993
New Mexico Region....................... 395 395 395 377 359 341 341 359
Utah Region............................. 446 446 446 426 406 386 386 406
Pacific Region.......................... 487 487 487 465 443 421 421 443
Oil Well Region......................... -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
SUB TOTAL............................... 4,424 4,424 4,424 4,223 4,022 3,821 3,821 4,022
------- ------- ------- ------- ------- ------- ------- -------
Effect of Investment Program............ 0 0 0 500 500 500 500 500
------- ------- ------- ------- ------- ------- ------- -------
TOTAL CEMENT SOLD....................... 11,000 11,000 11,000 11,000 10,500 10,000 10,000 10,500
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
Growth Rates(2)(3)
UTH EAST DIVISION....................... 0.1% 0.0% 0.0% -4.5% -4.8% -5.0% 0.0% 5.3%
CENTRAL DIVISION........................ 0.1% 0.0% 0.0% -4.5% -4.8% -5.0% 0.0% 5.3%
WEST DIVISION........................... 0.1% 0.0% 0.0% -4.5% -4.8% -5.0% 0.0% 5.3%
TOTAL CEMENT SOLD....................... 0.1% 0.0% 0.0% -4.5% -4.8% -5.0% 0.0% 5.3%
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
Total US Cement Consumption (PCA)....... 92,146 93,957 93,168 94,782
% Growth................................ 4.5% 2.0% -0.8% 1.7%
Holnam Market Share..................... 11.9% 11.7% 11.8% 11.6%
</TABLE>
30
<PAGE>
HOLNAM OPERATIONS
PRICE STATISTICS
<TABLE>
<CAPTION>
HISTORICAL
------------------ FORECAST BUDGET
US$/S.T. 1991 1992 1993 1994
- -------------------------------------------------- ------- ------- -------- ------
<S> <C> <C> <C> <C>
SOUTH EAST DIVISION
Santee Region..................................... 50.25 49.55 54.09 58.54
Florida/Georgia Region.......................... -- 40.59 48.11 56.99
Southern Region................................... 50.48 50.49 53.15 57.57
Rainbow Products.................................. 120.34 119.25 -- --
Mid-South Region.................................. 47.44 -- -- --
------- ------- ------- ------
Weighted Average.................................. 50.65 48.09 52.01 57.79
------- ------- ------- ------
CENTRAL DIVISION
South Central Region.............................. 46.18 45.11 47.74 51.86
North Central Region.............................. 51.95 51.33 55.36 58.13
Midwest Region.................................... 47.61 46.47 51.71 54.91
Northern Region................................... 54.22 54.45 59.95 62.85
------- ------- ------ ------
Weighted Average.................................. 50.38 49.73 53.83 56.98
------- ------- ------ ------
WEST DIVISION
Texas/Gulf (1).................................... -- -- -- 50.53
Montana Northwest................................. -- -- -- 73.08
Oklahoma/Arkansas Region.......................... 46.40 46.69 53.56 54.07
Houston Region.................................... 51.75 54.15 -- --
Colorado Region................................... 51.93 56.42 57.29 58.67
New Mexico Region................................. 58.60 52.53 52.63 57.12
Utah Region....................................... 59.93 63.61 65.50 68.31
Pacific Region.................................... 66.58 67.11 70.07 65.93
Oil Well Region................................... 59.84 58.81 63.10 --
------- ------- ------- -------
Weighted Average.................................. 57.70 58.22 59.92 58.58
------- ------- ------- ------
Total Weighted Average............................ 53.20 52.36 55.43 57.82
------- ------- ------- ------
------- ------- ------- ------
Growth Rates (US$)
SOUTH EAST DIVISION............................... (2.56) 3.92 5.78
CENTRAL DIVISION.................................. (0.65) 4.10 3.15
WEST DIVISION..................................... 0.52 1.70 (1.34)
------- ------- ------
Overall Weighted Average.......................... 0.84 3.07 2.39
------- ------- ------
------- ------- ------
Price Increase.................................... -1.6% 5.9% 4.3%
US Inflation...................................... 4.0% 2.6% 3.0%
Real Price Adjustment............................. NA NA (0.73)
<CAPTION>
PROJECTIONS
----------------------------------------------
US$/S.T. 1995 1996 1997 1998 1999 2000 2001 2002
- -------------------------------------------------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SOUTH EAST DIVISION
Santee Region..................................... 61.04 63.04 65.04 65.04 63.04 63.04 63.04 64.04
Florida/Georgia Region............................ 59.49 61.49 63.49 63.49 61.49 61.49 61.49 62.49
Southern Region................................... 60.07 62.07 64.07 64.07 62.07 62.07 62.07 63.07
Rainbow Products.................................. -- -- -- -- -- -- -- --
Mid-South Region.................................. -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Weighted Average.................................. 60.29 62.29 64.29 64.29 62.29 62.29 62.29 63.29
------ ------ ------ ------ ------ ------ ------ ------
CENTRAL DIVISION
South Central Region.............................. 54.36 56.36 58.36 58.36 56.36 56.36 56.36 57.36
North Central Region.............................. 60.63 62.63 64.63 64.63 62.63 62.63 62.63 63.63
Midwest Region.................................... 57.41 59.41 61.41 61.41 59.41 59.41 59.41 60.41
Northern Region................................... 65.35 67.35 69.35 69.35 67.35 67.35 67.35 68.35
------ ------ ------ ------ ------ ------ ------ ------
Weighted Average.................................. 59.48 61.48 63.48 63.48 61.48 61.48 61.48 62.48
------ ------ ------ ------ ------ ------ ------ ------
WEST DIVISION
Texas/Gulf(1)..................................... 53.03 55.03 57.03 57.03 55.03 55.03 55.03 56.03
Montana Northwest................................. 75.58 77.58 79.58 79.58 77.58 77.58 77.58 78.58
Oklahoma/Arkansas Region.......................... 56.57 58.57 60.57 60.57 58.57 58.57 58.57 59.57
Houston Region.................................... -- -- -- -- -- -- -- --
Colorado Region................................... 61.17 63.17 65.17 65.17 63.17 63.17 63.17 64.17
New Mexico Region................................. 59.62 61.62 63.62 63.62 61.62 61.62 61.62 62.62
Utah Region....................................... 70.81 72.81 74.81 74.81 72.81 72.81 72.81 73.81
Pacific Region.................................... 68.43 70.43 72.43 72.43 70.43 70.43 70.43 71.43
Oil Well Region................................... -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Weighted Average.................................. 61.08 63.08 65.08 65.08 63.08 63.08 63.08 64.08
------ ------ ------ ------ ------ ------ ------ ------
Total Weighted Average............................ 60.32 62.32 64.32 64.32 62.32 62.32 62.32 63.32
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
Growth Rates (US$)
SOUTH EAST DIVISION............................... 2.50 2.00 2.00 0.00 (2.00) 0.00 0.00 1.00
CENTRAL DIVISION.................................. 2.50 2.00 2.00 0.00 (2.00) 0.00 0.00 1.00
WEST DIVISION..................................... 2.50 2.00 2.00 0.00 (2.00) 0.00 0.00 1.00
------ ------ ------ ------ ------ ------ ------ ------
Overall Weighted Average.......................... 2.50 2.00 2.00 0.00 (2.00) 0.00 0.00 1.00
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
Price Increase.................................... 4.3% 3.3% 3.2% 0.0% -3.1% 0.0% 0.0% 1.6%
US Inflation...................................... 3.2% 3.8% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Real Price Adjustment............................. (1.38) (1.08) (0.59) 1.98 6.55 9.05 11.54 13.03
</TABLE>
31
<PAGE>
HOLNAM OPERATIONS
COST OF SALES ANALYSIS 1991 TO 2002
<TABLE>
<CAPTION>
HISTORICAL
-------------------- FORECAST BUDGET
1991 1992 1993 1994
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Cement Sold(1).......................... 8,967 10,023 9,510 10,989
Manufacturing Cost Analysis ('000 US$):
Depreciation............................ NA 47,049 41,874 48,519
Other Fixed Costs....................... NA 69,013 77,614 72,477
-------- -------- --------- --------
Total Fixed Costs....................... NA 116,062 119,488 120,996
Variable Costs.......................... NA 169,071 146,401 192,270
Maintenance Costs....................... NA 79,729 86,208 89,522
-------- -------- --------- --------
Total Manufacturing Costs............... 342,031 364,862 352,097 402,788
Intra-Company Freight................... 42,952 46,255 37,076 43,394
Traffic and Terminals................... 27,359 24,159 32,584 35,057
Plant Accounting........................ 4,420 4,150 3,620 3,396
Manufacturing Administration............ 5,400 6,388 7,818 9,214
-------- -------- --------- --------
Regular Cost of Cement Sales............ 422,162 445,814 433,195 493,849
Effect of Investment Program (1)........ 0 0 0 0
-------- -------- --------- --------
Total Cost of Cement Sales.............. 422,162 445,814 433,195 493,849
Manufacturing Cost Analysis (US$/s.t.):
Depreciation............................ NA 4.69 4.40 4.42
Other Fixed Costs....................... NA 6.89 8.16 6.60
-------- -------- --------- --------
Total Fixed Costs....................... NA 11.58 12.56 11.01
Variable Costs.......................... NA 16.87 15.39 17.50
Maintenance Cost........................ NA 7.95 9.06 8.15
-------- -------- --------- --------
Total Manufacturing Costs............... 38.14 36.40 37.02 36.65
Intra-Company Freight................... 4.79 4.61 3.90 3.95
Traffic and Terminals................... 3.05 2.41 3.43 3.19
Plant Accounting........................ 0.49 0.41 0.38 0.31
Manufacturing Administration............ 0.60 0.64 0.82 0.84
-------- -------- --------- --------
Total Cost of Cement Sales.............. 47.08 44.48 45.55 44.94
Effect of Investment Program (1)........ 0 0 0 0
-------- -------- --------- --------
Total Cost of Cement Sales.............. 47.08 44.48 45.55 44.94
Gross Margin / s.t...................... 6.12 7.88 9.88 12.88
Other Costs of Sales.................... 43,179 30,294 16,482 11,314
-------- -------- --------- --------
Total Costs of Sales.................... 465,341 476,108 449,677 505,163
Volume Growth........................... NA 11.8% -5.1% 15.6%
US Inflation............................ 4.0% 2.6% 3.0% 3.2%
Cost Increase........................... 4.0% 2.6% 3.0% 3.2%
<CAPTION>
PROJECTIONS
--------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Cement Sold (1)......................... 11,000 11,000 11,000 11,000 10,500 10,000 10,000
Manufacturing Cost Analysis ('000 US$):
Depreciation............................ 54,220 59,045 61,504 64,294 67,388 70,761 74,392
Other Fixed Costs....................... 73,564 74,668 75,788 76,924 78,078 79,249 80,438
-------- -------- -------- -------- -------- -------- --------
Total Fixed Costs....................... 127,784 133,713 137,291 141,218 145,466 150,011 154,830
Variable Costs.......................... 195,349 198,280 201,254 204,273 197,912 191,315 194,185
Maintenance Costs....................... 90,865 92,228 93,611 95,015 96,441 97,887 99,356
-------- -------- -------- -------- -------- -------- --------
Total Manufacturing Costs............... 413,998 424,220 432,157 440,506 439,819 439,213 448,371
Intra-Company Freight................... 44,696 46,037 47,418 48,840 50,306 51,815 53,369
Traffic and Terminals................... 36,109 37,192 38,308 39,457 40,641 41,860 43,116
Plant Accounting........................ 3,498 3,603 3,711 3,822 3,937 4,055 4,177
Manufacturing Administration............ 9,490 9,775 10,068 10,370 10,682 11,002 11,332
-------- -------- -------- -------- -------- -------- --------
Regular Cost of Cement Sales............ 507,791 520,827 531,661 542,996 545,383 547,945 560,364
Effect of Investment Program(1)......... 0 0 (16,500) (27,500) (36,750) (45,000) (55,000)
-------- -------- -------- -------- -------- -------- --------
Total Cost of Cement Sales.............. 507,791 520,827 515,161 515,496 508,633 502,945 505,364
Manufacturing Cost Analysis (US$/s.t.):
Depreciation............................ 4.93 5.37 5.59 5.84 6.42 7.08 7.44
Other Fixed Costs....................... 6.69 6.79 6.89 6.99 7.44 7.92 8.04
-------- -------- -------- -------- -------- -------- --------
Total Fixed Costs....................... 11.62 12.16 12.48 12.84 13.85 15.00 15.48
Variable Costs.......................... 17.76 18.03 18.30 18.57 18.85 19.13 19.42
Maintenance Cost........................ 8.26 8.38 8.51 8.64 9.18 9.79 9.94
-------- -------- -------- -------- -------- -------- --------
Total Manufacturing Costs............... 37.64 38.57 39.29 40.05 41.89 43.92 44.84
Intra-Company Freight................... 4.06 4.19 4.31 4.44 4.79 5.18 5.34
Traffic and Terminals................... 3.28 3.38 3.48 3.59 3.87 4.19 4.31
Plant Accounting........................ 0.32 0.33 0.34 0.35 0.37 0.41 0.42
Manufacturing Administration............ 0.86 0.89 0.92 0.94 1.02 1.10 1.13
-------- -------- -------- -------- -------- -------- --------
Total Cost of Cement Sales.............. 46.16 47.35 48.33 49.36 51.94 54.79 56.04
Effect of Investment Program(1)......... 0 0 (1.50) (2.50) (3.50) (4.50) (5.50)
-------- -------- -------- -------- -------- -------- --------
Total Cost of Cement Sales.............. 46.16 47.35 46.83 46.86 48.44 50.29 50.54
Gross Margin/s.t........................ 14.16 14.97 17.49 17.46 13.88 12.03 11.78
Other Costs of Sales.................... 12,000 12,000 12,000 12,000 12,000 12,000 12,000
-------- -------- -------- -------- -------- -------- --------
Total Costs of Sales.................... 519,791 532,827 527,161 527,496 520,633 514,945 517,364
Volume Growth........................... 0.1% 0.0% 0.0% 0.0% -4.5% -4.8% 0.0%
US Inflation............................ 3.8% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Cost Increase........................... 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
<CAPTION>
2002
--------
<S> <C>
Cement Sold (1)......................... 10,500
Manufacturing Cost Analysis ('000 US$):
Depreciation............................ 78,259
Other Fixed Costs....................... 81,645
--------
Total Fixed Costs....................... 159,904
Variable Costs.......................... 206,953
Maintenance Costs....................... 100,846
--------
Total Manufacturing Costs............... 467,702
Intra-Company Freight................... 54,970
Traffic and Terminals................... 44,409
Plant Accounting........................ 4,302
Manufacturing Administration............ 11,672
--------
Regular Cost of Cement Sales............ 583,056
Effect of Investment Program(1)......... (68,250)
--------
Total Cost of Cement Sales.............. 514,806
Manufacturing Cost Analysis (US$/s.t.):
Depreciation............................ 7.45
Other Fixed Costs....................... 7.78
--------
Total Fixed Costs....................... 15.23
Variable Costs.......................... 19.71
Maintenance Cost........................ 9.60
--------
Total Manufacturing Costs............... 44.54
Intra-Company Freight................... 5.24
Traffic and Terminals................... 4.23
Plant Accounting........................ 0.41
Manufacturing Administration............ 1.11
--------
Total Cost of Cement Sales.............. 55.53
Effect of Investment Program (1)........ (6.50)
--------
Total Cost of Cement Sales.............. 49.03
Gross Margin/s.t. ...................... 14.29
Other Costs of Sales.................... 12,000
--------
Total Costs of Sales.................... 526,806
Volume Growth........................... 5.0%
US Inflation............................ 4.0%
Cost Increase........................... 3.0%
</TABLE>
32
<PAGE>
HOLNAM OPERATIONS
INCOME STATEMENT 1991 - 2002
<TABLE>
<CAPTION>
HISTORICAL
--------------------- FORECAST BUDGET
(US$ IN '000 ) 1991 1992 1993 1994
- ---------------------------------------- --------- -------- --------- --------
<S> <C> <C> <C> <C>
Cement Sales............................ 477,044 524,820 521,976 635,384
Other Sales............................. 48,246 35,522 25,322 17,523
--------- -------- --------- --------
Total Sales............................. 525,290 560,342 547,298 652,907
Total Costs of Sales.................... 465,341 476,108 449,677 505,163
--------- -------- --------- --------
Gross Margin (as reported)(1)........... 59,949 84,234 97,621 147,744
(Addback: Depreciation)(1).............. 50,351 48,407 48,384 52,079
--------- -------- --------- --------
Gross Margin (as restated).............. 110,300 132,641 146,005 199,823
Selling Expense......................... 27,318 28,214 29,617 30,579
Administrative Expense.................. 32,362 28,742 30,150 30,051
Other (Income)/Expense.................. (3,540) (1,634) (2,250) (2,047)
Contribution TLP........................ -- -- 5,922 --
--------- -------- --------- --------
EBITDA.................................. 54,160 77,319 94,410 141,240
Depreciation............................ 50,351 47,049 41,874 48,519
Amortisation............................ 0 1,358 6,510 3,560
--------- -------- --------- --------
EBIT.................................... 3,809 28,912 46,026 89,161
Interest Expenses:
(Interest Income) @ 2.50%............... -- -- -- --
Revolving Line of Credit @ 4.44%........ -- -- -- --
Revolving Line of Credit @ 3.94%........ -- -- -- --
TLP Revolving Credit @ 4.06%............ -- -- -- --
Senior @ 9.85%.......................... -- -- -- --
Senior @ 8.03%.......................... -- -- -- --
Senior @ 9.50%.......................... -- -- -- --
Senior @ 8.00%.......................... -- -- -- --
Industrial Revenue Bonds @ 6.80%........ -- -- -- --
Subordinated Notes @ 8.00%.............. -- -- -- --
Subordinated Notes @ 9.60%.............. -- -- -- --
Subordinated Notes @ 16.00%............. -- -- -- --
--------- -------- --------- --------
Total Net Interest Expense.............. 43,986 40,383 37,800 40,825
Extraordinary Expenses.................. 60,364 -- 64,000 --
--------- -------- --------- --------
Pretax Profit........................... (100,541) (11,471) (55,774) 48,336
Tax (Credit) Provision @ 40.00%......... (10,385) 109 2,415 7,300
Minority Interest....................... -- -- -- 3,184
--------- -------- --------- --------
Net Income (Loss)....................... (90,156) (11,580) (58,189) 37,852
<CAPTION>
PROJECTIONS
--------------------------------------------------------------------------------
(US$ IN '000 ) 1995 1996 1997 1998 1999 2000 2001
- ---------------------------------------- -------- -------- -------- -------- -------- -------- --------
<S> <C>
Cement Sales............................ 663,520 685,520 707,520 707,520 654,360 623,200 623,200
Other Sales............................. 17,000 17,000 17,000 17,000 17,000 17,000 17,000
-------- -------- -------- -------- -------- -------- --------
Total Sales............................. 680,520 702,520 724,520 724,520 671,360 640,200 640,200
Total Costs of Sales.................... 519,791 532,827 527,161 527,496 520,633 514,945 517,364
-------- -------- -------- -------- -------- -------- --------
Gross Margin (as reported)(1)........... 160,729 169,693 197,359 197,024 150,727 125,255 122,836
(Addback: Depreciation)(1).............. 57,780 62,605 65,064 67,854 70,948 74,321 77,952
-------- -------- -------- -------- -------- -------- --------
Gross Margin (as restated).............. 218,509 232,298 262,423 264,878 221,674 199,576 200,788
Selling Expense......................... 31,558 32,504 33,479 34,484 35,518 36,584 37,681
Administrative Expense.................. 31,013 31,943 32,901 33,888 34,905 35,952 37,031
Other (Income)/Expense.................. (2,047) (2,047) (2,047) (2,047) (2,047) (2,047) (2,047)
Contribution TLP........................ -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
EBITDA.................................. 157,986 169,898 198,089 198,552 153,298 129,087 128,123
Depreciation............................ 54,220 59,045 61,504 64,294 67,388 70,761 74,392
Amortisation............................ 3,560 3,560 3,560 3,560 3,560 3,560 3,560
-------- -------- -------- -------- -------- -------- --------
EBIT.................................... 100,206 107,293 133,025 130,699 82,350 54,766 50,171
Interest Expenses:
(Interest Income) @ 2.50%............... (113) (113) (113) (113) (113) (113) (113)
Revolving Line of Credit @ 4.44%........ 1,669 1,047 796 1,373 1,329 781 405
Revolving Line of Credit @ 3.94%........ 1,181 1,181 1,181 1,181 1,181 1,181 1,181
TLP Revolving Credit @ 4.06%............ 366 0 0 0 0 0 0
Senior @ 9.85%.......................... 6,895 3,448 2,266 2,266 0 0 0
Senior @ 8.03%.......................... 2,409 2,409 2,409 0 0 0 0
Senior @ 9.50%.......................... 570 285 0 0 0 0 0
Senior @ 8.00%.......................... 2,800 2,100 700 0 0 0 0
Industrial Revenue Bonds @ 6.80%........ 4,891 4,891 4,891 4,891 4,551 4,551 4,551
Subordinated Notes @ 8.00%.............. 320 160 0 0 0 0 0
Subordinated Notes @ 9.60%.............. 1,548 1,548 1,548 0 0 0 0
Subordinated Notes @ 16.00%............. 800 800 800 0 0 0 0
-------- -------- -------- -------- -------- -------- --------
Total Net Interest Expense.............. 23,336 17,755 14,477 9,598 6,948 6,400 6,025
Extraordinary Expenses.................. --
-------- -------- -------- -------- -------- -------- --------
Pretax Profit........................... 76,870 89,537 118,548 121,101 75,402 48,366 44,146
Tax (Credit) Provision @ 40.00%......... 32,172 37,239 48,843 49,864 31,585 20,771 19,082
Minority Interest....................... 3,578 3,831 4,750 4,667 2,941 1,956 1,792
-------- -------- -------- -------- -------- -------- --------
Net Income (Loss)....................... 44,698 52,298 69,705 71,237 43,817 27,596 25,064
<CAPTION>
(US$ IN '000 ) 2002
- ---------------------------------------- --------
<S> <C>
Cement Sales............................ 664,860
Other Sales............................. 17,000
--------
Total Sales............................. 681,860
Total Costs of Sales.................... 526,806
--------
Gross Margin (as reported)(1)........... 155,054
(Addback: Depreciation) (1)............. 81,819
--------
Gross Margin (as restated).............. 236,873
Selling Expense......................... 38,812
Administrative Expense.................. 38,142
Other (Income)/Expense.................. (2,047)
Contribution TLP........................ --
--------
EBITDA.................................. 161,967
Depreciation............................ 78,259
Amortisation............................ 3,560
--------
EBIT.................................... 80,148
Interest Expenses:
(Interest Income) @ 2.50%............... (520)
Revolving Line of Credit @ 4.44%........ 0
Revolving Line of Credit @ 3.94%........ 1,181
TLP Revolving Credit @ 4.06%............ 0
Senior @ 9.85%.......................... 0
Senior @ 8.03%.......................... 0
Senior @ 9.50%.......................... 0
Senior @ 8.00%.......................... 0
Industrial Revenue Bonds @ 6.80%........ 4,551
Subordinated Notes @ 8.00%.............. 0
Subordinated Notes @ 9.60%.............. 0
Subordinated Notes @ 16.00%............. 0
--------
Total Net Interest Expense.............. 5,213
Extraordinary Expenses..................
--------
Pretax Profit........................... 74,935
Tax (Credit) Provision @ 40.00%......... 31,398
Minority Interest....................... 2,862
--------
Net Income (Loss)....................... 43,537
</TABLE>
- ------------
(1) Holnam recognises Depreciation as part of its Cost of Sales. For purposes of
presentation in the Income Statements, Depreciation was separated in order
to determine EBITDA.
33
<PAGE>
HOLNAM OPERATIONS
CASH FLOWS STATEMENT 1991 - 2002
<TABLE>
<CAPTION>
HISTORICAL
-------------------- FORECAST BUDGET
('000 US$) 1991 1992 1993 1994
- ---------------------------------------- -------- -------- --------- --------
<S> <C> <C> <C> <C>
Net Income (Loss)....................... (90,156) (11,580) (58,189) 37,852
-------- -------- --------- --------
Noncash Charges (Credits)
Depreciation of PP&E.................... 50,351 47,049 41,874 48,519
Amortisation of Goodwill................ 0 1,358 6,510 3,560
Net (Gain) Loss on Sale of Fixed
Assets................................ (78) (2,186) (194) 0
Deferred Income Taxes.................. (13,577) 179 1,880 2,300
Postretirement benefit Obligation...... 0 0 0 2,000
Minority Interest (net of capital
returned)............................. 0 0 0 2,437
Extraordinary Items.................... 60,364 -- 64,000 --
-------- -------- --------- --------
Changes in Assets and Liabilities
(Increase) Decrease in Receivables...... 6,034 3,083 4,039 (3,863)
(Increase) Decrease in Inventories...... (9,637) 12,853 (9,487) 610
(Increase) Decrease in Prepayments...... 1,304 3,963 (12,516) 0
(Decrease) Increase in Accounts
Payable................................ 5,079 (5,289) 1,454 5,138
(Increase) Decrease in Other Working
Capital................................ 7,136 (4,127) (868) 0
-------- -------- --------- --------
Cash provided by Operations............. 16,820 45,303 38,503 98,553
-------- -------- --------- --------
Cash Flow Before Investments............ 16,820 45,303 38,503 98,553
-------- -------- --------- --------
Proceeds from Sale of Assets............ 1,062 12,724 0 0
Capital Expenditures.................... (29,348) (31,800) (44,456) (61,900)
Investments in Affiliates............... (10,207) (1,551) (37,034) (72)
Advances to Box -- Crow................. (8,026) 0 0 0
Dividends Received from St. Lawrence.... 8,841 1,968 0 0
Other Investing Activities.............. (1,937) 2,374 2,507 0
-------- -------- --------- --------
Cash used for Investments............... (39,615) (16,285) (78,983) (61,972)
-------- -------- --------- --------
Cash Flow Before Financing.............. (22,795) 29,018 (40,480) 36,581
-------- -------- --------- --------
Net Proceeds (Repayment) -- Revolver.... (90,000) (20,000) (4,372) (27,050)
Proceeds from Short-Term Borrowings..... 0 3,000 55,500 0
Repayment of Short-Term Borrowings...... 0 0 (58,500) 0
Repayment of Other Borrowings........... (68,026) (66,993) (14,829) (11,000)
Proceeds from Other Borrowings.......... 185,000 50,000 30,000 0
Issuance of Common Stock................ 387 347 1,153 0
Issuance of Preffered Stock............. 0 0 30,000 0
-------- -------- --------- --------
Cash (Used for) Provided by Financing... 27,361 (33,646) 38,952 (38,050)
-------- -------- --------- --------
Net Increase (Decrease) in Cash......... 4,566 (4,628) (1,528) (1,469)
-------- -------- --------- --------
Cash Balance -- Beginning of Year....... 7,589 12,155 7,527 5,999
-------- -------- --------- --------
Cash Balance -- End of Year............. 12,155 7,527 5,999 4,530
-------- -------- --------- --------
-------- -------- --------- --------
<CAPTION>
PROJECTIONS
-------------------------------------------------------------------------------------
('000 US$) 1995 1996 1997 1998 1999 2000 2001
- ---------------------------------------- -------- -------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income (Loss)....................... 44,698 52,298 69,705 71,237 43,817 27,596 25,064
-------- -------- --------- --------- --------- --------- ---------
Noncash Charges (Credits)
Depreciation of PP&E.................... 54,220 59,045 61,504 64,294 67,388 70,761 74,392
Amortisation of Goodwill................ 3,560 3,560 3,560 3,560 3,560 3,560 3,560
Net (Gain) Loss on Sale of Fixed
Assets................................ 0 0 0 0 0 0 0
Deferred Income Taxes.................. 2,300 2,300 2,300 2,300 2,300 2,300 2,300
Postretirement benefit Obligation...... 2,000 2,000 2,000 2,000 2,000 2,000 2,000
Minority Interest (net of capital
returned)............................. 2,684 2,874 3,563 3,501 2,206 1,467 1,344
Extraordinary Items.................... -- -- -- -- -- -- --
-------- -------- --------- --------- --------- --------- ---------
Changes in Assets and Liabilities
(Increase) Decrease in Receivables...... (11,003) (2,956) (2,956) (0) 7,143 4,187 0
(Increase) Decrease in Inventories...... (23,890) (3,136) 1,363 (80) 1,651 1,369 (582)
(Increase) Decrease in Prepayments...... 0 0 0 0 0 0 0
(Decrease) Increase in Accounts
Payable................................ (3,274) 2,028 (881) 52 (1,068) (885) 376
(Increase) Decrease in Other Working
Capital................................ 0 0 0 0 0 0 0
-------- -------- --------- --------- --------- --------- ---------
Cash provided by Operations............. 71,295 118,013 140,157 146,862 128,997 112,355 108,454
-------- -------- --------- --------- --------- --------- ---------
Cash Flow Before Investments............ 71,295 118,013 140,157 146,862 128,997 112,355 108,454
-------- -------- --------- --------- --------- --------- ---------
Proceeds from Sale of Assets............ 0 0 0 0 0 0 0
Capital Expenditures.................... (58,685) (46,239) (100,000) (100,000) (100,000) (100,000) (100,000)
Investments in Affiliates............... 0 0 0 0 0 0 0
Advances to Box -- Crow................. 0 0 0 0 0 0 0
Dividends Received from St. Lawrence.... 0 0 0 0 0 0 0
Other Investing Activities.............. 0 0 0 0 0 0 0
-------- -------- --------- --------- --------- --------- ---------
Cash used for Investments............... (58,685) (46,239) (100,000) (100,000) (100,000) (100,000) (100,000)
-------- -------- --------- --------- --------- --------- ---------
Cash Flow Before Financing.............. 12,610 71,774 40,157 46,862 28,997 12,355 8,454
-------- -------- --------- --------- --------- --------- ---------
Net Proceeds (Repayment) -- Revolver.... 28,190 (14,024) (5,657) 13,014 (997) (12,355) (8,454)
Proceeds from Short-Term Borrowings..... 0 0 0 0 0 0 0
Repayment of Short-Term Borrowings...... 0 0 0 0 0 0 0
Repayment of Other Borrowings........... (40,800) (57,750) (34,500) (59,876) (28,000) 0 0
Proceeds from Other Borrowings.......... 0 0 0 0 0 0 0
Issuance of Common Stock................ 0 0 0 0 0 0 0
Issuance of Preffered Stock............. 0 0 0 0 0 0 0
-------- -------- -------- -------- --------- --------- ---------
Cash (Used for) Provided by Financing... (12,610) (71,774) (40,157) (46,862) (28,997) (12,355) (8,454)
-------- -------- -------- -------- --------- --------- ---------
Net Increase (Decrease) in Cash......... 0 0 0 0 0 0 0
-------- -------- -------- -------- --------- --------- ---------
Cash Balance -- Beginning of Year....... 4,530 4,530 4,530 4,530 4,530 4,530 4,530
-------- -------- -------- -------- --------- --------- ---------
Cash Balance -- End of Year............. 4,530 4,530 4,530 4,530 4,530 4,530 4,530
-------- -------- -------- -------- --------- --------- ---------
-------- -------- -------- -------- --------- --------- ---------
<CAPTION>
('000 US$) 2002
- ---------------------------------------- ---------
<S> <C>
Net Income (Loss)....................... 43,537
---------
Noncash Charges (Credits)
Depreciation of PP&E.................... 78,259
Amortisation of Goodwill................ 3,560
Net (Gain) Loss on Sale of Fixed
Assets................................ 0
Deferred Income Taxes.................. 2,300
Postretirement benefit Obligation...... 2,000
Minority Interest (net of capital
returned)............................. 2,147
Extraordinary Items.................... --
---------
Changes in Assets and Liabilities
(Increase) Decrease in Receivables...... (5,598)
(Increase) Decrease in Inventories...... (2,271)
(Increase) Decrease in Prepayments...... 0
(Decrease) Increase in Accounts
Payable................................ 1,469
(Increase) Decrease in Other Working
Capital................................ 0
---------
Cash provided by Operations............. 125,402
---------
Cash Flow Before Investments............ 125,402
---------
Proceeds from Sale of Assets............ 0
Capital Expenditures.................... (100,000)
Investments in Affiliates............... 0
Advances to Box -- Crow................. 0
Dividends Received from St. Lawrence.... 0
Other Investing Activities.............. 0
---------
Cash used for Investments............... (100,000)
---------
Cash Flow Before Financing.............. 25,402
---------
Net Proceeds (Repayment) -- Revolver.... (9,137)
Proceeds from Short-Term Borrowings..... 0
Repayment of Short-Term Borrowings...... 0
Repayment of Other Borrowings........... 0
Proceeds from Other Borrowings.......... 0
Issuance of Common Stock................ 0
Issuance of Preffered Stock............. 0
---------
Cash (Used for) Provided by Financing... (9,137)
---------
Net Increase (Decrease) in Cash......... 16,265
---------
Cash Balance -- Beginning of Year....... 4,530
---------
Cash Balance -- End of Year............. 20,795
---------
---------
</TABLE>
34
<PAGE>
HOLNAM OPERATIONS
EQUITY BASIS BALANCE SHEET 1991 -- 2002
<TABLE>
<CAPTION>
HISTORICAL
---------------------- FORECAST BUDGET
('000 US$) 1991 1992 1993 1994
- ---------------------------------------- ---------- -------- --------- --------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash................................. 12,155 7,527 6,000 4,531
Accounts Receivable.................. 76,584 72,287 76,580 80,443
Inventories & Supplies............... 118,499 104,685 101,770 101,160
Prepayments.......................... 7,112 2,999 2,779 2,779
---------- -------- --------- --------
Total Current Assets.................... 214,350 187,498 187,129 188,913
---------- -------- --------- --------
Property,Plant & Equipment -- Net....... 558,950 531,124 599,491 611,247
---------- -------- --------- --------
Other Assets
Cost in Excess of Net Fixed Assets... 39,892 38,534 32,024 28,464
Investment in St. Lawrence........... 197,691 162,718 149,311 149,311
Other Assets......................... 15,874 15,256 18,006 18,078
---------- -------- --------- --------
Total Other Assets...................... 253,457 216,508 199,341 195,853
Total Assets............................ 1,026,757 935,130 985,961 996,013
---------- -------- --------- --------
---------- -------- --------- --------
Liabilities & Net Worth
Current Liabilities
Accounts Payable & Accrued
Liabilities......................... 74,897 69,950 78,993 84,131
Current Maturity of Long-Term Debt... 15,327 10,252 11,000 11,000
---------- -------- --------- --------
Total Current Liabilities............... 90,224 80,202 89,993 95,131
---------- -------- --------- --------
Long-Term Debt.......................... 409,611 379,823 380,350 342,975
---------- -------- --------- --------
Deferred Taxes.......................... 17,966 18,145 16,767 16,767
---------- -------- --------- --------
Deferred Credits & Liabilities.......... 27,748 21,484 91,075 93,075
---------- -------- --------- --------
Shareholders' Equity
Common Stock......................... 1,349 1,350 32,394 32,394
Paid in Capital...................... 456,810 457,156 457,264 457,264
Retained Earnings.................... 5,182 (23,390) (86,522) (48,670)
Minority Interest TLP................ 0 0 11,889 14,326
Currency Translation Adjustments..... 17,867 360 (7,249) (7,249)
---------- -------- --------- --------
Total Shareholders' Equity.............. 481,208 435,476 407,776 448,065
---------- -------- --------- --------
Total Liabilities & Shareholders'
Equity................................. 1,026,757 935,130 985,961 996,013
---------- -------- --------- --------
---------- -------- --------- --------
<CAPTION>
PROJECTIONS
--------------------------------------------------------------------------------
('000 US$) 1995 1996 1997 1998 1999 2000
- ---------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash................................. 4,530 4,530 4,530 4,530 4,530 4,530
Accounts Receivable.................. 91,446 94,402 97,359 97,359 90,215 86,028
Inventories & Supplies............... 125,050 128,186 126,823 126,903 125,252 123,884
Prepayments.......................... 2,779 2,779 2,779 2,779 2,779 2,779
---------- ---------- ---------- ---------- ---------- ----------
Total Current Assets.................... 223,805 229,898 231,491 231,571 222,777 217,221
---------- ---------- ---------- ---------- ---------- ----------
Property,Plant & Equipment -- Net....... 615,712 602,906 641,402 677,108 709,721 738,960
---------- ---------- ---------- ---------- ---------- ----------
Other Assets
Cost in Excess of Net Fixed Assets... 24,904 21,344 17,784 14,224 10,664 7,104
Investment in St. Lawrence........... 149,311 149,311 149,311 149,311 149,311 149,311
Other Assets......................... 18,079 18,079 18,079 18,079 18,079 18,079
---------- ---------- ---------- ---------- ---------- ----------
Total Other Assets...................... 192,294 188,734 185,174 181,614 178,054 174,494
Total Assets............................ 1,031,811 1,021,537 1,058,066 1,090,293 1,110,551 1,130,674
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Liabilities & Net Worth
Current Liabilities
Accounts Payable & Accrued
Liabilities......................... 80,857 82,884 82,003 82,055 80,988 80,103
Current Maturity of Long-Term Debt... 40,800 57,750 34,500 59,876 28,000 0
---------- ---------- ---------- ---------- ---------- ----------
Total Current Liabilities............... 121,657 140,634 116,503 141,931 108,988 80,103
---------- ---------- ---------- ---------- ---------- ----------
Long-Term Debt.......................... 300,565 211,842 194,935 122,697 125,576 141,221
---------- ---------- ---------- ---------- ---------- ----------
Deferred Taxes.......................... 19,067 21,367 23,667 25,967 28,267 30,567
---------- ---------- ---------- ---------- ---------- ----------
Deferred Credits & Liabilities.......... 95,075 97,075 99,075 101,075 103,075 105,075
---------- ---------- ---------- ---------- ---------- ----------
Shareholders' Equity
Common Stock......................... 32,394 32,394 32,394 32,394 32,394 32,394
Paid in Capital...................... 457,264 457,264 457,264 457,264 457,264 457,264
Retained Earnings.................... (3,972) 48,326 118,031 189,267 233,085 260,681
Minority Interest TLP................ 17,010 19,883 23,446 26,947 29,152 30,619
Currency Translation Adjustments..... (7,249) (7,249) (7,249) (7,249) (7,249) (7,249)
---------- ---------- ---------- ---------- ---------- ----------
Total Shareholders' Equity.............. 495,447 550,619 623,886 698,623 744,646 773,709
---------- ---------- ---------- ---------- ---------- ----------
Total Liabilities & Shareholders'
Equity................................. 1,031,811 1,021,537 1,058,066 1,090,293 1,110,551 1,130,674
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
('000 US$) 2001 2002
- ---------------------------------------- ---------- ----------
<S> <C> <C>
ASSETS
Current Assets
Cash................................. 4,530 20,795
Accounts Receivable.................. 86,028 91,626
Inventories & Supplies............... 124,466 126,737
Prepayments.......................... 2,779 2,779
---------- ----------
Total Current Assets.................... 217,803 241,938
---------- ----------
Property,Plant & Equipment -- Net....... 764,568 786,309
---------- ----------
Other Assets
Cost in Excess of Net Fixed Assets... 3,544 (16)
Investment in St. Lawrence........... 149,311 149,311
Other Assets......................... 18,079 18,079
---------- ----------
Total Other Assets...................... 170,934 167,374
Total Assets............................ 1,153,304 1,195,620
---------- ----------
---------- ----------
Liabilities & Net Worth
Current Liabilities
Accounts Payable & Accrued
Liabilities......................... 80,479 81,948
Current Maturity of Long-Term Debt... 0 0
---------- ----------
Total Current Liabilities............... 80,479 81,948
---------- ----------
Long-Term Debt.......................... 132,767 123,630
---------- ----------
Deferred Taxes.......................... 32,867 35,167
---------- ----------
Deferred Credits & Liabilities.......... 107,075 109,075
---------- ----------
Shareholders' Equity
Common Stock......................... 32,394 32,394
Paid in Capital...................... 457,264 457,264
Retained Earnings.................... 285,744 329,281
Minority Interest TLP................ 31,963 34,109
Currency Translation Adjustments..... (7,249) (7,249)
---------- ----------
Total Shareholders' Equity.............. 800,116 845,800
---------- ----------
Total Liabilities & Shareholders'
Equity................................. 1,153,304 1,195,620
---------- ----------
---------- ----------
</TABLE>
35
<PAGE>
HOLNAM OPERATIONS
PP&E ANALYSIS 1991 to 2002
<TABLE>
<CAPTION>
HISTORICAL
-------------------- FORECAST BUDGET
('000 US$) 1991 1992 1993 1994
- ---------------------------------------- -------- -------- --------- --------
<S> <C> <C> <C> <C>
Existing Net PP&E....................... 558,950 531,124 599,491 611,247
Depreciation on exist. Net PP&E(t-1).... 50,351 47,049 41,874 48,519
Dep/Net PP&E............................ NA 8.4% 7.9% 8.1%
Year CAPEX Rate
-------- ------- ---------
1995.... 58,685 8.09%
1996.... 46,239 8.09%
1997.... 100,000 6.55%
1998.... 100,000 6.55%
1999.... 100,000 6.55%
2000.... 100,000 6.55%
2001.... 100,000 6.55%
2002.... 100,000 6.55%
-------- -------- --------- --------
New Depreciation
Total Depreciation
--------
Balance Net PP&E Beginning of Year...... 599,491
Capital Expenditure..................... 61,900
Total Depreciation...................... 48,519
Other Adjustment to Net PP&E............ 1,625
--------
Balance Net PP&E End of Year............ 611,247
<CAPTION>
PROJECTIONS
--------------------------------------------------------------------------------
('000 US$) 1995 1996 1997 1998 1999 2000 2001
- ---------------------------------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Existing Net PP&E....................... 624,628 574,075 527,613 484,911 445,665 409,596 376,446
Depreciation on exist. Net PP&E (t-1)... 49,470 50,553 46,462 42,702 39,246 36,069 33,150
Dep/Net PP&E............................ 8.1% 8.1% 8.1% 8.1% 8.1% 8.1% 8.1%
4,750 4,750 4,750 4,750 4,750 4,750 4,750
3,742 3,742 3,742 3,742 3,742 3,742
6,550 6,550 6,550 6,550 6,550
6,550 6,550 6,550 6,550
6,550 6,550 6,550
6,550 6,550
6,550
-------- -------- -------- -------- -------- -------- --------
4,750 8,492 15,042 21,592 28,142 34,692 41,242
54,220 59,045 61,504 64,294 67,388 70,761 74,392
-------- -------- -------- -------- -------- -------- --------
Balance Net PP&E Beginning of Year...... 611,247 615,712 602,906 641,402 677,108 709,721 738,960
Capital Expenditure..................... 58,685 46,239 100,000 100,000 100,000 100,000 100,000
Total Depreciation...................... 54,220 59,045 61,504 64,294 67,388 70,761 74,392
Other Adjustment to Net PP&E............ 0 0 0 0 0 0 0
-------- -------- -------- -------- -------- -------- --------
Balance Net PP&E End of Year............ 615,712 602,906 641,402 677,108 709,721 738,960 764,568
<CAPTION>
('000 US$) 2002
- ---------------------------------------- --------
<S> <C>
Existing Net PP&E....................... 345,979
Depreciation on exist. Net PP&E (t-1)... 30,467
Dep/Net PP&E............................ 8.1%
4,750
3,742
6,550
6,550
6,550
6,550
6,550
6,550
--------
47,792
78,259
--------
Balance Net PP&E Beginning of Year...... 764,568
Capital Expenditure..................... 100,000
Total Depreciation...................... 78,259
Other Adjustment to Net PP&E............ 0
--------
Balance Net PP&E End of Year............ 786,309
</TABLE>
- ------------
(1) Regular Expenditure is depreciated at historical 8.1%, incremental
investment in new plant is for long-life assets at 5% resulting in a blended
rate of 6.55%
36
<PAGE>
HOLNAM OPERATIONS
DEBT SCHEDULE 1991 - 2002
<TABLE>
<CAPTION>
HISTORICAL FORECAST BUDGET PROJECTIONS
-------------- ------ ------ --------------
('000 US$) 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
- ------------------------------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revolving Line of Credit 1.... 100,000 80,000 35,000 9,419 37,609 23,586 17,929 30,943 29,946 17,591 9,137 0
Revolving Line of Credit 2
(HOFI)...................... 0 0 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000
Revolving Line of Credit 3.... 50,000 0 0 0 0 0 0 0 0 0 0 0
TLP Revolving Credit Line..... 0 0 9,000 9,000 9,000 0 0 0 0 0 0 0
Senior 1...................... 70,000 70,000 70,000 70,000 70,000 35,000 23,000 23,000 0 0 0 0
Senior 2...................... 30,000 30,000 30,000 30,000 30,000 30,000 30,000 0 0 0 0 0
Senior 3...................... 5,750 2,875 0 0 0 0 0 0 0 0 0 0
Senior 4...................... 4,000 3,000 2,000 1,000 0 0 0 0 0 0 0 0
Senior 5...................... 35,000 35,000 35,000 35,000 35,000 26,250 8,750 0 0 0 0 0
Senior 6...................... 17,000 15,000 12,000 9,000 6,000 3,000 0 0 0 0 0 0
Industrial Revenue Bonds...... 61,409 59,519 71,930 71,930 71,930 71,930 71,930 71,930 66,930 66,930 66,930 66,930
Subordinated Notes 1.......... 12,000 10,000 8,000 6,000 4,000 2,000 0 0 0 0 0 0
Subordinated Notes 2.......... 0 50,000 50,000 13,000 0 0 0 0 0 0 0 0
Subordinated Notes 3.......... 16,106 16,126 16,126 16,126 16,126 16,126 16,126 0 0 0 0 0
Subordinated Notes 4.......... 5,000 5,000 5,000 5,000 5,000 5,000 5,000 0 0 0 0 0
Subordinated Notes 5.......... 20,620 15,163 0 0 0 0 0 0 0 0 0 0
TLP Subordinated Notes........ 0 0 26,700 26,700 26,700 26,700 26,700 26,700 26,700 26,700 26,700 26,700
Other......................... (1,947) (1,608) (9,406) 21,800 0 0 0 0 0 0 0 0
-----------------------------------------------------------------------------------------------
Total Debt............... 424,938 390,075 391,350 353,975 341,365 269,592 229,435 182,573 153,576 141,221 132,767 123,630
Current Portion of LTD........ 15,327 10,252 11,000 11,000 40,800 57,750 34,500 59,876 28,000 0 0 0
Total LTD................ 409,611 379,823 380,350 342,975 300,565 211,842 194,935 122,697 125,576 141,221 132,767 123,630
- ------------------------------------------------------------------------------------------------------------------------------
Repayment of Revolving Line of
Credit 1.................... NA (20,000)(45,000)(25,581) 0 (14,024) (5,657) 0 (997)(12,355) (8,454) (9,137)
Borrowing with Revolving Line
of Credit 1................. 0 28,190 0 0 13,014 0 0 0 0
Revolving Line of Credit 2.... NA 0 30,000 0 0 0 0 0 0 0 0 0
Revolving Line of Credit 3.... NA (50,000) 0 0 0 0 0 0 0 0 0 0
TLP Revolving Credit Line..... NA 0 9,000 0 0 (9,000) 0 0 0 0 0
Senior 1...................... NA 0 0 0 0 (35,000)(12,000) 0 (23,000) 0 0 0
Senior 2...................... NA 0 0 0 0 0 0 (30,000) 0 0 0 0
Senior 3...................... NA (2,875) (2,875) 0 0 0 0 0 0 0 0 0
Senior 4...................... NA (1,000) (1,000) (1,000) (1,000) 0 0 0 0 0 0 0
Senior 5...................... NA 0 0 0 0 (8,750)(17,500) (8,750) 0 0 0 0
Senior 6...................... NA (2,000) (3,000) (3,000) (3,000) (3,000) (3,000) 0 0 0 0 0
Industrial Revenue Bonds...... NA (1,890) 12,411 0 0 0 0 0 (5,000) 0 0 0
Subordinated Notes 1.......... NA (2,000) (2,000) (2,000) (2,000) (2,000) (2,000) 0 0 0 0 0
Subordinated Notes 2.......... NA 50,000 0 (37,000)(13,000) 0 0 0 0 0 0 0
Subordinated Notes 3.......... NA 20 0 0 0 0 0 (16,126) 0 0 0 0
Subordinated Notes 4.......... NA 0 0 0 0 0 0 (5,000) 0 0 0 0
Subordinated Notes 5.......... NA (5,457)(15,163) 0 0 0 0 0 0 0 0 0
TLP Subordinated Notes........ NA 0 26,700 0 0 0 0 0 0 0 0 0
Other......................... NA 339 (7,798) 31,206 (21,800) 0 0 0 0 0 0 0
------------------------------------------------------------------------------------------------
Total Debt.................. NA (34,863) 1,275 (37,375)(12,610)(71,774)(40,157) 46,862)(28,997)(12,355) (8,454) (9,137)
------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
<TABLE>
HOLNAM OPERATIONS
GROWTH RATES -- FINANCIAL RATIOS -- ASSUMPTIONS
<CAPTION>
HISTORICAL FORECAST BUDGET PROJECTIONS
-------------- ------ ------ --------------
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income Statement Items:
Cement Sales Growth
Rates.................. NA 10.0% -0.5% 21.7% 4.4% 3.3% 3.2% 0.0% -7.5% -4.8% 0.0% 6.7%
Other Sales Growth
Rates.................. NA -26.4% -28.7% -30.8% -3.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
------------------------------------------------------------------------------------------
Total Sales Growth
Rates............. NA 6.7% -2.3% 19.3% 4.2% 3.2% 3.1% 0.0% -7.3% -4.6% 0.0% 6.5%
Overall Gross Margin
(1).................... 21.0% 23.7% 26.7% 30.6% 32.1% 33.1% 36.2% 36.6% 33.0% 31.2% 31.4% 34.7%
EBITDA Margin............ 10.3% 13.8% 17.3% 21.6% 23.2% 24.2% 27.3% 27.4% 22.8% 20.2% 20.0% 23.8%
EBIT Margin.............. 0.7% 5.2% 8.4% 13.7% 14.7% 15.3% 18.4% 18.0% 12.3% 8.6% 7.8% 11.8%
Pretax Margin............ -19.1% -2.0% -10.2% 7.4% 11.3% 12.7% 16.4% 16.7% 11.2% 7.6% 6.9% 11.0%
Net Margin............... -17.2% -2.1% -10.6% 5.8% 6.6% 7.4% 9.6% 9.8% 6.5% 4.3% 3.9% 6.4%
Selling Expenses Growth
(%).................... NA 3.3% 5.0% 3.2% 3.2% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
General & Admin. Expenses
Growth (%)............. NA -11.2% 4.9% -0.3% 3.2% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
EBIT Growth (%) (2)...... NA 659.0% 59.2% 93.7% 12.4% 7.1% 24.0% -1.7% -37.0% -33.5% -8.4% 59.8%
Dividend Payout Ratio to
TLP Minority........... 0.0% 0.0% 23.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0%
Balance Sheet Items:
Accounts Receivable
Days................... N/A 49.9 48.2 49.0 49.0 49.0 49.0 49.0 49.0 49.0 49.0 49.0
Accounts Payable &
Accrued Liabilities
Days................... N/A 57.4 56.8 56.8 56.8 56.8 56.8 56.8 56.8 56.8 56.8 56.8
Debt/Equity.............. 88.3% 89.6% 96.0% 79.0% 68.9% 49.0% 36.8% 26.1% 20.6% 18.3% 16.6% 14.6%
Debt/Total Capital....... 46.9% 47.3% 49.0% 44.1% 40.8% 32.9% 26.9% 20.7% 17.1% 15.4% 14.2% 12.8%
Equity/Total Capital..... 53.1% 52.7% 51.0% 55.9% 59.2% 67.1% 73.1% 79.3% 82.9% 84.6% 85.8% 87.2%
Return on Equity......... NA -2.4% -13.4% 9.3% 10.0% 10.6% 12.7% 11.4% 6.3% 3.7% 3.2% 5.4%
Return on Net Operating
Assets (RONOA)............ NA 4.2% 7.2% 12.7% 14.1% 14.2% 17.8% 16.6% 10.0% 6.5% 5.8% 8.9%
Cash Flow Statement Items:
Capital Expenditure (US$
'000).................. 29,348 31,800 44,456 61,900 58,685 46,239 100,000 100,000 100,000 100,000 100,000 100,000
Depreciation (US$'000)... NA 47,049 41,874 48,519 54,220 59,045 61,504 64,294 67,388 70,761 74,392 78,259
Amortisation (US$
'000).................. NA 1,358 6,510 3,560 3,560 3,560 3,560 3,560 3,560 3,560 3,560 3,560
</TABLE>
- ------------
(1) Gross Margin adjusted for Depreciation
(2) EBIT Growth Rate drives development of TLP minority interest
38
<PAGE>
[CAPTION]
HOLNAM OPERATIONS
WEIGHTED AVERAGE COST OF CAPITAL CALCULATION
<TABLE>
<S> <C>
Risk-Free Interest Rate--10 yrs. Treasury Bond(1)............................................. 5.79%
Market Risk Premium(2)........................................................................ 7.60%
Tax Rate...................................................................................... 40.00%
Cost of Debt(3)............................................................................... 9.81%
Levered Beta(4)............................................................................... 1.31%
After-Tax Cost of Debt(5)..................................................................... 5.89%
Debt/Total Capital............................................................................ 49.0%
Equity/Total Capital.......................................................................... 51.0%
Cost of Equity(6)............................................................................. 15.75%
WACC(7)....................................................................................... 10.92%
</TABLE>
- ------------
(1) Source: Financial Times December 18, 1993
(2) Historical U.S. Equity Market Risk Premium (Approx.)
(3) Holnam's Effective Interest Rate 1993
(4) Source: Datastream (as of Dec 17, 1993)
(5) (Cost of Debt) * (1--Tax Rate)
(6) (Risk-Free Interest Rate) + (Levered Beta) * (Market Risk Premium)
(7) (Debt/Total Capital) * (Cost of Debt) * (1--Tax Rate) + (Equity/Total
Capital) * (Cost of Equity)
39
<PAGE>
ST. LAWRENCE CEMENT
CEMENT VOLUMES AND PRICES 1991 TO 2002
<TABLE>
<CAPTION>
HISTORICAL FORECAST BUDGET PROJECTIONS
------------ ----- ----- ------------
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CEMENT VOLUMES
St. Lawrence Sales Volume:(a)
Domestic-Ontario............... 726 639 653 672 737 778 771 771 759 743 728 728
Domestic-Quebec & Maritime..... 767 647 653 738 739 766 789 789 770 753 736 736
Domestic-USA................... 1,644 1,473 1,625 1,445 1,640 1,661 1,625 1,640 1,623 1,608 1,593 1,593
Others......................... 238 202 375 363 295 310 276 285 285 285 285 285
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Sub Total................. 3,375 2,961 3,306 3,218 3,411 3,515 3,461 3,486 3,437 3,389 3,341 3,341
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Cement Consumption
('000m.t.)(b)
Ontario........................ 2,316 2,105 2,011 2,161 2,381 2,512 2,491 2,491 2,450 2,400 2,350 2,350
Quebec + Maritimes............. 2,236 2,014 1,928 2,100 2,215 2,246 2,307 2,307 2,250 2,200 2,150 2,150
North East USA................. 9,517 9,608 9,825 10,530 11,038 11,159 10,701 10,814 10,700 10,600 10,500 10,500
Total Cement Consumption (% Growth)
Ontario........................ NA -9.1% -4.5% 7.5% 10.2% 5.5% -0.8% 0.0% -1.6% -2.0% -2.1% 0.0%
Quebec + Maritimes............. NA -9.9% -4.3% 8.9% 5.5% 1.4% 2.7% 0.0% -2.5% -2.2% -2.3% 0.0%
North East USA................. NA 1.0% 2.3% 7.2% 4.8% 1.1% -4.1% 1.1% -1.1% -0.9% -0.9% 0.0%
St. Lawrence Market Share
Ontario........................ 31.3% 30.4% 32.5% 31.1% 31.0% 31.0% 31.0% 31.0% 31.0% 31.0% 31.0% 31.0%
Quebec + Maritimes............. 34.3% 32.1% 33.9% 35.1% 33.4% 34.1% 34.2% 34.2% 34.2% 34.2% 34.2% 34.2%
North East USA................. 17.3% 15.3% 16.5% 13.7% 14.9% 14.9% 15.2% 15.2% 15.2% 15.2% 15.2% 15.2%
CEMENT PRICES
Prices (Can$/m.t.):
Domestic-Ontario............... 84.84 81.75 77.59 80.30 82.25 84.47 86.84 89.62 87.62 86.62 86.62 86.62
Domestic-Quebec & Maritime..... 65.31 65.21 68.98 74.54 79.42 81.52 83.92 86.60 84.60 83.60 83.60 83.60
Domestic-USA................... 57.76 54.55 61.02 68.25 69.55 72.59 75.52 77.37 75.37 74.37 74.37 74.37
Others......................... 65.57 60.79 46.17 43.07 47.00 48.65 51.54 53.80 51.80 50.80 50.80 50.80
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Weighted Average............... 65.85 63.18 64.18 69.37 72.49 75.05 78.05 80.24 78.24 77.24 77.24 77.24
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Price Changes:
Domestic-Ontario............... NA -3.09 -4.16 2.71 1.95 2.22 2.37 2.78 -2.00 -1.00 0.00 0.00
Domestic-Quebec & Maritime..... NA -0.10 3.77 5.56 4.88 2.10 2.40 2.68 -2.00 -1.00 0.00 0.00
Domestic-USA................... NA -3.21 6.47 7.23 1.30 3.04 2.93 1.85 -2.00 -1.00 0.00 0.00
Others......................... NA -4.78 -14.62 -3.10 3.93 1.65 2.89 2.26 -2.00 -1.00 0.00 0.00
Weighted Average............... NA -2.67 1.00 5.19 3.12 2.56 3.00 2.19 -2.00 -1.00 0.00 0.00
Canadian Inflation.................. 5.6% 1.7% 1.8% 1.9% 2.2% 2.7% 2.8% 3.2% NA NA NA NA
</TABLE>
- ------------
(a) Forecast for 1994 to 1998 are in line with PCA projections
40
<PAGE>
ST. LAWRENCE CEMENT
AGGREGATES AND CONCRETE: VOLUMES AND PRICES 1991 TO 2002
<TABLE>
<CAPTION>
HISTORICAL FORECAST BUDGET PROJECTIONS
----------- ----- ------ ---------------
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
----- ----- ----- ----- ----- ------- ------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AGGREGATES Volumes
('000m.t.)
Dufferin Aggregates...... 5,375 4,967 5,710 5,265 5,801 6,120 6,069 6,069 5,983 5,900 5,817 5,817
Demix Aggregates......... 3,258 3,134 2,761 3,087 3,335 3,451 3,573 3,573 3,523 3,474 3,425 3,425
BQG Aggregates........... 624 570 423 420 454 470 486 486 479 473 466 466
----- ----- ----- ----- ----- ------- ------- ------- ------ ------ ------ ------
Sub Total........... 9,257 8,671 8,894 8,772 9,590 10,041 10,129 10,129 9,985 9,846 9,708 9,708
Volume Growth Rates(a)... NA -6.3% 2.6% -1.4% 9.3% 4.7% 0.9% 0.0% -1.4% -1.4% -1.4% 0.0%
AGGREGATES Prices
(Can$/m.t.)
Dufferin Aggregates...... 6.00 6.38 6.07 6.23 6.37 6.54 6.72 6.94 6.77 6.68 6.68 6.68
Demix Aggregates......... 5.04 4.92 5.16 5.90 6.03 6.19 6.36 6.57 6.41 6.32 6.32 6.32
BQG Aggregates........... 5.53 5.18 5.27 5.77 5.90 6.06 6.23 6.42 6.26 6.18 6.18 6.18
----- ----- ----- ----- ----- ------- ------- ------- ------ ------ ------ ------
Weighted Average......... 5.63 5.77 5.75 6.09 6.23 6.40 6.57 6.78 6.61 6.53 6.53 6.53
----- ----- ----- ----- ----- ------- ------- ------- ------ ------ ------ ------
Price Growth Rates(b).... NA 2.6% -0.4% 6.0% 2.2% 2.7% 2.7% 3.2% -2.5% -1.3% 0.0% 0.0%
- -----------------------------------------------------------------------------------------------------------------------
CONCRETE Volumes
('000c.m.)
Dufferin Concrete........ 1,107 871 1,027 1,060 1,168 1,232 1,222 1,222 1,205 1,188 1,171 1,171
Boehmers Concrete........ 206 185 115 124 137 144 143 143 141 139 137 137
Demix Beton.............. 246 168 191 210 227 235 243 243 240 236 233 233
Beton Quebec............. 179 151 144 150 161 168 173 173 171 169 166 166
----- ----- ----- ----- ----- ------- ------- ------- ------ ------ ------ ------
Sub Total........... 1,738 1,375 1,477 1,544 1,693 1,779 1,781 1,781 1,756 1,732 1,707 1,707
----- ----- ----- ----- ----- ------- ------- ------- ------ ------ ------ ------
Volume Growth Rates(a)... NA -20.9% 7.4% 4.6% 9.7% 5.0% 0.2% -0.0% -1.4% -1.4% -1.4% 0.0%
CONCRETE Prices
(Can$/c.m)
Dufferin Concrete........ 79.29 83.15 84.98 83.67 85.51 87.82 90.28 93.17 90.85 89.69 89.69 89.69
Boehmers Concrete........ 79.27 86.04 87.08 88.47 90.42 92.86 95.46 98.51 96.05 94.83 94.83 94.83
Demix Beton.............. 75.18 77.14 73.89 81.58 83.37 85.63 88.02 90.84 88.58 87.44 87.44 87.44
Beton Quebec............. 97.21 94.49 87.25 91.75 93.77 96.30 99.00 102.16 99.61 98.34 98.34 98.34
----- ----- ----- ----- ----- ------- ------- ------- ------ ------ ------ ------
Weighted Average......... 80.55 84.05 83.95 84.56 86.41 88.74 91.24 94.16 91.81 90.64 90.64 90.64
----- ----- ----- ----- ----- ------- ------- ------- ------ ------ ------ ------
Price Growth Rates(b)... NA 4.3% -0.1% 0.7% 2.2% 2.7% 2.8% 3.2% -2.5% -1.3% 0.0% 0.0%
</TABLE>
- ------------
(a) Management expects aggregate and concrete volumes to develop in line with
PCA Cement Consumption growth rates until 1997 and then follow the projected
downward trend of cement volumes
(b) Management expects aggregate and concrete prices to develop with inflation
from 1995 to 1998 and then follow the projected downward trend in cement
prices
41
<PAGE>
ST. LAWRENCE CEMENT
CONSOLIDATED SALES ANALYSIS 1991 TO 2002
<TABLE>
<CAPTION>
HISTORICAL FORECAST BUDGET PROJECTIONS
-------------- ------ ------ --------------
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
------ ------ ------ ------ ------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CEMENT
Total Sales Volume
('000 m.t.)............ 3,375 2,961 3,306 3,218 3,411 3,515 3,461 3,486 3,437 3,389 3,341 3,341
Average Price
(Can$/m.t.)............ 65.85 63.18 64.18 69.37 72.49 75.05 78.05 80.24 78.24 77.24 77.24 77.24
Total Sales (Can$)....... 222,244 187,076 212,179 223,224 247,281 263,826 270,131 279,729 268,884 261,759 258,070 258,070
AGGREGATES
Total Sales Volume
('000 m.t.)............ 9,257 8,671 8,894 8,772 9,590 10,041 10,129 10,129 9,985 9,846 9,708 9,708
Average Price
(Can$/m.t.)............ 5.63 5.77 5.75 6.09 6.23 6.40 6.57 6.78 6.61 6.53 6.53 6.53
Total Sales (Can$)....... 52,105 50,061 51,137 53,437 59,721 64,236 66,571 68,702 66,039 64,288 63,382 63,382
CONCRETE
Total Sales Volume
('000 c.m.)............ 1,738 1,375 1,477 1,544 1,693 1,779 1,781 1,781 1,756 1,732 1,707 1,707
Average Price
(Can$/c.m.)............ 80.55 84.05 83.95 84.56 86.41 88.74 91.24 94.16 91.81 90.64 90.64 90.64
Total Sales (Can$)....... 139,963 115,580 123,967 130,555 146,333 157,846 162,540 167,741 161,238 156,965 154,753 154,753
OTHER
Construction............. 110,498 118,696 119,390 123,000 135,883 151,638 169,266 166,945 164,575 162,288 160,001 160,001
Concrete Products........ 2,120 1,716 428 0 0 0 0 0 0 0 0 0
Building Products........ 24,460 22,376 23,259 12,690 12,969 13,319 13,692 14,130 13,929 13,736 13,542 13,542
Others................... 17,475 16,595 14,132 25,691 26,243 27,730 28,582 29,561 29,141 28,736 28,331 28,331
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Other Sales(a) 154,553 159,383 157,209 161,381 175,095 192,687 211,540 210,636 207,646 204,760 201,874 201,874
TOTAL SALES................... 568,865 512,100 544,492 568,597 628,430 678,595 710,782 726,808 703,807 687,772 678,080 678,080
INTRA-COMPANY SALES(b)....... (64,386)(45,015)(64,319)(68,018)(61,479) (56,751)(50,157)(20,589)(20,589)(20,589)(20,589)(20,589)
-----------------------------------------------------------------------------------------------
CONSOLIDATED NET SALES........ 504,479 467,085 480,173 500,579 566,951 621,844 660,625 706,219 683,218 667,183 657,491 657,491
</TABLE>
- ------------
(a) 'Other Sales' have been projected by management through 1998 and develop in
line with cement volumes through 2002
(b) Intra-Company Sales have been projected by management through 1998.
Intra-Company Sales 1999 to 2002 are based on average 1991 to 1998 data
42
<PAGE>
ST. LAWRENCE CEMENT
COST OF SALES ANALYSIS 1991 TO 2002
<TABLE>
<CAPTION>
HISTORICAL PROJECTIONS
---------------- FORECAST BUDGET ----------------------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CEMENT
Cement Production
Volume: ('000 m.t.)
Domestic-Ontario........ 1,125 982 873 975 1,037 1,103 1,111 1,126 1,110 1,095 1,079 1,079
Domestic-Quebec &
Maritime.............. 1,201 1,002 1,087 1,212 1,239 1,241 1,224 1,224 1,207 1,190 1,173 1,173
Domestic-USA............ 939 840 965 938 1,046 1,071 1,023 1,029 1,014 1,000 986 986
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Sub Total............... 3,265 2,824 2,925 3,125 3,322 3,415 3,358 3,379 3,331 3,285 3,238 3,238
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Production Cost:
(Can$/m.t.)
Domestic-Ontario........ 42.22 44.38 44.07 42.91 42.75 42.75 43.73 44.82 46.07 47.32 48.36 49.28
Domestic-Quebec &
Maritime.............. 39.23 39.53 36.16 35.39 35.83 36.78 38.01 39.22 40.32 41.41 42.32 43.12
Domestic-USA............ 40.98 48.82 47.38 49.13 50.72 52.87 55.52 57.32 58.92 60.52 61.85 63.02
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Weighted Average........ 40.93 43.98 43.11 43.23 42.69 43.82 45.24 46.59 47.89 49.19 50.27 51.22
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Costs (Can$
'000)................. 133,653 124,219 126,113 135,114 141,804 149,654 151,932 157,426 159,536 161,567 162,794 165,887
Inventories &
Adjustments........... 19,965 14,151 27,027 11,706 15,453 16,763 17,338 17,836 17,530 17,530 17,530 17,530
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
COST OF CEMENT SALES.... 153,618 138,370 153,140 146,820 157,257 166,417 169,270 175,262 177,066 179,097 180,324 183,417
VOLUME GROWTH........... NA -13.5% 3.6% 6.8% 6.3% 2.8% -1.7% 0.6% -1.4% -1.4% -1.4% 0.0%
INFLATION............... 5.6% 1.7% 1.8% 1.9% 2.2% 2.7% 2.8% 3.2% 2.8% 2.7% 2.2% 1.9%
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
AGGREGATES
Production Volume ('000
m.t.)................. 9,257 8,671 8,894 8,772 9,590 10,041 10,129 10,129 9,985 9,846 9,708 9,708
Production Cost
(Can$/m.t.)........... 3.66 3.89 3.53 3.65 3.73 3.83 3.94 4.07 4.18 4.30 4.39 4.47
Total Costs (Can$
'000)................. 33,904 33,736 31,429 32,060 35,798 38,473 39,947 41,225 41,778 42,309 42,631 43,441
Inventories &
Adjustments........... 2,206 3,081 1,294 831 1,971 2,065 2,191 2,230 1,984 1,984 1,984 1,984
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
COST OF AGGREGATE
SALES................. 36,110 36,817 32,723 32,891 37,769 40,538 42,138 43,455 43,761 44,293 44,614 45,424
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
CONCRETE
Production Volume ('000
c.m.)................. 1,738 1,375 1,477 1,544 1,693 1,779 1,781 1,781 1,756 1,732 1,707 1,707
Production Cost
(Can$/c.m.)........... 74.27 76.37 71.94 77.89 78.57 80.19 82.33 84.97 87.35 89.71 91.68 93.42
Total Costs (Can$
'000)................. 129,051 105,015 106,226 120,251 133,059 142,643 146,674 151,368 153,397 155,350 156,530 159,504
Inventories &
Adjustments........... 0 0 0 0 0 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
COST OF CONCRETE
SALES................. 129,051 105,015 106,226 120,251 133,059 142,643 146,674 151,368 153,397 155,350 156,530 159,504
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
OTHER PRODUCTS
Variable Costs.......... 49,403 47,111 44,017 36,374 36,653 37,226 38,370 39,448 39,977 40,486 40,793 41,568
Fixed Costs............. 97,374 99,395 101,439 109,582 121,522 136,265 152,680 150,832 155,055 159,242 162,745 165,837
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Other Cost of
Sales................. 146,777 146,506 145,456 145,956 158,175 173,491 191,050 190,280 195,032 199,727 203,538 207,406
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL
Gross Total Cost of
Sales................. 465,556 426,708 437,545 445,918 486,260 523,089 549,132 560,365 569,257 578,467 585,007 595,751
Intra-Company
Adjustments........... (84,134) (48,560) (67,399) (80,969) (80,471) (76,687) (70,842) (42,280) (68,918) (68,918) (68,918) (68,918)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL COST OF SALES..... 381,422 378,148 370,146 364,949 405,789 446,402 478,290 518,085 500,339 509,549 516,089 526,833
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
</TABLE>
43
<PAGE>
ST. LAWRENCE CEMENT
INCOME STATEMENT 1991-2002
<TABLE>
<CAPTION>
HISTORICAL PROJECTIONS
---------------- FORECAST BUDGET ----------------------------------------------------------------------
(CAN$ IN '000 ) 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SALES................... 504,479 467,085 480,173 500,579 566,951 621,844 660,625 706,219 683,218 667,183 657,491 657,491
Total Costs of Sales.... 381,422 378,148 370,146 364,949 405,789 446,402 478,290 518,085 500,339 509,549 516,089 526,833
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Gross Margin............ 123,057 88,937 110,027 135,630 161,162 175,442 182,335 188,134 182,879 157,634 141,402 130,657
Selling &
Administrative........ 75,334 78,092 68,802 69,429 70,176 69,483 72,517 74,809 72,373 70,674 69,647 69,647
Corporate Reserve/Cost
Adjustment (a)........ 0 0 0 4,300 (16,400) (21,000) (21,800) (20,600) (22,000) (22,000) (22,000) (22,000)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
EBITDA.................. 47,723 10,845 41,225 61,901 107,386 126,959 131,618 133,925 132,506 108,960 93,754 83,010
Depreciation............ 35,428 36,726 34,860 34,634 38,164 38,960 39,671 41,309 38,762 39,336 39,856 40,329
Amortisation............ 920 1,165 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
EBIT.................... 11,375 (27,046) 5,208 26,110 68,065 86,842 90,790 91,459 92,587 68,468 52,741 41,524
Net Interest Expense.... (19,892) (19,600) (18,000) (15,500) (15,226) (15,226) (18,624) (20,429) (14,568) (12,807) (11,382) (10,411)
Extraordinary
Expenses.............. -- (13,333) (642) (-500) -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Pretax Profit........... (8,517) (59,979) (13,434) 10,110 52,839 71,616 72,166 71,030 78,020 55,660 41,359 31,113
Tax (Credit) Provision
@..................... (2,789) (20,110) (3,115) 5,511 19,550 26,498 26,701 26,281 28,867 20,594 15,303 11,512
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Income (Loss)....... (5,728) (39,869) (10,319) 4,599 33,289 45,118 45,465 44,749 49,152 35,066 26,056 19,601
</TABLE>
(a) Corporate Reserve/Cost Adjustment reflects top management's views on certain
items which were not otherwise taken into account
in the five-year plan.
Ajustment consists of: - Savings under EXCEL and BCM Cost reduction
programs
- Fees to Holderbank Financiere (Management and R&D
Fees)
- Reserve on ability to increase prices as
projected
44
<PAGE>
ST. LAWRENCE CEMENT
BALANCE SHEET 1991-2002
<TABLE>
<CAPTION>
HISTORICAL PROJECTIONS
--------------- FORECAST BUDGET ---------------------------------------------------------------
(CAN$ IN '000 ) 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Current Assets:
Accounts
Receivable........ 130,686 138,917 135,804 135,212 149,608 150,674 159,438 169,741 154,245 150,625 148,437 148,437
Inventories &
Supplies.......... 93,627 93,058 82,627 80,095 93,108 103,367 108,712 115,206 104,988 106,921 108,293 110,548
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Current Assets.... 224,313 231,975 218,431 215,307 242,716 254,041 268,150 284,947 259,233 257,546 256,730 258,985
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Property,Plant &
Equipment -- Net...... 427,738 412,915 398,117 399,684 406,520 412,560 417,888 421,579 427,817 433,482 438,626 443,296
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Other Assets...... 60,938 85,064 82,786 70,788 74,058 81,544 92,771 78,106 76,949 75,792 74,635 73,478
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Assets............ 712,989 729,955 699,335 685,779 723,294 748,145 778,809 784,633 764,000 766,820 769,991 775,759
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Liabilities & Net Worth
Current Liabilities
Accounts Payable &
Accrued
Liabilities....... 55,480 72,178 73,243 59,907 69,061 74,158 78,761 84,172 76,063 77,463 78,458 80,091
Short Term Debt..... 2,984 3,510 1,711 16,558 44,998 51,509 22,528 13,883 13,883 13,883 13,883 13,883
Taxes Deferred or
Payable........... 5,226 5,585 5,585 5,585 5,585 5,585 5,585 5,585 5,585 5,585 5,585 5,585
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Current
Liabilities........... 63,690 81,273 80,539 82,050 119,645 131,252 106,874 103,640 95,531 96,931 97,926 99,559
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Long-Term Debt.......... 221,856 260,176 240,289 215,913 179,849 158,615 183,443 163,734 117,698 101,800 88,926 80,153
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Deferred Taxes.......... 71,781 65,376 63,756 65,566 67,504 69,949 73,204 75,859 78,513 81,167 83,821 86,475
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Shareholders' Equity
Common Stock........ 110,605 134,724 137,364 140,964 144,264 147,264 150,264 153,389 156,514 159,639 162,764 165,889
Retained Earnings... 245,057 188,406 177,387 181,286 212,033 241,065 265,024 288,011 315,744 327,283 336,554 343,683
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Shareholders'
Equity................ 355,662 323,130 314,751 322,250 356,297 388,329 415,288 441,400 472,258 486,922 499,318 509,572
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Liabilities &
Shareholders'
Equity................ 712,989 729,955 699,335 685,779 723,294 748,145 778,809 784,633 764,000 766,820 769,991 775,759
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
</TABLE>
45
<PAGE>
ST. LAWRENCE CEMENT
CASH FLOW STATEMENT 1991-2002
<TABLE>
<CAPTION>
HISTORICAL PROJECTIONS
---------------- FORECAST BUDGET -----------------------------------------------------------------------
(CAN$ IN '000) 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Income
(Loss)......... (5,728) (39,869) (10,319) 4,599 33,289 45,118 45,465 44,749 49,152 35,066 26,056 19,601
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Noncash Charges
(Credits)
Depreciation
of PP&E........ 35,428 36,726 34,860 34,634 38,164 38,960 39,671 41,309 38,762 39,336 39,856 40,329
Amortisation
of Goodwill.... 920 1,165 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157
Deferred Income
Taxes.......... (552) (6,405) (1,621) 1,811 1,938 2,445 3,255 2,654 2,654 2,654 2,654 2,654
Other Non-Cash
Items.......... (962) (31) (1,200) (1,200) -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(Increase)
Decrease in
Receivables.... -- -- -- 592 (14,396) (1,066) (8,764) (10,303) 15,496 3,620 2,188 0
(Increase)
Decrease in
Inventories.... -- -- -- 2,532 (13,013) (10,259) (5,345) (6,494) 10,218 (1,933) (1,372) (2,255)
(Decrease)
Increase in
Accounts
Payable........ -- -- -- (13,336) 9,154 5,097 4,603 5,411 (8,109) 1,400 994 1,633
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Changes in
Working
Capital........ 2,096 9,434 14,648 (10,212) (18,255) (6,228) (9,506) (11,386) 17,605 3,088 1,810 (621)
CASH PROVIDED
BY OPERATIONS.. 31,202 1,020 37,525 30,789 56,293 81,452 80,042 78,483 109,330 81,300 71,534 63,120
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
CASH FLOW
BEFORE
INVESTMENTS.... 31,202 1,020 37,525 30,789 56,293 81,452 80,042 78,483 109,330 81,300 71,534 63,120
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Proceeds from
Sale of
Assets......... 3,375 3,388 10,000 10,000 0 0 0 0 0 0 0 0
Capital
Expenditures... (24,606) (19,271) (28,862) (45,000) (45,000) (45,000) (45,000) (45,000) (45,000) (45,000) (45,000) (45,000)
Acquisitions..... (6,644) (13,864) 0 0 0 0 0 0 0 0 0 0
Investments in
Affiliates/
Minority
Interests...... (33,355) (1,136) (85) 0 (6,500) 0 0 0 0 0 0 0
Hudson-Catskill
Project....... (4,624) 0 0 0 0 0 0 0 0 0 0 0
Increase in
Long-term
receivables.... (1,749) (9,732) 840 7,987 2,336 2,098 (3) 0 0 0 0 0
Deferred Exchange
on US Debt..... 0 (6,671) (1,275) 816 0 (13,100) (19,650) 9,355 0 0 0 0
Loans to
Employees...... 0 (836) 0 0 0 0 0 0 0 0 0 0
Other Investing
Activities..... (130) 919 1,605 2,038 (262) 2,358 7,270 4,152 0 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
CASH
USED FOR
INVESTMENTS.... (67,733) (47,203) (17,777) (24,159) (49,426) (53,644) (57,383) (31,493) (45,000) (45,000) (45,000) (45,000)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
CASH FLOW
BEFORE
FINANCING...... (36,531) (46,183) 19,748 6,630 6,867 27,808 22,659 46,990 64,330 36,300 26,534 18,120
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Variation in
Debt........... 2,647 777 37,374 (3,945) (1,096) (44,556) (937) (20,960) 0 0 0 0
Capital Issued... 19,563 24,119 2,640 3,600 3,300 3,000 3,000 3,125 3,125 3,125 3,125 3,125
Stock Dividends
paid........... (17,343) (11,897) 0 0 0 0 0 0 0 0 0 0
Cash Dividends... (13,960) (4,885) (700) (700) (2,542) (16,086) (21,505) (21,762) (21,419) (23,527) (16,785) (12,472)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(9,093) 8,114 39,314 (1,045) (338) (57,642) (19,442) (39,597) (18,294) (20,402) (13,660) (9,347)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
NET DECREASE
(INCREASE) IN
REVOLVER....... (45,624) (38,069) 59,062 5,585 6,529 (29,834) 3,217 7,393 46,036 15,898 12,874 8,773
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
</TABLE>
46
<PAGE>
ST. LAWRENCE CEMENT
GROWTH RATES-FINANCIAL RATIOS-ASSUMPTIONS
<TABLE>
<CAPTION>
HISTORICAL PROJECTIONS
-------------- FORECAST BUDGET --------------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income Statement Ratios:
Sales Growth Rate.................. NA -7.4% 2.8% 4.2% 13.3% 9.7% 6.2% 6.9% -3.3% -2.3% -1.5% 0.0%
Gross Margin....................... 24.4% 19.0% 22.9% 27.1% 28.4% 28.2% 27.6% 26.6% 26.8% 23.6% 21.5% 19.9%
EBITDA Margin...................... 9.5% 2.3% 8.6% 12.4% 18.9% 20.4% 19.9% 19.0% 19.4% 16.3% 14.3% 12.6%
EBIT Margin........................ 2.3% -5.8% 1.1% 5.2% 12.0% 14.0% 13.7% 13.0% 13.6% 10.3% 8.0% 6.3%
Pretax Margin...................... -1.7% -12.8% -2.8% 2.0% 9.3% 11.5% 10.9% 10.1% 11.4% 8.3% 6.3% 4.7%
Net Margin......................... -1.1% -8.5% -2.1% 0.9% 5.9% 7.3% 6.9% 6.3% 7.2% 5.3% 4.0% 3.0%
Cost of Sales/Sales................ 75.6% 81.0% 77.1% 72.9% 71.6% 71.8% 72.4% 73.4% 74.5% 74.5% 74.5% 74.5%
S,G&A/Sales........................ 14.9% 16.7% 14.3% 13.9% 12.4% 11.2% 11.0% 10.6% 10.6% 10.6% 10.6% 10.6%
Effective Interest Rate............ 8.8% 7.4% 7.5% 6.6% 6.3% 6.7% 8.5% 11.1% 11.1% 11.1% 11.1% 11.1%
Effective Tax Rate................. 32.7% 33.5% 23.2% 34.5% 37.0% 37.0% 37.0% 37.0% 37.0% 37.0% 37.0% 37.0%
Canadian Inflation................. 5.6% 1.7% 1.8% 1.9% 2.2% 2.7% 2.8% 3.2% 3.2% 3.2% 3.2% 3.2%
Balance Sheet Ratios:
Accounts Receivable Days........... N/A 102.1 105.6 99.0 87.0 87.8 83.2 82.4 82.4 82.4 82.4 82.4
Inventories & Supplies Turns....... N/A 4.0 4.0 4.4 5.1 4.8 4.6 4.8 4.8 4.8 4.8 4.8
Accounts Payable & Accrued
Liabilities Days................. N/A 53.6 71.2 73.3 53.9 56.5 56.6 55.5 55.5 55.5 55.5 55.5
Debt/Equity........................ 63.2% 81.6% 76.9% 72.1% 63.1% 54.1% 49.6% 40.2% 27.9% 23.8% 20.6% 18.5%
Debt/Total Capital................. 38.7% 44.9% 43.5% 41.9% 38.7% 35.1% 33.2% 28.7% 21.8% 19.2% 17.1% 15.6%
Equity/Total Capital............... 61.3% 55.1% 56.5% 58.1% 61.3% 64.9% 66.8% 71.3% 78.2% 80.8% 82.9% 84.4%
Dividend/Net Income (t-1).......... NA -85.3% -1.8% -6.8% 55.3% 48.3% 47.7% 47.9% 47.9% 47.9% 47.9% 47.9%
RONOA.............................. 1.9% -4.8% 1.0% 4.9% 12.9% 16.2% 15.7% 15.2% 15.7% 11.5% 8.8% 6.9%
Cash Flow Statement Ratios
Capital Expenditure (US$ '000)..... 24,606 19,271 28,862 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000
Capital Expenditure/Net PP&E
(t-1)............................ NA 4.5% 7.0% 11.3% 11.3% 11.1% 10.9% 10.8% 10.7% 10.5% 10.4% 10.3%
Depreciation, Amortisation (CAN$
'000)............................ 35,428 36,726 34,860 34,634 38,164 38,960 39,671 41,309 38,762 39,336 39,856 40,329
as % of Net PP&E (t-1)............. NA 8.59% 8.44% 8.70% 9.55% 9.58% 9.62% 9.89% 9.19% 9.19% 9.19% 9.19%
of which 'Depreciation'
(CAN$'000)....................... 34,508 35,561 33,703 33,477 37,007 37,803 38,514 40,152 37,605 38,179 38,699 39,172
of which 'Amortisation'
(CAN$'000)....................... 920 1,165 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157 1,157
</TABLE>
47
<PAGE>
ST. LAWRENCE CEMENT INC. DRAFT
WEIGHTED AVERAGE COST OF CAPITAL CALCULATION
<TABLE>
<S> <C>
Risk-Free Interest Rate -- 10 yrs. Treasury Bond (1)..... 6.78%
Market Risk Premium (2).................................. 7.60%
Tax Rate................................................. 34.50%
Cost of Debt(3).......................................... 7.4%
Levered Beta(4).......................................... 1.26
After-Tax Cost of Debt(5)................................ 4.85%
Debt/Total Capital....................................... 43.47%
Equity/Total Capital..................................... 56.53%
Cost of Equity(6)........................................ 16.36%
WACC (7)................................................. 11.35%
</TABLE>
(1) Source: Datastream December 17, 1993
(2) Historical US Equity Market Risk Premium (Approx.)
(3) St. Lawrence's effective cost of debt
(4) Source: Bloomberg Dec 17, 1993
(5) (Cost of Debt) * (1 -- Tax Rate)
(6) (Risk-Free Interest Rate) + (Levered Beta) * (Market Risk Premium)
(7) (Debt/Total Capital) * (Cost of Debt) * (1-Tax Rate) + (Equity/Total
Capital) * (Cost of Equity)
48
<PAGE>
F
<PAGE>
PROJECT CROSSROADS
CASE STUDY I: BOXCROW CEMENT CO LP - TEXAS CEMENT PLANT
<TABLE>
<S> <C> <C>
Date: 06 May 1993
Acquiror: Holnam Inc.
Transaction Description: Acquired the Midlothian, Texas cement plant, a debtor in Chapter 11 bankruptcy.
The transaction had received approval by a Dallas bankruptcy court. Funding for
the transaction consisted of $27 million in tax-exempt revenue bonds assumed by
the Partnership, $24 million in Partnership bank loans, and $40 million in equity.
The L.P is 75% and 25% owned by Holnam and Trammell Crow, respectively.
Target Description: Cement plant is a highly efficient and modern facility located at Midlothian,
Texas and has a production capacity of 1.0 million tons per year. The Partnership
also acquired terminals in Oklamoma City, Oklahoma, and Lubbock, Texas. The kiln
was built in 1987 and utilizes a dry process.
Transaction Summary: Transaction Value: $91.4 million
Production Capacity acquired: 1.0 million tons
Price/s.t of production capacity: $91.4
</TABLE>
[Logo]Merrill Lynch 'Holderbank'
<PAGE>
PROJECT CROSSROADS
CASE STUDY II: CERTAIN ASSETS OF LAFARGE CORPORATION
<TABLE>
<S> <C> <C>
Date: 01 February 1993
Acquiror: Medusa Corporation
Transaction Description: Acquired a cement plant and nine distribution terminals from Lafarge Corporation
for about $45.6 million in cash. In connection with the closing of the
acquisition, Medusa and Lafarge entered into a Cement Supply Contract and a Non
competition Agreement (Medusa paid Lafarge $4.5 million at the closing of the
acquisition). The former agreement provides that Medusa sell to Lafarge at least
50,000 tons of gray portland cement produced at the Dempolis plant during each
year of the initial five-year term of the contract.
Target Description: Assets acquired include Lafarge's seventeen-year old, 850,000 ton capacity
single-kiln cement plant (primarily gray portland and masonry cement) in Dempolis,
Alabama, two working quarries and two mineral reserve properties in the
surrounding area, terminals located in Montgomery, Alabama, Atlanta and
Bainbridge, Georgia and Chattanooga, Tennessee and related personal property.
Medusa also assumed Lafarge's leases on terminals in Dacatur and Mobile, Alabama,
Doraville, Georgia and Tallahassee, Florida. The plant utilizes a dry process.
Transaction Summary: Transaction Value: $45.6 million
Production Capacity acquired: 850,000 tons
Price/s.t. of production capacity: $53.65
</TABLE>
[Logo]Merrill Lynch 'Holderbank'
<PAGE>
PROJECT CROSSROADS
CASE STUDY III: RIVERSIDE CEMENT CO. - BEAZER PLC
<TABLE>
<S> <C> <C>
Date: 05 May 1991
Acquiror: Ssangyong Cement Industrial Co Ltd.
Transaction Description: Acquired a 50% interest in Riverside Cement from Beazer West, a unit of Beazer,
for $173 million. Riverside will be operated as a joint venture between Beazer and
Ssangyong.
Target Description: Riverside operates two plants producing 1.7 million tons of cement a year at Oro
Grande (maintains seven kilns) and Crestmore in California (1.6 million tons of
cement and .1 million tons of white cement). The kilns were built during 1948 -
1959; utilize a dry process.
Transaction Summary: Transaction Value: 173 million
Production Capacity acquired: 1.7 million tons
Price/s.t. of production capacity: $101.76
</TABLE>
[Logo]Merrill Lynch 'Holderbank'
<PAGE>
PROJECT CROSSROADS
CASE STUDY IV: BEAZER PLC - GIFFORD HILL CEMENT PLANT
<TABLE>
<S> <C> <C>
Date: 04 Feb 1991
Acquiror: Blue Circle Industries Plc
Transaction Description: Acquired the Gifford-Hill cement plant from Beazer for $60.7 million in cash. The
sale was a further step in Beazer's program to reduce its debt.
Target Description: The Gifford-Hill plant located at Harleyville, South Carolina was commissioned in
1974 and can produce 690,000 tons of cement per year; utilize a dry process.
Transaction Summary: Transaction Value: $60.7 million
Production Capacity acquired: 690,000 tons
Price/s.t. of production capacity: $87.97
</TABLE>
[Logo]Merrill Lynch 'Holderbank'
<PAGE>
PROJECT CROSSROADS
CASE STUDY V: MISSOURI PORTLAND CEMENT AND DAVENPORT CEMENT
<TABLE>
<S> <C> <C>
Date: 17 December 1990
Acquiror: Lafarge Corporation
Transaction Description: Acquired certain cement production and distribution, construction materials and
admixture businesses in the United States from Cementia Holdings, which is 60%
owned by Lafarge Copee (France), parent of Lafarge, Asland S.A. and certain of
their affiliates for about $160.6 million.
Target Description: Operates three cement plants in Grand Chain, IL (two kilns built in 1963 and
1975 -- dry process), Sugar Creek, MO (two kilns built in 1953 and 1957 -- dry
process), and Buffalo, IA (one kiln built in 1981 -- dry process), with a total
capacity of 2.6 million tons and 16 distribution terminals along the Mississippi.
Also maintains about 30 related ready-mix and aggregate operations as well as
Prochem Technology, Inc., a chemical admixtures business. The plants are
dry-process cement operations.
Transaction Summary: Transaction Value: $147.7 million
Production Capacity acquired: 2.6 million tons
Price/s.t. of production capacity: $56.81
</TABLE>
[Logo]Merrill Lynch 'Holderbank'
<PAGE>
PROJECT CROSSROADS
CASE STUDY VI: PACIFIC COAST CEMENT CO. (LONE STAR INDUSTRIES INC)
<TABLE>
<S> <C> <C>
Date: 07 June 90
Acquiror: Cementos Mexicanos SA
Transaction Description: Cemex acquired a 50% stake in Pacific Coast Cement from Lone Star Industries for
$40 million. The transaction has been subject to compliance with regulatory
requirements.
Target Description: Capacity estimated at approximately .9 million tons of cement per year. The kiln
was commissioned in 1981 and utilizes a dry process.
Transaction Summary: Transaction Value: $80 million
Production Capacity acquired: 900,000 tons
Price/s.t. of production capacity: $88.89
</TABLE>
[Logo]Merrill Lynch 'Holderbank'
<PAGE>
G
<PAGE>
PROJECT CROSSROADS
GLOSSARY
<TABLE>
<S> <C>
'NOLs' Net Operating Loss carry forwards
'DCF' Discounted Cash Flow
'Free Cash Flow' Cash Flow before Financing Activities
'NPV' Net Present Value
'WACC' Weighted Average Cost of Capital
'EBIT' Earnings before Interests and Taxes
'EBITDA' Earnings before Interests, Taxes, Depreciation and Amortisation
'PP&E' Property, Plant & Equipment
'EPS' Earnings per Share
'Market Cap.' Market Capitalisation = Market Value + Preferred Equity at Liquidation Value (Incl.
Redeemable) + Net Debt + Minority Interest
'TLP' Texas Limited Partnership
'PCA' Portland Cement Association
's.t.' short tons
'm.t.' metric tons
</TABLE>
[Logo]Merrill Lynch 'Holderbank'
