Exhibit 99(b)(2)
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PROJECT SHOUT
BOARD OF DIRECTORS MEETING
JANUARY 14, 1998
CONFIDENTIAL
XXXXXXX XXXXX XXXXXX
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CONFIDENTIAL
MATERIAL FOR THE BOARD OF DIRECTORS
OF
SHOUT
"Xxxxxxx Xxxxx Xxxxxx" is a service mark of Xxxxx Xxxxxx Inc. Xxxxx Xxxxxx
Inc. and Salomon Brothers Inc. are affiliated but separately registered
broker/dealers under common control of Xxxxxxx Xxxxx Xxxxxx Holdings Inc.
Salomon Brothers Inc. and Xxxxxxx Xxxxx Xxxxxx Holdings Inc. have been licensed
to use the Xxxxxxx Xxxxx Xxxxxx service mark. The following pages contain
material provided to the Board of Directors of SHOUT by Xxxxxxx Xxxxx Xxxxxx in
connection with the potential business combination involving SHOUT and BIDDER.
The accompanying material was compiled or prepared on a confidential basis
solely for use by the Board of Directors of SHOUT and not with a view toward
public disclosure under state and federal securities laws or otherwise. The
information contained in this material was obtained from SHOUT, BIDDER and other
sources. Any estimates and projections for such companies herein have been
prepared by the respective managements of such companies or are based upon such
estimates and projections, and involve numerous and significant subjective
determinations, which may or may not be correct. No representation or warranty,
express or implied, is made as to the accuracy or completeness of such
information and nothing contained herein is, or shall be relied upon as, a
representation, whether as to the past or future. This material was not prepared
for use by readers not as familiar with the business affairs of SHOUT as the
Board of Directors and, accordingly, neither SHOUT nor Xxxxxxx Xxxxx Xxxxxx nor
their respective legal or financial advisors or accountants takes any
responsibility for the accompanying material when used by persons other than the
Board of Directors of SHOUT.
CONFIDENTIAL PROJECT SHOUT
TABLE OF CONTENTS
Overview of Proposed Transaction................................................... 1
Review of Process.................................................................. 2
-Marketing Efforts
-Final Bids Received
Analysis of SHOUT Trading.......................................................... 3
Common Shares.................................................................. A
Preferred Shares............................................................... B
Overview of Operating Assumptions.................................................. 4
Valuation of Preferred Stock....................................................... 5
Valuation of SHOUT................................................................. 6
LBO Model Overview................................................................. 7
Analysis of Break Up Fees.......................................................... 8
Exhibits........................................................................... 9
Comparable Company Analysis.................................................... A
Precedent Transactions......................................................... B
Leveraged Recapitalization Model............................................... C
Preferred Term Sheet & Valuation............................................... D
WACC Calculation............................................................... E
TAB
1
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OVERVIEW OF PROPOSED TRANSACTION
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CONFIDENTIAL PROJECT SHOUT
XXXXXXX OF TERMS FOR PREFERRED
Consideration: - $13.75 in cash and $0.75 face value preferred shares
- Estimated value of preferred $0.47 to $0.54
- Estimated total value $14.22 to $14.29
- 30% premium to share price of $10.9375 on 1/13/97
- 68% premium to October 29, 1997 share price of $8.501
Structure: - Leveraged recapitalization
Topping Fee & Expenses - A topping fee of $16.5 million (approximately 3% of enterprise valuation)
will be payable in the event that the Company enters into another agreement
Break-up Fee - In the event that Xxxxxxxxx breaches the agreement, Xxxxxxxxx will pay the
Company $26.7 million (approximately $1.00 per share)
Conditions to Close - Receipt of financing
- Xxxx-Xxxxx-Xxxxxx approval
- Other customary conditions
Stockholder Agreement: - The offer is subject to shareholder approval
- Xxxxx Family has given irrevocable proxy and option to Bruckmann
------------------------
(1) On October 29, 1997, the Company announced that Xxxxx Xxxxxx had been
engaged to assist in the evaluation of strategic alternatives.
CONFIDENTIAL PROJECT SHOUT
Transaction Overview-Calculation of Transaction Value
(Dollars in Thousands)
Shares Outstanding (1)............................................................ 25,648
Share Price....................................................................... $ 14.50
---------
$ 371,893
Plus:
Options Outstanding............................................................... 2,003
Share Price....................................................................... $ 14.50
---------
$ 29,044
Cost of Equity.................................................................... $ 400,938
Less:
Options Outstanding............................................................... 2,003
Average Exercise Price............................................................ $ 5.01
---------
$ 10,035
Purchase Price of Equity.......................................................... $ 390,902
Bank Debt......................................................................... $ 129,312
Exchangeable Debentures........................................................... 10,055
---------
$ 139,367
Less: Cash........................................................................ $ 4,027
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Net Debt.......................................................................... $ 135,340
Enterprise Value.................................................................. $ 526,242
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---------
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(1) Common and preferred on a fully converted basis
CONFIDENTIAL PROJECT SHOUT
Summary of Terms of Preferred Stock
Name: Series A % Cumulative Compounding Senior Preferred Stock
Face: Amount $10.00
Rank: At issuance, the Series A preferred stock will rank senior to all other
equity securities of the Company.
Dividends: $1.30 per share -- 13% per annum
Liquidation Preference: $10.00 per share plus accrued dividends
Redemption: Callable at a premium prior to the 3rd anniversary, callable
thereafter at par
Mandatory Redemption: Mandatory Redemption by December 31, 2011 at Liquidation
Preference plus accrued dividends
Voting Rights: Holders of the Series A preferred stock will have no voting
rights except as otherwise required by Delaware law.
TAB
2
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REVIEW OF PROCESS
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Confidential PROJECT SHOUT
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Marketing Efforts and Investor Response
39 Buyers Signed 20 buyers Submitted
50 Potential Buyers --> Confidentiality Agreements --> Initial Indications of
Were Contacted and Received Confidential Interest
Memorandums
6 Buyers Attended --> 3 Buyers Submitted Final --> Negotiated Contract
Management Presentations Bids With Final Bidder
CONFIDENTIAL PROJECT SHOUT
------------------------------------------------------------------------------
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DETAILS OF INITIAL BIDS
COMMENTS ON
BIDDER PRICE CONSIDERATION ROLLOVER FINANCING AGREEMENT OTHER
---------------- --------- -------------- ---------------- ---------------- ---------------- --------------------
Bidder A $14.50/ $13.50 cash/ 1-2 MM shares Fully financed- Based on Management rolls
$14.25 $1.00 preferred MEDIQ/UHOS over options Proxy/
Agreement. Most Irrevocable option
extensive, but from Xxxxx Family. No
Changed to negotiable due diligence
$13.75 cash/ required
$0.75 preferred
Bidder B $13.00 $13.00 cash 1.138 MM shares Fully financed Most reasonable Irrevocable proxies
$14.8 MM from Xxxxx Family
Limited due
diligence required
Bidder C $12.00 $12.00 cash 2.5 MM shares Fully financed- Reasonable Irrevocable proxies
or less No fiduciary from Xxxxx family
out Limited due
diligence required
TAB
3
TAB
A
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ANALYSIS OF SHOUT TRADING (1)
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(1) Certain price and volume information that was set forth in Xxxxxxx Xxxxx
Xxxxxx'x written presentation to the Board cannot be reproduced in this
electronic filing. Such information may be inspected and obtained from
the Company at the principal executive offices of the Company during its
regular business hours.
PROJECT SHOUT
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Last 12 Months Annotated Price Volume Chart
Price Volume
$12.00 160,000
140,000
$10.00
120,000
$8.00
100,000
$6.00
80,000
60,000
$4.00
40,000
$2.00
20,000
$0.00
0
1/10/97 3/3/97 4/24/97 5/16/97 8/7/97 9/29/97 11/20/97 1/12/98
Source IDD Information Services/Tradeline
PROJECT SHOUT
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Price Volume Chart for the Last 3 Years
Price Volume
900,000
$12.00
800,000
700,000
$10.00
600,000
500,000
$8.00
400,000
300,000
$4.00
200,000
100,000
$2.00
$0.00 0
1/13/95 6/18/95 11/21/95 4/26/96 9/29/96 3/5/97 8/8/97 1/12/98
Source: IDD Information Services/Tradeline
PROJECT SHOUT
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Common Share Volume Trade at Specified Prices One Year Prior to Announcement
(Weighted average of daily closing price)
Volume
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
$5.00-6.00 $6.00-7.00 $7.00-8.00 $8.00-9.00 Price
Weighted Average of Daily Closing Prices: $7.625
Source: IDD Information Services/Tradeline
Note: Based on 19,377,000 shares outstanding as reported on 1/09/98. Based on
daily closing prices, October 29, 1996 to October 29, 1997.
Note: On October 29th, 1997, the Company announced that it had retained Xxxxx
Xxxxxx to assist in the evaluation of strategic alternatives.
PROJECT SHOUT
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Common Share Volume Traded at Specific Prices Since Announcement
(Weighted average of daily closing price: $10.329)
Volume
600,000
500,000
400,000
300,000
200,000
100,000
0
$9-10 $10-11 $11-12 Price
Weighted Average of Daily Closing Price: $10,329
Source: IDD Information Services/Tradeline
Note: Based on 19,377,000 shares outstanding as reported on 1/09/98. Based on
Daily closing prices, October 29, 1997 to January 12, 1998.
Note: On October 29th, 1997, the Company announced that it had retained Xxxxx
Xxxxxx to assist in the evaluation of strategic alternatives.
PROJECT SHOUT
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Price Performance Chart for the Last Twelve Months
210%
190%
170%
150%
130%
110%
90%
1/13/95 3/6/97 4/27/97 6/18/97 8/9/97 9/30/97 11/12/97 1/12/98
-- S&P 500 (500 STOCKS) 100 = 759,510 -- Shout 100 = 6.375 -- COMPS 100 = 28.519
Source: IDD Information Services/Tradeline
Note: COMPS is a composite of; KNCI, HB, DVI, LSN, COHR.
TAB
B
PROJECT SHOUT
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Price Volume Chart for the Last Twelve Months - Shout Pref.
Price Volume
8,000
$12.00
7,000
6,000
$10.00
5,000
4,000
$8.00
3,000
2,000
$6.00
$4.00
1,000
$2.00
$0.00 0
1/13/97 3/14/97 5/14/97 7/14/97 9/12/97 11/12/97 1/12/98
Source: IDD Information Services/Tradeline
PROJECT SHOUT
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Price Volume Chart for the Last 3 Years - Shout Pref.
Price Volume
$12.00 12,000
$10.00 10,000
$8.00 8,000
$6.00 6,000
$4.00 4,000
$2.00 2,000
$0.00 0
1/13/95 6/18/95 11/21/95 4/26/96 9.29/96 3/5/97 8/8/97 1/12/98
Source: IDD Information Services/Tradeline
PROJECT SHOUT
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Volume Traded at Specified Prices One Year Prior to Announcement - Shout Pref.
Volume
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
$5.00-6.00 $6.00-7.00 $7.00-8.00 $8.00-9.00 Price
Weighted average daily closing prices; $7.335
Based on 6,280,000 shares outstanding as reported on 1/12/98.
Source: IDD Information Services/Tradeline.
Note: On October 29th, 1997, the Company announced that it had retained Xxxxx
Xxxxxx to assist in the evaluation of strategic alternatives.
PROJECT SHOUT
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Volume Traded at Specified Prices Since Announcement - Shout Pref.
Volume
400
350
300
250
200
150
100
50
0
$9.00-10.00 $10.00-11.00 $11.00-12.00 Price
Weighted average of daily closing prices; $10.786
Based on 6,280,000 shares outstanding as reported on 1/12/98.
Source: IDD Information Services/Tradeline.
Note: On October 29th, 1997, the Company announced that it had retained Xxxxx
Xxxxxx to assist in the evaluation of strategic alternatives.
PROJECT SHOUT
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Price Performance Chart for the Last Twelve Months - Shout Pref.
210%
200%
190%
180%
170%
160%
150%
140%
130%
120%
110%
100%
90%
80%
70%
1/13/97 3/14/97 5/14/97 7/14/97 9/12/97 11/12/97 1/12/98
S&P 500 (500 STOCKS) 100 = 759.510 Shout Pref. 100 = 6.000 COMPS 100 = 28.519
COMPS is a composite of; KNCI, HB, DVI, LSN, COHR.
Source: IDD Information Services/Tradeline.
CONFIDENTIAL PROJECT SHOUT
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Mediq Inc Common vs. Preferred Price/Volume Analysis
Daily: January 13, 1997 to January 12, 1998
MEDIQ COMMON MEDIQ PREFERRED PRICE
DATE PRICE VOL. PRICE VOL. DIFFERENCE
--------- ------------- --------- --------------- --------- ----------
16-Dec-97 $ 11.56 26000 $ 11.50 100 $ 0.06
12-Dec-97 11.63 38100 11.50 200 0.13
11-Dec-97 11.50 87500 11.50 100 0.00
08-Dec-97 10.69 18100 10.50 100 0.19
25-Nov-97 10.00 10600 9.75 100 0.25
30-Oct-97 9.06 126200 9.25 100 -0.19
29-Oct-97 8.50 20600 8.25 300 0.25
27-Oct-97 8.56 15100 8.50 200 0.06
07-Oct-97 9.00 14000 8.50 200 0.50
22-Sep-97 8.38 14600 8.13 100 0.25
15-Sep-97 8.13 50800 8.00 300 0.13
25-Aug-97 7.50 1200 7.50 300 0.00
12-Aug-97 7.88 3500 7.63 400 0.25
05-Aug-97 7.81 9700 7.75 400 0.06
24-Jul-97 8.25 8900 8.00 1,000 0.25
21-Jul-97 8.69 15700 8.25 400 0.44
07-Jul-97 8.25 16400 8.38 7,800 -0.13
03-Jul-97 8.50 3800 8.50 500 0.00
27-Jun-97 8.75 16400 8.63 100 0.13
17-Jun-97 8.13 54400 7.50 2,500 0.63
12-May-97 7.44 14500 7.38 300 0.06
23-Apr-97 7.25 102900 7.50 100 -0.25
02-Apr-97 7.75 35000 7.50 7,500 0.25
05-Mar-97 7.75 34100 7.75 200 0.00
03-Mar-97 7.75 11700 7.50 100 0.25
28-Feb-97 7.69 25000 7.50 400 0.19
21-Feb-97 7.69 25300 7.50 100 0.19
20-Feb-97 7.75 71200 7.50 600 0.25
14-Feb-97 7.63 38900 7.38 1,700 0.25
28-Jan-97 6.56 16600 6.50 200 0.06
21-Jan-97 6.63 10500 6.88 1,000 -0.25
17-Jan-97 6.75 15200 6.75 5,000 0.00
16-Jan-97 6.63 12100 6.50 200 0.13
15-Jan-97 6.63 29200 6.13 600 0.50
Source: IDD Information Services Tradeline
TAB
4
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OVERVIEW OF OPERATING ASSUMPTIONS
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Confidential Project SHOUT
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Divisional Operating Projections Overview--Revenues
(Dollars in Millions)
1997 1998 1999 2000 2001 2002
------ ------ ------ ------ ------ ------
Growth Management Case
Rental........................ $123.5 $132.4 $139.2 $145.7 $152.2 $159.3
Spectracair................... 11.2 16.8 21 26.2 32.7 40.9
Disposable Products........... 16.3 23.9 31.6 39.2 46.2 48.3
Remarketing................... 3.6 6.0 6.4 5.7 5.2 5.4
Reconditioning................ 2.2 2.1 1.5 1.3 1.2 1.1
Consulting.................... 3.3 2.9 3.3 3.8 4.2 4.6
Outsourcing................... 6.5 8.4 19.4 37.2 62.3 96.9
------ ------ ------ ------ ------ ------
Total..................... $166.6 $192.5 $222.4 $259.1 $304.0 $356.5
Base Management Case
Rental........................ $123.5 $133.0 $138.0 $143.7 $149.3 $152.9
Spectracair................... 11.2 12.1 18.3 20.9 24.3 28.6
Disposable Products........... 16.3 20.7 26.8 33.5 38.9 42.7
Remarketing................... 3.6 4.2 3.9 4.1 4.3 4.5
Reconditioning................ 2.2 1.3 1.0 0.8 0.6 0.5
Consulting.................... 3.3 2.6 2.8 3.1 3.4 3.8
Outsourcing................... 6.5 10.9 18.6 29.9 43.7 61.3
------ ------ ------ ------ ------ ------
Total..................... $166.6 $184.8 $209.4 $235.9 $264.5 $294.3
Source: Company management projections
Confidential Project SHOUT
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Projected Operating Financial Overview
(Dollars in Thousands)
1997 1998 1999 2000 2001 2002
-------- -------- -------- -------- -------- --------
Growth Management Case
Revenues...................... $166,600 $192,500 $222,400 $259,100 $304,000 $356,500
Growth........................ -- 15.5% 15.5% 16.5% 17.3% 17.3%
EBITDA........................ $ 64,650 $ 70,510 $ 78,430 $ 90,150 $104,160 $120,970
Margin........................ 38.8% 36.6% 35.3% 34.8% 34.3% 33.9%
EBIT.......................... $ 34,291 $ 37,242 $ 46,300 $ 59,109 $ 72,558 $ 95,833
Margin........................ 20.6% 19.3% 20.8% 22.8% 23.9% 26.9%
Base Management Case
Revenues...................... $166,600 $184,789 $209,433 $235,929 $264,491 $294,297
Growth........................ -- 10.9% 13.3% 12.7% 12.1% 11.3%
EBITDA........................ $ 64,650 $ 68,077 $ 74,420 $ 81,383 $ 87,879 $ 95,756
Margin........................ 38.8% 36.8% 35.5% 34.5% 33.2% 32.5%
EBIT.......................... $ 34,291 $ 34,809 $ 42,290 $ 50,342 $ 56,277 $ 70,619
Margin........................ 20.6% 18.8% 20.2% 21.3% 21.3% 24.0%
Source: Company management projections
TAB
5
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VALUATION OF PREFERRED STOCK
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Confidential Project SHOUT
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Capital Structure and Coverages--Growth Management Case
(dollars in thousands)
MULTIPLE OF LTM REFERENCE ACTUAL
CAPITAL STRUCTURE EBITDA RATE RATE
-------------------------------------------------- --------------- --------------- ------
Bank Debt......................................... $166,645 2.6x LIBOR + 225-275 8.27%
Assumed Debt (Exchangeable Debentures)............ 10,055 0.2x Fixed 7.50%
Subordinated Debentures........................... 200,000 3.1x Fixed 10.00%
-------- ------
Operating Company Debt............................ $376,700 5.8x
Senior Discount Debentures........................ 30,000 0.5x Fixed 13.00%
-------- ------
Total Debt........................................ $406,700 6.3x
Series A Preferred ("Seller Paper")............... 20,219 0.3x Fixed 13.00%
-------- ------
Debt and Preferred................................ $426,919 6.6x
Total Equity...................................... 137,350 2.1x
-------- ------
Total Capitalization.............................. $564,269 8.7x
-------- ------
-------- ------
PRO FORMA PROJECTED
--------- ----------------------------------------
COVERAGES 1997 1998 1999 2000 2001 2002 2003
-------------------------------------------------- --------- ----- ----- ----- ----- ----- -----
EBITDA / Interest Expense......................... 1.7x 1.8x 2.1x 2.4x 2.9x 3.6x 4.5x
EBITDA--CapEx / Interest Expense.................. 1.3x 1.5x 1.7x 2.0x 2.5x 3.1x 4.1x
EBIT / Interest Expense........................... 0.9x 0.9x 1.2x 1.5x 2.0x 2.8x 3.7x
Debt / Total Book Capitalization.................. -187% -178% -175% -173% -176% -190% -223%
Bank Debt / EBITDA................................ 2.6x 2.2x 1.8x 1.3x 0.8x 0.4x 0.0x
Operating Company Debt / EBITDA................... 5.8x 5.1x 4.5x 3.6x 2.8x 2.1x 1.4x
Total Debt / EBITDA............................... 6.3x 5.6x 5.0x 4.1x 3.3x 2.6x 1.9x
(Total Debt + Preferred) / EBITDA................. 6.6x 5.9x 5.2x 4.3x 3.5x 2.7x 2.0x
Source: Company and Bidder estimates
Confidential Project SHOUT
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Capital Structure and Coverages--Base Management Case
(dollars in thousands)
MULTIPLE OF LTM REFERENCE ACTUAL
CAPITAL STRUCTURE EBITDA RATE RATE
-------------------------------------------------- --------------- --------------- ------
Bank Debt......................................... $166,645 2.6x LIBOR + 225-275 8.27%
Assumed Debt (Exchangeable Debentures)............ 10,055 0.2x Fixed 7.50%
Subordinated Debentures........................... 200,000 3.1x Fixed 10.00%
-------- ------
Operating Company Debt............................ $376,700 5.8x
Senior Discount Debentures........................ 30,000 0.5x Fixed 13.00%
-------- ------
Total Debt........................................ 406,700 6.3x
Series A Preferred ("Seller Paper")............... 20,219 0.3x Fixed 13.00%
-------- ------
Debt and Preferred................................ $426,919 6.6x
Total Equity...................................... 137,350 2.1x
-------- ------
Total Capitalization.............................. $564,269 8.7x
-------- ------
-------- ------
PRO FORMA PROJECTED
--------- ----------------------------------------
COVERAGES 1997 1998 1999 2000 2001 2002 2003
-------------------------------------------------- --------- ----- ----- ----- ----- ----- -----
EBITDA / Interest Expense......................... 1.7x 1.8x 2.0x 2.2x 2.4x 2.8x 3.2x
EBITDA--CapEx / Interest Expense.................. 1.3x 1.4x 1.6x 1.8x 2.0x 2.3x 2.8x
EBIT / Interest Expense........................... 0.9x 0.9x 1.1x 1.3x 1.5x 2.0x 2.4x
Debt / Total Book Capitalization.................. -187% -176% -172% -168% -164% -166% -173%
Bank Debt / EBITDA................................ 2.6x 2.2x 1.9x 1.5x 1.1x 0.7x 0.3x
Operating Company Debt / EBITDA................... 5.8x 5.3x 4.7x 4.1x 3.5x 2.9x 2.3x
Total Debt / EBITDA............................... 6.3x 5.8x 5.2x 4.6x 4.0x 3.4x 2.8x
(Total Debt + Preferred) / EBITDA................. 6.6x 6.1x 5.5x 4.8x 4.3x 3.7x 3.0x
Source: Company and Bidder estimates
Confidential Project SHOUT
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Preferred Share Valuation
Summary of Preferred Terms
------------------------------------------------------------
Face Value.............................. $0.75
Annual Coupon Rate...................... 13.0%
Maturity Date........................... Dec. 31, 2011
Maturity Term........................... 28 half-year periods
Payment Frequency....................... semi-annual
------------------------------------------------------------
------------------------------------------------
Estimate of Applicable Yield on Preferred
------------------------------------------------
Probable Senior Sub Rate...... 10.0%
Spread to Discount Notes...... 2.5%
Spread to Preferreds.......... 3.0%
Liquidity Discount............ 0.5%
Equity Kicker................. 0.0% -3.0%
----- -----
Implied Preferred Yield....... 16.0% -19.0%
------------------------------------------------
---------------------------------------------------------------------------------------------
Applicable Market Yield....... 16% 17% 18% 19% 20% 21% 22%
Value of Preferred............ $0.5387 $0.5151 $0.4932 $0.4727 $0.4537 $0.4359 $0.4193
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Value of preferred estimated by discounting cash dividends at the appropriate
market rate
CONFIDENTIAL PROJECT SHOUT
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DEBT COMPARABLES
(dollars in millions)
CREDIT RATING
COMPANY ISSUE (MATURITY) SIZE (MDY/S&P)
------------------------------ --------------------------- ------ -------------
Alliance Imaging.............. 9.625% Sr Sub Notes ('05) $140.0 B3/B-
Alaris Medical Inc............ 9.750% Sr Sub Notes ('06) 200.0 B3/B
Dynacare Inc.................. 10.750% Sr Notes ('06) 125.0 B2/B+
Maxxim Medical................ 10.500% Sr Sub Notes ('06) 100.0 B3/B
Owens & Minor Inc............. 10.875% Sr Sub Notes ('06) 150.0 B3/B+
Xxxxxx Field Health........... 9.750% Sr Sub Notes ('07) 100.0 B3/B-
Physician Sales & Services.... 8.500% Sr Sub Notes ('07) 125.0 B2/B
Kinetic Concepts.............. 9.625% Sr Sub Notes ('07) 200.0 B3/B-
SPREAD
CALL DATE CURRENT TO
--------------- ------------- YTW US
COMPANY DATE PRICE PRICE YTW DATE TREAS.
------------------------------ -------- ----- ------ ----- -------- ------
Alliance Imaging.............. 12/15/01 104.8% 102.50 9.069% 12/15/03 361 bp
Alaris Medical Inc............ 12/01/04 100.0 105.25 8.716 12/01/04 336
Dynacare Inc.................. 01/15/04 100.0 105.75 9.472 01/15/04 414
Maxxim Medical................ 08/01/04 100.0 108.25 8.814 07/30/04 333
Xxxxx & Minor Inc............. 06/01/01 105.4 111.00 8.487 06/01/01 307
Xxxxxx Field Health........... 08/15/02 104.3 105.50 8.741 08/15/05 324
Physician Sales & Services.... 10/01/02 104.8 102.00 8.172 10/01/06 268
Kinetic Concepts.............. 11/01/02 104.8 102.00 9.256 11/01/05 375
ALLIANCE ALARIS (1) XXXXXX XXXXX & XXXXXX PHYSICIAN
LATEST TWELVE MONTHS IMAGING (1) MEDICAL INC. DYNACARE (2) MEDICAL MINOR INC. FIELD SALES & SVCS
------------------------- ----------- ------------- ------------- ----------- ----------- ----------- -------------
Sales.................... $ 83.0 $ 366.3 $ 186.8 $ 536.3 $ 3,065.7 $ 364.1 $ 880.1
EBITDA................... 38.0 92.2 24.9 59.5 71.1 41.1 40.1
EBITDA Margin............ 45.8% 25.2% 13.3% 11.1% 2.3% 11.3% 4.6%
Interest Expense......... $ 20.1 $ 38.7 $ 14.4 $ 24.0 $ 15.5 $ 11.1 $ 11.7
Capital Expenditures..... 40.2 19.5 6.4 6.5 12.7 2.9 7.3
Total Debt............... 221.9 407.6 150.9 254.6 154.2 120.5 135.7
EBITDA/Interest.......... 1.9x 2.4x 1.7x 2.5x 4.6x 3.7x 3.4x
(EBITDA-CapEx)/
Interest............... NM 1.9x 1.3x 2.2x 3.8x 3.4x 2.8x
Total Debt/EBITDA........ 5.8x 4.9x 6.1x 4.3x 2.2x 2.9x 3.4x
Total Debt/Book
Capitalization......... 151.0% 79.2% 78.0% 67.0% 21.9% 26.0% 36.7%
KINETIC
LATEST TWELVE MONTHS CONCEPTS
------------------------- -----------
Sales.................... $ 308.1
EBITDA................... 95.2
EBITDA Margin............ 30.9%
Interest Expense......... $ 46.7
Capital Expenditures..... 24.6
Total Debt............... 540.8
EBITDA/Interest.......... 2.0x
(EBITDA-CapEx)/
Interest............... 1.5x
Total Debt/EBITDA........ 5.7x
Total Debt/Book
Capitalization......... 209.0%
------------------------
(1) LTM Figures are nine months ended 9/30/97, annualized
(2) Exchange rate CN$1.4/US$
TAB
6
-------------------------------------------------------------------------------
VALUATION OF SHOUT
-------------------------------------------------------------------------------
Confidential Project SHOUT
----------------------------------------------------------------------------------------------------------------------
VALUATION SUMMARY--SHOUT
(Dollars in Millions, Except Per Share Data)
Value Per Share (In Dollars)
$0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00
Comparable Company Valuation
$ 9.86 $12.93
Precedent Transaction Valuation $10.32 $13.42
Discounted Cash Flow-Growth Case $14.56 $18.43
Discounted Cash Flow-Base Case $13.87 $17.60
Absolute Accretion/(Dilution) $13.00 $14.00
52 Week Trading Range $6.31 $11.88
Current Price Implied Offer Price
$10.88 $14.25
Confidential Project SHOUT
----------------------------------------------------------------------------------------------------------------------
VALUATION SUMMARY--SHOUT
(Dollars in Millions, Except Per Share Data)
COMPARABLE COMPANY ANALYSIS
----------------------------------------------------------------------------------------------------------------------------------
MULTIPLE RANGE ENTERPRISE VALUE EQUITY VALUE PER SHARE AMOUNT
FINANCIAL -------------------- ---------------------- ---------------------- --------------------
STATISTIC LOW HIGH LOW HIGH LOW HIGH LOW HIGH
------------------ --------- --------- ---------- ---------- ---------- ---------- --------- ---------
LTM Revenues...... $166,600 2.2x 2.8x $ 366,520 $ 466,480 $ 231,180 $ 331,140 $ 8.58 $ 12.28
LTM EBITDA........ 64,650 7.7 9.3 497,805 601,245 362,465 465,905 $ 13.45 $ 17.28
1998E Calendar
E.P.S. (1)...... $0.59 14.0x 18.0x -- -- -- -- $ 8.28 $ 10.65
1999E Calendar
E.P.S. (1)...... $0.79 11.5x 14.5x -- -- -- -- $ 9.12 $ 11.50
Valuation Range $9.86 $ 12.93
PRECEDENT TRANSACTION ANALYSIS
ADJ. MULTIPLE RANGE ENTERPRISE VALUE EQUITY VALUE PER SHARE AMOUNT
FINANCIAL -------------------- ---------------------- ---------------------- -------------------
STATISTIC LOW HIGH LOW HIGH LOW HIGH LOW HIGH
---------- --------- --------- ---------- ---------- ---------- ---------- -------- --------
LTM Revenues............. $ 166,600 2.2x 2.8x $ 366,520 $ 466,480 $ 231,180 $ 331,140 $ 8.58 $ 12.28
LTM EBITDA............... 64,650 6.4 7.9 413,760 510,735 278,420 375,395 10.33 13.92
LTM EBIT................. 34,291 13.2 16.2 452,641 555,514 317,301 420,174 11.77 15.59
Control Premium (2)...... $ 8.50 25.0% 40.0% -- -- -- -- $ 10.63 $ 11.90
Valuation Range $ 10.32 $ 13.42
Notes
------------------------
(1) Based on Growth Management Case Net Income
(2) Unaffected SHOUT stock price as of October 29, 1997
Confidential Project SHOUT
----------------------------------------------------------------------------------------------------------------------
VALUATION SUMMARY--SHOUT
(Dollars in Millions , Except Per Share Data)
Discounted Cash Flow Analysis
---------------------------------------------------------------------------------------------------------------------
Growth Management Case
EQUITY VALUE BASED ON EBITDA MULTIPLE
---------------------------------------------------------
EBITDA TERMINAL MULTIPLE
DISCOUNT -------------------------------
RATE 7.0x 7.5x 8.0x Per Share Amount
----------- --------- --------- --------- -----------------
14.5% $ 16.15 $ 17.29 $ 18.43
15.5% $ 15.33 $ 16.43 $ 17.52
16.5% $ 14.56 $ 15.61 $ 16.65
Valuation Range $ 14.56 $ 18.43
BASE MANAGEMENT CASE
EQUITY VALUE BASED ON EBITDA MULTIPLE
----------------------------------------------------
EBITDA TERMINAL MULTIPLE
DISCOUNT -------------------------------
RATE 7.0x 7.5x 8.0x Per Share Amount
----------- --------- --------- --------- -----------------
10.5% $ 15.45 $ 16.52 $ 17.60
11.5% $ 14.64 $ 15.67 $ 16.70
12.5% $ 13.87 $ 14.86 $ 15.85
Valuation Range $ 13.87 $ 17.60
Absolute Accretion/(Dilution) Analsis
---------------------------------------------------------------------------------------------------------
Valuation Range $ 13.00 $ 14.00
CONFIDENTIAL PROJECT SHOUT
------------------------------------------------------------------------------
DISCOUNTED CASH FLOW ANALYSIS--BASE MANAGEMENT CASE
(Dollars in Thousands)
ESTIMATED PROJECTED
----------- -----------------------------------------------------
FISCAL YEAR END 12/31 1997 1998 1999 2000 2001 2002
-------------------------------------------------------------- ----------- --------- --------- --------- --------- ---------
Revenues...................................................... $ 166,600 $ 184,789 $ 209,433 $ 235,929 $ 264,491 $ 294,297
EBITDA........................................................ 64,650 68,077 74,420 81,383 87,879 95,756
Less: Depreciation & Amortization............................. (30,359) (30,462) (29,324) (28,235) (28,796) (22,331)
----------- --------- --------- --------- --------- ---------
EBIT.......................................................... 34,291 37,615 45,096 53,148 59,083 73,425
Less: Income Taxes @ 40%...................................... (13,716) (15,046) (18,039) (21,259) (23,633) (29,370)
----------- --------- --------- --------- --------- ---------
Unlevered After-Tax Income.................................... $ 20,575 $ 22,569 $ 27,058 $ 31,889 $ 35,450 $ 44,055
Plus: Depreciation & Amortization............................. $ 30,359 $ 30,462 $ 29,324 $ 28,235 $ 28,796 $ 22,331
Less: Capital Expenditures.................................... (15,458) (15,000) (15,000) (15,000) (15,000) (15,000)
Less: Working Capital Investment.............................. (1,560) (1,731) (10,447) (5,949) (5,733) (4,482)
----------- --------- --------- --------- --------- ---------
Free Cash Flow................................................ $ 33,915 $ 36,300 $ 30,934 $ 39,175 $ 43,513 $ 46,904
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
TERMINAL VALUE BASED ON EBITDA MULTIPLE
EXIT MULTIPLE IN YEAR 5 (2002) 7.0 X EBITDA 7.5 X EBITDA
------------------------------------------------ ----------------------------- -------------------------------
10.5% 11.5% 12.5% 10.5% 11.5% 12.5%
--------- --------- --------- --------- --------- ---------
DISCOUNTED FREE CASH FLOWS 1998--2002........... $ 144,876 $ 141,068 $ 137,415 $ 144,876 $ 141,068 $ 137,415
DISCOUNTED TERMINAL VALUE....................... 406,867 388,946 371,964 435,929 416,728 398,533
--------- --------- --------- --------- --------- ---------
ENTERPRISE VALUE................................ $ 551,743 $ 530,014 $ 509,380 $ 580,805 $ 557,796 $ 535,949
LESS: DEBT, PREFERRED & MINORITY INTEREST @
12/31/97....................................... (139,367) (139,367) (139,367) (139,367) (139,367) (139,367)
PLUS: CASH @ 12/31/97........................... 4,027 4,027 4,027 4,027 4,027 4,027
--------- --------- --------- --------- --------- ---------
IMPLIED EQUITY VALUE............................ $ 416,403 $ 394,674 $ 374,040 $ 445,465 $ 422,456 $ 400,609
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
EXIT MULTIPLE IN YEAR 5 (2002) 8.0 X EBITDA
------------------------------------------------ --------------------------------
10.5% 11.5% 12.5%
--------- --------- ---------
DISCOUNTED FREE CASH FLOWS 1998--2002........... $ 144,876 $ 141,068 $ 137,415
DISCOUNTED TERMINAL VALUE....................... 464,991 444,510 425,102
--------- --------- ---------
ENTERPRISE VALUE................................ $ 609,867 $ 585,578 $ 562,518
LESS: DEBT, PREFERRED & MINORITY INTEREST @
12/31/97....................................... (139,367) (139,367) (139,367)
PLUS: CASH @ 12/31/97........................... 4,027 4,027 4,027
--------- --------- ---------
IMPLIED EQUITY VALUE............................ $ 474,527 $ 450,238 $ 427,178
--------- --------- ---------
--------- --------- ---------
EQUITY VALUE BASED ON EBITDA MUTLIPLE
-------------------------------------------------------------------
EBITDA TERMINAL MULTIPLE
DISCOUNT ----------------------------------------------
RATE 7.0X 7.5X 8.0X
------------- --------- ---------- --------
10.5% $15.45 $16.52 $17.60
11.5% $14.64 $15.67 $16.70
12.5% $13.87 $14.86 $15.85
Shares (1) 26,959
------------------------
Source: Company management estimates
(1) Fully converted shares outstanding
CONFIDENTIAL PROJECT SHOUT
------------------------------------------------------------------------------------------------
DISCOUNTED CASH FLOW ANALYSIS--GROWTH MANAGEMENT CASE
(DOLLARS IN THOUSANDS)
ESTIMATED PROJECTED
----------- -----------------------------------------------------
FISCAL YEAR END 12/31 1997 1998 1999 2000 2001 2002
----------- --------- --------- --------- --------- ---------
Revenues............... $ 166,600 $ 192,500 $ 222,400 $ 259,100 $ 304,000 $ 356,500
EBITDA................. 64,650 70,510 78,430 90,150 104,160 120,970
Less: Depreciation &
Amortization......... (30,359) (30,462) (29,324) (28,235) (28,796) (22,331)
----------- --------- --------- --------- --------- ---------
EBIT................... 34,291 40,048 49,106 61,915 75,364 98,639
Less: Income Taxes @
40%.................. (13,716) (16,019) (19,643) (24,766) (30,146) (39,456)
----------- --------- --------- --------- --------- ---------
Unlevered After-Tax
Income............... $ 20,575 $ 24,029 $ 29,464 $ 37,149 $ 45,218 $ 59,184
Plus: Depreciation &
Amortization......... $ 30,359 $ 30,462 $ 29,324 $ 28,235 $ 28,796 $ 22,331
Less: Capital
Expenditures......... (15,458) (15,000) (15,000) (15,000) (15,000) (15,000)
Less: Working Capital
Investment........... (3,128) (3,614) (11,934) (8,826) (10,160) (10,239)
----------- --------- --------- --------- --------- ---------
Free Cash Flow......... $ 32,348 $ 35,876 $ 31,854 $ 41,558 $ 48,854 $ 56,275
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
TERMINAL
VALUE BASED
ON EBITDA
MULTIPLE
EXIT
MULTIPLE IN 7.0 X EBITDA 7.5 X EBITDA 8.0 X EBITDA
YEAR 5 ---------------------------------- ---------------------------------- ----------------------------------
(2002) 14.5% 15.5% 16.5% 14.5% 15.5% 16.5% 14.5% 15.5% 16.5%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Discounted
Free Cash
Flows
1998--2002... $ 140,334 $ 136,742 $ 133,293 $ 140,334 $ 136,742 $ 133,293 $ 140,334 $ 136,742 $ 133,293
Discounted
Terminal
Value....... 430,277 411,970 394,590 461,011 441,397 422,775 491,745 470,823 450,960
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Enterprise
Value....... $ 570,611 $ 548,712 $ 527,883 $ 601,345 $ 578,139 $ 556,068 $ 632,079 $ 607,565 $ 584,253
Less: Debt,
Preferred &
Minority
Interest @
12/31/97.... (139,367) (139,367) (139,367) (139,367) (139,367) (139,367) (139,367) (139,367) (139,367)
Plus: Cash @
12/31/97.... 4,027 4,027 4,027 4,027 4,027 4,027 4,027 4,027 4,027
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Implied
Equity
Value....... $ 435,271 $ 413,372 $ 392,543 $ 466,005 $ 442,799 $ 420,728 $ 496,739 $ 472,225 $ 448,913
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
EQUITY VALUE BASED ON EBITDA MULTIPLE
------------------------------------------------
EBITDA TERMINAL MULTIPLE
DISCOUNT ---------------------------------
RATE 7.0X 7.5X 8.0X
------------- ----------- ---------- ----------
14.5% $ 16.15 $ 17.29 $ 18.43
15.5% $ 15.33 $ 16.43 $ 17.52
Shares
(1).... 26,959 16.5% $ 14.56 $ 15.61 $ 16.65
------------------------
Source: Company management estimates
(1) Fully converted shares outstanding
CONFIDENTIAL PROJECT SHOUT
-------------------------------------------------------------------------------
ABSOLUTE EARNINGS DILUTION AND CASH FLOW ANALYSIS--GROWTH MANANGMENT CASE
(DOLLARS IN THOUSANDS)
ASSUMPTIONS
Number of Shares........................... 26,959
Purchase Price Per Share................... $ 14.50
---------
Purchase Price of Equity................... $ 390,902
Book value................................. 49,232
Goodwill................................... $ 341,670
Existing Net Debt.......................... 135,340
Amortization Term.......................... 30 years
Amortization Per Year...................... $ 11,389
Key rates
Debt Used in Acquisition................. 100.0%
Interest on Acquisition Debt............. 7.5%
Tax Rate............................... 40.0%
OPERATING RESULTS
INCOME STATEMENT 1998 1999
------------------------------------------- --------- ---------
Sales...................................... $ 192,500 $ 222,400
EBIT....................................... 37,242 46,300
Synergies.................................. 5,000 7,500
Interest Expense-Existing Net Debt......... (10,151) (10,151)
Taxes.................................... (12,837) (17,460)
--------- ---------
Implied Net Income......................... $ 19,255 $ 26,190
Adjustments
Less: Interest Expense................... (29,318) (28,304)
Plus: Tax Benefit of
Interest Expense....................... 11,727 11,322
Less: Goodwill Amortization.............. (11,389) (11,389)
--------- ---------
Incremental Earnings Contribution.......... $( 9,725) $( 2,182)
Cash Flow
Plus: Depreciation and Amortization........ $ 30,462 $ 29,324
Plus: Goodwill Amortization................ 11,389 11,389
--------- ---------
Less: Capital Expenditures................. (15,000) (15,000)
Less: Investment in Working Capital........ (3,614) (8,826)
--------- ---------
Cash Flow Available to Debt Service........ $ 13,512 $ 14,705
--------- ---------
--------- ---------
ACQUIROR P/E REQUIRED FOR
BREAKEVEN TRANSACTION
100% STOCK INCREMENTAL EARNINGS CONTRIB.
PURCHASE ACCOUNTING 100% CASH TRANSACTION
PURCHASE -------------------------- -----------------------------
PRICE 1998 1999 1998 1999
----------------- ----- ----- ----- -------
$ 12.00 32.0x 19.0x (4,445) 3,234
12.50 34.9x 20.3x (5,501) 2,151
13.00 38.0x 21.7x (6,557) 1,068
13.50 41.5x 23.2x (7,613) (16)
14.00 45.4x 24.7x (8,669) (1,099)
14.50 49.7x 26.4x (9,725) (2,182)
CONFIDENTIAL PROJECT SHOUT
---------------------------------------------------------------------------------------------------------------------------
VALUATION MATRIX
(DOLLARS IN THOUSANDS)
PURCHASE PRICE PER SHARE
FISCAL YEAR END SHOUT --------------------------------------------------------------------------------------------
9/30/97 09/30/97 AT MARKET PRICE
------------------ --------- ---------------
Price Per Share... $ 10.88 $ 12.00 $ 12.50 $ 13.00 $ 13.50 $ 14.00 $ 14.25 $ 14.50
Premium......... 0.0% 10.3% 14.9% 19.5% 24.1% 28.7% 31.0% 33.3%
MEDIQ Equity
Value........... $ 293,177 $ 323,505 $ 336,985 $ 350,464 $ 363,944 $ 377,423 $ 384,163 $ 390,902
Plus : Debt,
Preferred & MI.. 139,367 139,367 139,367 139,367 139,367 139,367 139,367 139,367
Less : Cash....... (4,027) (4,027) (4,027) (4,027) (4,027) (4,027) (4,027) (4,027)
--------------- --------- --------- --------- --------- --------- --------- ---------
MEDIQ Enterprise
Value........... $ 428,517 $ 458,845 $ 472,325 $ 485,804 $ 499,284 $ 512,763 $ 519,503 $ 526,242
--------------- --------- --------- --------- --------- --------- --------- ---------
--------------- --------- --------- --------- --------- --------- --------- ---------
PURCHASE PRICE PER SHARE
FISCAL YEAR END SHOUT --------------------------------------------------------------------------------------------
9/30/97 09/30/97 AT MARKET PRICE
------------------ --------- ---------------
Price Per Share... $ 15.00
Premium......... 37.9%
MEDIQ Equity
Value........... $ 404,382
Plus : Debt,
Preferred & MI.. 139,367
Less : Cash....... (4,027)
---------
MEDIQ Enterprise
Value........... $ 539,722
---------
---------
FINANCIAL
STATISTIC
(1) MULTIPLES OF ENTERPRISE VALUE
----------- -----------------------------------------------------
$10.88 $12.00 $12.50 $13.00 $13.50
Revenue....................................... 1997PF $ 166,600 2.6x 2.8x 2.8x 2.9x 3.0x
1998E 192,500 2.2x 2.4x 2.5x 2.5x 2.6x
EBITDA........................................ 1997PF $ 64,650 6.6x 7.1x 7.3x 7.5x 7.7x
1998E 70,510 6.1x 6.5x 6.7x 6.9x 7.1x
EBIT.......................................... 1997PF $ 34,291 12.5x 13.4x 13.8x 14.2x 14.6x
1998E 37,242 11.5x 12.3x 12.7x 13.0x 13.4x
MULTIPLES OF ENTERPRISE VALUE
-----------------------------------------------------
$14.00 $14.25 $14.50 $15.00
Revenue....................................... 3.1x 3.1x 3.2x 3.2x
2.7x 2.7x 2.7x 2.8x
EBITDA........................................ 7.9x 8.0x 8.1x 8.3x
7.3x 7.4x 7.5x 7.7x
EBIT.......................................... 15.0x 15.1x 15.3x 15.7x
13.8x 13.9x 14.1x 14.5x
FINANCIAL
STATISTIC
(1) MULTIPLES OF ENTERPRISE VALUE
----------- -----------------------------------------------------
$10.88 $12.00 $12.50 $13.00 $13.50
Net Income...................................... FY 1997A ($2,241) NM NM NM NM NM
FY 1998E 15,237 19.2x 21.2x 22.1x 23.0x 23.9x
CY 1998E 16,775 17.5x 19.3x 20.1x 20.9x 21.7x
CY 1999E 23,309 12.6x 13.9x 14.5x 15.0x 15.6x
MULTIPLES OF EQUITY VALUE
------------------------------------------
$14.00 $14.25 $14.50 $15.00
Net Income...................................... NM NM NM NM
24.8x 25.2x 25.7x 26.5x
22.5x 22.9x 23.3x 24.1x
16.2x 16.5x 16.8x 17.3x
MEDIQ Share Price as of 1/12/98................. $ 10.88
MEDIQ Fully Diluted Shares Outstanding (MM)..... 26,959
------------------------
(1) SHOUT financial statistics utilize the Company's Growth Management Case
TAB
7
-------------------------------------------------------------------------------
LBO OVERVIEW
-------------------------------------------------------------------------------
CONFIDENTIAL PROJECT SHOUT
-------------------------------------------------------------------------------
TRANSACTION SUMMARY--GROWTH MANAGEMENT CASE
(DOLLARS IN MILLIONS)
SOURCES AND USES OF FUNDS
-------------------------------------------------------------------------------
SOURCES AMOUNT %
---------------------------------------------------------------- ---------- ---------
Balance Sheet Cash............................................ $ 0 0.0%
Revolver...................................................... 0 0.0%
Term A........................................................ 166,645 29.5%
Term B........................................................ 0 0.0%
Term C........................................................ 0 0.0%
Exchangeable Debentures....................................... 10,055 1.8%
Senior Sub Note............................................... 200,000 35.4%
Senior Discount Debentures.................................... 30,000 5.3%
Seller Preferred.............................................. 20,219 3.6%
New Common.................................................... 105,340 18.7%
Existing Common............................................... 32,011 5.7%
---------- ---------
Total Sources.................................................. $ 564,269 100.0%
---------- ---------
---------- ---------
Uses
Purchase Price of Equity...................................... $ 390,902 69.3%
Assumed / Refinanced Debt..................................... 139,367 24.7%
Financing Fees................................................ 20,975 3.7%
Transaction Costs............................................. 13,025 2.3%
---------- ---------
Total Uses..................................................... $ 564,269 100.0%
---------- ---------
---------- ---------
PRO FORMA OWNERSHIP
--------------------------------------------------------------------------------
OWNER PRIMARY FULLY DILUTED
-------------------------------------------------------------- ---------- -------------
Equity Investor............................................... 76.7% 68.4%
Existing Equity............................................... 23.3% 20.8%
Management + Options.......................................... -- 10.8%
---------- ---------
100.0% 100.0%
PURCHASE PRICE CALCULATION
--------------------------------------------------------------------------------
Share Price Offered............................................................... $ 14.50
Shares Outstanding (000's)........................................................ 25,648
Options Outstanding (000's)....................................................... 2,003
Average Exercise Price............................................................ $ 5.01
Fully Diluted Shares.............................................................. 26,959
---------
Purchase Price of Equity.......................................................... $ 390,902
Plus: Net Debt.................................................................... 135,340
---------
Enterprise Value.................................................................. $ 526,242
Non-Deductible Goodwill........................................................... yes
GOODWILL CALCULATION
Plus: Fees and Expenses........................................................... 13,025
Less: Book Value of Equity........................................................ 49,232
Goodwill Created.................................................................. N/A
AMORTIZATION ASSUMPTIONS
--------------------------------------------------------------------------------
Goodwill Amort. Book.............................................................. 20.0
Goodwill Amort. Tax............................................................... 15.0
PP&E Amortization Period.......................................................... 7.0
Fee Amortization Period........................................................... 7.0
KEY RATES
--------------------------------------------------------------------------------
LIBOR............................................................................ 5.75%
Revolver......................................................................... 8.27%
Term A........................................................................... 8.27%
Term B........................................................................... 8.50%
Term C........................................................................... 8.75%
Exchangeable Debentures.......................................................... 7.50%
Senior Sub Note.................................................................. 10.00%
Junior Sub Note.................................................................. 13.00%
Preferred........................................................................ 13.00%
EQUITY RETURNS ANALYSIS
--------------------------------------------------------------------------------
Initial Equity Investment............................................. $ 137,350
Assumed EBITDA Exit Mult.............................................. 7.0x 7.5x 8.0x
--- --- ---------
2000 Implied Return................................................... 16.6% 23.2% 29.1%
2001 Implied Return................................................... 23.9% 28.0% 31.7%
2002 Implied Return................................................... 27.0% 29.8% 32.4%
ACQUISITION MULTIPLES
--------------------------------------------------------------------------------
1997 1998 1999
--------- --------- ---------
Ent. Value / EBITDA................................................... 8.2x 7.5x 6.8x
Ent. Value / EBIT..................................................... 15.5 14.9 11.9
PRO FORMA CREDIT STATISTICS
--------------------------------------------------------------------------------
1997PF 1998 1999
----------- ----- -----
EBITDA / Interest............................................................ 1.7x 2.1x 2.4x
(EBITDA-CapEx) / Interest.................................................... 1.3 1.5 1.7
Bank Debt / EBITDA........................................................... 2.6 2.2 1.8
Total Debt / EBITDA.......................................................... 6.3 5.6 5.0
(Total Debt + Pref.) / EBITDA................................................ 6.6 5.9 5.2
SUMMARY FINANCIAL INFORMATION
--------------------------------------------------------------------------------
1997PF 1998 1999
---------- ---------- ----------
Revenues..................................................................... $ 166,600 $ 192,500 $ 222,400
EBITDA....................................................................... 64,650 70,510 78,430
EBIT......................................................................... 34,291 35,495 44,553
Net Income................................................................... (2,366) (2,766) 3,104
TAB 8
--------------------------------------------------------------------------------
ANALYSIS OF BREAK UP FEES
--------------------------------------------------------------------------------
CONFIDENTIAL PROJECT SHOUT
TERMINATION FEES IN SELECTED TRANSACTIONS BETWEEN $500 MILLION & $750 MILLION
SINCE 1/1/90
(DOLLARS IN MILLIONS)
VALUES
DATE: --------------------
ANNOUNCED EFFECTIVE TARGET NAME ACQUIROR NAME TRANS. ENTERP. CONSIDERATION
---------- ---------- ------------------------------- ------------------------------ --------- --------- --------------
12/23/97 Pending XX Xxxxxxx Co Highwoods Properties Inc $ 555.9 -- Cash
10/29/97 Pending CapMAC Holdings Inc MBIA Inc 687.0 $ 700.9 Common Stock
10/15/97 Pending Viewlogic Systems Inc Synopsys Inc 530.9 493.0 Common Stock
08/11/97 Pending Envirodyne Industries Inc Heico Holding Inc 651.3 635.4 Liabilities
07/28/97 Pending Stampeder Exploration Ltd Gulf Canada Resources Ltd 747.4 -- Common Stock
07/15/97 Withdrawn Florida Crystals(Flo-Sun Inc) Savannah Foods & Industries 691.4 -- Common Stock
07/03/97 Part Comp Duty Free International Inc BAA PLC 674.6 751.3 Cash
07/03/97 Part Comp Wyle Electronics Xxxx Xxxxxxx XX(VEBA AG) 633.0 751.3 Cash
06/23/97 10/17/97 Integon Corp General Motors Acceptance(GM) 517.1 668.0 Cash
06/12/97 Withdrawn Envirodyne Industries Inc HK Acquisition Corp 650.6 616.1 Cash
06/12/97 10/01/97 Xxxxxxxx & Xxxxx Inc Thyssen AG 703.0 712.2 Cash
05/28/97 07/03/97 Fibreboard Corp Xxxxx Corning 631.2 478.0 Cash
05/06/97 08/15/97 BBN Corp GTE Corp 713.8 678.3 Cash
05/06/97 07/22/97 BW/IP Inc Durco International Inc 530.7 537.9 Common Stock
05/05/97 Withdrawn Transitional Hospitals Corp Select Medical Corp 569.4 534.1 Cash
04/30/97 06/03/97 Sinter Metals Inc GKN PLC 563.4 429.0 Cash
04/09/97 05/13/97 Stant Corp Xxxxxxx PLC 574.0 593.7 Cash
03/25/97 05/07/97 Foodbrands America Inc IBP Inc 657.5 634.7 Cash
02/26/97 07/02/97 Petrolite Corp Xxxxx Xxxxxx Inc 710.9 709.8 Common Stock
02/24/97 07/01/97 Security-Connecticut Corp ReliaStar Financial Corp,MN 545.4 503.5 Common Stock
01/27/97 03/07/97 Measurex Corp Honeywell Inc 597.0 587.4 Cash
12/16/96 04/16/97 Paragon Group Inc Camden Property Trust 624.8 619.1 Common Stock
11/27/96 03/19/97 Xxxx Healthcare Inc Cardinal Health Inc 544.1 481.7 Common Stock
11/18/96 03/27/97 Tyco Toys Inc Mattel Inc 737.4 1,073.1 Common Stock
10/21/96 Withdrawn Coram Healthcare Corp Integrated Health Services Inc 558.8 649.2 Common Stock
07/19/96 08/27/97 Xxxxxx Corp Huntsman Corp 606.8 494.5 Cash
05/03/96 Nowsco Well Service Ltd Great Lakes Chemical Corp 509.3 466.8 Cash
03/29/96 07/02/96 Xxxxx Wheels International Inc Motor Wheel Corp 563.8 695.1 Cash
02/16/96 06/13/96 Forum Group Inc Marriott International Inc 622.3 598.8 Cash
02/14/96 03/20/96 Xxxxxx Xxxxxx Industries Inc Unilever NV 737.4 882.1 Cash
01/31/96 03/04/96 Tivoli Systems Inc IBM Corp 709.8 688.0 Cash
12/18/95 05/14/96 AMSCO International Steris Corp 673.1 662.7 Common Stock
12/18/95 01/29/96 Cobra Golf Inc American Brands Inc 670.4 643.1 Cash
10/30/95 12/28/95 Learning Co SoftKey International Inc 579.6 573.4 Cash
07/31/95 Withdrawn Learning Co Broderbund Software Inc 515.7 513.3 Common Stock
06/26/95 10/05/95 Enterra Corp Xxxxxxxxxxx International Inc 540.6 660.2 Common Stock
06/22/95 10/30/95 Frame Technology Corp Adobe Systems Inc 566.6 549.6 Common Stock
03/31/95 07/10/95 Continental Medical Systems Horizon Healthcare Corp 594.5 919.6 Common Stock
03/30/95 07/17/95 Circa Pharmaceuticals Inc Xxxxxx Pharmaceuticals Inc 621.1 607.1 Common Stock
11/28/94 06/30/95 Xxxxxxxx Development Co Inc USA Waste Services Inc 725.0 626.4 Common Stock
TERMINATION FEE
DATE: ---------------
ANNOUNCED TARGET NAME $ %
---------- ----------- --- ---
12/23/97 XX Xxxxxxx Co. $ 14.7 2.6%
10/29/97 CapMAC Holdings Inc 19.4 2.8%
10/15/97 Viewlogic Systems Inc 10.0 1.9%
08/11/97 Envirodyne Industries Inc 4.0 0.6%
07/28/97 Stampeder Exploration Ltd 14.4 1.9%
07/15/97 Florida Crystals(Flo-Sun Inc) 5.0 0.7%
07/03/97 Duty Free International Inc 20.0 3.0%
07/03/97 Wyle Electronics 20.0 3.2%
06/23/97 Integon Corp 15.0 2.9%
06/12/97 Envirodyne Industries Inc 10.0 1.5%
06/12/97 Xxxxxxxx & Xxxxx Inc 20.0 2.8%
05/28/97 Fibreboard Corp 13.5 2.1%
05/06/97 BBN Corp 13.5 1.9%
05/06/97 BW/IP Inc 12.0 2.3%
05/05/97 Transitional Hospitals Corp 19.4 3.4%
04/30/97 Sinter Metals Inc 12.0 2.1%
04/09/97 Stant Corp 15.0 2.6%
TERMINATION FEE
DATE: ---------------
ANNOUNCED TARGET NAME $ %
---------- ----------- --- ---
03/25/97 Foodbrands America Inc 9.9 1.5%
02/26/97 Petrolite Corp 30.0 4.2%
02/24/97 Security-Connecticut Corp 8.0 1.5%
01/27/97 Measurex Corp 20.0 3.4%
12/16/96 Paragon Group Inc 10.0 1.6%
11/27/96 Xxxx Healthcare Inc 13.0 2.4%
11/18/96 Tyco Toys Inc 15.0 2.0%
10/21/96 Coram Healthcare Corp 25.0 4.5%
07/19/96 Xxxxxx Corp 15.0 2.5%
05/03/96 Nowsco Well Service Ltd 5.1 1.0%
03/29/96 Xxxxx Wheels International Inc 20.0 3.5%
02/16/96 Forum Group Inc 14.0 2.2%
02/14/96 Xxxxxx Xxxxxx Industries Inc 20.0 2.7%
01/31/96 Tivoli Systems Inc 5.0 0.7%
12/18/95 AMSCO International 20.0 3.0%
12/18/95 Cobra Golf Inc 15.0 2.2%
10/30/95 Learning Co 15.0 2.6%
07/31/95 Learning Co 15.0 2.9%
06/26/95 Enterra Corp 20.0 3.7%
06/22/95 Frame Technology Corp 18.0 3.2%
03/31/95 Continental Medical Systems 10.0 1.7%
03/30/95 Circa Pharmaceuticals Inc 15.0 2.4%
11/28/94 Xxxxxxxx Development Co Inc 21.0 2.9%
VALUES
DATE: --------------------
ANNOUNCED EFFECTIVE TARGET NAME ACQUIROR NAME TRANS. ENTERP. CONSIDERATION
---------- ---------- ------------------------------- ------------------------------ --------- --------- --------------
09/15/94 10/31/94 American Income Holdings Torchmark Corp 550.8 585.9 Cash
09/12/94 01/03/95 Gencare Health Systems United HealthCare Corp 512.2 475.2 Cash
08/18/94 03/01/95 Xxxxxxx Banking,Little Rock,AR Boatmen's Bancshares,St Louis 585.5 2,048.0 Common Stock
07/27/94 07/03/95 Iowa-Illinois Gas & Electric Midwest Resources Inc 642.4 722.3 Common Stock
06/28/94 Withdrawn Sierra Pacific Resources Washington Water Power Co 625.8 1,300.4 Common Stock
03/28/94 07/25/94 Trizec Corp Ltd Investor Group 740.0 -- Cash
02/24/94 12/16/94 Associated Communications Corp Southwestern Bell Corp 680.0 -- Common Stock
02/15/94 05/31/94 Ramsay-HMO United HealthCare Corp 564.9 474.2 Common Stock
02/07/94 07/11/94 Medisys,HealthInfusion,1 Other T2 Medical Inc 549.0 -- Common Stock
10/08/93 11/11/93 Xxxxxx Pharmaceutical Inc Hoechst Celanese Corp(Hoechst) 546.0 975.8 Cash
07/06/93 06/01/94 Cragin Financial Corp ABN-AMRO Holding NV 501.6 1,730.8 Cash
06/28/93 08/05/93 Damon Corp Corning Inc 565.3 530.2 Cash
05/10/93 07/30/93 Lifetime Corp Olsten Corp 607.0 461.1 Common Stock
12/17/92 06/11/93 Dentsply International Inc GENDEX Corp 577.0 -- Common Stock
12/15/92 06/03/93 Immunex Corp American Cyanamid Co 736.3 741.8 Cash
09/17/92 10/30/92 CONSTAR International Inc Crown Cork & Seal Co 528.9 583.4 Cash
06/03/92 12/04/92 Advanced Telecommunications LDDS Communications Inc 585.6 759.6 Common Stock
03/12/92 07/23/92 International Corona Corp Homestake Mining Co 559.8 695.3 Common Stock
11/22/91 02/14/92 Xxxxxxx Corp Xxxxxx Co 575.1 555.6 Common Stock
10/30/91 05/04/92 Merchants National Corp National City,Cleveland,Ohio 655.4 5,073.8 Common Stock
09/19/91 01/16/92 Genetics Institute Inc American Home Products Corp 667.0 664.8 Cash
07/10/91 10/11/91 Xxxxxx-Xxxx Corp Borland International Inc 547.6 361.2 Common Stock
06/07/91 Withdrawn Integrated Resources Inc Bankers Trust New York Corp 565.0 -- Cash
12/13/90 07/15/91 Vista Chemical Co RWE-DEA Mineraloel & Chemie 582.0 1,144.9 Cash
07/30/90 11/29/90 Diversified Energies Inc Arkla Inc 569.8 811.3 Common Stock
07/02/90 10/26/90 Xxx Jewelers Inc Ratners Group PLC 533.3 456.4 Convert.Preferred
06/05/90 08/22/90 Xxxxxxxx Industries Inc Xxxxxxx PLC 529.0 -- Cash
03/16/90 11/07/90 Iowa Resources Midwest Energy Co 516.1 931.3 Common Stock
02/20/90 03/26/90 Freeport McMoRan Gold Co Minorco SA(Anglo American) 704.9 695.6 Cash
01/15/90 04/03/90 Sea Containers-Cargo Container Tiphook PLC 537.0 -- Cash
Mean:
Median:
Maximum:
Minimum:
TERMINATION FEE
DATE: ---------------
ANNOUNCED TARGET NAME $ %
---------- --------------- --- ---
09/15/94 American Income Holdings 12.0 2.2%
09/12/94 Gencare Health Systems 13.0 2.5%
08/18/94 Xxxxxxx Banking,Little Rock,A 18.0 3.1%
07/27/94 Iowa-Illinois Gas & Electric 51.0 7.9%
06/28/94 Sierra Pacific Resources 25.0 4.0%
03/28/94 Trizec Corp Ltd 7.3 1.0%
02/24/94 Associated Communications Cor 25.0 3.7%
02/15/94 Xxxxxx-HMO 20.0 3.5%
02/07/94 Medisys,HealthInfusion,1 Othe 11.3 2.0%
10/08/93 Xxxxxx Pharmaceutical Inc 20.0 3.7%
07/06/93 Cragin Financial Corp 15.0 3.0%
06/28/93 Damon Corp 17.3 3.1%
05/10/93 Lifetime Corp 14.0 2.3%
12/17/92 Dentsply International Inc 5.0 0.9%
12/15/92 Immunex Corp 30.0 4.1%
09/17/92 CONSTAR International Inc 15.0 2.8%
06/03/92 Advanced Telecommunications 10.0 1.7%
03/12/92 International Corona Corp 10.0 1.8%
11/22/91 Xxxxxxx Corp 10.0 1.7%
10/30/91 Merchants National Corp 35.0 5.3%
09/19/91 Genetics Institute Inc 30.0 4.5%
07/10/91 Xxxxxx-Xxxx Corp 13.5 2.5%
06/07/91 Integrated Resources Inc 6.0 1.1%
12/13/90 Vista Chemical Co 29.0 5.0%
07/30/90 Diversified Energies Inc 3.0 0.5%
07/02/90 Xxx Jewelers Inc 10.0 1.9%
06/05/90 Xxxxxxxx Industries Inc 5.0 0.9%
03/16/90 Iowa Resources 25.0 4.8%
02/20/90 Freeport McMoRan Gold Co 7.0 1.0%
01/15/90 Sea Containers-Cargo Container 50.1 9.3%
Mean 2.7%
Median 2.5%
Maximum 9.3%
Minimum 0.5%
------------------------
Source: Securities Data Company, Inc. (000) 000-0000
TAB 9
--------------------------------------------------------------------------------
EXHIBITS
--------------------------------------------------------------------------------
TAB A
--------------------------------------------------------------------------------
COMPARABLE COMPANY ANALYSIS
--------------------------------------------------------------------------------
COMPARABLE COMPANY ANALYSIS
(Dollars in Thousands, Except Per Share Items)
Price/ Fully Dil Fully Dil Adj
Price 52 Week 52 Week Shares Market Market
Company Name Ticker 01/12/98 High-Low High Outs. Value Value(1)
------------------------------- ---------- -------- ------------ ------- --------- ------------ -----------
Cohr Inc. CHRI $11.06 $28.50-10.25 38.8 6,433 $71,167 $57,187
DVI Inc. DVI $19.50 $21.00-10.88 92.9 12,480 $243,351 $729,182
Xxxxxxxxxxx Industries HB $48.50 $31.50-36.75 94.2 68,802 $3,336,876 $3,270,876
Kinetic Concepts, Inc. (2) KNCI $17.63 $19.94-11.38 88.4 44,359 $781,828 $736,430
Leasing Solutions Inc. LSN $22.50 $32.50-6.75 69.2 8,519 $191,678 $609,487
Market Value Divided by: Adjusted Market Value(1)
---------------------------------------- --------------------------------
Cal. 98 P/E Net Revenue EBITDA
Cal. 97(E) Cal. 98(E) Cal. 99(E) as a % of -------------- --------------
Company Name Net Inc. Net Inc. Net Inc. 3-Yr. Gr. LTM LQA LTM LQA
------------------------------- ---------- ---------- ---------- ---------- ----- ----- ----- -----
Cohr Inc. 12.3x 10.3x 8.4x 47% 0.5x 0.5x 5.2x 5.4x
DVI Inc. 20.7x 15.9x 12.9x 84% 9.6x 8.6x 10.0x 9.0x
Xxxxxxxxxxx Industries 21.2x 18.0x 15.4x 106% 1.9x 1.9x 8.9x 9.7x
Kinetic Concepts, Inc. 18.8x 16.3x 13.9x 94% 2.5x 2.4x 8.5x 8.4x
Leasing Solutions Inc. 14.7x 12.2x 10.2x 54% 3.0x 2.6x 3.2x 2.9x
---------------------------------------------------------------------------------------------------------
Mean 17.5x 14.6x 12.2x 77% 3.5x 3.2x 7.2x 7.1x
Median 18.8 15.9 12.9 84% 2.5 2.4 8.5 8.4
---------------------------------------------------------------------------------------------------------
CAPITALIZATION & MARGINS
Tot. Debt Adj. Tot. Debt Tot. Debt EBITDA Margin Pre-Tax Margin Net Margin
as % of as % of as % of -------------- --------------- -------------
Company Name Tot. Cap. Adj. Tot. Cap Equity LTM LQA LTM LQA LTM LQA
------------------------------ ---------- -------------- ---------- ----- ----- ------ ------ ----- -----
Cohr Inc. 2.1% 17.2% 2.1% 9.9% 9.4% 9.4% 8.2% 5.6% 5.0%
DVI Inc. 84.1% 84.2% 528.9% 95.7% 96.2% 22.6% 23.0% 13.3% 13.7%
Xxxxxxxxxxx Industries 23.9% 31.8% 31.5% 21.1% 19.7% 14.2% 13.5% 8.6% 8.2%
Kinetic Concepts, Inc. 0.1% 0.1% 0.1% 29.3% 28.7% 24.2% 21.7% 14.6% 13.0%
Leasing Solutions Inc. 85.7% 85.8% 596.9% 91.9% 91.4% 9.8% 10.3% 5.7% 6.0%
----------------------------------------------------------------------------------------------------------------------------------
Mean 39.2% 43.8% 231.9% 49.6% 49.1% 16.0% 15.3% 9.6% 9.2%
Median 23.9% 31.8% 31.5% 29.3% 28.7% 14.2% 13.5% 8.6% 8.2%
----------------------------------------------------------------------------------------------------------------------------------
Actual/Projected Cal. EPS Growth
-------------------------------------------------------------
Company Name 1997(E) 1998(E) 1999(E) 3 Yr. (E)
------------------------------ --------- --------- --------- -----------
Cohr Inc. 2.3% 19.1% 22.5% 22.0%
DVI Inc. 13.9% 30.3% 23.4% 19.0%
Xxxxxxxxxxx Industries 12.4% 17.2% 17.0% 17.0%
Kinetic Concepts, Inc. 9.3% 13.8% 18.7% 17.5%
Leasing Solutions Inc. 31.9% 20.9% 18.9% 22.5%
----------------------------------------------------------------------------------------------------------------------------------
Mean 14.0% 20.3% 20.1% 19.6%
Median 12.4% 19.1% 18.9% 19.0%
----------------------------------------------------------------------------------------------------------------------------------
INCOME INFORMATION
Net Revenues EBITDA EBIT Pretax
------------------------ -------------------- -------------------- --------------------
Company Name LTM LQA LTM LQA LTM LQA LTM LQA
---------------------------- ---------- ---------- -------- -------- -------- -------- -------- --------
Cohr Inc. $100,856 $102,364 $9,983 $9,592 $8,408 $7,380 $9,433 $8,344
DVI Inc. $76,160 $84,396 $72,865 $81,200 $62,003 $69,900 $17,178 $19,424
Xxxxxxxxxxx Industries $1,742,000 $1,716,000 $367,000 $337,333 $267,000 $232,000 $247,000 $232,000
Kinetic Concepts, Inc. $294,563 $305,196 $86,320 $87,519 $63,869 $64,660 $71,277 $66,364
Leasing Solutions Inc. $206,270 $233,688 $189,562 $213,696 $49,028 $58,484 $20,241 $23,960
Net Income Calendar EPS
------------------------ ----------------------------------
Company Name LTM LQA 1997E 1998E 1999E
---------------------------- --------- --------- --------- --------- ---------
Cohr Inc. $5,651 $5,072 $0.90 $1.08 $1.32
DVI Inc. $10,093 $11,600 $0.94 $1.23 $1.51
Xxxxxxxxxxx Industries $150,000 $140,000 $2.29 $2.69 $3.14
Kinetic Concepts, Inc. $43,031 $39,792 $0.94 $1.07 $1.27
Leasing Solutions Inc. $11,779 $13,940 $1.53 $1.85 $2.20
Notes
----------------------------
(1) Adjusted Marked Value = Fully Diluted Market Value + Debt
Outstanding - Cash.
(2) KNCI stock price fixed as of 9/26/97, prior to announced acquisition by
Xxxxxxx X. Xxxx & Xxxxx. LP and Fremont Partners LP.
TAB B
--------------------------------------------------------------------------------
PRECEDENT TRANSACTIONS
--------------------------------------------------------------------------------
CONFIDENTIAL PROJECT SHOUT
--------------------------------------------------------------------------------
SELECTED TRANSACTIONS IN THE MEDICAL EQUIPMENT RENTAL INDUSTRY
($ IN MILLIONS)
MULTIPLES OF
PURCHASE PRICE MULTIPLES OF
-------------------------- TRANSACTION VALUE
DATE TARGET/ PURCHASE TRANSACTION NET TANGIBLE --------------------------
ANNOUNCED ACQUIROR PRICE VALUE INCOME BOOK VALUE SALES EBITDA EBIT
---------- ------------------------------ ----------- ----------- ----------- ------------- ----- ------- -----
11/26/97 Universal Hospital Services/
X.X. Childs Equity Partners LP $ 89.3 $ 122.8 30.1x 5.0x 2.0x 4.9x 13.8x
10/03/97 Kinetic Concepts Inc./
Xxxxxxx X, Xxxx & Associates LP
Fremont Partners LP 875.0 836.8 20.9 3.9 2.9 10.2 13.6
07/10/96 Biomedical Equipment Rental/
Universal Hospital Services $ 12.7 $ 13.2 43.2 4.2 4.5 9.1 63.3*
08/23/94 KCI Therapeutic Services/
MEDIQ Inc. 83.3 84.0 NA NA 1.9 NA NA
12/12/91 ATI Medical Inc/
MEDIQ Inc. 21.9 70.4 NM 2.5 1.3 4.2 16.8
Mean 31.4x 3.9x 2.5x 7.1x 14.7x
High 43.2 5.0 4.5 10.2 16.8
Low 20.9 2.5 1.3 4.2 13.6
------------------------
* Excluded from the calculations of mean, high and low.
(NA)- Not Available
(NM)- Not Meaningful
TAB
C
--------------------------------------------------------------------------------
LEVERAGED RECAPITALIZATION MODEL
--------------------------------------------------------------------------------
CONFIDENTIAL PROJECT SHOUT
--------------------------------------------------------------------------------
TRANSACTION SUMMARY--GROWTH MANAGEMENT CASE
(Dollars in Millions)
SOURCES AND USES OF FUNDS AMOUNT %
---------------------------------------------------------------------------------------- ---------- -------------
Sources
----------------------------------------------------------------------------------------
Balance Sheet Cash.................................................................... $ 0 0.0%
Revolver.............................................................................. 0 0.0%
Term A................................................................................ 166,645 29.5%
Term B................................................................................ 0 0.0%
Term C................................................................................ 0 0.0%
Exchangeable Debentures............................................................... 10,055 1.8%
Senior Sub Note....................................................................... 200,000 35.4%
Senior Discount Debentures............................................................ 30,000 5.3%
Seller Preferred...................................................................... 20,219 3.6%
New Common............................................................................ 105,340 18.7%
Existing Common....................................................................... 32,011 5.7%
---------- -----
Total Sources........................................................................... $ 564,269 100.0%
---------- -----
Uses
----------------------------------------------------------------------------------------
Purchase Price of Equity.............................................................. $ 390,902 69.3%
Assumed / Refinanced Debt............................................................. 139,367 24.7%
Financing Fees........................................................................ 20,975 3.7%
Transaction Costs..................................................................... 13,025 2.3%
---------- -----
Total Uses.............................................................................. $ 564,269 100.0%
---------- -----
PRO FORMA OWNERSHIP
----------------------------------------------------------------------------------------
OWNER PRIMARY FULLY DILUTED
---------------------------------------------------------------------------------------- ---------- -------------
Equity Investor....................................................................... 76.7% 68.4%
Existing Equity....................................................................... 23.3% 20.8%
Management + Options.................................................................. -- 10.8%
---------- -----
100.0% 100.0%
PURCHASE PRICE CALCULATION
------------------------------------------------------------------------------------------------------
Share Price Offered................................................................................... $ 14.50
Shares Outstanding (000's)............................................................................ 25,648
Options Outstanding (000's)........................................................................... 2,003
Average Exercise Price................................................................................ $ 5.01
Fully Diluted Shares.................................................................................. 26,959
----------
Purchase Price of Equity.............................................................................. $ 390,902
Plus: Net Debt........................................................................................ 135,340
----------
Enterprise Value...................................................................................... $ 526,242
Non-Deductible Goodwill............................................................................... yes
Goodwill Calculation
------------------------------------------------------------------------------------------------------
Plus: Fees and Expenses............................................................................... 13,025
Less: Book Value of Equity............................................................................ 49,232
Goodwill Created...................................................................................... N/A
Amortization Assumptions
Goodwill Amort. Book.................................................................................. 20.0
Goodwill Amort. Tax................................................................................... 15.0
PP&E Amortization Period.............................................................................. 7.0
Fee Amortization Period............................................................................... 7.0
KEY RATES
----------------------------------------------------------------------------------------------------------
LIBOR................................................................................................... 5.75%
Revolver................................................................................................ 8.27%
Term A.................................................................................................. 8.27%
Term B.................................................................................................. 8.50%
Term C.................................................................................................. 8.75%
Exchangeable Debentures................................................................................. 7.50%
Senior Sub Note......................................................................................... 10.00%
Junior Sub Note......................................................................................... 13.00%
Preferred............................................................................................... 13.00%
EQUITY RETURNS ANALYSIS
-----------------------------------------------------------------------------
Initial Equity Investment $ 137,350
Assumed EBITDA Exit Mult..................................................... 7.0x 7.5x 8.0x
---------- ---------- ----------
2000 Implied Return 16.6% 23.2% 29.1%
2001 Implied Return 23.9% 28.0% 31.7%
2002 Implied Return 27.0% 29.8% 32.4%
ACQUISITION MULTIPLES 1997 1998 1999
----------------------------------------------------------------------------- ---------- ---------- ----------
Ent. Value / EBITDA.......................................................... 8.2x 7.5x 6.8x
Ent. Value / EBIT............................................................ 15.5 14.9 11.9
PRO FORMA CREDIT STATISTICS 1997PF 1998 1999
----------------------------------------------------------------------------- ---------- ---------- ----------
EBITDA / Interest............................................................ 1.7x 2.1x 2.4x
(EBITDA-CapEx) / Interest.................................................... 1.3 1.5 1.7
Bank Debt / EBITDA........................................................... 2.6 2.2 1.8
Total Debt / EBITDA.......................................................... 6.3 5.6 5.0
(Total Debt + Pref.) / EBITDA................................................ 6.6 5.9 5.2
SUMMARY FINANCIAL INFORMATION 1997PF 1998 1999
----------------------------------------------------------------------------- ---------- ---------- ----------
Revenues..................................................................... $ 166,600 $ 192,500 $ 222,400
EBITDA....................................................................... 64,650 70,510 78,430
EBIT......................................................................... 34,291 35,495 44,553
Net Income (2,366) (2,766) 3,104
CONFIDENTIAL PROJECT SHOUT
--------------------------------------------------------------------------------
PURCHASE PRICE SENSITIVITY--GROWTH MANAGEMENT CASE
(Dollars in thousands)
EBITDA /
Interest Debt/ EBITDA 2001 Equity Return
Purchase price Transaftion Total Seller Equity ------------- ------------- -------------------
of Equity Value Debt Preferred Required 1997PF 1998 1997PF 1998 @7.0X @7.5X @8.0X
-------------- ----------- -------- --------- -------- ------ ---- ------ ---- ----- ----- -----
$12.00 $323,505 $458,845 $406,700 $20,219 $69,953 1.7x 1.8x 6.3x 5.6x 45.3% 50.1% 54.4%
12.50 336,985 472,325 406,700 20,219 83,433 1.7 1.8 6.3 5.6 39.5% 44.1% 48.2%
13.00 350,464 485,804 406,700 20,219 96,912 1.7 1.8 6.3 5.6 34.7% 39.1% 43.1%
13.50 363,944 499,284 406,700 20,219 110,391 1.7 1.8 6.3 5.6 30.6% 34.9% 38.8%
14.00 377,423 512,763 406,700 20,219 123,871 1.7 1.8 6.3 5.6 27.0% 31.2% 35.0%
14.50 390,902 526,242 406,700 20,219 137,350 1.7 1.8 6.3 5.6 23.9% 28.0% 31.7%
15.00 404,382 539,722 406,700 20,219 150,830 1.7 1.8 6.3 5.6 21.2% 25.2% 28.8%
CONFIDENTIAL PROJECT SHOUT
------------------------------------------------------------------------------------------------------------------------
PRO FORMA BALANCE SHEET--GROWTH MANAGEMENT CASE
(Dollars in Thousands)
ADJUSTMENTS
----------------------- PRO FORMA
12/31/97 FINANCING ACCOUNTING 12/31/97
---------- ---------- ----------- -----------
Assets
Cash................................................................ $ 4,027 $ 564,269 ($ 564,269) $ 4,027
Accounts Receivable................................................. 38,458 38,458
Inventory........................................................... 13,533 13,533
Current Assets...................................................... 5,902 5,902
---------- ---------- ----------- -----------
Total Current Assets.................................................. $ 61,920 $ 564,269 ($ 564,269) $ 61,920
Net PP&E.............................................................. 114,164 0 0 114,164
Goodwill.............................................................. 56,129 0 0 56,129
Deferred Financing Costs.............................................. 0 0 20,975 20,975
Other Assets.......................................................... 16,548 0 0 16,548
---------- ---------- ----------- -----------
Total Assets.......................................................... $ 248,761 $ 564,269 ($ 543,294) $ 269,736
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Accounts Payable...................................................... $ 8,793 $ 0 $ 0 $ 8,793
Other Current Liabilities............................................. 21,531 0 0 21,531
Deferred Income Taxes................................................. 0 0 0 0
Other LT Liabilities.................................................. 29,838 0 0 29,838
Revolver.............................................................. 129,312 0 (129,312) 0
Term A................................................................ 0 166,645 0 166,645
Term B................................................................ 0 0 0 0
Term C................................................................ 0 0 0 0
Exchangeable Debentures............................................... 10,055 10,055 (10,055) 10,055
Senior Sub Note....................................................... 0 200,000 0 200,000
Junior Sub Note....................................................... 0 30,000 0 30,000
---------- ---------- ----------- -----------
Total Liabilities..................................................... $ 199,529 $ 406,700 ($ 139,367) $ 466,862
Preferred............................................................. 0 20,219 0 20,219
Stockholders Equity................................................... 49,232 137,350 (403,927) (217,345)
---------- ---------- ----------- -----------
Total Liabilities & Equity............................................ $ 248,761 $ 564,269 ($ 543,294) $ 269,736
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
0 0 0 0
CONFIDENTIAL PROJECT SHOUT
-------------------------------------------------------------------------------
Pro Forma Credit Statistics
Pro Forma Projected
--------- --------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002 2003
--------- ----------- ------------ ----------- ----------- ---------- ---------
EBITDA/Interest Expense.......... 1.7x 1.8x 2.1x 2.4x 2.9x 3.6x 4.5x
EBITDA - CapEx/Interest Expense.. 1.3x 1.5x 1.7x 2.0x 2.5x 3.1x 4.1x
EBIT/Interest Expense............ 0.9x 0.9x 1.2x 1.5x 2.0x 2.8x 3.7x
Debt/Total Book Capitalization... -187% -178% -175% -173% -176% -190% -223%
Bank Debt/EBITDA................. 2.6x 2.2x 1.8x 1.3x 0.8x 0.4x 0.0x
Operating Company Debt/EBITDA.... 5.8x 5.1x 4.5x 3.6x 2.8x 2.1x 1.4x
Total Debt/EBITDA................ 6.3x 5.6x 5.0x 4.1x 3.3x 2.6x 1.9x
(Total Debt + Preferred)/EBITDA.. 6.6x 5.9x 5.2x 4.3x 3.5x 2.7x 2.0x
Confidential Project SHOUT
------------------------------------------------------------------------------
Income Statement
(Dollars in Thousands)
Actual Projected
------ ---------------------------------------------------------------
1997 1998 1999 2000 2001 2002 2003
-------- -------- -------- -------- -------- -------- --------
Revenues........................ $166,600 $192,500 $222,400 $259,100 $304,000 $356,500 $418,067
COGS............................ 68,750 85,290 102,370 123,650 149,940 180,130 211,238
-------- -------- -------- -------- -------- -------- --------
Gross Profit.................... $97,850 $107,210 $120,030 $135,450 $154,060 $176,370 $206,829
SG&A............................ 33,200 36,700 41,600 45,300 49,900 55,400 64,967
-------- -------- -------- -------- -------- -------- --------
EBITDA.......................... $64,650 $70,510 $78,430 $90,150 $104,160 $120,970 $141,862
Depreciation.................. $30,359 $30,462 $29,324 $28,235 $28,796 $22,331 $21,801
New Fees & Goodwill
Amortization................. 0 4,554 4,554 4,554 4,554 4,554 4,554
-------- -------- -------- -------- -------- -------- --------
EBIT............................ $34,291 $35,495 $44,553 $57,362 $70,810 $94,086 $115,508
--------
--------
Net Interest Expense............ 38,234 37,508 37,103 35,903 34,070 31,189
-------- -------- -------- -------- -------- --------
Pretax Income................... ($2,740) $7,044 $20,258 $34,907 $60,016 $84,318
Income Tax Expense............ 27 3,940 9,226 15,086 25,129 34,850
-------- -------- -------- -------- -------- --------
Net Income...................... ($2,766) $3,104 $11,032 $19,822 $34,887 $49,468
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Preferred Dividends on
Seller Paper................. 2,628 2,628 2,628 2,628 2,628 2,628
-------- -------- -------- -------- -------- --------
Net Income Available to Common.. ($5,395) $475 $8,404 $17,193 $32,258 $46,840
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
CONFIDENTIAL PROJECT SHOUT
-------------------------------------------------------------------------------
Balance Sheet
(Dollars in Thousands)
Pro forma Projected
----------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002 2003
---------- --------- --------- --------- --------- --------- ---------
Assets
Cash......................... $4,027 $4,027 $4,027 $4,027 $4,027 $4,027 ($3,152)
Accounts Receivable.......... 38,458 42,426 51,182 59,629 69,962 82,044 96,213
Inventory.................... 13,533 14,378 18,679 20,480 22,079 22,237 26,077
Other Current Assets......... 5,902 6,820 7,879 9,179 10,770 12,629 14,811
---------- --------- --------- --------- --------- --------- ---------
Total Current Assets........... $61,920 $67,650 $81,768 $93,315 $106,837 $120,937 $133,949
Net PP&E....................... 114,164 98,702 84,379 71,144 57,348 50,018 43,217
Goodwill....................... 56,129 53,323 50,516 47,710 44,903 42,097 39,290
Deferred Financial Costs....... 20,975 19,228 17,480 15,733 13,985 12,238 10,490
Other Assets................... 16,548 16,548 16,548 16,548 16,548 16,548 16,548
---------- --------- --------- --------- --------- --------- ---------
Total Assets................... $269,736 $255,450 $250,691 $244,449 $239,622 $241,837 $243,495
---------- --------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- --------- ---------
Accounts Payable............... $8,793 $10,908 $13,093 $15,815 $19,177 $23,038 $27,017
Other Current Liabilities...... 21,531 21,531 21,531 21,531 21,531 21,531 21,531
Deferred Income Taxes.......... 0 0 0 0 0 0 0
Other LT Liabilities........... 29,838 29,838 29,838 29,838 29,838 29,838 29,838
Revolver....................... 0 0 0 0 0 0 0
Term A......................... 166,645 151,739 139,912 117,565 86,555 46,292 0
Term B......................... 0 0 0 0 0 0 0
Term C......................... 0 0 0 0 0 0 0
Exchangeable Debentures........ 10,055 10,055 10,055 10,055 10,055 10,055 0
Senior Sub Note................ 200,000 200,000 200,000 200,000 200,000 200,000 200,000
Senior Discount Debentures..... 30,000 33,900 38,307 43,287 48,914 55,273 62,459
---------- --------- --------- --------- --------- --------- ---------
Total Liabilities.............. $466,862 $457,971 $452,736 $438,091 $416,070 $386,027 $340,845
Preferred...................... 20,219 20,219 20,219 20,219 20,219 20,219 20,219
Stockholders Equity............ (217,345) (222,740) (222,264) (213,861) (196,667) (164,409) (117,569)
---------- --------- --------- --------- --------- --------- ---------
Total Liabilities & Equity..... $269,736 $255,450 $250,691 $244,449 $239,622 $241,837 $243,495
---------- --------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- --------- ---------
0 0 0 0 0 0 (0)
CONFIDENTIAL PROJECT SHOUT
---------------------------------------------------------------------------------------------------------------------------------
Cash Flow Statement
(Dollars in Thousands)
Projected
-----------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
-------- -------- -------- -------- -------- --------
Net Income .............................. ($2,766) $3,104 $11,032 $19,822 $34,887 $49,468
Depreciation & Amortization............ 35,016 33,878 32,789 33,350 26,885 26,355
Change in Working Capital..............
Change in Accounts Receivable.......... (3,968) (8,757) (8,447) (10,333) (12,082 (14,169)
Change in inventory.................... (845) (4,302) (1,800) (1,599) (158) (3,840)
Change in Accounts Payable............ 2,115 2,185 2,722 3,362 3,861 3,979
Change in Other Short Term............. (918) (1,059) (1,300) (1,591) (1,860) (2,181)
Change in Other Long Term.............. 0 0 0 0 0 0
Change in Deferred Taxes............... 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Operating Cash Flow...................... $28,635 $25,048 $34,995 $43,012 $51,533 $59,611
CapEx.................................. (15,000) (15,000) (15,000) (15,000) (15,000) (15,000)
------- ------- ------- ------- ------- -------
Investing Activities..................... ($15,000) ($15,000) ($15,000) ($15,000) ($15,000) ($15,000)
Cash Available for Debt Repayment........ $14,906 $11,826 $22,347 $31,011 $40,263 $49,168
Additional Debt Draws / (Repayments)
Revolver.............................. 0 0 0 0 0 0
Term A................................ (14,906) (11,826) (22,347) (31,011) (40,263) (46,292)
Term B................................ 0 0 0 0 0 0
Term C................................ 0 0 0 0 0 0
Senior Note........................... 0 0 0 0 0 (10,055)
Senior Sub Note....................... 0 0 0 0 0 0
Senior Discount Debentures............ 3,900 4,407 4,980 5,627 6,359 7,185
Less: Preferred Dividends Paid........ (2,628) (2,628) (2,628) (2,628) (2,628) (2,628)
------- ------- ------- ------- ------- -------
Financing Activities.................... ($13,635) ($10,048) ($19,995) ($28,012) ($36,533) ($51,790)
Change in Cash.......................... 0 0 0 0 0 (7,179)
Cash at Beginning of Year............... 4,027 4,027 4,027 4,027 4,027 4,027
------- ------- ------- ------- ------- -------
Cash at End of Year..................... $4,027 $4,027 $4,027 $4,027 $4,027 ($3,152)
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
TAB
D
-------------------------------------------------------------------------------
PREFERRED SHARE VALUATION
-------------------------------------------------------------------------------
CONFIDENTIAL PROJECT SHOUT
-------------------------------------------------------------------------------
PREFERRED SHARE VALUATION
PRESENT VALUE AT VARIOUS DISCOUNT RATES
---------------------------------------
YEAR PERIOD DIVIDEND 16% 17% 18%
---------------------------- --------- --------- --------- --------- ---------
1998 1 0.0488 0.0451 0.0449 0.0447
2 0.0488 0.0418 0.0414 0.0410
1999 3 0.0488 0.0387 0.0382 0.0376
4 0.0488 0.0358 0.0352 0.0345
2000 5 0.0488 0.0332 0.0324 0.0317
6 0.0488 0.0307 0.0299 0.0291
2001 7 0.0488 0.0284 0.0275 0.0267
8 0.0488 0.0263 0.0254 0.0245
2002 9 0.0488 0.0244 0.0234 0.0224
10 0.0488 0.0226 0.0216 0.0206
2003 11 0.0488 0.0209 0.0199 0.0189
12 0.0488 0.0194 0.0183 0.0173
2004 13 0.0488 0.0179 0.0169 0.0159
14 0.0488 0.0166 0.0156 0.0146
2005 15 0.0488 0.0154 0.0143 0.0134
16 0.0488 0.0142 0.0132 0.0123
2006 17 0.0488 0.0132 0.0122 0.0113
18 0.0488 0.0122 0.0112 0.0103
2007 19 0.0488 0.0113 0.0103 0.0095
20 0.0488 0.0105 0.0095 0.0087
2008 21 0.0488 0.0097 0.0088 0.0080
22 0.0488 0.0090 0.0081 0.0073
2009 23 0.0488 0.0083 0.0075 0.0067
24 0.0488 0.0077 0.0069 0.0062
2010 25 0.0488 0.0071 0.0063 0.0057
26 0.0488 0.0066 0.0058 0.0052
2011 27 0.0488 0.0061 0.0054 0.0048
28 0.0488 0.0057 0.0050 0.0044
--------- --------- --------- --------- ---------
Totals... $ 0.5387 $ 0.5151 $ 0.4932
TAB
E
-------------------------------------------------------------------------------
WACC CALCULATION
-------------------------------------------------------------------------------
CONFIDENTIAL PROJECT SHOUT
-------------------------------------------------------------------------------
COST OF CAPITAL ANALYSIS
(Dollars in Thousands)
ASSUMPTIONS
Risk Free Rate (1).................................................................... 5.7%
Market Risk Premium (2)............................................................... 7.4%
Marginal Tax Rate..................................................................... 40.0%
Cost of Target Debt................................................................... 8.5%
HISTORICAL PROJECTED
REPORTED BETAS BLOOMBERG IDD BARRA BARRA MEAN
---------------------------------------------------------------- ------------- --------- ------------- ----------- -----
Xxxxxxxxxxx Industries.......................................... 0.58 0.40 0.78 0.81 0.64
DVI Inc......................................................... 0.51 0.42 1.98 1.52 1.11
Kinetic Concepts, Inc........................................... 0.61 0.46 N/ A N/ A 0.54
Leasing Solutions Inc........................................... 0.63 0.46 1.11 1.15 0.84
Cohr Inc........................................................ 1.07 N/ A 1.03 1.21 1.10
SHOUT........................................................... 0.40 0.40
LEVERED MKT. VAL. BOOK VAL. BOOK VAL. BV DEBT/ BV PREF.
UNLEVERED BETAS BETA EQUITY DEBT PREFERRED MV EQUITY MV EQUITY
---------------------------------------- ----------- ------------ ---------- ------------- ----------- ---------------
Xxxxxxxxxxx Industries.................. 0.64 $ 3,336,876 $264,000 $ 0 7.9% 0.0%
DVI Inc................................. 1.11 243,357 521,800 0 214.4% 0.0%
Kinetic Concepts, Inc................... 0.54 781,828 477 0 0.1% 0.0%
Leasing Solutions Inc................... 0.84 191,678 427,000 0 222.8% 0.0%
Cohr Inc................................ 1.10 71,167 1,455 0 2.0% 0.0%
Mean....................................
SHOUT................................... 0.40 $ 293,177 $139,367 $ 0 47.5% 0.0%
UNLEVERED
UNLEVERED BETAS BETA
---------------------------------------- -------------
Xxxxxxxxxxx Industries.................. 0.59
DVI Inc................................. 0.35
Kinetic Concepts, Inc................... 0.53
Leasing Solutions Inc................... 0.26
Cohr Inc................................ 1.08
Mean.................................... 0.56
SHOUT................................... 0.31
--------------------------
COST OF EQUITY ESTIMATE
--------------------------
Unlevered Beta........................................................................ 0.56
Target BV Debt/MV Equity.............................................................. 47.5%
Target BV Preferred/MV Equity......................................................... 0.0%
Levered Beta.......................................................................... 0.83
Risk Free Rate........................................................................ 5.7%
Risk Premium.......................................................................... 7.4%
Cost of Equity........................................................................ 11.9%
--------------------------------------------------------------------------------------------------
WACC Estimate
--------------------------------------------------------------------------------------------------
SHOUT BV Debt/MV Equity............................................................... 47.5%
SHOUT BV Debt/Total Market Capitalization............................................. 32.2%
SHOUT MV Equity/Total Market Capitalization........................................... 67.8%
Cost of Debt.......................................................................... 8.5%
Cost of Equity........................................................................ 11.9%
WACC.................................................................................. 10.8%
Notes:
------------------------
(1) Based on 30 year U.S. treasury bond rate.
(2) Source: Ibbotson arithmetic market premium, 1926--1995.
(3) Assumes Shout capital structure is industry optimal capital structure.
