<PAGE>
File No. 005-48641
As filed with the Securities and Exchange Commission on June 8, 1999
================================================================================
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)
---------------
J. RAY MCDERMOTT, S.A.
(Name of Issuer)
---------------
MCDERMOTT INTERNATIONAL, INC.
MCDERMOTT ACQUISITION COMPANY, INC.
J. RAY MCDERMOTT, S.A.
(Name of Person(s) Filing Statement)
---------------
Common Stock, Par Value $0.01 Per Share
(Title of Class of Securities)
---------------
P 64658 10 0
(CUSIP Number of Class of Securities)
---------------
S. Wayne Murphy Robert H. Rawle
McDermott International, Inc. J. Ray McDermott, S.A.
1450 Poydras Street 1450 Poydras Street
New Orleans, LA 70161 New Orleans, LA 70161
Telephone: (504) 587-5400 Telephone: (504) 587-5400
(Name, Address and Telephone Number of Persons Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
---------------
With Copies to:
Christopher Mayer R. Joel Swanson
Davis Polk & Wardwell Baker & Botts, L.L.P.
450 Lexington Avenue One Shell Plaza
New York, New York 10017 Houston, Texas 77002-4995
Telephone: (212) 450-4000 Telephone: (713) 229-1234
<PAGE>
This Amendment No. 1 ( "Amendment No. 1") amends and supplements the Rule 13e-
3 Transaction Statement on Schedule 13E-3 (the "Schedule 13E-3") originally
filed with the Securities and Exchange Commission (the "Commission") on May 13,
1999 by (i) McDermott International, Inc., a Panama corporation ("Parent"), (ii)
McDermott Acquisition Company, Inc., a Panama corporation ("Purchaser") and a
wholly-owned subsidiary of Parent, and (iii) J. Ray McDermott, S.A., a Panama
corporation (the "Company"), relating to the offer by Purchaser to purchase all
outstanding shares of common stock, par value $0.01 per share (the "Shares"), of
the Company (other than shares beneficially owned by Parent), at a price of
$35.62 per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated May 13, 1999 (the "Offer to
Purchase") and the related Letter of Transmittal.
On May 13, 1999, Parent and Purchaser filed a Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1"), as amended by Amendment No. 1 to the
Schedule 14D-1 filed with the Commission on May 14, 1999 and by Amendment No. 2
("Amendment No. 2") to the Schedule 14D-1 filed with the Commission on June 7,
1999. The information set forth in Amendment No 2 to the Schedule 14D-1,
including all exhibits thereto, is hereby expressly incorporated by reference.
All capitalized terms used in this Amendment No. 1 without definition have the
meanings attributed to them in the Schedule 13E-3.
The items of the Schedule 13E-3 set forth below are hereby amended as follows:
Item 1. Issuer and Class of Security Subject to the Transaction
Item 1(f) of the Schedule 13E-3 is hereby amended and supplemented by adding
the following to the end thereof:
The information set forth in the last paragraph of "Certain Projections" under
"Certain Information Concerning the Company" of the Offer to Purchase is hereby
amended and supplemented by the amended response to Item 3 of Amendment No. 2 to
the Schedule 14D-1, which is incorporated herein by reference.
Item 2. Identity and Background
Item 2 of the Schedule 13E-3 is hereby amended and supplemented by adding the
following to the end thereof:
The information set forth in the last paragraph of "Certain Projections" under
"Certain Information Concerning the Company" of the Offer to Purchase is hereby
amended and supplemented by the amended response to Item 3 of Amendment No. 2 to
the Schedule 14D-1, which is incorporated herein by reference.
The information set forth in Schedules I and II of the Offer to Purchase is
hereby amended and supplemented by the amended response to Item 2 of Amendment
No. 2 to the Schedule 14D-1, which is incorporated herein by reference.
Item 3. Past Contacts, Transactions or Negotiations
Item 3 of the Schedule 13E-3 is hereby amended and supplemented by adding the
following to the end thereof:
The amended response to Item 3 of Amendment No. 2 to the Schedule 14D-1 is
incorporated herein by reference.
Item 4. Terms of the Transaction
Item 4(a) of the Schedule 13E-3 is hereby amended and supplemented by adding
the following to the end thereof:
2
<PAGE>
The information set forth in "Background of the Offer; Recommendation of the
Independent Committee and the Company Board" of the Offer to Purchase is hereby
amended and supplemented by the amended response to Item 3 of Amendment No. 2 to
the Schedule 14D-1, which is incorporated herein by reference.
The information set forth in the first paragraph of "Increased Interest in Net
Book Value and Net Earnings of the Company" under "Certain Effects of the Offer"
of the Offer to Purchase is hereby amended and supplemented by the amended
response to Item 5 of Amendment No. 2 to the Schedule 14D-1, which is
incorporated herein by reference.
Item 5. Plans or Proposals of the Issuer or Affiliate
Item 5 of the Schedule 13E-3 is hereby amended and supplemented by adding the
following to the end thereof:
The amended response to Item 5 of Amendment No. 2 to the Schedule 14D-1 is
incorporated herein by reference.
Item 7. Purpose(s), Alternatives, Reasons and Effects
Item 7(a) of the Schedule 13E-3 is hereby amended and supplemented by adding
the following to the end thereof:
The amended response to Item 5 of Amendment No. 2 to the Schedule 14D-1 is
incorporated herein by reference.
Item 7(b) of the Schedule 13E-3 is hereby amended and supplemented by adding
the following to the end thereof:
The information set forth in "Background of the Offer; Recommendation of the
Independent Committee and the Company Board" and "Purpose and Structure of the
Offer and the Merger; Reasons of Parent for the Offer and the Merger" of the
Offer to Purchase is hereby amended and supplemented by the amended response to
Item 3 of Amendment No. 2 to the Schedule 14D-1, which is incorporated herein by
reference.
The information set forth in "Fairness of the Offer and the Merger" of the
Offer to Purchase is hereby amended and supplemented by the amended response to
Item 10 of Amendment No. 2 to the Schedule 14D-1, which is incorporated herein
by reference.
Item 7(c)-(d) of the Schedule 13E-3 is hereby amended and supplemented by
adding the following to the end thereof:
The information set forth in "Background of the Offer; Recommendation of the
Independent Committee and the Company Board" and "Purpose and Structure of the
Offer and the Merger; Reasons of Parent for the Offer and the Merger" of the
Offer to Purchase is hereby amended by the amended response to Item 3 of
Amendment No. 2 to the Schedule 14D-1, which is incorporated herein by
reference.
The information set forth in "Fairness of the Offer and the Merger" and
"Position of Parent and Purchaser Regarding Fairness of the Offer and the
Merger" of the Offer to Purchase is hereby amended and supplemented by the
amended response to Item 10 of Amendment No. 2 to the Schedule 14D-1, which is
incorporated herein by reference.
The information set forth in the first paragraph of "Increased Interest in Net
Book Value and Net Earnings of the Company" under "Certain Effects of the Offer"
of the Offer to Purchase is hereby amended and supplemented by the amended
response to Item 5 of Amendment No. 2 to the Schedule 14D-1, which is
incorporated herein by reference.
Item 8. Fairness of the Transaction
Item 8(a)-(e) of the Schedule 13E-3 is hereby amended and supplemented by
adding the following to the end thereof:
3
<PAGE>
The information set forth in "Background of the Offer; Recommendation of the
Independent Committee and the Company Board" and "Purpose and Structure of the
Offer and the Merger; Reasons of Parent for the Offer and the Merger" of the
Offer to Purchase is hereby amended and supplemented by the amended response to
Item 3 of Amendment No. 2 to the Schedule 14D-1, which is incorporated herein by
reference.
The information set forth in "Fairness of the Offer and the Merger" and
"Position of Parent and Purchaser Regarding Fairness of the Offer and the
Merger" of the Offer to Purchase is hereby amended and supplemented by the
amended response to Item 10 of Amendment No. 2 to the Schedule 14D-1, which is
incorporated herein by reference.
Item 9. Reports, Opinions, Appraisals And Certain Negotiations
Item 9 of the Schedule 13E-3 is hereby amended and supplemented by adding the
following to the end thereof:
The information set forth in "Background of the Offer; Recommendation of the
Independent Committee and the Company Board" of the Offer to Purchase is hereby
amended and supplemented by the amended response to Item 3 of Amendment No. 2 to
the Schedule 14D-1, which is incorporated herein by reference.
The information set forth in "Fairness of the Offer and the Merger" and
"Position of Parent and Purchaser Regarding Fairness of the Offer and the
Merger" of the Offer to Purchase is hereby amended and supplemented by the
amended response to Item 10 of Amendment No. 2 to the Schedule 14D-1, which is
incorporated herein by reference.
The information set forth in "Opinion of Financial Advisor to the Independent
Committee" and "Opinion of Financial Advisor to the Finance Committee" of the
Offer to Purchase is hereby amended and supplemented by the amended response to
Item 8 of Amendment No. 2 to the Schedule 14D-1, which is incorporated herein by
reference.
Item 10. Interest in Securities of the Issuer
Item 10 of the Schedule 13E-3 is hereby amended and supplemented by adding the
following to the end thereof:
The amended response to Item 6 of Amendment No. 2 to the Schedule 14D-1 is
incorporated herein by reference.
Item 11. Contracts, Arrangements or Understandings with Respect to the Issuer's
Securities
Item 11 of the Schedule 13E-3 is hereby amended and supplemented by adding the
following to the end thereof:
The amended response to Item 7 of Amendment No. 2 to the Schedule 14D-1 is
incorporated herein by reference.
Item 14. Financial Information
Item 14 of the Schedule 13E-3 is hereby amended and supplemented by adding the
following to the end thereof:
The information set forth in the last paragraph of "Certain Projections" under
"Certain Information Concerning the Company" of the Offer to Purchase is hereby
amended and supplemented by the amended response to Item 3 of Amendment No. 2 to
the Schedule 14D-1, which is incorporated herein by reference.
Item 15. Persons and Assets Employed, Retained or Utilized
Item 15(a) of the Schedule 13E-3 is hereby amended and supplemented by adding
the following to the end thereof:
The information set forth in "Background of the Offer; Recommendation of the
Independent Committee and the Company Board" of the Offer to Purchase is hereby
amended and supplemented by the amended response to Item 3 of Amendment No. 2 to
the Schedule 14D-1, which is incorporated herein by reference.
4
<PAGE>
The information set forth in the first paragraph of "Increased Interest in Net
Book Value and Net Earnings of the Company" under "Certain Effects of the Offer"
of the Offer to Purchase is hereby amended and supplemented by the amended
response to Item 5 of Amendment No. 2 to the Schedule 14D-1, which is
incorporated herein by reference.
Item 15(b) of the Schedule 13E-3 is hereby amended and supplemented by adding
the following to the end thereof:
The amended response to Item 8 of Amendment No. 2 to the Schedule 14D-1 is
incorporated herein by reference.
Item 16. Additional Information
Item 16 of the Schedule 13E-3 is hereby amended and supplemented by adding the
following to the end thereof:
The amended response to Item 10(f) of Amendment No. 2 to the Schedule 14D-1 is
incorporated herein by reference.
Item 17. Material to be Filed as Exhibits.
(b)(5) Materials Presented by Simmons on March 4, 1999
(b)(6) Materials Presented by Simmons on March 4, 1999
(b)(7) Materials Presented by Simmons on March 4, 1999
(b)(9) Materials Presented by Simmons on March 4, 1999
(b)(10) Materials Presented by Simmons on March 4, 1999
(b)(11) Materials Presented by Simmons on April 1, 1999
(b)(12) Materials Presented by Simmons on April 1, 1999
(b)(13) Materials Presented by Simmons on April 13, 1999
(b)(14) Materials Presented by Simmons on April 29, 1999
(b)(15) Materials Presented by Simmons on May 4, 1999
(b)(16) Materials Presented by Simmons on May 4, 1999
(b)(17) Materials Presented by Simmons on May 5, 1999
(b)(18) Presentation of Merrill Lynch, Pierce, Fenner & Smith Incorporated,
dated February 1, 1999.
(b)(19) Presentation of Merrill Lynch, Pierce, Fenner & Smith Incorporated,
dated March 15, 1999.
(b)(20) Presentation of Merrill Lynch, Pierce, Fenner & Smith Incorporated,
dated April 8, 1999.
5
<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.
Date: June 8, 1999
MCDERMOTT INTERNATIONAL, INC.
By: /s/ S. W. Murphy
------------------------------------
Name: S. W. Murphy
Title: Senior Vice President, General Councel
and Corporate Secretary
MCDERMOTT ACQUISITION COMPANY, INC.
By: /s/ Daniel R. Gaubert
------------------------------------
Name: Daniel R. Gaubert
Title: Treasurer
J. RAY MCDERMOTT, S.A.
By: /s/ R. H. Rawle
------------------------------------
Name: R. H. Rawle
Title: President and Chief Operating Officer
6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
(b)(5) Materials Presented by Simmons on March 4, 1999
(b)(6) Materials Presented by Simmons on March 4, 1999
(b)(7) Materials Presented by Simmons on March 4, 1999
(b)(9) Materials Presented by Simmons on March 4, 1999
(b)(10) Materials Presented by Simmons on March 4, 1999
(b)(11) Materials Presented by Simmons on April 1, 1999
(b)(12) Materials Presented by Simmons on April 1, 1999
(b)(13) Materials Presented by Simmons on April 13, 1999
(b)(14) Materials Presented by Simmons on April 29, 1999
(b)(15) Materials Presented by Simmons on May 4, 1999
(b)(16) Materials Presented by Simmons on May 4, 1999
(b)(17) Materials Presented by Simmons on May 5, 1999
(b)(18) Presentation of Merrill Lynch, Pierce, Fenner & Smith Incorporated, dated February 1, 1999.
(b)(19) Presentation of Merrill Lynch, Pierce, Fenner & Smith Incorporated, dated March 15, 1999.
(b)(20) Presentation of Merrill Lynch, Pierce, Fenner & Smith Incorporated, dated April 8, 1999.
</TABLE>
<PAGE>
EXHIBIT 99(B)(5)
DRAFT
-----
CONFIDENTIAL
------------
Project Big Mac
Discussion Materials Prepared For
The Independent Committee Of the Board Of Directors
SIMMONS & COMPANY
INTERNATIONAL
MARCH 1999
TABLE OF CONTENTS
-----------------
TAB
---
STATUS UPDATE............................................................. A
JUPITER VALUATION ANALYSIS................................................ B
MARS VALUATION ANALYSIS................................................... C
ANALYSIS OF POTENTIAL COMBINATION......................................... D
STRATEGIC ALTERNATIVES.................................................... E
TRANSMITTAL LETTER
This confidential memorandum ("Memorandum") has been prepared by Simmons &
Company International ("Simmons") for the Independent Committee of the Board of
Directors of Jupiter and Mars (the "Proposed Transaction").
This Memorandum is intended as background information for use by the
Independent Committee and does not purport to be all- inclusive or to contain
all of the information which the Independent Committee may desire or need to
evaluate the Proposed Transaction.
In preparing this Memorandum, Simmons has relied on publicly avaliable financial
and market information as well as internal information provided by Mars and
Jupiter. Simmons has not independently verified such information but has relied
on its preparers for its accuracy and completeness. Simmons, therefore, make no
express or implied warranty with respect to the accuracy or completeness of the
information is provided herein. Financial projections presented herein are
based on managements' and third-party analyses of information available at the
time this Memorandum was prepared, and there is no express or impiled warranty
that any of the projections will be realized.
SIMMONS & COMPANY INTERNATIONAL
March 1999
1
<PAGE>
- --------------------------------------------------------------------------------
Status Update
- --------------------------------------------------------------------------------
2
<PAGE>
Status Update
- --------------------------------------------------------------------------------
o Mars has indicated that it may make an offer to acquire the outstanding
publicly traded shares of Jupiter.
o The Independent Committee of the Board of Directors of Jupiter has been
tasked with analyzing any offer which is received and advising the public
shareholders of Jupiter of the merits, if any, of a proposal. Simmons has
been retained by the Independent Committee to assist in this process.
o Simmons has reviewed and analyzed certain detailed internal information of
Mars and Jupiter.
o Simmons has met with Robert H. Rawle, President and Chief Operating
Officer of Jupiter and John Krueger, Vice President-Planning and Business
Development of Jupiter, and discussed the business and outlook for the
Company.
o We have also had limited discussions with Daniel Gaubert, Senior Vice
President and Chief Financial Officer of Mars and Jupiter, regarding the
business of both companies.
o Simmons has also utilized internal and external sources of information
during its analysis.
o We have not, however, been permitted to meet with or talk to the senior
operating management of Mars' divisions. Nor have we been permitted to
discuss certain litigation issues with relevant Mars management.
o Simmons is working towards the goal of being ready to analyze a proposal,
if or when made, and advise the Independent Committee of its merits.
3
<PAGE>
- --------------------------------------------------------------------------------
Jupiter Valuation Analysis
- --------------------------------------------------------------------------------
4
<PAGE>
Summary Of Jupiter Capitalization At March 1, 1999
- --------------------------------------------------------------------------------
(Amounts in millions, except per share)
Cash $ 123.3
Pro Forma Investments In Debt Securities1 522.1
---------
Total Cash 645.4
Less: Operating Cash2 (72.3)
---------
Excess Cash $ 573.1
=========
Common Shares3 39.3
Share Price $ 20.88
Pro Forma Debt1 50.7
Antitrust Liability --4
Preferred Stock Market Value 160.0
Common Equity Market Value 819.9
---------
Total Market Capitalization 1,030.6
Less: Excess Cash $ (573.1)
---------
Adjusted Market Capitalization $ 457.5
=========
Common Equity Market Capitalization $ 819.9
Less: Excess Cash (573.1)
---------
Adjusted Equity Market Capitalization $ 246.8
=========
Pro Forma Shareholders' Equity $ 703.1
Pro Forma Debt 50.7
---------
Total Book Capitalization 753.8
Less: Excess Cash (573.1)
---------
Adjusted Book Capitalization $ 180.7
=========
- ----------
1 Assumes paydown of $200 million of $250 million outstanding 9 3/8 percent
senior subordinated notes at a total cost of $230 million.
2 Calculated as 5 percent of trailing 12 months' revenues.
3 Includes approximately 233,000 shares representing options on a treasury
basis.
4 To be determined in aggregate and allocated between Jupiter and Mars, as
appropriate.
5
<PAGE>
Historical Stock Prices For Jupiter
- --------------------------------------------------------------------------------
[Graph of the Company's daily stock price close from March 1, 1995 to
March 3, 1999; closing stock prices at March 1, 1995, 1996, 1997 and 1998 and
March 3, 1999 were $22.38, $18.00, $23.38, $42.44 and $20.88, respectively]
Source: Bloomberg Financial Services.
6
<PAGE>
Performance Of Jupiter Relative To Comparable Companies
- --------------------------------------------------------------------------------
[Graph of the Company's weekly stock price close indexed to January 5,
1995 compared with the daily stock price closes indexed to (equal to 100 on)
January 5, 1996 for Bouygues Offshore, Cal-Dive International, Coflexip-Stena,
Global Industries, Horizon Offshore, Gulf Island, Oceaneering and Stolt Comex
("Comparable Offshore Construction Companies") from January 5, 1996 to March 3,
1999: stock price indices for the above comparable companies on March 3, 1999
were 171, 178, 145, 136, 155, 147, 80 and 227, respectively, and for the
Company's stock price was 112.]
Source: Bloomberg Financial Services.
7
<PAGE>
Jupiter Relative To Market Indices
- --------------------------------------------------------------------------------
o Jupiter has generally tracked the OSX1 since January 1996.
[Graph of the Company's daily stock price close indexed to January 5,
1996 compared with the daily stock price closes indexed to (equal to 1 on)
January 5, 1996 of an index of the Comparable Offshore Construction Companies,
the Oil Service Index ("OSX") and the Dow Jones Industrial Average from January
5, 1996 to March 3, 1999; the values of the above indices at March 3, 1999 were
1.68, 1.13, and 1.76, respectively, and the Company's stock price was 1.34]
Source: Factset. Index Consists of: Bouygues, Cal Dive, Coflexip, Global, Gulf
Island, Horizon Offshore, Oceaneering and Stolt Comex. Indexed as of January 2,
1996.
- ----------
8
<PAGE>
1 Index of 15 large oil service companies used to price options on the
Philadelphia Exchange.
9
<PAGE>
Summary Descriptions Of Offshore Construction Companies1
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
Name Description
- --------------------------------- --------------------------------------------
Bouygues Offshore S.A. Designs, constructs, installs and manages
("Bouygues") onshore and offshore oil and gas
production-related turnkey projects. Also
provides maintenance services for
refineries, petrochemical plants and
offshore platforms, engages in maritime and
river-related civil projects and designs and
constructs liquefied natural gas terminals
and storage tanks. Operates a fleet of two
jackup barges, two pipelay/derrick barges,
two pipelay barges, a derrick barge and five
other barges. Focuses on Africa, Europe and
Asia Pacific. Based in France.
Cal Dive International, Inc. Provides construction, maintenance,
("Cal Dive") decommissioning, abandonment and salvage
services in the U.S. GOM. Construction fleet
includes one semisubmersible DP DSV, a
deepwater service barge, two moored
saturation MSVs, three other DSVs, two ROVs
and a salvage barge. Based in Houston,
Texas.
Coflexip SA Provides design, engineering, procurement,
("Coflexip") construction and project management services
for subsea oil and gas projects. Designs and
manufactures flexible pipe and transmission
cables. Focuses mainly in the North Sea with
smaller operations in Brazil, Asia Pacific,
West Africa and the U.S. GOM. Operates a
fleet of four pipelay vessels and seven
subsea construction vessels. Based in
France.
Global Industries, Ltd. Provides pipeline construction, platform
("Global") installation and removal, diving services
and construction support services primarily
in the U.S. GOM with smaller operations in
West Africa, Asia Pacific, the Middle East
and Latin America. Operates a fleet of 17
pipelay/derrick barges, 4 derrick barges, 2
pipelay barges, 22 liftboats, 24 DSV/OSVs
and a SWATH vessel and 5 other support
vessels. Based in Louisiana.
Gulf Island Fabrication, Inc. Fabricates offshore drilling and production
("Gulf Island") platforms and other specialized structures
used in the development of offshore oil and
gas reserves including jackets, deck
sections, hulls, piles and well protectors.
Focuses primarily on the U.S. GOM with
smaller operations in West Africa and Latin
America. Based in Louisiana.
Horizon Offshore, Inc. Provides marine construction services to the
("Horizon Offshore") offshore oil and gas industry primarily in
the United States Gulf of Mexico. The
company's marine fleet is used primarily to
install marine pipelines to transport oil
and gas from newly installed production
platforms and other subsea production
systems. Based in Houston, Texas.
Oceaneering International, Inc. Provides underwater intervention and above
("Oceaneering") water inspection, maintenance and repair
services for offshore platforms, pipelines
and subsea equipment. Also provides
engineers, procures, constructs and operates
FPSOs and ultra-deepwater ROVs. Focuses in
the U.S. GOM with smaller operations in
Europe, West Africa and Asia Pacific.
Operates the largest fleet of ROVs in the
world. Based in Houston, Texas.
Stolt Comex Seaway, S.A. Provides seabed survey and subsea drilling
("Stolt") support services as well as subsea
engineering, procurement, installation,
commissioning, maintenance, repair and
decommissioning services to the offshore oil
and gas industry. Focuses mainly on the
North Sea with smaller operations in Africa,
the Middle East, Asia Pacific, South America
and the U.S. GOM. Operates a fleet of 1
flowline vessel, 3 flowline/subsea
construction vessels, 26 DSVs (21 from
Ceanic), a heavy lift crane barge and 3
other vessels. Based in Scotland.
- ----------
10
<PAGE>
1 Fleet statistics from the latest annual report. Stolt is adjusted for the
acquisition of Ceanic.
11
<PAGE>
Summary Descriptions Of Oil Service Companies
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
Name Description
- --------------------------------- --------------------------------------------
BJ Services Co. Provides pressure pumping services
("BJ Services") consisting of well stimulation, cementing,
sand control and coiled tubing services used
in the completion of new oil and natural gas
wells and in remedial work on existing
wells, both onshore and offshore. Other
oilfield services include casing and tubular
services provided to the oil and gas
exploration and production industry,
commissioning and inspection services
provided to refineries, pipelines and
offshore platforms, specialty chemical
services and downhole tools. Based in
Houston, Texas.
Cooper Cameron Corporation Manufacturer of oil and gas pressure control
("Cooper Cameron") equipment, including valves, wellheads,
chokes, blowout preventers and assembled
systems for oil and gas drilling, production
and transmission used in onshore, offshore
and subsea applications. Cooper Cameron is
also a leading manufacturer of gas turbines,
centrifugal gas and air compressors,
integral and separable reciprocating
engines, compressors and turbochargers.
Based in Houston, Texas.
National-Oilwell, Inc. Designs, manufactures and sells machinery
("National-Oilwell") and equipment and in the distribution of
maintenance, repair and operating ("MRO")
products used in oil and gas drilling and
production. Machinery and equipment include
drawworks, mud pumps and power swivels,
which are the major mechanical components of
rigs used to drill oil and gas wells. many
of these components are designed
specifically for applications in offshore,
extended reach and deep land drilling. Based
in Houston, Texas.
Smith International, Inc. Provides a comprehensive line of
("Smith International") technologically advanced products and
engineering services, including drilling and
completion fluid systems, solids control
equipment, waste management services,
three-cone drill bits, diamond drill bits,
fishing services, drilling tools,
underreamers, sidetracking systems and liner
hangers. Based in Houston, Texas.
Tidewater, Inc. Provides offshore supply vessels and marine
("Tidewater") support services serving the energy
industry. With a fleet of approximately 700
vessels, the company operates, and has a
leading market share, in most of the world's
significant oil and gas exploration and
production markets and provides services
supporting all phases of offshore
exploration, development and production.
Based in Louisiana.
12
<PAGE>
Summary Descriptions Of Engineering And Construction ("E&C") Companies
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
Name Description
- --------------------------------- --------------------------------------------
Fluor Corp. Provides design, engineering, procurement,
("Fluor") construction, maintenance and other
diversified services on a worldwide basis to
an extensive range of industrial,
commercial, utility, natural resources,
energy and governmental clients. Based in
California.
Foster Wheeler Corp. Designs, engineers and constructs petroleum,
("Foster Wheeler") chemical and petrochemical facilities
including power generation and distribution
facilities, water treatment facilities and
process plants. Also designs and
manufactures steam generating and auxiliary
equipment including boilers and steam
condensers. Builds, owns and operates power
co-generation and independent power
generation and process facilities. Focuses
on the U.S., Europe, China, Southeast Asia
and the Middle East. Based in New Jersey.
Granite Construction Inc. The largest transportation contractor in the
("Granite") U.S. concentrating on roads, highways,
bridges, dams, tunnels, mass transit
facilities and airports. Also constructs
buildings, plants and subdivisions as well
as owns and operates 108 construction
material processing plants. Based in
California.
Morrison Knudsen Corp. Provides international engineering and
("Morrison Knudsen") construction management services to
industrial companies, electric utilities and
public agencies. Constructs highways,
airports and railways. Provides
environmental and hazardous material
remediation and contract mining and mine
planing services. Based in Idaho.
Stone & Webster Inc. Provides complete engineering, design,
("Stone & Webster") construction and full environmental services
for power, process, governmental,
industrial, transportation and civil works
projects. Based in Boston, Massachusetts.
13
<PAGE>
Summary Financial Performance Of Comparable Companies
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Offshore Construction Companies
------------------------------------------------------------------------------------------
Gulf Horizon
Bouygues Cal Dive Coflexip Global1 Island Offshore Oceaneering Stolt
-------- -------- -------- -------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TTM Ended 6/30/98 9/30/98 9/30/98 9/30/98 9/30/98 9/30/98 9/30/98 11/30/98
Current Year Ended 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 3/31/99 11/30/99
Adjusted Market Value $ 310.3 $ 192.4 $1,082.2 $ 700.2 $ 75.6 $ 163.5 $ 325.1 $ 600.3
Adjusted Book Value NMF 89.4 578.0 605.8 65.6 152.5 262.4 629.0
TTM Results
Revenues $ 832.8 $ 148.1 $1,320.9 $ 420.7 $ 184.2 $ 101.7 $ 381.3 $ 766.4
Gross Profit 130.9 56.9 403.8 156.4 37.9 27.6 107.2 182.0
Gross Margin 15.7% 38.4% 30.6% 37.2% 20.6% 27.1% 28.1% 23.7%
EBITDA 48.5 41.4 296.5 131.2 31.9 20.7 66.4 115.4
EBITDA Margin 5.8% 28.0% 22.4% 31.2% 17.3% 20.3% 17.4% 15.1%
Net Income 37.7 23.8 137.4 55.0 17.7 10.1 23.8 49.2
Net Income Margin 4.5% 16.1% 10.4% 13.1% 9.6% 9.9% 6.2% 6.4%
Cash Flow 54.7 32.3 219.3 93.9 21.6 13.4 50.3 95.9
Cash Flow Margin 6.6% 21.8% 16.6% 22.3% 11.7% 13.2% 13.2% 12.5%
Projected Results2
1998 EBITDA $ 53.6 $ 41.9 $ 280.7 $ 116.9 $ 32.8 $ 27.5 $ 72.3 N/A
1999 EBITDA 62.3 34.0 265.3 85.2 21.7 22.3 74.6 $ 132.5
2000 EBITDA N/A 40.5 N/A 112.6 25.3 15.1 N/A 152.8
1998 Net Income 42.3 23.4 124.4 49.6 18.7 13.7 25.3 N/A
1999 Net Income 50.4 18.3 114.4 29.0 11.5 10.3 26.6 53.4
2000 Net Income N/A 22.6 N/A 46.8 13.8 15.9 N/A 66.6
1998 Cash Flow 58.8 32.0 213.7 79.7 22.9 17.8 53.5 N/A
1999 Cash Flow 66.9 26.9 203.7 59.1 15.6 14.5 54.8 100.1
2000 Cash Flow N/A 31.1 N/A 76.9 18.0 20.0 N/A 113.3
<CAPTION>
Oil Service Companies
-------------------------------------------------------------------
BJ Cooper National- Smith
Services Cameron Oilwell International Tidewater Jupiter
-------- -------- --------- ------------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
TTM Ended 12/31/98 9/30/98 9/30/98 9/30/98 12/31/98 3/31/99
Current Year Ended 9/30/99 12/31/98 12/31/98 12/31/98 3/31/99 3/31/99
Adjusted Market Value $1,445.1 $1,855.2 $ 695.2 $1,967.8 $1,130.7 $ 457.5
Adjusted Book Value 1,390.0 1,250.3 578.2 1,422.6 1,010.7 180.7
TTM Results
Revenues $1,406.5 $1,941.4 $1,257.3 $2,247.0 $1,013.8 $1,293.0
Gross Profit 285.4 582.0 321.9 760.8 471.1 271.4
Gross Margin 20.3% 30.0% 25.6% 33.9% 46.5% 21.0%
EBITDA 236.8 340.4 179.7 347.2 397.8 161.3
EBITDA Margin 16.8% 17.5% 14.3% 15.5% 39.2% 12.5%
Net Income 80.3 164.3 88.1 133.4 220.8 113.6
Net Income Margin 5.7% 8.5% 7.0% 5.9% 21.8% 8.8%
Cash Flow 173.7 235.4 111.4 200.4 308.2 169.6
Cash Flow Margin 12.3% 12.1% 8.9% 8.9% 30.4% 13.1%
Projected Results2
1998 EBITDA $ 318.7 $ 340.1 $ 179.6 $ 309.5 $ 380.5 $ 161.3
1999 EBITDA 193.4 210.2 100.1 220.5 205.9 99.8
2000 EBITDA 229.1 233.2 111.2 252.2 N/A 108.5
1998 Net Income 117.2 153.4 82.7 101.5 194.6 113.6
1999 Net Income 35.8 68.9 33.4 43.6 81.2 45.8
2000 Net Income 59.0 83.9 40.3 64.2 N/A 58.5
1998 Cash Flow 224.7 224.5 105.9 170.4 289.9 169.6
1999 Cash Flow 143.3 140.0 56.6 112.6 176.4 101.2
2000 Cash Flow 166.5 155.0 63.5 133.2 N/A 106.3
</TABLE>
Note: Calendar years for comparable companies are compared to next fiscal year
(March 31 year-end) for Jupiter and Mars in this document.
- ----------
1 Global is changing its year end to December.
2 Source: First Call.
Relative Revenue Growth Performance: Jupiter
- --------------------------------------------------------------------------------
[Graph of 5-year, 3-year and 1-year revenue compounded annual growth rates
Comparing the Company with the Comparable Offshore Construction Companies and
Cooper Cameron, National Oilwell, Tidewater, BJ Services and Smith International
(Comparable Oil Service Companies) the 5-year, 3-year and 1-year average revenue
growth rates for the Company were 2.8%, 0.9% and (30.3%), respectively, compared
to ranges of 9.4% to 41.3%, 12.7% to 59.4% and 6.5% to 53.1%, respectively, for
the Comparable Offshore Construction Companies and ranges of 7.0% to 57.2%,
18.0% to 34.3% and (8.8%) to 27.0%, respectively for the Comparable Oil Service
Companies]
- ----------
1 Excludes Horizon Offshore.
14
<PAGE>
Relative Profitability Performance: Jupiter
- --------------------------------------------------------------------------------
[Graphs of 5-year, 3 year and 1 year EBITDA margin averages comparing the
Company with the Comparable Offshore Construction Companies and Stone & Webster,
Morrison Knudsen, Fluor, Foster Whealer and Granite ("Comparable E&C
Companies"), the 5-year, 3-year and 1-year average EBITDA margins for the
Company were 10.4%, 9.8% and 12.5%, respectively, compared to ranges of 6.7% to
28.5%, 6.2% to 30.1% and 5.1% to 31.5%, respectively, for the Comparable
Offshore Construction Companies and ranges of 2.7% to 7.6%, 4.4% to 7.7% and
3.8% to 8.0%, respectively, for the Comparable E&C Companies]
- ----------
1 Excludes Horizon Offshore.
15
<PAGE>
Summary Valuation Multiples Of Comparable Companies
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Offshore Construction Companies
----------------------------------------------------------------------------------
Horizon Gulf
Bouygues Cal Dive Coflexip Global Offshore Island Oceaneering Stolt
-------- -------- -------- ------ -------- ------ ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Adjusted Market Value To:
Adjusted Book Value NMF 2.2x 1.9x 1.2x 1.1x 1.2x 1.2x 1.0x
1998 EBITDA 5.8x 4.6x 3.9x 6.0x 5.9x 2.3x 4.5x 5.2x
1999 EBITDA 5.0x 5.7x 4.1x 8.2x 7.3x 3.5x 4.4x 4.5x
2000 EBITDA N/A 4.7x N/A 6.2x 10.8x 3.0x N/A 3.9x
Equity Value To:
1998 Net Income 10.7x 9.0x 8.6x 9.7x 8.1x 4.0x 9.3x 7.7x
1999 Net Income 9.0x 11.5x 9.3x 16.5x 10.7x 6.6x 8.8x 7.1x
2000 Net Income N/A 9.4x N/A 10.3x 7.0x 5.5x N/A 5.7x
1998 Cash Flow 7.7x 6.6x 5.0x 6.0x 6.2x 3.3x 4.4x 4.0x
1999 Cash Flow 6.7x 7.9x 5.2x 8.1x 7.6x 4.8x 4.3x 3.8x
2000 Cash Flow N/A 6.8x N/A 6.2x 5.5x 4.2x N/A 3.3x
<CAPTION>
Oil Service Companies Jupiter
---------------------------------------------------------------------------
BJ Cooper National- Smith
Services Cameron Oilwell International Tidewater Initial1 Revised2
-------- ------- ------- ------------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Adjusted Market Value To:
Adjusted Book Value 1.0x 1.5x 1.2x 1.4x 1.1x 2.5x
1998 EBITDA 4.5x 5.5x 3.9x 6.4x 3.0x 2.8x
1999 EBITDA 7.5x 8.8x 6.9x 8.9x 5.5x 6.3x 5.0x
2000 EBITDA 6.3x 8.0x 6.3x 7.8x N/A 4.2x
Equity Value To:
1998 Net Income 8.1x 8.9x 5.7x 11.8x 5.9x 2.9x3
1999 Net Income 26.6x 19.8x 14.1x 27.4x 14.1x NMF 26.7x3
2000 Net Income 16.1x 16.3x 11.7x 18.6x N/A 7.8x3
1998 Cash Flow 4.2x 6.1x 4.4x 7.0x 3.9x 1.7x3
1999 Cash Flow 6.6x 9.8x 8.3x 10.6x 6.5x 4.7x 3.8x3
2000 Cash Flow 5.7x 8.8x 7.4x 9.0x N/A 3.1x3
</TABLE>
- ----------
1 Initial Jupiter projection based on field level estimates.
2 Revised Jupiter projection after corporate modifications.
3 Net income and cash flow multiples have been adjusted to exclude the effects
of excess cash.
16
<PAGE>
Comparison Of Multiples
- --------------------------------------------------------------------------------
Jupiter
----------------------- Representative
Mars Fiscal Years Initial Revised Multiples
- ------------------------------ ----------- --------- --------------
Adjusted Market Value To:
Adjusted Book Value 2.5x 1.1x - 1.5x
1999 EBITDA 2.8x 4.5x - 5.5x
2000 EBITDA 6.3x 5.0x 4.5x - 6.0x
2001 EBITDA 4.2x 4.0x - 5.0x
Equity Value To:
1999 Net Income 2.9x 7.0x - 10.0x
2000 Net Income NMF 26.7x 9.0x - 12.0x
2001 Net Income 7.8x 8.0x - 11.0x
1999 Cash Flow 1.7x 4.0x - 5.5x
2000 Cash Flow 4.7x 3.8x 4.5x - 6.5x
2001 Cash Flow 3.1x 4.0x - 5.5x
17
<PAGE>
Comparison Of Calendar 1999 EPS Estimates1
- --------------------------------------------------------------------------------
o Analysts' mean estimates of Jupiter's fiscal year 2000 EPS have been
revised downwards over time, like the 1999 estimates of the comparable
companies.
Historical 1999 EPS Estimates: Historical 1999 EPS Estimates:
Jupiter Vs. Offshore Construction Companies Jupiter Vs. Oil Service Companies
[Graphs of monthly First Call 1999 EPS estimates for the Company, the
Comparable Offshore Construction Companies and the Comparable Oil Service
Companies indexed to (equal to 100 on) January 1998, from January 1998 to
January 1999; the index of the Company's 1999 EPS estimate in January 1999 was
37.3, compared to a range of 61.3 to 113.8 for the Comparable Offshore
Construction Companies and a range of 21.3 to 48.8 for the Comparable Oil
Service Companies]
Source: First Call
- ----------
1 Compares Jupiter fiscal year 2000 projected results to the 1999 projected
results for the comparable companies.
18
<PAGE>
Summary Of Comparable Transactions
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
o Simmons reviewed recent transactions involving companies with exposure to
offshore oil and gas activity and which had a transaction value of at
least $200 million.
<TABLE>
<CAPTION>
Transaction
Date Acquiror Target Value Target Sector
- -------- ------------------------- ------------------------------------- ----------- --------------------------------
<S> <C> <C> <C> <C>
12/01/98 R&B Falcon Cliffs Drilling $ 504.0 Offshore Driller
9/29/98 Halliburton Dresser Industries 5,512.4 Large Capitalization/Diversified
8/31/98 Schlumberger Camco 2,970.0 Large Capitalization/Diversified
8/18/98 Stolt Comex Seaway SA Ceanic (fka American Oilfield Divers) 218.0 Offshore Construction
8/10/98 Baker Hughes Western Atlas 3,420.0 Large Capitalization/Diversified
5/27/98 EVI Weatherford Enterra 2,477.2 Large Capitalization/Diversified
12/31/97 Falcon Drilling Reading & Bates 2,715.8 Offshore Driller
5/16/97 Tidewater OIL Ltd (Ocean Group) 542.7 Offshore Transportation
3/10/97 Pride Petroleum Services Forasol-Foramer NV 410.9 Offshore Driller
12/01/96 Offshore Logistics Bristow Helicopter Group 338.5 Offshore Transportation
11/12/96 Parker Drilling Mallard Bay Drilling Barge (EVI) 335.0 Offshore Driller
9/01/96 Sonat Offshore Drilling Transocean ASA 1,680.7 Offshore Driller
7/01/96 Noble Drilling Neddrill 398.8 Offshore Driller
6/12/96 ENSCO International Dual Drilling 405.7 Offshore Driller
4/29/96 Diamond Offshore Arethusa Offshore 986.6 Offshore Driller
3/13/96 Tidewater Hornbeck 302.0 Offshore Transportation
10/06/95 Transocean Offshore ASA Wilrig 286.8 Offshore Driller
10/05/95 Weatherford International Enterra 735.2 Large Capitalization/Diversified
1/01/95 Mars Offshore Pipelines 405.7 Offshore Construction
</TABLE>
19
<PAGE>
Summary Of Comparable Transactions
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
o Jupiter has higher revenues, but lower EBITDA margins than the majority of
the companies included in the comparable transaction analysis. Jupiter's
conservative capital structure results in the company's net income margins
being higher than most of the comparable target companies.
o The trailing 12-month margins for Jupiter compared to those of the
comparables also reflects the timing of the transaction relative to
overall oil service industry activity.
<TABLE>
<CAPTION>
Acquired Company's TTM Results
-------------------------------------------------------------
Transaction EBITDA Net Income
Date Target Value Revenues EBITDA Margin Net Income Margin
- -------- ------------------------------------- ----------- --------- ------- ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
12/01/98 Cliffs Drilling $ 504.0 $ 342.0 $ 133.5 39.0% $ 55.1 16.1%
9/29/98 Dresser Industries 5,512.4 7,457.9 863.0 11.6 310.4 4.2
8/31/98 Camco 2,970.0 946.4 244.1 25.8 107.7 11.4
8/18/98 Ceanic (fka American Oilfield Divers) 218.0 153.7 19.3 12.6 2.5 1.6
8/10/98 Western Atlas 3,420.0 1,768.9 635.1 35.9 114.8 6.5
5/27/98 Weatherford Enterra 2,477.2 1,084.0 303.9 28.0 112.9 10.4
12/31/97 Reading & Bates 2,715.8 312.5 153.3 49.1 85.3 27.3
5/16/97 OIL Ltd (Ocean Group) 542.7 138.4 45.5 32.9 20.2 14.6
3/10/97 Forasol-Foramer NV 410.9 199.5 19.9 10.0 (11.0) (5.5)
12/01/96 Bristow Helicopter Group 338.5 233.2 48.0 20.6 5.4 2.3
11/12/96 Mallard Bay Drilling Barge (EVI) 335.0 82.6 23.2 28.1 7.1 8.6
9/01/96 Transocean ASA 1,680.7 341.6 52.7 15.4 (5.9) (1.7)
7/01/96 Neddrill 398.8 135.6 44.8 33.0 2.0 1.5
6/12/96 Dual Drilling 405.7 81.2 16.6 20.4 (14.6) (18.0)
4/29/96 Arethusa Offshore 986.6 114.3 21.8 19.1 (7.9) (6.9)
3/13/96 Hornbeck 302.0 59.0 25.0 42.4 7.6 12.9
10/06/95 Wilrig 286.8 76.1 18.4 24.2 5.4 7.1
10/05/95 Enterra 735.2 456.4 77.7 17.0 16.0 3.5
1/01/95 Offshore Pipelines 405.7 427.1 47.8 11.2 22.3 5.2
Jupiter -- $ 1,293.0 $ 175.6 13.6% $ 151.4 11.7%
</TABLE>
20
<PAGE>
Summary Of Comparable Transactions
- --------------------------------------------------------------------------------
o Transaction values are highly dependent on the oil service industry
outlook at the time the transaction is negotiated. As a result,
transaction multiples of trailing 12-month results become less meaningful
during periods of high industry volatility, such as recently.
<TABLE>
<CAPTION>
Ratio Of Transaction Value Ratio Of Equity Value To
-------------------------- -----------------------------
TTM TTM TTM Adjusted Book
Date Target Revenue EBITDA Net Income Value
- -------- ------------------------------------- ----------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
12/01/98 Cliffs Drilling 1.5x 3.8x 9.1x 1.3x
9/29/98 Dresser Industries 0.7x 6.4x 17.2x 2.4x
8/31/98 Camco 3.1x 12.2x 27.6x 3.5x
8/18/98 Ceanic (fka American Oilfield Divers) 1.4x 11.3x NMF N/A
8/10/98 Western Atlas 1.9x 5.4x 29.8x 1.7x
5/27/98 Weatherford Enterra 2.3x 8.2x 21.9x 2.3x
12/31/97 Reading & Bates 8.7x 17.7x 29.2x 3.8x
5/16/97 OIL Ltd (Ocean Group) 3.9x 11.9x 26.4x NMF
3/10/97 Forasol-Foramer NV 2.1x 20.6x NMF 1.6x
12/01/96 Bristow Helicopter Group 1.5x 7.1x 34.9x 1.6x
11/12/96 Mallard Bay Drilling Barge (EVI) 4.1x 14.4x NMF 2.9x
9/01/96 Transocean ASA 4.9x 31.9x NMF 3.2x
7/01/96 Neddrill 2.9x 8.9x NMF N/A
6/12/96 Dual Drilling 5.0x 24.4x NMF 1.6x
4/29/96 Arethusa Offshore 8.6x 45.3x NMF 3.5x
3/13/96 Hornbeck 5.1x 12.1x 39.5x 2.8x
10/06/95 Wilrig 3.8x 15.6x 31.0x 1.2x
10/05/95 Enterra 1.6x 9.5x 37.8x 1.3x
1/01/95 Offshore Pipelines 0.9x 8.5x 14.5x 1.6x
Average 3.4x 14.5x 42.7x 2.3x
- --------------------------------------------------------------------------------------------------------------------
Jupiter1 0.3x 2.8x 2.9x 2.5x
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
21
<PAGE>
1 Excluding any acquisition premium.
22
<PAGE>
Weekly Average Trading Volume1
- --------------------------------------------------------------------------------
[Graphs comparing the Company's weekly average trading volume from January
1, 1998 to March 3, 1999 expressed as a percent of shares outstanding and as a
dollar amount compared with that of the Comparable Offshore Construction
Companies and Comparable Oil Service Companies; the Company's average weekly
trading volume, as a percent of shares outstanding was 1.18%, compared to ranges
of 0.54% to 5.25% for the Comparable Offshore Construction Companies and 2.15%
to 7.06% for the Comparable Oil Service Companies, the Company's average weekly
trading volume, in dollars, was $9.5 million, compared to ranges of $1.5 million
to $27.3 million for the Comparable Offshore Construction Companies and $11.3
million to $92.1 for the Comparable Oil Service Companies]
- ----------
23
<PAGE>
1 Average since January 1, 1998.
24
<PAGE>
Ownership Of Jupiter
- --------------------------------------------------------------------------------
(Share amounts in thousands)
o Mars owns approximately 63 percent of Jupiter with 13(f) institutions
representing the bulk of the remaining shareholders.
<TABLE>
<CAPTION>
Percent Of Total
Number Of Shares Shares
Held Outstanding
---------------- ----------------
<S> <C> <C>
Wellington Management Co. 2,168 5.6%
Prudential Insurance Co. 1,366 3.5
Lynch & Mayer, Inc. 1,063 2.7
Brahman Capital Corp. 1,039 2.7
Barrow Hanley Mewhinney 634 1.6
Wanger Asset Management LP 628 1.6
Friess Associates, Inc. 539 1.4
Fidelity Management & Resources Corp. 537 1.4
State Street Research & Management 448 1.1
NewSouth Capital Management 295 0.8
California Public Employees Retirement System 282 0.7
Duquesne Capital Management LLC 260 0.7
Chase Manhattan Corp. 251 0.6
Iridian Asset Management 231 0.6
Capital Guardian Trust 215 0.6
Kalmar Investments, Inc. 192 0.5
Kirr Marbach & Co. 190 0.5
American Century Companies 188 0.5
Scott & Stringfellow Capital 172 0.4
Advantus Capital Management 133 0.3
------- ------
Total Top 20 13(f) Institutions1 10,831 27.8
Other 13(f) Institutions1 1,525 3.9
Management And Board Of Directors2 147 0.4
Mars1 24,668 63.3
Other 1,803 4.7
------- ------
Total3 39,041 100.0%
======= ======
</TABLE>
- ----------
1 Source: CDA Spectrum-13(f) Institutional Stock Holdings as of September 30,
1998 and Jupiter Proxy dated July 1, 1998.
2 Holdings as stated in July 1998 proxy statement.
25
<PAGE>
3 Shares outstanding as of December 31, 1998.
26
<PAGE>
Wall Street's Views On Jupiter
- --------------------------------------------------------------------------------
Rating/
Analyst/Date Stock Price Selected Comments
- -------------------- ----------- ----------------------------------------
Johnson Rice Buy "Despite reducing our estimates, we
1/28/99 $24.00 believe Jupiter remains an inexpensive
stock on a variety of measures."
"The next 12-18 months will be the most
challenging that the oilfield services
market has seen in a long time. The
effect of sustained low oil prices has
taken its toll in the form of sharply
reduced capital spending plans by oil
companies (estimates range down 20-40
percent), with many projects delayed or
deferred."
Salomon Smith Barney Outperform "The deteriorating outlook for marine
1/28/99 $24.00 construction is causing us to lower our
fiscal 2000 estimates."
"Management commented on the prospects
for further equity restructuring
emphasizing continued organizational
restructuring, but an inclination to
make incremental changes over a more
extended period than originally
anticipated."
Howard, Weil Initiating "Because of the eroding fundamentals
1/19/99 Coverage facing the oil service sector, we view
$24 7/8 Jupiter's sound balance sheet,
cost-cutting efforts and working capital
shrinkage as worthy of close scrutiny
from investors seeking an alternative
within the oil service sector."
"Jupiter through a series of asset
rationalizations and cost cutting, has
positioned itself to weather the current
malaise afflicting the oil service
industry."
"We believe the service stocks,
including Jupiter, will continue to test
new lows. We feel that the current
operating environment for our universe
of companies may actually be worse than
even hardened skeptics tend to believe."
27
<PAGE>
Johnson Rice Buy "Even though the current industry
12/3/98 $25.75 environment is difficult, we reiterate
our Buy rating based on stock valuation
and management's commitment to
increasing shareholder value."
"Since new management assumed control of
the company in March 1997, financial
results have improved significantly."
"Persistently low oil prices through
1998 have reduced spending to the point
were cutbacks have affected the earnings
outlook for marine construction
companies."
28
<PAGE>
- --------------------------------------------------------------------------------
Mars Valuation Analysis
- --------------------------------------------------------------------------------
[Graphs comparing the Company's daily stock price close as a dollar amount and
indexed to (equal to 100 on) January 1, 1996 with that of the Parent from
January 1, 1995 to March 3, 1999; the Company's stock price and Parent's stock
price on January 1, 1996, 1997, 1995 and 1999 and March 5, 1999 were $18,38 and
$21.60, $21.88 and $16.62, $41.94 and $35.75, $24.00 and $24.25 and 20.88 and
$10.75, respectively; the indices of the Company's stock prices and the
Parent's stock price on March 3, 1989 were 113.6 and 51.9, respectively].
29
<PAGE>
Summary Of Mars Capitalization At March 1, 1999
- --------------------------------------------------------------------------------
(Amounts in millions, except per share)
<TABLE>
<CAPTION>
Excluding
Consolidated Beneficial Jupiter
------------ ---------- ---------
<S> <C> <C> <C>
Cash $ 265.3 $ 226.9 $ 142.0
Pro Forma Investments In Debt Securities1 890.7 728.2 368.6
----------- ----------- ----------
Total Cash 1,156.0 955.1 510.6
Less Operating Cash2 (166.3) (143.8) (94.0)
----------- ----------- ----------
Excess Cash $ 989.7 $ 811.4 $ 416.6
=========== =========== ==========
Common Shares3 60.2 60.2 N/A
Share Price $ 19.75 $ 19.75 N/A
Pro Forma Debt 403.6 387.8 352.9
Antitrust Liability --4 -- --
Net Environment Liability 144.1 144.1 144.1
Post-Retirement Benefit 24.3 24.3 24.3
Minority Interest 304.95 -- --
Common Equity Market Value 1,188.4 1,188.4 513.5
----------- ----------- ----------
Total Market Capitalization 2,065.3 1,744.6 1,034.7
Less: Excess Cash (989.7) (811.4) (416.6)
----------- ----------- ----------
Adjusted Market Capitalization $ 1,075.6 $ 933.2 $ 618.1
=========== =========== ==========
Common Equity Market Capitalization 1,188.4 1,188.4 513.5
Less: Excess Cash (989.7) (811.4) (416.6)
----------- ----------- ----------
Adjusted Equity Market Capitalization $ 198.7 $ 377.0 $ 96.8
=========== =========== ==========
Stockholders' Equity 830.1 830.1 499.7
Debt 403.6 387.8 352.9
Minority Interest 212.76 -- --
Less: Excess Cash (989.7) (811.4) (416.6)
----------- ----------- ----------
Adjusted Book Value $ 456.7 $ 406.6 $ 436.0
=========== =========== ==========
</TABLE>
- ----------
1 Assumes paydown of $200 million of Jupiter's outstanding $250 million 9 3/8
percent senior subordinated notes at a total cost of $230 million.
2 Calculated as 5 percent of trailing 12 months revenues.
3 Includes approximately 1,057,000 shares representing stock options on a
treasury basis.
4 To be determined in aggregate and allocated between Jupiter and Mars, as
appropriate.
5 Market value.
30
<PAGE>
6 Book value.
31
<PAGE>
Historic Stock Price For Mars
- --------------------------------------------------------------------------------
Graph of the daily stock price close of the Parent from March 1, 1995 to
March 3 1999; The Parent's stock prices at March 1, 1995, 1996, 1997 and 1998,
and March 3, 1999 were $27.88, $19.25, $22.25, $38.94 and $19.75, respectively.
Source: Bloomberg Financial Services.
32
<PAGE>
Performance Of Mars Relative To Offshore Construction Companies
- --------------------------------------------------------------------------------
[Graph comparing the Parent's daily stock price indexed to (equal to 100
on) January 5, 1996 compared with those of the Comparable Offshore Construction
Companies and an index comprising the Comparable Offshore Construction Companies
from January 5, 1996 to March 3, 1999, the index of the Parent's stock price on
March 3, 1999 was 97, compared to a range of 80 to 227 for the Comparable
Construction Companies]
Source: Bloomberg Financial Services.
- ----------
1 Index includes BWG, CDIS, CXIPY, GLBL, HOFF, OII and SCSWF.
33
<PAGE>
Performance Of Mars Relative To Comparable E&C Companies
- --------------------------------------------------------------------------------
[Graphs comparing the Parent's daily stock price indexed to (equal to 100 on)
January 5, 1996 compared with those of the Comparable E&C Companies and an index
comprising the Comparable E&C Companies from January 5, 1996 to March 3, 1999;
the index of the Parent's stock price on March 3, 1999 was 97, compared to a
range of 28 to 185 for the Comparable E&C Companies]
Source: Bloomberg Financial Services.
- ----------
1 Index includes FLR, FWC, GVA, MK and SW.
34
<PAGE>
Summary Financial Performance Of Comparable Companies
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share)
<TABLE>
<CAPTION>
Offshore Construction Companies
------------------------------------------------------------------------------------------------------
Horizon
Bouygues Cal Dive Coflexip Global2 Gulf Island Offshore Oceaneering Stolt1
--------- --------- --------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TTM Ended 6/30/98 9/30/98 9/30/98 9/30/98 9/30/98 9/30/98 9/30/98 11/30/98
Current Year Ended 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 3/31/99 11/30/99
Adjusted Market Value $ 310.3 $ 192.4 $ 1,082.2 $ 700.2 $ 75.6 $ 163.5 $ 325.1 $ 600.3
Adjusted Book Value (13.1) 89.4 578.0 605.8 65.6 152.5 262.4 629.0
TTM Results
Revenues $ 832.8 $ 148.1 $ 1,320.9 $ 420.7 $ 184.2 $ 101.7 $ 381.3 $ 766.4
Gross Profit 130.9 56.9 403.8 156.4 37.9 27.6 107.2 182.0
Gross Margin 15.7% 38.4% 30.6%% 37.2% 20.6% 27.1% 28.1% 23.7%
EBITDA 48.5 41.4 296.5 131.2 31.9 20.7 66.4 115.4
EBITDA Margin 5.8% 28.0% 22.4% 31.2% 17.3% 20.3% 17.4% 15.1%
Net Income 37.7 23.8 137.4 55.0 17.7 10.1 23.8 49.2
Net Income Margin 4.5% 16.1% 10.4%% 13.1% 9.6% 9.9% 6.2% 6.4%
Cash Flow 54.7 32.3 219.3 93.9 21.6 13.4 50.3 95.9
Cash Flow Margin 6.6% 21.8% 16.6% 22.3% 11.7% 13.2% 13.2% 12.5%
Projected Results3
1998 EBITDA $ 53.6 $ 41.9 $ 280.7 $ 116.9 $ 32.8 $ 27.5 72.3 N/A
1999 EBITDA 62.3 34.0 265.3 85.2 21.7 22.3 74.6 $ 132.5
2000 EBITDA N/A 40.5 N/A 112.6 25.3 15.1 N/A 152.8
1998 Net Income 42.3 23.4 124.4 49.6 18.7 13.7 25.3 N/A
1999 Net Income 50.4 18.3 114.4 29.0 11.5 10.3 26.6 53.4
2000 Net Income N/A 22.6 N/A 46.8 13.8 15.9 N/A 66.6
1998 Cash Flow 58.8 32.0 213.7 79.7 22.9 17.8 53.4 N/A
1999 Cash Flow 66.9 26.9 203.7 59.1 15.6 14.5 54.8 100.1
2000 Cash Flow N/A 31.1 N/A 76.9 18.0 20.0 N/A 113.3
<CAPTION>
E&C Companies Mars
------------------------------------------------------------- ----------------------
Foster Morrison Stone & Excluding
Fluor Wheeler1 Granite Knudsen Webster Beneficial Jupiter
--------- --------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
TTM Ended 7/31/98 9/30/98 9/30/98 8/31/98 9/30/98 3/31/99 3/31/99
Current Year Ended 10/31/98 12/31/98 12/31/98 11/30/98 12/31/98 3/31/99 3/31/99
Adjusted Market Value $ 2,997.3 $ 1,667.4 $ 744.6 $ 440.4 $ 395.9 $ 933.2 $ 618.1
Adjusted Book Value 1,873.5 1,740.6 328.2 295.1 405.9 406.8 436.0
TTM Results
Revenues $14,212.7 $ 4,215.9 $ 1,197.9 $ 1,758.2 $ 1,279.9 $ 2,700.2 $ 1,814.3
Gross Profit 701.9 503.2 180.0 115.5 60.2 567.1 381.1
Gross Margin 4.9% 11.9% 15.0% 6.6% 4.7% 21.0% 21.0%
EBITDA 693.0 264.1 99.9 91.8 44.2 258.9 153.1
EBITDA Margin 4.9% 6.3% 8.3% 5.2% 3.5% 9.6% 8.4%
Net Income 259.6 NMF 42.1 40.1 18.9 156.4 78.4
Net Income Margin 1.8% N/A 3.5% 2.3% 1.5% 5.8% 4.3%
Cash Flow 533.2 NMF 80.3 66.0 34.8 236.7 120.3
Cash Flow Margin 3.8% N/A 6.7% 3.8% 2.7% 8.8% 6.6%
Projected Results3
1998 EBITDA $ 644.6 $ 248.2 $ 102.5 $ 91.0 $ 43.1 $ 258.9 $ 153.1
1999 EBITDA 646.9 235.3 110.0 107.3 60.6 234.2 166.0
2000 EBITDA 643.4 217.7 118.3 119.5 74.3 280.4 206.9
1998 Net Income 225.0 74.9 46.3 36.9 16.6 156.4 78.4
1999 Net Income 226.5 67.2 51.1 45.4 27.8 110.7 74.6
2000 Net Income 224.3 56.6 56.5 51.8 36.5 143.0 98.8
1998 Cash Flow 503.2 140.7 84.5 63.3 34.0 236.7 120.3
1999 Cash Flow 504.7 132.9 89.4 71.8 45.2 185.7 111.6
2000 Cash Flow 502.5 122.3 94.8 78.2 53.9 213.4 136.5
</TABLE>
- ----------
1 Foster Wheeler was forced to significantly restate net income by the SEC
regarding provisions for losses on an unprofitable operating lease. This
causes the company's TTM net income and cash flow results to be not meaningful
when compared to pro forma, analyst expectations.
2 Global is changing its year end to December.
3 Source: First Call.
35
<PAGE>
Relative Performance: Mars (Excluding Jupiter)
- --------------------------------------------------------------------------------
Graphs comparing the Parent's 5-year, 3-year and 1-year EBITDA margin averages
and compounded annual revenue growth rates with those of the Comparable E&C
Companies; the Parent's 5-year, 3-year and 1-year revenue growth rates were
(0.6%), (3,0%) and (3.2%), respectively, compared to ranges of 10.3% to 37.3%,
1.0% to 18.6% and (0.4%) to 16.5%, respectively, for the Comparable E&C
Companies; the Parent's 5-year, 3-year and 1-year average EBITDA margins were
3.7%, 5.8% and 8.4% respectively, compared to ranges of 2.6% to 7.7%, 4.5% to
7.7% and 3.5% to 8.3%, respectively, for the Comparable E&C Companies.
1 Excludes Morrison Knudsen.
36
<PAGE>
Summary Valuation Multiples Of Comparable Companies
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Offshore Construction Companies
-----------------------------------------------------------------------------------------------------
Horizon Gulf
Bouygues Cal Dive Coflexip Global Offshore Island Oceaneering Stolt
-------- -------- -------- -------- -------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Adjusted Market Value To:
Adjusted Book Value NMF 2.2x 1.9x 1.2x 1.1x 1.2x 1.2x 1.0x
1998 EBITDA 5.8x 4.6x 3.9x 6.0x 5.9x 2.3x 4.5x 5.2x
1999 EBITDA 5.0x 5.7x 4.1x 8.2x 7.3x 3.5x 4.4x 4.5x
2000 EBITDA N/A 4.7x N/A 6.2x 10.8x 3.0x N/A 3.9x
Equity Value To:
1998 Net Income 10.7x 9.0x 8.6x 9.7x 8.1x 4.0x 9.3x 7.7x
1999 Net Income 9.0x 11.5x 9.3x 16.5x 10.7x 6.6x 8.8x 7.1x
2000 Net Income N/A 9.4x N/A 10.3x 7.0x 5.5x N/A 5.7x
1998 Cash Flow 7.7x 6.6x 5.0x 6.0x 6.2x 3.3x 4.4x 4.0x
1999 Cash Flow 6.7x 7.9x 5.2x 8.1x 7.6x 4.8x 4.3x 3.8x
2000 Cash Flow N/A 6.8x N/A 6.2x 5.5x 4.2x N/A 3.3x
<CAPTION>
E&C Companies Mars
------------------------------------------------------------- ----------------------
Foster Morrison Stone & Excluding
Fluor Wheeler Granite Knudsen Webster Beneficial Jupiter
--------- --------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Adjusted Market Value To:
Adjusted Book Value 1.6x 1.0x 2.3x 1.5x 1.0x 2.3x 1.3x
1998 EBITDA 4.7x 6.7x 7.3x 4.8x 9.2x 3.6x 4.0x
1999 EBITDA 4.6x 7.1x 6.8x 4.1x 6.5x 4.1x 3.7x
2000 EBITDA 4.7x 7.7x 6.3x 3.7x 5.3x 3.3x 3.0x
Equity Value To:
1998 Net Income 11.7x 6.7x 15.3x 13.7x 20.9x 2.6x1 1.7x1
1999 Net Income 11.7x 7.4x 13.8x 11.1x 12.4x 4.4x1 1.8x1
2000 Net Income 11.8x 8.8x 12.5x 9.7x 9.5x 3.1x1 1.3x1
1998 Cash Flow 5.3x 3.5x 8.4x 8.0x 10.2x 1.8x1 1.0x1
1999 Cash Flow 5.2x 3.8x 7.9x 7.0x 7.6x 2.3x1 1.1x1
2000 Cash Flow 5.3x 4.1x 7.5x 6.4x 6.4x 2.0x1 0.9x1
</TABLE>
- ----------
1 Net income and cash flow multiples have been adjusted to exclude the effects
of excess cash.
37
<PAGE>
Comparable Manufacturing Company Descriptions
- --------------------------------------------------------------------------------
Company Description
- -------------------------------- ----------------------------------------
Cummins Engine Company, Inc. Designs and manufactures diesel engines
and related products for the trucking,
power generation, bus, industrial,
marine and government markets worldwide.
Engines range from 64 to over 6,000
horsepower and are sold in over 130
countries.
Detroit Diesel Corp. Designs, manufactures and provides
aftermarket remanufactured products for
a full range of diesel and alternative
fuel engines. Products are designed for
trucking, automotive, power generation
and marine industries. Engines range
form 10-10,000 horsepower and are sold
in over 130 countries.
Magnetek, Inc. Manufactures electrical equipment
products and provides related repair and
rebuilding services to utility and
industrial customers. Products include
motors, generators, transformers,
lighting ballasts, speed drives and
power conversion systems. The company
serves the original equipment,
electricity generation, military and new
construction markets. The company sells
products worldwide.
United Dominion Industries, Ltd. Manufactures proprietary engineered
products in the flow technology,
machinery, specialty engineered products
and test instrumentation business
segments. The company operates in 89
locations in 18 countries.
38
<PAGE>
Summary Financial Performance Of Comparable Manufacturing Companies
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Mars
--------------------------
Cummins United Excluding
Engine Detroit Diesel Magnetek Dominion Beneficial Jupiter
-------- -------------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Fiscal Year End 12/31/98 12/31/98 6/30/99 12/31/99 3/31/99 3/31/99
TTM Ended 9/30/98 9/30/98 12/31/98 12/31/98 3/31/99 3/31/99
Adjusted Market Value $2,944.4 $ 656.5 $ 606.0 $1,414.8 $ 933.2 $ 618.1
Adjusted Book Value 2,635.0 480.2 465.0 1,525.0 406.8 436.0
TTM Results
Revenues $6,219.0 $2,250.8 $1,178.2 $2,020.4 $2,700.2 $1,814.3
Gross Profit 1,565.0 569.1 262.0 683.4 567.1 381.1
Gross Profit Margin 25.2% 25.3% 22.2% 33.8% 21.0% 21.0%
EBITDA 510.0 115.3 107.5 236.7 258.9 153.1
EBITDA Margin 8.2% 5.1% 9.1% 11.7% 9.6% 8.4%
Net Income 231.0 38.1 31.3 104.7 156.4 78.4
Net Income Margin 3.7% 1.7% 2.7% 5.2% 5.8% 4.3%
Cash Flow 419.0 84.9 69.6 169.6 236.7 120.3
Cash Flow Margin 6.7% 3.8% 5.9% 8.4% 8.8% 6.6%
Projected Results1
1998 EBITDA $ 431.4 $ 98.7 N/A $ 196.7 $ 258.9 $ 153.1
1999 EBITDA 441.4 102.5 $ 78.5 202.9 234.2 166.0
2000 EBITDA 457.6 104.9 88.1 213.4 280.4 206.9
1998 Net Income $ 139.4 $ 40.6 N/A $ 87.6 156.4 78.4
1999 Net Income 149.4 44.3 $ 29.4 93.7 110.7 74.6
2000 Net Income 165.6 46.8 39.0 104.3 143.0 98.8
1998 Cash Flow $ 336.7 $ 87.0 N/A $ 152.5 236.7 120.3
1999 Cash Flow 346.7 90.7 $ 67.1 158.6 185.7 111.6
2000 Cash Flow 362.9 93.2 76.7 169.2 213.4 136.5
</TABLE>
Source: First Call.
39
<PAGE>
Comparable Manufacturing Company Valuation Multiples
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Mars
----------------------
Cummins Detroit United Excluding
Engine Diesel Magnetek Dominion Beneficial Jupiter
------- ------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ratio Of Adjusted Market Value To:
Adjusted Book Value 1.1x 1.4x 1.3x 0.9x 2.3x 1.3x
1998 EBITDA 6.8x 6.6x N/A 7.2x 3.6x 4.0x
1999 EBITDA 6.7x 6.4x 7.7x 7.0x 4.1x 3.7x
2000 EBITDA 6.4x 6.3x 6.9x 6.6x 3.3x 3.0x
Ratio Of Market Equity Value To:
1998 Net Income 11.5x 13.3x N/A 9.0x 2.6x1 1.7x1
1999 Net Income 10.8x 12.2x 11.3x 8.4x 4.4x1 1.8x1
2000 Net Income 9.7x 11.5x 8.5x 7.5x 3.1x1 1.3x1
1998 Cash Flow 4.8x 6.2x N/A 5.2x 1.8x1 1.0x1
1999 Cash Flow 4.6x 6.0x 4.9x 5.0x 2.3x1 1.1x1
2000 Cash Flow 4.4x 5.8x 4.3x 4.7x 2.0x1 0.9x1
</TABLE>
Source: First Call.
- ----------
1 Net income and cash flow multiples have been adjusted to exclude the effects
of excess cash.
40
<PAGE>
Comparison Of Multiples
- --------------------------------------------------------------------------------
Mars
------------------------
Excluding Representative
Mars Fiscal Years Beneficial Jupiter Multiples
- ------------------------- ---------- --------- --------------
Adjusted Market Value To:
Adjusted Book Value 2.3x 1.3x 1.0x - 1.5x
1999 EBITDA 3.6x 4.0x 5.0x - 6.5x
2000 EBITDA 4.1x 3.7x 4.5x - 6.0x
2001 EBITDA 3.3x 3.0x 4.5x - 5.5x
Equity Value To:
1999 Net Income 2.9x 2.3x 11.0x - 14.0x
2000 Net Income 4.3x 1.8x 10.0x - 13.0x
2001 Net Income 3.1x 1.3x 9.0x - 11.0x
1999 Cash Flow 1.9x 1.2x 5.0x - 7.0x
2000 Cash Flow 2.3x 1.1x 5.0x - 6.5x
2001 Cash Flow 2.0x 0.9x 4.5x - 6.5x
41
<PAGE>
Weekly Average Trading Volume1
- --------------------------------------------------------------------------------
[Graphs comparing the Parent's weekly average trading volume from January 1,
1998 to March 3, 1999 expressed as a percent of shares outstanding and as a
dollar amount compared with that of the Comparable E&C Companies; the Parent's
average weekly trading volume as a percent of shares outstanding and in dollars
was 2.11% and $27 million, respectively, compared to ranges for the Comperable
E&C Companies of 0.63% to 2.75% and $2.3 million to $75.9 million, respectively]
- ----------
1 Average since January 1, 1998.
42
<PAGE>
Wall Street's Views On Mars
- --------------------------------------------------------------------------------
Rating/
Analyst/Date Stock Price Selected Comments
- -------------------- ----------- ------------------------------------------
Johnson Rice Buy "We believe the pervasive negativism
1/28/99 $21.69 toward energy-related stocks is an
opportunity for value-oriented investors
to buy Mars at attractive prices."
"Management indicated revenues (for Marine
Construction) are expected to decrease by
35 percent in F00...the outlook for power
generated systems over the next year is
stable...the outlook for this consistent
segment (Government) remains positive."
"To date, management of Mars has shown
excellent judgment."
Lazard Freres & Co. Buy "We continue to expect a variety of
1/28/99 $21 11/16 actions from capital spending
announcements, possible acquisitions to
additional share repurchases and
organizational restructuring. We remain
confident that this management team is
focused on increasing shareholder value."
"In the power generation business,
management pointed to a contract win in
Egypt...to illustrate how the lower cost
structure has improved their competitive
position."
"We are maintaining our Buy recommendation
with a price target of $35.00 per
share...we have lowered our price target
by $10.00 per share from $45.00."
43
<PAGE>
Salomon Smith Barney Outperform/ "While the outlook for the marine
High Risk construction and power generation markets
$29 remains tough for the next one to 11/13/98
two years, we have based our positive
recommendation on the continuation of
restructuring efforts in all of Mars'
operations."
"The outlook for Jupiter is cautious...the
outlook for PG and Govt is stable to
slightly improved, however."
"We have lowered our fiscal 2000 EPS
estimate to $2.05 from $2.30, to reflect
the impact of lower marine construction
activity."
"We reiterate our Outperform, High Risk
rating with a $42 price target."
"Management indicated that the market
outlook for PG is flat. However, the
company has been able to reduce its cost
basis considerably, and is now relatively
cost competitive with its peers."
44
<PAGE>
EXHIBIT 99.(B)(6)
- --------------------------------------------------------------------------------
Valuation Of Mars Components
- --------------------------------------------------------------------------------
<PAGE>
Power Generation
- --------------------------------------------------------------------------------
Factors Enhancing Value Factors Diminishing Value
- -------------------------------------- --------------------------------------
o Leader in fossil fuel utility o Environmental regulations restrict
boilers and environmental systems demand for coal fired systems
o Leader in North American nuclear o Asian crisis; suspension of two
steam generators key projects
o One of the largest installed bases o Mars is not a competitor in the
of equipment gas power generation business
o Brand name/reputation o Consolidation among competitors;
competitors with significant
o Worldwide operations resources
o Growing demand for environmental o Risks associated with importance
systems of major international projects
o Entering natural gas power o Principal Mars focus is not
generation business fastest growing regions.
2
<PAGE>
Valuation - Power Generation
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
o Simmons has selected valuation multiples based on the public multiples of
the E&C comparable group.
o Simmons has cross-checked its results with the Salomon Smith Barney
analyst report dated November 13, 1998 which used a 6.0x multiple of 2000
projected EBDIT, generating a value of $601.0 million (Mars share price
has since declined approximately 32 percent).
o Results of efforts to sell Power Generation will be critical to fully
understanding value. Mars management has elected not to discuss this issue
with Simmons.
<TABLE>
<CAPTION>
Suggested Multiple Power Generation Implied Total
Mars Fiscal Year Range Results Market Value
- ------------------------ ------------------ ---------------- ---------------
<S> <C> <C> <C>
1999 EBITDA 5.0x - 6.5x $ 105.7 $528.5 - $687.1
2000 EBITDA 4.5x - 6.0x 119.3 536.9 - 715.8
2001 EBITDA 4.5x - 5.5x 162.1 729.5 - 891.6
1999 Net Income 11.0x - 14.0x 55.0 605.0 - 770.0
2000 Net Income 10.0x - 13.0x 60.7 607.0 - 789.1
2001 Net Income 9.0x - 11.0x 86.4 777.6 - 950.4
1999 Cash Flow 5.0x - 7.0x 74.4 372.0 - 520.8
2000 Cash Flow 5.0x - 6.5x 80.4 402.0 - 522.6
2001 Cash Flow 4.5x - 6.5x 106.9 481.1 - 694.9
---------------
Implied Value $550.0 - $700.0
===============
</TABLE>
3
<PAGE>
Government Operations
- --------------------------------------------------------------------------------
Factors Enhancing Value Factors Diminishing Value
- -------------------------------------- --------------------------------------
o Long-term contracts; stability of o Limited growth opportunities
business
o Submarine construction has been
o Recent backlog increases wound down
o Potential of new Naval submarine o The need for a large submarine
and aircraft carrier fleet has declined as the Soviet
threat has receded
o Outsourcing of management and
operations services o Limited ability to enhance margins
o Mars is sole source for Naval o Single primary customer
Reactors Program
o Increasing capital expenditures
o Potential for downblending (or equipment lease cost)
military nuclear materials for
commercial use
o Reimbursement for additional costs
incurred on government contracts
(not fully cost-plus)
4
<PAGE>
Valuation - Government Operations
- --------------------------------------------------------------------------------
Discounted Cash Flow Assumptions
o Five-year projection uses fiscal 2000 and 2001 from Mars.
o Capital expenditures from 2000 through 2004 are expected to include
significant amounts related to the new nuclear attack submarine and
aircraft carrier. Based on discussions with Mars, capital expenditures
have been revised and the projection period has been extended to 2004.
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004
---- ---- ---- ---- ----
Mars Capital Expenditures
<S> <C> <C> <C> <C> <C> <C>
Projected $ 21.4 $ 24.5 $ 25.0 $ 25.0 $ 9.0 2000 and 2001 from Mars plan, 2002 and 2003 from
discussions with Mars.
Revised 9.1 9.3 9.0 9.0 9.0 From discussions with Mars: amounts in excess of
depreciation assumed to be made by U.S. government
and equipment leased by Mars.
U.S. Government Capital
Expenditures
Amounts $ 12.4 $ 15.9 $ 16.0 $ 16.0 $ -- From discussions with Mars.
Cumulative 12.4 28.2 44.2 60.2 60.2
Cost Of Mars Leasing Government
Equipment 1.5 3.4 5.3 7.2 7.2 Calculated assuming leasing cost of 12 percent of
cumulative capital investment.
</TABLE>
o Mars expects to be reimbursed for additional costs related to the new
naval vessels through its contract after fiscal 2001.
o Mars expects operating profit to remain flat going forward.
5
<PAGE>
Valuation - Government Operations
- --------------------------------------------------------------------------------
Discounted Cash Flow Analysis
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Projected
----------------------------------------------
1999E 2000 2001 2002 2003 2004
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Revenues $395.4 $421.7 $394.9
Operating Income 41.4 41.2 37.0 $ 44.3 $ 46.2 $ 46.2
Less: Lease Cost -- (1.5) (3.4) (5.3) (7.2) (7.2)
------ ------ ------ ------ ------ ------
Operating Income After Lease Cost 41.4 39.7 33.7 39.0 39.0 39.0
Plus: Depreciation 12.8 9.1 9.3 9.0 9.0 9.0
------ ------ ------ ------ ------ ------
EBITDA 52.2 48.8 42.9 48.0 48.0 48.0
Less:
Capital Expenditures (11.3) (9.1) (9.3) (9.0) (9.0) (9.0)
Working Capital Investment 6.7 (8.3) (8.3) -- -- --
Cash Taxes1 (16.6) (15.9) (13.5) (15.6) (15.6) (15.6)
------ ------ ------ ------ ------ ------
Free Cash Flow $ 31.0 $ 15.5 $ 11.9 $ 23.4 $ 23.4 $ 23.4
====== ====== ====== ====== ====== ======
Net Present Value At 10%2
Terminal Value $152.4 (Perpetuity At 10%)
NPV Of Cash Flows 75.6
------
Total $227.9
======
</TABLE>
- ------------------------------
1 Calculated as 40 percent (nominal government operations tax rate) of EBIT.
2 Assumes mid-year cash flows.
6
<PAGE>
Summary Descriptions Of Government Contractors
- --------------------------------------------------------------------------------
Company Description
- -------------------------------------- --------------------------------------
Avondale Industries, Inc. Designs, constructs, converts, repairs
and modernizes various types of
ocean-going vessels for the military
and commercial markets. The majority
of its revenues come from services to
the military, but it also focuses on
retrofitting oil tankers to comply
with the Oil Pollution Act (1990),
which requires the vessels to have a
double hull. Based in Louisiana.
Engineered Support Systems, Inc. Designs nuclear, biological and
chemical defense systems, air
conditioning, water and petroleum
distribution systems and other ground
support equipment. It also
manufactures injection molded plastic
products used mainly in consumer
goods. Most revenues come from sale of
equipment to the Department of
Defense. Based in Missouri.
ESCO Electronics Corp. Manufactures, sells and supports
defense and commercial systems and
products, including electronics,
communications and testing systems for
the defense industry. Defense products
include transportation systems and
weapon subsystems. Commercial products
include filtration to the commercial
aerospace industry and sorting systems
for the U.S. Postal Service. Based in
Missouri.
Litton Industries, Inc. Produces electronic and information
systems; builds large surface
combatant ships and provides overhaul,
repair, modernization, ship design and
engineering services. The U.S.
Government is the largest customer,
buying both defense, and non-defense
systems. The commercial side of the
company operates worldwide. Based in
Louisiana.
Primex Technologies Develops and produces large and medium
calibre ammunition, ball powder
propellant, propulsion systems for
large calibre gun systems, rocket
engines, electric propulsion systems,
solid propellants products and
electronic products. Customers include
the U.S. Government, the Department of
Defense, NASA and the DOE. Based in
Florida.
Newport News Shipbuilding, Inc. Designs, repairs, overhauls and
refuels nuclear-powered aircraft
carriers and submarines for the U.S.
Navy. It is America's largest
privately owned shipyard, being the
only one that can build Nimitz-class
aircraft carriers. Although over 95
percent of its revenues come from the
defense sector, it has recently
repaired the MS Ecstasy, a Carnival
cruise ship. Based in Virginia.
Northrop Grumman Corp. Designs, develops and makes aircraft,
aircraft subassemblies and electronic
systems for military and commercial
use; designs operates and supports
computer systems for scientific and
management information. The company is
the prime contractor for the B-2
bomber, which is the company's largest
program. It also makes portions of the
Boeing Jetliners and produces
electronics for defense applications.
Based in California.
7
<PAGE>
United Industrial Corp. Researches, develops and manufactures
training and simulation systems
related to U.S. Government defense
programs; makes and installs energy
systems used for industrial and
municipal power plants and heating of
public buildings; engineers and
fabricates thermoplastic parts. Its
energy systems sector specializes in
"waste to energy" technology and solid
fuel systems. Based in New York.
8
<PAGE>
Summary Financial Performance Of Comparable Government Contractors
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Mars
Avondale Engineered ESCO Newport Northrop United Government
Industries1 Support Electronics Litton News2 Grumman Primex Industrial Operations3
----------- ------- ----------- ------ ----- ------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TTM Ended 12/31/98 10/31/98 12/31/98 10/31/99 12/31/98 12/31/98 9/30/98 9/30/98 3/31/99
Fiscal Year End 12/31/99 10/31/99 9/30/99 7/31/99 12/31/99 12/31/99 12/31/98 12/31/98 3/31/99
Adjusted Market Value $ 402.7 $ 125.4 $ 226.2 $3,551.9 $1,618.6 $7,031.7 $ 251.0 $ 94.0
Adjusted Book Value 226.8 73.2 293.9 2,309.8 821.0 5,622.0 48.9 89.4
TTM Results
Revenues $ 748.9 $ 97.0 $ 375.2 $4,568.4 $1,862.0 $8,902.0 $ 93.4 $ 216.1 $ 395.4
Gross Profit 93.2 25.4 113.3 1,032.7 237.0 1,169.0 29.4 64.3 92.6
Gross Margin 12.4% 26.2% 30.2% 22.6% 12.7% 13.1% 31.5% 29.7% 23.4%
EBITDA 55.8 13.1 43.3 519.7 237.0 1,111.0 13.6 24.0 54.2
EBITDA Margin 7.4% 13.5% 11.5% 11.4% 12.7% 12.5% 14.6% 11.1% 13.7%
Net Income 39.0 1.1 10.2 184.3 66.0 481.3 7.3 11.1 32.1
Net Income Margin 5.2% 1.1% 2.7% 4.0% 3.5% 5.4% 7.9% 5.2% 8.1%
Cash Flow 47.9 3.9 27.4 337.3 128.0 701.3 10.6 19.8 44.9
Cash Flow Margin 6.4% 4.0% 7.3% 7.4% 6.9% 7.9% 11.4% 9.2% 11.4%
Projected Results4
1998 EBITDA $ 55.8 $ 13.1 $ 51.3 $ 498.8 $ 237.0 $1,111.0 $ 27.1 N/A $ 52.2
1999 EBITDA 60.7 15.0 49.6 529.5 234.4 1,114.3 31.3 N/A 50.3
2000 EBITDA N/A 18.3 53.5 564.5 247.0 1,162.6 35.2 N/A 46.3
1998 Net Income 39.0 4.9 13.0 177.5 66.0 481.3 14.5 N/A 23.8
1999 Net Income 34.0 7.0 11.8 197.5 72.4 426.6 17.2 N/A 24.7
2000 Net Income N/A 9.1 14.4 220.3 80.6 458.0 19.8 N/A 22.2
1998 Cash Flow 39.7 8.2 31.0 336.9 128.0 590.1 18.0 N/A 36.6
1999 Cash Flow 42.9 9.8 29.8 356.9 134.4 646.6 20.7 N/A 33.8
2000 Cash Flow N/A 11.9 32.4 379.7 142.6 678.0 23.2 N/A 31.5
</TABLE>
- ------------------------------
1 Share price as of January 17, 1999 pre Newport News merger announcement.
2 Share price as of February 17, 1999 pre-General Dynamics merger announcement.
3 Results listed under TTM are fiscal year 1999 projected results.
9
<PAGE>
4 Source: First Call.
10
<PAGE>
Comparable Government Contractors' Valuations Multiples
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Avondale Engineered ESCO Northrop United
Industries Support Electronics Litton Newport News Grumman Primex Industrial
---------- ------- ----------- ------ ------------ ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio Of Adjusted Market Value To
Adjusted Book Value 1.8x 1.7x 0.8x 1.6x 2.0x 1.3x 5.2x 1.0x
1998 EBITDA 7.2x 9.6x 4.3x 7.3x 6.8x 6.3x 9.3x 3.8x
1999 EBITDA 6.6x 8.3x 4.5x 6.9x 6.8x 6.3x 8.1x N/A
2000 EBITDA N/A 6.9x 4.1x 6.5x 6.5x 6.1x 7.2x N/A
Ratio Of Market Equity Value To
1998 Net Income 9.5x 16.8x 9.8x 14.4x 15.0x 8.9x 16.2x 9.7x
1999 Net Income 10.9x 11.8x 10.7x 12.9x 13.7x 10.1x 13.7x N/A
2000 Net Income N/A 9.1x 8.8x 11.6x 12.3x 9.4x 11.9x N/A
1998 Cash Flow 9.4x 10.1x 4.1x 7.6x 7.8x 7.3x 13.1x 5.4x
1999 Cash Flow 8.7x 8.4x 4.2x 7.2x 7.4x 6.7x 11.4x N/A
2000 Cash Flow N/A 6.9x 3.9x 6.7x 7.0x 6.3x 10.1x N/A
</TABLE>
Source: First Call.
11
<PAGE>
Valuation - Government Operations
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
o Valuation has used several of the key comparable companies with greater
weighting on Newport News and Avondale.
o DCF value is lower than indications below.
o Simmons has checked its valuation against a Salomon Smith Barney analyst
report dated November 13, 1998 which used an 8.0x multiple for projected
2000 EBITDA, generating a value of $381.4 million.
<TABLE>
<CAPTION>
Suggested Multiple Government Implied Total Market
Mars Fiscal Year Range Operations Results Value
- -------------------------------- ------------------ ------------------ --------------------
<S> <C> <C> <C>
1999 EBITDA 6.0x - 7.0x $ 52.2 $313.2 - $365.4
2000 EBITDA 5.5x - 6.5x 50.3 276.6 - 326.9
2001 EBITDA 5.5x - 6.5x 46.3 254.6 - 300.8
1999 Net Income 10.0x - 15.0x 23.8 238.0 - 357.0
2000 Net Income 10.0x - 13.0x 24.7 247.0 - 321.1
2001 Net Income 9.0x - 12.0x 22.2 199.8 - 266.4
1999 Cash Flow 6.0x - 7.0x 36.6 219.6 - 256.2
2000 Cash Flow 6.5x - 7.5x 33.8 219.7 - 253.5
2001 Cash Flow 6.0x - 7.0x 31.5 189.0 - 220.5
---------------
Implied Value $250.0 - $300.0
===============
</TABLE>
12
<PAGE>
Valuation - Industrial Operations
- --------------------------------------------------------------------------------
o Simmons has used several of the key public multiples of the E&C comparable
group for purposes of determining a range of values.
o Simmons has checked against a Salomon Smith Barney analyst report dated
November 13, 1998 which used a 6.6x multiple of 2000 EBITDA (applied to
Industrial and Corporate combined).
<TABLE>
<CAPTION>
Suggested Multiple Industrial Implied Total Market
Mars Fiscal Year Range Operations Results Value
- -------------------------------- ------------------ ------------------ --------------------
<S> <C> <C> <C>
1999 EBITDA 5.0x - 6.5x $ 19.0 $ 95.1 - $123.5
2000 EBITDA 4.5x - 6.0x 16.7 75.3 - 100.2
2001 EBITDA 4.5x - 5.5x 17.1 77.0 - 94.1
1999 Net Income 11.0x - 14.0x 10.0 110.0 - 140.0
2000 Net Income 10.0x - 13.0x 8.8 88.0 - 114.4
2001 Net Income 9.0x - 11.0x 9.1 81.9 - 100.1
1999 Cash Flow 5.0x - 7.0x 15.1 75.5 - 105.7
2000 Cash Flow 5.0x - 6.5x 13.5 67.5 - 87.8
2001 Cash Flow 4.5x - 6.5x 13.7 61.7 - 89.1
---------------
Implied Value $ 80.0 - $100.0
===============
</TABLE>
13
<PAGE>
Valuation - Mars
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share)
Valuation Range
-------------------
Power Generation $ 550.0 - $ 700.0
Government Operations 250.0 - 300.0
Industrial Operations 80.0 - 100.0
Corporate, SG&A And Other1 (121.8)
Jupiter Value (Common And Preferred) 674.9
Plus: Excess Cash 416.6
Less:
Debt (352.9)
Antitrust Liability --
Environmental Liabilities (144.1)
Post-Retirement Liabilities (24.3)
-------------------
Total Equity Value $1,328.4 - $1,548.4
===================
Total Shares Outstanding 60.2
-------------------
Value Per Share $ 22.07 - $ 25.72
===================
- ------------------------------
1 Uses 6.0x multiple of fiscal year 2000 EBITDA.
14
<PAGE>
- --------------------------------------------------------------------------------
Analysis Of Potential Combination
- --------------------------------------------------------------------------------
15
<PAGE>
Jupiter And Mars Stock Performance
- --------------------------------------------------------------------------------
Stock Price Indexed Stock Price
Graphs comparing the Company's daily stock price close as a dollar amount and
indexed to (equal to 100 on) January 1, 1996 with that of the Parent from
January 1, 1996 to March 3, 1999; the Company's stock price and Parent's stock
price on January 1, 1996, 1997, 1998 and 1999 and March 3, 1999 were $18.38 and
$21.50, $21.88 and $16.62, $41.94 and $35.75, $24.00 and $24.25 and $20.88 and
$19.75, respectively; the indices of the Company's stock price and the Parent's
stock price on March 3, 1999 were 113.6 and 91.9, respectively.
Source: Bloomberg Financial Services.
16
<PAGE>
Historical Ratio Of Share Prices
- --------------------------------------------------------------------------------
Jupiter Share
Price/Mars
Share Price
-----------
Current1 1.057x
1-Month Average 1.090x
3-Month Average 1.041x
[Graph fo the Company's
daily stock price close 6-Month Average 1.091x
divided by the Parent's
daily stock price close 12-Month Average 1.103x
("the Exchange Ratio")from
January 1, 1996 to March 3, 12-Month High 1.393x
1998]
12-Month Low 0.914x
- ------------------------------
1 At March 1, 1999.
17
<PAGE>
Relative Valuation Analysis
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Results Unadjusted Contribution (Percent)1
------------------------------ ---------------------------------- Implied
Beneficial2 Beneficial2 Beneficial2 Beneficial2 Exchange
Fiscal Years Jupiter Mars Jupiter Mars Ratio1
- ---------------------- ----------- ----------- -------------- -------------- --------
<S> <C> <C> <C> <C> <C>
Revenues
1997 $ 475.2 $ 2,675.7 15.1% 84.9% 0.890x
1998 669.5 3,005.2 18.2 81.8 1.031x
1999(E) 407.1 2,700.2 13.1 86.9 0.804x
2000(P) 264.4 2,638.9 9.1 90.9 0.641x
2001(P) 386.7 2,992.1 11.4 88.6 0.735x
EBITDA
1997 $ 33.2 $ 36.1 47.9 52.1 2.909x
1998 70.9 325.5 17.9 82.1 1.016x
1999(E) 50.8 258.9 16.4 83.6 0.948x
2000(P) 31.4 234.2 11.8 88.2 0.751x
2001(P) 34.1 280.4 10.9 89.1 0.711x
EBIT
1997 $ (0.4) $ (81.8) NMF NMF NMF
1998 37.0 217.1 14.6% 85.4% 0.868x
1999(E) 33.2 178.6 15.7 84.3 0.915x
2000(P) 14.0 159.2 8.1 91.9 0.600x
2001(P) 19.1 210.0 8.3 91.7 0.610x
Net Income3
1997 $ (16.7) $ (105.8) NMF NMF NMF
1998 13.6 70.5 16.1% 83.9% 0.867x
1999(E) 25.4 134.7 15.9 84.1 0.861x
2000(P) 5.4 90.5 5.6 94.4 0.662x
2001(P) 10.0 120.6 7.7 92.3 0.700x
Cash Flow3
1997 $ 17.0 $ 12.1 58.3% 41.7% 1.904x
1998 47.4 179.0 20.9 79.1 0.967x
1999(E) 43.0 215.0 16.7 83.3 0.878x
2000(P) 22.8 165.5 12.1 87.9 0.787x
2001(P) 25.0 191.0 11.6 88.4 0.776x
--------------------------------------
Mean4 0.872x
Median 0.861x
--------------------------------------
</TABLE>
- ------------------------------
1 In computing the implied exchange ratios, the relative contributions have
been adjusted to include the effects of excess cash, det, preferred stock and
certain other liabilities.
2 Reflects revenues, costs, etc. of Jupiter in proportion to the ownership
interest of the public shareholders. Mars results include results of Jupiter
in proportion to Mars ownership of Jupiter.
3 Adjusted to exclude income from interest on excess cash.
18
<PAGE>
4 Excluding high and low.
19
<PAGE>
Acquisition Assumptions
- --------------------------------------------------------------------------------
o Effect on Mars' earnings per share in projected 2000 and 2001 of a squeeze
out was examined.
o For illustrative purposes, an exchange ratio of 1.216x was used,
equivalent to a 15 percent premium to the latest share price ratio.
o Goodwill from the transaction was amortized over 15 years, consistent with
the period used on the Offshore Pipelines, Inc. merger.
o Consolidation cost savings of $5 million1 in SG&A were assumed. Source:
Mars management.
- ------------------------------
1 Pretax amount. Tax rate assumed at 38 percent.
20
<PAGE>
Projected 2000 Pro Forma Income Statement
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share amounts)
<TABLE>
<CAPTION>
Consolidated
Mars Jupiter Adjustments Combined
------------ ------- ----------- --------
<S> <C> <C> <C> <C>
Revenues $ 2,903.3 $ 839.8 $ 2,903.3
Cost Of Sales 2,337.8 659.7 2,337.8
--------- --------- ---------
Gross Profit 565.4 180.0 565.4
Gross Profit Margin 19.5% 21.4% 19.5%
SG&A Expense 315.2 86.4 $ (5.0) 310.2
Equity Expense/(Income) (9.4) (6.1) -- (9.4)
--------- --------- --------- ---------
EBDIT 259.6 99.8 5.0 264.6
EBDIT Margin 8.9% 11.9% 9.1%
Depreciation 92.4 55.4 92.4
Interest Expense/(Income) (18.8) (21.6) (18.8)
Other Expense/(Income) 0.5 (3.8) 0.5
Minority Interest 10.7 -- (16.8) (6.1)
Goodwill Amortization -- -- 8.9 8.9
--------- --------- --------- ---------
Pretax Income 174.7 69.7 12.9 187.6
Taxes 64.0 16.8 1.9 65.9
--------- --------- --------- ---------
Net Income 110.7 53.0 11.0 121.7
Less: Dividends On Series A Preferred Stock -- 7.2 --
--------- --------- --------- ---------
Net Income To Common $ 110.7 $ 45.8 $ 11.0 $ 121.7
========= ========= ========= =========
Net Income Margin 3.8% 5.5% 4.2%
========= ========= =========
- ---------------------------------------------------------------------------------------------------------------
Basic Shares Outstanding 59.1 39.0 17.8 76.9
Earnings Per Share $ 1.87 $ 1.17 $ 1.58
EPS Accretion/(Dilution) (0.29)
Cash Flow Per Share $ 3.44 $ 1.45 $ 2.90
CFPS Accretion/(Dilution) (0.54)
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Diluted Shares Outstanding 60.2 39.3 17.8 77.9
Earnings Per Share $ 1.84 $ 1.35 $ 1.56
EPS Accretion/(Dilution) (0.28)
Cash Flow Per Share $ 3.38 $ 1.45 $ 2.86
CFPS Accretion/(Dilution) (0.52)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
Projected 2001 Pro Forma Income Statement
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share amounts)
<TABLE>
<CAPTION>
Consolidated
Mars Jupiter Adjustments Combined
------------ ------- ----------- --------
<S> <C> <C> <C> <C>
Revenues $ 3,378.7 $ 1,228.1 $ 3,378.7
Cost Of Sales 2,763.0 1,040.7 2,763.0
--------- --------- ---------
Gross Profit 615.7 187.4 615.7
Gross Profit Margin 18.2% 15.3% 18.2%
SG&A Expense 317.5 86.2 $ (5.0) 312.5
Equity Expense/(Income) (9.9) (7.3) -- (9.9)
--------- --------- --------- ---------
EBDIT 308.1 108.5 5.0 313.1
EBDIT Margin 9.1% 8.8% 9.3%
Depreciation 85.4 47.8 85.4
Interest Expense/(Income) (16.3) (19.9) (16.3)
Other Expense/(Income) (0.1) (4.0) (0.1)
Minority Interest 14.2 -- (21.5) (7.3)
Goodwill Amortization -- -- 8.9 8.9
--------- --------- --------- ---------
Pretax Income 224.9 84.6 17.6 242.5
Taxes 81.9 18.9 1.9 83.8
--------- --------- --------- ---------
Net Income 143.0 65.7 15.7 158.7
Less: Dividends On Series A Preferred Stock -- 7.2 --
--------- --------- --------- ---------
Net Income To Common $ 143.0 $ 58.5 $ 15.7 $ 158.7
========= ========= ========= =========
Net Income Margin 4.2% 4.8% 4.7%
========= ========= =========
- ---------------------------------------------------------------------------------------------------------------
Basic Shares Outstanding 59.1 39.0 17.8 76.9
Earnings Per Share $ 2.42 $ 1.50 $ 1.98
EPS Accretion/(Dilution) (0.45)
Cash Flow Per Share $ 3.86 $ 1.26 $ 3.21
CFPS Accretion/(Dilution) (0.66)
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Diluted Shares Outstanding 60.2 39.3 17.8 77.9
Earnings Per Share $ 2.38 $ 1.67 $ 1.94
EPS Accretion/(Dilution) (0.44)
Cash Flow Per Share $ 3.80 $ 1.26 $ 3.15
CFPS Accretion/(Dilution) (0.65)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
EPS Breakeven Analysis: 2000
- --------------------------------------------------------------------------------
Graph showing the stock prices at which Parent could acquire the Company ("the
Combination") to generate breakeven EPS from the point of view of the
shareholders of the Parent and of the Company at a range of Company 2000 EPS
from $0.60 to $1.60
Jupiter FY2000 EPS1
- ------------------------------
1 Basic EPS.
23
<PAGE>
EPS Breakeven Analysis: 2001
- --------------------------------------------------------------------------------
[Graph showing the stock prices at which Parent could acquire the Company to
generate breakeven EPS from the point of view of the shareholder of the Parent
and of the Company at a range of Company 2001 EPS from $0.75 to $1.76]
Jupiter FY2001 EPS1
- ------------------------------
1 Basic EPS.
24
<PAGE>
Pro Forma Balance Sheets
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share amounts)
<TABLE>
<CAPTION>
Mars Jupiter
3/31/99 3/31/99 Adjustments Combined
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Assets
Cash And Cash Equivalents $ 206.9 $ 48.0 $ 206.9
Investments In Debt Securities 893.7 522.1 893.7
Accounts Receivable 507.4 207.5 507.4
Inventory 57.2 -- 57.2
Prepaids And Other 413.1 42.3 413.1
-------- -------- --------
Current Assets 2,078.4 819.8 2,078.4
Gross PP&E 1,539.2 993.6 1,539.2
Less: Accumulated Depreciation (1,058.0) (702.9) (1,058.0)
-------- -------- --------
Net PP&E 481.2 290.7 481.2
Investment In Affiliates -- 22.6 --
Goodwill 110.7 11.3 110.7
New Goodwill -- -- $ 133.7 133.7
Environmental And Products Liabilities Recoverable 437.7 -- 437.7
Other Assets 374.6 (120.7) 374.6
-------- -------- -------- --------
Total Assets $3,482.5 $1,023.8 $ 133.7 $3,616.2
======== ======== ======== ========
Liabilities And Stockholders' Equity
Accounts Payable $ 196.2 $ 90.5 $ 196.2
Other Current Liabilities 855.2 231.5 855.2
Current Debt 37.7 -- 37.7
-------- -------- --------
Current Liabilities 1,089.2 321.9 1,089.2
Long-term Debt 367.1 45.4 367.1
Accumulated Post-retirement Benefit Obligations 145.9 -- 145.9
Environmental And Products Liabilities 537.5 -- 537.5
Other 267.5 (60.0) 267.5
Minority Interest 217.0 -- $ (217.0) --
Preferred Stock -- 160.0 --
Common Equity 858.3 556.5 350.7 1,209.0
-------- -------- -------- --------
Total Liabilities And Equity $3,482.5 $1,023.8 $ 133.7 $3,616.2
======== ======== ======== ========
</TABLE>
25
<PAGE>
Comparison Of Multiples
- --------------------------------------------------------------------------------
Mars
-------------------------------
Jupiter1 Beneficial Excluding Jupiter
-------- ---------- -----------------
Adjusted Market Value To:
Adjusted Book Value 2.5x 2.3x 1.4x
1998 EBITDA 2.8x 3.6x 4.0x
1999 EBITDA 5.0x 4.1x 3.7x
2000 EBITDA 4.2x 3.3x 3.0x
Equity Value To:
1998 Net Income 2.9x 2.6x 1.7x
1999 Net Income 26.7x 4.4x 1.8x
2000 Net Income 7.8x 3.1x 1.3x
1998 Cash Flow 1.7x 1.8x 1.0x
1999 Cash Flow 3.8x 2.3x 1.1x
2000 Cash Flow 3.1x 2.0x 0.9x
- ------------------------------
1 Reflects Jupiter's Revised 2000 projection.
26
<PAGE>
Fiscal Year 2000 EPS Estimates1
- --------------------------------------------------------------------------------
o Analysts' estimates of Jupiter's 2000 EPS have declined over time more
than estimates of Mars' EPS.
<TABLE>
<CAPTION>
Mars
-----------------------------------------------------------------------------------------
Jupiter Contribution From Jupiter Other Mars Contribution Mars Total
------------------------ ------------------------- ------------------------ -------------------------
Percent Of Percent Of Percent Of Percent Of
2/98 2/98 2/98 2/98
Date EPS Estimate EPS Estimate EPS Estimate EPS Estimate
- ----- ------- ---------- ------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2/98 $ 2.78 100.0% $ 1.26 100.0% $ 1.49 100.0% $ 2.75 100.0%
3/98 2.53 91.0 1.16 91.9 1.64 110.2 2.80 101.8
4/98 2.72 97.8 1.23 98.0 1.50 100.3 2.73 99.3
5/98 2.96 106.5 1.33 105.9 1.48 99.1 2.81 102.2
6/98 2.87 103.2 1.30 102.9 1.43 96.2 2.73 99.3
7/98 2.58 92.8 1.18 93.5 1.19 80.0 2.39 86.2
8/98 2.65 95.3 1.21 95.8 1.22 82.1 2.43 88.4
9/98 2.53 91.0 1.16 91.9 1.25 84.1 2.41 87.6
10/98 1.73 62.2 0.83 65.8 1.35 90.6 2.18 79.3
11/98 1.80 64.7 0.86 68.1 1.28 86.0 2.14 77.8
12/98 1.77 69.7 0.85 67.1 1.30 87.5 2.15 78.2
1/99 1.12 40.3 0.58 46.0 1.23 82.6 1.81 65.8
</TABLE>
- ------------------------------
1 Source: First Call.
27
<PAGE>
Comparable Minority Squeeze Out Premium Analysis
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share)
o Squeeze outs in which stock is issued to the sellers typically occur at
lower premiums than cash transactions since the sellers often retain some
upside potential.
<TABLE>
<CAPTION>
Premium
------------------------------
Date Transaction Percent One-Day One Week Four Weeks
Acquiror Subsidiary Announced Value Acquired Prior Prior Prior
- -------------------------------- ------------------------------- --------- ----------- -------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash Transactions1
WMX Technologies Chemical Waste Management 7/28/94 $ 397.4 21.4% 10.6% 8.9% 1.1%
GTE Corp. Contel Cellular, Inc. 9/08/94 254.3 10.0 43.7 37.8 36.0
Pacificorp Pacific Telecom 11/02/94 159.0 13.4 23.7 23.7 23.7
Fleet Financial Group Fleet Mortgage Group 12/28/94 188.1 19.0 19.4 18.5 18.5
Club Mediterrenee SA Club Med Inc. 4/05/94 153.4 33.0 41.4 39.9 44.6
COBE Laboratories SA (Gambro AB) REN Corp-USA 7/14/95 182.1 47.0 27.0 20.3 26.0
Novartis AG SyStemix Inc. 5/27/96 107.6 26.8 25.6 23.1 25.3
Zurich Versicherungs GmbH Zurich Reinsurance Centre 1/13/97 319.0 34.0 17.1 18.5 11.6
Mafco Holdings Inc. Mafco Consolidated Group 1/21/97 116.8 15.0 23.5 23.5 27.6
Monsanto, Inc. Calgene Inc. 1/28/97 242.6 43.7 62.0 60.0 60.0
Anthem, Inc. Acordia, Inc. 6/02/97 193.2 33.2 12.7 11.5 26.0
Usinor SA J&L Specialty Steel, Inc. 9/23/98 115.0 46.5 100.0 112.5 37.8
Investor Group BET Holdings, Inc. 3/17/98 462.3 N/A 53.7 58.5 58.2
Dow AgroSciences (Dow Chemical) Mycogen Corp. 4/30/98 355.2 N/A 41.8 40.0 52.4
- ------------------------------------------------------------------------------------------------------------------------------------
Mean2 $ 233.0 28.6% 32.6% 31.3% 32.3%
Median 190.7 29.9 26.3 23.6 26.8
- ------------------------------------------------------------------------------------------------------------------------------------
Stock Transactions3
National Intergroup, Inc. FoxMeyer Corp 3/01/94 $ 79.7 19.5% 7.1% 9.1% 11.2%
Ogden Corp. Ogden Projects, Inc. 6/06/94 110.3 15.8 5.8 17.6 20.5
Genzyme Corp. IG Laboratories, Inc. 2/15/95 22.3 32.0 43.6 86.7 143.5
Grand Casinos, Inc. Grand Gaming Corp. 7/06/95 36.5 22.2 34.9 34.9 55.7
Conseco, Inc. Bankers Life Holding 8/26/96 120.8 11.5 14.9 10.5 11.7
National Patent Development General Physics Corp. 9/26/96 26.1 48.0 16.6 31.6 36.0
Electromagnetic Sciences, Inc. LXE 10/03/96 14.8 22.2 22.1 14.1 19.3
Apartment Investment And
Management Company NHP, Inc. 2/20/97 114.5 44.9 28.3 25.2 16.9
World Access, Inc. NACT Telecommunications 1/20/98 53.1 32.0 12.0 12.5 16.7
ISP Holdings, Inc. International Specialty Products 3/27/98 324.5 16.2 4.3 1.7 14.5
- ------------------------------------------------------------------------------------------------------------------------------------
Mean2 $ 70.4 25.6% 17.7% 19.4% 23.9%
Median 66.4 22.2 15.8 15.9 18.1
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Securities Data Corporation.
- -----------------------------
1 Cash transactions in the $100 million to $1 billion range since January 1,
1994.
2 Excluding high and low.
28
<PAGE>
3 Common stock issued to sellers.
29
<PAGE>
Minority Squeeze Out Premium Analysis - Stock Transactions1
- --------------------------------------------------------------------------------
o In the majority of minority squeeze outs in which stock was issued to the
sellers, the subsidiaries represented a relatively large part of the
parents' value, as in this case.
o Therefore, the sellers were not only retaining upside through receiving
stock, they were also receiving a stock which was very similar to the one
they were selling and through which they retained a similar ongoing
interest in the subsidiary.
o In such cases, premiums tend to be lower.
<TABLE>
<CAPTION>
Date Transaction Percent
Acquiror Subsidiary Announced Value Acquired
- ------------------------------------------- -------------------------------- --------- ----------- --------
<S> <C> <C> <C> <C>
National Intergroup, Inc. FoxMeyer Corp 3/01/94 $ 79.7 19.5%
Ogden Corp. Ogden Projects, Inc. 6/06/94 110.3 15.8
Genzyme Corp. IG Laboratories, Inc. 2/15/95 22.3 32.0
Grand Casinos, Inc. Grand Gaming Corp. 7/06/95 36.5 22.2
Conseco, Inc. Bankers Life Holding 8/26/96 120.8 11.5
National Patent Development General Physics Corp. 9/26/96 26.1 48.0
Electromagnetic Sciences, Inc. LXE 10/03/96 14.8 22.2
Apartment Investment And Management Company NHP, Inc. 2/20/97 114.5 44.9
World Access, Inc. NACT Telecommunications 1/20/98 53.1 32.0
ISP Holdings, Inc. International Specialty Products 3/27/98 324.5 16.2
- ----------------------------------------------------------------------------------------------------------------
Mean4 $ 70.4 25.6%
Median 66.4 22.2
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Premium
--------------------------------
Implied Acquiror
100% Of Equity Four
Subsidiary Market One Day One Week Weeks
Acquiror Value Value2 Prior Prior Prior
- ------------------------------------------- ---------- --------- ------- -------- ------
<S> <C> <C> <C> <C> <C>
National Intergroup, Inc. $ 408.7 $ 199.4 7.1% 9.1% 11.2%
Ogden Corp. 698.1 897.2 5.8 17.6 20.5
Genzyme Corp. 69.8 1,180.8 43.6 86.7 143.5
Grand Casinos, Inc. 164.4 77.4 34.9 34.9 55.7
Conseco, Inc. 1,050.4 1,635.7 14.9 10.5 11.7
National Patent Development 54.4 69.7 16.6 31.6 36.0
Electromagnetic Sciences, Inc. 66.7 96.3 22.1 14.1 19.3
Apartment Investment And Management Company 255.0 355.7 28.3 25.2 16.9
World Access, Inc. 165.9 353.9 12.0 12.5 16.7
ISP Holdings, Inc. 2,003.1 --3 4.3 1.7 14.5
- -------------------------------------------------------------------------------------------------------
Mean4 $ 359.9 $ 451.5 17.7% 19.4% 23.9%
Median 210.5 353.9 15.8 15.9 18.1
- -------------------------------------------------------------------------------------------------------
</TABLE>
Source: Securities Data Corporation
- ------------------------------
1 Common stock issued to sellers. Transactions since January 1, 1994.
2 Prior to transaction.
3 Interest in subsidiary was only asset of parent.
30
<PAGE>
4 Excluding high and low.
31
<PAGE>
Public Company Acquisition Premiums
- --------------------------------------------------------------------------------
o Premiums in acquisitions of public companies reflect lower premiums where
sellers retain some future upside through receiving stock in a
transaction.
Analysis Of Average Acquisition Premiums
<TABLE>
<CAPTION>
Cash Cash/Stock
---------------------------------------------------- ----------------------------------------------------
Premium Premium
Premium Premium One Premium Premium One
One Day One Week Month One Day One Week Month
Transactions Prior Prior Prior Transactions Prior Prior Prior
------------ ----- ----- ----- ------------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994 47 46.3% 51.1% 56.9% 100 39.4% 42.4% 50.9%
1995 66 41.7 46.3 52.4 130 35.5 40.4 47.6
1996 74 33.7 40.7 46.9 147 31.6 37.3 42.7
1997 123 32.1 37.6 42.8 252 30.2 35.0 41.4
1998 117 31.1 39.0 40.6 224 30.1 36.7 41.5
1999 YTD 13 20.3 32.9 46.0 24 26.5 34.3 41.7
- --------------------------------------------------------------------------------------------------------------------------------
Weighted Average 34.7% 41.1% 46.0% 32.2% 37.4% 43.6%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Stock
----------------------------------------------------
Premium
Premium Premium One
One Day One Week Month
Transactions Prior Prior Prior
------------ ----- ----- -----
1994 62 33.0% 34.8% 44.5%
1995 77 32.3 36.9 45.4
1996 93 30.5 34.8 41.2
1997 155 27.8 32.1 39.1
1998 126 28.1 34.8 42.0
1999 YTD 17 31.0 37.1 44.5
- --------------------------------------------------------------------------------
Weighted Average 29.7% 34.4% 41.9%
- --------------------------------------------------------------------------------
32
<PAGE>
Premiums In Recent Public Oil Service M&A Transactions
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Offer Premium Over Share
Price Prior To Announcement
Date Target Acquiror Stock/ ----------------------------------
Announced Name Name Cash One Day Prior 30 Days Prior
- --------- -------------------------------- ------------------------------ ------ ------------- -------------
<S> <C> <C> <C> <C> <C>
01/19/98 GeoScience Corp (Tech-Sym Corp.) Core Laboratories NV S/C 30.2% 52.2%
10/30/98 Pool Energy Services Co. Nabors Industries, Inc. S 51.3 70.6
10/29/98 Superior Energy Services1 Parker Drilling Co. S 16.5 36.6
10/19/98 Bayard Drilling Technologies Nabors Industries, Inc. S/C 40.0 30.5
08/10/98 Cliffs Drilling R&B Falcon S 39.0 28.3
06/29/98 Dawson Production Service Key Energy Group C 40.7 89.8
06/19/98 Camco International Schlumberger S 32.6 30.4
06/10/98 Ceanic Corporation Stolt Comex Seaway C 29.6 51.5
05/11/98 Western Atlas, Inc. Baker Hughes, Inc. S 21.3 26.9
03/30/98 Artisan Corp. Ensign Resource Service S/C 6.6 (2.2)
03/09/98 3-D Geophysical, Inc. Western Atlas, Inc. C 11.3 10.1
03/03/98 Weatherford Enterra, Inc. EVI, Inc. S 14.0 17.9
02/26/98 Dresser Industries, Inc. Halliburton Company S 7.6 14.1
12/16/97 Matrix Services Corporation1 ITEQ, Inc. S/C 12.4 32.5
12/15/97 Christiana Cos Inc. EVI, Inc. S/C 15.3 45.8
07/23/97 Astrotech International Corp. ITEQ, Inc. S 40.3 42.6
07/10/97 Reading & Bates Corporation Falcon Drilling Company S 16.6 12.9
06/10/97 Numar Corporation Halliburton Company S 91.0 80.7
05/20/97 Keystone International, Inc. Tyco International Ltd. S 61.5 55.8
05/14/97 Dreco Energy Services Ltd. National-Oilwell, Inc. S 21.9 34.8
05/06/97 BW/IP, Inc. Durco International, Inc. S (5.5) (1.7)
04/17/97 Drilex International, Inc. Baker Hughes, Inc. S 9.4 11.2
02/27/97 Production Operators Corporation Camco International, Inc. S 22.9 27.0
02/26/97 Petrolite Corporation Baker Hughes Inc. S 28.4 35.8
01/22/97 Norand Corp. Western Atlas, Inc. C 72.9 91.2
09/17/96 Bettis Corporation Daniel Industries, Inc. S 13.0 29.6
07/01/96 Landmark Graphics Corporation Halliburton Company S 65.5 70.3
04/26/96 EnServ Corporation Precision Drilling Corporation S/C 6.8 28.0
04/25/96 Transocean Sonat Offshore S/C 39.4 27.5
04/17/96 Tucker Patterson S 2.0 (0.5)
04/03/96 Nowsco Well Services, Inc. BJ Services C 30.4 23.1
01/25/96 Dual Drilling ENSCO International S 8.9 25.0
12/08/95 Arethusa Diamond Offshore S 6.4 24.2
11/20/95 Hornbeck Offshore Services, Inc. Tidewater, Inc. S 29.0 18.2
06/26/95 Enterra Corporation Weatherford International, Inc. S 3.0 (7.9)
03/13/95 Wilrig Transocean S 9.1 8.5
09/13/94 Western Company Of North America BJ Services S/C 69.2 54.1
06/13/94 Chiles Offshore Noble Drilling Corp. S 5.0 6.4
05/23/94 Wheatley TXT Corporation Dresser Industries, Inc. S 37.0 38.4
04/11/94 Fischer & Porter Co. Elsag Bailey Process C 2.8 21.7
09/07/93 Baroid Corporation Dresser Industries, Inc. S 19.3 38.6
----------------------------------------------------
Range2 2.0% - 72.9% (2.2%) - 89.8%
Mean2 26.2% 32.5%
Median 21.3% 28.3%
----------------------------------------------------
</TABLE>
- ------------------------------
33
<PAGE>
1 Not completed.
2 Excludes high and low values.
34
<PAGE>
Stock Performance Of Squeeze Outs - Stock Transactions
- --------------------------------------------------------------------------------
[Graph of the daily closing stock prices of the two stocks involved in each of
five previously closed minority squeeze outs involving stock transactions for
three months before and three months after the transactions took place, stock
prices were indexed to the beginning of the three month period preceding the
transactions.]
35
<PAGE>
Stock Performance Of Squeeze Outs - Stock Transactions
- --------------------------------------------------------------------------------
National Patent/General Physics
[GRAPHIC]
Electromagnetic Sciences/LXE
[GRAPHIC]
Apartment Investment/NHP
[GRAPHIC]
World Access/NACT
[GRAPHIC]
International Specialty Products1
[GRAPHIC]
- ------------------------------
1 ISP Holdings (largest shareholder) was not public.
36
<PAGE>
Effective Premium Analysis - Pre-Transaction Share Analysis
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share)
o If Jupiter's shareholders exchange Jupiter shares for shares of Mars, they
give up stock representing excess cash plus value of Jupiter's business
(less debt and certain other liabilities). In return, they receive Mars
stock which includes some amount of excess cash and value of Jupiter
business, as well as value of Mars businesses (less debt and certain
liabilities).
o Simmons has considered this in analyzing premiums in a potential
transaction.
<TABLE>
<CAPTION>
Jupiter Mars
------------------------ ------------------------
Total Per Share Total Per Share
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Excess Cash $ 573.1 $ 14.59 $ 989.7 $ 16.45
Value Of Mars Non-Jupiter Business -- -- 618.1 10.27
Value Of Jupiter Business 457.5 11.65 457.5 7.60
---------- ---------- ---------- ----------
Total 1,030.6 26.24 2,065.3 34.32
Less:
Debt $ (50.7) $ (1.29) (403.6) (6.71)
Antitrust Liability -- -- -- --
Net Environmental Liabilities -- -- (144.1) (2.39)
Post-Retirement Benefit -- -- (24.3) (0.40)
Minority Interest -- -- (340.9) (5.07)
Preferred Stock (160.0) (4.07) -- --
---------- ---------- ---------- ----------
Equity Value $ 819.9 $ 20.88 $ 1,188.4 $ 19.75
========== ========== ========== ==========
</TABLE>
37
<PAGE>
Effective Premium Analysis - Analysis Of Post-Transaction Mars Shares
- --------------------------------------------------------------------------------
(Amounts in dollars)
o The value per Mars share of excess cash, value of Mars' non-Jupiter
business, value of Jupiter's business, etc. is diluted by the issuance of
additional shares in the transaction.
o However, Mars' shareholders benefit from the elimination of the minority
interest.
o Simmons has assumed the post-transaction share price of Mars remains
unchanged for illustrative purposes.
<TABLE>
<CAPTION>
Pre-Transaction Post-Transaction
--------------- -------------------------------------------------------
Nominal Premium To Jupiter Shareholders 0.0% 5.0% 10.0% 15.0% 20.0%
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Exchange Ratio 1.057x 1.110x 1.163x 1.216x 1.268x
Shares Outstanding (Millions)
Pre-Transaction 60.2 60.2 60.2 60.2 60.2 60.2
Shares Issued N/A 15.4 16.2 17.0 17.8 18.5
------- ------- ------- ------- ------- -------
Total Post-Transaction 60.2 75.6 76.4 77.2 77.9 78.7
======= ======= ======= ======= ======= =======
Excess Cash $ 16.45 $ 13.09 $ 12.96 $ 12.83 $ 12.70 $ 12.58
Value Of Mars Non-Jupiter Business 10.27 8.17 8.29 8.41 8.52 8.63
Value Of Jupiter Business 7.60 6.05 5.99 5.93 5.87 5.81
------- ------- ------- ------- ------- -------
Total 34.32 27.31 27.24 27.16 27.09 27.02
Less:
Debt (6.71) (5.34) (5.28) (5.23) (5.18) (5.13)
Antitrust Liability -- -- -- -- -- --
Net Environmental Liability (2.39) (1.91) (1.89) (1.87) (1.85) (1.83)
Post-Retirement Benefit (0.40) (0.32) (0.32) (0.31) (0.31) (0.31)
Minority Interest (5.07) -- -- -- -- --
------- ------- ------- ------- ------- -------
Share Price $ 19.75 $ 19.75 $ 19.75 $ 19.75 $ 19.75 $ 19.751
======= ======= ======= ======= ======= =======
</TABLE>
- ------------------------------
1 If instead of Mars' stock price remaining constant, the sum of the public
equity values of Jupiter and Mars remains constant, at a 20 percent
nominal transaction premium, Mars' post-transaction share price would
decline approximately 3.9 percent.
38
<PAGE>
Effective Premium Analysis - Transaction Premiums
- --------------------------------------------------------------------------------
o Simmons has calculated various effective premiums represented by what
Jupiter's shareholders may receive in value of Mars non-Jupiter business
to their proportionate loss in net excess cash and value of Jupiter's
business.
o Simmons has calculated nominal premiums to the latest closing share price
ratio. Simmons would suggest determining the actual premium on some
average of recent trading share price ratios.
<TABLE>
<CAPTION>
Jupiter
Shareholders
Pre-Transaction Jupiter Shareholders Post-Transaction
--------------- --------------------------------------------------
Nominal Premium To Jupiter Shareholders 0% 5% 10% 15% 20%
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Exchange Ratio 1.057x 1.110x 1.163x 1.216x 1.268x
Net Excess Cash1 $ 9.23 $ 5.84 $ 6.07 $ 6.30 $ 6.52 $ 6.73
Value Of Jupiter Business 11.65 6.40 6.65 6.89 7.14 7.37
Value Of Mars Non-Jupiter Business 0.00 8.64 9.20 9.77 10.35 10.94
------ ------ ------ ------ ------ ------
Net Share Value $20.88 $20.88 $21.92 $22.96 $24.01 $25.05
====== ====== ====== ====== ====== ======
Jupiter Shareholders' Losses
Net Excess Cash $(3.39) $(3.16) $(2.93) $(2.71) $(2.49)
Value Of Jupiter Business (5.25) (5.00) (4.75) (4.51) (4.28)
------ ------ ------ ------ ------
Total Losses (8.64) (8.16) (7.69) (7.22) (6.77)
Jupiter Shareholders' Gains
Value Of Mars Non-Jupiter Business 8.64 9.20 9.77 10.35 10.94
------ ------ ------ ------ ------
Net Gain $ 0.00 $ 1.04 $ 2.09 $ 3.13 $ 4.18
====== ====== ====== ====== ======
Effective Premium 0.0% 12.8% 27.2% 43.4% 61.7%
====== ====== ====== ====== ======
</TABLE>
- ------------------------------
39
<PAGE>
1 Excess cash (cash in excess of 5 percent of revenues), less debt, preferred
stock, and environmental, post-retirement benefit and antitrust suit
liabilities.
40
<PAGE>
Effective Premium Analysis - No Premium On Excess Cash
- --------------------------------------------------------------------------------
o Jupiter's shareholders own shares which represent the value of net excess
cash1 and the value of Jupiter's operating business.
o Mars may be unwilling to pay a premium for Jupiter's net excess cash.
o Simmons has calculated various effective premiums on the pre-transaction
value of Jupiter's business assuming no transaction premium is
attributable to excess cash.
<TABLE>
<CAPTION>
Jupiter
Shareholders
Pre-Transaction Jupiter Shareholders Post-Transaction
--------------- ----------------------------------------------
Nominal Premium To Jupiter Shareholders 0% 5% 10% 15% 20%
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Exchange Ratio 1.057x 1.110x 1.163x 1.216x 1.268x
Per Share Values
Net Excess Cash1 $ 9.23 $ 9.23 $ 9.23 $ 9.23 $ 9.23 $ 9.23
Value Of Jupiter Business 11.65 11.65 12.69 13.74 14.78 15.82
------ ------ ------ ------ ------ ------
Total Share Value2 $20.88 $20.88 $21.92 $22.96 $24.01 $25.05
====== ====== ====== ====== ====== ======
Effective Premiums
Net Excess Cash 0.0% 0.0% 0.0% 0.0% 0.0%
Value Of Jupiter Business 0.0 9.0 17.9 26.9 35.8
------ ------ ------ ------ ------
Total 0.0% 5.0% 10.0% 15.0% 20.0%
====== ====== ====== ====== ======
</TABLE>
- ------------------------------
1 Excess cash (cash in excess of 5 percent of revenues), less debt, preferred
stock and antitrust suit liability.
2 For illustrative purposes, post-transaction share values assume Mars share
price remains at pre-transaction level.
41
<PAGE>
Share Ownership Overlap: Jupiter Top 20 Shareholders
- --------------------------------------------------------------------------------
(Dollar amounts in thousands)
o Jupiter's top 20 public shareholders also own 34 percent of Mars shares
outstanding.
<TABLE>
<CAPTION>
Jupiter Ownership Mars Ownership
---------------------------- ----------------------------
Percent Of Percent Of
Number Of Total Shares Number Of Total Shares
Shares Held Outstanding Shares Held Outstanding
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Wellington Management Co. 2,168 5.6% 700 1.2%
Prudential Insurance Co. 1,366 3.5 8,233 14.0
Lynch & Mayer, Inc. 1,063 2.7 2,685 4.5
Brahman Capital Corp. 1,039 2.7 638 1.1
Barrow Hanley Mewhinney 634 1.6
Wanger Asset Management LP 628 1.6
Friess Associates, Inc. 539 1.4 1,180 2.0
Fidelity Management & Resources Corp. 537 1.4 3,702 6.3
State Street Research & Management 448 1.1
NewSouth Capital Management 295 0.8 561 1.0
California Public Employees Retirement System 282 0.7 315 0.5
Duqesne Capital Management LLC 260 0.7 774 1.3
Chase Manhattan Corp. 251 0.4 687 1.2
Iridian Asset Management 231 0.6 332 0.6
Capital Guardian Trust 215 0.6
Kalmar Investments, Inc. 192 0.5
Kirr Marbach & Co. 190 0.5 1 0.0
American Century Companies 188 0.5
Scott & Stringfellow Capital 172 0.4
Advantus Capital Management 133 0.3 7 0.0
------ ----- ------ -----
Total Top 20 13(f) Institutions1 10,831 27.8 19,815 33.6
Other 13(f) Institutions1 1,525 3.9
Management And Board Of Directors2 147 0.4
Mars1 24,668 63.3
Other 1,830 4.7
------ -----
Total3 39,041 100.0% 59,012 100.0%
====== ===== ====== =====
</TABLE>
- ------------------------------
1 Source: CDA Spectrum-13(f) Institutional Stock Holdings, September 30, 1998;
Jupiter proxy dated July 6, 1998.
2 Holdings as stated in July 1998 proxy statement.
42
<PAGE>
3 Basic shares outstanding from respective December 1998 10-Qs.
43
<PAGE>
EXHIBIT 99(B)(7)
- --------------------------------------------------------------------------------
Strategic Alternatives
- --------------------------------------------------------------------------------
<PAGE>
Strategic Alternatives
- --------------------------------------------------------------------------------
o Simmons has considered a wide variety of alternatives for the publicly
held shares of Jupiter.
[GRAPHIC]
2
<PAGE>
- --------------------------------------------------------------------------------
Private Sale - Whole Of Jupiter
- --------------------------------------------------------------------------------
3
<PAGE>
Current Merger And Acquisition Environment
- --------------------------------------------------------------------------------
o Weaker oil and gas prices caused the M&A market in the oil service
industry to slow after the first quarter of 1998 as buyers became
reluctant to meet sellers' price expectations.
o However, several public companies with strong balance sheets have
continued to be highly interested in strategic acquisitions, particularly
with valuations significantly off their peaks.
o Public companies have shown a willingness to use their stock as part of
the acquisition price, recognizing that an element of dilution is
acceptable for the right strategic transaction and that retention of some
upside is important from a seller's point of view.
o A series of mega-deals occurred during 1998 (including Baker
Hughes/Western Atlas, EVI/Weatherford International, Halliburton/Dresser
and Schlumberger/Camco) which helped set a record of almost $25 billion in
completed transactions.
o Although significant capital is available from financial acquirors,
current industry conditions are unlikely to attract players with
sufficient resources to acquire Jupiter. Those financial groups which
focus on the oil service industry do not have adequate resources for such
a transaction.
4
<PAGE>
Private Sale Option
- --------------------------------------------------------------------------------
o Several strategic acquirors could be interested in Jupiter due to:
- Leading market share.
- Reputation.
- Strategic assets.
- Broad range of capabilities.
- Worldwide operations.
o Potential acquirors could achieve synergies through such a transaction.
- Broadening of product/service offering.
- Packaging/bundling of services.
- Cost consolidation benefits.
- Enhanced asset utilization.
o Jupiter's shareholders would be expected to achieve a premium to current
market in a sale. A transaction involving stock could also allow Jupiter's
shareholders to benefit from merger synergies, and to retain some future
upside in a recovery.
o Simmons has reviewed a selected group of candidates.
- Companies performing E&C of offshore facilities.
- Subsea E&C companies.
- E&C companies serving the onshore energy business.
o Simmons was not authorized to, and did not, discuss the potential sale of
Jupiter with any potential acquirors.
5
<PAGE>
Sale Of Whole Of Jupiter
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Public/Private And Total
Company Market Capitalization Description
- ----------------- ------------------------ --------------------------------------------------------------
<S> <C> <C>
ABB Group Public Diversified E&C company serving the power generation and
(Sweden, transmission, oil and gas, hydrocarbon processing and other
Switzerland, U.S.) industries. Also provides financial services. Energy E&C
$25,026 business includes construction and maintenance of offshore and
subsea facilities, and refining, chemical and petrochemical
plants. Operates worldwide.
Coflexip Public Provides design, engineering, procurement, construction and
(U.S., France) project management services for subsea oil and gas projects.
$1,250 Designs and manufactures flexible pipe and transmission
cables. Focuses mainly in the North Sea with smaller
operations in Brazil, Asia Pacific, West Africa and the U.S.
GOM. Operates a fleet of four pipelay vessels and seven subsea
construction vessels. Based in France.
ETPM Public Subsidiary of Suez Lyonnaise des Eaux. ETPM provides
(France) construction services for offshore pipelines and facilities
worldwide. Parent company also constructs and manages water,
waste, power and heating, communications, healthcare and other
facilities, and civil engineering works.
FMC Corporation Public Provides subsea and other wellheads, engineering and
(U.S.) construction of FPSOs and mooring systems, metering products
$3,199 and loading systems. Also provides equipment for airports and
food manufacturing, and chemicals for the agriculture, food
manufacturing and pharmaceutical industries.
</TABLE>
6
<PAGE>
Sale Of Whole Of Jupiter (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Public/Private And Total
Company Market Capitalization Description
- ----------------- ------------------------ --------------------------------------------------------------
<S> <C> <C>
Halliburton Public Brown & Root Energy Services provides engineering, project
(U.S.) management, construction and operation of upstream oil and
$14,620 gas facilities worldwide. Halliburton has a strong
presence throughout energy E&C: subsidiaries include
Brown & Root Engineering And Construction, MW Kellogg and
SubSea.
Heerema Private Operates one of the largest heavy-lift vessel fleets in
-- the world and provides E&C services for offshore oil and
gas facilities and large steel structures for the civil
sector.
Odebrecht Group Public Provides engineering and construction services to a wide
(Brazil) variety of industries including the offshore oil and gas and
$1,111 hydrocarbon processing industries. Also owns and operates
chemical and petrochemical facilities. Estimated revenues of
$3 billion, has approximately 45,000 employees in North and
South America, Africa and Europe.
Saipem Public Provides offshore engineering and construction services to the
(Italy) oil and gas industry, including laying of pipelines and
$1,496 construction and installation of offshore facilities. Also
provides E&C services to the onshore energy and hydrocarbon
processing industries, and provides onshore and offshore
drilling services. Operates worldwide. ENI Group owns
approximately 43 percent.
</TABLE>
7
<PAGE>
Sale Of Whole Of Jupiter (Continued)
- --------------------------------------------------------------------------------
o Several of the leading onshore engineering and construction companies
could be interested in an acquisition of Jupiter. Such a transaction would
combine leaders in both the onshore and offshore energy E&C sectors.
<TABLE>
<CAPTION>
Public/Private And Total
Company Market Capitalization Description
- ----------------- ------------------------ --------------------------------------------------------------
<S> <C> <C>
Bechtel Private One of the world's largest E&C companies; serves hydrocarbon
-- processing, chemical, power and other industries, and
provides civil engineering and environmental services.
Fluor Corp. Public Provides design, engineering, procurement, construction,
(U.S.) maintenance and other diversified services on a worldwide
$3,268 basis to an extensive range of industrial, commercial,
utility, natural resources, energy and governmental clients.
Foster Wheeler Public Designs, engineers and constructs hydrocarbon processing,
(U.S.) power generation and distribution, and water treatment
$1,568 facilities and process plants. Also manufactures steam
generating equipment and builds, owns and operates
independent power generation and process facilities. Focuses
on the U.S., Europe, China, Southeast Asia and the Middle
East.
Jacobs Engineering Public Provides engineering, design and consulting services;
(U.S.) construction and construction management services; and
$1,075 process plant maintenance services to industrial, commercial
and governmental clients. Operates throughout the U.S.,
Europe and India.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C> <C>
Techint Private Engineering and construction division builds chemical and
-- petrochemical plants, oil and gas facilities, pipelines,
transmission lines and power and other manufacturing plants.
Techint is also the world leader in seamless oilfield
tubulars, manufactures machinery for various manufacturing
industries, produces oil and gas, and provides a variety of
other services. Based in Argentina. Estimated revenues are $5
billion; has over 30,000 employees.
</TABLE>
9
<PAGE>
- --------------------------------------------------------------------------------
Private Sale - Publicly Held Jupiter Shares
- --------------------------------------------------------------------------------
10
<PAGE>
Private Sale Of Publicly Held Jupiter Shares
- --------------------------------------------------------------------------------
o While a buyer could surface for the minority shares of Jupiter, achieving
a premium to market could prove difficult.
o Potential acquirors are likely to be concerned about:
- Continuing Mars controlling interest.
- Continuing overhang from Mars ownership.
- Declining projected financial performance.
o Ownership of a minority interest by a strategic acquiror would be unlikely
to facilitate synergies between Jupiter and the acquiror. Absent ability
to create such synergies, strategic players would be unlikely to be
interested.
o Premium to current stock price is unlikely to permit adequate return on
the purchase of the minority interest to financial acquirors.
o Private sale of the publicly held (minority interest) Jupiter shares at a
premium to market is not a realistic alternative.
11
<PAGE>
- --------------------------------------------------------------------------------
Share Repurchase By Jupiter
- --------------------------------------------------------------------------------
12
<PAGE>
Share Repurchase By Jupiter
- --------------------------------------------------------------------------------
o An alternative to the minority squeeze out would be a repurchase of the
public outstanding shares by Jupiter using its excess cash.
o Jupiter initiated an open market share repurchase program in February
1998. By December 31, 1998, 2.2 million shares had been repurchased out of
an authorized 3 million shares.
o The pending call of Jupiter's debt issue may eliminate the covenants which
currently limit further repurchases.
o A tender for outstanding shares would typically be at a premium to market.
While open market repurchases occur at market prices at the time, such
buying activity could create a premium.
o Jupiter would likely have to defer any further repurchases for an
appropriate "cooling-off" period, having already initiated squeeze out
discussions.
o It is unlikely that Mars could achieve their objective of 100 percent
ownership through a repurchase program but would have to complete the
process through a minority squeeze out.
o If Mars were to reach a 90 percent ownership level (through repurchases
and conversion of its preferred) it would be able to force a merger. Under
these circumstances, the squeeze out premium would be applicable to a
lower number of outstanding shares than today.
13
<PAGE>
Self-Tender Stock Repurchases
- --------------------------------------------------------------------------------
Analysis Of Premiums In Self-Tender Stock Repurchases
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Repurchase Premium
--------------------------------------
Percent One Day One Week One Month
Transaction Shares Prior To Prior To Prior To
Date Company Value Acquired Announcement Announcement Announcement
---- ------- ----- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
2/04/97 WMX Technologies Inc. $900.0 6.2% (17.0%) (12.4%) (9.1%)
2/25/97 IPALCO Enterprises Inc. 408.0 22.2 21.4 22.5 24.8
4/16/97 Briggs & Stratton Corp. 183.1 12.4 19.3 14.6 11.8
5/07/97 ACM Managed Dollar Income Fund 102.6 27.0 0.0 0.0 0.0
10/09/97 Browning-Ferris Industries Inc. 585.0 7.0 4.7 3.1 3.8
1/20/98 ADVANTA Corp. 814.6 47.1 41.6 41.0 61.6
2/06/98 Corporate Express Inc. 376.3 27.0 15.8 21.6 (2.3)
8/21/98 Albemarle Corp. 112.1 10.0 6.8 5.8 (6.9)
11/05/98 Alliant Techsystems Inc. 129.2 13.5 4.3 11.1 14.9
-----------------------------------------------------------------------------------------------
Mean1 10.4% 11.1% 6.8%
Median 6.8% 10.2% 8.0%
-----------------------------------------------------------------------------------------------
</TABLE>
- ----------
1 Excludes high and low values.
14
<PAGE>
- --------------------------------------------------------------------------------
Strategic Acquisition Program
- --------------------------------------------------------------------------------
15
<PAGE>
Selected Strategic Acquisition Candidates
- --------------------------------------------------------------------------------
o There are several possible acquisitions which could strategically expand
Jupiter's capabilities or strengthen its position in key geographic
markets.
<TABLE>
<CAPTION>
Public/Private And
Total Market
Company Capitalization1 Description Acquisition Rationale
- -------------- -------------------- -------------------------------------------- --------------------------------------------
<S> <C> <C> <C>
Aker Maritime Public Provides engineering, construction, Provides Jupiter with a leading presence in
(Norway, U.K., U.S.) installation and maintenance of offshore oil the North Sea, a foothold in West Africa and
$580 and gas facilities in the North Sea, off South America and provides an element of
North and South America and West Africa, and consolidation in the GOM and North Sea.
in the Caspian. Aker is one of the "prime
contractors" in the Norwegian sector of the
North Sea. Also provides drilling systems
and downhole tools. Aker RGI holds
approximately 65 percent of Aker Maritime.
AMEC Public Provides integrated engineering, Provides Jupiter with a leading presence in
(U.K.) construction and maintenance services to the the U.K. sector of the North Sea, and
$924 oil, gas and petrochemical production, civil provides an element of consolidation in that
engineering, utilities and infrastructure, market.
property development, building services and
maintenance, facilities management, and
transportation industries. The company is
one of three or four "prime contractors" in
the U.K. sector of the North Sea.
Allseas Marine Private A leading pipelay contractor. Primarily Strengthens Jupiter's capabilities in
-- operates in the North Sea. Based in pipelay. Strengthens North Sea presence.
Switzerland.
Bluewater Private Designs, constructs and installs FPSOs and Strengthens FPSO construction and operation
-- single point moorings. Also owns and capabilities.
operates FPSOs. Based in Belgium.
Bouygues Offshore Public Designs, constructs, installs and manages Jupiter gains major presence and key assets
(U.S., France) onshore and offshore oil and gas in West Africa - strengthens Jupiter's
$490 production-related turnkey projects, and position in an emerging market.
provides maintenance services for
refineries, petrochemical plants and
offshore platforms. Also engages in maritime
and river-related civil projects and designs
and constructs liquefied natural gas
terminals and storage tanks. Operates a
fleet of two jackup barges, two
pipelay/derrick barges, two pipelay barges,
a derrick barge and five other barges.
Focuses on Africa, Europe and Asia Pacific.
</TABLE>
- ----------
1 At February 19, 1999.
16
<PAGE>
Selected Strategic Acquisition Candidates (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Public/Private And
Total Market
Company Capitalization Description Acquisition Rationale
- -------------- -------------------- -------------------------------------------- --------------------------------------------
<S> <C> <C> <C>
Cal Dive Public Provides construction, maintenance, Strengthens subsea construction and
International (U.S.) decommissioning, abandonment and salvage deepwater capabilities.
$212 services in the U.S. GOM. Construction fleet
includes one semisubmersible DP DSV, a
deepwater service barge, two moored
saturation MSVs, three other DSVs, two ROVs
and a salvage barge.
Dril-Quip Public Designs and manufactures subsea and surface Strengthens Jupiter's deepwater capabilities
(U.S.) wellheads, production trees, riser systems through addition of a leader in subsea
$224 and connectors. Also provides installation equipment.
services.
DSND Group Public Lays pipelines, installs floating production Strengthens Jupiter's subsea and pipelay
(Norway) systems and connects and completes subsea capabilities.
$355 production facilities. Focuses on deepwater
activities worldwide.
Friede Goldman Public Provides design, construction and conversion Broadens Jupiter's activities with drilling
(U.S.) services for offshore drilling rigs. rig-related capabilities.
$307
Global Industries Public Provides pipeline construction, platform Strengthens Jupiter's activities in pipeline
(U.S.) installation and removal, diving services construction. Also some consolidation in GOM
$688 and construction support services primarily and other offshore markets.
in the U.S. GOM with smaller operations in
West Africa, Asia Pacific, the Middle East
and Latin America. Operates a fleet of 17
pipelay/derrick barges, 4 derrick barges, 2
pipelay barges, 22 liftboats, 24 DSV/OSVs
and a SWATH vessel and 5 other support
vessels.
Horizon Offshore Public Provides marine construction services to the Strengthens Jupiter's capabilities in
(U.S.) offshore oil and gas industry primarily in pipeline construction.
$163 the U.S. GOM. The company's marine fleet is
used primarily to install marine pipelines.
IHC Caland Public Designs, constructs and installs FPSOs and Strengthens FPSO construction and operation
(Netherlands) single point moorings. Also owns and capabilities; gains immediate leading
$988 operates FPSOs. Also designs and constructs position in mooring systems through SBM
dredgers and other specialty vessels. subsidiary of IHC Caland.
</TABLE>
17
<PAGE>
Selected Strategic Acquisition Candidates (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Public/Private And
Total Market
Company Capitalization Description Acquisition Rationale
- --------------- ------------------ -------------------------------------------------- -----------------------------
<S> <C> <C> <C>
Keppel FELS Public Designs and constructs drilling rigs and floating Adds leading drilling rig
(Singapore) production systems, repairs and modifies drilling repair, modification and
$535 rigs. Also constructs and owns power plants, and construction capability.
commercial and industrial buildings. Key marine yards in
Southeast Asia and the U.S.
Kvaerner Public Provides a broad range of engineering and Provides Jupiter with a
(Norway) construction services, including E&C and leading presence throughout
$1,681 maintenance for offshore oil and gas facilities the North Sea. Broadens
(four fabrication yards in Norway and U.K.), Jupiter's range of services.
refining, chemical and petrochemical facilities,
pulp and paper, metals production and other
industries. Also constructs ships. Kvaerner
is one of three "prime contractors" in the
Norwegian sector of the North Sea.
Oceaneering Public Provides underwater intervention and above water Adds subsea E&C and FPSO
International (U.S.) inspection, maintenance and repair services for operations capabilities, and
$337 offshore platforms, pipelines and subsea strengthens Jupiter's FPSO
equipment. Also engineers, constructs and construction and deepwater
operates FPSOs and ultra-deepwater ROVs. Focuses activities.
on the U.S. GOM with smaller operations in Europe,
West Africa and Asia Pacific. Operates the
largest fleet of ROVs in the world.
Stolt Comex Seaway Public Provides seabed survey and subsea drilling support Adds a major subsea E&C
(U.S.) services as well as subsea engineering, capability to Jupiter.
$662 construction, maintenance and repair services.
Focuses mainly on the North Sea with smaller
operations in Africa, the Middle East, Asia
Pacific, South America and the U.S. GOM. Operates
a fleet of 1 flowline vessel, 3 flowline/subsea
construction vessels, 26 DSVs, a heavy lift crane
barge and 3 other vessels.
Umoe Oil & Gas Private Subsidiary of Umoe AS, a Norwegian shipping Jupiter gains major presence
-- company. Umoe Oil & Gas provides engineering, and key assets in Norwegian
fabrication, installation, hookup, commissioning, market.
and modifications and maintenance services for
offshore oil and gas facilities in the North Sea.
Umoe is one of three companies which function as
"prime contractors" in the Norwegian sector of the
North Sea. Revenues are estimated at
approximately $750 million.
</TABLE>
18
<PAGE>
Selected Consolidation Opportunities
- --------------------------------------------------------------------------------
o With the recent downturn in the industry, Jupiter could take the
opportunity to consolidate some of the more fragmented sectors of the
industry at more attractive prices and strengthen its position for a
recovery. However, this may not achieve Jupiter's stated objective of
moving to the higher margin sectors.
<TABLE>
<CAPTION>
Public/Private And
Total Market
Company Capitalization Description Acquisition Rationale
- -------------------- ------------------ ----------------------------------------------- --------------------------
<S> <C> <C> <C>
Bay Offshore Private Provides onshore and offshore fabrication and Some consolidation in
-- construction services on the Gulf Coast for the Gulf Coast offshore
oil and gas and hydrocarbon processing construction market.
industries. Broadens Jupiter's
activities with onshore
hydrocarbon processing
construction.
Gulf Island Fabrication Public Fabricates offshore drilling and production Some consolidation in
(U.S.) platforms and other structures including Gulf Coast fabrication
$75 jackets, deck sections, hulls, piles and well market, particularly in
protectors. Focuses primarily on the U.S. GOM 300-foot plus fixed
with smaller operations in West Africa and Latin platform market.
America.
TransCoastal Marine Public Fabricates offshore platforms and components for Some consolidation in
Services (U.S.) drilling rigs, and lays pipelines. Focuses in Gulf Coast shallow water
$82 the shallow water and transition zone areas of construction activities.
the Gulf of Mexico. Adds shallow water and
transition zone pipelay
capabilities.
Unifab International Public Fabrication of decks and modules for offshore Consolidation of shallow
(U.S.) platforms, primarily in the GOM. water offshore
$53 fabrication segment.
Others There are a wide variety of smaller players: Consolidation of various
Dynamic Offshore segments of the GOM
Grand Isle Shipyard offshore construction
Houma Industries market.
NATCO
Omega Service Industries
Production Management
SECO
Twin Brothers
</TABLE>
- ----------
19
<PAGE>
1 Fleet statistics from the latest annual report. Stolt is adjusted for the
acquisition of Ceanic.
20
<PAGE>
EPS Accretion Analysis Of Potential Acquisition Candidates
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
Spin-Off
- --------------------------------------------------------------------------------
22
<PAGE>
Spin-Off Of Mars Interest In Jupiter
- --------------------------------------------------------------------------------
o Distribution (Spin-off) of Mars interest in Jupiter to its shareholders
could create value for Jupiter's public shareholders.
- Potentially increased liquidity and critical mass could create
greater interest from institutional investors.
- Elimination of Mars "overhang".
o Spin-off is unlikely to be practical alternative:
- Likely not tax-free to Mars.
- Significantly reduces size of Mars: could affect investor interest
and liquidity and access to capital markets.
23
<PAGE>
- --------------------------------------------------------------------------------
Public Offering
- --------------------------------------------------------------------------------
24
<PAGE>
Public Offering Of Mars Interest In Jupiter
- --------------------------------------------------------------------------------
o A public offering of Mars interest in Jupiter, achieving wider
distribution and more liquidity (like a spin-off) could create a value for
Jupiter's public shareholders.
o The public offering market was active for oil service offerings in 1996
and 1997. However, only five offerings were completed in 1998. Currently
there are nine equity offerings of oil service companies in registration,
including four IPOs. However, the recent weakness in oil prices has closed
the offering window.
Oil Service Equity Offerings1
Annually Quarterly
[GRAPHIC] [GRAPHIC]
Note: Number of offerings in each period listed at the top of each bar.
Source: Simmons & Company International.
- ----------
25
<PAGE>
1 Through January 24, 1999. Does not include pending equity offerings in
registration.
26
<PAGE>
- --------------------------------------------------------------------------------
Summary Of Strategic Options
- --------------------------------------------------------------------------------
27
<PAGE>
Summary Of Alternatives
- --------------------------------------------------------------------------------
28
<PAGE>
EXHIBIT 99.(B)(9)
DRAFT
-----
CONFIDENTIAL
------------
Project Big Mac
Review of Jupiter
SIMMONS & COMPANY
INTERNATIONAL
MARCH 1999
<PAGE>
TRANSMITTAL LETTER
------------------
This confidential memorandum ("Memorandum") has been prepared by Simmons &
Company International ("Simmons") for the Independent Committee of the Board of
Directors of Jupiter (the "Independent Committee") as a review of certain issues
related to a potential transaction between Jupiter and Mars (the "Proposed
Transaction").
This Memorandum is intended as background information for use by the Independent
Committee and does not puport to be all-inclusive or to contain all of the
information which the Independent Committee may desire or need to evaluate the
Proposed Transaction.
In preparing this Memorandum, Simmons has relied on publicly available financial
and market information as well as internal information provided by Mars and
Jupiter. Simmons has not independently verified such information but has relied
on its preparers for its accuracy and completeness. Simmons, therefore, make no
express or implied warranty with respect to the accuracy or completeness of the
information contained herein or as to the non-occurrence of any change in the
affairs of Jupiter or Mars since the dates as of which information is provided
herein. Financial projections presented herein are based on managements' and
third-party analyses of information available at the time this Memorandum was
prepared, and there is no express or implied warranty that any of the
projections will be realized.
SIMMONS & COMPANY INTERNATIONAL
March 1999
<PAGE>
TABLE OF CONTENTS
-----------------
TAB
---
REVIEW OF JUPITER OPERATIONS................................................A
FINANCIAL PERFORMANCE.......................................................B
<PAGE>
- --------------------------------------------------------------------------------
Review Of Jupiter Operations
- --------------------------------------------------------------------------------
1
<PAGE>
Summary History of Jupiter
- --------------------------------------------------------------------------------
Prior to 1995 Jupiter operated as a wholly owned subsidiary of Mars.
1995 Jupiter becomes a publicly traded company as a result of a two-
step transaction. Mars contributed substantially all of its
marine construction services businesses to Jupiter in exchange
for common and preferred stock plus debt from Jupiter.
Subsequently, Offshore Pipelines, Inc. ("OPI"), a NYSE listed
company, was merged into Jupiter. As a result of these
transactions, Mars owned approximately 61 percent of Jupiter
common stock and former shareholders of OPI owned the remaining
39 percent. In addition, Mars owned preferred stock issued by
Jupiter with the face value of $160 million and a long-term note
with a face value of $231 million.
1996 Jupiter sold two derrick barges, the DB 101 and 102 into the
HeereMac joint venture for $106 million in cash and a note for
$105 million.
Announced the sale of its 49 percent ownership in CCC
Fabricaciones y Construcciones, S.A. de C.V. and the DB 15 and
DB 21 to Global Industries, Ltd. for $38.0 million.
1997 Jupiter paid a note payable to Mars in the amount of $231
million.
Roger E. Tetrault becomes Chairman of the Board and Chief
Executive Officer of Jupiter and Mars. Robert H. Rawle becomes
President and Chief Operating Officer of Jupiter.
Announce discovery of possible anti-competitive activity in the
lift barge service business of HeereMac, a joint venture 50
percent owned by Jupiter.
Terminated joint venture with HeereMac Offshore Construction
Group, generating approximately $319 million in cash as well as
title to the DB 101.
1998 Terminated joint venture with ETPM, generating $105 million in
cash and title to the DB 1601.
Announced its Malaysian joint venture, TL Marine Sdn. Bhd.,
agreed to sell two pipelay and derrick barges to Global
Industries, Ltd. for $50 million in cash.
Sold interest in Mars Engineering (Europe) Limited and announces
intention of exiting other European engineering operations.
Announced share repurchase program for up to three million
shares.
1999 Announced tender offer for 9 3/8 percent senior subordinated
notes.
Jupiter announced agreement to sell its Gulf of Mexico Diving
Division to Stolt Comex Seaway.
2
<PAGE>
Summary of Revenues By Operating Group
- --------------------------------------------------------------------------------
(U.S. dollar amounts in millions)
. Jupiter provides design, engineering, fabrication, installation and related
services for offshore drilling and production platforms, production equipment
modules, marine pipelines and subsea production systems. Approximately 25
percent of fiscal 1999 revenues were generated by deepwater or subsea
projects.
. Offshore revenues are were generated through the Company's fleet of 16 heavy
lift or pipelay barges (4 of which are in a joint venture).
. Fabrication revenues result primarily from the fabrication of production
facility topside equipment and platform jackets.
. Historically, Jupiter had provided engineering service for offshore structure
construction projects using in-house personnel. Jupiter recently sod part of
its U.K. engineering business and plans to outsource all future engineering
work except for bid preparation, project management and deepwater/subsea
work.
. Procurement revenues are driven by the mix of EPIC versus non-EPIC contracts
in a given year.
Historical And Projected Revenues By Service Line /1/
----------------------------------------------------
Fiscal Year Ending March 31
-----------------------------------------
1996 1997 1998
------- --------- ------
Offshore $ 548.6 $ 591.0 $ 743.1
Fabrication 311.6 376.3 455.3
Engineering 248.3 235.7 276.4
Procurement 235.9 240.1 425.4
Adjustments and Eliminations (85.0) (34.6) (44.8)
-------- -------- --------
Total Revenues $1,259.5 $1,408.5 $1,855.5
======== ======== ========
- -------------------------
/1/ Source: Jupiter 1998 SEC 10-K filing.
3
<PAGE>
Summary Of Jupiter's Offshore Fleet
- -------------------------------------------------------------------------------
. Jupiter has reduced the size of its fleet significantly over the past two
years in an effort to gain control over its assets and focus on
deepwater/subsea markets.
. Jupiter's fleet is oriented toward large diameter (greater than 20 inches)
trunkline pipelay and heavy lift. Heavy lift projects include the offshore
installation or removal of large freestanding platforms along with their
modular components.
. Large diameter pipelay is most common in the mature GOM, North Sea and Far
East basins.
. In response to an evolving market, Jupiter's offshore activity will
increasingly shift toward deepwater pipeline and subsea or floating
production system installations rather than the installation of fixed
platforms.
<TABLE>
<CAPTION>
Lift
DP/CM Capacity (s.t.) Pipelay Capacity Main Operating Theatre
--------- ------------------ ---------------------------------- ------------------------
<S> <C> <C> <C> <C>
Derrick/Lay Barges (9)
- ----------------------
DB 27 CM 2,400 Up to 72-inch diameter pipe Middle East
DLB 1601/1/ DP/5/ 2,000 S-Lay up to 72-inch diameter pipe North Sea/Mexico
DB 28/2/ CM 860 S-Lay reel system up to 60-inch pipe Gulf of Mexico
Ocean Builder/1/ CM 2,000 S-Lay reel system up to 48-inch pipe Mexico
DB 17 CM 860 S-Lay up to 60-inch diameter pipe Mexico
DB 26 CM 900 S-Lay up to 60-inch diameter pipe Southeast Asia
KP 1 CM 800 Up to 60-inch diameter pipe Southeast Asia
Hausteco/3/ CM 2,000 Up to 48-inch diameter pipe Mexico
Mixteco/3/ CM 800 Up to 48-inch diameter pipe Mexico
Derrick Barbes (4)
- ------------------
DB 50/1/ DP 4,400 J-Lay up to 20-inch umbilicals Gulf of Mexico
DB 101/1/ DP/4/ 3,500 Reel system up to 20-inch unbilicals Gulf of Mexico
DB 16/1/ DP 860 Reel system up to 10-inch pipe Gulf of Mexico
DB 11/3/ CM 600 Up to 8-inch diameter pipe Mexico
Lay Barges (2)
- --------------
LB 30 (DB 30)/5/ CM N/A S-Lay up to 60-inch diameter pipe Southeast Asia
Olmeca II/3/ CM N/A Up to 56-inch diameter pipe Mexico
Utility Barges (2)
- ------------------
SI. 5000 CM 5,000 N/A Gulf of Mexico
</TABLE>
- -----------------------------------------
/1/ Self propelled.
/2/ Cold stacked.
/3/ CMM joint venture 51 percent Protexa - 49 percent Jupiter
/4/ After conversion.
/5/ This vessel is currently in a shipyard being upgraded (adding 2,000+ ton
crane). It will be renamed the DB 30 when it becomes available for
service in June 1999.
4
<PAGE>
Heavy Lift Vessels By Company
- --------------------------------------------------------------------------------
. Jupiter is a leading competitor in both the large diameter pipelay and heavy
lift markets.
. The principal differentiating factor in the platform installation/removal
sector is heavy lift capability.
<TABLE>
<CAPTION>
Company Vessel Name Vessel Type Maximum Lift
- -------------------- ------------------ ----------------------------- -----------------
<S> <C> <C> <C>
ETPM Polaris Derrick/Pipelay Barge 1,600/1,650
ETPM DB 801 Derrick/Pipelay Barge 915/911
- ---------------------------------------------------------------------------------------------------------------
Global Industries Cherokee Derrick/Pipelay Barge 650/925
Global Industries Cheyenne Derrick/Pipelay Bury Barge 650/800
Global Industries Comanche Derrick/Pipelay Barge 640/1,000
Global Industries Arapaho Derrick Barge 650/800
Global Industries Hercules Derrick/Reel Or S-Lay Pipelay Barge 1,600/2,000
Global Industries Shawnee Derrick/Pipelay Barge 620/860
- ---------------------------------------------------------------------------------------------------------------
Heerema Balder Derrick Semi 5,500/7,000
Heerema Thaitf Derrick Semi 6,600/13,200
Heerema Hermod Derrick Semi 7,936/8,930
Heerema/1/ OHI 5000 Derrick Ship 3,300/5,311
- ---------------------------------------------------------------------------------------------------------------
Hyundai HD-2500 Derrick/Pipelay Barge 1,600/2,500
Hyundai HD-1000 Derrick Barge 825/1,000
- ---------------------------------------------------------------------------------------------------------------
Jupiter DB 101 Derrick Semi 2,700/3,500
Jupiter DB 16 Derrick/Reel-Lay Barge 600/860
Jupiter DB 17 Derrick/Pipelay Barge 657/860
Jupiter DB 26 Derrick/Pipelay Barge 800/1,000
Jupiter DB 27 Derrick/Pipelay Barge 1,400/2,400
Jupiter DB 28 Derrick/Pipelay Barge 600/860
Jupiter DB 50 Derrick/Reel Or J-Lay Barge 3,527/4,400
Jupiter/2/ DB II Derrick/Pipelay Barge 600/825
Jupiter DLB 1601 Derrick/Pipelay Barge 1,740/2,000
Jupiter/2/ Huasteco Derrick/Pipelay Ship 1,600/2,000
Jupiter KP 1 Derrick/Pipelay Barge 600/800
Jupiter/2/ Mixteco Derrick/Pipelay Ship 300/800
Jupiter Ocean Builder I Derrick/Pipelay Vessel 1,600/2,000
- ---------------------------------------------------------------------------------------------------------------
National Petroleum Const. DLB 1000 Derrick/Pipelay Barge 625/1,270
National Petroleum Const. HLS 2000 Derrick Ship 1,800/2,000
- ---------------------------------------------------------------------------------------------------------------
Nippon Steel Kuroshio Derrick/Pipelay Barge 2,000/2,500
Nippon Steel Kuroshio II Derrick/Pipelay Barge 800/1,038
- ---------------------------------------------------------------------------------------------------------------
Saipem/3/ Castoro Otto Derrick/Pipelay Ship 200/2,500
Saipem Pearl Marine Derrick Ship 1,800/2,400
Saipem Saipem S-7000 Derrick/J-Lay Semi 7,717/15,400
<CAPTION>
Maximum
Pipe Quarters/ Current
Company Diameter Moortype Location
- -------------------- ------------------ ---------------- -----------------
<S> <C> <C> <C>
ETPM 60 266-Conv North Sea
ETPM 60 236-Conv Middle East
- ---------------------------------------------------------------------------------------------------------------
Global Industries 36 184-Conv GOM
Global Industries 36 190-Conv West Africa
Global Industries 48 223-Conv West Africa
Global Industries -- 100-Conv GOM
Global Industries 60 235-DP GOM
Global Industries 48 272-Conv Mexico
- ---------------------------------------------------------------------------------------------------------------
Heerema -- 402-Conv GOM
Heerema -- 736-Conv North Sea
Heerema -- 336-Conv Far East
Heerema/1/ -- 207-Conv Far East
- ---------------------------------------------------------------------------------------------------------------
Hyundai 64 274-Conv Far East
Hyundai -- 250-Conv Black Sea
- ---------------------------------------------------------------------------------------------------------------
Jupiter -- 279-DP GOM
Jupiter 10 147-DP Venezuela
Jupiter 60 275-Conv Mexico
Jupiter 60 224-Conv Far East
Jupiter 72 276-Conv Far East
Jupiter 60 222-Conv GOM
Jupiter 42 234-DP GOM
Jupiter/2/ 8 208-Conv Mexico
Jupiter 72 370-Conv Mexico
Jupiter/2/ 48 200-Conv Mexico
Jupiter 60 220-Conv Far East
Jupiter/2/ 48 215-Conv Mexico
Jupiter 48 234-Conv Mexico
- ---------------------------------------------------------------------------------------------------------------
National Petroleum Const. 60 200-Conv Middle East
National Petroleum Const. -- 200-Conv Middle East
- ---------------------------------------------------------------------------------------------------------------
Nippon Steel 60 232-Conv Far East
Nippon Steel 60 232-Conv Far East
- ---------------------------------------------------------------------------------------------------------------
Saipem/3/ 56 339-Conv West Africa
Saipem 48 215-Conv Far East
Saipem -- 800-DP North Sea
</TABLE>
Source: Offshore Data Services.
- -------------------------------------------
/1/ To be scrapped.
/2/ Jupiter joint venture with Protexa (CMM)
/3/ Saipem joint venture with bouygues Offshore (SaiBos).
5
<PAGE>
Overview of Fabrication Operations
- --------------------------------------------------------------------------------
Jupiter has fabrication facilities located at most of the world's key offshore
petroleum producing regions. Jupiter's fabrication facilities are equipped with
covered fabrication facilities, rolling mills and wide variety of mostly movable
heavy duty construction equipment. This equipment included cranes, welding
equipment, machine tools and robotic and other automated equipment. Jupiter can
construct a full spectrum of offshore structures; from conventional jacket-type
fixed platforms, to deepwater platforms using compliant tower, tension-leg
floating production platform and spar technology.
Map of the world showing . Jupiter has six fabrication facilities.
the locations of the - Morgan City, Louisiana /1/
Company's six fabrication
facilities - Corpus Christi, Texas
- Inverness, Scotland
- Batam Island, Indonesia (Off
Singapore coast)
- Jebel Ali, UAE
- Veracruz, Mexico
. Jupiter has a joint venture (BarMac)
with the Brown & Root Energy Services
unit of Halliburton which was formed in
1995 in order to combine Jupiter's
Inverness and Brown & Roots's Nigg
fabrication operations in Scotland.
- -------------------------------
/1/ Principal domestic location and offshore base covering 1,114 acres.
<PAGE>
Overview of Fabrication Operations (Continued)
- --------------------------------------------------------------------------------
. Jupiter's GOM facility competes at the high end of the fabrication market.
With a higher cost structure than some of its smaller Gulf Coast competitors.
Jupiter is most competitive on large jacket (>300 feet) or topside projects.
Jupiter's Middle East and Far East facilities have cost structures similar to
those of their regional competitors.
. The market shift away form large fixed platforms in the GOM and North Sea has
had a significant, adverse impact on Jupiter, a company ideally positioned
for such work. Fixed platforms continue to be used widely in the Far East and
Middle East.
. Based on management's view that no large GOM platform jackets would be
fabricated for the foreseeable future, the Company wrote off most of its
Morgan City jacket fabrication equipment during the quarter ended December
31, 1998. Although Jupiter plans to exit this segment, the Company could
quickly reenter the market if demand were to materialize.
. Jupiter's fabrication yard in Morgan City is well suited for the fabrication
of large topsides. Management anticipates serving both the Gulf of Mexico and
West Africa markets from this facility.
. Jupiter operates one of only two significant fabrication facilities in the
Middle East. The other is operated by NPCC, the Abu Dhabi national oil
company. Management views local fabrication as a necessity to be
competitive the Middle East.
7
<PAGE>
Jupiter Revenues And Gross Profit By Region
- ----------------------------------------------------------------------
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Fiscal Year Ending March 31
---------------------------------------------------------------------
1996 1997 1998 1999P 2000E 2001E
-------- -------- -------- -------- -------- --------
Revenues
- --------
<S> <C> <C> <C> <C> <C> <C>
North America $ 407.2 $ 504.7 $ 657.9 $ 534.8 $ 322.4 $ 331.1
Far East 206.6 221.2 336.7 384.5 231.5 504.4
Middle East/1/ 155.2 192.6 345.1 243.7 165.1/1/ 268.5
Central And South America/2/ 4.6 30.9 32.7 28.5 30.8 31.8
West Africa -- -- -- -- -- --
Europe 479.7 361.5 378.0 78.2 15.9 3.1
Mentor (Subsea) 0.6 2.8 6.5 9.5 32.6 37.3
Jupiter Engineering 30.8 91.2 124.6 51.6 26.5 37.6
Other/Eliminations (25.2) 3.6 (26.1) (37.9) 14.9 14.3
-------- -------- -------- -------- -------- --------
Total $1,259.4 $1,408.5 $1,855.5 $1,293.0 $ 839.8 $1,228.1
======== ======== ======== ======== ======== ========
Gross Profit/3/
- ---------------
North America $ 56.7 $ 45.0 $ 89.9 $ 70.9 $ 51.4 $ 37.2
Far East/4/ 31.3 18.1 4.3 72.1 26.9 50.1
Middle East 19.8 21.8 48.8 55.5 31.2 30.3
Central And South America/2/ 1.1 3.3 4.6 4.1 7.6 8.1
West Africa -- -- -- -- -- --
Europe 62.0 20.9 43.2 6.2 0.1 (0.4)
Mentor (Subsea) (0.0) 0.3 1.0 1.8 5.0 5.4
Jupiter Engineering 4.0 11.6 8.3 2.3 (0.7) 5.2
Other/Eliminations (18.5) 3.7 13.1 0.6 3.2 3.7
-------- -------- -------- -------- -------- --------
Total $ 156.3 $ 124.8 $ 213.2 $ 213.4 $ 124.6 $ 139.6
======== ======== ======== ======== ======== ========
</TABLE>
Source: Jupiter management.
- ---------------------------------------------
/1/ The significant increase in Middle East revenues projected for fiscal 2001
without an increase in gross profit is driven by changes in procurement.
Fiscal 2000 includes $56 million of procurement revenues at a 7 percent
gross margin while fiscal 2001 includes $148 million of procurement
revenues at a 2 percent gross margin.
/2/ Includes Mexican operations.
/3/ After depreciation expense.
/4/ Gross profit from the Far East in fiscal 1999 includes the reversal of a $7
million reserve expensed in fiscal 1998 related to anticipated contract
performance.
8
<PAGE>
North America Market Situation
- --------------------------------------------------------------------------------
. Management anticipates that the North American market for traditional
installation and fabrication services will continue to deteriorate. Based on
the current environment, the greatest potential for a recovery in Jupiter's
North American operations comes from exposure to deepwater projects.
. Management estimates that approximately 60 percent of North America revenues
are related to deepwater or subsea work. Much of this deepwater work is the
fabrication of topsides for production systems or revenues from the DB 50,
Jupiter's dynamically positioned heavy lift J Lay barge.
. Jupiter had been a major competitor the business of fabricating large
jackets. Because management currently sees no large jacket projects on the
horizon, Jupiter plans to exit the jacket business, lower the Morgan City
facility's cost structure, and focus on topside fabrication work.
. The Morgan City fabrication yard is currently not very busy because of the
way jobs were bid several months ago. Jupiter had anticipated working on two
very large jobs, one for Amoco and one for Shell (one cancelled and one
deferred). As a result, management did not bid aggressively for other work.
. Management estimates that Jupiter's installation market share was 22 percent
during FY1998 based on barge days. As the total number of barge days declined
from 4,253 to 2,970 from FY1998 to FY1999, Jupiter's market share increased to
44 percent.
. 66 percent of projected FY2000 barge days, representing approximately 80
percent of projected North American barge gross profit, is already booked.
. Marine work to be awarded during the next 12 months has dropped considerably
in recent months. Barge operating days are projected to decline from 3,000 to
2,400 from fiscal 2000 to fiscal 2001 (20 percent). Deepwater projects tend to
have some visibility, but numerous smaller projects "pop up" as they do in the
Middle East market.
9
<PAGE>
Far East Market Situation
- --------------------------------------------------------------------------------
. Virtually all of Jupiter's Far East revenues are generated by traditional
shallow water/shelf projects.
. The Far East market is driven by major projects (mostly natural gas) that
tend to be visible relatively far in advance of the date when the project
is awarded.
. In recent years, the Far East market had been characterized by EPIC-type
contracts.
. The Far East market is currently very slow, except for a few major projects
that have been in the planning stages for a considerable period of time.
. If Jupiter is not awarded a large upcoming Shell job, the Company may shut
down its Far East fabrication facility and serve the Far East market from
its Middle East fabrication yard.
. Competitors are bidding extremely aggressively for any fabrication work.
10
<PAGE>
Middle East Market Situation
- --------------------------------------------------------------------------------
. As in the Far East, all of Jupiter's historical and current work in the
Middle East is related to traditional work in shallow water/shelf areas.
. Unlike the Far East market, however, the Middle East market offers the
potential for a large number of smaller jobs that can "pop up" on relatively
short notice.
. The outlook for fabrication work over the next few years is relatively good.
The fabrication projects expected to be awarded over the next several months
represent a fairly stable level of activity for Jupiter.
. Management estimates that Jupiter's average fabrication market share since
1996 has been 58 percent. The Company's financial projections for Middle East
fabrication are conservatively based on an assumed market share of 46 to 47
percent.
. The Middle East marine market is currently flat. Competitors can change from
year to year, but large vessels are unlikely to mobilize from the North Sea
or other areas for a single project.
11
<PAGE>
West Africa and North Sea Market Situations
- --------------------------------------------------------------------------------
. With the dissolution of the ETPM and HeereMac JVs, Jupiter is no longer
restricted from competing in the West Africa and North Sea markets.
. In the marine segment, Jupiter intends to be a deepwater and subsea
contractor in the West Africa market, including offshore Nigeria, Ivory
Coast, Angola and Equatorial Guinea. The Company will avoid competing
against smaller players for the lower margin work in the shallower waters.
. The fabrication of production modules for West Africa will be done at the
Morgan City yard or in Jebel Ali. Most of the modules used for West African
production systems are fabricated at Gulf Coast yards, although management
feels that a local presence in West Africa may be necessary to be
competitive for certain work.
. Management estimates the size of the West Africa fabrication and marine
markets each to be approximately $400 million per year.
. Jupiter's highest probability of securing North Sea business is in the
pipeline construction segment.
12
<PAGE>
Central and South America Market Situation
- --------------------------------------------------------------------------------
. Jupiter's deepwater and subsea experience and engineering/project management
capabilities are well suited for the offshore Brazil market. In addition,
management considers Venezuela and Trinidad to be good potential markets.
. To be competitive in the large market for topside modules in Brazil, Jupiter
will need to establish some kind of local Brazilian component. In addition to
obtaining a local fabrication capability, Jupiter would be interested in
acquiring a local engineering company.
. Management estimates the Central and South American fabrication markets in
which the Company could compete to be approximately $200 million per year.
<PAGE>
Worldwide Historical Rig Counts
- --------------------------------------------------------------------------------
Contracted Rig Count:
GOM
Graphs of worldwide offshore rig counts by month from February 1994 to February
1999; regions shown: Gulf of Mexico, Far East, Middle East, Latin America,
Europe and Africa
Recent/1/
Peak Latest Chance
------ ------ ------
Jackup 116 80 (31%)
Semi 33 29 (12%)
Contracted Rig Count:
Far East
Recent/1/
Peak Latest Chance
------ ------ ------
Jackup 40 30 (25%)
Semi 18 11 (39%)
Contracted Rig Count:
Middle East
Recent/1/
Peak Latest Chance
------ ------ ------
Jackup 39 34 (13%)
Semi 2 2 0%
Contracted Rig Count:
Latin America
Recent/1/
Peak Latest Chance
------ ------ ------
Jackup 24 16 (33%)
Semi 19 17 (11%)
Contracted Rig Count:
Europe
Recent/1/
Peak Latest Chance
------ ------ ------
Jackup 43 41 (5%)
Semi 49 39 (20%)
Contracted Rig Count:
Africa
Recent/1/
Peak Latest Chance
------ ------ ------
Jackup 30 20 (33%)
Semi 16 12 (25%)
Source: Offshore Data Services.
- ---------------------------------
/1/ Since December 1997
14
<PAGE>
Jupiter's Deepwater And Subsea Experience
- --------------------------------------------------------------------------------
. During the 1990s, Jupiter has played a significant role in 18 major
deepwater projects in water depths of at least 1,000 feet. Many of these
projects included the front end engineering and design work, as well as
the fabrication and installation work.
. Jupiter has completed 18 pipeline projects in water depths greater than
1,000 feet.
. BP Foinhaven development in 400 to 600 meter water depth exemplifies
Jupiter's capabilities: Jupiter was responsible for project management,
design, engineering, procurement and installation of total subsea system
(trees, flowlines, risers, etc.) as well as design, procurement and
supervision of hook-up and commissioning of the 95,000 bopd topsides and
turret.
. Chevron Genesis Spar is another example: Jupiter provided topsides design,
fabrication and equipment procurement; conceptual riser design services and
detailed review; installation of the spar mooring system, hull and topsides
facility; and hook-up and commissioning services.
. Jupiter has completed 40 subsea projects since 1995.
15
<PAGE>
Summary Of Major Trends In Jupiter's Business
- --------------------------------------------------------------------------------
. Worldwide exploration and production activity has experienced a major
decline as oil and gas prices remain at depressed levels. This environment
has curtailed activity in all segments of the market, but has had
particularly strong repercussions on higher cost offshore projects. The
market for GOM shelf fixed platforms, where Jupiter has been a major
competitor, is declining.
. Jupiter's market is undergoing a fundamental change as operators
increasingly opt for floating structures and subsea completions in place of
large fixed platforms. Improving subsea and floating production technology
combined with shift of activity toward deeper waters is driving this trend.
. Jupiter's traditional business of fabricating and installing large jackets
is shifting more toward the fabrication and installation of topside
structures and production equipment. Floating production systems and subsea
completions still require topside equipment.
. Competition among shallow water construction vessels has increased as
activity has declined and the business has become increasingly viewed as a
commodity.
. Geographically, the markets with significant deepwater areas have the
highest growth prospects. The deepwater Gulf of Mexico, the deepwater areas
off West Africa and offshore Brazil are becoming increasingly important to
Jupiter.
. Competition from fabrication contractors in Asia has become extremely
intense.
16
<PAGE>
Jupiter Quarterly Backlog Since March 31, 1994
- --------------------------------------------------------------------------------
. Jupiter's current backlog of $556 million is 51 percent below the average
backlog for the last five years of $1.1 billion, and 24 percent below the
five-year low-point at December 31, 1995 of $734 million.
Graph of the Company's quarterly backlog expressed in millions of dollars
from March 1994 to December 1998; backlogs at March 31, 1994, 1995, 1996,
1997, 1998 and at December 31, 1998 were $1,054 million, $1,003 million,
$978 million, $1,760 million, $1,267 million and $556 million, respectively.
17
<PAGE>
Summary Of Jupiter's Current Strategy
- --------------------------------------------------------------------------------
. Increase focus on deepwater and subsea. Jupiter already has a significant
exposure to deepwater and subsea markets (management estimates that greater
than 50 percent of GOM vessel operating days are related to such acitiviy).
During January and February 1999, Jupiter carved out its subsea and
deepwater expertise and centralized it in Mentor Subsea, a division
focused exclusively on these markets worldwide.
. Compete in markets where Jupiter has a competitive advantage. Jupiter's
fleet has declined from 44 owned or JV vessels in 1997 to 16 vessels today
as the Company has upgraded its fleet and focused its assets on higher
margin activities. Continuing this trend, management intends to upgrade one
vessel per year over the next two years with dynamic positioning ($50 to $60
million per vessel) to position Jupiter better for deepwater activity.
Jupiter also plans to scrap or sell two other, less competitive vessels in
the near future. On the fabrication side, Jupiter is exiting the large
jacket fabrication market in pursuit of higher growth markets where Jupiter
can be more competitive. For example, the Morgan City facility is well
suited for fabricating topside modules for the GOM, West Africa and Brazil
markets. The large vessels that had worked on large fixed platform jobs in
the east will increasingly compete in the deepwater pipeline market, which
is expected to be a higher growth area.
. Compete aggressively in geographic markets that had been limited by JVs.
The ETPM JV, dissolved in April 1998, had prohibited Jupiter from competing
in the West Africa and Brazilian markets and the North Sea market for
pipeline installations. The HeereMac JV, dissolved in December 1997, had
prevented Jupiter from competing for non-pipeline work in the North Sea.
Jupiter has the types of vessels to compete in these markets and
management is now working to establish a stronger local presence in these
areas.
18
<PAGE>
Summary of Jupiter's Current Strategy (Continued)
- --------------------------------------------------------------------------------
. Control assets and technology. Jupiter plans to continue the progress
made toward bringing its assets and technology under Jupiter control. The
Company is currently working to restructure its JV with Aker Maritime and
SPARs International to market SPARs.
. Cut costs and restruture management. During early calender 1999, an
additional layer of senior management was taken out as the Company
reorganized to place more emphasis on project management. Jupiter now has
Eastern and Western hemisphere managers and its Mentor Subsea operating
group. Virtually every senior operational manager's job description has
changed since February 1997. General and administrative expense is expected
to decline from $106 million in fiscal 1998 to $75 million by fiscal 2000.
. Selective acquistions to strengthen deepwater and subsea exposure and
knowledge base. Management is considering several acquistions that would add
technological expertise or additional complementary exposure to its
deepwater and subsea business. In addition, Jupiter would also consider
acquisitions that aided the Company in establishing a stronger base of
operations in West Africa or South America.
. Increase value added on subsea and deepwater projects. Through its new
Mentor Subsea operating group, Jupiter hopes to increase the engineering and
project management aspects of its business. The Company believes it has the
project management expertise to compete effectively as a general contractor
of subsea installations. Jupiter is also considering innovative approaches
to the growing subsea market, such as the leasing of floating production
systems.
19
<PAGE>
- --------------------------------------------------------------------------------
Financial Performance
- --------------------------------------------------------------------------------
20
<PAGE>
Pro Forma Jupiter Historical Income Statements/1/
- ----------------------------------------------------------------------
(U.S. dollar amounts in millions, except per share)
<TABLE>
<CAPTION>
Fiscal Year Ending March 31
----------------------------------------------
1996 1997 1998 1999E/2/
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $1,259.0 $1,408.5 $1,855.5 $1,293.0
Direct Costs 1,022.5 1,183.8 1,555.3 1,021.6
--------- --------- --------- ---------
Gross Profit 236.9 224.6 300.2 271.4
Gross Profit Margin 18.8% 15.9% 16.2% 21.0%
SG&A Expense 125.6 118.4 112.3 111.6
Minority Interest/(Equity Income) (9.1) 7.8 (8.6) (1.6)
--------- --------- --------- ---------
EBITDA 120.4 98.5 196.5 161.3
EBITDA Margin 9.6% 7.0% 10.6% 12.5%
Depreciation And Amortization 86.4 99.7 93.8 56.0
--------- --------- --------- ---------
EBIT 34.0 (1.2) 102.7 105.3
EBIT Margin 2.7% (0.1%) 5.5% 8.1%
Interest Expense 43.3 41.6 30.8 8.3
Interest (Income) (6.1) (16.6) (26.3) (33.0)
--------- --------- --------- ---------
Net Interest Expense/(Income) 37.2 25.0 4.5 (24.7)
Other Expense/(Income) (7.6) (20.8) (6.0) (8.8)
--------- --------- --------- ---------
Pretax Income 4.4 (5.5) 104.1 138.8
Income Taxes 5.7 20.1 33.0 18.0
--------- --------- --------- ---------
Net Income $ (1.3) $ (25.6) $ 71.0 $ 120.8
========= ========= ========= =========
Preferred Stock Dividends 7.7 7.2 7.2 7.2
--------- --------- --------- ---------
Net Income To Common $ (9.0) $ (32.8) $ 63.8 $ 113.6
========= ========= ========= =========
Basic Shares Outstanding 39.5 40.4 40.9 39.6
Fully Diluted Shares Outstanding 39.5 40.4 47.0 44.2
EPS (Basic) $ (0.23) $ (0.81) $ 1.56 $ 2.87
========= ========= ========= =========
EPS (Fully Diluted) $ (0.23) $ (0.81) $ 1.51 $ 2.73
========= ========= ========= =========
</TABLE>
Note: Totals throughout this document may not add due to rounding.
- -----------------------------------
/1/ Adjusted to exclude one-time costs and incomes.
/2/ Reflects paydown of $200 million of Jupiter's $250 million 9 3/8 percent
senior subordinated debt.
21
<PAGE>
Jupiter Reported Quarterly Results/1/ (No Adjustments)
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Fiscal Year 1998 Ending March 31 Fiscal Year 1999 Ending March 31
-------------------------------------------------- ---------------------------------------------------
Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Estimated
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $464.6 $494.2 $452.7 $444.1 $370.6 $349.1 $313.3 $260.0
Direct Costs 366.7 407.9 376.5 380.2 294.5 258.1 256.9 213.8
------ ------ ------ ------ ------ ------ ------ ------
Gross Profit 75.9 86.2 74.2 63.9 76.0 91.0 56.5 46.2
Gross Profit Margin 16.3% 17.4% 16.4% 14.4% 20.5% 26.1% 18.0% 17.8%
SG&A Expense 26.2 24.7 23.6 37.6 27.9 26.2 24.4 33.1
Equity Expense/(Income) 4.1 (2.2) (63.6) (8.4) (13.5) 3.8 2.4 (10.5)
Minority Interest - - - - - - - -
------ ------ ------ ------ ------ ------ ------ ------
EBITDA 45.5 63.7 114.2 34.7 61.6 61.0 29.7 23.7
EBITDA Margin 9.8% 12.9% 25.2% 7.8% 16.6% 17.5% 9.5% 9.1%
Depreciation Expense 26.2 27.2 21.1 19.3 14.3 12.9 13.1 16.0
------ ------ ------ ------ ------ ------ ------ ------
EBIT 19.4 36.5 93.1 15.3 47.3 48.1 16.6 7.7
Interest Expense/(Income) 4.8 2.2 (0.2) (2.3) (5.0) (5.1) (4.2) (4.3)
Loss/(Gain) On Asset Disposals (0.6) 0.6 40.3 (0.2) (45.0) 2.0 4.2 (0.1)
Other Expense(Income) (1.0) 0.5 (4.2) 0.5 (11.4) 0.2 0.7 (0.1)
------ ------ ------ ------ ------ ------ ------ ------
Pretax Income 16.1 33.2 57.2 17.2 108.6 51.0 15.8 12.1
Provision For Income Taxes 9.2 16.0 6.2 3.5 20.4 8.1 (16.2) (2.4)
------ ------ ------ ------ ------ ------ ------ ------
Net Income $ 7.0 $ 17.2 $ 51.0 $ 13.8 $ 88.4 $ 42.9 $ 32.0 $ 14.5
====== ====== ====== ====== ====== ====== ====== ======
Preferred Dividends 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8
------ ------ ------ ------ ------ ------ ------ ------
Net Income To Common $ 5.2 $ 15.4 $ 49.2 $ 12.0 $ 86.6 $ 41.1 $ 30.2 $ 12.7
====== ====== ====== ====== ====== ====== ====== ======
Basic Shares Outstanding 40.7 41.0 41.1 40.9 40.7 39.7 39.0 39.0
Diluted Shares Outstanding 46.7 47.0 47.1 47.0 46.8 45.6 45.0 45.0
Basic EPS $ 0.13 $ 0.38 $ 1.20 $ 0.29 $ 2.13 $ 1.04 $ 0.77 $ 0.33
====== ====== ====== ====== ====== ====== ====== ======
Diluted EPS $ 0.15 $ 0.37 $ 1.08 $ 0.29 $ 1.89 $ 0.94 $ 0.71 $ 0.32
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
- --------------------------------------
Not adjusted to exclude one-time items.
22
<PAGE>
Pro Forma Jupiter Historical And Projected Income Statements/1/
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fiscal Year Ending March 31
---------------------------------------------------------------
2000P/2,3/
------------------------
Initial Revised
1998 1999E/3/ Projection Projection 2001P/3/
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Revenues $ 1,855.5 $ 1,293.0 $ 839.8 $ 839.8 $ 1,228.1
Direct Costs 1,555.3 1,021.6 686.7 659.7 1,040.7
---------- ---------- ---------- ---------- ---------
Gross Profit 300.2 271.4 153.0 180.0 187.4
Gross Profit Margin 16.2% 21.0% 18.2% 21.4% 15.3%
SG&A Expense 112.3 111.6 86.4 86.4 86.2
Minority Interest/(Equity Income) (8.6) (1.6) (6.1) (6.1) (7.3)
---------- ---------- ---------- ---------- ---------
EBITDA 196.5 161.3 72.8 99.8 108.5
EBITDA Margin 10.6% 12.5% 8.7% 11.9% 8.8%
Depreciation And Amortization 93.8 56.0 55.4 55.4 47.8
---------- ---------- ---------- ---------- ---------
EBIT 102.7 105.3 17.3 44.3 60.7
EBIT Margin 5.5% 8.1% 2.1% 5.3% 4.9%
Interest Expense 30.8 8.3 7.1 7.1 6.8
Interest Income (26.3) (33.0) (28.6) (28.6) (26.7)
---------- ---------- ---------- ---------- ---------
Net Interest Expense/(Income) 4.5 (24.7) (21.6) (21.6) (19.9)
Other Expense/(Income) (6.0) (8.8) (3.8) (3.8) (4.0)
---------- ---------- ---------- ---------- ---------
Pretax Income 104.1 138.8 42.7 69.7 84.6
Income Taxes 33.0 18.0 10.0 16.8 18.9
---------- ---------- ---------- ---------- ---------
Net Income $ 71.0 $ 120.8 $ 32.7 $ 53.0 $ 65.7
========== ========== ========== ========== =========
Preferred Stock Dividends 7.2 7.2 7.2 7.2 7.2
---------- ---------- ---------- ---------- ---------
Net Income To Common $ 63.8 $ 113.6 $ 25.5 $ 45.8 $ 58.5
========== ========== ========== ========== =========
Basic Shares Outstanding 40.9 39.6 39.0 39.0 39.0
Diluted Shares Outstanding 47.0 44.2 45.0 45.0 45.0
EPS (Basic) $ 1.56 $ 2.87 $ 0.65 $ 1.17 $ 1.50
========== ========== ========== ========== =========
EPS (Diluted) $ 1.51 $ 2.73 $ 0.73 $ 1.18 $ 1.46
========== ========== ========== ========== =========
</TABLE>
- ---------------------------------
/1/ Adjusted to exclude one-time costs and revenues.
/2/ Initial projection was based on field estimates. Revised projection is
based on field level estimates as adjusted by senior management.
/3/ Reflects paydown of $200 million of Jupiter's $250 million 9 3/8 percent
senior subordinated notes
23
<PAGE>
Summary Of Jupiter Historical Consolidated Balance sheets
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
<TABLE>
<CAPTION>
At march 31 At 12/31/98
---------------------------------------------- ---------------------------
1995 1996 1997 1998 Reported Pro Forma/1/
--------- -------- -------- -------- ---------- --------------
Assets
- ------
<S> <C> <C> <C> <C> <C> <C>
Cash And Equivalent $ 52.2 $ 166.4 $ 212.3 $ 152.0 $ 123.3 $ 123.3
Investments In Debt Securities -- -- -- 543.7 752.1 522.1
Accounts Receivable 334.1 297.3 357.9 298.9 223.4 223.4
Contracts In Progress 54.9 181.4 81.7 71.1 45.1 45.1
Other Current Assets 28.8 57.3 39.9 45.6 30.6 30.6
------- ------- ------- ------- ------- -------
Total Current Assets 470.1 702.3 691.8 567.7 1,174.5 944.5
Property, Plant And Equipment 1,504.7 1,186.2 1,200.2 1,182.4 975.6 975.6
Accumulated Depreciation (910.6) (793.8) (819.1) (839.3) (696.8) (696.8)
------- ------- ------- ------- ------- -------
Net Property, Plant And Equipment 594.2 392.4 381.1 343.2 278.8 278.8
Goodwill 245.2 316.9 304.0 22.2 11.7 11.7
Investment In Unconsolidated Affiliates 105.3 72.8 72.7 29.1 14.6 14.6
Other Assets 67.5 53.3 57.1 43.0 36.0 36.0
------- ------- ------- ------- ------- -------
Total Assets $1,482.3 $1,537.7 $1,506.8 $1,548.7 $1,515.6 $1,285.6
======= ======= ======= ======= ======= =======
Liabilities And Stockholders' Equity
- ------------------------------------
Current Portion Of Long-term Debt $ 95.6 $ 96.1 $ 124.6 $ 31.3 $ 4.9 $ 4.9
Accounts Payable 141.4 151.2 153.0 171.2 122.8 122.8
Accrued Liabilities 158.9 190.3 179.4 243.4 216.9 216.9
Deposits And Advanced Billings 62.5 66.6 93.1 91.5 70.1 70.1
Income Taxes Payable 38.4 28.7 22.3 23.1 31.2 31.2
------- ------- ------- ------- ------- -------
Total Current Liabilities 496.7 532.9 572.4 560.5 446.0 446.0
Long-term Debt And Notes Payable 93.9 114.5 275.5 245.8 245.8 45.8
Notes Payable 231.0 231.0 -- -- -- --
Deferred Taxes 44.7 50.0 42.6 47.0 26.6 26.6
Other Liabilities 56.5 55.4 65.4 78.9 64.1 64.1
Preferred Stock 160.0 160.0 160.0 160.0 160.0 160.0
Common Stock 399.5 393.9 395.0 456.6 573.1 543.1
------- ------- ------- ------- ------- -------
Total Stockholders' Equity 559.5 553.9 551.0 616.6 733.1 703.1
------- ------- ------- ------- ------- -------
Total Liabilities and Stockholders' Equity $1,482.3 $1,537.7 $1,506.8 $1,548.7 $1,515.6 $1,285.6
======= ======= ======= ======= ======= =======
</TABLE>
- -----------------------------------
/1/ Pro Forma to reflect the retirement of $200 million of $250 million
outstanding 9 3/8 percent senior subordinated notes via tender offer at a
total cost of $230 million.
24
<PAGE>
HeereMac-Related Litigation Is A Material Contingent Liability of Jupiter
- ------------------------------------------------------------------------------
. Simmons has requested, but has not been granted, an interview with Mars or
Jupiter personnel to review this issue.
. Key issues are: (i) amount of liability; and (ii) relative liability of
Jupiter and Mars.
March 1997 . Mars and Jupiter investigate allegations of anti-competitive
acts involving worldwide heavy-lift activities by a limited
number of former employees of Mars, Jupiter, Heerema Offshore
Construction Group, Inc. ("Heerema") and others, relating to
the joint venture, HeereMac, owned by Jupiter and Heerema.
. Mars and Jupiter notify the Antitrust Division of the U.S.
Department of Justice ("DOJ") and the European Commission
("EC"). Proactive stance resulted in both Mars and Jupiter
being granted immunity from criminal prosecution by the DOJ.
December 1997 . HeereMac joint venture terminated.
. HeereMac and a HeereMac employee plead guilt to criminal
charges by the DOJ regarding a conspiracy to rig bids in
connection with the heavy-lift business in the GOM, North Sea
and Far East. HeereMac fined $49.0 million; HeereMac employee
fined $100,000. No Mars or Jupiter-related persons were a
party to these proceedings.
. DOJ requests additional information regarding possible anti-
competitive activity in the marine construction business of
Mars-ETPM East, Inc., a joint venture between Jupiter and ETPM
S.A. The U.S. Securities and Exchange Commission ("SEC") also
requests information related to these matters.
April 1998 . Mars-ETPM joint venture terminated.
June 1998 . In two separate cases, Phillips Petroleum Company ("Phillips")
(and certain other parties) and Shell Offshore, Inc. ("Shell")
(and certain other parties) filed suit in the U.S. District
Court for the Southern District of Texas against Mars,
Jupiter, Mars-ETPM, Inc. HeereMac, Heerema and other related
parties in connection with certain offshore transporation and
installation projects in the GOM, North Sea and Far East. The
plaintiffs seek actual damages, injunctive relief, attorneys'
fees, punitive and treble damages.
November 1998 . In a Salomon Smith Barney equity research report, the estimate
of the contingent liability of Jupiter is stated as $30-$150
million on a present value basis.
January 1999 . The U.S. District Court dismisses without prejudice, due to
the court's lack of subject matter jurisdiction, the claims of
the Phillips plaintiffs relating to the alleged injuries
sustained on any foreign projects.
. Salomon Smith Barney estimate revised to $175 million. Lazard
Freres reported there are a total of 15 plaintiffs in two law
suits.
25
<PAGE>
EXHIBIT 99.(B)(10)
DRAFT
-----
CONFIDENTIAL
-------------
PROJECT BIG MAC
REVIEW OF MARS
SIMMONS & COMPANY
INTERNATIONAL
MARCH 1999
<PAGE>
TRANSMITTAL LETTER
------------------
This confidential memorandum ("Memorandum") has been prepared by Simmons &
Company International ("Simmons") for the Independent Committee of the Board of
Directors of Jupiter (the "Independent Committee") as a review of certain issues
related to potential transaction between Jupiter and Mars (the "Proposed
Transaction").
This Memorandum is intended as background information for use by the Independent
Committee and does not purport to be all-inclusive or to contain all of the
information which the Independent Committee may desire or need to evaluate the
Proposed Transaction.
In preparing this Memorandum, Simmons has relied on publicly available
information as well as internal information provided by Mars and Jupiter.
Simmons has not independent verified such Information but has relied on its
preparing for its accuracy and completeness. Simmons, therefore, make no express
or implied warranty with respect to the accuracy or completeness of the
information contained herein or as to the non-occurrence of any change in the
affairs of Jupiter or Mars since the dates as of which information is provided
herein. Financial projections presented herein are based on managements' and
third-party analyses of information available at the time this Memorandum was
prepared, and there in no express or implied warranty that any of the
projections will be realized.
SIMMONS & COMPANY INTERNATIONAL
March 1999
<PAGE>
TABLE OF CONTENTS
------------------
TAB
---
REVIEW OF MARS OPERATIONS...................................... A
Overview OF Power Generation........................ 1
Overview OF Government Operations................... 2
Overview OF Industrial Operations................... 3
FINANCIAL PERFORMANCE.......................................... B
<PAGE>
---------------------------------------------------------------------------
Review of Mars Operations
---------------------------------------------------------------------------
<PAGE>
Summary History Of Mars
- --------------------------------------------------------------------------------
1923 Founded by R. Thomas McDermott to construct wooden drilling rigs.
1940s Mars begins to pioneer the construction and installation of platforms
to support marine drilling in waters near shore.
1959 Incorporated under the laws of the Republic of Panama.
1978 Acquired The Babcock & Wilcox Company ("B&W"), a company known for its
boiler and environmental equipment.
1995 Mars completes its purchase of Delta Catalytic, the largest engineering,
procurement, construction and maintenance company in Canada.
1995 Mars contributes substantially all of its marine construction business
to Jupiter which merges with Offshore Pipelines, Inc. Jupiter becomes a
public majority-owned subsidiary of Mars.
1997 Mars sells its interest in Unifab International Inc. ("Unifab") for
$35.7 in conjunction with Unifab's initial public offering.
Roger E. Telrault becomes Chief Executive Officer and Chairman of the
Board of Directors for both Mars and Jupiter.
Mars sells its interest in an oil project off of Russia's Sakhalin
Island for approximately $122 million.
1998 Mars redeemed Mars' series A Cumulative Convertible Preferred Stock
through a capital contribution of $90.0 million and the issuance of
23,251 shares of Mars common shares.
Mars redeemed a subsidiary's Series B Cumulative Preferred Stock through
a capital contribution of $68.0 million.
Mars converted all of its Series C Cumulative Convertible Preferred
Stock through the issuance of approximately 4.1 million common shares of
Mars.
2
<PAGE>
. Mars competes primarily in three general areas; marine construction
services, power generation systems and government operations. Mars
also provides certain other industrial products and services.
[Organizational chart describing the Parent's main operating units]
Mars
<TABLE>
<S> <C> <C> <C>
Jupiter
B&W Power Generation Group BWX Technologies, Inc. Industrial Group(1)
(Majority Owned ("B&W") ("BWX")
Public Subsidiary) (Wholly Owned Subsidiary) (Wholly Owned Subsidiary) (Includes Several
Wholly Owned Subsidaries)
Marine Construction Services Power Generation Systems Government Operations Other Operations
</TABLE>
- ---------------------------------
/1/ Includes Hudson Products Corporation, Delta-Hudson Engineering Ltd. and Mars
Technology, Inc.
3
<PAGE>
Mars Divisional Operating Performance
- --------------------------------------------------------------------------------
[Graphs of the Parent's annual revenues and EBITDA by operating unit and
graph of the Parent's annual EPS from fiscal year 1996 to fiscal year 1999;
Parent's EPS for fiscal 1996, 1997, 1998 and estimated 1999 were ($0.80),
($1.55), $1.77 and $2.65, respectively]
4
<PAGE>
- --------------------------------------------------------------------------------
Overview Of Power Generation
- --------------------------------------------------------------------------------
<PAGE>
Structure Of Power Generation
- --------------------------------------------------------------------------------
. The Power Generation group is comprised of The Babcock & Wilcox Company.
<TABLE>
<CAPTION>
[Organizational chart describing the Babcock & Wilcox division's main operating
areas]
The Babcock &
Wilcox Company
- ------------------------------------------------------------------------------
Primarily
Primarily OEM/1/ Aftermarket
Service
- --------------------------------------------------- ------------------------
Utility, Environmental
And Industrial Private Power B&W Service
Equipment Systems Company
("UE&IE") ("PPS") ("BWSC")
- ------------------------ ------------------------ ------------------------
<S> <C> <C>
. Provides Complete . Provide EPC For Fossil . Provides Engineered
Steam Generation And And Waste Fuel Fired Upgrades,
Environmental Control Power Plants. Replacement Parts
Systems. And Services For
. Provides Maintenance B&W And Competitors'
. Provides Design, And Operation Equipment.
Manufacturing And Services.
Construction For
Utility And Industrial
Repowering Projects.
</TABLE>
<TABLE>
<CAPTION>
The Babcock &
Wilcox Company
- ------------------------------------------------------------------------------
Primarily
Aftermarket
Service
- --------------------------------------------------- ------------------------
Diamond Power Global Sales
B&W Canada International, Inc. And Service
("BWC") ("DPII") ("GS&S")
- ------------------------ ------------------------ ------------------------
<S> <C> <C>
. Original And . Supplies Boiler . Sales And Service
Replacement Nuclear Cleaning Equipment Support Unit For Each
Steam Generators And And Ash-Handling Of B&W's Operating
Related Equipment Systems. Segments.
And Services.
. Service and
Construction For
Fossil And Nuclear
Power Plants.
</TABLE>
- ---------------------
/1/Almost all related to electricity generating industry.
<PAGE>
Overview Of Power Generation
- --------------------------------------------------------------------------------
. The Power Generation group provides services, replacement equipment and
original equipment to the global power industry. Service is expected to
account for almost three-quarters of revenues in fiscal 1999, compared to
recent historical levels of 55 to 60 percent.
. B&W is a major player in the design, manufacture and construction of steam
generation systems. B&W is known for its coal-fired boilers, environmental
equipment and replacement nuclear steam generators.
Services Provided Customers
- ----------------------------------------- ----------------------------------
. New boilers fueled by combustibles . Utilities
. Replacement parts and components for . Independent power producers
existing boilers
. Cogenerators
. Upgrade, inspection, repair and
maintenance services for boilers . Pulp and paper mills
. Turnkey facilities for boiler-intensive . Chemical process plants
industries
. Oil refineries
. Nuclear steam generators
. Steel mills
. Construction and installation services
for power generation equipment . Waste-to-energy plants
. Environmental control systems utilizing . Other steam-using industry
scrubbers, heat exchangers and other participants
systems
<PAGE>
Power Generation-Worldwide Locations
- --------------------------------------------------------------------------------
. B&W has sales representatives, licensees or joint ventures in many locations
around the world with the exception of the FSU and Africa. B&W has provided
services in over 85 countries.
. B&W has nine manufacturing locations (including joint-ventures) in the U.S.
(2), Egypt, Turkey, India, Indonesia and China.
Map of the world showing the Babcock & Wilcox division's worldwide locations
<PAGE>
Equipment Orders By Region
- --------------------------------------------------------------------------------
. The largest markets for new boilers and environmental control systems are
outside the U.S.
. B&W's coal-fired boiler plants are more suited to the Far East where
environmental laws are less stringent and coal is plentiful.
. Recent environmental regulation in the U.S. and Europe could result in a
pick-up in demand for B&W's scubber systems.
[Pie charts describing 1997 worldwide orders for new boilers 40 MW and over
and new scrubbers 40 MW and over in unit size by region of ultimate plant
location]
1997 Worldwide Order For New 1997 Worldwide Order For New
Boilers 40 MW And Over By Region Scubbers 40 MW And Over In Unit Size
Of Ultimate Plant Location By Region Of Ultimate Plant Location
China Other Asia Pacific Asia Pacific U.S. Europe
- ----- ----- ------------ ------------ ----- ------
49.0% 1.0% 37.0% 61.0% 10.0% 29.0%
Europe, Middle East, Africa
- ---------------------------
8.0%
U.S. Latin America
- ----- -------------
1.0% 4.0%
[Total 29.0 Million Kilowatts] [Total 6.4 Million Kilowatts]
Source: McCoy Power Reports
9
<PAGE>
B&W Activity By Region
- --------------------------------------------------------------------------------
. North "America has accounted for approximately half of B&W's activity
(measured by total electricity generating installed capacity). The developing
economies have accounted for approximately 23 percent of activity.
. B&W has joint-ventures in several developing regions (China, Indonesia,
India, Egypt, Mexico and Turkey). However, they are not consolidated and are
not reflected in revenues. They contributed approximately 7 percent of
EBDIT/1/ in fiscal 1998 and 1999. Approximately two-thirds of B&W's reported
revenues are derived in North America.
. Recent increases in demand in North America for new generating capacity are
expected to have little impact on B&W's business since most of the projects
are gas turbine plants.
B&W Installed Electricity Generating Capacity
Pie chart of Babcock & Wilcox worldwide installed electricity generating
capacity by region
U.S. Other Asia Japan China
- ----- ---------- ------ ------
47.4% 12.5% 12.5% 3.3%
Middle East
And Africa Western Europe Latin America Canada
- ----------- -------------- -------------- ------
4.7% 13.9% 2.8% 2.8%
[Total Capacity: 359 Million Kilowatts]
Source: Management.
- --------------------------
/1/ After elimination of one-time Items.
<PAGE>
Market Share Information
- --------------------------------------------------------------------------------
. Approximately half of the world's electric power market is supplied by water
tube boilers (approximately 38 percent is coal-fired)
. B&W boilers/1/ provide more than 23 percent of the world's boiler-powered
electricity generation capacity, and more than 35 percent of the capacity in
the U.S.
. Of the total installed electric generating capacity worldwide (includes
boilers and all other types of generating equipment), B&W boilers represent
approximately 12 percent of the total market, and 22 percent of the market in
the U.S.
Installed Electricity Generating Capacity/2/
--------------------------------------------
(Gigawatts)
B&W
---------------------
Total Market
Capacity Amount Share
------------ ---------- ----------
U.S. 765 170 22%
Canada 110 10 9
Latin America 172 10 6
Western Europe 600 50 8
Eastern Europe 130 - -
FSU 330 - -
Middle East and Africa 171 17 10
China 200 12 6
Japan 180 45 25
Other Asia 240 45 19
------ ------ ------
Total 2,898 359 12%
====== ====== =======
- -----------------------
/1/ Includes those manufactured by licensees.
/2/ Source: Management.
11
<PAGE>
Competition
- --------------------------------------------------------------------------------
. B&W is one of several large global manufacturers competing around the world.
. B&W faces stiff competition for its boilers and scrubbers by the other major
competitors, and from regional players in their home markets.
<TABLE>
<CAPTION>
Worldwide Orders -- Worldwide Orders --
------------------- -------------------
New Boilers 40 MW Or More/1/ New Scrubbers 40 MW Or More/2/
---------------------------- ----------------------------
1993 To 1993 To
Manufacturer 1997 1997 Manufacturer 1997 1997
- -------------------------- ----------- ------- -------------------------- ----------- --------
<S> <C> <C> <C> <C> <C>
Harbin (China) 15% 8% B&W (U.S.) 16% 32%
Shanghai (China) 12 8 Babcock-Hitachi/3/ (Japan) 16 3
Donfang (China) 8 9 Mitsubishi (Japan) 16 5
Foster-Wheeler (U.S.) 10 8 ABB (U.S.) 12 18
B&W (U.S.) 8 8 Lentjes Bischoff (Europe) 7 6
Hanjung (Korea) 7 7 Marsulex/4/ (U.S.) 4 17
Mitsubishi (Japan) 7 15 Deutsche Babcock/3/ (Europe) 2 9
ABB (U.S.) 7 5 Hanjung (Korea) 1 8
Others 26 31 Others 26 2
---- ---- ---- ----
Total 100% 100% Total 100% 100%
===== ===== ===== =====
</TABLE>
- --------------------------------------
/1/ Source: McCoy Power Reports, April 1998 Data.
/2/ Source: McCoy Power Reports, May 1998 Data.
/3/ Unrelated to B&W.
/4/ Formerly GE.
12
<PAGE>
U.S. Electricity Generating Market
- -------------------------------------------------------------------------------
. The demand for electricity is related to economic growth. The U.S. is a
maturing market: in the 1960s demand grew at approximately twice the rate of
economic growth, by the 1970s it had declined to 1.5 times, and by the 1980s
to 1.0 times.
. The change in growth rate has been driven by increased market saturation of
electric appliances, improvements in equipment efficiency, an utility
investments in demand-side management programs.
. The EIA does not expect this trend to change over its current projection
period which runs through 2020/1/.
. There is approximately 781 gigawatts/2/ of generating capacity in the U.S.
. Average utilization is approximately 48 percent. However peak utilization is
considerably higher.
. The average growth in total installed capacity from 1993 through 1997 was 0.8
percent per year.
. The EIA projects that an additional 363 gigawatts will be required by 2020 to
meet growing demand and to meet an expected 126 gigawatts of retiring
capacity.
- ----------------------------------
/1/ Source: EIA Annual Energy Outlook 1999.
/2/ Million kilowatts.
13
<PAGE>
. Utilities account for almost 91 percent of installed capacity in the U.S.
However, the non-utility segment is growing an order of magnitude faster than
the utility segment.
1997 Electricity Generating Capacity/1/ Capacity Growth Rates
(Gigawatts)
Pie chart of 1997 U.S. electricity generating capacity by utilities and non-
utilities
Installed Capacity
Utility ---------------------------
Non-Utility 1993 1997 CAGR
----------- ------- ------ ------
Utility
------- Utility 700.0 707.0 0.2%
90.5% Non-Utility 60.0 74.0 5.1
----- ----- -----
Non-Utility Total 760.7 781.1 0.7%
----------- ===== ===== =====
9.5%
[Total Capacity: 78.1 Gigawatts]
/1/ Source: EIA
<PAGE>
U.S. Electricity Generation Capacity By Fuel Source/1/
- --------------------------------------------------------------------------------
. The relatively low cost and easy availability of coal has resulted in coal-
fired steam generating plants accounting for the largest segment of U.S.
generation capacity.
. However, tightening environmental regulations, which impact coal-fired plants
more directly, and improvements in efficiencies of gas turbine generating
units have resulted in gas-fired capacity increasing at a greater rate than
any other generating segment.
<TABLE>
<CAPTION>
U.S. Generation Capacity By Type
--------------------------------
(Gigawatts)
Installed Capacity
------------------------------------------
1997 1993 To 1997 Change
------------------------ ----------------------------
Percent Percent
1993 Amount Of Total Amount Of Total CAGR
-------- ---------- ------------ ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Coal 310.6 313.8 40.2% 3.2 15.7% 0.3%
Gas 158.0 168.4 21.6 12.5 61.7 2.0
Nuclear 99.1 100.8 12.9 1.7 8.3 0.4
Hydroelectric 98.7 98.2 12.6 (0.4) (2.0) (0.1)
Petroleum 80.1 82.2 10.5 2.2 10.7 0.7
Other 16.5 17.6 2.3 1.1 5.5 1.7
------ ------ ------ ------ ------ ------
Total 760.8 781.1 100.0% 23.3 100.0% 0.7%
====== ====== ======= ====== ======= =======
</TABLE>
- ----------------------------------------
/1/ Source: EIA. Includes utility and non-utility capacity.
15
<PAGE>
U.S. Utility Generation Capacity Additions By Fuel Source
- --------------------------------------------------------------------------------
. Analysis of recent capacity additions by utilities, shows that all the
increases in gas-fired capacity are due to gas turbine additions. Gas-fired
steam power plants have declined in generating capacity in recent years.
. From 1993 to 1997, total fossil steam generating capacity declined by
approximately 2.2 GW while other generating types increased by 9.2 GW.
<TABLE>
<CAPTION>
Analysis Of U.S. Electricity Capacity Additions - Utilities
-----------------------------------------------------------
(Gigawatts)
Installed Capacity Change
------------------ -------------------
Percent
1993 1997 Amount Of Total CAGR
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Fossil Steam
- ------------
Coal 300.8 302.5 1.7 24.4% 0.1%
Petroleum 41.9 40.8 (1.1) (15.2) (0.7)
Gas 103.6 100.8 (2.8) (39.5) (0.7)
-------- -------- -------- -------- --------
Subtotal 446.3 444.2 (2.2) (30.4) (0.1)
Turbine/Internal Combustion
- ---------------------------
Petroleum 27.6 28.7 1.0 14.7% 0.9
Gas 28.9 36.9 8.0 113.5 6.3
-------- -------- -------- -------- --------
Subtotal 56.5 65.6 9.1 128.2 3.8
Nuclear 99.0 100.8 1.7 24.2%
Hydroelectric 95.9 94.5 (1.4) (20.2)
Other 2.2 2.1 (0.1) (1.8)
-------- -------- -------- --------
Total Utility 700.0 707.1 7.1 100.0% 0.3%
======== ======== ======== ======== ========
- -------------------
/1/Source: EIA.
</TABLE>
16
<PAGE>
Review Of U.S. Planned Capacity Additions/1/
- --------------------------------------------------------------------------------
. In the 1998 through 2001 period, almost 50 percent of total electricity
generating capacity additions are expected to be accounted for by gas-fired
capacity.
. Gas-fired capacity is expected to account for almost 90 percent of additions
by utilities (1998 through 2007), and over 40 percent of additions by non-
utilities (1998 through 2001). The EIA's long range forecast predicts 88
percent of new capacity through 2020 will be gas-fired.
. Gas turbine units are expected to account for almost all gas-fired additions.
. Non-utility generators are expected to be the most rapidly growing sector,
accounting for over 84 percent of planned additions from 1998 through 2001.
Analysis Of Planned Capacity Additions
----------------------------------------
(Gigawatts)
<TABLE>
<CAPTION>
1998 To 2001
1998 To 2007 By ------------------------------------------------------------------
Utilities By Utilities By Non-Utilities Total
--------------------- --------------------- ------------------- ------------------
Percent
Amount Of Total Amount Of Total Amount Of Total Amount Of Total
------ -------- --------- --------- -------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Coal 2.6 4.9% 0.1 0.6% 11.2 15.2% 11.3 12.9%
Gas 46.2 88.7 11.9 84.4 30.7 41.5 42.6 48.4
Nuclear - - - - - - - -
Hydroelectric 0.7 1.3 0.6 4.3 3.8 54.1 4.4 5.0
Petroleum 1.4 2.0 0.7 5.3 12.8 17.2 13.5 15.3
Other 1.2 2.3 0.7 5.3 15.5 20.9 16.2 18.4
------ ------- -------- -------- ------ -------- ------ --------
Total 52.0 100.0% 14.0 100.0% 74.0 100.0% 88.1 100.0%
====== ======= ======== ======== ===== ======== ====== ========
15.9% 84.1% 100.0%
======= ===== ======
- -----------------------------------------------
/1/ Source: EIA.
</TABLE>
<PAGE>
Worldwide Electricity Generation
- --------------------------------------------------------------------------------
. The OECD countries account for almost two-thirds of electricity generated
worldwide.
. Since 1973 the OECD has accounted for a little over half of the total
worldwide increase in generation. However, its annual average growth rate of
3.0 percent per year is considerably lower than those of the developing
nations.
Worldwide Electricity Generation
--------------------------------
(TWh)
<TABLE>
<CAPTION>
1973 1996 Change
------------- ------------------- ------------------- 1973 To
Percent Percent Percent 1996
Amount Of Total Amount Of Total Amount Of Total CAGR
------ -------- ------ -------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. N/A N/A 3,652 26.8% N/A N/A N/A
Other OECD N/A N/A 5,058 37.0 N/A N/A N/A
------ ------ ------ ------ ----- ------ ----
Total OECD 4,442 72.6% 8,710 63.8 4,268 56.7% 3.0%
FSU 918 15.0 1,256 9.2 338 4.5 1.4
China 165 2.7 1,079 7.9 913 12.1 8.5
Asia 171 2.8 997 7.3 825 11.0 8.0
Latin America 159 2.6 665 4.8 496 6.6 6.3
Africa 110 1.8 382 2.8 272 3.6 5.6
Middle East 37 0.6 341 2.5 305 4.0 10.2
Non-OECD Eurpoe 116 1.9 205 1.5 89 1.2 N/A
------ ------ ------ ------ ----- ------ ----
6,118 100.0% 13,652 100.0% 7,534 100.0% 3.6%
====== ======= ====== ====== ===== ======= =====
</TABLE>
<PAGE>
Growth In Worldwide Electricity Generation Capacity
- ----------------------------------------------------------------------
o The Far East region remains the growth leader in capacity installations.
Regions which had grown rapidly during the 1980s, such as Latin America, the
Middle East and Africa, have seen their recent growth rates decline to
levels near those of the developed countries.
World Total Electricity Installed Capacity
Graph of annual world total electricity installed capacity by region from 1980
to 1996
Installed Capacity (Millions of Kilowatts)
CAGR
-------------------
Percent 1980- 1990-
1996 Of Total 1990 1996
------- --------- ------- -------
North America 920.1 30.7% 2.1% 2.1%
Western Europe 599.7 20.0 2.2 0.6
Far East and Oceania 715.1 23.8 5.2 5.2
Eastern Europe And FSU 436.4 14.5 2.6 0.0
Latin America 150.6 5.0 5.0 2.2
Africa 92.4 3.1 5.9 2.7
Middle East 85.9 2.9 9.2 2.7
------- ----- ------ ------
Total/Average 3,000.2 14.3% 4.6% 2.2%
======= ===== ====== ======
Source: EIA.
19
<PAGE>
Worldwide Electricity Demand Per Capita
- --------------------------------------------------------------------------------
. The relative size of the population of the Far East region and its low per
capita electricity consumption (less than 10 percent of the U.S.) suggests
the Far East could be the most important driver of demand for generation
equipment in the long term.
. Continuing consumption growth from a significant existing base in North
America and Western Europe, and rapid consumption growth in Latin America
suggests these regions may also be important drivers of demand for new
generation equipment.
<TABLE>
<CAPTION>
World Population Annual Per Capital Electricity Consumption
(Millions of People) (Thousand of Kilowatt Hours)
--------------------------------------- ----------------------------------------
Percent of
CAGR North CAGR
Percent Of ------------------------ American ------------------------
1996 Total 1980-1990 1990-1996 1996 Consumption 1980-1990 1990-1996
------- ----- ----------- ----------- ------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
North America 392.0 6.8% 1.2% 1.2% 9.8 100.0% 1.5% 1.6%
Western Europe 473.0 8.2 0.58 0.6 5.1 51.4 1.9 1.0
Far East and Oceania 3,230.9 55.8 1.8 1.6 1.0 9.7 4.3 4.2
Eastern Europe And FSU 392.0 6.8 0.8 0.1 3.7 38.0 1.4 (3.7)
Latin America 388.4 6.7 1.9 1.7 1.6 16.3 3.0 3.3
Africa 759.5 13.1 2.9 2.9 0.4 4.4 1.9 (0.3)
Middle East 151.3 2.6 3.4 2.6 2.0 20.2 6.3 2.8
------- ----- ---- ---- ---- ---- ----
Total/Average 5,787.1 100.0% 1.8% 1.5% 3.4% 2.9% 1.2%
======= ===== ==== ==== ==== ==== ====
</TABLE>
<PAGE>
IEA World Generation Capacity Projection
- --------------------------------------------------------------------------------
. The IEA expects the most rapidly growing demand for generation capacity will
occur in China and South and East Asia.
. The largest demand growth in actual capacity is expected in China, North
America, and Western Europe.
<TABLE>
<CAPTION>
Change in Percent Of
Capacity(GW) Capacity (GW) Total Change CAGR
----------------------------- ------------------- ------------------- -------------------
1995 - 2010 - 1995 - 2010 - 1995 - 2010 -
1995 2010P 2020P 2010 2020 2010 2020 2010 2020
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OECD Europe 628 853 1,009 225 156 15.2% 11.5% 2.1% 1.7%
OECD North America 912 1,159 1,317 247 158 16.7 11.6 1.6 1.3
OECD Pacific/1/ 274 366 426 92 60 6.2 4.4 1.9 1.5
Eastern Europe and FSU 434 586 776 152 190 10.3 14.0 2.0 2.8
Latin America 187 326 480 139 154 9.4 11.3 3.8 3.9
Africa 97 152 208 55 56 3.7 4.1 3.0 3.2
Middle East 89 126 206 37 80 2.5 5.9 2.3 5.0
China 227 501 757 274 256 18.6 18.8 5.4 4.2
South Asia/2/ 106 212 304 106 92 7.2 6.8 4.7 3.7
East Asia/3/ 126 275 432 149 157 10.1 11.6 5.3 4.6
----- ----- ----- ----- ----- ----- ----- ----- -----
Total 3,080 4,556 5,915 1,476 1,359 100% 100% 2.6% 2.6%
----- ----- ----- ----- ----- ------ ------ ------ ------
</TABLE>
- -----------------------------
/1/ Japan, Australia and New Zealand.
/2/ Indian subcontinent and surrounding countries.
/3/ All other Asia from Myanmar to the east, excluding China.
21
<PAGE>
Worldwide Electricity Generation Capacity By Fuel Source
- --------------------------------------------------------------------------------
. Unlike in the U.S., on a worldwide basis coal has maintained its share as a
generating fuel over time. Coal accounted for almost 40 percent of the
increase in electricity generation between 1973 and 1996.
. Nuclear power was the second largest contributor to growth, accounting for
almost 30 percent.
. Gas-fired and hydroelectric plants accounted for most of the remainder
approximately equally.
<TABLE>
<CAPTION>
Worldwide Electricity Generation Capacity By Fuel Source
--------------------------------------------------------
(TWh)
1973 1996 1973 To 1996 Change
-------------------- ------------------- -------------------
Percent Percent Percent
Capacity Of Total Capacity Of Total Amount Of Total CAGR
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Coal 2,343 38.3% 5,242 38.4% 2,899 38.5% 3.6%
Hydroelectric 1,285 21.0 2,512 18.4 1,227 16.3 3.0
Nuclear 202 3.3 2,416 17.7 2,215 29.4 11.4
Gas 740 12.1 2,020 14.8 1,280 17.0 4.5
Oil 1,505 24.6 1,270 9.3 (235) (3.1) (0.7)
Other 43 0.7 191 1.4 148 2.0 6.7
------ ------ ------ ------ ------ ------ ------
Total 6,118 100% 13,652 100% 7,534 100% 3.6%
====== ======= ====== ======= ====== ======= =======
</TABLE>
22
<PAGE>
Growth In Electricity Generation By Region /1/
- -------------------------------------------------------------------------------
OECD (Excluding U.S.)
- ---------------------
Fossil fuel capacity is expected to show the fastest growth due to the limited
expansion of power generation from nuclear and hydroelectric source.
Of the fossil fuels, gas-fired capacity is expected to increase fastest.
Oil-fired capacity is expected to remain fairly constant and be used
increasingly for peak load purposes.
In Japan, however, coal capacity could increase faster than gas capacity due to
the relatively high cost of gas.
In Europe coal-fired capacity is expected to be built, however, projects will
depend on country and location specific factors which affect the relative costs
of coal and gas-fired capacity.
Nuclear is expected to account for shrinking share of power generation in future
due to its high capital costs and regulatory and safety issues. Only Japan is
expected to expand its nuclear generation significantly. Even France, which
traditionally favored nuclear power, has recently been reconsidering expansion
if its nuclear capacity. Plant closures, currently under consideration, would
also impact nuclear's future market share.
- -------------------------
/1/Source: IEA World Energy Outlook.
23
<PAGE>
Growth In Electricity Generation By Region/1/ (Continued)
- ----------------------------------------------------------------------
Rest Of The World (Excludes OECD)
- ---------------------------------
The choice of fuel for power generation is usually determined by the fuel that
is locally available.
Thus, the power generation systems of China and Southeast Asia are dominated by
coal and that of Latin America by hydroelectric. While this is expected to be
broadly the case in the future, the ongoing restructuring and deregulation of
the power generation sector, as well as the increasing introduction of private
capital, is likely to give a boost to the use of gas in many regions.
Electricity generation in Latin America is expected to continue to be
predominantly from hydroelectric, although some increase in fossil fuel-fired
generation can be expected.
Generation in China and Southeast Asia is expected to use mainly coal. However,
Southeast Asia is also developing gas reserves which are expected to account for
an increasing share of generation capacity.
Southern Africa will continue to use mainly coal-fired capacity, while in North
Africa, gas is being increasingly substituted for oil.
The substitution of gas in power generation is also noticeable in the Middle
East, where there is a concerted effort to free oil for export.
Nuclear is likely to remain an insignificant contributor to total capacity due
to the capital cost, technological complexity and shortage of qualified
personnel.
The electricity generation industry is dependent upon government for
investment funds. Availability of capital is highly dependent upon economic
growth as well as political and social goals.
Historically, the expansion of the power generation systems in OECD countries
was generally financed by domestic savings. The absence of international capital
to build these systems may have contributed to the regulated and monopolistic
structure of the industry in many of those countries. Many developing nations
may find it difficult to generate sufficient funds from domestic savings to make
the necessary investments. Deregulation may be necessary in order to attract
international capital.
- -----------------------------------------
/1/ Source: IEA World Energy Outlook.
24
<PAGE>
IEA Worldwide Generation Capacity By Fuel Source Projection
- --------------------------------------------------------------------------------
. The IEA projects gas-fired generation capacity to account for double the
capacity addition of coal-fired through 2020.
. Gas-fired capacity is projected to account for over 50 percent of additions
with coal-fired accounting for almost 26 percent.
<TABLE>
<CAPTION>
Capacity (GW) 1995-2020
-------------------------------------- --------------------------------
Percent of
1995 2010P 2020P Change (GW) Change CAGR
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Solid Fuel (Mainly Coal) 1,032 1,362 1,760 728 25.7% 2.2%
Oil 404 527 604 200 7.1 1.6
Gas 571 1,309 2,035 1,464 51.6 5.2
Nuclear 347 375 334 (13) (0.5) (0.2)
Hydroelectric 713 940 1,109 396 14.0 1.8
Other 13 43 73 60 2.1 7.1
----- ----- ----- ----- ----- -----
Total 3,080 4,556 5,915 2,835 100% 2.6%
===== ===== ===== ===== ===== =====
</TABLE>
25
<PAGE>
OEM/Aftermarket Service Revenue Analysis
- --------------------------------------------------------------------------------
. B&W's revenues are expected to decline by 10 percent in fiscal 1999.
. The 48 percent decline in OEM revenues reflects weakness in Asia and the Far
East. The decline has been partly offset by a 26 percent increase in service
revenues (reflecting increased focus on the service business and leverage in
B&W's installed base).
. Growth in the service business and declining OEM sales have increased service
from between 55 and 60 percent of revenues in fiscal 1996 through 1998 to
over 73 percent in 1999.
OEM/Aftermarket Service Revenue Summary
---------------------------------------
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Fiscal Year Ending March 31
-------------------------------------------
1996 1997 1998 1999(E)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
OEM $ 499.1 $ 412.0 $ 520.6 $ 271.3
Service
BWC Nuclear 168.3 108.5 89.8 80.2
Service 485.9 453.5 520.4 655.4
Operations And Maintenance 30.6 29.3 38.0 43.2
Eliminations (38.9) (17.9) (26.0) (26.6)
---------- ---------- ---------- ----------
Total Service 645.9 573.4 622.2 752.2
---------- ---------- ---------- ----------
Total Revenues $1,145.1 985.4 $1,142.7 $1,023.5
========== ========== ========== ==========
</TABLE>
26
<PAGE>
Backlog Analysis
- --------------------------------------------------------------------------------
. Backlog declined significantly in fiscal 1998 due to a decline in OEM
activity which is largely focused in Asia and the Far East and is comprised
of a few major projects.
. Backlog has since stablized despite the suspension of two major projects for
B&W in 1999 ($200 million Tanjung Jati in Indonesia; $90 million Saba Power
in Pakistan). Billings have recovered somewhat.
. Management is focusing on increasing service work (leveraging significant
installed base). Service work is primarily focused in North America.
. Management is also focusing on lowering its OEM cost structure.
Backlog Analysis/1/
----------------
(Dollar amounts in millions)
Total Backlog
Graph of the Babcock & Wilcox's Quarterly backlog expressed in millions of
dollars from March 1994 to December 1998, backlog at March 31, 1994, 1995,
1996, 1997, 1998 and December 31, 1998 were $1,622 million, $1,953 million,
$1,445 million, $1,554 million, $1,071 million and $1,010 million respectively
At March 31
-----------------
Primarily OEM 1997 1998 12/31/98
- ------------- -------- -------- --------
UE&IE $ 768.0 $ 360.4 $ 338.0
PPS 340.4 289.4 230.5
-------- -------- --------
Subtotal 1,108.4 649.7 568.5
Primarily Service
- -----------------
BWSC $ 198.6 $ 257.6 $ 230.1
BWC 128.6 117.0 165.7
GS&S 12.1 4.8 5.3
DPII 83.4 65.6 47.4
-------- -------- --------
Subtotal 422.7 445.0 448.5
Eliminations (27.6) (23.5) (7.2)
-------- -------- --------
Total Backlog $1,503.5 $1,071.1 $1,009.8
======== ======== ========
Bookings $1,100.1 $ 710.3 $ 952.3/2/
======== ======== ========
- -------------------------------
/1/ Excludes joint venture backlogs.
/2/ Annualized nine months ended December 31, 1998.
27
<PAGE>
Revenue Analysis
- --------------------------------------------------------------------------------
. Fiscal 1999 revenues are lower than 1998 due to a decrease in OEM
activity, offset by an increase in service work. The revenue decline is
much less than the decline in backlog which occurred during fiscal 1998.
Mars expects a recovery in OEM activity in 2000 and growth in both OEM
and service to drive the revenue increase in 2001.
. Although service activity, which is primarily in North America, has
increased, lower OEM activity in the U.S. has increased the importance
of foreign markets. Foreign activity tends to be dominated by a few
large projects.
. North America is expected to account for approximately two-thirds of
revenues (excluding results of joint ventures) in 2000.
<TABLE>
<CAPTION>
Fiscal Year Ending March 31
----------------------------------------------------------
1996 1997 1998 1999(E) 2000(P) 2001(P)
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Primarily OEM
UE&IE.............. $ 435.1 $ 340.5 $ 411.6 $ 163.3 $ 295.3 $ 308.5
PPS................ 38.5 49.8 76.8 81.0 134.0 160.5
-------- -------- -------- -------- -------- --------
Subtotal......... 473.6 390.3 488.4 244.3 429.3 469.0
Primarily Service
BWSC............... 351.3 290.2 355.3 473.0 460.7 506.8
BWC................ 257.5 182.9 160.8 163.2 175.9 202.6
GS&S............... 0.7 26.1 22.6 26.1 27.1 27.9
DP II.............. 100.9 113.9 141.6 143.6 131.2 134.8
-------- -------- -------- -------- -------- --------
Subtotal......... 710.4 613.1 680.3 805.9 794.9 872.1
Eliminations....... (38.9) (17.9) (26.0) (26.6) (5.6) (10.8)
-------- -------- -------- -------- -------- --------
Total Revenues... $1,145.1 $1,985.4 $1,142.7 $1,023.5 $1,218.5 $1,330.3
======== ======== ======== ======== ======== ========
</TABLE>
Used to be 25 percent U.S./75 percent foreign. FY 1999 is primarily one
Indonesian project./1/ FY 2000 is primarily one project in Turkey and two in
Egypt.
Generally around $30 million U.S. revenues and the rest foreign. Fiscal 1999
was largely one project in Pakistan./1/
Approximately 90 percent is service operations in the U.S. Canadian
operations and nuclear steam generators for the U.S.
Primarily provision of service engineers in the U.S.
Approximately 90 percent U.S.
- --------
/1/ Suspended during FY 1999.
28
<PAGE>
Financial Results -- Power Generation
- --------------------------------------------------------------------------------
. The change in mix towards higher margin service work in fiscal 1999
partly offset the effect of the revenue decline on profits.
. Mars is forecasting relatively flat margins in 2000 at the same time as
the lower margin OEM work recovers, and an increase in margins in 2001.
. The decline in profitability in 1997 is related to a fall in revenues and
variable margins while overhead remained fairly flat.
Summary Power Generation Results/1/
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Fiscal Year Ending March 31
---------------------------------------------------------
1996 1997 1998 1999(E) 2000(P) 2001(P)
-------- ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues................ $1,145.1 $985.4 $1,142.7 $1,023.5 $1,218.5 $1,330.3
EBDIT/2/................ 52.8 (8.3) 108.8 105.7 119.3 162.1
EBDIT Margin............ 4.6% (0.8%) 9.5% 10.3% 9.8% 12.2%
EBIT/2/................. 37.5 (22.3) 93.5 90.1 99.5 141.6
EBIT Margin............. 3.3% 2.3% 8.2% 8.8% 8.2% 10.6%
Contribution From Joint
Ventures/3/............ 8.9 (0.3) 7.5 7.8 7.1 9.3
Capital Expenditures.... 17.7 14.8 9.9 19.5 11.3 9.9
</TABLE>
- --------
/1/ Adjusted to exclude one-time expenses and incomes.
/2/ Includes income from joint ventures (after tax, where applicable).
/3/ After tax, where applicable.
29
<PAGE>
- --------------------------------------------------------------------------------
Overview Of Government Operations
- --------------------------------------------------------------------------------
30
<PAGE>
Overview Of Government Operations
- --------------------------------------------------------------------------------
. Provides nuclear fuel assemblies and nuclear reactor components to the U.S.
Navy for the Naval Reactors Program. Mars is the sole source provider to the
program, which accounts for approximately 55 percent/1/ of Government
Operations' revenues.
. Operates as part of consortiums to provide management and operation services
for seven U.S. Government-owned facilities (primarily facilities where nuclear
materials are stored or handled). This accounts for approximately 17
percent/1/ of Government Operations' revenues.
. Also provides environmental remediation services for U.S. Government and
commercial nuclear sites.
. Experience in nuclear industry has led to involvement in research and
development for advanced nuclear reactors including those for the Navy's new
attack submarine, a new generation aircraft carrier and various space, defense
and commercial applications.
. Through facilities in Barberton, Ohio and Mt. Vernon, Indiana, fabricates
heavy equipment and pressure vessels primarily for U.S. Navy submarines.
- ------------------------------------------
/1/ Based on fiscal 1998 revenues.
31
<PAGE>
Drivers And Outlook - Government Operations
- --------------------------------------------------------------------------------
. Revenues of Government Operations are primarily driven by the level of
defense capital spending by the U.S. Government.
. Work for the Naval Reactors Program is under long-term contract (typically
five to seven years). However, annual spending must be approved each year.
Contracts are typically modified cost-plus in which Mars shares in gains and
losses compared to estimate, with a floor and ceiling.
. There are no other suppliers for the program in the U.S. and a new entrant
would be unlikely to make the significant investment to enter the business.
. There are 83 nuclear powered submarines in the U.S. fleet (including 18/1/
Trident ballistic missile submarines).
. An estimated $750 to $800 million of the current $942 million in backlog is
for the Naval program.
. Mars is currently under contract to develop the power plant for the new
Virginia Class attack submarine and expects to be the fuel source supplier.
. Mars expects to benefit if a nuclear aircraft carrier is developed (benefits
B&W as well as Government Operations).
. However, the nuclear submarine fleet was developed to counter the Soviet
threat, and much of the fleet is less effective in the type of regional
conventional conflicts in which the U.S. becomes involved periodically.
. Management does not expect any significant growth due to reductions in the
defense budget in recent years. However, management expects activity to
remain stable since Mars is the sole source.
- ------------------------
/1/ If START II is implemented, this would decrease to 14.
32
<PAGE>
Drivers And Outlook - Government Operations (Continued)
- --------------------------------------------------------------------------------
. The contract management of U.S. Government facilities has grown rapidly ($3
million in revenues in fiscal 1996 to $64 million in 1998) with increased
outsourcing of such services.
. The pending transaction between Westinghouse and BNFL/1/ could impact
Westinghouse's ability to win U.S. Government contracts to manage facilities.
This could be positive for Mars. There are several sites up for bid
currently.
. The construction of new submarines has effectively wound down to one or two
per year, and is not expected to go to zero. Navy plans call for a limited
number of new nuclear vessels in future: one submarine per year and one
aircraft carrier every five years. /2/
. Analysts believe there is some potential upside due to:
- Development of the new Naval submarine and
aircraft carrier.
- Increased outsourcing of management for U.S.
Government facilities.
- New focus on cost reduction by Mars.
. Backlog levels have increased recently:
Total
Date Backlog
--------------- --------------
($Millions)
March 31, 1997 792.0
March 31, 1998 810.2
December 31, 1998 941.9
Government Operations: Quarterly Backlog
Dollar Amounts in Millions
Graph of the Government Operations' quarterly backlog expressed in millions of
dollars from March 1994 to December 1998; backlog at March 31, 1994, 1995, 1996,
1997, 1998 and December 31, 1998 was $776 million, $624 million, $817 million,
798 million, $811 million and $942 million, respectively
- -----------------------------
/1/ British Nuclear Fuels Limited.
/2/ Source: Wall Street Journal, February 24, 1999.
33
<PAGE>
Historical And Projected U.S. Navy Procurement Spending
- --------------------------------------------------------------------------------
. The navy procurement budget is expected to grow to an average rate of 4.8
percent per year from 1998 through 2003.
. In 1996 through 1998, procurement for shipbuilding and conversion accounted
for an average of 38 percent of the total navy procurement budget.
Graph of historical and projected annual U.S. Navy procurement apending
expressed in billions of fiscal year 1999 dollars from 1980 to 2002
Source: U.S. Department Of Defense 1999 Budget Estimates.
<PAGE>
Financial Results--Government Operations
- --------------------------------------------------------------------------------
. Government operations have reported fairly consistent revenues.
. Margins increased steadily through fiscal 1998 primarily due to a shift in
mix towards higher margin management and operations contracts. The
subsequent decline in margins was primarily caused by estimated cost
overruns on an environmental project in Russia (which pre-dates the new Mars
management team).
. Increasing capital expenditures in 1999 through the rest of the projection
period reflect equipment for the new submarine program. Mars is discussing
the possibility of leasing the equipment from the U.S. government as an
alternative. Mars would expect in either case that the contract revenues
would compensate for additional expenditures.
Summary Government Operations Results/1/
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Fiscal Year Ending March 31
-------------------------------------------------
1996 1997 1998 1999(E) 2000(P) 2001(P)
------ ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenues....................... $369.7 $373.0 $370.5 $395.4 $421.7 $394.9
EBDIT.......................... 43.3 49.7 52.5 52.2 50.3 46.3
EBDIT Margin................... 11.7% 13.3% 14.2% 13.2% 11.9% 11.7%
EBIT........................... 29.4 36.5 40.6 39.6 41.2 37.0
EBIT Margin.................... 8.0% 9.8% 11.0% 10.0% 9.8% 9.4%
Capital Expenditures........... 6.4 4.1 4.3 11.3 21.4 24.9
</TABLE>
- --------
/1/ Excludes one-time costs and incomes.
35
<PAGE>
- ------------------------------------------------------------------------------
Overview of Industrial Operations
- ------------------------------------------------------------------------------
36
<PAGE>
Overview Of Industrial Operations
- --------------------------------------------------------------------------------
. Hudson Products Corporation ("HPC") designs and manufactures air-
cooled heat exchangers, vacuum steam condensers, axial flow fans,
fan control systems and related products.
- Customers include the petroleum, chemical, gas processing, pulp
and paper, electric utility industries.
. Mars Engineers & Constructors (Canada) Ltd. ("MECL")(1) is an
engineering, procurement and construction management company
serving the energy industry.
- Specializations include sour gas treatment, NGL recovery, heavy
oil production systems and power generation.
- Management is focusing on the Canadian market.
. Mars Technology, Inc. performs research and development for Mars'
operating subsidiaries.
. Interest in Sakhalin Island oil and gas field, joint venture with
Unifab International, Inc., TNG Shipyard, Menck GmbH, Mars
Engineering Houston, and Mars' shipbuilding and ordnance
operations were sold in fiscal 1998.
- --------------------
(1) Includes Delta Hudson Engineering Ltd. and Delta Catalytic Industrial
Services.
37
<PAGE>
Financial Results--Industrial Operations
. Significant changes have occurred since fiscal 1996.
. From fiscal 1996 through fiscal 1998 revenues declined as MECL refocused
on its core Canadian market. This also resulted in a return to
profitability as loss-making contracts ended. The turnaround is also
evidenced by improving backlog by the end of fiscal 1998.
. Improving market conditions in Canada and increasing demand for HPC's
products led to revenue and margin increases in fiscal 1999.
<TABLE>
<CAPTION>
Summary Industrial Operations Results
--------------------------------------------------
Backlog Summary Fiscal Year Ending March 31
- --------------- --------------------------------------------------
Date Backlog 1996 1997 1998 1999(E) 2000(P) 2001(P)
---- ------- ------ ------ ------ ------- ------- -------
(Dollar amounts (Dollar amounts in millions)
in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3/31/97 $168.4 Revenues $583.0 $482.4 $368.8 $396.2 $423.2 $425.4
3/31/98 262.5
12/31/98 436.7 EBDIT 17.0 (18.1) 20.0 19.0 16.7 17.1
EBDIT Margin 2.9% (3.8)% 5.4% 4.8% 4.0% 4.0%
EBDIT 4.0 (23.9) 16.7 13.7 12.1 12.5
EBDIT Margin 0.7% (5.0)% 4.5% 3.5% 2.9% 2.9%
Capital Expenditures 23.3 14.7 6.3 4.0 3.8 3.8
</TABLE>
<PAGE>
-----------------------------------------------------------------
Financial Performance
-----------------------------------------------------------------
<PAGE>
Mars Financial Statements--Reported (Excluding One-Time Items)
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share)
. The following income statements are "as reported", but excluding one-
time items.
<TABLE>
<CAPTION>
Pro Forma Fiscal Year Ended March 31
-----------------------------------------------------------
1996 1997 1998 1999E 2000P/1/ 2001P
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues................ $3,244.3 $3,150.9 $3,674.6 $3,107.3 $2,903.3 $3,378.7
Direct Costs............ 2,830.4 2,810.8 3,117.3 2,454.8 2,337.8 2,763.0
-------- -------- -------- -------- -------- --------
Gross Profit.......... 413.9 340.1 557.4 652.5 565.4 615.7
Gross Profit Margin... 12.8% 10.8% 15.2% 21.0% 19.5% 18.2%
SG&A Expense............ 274.8 252.4 224.0 345.2 315.2 317.5
(Income) From
Investees.............. (17.8) 4.1 (85.4) (10.0) (9.4) (9.9)
Minority
Interest/(Equity
Income)................ 10.0 5.6 48.0 45.6 10.7 14.2
-------- -------- -------- -------- -------- --------
EBITDA................ 147.0 78.0 370.8 271.7 248.9 293.9
EBITDA Margin......... 4.5% 2.5% 10.1% 8.7% 8.6% 8.7%
Depreciation And
Amortization........... 139.9 151.6 142.3 97.9 92.4 85.4
-------- -------- -------- -------- -------- --------
EBIT.................. 7.1 (73.6) 228.5 173.8 156.5 208.5
EBIT Margin........... 0.2% (2.3%) 6.2% 5.6% 5.4% 6.1%
Interest Expense........ 84.3 91.2 81.5 26.6 38.2 37.0
Interest Income......... (37.2) (46.7) (62.5) (53.4) (56.9) (53.4)
-------- -------- -------- -------- -------- --------
Net Interest
Expense/(Income)..... 47.1 44.5 18.9 (26.8) (18.8) (16.3)
Other Expense/(Income).. 6.4 (47.2) 36.1 (14.3) 0.5 (0.1)
-------- -------- -------- -------- -------- --------
Pretax Income......... (46.4) (70.8) 173.5 214.8 174.7 224.9
Income Taxes............ (11.5) 4.9 66.9 58.4 64.0 81.9
-------- -------- -------- -------- -------- --------
Net Income............ $ (34.9) $ (75.7) $ 106.6 $ 156.4 $ 110.7 $ 143.0
======== ======== ======== ======== ======== ========
Preferred Stock
Dividends.............. 8.3 8.3 8.3 -- -- --
-------- -------- -------- -------- -------- --------
Net Income To Common.. $ (43.2) $ (84.0) $ 98.3 $ 156.4 $ 110.7 $ 143.0
======== ======== ======== ======== ======== ========
Basic Shares
Outstanding............ 54.2 54.3 55.4 59.1 59.1 59.1
Fully-Diluted Shares
Outstanding............ 54.4 54.3 63.8 61.8 60.2 60.2
EPS (Basic)............. $ (0.80) $ (1.55) $ 1.77 $ 2.65 $ 1.87 $ 2.42
======== ======== ======== ======== ======== ========
EPS (Diluted)........... $ (0.79) $ (1.55) $ 1.67 $ 2.53 $ 1.84 $ 2.38
======== ======== ======== ======== ======== ========
</TABLE>
- --------
/1/ Incorporates Jupiter's revised 2000 projection.
40
<PAGE>
Mars Financial Results--Beneficial
- --------------------------------------------------------------------------------
. "Beneficial" Mars results include the fraction of Jupiter's revenues,
costs, etc. equal to Mars' ownership interest./1/
<TABLE>
<CAPTION>
Pro Forma Fiscal Year Ended March 31
------------------------------------------------------------
1996 1997 1998 1999E 2000P/2/ 2001P
-------- -------- -------- -------- -------- --------
(Dollar amounts in millions, except per share)
<S> <C> <C> <C> <C> <C> <C>
Revenues................ $2,841.2 $2,675.7 $3,005.2 $2,700.2 $2,638.9 $2,992.1
Direct Costs............ 2,503.1 2,411.4 2,556.1 2,133.2 2,130.1 2,435.4
-------- -------- -------- -------- -------- --------
Gross Profit.......... 338.1 264.3 449.0 567.1 508.8 556.7
Gross Profit Margin... 11.9 % 9.9 % 14.9% 21.0% 19.3% 18.6%
SG&A Expense............ 234.6 2.2.5 183.4 310.1 288.0 290.4
(Income) From
Investees.............. (17.8) (10.2) (85.4) (10.0) (9.4) (9.9)
Minority
Interest/(Equity
Income)................ 13.4 11.6 25.5 8.1 (4.0) (4.2)
-------- -------- -------- -------- -------- --------
EBITDA................ 180.0 50.4 325.5 258.9 234.2 280.4
EBITDA Margin........... 3.8 % 1.9 % 10.8% 9.6% 8.9% 9.4%
Depreciation And
Amortization........... 112.2 118.0 108.4 80.3 75.0 70.4
-------- -------- -------- -------- -------- --------
EBIT.................. (4.2) (67.5) 217.1 178.6 159.2 210.0
EBIT Margin........... (0.1)% (2.5)% 7.2% 6.6% 6.0% 7.0%
Interest Expense........ 70.5 77.2 70.3 24.0 35.9 34.9
Interest (Income)....... (35.3) (41.2) (53.1) (43.0) (47.9) (44.9)
-------- -------- -------- -------- -------- --------
Net Interest
Expense/(Income)..... 35.2 36.0 17.3 (19.0) (12.0) (10.1)
Other Expense/(Income).. 8.9 (25.9) 38.3 (11.5) 1.7 1.2
-------- -------- -------- -------- -------- --------
Pretax Income......... (48.2) (77.6) 161.5 209.1 169.5 219.0
Income Taxes............ (13.3) (1.9) 55.0 52.7 58.7 75.9
-------- -------- -------- -------- -------- --------
Net Income............ $ (34.9) $ (75.7) $ 106.6 $ 156.4 $ 110.7 $ 143.0
======== ======== ======== ======== ======== ========
Preferred Stock
Dividends.............. 8.3 8.3 8.3 -- -- --
-------- -------- -------- -------- -------- --------
Net Income To Common.. $ (43.2) $ (84.0) $ 98.3 $ 156.4 $ 110.7 $ 143.0
======== ======== ======== ======== ======== ========
Basic Shares
Outstanding............ 54.2 54.3 55.4 59.1 59.1 59.1
Fully-Diluted Shares
Outstanding............ 54.4 54.3 63.8 61.8 60.2 60.2
EPS (Basic)............. $ (0.80) $ (1.55) $ 1.77 $ 2.65 $ 1.87 $ 2.42
======== ======== ======== ======== ======== ========
EPS (Fully Diluted)..... $ (0.79) $ (1.55) $ 1.67 $ 2.53 $ 1.84 $ 2.38
======== ======== ======== ======== ======== ========
</TABLE>
- --------
/1/Calculated from the market value of its common equity interest plus
preferred stock, divided by the total equity market value plus preferred
stock.
/2/Incorporates Jupiter's revised 2000 projection.
41
<PAGE>
Mars Financial Results--Excluding Jupiter
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share)
. The following results reflect Mars without any contribution from Jupiter.
<TABLE>
<CAPTION>
Pro Forma Fiscal Year Ended March 31
------------------------------------------------------------
1996 1997 1998 1999E 2000P 2001P
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues................ $1,984.9 $1,742.4 $1,819.1 $1,814.3 $2,063.5 $2,150.6
Direct Costs............ 1,807.8 1,627.0 1,562.0 1,433.2 1,678.1 1,722.3
-------- -------- -------- -------- -------- --------
Gross Profit.......... 177.0 115.4 257.1 381.1 385.4 428.3
Gross Profit Margin... 8.9% 6.6% 14.1% 21.0% 18.7% 19.9%
SG&A.................... 149.2 134.1 111.6 233.6 228.8 231.3
(Income) From
Investees.............. (17.8) 4.1 (85.4) (10.0) (9.4) (9.9)
Minority
Interest/(Equity
Income)................ 22.5 0.7 31.3 4.4 -- --
-------- -------- -------- -------- -------- --------
EBITDA................ 23.2 (23.4) 199.6 153.1 166.0 206.9
EBITDA Margin......... 1.2% (1.3%) 11.0% 8.4% 8.0% 9.6%
Depreciation And
Amortization........... 53.5 51.9 48.5 41.9 37.0 37.7
-------- -------- -------- -------- -------- --------
EBIT.................. (30.3) (75.3) 151.2 111.2 129.0 169.3
EBIT Margin........... (1.5)% (4.3%) 8.3% 6.1% 6.3% 7.9%
Interest Expense........ 41.0 49.6 50.7 18.3 31.1 30.2
Interest (Income)....... (31.1) (30.2) (36.3) (20.4) (28.3) (26.6)
-------- -------- -------- -------- -------- --------
Net Interest
Expense/(Income)..... 9.9 19.4 14.4 (2.1) 2.8 3.5
-------- -------- -------- -------- -------- --------
Other Expense/(Income).. 14.0 (9.8) 42.1 (5.5) 4.3 3.9
-------- -------- -------- -------- -------- --------
Pretax Income......... (54.2) (85.0) 94.7 (118.8) 121.8 161.8
Income Taxes............ (17.2) (6.8) 33.8 40.4 47.3 63.0
-------- -------- -------- -------- -------- --------
Net Income............ $ (37.0) $ (78.2) $ 60.9 $ 78.4 $ 74.6 $ 98.8
======== ======== ======== ======== ======== ========
Preferred Stock
Dividends.............. 8.3 8.3 8.3 -- -- --
-------- -------- -------- -------- -------- --------
Net Income To Common.. $ (45.3) $ (86.5) $ 52.6 $ 78.4 $ 74.6 $ 98.8
======== ======== ======== ======== ======== ========
Basic Shares
Outstanding............ 54.2 54.3 55.4 59.1 59.1 59.1
Fully-Diluted Shares
Outstanding............ 54.4 54.3 63.8 61.8 60.2 60.2
EPS (Basic)............. $ (0.83) $ (1.59) $ 0.95 $ 1.33 $ 1.26 $ 1.67
======== ======== ======== ======== ======== ========
EPS (Fully Diluted)..... $ (0.83) $ (1.59) $ 0.95 $ 1.27 $ 1.46 $ 1.64
======== ======== ======== ======== ======== ========
</TABLE>
42
<PAGE>
Mars Reported Quarterly Results (No Adjustments)
(Dollar amounts in millions)
. The following results are consolidated Mars financial statements as
reported.
<TABLE>
<CAPTION>
Fiscal Year 1998 Fiscal Year 1999
------------------------------ ---------------------------------
Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Estimated
------ ------ ------ ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $928.1 $920.1 $901.7 $924.8 $819.8 $780.0 $800.8 $706.7
Direct Costs............ 786.9 771.9 757.8 800.7 679.7 630.2 674.8 493.5
------ ------ ------ ------ ------ ------ ------ ------
Gross Profit.......... 141.2 148.2 143.9 124.0 140.1 149.8 126.1 213.2
Gross Profit Margin... 15.2% 16.1% 16.0% 13.4% 17.1% 19.2% 15.7% 30.2%
SG&A Expense............ 55.6 54.7 49.9 63.9 54.5 57.5 51.9 181.2
Equity
Expense/(Income)....... (0.1) (6.4) (69.0) (9.9) (16.9) 3.2 (0.5) (13.6)
Minority Interest....... 6.7 9.7 23.3 8.3 37.7 12.4 11.3 (3.2)
------ ------ ------ ------ ------ ------ ------ ------
EBITDA................ 79.0 90.2 139.7 61.7 64.8 76.8 63.4 48.7
EBITDA Margin......... 8.5% 9.8% 15.5% 6.7% 7.9% 9.8% 7.9% 6.9%
Deprecation Expense..... 38.3 39.4 33.4 31.2 26.6 21.7 24.6 2.8
------ ------ ------ ------ ------ ------ ------ ------
EBIT.................. 40.7 50.9 106.3 30.5 38.3 55.0 38.7 45.9
Interest
Expense/(Income)....... 12.7 6.8 1.2 (1.8) (16.1) (10.1) (3.3) (3.6)
Loss/(Gain) On Asset
Disposals.............. (97.4) (28.2) 40.2 6.3 (42.4) 1.7 3.8 0.4
Other Expense/(Income).. (1.6) 0.1 (4.2) 2.4 (41.6) 5.7 2.4 (3.7)
------ ------ ------ ------ ------ ------ ------ ------
Pretax Income......... 127.0 72.1 69.1 23.6 138.4 57.7 35.9 52.8
Income Taxes............ 17.2 34.0 18.1 6.9 16.8 6.1 (6.4) 12.8
------ ------ ------ ------ ------ ------ ------ ------
Net Income............ $109.9 $ 38.2 $ 51.0 $ 16.7 $121.6 $ 51.6 $ 42.3 $ 40.0
====== ====== ====== ====== ====== ====== ====== ======
Net Income Margin..... 11.8% 4.1% 5.7% 1.8% 14.8% 6.6% 5.3% 5.7%
Preferred Dividends..... 2.1 2.1 2.1 2.1 -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Net Income After
Preferred............ $107.8 $ 36.1 $ 48.9 $ 14.6 $121.6 $ 51.6 $ 42.3 $ 40.0
====== ====== ====== ====== ====== ====== ====== ======
Basic Shares
Outstanding............ 55.4 56.8 56.0 55.4 59.9 58.8 58.6 58.6
Fully Diluted Shares
Outstanding............ 63.0 64.1 64.4 63.8 65.5 62.0 59.6 59.6
EPS (Basic)............. $1.94 $ 0.64 $ 0.87 $ 0.26 $ 2.03 $ 0.88 $ 0.72 $ 0.68
====== ====== ====== ====== ====== ====== ====== ======
EPS (Diluted)........... $ 1.77 $ 0.62 $ 0.82 $ 0.29 $ 1.88 $ 0.85 $ 0.71 $ 0.67
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
43
<PAGE>
Summary of Mars Historical Consolidated Balance Sheets
- --------------------------------------------------------------------------------
(U.S. dollar amounts in millions)
<TABLE>
<CAPTION>
At December 31,
Actual, March 31 1998
------------------------------- --------------------
Pro
1996 1997 1998 Reported Forma/1/
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Cash and Equivalents... $ 238.7 $ 257.8 $ 277.9 $ 265.3 $ 265.3
Investments in Debt
Securities............ 244.1 485.5 1,073.5 1,120.7 890.7
Accounts Receivable.... 677.1 798.3 742.8 560.2 560.2
Contracts in Progress.. 457.3 326.5 239.5 214.2 214.2
Environmental and
Products Liabilities
Recoverable........... 116.3 183.0 143.6 135.2 135.2
Inventories............ 77.6 66.3 63.3 58.3 58.3
Deferred Income Taxes.. 93.1 60.9 84.0 81.5 81.5
Other Current Assets... 62.5 65.6 45.3 26.8 26.8
--------- --------- --------- --------- ---------
Total Current
Assets.............. 1,966.6 2,243.9 2,669.9 2,462.1 2,232.1
Gross Property, Plant
and Equipment......... 1,890.1 1,764.3 1,715.4 1,502.9 1,502.9
Less: Accumulated
Depreciation.......... (1,199.4) (1,164.6) (1,181.7) (1,045.4) (1,045.4)
--------- --------- --------- --------- ---------
Net Property, Plant
and Equipment....... 690.7 599.7 533.7 457.5 457.5
Goodwill............... 460.1 423.1 127.1 112.5 112.5
Environmental and
Products Liabilities
Recoverable........... 607.0 720.9 604.9 470.8 470.8
Prepaid Pension Costs.. 283.7 303.8 328.6 123.0 123.0
Other Assets........... 379.3 308.0 237.0 227.5 227.5
--------- --------- --------- --------- ---------
Total Assets......... $ 4,387.3 $ 4,599.5 $ 4,501.1 $ 3,853.5 $ 3,623.5
========= ========= ========= ========= =========
Notes Payable and
Short-term Debt....... $ 234.3 $ 451.9 $ 156.3 $ 35.8 $ 35.8
Accounts Payable....... 264.9 268.3 302.0 215.0 215.0
Environmental and
Products Liabilities--
Current............... 161.1 211.8 181.2 157.9 157.9
Advance Billings on
Contracts............. 187.4 200.2 268.8 295.6 295.6
Accrued Expenses....... 508.3 450.2 522.0 155.4 155.4
Other Current
Liabilities........... 36.7 26.4 30.8 348.1 348.1
--------- --------- --------- --------- ---------
Total Current
Liabilities......... 1,392.6 1,608.8 1,461.1 1,207.8 1,207.8
Long-term Debt......... 576.3 667.2 598.2 567.8 367.8
Accumulated Post-
Retirement Benefits
Obligation............ 401.3 400.4 393.6 147.3 147.3
Environmental and
Products Liabilities.. 721.7 903.4 751.6 592.2 592.2
Other Liabilities...... 269.0 250.9 271.5 265.6 265.6
Minority Interest...... 341.9 331.8 345.3 212.7 212.7
Stockholders' Equity:
Preferred Stock........ 2.9 2.9 2.9 -- --
Common Stock........... 681.6 434.1 676.9 860.1 830.1
--------- --------- --------- --------- ---------
Total Stockholders'
Equity.............. 684.5 437.0 679.8 860.1 830.1
--------- --------- --------- --------- ---------
Total Liabilities
and Stockholders'
Equity............ $ 4,387.3 $ 4,599.5 $ 4,501.1 $ 3,853.5 $ 3,623.5
========= ========= ========= ========= =========
</TABLE>
- --------
/1/Pro forma to reflect the retirement of $200 million of Jupiter's $250
million outstanding 9.375 percent senior subordinated notes at a total cost
of $230 million.
44
<PAGE>
Asbestos Litigation
- --------------------------------------------------------------------------------
. Simmons has requested, but has not been granted, access to Mars
personnel to review this issue.
. As a result of exposure to asbestos contained in boiler systems
manufactured by Mars, Mars is subject to product liability claims from
non-employees. The boilers were installed in U.S. Navy vessels from the
1940s through 1984. Claims began around 1980. Mars is not accepting
claims relating to exposure to asbestos after 1984 (when new OSHA
regulations for handling asbestos came into effect).
. Mars believes it is substantially insured for such claims except for the
claim year 1979 and for insolvent insurers.
. Estimates of future liabilities are management's best estimates based on
claims history. Estimates of insurance recoveries are management's
estimates based on analysis of insurers. Mars started reporting estimated
amounts of its asbestos liability in 1994.
. Average claim over the last three years is $6,400, up from an average of
$3,000 per claim for the fiscal 1992 through 1994 period. The estimated
uninsured portion has increased from 12 percent of estimated future
claims at the end of fiscal 1994 to almost 18 percent at December 31,
1998.
<TABLE>
<CAPTION>
Estimated Uninsured Amount Average
Estimated ----------------------------- Claim Amount
Total Future As Percent Of For Last
At March 31 Claims Expense Amount Future Claims 3 Years
------------ ------------ ---------- ---------- ------------- -------------
($Millions) ($Millions) ($Millions)
<S> <C> <C> <C> <C> <C>
1994 $1,122.1 $ 155.0 $ 135.1 12.0% $3,000
1995 995.9 14.5 134.5 13.5 4,800
1996 844.0 -- 120.8 14.3 5,500
1997 1,082.8 72.4 178.9 16.5 6,000
1998 886.7 -- 138.2 15.6 6,400
12/31/98 708.4 -- 126.2 17.8 N/A
</TABLE>
45
<PAGE>
EXHIBIT 99(B)(11)
DRAFT
CONFIDENTIAL
Project Big Mac
Discussion Materials Prepared For
The Independent Committee Of The Board Of Directors
SIMMONS & COMPANY
INTERNATIONAL
APRIL 1, 1999
<PAGE>
TRANSMITTAL LETTER
This confidential memorandum ("Memorandum") has been prepared by Simmons &
Company International ("Simmons") for the Independent Committee of the Board of
Directors of JRM (the "Independent Committee") as a review of certain issues
related to a potential transaction between JRM and MII (the "Proposed
Transaction").
This Memorandum is intended as background information for use by the Independent
Committee and does not purport to be all-inclusive or to contain all of the
information which the Independent Committee may desire or need to evaluate the
Proposed Transaction.
In preparing this Memorandum, Simmons has relied on publicly available financial
and market information as well as internal information provided by MII and JRM.
Simmons has not independently verified such information but has relied on its
preparers for its accuracy and completeness. Simmons, therefore, make no express
or implied warranty with respect to the accuracy or completeness of the
information contained herein or as to the non-occurrence of any change in the
affairs of JRM or MII since the dates as of which information is provided
herein. Financial projections presented herein are based on managements' and
third-party analyses of information available at the time this Memorandum was
prepared, and there is no express or implied warranty that any of the
projections will be realized.
SIMMONS & COMPANY INTERNATIONAL
April 1999
<PAGE>
TABLE OF CONTENTS
TAB
----
JRM VALUATION ANALYSIS....................................................... .A
MII VALUATION ANALYSIS........................................................ B
ANALYSIS OF SQUEEZE-OUT ALTERNATIVE........................................... C
STRATEGIC ALTERNATIVES........................................................ D
<PAGE>
- --------------------------------------------------------------------------------
JRM Valuation Analysis
- --------------------------------------------------------------------------------
1
<PAGE>
Summary Of JRM Capitalization At March 9, 1999
- --------------------------------------------------------------------------------
(Amounts in millions, except per share)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cash $ 123.3 Common Equity Market Capitalization $ 957.3
Investments In Debt Securities 752.1 Less: Excess Cash (528.7)
Less: Debt Repayment1 (282.0) --------
-------- Adjusted Equity Market Capitalization $ 428.6
Total Pro Forma Cash 593.4 ========
Pro Forma Shareholders' Equity $ 699.7
Less: Operating Cash2 (64.7) Antitrust Liability --4
-------- Pro Forma Debt 2.1
Excess Cash $ 528.7 --------
======== Total Book Capitalization 701.8
Common Shares3 39.3 Less: Excess Cash (528.7)
--------
Share Price $ 24.38 Adjusted Book Capitalization $ 173.1
========
Pro Forma Debt1 2.1
Antitrust Liability --4
Preferred Stock Market Value 160.0
Common Equity Market Value 957.3
--------
Total Market Capitalization 1,119.5
Less: Excess Cash $ (528.7)
--------
Adjusted Market Capitalization $ 590.7
========
</TABLE>
- ----------
1 Assumes paydown of $248.6 million of outstanding 9 3/8 percent senior
subordinated notes at a total cost of $282 million.
2 Calculated as 5 percent of fiscal year 1999 revenues.
3 Includes approximately 234,000 shares representing options on a treasury
basis.
4 To be determined in aggregate and allocated between JRM and MII, as
appropriate.
2
<PAGE>
Summary Valuation Multiples Of Comparable Companies - At March 9, 1999
----------------------------------------------------------------------
<TABLE>
<CAPTION>
Offshore Construction Companies
--------------------------------------------------------------------------------------------------
Horizon Gulf
Calendar Years Bouygues Cal Dive Coflexip Global Offshore Island Oceaneering Stolt
-------------- -------- -------- -------- ------ -------- ------ ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Adjusted Market Value To:
Adjusted Book Value NMF 2.5x 2.1x 1.3x 1.1x 1.4x 1.3x 1.1x
1998 EBITDA 5.4x 5.4x 4.0x 6.5x 5.9x 2.8x 5.4x 5.9x
1999 EBITDA 5.3x 6.6x 4.3x 8.8x 8.4x 4.2x 5.2x 5.3x
2000 EBITDA 4.5x 5.6x 4.2x 6.8x 6.3x 3.6x N/A 4.8x
Equity Value To:
1998 Net Income 9.5x 10.4x 8.7x 10.8x 8.0x 4.9x 10.7x 9.5x
1999 Net Income 9.4x 13.3x 9.6x 18.0x 13.1x 8.0x 10.2x 9.0x
2000 Net Income 7.8x 10.8x 9.2x 11.7x 8.7x 6.6x N/A 7.6x
1998 Cash Flow 7.1x 7.6x 5.3x 6.7x 6.1x 4.0x 5.1x 4.9x
1999 Cash Flow 7.1x 9.1x 5.6x 9.0x 8.7x 5.9x 4.9x 4.7x
2000 Cash Flow 6.1x 7.8x 5.4x 7.1x 6.5x 5.1x N/A 4.3x
<CAPTION>
Oil Service Companies JRM
-------------------------------------------------------------- ---------------------
BJ Cooper National- Smith
Calendar Years Services Cameron Oilwell International Tidewater Initial1 Revised2
-------------- -------- ------- ------- ------------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Adjusted Market Value To:
Adjusted Book Value 1.2x 1.6x 1.2x 1.6x 1.3x 3.4x
1998 EBITDA 5.1x 6.0x 4.0x 8.1x 3.4x 3.7x
1999 EBITDA 8.6x 9.3x 7.2x 10.5x 6.6x 8.1x 5.9x
2000 EBITDA 7.3x 8.4x 6.5x 9.2x N/A 5.4x
Equity Value To:
1998 Net Income 9.7x 10.2x 6.0x 16.9x 6.8x 5.0x3
1999 Net Income 33.0x 22.2x 14.8x 34.0x 17.6x NMF 19.8x3
2000 Net Income 20.0x 18.2x 12.3x 23.1x N/A 11.8x3
1998 Cash Flow 5.1x 6.9x 4.7x 9.4x 4.6x 3.0x3
1999 Cash Flow 8.1x 10.9x 8.7x 13.0x 7.7x 7.5x 5.6x3
2000 Cash Flow 7.0x 9.9x 7.8x 11.0x N/A 5.1x3
</TABLE>
- ----------
Includes initial JRM fiscal year 2000 projection based on field level estimates.
Includes revised JRM fiscal year 2000 projection.
Net income and cash flow multiples have been adjusted to exclude the effects of
excess cash.
3
<PAGE>
Valuation Of JRM - As Of Pre-Announcement Date (March 9, 1999)
- --------------------------------------------------------------------------------
o Average of the High implied values: $26.111
o Average of the Low implied values: $23.371
o Actual closing price: $24.38
Graph showing the high and low implied values as of March 9, 1999 (ranging
from $18.99 to $27.38) of the Company's stock price implied by a range of
EBITDA, EPS and CFPS multiples applied to projections for fiscal year 2000 and
fiscal year 2001, and showing the implied value of the Initial Offer received
from the Parent ($26.45) and the Company's closing stock price ($24.38) on March
9, 1999 (one day prior to the announcement of the offer)
- ----------
1 Excludes high and low.
2 Defined as net income plus depreciation and amortization per share.
4
<PAGE>
Analysis Of JRM Value At March 29, 1999
- --------------------------------------------------------------------------------
o There has been a recovery in oil service stocks in recent weeks.
o Simmons has used various oil service stock indices to adjust for the
recovery and to calculate an adjusted JRM share price.
<TABLE>
<CAPTION>
Prior To Announcement Date
-----------------------------------
20-Day 3-Month
One-Day Trading Trading
Prior1 Average2 Average2
-------- --------- ---------
<S> <C> <C> <C>
Percent Change To Current
- -------------------------
OSX 30.9% 41.9% 38.0%
Offshore Construction Comparables 42.4 38.7 33.2
Oil Service Comparables 35.5 45.7 40.9
-------- -------- --------
Average 36.3% 42.1% 37.4%
======== ======== ========
JRM Share Price $24.38 $23.55 $24.26
Less: Excess Cash (13.46) (13.46) (13.46)
-------- -------- --------
Net Share Price 10.92 10.09 10.80
Net Share Price Adjusted For Industry Recovery 14.88 14.34 14.84
Plus: Excess Cash 13.46 13.46 13.46
-------- -------- --------
Estimated JRM Share Price If No Transaction $28.34 $27.80 $28.30
======== ======== ========
</TABLE>
--------------------------------------------------
Suggested Value Adjusted For Recovery $28.00
======
--------------------------------------------------
- ----------
1 March 9, 1999
5
<PAGE>
2 Period ending March 9, 1999
6
<PAGE>
Antitrust Litigation
- --------------------------------------------------------------------------------
o Simmons had limited discussions with MII legal personnel regarding this
issue.
o Key issues are: (i) amount of liability; and (ii) relative liability of
JRM and MII.
March 1997 o MII and JRM investigate allegations of anti-competitive acts
involving worldwide heavy-lift activities by a limited number
of former employees of MII, JRM, Heerema Offshore Construction
Group, Inc. ("Heerema") and others, relating to the joint
venture, HeereMac, owned by JRM and Heerema.
o MII and JRM notify the Antitrust Division of the U.S.
Department of Justice ("DOJ") and the European Commission
("EC"). Proactive stance resulted in both MII and JRM being
granted immunity from criminal prosecution by the DOJ.
December 1997 o HeereMac joint venture terminated.
o HeereMac and a HeereMac employee plead guilt to criminal
charges by the DOJ regarding a conspiracy to rig bids in
connection with the heavy-lift business in the Gulf of Mexico,
North Sea and Far East. HeereMac fined $49.0 million; HeereMac
employee fined $100,000. No MII or JRM-related persons were a
party to these proceedings.
o DOJ requests additional information regarding possible
anti-competitive activity in the marine construction business
of McDermott-ETPM East, Inc., a joint venture between JRM and
ETPM S.A. The U.S. Securities and Exchange Commission ("SEC")
also requests information related to these matters.
April 1998 o McDermott-ETPM joint venture terminated.
June 1998 o In two separate cases, Phillips Petroleum Company ("Phillips")
(and certain other parties) and Shell Offshore, Inc. ("Shell")
(and certain other parties) filed suit in the U.S. District
Court for the Southern District of Texas against MII, JRM,
McDermott-ETPM, Inc., HeereMac, Heerema and other related
parties in connection with certain offshore transportation and
installation projects in the Gulf of Mexico, North Sea and Far
East. The plaintiffs seek actual damages, injunctive relief,
attorneys' fees, punitive and treble damages.
November 1998 o In a Salomon Smith Barney equity research report, the estimate
of the contingent liability of JRM is stated as $30-$150
million on a present value basis.
January 1999 o The U.S. District Court dismisses without prejudice, due to
the court's lack of subject matter jurisdiction, the claims of
the Phillips plaintiffs relating to the alleged injuries
sustained on any foreign projects.
o Salomon Smith Barney estimate revised to $175 million. Lazard
Freres reported there are a total of 15 plaintiffs in two law
suits.
7
<PAGE>
Antitrust Litigation - Key Questions
- --------------------------------------------------------------------------------
What is the potential amount of the liability?
o The lawsuits and discussion between the parties have not progressed
far enough to accurately predict the outcome.
What would be the relative split of liability, if any, between MII and JRM?
o Simmons understands, at the time of the OPI merger, JRM assumed all
the assets and all the liabilities of MII's marine business
(including those prior to the OPI merger), whether known or unknown,
and that MII believes it has an indemnity from JRM.
o Judge Harmon, in the Phillips case, has issued an opinion that U.S.
antitrust laws do not extend to foreign projects (i.e. only
potential damages from anti competitive practices in the Gulf of
Mexico will be considered). Judge Hughes, in the Shell case, has not
yet rendered an opinion.
- Heerema has testified projects for which bids were rigged did
not occur in the Gulf of Mexico until after the OPI merger.
o No disclosure of any agreements between JRM, HerreMac and its
competitors was made publicly at the time of the OPI merger.
- Heerema has also testified an agreement was made in the early
1990s between itself and Saipem in which heavy-lift work would
be split in the North Sea, 60 percent to HeereMac and 40
percent to Saipem.
- As a result of this agreement, the Saipem 7000 was moved out
of the Gulf of Mexico.
- Due to the lag (up to two or three-years) between bidding a
heavy-lift project and execution, projects performed in the
Gulf of Mexico after the OPI merger could have been bid while
JRM was wholly owned by MII.
How does the Independent Committee strengthen its position during negotiations?
8
<PAGE>
- --------------------------------------------------------------------------------
MII Valuation Analysis
- --------------------------------------------------------------------------------
9
<PAGE>
Summary Of MII Capitalization At March 29, 1999
- --------------------------------------------------------------------------------
(Amounts in millions, except per share)
<TABLE>
<CAPTION>
MII
---------------------------------------
Consolidated Excluding JRM
------------ -------------
<S> <C> <C>
Cash $ 265.3 $ 142.0
Investment In Debt Securities 1,120.7 368.6
Less: Debt Repayment1 (282.0) --
Less: Termination Of Factoring Program (55.0) (55.0)
--------- ---------
Total Pro Forma Cash 1,049.0 455.6
Less Operating Cash2 (155.4) 90.7
--------- ---------
Excess Cash $ 893.6 $ 364.9
========= =========
Common Shares3 60.2 N/A
Share Price $ 26.56 N/A
Pro Forma Debt 355.0 $ 352.9
Antitrust Liability --4 --4
After Tax Net Environmental And Products Liability 86.5 86.5
After Tax Post-Retirement Benefit Liability 14.6 14.6
Minority Interest 409.05 --
Common Equity Market Value 1,598.3 747.6
--------- ---------
Total Market Capitalization 2,463.3 1,201.5
Less: Excess Cash (893.6) (364.9)
--------- ---------
Adjusted Market Capitalization $1,569.7 $ 836.6
========= =========
Common Equity Market Capitalization 1,598.3 747.6
After Tax Net Environmental And Products Liability 86.5 86.5
After Tax Post-Retirement Benefit Liability 14.6 14.6
Less: Excess Cash (893.6) (364.9)
--------- ---------
Adjusted Equity Market Capitalization $ 805.7 $ 483.8
========= =========
Stockholders' Equity 826.7 499.7
Debt 355.0 352.9
Antitrust Liability --4 --4
Net Environmental And Products Liability 144.1 144.1
Post-Retirement Benefit 24.3 24.3
Minority Interest 212.76 --
Less: Excess Cash (893.6) (364.9)
--------- ---------
Adjusted Book Value $ 669.1 $ 656.1
========= =========
</TABLE>
- ----------
1 Assumes paydown of $248.6 million of JRM's outstanding 9 3/8 percent
senior subordinated notes at a total cost of $282 million.
2 Calculated as 5 percent of fiscal year 1999 revenues.
3 Includes approximately 1,057,000 shares representing stock options on a
treasury basis.
4 To be determined in aggregate and allocated between JRM and MII, as
appropriate.
10
<PAGE>
5 Market value (uses $28.00 estimated JRM price adjusted for industry
recovery).
6 Book value.
11
<PAGE>
Valuation Of MII - As Of March 29, 19991
- --------------------------------------------------------------------------------
o Actual closing price: $26.56
Graph showing the high and low implied values of the Parent's stock price
implied by a range of EBITDA, EPS and CFPS multiples applied to projections for
fiscal year 2000 and fiscal year 2001, and showing the Parent's closing stock
price ($26.56) on March 9, 1999 (one day prior to the announcement of the
Initial offer)
- ----------
1 Uses estimated JRM share price of $28.00.
2 Excluding high and low.
3 Defined as net income plus depreciation and amortization per share.
12
<PAGE>
- --------------------------------------------------------------------------------
Valuation Of MII Components
- --------------------------------------------------------------------------------
13
<PAGE>
Valuation - Power Generation
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
o Simmons has selected valuation multiples based on the public multiples of
the E&C comparable group.
o Simmons has cross-checked its results with the Salomon Smith Barney
analyst report dated November 13, 1998 which used a 6.0x multiple of 2000
projected EBITDA, generating a value of $601.0 million (MII share price
has since declined approximately 21 percent).
o Simmons has also noted the value calculated by Merrill Lynch in its
analysis presented to Simmons (the "Merrill Analysis") of $716 million.
o Results of efforts to sell Power Generation will be critical to fully
understanding value. MII management has elected not to discuss this issue
with Simmons.
<TABLE>
<CAPTION>
Suggested Multiple Power Generation Implied Total Market
MII Fiscal Years Range Results Value
- ---------------- ------------------ ---------------- --------------------
<S> <C> <C> <C>
1999 EBITDA 5.5x - 6.5x $ 105.7 $581.4 - $687.1
2000 EBITDA 5.0x - 6.0x 119.3 596.5 - 715.8
2001 EBITDA 4.5x - 5.5x 162.1 729.5 - 891.6
1999 Net Income 8.0x - 11.0x 54.11 432.8 - 595.1
2000 Net Income 8.0x - 11.0x 59.71 477.6 - 656.7
2001 Net Income 9.0x - 11.0x 85.01 765.0 - 935.0
1999 Cash Flow 5.0x - 7.0x 73.51 367.5 - 514.5
2000 Cash Flow 5.5x - 6.5x 79.41 436.7 - 516.1
2001 Cash Flow 5.0x - 5.5x 105.51 527.5 - 580.3
---------------
Implied Value $600.0 - $725.0
===============
</TABLE>
- ----------
1 Assumes 40 percent tax rate on EBIT.
14
<PAGE>
Valuation - Government Operations
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
Discounted Cash Flow Assumptions
o Five-year projection uses fiscal 2000 and 2001 from MII, and 2002 through
2004 from discussions with management of Government Operations.
o Operating income and depreciation are expected to remain flat in 2002
through 2004.
o MII is planning to make significant capital additions from fiscal year
2000 through 2004 to support the CVNX and two nuclear submarine shipsets
per year.
- $106 million for the Nuclear Equipment Division ("NED").
- $23 million for the Naval Nuclear Fuels Division ("NNFD").
o MII plans to move ahead with the NED investment in the early part of
fiscal year 2000. A decision on the NNFD investment is not required for
several years.
o MII has modified its capital expenditure plan to reflect leasing the new
NED assets:
<TABLE>
<CAPTION>
Fiscal Years 2000 2001 2002 2003 2004
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revised Capital Investment $ 16.0 $ 13.0 $ 9.3 $ 9.6 $ 9.8
</TABLE>
o Working capital tends to be cyclical. MII expects to invest approximately
$29 million from fiscal 2000 through 2003 which would be liquidated
(returned to MII) in 2004.
<TABLE>
<CAPTION>
Fiscal Years 2000 2001 2002 2003 2004
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Working Capital Investment $ 8.3 $ 8.3 $ 6.2 $ 6.4 $ (29.2)
</TABLE>
15
<PAGE>
Valuation - Government Operations
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
Summary Of Cash Flows
<TABLE>
<CAPTION>
Projected
-----------------------------------------------------------------
1999E 2000 2001 2002 2003 2004
-------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 395.4 $ 421.7 $ 394.9
Operating Income1 41.4 41.2 37.0 $ 38.1 $ 39.3 $ 40.4
Plus: Depreciation1 12.8 9.1 9.3 9.3 9.6 9.8
-------- -------- -------- ------- ------- -------
EBITDA 54.2 50.3 46.3 47.4 48.8 50.3
Less:
Capital Expenditures1 (11.3) (16.0) (13.0) (9.3) (9.6) (9.8)
Working Capital Investment1 6.7 (8.3) (8.3) (6.2) (6.4) 29.2
Cash Taxes2 (16.6) (16.5) (14.8) (15.2) (15.7) (16.2)
-------- -------- -------- ------- ------- -------
Free Cash Flow $ 33.0 $ 9.5 $ 10.2 $ 16.7 $ 17.2 $ 53.4
======== ======== ======== ======= ======= =======
</TABLE>
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
Discount Rate
----------------------------------------------------------------------------
12% 15%
------------------------------- ------------------------------
Terminal Value Terminal Value
------------------------------- ------------------------------
5x 2004 5x 2004
EBITDA Perpetuity EBITDA Perpetuity
------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Present Value Of
- ----------------
2000 To 2004 Cash Flows3 $ 73.8 $ 73.8 $ 67.9 $ 67.9
Terminal Value 142.6 166.7 125.0 111.0
NPV Of NED Project4 15.0 15.0 15.0 15.0
------- ------- ------- -------
Total $ 231.4 $ 255.5 $ 207.8 $ 193.9
======= ======= ======= =======
</TABLE>
- ----------
1 Adjusted for inflation at 3 percent per year in 2002 through 2004.
2 Calculated as 40 percent (nominal government operations tax rate) of EBIT.
3 Assumes mid-year cash flows.
16
<PAGE>
4 Source: MII; uses 15 percent discount rate.
17
<PAGE>
Valuation - Government Operations
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
o Valuation has used several of the key comparable companies.
o DCF value is in close agreement with indications below.
o Simmons has checked its valuation against a Salomon Smith Barney analyst
report dated November 13, 1998 which used an 8.0x multiple for projected
2000 EBITDA, generating a value of $381.4 million.
o Simmons has also noted the value shown in the Merrill Analysis of $245
million.
<TABLE>
<CAPTION>
Suggested Multiple Government Implied Total Market
MII Fiscal Years Range Operations Results Value
- ---------------- ------------------ ------------------ --------------------
<S> <C> <C> <C>
1999 EBITDA 5.0x - 6.0x $ 52.2 261.0 - 313.2
2000 EBITDA 4.5x - 6.0x 50.3 226.4 - 301.8
2001 EBITDA 4.5x - 5.5x 46.3 208.4 - 254.7
1999 Net Income 10.0x - 12.0x 23.81 238.0 - 285.6
2000 Net Income 9.0x - 11.0x 24.71 222.3 - 271.7
2001 Net Income 9.0x - 11.0x 22.21 199.8 - 244.2
1999 Cash Flow 6.0x - 7.0x 36.61 219.6 - 256.2
2000 Cash Flow 5.0x - 6.0x 33.81 169.0 - 202.8
2001 Cash Flow 5.0x - 6.0x 31.51 157.5 - 189.0
---------------
Implied Value $210.0 - $260.0
===============
</TABLE>
- ----------
1 Assumes 40 percent tax rate of EBIT.
18
<PAGE>
Valuation - Industrial Operations
- --------------------------------------------------------------------------------
o Simmons has used several of the key public multiples of the E&C comparable
group for purposes of determining a range of values.
o Simmons has checked against a Salomon Smith Barney analyst report dated
November 13, 1998 which used a 6.6x multiple of 2000 EBITDA (applied to
Industrial and Corporate combined).
o Simmons has also noted the value shown in the Merrill Analysis of $73
million.
<TABLE>
<CAPTION>
Suggested Industrial Implied Total
MII Fiscal Year Multiple Range Operations Results Market Value
- --------------------------------- -------------- ------------------ -----------------
<S> <C> <C> <C>
1999 EBITDA 4.0x - 5.5x $ 19.0 $ 76.0 - $104.5
2000 EBITDA 4.0x - 5.5x 16.7 66.8 - 91.9
2001 EBITDA 4.5x - 5.0x 17.1 77.0 - 85.5
1999 Net Income 10.0x - 12.0x 10.01 100.0 - 120.0
2000 Net Income 10.0x - 12.0x 8.81 88.0 - 105.6
2001 Net Income 9.0x - 11.0x 9.11 81.9 - 100.1
1999 Cash Flow 4.5x - 6.0x 15.11 68.0 - 90.6
2000 Cash Flow 4.5x - 5.5x 13.51 60.8 - 74.3
2001 Cash Flow 4.5x - 5.5x 13.71 61.7 - 75.4
----------------
Implied Value $ 75.0 - $ 95.0
================
</TABLE>
- ----------
1 Assumes 27 percent tax rate on EBIT.
19
<PAGE>
Valuation - MII At March 29, 1999
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share)
Valuation Range
---------------------
Power Generation $ 600.0 - $ 725.0
Government Operations 210.0 - 260.0
Industrial Operations 75.0 - 95.0
Corporate, SG&A And Other1 (121.8)
JRM Value (Common And Preferred)2 850.7
Plus: Excess Cash 364.9
Less:
Debt (352.9)
Antitrust Liability --
Environmental And Products Liability (86.5)3
Post-Retirement Liability (14.6)
---------------------
Total Equity Value $ 1,524.9 - $ 1,719.9
=====================
Total Shares Outstanding 60.2
---------------------
Value Per Share $ 25.33 - $ 28.57
=====================
- ----------
1 Uses 6.0x multiple of fiscal year 2000 EBITDA.
2 Uses $28.00 estimated JRM share price.
3 Post-tax (at 40 percent) balance sheet amount.
20
<PAGE>
Asbestos Liability - History
- --------------------------------------------------------------------------------
o Simmons has had limited access to MII personnel to review this issue.
o As a result of exposure to asbestos contained in boiler systems
manufactured by B&W, B&W is subject to products liability claims from
non-employees.
o The boilers were installed in power plants, military and civilian vessels,
chemical plants and other facilities from the 1940s through the early
1980s.
o Claims began in 1983. MII is not accepting any claims after 1986.
o New OSHA regulations for handling asbestos came into effect in 1986. The
asbestos remains in place. However, contractors are expected to be taking
precautions to safeguard their employees.
21
<PAGE>
Asbestos Liability - Insurance Coverage
- --------------------------------------------------------------------------------
o MII settles claims with plaintiff asbestos attorneys and has agreements
with most of its insurers to settle (providing proof of condition and
exposure are provided).
o MII believes it is substantially insured for asbestos-related claims
except for the insurance year 1979 and for insolvent insurers.
o 58 percent of insurance is through Lloyds; approximately 30 percent in
U.S. A-rated or better; approximately 12 percent is MII's liability (1979
or insolvencies).
o MII has settled over 300,000 claims at an average cost of $4,360 per
claim.
o Total value of claims settled is almost $1.4 billion.
o MII has approximately $1.6 billion remaining in insurance coverage, of
which $1.4 billion is estimated to be collectible.
22
<PAGE>
Asbestos Liability - Claims History
- --------------------------------------------------------------------------------
o The claims rate rose rapidly during the 1980s following the first in 1983.
o Since early 1989, the number of claims has remained fairly constant in the
6,000 to 8,000 per quarter range.
o An increase to over 12,000 per quarter in 1995 occurred at the same time
as an advertising campaign by plaintiffs attorneys seeking participants in
a class action lawsuit.
o The average amount per claim has increased over the last several years.
Asbestos Claims History Average Amount Per Claim ($)
----------------------------
Last Three Annual
Fiscal Years Years Average
------------ ---------- -------
Graph depicting the number 1993 $4,400
of asbestos claims in thousands 1994 $3,000
made against the Parent on a 1995 4,800
quarterly basis from first quarter 1996 5,500 6,500
1983 to fourth quarter 1998, the 1997 6,000
number of claims ranged from a low 1998 6,400
of 250 in the first quarter of 1999 6,9001 8,000/2/
1984, to a high of 12,525 in the 2000 6,900/3/
second quarter of 1994, and was
5,483 in the fourth quarter of
1998
- ----------
1 For three years ended December 31, 1998.
2 Calendar year 1998.
23
<PAGE>
2 Based on asserted claims, amount, and number of claims in backlog.
24
<PAGE>
Asbestos Liability - Estimated Amount
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
o Estimates of future liabilities are management's best estimates based on
claims history. Estimates of insurance recoveries are management's
estimates based on analysis of insurers.
o MII has not agreed to provide details of its assumptions to Simmons.
o MII estimates the future amount of claims will be approximately $708
million, and MII's pretax liability (not present value) will be $126
million.
o MII estimates the present value of its after-tax liability at $50 to $60
million.
o Merrill Lynch has estimated the present value of the after-tax liability
at $185 million.
<TABLE>
<CAPTION>
Estimated Future Claims1 Claims
--------------------------- ----------------------------
Uninsured Uninsured MII Reported
Fiscal Years Total Amount2 Total Amount Expense
- ----------------------------------- -------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
1994 $1,122.1 $ 135.1 $ 112.3 $ 11.1 $ 155.0
1995 995.9 134.5 126.2 15.0 14.5
1996 844.0 120.8 152.0 16.2 --
1997 1,082.8 178.9 188.2 18.2 72.4
1998 886.7 138.2 196.1 16.8 --
Annualized 9 Months Ended 12/31/98 708.4 126.2 237.7 47.7 --
</TABLE>
- ----------
1 As of end of period.
2 Pretax, not discounted to present value.
25
<PAGE>
Future Claims Scenarios - MII Projections
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
o MII's projection runs from calendar 1999 through 2012. Total claims are
projected to be $708 million, of which $126 million is expected to be paid
by MII.
Graph depicting the amount of future asbestos claims against the Parent
and against the Parent's insurance companies in millions of dollars according to
the Parent's projections which show a total aggregate payout of $708 million
26
<PAGE>
Future Claims Scenarios - If All Insurance Used And 1979 Capped At $140 Million
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
o MII estimates its liability at $185 million if claims warrant the use of
all of its available insurance. This assumes MII's liability for the 1979
year is $140 million, equal to the insurance amount it was carrying (but
can not use due to $500,000 per claim deductible).
Graph depicting the amount of future asbestos claims against the Parent
and against the Parent's insurance companies in millions of dollars if all the
Parent's insurance is used and the Parent's liability for the 1979 year is
capped at $140 million which shows total aggregate claims of $1.6 billion
27
<PAGE>
Future Claims Scenarios - If All Insurance Used And No 1979 Cap
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
o If MII is unable to agree with its insurers to have its 1979 liability
capped at $140 million, MII has calculated its liability, in order to draw
down all its insurance, would be $408 million.
Graph depicting the amount of future asbestos claims against the Parent
and against the Parent's insurance companies in millions of dollars if all the
Parent's insurance is used and the Parent's liability for the 1979 year is not
capped at $140 million which shows total aggregate claims of $1.8 billion
28
<PAGE>
Future Claims Scenarios - If All Insurance Used, No 1979 Cap And Claims Continue
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
o If claims continue beyond MII's insurance limits, MII would be liable for
all future claims.
Graph depicting the amount of future asbestos claims against the Parent
and against the Parent's insurance companies in millions of dollars if all the
Parent's insurance is used and the Parent's liability for the 1979 year is not
capped at $140 million and claims continued
29
<PAGE>
Asbestos Liability - Questions
- --------------------------------------------------------------------------------
o What could be the future claims rate?
- If illness takes approximately 10 years to develop, claims may
decline 10 years after the 1986 OSHA regulations became effective.
- However, by the end of 1998 it was not clear a decline had yet
occurred.
- MII has publicly announced its expectation that there will be a
significant decline in claims received in calendar 1999.
- Illustrative model suggests MII is projecting a 33 percent annual
decline in claims going forward.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Actual
Calendar Estimated Calendar Years
-------- -------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
-------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Claims Received (`000) 24.4 16.3 10.9 7.3 4.8 3.2 2.2 1.4 1.0 0.6 0.4
Claims Paid (`000) 21.9 20.0 15.0 11.3 8.4 6.3 2.6 1.0 0.6 0.4
Average Amount Per Claim Paid1 ($'000) 8.0 6.92 6.92 7.6 8.4 9.2 10.1 11.2 12.3 13.5 14.8
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Claims Paid ($'MM) $151.7 $138.5 $114.2 $ 94.3 $ 77.8 $ 64.2 $ 28.7 $ 11.8 $ 8.6 $ 6.3
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Cumulative $151.7 $290.1 $404.4 $498.6 $576.4 $640.6 $669.3 $681.0 $689.7 $696.0
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
- -------------------------------------------------------------
Total Payout Through 2012 ($'MM) $708.4
Annual Growth/(Decline) Rate In Claims Received 33.3%
- -------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
o How long could claims continue?
- As above, 10 years from the date of the OSHA regulations could mark
the beginning of the end.
- MII's projection model runs through 2012.
- However, a young contractor who came into contact with asbestos in
1985 could potentially make a claim anytime before approximately
2050 (based on life expectancy).
- ----------
1 MII is projecting annual growth in claim amounts of 10 percent.
2 From asserted claims at December 31, 1998 and number of claims in backlog.
30
<PAGE>
Asbestos Liability - Questions (Continued)
- --------------------------------------------------------------------------------
o What is the expected future amount per claim?
- MII is forecasting a growth rate in amount per claim of 10 percent
per year.
- Average claim amounts vary from year to year, and could decline by
14 percent in fiscal year 2000. The average growth rate from fiscal
1993 through 1999 was 10.5 percent per year, and from fiscal 1995
through 1999 was 7 percent per year.
o What could be the effect of a declining pool of plaintiff's?
- Asbestos litigation is an industry. There are 96 active and 50 to 60
periodically active law firms.
- Almost all the active law firms make the vast majority of their
revenues from asbestos claims.
- The number of active firms has increased by almost 40 percent (27
firms) in the last three years.
o What is the risk of law suits from foreign nationals?
- The asbestos law firms do not appear to have tapped the
international markets.
o Is the existing liability reserve adequate?
- B&W has $273 million in claims asserted at December 31, 1998.
- At the current run rate of 6,000 claims per quarter and $6,900 per
claim, asserted claims could exceed the estimate of total future
claims of $708.4 million in 2.6 years.
Current Annual Claims Rate ('000) $ 24.0
Average Amount Per Claim ($'000) 6.9
-------
Annual Claim Run Rate ($'MM) $165.6
=======
Estimated Future Claims ($'MM) $708.4
Less Asserted Claims (273.0)
-------
Unasserted Claims $ 435.4
=======
Years Until All Estimated Claims Are Asserted 2.6
=======
31
<PAGE>
Asbestos Liability - Questions (Continued)
- --------------------------------------------------------------------------------
o Is existing insurance coverage adequate?
- - At the current rate of claims with no increase in amount per claim,
asserted claims could exceed total insurance coverage of $1.6 billion in
under eight years.
--------------------------------------------------------------------
Annual Claim Run Rate ($'MM) $ 165.6
Available Insurance
Recoverable 1,400.3
MII Liability 184.8
---------
Total 1,585.1
Less Asserted Claims (273.0)
---------
Available Insurance For Unasserted Claims $ 1,312.1
=========
Years Until Claim Amounts Exceed All Available Insurance 7.9
=========
--------------------------------------------------------------------
o What is B&W's liability with respect to exposure post-1986?
- B&W has paid 12 claims for exposure after 1986, in error.
- B&W refuses all claims after 1986.
o What is B&W's exposure if all insurance is exhausted?
- Generally B&W is subject of claim. Of over 300,000 claims, only 100
to 200 have been against other MII companies.
- MII believes the liability resides with B&W and can not pass to
other MII entities.
32
<PAGE>
Apollo And Parks Township Litigation
- --------------------------------------------------------------------------------
o B&W has been sued by approximately 180 plaintiffs for injuries sustained
as a result of exposure to nuclear emissions from two B&W-owned facilities
in Pennsylvania which manufactured nuclear fuels.
o B&W purchased the facilities from ARCO in 1971. ARCO indemnified B&W for
any liabilities arising from operation prior to the sale to B&W. B&W held
liability insurance related to the facilities in the amount of
approximately $20 million per site at the start of the policy, increasing
to approximately $160 million by the end (early 1980s).
o Although emissions never exceeded the Price-Anderson standards, B&W
cleaned up the sites, reducing nuclear emissions within a short period
following purchase. The facilities were shut down in the early 1980s.
o In August and September 1998 the first trial occurred involving eight
plaintiffs (all chosen by the plaintiff's attorneys) in Pittsburgh. The
jury awarded $36.7 million in compensatory damages against ARCO, B&W and
others.
33
<PAGE>
Apollo And Parks Township Litigation (Continued)
- --------------------------------------------------------------------------------
o Prior to the punitive phase, B&W settled punitive damages for all 180
plaintiffs for a total of $8 million. B&W also negotiated a settlement on
all compensatory damages within its insurance limit.
o B&W's insurer refused to settle. B&W has sued the insurer to force it to
settle. The insurer intends to litigate all cases.
o The insurer has claimed: (i) that nuclear emissions declined rapidly after
B&W purchased the facilities therefore any damages are related to the
early periods of the policy during which insurance coverages were low; and
(ii) that those coverage amounts have already been spent in litigation.
o MII has publicly announced it believes all claims will be resolved within
its insurance limits. MII has paid $8 million (discussed above) and has
not accrued any other amounts for this case.
o Litigation question:
- What, if any, is MII's possible exposure?
34
<PAGE>
Analysis Of Asset Values Tax Issue
- --------------------------------------------------------------------------------
o The IRS is disputing the values at which vessels were transferred from MII
to JRM in 1995 at the time of the OPI merger.
o The IRS will propose insurance values should have been used rather than
appraised values.
o If the IRS prevails
- MII would be taxed on the additional $280.5 million in value
attributable to the transferred assets.
- JRM would benefit from over $89 million in increased tax basis of
assets in its Delaware entity.
- JRM does not benefit from the full $280.5 million in disputed basis
since some of the assets were transferred to JRM's Panamanian
entity.
o If the full amount of tax is payable, MII would pay tax of $1.63 per share
and JRM would get a reduction of cash taxes of $0.87 per share.
Tax (Payable)/Benefit
--------------------------------------
Total Amount1 Per Share Amount
------------- ----------------
(Millions)
MII $ (98.2) $ (1.63)
JRM 34.22 0.87
- ----------
1 Assumes 35 percent tax rate.
2 Undiscounted value. Reflects assets transferred to Delaware entity only.
35
<PAGE>
- --------------------------------------------------------------------------------
Analysis Of Squeeze-Out Alternative
- --------------------------------------------------------------------------------
<PAGE>
Squeeze-Out Considerations
- --------------------------------------------------------------------------------
o Pursuing a squeeze-out (on the right terms) has several potential
positives and negatives for JRM's public shareholders.
Positives Negatives
- -------------------------------------------- --------------------------------
o Premium to current market price o Potential dilution of
upside if oil service
industry continues to
recover
o Improved investor profile
- Elimination of overhang o Potential uncertainty of
- Greater float/liquidity MII's contingencies
- Simpler balance sheet and company
structure o Less access to excess cash
- Increased research following
- Larger institutional following
o Improved profile in capital markets
- Critical mass
o Benefit from elimination of any duplicate
costs
Other Issues
- --------------------------------------------------
o Loss of some element of control should be considered.
o Benefit, if any, of diversification into MII's other business activities
is not a significant issue.
37
<PAGE>
JRM And MII Stock Performance
- --------------------------------------------------------------------------------
[Graphic comparing the Company's daily stock price close as a dollar amount
and indexed to (equal to 100 on) January 1, 1996 with that of the Parent from
January 1, 1996 to March 3, 1999; the Company's stock price and Parent's stock
price on January 1, 1995, 1996, 1997 and 1998 and March 3, 1999 were $18.38 and
$21.50, $21.88 and $16.62, $41.94 and $35.75, $24.00 and $24.25 and $20.88 and
$19.75, respectively, the indices of the Company's stock price and the Parent's
stock price on March 3, 1999 were 113.6 and 91.9, respectively]
Source: Bloomberg Financial Services.
Through March 9, 1999.
38
<PAGE>
Historical Ratio Of Share Prices
- --------------------------------------------------------------------------------
JRM Share
Price/MII
Share Price
-----------
Graphic depicting Proposed Transaction 1.150x
the ratio of the share At March 29, 1999 1.174x
price of the Company to At March 9, 19991 1.060x
that of the Parent on a 20-Day Trading Average 1.068x
daily basis from January 3-Month Average 1.047x
1, 1996 to March 9, 1999 6-Month Average 1.081x
and showing the exchange 12-Month Average 1.102x
ratio proposed in the 12-Month High 1.393x
Initial Offer (1.150x) 12-Month Low 0.914x
by Parent and various
different exchange
ratios (up to 1.300x)
- ------------------------------
1 Close on day prior to announcement.
39
<PAGE>
Closing Market Share Price Ratio Since Announcement On March 10, 1999
- --------------------------------------------------------------------------------
(Amounts in dollars)
Share Prices
------------------------ Share Price
Date JRM MII Ratio
- ------------------- ------ ------ -----------
3/10/99 $28.13 $24.31 1.157x
3/11/99 29.88 25.63 1.166x
3/12/99 30.69 26.44 1.161x
3/15/99 28.88 24.81 1.164x
3/16/99 29.44 25.06 1.175x
3/17/99 30.50 26.13 1.167x
3/18/99 30.94 26.50 1.167x
3/19/99 30.25 25.50 1.186x
3/22/99 30.06 25.88 1.162x
3/23/99 29.25 25.00 1.170x
3/24/99 29.50 25.31 1.165x
3/25/99 29.56 25.38 1.165x
3/26/99 30.44 25.81 1.179x
3/29/99 31.19 26.56 1.174x
-------------------------------------
Average 1.168x
-------------------------------------
40
<PAGE>
Wall Street's Views On Proposed Transaction
- --------------------------------------------------------------------------------
Rating/
Stock
Analyst/Date Price Selected Comments
- -------------- ------- ---------------------------------------------
DLJ Buy "Expect modest sweetening of offer to lead to
3/16/99 $28.13 win-win resolution."
"Dilutive for MDR at first sight, but
unlikely to be so in actuality... Based on
our current estimates for FY 2000 for JRM and
MDR, we estimate that this transaction will
be 11 percent dilutive on EPS and 14 percent
on cash flow. However, we would be amazed if
the over $1 billion in cash at MDR after this
transaction only earns 5 percent interest, as
our current estimates assume."
TheStreet.com N/A "One J. Ray investor told me that's simply
3/10/99 too cheap for a cash-rich company that owns
60 percent of the world's heavy lifting
barge capacity. These are barges that sell
for $150 million to $300 million a piece."
"'I'm as surprised as anybody that it's an
all-stock offer,' says Donaldson Lufkin &
Jenrette analyst Arvind Sanger. I don't
think this is done yet. I think it's the
opening bid.'"
"Some people on Wall Street smell a good
thing, but McDermott's stock isn't racing.
At last check, it was up 1 1/14 at 24 1/4.
Reality: McDermott has a horrible history,
and it's simply too convoluted a story for
most of Wall Street to understand. For now."
41
<PAGE>
Potential Transaction Multiples Compared To Comparables
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Exchange Ratios Representative
------------------------------------------- Industry
1.150x 1.200x 1.250x 1.300x Multiples
------- ------ ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Fiscal 1999
- -----------
EBITDA 5.2x 5.5x 5.8x 6.1x 6.0x - 7.0x
Net Income 7.8x 8.4x 9.0x 9.6x 10.0x - 14.0x
Cash Flow 4.7x 5.1x 5.5x 5.8x 6.5x - 7.5x
Fiscal 2000
- -----------
EBITDA 8.4x 8.9x 9.4x 9.9x 6.0x - 7.0x
Net Income 31.0x 33.4x 35.8x 38.2x 12.0x - 16.0x
Cash Flow 8.7x 9.4x 10.1x 10.7x 7.0x - 8.5x
Fiscal 2001
- -----------
EBITDA 7.7x 8.2x 8.6x 9.1x 5.5x - 6.5x
Net Income 18.5x 19.9x 21.4x 22.8x 10.0x - 14.0x
Cash Flow 8.0x 8.6x 9.2x 9.8x 6.5x - 7.5x
</TABLE>
- ------------------------------
1 Excluding excess cash.
42
<PAGE>
<TABLE>
<CAPTION>
Analysis Of Potential Stock Plus Cash Offers
- --------------------------------------------------------------------------------------------------
(Dollar amounts in millions)
Exchange Ratios Representative
--------------------------------------------------------- Industry
1.150x 1.175x 1.200x 1.250x 1.300x Multiples
--------- --------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Value
- ---------------
Stock Value $ 30.55 $ 30.55 $ 30.55 $ 30.55 $ 30.55
Added Cash -- 0.66 1.33 2.66 3.98
--------- --------- --------- --------- ---------
Total $ 30.55 $ 31.21 $ 31.88 $ 33.20 $ 34.53
========= ========= ========= ========= =========
Combined Residual Pro Forma Cash $1,049.0 $1,039.3 $1,029.6 $1,010.2 $ 990.8
Multiples Analysis1
- ---------------------
FY 2000 EBITDA 8.4x 8.6x 8.9x 9.4x 9.9x 6.0x - 7.0x
FY 2001 EBITDA 7.7x 7.9x 8.2x 8.6x 9.1x 5.5x - 6.5x
FY 2000 Net Income 31.0x 32.2x 33.4x 35.8x 38.2x 12.0x - 16.0x
FY 2001 Net Income 18.5x 19.2x 19.9x 21.4x 22.8x 10.0x - 14.0x
</TABLE>
- ------------------------------
1 Excluding excess cash.
43
<PAGE>
Analysis Of Transaction Premiums
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
o Simmons has calculated value premiums at various exchange ratios using
both the MII stock price at March 9, 19991 (one day prior to announcement)
and the MII stock price at March 29, 19992 (latest close), relative to
various historical JRM stock prices.
<TABLE>
<CAPTION>
Exchange Ratios
-------------------------------------------
Historical Proposal
JRM Price 1.150x 1.200x 1.250x 1.300x
--------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Value Premium At March 9, 1999 Relative
- ---------------------------------------
To Periods Ending March 9, 1999:
--------------------------------
One Day Prior $24.38 8.5% 13.2% 17.9% 22.6%
20 Day Trading Average 23.55 12.3 17.2 22.1 27.0
Three Month Average 24.26 9.0 13.8 18.5 23.2
Value Premium At March 29, 1999 Relative
- ----------------------------------------
To Periods Ending March 9, 1999:
--------------------------------
One Day Prior $24.38 25.3% 30.7% 36.2% 41.6%
20 Day Trading Average 23.55 29.7 35.4 41.0 46.6
Three Month Average 24.26 25.9 31.4 36.9 42.3
</TABLE>
- ------------------------------
1 $23.00 per share.
2 $26.56 per share.
44
<PAGE>
Analysis Of Transaction Premiums - Adjusted For Industry Recovery
- --------------------------------------------------------------------------------
o Simmons has calculated value premiums (at various exchange ratios)
relative to historical JRM stock prices after adjustment for the recent
oil service recovery. Simmons has also calculated effective premiums (to
adjusted stock prices) if no premium is attached to excess cash.
<TABLE>
<CAPTION>
Historical JRM Share Price Exchange Ratios
-------------------------- -------------------------------------------
Adjusted For
Industry Proposal
Actual Recovery 1.150x 1.200x 1.250x 1.300x
------ -------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Value Premium At March 29, 1999
- -------------------------------
Relative To Periods Ending March
--------------------------------
9, 1999:
-------
One Day Prior $24.38 $28.34 7.8% 12.5% 17.2% 21.8%
20 Day Trading Average 23.55 27.80 9.9 14.7 19.4 24.2
Three Month Average 24.26 28.30 8.0 12.6 17.3 22.0
Value Premium At March 29, 1999 (If
- -----------------------------------
No Premium On Excess Cash)
--------------------------
Relative To Periods Ending March
--------------------------------
9, 1999
-------
One Day Prior $24.38 $28.34 14.8% 23.8% 32.7% 41.6%
20 Day Trading Average 23.55 27.80 19.2 28.4 37.7 46.9
Three Month Average 24.26 28.30 15.2 24.1 33.0 42.0
</TABLE>
45
<PAGE>
Relative Valuation Analysis
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Results Unadjusted Contribution (Percent)1
---------------------------------- ------------------------------------ Implied
Fiscal Years Beneficial2 JRM Beneficial2 MII Beneficial2 JRM Beneficial2 MII Exchange Ratio1
------------ --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenues
- --------
1997 $ 475.2 $2,675.7 15.1% 84.9% 0.865x
1998 669.5 3,033.5 18.1 81.9 1.010x
1999(E) 407.1 2,700.2 13.1 86.9 0.773x
2000(P) 264.4 2,638.9 9.1 90.9 0.598x
2001(P) 386.7 2,992.1 11.4 88.6 0.669x
EBITDA
- ------
1997 $ 33.2 $ 53.1 38.5% 61.5% 2.283x
1998 70.9 273.1 20.6 79.4 1.140x
1999(E) 50.8 258.8 16.4 83.6 0.928x
2000(P) 31.4 233.9 11.8 88.2 0.716x
2001(P) 34.1 280.1 10.9 89.1 0.673x
EBIT
- ----
1997 $ (0.4) $ (64.9) NMF NMF NMF
1998 37.0 164.6 18.4% 81.6% 1.024x
1999(E) 33.2 178.5 15.7 84.3 0.892x
2000(P) 14.0 158.9 8.1 91.9 0.555x
2001(P) 19.1 209.7 8.3 91.7 0.566x
Net Income3
- -----------
1997 $ (13.7) $ (129.1) NMF NMF NMF
1998 13.6 33.5 28.8% 71.2% 1.340x
1999(E) 27.1 104.1 20.7 79.3 1.031x
2000(P) 6.8 65.6 9.4 90.6 0.658x
2001(P) 11.4 100.9 10.2 89.8 0.682x
Cash Flow3
- ----------
1997 $ 19.9 $ (11.1) NMF NMF NMF
1998 47.4 141.9 25.0% 75.0% 1.192x
1999(E) 44.8 184.4 19.5 80.5 0.991x
2000(P) 24.3 140.6 14.7 85.3 0.827x
2001(P) 26.5 171.3 13.4 86.6 0.784x
----------------------------------
Mean4 0.870x
Median 0.846x
----------------------------------
----------------------------------
Proposed Transaction 1.150x
----------------------------------
</TABLE>
- ----------
1 In computing the implied exchange ratios, the relative contributions have
been adjusted to include the effects of excess cash, debt, preferred stock
and certain other liabilities.
2 Reflects revenues, costs, etc. of JRM in proportion to the ownership
interest of the public shareholders. MII results include results of JRM in
proportion to MII ownership of JRM.
3 Adjusted to exclude income from interest on excess cash.
46
<PAGE>
4 Excluding high and low values.
47
<PAGE>
Comparable Minority Squeeze Out Premium Analysis
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share)
o Squeeze outs in which stock is issued to the sellers typically occur at
lower premiums than cash transactions since the sellers often retain some
upside potential. In addition, the stock transactions typically involve
the sellers receiving a stock which reflects much of the intrinsic value
of the stock they are selling. This also tends to lower the premium paid.
<TABLE>
<CAPTION>
Premium: Closing
Valuation Relative
To Historical Share Prices
------------------------------
Date Transaction Percent One-Day One-Week Four Weeks
Acquiror Subsidiary Announced Value Acquired Prior Prior Prior
- ------------------------------- -------------------------- --------- ----------- -------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash Transactions1
- ------------------
WMX Technologies Chemical Waste Management 7/28/94 $ 397.4 21.4% 10.6% 8.9% 1.1%
GTE Corp. Contel Cellular, Inc. 9/08/94 254.3 10.0 43.7 37.8 36.0
Pacificorp Pacific Telecom 11/02/94 159.0 13.4 23.7 23.7 23.7
Fleet Financial Group Fleet Mortgage Group 12/28/94 188.1 19.0 19.4 18.5 18.5
Club Mediterrenee SA Club Med Inc. 4/05/94 153.4 33.0 41.4 39.9 44.6
COBE Laboratories SA (Gambro AB) REN Corp-USA 7/14/95 182.1 47.0 27.0 20.3 26.0
Novartis AG SyStemix Inc. 5/27/96 107.6 26.8 25.6 23.1 25.3
Zurich Versicherungs GmbH Zurich Reinsurance Centre 1/13/97 319.0 34.0 17.1 18.5 11.6
Mafco Holdings Inc. Mafco Consolidated Group 1/21/97 116.8 15.0 23.5 23.5 27.6
Monsanto, Inc. Calgene Inc. 1/28/97 242.6 43.7 62.0 60.0 60.0
Anthem, Inc. Acordia, Inc. 6/02/97 193.2 33.2 12.7 11.5 26.0
Investor Group BET Holdings, Inc. 3/17/98 462.3 N/A 53.7 58.5 58.2
Dow AgroSciences (Dow Chemical) Mycogen Corp. 4/30/98 355.2 N/A 41.8 40.0 52.4
Usinor SA J&L Specialty Steel, Inc. 9/23/98 115.0 46.5 100.0 112.5 37.8
- ------------------------------------------------------------------------------------------------------------------------------------
Mean2 $ 223.0 28.6% 32.6% 31.3% 32.3%
Median 190.7 29.9 26.3 23.6 26.8
- ------------------------------------------------------------------------------------------------------------------------------------
Stock Transactions3
- -------------------
National Intergroup, Inc. FoxMeyer Corp 3/01/94 $ 79.7 19.5% 7.1% 9.1% 11.2%
Ogden Corp. Ogden Projects, Inc. 6/06/94 110.3 15.8 5.8 17.6 20.5
Conseco, Inc. Bankers Life Holding 8/26/96 120.8 11.5 14.9 10.5 11.7
Apartment Investment
And Management Company NHP, Inc. 2/20/97 114.5 44.9 28.3 25.2 16.9
World Access, Inc. NACT Telecommunications 1/20/98 53.1 32.0 12.0 12.5 16.7
ISP Holdings, Inc. International Specialty Products 3/30/98 324.5 16.2 4.3 1.7 14.5
- ------------------------------------------------------------------------------------------------------------------------------------
Mean2 $ 106.3 20.9% 9.9% 12.4% 15.6%
Median 112.4 17.9 9.5 11.5 15.6
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Securities Data Corporation.
- ----------
1 Cash transactions in the $100 million to $1 billion range since January 1,
1994.
48
<PAGE>
2 Excluding high and low.
3 Common stock issued to sellers. Transactions over $50 million since
January 1, 1994.
49
<PAGE>
Minority Squeeze Out Premium Analysis - Comparable Stock Transactions1
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Date Transaction Percent
Acquiror Subsidiary Announced Value Acquired
- ------------------------------------------- ------------------------ --------- ----- --------
<S> <C> <C> <C> <C>
National Intergroup, Inc. FoxMeyer Corp 3/01/94 $ 79.7 19.5%
Ogden Corp. Ogden Projects, Inc. 6/06/94 110.3 15.8
Conseco, Inc. Bankers Life Holding 8/26/96 120.8 11.5
Apartment Investment And Management Company NHP, Inc. 2/20/97 114.5 44.9
World Access, Inc. NACT Telecommunications 1/20/98 53.1 32.0
International Specialty
ISP Holdings, Inc. Products 3/30/98 324.5 16.2
- -----------------------------------------------------------------------------------------------------------------
Mean2 $ 106.3 20.4%
Median 112.4 17.9
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
1.150x Current Premium $ 446.2 37.2%
Adjusted For Oil Service Recovery
Adjusted For Oil Service Recovery And No Premium On Excess Cash
1.200x Current Premium $ 465.6 37.2%
Adjusted For Oil Service Recovery
Adjusted For Oil Service Recovery And No Premium On Excess Cash
1.250x Current Premium $ 485.0 37.2%
Adjusted For Oil Service Recovery
Adjusted For Oil Service Recovery And No Premium On Excess Cash
1.300x Current Premium $ 504.4 37.2%
Adjusted For Oil Service Recovery
Adjusted For Oil Service Recovery And No Premium On Excess Cash
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
Premium: Closing Valuation Premium: Closing Exchange
Relative Ratio Relative To Historical
To Historical Share Prices Share Price Ratios
--------------------------- ----------------------------
Four Four
One-Day One-Week Weeks One-Day One-Week Weeks
Acquiror Subsidiary Prior Prior Prior Prior Prior Prior
- ------------------------------------------- ------------------------ ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
National Intergroup, Inc. FoxMeyer Corp 7.1% 9.1% 11.2% 1.7% 3.6% 4.7%
Ogden Corp. Ogden Projects, Inc. 5.8 17.6 20.5 5.8 15.6 13.6
Conseco, Inc. Bankers Life Holding 14.9 10.5 11.7 (22.5) (26.5) (30.4)
Apartment Investment And Management Company NHP, Inc. 28.3 25.2 16.9 28.3 27.0 21.2
World Access, Inc. NACT Telecommunications 12.0 12.5 16.7 23.1 29.7 3.0
International Specialty
ISP Holdings, Inc. Products 4.3 1.7 14.5 N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Mean2 9.9% 12.4% 15.6% 10.2% 15.4% 7.1%
Median 9.5 11.5 15.6 5.8 15.6 4.7
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
1.150x Current Premium 25.3% 45.0% 24.4% 8.5% 9.9% 7.7%
Adjusted For Oil Service Recovery 7.8 22.3 6.4
Adjusted For Oil Service Recovery And No Premium On Excess Cash 14.9 48.4 12.1
1.200x Current Premium 30.7% 51.4% 29.8% 13.2% 14.7% 12.4%
Adjusted For Oil Service Recovery 12.5 27.7 11.1
Adjusted For Oil Service Recovery And No Premium On Excess Cash 23.8 60.0 20.8
1.250x Current Premium 36.2% 57.7% 35.2% 17.9% 19.4% 17.0%
Adjusted For Oil Service Recovery 17.2 33.0 15.7
Adjusted For Oil Service Recovery And No Premium On Excess Cash 32.7 71.5 29.5
1.300x Current Premium 41.6% 64.0% 40.6% 22.7% 24.2% 21.7%
Adjusted For Oil Service Recovery 21.8 38.3 20.3
Adjusted For Oil Service Recovery And No Premium On Excess Cash 41.6 83.1 38.2
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Securities Data Corporation
- ----------
1 Common stock issued to sellers. Transactions over $50 million since
January 1, 1994.
2 Excluding high and low.
50
<PAGE>
Effective Premium Analysis - Pre-Transaction Share Analysis
- -------------------------------------------------------------------------------
(Dollar amounts in millions, except per share)
o If JRM's shareholders exchange JRM shares for shares of MII, they give up
stock representing excess cash plus value of JRM's business, less debt and
certain other liabilities. In return, they receive MII stock which
includes some amount of excess cash and value of JRM business, as well as
value of MII businesses, less debt and certain liabilities.
o Simmons has considered this in analyzing premiums in a potential
transaction. Simmons has examined two alternative methods of calculating
effective premiums.
o The analysis looks at pre-announcement share values.
<TABLE>
<CAPTION>
JRM MII
----------------------- -----------------------
Total Per Share Total Per Share
----- --------- ----- ---------
<S> <C> <C> <C> <C>
Excess Cash $ 528.7 $ 13.46 $ 893.6 $ 14.85
Value Of MII Non-JRM Business1 -- -- 711.7 11.83
Value Of JRM Business1 590.7 15.04 590.7 9.82
--------- -------- -------- --------
Total 1,119.5 28.50 2,196.0 36.50
Less:
Debt (2.1) (0.05) (355.0) (5.90)
Antitrust Liability -- -- -- --
Products Liability -- -- (86.5) (1.44)
Post-Retirement Benefit -- -- (14.6) (0.24)
Minority Interest -- -- (356.0) (5.92)
Preferred Stock (160.0) (4.07) -- --
--------- -------- -------- --------
Equity Value $ 957.3 $ 24.38 $1,384.0 $ 23.00
========= ======== ======== ========
</TABLE>
51
<PAGE>
- ----------
1 Determined from public share values.
52
<PAGE>
Effective Premium Analysis - Transaction Premiums (Alternative #1)
- --------------------------------------------------------------------------------
o Simmons has calculated various effective premiums represented by what
JRM's shareholders may receive in value of MII non-JRM business to their
proportionate loss in net excess cash and value of JRM's business.
o The proposed exchange ratio would generate an effective premium of 23.0
percent.
<TABLE>
<CAPTION>
JRM
Shareholders
Pre-Transaction JRM Shareholders Post-Transaction
--------------- ---------------------------------------------------
Proposal
Exchange Ratio 1.060x 1.150x 1.200x 1.250x 1.300x
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Nominal Premium To JRM 0.0% 8.5% 13.2% 18.0% 22.7%
Shareholders
Net Excess Cash1 $ 9.33 $ 6.13 $ 6.54 $ 6.76 $ 6.97 $ 7.19
Value Of JRM Business 15.04 8.28 8.83 9.12 9.41 9.70
Value Of MII Non-JRM Business -- 9.97 11.09 11.72 12.36 13.01
------- ------- ------- ------- ------- -------
Net Share Value $ 24.38 $ 24.38 $ 26.45 $ 27.60 $28.75 $29.90
======= ======= ======= ======= ======= =======
JRM Shareholders' Losses
Net Excess Cash $ (3.20) $ (2.80) $ (2.58) $ (2.36) $ (2.15)
Value Of JRM Business (6.77) (6.21) (5.92) (5.63) (5.34)
------- ------- ------- ------- -------
Total Losses (9.97) (9.01) (8.49) (7.99) (7.49)
JRM Shareholders' Gains
Value Of MII Non-JRM Business 9.97 11.09 11.72 12.36 13.01
------- ------- ------- ------- -------
Net Gain $ -- $ 2.08 $ 3.23 $ 4.38 $ 5.53
======= ======= ======= ======= =======
Effective Premium 0.0% 23.0% 38.0% 54.8% 73.8%
======= ======= ======= ======= =======
</TABLE>
- ----------
1 Excess cash (cash in excess of 5 percent of revenues), less debt,
preferred stock, and products, post-retirement benefit and antitrust suit
liabilities.
53
<PAGE>
Effective Premium Analysis - Transaction Premiums (Alternative #2)
- --------------------------------------------------------------------------------
o This alternative method of analyzing effective premiums looks at JRM's
shareholders' gains relative to their proportionate loss of JRM excess
cash and JRM business value, net of JRM liabilities.
o The proposed exchange ratio would generate an effective premium of 27.0
percent.
<TABLE>
<CAPTION>
JRM Shareholders Post-Transaction
-----------------------------------------------------------
Proposal
Exchange Ratio 1.060x 1.150x 1.200x 1.250x 1.300x
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Nominal Premium To JRM Shareholders 0.0% 8.5% 13.2% 18.0% 22.7%
JRM Shareholders' Losses
JRM Excess Cash $ (6.06) $ (5.56) $ (5.30) $ (5.04) (4.78)
Value Of JRM Business (6.77) (6.21) (5.92) (5.63) (5.34)
Less: JRM Liabilities1 4.09 4.09 4.09 4.09 4.09
------- ------- ------- ------- -------
Total Losses (8.72) (7.68) (7.12) (6.57) (6.03)
JRM Shareholders' Gains
MII Excess Cash 5.11 5.45 5.64 5.82 5.99
Value Of MII Non-JRM Business 9.97 11.09 11.72 12.36 13.01
Less: MII Liabilities2 (6.36) (6.78) (7.02) (7.24) (7.45)
------- ------- ------- ------- -------
Total Gains 8.72 9.76 10.34 10.94 11.55
------- ------- ------- ------- -------
Net Gain $ -- $ 2.08 $ 3.23 $ 4.38 $ 5.53
======= ======= ======= ======= =======
Effective Premium 0.0% 27.0% 45.3% 66.6% 91.7%
======= ======= ======= ======= =======
</TABLE>
- ----------
1 JRM debt, antitrust liability and preferred stock.
2 MII debt and antitrust, products and post-retirement liabilities.
54
<PAGE>
Effective Premium Analysis
- --------------------------------------------------------------------------------
o The effective premium analysis has been repeated using the $26.56 MII
closing price on March 29, 1999 and the estimated JRM share price
(adjusted for the recent industry recovery) of $28.00.
o The results of the March 9, 1999 analysis is very close to the updated
analysis.
<TABLE>
<CAPTION>
JRM Shareholders Post-Transaction
-----------------------------------------------------------
Proposal
Exchange Ratio 1.060x 1.150x 1.200x 1.250x 1.300x
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Nominal Premium To JRM Shareholders 0.0% 8.5% 13.2% 18.0% 22.7%
Effective Premiums Using Alternative #1
- ---------------------------------------
Share Prices As Of 3/9/99 0.0% 23.0% 38.0% 54.8% 73.8%
MII Price As Of 3/29/99, JRM Price Of 0.0 24.2 39.1 55.7 74.4
$28.001
Effective Premiums Using Alternative #2
- ---------------------------------------
Share Prices As Of 3/9/99 0.0% 27.0% 45.3% 66.6% 91.7%
MII Price As Of 3/29/99, JRM Price Of 0.0 27.7 45.3 65.7 89.3
$28.001
</TABLE>
- ----------
1 JRM historical share price adjusted for industry recovery.
55
<PAGE>
Public Company Acquisition Premiums
- --------------------------------------------------------------------------------
o Simmons has compared effective premiums at various exchange ratios to
premiums in acquisitions of public companies.
o In acquisitions of public companies, transactions in which sellers retain
some future upside through receiving stock tend to generate lower
premiums.
Analysis Of Average Acquisition Premiums1
<TABLE>
<CAPTION>
Cash Cash/Stock Stock
----------------------- ---------------------- -----------------------
Number Of Number Of Number Of
Transactions Premium Transactions Premium Transactions Premium
------------ ------- ------------ ------- ------------ -------
1994 47 46.3% 100 39.4% 62 33.0%
1995 66 41.7 130 35.5 77 32.3
1996 74 33.7 147 31.6 93 30.5
1997 123 32.1 252 30.2 155 27.8
1998 117 31.1 224 30.1 126 28.1
1999 YTD2 30 27.5 51 29.4 27 34.0
- -------------------------------------------------------------------------------------------
Weighted Average 34.7% 32.2% 29.9%
- -------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------
Exchange Ratio
----------------------------------------------
Proposal
Effective Transaction 1.150x 1.200x 1.250x 1.300x
------ ------ ------ ------
<S> <C> <C> <C> <C>
Premiums3
- ---------
Using Alternative #1 23.0% 38.0% 54.8% 73.8%
Using Alternative #2 27.0 45.3 66.6 74.4
- -------------------------------------------------------------------------------------------
</TABLE>
- ----------
1 Calculated using closing value relative to seller's value one-day prior to
announcement.
2 Through March 9, 1999. Transactions in the range of $100 million to $1
billion in size.
56
<PAGE>
3 Uses share prices as of March 9, 1999.
57
<PAGE>
Premiums In Recent Public Oil Service M&A Transactions
- --------------------------------------------------------------------------------
o Simmons has compared effective premiums at various exchange ratios to
premiums in recent acquisitions of public oil service companies.
<TABLE>
<CAPTION>
Offer Premium1
Relative To Share
Price One-Day Prior
Date Announced Target Name Acquiror Name Stock/Cash To Announcement
- -------------- ----------- ------------- ---------- ---------------
<S> <C> <C> <C> <C>
01/19/98 GeoScience Corp (Tech-Sym Corp.)2 Core Laboratories NV S/C 30.2%
10/30/98 Pool Energy Services Co. Nabors Industries, Inc. S 51.3
10/29/98 Superior Energy Services2 Parker Drilling Co. S 16.5
05/10/98 Western Atlas, Inc. Baker Hughes, Inc. S 21.3
03/04/98 Weatherford Enterra, Inc. EVI, Inc. S 14.0
02/26/98 Dresser Industries, Inc. Halliburton Company S 7.6
12/16/97 Matrix Services Corporation2 ITEQ, Inc. S/C 12.4
12/15/97 Christiana Cos Inc. EVI, Inc. S/C 6.2
07/23/97 Astrotech International Corp. ITEQ, Inc. S 40.3
07/10/97 Reading & Bates Corporation Falcon Drilling Company S 16.6
05/14/97 Dreco Energy Services, Ltd. National-Oilwell, Inc. S 21.9
05/06/97 BW/IP, Inc. Durco International, Inc. S (5.5)
04/17/97 Drilex International, Inc. Baker Hughes, Inc. S 9.4
02/27/97 Production Operators Corporation Camco International, Inc. S 22.9
09/17/96 Bettis Corporation Daniel Industries, Inc. S 13.0
04/26/96 EnServ Corporation Precision Drilling Corporation S/C 6.8
12/08/95 Arethusa Diamond Offshore S 6.4
03/13/95 Wilrig Transocean S 9.1
06/13/94 Chiles Offshore Noble Drilling Corp. S 5.0
05/23/94 Wheatley TXT Corporation Dresser Industries, Inc. S 37.0
04/11/94 Fischer & Porter Co. Elsag Bailey Process C 7.2
09/07/93 Baroid Corporation Dresser Industries, Inc. S 19.3
------------------------------------------------------------------------------------------
Range3 5.0% - 40.3%
Mean3 16.2%
Median 13.5
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Exchange Ratios
-------------------------------------------------
Proposal
Effective Transaction Premiums4 1.150x 1.200x 1.250x 1.300x
-------- ------ ------ ------
Using Alternative #1 23.0% 38.0% 54.8% 73.8%
Using Alternative #2 27.0 45.3 66.6 74.4
------------------------------------------------------------------------------------------
</TABLE>
- ----------
1 Calculated using acquiror's share price one-day prior to announcement.
2 Not completed.
3 Excludes high and low values.
58
<PAGE>
4 Uses share prices as of March 9, 1999.
59
<PAGE>
Acquisition Assumptions
- --------------------------------------------------------------------------------
o Effect on MII's earnings per share in projected 2000 and 2001 of a squeeze
out was examined.
o The proposed exchange ratio of 1.150x was used.
o Goodwill of approximately $229 million from the transaction was amortized
over 15 years, consistent with the period used on the Offshore Pipelines,
Inc. merger. Stock prices from closing on March 29, 1999 were used to
determine goodwill.
o Consolidation cost savings of $5 million1 in SG&A were assumed. Source:
MII management.
- ----------
1 Pretax amount. Tax rate assumed at 38 percent.
60
<PAGE>
Projected FY 2000 Pro Forma Income Statement
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share amounts)
o The proposed transaction is dilutive to MII's EPS and CFPS in FY 2000.
<TABLE>
<CAPTION>
Consolidated
MII JRM Adjustments Combined
------------ --------- ----------- --------
<S> <C> <C> <C> <C>
Revenues $2,903.3 $ 839.8 $2,903.3
Cost Of Sales 2,337.8 659.7 2,337.8
--------- ---------- ---------
Gross Profit 565.4 180.0 565.4
Gross Profit Margin 19.5% 21.4% 19.5%
SG&A Expense 315.2 86.4 $ (5.0) 310.2
Equity Expense/(Income) (9.4) (6.1) -- (9.4)
--------- ---------- ----------- ---------
EBDIT 259.6 99.8 5.0 264.6
EBDIT Margin 8.9% 11.9% 9.1%
Depreciation 92.4 55.4 92.4
Interest Expense/(Income) (20.5) (23.3) (20.5)
Other Expense/(Income) 0.5 (3.8) 0.5
Minority Interest 11.5 -- (17.6) (6.1)
Goodwill Amortization -- -- 15.3 15.3
--------- ---------- ----------- ---------
Pretax Income 175.6 71.4 7.3 183.0
Taxes 64.0 16.8 1.9 65.9
--------- ---------- ----------- ---------
Net Income 111.6 54.7 5.4 117.0
Less: Dividends On Series A -- 7.2 --
--------- ---------- ----------- ---------
Preferred Stock
Net Income To Common $ 111.6 $ 47.5 $ 5.4 $ 117.0
========= ========== =========== =========
Net Income Margin 3.8% 5.7% 4.0%
========= ========== =========== =========
- -------------------------------------------------------------------------------------------------
Shares Outstanding1 60.2 39.3 16.8 77.0
Earnings Per Share $ 1.85 $ 1.21 $ 1.52
EPS Accretion/(Dilution) (0.33)
Cash Flow Per Share $ 3.39 $ 2.62 $ 2.92
CFPS Accretion/(Dilution) (0.47)
- -------------------------------------------------------------------------------------------------
</TABLE>
- ----------
61
<PAGE>
1 Includes options.
62
<PAGE>
Projected FY 2001 Pro Forma Income Statement
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share amounts)
o The proposed transaction is dilutive to MII's EPS and CFPS in FY 2001.
<TABLE>
<CAPTION>
Consolidated
MII JRM Adjustments Combined
------------ --------- ----------- --------
<S> <C> <C> <C> <C>
Revenues $ 3,378.7 $ 1,228.1 $ 3,378.7
Cost Of Sales 2,763.0 1,040.7 2,763.0
---------- ----------- ----------- ----------
Gross Profit 615.7 187.4 615.7
Gross Profit Margin 18.2% 15.3% 18.2%
SG&A Expense 317.5 86.2 $ (5.0) 312.5
Equity Expense/(Income) (9.9) (7.3) -- (9.9)
---------- ----------- ----------- ----------
EBDIT 308.1 108.5 5.0 313.1
EBDIT Margin 9.1% 8.8% 9.3%
Depreciation 85.4 47.8 85.4
Interest Expense/(Income) (18.0) (21.6) (18.0)
Other Expense/(Income) (0.1) (4.0) (0.1)
Minority Interest 15.0 -- (22.4) (7.3)
Goodwill Amortization -- 15.3 15.3
--
---------- ----------- ----------- ----------
Pretax Income 225.8 86.3 12.1 237.8
Taxes 81.9 18.9 1.9 83.8
---------- ----------- ----------- ----------
Net Income 143.9 67.4 10.2 154.0
Less: Dividends On Series A -- 7.2
Preferred Stock --
---------- ----------- ----------- ----------
Net Income To Common $ 143.9 $ 60.2 $ 10.2 $ 154.0
========== =========== =========== ==========
Net Income Margin 4.3% 4.9% 4.6%
========== =========== ==========
- -------------------------------------------------------------------------------------------------
Shares Outstanding1 60.2 39.3 16.8 77.0
Earnings Per Share $ 2.39 $ 1.53 $ 2.00
EPS Accretion/(Dilution) (0.39)
Cash Flow Per Share $ 3.81 $ 2.75 $ 3.31
CFPS Accretion/(Dilution) (0.50)
- -------------------------------------------------------------------------------------------------
</TABLE>
- ----------
63
<PAGE>
1 Includes options.
64
<PAGE>
Post-Transaction Effect On EPS And CFPS
- --------------------------------------------------------------------------------
(Amounts in dollars)
o The proposed transaction is accretive to JRM's shareholders in both FY
2000 and 2001.
o The proposed transaction is dilutive to MII's shareholders in both FY 2000
and 2001.
Pre-Transaction Results
-----------------------------------------------------
JRM $ 1.21 $ 2.62 $ 1.53 $ 2.75
MII 1.85 3.39 2.39 3.81
Post-Transaction Accretion/(Dilution)
-----------------------------------------------------
FY 2000 FY 2001
---------------------- ----------------------
EPS CFPS EPS CFPS
------- ------- ------- -------
JRM
- --------------------
1.150x $ 0.54 $ 0.74 $ 0.77 $ 1.06
1.200x 0.58 0.85 0.83 1.19
1.250x 0.62 0.97 0.88 1.31
1.300x 0.66 1.07 0.94 1.44
MII
- --------------------
1.150x $ (0.33) $ (0.47) $ (0.39) $ (0.50)
1.200x (0.36) (0.50) (0.42) (0.53)
1.250x (0.39) (0.52) (0.46) (0.56)
1.300x (0.42) (0.55) (0.49) (0.59)
65
<PAGE>
Post-Transaction Effect On EPS And CFPS - All Cash Transaction
- --------------------------------------------------------------------------------
(Amounts in dollars)
o A transaction in which JRM's shareholders received 100 percent cash was
analyzed at various acquisition prices.
o The all cash transaction is dilutive to MII's EPS for both FY 2000 and
2001 at each of the purchase prices analyzed. Cash flow per share is
accretive in FY 2001 if the shares could be purchased for less than $31
per share.
Pre-Transaction MII Results
-----------------------------------------------------
$ 1.85 $ 3.39 $ 2.39 $ 3.81
Post-Transaction Accretion/(Dilution)
-----------------------------------------------------
FY 2000 FY 2001
----------------------- ----------------------
Ratio Share Price EPS CFPS EPS CFPS
- ----- ----------- -------- -------- -------- -------
1.150x $ 30.55 $ (0.31) $ (0.06) $ (0.24) $ 0.02
1.200x 31.88 (0.35) (0.08) (0.28) 0.00
1.250x 33.20 (0.39) (0.10) (0.32) (0.02)
1.300x 34.53 (0.43) (0.12) (0.36) (0.04)
66
<PAGE>
- --------------------------------------------------------------------------------
Strategic Alternatives
- --------------------------------------------------------------------------------
67
<PAGE>
Strategic Alternatives
- --------------------------------------------------------------------------------
o Simmons has considered a variety of alternatives for the publicly held
shares of JRM.
Organizational chart describing the strategic alternatives the Company
could pursue instead of the Combination, as described on following pages
68
<PAGE>
- --------------------------------------------------------------------------------
Public Continues To Hold JRM Shares
- --------------------------------------------------------------------------------
69
<PAGE>
Continue To Hold Shares
- --------------------------------------------------------------------------------
o JRM's shareholders should consider the positives and negatives of
continuing to hold their JRM shares (i.e. of rejecting MII's proposal to
acquire their shares in exchange for MII stock), including:
Positives
- ---------
Potential benefit from any industry recovery is not diluted.
Avoid uncertainty of MII contingencies.
Retain access to excess cash in a volatile environment.
Potential benefit of strategic growth plan is not diluted.
Negatives
- ---------
Loss of potential premium to current market values.
Do not gain enhanced stock liquidity.
Do not benefit from enhanced investor profile (critical mass, simpler balance
sheet and company structure, elimination of overhang).
Do not benefit from enhanced profile in capital markets.
Do not benefit from potential elimination of duplicate costs.
70
<PAGE>
Continued To Hold Shares (Continued)
- --------------------------------------------------------------------------------
o Industry conditions have improved recently:
- Industry stock values, measured by the OSX, reached a low point in
late August/September 1998. Subsequently, stock values staged a
series of recoveries. However, with little change in industry
fundamentals, the OSX fell back to its August/September 1998 low
levels.
- Beginning in early March 1999, expectations of OPEC production cuts
(which were subsequently agreed upon) and the first signs of
declining production and inventory levels due to lower E&P activity,
appear to have driven an improvement in industry conditions. As a
result, stock values have recovered with the OSX increasing by over
50 percent since March 1.
- Any continued improvement however, is dependent upon a wide variety
of unpredictable factors including OPEC adherence to its
recently-agreed cuts.
o Past performance of JRM stock has been strong during up cycles in the oil
service industry:
- Peak JRM/MII share price ratio in Q3/Q4 1997: 1.325x
- Peak share price in Q3/Q4 1997: $52.25
- As late as August 1998, analysts were forecasting JRM stock prices
above $50.00 per share:
12-Month
Analyst Date Price Target
---------------------- ----------- --------------
Prudential Securities 7/27/98 $52.00
DLJ 8/12/98 53.00
o However, JRM's shareholders have no assurance that industry conditions
will continue to recover, nor that JRM's share price would perform as it
has in the past during such recovery.
71
<PAGE>
- --------------------------------------------------------------------------------
Strategic Acquisition Program
- --------------------------------------------------------------------------------
72
<PAGE>
Strategic Acquisition Program
- --------------------------------------------------------------------------------
o There are several possible acquisitions which could strategically expand
JRM's capabilities or strengthen its position in key geographic markets.
Strategic Candidates Consolidation Candidates
------------------------------ ------------------------------
Aker Martime Bay Offshore
AMEC Gulf Island Fabrication
Allseas Marine TransCoastal Marine Services
Bluewater Unifab International
Bouygues Offshore Others
Cal Dive International Dynamic Offshore
DrilQuip Grand Isle Shipyard
DSND Group Houma Industries
Friede Goldman NATCO
Global Industries Omega Service Industries
Horizon Offshore Production Management
IMC Caland SECO
Keppel FELS Twin Brothers
Kvaerner
Oceaneering
Stolt Comex Seaway
Umoe Oil & Gas
73
<PAGE>
EPS Accretion Analysis Of Potential Acquisition Candidates
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Bouygues Cal Dive Dril-Quip
- ------------------------------------------- ----------------------------------------- ------------------------------------------
Pretax Benefit Pretax Benefit Pretax Benefit
------------------------------ ------------------------------ ------------------------------
Premium $5 $10 $15 Premium $5 $10 $15 Premium $5 $10 $15
- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0% $ 0.57 $ 0.64 $ 0.71 0% $ (0.07) $ 0.04 $ 0.15 0% $ (0.21) $ (0.11) $ 0.00
10 0.47 0.54 0.60 10 (0.15) (0.04) 0.07 10 (0.30) (0.20) (0.09)
20 0.25 0.32 0.38 20 (0.32) (0.22) (0.11) 20 (0.48) (0.38) (0.28)
30 (0.09) (0.03) (0.03) 30 (0.61) (0.51) (0.40) 30 (0.77) (0.68) (0.58)
40 (0.61) (0.55) (0.50) 40 (1.05) (0.96) (0.86) 40 (1.27) (1.18) (1.09)
<CAPTION>
Global Oceaneering Stolt Comex
- ------------------------------------------- ----------------------------------------- ------------------------------------------
Pretax Benefit Pretax Benefit Pretax Benefit
------------------------------ ------------------------------ ------------------------------
Premium $5 $10 $15 Premium $5 $10 $15 Premium $5 $10 $15
- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0% $ (0.48) $ (0.39) $ (0.29) 0% $ 0.32 $ 0.43 $ 0.55 0% $ 0.99 $ 1.06 $ 1.13
10 (0.66) (0.57) (0.48) 10 0.26 0.37 0.48 10 0.90 0.97 1.05
20 (1.02) (0.93) (0.85) 20 0.11 0.22 0.33 20 0.73 0.80 0.87
30 (1.58) (1.50) (1.42) 30 (0.12) (0.02) 0.08 30 0.44 0.51 0.57
40 (2.33) (2.27) (2.20) 40 (0.49) (0.39) (0.30) 40 0.00 0.06 0.12
</TABLE>
74
<PAGE>
- --------------------------------------------------------------------------------
Private Sale - Whole Of JRM
- --------------------------------------------------------------------------------
75
<PAGE>
Private Sale Option
- --------------------------------------------------------------------------------
o Simmons was not authorized to, and did not, discuss the potential sale of
JRM with any potential acquirors.
o JRM's shareholders could be expected to achieve a premium to current
market in a sale. A transaction involving stock could also allow JRM's
shareholders to benefit from merger synergies, and to retain some future
upside in a recovery.
o Several strategic acquirors could be interested in JRM due to:
- Leading market share.
- Reputation.
- Strategic assets.
- Broad range of capabilities.
- Worldwide operations.
o Potential acquirors could achieve synergies through such a transaction.
- Broadening of product/service offering.
- Packaging/bundling of services.
- Cost consolidation benefits.
- Enhanced asset utilization.
o Simmons has reviewed a selected group of candidates.
- Companies performing E&C of offshore facilities.
- Subsea E&C companies.
- E&C companies serving the onshore energy business.
76
<PAGE>
- --------------------------------------------------------------------------------
Private Sale - Publicly Held JRM Shares
- --------------------------------------------------------------------------------
77
<PAGE>
Private Sale Of Publicly Held JRM Shares
- --------------------------------------------------------------------------------
o While a buyer could surface for the minority shares of JRM, achieving a
premium to market could prove difficult.
o Potential acquirors are likely to be concerned about:
- Continuing MII controlling interest.
- Continuing overhang from MII ownership.
- Declining projected financial performance.
o Ownership of a minority interest by a strategic acquiror would be unlikely
to facilitate synergies between JRM and the acquiror. Absent ability to
create such synergies, strategic players would be unlikely to be
interested.
o Premium to current stock price is unlikely to permit adequate return on
the purchase of the minority interest to financial acquirors.
o Private sale of the publicly held (minority interest) JRM shares at a
premium to market is not a realistic alternative.
78
<PAGE>
- --------------------------------------------------------------------------------
Repurchase Of MII's JRM Shares By JRM
- --------------------------------------------------------------------------------
79
<PAGE>
Repurchase Of MII Held Shares By JRM - Assumptions
- --------------------------------------------------------------------------------
o JRM acquires the 24.7 million JRM shares held by MII at $31.08, the price
implied by a 1.170x exchange ratio applied to MII's current stock price
(representing a premium to the 1.150x ratio used in MII's current offer).
JRM does not repurchase the preferred stock held by MII.
o Total acquisition consideration is $767 million in cash:
Price Paid For JRM Stock $31.081
Shares Held By MII 24.7
Total Consideration $766.6
o Transaction was financed as follows:
<TABLE>
<CAPTION>
Interest
Source Amount Rate
------------- -------- --------
<S> <C> <C> <C>
Excess Cash $516.6 5.5% Non-tax deductible interest.
Senior Debt 250.0 11.0 Repayable at the end of seven years. Tax deductible interest.
------
Total Sources $766.6
======
</TABLE>
o Financial Projections: Management projections for 2000 and 2001; 2002 set
equal to 2001.
o Working Capital Accounts: Management projections for 2000 and 2001; 2002
held constant with 2001.
o A marginal tax rate of 38 percent in the U.S.
- ------------------------------
1 From March 29, 1999 closing price of MII and proposed 1.170x exchange ratio.
80
<PAGE>
Projected Pro Forma Balance Sheets
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
<TABLE>
<CAPTION>
12/31/98
---------------------------------
Pre- Post-
Buyback Adjustment Buyback 3/31/00 3/31/01 3/31/02
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Assets
- ------
Cash And Cash Equivalents $ 123.3 $ (48.7) $ 74.6 $ 20.8 $ 78.7 $ 113.5
Investments In Debt Securities 470.1 (470.1) -- -- -- --
Accounts Receivable 223.4 -- 223.4 173.7 245.0 245.0
Deferred Tax Asset 13.0 -- 13.0 15.9 19.8 23.7
Prepaids And Other 62.6 -- 62.6 249.9 82.3 82.3
-------- -------- -------- -------- -------- --------
Current Assets 892.5 (518.8) 373.7 460.4 425.8 464.5
Gross PP&E 975.6 -- 975.6 1,029.0 1,059.7 1,090.3
Accumulated Depreciation (696.8) -- (696.8) (752.2) (800.0) (847.8)
-------- -------- -------- -------- -------- --------
Net PP&E 278.8 -- 278.8 276.8 259.6 242.5
Investment In Affiliates 14.6 -- 14.6 14.6 14.6 14.6
Goodwill 11.7 -- 11.7 11.7 11.7 11.7
Other Assets 36.0 -- 36.0 36.0 36.0 36.0
-------- -------- -------- -------- -------- --------
Total Assets $1,233.6 $ (518.8) $ 714.8 $ 799.5 $ 747.8 $ 769.3
======== ======== ======== ======== ======== ========
Liabilities And Stockholders' Equity
- ------------------------------------
Accounts Payable $ 122.8 $ -- $ 122.8 $ 116.3 $ 143.1 $ 143.1
Other Current Liabilities 318.3 -- 318.3 402.2 302.2 302.2
Current Debt 2.1 (2.1)1 -- -- -- --
-------- -------- -------- -------- -------- --------
Current Liabilities 443.2 (2.1) 441.1 518.6 445.3 445.3
Long-term Debt - Senior -- 250.0 250.0 250.0 250.0 250.0
Other 90.7 -- 90.7 90.7 90.7 90.7
Preferred Stock 160.0 -- 160.0 160.0 160.0 160.0
Common Equity 539.7 (766.6) (227.0) (219.8) (198.3) (176.7)
-------- -------- -------- -------- -------- --------
Total Liabilities And Equity $1,233.6 $ (518.8) $ 714.8 $ 799.5 $ 747.8 $ 769.3
======== ======== ======== ======== ======== ========
Total Debt $ 2.1 $ 250.0 $ 250.0 $ 250.0 $ 250.0
</TABLE>
81
<PAGE>
- ------------------------------
1 JRM's remaining outstanding debt of $2.1 million is assumed to be repaid
simultaneous with the repurchase of MII's interests in JRM.
82
<PAGE>
Projected Pro Forma Income Statements
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share amounts)
<TABLE>
<CAPTION>
FY 2000
--------------------------------------
Pre- Post-
Repurchase Adjustments Repurchase FY 2001 FY 2002
---------- ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues $ 839.8 $ -- $ 839.8 $1,228.1 $1,228.1
Cost Of Sales 659.7 -- 657.7 1,040.7 1,040.7
-------- -------- -------- -------- --------
Gross Profit 180.0 -- 180.0 187.4 187.4
Gross Profit Margin 21.4% 21.4% 15.3% 15.3%
SG&A 86.4 -- 86.4 86.2 86.2
Equity Expense/(Income) (6.1) -- (6.1) (7.3) (7.3)
-------- -------- -------- -------- --------
EBDIT 99.8 -- 99.8 108.5 108.5
EBDIT Margin 11.9% 11.9% 8.8% 8.8%
Depreciation 55.4 -- 55.4 47.8 47.8
Interest Expense/(Income) (23.3) 50.8 27.5 27.5 27.5
Other Expense/(Income) (3.8) -- (3.8) (4.0) (4.0)
-------- -------- -------- -------- --------
Pretax Income 71.4 (50.8) 20.6 37.2 37.2
Taxes 16.8 (10.5) (6.3) 8.5 8.5
-------- -------- -------- -------- --------
Net Income 54.7 (40.3) 14.3 28.8 28.8
\Less: Dividends On Preferred Stock 7.2 -- 7.2 7.2 7.2
-------- -------- -------- -------- --------
Net Income To Common $ 47.5 $ (33.1) $ 7.1 $ 21.6 $ 21.6
======== ======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------
Shares Outstanding 39.3 (24.7) 14.6 14.6 14.6
EPS Pre-Repurchase $ 1.21 $ 1.21 $ 1.53 $ 1.53
EPS Post-Repurchase 0.49 1.48 1.48
EPS Accretion/(Dilution) (0.72) (0.06) (0.06)
CFPS Pre-Repurchase $ 2.62 $ 2.62 $ 2.75 $ 2.75
CFPS Post-Repurchase 4.28 4.75 4.75
CFPS Accretion/(Dilution) 1.66 2.00 2.00
- -----------------------------------------------------------------------------------------------------
</TABLE>
83
<PAGE>
Projected Pro Forma Cash Flows
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
FY 2000 FY 2001 FY 2002
------- ------- -------
Net Income $ 7.1 $ 21.6 $ 21.6
Plus:
Depreciation 55.4 47.8 47.8
Change In Working Capital (60.1) 23.1 --
Change In Deferred Tax Asset (2.9) (3.9) (3.9)
------ ------ ------
Cash Flow From Operations (0.4) 88.5 65.4
Less: Capital Expenditures (53.4) (30.6) (30.6)
------ ------ ------
Cash Flow Before Principal Payments (53.8) 88.5 34.8
Principal Payments -- -- --
New Debt -- -- --
------ ------ ------
Total Debt Payment -- -- --
------ ------ ------
Net Cash Flow $(53.8) $ 57.9 $ 34.8
====== ====== ======
Cash At Beginning Of Period $ 74.6 $ 20.8 $ 78.7
Change (53.8) 57.9 34.8
------ ------ ------
Cash At End Of Period $ 20.8 $ 78.7 $113.5
====== ====== ======
84
<PAGE>
- --------------------------------------------------------------------------------
Repurchase Of Public Shares By JRM
- --------------------------------------------------------------------------------
85
<PAGE>
Share Repurchase By JRM
- --------------------------------------------------------------------------------
o An alternative to the minority squeeze out would be a repurchase of the
public outstanding shares by JRM using its excess cash.
o JRM initiated an open market share repurchase program in February 1998. By
December 31, 1998, 2.2 million shares had been repurchased out of an
authorized 3 million shares.
o The recent call of the majority of JRM's debt issue eliminates the
covenants which have limited further repurchases.
o A tender for outstanding shares would typically be at a premium to market.
While open market repurchases occur at market prices at the time, such
buying activity could also create a premium.
o JRM would likely have to defer any further repurchases for an appropriate
"cooling-off" period, having already initiated squeeze out discussions.
o It is unlikely that MII could achieve their objective of 100 percent
ownership through a repurchase program but would have to complete the
process through a minority squeeze out.
o If MII were to reach a 90 percent ownership level (through repurchases and
conversion of its preferred) it would be able to force a merger. Under
these circumstances, the squeeze out premium would be applicable to a
lower number of outstanding shares than today.
86
<PAGE>
- --------------------------------------------------------------------------------
Spin-Off
- --------------------------------------------------------------------------------
87
<PAGE>
Spin-Off Of MII Interest In JRM
- --------------------------------------------------------------------------------
o Distribution (Spin-off) of MII interest in JRM to its shareholders could
create value for JRM's public shareholders.
- Potentially increased liquidity and critical mass could create
greater interest from institutional investors.
- Elimination of MII "overhang".
o Spin-off is unlikely to be practical alternative:
- Likely not tax-free to MII.
- JRM may not have necessary five-year operating history.
- Significantly reduces size of MII: could affect investor interest and
liquidity and access to capital markets.
88
<PAGE>
- --------------------------------------------------------------------------------
Public Offering
- --------------------------------------------------------------------------------
89
<PAGE>
Public Offering Of MII Interest In JRM
- --------------------------------------------------------------------------------
o A public offering of MII interest in JRM, achieving wider distribution and
more liquidity (like a spin-off) could create a value for JRM's public
shareholders.
o The public offering market was active for oil service offerings in 1996
and 1997. However, only five offerings were completed in 1998. Currently
there are nine equity offerings of oil service companies in registration,
including four IPOs. However, the recent weakness in oil prices has closed
the offering window.
Oil Service Equity Offerings1
Graphic of capital raised in billion through oil service equity offerings
on a quarterly and annual basis from first quarter 1993 to fourth quarter 1998
90
<PAGE>
1 Through January 24, 1999. Does not include pending equity offerings in
registration
91
<PAGE>
- --------------------------------------------------------------------------------
Summary Of Options
- --------------------------------------------------------------------------------
92
<PAGE>
Summary Of Alternatives
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Likelihood Likelihood
Of Premium Of Closing Key Advantages Key Disadvantages
---------- ---------- ------------------------------------ ----------------------------------
<S> <C> <C> <C> <C>
Pursue Squeeze-Out High High o Improved investor profile o Dilution to any industry
For Stock recovery
o Improved capital markets profile
o Risks of MII's contingencies
o Less downside in volatile
environment o Less access to excess cash
o
Pursue Squeeze-Out High Fair?/High o Some reduction in risk of MII o Less upside in recovery
For Stock And Cash contingencies
o Potential taxes
o Less downside in volatile
environment
o Cash
Continue To Hold None N/A o Retain any upside in a recovery o No premium
JRM Shares
o Retain access to excess cash in o No improved investor/capital
volatile market market profile
o Potential to pursue acquisition o Increases risk in industry
program decline or business change
Sale Of JRM High Depends On MII, o Retain some upside in a o Less access to excess cash
Antitrust transaction for stock
o Potential strategic benefits
</TABLE>
93
<PAGE>
Summary Of Alternatives (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Likelihood Likelihood
Of Premium Of Closing Key Advantages Key Disadvantages
---------- ---------- ------------------------------------ ----------------------------------
<S> <C> <C> <C> <C>
Repurchase By JRM Of N/A Depends On MII, o Greater upside in a recovery o Greater downside in volatile
MII's Shares Antitrust market
o More antitrust liability
exposure
Public Share Repurchase Fair Delayed Timing o Cash o Loss of upside in recovery
By JRM
o Potentially lower premium than
squeeze-out
Spin-Off Low/Fair Low o Improved investor/capital o Likely not attractive to MII
market profile o Timing issues
Public Offering Of MII's Low/Fair Depends On MII, o Improved investor/capital o Likely not attractive to MII
Shares Antitrust market profile
o Offering markets are closed
</TABLE>
94
<PAGE>
EXHIBIT 99.(B)(12)
DRAFT
-----
CONFIDENTIAL
------------
Project Big Mac
Review of MII's Proposal To
Acquire The Minority Interest Of JRM
SIMMONS & COMPANY
INTERNATIONAL
APRIL 1999
<PAGE>
Transaction Premium Relative To Pre-Announcement Share Prices
- --------------------------------------------------------------------------------
o Proposed transaction would provide a premium of approximately 25 percent
relative to the last closing price of JRM prior to announcement.
o However, there has been a recent significant recovery in oil service
values for which adjustments must be made.
o Adjusting the historical JRM prices for the recovery shows the proposed
transaction represents a discount to JRM's shareholders.
<TABLE>
<CAPTION>
Prior To Announcement Date
-------------------------------------------------------------
Three
20 Day Month
One Day One Week Four Weeks Trading Trading
Prior Prior Prior Average Average
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Date 3/9/99 3/2/99 2/9/99
Historical JRM Share Price $ 24.38 $ 21.06 $ 24.56 $ 23.55 $ 24.26
Current MII Share Price1 26.56 26.56 26.56 26.56 26.56
Exchange Ratio 1.150x 1.150x 1.150x 1.150x 1.150x
-------- -------- -------- -------- --------
Implied JRM Transaction Value $ 30.55 $ 30.55 $ 30.55 $ 30.55 $ 30.55
======== ======== ======== ======== ========
Transaction Premium To Historical JRM Price 25.3% 45.1% 24.4% 29.7% 25.9%
======== ======== ======== ======== ========
Change From Before Announcement Through Current1
OSX 30.9% 50.4% 39.4% 41.9% 38.0%
Offshore Construction Comparables2 42.4 46.7 34.4 38.7 33.2
Oil Service Comparables3 35.5 57.2 38.1 45.7 40.9
-------- -------- -------- -------- --------
Average 36.3% 51.4% 37.3% 42.1% 37.4%
======== ======== ======== ======== ========
Estimated JRM Price If No Transaction $ 33.22 $ 31.89 $ 33.72 $ 33.46 $ 33.33
Transaction Premium/(Discount) To Estimated JRM Price (8.0%) (4.2%) (9.4%) (8.7%) (8.3%)
======== ======== ======== ======== ========
</TABLE>
- -----------------------
1 March 29, 1999.
2 Includes Bouygues, Cal Dive, Coflexip, Global, Gulf Island, Horizon,
Oceaneering and Stolt-Comex.
3 Includes BJ Services, Cooper Cameron, National-Oilwell, Smith International
and Tidewater.
1
<PAGE>
Valuation Of JRM
- --------------------------------------------------------------------------------
o Valuation of JRM was performed using the method as presented in Merrill
Lynch's memorandum dated March 15, 1999 (the "Merrill Analysis").
o Valuation uses the multiples, EPS and CFPS as presented to Simmons, and
ignores JRM's excess cash.
o As a result, the valuation as presented tends to significantly undervalue
JRM's excess cash.
For example:
Calculated
Value Of
Multiple $1.00 In Cash
-------- -------------
EPS 10.5x $ 0.58
CFPS 6.0x 0.33
o The revised analysis applies multiples to adjusted EPS and CFPS (excluding
interest income from excess cash) to calculate values per share, and adds
back excess cash per share.
o Since analysts pay close attention to EBITDA multiples in their valuation
analyses, a valuation of JRM has been performed with the addition of
fiscal year 2000 and 2001 EBITDA multiples.
2
<PAGE>
Valuation Of JRM - As Of Pre-Announcement Date (March 9, 1999)
- --------------------------------------------------------------------------------
o Using the multiples as presented: Valuation As
Presented Revised
--------- -------
Average Of High Implied JRM Values $19.00 $25.95
Average Of Low Implied JRM Values 16.15 24.11
The revised analysis indicates the market is undervaluing JRM.
Graph showing the high and low implied values as of March 9, 1999 (ranging
from $20.42 to $28.82) of the Company's stock price implied by a range of EPS
and CFPS multiples applied to projections for fiscal year 2000 and fiscal year
2001, and showing the implied value of the Initial Offer received from Parent
($26.45) and the Company's closing stock price ($24.38) on March 9, 1999 (one
day prior to the announcement of the Offer).
- --------------------
1 Valuation uses multiples, EPS and CFPS from page 13 of Merrill Analysis.
2 Defined as net income plus depreciation and amortization.
3
<PAGE>
Comparable Company EBITDA Multiples
- --------------------------------------------------------------------------------
o Multiples of calendar 1999 and 2000 EBITDA for the comparable group have
been calculated for purposes of valuing JRM.
Ratio Of Adjusted Market
Value To EBITDA1
--------------------------
Calendar Calendar
1999 2000
--------- -----------
Aker Maritime 5.4x 5.3x
Coflexip 4.3x 4.2x
Cooper Cameron 9.3x 8.4x
Dril-Quip 8.9x 7.7x
DSND 5.1x 4.6x
Global Industries 8.8x 6.8x
IHC Caland 4.4x 4.0x
Oceaneering 5.2x N/A
Saipem 3.2x 3.3x
Stolt-Comex 5.3x 4.8x
- -------------------------------------------------------------------
Mean 6.0x 5.4x
- -------------------------------------------------------------------
- ---------------------------------
1 As of March 9, 1999.
4
<PAGE>
Valuation Of JRM - As Of Pre-Announcement Date (March 9, 1999)
- --------------------------------------------------------------------------------
o Using a method similar to the process of selecting EPS and CFPS multiples
for the valuation presented to Simmons, conservative EBITDA multiples were
chosen.
o The comparable company analysis shows JRM's stock price is undervalued in
the market.
Graph showing the high and low implied values as of March 9, 1999 (ranging
from $20.42 to $28.82) of the Company's stock price implied by a range of
EBITDA, EPS and CFPS multiples applied to projections for fiscal year 2000 and
fiscal year 2001, and showing the Initial Offer received from Parent ($26.45)
and the Company's closing stock price ($24.38) on March 9, 1999 (one day prior
to the announcement of the offer)
- --------------------
1 Defined as net income plus depreciation and amortization.
5
<PAGE>
Adjusted Exchange Ratio Based On March 9, 1999 Share Prices
- --------------------------------------------------------------------------------
(Amounts in dollars)
Low High
-------- --------
Average JRM Price, As Presented1 $ 16.15 $ 19.00
Revised Average JRM Price2 $ 24.11 $ 25.95
Percent Change 49.3% 36.6%
Proposed Exchange Ratio 1.150x
- --------------------------------------------------------------------------------
Exchange Ratio Implied By Revised Valuation Analysis 1.717x 1.571x
- --------------------------------------------------------------------------------
- -----------------------------------
1 Averages using page 13 of Merrill Analysis.
2 Uses Merrill's method, but adjusted to account for JRM's excess cash
of $528.7 million.
6
<PAGE>
Revised Break-up Valuation Of MII - At March 9, 1999
- --------------------------------------------------------------------------------
(Dollars in millions, except per share amounts)
o The break-up valuation of MII, as presented, has been revised to reflect
actual excess cash amounts.
<TABLE>
<CAPTION>
MII Ex-JRM Projected Year Ending March 31, 2000
---------------------------------------------------------
B&W Power Government Hudson
Co. Ops Products E&C Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
EBITDA $ 97
Equity And Other Income 5
-----
Adjusted EBITDA 102 $ 49 $ 9 $ 7 $ 167
Valuation Multiple 6.0x 5.0x 5.0x 4.0x 5.6x
--- --- --- --- ---
Enterprise Value $ 612 $ 245 $ 45 $ 28 $ 930
Plus: Excess Cash At December 31, 1998 365
Less: Debt (353)
Product Liability1 (185)
AntiTrust Liability
PostRetirement Benefits Liability (24)
----
Net Equity Value 733
Shares Outstanding 60.2
Value Per Share $12.18
Plus: JRM Value2 12.31
------
Total MII Value Per Share $24.49
======
</TABLE>
- ------------------------------
1 From Merrill Analysis. Represents the present value of after-tax net cash flow
payments related to asbestos (per management estimates).
2 At March 9, 1999. Value of 30.4 million shares of JRM at market owned by MII.
7
<PAGE>
Preliminary Break-up Valuation Of MII
- --------------------------------------------------------------------------------
o The calculated value of MII (after adjustment for actual excess cash
amounts) more closely agrees with market values and other analyst values:
<TABLE>
<CAPTION>
Break-up
Actual Premium
Break-up Share To
Date Value Price Market
---- ----- ----- ------
<S> <C> <C> <C> <C>
Salomon Smith Barney 11/10/98 $ 31.58 $ 29.00 8.9%
Merrill Lynch
Analysis As Presented 3/09/99 $ 28.60 23.00 24.3%
Adjusted For Excess Cash 3/09/99 24.49 23.00 6.5
</TABLE>
o With a good analyst following, MII would be expected to trade near
break-up value.
o If a significant differential existed on paper between break-up value and
actual market value, taxes would need to be considered in executing a
transaction to maximize value after taxes.
8
<PAGE>
Adjusted Exchange Ratio Based On March 9, 1999 Share Prices
- --------------------------------------------------------------------------------
(Amounts in dollars)
o The proposed exchange ratio of 1.150x has been adjusted to reflect the
revised comparable company valuation of JRM and the revised break-up
valuation of MII.
Low High
-------- --------
Average JRM Price, As Presented $ 16.15 $ 19.00
Revised Average JRM Price 24.11 25.95
Percent Change 49.3% 36.6%
Breakup Valuation Of MII, As Presented $ 28.60
Revised Break-up Valuation 24.49
Percent Change (14.4%)
Ratio Increase To Account For Lower MII Value 16.8%
Total Change In Exchange Ratio To Account For
Revisions 74.4% 59.5%
Proposed Exchange Ratio 1.150x
- --------------------------------------------------------------------------------
Exchange Ratio Implied By Revised Valuation Analysis 2.0x 1.8x
- --------------------------------------------------------------------------------
9
<PAGE>
Preliminary Break-up Valuation Of MII - At March 29, 1999
- --------------------------------------------------------------------------------
(Dollars in millions, except per share amounts)
o The break-up analysis has been updated to March 29, 1999. A revised value
for MII's interest in JRM, reflecting the recent run-up in oil service
values, has been included.
<TABLE>
<CAPTION>
MII Ex-JRM Projected Year Ending March 31, 2000
------------------------------------------------------
B&W Power Government Hudson
Co. Ops Products E&C Total
-------- --------- -------- ------ --------
<S> <C> <C> <C> <C> <C>
EBITDA $ 97
Equity And Other Income 5
---
Adjusted EBITDA 102 $ 49 $ 9 $ 7 $167
Valuation Multiple 6.0x 5.0x 5.0x 4.0x 5.6x
--- --- --- --- ---
Enterprise Value $612 $245 $45 $28 $930
Plus: Excess Cash 365
Less: Debt (353)
Product Liability1 (185)
AntiTrust Liability --
PostRetirement Benefits Liability (24)
Net Equity Value 733
Shares Outstanding 60.2
Value Per Share $12.18
Plus: JRM Value2 16.66
- ------
Total MII Value Per Share $28.84
======
</TABLE>
- ------------------------------
1 From Merrill Analysis. Represents the present value of after-tax net cash flow
payments related to asbestos (per management estimates).
2 At March 9, 1999. Value of 30.4 million shares of JRM at $33.00 estimated JRM
price adjusted for industry recovery.
10
<PAGE>
Analysis Of Proposed Exchange Ratio
- --------------------------------------------------------------------------------
o After adjustment for the recent recovery in oil service stocks, the ratio
of JRM share value to MII share value is almost identical to the proposed
transaction ratio.
o Adjusting the proposed transaction ratio upwards by the increase in share
price ratio caused by the oil service market recovery yields an exchange
ratio of 1.241x.
Current (March 29, 1999) Break-up Valuation Of
MII $ 28.84
Estimated JRM Price If No Transaction1 33.00
Implied Exchange Ratio With No Premium 1.144x
Proposed Exchange Ratio 1.150x
Proposed Transaction Premium/(Discount) 0.5%
=====
Share Price Ratio Pre-Announcement (March 9,
1999) 1.060x
Increase In Ratio Due To Market Recovery 7.9%
- -------------------------------------------------------------
Exchange Ratio To Maintain Premium 1.241x
- -------------------------------------------------------------
- ------------------------------
1 Uses historical JRM closing prices adjusted to reflect recent recovery in the
oil service industry (see page one).
11
<PAGE>
Stock Price Target Estimates
- --------------------------------------------------------------------------------
o A review of analysts' 12-month target stock prices for JRM and MII
generates an average ratio of 1.004x.(1)
<TABLE>
<CAPTION>
12-Month Price Target
-------------------------
Analyst Date JRM MII Ratio
- ------------------------------------ ------ -------- -------- ----------
<S> <C> <C> <C> <C>
Prudential Securities 7/27/98 $ 52.00
Salomon Smith Barney 7/27/98 45.00 $ 48.00 0.938x
DLJ 7/28/98 53.00 48.00 1.104x
DLJ 8/12/98 53.00 48.00 1.104x
Salomon Smith Barney 10/30/98 42.00
Prudential Securities 10/30/98 40.00
Lazard Freres 11/03/98 45.00
Salomon Smith Barney 11/10/98 45.00
Salomon Smith Barney 12/21/98 42.00 42.00 1.000x
DLJ 1/19/99 38.00
Howard, Weil 1/19/99 32.00
Lazard Freres 1/28/99 35.00
Prudential Securities 2/03/99 30.00
Salomon Smith Barney 2/04/99 32.00 32.00 1.000x
DLJ 2/04/99 40.00
Salomon Smith Barney 3/10/99 32.00 32.00 1.000x
DLJ 3/16/99 37.00 42.00 0.881x
-----
Average 1.004x
=====
Average Analysts' Ratio, As
Presented2 0.800x
Offered Ratio 1.150x
Increase Due To Revised Analysis 25.5%
- ------------------------------------------------------------------------------------------------
Revised Exchange Ratio 1.443x
- ------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------
1Stock prices from analysts not providing estimates for both companies have
been disregarded.
2Page 25 of Merrill Analysis.
12
<PAGE>
Historical Ratio Of Share Prices
- --------------------------------------------------------------------------------
Graphic depicting the ratio of the Company's share price to that of Parent
on a daily basis from January 1, 1996 to March 9, 1999, and the exchange ratio
proposed in the Initial Offer by the Parent (1.150x) and various different
exchange ratios (up to 1.300x): the share price ratio at close on March 9, 1999
was 1.050x, the average ratios for the 20-day trading, 3-month and six-month
periods ended March 9, 1999 were 1.068x, 1.047x and 1.081x
- -------------------------
1 Close on day prior to announcement.
13
<PAGE>
Comparable Minority Squeeze Out Premium Analysis1
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share)
<TABLE>
<CAPTION>
Premium: Closing Valuation
Relative To Historical
Share Prices
----------------------------
Four
Date Transaction Percent One-Day One-Week Weeks
Acquiror Subsidiary Announced Value Acquired Prior Prior Prior
- -------------------------------- -------------------------- ----------- ---------- ---------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ogden Corp. Ogden Projects, Inc. 6/06/94 $ 110.3 15.8% 5.8% 17.6% 20.5%
WMX Technologies Chemical Waste Management 7/28/94 397.4 21.4 10.6 8.9 1.1
GTE Corp. Contel Cellular, Inc. 9/08/94 254.3 10.0 43.7 37.8 36.0
Pacificorp Pacific Telecom 11/02/94 159.0 13.4 23.7 23.7 23.7
Fleet Financial Group Fleet Mortgage Group 12/28/94 188.1 19.0 19.4 18.5 18.5
Club Mediterrenee SA Club Med Inc. 4/05/95 153.4 33.0 41.4 39.9 44.6
COBE Laboratories SA (Gambro AB) REN Corp-USA 7/14/95 182.1 47.0 27.0 20.3 26.0
Novartis AG SyStemix Inc. 5/27/96 107.6 26.8 25.6 23.1 25.3
Conseco, Inc. Bankers Life Holding 8/26/96 120.8 11.5 14.9 10.5 11.7
Zurich Versicherungs GmbH Zurich Reinsurance Centre 1/13/97 319.0 34.0 17.1 18.5 11.6
Mafco Holdings Inc. Mafco Consolidated Group 1/21/97 116.8 15.0 23.5 23.5 27.6
Monsanto, Inc. Calgene Inc. 1/28/97 242.6 43.7 62.0 60.0 60.0
Apartment Investment And Management
Company NHP, Inc. 2/20/97 114.5 44.9 28.3 25.2 16.9
Anthem, Inc. Acordia, Inc. 6/02/97 193.2 33.2 12.7 11.5 26.0
Investor Group BET Holdings, Inc. 3/17/98 462.3 N/A 53.7 58.5 58.2
International Specialty
ISP Holdings, Inc. Products 3/30/98 324.5 16.2 4.3 1.7 14.5
Dow AgroSciences (Dow Chemical) Mycogen Corp. 4/30/98 355.2 N/A 41.8 40.0 52.4
Usinor SA J&L Specialty Steel, Inc. 9/23/98 115.0 46.5 100.0 112.5 37.8
- --------------------------------------------------------------------------------------------------------------------------------
Mean2 $209.1 26.7% 26.9% 30.3% 30.3%
Median 185.1 24.1 23.6 23.6 26.0
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Proposed Transaction $446.6(3) 37.2% 25.3%3 45.1%3 24.4%3
After Adjusting For Recent Oil Service Recovery (8.0%)4 (4.2%)4 (9.4%)4
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Securities Data Corporation.
- -----------------------------
1 Transactions in the $100 million to $1 billion range since January 1, 1994.
2 Excluding high and low.
3 Based on MII closing price on March 29, 1999 and proposed exchange ratio.
4 Historical JRM prices adjusted to reflect recent recovery in oil service
sector.
14
<PAGE>
Comments on Relative Value Of JRM And MII
- --------------------------------------------------------------------------------
o The foregoing revised valuation analyses indicate JRM and MII are both
slightly undervalued in the market today.
o Although some analysts have speculated that MII may acquire the
outstanding shares of JRM, there is no evidence, prior to March 9, 1999,
of arbitrage activity causing JRM's market price to rise and MII's to
fall.
o MII's management publicly announced in January 1999, at the time of the
third quarter analyst and investor conference call, that any further
equity restructuring would be incremental and would take place over a more
extended period than originally anticipated. This comment was reported by
analysts.
o If any arbitrage activity has been taking place, it is unlikely to have
depressed MII materially due to the relatively high liquidity of MII.
15
<PAGE>
Analysis Of Asset Values Tax Issue
- --------------------------------------------------------------------------------
o The IRS is disputing the values at which vessels were transferred from MII
to JRM in 1995 at the time of the OPI merger.
o The IRS will propose insurance values should have been used rather than
appraised values.
o If the IRS prevails, MII would be taxed on the additional $280.5 million
in value attributable to the transferred assets and JRM would benefit from
over $89 million in increased tax basis.
o Since the market is unaware of this potential value adjustment, the
exchange ratio would require modification should the IRS prevail.
Tax (Payable)/Benefit
---------------------
Per Share
Total Amount1 Amount
(Millions)
------------ ----------
MII $ (98.2) $ (1.63)
JRM 34.2(2) 0.87
----------------------------------------------------
Implied Increase in Exchange Ratio3 + 0.132x
----------------------------------------------------
------------------------------
1 Assumes 35 percent tax rate.
2 Undiscounted value. Reflects assets transferred to Delaware entity only.
3 Calculated using closing stock prices on March 9, 1999.
16
<PAGE>
Amount By Which JRM Cash Has Been Undervalued
- --------------------------------------------------------------------------------
o The proposed transaction undervalues JRM cash by approximately $5.50 to
$6.50 per share.
o An alternative transaction could involve retention of the "undervalued"
cash per share by JRM's shareholders.
<TABLE>
<CAPTION>
Actual
Multiples As Excess Cash Implied Excess Amount By Which Cash
Presented Value/Share Cash/Share Has Been Undervalued
------------------ ------------------- ---------- -----------------------
Fiscal 2000
- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
EPS 13.0x 17.0x $ 9.62 $12.58 $13.46 $ 3.84 $ 0.88
CFPS 6.5x 7.5x 4.81 5.55 13.46 8.65 7.91
Fiscal 2001
- -----------
EPS 10.5x 11.5x 7.77 8.51 13.46 5.69 4.95
CFPS 6.0x 7.5x 4.44 5.55 13.46 9.02 7.91
Average $ 6.80 $ 5.41
======= =======
</TABLE>
----------------------------------------------------
Alternative Transaction: 1.150 MII Shares
+ $ 6.00 In Cash
----------------------------------------------------
17
<PAGE>
Analysis Of Alternative Structures
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Exchange Ratio
----------------------------------------------------------------------
1.150x 1.175x 1.200x 1.250x 1.300x 1.350x
----------- --------- --------- --------- --------- ---------
Per Share Value
- ---------------
<S> <C> <C> <C> <C> <C> <C>
Stock Value $ 30.55 $ 30.55 $ 30.55 $ 30.55 $ 30.55 $ 30.55
Added Cash -- 0.66 1.33 2.66 3.98 5.31
----------- --------- --------- --------- --------- ---------
Total $ 30.55 $ 31.21 $ 31.88 $ 33.20 $ 34.53 $ 35.86
========= ========= ========= ========= ========= =========
Combined Residual Pro Forma Cash $1,049.0 $1,039.3 $1,029.6 $1,010.2 $ 990.8 $ 971.3
Premium Analysis
- ----------------
Premium To JRM Price Adjusted For
Industry Recovery: $33.00 (7.4%) (5.4%) (3.4%) 0.6% 4.6% 8.7%
====== ====== ====== ==== ==== ====
</TABLE>
18
<PAGE>
Conclusions
- --------------------------------------------------------------------------------
19
<PAGE>
EXHIBIT 99(B)(13)
DRAFT
CONFIDENTIAL
Draft Supplemental Analysis #2
SIMMONS & COMPANY
INTERNATIONAL
APRIL 1999
<PAGE>
Acquisition Assumptions
- --------------------------------------------------------------------------------
o Effect on MII's earnings per share in projected 2000 and 2001 of a squeeze
out was examined.
o The purchase price for JRM stock was: 1.150x MII shares, plus $4.00 in
cash.
o Goodwill of approximately $273 million from the transaction was amortized
over 15 years, consistent with the period used on the Offshore Pipelines,
Inc. merger. The April 12, 1999 closing stock price of $25.44 for MII was
used to determine goodwill.
o Consolidation cost savings of $5 million1 in SG&A were assumed. Source:
MII management.
- ----------
1 Pretax amount. Tax rate assumed at 40 percent.
1
<PAGE>
Projected FY 2000 Pro Forma Income Statement
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share amounts)
o The proposed transaction is dilutive to MII's EPS and CFPS in FY 2000.
o However, the projections furnished by MII's management reflect JRM's
excess cash (approximately $470 million post-transaction) earning only a
money market rate of return.
o Simmons and certain Wall Street analysts believe JRM's excess cash could
be redeployed at a greater return.
<TABLE>
<CAPTION>
Consolidated MII JRM Adjustments Combined
---------------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $ 2,903.3 $ 839.8 $ 2,903.3
Cost Of Sales 2,337.8 659.7 2,337.8
--------- --------- ---------
Gross Profit 565.4 180.0 565.4
Gross Profit Margin 19.5% 21.4% 19.5%
SG&A Expense 315.2 86.4 $ (5.0) 310.2
Equity Expense/(Income) (9.4) (6.1) -- (9.4)
--------- --------- --------- ---------
EBDIT 259.6 99.8 5.0 264.6
EBDIT Margin 8.9% 11.9% 9.1%
Depreciation 92.4 55.4 -- 92.4
Interest Expense/(Income) (20.5) (23.3) 3.2 (19.1)
Other Expense/(Income) 0.5 (3.8) -- 0.5
Minority Interest 11.5 -- (17.6) (6.1)
Goodwill Amortization -- -- 18.2 18.2
--------- --------- --------- ---------
Pretax Income 175.6 71.4 1.2 176.8
Taxes 64.0 16.8 2.0 66.0
--------- --------- --------- ---------
Net Income 111.6 54.7 (0.8) 110.8
Less: Dividends On Series A Preferred Stock -- 7.2 --
--------- --------- --------- ---------
Net Income To Common $ 111.6 $ 47.5 $ (0.8) $ 110.8
========= ========= ========= =========
Net Income Margin 3.8% 5.7% 3.8%
========= ========= =========
- ----------------------------------------------------------------------------------------------------------
Shares Outstanding1 60.2 39.3 16.8 77.0
Earnings Per Share $ 1.85 $ 1.21 $ 1.44
EPS Accretion/(Dilution) (0.41)
Cash Flow Per Share $ 3.39 $ 2.62 $ 2.88
CFPS Accretion/(Dilution) (0.51)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
2
<PAGE>
1 Includes options.
3
<PAGE>
Projected FY 2001 Pro Forma Income Statement
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share amounts)
o The proposed transaction is also dilutive to MII's EPS and CFPS in FY
2001.
<TABLE>
<CAPTION>
Consolidated
MII1 JRM1 Adjustments Combined
------------ --------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $ 3,378.7 $ 1,228.1 $ 3,378.7
Cost Of Sales 2,756.4 1,034.2 2,756.4
--------- --------- ---------
Gross Profit 622.3 194.0 622.3
Gross Profit Margin 18.4% 15.8% 18.4%
SG&A Expense 317.5 86.2 $ (5.0) 312.5
Equity Expense/(Income) (9.9) (7.3) -- (9.9)
--------- --------- --------- ---------
EBDIT 314.7 115.0 5.0 319.7
EBDIT Margin 9.3% 9.4% 9.5%
Depreciation 85.4 47.8 -- 85.4
Interest Expense/(Income) (18.0) (21.6) 3.2 (14.8)
Other Expense/(Income) (0.1) (4.0) -- (0.1)
Minority Interest 17.7 -- (25.0) (7.3)
Goodwill Amortization -- -- 18.2 18.2
--------- --------- --------- ---------
Pretax Income 229.7 92.9 8.6 238.3
Taxes 81.9 18.9 2.0 83.9
--------- --------- --------- ---------
Net Income 147.8 74.0 6.6 154.4
Less: Dividends On Series A Preferred Stock -- 7.2 --
--------- --------- --------- ---------
Net Income To Common $ 147.8 $ 66.8 $ 6.6 $ 154.4
========= ========= ========= =========
Net Income Margin 4.4% 5.4% - 4.6%
========= ========= =========
- ----------------------------------------------------------------------------------------------------------
Shares Outstanding2 60.2 39.3 16.8 77.0
Earnings Per Share $ 2.46 $ 1.70 $ 2.01
EPS Accretion/(Dilution) (0.45)
Cash Flow Per Share $ 3.88 $ 2.92 $ 3.35
CFPS Accretion/(Dilution) (0.53)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
1 March 1999 revision to JRM FY 2001 projection yields $1.50 EPS before
effect of repurchase of senior subordinated notes. Consolidated MII
projection has been adjusted to reflect change in JRM.
4
<PAGE>
2 Includes options.
5
<PAGE>
EPS Effect Of Investing JRM's Excess Cash In Capital Projects
- --------------------------------------------------------------------------------
o MII would acquire approximately $470 million in excess cash as a result of
acquiring JRM (at 1.150x MII shares and $4.00 in cash).
o Investing JRM's excess cash in capital projects at an after-tax net income
rate of return of 13.0 percent could increase MII's EPS by $0.46 per share
and CFPS by $0.87 per share (after loss of interest income).
o The net effect of the acquisition of JRM could be accretive to MII's EPS
and CFPS in FY 2000 and FY 2001.
<TABLE>
<CAPTION>
Fiscal Years
------------------------
2000 2001 Comments
-------- -------- ----------------------------------------------------------
<S> <C> <C> <C>
EPS
- ---
Pre-JRM Transaction $ 1.85 $ 2.46
Post-JRM Transaction 1.44 2.01
-------- --------
Accretion/(Dilution) (0.41) (0.45)
Net effect of a 13.0 percent post-tax return on $470.3
Effect Of Capital Investment 0.46 0.46 million of capital investment and the lost 5.5 percent
-------- -------- return on excess cash.
Final Accretion/(Dilution) $ 0.05 $ 0.01
======= =======
CFPS
- ----
JRM Transaction Accretion/(Dilution) $ (0.51) $ (0.53)
Effect Of Capital Investment 0.87 0.87 Assumes returns as above and 15-year depreciation period
-------- -------- on capital expenditures.
Final Accretion/(Dilution) $ 0.36 $ 0.34
======= =======
</TABLE>
6
<PAGE>
Repurchase Of Public Shares By JRM - Assumptions
- --------------------------------------------------------------------------------
o MII may not have sufficient capital projects to utilize JRM's excess cash
effectively.
o If this is the case, MII could consider returning some of JRM's excess
cash to shareholders through a repurchase of all of the public stock of
JRM for cash. Such a transaction could result in MII owning 100 percent of
JRM.
o To analyze this situation, Simmons has modeled a repurchase of all of
JRM's public shares at a stock price of $33.00.1
o Consolidation cost savings of $5 million2 in SG&A were assumed. Source:
MII management.
- ----------
1 Would be equivalent dollar value to a 1.297x exchange ratio at the April 12,
1999 closing stock price of $25.44 for MII.
2 Pretax amount. Tax rate assumed at 40 percent.
7
<PAGE>
Projected FY 2000 Pro Forma Income Statement
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share amounts)
o The proposed transaction is mildly dilutive to MII's EPS and CFPS in FY
2000, if excess cash (approximately $47 million) continues to earn only
money market rates of return.
<TABLE>
<CAPTION>
Consolidated
MII JRM Adjustments Combined
------------ --------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $ 2,903.3 $ 839.8 $ 2,903.3
Cost Of Sales 2,337.8 659.7 2,337.8
--------- --------- ---------
Gross Profit 565.4 180.0 565.4
Gross Profit Margin 19.5% 21.4% 19.5%
SG&A Expense 315.2 86.4 $ (5.0) 310.2
Equity Expense/(Income) (9.4) (6.1) -- (9.4)
--------- --------- --------- ---------
EBDIT 259.6 99.8 5.0 264.6
EBDIT Margin 8.9% 11.9% 9.1%
Depreciation 92.4 55.4 -- 92.4
Interest Expense/(Income) (20.5) (23.3) 26.5 6.0
Other Expense/(Income) 0.5 (3.8) -- 0.5
Minority Interest 11.5 -- (17.6) (6.1)
Goodwill Amortization -- -- -- --
--------- --------- --------- ---------
Pretax Income 175.6 71.4 (3.9) 171.7
Taxes 64.0 16.8 2.0 66.0
--------- --------- --------- ---------
Net Income 111.6 54.7 (5.9) 105.7
Less: Dividends On Series A Preferred Stock -- 7.2 --
--------- --------- --------- ---------
Net Income To Common $ 111.6 $ 47.5 $ (5.9) $ 105.7
========= ========= ========= =========
Net Income Margin 3.8% 5.7% 3.6%
========= ========= =========
- ----------------------------------------------------------------------------------------------------------
Shares Outstanding1 60.2 39.3 -- 60.2
Earnings Per Share $ 1.85 $ 1.21 $ 1.76
EPS Accretion/(Dilution) (0.09)
Cash Flow Per Share $ 3.39 $ 2.62 $ 3.29
CFPS Accretion/(Dilution) (0.10)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
- ----------
1 Includes options.
9
<PAGE>
Projected FY 2001 Pro Forma Income Statement
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share amounts)
o The proposed transaction is mildly accretive to MII's EPS and CFPS in FY
2001 even before investment of JRM's excess cash in capital projects.
<TABLE>
<CAPTION>
Consolidated
MII1 JRM1 Adjustments Combined
------------ --------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $ 3,378.7 $ 1,228.1 $ 3,378.7
Cost Of Sales 2,756.4 1,034.2 2,756.4
--------- --------- ---------
Gross Profit 622.3 194.0 622.3
Gross Profit Margin 18.4% 15.8% 18.4%
SG&A Expense 317.5 86.2 $ (5.0) 312.5
Equity Expense/(Income) (9.9) (7.3) -- (9.9)
--------- --------- --------- ---------
EBDIT 314.7 115.0 5.0 319.7
EBDIT Margin 9.3% 9.4% 9.5%
Depreciation 85.4 47.8 -- 85.4
Interest Expense/(Income) (18.0) (21.6) 26.5 8.5
Other Expense/(Income) (0.1) (4.0) -- (0.1)
Minority Interest 17.7 -- (25.0) (7.3)
Goodwill Amortization -- -- -- --
--------- --------- --------- ---------
Pretax Income 229.7 92.9 3.5 233.2
Taxes 81.9 18.9 2.0 83.9
--------- --------- --------- ---------
Net Income 147.8 74.0 1.5 149.3
Less: Dividends On Series A Preferred Stock -- 7.2 --
--------- --------- --------- ---------
Net Income To Common $ 147.8 $ 66.8 $ 1.5 $ 149.3
========= ========= ========= =========
Net Income Margin 4.4% 5.4% 4.4%
========= ========= =========
- ----------------------------------------------------------------------------------------------------------
Shares Outstanding2 60.2 39.3 -- 60.2
Earnings Per Share $ 2.46 $ 1.70 $ 2.48
EPS Accretion/(Dilution) 0.02
Cash Flow Per Share $ 3.88 $ 2.92 $ 3.90
CFPS Accretion/(Dilution) 0.02
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
10
<PAGE>
1 March 1999 revision to fiscal year 2001 projection.
2 Includes options.
11
<PAGE>
EPS Effect Of Investing JRM's Excess Cash In Capital Projects
- --------------------------------------------------------------------------------
o MII would acquire approximately $47 million in excess cash as a result of
acquiring 100 percent of JRM (through JRM repurchasing all public shares
at $33.00 per share in cash).
o Investing JRM's excess cash in capital projects at a 13.0 percent net
income after-tax rate of return could increase MII's EPS by $0.06 per
share and CFPS by $0.11 per share (after loss of interest income).
o The net effect of the acquisition of JRM could be slight dilution to EPS
in FY 2000, and accretion to EPS in FY 2001 and CFPS in both FY 2000 and
FY 2001.
Fiscal Years
-----------------------------
2000 2001
------- -------
EPS
- ---
Pre-JRM Transaction $ 1.85 $ 2.46
Post-JRM Transaction 1.76 2.48
------- -------
Accretion/(Dilution) (0.09) 0.02
Effects Of Capital Investment 0.06 0.06
------- -------
Final Accretion/(Dilution) $ (0.03) $ 0.08
======== =======
CFPS
- ----
Accretion/(Dilution) $ (0.10) $ 0.02
Effects Of Capital Investment 0.11 0.11
------- -------
Final Accretion/(Dilution) $ 0.01 $ 0.13
======= =======
12
<PAGE>
Potential Share Price Improvement From Redeploying Excess Cash
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share amounts)
<TABLE>
<CAPTION>
Combined JRM
-------------------- ---------------
13.0% 10.0% 13.0% 10.0%
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net Income Effect Of Capital Projects
Excess Cash After Transaction1 $835.2 $835.2 $470.3 $470.3
====== ====== ====== ======
After-Tax Return On Capital $108.6 $ 83.5 $ 61.1 $ 47.0
Lost Interest Income (45.9) (45.9) (25.9) (25.9)
------ ------ ------ ------
Net After-Tax Increase $ 62.6 $ 37.6 $ 35.3 $ 21.2
====== ====== ====== ======
EPS Effect2 $ 0.81 $ 0.49 $ 0.46 $ 0.27
====== ====== ====== ======
<CAPTION>
Assumed P/E
Multiple MII Share Price Increase2
------------ ----------------------------------------
<S> <C> <C> <C> <C>
15.0x $12.21 $ 7.32 $ 6.87 $ 4.12
17.0x 13.83 8.30 7.79 4.67
19.0x 15.46 9.28 8.71 5.22
</TABLE>
- ----------
1 Assumes $58.4 million ($4.00 per JRM share) is used to pay cash portion of
purchase price.
2 Assumes 77.0 million shares outstanding after transaction.
13
<PAGE>
14
<PAGE>
Comparison Of MII Fiscal 2000 P/E Multiples Assuming Constant MII Share Price
- --------------------------------------------------------------------------------
Post Post
MII Before Transaction Transaction
JRM Transaction 1.15x + $1.50 1.15x + $4.00
------ ----------- ------------- -------------
Share Price1 $29.63 $25.44 $25.44 $25.44
Fiscal 2000
- -----------
EPS $ 1.21 $ 1.85 $ 1.50 $ 1.45
P/E Multiple2 24.5x 13.8x 17.0x 17.5x
Fiscal 2001
- -----------
EPS $ 1.70 $ 2.46 $ 2.07 $ 2.01
P/E Multiple2 17.4x 10.3x 12.3x 12.7x
- ----------
1 Closing share prices on April 12, 1999.
2 The market may be anticipating a transaction in the range of 1.15x plus
$3.00 to $4.00 of cash. The fact that MII's share price did not decline
following announcement supports the argument that MII would achieve a
multiple expansion following a transaction.
15
<PAGE>
Comparison Of Multiples Based On Merrill Lynch Comparable Groups1
- --------------------------------------------------------------------------------
1999 P/E 2000 P/E
Multiple Multiple
-------- --------
JRM Comparables
- ---------------
Aker Maritime 12.5x 11.7x
Coflexip 13.1x 10.9x
Cooper Cameron 26.2x 21.4x
Dril-Quip 27.0x 21.9x
DSND 7.4x 6.8x
IHC Caland 12.7x 11.0x
Global Industries 32.1x 17.9x
Oceaneering 14.3x 13.1x
Saipem 13.7x 12.8x
Stolt Comex 12.6x 10.0x
---- ----
Average 17.2x 13.7x
==== ====
MII Comparables
- ---------------
Babcock Intl. Group 9.7x 8.7x
Jacobs Engineering 15.8x 13.6x
Fluor 11.4x 12.8x
Litton Industries 13.0x 11.7x
Foster Wheeler 9.3x 11.9x
---- ----
Average 11.8x 11.8x
==== ====
- ----------
1 As of April 12, 1999.
16
<PAGE>
EXHIBIT 99.(B)(14)
Comparison Of Projections
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
<TABLE>
<CAPTION>
JRM MII
------------------------------------------------- -----------------------------------------------
Fiscal Year 2000 2001 2000 2001
----------------------- --------------------- --------------------- ---------------------
Date Of Projection Preparation 12/98 3/99 12/98 3/99 12/98 3/99 12/98 3/99
--------- --------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 839.8 $ 789.3 $1,228.1 $1,094.8 $2,903.3 $2,920.8 $3,378.7 $3,359.0
Cost Of Sales 659.7 633.7 1,040.7 916.6 2,337.8 2,479.4 2,763.0 2,842.4
--------- --------- -------- -------- -------- -------- -------- --------
Gross Profit 180.0 155.5 187.4 178.2 565.4 441.4 615.7 516.6
Gross Profit Margin 21.4% 19.7% 15.3% 16.3% 19.5% 15.1% 18.2% 15.4%
SG&A 86.4 78.1 86.2 75.5 315.2 213.9 317.5 213.2
Equity Expense/(Income) (6.1) (5.4) (7.3) (4.6) (9.4) (13.9) (9.9) (15.0)
--------- --------- -------- -------- -------- -------- -------- --------
EBDIT 99.8 82.8 108.5 107.3 259.6 241.4 308.1 318.4
EBDIT Margin 11.9% 10.5% 8.8% 9.8% 8.9% 8.3% 9.1% 9.5%
Depreciation 55.4 48.8 47.8 37.3 92.4 82.1 85.4 69.2
Interest Expense/(Income) (23.3) (27.1) (21.6) (28.1) (20.5) (18.4) (18.0) (14.9)
Other Expense/(Income) (3.8) (3.3) (4.0) 0.8 0.5 (4.7) (0.1) (0.6)
Minority Interest -- 0.2 -- 0.3 11.5 16.2 15.0 26.6
Goodwill Amortization -- -- -- -- -- -- -- --
--------- --------- -------- -------- -------- -------- -------- --------
Pretax Income 71.4 64.2 86.3 97.0 175.6 166.3 225.8 238.2
Taxes 16.8 13.8 18.9 18.5 64.0 57.5 81.9 83.0
--------- --------- -------- -------- -------- -------- -------- --------
Net Income 54.7 50.4 67.4 78.6 111.6 108.8 143.9 155.1
Less: Dividends On Series A
Preferred Stock 7.2 7.2 7.2 7.2 -- -- -- --
--------- --------- -------- -------- -------- -------- -------- --------
Net Income To Common $ 47.5 $ 43.2 $ 60.2 $ 71.4 $ 111.6 $ 108.8 $ 143.9 $ 155.1
========= ========= ======== ======== ======== ======== ======== ========
5.7% 5.5% 4.9% 6.5% 3.9% 3.7% 4.3% 4.6%
Earnings Per Share $ 1.21 $ 1.10 $ 1.53 $ 1.82 $ 1.85 $ 1.81 $ 2.39 $ 2.58
</TABLE>
1
<PAGE>
Analysis Of MII EPS Accretion/(Dilution)1
- --------------------------------------------------------------------------------
(Amounts in dollars)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FY 2000
Exchange Ratio 1.150x 1.175x 1.200x 1.225x
Additional Cash $ 2.05 $ 1.38 $ 0.71 $ --
------ ------ ------ -------
Total Value $34.25 $34.28 $34.31 $34.30
====== ====== ====== ======
MII Accretion/(Dilution) $(0.43) $(0.43) $(0.43) $(0.43)
====== ====== ====== ======
Percent Accretion/(Dilution) (23.8%)
=====
Exchange Ratio 1.150x 1.175x 1.200x 1.225x 1.250x
Additional Cash $ 2.48 $ 1.82 $ 1.15 $ 0.49 $ --
------ ------ ------ ------ ------
Total Value $34.68 $34.72 $34.75 $34.79 $35.00
====== ====== ====== ====== ======
MII Accretion/(Dilution) $(0.44) $(0.44) $(0.44) $(0.44) $(0.44)
====== ====== ====== ====== ======
Percent Accretion/(Dilution) (24.3%)
=====
Exchange Ratio 1.150x 1.175x 1.200x 1.225x 1.250x 1.300x
Additional Cash $ 1.95 $ 1.61 $ 1.27 $ 0.93 $ 0.59 $ --
------ ------ ------ ------ ------ ------
Total Value $34.49 $34.82 $35.13 $35.47 $35.79 $36.40
====== ====== ====== ====== ====== ======
MII Accretion/(Dilution) $(0.53) $(0.53) $(0.53) $(0.53) $(0.53) $(0.53)
====== ====== ====== ====== ====== ======
Percent Accretion/(Dilution) (20.5%)
=====
FY 2001
Exchange Ratio 1.150x 1.175x 1.200x 1.225x
Additional Cash $ 2.33 $ 1.51 $ 0.69 $ --
------ ------ ------ ------
Total Value $34.53 $34.41 $34.29 $34.30
====== ====== ====== ======
MII Accretion/(Dilution) $(0.47) $(0.47) $(0.47) $(0.47)
====== ====== ====== ======
Percent Accretion/(Dilution) (18.2%)
=====
Exchange Ratio 1.150x 1.175x 1.200x 1.225x 1.250x
Additional Cash $ 3.19 $ 2.38 $ 1.57 $ 0.75 $ --
------ ------ ------ ------ ------
Total Value $35.39 $35.28 $35.17 $35.05 $35.00
====== ====== ====== ====== ======
MII Accretion/(Dilution) $(0.49) $(0.49) $(0.49) $(0.49) $(0.49)
====== ====== ====== ====== ======
Percent Accretion/(Dilution) (19.0%)
=====
Exchange Ratio 1.150x 1.175x 1.200x 1.225x 1.250x 1.300x
Additional Cash $ 2.29 $ 1.92 $ 1.53 $ 1.17 $ 0.79 $ --
------ ------ ------ ------ ------ ------
Total Value $34.49 $34.82 $35.13 $35.47 $35.79 $36.40
====== ====== ====== ====== ====== ======
MII Accretion/(Dilution) $(0.53) $(0.53) $(0.53) $(0.53) $(0.53) $(0.53)
====== ====== ====== ====== ====== ======
Percent Accretion/(Dilution) (20.5%)
=====
</TABLE>
- ----------
2
<PAGE>
1 Uses MII stock price at closing on April 27, 1999 ($28.00).
3
<PAGE>
Accretion/(Dilution) Analysis - With And Without Warrants
- --------------------------------------------------------------------------------
(Amounts in dollars)
<TABLE>
<CAPTION>
Transaction Value: $35.20 Transaction Value: $35.70 Transaction Value: $36.20
------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Without Warrants
MII Shares 1.15x 1.10x 1.15x 1.10x 1.15x 1.10x
Cash $ 3.00 $ 4.40 $ 3.50 $ 4.90 $ 4.00 $ 5.40
------ ------ ------ ------ ------ ------
Total Value1 $35.20 $35.20 $35.70 $35.70 $36.20 $36.20
====== ====== ====== ====== ====== ======
MII 2000 EPS Accretion/(Dilution) $(0.52) $(0.55) $(0.54) $(0.57) $(0.56) $(0.59)
Percent (28.6%) (30.3%) (29.8%) (31.5%) (31.0%) (32.7%)
====== ====== ====== ====== ====== ======
MII 2001 EPS Accretion/(Dilution) $(0.56) $(0.60) $(0.59) $(0.62) $(0.61) $(0.64)
------ ------ ------ ------ ------ ------
Percent (21.9%) (23.1%) (22.8%) (24.1%) (23.8%) (25.0%)
====== ====== ====== ====== ====== ======
With Warrants
MII Shares 1.15x 1.10x 1.15x 1.10x 1.15x 1.10x
Cash $ -- $ -- $ -- $ -- $ -- $ --
Warrant Value 3.00 4.40 3.50 4.90 4.00 5.40
------ ------ ------ ------ ------ ------
Total Value1 $35.20 $35.20 $35.70 $35.70 $36.20 $36.20
====== ====== ====== ====== ====== ======
MII 2000 EPS Accretion/(Dilution) $(0.38) $(0.35) $(0.38) $(0.35) $(0.38) $(0.35)
Percent (21.2%) (19.4%) (21.2%) (19.4%) (21.2%) (19.4%)
====== ====== ====== ====== ====== ======
MII 2001 EPS Accretion/(Dilution) $(0.42) $(0.38) $(0.42) $(0.38) $(0.42) $(0.38)
Percent (16.1%) (14.7%) (16.1%) (14.7%) (16.1%) (14.7%)
====== ====== ====== ====== ====== ======
</TABLE>
- ----------
1 Uses April 27, 1999 closing price for MII of $28.00.
4
<PAGE>
Effect Of Investing Excess Cash - Without Warrants
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share)
o Assumes 13 percent net income return on capital expenditures.
<TABLE>
<CAPTION>
Transaction Value: $35.20 Transaction Value: $35.70 Transaction Value $36.20
------------------------- ------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
MII Shares 1.15x 1.10x 1.15x 1.10x 1.15x 1.10x
Cash $ 3.00 $ 4.40 $ 3.50 $ 4.90 $ 4.00 $ 5.40
Total Value1 $ 35.20 $ 35.20 $ 35.70 $ 35.70 $ 36.20 $ 36.20
JRM Excess Cash $ 464.9 $ 444.5 $ 457.6 $ 437.2 $ 450.3 $ 429.9
Net Change In EPS From Investing Excess Cash 0.45 0.44 0.45 0.43 0.44 0.42
After Investing Excess Cash
MII 2000 EPS Accretion/(Dilution) $ (0.07) $ (0.11) $ (0.09) $ (0.14) $ (0.12) $ (0.17)
Percent (3.9%) (6.1%) (5.0%) (7.7%) (6.6%) (9.4%)
MII 2001 EPS Accretion/(Dilution) (0.11) (0.16) (0.14) (0.19) (0.17) (0.22)
Percent (4.3%) (6.2%) (5.4%) (7.4%) (6.6%) (8.5%)
</TABLE>
- ----------
1 Uses April 27, 1999 closing price for MII of $28.00.
5
<PAGE>
Effect Of Investing Excess Cash - With Warrants
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share)
<TABLE>
<CAPTION>
Transaction Value: $35.20 Transaction Value: $35.70 Transaction Value $36.20
------------------------- ------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
MII Shares 1.15x 1.10x 1.15x 1.10x 1.15x 1.10x
Cash $ -- $ -- $ -- $ -- $ -- $ --
Warrant Value 3.00 4.40 3.50 4.90 4.00 5.40
Total Value $ 35.20 $ 35.20 $ 35.70 $ 35.70 $ 36.20 $ 36.20
JRM Excess Cash $ 508.7 $ 508.7 $ 508.7 $ 508.7 $ 508.7 $ 508.7
Net Change In EPS From Investing Excess Cash 0.50 0.50 0.50 0.50 0.50 0.50
After Investing Excess Cash
MII 2000 EPS Accretion/(Dilution) $ 0.12 $ 0.15 $ 0.12 $ 0.15 $ 0.12 $ 0.15
Percent 6.6% 8.3% 6.6% 8.3% 6.6% 8.3%
MII 2001 EPS Accretion/(Dilution) 0.08 0.12 0.08 0.12 0.08 0.12
Percent 3.1% 4.7% 3.1% 4.7% 3.1% 4.7%
</TABLE>
6
<PAGE>
Warrant Valuation
- --------------------------------------------------------------------------------
(Amounts in dollars, except where noted)
Assumptions
- --------------------------------------------------------------------------------
Stock Price $28.00 (Closing Share Price On 2/18/98)
Exercise Price $35.00
Premium To Market 25.0%
Volatility 40.0%
Risk-Free Rate 5.0%
Time Period (years) 5.0
MDR Shares Outstanding 76.3 Million
Warrants Per JRM Share 0.49 0.55 0.61
------ ------ ------
Number Of Warrants Issued (Millions) 7.2 8.0 8.9
Value Per Warrant $ 9.06 $ 8.97 $ 8.88
Total Value ($ Millions) $ 64.9 $ 72.1 $ 79.1
Value Per JRM Share $ 4.44 $ 4.93 $ 5.42
7
<PAGE>
Analysis Of Transaction Premiums - At April 27, 1999
- --------------------------------------------------------------------------------
(Amounts in dollars)
<TABLE>
<CAPTION>
1.150x 1.150x 1.150x
1.225x 1.250x Plus $3.00 Plus $3.50 Plus $4.00
------ ------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total Value $34.30 $35.00 $35.20 $35.70 $36.20
Transaction Value Premium At April 27, 1999 Relative To:
April 27, 1999 JRM Stock Price 15.3% 17.6% 18.3% 20.0% 21.7%
If No Premium On Excess Cash1 27.1 31.3 32.4 35.4 38.4
</TABLE>
- ----------
1 Excess cash is $12.95 per share.
8
<PAGE>
Analysis Of JRM Value At April 27, 1999
- --------------------------------------------------------------------------------
(Amounts in dollars)
Prior To Announcement Date
20-Day 3-Month
One-Day Trading Trading
Prior1 Average2 Average2
------ -------- --------
Percent Change To Current
OSX 28.9% 39.7% 35.8%
Offshore Construction Comparables 49.5 61.5 55.1
Oil Service Comparables 35.4 45.6 40.7
------ ------ ------
Average 37.9% 48.9% 43.9%
====== ====== ======
JRM Share Price $24.38 $23.55 $24.26
Less: Excess Cash (12.95) (12.95) (12.95)
------ ------ ------
Net Share Price 11.43 10.60 11.31
Net Share Price Adjusted For Industry Recovery 15.76 15.79 16.28
Plus: Excess Cash 12.95 12.95 12.95
------ ------ ------
Estimated JRM Share Price If No Transaction $28.71 $28.74 $29.23
====== ====== ======
Estimated MII Share Price If No Transaction $27.67 $26.85 $28.28
====== ====== ======
-------------------------------------------------------
Suggested JRM Value Adjusted For Recovery3 $28.90
======
Suggested MII Value Adjusted For Recovery4 $27.60
======
-------------------------------------------------------
- ----------
1 March 9, 1999
2 Period ending March 9, 1999.
3 Closing price on April 27, 1999 was $29.75.
4 Closing price on April 27, 1999 was $28.00.
9
<PAGE>
Analysis Of Transaction Premiums
- --------------------------------------------------------------------------------
(Amounts in dollars)
o Simmons has calculated value premiums at various exchange ratios using
both the MII stock price at March 9, 19991 (one day prior to announcement)
and the MII stock price at April 27, 19992 (latest close), relative to
various historical JRM stock prices.
<TABLE>
<CAPTION>
Exchange Ratios
-----------------------------------------------------------
Historical 1.150x 1.150x 1.150x
JRM Price 1.225x 1.250x Plus $3.00 Plus $3.50 Plus $4.00
--------- ------ ------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Value Premium At March 9, 1999 Relative To Periods Ending
March 9, 1999:
One Day Prior $24.38 15.6% 17.9% 20.8% 22.9%
20 Day Trading Average 23.55 19.6 22.1 25.1 27.2
Three Month Average 24.26 16.1 18.5 21.4 23.5
Value Premium At April 27, 1999 Relative To Periods Ending
March 9, 1999:
One Day Prior $24.38 40.7% 43.6% 44.4% 46.5%
20 Day Trading Average 23.55 45.6 48.6 49.5 51.6
Three Month Average 24.26 41.4 44.3 45.1 47.2
</TABLE>
- ----------
1 $23.00 per share.
2 $28.00 per share.
10
<PAGE>
Analysis Of Transaction Premiums - Adjusted For Industry Recovery
- --------------------------------------------------------------------------------
o Simmons has calculated value premiums (at various exchange ratios)
relative to historical JRM stock prices after adjustment for the recent
oil service recovery. Simmons has also calculated effective premiums (to
adjusted stock prices) if no premium is attached to excess cash.
<TABLE>
<CAPTION>
Historical JRM Share Price Exchange Ratios
-------------------------- -------------------------------------------
Adjusted For 1.150x 1.150x 1.150x
For Industry Plus Plus Plus
Adjusted For Industry Recovery Actual Recovery 1.225x 1.250x $3.00 $3.50 $4.00
- -------------------------------------------------------- ------ -------- ------ ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Value Premium At April 27, 1999 Relative To Periods
Ending March 9, 1999:
One Day Prior $24.38 $28.71 19.5% 21.9% 22.6% 24.4%
20 Day Trading Average 23.55 28.74 19.4 21.8 22.5 24.2
Three Month Average 24.26 29.23 17.4 19.8 20.4 22.2
Value Premium At April 27, 1999 (If No Premium On Excess
Cash)1 Relative To Periods Ending March 9, 1999
One Day Prior $24.38 $28.71 35.5% 39.9% 41.2% 44.4%
20 Day Trading Average 23.55 28.74 35.2 39.7 40.9 44.1
Three Month Average 24.26 29.23 31.2 35.5 36.7 39.8
</TABLE>
- ----------
1 Excess cash is $12.95 per share.
11
<PAGE>
Minority Squeeze Out Premium Analysis - Comparable Stock Transactions1
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Date Transaction Percent
Acquiror Subsidiary Announced Value Acquired
- ------------------------------------------- -------------------------------- --------- ----------- --------
<S> <C> <C> <C> <C>
National Intergroup, Inc. FoxMeyer Corp 3/01/94 $ 79.7 19.5%
Ogden Corp. Ogden Projects, Inc. 6/06/94 110.3 15.8
Conseco, Inc. Bankers Life Holding 8/26/96 120.8 11.5
Apartment Investment And Management Company NHP, Inc. 2/20/97 114.5 44.9
World Access, Inc. NACT Telecommunications 1/20/98 53.1 32.0
ISP Holdings, Inc. International Specialty Products 3/30/98 324.5 16.2
- ----------------------------------------------------------------------------------------------------------------------
Mean2 $106.3 20.4%
Median 112.4 17.9
- ----------------------------------------------------------------------------------------------------------------------
Current Premium (No Premium On Excess Cash) Relative To JRM:
- ----------------------------------------------------------------------------------------------------------------------
1.225x $534.6 37.2%
1.250x $545.5 37.2
1.150x Plus $3.00 $545.7 37.2
1.150x Plus $3.50 $572.6 37.2
1.150x Plus $4.00
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Premium: Closing Valuation Premium: Closing Exchange
Relative Ratio Relative To Historical
To Historical Share Prices Share Price Ratios
------------------------------ ---------------------------------
Four Four
One-Day One-Week Weeks One-Day One-Week Weeks
Acquiror Prior Prior Prior Prior Prior Prior
- ------------------------------------------- ------- -------- ----- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
National Intergroup, Inc. 7.1% 9.1% 11.2% 1.7% 3.6% 4.7%
Ogden Corp. 5.8 17.6 20.5 5.8 15.6 13.6
Conseco, Inc. 14.9 10.5 11.7 (22.5) (26.5) (30.4)
Apartment Investment And Management Company 28.3 25.2 16.9 28.3 27.0 21.2
World Access, Inc. 12.0 12.5 16.7 23.1 29.7 3.0
ISP Holdings, Inc. 4.3 1.7 14.5 N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Mean2 9.9% 12.4% 15.6% 10.2% 15.4% 7.1%
Median 9.5 11.5 15.6 5.8 15.6 4.7
- -----------------------------------------------------------------------------------------------------------------
Current Premium (No Premium On Excess Cash) Relative To JRM:
- -----------------------------------------------------------------------------------------------------------------
1.225x 15.6% 17.0% 14.7%
1.250x 17.9% 19.4% 17.0%
1.150x Plus $3.00 20.8%3 24.1%3 19.9%3
1.150x Plus $3.50 22.9%3 42.2%3 21.9%3
1.150x Plus $4.00
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Securities Data Corporation
- ----------
1 Common stock issued to sellers. Transactions over $50 million since
January 1, 1994.
2 Excluding high and low.
3 Uses March 9, 1999 closing price for MII to calculate ratio premium.
12
<PAGE>
Premiums In All-Cash Transaction
- --------------------------------------------------------------------------------
(Amounts in dollars)
<TABLE>
<CAPTION>
Cash Offer Value
JRM --------------------------------------------------
Price $34.00 $35.00 $36.00 $37.00 $38.00
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Premium Relative To:
April 27, 1999 $29.75 14.3% 17.6% 21.0% 24.4% 27.7%
Estimated JRM Price Adjusted For Recovery 28.90 17.6 21.1 24.6 28.0 31.5
If No Premium On Excess Cash:
April 27, 1999 $29.75 25.3% 31.3% 37.2% 43.2% 49.1%
Estimated JRM Price Adjusted For Recovery 28.00 32.0 38.2 44.5 50.8 57.0
MII EPS Accretion/(Dilution)
2000 $(0.47) $(0.50) $(0.53) $(0.56) $(0.59)
Percent (25.9%) (27.5%) (29.2%) (30.8%) (32.4%)
2001 $(0.30) $(0.33) $(0.35) $(0.38) $(0.41)
Percent (11.5%) (12.6%) (13.8%) (14.9%) (16.1%)
</TABLE>
13
<PAGE>
Comparable Minority Squeeze Out Premium Analysis - Cash Transactions1
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Premium: Closing Valuation
Relative To
Historical Share Prices
--------------------------
Four
Date Transaction Percent One-Day One-Week Weeks
Acquiror Subsidiary Announced Value Acquired Prior Prior Prior
- -------------------------------- ------------------------- --------- ----------- -------- ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
WMX Technologies Chemical Waste Management 7/28/94 $397.4 21.4% 10.6% 8.9% 1.1%
GTE Corp. Contel Cellular, Inc. 9/08/94 254.3 10.0 43.7 37.8 36.0
PacifiCorp Pacific Telecom 11/02/94 159.0 13.4 23.7 23.7 23.7
Fleet Financial Group Fleet Mortgage Group 12/28/94 188.1 19.0 19.4 18.5 18.5
Club Mediterrenee SA Club Med Inc. 4/05/94 153.4 33.0 41.4 39.9 44.6
COBE Laboratories SA (Gambro AB) REN Corp-USA 7/14/95 182.1 47.0 27.0 20.3 26.0
Novartis AG SyStemix Inc. 5/27/96 107.6 26.8 25.6 23.1 25.3
Zurich Versicherungs GmbH Zurich Reinsurance Centre 1/13/97 319.0 34.0 17.1 18.5 11.6
Mafco Holdings Inc. Mafco Consolidated Group 1/21/97 116.8 15.0 23.5 23.5 27.6
Monsanto, Inc. Calgene Inc. 1/28/97 242.6 43.7 62.0 60.0 60.0
Anthem, Inc. Acordia, Inc. 6/02/97 193.2 33.2 12.7 11.5 26.0
Investor Group BET Holdings, Inc. 3/17/98 462.3 N/A 53.7 58.5 58.2
Dow AgroSciences (Dow Chemical) Mycogen Corp. 4/30/98 355.2 N/A 41.8 40.0 52.4
Usinor SA J&L Specialty Steel, Inc. 9/23/98 115.0 46.5 100.0 112.5 37.8
- ------------------------------------------------------------------------------------------------------------------------------------
Mean2 $223.0 28.6% 32.6% 31.3% 32.3%
Median 190.7 29.9 26.3 23.6 26.8
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Securities Data Corporation.
- ----------
1 Cash transactions in the $100 million to $1 billion range since January 1,
1994.
2 Excluding high and low.
14
<PAGE>
Public Company Acquisition Premiums - Cash Transactions1
- --------------------------------------------------------------------------------
Number Of Average
Transactions Premium
------------ -------
1994 47 46.3%
1995 66 41.7
1996 74 33.7
1997 123 32.1
1998 117 31.1
1999 YTD2 30 27.5
- --------------------------------------------------------------------------------
Weighted Average 34.7%
- --------------------------------------------------------------------------------
- ----------
1 Calculated using closing value relative to seller's value one-day prior to
announcement.
2 Through March 9, 1999. Transactions in the range of $100 million to $1 billion
in size.
15
<PAGE>
Acquisition Assumptions - All-Cash Transaction
- --------------------------------------------------------------------------------
o Effect on MII's earnings per share in projected 2000 and 2001 of a squeeze
out was examined.
o An all cash offering price of $36.00 per share was used.
o Goodwill of approximately $326 million from the transaction was amortized
over 15 years, consistent with the period used on the Offshore Pipelines,
Inc. merger.
o Consolidation cost savings of $5 million1 in SG&A were assumed. Source:
MII management.
- ----------
1 Pretax amount. Tax rate assumed at 40 percent.
16
<PAGE>
Projected FY 2000 Pro Forma Income Statement
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share amounts)
o The proposed transaction is dilutive to MII's EPS and CFPS in FY 2000.
<TABLE>
<CAPTION>
Consolidated
MII JRM Adjustments Combined
------------- --------- ----------- --------
<S> <C> <C> <C> <C>
Revenues $ 2,920.8 $ 789.3 $ 2,920.8
Cost Of Sales 2,479.4 633.7 2,479.4
--------- --------- ---------
Gross Profit 441.4 155.5 441.4
Gross Profit Margin 15.1% 19.7% 15.1%
SG&A Expense 213.9 78.1 (5.0) 208.9
Equity Expense/(Income) (13.9) (5.4) -- (13.9)
--------- --------- --------- ---------
EBDIT 241.4 82.8 5.0 246.4
EBDIT Margin 8.3% 10.5% 8.4%
Depreciation 82.1 48.8 82.1
Interest Expense/(Income) (18.4) (27.1) 28.9 10.5
Other Expense/(Income) (4.7) (3.3) (4.7)
Minority Interest 16.2 0.2 (16.0) 0.2
Goodwill Amortization -- -- 21.7 21.7
--------- --------- --------- ---------
Pretax Income 166.3 64.2 (29.7) 136.5
Taxes 57.5 13.8 2.0 59.5
--------- --------- --------- ---------
Net Income 108.8 50.4 (31.7) 77.1
Less: Dividends On Series A Preferred Stock -- 7.2 --
--------- --------- --------- ---------
Net Income To Common $ 108.8 $ 43.2 $ (31.7) $ 77.1
========= ========= ========= =========
Net Income Margin 3.7% 5.5% 2.6%
========= ========= =========
- --------------------------------------------------------------------------------------------------
Shares Outstanding1 60.2 39.3 -- 60.2
Earnings Per Share $ 1.81 $ 1.10 $ 1.28
EPS Accretion/(Dilution) (0.53)
Cash Flow Per Share $ 3.17 $ 2.34 $ 3.01
CFPS Accretion/(Dilution) (0.17)
- --------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
- ----------
1Includes options.
18
<PAGE>
Projected FY 2001 Pro Forma Income Statement
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share amounts)
o The proposed transaction is dilutive to MII's EPS and CFPS in FY 2001.
<TABLE>
<CAPTION>
Consolidated
MII JRM Adjustments Combined
------------- --------- ----------- --------
<S> <C> <C> <C> <C>
Revenues $ 3,359.0 $ 1,094.8 $ 3,359.0
Cost Of Sales 2,842.4 916.6 2,842.4
--------- --------- ---------
Gross Profit 516.6 178.2 516.6
Gross Profit Margin 15.4% 16.3% 15.4%
SG&A Expense 213.2 75.5 $ (5.0) 208.2
Equity Expense/(Income) (15.0) (4.6) -- (15.0)
--------- --------- --------- ---------
EBDIT 318.4 107.3 5.0 323.4
EBDIT Margin 9.5% 9.8% 9.6%
Depreciation 69.2 37.3 69.2
Interest Expense/(Income) (14.9) (28.1) 28.9 14.0
Other Expense/(Income) (0.6) 0.8 (0.6)
Minority Interest 26.6 0.3 (26.3) 0.3
Goodwill Amortization -- -- 21.7 21.7
--------- --------- --------- ---------
Pretax Income 238.2 97.0 (19.4) 218.8
Taxes 83.0 18.5 2.0 85.0
--------- --------- --------- ---------
Net Income 155.1 78.6 (21.4) 133.8
Less: Dividends On Series A Preferred Stock -- 7.2 --
--------- --------- ---------
Net Income To Common $ 155.1 $ 71.4 $ (21.4) $ 133.8
========= ========= ========= =========
Net Income Margin 4.6% 6.5% 4.0%
========= ========= =========
- --------------------------------------------------------------------------------------------------
Shares Outstanding1 60.2 39.3 -- 60.2
Earnings Per Share $ 2.58 $ 1.82 $ 2.22
EPS Accretion/(Dilution) (0.35)
Cash Flow Per Share $ 3.73 $ 2.77 $ 3.73
CFPS Accretion/(Dilution) 0.01
- --------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
- ----------
1 Includes options.
20
<PAGE>
EXHIBIT 99.(B)(15)
DRAFT
CONFIDENTIAL
Draft Supplemental Analysis Prepared For
JRM Independent Committee
SIMMONS & COMPANY
INTERNATIONAL
MAY 4, 1999
<PAGE>
<TABLE>
<CAPTION>
Comparison Of Projections
---------------------------------------------------------------------------------------------------------------
(Dollar amounts in millions)
JRM MII
----------------------------------------------- ------------------------
Fiscal Year 2000 2001 2000
----------------------------------------------------------------------------
Date Of Projection Preparation 12/98 3/99 12/98 3/99 12/98 3/99
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 839.8 $ 789.3 $ 1,228.1 $ 1,094.8 $ 2,903.3 $ 2,920.8
Cost Of Sales 659.7 633.7 1,040.7 916.6 2,337.8 2,479.4
--------- --------- --------- --------- --------- ---------
Gross Profit 180.0 155.5 187.4 178.2 565.4 441.4
Gross Profit Margin 21.4% 19.7% 15.3% 16.3% 19.5% 15.1%
SG&A 86.4 78.1 86.2 75.5 315.2 213.9
Equity Expense/(Income) (6.1) (5.4) (7.3) (4.6) (9.4) (13.9)
--------- --------- --------- --------- --------- ---------
EBDIT 99.8 82.8 108.5 107.3 259.6 241.4
EBDIT Margin 11.9% 10.5% 8.8% 9.8% 8.9% 8.3%
Depreciation 55.4 48.8 47.8 37.3 92.4 82.1
Interest Expense/(Income) (23.3) (27.1) (21.6) (28.1) (20.5) (18.4)
Other Expense/(Income) (3.8) (3.3) (4.0) 0.8 0.5 (4.7)
Minority Interest -- 0.2 -- 0.3 11.5 16.2
Goodwill Amortization
-- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Pretax Income 71.4 64.2 86.3 97.0 175.6 166.3
Taxes 16.8 13.8 18.9 18.5 64.0 57.5
--------- --------- --------- --------- --------- ---------
Net Income 54.7 50.4 67.4 78.6 111.6 108.8
Less: Dividends On Series A Preferred
Stock 7.2 7.2 7.2 7.2 -- --
--------- --------- --------- --------- --------- ---------
Net Income To Common $ 47.5 $ 43.2 $ 60.2 $ 71.4 $ 111.6 $ 108.8
========= ========= ========= ========= ========= =========
5.7% 5.5% 4.9% 6.5% 3.9% 3.7%
Earnings Per Share $ 1.21 $ 1.10 $ 1.53 $ 1.82 $ 1.85 $ 1.81
<CAPTION>
MII
-----------------------
Fiscal Year 2001
-----------------------
Date Of Projection Preparation 12/98 3/99
--------- ---------
<S> <C> <C>
Revenues $ 3,378.7 $ 3,359.0
Cost Of Sales 2,763.0 2,842.4
--------- ---------
Gross Profit 615.7 516.6
Gross Profit Margin 18.2% 15.4%
SG&A 317.5 213.2
Equity Expense/(Income) (9.9) (15.0)
--------- ---------
EBDIT 308.1 318.4
EBDIT Margin 9.1% 9.5%
Depreciation 85.4 69.2
Interest Expense/(Income) (18.0) (14.9)
Other Expense/(Income) (0.1) (0.6)
Minority Interest 15.0 26.6
Goodwill Amortization
-- --
--------- ---------
Pretax Income 225.8 238.2
Taxes 81.9 83.0
--------- ---------
Net Income 143.9 155.1
Less: Dividends On Series A Preferred
Stock -- --
--------- ---------
Net Income To Common $ 143.9 $ 155.1
========= =========
4.3% 4.6%
Earnings Per Share $ 2.39 $ 2.58
</TABLE>
1
<PAGE>
Accretion/(Dilution) Analysis - With And Without Warrants
- --------------------------------------------------------------------------------
(Amounts in dollars)
o Assumes no incremental net income from investing excess cash (i.e.excess cash
continues to earn 5.5 percent).
<TABLE>
<CAPTION>
Transaction Value: $36.35 Transaction Value: $36.85 Transaction Value: $37.35
------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Without Warrants
- ----------------
MII Shares 1.15x 1.09x1 1.15x 1.09x1 1.15x 1.09x1
Cash $ 3.00 $ 4.85 $ 3.50 $ 5.35 $ 4.00 $ 5.85
------ ------ ------ ------ ------ ------
Total Value2 $36.35 $36.35 $36.85 $36.85 $37.35 $37.35
====== ====== ====== ====== ====== ======
MII 2000 EPS Accretion/(Dilution) $(0.47) $(0.47) $(0.48) $(0.48) $(0.49) $(0.49)
Percent (25.8%) (26.0%) (26.4%) (26.6%) (27.1%) (27.3%)
====== ====== ====== ====== ====== ======
MII 2001 EPS Accretion/(Dilution) $(0.50) $(0.49) $(0.51) $(0.51) $(0.52) $(0.52)
Percent (19.4%) (19.2%) (19.8%) (19.6%) (20.3%) (20.1%)
====== ====== ====== ====== ====== ======
With Warrants
- --------------
MII Shares 1.15x 1.09x 1.15x 1.06x 1.15x 1.09x
Cash $ -- $ -- $ -- $ -- $ -- $ --
Warrant Value 3.00 4.85 3.50 5.35 4.00 5.85
------ ------ ------ ------ ------ ------
Total Value2 $36.35 $36.35 $36.85 $36.85 $37.35 $37.35
====== ====== ====== ====== ====== ======
MII 2000 EPS Accretion/(Dilution) $(0.44) $(0.42) $(0.44) $(0.42) $(0.45) $(0.43)
Percent (24.1%) (23.1%) (24.4%) (23.5%) (24.8%) (23.9%)
====== ====== ====== ====== ====== ======
MII 2001 EPS Accretion/(Dilution) $(0.47) $(0.44) $(0.48) $(0.45) $(0.48) $(0.46)
Percent (18.2%) (17.2%) (18.4%) (17.4%) (18.7%) (17.7%)
====== ====== ====== ====== ====== ======
</TABLE>
- ----------
1 Ratio of stock prices on April 30, 1999 was 1.0862x.
2 Uses April 30, 1999 closing price for MII of $29.00.
2
<PAGE>
Effect Of Investing Excess Cash - Without Warrants
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share)
o Assumes 13 percent net income return on capital expenditures.
<TABLE>
<CAPTION>
Transaction Value: $36.35 Transaction Value: $36.85 Transaction Value $37.35
------------------------- ------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
MII Shares 1.15x 1.09x 1.15x 1.09x 1.15x 1.09x
Cash $ 3.00 $ 4.85 $ 3.50 $ 5.35 $ 4.00 $ 5.85
------- ------- ------- ------- ------- -------
Total Value1 $ 36.35 $ 36.35 $ 36.85 $ 36.85 $ 37.35 $ 37.35
======= ======= ======= ======= ======= =======
JRM Excess Cash2 $ 464.9 $ 437.9 $ 457.6 $ 430.6 $ 450.3 $ 423.3
Net Change In EPS From Investing Excess Cash 0.45 0.43 0.45 0.42 0.44 0.42
After Investing Excess Cash
- ----------------------------
MII 2000 EPS Accretion/(Dilution) $ (0.02) $ (0.04) $ (0.03) $ (0.06) $ (0.05) $ (0.07)
Percent (1.1%) (2.2%) (1.7%) (3.3%) (2.8%) (3.9%)
MII 2001 EPS Accretion/(Dilution) $ (0.05) $ (0.06) $ (0.06) $ (0.09) $ (0.08) $ (0.10)
Percent (1.9%) (2.3%) (2.3%) (3.5%) (3.1%) (3.9%)
</TABLE>
- ----------
1 Uses April 30, 1999 closing price for MII of $29.00.
2 Net excess cash after cash paid to JRM shareholders.
3
<PAGE>
Effect Of Investing Excess Cash - With Warrants
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share)
<TABLE>
<CAPTION>
Transaction Value: $36.35 Transaction Value: $36.85 Transaction Value $37.35
------------------------- ------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
MII Shares 1.15x 1.09x 1.15x 1.09x 1.15x 1.09x
Cash $ -- $ -- $ -- $ -- $ -- $ --
Warrant Value 3.00 4.85 3.50 5.35 4.00 5.85
------- ------- ------- ------- ------- -------
Total Value $ 36.35 $ 36.35 $ 36.85 $ 36.85 $ 37.35 $ 37.35
======= ======= ======= ======= ======= =======
JRM Excess Cash $ 508.7 $ 508.7 $ 508.7 $ 508.7 $ 508.7 $ 508.7
Net Change In EPS From Investing Excess Cash 0.50 0.50 0.50 0.50 0.50 0.50
After Investing Excess Cash
- ----------------------------
MII 2000 EPS Accretion/(Dilution) $ 0.06 $ 0.08 $ 0.06 $ 0.08 $ 0.05 $ 0.07
Percent 3.3% 4.4% 3.3% 4.4% 2.8% 3.9%
MII 2001 EPS Accretion/(Dilution) $ 0.03 $ 0.06 $ 0.02 $ 0.05 $ 0.02 $ 0.04
Percent 1.2% 2.3% 0.7% 1.9% 0.7% 1.6%
</TABLE>
4
<PAGE>
Warrant Valuation
- --------------------------------------------------------------------------------
(Amounts in dollars, except where noted)
Assumptions
- --------------------------------------------------------------------------------
Stock Price $ 29.00 (Closing Share Price On 4/30/98)
Exercise Price $ 36.25
Premium To Market 25.0%
Volatility 40.0%
Risk-Free Rate 5.0%
Time Period (years) 5.0
MII Shares Outstanding 77.0 Million
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Warrants Per JRM Share 0.31 0.36 0.42 0.52 0.58 0.64
------ ------ ------ ------ ------ ------
Number Of Warrants Issued (Millions) 4.5 5.3 6.1 7.6 8.5 9.3
Value Per Warrant $ 9.70 $ 9.61 $ 9.51 $ 9.35 $ 9.25 $ 9.16
Total Value ($ Millions) $ 43.9 $ 50.5 $ 58.3 $ 71.0 $ 78.4 $ 85.6
Value Per JRM Share $ 3.01 $ 3.46 $ 3.99 $ 4.86 $ 5.37 $ 5.86
</TABLE>
5
<PAGE>
Comparable Minority Squeeze Out Premium Analysis1
- --------------------------------------------------------------------------------
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Date Transaction
Acquiror Subsidiary Announced Value
- -------------------------------------------- --------------------------------- --------- -----------
<S> <C> <C> <C>
Ogden Corp. Ogden Projects, Inc. 6/06/94 $ 110.3
WMX Technologies Chemical Waste Management 7/28/94 397.4
GTE Corp. Contel Cellular, Inc. 9/08/94 254.3
PacifiCorp Pacific Telecom 11/02/94 159.0
Fleet Financial Group Fleet Mortgage Group 12/28/94 188.1
Club Mediterrenee SA Club Med Inc. 4/05/95 153.4
COBE Laboratories SA (Gambro AB) REN Corp-USA 7/14/95 182.1
Novartis AG SyStemix Inc. 5/27/96 107.6
Conseco, Inc. Bankers Life Holding 8/26/96 120.8
Zurich Versicherungs GmbH Zurich Reinsurance Centre 1/13/97 319.0
Mafco Holdings Inc. Mafco Consolidated Group 1/21/97 116.8
Monsanto, Inc. Calgene Inc. 1/28/97 242.6
Apartment Investment And Management Company NHP, Inc. 2/20/97 114.5
Anthem, Inc. Acordia, Inc. 6/02/97 193.2
Investor Group BET Holdings, Inc. 3/17/98 462.3
ISP Holdings, Inc. International Specialty Products 3/30/98 324.5
Dow AgroSciences (Dow Chemical) Mycogen Corp. 4/30/98 355.2
Usinor SA J&L Specialty Steel, Inc. 9/23/98 115.0
- --------------------------------------------------------------------------------------------------------------------------
Mean2 $209.1
Median 185.1
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Premium: Closing Valuation Relative To
Historical Share Prices
--------------------------------------
Percent One Day One Week Four Weeks
Acquiror Acquired Prior Prior Prior
- -------------------------------------------- -------- ------- -------- ----------
<S> <C> <C> <C> <C>
Ogden Corp. 15.8% 5.8% 17.6% 20.5%
WMX Technologies 21.4 10.6 8.9 1.1
GTE Corp. 10.0 43.7 37.8 36.0
PacifiCorp 13.4 23.7 23.7 23.7
Fleet Financial Group 19.0 19.4 18.5 18.5
Club Mediterrenee SA 33.0 41.4 39.9 44.6
COBE Laboratories SA (Gambro AB) 47.0 27.0 20.3 26.0
Novartis AG 26.8 25.6 23.1 25.3
Conseco, Inc. 11.5 14.9 10.5 11.7
Zurich Versicherungs GmbH 34.0 17.1 18.5 11.6
Mafco Holdings Inc. 15.0 23.5 23.5 27.6
Monsanto, Inc. 43.7 62.0 60.0 60.0
Apartment Investment And Management Company 44.9 28.3 25.2 16.9
Anthem, Inc. 33.2 12.7 11.5 26.0
Investor Group N/A 53.7 58.5 58.2
ISP Holdings, Inc. 16.2 4.3 1.7 14.5
Dow AgroSciences (Dow Chemical) N/A 41.8 40.0 52.4
Usinor SA 46.5 100.0 112.5 37.8
- ------------------------------------------------------------------------------------------------------
Mean2 26.7% 26.9% 30.3% 30.3%
Median 24.1 23.6 23.6 26.0
- ------------------------------------------------------------------------------------------------------
</TABLE>
Source: Securities Data Corporation.
- -------------------------------------
1 Transactions in the $100 million to $1 billion range since January 1,
1994.
2 Excluding high and low.
6
<PAGE>
Analysis Of Transaction Premiums - At April 30, 1999
- --------------------------------------------------------------------------------
(Amounts in dollars)
<TABLE>
<CAPTION>
1.150x 1.150x 1.150x
1.225x 1.250x Plus $3.00 Plus $3.50 Plus $4.00
------ ------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total Value $35.53 $36.25 $36.35 $36.85 $37.35
Transaction Value Premium At April 30, 1999 Relative To
April 30, 1999 JRM Stock Price 12.8% 15.1% 15.4% 17.0% 18.6%
</TABLE>
7
<PAGE>
Closing Market Share Price Ratio Since Announcement On March 10, 1999
- --------------------------------------------------------------------------------
(Amounts in dollars)
<TABLE>
<CAPTION>
Share Prices
----------------------------------------- Share Price
Date JRM MII Ratio
--------------- --------------- --------------- ----------------
<S> <C> <C> <C>
3/10/99 $28.13 $24.31 1.157x
3/11/99 29.88 25.63 1.166x
3/12/99 30.69 26.44 1.161x
3/15/99 28.88 24.81 1.164x
3/16/99 29.44 25.06 1.175x
3/17/99 30.50 26.13 1.167x
3/18/99 30.94 26.50 1.167x
3/19/99 30.25 25.50 1.186x
3/22/99 30.06 25.88 1.162x
3/23/99 29.25 25.00 1.170x
3/24/99 29.50 25.31 1.165x
3/25/99 29.56 25.38 1.165x
3/26/99 30.44 25.81 1.179x
3/29/99 31.19 26.56 1.174x
3/30/99 29.69 25.50 1.164x
3/31/99 29.88 25.31 1.180x
4/01/99 29.63 25.13 1.179x
4/05/99 29.81 25.38 1.175x
4/06/99 29.69 25.00 1.188x
4/07/99 28.88 24.13 1.197x
4/08/99 28.94 24.75 1.169x
4/09/99 29.88 25.56 1.169x
4/12/99 29.63 25.44 1.165x
4/13/99 30.69 26.56 1.155x
4/14/99 31.38 27.06 1.159x
4/15/99 31.94 27.38 1.167x
4/16/99 34.31 29.56 1.161x
4/19/99 34.75 29.94 1.161x
-------
1.170x
20 Day Trading Average1 =======
Trading Discount At Various Potential Structures
1.225x (4.5%)
1.250x (6.4%)
1.150x Plus $3.002 (6.7%)
1.150x Plus $3.502 (7.9%)
1.150x Plus $4.002 (9.2%)
</TABLE>
- ----------
8
<PAGE>
1 Ending April 19, 1999.
2 Uses MII closing price on April 30, 1999 of $29.00.
9
<PAGE>
Premiums And Accretion/(Dilution) In All-Cash Transaction
- --------------------------------------------------------------------------------
(Amounts in dollars, except where noted)
<TABLE>
<CAPTION>
Cash Offer Value
JRM --------------------------------------------------------------
Price $36.00 $37.00 $38.00 $39.00 $40.00
----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Premium Relative To:
April 27, 1999 $ 31.50 14.3% 17.5% 20.6% 23.8% 27.0%
MII EPS Accretion/(Dilution)
2000 $ (0.53) $ (0.56) $ (0.59) $ (0.62) $ (0.65)
Percent (29.2%) (30.8%) (32.4%) (34.1%) (35.7%)
2001 $ (0.35) $ (0.38) $ (0.41) $ (0.44) $ (0.47)
Percent (13.8%) (14.9%) (16.1%) (17.2%) (18.4%)
Excess Cash (Post Transaction, $ million) -- -- -- -- --
</TABLE>
10
<PAGE>
Public Company Acquisition Premiums - Cash Transactions1
- --------------------------------------------------------------------------------
Number Of Average
Transactions Premium
------------ -------
1994 47 46.3%
1995 66 41.7
1996 74 33.7
1997 123 32.1
1998 117 31.1
1999 YTD2 30 27.5
- --------------------------------------------------------------------------------
Weighted Average 34.7%
- --------------------------------------------------------------------------------
- ----------
1 Calculated using closing value relative to seller's value one-day prior to
announcement.
2 Through March 9, 1999. Transactions in the range of $100 million to $1
billion in size.
11
<PAGE>
Acquisition Assumptions - All-Cash Transaction
- --------------------------------------------------------------------------------
o Effect on MII's earnings per share in projected 2000 and 2001 of a squeeze
out was examined.
o An all cash offering price of $38.00 per share was used.
o Goodwill of approximately $355 million from the transaction was amortized
over 15 years, consistent with the period used on the Offshore Pipelines,
Inc. merger.
o Consolidation cost savings of $5 million1 in SG&A were assumed. Source:
MII management.
- ----------
1 Pretax amount. Tax rate assumed at 40 percent.
12
<PAGE>
Projected FY 2000 Pro Forma Income Statement
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share amounts)
o The proposed transaction is dilutive to MII's EPS and CFPS in FY 2000.
<TABLE>
<CAPTION>
Consolidated MII JRM Adjustments Combined
---------------- --- ----------- --------
<S> <C> <C> <C> <C>
Revenues $2,920.8 $ 789.3 $2,920.8
Cost Of Sales 2,479.4 633.7 2,479.4
-------- --------- --------
Gross Profit 441.4 155.5 441.4
Gross Profit Margin 15.1% 19.7% 15.1%
SG&A Expense 213.9 78.1 (5.0) 208.9
Equity Expense/(Income) (13.9) (5.4) -- (13.9)
-------- --------- ---------- --------
EBDIT 241.4 82.8 5.0 246.4
EBDIT Margin 8.3% 10.5% 8.4%
Depreciation 82.1 48.8 82.1
Interest Expense/(Income) (18.4) (27.1) 30.5 12.1
Other Expense/(Income) (4.7) (3.3) (4.7)
Minority Interest 16.2 0.2 (16.0) 0.2
Goodwill Amortization -- -- 23.7 23.7
-------- --------- ---------- --------
Pretax Income 166.3 64.2 (33.3) 133.0
Taxes 57.5 13.8 2.0 59.5
-------- --------- ---------- --------
Net Income 108.8 50.4 (35.3) 73.5
Less: Dividends On Series A Preferred Stock -- 7.2 --
-------- --------- --------
Net Income To Common $ 108.8 $ 43.2 $ (35.3) $ 73.5
========= ========== =========== ==========
Net Income Margin 3.7% 5.5% 2.5%
========= ========== ==========
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Outstanding1 60.2 39.3 -- 60.2
Earnings Per Share $ 1.81 $ 1.10 $ 1.22
EPS Accretion/(Dilution) (0.59)
Cash Flow Per Share $ 3.17 $ 2.34 $ 2.98
CFPS Accretion/(Dilution) (0.19)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
- ----------
1 Includes options.
14
<PAGE>
Projected FY 2001 Pro Forma Income Statement
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share amounts)
o The proposed transaction is dilutive to MII's EPS and CFPS in FY 2001.
<TABLE>
<CAPTION>
Consolidated MII JRM Adjustments Combined
---------------- --- ----------- --------
<S> <C> <C> <C> <C>
Revenues $ 3,359.0 $ 1,094.8 $ 3,359.0
Cost Of Sales 2,842.4 916.6 2,842.4
--------- ---------- ---------
Gross Profit 516.6 178.2 516.6
Gross Profit Margin 15.4% 16.3% 15.4%
SG&A Expense 213.2 75.5 $ (5.0) 208.2
Equity Expense/(Income) (15.0) (4.6) -- (15.0)
--------- ---------- ----------- ---------
EBDIT 318.4 107.3 5.0 323.4
EBDIT Margin 9.5% 9.8% 9.6%
Depreciation 69.2 37.3 69.2
Interest Expense/(Income) (14.9) (28.1) 30.5 15.6
Other Expense/(Income) (0.6) 0.8 (0.6)
Minority Interest 26.6 0.3 (26.3) 0.3
Goodwill Amortization -- -- 23.7 23.7
--------- ---------- ----------- ---------
Pretax Income 238.2 97.0 (22.9) 215.2
Taxes 83.0 18.5 2.0 85.0
--------- ---------- ----------- ---------
Net Income 155.1 78.6 (24.9) 130.2
Less: Dividends On Series A Preferred Stock -- 7.2 --
--------- ---------- ---------
Net Income To Common $ 155.1 $ 71.4 $ (24.9) $ 130.2
========= ========== =========== =========
Net Income Margin 4.6% 6.5% 3.9%
========= ========== =========
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Outstanding1 60.2 39.3 -- 60.2
Earnings Per Share $ 2.58 $ 1.82 $ 2.16
EPS Accretion/(Dilution) (0.41)
Cash Flow Per Share $ 3.73 $ 2.77 $ 3.71
CFPS Accretion/(Dilution) (0.02)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
- ----------
1 Includes options.
16
<PAGE>
Comparison Of Multiples Based On Merrill Lynch Comparable Groups1
- --------------------------------------------------------------------------------
1999 P/E Multiple 2000 P/E Multiple
----------------- -----------------
JRM Comparables
Aker Maritime 12.7x 12.0x
Coflexip 17.0x 15.0x
Cooper Cameron 35.3x 27.3x
Dril-Quip 33.4x 25.4x
DSND 9.5x 9.8x
IHC Caland 16.6x 14.6x
Global Industries 49.2x 25.7x
Oceaneering 14.7x 14.2x
Saipem 14.5x 12.8x
Stolt Comex 16.4x 13.0x
------ ------
Average 21.9x 17.0x
====== ======
MII Comparables
Babcock Intl. Group 10.5x 9.4x
Jacobs Engineering 16.0x 13.8x
Fluor 12.6x 14.5x
Litton Industries 14.9x 13.4x
Foster Wheeler 10.2x 16.5x
------ ------
Average 12.8x 13.5x
====== ======
- ----------
1 As of April 30, 1999.
17
<PAGE>
Analysis Of JRM Value At April 30, 1999
- --------------------------------------------------------------------------------
(Amounts in dollars)
<TABLE>
<CAPTION>
Prior To Announcement Date
-----------------------------------------
One-Day 20-Day Trading 3-Month Trading
Prior1 Average2 Average2
------- -------------- ---------------
<S> <C> <C> <C>
Percent Change To Current
OSX 39.4% 51.1% 46.9%
Offshore Construction Comparables 56.7 69.3 62.6
Oil Service Comparables 44.2 55.0 49.8
------ ------ ------
Average 46.7% 58.5% 53.1%
====== ====== ======
JRM Share Price $24.38 $23.55 $24.26
Less: Excess Cash (12.95) (12.95) (12.95)
------ ------ ------
Net Share Price 11.43 10.60 11.31
Net Share Price Adjusted For Industry Recovery 16.77 16.80 17.32
Plus: Excess Cash 12.95 12.95 12.95
------ ------ ------
Estimated JRM Share Price If No Transaction $29.72 $29.75 $30.27
====== ====== ======
Estimated MII Share Price If No Transaction $28.76 $27.98 $29.41
====== ====== ======
- --------------------------------------------------------------------------------
Suggested JRM Value Adjusted For Recovery3 $29.91
======
Suggested MII Value Adjusted For Recovery4 $28.72
======
</TABLE>
- --------------------------------------------------------------------------------
- ----------
1 March 9, 1999
2 Period ending March 9, 1999.
3 Closing price on April 30, 1999 was $31.50.
4 Closing price on April 30, 1999 was $29.00.
18
<PAGE>
Analysis Of MII EPS Accretion/(Dilution)1
- --------------------------------------------------------------------------------
(Amounts in dollars)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FY 2000
Exchange Ratio 1.000x 1.050x 1.100x 1.150x 1.200x 1.225x
Additional Cash $ 5.92 $ 4.56 $ 3.17 $ 1.85 $ 0.49 $ --
------- ------- ------- ------- ------- -------
Total Value $ 34.92 $ 35.01 $ 35.07 $ 35.20 $ 35.29 $ 35.53
======= ======= ======= ======= ======= =======
MII Accretion/(Dilution) $ (0.44) $ (0.44) $ (0.44) $ (0.44) $ (0.44) $ (0.44)
======= ======= ======= ======= ======= =======
Percent Accretion/(Dilution) (24.6%)
=======
Exchange Ratio 1.000x 1.050x 1.100x 1.150x 1.200x 1.225x 1.250x
Additional Cash $ 6.76 $ 5.41 $ 4.07 $ 2.72 $ 1.37 $ 0.69 $ --
------- ------- ------- ------- ------- ------- -------
Total Value $ 35.76 $ 35.86 $ 35.97 $ 36.07 $ 36.17 $ 36.22 $ 36.25
======= ======= ======= ======= ======= ======= =======
MII Accretion/(Dilution) $ (0.46) $ (0.46) $ (0.46) $ (0.46) $ (0.46) $ (0.46) $ (0.46)
======= ======= ======= ======= ======= ======= =======
Percent Accretion/(Dilution) (25.4%)
=======
Exchange Ratio 1.000x 1.050x 1.100x 1.150x 1.200x 1.225x 1.250x 1.300x
Additional Cash $ 8.02 $ 6.69 $ 5.35 $ 4.02 $ 2.68 $ 2.01 $ 1.34 $ --
------- ------- ------- ------- ------- ------- ------- -------
Total Value $ 37.02 $ 37.14 $ 37.25 $ 37.37 $ 37.48 $ 37.54 $ 37.59 $ 37.70
======= ======= ======= ======= ======= ======= ======= =======
MII Accretion/(Dilution) $ (0.49) $ (0.49) $ (0.49) $ (0.49) $ (0.49) $ (0.49) $ (0.49) $ (0.49)
======= ======= ======= ======= ======= ======= ======= =======
Percent Accretion/(Dilution) (27.1%)
=======
FY 2001
Exchange Ratio 1.000x 1.050x 1.100x 1.150x 1.200x 1.225x
Additional Cash $ 7.52 $ 5.87 $ 4.22 $ 2.56 $ 0.91 $ --
------- ------- ------- ------- ------- -------
Total Value $ 36.52 $ 36.32 $ 36.12 $ 35.91 $ 35.71 $ 35.53
======= ======= ======= ======= ======= =======
MII Accretion/(Dilution) $ (0.49) $ (0.49) $ (0.49) $ (0.49) $ (0.49) $ (0.49)
======= ======= ======= ======= ======= =======
Percent Accretion/(Dilution) (18.9%)
=======
Exchange Ratio 1.000x 1.050x 1.100x 1.150x 1.200x 1.225x 1.250x
Additional Cash $ 8.36 $ 6.72 $ 5.07 $ 3.43 $ 1.78 $ 0.96 $ --
------- ------- ------- ------- ------- ------- -------
Total Value $ 37.36 $ 37.17 $ 36.97 $ 36.78 $ 36.58 $ 36.49 $ 36.25
====== ====== ====== ====== ====== ====== ======
MII Accretion/(Dilution) $ (0.51) $ (0.51) $ (0.51) $ (0.51) $ (0.51) $ (0.51) $ (0.51)
======= ======= ======= ======= ======= ======= =======
Percent Accretion/(Dilution) (19.7%)
=======
Exchange Ratio 1.000x 1.050x 1.100x 1.150x 1.200x 1.225x 1.250x 1.300x
Additional Cash $ 9.62 $ 7.99 $ 6.36 $ 4.73 $ 3.10 $ 2.28 $ 1.46 $ --
------- ------- ------- ------- ------- ------- ------- -------
Total Value $ 38.62 $ 38.44 $ 38.26 $ 38.08 $ 37.90 $ 37.81 $ 37.71 $ 37.70
======= ======= ======= ======= ======= ======= ======= =======
MII Accretion/(Dilution) $ (0.54) $ (0.54) $ (0.54) $ (0.54) $ (0.54) $ (0.54) $ (0.54) $ (0.54)
======= ======= ======= ======= ======= ======= ======= =======
Percent Accretion/(Dilution) (21.1%)
=======
</TABLE>
- ----------
19
<PAGE>
1 Uses MII stock price at closing on April 30, 1999 ($29.00).
20
<PAGE>
EXHIBIT 99.(B)(16)
Effective Premiums
- --------------------------------------------------------------------------------
. Transaction value of $35.60 in cash was analyzed.
JRM Value Premium
--------- -------
Relative To JRM Close On April 30, 1999
---------------------------------------
Nominal Premium $ 31.50 13.0%
No Premium On Excess Cash /1/ 22.1
Relative To Estimated JRM Price If No Transaction
-------------------------------------------------
Nominal Premium $ 29.91 19.0%
No Premium On Excess Cash/1/ 33.6
Relative to 20-Day Trading Average Through March 9, 1999
--------------------------------------------------------
Nominal Premium $ 23.55 51.2%
No Premium On Excess Cash /1/ 113.7
---------------------------------------
/1/ Excess cash is $12.95 per JRM share.
1
<PAGE>
Comparable Minority Squeeze Out Premium Analysis - Cash Transactions/1/
-----------------------------------------------------------------------
(Dollar amounts in millions, except per share)
<TABLE>
<CAPTION>
Date Transaction Percent
Acquiror Subsidiary Announced Value Acquired
- ----------------- --------------------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
GTE Corp. Contel Cellular, Inc. 9/08/94 254.3 10.0
Pacificorp Pacific Telecom 11/02/94 159.0 13.4
Fleet Financial Group Fleet Mortgage Group 12/28/94 188.1 19.0
Club Mediterranee SA Club Med Inc. 4/05/94 153.4 33.0
COBE Laboratories SA (Gambro AB) REN Comp-USA 7/14/95 182.1 47.0
Novartis AG SyStemix, Inc. 5/27/96 107.6 26.8
Zurich Versicherungs GmbH Zurich Reinsurance Centre 1/13/97 319.0 34.0
Mafoo Holdings Inc. Mafoo Consolidated Group 1/21/97 116.8 15.0
Monsanto, Inc. Calgene, Inc. 1/28/97 242.6 43.7
Anthem, Inc. Acordia, Inc. 6/02/97 193.2 33.2
Investor Group BET Holdings, Inc. 3/17/98 462.3 N/A
Dow AgroSciences (Dow Chemical) Mycogen Corp. 4/30/98 355.2 N/A
Usinor SA J&L Specialty Steel, Inc. 9/23/98 115.0 46.5
- ---------------------------------------------------------------------------------------------------------------------------------
Mean/2/ $ 223.0 26.6%
Median 190.7 29.9
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Premium: Closing Valuation Relative To
Historical Share Prices
- ----------------------------------------
Four
One-Day One-Week Weeks
Prior Prior Prior
- ----------- ---------- ----------
<S> <C> <C>
43.7 37.8 36.0
23.7 23.7 23.7
19.4 18.5 18.5
41.4 39.9 44.6
27.0 20.3 26.0
25.6 23.1 25.3
17.1 18.5 11.6
23.5 23.5 27.6
62.0 60.0 60.0
12.7 11.5 26.0
53.7 58.5 58.2
41.8 40.0 52.4
100.0 112.5 37.8
</TABLE>
Source: Securities Data Corporation.
- --------------------------------------
/1/ Cash transactions in the $100 million to $1 billion range since
January 1, 1994.
/2/ Excluding high and low.
2
<PAGE>
Analysis Of JRM Value At April 30, 1999
- --------------------------------------------------------------------------------
(Amounts in dollars)
Prior To Announcement Date
--------------------------------
20-Day 3-Month
One-Day Trading Trading
Prior/1/ Average/2/ Average/2/
--------------------------------
Percent Change To Current
- -------------------------
OSX 39.4% 51.1% 46.9%
Offshore Construction Comparables 56.7 69.3 62.6
Oil Service Comparables 44.2 55.0 49.8
------- ------ ------
Average 46.7% 58.5% 53.1%
======= ====== ======
JRM Share Price $24.38 $23.55 $24.26
Less: Excess Cash (12.95) (12.95) (12.95)
------- ------ ------
Net Share Price 11.43 10.60 11.31
Net Share Price Adjusted For Industry Recovery 16.77 16.80 17.32
Plus: Excess Cash 12.95 12.95 12.95
------- ------ ------
Estimated JRM Share Price If No Transaction $29.72 $29.75 $30.27
======= ====== ======
Estimated MII Share Price If No Transaction $28.76 $27.98 $29.41
======= ====== ======
-----------------------------------------------------------
Suggested JRM Value Adjusted For Recovery/3/ $29.91
======
Suggested MII Value Adjusted For Recovery/4/ $28.72
======
-----------------------------------------------------------
- -------------------------
/1/ March 9, 1999
/2/ Period ending March 9, 1999.
/3/ Closing price on April 30, 1999 was $31.50.
/4/ Closing price on April 30, 1999 was $29.00.
3
<PAGE>
Transaction Multiples
- --------------------------------------------------------------------------------
. At transaction price of $35.60:
EPS P/E Ratio
--------------- ---------------
2000 2001 2000 2001
------ ----- ----- -----
Nominal P/E Ratio $ 1.10 $ 1.82 32.4x 19.6x
P/E Ratio On JRM Business 39.6x 17.6x
4
<PAGE>
Comparison Of Multiples/1/
- --------------------------------------------------------------------------------
1999 P/E 2000 P/E
Multiple Multiple
------------ ------------
JRM Comparables
---------------
Aker Maritime 12.7x 12.0x
Coflexip 17.0x 15.0x
Cooper Cameron 35.3x 27.3x
Dril-Quip 33.4x 25.4x
DSND 9.5x 9.8x
IHC Caland 16.6x 14.6x
Global Industries 49.2x 25.7x
Oceaneering 14.7x 14.2x
Salpem 14.5x 12.8x
Stolt Comex 16.4x 13.0x
------- -------
Average 21.9x 17.0x
======= =======
MII Comparables
---------------
Babcock Intl. Group 10.5x 9.4x
Jacobs Engineering 16.0x 13.8x
Fluor 12.6x 14.5x
Litton Industries 14.9x 13.4x
Foster Wheeler 10.2x 16.5x
------- -------
Average 12.8x 13.5x
======= =======
--------------------------
/1/ As of April 30, 1999.
5
<PAGE>
Premiums And Accretion/(Dilution) In All-Cash Transaction
- --------------------------------------------------------------------------------
(Amounts in dollars)
Cash Offer
Value
$35.60
-----------
MII EPS Accretion/(Dilution)
----------------------------
2000 $ (0.52)
Percent (28.5%)
2001 $ (0.34)
Percent (13.3%)
Excess Cash (Post Transaction) --
6
<PAGE>
EXHIBIT 99(B)(17)
Effective Premiums
- --------------------------------------------------------------------------------
o Proposed transaction value of $35.62, per share, in cash was analyzed.
JRM Value Premium
--------- -------
Relative To JRM Close On May 4, 1999
Nominal Premium $ 31.63 12.6%
No Premium On Excess Cash1 21.4
Relative To Estimated JRM Price If No Transaction
Nominal Premium $ 29.89 19.2%
No Premium On Excess Cash1 33.8
Relative To 20-Day Trading Average Through March 9, 1999
Nominal Premium $ 22.43 58.8%
No Premium On Excess Cash1 139.1
- ----------
1 Excess cash is $12.95 per JRM share.
1
<PAGE>
Analysis Of JRM Value At May 4, 1999
- --------------------------------------------------------------------------------
(Amounts in dollars)
<TABLE>
<CAPTION>
Prior To Announcement Date
-----------------------------------
20-Day 3-Month
One-Day Trading Trading
Prior1 Average2 Average2
------- -------- --------
<S> <C> <C> <C>
Percent Change To Current
OSX 45.4% 57.6% 53.2%
Offshore Construction Comparables 57.0 69.6 63.0
Oil Service Comparables 53.2 64.8 59.3
------ ------ ------
Average 51.9% 64.0% 58.5%
====== ====== ======
JRM Share Price $24.38 $22.43 $24.26
Less: Excess Cash (12.95) (12.95) (12.95)
------ ------ ------
Net Share Price 11.43 9.48 11.31
Net Share Price Adjusted For Industry Recovery 17.35 15.55 17.92
Plus: Excess Cash 12.95 12.95 12.95
------ ------ ------
Estimated JRM Share Price If No Transaction $30.30 $28.50 $30.87
====== ====== ======
Estimated MII Share Price If No Transaction $29.39 $27.90 $30.07
====== ====== ======
</TABLE>
------------------------------------------------------------------
Suggested JRM Value Adjusted For Recovery3 $29.89
======
Suggested MII Value Adjusted For Recovery4 $29.12
======
------------------------------------------------------------------
- ----------
1 March 9, 1999
2 Period ending March 9, 1999.
3 Closing price on May 4, 1999 was $31.63.
4 Closing price on May 4, 1999 was $28.88.
2
<PAGE>
Comparable Minority Squeeze Out Premium Analysis - Cash Transactions1
- --------------------------------------------------------------------------------
(Dollar amounts in millions, except per share)
<TABLE>
<CAPTION>
Premium: Closing Valuation
Relative To
Pre-Announcement Share Prices
--------------------------------
Date Transaction Percent One-Day One-Week Four Weeks
Acquiror Subsidiary Announced Value Acquired Prior Prior Prior
- -------------------------------- ------------------------- --------- ----------- -------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
GTE Corp. Contel Cellular, Inc. 9/08/94 $ 254.3 10.0% 43.7% 37.8% 36.0%
Pacificorp Pacific Telecom 11/02/94 159.0 13.4 23.7 23.7 23.7
Fleet Financial Group Fleet Mortgage Group 12/28/94 188.1 19.0 19.4 18.5 18.5
Club Mediterrenee SA Club Med Inc. 4/05/94 153.4 33.0 41.4 39.9 44.6
COBE Laboratories SA (Gambro AB) REN Corp-USA 7/14/95 182.1 47.0 27.0 20.3 26.0
Novartis AG SyStemix Inc. 5/27/96 107.6 26.8 25.6 23.1 25.3
Zurich Versicherungs GmbH Zurich Reinsurance Centre 1/13/97 319.0 34.0 17.1 18.5 11.6
Mafco Holdings Inc. Mafco Consolidated Group 1/21/97 116.8 15.0 23.5 23.5 27.6
Monsanto, Inc. Calgene Inc. 1/28/97 242.6 43.7 62.0 60.0 60.0
Anthem, Inc. Acordia, Inc. 6/02/97 193.2 33.2 12.7 11.5 26.0
Investor Group BET Holdings, Inc. 3/17/98 462.3 N/A 53.7 58.5 58.2
Dow AgroSciences (Dow Chemical) Mycogen Corp. 4/30/98 355.2 N/A 41.8 40.0 52.4
Usinor SA J&L Specialty Steel, Inc. 9/23/98 115.0 46.5 100.0 112.5 37.8
- ------------------------------------------------------------------------------------------------------------------------------------
Mean2 $ 223.0 28.6% 32.6% 31.3% 32.3%
Median 190.7 29.9 26.3 23.6 26.8
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
$35.62 Proposed Transaction3
Recent JRM Share Prices $ 520.3 37.2% 21.4%4 34.9%5 35.4%6
Adjusted JRM Prices Reflecting No Transaction 30.6 30.4 26.5
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Securities Data Corporation.
- ----------------
1 Cash transactions in the $100 million to $1 billion range since January 1,
1994.
2 Excluding high and low.
3 Premiums assume no premium on excess cash.
4 Relative to May 4, 1999 close $31.63.
5 Relative to April 27, 1999 close $29.75.
6 Relative to April 6, 1999 close $29.69.
3
<PAGE>
Transaction Multiples
- --------------------------------------------------------------------------------
o At proposed transaction price of $35.62:
EPS P/E Ratio
----------------- -----------------
FY2000 FY2001 FY2000 FY2001
------ ------ ------ ------
Nominal P/E Ratio $ 1.10 $ 1.82 32.4x 19.6x
P/E Ratio On JRM Business 39.7x 17.6x
EBDIT EBDIT Multiple
----------------- -------------------
FY2000 FY2001 FY2000 FY2001
------ ------ ------ ------
Nominal EBDIT Multiple $ 82.8 $107.3 16.9x 13.1x
EBDIT Multiple On JRM Business 10.8x 8.3x
4
<PAGE>
Comparison Of Multiples1
- --------------------------------------------------------------------------------
EBDIT Multiples P/E Ratios
(Calendar Years) (Calendar Years)
----------------------- ----------------------
1999 2000 1999 2000
---- ---- ---- ----
JRM Comparables
Aker Maritime 7.3x 7.0x 13.2x 12.4x
Coflexip 6.0x 5.6x 16.7x 14.8x
Cooper Cameron 13.3x 11.7x 37.2x 28.7x
Dril-Quip 18.2x 14.3x 34.7x 26.0x
DSND 6.5x 6.7x 9.8x 10.1x
IHC Caland 7.3x 6.7x 16.7x 14.7x
Global Industries 14.1x 10.4x 49.5x 25.3x
Oceaneering 6.6x 6.5x 14.9x 14.4x
Saipem 4.4x 4.2x 15.1x 13.4x
Stolt Comex 6.9x 6.2x 16.1x 12.9x
---- ---- ----- ------
Average 9.1x 7.9x 22.4x 17.3x
==== ==== ===== ======
MII Comparables
Babcock Intl. Group N/A N/A 10.5x 9.4x
Jacobs Engineering 4.1x 7.4x 16.1x 13.9x
Fluor 4.1x 4.4x 13.4x 15.4x
Litton Industries 7.7x 7.2x 15.0x 13.5x
Foster Wheeler 5.7x 6.5x 10.2x 16.5x
---- ---- ----- ------
Average 5.4x 6.4x 13.0x 13.7x
==== ==== ===== ======
- ----------
1 As of May 4, 1999.
5
<PAGE>
JRM Historical Stock Price
- --------------------------------------------------------------------------------
Graph depicting the Company's daily stock price close from January 1, 1996
to May 4, 1999 versus the Parents offer price of $35.62; the Company's closing
stock price on January 1, 1996, 1997, 1998 and 1999 and May 4, 1999 was $18.38,
$21.88, $41.94, $24.00 and $31.62, respectively
6
<PAGE>
Premiums And Accretion/(Dilution) In All-Cash Transaction
- --------------------------------------------------------------------------------
(Amounts in dollars)
Cash Offer
Value
$35.62
----------
MII EPS Accretion/(Dilution)
2000 $ (0.52)
Percent (28.5%)
2001 $ (0.34)
Percent (13.3%)
Excess Cash (Post Transaction) --
7
<PAGE>
EXHIBIT 99.(B)(18)
- --------------------------------------------------------------------------------
Presentation to
McDermott International
Materials Prepared for Discussion
February 1, 1999
[LOGO] Merrill Lynch
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
A. Situation Analysis
B. Valuation of JRM
C. Valuation of MII
D. Financial Consequences
E. Next Steps
[LOGO] Merrill Lynch
-----------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
Situation Analysis
- --------------------------------------------------------------------------------
<PAGE>
Situation Analysis
- --------------------------------------------------------------------------------
Current Ownership Structure
[The omitted graphic shows the current ownership structure of
JRM (32% Public/68% MII) and MII (100% Public), as detailed below]
-------------------------------
Public
-------------------------------
100%
60.0 MM Shares
Market Value(a): $1,241 Million
-------------------------------
Public
-------------------------------
32%
14.6 MM Shares
Market Value(b): $347 Million
-------------------------------
MII
-------------------------------
68%
30.4 MM Shares (c)
Market Value(b): $722 Million
-------------------------------
JRM
45.0 MM Shares(c)
-------------------------------
- ---------------------------------------
(a) Based on MII closing stock price as of January 29, 1999 of $20.69.
(b) Based on JRM closing stock price as of January 29, 1999 of $23.75.
(c) Includes 5.7 million JRM common shares convertible from preferred shares.
[LOGO] Merrill Lynch
-----------------------------------------------------------
4
<PAGE>
Situation Analysis
- --------------------------------------------------------------------------------
Impact of JRM Minority Interest
o The public's interest in JRM was created at the time of the OPI
merger
o Assumed few synergistic benefits existed between the disparate
business segments in Offshore, Government Operations and Power
Generation
o Created "highlighting effect" with separately traded JRM stock
o For reasons unforeseen at the time, the two separate securities have
proven to be cumbersome
o Small float in JRM discourages many potential institutional
investors and equity research analysts
o MII's equity story is somewhat confusing given:
- The largest component of MII's market value is its
majority ownership position in JRM
- MII's other two business segments are smaller and
relatively less understood
o The current MII/JRM ownership structure presents several impediments
to McDermott in pursuing strategic actions
o Eliminates JRM stock as an acquisition currency (dilutes MII's
ownership and precludes pooling accounting)
o Excess cash balances are unable to be moved freely between MII
and JRM
o McDermott is subject to stringent corporate governance issues
regarding its majority interest in JRM
[LOGO] Merrill Lynch
-----------------------------------------------------------
5
<PAGE>
Situation Analysis
- --------------------------------------------------------------------------------
MII and JRM Relative Price Performance, from 1/2/96 to Present
[The omitted line graph depicts the relative trading ranges based on the closing
stock prices of MDR and JRM, the S&P 500 Index and a composite of comparable
oil field service companies over the past several years.
<TABLE>
<CAPTION>
Indexed Prices
--------------------------------------------------------
Oilfield
S&P 500 Service
Date MDR JRM Index Composite
- -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
01/02/96 100.0 100.0 100.0 100.0
04/13/96 95.9 119.7 104.7 119.2
07/24/96 90.7 120.4 101.8 128.3
02/13/97 94.8 135.4 130.2 183.0
05/26/97 119.8 142.9 137.4 226.0
09/05/97 156.7 220.1 150.0 315.6
12/16/97 139.8 190.5 153.9 294.0
03/28/98 194.2 227.2 175.1 317.4
07/08/98 158.1 221.1 185.8 238.9
10/18/98 130.2 173.8 172.6 148.0
01/29/99 97.1 129.9 211.2 119.8]
</TABLE>
MDR JRM Index S&P 500
------- ------- ------- ------
3 Years 7.7% 40.4% 25.6% 109.9%
2 Years 17.6% 3.2% (37.7%) 69.5%
------- ------- ------- ------
1 Year (34.1%) (33.2%) (56.4%) 33.4%
Six Months (18.7%) (17.1%) (36.0%) 16.9%
------- ------- ------- ------
Three Months (26.3%) (28.1%) (27.2%) 18.4%
- ---------------------------------------
(a) Oilfield Services Composite: BHI, HAL, SLB, WFT, BJS, RON, NOI, SII and VRC
[LOGO] Merrill Lynch
-----------------------------------------------------------
6
<PAGE>
Situation Analysis
- --------------------------------------------------------------------------------
Comparison of Stock Prices to 52-Week Highs(a)
[Bar Graphic of the percentages listed below]
Average
42.7%
IHC Caland 65.1%
Saipem 54.5%
JRM 50.1%
MDR 45.0%
Dril-Quip 43.2%
Oceaneering 40.1%
Coflexip 38.4%
Aker Maritime 37.3%
DSND 34.0%
Cooper Cameron 32.9%
Stolt Comex 29.0%
- -------------------------------------
(a) Based on closing stock prices as of 1/29/99.
[LOGO] Merrill Lynch
-----------------------------------------------------------
7
<PAGE>
Situation Analysis
- --------------------------------------------------------------------------------
Summary of Wall Street Earning Estimates
<TABLE>
<CAPTION>
MII Earning Estimates (a) JRM Earning Estimates (a)
--------------------------------------- ------------------------------------------
Last Last
Firm FY 1999 FY 2000 FY 2001 Confirmed FY 1999 FY 2000 FY 2001 Confirmed
- ---------------------- ------- ------- ------- --------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DLJ Securities $2.44 $1.75 $2.25 1/28 $2.44 $1.15 $1.75 1/28
Goldman Sachs 2.25 2.05 -- 1/28 -- -- --
Johnson Rice 2.45 2.25* -- 12/29 2.47 1.00 -- 1/28
Lazard Freres 2.50 1.75 -- 1/28 2.50 1.10 -- 1/28
Prudential Securities -- -- -- 2.47 0.75 -- 1/28
Salomon Smith Barney 2.40 1.75 2.00 1/28 2.50 1.05 1.80 1/28
Schroders -- -- 2.45 1.11 -- 1/28
- -------------------------------------------------------------------------------------------------------------------------
Mean $2.41 $1.83 $2.13 $2.47 $1.03 $1.78
Implied P/E (b) 8.6x 11.3x 9.7x 9.6x 23.1x 13.3x
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Management Projections $2.42 $1.76 $2.28 $2.51 $1.00 $1.27
Variance to Street 0.0% (4.0%) 7.0% 1.6% (2.9%) (28.7%)
Implied P/E (b) 8.6x 11.8x 9.1x 9.5x 23.8x 18.7x
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------------------------
(a) Source: First Call as of 1/29/99.
(b) Based on 1/29/99 closing stock price of $20.69 and $23.75 for MII and JRM,
respectively.
* Excluded from mean calculation.
[LOGO] Merrill Lynch
-----------------------------------------------------------
8
<PAGE>
Situation Analysis
- --------------------------------------------------------------------------------
Comparative Shareholder Profile
- --------------------------------------------------------------------------------
J. Ray McDermott
- --------------------------------------------------------------------------------
Number % of
of Shares Primary
Held (mm) Ownership
-------------- ------------
- -------------------------------------
Top 15 Institutional Shareholders (a)
- -------------------------------------
Wellington Management 2.17 5.5%
Prudential Ins. 1.37 3.5%
- ---------------
Lynch & Mayer 1.06 2.7%
- -------------
Brahman Capital Corp. 1.04 2.6%
Barrow Hanley Mewhinne 0.63 1.6%
Wanger Asset Management 0.63 1.6%
Fidelity Management & Resources 0.54 1.4%
- -------------------------------
State Street 0.45 1.1%
- ------------
Newsouth Capital Management 0.30 0.8%
California Public Employment Retirement 0.28 0.7%
Duquesne Capital Management 0.26 0.7%
- ---------------------------
Chase Manhattan 0.25 0.6%
Iridian Asset Management 0.23 0.6%
Capital Guardian Trust 0.21 0.5%
Kalmar Investments 0.19 0.5%
-------------- ------------
Subtotal 9.61 24.4%
Other Institutional Holdings 2.30 5.9%
-------------- ------------
Total Institutional Holdings 11.91 30.3%
- --------------------------
Management & Directors (b) 0.15 0.4%
- --------------------------
- --------------
Public/MII (d) 27.24 69.3%
- -------------- -------------- ------------
- ------------------------------------
Total Primary Shares Outstanding (e) 39.30 100.0%
- ------------------------------------ ============== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
McDermott International
- --------------------------------------------------------------------------------
Number % of
of Shares Primary
Held (mm) Ownership
-------------- ------------
- -------------------------------------
Top 15 Institutional Shareholders (a)
- -------------------------------------
Prudential Ins. 8.23 13.7%
- ---------------
Soros Fund Management 5.49 9.1%
Fidelity Management & Resources 3.70 6.2%
- -------------------------------
Lynch & Mayer 2.68 4.5%
- -------------
ICM Asset Management 1.73 2.9%
Neuberger & Berman Management 1.69 2.8%
Franklin Resources 1.68 2.8%
Barclays Bank 1.67 2.8%
Crabbe Huson Group 1.40 2.3%
Mass Mutual Life Ins. 1.20 2.0%
Aeltus Investment Management 1.13 1.9%
State Street 1.10 1.8%
- ------------
Mellon Bank 1.02 1.7%
T Rowe Rice 0.83 1.4%
Duquesne Capital Management 0.77 1.3%
- --------------------------- -------------- ------------
Subtotal 34.32 57.2%
Other Institutional Holdings 15.92 26.5%
-------------- ------------
Total Institutional Holdings 50.23 83.7%
- -------------------------
Management & Directors(c) 0.75 1.3%
- -------------------------
- ------
Public 9.02 15.0%
- ------ -------------- ------------
- ------------------------------------
Total Primary Shares Outstanding (e) 60.00 100.0%
- ------------------------------------ ============== ============
- --------------------------------------------------------------------------------
- ---------------------------------------
(a) Source: CDA/Spectrum run for quarter ending December 31, 1998.
(b) Source: JRM Proxy Statement dated July 1, 1998; excludes shares subject to
exercise of stock options and conversion of preferred stock.
(c) MII proxy statement dated July 6, 1998. Excludes shares subject to
exercise of stock options.
(d) MII is the beneficial owner of 24.7 million (63%) of JRM's primary shares.
(e) Source: MII management.
[LOGO] Merrill Lynch
-----------------------------------------------------------
9
<PAGE>
Situation Analysis
- --------------------------------------------------------------------------------
Discussion of Recombination
o A recombination of MII and JRM would position the combined company
as primarily an oilfield services company and be beneficial to both
companies and their shareholders for a variety of reasons:
o Creates a more attractive company for Wall Street, increasing
both research coverage and liquidity for investors
o Oilfield service companies, while currently out of favor on
Wall Street, typically are traded at higher multiples than
MII's other businesses, resulting in an increased valuation in
the public markets over the long term
o Potential for modest cost savings as the combined company
would no longer require certain functions to run two distinct
corporate entities
o Combines two boards of directors into one, creating a more
efficient organizational structure
o Creates one shareholder base
- Five institutional investors (Prudential, Fidelity,
Lynch & Mayer, State Street and Duquesne) own 28% of MDR
and 9% of JRM (28% of JRM public float)
o In addition, recombining the two entities would enable MII to access
the excess cash at JRM
o Currently, JRM cannot dividend the cash to MII without a
dividend to all public shareholders
[LOGO] Merrill Lynch
-----------------------------------------------------------
10
<PAGE>
Situation Analysis
- --------------------------------------------------------------------------------
Summary of Hypothetical Acquisition of JRM Publicly-Traded Shares
o Assuming an offer price of $27.31 per publicly-traded JRM share, MII
would issue 19.3 million new shares valued at $399 million
o The offer price represents a 15% premium to JRM's current
share price of $23.75
o The offer also represents a 19% premium to the one year
average exchange ratio of 1.11x
o JRM's public shareholders would own 24% of the combined
company
o Creates $183 million of new goodwill (non-deductible for tax
purposes)
o The $27.31 offer price represents implied multiples of:
o 21.5x and 15.3x FY2001 EPS estimates of $1.27 and $1.78, by
Management and Wall Street, respectively
o 13.7x JRM's "Normalized" EPS of $2.00
o Including net cash of $455 million, the implied transaction
multiple of Management's FY 1999 EBITDA of $170 million and
"Normalized" EBITDA of $138 million is 4.6x and 5.6x,
respectively
o Assuming that goodwill is amortized over 15 years, the transaction
is 16.8% and 16.1% dilutive to MII's FY 2000 and 2001 EPS,
respectively
o Increasing the goodwill amortization period to 30 years
reduces dilution by approximately 4%
o Increasing JRM's EPS estimates does not significantly reduce
MII's pro forma EPS dilution since any increase in JRM
earnings benefits MII's Standalone EPS through its 68%
ownership of JRM
[LOGO] Merrill Lynch
-----------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
Valuation of JRM
- --------------------------------------------------------------------------------
<PAGE>
Valuation of JRM
- --------------------------------------------------------------------------------
Summary of Historical and Projected EBITDA Amounts (a)
(Dollars in Millions)
[The omitted bar graphic shows EBITDA amounts per year]
$129.3 $132.1 $202.5 $169.5 $94.2 $102.6 $138.1 $175.2 $216.4
1996 1997 1998 1999 2000 2001 2002 2003 2004
Average
'99-'04
$149.3
Average
'96-'01
$138.4
Fiscal Year Ended March 31,
- ---------------------------------------
(a) EBITDA includes equity and other income; excludes non-recurring items.
Projections for FYE 1999-2001 provided by management, extrapolated by Merrill
Lynch IBK thereafter.
[LOGO] Merrill Lynch
-----------------------------------------------------------
13
<PAGE>
Valuation of JRM
- --------------------------------------------------------------------------------
Summary (a)
(Dollars in Millions, except Per Share Amounts)
[The omitted bar chart shows the values derived from the analyses described
below to be as follows:
Low High
Valuation Parameter Methodology Value Value
- ---------------------------- ------------------- --------- ---------
52 Week High/Low Share Prices -- $22.25 $47.38
Publicly Traded Comparable 10.0x - 13.0x 12.75 16.50
Company Trading Analysis -- FYE 2001
Management Case EPS of $1.27
Publicly Traded Comparable 10.0x - 13.0x 17.75 23.25
Company Trading Analysis -- FYE 2001
Street Case EPS of $1.78
Analysis of Premiums Paid In 15% - 25% 27.25 29.75
Minority "Squeeze Out" Premium to Current Price
Transactions
Analysis of Comparable 7.0x - 9.2x "Normalized" 31.50 37.75
Acquisition Transactions EBITDA of $138 million
10% - 12% Discount Rate]
Discounted Cash Flow Analysis 6.0x-8.0x "Adjusted" 24.75 30.25]
EBITDA of $149 million
10%-12% Discount Rate
<TABLE>
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5/11/98 10.0x - 13.0x 15% - 25% 7.0x - 9.0x 6.0x - 8.0x "Adjusted" (c)
Methodology FYE 2001 Premium to "Normalized" EBITDA of
12/15/98 EPS of $1.27 (Mgmt) Current Share EBITDA (b) $149
and $1.78 (Street) Price of $138 million 10.0% - 12.0%
Discount Rate
------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------------------------
(a) Assumes 45.0 million shares outstanding and net cash of $454.7 million.
(b) EBITDA (including equity and other income) normalized as average for FYE
1996-2001 (excluding non-recurring items) based on historical results and
management projections.
(c) Adjusted EBITDA equals EBITDA (including equity and other income),
normalized as average for projected FYE 1999-2004.
[LOGO] Merrill Lynch
-----------------------------------------------------------
14
<PAGE>
Valuation of JRM
- --------------------------------------------------------------------------------
Comparable Company Trading Analysis
(Dollars in Millions)
<TABLE>
<CAPTION>
Market Value
Market Value as as a Multiple of Cash
Multiple of EPS (a) Flow/Share (b)
------------------------ -------------------------
Market Market Calendar Calendar Calendar Calendar
Company Value Capitalization 1999 2000 1999 2000
- -------------------------- --------- -------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Aker Marine $485 $641 9.4x N/A N/A N/A
Coflexip 1,132 1,253 11.1 9.5x 6.0x 5.2x
Cooper Cameron 1,240 1,746 12.6 11.0 7.0 6.7
Dril-Quip 246 214 18.2 15.2 10.7 N/A
DSND 274 349 8.1 N/A N/A N/A
IHC Caland 528 427 12.7 N/A N/A N/A
Oceaneering 222 267 8.2 7.3 3.7 3.6
Saipem 762 762 11.3 N/A N/A N/A
Stolt Comex 413 439 7.1 5.1 3.8 3.1
----------------------------------------------------------------------------------------------
Average 11.0x 9.6x 6.2x 4.7x
----------------------------------------------------------------------------------------------
Research Estimates (c)
- --------------------------
JRM $1,069 $614 23.1x 13.3x 8.1x 6.2x
MII 1,241 958 11.3 9.7 6.1 N/A
Management Estimates (c)
- --------------------------
JRM $1,069 $614 23.8x 18.7x 10.6x 10.2x
MII 1,241 958 11.8 9.1 6.2 5.6
</TABLE>
- ---------------------------------------
(a) IBES estimates as of January 29, 1999.
(b) Based on selected research reports; Cash Flow defined as net income plus
depreciation and amortization.
(c) For JRM and MII, EPS and Cash Flow amounts for FYE 2000 and FYE 2001 have
been used as proxies for calendar 1999 and 2000 multiple analysis,
respectively.
[LOGO] Merrill Lynch
-----------------------------------------------------------
15
<PAGE>
Valuation of JRM
- --------------------------------------------------------------------------------
Analysis of Premiums Paid in Minority Interest Transactions
<TABLE>
<CAPTION>
Premium Paid
(prior to announcement)
Date Ownership Offer ----------------------------
Announced Target Name Acquiror Name Transaction Value 1 day 1 week 1 month
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12/7/98 Life Technologies Inc. Dexter Corporation 51.5% $450.9 5.0% 5.4% -0.3%
6/29/98 Waste Management International Waste Management Inc 80.0% 431.4 39.4% 33.7% 42.6%
5/29/98 Meridian Technologies Investor Group 58.9% 103.1 22.2% 37.5% 41.0%
5/26/98 CIPE France SA Tyco International Ltd 63.0% 413.5 0.4% 1.4% 16.0%
5/25/98 Prime Resources Group Inc Homestake Mining Co. 50.6% 306.0 57.5% 52.4% 50.0%
5/21/98 PolyGram NV Universal Studios Inc 75.0% 2,547.0 2.7% 0.5% 30.1%
4/30/98 Mycogen Corp Dow AgroSciences 68.6% 322.0 41.8% 40.0% 53.4%
4/16/98 NCR Japan Ltd NCR Corp 70.0% 304.0 26.5% 36.4% 32.2%
4/7/98 Starckjohann Oy Trelleborg AB 54.0% 101.5 0.8% 3.3% 5.6%
3/17/98 BET Holdings Inc. Investor Group 56.0% 462.3 4.0% 14.3% 17.5%
3/6/98 Credit General Kredietbank NV 75.0% 141.1 4.2% 8.6% 9.9%
11/28/97 Vendome Luxury Group PLC Richemont 77.3% 1,729.0 25.8% 43.3% 39.6%
9/18/97 Guaranty National Corp Orion Capital Corp 77.3% 117.2 10.8% 23.9% 26.6%
6/26/97 Rhone-Poulenc Rorer Inc Rhone-Poulenc SA 60.8% 4,831.6 22.1% 22.8% 26.8%
6/2/97 Acordia Inc Anthem Inc 60.8% 193.2 12.7% 11.5% 26.5%
5/14/97 Enron Global Power & Pipelines Enron Corp 50.6% 428.0 11.8% 13.7% 20.8%
2/20/97 NHP Inc Apartment Investment & Mgmt Co 53.4% 114.5 28.2% 25.2% 19.5%
1/21/97 Mafco Consolidated Grp Mafco Holdings Inc 85.0% 116.8 60.4% 60.4% 68.9%
1/13/97 Zurich Reinsurance Centre Zurich Versicherungs GmbH 66.0% 319.0 28.5% 30.0% 23.0%
12/17/96 Allmerica Property & Casualty Allmerica Financial Corp 59.3% 816.9 15.8% 12.8% 15.3%
9/20/96 Lloyds Abbey Life PLC Lloyds TSB Group PLC 62.6% 2,590.0 7.3% 9.0% 13.0%
8/26/96 Bankers Life Holding Conseco Inc 88.4% 120.8 14.9% 10.5% 10.5%
5/27/96 SyStemix Inc Novartis AG 67.8% 107.6 4.7% 69.6% 59.2%
8/25/95 GEICO Corp Berkshire Hathaway 52.6% 2,349.2 25.6% 23.1% 25.8%
7/20/95 BTR Nylex Ltd BTR PLC 62.6% 3,290.0 36.9% 26.8% 27.2%
5/19/95 Bic Corp BIC SA 79.0% 212.6 13.3% 12.5% 30.1%
4/20/95 Rothams International PLC Cie Financiere Richemont AG 61.0% 2,600.0 28.1% 25.8% 31.6%
4/7/95 LIN Broadcasting Corp McCaw Cellular Communications 52.0% 3,209.4 6.9% 6.7% 1.3%
4/5/95 Club Med Inc Club Mediterranee SA 67.0% 153.4 41.4% 39.9% 43.8%
-------------------------------------------------------------------------------------
Maximum 88.4% 60.4% 69.6% 68.9%
Mean 65.0% 20.7% 24.2% 27.8%
Median 62.6% 15.8% 23.1% 26.6%
Minimum 50.6% 0.4% 0.5% (0.3%)
-------------------------------------------------------------------------------------
</TABLE>
- ---------------------------------------
Source: Securities Data Company.
[LOGO] Merrill Lynch
-----------------------------------------------------------
16
<PAGE>
Valuation of JRM
- --------------------------------------------------------------------------------
Analysis of Comparable Acquisition Transactions
(Dollars in Millions)
<TABLE>
<CAPTION>
Announcement Adjusted Adjusted Market Market Value/LTM
Date Target/Buyer Market Value Value/LTM EBITDA Earnings
- ------------ ---------------------------------------------- ------------ ---------------- ----------------
<S> <C> <C> <C> <C>
01/11/99 Pool Energy/Nabors Industries $518 5.5x 14.6x
06/18/98 Camco/Schlumberger 3,287 14.0 28.9
05/11/98 Western Atlas/Baker Hughes 6,526 10.3 47.1
03/04/98 Weatherford/EVI 2,789 8.7 22.8
02/26/98 Dresser Industries/Halliburton Company 8,404 9.7 24.1
01/20/98 Wilson Industries/Smith International 483 12.1 20.9
12/18/97 Tidewater Compression/Castle Harlan 360 8.8 N.A.
05/14/97 Dreco Energy Services/National-Oilwell 344 15.9 33.9
04/17/97 Drilex/Baker Hughes 128 10.1 N.M.
02/27/97 Production Operators Corp./Camco International 602 13.2 30.6
02/26/97 Petrolite/Baker Hughes 693 17.5 37.3
07/01/96 Landmark Graphics/Halliburton Company 553 37.6* N.M.
04/03/96 NOWSCO Well Service Ltd./BJ Services Company C$796 12.8 37.3
01/04/96 Drexel Oilfield Services/Tuboscope Vetco Int'l. 136 6.8 11.7
11/20/95 Hornbeck/Tidewater 277 12.0 39.5
06/26/95 Enterra/Weatherford 660 10.1 36.8
09/13/94 Western Co./BJ Services Company 519 13.9 N.M.
10/18/94 Halliburton Compression/Tidewater 205 8.0 19.2
04/18/94 Total Energy Services/Enterra 330 10.5 24.8
05/23/94 Wheatley TXT/Dresser Industries 225 11.1 23.5
09/10/93 Baroid Corp./Dresser Industries 1,018 8.4 27.2
----------------------------------------------------
Maximum 17.5x 47.1x
Mean 11.0x 28.1x
Median 10.4x 26.0x
Minimum 5.5x 11.7x
----------------------------------------------------
</TABLE>
- ---------------------------------------
* Excluded from Summary Multiples.
[LOGO] Merrill Lynch
-----------------------------------------------------------
17
<PAGE>
Valuation of JRM
- --------------------------------------------------------------------------------
Discounted Cash Flow Analysis
(Dollars in Millions, except Per Share Amounts)
<TABLE>
<CAPTION>
Projected FYE March 31 (a)
FYE ------------------------------------------------------------ '99-'04
1999 2000 2001 2002 2003 2004 Average
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales $1,293.0 $852.0 $1,218.0 $1,236.3 $1,304.8 $1,428.7
EBITDA 192.2 78.9 91.0 126.6 163.7 204.9 $142.9
Equity/Other Income (22.3) 15.3 11.5 11.5 11.5 11.5
-------- -------- -------- -------- -------- --------
Adjusted EBITDA 169.9 94.2 102.6 138.1 175.2 216.4 $149.4
Less: Depreciation (45.4) (53.9) (46.2) (49.5) (52.2) (57.1)
-------- -------- -------- -------- -------- --------
EBITA 124.5 40.3 56.3 88.6 123.0 159.3
Less: Taxes @ 40.0% (49.8) (16.1) (22.5) (35.5) (49.2) (63.7)
-------- -------- -------- -------- -------- --------
Tax-effected EBITA 74.7 24.2 33.8 53.2 73.8 95.6
Plus: Depreciation 45.4 53.9 46.2 49.5 52.2 57.1
Plus: Deferred Taxes 0.0 0.0 0.0 0.0 0.0 0.0
Less: Capital Expenditures (100.1) (103.4) (80.6) (49.5) (52.2) (57.1)
Less: Changes in Working Capital (58.0) 10.0 23.0 4.5 5.1 9.3
-------- -------- -------- -------- -------- --------
Free Cash Flow ($38.0) ($15.4) $22.3 $57.7 $79.0 $104.8
Assumption:
Net Income $114.7 $45.0 $56.9 $81.0 $103.5 $127.6 $88.1
EPS $2.51 $1.00 $1.27 $1.80 $2.30 $2.84 $1.95
</TABLE>
- --------------------------------------------------------------------------------
Equity Value Per Share (b)
- --------------------------------------------------------------------------------
Terminal Value EBITDA Multiple
----------------------------------------------------------
Discount Rate 6.0x 7.0x 8.0x
- ------------- ------ ------ -------
10.0% $26.18 $28.24 $30.30
11.0% 25.49 27.46 29.44
12.0% 24.85 26.73 28.61
- --------------------------------------------------------------------------------
- ---------------------------------------
(a) Projections through FYE 2001 provided by management, extrapolated by
Merrill Lynch IBK thereafter.
(b) Assumes net cash of $454.7 million, including $100 million for product
liabilities, and 45.0 million shares outstanding.
[LOGO] Merrill Lynch
-----------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
Valuation of MII
- --------------------------------------------------------------------------------
<PAGE>
Valuation of MII
- --------------------------------------------------------------------------------
Summary Valuation of MII (a)
[The omitted bar chart shows the values derived from the analyses described
below to be as follows:
Low High
Valuation Parameter Methodology Value Value
- ---------------------------- ------------------- --------- ---------
52 Week High/Low Share Prices -- $19.25 $43.94
Publicly Traded Comparable 11.0x - 13.0x $19.75 $23.00
Company Trading Analysis -- FYE 2000 EPS
Management Case EPS of $1.76
Publicly Traded Comparable 11.0x - 13.0x $20.25 $23.75
Company Trading Analysis -- FYE 2000 EPS
Street Case of $1.83
Break-Up Valuation Sum-of-Parts Based $29.00 $29.00
On FYE 2000
EBITDA Multiples
Discounted Cash Flow Analysis Sum of DCF Values $27.75 $33.75]
for MII - ex JRM and
MII
Ownership of JRM
- --------------------------------------------------------------------------------
5/15/98 11.0x - 13.0x Sum-of-Parts Sum of DCF
Methodology FYE 2000 EPS Based on FY 2000 Values for MII-
9/3/98 of $1.76 (Mgmt.) EBITDA Multiples ex JRM and MII
and $1.83 (Street) ownership of JRM
- --------------------------------------------------------------------------------
- ---------------------------------------
(a) Assumes 60.0 million shares outstanding.
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20
<PAGE>
Valuation of MII
- --------------------------------------------------------------------------------
Contribution to MII Valuation (a)
[The omitted bar chart depicts the contribution to the valuationof MII by each
of MII and JRM under the following methodologies:
MII ex-JRM
Methodology Valuation/% JRM Valuation/%
- ----------------------- ------------------- -------------------
Current Share Price $8.66/42% $12.03/58%
Break-Up Valuation 16.25/56 12.75/44
Discounted Cash Flow Analysis 16.50/54 14.00/46]
- ---------------------------------------
(a) Assumes 60.0 and 45.0 million shares outstanding for MII and JRM,
respectively; assumes MII owns 30.4 million JRM shares.
(b) Represents the mid-point of the discounted cash flow valuation range.
[LOGO] Merrill Lynch
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21
<PAGE>
Valuation of MII
- --------------------------------------------------------------------------------
JRM Contribution Analysis
(Amounts in Millions, except Per Share Amounts)
Value Per
Amount MII Share
------ ---------
JRM Current Share Price (1/29/99) $23.75
JRM Market Value (a) $1,069
JRM Shares Owned by MII (b) 30.4
Market Value of JRM Investment $722 $12.03
MII Current Market Value (1/29/99) (c) $1,241 $20.69
Implied MII - ex JRM Market Value $519 $8.66
% of MII Market Value Contributed by JRM 58.0%
- ---------------------------------------
(a) Assumes 45.0 million JRM shares outstanding (including 5.7 million
convertible preferred shares).
(b) Includes 5.7 million JRM convertible preferred shares, represents 68% of
ownership of JRM.
(c) Assumes 60.0 million MII shares outstanding.
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22
<PAGE>
Valuation of MII
- --------------------------------------------------------------------------------
Preliminary Break-up Valuation
(Dollars in Millions, except Per Share Amounts)
<TABLE>
<CAPTION>
MII ex-JRM-Projected Year Ending March 31, 2000
----------------------------------------------------------------- ------------
B&W Gov't Hudson MII
Power Co. Ops Products E&C Total JRM Consolidated
--------- --- -------- --- ----- --- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
EBITDA $97 $158 $79 $237
Equity and Other Income 5 9 15 24
---- ------ ------ ------
Total Cash Flow $102 $49 $9 $7 $167 $94 $261
Valuation Multiple 6.0x 5.0x 5.0x 4.0x 5.6x 7.0x 6.1x
---- ---- ---- ---- ------ ------ ------
Enterprise Value $612 $245 $45 $28 $930 $658 $1,588
Plus: Cash & Investments (a) 588 800 1,388
Less: Debt (359) (245) (604)
Product Liability (b) (185) (100) (285)
JRM Minority Interest (c) -- -- (352)
------ ------ ------
Net Equity Value $974 $1,113 $1,735
Shares Outstanding 60.0 45.0 60.0
Value Per Share $16.23 $24.73 $28.92
Current Share Price (1/29/99) $23.75 $20.69
Difference 4% 40%
------------
</TABLE>
- ---------------------------------------
(a) Assumes CAFCO program is terminated (reduces B&W Power Co. cash balance by
$55 million).
(b) For B&W Power Co. the $185 product liability represents the present value
of after-tax net cash flow payments related to asbestos.
(c) Assumes JRM public shareholders own 14.6 million shares of JRM at $23.75
per share.
[LOGO] Merrill Lynch
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23
<PAGE>
Valuation of MII
- --------------------------------------------------------------------------------
Discounted Cash Flow Analysis - MII Excluding JRM
(Dollars in Millions, except Per Share Amounts)
<TABLE>
<CAPTION>
Projected FYE March 31 (a)
------------------------------------------------------------
FYE
1999 2000 2001 2002 2003 2004
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Sales $1,625.0 $2,031.3 $2,071.9 $2,154.8 $2,219.4 $2,297.1
EBITDA 106.1 148.3 185.3 182.5 190.9 201.1
Equity/Other Income 36.4 5.0 6.0 6.0 6.0 6.0
-------- -------- -------- -------- -------- --------
Adjusted EBITDA 142.5 153.3 191.3 188.6 197.0 207.0
Less: Depreciation (35.2) (34.4) (30.3) (30.2) (31.1) (32.2)
-------- -------- -------- -------- -------- --------
EBITA 107.3 118.9 161.0 158.4 165.9 174.9
Less: Taxes @ 38.0% (40.8) (45.2) (61.2) (60.2) (63.0) (66.5)
-------- -------- -------- -------- -------- --------
Tax-effected EBITA 66.5 73.7 99.8 98.2 102.8 108.4
Plus: Depreciation 35.2 34.4 30.3 30.2 31.1 32.2
Plus: Deferred Taxes (0.7) (0.1) (0.1) 0.0 0.0 0.0
Less: Capital Expenditures (34.1) (38.2) (38.9) (39.9) (41.1) (42.5)
Less: Changes in Working Capital 114.5 (31.5) (12.2) 0.4 (2.3) (2.7)
-------- -------- -------- -------- -------- --------
Free Cash Flow $181.5 $38.3 $78.8 $88.9 $90.6 $95.4
Net Income $73.2 $74.2 $95.5 $97.1 $105.6 $115.1
EPS $1.22 $1.24 $1.59 $1.62 $1.76 $1.92
</TABLE>
- --------------------------------------------------------------------------------
Equity Value Per Share (b)
- --------------------------------------------------------------------------------
Terminal Value EBITDA Multiple
-------------------------------------------------------
Discount Rate 5.0x 5.5x 6.0x
- ------------- ------ ------ ------
10.0% $16.24 $17.31 $18.38
11.0% 15.63 16.66 17.68
12.0% 15.05 16.03 17.01
- --------------------------------------------------------------------------------
- ---------------------------------------
(a) Projections through 2001 provided by management, extrapolated by Merrill
Lynch IBK thereafter.
(b) Assumes 60.0 million shares outstanding; net cash as of 3/31/99 of $43.9
million including $185 million for PV of asbestos liabilities.
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24
<PAGE>
Valuation of MII
- --------------------------------------------------------------------------------
Discounted Cash Flow Analysis - MII Including JRM
(Amounts in Millions, except Per Share Amounts)
Low Mid-Point High
------ ------ ------
Value per JRM Share $24.85 $27.46 $30.30
JRM Shares Owned by MII 30.4 30.4 30.4
------ ------ ------
Implied Value of JRM Investment 755.4 834.7 921.1
Implied Value per MII Share (a) $12.59 $13.91 $15.35
Value of MII ex JRM Share $15.05 $16.66 $18.38
------ ------ ------
Combined Value $27.64 $30.57 $33.73
====== ====== ======
- ---------------------------------------
(a) Assumes 60.0 million MII shares outstanding.
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25
<PAGE>
Valuation of MII
- --------------------------------------------------------------------------------
Comparable Company Analysis
(Dollars in Millions, except Per Share Amounts)
<TABLE>
<CAPTION>
Enterprise Value Market Value
as a Multiple of as a Multiple of
Market Enterprise Calendar Calendar
Value (a) Value 1998E EBITDA (a) 1999E EPS (b)
--------- ----- ---------------- -------------
<S> <C> <C> <C> <C>
Babcock Int'l Group (UK) $197 $239 4.8x 7.4x
Jacobs Engineering 1,075 990 8.8x 16.3x
Fluor Corporation 2,870 3,185 4.4x 12.1x
Litton Industries 2,584 3,616 6.9x 12.4x
Foster Wheeler 522 1,400 5.9x 7.2x
---------------- -------------
Mean -- -- 6.2x 11.1x
- -------------------------------------------------------------------------------------------------------
MII (c)
Research Estimates $1,241 $958 NM 11.3x
Amounts -- $1.83
Management Estimates $1,241 $958 3.1x 11.8x
Amounts $312.4 $1.76
- -------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------------------------
(a) EBITDA projections based on various equity research reports.
(b) Stock prices and First Call EPS projections as of 1/29/99.
(c) Assumes FYE 1999 EBITDA and FYE 2000 EPS estimates, as a proxy for
calendar 1998E EBITDA and calendar 1999E EPS, respectively.
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-----------------------------------------------------------
26
<PAGE>
- --------------------------------------------------------------------------------
Financial Consequences
- --------------------------------------------------------------------------------
<PAGE>
Financial Consequences
- --------------------------------------------------------------------------------
MII and JRM Historical Stock Price Performance, from 1/2/96 to Present
- --------------------------------------------------------------------------------
Cumulative Returns
------------------
MDR JRM
--- ---
- --------------------------------------------------------------------------------
3 Years 7.7% 40.4%
2 Years 17.6% 3.2%
1 Year (34.1%) (33.2%)
Six Months (18.7%) (17.1%)
Three Months (26.3%) (28.1%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Average Share Price
-------------------
MDR JRM
--- ---
- --------------------------------------------------------------------------------
3 Years $26.58 $30.21
2 Years 30.10 33.56
1 Year 31.26 34.42
Six Months 25.44 28.05
Three Months 26.03 26.80
Current 20.69 23.75
- --------------------------------------------------------------------------------
[The omitted graphic displays the three year
MII and JRM performance index as shown in the chart above]
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28
<PAGE>
Financial Consequences
- --------------------------------------------------------------------------------
One and Three Year Implied Ratio Based on Historical Market Prices
One Year Exchange Ratio
- --------------------------------------------------------------------------------
Average
Current:: 1.15x
1 Month: 1.05
3 Month: 1.03
6 Month: 1.11
1 Year: 1.11
- --------------------------------------------------------------------------------
Mean:
1.11x
[The omitted line chart depicts the historical exchange ratios based on the
closing stock prices of MII and JRM over the past year:
Date Exchange Ratio
------------------ ------------------
01/29/98 1.1282
03/06/98 1.1161
04/12/98 1.0710
05/18/98 1.0939
06/24/98 1.1243
07/30/98 1.1002
09/05/98 1.2704
10/11/98 1.1894
11/17/98 1.0830
12/23/98 0.9798
01/29/99 1.1479]
Three Year Exchange Ratio
- --------------------------------------------------------------------------------
High (10/29/96): 1.63x
Low (2/13/98): 0.83
Average: 1.14
- --------------------------------------------------------------------------------
Mean:
1.14x
[The omitted line chart depicts the historical exchange ratios based on the
closing stock prices of MII and JRM over the past three years:
Date Exchange Ratio
------------------ ------------------
01/02/98 0.8547
04/23/96 1.0756
08/13/96 1.1796
12/03/96 1.4126
03/26/97 1.0739
07/16/97 1.0513
11/05/97 1.1632
02/26/98 1.0756
06/18/98 1.0667
10/08/98 1.2096
01/29/99 1.1479]
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29
<PAGE>
Financial Consequences
- --------------------------------------------------------------------------------
Principal Assumptions
o Based on management projections MII and JRM are expected to earn the
following amounts per share:
FY 1999 FY 2000 FY 2001
------- ------- -------
MII $2.42 $1.76 $2.28
JRM $2.51 $1.00 $1.27
o Pre-tax combination benefits of $5.0 million per year
o Tax rate of 38%
o Goodwill is amortized over 15 years and is not deductible for tax
purposes
[LOGO] Merrill Lynch
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30
<PAGE>
Financial Consequences
- --------------------------------------------------------------------------------
Overview of Potential Transaction
(Amounts in Millions, except Per Share Amounts)
Implied Offer Price per JRM Share (a) $28.75
Premium to 1 Year Average Exchange Ratio of 1.10x 4.6%
Aggregate Offer Value to JRM Public Shareholders (b) $420
MII Shares to be Issued (c) 14.6
Goodwill Created $176
Annual Goodwill Amortization (30 years) $6
Existing MII Shareholders' Pro Forma Ownership(c) 78.1%
Former JRM Public Shareholders' Pro Forma Ownership(c) 21.9%
FY 2000 Dilution (d) (13.8%)
FY 2001 Dilution (d) (13.5%)
- ---------------------------------------
(a) Based on 4/6/99 closing stock price of $25.00 for MII.
(b) Assumes 14.6 million JRM shares held by public.
(c) Assumes 100% stock offer and MII closing stock price of $25.00 as of
4/6/99.
(d) Based on 60.0 million MII Shares outstanding prior to the transaction.
[LOGO] Merrill Lynch
-----------------------------------------------------------
31
<PAGE>
Financial Consequences
- --------------------------------------------------------------------------------
Overview of Potential Alternate Transaction Structures
(Amounts in Millions, except Per Share Amounts)
o Set forth in the table below is an overview of some potential
transaction structures available to MII as a counter offer to JRM's
offer.
o In each case, the amount of stock issued is assumed to remain
constant at 1.15 shares of MII for each share of JRM
- The difference in that value per share and the total
offer value per share is assumed to be made up for using
cash
<TABLE>
<CAPTION>
Exchange Ratio
--------------------------------------------------------------------
1.150x 1.175x 1.200x 1.225x 1.250x 1.275x 1.300x
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Value(a) $ 28.75 $ 29.38 $ 30.00 $ 30.63 $ 31.25 $ 31.88 $ 32.50
Value of Stock 28.75 28.75 28.75 28.75 28.75 28.75 28.75
Value of Cash -- 0.63 1.25 1.88 2.50 3.12 3.75
Premium to "Adjusted" (1.7%) 0.4% 2.6% 4.7% 6.8% 8.1% 11.1
JRMPrice of $29.25
Premium to One Year 4.5% 6.8% 9.1% 11.4% 13.6% 15.9% 18.2%
Historical Exchange Ratio
Aggregate Offer Value(6) $ 419.8 $ 428.9 $ 438.0 $ 447.1 $ 456.3 $ 465.4 $ 474.5
Cash Employed 9.1 18.3 27.4 36.5 45.6 54.8
</TABLE>
- ---------------------------------------
(a) Based on MII closing stock price of $25.00 per share as of April 6, 1999.
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32
<PAGE>
Financial Consequences
- --------------------------------------------------------------------------------
Sensitivity Analysis - Overview of Potential Transaction
(Amounts in Millions, except Per Share Amounts)
<TABLE>
<CAPTION>
Premium to Current JRM Share Price (a)
--------------------------------------------------
5% 10% 15% 20% 25%
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Offer Price per JRM Share $24.94 $26.13 $27.31 $28.50 $29.69
Implied Exchange Ratio 1.21x 1.26x 1.32x 1.38x 1.44x
Premium to 1 Year Average Implied Exchange
Ratio of 1.105x 10% 14% 19% 25% 30%
Aggregate Offer Value to JRM Public
Shareholders (b) $364 $381 $399 $416 $433
MII Shares to be Issued (c) 17.6 18.4 19.3 20.1 21.0
Pro Forma Ownership (d)
Existing MII Shareholders 77.3% 76.5% 75.7% 74.9% 74.1%
Former JRM Public Shareholders 22.7% 23.5% 24.3% 25.1% 25.9%
</TABLE>
- ---------------------------------------
(a) Based on 1/29/99 closing stock price of $23.75 for JRM.
(b) Assumes 14.6 million JRM shares held by public.
(c) Assumes 100% stock offer and MII closing stock price of $20.69 as of
1/29/99.
(d) Based on 60.0 million MII Shares outstanding prior to the transaction.
[LOGO] Merrill Lynch
-----------------------------------------------------------
33
<PAGE>
Financial Consequences
- --------------------------------------------------------------------------------
Overview of Potential Transaction
(Dollars in Millions, except Per Share Amounts)
Offer Price per JRM Share $27.31
Premium to Current JRM Share Price 15%
Implied Offer Value for 100% of JRM $1,229
Implied Transaction Value for 100% of JRM (a) $774
Implied EPS Multiples Amount
--------------------- ------
FY 2001 EPS Management $1.27 21.5x
FY 2001 EPS First Call (b) 1.78 15.3x
FY '99-'01 Average EPS 1.42 19.2x
"Normalized" EPS 2.00 13.7x
Implied EBITDA Multiples (b)
----------------------------
FY 1999 EBITDA Management $170 4.6x
FY '99-'01 Average EBITDA 122 6.3x
"Normalized" EBITDA (c) 138 5.6x
- ---------------------------------------
(a) Assumes net cash of $455 million (as of 3/31/99), including PV of product
liabilities ($100 million).
(b) First Call estimates as of January 29, 1999.
(c) "Normalized" EBITDA (including equity and other income) represents average
EBITDA for FYE 1996-2001 (excluding non-recurring items) based on
historical results and management projections.
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-----------------------------------------------------------
34
<PAGE>
Financial Consequences
- --------------------------------------------------------------------------------
Sensitivity Analysis - Overview of Potential Transaction
(Dollars in Millions, except Per Share Amounts)
<TABLE>
<CAPTION>
Premium to Current JRM Share Price
--------------------------------------------------------
5% 10% 15% 20% 25%
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Offer Price per JRM Share $24.94 $26.13 $27.31 $28.50 $29.69
Implied Offer Value for 100% of JRM $1,122 $1,176 $1,229 $1,283 $1,336
Implied Transaction Value for 100% of JRM (a) $667 $721 $774 $828 $881
<CAPTION>
Implied EPS Multiples Amount
- --------------------- ------
<S> <C> <C> <C> <C> <C> <C>
FY 2001 EPS Management $1.27 19.7x 20.6x 21.5x 22.5x 23.5x
FY 2001 EPS First Call (b) $1.78 14.0x 14.7x 15.3x 16.0x 16.7x
FY '99-'01 Average EPS $1.42 17.6x 18.4x 19.2x 20.1x 20.9x
"Normalized" EPS $2.00 12.5x 13.1x 13.7x 14.3x 14.8x
Implied EBITDA Multiples (b)
- ----------------------------
FY 1999 EBITDA Management $170 3.9x 4.2x 4.6x 4.9x 5.2x
FY 1999 EBITDA Research $148 4.5x 4.9x 5.2x 5.6x 6.0x
FY '99-'01 Average EBITDA $122 5.5x 5.9x 6.3x 6.8x 7.2x
"Normalized" EBITDA (c) $138 4.8x 5.2x 5.6x 6.0x 6.4x
</TABLE>
- ---------------------------------------
(a) Assumes net cash of $455 million (as of 3/31/99), including PV of product
liabilities ($100 million).
(b) First Call estimates as of January 29, 1999.
(c) "Normalized" EBITDA (including equity and other income) represents average
EBITDA for FYE 1996-2001 (excluding non-recurring items) based on
historical results and management projections.
[LOGO] Merrill Lynch
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35
<PAGE>
Financial Consequences
- --------------------------------------------------------------------------------
FY 2000 Pro Forma Income Statement Impact to MII - 100% Stock Offer @ 15%
Premium
(Dollars in Millions, except Per Share Amounts)
MII Transaction MII
Standalone Adjustments Pro Forma
---------- ----------- ---------
Revenues $2,883 $2,883
EBITDA 227 $5 232
Depreciation & Amortization 94 12 106
---------- ----------- ---------
EBIT 133 (7) 126
Net Interest Income 13 13
Minority Interest (20) 20 0
Other 20 20
---------- ----------- ---------
Pre-tax Income 147 12 159
Taxes 41 2 43
---------- ----------- ---------
Net Income $106 $10 $116
========== =========== =========
Shares Outstanding 60.0 19.3 79.3
Earnings Per Share $1.76 $1.46
Accretion/(Dilution) (17%)
- ---------------------------------------
(a) Assumes 15 year amortization of new goodwill.
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36
<PAGE>
Financial Consequences
- --------------------------------------------------------------------------------
Pro Forma EPS Impact to MII - 100% Stock Offer With Synergies
<TABLE>
<CAPTION>
EPS Accretion/(Dilution) (a) 2001 EPS Dilution
-------------------------------------------- if JRM
1999E 2000E 2001E EPS is $2.00 (b)
----- ----- ----- ----------------
<S> <C> <C> <C> <C>
$24.94 Offer Price (5% premium) (1.6%) (13.4%) (13.0%) (8.5%)
$26.13 Offer Price (10% premium) (3.3%) (15.1%) (14.6%) (10.1%)
$27.31 Offer Price (15% premium) (4.9%) (16.8%) (16.1%) (11.6%)
$28.50 Offer Price (20% premium) (6.5%) (18.5%) (17.6%) (13.0%)
$26.69 Offer Price (25% premium) (8.0%) (20.2%) (19.1%) (14.5%)
- ---------------------------------------------------------------------------------------------------------------
MII Standalone - Management $2.42 $1.76 $2.28 $2.67
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------------------------
(a) Assumes $5 million of pre-tax synergies; 14.6 million JRM shares held by
public; and 15 year amortization of new goodwill.
(b) Assumes JRM standalone FYE 2001 EPS is $1.27.
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-----------------------------------------------------------
37
<PAGE>
Financial Consequences
- --------------------------------------------------------------------------------
Sensitivity Analysis - FY2000 EPS Accretion/(Dilution) - With Synergies (a)
<TABLE>
<CAPTION>
Premium to Current JRM Share Price
----------------------------------------------------
5% 10% 15% 20% 25%
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Offer Price per JRM Share $24.94 $26.13 $27.31 $28.50 $29.69
Implied Exchange Ratio 1.21x 1.26x 1.32x 1.38x 1.44x
Goodwill Amortization Period:
----------------------------------------------------
15 Years (13.4%) (15.1%) (16.8%) (18.5%) (20.2%)
----------------------------------------------------
20 Years (11.5%) (13.1%) (14.7%) (16.2%) (17.6%)
30 Years (9.7%) (11.1%) (12.5%) (13.8%) (15.1%)
40 Years (8.8%) (10.1%) (11.4%) (12.6%) (13.8%)
</TABLE>
- ---------------------------------------
(a) Assumes pre-tax synergies of $5 million.
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-----------------------------------------------------------
38
<PAGE>
Financial Consequences
- --------------------------------------------------------------------------------
March 31, 1999 Pro Forma Balance Sheet Impact to MII - 100% Stock Offer @
15%Premium
(Dollars in Millions)
MII
Standalone Adjustments MII Pro Forma
---------- ----------- -------------
Assets
Cash $209.3 $209.3
Net Working Capital (23.2) (23.2)
Net PP&E 481.2 481.2
Goodwill 110.7 $183.3 294.0
Investment Portfolio 1,123.7 1,123.7
Other 931.7 931.7
---------- ----------- -------------
Total Assets $2,833.4 $183.3 $3,016.7
========== =========== =============
Liabilities and Equity
Total Debt $604.4 $604.4
Minority Interest 215.5 ($215.5) 0.0
Other Liabilities 1,121.8 1,121.8
Equity 891.7 398.8 1,290.5
---------- ----------- -------------
Total Liabilities & Equity $2,833.4 $183.3 $3,016.7
========== =========== =============
[LOGO] Merrill Lynch
-----------------------------------------------------------
39
<PAGE>
Financial Consequences
- --------------------------------------------------------------------------------
Pro Forma Shareholder Profile
<TABLE>
<CAPTION>
Implied Exchange Ratio/Offer Price
----------------------------------
1.21x 1.44x
MII 5% Premium 25% Premium
Standalone $24.94 $29.69
---------- ---------- -----------
Top Institutional Shareholders (a)
<S> <C> <C> <C>
Prudential Ins. 13.7% 12.7% 12.6%
Soros Fund Management 9.1% 7.1% 6.8%
Fidelity Management & Resources 6.2% 5.5% 5.5%
Lynch & Mayer 4.5% 5.1% 5.2%
ICM Asset Management 2.9% 2.1% 2.1%
Neuberger & Berman Management 2.8% 2.1% 2.1%
Franklin Resources 2.8% 2.1% 2.1%
Barclays Bank 2.8% 2.1% 2.1%
Crabbe Huson Group 2.3% 1.8% 1.7%
Mass Mutual Life Ins 2.0% 1.5% 1.5%
Aeltus Investment Management 1.9% 1.5% 1.4%
State Street 1.8% 2.1% 2.1%
Mellon Bank 1.7% 1.3% 1.3%
T. Rowe Rice 1.4% 1.1% 1.0%
Duquesne Capital Management 1.3% 1.4% 1.4%
Wellington Management -- 3.4% 3.8%
Brahman Capital Corp. -- 1.6% 1.8%
---------- ---------- -----------
Subtotal 57.2% 54.9% 54.6%
Other Institutional Holdings 26.5% 28.3% 28.6%
---------- ---------- -----------
Total Institutional Holdings 83.7% 83.2% 83.1%
Management & Directors (b) (c) 1.3% 1.2% 1.2%
Public 15.0% 15.6% 15.7%
---------- ---------- -----------
Total Primary Shares Outstanding 100.0% 100.0% 100.0%
========== ========== ===========
- -------------------------------------------------------------------------------------------
Total Primary Shares Outstanding (mm) 60.0 77.6 81.0
- -------------------------------------------------------------------------------------------
</TABLE>
- ---------------------------------------
(a) Source: CDA/Spectrum run for quarter ending December 31, 1998.
(b) Source: JRM Proxy Statement dated July 1, 1998; excludes shares subject to
exercise of stock options and conversion of preferred stock.
(c) Source: MII Proxy Statement dated July 6, 1998. Excludes shares subject to
exercise of stock options.
[LOGO] Merrill Lynch
-----------------------------------------------------------
40
<PAGE>
EXHIBIT 99.(B)(19)
- --------------------------------------------------------------------------------
Discussion Materials Prepared Regarding
MII's Offer to Acquire the Minority
Interest of JRM
March 15, 1999
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
A. Situation Analysis
B. Valuation of JRM
C. Valuation of MII
D. Relative Valuations of MII and JRM
E. Conclusion
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
Situation Analysis
- --------------------------------------------------------------------------------
<PAGE>
Situation Analysis
- --------------------------------------------------------------------------------
Current Ownership Structure
[The omitted graphic shows the current ownership structure of
JRM (32% Public/68% MII) and MII (100% Public), as detailed below]
100%
60.0MM Shares
Market Value(a): $1,380 Million
32%
14.6 MM Shares
Market Value(b): $356 Million
68%
30.4 MM Shares(c)
Market Value(b): $741 Million
- ----------
(a) Based on MII closing stock price as of March 9, 1999 of $23.00.
(b) based on JRM closing stock price as of March 9, 1999 of $24.38.
(c) Includes 5.7 million JRM common shares convertible from preferred shares.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
4
<PAGE>
Situation Analysis
- --------------------------------------------------------------------------------
Impact of JRM Minority Interest
o The public's interest in JRM was created at the time of the OPI
merger
- Assumed few synergistic benefits existed between the disparate
business segments in Offshore, Government Operations and Power
Generation
- Created "highlighting effect" with separately traded JRM stock
o For reasons unforeseen at the time, the two separate securities have
proven to be cumbersome
- Small float in JRM discourages many potential institutional
investors and equity research analysts
- MII's equity story is somewhat confusing given the largest
component of MII's market value is its majority ownership
position in JRM
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
5
<PAGE>
Situation Analysis
- --------------------------------------------------------------------------------
MII and JRM Three Year Relative Price Performance
o MII's and JRM's stocks have traded in close proximity over time.
[The omitted graph displays the three year MII and JRM
performance index from 3/8/96 to 3/10/99]
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
6
<PAGE>
Situation Analysis
- --------------------------------------------------------------------------------
Comparison of Stock Prices to 52-Week Highs - Pre-Announcement (a)
o Both stocks have traded down from their respective 52-week highs by
approximately the same amount
Average
-------
40.3%
[Bar graphic of the percentages listed below]
Saipem 61.2%
MDR 54.2%
JRM 51.2%
Oceaneering 50.0%
IHC Caland 46.9
Coflexip 40.3%
Cooper Cameron 40.3%
Dril-Quip 37.2%
Stolt Comex 31.0%
DSND 29.3%
Aker Maritime 29.3%
Global Industries 22.3%
- ----------
(a) Based on closing stock prices as of March 9, 1999.
[LOGO] Merrill Lynch
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7
<PAGE>
Situation Analysis
- --------------------------------------------------------------------------------
Summary of Wall Street Earnings Estimates
o Management's projections for MII's earnings closely approximate
Street estimates for FY2000 and are slightly more optimistic for
FY2001
- By comparison, JRM management's estimates are somewhat more
pessimistic than Street estimates in FY2000 and substantially
more pessimistic than the Street in FY2001
<TABLE>
<CAPTION>
MII Earnings Estimates (a) JRM Earnings Estimates (a)
------------------------------- -------------------------------
Last Last
Firm FY 2000 FY 2001 Confirmed FY 2000 FY 2001 Confirmed
- --------------------------- ------- ------- --------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
DLJ Securities $ 1.75 $ 2.25 2/8 $ 1.15 $ 1.75 2/4
Goldman Sachs 1.75 -- 2/2 -- -- --
Johnson Rice 1.70 -- 2/25 1.00 -- 2/25
Lazard Freres 1.75 -- 2/28 1.10 -- 1/28
Moness Crespi 1.75 -- 2/17 1.25 -- 3/2
Prudential Securities -- -- -- 0.75 -- 3/10
Salomon Smith Barney 1.80 2.00 3/10 1.20 1.80 2/8
Schroders -- -- -- 1.11 -- 3/4
- --------------------------------------------------------------------------------------------------------
Mean $ 1.75 $ 2.13 $ 1.08 $ 1.78
Implied P/E (b) 15.1x 12.4x 28.4x 17.2x
- --------------------------------------------------------------------------------------------------------
Management Projections (c) $ 1.76 $ 2.28 $ 1.00 $ 1.27
Variance to Street 0.6% 7.0% (7.4%) (28.7%)
Implied P/E (b) 15.0x 11.6x 30.7x 24.2x
- --------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(a) Source: First Call as of March 10, 1999.
(b) Based on March 12, 1999 closing stock price of $26.44 and $30.69 for MII
and JRM, respectively.
(c) Management projections are not pro forma for the recently completed tender
of the 9 3/8% senior subordinated notes, the earnings effect of which has
not yet been reflected by the Street.
[LOGO] Merrill Lynch
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8
<PAGE>
Situation Analysis
- --------------------------------------------------------------------------------
Rationale for Recombination
o A recombination of MII and JRM offers a number of attractive
benefits for JRM shareholders
- Creates a substantially more attractive company for Wall
Street
- Eliminates small float in JRM stock which currently
discourages investors and analysts
- Significantly increases liquidity for investors, a
critical factor in today's market
- Added liquidity and simplified corporate structure
encourages additional research coverage
- Attracts additional institutional interest
- Provides JRM investors with access to more stable earnings to
counteract cyclical offshore industry
- Creates a more efficient organizational structure
- Simplifies corporate/ownership structure
- Combines two Boards of Directors into one
- Provides modest cost savings
- Creates one shareholder base
[LOGO] Merrill Lynch
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9
<PAGE>
Situation Analysis
- --------------------------------------------------------------------------------
Summary of MII's Offer
o MII's offer of 1.15 shares of MII for each share of JRM represents
an attractive proposal for JRM's shareholders
- 8.5% premium to JRM's closing stock price on the day preceding
the offer
- 16.2% premium to JRM's stock price at the time of the
announcement of the offer
- 9.5% premium to the 90 day implied exchange ratio
- 6.5% premium to the 180 day implied exchange ratio
- Multiple at the time of the offer of management's earnings
estimates of 22.0x FY2000 and 18.1x FY2001
- Compares to average comparable company P/E ratios at the
time of the offer of 12.9x and 10.7x, respectively
- Current offer implies a multiple of 25.3x and 20.8x FY2000 and
FY2001 JRM estimates, respectively, versus comparable company
P/Es of 14.8x and 12.1x
o The following sections provide a valuation of MII's and JRM's stocks
- Such analyses reinforce the attractiveness of MII's offer to
JRM's shareholders
[LOGO] Merrill Lynch
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10
<PAGE>
- --------------------------------------------------------------------------------
Valuation of JRM
- --------------------------------------------------------------------------------
<PAGE>
Valuation of JRM
- --------------------------------------------------------------------------------
Analysis Overview
o In order to determine the appropriateness of JRM's stock price in
the public market today, a valuation of JRM was performed
o Such valuation relied on a comparable company trading analysis
("Comco Analysis")
- As such, multiples of various financial measures of comparable
companies trading in the public market were calculated and
applied to JRM's relevant financial measures
o The Comco Analysis was performed using two sets of earnings and cash
flow multiples:
- Street estimates
- Management estimates
o The analysis is based on closing stock prices as of March 9, 1999,
the day prior to the offer
- An alternate analysis was performed based on the most recent
closing stock prices (March 12, 1999)
o Other traditional valuation methodologies could not be employed in
valuing JRM at this time
- A comparable acquisition analysis is not appropriate given the
control premiums incorporated in the buyouts of entire
companies (rather than minority interests, as in the instant
case)
- A discounted cash flow analysis could not be performed given
the unavailability of management projections beyond FY2001
[LOGO] Merrill Lynch
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12
<PAGE>
Valuation of JRM
- --------------------------------------------------------------------------------
Public Market Equity Value Per Share - Summary (a)(b)
As of Pre-Announcement Date (March 9, 1999)
o A Comco Analysis indicates that JRM's stock price is overvalued in
the market today
The omitted bar chart depicts the values derived from a comparable company
trading analysis based on the methodologies described below to be as follows:
Low High
Valuation Parameter Methodology Value Value
- ---------------------------- ------------------- --------- ---------
FYE 2000 EPS - 13.0x - 17.0x $15.75 $20.50
Management and Street Cases EPS of $1.20
FYE 2000 CFPS - 6.5x - 7.5x $15.75 $18.25
Management and Street Cases CFPS of $2.43
FYE 2001 EPS - 10.5x - 11.5x $15.25 $16.75
Management Case EPS of $1.46
FYE 2001 EPS - 10.5x - 11.5x $18.75 $20.50
Street Case EPS of $1.78
FYE 2001 CFPS - 6.0x - 7.5x $15.25 $19.00
Management Case CFPS of $2.52
<TABLE>
<CAPTION>
FYE 2000 FYE 2001(c)
---------------------------- ----------------------------------------------------
Management/ Management/ Management Street Management
Street Case Street Case Case Case Case
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
13.0x - 17.0x 6.5x - 7.5x 10.5x - 11.5x 10.5x - 11.5x 6.0x - 7.5x
Methodology FYE 2000 FYE 2000 FYE 2001 FYE 2001 FYE 2001
EPS of Cash Flow(d) EPS of EPS of Cash Flow (d)
$1.20 of $2.43 $1.46 $1.78 of $2.52
---------------------------------------------------------------------------------------
</TABLE>
- ----------
(a) Assumes 45.0 million shares outstanding; Street estimates from various
equity research and First Call.
(b) Management projections are pro forma for the recent debt tendering.
(c) Street estimates for FYE 2001 Cash Flow not available.
(d) Cash flow defined as net income plus depreciation and amortization.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
13
<PAGE>
Valuation of JRM
- --------------------------------------------------------------------------------
Comparable Company Trading Analysis - As of Pre-Announcement Date
(March 9, 1999)
(Dollars in Millions)
<TABLE>
<CAPTION>
Market Value
Market Value as as a Multiple of Cash
Multiple of EPS (a) Flow/Share (b)
-------------------- ---------------------
Market Market Calendar Calendar Calendar Calendar
Company Value Capitalization 1999 2000 1999 2000
- ----------------------- ------ -------------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Aker Marine $ 397 $ 547 8.0x 7.5x N/A N/A
Coflexip 1,187 1,309 10.7 8.2 5.4x 5.1x
Cooper Cameron 1,585 2,091 24.1 19.8 10.7 10.5
Dril-Quip 246 214 18.6 16.1 10.6 N/A
DSND 229 301 6.6 5.8 N/A N/A
IHC Caland 403 306 11.3 8.0 N/A N/A
Global Industries 524 726 18.0 11.7 6.7 5.6
Oceaneering 276 322 10.6 10.2 4.6 4.4
Saipem 804 804 13.1 12.4 N/A N/A
Stolt Comex 441 467 8.5 6.8 4.3 3.7
---------------------------------------------------------------------
Average 12.9x 10.7x 7.0x 5.9x
---------------------------------------------------------------------
</TABLE>
- ----------
(a) Stock prices and IBES estimates as of March 9, 1999.
(b) Based on First Call estimates and selected research reports; Cash Flow
defined as net income plus depreciation and amortization.
[LOGO] Merrill Lynch
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14
<PAGE>
Valuation of JRM
- --------------------------------------------------------------------------------
Public Market Equity Value Per Share - Summary (a)(b)
As of Latest Close (March 12, 1999)
o An examination of the most recent trading prices, which incorporate the
rally in oil service stocks, indicates that MII's offer represents a
significant premium to JRM's intrinsic value
The omitted bar chart depicts the values derived from a comparable company
trading analysis based on the methodologies described below to be as follows:
Low High
Valuation Parameter Methodology Value Value
- ---------------------------- ------------------- --------- ---------
FYE 2000 EPS - 15.0x - 24.0x $18.00 $28.75
Management and Street Cases EPS of $1.20
FYE 2000 CFPS - 7.0x - 9.0x $17.00 $22.00
Management and Street Cases CFPS of $2.43
FYE 2001 EPS - 12.0x - 17.0x $17.50 $24.75
Management Case EPS of $1.46
FYE 2001 EPS - 12.0x - 17.0x $21.50 $30.25
Street Case EPS of $1.78
FYE 2001 CFPS - 7.0x - 8.0x $17.75 $20.25
Management Case CFPS of $2.52
<TABLE>
<CAPTION>
FYE 2000 FYE 2001(c)
---------------------------- ----------------------------------------------------
Management/ Management/ Management Street Management
Street Case Street Case Case Case Case
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
15.0x - 24.0x 7.0x - 9.0x 12.0x - 17.0x 12.0x - 17.0x 7.0x - 8.0x
Methodology FYE 2000 FYE 2000 FYE 2001 FYE 2001 FYE 2001
EPS of Cash Flow(d) EPS of EPS of Cash Flow (d)
$1.20 of $2.43 $1.46 $1.78 of $2.52
---------------------------------------------------------------------------------------
</TABLE>
- ----------
(a) Assumes 45.0 million shares outstanding; Street estimates from various
equity research and First Call.
(b) Management projections are pro forma for the recent debt tendering.
(c) Street estimates for FYE2001 Cash Flow not available.
(d) Cash flow defined as net income plus depreciation and amortization.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
15
<PAGE>
Valuation of JRM
- --------------------------------------------------------------------------------
Comparable Company Trading Analysis - As of Latest Close (March 12, 1999)
(Dollars in Millions)
<TABLE>
<CAPTION>
Market Value
Market Value as as a Multiple of Cash
Multiple of EPS (a) Flow/Share (b)
-------------------- ---------------------
Market Market Calendar Calendar Calendar Calendar
Company Value Capitalization 1999 2000 1999 2000
- ----------------------- ------ -------------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Aker Marine $ 437 $ 587 8.8x 8.2x N/A N/A
Coflexip 1,336 1,458 12.0 9.2 6.1x 5.7x
Cooper Cameron 1,599 2,105 24.3 20.0 10.8 10.6
Dril-Quip 246 214 21.5 18.7 12.3 N/A
DSND 206 278 6.0 5.2 N/A N/A
IHC Caland 439 341 12.3 9.3 N/A N/A
Global Industries 758 959 26.0 17.0 9.7 8.1
Oceaneering 321 367 12.3 11.8 5.3 5.2
Saipem 869 869 14.2 13.4 N/A N/A
Stolt Comex 541 567 10.4 8.3 5.2 4.6
---------------------------------------------------------------------
Average 14.8x 12.1x 8.2x 6.8x
---------------------------------------------------------------------
</TABLE>
- ----------
(a) Stock prices and IBES estimates as of March 9, 1999.
(b) Based on First Call estimates and selected research reports; Cash Flow
defined as net income plus depreciation and amortization.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
Valuation of MII
- --------------------------------------------------------------------------------
<PAGE>
Valuation of MII
- --------------------------------------------------------------------------------
Valuation Methodology
o To determine the appropriateness of MII's current stock price in the
public market today, a valuation analysis of MII's stock was
performed
o As with JRM, a Comco Analysis was relied upon for this valuation
- A comparable acquisition analysis and discounted cash flow
analysis were not performed for similar reasons to the JRM
case (i.e., inclusion of buyout premium and lack of data,
respectively)
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
18
<PAGE>
Valuation of MII
- --------------------------------------------------------------------------------
Contribution to MII Valuation (a)
o The valuation for MII's non-JRM holdings that is implied in its
current stock price is well below a break-up valuation based on a
Comco Analysis
- Such analysis indicates that MII's stock is undervalued by the
market today
The omitted bar chart depicts the contribution to the valuation of MII by each
of MII and JRM under the following methodologies:
MII ex-JRM
Methodology Valuation/% JRM Valuation/%
- ----------------------- ------------------- -------------------
Valuation Implied by Public Market $10.65/46% $12.35/54%
Break-Up Valuation $16.25/57% $12.35/43%
[LOGO] Merrill Lynch
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19
<PAGE>
Valuation of MII
- --------------------------------------------------------------------------------
JRM Contribution Analysis
(Amounts in Millions, except Per Share Amounts)
Value Per
Amount MII Share (c)
--------- -------------
JRM Share Price (3/9/99) $24.38
JRM Market Value (a) $1,097
JRM Shares Owned by MII (b) 30.4
Market Value of JRM Investment $ 741 $12.35
MII Market Value (3/9/99) (c) $1,380 $23.00
Implied MII - ex JRM Market Value $ 639 $10.65
% of MII Market Value Contributed by JRM 53.7%
- ----------
(a) Assumes 45.0 million JRM shares outstanding (including 5.7 million
convertible preferred shares).
(b) Includes 5.7 million JRM convertible preferred shares, represents 68% of
ownership of JRM.
(c) Assumes 60.0 million MII shares outstanding.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
20
<PAGE>
Valuation of MII
- --------------------------------------------------------------------------------
Preliminary Break-up Valuation
(Dollars in Millions, except Per Share Amounts)
<TABLE>
<CAPTION>
MII ex-JRM-Projected Year Ending March 31, 2000
-----------------------------------------------------------
B&W Gov't Hudson
Power Co. Ops Products E&C Total
--------- ----- -------- ---- -----
<S> <C> <C> <C> <C> <C>
EBITDA $ 97 $ 158
Equity and Other Income 5 9
---- ------
Adjusted EBITDA $102 $ 49 $ 9 $ 7 $ 167
Valuation Multiple 6.0x 5.0x 5.0x 4.0x 5.6x
---- ---- ---- ---- ------
Enterprise Value $612 $245 $ 45 $ 28 $ 930
Plus: Cash & Investments (a) 588
Less: Debt (359)
Product Liability (b) (185)
------
Net Equity Value $ 974
Shares Outstanding 60.0
Value Per Share $16.23
</TABLE>
- ----------
(a) Assumes CAFCO program is terminated (reduces B&W Power Co. cash balance by
$55 million).
(b) For B&W Power Co. the $185 product liability represents the present value
of after-tax net cash flow payments related to asbestos (per management
estimates).
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
21
<PAGE>
Valuation of MII
- --------------------------------------------------------------------------------
Comparable Company Analysis
(Dollars in Millions, except Per Share Amounts)
<TABLE>
<CAPTION>
Enterprise Value Market Value
as a Multiple of as a Multiple of
Market Enterprise Calendar Calendar
Value (a) Value 1999E EBITDA (b) 1999E EPS (c)
---------- ---------- ----------------- ---------------
<S> <C> <C> <C> <C>
Babcock Int'l Group (UK) $ 242 $ 309 7.4x 9.2x
Jacobs Engineering 945 860 5.5x 14.9x
Fluor Corporation 2,629 3,018 4.2x 11.5x
Litton Industries 2,587 3,619 6.7x 13.4x
Foster Wheeler 499 1,355 5.8x 7.4x
--- ---
Mean -- -- 5.9x 11.3x
<CAPTION>
- -------------------------------------------------------------------------------------------------
MII (d)
Research Estimates $1,241 $ 958 NM 11.3x
Amounts -- $ 1.83
Management Estimates $1,241 $ 958 3.1x 11.8x
Amounts $312.4 $ 1.76
- -------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(a) As of close on March 9, 1999.
(b) EBITDA projections based on various equity research reports.
(c) First Call EPS projections as of March 9, 1999.
(d) Assumes FYE 1999 EBITDA and FYE 2000 EPS estimates, as a proxy for
calendar 1998E EBITDA and calendar 1999E EPS, respectively.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
22
<PAGE>
- --------------------------------------------------------------------------------
Relative Valuations of MII and JRM
- --------------------------------------------------------------------------------
<PAGE>
Relative Valuations of MII and JRM
- --------------------------------------------------------------------------------
o Based on the valuations of MII and JRM discussed previously, MII's
stock is undervalued in the market today whereas JRM is overvalued
- MII is valued at approximately $28.00 per share versus a
pre-announcement price of $23.00 per share
- JRM is valued at approximately $18.00 per share versus a
pre-announcement price of $24.38 per share
o A plausible rationale for this discrepancy is the speculation of a
buy-in of JRM's minority interest by MII, which speculation has
circulated repeatedly over the past year
- Such speculation typically results in a buyout premium being
factored into the target's (JRM's) stock
- Simultaneously, the related arbitrage activity in the
acquiror's (MII's) stock typically has a depressing effect on
its valuation
o Based on MII's breakup valuation of $28.00 on March 9, MII's offer
represented a $32.20 per share price for JRM
- Such offer represented premiums of 32%, 36% and 35% to JRM's
closing price on March 9 of $24.38, to JRM's 60-day average
stock price of $23.69 and to JRM's 90-day average price of
$23.91, respectively
- Such offer represented a 69% - 101% premium to JRM's intrinsic
valuation ($16.00 - $19.00 per share) on such date
- Such offer values JRM's stock at 26.8x JRM management's FY2000
projected earnings and 22.1x FY 2001 projected earnings versus
average company P/E multiples of 12.9x and 10.7x,
respectively, on the day prior to the offer (March 9)
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
24
<PAGE>
Relative Valuations of MII and JRM
- --------------------------------------------------------------------------------
o In addition, research analysts covering the two companies predict
that MII's stock price has significantly more upside than JRM's
stock price within the next twelve months
12 Month Price Target
---------------------
Firm JRM MII
- ----------------------- ------ ------
DLJ $37.00 $42.00
Salomon Smith Barney 30.00 34.00
Lazard Freres -- 45.00
Prudential 30.00 --
Average $32.00 $40.00
o These expectations would imply an exchange ratio of 0.80 shares of
MII for each share of JRM
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
25
<PAGE>
- --------------------------------------------------------------------------------
Conclusion
- --------------------------------------------------------------------------------
<PAGE>
Conclusion
- --------------------------------------------------------------------------------
o The recombination of MII and JRM creates a more attractive company
for Wall Street and a more efficient corporate structure for the
combined companies
- The combined company's future stock trading will benefit from
increased focus from Wall Street, the increased liquidity for
investors and the more diversified and stable company that is
created
o In addition to the long-term benefits of such a combination, the
exchange ratio outlined in the proposal gives JRM shareholders a
meaningful premium to their current share price
- As of March 9, 1999, the exchange ratio represented a premiums
of approximately 9%, 12% and 11% to JRM's closing stock price,
60-day average stock price and 90-day average stock price,
respectively
- The offer values JRM's stock at an attractive multiple of
future earnings (22.0x and 18.1x FY2000 and FY2001 earnings,
respectively) and at a significant premium to comparable
companies trading in the market
o Furthermore, a valuation of each stock indicates that JRM
shareholders are receiving an even larger premium from the offer
than indicated by the market prices of the two stocks
- MII's stock is significantly undervalued in the market today
- In contrast, JRM's stock is overvalued in the market
- Management's earnings estimates are substantially below
the Street
- Most likely due to buyout speculation, JRM trades at a
significant multiple premium to its peers
- As a result, JRM's shareholders are receiving an effective
buyout premium of 69% - 101% vis-a- vis the intrinsic value of
their stock
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
27
<PAGE>
EXHIBIT 99.(B)(20)
-----------------------------------------------------
Presentation to McDermott Special Committee
Regarding
MII's Offer to Acquire the Minority
Interest of JRM
April 8, 1999
[LOGO] Merrill Lynch
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
A. Situation Analysis
B. Updated Valuations
C. Financial Consequences
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
Situation Analysis
- --------------------------------------------------------------------------------
<PAGE>
Situation Analysis
- --------------------------------------------------------------------------------
Current Ownership Structure
[The omitted graphic shows the current ownership structure of
JRM (32% Public/68% MII) and MII (100% Public), as detailed below]
100%
60.0 MM Shares
Market Value (a): $1,500 Million
32%
14.6 MM Shares
Market Value (b): $433 Million
68%
30.4 MM Shares (c)
Market Value (b): $903 Million
- ----------
(a) Based on MII closing stock price as of April 6, 1999 of $25.00.
(b) Based on JRM closing stock price as of April 6, 1999 of $29.69.
(c) Includes 5.7 million JRM common shares convertible from preferred shares.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
4
<PAGE>
Situation Analysis
- --------------------------------------------------------------------------------
Recent Events
o On March 10, 1999, MII presented an offer (the "Offer") to JRM's
Independent Committee to acquire the outstanding shares of JRM not
owned by MII for 1.15 shares of MII per JRM share.
- MII's closing stock price one day prior to the Offer was
$23.00 per share, resulting in a Offer price of $26.45 per JRM
share
- Equaled a premium of 8.5% based on JRM's closing stock
price of $24.38 and a 9.5% premium to the 90-day average
exchange ratio at the time of the Offer
- Currently, the Offer is worth $28.75 per JRM share (a),
which is somewhat lower than JRM's current trading price
of $29.69, suggesting the market expects MII ultimately
to raise the Offer
o Since March 10, 1999, OPEC's announcements regarding a cut in
production and the resulting strengthening in commodity prices have
had a positive impact on the stock prices of energy companies.
- Oil has risen from $13.90 per barrel on March 9 to $16.45 per
barrel on April 6, an increase of 18.3%
- The average offshore construction company stock has also
increased significantly over this time, increasing an average
of 20.3% since March 9
- ----------
(a) Based on MII closing stock price as of April 6, 1999 of $25.00.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
5
<PAGE>
Situation Analysis
- --------------------------------------------------------------------------------
Percentage Increase in Stock Prices Since Offer Date (a)
o As can be seen from the chart below, oil service stocks have
increased significantly since the day prior to the announcement of
the Offer (March 9).
- The average oilfield service equity has traded higher by 20.3%
over this time
[Bar Graphic of the percentages listed below has been omitted]
Global Industries 64.1%
Dril-Quip 40.9%
Stolt Comex 24.2%
IBC Caland 23.7%
J Ray McDermott 21.8%
Average (b) 20.3%
Aker Maritime 15.1%
Cooper Cameron 14.5%
Oceaneering 12.5%
Coflexip 10.9%
Saipem 10.6%
McDermott 8.7%
- ----------
(a) Based on closing stock prices as of April 6, 1999.
(b) Excludes high, low, JRM and MII.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
6
<PAGE>
Situation Analysis
- --------------------------------------------------------------------------------
Change in Comparable Company Trading Analysis (a)(b)
o In addition, the multiples afforded to the oilfield service
companies by the stock market have also increased dramatically over
the past month.
<TABLE>
<CAPTION>
Market Value as a Multiple of Net Income: Market Value as a Multiple of Cash Flow:
------------------------------------------ ------------------------------------------
CY 1999 CY 2000 CY 1999 CY 2000
------------------ ------------------ ------------------ ------------------
Company 3/9/99 4/6/99 3/9/99 4/6/99 3/9/99 4/6/99 3/9/99 4/6/99
- ------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Global 18.1x 31.8x 11.7x 19.4x 7.0x 11.5x 5.5x 9.0x
Saipem 25.0x 27.7x 23.7x 26.2x 12.6x 14.0x 10.4x 11.5x
IHC Caland 23.4x 28.9x 20.2x 25.0x 12.3x 15.2x 9.6x 11.8x
Aker 8.2x 9.5x 7.6x 8.8x 4.2x 4.8x 4.6x 5.3x
Dril-Quip 16.6x 25.7x 14.0x 20.0x 11.2x 15.8x 9.5x 13.4x
Oceaneering 10.7x 11.7x 10.2x 10.3x 4.7x 5.2x 4.2x 4.8x
Coflexip 10.6x 13.2x 8.6x 11.5x 5.6x 6.2x 6.9x 7.7x
Cooper Cameron 22.3x 27.1x 18.2x 22.2x 10.3x 11.8x 9.1x 10.4x
Stolt Comex 9.9x 12.3x 8.1x 10.0x 4.2x 5.3x 3.8x 4.8x
------------------------------------------------------------------------------------------
Average 16.1x 20.9x 13.6x 17.0x 8.0x 10.0x 7.1x 8.7x
------------------------------------------------------------------------------------------
</TABLE>
- ----------
(a) Stock prices and First Call estimates as of April 6, 1999.
(b) Based on First Call estimates and selected research reports; Cash Flow
defined as net income plus depreciation and amortization.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
7
<PAGE>
Situation Analysis
- --------------------------------------------------------------------------------
JRM One Year Relative Price Performance
o JRM's stock has traded in close proximity with other oilfield
service companies over time.
[The omitted line graph depicts the relative trading ranges based on the closing
stock prices of JRM. The S&P 500 Index and a composite of comparable oil field
service companies over the past year.
Indexed Prices
--------------------------------------------------------
Date JRM S&P 500 Index Oilfield Service
- ---------------------- ------------------ ------------- Composite
---------------------
04/06/98 100.0 100.0 100.0
05/15/98 111.1 98.9 105.7
06/25/98 93.1 100.7 81.1
08/15/98 62.9 94.8 49.7
10/21/98 82.6 95.4 54.1
12/03/98 57.9 102.6 41.7
01/14/99 58.9 108.1 48.4
02/25/99 49.5 111.0 45.0]
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
8
<PAGE>
Situation Analysis
- --------------------------------------------------------------------------------
Simmons & Co. Discussion
o On April 6, 1999, Merrill Lynch met with JRM's financial advisor,
Simmons & Co., for the purpose of discussing the Offer.
- Simmons & Co. indicated to Merrill Lynch that the JRM
Independent Committee did not consider the Offer acceptable
- Simmons stated that, in their opinion, the increase in
the stock prices and multiples of the oilfield service
stocks since the Offer date justified a higher valuation
for JRM's minority interest
- Simmons also disputed several assumptions used in the
valuation underlying the Offer
- In addition, Simmons presented several alternatives to the
Offer that they would be prepared to recommend to the JRM
Independent Committee
- 1.15 MII shares for each JRM share plus $4.00 per share
in cash ($32.75 per JRM share based on MII's closing
stock price of $25.00 as of April 6, 1999)
- 1.35 MII shares for each JRM share ($33.75 per JRM share
based on MII's closing stock price of $25.00 as of April
6, 1999)
- Simmons also indicated a willingness to recommend an all
cash offer from MII to JRM's Independent Committee
o This presentation provides an updated valuation of JRM for
consideration by the MII Special Committee in determining its
response to the information communicated by Simmons on behalf of the
JRM Independent Committee.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
Updated Valuations
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Updated Valuation of JRM
- --------------------------------------------------------------------------------
<PAGE>
Updated Valuation of JRM
- --------------------------------------------------------------------------------
Overview
o While JRM's stock price has rallied in recent weeks along with the
oil service industry as a whole, its stock price has under-performed
several of its most comparable companies during this period.
- JRM's price has become linked to MII's stock via the Offer
- MII has a significant non-oilfield component inherent in its
stock price
o The following pages present an updated valuation of JRM based on
current market conditions.
- Analysis of Comparable Company Trading Multiples
- Analysis of Premiums Paid in Minority Interest Transactions
- Discounted Cash Flow Analysis
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
12
<PAGE>
Updated Valuation of JRM
- --------------------------------------------------------------------------------
Summary of Historical and Projected EBITDA Amounts (a)
(Dollars in Millions)
[Bar Graphic of the percentages listed below has been omitted]
1996 $ 129.3
1997 $ 132.1
1998 $ 202.5
1999 $ 169.5
2000 $ 78.9
2001 $ 91.0
2002 $ 145.1
2003 $ 176.1
2004 $ 204.9
Average '99-'04 $147.6
Average '96-'01 $147.7
Fiscal Year Ended March 31,
- ----------
(a) EBITDA includes equity and other income; excludes non-recurring items.
Projections for FYE 1999-2001 provided by management, extrapolated by
Merrill Lynch IBK thereafter.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
13
<PAGE>
Updated Valuation of JRM
- --------------------------------------------------------------------------------
Public Market Equity Value Per Share - Summary (a)(b)
As of April 6, 1999
o A valuation of JRM under current market conditions indicates the
following values:
[The omitted bar chart depicts the values derived from a comparable company
trading analysis based on the methodologies described below to be as follows:
Low High
Valuation Parameter Methodology Value Value
- ------------------------------- ------------------- --------- ---------
Publicly Traded Comparable 21.0x -- 27.5x $24.00 $27.75
Company Trading Analysis FYE 2000 EPS
Publicly Traded Comparable 17.0x -- 23.0x $24.75 $29.50
Company Trading Analysis FYE 2001 EPS
Publicly Traded Comparable 10.0x -- 13.0x $29.75 $35.25
Company Trading Analysis FYE 2000 CFPS
Publicly Trading Comparable 9.0x -- 12.0x $28.00 $33.50
Company Trading Analysis FYE 2001 CFPS
Analysis of Premiums Paid in 15% -- 25% $33.50 $36.50
Minority "Squeeze-Out" Premium to "Adjusted"
Transactions Share Price
Discounted Cash Flow Analysis 8.0x -- 9.0x "Adjusted" $30.75 $34.75]
EBITDA of $148MM
10.0% -- 12.0%
Discount Rates
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
8.0x - 9.0x "Adjusted"
15% - 25% EBITDA of
Methodology 21.0x - 27.5x 17.0x - 23.0x 10.0x - 13.0x 9.0x - 12.0x Premium to $148MM (e)
FYE 2000 FYE 2001 FYE 2000 FYE 2001 "Adjusted" Share Share 10.0% - 12.0%
EPS(b) EPS(b) Cash Flow(b)(c) Cash Flow(b)(c) Price of $29.25(d) Discount Rate
-----------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(a) Assumes 45.0 million shares outstanding; Street estimates from various
equity research reports and First Call.
(b) Management projections are pro forma for the recent debt tendering. All
net in come and cash flow estimates adjusted to reflect value of cash.
(c) Cash flow defined as net income plus depreciation and amortization.
(d) Assumes an increase in JRM's stock price from March 9 to April 6 equal to
the average increase in comparable stocks of 20%.
(e) Equals average EBITDA for fiscal years 1999 to 2004.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
14
<PAGE>
Updated Valuation of JRM
- --------------------------------------------------------------------------------
Comparable Company Trading Analysis As of April 6, 1999 (a)(b)
(Dollars in Millions)
<TABLE>
<CAPTION>
AMV as a Multiple of:
Market Value as a Multiple of: EBITDA
Market Adj. Mkt. ---------------------------------------- ---------------------
Company Value Value 1999 NI 2000 NI 1999 CF 2000 CF 1999 2000
- ------- ------- -------- ------- ------- ------- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Global $856.1 $1,041.5 31.8x 19.4x 11.5x 9.0x 9.7x 7.8x
Saipem 1,572.7 1,477.3 27.7x 26.2x 14.0x 11.5x 10.0x 8.3x
IHC Caland 1,004.3 961.4 28.9x 25.0x 15.2x 11.8x 12.7x 10.0x
Aker 457.3 784.9 9.5x 8.8x 4.8x 5.3x 5.8x 6.6x
Dril-Quip 334.1 302.0 25.7x 20.0x 15.8x 13.4x N/A N/A
Oceaneering 305.6 410.8 11.7x 10.3x 5.2x 4.8x 5.4x 5.0x
Coflexip 1,317.1 1,439.0 13.2x 11.5x 6.2x 7.7x N/A N/A
Cooper Cameron 1,678.1 2,070.8 27.1x 22.2x 11.8x 10.4x 9.9x 9.8x
Stolt Comex 567.9 830.1 12.3x 10.0x 5.3x 4.8x 8.2x 8.4x
--------------------------------------------------------------------------
Average 20.9x 17.0x 10.0x 8.7x 8.8x 8.0x
--------------------------------------------------------------------------
</TABLE>
- ----------
(a) Stock prices and First Call estimates as of April 6, 1999.
(b) Based on First Call estimates and selected research reports; Cash Flow
defined as net income plus depreciation and amortization.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
15
<PAGE>
Updated Valuation of JRM
- --------------------------------------------------------------------------------
Analysis of Premiums Paid in Minority Interest Transactions
<TABLE>
<CAPTION>
Premium Paid
(prior to announcement)
Date Ownership Offer ----------------------------
Announced Target Name Acquiror Name Transaction Value 1 day 1 week 1 month
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12/7/98 Life Technologies Inc. Dexter Corporation 51.5% $450.9 5.0% 5.4% -0.3%
6/29/98 Waste Management International Waste Management Inc 80.0% 431.4 39.4% 33.7% 42.6%
5/29/98 Meridian Technologies Investor Group 58.9% 103.1 22.2% 37.5% 41.0%
5/26/98 CIPE France SA Tyco International Ltd 63.0% 413.5 0.4% 1.4% 16.0%
5/25/98 Prime Resources Group Inc Homestake Mining Co. 50.6% 306.0 57.5% 52.4% 50.0%
5/21/98 PolyGram NV Universal Studios Inc 75.0% 2,547.0 2.7% 0.5% 30.1%
4/30/98 Mycogen Corp Dow AgroSciences 68.6% 322.0 41.8% 40.0% 53.4%
4/16/98 NCR Japan Ltd NCR Corp 70.0% 304.0 26.5% 36.4% 32.2%
4/7/98 Starckjohann Oy Trelleborg AB 54.0% 101.5 0.8% 3.3% 5.6%
3/17/98 BET Holdings Inc. Investor Group 56.0% 462.3 4.0% 14.3% 17.5%
3/6/98 Credit Genera Kredietbank NV 75.0% 141.1 4.2% 8.6% 9.9%
11/28/97 Vendome Luxury Group PLC Richemont 77.3% 1,729.0 25.8% 43.3% 39.6%
9/18/97 Guaranty National Corp Orion Capital Corp 77.3% 117.2 10.8% 23.9% 26.6%
6/26/97 Rhone-Poulenc Rorer Inc Rhone-Poulenc SA 60.8% 4,831.6 22.1% 22.8% 26.8%
6/2/97 Acordia Inc Anthem Inc 60.8% 193.2 12.7% 11.5% 26.5%
5/14/97 Enron Global Power & Pipelines Enron Corp 50.6% 428.0 11.8% 13.7% 20.8%
2/20/97 NHP Inc Apartment Investment & Mgmt Co 53.4% 114.5 28.2% 25.2% 19.5%
1/21/97 Mafco Consolidated Grp Mafco Holdings Inc 85.0% 116.8 60.4% 60.4% 68.9%
1/13/97 Zurich Reinsurance Centre Zurich Versicherungs GmbH 66.0% 319.0 28.5% 30.0% 23.0%
12/17/96 Allmerica Property & Casualty Allmerica Financial Corp 59.3% 816.9 15.8% 12.8% 15.3%
9/20/96 Lloyds Abbey Life PLC Lloyds TSB Group PLC 62.6% 2,590.0 7.3% 9.0% 13.0%
8/26/96 Bankers Life Holding Conseco Inc 88.4% 120.8 14.9% 10.5% 10.5%
5/27/96 SyStemix Inc Novartis AG 67.8% 107.6 4.7% 69.6% 59.2%
8/25/95 GEICO Corp Berkshire Hathaway 52.6% 2,349.2 25.6% 23.1% 25.8%
7/20/95 BTR Nylex Ltd BTR PLC 62.6% 3,290.0 36.9% 26.8% 27.2%
5/19/95 Bic Corp BIC SA 79.0% 212.6 13.3% 12.5% 30.1%
4/20/95 Rothams International PLC Cie Financiere Richemont AG 61.0% 2,600.0 28.1% 25.8% 31.6%
4/7/95 LIN Broadcasting Corp McCaw Cellular Communications 52.0% 3,209.4 6.9% 6.7% 1.3%
4/5/95 Club Med Inc Club Mediterranee SA 67.0% 153.4 41.4% 39.9% 43.8%
-----------------------------------------------------------------------------------
Maximum 88.4% 60.4% 69.6% 68.9%
Mean 65.0% 20.7% 24.2% 27.8%
Median 62.6% 15.8% 23.1% 26.6%
Minimum 50.6% 0.4% 0.5% (0.3%)
-----------------------------------------------------------------------------------
</TABLE>
- ----------
Source: Securities Data Company.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
16
<PAGE>
Updated Valuation of JRM
- --------------------------------------------------------------------------------
Discounted Cash Flow Analysis
(Dollars in Millions, except Per Share Amounts)
Projected FYE March 31,(a)
-------------------------------------------
2000 2001 2002 2003
-------------------------------------------
Sales $852.0 $1,218.0 $1,236.3 $1,304.8
EBITDA 78.9 91.0 145.1 176.1
Equity/Other Income 15.3 11.5 11.5 11.5
-------------------------------------------
Subtotal: Adjusted EBITDA 94.2 102.6 156.6 187.6
Less: Depreciation (53.9) (46.2) (49.5) (52.2)
-------------------------------------------
EBITA 40.3 56.3 107.2 135.4
Less: Taxes @ 40.0% (16.1) (22.5) (42.9) (54.2)
-------------------------------------------
Tax-effected EBITA 24.2 33.8 64.3 81.3
Plus: Depreciation 53.9 46.2 49.5 52.2
Plus: Deferred Taxes 0.0 0.0 0.0 0.0
Less: Capital Expenditures (103.4) (80.6) (49.5) (52.2)
Less: Changes in Working Capital 10.0 23.0 4.5 5.1
-------------------------------------------
Free Cash Flow ($15.4) $22.3 $68.8 $86.4
- --------------------------------------------------------------------------------
Equity Value Per Share (b)
- --------------------------------------------------------------------------------
Terminal Value EBITDA Multiple
--------------------------------------
Discount Rate 8.0x 8.5x 9.0x
- ------------- ------ ------ ------
10.0% $32.58 $33.65 $34.71
11.0% 31.68 32.70 33.72
12.0% 30.83 31.80 32.78
- ----------
(a) Projections through 2001 provided by management, extrapolated by Merrill
Lynch IBK thereafter.
(b) Assumes 45.0 million shares outstanding; net cash as of 3/31/99 of $518
million.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
Updated Valuation of MII
- --------------------------------------------------------------------------------
<PAGE>
Updated Valuation of MII
- --------------------------------------------------------------------------------
Overview
(Amounts in Millions, Except per Share Amounts)
o The value of MII is comprised of its ownership interest in JRM
combined with the value of its non-oilfield businesses.
- As shown in the table below, as of March 9, 1999, MII's
non-oilfield businesses were valued by the market at $10.65
per share of MII
JRM Share Price (on 3/9/99) $24.38
JRM Shares Owned by MII (a) 30.4
------
Value of JRM Investment $741.0
MII Shares Outstanding 60.0
Value of JRM Investment per MII Share $12.35
MII Share Price (on 3/9/99) $23.00
Less: Value of JRM Investment per Share 12.35
------
Value of MII Ex-JRM Investment per Share $10.65
======
- The companies comparable to MII's non-oilfield businesses have
not experienced significant changes in stock market valuations
since March 9
- As such, the value of MII's non-oilfield businesses is
consistent today with its value at the time of the Offer
- ----------
(a) Includes 5.7 million JRM common shares convertible from preferred shares.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
19
<PAGE>
Updated Valuation of MII
- --------------------------------------------------------------------------------
Contribution to MII Valuation
(Amounts in Millions, Except per Share Amounts)
o Assuming a value for JRM of approximately $30 - $35 per share after
taking into account the recent recovery in the oilfield service
market, the table below sets forth the implied values for MII as a
whole under current market conditions.
<TABLE>
<CAPTION>
Assumed JRM Share Price As of April 6:
-------------------------------------------------------------------------
$30.00 $31.00 $32.00 $33.00 $34.00 $35.00
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
JRM Market Value(a) $1,350.0 $1,395.0 $1,440.0 $1,485.0 $1,530.0 $1,575.0
Shares Owned by MII(b) 30.4 30.4 30.4 30.4 30.4 30.4
Market Value of JRM Investment 912.0 942.4 972.8 1,003.2 1,033.6 1,064.0
MII Shares Outstanding 60.0 60.0 60.0 60.0 60.0 60.0
Value of JRM Investment per MII Share $15.20 $15.71 $16.21 $16.72 $17.23 $17.73
Market Value of MII Ex-JRM Investment per Share 10.65 10.65 10.65 10.65 10.65 10.65
-------- -------- -------- -------- -------- --------
Implied Price per MII Share $25.85 $26.36 $26.86 $27.37 $27.88 $28.38
======== ======== ======== ======== ======== ========
</TABLE>
- ----------
(a) Assumes 45.0 million shares outstanding.
(b) Includes 5.7 million JRM common shares convertible from preferred shares.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
20
<PAGE>
Updated Valuations
- --------------------------------------------------------------------------------
MII Versus JRM
o The following table sets forth the relative ratios of MII and JRM
values based on current market conditions.
- --------------------------------------------------------------------------------
Relative Valuations
- --------------------------------------------------------------------------------
JRM Value $30.00 $31.00 $32.00 $33.00 $34.00 $35.00
MII Value 25.85 26.36 26.86 27.37 27.88 28.38
------ ------ ------ ------ ------ ------
Implied Ratio 1.16x 1.18x 1.19x 1.21x 1.22x 1.23x
- --------------------------------------------------------------------------------
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
Financial Consequences
- --------------------------------------------------------------------------------
<PAGE>
Financial Consequences
- --------------------------------------------------------------------------------
Alternative Offers
o Based on discussions with Simmons, the JRM Independent Committee has
indicated that it would be prepared to consider a revised offer of
1.15 shares of MII plus $4.00 in cash for each JRM share or an all
stock transaction in excess of such value.
- The following table sets forth the range of values per JRM
share implied by the current Offer (1.15 exchange ratio) and
ratios up to the revised offer indicated by Simmons
- --------------------------------------------------------------------------------
Exchange Ratio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Current
Offer
<S> <C> <C> <C> <C> <C> <C>
100% Stock 1.15x 1.200x 1.225x 1.250x 1.275x 1.300x
------ ------ ------ ------ ------ ------
MII Stock Price (a) $25.00 $25.00 $25.00 $25.00 $25.00 $25.00
Implied Price per JRM Share 28.75 30.00 30.63 31.25 31.88 32.50
Stock & Cash
Value of Current Offer (1.15) $28.75 $28.75 $28.75 $28.75 $28.75 $28.75
Added Cash -- 1.25 1.88 2.50 3.13 3.75
------ ------ ------ ------ ------ ------
Total $28.75 $30.00 $30.63 $31.25 $31.88 $32.50
- ---------------------------------------------------------------------------------------
</TABLE>
- ----------
(a) Closing price on April 6, 1999.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
23
<PAGE>
Financial Consequences
- --------------------------------------------------------------------------------
Principal Assumptions Behind Financial Consequences
o Based on management projections, MII and JRM are expected to earn
the following amounts per share: (a)
FY 1999 FY 2000 FY 2001
------- ------- -------
MII $2.52 $1.86 $2.38
JRM $2.71 $1.20 $1.46
o Pre-tax combination benefits of $5.0 million per year
o Tax rate of 38%
o Good will is amortized over either 30 years or 15 years and is not
deductible for tax purposes
- ----------
(a) Management projections are pro forma for the recent debt tender.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
24
<PAGE>
Financial Consequences
- --------------------------------------------------------------------------------
Overview of Potential Transaction - 30-Year Goodwill Amortization Period
(Dollars in Millions, except Per Share Amounts)
o The following table sets forth the impact on MII's projected FY 2000
and FY 2001 earnings resulting from the alternative offers and
transaction structures set forth on page 23.
<TABLE>
<CAPTION>
Exchange Ratio
-------------------------------------------------------------
1.150x 1.200x 1.225x 1.250x 1.275x 1.300x
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Price per Share $28.75 $30.00 $30.63 $31.25 $31.88 $32.50
Accretion/(Dilution) - All Stock:
- ---------------------------------
FY 2000 (13.8%) (15.1%) (15.7%) (16.3%) (16.9%) (17.5%)
FY 2001 (13.5) (14.7) (15.2) (15.8) (16.3) (16.9)
Accretion/(Dilution) - Stock & Cash (a):
- ----------------------------------------
FY 2000 (13.8%) (15.0%) (15.5%) (16.1%) (16.7%) (17.2%)
FY 2001 (13.5) (14.4) (14.8) (15.3) (15.7) (16.2)
Accretion/(Dilution) - All Cash:
- --------------------------------
FY 2000 (10.4%) (11.9%) (12.6%) (13.3%) (14.0%) (14.7%)
FY 2001 (5.5) (6.6) (7.2) (7.8) (8.3) (8.9)
</TABLE>
- ----------
(a) Assumes current Offer of 1.15 plus additional cash to equal the value per
JRM share implied by the 100% stock exchange ratio at MII's closing stock
price of $25.00 on April 6, 1999.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
25
<PAGE>
Financial Consequences
- --------------------------------------------------------------------------------
Overview of Potential Transaction - 15-Year Goodwill Amortization Period
(Dollars in Millions, except Per Share Amounts)
o The following table sets forth the impact on MII's projected FY 2000
and FY 2001 earnings resulting from the alternative offers and
transaction structures set forth on page 23.
<TABLE>
<CAPTION>
Exchange Ratio
-------------------------------------------------------------
1.150x 1.200x 1.225x 1.250x 1.275x 1.300x
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Price per Share $28.75 $30.00 $30.63 $31.25 $31.88 $32.50
Accretion/(Dilution) - All Stock:
- ---------------------------------
FY 2000 (18.6%) (20.2%) (21.0%) (21.8%) (22.6%) (23.4%)
FY 2001 (17.2) (18.7) (19.4) (20.1) (20.8) (21.5)
Accretion/(Dilution) - Stock & Cash (a):
- ----------------------------------------
FY 2000 (18.6%) (20.2%) (20.9%) (21.7%) (22.5%) (23.3%)
FY 2001 (17.2) (18.5) (19.1) (19.7) (20.3) (20.9)
Accretion/(Dilution) - All Cash:
- --------------------------------
FY 2000 (16.5%) (18.5%) (19.5%) (20.5%) (21.5%) (22.5%)
FY 2001 (10.3) (11.8) (12.6) (13.4) (14.2) (15.0)
</TABLE>
- ----------
(a) Assumes current Offer of 1.15 plus additional cash to equal the value per
JRM share implied by the 100% stock exchange ratio at MII's closing stock
price of $25.00 on April 6, 1999.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
26
<PAGE>
Financial Consequences
- --------------------------------------------------------------------------------
Overview of Potential Transaction
(Dollars in Millions, except Per Share Amounts)
o The following table sets forth the impact on MII's projected FY 2000
and FY 2001 cash flow resulting from the alternative offers and
transaction structures set forth on page 23.
<TABLE>
<CAPTION>
Exchange Ratio
-------------------------------------------------------------
1.150x 1.200x 1.225x 1.250x 1.275x 1.300x
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Price per Share $28.75 $30.00 $30.63 $31.25 $31.88 $32.50
CFPS Accretion/(Dilution) - All Stock:
- --------------------------------------
FY 2000 (14.9%) (15.7%) (16.1%) (16.5%) (16.9%) (17.3%)
FY 2001 (14.2) (15.1) (15.5) (15.8) (16.2) (16.6)
CFPS Accretion/(Dilution) - Stock & Cash (a):
- ---------------------------------------------
FY 2000 (14.9%) (15.3%) (15.5%) (15.7%) (15.9%) (16.1%)
FY 2001 (14.2) (14.6) (14.8) (14.9) (15.1) (15.3)
CFPS Accretion/(Dilution) - All Cash:
- -------------------------------------
FY 2000 (2.3%) (2.8%) (3.1%) (3.3%) (3.6%) (3.8%)
FY 2001 (0.5) (0.9) (1.1) (1.3) (1.6) (1.8)
</TABLE>
- ----------
(a) Assumes current Offer of 1.15 plus additional cash to equal the value per
JRM share implied by the 100% stock exchange ratio at MII's closing stock
price of $25.00 on April 6, 1999.
[LOGO] Merrill Lynch
- --------------------------------------------------------------------------------
27
