Exhibit (b)(2)
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MATERIALS PREPARED FOR THE
BOARD OF DIRECTORS OF:
CORT BUSINESS SERVICES CORP.
MARCH 25, 1999
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THE FOLLOWING INFORMATION IS CONFIDENTIAL AND PROPRIETARY TO SUNTRUST
EQUITABLE SECURITIES CORPORATION. THE INFORMATION HAS BEEN PREPARED SOLELY FOR
THE BENEFIT OF THE BOARD OF DIRECTORS AND IS PROVIDED UPON THE UNDERSTANDING
THAT ANY PERSON ACCEPTING IT WILL NOT, WITHOUT THE PRIOR PERMISSION OF SUNTRUST
EQUITABLE SECURITIES, UTILIZE THE INFORMATION FOR ANY PURPOSE OTHER THAN AS
DESCRIBED HEREIN.
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THE FOLLOWING MATERIALS ARE BASED UPON SUNTRUST EQUITABLE SECURITIES
CORPORATION'S ANALYSIS OF THE TRANSACTION AS DESCRIBED IN THE DRAFT AGREEMENT
AND PLAN OF MERGER DATED MARCH 23, 1999. IN THE EVENT OF MATERIAL CHANGES TO
THIS DOCUMENT WHICH ARE NOT REFLECTED IN THESE MATERIALS, THE ENCLOSED ANALYSIS
AND OUR CONCLUSIONS MAY BE AFFECTED.
CERTAIN PORTIONS OF THE ENCLOSED ANALYSIS ARE BASED UPON PROJECTED FINANCIAL
RESULTS. ANY PROJECTED FINANCIAL RESULTS ARE BASED UPON MANAGEMENT PROJECTIONS,
ANALYST FORECASTS, INTERNAL PROJECTIONS AND DISCUSSIONS WITH MANAGEMENT. A
NUMBER OF FACTORS, INCLUDING INDUSTRY CONDITIONS, CHANGES IN COSTS, LABOR ISSUES
AND OTHER FACTORS WHICH ARE BEYOND THE SCOPE OF THESE PROJECTIONS AND OUT OF THE
CONTROL OF THE COMPANY AND SUNTRUST EQUITABLE MAY CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THESE PROJECTIONS.
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TABLE OF CONTENTS
Tab PAGE
--- ----
1. EXECUTIVE SUMMARY..........................................................1
2. HISTORICAL STOCK PRICE ANALYSIS............................................6
3. VALUATION ANALYSIS.........................................................8
A. COMPARABLE PUBLIC COMPANIES ANALYSIS.................................10
B. DISCOUNTED CASH FLOW ANALYSIS........................................26
C. LEVERAGED BUYOUT ANALYSIS............................................28
D. RECENT TRANSACTIONS IN THE RENTAL INDUSTRY...........................41
4. PREMIUMS PAID ANALYSIS....................................................44
EXHIBIT
A. FORM OF STES OPINION LETTER
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EXECUTIVE SUMMARY
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EXECUTIVE SUMMARY
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- We understand that an investor group that includes certain affiliates of
Xxxxxxxxx, Xxxxxx, Xxxxxxxx & Co. ("BRS") and members of management
(collectively, the "Affiliated Shareholders") has offered to pay $24.00 in
cash and $2.50 liquidation value in preferred stock for each share of CORT
Business Services Corporation ("CORT" or the "Company") other than shares
to be contributed by the Affiliated Shareholders (the "Proposed
Transaction").
- We have been informed that a newly-formed company to be known as
Acquisition Holdings, LLC ("Newco") will establish a wholly-owned
subsidiary, Acquisition Merger Sub, Inc. ("Sub"), which will be merged with
and into CORT, with CORT being the surviving entity. As a result, CORT will
become a wholly-owned subsidiary of Newco.
- SunTrust Equitable Securities Corporation ("STES") has been retained by the
Company to render an opinion as investment bankers (the "Opinion") as to
the fairness, from a financial point of view, of the consideration to be
paid to the Company's shareholders other than those shareholders affiliated
with the acquiring entity (the "Non-Affiliated Shareholders") under the
terms of the Proposed Transaction.
- We understand that the Board of Directors of Acquisition Holdings, LLC,
Acquisition Merger Sub, Inc. and the Company have deemed it advisable and
in the best interest of the respective companies and stockholders to
consummate the merger of Sub with and into the Company.
- Furthermore, we understand that the Affiliated Shareholders have expressed
their intention to vote their shares in favor of the Proposed Transaction
only if the holders of a majority of the shares held by the Non-Affiliated
Shareholders that are voted at the special stockholder's meeting, vote to
approve the Proposed Transaction.
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PAGE 1 SUNTRUST EQUITABLE SECURITIES
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EXECUTIVE SUMMARY (CONTINUED)
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SCOPE OF ENGAGEMENT
- In connection with our engagement, STES has, among other things:
- reviewed a draft of the merger agreement (without exhibits) dated
March 23, 1999;
- reviewed certain historical and projected financial information
regarding CORT;
- reviewed certain information relating to comparable acquisition
transactions;
- reviewed certain financial and other information with respect to
certain other rental companies;
- compared certain financial positions and operating results of the
Company; and
- conducted such other financial studies, analyses and investigations
and reviewed such other factors as we deemed appropriate.
- We held discussions with senior management of the Company concerning the
historical and current operations of the business, its financial condition
and prospects, as well as the present strategic and operating issues facing
the Company.
- We have assumed (i) the accuracy of the Company's audited historical
financial statements as prepared by XXXX's management and subject to audit
by KPMG Peat Marwick LLP, (ii) the accuracy of the Company's unaudited
interim historical financial statements as prepared by XXXX's management
and (iii) the financial forecasts which we examined were reasonably
prepared on bases reflecting the best currently available estimates and
good faith judgments of the management of CORT.
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PAGE 2 SUNTRUST EQUITABLE SECURITIES
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EXECUTIVE SUMMARY (CONTINUED)
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SCOPE OF ENGAGEMENT (CONTINUED)
- We have also assumed that all material assets and liabilities (contingent
or otherwise) of the Company are as set forth in the financial statements
of the Company or as otherwise disclosed by CORT.
- For purposes of our analysis, we have assumed, with guidance from
Company management and the Company's auditors that the transaction
will be accounted for utilizing recapitalization accounting for
business combinations and that the transaction will be taxable to the
selling shareholders.
- Our methodologies included:
- A review and comparison of trading multiples for comparable
publicly-traded companies of other companies in the rental industry
including consumer rental companies and equipment rental companies;
- A review of recently completed and announced precedent transaction
multiples for merger and acquisition transactions in the rental
industry (i.e., multiples of revenues, book value, EBITDA, EBIT, net
income and book value);
- A review of the premiums paid relative to recent public market trading
prices for cash transactions within a value range of $200 to $500
million since January 1, 1998;
- A review of the premiums paid relative to recent public market trading
prices for companies that had experienced a decline in stock price one
year prior to announcement;
- Performing a discounted cash-flow analysis of the Company including
sensitivity analyses utilizing a range of assumptions; and
- Performing a stand-alone leveraged buyout analysis of the Company,
employing capitalization assumptions consistent with the proposal
received from the proposed buyer including sensitivity analyses
utilizing a range of assumptions.
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EXECUTIVE SUMMARY (CONTINUED)
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TERMS AND CONDITIONS
PROPOSAL
- Newco will acquire, through a cash merger,
all of the issued and outstanding shares of
CORT other than shares to be contributed by
the Affiliated Shareholders in a taxable
transaction which will be accounted for
utilizing recapitalization accounting for
business combinations
CONDITIONS TO CLOSING - Negotiation of a definitive merger agreement
- Approval of the Proposed Transaction or the
expiration of any applicable waiting periods
under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976
- Receipt of debt financing commitments by
Xxxxx
- Receipt of shareholder approvals
DATE OF CLOSING - On or about June 30, 1999
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EXECUTIVE SUMMARY (CONTINUED)
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NON-CASH CONSIDERATION
- The terms of the Proposed Transaction include the issuance of $2.50
liquidation value preferred stock. The preferred stock has a 12% dividend
that is paid-in-kind for the first five years of the 12 year life.
- Several factors may affect the value at which this security trades relative
to par, including: (i) trading market liquidity, (ii) credit rating of the
issuer and (iii) market conditions and acceptance of the PIK structure.
- Due to the uncertainty surrounding the Company's capital structure, credit
rating and other factors following the Proposed Transaction, XXXX has not
attempted to formally value the security. However, based upon discussions
with STES equity capital markets professionals, we believe that the
security may trade at a yield in excess of its stated coupon rate.
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HISTORICAL STOCK PRICE ANALYSIS
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HISTORICAL STOCK PRICE ANALYSIS
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HISTORICAL PRICE VOLUME GRAPH - CORT BUSINESS SERVICES
WEEKLY SINCE JANUARY 1996
[GRAPHIC]
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PAGE 6 SUNTRUST EQUITABLE SECURITIES
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HISTORICAL STOCK PRICE ANALYSIS (CONTINUED)
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PROFILE OF COMPANY'S OWNERSHIP
TOTAL DILUTED SHARES OUTSTANDING -- 13,696,585 (1)
TOP 10 INSTITUTIONAL INVESTORS (2)
Latest
Shares Held Change Date
----------- ------ ----
Citicorp 5,779,000 0 12/98
X. Xxxx Price 1,268,000 0 2/99
Edgemont Asset Management 500,000 (1.2MM) 12/98
Kalmar Investments 469,400 59,800 12/98
Fiduciary Trust 416,600 (41,200) 12/98
Fidelity Management 397,200 292,500 12/98
Citigroup 314,552 85,576 12/98
Palisade Capital Management 286,500 (10,800) 12/98
Xxxxxx Xxxxxx & Company 282,200 (4,700) 12/98
Massachusetts Mutual 250,500 50,400 12/98
Other 2,486,048
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TOTAL INSTITUTIONAL 12,450,000
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PERCENT HELD 90.9%
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(1) Assumes a $26.50 stock price.
(2) Based upon data from Bloomberg.
(3) Based upon the Company's proxy statement stated March 31, 1998.
PRINCIPAL SHAREHOLDERS AND MANAGEMENT (3)
DIRECTORS SHARES HELD PERCENT
----------- -------
Xxxx X. Xxxxxx 181,662 1.3%
Xxxxx X. Xxxxxxxxx 161,239 1.2%
Xxxxx X. Xxxxxx 47,993 *
Xxxxxxx X. Xxxxxx 38,526 *
Xxxxxxx X. Xxxx 24,265 *
Xxxxx X. Xxxx 10,267 *
Xxxxxxx X. Xxxxxxx 4,334 *
CERTAIN EXECUTIVE OFFICERS
Xxxxx Xxxxxx 108,954 *
Xxxxxxx X. Xxxx 81,716 *
Xxxxxx X. Xxxxx 64,763 *
Xxxxxxx Xxx Xxxxxxxx 57,608 *
All Executive Officers and Directors 887,995 6.5%
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* Less than 1% ownership
[GRAPHIC]
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VALUATION MATRIX
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VALUATION MATRIX
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(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
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PRICE PER SHARE $24.50 $25.50 $26.50 $27.50 $28.50
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IMPLIED PREMIUM $ 15.63 3/23/99 56.8% 63.2% 69.6% 76.0% 82.4%
(000S) EXCEPT PER SHARE DATA
SHARES OUTSTANDING 13,095 $320,817 $333,912 $347,007 $360,101 $373,196
WARRANTS $0 $0 $0 $0 $0
OPTIONS $12,784 $14,480 $16,462 $18,498 $20,569
EQUITY PURCHASE PRICE $333,601 $348,392 $363,468 $378,599 $393,765
DEBT ASSUMED $90,800 $90,800 $90,800 $90,800 $90,800
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IMPLIED FIRM VALUE $424,401 $439,192 $454,268 $469,399 $484,565
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FIRM VALUE/TOTAL REVENUE
Trailing Twelve Months $308,352 1.4x 1.4x 1.5x 1.5x 1.6x
1998 (1) $318,964 1.3 1.4 1.4 1.5 1.5
Projected 1999 (2) $359,191 1.2 1.2 1.3 1.3 1.3
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FIRM VALUE/EBITDA
Trailing Twelve Months $59,514 7.1x 7.4x 7.6x 7.9x 8.1x
1998 (1) $60,793 7.0 7.2 7.5 7.7 8.0
Projected 1999 (2) $67,151 6.3 6.5 6.8 7.0 7.2
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FIRM VALUE/EBIT
Trailing Twelve Months $51,861 8.2x 8.5x 8.8x 9.1x 9.3x
1998 (1) $52,645 8.1 8.3 8.6 8.9 9.2
Projected 1999 (2) $57,954 7.3 7.6 7.8 8.1 8.4
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EQUITY PRICE/EPS
Trailing Twelve Months $1.89 13.0x 13.5x 14.0x 14.6x 15.1x
1998 (1) $1.92 12.8 13.3 13.8 14.3 14.8
Projected 1999 (2) $2.19 11.2 11.6 12.1 12.5 13.0
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EQUITY VALUE/BOOK EQUITY
Trailing Twelve Months $169,189 2.0x 2.1x 2.1x 2.2x 2.3x
1998 (1) $175,663 1.9 2.0 2.1 2.2 2.2
Projected 1999 (2) N/A N/A N/A N/A N/A N/A
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(1) 1998 FINANCIALS REFLECT UNAUDITED RESULTS.
(2) PROJECTION SOURCE: COMPANY PROJECTIONS.
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PAGE 8 SUNTRUST EQUITABLE SECURITIES
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VALUATION MATRIX (CONTINUED)
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CORT PROJECTED EPS ANALYSIS
P/E MULTIPLE AS CORT 1999 EPS
P/E PERCENTAGE OF ---------------------------------------------------------------------------------------
MULTIPLE 1999 EPS GROWTH $ 1.992 $ 2.092 $ 2.192 (1) $ 2.292 $ 2.392
---------------- -------------------- --------------- ---------------- ----------------- ----------------- --------------
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8.0x 56.7% $ 15.94 $ 16.74 $ 17.54 $ 18.34 $ 19.14
9.0x 63.8% $ 17.93 $ 18.83 $ 19.73 $ 20.63 $ 21.53
10.0x 70.9% $ 19.92 $ 20.92 $ 21.92 $ 22.92 $ 23.92
11.0x 78.0% $ 21.91 $ 23.01 $ 24.11 $ 25.21 $ 26.31
12.0x 85.1% $ 23.90 $ 25.10 $ 26.30 $ 27.50 $ 28.70
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(1) Management's estimate.
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COMPARABLE PUBLIC COMPANIES ANALYSIS
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COMPARABLE PUBLIC COMPANIES ANALYSIS
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- We have examined the trading and valuation characteristics of a group of
publicly-traded companies engaged in the rental industry. None of these
companies are identical to CORT. We have classified these companies into
two groups (i) consumer rental and (ii) equipment rental.
- The consumer rental companies operate in three distinct business segments:
(i) rent-to-rent, (ii) rental-purchase and (iii) interim housing services.
The companies examined were:
- Xxxxx Xxxxx
- Globe Business Resources
- Rainbow Rentals
- Rent-A-Center
- Rent-Way
- The equipment rental companies provide rental services for a wide range of
products, including heavy equipment, tools and small equipment, modular
structures, test equipment and computer hardware. The equipment rental
companies examined were:
- Electro Rent
- XxXxxxx Rentcorp
- National Equipment Services
- XXXX Corp.
- Rental Service Corp.
- United Rentals
- Due to the lack of comparability of these companies to CORT, we do not
believe that a mathematical application of broad averages or other
statistics derived from this group is meaningful in the determination of a
value for CORT. Each company's valuation must be analyzed in context with
its business focus and trading history relative to CORT. The schedules on
the following pages present an assessment of each company's business,
industry sector and trading history relative to CORT.
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PAGE 10 SUNTRUST EQUITABLE SECURITIES
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COMPARABLE PUBLIC COMPANIES ANALYSIS (CONTINUED)
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DESCRIPTION OF COMPARABLE COMPANIES (CONSUMER RENTAL)
XXXXX XXXXX (RNT-NYSE) - Xxxxx Xxxxx, Inc. rents and sells office and
residential furniture, household appliances and consumer electronics. The
Company also manufactures its furniture rental products through five furniture
manufacturing plants and four bedding manufacturing facilities. Xxxxx currently
operates or franchises 417 stores in 32 states.
GLOBE BUSINESS RESOURCES (GLBE-NASDAQ) - Globe Business Resources, Inc. operates
a rent-to-rent business, as well as providing corporate housing. The Company
rents furniture to corporate and individual customers, and provides short-term
leased housing to corporate personnel, government agency employees and other
individuals.
RAINBOW RENTALS (RBOW-NASDAQ) - Rainbow Rentals, Inc. operates 67
rental-purchase stores in eight states. The Company offers home electronics,
furniture, appliances and computers. Rainbow rents merchandise to individuals
under agreements that allow the customers to own the merchandise after a
specified number of rental payments.
RENT-A-CENTER (RCII-NASDAQ) - Rent-A-Center, Inc. operates 2,450
rental-purchase stores. The Company products include consumer electronics,
appliances, furniture and accessories. Rent-A-Center markets its products to
customers under rental purchase arrangements that allow customers to obtain
ownership of the merchandise at the conclusion of an agreed-upon rental period.
RENT-WAY (RWY-NYSE) - Rent-Way, Inc. operates 865 rental-purchase stores in the
United States. The Company's stores offer brand name entertainment equipment,
furniture, appliances and jewelry. Rent-Way operates in 32 states.
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COMPARABLE PUBLIC COMPANIES ANALYSIS
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DESCRIPTION OF COMPARABLE COMPANIES (EQUIPMENT RENTAL)
ELECTRO RENT (ELRC-NASDAQ) - Electro Rent Corporation offers short-term rental
of electronic equipment. The Company's equipment consists primarily of general
purpose test and measurement instruments and microprocessor development systems.
Electro also leases personal computers and workstations, and services its
customers through a network of equipment calibration and service centers in the
U.S. and Canada.
XxXXXXX RENTCORP (MGRC-NASDAQ) - XxXxxxx Rentcorp rents and sells relocatable
modular offices. The Company's offices are used as temporary offices adjacent to
existing facilities and as sales offices, construction field offices, classrooms
and for a variety of other purposes. XxXxxxx also rents electronic test and
measurement instruments. The Company operates two branch offices located in
California and one in Texas.
NATIONAL EQUIPMENT SERVICES (NSV-NYSE) - National Equipment Services, Inc. rents
general equipment to industrial and construction end-users. The Company rents
more than 750 different types of machinery and equipment, as well as distributes
new equipment for original equipment manufacturers.
XXXX CORPORATION (NFF-NYSE) - Xxxx Corporation is an equipment rental company.
The Company operates 70 rental locations in 15 states. Xxxx rents backhoes, air
compressors, loaders, lifts, and compaction equipment to construction and
industrial customers. The Company also sells used equipment, spare parts, and
merchandise and provides ongoing repair and maintenance services.
RENTAL SERVICE CORPORATION (RSV-NYSE) - Rental Service Corporation is a
consolidator in the equipment rental industry. The Company serves the
industrial, manufacturing and construction markets. Rental Service operates more
than 235 rental locations throughout the U.S. and Canada.
UNITED RENTALS (URI-NYSE) - United Rentals, Inc. is an equipment rental company
operating a network of locations in the United States, Canada and Mexico. The
Company serves the construction industry, industrial and commercial concerns,
homeowners and other individuals.
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PAGE 12 SUNTRUST EQUITABLE SECURITIES
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COMPARABLE PUBLIC COMPANIES ANALYSIS (CONTINUED)
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ASSESSMENT OF COMPARABLE COMPANIES RELATIVE TO CORT
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INDUSTRY GROWTH &
SIMILARITY OF TRADING HISTORICAL EXPECTED INDUSTRY CONSOLIDATION
COMPANY BUSINESS RELATIONSHIP GROWTH GROWTH SIZE OPPORTUNITIES
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Xxxxx Xxxxx High (50%) Consistent Lower Higher Same + RP segment Greater
Low (50%)
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Globe Bus. Res. High (60%) Moderately consistent Lower Higher Same + Interim Greater
Low (40%) housing segment
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Rainbow Rentals Low Limited history Higher Higher Significantly larger Greater
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Rent-A-Center Low Inconsistent Higher Higher Significantly larger Greater
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Rent-Way Low Inconsistent Higher Higher Significantly larger Greater
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Electro Rent Moderate Moderately consistent Similar N/A Larger Greater
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XxXxxxx Rentcorp Moderate Moderately consistent Similar Higher N/A N/A
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Nat. Equip. Svc. Moderate Limited history N/A Higher Significantly larger Greater
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XXXX Corp. Moderate Limited history Higher Higher Significantly larger Greater
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Rental Svc. Corp. Moderate Inconsistent Higher Higher Significantly larger Greater
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United Rentals Moderate Limited history Higher Higher Significantly larger Greater
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PAGE 13 SUNTRUST EQUITABLE SECURITIES
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COMPARABLE PUBLIC COMPANIES ANALYSIS (CONTINUED)
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HISTORICAL P/E GRAPHS - CORT VS. OTHER RENTAL-RELATED COMPANIES WEEKLY SINCE
JANUARY 1996
(EXCLUDES COMPANIES WITH LESS THAN TWO YEARS OF QUARTERLY EPS HISTORY)
XXXXX RENTS GLOBE BUSINESS RESOURCES
[GRAPHIC] [GRAPHIC]
RENT-A-CENTER (1) RENT-WAY (2)
[GRAPHIC] [GRAPHIC]
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PAGE 14 SUNTRUST EQUITABLE SECURITIES
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COMPARABLE PUBLIC COMPANIES ANALYSIS (CONTINUED)
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HISTORICAL P/E GRAPHS - CORT VS. OTHER RENTAL-RELATED COMPANIES
WEEKLY SINCE JANUARY 1996
(EXCLUDES COMPANIES WITH LESS THAN TWO YEARS OF QUARTERLY EPS HISTORY)
ELECTRO RENT XxXXXXX RENTCORP
[GRAPHIC] [GRAPHIC]
RENTAL SERVICE CORPORATION
[GRAPHIC]
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PAGE 15 SUNTRUST EQUITABLE SECURITIES
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COMPARABLE PUBLIC COMPANIES ANALYSIS (CONTINUED)
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COMPARABLE STOCK PERFORMANCE GRAPHS
DAILY SINCE MARCH 23, 1998
[GRAPHIC] [GRAPHIC]
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PAGE 16 SUNTRUST EQUITABLE SECURITIES
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COMPARABLE PUBLIC COMPANIES ANALYSIS (CONTINUED)
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COMPARABLE STOCK PERFORMANCE GRAPHS
DAILY SINCE MARCH 23, 1998
[GRAPHIC] [GRAPHIC]
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PAGE 17 SUNTRUST EQUITABLE SECURITIES
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CONSUMER RENTAL SECTOR OVERVIEW
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(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE)
SUMMARY OF FINANCIAL AND STATISTICAL DATA
TOTAL MARKET CAP AS A
MULTIPLE OF TR12:
----------------------------- 1999 P/E
3/23/99 EQUITY TOTAL AS A % OF
CLOSING MARKET MARKET NET TR12 EPS CY1998 CY1999 BOOK TRENDLINE
COMPANY NAME PRICE VALUE CAPITAL REVENUES EBITDA EBIT P/E P/E (1) P/E (1) VALUE GROWTH (1)
--------------------------------- ----------------------------- ------------------ -------------------------- --------- ----------
CORT BUSINESS SERVICES $15.63 $204,342 $303,642 $308,352 $59,514 $51,861 $1.89 $1.92 $2.20 $169,189 16.0%
1.0x 5.1x 5.9x 8.3x 8.1x 7.1x 1.2x 44.4%
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XXXXX RENTS 14.94 306,601 358,553 363,091 45,621 37,379 1.00 1.04 1.15 169,936 16.7%
1.0x 7.9x 9.6x 14.9x 14.4x 13.0x 1.8x 77.8%
GLOBE BUSINESS RESOURCES 12.63 58,850 120,599 139,355 15,126 11,261 0.93 1.06 1.25 38,935 18.3%
0.9x 8.0x 10.7x 13.6x 11.9x 10.1x 1.5x 55.3%
RAINBOW RENTALS 9.75 57,776 57,982 61,220 8,697 6,938 0.70 0.70 0.77 25,777 18.0%
0.9x 6.7x 8.4x 13.9x 13.9x 12.7x 2.2x 70.3%
RENT-A-CENTER 26.00 625,943 1,061,451 551,721 94,244 72,927 1.20 1.23 1.53 148,879 24.1%
1.9x 11.3x 14.6x 21.7x 21.1x 17.0x 4.2x 70.4%
RENT-WAY 24.00 507,827 715,989 470,954 26,671 21,329 0.34 1.12 1.39 238,383 27.4%
1.5x 26.8x 33.6x N/M 21.5x 17.3x 2.1x 63.0%
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MINIMUM MULTIPLE EXCLUDING CORT 0.9x 6.7x 8.4x 13.6x 11.9x 10.1x 1.5x 55.3%
MAXIMUM MULTIPLE EXCLUDING CORT 1.9x 26.8x 33.6x 21.7x 21.5x 17.3x 4.2x 77.8%
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(1) Earnings and trendline growth estimates are provided by I/B/E/S and Xxxx's.
Calendarized where appropriate.
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PAGE 18 SUNTRUST EQUITABLE SECURITIES
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CONSUMER RENTAL SECTOR OVERVIEW (CONTINUED)
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(Dollar amounts in thousands except per share)
SUMMARY OPERATIONAL RESULTS
NET REVENUES EBITDA MARGIN (1) NET INCOME
------------------------------------------------------------ DEBT/TOTAL --------------------------
TR12 CAGR (2) TR12 AVG. (3) CAPITALIZATION TR12 CAGR (2)
-------------- ----------- -------------- ----------- -------------- ----------- -----------
CORT BUSINESS SERVICES $308,352 26.6% 19.3% 18.1% 37.0% $25,419 89.5%
XXXXX XXXXX 363,091 14.3% 12.6% 10.2% 23.4% 20,392 18.0%
GLOBE BUSINESS 139,355 43.7% 10.9% 13.3% 61.3% 4,340 22.2%
RESOURCES
RAINBOW 61,220 14.0% 14.2% 14.2% 0.8% 3,120 48.0%
RENTALS
RENT-A-CENTER 551,721 57.7% 17.1% 17.4% 30.1% 29,928 55.4%
RENT-WAY 470,954 57.5% 5.7% 5.8% 46.6% 6,829 (10.1%)
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CORT'S RANK ---- 4 1 1 4 ---- 1
AVERAGE $317,268 37.5% 12.1% 12.2% 32.5% $12,922 26.7%
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RETURN ON
AVG.
EBIT EBIT MARGIN RETURN ON AVG. EQUITY ASSETS
---------------------------- -------------------------- --------------------------- ---------------------
TR12 CAGR (2) TR12 AVG. (3) TR12 AVG. (3) TR12 AVG. (3)
-------------- ----------- ------------ ----------- ------------- ----------- ----------- ---------
CORT BUSINESS SERVICES $51,861 31.6% 16.8% 15.7% 16.0% 16.0% 8.3% 8.1%
XXXXX XXXXX 37,379 19.1% 10.3% 9.5% 12.5% 14.0% 8.0% 8.3%
GLOBE BUSINESS 11,261 12.5% 8.1% 11.2% 11.7% 12.8% 4.0% 5.1%
RESOURCES
RAINBOW 6,938 38.2% 11.3% 10.3% 21.6% 26.0% 9.8% 9.3%
RENTALS
RENT-A-CENTER 72,927 52.3% 13.2% 13.7% 19.8% 18.2% 3.2% 9.3%
RENT-WAY 21,329 (0.4%) 4.5% 4.2% 2.8% 6.0% 1.4% 2.9%
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CORT'S RANK ---- 3 1 1 3 3 2 4
AVERAGE $29,967 24.3% 9.5% 9.8% 13.7% 15.4% 5.3% 7.0%
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------------
(1) EBITDA excludes rental merchandise depreciation.
(2) Computed over the previous three fiscal years.
(3) Average margin for the previous three fiscal years and the trailing 12
months.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PAGE 19 SUNTRUST EQUITABLE SECURITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CONSUMER RENTAL SECTOR OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
HISTORICAL STOCK PRICE PERFORMANCE
CLOSING STOCK PRICE
-------------------------------- AVERAGE DAILY DOLLAR PERCENTAGE
COMPANY TICKER 3/23/98 3/23/99 VOLUME VARIANCE VARIANCE
---------------------------- -------------- -------------- ---------------- --------------- --------------- ---------------
CORT BUSINESS SERVICES CBZ/NYSE $44.44 $15.63 43,015 (28.81) (64.8%)
XXXXX XXXXX (1) RNT/NYSE 23.44 14.94 39,018 (8.50) (36.3%)
GLOBE BUSINESS RESOURCES GLBE/Nasdaq 13.38 12.63 5,638 (0.75) (5.6%)
RAINBOW RENTALS (2) RBOW/Nasdaq 10.00 9.75 6,256 (0.25) (2.5%)
RENT-A-CENTER RCII/Nasdaq 25.25 26.00 108,589 0.75 3.0%
RENT-WAY (3) RWY/NYSE 23.25 24.00 94,887 0.75 3.2%
-----------------------------------------------------------------------------------------------------------------------------------
AVERAGE (7.6%)
-----------------------------------------------------------------------------------------------------------------------------------
------------
(1) Xxxxx Xxxxx completed a secondary offering of 2.5 million shares on April
28, 1998, priced at $20.13 per share.
(2) Rainbow Rentals completed an initial public offering of 2.25 million shares
on June 4, 1998, priced at $10.00 per share.
(3) Rent-Way issued approximately 10.0 million shares in the acquisition of
Home Choice Holdings.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PAGE 20 SUNTRUST EQUITABLE SECURITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CONSUMER RENTAL SECTOR OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
HISTORICAL MARKET CAPITALIZATION
MARKET VALUE (000'S)
CLOSING STOCK PRICE --------------------------------------------------------
------------------------- DOLLAR PERCENTAGE
COMPANY TICKER 3/23/98 3/23/99 3/23/98 3/23/99 VARIANCE VARIANCE
--------------------------- ------------ ------------ ---------- ------------ ------------ ----------- ------------
CORT BUSINESS SERVICES CBZ/NYSE $44.44 $15.63 $577,623 $204,342 ($373,281) (64.6%)
XXXXX XXXXX (1) RNT/NYSE 23.44 14.94 445,005 306,601 (138,404) (31.1%)
GLOBE BUSINESS RESOURCES GLBE/Nasdaq 13.38 12.63 60,835 58,850 (1,985) (3.3%)
RAINBOW RENTALS (2) RBOW/Nasdaq 10.00 9.75 59,257 57,776 (1,481) (2.5%)
RENT-A-CENTER RCII/Nasdaq 25.25 26.00 629,422 625,943 (3,479) (0.6%)
RENT-WAY (3) RWY/NYSE 23.25 24.00 253,063 507,827 254,765 100.7%
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL/AVERAGE $1,447,582 $1,556,997 $109,415 7.6%
-----------------------------------------------------------------------------------------------------------------------------------
------------
(1) Xxxxx Xxxxx completed a secondary offering of 2.5 million shares on April
28, 1998, priced at $20.13 per share.
(2) Rainbow Rentals completed an initial public offering of 2.25 million shares
on June 4, 1998, priced at $10.00 per share.
(3) Rent-Way issued approximately 10.0 million shares in the acquisition of
Home Choice Holdings.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PAGE 21 SUNTRUST EQUITABLE SECURITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUIPMENT RENTAL SECTOR OVERVIEW
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE)
SUMMARY FINANCIAL AND STATISTICAL MARKET DATA
TOTAL FIRM VALUE AS A 1999 P/E
MULTIPLE OF TR12: EQUITY VALUE AS A MULTIPLE OF: AS A %
3/23/99 TOTAL EQUITY ----------------------------- ------------------------------------- OF
CLOSING FIRM MARKET NET TR12 CY1998 CY1999 BOOK TRENDLINE
COMPANY NAME PRICE VALUE VALUE REVENUES EBITDA EBIT P/E P/E (1) P/E (1) VALUE GROWTH
(1)
---------------------- -------------------- ---------------------------------------- --------- ----------------- --------- ---------
CORT BUSINESS SERVICES $15.63 $303,642 $204,342 $308,352 $59,514 $51,861 $1.89 $1.92 $2.20 $169,189 16.0%
1.0x 5.1x 5.9x 8.3x 8.1x 7.1x 1.2x 44.4%
------------------------------------------------------------------------------------------------------------------------------------
ELECTRO RENT 10.00 421,542 244,542 307,706 68,461 63,811 1.13 N/A N/A 182,354 N/A
1.4x 6.2x 6.6x 8.8x N/A N/A 1.3x N/A
XxXXXXX RENTCORP 18.25 355,516 255,516 134,627 48,116 46,251 1.60 1.67 1.97 101,049 20.0%
2.6x 7.4x 7.7x 11.4x 10.9x 9.3x 1.2x 46.3%
NATIONAL EQUIPMENT 9.13 679,686 220,112 330,487 79,027 65,484 0.75 0.68 0.85 131,839 22.0%
SERVICES 2.1x 8.6x 10.4x 12.2x 13.4x 10.7x 1.7x 48.8%
XXXX CORP. 5.56 531,032 117,732 385,861 57,928 46,917 0.68 (0.23) 0.63 96,772 25.8%
1.4x 9.2x 11.3x 8.2x N/M 8.8x 1.2x 34.2%
RENTAL SERVICE CORP. (2) 16.00 1,194,686 385,974 578,474 122,077 101,500 1.32 1.32 1.58 417,485 22.8%
2.1x 9.8x 11.8x 12.1x 12.1x 10.1x 0.9x 44.4%
UNITED RENTALS 26.63 3,197,641 1,883,672 1,600,486 291,237 243,211 1.24 1.24 1.58 1,078,010 28.6%
2.0x 11.0x 13.1x 21.5x 21.5x 16.9x 1.7x 58.9%
-----------------------------------------------------------------------------------------------------------------------------------
MINIMUM MULTIPLE EXCLUDING CORT 1.4x 6.2x 6.6x 8.2x 10.9x 8.8x 0.9x 34.2%
MAXIMUM MULTIPLE EXCLUDING CORT 2.6x 11.0x 13.1x 21.5x 21.5x 16.9x 1.7x 58.9%
-----------------------------------------------------------------------------------------------------------------------------------
------------
(1) Earnings and trendline growth estimates provided by I/B/E/S and Xxxx's.
Calendarized where appropriate.
(2) Pending acquisition of NationsRent, Inc.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PAGE 22 SUNTRUST EQUITABLE SECURITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUIPMENT RENTAL SECTOR OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(dollar amounts in thousands except per share data)
SUMMARY OPERATIONAL RESULTS
NET REVENUES EBITDA EBITDA MARGINS (1) EBIT
------------------------- --------------------------- ------------------------ -------------------------
TR12 CAGR (2) TR12 CAGR (2) TR12 AVG. (3) TR12 CAGR (2)
------------- ----------- ------------- ----------- ------------ ----------- ------------- -----------
CORT BUSINESS SERVICES $308,352 26.6% $59,514 31.8% 19.3% 18.1% $51,861 31.6%
ELECTRO RENT 307,706 34.5% 68,461 29.6% 22.2% 26.4% 63,811 28.9%
XXXXXXX RENTCORP 134,627 37.6% 48,116 31.4% 35.7% 35.5% 46,251 31.8%
NATIONAL EQUIPMENT 330,487 N/A 79,027 N/A 23.9% 23.1% 65,484 N/A
SERVICES
XXXX CORP. 385,861 95.0% 57,928 113.5% 15.0% 11.3% 46,917 104.8%
RENTAL SERVICE CORP. 578,474 112.3% 122,077 153.6% 21.1% 18.8% 101,500 171.5%
UNITED 1,600,486 112.5% 291,237 123.5% 18.2% 17.2% 243,211 123.0%
RENTALS
------------------------------------------------------------------------------------------------------------------------------------
CORT'S RANK ---- 6 ---- 4 5 5 ---- 5
AVERAGE $520,856 69.7% $103,766 80.6% 22.2% 21.5% $88,434 81.9%
------------------------------------------------------------------------------------------------------------------------------------
EBIT MARGINS RETURN ON AVG. EQUITY RETURN ON AVG. ASSETS
------------------------- -------------------------- DEBT / TOTAL --------------------------
TR12 AVG. (3) TR12 AVG. (3) CAPITALIZATION TR12 AVG. (3)
------------- ----------- -------------- --------- ------------- ----------- -------------
CORT BUSINESS SERVICES 16.8% 15.7% 16.0% 16.0% 37.0% 8.3% 8.1%
ELECTRO RENT 20.7% 25.3% 16.1% 18.6% 49.3% 6.5% 10.0%
XXXXXXX RENTCORP 34.4% 34.2% 23.4% 22.3% 49.7% 8.9% 9.3%
NATIONAL EQUIPMENT SERVICES 19.8% 18.8% 19.7% 24.4% 77.7% 4.0% 5.0%
XXXX CORP. 12.2% 9.2% (4.0%) 20.4% 78.6% (0.3%) (1.5%)
RENTAL SERVICE CORP. 17.5% 15.1% 7.0% 7.4% 66.0% 2.2% 2.6%
UNITED 15.2% 14.4% 7.7% 7.5% 42.4% 3.1% 4.4%
RENTALS
------------------------------------------------------------------------------------------------------------------------
CORT'S RANK 5 4 4 5 1 2 3
AVERAGE 19.5% 19.0% 12.3% 16.7% 57.2% 4.7% 5.4%
------------------------------------------------------------------------------------------------------------------------
(1) EBITDA excludes rental merchandise depreciation.
(2) Computed over the previous three fiscal years.
(3) Average margin for the previous three fiscal years and the trailing 12
months.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PAGE 23 SUNTRUST EQUITABLE SECURITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUIPMENT RENTAL SECTOR OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
HISTORICAL STOCK PRICE PERFORMANCE
CLOSING STOCK
PRICE AVG DAILY
------------------------------- DOLLAR PERCENTAGE TRADING
COMPANY TICKER 3/23/98 3/23/99 CHANGE CHANGE VOLUME
-------------------------------- -------------- --------------- --------------- ---------------- -------------- ------------------
CORT BUSINESS SERVICES CBZ/NYSE $44.44 $15.63 ($28.81) (64.8%) 43,015
ELECTRO RENT (1) ELRC/NASDAQ 22.00 10.00 (12.00) (54.5%) 33,167
XxXXXXX RENTCORP MGRC/NASDAQ 19.94 18.25 (1.69) (8.5%) 18,795
NATIONAL EQUIPMENT SERVICES (2) NSV/NYSE 13.50 9.13 (4.38) (32.4%) 36,357
XXXX CORP. (3) NFF/NYSE 14.00 5.56 (8.44) (60.3%) 52,925
RENTAL SERVICE CORP. (4) RSV/NYSE 21.63 16.00 (5.63) (26.0%) 121,175
UNITED RENTALS (5) URI/AMEX 21.94 26.63 4.69 21.4% 282,834
---------------------------------------------------------------------------------------------------------------
AVERAGE (32.2%)
---------------------------------------------------------------------------------------------------------------
------------
(1) Electro Rent completed a 2-for-1 stock split on May 13, 1998.
(2) National Equipment Services completed an initial public offering on July
14, 1998, priced at $13.50 per share.
(3) Xxxx Corp. completed an initial public offering on May 22, 1998, priced at
$14.00 per share.
(4) Rental Service Corp. completed a secondary offering of 2.75 million shares
on August 13, 1998, priced at $27.31 per share.
(5) United Rentals completed a secondary offering of 8.0 million shares on
March 4, 1999, priced at $30.00 per share. In addition, the Company has
continually used its stock as currency for numerous acquisitions over the
last year.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PAGE 24 SUNTRUST EQUITABLE SECURITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUIPMENT RENTAL SECTOR OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
HISTORICAL MARKET VALUE
CLOSING STOCK PRICE MARKET VALUE (000S)
---------------------- ---------------------------------------------------------------
DOLLAR PERCENTAGE
COMPANY TICKER 3/23/98 3/23/99 3/23/98 3/23/99 CHANGE CHANGE
--------------------------- ----------- ---------- ---------- -------------- -------------- -------------- ------------
CORT BUSINESS SERVICES CBZ/NYSE $44.44 $15.63 $577,623 $204,342 ($373,281) (64.6%)
ELECTRO RENT (1) ELRC/NASDAQ 22.00 10.00 530,643 244,542 (286,100) (53.9%)
XXXXXXX RENTCORP MGRC/NASDAQ 19.94 18.25 281,276 255,516 (25,760) (9.2%)
NATIONAL EQUIPMENT SERVICES NSV/NYSE 13.50 9.13 316,554 220,112 (96,441) (30.5%)
(2)
XXXX CORP. (3) NFF/NYSE 14.00 5.56 296,315 117,732 (178,583) (60.3%)
RENTAL SERVICE CORP. (4) RSV/NYSE 21.63 16.00 439,277 385,974 (53,302) (12.1%)
UNITED RENTALS (5) URI/AMEX 21.94 26.63 731,480 1,883,672 1,152,192 157.5%
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL/AVERAGE $3,173,167 $3,311,891 ($138,724) (10.4%)
-----------------------------------------------------------------------------------------------------------------------------------
(1) Electro Rent completed a 2-for-1 stock split on May 13, 1998.
(2) National Equipment Services completed an initial public offering on July
14, 1998, priced at $13.50 per share.
(3) Xxxx Corp. completed an initial public offering on May 22, 1998, priced at
$14.00 per share.
(4) Rental Service Corp. completed a secondary offering of 2.75 million shares
on August 13, 1998, priced at $27.31 per share.
(5) United Rentals completed a secondary offering of 8.0 million shares on
March 4, 1999, priced at $30.00 per share. In addition, the Company has
continually used its stock as currency for numerous acquisitions over the
last year.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PAGE 25 SUNTRUST EQUITABLE SECURITIES
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
DISCOUNTED CASH FLOW ANALYSIS
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
DISCOUNTED CASH FLOW ANALYSIS
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
- The discounted cash flow analysis presents a valuation for the equity of
the Company based upon projected cash flows. The analysis seeks to evaluate
the intrinsic value of a business without considering a sale or other
transaction with the Company.
- The analysis is presented using projections provided by the Company for the
next five years.
- The final year of projections is utilized to calculate the "terminal
value," an estimate of the value of the Company at the end of the
projection period. This value is estimated by using a range of EBITDA
multiples. The range is based upon current and recent trading multiples for
the Company.
- The projections are utilized to calculate free cash flow that is discounted
to the present time utilizing discount rates ranging from 9.3% to 11.3%.
The discount rates reflect the uncertainty of the projections and are
estimated from the Company's theoretical cost of capital.
- Inherent in any discounted cash flow analysis are the use of a number of
assumptions, including the accuracy of projections, and the subjective
determination of an appropriate terminal value and discount rate to apply
to the projected cash flows of the entity under examination. Variations in
any of these assumptions or judgments could significantly alter the results
of a discounted cash flow analysis.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PAGE 26 SUNTRUST EQUITABLE SECURITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
DISCOUNTED CASH FLOW ANALYSIS (CONTINUED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
DISCOUNTED CASH FLOW ANALYSIS
1999 2000 2001 2002 2003
---- ---- ---- ---- ----
Earnings Before Interest & Taxes $58,200 $63,900 $70,400 $75,900 $81,800
Income Tax Effect 42.2% 42.2% 42.2% 42.2% 42.2%
------- ------- ------- ------- -------
Net Operating Earnings Less Taxes 33,640 36,934 40,691 43,870 47,280
Plus Depreciation & Amortization (3) 9,100 9,600 10,200 10,800 11,500
------- ------- ------- ------- -------
Cash Flow From Operations 42,740 46,534 50,891 54,670 58,780
Net Change in Other Assets and (3,052) 1,000 (2,200) (3,000) (3,200)
Liab (4)
Capital Expenditures (10,100) (10,900) (11,700) (12,700) (13,700)
------- ------- ------- ------- -------
Free Cash Flow $29,588 $36,634 $36,991 $38,970 $ 41,880
------- ------- ------- ------- -------
------- ------- ------- ------- -------
TERMINAL VALUE AS A MULTIPLE OF EBITDA (1)
5.1 X 5.7 X 6.3 X 6.9 X 7.5 X
----- ----- ----- ----- -----
$475,830 $531,810 $ 587,790 $ 643,770 $699,750
Net Obligations (2) $90,800
--------------------------------------------------------------------------------
PRESENT VALUE OF EQUITY (5)
DISCOUNT TERMINAL VALUE MULTIPLE
RATE (6) 5.1 X 5.7 X 6.3 X 6.9 X 7.5 X
-------- ----- ----- ----- ----- -----
9.3% 354,206 390,069 425,933 461,796 497,660
10.3% 336,905 371,172 405,439 439,706 473,974
11.3% 320,475 353,230 385,986 418,741 451,497
9.3% 25.86 28.48 31.10 33.72 36.33
10.3% 24.60 27.10 29.60 32.10 34.61
11.3% 23.40 25.79 28.18 30.57 32.96
--------------------------------------------------------------------------------
(1) STES estimate.
(2) Includes long-term debt as of 12/31/98.
(3) Non-rental depreciation.
(4) Net of rental depreciation.
(5) Adjusted to deduct outstanding obligations.
(6) Based on estimated cost of capital.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PAGE 27 SUNTRUST EQUITABLE SECURITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
LEVERAGED BUYOUT ANALYSIS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
LEVERAGED BUYOUT ANALYSIS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
- The leveraged buyout model presents an analysis of the going private value
of CORT. The analysis focuses upon the price that could be paid for CORT's
equity in a leveraged transaction while achieving an adequate internal rate
of return to the capital providers.
- The analysis is presented utilizing the operating assumptions from the
projections provided by XXXX's management. The transaction is assumed to be
structured as a recapitalization with no creation of goodwill.
- The capital structure assumptions are based upon our understanding of the
capital structure assumed by the Affiliated Shareholders. Existing
shareholders receive $2.50 of Senior Preferred stock for each share of
common. The equity sponsors invest in a Junior Preferred stock and receive
80% of the fully-diluted equity of the Company. Management invests in
common stock and receives 20% of the fully-diluted equity of the Company.
- The senior and subordinated debt are assumed to require coupon rates of
8.5% and 11.0%, respectively. The senior preferred stock issued to existing
shareholders is assumed to receive a 12% payment-in-kind dividend. The
junior preferred stock is assumed to have a blended 12.73% payment-in-kind
dividend.
- The return levels are calculated over a five-year time period with an
assumed exit valuation ranging from 7.0x to 8.0x EBITDA, a range that
approximates the assumed acquisition valuation multiple. This analysis
suggests that the equity provided by the Affiliated Shareholders would
receive an internal rate of return between 27.1% and 33.1%. Based upon
XXXX's judgment that the returns implied by this transaction are in line
with the return requirements expected by equity investors in leveraged
transactions of this type.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PAGE 28 SUNTRUST EQUITABLE SECURITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
LEVERAGED BUYOUT ANALYSIS (CONTINUED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
LBO SENSITIVITY ANALYSIS
TOTAL BLENDED
EQUITY IRR
--------------------
SCENARIO ASSUMPTIONS 7.0 X 8.0 X
----------------------- ------------------------------------------------------------------------ --------- --------
BASE CASE Management Estimates. 27.1% 33.1%
REVENUE GROWTH CASE
AGGRESSIVE Furniture rental revenue and furniture sales revenue growth are 10% 28.7% 34.7%
higher than Management Estimates in FY00 - FY03.
CONSERVATIVE Furniture rental revenue and furniture sales revenue growth are 10% 25.5% 31.7%
lower than Management Estimates in FY00 - FY03.
GROSS MARGIN CASE
AGGRESSIVE Gross margins are 1.0% better than Management Estimates in FY00 - FY03. 30.1% 36.0%
CONSERVATIVE Gross margins are 1.0% worse than Management Estimates in FY00 - FY03. 23.7% 30.1%
CONSOLIDATED CASES
AGGRESSIVE Both Aggressive Cases above are assumed. 31.7% 37.4%
CONSERVATIVE Both Conservative Cases above are assumed. 22.1% 28.6%
FINANCING CASE Senior Term Debt is assumed to have an 8.0% interest rate and Senior 27.7% 33.6%
Subordinated Debt 10.0%.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PAGE 29 SUNTRUST EQUITABLE SECURITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BASE CASE
--------------------------------------------------------------------------------
EXIT IRR
USES OF FUNDS SOURCES OF FUNDS % 7.0 x 8.0 x
-------------------------------------- -------------------------------------------------- ------- ----- ------
Net Purchase Price (1) $362,960 WC Revolver $ 0 0.0%
Debt Retired 90,800 Debt Assumed 0 0.0%
Debt Assumed 0 Senior Term Debt 85,260 17.9% 8.5% 8.5%
Cash Infusion 0 Senior Subordinated Debt 250,000 52.6% 11.0% 11.0%
Transaction Costs 21,500 Seller Note 0 0.0%
-------- Senior Preferred PIK 70,000 14.7% 12.0% 12.0%
TOTAL USES $475,260 Junior Preferred PIK 65,000 13.7% 31.5% 38.4%
======== Common Equity:
Sponsors 0 0.0%
New Equity 5,000 1.1% 46.9% 60.3%
Other Equity 0 0.0%
Offer Price per Share $ 26.50 Excess Cash on Balance Sheet 0 0.0%
Shares Outstanding 13,095 -------- -----
Net Value of Options $ 15,953 TOTAL SOURCES $475,260 100.0%
Market Price as of 03/23/99 $ 15.63
Implied Premium to Market 69.6%
Blended Equity 107,264 22.6% 27.1% 33.1%
Un- Fully-
ACQUISITION MULTIPLES (2) EQUITY ALLOCATION Diluted Diluted
------------------------------------ ------------------------- -------- -------
1998 EBITDA 7.5 x Senior Subordinated Debt * 0.0%
Est.1999 EBITDA 6.7 x Junior Preferred * 80.0%
1998 P/E 14.0 x Seller Note * 0.0%
1999 P/E #N/A x Senior Preferred * 0.0%
To Closing Book 2.1 x Sponsors 0.0% 0.0%
------------------------------------ New Equity 100.0% 20.0%
EXIT YEAR 2003 Other Equity 0.0% 0.0%
----- ------
EXIT EBITDA MULTIPLE 7.0 x TOTAL ALLOCATION 100.0% 100.0%
EXIT EBITDA MULTIPLE 8.0 x ----- ------
----- ------
Use WC Revolver YES = 1, NO = 0 0 Years of PIK
Retire Existing Debt YES = 1, NO = 0: 1 ------------
Junior Preferred PIK YES = 1, NO = 0 1 5
Senior Preferred PIK YES = 1, NO = 0 1 5
(1) Of the Net Purchase Price, approximately $32.7 million represents Senior
Preferred Stock issued to existing shareholders.
(2) Adjusted For Cash Reduction
--------------------------------------------------------------------------------
PAGE 30 SUNTRUST EQUITABLE SECURITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BASE CASE
(Historical FYE December 31)
Thousands of Dollars ---------------------------------------- ------------------------------------------
HISTORICAL PROJECTED
---------------------------------------- ------------------------------------------
INCOME STATEMENT ASSUMPTIONS 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Furniture Rental Growth -- -- -- -- 23.8% 12.1% 12.7% 7.0% 8.0% 8.0% 8.0%
Furniture Sales Growth -- -- -- -- 17.4% 6.2% 11.9% 7.9% 9.0% 9.0% 9.1%
---- --- --- ---- ---- ---- ---- ---- ---- ---- ----
Total Revenue Growth -- -- -- -- 22.7% 11.1% 12.6% 7.2% 8.2% 8.2% 8.2%
Furniture Rental Cost of Goods Sold -- -- -- 19.3% 19.2% 18.0% 18.5% 18.3% 18.2% 18.2% 18.2%
Furniture Sales Cost of Goods Sold -- -- -- 59.2% 60.5% 60.9% 60.9% 61.0% 60.9% 61.0% 61.0%
---- --- --- ---- ---- ---- ---- ---- ---- ---- ----
Total Cost of Goods Sold -- -- -- 26.5% 26.4% 25.1% 25.5% 25.4% 25.4% 25.4% 25.5%
---- --- --- ---- ---- ---- ---- ---- ---- ---- ----
GROSS MARGIN -- -- -- 73.5% 73.6% 74.9% 74.5% 74.6% 74.6% 74.6% 74.5%
Operating Expenses/Sales:
Selling, General and Administrative -- -- -- 56.3% 55.2% 55.8% 55.7% 55.5% 55.3% 55.3% 55.3%
PPE Depreciation and Amortization -- -- -- 2.0% 2.2% 2.6% 2.5% 2.5% 2.5% 2.4% 2.4%
---- --- --- ---- ---- ---- ---- ---- ---- ---- ----
OPERATING MARGIN -- -- -- 15.1% 16.1% 16.5% 16.2% 16.6% 16.9% 16.9% 16.8%
Interest (Coupon) Rates:
Existing Debt .. .. .. .. .. .. 8.00% 8.00% 8.00% 8.00% 8.00%
Overflow Debt .. .. .. .. .. .. 8.00% 8.00% 8.00% 8.00% 8.00%
Senior Term Debt .. .. .. .. .. .. 8.50% 8.50% 8.50% 8.50% 8.50%
WC Revolver .. .. .. .. .. .. 8.50% 8.50% 8.50% 8.50% 8.50%
Senior Subordinated Debt .. .. .. .. .. .. 11.00% 11.00% 11.00% 11.00% 11.00%
Junior Preferred .. .. .. .. .. .. 12.73% 12.73% 12.73% 12.73% 12.73%
Seller Note .. .. .. .. .. .. 0.00% 0.00% 0.00% 0.00% 0.00%
Senior Preferred .. .. .. .. .. .. 12.00% 12.00% 12.00% 12.00% 12.00%
Miscellaneous Income as a % of Sales .. .. .. .. .. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Taxes Rates:
Federal Tax Rate .. .. .. .. .. .. 42.20% 42.20% 42.20% 42.20% 42.20%
Effective Tax Rate .. .. .. 41.41% 41.15% 42.20% 47.71% 46.30% 45.33% 44.78% 44.37%
PAGE 31 SUNTRUST EQUITABLE SECURITIES
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--------------------------------------------------------------------------------
BASE CASE
(Historical FYE December 31)
Thousands of Dollars
------------------------------------------- -----------------------------------
HISTORICAL PROJECTED
------------------------------------------- -----------------------------------
BALANCE SHEET ASSUMPTIONS 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Current Assets:
Accounts Receivable/Total
Revenue -- -- -- 4.70% 4.71% 4.57% 4.57% 4.57% 4.57% 4.58% 4.58%
Rental Furniture, net/Rental
Revenue -- -- -- 76.82% 69.27% 71.11% 64.99% 61.04% 57.89% 55.04% 52.48%
Prepaid Expenses/Total
Revenue -- -- -- 1.80% 1.44% 1.86% 1.87% 1.85% 1.85% 1.87% 1.85%
Other Receivables and
Assets/Total Revenue -- -- -- 1.63% 1.11% 1.35% 1.20% 1.12% 1.03% 0.96% 0.88%
Current Liabilities:
Accounts Payable/Total COGS -- -- -- 6.69% 7.31% 4.26% 3.60% 3.58% 3.60% 3.58% 3.54%
Accrued Expenses/Total COGS -- -- -- 44.22% 36.81% 26.27% 25.85% 26.00% 26.04% 25.94% 25.93%
Deferred Revenue and Security
Deposits/Rental Revenue -- -- -- 7.50% 7.26% 7.94% 7.94% 7.95% 7.97% 7.97% 7.97%
OTHER ASSUMPTIONS
Proceeds From Sale of Assets............................................... $0 $0 $0 $0 $0
Book Value of Fixed Assets................................................. 0 0 0 0 0
Net Accounts Receivable.................................................... 0 0 0 0 0
Inventory.................................................................. 0 0 0 0 0
Prepaid Expenses........................................................... 0 0 0 0 0
Other Current Assets #1.................................................... 0 0 0 0 0
Other Current Assets #2.................................................... 0 0 0 0 0
Accounts Payable........................................................... 0 0 0 0 0
Accrued Salaries........................................................... 0 0 0 0 0
Other Accrued Expenses..................................................... 0 0 0 0 0
Other Cur. Liab. #1........................................................ 0 0 0 0 0
Other Cur. Liab. #2........................................................ 0 0 0 0 0
Other Cur. Liab. #3........................................................ 0 0 0 0 0
------- ------- ------- ------- -------
Gain (Loss) on Sale of Assets.............................................. $0 $0 $0 $0 $0
Capital Expenditures.......................................................$10,100 $10,900 $11,700 $12,700 $13,700
Depreciation-Manual Input=1,
Model Calculation=0 1 $9,100 $9,600 $10,200 $10,800 $11,500
Deferred Taxes-Manual Input=1,
Model Calculation=0 1 $0 $0 $0 $0 $0
Working Capital Advance Rates: Receivables 0.0% Transaction Cost Amount @ 5 Years NOL's Existing $0
Inventory 0.0% Goodwill Amortization @ 15 Years
$Ceiling $0 (O=No Limit) Asset Write-Ups @ 5 Years
PAGE 32 SUNTRUST EQUITABLE SECURITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BASE CASE
(Historical FYE December 31)
Thousands of Dollars
--------------------------------------------- ----------------------------------------
HISTORICAL PROJECTED
--------------------------------------------- ----------------------------------------
INCOME STATEMENT 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Furniture Rental Revenue -- -- -- $191,560 $237,212 $265,871 $299,600 $320,600 $346,200 $373,900 $403,800
Furniture Sales Revenue -- -- -- 42,589 50,006 53,093 59,400 64,100 69,900 76,200 83,100
---- ---- ----- -------- ------- -------- -------- ------- -------- -------- --------
Total Revenue -- -- -- $234,149 $287,218 $318,964 $359,000 $384,700 $416,100 $450,100 $486,900
Furniture Rental Cost of
Goods Sold -- -- -- 36,958 45,634 47,862 55,500 58,600 63,000 68,000 73,500
Furniture Sales Cost of
Goods Sold -- -- -- 25,207 30,257 32,354 36,200 39,100 42,600 46,500 50,700
---- ---- ----- -------- ------- -------- -------- ------- -------- -------- --------
Total Cost of Goods Sold -- -- -- 62,165 75,891 80,216 91,700 97,700 105,600 114,500 124,200
---- ---- ----- -------- ------- -------- -------- ------- -------- -------- --------
GROSS MARGIN -- -- -- $171,984 $211,327 $238,748 $267,300 $287,000 $310,500 $335,600 $362,700
Operating Expenses:
Selling, General and
Administrative -- -- -- $131,771 $158,602 $177,955 $200,000 $213,500 $229,900 $248,900 $269,400
PPE Depreciation and
Amortization(1) -- -- -- 4,765 6,417 8,148 9,100 9,600 10,200 10,800 11,500
---- ---- ----- -------- ------- -------- -------- ------- -------- -------- --------
OPERATING PROFIT -- -- -- $35,448 $46,308 $52,645 $58,200 $63,900 $70,400 $75,900 $81,800
EBITDA -- -- -- $40,213 $52,725 $60,793 $67,300 $73,500 $80,600 $86,700 $93,300
% MARGIN -- -- -- 17.2% 18.4% 19.1% 18.7% 19.1% 19.4% 19.3% 19.2%
Miscellaneous Income
(Expense) -- -- -- $0 $0 $0 $0 $0 $0 $0 $0
Gain (Loss) on Assets
Sales -- -- -- 0 0 0 0 0 0 0 0
Asset Write-Up Depreciation -- -- -- 0 0 0 0 0 0 0 0
Transaction Cost Amort. -- -- -- 0 0 0 (4,300) (4,300) (4,300) (4,300) (4,300)
---- ---- ----- -------- ------- -------- -------- ------- -------- -------- --------
EBIT -- -- -- $35,448 $46,308 $52,645 $53,900 $59,600 $66,100 $71,600 $77,500
Interest Expense:
Existing Debt -- -- -- $8,251 $8,374 $7,837 $0 $0 $0 $0 $0
Overflow Debt -- -- -- -- -- -- 0 0 0 0 0
Senior Term Debt -- -- -- -- -- -- 7,247 6,375 4,860 3,242 1,375
WC Revolver -- -- -- -- -- -- 0 0 0 0 0
Senior Subordinated Debt -- -- -- -- -- -- 27,500 27,500 27,500 27,500 27,500
Seller Note -- -- -- -- -- -- 0 0 0 0 0
---- ---- ----- -------- ------- -------- -------- ------- -------- -------- --------
TOTAL INTEREST EXPENSE -- -- -- $8,251 $8,374 $7,837 $34,747 $33,875 $32,360 $30,742 $28,875
E.B.T. -- -- -- $27,197 $37,934 $44,808 $19,153 $25,725 $33,740 $40,858 $48,625
Provision for Income Taxes -- -- -- 11,261 15,608 18,907 9,138 11,911 15,293 18,297 21,575
---- ---- ----- -------- ------- -------- -------- ------- -------- -------- --------
NET INCOME -- -- -- $15,936 $22,326 $25,901 $10,015 $13,814 $18,446 $22,561 $27,050
---- ---- ----- -------- ------- -------- -------- ------- -------- -------- --------
---- ---- ----- -------- ------- -------- -------- ------- -------- -------- --------
Senior Preferred Dividends -- -- -- 0 0 0 8,400 9,408 10,537 11,801 13,218
Junior Preferred Dividends -- -- -- 0 0 0 8,275 9,328 10,516 11,855 13,364
---- ---- ----- -------- ------- -------- -------- ------- -------- -------- --------
NET TO RETAINED EARNINGS -- -- -- $15,936 $22,326 $25,901 ($6,660) ($4,922)($2,607) ($1,095) $469
---- ---- ----- -------- ------- -------- -------- ------- -------- -------- --------
---- ---- ----- -------- ------- -------- -------- ------- -------- -------- --------
----------
(1) Includes Goodwill Amortization.
PAGE 33 SUNTRUST EQUITABLE SECURITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BASE CASE
(Historical FYE December 31)
Thousands of Dollars
--------------------------------------------- ----------------------------------------
HISTORICAL PROJECTED
--------------------------------------------- ----------------------------------------
CASH FLOW STATEMENT 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
NET TO RETAINED EARNINGS -- -- -- $15,936 $22,326 $25,901 ($6,660) ($4,922) ($2,607) ($1,095) $469
Non-Cash Adjustments:
PPE Depreciation and
Amortization............................................................. $9,100 $9,600 $10,200 $10,800 $11,500
Asset Write-Up
Depreciation............................................................. 0 0 0 0 0
Transaction Cost Amort.................................................... 4,300 4,300 4,300 4,300 4,300
Deferred Taxes............................................................ 0 0 0 0 0
Accrued Junior Preferred
Dividends................................................................ 8,275 9,328 10,516 11,855 13,364
Accrued Senior Preferred
Dividends................................................................ 8,400 9,408 10,537 11,801 13,218
------- ------- ------- ------- -------
FUNDS FROM OPERATIONS...................................................... $23,415 $27,714 $32,946 $37,661 $42,850
Net Working Capital Requirements:
Accounts Receivable....................................................... ($1,815) ($1,200) ($1,400) ($1,600) ($1,700)
Rental Furniture, net..................................................... (5,641) (1,000) (4,700) (5,400) (6,100)
Prepaid Expenses.......................................................... (782) (400) (600) (700) (600)
Other Receivables and
Assets................................................................... 0 0 0 0 0
Other Cur. Assets #2...................................................... 0 0 0 0 0
Accounts Payable.......................................................... (117) 200 300 300 300
Accrued Expenses.......................................................... 2,625 1,700 2,100 2,200 2,500
Misc. Reserve............................................................. 0 0 0 0 0
Deferred Revenue and
Security Deposits........................................................ 2,678 1,700 2,100 2,200 2,400
Other..................................................................... 0 0 0 0 0
Other Current
Liabilities #3........................................................... 0 0 0 0 0
------- ------- ------- ------- -------
(INCREASE) IN NET WORKING
CAPITAL.................................................................. ($3,052) $1,000 ($2,200) ($3,000) ($3,200)
CASH FROM OPERATIONS...................................................... $20,363 $28,714 $30,746 $34,661 $39,650
Capital Expenditures.......................................................($10,100)($10,900)($11,700)($12,700)($13,700)
Increase/(Decrease) in WC
Revolver.................................................................. 0 0 0 0 0
Decrease/(Increase) in
Other Assets #1........................................................... 0 0 0 0 0
Decrease/(Increase) in
Other Assets #2........................................................... 0 0 0 0 0
Book Value of Assets Sold.................................................. 0 0 0 0 0
------- ------- ------- ------- -------
CASH AVAILABLE FOR
AMORTIZATION $10,263 $17,814 $19,046 $21,961 $25,950
------- ------- ------- ------- -------
------- ------- ------- ------- -------
PAGE 34 SUNTRUST EQUITABLE SECURITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BASE CASE
(Historical FYE December 31)
Thousands of Dollars
---------------------------------------
PROJECTED
---------------------------------------
1999 2000 2001 2002 2003
DEBT AMORTIZATION SCHEDULE Year # 1 2 3 4 5
----- ----- ----- ----- ----
CASH AVAILABLE FOR AMORTIZATION $10,263 $17,814 $19,046 $21,961 $25,950
Overflow Debt Addition.................................... 0 0 0 0 0
------- ------- ------- ------- -------
Cash For Retirement of Existing Debt...................... $10,263 $17,814 $19,046 $21,961 $25,950
Existing Debt Retired.................................... 0 0 0 0 0
------- ------- ------- ------- -------
Cash For Retirement of Overflow Debt...................... $10,263 $17,814 $19,046 $21,961 $25,950
Overflow Debt Retired.................................... 0 0 0 0 0
------- ------- ------- ------- -------
Cash For Retirement of Senior Term Debt................... $10,263 $17,814 $19,046 $21,961 $25,950
Senior Term Debt Retired................................. (10,263) (17,814) (19,046) (21,961) (16,174)
------- ------- ------- ------- -------
Cash For Retirement of Senior Subordinated Debt........... $0 $0 $0 $0 $9,776
Senior Subordinated Debt Retired......................... 0 0 0 0 (9,776)
------- ------- ------- ------- -------
Cash For Retirement of Junior Preferred................... $0 $0 $0 $0 $0
Junior Preferred Retired................................. 0 0 0 0 0
------- ------- ------- ------- -------
Cash For Retirement of Seller Note........................ $0 $0 $0 $0 $0
Seller Note Retired...................................... 0 0 0 0 0
------- ------- ------- ------- -------
Cash For Retirement of Senior Preferred................... $0 $0 $0 $0 $0
Senior Preferred Retired................................. 0 0 0 0 0
------- ------- ------- ------- -------
CHANGE IN CASH ACCOUNT.................................. $0 $0 $0 $0 $0
------- ------- ------- ------- -------
------- ------- ------- ------- -------
PAGE 35 SUNTRUST EQUITABLE SECURITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BASE CASE
(Historical FYE December 31)
Thousands of Dollars
--------------------------------------------- ----------------------------------------
HISTORICAL PROJECTED
--------------------------------------------- ----------------------------------------
ASSETS 1993 1994 1995 1996 1997 1998 Adjust Closing 1999 2000 2001 2002 2003
------------------------ ---- ---- ---- ---- ---- ---- ------ ------- ---- ---- ---- ---- ----
Current Assets:
Cash & Cash Equivalents -- -- -- $123 $0 $703 $0 $703 $703 $703 $703 $703 $703
Accounts Receivable -- -- -- 11,011 13,521 14,585 14,585 16,400 17,600 19,000 20,600 22,300
Rental Furniture, net -- -- -- 147,161 164,323 189,059 189,059 194,700 195,700 200,400 205,800 211,900
Prepaid Expenses -- -- -- 4,224 4,127 5,918 5,918 6,700 7,100 7,700 8,400 9,000
Other Receivables and
Assets -- -- -- 3,815 3,183 4,300 4,300 4,300 4,300 4,300 4,300 4,300
---- ---- ---- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL CURRENT ASSETS -- -- -- $166,334 $185,154 $214,565 $214,565 $222,803 $225,403 $232,103 $239,803 $248,203
Fixed Assets:
Net PPE -- -- -- $35,667 $38,777 $43,861 $43,861 $44,861 $46,161 $47,661 $49,561 $51,761
Asset Write-Ups -- -- -- 0 0 0 0 0 0 0 0 0 0
Transaction Costs -- -- -- 0 0 0 21,500 21,500 17,200 12,900 8,600 4,300 0
Goodwill -- -- -- 45,198 53,910 74,470 0 74,470 74,470 74,470 74,470 74,470 74,470
---- ---- ---- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL FIXED ASSETS -- -- -- $80,865 $92,687 $118,331 $139,831 $136,531 $133,531 $130,731 $128,331 $126,231
TOTAL ASSETS -- -- -- $247,199 $277,841 $332,896 $354,396 $359,334 $358,934 $362,834 $368,134 $374,434
---- ---- ---- -------- -------- -------- -------- -------- -------- -------- -------- --------
---- ---- ---- -------- -------- -------- -------- -------- -------- -------- -------- --------
PAGE 36 SUNTRUST EQUITABLE SECURITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BASE CASE
(Historical FYE December 31)
Thousands of Dollars
--------------------------------------------- ----------------------------------------
HISTORICAL PROJECTED
--------------------------------------------- ----------------------------------------
LIABILITIES & EQUITY 1993 1994 1995 1996 1997 1998 Adjust Closing 1999 2000 2001 2002 2003
------------------------ ---- ---- ---- ---- ---- ---- ------ ------- ---- ---- ---- ---- ----
Current Liabilities:
Accounts Payable -- -- -- $4,157 $5,551 $3,417 $3,417 $3,300 $3,500 $3,800 $4,100 $4,400
Accrued Expenses -- -- -- 27,491 27,936 21,075 21,075 23,700 25,400 27,500 29,700 32,200
Deferred Revenue and
Security Deposits -- -- -- 14,358 17,217 21,122 21,122 23,800 25,500 27,600 29,800 32,200
---- ---- ---- ------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL CURRENT LIABILITIES -- -- -- $46,006 $50,704 $45,614 $45,614 $50,800 $54,400 $58,900 $63,600 $68,800
Deferred Taxes -- -- -- $10,441 $14,673 $20,819 $0 $20,819 $20,819 $20,819 $20,819 $20,819 $20,819
Long Term Debt:
Existing Debt -- -- -- $65,600 $63,132 $90,800 ($90,800) $0 $0 $0 $0 $0 $0
Overflow Debt -- -- -- 0 0 0 0 0 0 0 0 0
Senior Term Debt -- -- -- 0 0 0 85,260 85,260 74,996 57,182 38,135 16,174 0
WC Revolver -- -- -- 0 0 0 0 0 0 0 0 0 0
Senior Subordinated Debt -- -- -- 0 0 0 250,000 250,000 250,000 250,000 250,000 250,000 240,224
Seller Note -- -- -- 0 0 0 0 0 0 0 0 0
---- ---- ---- ------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL LONG TERM DEBT -- -- -- $65,600 $63,132 $90,800 $335,260 $324,996 $307,182 $288,135 $266,174 $240,224
TOTAL LIABILITIES -- -- -- $122,047 $128,509 $157,233 $401,693 $396,615 $382,401 $367,854 $350,593 $329,843
Net Worth:
Equity - Common -- -- -- $127 $129 $129 $4,871 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000
- Senior -- -- -- 0 0 0 70,000 70,000 78,400 87,808 98,345 110,146 123,364
Preferred
- Junior -- -- -- 0 0 0 65,000 65,000 73,275 82,603 93,120 104,974 118,338
Preferred
Retained Earnings -- -- -- 125,025 149,203 175,534 (362,831)(187,297)(193,956)(198,878)(201,485)(202,580)(202,111)
---- ---- ---- ------- -------- -------- -------- -------- -------- -------- -------- --------
NET WORTH -- -- -- $125,152 $149,332 $175,663 ($47,297)($37,281)($23,467) ($5,020) $17,541 $44,591
---- ---- ---- ------- -------- -------- -------- -------- -------- -------- -------- --------
LIABILITIES & NET WORTH -- -- -- $247,199 $277,841 $332,896 $354,396 $359,334 $358,934 $362,834 $368,134 $374,434
---- ---- ---- ------- -------- -------- -------- -------- -------- -------- -------- --------
---- ---- ---- ------- -------- -------- -------- -------- -------- -------- -------- --------
BALANCE SHEET CHECK => -- -- -- 0 0 0 0 0 0 0 0 0
0 0 0 0 0
PAGE 37 SUNTRUST EQUITABLE SECURITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BASE CASE
(Historical FYE December 31)
Thousands of Dollars
------------------------------- ----------------------------------------------------
HISTORICAL PROJECTED
------------------------------- ----------------------------------------------------
1993 1994 1995 1996 1997 1998 Closing 1999 2000 2001 2002 2003
Year # 0 1 2 3 4 5
---- ---- ---- ---- ---- ----- ------- ---- ---- ---- ---- ----
CAPITALIZATION SUMMARY
Existing Debt -- -- -- -- -- $90,800 $0 $0 $0 $0 $0 $0
Overflow Debt -- -- -- -- -- 0 0 0 0 0 0 0
Senior Term Debt -- -- -- -- -- 0 85,260 74,996 57,182 38,135 16,174 0
WC Revolver -- -- -- -- -- 0 0 0 0 0 0 0
Senior Subordinated Debt -- -- -- -- -- 0 250,000 250,000 250,000 250,000 250,000 240,224
Seller Note -- -- -- -- -- 0 0 0 0 0 0 0
Senior Preferred Equity -- -- -- -- -- 0 70,000 78,400 87,808 98,345 110,146 123,364
Junior Preferred Equity -- -- -- -- -- 0 65,000 73,275 82,603 93,120 104,974 118,338
Common Equity -- -- -- -- -- 175,663 (182,297) (188,956) (193,878)(196,485)(197,580)(197,111)
---- ---- ---- ---- ---- -------- -------- -------- -------- -------- -------- --------
BOOK CAPITALIZATION -- -- -- -- -- $266,463 $287,963 $287,715 $283,715 $283,115 $283,715 $284,815
TOTAL DEBT -- -- -- -- -- $90,800 $335,260 $324,996 $307,182 $288,135 $266,174 $240,224
BOOK EQUITY -- -- -- -- -- $175,663 ($47,297) ($37,281) ($23,467) ($5,020) $17,541 $44,591
RATIO ANALYSIS
Total Debt/Total Capitalization -- -- -- -- -- 34.1% 116.4% 113.0% 108.3% 101.8% 93.8% 84.3%
Senior Debt/Total Capitalization -- -- -- -- -- 34.1% 29.6% 26.1% 20.2% 13.5% 5.7% 0.0%
EBITDA/Interest -- -- -- -- -- -- 1.8 1.9 2.2 2.5 2.8 3.2
EBITDA/Senior Interest -- -- -- -- -- -- 8.8 9.3 11.5 16.6 26.7 67.9
Senior Debt/EBITDA -- -- -- -- -- -- 1.3 1.1 0.8 0.5 0.2 --
Senior Debt/EBIT -- -- -- -- -- -- 1.6 1.4 1.0 0.6 0.2 --
Senior Debt/Operating Cash Flow -- -- -- -- -- -- -- 3.7 2.0 1.2 0.5 --
Total Debt/EBITDA -- -- -- -- -- -- 5.2 4.8 4.2 3.6 3.1 2.6
Total Debt/EBIT -- -- -- -- -- -- 6.3 6.0 5.2 4.4 3.7 3.1
Total Debt/Operating Cash Flow -- -- -- -- -- -- -- 16.0 10.7 9.4 7.7 6.1
PAGE 38 SUNTRUST EQUITABLE SECURITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RETURNS SECTION
BASE CASE Exit Year 2003
Thousands of Dollars
Semi- Fully-
EQUITY ALLOCATION Investment % Diluted Diluted
-------------------------------- ---------- ------ ------- -------
Sponsors $0 0.0% 0.0% 0.0%
New Equity 5,000 100.0% 20.0% 20.0%
Other Equity 0 0.0% 0.0% 0.0%
Senior Preferred 70,000 * 0.0% 0.0%
Seller Note 0 * 0.0% 0.0%
Senior Subordinated Debt Option 250,000 * 0.0% 0.0%
Junior Preferred 65,000 * 80.0% 80.0%
Management Performance Option * * * 0.0%
-------- ----- ----- -----
TOTAL EQUITY ALLOCATION $390,000 100.0% 100.0% 100.0%
Exit Year EBITDA $93,300
x EBITDA Multiple 7.0
--------
EXIT VALUATION $653,100
PLUS: Excess Cash $0
Conversion Costs 0
LESS: Total Remaining Debt (240,224)
Total Preferred (241,702)
--------
NET PROCEEDS TO ALLOCATE $171,174
------------------------------- --------
Sr. Subordinated Share $0
LESS: Conversion Costs 0
Net Subordinated Share $0
------------------------------- --------
Junior Preferred Share $136,939
LESS: Conversion Costs 0
Net Junior Preferred Share $136,939
------------------------------- --------
Seller Note Share $0
------------------------------- --------
Preferred Share $0
------------------------------- --------
Sponsor's Equity Share $0
------------------------------- --------
New Equity Share $34,235
------------------------------- --------
Other Equity Share $0
CLOSE 1999 2000 2001 2002 2003
------- ------ ------ ------ ------ ------
Senior Subordinated Returns
Investment ($250,000) $0 $0 $0 $0 $250,000
Interest 27,500 27,500 27,500 27,500 27,500
Participation 0 0 0 0 0 0
--------- ------- ------- ------- ------- --------
IRR = 11.00% ($250,000) $27,500 $27,500 $27,500 $27,500 $277,500
---------------------------- --------- ------- ------- ------- ------- --------
Junior Preferred Returns
Investment ($65,000) $0 $0 $0 $0 $118,338
Interest 0 0 0 0 0
Participation 0 0 0 0 136,939
--------- ------- ------- ------- ------- --------
IRR = 31.47% ($65,000) $0 $0 $0 $0 $255,277
---------------------------- --------- ------- ------- ------- ------- --------
Senior Preferred Returns
Investment ($70,000) $0 $0 $0 $0 $123,364
Dividends 0 0 0 0 0
Participation 0 0 0 0 0
--------- ------- ------- ------- ------- --------
IRR = 12.00% ($70,000) $0 $0 $0 $0 $123,364
---------------------------- --------- ------- ------- ------- ------- --------
Sponsor Equity Returns
Investment $0 $0 $0 $0 $0 $0
Participation 0 0 0 0 0
--------- ------- ------- ------- ------- --------
IRR = #N/A $0 $0 $0 $0 $0 $0
---------------------------- --------- ------- ------- ------- ------- --------
Management Returns
Investment ($5,000) $0 $0 $0 $0 $0
Participation 0 0 0 0 34,235
--------- ------- ------- ------- ------- --------
IRR = 46.93% ($5,000) $0 $0 $0 $0 $34,235
---------------------------- --------- ------- ------- ------- ------- --------
Other Equity Returns
Investment 0 $0 $0 $0 $0 $0
Participation 0 0 0 0 0
--------- ------- ------- ------- ------- --------
IRR = #N/A 0 0 0 0 0 0
---------------------------- --------- ------- ------- ------- ------- --------
Total Equity Returns
Investment ($107,264) $0 $0 $0 $0 $184,009
Interest $0 $0 $0 $0 $0
Participation $0 $0 $0 $0 $171,174
--------- ------- ------- ------- ------- --------
IRR = 27.06% ($107,264) $0 $0 $0 $0 $355,183
---------------------------- --------- ------- ------- ------- ------- --------
PAGE 39 SUNTRUST EQUITABLE SECURITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RETURNS SECTION
BASE CASE Exit Year 2003
Thousands of Dollars
Semi- Fully-
EQUITY ALLOCATION Investment % Diluted Diluted
-------------------------------- ---------- ------ ------- -------
Sponsors $0 0.0% 0.0% 0.0%
New Equity 5,000 100.0% 20.0% 20.0%
Other Equity 0 0.0% 0.0% 0.0%
Senior Preferred 70,000 * 0.0% 0.0%
Seller Note 0 * 0.0% 0.0%
Senior Subordinated Debt Option 250,000 * 0.0% 0.0%
Junior Preferred 65,000 * 80.0% 80.0%
Management Performance Option * * * 0.0%
-------- ----- ----- -----
TOTAL EQUITY ALLOCATION $390,000 100.0% 100.0% 100.0%
-------------------------------- -------- ----- ----- -----
Exit Year EBITDA $93,300
x EBITDA Multiple 8.0
--------
EXIT VALUATION $746,400
PLUS: Excess Cash $0
Conversion Costs 0
LESS: Total Remaining Debt (240,224)
Total Preferred (241,702)
--------
NET PROCEEDS TO ALLOCATE $264,474
-------------------------------- --------
Sr. Subordinated Share $0
LESS: Conversion Costs 0
--------
Net Subordinated Share $0
-------------------------------- --------
Junior Preferred Share $211,579
LESS: Conversion Costs 0
--------
Net Junior Preferred Share $211,579
-------------------------------- --------
Seller Note Share $0
-------------------------------- --------
Preferred Share $0
-------------------------------- --------
Sponsor's Equity Share $0
-------------------------------- --------
New Equity Share $52,895
-------------------------------- --------
Other Equity Share $0
CLOSE 1999 2000 2001 2002 2003
------- ------ ------ ------ ------ ------
Senior Subordinated Returns
Investment ($250,000) $0 $0 $0 $0 $250,000
Interest 27,500 27,500 27,500 27,500 27,500
Participation 0 0 0 0 0
--------- ------- ------- ------- ------- --------
IRR = 11.00% ($250,000) $27,500 $27,500 $27,500 $27,500 $277,500
---------------------------- --------- ------- ------- ------- ------- --------
Junior Preferred Returns
Investment ($65,000) $0 $0 $0 $0 $118,338
Interest 0 0 0 0 0
Participation 0 0 0 0 211,579
--------- ------- ------- ------- ------- --------
IRR = 38.39% ($65,000) $0 $0 $0 $0 $329,917
---------------------------- --------- ------- ------- ------- ------- --------
Senior Preferred Returns
Investment ($70,000) $0 $0 $0 $0 $123,364
Dividends 0 0 0 0 0
Participation 0 0 0 0 0
--------- ------- ------- ------- ------- --------
IRR = 12.00% ($70,000) $0 $0 $0 $0 $123,364
---------------------------- --------- ------- ------- ------- ------- --------
Sponsor Equity Returns
Investment $0 $0 $0 $0 $0 $0
Participation 0 0 0 0 0
--------- ------- ------- ------- ------- --------
IRR = #N/A $0 $0 $0 $0 $0 $0
---------------------------- --------- ------- ------- ------- ------- --------
Management Returns
Investment ($5,000) $0 $0 $0 $0 $0
Participation 0 0 0 0 52,895
--------- ------- ------- ------- ------- --------
IRR = 60.28% ($5,000) $0 $0 $0 $0 $52,895
---------------------------- --------- ------- ------- ------- ------- --------
Other Equity Returns
Investment 0 $0 $0 $0 $0 $0
Participation 0 0 0 0 0
--------- ------- ------- ------- ------- --------
IRR = #N/A 0 $0 $0 $0 $0 $0
---------------------------- --------- ------- ------- ------- ------- --------
Total Equity Returns
Investment ($107,264) $0 $0 $0 $0 $184,009
Interest $0 $0 $0 $0 $0
Participation $0 $0 $0 $0 $264,474
--------- ------- ------- ------- ------- --------
IRR = 33.12% ($107,264) $0 $0 $0 $0 $448,483
---------------------------- --------- ------- ------- ------- ------- --------
PAGE 40 SUNTRUST EQUITABLE SECURITIES
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
RECENT TRANSACTIONS IN THE RENTAL INDUSTRY
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
RECENT TRANSACTIONS IN THE RENTAL INDUSTRY
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
o We reviewed and analyzed certain publicly-available financial and
structural information for selected merger and acquisition transactions
involving companies in the rental industry.
o We examined these transactions and calculated the multiples of revenues,
EBITDA, EBIT, net income and book value implied by the total transaction
value.
o No company or transaction is identical to CORT or the Proposed Transaction.
None of the transactions involved companies that focus on a rental sector
similar to CORT.
o In addition, several of the companies acquired in these transactions were
engaged in aggressive consolidation strategies prior to their acquisition
that may distort the suggested transaction valuation multiples.
o For these reasons, we do not believe that these transactions, averages or
other statistics derived from these transactions provide a meaningful basis
for determining a range of value for CORT.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Page 41 SunTrust Equitable Securities
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
RECENT TRANSACTIONS IN THE RENTAL INDUSTRY
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
MERGER AND ACQUISITION TRANSACTIONS
TRAILING 12 MONTHS FINANCIALS OF ACQUIRED (IN $MM)
ADJUSTED ---------------------------------------------------
DATE ACQUIROR TRANSACTION LT DEBT TRANSACTION NET BOOK
EFFECTIVE TARGET VALUE ASSUMED VALUE REVENUES EBITDA EBIT INCOME VALUE
---------- ------------------------- --------- -------- --------- --------- -------- -------- --------- --------
1/99 Rental Service Corp.
NationsRent Inc. $366.0 $389.9 $755.9 $236.4 $50.0 $42.7 $12.7 $282.0
12/98 Rent-Way, Inc.
Home Choice Holdings 238.4 48.2 286.6 251.9 7.6 (3.8) (6.3) 134.4
9/98 United Rentals Inc.
US Rentals Inc. 1,060.0 250.0 1,310.0 518.6 92.0 77.6 54.1 282.5
8/98 Renters Choice Inc.
Thorn Americas Inc. 977.2 714.7 1,691.9 913.8 111.5 54.7 0.9 239.8
5/98 EVI Inc.
Weatherford Enterra
Inc. 2,555.0 215.0 2,770.0 1,076.6 319.2 206.5 120.4 926.8
2/98 Alrenco, Inc.
RTO, Inc. 196.5 18.8 215.3 134.1 11.0 1.0 1.2 86.0
2/98 Rent-Way, Inc.
Champion Rentals 70.0 18.0 88.0 80.0 N/A N/A N/A N/A
1/98 Rent-Way, Inc.
Ace TV Rentals 25.0 0.0 25.0 22.0 N/A N/A N/A N/A
7/97 Atlas Copco North
America
Prime Service Inc. 900.0 260.0 1,160.0 340.3 64.0 56.9 13.1 237.4
6/97 TCF Financial Corp.
Winthrop Resources Corp. 340.0 0.0 340.0 78.7 42.4 41.8 15.7 84.8
ADJUSTED TRANSACTION VALUE TRANSACTION VALUE
AS A AS A
MULTIPLE OF MULTIPLE OF
----------------------------- -------------------
DATE ACQUIROR NET BOOK
EFFECTIVE TARGET REVENUES EBITDA EBIT INCOME VALUE
---------- ------------------------- -------- -------- -------- --------- --------
1/99 Rental Service Corp.
NationsRent Inc. 3.2x 15.1x 17.7x 28.9x 1.3x
12/98 Rent-Way, Inc.
Home Choice Holdings 1.1x 37.6x N/M N/M 1.8x
9/98 United Rentals Inc.
US Rentals Inc. 2.5x 14.2x 16.9x 19.6x 3.8x
8/98 Renters Choice Inc.
Thorn Americas Inc. 1.9x 15.2x 30.9x N/M 4.1x
5/98 EVI Inc.
Weatherford Enterra
Inc. 2.6x 8.7x 13.4x 21.2x 2.8x
2/98 Alrenco, Inc.
RTO, Inc. 1.6x 19.6x N/M N/M 2.3x
2/98 Rent-Way, Inc.
Champion Rentals 1.1x N/A N/A N/A N/A
1/98 Rent-Way, Inc.
Ace TV Rentals 1.1x N/A N/A N/A N/A
7/97 Atlas Copco North
America
Prime Service Inc. 3.4x 18.1x 20.4x 68.9x 3.8x
6/97 TCF Financial Corp.
Winthrop Resources Corp. 4.3x 8.0x 8.1x 21.7x 4.0x
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RECENT TRANSACTIONS IN THE RENTAL INDUSTRY (CONTINUED)
-------------------------------------------------------------------------------
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MERGER AND ACQUISITION TRANSACTIONS (CONTINUED)
TRAILING 12 MONTHS FINANCIALS OF ACQUIRED (IN $MM)
ADJUSTED ---------------------------------------------------
DATE ACQUIROR TRANSACTION LT DEBT TRANSACTION NET BOOK
EFFECTIVE TARGET VALUE ASSUMED VALUE REVENUES EBITDA EBIT INCOME VALUE
---------- ------------------------- --------- -------- --------- --------- -------- -------- --------- --------
9/96 Medical Resources Inc.
NMR of America Inc. $40.4 $0.0 $40.4 $26.3 $8.6 $5.4 $2.1 $21.6
8/96 RTO, Inc.
Action TV & Appl. Ren. 45.3 17.8 63.1 57.8 8.7 7.2 6.1 14.4
1/96 Thorn EMI Unit
Advantage Companies 78.5 (4.8) 73.7 73.5 10.6 7.8 5.1 29.8
ADJUSTED TRANSACTION VALUE TRANSACTION VALUE
AS A AS A
MULTIPLE OF MULTIPLE OF
---------------------------- -------------------
DATE ACQUIROR NET BOOK
EFFECTIVE TARGET REVENUES EBITDA EBIT INCOME VALUE
---------- ------------------------- -------- -------- -------- --------- --------
9/96 Medical Resources Inc.
NMR of America Inc. 1.5x 4.7x 7.5x 19.0x 1.9x
8/96 RTO, Inc.
Action TV & Appl. Ren. 1.1x 7.3x 8.8x 7.4x 3.1x
1/96 Thorn EMI Unit
Advantage Companies 1.0x 7.0x 9.4x 15.4x 2.6x
-------------------------------------------------------------------------------------------
MINIMUM 1.0X 4.7X 7.5X 7.4X 1.3X
MAXIMUM 4.3X 37.6X 30.9X 68.9X 4.1X
-------------------------------------------------------------------------------------------
SOURCE: SECURITIES DATA CORPORATION AND COMPANY DOCUMENTS.
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PAGE 43 SUNTRUST EQUITABLE SECURITIES
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PREMIUMS PAID ANALYSIS
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PREMIUMS PAID ANALYSIS
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PREMIUMS OFFERED IN $200MM TO $500MM CASH TRANSACTIONS SINCE 1/1/98 (1)
PREMIUM PRIOR TO ANNOUNCEMENT
------------------------------------------------------------------------------------------
1 DAY 1 WEEK 4 WEEKS 6 MONTHS 1 YEAR
------------ --------------- --------------- -------------- ---------------
MAXIMUM 126.4% 111.6% 121.2% 231.1% 425.4%
MINIMUM (10.7%) (1.1%) (7.2%) (70.1%) (80.8%)
MEDIAN 25.4% 31.4% 37.7% 36.0% 57.3%
AVERAGE 29.9% 35.4% 41.0% 43.8% 59.9%
AVERAGE EXCLUDING HIGH AND LOW 29.0% 34.8% 40.5% 42.7% 56.6%
------------------------------------------------------------------------------------------------------------------------------
CORT PREMIUM 69.5% 62.5% 62.5% (3.8%) (41.1%)
------------------------------------------------------------------------------------------------------------------------------
PREMIUMS OFFERED IN $200MM TO $500MM CASH TRANSACTIONS SINCE 1/1/98
WHEN THE TARGET COMPANY'S STOCK PRICE DECLINES DURING THE YEAR PRIOR TO THE TRANSACTION (2)
PREMIUM 1 DAY PRIOR TO
LTM STOCK PRICE PERFORMANCE ANNOUNCEMENT
-------------------------------------- -----------------------------------------
MAXIMUM (78.5%) 126.4%
MINIMUM (5.4%) (10.7%)
MEDIAN (25.1%) 35.6%
AVERAGE (32.0%) 41.3%
AVERAGE EXCLUDING HIGH AND LOW (31.0%) 39.7%
------------------------------------------------------------------------------------------------------------------------------
CORT PREMIUM (64.8%) 69.5%
--------------------------------------------------------------------------- ----- -----------------------------------------
(1) 77 transactions.
(2) 24 transactions.
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PREMIUMS PAID ANALYSIS (CONTINUED)
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ONE YEAR DECLINE VS. PREMIUM OFFERED
$200MM to $500MM Cash Transactions Since 1/1/98
[GRAPHIC]
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PREMIUMS PAID ANALYSIS (CONTINUED)
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$200MM TO $500MM CASH TRANSACTIONS SINCE 1/1/98
DATE TRANSACTION PRICE PER
ANNOUNCED TARGET NAME ACQUIROR NAME VALUE ($MIL) SHARE
--------- ------------------------------ ------------- ------------ ---------
01/12/98 Computer Language Research Inc Research Institute of America $ 325.4 $ 22.50
01/14/98 Freedom Chemical Co XX Xxxxxxxx Co 367.0 -
01/15/98 OHM Corp International Technology Corp 326.8 11.33
01/27/98 State of the Art Inc Sage Group PLC 245.2 22.00
01/29/98 Keebler Foods Co Flowers Industries Inc 309.1 27.60
01/29/98 ProSource Inc(Onex Corp) AmeriServe Food Distn Inc 343.3 15.00
01/30/98 Harveys Casino Resorts Colony Capital Inc 427.9 28.73
02/02/98 Pacific Scientific Co Xxxxxxx Corp 417.5 30.25
02/09/98 Summit Care Corp Fountain View(Heritage) 275.1 21.00
02/11/98 MTL Inc Sombrero Acquisition Corp 250.1 40.00
02/11/98 Waverly Inc Wolters Kluwer NV 375.6 39.00
02/17/98 Devon Group Inc Applied Graphics Technologies 474.4 60.08
02/19/98 Casino Magic Corp Hollywood Park Inc 344.8 2.27
02/24/98 Wonderware Corp Xxxxx PLC 362.7 24.00
03/02/98 Xxxxxxx Co Inc Sunbeam Corp 333.0 30.14
03/02/98 DeepTech International El Paso Natural Gas Co 375.4 14.00
03/02/98 Sealright Co Inc Huhtamaki Oy(Ahlgrens) 226.7 11.00
03/04/98 AP Green Industries Inc Global Industrial Technologies 212.0 22.00
03/05/98 Intelligent Electronics Inc Xerox Corp 342.4 7.60
03/13/98 Brown & Xxxxxx Manufacturing Thermo Instrument Systems Inc 212.3 15.50
03/13/98 MedCath Inc Investor Group 227.8 19.00
03/16/98 International Murex Tech Corp Xxxxxx Laboratories 232.7 13.00
03/17/98 BET Holdings Inc Investor Group 462.3 63.00
03/24/98 Insilco Corp DLJ Merchant Bkg Partners II 425.3 45.00
04/06/98 MoneyGram Payment Systems Inc Viad Corp 293.6 17.35
04/08/98 Blessings Corp Huntsman Packaging Corp 269.7 21.00
DATE PREMIUM PRIOR TO ANNOUNCEMENT
ANNOUNCED TARGET NAME ACQUIROR NAME 1 DAY 1 WEEK 4 WEEKS 6 MONTHS 1 YEAR STATUS
--------- ------------------------- -------------------- ----- ------ ------- -------- ------ ------
01/12/98 Computer Language Research Inc Research Institute of America 60.7% 62.2% 69.8% 91.5% 109.3% Completed
01/14/98 Freedom Chemical Co XX Xxxxxxxx Co Completed
01/15/98 OHM Corp International Technology Corp 24.2% 45.0% 46.6% 42.2% 33.8% Completed
01/27/98 State of the Art Inc Sage Group PLC 33.3% 35.4% 35.4% 69.2% 57.1% Completed
01/29/98 Keebler Foods Co Flowers Industries Inc (1 Completed
01/29/98 ProSource Inc(Onex Corp) AmeriServe Food Distn Inc 126.4% 106.9% 100.0% 84.5% 14.2% Completed
01/30/98 Harveys Casino Resorts Colony Capital Inc 27.7% 27.0% 37.6% 69.0% 71.5% Completed
02/02/98 Pacific Scientific Co Xxxxxxx Corp 20.4% 21.9% 28.7% 78.6% 77.9% Completed
02/09/98 Summit Care Corp Fountain View(Heritage) 14.3% 31.3% 37.7% 40.0% 90.9% Completed
02/11/98 MTL Inc Sombrero Acquisition Corp 37.9% 38.5% 56.1% 66.7% 79.8% Completed
02/11/98 Waverly Inc Wolters Kluwer NV 42.5% 50.7% 50.7% 70.5% 77.3% Completed
02/17/98 Devon Group Inc Applied Graphics Technologies 29.2% 32.0% 37.9% 66.9% 114.6% Completed
02/19/98 Casino Magic Corp Hollywood Park Inc 34.5% 32.1% 32.1% 95.7% (19.2%) Completed
02/24/98 Wonderware Corp Xxxxx PLC 50.0% 59.3% 79.4% 29.7% 125.8% Completed
03/02/98 Xxxxxxx Co Inc Sunbeam Corp 44.4% 58.6% 121.2% 93.7% 134.0% Pending
03/02/98 DeepTech International El Paso Natural Gas Co 8.7% 9.8% 15.5% 33.3% 138.1% Completed
03/02/98 Sealright Co Inc Huhtamaki Oy(Ahlgrens) (2.2%) (1.1%) (5.4%) (6.4%) 0.0% Completed
03/04/98 AP Green Industries Inc Global Industrial Technologies 24.4% 37.5% 89.2% 109.5% 134.5% Completed
03/05/98 Intelligent Electronics Inc Xerox Corp 5.7% 19.2% 34.4% 81.4% 124.9% Completed
03/13/98 Brown & Xxxxxx Manufacturing Thermo Instrument Systems Inc 44.2% 47.6% 65.3% 12.2% 11.7% Pending
03/13/98 MedCath Inc Investor Group 15.2% 10.9% 34.5% 1.3% 26.7% Completed
03/16/98 International Murex Tech Corp Xxxxxx Laboratories 21.6% 38.2% 50.7% 33.3% 62.5% Completed
03/17/98 BET Holdings Inc Investor Group 4.0% 14.3% 17.5% 18.6% 109.1% Completed
03/24/98 Insilco Corp DLJ Merchant Bkg Partners II 4.7% 11.1% 12.9% (2 Completed
04/06/98 MoneyGram Payment Systems Inc Viad Corp 11.5% 15.7% 42.4% (0.9%) 87.6% Completed
04/08/98 Blessings Corp Huntsman Packaging Corp 18.7% 18.3% 34.9% 40.0% 118.1% Completed
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DATE TRANSACTION PRICE PER
ANNOUNCED TARGET NAME ACQUIROR NAME VALUE ($MIL) SHARE
--------- -------------------------- ---------------------------- ------------ ---------
04/15/98 Harborside Healthcare Corp Investcorp $ 263.2 $ 25.00
04/17/98 XcelleNet Inc Sterling Commerce Inc 214.3 22.02
04/20/98 Atria Communities Inc Kapson Senior Quarters Corp 238.9 20.25
04/21/98 PCA International Inc Investor Group 232.5 26.50
04/28/98 Xxxxxx Global Properties-(13) Equity Office Properties Trust 394.0 -
04/30/98 Mycogen Corp(Dow AgroSciences) Dow AgroSciences(Dow Chemical) 355.2 28.00
06/04/98 Cable Michigan Inc Avalon Cable 291.2 40.50
06/10/98 Ceanic Corp Xxxxx Comex Seaway SA 222.8 20.00
06/10/98 Plenum Publishing Corp Wolters Kluwer NV 258.0 73.50
06/17/98 Nimbus CD International Inc Carlton Communications PLC 264.9 11.50
06/22/98 Special Devices Inc XX Xxxxxx & Co 277.8 34.00
06/23/98 Metallurg Inc Investor Group 303.1 30.00
06/29/98 Xxxx Co Inc Xxx River Inc 257.9 16.50
06/29/98 Xxxxxx Production Services Inc Key Energy Group Inc 348.8 17.50
06/30/98 Summit Holding Southeast Inc Liberty Mutual Group 233.4 33.00
07/07/98 Republic Engineered Steels Investor Group 417.8 7.25
07/17/98 Xxxxxxx Co Fenway Partners 500.0 -
08/06/98 Xxxx-Xxxxxxxxx Foods Co Safeway Inc 331.9 12.50
08/07/98 Atrium Companies Inc(Xxxxx) Investor Group 225.0 -
08/10/98 Molecular Dynamics Inc Amersham Pharmacia Biotech Ltd 222.2 20.50
08/24/98 Coho Energy Inc Xxxxx Muse Xxxx & Xxxxx Inc 250.0 6.00
10/08/98 Mecklermedia Corp Penton Media Inc 273.7 29.00
10/19/98 Bayard Drilling Technologies Nabors Industries Inc 200.5 4.41
10/19/98 Colonial Gas Co Eastern Enterprises 491.7 37.50
10/21/98 Centennial HealthCare Corp Welsh Xxxxxx Xxxxxxxx & Xxxxx 292.1 16.00
DATE PREMIUM PRIOR TO ANNOUNCEMENT
ANNOUNCED TARGET NAME ACQUIROR NAME 1 DAY 1 WEEK 4 WEEKS 6 MONTHS 1 YEAR STATUS
--------- ------------------------- -------------------- ----- ------ ------- -------- ------ ------
04/15/98 Harborside Healthcare Corp Investcorp 18.3% 22.7% 5.8% 19.0% 117.4% Completed
04/17/98 XcelleNet Inc Sterling Commerce Inc 6.1% 12.6% 7.7% 77.9% 57.3% Completed
04/20/98 Atria Communities Inc Kapson Senior Quarters Corp 2.5% 7.3% (0.3%) 25.1% 81.9% Completed
04/21/98 PCA International Inc Investor Group 23.3% 17.8% 20.5% 9.8% 80.4% Completed
04/28/98 Xxxxxx Global Properties-(13) Equity Office Properties Trust Pending
04/30/98 Mycogen Corp(Dow AgroSciences) Dow AgroSciences(Dow Chemical) 41.8% 40.0% 52.4% 34.9% 54.4% Completed
06/04/98 Cable Michigan Inc Avalon Cable 14.9% 14.9% 23.2% 69.6% 141.8% (3 Completed
06/10/98 Ceanic Corp Xxxxx Comex Seaway SA 29.6% 34.5% 29.0% 66.7% 79.7% Completed
06/10/98 Plenum Publishing Corp Wolters Kluwer NV 6.5% 6.7% 10.7% 57.0% 107.0% Completed
06/17/98 Nimbus CD International Inc Carlton Communications PLC 7.0% 5.7% 10.8% 15.0% 8.2% Completed
06/22/98 Special Devices Inc XX Xxxxxx & Co (2.5%) 1.9% 0.0% 20.4% 126.7% Completed
06/23/98 Metallurg Inc Investor Group 51.9% 51.9% 60.0% 77.7% 150.0% (4 Completed
06/29/98 Xxxx Co Inc Xxx River Inc 19.5% 22.2% 38.9% 109.4% 112.9% (5 Completed
06/29/98 Xxxxxx Production Services Inc Key Energy Group Inc 40.7% 50.5% 66.7% 7.7% 25.0% Completed
06/30/98 Summit Holding Southeast Inc Liberty Mutual Group 28.2% 26.3% 28.2% 55.3% 94.1% Completed
07/07/98 Republic Engineered Steels Investor Group 56.8% 68.1% 45.0% 231.1% 425.4% Completed
07/17/98 Xxxxxxx Co Fenway Partners Completed
08/06/98 Xxxx-Xxxxxxxxx Foods Co Safeway Inc 58.7% 48.1% 70.9% 140.8% 150.0% Pending
08/07/98 Atrium Companies Inc(Xxxxx) Investor Group Completed
08/10/98 Molecular Dynamics Inc Amersham Pharmacia Biotech Ltd 36.7% 47.7% 100.0% 64.0% (1.2%) Completed
08/24/98 Coho Energy Inc Xxxxx Muse Xxxx & Xxxxx Inc 28.0% 20.0% (4.0%) (23.9%) (36.0%) Pending
10/08/98 Mecklermedia Corp Penton Media Inc 43.7% 52.6% 39.8% 18.9% 28.1% Completed
10/19/98 Bayard Drilling Technologies Nabors Industries Inc (10.7%) 3.8% (7.2%) (70.1%) (80.8%) (6 Pending
10/19/98 Colonial Gas Co Eastern Enterprises 26.8% 29.9% 26.1% 33.3% 54.6% Pending
10/21/98 Centennial HealthCare Corp Welsh Xxxxxx Xxxxxxxx & Xxxxx 88.2% 111.6% 81.6% (31.6%) (35.5%) Pending
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DATE TRANSACTION PRICE PER
ANNOUNCED TARGET NAME ACQUIROR NAME VALUE ($MIL) SHARE
--------- -------------------------- ---------------------------- ------------ ---------
10/22/98 XX Xxxxxxxx Services Inc Bank of America,San Francisco $ 357.6 $ 20.50
10/27/98 Citizens Corp(Hanover Ins Co) Allmerica Financial Corp 212.4 33.25
11/10/98 Players International Inc Hollywood Park Inc 333.3 6.00
11/25/98 Sbarro Inc Investor Group 386.4 28.85
12/02/98 Brylane Inc Pinault-Printemps Redoute 230.6 24.50
12/07/98 BRC Holdings Inc Matador Capital Management 288.5 21.00
12/07/98 Interlake Corp GKN PLC 466.7 7.25
12/15/98 Global Industrial Technologies WHX Corp 224.8 10.50
12/17/98 RightCHOICE Managed Care Inc Blue Cross & Blue Shield of KC 282.3 15.25
12/18/98 LeaRonal Inc Rohm and Xxxx Co 449.2 34.00
12/19/98 Xxxxxxxxx Corp Xxxxxxxxxx & Co 201.6 18.50
12/27/98 Kaynar Technologies Inc Xxxxxxxxx Corp 393.8 28.75
01/14/99 Winsloew Furniture Inc Investor Group 236.2 30.00
01/18/99 GeoScience Corp(Tech-Sym Corp) Core Laboratories NV 216.3 17.88
01/19/99 Excel Industries Inc Dura Automotive Systems(Onex) 482.1 26.18
01/20/99 Integrated Circuit Systems Inc Investor Group 269.1 21.25
02/01/99 Muzak Limited Partnership Audio Communications Network 350.0 -
02/09/99 Players International Inc Jackpot Enterprises Inc 428.8 8.25
02/16/99 MVE Holdings Inc Chart Industries Inc 240.0 -
02/19/99 Xxxxxxxxx'x Inc Securitas AB 384.7 29.00
02/22/99 Republic Banking Corp,Miami,FL Union Planters Corp,Memphis,TN 409.5 19.25
02/26/99 North Face Inc Investor Group 219.5 17.00
03/04/99 Berkshire Realty Co Inc Aptco LLC 469.2 11.05
03/09/99 Powerhouse Technologies Inc Anchor Gaming 222.4 19.50
03/11/99 Franchise Mortgage Acceptance Bay View Capital,San Mateo,CA 333.8 10.58
03/11/99 Sodak Gaming Inc International Game Technology 228.4 10.00
DATE PREMIUM PRIOR TO ANNOUNCEMENT
ANNOUNCED TARGET NAME ACQUIROR NAME 1 DAY 1 WEEK 4 WEEKS 6 MONTHS 1 YEAR STATUS
--------- ------------------------- -------------------- ----- ------ ------- -------- ------ ------
10/22/98 XX Xxxxxxxx Services Inc Bank of America,San Francisco 47.1% 56.2% 42.0% 10.8% 9.7% Pending
10/27/98 Citizens Corp(Hanover Ins Co) Allmerica Financial Corp 20.6% 17.2% 20.9% 5.6% 14.1% Completed
11/10/98 Players International Inc Hollywood Park Inc 20.0% 29.7% 54.8% 17.0% 77.5% Pending
11/25/98 Sbarro Inc Investor Group 18.0% 17.8% 26.1% 0.1% 1.2% Pending
12/02/98 Brylane Inc Pinault-Printemps Redoute 45.2% 88.5% 44.1% (50.3%) (52.9%) Pending
12/07/98 BRC Holdings Inc Matador Capital Management 10.9% 10.2% 12.8% 13.5% 3.0% Pending
12/07/98 Interlake Corp GKN PLC 107.1% 110.9% 100.0% 73.0% 61.1% Completed
12/15/98 Global Industrial Technologies WHX Corp 25.4% 33.3% 13.5% (26.0%) (39.6%) Pending
12/17/98 RightCHOICE Managed Care Inc Blue Cross & Blue Shield of KC 71.8% 70.6% 67.1% 31.9% 52.5% Pending
12/18/98 LeaRonal Inc Rohm and Xxxx Co 29.2% 37.4% 59.1% 29.5% 50.2% Completed
12/19/98 Xxxxxxxxx Corp Xxxxxxxxxx & Co 12.1% 51.8% 35.2% 41.8% 127.6% Pending
12/27/98 Kaynar Technologies Inc Xxxxxxxxx Corp 16.8% 27.8% 38.6% 29.2% 0.0% Pending
01/14/99 Winsloew Furniture Inc Investor Group 18.8% 24.7% 17.1% 17.1% 106.9% Pending
01/18/99 GeoScience Corp(Tech-Sym Corp) Core Laboratories NV 30.0% 50.6% 107.3% 32.4% 9.6% Pending
01/19/99 Excel Industries Inc Dura Automotive Systems(Onex) 25.4% 41.0% 55.1% 89.6% 48.5% Pending
01/20/99 Integrated Circuit Systems Inc Investor Group 14.9% 14.9% 33.3% 42.8% (14.1%) Pending
02/01/99 Muzak Limited Partnership Audio Communications Network Pending
02/09/99 Players International Inc Jackpot Enterprises Inc 37.5% 44.3% 46.7% 57.1% 88.4% Pending
02/16/99 MVE Holdings Inc Chart Industries Inc Pending
02/19/99 Xxxxxxxxx'x Inc Securitas AB 71.2% 71.9% 46.8% 74.1% 28.5% Pending
02/22/99 Republic Banking Corp,Miami,FL Union Planters Corp,Memphis,TN 10.8% 28.9% 28.3% 40.5% 21.8% Pending
02/26/99 North Face Inc Investor Group 38.8% 32.7% 23.1% 36.0% (38.7%) Pending
03/04/99 Berkshire Realty Co Inc Aptco LLC 13.3% 17.1% 14.8% 16.3% (5.0%) Pending
03/09/99 Powerhouse Technologies Inc Anchor Gaming 35.1% 31.6% 52.2% 118.1% 64.1% Pending
03/11/99 Franchise Mortgage Acceptance Bay View Capital,San Mateo,CA 27.3% 24.5% 62.8% 30.1% (40.8%) Pending
03/11/99 Sodak Gaming Inc International Game Technology 25.0% 25.0% 34.5% 63.1% 39.1% Pending
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PREMIUMS PAID ANALYSIS (CONTINUED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$200MM TO $500MM CASH TRANSACTIONS SINCE 1/1/98
PREMIUM PRIOR TO ANNOUNCEMENT
DATE TRANSACTION PRICE PER -----------------------------
ANNOUNCED TARGET NAME ACQUIROR NAME VALUE ($MIL) SHARE 1 DAY 1 WEEK 4 WEEKS 6 MONTHS 1 YEAR STATUS
--------- ----------- ------------- ------------ ----- ----- ------ ------- -------- ------ ------
MAXIMUM 126.4% 111.6% 121.2% 231.1% 425.4%
MINIMUM (10.7%) (1.1%) (7.2%) (70.1%) (80.8%)
MEDIAN 25.4% 31.4% 37.7% 36.0% 57.3%
AVERAGE 29.9% 35.4% 41.0% 43.8% 59.9%
AVERAGE EXCLUDING HIGH AND LOW 29.0% 34.8% 40.5% 42.7% 56.6%
(1) Reflects 1/29/98 Initial Public Offering Price.
(2) Taken private effective 12/88 per Bloomberg
(3) Price as of 9/19/97
(4) Price as of 9/9/97
(5) Price as of 10/3/97
(6) Reflects 11/3/97 Initial Public Offering Price.
Source: Securities Data Company, Inc. (000) 000-0000
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PREMIUMS PAID ANALYSIS (CONTINUED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$200MM TO $500MM CASH TRANSACTIONS SINCE 1/1/98 STOCK PRICE DECLINE DURING THE
LTM PRIOR TO THE TRANSACTION
PRICE PER SHARE
TRANSACTION ------------------------------------
DATE VALUE 1 DAY PRIOR TO 1 YEAR PRIOR TO
ANNOUNCED TARGET NAME ACQUIROR INSERT ($MIL) OFFER ANNOUNCEMENT ANNOUNCEMENT
--------- -------------------- --------------------- ------ ----- ------------ ------------
01/29/98 ProSource Inc(Onex Corp) AmeriServe Food Distn Inc 343.3 $15.00 $ 6.63 $ 13.13
02/19/98 Casino Magic Corp Hollywood Park Inc 344.8 2.27 1.69 2.81
03/13/98 Brown & Xxxxxx Manufacturing Thermo Instrument Systems Inc 212.3 15.50 10.75 13.88
06/29/98 Xxxxxx Production Services Inc Key Energy Group Inc 348.8 17.50 12.44 14.00
08/10/98 Molecular Dynamics Inc Amersham Pharmacia Biotech Ltd 222.2 20.50 15.00 20.75
08/24/98 Coho Energy Inc Xxxxx Muse Xxxx & Xxxxx Inc 250.0 6.00 4.69 9.38
10/08/98 Mecklermedia Corp Penton Media Inc 273.7 29.00 20.19 22.63
10/19/98 Bayard Drilling Technologies Nabors Industries Inc 200.5 4.41 4.94 23.00 (1)
10/21/98 Centennial HealthCare Corp Welsh Xxxxxx Xxxxxxxx & Xxxxx 292.1 16.00 8.50 24.81
10/22/98 XX Xxxxxxxx Services Inc Bank of America,San Francisco 357.6 20.50 13.94 18.69
10/27/98 Citizens Corp(Hanover Ins Co) Allmerica Financial Corp 212.4 33.25 27.56 29.13
11/25/98 Sbarro Inc Investor Group 386.4 28.85 24.44 28.50
12/02/98 Brylane Inc Pinault-Printemps Redoute 230.6 24.50 16.88 52.06
12/07/98 BRC Holdings Inc Matador Capital Management 288.5 21.00 18.94 20.39
12/07/98 Interlake Corp GKN PLC 466.7 7.25 3.50 4.50
12/15/98 Global Industrial Technologies WHX Corp 224.8 10.50 8.38 17.38
12/17/98 RightCHOICE Managed Care Inc Blue Cross & Blue Shield of KC 282.3 15.25 8.88 10.00
12/27/98 Kaynar Technologies Inc Xxxxxxxxx Corp 393.8 28.75 24.63 28.75
01/18/99 GeoScience Corp(Tech-Sym Corp) Core Laboratories NV 216.3 17.88 13.75 16.31
01/20/99 Integrated Circuit Systems Inc Investor Group 269.1 21.25 18.50 24.75
1 YEAR PREMIUM OF
DATE DECLINE IN ANNOUNCEMENT
ANNOUNCED TARGET NAME ACQUIROR INSERT STOCK PRICE TO 1 DAY PRIOR STATUS
--------- ----------- --------------- ----------- -------------- ------
01/29/98 ProSource Inc(Onex Corp) AmeriServe Food Distn Inc (49.5%) 126.4% Completed
02/19/98 Casino Magic Corp Hollywood Park Inc (39.9%) 34.5% Completed
03/13/98 Brown & Xxxxxx Manufacturing Thermo Instrument Systems Inc (22.6%) 44.2% Pending
06/29/98 Xxxxxx Production Services Inc Key Energy Group Inc (11.2%) 40.7% Completed
08/10/98 Molecular Dynamics Inc Amersham Pharmacia Biotech Ltd (27.7%) 36.7% Completed
08/24/98 Coho Energy Inc Xxxxx Muse Xxxx & Xxxxx Inc (50.0%) 28.0% Pending
10/08/98 Mecklermedia Corp Penton Media Inc (10.8%) 43.7% Completed
10/19/98 Bayard Drilling Technologies Nabors Industries Inc (78.5%) (10.7%) Pending
10/21/98 Centennial HealthCare Corp Welsh Xxxxxx Xxxxxxxx & Xxxxx (65.7%) 88.2% Pending
10/22/98 XX Xxxxxxxx Services Inc Bank of America,San Francisco (25.4%) 47.1% Pending
10/27/98 Citizens Corp(Hanover Ins Co) Allmerica Financial Corp (5.4%) 20.6% Completed
11/25/98 Sbarro Inc Investor Group (14.2%) 18.0% Pending
12/02/98 Brylane Inc Pinault-Printemps Redoute (67.6%) 45.2% Pending
12/07/98 BRC Holdings Inc Matador Capital Management (7.1%) 10.9% Pending
12/07/98 Interlake Corp GKN PLC (22.2%) 107.1% Completed
12/15/98 Global Industrial Technologies WHX Corp (51.8%) 25.4% Pending
12/17/98 RightCHOICE Managed Care Inc Blue Cross & Blue Shield of KC (11.3%) 71.8% Pending
12/27/98 Kaynar Technologies Inc Xxxxxxxxx Corp (14.3%) 16.8% Pending
01/18/99 GeoScience Corp(Tech-Sym Corp) Core Laboratories NV (15.7%) 30.0% Pending
01/20/99 Integrated Circuit Systems Inc Investor Group (25.3%) 14.9% Pending
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PREMIUMS PAID ANALYSIS (CONTINUED)
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$200MM TO $500MM CASH TRANSACTIONS SINCE 1/1/98 STOCK PRICE DECLINE DURING THE
LTM PRIOR TO THE TRANSACTION
PRICE PER SHARE
TRANSACTION -------------------------------------
DATE VALUE 1 DAY PRIOR TO 1 YEAR PRIOR TO
ANNOUNCED TARGET NAME ACQUIROR INSERT ($MIL) OFFER ANNOUNCEMENT ANNOUNCEMENT
--------- ----------- --------------- ------ ----- ------------ ------------
02/19/99 Xxxxxxxxx'x Inc Securitas AB 384.7 29.00 16.94 22.56
02/26/99 North Face Inc Investor Group 219.5 17.00 12.25 27.75
03/04/99 Berkshire Realty Co Inc Aptco LLC 469.2 11.05 9.75 11.63
03/11/99 Franchise Mortgage Acceptance Bay View Capital,San Mateo,CA 333.8 10.58 8.31 17.88
1 YEAR PREMIUM OF
DATE DECLINE IN ANNOUNCEMENT
ANNOUNCED TARGET NAME ACQUIROR INSERT STOCK PRICE TO 1 DAY PRIOR STATUS
--------- ----------- --------------- ----------- -------------- ------
02/19/99 Xxxxxxxxx'x Inc Securitas AB (24.9%) 71.2% Pending
02/26/99 North Face Inc Investor Group (55.9%) 38.8% Pending
03/04/99 Berkshire Realty Co Inc Aptco LLC (16.2%) 13.3% Pending
03/11/99 Franchise Mortgage Acceptance Bay View Capital,San Mateo,CA (53.5%) 27.3% Pending
MINIMUM (5.4%) (10.7%)
MAXIMUM (78.5%) 126.4%
MEDIAN (25.1%) 35.6%
AVERAGE (32.0%) 41.3%
AVERAGE EXCLUDING HIGH AND LOW (31.0%) 39.7%
(1) Reflects 11/3/97 Initial Public Offering Price.
Source: Securities Data Company, Inc. (000) 000-0000
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EXHIBIT A:
FORM OF STES OPINION LETTER
, 1999
-------
Board of Directors
CORT Business Services Corporation
0000 Xxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
Members of the Board:
We understand that CORT Business Services Corporation ("CORT" or the
"Company") will enter into an Agreement and Plan of Merger to be dated March __,
1999 (the "Agreement"), with Acquisition Holdings, L.L.C. ("Parent") and
Acquisition Merger Sub, Inc. ("Sub") in substantially the form provided to us in
rendering this opinion. The Agreement provides that, at the effective time of
the merger (the "Merger") of Sub with and into CORT (the "Effective Time"), CORT
will become a wholly-owned subsidiary of Parent and each outstanding share of
Common Stock (as defined by the Agreement) of CORT (other than shares canceled
pursuant to Section 2.1(b) of the Agreement and other than Dissenting Shares (as
defined by the Agreement) and Retained Shares (as defined by the Agreement))
will be converted into the right to receive (i) $24.00 in cash and (ii) one
share of Senior Preferred (as defined by the Agreement), which consideration is
referred to in the Agreement and herein as the "Merger Consideration." The terms
and conditions of the Merger are more fully set forth in the Agreement.
You have requested our opinion as investment bankers as to the
fairness, from a financial point of view, of the Merger Consideration to the
shareholders of the Company receiving the Merger Consideration (the
"Non-Affiliated Shareholders").
SunTrust Equitable Securities Corporation ("SunTrust Equitable"), as
part of its investment banking business, is regularly engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. SunTrust Equitable has been engaged to render an opinion to the Board
of Directors of the Company with respect to the fairness, from a financial point
of view, to the Non-Affiliated Shareholders of the Merger Consideration and will
receive a fee for rendering this opinion and reimbursement of its expenses. In
addition, the Company has agreed to indemnify SunTrust Equitable for certain
liabilities arising out of its engagement, including the rendering of this
opinion. In the ordinary course of business, we trade the equity securities of
the Company for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in these securities.
In connection with our opinion, we have reviewed, among other things,
the Agreement, certain publicly-available information and certain other
financial information, reports, forecasts and other internal information that
was provided to us by or on behalf of the Company for
Board of Directors
__________, 1999
Page 2
purposes of our analysis. We held discussions with the management and
representatives of the Company concerning the historical and current operations
of the Company, its financial condition and its prospects. In addition, we
conducted such other financial studies, analyses and investigations and reviewed
such other information and factors as we deemed appropriate for purposes of this
opinion.
In rendering this opinion, we have relied, without assuming any
responsibility for independent verification, on the accuracy and completeness of
all financial and other information reviewed by us that was publicly available
or furnished to us by or on behalf of the Company. We have assumed with your
consent that the financial forecasts that we examined were reasonably prepared
on bases reflecting the best currently available estimates and good faith
judgments of the management of the Company. We express no opinion with respect
to such forecasts or the assumptions on which they were based. We have not made
an independent evaluation or appraisal of the assets or liabilities (contingent
or otherwise) of the Company, nor were we furnished with any such evaluations or
appraisals. In connection with the preparation of this opinion we have not been
authorized to solicit nor have we solicited or evaluated any alternative
transaction with any other party. Our opinion is based upon economic, market and
other conditions as they exist and can be evaluated on the date hereof. Our
opinion does not address the merits of the underlying decision by the Company to
engage in the Merger and does not constitute a recommendation to any shareholder
of the Company as to whether or not that shareholder should vote to approve the
Merger. The financial markets in general, and the markets for the securities of
the Company, in particular, are subject to volatility, and this opinion does not
purport to address potential developments in the financial markets or the
markets for the securities of the Company after the date hereof.
This letter may not be reproduced, disseminated, quoted or referred to
at any time without our prior written consent; however, the opinion rendered
hereby may be included in its entirety in the proxy statement relating to the
Merger to be distributed by the Company to its shareholders.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the Merger Consideration is fair, from a financial point of
view, to the Non-Affiliated Shareholders of the Company.
Very truly yours,
SunTrust Equitable Securities Corporation
