________________________________________________________________________________
___________________________________________________
Project Oregano
Presentation to the Special Committee
of the Board of Direetors
March 1998
___________________________________________________
[LOGO] Prudential
Securities
PROJECT OREGANO
________________________________________________________________________________
TABLE OF CONTENTS
I. Financial Data
II. Valuation Summary
A. Composite Implied Valuation
B. Discounted Cash Flow Analysis
C. Comparable Transactions Analysis
D. Comparable Companies Analysis
X. Xxxxxxxxx Buy-Out Analysis
Appendix A. Comparable Companies Analysis
1. Comparable Companies (Pizza and Value
Priced Italian Restaurants)
2. Comparable Companies (Fast Food
Restaurants)
B. Leveraged Buy-Out Analysis
[LOGO] Prudential
Securities
Section I
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___________________________________________________
I. Financial Data
___________________________________________________
[LOGO] Prudential
Securities
PROJECT OREGANO
________________________________________________________________________________
FINANCIAL DATA
HISTORICAL AND PROJECTED BALANCE SHEETS
HISTORICAL (1) PROJECTED (1)
---------------------- ---------------------------------------------------------
(In 000's) FY FY FY FY FY FY FY
ASSETS 1996 1997 1998 1999 2000 2001 2002
Cash and cash equivalents $ 114,818 $127,310 $134,350 $159,352 $186,766 $217,539 $250,312
Accounts receivables 1,865 2,375 2,242 2,364 2,492 2,621 2,751
Inventories 2,841 2,962 2,929 3,086 3,251 3,416 3,584
Prepaid expenses 1,409 1,768 1,560 1,645 1,734 1,823 1,914
--------- -------- -------- -------- -------- -------- --------
Total current assets 120,933 134,415 141,081 166,447 194,242 225,400 258,561
Property and equipment, net 130,993 136,798 139,254 132,015 123,805 115,175 106,003
Deferred charges, net 1,633 1,596 1,600 1,600 1,600 1,600 1,600
Other assets 5,100 5,840 6,500 6,500 6,500 6,500 6,500
--------- -------- -------- -------- -------- -------- --------
Total assets $ 258,659 $278,649 $288,435 $306,562 $326,147 $348,675 $372,664
========= ======== ======== ======== ======== ======== ========
LIABILITIES AND EQUITY
Accounts payable $ 7,173 $ 10,086 $ 7,391 $ 7,788 $ 8,202 $ 8,620 $ 9,042
Accrued expenses 22,663 26,025 23,376 24,630 25,940 27,262 28,597
Dividend payable (2) 4,691 5,521 5,521 5,521 5,521 5,521 5,521
Income taxes (2) 5,287 4,777 4,777 4,777 4,777 4,777 4,777
--------- -------- -------- -------- -------- -------- --------
Total current liabilities 39,814 46,409 41,065 42,715 44,439 46,180 47,937
Deferred income taxes 13,645 11,801 10,301 8,801 7,301 7,301 7,301
--------- -------- -------- -------- -------- -------- --------
Total liabilities 53,459 58,210 51,366 51,516 51,740 53,481 55,238
Retained earnings 173,777 220,439 237,069 255,045 274,407 295,194 317,425
--------- -------- -------- -------- -------- -------- --------
Shareholders' equity 205,200 220,439 237,069 255,045 274,407 295,194 317,425
Total liabilities and shareholders'
equity $ 258,659 $278,649 $288,435 $306,562 $326,147 $348,675 $372,664
========= ======== ======== ======== ======== ======== ========
(1) Historical results from Comnpany's 1O-K. Projections provided by the Company.
(2) Assumes that projected dividends payable and income taxes accounts will stay at 12/28/97 level through 2002.
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PROJECT OREGANO
________________________________________________________________________________
FINANCIAL DATA
HISTORICAL AND PROJECTED INCOME STATEMENTS
Historical (1) Projected (1)
---------------------- ---------------------------------------------------------
FY FY FY FY FY FY FY
(in 000's except per share data) 1996 1997 1998 1999 2000 2001 2002
Existing restaurant sales $ 319,315 $ 337,723 $ 349,149 $ 367,875 $ 387,436 $ 407,189 $ 427,134
Existing franchise related income 6,375 7,360 6,664 7,345 8,043 8,749 9,462
--------- --------- --------- --------- --------- --------- ---------
Total revenues 325,690 345,083 355,813 375,220 395,479 415,938 436,596
Cost of food and paper products 68,668 69,469 70,807 74,605 78,572 82,578 86,623
--------- --------- --------- --------- --------- --------- ---------
Gross profit 257,022 275,614 285,006 300,615 316,907 333,360 349,973
Gross margin as % of sales 80.5% 81.6% 81.6% 81.7% 81.8% 81.9% 81.9%
Payroll and other benefits 78,258 84,910 86,589 91.233 96,084 100,983 105,929
Occupancy and other expenses 85,577 93,528 40,187 42,342 44,594 46,867 49,163
Rent expense -- -- 56,911 59,964 63,152 66,372 69,623
General and administrative 14,940 17,762 18,303 19,301 20,343 21,396 22,459
Provision for unit closings -- 3,300 -- -- -- -- --
Other income (2) (1,171) (1,653) (1,466) (1,800) (1,800) (1,800) (1,800)
--------- --------- --------- --------- --------- --------- ---------
Total costs and expenses 177,604 197,847 200,524 211,040 222,374 233,818 245,374
EBITDA 79,418 81,067 84,482 89,574 94,534 99,542 104,600
EBITDA margin 24.4% 23.5% 23.7% 23.9% 23.9% 23.9% 24.0%
Depreciation 22,910 23,922 26,094 26,790 27,759 28,781 29,922
EBIT 56,508 57,145 58,388 62,785 66,774 70,762 74,678
Interest income 3,798 4,352 6,811 7,692 9,133 10,733 12,481
--------- --------- --------- --------- --------- --------- ---------
Income before taxes 60,306 58,197 65,199 70,476 75,908 81,495 87,159
Income taxes 22,916 22,115 24,776 26,781 28,845 30,968 33,120
--------- --------- --------- --------- --------- --------- ---------
Net income $ 37,390 $ 38,128 $ 40,423 $ 43,695 $ 47,063 $ 50,527 $ 54,038
========= ========= ========= ========= ========= ========= =========
Net income margin 11.5% 11.0% 11.4% 11.6% 11.9% 12.1% 12.4%
(1) Historical results from Company's 10-K. Projections provided by the Company.
(2) Includes income from joint ventures, income from two 20% owned stores, beverage rebates, and insurance recoveries.
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RESTAURANT OPENING ASSUMPTIONS/(1)/
FY FY FY FY FY
COMPANY OWNED RESTAURANTS 1998 1999 2000 2001 2002
------------------------- ---- ---- ---- ---- ----
Beginning number 627 659 691 723 755
Additions 35 35 35 35 35
Acquired from (sold to) franchisees -- -- -- -- --
Divestitures (3) (3) (3) (3) (3)
------ ------ ------ ------ ------
Ending number 659 691 723 755 787
Percent of total 71.6% 70.2% 69.1% 68.0% 67.l%
FRANCHISED RESTAURANTS
----------------------
Beginning number 231 262 293 324 355
Additions 35 35 35 35 35
Purchases from (sold to) franchisees -- -- -- -- --
Divestitures (4) (4) (4) (4) (4)
------ ------ ------ ------ ------
Ending number 262 293 324 355 386
Percent of total 28.4% 29.8% 30.9% 32.0% 32.9%
ALL RESTAURANTS
---------------
Beginning number 858 921 984 1,047 1,110
Additions 70 70 70 70 70
Closed during period (7) (7) (7) (7) (7)
------ ------ ------ ------ ------
Ending number 921 984 1,047 1,110 1,173
SAME STORE SALES GROWTH 0.50% 0.50% 0.50% 0.50% 0.50%
AVERAGE SALES PER RESTAURANT ($ IN MILLIONS) $ 0.543 $ 0.545 $ 0.548 $ 0.551 $ 0.554
(table continued)
FY FY FY FY FY
TOTAL SYSTEMWIDE SALES ($ IN MILLIONS) 1998 1999 2000 2001 2002
-------------------------------------- ---- ---- ---- ---- ----
Company-Owned $ 349.1 $ 367.9 $ 387.4 $ 407.2 $ 427.1
Franchises-existing (old) 76.3 74.4 72.6 70.8 69.0
Franchises-existing (new) 38.6 57.8 77.3 97.0 116.9
Franchises-new stores 19.0 19.1 19.2 19.3 19.4
------ ------- ------- ------- -------
Total Systemwide Sales 483.0 519.1 556.5 594.3 632.4
TOTAL REVENUE FROM FRANCHISEES ($ IN MILLIONS)
--------------------------------------------
FRANCHISE ROYALTY FEE (NEW) 4.0% 4.0% 4.0% 4.0% 4.0%
FRANCHISE ROYALTY FEE (OLD) 4.8% 4.8% 4.8% 4.8% 4.8%
INITIAL FRANCHISE FEE PER STORE/(2)/ $ 0.020 $ 0.020 $ 0.020 $ 0.020 $ 0.020
Total Initial Franchise Fee $ 0.7 $ 0.7 $ 0.7 $ 0.7 $ 0.7
Franchise Royalty Fee-existing $ 5.2 $ 5.9 $ 6.6 $ 7.3 $ 8.0
Franchise Royalty Fee-new stores $ 0.8 $ 0.8 $ 0.8 $ 0.8 $ 0.8
------ ------- ------- ------- -------
Total Revenue from Franchisees $ 6.66 $ 7.34 $ 8.04 $ 8.75 $ 9.46
TOTAL REVENUE ($ IN MILLIONS)
-----------------------------
Company-Owned $ 349.1 $ 367.9 $ 387.4 $ 407.2 $ 427.1
Franchises $ 6.7 $ 7.3 $ 8.0 $ 8.7 $ 9.5
------ ------- ------- ------- -------
Total Revenue $ 355.8 $ 375.2 $ 395.5 $ 415.9 $ 436.6
TOTAL CAPITAL EXPENDITURES ($ IN MILLIONS)
------------------------------------------
CapEx per New Restaurant $ 0.41 $ 0.41 $ 0.41 $ 0.41 $ 0.41
Restaurant CapEx $ 14.4 $ 14.4 $ 14.4 $ 14.4 $ 14.4
Capital Expenditures (New Headquarters) $ 9.0 $ - $ - $ - $ -
Maintenance Capital Expenditures $ 5.2 $ 5.2 $ 5.2 $ 5.8 $ 6.4
Investments in Joint Ventures $ - $ - $ - $ - $ -
Notes:
(1) Information provided by the Company.
(2) Represents weighted average fee which takes into account all franchise
types.
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PROJECT OREGANO
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FINANCIAL DATA
Working Capital Assumptions
HISTORICAL PROJECTED
------------------- ----------------------------------------------------
FY FY FY FY FY FY FY
1996 1997 1998 1999 2000 2001 2002
Inventory as days of COGS 15.1 15.6 15.1 15.1 15.1 15.1 15.1
Accounts receivable as days of sales 2.3 2.5 2.3 2.3 2.3 2.3 2.3
Prepaid expenses as days of sales 1.6 1.9 1.6 1.6 1.6 1.6 1.6
Accounts payable as days of COGS 38.1 53.0 38.1 38.1 38.1 38.1 38.1
Accrued expenses as days of COGS 120.5 136.7 120.5 120.5 120.5 120.5 120.5
Other assets as days of sales (1) 5.7 6.2 6,500 6,500 6,500 6,500 6,500
Deferred charges, net (in 000s) 1,633 1,596 1,600 1,600 1,600 1,600 1,600
Dividends payable 4,691 5,521 5,521 5,521 5,521 5,521 5,521
Income taxes payable 5,287 4,777 4,777 4,777 4,777 4,777 4,777
Deferred income taxes (in 000s) 13,645 11,801 10,301 8,801 7,301 7,301 7,301
(1) Historical numbers are days of sales. Projected assumptions were provided
by the Company.
6 [LOGO] Prudential
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Section II
________________________________________________________________________________
___________________________________________________
II. Valuation Summary
___________________________________________________
[LOGO] Prudential
Securities
________________________________________________________________________________
___________________________________________________
A. Composite Implied Valuation
___________________________________________________
[LOGO] Prudential
Securities
PROJECT OREGANO
________________________________________________________________________________
VALUATION SUMMARY
COMPOSITE IMPLIED VALUATION SHARE PRICE
[Graphic]
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PROJECT OREGANO
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VALUATION SUMMARY
SUMMARY OF IMPLIED PRICES OF ALL VALUATION METHODOLOGIES
OFFER PRICE $ 28.50
------------------------
HIGH LOW MEAN MEDIAN
-----------------------------------
DISCOUNTED CASH FLOWS $ 36.68 $ 30.00 $ 33.18 $ 33.11
COMPARABLE TRANSACTIONS
LTM Revenue $ 28.85 $ 16.36 $ 22.22 $ 21.45
LTM EBITDA 41.31 33.03 37.17 37.17
LTM EBIT 40.76 31.66 35.40 33.76
LTM Net Income 37.72 22.99 30.37 30.39
Tangible Book Value 37.01 10.08 23.54 23.54
------- ------- ------- -------
Mean $ 37.13 $ 22.82 $ 29.74 $ 29.27
COMPARABLE COMPANIES
Pizza and Value Priced Italian Restaurants
LTM Revenue $ 34.95 $ 17.05 $ 24.50 $ 25.42
LTM EBITDA 42.30 26.01 37.01 40.19
LTM ESIT 56.44 34.70 42.69 39.33
LTM Net Income 56.12 26.40 37.53 29.33
Tangible Book Value 69.94 10.51 33.12 28.00
------- ------- ------- -------
Mean $ 51.95 $ 22.93 $ 34.97 $ 32.46
Fast Food Restaurants
LTM Revenue $ 42.79 $ 13.86 $ 25.97 $ 22.95
LTM EBITDA 42.84 19.92 34.88 37.35
LTM EBIT 74.03 23.91 43.10 40.94
LTM Net Income 119.01 30.93 52.27 37.44
Tangible Book Value 92.09 11.65 35.06 25.82
------- ------- ------- -------
Mean $ 74.15 $ 20.05 $ 38.26 $ 32.90
LBO ANALYSIS $ 33.00 $ 29.00 $ 31.00 $ 31.00
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B. Discounted Cash Flow Analysis
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[LOGO] Prudential
Securities
PROJECT OREGANO
________________________________________________________________________________
DISCOUNTED CASH FLOW ANALYSIS
IMPLIED VALUATION
PRESENT VALUE OF PROJECTED CASH FLOWS AND TERMINAL VALUES
(IN 000'S, EXCEPT PER SHARE DATA)
---------------------------------------------------------
TERMINAL PV OF PV OF
VALUE FREE PV OF AGGREGATE LESS: PV OF EQUITY
MULTIPLE OF DISCOUNT CASH FLOW TERMINAL PRESENT TOTAL PLUS: EQUITY PER
2002 EBITDA RATE (0) 0000-0000 VALUE VALUE DEBT(2) CASH(2) VALUE SHARE
----------------------------------------------------------------------------------------------------------------------
11.00% $175,566 $392,399 $567,965 $ - $ 127,310 $ 695,275 $ 33.52
12.00% $171,522 $376,877 548,400 - 127,310 675,710 $ 32.58
-------------- -----------------------------------------------------------------------------------------------------
6.0x 13.00% $167,630 $362,100 529,730 - 127,310 657,040 $ 31.68
-------------- -----------------------------------------------------------------------------------------------------
14.00% $163,883 $348,024 511,907 - 127,310 639,217 $ 30.82
15.00% $160,274 $334,612 494,885 - 127,310 622,195 $ 30.00
---------- -------
11.00% $175,566 $457,799 $633,365 $ - $ 127,310 $ 760,675 $ 36.68
12.00% $171,522 $439,690 611,212 - 127,310 738,522 $ 35.61
-------------- -----------------------------------------------------------------------------------------------------
7.0x 13.00% $167,630 $422,450 590,080 - 127,310 717,390 $ 34.59
-------------- -----------------------------------------------------------------------------------------------------
14.00% $163,883 $406,028 569,911 - 127,310 697,221 $ 33.62
15.00% $160,274 $390,380 550,654 - 127,310 677,964 $ 32.69
---------- -------
(1) As of 2/24/98, Company's weighted average cost of capital was 12.73%.
(2) As of 12/28/97 balance sheet.
(3) Assumes fully diluted shares outstanding as of 12/28/97 of 20,739,373.
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DISCOUNTED CASH FLOW ANALYSIS
PROJECTED UNLEVERED FREE CASH FLOWS
(in 000's) FISCAL YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
FREE CASH FLOW: 1998 1999 2000 2001 2002
Operating Income (EBITA) $ 58,388 $ 62,785 $ 66,774 $ 70,762 $ 74,678
Less: Income Taxes @ 38.0% (22,188) (23,858) (25,374) (26,889) (28,378)
---------- ---------- ---------- ---------- ---------
Tax-Adjusted Operating Income $ 36,201 $ 38,926 $ 41,400 $ 43,872 $ 46,300
plus: Depreciation 26,094 26,790 27,759 28,781 29,922
less: Capital Expenditures (28,550) (19,550) (19,550) (20,150) (20,750)
plus: (Increases)/Decreases in Non-
Cash Working Capital
Deferred Taxes (1,500) (1,500) (1,500) - -
Receivables 133 (122) (128) (129) (130)
Inventories 33 (157) (164) (166) (167)
Prepaid Expenses 208 (85) (89) (90) (91)
Deferred Charges (4) -- -- -- --
Other Assets (660) -- -- -- --
Accounts Payable and Accruals (5,344) 1,650 1,724 1,741 1,758
Free Cash Flow: $ 26,611 $ 45,952 $ 49,453 $ 53,859 $ 56,842
---------- ---------- ---------- ---------- ---------
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___________________________________________________
C. Comparable Transactions Analysis
___________________________________________________
[LOGO] Prudential
Securities
PROJECT OREGANO
________________________________________________________________________________
VALUATION SUMMARY
COMPARABLE TRANSACTIONS SUMMARY VALUATION MATRIX
($ in thousands, except per share)
Offer Price $ 28.50
----------------------------------
Enterprise Value/ Equity Value/
--------------------------------------- ------------------------
REVENUE EBITDA EBIT NET INCOME BOOK VALUE
------- ------ ---- ---------- ----------
SBARRO 1997 OPERATING PARAMETERS(1) $345,083.0 $ 81,067.0 $ 57,145.0 $ 38,128.0 $ 220,439.0
------------------------------------------------------------------
COMPARABLE TRANSACTION VALUATION MULTIPLES(2)
HIGH 1.4x 9.0x 12.5x 20.5x 3.5x
LOW 0.6 6.9 9.2 12.5 0.9
MEAN 1.0 7.9 10.6 16.5 2.2
MEDIAN 0.9 7.9 10.0 16.5 2.2
------------------------------------------------------------------
PLUS: CASH (3) $ 127,310 $ 127,310 $ 127,310
---------------------------------------
FULLY DILUTED SHARES OUTSTANDING(4) 20,679.0 20,679.0 20,679.0 20,679.0 20,679.0
------------------------------------------------------------------
IMPLIED EQUITY VALUE PER SHARE MEAN
HIGH $ 28.85 $ 41.31 $ 40.76 $ 37.72 $ 37.01 $ 37.13
LOW 16.36 33.03 31.66 22.99 10.08 22.82
MEAN 22.22 37.17 35.40 30.37 23.54 29.74
MEDIAN 21.45 37.17 33.78 30.39 23.54 29.27
------------------------------------------------------------------ --------
SBARRO'S IMPLIED MULTIPLE AT OFFER PRICE 1.7x 7.3x 10.3x 15.5x 2.7x
------------------------------------------------------------------
(1) Financial information for the fiscal year ended 12/28/97. Source:
Company submitted information.
(2) Revenue, EBITDA, and EBIT are multiples of Enterprise Value. Net Income
and Book Value are multiples of Equity Value. Includes Perkins Family
Restaurants, International Dairy Queen, Family Restaurants.
(3) As of 12/28/97.
(4) Calculated using the Treasury Method
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VALUATION SUMMARY
COMPARABLE TRANSACTIONS VALUATION SUMMARY
($ in millions)
Target Target Announced Offer Terms EV Revenue EBIT EBITDA Net Income TBV
Acquiror Business Description Effective Status EPP EV/Rev. EV/EBIT EV/EBITDA EPP/Net Inc. EPP/TBV
------------------------------------------------------------------------------------------------------------------------------------
International Dairy Queen (2) Develops, licenses and 10/21/97 Stock $559.1 $411.2 $55.9 $62.3 $35.4 $168.1
services a chain of 1/8/98 Friendly $583.6 1.4x 10.0x 9.0x 16.5x 3.5x
restaurants.
Berkshire Hathaway, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Perkins Family Restaurants, Owns and operates 8/4/97 Cash $240.8 $262.8 $19.2 $35.1 $ 9.1 $ 37.7
L.P.(3)(4) franchised restaurants. 12/23/97 Completed $186.4 0.9x 12.5x 6.9x 20.5x 4.9x
The Restaurant Company
------------------------------------------------------------------------------------------------------------------------------------
Family Restaurants, Inc.(5)(6) Xxxx's operates 170 3/4/96 Cash $306.5 $501.2 $33.2 NA $10.0 $132.2
(Xxxx's and Carrows) bakery restaurants and 5/23/98 Completed $125.0 0.6x 9.2x NA 12.5x 0.9x
Flagstar Companies, Inc. operates 157 family
restaurants primarily
in California.
------------------------------------------------------------------------------------------------------------------------------------
SUMMARY STATISTICS
LEGEND HIGH 1.4x 12.5x 9.0x 20.5x 3.5x
EV = ENTERPRISE VALUE LOW 0.6x 9.2x 6.9x 12.5x 0.9x
EPP = EQUITY PURCHASE PRICE MEAN 1.0x 10.6x 7.9x 16.5x 2.2x
LTM = LATEST TWELVE MONTHS MEDIAN 0.9x l0.0x 7.9x 16.5x 2.2x
TBV = TANGIBLE BOOK VALUE
Footnotes:
-----------------------------------------------------------------------
(1) Financial data excludes the results of discontinued operations,
extraordinary gains and one-time charges. Unless otherwise noted, options
are assumed to be cashed out based on the treasury stock method.
(2) Depreciation and amortization not disclosed in 10-Q. Depreciation and
amortization is from latest 10-K.
(3) Company is a "pass through" entity, i.e, S-Corp or Partnership. Tangible
book value (TBV) has been excluded from summary statistics.
(4) Net income is calculated based on an assumed 40% tax rate.
(5) Denotes a private company.
(6) Assumption of debt includes issuance of $150MM of senior notes to refinance
target's outstanding balance on revolver and the assumption of capital
lease obligations.
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D. Comparable Companies Analysis
___________________________________________________
[LOGO] Prudential
Securities
PROJECT OREGANO
________________________________________________________________________________
VALUATION SUMMARY
COMPARABLE COMPANIES SUMMARY VALUATION MATRIX - PIZZA AND VALUE PRICED ITALIAN
RESTAURANTS
($ in thousands, except per share)
Offer Price $ 28.50
----------------------------------
Enterprise Value/ Equity Value/
--------------------------------------- ------------------------
REVENUE EBITDA EBIT NET INCOME BOOK VALUE
------- ------ ---- ---------- ----------
SBARRO 1997 OPERATING PARAMETERS(1) $345,083 $ 81,067 $ 57,145 $ 38,128 $ 220,439
------------------------------------------------------------------
COMPARABLE COMPANY VALUATION MULTIPLES(2)
PIZZA AND VALUE HIGH 1.7x 9.2x 18.2x 30.4x 6.6x
PRICED ITALIAN LOW 0.7 5.1 10.3 14.3 1.0
COMPARABLES(3) MEAN 1.1 7.9 13.2 20.4 3.1
MEDIAN 1.2 8.7 12.0 15.9 2.6
------------------------------------------------------------------
PLUS: CASH (4) $ 127,310 $ 127,310 $ 127,310
---------------------------------------
FULLY DILUTED SHARES OUTSTANDING(1) 20,679.0 20,679.0 20,679.0 20,679.0 20,679.0
------------------------------------------------------------------
IMPLIED EQUITY VALUE PER SHARE MEAN
PIZZA AND VALUE HIGH $ 34.95 $ 42.30 $ 56.44 $ 56.12 $ 69.94 $ 51.95
PRICED ITALIAN LOW 17.05 26.01 34.70 26.40 10.51 22.93
COMPARABLES MEAN 24.50 37.01 42.69 37.53 33.12 34.97
MEDIAN 25.42 40.19 39.33 29.33 28.00 32.46
------------------------------------------------------------------ --------
SBARRO IMPLIED MULTIPLE AT OFFER PRICE 1.7x 7.3x 10.3x 15.5x 2.7x
------------------------------------------------------------------
(1) Financial information for the fiscal year ended 12/28/97. Source:
Company submitted information.
(2) Revenue, EBITDA, and EBIT are multiples of Enterprise Value and Net
Income is a multiple of Equity Value. Per l0/5/97 10-Q, includes held
to maturity marketable maturities, which mature in 1998.
(3) Includes Xxxxxx Restaurants, NPC International, Pizza Inn, Showbiz
Pizza, and Uno Restaurant Corp.
(4) As of 12/28/97.
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VALUATION SUMMARY
COMPARABLE COMPANIES SUMMARY VALUATION MATRIX - FAST FOOD RESTAURANTS
($ in thousands, except per share)
Offer Price $ 28.50
----------------------------------
Enterprise Value/ Equity Value/
--------------------------------------- ------------------------
REVENUE EBITDA EBIT NET INCOME BOOK VALUE
------- ------ ---- ---------- ----------
SBARRO 1997 OPERATING PARAMETERS(1) $345,083 $ 81,067 $ 57,145 $ 38,128 $ 220,439
------------------------------------------------------------------
COMPARABLE COMPANY VALUATION MULTIPLES(2)
FAST FOOD RESTAURANT HIGH 2.2x 9.4x 24.6x 64.5x 8.6x
COMPARABLES(3) LOW 0.5 3.5 6.4 16.8 1.1
MEAN 1.2 7.3 13.4 28.3 3.3
MEDIAN 1.0 8.0 12.6 20.3 2.4
------------------------------------------------------------------
PLUS: CASH (4) $ 127,310 $ 127,310 $ 127,310
---------------------------------------
FULLY DILUTED SHARES OUTSTANDING(1) 20,679.0 20,679.0 20,679.0 20,679.0 20,679.0
------------------------------------------------------------------
IMPLIED EQUITY VALUE PER SHARE MEAN
FAST FOOD RESTAURANT HIGH $ 42.79 $ 42.84 $ 74.03 $ 119.01 $ 92.09 $ 74.15
COMPARABLES LOW 13.86 19.92 23.91 30.93 11.65 20.05
MEAN 25.97 34.88 43.10 52.27 35.06 38.26
MEDIAN 22.95 37.35 40.94 37.44 25.82 32.90
------------------------------------------------------------------ --------
SBARRO IMPLIED MULTIPLE AT OFFER PRICE 1.7x 7.3x 10.3x 15.5x 2.7x
------------------------------------------------------------------
(1) Financial information for the fiscal year ended 12/28/97. Source:
Company submitted information.
(2) Revenue, EBITDA, and EBIT are multiples of Enterprise Value and Net
Income is a multiple of Equity Value. Per l0/5/97 10-Q, includes held
to maturity marketable securities, which mature in 1998.
(3) Includes Au Bon Pain, Foodmaker, Tricon Global Restaurants, Sonic
Corp., and Xxxxx's.
(4) As of 12/28/97.
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PROJECT OREGANO
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SELECTED COMPARABLE PIZZA AND VALUE PRICED ITALIAN FOOD RESTAURANTS
(Dollars in millions, except per share data) LTM FYE Shares
Ticker Date Date Out.
------ -------- -------- -----
Xxxxxx Restaurants, Inc. (b)(c)(d) DRI 11/23/97 5/25/97 148.6
NPC International, Inc. (e)(f)(g) NPCI 12/23/97 3/25/97 24.7
Pizza Inn, Inc. (h)(i)(j) PZZI l2/28/97 6/29/97 12.7
Showbiz Pizza Time, Inc. (e)(k) SHBZ 9/26/97 12/27/96 18.7
Uno Restaurant Corporation (e)(l)(m) UNO 12/28/97 9/28/97 10.9
Sbarro, Inc. (n) SBA 12/28/97 12/28/97 20.4
SUMMARY STATISTICS EXCLUDE SBARRO, INC.
(table continued)
Based on Latest Twelve Months Results
-----------------------------------------------------------------------------------------
Market Values Enterprise Value Multiples Equity Value Multiples
----------------------------- --------------------------- ---------------------------
(Dollars in millions, except per share data)
2/27/98 Book Net LTM
Per Share Equity Unlevered Sales EBITDA EBIT Value Income E.P.S.
--------- -------- --------- ------- ------ -------- --------- ------- ------
Xxxxxx Restaurants, Inc. $13.50 $2,041.4 $2,393.1 0.8x 9.0x 18.2x 1.9x 30.4x 30.9x
NPC International, Inc. $11.50 $289.4 $495.3 1.2x 7.4x 12.0x 2.6x 15.9x l5.9x
Pizza Inn, Inc. $5.31 $72.6 $78.4 1.2x 9.2x 10.3x 6.6x 15.6x 15.6x
Showbiz Pizza Time, Inc. $29.00 $562.2 $571.3 1.7x 8.7x 14.3x 3.4x 25.5x 25.0x
Uno Restaurant Corporation $6.50 $71.1 $118.0 0.7x 5.1x 11.3x l.0x 14.3x 15.3x
Sbarro, Inc. $29.50 $611.8 $484.5 1.4x 6.0x 8.5x 2.8x l6.0x 15.9x
SUMMARY STATISTICS EXCLUDE SBARRO, INC.
HIGH 1.7x 9.2x 18.2x 6.6x 30.4x 30.9x
LOW 0.7x 5.lx 10.3x 1.0x 14.3x 15.3x
MEAN 1.lx 7.9x 13.2x 3.lx 20.4x 20.5x
MEDIAN 1.2x 8.7x 12.0x 2.6x 15.9x l5.9x
ADJ. MEAN 1.0x 8.4x 12.5x 2.7x l9.0x 18.9x
COUNT 5 5 5 5 5 5
(table continued)
Based on Forward Results
-------------------------------
Equity Value Multiples
-------------------------------
(Dollars in millions, except per sharem data)
1997 1998 1998P/E/
E.P.S. E.P.S. 5yr Growth
--------- ------ ----------
Xxxxxx Restaurants, Inc. 27.0x 19.6x l.6x
NPC International, Inc. 15.9x 12.lx 0.6x
Pizza Inn, Inc. 15.6x 12.6x 0.8x
Showbiz Pizza Time, Inc. 21.8x 17.7x 1.0x
Uno Restaurant Corporation 15.3x NA NA
Sbarro, Inc. 15.9x 15.0x 1.2x
SUMMARY STATISTICS EXCLUDE SBARRO, INC.
HIGH 27.0x 19.6x 1.6x
LOW 15.6x 12.lx 0.6x
MEAN 20.1x 15.5x 1.0x
MEDIAN 18.9x 15.2x 0.9x
ADJ. MEAN 18.9x 15.2x 0.9x
COUNT 4 4 4
20 [LOGO] Prudential
--- Securities
PROJECT OREGANO
________________________________________________________________________________
SELECTED COMPARABLE FAST FOOD COMPANIES
(Dollars in millions, except per share data)
LTM FYE Shares
Ticker Date Date Out.
------ ---- ---- ----
Au Bon Pain Co., Inc. (b)(c)(d) ABPCA 10/4/97 12/28/96 11.8
Foodmaker, Inc. (c)(e) FM 9/28/97 9/28/97 39.1
Tricon Global Restaurants, Inc. (c)(f)(g) YUM 9/6/97 12/30/96 151.8
Sonic Corp. (h) SONC 10/30/97 8/31/97 12.8
Wendy's International, Inc. (i)(j) WEN 9/28/97 12/29/96 132.2
Sbarro, Inc. (k) SBA 12/28/97 12/28/97 20.4
SUMMARY STATISTICS EXCLUDE SBARRO, INC.
(table continued)
BASED ON LATEST TWELVE MONTHS RESULTS
-------------------------------------------------------------------------------------------------
(Dollars in millions, except per share data)
Market Values Enterprise Value Multiples Equity Value Multiples
------------------------------ -------------------------- -------------------------
2/27/98 Book Net LTM
Per Share Equity Unlevered Sales EBITDA EBIT Value Income E.P.S.
--------- ------ --------- ----- ------ ---- ----- ------ ------
Au Bon Pain Co., Inc. $8.38 $100.0 $177.2 0.7x 7.2x 24.6x 1.1x 64.5x 63.7x
Foodmaker, Inc. $18.81 $759.2 $1,078.3 1.0x 8.6x 12.6x 8.6x 21.5x 21.2x
Tricon Global Restaurants, Inc. $28.50 $4,325.6 $4,444.6 0.5x 3.5x 6.4x 1.2x 19.9x 20.3x
Sonic Corp. $29.25 $381.2 $423.5 2.2x 9.4x 12.6x 3.1x 19.2x 19.7x
Wendy's International, Inc. $21.69 $2,916.5 $3,140.4 1.6x 8.0x 10.7x 2.4x 16.4x 16.8x
Sbarro, Inc. $29.50 $611.8 $484.5 1.4x 6.0x 8.5x 2.8x 16.0x 15.9x
SUMMARY STATISTICS EXCLUDE SBARRO, INC.
HIGH 2.2x 9.4x 24.6x 8.6x 64.5x 63.7x
LOW 0.5x 3.5x 6.4x 1.1x 16.4x 16.8x
MEAN 1.2x 7.3x 13.4x 3.3x 28.3x 28.3x
MEDIAN 1.0x 8.0x 12.6x 2.4x 19.9x 20.3x
ADJ. MEAN 1.1x 7.9x 12.0x 2.2x 20.2x 20.4x
COUNT 5 5 5 5 5 5
(table continued)
BASED ON FORWARD RESULTS
---------------------------------
(Dollars in millions, except per share data)
Equity Value Multiples
---------------------------------
1997 1998 1998P/E/
E.P.S. E.P.S. 5yr Growth
----- ----- ----------
Au Bon Pain Co., Inc. 44.1x 26.2x 1.5x
Foodmaker, Inc. 19.8x 16.8x 0.8x
Tricon Global Restaurants, Inc. NA 14.9x 1.1x
Sonic Corp. 19.6x 17.1x 1.1x
Wendy's International, Inc. 16.3x 18.1x 1.2x
Sbarro, Inc. 15.9x 15.0x 1.2x
SUMMARY STATISTICS EXCLUDE SBARRO, INC.
HIGH 44.1x 26.2x 1.5x
LOW 16.3x 14.9x 0.8x
MEAN 25.0x 18.6x 1.2x
MEDIAN 19.7x 17.1x 1.1x
ADJ. MEAN 19.7x 17.3x 1.1x
COUNT 4 5 5
21 [LOGO] Prudential
--- Securities
________________________________________________________________________________
___________________________________________________
X. Xxxxxxxxx Buy-Out Analysis
___________________________________________________
[LOGO] Prudential
Securities
PROJECT OREGANO
________________________________________________________________________________
VALUATION SUMMARY
LEVERAGED BUY-OUT ANALYSIS
BASE CASE SCENARIO - ANALYSIS ASSUMES 0.5% COMPARATIVE STORE SALES GROWTH AND 70
NEW STORES, PER ANNUM.
SENSITIVITY ANALYSIS - YEAR 2002 CASH OUT
------------------------------------------------
OFFER PRICE
$29.00 $30.00 $31.00 $32.00 $33.00
CASH OUT MULTIPLE -EBITDA 6.0x 110% 51% 34% 25% 18%
7.0x 126% 63% 44% 34% 27%
8.0x 139% 72% 52% 42% 34%
23 [LOGO] Prudential
--- Securities
Section III
________________________________________________________________________________
___________________________________________________
III. Appendix
___________________________________________________
[LOGO] Prudential
Securities
________________________________________________________________________________
___________________________________________________
A. Comparable Companies Analysis
___________________________________________________
[LOGO] Prudential
Securities
PROJECT OREGANO
________________________________________________________________________________
VALUATION SUMMARY
COMPARABLE RESTAURANT COMPANIES
ANALYSIS(1)(2)
SIZE FACTORS ($ IN MILLIONS)
LTM SALES
----------------------------------------
Tricon Global Restaurants, Inc. $9,625.0
Xxxxxx Restaurants, Inc. $3,172.1
Wendy's International, Inc. $2,013.4
Foodmaker, Inc. $1,071.7
NPC International, Inc. $409.8
SBARRO, INC. $345.1
Showbiz Pizza Time, Inc. $331.1
Au Bon Pain Co., Inc. $248.6
Sonic Corp. $192.9
Uno Restaurant Corporation $180.8
Pizza Inn, Inc. $68.0
----------------------------------------
MEAN $1,731.3
EQUITY VALUE AS OF 2/27/98
(EQUITY MARKET CAPITALIZATION)
----------------------------------------
Tricon Global Restaurants, Inc. $4,325.6
Wendy's International, Inc. $2,916.5
Xxxxxx Restaurants, Inc. $2,041.4
Foodmaker, Inc. $759.2
SBARRO, INC. $611.8
Showbiz Pizza Time, Inc. $562.2
Sonic Corp. $381.2
NPC International, Inc. $289.4
Au Bon Pain Co., Inc. $100.0
Pizza Inn, Inc. $72.6
Uno Restaurant Corporation $71.1
----------------------------------------
MEAN $1,151.9
NUMBER OF RESTAURANTS
----------------------------------------
Tricon Global Restaurants, Inc. 29,096
Wendy's International, Inc. 6,626
Sonic Corp. 1,717
Foodmaker, Inc. 1,323
Xxxxxx Restaurants, Inc. 1,151
NPC International, Inc. 876
SBARRO, INC. 858
Pizza Inn, Inc. 494
Showbiz Pizza Time, Inc. 314
Au Bon Pain Co., Inc. 289
Uno Restaurant Corporation 161
----------------------------------------
MEAN 4,205
ENTERPRISE VALUE AS OF 2/27/98
(EQUITY MARKET CAPITALIZATION
PLUS NET DEBT)
----------------------------------------
Tricon Global Restaurants, Inc. $4,444.6
Wendy's International, Inc. $3,140.4
Xxxxxx Restaurants, Inc. $2,393.1
Foodmaker, Inc. $1,078.3
Showbiz Pizza Time, Inc. $571.3
NPC International, Inc. $495.3
SBARRO, INC. $484.5
Sonic Corp. $423.5
Au Bon Pain Co., Inc. $177.2
Uno Restaurant Corporation $118.0
Pizza Inn, Inc. $78.4
----------------------------------------
MEAN $1,292.0
26 [LOGO] Prudential
--- Securities
PROJECT OREGANO
________________________________________________________________________________
VALUATION SUMMARY
COMPARABLE RESTAURANT COMPANIES ANALYSIS(1)(2)
GROWTH FACTORS AS OF FISCAL YEAR END
SALES GROWTH
(Two (2) Year CAGR)
----------------------------------------
Sonic Corp. 21.9%
Au Bon Pain Co., Inc. 13.8%
Wendy's International, Inc. 9.2%
Uno Restaurant Corporation 5.9%
Pizza Inn, Inc. 5.6%
Showbiz Pizza Time, Inc. 4.6%
SBARRO, INC. 4.5%
Foodmaker, Inc. 2.6%
Tricon Global Restaurants, Inc. 1.4%
Xxxxxx Restaurants, Inc. 0.1%
NPC International, Inc. -3.6%
----------------------------------------
MEAN 6.2%
EBIT GROWTH
(Two (2) Year CAGR)
----------------------------------------
Showbiz Pizza Time, Inc. 127.3%
Foodmaker, Inc. 51.7%
Sonic Corp. 21.9%
NPC International, Inc. 20.1%
Xxxxx's International, Inc. 16.6%
Pizza Inn, Inc. 15.8%
SBARRO, INC. 9.5%
Tricon Global Restaurants, Inc. 3.9%
Uno Restaurant Corporation -13.3%
Xxxxxx Restaurants, Inc. -27.6%
Au Bon Pain Co., Inc. -61.2%
----------------------------------------
MEAN 15.5%
EBITDA GROWTH
(Two (2) Year CAGR)
----------------------------------------
Foodmaker, Inc. 28.9%
Showbiz Pizza Time, Inc. 27.9%
Sonic Corp. 27.9%
Pizza Inn, Inc. 16.1%
Xxxxx's International, Inc. 14.4%
NPC International, Inc. 8.1%
SBARRO, INC. 6.7%
Tricon Global Restaurants, Inc. 1.9%
Uno Restaurant Corporation -3.5%
Xxxxxx Restaurants, Inc. -13.9%
Au Bon Pain Co., Inc. -16.8%
----------------------------------------
MEAN 9.1%
NET INCOME GROWTH
(Two (2) Year CAGR)
----------------------------------------
Au Bon Pain Co., Inc. NM
Foodmaker, Inc. NM
Showbiz Pizza Time, Inc. 341.1%
NPC International, Inc. 81.8%
Pizza Inn, Inc. 26.1%
Sonic Corp. 24.0%
Wendy's International, Inc. 16.6%
SBARRO, INC. 10.1%
Tricon Global Restaurants, Inc. 4.9%
Uno Restaurant Corporation -17.9%
Xxxxxx Restaurants, Inc. -42.0%
----------------------------------------
MEAN 54.3%
27 [LOGO] Prudential
--- Securities
PROJECT OREGANO
________________________________________________________________________________
VALUATION SUMMARY
COMPARABLE RESTAURANT COMPANIES ANALYSIS(1)(2)
GROWTH FACTORS (CONT'D)
COMPARATIVE STORE SALES GROWTH
(Trailing One (1) Year Growth)
----------------------------------------
Showbiz Pizza, Inc. 9.6%
Foodmaker, Inc. 6.5%
Sonic Corp. 6.3%
Xxxxx's International, Inc. 5.3%
Xxxxxx Restaurants, Inc. 1.2%
SBARRO, INC. -0.4%
Au Bon Pain Co., Inc. -1.3%
Uno Restaurant Corporation -1.7%
Pizza Inn, Inc. -2.0%
Tricon Global Restaurants, Inc. -4.0%
NPC International, Inc. -7.5%
----------------------------------------
MEAN 1.2%
CONSENSUS FORWARD GROWTH RATE
(Five (5) Year Growth)
----------------------------------------
NPC International, Inc. 22.0%
Foodmaker, Inc. 20.0%
Au Bon Pain Co., Inc. 17.0%
Showbiz Pizza Time, Inc. 17.0%
Sonic Corp. 16.0%
Xxxxx's International, Inc. 15.0%
Pizza Inn, Inc. 15.0%
Uno Restaurant Corporation 15.0%
Tricon Global Restaurants, Inc. 13.0%
Xxxxxx Restaurants, Inc. 12.0%
SBARRO, INC. 12.0%
----------------------------------------
MEAN 16.2%
28 [LOGO] Prudential
--- Securities
PROJECT OREGANO
________________________________________________________________________________
VALUATION SUMMARY
COMPARABLE RESTAURANT COMPANIES ANALYSIS(1)(2)
RISK FACTORS
EBITDA MARGINS
(EBITDA to Sales)
----------------------------------------
SBARRO, INC. 23.5%
Sonic Corp. 23.5%
Showbiz Pizza Time, Inc. 19.9%
Xxxxx's International, Inc. 19.6%
NPC International, Inc. 16.4%
Tricon Global Restaurants, Inc. 13.2%
Uno Restaurant Corporation 12.9%
Pizza Inn, Inc. 12.5%
Foodmaker, Inc. 11.7%
Au Bon Pain Co., Inc. 9.9%
Xxxxxx Restaurants, Inc. 8.4%
----------------------------------------
MEAN 14.8%
LEVERAGE
(Total Debt to Total Cap. (book))
----------------------------------------
SBARRO, INC. 0.0X
Tricon Global Restaurants, Inc. 0.1x
Showbiz Pizza Time, Inc. 0.2x
Xxxxxx Restaurants, Inc. 0.3x
Sonic Corp. 0.3x
Wendy's International, Inc. 0.3x
Pizza Inn, Inc. 0.4x
Uno Restaurant Corporation 0.4x
Au Bon Pain Co., Inc. 0.5x
NPC International, Inc. 0.7x
Foodmaker, Inc. 0.8x
----------------------------------------
MEAN 0.4X
EBIT MARGINS
(EBIT to Sales)
----------------------------------------
Sonic Corp. 17.4%
SBARRO, INC. 16.6%
Xxxxx's International, Inc. 14.6%
Showbiz Pizza Time, Inc. 12.1%
Pizza Inn, Inc. 11.2%
NPC International, Inc. 10.1%
Foodmaker, Inc. 8.0%
Tricon Global Restaurants, Inc. 7.2%
Uno Restaurant Corporation 5.8%
Xxxxxx Restaurants, Inc. 4.1%
Au Bon Pain Co., Inc. 2.9%
----------------------------------------
MEAN 9.3%
NET INCOME MARGINS
(Net Income to Sales)
----------------------------------------
SBARRO, INC. 11.0%
Sonic Corp. 10.3%
Wendy's International, Inc. 8.9%
Pizza Inn, Inc. 6.8%
Showbiz Pizza Time, Inc. 6.7%
NPC International, Inc. 4.4%
Foodmaker, Inc. 3.3%
Uno Restaurant Corporation 2.7%
Tricon Global Restaurants, Inc. 2.3%
Xxxxxx Restaurants, Inc. 2.1%
Au Bon Pain Co., Inc. 0.6%
----------------------------------------
MEAN 4.8%
29 [LOGO] Prudential
--- Securities
Section I
________________________________________________________________________________
___________________________________________________
1. Comparable Companies (Pizza and
Value Priced Italian Restaurants)
___________________________________________________
[LOGO] Prudential
Securities
PROJECT OREGANO
________________________________________________________________________________
SELECTED COMPARABLE PIZZA AND VALUE PRICED ITALIAN FOOD RESTAURANTS
LATEST TWELVE MONTH RESULTS
--------------------------------------------------------------------------------------------------
Results
--------------------------------------------------------------------------------------------------
(Dollars in millions, except per share data)
Sales Rest. Pat. EBITDA EBIT Net Inc. Assets Book Value Debt XXX
----- ---------- ------ ---- -------- ------ ---------- ---- ---
Xxxxxx Restaurants, Inc. $3,172.1 $603.9 $265.1 $131.5 $67.1 $1,981.6 $1,065.1 $373.7 5.9%
NPC International, Inc. $409.8 $72.4 $67.3 $41.3 $18.2 $391.8 $110.2 $210.2 18.1%
Pizza Inn, Inc. $68.0 $12.4 $8.5 $7.6 $4.6 $22.9 $11.1 $6.5 44.3%
Showbiz Pizza Time, Inc. $331.1 $128.2 $65.8 $40.0 $22.1 $231.0 $163.2 $30.2 14.6%
Uno Restaurant Corporation $180.8 $53.7 $23.3 $10.5 $5.0 $145.3 $72.1 $48.9 6.6%
Sbarro, Inc. $345.1 $97.2 $81.1 $57.1 $38.1 $278.6 $220.4 $0.0 17.9%
SUMMARY STATISTICS EXCLUDE SBARRO, INC.
(table continued)
LATEST FISCAL YEAR RESULTS
Results Per Share Results (a) EPS Growth
(Dollars in millions, except per share data)
Sales EBIT Net LTM EPS 1997 EPS 1998 EPS 97-98 5-Yrs.
----- ---- --- ------- -------- -------- ----- ------
Xxxxxx Restaurants, Inc. $3,171.8 $97.7 $44.4 $0.44 $0.50 $0.69 38.0% 12.00%
NPC International, Inc. $295.3 $34.5 $17.8 $0.72 $0.72 $0.95 31.6% 22.00%
Pizza Inn, Inc. $69.1 $7.5 $4.5 $0.34 $0.34 $0.42 23.5% 15.00%
Showbiz Pizza Time, Inc. $292.9 $25.7 $13.2 $1.16 $1.33 $1.64 23.3% 17.00%
Uno Restaurant Corporation $178.0 $10.0 $4.9 $0.42 $0.42 NA NA 15.00%
Sbarro, Inc. $345.1 $57.1 $38.1 $1.86 $1.86 $1.97 5.9% 12.00%
SUMMARY STATISTICS EXCLUDE SBARRO, INC.
HIGH 38.0% 22.0%
LOW 23.3% 12.0%
MEAN 29.1% 16.2%
MEDIAN 27.6% 15.0%
ADJ. MEAN 27.6% 15.7%
COUNT 4 5
31 [LOGO] Prudential
--- Securities
PROJECT OREGANO
---------------------------------------------------------------------------
SELECTED COMPARABLE PIZZA AND VALUE PRICED ITALIAN FOOD RESTAURANTS
LATEST TWELVE MONTHS
-------------------------------------------------------------------------------------------------
(Dollars in millions, except per share data)
Margins Credit
------------------------------------------- --------------------------------------------------
Rest.
Pat. S, G &A EBITDA EBIT Net Debt/Cap. Crnt. Ratio Debt/EBITDA EBITDA/Int
---- ------- ------ ---- --- --------- ----------- ----------- -----------
Xxxxxx Restaurants, Inc. 19.0% 14.9% 8.4% 4.1% 2.1% 0.3x 0.7x 1.4x 12.5x
NPC International, Inc. 17.7% 7.8% 16.4% 10.1% 4.4% 0.7x 0.4x 3.1x 5.2x
Pizza Inn, Inc. 18.2% 7.0% 12.5% 11.2% 6.8% 0.4x 2.3x 0.8x 15.2x
Showbiz Pizza Time, Inc. 38.7% 41.0% 19.9% 12.1% 6.7% 0.2x 1.4x 0.5x 22.0x
Uno Restaurant Corporation 29.7% 23.4% 12.9% 5.8% 2.7% 0.4x 0.4x 2.1x 7.9x
Sbarro, Inc. 28.2% 12.1% 23.5% 16.6% 11.0% 0.0x 2.9x 0.0x NM
SUMMARY STATISTICS EXCLUDE SBARRO, INC.
HIGH 38.7% 41.0% 19.9% 12.1% 6.8% 0.7x 2.3x 3.1x 22.0x
LOW 17.7% 7.0% 8.4% 4.1% 2.1% 0.2x 0.4x 0.5x 5.2x
MEAN 24.7% 18.8% 14.0% 8.7% 4.6% 0.4x 1.0x 1.6x 12.6x
MEDIAN 19.0% 14.9% 12.9% 10.1% 4.4% 0.4x 0.7x 1.4x 12.5x
ADJ. MEAN 22.3% 15.4% 13.9% 9.0% 4.6% 0.3x 0.8x 1.4x 11.9x
COUNT 5 5 5 5 5 5 5 5 5
(table continued)
(Dollars in millions, except per share data)
Two Year Growth
-------------------------------------
Net
Sales EBIT EBITDA Income
----- ------- ------- --------
Xxxxxx Restaurants, Inc. 0.1% -27.6% -13.9% -42.0%
NPC International, Inc. -3.6% 20.1% 8.1% 81.8%
Pizza Inn, Inc. 5.6% 15.8% 16.1% 26.1%
Showbiz Pizza Time, Inc. 4.6% 127.3% 27.9% 341.1%
Uno Restaurant Corporation 5.9% 13.3% -3.5% -17.9%
Sbarro, Inc. 4.5% 9.5% 6.7% 10.1%
SUMMARY STATISTICS EXCLUDE SBARRO, INC.
HIGH 5.9% 127.3% 27.9% 341.1%
LOW -3.6% -27.6% -13.9% -42.0%
MEAN 2.5% 24.5% 6.9% 77.8%
MEDIAN 4.6% 15.8% 8.1% 26.1%
ADJ. MEAN 3.4% 7.5% 6.9% 30.0%
COUNT 5 5 5 5
32 [LOGO] Prudential
--- Securities
PROJECT OREGANO
---------------------------------------------------------------------------
SELECTED COMPARABLE PIZZA AND VALUE PRICED ITALIAN FOOD RESTAURANTS
LATEST TWELVE MONTHS
------------------------------------------------------------------------------------
Restaurants Per Unit Data
------------------------ -------------------------------------------------------
(Dollars in millions except per unit data)
Owned Franchised Total Revenue EBIT EBITDA EBITDA+Rent ROI
----- ---------- ------ ---------- -------- -------- ----------- ------
Xxxxxx Restaurants, Inc. 1,151 - 1,151 $2,675,000 $361,000 $468,000 $522,000 20.9%
NPC International, Inc. 732 144 876 $665,000 $116,375 NA $206,510 31.0%
Pizza Inn, Inc. 5 489 494 NA NA NA NA NA
Showbiz Pizza Time, Inc. 245 69 314 $1,400,000 $117,600 $238,000 NA NA
Uno Restaurant Corporation 95 66 161 $1,920,000 NA $407,250 NA 18.10%
Sbarro, Inc. 627 231 858 $548,922 $104,131 $138,328 $261,891 30.5%
SUMMARY STATISTICS EXCLUDE SBARRO, INC.
HIGH 1,151.0 489.0 1,151.0 $2,675,000 $361,000 $468,000 $522,000 31.0%
LOW 5.0 66.0 161.0 $665,000 $116,375 $238,000 $206,150 18.1%
MEAN 445.6 192.0 599.2 $1,665,000 $198,325 $371,083 $364,075 23.3%
MEDIAN 245.0 106.5 494.0 $1,660,000 $117,600 $407,250 $364,075 20.9%
ADJ. MEAN 357.3 106.5 561.3 $1,660,000 $117,600 $407,250 NA 20.9%
COUNT 5 4 5 4 3 3 2 3
(table continued)
LATEST TWELVE MONTHS
--------------------
New Store
--------------------
(Dollars in millions except per unit data)
Tot.
Growth Cost/Unit
------- ----------
Xxxxxx Restaurants, Inc. -6.0% $2,500,000
NPC International, Inc. 60.7% $665,000
Pizza Inn, Inc. 5.1% NA
Showbiz Pizza Time, Inc. -1.6% $1,300,000
Uno Restaurant Corporation 7.3% $2,250,000
Sbarro, Inc. 5.1% $859,036
SUMMARY STATISTICS EXCLUDE SBARRO, INC.
HIGH 60.7% $2,500,000
LOW -6.0% $665,000
MEAN 13.1% $1,678,750
MEDIAN 5.1% $1,775,000
ADJ. MEAN 3.6% $1,775,000
COUNT 5 4
(1) Unit level data from Salomon Industry research report except for NPC
International unit data which comes from X.X. Xxxxxxx & Sons company
research report, Showbiz Pizza Time unit data which comes from Credit
Suisse First Boston company research report and Uno Restaurant Corporation
unit data which comes from NationsBanc Xxxxxxxxxx Securities Industry
research report.
33 [LOGO] Prudential
--- Securities
PROJECT OREGANO
________________________________________________________________________________
SELECTED COMPARABLE PIZZA AND VALUE PRICED ITALIAN FOOD RESTAURANTS
Footnotes
---------
(a) Earnings estimates from First Call except Sbarro estimates which are from
company projections.
(b) Charges for restructuring and asset impairment in fiscal 1995, 1996 and
1997 were added back after tax effecting at the average tax rate of the
company.
(c) Exercise price of options assumed to be the average price of exercisable
options.
(d) Per unit data and comparative store sales data is for Olive Garden
restaurants only.
(e) Exercise price of outstanding options used as average exercise of
exercisable options.
(f) Impairment and loss provision for underperforming assets in fiscal 1996
and fiscal 1995 were added back after tax effecting at a 40% tax rate.
(g) Per unit restaurant data and comparative store sales data is for Pizza Hut
restaurants only. Comparative store sales are for the nine months ended
12/97.
(h) Non-recurring gain in fiscal 1995 was added back after tax effecting at the
average tax rate of the company. Dividend payout ratio is based on declared
dividend rate at 12/97.
(i) Restaurant count as of fiscal 1996. Comparative store sales information
from Xxx Xxxxxx & Company research report.
(j) All outstanding options were assumed to be exercisable.
(k) Restaurant count as of fiscal 1996. Comparative store growth for the nine
months ended 9/97.
(1) Asset impairment charges in fiscal 1996 and 1997 were added back after tax
effecting at the average tax rate of the company.
(m) Comparative store sales data information is for the year ended 9/97.
(n) Provision for unit closings in fiscal 1995 and 1997 was added back after
tax effecting at a 40% tax rate.
34 [LOGO] Prudential
--- Securities
PROJECT OREGANO
________________________________________________________________________________
COMPARABLE COMPANIES
COMPANY XXXXXX RESTAURANTS, INC.
DESCRIPTIONS ------------------------
The company is the world's largest full-service
restaurant organization. In the United States, as
of November 23, 1997, the company operated 1,111
restaurants in 49 states, including 649 Red
Lobster restaurants, 460 The Olive Garden
restaurants, and two Bahama Breeze restaurants. In
addition, the company operated 40 restaurants in
Canada, including 35 Red Lobster and 5 The Olive
Garden restaurants. All of its restaurants in
North America are company-operated.
NPC INTERNATIONAL, INC.
------------------------
The company is the largest Pizza Hut franchisee in
the world. The company, through its wholly owned
subsidiary, Romacorp, Inc., is also the
owner/franchisor of Xxxx Xxxx'x, a casual theme
restaurant. As of December 23, 1997, the company
owned and operated 684 Pizza Hut restaurants and
45 Xxxx Xxxx'x restaurants. Additionally, 145 Xxxx
Xxxx'x restaurants were franchised.
PIZZA INN, INC.
---------------
The company is the franchisor and food and supply
distributor to a system of restaurants operating
under the Pizza Inn name. At September 8, 1997,
the Pizza Inn system consisted of 494 units,
including five company operated units and 489
franchised units. Pizza Inn units are currently
located in 18 states and 19 foreign countries.
Domestic units are located predominantly in the
southern half of the United States, with Texas,
North Carolina and Arkansas accounting for
approximately 30%, 15% and 11%, respectively, of
the total.
35 [LOGO] Prudential
--- Securities
PROJECT OREGANO
________________________________________________________________________________
COMPARABLE COMPANIES
COMPANY SHOWBIZ PIZZA, INC.
DESCRIPTIONS -------------------
The company is engaged in the family restaurant/
entertainment center business through its Xxxxx X.
Xxxxxx's restaurants which offer a variety of
pizza, salad bar, sandwiches and desserts and
feature musical and comic entertainment by
life-size, computer-controlled robotic characters,
family oriented games, rides and arcade-style
activities. As of March 14, 1997, the company
operated 245 restaurants and franchisees operated
69 restaurants located in 44 states.
UNO RESTAURANT CORPORATION
--------------------------
The Company owns and operates or franchises a
total of 161 restaurants, including 95 owned and
66 franchised casual dining, full-servlce
restaurants under the Pizzeria Uno ... Chicago Bar
& Grill name. Company-owned restaurants are
located primarily in major markets from New
England to Virginia, Florida, Chicago and Denver
and franchised restaurants are located throughout
the United States as well as one restaurant in
Seoul, Korea.
36 [LOGO] Prudential
--- Securities
Section II
________________________________________________________________________________
___________________________________________________
2. Comparable Companies (Fast Food
Restaurants)
___________________________________________________
[LOGO] Prudential
Securities
PROJECT OREGANO
________________________________________________________________________________
SELECTED COMPARABLE FAST FOOD COMPANIES
LATEST TWELVE MONTH RESULTS
-------------------------------------------------------------------------------------------
(Dollars in millions, except per share data)
Results
-------------------------------------------------------------------------------------------
Rest. Book
Sales Pft. EBITDA EBIT Net Inc. Assets Value Debt XXX
-------- -------- -------- ------ -------- -------- -------- ------ ------
Au Bon Pain Co., Inc. $248.6 $129.5 $24.5 $7.2 $1.5 $196.3 $91.6 $80.9 1.7%
Foodmaker, Inc. $1,017.7 $166.0 $125.5 $85.6 $35.3 $681.8 $87.9 $347.7 50.7%
Tricon Global Restaurants, Inc. $9,625.0 $1,568.0 $1,266.0 $692.0 $217.0 $5,865.0 $3,564.0 $299.0 NA
Sonic Corp. $192.9 $75.2 $45.3 $33.6 $19.9 $188.8 $123.8 $46.5 16.7%
Wendy's International, Inc. $2,013.4 $603.6 $394.7 $294.2 $178.3 $1,914.0 $1,204.2 $454.8 16.0%
Sbarro, Inc. $345.1 $97.2 $81.1 $57.1 $38.1 $278.6 $220.4 $0.0 17.9%
SUMMARY STATISTICS EXCLUDE SBARRO, INC.
(table continued)
LATEST FISCAL YEAR RESULTS
-------------------------
(Dollars in millions, except per share data)
Results Per Share Results (a) EPS Growth
------------------------- ---------------------------- -----------------
Sales EBIT Net LTM EPS 1997 EPS 1998 EPS 97-98 5-Yrs.
----- ---- --- ------- -------- -------- ----- ------
Au Bon Pain Co., Inc. $236.9 $2.3 ($1.7) $0.13 $0.19 $0.32 68.4% 17.00%
Foodmaker, Inc. $1,071.7 $85.6 $35.3 $0.89 $0.95 $1.12 17.9% 20.00%
Tricon Global Restaurants, Inc. $9,838.0 $628.0 $131.0 $1.40 ($0.56) $1.91 NA 13.00%
Sonic Corp. $184.0 $32.2 $19.2 $1.48 $1.49 $1.71 14.8% 16.00%
Wendy's International, Inc. $1,897.1 $261.6 $155.9 $1.29 $1.33 $1.20 -9.8% 15.00%
Sbarro, Inc. $345.1 $57.1 $38.1 $1.86 $1.86 $1.97 5.9% 12.00%
SUMMARY STATISTICS EXCLUDE SBARRO, INC. HIGH 68.4% 20.0%
LOW -9.8% 13.0%
MEAN 22.8% 16.2%
MEDIAN 16.3% 16.0%
ADJ. MEAN 16.3% 16.0%
COUNT 4 5
38 [LOGO] Prudential
--- Securities
PROJECT OREGANO
________________________________________________________________________________
SELECTED COMPARABLE FAST FOOD COMPANIES
LATEST TWELVE MONTHS
----------------------------------------------------------------------------------------------
(Dollars in millions, except per share data)
Margins Credit
------------------------------------------- -----------------------------------------------
Rest. Crnt.
Pft. S, G & A EBITDA EBIT Net Debt/Cap. Ratio Debt/EBITDA EBITDA/Int
----- -------- ------ ---- ----- --------- ------ ----------- ----------
Au Bon Pain Co., Inc. 52.1% 13.3% 9.9% 2.9% 0.6% 0.5x 1.3x 3.3x 3.5x
Foodmaker, Inc. 15.5% 7.5% 11.7% 8.0% 3.3% 0.8x 0.5x 2.8x 3.1x
Tricon Global Restaurants, Inc. 16.3% 10.0% 13.2% 7.2% 2.3% 0.1x 0.6x 0.2x 4.3x
Sonic Corp. 39.0% 21.5% 23.5% 17.4% 10.3% 0.3x 0.9x 1.0x 22.8x
Wendy's International, Inc. 30.0% 15.4% 19.6% 14.6% 8.9% 0.3x 2.0x 1.2x 76.7x
Sbarro, Inc. 28.2% 12.1% 23.5% 16.6% 11.0% 0.0x 2.9x 0.0x NM
SUMMARY STATISTICS EXCLUDE SBARRO, INC.
HIGH 52.1% 21.5% 23.5% 17.4% 10.3% 0.8x 2.0x 3.3x 76.7x
LOW 15.5% 7.5% 9.9% 2.9% 0.6% 0.1x 0.5x 0.2x 3.1x
MEAN 30.6% 13.5% 15.6% 10.0% 5.1% 0.4x 1.1x 1.7x 22.1x
MEDIAN 30.0% 13.3% 13.2% 8.0% 3.3% 0.3x 0.9x 1.2x 4.3x
ADJ. MEAN 28.4% 12.9% 14.8% 9.9% 4.8% 0.3x 0.9x 1.7x 10.2x
COUNT 5 5 5 5 5 5 5 5 5
(table continued)
(Dollars in millions, except per share data)
Two Year Growth
------------------------------------
Net
Sales EBIT EBITDA Income
----- ----- ------ ------
Au Bon Pain Co., Inc. 13.8 -61.2 -16.8 NA
Foodmaker, Inc. 2.6 51.7 28.9 NA
Tricon Global Restaurants, Inc. 1.4 3.9 1.9 4.9
Sonic Corp. 21.9 21.9 27.9 24.0
Wendy's International, Inc. 9.2 16.6 14.4 16.6
Sbarro, Inc. 4.5% 9.5% 6.7% 10.1%
SUMMARY STATISTICS EXCLUDE SBARRO, INC.
HIGH 21.9% 51.7% 28.9% 24.0%
LOW 1.4% -61.2% -16.8% 4.9%
MEAN 9.8% 6.6% 11.2% 15.1%
MEDIAN 9.2% 16.6% 14.4% 16.6%
ADJ. MEAN 8.5% 14.1% 14.7% 16.6%
COUNT 5 5 5 3
39 [LOGO] Prudential
--- Securities
PROJECT OREGANO
________________________________________________________________________________
SELECTED COMPARABLE FAST FOOD COMPANIES
LATEST TWELVE MONTHS
----------------------------------------------------------------------------------------
Restaurants Per Unit Data(1)(2)
----------------------------- --------------------------------------------------------
(Dollars in millions, except per unit data)
Owned Franchised Total Revenue EBIT EBITDA EBITDA+Xxxx XXX
------ ---------- ----- ------- ---- ------ ----------- ---
Au Bon Pain Co., Inc. 231 58 289 $950,000 $74,000 $139,000 $237,000 13.5%
Foodmaker, Inc. 963 360 1,323 $1,071,00 $108,171 $145,656 $224,900 17.3%
Tricon Global Restaurants, Inc. 12,883 16,213 29,096 $665,000 $116,375 NA $206,150 31.0%
Sonic Corp. 267 1,450 1,717 $600,000 $93,000 $128,000 $140,000 25.5%
Wendy's International, Inc. 2,725 3,901 6,626 $975,000 $133,000 $176,000 $211,000 22.2%
Sbarro, Inc. 627 231 858 $548,922 $104,131 $138,328 $261,891 30.5%
SUMMARY STATISTICS EXCLUDE SBARRO, INC.
HIGH 12,883.0 16,213.0 29,096.0 $1,071,000 $133,000 $176,000 $237,000 31.0%
LOW 231.0 58.0 289.0 $600,000 $74,000 $128,000 $140,000 13.5%
MEAN 3,413.8 4,396.4 7,810.2 $852,200 $104,909 $147,164 $203,810 21.9%
MEDIAN 963.0 1,450.0 1,717.0 $950,000 $108,171 $142,328 $211,000 22.2%
ADJ. MEAN 1,318.3 1,903.7 3,222.0 $863,333 $105,849 $142,328 $214,017 21.7%
COUNT 5 5 5 5 5 4 5 5
(table continued)
LATEST TWELVE MONTHS
--------------------
New Store
--------------------
(Dollars in millions, except per unit data)
Tot.
Growth Cost/Unit
------ ----------
Au Bon Pain Co., Inc. 13.3% $1,750,000
Foodmaker, Inc. 4.2% $1,300,000
Tricon Global Restaurants, Inc. NA $665,000
Sonic Corp. 8.2% $550,000
Wendy's International, Inc. 7.5% $950,000
Sbarro, Inc. 5.1% $859,036
SUMMARY STATISTICS EXCLUDE SBARRO, INC.
HIGH 13.3% $1,750,000
LOW 4.2% $550,000
MEAN 8.3% $1,043,000
MEDIAN 7.8% $950,000
ADJ. MEAN 7.8% $971,667
COUNT 4 5
(1) Unit level data from Salomon Industry research report except for Foodmaker
unit data which comes from Xxxxxxx Xxxxx Xxxxxx company research report.
40 [LOGO] Prudential
--- Securities
PROJECT OREGANO
________________________________________________________________________________
SELECTED COMPARABLE FAST FOOD COMPANIES
FOOTNOTES
---------
(a) Earnings estimates from First Call except Sbarro estimates which are from
company projections.
(b) Reduction in carrying value of long-lived assets in fiscal 1995 and 1996
and facilities relocation charges in fiscal 1994, 1995 and 1996 were added
back after tax effecting at a 40% tax rate.
(c) Restaurant count as of fiscal 1996.
(d) Per unit data is for Au Bon Pain restaurants only.
(e) Equity in loss of FRI was added back in fiscal 1995 after tax effecting at
a 40% tax rate.
(f) Income statement results are pro forma for the spin off from PepsiCo. Gains
from restaurant sales are not included in SG&A. Per unit restaurant data is
for Pizza Hut restaurants only.
(g) Unusual disposal charges in fiscal 1996 were added back after tax effecting
at a 40% tax rate. Outstanding option information was not available.
(h) Provision for impairment of long-lived assets in fiscal years 1995-1997
and the 3-months ended 11/97 were added back after tax effecting at a 40%
tax rate.
(i) Special charges in fiscal 1994 and 1995 and restructuring charges during
the nine months ended 9/97 were added back after tax effecting at a 40% tax
rate.
(j) Comparable store sale information is from Xxxx Xxxxx research report.
(k) Provision for unit closings in fiscal 1995 and 1997 was added back after
tax effecting at a 38% tax rate.
41 [LOGO] Prudential
--- Securities
PROJECT OREGANO
________________________________________________________________________________
COMPARABLE COMPANIES
COMPANY AU BON PAIN CO., INC.
DESCRIPTIONS ---------------------
The company owns, operates and franchises Au Bon
Pain and Saint Louis Bread Company bakery cafes.
Both concepts specialize in high quality food for
breakfast and lunch. The company's bakery cafes
are principally located in the northeastern and
mid-Atlantic United States. As of December 28,
1996, there were 289 bakery cafes of which 231
were operated by the company (177 Au Bon Pain
restaurants and 54 Saint Louis Bread Company
restaurants) and 58 were franchised (48 Au Bon
Pain restaurants and 10 Saint Louis Bread Company
restaurants).
FOODMAKER, INC.
----------------
The company owns, operates and franchises Jack in
the Box restaurants, a fast-food chain located
principally in the western and southwestern United
States. Jack in the Box is a leading regional
competitor in the fast-food segment of the
restaurant industry. At September 28, 1997, there
were 1,323 Jack in the Box restaurants, of which
963 were operated by the company and 360 were
franchised.
TRICON Global Restaurants, Inc.
--------------------------------
The company is the world's largest quick service
restaurant company based on number of units, with
more than 29,000 units in 95 countries and
territories. The company, owns, operates and
franchises three of the most recognized
restaurants concepts, Pizza Hut, Taco Bell and
KFC. As of December 30, 1996, the company's system
included 12,883 company operated/joint venture
restaurants and 16,213 franchised restaurants. Of
the total restaurants, 9,863 were KFC restaurants,
12,388 were Pizza Hut restaurants, and 6,845 were
Taco Bell restaurants.
42 [LOGO] Prudential
--- Securities
PROJECT OREGANO
________________________________________________________________________________
COMPARABLE COMPANIES
COMPANY SONIC CORP.
DESCRIPTIONS -----------
The company operates and franchises the largest
chain of drive-in restaurants in the United
States. As of November 30, 1997, the company had
1,717 restaurants in operation, consisting of 267
company-owned restaurants and 1,450 franchised
restaurants, principally in the south central and
southeastern United States. At a typical Sonic
restaurant, a customer drives into one of 24 to 36
covered drive-in spaces, orders through an
intercom, and has the food delivered by a carhop
within an average of four minutes.
XXXXX'S INTERNATIONAL, INC.
---------------------------
The company is primarily engaged in the business
of operating, developing, and franchising a system
of distinctive quick-service restaurants. At
September 28, 1997, there were 5,133 Xxxxx's
restaurants in operation in the United States and
in 33 other countries and territories. Of these
restaurants, 1,232 were operated by the company
and 3,901 were franchised. During the same period,
the company and its franchisees also operated
1,493 Xxx Hortons restaurants in Canada and the
United States.
43 [LOGO] Prudential
--- Securities
________________________________________________________________________________
___________________________________________________
X. Xxxxxxxxx Buy-Out Analysis
___________________________________________________
[LOGO] Prudential
Securities
PROJECT OREGANO
________________________________________________________________________________
LEVERAGED BUY-OUT ANALYSIS
TRANSACTION ASSUMPTIONS
(In millions, except offer price)
OFFER PRICE $ 33.00
COMPARATIVE STORE SALES GROWTH 0.5%
SOURCES AND USES OF FUNDS
-------------------------
SOURCES OF FUNDS
----------------
Excess Cash on Balance Sheet $ 117.1
Bank Credit Facility 200.0
Senior Unsecured Notes 300.0
Equity Investment 103.1
------------------
TOTAL SOURCES OF FUNDS $ 720.2
==================
USES OF FUNDS
-------------
Number of Fully Diluted Shares Outstanding 20,914
Number of Shares to be Repurchased 20,914 100.0%
Purchase Price of Equity $ 690.2
Purchase Price of Options 15.4
Repayment of Existing Debt -
------------------
TOTAL PURCHASE PRICE $ 705.6
Financing Costs 9.8
Non-Financing Costs 4.8
------------------
TOTAL USES OF FUNDS $ 720.2
==================
PRO FORMA % OF
ESTIMATED TOTAL INTEREST
PRO FORMA CAPITALIZATION 12/28/97 CAPITALIZATION RATE
------------------------
Cash & Cash Equivalents $ 10.2 5.50%
Bank Credit Facility 200.0 33.2% 8.00%
Senior Unsecured Notes 300.0 49.7% 10.50%
------------
TOTAL LONG TERM DEBT $ 500.0
Common Equity $ 103.1 17.1%
------------
Total Shareholders' Equity 103.1 17.1%
TOTAL CAPITALIZATION $ 603.1 100.0%
============ ================
Implied Equity Value $ 690.2
Implied Enterprise Value $ 572.2
Goodwill $ 484.4
Period (Years) 30
45 [LOGO] Prudential
--- Securities
PROJECT OREGANO
________________________________________________________________________________
LEVERAGED BUY-OUT ANALYSIS
INCOME STATEMENTS
--------------------------------------------------------------------------------------
PROJECTED FISCAL YEARS ENDING DECEMBER 31,
--------------------------------------------------------------------------------------
(In 000's except per share data) 1998 1999 2000 2001 2002
---- ---- ---- ---- ----
Existing restaurant sales $ 349,149 $ 368,358 $ 387,750 $ 407,326 $ 427,089
Existing franchise related income 6.664 7,353 8,049 8,752 9,461
---------- ----------- ---------- ---------- -----------
Total revenues 355,813 375,711 395,799 416,078 436,550
Cost of food and paper products 70,807 74,703 78,636 82,606 86,614
---------- ----------- ---------- ---------- -----------
Gross profit 285,006 301,008 317,163 333,472 349,937
Gross margin 81.6% 81.7% 81.8% 81.9% 81.9%
Payroll and other benefits 86,589 91,353 96,162 101,017 105,918
Occupancy and other expenses 40,187 42,398 44,630 46,883 49,158
Rent expense 56,911 60,042 63,203 66,394 69,616
General and administrative 17,960 18,948 19,946 20,953 21,969
Provision for unit closings - - - - -
Other income (1,466) (2,173) (2,171) (2,159) (2,135)
---------- ----------- ---------- ---------- -----------
Total costs and expenses 200,181 210,568 221,770 233,088 244,526
EBITDA 84,825 90,440 95,394 100,384 105,411
EBITDA margin 23.8% 24.1% 24.1% 24.1% 24.1%
Depreciation 26,094 26,790 27,759 28,781 29,922
Amortization (1) 16,147 16,147 16,147 16,147 16,147
---------- ----------- ---------- ---------- -----------
EBIT 42,584 47,503 51,487 55,456 59,342
Interest expense 48,320 47,560 45,960 43,960 41,760
Interest income 12 184 58 175 266
---------- ----------- ---------- ---------- -----------
Income before taxes (5.,724) 127 5,585 11,671 17,848
Income taxes @ 40% 3,961 6,184 8,258 10,571 12,918
---------- ----------- ---------- ---------- -----------
Net income $ (9,685) $ (6,057) $ (2,673) $ 1,100 $ 4,930
========== =========== ========== ========== ===========
Net income margin -2.8% -1.6% -0.7% 0.3% 1.2%
(1) Goodwill is not tax-deductible.
46 [LOGO] Prudential
--- Securities
PROJECT OREGANO
________________________________________________________________________________
LEVERAGED BUY-OUT ANALYSIS
BALANCE SHEETS
------------- ---------------------------------------------------------------------
PRO FORMA PROJECTED FISCAL YEARS ENDING DECEMBER 31,
------------- ---------------------------------------------------------------------
(In 000's) 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
ASSETS
Cash and cash equivalents $ 10,214 $ 219 $ 3,343 $ 1,059 $ 3,174 $ 4,836
Accounts receivables 2,375 2,242 2,367 2,494 2,622 2,751
Inventories 2,962 2,929 3,090 3,253 3,417 3,583
Prepaid expenses 1,768 1,560 1,647 1,735 1,824 1,914
------------ ------------ ------------ ----------- ------------- ------------
Total current assets 17,319 6,950 10,448 8,541 11,037 13,083
Property and equipment, net 136,798 139,254 132,015 123,805 115,175 106,003
Goodwill 484,418 468,271 452,124 435,976 419,829 403,682
Deferred financing fees 9,800 8,820 7,840 6,860 5,880 4,900
Deferred charges, net 1,596 1,600 1,600 1,600 1,600 1,600
Other assets 5,840 6,500 6,500 6,500 6,500 6,500
------------ ------------ ------------ ----------- ------------- ------------
Total assets $ 655,771 $ 631,395 $ 610,526 $ 583,283 $ 560,021 $ 535,768
============ ============ ============ =========== ============= ============
LIABILITIES AND EQUITY
Accounts payable $ 10,086 $ 7,391 $ 7,798 $ 8,208 $ 8,623 $ 9,041
Accrued expenses 26,025 23,376 24,662 25,961 27,271 28,594
Dividend payable - - - - - -
Income taxes 4,777 1,200 1,200 1,200 1,200 1,200
------------ ------------ ------------ ----------- ------------- ------------
Total current liabilities 40,888 31,967 33,660 35,369 37,094 38,835
Deferred income taxes 11,801 10,031 8,526 7,247 6,160 5,236
Bank credit facility 200,000 196,000 181,000 156,000 131,000 101,000
Senior unsecured notes 300,000 300,000 300,000 300,000 300,000 300,000
------------ ------------ ------------ ----------- ------------- ------------
Total liabilities 552,689 537,998 523,186 498,616 474,254 445,072
Retained earnings 103,082 93,397 87,340 84,667 85,767 90,696
------------ ------------ ------------ ----------- ------------- ------------
Shareholders' equity 103,082 95,397 87,340 84,667 85,767 90,696
------------ ------------ ------------ ----------- ------------- ------------
Total liabilities and shareholders' equity $ 655,771 $ 631,395 $ 610,526 $ 583,283 $ 560,021 $ 535,768
============ ============ ============ =========== ============= ============
47 [LOGO] Prudential
--- Securities
PROJECT OREGANO
________________________________________________________________________________
LEVERAGED BUY-OUT ANALYSIS
CASH FLOW STATEMENTS
---------------------------------------------------------------
PROJECTED FISCAL YEARS ENDING DECEMBER 31,
---------------------------------------------------------------
(In 000's) 1998 1999 2000 2001 2002
---- ---- ---- ---- ----
Net Income $ (9,685) $ (6,057) $ (2,673) $ 1,100 $ 4,930
Depreciation and Amortization 43,221 43,917 44,887 45,908 47,049
Deferred taxes (1,770) (1,505) (1,279) (1,087) (924)
Decrease (increase) in receivables 133 (125) (127) (128) (129)
Decrease (increase) in inventories 33 (161) (163) (164) (166)
Decrease (increase) in prepaid expenses 208 (87) (88) (89) (90)
Decrease (increase) in deferred charges (4) - - - -
Increase in other assets (660) - - - -
(Decrease) increase in accounts payable and accruals (5,344) 1,693 1,709 1,725 1,742
(Decrease) increase in income taxes and dividends payable (3,577) - - - -
---------- ---------- ---------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 22,555 $ 37,674 $ 42,266 $ 47,265 $ 52,412
Capital expenditures (new stores) (14,350) (14,350) (14,350) (14,350) (14,350)
Capital expenditures (maintenance) (14,200) (5,200) (5,200) (5,800) (6,400)
Proceeds from sale of mark. sec - - - - -
Proceeds from disposition of property & equip - - - - -
---------- ---------- ---------- ---------- ----------
NET CASH PROVIDED (USED IN) INVESTING ACTIVITIES (28,550) (19,550) (19,550) (20,150) (20,750)
Proceeds (repayment) of bank credit facility (4,000) (15,000) (25,000) (25,000) (30,000)
Proceeds (repayment) of unsecured debt - - - - -
Payment of annual dividends - - - - -
Transaction adjustments-assets -
Transaction adjustments-equity
Proceeds from exercise of stock options - - - - -
Cash dividends paid - - - - -
---------- ---------- ---------- ---------- ----------
NET CASH USED IN FINANCING ACTIVITIES (4,000) (15,000) (25,000) (25,000) (25,000)
Increase in cash (9,995) 3,124 (2,284) 2,115 1,662
Cash at beginning of year 10,214 219 3,343 1,059 3,174
---------- ---------- ---------- ---------- ----------
Cash at end of year $ 219 $ 3,343 $ 1,059 $ 3,174 $ 4,836
==============================================================
48 [LOGO] Prudential
--- Securities
PROJECT OREGANO
________________________________________________________________________________
LEVERAGED BUY-OUT ANALYSIS
LEVERAGED BUY-OUT CASH FLOWS
(In 000's except offer price) PROJECTED FISCAL YEARS ENDING DECEMBER 31,
-------------------------------------------------------------------------------
Income Statement: 1998 1999 2000 2001 2002
----------------- ---- ---- ---- ---- ----
EBITDA $84,825 $90,440 $95,394 $100,384 $105,411
Depreciation 26,094 26,790 27,759 28,781 29,922
Amortization 16,147 16,147 16,147 16,147 16,147
OPERATING PROFIT (EBIT) 42,584 47,503 51,487 55,456 59,342
------------------------------------------------------------------------------------------------------------------------
Interest Expense (Net)/(1)/ 48,308 47,376 45,902 43,785 41,494
-------- ------- ------- -------- --------
Pretax Income (5,724) 127 5,585 11,671 17,848
Taxes @40.00%/(2)/ 4,169 6,510 8,693 11,127 13,598
-------- ------- ------- -------- --------
Net Income $ (9,893) $(6,383) $(3,108) $ 543 $ 4,250
======== ======= ======= ======== ========
Cash Flow:
---------
EBITA $58,731 $63,650 $67,634 $71,603 $75,489
Add: Depreciation 26,094 26,790 27,759 28,781 29,922
Less: Taxes (4,169) (6,510) (8,693) (11,127) (13,598)
Capital Expenditures (28,550) (19,550) (19,550) (20,150) (20,750)
Change in WC source/(use) (5,634) 1,319 1,332 1,344 1,357
-------- ------- ------- -------- --------
Cash Flow Available for Debt Service 46,472 65,699 68,482 70,451 72,420
Less: Net Interest Expense (48,308) (47,376) (45,902) (43,785) (41,494)
-------- ------- ------- -------- --------
Cash Flow Available for Distribution $ (1,836) $18,323 $22,580 $26,665 $30,926
======== ======= ======= ======== ========
Capital Structure: Rates
----------------- -----
Cash $219 $3,343 $1,059 $3,174 $4,836
Bank Credit Facility 8.00% 196,000 181,000 156,000 131,000 101,000
Senior Unsecured Notes 10.50% 300,000 300,000 300,000 300,000 300,000
-------- ------- ------- -------- --------
Net Debt Outstanding $495,781 $477,657 $454,941 $427,826 $396,164
======== ======= ======= ======== ========
Interest Expense:
----------------
Bank Credit facility 8.00% $15,840 $15,080 $13,480 $11,480 $9,280
Senior Unsecured Notes 10.50% 31,500 31,500 31,500 31,500 31,500
-------- ------- ------- -------- --------
Total Interest Expense 47,340 46,580 44,980 42,980 40,780
Interest Income @ 5.50% 12 184 58 175 266
-------- ------- ------- -------- --------
Net Interest Expense 47,328 46,396 44,922 42,805 40,514
Deferred Financing Charges 980 980 980 980 980
Notes:
-----
(1) Includes amortization of deferred financing charges
(2) Goodwill is not tax-deductible
49 [LOGO] Prudential
--- Securities
PROJECT OREGANO
________________________________________________________________________________
LEVERAGED BUY-OUT ANALYSIS
CREDIT STATISTICS
PRO FORMA PROJECTED FISCAL YEARS ENDING DECEMBER 31,
--------- -----------------------------------------------------------
(In 000's, except offer price) 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
OPERATIONAL PARAMETERS
EBIT $57,145 $42,584 $47,503 $51,487 $55,456 $59,342
EBITDA 81,067 84,825 90,440 95,394 100,384 105,411
Total Debt 500,000 496,000 481,000 456,000 431,000 401,000
Net Cash Interest Expense 47,328 47,328 46,396 44,922 42,805 40,514
Cash 10,214 219 3,343 1,059 3,174 4,836
COVERAGE STATISTICS:
EBIT/Net Cash Interest Expense 1.21x 0.90x 1.02x 1.15x 1.30x 1.46x
EBITDA/Total Cash Interest Expense 1.71x 1.79x 1.94x 2.12x 2.34x 2.58x
EBITDA/Net Cash Interest Expense 1.71x 1.79x 1.95x 2.12x 2.35x 2.60x
(EBITDA-CapEx)/Total Cash Interest Expense 1.11x 1.19x 1.52x 1.69x 1.87x 2.08x
LEVERAGE STATISTICS:
Total Net Debt/EBIT 8.57x 11.64x 10.06x 8.84x 7.71x 6.68x
Total Net Debt/EBITDA 6.04x 5.84x 5.28x 4.77x 4.26x 3.76x
Total Debt/EBITDA 6.17x 5.85x 5.32x 4.78x 4.29x 3.80x
OFFER PRICE $33.00
COMPARATIVE STORE SALES GROWTH 0.5%
NOTES:
-----
Total Cash Interest Expense excludes deferred financing charges.
Net Cash Interest Expense includes interest income, but excludes deferred
financing charges.
50 [LOGO] Prudential
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PROJECT OREGANO
________________________________________________________________________________
LEVERAGED BUY-OUT ANALYSIS
RETURNS ANALYSIS
PROJECTED FISCAL YEARS ENDING DECEMBER 31,
-----------------------------------------------------------------
(In 000's, except offer price) 1998 1999 2000 2001 2002
---- ---- ---- ---- ----
EBITDA $84,825 $90,440 $95,394 $100,384 $105,411
ENTERPRISE VALUE
Multiples of EBITDA
6.0 x $508,949 $542,641 $572,362 $602,303 $632,466
7.0 593,774 633,081 667,755 702,687 737,877
8.0 678,598 723,521 763,149 803,071 843,288
Net Debt Outstanding $495,781 $477,657 $454,941 $427,826 $396,164
EQUITY VALUE
Multiples of EBITDA
6.0 x $13,168 $64,984 $117,421 $174,477 $236,301
7.0 97,993 155,424 212,815 274,861 341,712
8.0 182,818 245,864 308,208 375,245 447,123
OFFER PRICE $33.00
COMPARATIVE STORE SALES GROWTH 0.5%
51 [LOGO] Prudential
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